First Community Bankshares, Inc. Announces Third Quarter 2022 Results and Quarterly Cash Dividend

BLUEFIELD, Va., Oct. 25, 2022 (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 September 30, 2022. The Company reported net income of $13.35 million, or $0.81 per diluted common share, for the quarter ended September 30, 2022. Net income for the nine months ended September 30, 2022, was $34.08 million or $2.05 per diluted common share.

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 2021. The quarterly dividend is payable to common shareholders of record on November 4, 2022, and is expected to be paid on or about November 18, 2022. This marks the 37^th consecutive year of regular dividends to common shareholders.

Third Quarter 2022 and Current Highlights

      Income Statement

• Net income of $13.35 million for the quarter was an increase of $743 thousand compared to $12.61 million recorded in the same quarter of 2021. The increase is primarily attributable to an increase in net interest income of $4.2 million and the branch sale gains of $1.66 million offset by an increase in the provision for credit losses of $2.08 million and an increase in salaries and employee benefits of $1.44 million compared to 2021.
• On September 16, 2022, the Company completed the sale of First Community Bank's Emporia, Virginia branch to Benchmark Community Bank. A gain of $1.66 million was realized from the sale.
• When adjusted for non-core and non-recurring items, adjusted earnings have increased from $9.52 million in the first quarter and $11.14 million in the second quarter of 2022.
• Net interest margin for the third quarter was 4.01%, which was a 45 basis point increase from 3.56% reported for third quarter of 2021. The yield on earning assets increased 42 basis points, primarily driven by increased earnings on securities and overnight funds.
• The cost of interest-bearing deposits declined 6 basis points to 0.08%, primarily driven by a decrease in the cost of time deposits and focus on non-maturing deposits. Additionally, non-maturing deposit balances remained strong even after the Emporia branch sale.
• Net interest income increased $4.2 million compared to the same quarter of 2021. Interest income from securities of $1.79 million was an increase of $1.34 million over the third quarter of 2021. Interest on fed funds also increased $1.31 million to $1.53 million for the third quarter as a result of the Federal Open Market Committee's incremental 300 basis point rate increase in overnight rates throughout 2022 as compared to the overnight rates of 2021. Interest and fees on loans increased $1.29 million from the same quarter of 2021 and is primarily attributable to loan demand and originations.
• The provision for credit losses of $685 thousand for the quarter was an increase of $2.08 million compared to the same quarter of 2021. The increase was attributable to a return to normalized provisions as compared with prior year recoveries of pandemic-related provisioning.
• Despite the significant increase in credit loss provision over 2021, annualized return on average assets was 1.63% for the third quarter and 1.41% for the first nine months of 2022. Annualized return on average common equity was 12.60% for the third quarter and 10.73% for the first nine months of 2022.
• Salaries and employee benefits for the third quarter increased $1.44 million, or 13.48%, over the same quarter in 2021. Salaries and employee benefits for the first nine months increased $3.52 million, or 11.10%, over the first nine months of 2021. During the first quarter of 2022, the Company implemented annualized wage increases of approximately $2.5 million as part of its ongoing strategic initiative to enhance Human Capital Management, which included an increased minimum wage.
  
  

      Balance Sheet and Asset Quality

• The Company's loan portfolio increased by $197.16 million, an annualized growth rate of 12.17%, during the first nine months of 2022. Loan demand and originations were strong in all categories, including construction, commercial real estate, residential mortgage, and consumer loans.
• Total deposits sold to Benchmark as part of the Emporia branch sale totaled $61.05 million.
• During the third quarter, the Company repurchased 235,400 of its common shares for $7.38 million. The Company repurchased 650,907 common shares for $19.42 million during the first nine months of 2022.  
• Non-performing loans to total loans remained very low at 0.71% of total loans and continues the declining trend experienced over the past four quarters.   The Company experienced net charge-offs for the third quarter of 2022 of $1.05 million, or 0.18% of annualized average loans, compared to net charge-offs of $586 thousand, or 0.11% of annualized average loans, for the same period in 2021. Net charge-offs for the nine-month period ended September 30, 2022, were $1.63 million, or 0.10% of annualized average loans, compared to net charge-offs of $1.79 million, or 0.11% of annualized average loans, for the same period in 2021.
• The allowance for credit losses to total loans decreased slightly to 1.24% of total loans.
• Book value per share at September 30, 2022, was $25.33, a slight decrease of $0.01 from year-end 2021.

