First Community Bankshares : Announces Record 2021 Full Year Results, Fourth Quarter 2021 Results, and Quarterly Cash Dividend Declared - Form 8-K

First Community Bankshares, Inc. Announces Record 2021 Full Year Results, Fourth Quarter 2021 Results, and

Quarterly Cash Dividend Declared

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 year and quarter ended December 31, 2021. Annual net income for 2021 was a record $51.17 million, or $2.94 per diluted common share. The Company reported net income of $10.56 million, or $0.62 per diluted common share, for the quarter ended December 31, 2021.

The Company also declared a quarterly cash dividend to common shareholders of twenty-seven cents ($0.27) per common share, which is an increase of 8.00% over the same quarter last year. The quarterly dividend is payable to common shareholders of record on February 11, 2022, and is expected to be paid on or about February 25, 2022. 2022 is the 37^th consecutive year of regular dividends to common shareholders.

Fourth Quarter 2021 and Current Highlights

Income Statement

o

Annual net income for 2021 of $51.17 million, or $2.94 per diluted common share, was an increase of $15.24 million over 2020 and represents a 45.54% increase in diluted earnings per share compared to 2020. A reversal of $8.47 million in the allowance for credit losses in 2021 accounts for a large portion of the increase in net income. The decreases in credit loss provisioning are primarily due to significantly improved economic forecasts and GDP growth in the current year, as well as strong credit quality metrics, versus prior year provisioning driven by the pandemic. The increase was offset by a decrease in net interest income of $6.10 million, or 5.62%, driven by the current historically low interest rate environment, as well as a $3.33 million decrease in accretion on acquired loans

	o	Net income for the fourth quarter of 2021 decreased $995 thousand to $10.56 million, or $0.62 per diluted common share, compared to the same quarter of 2020. The decrease was primarily driven by a decrease in net interest income of $2.49 million, or 8.97%, due to the current historically low interest rate environment, as well as a $1.67 million decrease in accretion on acquired loans. The decrease in net interest income was offset by the reversal of $846 thousand in allowance for credit losses for the fourth quarter.
	o	2021 year-to-date return on average common equity increased to 11.96% compared to 8.54% in 2020. Annualized fourth quarter-to-date return on average common equity decreased to 9.77% compared to 10.82% over the same quarter of 2020.
	o	2021 year-to-date return on average assets increased to 1.63% compared to 1.24% for 2020. Annualized quarter-to-date return on average assets decreased to 1.32% compared to 1.54% over the same quarter of 2020.
	o	Year-to-date non-interest income increased 14.98% to $34.30 million, over last year. Non-interest income for the fourth quarter of 2021 increased $1.48 million, or 19.16%, compared to the same quarter of the prior year. Both increases are largely attributable to increases in other service charges due to the more vibrant state of local economies with increased customer activity compared with last year.

Balance Sheet and Asset Quality

o

Year-to-date, the Company has repurchased 949,386 common shares, or 5.36% of outstanding, for $28.88 million.

o

During the fourth quarter, the Company repurchased 222,700 common shares for $7.45 million.

o

Net charge-offs for the fourth quarter of 2021 were $1.17 million, or 0.22% of annualized average loans, compared to net charge-offs of $1.73 million, or 0.26% of annualized average loans, for the same period in 2020. Non-performing loans to total loans remained a very low 1.03%.

o

The allowance for credit losses to total loans remains very strong at 1.29% of total loans.

	o	The SBA had forgiven $56.86 million, or 93.20%, of the Company's first round Paycheck Protection Program ("PPP") loan balances through December 31, 2021. Current PPP loan balances at December 31, 2021, which include second round originations, were $20.64 million.
	o	Book value per share at December 31, 2021, was $25.34; an increase of $1.26 from year-end 2020.

