Results

First Community Bancshares Inc.

04/23/2024 | Press release | Distributed by Public on 04/23/2024 14:13

First Community Bankshares, Inc. Announces First Quarter 2024 Results and Quarterly Cash Dividend - Form 8-K

First Community Bankshares, Inc. Announces First Quarter 2024 Results and Quarterly Cash Dividend

Bluefield, Virginia - 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 March 31, 2024. The Company reported net income of $12.85 million, or $0.71 per diluted common share, for the quarter ended March 31, 2024.

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 May 10, 2024, and is expected to be paid on or about May 24, 2024. This marks the 39th consecutive year of regular dividends to common shareholders.

First Quarter 2024 Highlights

Income Statement

o

Net income of $12.85 million for the first quarter of 2024, was an increase of $1.06 million, or 9.02%, from the same quarter of 2023.

o Net interest income increased $2.22 million compared to the same quarter in 2023, as increases in benchmark interest rates have improved net interest margin. Provision for credit losses was approximately $731 thousand lower than the same quarter last year.
o Net interest margin of 4.47% is an increase of 12 basis points over the same quarter of 2023. The yield on earning assets increased 62 basis points primarily driven by increased earnings on loans.
o Interest and fees on loans increased $5.79 million from the same quarter of 2023 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. The Company acquired Surrey Bancorp on April 21, 2023, adding approximately $239.08 million in loans.
o Noninterest income increased approximately $676 thousand, or 7.88%, when compared to the same quarter of 2023. The increase was primarily driven by increased interchange income. Noninterest expense increased $2.57 million, or 12.36%. The increase in noninterest expense was primarily driven by salaries and employee benefits, service fees, and other operating expense. The increase in non interest expense is primarily attributable to the addition of Surrey branches and staff .

o

Annualized return on average assets ("ROA") was 1.60% for the first quarter of 2024 compared to 1.55% for the same period of 2023. Annualized return on average common equity ("ROE") was 10.18% for the first quarter of 2024 compared to 11.15% for the same period of 2023.

Balance Sheet and Asset Quality

o

Consolidated assets totaled $3.24 billion at March 31, 2024.

o Securities available for sale decreased $114.71 million, or 40.83%, from December 31,2023. The decrease is primarily attributable to the maturity of $115.75 million in U.S. Treasury Notes during the first quarter of 2024. Loans decreased $52.47 million, or 2.04%. Deposits decreased $40.11 million, or 1.47%. The net effect of these balance sheet changes resulted in an increase in cash and cash equivalents of $132.49 million, or 113.80%. The increase in cash and cash equivalents is primarily attributable to an increase in federal funds sold of $142.63 million.

o

The Company repurchased 89,396 common shares during the first quarter of 2024 for a total cost of $2.97 million.

o

Non-performing loans to total loans increased to 0.78% when compared with the same quarter of 2023. The Company experienced net charge-offs for the first quarter of 2024 of $1.74 million, or 0.27%, of annualized average loans, compared to net charge-offs of $1.74 million, or 0.29%, of annualized average loans for the same period in 2023.

1

o

The allowance for credit losses to total loans was 1.41% at March 31, 2024, compared to 1.41% at December 31, 2023, and 1.29% for March 31, 2023.

o

Book value per share at March 31, 2024, was $27.53, an increase of $0.33 from year-end 2023.

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%. Where non-GAAP financial measures are used, the comparable GAAP financial measure, as well as a reconciliation to that comparable GAAP financial measure can be found in the attached tables to this press release. 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 March 31, 2024. 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 $1.55 billion in combined assets as of March 31, 2024. The Company reported consolidated assets of $3.24 billion as of March 31, 2024. 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; changes in banking laws and regulations; the degree of competition by traditional and non-traditional competitors; the impact of natural disasters, extreme weather events, military conflict , terrorism or other geopolitical events; 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.

