ex_466792.htm

EX-99.1 2 ex_466792.htm EXHIBIT 99.1 ex_466792.htm

Exhibit 99.1

NEWS RELEASE

FOR IMMEDIATE RELEASE:	FOR MORE INFORMATION, CONTACT:
January 24, 2023	David D. Brown
	(276) 326-9000

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

Bluefield, Virginia – 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, 2022. The Company reported net income of $12.58 million, or $0.77 per diluted common share, for the quarter ended December 31, 2022. Net income for the year ended December 31, 2022, was $46.66 million or $2.82 per diluted common share.

The Company also declared a quarterly cash dividend to common shareholders of twenty-nine cents ($0.29) per common share, an increase of two cents ($0.02), or 7.41%, over the quarterly dividend declared in the same quarter of 2021. The quarterly dividend is payable to common shareholders of record on February 10, 2023, and is expected to be paid on or about February 24, 2023. This marks the 38^th consecutive year of regular dividends to common shareholders.

During the fourth quarter, the Company entered into an agreement to acquire Mount Airy, North Carolina-based Surrey Bancorp. The acquisition will strengthen the Company’s presence in western North Carolina, result in top market share in Mount Airy, and add approximately $500 million in assets. Surrey has a record of excellent financial performance and a very strong core deposit franchise across its seven branch network. The acquisition is subject to customary regulatory and shareholder approvals and is expected to close in the second quarter of 2023.

Fourth Quarter 2022 and Current Highlights

Income Statement

Net income of $12.58 million for the quarter was an increase of $2.03 million compared to $10.56 million recorded in the same quarter of 2021. The increase is primarily attributable to an increase in net interest income of $5.39 million as well as a decrease in noninterest expense of $971 thousand. The positive increases to income were offset by an increase in the provision for credit losses of $4.26 million compared to the same quarter of 2021.

Annualized return on average assets was 1.59% for the fourth quarter and 1.45% for year-end 2022. Annualized return on average common equity was 11.99% for the fourth quarter and 11.04% for year-end 2022.

Net interest margin for the fourth quarter was 4.34%, which was an 82 basis point increase from 3.52% reported for fourth quarter of 2021. The yield on earning assets increased 79 basis points, primarily driven by increased earnings on loans and securities.

The cost of interest-bearing deposits declined 5 basis points to 0.08%, primarily driven by a decrease in the cost of time deposits and an increase in non-maturing deposits.

Net interest income increased $5.39 million compared to the same quarter of 2021. Interest and fees on loans increased $2.64 million from the same quarter of 2021 and is primarily attributable to loan demand and originations. Interest income from securities of $1.90 million was an increase of $1.54 million over the fourth quarter of 2021. Interest on deposits in banks also increased $981 thousand to $1.22 million for the fourth quarter as a result of the Federal Open Market Committee’s incremental 425 basis point rate increase in overnight rates throughout 2022 as compared to the overnight rates of 2021.

The provision for credit losses of $3.42 million for the quarter was an increase of $4.26 million compared to the same quarter of 2021. The increase was largely attributable to the growth of the loan portfolio throughout 2022 and an economic forecast that projects higher unemployment rates and weaker macroeconomic trends. The fourth quarter and full year of 2021 included recoveries of pandemic-related provisioning.

Salaries and employee benefits for the fourth quarter decreased $580 thousand, or 4.64%, over the same quarter in 2021, while increasing $2.94 million, or 6.65%, for the full year of 2022 compared with 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 $234.63 million, a growth rate of 10.83%, during of 2022. Loan demand and originations were strong in all categories, including construction, commercial real estate, residential mortgage, and consumer loans.

During the fourth quarter, the Company repurchased 55,210 of its common shares for $1.89 million. The Company repurchased 706,117 common shares for $21.31 million during 2022. Share repurchases have been curtailed due to the announced acquisition of Surrey Bancorp.

