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 June 30, 2022. The Company reported net income of $11.21 million, or $0.67 per diluted common share, for the quarter ended June 30, 2022. Net income for the six months ended June 30, 2022, was $20.73 million or $1.24 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 also an increase of two cents ($0.02) from the dividends declared in the previous two quarters of 2022.  The quarterly dividend is payable to common shareholders of record on August 5, 2022, and is expected to be paid on or about August 19, 2022.  This marks the 37th consecutive year of regular dividends to common shareholders.

Second Quarter 2022 and Current Highlights

      Income Statement

• Net income of $11.21 million for the quarter was a decrease compared to the same quarter of 2021, which included a significant reversal of provision for credit losses. The normalized provision for credit losses drove much of the difference between current year-to-date net income of $20.73 million and the same period in 2021.
• Interest income from securities of $1.55 million was an increase of $1.12 million over the second quarter of 2021, as the Company added to its portfolio with a significant weighting toward 2-year treasury securities. Interest on fed funds also increased $602 thousand to $768 thousand for the second quarter as a result of the Federal Open Market Committee’s 150 basis point increase in overnight rates.
• The total cost of funds remained very low at 0.06%, a decrease of 0.05% from the second quarter of 2021.
• Despite the significant increase in credit loss provision over 2021, annualized return on average assets was 1.38% for the second quarter and 1.29% for the first six months of 2022. Annualized return on average common equity was 10.61% for the second quarter and 9.80% for the first half of 2022.
• Net interest margin for the second quarter was 3.78%, which was a 10 basis point increase from 3.68% reported for second quarter of 2021.   The yield on earning assets increased 6 basis points, primarily driven by an increase in the yields on overnight funds. The cost of interest-bearing deposits declined 6 basis points to 0.09%, primarily driven by a decrease in the cost of time deposits.
• Salaries and employee benefits for the second quarter increased $1.30 million, or 12.74%, over the same quarter in 2021. Salaries and employee benefits for the first six months increased $2.09 million, or 9.90%, over the first six 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 $134.23 million, an annualized growth rate of 12.50%, during the first six months of 2022. Loan demand and originations were strong in all categories, including construction, commercial real estate, residential mortgage, and consumer loans.
• During the second quarter, the Company repurchased 283,507 of its common shares for $7.95 million. The Company repurchased 415,507 common shares for $12.03 million during the six months of 2022.  
• Non-performing loans to total loans remained very low at 0.80% of total loans and continues the declining trend experienced over the past four quarters. The Company experienced net recoveries for the second quarter of 2022 of $258 thousand, or 0.05% of annualized average loans, compared to net charge-offs of $476 thousand, or 0.09% of annualized average loans, for the same period in 2021. Net charge-offs for the six-month period ended June 30, 2022, were $580 thousand, or 0.05% of annualized average loans, compared to net charge-offs of $1.20 million, or 0.11% of annualized average loans, for the same period in 2021.
• The allowance for credit losses to total loans remained at 1.29% of total loans.
• Book value per share at June 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 49 branch banking locations in Virginia, West Virginia, North Carolina, and Tennessee as of June 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 $1.20 billion in combined assets as of June 30, 2022. The Company reported consolidated assets of $3.26 billion as of June 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																				Six Months Ended
				June 30,				March 31,				December 31,				September 30,				June 30,				June 30,
