First Community Bankshares, Inc. Announces First Quarter 2023 Results and Quarterly Cash Dividend

First Community Bankshares, Inc.

BLUEFIELD, Va., April 25, 2023 (GLOBE NEWSWIRE) -- First Community Bankshares, Inc. (NASDAQ: FCBC) (www.firstcommunitybank.com) (the “Company”) today reported its unaudited results of operations and other financial information for the quarter ended March 31, 2023. The Company reported net income of $11.78 million, or $0.72 per diluted common share, for the quarter ended March 31, 2023.

The Company also declared a quarterly cash dividend to common shareholders of twenty-nine cents ($0.29) per common share, an increase of two cents $0.02, or 7.41%, over the quarterly dividend declared in the same quarter of 2022. The quarterly dividend is payable to common shareholders of record on May 12, 2023, and is expected to be paid on or about May 26, 2023. This marks the 38^th consecutive year of regular dividends to common shareholders.

On April 21, 2023, the Company completed its acquisition of Surrey Bancorp and its subsidiary Surrey Bank and Trust of Mount Airy, North Carolina. At closing, Surrey had approximately $468 million in assets, $253 million in loans, and $405 million in deposits.

First Quarter 2023 and Current Highlights

Income Statement

• Net income of $11.78 million for the quarter was an approximate 24% increase, or $2.27 million, compared to $9.52 million recorded in the same quarter of 2022. The increase is primarily attributable to an increase in net interest income of $4.26 million. The increase in net interest income was offset by an increase in noninterest expense of $827 thousand and a decrease in noninterest income of $611 thousand.

• Annualized return on average assets was 1.55% for the first quarter of 2023 and 1.20% for the same quarter of 2022. Annualized return on average common equity was 11.15% for the first quarter of 2023 and 8.98% for the same quarter of 2022.

• Net interest margin for the first quarter was 4.35%, which was an 80 basis point increase from 3.55% reported for the same quarter of 2022. The yield on earning assets increased 85 basis points, primarily driven by increased earnings on loans and securities.

• The cost of interest-bearing deposits increased 6 basis points to 0.16%, primarily driven by an increase in the interest expense associated with savings and money market deposit accounts.

• Interest and fees on loans increased $2.99 million from the same quarter of 2022 and is attributable to both an increase in yield and an increase in average balance compared to the yield and average balance of the prior year. Interest income from securities of $2.10 million was an increase of $1.35 million over the first quarter of 2022 primarily attributable to an increase in the portfolio. Interest income on deposits in banks also increased $214 thousand to $462 thousand for the first quarter primarily due to a significant increase in overnight rates as compared to the first quarter of 2022.

• The net provision for credit losses of $1.74 million for the quarter was a decrease of $219 thousand compared to $1.96 million recorded in the same quarter of 2022. This quarter’s provision was a function of a $1.97 million provision for credit losses and a reduction in the allowance for unfunded commitments of $232 thousand.

Balance Sheet and Asset Quality

• The Company’s loan portfolio decreased by $11.3 million, or 0.47%, from year-end 2022, with the largest decreases in the consumer non-real estate loan type.

• The Company did not repurchase any common shares during the first quarter of 2023. Share repurchases had been stopped in anticipation of the now completed acquisition of Surrey Bancorp.

• Non-performing loans to total loans remained low at 0.65% of total loans and continues the declining trend experienced over the past four quarters. The Company experienced net charge-offs for the first quarter of 2023 of $1.74 million, or 0.29% of annualized average loans, compared to net charge-offs of $838 thousand, or 0.15% of annualized average loans, for the same period in 2022.

• The allowance for credit losses to total loans was 1.29% at March 31, 2023.

• Book value per share at March 31, 2023, was $26.58, an increase of $0.57 from year-end 2022.

