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First Community Bankshares, Inc. Announces Third Quarter 2022 Results and Quarterly Cash Dividend
Source: Nasdaq GlobeNewswire / 25 Oct 2022 16:06:49 America/New_York
BLUEFIELD, Va., Oct. 25, 2022 (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, 2022. The Company reported net income of $13.35 million, or $0.81 per diluted common share, for the quarter ended September 30, 2022. Net income for the nine months ended September 30, 2022, was $34.08 million or $2.05 per diluted common share.
The Company also declared a quarterly cash dividend to common shareholders of twenty-nine cents ($0.29) per common share, an increase of two cents ($0.02), or 7.41%, over the quarterly dividend declared in the same quarter of 2021. The quarterly dividend is payable to common shareholders of record on November 4, 2022, and is expected to be paid on or about November 18, 2022. This marks the 37th consecutive year of regular dividends to common shareholders.
Third Quarter 2022 and Current Highlights
Income Statement
- Net income of $13.35 million for the quarter was an increase of $743 thousand compared to $12.61 million recorded in the same quarter of 2021. The increase is primarily attributable to an increase in net interest income of $4.2 million and the branch sale gains of $1.66 million offset by an increase in the provision for credit losses of $2.08 million and an increase in salaries and employee benefits of $1.44 million compared to 2021.
- On September 16, 2022, the Company completed the sale of First Community Bank’s Emporia, Virginia branch to Benchmark Community Bank. A gain of $1.66 million was realized from the sale.
- When adjusted for non-core and non-recurring items, adjusted earnings have increased from $9.52 million in the first quarter and $11.14 million in the second quarter of 2022.
- Net interest margin for the third quarter was 4.01%, which was a 45 basis point increase from 3.56% reported for third quarter of 2021. The yield on earning assets increased 42 basis points, primarily driven by increased earnings on securities and overnight funds.
- The cost of interest-bearing deposits declined 6 basis points to 0.08%, primarily driven by a decrease in the cost of time deposits and focus on non-maturing deposits. Additionally, non-maturing deposit balances remained strong even after the Emporia branch sale.
- Net interest income increased $4.2 million compared to the same quarter of 2021. Interest income from securities of $1.79 million was an increase of $1.34 million over the third quarter of 2021. Interest on fed funds also increased $1.31 million to $1.53 million for the third quarter as a result of the Federal Open Market Committee’s incremental 300 basis point rate increase in overnight rates throughout 2022 as compared to the overnight rates of 2021. Interest and fees on loans increased $1.29 million from the same quarter of 2021 and is primarily attributable to loan demand and originations.
- The provision for credit losses of $685 thousand for the quarter was an increase of $2.08 million compared to the same quarter of 2021. The increase was attributable to a return to normalized provisions as compared with prior year recoveries of pandemic-related provisioning.
- Despite the significant increase in credit loss provision over 2021, annualized return on average assets was 1.63% for the third quarter and 1.41% for the first nine months of 2022. Annualized return on average common equity was 12.60% for the third quarter and 10.73% for the first nine months of 2022.
- Salaries and employee benefits for the third quarter increased $1.44 million, or 13.48%, over the same quarter in 2021. Salaries and employee benefits for the first nine months increased $3.52 million, or 11.10%, over the first nine months of 2021. During the first quarter of 2022, the Company implemented annualized wage increases of approximately $2.5 million as part of its ongoing strategic initiative to enhance Human Capital Management, which included an increased minimum wage.
Balance Sheet and Asset Quality
- The Company’s loan portfolio increased by $197.16 million, an annualized growth rate of 12.17%, during the first nine months of 2022. Loan demand and originations were strong in all categories, including construction, commercial real estate, residential mortgage, and consumer loans.
- Total deposits sold to Benchmark as part of the Emporia branch sale totaled $61.05 million.
- During the third quarter, the Company repurchased 235,400 of its common shares for $7.38 million. The Company repurchased 650,907 common shares for $19.42 million during the first nine months of 2022.
- Non-performing loans to total loans remained very low at 0.71% of total loans and continues the declining trend experienced over the past four quarters. The Company experienced net charge-offs for the third quarter of 2022 of $1.05 million, or 0.18% of annualized average loans, compared to net charge-offs of $586 thousand, or 0.11% of annualized average loans, for the same period in 2021. Net charge-offs for the nine-month period ended September 30, 2022, were $1.63 million, or 0.10% of annualized average loans, compared to net charge-offs of $1.79 million, or 0.11% of annualized average loans, for the same period in 2021.
- The allowance for credit losses to total loans decreased slightly to 1.24% of total loans.
- Book value per share at September 30, 2022, was $25.33, a slight decrease of $0.01 from year-end 2021.