Non-performing loans to total loans remained low at 0.70% of total loans and continues the declining trend experienced over the past four quarters. The Company experienced net charge-offs for the fourth quarter of 2022 of $2.25 million, or 0.37% of annualized average loans, compared to net charge-offs of $1.17 million, or 0.22% of annualized average loans, for the same period in 2021. Net charge-offs for the year ended December 31, 2022, were $3.87 million, or 0.23% of annualized average loans, compared to net charge-offs of $2.96 million, or 0.18% of annualized average loans, for the same period in 2021.

The allowance for credit losses to total loans was 1.27% at December 31, 2022.

Book value per share at December 31, 2022, was $26.01, an increase of $0.67 from year-end 2021.

Non-GAAP Financial Measures

In addition to financial statements prepared in accordance with U.S. generally accepted accounting principles (“GAAP”), the Company uses certain non-GAAP financial measures that provide useful information for financial and operational decision making, evaluating trends, and comparing financial results to other financial institutions. The non-GAAP financial measures presented in this news release include “tangible book value per common share,” “return on average tangible common equity,” “adjusted earnings,” “adjusted diluted earnings per share,” “adjusted return on average assets,” “adjusted return on average common equity,” “adjusted return on average tangible common equity,” and certain financial measures presented on a fully taxable equivalent (“FTE”) basis. FTE basis is calculated using the federal statutory income tax rate of 21%. While the Company believes certain non-GAAP financial measures enhance the understanding of its business and performance, they are supplemental and not a substitute for, or more important than, financial measures prepared in accordance with GAAP and may not be comparable to those reported by other financial institutions.

About First Community Bankshares, Inc.

First Community Bankshares, Inc., a financial holding company headquartered in Bluefield, Virginia, provides banking products and services through its wholly owned subsidiary First Community Bank. First Community Bank operated 48 branch banking locations in Virginia, West Virginia, North Carolina, and Tennessee as of December 31, 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 $1.28 billion in combined assets as of December 31, 2022. The Company reported consolidated assets of $3.14 billion as of December 31, 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															Twelve Months Ended
(Amounts in thousands, except	December 31,			September 30,			June 30,			March 31,			December 31,			December 31,
share and per share data)	2022			2022			2022			2022			2021			2022			2021
Interest income
Interest and fees on loans	$	27,873		$	26,405		$	25,651		$	24,641		$	25,236		$	104,570		$	102,832
Interest on securities		1,900			1,785			1,551			750			362			5,986			1,737
Interest on deposits in banks		1,215			1,532			768			248			234			3,763			741
Total interest income		30,988			29,722			27,970			25,639			25,832			114,319			105,310
Interest expense
Interest on deposits		366			380			422			486			600			1,654			2,835
Interest on borrowings		1			-			1			-			-			2			1
Total interest expense		367			380			423			486			600			1,656			2,836
Net interest income		30,621			29,342			27,547			25,153			25,232			112,663			102,474
Provision for (recovery of) credit losses		3,416			685			510			1,961			(846	)		6,572			(8,471	)
Net interest income after provision		27,205			28,657			27,037			23,192			26,078			106,091			110,945
Noninterest income		9,184			9,950			8,854			9,194			9,215			37,182			34,301
Noninterest expense		20,730			21,145			21,255			19,986			21,701			83,116			78,718
Income before income taxes		15,659			17,462			14,636			12,400			13,592			60,157			66,528
Income tax expense		3,076			4,111			3,423			2,885			3,037			13,495			15,360
Net income	$	12,583		$	13,351		$	11,213		$	9,515		$	10,555		$	46,662		$	51,168

Earnings per common share
Basic	$	0.78		$	0.82		$	0.67		$	0.57		$	0.62		$	2.82		$	2.95
Diluted		0.77			0.81			0.67			0.56			0.62			2.82			2.94
Cash dividends per common share
Regular		0.29			0.29			0.27			0.27			0.27			1.12			1.04
Weighted average shares outstanding
Basic		16,229,289			16,378,022			16,662,817			16,817,284			16,974,005			16,519,848			17,335,615
Diluted		16,281,922			16,413,202			16,682,615			16,864,515			17,038,980			16,562,257			17,402,936
Performance ratios
Return on average assets		1.59	%		1.63	%		1.38	%		1.20	%		1.32	%		1.45	%		1.63	%
Return on average common equity		11.99	%		12.60	%		10.61	%		8.98	%		9.77	%		11.04	%		11.96	%
Return on average tangible common equity⁽¹⁾		17.75	%		18.51	%		15.56	%		13.10	%		14.28	%		16.17	%		17.53	%

