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

Rhea-AI Summary

First Community Bankshares, Inc. (NASDAQ: FCBC) reported Q2 2021 net income of $13.40 million ($0.76/share), a 65.22% increase YoY. The six-month net income reached $28.01 million ($1.59/share), up 76.67%. The company declared a quarterly cash dividend of $0.27, an 8% increase, payable on August 23, 2021. A significant part of the income growth is attributed to a $2.23 million reversal in credit loss allowances. The annualized return on average equity rose to 12.55% from 7.97% YoY, while non-interest income increased 27.25% to $8.80 million, reflecting improved economic activity.

Positive

• Net income for Q2 2021 increased by $5.17 million to $13.40 million.
• Diluted earnings per share rose to $0.76, up 65.22% YoY.
• Quarterly cash dividend increased by 8% to $0.27, payable on August 23, 2021.
• Annualized return on average equity increased to 12.55% from 7.97% YoY.
• Non-interest income for Q2 increased by 27.25%, reflecting strong economic activity.

Negative

• Provision for credit losses was reversed, which may reflect underlying credit quality issues.
• COVID-19 loan deferrals remained significant at $4.02 million as of Q2 2021.

BLUEFIELD, Va., July 28, 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 June 30, 2021. The Company reported net income of $13.40 million, or $0.76 per diluted common share, for the quarter ended June 30, 2021, which was an increase of $0.30 per diluted common share, or 65.22%, over the same quarter of 2020. Net income for the six months ended June 30, 2021 was $28.01 million or $1.59 per diluted common share, which represents a 76.67% 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 last quarter and last year. The quarterly dividend is payable to common shareholders of record on August 9, 2021, and is expected to be paid on or about August 23, 2021. 2021 is the 36^th consecutive year of regular dividends to common shareholders.

Second Quarter 2021 and Current Highlights

      General

• Net income for the quarter increased $5.17 million to $13.40 million compared to the same quarter of 2020. The large increase in net income includes the reversal of $2.23 million in allowance for credit losses for the second quarter of 2021. Net income for the six month period increased $11.90 million compared to the same period of 2020. Similarly, for the six month period, a reversal of $6.23 million in the allowance for credit losses accounts for a large part of the increase in 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, and prior year provisioning driven by the pandemic.
• During the second quarter, the Company repurchased 261,600 common shares for $7.98 million. Year-to-date the Company has repurchased 449,300 common shares for $12.96 million.

      Income Statement

• Diluted earnings per share increased $0.30 to $0.76 compared to the same quarter of 2020. Diluted earnings per share for the six month period increased $0.69 to $1.59 compared to 2020.
• Due to forecasted continued improving jobless rates and other economic indicators, as well as strong credit quality metrics, the Company released a substantial amount of allowance for credit losses for the quarter resulting in a reversal of $2.23 million in the provision for credit losses; a significant improvement from the $3.83 million loan loss provision recorded in the second quarter of 2020 at the onset of the COVID-19 pandemic. For the six month period, the Company reversed $6.23 million compared to $7.33 million in loan loss provision recorded for the same period in 2020.
• Annualized return on average equity increased to 12.55% compared to 7.97% from the same quarter of 2020, and return on average equity for the first six months increased to 13.24% compared to 7.73% from the same period last year.
• Annualized return on average assets increased to 1.70% compared to 1.15% from the same quarter of 2020, while year-to-date return on average assets increased to 1.82% compared to 1.15% for the same period of 2020.
• Non-interest income for the second quarter of 2021 increased $1.88 million, or 27.25%, compared to the prior year. Year-to-date non-interest income increased 13.17% to $16.37 million compared to last year. Both increases are largely attributable to the more vibrant state of local economies with increased customer activity compared with last spring.
• Other income includes $946 thousand of accelerated amortization that eliminates the carrying value of the indemnification asset with no anticipated claims in the future.
  

