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First Community Bankshares, Inc. Announces Third Quarter 2023 Results and Quarterly Cash Dividend
Source: Nasdaq GlobeNewswire / 24 Oct 2023 16:15:35 America/New_York
BLUEFIELD, Va., Oct. 24, 2023 (GLOBE NEWSWIRE) -- First Community Bankshares, Inc. (NASDAQ: FCBC) (www.firstcommunitybank.com) (the “Company”) today reported its unaudited results of operations and other financial information for the quarter ended September 30, 2023. The Company reported net income of $14.64 million, or $0.79 per diluted common share, for the quarter ended September 30, 2023. Net income for the nine months ended September 30, 2023, was $36.24 million or $2.06 per diluted common share.
The Company also declared a quarterly cash dividend to common shareholders of twenty-nine cents $0.29 per common share. The quarterly dividend is payable to common shareholders of record on November 10, 2023, and is expected to be paid on or about November 24, 2023. This marks the 38th consecutive year of regular dividends to common shareholders.
Third Quarter 2023 and Current Highlights
Income Statement
o Net income of $14.64 million for the quarter was approximately 9.66%, or $1.29 million, higher compared to net income of $13.35 million in the same quarter of 2022. Adjusted for non-recurring items, third quarter net income increased $2.52 million to $14.72 million compared to third quarter 2022. The increase is primarily attributable to a significant increase in net interest income. o Net interest income increased $4.01 million compared to the same quarter in 2022, as increases in benchmark interest rates have improved net interest margin. o Net interest margin of 4.51% is an increase of 50 basis points over the same quarter of 2022. The yield on earning assets increased 82 basis points primarily driven by increased earnings on loans and securities. o Interest and fees on loans increased $7.09 million from the same quarter of 2022 and is attributable to both an increase in yield and an increase in average balance compared to the yield and average balance of the prior year. Interest income from securities of $1.91 million was an increase of $127 thousand over the same quarter of 2022 and is primarily attributable to an increase in yield from the same period of the prior year. Interest income on deposits in banks decreased $835 thousand to $697 thousand for the third quarter, primarily due to a significant decrease in the average balance compared to the third quarter of 2022. o Annualized return on average assets was 1.74% for the third quarter and 1.49% for the first nine months of 2023 compared to 1.63% and 1.41% for the same periods, respectively of 2022. Annualized return on average common equity was 11.63% for the third quarter and 10.25% for the first nine months of 2023 compared to 12.60% and 10.73%, for the same periods, respectively of 2022. Balance Sheet and Asset Quality
o The Company’s loan portfolio increased by $193.28 million, or 8.05%, from December 31, 2022. Excluding the Surrey transaction, the loan portfolio decreased approximately $45.81 million, or 1.91%. o Deposits increased $67.32 million, or 2.51%, from year-end 2022. Excluding the Surrey transaction, deposits decreased approximately $336.31 million, or 12.55%, from December 31, 2022. o The Company repurchased 299,012 common shares during the third quarter of 2023 for a total cost of $9.37 million. The Company repurchased 578,579 common shares year-to-date for a total cost of $17.06 million. The Company recently announced a new 2.7 million share repurchase program that replaces the small remainder of the prior program and expires December 31, 2026. o Non-performing loans to total loans remained at 0.71% when compared with the prior quarter of June 30, 2023. The Company experienced net charge-offs for the third quarter of 2023 of $1.46 million, or 0.22%, of annualized average loans, compared to net charge-offs of $1.05 million, or 0.18%, of annualized average loans for the same period in 2022. o The allowance for credit losses to total loans was 1.39% at September 30, 2023 compared to 1.38% for the second quarter of 2023. o Accumulated other comprehensive loss of $17.44 million at September 30, 2023, is primarily attributable to a relatively small decline in the market value of investment securities compared to book value after the significant increases in benchmark interest rates over the last seven quarters. o Book value per share at September 30, 2023, was $26.55, an increase of $0.54 from year-end 2022. Non-GAAP Financial Measures
In addition to financial statements prepared in accordance with U.S. generally accepted accounting principles (“GAAP”), the Company uses certain non-GAAP financial measures that provide useful information for financial and operational decision making, evaluating trends, and comparing financial results to other financial institutions. The non-GAAP financial measures presented in this news release include “tangible book value per common share,” “return on average tangible common equity,” “adjusted earnings,” “adjusted diluted earnings per share,” “adjusted return on average assets,” “adjusted return on average common equity,” “adjusted return on average tangible common equity,” and certain financial measures presented on a fully taxable equivalent (“FTE”) basis. FTE basis is calculated using the federal statutory income tax rate of 21%. While the Company believes certain non-GAAP financial measures enhance the understanding of its business and performance, they are supplemental and not a substitute for, or more important than, financial measures prepared in accordance with GAAP and may not be comparable to those reported by other financial institutions.
