First Community Bancshares, Inc. Announces Third Quarter 2015 Results and Quarterly Dividend

BLUEFIELD, Va., Oct. 27, 2015 (GLOBE NEWSWIRE) — First Community Bancshares, Inc. (NASDAQ:FCBC) (www.fcbinc.com) (the “Company”) today announced financial results for the quarter and nine months ended September 30, 2015. The Company reported net income of $6.26 million for the quarter and $18.39 million for the nine months ended September 30, 2015. Net income available to common shareholders totaled $6.26 million, or $0.34 per diluted common share, for the quarter and $18.29 million, or $0.97 per diluted common share, for the nine months ended September 30, 2015. Core earnings totaled $6.24 million for the quarter and $18.35 million for the nine months ended September 30, 2015.

The Company also announced today that the Board of Directors declared a quarterly cash dividend to common shareholders of fourteen cents ($0.14) per common share. The quarterly dividend is payable to common shareholders of record on November 6, 2015, and is expected to be paid on or about November 20, 2015. The current year marks the 30th consecutive year of cash dividends paid to stockholders.

Third Quarter 2015 Highlights –

  • The third quarter of 2015 marks the 3rd consecutive quarter of growth in linked quarter earnings per share.
  • The Company’s non-covered loan portfolio as of September 30, 2015, increased $35.62 million, or 2.28%, compared with June 30, 2015, and increased $33.10 million, or 2.11%, compared with December 31, 2014.
  • The Company repurchased 334,319 common shares during the third quarter, bringing total repurchased shares to 1,018,726 during the first nine months of 2015.
  • The Company significantly exceeds regulatory “well capitalized” targets as of September 30, 2015.

Net Interest Income

Net interest income decreased $346 thousand, or 1.57%, to $21.67 million for the third quarter of 2015 compared with the same quarter of 2014. The tax equivalent net interest margin decreased to 4.05% for the third quarter of 2015 compared with 4.06% for the same quarter of 2014. Total interest income decreased $1.40 million, or 5.45%, to $24.35 million for the third quarter of 2015 compared with the same quarter of 2014. The tax equivalent yield on loans increased one basis point to 5.28% while the average loan balance decreased $90.98 million, or 5.15%, to $1.68 billion for the third quarter of 2015 compared with the same quarter of 2014. The decrease in net interest income and the average loan balance is primarily due to loans sold in divestiture activities during the fourth quarter of 2014 and decreases in the covered loan portfolio compared to the third quarter of 2014.

Purchased credit impaired (“PCI”) loan interest accretion totaled $8.77 million for the third quarter of 2015, of which $3.33 million was received in cash, compared to accretion income of $8.72 million for the same quarter of 2014, of which $3.21 million was received in cash. The normalized net interest margin, which excludes non-cash loan interest accretion, was 3.59% for the third quarter of 2015 and 3.75% for same quarter of 2014. The normalized yield on loans was 4.84% for the third quarter of 2015 compared to 4.93% for the same quarter of 2014.

Total interest expense decreased $1.06 million, or 28.29%, to $2.68 million for the third quarter of 2015 compared with the same quarter of 2014. Deposit costs decreased $398 thousand, or 22.33%, to $1.38 million for the third quarter of 2015 compared with the same quarter of 2014, reflecting a 9 basis point decrease in the average rate paid on interest-bearing deposits. Borrowing costs decreased $659 thousand, or 33.73%, to $1.30 million for the third quarter of 2015 compared with the same quarter of 2014 primarily due to Federal Home Loan Bank (“FHLB”) debt prepayments. The average rate paid on interest-bearing liabilities decreased 19 basis points to 0.63% for the third quarter of 2015 compared with the same quarter of 2014. The average balance of interest-bearing liabilities decreased $121.94 million, or 6.75%, to $1.69 billion for the third quarter of 2015 compared with the same quarter of 2014, which included a $63.93 million decrease in average interest-bearing deposits and a $58.02 million decrease in average total borrowings.

Noninterest Income

Noninterest income decreased $593 thousand, or 7.73%, to $7.07 million for the third quarter of 2015 compared with the same quarter of 2014, which was largely due to a $672 thousand, or 61.31%, increase in the net amortization expense related to the FDIC indemnification asset as a result of continuing better than expected performance in the covered loan portfolio. Wealth management revenues increased $120 thousand, or 17.91%, for the third quarter of 2015 compared with the same quarter of 2014. The Trust and Wealth Management Divisions reported $710 million in combined assets under management as of September 30, 2015. Service charges on deposits and other service charges and fees increased $260 thousand, or 4.76%, to $5.72 million for the third quarter of 2015 compared with the same quarter of 2014. Insurance commissions decreased $45 thousand, or 2.65%, for the third quarter of 2015 compared with the same quarter of 2014. The Company incurred no other-than-temporary impairment charges during the third quarter of 2015 compared to $219 thousand during the same quarter of 2014 related to a non-Agency mortgage-backed security that was sold during the fourth quarter of 2014.  The Company realized a $39 thousand net loss on the sale of securities in the third quarter of 2015 compared to a net gain of $320 thousand in the same quarter of 2014. Other operating income decreased $116 thousand, or 13.83%, for the third quarter of 2015 compared with the same quarter of 2014.

