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

Rhea-AI Summary

First Community Bankshares reported a net income of $12.61 million for Q3 2021, marking a 55.32% increase in diluted earnings per share to $0.73 compared to Q3 2020. For the nine months ended September 30, 2021, net income rose 69.34% to $40.61 million. A quarterly cash dividend of $0.27 per share was declared, up 8.00% year-over-year. Improved economic forecasts allowed for a reversal of $1.39 million in credit loss provisions. The bank also repurchased 277,386 shares for $8.46 million.

Positive

• Net income increased by $4.34 million in Q3, reflecting strong financial performance.
• Diluted earnings per share rose to $0.73, indicating a healthy profit increase.
• Quarterly cash dividend was increased by 8.00%, enhancing shareholder returns.
• Reversal of $1.39 million in loan loss provisions improved the financial outlook.
• Repurchased 277,386 shares for $8.46 million, enhancing shareholder value.

Negative

• None.

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 36^th 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 Ended																				Nine 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)			Balance			Interest(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

FAQ

What was First Community Bankshares' net income for Q3 2021?

For Q3 2021, First Community Bankshares reported a net income of $12.61 million.

How much did First Community Bankshares increase its dividend in Q3 2021?

The dividend was increased by 8.00% to $0.27 per common share.

When is the dividend payable for First Community Bankshares?

The dividend is expected to be paid on or about November 19, 2021, to shareholders of record on November 5, 2021.

What were the diluted earnings per share for First Community Bankshares in Q3 2021?

Diluted earnings per share for Q3 2021 were $0.73, an increase of 55.32% from the same quarter last year.

How much has First Community Bankshares repurchased in common shares this year?

Year-to-date, the company repurchased 726,686 common shares for $21.43 million.