8-K: First Community Bankshares Reports Solid Q4 2023 Earnings, Announces Dividend

First Community Bankshares, Inc. announced its fourth quarter 2023 results, reporting a net income of $11.78 million and declaring a $0.29 per share quarterly cash dividend.

Summary

• First Community Bankshares, Inc. reported a net income of $11.78 million, or $0.66 per diluted share, for the fourth quarter of 2023.
• The full year net income for 2023 was $48.02 million, or $2.72 per diluted share.
• The company declared a quarterly cash dividend of $0.29 per common share, payable on or about February 23, 2024, to shareholders of record on February 9, 2024.
• The fourth quarter net income was negatively impacted by a $3.00 million accrual for estimated litigation expenses.
• Adjusted for non-recurring items, fourth quarter net income increased to $14.59 million, compared to the fourth quarter of 2022.
• Adjusted full year net income was $54.74 million, which is 19.99% greater than the previous year.
• Net interest income increased by $1.44 million compared to the same quarter in 2022.
• The net interest margin was 4.42%, an increase of 8 basis points over the same quarter of 2022.
• The loan portfolio increased by $172.10 million, or 7.17%, from December 31, 2022, including the acquisition of Surrey Bancorp.
• Excluding the Surrey transaction, the loan portfolio decreased by approximately $66.98 million, or 2.79%.
• Deposits increased by $43.51 million, or 1.62%, from year-end 2022, including the Surrey transaction.
• Excluding the Surrey transaction, deposits decreased by approximately $360.13 million, or 13.44%, from December 31, 2022.
• The company repurchased 189,500 common shares during the fourth quarter of 2023 for a total cost of $5.98 million.
• Non-performing loans to total loans increased to 0.76% when compared with the same quarter of 2022.
• 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.
• Book value per share at December 31, 2023, was $27.20, an increase of $1.19 from year-end 2022.

Sentiment

Score: 7

Explanation: The sentiment is positive due to the increase in adjusted earnings and net interest margin, but tempered by the litigation expense and deposit decrease excluding the acquisition. The dividend announcement is also a positive factor.

Positives

• The company's net interest income increased by $1.44 million compared to the same quarter in 2022.
• The yield on earning assets increased by 57 basis points, primarily driven by increased earnings on loans.
• Interest and fees on loans increased by $5.80 million from the same quarter of 2022.
• The company has maintained a regular dividend for 39 consecutive years.
• The company's loan portfolio increased by $172.10 million, or 7.17%, from December 31, 2022.
• The company's book value per share increased by $1.19 from year-end 2022.

Negatives

• Net income for the fourth quarter and full year was negatively impacted by a $3.00 million accrual for estimated litigation expenses.
• Interest income on deposits in banks decreased by $777 thousand due to a decrease in the average balance.
• Non-performing loans to total loans increased to 0.76% when compared with the same quarter of 2022.
• Excluding the Surrey transaction, deposits decreased by approximately $360.13 million, or 13.44%, from December 31, 2022.
• The company experienced net charge-offs for the fourth quarter of 2023 of $883 thousand, or 0.14%, of annualized average loans.

Risks

• The company faces risks related to changes in business or market conditions.
• There are risks associated with the timely development, production, and acceptance of new products and services.
• The company must manage asset/liability levels, credit risk, and interest rate risk.
• Keeping expense growth at modest levels while increasing revenues is a challenge.
• Changes in banking laws and regulations could impact the company.
• The company faces competition from traditional and non-traditional competitors.
• Natural disasters, extreme weather events, military conflict, terrorism, or other geopolitical events could pose risks.

Future Outlook

The company does not undertake to update forward-looking statements to reflect circumstances or events that occur after the date the forward-looking statements are made.

Management Comments

• The company reported its unaudited results of operations and other financial information for the quarter ended December 31, 2023.
• The company also declared a quarterly cash dividend to common shareholders of twenty-nine cents $0.29 per common share.

Industry Context

The results reflect the current banking environment with increased interest rates impacting net interest margins and loan growth. The company's performance is in line with other regional banks navigating similar economic conditions.

Comparison to Industry Standards

• The company's net interest margin of 4.42% is comparable to other regional banks, but the increase of 8 basis points year-over-year is a positive sign.
• The loan growth of 7.17% is solid, but the decrease in deposits excluding the Surrey acquisition is a concern compared to industry averages.
• The return on average assets (ROA) of 1.43% for the fourth quarter and 1.48% for the year is slightly below some of its peers, such as Truist Financial Corporation which has an ROA of 1.55% for the full year 2023.
• The return on average common equity (ROE) of 9.39% for the fourth quarter and 10.02% for the year is also below some of its peers, such as Bank of America which has an ROE of 10.5% for the full year 2023.
• The company's non-performing loan ratio of 0.76% is within the range of other regional banks, but the increase from the previous year is a point of concern.

Legal Proceedings

• The company accrued $3.00 million for estimated litigation expenses, which negatively impacted net income.

Stakeholder Impact

• Shareholders will receive a quarterly cash dividend of $0.29 per share.
• Shareholders saw an increase in book value per share.
• Employees may be impacted by the company's efforts to manage expenses.
• Customers may benefit from the company's increased lending activity.

Next Steps

• The company will pay a quarterly cash dividend on or about February 23, 2024.
• The company will continue to manage its loan portfolio and deposits.
• The company will continue to monitor and manage credit risk and interest rate risk.

Key Dates

Keywords

earnings, dividend, net income, loan portfolio, net interest margin, share repurchase, bank, financial results, credit losses, non-performing loans