1

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 December 31, 2021. First Community Bank offers wealth management and investment advice through its Trust Division and First Community Wealth Management, which collectively managed and administered $1.32 billion in combined assets as of December 31, 2021. The Company reported consolidated assets of $3.19 billion as of December 31, 2021. 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.

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CONDENSED CONSOLIDATED STATEMENTS OF INCOME (Unaudited)

			Three Months Ended			Twelve Months Ended
			December 31,			September 30,			June 30,			March 31,			December 31,			December 31,
(Amounts in thousands, except share and per share data)			2021			2021			2021			2021			2020			2021			2020
Interest income
Interest and fees on loans			$	25,236			$	25,119			$	25,937			$	26,540			$	28,101			$	102,832			$	110,447
Interest on securities				362				445				435				495				549				1,737				2,789
Interest on deposits in banks				234				225				166				116				96				741				800
Total interest income				25,832				25,789				26,538				27,151				28,746				105,310				114,036
Interest expense
Interest on deposits				600				642				724				869				1,029				2,835				5,460
Interest on borrowings				-				1				-				-				-				1				4
Total interest expense				600				643				724				869				1,029				2,836				5,464
Net interest income				25,232				25,146				25,814				26,282				27,717				102,474				108,572
(Recovery of) provision for credit losses				(846	)			(1,394	)			(2,230	)			(4,001	)			634				(8,471	)			12,668
Net interest income after provision				26,078				26,540				28,044				30,283				27,083				110,945				95,904
Noninterest income				9,215				8,720				8,797				7,569				7,733				34,301				29,833
Noninterest expense				21,701				18,836				19,361				18,820				19,877				78,718				79,625
Income before income taxes				13,592				16,424				17,480				19,032				14,939				66,528				46,112
Income tax expense				3,037				3,816				4,077				4,430				3,389				15,360				10,186
Net income			$	10,555			$	12,608			$	13,403			$	14,602			$	11,550			$	51,168			$	35,926
Earnings per common share
Basic			$	0.62			$	0.73			$	0.77			$	0.83			$	0.65			$	2.95			$	2.02
Diluted				0.62				0.73				0.76				0.82				0.65				2.94				2.02
Cash dividends per common share
Regular				0.27				0.27				0.25				0.25				0.25				1.04				1.00
Weighted average shares outstanding
Basic				16,974,005				17,221,244				17,486,182				17,669,937				17,717,356				17,335,615				17,781,748
Diluted				17,038,980				17,279,576				17,536,144				17,729,185				17,751,805				17,402,936				17,815,380
Performance ratios
Return on average assets				1.32	%			1.59	%			1.70	%			1.94	%			1.54	%			1.63	%			1.24	%
Return on average common equity				9.77	%			11.65	%			12.55	%			13.94	%			10.82	%			11.96	%			8.54	%
Return on average tangible common equity(1)				14.28	%			17.04	%			18.40	%			20.54	%			15.96	%			17.53	%			12.68	%

(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)		2021			2021			2021			2021			2020			2021			2020
Noninterest income
Wealth management		$	940			$	974			$	1,058			$	881			$	810			$	3,853			$	3,417
Service charges on deposits			3,718				3,599				3,098				3,031				3,478				13,446				13,019
Other service charges and fees			3,091				3,143				3,166				3,022				2,737				12,422				10,333
Net gain on sale of securities			-				-				-				-				-				-				385
Net FDIC indemnification asset amortization			-				-				(946	)			(280	)			(338	)			(1,226	)			(1,690	)
Other operating income			1,466				1,004				2,421				915				1,046				5,806				4,369
Total noninterest income		$	9,215			$	8,720			$	8,797			$	7,569			$	7,733			$	34,301			$	29,833
Noninterest expense
Salaries and employee benefits		$	12,493			$	10,646			$	10,216			$	10,884			$	11,119			$	44,239			$	44,005
Occupancy expense			1,368				1,155				1,115				1,275				1,225				4,913				5,043
Furniture and equipment expense			1,418				1,385				1,457				1,367				1,446				5,627				5,558
Service fees			1,946				1,530				1,513				1,335				1,232				6,324				5,665
Advertising and public relations			589				536				616				335				534				2,076				1,951
Professional fees			455				313				290				466				276				1,524				1,224
Amortization of intangibles			364				365				360				357				364				1,446				1,450
FDIC premiums and assessments			213				216				204				199				202				832				426
Merger, acquisition, and divestiture expense			-				-				-				-				-				-				1,893
Other operating expense			2,855				2,690				3,590				2,602				3,479				11,737				12,410
Total noninterest expense		$	21,701			$	18,836			$	19,361			$	18,820			$	19,877			$	78,718			$	79,625

