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

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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 EndedNine 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

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