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 December 31, 2023. The Company reported net income of $11.78 million, or $0.66 per diluted common share, for the quarter ended December 31, 2023. Net income for the twelve months ended December 31, 2023, was $48.02 million or $2.72 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 February 9, 2024, and is expected to be paid on or about February 23, 2024. This marks the 39th consecutive year of regular dividends to common shareholders.

Fourth Quarter 2023 and Full Year Highlights

Income Statement

• Net income of $11.78 million for the fourth quarter and $48.02 million for the year were negatively impacted by a $3.00 million accrual for estimated litigation expenses.
• Adjusted for non-recurring items, fourth quarter net income increased $1.84 million to $14.59 million compared to fourth quarter 2022 on improved net interest margin and lower provision for credit losses. Also adjusted for non-recurring items, current year net income of $54.74 million was $9.12 million, or 19.99%, greater than last year.
• Net interest income increased $1.44 million compared to the same quarter in 2022, as increases in benchmark interest rates have improved net interest margin. Provision for credit losses was approximately $2.39 million lower than the same quarter last year.
• Interest and fees on loans increased $5.80 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. The Company acquired Surrey Bancorp on April 21, 2023, adding approximately $239.08 million in loans. Interest income on deposits in banks decreased $777 thousand to $438 thousand for the fourth quarter, primarily due to a significant decrease in the average balance compared to the fourth quarter of 2022.
• Annualized return on average assets (“ROA”) was 1.43% for the fourth quarter and 1.48% for the twelve months of 2023 compared to 1.59% and 1.45% for the same periods, respectively of 2022. Annualized return on average common equity (“ROE”) was 9.39% for the fourth quarter and 10.02% for the twelve months of 2023 compared to 11.99% and 11.04%, for the same periods, respectively of 2022. Adjusted for non-recurring items, ROA was 1.77% and ROE was 11.63% for the fourth quarter of 2023.

Balance Sheet and Asset Quality

• The Company’s loan portfolio increased by $172.10 million, or 7.17%, from December 31, 2022. Excluding the Surrey transaction, the loan portfolio decreased approximately $66.98 million, or 2.79%.
• Deposits increased $43.51 million, or 1.62%, from year-end 2022. Excluding the Surrey transaction, deposits decreased approximately $360.13 million, or 13.44%, from December 31, 2022.
• The Company repurchased 189,500 common shares during the fourth quarter of 2023 for a total cost of $5.98 million. The Company repurchased 768,079 common shares during 2023 for a total cost of $23.04 million. The Company recently announced a new 2.7 million share repurchase program that replaced the remainder of the prior program.
• Non-performing loans to total loans increased to 0.76% when compared with the same quarter of 2022. The Company experienced net charge-offs for the fourth quarter of 2023 of $883 thousand, or 0.14%, of annualized average loans, compared to net charge-offs of $2.25 million, or 0.37%, of annualized average loans for the same period in 2022.
• The allowance for credit losses to total loans was 1.41% at December 31, 2023, compared to 1.27% for the same period of 2022.
• The accumulated other comprehensive loss of $10.95 million at December 31, 2023, decreased $4.77 million compared to the accumulated other comprehensive loss of $15.71 million at December 31, 2022.
