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First Community Bankshares, Inc. Announces Fourth Quarter 2022 Results and Quarterly Cash Dividend

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BLUEFIELD, Va., Jan. 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 December 31, 2022. The Company reported net income of $12.58 million, or $0.77 per diluted common share, for the quarter ended December 31, 2022. Net income for the year ended December 31, 2022, was $46.66 million or $2.82 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 February 10, 2023, and is expected to be paid on or about February 24, 2023. This marks the 38th consecutive year of regular dividends to common shareholders.

During the fourth quarter, the Company entered into an agreement to acquire Mount Airy, North Carolina-based Surrey Bancorp. The acquisition will strengthen the Company’s presence in western North Carolina, result in top market share in Mount Airy, and add approximately $500 million in assets. Surrey has a record of excellent financial performance and a very strong core deposit franchise across its seven branch network. The acquisition is subject to customary regulatory and shareholder approvals and is expected to close in the second quarter of 2023.

Fourth Quarter 2022 and Current Highlights

Income Statement

  • Net income of $12.58 million for the quarter was an increase of $2.03 million compared to $10.56 million recorded in the same quarter of 2021. The increase is primarily attributable to an increase in net interest income of $5.39 million as well as a decrease in noninterest expense of $971 thousand. The positive increases to income were offset by an increase in the provision for credit losses of $4.26 million compared to the same quarter of 2021.
  • Annualized return on average assets was 1.59% for the fourth quarter and 1.45% for year-end 2022. Annualized return on average common equity was 11.99% for the fourth quarter and 11.04% for year-end 2022.
  • Net interest margin for the fourth quarter was 4.34%, which was an 82 basis point increase from 3.52% reported for fourth quarter of 2021. The yield on earning assets increased 79 basis points, primarily driven by increased earnings on loans and securities.
  • The cost of interest-bearing deposits declined 5 basis points to 0.08%, primarily driven by a decrease in the cost of time deposits and an increase in non-maturing deposits.  
  • Net interest income increased $5.39 million compared to the same quarter of 2021. Interest and fees on loans increased $2.64 million from the same quarter of 2021 and is primarily attributable to loan demand and originations.   Interest income from securities of $1.90 million was an increase of $1.54 million over the fourth quarter of 2021. Interest on deposits in banks also increased $981 thousand to $1.22 million for the fourth quarter as a result of the Federal Open Market Committee’s incremental 425 basis point rate increase in overnight rates throughout 2022 as compared to the overnight rates of 2021.
  • The provision for credit losses of $3.42 million for the quarter was an increase of $4.26 million compared to the same quarter of 2021. The increase was largely attributable to the growth of the loan portfolio throughout 2022 and an economic forecast that projects higher unemployment rates and weaker macroeconomic trends. The fourth quarter and full year of 2021 included recoveries of pandemic-related provisioning.
  • Salaries and employee benefits for the fourth quarter decreased $580 thousand, or 4.64%, over the same quarter in 2021, while increasing $2.94 million, or 6.65%, for the full year of 2022 compared with 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 $234.63 million, a growth rate of 10.83%, during of 2022. Loan demand and originations were strong in all categories, including construction, commercial real estate, residential mortgage, and consumer loans.
  • During the fourth quarter, the Company repurchased 55,210 of its common shares for $1.89 million. The Company repurchased 706,117 common shares for $21.31 million during 2022.   Share repurchases have been curtailed due to the announced acquisition of Surrey Bancorp.
  • Non-performing loans to total loans remained low at 0.70% of total loans and continues the declining trend experienced over the past four quarters. The Company experienced net charge-offs for the fourth quarter of 2022 of $2.25 million, or 0.37% of annualized average loans, compared to net charge-offs of $1.17 million, or 0.22% of annualized average loans, for the same period in 2021. Net charge-offs for the year ended December 31, 2022, were $3.87 million, or 0.23% of annualized average loans, compared to net charge-offs of $2.96 million, or 0.18% of annualized average loans, for the same period in 2021.
  • The allowance for credit losses to total loans was 1.27% at December 31, 2022.
  • Book value per share at December 31, 2022, was $26.01, an increase of $0.67 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 December 31, 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 $1.28 billion in combined assets as of December 31, 2022. The Company reported consolidated assets of $3.14 billion as of December 31, 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 Twelve Months Ended
  December 31, September 30, June 30, March 31, December 31, December 31,
(Amounts in thousands, except share and per share data)2022 2022 2022 2022 2021 2022 2021
Interest income             
 Interest and fees on loans$27,873  $26,405  $25,651  $24,641  $25,236  $104,570  $102,832 
 Interest on securities 1,900   1,785   1,551   750   362   5,986   1,737 
 Interest on deposits in banks 1,215   1,532   768   248   234   3,763   741 
Total interest income 30,988   29,722   27,970   25,639   25,832   114,319   105,310 
Interest expense             
 Interest on deposits 366   380   422   486   600   1,654   2,835 
 Interest on borrowings 1   -   1   -   -   2   1 
Total interest expense 367   380   423   486   600   1,656   2,836 
Net interest income 30,621   29,342   27,547   25,153   25,232   112,663   102,474 
Provision for (recovery of) credit losses 3,416   685   510   1,961   (846)  6,572   (8,471)
Net interest income after provision 27,205   28,657   27,037   23,192   26,078   106,091   110,945 
Noninterest income 9,184   9,950   8,854   9,194   9,215   37,182   34,301 
Noninterest expense 20,730   21,145   21,255   19,986   21,701   83,116   78,718 
Income before income taxes 15,659   17,462   14,636   12,400   13,592   60,157   66,528 
Income tax expense 3,076   4,111   3,423   2,885   3,037   13,495   15,360 
Net income$12,583  $13,351  $11,213  $9,515  $10,555  $46,662  $51,168 
               
