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First Community Bancshares, Inc. Announces Record Third Quarter 2012 Results

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BLUEFIELD, Va., Nov. 2, 2012 (GLOBE NEWSWIRE) -- First Community Bancshares, Inc. (Nasdaq: FCBC) (www.fcbinc.com) (the "Company") today reported net income for the quarter and nine months ended September 30, 2012, of $10.06 million and $20.14 million, respectively. Net income available to common shareholders totaled $9.84 million, or $0.47 per diluted common share, for the quarter ended September 30, 2012. Net income available to common shareholders totaled $19.35 million, or $1.00 per diluted common share, for the nine months ended September 30, 2012. Net income for the quarter and nine months ended September 30, 2012, was impacted by $645 thousand and $4.23 million, respectively, in merger related expenses. Excluding nonrecurring income and expense items, core earnings for the quarter and nine months ended September 30, 2012, totaled $9.42 million and $21.70 million, respectively.

President and CEO John M. Mendez commented, "We are very pleased with the results of third quarter operations. Significant improvements were seen in a number of areas. Record quarterly earnings include the impact of a favorable conversion adjustment; however, core earnings likewise set new records. Results from our two second quarter acquisitions have exceeded our expectations and are contributing well ahead of plan. Performance in our legacy markets remains solid despite the continued low rate environment. We remain pleased with our performance on all levels including our credit results and we look forward to continued expansion of our leverage position and returns in the coming periods."

On October 23, 2012, the Company announced that the board of directors declared a quarterly cash dividend to common shareholders of eleven cents ($0.11) per common share. The quarterly dividend is payable to common shareholders of record on November 9, 2012, and is expected to be paid on or about November 23, 2012. The current year marks the 27th consecutive year of cash dividends to shareholders.

Third Quarter 2012 Highlights –

  • Core earnings were a record $9.42 million, an increase of $4.04 million, or 75.16%, compared with the third quarter of 2011.
  • Core return on average assets was 1.35% and core return on average tangible common equity was 16.65% for the third quarter of 2012 which are at the highest level since 2007.
  • Third quarter 2012 core diluted earnings per share of $0.44 are the highest since 2008.
  • The tax equivalent net interest margin increased 71 basis points to 4.48% for the third quarter of 2012 compared with the third quarter of 2011.
  • Net interest income was $26.46 million, an increase of $8.73 million, or 49.20%, compared with third quarter 2011.

Net Interest Income

Net interest income increased $8.73 million, or 49.20%, to $26.46 million for the third quarter of 2012 compared with the third quarter of 2011. The tax equivalent net interest margin increased 71 basis points to 4.48% for the third quarter of 2012 compared with 3.77% for the third quarter of 2011. Total interest income increased $8.49 million, or 36.82%, to $31.54 million for the third quarter of 2012 compared with the third quarter of 2011. The increase reflects the increases in loan portfolio balances from the acquisitions of Peoples Bank of Virginia ("Peoples") and Waccamaw Bank ("Waccamaw") during the second quarter of 2012, as well as the associated loan interest accretion stemming from those transactions. Total accretion for the third quarter approximated $3.32 million related to Peoples and Waccamaw. The tax equivalent yield on loans increased to 6.29% while the average loan balance increased $411.35 million, or 29.83%, to $1.79 billion for the third quarter of 2012 compared with the third quarter of 2011. Before the purchase accounting accretion in the Peoples and Waccamaw loan portfolios, the yield on loans and net interest margin for the current quarter were 5.55% and 3.94%, respectively.

Total interest expense decreased $239 thousand, or 4.50%, to $5.08 million for the third quarter of 2012 compared with the third quarter of 2011. Deposit costs decreased $395 thousand, or 13.18%, to $2.60 million for the third quarter of 2012 compared with the third quarter of 2011, which was primarily due to a 28 basis point decrease in the average rate paid on interest-bearing deposits. Borrowing costs increased $156 thousand, or 6.73%, to $2.47 million for the third quarter of 2012 compared with the third quarter of 2011. The average rate paid on interest-bearing liabilities decreased 29 basis points to 0.98% for the third quarter of 2012 compared with the third quarter of 2011. The average balance of interest-bearing liabilities increased $405.26 million, or 24.43%, to $2.06 billion for the third quarter of 2012 compared with the third quarter of 2011, which included a $376.05 million increase in average interest-bearing deposits and a $29.21 million increase in average total borrowings. The increases were primarily the result of the Peoples and Waccamaw acquisitions that occurred during the second quarter of 2012.

