Table of Contents

UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

SCHEDULE 14A

Proxy Statement Pursuant to Section 14(a) of the Securities Exchange Act of 1934, as amended

Filed by the Registrant ☒

Filed by a party other than the Registrant ☐

Check the appropriate box:

FIRST COMMUNITY BANKSHARES, INC.

(Name of Registrant as Specified in Its Charter)

Not Applicable

(Name of Person(s) Filing Proxy Statement, if other than the Registrant)

Payment of Filing Fee (Check the appropriate box):

NOTICE OF 2022 ANNUAL MEETING OF SHAREHOLDERS

April 26, 2022, at 2:00 p.m. Eastern Daylight Time

March 16, 2022

To First Community Bankshares, Inc. Shareholders:

First Community Bankshares, Inc.’s Annual Meeting of Shareholders will be held at 2:00 p.m. Eastern Daylight Time on Tuesday, April 26, 2022. Due to the ongoing global health pandemic resulting from the coronavirus outbreak (COVID-19), and out of concerns for the health and well-being of our employees and shareholders, the Annual Meeting will be held in a virtual meeting format only, via live webcast. You will not be able to attend the Annual Meeting in person.

At the Annual Meeting shareholders will:

Shareholders of record at the close of business on March 3, 2022, will be entitled to vote at the Annual Meeting and any adjournments.

Because the Annual Meeting is virtual and being conducted via live webcast, shareholders will not be able to attend the Annual Meeting in person. However, you will be able to attend and participate in the Annual Meeting, vote your shares electronically, and submit your questions during the meeting by visiting www.virtualshareholdermeeting.com/FCBC2022. To participate in the Annual Meeting, you must enter the control number found on your Notice Regarding the Availability of Proxy Materials, Proxy Card, or Voter Instruction Form. It is important to note that shareholders have the same rights and opportunities by participating in a virtual meeting as they would if attending a in-person meeting. Details regarding how to participate in the meeting online and the business to be conducted at the Annual Meeting are more fully described in this proxy statement.

You may vote during the Annual Meeting by following the instructions available on the Annual Meeting website. Whether or not you plan to attend the Annual Meeting, the Board of Directors urges you to vote and submit your proxy in advance of the Annual Meeting by one of the methods described in the proxy materials.

IMPORTANT NOTICE

REGARDING THE AVAILABILITY OF PROXY MATERIALS

FOR THE ANNUAL MEETING OF SHAREHOLDERS TO BE HELD ON

April 26, 2022

The proxy materials for this Annual Meeting of Shareholders of First Community Bankshares, Inc., consisting of the proxy statement, annual report, and proxy card are available online at www.firstcommunitybank.com under Investor Relations.

You will be able to attend the First Community Bankshares, Inc. Annual Meeting online and submit your questions during the meeting by visiting www.virtualshareholdermeeting.com/FCBC2022. You will also be able to vote your shares online by attending the Annual Meeting by webcast. It is important to note that shareholders have the same rights and opportunities by participating in a virtual meeting as they would if attending a in-person meeting. If your shares are held in the name of a bank, broker, or other holder of record, you must obtain a proxy, executed in your favor, from the holder of record to be able to vote online at the meeting. Information regarding how to obtain a proxy from the holder of record and how to submit it to Broadridge to vote at the Annual Meeting is set forth on page 2 of this proxy statement under the heading “How to Register to Attend the Annual Meeting Virtually.”

WHETHER OR NOT YOU ATTEND THE ANNUAL MEETING, YOUR VOTE IS IMPORTANT TO FIRST COMMUNITY BANKSHARES, INC. YOU MAY VOTE BY THE FOLLOWING METHODS:

FIRST COMMUNITY BANKSHARES, INC. ENCOURAGES SHAREHOLDERS TO SUBMIT THEIR PROXIES IN ADVANCE OF THE ANNUAL MEETING. YOU MAY REVOKE YOUR PROXY AT ANY TIME PRIOR TO THE TIME IT IS VOTED.

First Community Bankshares, Inc.

29 College Drive

P. O. Box 989

Bluefield, Virginia 24605-0989

March 16, 2022

Dear Shareholder,

You are invited to attend the 2022 Annual Meeting of Shareholders of First Community Bankshares, Inc. (the “Corporation”) to be held on Tuesday, April 26, 2022, at 2:00 p.m. Eastern Daylight Time, which will be held virtually at www.virtualshareholdermeeting.com/FCBC2022. Due to the continuing public health impact of the coronavirus pandemic (COVID-19) and to support the health and well-being of our employees, shareholders, and community, this year’s Annual Meeting will be a completely virtual meeting of shareholders, which will be conducted solely via live webcast.

Because the Annual Meeting is virtual and being conducted via live webcast, shareholders will not be able to attend the Annual Meeting in person. However, you will be able to attend and participate in the First Community Bankshares, Inc. Annual Meeting online and submit your questions during the meeting by visiting www.virtualshareholdermeeting.com/FCBC2022. It is important to note that shareholders have the same rights and opportunities by participating in a virtual meeting as they would if attending a in-person meeting. Details regarding how to participate in the meeting online and the business to be conducted at the Annual Meeting are more fully described in this proxy statement. Information regarding how to obtain a proxy from the holder of record and how to submit it to Broadridge to vote at the Annual Meeting is set forth on page 2 of this proxy statement under the heading “How to Register to Attend the Annual Meeting Virtually.”

The Annual Meeting will begin with brief comments on the Corporation’s operations. This will be followed by discussion and voting on the matters set forth in the accompanying Notice of Annual Meeting and discussion of other business matters properly brought before the meeting.

Whether or not you plan to attend, please ensure that your shares are represented at the meeting by promptly voting and submitting your proxy by telephone, on the Internet, or by completing, signing, dating, and returning your proxy card in the enclosed envelope.

TABLE OF CONTENTS

PROXY STATEMENT

First Community Bankshares, Inc.

29 College Drive

P. O. Box 989

Bluefield, Virginia 24605

The Board of Directors (the "Board") of First Community Bankshares, Inc. (the “Corporation”) solicits the enclosed proxy for use at the Annual Meeting of Shareholders of the Corporation (the “Annual Meeting”), which will be held on Tuesday, April 26, 2022, at 2:00 p.m. Eastern Daylight Time. Due to the global health pandemic resulting from the coronavirus outbreak (COVID-19) and out of concerns for the health and well-being of our employees and shareholders, the Annual Meeting will be held in a virtual format only, via live webcast. You will not be able to attend the Annual Meeting in person.

The expenses of solicitation of proxies for the Annual Meeting, including the cost of preparing, assembling, and mailing the notice, proxy statement, proxy card, and return envelopes; the handling and tabulation of proxies received; charges of brokerage houses and other institutions, nominees, or fiduciaries for forwarding such documents to beneficial owners; and expenses associated with the virtual hosting of the Annual Meeting, will be paid by the Corporation. In addition to mailing of proxy materials, solicitation may be made in person, by telephone, or by other means by officers, directors, or employees of the Corporation.

This proxy statement and the proxies solicited hereby are being first sent or delivered to shareholders of the Corporation on or about March 16, 2022.

Voting

Shares of common stock (par value $1.00 per share) (“Common Stock”) represented by proxies in the accompanying form, which are properly executed and returned to the Corporation, will be voted at the Annual Meeting in accordance with the shareholder’s instructions contained therein. In the absence of contrary instructions, shares represented by such proxies will be voted FOR the election of the three (3) directors nominated by the Board of Directors and named in this proxy statement; FOR approval, on a non-binding, advisory basis, of the Corporation’s executive compensation; FOR ratification of Elliott Davis, PLLC as the Corporation's independent registered public accounting firm; and FOR approval of the First Community Bankshares, Inc. 2022 Omnibus Equity Compensation Plan (the "2022 Plan").

Any shareholder may revoke their proxy at any time before it is voted. A proxy may be revoked at any time prior to its exercise by the filing of written notice of revocation with the Secretary of the Corporation, by delivering to the Corporation a duly executed proxy bearing a later date, or by attending the Annual Meeting virtually and voting electronically. If your shares of the Corporation’s Common Stock are held for you in a brokerage, bank, or other institutional account, you must obtain a proxy, executed in your favor, from the holder of record to be able to vote online at the Annual Meeting. Information regarding how to obtain a proxy from the holder of record and how to submit it to Broadridge to vote at the Annual Meeting is set forth below under the heading “How to Register to Attend the Annual Meeting Virtually.”

The Board has fixed March 3, 2022, as the record date for shareholders entitled to notice of the Annual Meeting. Shares of Common Stock outstanding on the record date are entitled to be voted at the Annual Meeting, and the holders of record on the record date will have one vote for each share so held in the matters to be voted upon by the shareholders. Treasury shares are not voted. As of the close of business on March 3, 2022, the outstanding shares of the Corporation consisted of 16,794,260 shares of Common Stock.

The presence in person (including by attendance at the virtual meeting) or by proxy of a majority of the shares of the Common Stock entitled to vote is necessary to constitute a quorum at the Annual Meeting. Abstentions and broker non-votes are counted as present for purposes of determining a quorum. A broker non-vote occurs when a nominee holding shares for a beneficial owner does not vote on a particular proposal because the nominee does not have discretionary voting power for that particular item and has not received instructions from the beneficial owner. Directors are elected by a plurality of the votes cast at a shareholders’ meeting with a quorum present. The three (3) persons who receive the greatest number of votes of the holders of Common Stock represented in person or by proxy at the Annual Meeting for the class of 2025 will be elected directors of the Corporation. Because this is an uncontested election, if a nominee for director does not receive a greater number of votes “for” their election than votes “withheld” from their election, the director shall promptly tender her or his resignation to the Board of Directors. The Board’s Governance and Nominating Committee (the "GNC") shall make a recommendation to the Board of Directors as to whether to accept or reject the tendered resignation or whether other action should be taken. The advisory approval of the Corporation’s executive compensation program, the ratification of the independent registered public accounting firm, and the approval of the 2022 Plan each require that the number of votes cast in favor of the proposal exceed the number of votes cast against. Except as stated above regarding the presence of a quorum, abstentions and broker non-votes will have no effect on any of the proposals set forth in this proxy statement.

If the shares you own are held in “street name” (that is, through a brokerage firm, bank, or other nominee) you may vote your shares by following the instructions provided by the nominee. As the record holder of your shares, your nominee is required to vote your shares according to your instructions. In order to vote your shares, you will need to follow the directions provided to you by your nominee, many of which offer the option of voting online or by telephone. Under the current rules of the NASDAQ Stock Market LLC or NASDAQ, if you do not give instructions to your nominee, it will only be able to vote your shares for the ratification of the independent registered public accounting firm, and it will be prohibited from voting your shares on the remaining matters brought before the meeting.

Information about the Virtual Annual Meeting

How to Attend the Virtual Meeting.  The 2022 Annual Meeting will be a completely virtual meeting of shareholders, which will be conducted exclusively by webcast on the internet. No physical meeting will be held. You will be able to attend the Annual Meeting online and submit your questions during the meeting by visiting www.virtualshareholdermeeting.com/FCBC2022. You will also be able to vote your shares online by attending the Annual Meeting by webcast.

To login to the virtual Annual Meeting please go to www.virtualshareholdermeeting.com/FCBC2022. You will be required to have a control number to participate in the Annual Meeting. The 16-digit control number can be found on your Notice Regarding the Availability of Proxy Materials, Proxy Card, or Voter Instruction Form included with this proxy statement.

The online meeting will begin promptly at 2:00 p.m. Eastern Daylight Time on April 26, 2022. We encourage you to access the meeting prior to the start of the meeting to leave ample time for the check-in process. Registration begins fifteen (15) minutes prior to the state of the meeting.  Please follow the registration instructions as outlined below.

