Forward-looking statements in filings with the Securities and Exchange Commission, including this Quarterly Report on Form 10-Q and the accompanying Exhibits, filings incorporated by reference, reports to shareholders, and other communications that represent the ~~Company~~’sCompany’s beliefs, plans, objectives, goals, guidelines, expectations, anticipations, estimates, and intentions are made in good faith pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. These statements are not guarantees of future performance and involve certain risks, uncertainties, and assumptions that are difficult to predict. The words “may,” “could,” “should,” “would,” “believe,” “anticipate,” “estimate,” “expect,” “intend,” “plan,” and other similar expressions identify forward-looking statements. The following factors, among others, could cause financial performance to differ materially from that expressed in such forward-looking statements:

This list of important factors is not exclusive. If one or more of the factors affecting these forward-looking statements proves incorrect, actual results, performance, or achievements could differ materially from those expressed in, or implied by, forward-looking statements contained in this Quarterly Report on Form 10-Q and other reports we file with the Securities and Exchange Commission. Therefore, the Company cautions you not to place undue reliance on forward-looking information and statements. The Company does not intend to update any forward-looking statements, whether written or oral, to reflect changes. These cautionary statements expressly qualify all forward-looking statements that apply to the Company including the risk factors presented in Part II, Item 1A, “Risk Factors,” of this ~~report~~Quarterly Report on Form 10-Q and Part I, Item 1A, “Risk Factors,” of the Company’s Annual Report on Form 10-K for the year ended December 31, ~~2016.~~2021.

~~FIRST COMMUNITY BANCSHARES, INC.~~
~~CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (UNAUDITED)~~

Three Months Ended

Nine Months Ended

September 30,

September 30,

2017

2016

2017

2016

(Amounts in thousands)

Net income
$ 7,652 $ 6,383 $ 20,272 $ 18,722
Other comprehensive income, before tax

Available-for-sale securities:

Change in net unrealized (losses) gains on securities without other-than-temporary impairment
(169 ) 744 2,127 4,141
Reclassification adjustment for net losses recognized in net income
- (25 ) 657 53
Reclassification adjustment for other-than-temporary impairment losses recognized in net income
- 4,635 - 4,646
Net unrealized (losses) gains on available-for-sale securities
(169 ) 5,354 2,784 8,840
Employee benefit plans:

Net actuarial (loss) gain
(1 ) (2 ) 133 (56 )
Reclassification adjustment for amortization of prior service cost and net actuarial loss recognized in net income
65 69 194 205
Net unrealized gains on employee benefit plans
64 67 327 149
Other comprehensive (loss) income, before tax
(105 ) 5,421 3,111 8,989
Income tax (benefit) expense
(39 ) 2,034 1,167 3,372
Other comprehensive (loss) income, net of tax
(66 ) 3,387 1,944 5,617
Total comprehensive income
$ 7,586 $ 9,770 $ 22,216 $ 24,339

~~See Notes to Consolidated Financial Statements.~~

~~Table of Contents~~

~~FIRST COMMUNITY BANCSHARES, INC.~~

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY (UNAUDITED)

THREE MONTHS ENDED

June 30, 2022 and 2021

Accumulated

Additional

Other

Preferred

Common

Paid-in

Retained

Treasury

Comprehensive

(Amounts in thousands,

Stock

Stock

Capital

Earnings

Stock

Income (Loss)

Total

except share and per share data)

Balance January 1, 2016
$ - $ 21,382 $ 227,692 $ 155,647 $ (56,457 ) $ (5,247 ) $ 343,017
Net income
- - - 18,722 - - 18,722
Other comprehensive income
- - - - - 5,617 5,617
Common dividends declared -- $0.44 per share
- - - (7,680 ) - - (7,680 )
Equity-based compensation expense
- - 144 - - - 144
Common stock options exercised -- 11,730 shares
- - (23 ) - 205 - 182
Restricted stock awards -- 15,587 shares
- - 26 - 270 - 296
Issuance of treasury stock to 401(k) plan -- 16,290 shares
- - 45 - 287 - 332
Purchase of treasury shares -- 1,152,776 shares at $20.00 per share
- - - - (23,094 ) - (23,094 )
Balance September 30, 2016
$ - $ 21,382 $ 227,884 $ 166,689 $ (78,789 ) $ 370 $ 337,536
��
Balance January 1, 2017
$ - $ 21,382 $ 228,142 $ 170,377 $ (78,833 ) $ (2,011 ) $ 339,057
Net income
- - - 20,272 - - 20,272
Other comprehensive income
- - - - - 1,944 1,944
Common dividends declared -- $0.50 per share
- - - (8,504 ) - - (8,504 )
Equity-based compensation expense
- - 290 - - - 290
Common stock options exercised -- 8,036 shares
- - 6 - 145 - 151
Restricted stock awards -- 21,542 shares
- - (40 ) - 387 - 347
Issuance of treasury stock to 401(k) plan -- 12,834 shares
- - 112 - 231 - 343
Purchase of treasury shares -- 50,118 shares at $25.16 per share
- - - - (1,263 ) - (1,263 )
Balance September 30, 2017
$ - $ 21,382 $ 228,510 $ 182,145 $ (79,333 ) $ (67 ) $ 352,637


																	*Accumulated*
	*Preferred*				*Common*						*Additional*						*Other*
(Amounts in thousands, except share and per share data)	*Stock Outstanding*		*Preferred Stock*		*Stock Outstanding*			*Common Stock*			*Paid-in Capital*			*Retained Earnings*			*Comprehensive Loss*			*Total*

Balance April, 1 2021		0	$	0		17,592,009		$	17,592		$	169,173		$	241,889		$	(2,655	)	$	425,999
Net income		-		0		-			0			0			13,403			0			13,403
Other comprehensive income		-		0		-			0			0			0			90			90
Common dividends declared -- $0.25 per share		-		0		-			0			0			(4,381	)		0			(4,381	)
Equity-based compensation expense		0		0		639			1			296			0			0			297
Issuance of common stock to 401(k) plan		0		0		3,499			3			103			0			0			106
Repurchase of common shares at $30.51 per share		0		0		(261,600	)		(261	)		(7,719	)		0			0			(7,980	)
Balance June 30, 2021		0	$	0		17,334,547		$	17,335		$	161,853		$	250,911		$	(2,565	)	$	427,534

Balance April, 1 2022		0	$	0		16,781,975		$	16,782		$	144,088		$	269,798		$	(6,512	)	$	424,156
Net income		-		0		-			0			0			11,213			0			11,213
Other comprehensive loss		-		0		-			0			0			0			(5,148	)		(5,148	)
Common dividends declared -- $0.27 per share		-		0		-			0			0			(4,512	)		0			(4,512	)
Equity-based compensation expense		-		0		-			0			181			0			0			181
Issuance of common stock to 401(k) plan		0		0		3,676			4			100			0			0			104
Repurchase of common shares at $28.03 per share		0		0		(283,507	)		(284	)		(7,664	)		0			0			(7,948	)
Balance June 30, 2022		0	$	0		16,502,144		$	16,502		$	136,705		$	276,499		$	(11,660	)	$	418,046

See Notes to Condensed Consolidated Financial Statements.

Table of Contents

~~FIRST COMMUNITY BANCSHARES, INC.~~
CONDENSED CONSOLIDATED STATEMENTS OF ~~CASH FLOWS~~CHANGES IN STOCKHOLDERS' EQUITY (UNAUDITED)
Six MONTHS ENDED
June 30, 2022 and 2021

Nine Months Ended

September 30,

(Amounts in thousands)

2017

2016

Operating activities

Net income
$ 20,272 $ 18,722
Adjustments to reconcile net income to net cash provided by operating activities

Provision for loan losses
2,156 755
Depreciation and amortization of property, plant, and equipment
2,688 2,707
Amortization of premiums on investments, net
63 2,758
Amortization of FDIC indemnification asset, net
3,186 3,856
Amortization of intangible assets
790 871
Accretion on acquired loans
(4,257 ) (3,893 )
Gain on divestiture, net
- (3,065 )
Equity-based compensation expense
290 144
Restricted stock awards
347 296
Issuance of treasury stock to 401(k) plan
343 332
Loss on sale of property, plant, and equipment, net
13 271
Loss on sale of other real estate
940 1,487
Loss on sale of securities
657 53
Net impairment losses recognized in earnings
- 4,646
Decrease in accrued interest receivable
397 509
(Increase) decrease in other operating activities
(2,008 ) 4,341
Net cash provided by operating activities
25,877 34,790
Investing activities

Proceeds from sale of securities available for sale
12,273 70,530
Proceeds from maturities, prepayments, and calls of securities available for sale
18,022 77,395
Proceeds from maturities and calls of securities held to maturity
21,840 190
Payments to acquire securities available for sale
(36,966 ) (1,174 )
Proceeds from (originations of) loans, net
17,304 (138,984 )
Proceeds from (payments for) FHLB stock, net
694 (933 )
Cash proceeds from mergers, acquisitions, and divestitures, net
- 24,816
Proceeds from the FDIC
1,701 3,639
Payments to acquire property, plant, and equipment, net
(1,999 ) (448 )
Proceeds from sale of other real estate
2,130 4,541
Net cash provided by investing activities
34,999 39,572
Financing activities

Increase in noninterest-bearing deposits, net
25,235 28,322
Decrease in interest-bearing deposits, net
(2,753 ) (62,819 )
Repayments of securities sold under agreements to repurchase, net
(14,222 ) (20,082 )
(Repayments of) proceeds from FHLB and other borrowings, net
(30,708 ) 24,951
Proceeds from stock options exercised
151 182
Payments for repurchase of treasury stock
(1,263 ) (23,094 )
Payments of common dividends
(8,504 ) (7,680 )
Net cash used in financing activities
(32,064 ) (60,220 )
Net increase in cash and cash equivalents
28,812 14,142
Cash and cash equivalents at beginning of period
76,307 51,787
Cash and cash equivalents at end of period
$ 105,119 $ 65,929

Supplemental disclosure -- cash flow information

Cash paid for interest
$ 6,257 $ 7,394
Cash paid for income taxes
12,942 6,488

Supplemental transactions -- noncash items

Transfer of loans to other real estate
1,282 3,652
Loans originated to finance other real estate
- 42


																	*Accumulated*
	*Preferred*				*Common*						*Additional*						*Other*
(Amounts in thousands, except share and per share data)		*Stock Outstanding*		*Preferred Stock*		*Stock Outstanding*			*Common Stock*			*Paid-in Capital*			*Retained Earnings*			*Comprehensive Loss*			*Total*
Balance January 1, 2021		0	$	0		17,722,507		$	17,723		$	173,345		$	237,585		$	(1,923	)	$	426,730
Cumulative effect of adoption of ASU 2016-13				0					0			0			(5,870	)		0			(5,870	)
Net income		-		0		-			0			0			28,005			0			28,005
Other comprehensive loss		-		0		-			0			0			0			(642	)		(642	)
Common dividends declared -- $0.25 per share		-		0		-			0			0			(8,809	)		0			(8,809	)
Equity-based compensation expense		0		0		52,189			52			779			0			0			831
Issuance of common stock to 401(k) plan		0		0		9,151			9			244			0			0			253
Repurchase of common shares at $28.86 per share		0		0		(449,300	)		(449	)		(12,515	)		0			0			(12,964	)
Balance June 30, 2021		0	$	0		17,334,547		$	17,335		$	161,853		$	250,911		$	(2,565	)	$	427,534

Balance January 1, 2022		0	$	0		16,878,220		$	16,878		$	147,619		$	264,824		$	(1,546	)	$	427,775
Net income		-		0		-			0			0			20,728			0			20,728
Other comprehensive loss		-		0		-			0			0			0			(10,114	)		(10,114	)
Common dividends declared -- $0.54 per share		-		0		-			0			0			(9,053	)		0			(9,053	)
Equity-based compensation expense		0		0		25,137			25			328			0			0			353
Common stock options exercised		0		0		4,536			5			98			0			0			103
Issuance of common stock to 401(k) plan		0		0		9,758			10			279			0			0			289
Repurchase of common shares at $28.96 per share		0		0		(415,507	)		(416	)		(11,619	)		0			0			(12,035	)
Balance June 30, 2022		0	$	0		16,502,144		$	16,502		$	136,705		$	276,499		$	(11,660	)	$	418,046

See Notes to Condensed Consolidated Financial Statements.

Table of Contents

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)

	*Six Months Ended*
	*June 30,*
(Amounts in thousands)	*2022*			*2021*
Operating activities
Net income	$	20,728		$	28,005
Adjustments to reconcile net income to net cash provided by operating activities
Provision for (recovery of) credit losses		2,471			(6,231	)
Depreciation and amortization of premises and equipment		2,168			2,240
Amortization of premiums on investments, net		117			217
Amortization of FDIC indemnification asset, net		0			1,226
Amortization of intangible assets		717			717
Accretion on acquired loans		(1,736	)		(2,442	)
Equity-based compensation expense		353			699
Issuance of common stock to 401(k) plan		289			253
(Gain) loss on sale of premises and equipment, net		(381	)		524
Loss on sale of other real estate owned		420			251
(Increase) decrease in accrued interest receivable		(533	)		572
Decrease (increase) in other operating activities		3,587			(6,322	)
Net cash provided by operating activities		28,200			19,709
Investing activities
Proceeds from maturities, prepayments, and calls of securities available for sale		12,812			14,174
Payments to acquire securities available for sale		(236,850	)		(11,675	)
Net (increase) decrease in loans		(133,395	)		39,323
(Purchase of) proceeds from FHLB stock, net		(240	)		1,012
Proceeds from sale of premises and equipment		1,145			2,208
Payments to acquire premises and equipment		(469	)		(1,669	)
Proceeds from sale of other real estate owned		338			1,259
Net cash (used) provided by investing activities		(356,659	)		44,632
Financing activities
Increase in noninterest-bearing deposits, net		35,179			46,343
Increase in interest-bearing deposits, net		33,969			73,104
Proceeds from securities sold under agreements to repurchase, net		1,099			30
Proceeds from stock options exercised		103			132
Payments for repurchase of common stock		(12,035	)		(12,964	)
Payments of common dividends		(9,053	)		(8,809	)
Net cash provided by financing activities		49,262			97,836
Net (decrease) increase in cash and cash equivalents		(279,197	)		162,177
Cash and cash equivalents at beginning of period		677,439			456,561
Cash and cash equivalents at end of period	$	398,242		$	618,738

Supplemental disclosure -- cash flow information
Cash paid for interest	$	1,330		$	1,846
Cash paid for income taxes		490			11,704

Supplemental transactions -- noncash items
Transfer of loans to other real estate owned		322			810
Loans originated to finance other real estate owned		0			59
Increase in accumulated other comprehensive loss, net of taxes		(10,114	)		642

See Notes to Condensed Consolidated Financial Statements.

Table of Contents

NOTES TO ~~CONDENSED~~CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

Note 1. Basis of Presentation

General

First Community ~~Bancshares,~~Bankshares, Inc. (the “Company”), is a financial holding company ~~was founded in 1989 and~~ incorporated under the laws of ~~Nevada in 1997.~~the Commonwealth of Virginia. The ~~Company~~’sCompany’s principal executive office is located ~~at One Community Place,~~in Bluefield, Virginia. The Company provides banking products and services to individual and commercial customers through its wholly owned subsidiary First Community Bank (the “Bank”), a Virginia-chartered banking institution founded in 1874. The Bank operates as First Community Bank in Virginia, West Virginia, and North Carolina and People’s Community Bank, a Division of First Community Bank, in Tennessee. The Bank provides insurance services through its wholly owned subsidiary First Community Insurance Services (“FCIS”) and offers wealth management and investment advice through its Trust Division and wholly owned subsidiary First Community Wealth Management, Inc. (“FCWM”). Unless the context suggests otherwise, the terms “First Community,” “Company,” “we,” “our,” and “us” refer to First Community ~~Bancshares,~~Bankshares, Inc. and its subsidiaries as a consolidated entity.

Principles of Consolidation

The ~~Company~~’sCompany’s accounting and reporting policies conform with U.S. generally accepted accounting principles (“GAAP”) and prevailing practices in the banking industry. The consolidated financial statements include all accounts of the Company and its wholly owned subsidiaries and eliminate all intercompany balances and transactions. The Company operates in one business segment, Community Banking, which consists of all operations, including commercial and consumer banking, lending activities, and wealth ~~management, and insurance services.~~management. Operating results for interim periods are not necessarily indicative of results that may be expected for other interim periods or for the full year. In management’s opinion, the accompanying unaudited interim condensed consolidated financial statements contain all necessary adjustments, including normal recurring accruals, and disclosures for a fair presentation.

~~The condensed consolidated balance sheet as of~~ ~~December 31, 2016, has been derived from the audited consolidated financial statements.~~ These unaudited interim condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and accompanying notes included in the Company’s Annual Report on Form ~~10-K~~10-K for the year ended December 31, ~~2016~~2021 (the ~~“2016~~“2021 Form ~~10-K”~~10-K”), as filed with the Securities and Exchange Commission (the “SEC”) on March 3, ~~2017.~~2022. The condensed consolidated balance sheet as of December 31, 2021, has been derived from the audited consolidated financial statements.

Reclassifications

Certain amounts reported in prior years have been reclassified to conform to the current ~~year~~’syear’s presentation. These reclassifications had no effect on the Company’s results of operations, financial position, or net cash flow.

Use of Estimates

Preparation of the condensed consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities as of the date of the balance sheet and reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Material estimates that require the most subjective or complex judgments relate to fair value measurements, investment securities, the allowance for loan losses, ~~the Federal Deposit Insurance Corporation (“FDIC”) indemnification asset,~~ goodwill and other intangible assets, and income taxes. A discussion of the Company’s application of critical accounting estimates is included in “Critical Accounting Estimates” in Item 2 of this report.

Significant Accounting Policies

~~A complete and detailed description of the Company~~’sThe Company’s significant accounting policies isare included in Note 1, “Basis of Presentation and Significant Accounting Policies,” of the Notes to Consolidated Financial Statements in Part II, Item 8 of the Company’s ~~2016~~2021 Form ~~10-K.~~10-K.

~~Recent Accounting~~ ~~Standards~~

Allowance for Credit Losses (“ACL”)

~~Standards Adopted~~

In On January ~~2017,~~1, 2021, the FASB issued Accounting Standards Update (“ASU”) 2017-04, “Intangibles – Goodwill and Other (Topic 350): Simplifying the Accounting for Goodwill Impairment.” This ASU removes the requirement to perform a hypothetical purchase price allocation to measure goodwill impairment. A goodwill impairment will now be the amount by which a reporting unit’s carrying value exceeds its fair value, not to exceed the carrying amount of goodwill. ASU 2017-04 is effective for fiscal years beginning after December 15, 2019, with early adoption permitted. The update should be applied prospectively. The Company early adopted ASU 2017-04 in the first quarter of 2017. The adoption of the standard did not have an effect on the Company’s financial statements.

~~Table of Contents~~

~~In January 2017, the FASB issued ASU 2017-03, “Accounting Changes and Error Corrections (Topic 250) and Investments~~ – Equity Method and Joint Ventures (Topic 323): Amendments to SEC Paragraphs Pursuant to Staff Announcements at the September 22, 2016 and November 17, 2016 EITF Meetings.” This ASU requires registrants to disclose the effect that recently issued accounting standards will have on their financial statements when adopted in a future period. In cases where a registrant cannot reasonably estimate the impact of the adoption, additional qualitative disclosures should be considered to assist the reader in assessing the significance of the standard's impact on its financial statements. The Company adopted ASU 2017-03 in the first quarter of 2017. The adoption of the standard resulted in enhanced disclosures regarding the impact that recently issued accounting standards adopted in a future period will have on the Company’s financial statements and disclosures. See “Standards Not Yet Adopted” below.

~~In March~~ 2016 the FASB issued ASU 2016-09, “Compensation – Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting.” This ASU simplifies several aspects of the accounting for share-based payment award transactions including income tax consequences, classification of awards as either equity or liabilities, and classification on the statement of cash flows. The guidance eliminates additional paid-in capital pools for equity-based awards and requires that the related income tax effects of awards be recognized in the income statement. The guidance also allows an employer to repurchase more of an employee’s shares for tax withholding purposes without triggering liability accounting and to make a policy election to account for forfeitures as they occur. The Company adopted ASU 2016-09 in the first quarter of 2017 on a prospective basis and elected to account for forfeitures of share-based awards as they occur. Excess tax benefits on share-based awards in the statements of cash flows in prior periods have not been adjusted. The adoption of the standard did not have a material effect on the Company’s financial statements.

~~Standards Not Yet Adopted~~

~~In August 2017, the FASB~~ issued ASU 2017-12, “Derivatives and Hedging (Topic 815): Targeted Improvements to Accounting for Hedging Activities.” This ASU intends to improve the financial reporting of hedging relationships to better portray the economic results of an entity’s risk management activities in its financial statements and simplify the application of hedge accounting guidance. ASU 2017-12 will be effective for the Company for fiscal years beginning after December 15, 2018.The Company expects to adopt ASU 2017-12 in the first quarter of 2019. The Company is evaluating the impact of the standard and does not expect the guidance to have a material effect on its financial statements.

In May 2017, the FASB issued ASU 2017-09, “Compensation – Stock Compensation (Topic 718): Scope of Modification Accounting.” This ASU clarifies when to account for a change to the terms or conditions of a share-based payment award as a modification. Under the new guidance, modification accounting is required only if the fair value, the vesting conditions, or the classification of the award (as equity or liability) changes as a result of the change in terms or conditions. ASU 2017-09 will be effective for the Company for fiscal years beginning after December 15, 2017. The Company expects to adopt ASU 2017-09 in the first quarter of 2018. The Company is evaluating the impact of the standard and does not expect the guidance to have a material effect on its financial statements.

In March 2017, the FASB issued ASU 2017-08, “Receivables – Nonrefundable Fees and Other Costs (Subtopic 310-20): Premium Amortization on Purchased Callable Securities.” This ASU amends the amortization period for certain purchased callable debt securities held at a premium. ASU 2017-08 will be effective for the Company for fiscal years beginning after December 15, 2018. The Company expects to adopt ASU 2017-08 in the first quarter of 2019. The Company is evaluating the impact of the standard and does not expect the guidance to have a material effect on its financial statements.

In March 2017, the FASB issued ASU 2017-07, “Compensation – Retirement Benefits (Topic 715): Improving the Presentation of Net Periodic Pension Cost and Net Periodic Postretirement Benefit Cost.” This ASU intends to improve the presentation of net periodic pension cost and net periodic postretirement benefit costs in the income statement and to narrow the amounts eligible for capitalization in assets. ASU 2017-07 will be effective for the Company for fiscal years beginning after December 15, 2017. The Company expects to adopt ASU 2017-07 in the first quarter of 2018. The Company is evaluating the impact of the standard and does not expect the guidance to have a material effect on its financial statements.

~~In November 2016, the FASB issued ASU 2016-18, “Statement of Cash Flows (Topic 230): Restricted Cash.” This ASU requires that a statement of cash flows explain~~s the change during the period in the total of cash, cash equivalents, and amounts generally described as restricted cash or restricted cash equivalents. Amounts generally described as restricted cash and restricted cash equivalents should be included with cash and cash equivalents when reconciling the beginning-of-period and end-of-period total amounts shown on the statement of cash flows. ASU 2016-18 will be effective for the Company for fiscal years beginning after December 15, 2017. The Company expects to adopt ASU 2016-18 in the first quarter of 2018. The Company is evaluating the impact of the standard and does not expect the guidance to have a material effect on its financial statements.

~~Table of Contents~~

In August 2016, the FASB issued ASU 2016-15, “Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments.” This ASU makes eight targeted changes to how cash receipts and cash payments are presented and classified in the statement of cash flows. ASU 2016-15 will be effective for the Company for fiscal years beginning after December 15, 2017, with early adoption permitted. The update should be applied on a retrospective basis, if practicable. The Company expects to adopt ASU 2016-15 in the first quarter of 2018. The Company is evaluating the impact of the standard and does not expect the guidance to have a material effect on its financial statements.

~~In June 2016, the FASB issued ASU 2016-13,~~-13, “Financial Instruments – Credit Losses (Topic ~~326)~~326): Measurement of Credit Losses on Financial Instruments.” This ASU ~~intends~~applies to ~~improve~~all financial ~~reporting~~assets measured at amortized cost and off balance sheet credit exposures, including loans, investment securities, and unfunded commitments. The Company applied the ASU’s provisions using the modified retrospective method as a cumulative-effect adjustment to retained earnings as of January 1, 2021. The cumulative-effect adjustment was a decrease to retained earnings net of tax of $5.87 million. This adoption method is considered a change in accounting principle requiring additional disclosure of the nature of and reason for the change, which is solely a result of the adoption of the required standard.

ACL – Investment Securities

The Company no longer evaluates securities for other-than-temporary impairment (“OTTI”), as ASU 2016-13, “Financial Instruments – Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments” changes the accounting for recognizing impairment on available-for-sale debt securities. Each quarter, the Company evaluates impairment where there has been a decline in fair value below the amortized cost basis of a security to determine whether there is a credit loss associated with the decline in fair value. The nature of the collateral is considered along with potential future changes in collateral values, default rates, delinquency rates, third-party guarantees, credit ratings, interest rate changes since purchase, volatility of the security’s fair value and historical loss information for financial assets secured with similar collateral among other factors. Credit losses are calculated individually, rather than collectively, using a discounted cash flow method, whereby management compares the present value of expected cash flows with the amortized cost basis of the security. The credit loss component would be recognized through the provision for credit losses in the Statement of Income and establish an allowance for credit losses on the Balance Sheet.

The Company excludes the accrued interest receivable from the amortized cost basis in measuring expected credit losses on the investment securities. Nor does the Company record an allowance for credit losses on accrued interest receivable. As of June 30, 2022, the accrued interest receivable for investment securities available for sale was $1.32 million.

Table of Contents

The Company’s estimate of expected credit losses includes a measure of the expected risk of credit loss even if that risk is remote. The Company does not measure expected credit losses on an investment security in which historical credit loss information adjusted for current conditions and reasonable and supportable forecast results in an expectation that nonpayment of the amortized cost basis is zero. Nonpayment of the amortized cost basis is not expected to be zero solely on the basis of the current value of collateral securing the security but, also considers the nature of the collateral, potential future changes in collateral values, default rates, delinquency rates, third-party guarantees, credit ratings, interest rate change since purchase, volatility of the security’s fair value and historical loss information for financial assets securitized with similar collateral. The Company performed an analysis that determined that the following securities have a zero expected credit loss: U.S. Treasury Securities, Agency-Backed Securities including Government National Mortgage Association (“GNMA”), Federal Home Loan Mortgage Corporation (“FHLMC”), Federal National Mortgage Association (“FNMA”), Federal Home Loan Bank (“FHLB”), Federal Farm Credit Banks (“FFCB”) and Small Business Administration (“SBA”). All of the U.S. Treasury and Agency-Backed Securities have the full faith and credit backing of the United States Government or one of its agencies. These securities are included in Government-Sponsored Entities Debt and Mortgage-Backed Securities line items in the Investment Securities footnote. Municipal securities and all other securities that do not have a zero expected credit loss will be evaluated quarterly to determine whether there is a credit loss associated with a decline in fair value.

ACL – Loans

The ACL is an estimate of losses that will result from the inability of borrowers to make required loan payments. The Company established the incremental increase in the ACL at the adoption of ASU 2016-13, through retained earnings and subsequent adjustments are made through a provision for credit losses charged to earnings. Loans charged off are recorded against the ACL and subsequent recoveries increase the ACL when they are recognized.

A systematic methodology is used to determine ACL for loans held for investment and certain off-balance sheet credit exposures. The ACL is a valuation account that is deducted from the amortized cost basis to present the net amount expected to be collected on the loan portfolio. Management considers the effects of past events, current conditions, and reasonable and supportable forecasts on the collectability of the loan portfolio. The Company’s estimate of its ACL involves a high degree of judgement and reflects management’s best estimate within the range of expected credit losses. The Company recognizes in net income the amount needed to adjust the ACL for management’s current estimate of expected credit losses. The Company’s ACL is calculated using collectively evaluated and individually evaluated loans.

The Company collectively evaluates loans that share similar risk characteristics. In general, loans are segmented by ~~requiring timelier~~loan purpose. The Company collectively evaluates loans within the following consumer and commercial segments: Loans secured by 1-4 Family Properties, Home Equity Lines of Credit (“HELOC”), Owner Occupied Construction Loans, Consumer Loans, Commercial and Industrial, Multi-family, Non-farm/Non-residential Property, Commercial Construction/A&D/other Land Loans, Agricultural Loans, Credit Card Loans, Loans Secured by Farmland, and Other Consumer Loans (Overdrafts).

For collectively evaluated loans, the Company uses a combination of discounted cash flow and remaining life to estimate expected credit losses.

In addition to its own loss experience, management also includes peer bank historical loss experience in its assessment of expected credit losses to determine the ACL. The Company utilizes call report data to measure its and its peers' historical credit losses experience with similar risk characteristics within the segments over an economic cycle. Management reviews the historical loss information to appropriately adjust for differences in current asset specific risk characteristics. Also considered are further adjustments to historical loss information for current conditions and reasonable and supportable forecasts that differ from the conditions that existed for the period over which historical information is evaluated. For the majority of the segments of collectively evaluated loans, the Company incorporates at least one macroeconomic driver either using a statistical regression modeling methodology.

Management considers forward-looking information in estimated expected credit losses. The Company subscribes to a third-party service which provides summary detail of dozens of economic forecasts. Using that information and other publicly available economic forecasts, management determines the economic variables to use for the one-year reasonable and supportable forecast period. Management has determined that the forecast period is consistent with how the Company has historically forecasted for its profitability planning and capital management. Management has evaluated the appropriateness of the reasonable and supportable forecast for the current period along with the inputs used in the estimation of expected credit losses. For the contractual term that extends beyond the reasonable and supportable forecast period, the Company reverts to historical loss information over eight quarters using a straight-line approach. Management may apply different reversion techniques depending on the economic environment for the financial asset portfolio and as of the current period has utilized a linear reversion technique.

Included in its systematic methodology to determine its ACL for loans held for investment and certain off-balance sheet credit exposures, Management considers the need to qualitatively adjust expected credit losses for information not already captured in the loss estimation process. These qualitative adjustments either increase or decrease the quantitative model estimation. Each period the Company considers qualitative factors that are relevant within the qualitative framework that includes the following: 1) changes in lending polices and procedures, 2) changes in economic conditions, 3) changes in portfolio nature and volume, 4) changes in management, 5) changes in past due loans, 6) changes in the quality of the Company’s credit review system, 7) changes in the value of underlying collateral, 8) the effect of concentrations of credit, and 9) the effect of other external factors.

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When a loan no longer shares similar risk characteristics with its segment, the asset is assessed to determine whether it should be included in another pool or should be individually evaluated. The Company currently maintains a net book balance threshold of $500,000 for individually-evaluated loans . Generally, individually-evaluated loans other than Troubled Debt Restructurings, otherwise referred to herein as “TDRs,” are on nonaccrual status. Based on the threshold above, consumer loans will generally remain in pools unless they meet the dollar threshold and foreclosure is probable. The expected credit losses on individually-evaluated loans will be estimated based on discounted cash flow analysis unless the loan meets the criteria for use of the fair value of collateral, either by virtue of an expected foreclosure or through meeting the definition of collateral-dependent. Financial assets that have been individually evaluated can be returned to a pool for purposes of estimating the expected credit loss insofar as their credit profile improves and that the repayment terms were not considered to be unique to the asset.

Management measures expected credit losses over the contractual term of the loans. When determining the contractual term, the Company considers expected prepayments but is precluded from considering expected extensions, renewals, or modifications, unless the Company reasonably expects it will execute a TDR with a borrower. In the event of a reasonably-expected TDR, the Company factors the reasonably-expected TDR into the current expected credit losses estimate. The effects of a TDR are recorded when an individual asset is specifically identified as a reasonably-expected TDR. For consumer loans, the point at which a TDR is reasonably expected is when the Company approves the borrower’s application for a modification (i.e. the borrower qualifies for the TDR) or when the Credit Administration department approves loan concessions. For commercial loans, the point at which a TDR is reasonably expected is when the Company approves the loan for modification or when the Credit Administration department approves loan concessions. The Company uses a discounted cash flow methodology to calculate the effect of the concession provided to the borrower in TDR within the ACL.

Purchased credit-deteriorated, otherwise referred to herein as PCD, assets are defined as acquired individual financial assets (or acquired groups of financial assets with similar risk characteristics) that, as of the date of acquisition, have experienced a more-than-insignificant deterioration in credit quality since origination, as determined by the Company’s assessment. The Company records acquired PCD loans by adding the expected credit losses (i.e. allowance for credit losses) to the purchase price of the financial assets rather than recording through the provision for credit losses in the income statement. The expected credit loss, as of the acquisition date, of a PCD loan is added to the allowance for credit losses. The non-credit discount or premium is the difference between the fair value and the amortized cost basis as of the acquisition date. Subsequent to the acquisition date, the change in the ACL on PCD loans is recognized through the provision for credit losses. The non-credit discount or premium is accreted or amortized, respectively, into interest income over the remaining life of the PCD loan on a level-yield basis. In accordance with the transition requirements within the standard, the Company’s acquired purchased credit impaired loans were treated as PCD loans.

The Company follows its nonaccrual policy by reversing contractual interest income in the income statement when the Company places a loan on nonaccrual status. Therefore, Management excludes the accrued interest receivable balance from the amortized cost basis in measuring expected credit losses on the portfolio and does not record an allowance for credit losses on accrued interest receivable. As of June 30, 2022, the accrued interest receivable for loans was $7.11 million.

The Company has a variety of assets that have a component that qualifies as an off-balance sheet exposure. These primarily include undrawn portions of revolving lines of credit and standby letters of credit. The expected losses associated with these exposures within the unfunded portion of the loans will be recorded as a liability on the balance sheet with an offsetting income statement expense. Management has determined that a majority of the Company’s off-balance-sheet credit exposures are not unconditionally cancellable. As of June 30, 2022, the liability recorded for expected credit losses on unfunded commitments in Other Liabilities was $956 thousand.

Risks and Uncertainties

COVID-19 Virus Developments

During the last two-and-a-half years, government reaction to the novel coronavirus (“COVID-19”) pandemic significantly disrupted local, national, and global economies and adversely impacted a broad range of industries, including banking and other financial services. As COVID-19 events unfolded, the Company implemented various plans, strategies and protocols to protect its employees, maintain services for customers, assure the functional continuity of its operating systems, controls and processes, and mitigate financial risks posed by changing market conditions.

While direct impacts of COVID- 19 appear to be declining and conditions have improved as of June 30, 2022, if there is a resurgence in the virus, the Company could experience adverse effects on its business, financial condition, results of operations and cash flows. While it is not possible to know the full extent that the impact of COVID- 19, and any potential resulting measures to curtail its spread, will have on the Company's future operations, the Company's management believes its financial position, including high levels of capital and liquidity, will allow it to successfully endure the negative economic impacts of the pandemic.

