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

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.