First munity Bancshares(FCBC) - 2024 Q1 - Quarterly Results

Executive Summary & Highlights First Quarter 2024 Performance Overview First Community Bankshares, Inc. reported a net income of $12.85 million, or $0.71 per diluted common share, for the first quarter ended March 31, 2024, marking a 9.02% increase from the same period in 2023 First Quarter 2024 Performance Overview | Metric | Q1 2024 (Millions) | Q1 2023 (Millions) | YoY Change (%) | | :------------------- | :------------------ | :------------------ | :------------- | | Net Income | $12.85 | $11.78 | 9.02% | | Diluted EPS | $0.71 | $0.72 | -1.39% | Quarterly Cash Dividend The Company declared a quarterly cash dividend of $0.29 per common share, payable on or about May 24, 2024, to shareholders of record on May 10, 2024, marking the 39th consecutive year of regular dividends - Quarterly cash dividend declared: $0.29 per common share[3] - Dividend payable on or about May 24, 2024, to shareholders of record on May 10, 2024[3] - This marks the 39th consecutive year of regular dividends to common shareholders[3] First Quarter 2024 Key Highlights The first quarter of 2024 saw significant improvements in net interest income and margin, driven by higher interest rates and loan growth, partially offset by increased noninterest expenses, while asset quality metrics showed slight increases in non-performing loans but stable allowance for credit losses Income Statement Highlights - Net interest income increased $2.22 million compared to Q1 2023, driven by improved net interest margin due to higher benchmark interest rates[6] Net Interest Margin and Yield on Earning Assets | Metric | Q1 2024 | Q1 2023 | YoY Change (bps) | | :---------------------- | :------ | :------ | :--------------- | | Net Interest Margin | 4.47% | 4.35% | +12 | | Yield on Earning Assets | 5.09% | 4.47% | +62 | - Interest and fees on loans increased $5.79 million from Q1 2023, attributed to both increased yield and average balance, including approximately $239.08 million in loans from the Surrey Bancorp acquisition on April 21, 2023[6] - Noninterest income increased approximately $676 thousand (7.88%) YoY, primarily driven by increased interchange income[6] - Noninterest expense increased $2.57 million (12.36%) YoY, mainly due to salaries and employee benefits, service fees, and other operating expenses, largely attributable to the addition of Surrey branches and staff[6] Annualized Returns | Metric | Q1 2024 | Q1 2023 | YoY Change (bps) | | :----------------------------------- | :------ | :------ | :--------------- | | Annualized Return on Average Assets | 1.60% | 1.55% | +5 | | Annualized Return on Average Equity | 10.18% | 11.15% | -97 | Balance Sheet and Asset Quality Highlights - Consolidated assets totaled $3.24 billion at March 31, 2024[6][8] - Securities available for sale decreased $114.71 million (40.83%) from December 31, 2023, primarily due to the maturity of $115.75 million in U.S. Treasury Notes[6] - Loans decreased $52.47 million (2.04%) and deposits decreased $40.11 million (1.47%) from December 31, 2023[6] - Cash and cash equivalents increased $132.49 million (113.80%) from December 31, 2023, mainly due to an increase in federal funds sold[6] - The Company repurchased 89,396 common shares for $2.97 million during Q1 2024[6] Asset Quality Ratios | Metric | Q1 2024 | Q1 2023 | YoY Change (bps) | | :----------------------------------- | :------ | :------ | :--------------- | | Non-performing loans to total loans | 0.78% | 0.65% | +13 | | Net charge-offs (annualized average) | 0.27% | 0.29% | -2 | Key Balance Sheet Ratios | Metric | Mar 31, 2024 | Dec 31, 2023 | Mar 31, 2023 | | :----------------------------------- | :----------- | :----------- | :----------- | | Allowance for credit losses to total loans | 1.41% | 1.41% | 1.29% | | Book value per share | $27.53 | $27.20 | $26.58 | Company Information & Disclosures About First Community Bankshares, Inc. First Community Bankshares, Inc. is a financial holding company operating through its subsidiary, First Community Bank, with 53 branch