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Recent Accounting Standards

Standards Adopted in 2021

In June 2016, the FASB issued ASU 2016-13, “Financial Instruments – Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments.” This ASU requires earlier recording of credit losses on loans and other financial ~~instruments~~assets held by financial institutions and other organizations. This ASU also requires an organization to measure all expected credit losses for financial assets held at the reporting date based on historical experience, current conditions, and reasonable and supportable ~~forecasts and~~forecasts. It further requires enhanced disclosures related to the significant estimates and judgments used in estimating credit losses, as well as the credit quality and underwriting standards of an ~~organization~~’sorganization’s portfolio. In addition, the ~~update~~ASU amends the accounting for credit losses ~~on available-for-sale~~in investments in debt securities and purchased financial assets with credit deterioration. ~~ASU 2016-13 will be effective for the Company for fiscal years beginning after December 15, 2019, with early adoption permitted for fiscal years beginning after December 15, 2018.~~ The Company ~~expects to adopt ASU 2016-13 in~~adopted the ~~first quarter~~new standard as of ~~2020 and recognize~~January 1, 2021. The standard was applied using the modified retrospective method as a ~~cumulative~~cumulative-effect adjustment to retained earnings as of January 1, 2021. Under this method, comparative periods will not be required to be restated for financial statements related to Topic 326. Comparative prior period disclosures will be presented using the ~~beginning~~guidance for the allowance for loan losses. This adoption method is considered a change in accounting principle requiring additional disclosure of the ~~year~~nature of ~~adoption. The~~and the reasons for the change, which is solely a result of the adoption of the required standard. This standard did not have a material impact on our investment securities portfolio at implementation. Related to the implementation of the standard, the Company ~~is evaluating~~recorded an additional ACL for loans of $13.11 million, deferred tax assets of $1.81 million, and additional reserve for unfunded commitments of $509 thousand and an adjustment to retained earnings, net of tax, of $5.87 million. See the table below for the impact of ASU 2016-13 on the ~~standard.~~Company’s consolidated balance sheet.

	*January 1, 2021*
	*As Reported*			*Pre-*			*Impact of*
	*Under*			*ASU 2016-13*			*ASU 2016-13*
	*ASU 2016-13*			*Adoption*			*Adoption*


Assets:
Non-covered loans held for investment
Allowance for credit losses on debt securities
Investment securities - available for sale	$	83,358		$	83,358		$	0		A
Loans
Non-acquired loans and acquired performing loans		2,146,972			2,146,972			0
Acquired purchased deteriorated loans		45,535			39,660			5,875		B
Allowance for credit losses on loans		(39,289	)		(26,182	)		(13,107	)	C
Deferred tax asset		19,306			17,493			1,813		D
Accrued interest receivable - loans		9,109			9,052			57		B

Liabilities
Allowance for credit losses on off-balance sheet
credit exposures		575			66			509		E

Equity:
Retained earnings		231,714			237,585			(5,871	)	F

A.	Per our analysis no ACL was necessary for investment securities available-for-sale.
B.	Accrued interest receivable from acquired credit impaired loans of $57 thousand was reclassed to other assets and was offset by the reclass of the grossed up credit discount on acquired credit impaired loans of $57 thousand that was moved to the ACL for the purchased credit deteriorated loans.
C.	Calculated adjustment to the ACL related to the adoption of ASU 2016-13. Includes additional reserve related to purchased deteriorated loans of $5.88 million.
D.	Effect of deferred tax assets related to the adjustment to the ACL form the adoption of ASU 2016-13 using a 23.37% tax rate.
E.	Adjustment to the reserve for unfunded commitments related to the adoption of ASU 2016-13.
F.	Net adjustment to retained earnings related to the adoption of ASU 2016-13.

In ~~February 2016,~~ December 2019, the FASB issued ASU ~~2016-02, “Leases~~2019-12, “Income Taxes (Topic ~~842)~~740), Simplifying the Accounting for Income Taxes”.” This ASU ~~increases transparency~~simplifies the accounting for income taxes by removing certain exceptions to the approach for intraperiod tax allocation, the methodology for calculating income taxes in an interim period and ~~comparability among organizations by recognizing lease assets and lease~~the recognition for deferred tax liabilities ~~on the balance sheet and requiring more disclosures related to leasing transactions. ASU 2016-02 will be effective~~ for ~~the Company for fiscal years beginning after December 15, 2018, with early adoption permitted.~~outside basis differences. The Company ~~expects to adopt~~adopted this ASU ~~2016-02 in the first quarter~~as of ~~2019. The Company leases certain banking offices under lease agreements~~January 1, 2021, and it ~~classifies as operating leases. The Company is evaluating the impact of the standard and expects an increase in assets and liabilities; however, the Company does~~ did not ~~expect the guidance to~~ have a material effect on ~~its~~the Company's financial statements.

~~In January 2016, the FASB issued ASU 2016-01, “Financial Instruments – Overall (Subtopic 825-10):~~ Recognition and Measurement of Financial Assets and Financial Liabilities.” This ASU significantly revises an entity’s accounting related to (1) the classification and measurement of investments in equity securities and (2) the presentation of certain fair value changes for financial liabilities measured at fair value. The new guidance also amends certain disclosure requirements associated with the fair value of financial instruments. ASU 2016-01 will be effective for the Company for fiscal years beginning after December 15, 2017, with early adoption permitted for the instrument-specific credit risk provision. The Company expects to adopt ASU 2016-01 in the first quarter of 2018. The Company is evaluating the impact of the standard and does not expect to recognize a significant cumulative effect adjustment to retained earnings at the beginning of the year of adoption or expect the guidance to have a material effect on its financial statements. The cumulative-effect adjustment will be dependent on the composition and fair value of the Company’s equity securities portfolio at the adoption date.

~~In May 2014, the FASB issued ASU 2014-09, “Revenue from Contracts with Customers.” This ASU~~’s core principle is that an entity will recognize revenue when it transfers promised goods or services to customers in an amount that reflects the consideration to which the company expects to be entitled in exchange for those goods or services. In doing so, companies will need to use more judgment and make more estimates than under existing guidance. These may include identifying performance obligations in the contract, estimating the amount of variable consideration to include in the transaction price and allocating the transaction price to each separate performance obligation. In August 2015, the FASB issued ASU 2015-14, “Revenue from Contracts with Customers” deferring the effective date of ASU 2014-09 for the Company until fiscal years beginning after December 15, 2017, with early adoption permitted for fiscal years beginning after December 15, 2016. Additional revenue related standards to be adopted concurrently with ASU 2014-09 include ASU 2017-10, ASU 2017-05, ASU 2016-20, ASU 2016-12, ASU 2016-10, and ASU 2016-08. The Company expects to adopt ASU 2014-09, and related updates, in the first quarter of 2018 and recognize a cumulative adjustment to retained earnings as of the beginning of the year of adoption, if necessary. The Company’s primary source of revenue is interest income, which is excluded from the scope of this guidance; however, the Company is evaluating the impact of the standard on other income, which includes fees for services, commissions on sales, and various deposit service charges. The Company does not expect the guidance to have a material effect on its financial statements.

The Company does not expect other recent accounting standards issued by the FASB or other standards-setting bodies to have a material impact on the consolidated financial statements.

Standards Not Yet Adopted

In March 2022, the Financial Accounting Standards Board issued ASU 2022-02, Financial Instruments-Credit Losses (Topic 326), Troubled Debt Restructurings and Vintage Disclosures. This new accounting topic provides accounting guidance for troubled debt restructuring (TDR) and write-offs, effective January 1, 2023, with early adoption permitted. The amendments eliminate TDR accounting guidance for issuers that have adopted ASU 2016-13, create a single loan modification accounting model, and clarify disclosure requirments for loan modifications and write-offs. We are currently reviewing the impact of the updated guidance on our Consolidated Financial Statements, but do no anticipate a material impact. At this time, the Company has no plans to early adopt this guidance.

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Note 2. ~~Investment~~ Debt Securities

There was 0 allowance for credit losses for investments as of June 30, 2022; therefore, it is not presented in the table below. The following tables present the amortized cost and fair value of available-for-sale debt securities, including gross unrealized gains and losses, as of the dates indicated:

September 30, 2017

Amortized

Unrealized

Unrealized

Fair

Cost

Gains

Losses

Value

(Amounts in thousands)

U.S. Treasury securities
$ 36,973 $ - $ (9 ) $ 36,964
U.S. Agency securities
1,254 21 - 1,275
Municipal securities
102,347 2,648 (88 ) 104,907
Single issue trust preferred securities
9,363 - (401 ) 8,962
Mortgage-backed Agency securities
22,518 72 (347 ) 22,243
Equity securities
55 18 - 73
Total securities available for sale
$ 172,510 $ 2,759 $ (845 ) $ 174,424

	*June 30, 2022*
	*Amortized*		*Unrealized*		*Unrealized*			*Fair*
	*Cost*		*Gains*		*Losses*			*Value*
(Amounts in thousands)
U.S. Agency securities	$	425	$	0	$	(2	)	$	423
U.S. Treasury Notes		136,419		0		(2,176	)		134,243
Municipal securities		24,461		51		(58	)		24,454
Corporate notes		40,625		0		(1,520	)		39,105
Agency mortgage-backed securities		98,265		13		(8,736	)		89,542
Total	$	300,195	$	64	$	(12,492	)	$	287,767

December 31, 2016

Amortized

Unrealized

Unrealized

Fair

Cost

Gains

Losses

Value

(Amounts in thousands)

U.S. Agency securities
$ 1,342 $ 3 $ - $ 1,345
Municipal securities
111,659 2,258 (586 ) 113,331
Single issue trust preferred securities
22,104 - (2,165 ) 19,939
Mortgage-backed Agency securities
31,290 66 (465 ) 30,891
Equity securities
55 18 - 73
Total securities available for sale
$ 166,450 $ 2,345 $ (3,216 ) $ 165,579

	*December 31, 2021*
	*Amortized*		*Unrealized*		*Unrealized*			*Fair*
	*Cost*		*Gains*		*Losses*			*Value*
(Amounts in thousands)
U.S. Agency securities	$	469	$	0	$	(3	)	$	466
Municipal securities		28,596		198		0			28,794
Corporate notes		9,935		0		(16	)		9,919
Agency mortgage-backed securities		37,273		513		(673	)		37,113
Total	$	76,273	$	711	$	(692	)	$	76,292

The ~~following tables present the amortized cost and fair value of held-to-maturity securities, including gross unrealized gains and losses, as of the dates indicated:~~

September 30, 2017

Amortized

Unrealized

Unrealized

Fair

Cost

Gains

Losses

Value

(Amounts in thousands)

U.S. Agency securities
$ 17,949 $ 31 $ - $ 17,980
Corporate securities
7,233 13 - 7,246
Total securities held to maturity
$ 25,182 $ 44 $ - $ 25,226

December 31, 2016

Amortized

Unrealized

Unrealized

Fair

Cost

Gains

Losses

Value

(Amounts in thousands)

U.S. Agency securities
$ 36,741 $ 124 $ - $ 36,865
Corporate securities
10,392 11 (2 ) 10,401
Total securities held to maturity
$ 47,133 $ 135 $ (2 ) $ 47,266

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The following table presents the amortized cost and aggregate fair value of available-for-sale ~~securities and held-to-maturity~~debt securities by contractual maturity, as of the date indicated. Actual maturities could differ from contractual maturities because issuers may have the right to call or prepay obligations with or without penalties.

September 30, 2017

Amortized

(Amounts in thousands)

Cost

Fair Value

Available-for-sale securities

Due within one year
$ 37,288 $ 37,279
Due after one year but within five years
5,617 5,734
Due after five years but within ten years
96,693 98,602
Due after ten years
10,339 10,493
149,937 152,108
Mortgage-backed securities
22,518 22,243
Equity securities
55 73
Total securities available for sale
$ 172,510 $ 174,424

Held-to-maturity securities

Due within one year
$ - $ -
Due after one year but within five years
25,182 25,226
Due after five years but within ten years
- -
Due after ten years
- -
Total securities held to maturity
$ 25,182 $ 25,226

	*June 30, 2022*
	*Amortized*
(Amounts in thousands)	*Cost*		*Fair Value*
Available-for-sale debt securities
Due within one year	$	19,637	$	19,499
Due after one year but within five years		177,850		174,311
Due after five years but within ten years		4,443		4,415
		201,930		198,225
Agency mortgage-backed securities		98,265		89,542
Total debt securities available for sale	$	300,195	$	287,767

The following tables present the fair values and unrealized losses for available-for-sale debt securities in a continuous unrealized loss position for less than 12 months and for 12 months or longer as of the dates indicated:

	September 30, 2017															*June 30, 2022*
	Less than 12 Months					12 Months or Longer					Total					*Less than 12 Months*					*12 Months or Longer*					*Total*
	Fair		Unrealized			Fair		Unrealized			Fair		Unrealized			*Fair*		*Unrealized*			*Fair*		*Unrealized*			*Fair*		*Unrealized*
	Value		Losses			Value		Losses			Value		Losses			*Value*		*Losses*			*Value*		*Losses*			*Value*		*Losses*
(Amounts in thousands)
U.S. Treasury securities	$	36,963	$	(9	)	$	-	$	-		$	36,963	$	(9	)
U.S. Agency securities																$	0	$	0		$	416	$	(2	)	$	416	$	(2	)
U.S. Treasury Notes																	134,243		(2,176	)		0		0			134,243		(2,176	)
Municipal securities		9,421		(52	)		1,427		(36	)		10,848		(88	)		5,178		(58	)		0		0			5,178		(58	)
Single issue trust preferred securities		-		-			8,962		(401	)		8,962		(401	)
Mortgage-backed Agency securities		7,898		(59	)		8,281		(288	)		16,179		(347	)
Corporate notes																	38,119		(1,520	)		0		0			38,119		(1,520	)
Agency mortgage-backed securities																	76,334		(6,381	)		12,009		(2,355	)		88,343		(8,736	)
Total	$	54,282	$	(120	)	$	18,670	$	(725	)	$	72,952	$	(845	)	$	253,874	$	(10,135	)	$	12,425	$	(2,357	)	$	266,299	$	(12,492	)

December 31, 2016

Less than 12 Months

12 Months or Longer

Total

Fair

Unrealized

Fair

Unrealized

Fair

Unrealized

Value

Losses

Value

Losses

Value

Losses

(Amounts in thousands)

Municipal securities
$ 24,252 $ (527 ) $ 715 $ (59 ) $ 24,967 $ (586 )
Single issue trust preferred securities
- - 19,939 (2,165 ) 19,939 (2,165 )
Mortgage-backed Agency securities
12,834 (166 ) 11,851 (299 ) 24,685 (465 )
Total
$ 37,086 $ (693 ) $ 32,505 $ (2,523 ) $ 69,591 $ (3,216 )

	*December 31, 2021*
	*Less than 12 Months*					*12 Months or Longer*					*Total*
	*Fair*		*Unrealized*			*Fair*		*Unrealized*			*Fair*		*Unrealized*
	*Value*		*Losses*			*Value*		*Losses*			*Value*		*Losses*
(Amounts in thousands)
U.S. Agency securities	$	0	$	0		$	459	$	(3	)	$	459	$	(3	)
Corporate notes		9,919		(16	)		0		0			9,919		(16	)
Agency mortgage-backed securities		14,092		(253	)		8,384		(420	)		22,476		(673	)
Total	$	24,011	$	(269	)	$	8,843	$	(423	)	$	32,854	$	(692	)

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There were ~~no unrealized losses for held-to-maturity securities as of~~ September 30, 2017. The following table presents the fair values and unrealized losses for held-to-maturity securities in a continuous unrealized loss position for less than 12 months and for 12 months or longer as of the date indicated:

T~~here were 45~~90 individual debt securities in an unrealized loss position as of ~~September~~June 30, ~~2017,~~2022, and ~~their~~the combined depreciation in value represented ~~0.42%~~4.34% of the ~~investment~~debt securities portfolio. There were 8223 individual debt securities in an unrealized loss position as of December 31, ~~2016,~~2021, and their combined depreciation in value represented ~~1.51%~~0.91% of the ~~investment~~debt securities portfolio.

~~The Company reviews its investment portfolio quarterly~~Management evaluates securities for ~~indications of~~ ~~other-than-temporary~~ impairment ~~(“OTTI”). The initial indicator of OTTI for both debt and equity securities is~~where there has been a decline in fair value below ~~book~~the amortized cost basis of a security to determine whether there is a credit loss associated with the decline in fair value on at least a quarterly basis, and more frequently when economic or market concerns warrant such evaluation. Credit losses are calculated individually, rather than collectively, using a discounted cash flow method, whereby Management compares the present value of expected cash flows with the amortized cost basis of the security. The credit loss component would be recognized through the provision for credit losses and the ~~severity~~creation of an allowance for credit losses. Consideration is given to (1) the financial condition and ~~duration~~near-term prospects of the ~~decline. For~~issuer including looking at default and delinquency rates, (2) the outlook for receiving the contractual cash flows of the investments, (3) the length of time and the extent to which the fair value has been less than cost, (4) our intent and ability to retain its investment in the issuer for a period of time sufficient to allow for any anticipated recovery in fair value or for a debt security whether it is more-likely-than-not that we will be required to sell the debt security prior to recovering its fair value, (5) the anticipated outlook for changes in the general level of interest rates, (6) credit ratings, (7) third party guarantees, and (8) collateral values. In analyzing an issuer’s financial condition, management considers whether the securities are issued by the federal government or its agencies, whether downgrades by bond rating agencies have occurred, the results of reviews of the issuer’s financial condition, and the issuer’s anticipated ability to pay the contractual cash flows of the investments. All of the U.S. Treasury and Agency-Backed Securities have the full faith and credit backing of the United State Government or one of its agencies. Municipal securities and all other securities that do not have a zero expected credit loss are evaluated quarterly to determine whether there is a credit loss associated with a decline in fair value. All debt securities available for sale in an unrealized loss position as of June 30, 2022, continue to perform as scheduled and we do not believe that there is a credit loss or that a provision for credit losses is necessary. Also, as part of our evaluation of our intent and ability to hold investments for a period of time sufficient to allow for any anticipated recovery in the ~~credit-related OTTI~~market, we consider our investment strategy, cash flow needs, liquidity position, capital adequacy and interest rate risk position. We do not currently intend to sell the securities within the portfolio and it is ~~recognized as~~not more-likely-than-not that we will be required to sell the debt securities. See Note 1 – Basis of Presentation for further discussion.

Management continues to monitor all of our securities with a high degree of scrutiny. There can be no assurance that we will not conclude in future periods that conditions existing at that time indicate some or all of its securities may be sold or would require a charge to noninterest income and the noncredit-related OTTI is recognized in other comprehensive income (“OCI”). During the three and nine months ended September 30, 2017, the Company incurred no OTTI charges on debt securities. During the three and nine months ended September 30, 2016, the Company incurred OTTI charges on debt securities owned of $4.64 million related to the Company’s change in intent to hold certain securities to recovery. The intent was changed to sell specific trust preferred securities in the Company’s investment portfolio primarily to reduce credit concentrations with two issuers. Temporary impairment on debt securities is primarily related to changes in benchmark interest rates, changes in pricing in the credit markets, and other current economic factors. For equity securities, the OTTI is recognizedearnings as a charge to noninterest income. During the three and nine months ended September 30, 2017, the Company incurred no OTTI charges related to equity securities. During the three months ended September 30, 2016, the Company incurred no OTTI charges related to equity holdings. During the nine months ended September 30, 2016, the Company incurred OTTI charges related to certain equity holdings of $11 thousand.provision for credit losses in such periods.

~~The~~ ~~following table presents~~There were 0 gross realized gains and losses from the sale of available-for-sale debt securities for the ~~periods indicated:~~three and six months ended June 30, 2022 and 2021.

Three Months Ended

Nine Months Ended

September 30,

September 30,

2017

2016

2017

2016

(Amounts in thousands)

Gross realized gains
$ - $ 203 $ - $ 344
Gross realized losses
- (178 ) (657 ) (397 )
Net gain (loss) on sale of securities
$ - $ 25 $ (657 ) $ (53 )

The carrying amount of securities pledged for various purposes totaled ~~$99.69~~$34.22 million as of ~~September~~June 30, ~~2017,~~2022, and ~~$139.75~~$22.15 million as of December 31, ~~2016.~~2021.

Note 3. Loans

The Company groups loans held for investment into three segments (commercial loans, consumer real estate loans, and consumer and other loans) with each segment divided into various classes. ~~Covered loans are those loans acquired in~~ ~~Federal Deposit Insurance Corporation (“FDIC”) assisted transactions that are covered by loss share agreements.~~ Customer overdrafts reclassified as loans totaled ~~$1.45~~$1.94 million as of ~~September~~June 30, ~~2017,~~2022, and ~~$1.41~~$1.65 million as of December 31, ~~2016.~~2021. Deferred loan fees, net of loan costs, totaled ~~$4.48~~$3.90 million as of ~~September~~June 30, ~~2017,~~2022, and ~~$5.34~~$5.06 million as of December 31, ~~2016.~~2021. For information about off-balance sheet financing, see Note 14, “Litigation, Commitments, and Contingencies,” to the Condensed Consolidated Financial Statements of this report.

In accordance with the adoption of ASU 2016-13, the table below reflects the loan portfolio at the amortized cost basis to include net deferred loan fees of $3.90 million and $5.06 million and unamortized discount related to loans acquired of $4.50 million and $5.41 million million for June 30, 2022, and December 31, 2021, respectively. Accrued interest receivable (AIR) of $7.11 million as of June 30, 2022, and $7.54 million as of December 31, 2021, is accounted for separately and reported in Interest Receivable on the Consolidated Balance Sheet.

Table of Contents

	*June 30, 2022*					*December 31, 2021*
(Amounts in thousands)	*Amount*		*Percent*			*Amount*		*Percent*
Loans held for investment
Commercial loans
Construction, development, and other land	$	92,840		4.04	%	$	65,806		3.04	%
Commercial and industrial		139,792		6.08	%		133,630		6.17	%
Multi-family residential		124,274		5.40	%		100,402		4.64	%
Single family non-owner occupied		195,113		8.48	%		198,778		9.18	%
Non-farm, non-residential		752,369		32.72	%		707,506		32.67	%
Agricultural		9,987		0.43	%		9,341		0.43	%
Farmland		12,833		0.56	%		15,013		0.69	%
Total commercial loans		1,327,208		57.71	%		1,230,476		56.82	%
Consumer real estate loans
Home equity lines		78,999		3.44	%		79,857		3.69	%
Single family owner occupied		722,370		31.41	%		703,864		32.50	%
Owner occupied construction		17,331		0.75	%		16,910		0.78	%
Total consumer real estate loans		818,700		35.60	%		800,631		36.97	%
Consumer and other loans
Consumer loans		148,741		6.47	%		129,794		5.99	%
Other		5,149		0.22	%		4,668		0.22	%
Total consumer and other loans		153,890		6.69	%		134,462		6.21	%
Total loans held for investment, net of unearned income	$	2,299,798		100.00	%	$	2,165,569		100.00	%

The ~~following table presents~~Company began participating as a Small Business Administration Paycheck Protection Program lender during the second quarter of 2020. At June 30, 2022, the PPP loans had a current balance of $2.07 million, compared to $20.64 million at December 31, 2021, and were included in commercial and industrial loans, balances. Deferred remaining loan origination fees related to the PPP loans, net of ~~unearned income, with~~deferred loan origination costs, totaled $80 thousand at June 30, 2022, and $733 thousand at December 31, 2021. During the ~~non-covered portfolio by~~second quarter of 2022, the Company recorded amortization of net deferred loan ~~class, as~~origination fees of $319 thousand on PPP loans and recorded $654 thousand in amortization for the six month period of 2022 . The Company recorded amortization of net deferred loan origination fees on PPP loans of $608 thousand and $1.53 million in amortization for the same periods, respectively, of 2021. The remaining net deferred loan origination fees will be amortized over the expected life of the ~~dates indicated:~~

September 30, 2017

December 31, 2016

(Amounts in thousands)

Amount

Percent

Amount

Percent

Non-covered loans held for investment

Commercial loans

Construction, development, and other land
$ 72,952 3.97 % $ 56,948 3.07 %
Commercial and industrial
90,184 4.91 % 92,204 4.98 %
Multi-family residential
125,997 6.86 % 134,228 7.24 %
Single family non-owner occupied
143,213 7.79 % 142,965 7.72 %
Non-farm, non-residential
613,380 33.38 % 598,674 32.31 %
Agricultural
6,096 0.33 % 6,003 0.32 %
Farmland
27,897 1.52 % 31,729 1.71 %
Total commercial loans
1,079,719 58.76 % 1,062,751 57.35 %
Consumer real estate loans

Home equity lines
102,888 5.60 % 106,361 5.74 %
Single family owner occupied
501,242 27.27 % 500,891 27.03 %
Owner occupied construction
47,034 2.56 % 44,535 2.41 %
Total consumer real estate loans
651,164 35.43 % 651,787 35.18 %
Consumer and other loans

Consumer loans
70,695 3.85 % 77,445 4.18 %
Other
4,856 0.26 % 3,971 0.21 %
Total consumer and other loans
75,551 4.11 % 81,416 4.39 %
Total non-covered loans
1,806,434 98.30 % 1,795,954 96.92 %
Total covered loans
31,287 1.70 % 56,994 3.08 %
Total loans held for investment, net of unearned income
$ 1,837,721 100.00 % $ 1,852,948 100.00 %

~~The following table presents~~respective loans, or until forgiven by the ~~covered loan portfolio, by loan class, as of the dates indicated:~~

September 30, 2017

December 31, 2016

(Amounts in thousands)

Covered loans

Commercial loans

Construction, development, and other land
$ 40 $ 4,570
Commercial and industrial
- 895
Multi-family residential
- 8
Single family non-owner occupied
292 962
Non-farm, non-residential
10 7,512
Agricultural
- 25
Farmland
- 397
Total commercial loans
342 14,369
Consumer real estate loans

Home equity lines
26,850 35,817
Single family owner occupied
4,095 6,729
Total consumer real estate loans
30,945 42,546
Consumer and other loans

Consumer loans
- 79
Total covered loans
$ 31,287 $ 56,994

~~The Company identifies certain purchased loans as impaired when fair values are established at acquisition~~SBA, and ~~groups those~~ ~~purchased credit impaired (“PCI”) loans into loan pools with common risk characteristics. The Company estimates cash flows to~~will be ~~collected on PCI loans and discounts those cash flows at a market rate of interest.~~recognized in net interest income.

Table of Contents

~~The following table presents the recorded investment and contractual unpaid principal balance of PCI loans, by acquisition, as of the dates indicated:~~

September 30, 2017

December 31, 2016

(Amounts in thousands)

Recorded Investment

Unpaid Principal Balance

Recorded Investment

Unpaid Principal Balance

PCI Loans, by acquisition

Peoples
$ 5,179 $ 8,328 $ 5,576 $ 9,397
Waccamaw
14,903 34,420 21,758 45,030
Other acquired
1,011 1,037 1,095 1,121
Total PCI Loans
$ 21,093 $ 43,785 $ 28,429 $ 55,548

~~The following table presents the changes in the accretable yield on PCI loans, by acquisition, during the periods indicated:~~

Peoples

Waccamaw

Total

(Amounts in thousands)

Balance January 1, 2016
$ 3,589 $ 26,109 $ 29,698
Accretion
(982 ) (4,408 ) (5,390 )
Reclassifications from nonaccretable difference⁽¹⁾
231 848 1,079
Other changes, net
1,774 4 1,778
Balance September 30, 2016
$ 4,612 $ 22,553 $ 27,165

Balance January 1, 2017
$ 4,392 $ 21,834 $ 26,226
Accretion
(969 ) (4,690 ) (5,659 )
Reclassifications from nonaccretable difference⁽¹⁾
782 2,525 3,307
Other changes, net
(375 ) (311 ) (686 )
Balance September 30, 2017
$ 3,830 $ 19,358 $ 23,188

(1) Represents changes attributable to expected loss assumptions

Note 4. Credit Quality

The Company uses a risk grading matrix to assign a risk grade to each loan in its portfolio. Loan risk ratings may be upgraded or downgraded to reflect current information identified during the loan review process. The general characteristics of each risk grade are as follows:

●

●Pass -- This grade is assigned to loans with acceptable credit quality and risk. The Company further segments this grade based on borrower characteristics that include capital strength, earnings stability, liquidity, leverage, and industry conditions.

Pass -- This grade is assigned to loans with acceptable credit quality and risk. The Company further segments this grade based on borrower characteristics that include capital strength, earnings stability, liquidity, leverage, and industry conditions.

●

Special Mention -- This grade is assigned to loans that require an above average degree of supervision and attention. These loans have the characteristics of an asset with acceptable credit quality and risk; however, adverse economic or financial conditions exist that create potential weaknesses deserving of ~~management~~’smanagement’s close attention. If potential weaknesses are not corrected, the prospect of repayment may worsen.

●

Substandard -- This grade is assigned to loans that have well defined weaknesses that may make payment default, or principal exposure, possible. These loans will likely be dependent on collateral liquidation, secondary repayment sources, or ~~principal exposure, possible. These loans will likely be dependent on collateral liquidation, secondary~~events outside the normal course of business to meet repayment ~~sources, or events outside the normal course of business to meet repayment~~ terms.

●

Doubtful -- This grade is assigned to loans that have the weaknesses inherent in substandard loans; however, the weaknesses ~~inherent~~are so severe that collection or liquidation in ~~substandard loans; however,~~full is unlikely based on current facts, conditions, and values. Due to certain specific pending factors, the ~~weaknesses are so severe that collection or liquidation in full is unlikely based on current facts, conditions, and values. Due to certain specific pending factors, the~~ amount of loss cannot yet be determined.

●

Loss -- This grade is assigned to loans that will be charged off or charged down when payments, including the timing and value of payments, are uncertain. This risk grade does not imply that the asset has no recovery or salvage value, but simply means that it is not practical or desirable to defer writing off, either all or a portion of, the loan balance even though partial recovery may be realized in the future.

~~Table of Contents~~

The following ~~tables present~~table presents the recorded investment of the loan portfolio, by loan class and credit quality, as of the dates ~~indicated. Losses on covered loans are generally reimbursable by the FDIC at the applicable loss share percentage, 80%; therefore, covered loans are disclosed separately.~~indicated:

	September 30, 2017												*June 30, 2022*
			Special												*Special*
(Amounts in thousands)	Pass		Mention		Substandard		Doubtful		Loss		Total		*Pass*		*Mention*		*Substandard*		*Doubtful*		*Loss*		*Total*
Non-covered loans
Commercial loans
Construction, development, and other land	$	69,257	$	2,791	$	904	$	-	$	-	$	72,952	$	91,872	$	417	$	551	$	0	$	0	$	92,840
Commercial and industrial		85,368		1,844		2,972		-		-		90,184		136,353		982		2,457		0		0		139,792
Multi-family residential		119,399		5,882		716		-		-		125,997		123,403		649		222		0		0		124,274
Single family non-owner occupied		132,000		6,839		4,374		-		-		143,213		184,275		2,287		8,551		0		0		195,113
Non-farm, non-residential		593,809		11,126		8,243		202		-		613,380		723,467		16,794		12,108		0		0		752,369
Agricultural		5,743		235		118		-		-		6,096		9,754		54		179		0		0		9,987
Farmland		25,097		153		2,647		-		-		27,897		10,584		603		1,646		0		0		12,833
Consumer real estate loans
Home equity lines		100,375		850		1,663		-		-		102,888		75,540		430		3,029		0		0		78,999
Single family owner occupied		471,378		5,705		24,159		-		-		501,242		692,766		2,041		27,563		0		0		722,370
Owner occupied construction		46,802		-		232		-		-		47,034		17,167		0		164		0		0		17,331
Consumer and other loans
Consumer loans		70,459		27		209		-		-		70,695		145,934		11		2,796		0		0		148,741
Other		4,856		-		-		-		-		4,856		5,149		0		0		0		0		5,149
Total non-covered loans		1,724,543		35,452		46,237		202		-		1,806,434
Covered loans
Commercial loans
Construction, development, and other land		-		39		1		-		-		40
Single family non-owner occupied		271		-		21		-		-		292
Non-farm, non-residential		-		-		10		-		-		10
Consumer real estate loans
Home equity lines		12,242		13,840		768		-		-		26,850
Single family owner occupied		3,136		425		534		-		-		4,095
Total covered loans		15,649		14,304		1,334		-		-		31,287
Total loans	$	1,740,192	$	49,756	$	47,571	$	202	$	-	$	1,837,721	$	2,216,264	$	24,268	$	59,266	$	0	$	0	$	2,299,798

	*December 31, 2021*
			*Special*
(Amounts in thousands)	*Pass*		*Mention*		*Substandard*		*Doubtful*		*Loss*		*Total*

Commercial loans
Construction, development, and other land	$	64,498	$	451	$	857	$	0	$	0	$	65,806
Commercial and industrial		128,770		1,005		3,855		0		0		133,630
Multi-family residential		98,457		1,090		855		0		0		100,402
Single family non-owner occupied		186,184		3,607		8,977		10		0		198,778	��
Non-farm, non-residential		665,559		25,624		16,323		0		0		707,506
Agricultural		8,758		70		513		0		0		9,341
Farmland		11,939		633		2,441		0		0		15,013
Consumer real estate loans
Home equity lines		76,259		426		3,172		0		0		79,857
Single family owner occupied		671,459		2,420		29,985		0		0		703,864
Owner occupied construction		16,629		0		281		0		0		16,910
Consumer and other loans
Consumer loans		127,514		16		2,264		0		0		129,794
Other		4,668		0		0		0		0		4,668
Total loans	$	2,060,694	$	35,342	$	69,523	$	10	$	0	$	2,165,569

Table of Contents

December 31, 2016

Special

(Amounts in thousands)

Pass

Mention

Substandard

Doubtful

Loss

Total

Non-covered loans

Commercial loans

Construction, development, and other land
$ 55,188 $ 980 $ 780 $ - $ - $ 56,948
Commercial and industrial
87,581 3,483 1,137 - 3 92,204
Multi-family residential
126,468 6,992 768 - - 134,228
Single family non-owner occupied
131,934 5,466 5,565 - - 142,965
Non-farm, non-residential
579,134 10,236 9,102 202 - 598,674
Agricultural
5,839 164 - - - 6,003
Farmland
28,887 1,223 1,619 - - 31,729
Consumer real estate loans

Home equity lines
104,033 871 1,457 - - 106,361
Single family owner occupied
475,402 4,636 20,381 472 - 500,891
Owner occupied construction
43,833 - 702 - - 44,535
Consumer and other loans

Consumer loans
77,218 11 216 - - 77,445
Other
3,971 - - - - 3,971
Total non-covered loans
1,719,488 34,062 41,727 674 3 1,795,954
Covered loans

Commercial loans

Construction, development, and other land
2,768 803 999 - - 4,570
Commercial and industrial
882 - 13 - - 895
Multi-family residential
- - 8 - - 8
Single family non-owner occupied
796 63 103 - - 962
Non-farm, non-residential
6,423 537 552 - - 7,512
Agricultural
25 - - - - 25
Farmland
132 - 265 - - 397
Consumer real estate loans

Home equity lines
14,283 20,763 771 - - 35,817
Single family owner occupied
4,601 928 1,200 - - 6,729
Consumer and other loans