About First Community Bankshares, Inc.
First Community Bankshares, Inc., a financial holding company headquartered in Bluefield, Virginia, provides banking products and services through its wholly owned subsidiary First Community Bank. First Community Bank operated 53 branch banking locations in Virginia, West Virginia, North Carolina, and Tennessee as of September 30, 2023. First Community Bank offers wealth management and investment advice and services through its Trust Division and through its wholly owned subsidiary, First Community Wealth Management, which collectively managed and administered $1.40 billion in combined assets as of September 30, 2023. The Company reported consolidated assets of $3.28 billion as of September 30, 2023. The Company’s common stock is listed on the NASDAQ Global Select Market under the trading symbol, “FCBC”. Additional investor information is available on the Company’s website at www.firstcommunitybank.com.
This news release may include forward-looking statements. These forward-looking statements are based on current expectations that involve risks, uncertainties, and assumptions. Should one or more of these risks or uncertainties materialize or should underlying assumptions prove incorrect, actual results may differ materially. These risks include: changes in business or other market conditions; the timely development, production and acceptance of new products and services; the challenge of managing asset/liability levels; the management of credit risk and interest rate risk; the difficulty of keeping expense growth at modest levels while increasing revenues; and other risks detailed from time to time in the Company’s Securities and Exchange Commission reports including, but not limited to, the Annual Report on Form 10-K for the most recent fiscal year end. Pursuant to the Private Securities Litigation Reform Act of 1995, the Company does not undertake to update forward-looking statements to reflect circumstances or events that occur after the date the forward-looking statements are made.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME (Unaudited) Three Months Ended Nine Months Ended September 30, June 30, March 31, December 31, September 30, September 30, (Amounts in thousands, except share and per share data) 2023 2023 2023 2022 2022 2023 2022 Interest income Interest and fees on loans $ 33,496 $ 31,927 $ 27,628 $ 27,873 $ 26,405 $ 93,051 $ 76,697 Interest on securities 1,912 2,057 2,099 1,900 1,785 6,068 4,086 Interest on deposits in banks 697 885 462 1,215 1,532 2,044 2,548 Total interest income 36,105 34,869 30,189 30,988 29,722 101,163 83,331 Interest expense Interest on deposits 2,758 1,930 718 366 380 5,406 1,288 Interest on borrowings - 77 59 1 - 136 1 Total interest expense 2,758 2,007 777 367 380 5,542 1,289 Net interest income 33,347 32,862 29,412 30,621 29,342 95,621 82,042 Provision for credit losses 1,109 4,105 1,742 3,416 685 6,956 3,156 Net interest income after provision 32,238 28,757 27,670 27,205 28,657 88,665 78,886 Noninterest income 9,622 8,785 8,583 9,184 9,950 26,990 27,998 Noninterest expense 22,913 24,671 20,813 20,730 21,145 68,397 62,386 Income before income taxes 18,947 12,871 15,440 15,659 17,462 47,258 44,498 Income tax expense 4,307 3,057 3,658 3,076 4,111 11,022 10,419 Net income $ 14,640 $ 9,814 $ 11,782 $ 12,583 $ 13,351 $ 36,236 $ 34,079 Adjustment to Net Income for Fair Value Changes to Restricted Stock Units (tax-effected) $ 237 $ 335 $ 20 $ - $ - $ 592 $ - Adjusted Net Income for diluted earnings per share $ 14,877 $ 10,149 $ 11,802 $ 12,583 $ 13,351 $ 36,828 $ 34,079 Earnings per common share Basic $ 0.78 $ 0.53 $ 0.73 $ 0.78 $ 0.82 $ 2.03 $ 2.05 Diluted $ 0.79 $ 0.55 $ 0.72 $ 0.77 $ 0.81 $ 2.06 $ 2.05 Cash dividends per common share Regular 0.29 0.29 0.29 0.29 0.27 0.87 0.83 Weighted average shares outstanding Basic 18,786,032 18,407,078 16,228,297 16,229,289 16,378,022 17,816,505 16,617,766 Diluted 18,831,836 18,431,598 16,289,489 16,281,922 16,413,202 17,857,494 16,654,697 Performance ratios Return on average assets 1.74 % 1.18 % 1.55 % 1.59 % 1.63 % 1.49 % 1.41 % Return on average common equity 11.63 % 8.04 % 11.15 % 11.99 % 12.60 % 10.25 % 10.73 % Return on average tangible common equity(1) 17.11 % 11.65 % 16.19 % 17.75 % 18.51 % 14.94 % 15.71 %
(1 ) A non-GAAP financial measure defined as net income divided by average stockholders’ equity less average goodwill and other intangible assets CONDENSED CONSOLIDATED QUARTERLY NONINTEREST INCOME AND EXPENSE (Unaudited) Three Months Ended Nine Months Ended September 30, June 30, March 31, December 31, September 30, September 30, (Amounts in thousands) 2023 2023 2023 2022 2022 2023 2022 Noninterest income Wealth management $ 1,145 $ 965 $ 1,017 $ 958 $ 932 $ 3,127 $ 2,897 Service charges on deposits 3,729 3,471 3,159 3,354 3,689 10,359 10,859 Other service charges and fees 3,564 3,460 3,082 3,006 2,988 10,106 9,302 (Loss) gain on sale of securities - (28 ) 7 - - (21 ) - Gain on divestiture - - - - 1,658 - 1,658 Other operating income 1,184 917 1,318 1,866 683 3,419 3,282 Total noninterest income $ 9,622 $ 8,785 $ 8,583 $ 9,184 $ 9,950 $ 26,990 $ 27,998 Noninterest expense Salaries and employee benefits $ 12,673 $ 12,686 $ 11,595 $ 11,913 $ 12,081 $ 36,954 $ 35,270 Occupancy expense 1,271 1,276 1,168 1,196 1,188 3,715 3,622 Furniture and equipment expense 1,480 1,508 1,401 1,413 1,478 4,389 4,588 Service fees 2,350 2,284 2,019 1,905 1,635 6,653 5,701 Advertising and public relations 968 846 643 574 718 2,457 1,835 Professional fees 172 281 327 98 208 780 1,205 Amortization of intangibles 536 425 234 364 365 1,195 1,082 FDIC premiums and assessments 392 423 320 330 321 1,135 796 Merger expense - 2,014 379 596 - 2,393 - Divestiture expense - - - - 153 - 153 Other operating expense 3,071 2,928 2,727 2,341 2,998 8,726 8,134 Total noninterest expense $ 22,913 $ 24,671 $ 20,813 $ 20,730 $ 21,145 $ 68,397 $ 62,386 RECONCILIATION OF GAAP NET INCOME TO NON-GAAP ADJUSTED EARNINGS (Unaudited) Three Months Ended Nine Months Ended September 30, June 30, March 31, December 31, September 30, September 30, (Amounts in thousands, except per share data) 2023 2023 2023 2022 2022 2023 2022 Adjusted Net Income for diluted earnings per share $ 14,877 $ 10,149 $ 11,802 $ 12,583 $ 13,351 $ 36,828 $ 34,079 Non-GAAP adjustments: Loss (gain) on sale of securities - 28 (7 ) - - 21 - Merger expense - 2,014 379 596 - 2,393 - Day 2 provision for allowance for credit losses - Surrey - 1,614 - - - 1,614 - Divestiture expense - - - - 153 - 153 Gain on divestiture - - - - (1,658 ) - (1,658 ) Other items(1) (204 ) - - (450 ) - - (92 ) Total adjustments (204 ) 