Note 1 - Basis of Presentation	9 Months Ended
Sep. 30, 2019
Notes to Financial Statements
Basis of Accounting [Text Block]	Note 1. Basis of Presentation General First Community Bankshares, Inc. (the “Company”), a financial holding company, was founded in 1989 and incorporated under the laws of the Commonwealth of Virginia in 2018. The Company is the successor to First Community Bancshares, Inc., a Nevada corporation, pursuant to an Agreement and Plan of Reincorporation and Merger, the sole purpose of which was to change the Company’s state of incorporation from Nevada to Virginia. The Company’s principal executive office is located at One Community Place, 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 offers wealth management and investment advice through its Trust Division and wholly owned subsidiary First Community Wealth Management (“FCWM”). 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. Principles of Consolidation The Company’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. 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. 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 for the year ended December 31, 2018 ( the “2018 Form 10 -K”), as filed with the Securities and Exchange Commission (the “SEC”) on March 1, 2019. The condensed consolidated balance sheet as of December 31, 2018, 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’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, 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 The Company’s significant accounting policies are 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 2018 Form 10 -K. Recent Accounting Standards Standards Adopted in 2019 In July 2018, the FASB issued ASU 2018 - 09, “Codification Improvements.” This ASU makes changes to a variety of topics to clarify, correct errors in, or make minor improvements to the Accounting Standards Codification. The majority of the amendments in ASU 2018 - 09 became effective for the Company for fiscal years beginning after December 15, 2018. The Company adopted ASU 2018 - 09 in the first quarter of 2019. The adoption of the standard had no material effect on its financial statements. In August 2017, the FASB issued ASU 2017 - 12, “Derivatives and Hedging (Topic 815 ): Targeted Improvements to Accounting for Hedging Activities.” The 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 became effective for the Company for fiscal years beginning after December 15, 2018. The Company adopted ASU 2017 - 12 in the first quarter of 2019. The adoption of the standard had no material effect on its financial statements. In February 2016, the FASB issued ASU 2016 - 02, “Leases (Topic 842 ).” This ASU increases transparency and comparability among organizations by recognizing lease assets and lease liabilities on the balance sheet and requiring more disclosures related to leasing transactions. In January 2018, the FASB issued ASU 2018 - 01, which allows entities the option to apply the provisions of the new guidance at the effective date without adjusting the comparative periods presented. In July 2018, the FASB issued ASU 2018 - 10, “Codification Improvements to Topic 842, Leases,” which updates narrow aspects of the guidance issued in ASU 2016 - 02, as well as issuing ASU 2018 - 11, which allows entities to choose an additional transition method in which an entity is allowed to apply the standard at adoption date and recognize a cumulative-effect adjustment to the opening balance of retained earnings in the period of adoption. Under this method, the entity shall recognize and measure the leases that exist at the adoption date and the prior comparative periods are not adjusted. The Company adopted ASU 2016 - 02 January 1, 2019, electing to recognize and measure existing leases at the adoption date with no adjustments to prior periods. In addition, the Company elected the practical expedients of not re-assessing the classifications of existing leases, not re-assessing if existing leases have initial direct costs, or examining expired or existing contracts to determine if a lease exists. All of the current leases are classified as operating leases. The adoption of the standard resulted in a right-of-use asset of $915 thousand and a lease liability of $915 thousand which are included in other assets and other liabilities, respectively, in the condensed consolidated balance sheets. The adoption did not have a material impact on the financial position or results of operations of the Company. Standards Not Yet Adopted In June 2016, the FASB issued ASU 2016 - 13, “Financial Instruments – Credit Losses (Topic 326 ): Measurement of Credit Losses on Financial Instruments.” This ASU intends to improve financial reporting by requiring timelier recording of credit losses on loans and other financial instruments held by financial institutions and other organizations. This ASU 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 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’s portfolio. In addition, the update amends the accounting for credit losses on available-for-sale 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 the first quarter of 2020 and recognize a cumulative adjustment to retained earnings as of the beginning of the year of adoption. The Company has established a working group to prepare for, and implement changes related to, the standard and has engaged a third -party vendor solution to assist in the application of the standard. The Company has established a cross-functional implementation team with assigned roles and responsibilities, key tasks to complete, and a general timeline to be followed. The team meets regularly to discuss the latest developments and ensure progress is being made on the adoption plan. The Company has contracted with a third -party provider for enhanced modeling techniques that incorporate the loss measurement requirements in these amendments and is in the process of finalizing and documenting the methodologies that will be utilized, including challenging estimated credit loss model assumptions and outputs and refining the qualitative framework. The team is also currently developing controls, processes, policies and disclosures and performing parallel runs. The Company expects validation of the new model(s) to be completed during early 2020. The Company continues to evaluate the impact adoption of ASU 2016 - 13 will have on its consolidated financial statements and disclosures, and while currently unable to reasonably estimate the impact of adopting this ASU, the Company expects that the impact of adoption could be significantly influenced by the composition, characteristics and quality of its loan portfolio as well as the prevailing economic conditions and forecasts as of the adoption date. 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.