Noninterest Expense

Noninterest expense decreased $2.45 million, or 11.41%, to $19.02 million for the third quarter of 2015 compared with the same quarter of 2014, which was largely due to the absence of FHLB debt prepayment fees. The Company incurred fees of $3.05 million related to the prepayment of FHLB convertible advances during the third quarter of 2014. Salaries and employee benefits increased $47 thousand, or 0.47%, to $9.97 million for the third quarter of 2015 compared with the same quarter of 2014. Full-time equivalent employees totaled 677 as of September 30, 2015, a decrease of 14 employees compared with the same period of the prior year. The decrease was primarily due to branch consolidation and divestiture activities offset by the Bank of America branch acquisition that occurred during the fourth quarter of 2014. Occupancy, furniture, and equipment expenses increased $21 thousand, or 0.78%, to $2.70 million for the third quarter of 2015 compared with the same quarter of 2014. Other operating expenses increased $754 thousand, or 15.28%, to $5.69 million for the third quarter of 2015 compared with the same quarter of 2014, which included a $641 thousand increase in the net loss on sales and expenses associated with other real estate owned (“OREO”). The non-GAAP efficiency ratio for the third quarter of 2015 was 60.26% compared to 58.21% for the same quarter of 2014.

Allowance for Loan Losses and Asset Quality

The allowance for loan losses totaled $20.13 million as of September 30, 2015, a decrease of $100 thousand compared to $20.23 million as of December 31, 2014, and a decrease of $1.03 million compared to $21.16 million as of September 30, 2014. As of September 30, 2015, $20.11 million of the allowance was attributed to the non-PCI loan portfolio and $20 thousand was attributed to the PCI loan portfolio. Non-covered loans and OREO are those assets not covered by FDIC loss share agreements. The allowance for loan losses, excluding PCI loans, as a percentage of non-covered loans was 1.26% as of September 30, 2015, compared with 1.29% as of December 31, 2014, and 1.28% as of September 30, 2014. Allowance activity in the third quarter of 2015 included a $381 thousand provision for loan losses compared to a $2.44 million recovery of loan losses for the same quarter of 2014. Activity in the allowance also included a recovery of loan losses recorded through the FDIC indemnification asset of $75 thousand in the third quarter of 2015, a decrease of $35 thousand compared to the recovery in the third quarter of 2014. The Company realized net charge-offs of $437 thousand in the third quarter of 2015, an increase of $234 thousand compared to $203 thousand in the same quarter of 2014. The ratio of annualized net charge-offs to average non-covered loans was 0.11% for the third quarter of 2015, which represents an increase of 6 basis points compared with 0.05% for the third quarter of 2014.

Non-covered delinquent loans, which are comprised of loans 30 days or more past due and nonaccrual loans, as a percentage of total non-covered loans increased to 1.44% as of September 30, 2015, compared to 1.28% for the same period of the prior year. Non-covered nonaccrual loans totaled $17.10 million as of September 30, 2015, compared to $10.56 million as of December 31, 2014, and $11.48 million as of September 30, 2014. At quarter-end, the Company’s non-covered nonaccrual loans as a percentage of total non-covered loans were 1.07%, compared to 0.67% at year-end 2014 and 0.70% for the same period of the prior year. As of September 30, 2015, the Company’s non-covered nonperforming loans as a percentage of total non-covered loans were 1.07% and non-covered nonperforming assets as a percentage of total non-covered assets were 0.93%.

As of September 30, 2015, total nonperforming assets, including the covered and non-covered loan portfolios, consisted of $17.10 million in nonaccrual loans, $3 thousand in accruing loans past due 90 days or more, $74 thousand in unseasoned, accruing troubled debt restructurings, and $5.09 million in OREO. In comparison, total nonperforming assets consisted of $12.99 million in nonaccrual loans, $2.73 million in unseasoned, accruing troubled debt restructurings, and $12.96 million in OREO as of December 31, 2014. In addition, total non-covered nonperforming assets increased $1.72 million, or 8.39%, and total covered nonperforming assets decreased $3.86 million, or 44.07%, as of September 30, 2015, compared to December 31, 2014.

Balance Sheet and Capital

Consolidated assets totaled $2.48 billion as of September 30, 2015, a decrease of $129.82 million, or 4.98%, compared with $2.61 billion as of December 31, 2014. The change in consolidated assets was primarily driven by a $169.76 million, or 86.23%, decrease in federal funds sold as liquidity was used to reduce high cost borrowings and deposits, redeem the Company’s convertible preferred shares and repurchase common stock. As of September 30, 2015, securities available for sale increased $56.10 million and securities held to maturity increased $14.65 million compared to December 31, 2014.

Consolidated liabilities totaled $2.13 billion as of September 30, 2015, a decrease of $123.27 million, or 5.45%, compared with $2.26 billion as of December 31, 2014. The change in consolidated liabilities was driven by a $97.86 million decrease in deposits and a $27.04 million decrease in FHLB and other borrowings. The Company prepaid an additional $25 million of a $50 million FHLB convertible advance with a May 2017 maturity and 4.15% interest rate during the second quarter of 2015. The prepayment resulted in a pre-tax penalty of $1.70 million.

