First munity Bancshares(FCBC) - 2023 Q4 - Annual Report

Branch Operations - As of December 31, 2023, First Community Bankshares operated 53 branches across Virginia, West Virginia, North Carolina, and Tennessee[139] Financial Performance - The company reported net income of $48.02 million for 2023, reflecting a 2.91% increase from $46.66 million in 2022[152] - Annual net income for 2023 was $48.02 million, an increase of $1.36 million, or 2.91%, compared to 2022[154] - Net interest income for 2023 was $127.68 million, an increase of 15.02 million or 13.33% compared to $112.66 million in 2022[152] - Net interest income increased by $15.02 million, or 13.33%, driven by higher benchmark interest rates and improved net interest margin[158] - Noninterest income increased by $270 thousand, or 0.73%, in 2023, primarily due to a $1.34 million increase in other service charges and fees[166] - Total revenues for the year ended December 31, 2023, are projected to be $165.14 million, compared to $170.21 million for the year ended December 31, 2022[324] - The effective tax rate slightly increased to 22.51% in 2023 from 22.43% in 2022, with income tax expense rising by $459 thousand, or 3.40%[172] - Net income for 2023 was $48,020,000, a 2.9% increase from $46,662,000 in 2022[230] Asset Management - The Trust Division and First Community Wealth Management managed $1.49 billion in assets as of December 31, 2023[140] - Total assets increased by $132.97 million, or 4.24%, to $3.27 billion as of December 31, 2023, largely due to the acquisition of Surrey Bancorp[174] - Total assets increased to $3,268.55 million as of December 31, 2023, from $3,135.57 million in 2022[224] - Total loans held for investment increased by $172.10 million, or 7.17%, to $2.57 billion as of December 31, 2023, primarily due to the Surrey acquisition[179] - The loan portfolio increased by $172.10 million, or 7.17%, from December 31, 2022, while excluding the Surrey transaction, it decreased by approximately $66.98 million, or 2.79%[154] Acquisition Details - The acquisition of Surrey Bancorp on April 21, 2023, involved total assets of $466.25 million and resulted in $14.38 million in goodwill[141] - The company acquired Surrey Bancorp on April 21, 2023, adding approximately $239.08 million in loans and increasing total assets to $3.39 billion[154] - The merger with Surrey Bancorp was finalized on April 21, 2023, with a total purchase price of $71.37 million, converting each share of Surrey common stock into 0.7159 shares of the Company's common stock[313] - The Company recognized $14.38 million in goodwill from the Surrey acquisition, with core deposit intangibles valued at $12.70 million[315] - The total assets acquired from Surrey amounted to $466.96 million, with total liabilities of $410.85 million[318] Credit Losses and Provisions - The provision for credit losses increased by $1.41 million in 2023, primarily due to a $1.61 million provision related to the acquisition of the Surrey loan portfolio[152] - The allowance for credit losses (ACL) was $36.19 million, or 1.41% of total loans, as of December 31, 2023, reflecting an increase of $5.63 million from $30.56 million at the end of 2022[198] - The provision for credit losses was $7,985,000 in 2023, compared to $6,572,000 in 2022, indicating an increase in expected credit losses[236] - The allowance for credit losses to total loans was 1.41% at December 31, 2023, compared to 1.27% for the same period of 2022[154] - The company recorded a provision for credit losses of $7.99 million for the year ended December 31, 2023, which included a day two provision of $1.61 million for Surrey loans[198] Loan and Deposit Trends - Deposits increased by $43.51 million, or 1.62%, from year-end 2022, but decreased approximately $360.13 million, or 13.44%, excluding the Surrey transaction[154] - Total deposits increased to $2,722.33 million as of December 31, 2023, compared to $2,678.82 million in 2022[224] - The company experienced deposit attrition related to the Surrey merger totaling $70.77 million, with the largest losses in interest-bearing demand accounts[202] - Delinquent loans totaled $33.93 million as of December 31, 2023, an increase of $4.25 million, or 14.32%, from $29.68 million as of December 31, 2022[190] Shareholder Information - The company repurchased 768,079 common shares during 2023 for a total cost of $23.04 million[154] - Book value per share at December 31, 2023, was $27.20, an increase of $1.19 from year-end 2022[154] - Cash dividends per common share increased to $1.16 in 2023, compared to $1.12 in 2022[227] - The Company paid $21,089,000 in common stock dividends in 2023, up from $18,515,000 in 2022[236] Risk Management - The company’s allowance for credit losses (ACL) is sensitive to unemployment rate forecasts, with a projected range of 4.0% to 4.3% for December 31, 2023[145] - The liquidity risk management policy includes ongoing monitoring of credit-sensitive liabilities and sources of liquidity to address potential funding crises[207] - The Company maintains a net book balance threshold of $500,000 for individually-evaluated loans, which are generally on nonaccrual status[260] Securities and Investments - The fair value of available-for-sale debt securities as of December 31, 2023, was $280.96 million, with unrealized losses of $14.11 million[326] - The total amortized cost of available-for-sale municipal securities was $19.53 million, with the majority rated AA or higher, and no credit losses reported[334] - The total amortized cost of available-for-sale corporate notes was $28.57 million, with no credit losses attributed to these securities[335] - The total amortized cost of available-for-sale mortgage-backed Agency securities was $94.55 million, with guarantees of full and timely payments by the issuing agencies[336] Miscellaneous - The Company completed the sale of its Emporia Branch for $1.50 million, with total deposits of $61.05 million acquired by Benchmark Community Bank[312] - The Company incurred $2.99 million in merger expenses related to the Surrey transaction, primarily for data conversion and legal fees[314] - The Company uses derivative instruments to hedge against risks related to price or interest rate movements, with changes in fair value recognized in earnings[293]