FCBC First Community Bancshares Inc

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, 2023. The Company reported net income of $14.64 million, or $0.79 per diluted common share, for the quarter ended September 30, 2023. Net income for the nine months ended September 30, 2023, was $36.24 million or $2.06 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 November 10, 2023, and is expected to be paid on or about November 24, 2023. This marks the 38th consecutive year of regular dividends to common shareholders.

Third Quarter 2023 and Current Highlights

Income Statement

	o	Net income of $14.64 million for the quarter was approximately 9.66%, or $1.29 million, higher compared to net income of $13.35 million in the same quarter of 2022. Adjusted for non-recurring items, third quarter net income increased $2.52 million to $14.72 million compared to third quarter 2022. The increase is primarily attributable to a significant increase in net interest income.
	o	Net interest income increased $4.01 million compared to the same quarter in 2022, as increases in benchmark interest rates have improved net interest margin.
	o	Net interest margin of 4.51% is an increase of 50 basis points over the same quarter of 2022. The yield on earning assets increased 82 basis points primarily driven by increased earnings on loans and securities.
	o	Interest and fees on loans increased $7.09 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 $1.91 million was an increase of $127 thousand over the same quarter of 2022 and is primarily attributable to an increase in yield from the same period of the prior year. Interest income on deposits in banks decreased $835 thousand to $697 thousand for the third quarter, primarily due to a significant decrease in the average balance compared to the third quarter of 2022.
	o	Annualized return on average assets was 1.74% for the third quarter and 1.49% for the first nine months of 2023 compared to 1.63% and 1.41% for the same periods, respectively of 2022. Annualized return on average common equity was 11.63% for the third quarter and 10.25% for the first nine months of 2023 compared to 12.60% and 10.73%, for the same periods, respectively of 2022.

Balance Sheet and Asset Quality

	o	The Company’s loan portfolio increased by $193.28 million, or 8.05%, from December 31, 2022. Excluding the Surrey transaction, the loan portfolio decreased approximately $45.81 million, or 1.91%.
	o	Deposits increased $67.32 million, or 2.51%, from year-end 2022. Excluding the Surrey transaction, deposits decreased approximately $336.31 million, or 12.55%, from December 31, 2022.
	o	The Company repurchased 299,012 common shares during the third quarter of 2023 for a total cost of $9.37 million. The Company repurchased 578,579 common shares year-to-date for a total cost of $17.06 million. The Company recently announced a new 2.7 million share repurchase program that replaces the small remainder of the prior program and expires December 31, 2026.
	o	Non-performing loans to total loans remained at 0.71% when compared with the prior quarter of June 30, 2023. The Company experienced net charge-offs for the third quarter of 2023 of $1.46 million, or 0.22%, of annualized average loans, compared to net charge-offs of $1.05 million, or 0.18%, of annualized average loans for the same period in 2022.
	o	The allowance for credit losses to total loans was 1.39% at September 30, 2023 compared to 1.38% for the second quarter of 2023.
	o	Accumulated other comprehensive loss of $17.44 million at September 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 over the last seven quarters.
	o	Book value per share at September 30, 2023, was $26.55, an increase of $0.54 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 September 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 $1.40 billion in combined assets as of September 30, 2023. The Company reported consolidated assets of $3.28 billion as of September 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																				Nine Months Ended
		September 30,				June 30,				March 31,				December 31,				September 30,				September 30,
(Amounts in thousands, except share and per share data)		2023				2023				2023				2022				2022				2023				2022
Interest income
Interest and fees on loans		$	33,496			$	31,927			$	27,628			$	27,873			$	26,405			$	93,051			$	76,697
Interest on securities			1,912				2,057				2,099				1,900				1,785				6,068				4,086
Interest on deposits in banks			697				885				462				1,215				1,532				2,044				2,548
Total interest income			36,105				34,869				30,189				30,988				29,722				101,163				83,331
Interest expense
Interest on deposits			2,758				1,930				718				366				380				5,406				1,288
Interest on borrowings			-				77				59				1				-				136				1
Total interest expense			2,758				2,007				777				367				380				5,542				1,289
Net interest income			33,347				32,862				29,412				30,621				29,342				95,621				82,042
Provision for credit losses			1,109				4,105				1,742				3,416				685				6,956				3,156
Net interest income after provision			32,238				28,757				27,670				27,205				28,657				88,665				78,886
Noninterest income			9,622				8,785				8,583				9,184				9,950				26,990				27,998
Noninterest expense			22,913				24,671				20,813				20,730				21,145				68,397				62,386
Income before income taxes			18,947				12,871				15,440				15,659				17,462				47,258				44,498
Income tax expense			4,307				3,057				3,658				3,076				4,111				11,022				10,419
Net income		$	14,640			$	9,814			$	11,782			$	12,583			$	13,351			$	36,236			$	34,079
Adjustment to Net Income for Fair Value Changes to Restricted Stock Units (tax-effected)		$	237			$	335			$	20			$	-			$	-			$	592			$	-
Adjusted Net Income for diluted earnings per share		$	14,877			$	10,149			$	11,802			$	12,583			$	13,351			$	36,828			$	34,079
Earnings per common share
Basic		$	0.78			$	0.53			$	0.73			$	0.78			$	0.82			$	2.03			$	2.05
Diluted		$	0.79			$	0.55			$	0.72			$	0.77			$	0.81			$	2.06			$	2.05
Cash dividends per common share
Regular			0.29				0.29				0.29				0.29				0.27				0.87				0.83
Weighted average shares outstanding
Basic			18,786,032				18,407,078				16,228,297				16,229,289				16,378,022				17,816,505				16,617,766
Diluted			18,831,836				18,431,598				16,289,489				16,281,922				16,413,202				17,857,494				16,654,697
Performance ratios
Return on average assets			1.74	%			1.18	%			1.55	%			1.59	%			1.63	%			1.49	%			1.41	%
Return on average common equity			11.63	%			8.04	%			11.15	%			11.99	%			12.60	%			10.25	%			10.73	%
Return on average tangible common equity(1)			17.11	%			11.65	%			16.19	%			17.75	%			18.51	%			14.94	%			15.71	%