      Balance Sheet and Asset Quality

• Net charge-offs for the first quarter of 2021 were $476 thousand and the allowance for credit losses remains very strong at 1.48% of total loans.
• As of June 30, 2021, total COVID-19 loan deferrals stood at $4.02 million, down significantly from the peak of $436.11 million at June 30, 2020.
• The SBA had forgiven $48.27 million, or 79.15%, of the Company’s first round Paycheck Protection Program loan balances through June 30, 2021. Current PPP loan balances at June 30, 2021, which include second round originations were, $41.63 million.
• Book value per share at June 30, 2021, was $24.66, an increase of $0.58 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 June 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 June 30, 2021. The Company reported consolidated assets of $3.13 billion as of June 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																				Six Months Ended
				June 30,				March 31,				December 31,				September 30,				June 30,				June 30,
(Amounts in thousands, except share and per share data)				2021				2021				2020				2020				2020				2021				2020
Interest income
	Interest and fees on loans			$	25,937			$	26,540			$	28,101			$	27,297			$	26,991			$	52,477			$	55,049
	Interest on securities				435				495				549				609				713				930				1,631
	Interest on deposits in banks				166				116				96				89				82				282				615
Total interest income					26,538				27,151				28,746				27,995				27,786				53,689				57,295
Interest expense
	Interest on deposits				724				869				1,029				1,161				1,445				1,593				3,270
	Interest on borrowings				-				-				-				-				2				-				4
Total interest expense					724				869				1,029				1,161				1,447				1,593				3,274
Net interest income					25,814				26,282				27,717				26,834				26,339				52,096				54,021
(Recovery of) provision for credit losses					(2,230	)			(4,001	)			634				4,703				3,831				(6,231	)			7,331
Net interest income after provision					28,044				30,283				27,083				22,131				22,508				58,327				46,690
Noninterest income					8,797				7,569				7,733				7,638				6,913				16,366				14,462
Noninterest expense					19,361				18,820				19,877				19,171				18,913				38,181				40,577
Income before income taxes					17,480				19,032				14,939				10,598				10,508				36,512				20,575
Income tax expense					4,077				4,430				3,389				2,332				2,270				8,507				4,465
Net income				$	13,403			$	14,602			$	11,550			$	8,266			$	8,238			$	28,005			$	16,110
Earnings per common share
	Basic			$	0.77			$	0.83			$	0.65			$	0.47			$	0.47			$	1.59			$	0.90
	Diluted				0.76				0.82				0.65				0.47				0.46				1.59				0.90
Cash dividends per common share
	Regular				0.25				0.25				0.25				0.25				0.25				0.50				0.50
Weighted average shares outstanding
	Basic				17,486,182				17,669,937				17,717,356				17,710,283				17,701,853				17,577,552				17,850,423
	Diluted				17,536,144				17,729,185				17,751,805				17,732,428				17,728,300				17,631,330				17,888,325
Performance ratios
	Return on average assets				1.70	%			1.94	%			1.54	%			1.11	%			1.15	%			1.82	%			1.15	%
	Return on average common equity				12.55	%			13.94	%			10.82	%			7.83	%			7.97	%			13.24	%			7.73	%
	Return on average tangible common equity(1)				18.40	%			20.54	%			15.96	%			11.62	%			11.91	%			19.45	%			11.51	%
(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)		2021				2021				2020				2020				2020				2021				2020
Noninterest income
	Wealth management	$	1,058			$	881			$	810			$	909			$	854			$	1,939			$	1,698
	Service charges on deposits		3,098				3,031				3,478				3,250				2,560				6,129				6,291
	Other service charges and fees		3,166				3,022				2,737				2,748				2,617				6,188				4,848
	Net gain on sale of securities		-				-				-				-				-				-				385
	Net FDIC indemnification asset amortization		(946	)			(280	)			(338	)			(383	)			(483	)			(1,226	)			(969	)
	Other operating income		2,421				915				1,046				1,114				1,365				3,336				2,209
Total noninterest income		$	8,797			$	7,569			$	7,733			$	7,638			$	6,913			$	16,366			$	14,462
Noninterest expense
	Salaries and employee benefits	$	10,216			$	10,884			$	11,119			$	10,485			$	11,015			$	21,100			$	22,401
	Occupancy expense		1,115				1,275				1,225				1,228				1,275				2,390				2,590
	Furniture and equipment expense		1,457				1,367				1,446				1,412				1,316				2,824				2,700
	Service fees		1,513				1,335				1,232				1,581				1,329				2,848				2,852
	Advertising and public relations		616				335				534				430				475				951				987
	Professional fees		290				466				276				408				307				756				540
	Amortization of intangibles		360				357				364				365				360				717				721
	FDIC premiums and assessments		204				199				202				191				33				403				33
	Merger, acquisition, and divestiture expense		-				-				-				-				-				-				1,893
	Other operating expense		3,590				2,602				3,479				3,071				2,803				6,192				5,860
Total noninterest expense		$	19,361			$	18,820			$	19,877			$	19,171			$	18,913			$	38,181			$	40,577