Note

Basis of Presentation

General

First Community Bankshares, Inc. (the “Company”), a financial holding company, was founded in

1989

and incorporated under the laws of the Commonwealth of Virginia in

2018.

The Company is the successor to First Community Bancshares, Inc., a Nevada corporation, pursuant to an Agreement and Plan of Reincorporation and Merger, the sole purpose of which was to change the Company’s state of incorporation from Nevada to Virginia. The Company’s principal executive office is located at One Community Place, 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 offers wealth management and investment advice through its Trust Division and wholly owned subsidiary First Community Wealth Management (“FCWM”). 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.

Principles of Consolidation

The Company’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. 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.

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

-K for the year ended

December 31, 2018 (

the

“2018

Form

-K”), as filed with the Securities and Exchange Commission (the “SEC”) on

March 1, 2019.

The condensed consolidated balance sheet as of

December 31, 2018,

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’s presentation. These reclassifications had

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, 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

of this report.

Significant Accounting Policies

The Company’s significant accounting policies are included in Note

“Basis of Presentation and Significant Accounting Policies,” of the Notes to Consolidated Financial Statements in Part II, Item

of the Company’s

2018

Form

-K.

Recent Accounting

Standards

Standards Adopted in

2019

July 2018,

the FASB issued ASU

2018

09,

“Codification Improvements.” This ASU makes changes to a variety of topics to clarify, correct errors in, or make minor improvements to the Accounting Standards Codification. The majority of the amendments in ASU

2018

became effective for the Company for fiscal years beginning after

December 15, 2018.

The Company adopted ASU

2018

in the

first

quarter of

2019.

The adoption of the standard had

material effect on its financial statements.

August 2017,

the FASB issued ASU

2017

12,

“Derivatives and Hedging (Topic

815

): Targeted Improvements to Accounting for Hedging Activities.” The 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

became effective for the Company for fiscal years beginning after

December 15, 2018.

The Company adopted ASU

2017

in the

first

quarter of

2019.

The adoption of the standard had

material effect on its financial statements.

February 2016,

the FASB issued ASU

2016

02,

“Leases (Topic

842

).” This ASU increases transparency and comparability among organizations by recognizing lease assets and lease liabilities on the balance sheet and requiring more disclosures related to leasing transactions. In

January 2018,

the FASB issued ASU

2018

01,

which allows entities the option to apply the provisions of the new guidance at the effective date without adjusting the comparative periods presented. In

July 2018,

the FASB issued ASU

2018

10,

“Codification Improvements to Topic

842,

Leases,” which updates narrow aspects of the guidance issued in ASU

2016

02,

as well as issuing ASU

2018

11,

which allows entities to choose an additional transition method in which an entity is allowed to apply the standard at adoption date and recognize a cumulative-effect adjustment to the opening balance of retained earnings in the period of adoption. Under this method, the entity shall recognize and measure the leases that exist at the adoption date and the prior comparative periods are

not

adjusted. The Company adopted ASU

2016

January 1, 2019,

electing to recognize and measure existing leases at the adoption date with

adjustments to prior periods. In addition, the Company elected the practical expedients of

not

re-assessing the classifications of existing leases,

not

re-assessing if existing leases have initial direct costs, or examining expired or existing contracts to determine if a lease exists. All of the current leases are classified as operating leases. The adoption of the standard resulted in a right-of-use asset of

$915

thousand and a lease liability of

$915

thousand which are included in other assets and other liabilities, respectively, in the condensed consolidated balance sheets. The adoption did

not

have a material impact on the financial position or results of operations of the Company.

Standards

Not

Yet Adopted

June 2016,

the FASB issued ASU

2016

13,

“Financial Instruments – Credit Losses (Topic

326

): Measurement of Credit Losses on Financial Instruments.” This ASU intends to improve financial reporting by requiring timelier recording of credit losses on loans and other financial instruments held by financial institutions and other organizations. This ASU 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 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’s portfolio. In addition, the update amends the accounting for credit losses on available-for-sale debt securities and purchased financial assets with credit deterioration. ASU

2016

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

in the

first

quarter of

2020

and recognize a cumulative adjustment to retained earnings as of the beginning of the year of adoption. The Company has established a working group to prepare for, and implement changes related to, the standard and has engaged a

third

-party vendor solution to assist in the application of the standard. The Company has established a cross-functional implementation team with assigned roles and responsibilities, key tasks to complete, and a general timeline to be followed. The team meets regularly to discuss the latest developments and ensure progress is being made on the adoption plan. The Company has contracted with a

third

-party provider for enhanced modeling techniques that incorporate the loss measurement requirements in these amendments and is in the process of finalizing and documenting the methodologies that will be utilized, including challenging estimated credit loss model assumptions and outputs and refining the qualitative framework. The team is also currently developing controls, processes, policies and disclosures and performing parallel runs. The Company expects validation of the new model(s) to be completed during early

2020.

The Company continues to evaluate the impact adoption of ASU

2016

will have on its consolidated financial statements and disclosures, and while currently unable to reasonably estimate the impact of adopting this ASU, the Company expects that the impact of adoption could be significantly influenced by the composition, characteristics and quality of its loan portfolio as well as the prevailing economic conditions and forecasts as of the adoption date.

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.