2

CONDENSED CONSOLIDATED STATEMENTS OF INCOME (Unaudited)

Three Months Ended

March 31,

December 31,

September 30,

June 30,

March 31,

(Amounts in thousands, except share and per share data)

2024

2023

2023

2023

2023

Interest income

Interest and fees on loans

$ 33,418 $ 33,676 $ 33,496 $ 31,927 $ 27,628

Interest on securities

1,698 1,888 1,912 2,057 2,099

Interest on deposits in banks

913 438 697 885 462

Total interest income

36,029 36,002 36,105 34,869 30,189

Interest expense

Interest on deposits

4,365 3,935 2,758 1,930 718

Interest on borrowings

35 4 0 77 59

Total interest expense

4,400 3,939 2,758 2,007 777

Net interest income

31,629 32,063 33,347 32,862 29,412

Provision for credit losses

1,011 1,029 1,109 4,105 1,742

Net interest income after provision

30,618 31,034 32,238 28,757 27,670

Noninterest income

9,259 10,462 9,622 8,785 8,583

Noninterest expense

23,386 26,780 22,913 24,671 20,813

Income before income taxes

16,491 14,716 18,947 12,871 15,440

Income tax expense

3,646 2,932 4,307 3,057 3,658

Net income

$ 12,845 $ 11,784 $ 14,640 $ 9,814 $ 11,782

Adjustment to Net Income for Fair Value Changes to Restricted Stock Units (tax-effected)

$ 240 $ 530 $ 215 $ 335 $ 20

Adjusted Net Income for diluted earnings per share

$ 13,085 $ 12,314 $ 14,855 $ 10,149 $ 11,802

Earnings per common share

Basic

$ 0.70 $ 0.64 $ 0.78 $ 0.53 $ 0.73

Diluted

$ 0.71 $ 0.66 $ 0.79 $ 0.55 $ 0.72

Cash dividends per common share

Regular

0.29 0.29 0.29 0.29 0.29

Weighted average shares outstanding

Basic

18,476,128 18,530,114 18,786,032 18,407,078 16,228,297

Diluted

18,545,910 18,575,226 18,831,836 18,431,598 16,289,489

Performance ratios

Return on average assets

1.60 % 1.43 % 1.74 % 1.18 % 1.55 %

Return on average common equity

10.18 % 9.39 % 11.63 % 8.04 % 11.15 %

Return on average tangible common equity(1)

14.82 % 13.82 % 17.11 % 11.65 % 16.19 %

(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

March 31,

December 31,

September 30,

June 30,

March 31,

(Amounts in thousands)

2024

2023

2023

2023

2023

Noninterest income

Wealth management

$ 1,099 $ 1,052 $ 1,145 $ 965 $ 1,017

Service charges on deposits

3,310 3,637 3,729 3,471 3,159

Other service charges and fees

3,450 3,541 3,564 3,460 3,082

(Loss) gain on sale of securities

- - - (28 ) 7

Other operating income

1,400 2,232 1,184 917 1,318

Total noninterest income

$ 9,259 $ 10,462 $ 9,622 $ 8,785 $ 8,583

Noninterest expense

Salaries and employee benefits

$ 12,581 $ 12,933 $ 12,673 $ 12,686 $ 11,595

Occupancy expense

1,378 1,252 1,271 1,276 1,168

Furniture and equipment expense

1,545 1,489 1,480 1,508 1,401

Service fees

2,449 2,255 2,350 2,284 2,019

Advertising and public relations

796 843 968 846 643

Professional fees

372 787 172 281 327

Amortization of intangibles

530 536 536 425 234

FDIC premiums and assessments

369 376 392 423 320

Merger expense

- - - 2,014 379

Litigation expense

- 3,000 - - -

Other operating expense

3,366 3,309 3,071 2,928 2,727

Total noninterest expense

$ 23,386 $ 26,780 $ 22,913 $ 24,671 $ 20,813
3

RECONCILIATION OF GAAP NET INCOME TO NON-GAAP ADJUSTED EARNINGS (Unaudited)

Three Months Ended

March 31,

December 31,

September 30,

June 30,

March 31,

(Amounts in thousands, except per share data)

2024

2023

2023

2023

2023

Adjusted Net Income for diluted earnings per share

$ 13,085 $ 12,314 $ 14,855 $ 10,149 $ 11,802

Non-GAAP adjustments:

Loss (gain) on sale of securities

- - - 28 (7 )

Merger expense

- - - 2,014 379

Day 2 provision for allowance for credit losses - Surrey

- - - 1,614 -

Litigation expense

- 3,000 - - -

Other items(1)

