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

First Community Bankshares, Inc.

BLUEFIELD, Va., July 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 June 30, 2023. The Company reported net income of $ 9.81 million, or $ 0.55 per diluted common share, for the quarter ended June 30, 2023. When adjusted to exclude the impact of merger-related expenses associated with the acquisition of Surrey Bancorp, net income was $12.95 million for the second quarter. Net income for the six months ended June 30, 2023, was $ 21.60 million or $ 1.26 per diluted common share.

The Company also declared a quarterly cash dividend to common shareholders of twenty-nine cents ($ 0.29) per common share. The quarterly dividend is payable to common shareholders of record on August 11, 2023, and is expected to be paid on or about August 25, 2023. This marks the 38th consecutive year of regular dividends to common shareholders.

Second Quarter 2023 and Current Highlights

Income Statement

• Net income of $9.81 million for the quarter was approximately 12.48%, or $1.40 million, lower compared to net income of $11.21 million in the same quarter of 2022. The decrease is primarily attributable to $2.01 million in one-time merger-related costs and $1.61 million in additional credit loss provision both associated with the acquisition of Surrey Bancorp on April 21, 2023.

• When adjusted for merger-related costs and provisions and other non-recurring items, second quarter net income of $12.95 million, or $0.70 per diluted common share was an increase of $1.81 million, or 16.20%, from the same quarter last year.

• Net interest income increased $5.32 million compared to the same quarter in 2022, as increases in interest rates improved net interest margin.

• Net interest margin of 4.48% is an increase of 70 basis points over the same quarter of 2022.  The yield on earning assets increased 91 basis points primarily driven by increased earnings on loans and securities.

• Interest and fees on loans increased $6.28 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 $2.06 million was an increase of $506 thousand over the same quarter of 2022 and is attributable to an increase in the portfolio and in yield from the same period of the prior year. Interest income on deposits in banks also increased $117 thousand to $885 thousand for the second quarter, primarily due to a significant increase in overnight rates compared to the second quarter of 2022.

• Annualized return on average assets was 1.18% for the second quarter and 1.36% for the first six months of 2023 compared to 1.38% and 1.29% for the same periods, respectively of 2022. Annualized return on average common equity was 8.04% for the second quarter and 9.48% for the first six months of 2023 compared to 10.61% and 9.80% for the same periods, respectively of 2022.

Balance Sheet and Asset Quality

• The Company completed the strategic acquisition of Surrey Bancorp, on April 21, 2023. Total assets of $466.25 million were acquired in the transaction increasing the Company's consolidated assets to $3.39 billion. In addition, the Company issued 2.99 million common shares in the purchase resulting in an increase in capital of $71.37 million. The purchase transaction created $14.38 million in goodwill and $12.70 million in other intangible assets. Other major balance sheet components increased in the transaction with $239.08 million acquired in loans and $403.64 million in deposits.

• The Company’s loan portfolio increased by $220.88 million, or 9.20% from December 31, 2022.  Excluding the Surrey transaction, the loan portfolio decreased approximately $18.20 million, or 0.76%.

• Deposits increased $173.86 million, or 6.49% from year-end 2022.  Excluding the Surrey transaction, deposits decreased approximately $229.77 million, or 8.58% from December 31, 2022.

• The Company repurchased 279,567 common shares during the second quarter of 2023 for a total cost of $7.69 million. Share repurchases had been suspended in the fourth quarter of 2022 in anticipation of the now completed acquisition of Surrey Bancorp and not restarted until the second quarter of 2023.

• Non-performing loans to total loans increased slightly to 0.71% from 0.65% that was reported at March 31, 2023.  The Company experienced net charge-offs for the second quarter of 2023 of $728 thousand, or 0.11% of annualized average loans, compared to net recoveries of $258 thousand, or 0.05% of annualized average loans for the same period in 2022.

• The allowance for credit losses to total loans was 1.38% at June 30, 2023 compared to 1.29% for the first quarter of 2023.

