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First Community Bancshares, Inc. Announces Fourth Quarter and Full Year 2015 Results and Quarterly Dividend

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BLUEFIELD, Va., Jan. 26, 2016 (GLOBE NEWSWIRE) -- First Community Bancshares, Inc. (NASDAQ: FCBC) (www.fcbinc.com) (the "Company") today announced financial results for the quarter and year ended December 31, 2015. The Company reported net income of $6.15 million for the quarter and $24.54 million for the year ended December 31, 2015. Net income available to common shareholders totaled $6.15 million, or $0.34 per diluted common share, for the quarter and $24.44 million, or $1.31 per diluted common share, for the year ended December 31, 2015. Core earnings totaled $6.17 million for the quarter and $24.52 million for the year ended December 31, 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 February 5, 2016, and is expected to be paid on or about February 19, 2016. The current year marks the 31st consecutive year of cash dividends paid to stockholders.

Fourth Quarter 2015 Highlights –

  • The Company's diluted earnings per share increased 5 basis points, or 17.24%, to $0.34 for the fourth quarter of 2015 compared to the fourth quarter of 2014.

  • The Company's normalized net interest margin increased 17 basis points to 3.68% for the fourth quarter of 2015 compared to the fourth quarter of 2014.
  • The Company's non-covered loan portfolio as of December 31, 2015, increased $23.24 million, or 1.45%, compared with September 30, 2015, and increased $56.33 million, or 3.59%, compared with December 31, 2014.
  • The Company repurchased 219,573 common shares during the fourth quarter, bringing total repurchased shares to 1,401,622 during the year ended December 31, 2015, including the effect of the preferred share redemption.
  • The Company significantly exceeds regulatory "well capitalized" targets as of December 31, 2015.

Net Interest Income

Net interest income decreased $3.54 million, or 14.31%, to $21.18 million for the fourth quarter of 2015 compared with the same quarter of 2014. The tax equivalent net interest margin decreased to 3.98% for the fourth quarter of 2015 compared with 4.19% for the same quarter of 2014. Total interest income decreased $4.50 million, or 15.98%, to $23.68 million for the fourth quarter of 2015 compared with the same quarter of 2014. The tax equivalent yield on loans decreased 82 basis points to 5.07% while the average loan balance decreased $50.24 million, or 2.88%, to $1.69 billion for the fourth quarter of 2015 compared with the same quarter of 2014. The decrease in net interest income and the average loan balance was primarily due to loans sold in divestiture activities during the fourth quarter of 2014 and decreases in the covered loan portfolio compared to the fourth quarter of 2014. In addition, we realized a positive resolution of a sizable problem credit which resulted in enhanced accretion income, reduced specific reserves, and recovery of prior years' charge-offs during the fourth quarter of 2014.

Purchased credit impaired ("PCI") loan interest accretion totaled $2.49 million for the fourth quarter of 2015, of which $824 thousand was received in cash, compared to accretion income of $2.75 million for the same quarter of 2014, of which $1.20 million was received in cash. Accretion income was enhanced in the fourth quarter of 2014 by discount accretion of $2.59 million related to the positive resolution of a sizable problem credit. The normalized net interest margin, which excludes non-cash loan interest accretion, was 3.68% for the fourth quarter of 2015 compared to 3.51% for same quarter of 2014. The normalized yield on loans was 4.68% for the fourth quarter of 2015 compared to 4.95% for the same quarter of 2014.

Total interest expense decreased $969 thousand, or 27.92%, to $2.50 million for the fourth quarter of 2015 compared with the same quarter of 2014. Deposit costs decreased $601 thousand, or 33.33%, to $1.20 million for the fourth quarter of 2015 compared with the same quarter of 2014, reflecting a 10 basis point decrease in the average rate paid on interest-bearing deposits. Borrowing costs decreased $368 thousand, or 22.06%, to $1.30 million for the fourth 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 12 basis points to 0.60% for the fourth quarter of 2015 compared with the same quarter of 2014. The average balance of interest-bearing liabilities decreased $262.68 million, or 13.76%, to $1.65 billion for the fourth quarter of 2015 compared with the same quarter of 2014, which included a $235.57 million decrease in average interest-bearing deposits and a $27.11 million decrease in average total borrowings.

