FIRST COMMUNITY BANKSHARES INC VA

Previous wording

First Community Bankshares, Inc. (the “Company”) is a financial holding company, headquartered in Bluefield, Virginia, that provides banking products and services through its wholly owned subsidiary First Community Bank (the “Bank”), a Virginia chartered bank institution. As of March 31, 2024, the Bank operated 53 branches in Virginia, West Virginia, North Carolina and Tennessee. As of March 31, 2024, full-time equivalent employees, calculated using the number of hours worked, totaled 596. Our primary source of earnings is net interest income, the difference between interest earned on assets and interest paid on liabilities, which is supplemented by fees for services, commissions on sales, and various deposit service charges. We fund our lending and investing activities primarily through the retail deposit operations of our branch banking network. We invest our funds primarily in loans to retail and commercial customers and various investment securities. Our common stock is traded on the NASDAQ Global Select Market under the symbol FCBC.

Current wording

First Community Bankshares, Inc. (the “Company”) is a financial holding company, headquartered in Bluefield, Virginia, that provides banking products and services through its wholly owned subsidiary First Community Bank (the “Bank”), a Virginia chartered bank institution. As of June 30, 2024, the Bank operated 53 branches in Virginia, West Virginia, North Carolina and Tennessee. As of June 30, 2024, full-time equivalent employees, calculated using the number of hours worked, totaled 591. Our primary source of earnings is net interest income, the difference between interest earned on assets and interest paid on liabilities, which is supplemented by fees for services, commissions on sales, and various deposit service charges. We fund our lending and investing activities primarily through the retail deposit operations of our branch banking network. We invest our funds primarily in loans to retail and commercial customers and various investment securities. Our common stock is traded on the NASDAQ Global Select Market under the symbol FCBC.

Previous wording

The Bank offers trust management, estate administration, and investment advisory services through its Trust Division and wholly owned subsidiary First Community Wealth Management Inc. (“FCWM”). The Trust Division manages inter vivos trusts and trusts under will, develops and administers employee benefit and individual retirement plans, and manages and settles estates. Fiduciary fees for these services are charged on a schedule related to the size, nature, and complexity of the account. Revenues consist primarily of investment advisory fees and commissions on assets under management and administration. As of March 31, 2024, the Trust Division and FCWM managed and administered $1.55 billion in combined assets under various fee-based arrangements as fiduciary or agent. The Bank also offers a full range of commercial and personal insurance products through its strategic partnership with Bankers Insurance, LLC.

Current wording

The Bank offers trust management, estate administration, and investment advisory services through its Trust Division and wholly owned subsidiary First Community Wealth Management Inc. (“FCWM”). The Trust Division manages inter vivos trusts and trusts under will, develops and administers employee benefit and individual retirement plans, and manages and settles estates. Fiduciary fees for these services are charged on a schedule related to the size, nature, and complexity of the account. Revenues consist primarily of investment advisory fees and commissions on assets under management and administration. As of June 30, 2024, the Trust Division and FCWM managed and administered $1.58 billion in combined assets under various fee-based arrangements as fiduciary or agent. The Bank also offers a full range of commercial and personal insurance products through its strategic partnership with Bankers Insurance, LLC.

Previous wording

Highlights of our results of operations for the three months ended March 31, 2024, and financial condition as of March 31, 2024, include the following:

Current wording

Highlights of our results of operations for the three and six months ended June 30, 2024, and financial condition as of June 30, 2024, include the following:

Previous wording

Net income increased $1.06 million in the first quarter of 2024 compared to the same period in 2023. The increase is primarily attributable to an increase in net interest income of $2.22 million. Provision for credit losses decreased $731 thousand and noninterest income increased $676 thousand. These increases were offset by an increase in noninterest expense of $2.57 million compared to the same period in 2023.

Current wording

Net income increased $3.94 million in the first six months of 2024 compared to the same period in 2023. The increase is primarily attributable to a decrease in provision for credit losses of $4.69 million. In addition, net interest income increased $1.27 million and noninterest income increased $1.23 million. These increases were offset by an increase in noninterest expense of $2.80 million compared to the same period in 2023.