How to Register to Attend the Annual Meeting Virtually.  If you are a registered shareholder, you do not need to register to attend the Annual Meeting virtually on the internet. Please follow the instructions on the enclosed proxy card.

For those investors whose shares are held by a broker, bank, or other nominee, you must obtain the 16-digit control number from your broker, bank, or nominee in order to instruct your broker, bank, or nominee.

How to Submit Questions During the Virtual Meeting.  Shareholders as of the record date who attend the virtual Annual Meeting using their control number (as described above) will have the opportunity to submit questions during the meeting by going to the virtual meeting site at www.virtualshareholdermeeting.com/FCBC2022 and entering your control number. Once logged in, questions may be submitted through a field in the web portal. Questions pertinent to meeting matters will be answered during the meeting, subject to time constraints. If a question is submitted about one of the matters in the agenda to be voted on by the shareholders at the Annual Meeting, the question must be submitted at or before the time such matter is before the Annual Meeting for consideration.

The meeting is not to be used as a forum to present personal matters, or general economic, political or other views that are not directly related to the business of the Corporation and the matters properly before the meeting, and therefore questions on such matters will not be answered. If there are any matters of individual concern to a shareholder and not of general concern to all shareholders, such matters may be raised separately after the Annual Meeting by contacting Investor Relations at investorrelations@fcbinc.com.

To allow the Corporation to answer as many proper and relevant questions from as many shareholders as possible, we will limit each shareholder to one question. It will help us if questions are succinct and cover only one topic per question. Questions from multiple shareholders on the same topic or that are otherwise related may be grouped, summarized, and answered together. The Corporation does not intend to address any questions that are:

All questions will be reviewed by the Chairman. If properly raised, the Chairman will read aloud the question and respond to the question or direct appropriate officers of the Corporation to respond to the question. If a question violates the rules of conduct for asking questions, as described above, it will not be summarized or answered.

Technical Assistance During the Virtual Meeting.  In the event technical issues delay or disrupt the ability to convene the meeting for longer than thirty minutes, the Corporation will make an announcement on its website www.firstcommunitybank.com under Investor Relations regarding a date and time for reconvening the Annual Meeting. In the event of disorder, technical malfunction, or other significant problem that disrupts the Annual Meeting, the Chairman may adjourn, recess, or expedite the Annual Meeting, or take such other action as the Chairman determines is appropriate in light of the circumstances.

If you have difficulty accessing the virtual Annual Meeting, please call the support line displayed on the meeting page at www.virtualshareholdermeeting.com/FCBC2022.  Technicians will be available to assist you.

PROPOSAL 1: ELECTION OF DIRECTORS

The Board is currently comprised of eight (8) directors, including six (6) non-management directors, divided into three (3) classes with staggered terms: the class of 2022, consisting of three (3) directors; the class of 2023, consisting of two (2) directors; and the class of 2024, consisting of three (3) directors. Accordingly, three (3) directors will be elected to the class of 2025 and will serve until the 2025 Annual Meeting. The three (3) directors from the class of 2022 are each nominated for re-election into the class of 2025.

The Board has adopted a policy which requires that a nominee for director in an uncontested election who does not receive a greater number of votes “for” election than votes “withheld” promptly tender her or his resignation to the Board. The GNC shall make a recommendation to the Board of Directors as to whether to accept or reject the tendered resignation or whether other action should be taken.  The full text of this policy can be found in the Governance and Nominating Committee Charter available on the Corporation's website www.firstcommunitybank.com under Investor Relations.

In the event any nominee is unable or declines to serve as a director at the time of the Annual Meeting, all proxy votes for that individual will be voted for an alternate nominee designated by the present Board to fill the vacancy. Unless contrary instructions are given by a shareholder who signs and returns a proxy, in the event more than three (3) persons are nominated for election as directors, the proxy holder shall assume the shareholder intended to vote all shares represented by that proxy for the nominees listed herein, or for any alternates nominated by the Board. All nominees named herein have consented to be named and to serve as directors if elected.

No director or executive officer of the Corporation is closely related to any other director or executive officer of the Corporation by blood, marriage, or adoption.

The table set forth below describes each director and nominee, including their age; the applicable director class, which is based upon the year in which their term of service expires; and title. A biography describing each director’s and each nominee’s qualifications and business background is set forth below the table. The Corporation does not know of any reason why any nominee would be unable to serve as a director.

Members of the Corporation’s Board of Directors are expected to have the appropriate skills and characteristics necessary to function in the Corporation’s current operating environment and contribute to its future direction and strategies. These include legal, financial, management and other relevant skills. In addition, the Corporation looks to achieve a diversified Board, including members with varying experience, age, perspective, residence, background, race, gender, and other demographic characteristics. All members of the Corporation’s Board also serve as directors for the board of the Corporation’s banking subsidiary.

DIRECTOR NOMINEES FOR THE CLASS OF 2025

Samuel L. Elmore, Former Executive Vice President and Chief Credit Officer, First Community Bank, Beckley, West Virginia.

Mr. Elmore received a Bachelor of Science in Business Management and Marketing in 1970 from the University of Charleston. Prior to joining First Community Bank, Mr. Elmore served as President, Citizens Southern Bank, Beckley, West Virginia; President and Chief Executive Officer, Charleston National Bank, Charleston, West Virginia; Vice President, Key Centurion Bancshares, Huntington, West Virginia; and President and Chief Operations Officer, Beckley National Bank, Beckley, West Virginia. Mr. Elmore also served in the United States Army from 1964 to 1967. Mr. Elmore currently serves on the Board of First Community Bank and has previously served on the Boards of The United Way of Beckley, Beckley Area Foundation, Raleigh General Hospital, Raleigh County Community Action, Pinecrest Development Corporation, Raleigh County Commission on Aging, and the Virginia’s Automated Clearing House Association.

Mr. Elmore’s relevant experience qualifying him for service as a director includes: more than forty (40) years of experience in the community banking industry, including service as an auditor, Chief Operations Officer, Chief Financial Officer, and Chief Credit Officer; prior experience with acquisitions and mergers; and experience in a variety of offices held with increasing management responsibilities during his banking career.

Richard S. Johnson, Chairman, President and Chief Executive Officer, The Wilton Companies, Richmond, Virginia.

Mr. Johnson earned a Bachelor of Science in Business Administration from the University of Richmond, Richmond, Virginia in 1973, with concentrations in Economics and Finance, and graduated with a Master of Science from Virginia Commonwealth University, Richmond, Virginia in 1977, with a concentration in Real Estate and Urban Land Development.  Mr. Johnson has been the President and Chief Executive Officer of The Wilton Companies, a real estate investment, development, brokerage and management group of companies, since 2002. He assumed the role of Chairman of The Wilton Companies in 2010.  Prior to joining The Wilton Companies, Mr. Johnson served as President of Southern Financial Corp. of Virginia from 1985 to 2002 and Chairman of the Board of Southern Title Insurance Corporation from 1980 to 1985.  Mr. Johnson currently serves as a Director of First Community Bankshares, Inc., First Community Bank, The Wilton Companies, Inc., and The Wilton Companies, LLC. Mr. Johnson serves as a Director of the American Civil War Museum.  Mr. Johnson also serves as the Assistant Treasurer and Director Emeritus of Ducks Unlimited, Inc. and further serves as Emeritus Trustee of the Board of Trustees for the University of Richmond.  He has previously served as a director/trustee of the State Fair of Virginia, the Children’s Museum of Richmond, Omicron Delta Kappa, a National collegiate honor society, Ducks Unlimited Canada, Landmark Apartment Trust of America, and the City of Richmond Economic Development Authority, where he previously held the seat of Chairman.

Mr. Johnson’s relevant experience qualifying him for service as a director includes his background in: long-range planning, various aspects of mortgage underwriting, marketing, and mortgage portfolio servicing; previously chairing the Economic Development Authority of the City of Richmond, Virginia; past service as a director and Finance Committee member of Ducks Unlimited, Inc. and Ducks Unlimited Canada; having served in various state and national offices with Ducks Unlimited, Inc., including Assistant Treasurer and member of the Finance and Audit Subcommittee; and previous service as a director and Audit Committee member of the Apartment Trust of America.

Beth A. Taylor, Mayor of the Town of Wytheville, Virginia 

Dr. Taylor earned a Nursing Degree from Samford University in Birmingham, Alabama in 1976 and a Bachelor of Science from University of Alabama in Birmingham, Alabama in 1985.  She then attended medical school at the University of South Alabama in Mobile, Alabama, earning her Doctor of Medicine in 1989.  She also received certifications in Internal Medicine (1992) and Gastroenterology (1995) from the University of South Alabama.  Dr. Taylor spent her medical career in private practice, focusing on gastroenterology.  She retired from medical practice in 2015. 

In August 2016, Dr. Taylor was elected to the Town Council of the Town of Wytheville, Virginia and on July 30, 2018, she was elected as the first female Mayor of the Town of Wytheville, Virginia.  During her tenure with the Town, Dr. Taylor has, at various times, served on multiple committees, including, without limitation the Crossroads Regional Industrial Development Authority, District Three Committee, Beautification Committee, Budget and Finance Committee, and Tree Advisory Committee.   She also routinely attends meetings of the Joint Industry Development Authority and the Regional Water Authority and Planning Commission.

Dr. Taylor’s relevant experience qualifying her for service as a director includes a broad range of business, financial, and related experience obtained while in private medical practice; extensive civic and community service; and extensive municipal government service, including service directly related to community development activities. 

The Board of Directors unanimously recommends a vote FOR the nominees set forth above.

INCUMBENT DIRECTORS

C. William Davis, Attorney, Richardson & Davis, PLLC, Bluefield, West Virginia.

Mr. Davis was appointed to serve on the Board on August 25, 2015. Mr. Davis graduated from the Virginia Military Institute in 1970, with a Bachelor of Science in Civil Engineering and from Washington & Lee University School of Law in 1973, with a Juris Doctor degree. Mr. Davis is a member of Richardson & Davis, PLLC and practices law, primarily in the areas of civil litigation, commercial transactions, trusts and estates, and banking. Mr. Davis has served as a Director of the Corporation since 2015, of the Corporation’s banking subsidiary since 1990, and of a predecessor bank from 1987 to 1990. Mr. Davis has served as a Director for a variety of business and professional organizations in the region, including Bluefield Supply Company, Flat Top Insurance Agency, the Defense Trial Counsel of West Virginia, Inc., and the West Virginia State Bar Board of Governors.

Mr. Davis’ relevant experience qualifying him for service as a director includes: a broad range of business, legal, banking, and regulatory related issues encountered in the practice of law; extensive civic and community service; and more than thirty-five (35) years of board service in the banking industry.

Gary R. Mills, President, First Community Bankshares, Inc. and Chief Executive Officer and President, First Community Bank, Bluefield, Virginia.

Mr. Mills has served as President of the Corporation since August 31, 2013 and currently serves as Chief Executive Officer and President of First Community Bank. Mr. Mills has been employed by the Corporation and/or one of its subsidiaries since 1998. Mr. Mills served as Market President of the Princeton Division of First Community Bank from 1998 until 2005, Senior Vice President of Credit Administration from 2005 to 2006, and most recently as Chief Credit Officer from 2007 until his appointment as Chief Executive Officer. Mr. Mills is a Certified Public Accountant and holds a Bachelor of Science in Business Administration with a concentration in Accounting from Concord College (now University).

Mr. Mills’ relevant experience qualifying him for service as a director includes: more than thirty (30) years of experience in the financial services industry; extensive civic and community involvement; and eight (8) years of board service for the Corporation’s banking subsidiary.

Harriet B. Price, Chief Financial Officer, Price-Williams Realty, Inc., Radford, Virginia.