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 September 30, 2022. 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 $1.19 billion in combined assets as of September 30, 2022. The Company reported consolidated assets of $3.16 billion as of September 30, 2022. 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																				Nine Months Ended
(Amounts in thousands, except share and per share data)				September 30,				June 30,				March 31,				December 31,				September 30,				September 30,
				2022				2022				2022				2021				2021				2022				2021
Interest income
	Interest and fees on loans			$	26,405			$	25,651			$	24,641			$	25,236			$	25,119			$	76,697			$	77,596
	Interest on securities				1,785				1,551				750				362				445				4,086				1,375
	Interest on deposits in banks				1,532				768				248				234				225				2,548				507
Total interest income					29,722				27,970				25,639				25,832				25,789				83,331				79,478
Interest expense
	Interest on deposits				380				422				486				600				642				1,288				2,235
	Interest on borrowings				-				1				-				-				1				1				1
Total interest expense					380				423				486				600				643				1,289				2,236
Net interest income					29,342				27,547				25,153				25,232				25,146				82,042				77,242
Provision for (recovery of) credit losses					685				510				1,961				(846	)			(1,394	)			3,156				(7,625	)
Net interest income after provision					28,657				27,037				23,192				26,078				26,540				78,886				84,867
Noninterest income					9,950				8,854				9,194				9,215				8,720				27,998				25,086
Noninterest expense					21,145				21,255				19,986				21,701				18,836				62,386				57,017
Income before income taxes					17,462				14,636				12,400				13,592				16,424				44,498				52,936
Income tax expense					4,111				3,423				2,885				3,037				3,816				10,419				12,323
Net income				$	13,351			$	11,213			$	9,515			$	10,555			$	12,608			$	34,079			$	40,613
Earnings per common share
	Basic			$	0.82			$	0.67			$	0.57			$	0.62			$	0.73			$	2.05			$	2.32
	Diluted				0.81				0.67				0.56				0.62				0.73				2.05				2.32
Cash dividends per common share
	Regular				0.29				0.27				0.27				0.27				0.27				0.83				0.77
Weighted average shares outstanding
	Basic				16,378,022				16,662,817				16,817,284				16,974,005				17,221,244				16,617,766				17,457,477
	Diluted				16,413,202				16,682,615				16,864,515				17,038,980				17,279,576				16,654,697				17,511,900
Performance ratios
	Return on average assets				1.63	%			1.38	%			1.20	%			1.32	%			1.59	%			1.41	%			1.74	%
	Return on average common equity				12.60	%			10.61	%			8.98	%			9.77	%			11.65	%			10.73	%			12.70	%
	Return on average tangible common equity(1)				18.51	%			15.56	%			13.10	%			14.28	%			17.04	%			15.71	%			18.63	%
(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															Nine Months Ended
		September 30,			June 30,			March 31,			December 31,			September 30,			September 30,
(Amounts in thousands)		2022			2022			2022			2021			2021			2022			2021
Noninterest income
	Wealth management	$	932		$	993		$	972		$	940		$	974		$	2,897		$	2,913
	Service charges on deposits		3,689			3,672			3,498			3,718			3,599			10,859			9,728
	Other service charges and fees		2,988			3,297			3,017			3,091			3,143			9,302			9,331
	Net FDIC indemnification asset amortization		-			-			-			-			-			-			(1,226	)
	Gain on divestiture		1,658			-			-			-			-			1,658			-
	Other operating income		683			892			1,707			1,466			1,004			3,282			4,340
Total noninterest income		$	9,950		$	8,854		$	9,194		$	9,215		$	8,720		$	27,998		$	25,086
Noninterest expense
	Salaries and employee benefits	$	12,081		$	11,518		$	11,671		$	12,493		$	10,646		$	35,270		$	31,746
	Occupancy expense		1,188			1,165			1,269			1,368			1,155			3,622			3,545
	Furniture and equipment expense		1,478			1,496			1,614			1,418			1,385			4,588			4,209
	Service fees		1,635			2,563			1,503			1,946			1,530			5,701			4,378
	Advertising and public relations		718			577			540			589			536			1,835			1,487
	Professional fees		208			544			453			455			313			1,205			1,069
	Amortization of intangibles		365			360			357			364			365			1,082			1,082
	FDIC premiums and assessments		321			257			218			213			216			796			619
	Divestiture expense		153			-			-			-			-			153			-
	Other operating expense		2,998			2,775			2,361			2,855			2,690			8,134			8,882
Total noninterest expense		$	21,145		$	21,255		$	19,986		$	21,701		$	18,836		$	62,386		$	57,017

