FIRST COMMUNITY BANKSHARES INC /VA/ [FCBC] Filings

10-Q 1 fcbc20230331_10q.htm FORM 10-Q fcbc20230331_10q.htm

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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

☑ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2023

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

Commission file number: 000-19297

FIRST COMMUNITY BANKSHARES, INC.

(Exact name of registrant as specified in its charter)

Virginia

55-0694814

(State or other jurisdiction of incorporation or organization)

(IRS Employer Identification No.)

P.O. Box 989

Bluefield, Virginia

24605-0989

(Address of principal executive offices)

(Zip Code)

(276) 326-9000

(Registrant’s telephone number, including area code)

Not Applicable

(Former name, former address and former fiscal year, if changed since last report)

Securities registered pursuant to Section 12 (b) of the Act:

Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock ($1.00 par value)	FCBC	NASDAQ Global Select

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

☑ Yes ☐ No

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).

☑ Yes ☐ No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer ☐

Accelerated filer ☑

Non-accelerated filer ☐

Smaller reporting company ☐

Emerging growth company ☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

☐ Yes ☑ No

As of May 3, 2023, there were 19,234,637 shares outstanding of the registrant’s Common Stock, $1.00 par value.

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FIRST COMMUNITY BANKSHARES, INC.
FORM 10-Q
INDEX

PART I.	FINANCIAL INFORMATION		Page

Item 1.	Financial Statements
		Condensed Consolidated Balance Sheets as of March 31, 2023 (Unaudited) and December 31, 2022	4
		Condensed Consolidated Statements of Income for the Three Months Ended March 31, 2023 and 2022 (Unaudited)	5
		Condensed Consolidated Statements of Comprehensive Income for the Three Months Ended March 31, 2023 and 2022 (Unaudited)	6
		Condensed Consolidated Statements of Changes in Stockholders’ Equity for the Three Months Ended March 31, 2023 and 2022 (Unaudited)	7
		Condensed Consolidated Statements of Cash Flows for the Three Months Ended March 31, 2023 and 2022 (Unaudited)	8
		Notes to Condensed Consolidated Financial Statements (Unaudited)	9
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations		33
Item 3.	Quantitative and Qualitative Disclosures About Market Risk		47
Item 4.	Controls and Procedures		47

PART II.	OTHER INFORMATION

Item 1.	Legal Proceedings		47
Item 1A.	Risk Factors		47
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds		48
Item 3.	Defaults Upon Senior Securities		48
Item 4.	Mine Safety Disclosures		48
Item 5.	Other Information		48
Item 6.	Exhibits		49

Signatures			51

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CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS

Forward-looking statements in filings with the Securities and Exchange Commission, including this Quarterly Report on Form 10-Q and the accompanying Exhibits, filings incorporated by reference, reports to shareholders, and other communications that represent the Company’s beliefs, plans, objectives, goals, guidelines, expectations, anticipations, estimates, and intentions are made in good faith pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. These statements are not guarantees of future performance and involve certain risks, uncertainties, and assumptions that are difficult to predict. The words “may,” “could,” “should,” “would,” “believe,” “anticipate,” “estimate,” “expect,” “intend,” “plan,” and other similar expressions identify forward-looking statements. The following factors, among others, could cause financial performance to differ materially from that expressed in such forward-looking statements:

●

inflation, interest rate, market and monetary fluctuations;

	●	the strength of the U.S. economy in general and the strength of the local economies in which we conduct operations;
	●	the effects of, and changes in, trade, monetary, and fiscal policies and laws, including interest rate policies of the Federal Reserve System;

●

timely development of competitive new products and services and the acceptance of these products and services by new and existing customers;

●

the willingness of customers to substitute competitors’ products and services for the Company’s products and services and vice versa;

●

the impact of changes in financial services laws and regulations, including laws about taxes, banking, securities, and insurance;

●

the impact of the U.S. Department of the Treasury and federal banking regulators’ continued implementation of programs to address capital and liquidity in the banking system;

●

technological changes;

	●	the cost and effects of cyber incidents or other failures, interruptions, or security breaches of our systems or those of third-party providers;
	●	the effect of changes in accounting policies and practices, as may be adopted by the regulatory agencies, as well as the Public Company Accounting Oversight Board, the Financial Accounting Standards Board, and other accounting standard setters;

●

the effect of acquisitions, including, without limitation, the failure to achieve the expected revenue growth and/or expense savings from such acquisitions;

●

the sustainability of noninterest, or fee, income being less than expected;

●

unanticipated regulatory or judicial proceedings;

●

changes in consumer spending and saving habits; and

●

the Company’s success at managing the risks mentioned above.