• Accumulated other comprehensive loss of $14.46 million at June 30, 2023, is primarily attributable to a relatively small decline in the market value of investment securities compared to book value after the significant increases in benchmark interest rates of the last six quarters.

• Book value per share at June 30, 2023, was $26.29, an increase of $0.28 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 53 branch banking locations in Virginia, West Virginia, North Carolina, and Tennessee as of June 30, 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 $ 1.42 billion in combined assets as of June 30, 2023. The Company reported consolidated assets of $ 3.39 billion as of June 30, 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																				Six Months Ended
(Amounts in thousands,		June 30,				March 31,				December 31,				September 30,				June 30,				June 30,
except share and per share data)		2023				2023				2022				2022				2022				2023				2022
Interest income
Interest and fees on loans		$	31,927			$	27,628			$	27,873			$	26,405			$	25,651			$	59,555			$	50,292
Interest on securities			2,057				2,099				1,900				1,785				1,551				4,156				2,301
Interest on deposits in banks			885				462				1,215				1,532				768				1,347				1,016
Total interest income			34,869				30,189				30,988				29,722				27,970				65,058				53,609
Interest expense			-
Interest on deposits			1,930				718				366				380				422				2,648				908
Interest on borrowings			77				59				1				-				1				136				1
Total interest expense			2,007				777				367				380				423				2,784				909
Net interest income			32,862				29,412				30,621				29,342				27,547				62,274				52,700
Provision for credit losses			4,105				1,742				3,416				685				510				5,847				2,471
Net interest income after provision			28,757				27,670				27,205				28,657				27,037				56,427				50,229
Noninterest income			8,785				8,583				9,184				9,950				8,854				17,368				18,048
Noninterest expense			24,671				20,813				20,730				21,145				21,255				45,484				41,241
Income before income taxes			12,871				15,440				15,659				17,462				14,636				28,311				27,036
Income tax expense			3,057				3,658				3,076				4,111				3,423				6,715				6,308
Net income		$	9,814			$	11,782			$	12,583			$	13,351			$	11,213			$	21,596			$	20,728
Earnings per common share
Basic		$	0.53			$	0.73			$	0.78			$	0.82			$	0.67			$	1.25			$	1.24
Diluted		$	0.55			$	0.72			$	0.77			$	0.81			$	0.67			$	1.26			$	1.24
Cash dividends per common share
Regular			0.29				0.29				0.29				0.27				0.27				0.58				0.54
Weighted average shares outstanding
Basic			18,407,078				16,228,297				16,229,289				16,378,022				16,662,817				17,323,706				16,739,624
Diluted			18,431,598				16,289,489				16,281,922				16,413,202				16,682,615				17,363,478				16,772,847
Performance ratios
Return on average assets			1.18	%			1.55	%			1.59	%			1.63	%			1.38	%			1.36	%			1.29	%
Return on average common equity			8.04	%			11.15	%			11.99	%			12.60	%			10.61	%			9.48	%			9.80	%
Return on average tangible common equity(1)			11.65	%			16.19	%			17.75	%			18.51	%			15.56	%			13.76	%			14.32	%