Consumer loans
79 - - - - 79
Total covered loans
29,989 23,094 3,911 - - 56,994
Total loans
$ 1,749,477 $ 57,156 $ 45,638 $ 674 $ 3 $ 1,852,948

The ~~Company identifies loans for potential impairment through a variety~~following tables present the amortized cost basis of means, including, but not limited to, ongoing loan review, renewal processes, delinquency data, market communications, and public information. If the Company determines that it is probable all principal and interest amounts contractually due will not be collected, the loan ~~is generally deemed impaired.~~portfolio, by year of origination, loan class, and credit quality, as of the date indicated:

(Amounts in thousands)	*Term Loans Amortized Cost Basis by Origination Year*
Balance at June 30, 2022	*2022*		*2021*		*2020*		*2019*		*2018*		*Prior*		*Revolving*		*Total*
Construction, development
and other land
Pass	$	19,079	$	49,774	$	10,616	$	2,732	$	3,037	$	6,280	$	354	$	91,872
Special Mention		0		0		0		0		111		270		36		417
Substandard		0		0		255		36		12		248		0		551
Doubtful		0		0		0		0		0		0		0		0
Loss		0		0		0		0		0		0		0		0
Total construction, development, and other land	$	19,079	$	49,774	$	10,871	$	2,768	$	3,160	$	6,798	$	390	$	92,840
Commercial and industrial
Pass	$	44,408	$	28,875	$	15,160	$	10,273	$	11,012	$	8,013	$	16,545	$	134,286
Special Mention		0		25		35		601		226		0		95		982
Substandard		145		176		222		588		231		578		517		2,457
Doubtful		0		0		0		0		0		0		0		0
Loss		0		0		0		0		0		0		0		0
Total commercial and industrial	$	44,553	$	29,076	$	15,417	$	11,462	$	11,469	$	8,591	$	17,157	$	137,725
Paycheck Protection Loans
Pass	$	0	$	2,038	$	29	$	0	$	0	$	0	$	0	$	2,067
Special Mention		0		0		0		0		0		0		0		0
Substandard		0		0		0		0		0		0		0		0
Doubtful		0		0		0		0		0		0		0		0
Loss		0		0		0		0		0		0		0		0
Total Paycheck Protection Loans	$	0	$	2,038	$	29	$	0	$	0	$	0	$	0	$	2,067
Multi-family residential
Pass	$	33,938	$	10,932	$	23,800	$	4,354	$	1,807	$	47,638	$	934	$	123,403
Special Mention		0		0		0		0		0		649		0		649
Substandard		0		0		0		0		0		222		0		222
Doubtful		0		0		0		0		0		0		0		0
Loss		0		0		0		0		0		0		0		0
Total multi-family residential	$	33,938	$	10,932	$	23,800	$	4,354	$	1,807	$	48,509	$	934	$	124,274
Non-farm, non-residential
Pass	$	134,331	$	139,073	$	129,979	$	57,546	$	39,902	$	208,618	$	14,018	$	723,467
Special Mention		0		1,969		868		1,216		2,571		10,020		150		16,794
Substandard		0		1,144		692		2,471		722		6,851		228		12,108
Doubtful		0		0		0		0		0		0		0		0
Loss		0		0		0		0		0		0		0		0
Total non-farm, non-residential	$	134,331	$	142,186	$	131,539	$	61,233	$	43,195	$	225,489	$	14,396	$	752,369
Agricultural
Pass	$	2,560	$	3,779	$	1,258	$	601	$	407	$	715	$	434	$	9,754
Special Mention		0		37		17		0		0		0		0		54
Substandard		0		40		7		84		36		12		0		179
Doubtful		0		0		0		0		0		0		0		0
Loss		0		0		0		0		0		0		0		0
Total agricultural	$	2,560	$	3,856	$	1,282	$	685	$	443	$	727	$	434	$	9,987
Farmland
Pass	$	166	$	727	$	1,002	$	77	$	903	$	6,176	$	1,533	$	10,584
Special Mention		0		110		0		0		232		261		0		603
Substandard		0		0		13		0		257		1,376		0		1,646
Doubtful		0		0		0		0		0		0		0		0
Loss		0		0		0		0		0		0		0		0
Total farmland	$	166	$	837	$	1,015	$	77	$	1,392	$	7,813	$	1,533	$	12,833

Table of Contents

(Amounts in thousands)	*Term Loans Amortized Cost Basis by Origination Year*
Balance at June 30, 2022	*2022*		*2021*		*2020*		*2019*		*2018*		*Prior*		*Revolving*		*Total*
Home equity lines
Pass	$	1,026	$	102	$	0	$	0	$	62	$	861	$	73,489	$	75,540
Special Mention		0		0		0		0		0		0		430		430
Substandard		0		0		85		36		205		1,253		1,450		3,029
Doubtful		0		0		0		0		0		0		0		0
Loss		0		0		0		0		0		0		0		0
Total home equity lines	$	1,026	$	102	$	85	$	36	$	267	$	2,114	$	75,369	$	78,999
Single family Mortgage
Pass	$	92,181	$	235,009	$	213,126	$	54,675	$	39,796	$	241,066	$	1,188	$	877,041
Special Mention		0		387		85		372		266		3,218		0		4,328
Substandard		382		1,041		715		1,082		2,172		30,722		0		36,114
Doubtful		0		0		0		0		0		0		0		0
Loss		0		0		0		0		0		0		0		0
Total single family owner and non-owner occupied	$	92,563	$	236,437	$	213,926	$	56,129	$	42,234	$	275,006	$	1,188	$	917,483
Owner occupied construction
Pass	$	2,591	$	11,768	$	2,005	$	32	$	16	$	755	$	0	$	17,167
Special Mention		0		0		0		0		0		0		0		0
Substandard		0		0		163		0		0		1		0		164
Doubtful		0		0		0		0		0		0		0		0
Loss		0		0		0		0		0		0		0		0
Total owner occupied construction	$	2,591	$	11,768	$	2,168	$	32	$	16	$	756	$	0	$	17,331
Consumer loans
Pass	$	53,360	$	49,325	$	22,059	$	11,474	$	3,844	$	8,796	$	2,225	$	151,083
Special Mention		0		3		0		7		0		0		1		11
Substandard		55		1,049		730		645		52		189		76		2,796
Doubtful		0		0		0		0		0		0		0		0
Loss		0		0		0		0		0		0		0		0
Total consumer loans	$	53,415	$	50,377	$	22,789	$	12,126	$	3,896	$	8,985	$	2,302	$	153,890

~~The following table presents the recorded investment, unpaid principal balance, and related allowance for loan losses for impaired loans, excluding PCI loans, as of the dates indicated:~~

September 30, 2017

December 31, 2016

Unpaid

Unpaid

Recorded

Principal

Related

Recorded

Principal

Related

(Amounts in thousands)

Investment

Balance

Allowance

Investment

Balance

Allowance

Impaired loans with no related allowance

Commercial loans

Construction, development, and other land
$ 662 $ 999 $ - $ 33 $ 35 $ -
Commercial and industrial
146 1,093 - 346 383 -
Multi-family residential
381 836 - 294 369 -
Single family non-owner occupied
2,485 3,891 - 3,084 3,334 -
Non-farm, non-residential
3,905 6,239 - 3,829 4,534 -
Agricultural
118 122 - - - -
Farmland
990 1,037 - 1,161 1,188 -
Consumer real estate loans

Home equity lines
1,624 1,766 - 913 968 -
Single family owner occupied
16,768 18,932 - 11,779 12,630 -
Owner occupied construction
233 233 - 573 589 -
Consumer and other loans

Consumer loans
61 63 - 62 103 -
Total impaired loans with no allowance
27,373 35,211 - 22,074 24,133 -

Impaired loans with a related allowance

Commercial loans

Construction, development, and other land
- - - - - -
Commercial and industrial
2,400 2,400 262 - - -
Single family non-owner occupied
771 772 69 351 351 31
Non-farm, non-residential
865 874 325 - - -
Farmland
410 418 50 430 430 18
Consumer real estate loans

Home equity lines
- - - - - -
Single family owner occupied
3,771 3,779 754 4,118 4,174 770
Total impaired loans with an allowance
8,217 8,243 1,460 4,899 4,955 819
Total impaired loans⁽¹⁾
$ 35,590 $ 43,454 $ 1,460 $ 26,973 $ 29,088 $ 819

~~(1)~~

Includes loans totaling $20.07 million as of September 30, 2017, and $16.89 million as of December 31, 2016, that do not meet the Company's evaluation threshold for individual impairment and are therefore collectively evaluated for impairment

(Amounts in thousands)	*Term Loans Amortized Cost Basis by Origination Year*
Balance at June 30, 2022	*2022*		*2021*		*2020*		*2019*		*2018*		*Prior*		*Revolving*		*Total*
Total Loans
Pass	$	383,640	$	531,402	$	419,034	$	141,764	$	100,786	$	528,918	$	110,720	$	2,216,264
Special Mention		0		2,531		1,005		2,196		3,406		14,418		712		24,268
Substandard		582		3,450		2,882		4,942		3,687		41,452		2,271		59,266
Doubtful		0		0		0		0		0		0		0		0
Loss		0		0		0		0		0		0		0		0
Total loans	$	384,222	$	537,383	$	422,921	$	148,902	$	107,879	$	584,788	$	113,703	$	2,299,798

Table of Contents

~~The following table presents the average recorded investment and interest income recognized on impaired loans, excluding PCI loans, for the periods indicated:~~

Three Months Ended September 30,

Nine Months Ended September 30,

2017

2016

2017

2016

(Amounts in thousands)

Interest Income Recognized

Average Recorded Investment

Interest Income Recognized

Average Recorded Investment

Interest Income Recognized

Average Recorded Investment

Interest Income Recognized

Average Recorded Investment

Impaired loans with no related allowance:

Commercial loans

Construction, development, and other land
$ 32 $ 907 $ 22 $ 600 $ 32 $ 309 $ 22 $ 447
Commercial and industrial
5 754 6 1,029 8 468 10 738
Multi-family residential
- 509 15 562 3 474 15 309
Single family non-owner occupied
11 3,304 91 3,498 88 3,313 107 3,035
Non-farm, non-residential
68 5,244 65 8,930 93 3,766 307 10,186
Agricultural
4 127 - - 4 127 - -
Farmland
17 1,003 5 204 17 1,004 9 186
Consumer real estate loans

Home equity lines
15 1,683 6 1,157 35 1,259 21 1,318
Single family owner occupied
137 17,478 91 13,175 317 15,209 254 12,436
Owner occupied construction
1 235 2 585 6 234 7 470
Consumer and other loans

Consumer loans
1 62 2 63 3 52 2 45
Total impaired loans with no related allowance
291 31,306 305 29,803 606 26,215 754 29,170

Impaired loans with a related allowance:

Commercial loans

Construction, development, and other land
- - - - - 143 - -
Commercial and industrial
50 2,516 - - 103 1,727 - -
Single family non-owner occupied
8 778 5 682 21 488 18 572
Non-farm, non-residential
- 872 45 4,658 15 964 215 5,108
Farmland
- 413 - - - 275 - -
Consumer real estate loans

Home equity lines
- - - - - 139 - -
Single family owner occupied
24 3,814 24 4,130 92 4,527 91 4,547
Owner occupied construction
- - - - - 1 - 115
Total impaired loans with a related allowance
82 8,393 74 9,470 231 8,264 324 10,342
Total impaired loans
$ 373 $ 39,699 $ 379 $ 39,273 $ 837 $ 34,479 $ 1,078 $ 39,512

~~The following tables provide information on impaired PCI loan pools as of and for the dates indicated:~~

September 30, 2017

December 31, 2016

(Amounts in thousands, except impaired loan pools)

Unpaid principal balance
$ - $ 1,086
Recorded investment
- 1,085
Allowance for loan losses related to PCI loan pools
- 12

Impaired PCI loan pools
- 1

Three Months Ended September 30,

Nine Months Ended September 30,

2017

2016

2017

2016

(Amounts in thousands)

Interest income recognized
$ - $ 12 $ 20 $ 130
Average recorded investment
- 1,139 705 2,195

(Amounts in thousands)	Term Loans Amortized Cost Basis by Origination Year
Balance at December 31, 2021	2021		2020		2019		2018		2017		Prior		Revolving		Total
Construction, development
and other land
Pass	$	40,207	$	10,127	$	3,081	$	3,704	$	1,308	$	5,717	$	354	$	64,498
Special Mention		0		266		0		128		0		21		36		451
Substandard		0		0		128		11		291		427		0		857
Doubtful		0		0		0		0		0		0		0		0
Loss		0		0		0		0		0		0		0		0
Total construction, development, and other land	$	40,207	$	10,393	$	3,209	$	3,843	$	1,599	$	6,165	$	390	$	65,806
Commercial and industrial
Pass	$	34,539	$	18,887	$	13,679	$	13,772	$	4,817	$	5,890	$	16,544	$	108,128
Special Mention		32		60		597		192		28		0		96		1,005
Substandard		184		355		706		384		842		866		518		3,855
Doubtful		0		0		0		0		0		0		0		0
Loss		0		0		0		0		0		0		0		0
Total commercial and industrial	$	34,755	$	19,302	$	14,982	$	14,348	$	5,687	$	6,756	$	17,158	$	112,988
Paycheck Protection Loans
Pass	$	16,482	$	4,160	$	0	$	0	$	0	$	0	$	0	$	20,642
Special Mention		0		0		0		0		0		0		0		0
Substandard		0		0		0		0		0		0		0		0
Doubtful		0		0		0		0		0		0		0		0
Loss		0		0		0		0		0		0		0		0
Total Paycheck Protection Loans	$	16,482	$	4,160	$	0	$	0	$	0	$	0	$	0	$	20,642
Multi-family residential
Pass	$	11,307	$	24,299	$	4,644	$	1,897	$	8,413	$	46,962	$	935	$	98,457
Special Mention		0		0		0		0		0		1,090		0		1,090
Substandard		0		0		0		0		0		855		0		855
Doubtful		0		0		0		0		0		0		0		0
Loss		0		0		0		0		0		0		0		0
Total multi-family residential	$	11,307	$	24,299	$	4,644	$	1,897	$	8,413	$	48,907	$	935	$	100,402
Non-farm, non-residential
Pass	$	147,978	$	146,381	$	62,651	$	50,943	$	43,776	$	199,812	$	14,018	$	665,559
Special Mention		397		3,334		823		2,595		9,190		9,135		150		25,624
Substandard		1,161		711		2,508		2,531		3,232		5,953		227		16,323
Doubtful		0		0		0		0		0		0		0		0
Loss		0		0		0		0		0		0		0		0
Total non-farm, non-residential	$	149,536	$	150,426	$	65,982	$	56,069	$	56,198	$	214,900	$	14,395	$	707,506
Agricultural
Pass	$	4,564	$	1,548	$	998	$	534	$	346	$	335	$	433	$	8,758
Special Mention		43		27		0		0		0		0		0		70
Substandard		44		11		282		39		17		120		0		513
Doubtful		0		0		0		0		0		0		0		0
Loss		0		0		0		0		0		0		0		0
Total agricultural	$	4,651	$	1,586	$	1,280	$	573	$	363	$	455	$	433	$	9,341
Farmland
Pass	$	428	$	1,047	$	82	$	1,125	$	887	$	6,835	$	1,535	$	11,939
Special Mention		189		0		0		240		5		199		0		633
Substandard		0		14		519		249		264		1,395		0		2,441
Doubtful		0		0		0		0		0		0		0		0
Loss		0		0		0		0		0		0		0		0
Total farmland	$	617	$	1,061	$	601	$	1,614	$	1,156	$	8,429	$	1,535	$	15,013

Table of Contents

(Amounts in thousands)	Term Loans Amortized Cost Basis by Origination Year												��
Balance at December 31, 2021	2021		2020		2019		2018		2017		Prior		Revolving		Total
Home equity lines
Pass	$	115	$	59	$	0	$	25	$	2	$	2,168	$	73,890	$	76,259
Special Mention		0		0		0		0		0		0		426		426
Substandard		0		0		28		249		128		1,316		1,451		3,172
Doubtful		0		0		0		0		0		0		0		0
Loss		0		0		0		0		0		0		0		0
Total home equity lines	$	115	$	59	$	28	$	274	$	130	$	3,484	$	75,767	$	79,857
Single family Mortgage
Pass	$	239,917	$	225,294	$	61,925	$	46,716	$	41,757	$	240,845	$	1,189	$	857,643
Special Mention		399		510		937		269		137		3,775		0		6,027
Substandard		1,213		799		1,475		1,668		1,878		31,929		0		38,962
Doubtful		0		0		0		0		0		10		0		10
Loss		0		0		0		0		0		0		0		0
Total single family owner and non-owner occupied	$	241,529	$	226,603	$	64,337	$	48,653	$	43,772	$	276,559	$	1,189	$	902,642
Owner occupied construction
Pass	$	9,689	$	4,729	$	178	$	22	$	428	$	1,583	$	0	$	16,629
Special Mention		0		0		0		0		0		0		0		0
Substandard		0		0		0		0		0		281		0		281
Doubtful		0		0		0		0		0		0		0		0
Loss		0		0		0		0		0		0		0		0
Total owner occupied construction	$	9,689	$	4,729	$	178	$	22	$	428	$	1,864	$	0	$	16,910
Consumer loans
Pass	$	65,018	$	31,065	$	16,548	$	4,980	$	2,306	$	10,040	$	2,225	$	132,182
Special Mention		0		0		16		0		0		0		0		16
Substandard		328		663		824		107		78		186		78		2,264
Doubtful		0		0		0		0		0		0		0		0
Loss		0		0		0		0		0		0		0		0
Total consumer loans	$	65,346	$	31,728	$	17,388	$	5,087	$	2,384	$	10,226	$	2,303	$	134,462

(Amounts in thousands)	Term Loans Amortized Cost Basis by Origination Year
Balance at December 31, 2021	2021		2020		2019		2018		2017		Prior		Revolving		Total
Total Loans
Pass	$	570,244	$	467,596	$	163,786	$	123,718	$	104,040	$	520,187	$	111,123	$	2,060,694
Special Mention		1,060		4,197		2,373		3,424		9,360		14,220		708		35,342
Substandard		2,930		2,553		6,470		5,238		6,730		43,328		2,274		69,523
Doubtful		0		0		0		0		0		10		0		10
Loss		0		0		0		0		0		0		0		0
Total loans	$	574,234	$	474,346	$	172,629	$	132,380	$	120,130	$	577,745	$	114,105	$	2,165,569

Table of Contents

The Company generally places a loan on nonaccrual status when it is 90 days or more past due. ~~PCI loans are generally not classified as nonaccrual due to the accrual of interest income under the accretion method of accounting.~~ The following table presents nonaccrual loans, by loan class, as of the dates indicated:

	September 30, 2017						December 31, 2016						*June 30, 2022*						*December 31, 2021*
(Amounts in thousands)	Non-covered		Covered		Total		Non-covered		Covered		Total		*No Allowance*		*With an Allowance*		*Total*		*No Allowance*		*With an Allowance*		*Total*
Commercial loans
Construction, development, and other land	$	126	$	-	$	126	$	72	$	32	$	104	$	277	$	0	$	277	$	409	$	0	$	409
Commercial and industrial		118		-		118		332		13		345		435		0		435		1,734		0		1,734
Multi-family residential		330		-		330		294		-		294		266		0		266		208		0		208
Single family non-owner occupied		1,626		20		1,646		1,242		24		1,266		2,132		0		2,132		2,304		0		2,304
Non-farm, non-residential		3,352		-		3,352		3,295		30		3,325		2,815		0		2,815		3,439		1,100		4,539
Agricultural		118		-		118		-		-		-		22		0		22		136		0		136
Farmland		870		-		870		1,591		-		1,591		133		0		133		222		0		222
Consumer real estate loans
Home equity lines		828		350		1,178		705		400		1,105		775		0		775		767		0		767
Single family owner occupied		11,517		50		11,567		7,924		109		8,033		8,816		0		8,816		8,957		0		8,957
Owner occupied construction		-		-		-		336		-		336		0		0		0		0		0		0
Consumer and other loans
Consumer loans		57		-		57		63		-		63		2,155		0		2,155		1,492		0		1,492
Total nonaccrual loans	$	18,942	$	420	$	19,362	$	15,854	$	608	$	16,462	$	17,826	$	0	$	17,826	$	19,668	$	1,100	$	20,768

~~Table~~

During the second quarter of ~~Contents~~

2022, $1 thousand in nonaccrual loan interest was recognized compared to $15 thousand for the same period of 2021. During the firstsix months of 2022 $3 thousand in nonaccrual loan interest was recognized compared to $24 thousand for the same period of 2021 .

The following tables ~~present~~presents the aging of past due loans, by loan class, as of the dates indicated. Nonaccrual loans 30 days or more past due are included in the applicable delinquency category. Loans acquired with credit deterioration, with a discount, continue to accrue interest based on expected cash flows; therefore, PCI loans are not generally considered nonaccrual. There were no non-covered accruing loans contractually past due 90 days or more as of September 30, 2017, or December 31, 2016.category:

													*June 30, 2022*
	September 30, 2017																								*Amortized Cost of*
	30 - 59 Days		60 - 89 Days		90+ Days		Total		Current		Total		*30 - 59 Days*		*60 - 89 Days*		*90+ Days*		*Total*		*Current*		*Total*		*> 90 Days Accruing*
(Amounts in thousands)	Past Due		Past Due		Past Due		Past Due		Loans		Loans		*Past Due*		*Past Due*		*Past Due*		*Past Due*		*Loans*		*Loans*		*No Allowance*
Non-covered loans

Commercial loans
Construction, development, and other land	$	25	$	-	$	-	$	25	$	72,927	$	72,952	$	231	$	252	$	25	$	508	$	92,332	$	92,840	$	0
Commercial and industrial		226		36		47		309		89,875		90,184		346		84		192		622		139,170		139,792		0
Multi-family residential		341		185		-		526		125,471		125,997		148		0		0		148		124,126		124,274		0
Single family non-owner occupied		405		186		861		1,452		141,761		143,213		180		327		502		1,009		194,104		195,113		0
Non-farm, non-residential		523		17		2,623		3,163		610,217		613,380		90		16		2,050		2,156		750,213		752,369		0
Agricultural		6		-		-		6		6,090		6,096		16		0		13		29		9,958		9,987		0
Farmland		849		410		343		1,602		26,295		27,897		0		0		133		133		12,700		12,833		0
Consumer real estate loans
Home equity lines		242		105		298		645		102,243		102,888		405		123		469		997		78,002		78,999		0
Single family owner occupied		3,133		1,414		6,199		10,746		490,496		501,242		3,977		2,471		3,017		9,465		712,905		722,370		0
Owner occupied construction		330		-		-		330		46,704		47,034		0		0		-		0		17,331		17,331		0
Consumer and other loans
Consumer loans		360		62		38		460		70,235		70,695		3,002		1,035		1,176		5,213		143,528		148,741		0
Other		-		-		-		-		4,856		4,856		0		0		0		0		5,149		5,149		0
Total non-covered loans		6,440		2,415		10,409		19,264		1,787,170		1,806,434
Covered loans
Commercial loans
Construction, development, and other land		-		-		-		-		40		40
Single family non-owner occupied		72		-		-		72		220		292
Non-farm, non-residential		-		-		-		-		10		10
Consumer real estate loans
Home equity lines		291		-		118		409		26,441		26,850
Single family owner occupied		-		-		28		28		4,067		4,095
Total covered loans		363		-		146		509		30,778		31,287
Total loans	$	6,803	$	2,415	$	10,555	$	19,773	$	1,817,948	$	1,837,721	$	8,395	$	4,308	$	7,577	$	20,280	$	2,279,518	$	2,299,798	$	0

	December 31, 2021
													Amortized Cost of
	*30 - 59 Days*		*60 - 89 Days*		*90+ Days*		*Total*		*Current*		*Total*		*> 90 Days Accruing*
(Amounts in thousands)	*Past Due*		*Past Due*		*Past Due*		*Past Due*		*Loans*		*Loans*		*No Allowance*

Commercial loans
Construction, development, and other land	$	52	$	0	$	120	$	172	$	65,634	$	65,806	$	0
Commercial and industrial		325		35		1,394		1,754		131,876		133,630		0
Multi-family residential		97		0		0		97		100,305		100,402		0
Single family non-owner occupied		1,210		583		795		2,588		196,190		198,778		0
Non-farm, non-residential		1,002		441		2,333		3,776		703,730		707,506		0
Agricultural		73		7		101		181		9,160		9,341		0
Farmland		52		0		222		274		14,739		15,013		0
Consumer real estate loans
Home equity lines		275		388		333		996		78,861		79,857		0
Single family owner occupied		4,740		2,584		3,880		11,204		692,660		703,864		0
Owner occupied construction		139		0		0		139		16,771		16,910		0
Consumer and other loans
Consumer loans		3,469		1,182		1,049		5,700		124,094		129,794		0
Other		0		0		0		0		4,668		4,668		0
Total loans	$	11,434	$	5,220	$	10,227	$	26,881	$	2,138,688	$	2,165,569	$	0

Table of Contents

ASC 326 prescribes that when an entity determines foreclosure is probable, the expected credit loss is required to be measured based on the fair value of the collateral. As a practical expedient, an entity may use the fair value as of the reporting date when recording the net carrying amount of the asset. For the collateral dependent asset ("CDA") a credit loss expense is recorded for loan amounts in excess of fair value of the collateral. The table below summarizes collateral dependent loans, where foreclosure is probable, by type of collateral, and the extent to which they are collateralized during the period.

December 31, 2016

30 - 59 Days

60 - 89 Days

90+ Days

Total

Current

Total

(Amounts in thousands)

Past Due

Past Due

Past Due

Past Due

Loans

Loans

Non-covered loans

Commercial loans

Construction, development, and other land
$ 33 $ 5 $ 17 $ 55 $ 56,893 $ 56,948
Commercial and industrial
174 30 149 353 91,851 92,204
Multi-family residential
163 - 281 444 133,784 134,228
Single family non-owner occupied
1,302 159 835 2,296 140,669 142,965
Non-farm, non-residential
1,235 332 2,169 3,736 594,938 598,674
Agricultural
- 5 - 5 5,998 6,003
Farmland
224 343 565 1,132 30,597 31,729
Consumer real estate loans

Home equity lines
78 136 658 872 105,489 106,361
Single family owner occupied
4,777 2,408 3,311 10,496 490,395 500,891
Owner occupied construction
342 336 - 678 43,857 44,535
Consumer and other loans

Consumer loans
371 90 15 476 76,969 77,445
Other
- - - - 3,971 3,971
Total non-covered loans
8,699 3,844 8,000 20,543 1,775,411 1,795,954
Covered loans

Commercial loans

Construction, development, and other land
434 - 32 466 4,104 4,570
Commercial and industrial
- - - - 895 895
Multi-family residential
- - - - 8 8
Single family non-owner occupied
24 - - 24 938 962
Non-farm, non-residential
32 - - 32 7,480 7,512
Agricultural
- - - - 25 25
Farmland
- - - - 397 397
Consumer real estate loans

Home equity lines
108 146 62 316 35,501 35,817
Single family owner occupied
58 - 39 97 6,632 6,729
Owner occupied construction
- - - - - -
Consumer and other loans

Consumer loans
- - - - 79 79
Total covered loans
656 146 133 935 56,059 56,994
Total loans
$ 9,355 $ 3,990 $ 8,133 $ 21,478 $ 1,831,470 $ 1,852,948

	*June 30, 2022*							*December 31, 2021*
(Amounts in thousands)	*Balance*		*Collateral Coverage*		%			*Balance*		*Collateral Coverage*		%
Commercial Real Estate
Hotel	$	0	$	0		0		$	0	$	0		0
Office		0		0		0			0		0		0
Other		766		972		126.89	%		2,216		2,312		104.33	%
Retail		0		0		0			0		0		0
Multi-Family
Industrial		0		0		0			0		0		0
Office		0		0		0			0		0		0
Other		0		0		0			0		0		0
Commercial and industrial
Industrial		0		0		0			0		0		0
Other		0		0		0			0		0		0
Home equity loans		0		0		0			0		0		0
Consumer owner occupied		0		0		0			0		0		0
Consumer		-		-		-			-		-		-
Total collateral dependent loans	$	766	$	972		126.89	%	$	2,216	$	2,312		104.33	%

The Company may make concessions in interest rates, loan terms and/or amortization terms when restructuring loans for borrowers experiencing financial difficulty. Restructured loans in excess of $250 thousand are evaluated for a specific reserve based on either the collateral or net present value method, whichever is most applicable. Restructured loans under $250 thousand are subject to the reserve calculation at the historical loss rate for classified loans. Certain ~~troubled debt restructurings (“TDRs”)~~TDRs are classified as nonperforming at the time of restructuring and are returned to performing status after six months of satisfactory payment performance; however, these loans remain identified as impaired until full payment or other satisfaction of the obligation occurs. ~~PCI loans are generally~~

The CARES Act included a provision allowing banks to not ~~considered TDRs~~ apply the guidance on accounting for troubled debt restructurings to loan modifications, such as ~~long as~~extensions or deferrals, related to COVID-19 made between March 1, 2020, and the ~~loans remain in~~earlier of (i) December 31, 2021, or (ii) 60 days after the ~~assigned loan pool. No covered loans~~end of the COVID-19 national emergency. The relief can only be applied to modifications for borrowers that were ~~recorded as TDRs~~not more than 30 days past due as of ~~September 30, 2017, or~~ December 31, ~~2016.~~2019. The Company elected to adopt this provision of the CARES Act.

Table of Contents

The following table presents loans modified as TDRs, by loan class and accrual status, as of the dates indicated:

		September 30, 2017						December 31, 2016						*June 30, 2022*						*December 31, 2021*
(Amounts in thousands)	(Amounts in thousands)	Nonaccrual⁽¹⁾		Accruing		Total		Nonaccrual⁽¹⁾		Accruing		Total		*Nonaccrual(1)*		*Accruing*		*Total*		*Nonaccrual(1)*		*Accruing*		*Total*
Commercial loans	Commercial loans
Commercial and industrial														$	0	$	432	$	432	$	396	$	470	$	866
Single family non-owner occupied	Single family non-owner occupied	$	33	$	875	$	908	$	38	$	892	$	930		150		853		1,003		857		1,100		1,957
Non-farm, non-residential	Non-farm, non-residential		-		295		295		-		4,160		4,160		0		1,963		1,963		0		2,021		2,021
Consumer real estate loans	Consumer real estate loans
Home equity lines	Home equity lines		-		148		148		-		158		158		0		61		61		0		67		67
Single family owner occupied	Single family owner occupied		1,484		6,690		8,174		905		7,503		8,408		1,284		4,978		6,262		1,266		4,755		6,021
Owner occupied construction	Owner occupied construction		-		234		234		341		239		580		0		0		0		0		212		212
Consumer and other loans
Consumer loans															0		26		26		0		27		27
Total TDRs	Total TDRs	$	1,517	$	8,242	$	9,759	$	1,284	$	12,952	$	14,236	$	1,434	$	8,313	$	9,747	$	2,519	$	8,652	$	11,171

Allowance for loan losses related to TDRs						$	707					$	670
Allowance for credit losses related to TDRs																		$	0					$	0

~~(1)~~(1)

Nonaccrual TDRs are included in total nonaccrual loans disclosed in the nonaccrual table above.

The following table presents interest income recognized on TDRs for the periods indicated:

		Three Months Ended September 30,				Nine Months Ended September 30,				*Three Months Ended June 30,*				*Six Months Ended June 30,*
		2017		2016		2017		2016		*2022*		*2021*		*2022*		*2021*
(Amounts in thousands)	(Amounts in thousands)
Interest income recognized	Interest income recognized	$	74	$	143	$	159	$	296	$	97	$	94	$	202	$	198

The following tables present loans modified as TDRs, by type of concession made and loan class, that were restructured during the periods ~~indicated. The post-modification recorded investment represents the loan balance immediately following modification.~~indicated:

	Three Months Ended September 30,												*Three Months Ended June 30,*
	2017						2016						*2022*						*2021*
(Amounts in thousands)	Total Contracts		Pre-modification Recorded Investment		Post-modification Recorded Investment		Total Contracts		Pre-modification Recorded Investment		Post-modification Recorded Investment		*Total Contracts*		*Pre-modification Recorded Investment*		*Post-modification Recorded Investment(1)*		*Total Contracts*		*Pre-modification Recorded Investment*		*Post-modification Recorded Investment(1)*
Below market interest rate and extended payment term
Extended term
Single family owner occupied		1	$	42	$	42		-	$	-	$	-		2	$	238	$	245		0	$	0	$	0
Total extended term														2		238		245		0		0		0
Total		1	$	42	$	42		-	$	-	$	-		2	$	238	$	245		0	$	0	$	0

Nine Months Ended September 30,

2017

2016

(Amounts in thousands)

Total Contracts

Pre-modification
Recorded Investment

Post-modification
Recorded Investment

Total Contracts

Pre-modification
Recorded Investment

Post-modification
Recorded Investment

Below market interest rate and extended payment term

Single family owner occupied
3 $ 141 $ 141 1 $ 115 $ 115
Total
3 $ 141 $ 141 1 $ 115 $ 115

(1)	Represents the loan balance immediately following modification

	*Six Months Ended June 30,*
	*2022*						*2021*
(Amounts in thousands)	*Total Contracts*		*Pre-modification Recorded Investment*		*Post-modification Recorded Investment(1)*		*Total Contracts*		*Pre-modification Recorded Investment*		*Post-modification Recorded Investment(1)*
Below market interest rate
Single family owner occupied		1	$	31	$	31		0	$	0	$	0
Total below market interest rate		1	$	31	$	31		0		0		0
Extended payment term
Single family owner occupied		2		238		245		0		0		0
Total extended payment term		2		238		245		0		0		0
Payment deferral
Non-farm, non-residential		0		0		0		1		1,390		1,374
Total principal deferral		0		0		0		1		1,390		1,374
Total		3	$	269	$	276		1	$	1,390	$	1,374

(1)	Represents the loan balance immediately following modification

There ~~were no~~was one payment ~~defaults on~~default in the amount of $39 thousand for loans modified as TDRs ~~that were~~ restructured within the previous 12 months as of ~~September~~June 30, ~~2017 or 2016.~~2022, and none as of June 30, 2021.