This list of important factors is not exclusive. If one or more of the factors affecting these forward-looking statements proves incorrect, actual results, performance, or achievements could differ materially from those expressed in, or implied by, forward-looking statements contained in this Quarterly Report on Form 10-Q and other reports we file with the Securities and Exchange Commission. Therefore, the Company cautions you not to place undue reliance on forward-looking information and statements. The Company does not intend to update any forward-looking statements, whether written or oral, to reflect changes. These cautionary statements expressly qualify all forward-looking statements that apply to the Company including the risk factors presented in Part II, Item 1A, “Risk Factors,” of this Quarterly Report on Form 10-Q and Part I, Item 1A, “Risk Factors,” of the Company’s Annual Report on Form 10-K for the year ended December 31, 2022.

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PART I.

FINANCIAL INFORMATION

Item 1. Financial Statements

CONDENSED CONSOLIDATED BALANCE SHEETS

	*March 31,*			*December 31,*
	*2023*			2022⁽¹⁾
(Amounts in thousands, except share and per share data)	(Unaudited)
Assets
Cash and due from banks	$	62,309		$	63,044
Federal funds sold		28,135			105,636
Interest-bearing deposits in banks		1,941			2,166
Total cash and cash equivalents		92,385			170,846
Debt securities available for sale		308,269			300,349
Loans held for investment, net of unearned income		2,388,897			2,400,197
Allowance for credit losses		(30,789	)		(30,556	)
Loans held for investment, net		2,358,108			2,369,641
Premises and equipment, net		47,407			47,340
Other real estate owned		481			703
Interest receivable		8,646			9,279
Goodwill		129,565			129,565
Other intangible assets		3,942			4,176
Other assets		102,869			103,673
Total assets	$	3,051,672		$	3,135,572

Liabilities
Deposits
Noninterest-bearing	$	823,297		$	872,168
Interest-bearing		1,761,327			1,806,647
Total deposits		2,584,624			2,678,815
Securities sold under agreements to repurchase		1,866			1,874
Interest, taxes, and other liabilities		33,451			32,898
Total liabilities		2,619,941			2,713,587

Stockholders' equity
Preferred stock, undesignated par value; 1,000,000 shares authorized; Series A Noncumulative Convertible Preferred Stock, $0.01 par value; 25,000 shares authorized; none outstanding		-			-
Common stock, $1 par value; 50,000,000 shares authorized; 24,495,623 shares issued and 16,243,551 outstanding at March 31, 2023; 23,371,822 shares issued and 16,225,399 outstanding at December 31, 2022		16,243			16,225
Additional paid-in capital		128,666			128,508
Retained earnings		300,047			292,971
Accumulated other comprehensive loss		(13,225	)		(15,719	)
Total stockholders' equity		431,731			421,985
Total liabilities and stockholders' equity	$	3,051,672		$	3,135,572

(1) Derived from audited financial statements

See Notes to Condensed Consolidated Financial Statements.

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CONDENSED CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)

	*Three Months Ended*
	*March 31,*
(Amounts in thousands, except share and per share data)	*2023*		*2022*
Interest income
Interest and fees on loans	$	27,628	$	24,641
Interest on securities -- taxable		1,934		556
Interest on securities -- tax-exempt		165		194
Interest on deposits in banks		462		248
Total interest income		30,189		25,639
Interest expense
Interest on deposits		718		486
Interest on short-term borrowings		59		-
Total interest expense		777		486
Net interest income		29,412		25,153
Provision for credit losses		1,742		1,961
Net interest income after provision for loan losses		27,670		23,192
Noninterest income
Wealth management		1,017		972
Service charges on deposits		3,159		3,498
Other service charges and fees		3,082		3,017
Gain on sale of securities		7		-
Other operating income		1,318		1,707
Total noninterest income		8,583		9,194
Noninterest expense
Salaries and employee benefits		11,595		11,671
Occupancy expense		1,168		1,269
Furniture and equipment expense		1,401		1,614
Service fees		2,019		1,503
Advertising and public relations		643		540
Professional fees		327		453
Amortization of intangibles		234		357
FDIC premiums and assessments		320		218
Merger expenses		379		-
Other operating expense		2,727		2,361
Total noninterest expense		20,813		19,986
Income before income taxes		15,440		12,400
Income tax expense		3,658		2,885
Net income	$	11,782	$	9,515

Earnings per common share
Basic	$	0.73	$	0.57
Diluted		0.72		0.56
Weighted average shares outstanding
Basic		16,228,297		16,817,284
Diluted		16,289,489		16,864,515

See Notes to Condensed Consolidated Financial Statements.

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CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (UNAUDITED)

	*Three Months Ended*
	*March 31,*
	*2023*			*2022*
(Amounts in thousands)
Net income	$	11,782		$	9,515
Other comprehensive income (loss), before tax
Available-for-sale debt securities:
Change in net unrealized losses on debt securities		3,163			(5,896	)
Reclassification adjustment for gains recognized in net income		(7	)		-
Net unrealized gains on available-for-sale debt securities		3,156			(5,896	)
Employee benefit plans:
Net actuarial loss		(33	)		(423	)
Reclassification adjustment for amortization of prior service cost and net actuarial loss recognized in net income		33			34
Net unrealized losses on employee benefit plans		-			(389	)
Other comprehensive income (loss), before tax		3,156			(6,285	)
Income tax expense (benefit)		662			(1,319	)
Other comprehensive income (loss), net of tax		2,494			(4,966	)
Total comprehensive income	$	14,276		$	4,549

See Notes to Condensed Consolidated Financial Statements.