Provision for Loan Losses

The provision for loan losses for the third quarter of 2012 was $1.92 million, a slight decrease from same period in the prior year. Provision for the first nine months of 2012 decreased $2.15 million, or 32.57%, to $4.46 million for the first nine months of 2012, compared with the same period of the prior year. The third quarter of 2012 marks the eighth consecutive quarter of provision decreases when compared to the prior year's comparable quarter.

Noninterest Income

Noninterest income increased $3.10 million, or 38.40%, to $11.16 million for the third quarter of 2012 compared with the third quarter of 2011, which was largely due to the $2.39 million correction for the prior periods' understatement of income. The Company realized a $228 thousand net gain on sale of securities for the third quarter of 2012, which was an increase of $50 thousand, or 28.09%, compared to the third quarter of 2011. Wealth management revenues increased $137 thousand, or 15.78%, for the third quarter of 2012 compared with the third quarter of 2011. The Trust and Wealth Management Divisions reported $884 million in assets under management as of September 30, 2012. Service charges on deposit accounts increased $491 thousand, or 14.42%, for the third quarter of 2012 compared with the third quarter of 2011, and are attributable to the addition of Waccamaw. Insurance commissions increased $93 thousand, or 6.11%, to $1.62 million for the third quarter of 2012 compared with the same quarter of 2011. The Company incurred other-than-temporary impairment charges of $942 thousand related to a non-Agency mortgage-backed security for the third quarter of 2012.

The $2.39 million correction included in other noninterest income was discovered through the Company's core operating system conversion completed during the third quarter of 2012. The error was due to overstatement of loan charge-offs in periods from 2007 through 2012 resulting from not recognizing the impact of interest payments that had been applied to principal. The error resulted in overstatements of provision for loan losses and corresponding understatement of pre-tax income of $938 thousand, $639 thousand, and $321 thousand during 2011, 2010, and 2009, respectively. The total of periodic charge-off overstatements from 2007 to 2011 approximated $2.39 million.

Noninterest Expense

Noninterest expense increased $4.27 million, or 26.56%, to $20.33 million for the third quarter of 2012 compared with the third quarter of 2011, due largely to the Peoples and Waccamaw acquisitions. Salaries and employee benefits increased $2.45 million, or 29.15%, to $10.86 million for the third quarter of 2012 compared with the third quarter of 2011. The Peoples and Waccamaw acquisitions accounted for an increase in salaries and employee benefits of $299 thousand and $628 thousand, respectively, during the third quarter of 2012. Occupancy, furniture, and equipment expense increased $371 thousand, or 15.87%, to $2.71 million for the third quarter of 2012 compared with the third quarter of 2011. FDIC premiums and assessments increased $263 thousand, or 75.57%, to $611 thousand for the third quarter of 2012 compared with the third quarter of 2011. During the third quarter of 2012, the Company incurred merger related expenses of $645 thousand in connection with the acquisition of Peoples and Waccamaw. Other operating expense increased $594 thousand, or 12.60%, to $5.31 million for the third quarter of 2012 compared with the third quarter of 2011. Other operating expense included a net loss on sales and expenses associated with other real estate owned of $490 thousand for the third quarter of 2012 compared to $627 thousand for the third quarter of 2011. The efficiency ratio for the third quarter of 2012 showed improvement at 52.40% compared to 57.97% for the third quarter of 2011. Before the effects of loan accretion, the efficiency ratio would have been approximately 57.62%.

Allowance for Loan Losses and Credit Quality on Non-covered Loans

Non-covered loans and other real estate owned are those assets not covered by the loss share agreement between the FDIC and the Bank in relation to the acquisition of Waccamaw. The allowance for loan losses on non-covered loans decreased to $25.84 million at September 30, 2012, compared with $26.21 million at December 31, 2011, and $26.41 million at September 30, 2011. The allowance for loan losses for non-covered loans as a percentage of non-covered loans decreased to 1.68% at September 30, 2012, compared with 1.88% at December 31, 2011, and 1.92% at September 30, 2011. The decrease in the ratio of allowance for loan losses for non-covered loans as a percentage of non-covered loans for the third quarter of 2012 was impacted by loans marked to fair value as part of the Peoples' acquisition. For the third quarter of 2012, net charge-offs increased $257 thousand, or 12.88%, compared with the third quarter of 2011. Annualized net charge-offs as a percentage of average loans were 0.57% for the third quarter of 2012, which represents a slight decrease compared with 0.58% for the third quarter of 2011.