Table of Contents

The following table provides information about other real estate owned (“OREO”), which consists of properties acquired through foreclosure, as of the dates indicated:

September 30, 2017

December 31, 2016

(Amounts in thousands)

Non-covered OREO
$ 3,543 $ 5,109
Covered OREO
54 276
Total OREO
$ 3,597 $ 5,385

Non-covered OREO secured by residential real estate
$ 971 $ 1,746
Residential real estate loans in the foreclosure process⁽¹⁾
10,025 2,539

	*June 30, 2022*		*December 31, 2021*
(Amounts in thousands)
OREO	$	579	$	1,015

OREO secured by residential real estate	$	221	$	337
Residential real estate loans in the foreclosure process⁽¹⁾	$	2,741	$	2,210

(1)
~~(1)~~		The recorded investment in consumer mortgage loans collateralized by residential real estate that are in the process of foreclosure according to local requirements of the applicable jurisdiction

Note 5. Allowance for ~~Loan~~Credit Losses

The following tables present the changes in the allowance for ~~loan~~credit losses, by loan segment, during the periods indicated:

Three Months Ended September 30, 2017

(Amounts in thousands)

Commercial

Consumer Real
Estate

Consumer and
Other

Total
Allowance

Allowance, excluding PCI

Beginning balance
$ 12,283 $ 5,802 $ 793 $ 18,878
Provision for loan losses charged to operations
358 75 305 738
Charge-offs
(207 ) (137 ) (373 ) (717 )
Recoveries
170 67 70 307
Net charge-offs
(37 ) (70 ) (303 ) (410 )
Ending balance
$ 12,604 $ 5,807 $ 795 $ 19,206

PCI allowance

Beginning balance
$ - $ 8 $ - $ 8
Recovery of loan losses
- (8 ) - (8 )
Benefit attributable to the FDIC indemnification asset
- - - -
Recovery of loan losses charged to operations
- (8 ) - (8 )
Recovery of loan losses recorded through the FDIC indemnification asset
- - - -
Ending balance
$ - $ - $ - $ -

Total allowance

Beginning balance
$ 12,283 $ 5,810 $ 793 $ 18,886
Provision for loan losses
358 67 305 730
Benefit attributable to the FDIC indemnification asset
- - - -
Provision for loan losses charged to operations
358 67 305 730
Recovery of loan losses recorded through the FDIC indemnification asset
- - - -
Charge-offs
(207 ) (137 ) (373 ) (717 )
Recoveries
170 67 70 307
Net charge-offs
(37 ) (70 ) (303 ) (410 )
Ending balance
$ 12,604 $ 5,807 $ 795 $ 19,206

	*Three Months Ended June 30, 2022*
				*Consumer Real*			*Consumer and*			*Total*
(Amounts in thousands)	*Commercial*			*Estate*			*Other*			*Allowance*
Total allowance
Beginning balance	$	15,896		$	9,764		$	3,321		$	28,981
Provision for (recovery of) loan losses charged to operations		(808	)		48			1,270			510
Charge-offs		(151	)		(88	)		(1,230	)		(1,469	)
Recoveries		1,182			325			220			1,727
Net recoveries (charge-offs)		1,031			237			(1,010	)		258
Ending balance	$	16,119		$	10,049		$	3,581		$	29,749

	*Three Months Ended June 30, 2021*
				*Consumer Real*			*Consumer and*			*Total*
(Amounts in thousands)	*Commercial*			*Estate*			*Other*			*Allowance*
Total allowance
Beginning balance	$	19,586		$	11,887		$	3,090		$	34,563
(Recovery of) provision for credit losses charged to operations		(1,712	)		(986	)		468			(2,230	)
Charge-offs		(1,202	)		(48	)		(652	)		(1,902	)
Recoveries		1,032			202			192			1,426
Net (charge-offs) recoveries		(170	)		154			(460	)		(476	)
Ending balance	$	17,704		$	11,055		$	3,098		$	31,857

	*Six Months Ended June 30, 2022*
				*Consumer Real*			*Consumer and*			*Total*
(Amounts in thousands)	*Commercial*			*Estate*			*Other*			*Allowance*
Total allowance
Beginning balance	$	14,775		$	9,972		$	3,111		$	27,858
Provision for (recovery of) loan losses charged to operations		300			(193	)		2,364			2,471
Charge-offs		(408	)		(94	)		(2,269	)		(2,771	)
Recoveries		1,452			364			375			2,191
Net recoveries (charge-offs)		1,044			270			(1,894	)		(580	)
Ending balance	$	16,119		$	10,049		$	3,581		$	29,749

	*Six Months Ended June 30, 2021*
				*Consumer Real*			*Consumer and*			*Total*
(Amounts in thousands)	*Commercial*			*Estate*			*Other*			*Allowance*
Total allowance
Beginning balance	$	14,661		$	8,951		$	2,570		$	26,182
Cumulative effect of adoption of ASU 2016-13		8,360			4,145			602			13,107
Provision for loan losses charged to operations		(4,782	)		(2,528	)		1,079			(6,231	)
Charge-offs		(1,959	)		(58	)		(1,615	)		(3,632	)
Recoveries		1,424			545			462			2,431
Net (charge-offs) recoveries		(535	)		487			(1,153	)		(1,201	)
Ending balance	$	17,704		$	11,055		$	3,098		$	31,857

Table of Contents

Three Months Ended September 30, 2016

(Amounts in thousands)

Commercial

Consumer Real Estate

Consumer and Other

Total Allowance

Allowance, excluding PCI

Beginning balance
$ 13,689 $ 6,625 $ 773 $ 21,087
(Recovery of) provision for loan losses charged to operations
(726 ) (575 ) 147 (1,154 )
Charge-offs
(272 ) (207 ) (293 ) (772 )
Recoveries
295 89 76 460
Net recoveries (charge-offs)
23 (118 ) (217 ) (312 )
Ending balance
$ 12,986 $ 5,932 $ 703 $ 19,621

PCI allowance

Beginning balance
$ - $ 12 $ - $ 12
Recovery of loan losses
- - - -
Benefit attributable to the FDIC indemnification asset
- - - -
Recovery of loan losses charged to operations
- - - -
Recovery of loan losses recorded through the FDIC indemnification asset
- - - -
Ending balance
$ - $ 12 $ - $ 12

Total allowance

Beginning balance
$ 13,689 $ 6,637 $ 773 $ 21,099
(Recovery of) provision for loan losses
(726 ) (575 ) 147 (1,154 )
Benefit attributable to the FDIC indemnification asset
- - - -
(Recovery of) provision for loan losses charged to operations
(726 ) (575 ) 147 (1,154 )
Recovery of loan losses recorded through the FDIC indemnification asset
- - - -
Charge-offs
(272 ) (207 ) (293 ) (772 )
Recoveries
295 89 76 460
Net recoveries (charge-offs)
23 (118 ) (217 ) (312 )
Ending balance
$ 12,986 $ 5,944 $ 703 $ 19,633

~~Table of Contents~~

Nine Months Ended September 30, 2017

(Amounts in thousands)

Commercial

Consumer Real Estate

Consumer and Other

Total Allowance

Allowance, excluding PCI

Beginning balance
$ 11,690 $ 5,487 $ 759 $ 17,936
Provision for loan losses charged to operations
822 561 785 2,168
Charge-offs
(493 ) (535 ) (948 ) (1,976 )
Recoveries
585 294 199 1,078
Net recoveries (charge-offs)
92 (241 ) (749 ) (898 )
Ending balance
$ 12,604 $ 5,807 $ 795 $ 19,206

PCI allowance

Beginning balance
$ - $ 12 $ - $ 12
Recovery of loan losses
- (12 ) - (12 )
Benefit attributable to the FDIC indemnification asset
- - - -
Recovery of loan losses charged to operations
- (12 ) - (12 )
Recovery of loan losses recorded through the FDIC indemnification asset
- - - -
Ending balance
$ - $ - $ - $ -

Total allowance

Beginning balance
$ 11,690 $ 5,499 $ 759 $ 17,948
Provision for loan losses
822 549 785 2,156
Benefit attributable to the FDIC indemnification asset
- - - -
Provision for loan losses charged to operations
822 549 785 2,156
Recovery of loan losses recorded through the FDIC indemnification asset
- - - -
Charge-offs
(493 ) (535 ) (948 ) (1,976 )
Recoveries
585 294 199 1,078
Net recoveries (charge-offs)
92 (241 ) (749 ) (898 )
Ending balance
$ 12,604 $ 5,807 $ 795 $ 19,206

~~Table of Contents~~

Nine Months Ended September 30, 2016

(Amounts in thousands)

Commercial

Consumer Real Estate

Consumer and Other

Total Allowance

Allowance, excluding PCI

Beginning balance
$ 13,133 $ 6,356 $ 690 $ 20,179
(Recovery of) provision for loan losses charged to operations
(200 ) 436 560 796
Charge-offs
(747 ) (1,135 ) (809 ) (2,691 )
Recoveries
800 275 262 1,337
Net recoveries (charge-offs)
53 (860 ) (547 ) (1,354 )
Ending balance
$ 12,986 $ 5,932 $ 703 $ 19,621

PCI allowance

Beginning balance
$ - $ 54 $ - $ 54
Recovery of loan losses
- (42 ) - (42 )
Benefit attributable to the FDIC indemnification asset
- 1 - 1
Recovery of loan losses charged to operations
- (41 ) - (41 )
Recovery of loan losses recorded through the FDIC indemnification asset
- (1 ) - (1 )
Ending balance
$ - $ 12 $ - $ 12

Total allowance

Beginning balance
$ 13,133 $ 6,410 $ 690 $ 20,233
(Recovery of) provision for loan losses
(200 ) 394 560 754
Benefit attributable to the FDIC indemnification asset
- 1 - 1
(Recovery of) provision for loan losses charged to operations
(200 ) 395 560 755
Recovery of loan losses recorded through the FDIC indemnification asset
- (1 ) - (1 )
Charge-offs
(747 ) (1,135 ) (809 ) (2,691 )
Recoveries
800 275 262 1,337
Net recoveries (charge-offs)
53 (860 ) (547 ) (1,354 )
Ending balance
$ 12,986 $ 5,944 $ 703 $ 19,633

~~Table of Contents~~

~~The following tables present the allowance for loan losses and recorded investment in loans evaluated for impairment, excluding PCI loans, by loan class, as of the dates indicated:~~

September 30, 2017

(Amounts in thousands)

Loans Individually
Evaluated for
Impairment

Allowance for Loans Individually
Evaluated

Loans Collectively
Evaluated for
Impairment

Allowance for Loans Collectively
Evaluated

Commercial loans

Construction, development, and other land
$ - $ - $ 72,293 $ 1,099
Commercial and industrial
2,400 262 87,782 478
Multi-family residential
254 - 125,743 1,133
Single family non-owner occupied
1,103 69 140,150 2,308
Non-farm, non-residential
2,561 325 606,773 6,706
Agricultural
- - 6,096 44
Farmland
940 50 26,957 130
Total commercial loans
7,258 706 1,065,794 11,898
Consumer real estate loans

Home equity lines
- - 116,468 825
Single family owner occupied
8,259 754 496,264 3,852
Owner occupied construction
- - 47,034 376
Total consumer real estate loans
8,259 754 659,766 5,053
Consumer and other loans

Consumer loans
- - 70,695 795
Other
- - 4,856 -
Total consumer and other loans
- - 75,551 795
Total loans, excluding PCI loans
$ 15,517 $ 1,460 $ 1,801,111 $ 17,746

December 31, 2016

(Amounts in thousands)

Loans Individually Evaluated for Impairment

Allowance for Loans Individually Evaluated

Loans Collectively Evaluated for Impairment

Allowance for Loans Collectively Evaluated

Commercial loans

Construction, development, and other land
$ - $ - $ 60,281 $ 889
Commercial and industrial
- - 93,099 495
Multi-family residential
281 - 133,947 1,157
Single family non-owner occupied
1,910 31 139,711 2,721
Non-farm, non-residential
1,454 - 600,915 6,185
Agricultural
- - 6,028 43
Farmland
981 18 31,145 151
Total commercial loans
4,626 49 1,065,126 11,641
Consumer real estate loans

Home equity lines
- - 122,000 895
Single family owner occupied
5,120 770 501,617 3,594
Owner occupied construction
336 - 44,199 228
Total consumer real estate loans
5,456 770 667,816 4,717
Consumer and other loans

Consumer loans
- - 77,524 759
Other
- - 3,971 -
Total consumer and other loans
- - 81,495 759
Total loans, excluding PCI loans
$ 10,082 $ 819 $ 1,814,437 $ 17,117

~~Table of Contents~~

~~The following table presents the allowance for loan losses on PCI loans and recorded investment in PCI loans, by loan pool, as of the dates indicated:~~

September 30, 2017

December 31, 2016

(Amounts in thousands)

Recorded
Investment

Allowance for Loan
Pools With
Impairment

Recorded
Investment

Allowance for Loan
Pools With
Impairment

Commercial loans

Waccamaw commercial
$ 452 $ - $ 260 $ -
Peoples commercial
4,159 - 4,491 -
Other
1,011 - 1,095 -
Total commercial loans
5,622 - 5,846 -
Consumer real estate loans

Waccamaw serviced home equity lines
13,270 - 20,178 -
Waccamaw residential
1,181 - 1,320 -
Peoples residential
1,020 - 1,085 12
Total consumer real estate loans
15,471 - 22,583 12
Total PCI loans
$ 21,093 $ - $ 28,429 $ 12

~~Management believed the allowance was adequate to absorb probable loan losses inherent in the loan portfolio as of~~ ~~September 30, 2017.~~

Note 6~~. FDIC~~ ~~Indemnification Asset~~

~~In connection with the FDIC-~~assisted acquisition of Waccamaw in 2012, the Company entered into loss share agreements with the FDIC that covered $31.29 million of loans and $54 thousand of OREO as of September 30, 2017, compared to $56.99 million of loans and $276 thousand of OREO as of December 31, 2016. Under the loss share agreements, the FDIC agrees to cover 80% of most loan and foreclosed real estate losses and reimburse certain expenses incurred in relation to these covered assets. Loss share coverage expired June 30, 2017, for commercial loans, with recoveries continuing until June 30, 2019. Loss share coverage will expire June 30, 2022, for single family loans. The Company’s condensed consolidated statements of income include the expense on covered assets net of estimated reimbursements. The following table presents the changes in the FDIC indemnification asset during the periods indicated:

Three Months Ended September 30,

Nine Months Ended September 30,

2017

2016

2017

2016

(Amounts in thousands)

Beginning balance
$ 8,159 $ 16,431 $ 12,173 $ 20,844
Decrease in estimated losses on covered loans
- - - (1 )
Increase in estimated losses on covered OREO
4 277 71 851
Reimbursable expenses from the FDIC
47 60 108 134
Net amortization
(268 ) (1,369 ) (3,186 ) (3,856 )
Reimbursements from the FDIC
(477 ) (1,067 ) (1,701 ) (3,640 )
Ending balance
$ 7,465 $ 14,332 $ 7,465 $ 14,332
30
~~Table of Contents~~

~~Note~~ 7. Deposits

The following table presents the components of deposits as of the dates indicated:

	September 30, 2017		December 31, 2016		*June 30, 2022*		*December 31, 2021*
(Amounts in thousands)
Noninterest-bearing demand deposits	$	452,940	$	427,705	$	877,962	$	842,783
Interest-bearing deposits:
Interest-bearing demand deposits		393,244		378,339		702,925		676,254
Money market accounts		172,266		196,997		302,452		293,915
Savings deposits		337,934		326,263		589,927		561,576
Certificates of deposit		381,625		382,503		212,968		237,919
Individual retirement accounts		125,811		129,531		112,305		116,944
Total interest-bearing deposits		1,410,880		1,413,633		1,920,577		1,886,608
Total deposits	$	1,863,820	$	1,841,338	$	2,798,539	$	2,729,391

Note 7. Leases

Operating leases are recorded as a right of use (“ROU”) asset and operating lease liability. The ROU asset is recorded in other assets, while the lease liability is recorded in other liabilities on the condensed balance sheet beginning January 1, 2019, when the Company adopted ASU 2016-02, on a prospective basis. The ROU asset represents the right to use an underlying asset during the lease term and the lease liability represents the obligation to make lease payments arising from the lease. The ROU asset and lease liability have been recognized based on the present value of the lease payments using a discount rate that represented our incremental borrowing rate at the lease commencement date or the date of adoption of ASU 2016-02. The lease expense, which is comprised of the amortization of the ROU asset and the implicit interest accreted on the lease liability, is recognized on a straight-line basis over the lease term, and is recorded in occupancy expense in the condensed statements of income.

The Company’s current operating leases relate to one existing bank branch and one operating lease acquired in a prior bank acquisition. The acquired operating lease was for vacant land and will terminate in July of 2029. The Company’s ROU asset was $695 thousand as of June 30, 2022 compared to $741 thousand as of December 31, 2021. The operating lease liability as of June 30, 2022, was $714 thousand compared to $770 thousand as of December 31, 2021. The Company’s total operating leases have remaining terms of 2 - 7 years; compared with 4 months to 7.5 years as of December 31, 2021. The June 30, 2022 weighted average discount rate of 3.22% did not change from December 31, 2021.

Future minimum lease payments as of the dates indicated are as follows:

Year	*June 30, 2022*
(Amounts in thousands)
2023	$	117
2024		121
2025		108
2026		101
2027 and thereafter		311
Total lease payments		758
Less: Interest		(44	)
Present value of lease liabilities	$	714

Year	*December 31, 2021*
(Amounts in thousands)
2022	$	131
2023		119
2024		117
2025		101
2026 and thereafter		362
Total lease payments		830
Less: Interest		(60	)
Present value of lease liabilities	$	770

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Note 8. Borrowings

The following table presents the components of borrowings as of the dates indicated:

September 30, 2017

December 31, 2016

(Amounts in thousands)

Balance

Weighted
Average Rate

Balance

Weighted
Average Rate

Short-term borrowings

Retail repurchase agreements
$ 58,783 0.07 % $ 73,005 0.07 %
Long-term borrowings

Wholesale repurchase agreements
25,000 3.18 % 25,000 3.18 %
Long-term FHLB advances
50,000 4.00 % 65,000 4.04 %
Other borrowings

Subordinated debt
- - 15,464 3.65 %
Other debt
- 244
Total borrowings
$ 133,783 $ 178,713

	*June 30, 2022*					*December 31, 2021*
			*Weighted*					*Weighted*
(Amounts in thousands)	*Balance*		*Average Rate*			*Balance*		*Average Rate*
Retail repurchase agreements	$	2,635		0.08	%	$	1,536		0.07	%

~~The following schedule presents~~Repurchase agreements are secured by certain securities that remain under the ~~contractual and weighted average maturities~~Company’s control during the terms of ~~long-term borrowings, by year, as of~~ ~~September 30, 2017:~~the agreements.

Wholesale Repurchase
Agreements

FHLB Borrowings

Total

(Amounts in thousands)

2017
$ - $ - $ -
2018
- - -
2019
25,000 - 25,000
2020
- - -
2021
- 50,000 50,000
2022 and thereafter
- - -
Total long-term borrowings
$ 25,000 $ 50,000 $ 75,000

Weighted average maturity (in years)
1.41 3.27 2.65

As of June 30, 2022, the Company had 0 long-term borrowings.

~~The FHLB may redeem callable advances at quarterly intervals, which could substantially shorten the advances~~’ lives. If called, the advance may be paid in full or converted into another FHLB credit product. Prepayment of an advance may result in substantial penalties based on the differential between the contractual note and current advance rate for similar maturities. The Company pledged certain loans to secure FHLB advances and letters of credit totaling $934.90 million as of September 30, 2017. Unused borrowing capacity with the FHLB totaled ~~$446.30~~$427.55 million, net of FHLB letters of credit of ~~$113.71~~$123.65 million, as of ~~September~~June 30, ~~2017. The~~2022. As of June 30, 2022, the Company pledged $734.26 million in qualifying loans to secure the FHLB ~~letters of credit provide an attractive alternative to pledging securities for public unit deposits.~~borrowing capacity.

~~Table of Contents~~

~~Investment securities pledged to secure repurchase agreements remain under the Company~~’s control during the agreements’ terms. The counterparties may redeem callable repurchase agreements, which could substantially shorten the borrowings’ lives. The prepayment or early termination of a repurchase agreement may result in substantial penalties based on market conditions. The following schedule presents the contractual maturities of repurchase agreements, by type of collateral pledged, as of September 30, 2017:

U.S. Treasury
Securities

U.S. Agency
Securities

Municipal Securities

Mortgage-backed
Agency Securities

Total

(Amounts in thousands)

Overnight and continuous
$ 5,240 $ 12,874 $ 37,953 $ 2,639 $ 58,706
Up to 30 days
- - - - -
30 - 90 days
- - - - -
Greater than 90 days
9,000 3,400 - 12,677 25,077
$ 14,240 $ 16,274 $ 37,953 $ 15,316 $ 83,783

The Company issued $15.46 million of junior subordinated debentures (“Debentures”) to FCBI Capital Trust (the “Trust”), an unconsolidated subsidiary, in October 2003 with an interest rate of three-month London InterBank Offered Rate (“LIBOR”) plus 2.95% and a 30-year term ending in October 2033. The Trust purchased the Debentures through the issuance of trust preferred securities, which had substantially identical terms as the Debentures. Net proceeds from the offering were contributed as capital to the Bank to support further growth. During the first quarter of 2017, the Company redeemed all $15.46 million of its trust preferred securities issued through the Trust.

~~In addition, the Company maintains a $15.00 million unsecured, committed line of credit with an unrelated financial institution with an interest rate of one-month LIBOR plus 2.00%~~ ~~that matures in April 2018. There was no outstanding balance on the line as of September 30, 2017, or December 31, 2016.~~

Note 9. Derivative Instruments and Hedging Activities

~~As of~~ ~~September 30, 2017, the Company’s derivative instruments consisted of interest rate swaps.~~ Generally, derivative instruments help the Company manage exposure to market risk and meet customer financing needs. Market risk represents the possibility that fluctuations in external factors such as interest rates, market-driven loan rates, prices, or other economic factors will adversely affect economic value or net interest income.

The Company uses interest rate swap contracts to modify its exposure to interest rate risk caused by changes in the LIBOR curve in relation to certain designated fixed rate loans. These instruments are used to convert these fixed rate loans to an effective floating rate. If the LIBOR rate falls below the ~~loan~~’sloan’s stated fixed rate for a given period, the Company will owe the floating rate payer the notional amount times the difference between LIBOR and the stated fixed rate. If LIBOR is above the stated rate for a given period, the Company will receive payments based on the notional amount times the difference between LIBOR and the stated fixed rate. In March 2020, the Company adopted ASU 2020-04, "Reference Rate Reform" which provided temporary guidance to ease the potential burden in accounting for reference rate reform. With global capital markets moving away from LIBOR, the guidance provided optional expedients and exceptions for applying generally accepted accounting principles to contract modifications and hedging relationships that reference LIBOR. The ~~Company’s~~migration from LIBOR is not expected to have any material effect on the Company's financial statements when and as changes are made to migrate from the reference rate.

Certain of the Company's interest rate swaps qualify as fair value hedging instruments; therefore, fair value changes in the derivative and hedged item attributable to the hedged risk are recognized in earnings in the same period.

~~The Company~~’s interest rate swap agreements include a ten-year, $1.28 million notional swap entered into in August 2017; a fourteen-year, $1.20 million notional swap entered into in March 2015; and a fifteen-year, $4.37 million notional swap entered into in February 2014. The swap agreements, which are accounted for as fair value hedges, and the loans hedged by the agreements are recorded at fair value. The fair value hedges were effective as of ~~September~~June 30, ~~2017.~~ 2022. The remaining interest rate swaps do not qualify as fair value hedges and the fair value changes in the derivative are recognized in earnings each period.

The following table presents the notional, or contractual, amounts and fair values of derivative instruments as of the dates indicated:

													*June 30, 2022*						*December 31, 2021*
	September 30, 2017						December 31, 2016						*Notional or*		*Fair Value*				*Notional or*		*Fair Value*
	Notional or		Fair Value				Notional or		Fair Value				*Contractual*		*Derivative*		*Derivative*		*Contractual*		*Derivative*		*Derivative*
(Amounts in thousands)	Contractual Amount		Derivative Assets		Derivative Liabilities		Contractual Amount		Derivative Assets		Derivative Liabilities		*Amount*		*Assets*		*Liabilities*		*Amount*		*Assets*		*Liabilities*
Derivatives designated as hedges
Interest rate swaps	$	5,892	$	-	$	151	$	4,835	$	-	$	167	$	4,188	$	67	$	0	$	4,388	$	0	$	229
Derivatives not designated as hedges
Interest rate swaps													$	7,759	$	59	$	0	$	7,890	$	0	$	608
Total derivatives	$	5,892	$	-	$	151	$	4,835	$	-	$	167	$	11,947	$	126	$	0	$	12,278	$	0	$	837

~~Table of Contents~~

The following table presents the effect of derivative and hedging activity, if applicable, on the consolidated statements of income for the periods indicated:

	Three Months Ended September 30,				Nine Months Ended September 30,					*Three Months Ended June 30,*				*Six Months Ended June 30,*
(Amounts in thousands)	2017		2016		2017		2016		Income Statement Location	*2022*		*2021*		*2022*		*2021*		*Income Statement Location*
Derivatives designated as hedges
Interest rate swaps	$	23	$	31	$	64	$	86	Interest and fees on loans	$	19	$	28	$	44	$	56	Interest and fees on loans
Derivatives not designated as hedges
Interest rate swaps										$	32	$	50	$	83	$	118	Interest and fees on loans
Total derivative expense	$	23	$	31	$	64	$	86		$	51	$	78	$	127	$	174

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Note 1010. Employee Benefit Plans

The Company maintains two nonqualified domestic, noncontributory defined benefit plans (the “Benefit Plans”) for key members of senior management and non-management directors. The ~~Company~~’sCompany’s unfunded Benefit Plans include the Supplemental Executive Retention Plan ("SERP") and the Directors’ Supplemental Retirement Plan. The SERP was frozen near the end of 2021; the Director's Plan was fundamentally frozen at that time as well. The following table presents the components of net periodic pension cost and the effect on the consolidated statements of income for the periods indicated:

	Three Months Ended September 30,				Nine Months Ended September 30,				*Three Months Ended June 30,*				*Six Months Ended June 30,*
	2017		2016		2017		2016		*2022*		*2021*		*2022*		*2021*		*Income Statement Location*
(Amounts in thousands)
Service cost	$	57	$	46	$	173	$	138	$	0	$	88	$	0	$	176	Salaries and employee benefits
Interest cost		93		95		279		286		83		79		166		158	Other expense
Amortization of prior service cost		57		57		171		170		0		30		0		61	Other expense
Amortization of losses		8		12		23		35		33		66		67		132	Other expense
Net periodic cost	$	215	$	210	$	646	$	629	$	116	$	263	$	233	$	527

Note 11. Earnings per Share

The following table presents the calculation of basic and diluted earnings per common share for the periods indicated:

	*Three Months Ended*				*Six Months Ended*
	*June 30,*				*June 30,*
	*2022*		*2021*		*2022*		*2021*
(Amounts in thousands, except share and per share data)
Net income	$	11,213	$	13,403	$	20,728	$	28,005

Weighted average common shares outstanding, basic		16,662,817		17,486,182		16,739,624		17,577,552
Dilutive effect of potential common shares
Stock options		13,068		34,277		15,266		29,969
Unvested stock awards		6,169		0		17,123		0
Performance restricted stock units		561		15,685		834		23,809
Total dilutive effect of potential common shares		19,798		49,962		33,223		53,778
Weighted average common shares outstanding, diluted		16,682,615		17,536,144		16,772,847		17,631,330

Basic earnings per common share	$	0.67	$	0.77	$	1.24	$	1.59
Diluted earnings per common share		0.67		0.76		1.24		1.59

Antidilutive potential common shares
Stock options		143,676		0		131,198		13,990
Unvested stock awards		0		0		0		22,311
Total potential antidilutive shares		143,676		0		131,198		36,301

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Note 1112. Accumulated Other Comprehensive Income (Loss)

The following ~~table~~stables present the ~~activity~~changes in accumulated other comprehensive income (loss) (“AOCI”), net of tax and by component, during the periods indicated:

										*Three Months Ended June 30, 2022*
										*Unrealized Gains*
	Three Months Ended September 30, 2017									*(Losses) on Available-*
	Unrealized Gains (Losses) on Available-for-Sale Securities			Employee Benefit Plans			Total			*for-Sale Securities*			*Employee Benefit Plans*			*Total*
(Amounts in thousands)
Beginning balance	$	1,302		$	(1,303	)	$	(1	)	$	(4,643	)	$	(1,869	)	$	(6,512	)
Other comprehensive loss before reclassifications		(106	)		(1	)		(107	)		(5,174	)		0			(5,174	)
Reclassified from AOCI		-			41			41			0			26			26
Other comprehensive (loss) income, net		(106	)		40			(66	)
Other comprehensive loss, net											(5,174	)		26			(5,148	)
Ending balance	$	1,196		$	(1,263	)	$	(67	)	$	(9,817	)	$	(1,843	)	$	(11,660	)

										*Three Months Ended June 30, 2021*
										*Unrealized Gains*
	Three Months Ended September 30, 2016									*(Losses) on Available-*
	Unrealized Gains (Losses) on Available-for-Sale Securities			Employee Benefit Plans			Total			*for-Sale Securities*		*Employee Benefit Plans*			*Total*
(Amounts in thousands)
Beginning balance	$	(1,706	)	$	(1,311	)	$	(3,017	)	$	460	$	(3,115	)	$	(2,655	)
Other comprehensive income (loss) before reclassifications		465			(2	)		463
Other comprehensive income before reclassifications											14		0			14
Reclassified from AOCI		2,881			43			2,924			0		76			76
Other comprehensive income, net		3,346			41			3,387			14		76			90
Ending balance	$	1,640		$	(1,270	)	$	370		$	474	$	(3,039	)	$	(2,565	)

	*Six Months Ended June 30, 2022*
	*Unrealized Gains*
	*(Losses) on Available-*
	*for-Sale Securities*			*Employee Benefit Plans*			*Total*
(Amounts in thousands)
Beginning balance	$	15		$	(1,561	)	$	(1,546	)
Other comprehensive loss before reclassifications		(9,832	)		(335	)		(10,167	)
Reclassified from AOCI		0			53			53
Other comprehensive loss, net		(9,832	)		(282	)		(10,114	)
Ending balance	$	(9,817	)	$	(1,843	)	$	(11,660	)

	*Six Months Ended June 30, 2021*
	*Unrealized Gains*
	*(Losses) on Available-*
	*for-Sale Securities*			*Employee Benefit Plans*			*Total*
(Amounts in thousands)
Beginning balance	$	1,106		$	(3,029	)	$	(1,923	)
Other comprehensive loss before reclassifications		(632	)		(162	)		(794	)
Reclassified from AOCI		0			152			152
Other comprehensive loss, net		(632	)		(10	)		(642	)
Ending balance	$	474		$	(3,039	)	$	(2,565	)

Table of Contents

Nine Months Ended September 30, 2017

Unrealized Gains (Losses) on Available-for-Sale Securities

Employee Benefit Plans

Total

(Amounts in thousands)

Beginning balance
$ (544 ) $ (1,467 ) $ (2,011 )
Other comprehensive income before reclassifications
1,329 83 1,412
Reclassified from AOCI
411 121 532
Other comprehensive income, net
1,740 204 1,944
Ending balance
$ 1,196 $ (1,263 ) $ (67 )

Nine Months Ended September 30, 2016

Unrealized Gains (Losses) on Available-for-Sale Securities

Employee Benefit
Plans

Total

(Amounts in thousands)

Beginning balance
$ (3,885 ) $ (1,362 ) $ (5,247 )
Other comprehensive income (loss) before reclassifications
2,588 (36 ) 2,552
Reclassified from AOCI
2,937 128 3,065
Other comprehensive income, net
5,525 92 5,617
Ending balance
$ 1,640 $ (1,270 ) $ 370

The following table presents reclassifications out of AOCI,, by component, during the periods indicated:

	Three Months Ended					Nine Months Ended					*Three Months Ended*				*Six Months Ended*
	September 30,					September 30,				Income Statement	*June 30,*				*June 30,*				*Income Statement*
(Amounts in thousands)	2017		2016			2017		2016		Line Item Affected	*2022*		*2021*		*2022*		*2021*		*Line Item Affected*
Available-for-sale securities
Loss (gain) recognized	$	-	$	(25	)	$	657	$	53	Net gain (loss) on sale of securities
Credit-related OTTI recognized		-		4,635			-		4,646	Net impairment losses recognized in earnings
Gain recognized											$	0	$	0	$	0	$	0	Net loss on sale of securities
Reclassified out of AOCI, before tax		-		4,610			657		4,699	Income before income taxes		0		0		0		0	Income before income taxes
Income tax expense		-		1,729			246		1,762	Income tax expense		0		0		0		0	Income tax expense
Reclassified out of AOCI, net of tax		-		2,881			411		2,937	Net income		0		0		0		0	Net income
Employee benefit plans
Amortization of prior service cost		57		57			171		170	(1)	$	0	$	31	$	0	$	61	Salaries and employee benefits
Amortization of net actuarial benefit cost		8		12			23		35	(1)		33		66		67		132	Salaries and employee benefits
Reclassified out of AOCI, before tax		65		69			194		205	Income before income taxes		33		97		67		193	Income before income taxes
Income tax expense		24		26			73		77	Income tax expense		7		21		14		41	Income tax expense
Reclassified out of AOCI, net of tax		41		43			121		128	Net income		26		76		53		152	Net income
Total reclassified out of AOCI, net of tax	$	41	$	2,924		$	532	$	3,065	Net income	$	26	$	76	$	53	$	152	Net income

~~(1)~~(1)

Amortization is included in net periodic pension cost. See Note 10, "Employee Benefit Plans."

Note 1213. Fair Value

Financial Instruments Measured at Fair Value

Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants. The fair value hierarchy ranks the inputs used in measuring fair value as follows:

●

Level 1– Observable, unadjusted quoted prices in active markets

●

Level 2– Inputs other than quoted prices included in Level 1 that are directly or indirectly observable for the asset or liability

●

Level 3– Unobservable inputs with little or no market activity that require the Company to use reasonable inputs and assumptions

~~Table of Contents~~

The Company uses fair value measurements to record adjustments to certain financial assets and liabilities on a recurring basis. The Company may be required to record certain assets at fair value on a nonrecurring basis in specific circumstances, such as evidence of impairment. Methodologies used to determine fair value might be highly subjective and judgmental in nature; therefore, valuations may not be precise. If the Company determines that a valuation technique change is necessary, the change is assumed to have occurred at the end of the respective reporting period. The following discussion describes the valuation methodologies used for instruments measured at fair value, as well as the general classification of such instruments under the valuation hierarchy.

Table of Contents

Assets and Liabilities Reported at Fair Value on a Recurring Basis

Available-for-Sale Debt Securities~~. Securities~~

Debt securities available for sale are reported at fair value on a recurring basis. The fair value of Level 1 securities is based on quoted market prices in active markets, if available. ~~The Company also uses Level 1 inputs to value equity securities that are traded in active markets.~~ If quoted market prices are not available, fair values are measured utilizing independent valuation techniques of identical or similar securities for which significant assumptions are primarily derived from or corroborated by observable market data. Level 2 securities use fair value measurements from independent pricing services obtained by the Company. These fair value measurements consider observable data that may include dealer quotes, market spreads, cash flows, the Treasury yield curve, live trading levels, trade execution data, market consensus prepayment speeds, credit information, and bond terms and conditions. The Company’s Level 2 securities include U.S. Agency and Treasury securities, ~~single issue trust preferred securities, corporate securities, mortgage-backed~~municipal securities, and ~~certain equity securities that are not actively traded.~~mortgage-backed securities. Securities are based on Level 3 inputs when there is limited activity or less transparency to the valuation inputs. In the absence of observable or corroborated market data, internally developed estimates that incorporate market-based assumptions are used when such information is available.