Previous wording

Average earning assets increased $103.11 million, or 3.75%, primarily due to an increase in average loans as noted above. In addition, the average balance for interest-bearing deposits with other banks increased $25.49 million, or 62.18%. These increases to earning assets were offset by a decrease in the average balance for securities available-for-sale of $77.72 million, or 24.54%. The yield on earning assets increased 62 basis points, or 13.87%, primarily due to an increase in benchmark rates as compared to the same period of 2023. The average loan to deposit ratio increased to 95.51% from 91.96% reported in the same quarter of 2023. Non-cash accretion income increased to $781 thousand from $193 thousand reported in the same quarter of 2023 and is primarily due to the Surrey Bancorp acquisition.

Current wording

Average earning assets decreased $97.66 million, or 3.31%, primarily due to an decrease in average securities available for sale of $173.51 million, or 54.52%. In addition, the average balance for loans decreased $71.27 million, or 2.77%. These decreases to earning assets were offset by an increase in the average balance for interest-bearing balances with banks of $147.11 million, or 232.32%. The yield on earning assets increased 45 basis points, or 9.47%, primarily due to an increase in benchmark rates as compared to the same period of 2023. The average loan to deposit ratio increased to 93.60% from 91.92% reported in the same quarter of 2023. Non-cash accretion income was $661 thousand for the second quarter compared to $884 thousand reported in the same period of 2023.

Previous wording

Average interest-bearing liabilities, which consist of interest-bearing deposits and borrowings, increased $13.71 million, or 0.77%, primarily due to a increase in deposits. Savings deposits increased $38.67 million, or 4.67%, while time deposits decreased $21.24 million, or 7.83%. The yield on interest-bearing liabilities increased 81 basis points and is primarily due to increases in benchmark rates throughout 2023.

Current wording

Average interest-bearing liabilities, which consist of interest-bearing deposits and borrowings, decreased $77.69 million, or 4.17%, primarily due to a decrease in deposits. Demand deposits decreased $48.24 million, or 6.77%, while time deposits decreased $35.94 million, or 12.73%. These decreases were offset by an increase in savings deposits of $13.11 million, or 1.52%. The yield on interest-bearing liabilities increased 67 basis points and is primarily due to increases in benchmark rates throughout 2023.

Previous wording

Three*-*Month Comparison. Net interest income comprised 77.36% of total net interest and noninterest income in the first quarter of 2024 compared to 77.41% in the same quarter of 2023. Net interest income on a GAAP basis increased $2.22 million, or 7.54%. Net interest income on a FTE basis increased $2.22 million as well, with a percentage increase of 7.53%. The net interest margin on a FTE basis increased 12 basis points while the net interest spread on a FTE basis decreased 19 basis points. The increase in net interest margin was primarily driven by increase in the average balance for loans as well as an increase in the yield on loans. The average balance for loans increased $155.35 million, while the yield increased 60 basis points resulting in a tax effected increase in interest on loans of $5.80 million compared to 2023. The 19 basis point decrease in net interest spread is primarily due to the increase in yield for interest-bearing liabilities of 81 basis points versus the increase in yield for earning assets of 62 basis points.

Current wording

*Six-*Month Comparison. Net interest income comprised 77.36% of total net interest and noninterest income for the six months ending June 30, 2024 compared to 78.19% in the same period of 2023. Net interest income on a GAAP basis increased $1.27 million, or 2.03%. Net interest income on a FTE basis increased $1.27 million as well, with a percentage increase of 2.04%. The net interest margin on a FTE basis increased 7 basis points while the net interest spread on a FTE basis decreased 20 basis points. The increase in net interest margin was primarily driven by increase in the average balance for loans as well as an increase in the yield on loans. The average balance for loans increased $41.55 million, while the yield increased 43 basis points resulting in a tax effected increase in interest on loans of $6.58 million compared to 2023. The 20 basis point decrease in net interest spread is primarily due to the increase in yield for interest-bearing liabilities of 73 basis points versus the increase in yield for earning assets of 53 basis points.