• Book value per share at December 31, 2023, was $27.20, an increase of $1.19 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%. Where non-GAAP financial measures are used, the comparable GAAP financial measure, as well as a reconciliation to that comparable GAAP financial measure can be found in the attached tables to this press release. 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 December 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 $1.49 billion in combined assets as of December 31, 2023. The Company reported consolidated assets of $3.27 billion as of December 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; changes in banking laws and regulations; the degree of competition by traditional and non-traditional competitors; the impact of natural disasters, extreme weather events, military conflict , terrorism or other geopolitical events; 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																				Year Ended
	December 31,				September 30,				June 30,				March 31,				December 31,				December 31,
(Amounts in thousands, except share and per share data)	2023				2023				2023				2023				2022				2023				2022
Interest income
Interest and fees on loans	$	33,676			$	33,496			$	31,927			$	27,628			$	27,873			$	126,727			$	104,570
Interest on securities		1,888				1,912				2,057				2,099				1,900				7,956				5,986
Interest on deposits in banks		438				697				885				462				1,215				2,482				3,763
Total interest income		36,002				36,105				34,869				30,189				30,988				137,165				114,319
Interest expense
Interest on deposits		3,935				2,758				1,930				718				366				9,341				1,654
Interest on borrowings		4				0				77				59				1				140				2
Total interest expense		3,939				2,758				2007				777				367				9,481				1,656
Net interest income		32,063				33,347				32,862				29,412				30,621				127,684				112,663
Provision for credit losses		1,029				1,109				4,105				1,742				3,416				7,985				6,572
Net interest income after provision		31,034				32,238				28,757				27,670				27,205				119,699				106,091
Noninterest income		10,462				9,622				8,785				8,583				9,184				37,452				37,182
Noninterest expense		26,780				22,913				24,671				20,813				20,730				95,177				83,116
Income before income taxes		14,716				18,947				12,871				15,440				15,659				61,974				60,157
Income tax expense		2,932				4,307				3,057				3,658				3,076				13,954				13,495
Net income	$	11,784			$	14,640			$	9,814			$	11,782			$	12,583			$	48,020			$	46,662
Adjustment to Net Income for Fair Value Changes to Restricted Stock Units (tax-effected)	$	530			$	215			$	335			$	20			$	-			$	1,100			$	-
Adjusted Net Income for diluted earnings per share	$	12,314			$	14,855			$	10,149			$	11,802			$	12,583			$	49,120			$	46,662
Earnings per common share
Basic	$	0.64			$	0.78			$	0.53			$	0.73			$	0.78			$	2.67			$	2.82
Diluted	$	0.66			$	0.79			$	0.55			$	0.72			$	0.77			$	2.72			$	2.82
Cash dividends per common share
Regular		0.29				0.29				0.29				0.29				0.29				1.16				1.12
Weighted average shares outstanding
Basic		18,530,114				18,786,032				18,407,078				16,228,297				16,229,289				17,996,373				16,519,848
Diluted		18,575,226				18,831,836				18,431,598				16,289,489				16,281,922				18,027,151				16,562,257
Performance ratios
Return on average assets		1.43	%			1.74	%			1.18	%			1.55	%			1.59	%			1.48	%			1.45	%
Return on average common equity		9.39	%			11.63	%			8.04	%			11.15	%			11.99	%			10.02	%			11.04	%
Return on average tangible common equity (1)		13.82	%			17.11	%			11.65	%			16.19	%			17.75	%			14.65	%			16.17	%
(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															Year Ended
	December 31,			September 30,			June 30,			March 31,			December 31,			December 31,
(Amounts in thousands)	2023			2023			2023			2023			2022			2023			2022
Noninterest income
Wealth management	$	1,052		$	1,145		$	965		$	1,017		$	958		$	4,179		$	3,855
Service charges on deposits		3,637			3,729			3,471			3,159			3,354			13,996			14,213
Other service charges and fees		3,541			3,564			3,460			3,082			3,006			13,647			12,308
(Loss) gain on sale of securities		-			-			(28	)		7			-			(21	)		-
Gain on divestiture		-			-			-			-			-			-			1,658
Other operating income		2,232			1,184			917			1,318			1866			5,651			5,148
Total noninterest income	$	10,462		$	9,622		$	8,785		$	8,583		$	9,184		$	37,452		$	37,182
Noninterest expense
Salaries and employee benefits	$	12,933		$	12,673		$	12,686		$	11,595		$	11,913		$	49,887		$	47,183
