First munity Bancshares(FCBC) - 2019 Q4 - Annual Report

Financial Performance - Net interest income for 2019 was $89.453 million, slightly down from $90.845 million in 2018[131]. - Noninterest income rose to $33.677 million in 2019, up from $26.443 million in 2018, reflecting growth in service fees and commissions[131]. - Net income available to common shareholders for 2019 was $38.802 million, an increase from $36.340 million in 2018[131]. - Basic earnings per common share increased to $2.47 in 2019, compared to $2.19 in 2018[131]. - Pre-tax income increased by $4.67 million, or 10.36%, due to an increase in noninterest income of $7.23 million[149]. - Net interest income decreased by $1.39 million, or 1.53%, compared to the previous year, with a net interest margin increase of 18 basis points[159]. - Noninterest expense decreased by $10 thousand, or 0.01%, in 2019, primarily due to one-time charges recognized in 2018, while total noninterest expense for 2018 increased by $2.87 million, or 4.29%[170][171]. - The effective tax rate increased to 22.08% in 2019 from 19.46% in 2018, with income tax expense rising by $2.21 million, or 25.19%[173]. Asset and Liability Management - As of December 31, 2019, total assets increased to $2.80 billion following the acquisition of Highlands Bankshares, Inc. with total assets of $563 million[135]. - Total liabilities decreased to $1,881,103 million from $1,989,092 million, a decline of 5.45% year-over-year[156]. - Stockholders' equity decreased to $336,138 million from $341,519 million, a decrease of 1.11% year-over-year[156]. - Total assets increased by $554.47 million, or 24.71%, to $2.80 billion as of December 31, 2019, primarily due to the acquisition of Highlands[176]. - Total liabilities increased by $458.51 million, or 23.99%, to $2.37 billion as of December 31, 2019, also attributed to the Highlands acquisition[176]. - Total stockholders' equity increased by $95.96 million, or 28.83%, to $428.82 million as of December 31, 2019, largely due to the acquisition of Highlands[220]. Loan and Credit Quality - The provision for loan losses was $3.571 million, compared to $2.393 million in 2018, indicating an increase in expected loan losses[131]. - The allowance for loan losses was $18.425 million, slightly up from $18.267 million in 2018, indicating a stable approach to risk management[131]. - Total loans held for investment increased by $339.38 million, or 19.12%, compared to the previous year, primarily due to a $345.33 million, or 19.66%, increase in non-covered loans[183]. - Nonperforming assets decreased by $2.66 million, or 11.28%, from December 31, 2018, primarily due to a $3.47 million, or 17.72%, decrease in non-covered nonaccrual loans[199]. - Non-covered delinquent loans totaled $35.62 million as of December 31, 2019, an increase of $5.74 million, or 19.19%, compared to $29.89 million as of December 31, 2018[201]. - The allowance for loan losses was maintained at a level deemed sufficient to absorb probable loan losses, reflecting stable risk factors as of December 31, 2019[202]. Capital Management - The common equity Tier 1 ratio stood at 14.31% as of December 31, 2019, consistent with the previous year[131]. - Common equity Tier 1 ratio improved to 14.31% as of December 31, 2019, compared to 13.72% in 2018[223]. - The company repurchased 487,400 common shares for approximately $16.36 million[147]. - Book value per common share increased by $2.54 to $23.33 compared to December 31, 2018[147]. Interest Rate Risk Management - The company maintained interest rate swap agreements with notional amounts totaling $17.43 million to manage exposure to interest rate risk[234]. - A 300 basis point increase in interest rates would result in a $171 thousand increase in interest income, while a 200 basis point decrease would lead to an $8.571 million decrease[230]. - The company’s exposure to interest rate risk was deemed adequately mitigated as of December 31, 2019[233]. - Interest rate risk management strategies include periodic reviews of internal and third-party simulation models to project net interest income at risk[229]. Deposits and Funding - Total deposits as of December 31, 2019, increased by $474.16 million, or 25.55%, compared to December 31, 2018[209]. - The acquisition of Highlands added $501.74 million in deposits, including $155.71 million in non-interest bearing demand deposits[209]. - Total borrowings decreased by $27.73 million, or 94.41%, to $1.55 million as of December 31, 2019, primarily due to the maturity of a $25.00 million wholesale repurchase agreement[211]. - Cash reserves totaled $24.00 million, with an additional $15.00 million available on an unsecured line of credit as of December 31, 2019[215].