Financial Performance - Diluted earnings per share was $0.47 for Q3 2020 and $1.37 for the first nine months, reflecting a decrease of 20.34% and 26.34% respectively compared to the same periods in 2019[166]. - The Company recorded a net income of $8.27 million for Q3 2020, a decrease of 9.72% from $9.16 million in Q3 2019, and $24.38 million for the first nine months, down 16.63% from $29.24 million in the prior year[168]. - Total stockholders' equity decreased by $8.90 million, or 2.08%, to $419.92 million as of September 30, 2020, from $428.82 million as of December 31, 2019[237]. - Net income for the period was $24.38 million, offset by share repurchases totaling $21.87 million and dividends of $13.45 million[237]. Loan Loss Provisions and Asset Quality - The loan loss provision increased by $4.03 million in Q3 2020, totaling $4.70 million, and $12.03 million for the first nine months, an increase of $8.55 million from the prior year, due to the economic uncertainty from the COVID-19 pandemic[166][169]. - The provision for loan losses increased by $4.03 million, or 596.74%, to $4.70 million in Q3 2020 compared to the same quarter of 2019, primarily due to the impact of the coronavirus slowdown[185]. - Nonaccrual loans increased to $24,423,000 as of September 30, 2020, up 51.57% from $16,113,000 as of December 31, 2019[213]. - Total nonperforming loans reached $25,255,000 as of September 30, 2020, compared to $17,221,000 as of December 31, 2019, reflecting a 46.73% increase[213]. - The allowance for loan losses to nonperforming loans ratio was 108.01% as of September 30, 2020, compared to 106.99% as of December 31, 2019[213]. Deposits and Borrowings - Total deposits grew by $162.33 million, or 6.97%, during 2020, with $122.41 million of the increase occurring in interest-free categories[166]. - Total liabilities were $2,440,427,000 as of September 30, 2020, compared to $1,881,217,000 in 2019[174]. - Total liabilities as of September 30, 2020, increased by $157.98 million, or 6.67%, driven by a $162.33 million increase in total deposits, or 6.97%[198]. - Total borrowings decreased by $645 thousand as of September 30, 2020, compared to December 31, 2019[230]. Interest Income and Margin - Net interest margin decreased by 46 basis points to 4.10% in Q3 2020 and by 30 basis points to 4.33% for the first nine months compared to the same periods in 2019, attributed to the historically low interest rate environment[166]. - Net interest income for the nine months ended September 30, 2020, was $81,366,000, compared to $68,055,000 for the same period in 2019, reflecting an increase of approximately 19.5%[174]. - The net interest margin on a fully taxable equivalent (FTE) basis was 4.33% for the nine months ended September 30, 2020, down from 4.63% in the prior year[174]. - The net interest rate spread decreased to 4.22% for the nine months ended September 30, 2020, from 4.51% in the previous year[174]. Operational Changes and Expenses - The Company modified or deferred payments on 3,362 loans totaling $426.45 million in principal through September 30, 2020, with $115.63 million currently in deferral[157]. - Noninterest expense increased by $1.73 million, or 9.90%, in Q3 2020 compared to Q3 2019, primarily due to an increase in salaries and benefits of $1.15 million[191]. - For the first nine months of 2020, noninterest expense rose by $8.87 million, or 17.43%, mainly driven by a $5.23 million increase in salaries and benefits, or 18.92%[192]. - Salaries and employee benefits increased by $1.15 million, or 12.33%, compared to the same quarter of 2019[189]. Capital and Liquidity - Common Equity Tier 1 ratio was 13.89% as of September 30, 2020, compared to 14.31% as of December 31, 2019[239]. - Total risk-based capital ratio was 15.14% as of September 30, 2020, down from 15.21% as of December 31, 2019[239]. - The company continues to meet all capital adequacy requirements and is classified as well-capitalized under regulatory frameworks[239]. - The company’s liquidity plan includes ongoing monitoring of credit-sensitive liabilities and sources of liquidity to address potential funding crises[231]. Market and Economic Conditions - The acquisition of Highlands Bankshares, Inc. was completed on December 31, 2019, for a total purchase price of $86.65 million, enhancing the Company's market presence[160]. - The sensitivity of net interest income to a 300 basis point increase is projected to be $7.63 million, representing a 6.97% change[246]. - The company is transitioning from LIBOR to alternative reference rates in anticipation of LIBOR's discontinuation at the end of 2021[245].