Previous wording

Three*-*Month Comparison. The provision charged to operations decreased $731 thousand in the first quarter of 2024 compared to the same quarter of 2023. Provision for credit losses for loans of $1.01 million was recorded in the first quarter of 2024 compared to the provision of $1.97 million recorded in the same period of 2023. The decrease in provision is commensurate with changes in economic forecasts and changes in the loan portfolio. There was no provision recorded for loan commitments during the first quarter of 2024. There was a recovery of provision for loan commitments for the same quarter of 2023 of $232 thousand.

Current wording

Three*-*Month Comparison. The provision charged to operations decreased $3.96 million in the second quarter of 2024 compared to the same quarter of 2023. Provision for credit losses for loans of $449 thousand was recorded in the second quarter of 2024 compared to the provision of $4.11 million recorded in the same period of 2023. The provision of $4.11 million recorded in the second quarter of 2023 included $1.61 million of Day 2 provision associated with the Surrey Bancorp acquisition. The remaining decrease in provision is primarily due a much smaller required credit loss provision as the loan portfolio has experienced a decrease in balance of $147.81 million from the same period of 2023. In addition, there was a recovery of provision recorded for the allowance for unfunded commitments during the second quarter of 2024 of $305 thousand. There was no provision for the allowance for unfunded commitments for the same quarter of 2023.

Previous wording

Three*-*Month Comparison. Noninterest income comprised 22.64% of total net interest and noninterest income in the first quarter of 2024 compared to 22.59% in the same quarter of 2023. Noninterest income increased $676 thousand or 7.88%. Other service charges and fees increased $368 thousand and was primarily driven by an increase in interchange income. Service charges on deposits increased $151 thousand. Increases in these categories can both be attributed to increased activity resulting from the Surrey acquisition.

Current wording

Three*-*Month Comparison. Noninterest income comprised 22.65% of total net interest and noninterest income in the second quarter of 2024 compared to 21.09% in the same quarter of 2023. Noninterest income increased $557 thousand or 6.34%. Other service charges and fees increased $210 thousand and was primarily driven by an increase in interchange income. Other operating income increased $263 thousand and is primarily attributable to a holdback payment of $184 thousand related to a prior divestiture of an insurance agency .

Previous wording

Three-Month Comparison. Income tax expense decreased $12 thousand, or 0.33%. The effective tax rate decreased to 22.11% in the first quarter of 2024 from 23.69% in the same quarter of 2023.

Current wording

Three-Month Comparison. Income tax expense increased $470 thousand, or 15.37%. The effective tax rate decreased to 21.75% in the second quarter of 2024 from 23.75% in the same quarter of 2023.

Previous wording

Total assets as of March 31, 2024, decreased $32.56 million, or 1.00%, from December 31, 2023. The decrease in assets was primarily driven by decreases in the securities available-for-sale portfolio and loans. Total liabilities decreased $36.21 million, or 1.31%, and was primarily driven by a decrease in deposits. Stockholders' equity increased $3.65 million or 0.73%.

Current wording

Total assets as of June 30, 2024, decreased $35.73 million, or 1.09%, from December 31, 2023. The decrease in assets was primarily driven by decreases in the securities available-for-sale portfolio and loans. Total liabilities decreased $41.32 million, or 1.49%, and was primarily driven by a decrease in deposits. Stockholders' equity increased $5.59 million or 1.11%.

Previous wording

Available-for-sale debt securities as of March 31, 2024, decreased $114.71 million, or 40.83%, compared to December 31, 2023. The decrease is due to the maturity of $115.75 million in U. S. Treasury Notes during the first quarter of 2024. The market value of debt securities available-for-sale as a percentage of amortized cost was 91.58% as of March 31, 2024, compared to 95.23% as of December 31, 2023.

