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First Community Bankshares, Inc. Announces Second Quarter 2022 Results and Increased Quarterly Cash Dividend
Source: Nasdaq GlobeNewswire / 26 Jul 2022 16:00:02 America/New_York
BLUEFIELD, Va., July 26, 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 June 30, 2022. The Company reported net income of $11.21 million, or $0.67 per diluted common share, for the quarter ended June 30, 2022. Net income for the six months ended June 30, 2022, was $20.73 million or $1.24 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 also an increase of two cents ($0.02) from the dividends declared in the previous two quarters of 2022. The quarterly dividend is payable to common shareholders of record on August 5, 2022, and is expected to be paid on or about August 19, 2022. This marks the 37th consecutive year of regular dividends to common shareholders.
Second Quarter 2022 and Current Highlights
Income Statement
- Net income of $11.21 million for the quarter was a decrease compared to the same quarter of 2021, which included a significant reversal of provision for credit losses. The normalized provision for credit losses drove much of the difference between current year-to-date net income of $20.73 million and the same period in 2021.
- Interest income from securities of $1.55 million was an increase of $1.12 million over the second quarter of 2021, as the Company added to its portfolio with a significant weighting toward 2-year treasury securities. Interest on fed funds also increased $602 thousand to $768 thousand for the second quarter as a result of the Federal Open Market Committee’s 150 basis point increase in overnight rates.
- The total cost of funds remained very low at 0.06%, a decrease of 0.05% from the second quarter of 2021.
- Despite the significant increase in credit loss provision over 2021, annualized return on average assets was 1.38% for the second quarter and 1.29% for the first six months of 2022. Annualized return on average common equity was 10.61% for the second quarter and 9.80% for the first half of 2022.
- Net interest margin for the second quarter was 3.78%, which was a 10 basis point increase from 3.68% reported for second quarter of 2021. The yield on earning assets increased 6 basis points, primarily driven by an increase in the yields on overnight funds. The cost of interest-bearing deposits declined 6 basis points to 0.09%, primarily driven by a decrease in the cost of time deposits.
- Salaries and employee benefits for the second quarter increased $1.30 million, or 12.74%, over the same quarter in 2021. Salaries and employee benefits for the first six months increased $2.09 million, or 9.90%, over the first six 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 $134.23 million, an annualized growth rate of 12.50%, during the first six months of 2022. Loan demand and originations were strong in all categories, including construction, commercial real estate, residential mortgage, and consumer loans.
- During the second quarter, the Company repurchased 283,507 of its common shares for $7.95 million. The Company repurchased 415,507 common shares for $12.03 million during the six months of 2022.
- Non-performing loans to total loans remained very low at 0.80% of total loans and continues the declining trend experienced over the past four quarters. The Company experienced net recoveries for the second quarter of 2022 of $258 thousand, or 0.05% of annualized average loans, compared to net charge-offs of $476 thousand, or 0.09% of annualized average loans, for the same period in 2021. Net charge-offs for the six-month period ended June 30, 2022, were $580 thousand, or 0.05% of annualized average loans, compared to net charge-offs of $1.20 million, or 0.11% of annualized average loans, for the same period in 2021.
- The allowance for credit losses to total loans remained at 1.29% of total loans.
