First munity Bancshares(US:FCBC)2019-11-08 18:48Financial Performance - Net income for the third quarter of 2019 was $9.156 million, a slight increase of $56 thousand or 0.62% compared to $9.100 million in the same quarter of 2018[160]. - Year-to-date net income for the first nine months of 2019 reached $29.238 million, an increase of $2.204 million or 8.15% from $27.034 million in the same period of 2018[160]. - Diluted earnings per share increased by $0.03 to $0.58, representing a 5.45% increase compared to the same quarter last year[161]. - Noninterest income increased by $1.12 million, or 17.10%, in Q3 2019, primarily due to $900 thousand received from litigation settlements[180]. - Noninterest income for the first nine months of 2019 increased by $4.22 million, or 20.93%, compared to the same period in 2018[181]. Asset and Liability Management - Total earning assets decreased to $1,948,277 thousand from $2,072,460 thousand, reflecting a decline of approximately 5.97% year-over-year[165]. - Total assets decreased to $2,198,419 thousand from $2,325,659 thousand, representing a decline of approximately 5.45%[165]. - Total liabilities decreased to $1,862,071 thousand from $1,984,736 thousand, indicating a reduction of about 6.15%[165]. - Total deposits as of September 30, 2019, decreased by $18.89 million, or 1.02%, compared to December 31, 2018, primarily due to a $40.26 million decrease in time deposits[212]. - Total borrowings as of September 30, 2019, decreased by $27.51 million, or 93.66%, compared to December 31, 2018, following the maturity of a $25 million wholesale repurchase agreement[213]. Interest Income and Margin - The net interest margin rose by 24 basis points to 4.56% compared to the same quarter of 2018[161]. - Net interest income for the period was $22,417 thousand, slightly down from $22,550 thousand, indicating a decrease of about 0.59%[165]. - The average yield on loans was 5.14%, up from 5.00% in the previous year, reflecting an increase of 14 basis points[165]. - The net interest margin on a GAAP basis increased to 4.53% in Q3 2019 from 4.27% in Q3 2018[190]. - A 300 basis point increase in interest rates could lead to a net interest income change of $610,000, while a decrease of 200 basis points could result in a decrease of $6,949,000 in net interest income[228]. Equity and Capitalization - Stockholders' equity slightly decreased to $336,348 thousand from $340,923 thousand, a decline of approximately 1.68%[165]. - Total stockholders' equity as of September 30, 2019, increased by $4.51 million, or 1.35%, to $337.36 million from $332.86 million as of December 31, 2018[219]. - Common equity Tier 1 ratio as of September 30, 2019, was 14.66%, an increase from 13.72% as of December 31, 2018[222]. Loan Portfolio and Credit Quality - Loans held for investment decreased by $80.96 million, or 4.56%, as of September 30, 2019, primarily due to a $76.31 million decrease in non-covered loans[196]. - Nonperforming assets include nonaccrual loans and loans past due 90 days or more, with ongoing classification activity based on economic conditions and borrower capacity[200]. - Non-covered nonperforming assets decreased by $3.60 million, or 15.27%, from December 31, 2018, primarily due to a decrease in non-covered nonaccrual loans[203]. - The allowance for loan losses is established to mitigate potential losses, although actual losses may exceed these reserves[199]. - The company tracks credit quality indicators, including trends in commercial loan risk ratings and levels of classified loans[199]. Expenses and Taxation - Noninterest expense decreased by $687 thousand, or 3.79%, in Q3 2019 compared to Q3 2018, primarily due to a goodwill impairment of $1.49 million recognized in Q3 2018[183]. - Income tax expense increased by $1.46 million, or 130.77%, in Q3 2019, with the effective tax rate rising to 21.98% from 10.94% in Q3 2018[186]. - For the first nine months of 2019, income tax expense increased by $1.98 million, or 31.93%, with the effective tax rate at 21.82% compared to 18.62% in the same period of 2018[187]. Strategic Initiatives - The Company announced an agreement to acquire Highlands Bankshares, which had total assets of approximately $612 million as of June 30, 2019, for an aggregate transaction value of approximately $91.0 million[155]. - The Company incurred $592 thousand in merger expenses related to the acquisition of Highlands Bankshares in the third quarter of 2019[161]. - The company is transitioning away from LIBOR in two phases, with the first phase involving new loans and the second phase focusing on current variable loans tied to LIBOR[230].