Stockholders’ equity totaled $344.83 million as of September 30, 2015, a decrease of $6.55 million, or 1.86%, compared with $351.37 million as of December 31, 2014. The Company redeemed all outstanding shares of its convertible preferred stock during the first quarter of 2015, resulting in the redemption of 2,367 preferred shares totaling $2.37 million. Additionally, the Company repurchased 1,018,726 common shares at a weighted average cost of $17.13 per share and paid a cash dividend of $0.40 per common share during the first nine months of 2015. Book value per common share increased 4.26% to $18.83 as of September 30, 2015, compared with $18.06 as of December 31, 2014. Tangible book value per common share increased 3.66% to $13.02 as of September 30, 2015, compared with $12.56 as of December 31, 2014.

The Company significantly exceeds regulatory “well capitalized” targets as of September 30, 2015.

Non-GAAP Financial Measures

The Company prepares its financial statements in accordance with generally accepted accounting principles in the United States (“GAAP”). This press release also refers to certain non-GAAP financial measures that the Company believes provide investors with important information, when used in conjunction with results presented in accordance with GAAP, regarding its operational performance.

Core earnings are a non-GAAP financial measure that excludes certain items from net income. Excluded items include gains, losses, and impairment losses on securities; goodwill and intangible impairment; amortization of intangibles; taxes; and other nonrecurring income and expense items. Management believes that core earnings provide the Company and investors a valuable tool to evaluate the Company’s financial results.

The efficiency ratio is a non-GAAP financial measure computed by dividing adjusted noninterest expense by the sum of tax equivalent net interest income and adjusted noninterest income. Management believes this measure provides investors with important information about the Company’s operating expense control and efficiency of operations. Management also believes this ratio focuses attention on the core operating performance of the Company over time and is highly useful in comparing period-to-period operating performance of core business operations. The efficiency ratio used by the Company may not be comparable to efficiency ratios reported by other financial institutions.

Tangible book value per common share is a non-GAAP financial measure defined as stockholders’ equity less goodwill and other intangibles, divided by as-converted common shares outstanding. Average tangible common equity is a non-GAAP financial measure defined as average stockholders’ equity less average goodwill, other intangibles, and the preferred liquidation preference.

The normalized net interest margin and the normalized yield on loans are non-GAAP financial measures that exclude non-cash loan interest accretion related to PCI loans.

About First Community Bancshares, Inc.

First Community Bancshares, Inc., a financial holding company headquartered in Bluefield, Virginia, provides banking products and services through its wholly-owned subsidiary First Community Bank. First Community Bank operated 52 banking locations throughout Virginia, West Virginia, North Carolina, and Tennessee as of September 30, 2015. First Community Bank offers wealth management and investment services through its wholly-owned subsidiary First Community Wealth Management, a registered investment advisory firm, and the Bank’s Trust Division, which collectively managed $710 million in combined assets as of September 30, 2015. The Company provides insurance services through its wholly-owned subsidiary Greenpoint Insurance Group, Inc., a full-service insurance agency headquartered in High Point, North Carolina, that operated 11 insurance locations throughout Virginia, West Virginia, and North Carolina as of September 30, 2015. The Company’s common stock is listed on the NASDAQ Global Select Market under the trading symbol, “FCBC”. The Company reported consolidated assets of $2.48 billion as of September 30, 2015. Additional investor information is available on the Company’s website at www.fcbinc.com.

This news release may include 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 fiscal year end. 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.

FIRST COMMUNITY BANCSHARES, INC. 
CONDENSED CONSOLIDATED STATEMENTS OF INCOME (Unaudited)
                   
    Three Months Ended   Nine Months Ended   
    September 30,
  September 30,
 
(Amounts in thousands, except share and per share data)     2015       2014       2015       2014    
Interest income                  
Interest and fees on loans held for investment   $   22,259     $   23,407     $   65,999     $   69,651    
Interest on securities — taxable       1,062         1,196         3,167         4,830    
Interest on securities — nontaxable       994         1,108         3,013         3,329    
Interest on deposits in banks       33         40         246         117    
Total interest income       24,348         25,751         72,425         77,927    
Interest expense                  
Interest on deposits       1,384         1,782         4,676         5,505    
Interest on short-term borrowings       497         526         1,486         1,511    
Interest on long-term borrowings       798         1,428         2,685         4,803    
Total interest expense       2,679         3,736         8,847         11,819    
Net interest income       21,669         22,015         63,578         66,108    
Provision for (recovery of) loan losses       381         (2,439 )       1,757         633    
Net interest income after provision for loan losses       21,288         24,454         61,821         65,475    
Noninterest income                  
Wealth management income       790         670         2,231         2,396    
Service charges on deposit accounts       3,744         3,606         10,154         10,099    
Other service charges and fees       1,974         1,852         5,987         5,473    
Insurance commissions       1,650         1,695         5,336         5,113    
Net impairment losses recognized in earnings       –         (219 )       –         (737 )  
Net (loss) gain on sale of securities       (39 )       320         151         306    
Net FDIC indemnification asset amortization       (1,768 )       (1,096 )       (5,179 )       (3,166 )  
Other operating income       723         839         3,367         3,021    
Total noninterest income        7,074         7,667         22,047         22,505    
Noninterest expense                  
Salaries and employee benefits       9,971         9,924         29,357         29,872    
Occupancy expense of bank premises       1,443         1,469         4,404         4,825    
Furniture and equipment        1,259         1,212         3,854         3,611    
Amortization of intangible assets       281         179         837         532    
FDIC premiums and assessments       377         419         1,181         1,311    
FHLB debt prepayment fees       –         3,047         1,702         3,047    
Merger, acquisition, and divestiture expense       –         285         86         285    
Other operating expense       5,688         4,934         15,667         15,329    
Total noninterest expense       19,019         21,469         57,088         58,812    
Income before income taxes       9,343         10,652         26,780         29,168    
Income tax expense       3,084         3,609         8,388         9,393    
Net income        6,259         7,043         18,392         19,775    
Dividends on preferred stock       –         228         105         683    
Net income available to common shareholders   $   6,259     $   6,815     $   18,287     $   19,092    
                   