- Book value per share at June 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 49 branch banking locations in Virginia, West Virginia, North Carolina, and Tennessee as of June 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 $1.20 billion in combined assets as of June 30, 2022. The Company reported consolidated assets of $3.26 billion as of June 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 Six Months Ended June 30, March 31, December 31, September 30, June 30, June 30, (Amounts in thousands, except share and per share data) 2022 2022 2021 2021 2021 2022 2021 Interest income Interest and fees on loans $ 25,651 $ 24,641 $ 25,236 $ 25,119 $ 25,937 $ 50,292 $ 52,477 Interest on securities 1,551 750 362 445 435 2,301 930 Interest on deposits in banks 768 248 234 225 166 1,016 282 Total interest income 27,970 25,639 25,832 25,789 26,538 53,609 53,689 Interest expense Interest on deposits 422 486 600 642 724 908 1,593 Interest on borrowings 1 - - 1 - 1 - Total interest expense 423 486 600 643 724 909 1,593 Net interest income 27,547 25,153 25,232 25,146 25,814 52,700 52,096 (Recovery of) provision for credit losses 510 1,961 (846 ) (1,394 ) (2,230 ) 2,471 (6,231 ) Net interest income after provision 27,037 23,192 26,078 26,540 28,044 50,229 58,327 Noninterest income 8,854 9,194 9,215 8,720 8,797 18,048 16,366 Noninterest expense 21,255 19,986 21,701 18,836 19,361 41,241 38,181 Income before income taxes 14,636 12,400 13,592 16,424 17,480 27,036 36,512 Income tax expense 3,423 2,885 3,037 3,816 4,077 6,308 8,507 Net income $ 11,213 $ 9,515 $ 10,555 $ 12,608 $ 13,403 $ 20,728 $ 28,005 Earnings per common share Basic $ 0.67 $ 0.57 $ 0.62 $ 0.73 $ 0.77 $ 1.24 $ 1.59 Diluted 0.67 0.56 0.62 0.73 0.76 1.24 1.59 Cash dividends per common share Regular 0.27 0.27 0.27 0.27 0.25 0.54 0.50 Weighted average shares outstanding Basic 16,662,817 16,817,284 16,974,005 17,221,244 17,486,182 16,739,624 17,577,552 Diluted 16,682,615 16,864,515 17,038,980 17,279,576 17,536,144 16,772,847 17,631,330 Performance ratios Return on average assets 1.38 % 1.20 % 1.32 % 1.59 % 1.70 % 1.29 % 1.82 % Return on average common equity 10.61 % 8.98 % 9.77 % 11.65 % 12.55 % 9.80 % 13.24 % Return on average tangible common equity(1) 15.56 % 13.10 % 14.28 % 17.04 % 18.40 % 14.32 % 19.45 % (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) 2022 2022 2021 2021 2021 2022 2021 Noninterest income Wealth management $ 993 $ 972 $ 940 $ 974 $ 1,058 $ 1,965 $ 1,939 Service charges on deposits 3,672 3,498 3,718 3,599 3,098 7,170 6,129 Other service charges and fees 3,297 3,017 3,091 3,143 3,166 6,314 6,188 Net FDIC indemnification asset amortization - - - - (946 ) - (1,226 ) Other operating income 892 1,707 1,466 1,004 2,421 2,599 3,336 Total noninterest income $ 8,854 $ 9,194 $ 9,215 $ 8,720 $ 8,797 $ 18,048 $ 16,366 Noninterest expense Salaries and employee benefits $ 11,518 $ 11,671 $ 12,493 $ 10,646 $ 10,216 $ 23,189 $ 21,100 Occupancy expense 1,165 1,269 1,368 1,155 1,115 2,434 2,390 Furniture and equipment expense 1,496 1,614 1,418 1,385 1,457 3,110 2,824 Service fees 2,563 1,503 1,946 1,530 1,513 4,066 2,848 Advertising and public relations 577 540 589 536 616 1,117 951 Professional fees 544 453 455 313 290 997 756 Amortization of intangibles 360 357 364 365 360 717 717 FDIC premiums and assessments 257 218 213 216 204 475 403 Other operating expense 2,775 2,361 2,855 2,690 3,590 5,136 6,192 Total noninterest expense $ 21,255 $ 19,986 $ 21,701 $ 18,836 $ 19,361 $ 41,241 $ 38,181 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, 2022 2022 2021 2021 2021 2022 2021 (Amounts in thousands, except per share data) Net income $ 11,213 $ 9,515 $ 10,555 $ 12,608 $ 13,403 $ 28,005 $ 28,005 Non-GAAP adjustments: Net (gain) loss on sale of securities - - - - - - - Merger, acquisition, and divestiture expense - - - - - - - Other items(1) (92 ) - - - - - - Total adjustments (92 ) - - - - - - Tax effect (22 ) - - - - - - Adjusted earnings, non-GAAP $ 11,143 $ 9,515 $ 10,555 $ 12,608 $ 13,403 $ 28,005 $ 28,005 Adjusted diluted earnings per common share, non-GAAP $ 0.67 $ 0.56 $ 0.62 $ 0.73 $ 0.76 $ 1.59 $ 1.59 Performance ratios, non-GAAP Adjusted return on average assets 1.37 % 1.20 % 1.32 % 1.59 % 1.70 % 1.82 % 1.82 % Adjusted return on average common equity 10.55 % 8.98 % 9.77 % 11.65 % 12.55 % 13.24 % 13.24 % Adjusted return on average tangible common equity(2) 15.46 % 13.10 % 14.28 % 17.04 % 18.40 % 19.45 % 19.45 % (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 June 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) $ 2,273,844 $ 25,714 4.54 % $ 2,134,136 $ 25,979 4.88 % Securities available for sale 280,823 1,597 2.28 % 84,099 508 2.42 % Interest-bearing deposits 377,931 769 0.82 % 610,148 166 0.11 % Total earning assets 2,932,598 28,080 3.84 % 2,828,383 26,653 3.78 % Other assets 331,774 331,563 Total assets $ 3,264,372 $ 3,159,946 Liabilities and stockholders' equity Interest-bearing deposits Demand deposits $ 698,978 $ 29 0.02 % $ 654,767 $ 33 0.02 % Savings deposits 895,370 67 0.03 % 818,490 63 0.03 % Time deposits 331,555 326 0.39 % 394,889 628 0.64 % Total interest-bearing deposits 1,925,903 422 0.09 % 1,868,146 724 0.15 % Borrowings Retail repurchase agreements 2,105 1 0.08 % 1,266 - N/M Total borrowings 2,105 1 0.08 % 1,266 - N/M Total interest-bearing liabilities 1,928,008 423 0.09 % 1,869,412 724 0.16 % Noninterest-bearing demand deposits 874,507 824,888 Other liabilities 38,106 37,306 Total liabilities 2,840,621 2,731,606 Stockholders' equity 423,751 428,340 Total liabilities and stockholders' equity $ 3,264,372 $ 3,159,946 Net interest income, FTE(1) $ 27,657 $ 25,929 Net interest rate spread 3.75 % 3.62 % Net interest margin, FTE(1) 3.78 % 3.68 % (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 $870 thousand and $1.25 million for the three months ended June 30, 2022 and 2021, respectively. AVERAGE BALANCE SHEETS AND NET INTEREST INCOME ANALYSIS (Unaudited) Six Months Ended June 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) $ 2,237,128 $ 50,412 4.54 % $ 2,149,509 $ 52,561 4.93 % Securities available for sale 211,285 2,397 2.29 % 83,868 1,081 2.60 % Interest-bearing deposits 460,864 1,018 0.45 % 539,500 284 0.11 % Total earning assets 2,909,277 53,827 3.73 % 2,772,877 53,926 3.92 % Other assets 330,003 331,524 Total assets $ 3,239,280 $ 3,104,401 Liabilities and stockholders' equity Interest-bearing deposits Demand deposits $ 689,149 $ 57 0.02 % $ 634,000 $ 72 0.02 % Savings deposits 888,371 133 0.03 % 798,571 154 0.04 % Time deposits 339,186 718 0.43 % 403,888 1,367 0.68 % Total interest-bearing deposits 1,916,706 908 0.10 % 1,836,459 1,593 0.16 % Borrowings Retail repurchase agreements 2,050 1 0.08 % 1,250 - N/M Total borrowings 2,050 1 0.08 % 1,250 - N/M Total interest-bearing liabilities 1,918,756 909 0.10 % 1,837,709 1,593 0.17 % Noninterest-bearing demand deposits 855,321 801,512 Other liabilities 38,529 38,609 Total liabilities 2,812,606 2,677,830 Stockholders' equity 426,674 426,571 Total liabilities and stockholders' equity $ 3,239,280 $ 3,104,401 Net interest income, FTE(1) $ 52,918 $ 52,333 Net interest rate spread 3.64 % 3.75 % Net interest margin, FTE(1) 3.67 % 3.81 % (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 $1.74 million and $2.44 million for the six months ended June 30, 2022 and 2021, respectively. CONDENSED CONSOLIDATED QUARTERLY BALANCE SHEETS (Unaudited) June 30, March 31, December 31, September 30, June 30, (Amounts