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,
				2021				2021				2020				2020				2020				2021				2020
(Amounts in thousands, except per share data)
Net income				$	13,403			$	14,602			$	11,550			$	8,266			$	8,238			$	28,005			$	16,110
Non-GAAP adjustments:
	Net (gain) loss on sale of securities				-				-				-				-				-				-				(385	)
	Merger, acquisition, and divestiture expense				-				-				-				-				-				-				1,893
	Other items(1)				-				-				-				-				-				-				-
Total adjustments					-				-				-				-				-				-				1,508
Tax effect					-				-				-				-				-				-				354
Adjusted earnings, non-GAAP				$	13,403			$	14,602			$	11,550			$	8,266			$	8,238			$	28,005			$	17,264
Adjusted diluted earnings per common share,
	non-GAAP			$	0.76			$	0.82			$	0.65			$	0.47			$	0.46			$	1.59			$	0.97
Performance ratios, non-GAAP
	Adjusted return on average assets				1.70	%			1.94	%			1.54	%			1.11	%			1.15	%			1.82	%			1.24	%
	Adjusted return on average common equity				12.55	%			13.94	%			10.82	%			7.83	%			7.97	%			13.24	%			8.28	%
	Adjusted return on average tangible
			common equity(2)		18.40	%			20.54	%			15.96	%			11.62	%			11.91	%			19.45	%			12.33	%
(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 June 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)			$	2,134,136		$	25,979		4.88	%		$	2,129,513		$	27,040		5.11	%
	Securities available for sale				84,099			508		2.42	%			103,378			839		3.26	%
	Interest-bearing deposits				610,148			166		0.11	%			293,791			81		0.11	%
Total earning assets					2,828,383			26,653		3.78	%			2,526,682			27,960		4.45	%
Other assets					331,563									356,913
Total assets				$	3,159,946								$	2,883,595
Liabilities and stockholders' equity
Interest-bearing deposits
	Demand deposits			$	654,767		$	33		0.02	%		$	547,445		$	98		0.07	%
	Savings deposits				818,490			63		0.03	%			707,298			240		0.14	%
	Time deposits				394,889			628		0.64	%			465,212			1,107		0.96	%
Total interest-bearing deposits					1,868,146			724		0.15	%			1,719,955			1,445		0.34	%
Borrowings
	Retail repurchase agreements				1,266			-		N/M				1,244			1		0.14	%
Total borrowings					1,266			-		-				1,244			1		0.32	%
Total interest-bearing liabilities					1,869,412			724		0.16	%			1,721,199			1,446		0.34	%
Noninterest-bearing demand deposits					824,888									711,174
Other liabilities					37,306									35,467
Total liabilities					2,731,606									2,467,840
Stockholders' equity					428,340									415,755
Total liabilities and stockholders' equity				$	3,159,946								$	2,883,595
Net interest income, FTE(1)							$	25,929								$	26,514
Net interest rate spread										3.62	%								4.11	%
Net interest margin, FTE(1)										3.68	%								4.22	%
(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 $1.25 million and $1.50 million for the three months ended June 30, 2021 and 2020, respectively.