(Amounts in thousands, except share and per share data)					2022				2022				2021				2021				2021				2022				2021
Interest income
	Interest and fees on loans			$	25,651			$	24,641			$	25,236			$	25,119			$	25,937			$	50,292			$	52,477
	Interest on securities				1,551				750				362				445				435				2,301				930
	Interest on deposits in banks				768				248				234				225				166				1,016				282
Total interest income					27,970				25,639				25,832				25,789				26,538				53,609				53,689
Interest expense
	Interest on deposits				422				486				600				642				724				908				1,593
	Interest on borrowings				1				-				-				1				-				1				-
Total interest expense					423				486				600				643				724				909				1,593
Net interest income					27,547				25,153				25,232				25,146				25,814				52,700				52,096
(Recovery of) provision for credit losses					510				1,961				(846	)			(1,394	)			(2,230	)			2,471				(6,231	)
Net interest income after provision					27,037				23,192				26,078				26,540				28,044				50,229				58,327
Noninterest income					8,854				9,194				9,215				8,720				8,797				18,048				16,366
Noninterest expense					21,255				19,986				21,701				18,836				19,361				41,241				38,181
Income before income taxes					14,636				12,400				13,592				16,424				17,480				27,036				36,512
Income tax expense					3,423				2,885				3,037				3,816				4,077				6,308				8,507
Net income				$	11,213			$	9,515			$	10,555			$	12,608			$	13,403			$	20,728			$	28,005
Earnings per common share
	Basic			$	0.67			$	0.57			$	0.62			$	0.73			$	0.77			$	1.24			$	1.59
	Diluted				0.67				0.56				0.62				0.73				0.76				1.24				1.59
Cash dividends per common share
	Regular				0.27				0.27				0.27				0.27				0.25				0.54				0.50
Weighted average shares outstanding
	Basic				16,662,817				16,817,284				16,974,005				17,221,244				17,486,182				16,739,624				17,577,552
	Diluted				16,682,615				16,864,515				17,038,980				17,279,576				17,536,144				16,772,847				17,631,330
Performance ratios
	Return on average assets				1.38	%			1.20	%			1.32	%			1.59	%			1.70	%			1.29	%			1.82	%
	Return on average common equity				10.61	%			8.98	%			9.77	%			11.65	%			12.55	%			9.80	%			13.24	%
	Return on average tangible common equity(1)				15.56	%			13.10	%			14.28	%			17.04	%			18.40	%			14.32	%			19.45	%
(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)			2022			2022			2021				2021			2021			2022				2021
Noninterest income
	Wealth management	$	993		$	972		$	940			$	974		$	1,058			$	1,965		$	1,939
	Service charges on deposits		3,672			3,498			3,718				3,599			3,098				7,170			6,129
	Other service charges and fees		3,297			3,017			3,091				3,143			3,166				6,314			6,188
	Net FDIC indemnification asset amortization		-			-			-				-			(946	)			-			(1,226	)
	Other operating income		892			1,707			1,466				1,004			2,421				2,599			3,336
Total noninterest income		$	8,854		$	9,194		$	9,215			$	8,720		$	8,797			$	18,048		$	16,366
Noninterest expense
	Salaries and employee benefits	$	11,518		$	11,671		$	12,493			$	10,646		$	10,216			$	23,189		$	21,100
	Occupancy expense		1,165			1,269			1,368				1,155			1,115				2,434			2,390
	Furniture and equipment expense		1,496			1,614			1,418				1,385			1,457				3,110			2,824
	Service fees		2,563			1,503			1,946				1,530			1,513				4,066			2,848
	Advertising and public relations		577			540			589				536			616				1,117			951
	Professional fees		544			453			455				313			290				997			756
	Amortization of intangibles		360			357			364				365			360				717			717
	FDIC premiums and assessments		257			218			213				216			204				475			403
	Other operating expense		2,775			2,361			2,855				2,690			3,590				5,136			6,192
Total noninterest expense		$	21,255		$	19,986		$	21,701			$	18,836		$	19,361			$	41,241		$	38,181

RECONCILIATION OF GAAP NET INCOME TO NON-GAAP ADJUSTED EARNINGS (Unaudited)
				Three Months Ended																				Six Months Ended
				June 30,				March 31,				December 31,				September 30,				June 30,				June 30,
					2022				2022				2021				2021				2021				2022				2021
(Amounts in thousands, except per share data)
Net income				$	11,213			$	9,515			$	10,555			$	12,608			$	13,403			$	28,005			$	28,005
Non-GAAP adjustments:
	Net (gain) loss on sale of securities				-				-				-				-				-				-				-
