FIRST COMMUNITY BANKSHARES INC /VA/ [FCBC] Filings

10-Q 1 fcbc20220331_10q.htm FORM 10-Q fcbc20220331_10q.htm

Table of Contents

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, 2022

☐ 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 April 29, 2022, there were 16,735,375 shares outstanding of the registrant’s Common Stock, $1.00 par value.

Table of Contents

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, 2022 (Unaudited) and December 31, 2021	4
		Condensed Consolidated Statements of Income for the Three Months Ended March 31, 2022 and 2021 (Unaudited)	5
		Condensed Consolidated Statements of Comprehensive Income for the Three Months Ended March 31, 2022 and 2021 (Unaudited)	6
		Condensed Consolidated Statements of Changes in Stockholders’ Equity for the Three Months Ended March 31, 2022 and 2021 (Unaudited)	7
		Condensed Consolidated Statements of Cash Flows for the Three Months Ended March 31, 2022 and 2021 (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

Table of Contents

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:

●

the effects of the COVID-19 pandemic, including the negative impacts and disruptions to the communities the Company serves, and the domestic and global economy, which may have an adverse effect on the Company’s business;

●

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;

●

inflation, interest rate, market and monetary fluctuations;

●

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 growth and profitability 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, 2021.

Table of Contents

PART I.

FINANCIAL INFORMATION

Item 1. Financial Statements

CONDENSED CONSOLIDATED BALANCE SHEETS

	*March 31,*			*December 31,*
	*2022*			2021⁽¹⁾
(Amounts in thousands, except share and per share data)	(Unaudited)
Assets
Cash and due from banks	$	50,485		$	47,067
Federal funds sold		403,742			627,036
Interest-bearing deposits in banks		3,079			3,336
Total cash and cash equivalents		457,306			677,439
Debt securities available for sale		268,703			76,292
Loans held for investment, net of unearned income		2,244,296			2,165,569
Allowance for credit losses		(28,981	)		(27,858	)
Loans held for investment, net		2,215,315			2,137,711
Premises and equipment, net		50,912			52,284
Other real estate owned		848			1,015
Interest receivable		8,100			7,900
Goodwill		129,565			129,565
Other intangible assets		5,266			5,622
Other assets		108,112			106,691
Total assets	$	3,244,127		$	3,194,519

Liabilities
Deposits
Noninterest-bearing	$	860,652		$	842,783
Interest-bearing		1,922,292			1,886,608
Total deposits		2,782,944			2,729,391
Securities sold under agreements to repurchase		2,488			1,536
Interest, taxes, and other liabilities		34,539			35,817
Total liabilities		2,819,971			2,766,744

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; 23,910,857 shares issued and 16,781,975 outstanding at March 31, 2022; 23,971,347 shares issued and 16,878,220 outstanding at December 31, 2021		16,782			16,878
Additional paid-in capital		144,088			147,619
Retained earnings		269,798			264,824
Accumulated other comprehensive loss		(6,512	)		(1,546	)
Total stockholders' equity		424,156			427,775
Total liabilities and stockholders' equity	$	3,244,127		$	3,194,519

(1) Derived from audited financial statements
See Notes to Condensed Consolidated Financial Statements.

Table of Contents

CONDENSED CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)

	*Three Months Ended*
	*March 31,*
(Amounts in thousands, except share and per share data)	*2022*		*2021*
Interest income
Interest and fees on loans	$	24,641	$	26,540
Interest on securities -- taxable		556		198
Interest on securities -- tax-exempt		194		297
Interest on deposits in banks		248		116
Total interest income		25,639		27,151
Interest expense
Interest on deposits		486		869
Total interest expense		486		869
Net interest income		25,153		26,282
Provision for (recovery of) credit losses		1,961		(4,001	)
Net interest income after provision for loan losses		23,192		30,283
Noninterest income
Wealth management		972		881
Service charges on deposits		3,498		3,031
Other service charges and fees		3,017		3,022
Other operating income		1,707		635
Total noninterest income		9,194		7,569
Noninterest expense
Salaries and employee benefits		11,671		10,884
Occupancy expense		1,269		1,275
Furniture and equipment expense		1,614		1,367
Service fees		1,503		1,335
Advertising and public relations		540		335
Professional fees		453		466
Amortization of intangibles		357		357
FDIC premiums and assessments		218		199
Other operating expense		2,361		2,602
Total noninterest expense		19,986		18,820
Income before income taxes		12,400		19,032
Income tax expense		2,885		4,430
Net income	$	9,515	$	14,602

Earnings per common share
Basic	$	0.57	$	0.83
Diluted		0.56		0.82
Weighted average shares outstanding
Basic		16,817,284		17,669,937
Diluted		16,864,515		17,729,185

See Notes to Condensed Consolidated Financial Statements.

