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

Tuesday, 26. October 2021 23:00

BLUEFIELD, Va., Oct. 26, 2021 (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, 2021. The Company reported net income of $12.61 million, or $0.73 per diluted common share, for the quarter ended September 30, 2021, which was an increase of $0.26 per diluted common share, or 55.32%, over the same quarter of 2020.  Net income for the nine months ended September 30, 2021, was $40.61 million, or $2.32 per diluted common share, which represents a 69.34% increase in diluted earnings per share compared to the same period of 2020.

The Company also declared a quarterly cash dividend to common shareholders of twenty-seven cents ($0.27) per common share, which is an increase of 8.00% over the same quarter last year.  The quarterly dividend is payable to common shareholders of record on November 5, 2021, and is expected to be paid on or about November 19, 2021.  2021 is the 36th consecutive year of regular dividends to common shareholders.

Third Quarter 2021 and Current Highlights

General

  • Net income for the quarter increased $4.34 million to $12.61 million compared to the same quarter of 2020.  The large increase in net income reflects the reversal of $1.39 million in allowance for credit losses for the third quarter of 2021 compared to $4.70 million in loan loss provision recorded in the third quarter of 2020.  Net income for the nine month period ended September 30, 2021, increased $16.24 million compared to the same period of 2020.  Similarly, for the nine-month period, a reversal of $7.63 million in the allowance for credit losses for 2021 compared to $12.03 million in loan loss provision for the same period in 2020 accounts for a large part of the increase in net income over the same period in 2020.  The decreases in credit loss provisioning are primarily due to significantly improved economic forecasts and GDP growth in the current year, versus prior year provisioning driven by the pandemic.
  • During the third quarter, the Company repurchased 277,386 common shares for $8.46 million.  Year-to-date the Company has repurchased 726,686 common shares for $21.43 million.
  • The Company terminated its last loss share agreement with the FDIC and received a payment of $176 thousand in consideration.  The termination eliminates the FDIC guarantee on particular loan losses associated with Waccamaw Bank and largely removes future responsibility related to the agreement.

Income Statement

  • Diluted earnings per share increased $0.26 to $0.73 compared to the same quarter of 2020.  Diluted earnings per share for the nine-month period increased $0.95 to $2.32 compared to 2020.
  • Due to continued improving economic forecasts, as well as strong credit quality metrics, the Company released allowance for credit losses for the quarter resulting in a reversal of $1.39 million in the provision for credit losses; a significant improvement from the $4.70 million loan loss provision recorded in the third quarter of 2020 amidst general economic slowdowns and market conditions resulting from the COVID-19 pandemic.  For the nine-month period, the Company reversed $7.63 million compared to $12.03 million in loan loss provision recorded for the same period in 2020. 
  • Annualized return on average equity increased to 11.65% compared to 7.83% over the same quarter of 2020, and annualized return on average equity for the first nine months increased to 12.70% compared to 7.76% for the same period last year.
  • Annualized return on average assets increased to 1.59% compared to 1.11% over the same quarter of 2020, while year-to-date annualized return on average assets increased to 1.74% compared to 1.14% for the same period of 2020.
  • Non-interest income for the third quarter of 2021 increased $1.08 million, or 14.17%, compared to the prior year.  Year-to-date non-interest income increased 13.51% to $25.09 million compared to last year.  Both increases are largely attributable to increases in other service charges due to the more vibrant state of local economies with increased customer activity compared with last year.

Balance Sheet and Asset Quality

  • Net charge-offs for the third quarter of 2021 were $586 thousand, or 0.11% annualized of average loans, and non-performing loans to total loans remains a very low 1.05%.
  • The SBA had forgiven $56.74 million, or 93.03%, of the Company’s first round Paycheck Protection Program loan balances through September 30, 2021.  Current PPP loan balances at September 30, 2021, which include second round originations were, $26.93 million.
  • Book value per share at September 30, 2021, was $25.03, an increase of $0.95 from year-end 2020.