locations across Virginia, West Virginia, North Carolina, and Tennessee, also offering wealth management services, managing and administering $1.55 billion in combined assets - Headquartered in Bluefield, Virginia, operating through First Community Bank[8] - Operates 53 branch banking locations in Virginia, West Virginia, North Carolina, and Tennessee[8] - Wealth management and investment advice services managed and administered $1.55 billion in combined assets as of March 31, 2024[8] - Consolidated assets totaled $3.24 billion as of March 31, 2024[8] Non-GAAP Financial Measures Disclosure The Company utilizes various non-GAAP financial measures, such as 'tangible book value per common share' and 'adjusted earnings,' to provide additional insights into its financial and operational performance, which are supplemental to GAAP and reconciled in attached tables - Non-GAAP measures 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 FTE basis measures[7] - These measures are used for financial and operational decision making, evaluating trends, and comparing financial results[7] - Reconciliations to comparable GAAP measures are provided in the press release tables, emphasizing that non-GAAP measures are supplemental and not a substitute for GAAP[7] Forward-Looking Statements This news release contains forward-looking statements based on current expectations, which are subject to various risks, uncertainties, and assumptions, where actual results may differ materially due to factors such as market conditions, regulatory changes, and credit risk, and the Company does not undertake to update these statements - Forward-looking statements are based on current expectations and involve risks, uncertainties, and assumptions[9] - Risks include changes in market conditions, timely development of products, managing asset/liability levels, credit and interest rate risk, expense growth, banking laws, competition, and geopolitical events[9] - The Company does not undertake to update forward-looking statements to reflect circumstances or events occurring after their initial release[9] Unaudited Financial Statements Condensed Consolidated Statements of Income The condensed consolidated statements of income provide a quarterly overview of the Company's financial performance, highlighting trends in interest income, interest expense, net interest income, provision for credit losses, noninterest income and expense, and ultimately net income and earnings per share Condensed Consolidated Statements of Income | Metric (in thousands) | March 31, 2024 | March 31, 2023 | | :-------------------- | :------------- | :------------- | | Total interest income | $36,029 | $30,189 | | Total interest expense | $4,400 | $777 | | Net interest income | $31,629 | $29,412 | | Provision for credit losses | $1,011 | $1,742 | | Noninterest income | $9,259 | $8,583 | | Noninterest expense | $23,386 | $20,813 | | Net income | $12,845 | $11,782 | | Diluted EPS | $0.71 | $0.72 | | Return on average assets | 1.60% | 1.55% | | Return on average common equity | 10.18% | 11.15% | | Return on average tangible common equity | 14.82% | 16.19% | Condensed Consolidated Quarterly Noninterest Income and Expense This section details the quarterly breakdown of noninterest income and expense categories, showing contributions from wealth management, service charges, and other operating income, alongside major expense items like salaries, occupancy, and service fees Condensed Consolidated Quarterly Noninterest Income and Expense | Metric (in thousands) | March 31, 2024 | March 31, 2023 | | :-------------------- | :------------- | :------------- | | Noninterest income | | | | Wealth management | $1,099 | $1,017 | | Service charges on deposits | $3,310 | $3,159 | | Other service charges and fees | $3,450 | $3,082 | | Other operating income | $1,400 | $1,318 | | Total noninterest income | $9,259 | $8,583 | | Noninterest expense | | | | Salaries and employee benefits | $12,581 | $11,595 | | Occupancy expense | $1,378 | $1,168 | | Furniture and equipment expense | $1,545 | $1,401 | | Service