Noninterest Income

Noninterest income experienced a slight decrease of $15 thousand, or 0.20%, to $7.48 million for the fourth quarter of 2015 compared with the same quarter of 2014, which was largely due to a decrease in the net loss on sale of securities offset by an increase in the net amortization expense related to the FDIC indemnification asset, a decrease in other operating income, and the net gain from the sale of thirteen branches to CresCom Bank during the fourth quarter of 2014. Wealth management revenues increased $110 thousand, or 17.35%, for the fourth quarter of 2015 compared with the same quarter of 2014. The Trust and Wealth Management Divisions reported $742 million in combined assets under management as of December 31, 2015. Service charges on deposits and other service charges and fees decreased $216 thousand, or 3.70%, to $5.62 million for the fourth quarter of 2015 compared with the same quarter of 2014. Insurance commissions increased $121 thousand, or 8.39%, for the fourth quarter of 2015 compared with the same quarter of 2014. The Company realized a $7 thousand net loss on the sale of securities in the fourth quarter of 2015 compared to a net loss of $1.69 million in the same quarter of 2014. The net loss in the fourth quarter of 2014 included the sale of the Company's only remaining non-Agency mortgage-backed security at a loss of $1.62 million. Net amortization expense related to the FDIC indemnification asset increased $387 thousand, or 47.60%, for the fourth quarter of 2015 compared with the same quarter of 2014 as a result of continuing better than expected performance in the covered loan portfolio. Other operating income decreased $572 thousand, or 42.88%, for the fourth quarter of 2015 compared with the same quarter of 2014 primarily due to a $400 thousand legal settlement recognized during the fourth quarter of 2014.

Noninterest Expense

Noninterest expense decreased $4.97 million, or 20.65%, to $19.08 million for the fourth quarter of 2015 compared with the same quarter of 2014, which was largely due to the absence of FHLB debt prepayment fees and merger, acquisition, and divestiture expenses coupled with a decrease in other operating expense. The Company incurred fees of $1.96 million related to the prepayment of $25 million in FHLB convertible advances and expenses related to branch acquisition and divestitures of $865 thousand in the fourth quarter of 2014. Salaries and employee benefits decreased $573 thousand, or 5.29%, to $10.27 million for the fourth quarter of 2015 compared with the same quarter of 2014. Full-time equivalent employees totaled 673 as of December 31, 2015, a decrease of 5 employees compared with the same period of the prior year. Occupancy, furniture, and equipment expenses decreased $96 thousand, or 3.36%, to $2.76 million for the fourth quarter of 2015 compared with the same quarter of 2014. Other operating expense decreased $1.47 million, or 21.25%, to $5.44 million for the fourth quarter of 2015 compared with the same quarter of 2014, which was largely due to write-downs of certain long-term investments in land and buildings totaling $935 thousand during the fourth quarter of 2014. Other operating expense also included a $72 thousand increase in the net loss on sales and expenses associated with other real estate owned ("OREO"). The non-GAAP efficiency ratio for the fourth quarter of 2015 was 63.55% compared to 57.70% for the same quarter of 2014.

Allowance for Loan Losses and Asset Quality

The allowance for loan losses totaled $20.23 million as of December 31, 2015 and December 31, 2014. As of December 31, 2015, $20.18 million of the allowance was attributed to the non-PCI loan portfolio and $54 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 1.24% as of December 31, 2015, compared with 1.29% as of December 31, 2014. Allowance activity in the fourth quarter of 2015 included a $434 thousand provision for loan losses compared to a $488 thousand recovery of loan losses for the same quarter of 2014. There was no activity related to loan losses recorded through the FDIC indemnification asset in the fourth quarter of 2015, compared to a provision of $29 thousand in the fourth quarter of 2014. The Company realized net charge-offs of $328 thousand in the fourth quarter of 2015, an increase of $537 thousand compared to net recoveries of $209 thousand in the same quarter of 2014. The ratio of annualized net charge-offs to average non-covered loans was 0.08% for the fourth quarter of 2015.