Table of Contents UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q ☑ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended June 30, 2020 or ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 Commission file number: 000-19297 FIRST COMMUNITY BANKSHARES, INC. (Exact name of registrant as specified in its charter) | --- | --- | --- | --- | |---------------------------------- ...

Financial Performance - For the three months ended March 31, 2020, net income decreased by $1.76 million to $7.87 million, an 18.26% decline compared to the same period in 2019[160] - The diluted earnings per share for the current quarter was $0.44, down 26.67% from $0.60 in the first quarter of 2019[160] - Return on average assets decreased to 1.16%, down 33.71% from 1.75% in the first quarter of 2019[160] - Noninterest income decreased by $531 thousand, or 6.57%, primarily due to a lack of litigation settlements compared to the previous year[171] - The effective tax rate increased to 21.80% in Q1 2020 from 21.45% in Q1 2019, while income tax expense decreased by $435 thousand, or 16.54%[175] - Total stockholders' equity decreased by $17.21 million, or 4.01%, to $411.61 million as of March 31, 2020, due to stock repurchases and dividends declared[210] Loan Loss Provisions and Asset Quality - The provision for loan losses increased by $2.28 million to $3.50 million, reflecting the impact of the coronavirus slowdown[158] - The provision for loan losses increased by $2.28 million, or 186.89%, to $3.50 million in the first quarter of 2020, reflecting the impact of the coronavirus slowdown[168] - Non-covered nonperforming assets increased by $2.77 million, or 13.23%, from December 31, 2019, primarily due to an increase in non-covered nonaccrual loans[191] - Non-covered nonaccrual loans rose by $4.15 million, or 25.76%, as of March 31, 2020, with 40.54% attributed to single-family owner-occupied loans[191] - Non-covered delinquent loans totaled $45.23 million as of March 31, 2020, an increase of $9.61 million, or 26.97%, compared to December 31, 2019[193] - The allowance for loan losses increased by $2.71 million, or 14.71%, from December 31, 2019, due to increased potential for loan defaults related to the COVID-19 pandemic[198] - Nonperforming loans to total loans ratio was 1.02% as of March 31, 2020, compared to 0.81% as of December 31, 2019[190] - Nonperforming assets to total assets ratio was 0.87% as of March 31, 2020, up from 0.75% as of December 31, 2019[190] Interest Income and Margin - The net interest margin increased by 11 basis points to 4.71% compared to the same quarter of 2019, attributed to the acquisition of Highlands Bankshares, Inc.[158] - Net interest income increased by $5.50 million, or 24.77%, compared to the same quarter of 2019, with a net interest margin on a FTE basis rising by 11 basis points[165] - Net interest income on a GAAP basis was $27.68 million for Q1 2020, up from $22.19 million in Q1 2019, reflecting a growth of 24.73%[177] - The net interest margin on a GAAP basis improved to 4.68% in Q1 2020 from 4.55% in Q1 2019[177] - The yield on earning assets increased by 13 basis points, or 2.66%, due to a 32 basis point increase in yield on loans[166] - The net interest rate spread on a FTE basis increased by 10 basis points, while the net interest margin increased by 11 basis points[165] Regulatory Compliance and Capitalization - As of March 31, 2020, the Company continues to exceed regulatory "well capitalized" targets[158] - The company continues to meet all capital adequacy requirements and is classified as well-capitalized under regulatory standards as of March 31, 2020[213] - Common equity Tier 1 ratio was 13.54% as of March 31, 2020, down from 14.31% as of December 31, 2019[213] Acquisitions and Expenses - The Company incurred $1.89 million in residual merger expenses related to the Highlands acquisition that occurred on December 31, 2019[158] - The total purchase price for the Highlands Bankshares acquisition was $86.65 million[153] - The company incurred $1.89 million in merger expenses related to the Highlands acquisition during Q1 2020[172] Deposits and Borrowings - Total deposits decreased by $41.50 million, or 1.78%, compared to December 31, 2019, primarily due to an $42.38 million decrease in time deposits[203] - Total borrowings increased by $747 thousand as of March 31, 2020, driven by a $1.00 million draw on a correspondent line of credit[204] - Total interest-bearing deposits increased by $280.59 million, or 20.23%, following the Highlands acquisition[167] Cash Flow and Liquidity - Net cash provided by operating activities was $11.37 million for the three months ended March 31, 2020, compared to $14.09 million for the same period in 2019[209] - Cash reserves totaled $8.33 million, with an additional $15.00 million available on an unsecured line of credit as of March 31, 2020[206] - Cash and cash equivalents increased by $24.60 million for the three months ended March 31, 2020, compared to an increase of $71.67 million for the same period in the prior year[209] - The liquidity model incorporates various funding crisis scenarios to manage liquidity risk effectively[205] LIBOR Transition - The company is transitioning from LIBOR to an equivalent rate index for new loans, ensuring interest rates remain consistent[221] - The company is quantifying the dollar amount and number of current variable loans tied to LIBOR that extend beyond 2021[221] - The company is transitioning from the LIBOR swap curve to treasury rates for certain loans[221] - The first phase of the LIBOR transition includes adding language to new loans to replace LIBOR with an equivalent rate index[221] Economic Outlook - Management believes that inflation will not materially impact financial performance, as interest rates have a greater effect[220] - The U.S. inflation rate remains relatively stable, with no significant changes expected to affect operations[220]

