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

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BLUEFIELD, Va., July 26, 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 June 30, 2022. The Company reported net income of $11.21 million, or $0.67 per diluted common share, for the quarter ended June 30, 2022. Net income for the six months ended June 30, 2022, was $20.73 million or $1.24 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 also an increase of two cents ($0.02) from the dividends declared in the previous two quarters of 2022.  The quarterly dividend is payable to common shareholders of record on August 5, 2022, and is expected to be paid on or about August 19, 2022.  This marks the 37th consecutive year of regular dividends to common shareholders.

Second Quarter 2022 and Current Highlights

      Income Statement

  • Net income of $11.21 million for the quarter was a decrease compared to the same quarter of 2021, which included a significant reversal of provision for credit losses. The normalized provision for credit losses drove much of the difference between current year-to-date net income of $20.73 million and the same period in 2021.
  • Interest income from securities of $1.55 million was an increase of $1.12 million over the second quarter of 2021, as the Company added to its portfolio with a significant weighting toward 2-year treasury securities. Interest on fed funds also increased $602 thousand to $768 thousand for the second quarter as a result of the Federal Open Market Committee’s 150 basis point increase in overnight rates.
  • The total cost of funds remained very low at 0.06%, a decrease of 0.05% from the second quarter of 2021.
  • Despite the significant increase in credit loss provision over 2021, annualized return on average assets was 1.38% for the second quarter and 1.29% for the first six months of 2022. Annualized return on average common equity was 10.61% for the second quarter and 9.80% for the first half of 2022.
  • Net interest margin for the second quarter was 3.78%, which was a 10 basis point increase from 3.68% reported for second quarter of 2021.   The yield on earning assets increased 6 basis points, primarily driven by an increase in the yields on overnight funds. The cost of interest-bearing deposits declined 6 basis points to 0.09%, primarily driven by a decrease in the cost of time deposits.
  • Salaries and employee benefits for the second quarter increased $1.30 million, or 12.74%, over the same quarter in 2021. Salaries and employee benefits for the first six months increased $2.09 million, or 9.90%, over the first six 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 $134.23 million, an annualized growth rate of 12.50%, during the first six months of 2022. Loan demand and originations were strong in all categories, including construction, commercial real estate, residential mortgage, and consumer loans.
  • During the second quarter, the Company repurchased 283,507 of its common shares for $7.95 million. The Company repurchased 415,507 common shares for $12.03 million during the six months of 2022.  
  • Non-performing loans to total loans remained very low at 0.80% of total loans and continues the declining trend experienced over the past four quarters. The Company experienced net recoveries for the second quarter of 2022 of $258 thousand, or 0.05% of annualized average loans, compared to net charge-offs of $476 thousand, or 0.09% of annualized average loans, for the same period in 2021. Net charge-offs for the six-month period ended June 30, 2022, were $580 thousand, or 0.05% of annualized average loans, compared to net charge-offs of $1.20 million, or 0.11% of annualized average loans, for the same period in 2021.
  • The allowance for credit losses to total loans remained at 1.29% of total loans.
  • Book value per share at June 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 49 branch banking locations in Virginia, West Virginia, North Carolina, and Tennessee as of June 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 $1.20 billion in combined assets as of June 30, 2022. The Company reported consolidated assets of $3.26 billion as of June 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 Six Months Ended
   June 30, March 31, December 31,September 30,June 30, June 30,
(Amounts in thousands, except share and per share data) 2022   2022   2021   2021   2021   2022   2021 
Interest income                           
 Interest and fees on loans$25,651  $24,641  $25,236  $25,119  $25,937  $50,292  $52,477 
 Interest on securities 1,551   750   362   445   435   2,301   930 
 Interest on deposits in banks 768   248   234   225   166   1,016   282 
Total interest income 27,970   25,639   25,832   25,789   26,538   53,609   53,689 
Interest expense             
 Interest on deposits 422   486   600   642   724   908   1,593 
 Interest on borrowings 1   -   -   1   -   1   - 
Total interest expense 423   486   600   643   724   909   1,593 
Net interest income 27,547   25,153   25,232   25,146   25,814   52,700   52,096 
(Recovery of) provision for credit losses 510   1,961   (846)  (1,394)  (2,230)  2,471   (6,231)
Net interest income after provision 27,037   23,192   26,078   26,540   28,044   50,229   58,327 
Noninterest income 8,854   9,194   9,215   8,720   8,797   18,048   16,366 
Noninterest expense 21,255   19,986   21,701   18,836   19,361   41,241   38,181 
Income before income taxes 14,636   12,400   13,592   16,424   17,480   27,036   36,512 
Income tax expense 3,423   2,885   3,037   3,816   4,077   6,308   8,507 
Net income$11,213  $9,515  $10,555  $12,608  $13,403  $20,728  $28,005 
                
