GlobeNewswire Inc | Jul 28, 2021 04:00PM EDT

July 28, 2021

BLUEFIELD, Va., July 28, 2021 (GLOBE NEWSWIRE) -- 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, 2021. The Company reported net income of $13.40 million, or $0.76 per diluted common share, for the quarter ended June 30, 2021, which was an increase of $0.30 per diluted common share, or 65.22%, over the same quarter of 2020. Net income for the six months ended June 30, 2021 was $28.01 million or $1.59 per diluted common share, which represents a 76.67% increase in diluted earnings per share compared to the same period of 2020.

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 last quarter and last year. The quarterly dividend is payable to common shareholders of record on August 9, 2021, and is expected to be paid on or about August 23, 2021. 2021 is the 36th consecutive year of regular dividends to common shareholders.

Second Quarter 2021 and Current Highlights

General

-- Net income for the quarter increased $5.17 million to $13.40 million compared to the same quarter of 2020. The large increase in net income includes the reversal of $2.23 million in allowance for credit losses for the second quarter of 2021. Net income for the six month period increased $11.90 million compared to the same period of 2020. Similarly, for the six month period, a reversal of $6.23 million in the allowance for credit losses accounts for a large part of the increase in income over the same period in 2020. The decreases in credit loss provisioning are primarily due to significantly improved economic forecasts and GDP growth in the current year, and prior year provisioning driven by the pandemic. -- During the second quarter, the Company repurchased 261,600 common shares for $7.98 million. Year-to-date the Company has repurchased 449,300 common shares for $12.96 million.

Income Statement

-- Diluted earnings per share increased $0.30 to $0.76 compared to the same quarter of 2020. Diluted earnings per share for the six month period increased $0.69 to $1.59 compared to 2020. -- Due to forecasted continued improving jobless rates and other economic indicators, as well as strong credit quality metrics, the Company released a substantial amount of allowance for credit losses for the quarter resulting in a reversal of $2.23 million in the provision for credit losses; a significant improvement from the $3.83 million loan loss provision recorded in the second quarter of 2020 at the onset of the COVID-19 pandemic. For the six month period, the Company reversed $6.23 million compared to $7.33 million in loan loss provision recorded for the same period in 2020. -- Annualized return on average equity increased to 12.55% compared to 7.97% from the same quarter of 2020, and return on average equity for the first six months increased to 13.24% compared to 7.73% from the same period last year. -- Annualized return on average assets increased to 1.70% compared to 1.15% from the same quarter of 2020, while year-to-date return on average assets increased to 1.82% compared to 1.15% for the same period of 2020. -- Non-interest income for the second quarter of 2021 increased $1.88 million, or 27.25%, compared to the prior year. Year-to-date non-interest income increased 13.17% to $16.37 million compared to last year. Both increases are largely attributable to themore vibrant state of local economies with increased customer activity compared with last spring. -- Other income includes $946 thousand of accelerated amortization that eliminates the carrying value of the indemnification asset with no anticipated claims in the future.

Balance Sheet and Asset Quality

-- Net charge-offs for the first quarter of 2021 were $476 thousand and the allowance for credit losses remains very strong at 1.48% of total loans. -- As of June 30, 2021, total COVID-19 loan deferrals stood at $4.02 million, down significantly from the peak of $436.11million at June 30, 2020. -- The SBA had forgiven $48.27 million, or 79.15%, of the Companys first round Paycheck Protection Program loan balances through June 30, 2021. Current PPP loan balances at June 30, 2021, which include second round originations were, $41.63 million. -- Book value per share at June 30, 2021, was $24.66, an increase of $0.58 from year-end 2020.