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 1.72% as of December 31, 2015, compared to 1.40% for the same period of the prior year. Non-covered nonaccrual loans totaled $17.85 million as of December 31, 2015, compared to $10.56 million as of December 31, 2014. At quarter-end, the Company's non-covered nonaccrual loans as a percentage of total non-covered loans were 1.10%, compared to 0.67% at year-end 2014. As of December 31, 2015, the Company's non-covered nonperforming loans as a percentage of total non-covered loans were 1.15% and non-covered nonperforming assets as a percentage of total non-covered assets were 0.99%.

As of December 31, 2015, total nonperforming assets, including the covered and non-covered loan portfolios, consisted of $18.49 million in nonaccrual loans, $824 thousand in unseasoned, accruing troubled debt restructurings, and $8.91 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 $3.62 million, or 18.19%, and total covered nonperforming assets decreased $4.08 million, or 46.58%, as of December 31, 2015, compared to December 31, 2014.

Balance Sheet and Capital

Consolidated assets totaled $2.46 billion as of December 31, 2015, a decrease of $145.66 million, or 5.59%, compared with $2.61 billion as of December 31, 2014. The change in consolidated assets was primarily driven by a $183.38 million, or 93.14%, 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 December 31, 2015, securities available for sale increased $40.06 million, securities held to maturity increased $14.59 million, and loans held for investment increased $15.33 million compared to December 31, 2014.

Consolidated liabilities totaled $2.12 billion as of December 31, 2015, a decrease of $137.30 million, or 6.08%, compared with $2.26 billion as of December 31, 2014. The change in consolidated liabilities was driven by a $127.50 million decrease in deposits and a $27.24 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 $343.02 million as of December 31, 2015, a decrease of $8.36 million, or 2.38%, 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. Additionally, the Company repurchased 1,238,299 common shares at a weighted average cost of $17.35 per share and paid a cash dividend of $0.54 per common share during 2015. Book value per common share increased 4.93% to $18.95 as of December 31, 2015, compared with $18.06 as of December 31, 2014. Tangible book value per common share increased 4.38% to $13.11 as of December 31, 2015, compared with $12.56 as of December 31, 2014.

The Company significantly exceeds regulatory "well capitalized" targets as of December 31, 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 50 banking locations throughout Virginia, West Virginia, North Carolina, and Tennessee as of December 31, 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 $742 million in combined assets as of December 31, 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 9 insurance locations throughout Virginia, West Virginia, and North Carolina as of December 31, 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 $2.46 billion as of December 31, 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 Year Ended 
 December 31, December 31, 
(Amounts in thousands, except share and per share data) 2015   2014   2015   2014  
Interest income        
Interest and fees on loans held for investment$  21,633  $  25,841  $  87,632  $  95,492  
Interest on securities -- taxable   1,058     1,145     4,225     5,975  
Interest on securities -- nontaxable   965     1,021     3,978     4,350  
Interest on deposits in banks   21     174     267     291  
Total interest income   23,677     28,181     96,102     106,108  
Interest expense        
Interest on deposits   1,202     1,803     5,878     7,308  
Interest on short-term borrowings   466     513     1,952     2,024  
Interest on long-term borrowings   834     1,155     3,519     5,958  
Total interest expense   2,502     3,471     11,349     15,290  
Net interest income   21,175     24,710     84,753     90,818  
Provision for (recovery of) loan losses   434     (488)    2,191     145  
Net interest income after provision for loan losses   20,741     25,198     82,562     90,673  
Noninterest income        
Wealth management income   744     634     2,975     3,030  
Service charges on deposit accounts   3,563     3,729     13,717     13,828  
Other service charges and fees   2,058     2,108     8,045     7,581  
Insurance commissions   1,563     1,442     6,899     6,555  
Net impairment losses recognized in earnings   -     -     -     (737) 
Net (loss) gain on sale of securities   (7)    (1,691)    144     (1,385) 
Net FDIC indemnification asset amortization   (1,200)    (813)    (6,379)    (3,979) 
Net gain on branch divestiture   -     755     -     755  
Other operating income   762     1,334     4,129     4,355  
Total noninterest income    7,483     7,498     29,530     30,003  
Noninterest expense        
Salaries and employee benefits   10,268     10,841     39,625     40,713  
Occupancy expense of bank premises   1,413     1,513     5,817     6,338  
Furniture and equipment    1,345     1,341     5,199     4,952  
Amortization of intangible assets   281     255     1,118     787  
FDIC premiums and assessments   332     361     1,513     1,672  
FHLB debt prepayment fees   -     1,961     1,702     5,008  
Merger, acquisition, and divestiture expense   -     865     86     1,150  
Other operating expense   5,444     6,913     21,111     22,242  
Total noninterest expense   19,083     24,050     76,171     82,862  
Income before income taxes   9,141     8,646     35,921     37,814  
Income tax expense   2,993     2,931     11,381     12,324  
Net income    6,148     5,715     24,540     25,490  
Dividends on preferred stock   -     227     105     910  
Net income available to common shareholders$  6,148  $  5,488  $  24,435  $  24,580  
         