Non-covered delinquent loans, comprised of loans 30 days or more past due and nonaccrual loans, as a percentage of total non-covered loans measured 2.71% at September 30, 2012, compared to 2.30% for the same period of the prior year. Non-covered nonaccrual loans increased to $26.40 million at September 30, 2012, compared with $24.49 million at December 31, 2011, and $22.88 million at September 30, 2011. The increases in non-covered delinquent and nonaccrual loans are due primarily to the Peoples acquisition. At quarter end, the Company's non-covered nonperforming loans as a percentage of total non-covered loans were 1.72% and non-covered nonperforming assets as a percentage of total non-covered assets were 1.28%. Nonperforming assets included $121 thousand in unseasoned, accruing troubled debt restructurings and $9.51 million in other real estate owned, of which $3.55 million was covered under the loss share agreement, at September 30, 2012.

Balance Sheet and Capital

Consolidated assets totaled $2.77 billion as of September 30, 2012, an increase of $604.00 million, or 27.90%, compared with $2.16 billion at December 31, 2011. Consolidated liabilities totaled $2.42 billion as of September 30, 2012, an increase of $557.92 million, or 30.01%, compared with $1.86 billion at December 31, 2011. Total stockholders' equity increased to $351.81 million as of September 30, 2012, compared with $305.73 million at December 31, 2011. Book value per as-converted common share increased to $16.50 for the quarter ended September 30, 2012, compared with $15.96 for the quarter ended December 31, 2011. Tangible book value per common share decreased $0.28, or 2.46%, to $11.12 compared with the fourth quarter of 2011. During the third quarter of 2012, the Company paid an $0.11 per share cash dividend on common shares.

The Company significantly exceeds regulatory "well capitalized" targets as of September 30, 2012, with a total risk-based capital ratio of 15.62%, Tier 1 risk-based capital ratio of 14.38%, and a Tier 1 leverage ratio of 9.52%.

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 our 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 that is 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 that is 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 that is defined as average stockholders' equity less average goodwill, other intangibles, and the preferred liquidation preference.

Investor Relations

The Company will host an investor and media teleconference and webcast on Friday, November 2, 2012, at 11:00 a.m. To access the teleconference, the toll-free number is (877) 407-8033. Individuals may listen to the live or archived webcast of the conference call. To listen to the webcast, visit www.fcbinc.com and follow the link under the Investor Relations section. The Company's press release and financial summary will be available in this section, as well. Copies of the Company's third quarter 2012 earnings press release and financial summary will be made available upon request via fax, email, or postal service mail. To request a copy, contact David D. Brown, Chief Financial Officer, at (276) 326-9000.

About First Community Bancshares, Inc.

First Community Bancshares, Inc., headquartered in Bluefield, Virginia, is a $2.77 billion financial holding company and the parent company of First Community Bank. First Community Bank operates seventy-four banking locations throughout Virginia, West Virginia, North Carolina, South Carolina, and Tennessee. First Community Bank offers wealth management and investment services through its Trust Division and First Community Wealth Management, a registered investment advisory firm. The Trust Division and First Community Wealth Management managed assets with a market value of $884 million as of September 30, 2012. The Company is also the parent company of Greenpoint Insurance Group, Inc., a full-service insurance agency headquartered in High Point, North Carolina, that operates six insurance offices throughout Virginia, West Virginia, and North Carolina. The Company's common stock is traded on the NASDAQ Global Select Market under the symbol, "FCBC". Additional investor information can be found on the Company's website at www.fcbinc.com.

The First Community Bancshares, Inc. logo is available at http://www.globenewswire.com/newsroom/prs/?pkgid=6960

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 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.

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) 2012 2011 2012 2011
Interest income        
Interest and fees on loans held for investment  $ 28,275  $ 20,084  $ 68,496  $ 60,633
Interest on securities --- taxable  1,980  1,711  6,060   6,094
Interest on securities --- nontaxable  1,215  1,180  3,667  4,004
Interest on deposits in banks  66  75  177   244
Total interest income  31,536  23,050  78,400  70,975
Interest expense        
Interest on deposits  2,603  2,998  7,368   10,151
Interest on short-term borrowings  675  611  1,859  1,872
Interest on long-term borrowings  1,799  1,707  5,253  5,189
Total interest expense  5,077  5,316  14,480  17,212
Net interest income  26,459  17,734  63,920  53,763
Provision for loan losses  1,916  1,920  4,458  6,611
Net interest income after provision for loan losses  24,543  15,814  59,462  47,152
Noninterest income        
Wealth management income  1,005  868  2,839  2,692
Service charges on deposit accounts  3,895  3,404  10,237   9,788
Other service charges and fees  1,631  1,426  4,780  4,293
Insurance commissions  1,616  1,523  4,528  5,027
Net impairment losses recognized in earnings  (942)  (210)  (942)  (737)
Net (loss) gain on sale of securities  228  178  270  5,238
Other operating income  3,730  877  5,785  2,627
Total noninterest income  11,163  8,066  27,497  28,928
Noninterest expense        
Salaries and employee benefits  10,860  8,409  27,974  26,223
Occupancy expense of bank premises  1,754  1,476  4,934   4,691
Furniture and equipment  955  862  2,741  2,686
Amortization of intangible assets  191  250  613  770
FDIC premiums and assessments  611  348  1,223  1,640
FHLB debt prepayment fees  --  --  --  471
Merger related expense  645  --  4,227  --
Other operating expense  5,309  4,715  14,938  15,380
Total noninterest expense  20,325  16,060  56,650  51,861
Income before income taxes  15,381  7,820  30,309  24,219
Income tax expense   5,322  2,502  10,171  7,422
Net income  10,059  5,318  20,138  16,797
Dividends on preferred stock  220  286   786  417
Net income available to common shareholders  $ 9,839  $ 5,032  $ 19,352  $ 16,380
         