Financial Performance - Net interest income for 2019 was $89.453 million, slightly down from $90.845 million in 2018[131]. - Noninterest income rose to $33.677 million in 2019, up from $26.443 million in 2018, reflecting growth in service fees and commissions[131]. - Net income available to common shareholders for 2019 was $38.802 million, an increase from $36.340 million in 2018[131]. - Basic earnings per common share increased to $2.47 in 2019, compared to $2.19 in 2018[131]. - Pre-tax income increased by $4.67 million, or 10.36%, due to an increase in noninterest income of $7.23 million[149]. - Net interest income decreased by $1.39 million, or 1.53%, compared to the previous year, with a net interest margin increase of 18 basis points[159]. - Noninterest expense decreased by $10 thousand, or 0.01%, in 2019, primarily due to one-time charges recognized in 2018, while total noninterest expense for 2018 increased by $2.87 million, or 4.29%[170][171]. - The effective tax rate increased to 22.08% in 2019 from 19.46% in 2018, with income tax expense rising by $2.21 million, or 25.19%[173]. Asset and Liability Management - As of December 31, 2019, total assets increased to $2.80 billion following the acquisition of Highlands Bankshares, Inc. with total assets of $563 million[135]. - Total liabilities decreased to $1,881,103 million from $1,989,092 million, a decline of 5.45% year-over-year[156]. - Stockholders' equity decreased to $336,138 million from $341,519 million, a decrease of 1.11% year-over-year[156]. - Total assets increased by $554.47 million, or 24.71%, to $2.80 billion as of December 31, 2019, primarily due to the acquisition of Highlands[176]. - Total liabilities increased by $458.51 million, or 23.99%, to $2.37 billion as of December 31, 2019, also attributed to the Highlands acquisition[176]. - Total stockholders' equity increased by $95.96 million, or 28.83%, to $428.82 million as of December 31, 2019, largely due to the acquisition of Highlands[220]. Loan and Credit Quality - The provision for loan losses was $3.571 million, compared to $2.393 million in 2018, indicating an increase in expected loan losses[131]. - The allowance for loan losses was $18.425 million, slightly up from $18.267 million in 2018, indicating a stable approach to risk management[131]. - Total loans held for investment increased by $339.38 million, or 19.12%, compared to the previous year, primarily due to a $345.33 million, or 19.66%, increase in non-covered loans[183]. - Nonperforming assets decreased by $2.66 million, or 11.28%, from December 31, 2018, primarily due to a $3.47 million, or 17.72%, decrease in non-covered nonaccrual loans[199]. - Non-covered delinquent loans totaled $35.62 million as of December 31, 2019, an increase of $5.74 million, or 19.19%, compared to $29.89 million as of December 31, 2018[201]. - The allowance for loan losses was maintained at a level deemed sufficient to absorb probable loan losses, reflecting stable risk factors as of December 31, 2019[202]. Capital Management - The common equity Tier 1 ratio stood at 14.31% as of December 31, 2019, consistent with the previous year[131]. - Common equity Tier 1 ratio improved to 14.31% as of December 31, 2019, compared to 13.72% in 2018[223]. - The company repurchased 487,400 common shares for approximately $16.36 million[147]. - Book value per common share increased by $2.54 to $23.33 compared to December 31, 2018[147]. Interest Rate Risk Management - The company maintained interest rate swap agreements with notional amounts totaling $17.43 million to manage exposure to interest rate risk[234]. - A 300 basis point increase in interest rates would result in a $171 thousand increase in interest income, while a 200 basis point decrease would lead to an $8.571 million decrease[230]. - The company’s exposure to interest rate risk was deemed adequately mitigated as of December 31, 2019[233]. - Interest rate risk management strategies include periodic reviews of internal and third-party simulation models to project net interest income at risk[229]. Deposits and Funding - Total deposits as of December 31, 2019, increased by $474.16 million, or 25.55%, compared to December 31, 2018[209]. - The acquisition of Highlands added $501.74 million in deposits, including $155.71 million in non-interest bearing demand deposits[209]. - Total borrowings decreased by $27.73 million, or 94.41%, to $1.55 million as of December 31, 2019, primarily due to the maturity of a $25.00 million wholesale repurchase agreement[211]. - Cash reserves totaled $24.00 million, with an additional $15.00 million available on an unsecured line of credit as of December 31, 2019[215].