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 September 30, 2021. First Community Bank offers wealth management and investment advice through its Trust Division and First Community Wealth Management, which collectively managed and administered $1.27 billion in combined assets as of September 30, 2021. The Company reported consolidated assets of $3.14 billion as of September 30, 2021. 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 
   September 30, June 30, March 31, December 31,September 30,September 30, 
(Amounts in thousands, except share and per share data) 2021   2021   2021   2020   2020   2021   2020  
Interest income              
 Interest and fees on loans$25,119  $25,937  $26,540  $28,101  $27,297  $77,596  $82,346  
 Interest on securities 445   435   495   549   609   1,375   2,240  
 Interest on deposits in banks 225   166   116   96   89   507   704  
Total interest income 25,789   26,538   27,151   28,746   27,995   79,478   85,290  
Interest expense              
 Interest on deposits 642   724   869   1,029   1,161   2,235   4,431  
 Interest on borrowings 1   -   -   -   -   1   4  
Total interest expense 643   724   869   1,029   1,161   2,236   4,435  
Net interest income 25,146   25,814   26,282   27,717   26,834   77,242   80,855  
(Recovery of) provision for credit losses (1,394)  (2,230)  (4,001)  634   4,703   (7,625)  12,034  
Net interest income after provision 26,540   28,044   30,283   27,083   22,131   84,867   68,821  
Noninterest income 8,720   8,797   7,569   7,733   7,638   25,086   22,100  
Noninterest expense 18,836   19,361   18,820   19,877   19,171   57,017   59,748  
Income before income taxes 16,424   17,480   19,032   14,939   10,598   52,936   31,173  
Income tax expense 3,816   4,077   4,430   3,389   2,332   12,323   6,797  
Net income$12,608  $13,403  $14,602  $11,550  $8,266  $40,613  $24,376  
                 
Earnings per common share              
 Basic$0.73  $0.77  $0.83  $0.65  $0.47  $2.32  $1.37  
 Diluted 0.73   0.76   0.82   0.65   0.47   2.32   1.37  
Cash dividends per common share              
 Regular 0.27   0.25   0.25   0.25   0.25   0.77   0.75  
Weighted average shares outstanding              
 Basic 17,221,244   17,486,182   17,669,937   17,717,356   17,710,283   17,457,477   17,803,369  
 Diluted 17,279,576   17,536,144   17,729,185   17,751,805   17,732,428   17,511,900   17,836,963  
Performance ratios              
 Return on average assets 1.59%   1.70%   1.94%   1.54%   1.11%   1.74%   1.14%  
 Return on average common equity 11.65%   12.55%   13.94%   10.82%   7.83%   12.70%   7.76%  
 Return on average tangible common equity(1) 17.04%   18.40%   20.54%   15.96%   11.62%   18.63%   11.55%  
                 
(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) 2021   2021   2021   2020   2020   2021   2020  
Noninterest income               
 Wealth management$974  $1,058  $881  $810  $909  $2,913  $2,607  
 Service charges on deposits 3,599   3,098   3,031   3,478   3,250   9,728   9,541  
 Other service charges and fees 3,143   3,166   3,022   2,737   2,748   9,331   7,596  
 Net gain on sale of securities -   -   -   -   -   -   385  
 Net FDIC indemnification asset amortization -   (946)  (280)  (338)  (383)  (1,226)  (1,352) 
 Other operating income 1,004   2,421   915   1,046   1,114   4,340   3,323  
Total noninterest income$8,720  $8,797  $7,569  $7,733  $7,638  $25,086  $22,100  
Noninterest expense               
 Salaries and employee benefits$10,646  $10,216  $10,884  $11,119  $10,485  $31,746  $32,886  
 Occupancy expense 1,155   1,115   1,275   1,225   1,228   3,545   3,818  
 Furniture and equipment expense 1,385   1,457   1,367   1,446   1,412   4,209   4,112  
 Service fees 1,530   1,513   1,335   1,232   1,581   4,378   4,433  
 Advertising and public relations 536   616   335   534   430   1,487   1,417  
 Professional fees 313   290   466   276   408   1,069   948  
 Amortization of intangibles 365   360   357   364   365   1,082   1,086  
 FDIC premiums and assessments 216   204   199   202   191   619   224  
 Merger, acquisition, and divestiture expense -   -   -   -   -   -   1,893  
 Other operating expense 2,690   3,590   2,602   3,479   3,071   8,882   8,931  
Total noninterest expense$18,836  $19,361  $18,820  $19,877  $19,171  $57,017  $59,748  
                 


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, 
    2021   2021   2021   2020   2020   2021   2020  
(Amounts in thousands, except per share data)              
Net income$12,608  $13,403  $14,602  $11,550  $8,266  $40,613  $24,376  
Non-GAAP adjustments:              
 Net (gain) loss on sale of securities -   -   -   -   -   -   (385) 
 Merger, acquisition, and divestiture expense -   -   -   -   -   -   1,893  
Total adjustments -   -   -   -   -   -   1,508  
Tax effect -   -   -   -   -   -   354  
Adjusted earnings, non-GAAP$12,608  $13,403  $14,602  $11,550  $8,266  $40,613  $25,530  
                 
Adjusted diluted earnings per common share,              
 non-GAAP$0.73  $0.76  $0.82  $0.65  $0.47  $2.32  $1.43  
Performance ratios, non-GAAP              
 Adjusted return on average assets 1.59%   1.70%   1.94%   1.54%   1.11%   1.74%   1.19%  
 Adjusted return on average common equity 11.65%   12.55%   13.94%   10.82%   7.83%   12.70%   8.13%  
 Adjusted return on average tangible              
  common equity(1) 17.04%   18.40%   20.54%   15.96%   11.62%   18.63%   12.09%  
                 