Occupancy expense		1,252			1,271			1,276			1,168			1,196			4,967			4,818
Furniture and equipment expense		1,489			1,480			1,508			1,401			1,413			5,878			6,001
Service fees		2,255			2,350			2,284			2,019			1,905			8,908			7,606
Advertising and public relations		843			968			846			643			574			3,300			2,409
Professional fees		787			172			281			327			98			1,567			1,303
Amortization of intangibles		536			536			425			234			364			1,731			1,446
FDIC premiums and assessments		376			392			423			320			330			1,511			1,126
Merger expense		-			-			2,014			379			596			2,393			596
Divestiture expense		-			-			-			-			-			-			153
Litigation expense		3,000			-			-			-			-			3,000			-
Other operating expense		3,309			3,071			2,928			2,727			2,341			12,035			10,475
Total noninterest expense	$	26,780		$	22,913		$	24,671		$	20,813		$	20,730		$	95,177		$	83,116

RECONCILIATION OF GAAP NET INCOME TO NON-GAAP ADJUSTED EARNINGS (Unaudited)
	Three Months Ended																				Year Ended
	December 31,				September 30,				June 30,				March 31,				December 31,				December 31,
(Amounts in thousands, except per share data)	2023				2023				2023				2023				2022				2023				2022
Adjusted Net Income for diluted earnings per share	$	12,314			$	14,855			$	10,149			$	11,802			$	12,583			$	49,120			$	46,662
Non-GAAP adjustments:
Loss (gain) on sale of securities		-				-				28				(7	)			-				21				-
Merger expense		-				-				2,014				379				596				2,393				596
Day 2 provision for allowance for credit losses - Surrey		-				-				1,614				-				-				1,614				-
Divestiture expense		-				-				-				-				-				-				153
Gain on divestiture		-				-				-				-				-				-				(1,658	)
Litigation expense		3,000				-				-				0				-				3,000
Other items (1)		-				(204	)			-				-				(450	)			(204	)			(542	)
Total adjustments		3,000				(204	)			3,656				372				146				6,824				(1,451	)
Tax effect		720				(49	)			522				10				(29	)			1,203				(412	)
Adjusted earnings, non-GAAP	$	14,594			$	14,700			$	13,283			$	12,163			$	12,758			$	54,741			$	45,623
Adjusted diluted earnings per common share, non-GAAP	$	0.79			$	0.78			$	0.72			$	0.75			$	0.78			$	3.04			$	2.75
Performance ratios, non-GAAP
Adjusted return on average assets		1.77	%			1.75	%			1.60	%			1.60	%			1.61	%			1.68	%			1.42	%
Adjusted return on average common equity		11.63	%			11.68	%			10.88	%			11.51	%			12.16	%			11.43	%			10.80	%
Adjusted return on average tangible common equity (2)		17.11	%			17.18	%			15.77	%			16.72	%			17.93	%			16.70	%			15.84	%
(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 December 31,
	2023												2022
(Amounts in thousands)	AverageBalance				Interest(1)				Average Yield/Rate(1)				AverageBalance				Interest(1)				Average Yield/Rate(1)
Assets
Earning assets
Loans (2) (3)	$	2,581,528			$	33,758				5.19	%		$	2,383,161			$	27,944				4.65	%
Securities available for sale		274,513				1,924				2.78	%			299,488				1,942				2.57	%
Interest-bearing deposits		31,293				438				5.55	%			130,363				1,218				3.71	%
Total earning assets		2,887,334				36,120				4.96	%			2,813,012				31,104				4.39	%
Other assets		379,960												326,043
Total assets	$	3,267,294											$	3,139,055
Liabilities and stockholders' equity
Interest-bearing deposits
Demand deposits	$	697,555			$	180				0.10	%		$	666,517			$	27				0.02	%
Savings deposits		838,455				3,050				1.44	%			856,755				106				0.05	%
Time deposits		254,668				705				1.10	%			293,520				232				0.31	%
Total interest-bearing deposits		1,790,678				3,935				0.87	%			1,816,792				365				0.08	%
Borrowings
Federal funds purchased		293				4				5.35	%			-				-				0.00	%
Retail repurchase agreements		1,090				-				0.05	%			2,473				1				0.07	%
Total borrowings		1,383				4				0.87	%			2,473				1				0.07	%
Total interest-bearing liabilities		1,792,061				3,939				0.87	%			1,819,265				366				0.08	%
Noninterest-bearing demand deposits		931,681												864,537
Other liabilities		45,819												38,993
Total liabilities		2,769,561												2,722,795
Stockholders' equity		497,733												416,260
Total liabilities and stockholders' equity	$	3,267,294											$	3,139,055
Net interest income, FTE (1)					$	32,181											$	30,738
Net interest rate spread										4.09	%											4.31	%
Net interest margin, FTE (1)										4.42	%											4.34	%
(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 $792 thousand and $395 thousand for the      three months ended December 31, 2023 and 2022, respectively.