Basic earnings per common share $  0.34  $  0.30  $  1.32  $  1.34  
Diluted earnings per common share    0.34     0.29     1.31     1.31  
Cash dividends per common share   0.14     0.13     0.54     0.50  
         
Weighted average basic shares outstanding 18,193,824   18,403,959   18,531,039   18,406,363  
Weighted average diluted shares outstanding 18,226,719   19,482,000   18,727,464   19,483,054  
         
Return on average assets 0.99%  0.80%  0.97%  0.94% 
Return on average common equity 7.05%  6.48%  7.08%  7.51% 
         

 

  
FIRST COMMUNITY BANCSHARES, INC. 
CONDENSED QUARTERLY STATEMENTS OF INCOME (Unaudited) 
           
 Quarter Ended 
 December 31, September 30, June 30, March 31, December 31, 
(Amounts in thousands, except share and per share data) 2015   2015   2015   2015   2014  
Interest Income          
Interest and fees on loans held for investment$  21,633  $  22,259  $  21,826  $  21,914  $  25,841  
Interest on securities -- taxable   1,058     1,062     1,070     1,035     1,145  
Interest on securities -- nontaxable   965     994     1,003     1,016     1,021  
Interest on deposits in banks   21     33     80     133     174  
Total interest income   23,677     24,348     23,979     24,098     28,181  
Interest Expense          
Interest on deposits   1,202     1,384     1,562     1,730     1,803  
Interest on short-term borrowings   466     497     499     490     513  
Interest on long-term borrowings   834     798     848     1,039     1,155  
Total interest expense   2,502     2,679     2,909     3,259     3,471  
Net interest income   21,175     21,669     21,070     20,839     24,710  
Provision for (recovery of) loan losses   434     381     276     1,100     (488) 
Net interest income after provision for loan losses   20,741     21,288     20,794     19,739     25,198  
Noninterest Income          
Wealth management income   744     790     775     666     634  
Service charges on deposit accounts   3,563     3,744     3,507     2,903     3,729  
Other service charges and fees   2,058     1,974     2,005     2,008     2,108  
Insurance commissions   1,563     1,650     1,559     2,127     1,442  
Net impairment losses recognized in earnings   -     -     -     -     -  
Net (loss) gain on sale of securities   (7)    (39)    213     (23)    (1,691) 
Net FDIC indemnification asset amortization   (1,200)    (1,768)    (1,846)    (1,565)    (813) 
Net gain on branch divestiture   -     -     -     -     755  
Other operating income   762     723     1,924     720     1,334  
Total noninterest income    7,483     7,074     8,137     6,836     7,498  
Noninterest Expense          
Salaries and employee benefits   10,268     9,971     9,693     9,693     10,841  
Occupancy expense of bank premises   1,413     1,443     1,427     1,534     1,513  
Furniture and equipment   1,345     1,259     1,358     1,237     1,341  
Amortization of intangible assets   281     281     279     277     255  
FDIC premiums and assessments    332     377     389     415     361  
FHLB debt prepayment fees   -     -     1,702     -     1,961  
Merger, acquisition, and divestiture expense   -     -     -     86     865  
Other operating expense   5,444     5,688     5,441     4,538     6,913  
Total noninterest expense   19,083     19,019     20,289     17,780     24,050  
Income before income taxes   9,141     9,343     8,642     8,795     8,646  
Income tax expense   2,993     3,084     2,467     2,837     2,931  
Net income    6,148     6,259     6,175     5,958     5,715  
Dividends on preferred stock   -     -     -     105     227  
Net income available to common shareholders$  6,148  $  6,259  $  6,175  $  5,853  $  5,488  
           
