First Community Bancshares Inc.

23/07/2024 | Press release | Distributed by Public on 23/07/2024 20:22

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

First Community Bankshares, Inc. Announces Second 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 June 30, 2024. The Company reported net income of $12.69 million, or $0.71 per diluted common share, for the quarter ended June 30, 2024. Net income for the six months ended June 30, 2024, was $25.53 million or $1.42 per diluted common share.

The Company also declared a quarterly cash dividend to common shareholders of thirty-one cents, $0.31 per common share. The quarterly dividend is payable to common shareholders of record on August 9, 2024, and is expected to be paid on or about August 23, 2024. This marks the 39th consecutive year of regular dividends to common shareholders.

Second Quarter 2024 Highlights

Income Statement

o

Net income of $12.69 million for the second quarter of 2024, was an increase of $2.87 million, or 29.26%, from the same quarter of 2023. Net income of $25.53 million for the first six months of 2024, was an increase of $3.94 million, or 18.22%, from the same period of 2023.

o The provision for credit losses decreased $3.96 million, or 96.49%, from the same quarter of 2023. The second quarter of 2023 included $1.61 million of Day 2 provision associated with the Surrey Bancorp acquisition. The majority of the difference is due to a much smaller required credit loss provision as the loan portfolio has experienced a decline of $147.81 million from the same period of 2023. In addition, there was a recovery of provision for the allowance for unfunded commitments of $305 thousand for the current quarter; there was no provision for the same period of 2023.
o Net interest income decreased $950 thousand compared to the same quarter in 2023, primarily due to increases in rates paid on interest-bearing deposits.
o Net interest margin of 4.51% was an increase of 3 basis points over the same quarter of 2023. The yield on earning assets increased 45 basis points from the same period of 2023 and is attributable to an increase in interest income resulting from an increase in yield and an increase in average balance. There was an increase in yield for both loans and securities available for sale. The average balance for interest-bearing deposits with banks increased $147.11 million over the same period of 2023. The yield on interest-bearing liabilities increased 67 basis points when compared with the same period of 2023 and is primarily attributable to increased rates on interest-bearing deposit liabilities.
o Noninterest income increased approximately $557 thousand, or 6.34%, when compared to the same quarter of 2023. Noninterest expense increased $226 thousand, or 0.92%. Noninterest expense for the quarter ending June 30, 2024, included a non-recurring charge of $1.80 million to settle a putative class action lawsuit. Noninterest expense for the same period of 2023 included non-recurring expense of $2.01 million in merger charges related to the Surrey Bancorp acquisition.

o

Annualized return on average assets ("ROA") was 1.58% for the second quarter and 1.59% for the first six months of 2024 compared to 1.18% and 1.36% for the same periods, respectively, of 2023. Annualized return on average common equity ("ROE") was 10.02% for the second quarter and 10.10% for the first six months of 2024 compared to 8.04% and 9.48% for the same periods, respectively, of 2023.

Balance Sheet and Asset Quality

o

Consolidated assets totaled $3.23 billion at June 30, 2024.

o Securities available for sale decreased $151.28 million, or 53.84%, from December 31, 2023. The decrease is primarily attributable to the maturity of $141.50 million in U.S. Treasury Notes during the first six months of 2024. Loans decreased $99.03 million, or 3.85%. Deposits decreased $45.05 million, or 1.65%. The net effect of these balance sheet changes resulted in an increase in cash and cash equivalents of $213.46 million, or 183.35%.

o

The Company repurchased 155,044 common shares during the second quarter of 2024 at a total cost of $5.28 million. The Company repurchased 244,440 common shares during the first six months of 2024 at a total cost of $8.25 million.

o

Non-performing loans to total loans increased to 0.80% when compared with the same quarter of 2023. The Company experienced net charge-offs for the second quarter of 2024 of $1.03 million, or 0.16% of annualized average loans, compared to net charge-offs of $728 thousand, or 0.11%, of annualized average loans for the same period in 2023.