Ms. Price was appointed to serve on the Board effective January 1, 2021. Ms. Price received a Bachelor of Science in Accounting from Virginia Polytechnic Institute and State University. She is a certified public accountant and active in the executive management of Price-Williams Realty, Inc.

Ms. Price takes pride in serving her community through her mentoring of students in accounting at Virginia Tech and Radford University over the past twenty-five years, previously serving on the City of Radford Executive Chamber Board, and volunteering in Radford City Schools. 

Ms. Price’s relevant experience qualifying her for service as a director includes: more than twenty-five (25) years’ experience in business management and accounting and extensive civic and community service.

M. Adam Sarver, Real Estate Developer and Businessman, Princeton, West Virginia.

Mr. Sarver was appointed to serve on the Board on August 25, 2015. Mr. Sarver received his Bachelor of Science in Communication Studies in 2000 from West Virginia University. Mr. Sarver has served on the Board of Directors of the Corporation’s banking subsidiary since 2014. He owns and manages several businesses in Southern West Virginia including Main Street Builders, LLC; Eastern Door & Glass, LLC; Longview Properties, LLC; and Clover Leaf Properties, LLC, which are focused on real estate development coupled with residential and commercial construction and development. Mr. Sarver currently serves as a Director for a variety of businesses, civic and charitable organizations in the region, including the Princeton Salvation Army Advisory Board (past Chairman) and the First United Methodist Church. He was previously a Director for the Princeton – Mercer County Chamber of Commerce.

Mr. Sarver’s relevant experience qualifying him for service as a director includes: a broad range of business, financial, and related experience associated with operating multiple business interests and extensive civic and community service on a variety of boards.

William P. Stafford, II, Chief Executive Officer, First Community Bankshares, Inc., Bluefield, Virginia and Attorney, Brewster Morhous PLLC, Bluefield, West Virginia.

Mr. Stafford is a graduate of Virginia Polytechnic Institute and State University, Blacksburg, Virginia, and holds a Bachelor of Science in Mechanical Engineering. He also holds a Juris Doctor, cum laude, from Washington & Lee University School of Law, Lexington, Virginia. Mr. Stafford has served as Chief Executive Officer of the Corporation since his appointment by the Board in August 2013. Mr. Stafford is a member of Brewster Morhous PLLC, and practices law on a limited basis primarily in the areas of commercial transactions, banking, creditor’s rights, and trusts and estates. He currently serves as Chairman of the Board of the Corporation and Chairman of the Board of the Corporation’s banking subsidiary. Mr. Stafford serves as Director and Corporate Secretary of the H. P. and Anne S. Hunnicutt Foundation, Inc., Princeton Machinery Service, Inc., and Melrose Enterprises, Ltd. He is a member of Stafford Farms, LLC, Vermillion Development, LLC, and Walnut Hill, LLC, which include real estate and agricultural holdings. Mr. Stafford is a partner in Legal Realty, A Partnership.  Mr. Stafford has served, and continues to serve, on numerous civic and community service boards and commissions.

Mr. Stafford’s relevant experience qualifying him for service as a director includes: a broad range of regulatory, business, legal and banking related issues encountered in the practice of law and personal business endeavors; extensive state and municipal government service; extensive civic and community service; and service as a member of the Board of Directors of the Corporation since 1994.

Changes to Composition of the Board of Directors in 2022

On December 13, 2021, at a regular meeting of its Board, by resolution as authorized in the bylaws, the size of the Board was increased from seven (7) members to eight (8) members, and the Board appointed Dr. Beth A. Taylor to fill the vacancy created by that action. This appointment was, in part, a result of the GNC’s search for candidates with diverse backgrounds willing to serve on the Board. Dr. Taylor is highly qualified and brings a diverse and expansive mix of insight and expertise, including significant local market knowledge, to the Board. The appointment was effective January 1, 2022.

Director Qualifications and Experience

The GNC is committed to presenting for shareholder consideration a slate of nominees who, taken together with current Directors, have the experience, qualifications, attributes, and skills appropriate for functioning effectively as a board and as liaisons to the customers and communities the Corporation serves. The GNC regularly reviews the composition of the Board in light of the Corporation’s evolving needs, its assessment of the Board’s performance, and the input of shareholders. In considering whether to recommend any candidate for inclusion in the Board’s slate of recommended director nominees, including candidates recommended by shareholders, the GNC considers a number of criteria, including, but not limited to, the candidate’s integrity, business acumen, age, experience, education, involvement in the communities served by the Corporation, relationships and familiarity with the Corporation’s customers, commitment to the Corporation, diligence, geographic representation, conflicts of interest, strong professional reputation and record of achievement, constructive and collegial personal attributes, significant investment in or experience with the Corporation, ability and commitment to devote sufficient time and energy to Board service, and ability to act in the interests of all shareholders, rather than focusing on representation of a particular group, issue or interest. Additionally, the GNC must ensure that the composition of the Board and its committees satisfies SEC, NASDAQ, and banking regulatory standards, including those related to director independence. Further examples of individual qualifications and experience considered by the GNC include the candidate’s professional standing in their chosen field and in the communities served by the Corporation, expertise in the financial services industry, civic and community involvement in the communities served by the Corporation, leadership skills, and intelligence. The GNC also strives to accomplish broad geographic representation from the communities and markets the Corporation serves and seeks candidates who can help ensure the Board remains knowledgeable and intimately involved in the banking affairs of those customers and communities. The GNC also seeks candidates with a representative mix of skills in finance, technology, marketing, community and business affairs, human resources, and governance.

Diversity of Director Nominees

The Governance and Nominating Committee Charter, which is publicly available on the Corporation's website www.firstcommunitybank.com under Investor Relations, addresses specifically how diversity is to be considered in the director nomination process.  More broadly, however, the GNC seeks to ensure that there is diversity of thought among directors. Having diversity of thought results in more thorough analysis of each issue and better decisions, which in the long term results in greater shareholder value. The GNC believes that diversity of thought stems from many factors, including professional experience, life experience, socio-economic background, gender, race, religion, nationality, skill set, and geographic representation. The GNC does not assign specific weights to particular factors, and no particular factor is necessarily applicable to all prospective nominees. The Corporation believes that the backgrounds and qualifications of the directors, considered as a group, should provide a significant composite mix of experience, knowledge, and abilities that will allow the Board to fulfill its responsibilities. The diversity of the Board is evaluated on a continuing basis by assessing whether varying viewpoints are routinely presented, evaluating the individual performance and contributions of each Director, and ensuring that varying perspectives are presented on key issues.

Recommendations for Director Candidates

The GNC’s practice is to consider all shareholder recommendations for director candidates which are received prior to February 15^th each year. Any such recommendations should be sent to the GNC, c/o Secretary of First Community Bankshares, Inc., P. O. Box 989, Bluefield, Virginia 24605-0989. The Corporation believes that directors should possess the highest personal and professional ethics, integrity and values, and be committed to representing the long-term interests of the shareholders. The GNC also considers candidates recommended by current directors, officers, employees, and others. The GNC evaluates all nominees for director in the same manner and typically bases its initial review on any written materials submitted with respect to the candidate.

NON-DIRECTOR NAMED EXECUTIVE OFFICERS

Named executive officers who are not directors of the Corporation, including their title, age, and year they became an officer of the Corporation, are set forth in the chart below, which is followed by a brief biography describing each named executive officer’s business experience.

Jason R. Belcher, Chief Operating Officer of the Corporation and First Community Bank.

Mr. Belcher has served as an officer of First Community Bank since March 2, 2015, having previously served as Chief Risk Officer and Chief Administrative Officer. Mr. Belcher assumed the role of Chief Operating Officer of the Corporation on January 1, 2020 pursuant to the retirement of E. Stephen Lilly. He has been employed by the Corporation’s banking subsidiary since 2005, in various roles including Market President, Finance and Tax Director, and Treasurer. Mr. Belcher, a Certified Public Accountant, earned his Bachelor of Science in Business Administration from West Virginia University in 1999 and a Master of Accounting and Information Systems Degree from Virginia Polytechnic Institute and State University in 2006.  In his community, Mr. Belcher serves in various roles for his church, including as a former Deacon and as a member of the Church Officers Committee. Mr. Belcher coaches middle school football, soccer, and basketball teams and serves on the Board of Directors of the Tiger Athletic Foundation in Princeton, West Virginia.

David D. Brown, Chief Financial Officer of the Corporation and First Community Bank.

Mr. Brown has been Chief Financial Officer of the Corporation and First Community Bank since May 2006 and has been employed by the Corporation and/or one of its subsidiaries since 2005. Prior to joining the Corporation, Mr. Brown served in various positions including Corporate Auditor of United Bankshares, Inc. from 1999 to 2005. From 1997 to 1999, Mr. Brown practiced in the field of public accounting, concentrating his work on tax, accounting, and auditing across a variety of industries. Mr. Brown is a Certified Public Accountant and holds Master of Public Accountancy and Bachelor of Science degrees from West Virginia University.  Mr. Brown is a member of the American Institute of Certified Public Accountants and the West Virginia Society of Certified Public Accountants. In his community, Mr. Brown serves on the Carlock Pruett Athletic Foundation Board and previously served on the board of the Bluefield, Virginia Little League.  He has also coached middle school and Little League baseball and serves as a Virginia State Little League umpire.

Sarah W. Harmon, Chief Administrative Officer, General Counsel, and Secretary of the Corporation and First Community Bank.

Ms. Harmon has been employed by the Corporation’s banking subsidiary since 2013. She has served as General Counsel of First Community Bank since 2018 and General Counsel of the Corporation since 2020.  In 2021, Ms. Harmon was appointed Chief Administrative Officer for the Corporation and First Community Bank. In addition to her traditional General Counsel duties, Ms. Harmon provides executive oversight to the legal, compliance, and human resources departments. Ms. Harmon earned her Bachelor of Arts in the Interdisciplinary Studies of Behavioral Science and Business from Concord College (now University) in 2002, graduating summa cum laude as Valedictorian, her Juris Doctorate from Washington and Lee School of Law in 2006, graduating cum laude, and her Master of Business Administration from West Virginia University in 2017.  Since March 2021, Ms. Harmon has served as the District 10 Representative for the West Virginia State Bar Board of Governors, which includes service on various sub-committees. Since 2018, she has been a member of the ABA General Counsel Group; the Virginia Bankers Association Legal Affairs Committee, which she currently chairs; and the West Virginia Bankers Association Legislative Affairs and Government Relations Committee, which she currently chairs.  She has previously served as the Legislative Director for the Society for Human Resource Management, Appalachian Chapter of the Virginias Board of Directors and remains a member.  Ms. Harmon is involved in her community through volunteering and other support of local schools and participation in civic and community events.  She previously served on the Board of Directors for Mother Goose Child Care Center.

OTHER KEY OFFICERS

In addition to the Corporation’s named executive officers, certain other key officers and executives of subsidiaries (collectively, the “Senior Management Team”) are integral to the smooth operation and continued success of the Corporation and its subsidiaries. Each member of the Senior Management Team is responsible for the oversight of several functional business units of the Corporation’s banking subsidiary and is primarily responsible for assessing and managing the Corporation’s risk exposure, under the supervision of the Board and its committees. In addition to the named executive officers, the Senior Management Team consists of the following officers:

Tamara L. Abel, Chief Mortgage Banking Officer of First Community Bank.

Ms. Abel has been employed by the Corporation’s banking subsidiary since 2003, having over 19 years of experience in the banking industry. Previous roles include credit analyst, business development officer, small business lending, loan review manager, and vice president of credit administration.  As the Chief Mortgage Banking Officer (formerly, Senior Vice President - Mortgage Banking), Ms. Abel is responsible for the oversight and management of the Bank's mortgage banking operations, including development of policies and procedures that govern mortgage product design and underwriting criteria, compliance with applicable laws and regulations, origination of mortgage loans, and the direct supervision of the Mortgage Executive and the Mortgage Credit Executive. Ms. Abel obtained a Bachelor of Science in Business Administration with a concentration in Accounting from Concord College (now University) in 1986.   