(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										Twelve Months Ended
	December 31,		September 30,		June 30,		March 31,		December 31,		December 31,
(Amounts in thousands)	2022		2022		2022		2022		2021		2022		2021
Noninterest income
Wealth management	$	958	$	932	$	993	$	972	$	940	$	3,855	$	3,853
Service charges on deposits		3,354		3,689		3,672		3,498		3,718		14,213		13,446
Other service charges and fees		3,006		2,988		3,297		3,017		3,091		12,308		12,422
Net FDIC indemnification asset amortization		-		-		-		-		-		-		(1,226	)
Gain on divestiture		-		1,658		-		-		-		1,658		-
Other operating income		1,866		683		892		1,707		1,466		5,148		5,806
Total noninterest income	$	9,184	$	9,950	$	8,854	$	9,194	$	9,215	$	37,182	$	34,301
Noninterest expense
Salaries and employee benefits	$	11,913	$	12,081	$	11,518	$	11,671	$	12,493	$	47,183	$	44,239
Occupancy expense		1,196		1,188		1,165		1,269		1,368		4,818		4,913
Furniture and equipment expense		1,413		1,478		1,496		1,614		1,418		6,001		5,627
Service fees		1,905		1,635		2,563		1,503		1,946		7,606		6,324
Advertising and public relations		574		718		577		540		589		2,409		2,076
Professional fees		98		208		544		453		455		1,303		1,524
Amortization of intangibles		364		365		360		357		364		1,446		1,446
FDIC premiums and assessments		330		321		257		218		213		1,126		832
Merger expense		596		-		-		-		-		596		-
Divestiture expense		-		153		-		-		-		153		-
Other operating expense		2,341		2,998		2,775		2,361		2,855		10,475		11,737
Total noninterest expense	$	20,730	$	21,145	$	21,255	$	19,986	$	21,701	$	83,116	$	78,718

RECONCILIATION OF GAAP NET INCOME TO NON-GAAP ADJUSTED EARNINGS (Unaudited)

	Three Months Ended															Twelve Months Ended
	December 31,			September 30,			June 30,			March 31,			December 31,			December 31,
(Amounts in thousands, except	2022			2022			2022			2022			2021			2022			2021
per share data)
Net income	$	12,583		$	13,351		$	11,213		$	9,515		$	10,555		$	46,662		$	51,168
Non-GAAP adjustments:
Merger expense		596			-			-			-			-			596			-
Divestiture expense		-			153			-			-			-			153			-
Gain on divestiture		-			(1,658	)		-			-			-			(1,658	)
Other items⁽¹⁾		(450	)		-			(92	)		-			-			(542	)		-
Total adjustments		146			(1,505	)		(92	)		-			-			(1,451	)		-
Tax effect		(29	)		(361	)		(22	)		-			-			(412	)		-
Adjusted earnings, non-GAAP	$	12,758		$	12,207		$	11,143		$	9,515		$	10,555		$	45,623		$	51,168

Adjusted diluted earnings per common share, non-GAAP	$	0.78		$	0.74		$	0.67		$	0.56		$	0.62		$	2.75		$	2.94
Performance ratios, non-GAAP
Adjusted return on average assets		1.61	%		1.49	%		1.37	%		1.20	%		1.32	%		1.42	%		1.63	%
Adjusted return on average common equity		12.16	%		11.52	%		10.55	%		8.98	%		9.77	%		10.80	%		11.96	%
Adjusted return on average tangible common equity⁽²⁾		17.93	%		16.92	%		15.46	%		13.10	%		14.28	%		15.84	%		17.53	%

