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First Community Bankshares, Inc. Announces Fourth Quarter 2022 Results and Quarterly Cash Dividend
ソース: Nasdaq GlobeNewswire / 24 1 2023 16:02:48 America/New_York
BLUEFIELD, Va., Jan. 24, 2023 (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 December 31, 2022. The Company reported net income of $12.58 million, or $0.77 per diluted common share, for the quarter ended December 31, 2022. Net income for the year ended December 31, 2022, was $46.66 million or $2.82 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 February 10, 2023, and is expected to be paid on or about February 24, 2023. This marks the 38th consecutive year of regular dividends to common shareholders.
During the fourth quarter, the Company entered into an agreement to acquire Mount Airy, North Carolina-based Surrey Bancorp. The acquisition will strengthen the Company’s presence in western North Carolina, result in top market share in Mount Airy, and add approximately $500 million in assets. Surrey has a record of excellent financial performance and a very strong core deposit franchise across its seven branch network. The acquisition is subject to customary regulatory and shareholder approvals and is expected to close in the second quarter of 2023.
Fourth Quarter 2022 and Current Highlights
Income Statement
- Net income of $12.58 million for the quarter was an increase of $2.03 million compared to $10.56 million recorded in the same quarter of 2021. The increase is primarily attributable to an increase in net interest income of $5.39 million as well as a decrease in noninterest expense of $971 thousand. The positive increases to income were offset by an increase in the provision for credit losses of $4.26 million compared to the same quarter of 2021.
- Annualized return on average assets was 1.59% for the fourth quarter and 1.45% for year-end 2022. Annualized return on average common equity was 11.99% for the fourth quarter and 11.04% for year-end 2022.
- Net interest margin for the fourth quarter was 4.34%, which was an 82 basis point increase from 3.52% reported for fourth quarter of 2021. The yield on earning assets increased 79 basis points, primarily driven by increased earnings on loans and securities.
- The cost of interest-bearing deposits declined 5 basis points to 0.08%, primarily driven by a decrease in the cost of time deposits and an increase in non-maturing deposits.
- Net interest income increased $5.39 million compared to the same quarter of 2021. Interest and fees on loans increased $2.64 million from the same quarter of 2021 and is primarily attributable to loan demand and originations. Interest income from securities of $1.90 million was an increase of $1.54 million over the fourth quarter of 2021. Interest on deposits in banks also increased $981 thousand to $1.22 million for the fourth quarter as a result of the Federal Open Market Committee’s incremental 425 basis point rate increase in overnight rates throughout 2022 as compared to the overnight rates of 2021.
- The provision for credit losses of $3.42 million for the quarter was an increase of $4.26 million compared to the same quarter of 2021. The increase was largely attributable to the growth of the loan portfolio throughout 2022 and an economic forecast that projects higher unemployment rates and weaker macroeconomic trends. The fourth quarter and full year of 2021 included recoveries of pandemic-related provisioning.
- Salaries and employee benefits for the fourth quarter decreased $580 thousand, or 4.64%, over the same quarter in 2021, while increasing $2.94 million, or 6.65%, for the full year of 2022 compared with 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 $234.63 million, a growth rate of 10.83%, during of 2022. Loan demand and originations were strong in all categories, including construction, commercial real estate, residential mortgage, and consumer loans.
- During the fourth quarter, the Company repurchased 55,210 of its common shares for $1.89 million. The Company repurchased 706,117 common shares for $21.31 million during 2022. Share repurchases have been curtailed due to the announced acquisition of Surrey Bancorp.
- Non-performing loans to total loans remained low at 0.70% of total loans and continues the declining trend experienced over the past four quarters. The Company experienced net charge-offs for the fourth quarter of 2022 of $2.25 million, or 0.37% of annualized average loans, compared to net charge-offs of $1.17 million, or 0.22% of annualized average loans, for the same period in 2021. Net charge-offs for the year ended December 31, 2022, were $3.87 million, or 0.23% of annualized average loans, compared to net charge-offs of $2.96 million, or 0.18% of annualized average loans, for the same period in 2021.
- The allowance for credit losses to total loans was 1.27% at December 31, 2022.