Basic earnings per common share    $   0.34     $   0.37     $   0.98     $   1.04    
Diluted earnings per common share        0.34         0.36         0.97         1.02    
Cash dividends per common share       0.14         0.13         0.40         0.37    
                   
Weighted average basic shares outstanding     18,470,348       18,402,764       18,644,679       18,407,173    
Weighted average diluted shares outstanding     18,500,975       19,466,126       18,895,909       19,472,136    
                   
Return on average assets     1.00 %     1.06 %     0.96 %     0.99 %  
Return on average common equity     7.18 %     8.15 %     7.07 %     7.86 %  

FIRST COMMUNITY BANCSHARES, INC.  
CONDENSED QUARTERLY STATEMENTS OF INCOME (Unaudited)  
   
    Quarter Ended  
    September 30,   June 30,   March 31,   December 31,   September 30,  
(Amounts in thousands, except share and per share data)     2015       2015       2015       2014       2014    
Interest Income                      
Interest and fees on loans held for investment   $   22,259     $   21,826     $   21,914     $   25,841     $   23,407    
Interest on securities — taxable       1,062         1,070         1,035         1,145         1,196    
Interest on securities — nontaxable       994         1,003         1,016         1,021         1,108    
Interest on deposits in banks       33         80         133         174         40    
Total interest income       24,348         23,979         24,098         28,181         25,751    
Interest Expense                      
Interest on deposits       1,384         1,562         1,730         1,803         1,782    
Interest on short-term borrowings       497         499         490         513         526    
Interest on long-term borrowings       798         848         1,039         1,155         1,428    
Total interest expense       2,679         2,909         3,259         3,471         3,736    
Net interest income       21,669         21,070         20,839         24,710         22,015    
Provision for (recovery of) loan losses       381         276         1,100         (488 )       (2,439 )  
Net interest income after provision for loan losses       21,288         20,794         19,739         25,198         24,454    
Noninterest Income                      
Wealth management income       790         775         666         634         670    
Service charges on deposit accounts       3,744         3,507         2,903         3,729         3,606    
Other service charges and fees       1,974         2,005         2,008         2,108         1,852    
Insurance commissions       1,650         1,559         2,127         1,442         1,695    
Net impairment losses recognized in earnings       –         –         –         –         (219 )  
Net (loss) gain on sale of securities       (39 )       213         (23 )       (1,691 )       320    
Net FDIC indemnification asset amortization       (1,768 )       (1,846 )       (1,565 )       (813 )       (1,096 )  
Net gain on branch divestiture       –         –         –         755         –    
Other operating income       723         1,924         720         1,334         839    
Total noninterest income        7,074         8,137         6,836         7,498         7,667    
Noninterest Expense                      
Salaries and employee benefits       9,971         9,693         9,693         10,841         9,924    
Occupancy expense of bank premises       1,443         1,427         1,534         1,513         1,469    
Furniture and equipment       1,259         1,358         1,237         1,341         1,212    
Amortization of intangible assets       281         279         277         255         179    
FDIC premiums and assessments        377         389         415         361         419    
FHLB debt prepayment fees       –         1,702         –         1,961         3,047    
Merger, acquisition, and divestiture expense       –         –         86         865         285    
Other operating expense       5,688         5,441         4,538         6,913         4,934    
Total noninterest expense       19,019         20,289         17,780         24,050         21,469    
Income before income taxes       9,343         8,642         8,795         8,646         10,652    
Income tax expense       3,084         2,467         2,837         2,931         3,609    
Net income        6,259         6,175         5,958         5,715         7,043    
Dividends on preferred stock       –         –         105         227         228    
Net income available to common shareholders   $   6,259     $   6,175     $   5,853     $   5,488     $   6,815    
                       
Basic earnings per common share   $   0.34     $   0.33     $   0.31     $   0.30     $   0.37    
Diluted earnings per common share       0.34         0.33         0.31         0.29         0.36    
Cash dividends per common share       0.14         0.13         0.13         0.13         0.13    
                       
Weighted average basic shares outstanding      18,470,348        18,831,742         18,633,574         18,403,959         18,402,764    
Weighted average diluted shares outstanding      18,500,975        18,860,119         19,344,443         19,482,000         19,466,126    
                       

FIRST COMMUNITY BANCSHARES, INC.
RECONCILIATION OF GAAP NET INCOME TO CORE EARNINGS (Unaudited)
                     