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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,
		2021			2021			2021			2021			2020			2021			2020
(Amounts in thousands, except per share data)
Net income		$	10,555			$	12,608			$	13,403			$	14,602			$	11,550			$	51,168			$	35,926
Non-GAAP adjustments:
Net (gain) loss on sale of securities			-				-				-				-				-				-				(385	)
Merger, acquisition, and divestiture expense			-				-				-				-				-				-				1,893
Total adjustments			-				-				-				-				-				-				1,508
Tax effect			-				-				-				-				-				-				354
Adjusted earnings, non-GAAP		$	10,555			$	12,608			$	13,403			$	14,602			$	11,550			$	51,168			$	37,080
Adjusted diluted earnings per common share, non-GAAP		$	0.62			$	0.73			$	0.76			$	0.82			$	0.65			$	2.94			$	2.08
Performance ratios, non-GAAP
Adjusted return on average assets			1.32	%			1.59	%			1.70	%			1.94	%			1.54	%			1.63	%			1.28	%
Adjusted return on average common equity			9.77	%			11.65	%			12.55	%			13.94	%			10.82	%			11.96	%			8.81	%
Adjusted return on average tangible common equity(1)			14.28	%			17.04	%			18.40	%			20.54	%			15.96	%			17.53	%			13.08	%

A non-GAAP financial measure defined as adjusted earnings divided by average stockholders' equity less average goodwill and other intangible assets

4

AVERAGE BALANCE SHEETS AND NET INTEREST INCOME ANALYSIS (Unaudited)

		Three Months Ended December 31,
		2021			2020
		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)		$	2,163,613			$	25,274				4.63	%		$	2,188,069			$	28,143				5.12	%
Securities available for sale			76,556				418				2.17	%			87,592				640				2.91	%
Interest-bearing deposits			613,377				237				0.15	%			375,088				99				0.11	%
Total earning assets			2,853,546				25,929				3.60	%			2,650,749				28,882				4.33	%
Other assets			328,866												337,906
Total assets		$	3,182,412											$	2,988,655
Liabilities and stockholders' equity
Interest-bearing deposits
Demand deposits		$	668,335			$	28				0.02	%		$	594,222			$	50				0.03	%
Savings deposits			843,501				64				0.03	%			739,312				112				0.06	%
Time deposits			362,869				509				0.56	%			428,849				867				0.80	%
Total interest-bearing deposits			1,874,705				601				0.13	%			1,762,383				1,029				0.23	%
Borrowings
Retail repurchase agreements			1,236				-			N/M				925				1				0.14	%
Total borrowings			1,236				-			N/M				925				1				0.14	%
Total interest-bearing liabilities			1,875,941				601				0.13	%			1,763,308				1,030				0.23	%
Noninterest-bearing demand deposits			838,920												763,412
Other liabilities			38,986												37,305
Total liabilities			2,753,847												2,564,025
Stockholders' equity			428,565												424,630
Total liabilities and stockholders' equity		$	3,182,412											$	2,988,655
Net interest income, FTE(1)						$	25,328											$	27,852
Net interest rate spread											3.47	%											4.10	%
Net interest margin, FTE(1)											3.52	%											4.18	%

(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 $1.10 million and $2.77 million for the three months ended December 31, 2021 and 2020, respectively.