Earnings per common share             
 Basic$0.67  $0.57  $0.62  $0.73  $0.77  $1.24  $1.59 
 Diluted 0.67   0.56   0.62   0.73   0.76   1.24   1.59 
Cash dividends per common share             
 Regular 0.27   0.27   0.27   0.27   0.25   0.54   0.50 
Weighted average shares outstanding             
 Basic 16,662,817   16,817,284   16,974,005   17,221,244   17,486,182   16,739,624   17,577,552 
 Diluted 16,682,615   16,864,515   17,038,980   17,279,576   17,536,144   16,772,847   17,631,330 
Performance ratios             
 Return on average assets 1.38%  1.20%  1.32%  1.59%  1.70%  1.29%  1.82%
 Return on average common equity 10.61%  8.98%  9.77%  11.65%  12.55%  9.80%  13.24%
 Return on average tangible common equity(1) 15.56%  13.10%  14.28%  17.04%  18.40%  14.32%  19.45%
                
(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 Six Months Ended
  June 30, March 31, December 31,September 30,June 30, June 30,
(Amounts in thousands) 2022  2022  2021  2021  2021  2022  2021 
Noninterest income             
 Wealth management$993 $972 $940 $974 $1,058  $1,965 $1,939 
 Service charges on deposits 3,672  3,498  3,718  3,599  3,098   7,170  6,129 
 Other service charges and fees 3,297  3,017  3,091  3,143  3,166   6,314  6,188 
 Net FDIC indemnification asset amortization -  -  -  -  (946)  -  (1,226)
 Other operating income 892  1,707  1,466  1,004  2,421   2,599  3,336 
Total noninterest income$8,854 $9,194 $9,215  $8,720 $8,797  $18,048 $16,366 
Noninterest expense             
 Salaries and employee benefits$11,518 $11,671 $12,493 $10,646 $10,216  $23,189 $21,100 
 Occupancy expense 1,165  1,269  1,368  1,155  1,115   2,434  2,390 
 Furniture and equipment expense 1,496  1,614  1,418  1,385  1,457   3,110  2,824 
 Service fees 2,563  1,503  1,946  1,530  1,513   4,066  2,848 
 Advertising and public relations 577  540  589  536  616   1,117  951 
 Professional fees 544  453  455  313  290   997  756 
 Amortization of intangibles 360  357  364  365  360   717  717 
 FDIC premiums and assessments 257  218  213  216  204   475  403 
 Other operating expense 2,775  2,361  2,855  2,690  3,590   5,136  6,192 
Total noninterest expense$21,255 $19,986 $21,701 $18,836 $19,361  $41,241 $38,181 
               


RECONCILIATION OF GAAP NET INCOME TO NON-GAAP ADJUSTED EARNINGS (Unaudited)
                
   Three Months EndedSix Months Ended
   June 30, March 31, December 31, September 30,June 30, June 30,
    2022   2022   2021   2021   2021   2022   2021 
(Amounts in thousands, except per share data)             
Net income$11,213  $9,515  $10,555  $12,608  $13,403  $28,005  $28,005 
Non-GAAP adjustments:             
 Net (gain) loss on sale of securities -   -   -   -   -   -   - 
 Merger, acquisition, and divestiture expense -   -   -   -   -   -   - 
 Other items(1) (92)  -   -   -   -   -   - 
Total adjustments (92)  -   -   -   -   -   - 
Tax effect (22)  -   -   -   -   -   - 
Adjusted earnings, non-GAAP$11,143  $9,515  $10,555  $12,608  $13,403  $28,005  $28,005 
                