(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)		2023				2023				2023				2022				2022				2023				2022
Noninterest income
Wealth management		$	1,145			$	965			$	1,017			$	958			$	932			$	3,127			$	2,897
Service charges on deposits			3,729				3,471				3,159				3,354				3,689				10,359				10,859
Other service charges and fees			3,564				3,460				3,082				3,006				2,988				10,106				9,302
(Loss) gain on sale of securities			-				(28	)			7				-				-				(21	)			-
Gain on divestiture			-				-				-				-				1,658				-				1,658
Other operating income			1,184				917				1,318				1,866				683				3,419				3,282
Total noninterest income		$	9,622			$	8,785			$	8,583			$	9,184			$	9,950			$	26,990			$	27,998
Noninterest expense
Salaries and employee benefits		$	12,673			$	12,686			$	11,595			$	11,913			$	12,081			$	36,954			$	35,270
Occupancy expense			1,271				1,276				1,168				1,196				1,188				3,715				3,622
Furniture and equipment expense			1,480				1,508				1,401				1,413				1,478				4,389				4,588
Service fees			2,350				2,284				2,019				1,905				1,635				6,653				5,701
Advertising and public relations			968				846				643				574				718				2,457				1,835
Professional fees			172				281				327				98				208				780				1,205
Amortization of intangibles			536				425				234				364				365				1,195				1,082
FDIC premiums and assessments			392				423				320				330				321				1,135				796
Merger expense			-				2,014				379				596				-				2,393				-
Divestiture expense			-				-				-				-				153				-				153
Other operating expense			3,071				2,928				2,727				2,341				2,998				8,726				8,134
Total noninterest expense		$	22,913			$	24,671			$	20,813			$	20,730			$	21,145			$	68,397			$	62,386

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,
(Amounts in thousands, except per share data)		2023				2023				2023				2022				2022				2023				2022
Adjusted Net Income for diluted earnings per share		$	14,877			$	10,149			$	11,802			$	12,583			$	13,351			$	36,828			$	34,079
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				-				-				-				1,614				-
Divestiture expense			-				-				-				-				153				-				153
Gain on divestiture			-				-				-				-				(1,658	)			-				(1,658	)
Other items(1)			(204	)			-				-				(450	)			-				-				(92	)
Total adjustments			(204	)			3,656				372				146				(1,505	)			4,028				(1,597	)
Tax effect			(49	)			522				10				(29	)			(361	)			532				(383	)
Adjusted earnings, non-GAAP		$	14,722			$	13,283			$	12,163			$	12,758			$	12,207			$	40,324			$	32,865
Adjusted diluted earnings per common share, non-GAAP		$	0.78			$	0.72			$	0.75			$	0.78			$	0.74			$	2.26			$	1.97
Performance ratios, non-GAAP
Adjusted return on average assets			1.75	%			1.60	%			1.60	%			1.61	%			1.49	%			1.66	%			1.36	%
Adjusted return on average common equity			11.70	%			10.88	%			11.51	%			12.16	%			11.52	%			11.40	%			10.35	%
Adjusted return on average tangible common equity(2)			17.21	%			15.77	%			16.72	%			17.93	%			16.92	%			16.62	%			15.16	%