Basic earnings per common share  $ 0.49  $  0.28  $ 1.03  $ 0.92
Diluted earnings per common share  $ 0.47  $ 0.28  $ 1.00  $ 0.91
Cash dividends per common share  $ 0.11  $ 0.20  $ 0.32  $ 0.30
         
Weighted average basic shares outstanding  20,013,264  17,896,534  18,812,516  17,886,902
Weighted average diluted shares outstanding  21,476,497  19,205,634  20,159,386  18,533,364
         
Return on average assets 1.41% 0.91% 1.06% 0.99%
Return on average common equity 11.91% 6.94% 8.38% 7.76%
 
 
FIRST COMMUNITY BANCSHARES, INC.
CONDENSED QUARTERLY STATEMENTS OF INCOME (Unaudited)
           
   As of and for the Quarter Ended
  September 30, June 30, March 31, December 31, September 30,
(Amounts in thousands, except share and per share data) 2012 2012 2012 2011 2011
Interest Income          
Interest and fees on loans held for investment  $ 28,275  $  20,853  $ 19,368  $ 19,947  $ 20,084
Interest on securities --- taxable  1,980  2,001  2,079  2,023  1,711
Interest on securities --- nontaxable  1,215  1,256  1,196  1,190  1,180
Interest on deposits in banks  66  72  39  41   75
Total interest income  31,536  24,182  22,682  23,201  23,050
Interest Expense          
Interest on deposits  2,603  2,360   2,405  2,637  2,998
Interest on short-term borrowings  675  589  595  592  611
Interest on long-term borrowings   1,799  1,749  1,705  1,706  1,707
Total interest expense  5,077  4,698  4,705  4,935  5,316
Net interest income  26,459  19,484  17,977  18,266  17,734
Provision for loan losses  1,916  1,620  922  2,436  1,920
Net interest income after provision for loan losses  24,543  17,864  17,055  15,830  15,814
Noninterest Income          
Wealth management income  1,005  940  894  818  868
Service charges on deposit accounts  3,895  3,329  3,013  3,450  3,404
Other service charges and fees  1,631  1,564  1,585  1,429  1,426
Insurance commissions  1,616  1,336  1,576  1,170  1,523
Net impairment losses recognized in earnings  (942)  --  --  (1,548)  (210)
Net (loss) gain on sale of securities  228  (9)   51  26  178
Other operating income  3,730  1,183  872  1,261  877
Total noninterest income  11,163   8,343  7,991  6,606  8,066
Noninterest Expense          
Salaries and employee benefits  10,860  8,892  8,222  7,903  8,409
Occupancy expense of bank premises  1,754  1,654  1,526  1,589  1,476
Furniture and equipment  955  975  811   804  862
Amortization of intangible assets  191  189  233  250  250
FDIC premiums and assessments  611   290  322  344  348
Merger related expense  645  3,419  163  --   -- 
Goodwill impairment   --  --  --  1,239  -- 
Other operating expense  5,309  4,713  4,916  4,925  4,715
Total noninterest expense  20,325  20,132  16,193  17,054  16,060
Income before income taxes  15,381  6,075  8,853  5,382   7,820
Income tax expense  5,322  1,997  2,852  2,151  2,502
Net income  10,059  4,078  6,001  3,231   5,318
Dividends on preferred stock  220  283  283  286  286
Net income available to common shareholders  $ 9,839  $ 3,795  $ 5,718  $ 2,945  $ 5,032
           