____________

(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																				Six Months Ended
		June 30,				March 31,				December 31,				September 30,				June 30,				June 30,
(Amounts in thousands)		2023				2023				2022				2022				2022				2023				2022
Noninterest income
Wealth management		$	965			$	1,017			$	958			$	932			$	993			$	1,982			$	1,965
Service charges on deposits			3,471				3,159				3,354				3,689				3,672				6,630				7,170
Other service charges and fees			3,460				3,082				3,006				2,988				3,297				6,542				6,314
(Loss) gain on sale of securities			(28	)			7				-				-				-				(21	)			-
Gain on divestiture			-				-				-				1,658				-				-				-
Other operating income			917				1,318				1,866				683				892				2,235				2,599
Total noninterest income		$	8,785			$	8,583			$	9,184			$	9,950			$	8,854			$	17,368			$	18,048
Noninterest expense
Salaries and employee benefits		$	12,686			$	11,595			$	11,913			$	12,081			$	11,518			$	24,281			$	23,189
Occupancy expense			1,276				1,168				1,196				1,188				1,165				2,444				2,434
Furniture and equipment expense			1,508				1,401				1,413				1,478				1,496				2,909				3,110
Service fees			2,284				2,019				1,905				1,635				2,563				4,303				4,066
Advertising and public relations			846				643				574				718				577				1,489				1,117
Professional fees			281				327				98				208				544				608				997
Amortization of intangibles			425				234				364				365				360				659				717
FDIC premiums and assessments			423				320				330				321				257				743				475
Merger expense			2,014				379				596				-				-				2,393				-
Divestiture expense			-				-				-				153				-				-				-
Other operating expense			2,928				2,727				2,341				2,998				2,775				5,655				5,136
Total noninterest expense		$	24,671			$	20,813			$	20,730			$	21,145			$	21,255			$	45,484			$	41,241

RECONCILIATION OF GAAP NET INCOME TO NON-GAAP ADJUSTED EARNINGS (Unaudited)
		Three Months Ended																				Six Months Ended
(Amounts in thousands,		June 30,				March 31,				December 31,				September 30,				June 30,				June 30,
except per share data)		2023				2023				2022				2022				2022				2023				2022
Net income		$	9,814			$	11,782			$	12,583			$	13,351			$	11,213			$	21,596			$	20,728
Non-GAAP adjustments:
Loss (gain) on sale of securities			28				(7	)			-				-				-				21				-
Merger expense			2,014				379				596				-				-				2,393				-
Day 2 provision for allowance for credit losses - Surrey			1,614				-				-				-				-				-				-
Divestiture expense			0				-				-				153				-				-				-
Gain on divestiture			0				-				-				(1,658	)			-				-				-
Other items (1)			0				-				(450	)			-				(92	)			1,614				(92	)
Total adjustments			3,656				372				146				(1,505	)			(92	)			4,028				(92	)
Tax effect			522				10				(29	)			(361	)			(22	)			532				(22	)
Adjusted earnings, non-GAAP		$	12,948			$	12,144			$	12,758			$	12,207			$	11,143			$	25,092			$	20,658
Adjusted diluted earnings per common share, non-GAAP		$	0.70			$	0.75			$	0.78			$	0.74			$	0.67			$	1.45			$	1.23
Performance ratios, non-GAAP
Adjusted return on average assets			1.56	%			1.60	%			1.61	%			1.49	%			1.37	%			1.58	%			1.29	%
Adjusted return on average common equity			10.61	%			11.49	%			12.16	%			11.52	%			10.55	%			11.02	%			9.76	%
Adjusted return on average tangible common equity (2)			15.37	%			16.69	%			17.93	%			16.92	%			15.46	%			15.98	%			14.27	%

__________

(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 June 30,
		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)		$	2,570,477			$	31,997				4.99	%		$	2,273,844			$	25,714				4.54	%
Securities available for sale			318,263				2,099				2.65	%			280,823				1,597				2.28	%
Interest-bearing deposits			63,322				885				5.61	%			377,931				769				0.82	%
Total earning assets			2,952,062				34,981				4.75	%			2,932,598				28,080				3.84	%
Other assets			382,162												331,774
Total assets		$	3,334,224											$	3,264,372
Liabilities and stockholders' equity
Interest-bearing deposits
Demand deposits		$	712,943			$	34				0.02	%		$	698,978			$	29				0.02	%
Savings deposits			861,315				1,306				0.61	%			895,370				67				0.03	%
Time deposits			282,229				590				0.84	%			331,555				326				0.39	%
Total interest-bearing deposits			1,856,487				1,930				0.42	%			1,925,903				422				0.09	%
Borrowings
Federal funds purchased			5,927				76				5.14	%			-				-				0.00	%
Retail repurchase agreements			1,693				1				0.06	%			2,105				1			0.08		%
Total borrowings			7,620				77				4.05	%			2,105				1			0.08		%
Total interest-bearing liabilities			1,864,107				2,007				0.43	%			1,928,008				423				0.09	%
Noninterest-bearing demand deposits			939,902												874,507
Other liabilities			40,705												38,106
Total liabilities			2,844,714												2,840,621
Stockholders' equity			489,510												423,751
Total liabilities and stockholders' equity		$	3,334,224											$	3,264,372
Net interest income, FTE(1)						$	32,974											$	27,657
Net interest rate spread											4.32	%											3.75	%
Net interest margin, FTE(1)											4.48	%											3.78	%