Adjusted diluted earnings per common share,             
 non-GAAP$0.67  $0.56  $0.62  $0.73  $0.76  $1.59  $1.59 
Performance ratios, non-GAAP             
 Adjusted return on average assets 1.37%  1.20%  1.32%  1.59%  1.70%  1.82%  1.82%
 Adjusted return on average common equity 10.55%  8.98%  9.77%  11.65%  12.55%  13.24%  13.24%
 Adjusted return on average tangible             
  common equity(2) 15.46%  13.10%  14.28%  17.04%  18.40%  19.45%  19.45%
                
(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 June 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)$2,273,844 $25,714 4.54% $2,134,136 $25,979 4.88%
 Securities available for sale 280,823  1,597 2.28%  84,099  508 2.42%
 Interest-bearing deposits 377,931  769 0.82%  610,148  166 0.11%
Total earning assets 2,932,598  28,080 3.84%  2,828,383  26,653 3.78%
Other assets 331,774      331,563    
Total assets$3,264,372     $3,159,946    
             
Liabilities and stockholders' equity           
Interest-bearing deposits           
 Demand deposits$698,978 $29 0.02% $654,767 $33 0.02%
 Savings deposits 895,370  67 0.03%  818,490  63 0.03%
 Time deposits 331,555  326 0.39%  394,889  628 0.64%
Total interest-bearing deposits 1,925,903  422 0.09%  1,868,146  724 0.15%
Borrowings           
 Retail repurchase agreements 2,105  1 0.08%  1,266  - N/M
Total borrowings 2,105  1 0.08%  1,266  - N/M
Total interest-bearing liabilities 1,928,008  423 0.09%  1,869,412  724 0.16%
Noninterest-bearing demand deposits 874,507      824,888    
Other liabilities 38,106      37,306    
Total liabilities 2,840,621      2,731,606    
Stockholders' equity 423,751      428,340    
Total liabilities and stockholders' equity$3,264,372     $3,159,946    
Net interest income, FTE(1)  $27,657     $25,929  
Net interest rate spread    3.75%     3.62%
Net interest margin, FTE(1)    3.78%     3.68%
             
(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 $870 thousand and $1.25 million for the three months ended June 30, 2022 and 2021, respectively.
             


AVERAGE BALANCE SHEETS AND NET INTEREST INCOME ANALYSIS (Unaudited)
             
  Six Months Ended June 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)$2,237,128 $50,412 4.54% $2,149,509 $52,561 4.93%
 Securities available for sale 211,285  2,397 2.29%  83,868  1,081 2.60%
 Interest-bearing deposits 460,864  1,018 0.45%  539,500  284 0.11%
Total earning assets 2,909,277  53,827 3.73%  2,772,877  53,926 3.92%
Other assets 330,003      331,524    
Total assets$3,239,280     $3,104,401    
             
Liabilities and stockholders' equity           
Interest-bearing deposits           
 Demand deposits$689,149 $57 0.02% $634,000 $72 0.02%
 Savings deposits 888,371  133 0.03%  798,571  154 0.04%
 Time deposits 339,186  718 0.43%  403,888  1,367 0.68%
Total interest-bearing deposits 1,916,706  908 0.10%  1,836,459  1,593 0.16%
Borrowings           
 Retail repurchase agreements 2,050  1 0.08%  1,250  - N/M
Total borrowings 2,050  1 0.08%  1,250  - N/M
Total interest-bearing liabilities 1,918,756  909 0.10%  1,837,709  1,593 0.17%
Noninterest-bearing demand deposits 855,321      801,512    
Other liabilities 38,529      38,609    
Total liabilities 2,812,606      2,677,830    
Stockholders' equity 426,674      426,571    
Total liabilities and stockholders' equity$3,239,280     $3,104,401    
Net interest income, FTE(1)  $52,918     $52,333  
Net interest rate spread    3.64%     3.75%
Net interest margin, FTE(1)    3.67%     3.81%
             
(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 $1.74 million and $2.44 million for the six months ended June 30, 2022 and 2021, respectively.
             