Fair value models may be required when trading activity has declined significantly or does not exist, prices are not current, or pricing variations are significant. For Level 3 securities, the Company obtains the cash flow of specific securities from third parties that use modeling software to determine cash flows based on market participant data and knowledge of the structures of each individual security. The fair values of Level 3 securities are determined by applying proper market observable discount rates to the cash flow derived from ~~third-party~~third-party models. Discount rates are developed by determining credit spreads above a benchmark rate, such as LIBOR, and adding premiums for illiquidity, which are based on a comparison of initial issuance spread to LIBOR versus a financial sector curve for recently issued debt to LIBOR. Securities with increased uncertainty about the receipt of cash flows are discounted at higher rates due to the addition of a deal specific credit premium based on assumptions about the performance of the underlying collateral. Finally, internal fair value model pricing and external pricing observations are combined by assigning weights to each pricing observation. Pricing is reviewed for reasonableness based on the direction of specific markets and the general economic indicators.

Equity Securities. Equity securities are recorded at fair value on a recurring basis and included in other assets in the consolidated balance sheets. The Company uses Level 1 inputs to value equity securities that are traded in active markets. Equity securities that are not actively traded are classified in Level 2.

Loans Held for Investment. Loans held for investment that are subject to a fair value hedge are reported at fair value ~~using discounted future cash flows that apply current interest rates for loans with similar terms and borrower credit quality.~~derived from third-party models. Loans ~~related to~~designated in fair value hedges are recorded at fair value on a recurring basis.

Deferred Compensation Assets and Liabilities. Securities held for trading purposes are recorded at fair value on a recurring basis and included in other assets in the consolidated balance sheets. These securities include assets related to employee deferred compensation plans, which are generally invested in Level 1 equity securities. The liability associated with these deferred compensation plans is carried at the fair value of the obligation to the employee, which corresponds to the fair value of the invested assets.

Derivative Assets and Liabilities. Derivatives are recorded at fair value on a recurring basis. The Company obtains dealer quotes, Level 2 inputs, based on observable data to value derivatives.

~~Table of Contents~~

The following tables summarize financial assets and liabilities recorded at fair value on a recurring basis, by the level of valuation inputs in the fair value hierarchy, as of the dates indicated:

	September 30, 2017								*June 30, 2022*
	Total		Fair Value Measurements Using						*Total*		*Fair Value Measurements Using*
(Amounts in thousands)	Fair Value		Level 1		Level 2		Level 3		*Fair Value*		*Level 1*		*Level 2*		*Level 3*
Available-for-sale securities
U.S. Treasury securities	$	36,964	$	-	$	36,964	$	-
Available-for-sale debt securities
U.S. Agency securities		1,275		-		1,275		-	$	423	$	0	$	423	$	0
U.S. Treasury Notes										134,243		0		134,243		0
Municipal securities		104,907		-		104,907		-		24,454		0		24,454		0
Single issue trust preferred securities		8,962		-		8,962		-
Mortgage-backed Agency securities		22,243		-		22,243		-
Corporate Notes										39,105		0		39,105		0
Agency mortgage-backed securities										89,542		0		89,542		0
Total available-for-sale debt securities										287,767		0		287,767		0
Equity securities		73		55		18		-		55		0		55		0
Total available-for-sale securities		174,424		55		174,369		-
Fair value loans		5,758		-		5,758		-		12,480		0		0		12,480
Deferred compensation assets		3,330		3,330		-		-		4,803		4,803		0		0
Deferred compensation liabilities		3,330		3,330		-		-		4,803		4,803		0		0
IRLCs		-		-		-		-
Derivative liabilities		151		-		151		-

	December 31, 2016								*December 31, 2021*
	Total		Fair Value Measurements Using						*Total*		*Fair Value Measurements Using*
(Amounts in thousands)	Fair Value		Level 1		Level 2		Level 3		*Fair Value*		*Level 1*		*Level 2*		*Level 3*
Available-for-sale securities
Available-for-sale debt securities
U.S. Agency securities	$	1,345	$	-	$	1,345	$	-	$	466	$	0	$	466	$	0
Municipal securities		113,331		-		113,331		-		28,794		0		28,794		0
Single issue trust preferred securities		19,939		-		19,939		-
Mortgage-backed Agency securities		30,891		-		30,891		-
Corporate notes										9,919		0		9,919		0
Agency mortgage-backed securities										37,113		0		37,113		0
Total available-for-sale debt securities										76,292		0		76,292		0
Equity securities		73		55		18		-		55		0		55		0
Total available-for-sale securities		165,579		55		165,524		-
Fair value loans		4,701		-		4,701		-		13,106		0		0		13,106
Deferred compensation assets		3,224		3,224		-		-		5,245		5,245		0		0
Deferred compensation liabilities		3,224		3,224		-		-		5,245		5,245		0		0
Derivative liabilities		167		-		167		-		837		0		837		0

~~No changes in valuation techniques or transfers into or out~~

Table of ~~Level 3 of the fair value hierarchy occurred during the~~ ~~three and nine months ended September 30, 2017 or 2016.~~

Contents

Assets Measured at Fair Value on a Nonrecurring Basis

Impaired Loans. ~~Impaired~~Prior to the adoption of ASU 2016-13, impaired loans ~~are~~were recorded at fair value on a nonrecurring basis when repayment is expected solely from the sale of the loan’s collateral. Fair value is based on appraised value adjusted for customized discounting criteria, Level 3 inputs.

The Company maintains an active and robust problem credit identification system. The impairment review includes obtaining ~~third-party~~third-party collateral valuations to help management identify potential credit impairment and determine the amount of impairment to record. The ~~Company~~’sCompany’s Special Assets staff manages and monitors all impaired loans. Internal collateral valuations are generally performed within two to four weeks of identifying the initial potential impairment. The internal valuation compares the original appraisal to current local real estate market conditions and considers experience and expected liquidation costs. The Company typically receives a ~~third-party~~third-party valuation within thirty to forty-five days of completing the internal valuation. When a ~~third-party~~third-party valuation is received, it is reviewed for reasonableness. Once the valuation is reviewed and accepted, discounts are applied to fair market value, based on, but not limited to, our historical liquidation experience for like collateral, resulting in an estimated net realizable value. The estimated net realizable value is compared to the outstanding loan balance to determine the appropriate amount of specific impairment reserve.

~~Table of Contents~~

Specific reserves are generally recorded for impaired loans while third-party valuations are in process and for impaired loans that continue to make some form of payment. While waiting to receive the third-party appraisal, the Company regularly reviews the relationship to identify any potential adverse developments and begins the tasks necessary to gain control of the collateral and prepare it for liquidation, including, but not limited to, engagement of counsel, inspection of collateral, and continued communication with the borrower. Generally, the only difference between the current appraised value, less liquidation costs, and the carrying amount of the loan, less the specific reserve, is any downward adjustment to the appraised value that the Company deems appropriate, such as the costs to sell the property. Impaired loans that do not meet certain criteria and do not have a specific reserve have typically been written down through partial charge-offs to net realizable value. Based on prior experience, the Company rarely returns loans to performing status after they have been partially charged off. Credits identified as impaired move quickly through the process towards ultimate resolution, except in cases involving bankruptcy and various state judicial processes that may extend the time for ultimate resolution.

OREO. OREO is recorded at fair value on a nonrecurring basis using Level 3 inputs. The Company calculates the fair value of OREO from current or prior appraisals that have been adjusted for valuation declines, estimated selling costs, and other proprietary qualitative adjustments that are deemed necessary.

The following tables present assets measured at fair value on a nonrecurring basis, by the level of valuation inputs in the fair value hierarchy, as of the dates indicated:

September 30, 2017

Total

Fair Value Measurements Using

Fair Value

Level 1

Level 2

Level 3

(Amounts in thousands)

Impaired loans, non-covered
$ 6,757 $ - $ - $ 6,757
OREO, non-covered
2,293 - - 2,293
OREO, covered
54 - - 54

	*June 30, 2022*
	*Total*		*Fair Value Measurements Using*
	*Fair Value*		*Level 1*		*Level 2*		*Level 3*
(Amounts in thousands)
Collateral dependent assets with specific reserves	$	766	$	0	$	0	$	766
OREO	$	579	$	0	$	0	$	579

December 31, 2016

Total

Fair Value Measurements Using

Fair Value

Level 1

Level 2

Level 3

(Amounts in thousands)

Impaired loans, non-covered
$ 4,078 $ - $ - $ 4,078
OREO, non-covered
5,109 - - 5,109
OREO, covered
265 - - 265

	*December 31, 2021*
	*Total*		*Fair Value Measurements Using*
	*Fair Value*		*Level 1*		*Level 2*		*Level 3*
(Amounts in thousands)
Collateral dependent assets with specific reserves	$	2,312	$	0	$	0	$	2,312
OREO		1,015		0		0		1,015

Quantitative Information about Level 3 Fair Value Measurements

The following ~~table~~tables provides quantitative information for assets measured at fair value on a nonrecurring basis using Level 3 valuation inputs as of the dates indicated:

Valuation

Unobservable

Discount Range (Weighted Average)

Technique

Input

September 30, 2017

December 31, 2016

Impaired loans, non-covered
Discounted appraisals⁽¹⁾

Appraisal adjustments⁽²⁾
2% to 63% (18%) 3% to 39% (17%)
OREO, non-covered
Discounted appraisals⁽¹⁾

Appraisal adjustments⁽²⁾
10% to 62% (28%) 0% to 88% (30%)
OREO, covered
Discounted appraisals⁽¹⁾

Appraisal adjustments⁽²⁾
0% to 65% (56%) 0% to 44% (40%)

				*Discount Range*
	*Valuation*		*Unobservable*		*(Weighted Average)*
	*Technique*	*Input*		*June 30, 2022*

~~(1)~~Collateral dependent assets with specific reserves	Discounted appraisals(1)	Appraisal adjustments(2)			0% to 0% (0%)
OREO	Discounted appraisals(1)	Appraisal adjustments(2)			10% to 95% (71%)

(1)	Fair value is generally based on appraisals of the underlying collateral.
~~(2)~~(2)	Appraisals may be adjusted by management for customized discounting criteria, estimated sales costs, and proprietary qualitative adjustments.

			*Discount Range*
	*Valuation*	*Unobservable*	*(Weighted Average)*
	*Technique*	*Input*	*December 31, 2021*

Collateral dependent assets with specific reserves	Discounted appraisals(1)	Appraisal adjustments(2)		0% to 11% (6%)
OREO	Discounted appraisals(1)	Appraisal adjustments(2)		0% to 87% (32%)

(1)	Fair value is generally based on appraisals of the underlying collateral.
(2)	Appraisals may be adjusted by management for customized discounting criteria, estimated sales costs, and proprietary qualitative adjustments.

Table of Contents

Fair Value of Financial Instruments

The Company uses various methodologies and assumptions to estimate the fair value of certain financial instruments. A description of valuation methodologies used for instruments not previously discussed is as follows:

Cash and Cash Equivalents. Cash and cash equivalents ~~are reported~~fair value is estimated at their carrying amount, which is considered a reasonable estimate due to the short-term nature of these instruments.

~~Held-to-Maturity Securities~~~~. Securities held to maturity are reported at fair value using quoted market prices or dealer quotes.~~

~~FDIC Indemnification Asset~~~~. The FDIC indemnification asset is reported at fair value using discounted future cash flows that apply current discount rates.~~

~~Table of Contents~~

Accrued Interest Receivable/Payable. Accrued interest receivable/payable fair value is ~~reported~~estimated at ~~their~~its carrying amount, which is considered a reasonable estimate due to the short-term nature of these instruments.

Deposits and Securities Sold Under Agreements to Repurchase. Deposits without a stated maturity, such as demand, interest-bearing demand, and savings, are reported at their carrying amount, the amount payable on demand as of the reporting date, which is considered a reasonable estimate of fair value. Deposits and repurchase agreements with fixed maturities and rates are ~~reported~~estimated at fair value using discounted future cash flows that apply interest rates available in the market for instruments with similar characteristics and maturities.

FHLB and Other Borrowings. FHLB and other borrowings are ~~reported~~estimated at fair value using discounted future cash flows that apply interest rates available to the Company for borrowings with similar characteristics and maturities. ~~Trust preferred obligations are reported at fair value using current credit spreads in the market for similar issues.~~

Off-Balance Sheet Instruments. The Company believes that fair values of unfunded commitments to extend credit, standby letters of credit, and financial guarantees are not meaningful; therefore, off-balance sheet instruments are not addressed in the fair value disclosures. The Company believes it is not feasible or practical to accurately disclose the fair values of off-balance sheet instruments due to the uncertainty and difficulty in assessing the likelihood and timing of advancing available proceeds, the lack of an established market for these instruments, and the diversity in fee structures. For additional information about the unfunded, contractual value of off-balance sheet financial instruments, see Note 14, “Litigation, Commitments, and Contingencies,” to the Condensed Consolidated Financial Statements of this report.

The following tables present the carrying amounts and fair values of financial instruments, by the level of valuation inputs in the fair value hierarchy, as of the dates indicated:

	September 30, 2017										*June 30, 2022*
	Carrying				Fair Value Measurements Using						*Carrying*				*Fair Value Measurements Using*
(Amounts in thousands)	Amount		Fair Value		Level 1		Level 2		Level 3		*Amount*		*Fair Value*		*Level 1*		*Level 2*		*Level 3*
Assets
Cash and cash equivalents	$	105,119	$	105,119	$	105,119	$	-	$	-	$	398,242	$	398,242	$	398,242	$	0	$	0
Securities available for sale		174,424		174,424		55		174,369		-
Securities held to maturity		25,182		25,226		-		25,226		-
Debt securities available for sale												287,767		287,767		0		287,767		0
Equity securities												55		55		0		55		0
Loans held for investment, net of allowance		1,818,515		1,792,719		-		5,758		1,786,961		2,299,798		2,163,191		0		0		2,163,191
FDIC indemnification asset		7,465		4,548		-		-		4,548
Derivative financial assets												126		126		0		126		0
Interest receivable		5,156		5,156		-		5,156		-		8,433		8,433		0		8,433		0
Deferred compensation assets		3,330		3,330		3,330		-		-		4,803		4,803		4,803		0		0

Liabilities
Demand deposits		452,940		452,940		-		452,940		-
Interest-bearing demand deposits		393,244		393,244		-		393,244		-
Savings deposits		510,200		510,200		-		510,200		-
Time deposits		507,436		503,332		-		503,332		-		325,273		325,872		0		325,872		0
Securities sold under agreements to repurchase		83,783		84,315		-		84,315		-		2,635		2,635		0		2,635		0
Interest payable		1,085		1,085		-		1,085		-		197		197		0		197		0
FHLB and other borrowings		50,000		53,402		-		53,402		-
Derivative financial liabilities		151		151		-		151		-
Deferred compensation liabilities		3,330		3,330		3,330		-		-		4,803		4,803		4,803		0		0

	*December 31, 2021*
	*Carrying*				*Fair Value Measurements Using*
(Amounts in thousands)	*Amount*		*Fair Value*		*Level 1*		*Level 2*		*Level 3*
Assets
Cash and cash equivalents	$	677,439	$	677,439	$	677,439	$	0	$	0
Debt securities available for sale		76,292		76,292		0		76,292		0
Equity securities		55		55		0		55		0
Loans held for investment, net of allowance		2,137,711		2,108,513		0		0		2,108,513
Interest receivable		7,900		7,900		0		7,900		0
Deferred compensation assets		5,245		5,245		5,245		0		0

Liabilities
Time deposits		354,863		352,000		0		352,000		0
Securities sold under agreements to repurchase		1,536		1,536		0		1,536		0
Interest payable		314		314		0		314		0
Deferred compensation liabilities		5,245		5,245		5,245		0		0
Derivative liabilities		837		837		0		837		0

Table of Contents

December 31, 2016

Carrying

Fair Value Measurements Using

(Amounts in thousands)

Amount

Fair Value

Level 1

Level 2

Level 3

Assets

Cash and cash equivalents
$ 76,307 $ 76,307 $ 76,307 $ - $ -
Securities available for sale
165,579 165,579 55 165,524 -
Securities held to maturity
47,133 47,266 - 47,266 -
Loans held for investment, net of allowance
1,835,000 1,805,999 - 4,701 1,801,298
FDIC indemnification asset
12,173 8,112 - - 8,112
Interest receivable
5,553 5,553 - 5,553 -
Deferred compensation assets
3,224 3,224 3,224 - -

Liabilities

Demand deposits
427,705 427,705 - 427,705 -
Interest-bearing demand deposits
378,339 378,339 - 378,339 -
Savings deposits
523,260 523,260 - 523,260 -
Time deposits
512,034 507,917 - 507,917 -
Securities sold under agreements to repurchase
98,005 98,879 - 98,879 -
Interest payable
1,280 1,280 - 1,280 -
FHLB and other borrowings
80,708 83,551 - 83,551 -
Derivative financial liabilities
167 167 - 167 -
Deferred compensation liabilities
3,224 3,224 3,224 - -

~~Note 13. Earnings per Share~~

~~The following table presents the calculation of basic and diluted earnings per common share for the periods indicated:~~

Three Months Ended

Nine Months Ended

September 30,

September 30,

2017

2016

2017

2016

(Amounts in thousands, except share and per share data)

Net income
$ 7,652 $ 6,383 $ 20,272 $ 18,722
Dividends on preferred stock
- - - -
Net income available to common shareholders
$ 7,652 $ 6,383 $ 20,272 $ 18,722

Weighted average common shares outstanding, basic
17,005,654 17,031,074 17,005,350 17,433,406
Dilutive effect of potential common shares

Stock options
49,739 38,746 50,140 31,856
Restricted stock
27,336 13,706 21,468 9,949
Total dilutive effect of potential common shares
77,075 52,452 71,608 41,805
Weighted average common shares outstanding, diluted
17,082,729 17,083,526 17,076,958 17,475,211

Basic earnings per common share
$ 0.45 $ 0.37 $ 1.19 $ 1.07
Diluted earnings per common share
0.45 0.37 1.19 1.07

Antidilutive potential common shares

Stock options
71,592 127,789 75,868 127,789
Total potential antidilutive shares
71,592 127,789 75,868 127,789

Note 1414. Litigation, Commitments, and Contingencies

Litigation

In the normal course of business, the Company is a defendant in various legal actions and asserted claims. While the Company and its legal counsel are unable to assess the ultimate outcome of each of these matters with certainty, the Company believes the resolution of these actions, singly or in the aggregate, should not have a material adverse effect on its financial condition, results of operations, or cash flows.

~~Table of Contents~~

Commitments and Contingencies

The Company is a party to financial instruments with off~~-balance~~ balance sheet risk in the normal course of business to meet the financing needs of its customers. These financial instruments include commitments to extend credit, standby letters of credit, and financial guarantees. These instruments involve, to varying degrees, elements of credit and interest rate risk beyond the amount recognized in the consolidated balance sheets. The contractual amounts of these instruments reflect the extent of involvement the Company has in particular classes of financial instruments. If the other party to a financial instrument does not perform, the Company’s credit loss exposure is the same as the contractual amount of the instrument. The Company uses the same credit policies in making commitments and conditional obligations as it does for ~~on-balance~~on balance sheet instruments.

Commitments to extend credit are agreements to lend to a customer as long as there is no violation of any condition established in the contract. Commitments generally have fixed expiration dates or other termination clauses and may require payment of a fee. Since many commitments are expected to expire without being drawn on, the total commitment amounts do not necessarily represent future cash requirements. The amount of collateral obtained, if deemed necessary, is based on management’s credit evaluation of each customer on a case-by-case basis. Collateral may include accounts receivable, inventory, property, plant and equipment, and income producing commercial properties. The Company maintains a reserve for the risk inherent in unfunded lending commitments, which is included in other liabilities in the consolidated balance sheets.

Standby letters of credit and financial guarantees are conditional commitments issued by the Company to guarantee the performance of a customer to a third party. The credit risk involved in issuing letters of credit is essentially the same as that involved in extending credit to customers. The amount of collateral obtained, if deemed necessary, to secure the ~~customer~~’scustomer’s performance under certain letters of credit is based on management’s credit evaluation of the customer.

The following table presents the off-balance sheet financial instruments as of the dates indicated:

		September 30, 2017		December 31, 2016		*June 30, 2022*		*December 31, 2021*
(Amounts in thousands)	(Amounts in thousands)
Commitments to extend credit	Commitments to extend credit	$	245,978	$	261,801	$	299,637	$	272,447
Standby letters of credit and financial guarantees⁽¹⁾	Standby letters of credit and financial guarantees⁽¹⁾		118,318		83,900		126,275		153,717
Total off-balance sheet risk	Total off-balance sheet risk		364,296		345,701	$	425,912	$	426,164

Reserve for unfunded commitments		$	66	$	326
Allowance for unfunded commitments						$	956	$	678

(1)
~~(1)~~ Includes FHLB letters of credit

~~Table of Contents~~

ITEM 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

Unless the context suggests otherwise, the terms “First Community,” “Company,” “we,” “our,” and “us” refer to First Community Bancshares, Inc. and its subsidiaries as a consolidated entity. Management’sManagement’s Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”) is intended to help the reader understand our financial condition, changes in financial condition, and results of operations. MD&A contains forward-looking statements and should be read in conjunction with our consolidated financial statements, accompanying notes, and other financial information included in this report and our Annual Report on Form 10-K for the year ended December 31, ~~2016~~2021 (the ~~“2016~~“2021 Form 10-K”). Unless the context suggests otherwise, the terms “First Community,” “Company,” “we,” “our,” and “us” refer to First Community Bankshares, Inc. and its subsidiaries as a consolidated entity.

Executive Overview

First Community ~~Bancshares,~~Bankshares, Inc. (the “Company”) is a financial holding company, headquartered in Bluefield, Virginia, that provides banking products and services through its wholly owned subsidiary First Community Bank (the “Bank”), a Virginia chartered bank institution. As of ~~September~~June 30, ~~2017,~~2022, the Bank operated 4449 branches ~~as First Community Bank~~ in Virginia, West Virginia, ~~and~~ North Carolina and ~~as People’s Community Bank, a Division~~Tennessee. As of ~~First Community Bank, in Tennessee.~~June 30, 2022, full-time equivalent employees, calculated using the number of hours worked, totaled 622. Our primary source of earnings is net interest income, the difference between interest earned on assets and interest paid on liabilities, which is supplemented by fees for services, commissions on sales, and various deposit service charges. We fund our lending and investing activities primarily through the retail deposit operations of our branch banking ~~network and, to a lesser extent, retail and wholesale repurchase agreements and Federal Home Loan Bank (“FHLB”) borrowings.~~network. We invest our funds primarily in loans to retail and commercial customers and various investment securities. Our common stock is traded on the NASDAQ Global Select Market under the symbol, FCBC.

~~The Bank offers commercial and personal insurance services through its~~ ~~wholly owned subsidiary First Community Insurance Services (“FCIS”). Revenues are primarily derived from commissions paid by issuing companies on the sale~~

Table of ~~policies. As of September 30, 2017, FCIS operated 6 in-branch locations in Virginia and West Virginia.~~ Contents

The Bank offers trust management, estate administration, and investment advisory services through its Trust Division and wholly owned subsidiary First Community Wealth Management Inc. (“FCWM”). The Trust Division manages inter vivos trusts and trusts under will, develops and administers employee benefit and individual retirement plans, and manages and settles estates. Fiduciary fees for these services are charged on a schedule related to the size, nature, and complexity of the account. Revenues consist primarily of investment advisory fees and commissions on assets under management and ~~investment advisory fees.~~administration. As of ~~September~~June 30, ~~2017,~~2022, the Trust Division and FCWM managed ~~$936 million~~and administered $1.20 billion in combined assets under various fee-based arrangements as fiduciary or agent. The Bank also offers a full range of commercial and personal insurance products through its strategic partnership with Bankers Insurance, LLC.

~~Our acquisition~~On March 29, 2022, the Bank entered into a Purchase and ~~divestiture activity during~~Assumption Agreement with Benchmark Community Bank, the ~~nine~~ ~~months ended September 30, 2017,~~banking subsidiary of Benchmark Bankshares, Inc., to sell its Emporia, Virginia branch. The sale, which is expected to close in the third quarter of 2022, includes the branch real estate, certain personal property, and ~~year ended December 31, 2016, included~~all deposits associated with the ~~sale of Greenpoint Insurance Agency Inc. on October 1, 2016, and the simultaneous sale of six branches to and purchase of seven branches from First Bank on July 15, 2016.~~branch.

Critical Accounting Estimates

We prepare our consolidated financial statements in accordance with generally accepted accounting principles (“GAAP”) in the U.S. and conform to general practices within the banking industry. Our financial position and results of operations may require management to make significant estimates and assumptions that have a material impact on our financial condition or operating performance. Due to the level of subjectivity and the susceptibility of such matters to change, actual results could differ significantly from management’s assumptions and estimates. Estimates, assumptions, and judgments, which are periodically evaluated, are based on historical experience and other factors, including expectations of future events believed reasonable under the circumstances. These estimates are generally necessary when assets and liabilities are required to be recorded at estimated fair value, when a decline in the value of an asset carried on the financial statements at fair value warrants an impairment write-down or a valuation reserve, or when an asset or liability needs recorded based on the probability of occurrence of a future event. Carrying assets and liabilities at fair value inherently results in more financial statement volatility. Fair values and information used to record valuation adjustments for certain assets and liabilities are based on quoted market prices, when available, or third-party sources. When quoted prices or third-party information is not available, management estimates valuation adjustments primarily through the use of financial modeling techniques and appraisal estimates.

Allowance for Credit Losses or "ACL"

The ACL reflects management’s estimate of losses that will result from the inability of our borrowers to make required loan payments. Management uses a systematic methodology to determine its ACL for loans held for investment and certain off-balance-sheet credit exposures. Management considers the effects of past events, current conditions, and reasonable and supportable forecasts on the collectability of the loan portfolio. The Company’s estimate of its ACL involves a high degree of judgment; therefore, management’s process for determining expected credit losses may result in a range of expected credit losses. It is possible that others, given the same information, may at any point in time reach a different reasonable conclusion. The Company’s ACL recorded in the balance sheet reflects management’s best estimate of expected credit losses. The Company recognizes in net income the amount needed to adjust the ACL for management’s current estimate of expected credit losses. See Note 1 – "Basis of Presentation - Significant Accounting Policies" in this Quarterly Report on Form 10-Q for further detailed descriptions of our estimation process and methodology related to the ACL. See also Note 5 — "Allowance for Credit Losses" in this Quarterly Report on Form 10-Q, “Provision for Loan Losses and Nonperforming Assets” in this MD&A. Periods prior to the January 1, 2021, adoption of ASU 2016-13 follow prior accounting guidance for estimated loan losses and may not be comparable.

Our accounting policies are fundamental in understanding MD&A and the disclosures presented in Item 1, “Financial Statements,” of this ~~report.~~Quarterly Report on Form 10-Q. Our accounting policies are described in detail in Note 1, “Basis of Presentation,” of the Notes to Condensed Consolidated Financial Statements in Part I, Item 1 of the Company’s Quarterly Report on Form 10-Q for the period ended June 30, 2022, and in Note 1,“Basis of Presentation and Significant Accounting Policies,” of the Notes to ~~the~~ Consolidated Financial Statements in Part II, Item 8 of our ~~2016~~2021 Form ~~10-K and our~~10-K. Our critical accounting estimates are detailed in the “Critical Accounting Estimates” section in Part II, Item 7 of our ~~2016~~2021 Form 10-K.

Table of Contents

Performance Overview

Highlights of our results of operations for the three and ~~nine~~six months ended ~~September~~June 30, ~~2017,~~2022, and financial condition as of ~~September~~June 30, ~~2017,~~2022, include the following:

●

Net income ~~available to common shareholders~~ ~~increased $1.27~~of $11.21 million ~~or 19.88%, to $7.65 million and diluted earnings per share increased $0.08, or 21.62%, to $0.45~~ for the ~~third~~ quarter ~~of 2017~~was a decrease compared to the same quarter of ~~2016.~~2021, which included a significant reversal of provision for credit losses. The normalized provision for credit losses drove much of the difference between current year-to-date net income of $20.73 million and the same period in 2021.

●

Interest income from securities of $1.55 million was an increase of $1.12 million over the second quarter of 2021, as the Company added to its portfolio with a significant weighting toward 2-year treasury securities. Interest on fed funds also increased $602 thousand to $768 thousand for the second quarter as a result of the Federal Open Market Committee’s 150 basis point increase in overnight rates.

~~Table of Contents~~

	●	Despite the significant increase in credit loss provision over 2021, annualized return on average assets was 1.38% for the second quarter and 1.29% for the first six months of 2022. Annualized return on average common equity was 10.61% for the second quarter and 9.80% for the first six months of 2022.
	●	The total cost of funds remained very low at 0.06%, a decrease of 0.05% from the second quarter of 2021.

●

Net interest margin for the second quarter was 3.78%, which was a 10 basis point increase from 3.68% reported for the second quarter of 2021. The yield on earning assets increased 306 basis points primarily driven by an increase in the yields on overnight funds. The cost of interest-bearing deposits declined 6 basis points to ~~4.25%, and normalized net interest margin increased 23 basis points to 4.00% for~~0.09% primarily driven by a decrease in the ~~third quarter~~cost of ~~2017 compared to the same quarter of 2016.~~

time deposits.

●

Salaries and employee benefits for the second quarter increased $1.30 million, or 12.74%, over the same quarter in 2021. Salaries and employee benefits for the first six months increased $2.09 million or 9.90%, over the first six months of 2021. During the first quarter of 2022, the Company implemented annualized wage increases of approximately $2.50 million as part of its ongoing strategic initiative to enhance Human Capital Management, which included an increased minimum wage.

	●	The Company's loan portfolio increased by $134.23 million, or an annualized growth rate of 12.50%, during the first six months of 2022. Loan demand and originations were strong in all categories, including construction, commercial real estate, residential mortgage, and consumer loans.
	●	Non-performing loans to total loans remained very low at 0.80% of total loans and continues the declining trend experienced over the past four quarters. The Company~~’s book~~ experienced net recoveries for the second quarter of 2022 of $258 thousand, or 0.05% of annualized average loans, compared to net charge-offs of $476 thousand, or 0.09% of annualized average loans, for the same period in 2021. Net charge-offs for the six-month period ended June 30, 2022, were $580 thousand, or 0.05% of annualized average loans, compared to net charge-offs of $1.20 million, or 0.11% of annualized average loans, for the same period in 2021.
	●	During the second quarter, the Company repurchased 283,507 of its common shares for $7.95 million. The Company repurchased 415,507 common shares for $12.03 million during the six months of 2022.
	●	The allowance for credit losses to total loans remained at 1.29% of total loans.
	●	Book value per ~~common~~ share ~~increased $0.81 to $20.76 compared to December 31, 2016.~~

●

~~The Company significantly exceeds regulatory “well capitalized” targets as~~at June 30, 2022, was $25.33, a slight decrease of ~~September 30, 2017.~~

$0.01 from year-end 2021.

Results of Operations

Net Income

The following table presents the changes in net income and related information for the periods indicated:

	Three Months Ended						Three Months Ended						Nine Months Ended						Nine Months Ended						Three Months Ended												Six Months Ended
(Amounts in thousands, except per																									June 30,						Increase						June 30,						Increase
share data)																									2022			2021			(Decrease)			% Change			2022			2021			(Decrease)			% Change
	September 30,						Increase						September 30,						Increase
(Amounts in thousands, except	2017			2016			(Decrease)			% Change			2017			2016			(Decrease)			% Change
per share data)
Net income	$	7,652		$	6,383		$	1,269			19.88	%	$	20,272		$	18,722		$	1,550			8.28	%	$	11,213		$	13,403		$	(2,190	)		-16.34	%	$	20,728		$	28,005		$	(7,277	)		-25.98	%
Net income available to common shareholders		7,652			6,383			1,269			19.88	%		20,272			18,722			1,550			8.28	%

Basic earnings per common share		0.45			0.37			0.08			21.62	%		1.19			1.07			0.12			11.21	%		0.67			0.77			(0.10	)		-12.99	%		1.24			1.59			(0.35	)		-22.01	%
Diluted earnings per common share		0.45			0.37			0.08			21.62	%		1.19			1.07			0.12			11.21	%		0.67			0.76			(0.09	)		-11.84	%		1.24			1.59			(0.35	)		-22.01	%

Return on average assets		1.29	%		1.03	%		0.26	%		25.24	%		1.14	%		1.01	%		0.13	%		12.87	%		1.38	%		1.70	%		-0.32	%		-18.82	%		1.29	%		1.82	%		-0.53	%		-29.12	%
Return on average common equity		8.61	%		7.58	%		1.03	%		13.59	%		7.80	%		7.40	%		0.40	%		5.41	%		10.61	%		12.55	%		-1.94	%		-15.46	%		9.80	%		13.24	%		-3.44	%		-25.98	%

Three-Month Comparison. Net income ~~increased~~decreased $2.19 million in the ~~third~~second quarter of ~~2017~~2022 largely due to a ~~decrease in noninterest expense and increases in noninterest and net interest income. These changes were offset by increases~~$2.74 million increase in the provision for credit losses. Provision for credit losses totaled $510 thousand for the second quarter of 2022 compared to a reversal of provision of $2.23 million in the second quarter of 2021. The current year provision is largely due to the loan ~~losses and income tax.~~growth, in particular commercial loan demand. The reversal of provision in the second quarter of 2021 was driven by significantly improved economic forecasts.

~~Nine-Month~~Six- ~~Comparison.~~Month Comparison. Net income ~~increased~~decreased $7.28 million in the first ~~nine~~six months of ~~2017~~2022 largely due to a ~~decrease in noninterest expense and an~~$8.70 million increase ~~in net interest income. These changes were offset by a decrease in noninterest income and increases~~ in the provision for credit losses. Provision for credit losses totaled $2.47 million for the first six months of 2022 compared to a reversal of provision of $6.23 million in the same period of 2021. As noted for the quarter, the current year provision is largely due to loan ~~losses and income tax.~~growth in the first six months, in particular commercial loan demand. The reversal of provision in 2021 was driven by significantly improved economic forecasts.

Table of Contents

Net Interest Income

Net interest income, our largest contributor to earnings, is analyzed on a fully taxable equivalent (“FTE”) basis, a non-GAAP financial measure. For additional information, see “Non-GAAP Financial Measures” below.