Basic earnings per common share  $ 0.49  $ 0.20  $ 0.32  $ 0.16  $ 0.28
Diluted earnings per common share  $ 0.47  $ 0.20  $ 0.31  $ 0.17  $ 0.28
Cash dividends per common share  $ 0.11  $ 0.11  $ 0.10  $ 0.10  $ 0.10
           
Weighted average basic shares outstanding  20,013,264  18,561,714  17,849,376  17,849,286  17,896,534
Weighted average diluted shares outstanding  21,476,497  19,909,242  19,189,923  19,159,090  19,205,634
 
 
FIRST COMMUNITY BANCSHARES, INC.
RECONCILIATION OF GAAP NET INCOME TO CORE EARNINGS (Unaudited)
         
  Three Months Ended Nine Months Ended
  September 30, September 30,
  2012 2011 2012 2011
(Amounts in thousands, except per share data)        
Net income, GAAP  $ 10,059  $ 5,318  $ 20,138  $ 16,797
Non-GAAP adjustments:        
Net impairment losses recognized in earnings  942  210  942  737
Net loss (gain) on sale of securities  (228)  (178)  (270)   (5,238)
FHLB debt prepayment fees  --  --  --  471
Merger related expense  645  --  4,227   --
Prospective correction of prior period understatement  (2,395)  --  (2,395)  --
Other noncore, nonrecurring items  --  59   --  59
Total adjustments to core earnings  (1,036)  91  2,504  (3,971)
Tax effect  (392)  34  947   (1,489)
Core earnings, non-GAAP  $ 9,415  $ 5,375  $ 21,695  $ 14,315
         
Core return on average assets 1.35% 0.97% 1.19% 0.87%
Core return on average common equity 11.39% 7.41% 9.39% 6.78%
Core return on average tangible common equity 16.65% 10.73% 13.63% 9.95%
Core diluted earnings per common share $0.44 $0.28 $1.08 $0.77
 
 
FIRST COMMUNITY BANCSHARES, INC.
EFFICIENCY RATIO CALCULATION (Unaudited)
         
  Three Months Ended Nine Months Ended
  September 30, September 30,
  2012 2011 2012 2011
(Amounts in thousands)        
Noninterest expense, GAAP  $ 20,325  $  16,060  $ 56,650  $ 51,861
Non-GAAP adjustments:        
FHLB debt prepayment fees  --  --  --  (471)
Merger related expenses   (645)  --  (4,227)  --
OREO expense and net loss  (490)  (627)  (1,581)  (2,626)
Other noncore, nonrecurring items   --  (77)  --  (77)
Adjusted noninterest expense  19,190  15,356  50,842  48,687
         
Net interest income, GAAP  26,459  17,734  63,920  53,763
Noninterest income, GAAP  11,163  8,066  27,497  28,928
Non-GAAP adjustments:        
Tax equivalency adjustment  680  676  1,934  2,278
Net impairment losses recognized in earnings  942  210  942  737
Net loss (gain) on sale of securities   (228)  (178)  (270)  (5,238)
Prospective correction of prior period understatement  (2,395)  --  (2,395)  --
Other noncore, nonrecurring items  --  (18)  --  (18)
Adjusted net interest and noninterest income  36,621  26,490  91,628  80,450
         
Efficiency Ratio 52.40% 57.97% 55.49% 60.52%
 
 
FIRST COMMUNITY BANCSHARES, INC.
CONDENSED QUARTERLY BALANCE SHEETS (Unaudited)
           
   For the Quarter Ended
  September 30, June 30, March 31, December 31, September 30,
  2012 2012 2012 2011 2011
(Amounts in thousands)          
Cash and due from banks  $ 44,865  $ 54,494  $ 36,555  $  34,578  $ 38,776
Federal funds sold  93,005  64,815  61,328  1,909  103,179
Interest-bearing deposits in banks  27,359   36,856  11,729  10,807  6,365
Total cash and cash equivalents  165,229  156,165  109,612  47,294  148,320
Securities available-for-sale  517,161  526,607  478,352  482,430  449,387
Securities held-to-maturity  816  1,295  2,874   3,490  3,342
Loans held for sale  4,446  1,179  3,522  5,820  3,575
Loans held for investment, net of unearned income:          
Covered under loss share agreements  223,758  238,777  --  --  --
Not covered under loss share agreements  1,539,472  1,568,312   1,386,525  1,396,067  1,374,656
Less allowance for loan losses  25,835  26,171  25,800  26,205  26,407
Loans, net  1,741,841  1,782,097  1,364,247  1,375,682  1,351,824
FDIC receivable under loss share agreements  49,477  52,067  --  --   --
Property, plant, and equipment, net  62,191  60,829  54,616  54,721  54,860
Other real estate owned:          
Covered under loss share agreements   3,553  5,325  --  --  --
Not covered under loss share agreements  5,957  4,938  3,829   5,914  5,942
Interest receivable  6,038  8,396  5,886  6,193  6,264
Goodwill  111,001  99,402   83,056  83,056  83,832
Intangible assets  3,713  3,903  4,093  4,326  4,576
Other assets  101,812  109,297  96,704  101,683  111,745
Total assets  $ 2,768,789  $ 2,810,321  $ 2,203,269  $ 2,164,789  $ 2,220,092
           