Table of Contents

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (UNAUDITED)

	*Three Months Ended*
	*March 31,*
	*2022*			*2021*
(Amounts in thousands)
Net income	$	9,515		$	14,602
Other comprehensive income, before tax
Available-for-sale debt securities:
Change in net unrealized losses on debt securities		(5,896	)		(817	)
Net unrealized losses on available-for-sale debt securities		(5,896	)		(817	)
Employee benefit plans:
Net actuarial loss		(423	)		(206	)
Reclassification adjustment for amortization of prior service cost and net actuarial loss recognized in net income		34			97
Net unrealized losses on employee benefit plans		(389	)		(109	)
Other comprehensive loss, before tax		(6,285	)		(926	)
Income tax benefit		(1,319	)		(194	)
Other comprehensive loss, net of tax		(4,966	)		(732	)
Total comprehensive income	$	4,549		$	13,870

See Notes to Condensed Consolidated Financial Statements.

Table of Contents

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

THREE MONTHS ENDED

March 31, 2022 and 2021

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

Balance January 1, 2021		-	$	-		17,722,507		$	17,723		$	173,345		$	237,585		$	(1,923	)	$	426,730
Cumulative effect of adoption of ASU 2016-13		-		-		-			-			-			(5,870	)		-			(5,870	)
Net income		-		-		-			-			-			14,602			-			14,602
Other comprehensive loss		-		-		-			-			-			-			(732	)		(732	)
Common dividends declared -- $0.25 per share		-		-		-			-			-			(4,428	)		-			(4,428	)
Equity-based compensation expense		-		-		51,550			51			483			-			-			534
Issuance of common stock to 401(k) plan -- 5,652 shares		-		-		5,652			6			142			-			-			148
Repurchase of common shares -- 187,700 shares at $26.56 per share		-		-		(187,700	)		(188	)		(4,797	)		-			-			(4,985	)
Balance March 31, 2021		-	$	-		17,592,009		$	17,592		$	169,173		$	241,889		$	(2,655	)	$	425,999

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 common shares -- 132,000 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

See Notes to Condensed Consolidated Financial Statements.

Table of Contents

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)

	*Three Months Ended*
	*March 31,*
(Amounts in thousands)	*2022*			*2021*
Operating activities
Net income	$	9,515		$	14,602
Adjustments to reconcile net income to net cash provided by operating activities
Provision for (recovery of) credit losses		1,961			(4,001	)
Depreciation and amortization of premises and equipment		1,108			1,125
Amortization of premiums on investments, net		100			85
Amortization of FDIC indemnification asset, net		-			280
Amortization of intangible assets		357			357
Accretion on acquired loans		(866	)		(1,187	)
Equity-based compensation expense		172			402
Issuance of common stock to 401(k) plan		185			148
Gain on sale of premises and equipment, net		(392	)		(64	)
(Gain) loss on sale of other real estate owned		(5	)		316
(Decrease) increase in accrued interest receivable		(200	)		328
(Decrease) increase in other operating activities		(1,497	)		224
Net cash provided by operating activities		10,438			12,615
Investing activities
Proceeds from maturities, prepayments, and calls of securities available for sale		4,763			6,489
Payments to acquire securities available for sale		(203,170	)		(11,675	)
Net (Increase) decrease in loans		(78,716	)		45,985
(Purchase of) proceeds from FHLB stock, net		(238	)		1,012
Payments to the FDIC		-			(3	)
Proceeds from sale of premises and equipment		796			128
Payments to acquire premises and equipment		(175	)		(922	)
Proceeds from sale of other real estate owned		189			428
Net cash (used) provided by investing activities		(276,551	)		41,442
Financing activities
Increase in noninterest-bearing deposits, net		17,869			51,781
Increase in interest-bearing deposits, net		35,684			75,072
Proceeds from securities sold under agreements to repurchase, net		952			555
Proceeds from stock options exercised		103			132
Payments for repurchase of common stock		(4,087	)		(4,985	)
Payments of common dividends		(4,541	)		(4,428