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, 2021. First Community Bank offers wealth management and investment advice through its Trust Division and First Community Wealth Management, which collectively managed and administered $1.27 billion in combined assets as of June 30, 2021. The Company reported consolidated assets of $3.13 billion as of June 30, 2021. The Companys common stock is listed on the NASDAQ Global Select Market under the trading symbol, FCBC. Additional investor information is available on the Companys 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 Companys 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 inthousands,except share 2021 2021 2020 2020 2020 2021 2020 and per sharedata)Interest income Interest and fees on $ 25,937 $ 26,540 $ 28,101 $ 27,297 $ 26,991 $ 52,477 $ 55,049 loans Interest on 435 495 549 609 713 930 1,631 securities Interest on deposits in 166 116 96 89 82 282 615 banksTotal interest 26,538 27,151 28,746 27,995 27,786 53,689 57,295 incomeInterest expense Interest on 724 869 1,029 1,161 1,445 1,593 3,270 deposits Interest on - - - - 2 - 4 borrowingsTotal interest 724 869 1,029 1,161 1,447 1,593 3,274 expenseNet interest 25,814 26,282 27,717 26,834 26,339 52,096 54,021 income(Recovery of)provision for (2,230 ) (4,001 ) 634 4,703 3,831 (6,231 ) 7,331 credit lossesNet interestincome after 28,044 30,283 27,083 22,131 22,508 58,327 46,690 provisionNoninterest 8,797 7,569 7,733 7,638 6,913 16,366 14,462 incomeNoninterest 19,361 18,820 19,877 19,171 18,913 38,181 40,577 expenseIncome before 17,480 19,032 14,939 10,598 10,508 36,512 20,575 income taxesIncome tax 4,077 4,430 3,389 2,332 2,270 8,507 4,465 expenseNet income $ 13,403 $ 14,602 $ 11,550 $ 8,266 $ 8,238 $ 28,005 $ 16,110 Earnings per common share Basic $ 0.77 $ 0.83 $ 0.65 $ 0.47 $ 0.47 $ 1.59 $ 0.90 Diluted 0.76 0.82 0.65 0.47 0.46 1.59 0.90 Cash dividendsper common share Regular 0.25 0.25 0.25 0.25 0.25 0.50 0.50 Weightedaverage shares outstanding Basic 17,486,182 17,669,937 17,717,356 17,710,283 17,701,853 17,577,552 17,850,423 Diluted 17,536,144 17,729,185 17,751,805 17,732,428 17,728,300 17,631,330 17,888,325 Performance ratios Return on average 1.70 % 1.94 % 1.54 % 1.11 % 1.15 % 1.82 % 1.15 % assets Return on average 12.55 % 13.94 % 10.82 % 7.83 % 7.97 % 13.24 % 7.73 % common equity Return on average tangible 18.40 % 20.54 % 15.96 % 11.62 % 11.91 % 19.45 % 11.51 % common equity^(1) (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 June 30, June 30, 30,(Amounts in 2021 2021 2020 2020 2020 2021 2020 thousands)Noninterest income Wealth $ 1,058 $ 881 $ 810 $ 909 $ 854 $ 1,939 $ 1,698 management Service charges 3,098 3,031 3,478 3,250 2,560 6,129 6,291 on deposits Other service charges and 3,166 3,022 2,737 2,748 2,617 6,188 4,848 fees Net gain on sale of - - - - - - 385 securities Net FDIC indemnification (946 ) (280 ) (338 ) (383 ) (483 ) (1,226 ) (969 ) asset amortization Other operating 2,421 915 1,046 1,114 1,365 3,336 2,209 incomeTotal noninterest $ 8,797 $ 7,569 $ 7,733 $ 7,638 $ 6,913 $ 16,366 $ 14,462 incomeNoninterest expense Salaries and employee $ 10,216 $ 10,884 $ 11,119 $ 10,485 $ 11,015 $ 21,100 $ 22,401 benefits Occupancy 1,115 1,275 1,225 1,228 1,275 2,390 2,590 expense Furniture and equipment 1,457 1,367 1,446 1,412 1,316 2,824 2,700 expense Service fees 1,513 1,335 1,232 1,581 1,329 2,848 2,852 Advertising and public 616 335 534 430 475 951 987 relations Professional 290 466 276 408 307 756 540 fees Amortization of 360 357 364 365 360 717 721 intangibles FDIC premiums 204 199 202 191 33 403 33 and assessments Merger, acquisition, - - - - - - 1,893 and divestiture expense Other operating 3,590 2,602 3,479 3,071 2,803 6,192 5,860 expenseTotal noninterest $ 19,361 $ 18,820 $ 19,877 $ 19,171 $ 18,913 $ 38,181 $ 40,577 expense