AVERAGE BALANCE SHEETS AND NET INTEREST INCOME ANALYSIS (Unaudited)
				Six Months Ended June 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)			$	2,149,509		$	52,561		4.93	%		$	2,105,323		$	55,145		5.27	%
	Securities available for sale				83,868			1,081		2.60	%			119,744			1,899		3.19	%
	Interest-bearing deposits				539,500			284		0.11	%			228,636			616		0.53	%
Total earning assets					2,772,877			53,926		3.92	%			2,453,703			57,660		4.73	%
Other assets					331,524									355,280
Total assets				$	3,104,401								$	2,808,983
Liabilities and stockholders' equity
Interest-bearing deposits
	Demand deposits			$	634,000		$	72		0.02	%		$	525,024		$	188		0.07	%
	Savings deposits				798,571			154		0.04	%			693,477			654		0.19	%
	Time deposits				403,888			1,367		0.68	%			475,149			2,429		1.03	%
Total interest-bearing deposits					1,836,459			1,593		0.16	%			1,693,650			3,271		0.39	%
Borrowings
	Retail repurchase agreements				1,250			-		N/M				1,346			3		0.39	%
	FHLB advances and other borrowings				-			-		-				72			1		2.23	%
Total borrowings					1,250			-		-				1,418			4		0.57	%
Total interest-bearing liabilities					1,837,709			1,593		0.17	%			1,695,068			3,275		0.39	%
Noninterest-bearing demand deposits					801,512									655,906
Other liabilities					38,609									38,820
Total liabilities					2,677,830									2,389,794
Stockholders' equity					426,571									419,189
Total liabilities and stockholders' equity				$	3,104,401								$	2,808,983
Net interest income, FTE(1)							$	52,333								$	54,385
Net interest rate spread										3.75	%								4.34	%
Net interest margin, FTE(1)										3.81	%								4.46	%
(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 $2.44 million and $3.46 million for the six months ended June 30, 2021 and 2020, respectively.