Current wording

Available-for-sale debt securities as of June 30, 2024, decreased $151.28 million, or 53.84%, compared to December 31, 2023. The decrease is primarily due to the maturity of $141.50 million in U. S. Treasury Notes during the first six months of 2024. The market value of debt securities available-for-sale as a percentage of amortized cost was 89.06% as of June 30, 2024, compared to 95.23% as of December 31, 2023.

Previous wording

Total loans as of March 31, 2024, decreased $52.47 million, or 2.04%, compared to December 31, 2023. The largest decrease occurred in the commercial loans segment with an overall decrease of $34.68 million, or 2.09%. Within this segment, the largest decreases occurred in construction, commercial and industrial, and non-farm, non-residential loans with decreases of $17.10 million, $8.32 million, and $7.30 million, respectively. The consumer real estate segment decreased $11.37 million, or 1.44%, primarily due to a decrease in single family owner occupied of $8.33 million, or 1.20%.

Current wording

Total loans as of June 30, 2024, decreased $99.03 million, or 3.85%, compared to December 31, 2023. The largest decrease occurred in the commercial loans segment with an overall decrease of $64.56 million, or 3.89%. Within this segment, the largest decreases occurred in construction and non-farm, non-residential loans with decreases of $24.25 million and $24.04 million, respectively. The consumer real estate segment decreased $21.97 million, or 2.77%, primarily due to a decrease in single family owner occupied of $19.24 million, or 2.76%.

Previous wording

Nonperforming assets as of March 31, 2024, increased $369 thousand, or 1.88%, from December 31, 2023. Nonaccrual loans increased $261 thousand, or 1.35%. OREO increased $182 thousand, or 94.79% and accruing loans past due 90 days or more decreased $74 thousand from year-end. As of March 31, 2024, nonaccrual loans were largely attributed to single family owner occupied (47.88%), non-farm, non-residential (15.65%), and consumer of (8.41%). Certain loans included in the nonaccrual category have been written down to estimated realizable value or assigned specific reserves in the allowance for loan losses based on management’s estimate of loss at ultimate resolution.

Current wording

Nonperforming assets as of June 30, 2024, increased $282 thousand, or 1.43%, from December 31, 2023. Nonaccrual loans increased $459 thousand, or 2.37%. OREO decreased $92 thousand, or 47.92% and accruing loans past due 90 days or more decreased $85 thousand from year-end. As of June 30, 2024, nonaccrual loans were largely attributed to single family owner occupied (48.58%), non-farm, non-residential (14.13%), and commercial and industrial of (8.57%). Certain loans included in the nonaccrual category have been written down to estimated realizable value or assigned specific reserves in the allowance for loan losses based on management’s estimate of loss at ultimate resolution.

Previous wording

Delinquent loans, comprised of loans 30 days or more past due and nonaccrual loans, totaled $31.63 million as of March 31, 2024, a decrease of $2.30 million, or 6.78%, compared to $33.93 million as of December 31, 2023. Delinquent loans as a percent of total loans totaled 1.26% as of March 31, 2024, which includes past due loans (0.48%) and nonaccrual loans (0.78%).

Current wording

Delinquent loans, comprised of loans 30 days or more past due and nonaccrual loans, totaled $31.03 million as of June 30, 2024, a decrease of $2.90 million, or 8.54%, compared to $33.93 million as of December 31, 2023. Delinquent loans as a percent of total loans totaled 1.23% as of June 30, 2024, which includes past due loans (0.45%) and nonaccrual loans (0.80%).

Previous wording

When restructuring loans for borrowers experiencing financial difficulty, we generally make concessions in interest rates, loan terms, or amortization terms. Total loans modified as of March 31, 2024, were $2.18 million. As of March 31, 2024, $250 thousand of these loans were 30-89 days past due.

Current wording

When restructuring loans for borrowers experiencing financial difficulty, we generally make concessions in interest rates, loan terms, or amortization terms. Total loans modified as of June 30, 2024, were $2.29 million. As of June 30, 2024, $26 thousand of these loans were 30-89 days past due.