Deposits:          
Noninterest-bearing  $ 335,100  $ 340,895  $ 253,352  $ 240,268  $ 233,683
Interest-bearing  360,061  335,686  307,136  275,156  295,804
Savings  496,740  494,516  397,850  394,707  396,767
Time  872,059  934,110  621,412  633,336  664,237
Total deposits  2,063,960  2,105,207  1,579,750  1,543,467  1,590,491
Interest, taxes, and other liabilities  28,249  22,465  23,203   20,452  20,030
Securities sold under agreements to repurchase  146,904  148,367  124,266  129,208  139,510
FHLB advances  161,971  176,653  150,000  150,000  150,000
Other borrowings  15,892  15,918  15,925  15,933  15,941
Total liabilities  2,416,976  2,468,610  1,893,144  1,859,060  1,915,972
           
Preferred stock  17,921  18,921  18,921  18,921  18,921
Common stock  20,309  20,240  18,083  18,083  18,083
Additional paid-in capital  213,320  212,510  188,149  188,118   188,243
Retained earnings  107,055  99,418  97,588  93,656  92,498
Treasury stock, at cost  (5,446)  (5,672)  (5,721)  (5,721)  (5,651)
Accumulated other comprehensive loss  (1,346)  (3,706)  (6,895)  (7,328)  (7,974)
Total stockholders' equity  351,813  341,711  310,125  305,729  304,120
Total liabilities and stockholders' equity  $ 2,768,789  $ 2,810,321  $ 2,203,269  $ 2,164,789  $ 2,220,092
           
Shares outstanding at period end  20,086,404  20,008,181  17,849,376  17,849,376  17,869,514
Book value per common share at period end (1)  $ 16.50  $ 16.03  $ 16.19  $ 15.96  $ 15.86
Tangible book value per common share at period end (2)  $ 11.12  $ 11.19  $ 11.64  $ 11.40  $ 11.25
           
           
(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) 2012 2012 2012 2011 2011
Allowance for Loan Losses on Non-covered Loans          
Beginning balance  $ 26,171  $ 25,800  $ 26,205  $ 26,407  $ 26,482
Provision for loan losses  1,916  1,620  922  2,436  1,920
Charge-offs  (2,613)  (1,613)  (1,562)   (2,915)  (3,062)
Recoveries  361  364  235  277  1,067
Net charge-offs  (2,252)  (1,249)  (1,327)  (2,638)  (1,995)
Ending balance  $ 25,835  $ 26,171  $ 25,800  $ 26,205  $ 26,407
           
Summary of Asset Quality          
Non-covered loans          
Nonaccrual loans  $ 26,404  $ 27,947  $ 24,617  $ 24,487  $ 22,877
Accruing loans past due 90 days or more  --  --  --  --   --
Troubled debt restructurings ("TDRs") (1)  121  469  2,668  600  964
Total non-covered nonperforming loans  26,525  28,416  27,285  25,087  23,841
Other real estate owned ("OREO") not covered under FDIC loss share agreements  5,957  4,938  3,829  5,914   5,942
Total non-covered nonperforming assets  $ 32,482  $ 33,354  $ 31,114  $ 31,001  $ 29,783
Covered Loans          
Nonaccrual loans  $ 2,747  $ --  $  --  $ --  $ --
Accruing loans past due 90 days or more  --  --  --  --  --
Total covered nonperforming loans  2,747  --  --  --  --
OREO covered under FDIC loss share agreements  3,553  5,325   --  --  --
Total covered nonperforming assets  6,300  5,325  --  --  --
Total nonperforming assets  $ 38,782  $ 38,679  $ 31,114  $ 31,001  $ 29,783
           
Performing TDRs (2)  $ 6,742  $ 6,995  $ 7,052  $ 8,854  $ 11,234
Total TDRs (3)  $ 6,863  $ 7,464  $ 9,720  $ 9,454  $ 12,198
           