(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,
	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⁾	$	2,383,161	$	27,944		4.65%	$	2,163,613	$	25,274		4.63%
Securities available for sale		299,488		1,942		2.57%		76,556		418		2.17%
Interest-bearing deposits		130,363		1,218		3.71%		613,377		237		0.15%
Total earning assets		2,813,012		31,104		4.39%		2,853,546		25,929		3.60%
Other assets		326,043						328,866
Total assets	$	3,139,055					$	3,182,412

Liabilities and stockholders' equity
Interest-bearing deposits
Demand deposits	$	666,517	$	27		0.02%	$	668,335	$	28		0.02%
Savings deposits		856,755		106		0.05%		843,501		64		0.03%
Time deposits		293,520		232		0.31%		362,869		509		0.56%
Total interest-bearing deposits		1,816,792		365		0.08%		1,874,705		601		0.13%
Borrowings
Retail repurchase agreements		2,473		1		0.07%		1,236		-		N/M
Total borrowings		2,473		1		0.07%		1,236		-		N/M
Total interest-bearing liabilities		1,819,265		366		0.08%		1,875,941		601		0.13%
Noninterest-bearing demand deposits		864,537						838,920
Other liabilities		38,993						38,986
Total liabilities		2,722,795						2,753,847
Stockholders' equity		416,260						428,565
Total liabilities and stockholders' equity	$	3,139,055					$	3,182,412
Net interest income, FTE⁽¹⁾			$	30,738					$	25,328
Net interest rate spread						4.31%						3.47%
Net interest margin, FTE⁽¹⁾						4.34%						3.52%

(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 $395 thousand and $1.10 million for the three months ended December 31, 2022 and 2021, respectively.

AVERAGE BALANCE SHEETS AND NET INTEREST INCOME ANALYSIS (Unaudited)

	Twelve Months Ended December 31,
	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⁾	$	2,298,503	$	104,830		4.56%	$	2,153,099	$	102,996		4.78%
Securities available for sale		256,221		6,172		2.41%		81,049		2,008		2.48%
Interest-bearing deposits		330,785		3,767		1.14%		570,040		745		0.13%
Total earning assets		2,885,509		114,769		3.98%		2,804,188		105,749		3.77%
Other assets		328,635						330,640
Total assets	$	3,214,144					$	3,134,828

Liabilities and stockholders' equity
Interest-bearing deposits
Demand deposits	$	683,502	$	112		0.02%	$	646,999	$	127		0.02%
Savings deposits		880,171		306		0.03%		816,845		281		0.03%
Time deposits		322,158		1,235		0.38%		387,249		2,427		0.63%
Total interest-bearing deposits		1,885,831		1,653		0.09%		1,851,093		2,835		0.15%
Borrowings
Retail repurchase agreements		2,239		2		0.07%		1,194		1		0.07%
Total borrowings		2,239		2		0.07%		1,194		1		0.07%
Total interest-bearing liabilities		1,888,070		1,655		0.09%		1,852,287		2,836		0.15%
Noninterest-bearing demand deposits		864,224						816,638
Other liabilities		39,363						38,151
Total liabilities		2,791,657						2,707,076
Stockholders' equity		422,487						427,752
Total liabilities and stockholders' equity	$	3,214,144					$	3,134,828
Net interest income, FTE⁽¹⁾			$	113,114					$	102,913
Net interest rate spread						3.89%						3.62%
Net interest margin, FTE⁽¹⁾						3.92%						3.67%

(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 $2.62 million and $4.66 million for the twelve months ended December 31, 2022 and 2021, respectively.

CONDENSED CONSOLIDATED QUARTERLY BALANCE SHEETS (Unaudited)

	December 31,			September 30,			June 30,			March 31,			December 31,
(Amounts in thousands, except per share data)	2022			2022			2022			2022			2021
Assets
Cash and cash equivalents	$	170,846		$	229,095		$	398,242		$	457,306		$	677,439
Debt securities available for sale		300,349			299,620			287,767			268,703			76,292
Loans held for investment, net of unearned income		2,400,197			2,362,733			2,299,798			2,244,296			2,165,569
Allowance for credit losses		(30,556	)		(29,388	)		(29,749	)		(28,981	)		(27,858	)
Loans held for investment, net		2,369,641			2,333,345			2,270,049			2,215,315			2,137,711
Premises and equipment, net		47,340			47,891			49,752			50,912			52,284
Other real estate owned		703			559			579			848			1,015
Interest receivable		9,279			8,345			8,433			8,100			7,900
Goodwill		129,565			129,565			129,565			129,565			129,565
Other intangible assets		4,176			4,541			4,905			5,266			5,622
Other assets		103,673			107,838			109,085			108,112			106,691
Total assets	$	3,135,572		$	3,160,799		$	3,258,377		$	3,244,127		$	3,194,519