- - (204 ) - -

Total adjustments

- 3,000 (204 ) 3,656 372

Tax effect

- 720 (49 ) 522 10

Adjusted earnings, non-GAAP

$ 13,085 $ 14,594 $ 14,700 $ 13,283 $ 12,163

Adjusted diluted earnings per common share, non-GAAP

$ 0.71 $ 0.79 $ 0.78 $ 0.72 $ 0.75

Performance ratios, non-GAAP

Adjusted return on average assets

1.63 % 1.77 % 1.75 % 1.60 % 1.60 %

Adjusted return on average common equity

10.37 % 11.63 % 11.68 % 10.88 % 11.51 %

Adjusted return on average tangible common equity (2)

15.10 % 17.11 % 17.18 % 15.77 % 16.72 %

(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.

4

AVERAGE BALANCE SHEETS AND NET INTEREST INCOME ANALYSIS (Unaudited)

Three Months Ended March 31,

2024

2023

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)

$ 2,549,107 $ 33,500 5.29 % $ 2,393,759 $ 27,698 4.69 %

Securities available for sale

239,010 1,731 2.91 % 316,734 2,140 2.74 %

Interest-bearing deposits

66,483 916 5.54 % 40,993 465 4.60 %

Total earning assets

2,854,600 36,147 5.09 % 2,751,486 30,303 4.47 %

Other assets

373,614 322,789

Total assets

$ 3,228,214 $ 3,074,275

Liabilities and stockholders' equity

Interest-bearing deposits

Demand deposits

$ 665,875 $ 162 0.10 % $ 666,447 $ 26 0.02 %

Savings deposits

866,084 3,412 1.58 % 827,414 484 0.24 %

Time deposits

249,974 790 1.27 % 271,214 208 0.31 %

Total interest-bearing deposits

1,781,933 4,364 0.98 % 1,765,075 718 0.16 %

Borrowings

Federal funds purchased

2,527 35 5.52 % 4,719 58 5.07 %

Retail repurchase agreements

1,127 - 0.05 % 2,086 1 0.06 %

Total borrowings

3,654 35 3.85 % 6,805 59 0.07 %

Total interest-bearing liabilities

1,785,587 4,399 0.99 % 1,771,880 777 0.18 %

Noninterest-bearing demand deposits

886,947 838,041

Other liabilities

48,298 35,669

Total liabilities

2,720,832 2,645,590

Stockholders' equity

507,382 428,685

Total liabilities and stockholders' equity

$ 3,228,214 $ 3,074,275

Net interest income, FTE(1)

$ 31,748 $ 29,526

Net interest rate spread

4.10 % 4.29 %

Net interest margin, FTE(1)

4.47 % 4.35 %

(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 $781 thousand and $193 thousand for the three months ended March 31, 2024 and 2023, respectively.

5

CONDENSED CONSOLIDATED QUARTERLY BALANCE SHEETS (Unaudited)

March 31,

December 31,

September 30,

June 30,

March 31,

(Amounts in thousands, except per share data)

2024

2023

2023

2023

2023

Assets

Cash and cash equivalents

$ 248,905 $ 116,420 $ 113,397 $ 152,660 $ 92,385

Debt securities available for sale, at fair value

166,247 280,961 275,332 314,373 308,269

Loans held for investment, net of unearned income

2,519,833 2,572,298 2,593,472 2,621,073 2,388,897

Allowance for credit losses

(35,461 ) (36,189 ) (36,031 ) (36,177 ) (30,789 )