Earnings per common share             
 Basic$0.78  $0.82  $0.67  $0.57  $0.62  $2.82  $2.95 
 Diluted 0.77   0.81   0.67   0.56   0.62   2.82   2.94 
Cash dividends per common share             
 Regular 0.29   0.29   0.27   0.27   0.27   1.12   1.04 
Weighted average shares outstanding             
 Basic 16,229,289   16,378,022   16,662,817   16,817,284   16,974,005   16,519,848   17,335,615 
 Diluted 16,281,922   16,413,202   16,682,615   16,864,515   17,038,980   16,562,257   17,402,936 
Performance ratios             
 Return on average assets 1.59%  1.63%  1.38%  1.20%  1.32%  1.45%  1.63%
 Return on average common equity 11.99%  12.60%  10.61%  8.98%  9.77%  11.04%  11.96%
 Return on average tangible common equity(1) 17.75%  18.51%  15.56%  13.10%  14.28%  16.17%  17.53%
               
(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 Twelve Months Ended
  December 31,
 September 30,
 June 30, March 31, December 31,
 December 31,
(Amounts in thousands)2022 2022 2022 2022 2021 2022 2021
Noninterest income             
 Wealth management$958 $932 $993 $972 $940 $3,855 $3,853 
 Service charges on deposits 3,354  3,689  3,672  3,498  3,718  14,213  13,446 
 Other service charges and fees 3,006  2,988  3,297  3,017  3,091  12,308  12,422 
 Net FDIC indemnification asset amortization -  -  -  -  -  -  (1,226)
 Gain on divestiture -  1,658  -  -  -  1,658  - 
 Other operating income 1,866  683  892  1,707  1,466  5,148  5,806 
Total noninterest income$9,184 $9,950 $8,854 $9,194 $9,215 $37,182 $34,301 
Noninterest expense             
 Salaries and employee benefits$11,913 $12,081 $11,518 $11,671 $12,493 $47,183 $44,239 
 Occupancy expense 1,196  1,188  1,165  1,269  1,368  4,818  4,913 
 Furniture and equipment expense 1,413  1,478  1,496  1,614  1,418  6,001  5,627 
 Service fees 1,905  1,635  2,563  1,503  1,946  7,606  6,324 
 Advertising and public relations 574  718  577  540  589  2,409  2,076 
 Professional fees 98  208  544  453  455  1,303  1,524 
 Amortization of intangibles 364  365  360  357  364  1,446  1,446 
 FDIC premiums and assessments 330  321  257  218  213  1,126  832 
 Merger expense 596  -  -  -  -  596  - 
 Divestiture expense -  153  -  -  -  153  - 
 Other operating expense 2,341  2,998  2,775  2,361  2,855  10,475  11,737 
Total noninterest expense$20,730 $21,145 $21,255 $19,986 $21,701 $83,116 $78,718 


RECONCILIATION OF GAAP NET INCOME TO NON-GAAP ADJUSTED EARNINGS (Unaudited)
               
  Three Months EndedTwelve Months Ended
  December 31, September 30,
 June 30, March 31, December 31, December 31,
  2022
 2022
 2022
 2022
 2021
 2022
 2021
(Amounts in thousands, except per share data)             
Net income$12,583  $13,351  $11,213  $9,515  $10,555  $46,662  $51,168 
Non-GAAP adjustments:             
Merger expense 596   -   -   -   -   596   - 
Divestiture expense -   153   -   -   -   153   - 
Gain on divestiture -   (1,658)  -   -   -   (1,658)  
Other items(1) (450)  -   (92)  -   -   (542)  - 
Total adjustments 146   (1,505)  (92)  -   -   (1,451)  - 
Tax effect (29)  (361)  (22)  -   -   (412)  - 
Adjusted earnings, non-GAAP$12,758  $12,207  $11,143  $9,515  $10,555  $45,623  $51,168 
               