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 48 branch banking locations in Virginia, West Virginia, North Carolina, and Tennessee as of September 30, 2022. 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 $1.19 billion in combined assets as of September 30, 2022. The Company reported consolidated assets of $3.16 billion as of September 30, 2022. 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 (Amounts in thousands, except share and per share data) September 30, June 30, March 31, December 31, September 30, September 30, 2022 2022 2022 2021 2021 2022 2021 Interest income Interest and fees on loans $ 26,405 $ 25,651 $ 24,641 $ 25,236 $ 25,119 $ 76,697 $ 77,596 Interest on securities 1,785 1,551 750 362 445 4,086 1,375 Interest on deposits in banks 1,532 768 248 234 225 2,548 507 Total interest income 29,722 27,970 25,639 25,832 25,789 83,331 79,478 Interest expense Interest on deposits 380 422 486 600 642 1,288 2,235 Interest on borrowings - 1 - - 1 1 1 Total interest expense 380 423 486 600 643 1,289 2,236 Net interest income 29,342 27,547 25,153 25,232 25,146 82,042 77,242 Provision for (recovery of) credit losses 685 510 1,961 (846 ) (1,394 ) 3,156 (7,625 ) Net interest income after provision 28,657 27,037 23,192 26,078 26,540 78,886 84,867 Noninterest income 9,950 8,854 9,194 9,215 8,720 27,998 25,086 Noninterest expense 21,145 21,255 19,986 21,701 18,836 62,386 57,017 Income before income taxes 17,462 14,636 12,400 13,592 16,424 44,498 52,936 Income tax expense 4,111 3,423 2,885 3,037 3,816 10,419 12,323 Net income $ 13,351 $ 11,213 $ 9,515 $ 10,555 $ 12,608 $ 34,079 $ 40,613 Earnings per common share Basic $ 0.82 $ 0.67 $ 0.57 $ 0.62 $ 0.73 $ 2.05 $ 2.32 Diluted 0.81 0.67 0.56 0.62 0.73 2.05 2.32 Cash dividends per common share Regular 0.29 0.27 0.27 0.27 0.27 0.83 0.77 Weighted average shares outstanding Basic 16,378,022 16,662,817 16,817,284 16,974,005 17,221,244 16,617,766 17,457,477 Diluted 16,413,202 16,682,615 16,864,515 17,038,980 17,279,576 16,654,697 17,511,900 Performance ratios Return on average assets 1.63 % 1.38 % 1.20 % 1.32 % 1.59 % 1.41 % 1.74 % Return on average common equity 12.60 % 10.61 % 8.98 % 9.77 % 11.65 % 10.73 % 12.70 % Return on average tangible common equity(1) 18.51 % 15.56 % 13.10 % 14.28 % 17.04 % 15.71 % 18.63 % (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) 2022 2022 2022 2021 2021 2022 2021 Noninterest income Wealth management $ 932 $ 993 $ 972 $ 940 $ 974 $ 2,897 $ 2,913 Service charges on deposits 3,689 3,672 3,498 3,718 3,599 10,859 9,728 Other service charges and fees 2,988 3,297 3,017 3,091 3,143 9,302 9,331 Net FDIC indemnification asset amortization - - - - - - (1,226 ) Gain on divestiture 1,658 - - - - 1,658 - Other operating income 683 892 1,707 1,466 1,004 3,282 4,340 Total noninterest income $ 9,950 $ 8,854 $ 9,194 $ 9,215 $ 8,720 $ 27,998 $ 25,086 Noninterest expense Salaries and employee benefits $ 12,081 $ 11,518 $ 11,671 $ 12,493 $ 10,646 $ 35,270 $ 31,746 Occupancy expense 1,188 1,165 1,269 1,368 1,155 3,622 3,545 Furniture and equipment expense 1,478 1,496 1,614 1,418 1,385 4,588 4,209 Service fees 1,635 2,563 1,503 1,946 1,530 5,701 4,378 Advertising and public relations 718 577 540 589 536 1,835 1,487 Professional fees 208 544 453 455 313 1,205 1,069 Amortization of intangibles 365 360 357 364 365 1,082 1,082 FDIC premiums and assessments 321 257 218 213 216 796 619 Divestiture expense 153 - - - - 153 - Other operating expense 2,998 2,775 2,361 2,855 2,690 8,134 8,882 Total noninterest expense $ 21,145 $ 21,255 $ 19,986 $ 21,701 $ 18,836 $ 62,386 $ 57,017 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, 2022 2022 2022 2021 2021 2022 2021 (Amounts in thousands, except per