Financial Performance - Net income for the third quarter of 2019 was $9.156 million, a slight increase of $56 thousand or 0.62% compared to $9.100 million in the same quarter of 2018[160]. - Year-to-date net income for the first nine months of 2019 reached $29.238 million, an increase of $2.204 million or 8.15% from $27.034 million in the same period of 2018[160]. - Diluted earnings per share increased by $0.03 to $0.58, representing a 5.45% increase compared to the same quarter last year[161]. - Noninterest income increased by $1.12 million, or 17.10%, in Q3 2019, primarily due to $900 thousand received from litigation settlements[180]. - Noninterest income for the first nine months of 2019 increased by $4.22 million, or 20.93%, compared to the same period in 2018[181]. Asset and Liability Management - Total earning assets decreased to $1,948,277 thousand from $2,072,460 thousand, reflecting a decline of approximately 5.97% year-over-year[165]. - Total assets decreased to $2,198,419 thousand from $2,325,659 thousand, representing a decline of approximately 5.45%[165]. - Total liabilities decreased to $1,862,071 thousand from $1,984,736 thousand, indicating a reduction of about 6.15%[165]. - Total deposits as of September 30, 2019, decreased by $18.89 million, or 1.02%, compared to December 31, 2018, primarily due to a $40.26 million decrease in time deposits[212]. - Total borrowings as of September 30, 2019, decreased by $27.51 million, or 93.66%, compared to December 31, 2018, following the maturity of a $25 million wholesale repurchase agreement[213]. Interest Income and Margin - The net interest margin rose by 24 basis points to 4.56% compared to the same quarter of 2018[161]. - Net interest income for the period was $22,417 thousand, slightly down from $22,550 thousand, indicating a decrease of about 0.59%[165]. - The average yield on loans was 5.14%, up from 5.00% in the previous year, reflecting an increase of 14 basis points[165]. - The net interest margin on a GAAP basis increased to 4.53% in Q3 2019 from 4.27% in Q3 2018[190]. - A 300 basis point increase in interest rates could lead to a net interest income change of $610,000, while a decrease of 200 basis points could result in a decrease of $6,949,000 in net interest income[228]. Equity and Capitalization - Stockholders' equity slightly decreased to $336,348 thousand from $340,923 thousand, a decline of approximately 1.68%[165]. - Total stockholders' equity as of September 30, 2019, increased by $4.51 million, or 1.35%, to $337.36 million from $332.86 million as of December 31, 2018[219]. - Common equity Tier 1 ratio as of September 30, 2019, was 14.66%, an increase from 13.72% as of December 31, 2018[222]. Loan Portfolio and Credit Quality - Loans held for investment decreased by $80.96 million, or 4.56%, as of September 30, 2019, primarily due to a $76.31 million decrease in non-covered loans[196]. - Nonperforming assets include nonaccrual loans and loans past due 90 days or more, with ongoing classification activity based on economic conditions and borrower capacity[200]. - Non-covered nonperforming assets decreased by $3.60 million, or 15.27%, from December 31, 2018, primarily due to a decrease in non-covered nonaccrual loans[203]. - The allowance for loan losses is established to mitigate potential losses, although actual losses may exceed these reserves[199]. - The company tracks credit quality indicators, including trends in commercial loan risk ratings and levels of classified loans[199]. Expenses and Taxation - Noninterest expense decreased by $687 thousand, or 3.79%, in Q3 2019 compared to Q3 2018, primarily due to a goodwill impairment of $1.49 million recognized in Q3 2018[183]. - Income tax expense increased by $1.46 million, or 130.77%, in Q3 2019, with the effective tax rate rising to 21.98% from 10.94% in Q3 2018[186]. - For the first nine months of 2019, income tax expense increased by $1.98 million, or 31.93%, with the effective tax rate at 21.82% compared to 18.62% in the same period of 2018[187]. Strategic Initiatives - The Company announced an agreement to acquire Highlands Bankshares, which had total assets of approximately $612 million as of June 30, 2019, for an aggregate transaction value of approximately $91.0 million[155]. - The Company incurred $592 thousand in merger expenses related to the acquisition of Highlands Bankshares in the third quarter of 2019[161]. - The company is transitioning away from LIBOR in two phases, with the first phase involving new loans and the second phase focusing on current variable loans tied to LIBOR[230].