__________

(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 $884 thousand and $870 thousand for the three months ended June 30, 2023 and 2022, respectively.

AVERAGE BALANCE SHEETS AND NET INTEREST INCOME ANALYSIS (Unaudited)
		Six Months Ended June 30,
		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)		$	2,482,606			$	59,695				4.85	%		$	2,237,128			$	50,412				4.54	%
Securities available for sale			317,503				4,239				2.69	%			211,285				2,397				2.29	%
Interest-bearing deposits			52,219				1,350				5.21	%			460,864				1,018				0.45	%
Total earning assets			2,852,328				65,284				4.62	%			2,909,277				53,827				3.73	%
Other assets			352,643												330,003
Total assets		$	3,204,971											$	3,239,280
Liabilities and stockholders' equity
Interest-bearing deposits
Demand deposits		$	689,823				60				0.02	%		$	689,149			$	57				0.02	%
Savings deposits			844,459				1,790				0.43	%			888,371				133				0.03	%
Time deposits			276,752				798				0.58	%			339,186				718				0.43	%
Total interest-bearing deposits			1,811,034				2,648				0.29	%			1,916,706				908				0.10	%
Borrowings
Federal funds purchased			5,326				135				5.11	%			-				-				0.00	%
Retail repurchase agreements			1,889				1				0.06	%			2,050				1				0.08	%
Total borrowings			7,215				136				3.80	%			2,050				1				0.08	%
Total interest-bearing liabilities			1,818,249				2,784				0.31	%			1,918,756				909				0.10	%
Noninterest-bearing demand deposits			889,253												855,321
Other liabilities			38,204												38,529
Total liabilities			2,745,706												2,812,606
Stockholders' equity			459,265												426,674
Total liabilities and stockholders' equity		$	3,204,971											$	3,239,280
Net interest income, FTE(1)						$	62,500											$	52,918
Net interest rate spread											4.31	%											3.64	%
Net interest margin, FTE(1)											4.42	%											3.67	%

___________

(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 $1.08 million and $1.74 million for the six months ended June 30, 2023 and 2022, respectively.

