First munity Bancshares(FCBC) - 2019 Q1 - Quarterly Report

Financial Performance - Net income increased by $763 thousand, or 8.60%, to $9.63 million compared to the same quarter of 2018[137] - Diluted earnings per share rose by $0.08 to $0.60, reflecting a 15.38% increase year-over-year[137] - Return on average assets improved to 1.75%, while return on average equity increased to 11.77%[137] - Net interest margin increased by 22 basis points to 4.60% compared to the same quarter of 2018[137] - Noninterest income increased by $1.41 million, or 21.18%, primarily due to $1.68 million received from litigation settlements[147] - Total noninterest expense decreased by $331 thousand, or 1.93%, largely due to a decrease in salaries and employee benefits of $275 thousand[148] - The effective tax rate decreased to 21.45% in the first quarter of 2019 from 22.46% in the same quarter of 2018[151] - Total stockholders' equity increased by $245 thousand, or 0.07%, to $333.10 million as of March 31, 2019, driven by net income of $9.63 million and share repurchases totaling $7.78 million[185] Asset Management - The Trust Division and First Community Wealth Management managed and administered $1.02 billion in combined assets as of March 31, 2019[131] - Book value per common share increased by $0.27 to $21.06, and tangible book value per common share rose by $0.20 to a record $14.89 compared to December 31, 2018[137] - The Company repurchased 232,900 common shares for $7.78 million during the quarter[137] Loan and Deposit Activity - Average earning assets decreased by $136.07 million, or 6.44%, primarily due to a decrease in average interest-bearing deposits and average loans[143] - Total loans held for investment decreased by $37.70 million, or 2.14%, from December 31, 2018, primarily due to a $36.36 million, or 2.07%, decrease in non-covered loans[162] - Total deposits increased by $22.69 million, or 1.22%, as of March 31, 2019, largely due to a $19.75 million increase in non-interest bearing demand accounts[178] Credit Quality and Risk Management - The provision for loan losses increased by $725 thousand, or 146.46%, to $1.22 million in the first quarter of 2019 compared to the same quarter of 2018[145] - Nonperforming assets include nonaccrual loans and loans past due 90 days or more, with ongoing activity in collections and foreclosures[166] - The company tracks credit quality indicators such as trends in risk ratings and levels of classified commercial loans[165] - Non-covered nonperforming assets as of March 31, 2019, decreased by $170 thousand, or 0.72%, from December 31, 2018, primarily due to a decrease in non-covered nonaccrual loans[169] - Non-covered nonaccrual loans decreased by $1.04 million, or 5.31%, as of March 31, 2019, with 49.78% attributed to single family owner occupied loans[169] - Non-covered delinquent loans totaled $29.53 million as of March 31, 2019, a decrease of $354 thousand, or 1.18%, compared to December 31, 2018[171] Capital Adequacy - The Company and its subsidiary bank both significantly exceed regulatory "well capitalized" targets as of March 31, 2019[137] - The common equity Tier 1 ratio was 14.00% as of March 31, 2019, up from 13.72% as of December 31, 2018, indicating improved capital adequacy[188] Liquidity and Funding - As of March 31, 2019, the company's cash reserves totaled $13.77 million, with an additional $15.00 million available on an unsecured line of credit[181] - The company has unencumbered cash of $148.55 million and unused borrowing capacity from the FHLB totaling $397.66 million as of March 31, 2019[182] - The liquidity model includes various funding crisis scenarios, with a specific action plan activated when a financial shock is identified[180] Interest Rate Risk - The company maintained interest rate swap agreements with notional amounts totaling $5.40 million to manage exposure to interest rate risk[194] - The sensitivity analysis showed that a 300 basis point increase in interest rates would result in a $7 thousand increase in net interest income, while a 200 basis point decrease would lead to a $7.82 million decrease[194]