CONDENSED CONSOLIDATED QUARTERLY BALANCE SHEETS (Unaudited)
				June 30,				March 31,				December 31,				September 30,				June 30,
(Amounts in thousands, except per share data)				2021				2021				2020				2020				2020
Assets
Cash and cash equivalents				$	618,738			$	628,745			$	456,561			$	375,664			$	421,492
Debt securities available for sale					79,842				87,643				83,358				90,972				98,367
Loans held for investment, net of unearned income
	(includes covered loans of $7,503, $9,041, $9,680,
	$10,744, and $11,257, for the stated periods, respectively)				2,153,731				2,146,640				2,186,632				2,194,995				2,136,817
	Allowance for credit losses (1)				(31,857	)			(34,563	)			(26,182	)			(27,277	)			(23,758	)
Loans held for investment, net					2,121,874				2,112,077				2,160,450				2,167,718				2,113,059
FDIC indemnification asset					-				946				1,223				1,598				1,943
Premises and equipment, net					53,560				57,371				57,700				60,488				62,658
Other real estate owned, noncovered					1,324				1,740				2,083				2,103				2,181
Interest receivable					8,480				8,724				9,052				9,151				8,380
Goodwill					129,565				129,565				129,565				129,565				129,565
Other intangible assets					6,352				6,712				7,069				7,433				7,798
Other assets					109,548				106,543				104,075				103,236				103,623
Total assets				$	3,129,283			$	3,140,066			$	3,011,136			$	2,947,928			$	2,949,066
Liabilities
Deposits
	Noninterest-bearing			$	819,138			$	824,576			$	772,795			$	750,277			$	752,899
	Interest-bearing				1,846,556				1,848,524				1,773,452				1,741,962				1,744,947
Total deposits					2,665,694				2,673,100				2,546,247				2,492,239				2,497,846
Securities sold under agreements to repurchase					994				1,519				964				956				1,100
Interest, taxes, and other liabilities					35,061				39,448				37,195				34,816				34,290
Total liabilities					2,701,749				2,714,067				2,584,406				2,528,011				2,533,236
Stockholders' equity
Common stock					17,335				17,592				17,723				17,717				17,710
Additional paid-in capital					161,853				169,173				173,345				172,980				172,601
Retained earnings					250,911				241,889				237,585				230,464				226,627
Accumulated other comprehensive loss					(2,565	)			(2,655	)			(1,923	)			(1,244	)			(1,108	)
Total stockholders' equity					427,534				425,999				426,730				419,917				415,830
Total liabilities and stockholders' equity				$	3,129,283			$	3,140,066			$	3,011,136			$	2,947,928			$	2,949,066
Shares outstanding at period-end					17,334,547				17,592,009				17,722,507				17,716,522				17,709,569
Book value per common share				$	24.66			$	24.22			$	24.08			$	23.70			$	23.48
Tangible book value per common share(2)					16.82				16.47				16.37				15.97				15.72
(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)  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)				2021				2021				2020				2020				2020
Allowance for Credit Losses (1)
Beginning balance				$	34,563			$	26,182			$	27,277			$	23,758			$	21,137
Cumulative effect of adoption of ASU 2016-13					-				13,107				-				-				-
(Recovery of) provision for
credit/loan losses charged to operations					(2,230	)			(4,001	)			634				4,703				3,831
Charge-offs					(1,902	)			(1,730	)			(2,194	)			(1,563	)			(1,672	)
Recoveries					1,426				1,005				465				379				462
Net charge-offs					(476	)			(725	)			(1,729	)			(1,184	)			(1,210	)
Ending balance				$	31,857			$	34,563			$	26,182			$	27,277			$	23,758
Nonperforming Assets
Nonaccrual loans				$	24,085			$	26,106			$	22,003			$	24,756			$	24,770
Accruing loans past due 90 days or more					327				171				295				43				284
Troubled debt restructurings ("TDRs")(2)					133				308				187				456				598
Total nonperforming loans					24,545				26,585				22,485				25,255				25,652
OREO					1,324				1,740				2,083				2,103				2,181
Total nonperforming assets				$	25,869			$	28,325			$	24,568			$	27,358			$	27,833
Additional Information
Total Accruing TDRs(3)				$	8,309			$	9,027			$	10,248			$	10,936			$	11,420
Asset Quality Ratios
Nonperforming loans to total loans					1.14	%			1.24	%			1.03	%			1.15	%			1.20	%
Nonperforming assets to total assets					0.83	%			0.90	%			0.82	%			0.93	%			0.94	%
Allowance for credit/loan losses to nonperforming loans					129.79	%			130.01	%			116.44	%			108.01	%			92.62	%
Allowance for credit/loan losses to total loans					1.48	%			1.61	%			1.20	%			1.24	%			1.11	%
Annualized net charge-offs to average loans					0.09	%			0.14	%			0.26	%			0.22	%			0.23	%
(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

FAQ

What were the financial results for FCBC for Q2 2021?

FCBC reported a net income of $13.40 million, or $0.76 per diluted share, a 65.22% increase compared to Q2 2020.

What is the cash dividend declared by FCBC for Q2 2021?

FCBC declared a quarterly cash dividend of $0.27 per common share, payable on August 23, 2021.

How did the non-interest income of FCBC perform in Q2 2021?

Non-interest income for Q2 2021 increased by 27.25% to $8.80 million.

What is the annualized return on average equity for FCBC?

The annualized return on average equity increased to 12.55% for Q2 2021.

How much did FCBC's provision for credit losses change in Q2 2021?

FCBC reversed $2.23 million in provision for credit losses, reflecting improved credit quality.