AVERAGE BALANCE SHEETS AND NET INTEREST INCOME ANALYSIS (Unaudited)
	Year Ended December 31,
	2023												2022
(Amounts in thousands)	AverageBalance				Interest(1)				Average Yield/Rate(1)				AverageBalance				Interest(1)				Average Yield/Rate(1)
Assets
Earning assets
Loans (2) (3)	$	2,538,361			$	127,019				5.00	%		$	2,298,503			$	104,830				4.56	%
Securities available for sale		298,389				8,115				2.72	%			256,221				6,172				2.41	%
Interest-bearing deposits		46,601				2,485				5.33	%			330,785				3,767				1.14	%
Total earning assets		2,883,351				137,619				4.77	%			2,885,509				114,769				3.98	%
Other assets		369,700												328,635
Total assets	$	3,253,051											$	3,214,144
Liabilities and stockholders' equity
Interest-bearing deposits
Demand deposits	$	686,534			$	405				0.06	%		$	683,502			$	112				0.02	%
Savings deposits		847,397				6,781				0.80	%			880,171				306				0.03	%
Time deposits		267,957				2,155				0.80	%			322,158				1,235				0.38	%
Total interest-bearing deposits		1,801,888				9,341				0.52	%			1,885,831				1,653				0.09	%
Borrowings
Federal funds purchased		2,715				139				5.12	%			-				-				0.00	%
Retail repurchase agreements		1,528				1				0.06	%			2,239				2				0.07	%
Total borrowings		4,243				140				3.30	%			2,239				2				0.07	%
Total interest-bearing liabilities		1,806,131				9,481				0.52	%			1,888,070				1,655				0.09	%
Noninterest-bearing demand deposits		926,378												864,224
Other liabilities		41,477												39,363
Total liabilities		2,773,986												2,791,657
Stockholders' equity		479,065												422,487
Total liabilities and stockholders' equity	$	3,253,051											$	3,214,144
Net interest income, FTE (1)					$	128,138											$	113,114
Net interest rate spread										4.25	%											3.89	%
Net interest margin, FTE (1)										4.44	%											3.92	%
(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 $2.74 million and $2.62 million for the       twelve months ended December 31, 2023 and 2022, respectively.