Derek A. Bonnett, Chief Risk Officer of the Corporation and First Community Bank.

Mr. Bonnett has been employed by the Corporation since 2016, having served as the Director of Internal Audit until being named the Chief Risk Officer in 2021.  He has over 13 years of experience providing risk management advice, insight, and assurance to financial institutions. Mr. Bonnett is a Certified Public Accountant, Certified Internal Auditor, and Certified Information Systems Auditor.  He holds a Bachelor of Science in Business Administration with a concentration in Accounting obtained from Concord University in 2010, from which he graduated valedictorian of his class. In his current role, Mr. Bonnett is responsible for oversight and administration of the Bank’s enterprise risk management (ERM) program to ensure alignment of strategy and operations.

Milton Campbell, Chief Retail Banking Officer of First Community Bank.

Mr. Campbell has been employed by the Corporation’s banking subsidiary since 1998, served as a Regional President of the bank from 2009 to 2021, and was named Chief Retail Banking Officer in 2021 when the bank transitioned from a regional banking management structure to a line of business structure. Mr. Campbell joined First Community following the acquisition of Blue Ridge Bank, where he had been employed from 1989 to 1996. He has over 38 years of experience in the banking industry. As Chief Retail Banking Officer, Mr. Campbell provides oversight to all functions of the branch network's deposit and retail loan operations.  Mr. Campbell is also the executive responsible for oversight of the bank’s credit card portfolio. Mr. Campbell obtained a Business Administration degree from Elon College (now University) in 1983 and is a graduate of the North Carolina School of Banking.

Amy S. Hall, Chief Customer Service Officer of First Community Bank.

Ms. Hall has been employed by the Corporation’s banking subsidiary, or a predecessor bank, since 1993 and served as Director of Branch Administration from 2012 to 2021 when she was named Chief Customer Service Officer.  In her current role, Ms. Hall provides executive oversight of all market staff training, all operational procedures, and market network support. In addition, Ms. Hall is responsible for executive oversight of the banking subsidiary's Client Care Center and the Digital Delivery Channels. Ms. Hall obtained her Associate Degree in Business Administration from Wilkes Community College in 1989.

Samuel G. Hill, Chief Wealth Management Officer and Senior Trust Officer of First Community Bank.

Mr. Hill has been employed by the Corporation’s banking subsidiary since 2006 and has served in his current role since 2010 (previously Senior Vice President and Senior Trust Officer). In addition to overseeing the bank’s trust department, Mr. Hill serves as the President of the bank’s insurance subsidiary, First Community Insurance Services, and the bank's wealth management subsidiary, First Community Wealth Management, Inc. ("FCWM").  He has been employed by FCWM or its predecessor since 1992, and directly provides financial advising services to wealth management clients. Mr. Hill obtained his Bachelor of Science in Business Administration with a concentration in Accounting from Concord College (now University) in 1990 and holds a Master of Business Administration from West Virginia University obtained in 1999. Mr. Hill is a Certified Public Accountant, is a graduate of Cannon Trust School, and holds FINRA Series 7 and Series 63 securities licenses.

William C. Hopkins, Chief Commercial Banking Officer of First Community Bank.

Mr. Hopkins has been employed by the Corporation’s banking subsidiary since 1996, served as a Regional President of the bank from 2014 to 2021, and was named Chief Retail Banking Officer in 2021 when the bank transitioned from a regional banking management structure to a line of business structure.  Previous roles include auditor, credit analyst, corporate strategist, commercial loan officer, commercial sales leader, and market president. As Chief Commercial Banking Officer, Mr. Hopkins provides oversight to all functions of the branch network's commercial lending and deposit functions.  Mr. Hopkins is also the executive responsible for oversight of commercial credit documentation quality control and the bank's treasury services function.  Mr. Hopkins holds a Bachelor of Science in Business with a concentration in Accounting and Finance obtained from Concord College (now University) in 1995. He has also completed the ABA Commercial Lending School and the Wachovia Commercial Lending School.

Jeffrey N. Noble, Chief Credit Officer of First Community Bank.

Mr. Noble has served the Corporation’s banking subsidiary in various roles for more than thirty-five (35) years and has held his current position since 2013. In this role, Mr. Noble is responsible for the supervision of personnel, policies, procedures, and documentation for the Corporation’s credit administration function, inclusive of Consumer Lending, Small Business Lending, Commercial Lending, Appraisal Services, and Special Assets. Mr. Noble holds a Bachelor of Science in Business Administration with a concentration in Accounting, obtained from Concord College (now University) in 1986. He is also a graduate of the West Virginia School of Banking, RMA Commercial Lending School, and RMA Lending to Small Business School.

CORPORATE GOVERNANCE

Corporate Governance Guidelines

The Board regularly reviews corporate governance developments and considers modifications to clarify and augment the Board’s processes, including those relating to risk oversight.

The Board’s Role in Risk Oversight. The Board believes that each member has a responsibility to monitor and manage risks faced by the Corporation. At a minimum, this requires members of the Board to be actively engaged in Board discussions, review materials provided to them, and know when it is appropriate to request further information from management and/or engage the assistance of outside advisors. Furthermore, because the banking industry is highly regulated, certain risks to the Corporation are monitored by the Board through its review of the Corporation’s compliance with regulations set forth by its regulatory authorities, including recommendations contained in regulatory examinations.

During 2021, given the ongoing nature of the COVID-19 pandemic, the Board and its committees continued to review and consider with management the impact of COVID-19 on the Corporation’s employees, customers, and financial performance, and management’s strategies and initiatives to respond to, and mitigate, adverse pandemic impacts, including enhanced health and safety measures for the Corporation’s employees. Management reviewed and, in many cases, refined various plans, strategies, and protocols developed at the onset of the pandemic to protect employees, maintain services for clients, ensure the functional continuity of operating systems, controls and processes, and mitigate the financial risks posed by changing market conditions. 

Because the Corporation believes risk oversight is the responsibility of each member of the Board, it does not concentrate the Board’s responsibility for risk oversight in a single committee. Instead, each committee concentrates on specific risks for which it possesses relevant information and expertise, and each committee regularly reports to the Board on its findings. For example, the Audit, Compliance, and Enterprise Risk Committee (the “ACER Committee”) regularly monitors the Corporation’s exposure to certain reputational risks by establishing and evaluating the effectiveness of its programs to report and monitor fraud and by monitoring the Corporation’s internal controls over financial reporting; the Asset/Liability Management Committee of the Corporation’s banking subsidiary monitors liquidity and interest rate risk; the Information Systems Steering Committee of the Corporation’s banking subsidiary monitors information technology and operations risk; and the Corporation’s Compensation and Retirement Committee (the "CRC") monitors risks associated with the design and administration of employee compensation and benefit plans.

Independence of Directors

The Board annually reviews the relationships of each of its members with the Corporation to determine whether each director is independent. This determination is based on both subjective and objective criteria developed by the NASDAQ listing standards and the SEC rules. Factors considered include but are not limited to: each Director’s employment history with the Corporation, if any; compensation by the Corporation to each Director and their family members, if any; and the report of the GNC Chairman, which, for 2021, indicates that no related party transactions with any Director constitutes a material relationship with the Corporation. After considering each Director’s individual circumstance, the Board determined that, with regard to the following Directors and nominees, no circumstances or relationships exist which would interfere with their exercise of independent judgment as a director: C. William Davis; Samuel L. Elmore; Richard S. Johnson; Harriet B. Price; M. Adam Sarver; and Beth A. Taylor. Accordingly, these Directors and nominees are considered independent. Directors Stafford and Mills are not independent solely because they are executive officers of the Corporation.

SEC Rules and/or NASDAQ listing standards contain additional requirements for members of the ACER Committee, the CRC, and the GNC. All of the directors serving on these committees are independent under the additional requirements applicable to each such committee.

The Board of Directors and Board Meetings

Board Leadership Structure. William P. Stafford, II currently serves as Chief Executive Officer of the Corporation and as Chairman of the Board. The role of the Chief Executive Officer is to set the strategic direction for the Corporation and manage its performance, while the Chairman of the Board is tasked with setting the agenda for Board meetings and presiding over meetings of the Board. The Board believes combining the roles of Chief Executive Officer and Chairman is in the best interests of the Corporation at this time, as doing so best positions the Corporation to carry out its strategic plan for core growth and enhanced performance; provides for greater accountability and transparency; enhances oversight of operations; and provides for greater Board involvement. However, in making this decision, the Board is not unmindful of the corporate governance objectives that are sometimes achieved through bifurcation of the Chairman and Chief Executive Officer roles. To achieve those objectives, the Board has bifurcated the positions of Chief Executive Officer of the Corporation and Chief Executive Officer of First Community Bank, the Corporation’s banking subsidiary, which is its primary operating entity. Gary R. Mills serves as Chief Executive Officer and President of First Community Bank, supervises all bank operations, and manages its performance. Both Mr. Stafford and Mr. Mills work closely with the Board and its committees in their respective areas of responsibility. The Board believes, under the present circumstances particular to the Corporation, that this structure better achieves the desired corporate governance objectives set forth above, and others. Further, the Board has appointed Director Elmore as the Lead Independent Director and Vice Chairman of the Board. Director Elmore serves as Chairman of meetings of the independent directors.

Standards of Conduct. All directors, named executive officers, and other employees of the Corporation must act ethically at all times and in accordance with the policies comprising the Corporation’s Standards of Conduct (the “Standards”), which are available at the Corporation’s website www.firstcommunitybank.com under Investor Relations. Certification of compliance with the Standards is required on a annual basis. Only the Board of Directors may waive a provision of the Standards for directors and named executive officers and will only do so for just cause in an instance where the underlying ethical objective will not be violated. No waivers were granted to any director or named executive officer during 2021. Amendments to the Standards will be published on the Corporation’s website, as required by SEC rules. If an actual or potential conflict of interest arises for a director, the director must promptly inform the Board.

Communicating Concerns to Directors. The ACER Committee and the non-management directors have established procedures to enable any employee who has a concern about accounting, internal accounting controls, or auditing matters related to the Corporation to communicate that concern directly to the Board through an e-mail or written notification directed to the Chairman of the ACER Committee. Such communications may be confidential or anonymous. During orientation, employees are informed how to submit such communications and the Whistleblower Policy is provided in the employee handbook, on the Corporation’s Intranet, and a notice regarding the same can be found posted on bulletin boards at each location of the Corporation and its subsidiaries. The status of any unresolved concern is reported to the non-management directors of the Board periodically by the Chairman of the ACER Committee.

Shareholder Communications. Shareholders may communicate with all or any member of the Board by addressing correspondence to the Board or to the individual director. Shareholders may address such communication to Secretary, First Community Bankshares, Inc., P. O. Box 989, Bluefield, Virginia 24605-0989, and all communications so addressed will be forwarded to the Chairman of the Board or to the individual director to whom such correspondence is directed, without exception.

Board Meetings. In 2021, the Board held nine (9) regular meetings. No member attended fewer than seventy-five percent (75%) of the Board meetings or committee meetings on which the member sits. Each director is expected to devote sufficient time, energy and attention to ensure diligent performance of the director’s duties and to attend all regularly scheduled Board, committee, and shareholder meetings. It is the Board’s policy that the directors should attend the Annual Meeting absent exceptional circumstances. All then-current directors attended the 2021 Annual Meeting.

Meetings of Independent Directors. The non-management directors met without any management director or other employee present on at least two (2) occasions in 2021.