1

o

The allowance for credit losses to total loans was 1.41% at June 30, 2024, compared to 1.41% at December 31, 2023, and 1.38% for June 30, 2023.

o

Book value per share at June 30, 2024, was $ 27.85, an increase of $0.65 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 June 30, 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 $1.58 billion in combined assets as of June 30, 2024. The Company reported consolidated assets of $3.23 billion as of June 30, 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.

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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)

2024

2024

2023

2023

2023

2024

2023

Interest income

Interest and fees on loans

$ 32,696 $ 33,418 $ 33,676 $ 33,496 $ 31,927 $ 66,114 $ 59,555

Interest on securities

1,211 1,698 1,888 1,912 2,057 2,909 4,156

Interest on deposits in banks

2,882 913 438 697 885 3,795 1,347

Total interest income

36,789 36,029 36,002 36,105 34,869 72,818 65,058

Interest expense

Interest on deposits

4,877 4,365 3,935 2,758 1,930 9,242 2,648

Interest on borrowings

- 35 4 - 77 35 136

Total interest expense

4,877 4,400 3,939 2,758 2,007 9,277 2,784

Net interest income

31,912 31,629 32,063 33,347 32,862 63,541 62,274

Provision for credit losses

144 1,011 1,029 1,109 4,105 1,155 5,847

Net interest income after provision

31,768 30,618 31,034 32,238 28,757 62,386 56,427

Noninterest income

9,342 9,259 10,462 9,622 8,785 18,601 17,368

Noninterest expense

24,897 23,386 26,780 22,913 24,671 48,283 45,484

Income before income taxes

16,213 16,491 14,716 18,947 12,871 32,704 28,311

Income tax expense

3,527 3,646 2,932 4,307 3,057 7,173 6,715

Net income

$ 12,686 $ 12,845 $ 11,784 $ 14,640 $ 9,814 $ 25,531 $ 21,596

Earnings per common share

Basic

$ 0.69 $ 0.70 $ 0.64 $ 0.78 $ 0.53 $ 1.39 $ 1.25

Diluted

$ 0.71 $ 0.71 $ 0.66 $ 0.79 $ 0.55 $ 1.42 $ 1.26

Cash dividends per common share

Regular

0.29 0.29 0.29 0.29 0.29 0.58 0.58

Weighted average shares outstanding

Basic

18,343,958 18,476,128 18,530,114 18,786,032 18,407,078 18,410,043 17,323,706

Diluted

18,409,876 18,545,910 18,575,226 18,831,836 18,431,598 18,475,110 17,363,478

Performance ratios

Return on average assets

1.58 % 1.60 % 1.43 % 1.74 % 1.18 % 1.59 % 1.36 %

Return on average common equity

10.02 % 10.18 % 9.39 % 11.63 % 8.04 % 10.10 % 9.48 %

Return on average tangible common equity(1)

14.54 % 14.82 % 13.82 % 17.11 % 11.65 % 14.68 % 13.76 %

(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)

2024

2024

2023

2023

2023

2024

2023

Noninterest income

Wealth management

$ 1,064 $ 1,099 $ 1,052 $ 1,145 $ 965 $ 2,163 $ 1,982

Service charges on deposits

3,428 3,310 3,637 3,729 3,471 6,738 6,630

Other service charges and fees

3,670 3,450 3,541 3,564 3,460 7,120 6,542

(Loss) gain on sale of securities

- - - - (28 ) - (21 )