Basic earnings per common share$  0.34  $  0.34  $  0.33  $  0.31  $  0.30  
Diluted earnings per common share   0.34     0.34     0.33     0.31     0.29  
Cash dividends per common share   0.14     0.14     0.13     0.13     0.13  
           
Weighted average basic shares outstanding   18,193,824     18,470,348     18,831,742     18,633,574     18,403,959  
Weighted average diluted shares outstanding   18,226,719     18,500,975     18,860,119     19,344,443     19,482,000  
           

 

 
FIRST COMMUNITY BANCSHARES, INC.
RECONCILIATION OF GAAP NET INCOME TO CORE EARNINGS (Unaudited)
          
 Three Months Ended
 December 31, September 30, June 30, March 31, December 31,
  2015   2015   2015   2015   2014 
(Amounts in thousands, except per share data)         
Net income, GAAP$  6,148  $  6,259  $  6,175  $  5,958  $  5,715 
Non-GAAP adjustments:         
Net impairment losses recognized in earnings   -     -     -     -     - 
Net loss (gain) on sale of securities   7     39     (213)    23     1,691 
Net gain on branch divestiture   -     -     -     -     (755)
FHLB debt prepayment fees   -     -     1,702     -     1,961 
Merger, acquisition, and divestiture expense   -     -     -     86     865 
Other noncore, nonrecurring items   31     (75)    (930)    (30)    1,173 
Total adjustments to core earnings   38     (36)    559     79     4,935 
Tax effect    14     (13)    630     29     1,859 
Core earnings, non-GAAP$  6,172  $  6,236  $  6,104  $  6,008  $  8,791 
          
Core return on average assets 0.99%  1.00%  0.96%  0.94%  1.28%
Core return on average common equity 7.08%  7.16%  7.00%  7.09%  10.39%
Core return on average tangible common equity 10.21%  10.34%  10.07%  10.31%  15.50%
Core diluted earnings per common share$  0.34  $  0.34  $  0.32  $  0.31  $  0.45 
          
       Year Ended
       December 31,
        2015   2014 
(Amounts in thousands, except per share data)         
Net income, GAAP      $  24,540  $  25,490 
Non-GAAP adjustments:         
Net impairment losses recognized in earnings         -     737 
Net (gain) loss on sale of securities         (144)    1,385 
Net gain on branch divestiture         -     (755)
FHLB debt prepayment fees         1,702     5,008 
Merger, acquisition, and divestiture expense         86     1,150 
Other noncore, nonrecurring items         (1,004)    637 
Total adjustments to core earnings         640     8,162 
Tax effect          660     3,074 
Core earnings, non-GAAP      $  24,520  $  30,578 
          
Core return on average assets       0.97%  1.17%
Core return on average common equity       7.09%  9.34%
Core return on average tangible common equity       10.25%  13.99%
Core diluted earnings per common share      $  1.31  $  1.57 
          

 

  
FIRST COMMUNITY BANCSHARES, INC. 
EFFICIENCY RATIO CALCULATION (Unaudited) 
           
 Three Months Ended 
 December 31, September 30, June 30, March 31, December 31, 
  2015   2015   2015   2015   2014  
(Amounts in thousands)          
Noninterest expense, GAAP$  19,083  $  19,019  $  20,289  $  17,780  $  24,050  
Non-GAAP adjustments:          
FHLB debt prepayment fees   -     -     (1,702)    -     (1,961) 
Merger, acquisition, and divestiture expense   -     -     -     (86)    (865) 
OREO expense and net loss   (475)    (1,220)    (416)    (327)    (403) 
Other noncore, nonrecurring items   (61)    15     (213)    -     (1,573) 
Adjusted noninterest expense   18,547     17,814     17,958     17,367     19,248  
           