3,656 372 146 (1,505 ) 4,028 (1,597 ) Tax effect (49 ) 522 10 (29 ) (361 ) 532 (383 ) Adjusted earnings, non-GAAP $ 14,722 $ 13,283 $ 12,163 $ 12,758 $ 12,207 $ 40,324 $ 32,865 Adjusted diluted earnings per common share, non-GAAP $ 0.78 $ 0.72 $ 0.75 $ 0.78 $ 0.74 $ 2.26 $ 1.97 Performance ratios, non-GAAP Adjusted return on average assets 1.75 % 1.60 % 1.60 % 1.61 % 1.49 % 1.66 % 1.36 % Adjusted return on average common equity 11.70 % 10.88 % 11.51 % 12.16 % 11.52 % 11.40 % 10.35 % Adjusted return on average tangible common equity(2) 17.21 % 15.77 % 16.72 % 17.93 % 16.92 % 16.62 % 15.16 %
(1 ) Includes other non-recurring income and expense items (2 ) A non-GAAP financial measure defined as adjusted earnings divided by average stockholders’ equity less average goodwill and other intangible assets AVERAGE BALANCE SHEETS AND NET INTEREST INCOME ANALYSIS (Unaudited) Three Months Ended September 30, 2023 2022 Average Average Yield/ Average Average Yield/ (Amounts in thousands) Balance Interest(1) Rate(1) Balance Interest(1) Rate(1) Assets Earning assets Loans(2)(3) $ 2,604,885 $ 33,566 5.11 % $ 2,334,596 $ 26,474 4.50 % Securities available for sale 284,659 1,952 2.72 % 301,360 1,833 2.41 % Interest-bearing deposits 50,855 697 5.44 % 275,290 1,531 2.21 % Total earning assets 2,940,399 36,215 4.89 % 2,911,246 29,838 4.07 % Other assets 393,001 328,534 Total assets $ 3,333,400 $ 3,239,780 Liabilities and stockholders’ equity Interest-bearing deposits Demand deposits $ 699,066 $ 165 0.09 % $ 689,376 $ 28 0.02 % Savings deposits 862,121 1,941 0.89 % 887,454 67 0.03 % Time deposits 263,940 652 0.98 % 317,294 285 0.36 % Total interest-bearing deposits 1,825,127 2,758 0.60 % 1,894,124 380 0.08 % Borrowings Retail repurchase agreements 1,254 - N/M 2,378 - N/M Total borrowings 1,254 - N/M 2,378 - N/M Total interest-bearing liabilities 1,826,381 2,758 0.60 % 1,896,502 380 0.08 % Noninterest-bearing demand deposits 964,093 881,429 Other liabilities 43,574 41,373 Total liabilities 2,834,048 2,819,304 Stockholders’ equity 499,352 420,476 Total liabilities and stockholders’ equity $ 3,333,400 $ 3,239,780 Net interest income, FTE(1) $ 33,457 $ 29,458 Net interest rate spread 4.29 % 3.99 % Net interest margin, FTE(1) 4.51 % 4.01 %
(1 ) Interest income and average yield/rate are presented on a FTE, non-GAAP, basis using the federal statutory income tax rate of 21%. (2 ) Nonaccrual loans are included in the average balance; however, no related interest income is recorded during the period of nonaccrual. (3 ) Interest on loans includes non-cash and accelerated purchase accounting accretion of $874 thousand and $487 thousand for the three months ended September 30, 2023 and 2022, respectively. AVERAGE BALANCE SHEETS AND NET INTEREST INCOME ANALYSIS (Unaudited) Nine Months Ended September 30, 2023 2022 Average Average Yield/ Average Average Yield/ (Amounts in thousands) Balance Interest(1) Rate(1) Balance Interest(1) Rate(1) Assets Earning assets Loans(2)(3) $ 2,523,814 $ 93,261 4.94 % $ 2,269,974 $ 76,886 4.53 % Securities available for sale 306,435 6,191 2.70 % 241,640 4,230 2.34 % Interest-bearing deposits 51,759 2,047 5.29 % 398,326 2,549 0.86 % Total earning assets 2,882,008 101,499 4.71 % 2,909,940 83,665 3.84 % Other assets 366,243 329,508 Total assets $ 3,248,251 $ 3,239,448 Liabilities and