Other operating income

1,180 1,400 2,232 1,184 917 2,580 2,235

Total noninterest income

$ 9,342 $ 9,259 $ 10,462 $ 9,622 $ 8,785 $ 18,601 $ 17,368

Noninterest expense

Salaries and employee benefits

$ 12,491 $ 12,581 $ 12,933 $ 12,673 $ 12,686 $ 25,072 $ 24,281

Occupancy expense

1,309 1,378 1,252 1,271 1,276 2,687 2,444

Furniture and equipment expense

1,687 1,545 1,489 1,480 1,508 3,232 2,909

Service fees

2,427 2,449 2,255 2,350 2,284 4,876 4,303

Advertising and public relations

933 796 843 968 846 1,729 1,489

Professional fees

330 372 787 172 281 702 608

Amortization of intangibles

530 530 536 536 425 1,060 659

FDIC premiums and assessments

364 369 376 392 423 733 743

Merger expense

- - - - 2,014 - 2,393

Litigation expense

1,800 - 3,000 - - 1,800 -

Other operating expense

3,026 3,366 3,309 3,071 2,928 6,392 5,655

Total noninterest expense

$ 24,897 $ 23,386 $ 26,780 $ 22,913 $ 24,671 $ 48,283 $ 45,484
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RECONCILIATION OF GAAP NET INCOME TO NON-GAAP ADJUSTED EARNINGS (Unaudited)

Three Months Ended

Six Months Ended

June 30,

March 31,

December 31,

September 30,

June 30,

June 30,

(Amounts in thousands, except per share data)

2024

2024

2023

2023

2023

2024

2023

Adjusted Net Income for diluted earnings per share

$ 13,125 $ 13,085 $ 12,314 $ 14,855 $ 10,149 $ 26,210 $ 21,951

Non-GAAP adjustments:

Loss (gain) on sale of securities

- - - - 28 - 21

Merger expense

- - - - 2,014 - 2,393

Day 2 provision for allowance for credit losses - Surrey

- - - - 1,614 - 1,614

Litigation expense

1,800 - 3,000 - - 1,800 -

Other items(1)

- - - (204 ) - - -

Total adjustments

1,800 - 3,000 (204 ) 3,656 1,800 4,028

Tax effect

432 - 720 (49 ) 522 432 532

Adjusted earnings, non-GAAP

$ 14,493 $ 13,085 $ 14,594 $ 14,700 $ 13,283 $ 27,578 $ 25,447

Adjusted diluted earnings per common share, non-GAAP

$ 0.79 $ 0.71 $ 0.79 $ 0.78 $ 0.72 $ 1.49 $ 1.47

Performance ratios, non-GAAP

Adjusted return on average assets

1.81 % 1.63 % 1.77 % 1.75 % 1.60 % 1.72 % 1.60 %

Adjusted return on average common equity

11.45 % 10.37 % 11.63 % 11.68 % 10.88 % 10.91 % 11.17 %

Adjusted return on average tangible common equity (2)

16.61 % 15.10 % 17.11 % 17.18 % 15.77 % 15.86 % 16.21 %

(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 June 30,

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)

$ 2,499,212 $ 32,777 5.27 % $ 2,570,477 $ 31,997 4.99 %

Securities available for sale

144,755 1,242 3.45 % 318,263 2,099 2.65 %

Interest-bearing deposits

210,432 2,883 5.51 % 63,322 885 5.61 %

Total earning assets

2,854,399 36,902 5.20 % 2,952,062 34,981 4.75 %

Other assets

373,029 382,162

Total assets

$ 3,227,428 $ 3,334,224

Liabilities and stockholders' equity

Interest-bearing deposits

Demand deposits

$ 664,707 $ 174 0.10 % $ 712,943 $ 34 0.02 %

Savings deposits

874,420 3,582 1.65 % 861,315 1,306 0.61 %

Time deposits

246,291 1,121 1.83 % 282,229 590 0.84 %

Total interest-bearing deposits

1,785,418 4,877 1.10 % 1,856,487 1,930 0.42 %

Borrowings

Federal funds purchased

- - - 5,927 76 5.14 %

Retail repurchase agreements

1,002 - 0.04 % 1,693 1 0.06 %

Total borrowings

1,002 - 0.04 % 7,620 77 3.94 %

Total interest-bearing liabilities

1,786,420 4,877 1.10 % 1,864,107 2,007 0.43 %

Noninterest-bearing demand deposits

884,681 939,902

Other liabilities

47,123 40,705

Total liabilities

2,718,224 2,844,714

Stockholders' equity

509,204 489,510

Total liabilities and stockholders' equity

$ 3,227,428 $ 3,334,224

Net interest income, FTE(1)