5

AVERAGE BALANCE SHEETS AND NET INTEREST INCOME ANALYSIS (Unaudited)

		Twleve Months Ended December 31,
		2021			2020
		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)		$	2,153,099			$	102,996				4.78	%		$	2,142,637			$	110,619				5.16	%
Securities available for sale			81,049				2,008				2.48	%			105,005				3,259				3.10	%
Interest-bearing deposits			570,040				745				0.13	%			296,495				805				0.27	%
Total earning assets			2,804,188				105,749				3.77	%			2,544,137				114,683				4.51	%
Other assets			330,640												348,150
Total assets		$	3,134,828											$	2,892,287
Liabilities and stockholders' equity
Interest-bearing deposits
Demand deposits		$	646,999			$	127				0.02	%		$	556,279			$	311				0.06	%
Savings deposits			816,845				281				0.03	%			711,831				902				0.13	%
Time deposits			387,249				2,427				0.63	%			456,755				4,247				0.93	%
Total interest-bearing deposits			1,851,093				2,835				0.15	%			1,724,865				5,460				0.32	%
Borrowings
Retail repurchase agreements			1,194				1				0.07	%			1,145				3				0.28	%
FHLB advances and other borrowings			-				-				-				36				1				2.23	%
Total borrowings			1,194				1				0.07	%			1,181				4				0.34	%
Total interest-bearing liabilities			1,852,287				2,836				0.15	%			1,726,046				5,464				0.32	%
Noninterest-bearing demand deposits			816,638												707,623
Other liabilities			38,151												37,826
Total liabilities			2,707,076												2,471,495
Stockholders' equity			427,752												420,792
Total liabilities and stockholders' equity		$	3,134,828											$	2,892,287
Net interest income, FTE(1)						$	102,913											$	109,219
Net interest rate spread											3.62	%											4.19	%
Net interest margin, FTE(1)											3.67	%											4.29	%

(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 $4.66 million and $7.99 million for the twelve months ended December 31, 2021 and 2020, respectively.

6

CONDENSED CONSOLIDATED QUARTERLY BALANCE SHEETS (Unaudited)

			December 31,			September 30,			June 30,			March 31,			December 31,
(Amounts in thousands, except per share data)			2021			2021			2021			2021			2020
Assets
Cash and cash equivalents			$	677,439			$	635,007			$	618,738			$	628,745			$	456,561
Debt securities available for sale				76,292				77,440				79,842				87,643				83,358
Loans held for investment, net of unearned income (includes covered loans of $0, $9,041, $9,680, $10,744,and $11,257, for the stated periods, respectively) (1)				2,165,569				2,152,103				2,153,731				2,146,640				2,186,632
Allowance for credit losses (2)				(27,858	)			(29,877	)			(31,857	)			(34,563	)			(26,182	)
Loans held for investment, net				2,137,711				2,122,226				2,121,874				2,112,077				2,160,450
FDIC indemnification asset				-				-				-				946				1,223
Premises and equipment, net				52,284				52,842				53,560				57,371				57,700
Other real estate owned				1,015				1,240				1,324				1,740				2,083
Interest receivable				7,900				8,146				8,480				8,724				9,052
Goodwill				129,565				129,565				129,565				129,565				129,565
Other intangible assets				5,622				5,987				6,352				6,712				7,069
Other assets				106,691				107,258				109,548				106,543				104,075
Total assets			$	3,194,519			$	3,139,711			$	3,129,283			$	3,140,066			$	3,011,136
Liabilities
Deposits
Noninterest-bearing			$	842,783			$	820,147			$	819,138			$	824,576			$	772,795
Interest-bearing				1,886,608				1,853,699				1,846,556				1,848,524				1,773,452
Total deposits				2,729,391				2,673,846				2,665,694				2,673,100				2,546,247
Securities sold under agreements to repurchase				1,536				1,106				994				1,519				964
Interest, taxes, and other liabilities				35,817				37,395				35,061				39,448				37,195
Total liabilities				2,766,744				2,712,347				2,701,749				2,714,067				2,584,406
Stockholders' equity
Common stock				16,878				17,071				17,335				17,592				17,723
Additional paid-in capital				147,619				154,086				161,853				169,173				173,345
Retained earnings				264,824				258,860				250,911				241,889				237,585
Accumulated other comprehensive loss				(1,546	)			(2,653	)			(2,565	)			(2,655	)			(1,923	)
Total stockholders' equity				427,775				427,364				427,534				425,999				426,730
Total liabilities and stockholders' equity			$	3,194,519			$	3,139,711			$	3,129,283			$	3,140,066			$	3,011,136
Shares outstanding at period-end				16,878,220				17,071,052				17,334,547				17,592,009				17,722,507
Book value per common share			$	25.34			$	25.03			$	24.66			$	24.22			$	24.08
Tangible book value per common share(3)				17.34				17.09				16.82				16.47				16.37