Non-GAAP Financial Measures

In addition to financial statements prepared in accordance with U.S. generally accepted accounting principles (“GAAP”), the Company uses certain non-GAAP financial measures that provide useful information for financial and operational decision making, evaluating trends, and comparing financial results to other financial institutions. The non-GAAP financial measures presented in this news release 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 certain financial measures presented on a fully taxable equivalent (“FTE”) basis. FTE basis is calculated using the federal statutory income tax rate of 21%. While the Company believes certain non-GAAP financial measures enhance the understanding of its business and performance, they are supplemental and not a substitute for, or more important than, financial measures prepared in accordance with GAAP and may not be comparable to those reported by other financial institutions.

About First Community Bankshares, Inc.

First Community Bankshares, Inc., a financial holding company headquartered in Bluefield, Virginia, provides banking products and services through its wholly owned subsidiary First Community Bank. First Community Bank operated 48 branch banking locations in Virginia, West Virginia, North Carolina, and Tennessee as of March 31, 2023. First Community Bank offers wealth management and investment advice and services through its Trust Division and through its wholly owned subsidiary, First Community Wealth Management, which collectively managed and administered $1.34 billion in combined assets as of March 31, 2023. The Company reported consolidated assets of $3.05 billion as of March 31, 2023. The Company’s common stock is listed on the NASDAQ Global Select Market under the trading symbol, “FCBC”. Additional investor information is available on the Company’s website at www.firstcommunitybank.com.

This news release may include forward-looking statements. These forward-looking statements are based on current expectations that involve risks, uncertainties, and assumptions. Should one or more of these risks or uncertainties materialize or should underlying assumptions prove incorrect, actual results may differ materially. These risks include: changes in business or other market conditions; the timely development, production and acceptance of new products and services; the challenge of managing asset/liability levels; the management of credit risk and interest rate risk; the difficulty of keeping expense growth at modest levels while increasing revenues; and other risks detailed from time to time in the Company’s Securities and Exchange Commission reports including, but not limited to, the Annual Report on Form 10-K for the most recent fiscal year end. Pursuant to the Private Securities Litigation Reform Act of 1995, 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.

CONDENSED CONSOLIDATED STATEMENTS OF INCOME (Unaudited)
				Three Months Ended
				March 31,					December 31,					September 30,					June 30,					March 31,
(Amounts in thousands, except share and per share data)					2023					2022					2022					2022					2022
Interest income
	Interest and fees on loans			$	27,628				$	27,873				$	26,405				$	25,651				$	24,641
	Interest on securities				2,099					1,900					1,785					1,551					750
	Interest on deposits in banks				462					1,215					1,532					768					248
Total interest income					30,189					30,988					29,722					27,970					25,639
Interest expense
	Interest on deposits				718					366					380					422					486
	Interest on borrowings				59					1					-					1					-
Total interest expense					777					367					380					423					486
Net interest income					29,412					30,621					29,342					27,547					25,153
Provision for credit losses					1,742					3,416					685					510					1,961
Net interest income after provision					27,670					27,205					28,657					27,037					23,192
Noninterest income					8,583					9,184					9,950					8,854					9,194
Noninterest expense					20,813					20,730					21,145					21,255					19,986
Income before income taxes					15,440					15,659					17,462					14,636					12,400
Income tax expense					3,658					3,076					4,111					3,423					2,885
Net income				$	11,782				$	12,583				$	13,351				$	11,213				$	9,515
Earnings per common share
	Basic			$	0.73				$	0.78				$	0.82				$	0.67				$	0.57
	Diluted				0.72					0.77					0.81					0.67					0.56
Cash dividends per common share
	Regular				0.29					0.29					0.27					0.27					0.27
Weighted average shares outstanding
	Basic				16,228,297					16,229,289					16,378,022					16,662,817					16,817,284
	Diluted				16,289,489					16,281,922					16,413,202					16,682,615					16,864,515
Performance ratios
	Return on average assets				1.55	%				1.59	%				1.63	%				1.38	%				1.20	%
	Return on average common equity				11.15	%				11.99	%				12.60	%				10.61	%				8.98	%
	Return on average tangible common equity(1)				16.19	%				17.75	%				18.51	%				15.56	%				13.10	%
(1)  A non-GAAP financial measure defined as net income divided by average stockholders' equity less average goodwill and other intangible assets