    Three Months Ended
    September 30,   June 30,   March 31,   December 31,   September 30,
      2015       2015       2015       2014       2014  
(Amounts in thousands, except per share data)                    
Net income, GAAP   $   6,259     $   6,175     $   5,958     $   5,715     $   7,043  
Non-GAAP adjustments:                    
Net impairment losses recognized in earnings       –         –         –         –         219  
Net loss (gain) on sale of securities       39         (213 )       23         1,691         (320 )
Net gain on branch divestiture       –         –         –         (755 )       –  
FHLB debt prepayment fees       –         1,702         –         1,961         3,047  
Merger, acquisition, and divestiture expense       –         –         86         865         285  
Other noncore, nonrecurring items       (75 )       (930 )       (30 )       1,173         –  
Total adjustments to core earnings       (36 )       559         79         4,935         3,231  
Tax effect        (13 )       630         29         1,859         1,217  
Core earnings, non-GAAP   $   6,236     $   6,104     $   6,008     $   8,791     $   9,057  
                     
Core return on average assets     1.00 %     0.96 %     0.94 %     1.28 %     1.41 %
Core return on average common equity     7.16 %     7.00 %     7.09 %     10.39 %     10.83 %
Core return on average tangible common equity     10.34 %     10.07 %     10.31 %     15.50 %     16.06 %
Core diluted earnings per common share   $   0.34     $   0.32     $ 0.31     $ 0.45     $ 0.47  
                     
                Nine Months Ended
                September 30,
                  2015       2014  
(Amounts in thousands, except per share data)                    
Net income, GAAP               $   18,392     $   19,775  
Non-GAAP adjustments:                    
Net impairment losses recognized in earnings                   –         737  
Net gain on sale of securities                   (151 )       (306 )
FHLB debt prepayment fees                   1,702         3,047  
Merger, acquisition, and divestiture expense                   86         285  
Other noncore, nonrecurring items                   (1,035 )       (536 )
Total adjustments to core earnings                   602         3,227  
Tax effect                    646         1,215  
Core earnings, non-GAAP               $   18,348     $   21,787  
                     
Core return on average assets                 0.97 %     1.13 %
Core return on average common equity                 7.09 %     8.97 %
Core return on average tangible common equity                 10.26 %     13.45 %
Core diluted earnings per common share               $   0.97     $ 1.12  
                     

FIRST COMMUNITY BANCSHARES, INC.  
EFFICIENCY RATIO CALCULATION (Unaudited)  
   
    Three Months Ended  
    September 30,   June 30,   March 31,   December 31,   September 30,  
      2015       2015       2015       2014       2014    
(Amounts in thousands)                      
Noninterest expense, GAAP   $   18,600     $   20,289     $   17,780     $   24,050     $   21,469    
Non-GAAP adjustments:                      
FHLB debt prepayment fees       –         (1,702 )       –         (1,961 )       (3,047 )  
Merger, acquisition, and divestiture expense       –         –         (86 )       (865 )       (285 )  
OREO expense and net loss       (1,220 )       (416 )       (327 )       (403 )       (580 )  
Other noncore, nonrecurring items       15         (213 )       –         (1,573 )       –    
Adjusted noninterest expense       17,395         17,958         17,367         19,248         17,557    
                       
Net interest income, GAAP       21,669         21,070         20,839         24,710         22,015    
Noninterest income, GAAP       6,655         8,137         6,836         7,498         7,667    
Non-GAAP adjustments:                      
Tax equivalency adjustment       565         1,249         588         613         582    
Net impairment losses recognized in earnings       –         –         –         –         219    
Net loss (gain) on sale of securities       39         (213 )       23         1,691         (320 )  
Net gain on branch divestiture       –         –         –         (755 )       –    
Other noncore, nonrecurring items       (60 )       (1,143 )       (30 )       (400 )       –    
Adjusted net interest and noninterest income       28,868         29,100         28,256         33,357         30,163    
                       
Non-GAAP efficiency ratio     60.26 %     61.71 %     61.46 %     57.70 %     58.21 %  
GAAP efficiency ratio     65.67 %     69.47 %     64.25 %     74.67 %     72.33 %  
                       
                Nine Months Ended  
                September 30,  
                  2015       2014    
(Amounts in thousands)                      
Noninterest expense, GAAP               $   56,669     $   58,812    
Non-GAAP adjustments:                      
FHLB debt prepayment fees                   (1,702 )       (3,047 )  
Merger, acquisition, and divestiture expense                   (86 )       (1,691 )  
OREO expense and net loss                   (1,963 )       (285 )  
Other noncore, nonrecurring items                   (198 )       –    
Adjusted noninterest expense                   52,720         53,789    
                       
Net interest income, GAAP                   63,578         66,108    
Noninterest income, GAAP                   21,628         22,505    
Non-GAAP adjustments:                      
Tax equivalency adjustment                   2,402         1,943    
Net impairment losses recognized in earnings                   –         737    
Net gain on sale of securities                   (151 )       (306 )  
Other noncore, nonrecurring items                   (1,233 )       (536 )  
Adjusted net interest and noninterest income                   86,224         90,451    
                       
Non-GAAP efficiency ratio                 61.14 %     59.47 %  
GAAP efficiency ratio                 66.51 %     66.37 %  
                       