Previous wording

OREO, which is carried at the lesser of estimated net realizable value or cost, increased $182 thousand, or 94.79%, as of March 31, 2024, compared to December 31, 2023, and consisted of 7 properties with an average holding period of approximately 10 months. The net loss on the sale of OREO totaled $14 thousand for the three months ended March 31, 2024, compared to a net loss of $51 thousand for the same period of the prior year. The following table presents the changes in OREO during the periods indicated:

Current wording

OREO, which is carried at the lesser of estimated net realizable value or cost, decreased $92 thousand, or 47.92%, as of June 30, 2024, compared to December 31, 2023, and consisted of 3 properties with an average holding period of approximately 24 months. The net loss on the sale of OREO totaled $32 thousand for the six months ended June 30, 2024, compared to a net loss of $41 thousand for the same period of the prior year. The following table presents the changes in OREO during the periods indicated:

Previous wording

As of March 31, 2024, the balance of the ACL for loans was $35.46 million, or 1.41% of total loans. The ACL at March 31, 2024, decreased $728 thousand from the balance of $36.19 million recorded at December 31, 2023. This decrease included a $1.01 million provision offset by net charge-offs for the three months of $1.74 million.

Current wording

As of June 30, 2024, the balance of the ACL for loans was $34.89 million, or 1.41% of total loans. The ACL at June 30, 2024, decreased $1.30 million from the balance of $36.19 million recorded at December 31, 2023. This decrease included a $1.46 million provision offset by net charge-offs for the six months of $2.76 million.

Previous wording

At March 31, 2024, the Company also had an allowance for unfunded commitments of $746 thousand which was recorded in Other Liabilities on the Balance Sheet. During the first three months of 2024, the Company did not record a provision for credit losses on unfunded commitments compared to a recovery of provision of $232 thousand recorded in the same period of 2023.

Current wording

At June 30, 2024, the Company also had an allowance for unfunded commitments of $441 thousand which was recorded in Other Liabilities on the Balance Sheet. During the first six months of 2024, the Company recorded a recovery of provision for credit losses for loan commitments of $305 thousand compared to a recovery of provision of $232 thousand recorded in the same period of 2023.

Previous wording

Total deposits as of March 31, 2024, decreased $40.11 million, or 1.47%, compared to December 31, 2023. The largest decreases in deposits occurred in interest-bearing demand of $32.32 million, or 4.66%, and noninterest-bearing demand of $29.52 million, or 3.17%. Time deposits decreased $5.86 million or 2.31%. Theses decreases were offset by an increase in savings of $27.60 million or 3.27%.

Current wording

Total deposits as of June 30, 2024, decreased $45.05 million, or 1.65%, compared to December 31, 2023. The largest decreases in deposits occurred in noninterest-bearing demand of $42.46 million, or 4.56%, and interest-bearing demand of $34.99 million, or 5.04%. Time deposits decreased $7.82 million or 3.09%. Theses decreases were offset by an increase in savings of $40.21 million or 4.77%.

Previous wording

Total borrowings in the form of retail repurchase agreements as of March 31, 2024, decreased $113 thousand, or 10.10%, compared to December 31, 2023.

Current wording

Total borrowings in the form of retail repurchase agreements as of June 30, 2024, decreased $225 thousand, or 20.11%, compared to December 31, 2023.

Previous wording

As a financial holding company, the Company’s primary source of liquidity is dividends received from the Bank, which are subject to certain regulatory limitations. Other sources of liquidity include cash, investment securities, and borrowings. As of March 31, 2024, the Company’s cash reserves and short-term investment securities totaled $19.76 million and $22.12 million, respectively. The Company’s cash reserves and investments provide adequate working capital to meet obligations for the next twelve months.