Liabilities
Deposits
Noninterest-bearing	$	872,168		$	878,423		$	877,962		$	860,652		$	842,783
Interest-bearing		1,806,647			1,831,798			1,920,577			1,922,292			1,886,608
Total deposits		2,678,815			2,710,221			2,798,539			2,782,944			2,729,391
Securities sold under agreements to repurchase		1,874			1,958			2,635			2,488			1,536
Interest, taxes, and other liabilities		32,898			36,362			39,157			34,539			35,817
Total liabilities		2,713,587			2,748,541			2,840,331			2,819,971			2,766,744

Stockholders' equity
Common stock		16,225			16,273			16,502			16,782			16,878
Additional paid-in capital		128,508			129,914			136,705			144,088			147,619
Retained earnings		292,971			285,096			276,499			269,798			264,824
Accumulated other comprehensive loss		(15,719	)		(19,025	)		(11,660	)		(6,512	)		(1,546	)
Total stockholders' equity		421,985			412,258			418,046			424,156			427,775
Total liabilities and stockholders' equity	$	3,135,572		$	3,160,799		$	3,258,377		$	3,244,127		$	3,194,519

Shares outstanding at period-end		16,225,399			16,273,177			16,502,144			16,781,975			16,878,220
Book value per common share	$	26.01		$	25.33		$	25.33		$	25.27		$	25.34
Tangible book value per common share⁽¹⁾		17.76			17.09			17.18			17.24			17.34

(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)

	December 31,			September 30,			June 30,			March 31,			December 31,
(Amounts in thousands)	2022			2022			2022			2022			2021
Allowance for Credit Losses
Beginning balance	$	29,388		$	29,749		$	28,981		$	27,858		$	29,877
Provision for (recovery of) credit losses charged to operations		3,416			685			510			1,961			(846	)
Charge-offs		(2,873	)		(2,158	)		(1,469	)		(1,302	)		(1,887	)
Recoveries		625			1,112			1,727			464			714
Net (charge-offs) recoveries		(2,248	)		(1,046	)		258			(838	)		(1,173	)
Ending balance	$	30,556		$	29,388		$	29,749		$	28,981		$	27,858

Nonperforming Assets
Nonaccrual loans	$	15,208		$	15,303		$	17,826		$	20,487		$	20,768
Accruing loans past due 90 days or more		142			131			131			-			87
Troubled debt restructurings ("TDRs")⁽¹⁾		1,346			1,331			515			1,141			1,367
Total nonperforming loans		16,696			16,765			18,472			21,628			22,222
OREO		703			559			579			848			1,015
Total nonperforming assets	$	17,399		$	17,324		$	19,051		$	22,476		$	23,237

Additional Information
Total accruing TDRs ⁽²⁾	$	7,112		$	7,028		$	8,313		$	8,782		$	8,652

Asset Quality Ratios
Nonperforming loans to total loans		0.70	%		0.71	%		0.80	%		0.96	%		1.03	%
Nonperforming assets to total assets		0.55	%		0.55	%		0.58	%		0.69	%		0.73	%
Allowance for credit losses to nonperforming loans		183.01	%		175.29	%		161.05	%		134.00	%		125.36	%
Allowance for credit losses to total loans		1.27	%		1.24	%		1.29	%		1.29	%		1.29	%
Annualized net charge-offs (recoveries) to average loans		0.37	%		0.18	%		-0.05	%		0.15	%		0.22	%

(1)	Accruing TDRs restructured within the past six months or nonperforming
(2)	Accruing total TDRs