Adjusted diluted earnings per common share,             
non-GAAP$0.78  $0.74  $0.67  $0.56  $0.62  $2.75  $2.94 
Performance ratios, non-GAAP             
Adjusted return on average assets 1.61%  1.49%  1.37%  1.20%  1.32%  1.42%  1.63%
Adjusted return on average common equity 12.16%  11.52%  10.55%  8.98%  9.77%  10.80%  11.96%
Adjusted return on average tangible             
 common equity(2) 17.93%  16.92%  15.46%  13.10%  14.28%  15.84%  17.53%
               
(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 December 31,
   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)$2,383,161 $27,944 4.65% $2,163,613 $25,274 4.63%
 Securities available for sale 299,488  1,942 2.57%  76,556  418 2.17%
 Interest-bearing deposits 130,363  1,218 3.71%  613,377  237 0.15%
Total earning assets 2,813,012  31,104 4.39%  2,853,546  25,929 3.60%
Other assets 326,043      328,866    
Total assets$3,139,055     $3,182,412    
             
Liabilities and stockholders' equity           
Interest-bearing deposits           
 Demand deposits$666,517 $27 0.02% $668,335 $28 0.02%
 Savings deposits 856,755  106 0.05%  843,501  64 0.03%
 Time deposits 293,520  232 0.31%  362,869  509 0.56%
Total interest-bearing deposits 1,816,792  365 0.08%  1,874,705  601 0.13%
Borrowings           
 Retail repurchase agreements 2,473  1 0.07%  1,236  - N/M
Total borrowings 2,473  1 0.07%  1,236  - N/M
Total interest-bearing liabilities 1,819,265  366 0.08%  1,875,941  601 0.13%
Noninterest-bearing demand deposits 864,537      838,920    
Other liabilities 38,993      38,986    
Total liabilities 2,722,795      2,753,847    
Stockholders' equity 416,260      428,565    
Total liabilities and stockholders' equity$3,139,055     $3,182,412    
Net interest income, FTE(1)  $30,738     $25,328  
Net interest rate spread    4.31%     3.47%
Net interest margin, FTE(1)    4.34%     3.52%
             
(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 $395 thousand and $1.10 million for the three months ended December 31, 2022 and 2021, respectively.


AVERAGE BALANCE SHEETS AND NET INTEREST INCOME ANALYSIS (Unaudited)
             
  Twelve Months Ended December 31,
  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)$2,298,503 $104,830 4.56% $2,153,099 $102,996 4.78%
 Securities available for sale 256,221  6,172 2.41%  81,049  2,008 2.48%
 Interest-bearing deposits 330,785  3,767 1.14%  570,040  745 0.13%
Total earning assets 2,885,509  114,769 3.98%  2,804,188  105,749 3.77%
Other assets 328,635      330,640    
Total assets$3,214,144     $3,134,828    
             
Liabilities and stockholders' equity           
Interest-bearing deposits           
 Demand deposits$683,502 $112 0.02% $646,999 $127 0.02%
 Savings deposits 880,171  306 0.03%  816,845  281 0.03%
 Time deposits 322,158  1,235 0.38%  387,249  2,427 0.63%
Total interest-bearing deposits 1,885,831  1,653 0.09%  1,851,093  2,835 0.15%
Borrowings           
 Retail repurchase agreements 2,239  2 0.07%  1,194  1 0.07%
Total borrowings 2,239  2 0.07%  1,194  1 0.07%
Total interest-bearing liabilities 1,888,070  1,655 0.09%  1,852,287  2,836 0.15%
Noninterest-bearing demand deposits 864,224      816,638    
Other liabilities 39,363      38,151    
Total liabilities 2,791,657      2,707,076    
Stockholders' equity 422,487      427,752    
Total liabilities and stockholders' equity$3,214,144     $3,134,828    
Net interest income, FTE(1)  $113,114     $102,913  
Net interest rate spread    3.89%     3.62%
Net interest margin, FTE(1)    3.92%     3.67%
             
(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 $2.62 million and $4.66 million for the twelve months ended December 31, 2022 and 2021, respectively.