RECONCILIATION OF GAAP NET INCOME TO NON-GAAP ADJUSTED EARNINGS (Unaudited) Three Months Ended Six Months Ended June 30, March 31, December 31, September June 30, June 30, 30, 2021 2021 2020 2020 2020 2021 2020 (Amounts inthousands, except pershare data)Net income $ 13,403 $ 14,602 $ 11,550 $ 8,266 $ 8,238 $ 28,005 $ 16,110 Non-GAAP adjustments: Net (gain) loss on sale - - - - - - (385 ) of securities Merger, acquisition, and - - - - - - 1,893 divestiture expense Other items^ - - - - - - - (1)Total - - - - - - 1,508 adjustmentsTax effect - - - - - - 354 Adjustedearnings, $ 13,403 $ 14,602 $ 11,550 $ 8,266 $ 8,238 $ 28,005 $ 17,264 non-GAAP Adjusteddiluted earnings percommon share, non-GAAP $ 0.76 $ 0.82 $ 0.65 $ 0.47 $ 0.46 $ 1.59 $ 0.97 Performanceratios, non-GAAP Adjusted return on 1.70 % 1.94 % 1.54 % 1.11 % 1.15 % 1.82 % 1.24 % average assets Adjusted return on average 12.55 % 13.94 % 10.82 % 7.83 % 7.97 % 13.24 % 8.28 % common equity Adjusted return on average tangible common equity^ 18.40 % 20.54 % 15.96 % 11.62 % 11.91 % 19.45 % 12.33 % (2) (1 ) 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, 2021 2020 Average Average Average Average Yield/ Yield/(Amounts in thousands) Balance Interest^ Rate^ Balance Interest^ Rate^ (1) (1) (1) (1)Assets Earning assets Loans^(2)(3) $ 2,134,136 $ 25,979 4.88 % $ 2,129,513 $ 27,040 5.11 % Securities available for 84,099 508 2.42 % 103,378 839 3.26 % sale Interest-bearing 610,148 166 0.11 % 293,791 81 0.11 % depositsTotal earning assets 2,828,383 26,653 3.78 % 2,526,682 27,960 4.45 % Other assets 331,563 356,913 Total assets $ 3,159,946 $ 2,883,595 Liabilities and stockholders' equityInterest-bearing deposits Demand deposits $ 654,767 $ 33 0.02 % $ 547,445 $ 98 0.07 % Savings deposits 818,490 63 0.03 % 707,298 240 0.14 % Time deposits 394,889 628 0.64 % 465,212 1,107 0.96 % Total interest-bearing 1,868,146 724 0.15 % 1,719,955 1,445 0.34 % depositsBorrowings Retail repurchase 1,266 - N/M 1,244 1 0.14 % agreementsTotal borrowings 1,266 - - 1,244 1 0.32 % Total interest-bearing 1,869,412 724 0.16 % 1,721,199 1,446 0.34 % liabilitiesNoninterest-bearing 824,888 711,174 demand depositsOther liabilities 37,306 35,467 Total liabilities 2,731,606 2,467,840 Stockholders' equity 428,340 415,755 Total liabilities and $ 3,159,946 $ 2,883,595 stockholders' equityNet interest income, $ 25,929 $ 26,514 FTE^(1)Net interest rate 3.62 % 4.11 % spreadNet interest margin, 3.68 % 4.22 % FTE^(1) (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 purchaseaccounting accretion of $1.25 million and $1.50 million for the three months ended June 30, 2021 and 2020, respectively.