(1)  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, 
    2021   2020  
   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)$2,149,647  $25,161   4.64%  $2,171,023  $27,331   5.01%  
 Securities available for sale 79,995   509   2.52%   93,263   720   3.07%  
 Interest-bearing deposits 586,787   224   0.15%   352,144   90   0.10%  
Total earning assets 2,816,429   25,894   3.65%   2,616,430  28,141   4.28%  
Other assets 330,679        344,285      
Total assets$3,147,108       $2,960,715      
                 
Liabilities and stockholders' equity              
Interest-bearing deposits              
 Demand deposits$651,237  $27   0.02%  $580,165 $73   0.05%  
 Savings deposits 826,144   63   0.03%   720,657  136   0.08%  
 Time deposits 378,895   551   0.58%   448,275  951   0.84%  
Total interest-bearing deposits 1,856,276   641   0.14%   1,749,097  1,160   0.26%  
Borrowings              
 Retail repurchase agreements 1,040   1   0.07%   969   1   0.14%  
Total borrowings 1,040   1   0.07%   969  1   0.14%  
Total interest-bearing liabilities 1,857,316   642   0.14%   1,750,066  1,161   0.26%  
Noninterest-bearing demand deposits 824,112        754,147      
Other liabilities 36,419        36,379      
Total liabilities 2,717,847        2,540,592      
Stockholders' equity 429,261        420,123      
Total liabilities and stockholders' equity$3,147,108       $2,960,715      
Net interest income, FTE(1)  $25,252       $26,980     
Net interest rate spread     3.51%       4.02%  
Net interest margin, FTE(1)     3.56%       4.10%  
                 
(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 $1.01 million and $1.77 million for the three months ended September 30, 2021 and 2020, respectively. 


AVERAGE BALANCE SHEETS AND NET INTEREST INCOME ANALYSIS (Unaudited)
                
   Nine Months Ended September 30, 
    2021   2020  
   Average     Average Yield/ Average    Average Yield/
(Amounts in thousands)Balance Interest(1)  Rate(1) BalanceInterest(1)  Rate(1) 
Assets             
Earning assets             
 Loans(2)(3)$2,149,556  $77,722   4.83%  $2,127,383  $82,476   5.18%  
 Securities available for sale 82,563   1,590   2.57%   110,852   2,619   3.16%  
 Interest-bearing deposits 555,435   508   0.12%   270,106   706   0.34%  
Total earning assets 2,787,554   79,820   3.83%   2,508,341   85,801   4.57%  
Other assets 331,239        351,589         
Total assets$3,118,793       $2,859,930         
                   
Liabilities and stockholders' equity                
Interest-bearing deposits                
 Demand deposits$639,809  $99   0.02%  $543,539  $261   0.06%  
 Savings deposits 807,863   217   0.04%   702,604   790   0.15%  
 Time deposits 395,465   1,918   0.65%   466,126   3,380   0.97%  
Total interest-bearing deposits 1,843,137   2,234   0.16%   1,712,269   4,431   0.35%  
Borrowings             
 Retail repurchase agreements 1,179   1   0.07%   1,218   3   0.32%  
 FHLB advances and other borrowings -   -   -   48   1   2.23%  
Total borrowings 1,179   1   0.07%   1,266   4   0.42%  
Total interest-bearing liabilities 1,844,316   2,235   0.16%   1,713,535   4,435   0.35%  
Noninterest-bearing demand deposits 809,128        688,891         
Other liabilities 37,871        38,001         
Total liabilities 2,691,315        2,440,427         
Stockholders' equity 427,478        419,503         
Total liabilities and stockholders' equity$3,118,793       $2,859,930         
Net interest income, FTE(1)  $77,585       $81,366     
Net interest rate spread     3.67%         4.22%  
Net interest margin, FTE(1)     3.72%         4.33%  
                   
(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 $3.45 million and $5.22 million for the nine months ended September 30, 2021 and 2020, respectively. 