FIRST COMMUNITY BANCSHARES, INC.  
CONDENSED CONSOLIDATED QUARTERLY BALANCE SHEETS (Unaudited)  
   
      As of the Quarter Ended  
    September 30,   June 30,   March 31,   December 31,   September 30,  
      2015       2015       2015       2014       2014    
(Amounts in thousands)                      
Cash and due from banks   $   33,555     $   38,200     $   36,222     $   39,450     $   44,703    
Federal funds sold       27,118         53,023         169,422         196,873         55,503    
Interest-bearing deposits in banks       1,351         1,379         1,380         1,337         5,716    
Total cash and cash equivalents       62,024         92,602         207,024         237,660         105,922    
Securities available for sale        382,212         376,191         351,454         326,117         351,693    
Securities held to maturity        72,596         72,652         72,897         57,948         31,029    
Loans held for sale       523         913         1,174         1,792         1,150    
Loans held for investment, net of unearned income:                      
Covered under loss share agreements       90,203         102,634         112,724         122,240         126,611    
Not covered under loss share agreements       1,600,271         1,564,655         1,558,310         1,567,176         1,636,181    
Less allowance for loan losses       (20,127 )       (20,258 )       (20,252 )       (20,227 )       (21,159 )  
Loans, net       1,670,870         1,647,944         1,651,956         1,670,981         1,742,783    
FDIC indemnification asset       22,049         23,653         26,053         27,900         29,745    
Property, plant, and equipment, net       53,442         54,112         54,955         55,844         59,283    
Other real estate owned:                      
Covered under loss share agreements       4,079         5,382         5,834         6,324         7,620    
Not covered under loss share agreements       5,088         7,434         7,032         6,638         5,612    
Interest receivable       5,910         6,119         6,188         6,315         6,346    
Goodwill       100,810         100,810         100,810         100,722         105,657    
Intangible assets       5,583         5,865         6,144         6,422         2,334    
Other assets       93,453         99,034         95,497         105,065         102,103    
Total assets   $   2,478,116     $   2,491,798     $   2,585,844     $   2,607,936     $   2,550,127    
                       
Deposits:                      
Noninterest-bearing demand   $   442,021     $   424,438     $   433,422     $   417,729     $   397,523    
Interest-bearing demand       343,303         329,583         341,300         353,874         347,589    
Savings       526,627         528,003         533,589         525,478         519,902    
Time       590,951         638,197         682,878         703,678         667,261    
Total deposits       1,902,902         1,920,221         1,991,189         2,000,759         1,932,275    
Interest, taxes, and other liabilities       25,356         23,852         24,203         26,062         25,131    
Securities sold under agreements to repurchase       124,076         122,158         116,302         121,742         114,439    
FHLB borrowings       65,000         65,000         90,000         90,000         115,000    
Other borrowings       15,955         15,999         15,999         17,999         16,047    
Total liabilities       2,133,289         2,147,230         2,237,693         2,256,562         2,202,892    
                       
Preferred stock       –         –         –         15,151         15,151    
Common stock       21,382         21,382         21,382         20,500         20,500    
Additional paid-in capital       227,621         227,616         227,782         215,873         215,729    
Retained earnings       152,046         148,378         144,656         141,206         138,111    
Treasury stock, at cost       (52,484 )       (46,610 )       (41,078 )       (35,751 )       (35,808 )  
Accumulated other comprehensive loss       (3,738 )       (6,198 )       (4,591 )       (5,605 )       (6,448 )  
Total stockholders’ equity       344,827         344,568         348,151         351,374         347,235    
Total liabilities and stockholders’ equity   $   2,478,116     $   2,491,798     $   2,585,844     $   2,607,936     $   2,550,127    
                       
Shares outstanding at period-end       18,313,425         18,641,966         18,965,274         18,406,219         18,402,919    
Book value per common share at period-end(1)   $   18.83     $   18.48     $   18.36     $   18.06     $   17.85    
Tangible book value per common share                       
at period-end(2)   $   13.02     $   12.76     $   12.72     $   12.56     $   12.30    
                       
(1) Book value per common share is defined as stockholders’ equity divided by as-converted common shares outstanding.  
(2) Tangible book value per common share is defined as stockholders’ equity less goodwill and other intangibles divided by as-converted common shares outstanding.  

FIRST COMMUNITY BANCSHARES, INC.
SELECTED CREDIT QUALITY INFORMATION (Unaudited)
 
    As of and for the Quarter Ended
    September 30,   June 30,   March 31,   December 31,   September 30,
(Amounts in thousands)     2015       2015       2015       2014       2014  
Allowance for Loan Losses                     
Beginning balance   $   20,258     $   20,252     $   20,227     $   21,159     $   23,911  
Removal of loans transferred        –         –         –         (682 )       –  
Provision for (recovery of) loan losses charged                    
to operations       381         276         1,100         (488 )       (2,439 )
(Recovery of) provision for  loan losses recorded                    
through the FDIC indemnification asset       (75 )       –         46         29         (110 )
Charge-offs       (689 )       (673 )       (1,578 )       (1,362 )       (1,118 )
Recoveries       252         403         457         1,571         915  
Net (charge-offs) recoveries        (437 )       (270 )       (1,121 )       209         (203 )
Ending balance   $   20,127     $   20,258     $   20,252     $   20,227     $   21,159  
                     