(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,
		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)		$	2,604,885			$	33,566				5.11	%		$	2,334,596			$	26,474				4.50	%
Securities available for sale			284,659				1,952				2.72	%			301,360				1,833				2.41	%
Interest-bearing deposits			50,855				697				5.44	%			275,290				1,531				2.21	%
Total earning assets			2,940,399				36,215				4.89	%			2,911,246				29,838				4.07	%
Other assets			393,001												328,534
Total assets		$	3,333,400											$	3,239,780
Liabilities and stockholders’ equity
Interest-bearing deposits
Demand deposits		$	699,066			$	165				0.09	%		$	689,376			$	28				0.02	%
Savings deposits			862,121				1,941				0.89	%			887,454				67				0.03	%
Time deposits			263,940				652				0.98	%			317,294				285				0.36	%
Total interest-bearing deposits			1,825,127				2,758				0.60	%			1,894,124				380				0.08	%
Borrowings
Retail repurchase agreements			1,254				-				N/M				2,378				-			N/M
Total borrowings			1,254				-				N/M				2,378				-			N/M
Total interest-bearing liabilities			1,826,381				2,758				0.60	%			1,896,502				380				0.08	%
Noninterest-bearing demand deposits			964,093												881,429
Other liabilities			43,574												41,373
Total liabilities			2,834,048												2,819,304
Stockholders’ equity			499,352												420,476
Total liabilities and stockholders’ equity		$	3,333,400											$	3,239,780
Net interest income, FTE(1)						$	33,457											$	29,458
Net interest rate spread											4.29	%											3.99	%
Net interest margin, FTE(1)											4.51	%											4.01	%

(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 $874 thousand and $487 thousand for the three months ended September 30, 2023 and 2022, respectively.

AVERAGE BALANCE SHEETS AND NET INTEREST INCOME ANALYSIS (Unaudited)
		Nine Months Ended September 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)		$	2,523,814			$	93,261				4.94	%		$	2,269,974			$	76,886				4.53	%
Securities available for sale			306,435				6,191				2.70	%			241,640				4,230				2.34	%
Interest-bearing deposits			51,759				2,047				5.29	%			398,326				2,549				0.86	%
Total earning assets			2,882,008				101,499				4.71	%			2,909,940				83,665				3.84	%
Other assets			366,243												329,508
Total assets		$	3,248,251											$	3,239,448
Liabilities and stockholders’ equity
Interest-bearing deposits
Demand deposits		$	682,820			$	225				0.04	%		$	689,226			$	85				0.02	%
Savings deposits			850,411				3,731				0.59	%			888,062				200				0.03	%
Time deposits			272,435				1,450				0.71	%			331,808				1,003				0.40	%
Total interest-bearing deposits			1,805,666				5,406				0.40	%			1,909,096				1,288				0.09	%
Borrowings
Federal funds purchased			3,532				135				5.11	%			-				-				0.00	%
Retail repurchase agreements			1,674				1				0.06	%			2,161				1				0.07	%
Total borrowings			5,206				136				3.49	%			2,161				1				0.07	%
Total interest-bearing liabilities			1,810,872				5,542				0.41	%			1,911,257				1,289				0.09	%
Noninterest-bearing demand deposits			924,591												864,119
Other liabilities			40,014												39,487
Total liabilities			2,775,477												2,814,863
Stockholders’ equity			472,774												424,585
Total liabilities and stockholders’ equity		$	3,248,251											$	3,239,448
Net interest income, FTE(1)						$	95,957											$	82,376
Net interest rate spread											4.30	%											3.75	%
Net interest margin, FTE(1)											4.45	%											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 $1.95 million and $2.22 million for the nine months ended September 30, 2023 and 2022, respectively.