Financial Performance - Net income increased by $1.39 million, or 15.28%, to $10.45 million compared to the same quarter of 2018[143] - Diluted earnings per share rose by $0.12 to $0.66, reflecting a 22.22% increase compared to the same quarter of 2018[145] - Return on average assets for the quarter increased to 1.89%, while return on average equity rose to 12.57%[145] - Net interest margin increased by 47 basis points to 4.72% compared to the same quarter of 2018[143] - Net interest income for the three months ended June 30, 2019, was $23,213 thousand, compared to $22,488 thousand for the same period in 2018, reflecting an increase of 3.23%[149] - Noninterest income increased by $1.63 million, or 23.28%, in Q2 2019, primarily due to $2.03 million received from litigation settlements[162] - Net interest income on a GAAP basis increased by $727 thousand, or 3.27%, in Q2 2019 compared to Q2 2018, while on a FTE basis, it increased by $725 thousand, or 3.22%[153] Asset and Liability Management - Total earning assets decreased to $1,973,304 thousand from $2,120,146 thousand, a decline of approximately 6.93% year-over-year[149] - Total assets decreased to $2,221,574 thousand from $2,372,989 thousand, a decline of about 6.36% year-over-year[149] - Total liabilities decreased to $1,878,963 thousand from $2,032,407 thousand, a decline of approximately 7.57% year-over-year[149] - Stockholders' equity decreased to $333,595 thousand from $340,582 thousand, a decline of about 2.91% year-over-year[149] - Average earning assets decreased by $146.84 million, or 6.93%, primarily due to a decrease in average loans and the investment portfolio[154] - Average interest-bearing liabilities decreased by $167.54 million, or 10.75%, primarily due to a decline in average borrowings[155] Loan and Deposit Trends - Demand deposits decreased to $454,246 thousand from $484,776 thousand, a decline of approximately 6.30% year-over-year[149] - Time deposits increased to $429,469 thousand from $477,691 thousand, reflecting a decrease of about 10.08% year-over-year[149] - Average loans decreased by $73.70 million, or 4.11%, with the average loan to deposit ratio decreasing to 92.68% from 93.13% in the same quarter of 2018[154] - Total deposits decreased by $7.71 million, or 0.42%, compared to December 31, 2018, largely due to a $24.30 million decrease in time deposits[198] Nonperforming Assets and Loan Losses - Nonaccrual loans decreased to $16,368 thousand as of June 30, 2019, down from $19,583 thousand in December 31, 2018[186] - Total nonperforming loans were $17,226 thousand as of June 30, 2019, compared to $19,802 thousand in December 31, 2018, indicating a reduction in nonperforming assets[188] - The ratio of nonperforming loans to total loans was 1.02% as of June 30, 2019, down from 1.13% in December 31, 2018[188] - The allowance for loan losses to nonperforming loans ratio was 106.37% as of June 30, 2019, an increase from 90.77% in December 31, 2018[188] - The provision for loan losses increased by $1.09 million, or 220.20%, to $1.59 million in Q2 2019 compared to Q2 2018[160] Capital and Equity - Book value per common share increased by $0.55 to $21.34, and tangible book value per common share increased by $0.43 to a record $15.12 compared to December 31, 2018[143] - Total stockholders' equity increased by $829 thousand, or 0.25%, to $333.69 million as of June 30, 2019, from $332.86 million as of December 31, 2018[205] - Common equity Tier 1 ratio improved to 14.29% as of June 30, 2019, from 13.72% as of December 31, 2018[209] - Total risk-based capital ratio increased to 15.42% as of June 30, 2019, compared to 14.79% as of December 31, 2018[209] Cash Flow and Investments - Cash and cash equivalents increased by $79.61 million for the six months ended June 30, 2019, compared to a decrease of $49.99 million for the same period of the prior year[204] - Net cash provided by investing activities increased by $124.70 million, driven by proceeds from repayment of loans and maturities in investment portfolios[204] - Net cash provided by operating activities was $25.45 million for the six months ended June 30, 2019, compared to $21.14 million for the same period in 2018[207] Regulatory and Economic Environment - The effective federal statutory income tax rate was reduced from 35% to 21% due to the Tax Cuts and Jobs Act enacted on December 22, 2017[171] - The Federal Open Market Committee set the benchmark federal funds rate to a range of 225 to 250 basis points as of June 30, 2019[214] - The company continues to meet all capital adequacy requirements and is classified as well-capitalized under regulatory frameworks[209]