CONDENSED CONSOLIDATED QUARTERLY NONINTEREST INCOME AND EXPENSE (Unaudited)
		Three Months Ended
		March 31,				December 31,				September 30,				June 30,				March 31,
(Amounts in thousands)			2023				2022				2022				2022				2022
Noninterest income
	Wealth management	$	1,017			$	958			$	932			$	993			$	972
	Service charges on deposits		3,159				3,354				3,689				3,672				3,498
	Other service charges and fees		3,082				3,006				2,988				3,297				3,017
	Gain on sale of securities		7				-				-				-				-
	Gain on divestiture		-				-				1,658				-				-
	Other operating income		1,318				1,866				683				892				1,707
Total noninterest income		$	8,583			$	9,184			$	9,950			$	8,854			$	9,194
Noninterest expense
	Salaries and employee benefits	$	11,595			$	11,913			$	12,081			$	11,518			$	11,671
	Occupancy expense		1,168				1,196				1,188				1,165				1,269
	Furniture and equipment expense		1,401				1,413				1,478				1,496				1,614
	Service fees		2,019				1,905				1,635				2,563				1,503
	Advertising and public relations		643				574				718				577				540
	Professional fees		327				98				208				544				453
	Amortization of intangibles		234				364				365				360				357
	FDIC premiums and assessments		320				330				321				257				218
	Merger expense		379				596				-				-				-
	Divestiture expense		-				-				153				-				-
	Other operating expense		2,727				2,341				2,998				2,775				2,361
Total noninterest expense		$	20,813			$	20,730			$	21,145			$	21,255			$	19,986

RECONCILIATION OF GAAP NET INCOME TO NON-GAAP ADJUSTED EARNINGS (Unaudited)
				Three Months Ended
				March 31,				December 31,				September 30,				June 30,				March 31,
					2023				2022				2022				2022				2022
(Amounts in thousands, except per share data)
Net income				$	11,782			$	12,583			$	13,351			$	11,213			$	9,515
Non-GAAP adjustments:
	(Gain) loss on sale of securities				(7	)			-				-				-				-
	Merger expense				379				596				-				-				-
	Divestiture expense				-				-				153				-				-
	Gain on divestiture				-				-				(1,658	)			-				-
	Other items(1)				-				(450	)			-				(92	)			-
Total adjustments					372				146				(1,505	)			(92	)			-
Tax effect					10		-		(29	)	-		(361	)	-		(22	)	-		-
Adjusted earnings, non-GAAP				$	12,144			$	12,758			$	12,207			$	11,143			$	9,515
Adjusted diluted earnings per common share,
	non-GAAP			$	0.75			$	0.78			$	0.74			$	0.67			$	0.56
Performance ratios, non-GAAP
	Adjusted return on average assets				1.60	%			1.61	%			1.49	%			1.37	%			1.20	%
	Adjusted return on average common equity				11.49	%			12.16	%			11.52	%			10.55	%			8.98	%
	Adjusted return on average tangible
			common equity(2)		16.69	%			17.93	%			16.92	%			15.46	%			13.10	%
(1) Includes other non-recurring income and expense items
(2) A non-GAAP financial measure defined as adjusted earnings divided by average stockholders' equity less average goodwill and other intangible assets