RECONCILIATION OF GAAP NET INCOME TO NON-GAAP ADJUSTED EARNINGS (Unaudited)
				Three Months Ended																				Nine Months Ended
				September 30,				June 30,				March 31,				December 31,				September 30,				September 30,
				2022				2022				2022				2021				2021				2022				2021
(Amounts in thousands, except per share data)
Net income				$	13,351			$	11,213			$	9,515			$	10,555			$	12,608			$	34,079			$	40,613
Non-GAAP adjustments:
	Net (gain) loss on sale of securities				-				-				-				-				-				-				-
	Divestiture expense				153				-				-				-				-				153				-
	Gain on divestiture				(1,658	)			-				-				-				-				(1,658	)
	Other items(1)				-				(92	)			-				-				-				(92	)			-
Total adjustments					(1,505	)			(92	)			-				-				-				(1,597	)			-
Tax effect					(361	)			(22	)			-				-				-				(383	)			-
Adjusted earnings, non-GAAP				$	12,207			$	11,143			$	9,515			$	10,555			$	12,608			$	32,865			$	40,613
Adjusted diluted earnings per common share,
	non-GAAP			$	0.74			$	0.67			$	0.56			$	0.62			$	0.73			$	1.97			$	2.32
Performance ratios, non-GAAP
	Adjusted return on average assets				1.49	%			1.37	%			1.20	%			1.32	%			1.59	%			1.36	%			1.74	%
	Adjusted return on average common equity				11.52	%			10.55	%			8.98	%			9.77	%			11.65	%			10.35	%			12.70	%
	Adjusted return on average tangible
			common equity(2)		16.92	%			15.46	%			13.10	%			14.28	%			17.04	%			15.16	%			18.63	%
(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 September 30,
				2022									2021
				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)			$	2,334,596		$	26,474		4.50	%		$	2,149,647		$	25,161		4.64	%
	Securities available for sale				301,360			1,833		2.41	%			79,995			509		2.52	%
	Interest-bearing deposits				275,290			1,531		2.21	%			586,787			224		0.15	%
Total earning assets					2,911,246			29,838		4.07	%			2,816,429			25,894		3.65	%
Other assets					328,534									330,679
Total assets				$	3,239,780								$	3,147,108
Liabilities and stockholders' equity
Interest-bearing deposits
	Demand deposits			$	689,376		$	28		0.02	%		$	651,237		$	27		0.02	%
	Savings deposits				887,454			67		0.03	%			826,144			63		0.03	%
	Time deposits				317,294			285		0.36	%			378,895			551		0.58	%
Total interest-bearing deposits					1,894,124			380		0.08	%			1,856,276			641		0.14	%
Borrowings
	Retail repurchase agreements				2,378			-		N/M				1,040			1		0.07	%
Total borrowings					2,378			-		N/M				1,040			1		0.07	%
Total interest-bearing liabilities					1,896,502			380		0.08	%			1,857,316			642		0.14	%
Noninterest-bearing demand deposits					881,429									824,112
Other liabilities					41,373									36,419
Total liabilities					2,819,304									2,717,847
Stockholders' equity					420,476									429,261
Total liabilities and stockholders' equity				$	3,239,780								$	3,147,108
Net interest income, FTE(1)							$	29,458								$	25,252
Net interest rate spread										3.99	%								3.51	%
Net interest margin, FTE(1)										4.01	%								3.56	%
(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 $487 thousand and $1.01 million for the three months ended September 30, 2022 and 2021, respectively.

AVERAGE BALANCE SHEETS AND NET INTEREST INCOME ANALYSIS (Unaudited)
				Nine Months Ended September 30,
				2022									2021
				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)			$	2,269,974		$	76,886		4.53	%		$	2,149,556		$	77,722		4.83	%
	Securities available for sale				241,640			4,230		2.34	%			82,563			1,590		2.57	%
	Interest-bearing deposits				398,326			2,549		0.86	%			555,435			508		0.12	%
Total earning assets					2,909,940			83,665		3.84	%			2,787,554			79,820		3.83	%
Other assets					329,508									331,239
Total assets				$	3,239,448								$	3,118,793
Liabilities and stockholders' equity
Interest-bearing deposits
	Demand deposits			$	689,226		$	85		0.02	%		$	639,809		$	99		0.02	%
	Savings deposits				888,062			200		0.03	%			807,863			217		0.04	%
	Time deposits				331,808			1,003		0.40	%			395,465			1,918		0.65	%
Total interest-bearing deposits					1,909,096			1,288		0.09	%			1,843,137			2,234		0.16	%
Borrowings
	Retail repurchase agreements				2,161			1		0.07	%			1,179			1		0.07	%
Total borrowings					2,161			1		0.07	%			1,179			1		0.07	%
Total interest-bearing liabilities					1,911,257			1,289		0.09	%			1,844,316			2,235		0.16	%
Noninterest-bearing demand deposits					864,119									809,128
Other liabilities					39,487									37,871
Total liabilities					2,814,863									2,691,315
Stockholders' equity					424,585									427,478
Total liabilities and stockholders' equity				$	3,239,448								$	3,118,793
Net interest income, FTE(1)							$	82,376								$	77,585
Net interest rate spread										3.75	%								3.67	%
Net interest margin, FTE(1)										3.78	%								3.72	%
(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 $2.22 million and $3.45 million for the nine months ended September 30, 2022 and 2021, respectively.