Loans held for investment, net

2,484,372 2,536,109 2,557,441 2,584,896 2,358,108

Premises and equipment, net

51,333 50,680 51,205 53,546 47,407

Other real estate owned

374 192 243 339 481

Interest receivable

10,719 10,881 10,428 10,185 8,646

Goodwill

143,946 143,946 143,946 143,946 129,565

Other intangible assets

14,615 15,145 15,681 16,217 3,942

Other assets

115,470 114,854 116,552 115,275 102,869

Total assets

$ 3,235,981 $ 3,269,188 $ 3,284,225 $ 3,391,437 $ 3,051,672

Liabilities

Deposits

Noninterest-bearing

$ 902,396 $ 931,920 $ 944,301 $ 974,995 $ 823,297

Interest-bearing

1,779,819 1,790,405 1,801,835 1,877,683 1,761,327

Total deposits

2,682,215 2,722,325 2,746,136 2,852,678 2,584,624

Securities sold under agreements to repurchase

1,006 1,119 1,029 1,348 1,866

Interest, taxes, and other liabilities

45,816 42,450 41,393 38,691 33,451

Total liabilities

2,729,037 2,765,894 2,788,558 2,892,717 2,619,941

Stockholders' equity

Common stock

18,413 18,502 18,671 18,969 16,243

Additional paid-in capital

173,041 175,841 180,951 189,917 128,666

Retained earnings

327,389 319,902 313,489 304,295 300,047

Accumulated other comprehensive loss

(11,899 ) (10,951 ) (17,444 ) (14,461 ) (13,225 )

Total stockholders' equity

506,944 503,294 495,667 498,720 431,731

Total liabilities and stockholders' equity

$ 3,235,981 $ 3,269,188 $ 3,284,225 $ 3,391,437 $ 3,051,672

Shares outstanding at period-end

18,413,088 18,502,396 18,671,470 18,969,281 16,243,551

Book value per common share

$ 27.53 $ 27.20 $ 26.55 $ 26.29 $ 26.58

Tangible book value per common share(1)

18.92 18.60 18.00 17.85 18.36

(1)

A non-GAAP financial measure defined as stockholders' equity less goodwill and other intangible assets, divided by shares outstanding.

6

SELECTED CREDIT QUALITY INFORMATION (Unaudited)

March 31,

December 31,

September 30,

June 30,

March 31,

(Amounts in thousands)

2024

2023

2023

2023

2023

Allowance for Credit Losses

Balance at beginning of period:

Allowance for credit losses - loans

$ 36,189 $ 36,031 $ 36,177 $ 30,789 $ 30,556

Allowance for credit losses - loan commitments

746 758 964 964 1,196

Total allowance for credit losses beginning of period

36,935 36,789 37,141 31,753 31,752

Adjustments to beginning balance:

Allowance for credit losses - loans - Surrey acquisition for purchased credit deteriorated loans

- - - 2,011 -

Allowance for credit losses - loan commitments

- - - - -

Net Adjustments

- - - 2,011 -

Provision for credit losses:

Provision for credit losses - loans

1,011 1,041 1,315 4,105 1,974

(Recovery of) provision for credit losses - loan commitments

- (12 ) (206 ) - (232 )

Total provision for credit losses - loans and loan commitments

1,011 1,029 1,109 4,105 1,742

Charge-offs

(2,448 ) (2,105 ) (2,157 ) (1,993 ) (2,570 )

Recoveries

709 1,222 696 1,265 829

Net (charge-offs) recoveries

(1,739 ) (883 ) (1,461 ) (728 ) (1,741 )

Balance at end of period:

Allowance for credit losses - loans

35,461 36,189 36,031 36,177 30,789

Allowance for credit losses - loan commitments

746 746 758 964 964

Ending balance

$ 36,207 $ 36,935 $ 36,789 $ 37,141 $ 31,753

Nonperforming Assets

Nonaccrual loans

$ 19,617 $ 19,356 $ 18,366 $ 18,628 $ 15,557

Accruing loans past due 90 days or more

30 104 59 - 23

Modified loans past due 90 days or more

- - - - -

Total nonperforming loans

19,647 19,460 18,425 18,628 15,580

OREO

374 192 243 339 481

Total nonperforming assets

$ 20,021 $ 19,652 $ 18,668 $ 18,967 $ 16,061

Additional Information

Total modified loans

$ 2,177 $ 1,873 $ 1,674 $ 642 $ 429

Asset Quality Ratios

Nonperforming loans to total loans

0.78 % 0.76 % 0.71 % 0.71 % 0.65 %

Nonperforming assets to total assets

0.62 % 0.60 % 0.57 % 0.56 % 0.53 %

Allowance for credit losses to nonperforming loans

180.49 % 185.97 % 195.55 % 194.21 % 197.62 %

Allowance for credit losses to total loans

1.41 % 1.41 % 1.39 % 1.38 % 1.29 %

Annualized net charge-offs (recoveries) to average loans

0.27 % 0.14 % 0.22 % 0.11 % 0.29 %
7