AVERAGE BALANCE SHEETS AND NET INTEREST INCOME ANALYSIS (Unaudited)
			Three Months Ended March 31,
				2023								2022
			Average					Average Yield/			Average					Average Yield/
(Amounts in thousands)			Balance		Interest(1)			Rate(1)			Balance		Interest(1)			Rate(1)
Assets
Earning assets
	Loans(2)(3)		$	2,393,759	$	27,698		4.69	%		$	2,200,003	$	24,698		4.55	%
	Securities available for sale			316,734		2,140		2.74	%			140,975		800		2.30	%
	Interest-bearing deposits			40,993		465		4.60	%			544,718		249		0.19	%
Total earning assets				2,751,486		30,303		4.47	%			2,885,696		25,747		3.62	%
Other assets				322,789								328,212
Total assets			$	3,074,275							$	3,213,908
Liabilities and stockholders' equity
Interest-bearing deposits
	Demand deposits		$	666,447	$	26		0.02	%		$	679,211	$	28		0.02	%
	Savings deposits			827,414		484		0.24	%			881,295		66		0.03	%
	Time deposits			271,214		208		0.31	%			346,902		392		0.46	%
Total interest-bearing deposits				1,765,075		718		0.16	%			1,907,408		486		0.10	%
Borrowings
	Federal funds purchased			4,719		58		5.07	%			-		-		-
	Retail repurchase agreements			2,086		1		0.06	%			1,993		-		N/M
Total borrowings				6,805		59		0.07	%			1,993		-		N/M
Total interest-bearing liabilities				1,771,880		777		0.18	%			1,909,401		486		0.10	%
Noninterest-bearing demand deposits				838,041								835,921
Other liabilities				35,669								38,956
Total liabilities				2,645,590								2,784,278
Stockholders' equity				428,685								429,630
Total liabilities and stockholders' equity			$	3,074,275							$	3,213,908
Net interest income, FTE(1)					$	29,526							$	25,261
Net interest rate spread								4.29	%							3.52	%
Net interest margin, FTE(1)								4.35	%							3.55	%
(1) Interest income and average yield/rate are presented on a FTE, non-GAAP, basis using the federal statutory income tax rate of 21%.
(2) Nonaccrual loans are included in the average balance; however, no related interest income is recorded during the period of nonaccrual.
(3) Interest on loans includes non-cash and accelerated purchase accounting accretion of $193 thousand and $866 thousand for the three months ended March 31, 2023 and 2022, respectively.

CONDENSED CONSOLIDATED QUARTERLY BALANCE SHEETS (Unaudited)
			March 31,				December 31,				September 30,				June 30,				March 31,
(Amounts in thousands, except per share data)				2023				2022				2022				2022				2022
Assets
Cash and cash equivalents			$	92,385			$	170,846			$	229,095			$	398,242			$	457,306
Debt securities available for sale				308,269				300,349				299,620				287,767				268,703
Loans held for investment, net of unearned income				2,388,897				2,400,197				2,362,733				2,299,798				2,244,296
	Allowance for credit losses			(30,789	)			(30,556	)			(29,388	)			(29,749	)			(28,981	)
Loans held for investment, net				2,358,108				2,369,641				2,333,345				2,270,049				2,215,315
Premises and equipment, net				47,407				47,340				47,891				49,752				50,912
Other real estate owned				481				703				559				579				848
Interest receivable				8,646				9,279				8,345				8,433				8,100
Goodwill				129,565				129,565				129,565				129,565				129,565
Other intangible assets				3,942				4,176				4,541				4,905				5,266
Other assets				102,869				103,673				107,838				109,085				108,112
Total assets			$	3,051,672			$	3,135,572			$	3,160,799			$	3,258,377			$	3,244,127
Liabilities
Deposits
	Noninterest-bearing		$	823,297			$	872,168			$	878,423			$	877,962			$	860,652
	Interest-bearing			1,761,327				1,806,647				1,831,798				1,920,577				1,922,292
Total deposits				2,584,624				2,678,815				2,710,221				2,798,539				2,782,944
Securities sold under agreements to repurchase				1,866				1,874				1,958				2,635				2,488
Interest, taxes, and other liabilities				33,451				32,898				36,362				39,157				34,539
Total liabilities				2,619,941				2,713,587				2,748,541				2,840,331				2,819,971
Stockholders' equity
Common stock				16,243				16,225				16,273				16,502				16,782
Additional paid-in capital				128,666				128,508				129,914				136,705				144,088
Retained earnings				300,047				292,971				285,096				276,499				269,798
Accumulated other comprehensive loss				(13,225	)			(15,719	)			(19,025	)			(11,660	)			(6,512	)
Total stockholders' equity				431,731				421,985				412,258				418,046				424,156
Total liabilities and stockholders' equity			$	3,051,672			$	3,135,572			$	3,160,799			$	3,258,377			$	3,244,127
Shares outstanding at period-end				16,243,551				16,225,399				16,273,177				16,502,144				16,781,975
Book value per common share			$	26.58			$	26.01			$	25.33			$	25.33			$	25.27
Tangible book value per common share(1)				18.36				17.76				17.09				17.18				17.24
(1) A non-GAAP financial measure defined as stockholders' equity less goodwill and other intangible assets, divided by shares outstanding