First Community Bank Board. First Community Bank (the “Bank”) is a Virginia chartered commercial banking corporation and the Corporation’s primary operating subsidiary. The Corporation conducts its banking operations, which constitute the overwhelming majority of its activities, exclusively through First Community Bank. The Board is aided in the governance and operation of its banking subsidiary by the board of directors of First Community Bank (the “Bank Directors”). The Bank Directors currently consist of the directors of the Corporation and eight (8) additional individuals with experience, qualifications, attributes, and skills appropriate for governing a community bank. In addition, due to their involvement in the communities served by the Corporation, the Bank Directors are uniquely positioned to advise the Senior Management Team regarding community banking matters. The GNC regularly reviews the composition of the Bank board of directors in light of the Bank’s evolving needs, its assessment of the Bank Directors’ performance, and the markets in which the Bank operates. In considering whether to recommend any candidate for election to the Bank board of directors, the GNC considers many of the same criteria as when considering candidates for the Board of Directors, including but not limited to, the candidate’s integrity, reputation, business acumen, age, education, involvement in the communities served by the Bank, relationships and familiarity with the Bank’s customers, potential conflicts of interest, constructive and collegial personal attributes, knowledge of banking regulatory matters, as well as the candidate’s general experience and expertise in the financial services industry and civic and community involvement. The GNC also strives to accomplish broad geographic representation from the communities and markets the Bank serves and seeks candidates who can help ensure the Bank Directors remain intimately involved in the banking affairs of the Bank’s customers and communities.

In addition to the Board committees mentioned previously discussed, the Bank maintains several standing committees, including, without limitation, Loan Committee (which oversees lending matters), Asset/Liability Management Committee (ALCO) (which oversees management of the Bank’s balance sheet), Trust Committee (which oversees trust and investment matters), and Information Systems Steering Committee (ISSC) (which oversees information technology matters, including digital information systems, information security, and payment channels). Both Corporation directors and Bank directors serve on each Bank-level committee, providing oversight to that committee’s respective area of operation.

Board Committees

The Board has four (4) standing committees: the ACER Committee, the Executive Committee, the CRC, and the GNC. For each of these committees, except the Executive Committee, the Board has adopted a written charter, a current copy of which is available for review and/or printing on the Corporation’s website at www.firstcommunitybank.com under Investor Relations. Each such charter is reviewed and approved annually by the relevant committee and by the Board.

Audit Compliance and Enterprise Risk Committee. The ACER Committee combines the functions of an audit committee with those of a compliance and enterprise risk committee to provide members a more holistic view of the financial, legal, and regulatory risks affecting the Corporation and its banking subsidiary.

The current members of the ACER Committee are Director Johnson, who chairs the Committee; Director Elmore; Director Price; and Director Sarver. All members of the ACER Committee are independent. Director Johnson is the audit committee financial expert, as the SEC defines that term and as the Board interprets such qualification in its business judgment consistent with such definition. The ACER Committee is concerned with the integrity of the Corporation’s financial statements, the independence, qualifications, and performance of the Corporation's independent registered public accounting firm, and the performance of the Corporation’s internal audit function. Its duties include but are not limited to: (1) selection and oversight of the independent registered public accounting firm; (2) review of the scope of the audit to be conducted by the independent registered public accounting firm, as well as the results of that audit; (3) oversight of the Corporation’s financial reporting activities, including the annual report and the accounting standards and principles followed; (4) discussion with the Senior Management Team and other relevant employees of risk assessment and management policies, including risk relating to the financial statements and financial reporting process and the steps taken by management to monitor and mitigate such risks; (5) approval of audit and non-audit services provided to the Corporation by the independent registered public accounting firm; (6) review of the organization and scope of the Corporation’s internal audit function and its disclosure and internal controls; and (7) oversight of regulatory compliance and enterprise risk management. The ACER Committee held eleven (11) meetings during 2021. The ACER Committee’s report is on page 41.

Executive Committee. The current members of the Executive Committee are Director Stafford, II, who chairs the Committee; Director Davis; Director Elmore; Director Johnson; Director Mills; Director Price; Director Sarver; and Director Taylor. The Executive Committee did not meet in 2021. The Committee, subject to the supervision and control of the Board of Directors, has been delegated substantially all of the powers of the Board to act between meetings of the Board, except for certain matters reserved to the Board by law.         

Compensation and Retirement Committee. The current members of the CRC are Director Davis, who chairs the Committee; Director Johnson; and Director Elmore. All three (3) members of the CRC are independent. The CRC’s primary duties and responsibilities are to: (1) review, evaluate, and determine annually compensation of the Chief Executive Officer and President; (2) review, evaluate, and approve annually compensation of each other named executive officer; (3) review, evaluate, and approve annually compensation of the other members of the Senior Management Team; (4) review, evaluate, and approve all incentive and equity-based compensation; and (5)  review, evaluate, and approve the proxy statement Compensation Discussion and Analysis and the CRC report. While the CRC receives input from the Chief Executive Officer and President, who play a significant role in the compensation setting process, as well as other members of management, as needed, the ultimate decision regarding compensation of the named executive officers rests with the CRC. Further, the Chief Executive Officer and President do not participate in these matters as they relate to their respective compensation. For a full discussion of the CRC and management’s respective roles administering the executive compensation program, please see the Compensation Discussion and Analysis. The CRC does not delegate any of its responsibilities to subcommittees, except as it relates to the day-to-day administration of benefit plans. The CRC held seven (7) meetings in 2021. The CRC’s report is on page 26.

Compensation and Retirement Committee Interlocks and Insider Participation. None of the members of the CRC are or were formerly employed by the Corporation or any of its subsidiaries in the last completed fiscal year. None of the named executive officers of the Corporation currently serve or previously served on any compensation committee or any board of directors of another company of which any of the Corporation’s Board members were also an executive officer.

Governance and Nominating Committee. The current members of the GNC are Director Elmore, who chairs the Committee; Director Davis; Director Sarver; and Director Price.  All four (4) members of the Committee are independent. The Committee’s responsibilities include the selection of director nominees for Board service and the development and review of governance guidelines. The Committee also: (1) oversees evaluations of the Board, as well as director performance and Board dynamics; (2) makes recommendations to the Board concerning the structure and membership of Board committees; and (3) reviews, approves, and ratifies significant transactions with related persons. This Committee held six (6) meetings in 2021.

Anti-Hedging Policy

All of the Corporation’s directors, officers and employees are subject to the First Community Bankshares, Inc. Insider Trading Policy. The Insider Trading Policy provides that insiders (defined as directors, officers, employees, and independent contractors and those in a special relationship with the Corporation such as auditors, consultants or attorneys, who possess material, non-public information) and their related persons should not engage in any transactions that suggest they are speculating in the Corporation’s securities. The Insider Trading Policy prohibits insiders and their related persons from trading in options, warrants, puts and calls or similar instruments on Corporation securities or selling Corporation securities “short” or “selling against the box.” The Insider Trading Policy also prohibits insiders and their related persons from holding Corporation securities in margin accounts. The Insider Trading Policy discourages insiders from engaging in hedging transactions, such as “cashless” collars, forward sales, equity swaps and other similar arrangements and requires that any such transaction be carefully reviewed by the Insider Trading Officer (the General Counsel of the Corporation or their designee) prior to the insider entering into such transaction to determine whether such transaction would violate the Insider Trading Policy. The Insider Trading Policy contains an addendum with more restrictive requirements, including a prohibition on trading during standard quarterly blackout periods that apply to certain designated insiders, including executive officers and directors.

Environmental, Social, and Governance (“ESG”) Framework

We believe in developing and nurturing mutually beneficial relationships with customers, shareholders, and employees. Our ESG framework is built around this mission statement. While our efforts in this regard are shown throughout this proxy statement, below are some highlights of our program.

Human Capital. We believe in investing in our most valuable corporate resource -- our people!  In 2021, the Corporation engaged compensation consultant Pearl Meyer & Partners, LLC to review each position in the organization, identify a market comparable, and provide benchmark data for competitive market pay. Based on the results of this exercise, the company increased employee base compensation by approximately $2.4 million.  Simultaneously with this project, we updated job descriptions to ensure that expectations were clearly communicated and evaluation of those specific expectations could be easily accomplished.  We also revamped our salary administration practices, including the introduction of a pay grade structure which fosters greater consistency across the organization and increased transparency for employees in career path planning.  

In addition to competitive base compensation, we offer competitive benefits to attract and retain the best employees possible, including the ability to participate in our qualified defined contribution Employee Stock Ownership and 401(k) plan, discussed further on page 24. For 2021, the Board approved matching all employee contributions to their 401(k) plan account dollar-for-dollar up to 8% of each employee’s compensation. A portion of the match is provided in the form of Corporation stock to promote employee ownership of the Corporation throughout the organization. We support work-life balance by offering paid time off for vacation, holidays, and personal leave, including parental involvement in schools. We also provide employees with 24 hours per year of compensated time to volunteer in their communities through our FCB Cares Volunteer Program. We strive to maintain a safe and healthy work environment and have adopted policies and practices to foster employee health including our employee wellness program and safety measures to reduce the spread of COVID-19. For 2021, employees were also granted ten (10) additional days of compensated absence for use in certain COVID related scenarios. We provide an Employee Assistance Program that includes clinical services and counseling options to employees and their families and access to financial, legal, and work-life balance resources.  Generous educational assistance opportunities are also available to employees to help our team members improve on-the-job proficiency and to prepare them for advancement within the Corporation.

We believe in diversity and are committed to fostering, cultivating, and preserving a culture of diversity and inclusion. Our goal is for the Corporation to be reflective of the communities and people we serve. Consistent with these efforts, 25% of Directors on the Board are women.  Women also comprise 25% of the Senior Management Team and 58% of managers who report directly to the Senior Management Team. We foster an equal opportunity environment, encouraging non-discriminatory practices, and we have strict policies in place that prohibit any form of harassment, retaliation, or intimidation. We have a strong Whistleblower Policy that provides for multiple reporting channels, including anonymous reporting directly to the ACER Committee, and we pride ourselves in adherence to our Standards of Conduct.

Social Capital. We believe in building strong, enduring relationships with our customers and the communities we serve.  We build relationships with customers by offering a robust selection of products and services to meet their financial needs, including online and mobile banking tools and live Interactive Teller Machines to provide convenient, 24/7 access to financial resources.  

We give back to our communities. In 2021, we contributed in excess of $130,000 to the communities we serve, nearly $22,000 of which was through our matching gifts program, an employee benefit designed to enhance employee charitable giving to qualified charitable organizations. Contributions supported the efforts of community organizations that are engaged in literacy programs, community revitalization, and the fight against substance abuse, homelessness, and hunger. Our employees engaged in acts of volunteerism, providing more than 300 hours of community service to organizations supporting affordable housing, economic development, financial literacy, affordable health care, youth athletics, and fighting substance abuse.  We originated $29 million in loans to organizations providing rural health care services, critical municipal infrastructure, economic development, community revitalization, and job creation. We also originated more than 1,900 small business loans totaling $189.5 million, including 629 Paycheck Protection Program loans totaling $31.5 million, in support of small and medium sized businesses in the communities we serve.

We also support the future of our communities through our generous financial and other support of local schools within our footprint, our participation in various financial education programs, and the First Community Bankshares, Inc. Scholarship Program, which provides an annual award of $3,000 to an eligible dependent child of a First Community employee who is seeking higher education.  