CONDENSED CONSOLIDATED QUARTERLY BALANCE SHEETS (Unaudited)
            
   June 30, March 31, December 31, September 30,June 30,
(Amounts in thousands, except per share data) 2022   2022   2021   2021   2021 
Assets         
Cash and cash equivalents$398,242  $457,306  $677,439  $635,007  $618,738 
Debt securities available for sale 287,767   268,703   76,292   77,440   79,842 
Loans held for investment, net of unearned income         
 (includes covered loans of $7,503 for June 30, 2021) (1)  2,299,798   2,244,296   2,165,569   2,152,103   2,153,731 
 Allowance for credit losses (29,749)  (28,981)  (27,858)  (29,877)  (31,857)
Loans held for investment, net 2,270,049   2,215,315   2,137,711   2,122,226   2,121,874 
Premises and equipment, net 49,752   50,912   52,284   52,842   53,560 
Other real estate owned 579   848   1,015   1,240   1,324 
Interest receivable 8,433   8,100   7,900   8,146   8,480 
Goodwill 129,565   129,565   129,565   129,565   129,565 
Other intangible assets 4,905   5,266   5,622   5,987   6,352 
Other assets 109,085   108,112   106,691   107,258   109,548 
Total assets$3,258,377  $3,244,127  $3,194,519  $3,139,711  $3,129,283 
            
Liabilities         
Deposits         
 Noninterest-bearing$877,962  $860,652  $842,783  $820,147  $819,138 
 Interest-bearing 1,920,577   1,922,292   1,886,608   1,853,699   1,846,556 
Total deposits 2,798,539   2,782,944   2,729,391   2,673,846   2,665,694 
Securities sold under agreements to repurchase 2,635   2,488   1,536   1,106   994 
Interest, taxes, and other liabilities 39,157   34,539   35,817   37,395   35,061 
Total liabilities 2,840,331   2,819,971   2,766,744   2,712,347   2,701,749 
            
Stockholders' equity         
Common stock 16,502   16,782   16,878   17,071   17,335 
Additional paid-in capital 136,705   144,088   147,619   154,086   161,853 
Retained earnings 276,499   269,798   264,824   258,860   250,911 
Accumulated other comprehensive loss (11,660)  (6,512)  (1,546)  (2,653)  (2,565)
Total stockholders' equity 418,046   424,156   427,775   427,364   427,534 
Total liabilities and stockholders' equity$3,258,377  $3,244,127  $3,194,519  $3,139,711  $3,129,283 
            
Shares outstanding at period-end 16,502,144   16,781,975   16,878,220   17,071,052   17,334,547 
Book value per common share$25.33  $25.27  $25.34  $25.03  $24.66 
Tangible book value per common share(2) 17.18   17.24   17.34   17.09   16.82 
            
(1) FDIC Loss Share agreement terminated in September 2021.
(2) A non-GAAP financial measure defined as stockholders' equity less goodwill and other intangible assets, divided by shares outstanding
            


SELECTED CREDIT QUALITY INFORMATION (Unaudited)
           
  June 30, March 31, December 31,September 30,June 30,
(Amounts in thousands)  2022   2022   2021   2021   2021 
Allowance for Credit Losses          
Beginning balance $28,981  $27,858  $29,877  $31,857  $34,563 
Provision for (recovery of)          
credit/loan losses charged to operations  510   1,961   (846)  (1,394)  (2,230)
Charge-offs  (1,469)  (1,302)  (1,887)  (1,255)  (1,902)
Recoveries  1,727   464   714   669   1,426 
Net recoveries (charge-offs)  258   (838)  (1,173)  (586)  (476)
Ending balance $29,749  $28,981  $27,858  $29,877  $31,857 
           
Nonperforming Assets          
Nonaccrual loans $17,826  $20,487  $20,768  $22,070  $24,085 
Accruing loans past due 90 days or more  131   -   87   5   327 
Troubled debt restructurings ("TDRs")(1)  515   1,141   1,367   359   133 
Total nonperforming loans  18,472   21,628   22,222   22,434   24,545 
OREO  579   848   1,015   1,240   1,324 
Total nonperforming assets $19,051  $22,476  $23,237  $23,674  $25,869 
           
           
Additional Information          
Total accruing TDRs(3) $8,313  $8,782  $8,652  $8,185  $8,309 
           
Asset Quality Ratios          
Nonperforming loans to total loans  0.80%  0.96%  1.03%  1.04%  1.14%
Nonperforming assets to total assets  0.58%  0.69%  0.73%  0.75%  0.83%
Allowance for credit/loan losses to nonperforming loans  161.05%  134.00%  125.36%  133.18%  129.79%
Allowance for credit/loan losses to total loans  1.29%  1.29%  1.29%  1.39%  1.48%
Annualized net (recoveries) charge-offs to average loans  -0.05%  0.15%  0.22%  0.11%  0.09%
           
           
(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


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