First munity Bancshares(FCBC) - 2020 Q3 - Quarterly Report

Financial Performance - Diluted earnings per share was $0.47 for Q3 2020 and $1.37 for the first nine months, reflecting a decrease of 20.34% and 26.34% respectively compared to the same periods in 2019[166]. - The Company recorded a net income of $8.27 million for Q3 2020, a decrease of 9.72% from $9.16 million in Q3 2019, and $24.38 million for the first nine months, down 16.63% from $29.24 million in the prior year[168]. - Total stockholders' equity decreased by $8.90 million, or 2.08%, to $419.92 million as of September 30, 2020, from $428.82 million as of December 31, 2019[237]. - Net income for the period was $24.38 million, offset by share repurchases totaling $21.87 million and dividends of $13.45 million[237]. Loan Loss Provisions and Asset Quality - The loan loss provision increased by $4.03 million in Q3 2020, totaling $4.70 million, and $12.03 million for the first nine months, an increase of $8.55 million from the prior year, due to the economic uncertainty from the COVID-19 pandemic[166][169]. - The provision for loan losses increased by $4.03 million, or 596.74%, to $4.70 million in Q3 2020 compared to the same quarter of 2019, primarily due to the impact of the coronavirus slowdown[185]. - Nonaccrual loans increased to $24,423,000 as of September 30, 2020, up 51.57% from $16,113,000 as of December 31, 2019[213]. - Total nonperforming loans reached $25,255,000 as of September 30, 2020, compared to $17,221,000 as of December 31, 2019, reflecting a 46.73% increase[213]. - The allowance for loan losses to nonperforming loans ratio was 108.01% as of September 30, 2020, compared to 106.99% as of December 31, 2019[213]. Deposits and Borrowings - Total deposits grew by $162.33 million, or 6.97%, during 2020, with $122.41 million of the increase occurring in interest-free categories[166]. - Total liabilities were $2,440,427,000 as of September 30, 2020, compared to $1,881,217,000 in 2019[174]. - Total liabilities as of September 30, 2020, increased by $157.98 million, or 6.67%, driven by a $162.33 million increase in total deposits, or 6.97%[198]. - Total borrowings decreased by $645 thousand as of September 30, 2020, compared to December 31, 2019[230]. Interest Income and Margin - Net interest margin decreased by 46 basis points to 4.10% in Q3 2020 and by 30 basis points to 4.33% for the first nine months compared to the same periods in 2019, attributed to the historically low interest rate environment[166]. - Net interest income for the nine months ended September 30, 2020, was $81,366,000, compared to $68,055,000 for the same period in 2019, reflecting an increase of approximately 19.5%[174]. - The net interest margin on a fully taxable equivalent (FTE) basis was 4.33% for the nine months ended September 30, 2020, down from 4.63% in the prior year[174]. - The net interest rate spread decreased to 4.22% for the nine months ended September 30, 2020, from 4.51% in the previous year[174]. Operational Changes and Expenses - The Company modified or deferred payments on 3,362 loans totaling $426.45 million in principal through September 30, 2020, with $115.63 million currently in deferral[157]. - Noninterest expense increased by $1.73 million, or 9.90%, in Q3 2020 compared to Q3 2019, primarily due to an increase in salaries and benefits of $1.15 million[191]. - For the first nine months of 2020, noninterest expense rose by $8.87 million, or 17.43%, mainly driven by a $5.23 million increase in salaries and benefits, or 18.92%[192]. - Salaries and employee benefits increased by $1.15 million, or 12.33%, compared to the same quarter of 2019[189]. Capital and Liquidity - Common Equity Tier 1 ratio was 13.89% as of September 30, 2020, compared to 14.31% as of December 31, 2019[239]. - Total risk-based capital ratio was 15.14% as of September 30, 2020, down from 15.21% as of December 31, 2019[239]. - The company continues to meet all capital adequacy requirements and is classified as well-capitalized under regulatory frameworks[239]. - The company’s liquidity plan includes ongoing monitoring of credit-sensitive liabilities and sources of liquidity to address potential funding crises[231]. Market and Economic Conditions - The acquisition of Highlands Bankshares, Inc. was completed on December 31, 2019, for a total purchase price of $86.65 million, enhancing the Company's market presence[160]. - The sensitivity of net interest income to a 300 basis point increase is projected to be $7.63 million, representing a 6.97% change[246]. - The company is transitioning from LIBOR to alternative reference rates in anticipation of LIBOR's discontinuation at the end of 2021[245].