CONDENSED CONSOLIDATED QUARTERLY BALANCE SHEETS (Unaudited) 
             
   September 30,June 30, March 31, December 31,September 30,
(Amounts in thousands, except per share data) 2021   2021   2021   2020   2020  
Assets          
Cash and cash equivalents$635,007  $618,738  $628,745  $456,561  $375,664  
Debt securities available for sale 77,440   79,842   87,643   83,358   90,972  
Loans held for investment, net of unearned income          
 (includes covered loans of $0, $9,041, $9,680, $10,744,         
 and $11,257, for the stated periods, respectively) (1) 2,152,103   2,153,731   2,146,640   2,186,632   2,194,995  
 Allowance for credit losses (2) (29,877)  (31,857)  (34,563)  (26,182)  (27,277) 
Loans held for investment, net 2,122,226   2,121,874   2,112,077   2,160,450   2,167,718  
FDIC indemnification asset -   -   946   1,223   1,598  
Premises and equipment, net 52,842   53,560   57,371   57,700   60,488  
Other real estate owned, noncovered 1,240   1,324   1,740   2,083   2,103  
Interest receivable 8,146   8,480   8,724   9,052   9,151  
Goodwill 129,565   129,565   129,565   129,565   129,565  
Other intangible assets 5,987   6,352   6,712   7,069   7,433  
Other assets 107,258   109,548   106,543   104,075   103,236  
Total assets$3,139,711  $3,129,283  $3,140,066  $3,011,136  $2,947,928  
             
Liabilities          
Deposits          
 Noninterest-bearing$820,147  $819,138  $824,576  $772,795  $750,277  
 Interest-bearing 1,853,699   1,846,556   1,848,524   1,773,452   1,741,962  
Total deposits 2,673,846   2,665,694   2,673,100   2,546,247   2,492,239  
Securities sold under agreements to repurchase 1,106   994   1,519   964   956  
Interest, taxes, and other liabilities 37,395   35,061   39,448   37,195   34,816  
Total liabilities 2,712,347   2,701,749   2,714,067   2,584,406   2,528,011  
             
Stockholders' equity          
Common stock 17,071   17,335   17,592   17,723   17,717  
Additional paid-in capital 154,086   161,853   169,173   173,345   172,980  
Retained earnings 258,860   250,911   241,889   237,585   230,464  
Accumulated other comprehensive loss (2,653)  (2,565)  (2,655)  (1,923)  (1,244) 
Total stockholders' equity 427,364   427,534   425,999   426,730   419,917  
Total liabilities and stockholders' equity$3,139,711  $3,129,283  $3,140,066  $3,011,136  $2,947,928  
             
Shares outstanding at period-end 17,071,052   17,334,547   17,592,009   17,722,507   17,716,522  
Book value per common share$25.03  $24.66  $24.22  $24.08  $23.70  
Tangible book value per common share(3) 17.09   16.82   16.47   16.37   15.97  
             
(1)  No covered loans for September 2021. FDIC Loss Share agreement terminated in September 2021.
(2)  Effective January 1, 2021, the Company adopted the current expected credit loss methodology ("CECL"); prior to January 1, 2021, the
  Company utilized the incurred credit loss methodology.
(3)  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) 2021   2021   2021   2020   2020  
Allowance for Credit Losses (1)          
Beginning balance$31,857  $34,563  $26,182  $27,277  $23,758  
Cumulative effect of adoption of ASU 2016-13 -   -   13,107   -   -  
(Recovery of) provision for          
credit/loan losses charged to operations (1,394)  (2,230)  (4,001)  634   4,703  
Charge-offs (1,255)  (1,902)  (1,730)  (2,194)  (1,563) 
Recoveries 669   1,426   1,005   465   379  
Net charge-offs (586)  (476)  (725)  (1,729)  (1,184) 
Ending balance$29,877  $31,857  $34,563  $26,182  $27,277  
             
Nonperforming Assets          
Nonaccrual loans$22,067  $24,085  $26,106  $22,003  $24,756  
Accruing loans past due 90 days or more 5   327   171   295   43  
Troubled debt restructurings ("TDRs")(2) 584   133   308   187   456  
Total nonperforming loans 22,656   24,545   26,585   22,485   25,255  
OREO 1,240   1,324   1,740   2,083   2,103  
Total nonperforming assets$23,896  $25,869  $28,325  $24,568  $27,358  
             
             
Additional Information          
Total Accruing TDRs(3)$8,185  $8,309  $9,027  $10,248  $10,936  
             
Asset Quality Ratios          
Nonperforming loans to total loans 1.05%  1.14%  1.24%  1.03%  1.15% 
Nonperforming assets to total assets 0.76%  0.83%  0.90%  0.82%  0.93% 
Allowance for credit/loan losses to nonperforming loans   131.87%  129.79%  130.01%  116.44%  108.01% 
Allowance for credit/loan losses to total loans 1.39%  1.48%  1.61%  1.20%  1.24% 
Annualized net charge-offs to average loans 0.11%  0.09%  0.14%  0.26%  0.22% 
             
             
(1) Effective January 1, 2021, the Company adopted the current expected credit loss methodology ("CECL"); prior to January 1, 2021, the
Company utilized the incurred credit loss methodology.         
(2) Accruing TDRs restructured within the past six months or nonperforming 
(3) Accruing total TDRs 


FOR MORE INFORMATION, CONTACT:
David D. Brown
(276) 326-9000

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