Corporate Governance. We believe in good corporate governance. In 2021, we were actively engaged with multiple shareholders and are committed to regular and open communications. In response to shareholder engagement, a modified majority voting standard, outlined on page 4, was adopted for election of directors in uncontested director elections. Over 75% of our directors, including all non-management directors, are independent under NASDAQ standards and our director independence standards follow the definitions established by the SEC, NASDAQ, and the FDIC. All directors serving during 2021 attended more than 75% of board and applicable committee meetings and no director serves on an excessive number of outside boards. All directors and executive officers are subject to our rigorous Stock Ownership Guidelines, which include holding requirements for all stock granted by the Corporation, and are prohibited from engaging in certain transactions in our common stock including margin accounts, short selling, trading derivative securities, and hedging. The Corporation’s Stock Ownership Guidelines are more thoroughly outlined on page 24. The CRC conducts annual performance evaluations of the named executive officers and both the Board of the Corporation and its banking subsidiary perform annual self-assessments. Executive incentive and equity compensation are subject to clawback provisions.

Sustainability. We believe in longevity. Having served the financial needs of our communities since 1874, we understand what creates sustainable value to our shareholders, customers, and communities. We serve an essential role in the economies of our communities by facilitating the transfer of financial capital to their most productive activities, including lending for infrastructure, real estate development, community revitalization, and other projects.  Our executive compensation program is designed to balance business risk with sound financial policy and shareholders' interests, and to align the interests of our executive officers with the long-term interests of our shareholders by encouraging growth in the value of the Corporation and our shareholders' investments.  We have a robust business continuity management program, overseen by the Chief Risk Officer, that manages the threats and impacts associated with a potential disruption in key resources, including people, equipment, facilities, technology, and suppliers. Our business continuity plans include a pandemic response plan, which has been fully implemented in response to the COVID 19 pandemic.  We have comprehensive policies and procedures to guide the management of strategic, regulatory, legal, operational, and other risks.

Environmental. We believe in preparing for tomorrow. We support utilizing technology and digital channels, including payments, credit, savings, remittances, mobile banking, online account opening, imaging systems, and a board portal for providing board materials and information. We provide access to our proxy materials by Internet in accordance with the “notice and access” proxy rules. We also promote the utilization of electronic deposit account statements and e-signature technology, which promotes efficiency and paper reduction.  Additionally, we work primarily with shred vendors who recycle our shred waste.  

PROPOSAL 2: NON-BINDING, ADVISORY VOTE ON EXECUTIVE COMPENSATION

Pursuant to Section 14A of the Securities and Exchange Act of 1934, as amended (the “Exchange Act”), the Corporation is requesting shareholder approval of the compensation of its named executive officers as disclosed in this proxy statement. This proposal, commonly known as a “say-on-pay” proposal, gives shareholders the opportunity to express their views regarding named executive officers’ compensation. The vote is not intended to address any specific items of compensation, but rather the overall compensation of named executive officers and the philosophy, policies, and practices described in this proxy statement. The Corporation believes that the compensation of named executive officers is straightforward, uncontroversial, and designed to discourage executives from taking excessive risk. We believe executive compensation is, in large part, Corporation performance based and not excessive but sufficient to be competitive with peers and retain the talent and skill required to run the corporation at the profitability levels historically enjoyed by shareholders.  Accordingly, the following resolution is submitted for shareholder approval.

The “say-on-pay” vote is an advisory vote, which is not binding on the Corporation. However, the Board and the CRC value the opinions expressed by shareholders through their vote on this proposal and will carefully consider the outcome of the vote when making future compensation decisions with respect to the Corporation’s named executive officers.

At the 2020 Annual Meeting, the majority of shareholders, at the recommendation of the Board, supported a frequency of every three (3) years for future shareholder advisory votes on executive compensation. However, starting with the 2021 Annual Meeting, the Board determined that an annual “say-on-pay” vote provided shareholders more timely input and provided the Board more targeted and consistent feedback for use in effectively implementing changes, as needed, to executive compensation. Accordingly, “say-on-pay” votes will be held on an annual basis.

The Board of Directors unanimously recommends a vote FOR this proposal.

COMPENSATION DISCUSSION AND ANALYSIS

This compensation discussion and analysis explains our executive compensation program for our named executive officers listed below. It also describes the process followed by the CRC for making pay decisions, as well as its rationale for specific decisions related to 2021.

All named executive officers are part of the Senior Management Team, which also includes certain other key officers and executives of subsidiaries who are generally subject to the same compensation programs and governance policies.

Executive Summary

Business Overview and Financial Highlights. The Corporation is the holding company of a high performing community bank with over $3 billion in total assets. We serve our customers through our network of forty-nine branch locations. Our consistent strong earnings, solid asset quality, and excellent capital management are hallmarks of our performance. Key highlights from 2021 include:

Say-on-Pay and Shareholder Engagement. Each year, we carefully consider the results of our previous shareholder say-on-pay vote. In 2021, approximately 76% of the votes cast supported our executive compensation decisions. We periodically engage with shareholders on executive compensation and other corporate governance issues. Based on the feedback we received, our shareholders indicated broad support of our executive compensation program. We will continue to keep an open dialogue with our shareholders to help ensure that we have a regular pulse on investor perspectives.

Best Compensation Practices and Policies. Our executive compensation program includes practices and policies that promote sound compensation governance and are in the best interests of our shareholders and executives:

What Guides our Program

Compensation Philosophy and Objectives. The overall objectives of the executive compensation program are to align the long-term interests of our named executive officers and other executives as closely as possible with those of shareholders and to motivate high performing executives to continue with the Corporation for long, productive careers. The Board’s belief is that shareholder value is created over time through consistent financial and operating performance coupled with strong leadership. This overriding objective affects all elements of the compensation program.

Components of Executive Compensation. The principal components of the executive compensation program are:

In addition to these principal components, the compensation program also includes retirement programs available to all employees and an option to defer compensation. Perquisites are limited and are generally business-related and granted to facilitate the efficiency and productivity of our executives.

Pay Mix. The Corporation’s pay-for-performance philosophy is reinforced through variable compensation, which is an important underpinning of the Corporation’s compensation framework. For 2021, total variable compensation was approximately 36%, as graphically illustrated in the charts below.  The reduced percentage of variable compensation in 2021 as compared to 2020 results from lower incentive paid in 2021 for 2020 performance.  Incentive compensation based on the Corporation's exceptional performance in 2021 will be paid in March 2022.  

The Decision-Making Process

The Role of the CRC. The CRC is responsible for administering the Corporation’s executive compensation program in a manner consistent with the compensation philosophy. Details of the CRC’s authority and responsibilities are specified in its charter, which is available at www.firstcommunitybank.com under Investor Relations. Under the CRC’s charter, it has authority to review and approve the total compensation, including base salary, cash and equity incentives, benefits, and other compensation of the named executive officers.

In making its deliberations, the CRC’s goal is to achieve a balance of fixed and variable compensation that contributes to the attraction and retention of highly qualified executives and ensures that the Corporation’s executive compensation remains competitive over the long term. While the CRC does not use formulas in determining the level or mix of compensation for named executive officers, it evaluates a wide range of quantitative and qualitative factors, which include consistency in reaching targeted goals, the ability to perform in both good and challenging economic times, a history of integrity, evidence that the named executive officer uses good judgment, and the executive’s ability to lead and create future value for the Corporation. In evaluating sustained performance, the Corporation gives weight to the relative performance of each named executive officer in their particular industry segment or function. The CRC also places substantial weight on the Corporation’s overall financial success, including achievement of short- and long-term strategic goals and annual financial results.

In connection with its analysis, the CRC also reviews and considers information provided by its independent compensation consultant and surveys to determine the appropriate level and mix of base salary, incentive pay, and other elements of compensation. The CRC reviews both compensation and performance of peer companies as just one among several factors to inform its decisions so it can set total compensation levels commensurate with the Corporation's performance and strategic initiatives.

The CRC meets at least annually to evaluate the performance, establish performance objectives, and determine compensation for the Chief Executive Officer and President. The Chief Executive Officer and President are not present for any deliberations regarding their compensation. The CRC also annually reviews, evaluates, and approves the following compensation for the other named executive officers and Senior Management Team: base compensation, any incentive compensation, and any long-term equity compensation.

The Role of Senior Management. Each of the named executive officers, except the Chief Executive Officer and President, is a leader of several business units or functions of the Corporation’s banking subsidiary in their areas of expertise. As part of the Senior Management Team, each reports directly to Mr. Mills in his capacity as President of the Corporation and as the Bank’s Chief Executive Officer and President. Mr. Mills then develops the objectives that each individual is expected to achieve, which is derived largely from the Corporation’s financial, budget, and strategic planning processes. Performance is assessed annually, and each named executive officer’s individual performance is assessed against the objectives, the Corporation’s overall performance, and the performance of the named executive officer’s business unit or function. The Chief Executive Officer and President then propose base compensation levels, including any adjustments, as well as any proposed annual incentive compensation or long-term equity compensation for each named executive officer to the CRC. The CRC then considers proposed annual incentive compensation and/or long-term equity compensation, if any, for the named executive officers, other members of the Senior Management Team, and other employees.

The Role of the Independent Compensation Consultant. As part of the Corporation’s ongoing effort to ensure its compensation program complies with industry best practices and meets or exceeds enhanced levels of regulation and scrutiny on executive compensation, the CRC exercises its authority to retain independent compensation consultants, as needed, to provide technical advice and information related to Board and executive compensation. In early 2021, Pearl Meyer & Partners, LLC ("Pearl Meyer") was engaged as the CRC’s independent compensation consultant.

Pearl Meyer reports directly to the CRC and does not provide any additional services to management, although representatives of the firm may meet with members of management, including the Chief Executive Officer and Senior Management Team, for purposes of gathering information on proposals that management may make to the CRC. The CRC has conducted an independence assessment of Pearl Meyer in accordance with SEC rules and concluded that Pearl Meyer is independent.

Peer Groups/Benchmarking Practices.  In 2021, the CRC engaged Pearl Meyer to conduct a benchmarking and peer group exercise.  As a result of this exercise, Pearl Meyer presented to the CRC a recommended peer group that utilized as the primary criteria for inclusion publicly traded U.S. banks with asset sizes of $1.9 billion to $6.2 billion.  The CRC considered the "compatibility" and "comparability" of each company when selecting the 2021 peer group.  The CRC reviewed, among other things, each peer company's asset size, earnings, geographic location, organizational structure and governance, number of employees, number of branch offices, and service offerings.  

Following selection and approval by the CRC of the peer group, the Corporation was positioned near the median of the group in terms of asset size.  As a result, during 2021, the CRC compared the principal elements of total direct compensation against the peers listed below: 

(1) Merged with United Community Banks, Inc. in January 2022.

(2) Merged with F.N.B. Corporation in January 2022.

In addition to the selected peer group, the CRC also considered the executive compensation of peer companies used by proxy advisory firms to ensure reasonable overlap.  

As part of the benchmarking exercise, the CRC reviewed relevant market and survey data on comparable banking organizations as well as other analyses provided by Pearl Meyer. 

Executive positions were matched to the survey and/or proxy data based on job duties using the appropriate scope for asset size.  In addition to reviewing the respective data, the CRC considered recommendations of other key executives, including the Chief Executive Officers.   

2021 Executive Compensation Decisions in Detail

Base Compensation. Base compensation levels are established annually under a methodology intended to maintain parity among the Senior Management Team based on levels of responsibility and the competitive market for executives in comparable positions. Base salary is a critical element of executive compensation because it provides executives with a fixed level of income. In determining base compensation, the CRC considers qualifications and experience, scope of responsibilities, future potential, established goals and objectives, past performance, competitive salary practices at peer companies, internal pay equity, and the tax deductibility of base compensation.

Based on the above criteria, the Chief Executive Officer and President recommend base compensation for all named executive officers to the CRC for its consideration, except the Chief Executive Officer and President do not participate in their respective base compensation determinations. The CRC then considers and approves or declines base compensation adjustments for all named executive officers. Based on the above criteria, the CRC also adjusts base compensation for the Chief Executive Officer and President.

The following table outlines the base compensation adjustments which were made in 2021 based on the above-described base compensation considerations.