in thousands, except per share data) 2022 2022 2021 2021 2021 Assets Cash and cash equivalents $ 398,242 $ 457,306 $ 677,439 $ 635,007 $ 618,738 Debt securities available for sale 287,767 268,703 76,292 77,440 79,842 Loans held for investment, net of unearned income (includes covered loans of $7,503 for June 30, 2021) (1) 2,299,798 2,244,296 2,165,569 2,152,103 2,153,731 Allowance for credit losses (29,749 ) (28,981 ) (27,858 ) (29,877 ) (31,857 ) Loans held for investment, net 2,270,049 2,215,315 2,137,711 2,122,226 2,121,874 Premises and equipment, net 49,752 50,912 52,284 52,842 53,560 Other real estate owned 579 848 1,015 1,240 1,324 Interest receivable 8,433 8,100 7,900 8,146 8,480 Goodwill 129,565 129,565 129,565 129,565 129,565 Other intangible assets 4,905 5,266 5,622 5,987 6,352 Other assets 109,085 108,112 106,691 107,258 109,548 Total assets $ 3,258,377 $ 3,244,127 $ 3,194,519 $ 3,139,711 $ 3,129,283 Liabilities Deposits Noninterest-bearing $ 877,962 $ 860,652 $ 842,783 $ 820,147 $ 819,138 Interest-bearing 1,920,577 1,922,292 1,886,608 1,853,699 1,846,556 Total deposits 2,798,539 2,782,944 2,729,391 2,673,846 2,665,694 Securities sold under agreements to repurchase 2,635 2,488 1,536 1,106 994 Interest, taxes, and other liabilities 39,157 34,539 35,817 37,395 35,061 Total liabilities 2,840,331 2,819,971 2,766,744 2,712,347 2,701,749 Stockholders' equity Common stock 16,502 16,782 16,878 17,071 17,335 Additional paid-in capital 136,705 144,088 147,619 154,086 161,853 Retained earnings 276,499 269,798 264,824 258,860 250,911 Accumulated other comprehensive loss (11,660 ) (6,512 ) (1,546 ) (2,653 ) (2,565 ) Total stockholders' equity 418,046 424,156 427,775 427,364 427,534 Total liabilities and stockholders' equity $ 3,258,377 $ 3,244,127 $ 3,194,519 $ 3,139,711 $ 3,129,283 Shares outstanding at period-end 16,502,144 16,781,975 16,878,220 17,071,052 17,334,547 Book value per common share $ 25.33 $ 25.27 $ 25.34 $ 25.03 $ 24.66 Tangible book value per common share(2) 17.18 17.24 17.34 17.09 16.82 (1) FDIC Loss Share agreement terminated in September 2021. (2) A non-GAAP financial measure defined as stockholders' equity less goodwill and other intangible assets, divided by shares outstanding SELECTED CREDIT QUALITY INFORMATION (Unaudited) June 30, March 31, December 31, September 30, June 30, (Amounts in thousands) 2022 2022 2021 2021 2021 Allowance for Credit Losses Beginning balance $ 28,981 $ 27,858 $ 29,877 $ 31,857 $ 34,563 Provision for (recovery of) credit/loan losses charged to operations 510 1,961 (846 ) (1,394 ) (2,230 ) Charge-offs (1,469 ) (1,302 ) (1,887 ) (1,255 ) (1,902 ) Recoveries 1,727 464 714 669 1,426 Net recoveries (charge-offs) 258 (838 ) (1,173 ) (586 ) (476 ) Ending balance $ 29,749 $ 28,981 $ 27,858 $ 29,877 $ 31,857 Nonperforming Assets Nonaccrual loans $ 17,826 $ 20,487 $ 20,768 $ 22,070 $ 24,085 Accruing loans past due 90 days or more 131 - 87 5 327 Troubled debt restructurings ("TDRs")(1) 515 1,141 1,367 359 133 Total nonperforming loans 18,472 21,628 22,222 22,434 24,545 OREO 579 848 1,015 1,240 1,324 Total nonperforming assets $ 19,051 $ 22,476 $ 23,237 $ 23,674 $ 25,869 Additional Information Total accruing TDRs(3) $ 8,313 $ 8,782 $ 8,652 $ 8,185 $ 8,309 Asset Quality Ratios Nonperforming loans to total loans 0.80 % 0.96 % 1.03 % 1.04 % 1.14 % Nonperforming assets to total assets 0.58 % 0.69 % 0.73 % 0.75 % 0.83 % Allowance for credit/loan losses to nonperforming loans 161.05 % 134.00 % 125.36 % 133.18 % 129.79 % Allowance for credit/loan losses to total loans 1.29 % 1.29 % 1.29 % 1.39 % 1.48 % Annualized net (recoveries) charge-offs to average loans -0.05 % 0.15 % 0.22 % 0.11 % 0.09 % (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