CONDENSED CONSOLIDATED QUARTERLY BALANCE SHEETS (Unaudited)
		June 30,				March 31,				December 31,				September 30,				June 30,
(Amounts in thousands, except per share data)		2023				2023				2022				2022				2022
Assets
Cash and cash equivalents		$	152,660			$	92,385			$	170,846			$	229,095			$	398,242
Debt securities available for sale			314,373				308,269				300,349				299,620				287,767
Loans held for investment, net of unearned income			2,621,073				2,388,897				2,400,197				2,362,733				2,299,798
Allowance for credit losses			(36,177	)			(30,789	)			(30,556	)			(29,388	)			(29,749	)
Loans held for investment, net			2,584,896				2,358,108				2,369,641				2,333,345				2,270,049
Premises and equipment, net			53,546				47,407				47,340				47,891				49,752
Other real estate owned			339				481				703				559				579
Interest receivable			10,185				8,646				9,279				8,345				8,433
Goodwill			143,946				129,565				129,565				129,565				129,565
Other intangible assets			16,217				3,942				4,176				4,541				4,905
Other assets			115,275				102,869				103,673				107,838				109,085
Total assets		$	3,391,437			$	3,051,672			$	3,135,572			$	3,160,799			$	3,258,377
Liabilities
Deposits
Noninterest-bearing		$	974,995			$	823,297			$	872,168			$	878,423			$	877,962
Interest-bearing			1,877,683				1,761,327				1,806,647				1,831,798				1,920,577
Total deposits			2,852,678				2,584,624				2,678,815				2,710,221				2,798,539
Securities sold under agreements to repurchase			1,348				1,866				1,874				1,958				2,635
Interest, taxes, and other liabilities			38,691				33,451				32,898				36,362				39,157
Total liabilities			2,892,717				2,619,941				2,713,587				2,748,541				2,840,331
Stockholders' equity
Common stock			18,969				16,243				16,225				16,273				16,502
Additional paid-in capital			189,917				128,666				128,508				129,914				136,705
Retained earnings			304,295				300,047				292,971				285,096				276,499
Accumulated other comprehensive loss			(14,461	)			(13,225	)			(15,719	)			(19,025	)			(11,660	)
Total stockholders' equity			498,720				431,731				421,985				412,258				418,046
Total liabilities and stockholders' equity		$	3,391,437			$	3,051,672			$	3,135,572			$	3,160,799			$	3,258,377
Shares outstanding at period-end			18,969,281				16,243,551				16,225,399				16,273,177				16,502,144
Book value per common share		$	26.29			$	26.58			$	26.01			$	25.33			$	25.33
Tangible book value per common share(1)			17.85				18.36				17.76				17.09				17.18

___________

(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)
		June 30,				March 31,				December 31,				September 30,				June 30,
(Amounts in thousands)		2023				2023				2022				2022				2022
Allowance for Credit Losses
Balance at beginning of year:
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
Total allowance for credit losses beginning of year			31,753				31,752				30,804				30,705				29,756
Adjustments to beginning balance:
Allowance for credit losses - loans - Surrey acquisition for purchased credit deteriorated loans			2,011				-				-				-				-
Allowance for credit losses - loan commitments (1)			-				-				-				-				-
Net Adjustments			2,011				-				-				-				-
Provision for credit losses:
Provision for credit losses - loans			4,105				1,974				3,416				685				510
(Recovery of) provision for credit losses - loan commitments (1)			-				(232	)			(220	)			460				181
Total provision for credit losses - loans and loan commitments			4,105				1,742				3,196				1,145				691
Charge-offs			(1,993	)			(2,570	)			(2,873	)			(2,158	)			(1,469	)
Recoveries			1,265				829				625				1,112				1,727
Net (charge-offs) recoveries			(728	)			(1,741	)			(2,248	)			(1,046	)			258
Balance at end of period:
Allowance for credit losses - loans			36,177				30,789				30,556				29,388				29,749
Allowance for credit losses - loan commitments (1)			964				964				1,196				1,416				956
Ending balance		$	37,141			$	31,753			$	31,752			$	30,804			$	30,705
Nonperforming Assets
Nonaccrual loans		$	18,628			$	15,557			$	15,208			$	15,303			$	17,826
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
Total nonperforming loans			18,628				15,580				16,696				16,765				18,472
OREO			339				481				703				559				579
Total nonperforming assets		$	18,967			$	16,061			$	17,399			$	17,324			$	19,051
Additional Information
Total modified loans (2)		$	642			$	429			$	-			$	-			$	-
Total accruing TDRs (4)		$	-			$	-			$	7,112			$	7,028			$	8,313
Asset Quality Ratios
Nonperforming loans to total loans			0.71	%			0.65	%			0.70	%			0.71	%			0.80	%
Nonperforming assets to total assets			0.56	%			0.53	%			0.55	%			0.55	%			0.58	%
Allowance for credit losses to nonperforming loans			194.21	%			197.62	%			183.01	%			175.29	%			161.05	%
Allowance for credit losses to total loans			1.38	%			1.29	%			1.27	%			1.24	%			1.29	%
Annualized net charge-offs (recoveries) to average loans			0.11	%			0.29	%			0.37	%			0.18	%			-0.05	%

_________

(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