Net interest income, GAAP   21,175     21,669     21,070     20,839     24,710  
Noninterest income, GAAP   7,483     7,074     8,137     6,836     7,498  
Non-GAAP adjustments:          
Tax equivalency adjustment   548     565     1,249     588     613  
Net impairment losses recognized in earnings   -     -     -     -     -  
Net loss (gain) on sale of securities   7     39     (213)    23     1,691  
Net gain on branch divestiture   -     -     -     -     (755) 
Other noncore, nonrecurring items   (30)    (60)    (1,143)    (30)    (400) 
Adjusted net interest and noninterest income   29,183     29,287     29,100     28,256     33,357  
           
Non-GAAP efficiency ratio 63.55%  60.83%  61.71%  61.46%  57.70% 
GAAP efficiency ratio 66.59%  66.17%  69.47%  64.25%  74.67% 
           
       Year Ended 
       December 31,

 
        2015   2014  
(Amounts in thousands)          
Noninterest expense, GAAP      $  76,171  $  82,862  
Non-GAAP adjustments:          
FHLB debt prepayment fees         (1,702)    (5,008) 
Merger, acquisition, and divestiture expense         (86)    (1,150) 
OREO expense and net loss         (2,438)    (2,094) 
Other noncore, nonrecurring items         (259)    (1,573) 
Adjusted noninterest expense         71,686     73,037  
           
Net interest income, GAAP         84,753     90,818  
Noninterest income, GAAP         29,530     30,003  
Non-GAAP adjustments:          
Tax equivalency adjustment         2,950     2,557  
Net impairment losses recognized in earnings         -     737  
Net (gain) loss on sale of securities         (144)    1,385  
Net gain on branch divestiture         -     (755) 
Other noncore, nonrecurring items         (1,263)    (936) 
Adjusted net interest and noninterest income         115,826     123,809  
           
Non-GAAP efficiency ratio       61.89%  58.99% 
GAAP efficiency ratio       66.65%  68.58% 
           

 

  
FIRST COMMUNITY BANCSHARES, INC. 
CONDENSED CONSOLIDATED QUARTERLY BALANCE SHEETS (Unaudited) 
           
   As of the Quarter Ended 
 December 31, September 30, June 30, March 31, December 31, 
  2015   2015   2015   2015   2014  
(Amounts in thousands)          
Cash and due from banks$  37,383  $  33,555  $  38,200  $  36,222  $  39,450  
Federal funds sold   13,498     27,118     53,023     169,422     196,873  
Interest-bearing deposits in banks   906     1,351     1,379     1,380     1,337  
Total cash and cash equivalents   51,787     62,024     92,602     207,024     237,660  
Securities available for sale    366,173     382,212     376,191     351,454     326,117  
Securities held to maturity    72,541     72,596     72,652     72,897     57,948  
Loans held for sale   -     523     913     1,174     1,792  
Loans held for investment, net of unearned income:         
Covered under loss share agreements   83,035     90,203     102,634     112,724     122,240  
Not covered under loss share agreements   1,623,506     1,600,271     1,564,655     1,558,310     1,567,176  
Less allowance for loan losses   (20,233)    (20,127)    (20,258)    (20,252)    (20,227) 
Loans, net   1,686,308     1,670,870     1,647,944     1,651,956     1,670,981  
FDIC indemnification asset   20,844     22,049     23,653     26,053     27,900  
Property, plant, and equipment, net   52,756     53,442     54,112     54,955     55,844  
Other real estate owned:          
Covered under loss share agreements   4,034     4,079     5,382     5,834     6,324  
Not covered under loss share agreements   4,873     5,088     7,434     7,032     6,638  
Interest receivable   6,007     5,910     6,119     6,188     6,315  
Goodwill   100,486     100,810     100,810     100,810     100,722  
Intangible assets   5,243     5,583     5,865     6,144     6,422  
Other assets   91,224     93,453     99,034     95,497     105,065  
Total assets$  2,462,276  $  2,478,116  $  2,491,798  $  2,585,844  $  2,607,936  
           