$ 32,025 $ 32,974

Net interest rate spread

4.10 % 4.32 %

Net interest margin, FTE(1)

4.51 % 4.48 %

(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 $661 thousand and $884 thousand for the three months ended June 30, 2024 and 2023, respectively.

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AVERAGE BALANCE SHEETS AND NET INTEREST INCOME ANALYSIS (Unaudited)

Six Months Ended June 30,

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)

$ 2,524,159 $ 66,278 5.28 % $ 2,482,606 $ 59,695 4.85 %

Securities available for sale

191,882 2,974 3.12 % 317,503 4,239 2.69 %

Interest-bearing deposits

138,458 3,798 5.52 % 52,219 1,350 5.21 %

Total earning assets

2,854,499 73,050 5.15 % 2,852,328 65,284 4.62 %

Other assets

373,322 352,643

Total assets

$ 3,227,821 $ 3,204,971

Liabilities and stockholders' equity

Interest-bearing deposits

Demand deposits

$ 665,291 $ 336 0.10 % $ 689,823 $ 60 0.02 %

Savings deposits

870,252 6,995 1.62 % 844,459 1,790 0.43 %

Time deposits

248,133 1,911 1.55 % 276,752 798 0.58 %

Total interest-bearing deposits

1,783,676 9,242 1.04 % 1,811,034 2,648 0.29 %

Borrowings

Federal funds purchased

1,264 35 5.52 % 5,326 135 5.11 %

Retail repurchase agreements

1,065 - 0.05 % 1,889 1 0.06 %

Total borrowings

2,329 35 3.02 % 7,215 136 3.80 %

Total interest-bearing liabilities

1,786,005 9,277 1.04 % 1,818,249 2,784 0.31 %

Noninterest-bearing demand deposits

885,813 889,253

Other liabilities

47,710 38,204

Total liabilities

2,719,528 2,745,706

Stockholders' equity

508,293 459,265

Total liabilities and stockholders' equity

$ 3,227,821 $ 3,204,971

Net interest income, FTE(1)

$ 63,773 $ 62,500

Net interest rate spread

4.11 % 4.31 %

Net interest margin, FTE(1)

4.49 % 4.42 %

(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 $1.44 million and $1.08 million for the six months ended June 30, 2024 and 2023, respectively.

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CONDENSED CONSOLIDATED QUARTERLY BALANCE SHEETS (Unaudited)

June 30,

March 31,

December 31,

September 30,

June 30,

(Amounts in thousands, except per share data)

2024

2024

2023

2023

2023

Assets

Cash and cash equivalents

$ 329,877 $ 248,905 $ 116,420 $ 113,397 $ 152,660

Debt securities available for sale, at fair value

129,686 166,247 280,961 275,332 314,373

Loans held for investment, net of unearned income

2,473,268 2,519,833 2,572,298 2,593,472 2,621,073

Allowance for credit losses

(34,885 ) (35,461 ) (36,189 ) (36,031 ) (36,177 )