CONDENSED CONSOLIDATED QUARTERLY BALANCE SHEETS (Unaudited)
				September 30,				June 30,				March 31,				December 31,				September 30,
(Amounts in thousands, except per share data)				2022				2022				2022				2021				2021
Assets
Cash and cash equivalents				$	229,095			$	398,242			$	457,306			$	677,439			$	635,007
Debt securities available for sale					299,620				287,767				268,703				76,292				77,440
Loans held for investment, net of unearned income					2,362,733				2,299,798				2,244,296				2,165,569				2,152,103
	Allowance for credit losses				(29,388	)			(29,749	)			(28,981	)			(27,858	)			(29,877	)
Loans held for investment, net					2,333,345				2,270,049				2,215,315				2,137,711				2,122,226
Premises and equipment, net					47,891				49,752				50,912				52,284				52,842
Other real estate owned					559				579				848				1,015				1,240
Interest receivable					8,345				8,433				8,100				7,900				8,146
Goodwill					129,565				129,565				129,565				129,565				129,565
Other intangible assets					4,541				4,905				5,266				5,622				5,987
Other assets					107,838				109,085				108,112				106,691				107,258
Total assets				$	3,160,799			$	3,258,377			$	3,244,127			$	3,194,519			$	3,139,711
Liabilities
Deposits
	Noninterest-bearing			$	878,423			$	877,962			$	860,652			$	842,783			$	820,147
	Interest-bearing				1,831,798				1,920,577				1,922,292				1,886,608				1,853,699
Total deposits					2,710,221				2,798,539				2,782,944				2,729,391				2,673,846
Securities sold under agreements to repurchase					1,958				2,635				2,488				1,536				1,106
Interest, taxes, and other liabilities					36,362				39,157				34,539				35,817				37,395
Total liabilities					2,748,541				2,840,331				2,819,971				2,766,744				2,712,347
Stockholders' equity
Common stock					16,273				16,502				16,782				16,878				17,071
Additional paid-in capital					129,914				136,705				144,088				147,619				154,086
Retained earnings					285,096				276,499				269,798				264,824				258,860
Accumulated other comprehensive loss					(19,025	)			(11,660	)			(6,512	)			(1,546	)			(2,653	)
Total stockholders' equity					412,258				418,046				424,156				427,775				427,364
Total liabilities and stockholders' equity				$	3,160,799			$	3,258,377			$	3,244,127			$	3,194,519			$	3,139,711
Shares outstanding at period-end					16,273,177				16,502,144				16,781,975				16,878,220				17,071,052
Book value per common share				$	25.33			$	25.33			$	25.27			$	25.34			$	25.03
Tangible book value per common share(1)					17.09				17.18				17.24				17.34				17.09
(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)
	September 30,				June 30,				March 31,				December 31,				September 30,
(Amounts in thousands)	2022				2022				2022				2021				2021
Allowance for Credit Losses
Beginning balance	$	29,749			$	28,981			$	27,858			$	29,877			$	31,857
Provision for (recovery of)
credit losses charged to operations		685				510				1,961				(846	)			(1,394	)
Charge-offs		(2,158	)			(1,469	)			(1,302	)			(1,887	)			(1,255	)
Recoveries		1,112				1,727				464				714				669
Net (charge-offs) recoveries		(1,046	)			258				(838	)			(1,173	)			(586	)
Ending balance	$	29,388			$	29,749			$	28,981			$	27,858			$	29,877
Nonperforming Assets
Nonaccrual loans	$	15,303			$	17,826			$	20,487			$	20,768			$	22,070
Accruing loans past due 90 days or more		131				131				-				87				5
Troubled debt restructurings ("TDRs")(1)		1,331				515				1,141				1,367				359
Total nonperforming loans		16,765				18,472				21,628				22,222				22,434
OREO		559				579				848				1,015				1,240
Total nonperforming assets	$	17,324			$	19,051			$	22,476			$	23,237			$	23,674
Additional Information
Total accruing TDRs(2)	$	7,028			$	8,313			$	8,782			$	8,652			$	8,185
Asset Quality Ratios
Nonperforming loans to total loans		0.71	%			0.80	%			0.96	%			1.03	%			1.04	%
Nonperforming assets to total assets		0.55	%			0.58	%			0.69	%			0.73	%			0.75	%
Allowance for credit losses to nonperforming loans		175.29	%			161.05	%			134.00	%			125.36	%			133.18	%
Allowance for credit losses to total loans		1.24	%			1.29	%			1.29	%			1.29	%			1.39	%
Annualized net charge-offs (recoveries) to average loans		0.18	%			-0.05	%			0.15	%			0.22	%			0.11	%
(1) Accruing TDRs restructured within the past six months or nonperforming
(2) Accruing total TDRs

FOR MORE INFORMATION, CONTACT:

David D. Brown

(276) 326-9000