Summary of Asset Quality                    
Non-covered nonperforming                    
Nonaccrual loans    $   17,100     $   15,936     $   15,387     $   10,556     $   11,480  
Accruing loans past due 90 days or more       3         –         –         –         –  
Troubled debt restructurings (“TDRs”)(1)       74         –         –         2,726         3,450  
Total non-covered nonperforming loans       17,177         15,936         15,387         13,282         14,930  
OREO not covered under FDIC loss share agreements     5,088         7,434         7,032         6,638         5,612  
Total non-covered nonperforming assets   $   22,265     $   23,370     $   22,419     $   19,920     $   20,542  
Covered nonperforming                    
Nonaccrual loans    $   815     $   1,062     $   2,780     $   2,438     $   1,131  
Accruing loans past due 90 days or more       –         –         60         –         –  
Total covered nonperforming loans       815         1,062         2,840         2,438         1,131  
OREO covered under FDIC loss share agreements     4,079         5,382         5,834         6,324         7,620  
Total covered nonperforming assets   $   4,894     $   6,444     $   8,674     $   8,762     $   8,751  
                     
Additional Information                    
Performing TDRs(2)   $   13,965     $   13,841     $   14,025     $   11,808     $   11,701  
Total TDRs(3)       14,039         13,841         14,025         14,534         15,151  
                     
Asset Quality Ratios                    
Non-covered                     
Nonperforming loans to total loans     1.07 %     1.02 %     0.99 %     0.85 %     0.91 %
Nonperforming assets to total assets     0.93 %     0.98 %     0.91 %     0.80 %     0.85 %
Non-PCI allowance to nonperforming loans     117.06 %     126.41 %     130.88 %     151.85 %     140.35 %
Non-PCI allowance to total loans     1.26 %     1.29 %     1.29 %     1.29 %     1.28 %
Annualized net charge-offs to average loans     0.11 %     0.07 %     0.29 %     NM       0.05 %
Non-covered and covered                    
Nonperforming loans to total loans     1.06 %     1.02 %     1.09 %     0.93 %     0.91 %
Nonperforming assets to total assets     1.10 %     1.20 %     1.20 %     1.10 %     1.15 %
Nonperforming assets to total loans and OREO     1.60 %     1.77 %     1.85 %     1.68 %     1.65 %
Allowance for loan losses to nonperforming loans   111.87 %     119.18 %     111.11 %     128.67 %     131.74 %
Allowance for loan losses to total loans     1.19 %     1.22 %     1.21 %     1.20 %     1.20 %
                     
(1) Accruing TDRs restructured within the past six months or nonperforming
(2) Accruing TDRs with six months or more of satisfactory payment performance
(3) Accruing nonperforming and performing TDRs 

FIRST COMMUNITY BANCSHARES, INC.
AVERAGE BALANCE SHEETS AND NET INTEREST INCOME ANALYSIS (Unaudited)
 
    Three Months Ended September 30,
      2015       2014  
    Average        Average Yield/   Average        Average Yield/
(Amounts in thousands)   Balance   Interest(1)   Rate(1)   Balance   Interest(1)   Rate(1)
Assets                        
Earning assets                        
Loans(2)   $   1,675,787     $   22,291       5.28 %   $   1,766,769     $   23,460       5.27 %
Securities available-for-sale       382,099         2,394       2.49 %       376,778         2,811       2.96 %
Securities held-to-maturity       72,624         195       1.07 %       24,189         73       1.20 %
Interest-bearing deposits       48,750         33       0.27 %       45,826         40       0.35 %
Total earning assets       2,179,260         24,913       4.53 %       2,213,562         26,384       4.73 %
Other assets        305,331                 331,771          
Total assets   $   2,484,591             $   2,545,333          
                         
Liabilities                        
Interest-bearing deposits                        
Demand deposits    $   335,831     $   52       0.06 %   $   349,013     $   49       0.06 %
Savings deposits        532,445         83       0.06 %       521,334         121       0.09 %
Time deposits       613,598         1,249       0.81 %       675,454         1,612       0.95 %
Total interest-bearing deposits       1,481,874         1,384       0.37 %       1,545,801         1,782       0.46 %
Borrowings                        
Federal funds purchased       7         –       0.00 %       69         –       0.00 %
Retail repurchase agreements       72,740         16       0.09 %       69,565         23       0.13 %
Wholesale repurchase agreements       50,000         473       3.75 %       50,000         474       3.76 %
FHLB advances and other borrowings       80,985         806       3.95 %       142,115         1,457       4.07 %
Total borrowings       203,732         1,295       2.52 %       261,749         1,954       2.96 %
Total interest-bearing liabilities       1,685,606         2,679       0.63 %       1,807,550         3,736       0.82 %
Noninterest-bearing demand deposits       433,164                 371,877          
Other liabilities       20,028                 18,888          
Total liabilities       2,138,798                 2,198,315          
Stockholders’ equity       345,793                 347,018          
Total liabilities and stockholders’ equity   $   2,484,591             $   2,545,333          
Net interest income, FTE       $   22,234             $   22,648      
Net interest rate spread             3.90 %             3.91 %
Net interest margin             4.05 %             4.06 %
                         
(1) Fully taxable equivalent (“FTE”) basis based on the federal statutory rate of 35%
(2) Nonaccrual loans are included in average balances; however, no related interest income is recorded during the period of nonaccrual.