SELECTED CREDIT QUALITY INFORMATION (Unaudited)
		March 31,				December 31,				September 30,				June 30,				March 31,
(Amounts in thousands)			2023				2022				2022				2022				2022
Allowance for Credit Losses
Balance at beginning of year:
Allowance for credit losses - loans		$	30,556			$	29,388			$	29,749			$	28,981			$	27,858
Allowance for credit losses - loan commitments (1)			1,196				1,416				956				775				678
Total allowance for credit losses beginning of year			31,752				30,804				30,705				29,756				28,536
Provision for credit losses:
Provision for credit losses - loans			1,974				3,416				685				510				1,961
(Recovery of) provision for credit losses - loan commitments (1)			(232	)			(220	)			460				181				97
Total provision for credit losses - loans and loan commitments			1,742				3,196				1,145				691				2,058
Charge-offs			(2,570	)			(2,873	)			(2,158	)			(1,469	)			(1,302	)
Recoveries			829				625				1,112				1,727				464
Net (charge-offs) recoveries			(1,741	)			(2,248	)			(1,046	)			258				(838	)
Balance at end of period:
Allowance for credit losses - loans			30,789				30,556				29,388				29,749				28,981
Allowance for credit losses - loan commitments (1)			964				1,196				1,416				956				775
Ending balance		$	31,753			$	30,556			$	29,388			$	29,749			$	28,981
Nonperforming Assets
Nonaccrual loans		$	15,557			$	15,208			$	15,303			$	17,826			$	20,487
Accruing loans past due 90 days or more			23				142				131				131				-
Modified loans past due 90 days or more (2)			-				-				-				-				-
Troubled debt restructurings ("TDRs") (3)			-				1,346				1,331				515				1,141
Total nonperforming loans			15,580				16,696				16,765				18,472				21,628
OREO			481				703				559				579				848
Total nonperforming assets		$	16,061			$	17,399			$	17,324			$	19,051			$	22,476
Additional Information
Total modified loans (2)		$	429			$	-			$	-			$	-			$	-
Total accruing TDRs (4)		$	-			$	7,112			$	7,028			$	8,313			$	8,782
Asset Quality Ratios
Nonperforming loans to total loans			0.65	%			0.70	%			0.71	%			0.80	%			0.96	%
Nonperforming assets to total assets			0.53	%			0.55	%			0.55	%			0.58	%			0.69	%
Allowance for credit losses to nonperforming loans			197.62	%			183.01	%			175.29	%			161.05	%			134.00	%
Allowance for credit losses to total loans			1.29	%			1.27	%			1.24	%			1.29	%			1.29	%
Annualized net charge-offs (recoveries) to average loans			0.29	%			0.37	%			0.18	%			-0.05	%			0.15	%
(1) Prior quarter information for loan commitments has been reclassed for presentation purposes.
(2) ASU 2022-02, Financial Instruments-Credit Losses (Topic 326), Troubled Debt Restructurings and Vintage Disclosures. ASU adopted effective January 1, 2023.
(3) Accruing TDRs restructured within the past six months or nonperforming as reported prior to the adoption of ASU 2022-02 Financial Instruments-Credit Losses (Topic 326), Troubled Debt Restructurings and Vintage Disclosures.
(4) Accruing total TDRs as reported prior to the adoption of ASU 2022-02 Financial Instruments-Credit Losses (Topic 326), Troubled Debt Restructurings and Vintage Disclosures.

FOR MORE INFORMATION, CONTACT:
David D. Brown
(276) 326-9000