CONDENSED CONSOLIDATED QUARTERLY BALANCE SHEETS (Unaudited)
		September 30,				June 30,				March 31,				December 31,				September 30,
(Amounts in thousands, except per share data)		2023				2023				2023				2022				2022
Assets
Cash and cash equivalents		$	113,397			$	152,660			$	92,385			$	170,846			$	229,095
Debt securities available for sale			275,332				314,373				308,269				300,349				299,620
Loans held for investment, net of unearned income			2,593,472				2,621,073				2,388,897				2,400,197				2,362,733
Allowance for credit losses			(36,031	)			(36,177	)			(30,789	)			(30,556	)			(29,388	)
Loans held for investment, net			2,557,441				2,584,896				2,358,108				2,369,641				2,333,345
Premises and equipment, net			51,205				53,546				47,407				47,340				47,891
Other real estate owned			243				339				481				703				559
Interest receivable			10,428				10,185				8,646				9,279				8,345
Goodwill			143,946				143,946				129,565				129,565				129,565
Other intangible assets			15,681				16,217				3,942				4,176				4,541
Other assets			116,552				115,275				102,869				103,673				107,838
Total assets		$	3,284,225			$	3,391,437			$	3,051,672			$	3,135,572			$	3,160,799
Liabilities
Deposits
Noninterest-bearing		$	944,301			$	974,995			$	823,297			$	872,168			$	878,423
Interest-bearing			1,801,835				1,877,683				1,761,327				1,806,647				1,831,798
Total deposits			2,746,136				2,852,678				2,584,624				2,678,815				2,710,221
Securities sold under agreements to repurchase			1,029				1,348				1,866				1,874				1,958
Interest, taxes, and other liabilities			41,393				38,691				33,451				32,898				36,362
Total liabilities			2,788,558				2,892,717				2,619,941				2,713,587				2,748,541
Stockholders’ equity
Common stock			18,671				18,969				16,243				16,225				16,273
Additional paid-in capital			180,951				189,917				128,666				128,508				129,914
Retained earnings			313,489				304,295				300,047				292,971				285,096
Accumulated other comprehensive loss			(17,444	)			(14,461	)			(13,225	)			(15,719	)			(19,025	)
Total stockholders’ equity			495,667				498,720				431,731				421,985				412,258
Total liabilities and stockholders’ equity		$	3,284,225			$	3,391,437			$	3,051,672			$	3,135,572			$	3,160,799
Shares outstanding at period-end			18,671,470				18,969,281				16,243,551				16,225,399				16,273,177
Book value per common share		$	26.55			$	26.29			$	26.58			$	26.01			$	25.33
Tangible book value per common share(1)			18.00				17.85				18.36				17.76				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)		2023				2023				2023				2022				2022
Allowance for Credit Losses
Balance at beginning 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
Total allowance for credit losses beginning of period			37,141				31,753				31,752				30,804				30,705
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			1,315				4,105				1,974				3,416				685
(Recovery of) provision for credit losses - loan commitments(1)			(206	)			-				(232	)			(220	)			460
Total provision for credit losses - loans and loan commitments			1,109				4,105				1,742				3,196				1,145
Charge-offs			(2,157	)			(1,993	)			(2,570	)			(2,873	)			(2,158	)
Recoveries			696				1,265				829				625				1,112
Net (charge-offs) recoveries			(1,461	)			(728	)			(1,741	)			(2,248	)			(1,046	)
Balance at end of period:
Allowance for credit losses - loans			36,031				36,177				30,789				30,556				29,388
Allowance for credit losses - loan commitments(1)			758				964				964				1,196				1,416
Ending balance		$	36,789			$	37,141			$	31,753			$	31,752			$	30,804
Nonperforming Assets
Nonaccrual loans		$	18,366			$	18,628			$	15,557			$	15,208			$	15,303
Accruing loans past due 90 days or more			59				-				23				142				131
Modified loans past due 90 days or more(2)			-				-				-				-				-
Troubled debt restructurings (“TDRs”)(3)			-				-				-				1,346				1,331
Total nonperforming loans			18,425				18,628				15,580				16,696				16,765
OREO			243				339				481				703				559
Total nonperforming assets		$	18,668			$	18,967			$	16,061			$	17,399			$	17,324
Additional Information
Total modified loans(2)		$	1,674			$	642			$	429			$	-			$	-
Total accruing TDRs(4)		$	-			$	-			$	-			$	7,112			$	7,028
Asset Quality Ratios
Nonperforming loans to total loans			0.71	%			0.71	%			0.65	%			0.70	%			0.71	%
Nonperforming assets to total assets			0.57	%			0.56	%			0.53	%			0.55	%			0.55	%
Allowance for credit losses to nonperforming loans			195.55	%			194.21	%			197.62	%			183.01	%			175.29	%
Allowance for credit losses to total loans			1.39	%			1.38	%			1.29	%			1.27	%			1.24	%
Annualized net charge-offs (recoveries) to average loans			0.22	%			0.11	%			0.29	%			0.37	%			0.18	%

(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