*Adjustments were made to base compensation for the named executive officers, as well as other members of the Senior Management Team, in 2021 based on peer and other data as a result of the CRC's engagement with Pearl Meyer and the subsequent independent review of compensation.  As these adjustments were made mid-year, the 2021 base compensation listed in the table above is not the amount of base compensation actually received in 2021, as reflected in the Summary Compensation Table on Page 27.  Rather, this is the annualized amount of each executive's current base compensation as of December 31, 2021.  This is compared against annualized base compensation as of December 31, 2020.  

Annual Incentive Compensation for 2021. In 2021, based on 2020 performance, annual incentive awards earned were paid to named executive officers in the form of cash bonuses (75%) and grants of Corporation stock (25%), subject to a two-year restriction period.  Awards were based on certain evaluation criteria, including Corporation performance compared to strategic objectives as measured by incentive compensation scorecards, and the overall financial and strategic performance of the Corporation. Scorecards were developed and/or reviewed by the CRC in conjunction with review of the Corporation’s strategic plan, objectives, and annual financial budget, during which the Corporation’s performance and growth opportunities are analyzed and goals and objectives are established for the upcoming year(s). These objectives include both objective financial metrics and quantitative and qualitative strategic and operational goals. Financial measurements within the scorecard are calculated using audited financial information obtained from the Corporation’s filed Form 10-K.

The scorecard defines suggested maximum incentive award opportunities as a percentage of each executive’s base salary based on the achievement of predetermined return on average equity (“ROAE”) performance levels. For 2021, based on 2020 performance, no incentive awards are earned if annual ROAE is less than 8.50%.

The scorecard reviews predetermined key performance indicators (“KPI’s”) which also align with the Corporation’s strategic plan objectives and annual financial budget, but focus specifically on selected performance goals of the Corporation. Each KPI is assigned a weighting. The KPI’s for 2020 included:

A performance objective, or target, is established for each KPI. Recognizing the difficulty in precisely defining the appropriate target, and to further discourage imprudent or excessive risk taking to meet a particular KPI, a range of acceptable performance is defined representing the minimum level of performance and maximum level of performance relative to target that results in incentive compensation credit for that KPI.

The CRC retains discretion to reduce or eliminate the award indicated by the above-described process based on its assessment of overall corporate and individual performance. In 2020, the Corporation’s ROAE was 8.54% which resulted in annual incentive compensation paid in 2021 (as further outlined in the Summary Compensation Table) of 15.18% of each named executive officer’s annualized base compensation as of December 31, 2020.

Revisions to Annual Incentive Compensation.  In 2021, the CRC requested that Pearl Meyer review the Corporation’s methodology for awarding annual incentive compensation.  As a result of this review, the CRC retained Pearl Meyer to assist in designing a written plan.  The CRC is preparing a new executive annual incentive plan (the “Executive Incentive Plan”) that will be used for the grant of annual cash incentive compensation going forward, and which should be fnalized in March 2022.

Under the Executive Incentive Plan, target opportunities for the executives will continue to be set as a percentage of each executive’s base compensation, will be based on the achievement of a pre-determined financial measure and several predetermined KPI’s that align with the Corporation’s strategic plan, and will be distributed in cash; however, the new financial return performance range and the performance range for the KPI’s will be based on the prior three-year average results of banks comprising the peer group along with other information deemed relevant by the CRC such as the Corporation’s historical and projected performance, changes in accounting regulations and tax rates, and economic factors impacting the banking industry.   In addition, the CRC’s discretion in the award process will be greatly reduced under the new Executive Incentive Plan.  Under the prior methodology, CRC discretion accounted for one-fourth of the overall potential payout and the CRC had ultimate discretion with respect to the remaining KPIs.  However, under the new Executive Incentive Plan, the CRC will only have discretion to reduce the award calculated under the plan if the CRC believes a calculated award to be inconsistent with the best interests of the Corporation or shareholders, such as based on the CRC’s assessment of individual executive performance.  

The CRC believes that adopting a  new written plan will provide greater clarity and transparency than the current methodology. Specifically,  the performance range under the Executive Incentive Plan will be based on peer group results which significantly limits the CRC’s discretion in setting the performance range and determining whether the performance goals have been achieved.  

Long-Term Equity Compensation. The CRC believes that long-term equity compensation supports the Corporation’s commitment to sound corporate governance, aligns the financial interests of executives with the interests of shareholders, specifically discourages imprudent, unreasonable, or excessive risk taking, and rewards executives and leaders of core functional business units for achievement of the Corporation’s long-term strategic goals. Long-term equity compensation also supports the Corporation’s leadership retention objectives and reinforces a strong ownership culture. The CRC believes a meaningful portion of the Corporation’s named executive officers’ compensation should be in the form of long-term, equity compensation. However, as discussed below, the Corporation must meet a required level of performance before any long-term equity compensation is awarded.  The CRC will not grant any equity compensation in any year in which the Corporation’s minimum three (3)-year rolling ROAE is below 8.5%, or such other minimum ROAE as determined by the CRC from time to time considering economic conditions, operating results, and adjustments to the Corporation’s strategic plan goals. The financial measurements utilized in the administration of the equity compensation methodology are calculated using audited financial information.

When granting restricted stock to named executive officers or other members of the Senior Management Team, the CRC determines the applicable vesting schedule for the granted shares reflecting attainment of designated performance goals, service to the Corporation through a prescribed future date, and/or other criteria specified in the award documents. Under the plan, the CRC may provide for the payment of any applicable dividends paid with respect to any shares of Common Stock subject to a restricted stock award during the period prior to lapse.

Utilizing this methodology, on March 19, 2021, the CRC awarded long-term incentive equity compensation under the 2012 Plan to the named executive officers in the form of restricted Common Stock of the Corporation. Such shares were subject to a ratable three (3)-year vesting schedule and were further subject to a five (5)-year holding period subsequent to vesting.  However, on November 3, 2021, the CRC approved the exchange of these unvested restricted stock awards for unvested  stock options  of equivalent value. These stock options will vest over a period of three years. The CRC elected to approve the aforesaid exchange of the unvested restricted stock awards for unvested stock options after the Corporation initiated a review of its restricted stock awards under the 2012 Plan in response to a shareholder letter received in June 2021. The shareholder letter alleged that, although the Corporation complied with the overall share issuance limit in the 2012 Plan, grants of restricted stock and performance awards prior to 2021 allegedly exceeded a sub-limit in the 2012 Plan that limited the award of certain forms of restricted stock, restricted stock units, or performance awards to 300,000 shares.

The Corporation disagrees with the assertion in the shareholder letter.  Nevertheless, the CRC took the above-described actions prior to vesting of the restricted share awards in order to ensure that the Corporation remained in compliance with the referenced sub-limit during 2021.

The 2012 Plan expires by its own terms in 2022.  Accordingly, any long-term incentive compensation granted in 2022, or in subsequent years, will be granted under the 2022 Plan, subject to shareholder approval of the same at the Annual Meeting.  Beginning in 2022, the CRC intends to award most long-term equity compensation to named executive officers and other members of the Senior Management Team in the form of Performance Restricted Stock with a three-year cliff vesting schedule. 

Other Practices, Policies, and Guidelines

Stock Ownership Guidelines. The Corporation previously adopted the First Community Bankshares, Inc. Stock Ownership Policy, which encourages ownership of the Corporation’s Common Stock by the directors, named executive officers, and other members of the Senior Management Team in order to align the interests of the Corporation’s key decision makers with the Corporation’s shareholders. For each named executive officer, except the Chief Executive Officers of the Corporation and First Community Bank, the guidelines require Corporation stock ownership of value equal to 2.5 times the officer’s base compensation. For the Chief Executive Officers, the guidelines require ownership of value equal to 3.5 times that Chief Executive Officer’s respective base compensation. In addition to all holding requirements or other restrictions placed upon granted stock or options pursuant to the respective grant agreement as discussed above, the Stock Ownership Policy requires all directors, named executive officers, and other members of the Senior Management Team to hold all shares received as the result of the vesting or payment of any equity awards or obtained by exercising stock options which were granted from and after the original effective date of this policy until such time as the holder is in compliance with this policy. Notwithstanding anything else in this section, members of the Senior Management Team and directors may immediately sell shares acquired by exercising stock options for the limited purposes of paying the exercise price of the stock option and any applicable tax liability.

Each year, the CRC receives a report regarding Senior Management Team and director compliance with this policy. As of December 31, 2021, all officers and directors are in compliance with the restrictions contained in the policy and have met or are making satisfactory progress toward meeting their respective guideline level, many of which increased in 2021. Based upon the holding requirements, no specific timeline for achieving the guideline level has been established.

Clawback Policy. Restricted shares granted to named executive officers or other members of the Senior Management Team as long-term equity compensation are subject to clawback. The Corporation’s clawback policy requires recoupment if the Corporation is required to prepare an accounting restatement due to the Corporation’s material noncompliance with any financial reporting requirement under applicable securities laws which would result in the restatement of the Corporation’s financial statements. In the event of a clawback, the executive officer agrees to return the entirety of the award to the Corporation. Awards will not be subject to clawback due to immaterial corrections or changes to the Corporation’s relevant financial statements or due to a restatement that is voluntary or self-imposed by the Corporation.

Anti-Hedging Policy. All named executive officers of the Corporation are subject to the First Community Bankshares, Inc. Insider Trading Policy, inclusive of its anti-hedging provisions. For more information, please see page 15.

Retirement Plans. The Corporation maintains certain retirement plans for some or all employees as follows:

KSOP Plan.

The Corporation offers to most of its employees, including the named executive officers, a qualified defined contribution Employee Stock Ownership and 401(k) plan known as the “KSOP". The KSOP Plan is administered by the CRC.

WRAP Plan.

The First Community Bankshares, Inc. Deferred Compensation Plan, referred to as the WRAP, is a voluntary, non-tax qualified deferred compensation plan available to certain employees, including all named executive officers. Under the WRAP, participants may defer a portion of their base and/or annual incentive compensation. The WRAP is intended to mirror the Corporation’s qualified KSOP and may include a discretionary match that coincides with a match made to the KSOP to the extent participants cannot otherwise receive the full match in the KSOP.

SERP.

The Corporation previously provided a defined retirement benefit to certain named executive officers and certain other key employees pursuant to a supplemental executive retention plan (the “SERP”). The SERP is unfunded and was designed to provide a benefit at or after age sixty-two (62) upon separation from service. The benefit was targeted at a maximum of thirty-five percent (35%) of final average compensation subject to an annual benefit limit of $80,000. Final average compensation was calculated as the average of the participant’s last three (3) full calendar years’ compensation, which compensation would have been determined by assuming a three percent (3%) compound annual rate of increase to the participant’s annualized base monthly salary as of the date that the participant enters the SERP. Vesting was on a graded schedule as follows: twenty-five percent (25%) vesting after five (5) years of service; fifty percent (50%) vesting after ten (10) years of service; seventy-five percent (75%) vesting after fifteen (15) years of service; an additional five percent (5%) vesting for each year of service beyond fifteen (15) years, and full vesting after twenty (20) years of service or upon reaching age sixty-two (62).  As of December 31, 2021, the SERP was frozen to new participants, further vesting, and further accruals.  All current participants will receive, upon separation from service at or after age sixty-two (62), only such benefit as was accrued and vested as of December 31, 2021.

Other Benefits and Perquisites

Named executive officers participate in other employee benefit plans generally available to all employees on the same terms as similarly situated employees. These plans include medical, dental, group life insurance, and group disability programs, as well as flexible spending accounts for reimbursement of medical expenses. The Corporation does not provide excessive perquisites to its executive officers, and those perquisites offered are business-related and granted to facilitate the efficiency and productivity of our executives. Named executive officers, at the discretion of the CRC, may be eligible for executive life insurance, club dues, and automobile allowance. The costs associated with providing these benefits and other items of compensation for named executive officers are reflected in the Summary Compensation Table on page 27. A chart disclosing the value of these additional items is found on page 28 entitled “All Other Compensation and Benefits.”