fees | $2,449 | $2,019 | | Other operating expense | $3,366 | $2,727 | | Total noninterest expense | $23,386 | $20,813 | Reconciliation of GAAP Net Income to Non-GAAP Adjusted Earnings This reconciliation provides a clear bridge between GAAP net income and various non-GAAP adjusted earnings metrics, accounting for specific non-recurring or non-operational items to offer a more normalized view of performance Reconciliation of GAAP Net Income to Non-GAAP Adjusted Earnings | Metric (in thousands) | March 31, 2024 | March 31, 2023 | | :-------------------- | :------------- | :------------- | | Adjusted Net Income for diluted EPS | $13,085 | $11,802 | | Total adjustments | $- | $372 | | Tax effect | $- | $10 | | Adjusted earnings, non-GAAP | $13,085 | $12,163 | | Adjusted diluted EPS, non-GAAP | $0.71 | $0.75 | | Adjusted return on average assets | 1.63% | 1.60% | | Adjusted return on average common equity | 10.37% | 11.51% | | Adjusted return on average tangible common equity | 15.10% | 16.72% | Average Balance Sheets and Net Interest Income Analysis This analysis presents average balance sheet figures and a detailed breakdown of interest income and expense, providing insights into the Company's net interest margin and rate spread on a fully taxable equivalent (FTE) basis Average Balance Sheets and Net Interest Income Analysis | Metric (in thousands) | March 31, 2024 | March 31, 2023 | | :-------------------- | :------------- | :------------- | | Average Earning Assets | | | | Loans | $2,549,107 | $2,393,759 | | Securities available for sale | $239,010 | $316,734 | | Interest-bearing deposits | $66,483 | $40,993 | | Total earning assets | $2,854,600 | $2,751,486 | | Average Interest-Bearing Liabilities | | | | Total interest-bearing deposits | $1,781,933 | $1,765,075 | | Total borrowings | $3,654 | $6,805 | | Total interest-bearing liabilities | $1,785,587 | $1,771,880 | | Net interest income, FTE | $31,748 | $29,526 | | Net interest rate spread | 4.10% | 4.29% | | Net interest margin, FTE | 4.47% | 4.35% | Condensed Consolidated Quarterly Balance Sheets The condensed consolidated quarterly balance sheets provide a snapshot of the Company's financial position at the end of each quarter, detailing assets, liabilities, and stockholders' equity, including key per-share metrics Condensed Consolidated Quarterly Balance Sheets | Metric (in thousands) | March 31, 2024 | March 31, 2023 | | :-------------------- | :------------- | :------------- | | Cash and cash equivalents | $248,905 | $92,385 | | Debt securities available for sale, at fair value | $166,247 | $308,269 | | Loans held for investment, net | $2,484,372 | $2,358,108 | | Total assets | $3,235,981 | $3,051,672 | | Total deposits | $2,682,215 | $2,584,624 | | Total liabilities | $2,729,037 | $2,619,941 | | Total stockholders' equity | $506,944 | $431,731 | | Book value per common share | $27.53 | $26.58 | | Tangible book value per common share | $18.92 | $18.36 | Selected Credit Quality Information This section provides critical insights into the Company's credit quality, including the allowance for credit losses, nonperforming assets, and key ratios that assess the health of its loan portfolio Selected Credit Quality Information | Metric (in thousands) | March 31, 2024 | March 31, 2023 | | :-------------------- | :------------- | :------------- | | Allowance for Credit Losses | | | | Balance at beginning of period | $36,935 | $31,752 | | Provision for credit losses | $1,011 | $1,742 | | Net (charge-offs) recoveries | $(1,739) | $(1,741) | | Ending balance | $36,207 | $31,753 | | Nonperforming Assets | | | | Nonaccrual loans | $19,617 | $15,557 | | OREO | $374 | $481 | | Total nonperforming assets | $20,021 | $16,061 | | Asset Quality Ratios | | | | Nonperforming loans to total loans | 0.78% | 0.65% | | Nonperforming assets to total assets | 0.62% | 0.53% | | Allowance for credit losses to nonperforming loans | 180.49% | 197.62% | | Allowance for credit losses to total loans | 1.41% | 1.29% | | Annualized net charge-offs (recoveries) to average loans | 0.27% | 0.29% |