- Book value per share at December 31, 2022, was $26.01, an increase of $0.67 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 December 31, 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 $1.28 billion in combined assets as of December 31, 2022. The Company reported consolidated assets of $3.14 billion as of December 31, 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 Twelve Months Ended December 31, September 30, June 30, March 31, December 31, December 31, (Amounts in thousands, except share and per share data) 2022 2022 2022 2022 2021 2022 2021 Interest income Interest and fees on loans $ 27,873 $ 26,405 $ 25,651 $ 24,641 $ 25,236 $ 104,570 $ 102,832 Interest on securities 1,900 1,785 1,551 750 362 5,986 1,737 Interest on deposits in banks 1,215 1,532 768 248 234 3,763 741 Total interest income 30,988 29,722 27,970 25,639 25,832 114,319 105,310 Interest expense Interest on deposits 366 380 422 486 600 1,654 2,835 Interest on borrowings 1 - 1 - - 2 1 Total interest expense 367 380 423 486 600 1,656 2,836 Net interest income 30,621 29,342 27,547 25,153 25,232 112,663 102,474 Provision for (recovery of) credit losses 3,416 685 510 1,961 (846 ) 6,572 (8,471 ) Net interest income after provision 27,205 28,657 27,037 23,192 26,078 106,091 110,945 Noninterest income 9,184 9,950 8,854 9,194 9,215 37,182 34,301 Noninterest expense 20,730 21,145 21,255 19,986 21,701 83,116 78,718 Income before income taxes 15,659 17,462 14,636 12,400 13,592 60,157 66,528 Income tax expense 3,076 4,111 3,423 2,885 3,037 13,495 15,360 Net income $ 12,583 $ 13,351 $ 11,213 $ 9,515 $ 10,555 $ 46,662 $ 51,168 Earnings per common share Basic $ 0.78 $ 0.82 $ 0.67 $ 0.57 $ 0.62 $ 2.82 $ 2.95 Diluted 0.77 0.81 0.67 0.56 0.62 2.82 2.94 Cash dividends per common share Regular 0.29 0.29 0.27 0.27 0.27 1.12 1.04 Weighted average shares outstanding Basic 16,229,289 16,378,022 16,662,817 16,817,284 16,974,005 16,519,848 17,335,615 Diluted 16,281,922 16,413,202 16,682,615 16,864,515 17,038,980 16,562,257 17,402,936 Performance ratios Return on average assets 1.59 % 1.63 % 1.38 % 1.20 % 1.32 % 1.45 % 1.63 % Return on average common equity 11.99 % 12.60 % 10.61 % 8.98 % 9.77 % 11.04 % 11.96 % Return on average tangible common equity(1) 17.75 % 18.51 % 15.56 % 13.10 % 14.28 % 16.17 % 17.53 % (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 Twelve Months Ended December 31, September 30, June 30, March 31, December 31, December 31, (Amounts in thousands) 2022 2022 2022 2022 2021 2022 2021 Noninterest income Wealth management $ 958 $ 932 $ 993 $ 972 $ 940 $ 3,855 $ 3,853 Service charges on deposits 3,354 3,689 3,672 3,498 3,718 14,213 13,446 Other service charges and fees 3,006 2,988 3,297 3,017 3,091 12,308 12,422 Net FDIC indemnification asset amortization - - - - - - (1,226 ) Gain on divestiture - 1,658 - - - 1,658 - Other operating income 1,866 683 892 1,707 1,466 5,148 5,806 Total noninterest income $ 9,184 $ 9,950 $ 8,854 $ 9,194 $ 9,215 $ 37,182 $ 34,301 Noninterest expense Salaries and employee benefits $ 11,913 $ 12,081 $ 11,518 $ 11,671 $ 12,493 $ 47,183 $ 44,239 Occupancy expense 1,196 1,188 1,165 1,269 1,368 4,818 4,913 Furniture and equipment expense 1,413 1,478 1,496 1,614 1,418 6,001 5,627 Service fees 1,905 1,635 2,563 1,503 1,946 7,606 6,324 Advertising and public relations 574 718 577 540 589 2,409 2,076 Professional fees 98 208 544 453 455 1,303 1,524 Amortization of intangibles 364 365 360 357 364 1,446 1,446 FDIC premiums and assessments 330 321 257 218 213 1,126 832 Merger expense 596 - - - - 596 - Divestiture expense - 153 - - - 153 - Other operating expense 2,341 2,998 2,775 2,361 2,855 10,475 11,737 Total noninterest expense $ 20,730 $ 21,145 $ 21,255 $ 19,986 $ 21,701 $ 83,116 $ 78,718 RECONCILIATION OF GAAP NET INCOME TO NON-GAAP ADJUSTED EARNINGS (Unaudited) Three Months Ended Twelve Months Ended December 31, September 30, June 30, March 31, December 31, December 31, 2022 2022 2022 2022 2021 2022 2021 (Amounts in thousands, except per share data) Net income $ 12,583 $ 13,351 $ 11,213 $ 9,515 $ 10,555 $ 46,662 $ 51,168 Non-GAAP adjustments: Merger expense 596 - - - - 596 - Divestiture expense - 153 - - - 153 - Gain on divestiture - (1,658 ) - - - (1,658 ) Other items(1) (450 ) - (92 ) - - (542 ) - Total adjustments 146 (1,505 ) (92 ) - - (1,451 ) - Tax effect (29 ) (361 ) (22 ) - - (412 ) - Adjusted earnings, non-GAAP $ 12,758 $ 12,207 $ 11,143 $ 9,515 $ 10,555 $ 45,623 $ 51,168 Adjusted diluted earnings per common share, non-GAAP $ 0.78 $ 0.74 $ 0.67 $ 0.56 $ 0.62 $ 2.75 $ 2.94 Performance ratios, non-GAAP Adjusted return on average assets 1.61 % 1.49 % 1.37 % 1.20 % 1.32 % 1.42 % 1.63 % Adjusted return on average common equity 12.16 % 11.52 % 10.55 % 8.98 % 9.77 % 10.80 % 11.96 % Adjusted return on average tangible common equity(2) 17.93 % 16.92 % 15.46 % 13.10 % 14.28 % 15.84 % 17.53 % (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 December 31, 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) $ 2,383,161 $ 27,944 4.65 % $ 2,163,613 $ 25,274 4.63 % Securities available for sale 299,488 1,942 2.57 % 76,556 418 2.17 % Interest-bearing deposits 130,363 1,218 3.71 % 613,377 237 0.15 % Total earning assets 2,813,012 31,104 4.39 % 2,853,546 25,929 3.60 % Other assets 326,043 328,866 Total assets $ 3,139,055 $ 3,182,412 Liabilities and stockholders' equity Interest-bearing deposits Demand deposits $ 666,517 $ 27 0.02 % $ 668,335 $ 28 0.02 % Savings deposits 856,755 106 0.05 % 843,501 64 0.03 % Time deposits 293,520 232 0.31 % 362,869 509 0.56 % Total interest-bearing deposits 1,816,792 365 0.08 % 1,874,705 601 0.13 % Borrowings Retail repurchase agreements 2,473 1 0.07 % 1,236 - N/M Total borrowings 2,473 1 0.07 % 1,236 - N/M Total interest-bearing liabilities 1,819,265 366 0.08 % 1,875,941 601 0.13 % Noninterest-bearing demand deposits 864,537 838,920 Other liabilities 38,993 38,986 Total liabilities 2,722,795 2,753,847 Stockholders' equity 416,260 428,565 Total liabilities and stockholders' equity $ 3,139,055 $ 3,182,412 Net interest income, FTE(1) $ 30,738 $ 25,328 Net interest rate spread 4.31 % 3.47 % Net interest margin, FTE(1) 4.34 % 3.52 % (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 $395 thousand and $1.10 million for the three months ended December 31, 2022 and 2021, respectively. AVERAGE BALANCE SHEETS AND NET INTEREST INCOME ANALYSIS (Unaudited) Twelve Months Ended December 31, 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) $ 2,298,503 $ 104,830 4.56 % $ 2,153,099 $ 102,996 4.78 % Securities available for sale 256,221 6,172 2.41 % 81,049 2,008 2.48 % Interest-bearing deposits 330,785 3,767 1.14 % 570,040 745 0.13 % Total earning assets 2,885,509 114,769 3.98 % 2,804,188 105,749 3.77 % Other assets 328,635 330,640 Total assets $ 3,214,144 $ 3,134,828 Liabilities and stockholders' equity Interest-bearing deposits Demand deposits $ 683,502 $ 112 0.02 % $ 646,999 $ 127 0.02 % Savings deposits 880,171 306 0.03 % 816,845 281 0.03 % Time deposits 322,158 1,235 0.38 % 387,249 2,427 0.63 % Total interest-bearing deposits 1,885,831 1,653 0.09 % 1,851,093 2,835 0.15 % Borrowings Retail repurchase agreements 2,239 2 0.07 % 1,194 1 0.07 % Total borrowings 2,239 2 0.07 % 1,194 1 0.07 % Total interest-bearing liabilities 1,888,070 1,655 0.09 % 1,852,287 2,836 0.15 % Noninterest-bearing demand deposits 864,224 816,638 Other liabilities 39,363 38,151 Total liabilities 2,791,657 2,707,076 Stockholders' equity 422,487 427,752 Total liabilities and stockholders' equity $ 3,214,144 $ 3,134,828 Net interest income, FTE(1) $ 113,114 $ 102,913 Net interest rate spread 3.89 % 3.62 % Net interest margin, FTE(1) 3.92 % 3.67 % (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 $2.62 million and $4.66 million for the twelve months ended December 31, 2022 and 2021, respectively. CONDENSED CONSOLIDATED QUARTERLY BALANCE SHEETS (Unaudited) December 31, September 30, June 30, March 31, December 31, (Amounts in thousands, except per share data) 2022 2022 2022 2022 2021 Assets Cash and cash equivalents $ 170,846 $ 229,095 $ 398,242 $ 457,306 $ 677,439 Debt securities available for sale 300,349 299,620 287,767 268,703 76,292 Loans held for investment, net of unearned income 2,400,197 2,362,733 2,299,798 2,244,296 2,165,569 Allowance for credit losses (30,556 ) (29,388 ) (29,749 ) (28,981 ) (27,858 ) Loans held for investment, net 2,369,641 2,333,345 2,270,049 2,215,315 2,137,711 Premises and equipment, net 47,340 47,891 49,752 50,912 52,284 Other real estate owned 703 559 579 848 1,015 Interest receivable 9,279 8,345 8,433 8,100 7,900 Goodwill 129,565 129,565 129,565 129,565 129,565 Other intangible assets 4,176 4,541 4,905 5,266 5,622 Other assets 103,673 107,838 109,085 108,112 106,691 Total assets $ 3,135,572 $ 3,160,799 $ 3,258,377 $ 3,244,127 $ 3,194,519 Liabilities Deposits Noninterest-bearing $ 872,168 $ 878,423 $ 877,962 $ 860,652 $ 842,783 Interest-bearing 1,806,647 1,831,798 1,920,577 1,922,292 1,886,608 Total deposits 2,678,815 2,710,221 2,798,539 2,782,944 2,729,391 Securities sold under agreements to repurchase 1,874 1,958 2,635 2,488 1,536 Interest, taxes, and other liabilities 32,898 36,362 39,157 34,539 35,817 Total liabilities 2,713,587 - 2,748,541 - 2,840,331 - 2,819,971 - 2,766,744 Stockholders' equity Common stock 16,225 16,273 16,502 16,782 16,878 Additional paid-in capital 128,508 129,914 136,705 144,088 147,619 Retained earnings 292,971 285,096 276,499 269,798 264,824 Accumulated other comprehensive loss (15,719 ) (19,025 ) (11,660 ) (6,512 ) (1,546 ) Total stockholders' equity 421,985 412,258 418,046 424,156 427,775 Total liabilities and stockholders' equity $ 3,135,572 $ 3,160,799 $ 3,258,377 $ 3,244,127 $ 3,194,519 Shares outstanding at period-end 16,225,399 16,273,177 16,502,144 16,781,975 16,878,220 Book value per common share $ 26.01 $ 25.33 $ 25.33 $ 25.27 $ 25.34 Tangible book value per common share(1) 17.76 17.09 17.18 17.24 17.34 (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) December 31, September 30, June 30, March 31, December 31, (Amounts in thousands) 2022 2022 2022 2022 2021 Allowance for Credit Losses Beginning balance $ 29,388 $ 29,749 $ 28,981 $ 27,858 $ 29,877 Provision for (recovery of) credit losses charged to operations 3,416 685 510 1,961 (846 ) Charge-offs (2,873 ) (2,158 ) (1,469 ) (1,302 ) (1,887 ) Recoveries 625 1,112 1,727 464 714 Net (charge-offs) recoveries (2,248 ) (1,046 ) 258 (838 ) (1,173 ) Ending balance $ 30,556 $ 29,388 $ 29,749 $ 28,981 $ 27,858 Nonperforming Assets Nonaccrual loans $ 15,208 $ 15,303 $ 17,826 $ 20,487 $ 20,768 Accruing loans past due 90 days or more 142 131 131 - 87 Troubled debt restructurings ("TDRs")(1) 1,346 1,331 515 1,141 1,367 Total nonperforming loans 16,696 16,765 18,472 21,628 22,222 OREO 703 559 579 848 1,015 Total nonperforming assets $ 17,399 $ 17,324 $ 19,051 $ 22,476 $ 23,237 Additional Information Total accruing TDRs(2) $ 7,112 $ 7,028 $ 8,313 $ 8,782 $ 8,652 Asset Quality Ratios Nonperforming loans to total loans 0.70 % 0.71 % 0.80 % 0.96 % 1.03 % Nonperforming assets to total assets 0.55 % 0.55 % 0.58 % 0.69 % 0.73 % Allowance for credit losses to nonperforming loans 183.01 % 175.29 % 161.05 % 134.00 % 125.36 % Allowance for credit losses to total loans 1.27 % 1.24 % 1.29 % 1.29 % 1.29 % Annualized net charge-offs (recoveries) to average loans 0.37 % 0.18 % -0.05 % 0.15 % 0.22 % (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 