AVERAGE BALANCE SHEETS AND NET INTEREST INCOME ANALYSIS (Unaudited) Six Months Ended June 30, 2021 2020 Average Average Average Average Yield/ Yield/(Amounts in Balance Interest^ Rate^ Balance Interest^ Rate^ thousands) (1) (1) (1) (1)Assets Earning assets Loans^(2)(3) $ 2,149,509 $ 52,561 4.93 % $ 2,105,323 $ 55,145 5.27 % Securities available for 83,868 1,081 2.60 % 119,744 1,899 3.19 % sale Interest-bearing 539,500 284 0.11 % 228,636 616 0.53 % depositsTotal earning 2,772,877 53,926 3.92 % 2,453,703 57,660 4.73 % assetsOther assets 331,524 355,280 Total assets $ 3,104,401 $ 2,808,983 Liabilities andstockholders' equityInterest-bearing deposits Demand deposits $ 634,000 $ 72 0.02 % $ 525,024 $ 188 0.07 % Savings deposits 798,571 154 0.04 % 693,477 654 0.19 % Time deposits 403,888 1,367 0.68 % 475,149 2,429 1.03 % Totalinterest-bearing 1,836,459 1,593 0.16 % 1,693,650 3,271 0.39 % depositsBorrowings Retail repurchase 1,250 - N/M 1,346 3 0.39 % agreements FHLB advances and other - - - 72 1 2.23 % borrowingsTotal borrowings 1,250 - - 1,418 4 0.57 % Totalinterest-bearing 1,837,709 1,593 0.17 % 1,695,068 3,275 0.39 % liabilitiesNoninterest-bearing 801,512 655,906 demand depositsOther liabilities 38,609 38,820 Total liabilities 2,677,830 2,389,794 Stockholders' 426,571 419,189 equityTotal liabilitiesand stockholders' $ 3,104,401 $ 2,808,983 equityNet interest $ 52,333 $ 54,385 income, FTE^(1)Net interest rate 3.75 % 4.34 % spreadNet interest 3.81 % 4.46 % margin, FTE^(1) (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 purchaseaccounting accretion of $2.44 million and $3.46 million for the six months ended June 30, 2021 and 2020, respectively.

CONDENSED CONSOLIDATED QUARTERLY BALANCE SHEETS (Unaudited) June 30, March 31, December 31, September 30, June 30, (Amounts in thousands, 2021 2021 2020 2020 2020 except per share data)Assets Cash and cash $ 618,738 $ 628,745 $ 456,561 $ 375,664 $ 421,492 equivalentsDebt securities 79,842 87,643 83,358 90,972 98,367 available for saleLoans held forinvestment, net of unearned income (includes covered loans of $7,503, $9,041, $9,680, $10,744, and $11,257, for the stated 2,153,731 2,146,640 2,186,632 2,194,995 2,136,817 periods, respectively) Allowance for (31,857 ) (34,563 ) (26,182 ) (27,277 ) (23,758 ) credit losses ^(1)Loans held for 2,121,874 2,112,077 2,160,450 2,167,718 2,113,059 investment, netFDIC indemnification - 946 1,223 1,598 1,943 assetPremises and 53,560 57,371 57,700 60,488 62,658 equipment, netOther real estate 1,324 1,740 2,083 2,103 2,181 owned, noncoveredInterest receivable 8,480 8,724 9,052 9,151 8,380 Goodwill 129,565 129,565 129,565 129,565 129,565 Other intangible 6,352 6,712 7,069 7,433 7,798 assetsOther assets 109,548 106,543 104,075 103,236 103,623 Total assets $ 3,129,283 $ 3,140,066 $ 3,011,136 $ 2,947,928 $ 2,949,066 Liabilities Deposits Noninterest-bearing $ 819,138 $ 824,576 $ 772,795 $ 750,277 $ 752,899 Interest-bearing 1,846,556 1,848,524 1,773,452 1,741,962 1,744,947 Total deposits 2,665,694 2,673,100 2,546,247 2,492,239 2,497,846 Securities sold underagreements to 994 1,519 964 956 1,100 repurchaseInterest, taxes, and 35,061 39,448 37,195 34,816 34,290 other liabilitiesTotal liabilities 2,701,749 2,714,067 2,584,406 2,528,011 2,533,236 Stockholders' equity Common stock 17,335 17,592 17,723 17,717 17,710 Additional paid-in 161,853 169,173 173,345 172,980 172,601 capitalRetained earnings 250,911 241,889 237,585 230,464 226,627 Accumulated other (2,565 ) (2,655 ) (1,923 ) (1,244 ) (1,108 ) comprehensive lossTotal stockholders' 427,534 425,999 426,730 419,917 415,830 equityTotal liabilities and $ 3,129,283 $ 3,140,066 $ 3,011,136 $ 2,947,928 $ 2,949,066 stockholders' equity Shares outstanding at 17,334,547 17,592,009 17,722,507 17,716,522 17,709,569 period-endBook value per common $ 24.66 $ 24.22 $ 24.08 $ 23.70 $ 23.48 shareTangible book value 16.82 16.47 16.37 15.97 15.72 per common share^(2) (1) Effective January 1, 2021, the Company adopted the current expectedcredit loss methodology ("CECL"); prior to January 1, 2021, theCompanyutilized the incurred credit loss methodology. (2) A non-GAAP financial measure defined as stockholders' equity lessgoodwill and other intangible assets, divided by shares outstanding

