Item 4.01 Changes in Registrant's Certifying Accountant.
(a) Dismissal of Independent Registered Public Accounting Firm.
After conducting an extensive and competitive request for proposals and
diligence process, which process included an assessment of the reasonableness of
audit fees proposed by each provider, on March 9, 2022, the Audit, Compliance
and Enterprise Risk Committee (the "Audit Committee") of the Board of Directors
of First Community Bankshares, Inc. (the "Registrant") selected the proposal of
Elliott Davis, PLLC ("Elliott Davis") and approved the engagement of Elliott
Davis as the independent registered public accounting firm for the Registrant
for the year ending December 31, 2022. Elliott Davis' aforesaid proposal
included the following statement which influenced the Registrant's engagement
decision.
"Fees are based upon the assumption there will be no significant changes in the
Company or the scope of our engagement beyond that discussed to date. If changes
occur beyond predicted levels, we will discuss with you the related impact on
our accounting and tax procedures and will negotiate mutually acceptable
adjustments to our proposed fees. These fees exclude any time spent by us
regarding startup time and transition. We will absorb these costs as part of
our investment in a longterm relationship."
Elliott Davis' proposal included a three-year fee quote which reflected a fee of
$217,000 for the audit of the Registrant's consolidated financial statements and
internal control over financial reporting for the year ended December 31, 2023.
On April 12, 2023, Elliott Davis informed the Registrant of its decision to
adjust fees for the year ending December 31, 2023. On April 19, 2023, Elliott
Davis provided the Registrant with an engagement letter for the audit of the
Registrant's consolidated financial statements for the year ended December 31,
2023, containing a fee of $400,000. Elliott Davis' proposed 2023 fee constituted
a 90% increase over the prior year and an 84% increase over Elliott
Davis' original proposal. Elliott Davis cited a change in desired
profitability as explanation for the increase.
As a result of the aforesaid Elliott Davis fee increase, on May 9, 2023, the
Audit Committee of the Registrant approved the dismissal of Elliott Davis as the
independent registered public accounting firm for the Registrant.
The report of Elliott Davis on the consolidated financial statements of the
Registrant for the year ended December 31, 2022, contained no adverse opinion or
disclaimer of opinion, and such report was not qualified or modified as to
uncertainty, audit scope, or accounting principles.
The audit report of Elliott Davis on the effectiveness of the Registrant's
internal control over financial reporting as of December 31, 2022, also did not
contain any adverse opinion or disclaimer of opinion.
During the year ended December 31, 2022, and the subsequent interim period
through May 9, 2023, the Registrant had no disagreements (as that term is
defined in Item 304(a)(1)(iv) of Regulation S-K and the related instructions)
with Elliott Davis on any matter of accounting principles or practices,
financial statement disclosure, or auditing scope or procedure, which
disagreements if not resolved to the satisfaction of Elliott Davis would have
caused it to make a reference to the subject matter of the disagreements in
connection with its report on the Registrant's financial statements for such
period.
No reportable event as described in paragraph (a)(1)(v) of Item 304 of
Regulation S-K occurred during the year ended December 31, 2022, and the
subsequent interim period through May 9, 2023.
The Registrant provided a copy of the foregoing disclosures to Elliott Davis
prior to the date of filing of this report and requested that Elliott Davis
furnish the Registrant with a letter addressed to the United States Securities
and Exchange Commission ("SEC") stating whether or not Elliott Davis agrees with
the above disclosures. A copy of Elliott Davis' letter to the SEC dated May 15,
2023, furnished in response to the Registrant's said request, is filed as
Exhibit 16.1 to this Current Report on Form 8-K.
(b) Appointment of New Independent Registered Public Accounting Firm.
On May 9, 2023, the Audit Committee of the Registrant engaged Crowe, LLP as the
Registrant's independent registered public accounting firm for the year ended
December 31, 2023, subject to completion of Crowe, LLP's standard client
acceptance procedures. During the fiscal years ended December 31, 2022 and 2021,
and the subsequent interim period through May 9, 2023, Crowe, LLP was not
consulted by the Registrant, or anyone on its behalf, on any matter referenced
in Item 304(a)(2)(i) or (ii) of Regulation S-K.
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(c) Proposal to Ratify Independent Registered Public Accounting Firm at Annual
Meeting.
Prior to receipt of the aforesaid notice on April 12, 2023, that Elliott Davis
intended to increase the Registrant's audit fees and the ensuing dismissal of
Elliott Davis, the Registrant mailed and filed Notice of the Registrant's 2023
Annual Meeting of Shareholders and Proxy Statement, which included a proposal
for shareholders to ratify the engagement of Elliott Davis as the Registrant's
independent registered public accounting firm for the year ending December 31,
2023. The Registrant will retain this proposal on the agenda for its Annual
Meeting of Shareholders. All proxies received by the Registrant will be voted at
the Registrant's Annual Meeting in accordance with the instructions of each
shareholder contain therein, including voting to ratify the aforesaid engagement
of Elliott Davis, if so directed. In light of the aforesaid fee developments
with respect to the engagement of Elliott Davis, the Board of Directors and
management of the Registrant will abstain from voting on, or will vote against,
the proposal to ratify the engagement of Elliott Davis. Ratification of the
engagement of Elliott Davis by the shareholders at the Registrant's Annual
Meeting will not alter the dismissal of Elliott Davis or the appointment of
Crowe, LLP, by the Registrant's Audit Committee as the Registrant's independent
registered public accounting firm for the year ended December 31, 2023. The
Company intends to seek ratification of its independent registered public
accounting firm for the years ending December 31, 2023 and December 31, 2024 at
the Registrant's 2024 Annual Meeting of Stockholders.
Item 9.01 Financial Statements and Exhibits.
(d) Exhibits
The following exhibits are included with this report:
Exhibit No. Exhibit Description
16.1 Letter from Elliott Davis, PLLC,
dated May 15, 2023, regarding
change in certifying accountant
104 Cover Page Interactive Data File
(formatted as Inline XBRL)
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Forward-Looking Statements
This Current Report on Form 8-K contains forward-looking statements. These
forward-looking statements are based on current expectations that involve risks,
uncertainties, and assumptions. Should one or more of these risks or
uncertainties materialize or should underlying assumptions prove incorrect,
actual results may differ materially. These risks include: changes in business
or other market conditions; the timely development, production and acceptance of
new products and services; the challenge of managing asset/liability levels; the
management of credit risk and interest rate risk; the difficulty of keeping
expense growth at modest levels while increasing revenues; and other risks
detailed from time to time in the Company's Securities and Exchange Commission
reports, including but not limited to the Annual Report on Form 10-K for the
most recent year ended. Pursuant to the Private Securities Litigation Reform Act
of 1995, the Company does not undertake to update forward-looking statements to
reflect circumstances or events that occur after the date the forward-looking
statements are made.
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