FIRST COMMUNITY BANCSHARES, INC.
AVERAGE BALANCE SHEETS AND NET INTEREST INCOME ANALYSIS (Unaudited)
 
    Nine Months Ended September 30,
      2015       2014  
    Average        Average Yield/   Average        Average Yield/
(Amounts in thousands)   Balance   Interest(1)   Rate(1)   Balance   Interest(1)   Rate(1)
Assets                        
Earning assets                        
Loans(2)   $   1,675,118     $   66,107       5.28 %   $   1,744,422     $   69,818       5.35 %
Securities available-for-sale       358,690         7,225       2.69 %       434,462         9,808       3.02 %
Securities held-to-maturity       70,454         577       1.09 %       12,858         127       1.32 %
Interest-bearing deposits       125,295         246       0.26 %       40,587         117       0.39 %
Total earning assets       2,229,557         74,155       4.45 %       2,232,329         79,870       4.78 %
Other assets        311,825                 337,298          
Total assets   $   2,541,382             $   2,569,627          
                         
Liabilities                        
Interest-bearing deposits                        
Demand deposits    $   342,639     $   156       0.06 %   $   363,780     $   154       0.06 %
Savings deposits        532,641         289       0.07 %       525,269         387       0.10 %
Time deposits       655,314         4,231       0.86 %       695,585         4,964       0.95 %
Total interest-bearing deposits       1,530,594         4,676       0.41 %       1,584,634         5,505       0.46 %
Borrowings                        
Federal funds purchased       2         –       0.00 %       1,192         3       0.34 %
Retail repurchase agreements       70,325         53       0.10 %       73,669         74       0.13 %
Wholesale repurchase agreements       50,000         1,405       3.76 %       50,000         1,405       3.76 %
FHLB advances and other borrowings       91,305         2,713       3.97 %       158,009         4,832       4.09 %
Total borrowings       211,632         4,171       2.64 %       282,870         6,314       2.98 %
Total interest-bearing liabilities       1,742,226         8,847       0.68 %       1,867,504         11,819       0.85 %
Noninterest-bearing demand deposits       429,661                 343,568          
Other liabilities       20,472                 18,758          
Total liabilities       2,192,359                 2,229,830          
Stockholders’ equity       349,023                 339,797          
Total liabilities and stockholders’ equity   $   2,541,382             $   2,569,627          
Net interest income, FTE       $   65,308             $   68,051      
Net interest rate spread             3.77 %             3.93 %
Net interest margin             3.92 %             4.08 %
                         
(1) FTE basis based on the federal statutory rate of 35%
(2) Nonaccrual loans are included in average balances; however, no related interest income is recorded during the period of nonaccrual.

FIRST COMMUNITY BANCSHARES, INC.
RECONCILIATION OF GAAP NET INTEREST MARGIN TO NORMALIZED NET INTEREST MARGIN (Unaudited)
 
     Three Months Ended September 30, 
      2015       2014  
        Average Yield/       Average Yield/
(Amounts in thousands)   Interest(1)   Rate(1)   Interest(1)   Rate(1)
Earning assets                
Loans(2)   $   22,291       5.28 %   $   23,460       5.27 %
Accretion income       2,930             2,813      
Less: cash accretion income       903             1,367      
Non-cash accretion income       2,027             1,446      
Loans, excluding non-cash accretion income       20,264       4.80 %       22,014       4.94 %
Other earning assets       2,622       2.07 %       2,924       2.60 %
Total earning assets       22,886       4.17 %       24,938       4.47 %
Total interest-bearing liabilities       2,679       0.63 %       3,736       0.82 %
Net interest income, FTE   $   20,207         $   21,202      
Net interest rate spread         3.54 %         3.65 %
Net interest margin         3.68 %         3.80 %
                 
(1) FTE basis based on the federal statutory rate of 35%
(2) Nonaccrual loans are included in average balances; however, no related interest income is recorded during the period of nonaccrual.
                 
     Nine Months Ended June 30, 
      2015       2014  
        Average Yield/       Average Yield/
(Amounts in thousands)   Interest(1)   Rate(1)   Interest(1)   Rate(1)
Earning assets                
Loans(2)   $   66,107       5.28 %   $   69,818       5.35 %
Accretion income       8,765             8,724      
Less: cash accretion income       3,326             3,214      
Non-cash accretion income       5,439             5,510      
Loans, excluding non-cash accretion income       60,668       4.84 %       64,308       4.93 %
Other earning assets       8,048       1.94 %       10,052       2.75 %
Total earning assets       68,716       4.12 %       74,360       4.45 %
Total interest-bearing liabilities       8,847       0.68 %       11,819       0.85 %
Net interest income, FTE   $   59,869         $   62,541      
Net interest rate spread         3.44 %         3.60 %
Net interest margin         3.59 %         3.75 %
                 
(1) FTE basis based on the federal statutory rate of 35%
(2) Nonaccrual loans are included in average balances; however, no related interest income is recorded during the period of nonaccrual.
CONTACT: FOR MORE INFORMATION, CONTACT:
David D. Brown
(276) 326-9000

Left Menu Icon
Right Menu Icon