CONDENSED CONSOLIDATED QUARTERLY BALANCE SHEETS (Unaudited)
(Amounts in thousands, except per share data)	December31,2023				September30,2023				June 30,2023				March 31,2023				December31,2022
Assets
Cash and cash equivalents	$	116,420			$	113,397			$	152,660			$	92,385			$	170,846
Debt securities available for sale		280,961				275,332				314,373				308,269				300,349
Loans held for investment, net of unearned income		2,572,298				2,593,472				2,621,073				2,388,897				2,400,197
Allowance for credit losses		(36,189	)			(36,031	)			(36,177	)			(30,789	)			(30,556	)
Loans held for investment, net		2,536,109				2,557,441				2,584,896				2,358,108				2,369,641
Premises and equipment, net		50,680				51,205				53,546				47,407				47,340
Other real estate owned		192				243				339				481				703
Interest receivable		10,881				10,428				10,185				8,646				9,279
Goodwill		143,946				143,946				143,946				129,565				129,565
Other intangible assets		15,145				15,681				16,217				3,942				4,176
Other assets		114,854				116,552				115,275				102,869				103,673
Total assets	$	3,269,188			$	3,284,225			$	3,391,437			$	3,051,672			$	3,135,572
Liabilities
Deposits
Noninterest-bearing	$	931,920			$	944,301			$	974,995			$	823,297			$	872,168
Interest-bearing		1,790,405				1,801,835				1,877,683				1,761,327				1,806,647
Total deposits		2,722,325				2,746,136				2,852,678				2,584,624				2,678,815
Securities sold under agreements to repurchase		1,119				1,029				1,348				1,866				1,874
Interest, taxes, and other liabilities		42,450				41,393				38,691				33,451				32,898
Total liabilities		2,765,894				2,788,558				2,892,717				2,619,941				2,713,587
Stockholders' equity
Common stock		18,502				18,671				18,969				16,243				16,225
Additional paid-in capital		175,841				180,951				189,917				128,666				128,508
Retained earnings		319,902				313,489				304,295				300,047				292,971
Accumulated other comprehensive loss		(10,951	)			(17,444	)			(14,461	)			(13,225	)			(15,719	)
Total stockholders' equity		503,294				495,667				498,720				431,731				421,985
Total liabilities and stockholders' equity	$	3,269,188			$	3,284,225			$	3,391,437			$	3,051,672			$	3,135,572
Shares outstanding at period-end		18,502,396				18,671,470				18,969,281				16,243,551				16,225,399
Book value per common share	$	27.20			$	26.55			$	26.29			$	26.58			$	26.01
Tangible book value per common share (1)		18.60				18.00				17.85				18.36				17.76
(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)
(Amounts in thousands)	December31,2023				September30,2023				June 30,2023				March 31,2023				December31,2022
Allowance for Credit Losses
Balance at beginning 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
Total allowance for credit losses beginning of period		36,789				37,141				31,753				31,752				30,804
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		1,041				1,315				4,105				1,974				3,416
(Recovery of) provision for credit losses - loan commitments (1)		(12	)			(206	)			-				(232	)			(220	)
Total provision for credit losses - loans and loan commitments		1,029				1,109				4,105				1,742				3,196
Charge-offs		(2,105	)			(2,157	)			(1,993	)			(2,570	)			(2,873	)
Recoveries		1,222				696				1,265				829				625
Net (charge-offs) recoveries		(883	)			(1,461	)			(728	)			(1,741	)			(2,248	)
Balance at end of period:
Allowance for credit losses - loans		36,189				36,031				36,177				30,789				30,556
Allowance for credit losses - loan commitments (1)		746				758				964				964				1,196
Ending balance	$	36,935			$	36,789			$	37,141			$	31,753			$	31,752
Nonperforming Assets
Nonaccrual loans	$	19,356			$	18,366			$	18,628			$	15,557			$	15,208
Accruing loans past due 90 days or more		104				59				-				23				142
Modified loans past due 90 days or more (2)		-				-				-				-				-
Troubled debt restructurings (“TDRs”) (3)		-				-				-				-				1,346
Total nonperforming loans		19,460				18,425				18,628				15,580				16,696
OREO		192				243				339				481				703
Total nonperforming assets	$	19,652			$	18,668			$	18,967			$	16,061			$	17,399
Additional Information
Total modified loans (2)	$	1,873			$	1,674			$	642			$	429			$	-
Total accruing TDRs (4)	$	-			$	-			$	-			$	-			$	7,112
Asset Quality Ratios
Nonperforming loans to total loans		0.76	%			0.71	%			0.71	%			0.65	%			0.70	%
Nonperforming assets to total assets		0.60	%			0.57	%			0.56	%			0.53	%			0.55	%
Allowance for credit losses to nonperforming loans		185.97	%			195.55	%			194.21	%			197.62	%			183.01	%
Allowance for credit losses to total loans		1.41	%			1.39	%			1.38	%			1.29	%			1.27	%
Annualized net charge-offs (recoveries) to average loans		0.14	%			0.22	%			0.11	%			0.29	%			0.37	%
(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