Deposits:          
Noninterest-bearing demand$  451,511  $  442,021  $  424,438  $  433,422  $  417,729  
Interest-bearing demand   347,705     343,303     329,583     341,300     353,874  
Savings   530,585     526,627     528,003     533,589     525,478  
Time   543,458     590,951     638,197     682,878     703,678  
Total deposits   1,873,259     1,902,902     1,920,221     1,991,189     2,000,759  
Interest, taxes, and other liabilities   26,630     25,356     23,852     24,203     26,062  
Securities sold under agreements to repurchase   138,614     124,076     122,158     116,302     121,742  
FHLB borrowings   65,000     65,000     65,000     90,000     90,000  
Other borrowings   15,756     15,955     15,999     15,999     17,999  
Total liabilities   2,119,259     2,133,289     2,147,230     2,237,693     2,256,562  
           
Preferred stock   -     -     -     -     15,151  
Common stock   21,382     21,382     21,382     21,382     20,500  
Additional paid-in capital   227,692     227,621     227,616     227,782     215,873  
Retained earnings   155,647     152,046     148,378     144,656     141,206  
Treasury stock, at cost   (56,457)    (52,484)    (46,610)    (41,078)    (35,751) 
Accumulated other comprehensive loss   (5,247)    (3,738)    (6,198)    (4,591)    (5,605) 
Total stockholders' equity   343,017     344,827     344,568     348,151     351,374  
Total liabilities and stockholders' equity$  2,462,276  $  2,478,116  $  2,491,798  $  2,585,844  $  2,607,936  
           
Shares outstanding at period-end   18,098,141     18,313,425     18,641,966     18,965,274     18,406,219  
Book value per common share at period-end(1)$  18.95  $  18.83  $  18.48  $  18.36  $  18.06  
Tangible book value per common share at period-end(2)$  13.11  $  13.02  $  12.76  $  12.72  $  12.56  
             
             
(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
 December 31, September 30, June 30, March 31, December 31,
(Amounts in thousands) 2015   2015   2015   2015   2014 
Allowance for Loan Losses          
Beginning balance$  20,127  $  20,258  $  20,252  $  20,227  $  21,159 
Removal of loans transferred    -     -     -     -     (682)
Provision for (recovery of) loan losses charged to operations   434     381     276     1,100     (488)
(Recovery of) provision for  loan losses recorded through the FDIC indemnification asset   -     (75)    -     46     29 
Charge-offs   (805)    (689)    (673)    (1,578)    (1,362)
Recoveries   477     252     403     457     1,571 
Net (charge-offs) recoveries    (328)    (437)    (270)    (1,121)    209 
Ending balance$  20,233  $  20,127  $  20,258  $  20,252  $  20,227 
          
Summary of Asset Quality         
Non-covered nonperforming         
Nonaccrual loans $  17,847  $  17,100  $  15,936  $  15,387  $  10,556 
Accruing loans past due 90 days or more   -     3     -     -     - 
Troubled debt restructurings ("TDRs")(1)  824     74     -     -     2,726 
Total non-covered nonperforming loans  18,671     17,177     15,936     15,387     13,282 
OREO not covered under FDIC loss share agreements   4,873     5,088     7,434     7,032     6,638 
Total non-covered nonperforming assets$ 23,544  $  22,265  $  23,370  $  22,419  $  19,920 
Covered nonperforming         
Nonaccrual loans $  647  $  815  $  1,062  $  2,780  $  2,438 
Accruing loans past due 90 days or more   -     -     -     60     - 
Total covered nonperforming loans   647     815     1,062     2,840     2,438 
OREO covered under FDIC loss share agreements   4,034     4,079     5,382     5,834     6,324 
Total covered nonperforming assets$  4,681  $  4,894  $  6,444  $  8,674  $  8,762 
          
Additional Information         
Performing TDRs(2)$  13,890  $  13,965  $  13,841  $  14,025  $  11,808 
Total TDRs(3)  14,714     14,039     13,841     14,025     14,534 
          