~~Table of Contents~~

The following ~~table~~stables present the consolidated average balance sheets and net interest analysis on a FTE basis for the dates indicated:

Three Months Ended September 30,

2017

2016

Average

Average Yield/

Average

Average Yield/

(Amounts in thousands)

Balance

Interest⁽¹⁾

Rate⁽¹⁾

Balance

Interest⁽¹⁾

Rate⁽¹⁾

Assets

Earning assets

Loans⁽²⁾
$ 1,843,612 $ 22,765 4.90 % $ 1,820,899 $ 21,974 4.80 %
Securities available for sale
157,038 1,373 3.47 % 266,162 1,941 2.90 %
Securities held to maturity
25,199 106 1.67 % 72,210 189 1.04 %
Interest-bearing deposits
73,802 275 1.48 % 19,025 26 0.54 %
Total earning assets
2,099,651 24,519 4.63 % 2,178,296 24,130 4.41 %
Other assets
258,763 282,310
Total assets
$ 2,358,414 $ 2,460,606

Liabilities and stockholders' equity

Interest-bearing deposits

Demand deposits
$ 384,594 $ 89 0.09 % $ 337,893 $ 60 0.07 %
Savings deposits
518,355 43 0.03 % 523,503 62 0.05 %
Time deposits
509,251 1,143 0.89 % 529,344 1,011 0.76 %
Total interest-bearing deposits
1,412,200 1,275 0.36 % 1,390,740 1,133 0.32 %
Borrowings

Federal funds purchased
- - - 3,696 6 0.65 %
Retail repurchase agreements
58,194 10 0.07 % 64,385 12 0.07 %
Wholesale repurchase agreements
25,000 203 3.22 % 50,000 473 3.76 %
FHLB advances and other borrowings
50,000 511 4.05 % 133,838 876 2.60 %
Total borrowings
133,194 724 2.16 % 251,919 1,367 2.16 %
Total interest-bearing liabilities
1,545,394 1,999 0.51 % 1,642,659 2,500 0.61 %
Noninterest-bearing demand deposits
440,227 462,588
Other liabilities
20,101 20,462
Total liabilities
2,005,722 2,125,709
Stockholders' equity
352,692 334,897
Total liabilities and stockholders' equity
$ 2,358,414 $ 2,460,606
Net interest income, FTE
$ 22,520 $ 21,630
Net interest rate spread
4.12 % 3.80 %
Net interest margin
4.25 % 3.95 %

AVERAGE BALANCE SHEETS AND NET INTEREST INCOME ANALYSIS (Unaudited)

	Three Months Ended June 30,
	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⁾	$	2,273,844	$	25,714		4.54	%	$	2,134,136	$	25,979		4.88	%
Securities available for sale		280,823		1,597		2.28	%		84,099		508		2.42	%
Interest-bearing deposits		377,931		769		0.82	%		610,148		166		0.11	%
Total earning assets		2,932,598		28,080		3.84	%		2,828,383		26,653		3.78	%
Other assets		331,774							331,563
Total assets	$	3,264,372						$	3,159,946

Liabilities and stockholders' equity
Interest-bearing deposits
Demand deposits	$	698,978	$	29		0.02	%	$	654,767	$	33		0.02	%
Savings deposits		895,370		67		0.03	%		818,490		63		0.03	%
Time deposits		331,555		326		0.39	%		394,889		628		0.64	%
Total interest-bearing deposits		1,925,903		422		0.09	%		1,868,146		724		0.19	%
Borrowings
Retail repurchase agreements		2,105		1		0.08	%		1,266		-		N/M
Total borrowings		2,105		1		0.08	%		1,266		-		N/M
Total interest-bearing liabilities		1,928,008		423		0.09	%		1,869,412		724		0.16	%
Noninterest-bearing demand deposits		874,507							824,888
Other liabilities		38,106							37,306
Total liabilities		2,840,621							2,731,606
Stockholders' equity		423,751							428,340
Total liabilities and stockholders' equity	$	3,264,372						$	3,159,946
Net interest income, FTE⁽¹⁾			$	27,657						$	25,929
Net interest rate spread						3.75	%						3.62	%
Net interest margin, FTE⁽¹⁾						3.78	%						3.68	%

(1)	~~Fully taxable equivalent ("FTE")~~Interest income and average yield/rate are presented on a FTE, non-GAAP, basis ~~based on~~using the federal statutory income tax rate of ~~35%~~21%.
(2)	Nonaccrual loans are included in the average ~~balances;~~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 $870 thousand and $1.25 million for the three months ended June 30, 2022 and 2021, respectively.

Table of Contents

Nine Months Ended September 30,

2017

2016

Average

Average Yield/

Average

Average Yield/

(Amounts in thousands)

Balance

Interest⁽¹⁾

Rate⁽¹⁾

Balance

Interest⁽¹⁾

Rate⁽¹⁾

Assets

Earning assets

Loans⁽²⁾
$ 1,841,981 $ 67,645 4.91 % $ 1,775,744 $ 65,836 4.95 %
Securities available for sale
162,198 4,312 3.55 % 318,891 6,403 2.68 %
Securities held to maturity
35,578 382 1.44 % 72,350 575 1.06 %
Interest-bearing deposits
66,069 655 1.33 % 13,288 55 0.55 %
Total earning assets
2,105,826 72,994 4.63 % 2,180,273 72,869 4.47 %
Other assets
264,333 287,784
Total assets
$ 2,370,159 $ 2,468,057

Liabilities and stockholders' equity

Interest-bearing deposits

Demand deposits
$ 384,265 $ 301 0.10 % $ 339,920 $ 177 0.07 %
Savings deposits
523,219 114 0.03 % 533,799 191 0.05 %
Time deposits
513,072 3,259 0.85 % 527,056 2,966 0.75 %
Total interest-bearing deposits
1,420,556 3,674 0.35 % 1,400,775 3,334 0.32 %
Borrowings

Federal funds purchased
2 - 0.00 % 5,393 26 0.64 %
Retail repurchase agreements
61,951 31 0.07 % 69,347 37 0.07 %
Wholesale repurchase agreements
25,000 602 3.22 % 50,000 1,410 3.77 %
FHLB advances and other borrowings
57,357 1,754 4.09 % 124,803 2,578 2.76 %
Total borrowings
144,310 2,387 2.21 % 249,543 4,051 2.17 %
Total interest-bearing liabilities
1,564,866 6,061 0.52 % 1,650,318 7,385 0.60 %
Noninterest-bearing demand deposits
435,825 457,250
Other liabilities
21,905 22,581
Total liabilities
2,022,596 2,130,149
Stockholders' equity
347,563 337,908
Total liabilities and stockholders' equity
$ 2,370,159 $ 2,468,057
Net interest income, FTE
$ 66,933 $ 65,484
Net interest rate spread
4.11 % 3.87 %
Net interest margin
4.25 % 4.01 %

AVERAGE BALANCE SHEETS AND NET INTEREST INCOME ANALYSIS (Unaudited)

	Six Months Ended June 30,
	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⁾	$	2,237,128	$	50,412		4.54	%	$	2,149,509	$	52,561		4.93	%
Securities available for sale		211,285		2,397		2.29	%		83,868		1,081		2.60	%
Interest-bearing deposits		460,864		1,018		0.45	%		539,500		284		0.11	%
Total earning assets		2,909,277		53,827		3.73	%		2,772,877		53,926		3.92	%
Other assets		330,003							331,524
Total assets	$	3,239,280						$	3,104,401

Liabilities and stockholders' equity
Interest-bearing deposits
Demand deposits	$	689,149	$	57		0.02	%	$	634,000	$	72		0.02	%
Savings deposits		888,371		133		0.03	%		798,571		154		0.04	%
Time deposits		339,186		718		0.43	%		403,888		1,367		0.68	%
Total interest-bearing deposits		1,916,706		908		0.10	%		1,836,459		1,593		0.16	%
Borrowings
Retail repurchase agreements		2,050		1	0.08		%		1,250		-	N/M
Total borrowings		2,050		1	0.08		%		1,250		-	N/M
Total interest-bearing liabilities		1,918,756		909		0.10	%		1,837,709		1,593		0.17	%
Noninterest-bearing demand deposits		855,321							801,512
Other liabilities		38,529							38,609
Total liabilities		2,812,606							2,677,830
Stockholders' equity		426,674							426,571
Total liabilities and stockholders' equity	$	3,239,280						$	3,104,401
Net interest income, FTE⁽¹⁾			$	52,918						$	52,333
Net interest rate spread						3.64	%						3.75	%
Net interest margin, FTE⁽¹⁾						3.67	%						3.81	%


(1)	~~Fully taxable equivalent ("FTE")~~Interest income and average yield/rate are presented on a FTE, non-GAAP, basis ~~based on~~using the federal statutory income tax rate of ~~35%~~21%.
(2)	Nonaccrual loans are included in the average ~~balances;~~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 $1.74 million and $2.44 million for the six months ended June 30, 2022 and 2021, respectively.

Table of Contents

The following table presents the impact to net interest income on a FTE basis due to changes in volume ~~(average~~(change in average volume times the prior ~~year~~’syear’s average rate), rate (average rate times the prior year’s average volume), and rate/volume (average volume times the change in average rate), for the periods indicated:

	Three Months Ended												Nine Months Ended												Three Months Ended												Six Months Ended
	September 30, 2017 Compared to 2016												September 30, 2017 Compared to 2016												June 30, 2022 Compared to 2021												June 30, 2022 Compared to 2021
	Dollar Increase (Decrease) due to												Dollar Increase (Decrease) due to												Dollar Increase (Decrease) due to												Dollar Increase (Decrease) due to
							Rate/												Rate/												Rate/												Rate/
(Amounts in thousands)	Volume			Rate			Volume			Total			Volume			Rate			Volume			Total			Volume			Rate			Volume			Total			Volume			Rate			Volume			Total
Interest earned on⁽¹⁾
Interest earned on(1)
Loans⁽²⁾	$	816		$	1,336		$	(1,361	)	$	791		$	2,456		$	(563	)	$	(84	)	$	1,809		$	3,383		$	(3,670	)	$	22		$	(265	)	$	2,143		$	(4,123	)	$	(169	)	$	(2,149	)
Securities available-for-sale		(2,368	)		1,130			670			(568	)		(3,146	)		2,081			(1,026	)		(2,091	)		2,364			(59	)		(1,216	)		1,089			1,642			(130	)		(196	)		1,316
Securities held-to-maturity		(366	)		339			(56	)		(83	)		(292	)		202			(103	)		(193	)
Interest-bearing deposits with other banks		223			133			(107	)		249			218			77			305			600			(126	)		2,139			(1,410	)		603			(37	)		934			(163	)		734
Total interest earning assets		(1,695	)		2,938			(854	)		389			(764	)		1,797			(908	)		125			5,621			(1,590	)		(2,604	)		1,427			3,748			(3,319	)		(528	)		(99	)

Interest paid on⁽¹⁾
Interest paid on
Demand deposits		25			53			(49	)		29			23			89			12			124			4			(12	)		4			(4	)		6			(20	)		(1	)		(15	)
Savings deposits		(2	)		(56	)		39			(19	)		(4	)		(75	)		2			(77	)		12			(3	)		(5	)		4			17			(34	)		(4	)		(21	)
Time deposits		(114	)		517			(271	)		132			(79	)		385			(13	)		293			(200	)		(477	)		375			(302	)		(219	)		(512	)		82			(649	)
Federal funds purchased		(18	)		(18	)		30			(6	)		(26	)		-			-			(26	)
Retail repurchase agreements		(3	)		(3	)		4			(2	)		(4	)		(2	)		-			(6	)		-			1			-			1			-			1			-			1
Wholesale repurchase agreements		(704	)		(203	)		637			(270	)		(705	)		(205	)		102			(808	)
FHLB advances and other borrowings		(1,633	)		1,452			(184	)		(365	)		(1,393	)		1,241			(672	)		(824	)		-			-			-			-			-			-			-			-
Total interest-bearing liabilities		(2,449	)		1,742			206			(501	)		(2,188	)		1,433			(569	)		(1,324	)		(184	)		(491	)		374			(301	)		(196	)		(565	)		77			(684	)

Change in net interest income⁽¹⁾	$	754		$	1,196		$	(1,060	)	$	890		$	1,424		$	364		$	(339	)	$	1,449
Change in net interest income(1)																									$	5,805		$	(1,099	)	$	(2,978	)	$	1,728		$	3,944		$	(2,754	)	$	(605	)	$	585

(1)

FTE basis based on the federal statutory rate of ~~35%~~

~~(2)~~

~~Nonaccrual loans are included in average balances; however, no related interest income is recorded during the period of nonaccrual.~~21%.

Table of Contents

~~The following tables present the net interest analysis on a FTE basis excluding the impact of non-cash purchase accounting accretion from acquired loan portfolios for the periods indicated:~~

Three Months Ended September 30,

2017

2016

(Amounts in thousands)

Interest⁽¹⁾

Average Yield/
Rate⁽¹⁾

Interest⁽¹⁾

Average Yield/
Rate⁽¹⁾

Earning assets

Loans⁽²⁾
$ 22,765 4.90 % $ 21,974 4.80 %
Accretion income
1,925 1,683
Less: cash accretion income
548 699
Non-cash accretion income
1,377 984
Loans, normalized⁽³⁾
21,388 4.60 % 20,990 4.59 %
Other earning assets
1,754 2.72 % 2,156 2.40 %
Total earning assets
23,142 4.37 % 23,146 4.23 %
Total interest-bearing liabilities
1,999 0.51 % 2,500 0.61 %
Net interest income, FTE⁽³⁾
$ 21,143 $ 20,646
Net interest rate spread, normalized⁽³⁾
3.86 % 3.62 %
Net interest margin, normalized⁽³⁾
4.00 % 3.77 %

~~(1)~~

~~FTE basis based on the federal statutory rate of 35%~~

~~(2)~~

~~Nonaccrual loans are included in average balances; however, no related interest income is recorded during the period of nonaccrual.~~

~~(3)~~

~~Normalized totals are non-GAAP financial measures that exclude non-cash loan interest accretion related to PCI loans.~~

Nine Months Ended September 30,

2017

2016

(Amounts in thousands)

Interest⁽¹⁾

Average Yield/
Rate⁽¹⁾

Interest⁽¹⁾

Average Yield/
Rate⁽¹⁾

Earning assets

Loans⁽²⁾
$ 67,645 4.91 % $ 65,836 4.95 %
Accretion income
6,243 6,183
Less: cash accretion income
1,986 2,290
Non-cash accretion income
4,257 3,893
Loans, normalized⁽³⁾
63,388 4.60 % 61,943 4.66 %
Other earning assets
5,349 2.71 % 7,033 2.32 %
Total earning assets
68,737 4.36 % 68,976 4.23 %
Total interest-bearing liabilities
6,061 0.52 % 7,385 0.60 %
Net interest income, FTE⁽³⁾
$ 62,676 $ 61,591
Net interest rate spread, normalized⁽³⁾
3.84 % 3.63 %
Net interest margin, normalized⁽³⁾
3.98 % 3.77 %

~~(1)~~

~~FTE basis based on the federal statutory rate of 35%~~

~~(2)~~

~~Nonaccrual loans are included in average balances; however, no related interest income is recorded during the period of nonaccrual.~~

~~(3)~~

~~Normalized totals are non-GAAP financial measures that exclude non-cash loan interest accretion related to PCI loans.~~

Three-Month Comparison. Net interest income comprised ~~75.55%~~75.68% of total net interest and noninterest income in the ~~third~~second quarter of ~~2017~~2022 compared to ~~78.18%~~74.58% in the same quarter of ~~2016.~~2021. Net interest income on a GAAP basis increased ~~$929 thousand,~~$1.73 million, or ~~4.40%~~6.71%, ~~and~~compared to an increase of $1.73 million, or 6.66%, on a FTE basis. The net interest ~~income~~margin on a FTE basis increased ~~$890 thousand, or 4.11%. Normalized~~10 basis points and the net interest ~~income~~spread on a FTE basis ~~is a non-GAAP measure that excludes non-cash loan accretion income related to PCI loans. For additional information, see “Non-GAAP Financial Measures” below. Normalized net interest margin~~ increased 2313 basis ~~points compared to~~points. The increase was primarily driven by an increase in the yield on overnight funds and a decrease in the cost of ~~30 basis points on a FTE basis. Normalized net interest spread increased 24 basis points compared to an increase of 32 basis points on a FTE basis.~~time deposits.

Average earning assets ~~decreased $78.65~~increased $104.22 million, or ~~3.61%~~3.68%, primarily due to ~~a decrease in investment securities offset by loan growth and~~ an increase in both the securities available for sale and loan portfolios. Securities available for sale increased $196.72 million, or 233.92% due to recent purchases of $236.85 million in the first six months of 2022. In addition, average loans increased $139.71 million, or 6.55%, primarily due to strong levels of loan demand in all categories. Average interest-bearing ~~deposits.~~deposits increased $57.76 million, or 3.09%. The ~~normalized~~ yield on earning assets increased 146 basis points, ~~compared~~or 1.59%, primarily due to anthe increase in yield on overnight funds due to the Federal Open Market Committee's increase in the fed funds rate of 22150 basis points ~~on a GAAP basis. Average loans increased $22.71 million, or 1.25%, and the~~during 2022. The average loan to deposit ratio increased to ~~99.52%~~81.20% from ~~98.25%. The normalized yield on loans increased 1 basis point compared to an increase~~79.25% in the same quarter of ~~10 basis points on a GAAP basis.~~2021. Non-cash accretion income ~~increased $393~~decreased $384 thousand, or ~~39.94%~~30.62%.

~~Table of Contents~~

~~Average interest-bearing liabilities, which consist of interest-bearing deposits and borrowings, decreased $~~97.27 million, or 5.92%, primarily due to a decline in average borrowings. The yield on interest-bearing liabilities decreased 10 basis points, largely driven by a decrease in the average balance of borrowings. Average borrowings decreased $118.73 million, or 47.13%, largely due to an $83.84 million, or 62.64%, decrease in average FHLB advances and other borrowings, a $25.00 million, or 50.00%, decrease in average wholesale repurchase agreements, a $6.19 million, or 9.62%, decrease in average retail repurchase agreements, and a $3.70 million decrease in average federal funds purchased. Average interest-bearing deposits increased $21.46 million, or 1.54%, which was driven by a $46.70 million, or 13.82%, increase in average interest-bearing demand deposits offset by a $20.09 million, or 3.80%, decrease in average time deposits, and a $5.15 million, or 0.98%, decrease in average savings deposits, which include money market and savings accounts.

~~Nine-Month~~ ~~Comparison~~. Net interest income comprised 78.16% of total net interest and noninterest income in the first nine months of 2017 compared to 75.42% in the same period of 2016. Net interest income on a GAAP basis increased $1.56 million, or 2.44%, and net interest income on a FTE basis increased $1.45 million, or 2.21%. Normalized net interest margin increased 21 basis points compared to an increase of 24 basis points on a FTE basis. Normalized net interest spread increased 21 basis points compared to an increase of 24 basis points on a FTE basis.

~~Average earning assets~~ decreased $74.45 million, or 3.41%, primarily due to a decrease in investment offset by loan growth and an increase in interest-bearing deposits. The normalized yield on earning assets increased 13 basis points compared to an increase of 16 basis points on a GAAP basis. Average loans increased $66.24 million, or 3.73%, and the average loan to deposit ratio increased to 99.22% from 95.57%. The normalized yield on loans decreased 6 basis points compared to a decrease of 4 basis points on a GAAP basis. Non-cash accretion income increased $364 thousand, or 9.35%, as the effect of accretion income continued to decline from acquired portfolio attrition.

Average interest-bearing liabilities, which consist of interest-bearing deposits and borrowings, ~~decreased $85.45~~increased $58.60 million, or ~~5.18%~~3.13%, primarily due to ~~a decline~~an increase in ~~average borrowings.~~interest-bearing deposits. The yield on interest-bearing liabilities decreased 87 basis points. Average interest-bearing deposits increased $57.76 million, or 3.09%. Savings deposits increased $76.88 million, or 9.39%, and interest-bearing demand deposits increased $44.21 million, or 6.75%. These increases were offset by a decrease in time deposits of $63.33 million, or 16.04%.

Six-Month Comparison. Net interest income comprised 74.49% of total net interest and noninterest income in the six months ended June 30, 2022 compared to 76.09% in the same period of 2021. Net interest income on a GAAP basis increased $604 thousand, or 1.16%, compared to an increase of $585 thousand, or 1.12%, on a FTE basis. The net interest margin on a FTE basis decreased 14 basis points ~~largely~~and the net interest spread on a FTE basis decreased 11 basis points. The decrease was primarily driven by a decrease in the ~~average balance~~yields in both the securities available for sale and loan portfolios offset by an increase in the yield on overnight funds and a decrease in the cost of ~~borrowings.~~ time deposits.

Average ~~borrowings decreased $105.23~~earning assets increased $136.40 million, or ~~42.17%~~4.92%, ~~largely~~primarily due to ~~a $67.45~~an increase in both the securities available for sale and loan portfolios. Securities available for sale increased $127.42 million, or ~~54.04%, decrease~~151.93% due to recent purchases of $236.85 million in the first six months of 2022. In addition, average ~~FHLB advances and other borrowings, a $25.00~~loans increased $87.62 million, or ~~50.00%~~4.08%, ~~decrease~~primarily due to strong levels of loan demand in ~~average wholesale repurchase agreements, a $7.40 million, or 10.67%, decrease in average retail repurchase agreements, and a $5.39 million, or 99.96%, decrease in average federal funds purchased.~~all categories. Average interest-bearing deposits increased ~~$19.78~~$80.25 million, or ~~1.41%~~4.37%. The yield on earning assets decreased 19 basis points, or 4.85%, primarily due to the decrease in yields in the securities available for sale and loan portfolios. The decrease in yields in these portfolios was offset by an increase in yield on overnight funds due to year-to-date increases in the fed funds rate of 150 basis points. The average loan to deposit ratio decreased to 80.70% from 81.48% in the same period of 2021. Non-cash accretion income decreased $705 thousand, or 28.88%.

Average interest-bearing liabilities, which ~~was driven by a $44.35~~consist of interest-bearing deposits and borrowings, increased $81.05 million, or ~~13.05%~~4.41%, primarily due to an increase in ~~average~~interest-bearing deposits. The yield on interest-bearing liabilities decreased 7 basis points. Average interest-bearing deposits increased $80.25 million, or 4.37%. Savings deposits increased $89.80 million, or 11.25%, and interest-bearing demand deposits increased $55.15 million, or 8.70%. These increases were offset by a ~~$13.98~~decrease in time deposits of $64.70 million, or ~~2.65%, decrease in average time deposits, and a $10.58 million, or 1.98%, decrease in average savings deposits, which include money market and savings accounts.~~16.02%.

Provision for ~~Loan~~Credit Losses

Three-Month Comparison. The provision charged to operations increased ~~$1.88~~$2.74 million, ~~to $730 thousand~~ in the ~~third~~second quarter of ~~2017~~2022 compared to ~~a recovery of $1.15 million in~~ the same quarter of ~~2016, which~~2021. Provision for credit losses of $510 thousand was ~~attributed to the reversal of $1.35 million in loan loss provisions related to loans divested~~recorded in the ~~First Bank transaction during the third~~second quarter of ~~2016. For additional information, see “Allowance for Loan Losses”~~2022 and was primarily attributable to loan growth. A reversal in provision of $2.23 million was recorded in the ~~“Financial Condition” section below.~~second quarter of 2021 and was due to significantly improved economic forecasts.

~~Nine-Month~~Six-Month Comparison. The provision charged to operations increased ~~$1.40~~$8.70 million, ~~to $2.16 million in~~for the ~~first nine~~six months ~~of 2017~~ended June 30, 2022 compared to the same period of ~~2016, which~~2021. Provision for credit losses of $2.47 million was ~~attributed~~recorded for the first six months of 2022 and was primarily attributable to ~~the~~loan growth. A reversal in provision of ~~$1.35~~$6.23 million ~~in loan loss provisions related to loans divested~~was recorded in the ~~First Bank transaction during the third quarter~~same period of ~~2016.~~2021 and was due to significantly improved economic forecasts.

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Noninterest Income

The following table presents the components of, and changes in, noninterest income for the periods indicated:

	Three Months Ended						Three Months Ended						Nine Months Ended						Nine Months Ended						Three Months Ended										Six Months Ended
	September 30,						Increase						September 30,						Increase						June 30,				Increase			%			June 30,				Increase		%
	2017			2016			(Decrease)			% Change			2017			2016			(Decrease)			% Change			2022		2021		(Decrease)			Change			2022		2021		(Decrease)		Change
(Amounts in thousands)
Wealth management	$	758		$	653		$	105			16.08	%	$	2,339		$	2,147		$	192			8.94	%	$	993	$	1,058	$	(65	)		-6.14	%	$	1,965	$	1,939	$	26		1.34	%
Service charges on deposits		3,605			3,494			111			3.18	%		10,078			10,146			(68	)		-0.67	%		3,672		3,098		574			18.53	%		7,170		6,129		1,041		16.98	%
Other service charges and fees		2,141			2,024			117			5.78	%		6,387			6,088		��	299			4.91	%		3,297		3,166		131			4.14	%		6,314		6,188		126		2.04	%
Insurance commissions		306			1,592			(1,286	)		-80.78	%		1,004			5,383			(4,379	)		-81.35	%
Net impairment losses recognized in earnings		-			(4,635	)		4,635			-100.00	%		-			(4,646	)		4,646			-100.00	%
Net loss on sale of securities		-			25			(25	)		-100.00	%		(657	)		(53	)		(604	)		1139.62	%
Net FDIC indemnification asset amortization		(268	)		(1,369	)		1,101			-80.42	%		(3,186	)		(3,856	)		670			-17.38	%
Net gain on divestiture		-			3,065			(3,065	)		-100.00	%		-			3,065			(3,065	)		-100.00	%
Other operating income		593			1,046			(453	)		-43.31	%		2,336			2,554			(218	)		-8.54	%		892		1,475		(583	)		-39.53	%		2,599		2,110		489		23.18	%
Total noninterest income	$	7,135		$	5,895		$	1,240			21.03	%	$	18,301		$	20,828		$	(2,527	)		-12.13	%	$	8,854	$	8,797	$	57			0.65	%	$	18,048	$	16,366	$	1,682		10.28	%

Three-Month Comparison. Noninterest income comprised ~~24.45%~~24.32% of total net interest and noninterest income in the ~~third~~second quarter of ~~2017~~2022 compared to ~~21.82%~~25.42% in the same quarter of ~~2016.~~2021. Noninterest income increased ~~$1.24 million,~~$57 thousand or ~~21.03%~~0.65%. Service charges on deposits increased $574 thousand, or 18.53%, and other service charges and fees increased $131 thousand, or 4.14%, compared with the same quarter of 2021. The increases are primarily attributable to increased customer activity compared to the activity levels experienced during 2021.Other operating income decreased $583 thousand, or 39.53%. The decrease was primarily due to ~~net impairment losses recognized in~~a recovery of $1.00 million during the ~~third~~second quarter of ~~2016 and~~2021 of an acquired loan from a failed bank acquisition that had been written down prior to acquisition. In addition, 2021 included gains of approximately $626 thousand recorded during the ~~decrease in net negative~~quarter for the sale of various bank-owned properties. These decreases were offset by the 2021 amortization ~~related to~~of the FDIC indemnification asset ~~as loss share coverage expired June 30, 2017, for commercial loans. See Note 2, “Investment Securities,” to the Condensed Consolidated Financial Statements in Item 1~~ of ~~this report. These changes were offset by a decrease in insurance commissions resulting from the Greenpoint divestiture~~$945 thousand that was fully amortized in the ~~fourth~~second quarter of ~~2016 and~~2021, as well as a ~~net gain on the divestiture of six bank branches to First Bank~~fair value increase recognized in earnings in the ~~third~~second quarter of 2016. Excluding the impact from impairment losses, sales of securities and branches, net FDIC indemnification asset amortization, and net gain on divestiture, noninterest income decreased $1.33 million, or 15.22%,2022 for $275 thousand related to ~~$7.40 million in the third quarter of 2017, from $8.73 million in the same quarter of 2016. The decrease was due primarily to~~interest rate swaps that do no qualify as a ~~$1.29 million decrease in insurance commissions resulting from the Greenpoint divestiture.~~fair value hedge.

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~~Nine-Month~~Six-Month Comparison. Noninterest income comprised ~~21.84%~~25.51% of total net interest and noninterest income infor the first ~~nine~~six months of ~~2017~~2022 compared to ~~24.58%~~23.91% in the same period of ~~2016.~~2021. Noninterest income ~~decreased $2.53~~increased $1.68 million or ~~12.13%~~10.28%. Service charges on deposits increased $1.04 million, or 16.98%, and other service charges and fees increased $126 thousand, or 2.04%, compared with the same period of 2021. As noted for the quarter, the increases are primarily attributable to increased customer activity compared to the activity levels experienced during 2021.Other operating income increased $489 thousand, or 23.18%. The increase was primarily due to ~~a decrease in insurance commissions resulting from~~ the ~~Greenpoint divestiture in the fourth quarter~~2021 amortization of 2016 and a net gain on the divestiture of six bank branches to First Bank in the third quarter of 2016 offset by net impairment losses recognized in the third quarter of 2016. See Note 2, “Investment Securities,” to the Condensed Consolidated Financial Statements in Item 1 of this report. Net negative amortization related to the FDIC indemnification asset ~~decreased due~~of $1.23 million that was fully amortized in the second quarter of 2021, as well as a fair value increase recognized in earnings in 2022 for $853 thousand related to ~~additional reserve provisions~~interest rate swaps that do no qualify as ~~loss share coverage expired June 30, 2017,~~a fair value hedge. The increases were offset by a recovery of $1.00 million during the second quarter of 2021 of an acquired loan from a failed bank acquisition that had been written down prior to acquisition. In addition, the income recognized for ~~commercial loans. Excluding~~ the ~~impact from impairment losses, sales~~adjustment to cash surrender value of ~~securities and branches, net FDIC indemnification asset amortization, net gain on divestiture, and bank owned~~bank-owned life insurance ~~proceeds, noninterest income~~ decreased ~~$4.19 million, or 16.20%, to $21.69 million in~~$547 thousand for the first nine months of 2017, from $25.88 million in the same period of 2016. The decrease was due primarily to a $4.38 million decrease in insurance commissions resulting from the Greenpoint divestiture.

Three-Month Comparison. Noninterest expense ~~decreased $1.65~~increased $1.89 million, or ~~8.88%~~9.78%, in the ~~third~~second quarter of ~~2017~~2022 compared to the same quarter of ~~2016, which~~2021. The increase was largely ~~due~~attributable to ~~a decrease~~an increase in salaries and employee ~~benefits. Salaries and employee~~ benefits ~~decreased~~of $1.30 million or 12.74%. Early in the first quarter of 2022, the Company implemented annualized wage increases of approximately $2.5 million as ~~full-time equivalent employees, calculated using the number~~part of ~~hours worked, decreased~~its strategic initiative to ~~569 as of September 30, 2017, from 624 as of September 30, 2016,~~enhance Human Capital Management, which included an increased minimum wage. In addition, service fees increased $1.05 million, or 69.40% primarily due to the First Bank and Greenpoint transactions that occurred during the second half of 2016. We incurred expenses totaling $226 thousand related to the branch exchange with First Bank during the third quarter of 2016. Occupancy, furniture, and equipment expense decreased $100 thousand, or 4.32%, due to branch closures and divestitures that occurred during the prior year. Other operating expense included a $421 thousandan increase in legal fees, a $146 thousand increase in property writedowns, and a $369 thousand increase in the net loss on sales and expenses related to other real estate owned (“OREO”) to $647 thousand from $278 thousand in the third quarter of 2016.core processing expense. These increases were offset by ~~decreases~~a decrease in ~~office supplies~~other operating expense ~~other service fees, nonemployee compensation, and consulting fees.~~of $815 thousand or 22.70%. The decrease is primarily attributable to the 2021 write-down of bank property of $781 thousand.

~~Nine-Month~~Six-Month Comparison. Noninterest expense ~~decreased $4.64~~increased $3.06 million, or ~~8.28%~~8.01%, in the first ~~nine~~six months of ~~2017~~2022 compared to the same period of ~~2016, which~~2021. As in the quarter, the increase was largely ~~due~~attributable to ~~a decrease~~an increase in salaries and employee ~~benefits. Salaries and employee~~ benefits ~~decreased~~of $2.09 million or 9.90%. The increase is due to wage increases implemented in the first quarter as part of the Company's strategic initiative to enhance Human Capital Management, which included an increased minimum wage. In addition, service fees increased $1.22 million, or 42.77% primarily due to the First Bank and Greenpoint transactions that occurred during the second half of 2016. We incurred expenses totaling $675 thousand related to the First Bank branch exchange during the first nine months of 2016. Occupancy, furniture, and equipment expense decreased $428 thousand, or 5.78%, due to branch closures and divestitures that occurred during the prior year. Other operating expense included a $467 thousandan increase in ~~legal fees which~~core processing expense. These increases were offset by a ~~$48 thousand~~ decrease in other operating expense of $1.06 million, or 17.05%. The decrease is primarily attributable to the ~~net loss on sales and expenses related to OREO to $1.19 million from $1.24 million in the first nine months~~2021 write-down of ~~2016.~~bank property of $781 thousand.

The Company’s effective tax rate, income tax as a percent of pre-tax income, may vary significantly from the statutory rate due to permanent differences and available tax credits. Permanent differences are income and expense items excluded by law in the calculation of taxable income. The Company’s most significant permanent differences generally include interest income on municipal securities and increases in the cash surrender value of life insurance policies.

Three-Month Comparison. The Company’s effective tax rate, income tax as a percent of pre-tax income, may vary significantly from the statutory rate due to permanent differences and available tax credits. Permanent differences are income and expense items excluded by law in the calculation of taxable income. The Company’s most significant permanent differences generally include interest income on municipal securities and increases in the cash surrender value of life insurance policies. Income tax expense ~~increased $664~~decreased $654 thousand, or ~~20.56%,~~16.04% and was primarily due to the decrease in pre-tax income. The effective tax rate increased ~~13 basis points~~ to ~~33.73%~~23.39% in the ~~third~~second quarter of ~~2017 compared to~~2022 from 23.32% in the same quarter of ~~2016.~~2021. The increase in the effective ~~tax~~ rate was ~~largely~~primarily due to a decrease in ~~tax-exempt revenue.~~permanent differences for officers life insurance quarter over quarter.

~~Nine-Month~~Six-Month Comparison. Income tax expense ~~increased $727 thousand,~~decreased $2.20 million, or ~~7.92%,~~25.85% and was primarily due to the decrease in pre-tax income. The effective tax rate ~~decreased 7~~remained level for the first six months of 2022 and increased only three basis points to ~~32.83%~~23.33% from 23.30% in ~~the first nine months of 2017 compared to~~ the same period of ~~2016. The decrease in the effective tax rate was largely due to an increase in tax-exempt revenue.~~2021.

In addition to financial statements prepared in accordance with GAAP, we use certain non-GAAP financial measures that management believes provide investors with important information useful in understanding our operational performance and comparing our financial measures with other financial institutions. The non-GAAP financial ~~measures~~measure presented in this report ~~include net interest income on a FTE basis and normalized~~includes net interest income on a FTE basis. While we believe these non-GAAP financial measures enhance understanding of our business and performance, they are supplemental and not a substitute for, or more important than, financial measures prepared on a GAAP basis. Our non-GAAP financial measures may not be comparable to those reported by other financial institutions. The reconciliations of these measures to GAAP measures are presented below.

We believe FTE basis is the preferred industry measurement of net interest income and provides better comparability between taxable and tax exempt amounts. We use this non-GAAP financial measure to monitor net interest income performance and to manage the composition of our balance sheet. The FTE basis adjusts for the tax benefits of income from certain tax exempt loans and investments using the federal statutory rate of 35%21%. ~~Normalized net interest income~~While we believe certain non-GAAP financial measures enhance understanding of our business and performance, they are supplemental and not a substitute for, or more important than, financial measures prepared on a ~~FTE basis is a~~GAAP basis. Our non-GAAP ~~measure that excludes non-cash loan accretion income related~~financial measures may not be comparable to ~~PCI loans.~~those reported by other financial institutions. The reconciliations of non-GAAP to GAAP measures are presented below.