	Merger, acquisition, and divestiture expense				-				-				-				-				-				-				-
	Other items(1)				(92	)			-				-				-				-				-				-
Total adjustments					(92	)			-				-				-				-				-				-
Tax effect					(22	)			-				-				-				-				-				-
Adjusted earnings, non-GAAP				$	11,143			$	9,515			$	10,555			$	12,608			$	13,403			$	28,005			$	28,005
Adjusted diluted earnings per common share,
	non-GAAP			$	0.67			$	0.56			$	0.62			$	0.73			$	0.76			$	1.59			$	1.59
Performance ratios, non-GAAP
	Adjusted return on average assets				1.37	%			1.20	%			1.32	%			1.59	%			1.70	%			1.82	%			1.82	%
	Adjusted return on average common equity				10.55	%			8.98	%			9.77	%			11.65	%			12.55	%			13.24	%			13.24	%
	Adjusted return on average tangible
			common equity(2)		15.46	%			13.10	%			14.28	%			17.04	%			18.40	%			19.45	%			19.45	%
(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,
			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)		$	2,273,844		$	25,714		4.54	%		$	2,134,136		$	25,979		4.88	%
	Securities available for sale			280,823			1,597		2.28	%			84,099			508		2.42	%
	Interest-bearing deposits			377,931			769		0.82	%			610,148			166		0.11	%
Total earning assets				2,932,598			28,080		3.84	%			2,828,383			26,653		3.78	%
Other assets				331,774									331,563
Total assets			$	3,264,372								$	3,159,946
Liabilities and stockholders' equity
Interest-bearing deposits
	Demand deposits		$	698,978		$	29		0.02	%		$	654,767		$	33		0.02	%
	Savings deposits			895,370			67		0.03	%			818,490			63		0.03	%
	Time deposits			331,555			326		0.39	%			394,889			628		0.64	%
Total interest-bearing deposits				1,925,903			422		0.09	%			1,868,146			724		0.15	%
Borrowings
	Retail repurchase agreements			2,105			1		0.08	%			1,266			-		N/M
Total borrowings				2,105			1		0.08	%			1,266			-		N/M
Total interest-bearing liabilities				1,928,008			423		0.09	%			1,869,412			724		0.16	%
Noninterest-bearing demand deposits				874,507									824,888
Other liabilities				38,106									37,306
Total liabilities				2,840,621									2,731,606
Stockholders' equity				423,751									428,340
Total liabilities and stockholders' equity			$	3,264,372								$	3,159,946
Net interest income, FTE(1)						$	27,657								$	25,929
Net interest rate spread									3.75	%								3.62	%
Net interest margin, FTE(1)									3.78	%								3.68	%
(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 $870 thousand and $1.25 million for the three months ended June 30, 2022 and 2021, respectively.

AVERAGE BALANCE SHEETS AND NET INTEREST INCOME ANALYSIS (Unaudited)
			Six Months Ended June 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)		$	2,237,128		$	50,412		4.54	%		$	2,149,509		$	52,561		4.93	%
	Securities available for sale			211,285			2,397		2.29	%			83,868			1,081		2.60	%
	Interest-bearing deposits			460,864			1,018		0.45	%			539,500			284		0.11	%
Total earning assets				2,909,277			53,827		3.73	%			2,772,877			53,926		3.92	%
Other assets				330,003									331,524
Total assets			$	3,239,280								$	3,104,401
Liabilities and stockholders' equity
Interest-bearing deposits
	Demand deposits		$	689,149		$	57		0.02	%		$	634,000		$	72		0.02	%
	Savings deposits			888,371			133		0.03	%			798,571			154		0.04	%
	Time deposits			339,186			718		0.43	%			403,888			1,367		0.68	%
Total interest-bearing deposits				1,916,706			908		0.10	%			1,836,459			1,593		0.16	%
Borrowings
	Retail repurchase agreements			2,050			1		0.08	%			1,250			-		N/M
Total borrowings				2,050			1		0.08	%			1,250			-		N/M
Total interest-bearing liabilities				1,918,756			909		0.10	%			1,837,709			1,593		0.17	%
Noninterest-bearing demand deposits				855,321									801,512
Other liabilities				38,529									38,609
Total liabilities				2,812,606									2,677,830
Stockholders' equity				426,674									426,571
Total liabilities and stockholders' equity			$	3,239,280								$	3,104,401
Net interest income, FTE(1)						$	52,918								$	52,333
Net interest rate spread									3.64	%								3.75	%
Net interest margin, FTE(1)									3.67	%								3.81	%
(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 $1.74 million and $2.44 million for the six months ended June 30, 2022 and 2021, respectively.