Current wording

As a financial holding company, the Company’s primary source of liquidity is dividends received from the Bank, which are subject to certain regulatory limitations. Other sources of liquidity include cash, investment securities, and borrowings. As of June 30, 2024, the Company’s cash reserves and short-term investment securities totaled $34.08 million and $10.77 million, respectively. The Company’s cash reserves and investments provide adequate working capital to meet obligations for the next twelve months.

Previous wording

In addition to cash on hand and deposits with other financial institutions, we rely on customer deposits, cash flows from loans and investment securities, and lines of credit from the FHLB and the Federal Reserve Bank (“FRB”) Discount Window to meet potential liquidity demands. These sources of liquidity are immediately available to satisfy deposit withdrawals, customer credit needs, and our operations. Secondary sources of liquidity include approved lines of credit with correspondent banks and unpledged available-for-sale securities. As of March 31, 2024, our unencumbered cash totaled $248.91 million, unused borrowing capacity from the FHLB totaled $402.00 million, available credit from the FRB Discount Window totaled $25.54 million, available lines from correspondent banks totaled $100.00 million, and unpledged available-for-sale securities totaled $121.70 million.

Current wording

In addition to cash on hand and deposits with other financial institutions, we rely on customer deposits, cash flows from loans and investment securities, and lines of credit from the FHLB and the Federal Reserve Bank (“FRB”) Discount Window to meet potential liquidity demands. These sources of liquidity are immediately available to satisfy deposit withdrawals, customer credit needs, and our operations. Secondary sources of liquidity include approved lines of credit with correspondent banks and unpledged available-for-sale securities. As of June 30, 2024, our unencumbered cash totaled $329.88 million, unused borrowing capacity from the FHLB totaled $391.26 million, available credit from the FRB Discount Window totaled $5.78 million, available lines from correspondent banks totaled $100.00 million, and unpledged available-for-sale securities totaled $106.97 million.

Previous wording

We are committed to effectively managing our capital to protect our depositors, creditors, and shareholders. Failure to meet certain capital requirements may result in actions by regulatory agencies that could have a material impact on our operations. Total stockholders’ equity as of March 31, 2024, increased $3.65 million, or 0.73%, to $506.94 million from $503.29 million as of December 31, 2023. Capital increased due to net income of $12.85 million. The increase was offset by dividends declared of $5.36 million as well as the repurchase of our common stock totaling $2.97 million. Book value per share at March 31, 2024, was $27.53, an increase of $0.33 from year-end 2023.

Current wording

We are committed to effectively managing our capital to protect our depositors, creditors, and shareholders. Failure to meet certain capital requirements may result in actions by regulatory agencies that could have a material impact on our operations. Total stockholders’ equity as of June 30, 2024, increased $5.59 million, or 1.11%, to $508.88 million from $503.29 million as of December 31, 2023. Capital increased due to net income of $25.53 million. The increase was offset by dividends declared of $10.68 million as well as the repurchase of our common stock totaling $8.25 million. Book value per share at June 30, 2024, was $27.85, an increase of $0.65 from year-end 2023.

Previous wording

Our risk-based capital ratios as of March 31, 2024, increased from December 31, 2023, primarily due to a decrease in risk weighted assets. The decrease in risk-weighted assets was primarily driven by the decrease in the loan portfolio. As of March 31, 2024, we continued to meet all capital adequacy requirements and were classified as well-capitalized under the regulatory framework for prompt corrective action. Management believes there have been no conditions or events since those notifications that would change the Bank’s classification. Additionally, our capital ratios were in excess of the minimum standards under the Basel III capital rules as of March 31, 2024.

Current wording

Our risk-based capital ratios as of June 30, 2024, increased from December 31, 2023, primarily due to a decrease in risk weighted assets. The decrease in risk-weighted assets was primarily driven by a decrease in both the loan and securities available for sale portfolios. As of June 30, 2024, we continued to meet all capital adequacy requirements and were classified as well-capitalized under the regulatory framework for prompt corrective action. Management believes there have been no conditions or events that would change the Bank’s classification. Additionally, our capital ratios were in excess of the minimum standards under the Basel III capital rules as of June 30, 2024.