stockholders’ equity Interest-bearing deposits Demand deposits $ 682,820 $ 225 0.04 % $ 689,226 $ 85 0.02 % Savings deposits 850,411 3,731 0.59 % 888,062 200 0.03 % Time deposits 272,435 1,450 0.71 % 331,808 1,003 0.40 % Total interest-bearing deposits 1,805,666 5,406 0.40 % 1,909,096 1,288 0.09 % Borrowings Federal funds purchased 3,532 135 5.11 % - - 0.00 % Retail repurchase agreements 1,674 1 0.06 % 2,161 1 0.07 % Total borrowings 5,206 136 3.49 % 2,161 1 0.07 % Total interest-bearing liabilities 1,810,872 5,542 0.41 % 1,911,257 1,289 0.09 % Noninterest-bearing demand deposits 924,591 864,119 Other liabilities 40,014 39,487 Total liabilities 2,775,477 2,814,863 Stockholders’ equity 472,774 424,585 Total liabilities and stockholders’ equity $ 3,248,251 $ 3,239,448 Net interest income, FTE(1) $ 95,957 $ 82,376 Net interest rate spread 4.30 % 3.75 % Net interest margin, FTE(1) 4.45 % 3.78 %
(1 ) Interest income and average yield/rate are presented on a FTE, non-GAAP, basis using the federal statutory income tax rate of 21%. (2 ) Nonaccrual loans are included in the average balance; however, no related interest income is recorded during the period of nonaccrual. (3 ) Interest on loans includes non-cash and accelerated purchase accounting accretion of $1.95 million and $2.22 million for the nine months ended September 30, 2023 and 2022, respectively. CONDENSED CONSOLIDATED QUARTERLY BALANCE SHEETS (Unaudited) September 30, June 30, March 31, December 31, September 30, (Amounts in thousands, except per share data) 2023 2023 2023 2022 2022 Assets Cash and cash equivalents $ 113,397 $ 152,660 $ 92,385 $ 170,846 $ 229,095 Debt securities available for sale 275,332 314,373 308,269 300,349 299,620 Loans held for investment, net of unearned income 2,593,472 2,621,073 2,388,897 2,400,197 2,362,733 Allowance for credit losses (36,031 ) (36,177 ) (30,789 ) (30,556 ) (29,388 ) Loans held for investment, net 2,557,441 2,584,896 2,358,108 2,369,641 2,333,345 Premises and equipment, net 51,205 53,546 47,407 47,340 47,891 Other real estate owned 243 339 481 703 559 Interest receivable 10,428 10,185 8,646 9,279 8,345 Goodwill 143,946 143,946 129,565 129,565 129,565 Other intangible assets 15,681 16,217 3,942 4,176 4,541 Other assets 116,552 115,275 102,869 103,673 107,838 Total assets $ 3,284,225 $ 3,391,437 $ 3,051,672 $ 3,135,572 $ 3,160,799 Liabilities Deposits Noninterest-bearing $ 944,301 $ 974,995 $ 823,297 $ 872,168 $ 878,423 Interest-bearing 1,801,835 1,877,683 1,761,327 1,806,647 1,831,798 Total deposits 2,746,136 2,852,678 2,584,624 2,678,815 2,710,221 Securities sold under agreements to repurchase 1,029 1,348 1,866 1,874 1,958 Interest, taxes, and other liabilities 41,393 38,691 33,451 32,898 36,362 Total liabilities 2,788,558 2,892,717 2,619,941 2,713,587 2,748,541 Stockholders’ equity Common stock 18,671 18,969 16,243 16,225 16,273 Additional paid-in capital 180,951 189,917 128,666 128,508 129,914 Retained earnings 313,489 304,295 300,047 292,971 285,096 Accumulated other comprehensive loss (17,444 ) (14,461 ) (13,225 ) (15,719 ) (19,025 ) Total stockholders’ equity 495,667 498,720 431,731 421,985 412,258 Total liabilities and stockholders’ equity $ 3,284,225 $ 3,391,437 $ 3,051,672 $ 3,135,572 $ 3,160,799 Shares outstanding at period-end 18,671,470 18,969,281 16,243,551 16,225,399 16,273,177 Book value per common share $ 26.55 $ 26.29 $ 26.58 $ 26.01 $ 25.33 Tangible book value per common share(1) 18.00 17.85 18.36 17.76 17.09