CONDENSED CONSOLIDATED QUARTERLY BALANCE SHEETS (Unaudited)
				June 30,				March 31,				December 31,				September 30,				June 30,
(Amounts in thousands, except per share data)					2022				2022				2021				2021				2021
Assets
Cash and cash equivalents				$	398,242			$	457,306			$	677,439			$	635,007			$	618,738
Debt securities available for sale					287,767				268,703				76,292				77,440				79,842
Loans held for investment, net of unearned income
	(includes covered loans of $7,503 for June 30, 2021) (1)				2,299,798				2,244,296				2,165,569				2,152,103				2,153,731
	Allowance for credit losses				(29,749	)			(28,981	)			(27,858	)			(29,877	)			(31,857	)
Loans held for investment, net					2,270,049				2,215,315				2,137,711				2,122,226				2,121,874
Premises and equipment, net					49,752				50,912				52,284				52,842				53,560
Other real estate owned					579				848				1,015				1,240				1,324
Interest receivable					8,433				8,100				7,900				8,146				8,480
Goodwill					129,565				129,565				129,565				129,565				129,565
Other intangible assets					4,905				5,266				5,622				5,987				6,352
Other assets					109,085				108,112				106,691				107,258				109,548
Total assets				$	3,258,377			$	3,244,127			$	3,194,519			$	3,139,711			$	3,129,283
Liabilities
Deposits
	Noninterest-bearing			$	877,962			$	860,652			$	842,783			$	820,147			$	819,138
	Interest-bearing				1,920,577				1,922,292				1,886,608				1,853,699				1,846,556
Total deposits					2,798,539				2,782,944				2,729,391				2,673,846				2,665,694
Securities sold under agreements to repurchase					2,635				2,488				1,536				1,106				994
Interest, taxes, and other liabilities					39,157				34,539				35,817				37,395				35,061
Total liabilities					2,840,331				2,819,971				2,766,744				2,712,347				2,701,749
Stockholders' equity
Common stock					16,502				16,782				16,878				17,071				17,335
Additional paid-in capital					136,705				144,088				147,619				154,086				161,853
Retained earnings					276,499				269,798				264,824				258,860				250,911
Accumulated other comprehensive loss					(11,660	)			(6,512	)			(1,546	)			(2,653	)			(2,565	)
Total stockholders' equity					418,046				424,156				427,775				427,364				427,534
Total liabilities and stockholders' equity				$	3,258,377			$	3,244,127			$	3,194,519			$	3,139,711			$	3,129,283
Shares outstanding at period-end					16,502,144				16,781,975				16,878,220				17,071,052				17,334,547
Book value per common share				$	25.33			$	25.27			$	25.34			$	25.03			$	24.66
Tangible book value per common share(2)					17.18				17.24				17.34				17.09				16.82
(1) FDIC Loss Share agreement terminated in September 2021.
(2) 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)			2022				2022				2021				2021				2021
Allowance for Credit Losses
Beginning balance		$	28,981			$	27,858			$	29,877			$	31,857			$	34,563
Provision for (recovery of)
credit/loan losses charged to operations			510				1,961				(846	)			(1,394	)			(2,230	)
Charge-offs			(1,469	)			(1,302	)			(1,887	)			(1,255	)			(1,902	)
Recoveries			1,727				464				714				669				1,426
Net recoveries (charge-offs)			258				(838	)			(1,173	)			(586	)			(476	)
Ending balance		$	29,749			$	28,981			$	27,858			$	29,877			$	31,857
Nonperforming Assets
Nonaccrual loans		$	17,826			$	20,487			$	20,768			$	22,070			$	24,085
Accruing loans past due 90 days or more			131				-				87				5				327
Troubled debt restructurings ("TDRs")(1)			515				1,141				1,367				359				133
Total nonperforming loans			18,472				21,628				22,222				22,434				24,545
OREO			579				848				1,015				1,240				1,324
Total nonperforming assets		$	19,051			$	22,476			$	23,237			$	23,674			$	25,869
Additional Information
Total accruing TDRs(3)		$	8,313			$	8,782			$	8,652			$	8,185			$	8,309
Asset Quality Ratios
Nonperforming loans to total loans			0.80	%			0.96	%			1.03	%			1.04	%			1.14	%
Nonperforming assets to total assets			0.58	%			0.69	%			0.73	%			0.75	%			0.83	%
Allowance for credit/loan losses to nonperforming loans			161.05	%			134.00	%			125.36	%			133.18	%			129.79	%
Allowance for credit/loan losses to total loans			1.29	%			1.29	%			1.29	%			1.39	%			1.48	%
Annualized net (recoveries) charge-offs to average loans			-0.05	%			0.15	%			0.22	%			0.11	%			0.09	%
(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