Employment Agreements

The Corporation provides named executive officers with written employment agreements. Each agreement is consistent with the prototype agreement previously reported on a Form 8-K filed on April 16, 2015. Accordingly, the Corporation maintains uniformity among the named executive officers concerning the terms of their employment. The agreements have an initial term of three (3) years and automatically extend for an additional year each January 1^st unless the Corporation or the respective executive gives notice that the employment term will not be extended. There are no golden parachute, tax gross-up, or other similar type provisions contained in these contracts.

Each agreement provides for continuation of base compensation for thirty-six (36) months in the event of a change of control coupled with terminated employment either without “Cause” by the Corporation or by the executives for “Good Reason” (as these terms are defined in the agreements). The Corporation may terminate the employment of any executive at any time for “Cause” without further obligation. If the Corporation terminates employment for any reason other than for “Cause” or the executive terminates their employment for “Good Reason,” the Corporation will generally be obligated to provide compensation and benefits specified in the agreement for the balance of the term of the agreement. Upon the termination of employment, the executive will be subject to non-competition and non-solicitation restrictions. If the executive dies while employed by the Corporation, the Corporation will pay their estate through the end of the month in which their death occurs. If their employment is terminated as a result of permanent disability as determined pursuant to the agreement, then the Corporation has the right to terminate employment before the end of the applicable term. See the section entitled “Potential Payments Upon Termination,” including the related tables, beginning on page 32 for an estimate of the benefits that the named executive officers would be entitled to receive pursuant to their respective employment agreements under various employment termination scenarios.

Risk Considerations

The CRC views the Corporation’s compensation program with a long-term focus. Under the program, an executive may achieve the greatest amount of compensation through the Corporation’s sustained superior performance over long periods of time. The Corporation believes this provides a strong incentive to manage the Corporation for the long term with a clear message to avoid excessive risk in the near term. The CRC maintains full discretion to adjust compensation based on performance and adherence to the Corporation’s values.

In 2021, the CRC continued its extensive review of the relationship between risk management and incentive compensation to ensure that incentive compensation does not encourage engaging in unnecessary or excessive risks that threaten the value of the Corporation. The CRC concluded that the Corporation’s compensation policies and practices do not encourage excessive or inappropriate risk and instead encourage behaviors that support sustainable long-term value creation. For instance, the CRC does not use highly leveraged, short-term incentives that drive high risk investments at the expense of long-term company value. Rather, the Corporation’s annual incentive compensation is based on balanced performance metrics that promote disciplined progress focused on longer-term goals.

Tax Deductibility of Compensation

Under Section 162(m) of the Internal Revenue Code (the "Code"), publicly held corporations generally may not take a tax deduction for compensation in excess of $1 million paid to any named executive officer during any fiscal year. There was an exception to the $1 million limitation for performance-based compensation meeting certain requirements. However, as a result of changes made by the Tax Cuts and Jobs Act of 2017, starting with the 2018 fiscal year Section 162(m) prohibits deducting compensation, including performance-based compensation, in excess of $1 million paid to anyone who serves as the chief executive officer or chief financial officer, or who is among the three most highly compensated executive officers. The only exception to this rule is for compensation (including performance-based compensation) that is paid pursuant to a binding contract in effect on November 2, 2017, that would have otherwise been deductible under the prior Section 162(m) rules.

To maintain flexibility in compensating executive officers in a manner designed to promote varying corporate goals, the CRC has not adopted a policy requiring all compensation to be deductible. However, the CRC considers deductibility under Section 162(m) with respect to compensation arrangements for executive officers. In 2021, none of the named executive officers received compensation that the Corporation could not deduct by reason of Section 162(m) either before or after the changes made by the Tax Cuts and Jobs Act of 2017.

Compensation and Retirement Committee Report

The CRC has reviewed the Compensation Discussion and Analysis and discussed that analysis with management. Based on its review and discussions with management, the CRC recommended to the Board of Directors that the Compensation Discussion and Analysis be included in the Corporation’s 2021 Annual Report on Form 10-K and the Corporation’s 2022 proxy statement. The following independent directors, who comprise the CRC, provide this report:

C. William Davis (Chairman)

Samuel L. Elmore

Richard S. Johnson

2021 Summary Compensation Table

2021 All Other Compensation and Benefits

The Corporation provides the named executive officers with other perquisites and personal benefits as shown in the “All Other Compensation” column of the “2021 Summary Compensation Table.” The Corporation and the CRC believe these are reasonable and consistent with its overall compensation program and better enable the Corporation to attract and retain superior employees for key positions. The CRC periodically reviews the levels of perquisites and other personal benefits provided to the named executive officers. The Corporation provides additional detail of those benefits in the tables below.

Grants of Plan-Based Awards

The following table sets forth information concerning individual grants of stock awarded in fiscal year 2021 to the named executive officers.

Outstanding Equity Awards at December 31, 2021

The following table includes information on the current holdings of unexercised stock options and stock awards that have not yet vested by the named executive officers as of December 31, 2021. Each equity grant is shown separately for each named executive officer.

2021 Options Exercised and Stock Vested

The following table provides information for the named executive officers with respect to (1) stock option awards exercised during 2021, including the number of shares acquired upon exercise and the value realized at such time, and (2) the number of shares acquired upon the vesting of restricted stock awards and the value realized at such time, before the payment of any applicable withholding tax and brokerage commissions.

2021 Pension Benefits

The table below sets forth the details on pension benefits for the named executive officers under the following plan:

The Corporation’s Executive SERP. The Corporation’s SERP is unfunded and not qualified for tax purposes. The values in the above table reflect the actuarial present value of the named executive officer’s accumulated benefit under the SERP, computed as of December 31, 2021. As of December 31, 2021, the SERP was frozen to new participants; however, previously, employees considered highly compensated under ERISA and other senior management employees were eligible to participate in the SERP at the recommendation of the Chief Executive Officer as approved by the CRC. All participants in the SERP prior to December 31, 2021, will receive, upon separation of service at or after age 62, only such benefit as was accrued and vested as of December 31, 2021.  Only those named executive officers currently approved for participation are included in the above table. Refer to page 25 of this proxy statement for a more detailed discussion of the SERP and to Note 13 of the Consolidated Financial Statements in the Annual Report for the year ended December 31, 2021, for discussion of the methodologies and assumptions underlying the projected SERP benefits.

2021 Non-Qualified Deferred Compensation

Deferral of Salary.  The named executive officers, like any employee otherwise ineligible to fully participate in the KSOP, who meets the Code definition of being “highly compensated,” have historically been eligible to elect to defer up to seventy-five percent (75%) of their base salary and/or cash incentive compensation to the Corporation’s WRAP plan, in the same way that not highly compensated employees may defer to the KSOP.  Deferrals to the WRAP are invested as directed by each participant and are matched at the discretion of the Board of Directors in conjunction with and subject to limits established each year by the Board of Directors for elective deferrals to the KSOP. Earnings on deferrals are based on the investment elections made by the individual WRAP participants and no guaranteed return is available to any named executive officer participating in the WRAP.  On an annual basis, each WRAP participant is allowed to designate or modify the percentage of salary to defer to the WRAP in compliance with Code Section 409A.  The table below provides detail regarding non-qualified deferred compensation of the named executive officers.  Balances previously deferred by the named executive officers to a second non-qualified plan, known as the “Deferred Compensation Plan,” have been combined with the WRAP deferrals and reported in a single table below.  Distributions from the WRAP are only available post-termination or retirement and cannot be taken without a minimum of six (6) months’ separation from employment in compliance with Code Section 409A.  Only those named executive officers who currently participate in the WRAP are included in the below table.

Potential Payments upon Termination

The information below describes the compensation that would become payable under existing plans and agreements based on the named executive officer’s actual termination of employment coupled with the assumption that the named executive officer’s employment had terminated on December 31, 2021, given the named executive officer’s compensation, years of service, and a presumed age of 62.

These benefits are in addition to benefits generally available to other non-executive officers, who are salaried employees, such as distributions under the KSOP and disability insurance benefits. The Corporation has estimated the amounts of compensation payable to each named executive officer under a variety of termination circumstances, including: early retirement, involuntary termination not for “Cause,” termination for “Cause,” termination following a change of control, and death of the named executive officer.

Since a variety of factors might affect the nature and amount of any benefits payable upon the events discussed below, actual amounts may vary from what the Corporation has projected.

Regardless of the manner in which a named executive officer’s employment terminates, he or she may be entitled to receive amounts earned during their term of employment. Such amounts include:

In the event of an involuntary termination without “Cause” or termination by a named executive officer for “Good Reason” other than a change in control, the Corporation shall pay the named executive officer severance in the form of continuing to pay their base salary for the balance of the existing term of the existing employment agreement. In addition, the Corporation shall maintain and continue to provide health, dental, accident and disability insurance and certain other executive benefit plans, programs and arrangements until the earlier of (i) the expiration of the remaining term; (ii) the named executive officer commences full-time employment with another employer or commences self-employment where earnings are expected to be, on an annualized basis, 75% or more of the base salary as of the date of termination; or (iii) the date on which the Corporation determines that the named executive officer has violated any one of several specified sections of the agreement. Additional details regarding these agreements are set forth in the discussion beginning on page 26. As required by said employment agreements, in the event of termination without “Cause,” termination due to change of control, or termination by a named executive officer for “Good Reason,” payment of any severance amounts due under the employment agreement is conditioned upon the execution of a separation agreement containing a valid waiver and release of any and all claims and a reaffirmation of the restrictions upon the executive contained in the employment agreement.

Payments Made Upon Retirement

In the event of the retirement of a named executive officer, in addition to the items identified above:

Payments Made Upon Death or Disability

In the event of the death or disability of a named executive officer, in addition to the benefit payments made upon termination or retirement, the named executive officer or their beneficiaries may receive benefits under the Corporation’s disability plan or executive life insurance plan, as appropriate, if enrolled. Currently, Mr. Stafford, II is the only named executive officer enrolled in a split dollar life insurance plan. If Mr. Stafford had died on December 31, 2021, his survivors would have received the projected amount of $100,000 from the proceeds of any individual split dollar life insurance policy. The premiums associated with this policy are included in the “2021 All Other Compensation and Benefits” table on page 29. The estimated amounts payable to the beneficiaries are derived by reflecting a deduction for repayment to the Corporation of the cash surrender value of the split dollar life insurance policies and distribution of eighty percent (80%) of the face value of any remaining insurance proceeds to the respective beneficiaries and twenty percent (20%) to the Corporation.

Payments Made Upon a Change of Control

As previously stated, the Corporation has entered into employment agreements with each of the named executive officers, which agreements include change of control provisions. Under these provisions and subject to certain requirements and restrictions, if within three (3) years after a change of control, a named executive officer is separated from service either because of (i) non-renewal of the agreement by the Corporation, (ii) termination by the Corporation without “Cause,” (iii) termination by the named executive officer for “Good Reason,” or (iv) termination by the named executive officer due to forced relocation, the named executive officer shall receive severance in the form of continued payment of their base salary and providing all other compensation benefits of a like kind and value as in effect at the time of the change of control, or on the date of termination, whichever is greater, for a period of thirty-six (36) months. Additional information relating to the terms of said employment agreements, including the change of control provisions, are set forth in the discussion beginning on page 26.

Potential Incremental Payments Table

The following table shows the potential incremental value transfer to each named executive officer under various termination scenarios. The table was prepared as though each named executive officer’s employment was terminated on December 31, 2021, with proper prior notice if applicable.