Asset Quality Ratios          
Excluding covered assets          
Nonperforming loans to total loans 1.72% 1.81% 1.97% 1.80% 1.73%
Nonperforming assets to total assets 1.28% 1.30% 1.41% 1.43% 1.34%
Allowance for loan losses to nonperforming loans (4) 97.40% 92.10% 94.56% 104.46% 110.76%
Allowance for loan losses to non-covered total loans 1.68% 1.67% 1.86% 1.88% 1.92%
Annualized net charge-offs to average loans 0.57% 0.38% 0.38% 0.76% 0.58%
Including covered assets          
Nonperforming loans to total loans 1.66% 1.57% 1.97% 1.80% 1.73%
Nonperforming assets to total assets 1.40% 1.38% 1.41% 1.43% 1.34%
Allowance for loan losses to nonperforming loans 88.26% 92.10% 94.56% 104.46% 110.76%
Allowance for loan losses to total loans 1.47% 1.45% 1.86% 1.88% 1.92%
           
           
(1) Accruing TDRs restructured within the past six months
(2) Accruing TDRs with six months or more of satisfactory payment performance
(3) Accruing nonperforming and performing TDRs
(4) In accordance with GAAP, the Company recorded no allowance for the Peoples' loan portfolio because the fair value of the acquired loans incorporates assumptions regarding credit risk. The Company recorded an initial fair value adjustment of approximately $17.43 million on the loans acquired from Peoples in the second quarter of 2012.
 
 
FIRST COMMUNITY BANCSHARES, INC.
SELECTED FINANCIAL INFORMATION (Unaudited)
           
  As of and for the Quarter Ended
  September 30, June 30, March 31, December 31, September 30,
  2012 2012 2012 2011 2011
Selected Ratios          
Return on average assets 1.41% 0.65% 1.06% 0.54% 0.91%
Return on average common equity 11.91% 5.00% 7.88% 4.06% 6.94%
Net interest margin 4.48% 3.93% 3.91% 3.93% 3.77%
Efficiency ratio for the quarter 55.49% 57.58% 57.18% 56.73% 57.97%
Efficiency ratio year-to-date 52.40% 57.38% 57.18% 59.56% 60.52%
Total equity to total assets 12.72% 12.16% 14.08% 14.12% 13.70%
Average earning assets to average assets 87.02% 87.68% 88.24% 88.27% 88.39%
Average loans to average deposits 87.88% 88.57% 89.85% 89.45% 87.15%
           
(Amounts in thousands)          
Average Balances          
Loans  $ 1,790,489  $ 1,512,451  $ 1,394,246  $ 1,392,650  $ 1,379,144
Investment securities   528,126  490,219  481,595  479,638  417,291
Earning assets  2,408,442  2,069,799  1,918,366  1,913,768  1,936,720
Total assets  2,767,790  2,360,567  2,174,004  2,168,166  2,191,145
Total deposits  2,037,467  1,707,613  1,551,728  1,556,990  1,582,481
Interest-bearing deposits  1,733,987  1,437,548  1,312,865  1,320,186  1,357,938
Borrowings  329,958  303,474  290,015  295,303  300,751
Interest-bearing liabilities  2,063,945  1,741,022  1,602,880  1,615,489  1,658,689
Stockholders' equity  347,637  323,994  310,795  306,779  306,524
Tax equivalent net interest income  27,139  20,206  18,660  18,947  18,410
 
 
FIRST COMMUNITY BANCSHARES, INC.
AVERAGE BALANCE SHEETS AND NET INTEREST INCOME ANALYSIS (Unaudited)
             
  Three Months Ended September 30,
  2012 2011
  Average   Average Yield/ Average   Average Yield/
(Amounts in thousands) Balance Interest (1) Rate (1) Balance Interest (1) Rate (1)
Assets            
Earning assets            
Loans (2)  $ 1,790,489  $ 28,305 6.29%  $ 1,379,144  $ 20,126 5.79%
Securities available-for-sale  525,151  3,819 2.89%  413,538  3,447 3.31%
Securities held-to-maturity   2,975  26 3.48%  3,753  78 8.25%
Interest-bearing deposits  89,827  65 0.29%  140,285  75 0.21%
Total earning assets  2,408,442  32,215 5.32%  1,936,720  23,726 4.86%
Other assets  359,348      254,425    
Total assets  $ 2,767,790      $ 2,191,145    
             