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The following table reconciles net interest income and margin, as presented in our consolidated statements of income, to net interest income on a FTE basis for the periods indicated:

Total assets as of ~~September~~June 30, ~~2017, decreased $11.62~~2022, increased $63.86 million, or ~~0.49%~~2.00%, ~~to $2.37 billion~~ from ~~$2.39 billion~~December 31, 2021. The increase in assets was primarily driven by an increase in securities available-for-sale of $211.48 million, or 277.19%. Loans increased $134.23 million, or 6.20%. These increases were offset by a decrease in overnight funds of $285.41 million, or 45.52%. In addition, total liabilities increased $73.59 million, or 2.66%, as of June 30, 2022, from December 31, ~~2016. Total~~2021. The increase in liabilities aswas primarily driven by an increase in total deposits of ~~September 30, 2017, decreased $25.20~~$69.15 million, or ~~1.23%, to $2.02 billion from $2.05 billion as of December 31, 2016.~~2.53%.

Our investment securities are used to generate interest income through the employment of excess funds, to provide liquidity, to fund loan demand or deposit liquidation, and to pledge as collateral where required. The composition of our investment portfolio changes from time to time as we consider our liquidity needs, interest rate expectations, asset/liability management strategies, and capital requirements.

Available-for-sale debt securities as of ~~September~~June 30, ~~2017,~~2022, increased ~~$8.85~~$211.48 million, or ~~5.34%~~277.19%, compared to December 31, ~~2016, primarily~~2021. The increase is due to the purchase of ~~U.S.~~$236.85 million in securities comprised of U. S. Treasury Notes, mortgage-backed securities, and corporate notes. The purchases were offset by ~~the maturity~~$12.81 million in maturities, prepayments, and ~~sale of municipal, single-issue trust preferred, and mortgage-backed Agency securities.~~calls. The market value of debt securities available for sale as a percentage of amortized cost was ~~101.11%~~95.86% as of ~~September~~June 30, ~~2017,~~2022, compared to ~~99.48%~~100.02% as of December 31, ~~2016. Held-to-maturity~~2021.

Management evaluates securities for impairment where there has been a decline in fair value below the amortized cost basis of a security to determine whether there is a credit loss associated with the decline in fair value on at least a quarterly basis, and more frequently when economic or market concerns warrant such evaluation. Credit losses are calculated individually, rather than collectively, using a discounted cash flow method, whereby Management compares the present value of expected cash flows with the amortized cost basis of the security. The credit loss component would be recognized through the provision for credit losses and the creation of an allowance for credit losses. Consideration is given to (1) the financial condition and near-term prospects of the issuer including looking at default and delinquency rates, (2) the outlook for receiving the contractual cash flows of the investments, (3) the length of time and the extent to which the fair value has been less than cost, (4) our intent and ability to retain its investment in the issuer for a period of time sufficient to allow for any anticipated recovery in fair value or for a debt security whether it is more-likely-than-not that we will be required to sell the debt security prior to recovering its fair value, (5) the anticipated outlook for changes in the general level of interest rates, (6) credit ratings, (7) third party guarantees, and (8) collateral values. In analyzing an issuer’s financial condition, management considers whether the securities are issued by the federal government or its agencies, whether downgrades by bond rating agencies have occurred, the results of reviews of the issuer’s financial condition, and the issuer’s anticipated ability to pay the contractual cash flows of the investments. U.S. Treasury Securities, Agency-Backed Securities including GNMA, FHLMC, FNMA, FHLB, FFCB and SBA. All of the U.S. Treasury and Agency-Backed Securities have the full faith and credit backing of the United State Government or one of its agencies. Municipal securities and all other securities that do not have a zero expected credit loss are evaluated quarterly to determine whether there is a credit loss associated with a decline in fair value. All debt securities available for sale in an unrealized loss position as of ~~September~~June 30, ~~2017, decreased $21.95 million, or 46.57%, compared~~2022 continue to ~~December 31, 2016, primarily due to the maturity of U.S. Agency securities. The market value of securities held to maturity~~perform as scheduled and we do not believe that a ~~percentage of amortized cost was 100.17% as of September 30, 2017, compared to 100.28% as of December 31, 2016.~~

~~Investment securities are reviewed quarterly~~provision for ~~possible~~ other-than-temporary impairment (“OTTI”) charges. We recognized no OTTI charges in earnings associated with debt securities for the three and nine months ended September 30, 2017. We recognized credit-related OTTI charges in earnings associated with debt securities of $4.64 million during the three and nine months ended September 30, 2016, due to our change in intent to hold certain trust preferred securities to recovery. We recognized no OTTI charges in earnings associated with equity securities for the three and nine months ended September 30, 2017, or the three months ended September 30, 2016. We recognized OTTI charges in earnings associated with certain equity securities of $11 thousand for the nine months ended September 30, 2016. For additional information, see Note 2, “Investment Securities,” to the Condensed Consolidated Financial Statements in Item 1 of this report.credit losses is necessary.

L~~oans~~Loans held for investment, ~~our~~which generates the largest component of interest income, are grouped into commercial, consumer real estate, and consumer and other loan segments. Each segment is divided into various loan classes based on collateral or purpose. ~~Certain loans acquired in FDIC-assisted transactions are covered under loss share agreements (“covered loans”). Total loans held for investment, net~~

Table of unearned income, as of September 30, 2017, decreased $15.23 million, or 0.82%, compared to December 31, 2016, primarily due to a $25.71 million, or 45.10%, decrease in covered loans as the covered Waccamaw portfolio continues to run off. The decrease was offset by a $10.48 million, or 0.58%, increase in non-covered loans driven by the commercial construction and non-farm, non-real estate commercial segments. For additional information, see Note 3, “Loans,” to the Condensed Consolidated Financial Statements in Item 1 of this report.

Contents

The following table presents loans, net of unearned income,, with non-covered loans by loan class as of the dates indicated:

~~The following table presents covered~~Total loans~~, by loan class,~~ as of June 30, 2022, increased $134.23 million, or 6.20%, compared to December 31, 2021, with increases in all three loan segments. The largest increase, $96.73 million, occurred in the ~~dates indicated:~~commercial loan segment. The increase was comprised of increases of $44.86 million in non-farm, non-residential real estate, $27.03 million in construction, development, and other land, and $23.87 million in multi-family categories. Consumer real estate loans increased $18.06 million with the increase concentrated in the single family owner occupied category. Consumer and other loans also increased with a total increase of $19.43 million,

We seek to mitigate credit risk by ~~adhering to~~following specific underwriting practices and by ongoing monitoring of our loan portfolio. Our underwriting practices include the analysis of ~~borrowers~~’borrowers’ prior credit histories, financial statements, tax returns, and cash flow projections; valuation of collateral based on independent appraisers’ reports; and verification of liquid assets. We believe our underwriting criteria are appropriate for the various loan types we offer; however, losses may occur that exceed the reserves established in our allowance for loan losses. We track certain credit quality indicators that include: trends related to the risk rating of commercial loans, the level of classified commercial loans, net charge-offs, nonperforming loans, and general economic conditions. The Company’s loan review function generally analyzes all commercial loan relationships greater than ~~$4.0~~$4.00 million annually and at various times during the year. Smaller commercial and retail loans are sampled for review during the year.

Nonperforming assets consist of nonaccrual loans, accrual loans contractually past due 90 days or more, unseasoned troubled debt restructurings (“TDRs”), and OREO. Ongoing activity in the classification and categories of nonperforming loans include collections on delinquencies, foreclosures, loan restructurings, and movements into or out of the nonperforming classification due to changing economic conditions, borrower financial capacity, or resolution efforts. ~~Loans acquired with credit~~ deterioration, with a discount, continue to accrue interest based on expected cash flows; therefore, PCI loans are not generally considered nonaccrual. For additional information, see Note 4, “Credit Quality,” to the Condensed Consolidated Financial Statements in Item 1 of this report.

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The following table presents the components of nonperforming assets and related information as of the periods indicated:

~~Non-covered nonperforming~~Nonperforming assets as of ~~September~~June 30, ~~2017, increased $1.55~~2022, decreased $4.19 million, or ~~7.35%~~18.01%, from December 31, ~~2016, primarily due to an increase in non-covered~~2021, with the largest decrease occurring on nonaccrual loans. ~~Non-covered nonaccrual~~Nonaccrual loans ~~as of September 30, 2017, increased $3.09~~decreased $2.94 million, or ~~19.48%~~14.17%, ~~from December 31, 2016.~~non-performing TDR's decreased $852 thousand, or 62.33%, and OREO decreased $436 thousand, or 42.96%. As of ~~September~~June 30, ~~2017, non-covered~~2022, nonaccrual loans were largely attributed to single family owner occupied ~~(60.80%~~(49.46%) ~~and~~, non-farm, non-residential ~~(17.70%~~(15.79%) ~~loans. As of September 30, 2017, approximately $833 thousand, or 4.40%~~, ~~of non-covered nonaccrual~~and single family non-owner occupied loans ~~were attributed to performing loans acquired in business combinations.~~(11.96%). Certain loans included in the nonaccrual category have been written down to estimated realizable value or assigned specific reserves in the allowance for loan losses based on management’s estimate of loss at ultimate resolution.

~~Non-covered delinquent~~Delinquent loans, comprised of loans 30 days or more past due and nonaccrual loans, totaled $~~25.10~~$26.56 million as of ~~September~~June 30, ~~2017, an increase~~2022, a decrease of ~~$88 thousand,~~$6.54 million, or ~~0.35%~~19.76%, compared to ~~$25.02~~$33.10 million as of December 31, ~~2016. Non-covered delinquent~~2021. Delinquent loans as a percent of total ~~non-covered~~ loans totaled ~~1.40%~~1.16% as of ~~September~~June 30, ~~2017,~~2022, which includes past due loans ~~(0.34%~~(0.38%) and nonaccrual loans ~~(1.06%~~(0.78%).

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When restructuring loans for borrowers experiencing financial difficulty, we generally make concessions in interest rates, loan terms, or amortization terms. Certain TDRs are classified as nonperforming when modified and are returned to performing status after ~~nine~~six months of satisfactory payment performance; however, these loans remain identified as impaired until full payment or other satisfaction of the obligation occurs. Accruing TDRs as of ~~September~~June 30, ~~2017,~~2022, decreased ~~$4.71 million,~~$339 thousand, or ~~36.37%~~3.92%, to ~~$8.24~~$8.31 million from December 31, ~~2016. Nonperforming~~2021. Unseasoned, or loans restructured within the last six months, and nonperforming accruing TDRs as of ~~September~~June 30, ~~2017, increased $27 thousand, or 23.68%, to $141~~2022, decreased $852 thousand compared to December 31, ~~2016. Nonperforming~~2021. Unseasoned and nonperforming accruing TDRs as a percent of total accruing TDRs totaled ~~1.71%~~6.20% as of ~~September~~June 30, ~~2017,~~2022, compared to ~~0.88%~~15.81% as of December 31, ~~2016. Specific~~2021. There were no specific reserves onrelated to TDRs ~~totaled $707 thousand~~ as of ~~September~~June 30, ~~2017, compared~~2022, or December 31, 2021.

The CARES Act included a provision allowing banks to ~~$670 thousand~~not apply the guidance on accounting for troubled debt restructurings to loan modifications, such as extensions or deferrals, related to COVID-19 made between March 1, 2020, and the earlier of (i) December 31, 2021, or (ii) 60 days after the end of the COVID-19 national emergency. The relief can only be applied to modifications for borrowers that were not more than 30 days past due as of December 31, ~~2016.~~2019. The Company elected to adopt this provision of the CARES Act.

~~Non-covered~~ OREO, which is carried at the lesser of estimated net realizable value or cost, decreased ~~$1.57 million,~~$436 thousand, or ~~30.65%~~42.96%, as of ~~September~~June 30, ~~2017,~~2022, compared to December 31, ~~2016. Non-covered OREO~~2021, and consisted of 2610 properties with an average holding period of ~~13 months as of September 30, 2017.~~approximately 14 months. The net loss on the sale of OREO totaled ~~$522~~$421 thousand for the ~~three~~six months ended ~~September~~June 30, ~~2017,~~2022, compared to ~~$184~~$252 thousand ~~for the same period of the prior year, and $943 thousand for the nine months ended September 30, 2017, compared to $1.00 million~~ for the same period of the prior year. The following table presents the changes in OREO during the periods indicated:

The ~~allowance~~ACL reflects management’s estimate of losses that will result from the inability of our borrowers to make required loan payments. Management uses a systematic methodology to determine its ACL for loans held for investment and certain off-balance-sheet credit exposures. The ACL is a valuation account that is deducted from the amortized cost basis to present the net amount expected to be collected on the loan ~~losses is maintained at a level management deems sufficient to absorb probable loan losses inherent in~~portfolio. Management considers the effects of past events, current conditions, and reasonable and supportable forecasts on the collectability of the loan portfolio. The Company’s estimate of its ACL involves a high degree of judgment; therefore, management’s process for determining expected credit losses may result in a range of expected credit losses. It is possible that others, given the same information, may at any point in time reach a different reasonable conclusion. The Company’s ACL recorded in the balance sheet reflects management’s best estimate of expected credit losses. The Company recognizes in net income the amount needed to adjust the ACL for management’s current estimate of expected credit losses. The Company’s measurement of credit losses policy adheres to GAAP as well as interagency guidance. The Company's ACL is calculated using collectively evaluated and individually evaluated loans.

For collectively evaluated loans, the Company in general uses two modeling approaches to estimate expected credit losses. The Company projects the contractual run-off of its portfolio at the segment level and incorporates a prepayment assumption in order to estimate exposure at default. Financial assets that have been individually evaluated can be returned to a pool for purposes of estimating the expected credit loss insofar as their credit profile improves and that the repayment terms were not considered to be unique to the asset.

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Included in its systematic methodology to determine its ACL for loans held for investment and certain off-balance-sheet credit exposures. Management considers the need to qualitatively adjust expected credit losses for information not already captured in the loss estimation process. These qualitative adjustments either increase or decrease the quantitative model estimation (i.e. formulaic model results). Each period the Company considers qualitative factors that are relevant within the qualitative framework. For further discussion of our Allowance for Credit Losses - See Note 1 - "Basis of Presentation - Significant Accounting Policies".

With the adoption of ASU 2016-13 effective January 1, 2021, the Company changed its method for calculating it allowance isfor loans from an incurred loss method to a life of loan method. See Note 1 – "Basis of Presentation - Significant Accounting Policies" for further details. As of June 30, 2022, the balance of the ACL for loans was $29.75 million, or 1.29% of total loans. The ACL at June 30, 2022, increased $1.89 million from the balance of $27.86 million recorded at December 31, 2021. This increase included a $2.47 million provision offset by net charge-offs for the six months of $580 thousand. The provision was primarily driven by loan growth in the first half.

At June 30, 2022, the Company also had an allowance for unfunded commitments of $956 thousand which was recorded in Other Liabilities on the Balance Sheet. During the first six months of 2022, the provision for ~~loan~~credit losses and recoveries of prior loan charge-offs and decreased by loans charged off. The provision for loan losses is calculated and charged to expense to bring the allowance to an appropriate level using a systematic process of measurement that requires significant judgments and estimates. As of December 31, 2016, our qualitative risk factors reflect a stable risk of loan losses due to consistent asset quality metrics and relatively stable business and economic conditions in our primary market areas. The loan portfolio is continually monitored for deterioration in credit, which may result in the need to increase the allowance for loan losses in future periods. Management considered the allowance adequate as of September 30, 2017; however, no assurance can be made that additions to the allowance will not be required in future periods. For additional information, see Note 5, “Allowance for Loan Losses,” to the Condensed Consolidated Financial Statements in Item 1 of this report.

~~The allowance for loan losses as~~ ~~of September 30, 2017, increased $1.26 million, or 7.01%, from December 31, 2016. The increase~~on unfunded commitments was ~~largely attributed to a $1.00 million increase in unallocated reserves combined with a $641~~$278 thousand increase in specific reserves on impaired loans. The non-PCI allowance as a percent of non-covered loans totaled 1.06% as of September 30, 2017, compared to 1.00% as of December 31, 2016. PCI loans were aggregated into five loan pools as of September 30, 2017, and December 31, 2016: Waccamaw commercial, Waccamaw serviced home equity lines, Waccamaw residential, Peoples Bank of Virginia (“Peoples”) commercial, and Peoples residential. The cash flow analysis identified no impaired PCI loan pools as of September 30, 2017, compared to one impaired PCI loan pool with a cumulative impairment of $12 thousand as of December 31, 2016. We recorded a net charge-off of $410 thousand for the three months ended September 30, 2017, compared to a ~~net charge-off~~reversal of ~~$312~~provision of $48 thousand recorded in the same period of the prior year, largely due to an increase in recoveries in the commercial loan segment in 2016. We recorded a net charge-off of $898 thousand for the nine months ended September 30, 2017, compared to a net charge-off of $1.35 million in the same period of the prior year, largely due to an overall reduction in charge-offs for commercial and consumer real estate loans offset by an increase in recoveries in the commercial loan segment in 2016.2021.

The following table presents the changes in the allowance for ~~loan~~credit losses ~~by loan class,~~for loans during the periods indicated:

Total deposits as of ~~September~~June 30, ~~2017,~~2022, increased ~~$22.48~~$69.15 million, or ~~1.22%~~2.53%, compared to December 31, ~~2016. Noninterest-bearing deposits increased $25.24 million~~2021. The increase was largely attributable to savings and ~~interest-bearing deposits increased $14.91 million while savings~~noninterest-bearing demand deposits which ~~include money market accounts~~increased $36.89 million, or 4.31% and ~~savings accounts, decreased $13.06 million; and~~$35.18 million, or 4.17%, respectively. Interest-bearing demand deposits also reflected growth with an increase of $26.67 million, or 3.94%. These increases were offset by a decrease in time deposits ~~which include certificates~~ of ~~deposit and individual retirement accounts, decreased $4.60 as of September 30, 2017, compared to December 31, 2016.~~$29.59 million, or 8.34%.

Total borrowings in the form of retail repurchase agreements as of ~~September~~June 30, ~~2017, decreased $44.93~~2022, increased $1.10 million, or ~~25.14%~~71.55%, compared to December 31, 2016. Short-term borrowings consisted of retail repurchase agreements, which decreased $14.22 million, or 19.48%, while the weighted average rate remained constant at 0.07%, as of September 30, 2017, and December 31, 2016.

~~Long-term borrowings~~ consisted of wholesale repurchase agreements and FHLB borrowings, including convertible and callable advances as of September 30, 2017. Wholesale repurchase agreements totaled $25.00 million with a weighted average rate of 3.18% as of September 30, 2017, and December 31, 2016. Long-term FHLB borrowings decreased $15.00 million, or 23.08%, to $50.00 million and the weighted average rate decreased 4 basis points to 4.00% as of September 30, 2017, compared to December 31, 2016. The decrease was due to a $15.00 million convertible advance with a 4.15% rate that matured on May 4, 2017. The Company redeemed all of its trust preferred securities on January 9, 2017, resulting in a decrease of $15.46 million in subordinated debt.2021.

Liquidity is a measure of our ability to convert assets to cash or raise cash to meet financial obligations. We believe that liquidity management should encompass an overall balance sheet approach that draws together all sources and uses of liquidity. Poor or inadequate liquidity risk management may result in a funding deficit that could have a material impact on our operations. We maintain a liquidity risk management policy and contingency funding policy (“Liquidity Plan”) to detect potential liquidity issues and protect our depositors, creditors, and shareholders. The Liquidity Plan includes various internal and external indicators that are reviewed on a recurring basis by our Asset/Liability Management Committee (“ALCO”) of the Board of Directors. ALCO reviews liquidity risk exposure and policies related to liquidity management; ensures that systems and internal controls are consistent with liquidity policies; and provides accurate reports about liquidity needs, sources, and compliance. The Liquidity Plan involves ongoing monitoring and estimation of potentially credit sensitive liabilities and the sources and amounts of balance sheet and external liquidity available to replace outflows during a funding crisis. The liquidity model incorporates various funding crisis scenarios and a specific action plan is formulated, and activated, when a financial shock that affects our normal funding activities is identified. Generally, the plan will reflect a strategy of replacing liability outflows with alternative liabilities, rather than balance sheet asset liquidity, to the extent that significant premiums can be avoided. If alternative liabilities are not available, outflows will be met through liquidation of balance sheet assets, including unpledged securities.

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As a financial holding company, the ~~Company~~’sCompany’s primary source of liquidity is dividends received from the Bank, which are subject to certain regulatory limitations. Other sources of liquidity include cash, investment securities, and borrowings. As of ~~September~~June 30, ~~2017,~~2022, the Company’s cash reserves and short-term investment securities totaled ~~$13.84~~$9.28 million and ~~availability on an unsecured, committed line of credit with an unrelated financial institution totaled $15.00 million. There was no outstanding balance on the line of credit as of September 30, 2017.~~$20.26 million, respectively. The Company’s cash reserves and investments provide adequate working capital to meet obligations ~~projected dividends to shareholders, and anticipated debt repayments~~ for the next twelve months.

In addition to cash on hand and deposits with other financial institutions, we rely on customer deposits, cash flows from loans and investment securities, and lines of credit from the FHLB and the Federal Reserve Bank (“FRB”) Discount Window to meet potential liquidity demands. These sources of liquidity are immediately available to satisfy deposit withdrawals, customer credit needs, and our operations. Secondary sources of liquidity include approved lines of credit with correspondent banks and unpledged available-for-sale securities. As of ~~September~~June 30, ~~2017,~~2022, our unencumbered cash totaled ~~$105.12~~$398.24 million, unused borrowing capacity from the FHLB totaled ~~$446.30~~$427.55 million, available credit from the FRB Discount Window totaled ~~$6.15~~$6.08 million, available lines from correspondent banks totaled $90.00 million, and unpledged available-for-sale securities totaled ~~$73.74~~$253.55 million.

The following table summarizes the components of cash flow for the periods indicated:

Cash and cash equivalents ~~increased $28.81~~decreased $279.20 million for the ~~nine~~six months ended ~~September~~June 30, ~~2017,~~2022, compared to an increase of ~~$14.14~~$162.18 million for the same period of the prior ~~year primarily due to financing activities. Net~~year. The decrease in cash ~~used in financing activities decreased $28.16 million~~and cash equivalents for the ~~nine months ended September 30, 2017, compared~~six month period was due largely to the ~~same period~~purchase of securities available for sale of $236.85 million and the ~~prior year primarily due to a decline~~funding of $133.40 million in ~~interest-bearing deposit runoff and treasury stock repurchases~~loan originations. The decreases were offset by ~~the maturity and repayment~~an net increase in deposits of FHLB and other borrowings. Net cash provided by operating activities decreased $8.91 million for the nine months ended September 30, 2017, compared to the same period of the prior year. Net cash provided by investing activities decreased $4.57 million for the nine months ended September 30, 2017, compared to the same period of the prior year, which was largely due to a decrease in loan originations offset by a decrease in proceeds from sales and maturities of available-for-sale securities.$69.15 million.

We are committed to effectively managing our capital to protect our depositors, creditors, and shareholders. Failure to meet certain capital requirements may result in actions by regulatory agencies that could have a material impact on our operations. Total ~~stockholders~~’stockholders’ equity as of ~~September~~June 30, ~~2017, increased $13.58~~2022, decreased $9.73 million, or ~~4.01%~~2.27%, to ~~$352.64~~$418.05 million from ~~$339.06~~$427.78 million as of December 31, ~~2016.~~2021. The change in stockholders’ equity was largely due to net income of ~~$20.27~~$20.73 million ~~and~~offset by other comprehensive ~~income (“OCI”)~~loss of ~~$1.94~~$10.11 million, ~~offset by~~the repurchase of 415,507 shares of our common stock totaling $12.04 million, and dividends declared on our common stock of ~~$8.50 million and repurchased treasury shares of $1.26~~$9.05 million. ~~OCI was primarily due to net unrealized gains on securities.~~ In accordance with current regulatory guidelines, accumulated other comprehensive income/(loss) is largely excluded from ~~stockholders'~~stockholders’ equity in the calculation of our capital ratios. ~~We repurchased 50,118 shares of our common stock for $1.26 million in the first nine months of 2017.~~ Our book value per common share ~~increased $0.81,~~decreased $0.01, or ~~4.06%~~0.04%, to ~~$20.76~~$25.33 as of ~~September~~June 30, ~~2017,~~2022, from ~~$19.95~~$25.34 as of December 31, ~~2016.~~2021.

Risk-based capital guidelines, issued by state and federal banking agencies, include balance sheet assets and off-balance sheet arrangements weighted by the risks inherent in the specific asset type. Our current risk-based capital requirements are based on the international capital standards known as Basel ~~III, became effective on January 1, 2015, subject to a four-year phase-in period. Basel III~~’s capital conservation buffer became effective on January 1, 2016, at 0.625%, and will be phased in over a four-year period (increasing by an additional 0.625% each year until it reaches 2.5% on January 1, 2019).III. A description of the Basel III capital rules is included in Part I, Item 1 of the ~~2016~~2021 Form 10-K. Our current required capital ratios are as follows:

Our risk-based capital ratios as of June 30, 2022, decreased from December 31, 2021, due to an increase in our risk-weighted assets. The increase in risk-weighted assets was primarily due to the increase in total loans as well as an increase in available for sale debt securities from year-end 2021. As of ~~September~~June 30, ~~2017,~~2022, we continued to meet all capital adequacy requirements and were classified as well-capitalized under the regulatory framework for prompt corrective action. Management believes there have been no conditions or events since those notifications that would change the Bank’s classification. Additionally, our capital ratios were in excess of the minimum standards under the Basel III capital rules ~~on a fully phased-in basis, if such requirements were in effect,~~ as of ~~September~~June 30, ~~2017.~~2022.

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We extend contractual commitments with off-balance sheet risk in the normal course of business to meet the financing needs of our customers. Our exposure to credit loss in the event of nonperformance by other parties to financial instruments is the same as the contractual amount of the instrument.

The following table presents our off-balance sheet arrangements as of the dates indicated:

Market risk represents the risk of loss due to adverse changes in current and future cash flows, fair values, earnings, or capital due to movements in interest rates and other factors. Our profitability is largely dependent upon net interest income, which is subject to variation due to changes in the interest rate environment and unbalanced repricing opportunities. We are subject to interest rate risk when interest-earning assets and interest-bearing liabilities reprice at differing times, when underlying rates change at different levels or in varying degrees, when there is an unequal change in the spread between two or more rates for different maturities, and when embedded options, if any, are exercised. ALCO reviews our mix of assets and liabilities with the goal of limiting exposure to interest rate risk, ensuring adequate liquidity, and coordinating sources and uses of funds while maintaining an acceptable level of net interest income given the current interest rate environment. ALCO is also responsible for overseeing the formulation and implementation of policies and strategies to improve balance sheet positioning and mitigate the effect of interest rate changes.

In order to manage our exposure to interest rate risk, we periodically review ~~third-party~~internal simulation and ~~internal simulation~~third-party models that project net interest income at risk, which measures the impact of different interest rate scenarios on net interest income, and the economic value of equity at risk, which measures potential long-term risk in the balance sheet by valuing our assets and liabilities at fair value under different interest rate scenarios. Simulation results show the existence and severity of interest rate risk in each scenario based on our current balance sheet position, assumptions about changes in the volume and mix of interest-earning assets and interest-bearing liabilities, and estimated yields earned on assets and rates paid on liabilities. The simulation model provides the best tool available to us and the industry for managing interest rate risk; however, the model cannot precisely predict the impact of fluctuations in interest rates on net interest income due to the use of significant estimates and assumptions. Actual results will differ from simulated results due to the timing, magnitude, and frequency of interest rate changes; changes in market conditions and customer behavior; and changes in our strategies that management might undertake in response to a sudden and sustained rate shock.

~~The~~As of June 30, 2022, the Federal Open Market Committee ~~maintained~~had set the benchmark federal funds rate atto a range of ~~100~~150 to ~~125~~175 basis points. The level of benchmark interest rates at year-end 2021, rendered a complete downward shock of 100 basis points meaningless; accordingly, a downward rate scenario is only presented for the current period. In the downward rate shock presented, benchmark interest rates were assumed at levels with floors near 0%. The following table presents the sensitivity of net interest income from immediate and sustained rate shocks in various interest rate scenarios over a twelve-month period for the periods indicated. ~~Due to the current target rate, we do not reflect a decrease of more than 100 basis points from current rates in our analysis.~~

~~We have established policy limits for tolerance of interest rate risk in various interest rate scenarios and exposure limits to changes in the economic value of equity.~~ ~~As of September 30, 2017, exposure to interest rate risk is within our defined policy limits.~~

~~The Company primarily uses derivative instruments to manage exposure to market risk and meet customer financing needs. As of~~ September 30, 2017, we maintained interest rate swap agreements with notional amounts totaling $5.89 million to modify our exposure to interest rate risk caused by changes in the LIBOR curve in relation to certain designated fixed rate loans. The fair value of the swap agreements, which are accounted for as fair value hedges and recorded as derivative liabilities, totaled $151 thousand as of September 30, 2017, and $167 thousand as of December 31, 2016. For additional information, see Note 9, “Derivative Instruments and Hedging Activities,” to the Condensed Consolidated Financial Statements in Item 1 of this report.

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Our consolidated financial statements and related notes are presented in accordance with GAAP, which requires the measurement of results of operations and financial position in historical dollars. Inflation may cause a rise in price levels and changes in the relative purchasing power of money. These inflationary effects are not reflected in historical dollar measurements. The primary effect of inflation on our operations is increased operating costs. In ~~management~~’smanagement’s opinion, interest rates have a greater impact on our financial performance than inflation. Interest rates do not necessarily fluctuate in the same direction, or to the same extent, as the price of goods and services; therefore, the effect of inflation on businesses with large investments in property, plant, and inventory is generally more significant than the effect on financial institutions.

Astronomic federal government spending, growth in economic activity and demand for goods and services, alongside labor shortages and supply chain complications, have contributed to rising inflation. In response, the Central Bank has begun raising interest rates and signaled that it will continue to raise rates, taper its purchase of mortgage and other bonds and reduce the size of the balance sheet over time. The ~~U.S.~~timing and impact of inflation and rising interest rates on our business and related financial results will depend on future developments, which are highly uncertain and difficult to predict.

In anticipation of the potential discontinuance of the London Interbank Offered Rate (LIBOR) in 2023, the Company has developed a LIBOR transition plan. In 2018, the Company discontinued the use of LIBOR as a reference rate ~~continues~~in new loan originations. Additionally, the Company has the ability to ~~be relatively stable, and management believes that any changes in inflation will not be material~~substitute an alternative referenced rate for most adjustable rate loans originated prior to ~~our financial performance.~~2018.

The information required in this item is incorporated by reference to “Market Risk and Interest Rate Sensitivity” in Item 12 of this ~~report.~~Quarterly Report on Form 10-Q.

In connection with this report, we conducted an evaluation, under the supervision and with the participation of management, including our Chief Executive Officer (“CEO”) and Chief Financial Officer (“CFO”), of the effectiveness of our disclosure controls and procedures under the Exchange Act Rule 13a-15(b). Based upon that evaluation, the CEO and CFO concluded that, as of ~~September~~June 30, ~~2017,~~2022, our disclosure controls and procedures were effective.

Disclosure controls and procedures are our ~~Company~~’sCompany’s controls and other procedures that are designed to ensure that information we are required to disclose in the reports we file or submit under the Exchange Act is recorded, processed, summarized, and reported within the periods specified in the SEC’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information we are required to disclose in the reports that we file or submit under the Exchange Act is accumulated and communicated to management, including the CEO and CFO, as appropriate, to allow timely decisions about required disclosure.

Management, including the CEO and CFO, does not expect that our disclosure controls and internal controls will prevent all errors and all fraud. A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within our Company have been detected. These inherent limitations include the realities that judgments in decision making can be faulty, and that breakdowns can occur because of simple error or mistake. Additionally, controls can be circumvented by the individual acts of some persons, collusion of two or more people, or ~~management~~’smanagement’s override of the controls.

We assess the adequacy of our internal control over financial reporting quarterly and enhance our controls in response to internal control assessments and internal and external audit and regulatory recommendations. There were no changes in our internal control over financial reporting during the quarter ended ~~September~~June 30, ~~2017,~~2022, that materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

We are currently a defendant in various legal actions and asserted claims in the normal course of business. Although we are unable to assess the ultimate outcome of each matter with certainty, we believe that the resolution of these actions should not have a material adverse effect on our financial position, results of operations, or cash flows.

~~Our~~The risk factors set forth in our annual report on Form 10-K for the year ended December 31, 2021, discuss potential events, trends, or other circumstances that could adversely affect our business, financial condition, results of operations, cash flows, liquidity, access to capital resources, and, consequently, cause the market value of our common stock to decline. These risks could cause our future results to differ materially from historical results and expectations of future financial performance. If any of the risks occur and the market price of our common stock declines significantly, individuals may lose all, or part, of their investment in our ~~company.~~Company. Individuals should carefully consider our risk factors and information included ~~or incorporated by reference,~~ in ~~this~~our annual report on Form 10-K for the year ended December 31, 2021 before making an investment decision. There may be risks and uncertainties that we have not identified or that we have deemed immaterial that could adversely affect our business; therefore, ~~our~~such risk factors are not intended to be an exhaustive list of all risks we face. There have been no material changes to the risk factors included in Part I, Item 1A, “Risk Factors,” of our ~~2016~~annual report on Form ~~10-K.~~10-K for the year ended December 31, 2021.

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We repurchased ~~39,516~~283,507 shares of our common stock during the ~~third~~second quarter of ~~2017~~2022 compared to ~~171,225~~261,600 shares purchased during the same quarter of ~~the prior year.~~2021.

The following table provides information about purchases of our common stock made by us or on our behalf by any affiliated purchaser, as defined in Rule 10b-18(a)(3) under the Exchange Act, during the periods indicated:

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Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned,, thereunto duly authorized, on the 3^rd5th day of ~~November, 2017.~~August, 2022.