share data) Net income $ 13,351 $ 11,213 $ 9,515 $ 10,555 $ 12,608 $ 34,079 $ 40,613 Non-GAAP adjustments: Net (gain) loss on sale of securities - - - - - - - Divestiture expense 153 - - - - 153 - Gain on divestiture (1,658 ) - - - - (1,658 ) Other items(1) - (92 ) - - - (92 ) - Total adjustments (1,505 ) (92 ) - - - (1,597 ) - Tax effect (361 ) (22 ) - - - (383 ) - Adjusted earnings, non-GAAP $ 12,207 $ 11,143 $ 9,515 $ 10,555 $ 12,608 $ 32,865 $ 40,613 Adjusted diluted earnings per common share, non-GAAP $ 0.74 $ 0.67 $ 0.56 $ 0.62 $ 0.73 $ 1.97 $ 2.32 Performance ratios, non-GAAP Adjusted return on average assets 1.49 % 1.37 % 1.20 % 1.32 % 1.59 % 1.36 % 1.74 % Adjusted return on average common equity 11.52 % 10.55 % 8.98 % 9.77 % 11.65 % 10.35 % 12.70 % Adjusted return on average tangible common equity(2) 16.92 % 15.46 % 13.10 % 14.28 % 17.04 % 15.16 % 18.63 % (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, 2022 2021 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) $ 2,334,596 $ 26,474 4.50 % $ 2,149,647 $ 25,161 4.64 % Securities available for sale 301,360 1,833 2.41 % 79,995 509 2.52 % Interest-bearing deposits 275,290 1,531 2.21 % 586,787 224 0.15 % Total earning assets 2,911,246 29,838 4.07 % 2,816,429 25,894 3.65 % Other assets 328,534 330,679 Total assets $ 3,239,780 $ 3,147,108 Liabilities and stockholders' equity Interest-bearing deposits Demand deposits $ 689,376 $ 28 0.02 % $ 651,237 $ 27 0.02 % Savings deposits 887,454 67 0.03 % 826,144 63 0.03 % Time deposits 317,294 285 0.36 % 378,895 551 0.58 % Total interest-bearing deposits 1,894,124 380 0.08 % 1,856,276 641 0.14 % Borrowings Retail repurchase agreements 2,378 - N/M 1,040 1 0.07 % Total borrowings 2,378 - N/M 1,040 1 0.07 % Total interest-bearing liabilities 1,896,502 380 0.08 % 1,857,316 642 0.14 % Noninterest-bearing demand deposits 881,429 824,112 Other liabilities 41,373 36,419 Total liabilities 2,819,304 2,717,847 Stockholders' equity 420,476 429,261 Total liabilities and stockholders' equity $ 3,239,780 $ 3,147,108 Net interest income, FTE(1) $ 29,458 $ 25,252 Net interest rate spread 3.99 % 3.51 % Net interest margin, FTE(1) 4.01 % 3.56 % (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 $487 thousand and $1.01 million for the three months ended September 30, 2022 and 2021, respectively. AVERAGE BALANCE SHEETS AND NET INTEREST INCOME ANALYSIS (Unaudited) Nine Months Ended September 30, 2022 2021 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) $ 2,269,974 $ 76,886 4.53 % $ 2,149,556 $ 77,722 4.83 % Securities available for sale 241,640 4,230 2.34 % 82,563 1,590 2.57 % Interest-bearing deposits 398,326 2,549 0.86 % 555,435 508 0.12 % Total earning assets 2,909,940 83,665 3.84 % 2,787,554 79,820 3.83 % Other assets 329,508 331,239 Total assets $ 3,239,448 $ 3,118,793 Liabilities and stockholders' equity Interest-bearing deposits Demand deposits $ 689,226 $ 85 0.02 % $ 639,809 $ 99 0.02 % Savings deposits 888,062 200 0.03 % 807,863 217 0.04 % Time deposits 331,808 1,003 0.40 % 395,465 1,918 0.65 % Total interest-bearing deposits 1,909,096 1,288 0.09 % 1,843,137 2,234 0.16 % Borrowings Retail repurchase agreements 2,161 1 0.07 % 1,179 1 0.07 % Total borrowings 2,161 1 0.07 % 1,179 1 0.07 % Total interest-bearing liabilities 1,911,257 1,289 0.09 % 1,844,316 2,235 0.16 % Noninterest-bearing demand deposits 864,119 809,128 Other liabilities 39,487 37,871 Total liabilities 2,814,863 2,691,315 Stockholders' equity 424,585 427,478 Total liabilities and stockholders' equity $ 3,239,448 $ 3,118,793 Net interest income, FTE(1) $ 82,376 $ 77,585 Net interest rate spread 3.75 % 3.67 % Net interest margin, FTE(1) 3.78 % 3.72 % (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 $2.22 million and $3.45 million for the nine months ended September 30, 2022 and 2021, respectively. CONDENSED CONSOLIDATED QUARTERLY BALANCE SHEETS (Unaudited) September 30, June 30, March 31, December 31, September 30, (Amounts in thousands, except per share data) 2022 2022 2022 2021 2021 Assets Cash and cash equivalents $ 229,095 $ 398,242 $ 457,306 $ 677,439 $ 635,007 Debt securities available for sale 299,620 287,767 268,703 76,292 77,440 Loans held for investment, net of unearned income 2,362,733 2,299,798 2,244,296 2,165,569 2,152,103 Allowance for credit losses (29,388 ) (29,749 ) (28,981 ) (27,858 ) (29,877 ) Loans held for investment, net 2,333,345 2,270,049 2,215,315 2,137,711 2,122,226 Premises and equipment, net 47,891 49,752 50,912 52,284 52,842 Other real estate owned 559 579 848 1,015 1,240 Interest receivable 8,345 8,433 8,100 7,900 8,146 Goodwill 129,565 129,565 129,565 129,565 129,565 Other intangible assets 4,541 4,905 5,266 5,622 5,987 Other assets 107,838 109,085 108,112 106,691 107,258 Total assets $ 3,160,799 $ 3,258,377 $ 3,244,127 $ 3,194,519 $ 3,139,711 Liabilities Deposits Noninterest-bearing $ 878,423 $ 877,962 $ 860,652 $ 842,783 $ 820,147 Interest-bearing 1,831,798 1,920,577 1,922,292 1,886,608 1,853,699 Total deposits 2,710,221 2,798,539 2,782,944 2,729,391 2,673,846 Securities sold under agreements to repurchase 1,958 2,635 2,488 1,536 1,106 Interest, taxes, and other liabilities 36,362 39,157 34,539 35,817 37,395 Total liabilities 2,748,541 2,840,331 2,819,971 2,766,744 2,712,347 Stockholders' equity Common stock 16,273 16,502 16,782 16,878 17,071 Additional paid-in capital 129,914 136,705 144,088 147,619 154,086 Retained earnings 285,096 276,499 269,798 264,824 258,860 Accumulated other comprehensive loss (19,025 ) (11,660 ) (6,512 ) (1,546 ) (2,653 ) Total stockholders' equity 412,258 418,046 424,156 427,775 427,364 Total liabilities and stockholders' equity $ 3,160,799 $ 3,258,377 $ 3,244,127 $ 3,194,519 $ 3,139,711 Shares outstanding at period-end 16,273,177 16,502,144 16,781,975 16,878,220 17,071,052 Book value per common share $ 25.33 $ 25.33 $ 25.27 $ 25.34 $ 25.03 Tangible book value per common share(1) 17.09 17.18 17.24 17.34 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) 2022 2022 2022 2021 2021 Allowance for Credit Losses Beginning balance $ 29,749 $ 28,981 $ 27,858 $ 29,877 $ 31,857 Provision for (recovery of) credit losses charged to operations 685 510 1,961 (846 ) (1,394 ) Charge-offs (2,158 ) (1,469 ) (1,302 ) (1,887 ) (1,255 ) Recoveries 1,112 1,727 464 714 669 Net (charge-offs) recoveries (1,046 ) 258 (838 ) (1,173 ) (586 ) Ending balance $ 29,388 $ 29,749 $ 28,981 $ 27,858 $ 29,877 Nonperforming Assets Nonaccrual loans $ 15,303 $ 17,826 $ 20,487 $ 20,768 $ 22,070 Accruing loans past due 90 days or more 131 131 - 87 5 Troubled debt restructurings ("TDRs")(1) 1,331 515 1,141 1,367 359 Total nonperforming loans 16,765 18,472 21,628 22,222 22,434 OREO 559 579 848 1,015 1,240 Total nonperforming assets $ 17,324 $ 19,051 $ 22,476 $ 23,237 $ 23,674 Additional Information Total accruing TDRs(2) $ 7,028 $ 8,313 $ 8,782 $ 8,652 $ 8,185 Asset Quality Ratios Nonperforming loans to total loans 0.71 % 0.80 % 0.96 % 1.03 % 1.04 % Nonperforming assets to total assets 0.55 % 0.58 % 0.69 % 0.73 % 0.75 % Allowance for credit losses to nonperforming loans 175.29 % 161.05 % 134.00 % 125.36 % 133.18 % Allowance for credit losses to total loans 1.24 % 1.29 % 1.29 % 1.29 % 1.39 % Annualized net charge-offs (recoveries) to average loans 0.18 % -0.05 % 0.15 % 0.22 % 0.11 % (1) Accruing TDRs restructured within the past six months or nonperforming (2) Accruing total TDRs FOR MORE INFORMATION, CONTACT: David D. Brown (276) 326-9000 