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CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY (UNAUDITED)

THREE MONTHS ENDED

March 31, 2023 and 2022


																	*Accumulated*
	*Preferred*				*Common*						*Additional*						*Other*
(Amounts in thousands, except share and per share data)	*Stock Outstanding*		*Preferred Stock*		*Stock Outstanding*			*Common Stock*			*Paid-in Capital*			*Retained Earnings*			*Comprehensive Loss*			*Total*

Balance January 1, 2022		-	$	-		16,878,220		$	16,878		$	147,619		$	264,824		$	(1,546	)	$	427,775
Net income		-		-		-			-			-			9,515			-			9,515
Other comprehensive loss		-		-		-			-			-			-			(4,966	)		(4,966	)
Common dividends declared -- $0.27 per share		-		-		-			-			-			(4,541	)		-			(4,541	)
Equity-based compensation expense		-		-		25,137			25			147			-			-			172
Common stock options exercised -- 4,536 shares		-		-		4,536			5			98			-			-			103
Issuance of common stock to 401(k) plan -- 6,082 shares		-		-		6,082			6			179			-			-			185
Repurchase of 132,000 common shares at $30.96 per share		-		-		(132,000	)		(132	)		(3,955	)		-			-			(4,087	)
Balance March 31, 2022		-	$	-		16,781,975		$	16,782		$	144,088		$	269,798		$	(6,512	)	$	424,156

Balance January 1, 2023		-	$	-		16,225,399		$	16,225		$	128,508		$	292,971		$	(15,719	)	$	421,985
Net income		-		-		-			-			-			11,782			-			11,782
Other comprehensive income		-		-		-			-			-			-			2,494			2,494
Common dividends declared -- $0.29 per share		-		-		-			-			-			(4,706	)		-			(4,706	)
Equity-based compensation expense		-		-		15,732			16			104			-			-			120
Common stock options exercised -- 2,158 shares		-		-		2,158			2			46			-			-			48
Issuance of common stock to 401(k) plan -- 262 shares		-		-		262			-			8			-			-			8
Balance March 31, 2023		-	$	-		16,243,551		$	16,243		$	128,666		$	300,047		$	(13,225	)	$	431,731

See Notes to Condensed Consolidated Financial Statements.

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CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)

	*Three Months Ended*
	*March 31,*
(Amounts in thousands)	*2023*			*2022*
Operating activities
Net income	$	11,782		$	9,515
Adjustments to reconcile net income to net cash provided by operating activities
Provision for credit losses for loans		1,742			1,961
Depreciation and amortization of premises and equipment		921			1,108
(Accretion) amortization of premiums (discounts) on investments, net		(523	)		100
Amortization of intangible assets		234			357
Accretion on acquired loans		(193	)		(866	)
Equity-based compensation expense		120			172
Issuance of common stock to 401(k) plan		8			185
(Gain) loss on sale of premises and equipment, net		(2	)		(392	)
Loss (gain) on sale of other real estate owned		51			(5	)
Gain on sale of securities		(7	)		-
Decrease (increase) in accrued interest receivable		633			(200	)
Decrease (increase) in other operating activities		1,061			(1,497	)
Net cash provided by operating activities		15,827			10,438
Investing activities
Proceeds from sale of securities available for sale		17,007			-
Proceeds from maturities, prepayments, and calls of securities available for sale		10,618			4,763
Payments to acquire securities available for sale		(31,859	)		(203,170	)
Net decrease (increase) in loans		9,695			(78,716	)
Purchase of FHLB stock, net		(3,829	)		(238	)
Proceeds from bank owned life insurance		3,717			-
Proceeds from sale of premises and equipment		4			796
Payments to acquire premises and equipment		(1,012	)		(175	)
Proceeds from sale of other real estate owned		228			189
Net cash provided (used) by investing activities		4,569			(276,551	)
Financing activities
(Decrease) increase in noninterest-bearing deposits, net		(48,871	)		17,869
(Decrease) increase in interest-bearing deposits, net		(45,320	)		35,684
(Repayments) proceeds from securities sold under agreements to repurchase, net		(8	)		952
Proceeds from stock options exercised		48			103
Payments for repurchase of common stock		-			(4,087	)
Payments of common dividends		(4,706	)		(4,541	)
Net cash (used) provided by financing activities		(98,857	)		45,980
Net (decrease) increase in cash and cash equivalents		(78,461	)		(220,133	)
Cash and cash equivalents at beginning of period		170,846			677,439
Cash and cash equivalents at end of period	$	92,385