SELECTED CREDIT QUALITY INFORMATION (Unaudited) June 30, March 31, December 31, September June 30, 30,(Amounts in 2021 2021 2020 2020 2020 thousands)Allowance for Credit Losses ^(1)Beginning balance $ 34,563 $ 26,182 $ 27,277 $ 23,758 $ 21,137 Cumulative effect ofadoption of ASU - 13,107 - - - 2016-13(Recovery of) provision forcredit/loanlosses charged to (2,230 ) (4,001 ) 634 4,703 3,831 operationsCharge-offs (1,902 ) (1,730 ) (2,194 ) (1,563 ) (1,672 ) Recoveries 1,426 1,005 465 379 462 Net charge-offs (476 ) (725 ) (1,729 ) (1,184 ) (1,210 ) Ending balance $ 31,857 $ 34,563 $ 26,182 $ 27,277 $ 23,758 Nonperforming Assets Nonaccrual loans $ 24,085 $ 26,106 $ 22,003 $ 24,756 $ 24,770 Accruing loans past 327 171 295 43 284 due 90 days or moreTroubled debtrestructurings 133 308 187 456 598 ("TDRs")^(2)Total nonperforming 24,545 26,585 22,485 25,255 25,652 loansOREO 1,324 1,740 2,083 2,103 2,181 Total nonperforming $ 25,869 $ 28,325 $ 24,568 $ 27,358 $ 27,833 assets Additional InformationTotal Accruing TDRs^ $ 8,309 $ 9,027 $ 10,248 $ 10,936 $ 11,420 (3) Asset Quality Ratios Nonperforming loans 1.14 % 1.24 % 1.03 % 1.15 % 1.20 % to total loansNonperforming assets 0.83 % 0.90 % 0.82 % 0.93 % 0.94 % to total assetsAllowance forcredit/loanlosses to 129.79 % 130.01 % 116.44 % 108.01 % 92.62 % nonperformingloansAllowance for credit/loan losses to 1.48 % 1.61 % 1.20 % 1.24 % 1.11 % total loansAnnualized netcharge-offs to 0.09 % 0.14 % 0.26 % 0.22 % 0.23 % average loans (1) Effective January 1, 2021, the Company adopted the current expectedcredit loss methodology ("CECL"); prior to January 1, 2021, theCompanyutilized the incurred credit loss methodology. (2) Accruing TDRs restructured within the past six months or nonperforming (3) Accruing total TDRs

FOR MORE INFORMATION, CONTACT:David D. Brown(276) 326-9000