(1)	No covered loans for December 2021 and September 2021. FDIC Loss Share agreement terminated in September 2021.
(2)	Effective January 1, 2021, the Company adopted the current expected credit loss methodology ("CECL"); prior to January 1, 2021, the Company utilized the incurred credit loss methodology.
(3)	A non-GAAP financial measure defined as stockholders' equity less goodwill and other intangible assets, divided by shares outstanding

7

SELECTED CREDIT QUALITY INFORMATION (Unaudited)

		December 31,			September 30,			June 30,			March 31,			December 31,
(Amounts in thousands)		2021			2021			2021			2021			2020
Allowance for Credit Losses (1)
Beginning balance		$	29,877			$	31,857			$	34,563			$	26,182			$	27,277
Cumulative effect of adoption of ASU 2016-13			-				-				-				13,107				-
(Recovery of) provision forcredit/loan losses charged to operations			(846	)			(1,394	)			(2,230	)			(4,001	)			634
Charge-offs			(1,887	)			(1,255	)			(1,902	)			(1,730	)			(2,194	)
Recoveries			714				669				1,426				1,005				465
Net charge-offs			(1,173	)			(586	)			(476	)			(725	)			(1,729	)
Ending balance		$	27,858			$	29,877			$	31,857			$	34,563			$	26,182
Nonperforming Assets
Nonaccrual loans		$	20,768			$	22,070			$	24,085			$	26,106			$	22,003
Accruing loans past due 90 days or more			87				5				327				171				295
Troubled debt restructurings ("TDRs")(2)			1,367				359				133				308				187
Total nonperforming loans			22,222				22,434				24,545				26,585				22,485
OREO			1,015				1,240				1,324				1,740				2,083
Total nonperforming assets		$	23,237			$	23,674			$	25,869			$	28,325			$	24,568
Additional Information
Total Accruing TDRs(3)		$	8,652			$	8,185			$	8,309			$	9,027			$	10,248
Asset Quality Ratios
Nonperforming loans to total loans			1.03	%			1.04	%			1.14	%			1.24	%			1.03	%
Nonperforming assets to total assets			0.73	%			0.75	%			0.83	%			0.90	%			0.82	%
Allowance for credit/loan losses to nonperforming loans			125.36	%			133.18	%			129.79	%			130.01	%			116.44	%
Allowance for credit/loan losses to total loans			1.29	%			1.39	%			1.48	%			1.61	%			1.20	%
Annualized net charge-offs to average loans			0.22	%			0.11	%			0.09	%			0.14	%			0.26	%

(1)	Effective January 1, 2021, the Company adopted the current expected credit loss methodology ("CECL"); prior to January 1, 2021, the Company utilized the incurred credit loss methodology.
(2)	Accruing TDRs restructured within the past six months or nonperforming
(3)	Accruing total TDRs

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