Loans held for investment, net

2,438,383 2,484,372 2,536,109 2,557,441 2,584,896

Premises and equipment, net

50,528 51,333 50,680 51,205 53,546

Other real estate owned

100 374 192 243 339

Interest receivable

9,984 10,719 10,881 10,428 10,185

Goodwill

143,946 143,946 143,946 143,946 143,946

Other intangible assets

14,085 14,615 15,145 15,681 16,217

Other assets

116,230 115,470 114,211 116,552 115,275

Total assets

$ 3,232,819 $ 3,235,981 $ 3,268,545 $ 3,284,225 $ 3,391,437

Liabilities

Deposits

Noninterest-bearing

$ 889,462 $ 902,396 $ 931,920 $ 944,301 $ 974,995

Interest-bearing

1,787,810 1,779,819 1,790,405 1,801,835 1,877,683

Total deposits

2,677,272 2,682,215 2,722,325 2,746,136 2,852,678

Securities sold under agreements to repurchase

894 1,006 1,119 1,029 1,348

Interest, taxes, and other liabilities

45,769 45,816 41,807 41,393 38,691

Total liabilities

2,723,935 2,729,037 2,765,251 2,788,558 2,892,717

Stockholders' equity

Common stock

18,270 18,413 18,502 18,671 18,969

Additional paid-in capital

168,272 173,041 175,841 180,951 189,917

Retained earnings

334,756 327,389 319,902 313,489 304,295

Accumulated other comprehensive loss

(12,414 ) (11,899 ) (10,951 ) (17,444 ) (14,461 )

Total stockholders' equity

508,884 506,944 503,294 495,667 498,720

Total liabilities and stockholders' equity

$ 3,232,819 $ 3,235,981 $ 3,268,545 $ 3,284,225 $ 3,391,437

Shares outstanding at period-end

18,270,273 18,413,088 18,502,396 18,671,470 18,969,281

Book value per common share

$ 27.85 $ 27.53 $ 27.20 $ 26.55 $ 26.29

Tangible book value per common share(1)

19.20 18.92 18.60 18.00 17.85

(1)

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

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SELECTED CREDIT QUALITY INFORMATION (Unaudited)

June 30,

March 31,

December 31,

September 30,

June 30,

(Amounts in thousands)

2024

2024

2023

2023

2023

Allowance for Credit Losses

Balance at beginning 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

Total allowance for credit losses beginning of period

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

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

449 1,011 1,041 1,315 4,105

(Recovery of) provision for credit losses - loan commitments

(305 ) - (12 ) (206 ) -

Total provision for credit losses - loans and loan commitments

144 1,011 1,029 1,109 4,105

Charge-offs

(1,599 ) (2,448 ) (2,105 ) (2,157 ) (1,993 )

Recoveries

574 709 1,222 696 1,265

Net (charge-offs) recoveries

(1,025 ) (1,739 ) (883 ) (1,461 ) (728 )

Balance at end of period:

Allowance for credit losses - loans

34,885 35,461 36,189 36,031 36,177

Allowance for credit losses - loan commitments

441 746 746 758 964

Ending balance

$ 35,326 $ 36,207 $ 36,935 $ 36,789 $ 37,141

Nonperforming Assets

Nonaccrual loans

$ 19,815 $ 19,617 $ 19,356 $ 18,366 $ 18,628

Accruing loans past due 90 days or more

19 30 104 59 -

Modified loans past due 90 days or more

- - - - -

Total nonperforming loans

19,834 19,647 19,460 18,425 18,628

OREO

100 374 192 243 339

Total nonperforming assets

$ 19,934 $ 20,021 $ 19,652 $ 18,668 $ 18,967

Additional Information

Total modified loans

$ 2,290 $ 2,177 $ 1,873 $ 1,674 $ 642

Asset Quality Ratios

Nonperforming loans to total loans

0.80 % 0.78 % 0.76 % 0.71 % 0.71 %

Nonperforming assets to total assets

0.62 % 0.62 % 0.60 % 0.57 % 0.56 %

Allowance for credit losses to nonperforming loans

175.88 % 180.49 % 185.97 % 195.55 % 194.21 %

Allowance for credit losses to total loans

1.41 % 1.41 % 1.41 % 1.39 % 1.38 %

Annualized net charge-offs (recoveries) to average loans

0.16 % 0.27 % 0.14 % 0.22 % 0.11 %
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