(Former name, former address and former fiscal year, if changed since last report)

Securities registered pursuant to Section 12 (b) of the Act:

Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock ($1.00 par value)	FCBC	NASDAQ Global Select

FIRST COMMUNITY ~~BANCSHARES,~~BANKSHARES, INC.
FORM 10-Q
INDEX

PART I.	FINANCIAL INFORMATION		~~PAGE~~Page

Item 1.	Financial Statements
		Condensed Consolidated Balance Sheets as of ~~September~~June 30, ~~2017~~2022 (Unaudited) and December 31, ~~2016~~2021	4
		Condensed Consolidated Statements of Income for the Three and ~~Nine~~Six Months Ended ~~September~~June 30, ~~2017~~2022 and ~~2016~~2021 (Unaudited)	5
		Condensed Consolidated Statements of Comprehensive Income for the Three and ~~Nine~~Six Months Ended ~~September~~June 30, ~~2017~~2022 and ~~2016~~2021 (Unaudited)	6
		Condensed Consolidated Statements of Changes in ~~Stockholders~~’Stockholders’ Equity for the ~~Nine~~Three and Six Months Ended ~~September~~June 30, ~~2017~~2022 and ~~2016~~2021 (Unaudited)	7
		Condensed Consolidated Statements of Cash Flows for the ~~Nine~~Six Months Ended ~~September~~June 30, ~~2017~~2022 and ~~2016~~2021 (Unaudited)	89
		Notes to Condensed Consolidated Financial Statements (Unaudited)	910
Item 2.	~~Management~~’sManagement’s Discussion and Analysis of Financial Condition and Results of Operations		4134
Item 3.	Quantitative and Qualitative Disclosures About Market Risk		5949
Item 4.	Controls and Procedures		5949

PART II.	OTHER INFORMATION

Item 1.	Legal Proceedings		59 49
Item 1A.	Risk Factors		6049
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds		6050
Item 3.	Defaults Upon Senior Securities		6050
Item 4.	Mine Safety Disclosures		6050
Item 5.	Other Information		6050
Item 6.	Exhibits		6051

~~SIGNATURES~~Signatures			6353

	●	the effects of the COVID-19 pandemic, including the negative impacts and disruptions to the communities the Company serves, and the domestic and global economy, which may have an adverse effect on the Company’s business;
	●	the strength of the U.S. economy in general and the strength of the local economies in which we conduct operations;

	●	the cost and effects of cyber incidents or other failures, interruptions, or security breaches of our systems or those of third-party providers;
	●	the effect of ~~acquisitions, including, without limitation,~~changes in accounting policies and practices, as may be adopted by the ~~failure to achieve~~regulatory agencies, as well as the ~~expected revenue growth and/or expense savings from such acquisitions;~~ Public Company Accounting Oversight Board, the Financial Accounting Standards Board, and other accounting standard setters;

~~FIRST COMMUNITY BANCSHARES, INC.~~
CONDENSED CONSOLIDATED BALANCE SHEETS

	September 30,			December 31,			*June 30,*			*December 31,*
	2017				2016⁽¹⁾		*2022*			2021⁽¹⁾
(Amounts in thousands, except share and per share data)	(Unaudited)						(Unaudited)
Assets
Cash and due from banks	$	37,050		$	36,645		$	53,556		$	47,067
Federal funds sold		67,124			38,717			341,627			627,036
Interest-bearing deposits in banks		945			945			3,059			3,336
Total cash and cash equivalents		105,119			76,307			398,242			677,439
Securities available for sale		174,424			165,579
Securities held to maturity		25,182			47,133
Debt securities available for sale								287,767			76,292
Loans held for investment, net of unearned income								2,299,798			2,165,569
Non-covered		1,806,434			1,795,954
Covered		31,287			56,994
Less: allowance for loan losses		(19,206	)		(17,948	)
Allowance for credit losses								(29,749	)		(27,858	)
Loans held for investment, net		1,818,515			1,835,000			2,270,049			2,137,711
FDIC indemnification asset		7,465			12,173
Premises and equipment, net		48,949			50,085			49,752			52,284
Other real estate owned, non-covered		3,543			5,109
Other real estate owned, covered		54			276
Other real estate owned								579			1,015
Interest receivable		5,156			5,553			8,433			7,900
Goodwill		95,779			95,779			129,565			129,565
Other intangible assets		6,417			7,207			4,905			5,622
Other assets		84,177			86,197			109,085			106,691
Total assets	$	2,374,780		$	2,386,398		$	3,258,377		$	3,194,519

Liabilities
Deposits
Noninterest-bearing	$	452,940		$	427,705		$	877,962		$	842,783
Interest-bearing		1,410,880			1,413,633			1,920,577			1,886,608
Total deposits		1,863,820			1,841,338			2,798,539			2,729,391
Securities sold under agreements to repurchase		83,783			98,005			2,635			1,536
FHLB borrowings		50,000			65,000
Other borrowings		-			15,708
Interest, taxes, and other liabilities		24,540			27,290			39,157			35,817
Total liabilities		2,022,143			2,047,341			2,840,331			2,766,744

Stockholders' equity
Preferred stock, undesignated par value; 1,000,000 shares authorized; Series A Noncumulative Convertible Preferred Stock, $0.01 par value; 25,000 shares authorized; none outstanding		-			-
Common stock, $1 par value; 50,000,000 shares authorized; 21,381,779 shares issued at September 30, 2017, and December 31, 2016; 4,395,277 and 4,387,571 shares in treasury at September 30, 2017, and December 31, 2016, respectively		21,382			21,382
Preferred stock, undesignated par value; 1,000,000 shares authorized; Series A Noncumulative Convertible Preferred Stock, $0.01 par value; 25,000 shares authorized; none outstanding								0			0
Common stock, $1 par value; 50,000,000 shares authorized; 23,634,702 shares issued and 16,502,144 outstanding at June 30, 2022; 23,971,347 shares issued and 16,878,220 outstanding at December 31, 2021								16,502			16,878
Additional paid-in capital		228,510			228,142			136,705			147,619
Retained earnings		182,145			170,377			276,499			264,824
Treasury stock, at cost		(79,333	)		(78,833	)
Accumulated other comprehensive loss		(67	)		(2,011	)		(11,660	)		(1,546	)
Total stockholders' equity		352,637			339,057			418,046			427,775
Total liabilities and stockholders' equity	$	2,374,780		$	2,386,398		$	3,258,377		$	3,194,519

(1) Derived from audited financial statements

														Accumulated
					Additional									Other
	Preferred		Common		Paid-in			Retained			Treasury			Comprehensive
(Amounts in thousands,	Stock		Stock		Capital			Earnings			Stock			Income (Loss)			Total
except share and per share data)
Balance January 1, 2016	$	-	$	21,382	$	227,692		$	155,647		$	(56,457	)	$	(5,247	)	$	343,017
Net income		-		-		-			18,722			-			-			18,722
Other comprehensive income		-		-		-			-			-			5,617			5,617
Common dividends declared -- $0.44 per share		-		-		-			(7,680	)		-			-			(7,680	)
Equity-based compensation expense		-		-		144			-			-			-			144
Common stock options exercised -- 11,730 shares		-		-		(23	)		-			205			-			182
Restricted stock awards -- 15,587 shares		-		-		26			-			270			-			296
Issuance of treasury stock to 401(k) plan -- 16,290 shares		-		-		45			-			287			-			332
Purchase of treasury shares -- 1,152,776 shares at $20.00 per share		-		-		-			-			(23,094	)		-			(23,094	)
Balance September 30, 2016	$	-	$	21,382	$	227,884		$	166,689		$	(78,789	)	$	370		$	337,536
									��
Balance January 1, 2017	$	-	$	21,382	$	228,142		$	170,377		$	(78,833	)	$	(2,011	)	$	339,057
Net income		-		-		-			20,272			-			-			20,272
Other comprehensive income		-		-		-			-			-			1,944			1,944
Common dividends declared -- $0.50 per share		-		-		-			(8,504	)		-			-			(8,504	)
Equity-based compensation expense		-		-		290			-			-			-			290
Common stock options exercised -- 8,036 shares		-		-		6			-			145			-			151
Restricted stock awards -- 21,542 shares		-		-		(40	)		-			387			-			347
Issuance of treasury stock to 401(k) plan -- 12,834 shares		-		-		112			-			231			-			343
Purchase of treasury shares -- 50,118 shares at $25.16 per share		-		-		-			-			(1,263	)		-			(1,263	)
Balance September 30, 2017	$	-	$	21,382	$	228,510		$	182,145		$	(79,333	)	$	(67	)	$	352,637

	September 30, 2017
	Amortized		Unrealized		Unrealized			Fair
	Cost		Gains		Losses			Value
(Amounts in thousands)
U.S. Treasury securities	$	36,973	$	-	$	(9	)	$	36,964
U.S. Agency securities		1,254		21		-			1,275
Municipal securities		102,347		2,648		(88	)		104,907
Single issue trust preferred securities		9,363		-		(401	)		8,962
Mortgage-backed Agency securities		22,518		72		(347	)		22,243
Equity securities		55		18		-			73
Total securities available for sale	$	172,510	$	2,759	$	(845	)	$	174,424

	Peoples			Waccamaw			Total
(Amounts in thousands)
Balance January 1, 2016	$	3,589		$	26,109		$	29,698
Accretion		(982	)		(4,408	)		(5,390	)
Reclassifications from nonaccretable difference⁽¹⁾		231			848			1,079
Other changes, net		1,774			4			1,778
Balance September 30, 2016	$	4,612		$	22,553		$	27,165

Balance January 1, 2017	$	4,392		$	21,834		$	26,226
Accretion		(969	)		(4,690	)		(5,659	)
Reclassifications from nonaccretable difference⁽¹⁾		782			2,525			3,307
Other changes, net		(375	)		(311	)		(686	)
Balance September 30, 2017	$	3,830		$	19,358		$	23,188

(1) Represents changes attributable to expected loss assumptions

	September 30, 2017						December 31, 2016
			Unpaid						Unpaid
	Recorded		Principal		Related		Recorded		Principal		Related
(Amounts in thousands)	Investment		Balance		Allowance		Investment		Balance		Allowance
Impaired loans with no related allowance
Commercial loans
Construction, development, and other land	$	662	$	999	$	-	$	33	$	35	$	-
Commercial and industrial		146		1,093		-		346		383		-
Multi-family residential		381		836		-		294		369		-
Single family non-owner occupied		2,485		3,891		-		3,084		3,334		-
Non-farm, non-residential		3,905		6,239		-		3,829		4,534		-
Agricultural		118		122		-		-		-		-
Farmland		990		1,037		-		1,161		1,188		-
Consumer real estate loans
Home equity lines		1,624		1,766		-		913		968		-
Single family owner occupied		16,768		18,932		-		11,779		12,630		-
Owner occupied construction		233		233		-		573		589		-
Consumer and other loans
Consumer loans		61		63		-		62		103		-
Total impaired loans with no allowance		27,373		35,211		-		22,074		24,133		-

Impaired loans with a related allowance
Commercial loans
Construction, development, and other land		-		-		-		-		-		-
Commercial and industrial		2,400		2,400		262		-		-		-
Single family non-owner occupied		771		772		69		351		351		31
Non-farm, non-residential		865		874		325		-		-		-
Farmland		410		418		50		430		430		18
Consumer real estate loans
Home equity lines		-		-		-		-		-		-
Single family owner occupied		3,771		3,779		754		4,118		4,174		770
Total impaired loans with an allowance		8,217		8,243		1,460		4,899		4,955		819
Total impaired loans⁽¹⁾	$	35,590	$	43,454	$	1,460	$	26,973	$	29,088	$	819

	September 30, 2017		December 31, 2016
(Amounts in thousands, except impaired loan pools)
Unpaid principal balance	$	-	$	1,086
Recorded investment		-		1,085
Allowance for loan losses related to PCI loan pools		-		12

Impaired PCI loan pools		-		1

	Three Months Ended September 30, 2017
(Amounts in thousands)	Commercial			Consumer Real Estate			Consumer and Other			Total Allowance
Allowance, excluding PCI
Beginning balance	$	12,283		$	5,802		$	793		$	18,878
Provision for loan losses charged to operations		358			75			305			738
Charge-offs		(207	)		(137	)		(373	)		(717	)
Recoveries		170			67			70			307
Net charge-offs		(37	)		(70	)		(303	)		(410	)
Ending balance	$	12,604		$	5,807		$	795		$	19,206

PCI allowance
Beginning balance	$	-		$	8		$	-		$	8
Recovery of loan losses		-			(8	)		-			(8	)
Benefit attributable to the FDIC indemnification asset		-			-			-			-
Recovery of loan losses charged to operations		-			(8	)		-			(8	)
Recovery of loan losses recorded through the FDIC indemnification asset		-			-			-			-
Ending balance	$	-		$	-		$	-		$	-

Total allowance
Beginning balance	$	12,283		$	5,810		$	793		$	18,886
Provision for loan losses		358			67			305			730
Benefit attributable to the FDIC indemnification asset		-			-			-			-
Provision for loan losses charged to operations		358			67			305			730
Recovery of loan losses recorded through the FDIC indemnification asset		-			-			-			-
Charge-offs		(207	)		(137	)		(373	)		(717	)
Recoveries		170			67			70			307
Net charge-offs		(37	)		(70	)		(303	)		(410	)
Ending balance	$	12,604		$	5,807		$	795		$	19,206

	September 30, 2017
(Amounts in thousands)	Loans Individually Evaluated for Impairment		Allowance for Loans Individually Evaluated		Loans Collectively Evaluated for Impairment		Allowance for Loans Collectively Evaluated
Commercial loans
Construction, development, and other land	$	-	$	-	$	72,293	$	1,099
Commercial and industrial		2,400		262		87,782		478
Multi-family residential		254		-		125,743		1,133
Single family non-owner occupied		1,103		69		140,150		2,308
Non-farm, non-residential		2,561		325		606,773		6,706
Agricultural		-		-		6,096		44
Farmland		940		50		26,957		130
Total commercial loans		7,258		706		1,065,794		11,898
Consumer real estate loans
Home equity lines		-		-		116,468		825
Single family owner occupied		8,259		754		496,264		3,852
Owner occupied construction		-		-		47,034		376
Total consumer real estate loans		8,259		754		659,766		5,053
Consumer and other loans
Consumer loans		-		-		70,695		795
Other		-		-		4,856		-
Total consumer and other loans		-		-		75,551		795
Total loans, excluding PCI loans	$	15,517	$	1,460	$	1,801,111	$	17,746

	December 31, 2016
(Amounts in thousands)	Loans Individually Evaluated for Impairment		Allowance for Loans Individually Evaluated		Loans Collectively Evaluated for Impairment		Allowance for Loans Collectively Evaluated
Commercial loans
Construction, development, and other land	$	-	$	-	$	60,281	$	889
Commercial and industrial		-		-		93,099		495
Multi-family residential		281		-		133,947		1,157
Single family non-owner occupied		1,910		31		139,711		2,721
Non-farm, non-residential		1,454		-		600,915		6,185
Agricultural		-		-		6,028		43
Farmland		981		18		31,145		151
Total commercial loans		4,626		49		1,065,126		11,641
Consumer real estate loans
Home equity lines		-		-		122,000		895
Single family owner occupied		5,120		770		501,617		3,594
Owner occupied construction		336		-		44,199		228
Total consumer real estate loans		5,456		770		667,816		4,717
Consumer and other loans
Consumer loans		-		-		77,524		759
Other		-		-		3,971		-
Total consumer and other loans		-		-		81,495		759
Total loans, excluding PCI loans	$	10,082	$	819	$	1,814,437	$	17,117

	Wholesale Repurchase Agreements		FHLB Borrowings		Total
(Amounts in thousands)
2017	$	-	$	-	$	-
2018		-		-		-
2019		25,000		-		25,000
2020		-		-		-
2021		-		50,000		50,000
2022 and thereafter		-		-		-
Total long-term borrowings	$	25,000	$	50,000	$	75,000

Weighted average maturity (in years)		1.41		3.27		2.65

	U.S. Treasury Securities		U.S. Agency Securities		Municipal Securities		Mortgage-backed Agency Securities		Total
(Amounts in thousands)
Overnight and continuous	$	5,240	$	12,874	$	37,953	$	2,639	$	58,706
Up to 30 days		-		-		-		-		-
30 - 90 days		-		-		-		-		-
Greater than 90 days		9,000		3,400		-		12,677		25,077
	$	14,240	$	16,274	$	37,953	$	15,316	$	83,783

	Valuation	Unobservable	Discount Range (Weighted Average)
	Technique	Input	September 30, 2017					December 31, 2016

Impaired loans, non-covered	Discounted appraisals⁽¹⁾	Appraisal adjustments⁽²⁾		2%	to	63%	(18%)		3%	to	39%	(17%)
OREO, non-covered	Discounted appraisals⁽¹⁾	Appraisal adjustments⁽²⁾		10%	to	62%	(28%)		0%	to	88%	(30%)
OREO, covered	Discounted appraisals⁽¹⁾	Appraisal adjustments⁽²⁾		0%	to	65%	(56%)		0%	to	44%	(40%)

	September 30, 2017					December 31, 2016					September 30, 2016
(Amounts in thousands)	Amount		Percent			Amount		Percent			Amount		Percent
Non-covered loans held for investment
Commercial loans
Construction, development, and other land	$	72,952		3.97	%	$	56,948		3.07	%	$	49,799		2.71	%
Commercial and industrial		90,184		4.91	%		92,204		4.98	%		90,362		4.92	%
Multi-family residential		125,997		6.86	%		134,228		7.24	%		127,468		6.94	%
Single family non-owner occupied		143,213		7.79	%		142,965		7.72	%		144,023		7.84	%
Non-farm, non-residential		613,380		33.38	%		598,674		32.31	%		596,015		32.46	%
Agricultural		6,096		0.33	%		6,003		0.32	%		5,786		0.32	%
Farmland		27,897		1.52	%		31,729		1.71	%		31,974		1.74	%
Total commercial loans		1,079,719		58.76	%		1,062,751		57.35	%		1,045,427		56.93	%
Consumer real estate loans
Home equity lines		102,888		5.60	%		106,361		5.74	%		108,108		5.89	%
Single family owner occupied		501,242		27.27	%		500,891		27.03	%		497,695		27.10	%
Owner occupied construction		47,034		2.56	%		44,535		2.41	%		43,925		2.39	%
Total consumer real estate loans		651,164		35.43	%		651,787		35.18	%		649,728		35.38	%
Consumer and other loans
Consumer loans		70,695		3.85	%		77,445		4.18	%		76,363		4.16	%
Other		4,856		0.26	%		3,971		0.21	%		3,029		0.16	%
Total consumer and other loans		75,551		4.11	%		81,416		4.39	%		79,392		4.32	%
Total non-covered loans		1,806,434		98.30	%		1,795,954		96.92	%		1,774,547		96.63	%
Total covered loans		31,287		1.70	%		56,994		3.08	%		61,837		3.37	%
Total loans held for investment, net of unearned income		1,837,721		100.00	%		1,852,948		100.00	%		1,836,384		100.00	%
Less: allowance for loan losses		19,206					17,948					19,633
Total loans held for investment, net of unearned income and allowance	$	1,818,515				$	1,835,000				$	1,816,751

	June 30, 2022					December 31, 2021					June 30, 2021
(Amounts in thousands)	Amount		Percent			Amount		Percent			Amount		Percent
Loans held for investment
Commercial loans
Construction, development, and other land	$	92,840		4.04	%	$	65,806		3.04	%	$	60,560		2.81	%
Commercial and industrial		139,792		6.08	%		133,630		6.17	%		147,768		6.86	%
Multi-family residential		124,274		5.40	%		100,402		4.64	%		100,347		4.66	%
Single family non-owner occupied		195,113		8.48	%		198,778		9.18	%		190,008		8.82	%
Non-farm, non-residential		752,369		32.72	%		707,506		32.67	%		713,089		33.11	%
Agricultural		9,987		0.43	%		9,341		0.43	%		8,665		0.40	%
Farmland		12,833		0.56	%		15,013		0.69	%		18,285		0.85	%
Total commercial loans		1,327,208		57.71	%		1,230,476		56.82	%		1,238,722		57.51	%
Consumer real estate loans
Home equity lines		78,999		3.44	%		79,857		3.69	%		87,251		4.05	%
Single family owner occupied		722,370		31.41	%		703,864		32.50	%		679,863		31.57	%
Owner occupied construction		17,331		0.75	%		16,910		0.78	%		21,158		0.98	%
Total consumer real estate loans		818,700		35.60	%		800,631		36.97	%		788,272		36.60	%
Consumer and other loans
Consumer loans		148,741		6.47	%		129,794		5.99	%		122,067		5.67	%
Other		5,149		0.22	%		4,668		0.22	%		4,670		0.22	%
Total consumer and other loans		153,890		6.69	%		134,462		6.21	%		126,737		5.89	%
Total loans held for investment, net of unearned income		2,299,798		100.00	%		2,165,569		100.00	%		2,153,731		100.00	%
Less: allowance for credit losses		29,749					27,858					31,857
Total loans held for investment, net of unearned income and allowance	$	2,270,049				$	2,137,711				$	2,121,874


(1)	TDRs restructured within the past six months and nonperforming TDRs exclude nonaccrual TDRs of ~~$15 thousand, $224 thousand,~~$1.17 million, $1.80 million, and ~~$268 thousand~~$2.26 million for the periods ended ~~September~~June 30, ~~2017,~~2022, December 31, ~~2016,~~2021, and ~~September~~June 30, ~~2016,~~2021, respectively. They are included in nonaccrual loans.
(2)	Total accruing TDRs ~~with six months or more of satisfactory payment performance~~ exclude nonaccrual TDRs of ~~$1.50~~$1.43 million, ~~$1.06~~$2.52 million, and ~~$1.04~~$3.63 million for the periods ended ~~September~~June 30, ~~2017,~~2022, December 31, ~~2016,~~2021, and ~~September~~June 30, ~~2016,~~2021, respectively. They are included in nonaccrual loans.
~~(3)~~		~~Total TDRs exclude nonaccrual TDRs of $1.52 million, $1.28 million, and $1.31 million for the periods ended September 30, 2017, December 31, 2016, and September 30, 2016, respectively.~~

		September 30, 2017	December 31, 2016	June 30, 2022		December 31, 2021
The Company
				Company	Bank	Company	Bank

Common equity Tier 1 ratio	Common equity Tier 1 ratio	13.90%	13.88%	13.37%	11.93%	14.39%	13.37%
Tier 1 risk-based capital ratio	Tier 1 risk-based capital ratio	13.90%	14.74%	13.37%	11.93%	14.39%	13.37%
Total risk-based capital ratio	Total risk-based capital ratio	14.96%	15.79%	14.62%	13.18%	15.65%	14.62%
Tier 1 leverage ratio	Tier 1 leverage ratio	11.18%	11.07%	9.53%	8.40%	9.65%	8.94%

The Bank
Common equity Tier 1 ratio		12.68%	12.93%
Tier 1 risk-based capital ratio		12.68%	12.93%
Total risk-based capital ratio		13.74%	13.98%
Tier 1 leverage ratio		10.18%	9.71%

	September 30, 2017					December 31, 2016
	Change in					Change in
Increase (Decrease) in Basis Points	Net Interest Income			Percent Change		Net Interest Income			Percent Change
(Dollars in thousands)
300	$	1,655		1.9	%	$	526			0.6	%
200		1,294		1.5	%		438			0.5	%
100		775		0.9	%		183			0.2	%
(100)		(4,039	)	-4.8	%		(2,616	)		-3.1	%

	Total Number of Shares Purchased		Average Price Paid per Share		Total Number of Shares Purchased as Part of a Publicly Announced Plan		Maximum Number of Shares that May Yet be Purchased Under the Plan⁽¹⁾

July 1-31, 2017		-	$	-		-		635,804
August 1-31, 2017		13,177		25.16		13,177		622,627
September 1-30, 2017		26,339		25.57		26,339		604,723
Total		39,516	$	25.43		39,516


~~(1)~~		Our stock repurchase plan, as amended, authorizes the purchase and retention of up to 5,000,000 shares. The plan has no expiration date and is currently in effect. No determination has been made to terminate the plan or to cease making purchases. We held 4,395,277 shares in treasury as of September 30, 2017.

	Total Number of Shares Purchased		Average Price Paid per Share		Total Number of Shares Purchased as Part of a Publicly Announced Plan		Maximum Number of Shares that May Yet be Purchased Under the Plan

April 1-30, 2022		46,600	$	27.66		46,600		1,272,014
May 1-31, 2022		118,600		27.53		118,600		1,153,414
June 1-30, 2022		118,307		28.68		118,307		1,035,107
Total		283,507	$	28.03		283,507

~~Exhibit~~ ~~No.~~2.1	Agreement and Plan of Reincorporation and Merger between First Community Bancshares, Inc. and First Community Bankshares, Inc., incorporated by reference to Appendix A of the Definitive Proxy Statement on Form DEF 14A dated April 24, 2018, filed on March 13, 2018
2.2	Agreement and Plan of Merger between First Community Bankshares, Inc. and Highlands Bankshares, Inc., incorporated by reference to Exhibit 2.1 of the Current Report on Form 8-K dated and filed September 11, 2019
3.1		Articles of Incorporation of First Community ~~Bancshares,~~Bankshares, Inc., ~~as amended,~~ incorporated by reference to ~~Exhibit 3(i)~~Appendix B of the ~~Quarterly Report~~Definitive Proxy Statement on Form ~~10-Q for the period ended June 30, 2010,~~DEF 14A dated April 24, 2018, filed on ~~August 16, 2010~~March 13, 2018
3.2		~~Amended and Restated~~ Bylaws of First Community ~~Bancshares,~~Bankshares, Inc., incorporated by reference to Exhibit ~~3.1~~3.2 of the Current Report on Form 8-K dated ~~February 23, 2016,~~and filed ~~on February 25, 2016~~October 2, 2018
4.1		~~Specimen stock certificate~~Description of First Community ~~Bancshares, Inc.,~~Bankshares, Inc. Common Stock, incorporated by reference to Exhibit 4.1 of the ~~Annual~~Current Report on Form ~~10-K for the period ended December 31, 2002,~~8-K dated and filed ~~on March 25, 2003~~October 2, 2018
4.2		~~Indenture between~~Form of First Community ~~Bancshares,~~Bankshares, Inc. ~~and Wilmington Trust Company,~~Common Stock Certificate, incorporated by reference to Exhibit 4.2 of the ~~Quarterly~~Current Report on Form ~~10-Q for the period ended September 30, 2003,~~8-K dated and filed ~~on November 10, 2003~~
~~4.3~~		~~Amended and Restated Declaration of Trust of FCBI Capital Trust, incorporated by reference to Exhibit 4.3 of the Quarterly Report on Form 10-Q for the period ended September 30, 2003, filed on November 10, 2003~~

~~4.4~~		~~Preferred Securities Guarantee Agreement, incorporated by reference to Exhibit 4.4 of the Quarterly Report on Form 10-Q for the period ended September 30, 2003, filed on November 10, 2003~~October 2, 2018
10.1.1**		First Community Bancshares, Inc. 1999 Stock Option Plan, incorporated by reference to Exhibit 10.1 of the Annual Report on Form 10-K/A for the period ended December 31, 1999, filed on April 13, 2000
10.1.2**		Amendment One to the First Community Bancshares, Inc. 1999 Stock Option Plan, incorporated by reference to Exhibit 10.1.1 of the Quarterly Report on Form 10-Q for the period ended March 31, 2004, filed on May 7, 2004
10.2**		First Community Bancshares, ~~Inc~~.Inc. 1999 Stock Option Agreement, incorporated by reference to Exhibit 10.5 of the Quarterly Report on Form 10-Q for the period ended June 30, 2002, filed on August ~~14,~~13, 2002
10.3**		First Community Bancshares, Inc. 2001 Nonqualified Director Stock Option ~~Agreement,~~Agreement, incorporated by reference to Exhibit 10.4 of the Quarterly Report on Form 10-Q for the period ended June 30, 2002, filed on August 14, 2002
10.4**		~~First Community Bancshares, Inc. 2004 Omnibus Stock Option Plan, incorporated by reference to Annex B~~ ~~of the Definitive Proxy Statement on Form DEF 14A dated April 27, 2004, filed on March 15, 2004~~
10.5**		~~First Community Bancshares, Inc. 2004 Omnibus Stock Option Plan Stock Award Agreement, incorporated by reference to Exhibit 10.13 of the Quarterly Report on Form 10-Q for the period ended June 30, 2004, filed on August 6, 2004~~

10.6**		First Community Bancshares, Inc. 2012 Omnibus Equity Compensation Plan, incorporated by reference to Appendix B of the Definitive Proxy Statement on Form DEF 14A dated ~~Apri~~lApril 24, 2012, filed on March 7, 2012
10.7**		First Community Bancshares, Inc. 2012 Omnibus Equity Compensation Plan Restricted Stock Grant Agreement, incorporated by reference to Exhibit 99.1 of the Current Report on Form 8-K dated and filed May 28, 2013
10.810.8*		First Community Bancshares, Inc. Life Insurance Endorsement Method Split Dollar Plan and Agreement, incorporated by reference to Exhibit 10.5 of the Annual Report on Form 10-K/A for the period ended December 31, 1999, filed on April 13, 2000
10.9.1**		First Community Bancshares, Inc. and Affiliates Executive Retention Plan, incorporated by reference to Exhibit 10.1 of the Current Report on Form 8-K dated December 30, 2008, filed on January 5, 2009; ~~Amendment #1, incorporated by reference to Exhibit 10.~~3 of the Current Report on Form 8-K dated December 16, 2010, filed on December 17, 2010; Amendment #2, incorporated by reference to Exhibit 10.1 of the Current Report on Form 8-K dated February 21, 2013, filed on February 25, 2013; Amendment #3, incorporated by reference to Exhibit 10.1 of the Current Report on Form 8-K dated May 24, 2016, filed on May 27, 2016; and Amendment #4, incorporated by reference to Exhibit 10.1 of the Current Report on Form 8-K dated and filed on February 28, 2017
10.9.2**		~~Amendment~~Amendment #1 to the First Community Bancshares, Inc. and Affiliates Executive Retention Plan, incorporated by reference to Exhibit 10.3 of the Current Report on Form 8-K dated December 16, 2010, filed on December 17, 2010
10.9.3**		Amendment #2 to the First ~~Community~~Community Bancshares, Inc. and Affiliates Executive Retention Plan, incorporated by reference to Exhibit 10.1 of the Current Report on Form 8-K dated February 21, 2013, filed on February 25, 2013

10.9.4**		Amendment #3 to the First Community Bancshares, Inc. andand Affiliates Executive Retention Plan, incorporated by reference to Exhibit 10.1 of the Current Report on Form 8-K dated May 24, 2016, filed on May 31, 2016
10.9.5**		Amendment #4 to the First Community Bancshares, Inc. and Affiliates Executive Retention Plan, incorporated by reference to Exhibit 10.1 of the Current Report on Form 8-K dated and filed on February 28, 2017
10.9.6*	Amendment #5 to the First Community Bancshares, Inc. and Affiliates Executive Retention Plan.
10.9.7*	Amendment #6 to the First Community Bancshares, Inc. and Affiliates Executive Retention Plan.
10.10**		Amended and Restated Deferred ~~Compensati~~onCompensation Plan for Directors of First Community Bancshares, Inc. and Affiliates, incorporated by reference to Exhibit ~~99.2~~10.1 of the Current Report on Form 8-K dated ~~August 22, 2006,~~December 16, 2019, filed on ~~August 23, 2006~~December 19,2019
10.11.1**		First Community Bancshares, Inc. Amended and Re~~stated~~Restated Nonqualified Supplemental Cash or Deferred Retirement Plan, incorporated by reference to Exhibit 99.1 of the Current Report on Form 8-K dated August 22, 2006, filed on August 23, 2006, and Amendment #2, incorporated by reference to Exhibit 10.2 of the Current Report on Form 8-K dated and filed on February 28, 2017
10.11.2**		Amendment #2 to the First Community Bancshares, Inc. Amended and Restated Nonqualified Supplemental Cash or Deferred Retirement Plan, incorporated by reference to Exhibit 10.2 of the Current Report on Form 8-K dated and filed on February 28, 2017
10.12.1**		First Community Bancshares, Inc. Supplemental Directors Retirement Plan, as amended and restated, incorporated by reference to Exhibit 10.1 of the Current Report on Form 8-K dated December 16, 2010, filed on December 17, 2010, and Amendment #2, ~~incorporated~~incorporated by reference to Exhibit 10.2 of the Current Report on Form 8-K dated May 24, 2016, filed on May 31, 2016
10.12.2**		Amendment #2 to the First Community Bancshares, Inc. Supplemental Directors Retirement Plan, as amended and restated, incorporated by re~~ference~~reference to Exhibit 10.2 of the Current Report on Form 8-K dated May 24, 2016, filed on May 31, 2016
10.13**		Employment Agreement between First Community Bancshares, Inc. and David D. Brown, incorporated by reference to Exhibit 10.3 of the Current Report o~~n Form 8-K dated and filed on April 16, 2015~~

10.14**		~~Employment Agreement between First Community Bancshares, Inc. and E. Stephen Lilly, incorporated by reference to Exhibit 10.5 of the Current Report~~ on Form 8-K dated and filed on April 16, 2015
10.15**		Employment Agreement between First Community Bancshares, Inc. and Gary R. Mills, incorporated by reference to Exhibit 10.2 of the Current Report on Form 8-K dated and filed on April 16, 2015
10.16**		Employment Agreement between First Community Bancshares,, Inc. and William P. Stafford, II, incorporated by reference to Exhibit 10.1 of the Current Report on Form 8-K dated and filed on April 16, 2015
10.17**		~~Employment Agreement between First Community Bank and Mark R. Evans, incorporated by reference to Exhibit 2.1 of the Current Report on Form 8-K dated April 2, 2009, filed on April 3, 2009~~

11		~~Statement Regarding Computation of Earnings per Share, incorporated by reference to Note 13 of the Notes to Condensed Consolidated Financial Statements in Part I, Item 1 of this report~~
31.1*		Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
31.2*		Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
32*		Certification of Chief Executive Officer and Chief Financial Officer pursuant to Section 906 of the ~~Sarbanes-Oxley~~Sarbanes-Oxley Act of 2002

101***		Interactive data files pursuant to Rule 405 of Regulation ~~S-T:~~S-T formatted in Inline Extensible Business Reporting Language (iXBRL): (i) Condensed Consolidated Balance Sheets as of ~~September~~June 30, ~~2017,~~2022, (Unaudited) and December 31, ~~2016;~~2021; (ii) Condensed Consolidated Statements of Income (Unaudited) for the three and ~~nine~~six months ended ~~September~~June 30, ~~2017~~2022 and ~~2016 ;~~2021; (iii) Condensed Consolidated Statements of Comprehensive Income (Unaudited) for the three and ~~nine~~six months ended ~~September~~June 30, ~~2017~~2022 and ~~2016;~~2021; (iv) Condensed Consolidated Statements of ~~Stockholders'~~Stockholders’ Equity (Unaudited) for the ~~nine~~three and six months ended ~~September~~June 30, ~~2017~~2022 and ~~2016;~~2021; (v) Condensed Consolidated Statements of Cash Flows (Unaudited) for the ~~nine~~six months ended ~~September~~June 30, ~~2017~~2022 and ~~2016;~~2021; and (vi) Notes to Condensed Consolidated Financial Statements (Unaudited).
104*	The cover page of First Community Bankshares, Inc. Quarterly Report on Form 10-Q for the quarter ended June 30, 2022, formatted in Inline XBRL (included within the Exhibit 101 attachments).

		First Community ~~Bancshares,~~Bankshares, Inc. (Registrant)




		/s/ William P. Stafford, II

		William P. Stafford, II
		Chief Executive Officer
		(Principal Executive Officer)




		/s/ David D. Brown
		David D. Brown
		~~David D. Brown~~Chief Financial Officer
		~~Chief Financial Officer~~
		(Principal Accounting Officer)