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First Community Bankshares (FCBC)

Filed: 26 Oct 21, 5:12pm

Exhibit 99.1

 

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NEWS RELEASE

FOR IMMEDIATE RELEASE:

 

FOR MORE INFORMATION, CONTACT:

 October 26, 2021

 

David D. Brown

  

(276) 326-9000

 

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

Quarterly Cash Dividend

 

Bluefield, Virginia – First Community Bankshares, Inc. (NASDAQ: FCBC) (www.firstcommunitybank.com) (the “Company”) today reported its unaudited results of operations and other financial information for the quarter ended 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 36th consecutive year of regular dividends to common shareholders.

 

Third Quarter 2021 and Current Highlights

 

General

 

o

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.

 

o

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.

 

o

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

 

o

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.

 

o

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.

 

o

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.

 

o

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.

 

1

 

 

 

o

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

 

o

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%.

 

o

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.

 

o

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 Companys 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.

 

2

 

 

CONDENSED CONSOLIDATED STATEMENTS OF INCOME (Unaudited)

 

  

Three Months Ended

  

Nine Months Ended

 
(Amounts in thousands, except share and 

September 30,

  

June 30,

  

March 31,

  

December 31,

  

September 30,

  

September 30,

 

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 

 

3

 

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

 

4

 

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.

 

5

 

 

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.

 

6

 

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

 

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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 

 

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