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

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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.
FOR MORE INFORMATION, CONTACT: David D. Brown (276) 326-9000

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