Liabilities            
Interest-bearing deposits            
Demand deposits  $ 335,299  $ 49 0.06%  $ 279,722  $ 80 0.11%
Savings deposits  500,761  171 0.14%  403,688   171 0.17%
Time deposits  897,927  2,384 1.06%  674,528  2,747 1.62%
Total interest-bearing deposits  1,733,987  2,604 0.60%  1,357,938  2,998 0.88%
Borrowings            
Retail repurchase agreements  88,484  120 0.54%  84,813  126 0.59%
Wholesale repurchase agreements  58,195  544 3.72%   50,000  474 3.76%
FHLB advances and other borrowings  183,279  1,808 3.92%  165,938  1,718 4.11%
Total borrowings  329,958  2,472 2.98%   300,751  2,318 3.06%
Total interest-bearing liabilities  2,063,945  5,076 0.98%  1,658,689  5,316 1.27%
Noninterest-bearing demand deposits  303,480      224,543    
Other liabilities  25,728      1,389    
Total liabilities  2,393,153      1,884,621    
Stockholders' equity  347,637      306,524    
Total liabilities and stockholders' equity  $ 2,740,790      $ 2,191,145    
Net interest income, tax equivalent    $ 27,139      $ 18,410  
Net interest rate spread (3)     4.34%     3.59%
Net interest margin (4)     4.48%     3.77%
             
(1) Fully taxable equivalent at the rate of 35% ("FTE"). The FTE basis adjusts for the tax benefits of income on certain tax exempt loans and investments using the federal statutory rate of 35% for each period presented. The Company believes this measure to be the preferred industry measurement of net interest income and provides relevant comparison between taxable and nontaxable amounts.
(2) Nonaccrual loans are included in average balances outstanding, but with no related interest income during the period of nonaccrual.
(3) Represents the difference between the yield on earning assets and cost of funds.
(4) Represents tax equivalent net interest income divided by average earning assets.
 
 
FIRST COMMUNITY BANCSHARES, INC.
AVERAGE BALANCE SHEETS AND NET INTEREST INCOME ANALYSIS (Unaudited)
             
  Nine Months Ended September 30,
  2012 2011
  Average   Average Yield/ Average   Average Yield/
(Amounts in thousands) Balance Interest (1) Rate (1) Balance Interest (1) Rate (1)
Assets            
Earning assets            
Loans (2)  $ 1,566,550  $ 68,610 5.85%  $ 1,378,540  $ 60,755 5.89%
Securities available-for-sale  496,854  11,547 3.10%  420,544  11,991 3.81%
Securities held-to-maturity  3,228  155 6.41%  4,203  263 8.37%
Interest-bearing deposits  66,579  177 0.36%  141,198  244 0.23%
Total earning assets  2,133,211  80,489 5.04%  1,944,485  73,253 5.04%
Other assets  302,136      260,413    
Total assets  $ 2,435,347      $ 2,204,898    
             
Liabilities            
Interest-bearing deposits            
Demand deposits  $ 305,055  $ 123 0.05%  $ 277,109  $ 404 0.19%
Savings deposits  439,451  400 0.12%  415,197  769 0.25%
Time deposits  751,167  6,846 1.22%  695,150  8,978 1.73%
Total interest-bearing deposits  1,495,673  7,369 0.66%   1,387,456  10,151 0.98%
Borrowings            
Federal funds purchased  654  2 0.41%  --  -- 0.00%
Retail repurchase agreements  78,472  343 0.58%  85,064  440 0.69%
Wholesale repurchase agreements  54,145  1,482 3.66%  50,000  1,409 3.77%
FHLB advances and other borrowings  174,627  5,284 4.04%  170,034  5,212 4.10%
Total borrowings  307,898  7,111 3.08%  305,098  7,061 3.09%
Total interest-bearing liabilities  1,803,571  14,480 1.07%  1,692,554  17,212 1.36%
Noninterest-bearing demand deposits  279,987      218,659    
Other liabilities  24,241      2,454    
Total liabilities  2,107,799      1,913,667    
Stockholders' equity  327,548      291,231    
Total liabilities and stockholders' equity  $ 2,435,347      $ 2,204,898    
Net interest income, tax equivalent    $ 66,009      $ 56,041  
Net interest rate spread (3)     3.97%     3.68%
Net interest margin (4)     4.13%     3.85%
             
(1) Fully taxable equivalent at the rate of 35% ("FTE"). The FTE basis adjusts for the tax benefits of income on certain tax exempt loans and investments using the federal statutory rate of 35% for each period presented. The Company believes this measure to be the preferred industry measurement of net interest income and provides relevant comparison between taxable and nontaxable amounts.
(2) Nonaccrual loans are included in average balances outstanding, but with no related interest income during the period of nonaccrual.
(3) Represents the difference between the yield on earning assets and cost of funds.
(4) Represents tax equivalent net interest income divided by average earning assets.
CONTACT: David D. Brown (276) 326-9000

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