(1 ) A non-GAAP financial measure defined as stockholders’ equity less goodwill and other intangible assets, divided by shares outstanding SELECTED CREDIT QUALITY INFORMATION (Unaudited) September 30, June 30, March 31, December 31, September 30, (Amounts in thousands) 2023 2023 2023 2022 2022 Allowance for Credit Losses Balance at beginning of period: Allowance for credit losses - loans $ 36,177 $ 30,789 $ 30,556 $ 29,388 $ 29,749 Allowance for credit losses - loan commitments(1) 964 964 1,196 1,416 956 Total allowance for credit losses beginning of period 37,141 31,753 31,752 30,804 30,705 Adjustments to beginning balance: Allowance for credit losses - loans - Surrey acquisition for purchased credit deteriorated loans - 2,011 - - - Allowance for credit losses - loan commitments(1) - - - - - Net Adjustments - 2,011 - - - Provision for credit losses: Provision for credit losses - loans 1,315 4,105 1,974 3,416 685 (Recovery of) provision for credit losses - loan commitments(1) (206 ) - (232 ) (220 ) 460 Total provision for credit losses - loans and loan commitments 1,109 4,105 1,742 3,196 1,145 Charge-offs (2,157 ) (1,993 ) (2,570 ) (2,873 ) (2,158 ) Recoveries 696 1,265 829 625 1,112 Net (charge-offs) recoveries (1,461 ) (728 ) (1,741 ) (2,248 ) (1,046 ) Balance at end of period: Allowance for credit losses - loans 36,031 36,177 30,789 30,556 29,388 Allowance for credit losses - loan commitments(1) 758 964 964 1,196 1,416 Ending balance $ 36,789 $ 37,141 $ 31,753 $ 31,752 $ 30,804 Nonperforming Assets Nonaccrual loans $ 18,366 $ 18,628 $ 15,557 $ 15,208 $ 15,303 Accruing loans past due 90 days or more 59 - 23 142 131 Modified loans past due 90 days or more(2) - - - - - Troubled debt restructurings (“TDRs”)(3) - - - 1,346 1,331 Total nonperforming loans 18,425 18,628 15,580 16,696 16,765 OREO 243 339 481 703 559 Total nonperforming assets $ 18,668 $ 18,967 $ 16,061 $ 17,399 $ 17,324 Additional Information Total modified loans(2) $ 1,674 $ 642 $ 429 $ - $ - Total accruing TDRs(4) $ - $ - $ - $ 7,112 $ 7,028 Asset Quality Ratios Nonperforming loans to total loans 0.71 % 0.71 % 0.65 % 0.70 % 0.71 % Nonperforming assets to total assets 0.57 % 0.56 % 0.53 % 0.55 % 0.55 % Allowance for credit losses to nonperforming loans 195.55 % 194.21 % 197.62 % 183.01 % 175.29 % Allowance for credit losses to total loans 1.39 % 1.38 % 1.29 % 1.27 % 1.24 % Annualized net charge-offs (recoveries) to average loans 0.22 % 0.11 % 0.29 % 0.37 % 0.18 %
(1 ) Prior quarter information for loan commitments has been reclassed for presentation purposes. (2 ) ASU 2022-02, Financial Instruments-Credit Losses (Topic 326), Troubled Debt Restructurings and Vintage Disclosures. ASU adopted effective January 1, 2023. (3 ) Accruing TDRs restructured within the past six months or nonperforming as reported prior to the adoption of ASU 2022-02 Financial Instruments-Credit Losses (Topic 326), Troubled Debt Restructurings and Vintage Disclosures. (4 ) Accruing total TDRs as reported prior to the adoption of ASU 2022-02 Financial Instruments-Credit Losses (Topic 326), Troubled Debt Restructurings and Vintage Disclosures. FOR MORE INFORMATION, CONTACT:
David D. Brown
(276) 326-9000