Financial Performance - Net income increased by $763 thousand, or 8.60%, to $9.63 million compared to the same quarter of 2018[137] - Diluted earnings per share rose by $0.08 to $0.60, reflecting a 15.38% increase year-over-year[137] - Return on average assets improved to 1.75%, while return on average equity increased to 11.77%[137] - Net interest margin increased by 22 basis points to 4.60% compared to the same quarter of 2018[137] - Noninterest income increased by $1.41 million, or 21.18%, primarily due to $1.68 million received from litigation settlements[147] - Total noninterest expense decreased by $331 thousand, or 1.93%, largely due to a decrease in salaries and employee benefits of $275 thousand[148] - The effective tax rate decreased to 21.45% in the first quarter of 2019 from 22.46% in the same quarter of 2018[151] - Total stockholders' equity increased by $245 thousand, or 0.07%, to $333.10 million as of March 31, 2019, driven by net income of $9.63 million and share repurchases totaling $7.78 million[185] Asset Management - The Trust Division and First Community Wealth Management managed and administered $1.02 billion in combined assets as of March 31, 2019[131] - Book value per common share increased by $0.27 to $21.06, and tangible book value per common share rose by $0.20 to a record $14.89 compared to December 31, 2018[137] - The Company repurchased 232,900 common shares for $7.78 million during the quarter[137] Loan and Deposit Activity - Average earning assets decreased by $136.07 million, or 6.44%, primarily due to a decrease in average interest-bearing deposits and average loans[143] - Total loans held for investment decreased by $37.70 million, or 2.14%, from December 31, 2018, primarily due to a $36.36 million, or 2.07%, decrease in non-covered loans[162] - Total deposits increased by $22.69 million, or 1.22%, as of March 31, 2019, largely due to a $19.75 million increase in non-interest bearing demand accounts[178] Credit Quality and Risk Management - The provision for loan losses increased by $725 thousand, or 146.46%, to $1.22 million in the first quarter of 2019 compared to the same quarter of 2018[145] - Nonperforming assets include nonaccrual loans and loans past due 90 days or more, with ongoing activity in collections and foreclosures[166] - The company tracks credit quality indicators such as trends in risk ratings and levels of classified commercial loans[165] - Non-covered nonperforming assets as of March 31, 2019, decreased by $170 thousand, or 0.72%, from December 31, 2018, primarily due to a decrease in non-covered nonaccrual loans[169] - Non-covered nonaccrual loans decreased by $1.04 million, or 5.31%, as of March 31, 2019, with 49.78% attributed to single family owner occupied loans[169] - Non-covered delinquent loans totaled $29.53 million as of March 31, 2019, a decrease of $354 thousand, or 1.18%, compared to December 31, 2018[171] Capital Adequacy - The Company and its subsidiary bank both significantly exceed regulatory "well capitalized" targets as of March 31, 2019[137] - The common equity Tier 1 ratio was 14.00% as of March 31, 2019, up from 13.72% as of December 31, 2018, indicating improved capital adequacy[188] Liquidity and Funding - As of March 31, 2019, the company's cash reserves totaled $13.77 million, with an additional $15.00 million available on an unsecured line of credit[181] - The company has unencumbered cash of $148.55 million and unused borrowing capacity from the FHLB totaling $397.66 million as of March 31, 2019[182] - The liquidity model includes various funding crisis scenarios, with a specific action plan activated when a financial shock is identified[180] Interest Rate Risk - The company maintained interest rate swap agreements with notional amounts totaling $5.40 million to manage exposure to interest rate risk[194] - The sensitivity analysis showed that a 300 basis point increase in interest rates would result in a $7 thousand increase in net interest income, while a 200 basis point decrease would lead to a $7.82 million decrease[194]

Table of Contents UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-K ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended December 31, 2018 Commission file number 000-19297 FIRST COMMUNITY BANKSHARES, INC. (Exact name of registrant as specified in its charter) Virginia 55-0694814 (State or other jurisdiction of incorporation or organization) (I.R.S. Employer Identification No.) P.O. Box 989 Bluefield, Virginia 24605-098 ...