CONDENSED CONSOLIDATED QUARTERLY BALANCE SHEETS (Unaudited)
           
  December 31, September 30,
 June 30, March 31, December 31,
(Amounts in thousands, except per share data)2022 2022 2022 2022 2021
Assets         
Cash and cash equivalents$170,846  $229,095  $398,242  $457,306  $677,439 
Debt securities available for sale 300,349   299,620   287,767   268,703   76,292 
Loans held for investment, net of unearned income 2,400,197   2,362,733   2,299,798   2,244,296   2,165,569 
 Allowance for credit losses (30,556)  (29,388)  (29,749)  (28,981)  (27,858)
Loans held for investment, net 2,369,641   2,333,345   2,270,049   2,215,315   2,137,711 
Premises and equipment, net 47,340   47,891   49,752   50,912   52,284 
Other real estate owned 703   559   579   848   1,015 
Interest receivable 9,279   8,345   8,433   8,100   7,900 
Goodwill 129,565   129,565   129,565   129,565   129,565 
Other intangible assets 4,176   4,541   4,905   5,266   5,622 
Other assets 103,673   107,838   109,085   108,112   106,691 
Total assets$3,135,572  $3,160,799  $3,258,377  $3,244,127  $3,194,519 
           
Liabilities         
Deposits         
 Noninterest-bearing$872,168  $878,423  $877,962  $860,652  $842,783 
 Interest-bearing 1,806,647   1,831,798   1,920,577   1,922,292   1,886,608 
Total deposits 2,678,815   2,710,221   2,798,539   2,782,944   2,729,391 
Securities sold under agreements to repurchase 1,874   1,958   2,635   2,488   1,536 
Interest, taxes, and other liabilities 32,898   36,362   39,157   34,539   35,817 
Total liabilities 2,713,587 - 2,748,541 - 2,840,331 - 2,819,971 - 2,766,744 
           
Stockholders' equity         
Common stock 16,225   16,273   16,502   16,782   16,878 
Additional paid-in capital 128,508   129,914   136,705   144,088   147,619 
Retained earnings 292,971   285,096   276,499   269,798   264,824 
Accumulated other comprehensive loss (15,719)  (19,025)  (11,660)  (6,512)  (1,546)
Total stockholders' equity 421,985   412,258   418,046   424,156   427,775 
Total liabilities and stockholders' equity$3,135,572  $3,160,799  $3,258,377  $3,244,127  $3,194,519 
           
Shares outstanding at period-end 16,225,399   16,273,177   16,502,144   16,781,975   16,878,220 
Book value per common share$26.01  $25.33  $25.33  $25.27  $25.34 
Tangible book value per common share(1) 17.76   17.09   17.18   17.24   17.34 
           
(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)
          
 December 31,
 September 30,
 June 30, March 31, December 31,
(Amounts in thousands)2022 2022 2022 2022 2021
Allowance for Credit Losses         
Beginning balance$29,388  $29,749  $28,981  $27,858  $29,877 
Provision for (recovery of)         
credit losses charged to operations 3,416   685   510   1,961   (846)
Charge-offs (2,873)  (2,158)  (1,469)  (1,302)  (1,887)
Recoveries 625   1,112   1,727   464   714 
Net (charge-offs) recoveries (2,248)  (1,046)  258   (838)  (1,173)
Ending balance$30,556  $29,388  $29,749  $28,981  $27,858 
          
Nonperforming Assets         
Nonaccrual loans$15,208  $15,303  $17,826  $20,487  $20,768 
Accruing loans past due 90 days or more 142   131   131   -   87 
Troubled debt restructurings ("TDRs")(1) 1,346   1,331   515   1,141   1,367 
Total nonperforming loans 16,696   16,765   18,472   21,628   22,222 
OREO 703   559   579   848   1,015 
Total nonperforming assets$17,399  $17,324  $19,051  $22,476  $23,237 
          
          
Additional Information         
Total accruing TDRs(2)$7,112  $7,028  $8,313  $8,782  $8,652 
          
Asset Quality Ratios         
Nonperforming loans to total loans 0.70%  0.71%  0.80%  0.96%  1.03%
Nonperforming assets to total assets 0.55%  0.55%  0.58%  0.69%  0.73%
Allowance for credit losses to nonperforming loans 183.01%  175.29%  161.05%  134.00%  125.36%
Allowance for credit losses to total loans 1.27%  1.24%  1.29%  1.29%  1.29%
Annualized net charge-offs (recoveries) to average loans 0.37%  0.18%  -0.05%  0.15%  0.22%
          
          
(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

First Community Bankshares Inc.

NASDAQ:FCBC

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Commercial Banking
Finance and Insurance
Finance, Regional Banks, Finance and Insurance, Commercial Banking