First munity Bancshares(US:FCBC)2021-11-08 16:00Branch and Employee Information - As of September 30, 2021, First Community Bank operated 49 branches across Virginia, West Virginia, North Carolina, and Tennessee, with a total of 598 full-time equivalent employees[161]. Asset Management - The Trust Division and First Community Wealth Management Inc. managed and administered $1.27 billion in combined assets under various fee-based arrangements as fiduciary or agent as of September 30, 2021[164]. Credit Losses and Provisions - The allowance for credit losses increased by $13.11 million due to the uncertainty around the impact of COVID-19, but a reversal of provision for credit losses of $7.63 million occurred in the first nine months of 2021[178]. - The economic forecasts improved significantly in 2021, contributing to a reversal of provision for credit losses, but future economic conditions could lead to increased credit losses[178]. - The allowance for credit losses (ACL) for loans was $29.88 million, representing 1.39% of total loans, an increase of $5.68 million from $26.18 million prior to the adoption of ASU 2016-13[258]. - The company recorded an additional allowance for credit losses (ACL) for loans of $13.11 million as a result of adopting ASU 2016-13[55]. Financial Performance - Net income for Q3 2021 increased by $4.34 million to $12.61 million compared to Q3 2020, driven by a reversal of $1.39 million in allowance for credit losses[196]. - For the nine-month period ended September 30, 2021, net income increased by $16.24 million compared to the same period in 2020, largely due to a reversal of $7.63 million in allowance for credit losses[196]. - Diluted earnings per share for Q3 2021 increased by $0.26 to $0.73 compared to Q3 2020, and for the nine-month period, it increased by $0.95 to $2.32[196]. - Annualized return on average equity increased to 11.65% in Q3 2021 compared to 7.83% in Q3 2020, and for the first nine months, it increased to 12.70% compared to 7.76%[196]. - Annualized return on average assets increased to 1.59% in Q3 2021 compared to 1.11% in Q3 2020, while year-to-date annualized return on average assets increased to 1.74% compared to 1.14%[196]. Loan Modifications and Deferrals - The Company modified a total of 3,958 commercial and consumer loans totaling $472.43 million under the CARES Act, primarily consisting of short-term payment deferrals[188]. - As of September 30, 2021, current COVID-19 loan deferrals stood at $4.71 million, with potential for extensions under the CARES Act[188]. - As of September 30, 2021, total COVID-19 loan deferrals were $4.71 million, significantly down from $115.63 million at September 30, 2020[237]. Deposits and Liquidity - Total deposits increased by $127.60 million, or 5.01%, as of September 30, 2021, primarily due to increases in savings and interest-bearing demand deposits of $76.82 million (10.18%) and $52.46 million (8.77%) respectively[261]. - The Company maintains access to multiple sources of liquidity, although short-term funding rates have been volatile throughout the pandemic[183]. Noninterest Income and Expenses - Noninterest income increased by $1.08 million, or 14.17%, in Q3 2021 compared to Q3 2020, with service charges on deposits increasing by $349 thousand, or 10.74%[216]. - Noninterest expense decreased by $335 thousand, or 1.75%, in Q3 2021 compared to Q3 2020, largely due to prior year charges for early contract termination[219]. Tax and Regulatory Compliance - The effective tax rate increased to 23.23% in Q3 2021 from 22.00% in Q3 2020, with income tax expense rising by $1.48 million, or 63.64%[222]. - The Company and Bank met all capital adequacy requirements and were classified as well-capitalized under the regulatory framework as of September 30, 2021[182]. Shareholder Information - The Company repurchased 277,386 common shares for $8.46 million during the quarter, totaling 726,686 shares repurchased for $21.43 million year-to-date[196]. - Common dividends declared increased from $0.25 per share in Q3 2020 to $0.27 per share in Q3 2021, reflecting a growth of 8%[17]. Loan Portfolio and Quality - Total loans held for investment as of September 30, 2021, amounted to $2,152,103 thousand, a decrease from $2,186,632 thousand at December 31, 2020[73]. - Commercial loans represented 57.01% of total loans as of September 30, 2021, down from 58.76% at December 31, 2020[73]. - The total amount of loans under special mention was $57,306,000, which is a notable concern for the company's future performance[86]. - The company continues to monitor loan performance closely, with a focus on identifying loans that may not meet contractual terms[87]. COVID-19 Impact - The COVID-19 pandemic has resulted in changes in consumer spending behaviors, negatively impacting the demand for loans and other services offered by the Company[165]. - The Company continues to monitor customers in significantly impacted industries, including energy, hotel/lodging, and retail, which may take longer to recover[165].