Asset Quality Ratios         
Non-covered          
Nonperforming loans to total loans 1.15%  1.07%  1.02%  0.99%  0.85%
Nonperforming assets to total assets 0.99%  0.93%  0.98%  0.91%  0.80%
Non-PCI allowance to nonperforming loans 108.08%  117.06%  126.41%  130.88%  151.85%
Non-PCI allowance to total loans 1.24%  1.26%  1.29%  1.29%  1.29%
Annualized net charge-offs to average loans 0.08%  0.11%  0.07%  0.29%  NM 
Non-covered and covered         
Nonperforming loans to total loans 1.13%  1.06%  1.02%  1.09%  0.93%
Nonperforming assets to total assets 1.15%  1.10%  1.20%  1.20%  1.10%
Nonperforming assets to total loans and OREO 1.65%  1.60%  1.77%  1.85%  1.68%
Allowance for loan losses to nonperforming loans 104.74%  111.87%  119.18%  111.11%  128.67%
Allowance for loan losses to total loans 1.19%  1.19%  1.22%  1.21%  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 December 31,
  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)$  1,694,569  $  21,661   5.07% $  1,744,810  $  25,889   5.89%
Securities available-for-sale   377,213     2,349   2.47%    337,952     2,592   3.04%
Securities held-to-maturity   72,568     194   1.06%    44,538     140   1.25%
Interest-bearing deposits   19,544     21   0.43%    268,724     174   0.26%
Total earning assets   2,163,894     24,225   4.44%    2,396,024     28,795   4.77%
Other assets    298,312         328,105     
Total assets$  2,462,206      $  2,724,129     
            
Liabilities           
Interest-bearing deposits           
Demand deposits $  344,214  $  47   0.05% $  376,285  $  52   0.05%
Savings deposits    530,977     78   0.06%    564,892     127   0.09%
Time deposits   561,443     1,077   0.76%    731,026     1,624   0.88%
Total interest-bearing deposits   1,436,634     1,202   0.33%    1,672,203     1,803   0.43%
Borrowings           
Federal funds purchased   2,114     2   0.38%    -     -   - 
Retail repurchase agreements   74,042     14   0.08%    70,686     23   0.13%
Wholesale repurchase agreements   50,000     474   3.76%    50,000     473   3.75%
FHLB advances and other borrowings   83,748     810   3.84%    116,333     1,172   4.00%
Total borrowings   209,904     1,300   2.46%    237,019     1,668   2.79%
Total interest-bearing liabilities   1,646,538     2,502   0.60%    1,909,222     3,471   0.72%
Noninterest-bearing demand deposits   446,623         437,781     
Other liabilities   23,293         26,133     
Total liabilities   2,116,454         2,373,136     
Stockholders' equity   345,752         350,993     
Total liabilities and stockholders' equity$  2,462,206      $  2,724,129     
Net interest income, FTE  $  21,723      $  25,324   
Net interest rate spread     3.84%      4.05%
Net interest margin     3.98%      4.19%
            
            
(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)
            
 Year Ended December 31,
  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)$  1,680,021  $  87,768   5.22% $  1,744,520  $  95,707   5.49%
Securities available-for-sale   363,359     9,575   2.64%    410,136     12,400   3.02%
Securities held-to-maturity   70,987     770   1.08%    20,843     267   1.28%
Interest-bearing deposits   98,639     267   0.27%    98,090     291   0.30%
Total earning assets   2,213,006     98,380   4.44%    2,273,589     108,665   4.78%
Other assets    307,928         334,981     
Total assets$  2,520,934      $  2,608,570     
            
Liabilities           
Interest-bearing deposits           
Demand deposits $  343,036  $  203   0.06% $  366,932  $  206   0.06%
Savings deposits    532,221     367   0.07%    535,256     514   0.10%
Time deposits   631,654     5,308   0.84%    704,518     6,588   0.94%
Total interest-bearing deposits   1,506,911     5,878   0.39%    1,606,706     7,308   0.45%
Borrowings           
Federal funds purchased   535     2   0.37%    892     3   0.34%
Retail repurchase agreements   71,262     68   0.10%    72,917     97   0.13%
Wholesale repurchase agreements   50,000     1,878   3.76%    50,000     1,878   3.76%
FHLB advances and other borrowings   89,400     3,523   3.94%    147,504     6,004   4.07%
Total borrowings   211,197     5,471   2.59%    271,313     7,982   2.94%
Total interest-bearing liabilities   1,718,108     11,349   0.66%    1,878,019     15,290   0.81%
Noninterest-bearing demand deposits   433,936         367,315     
Other liabilities   20,691         20,617     
Total liabilities   2,172,735         2,265,951     
Stockholders' equity   348,199         342,619     
Total liabilities and stockholders' equity$  2,520,934      $  2,608,570     
Net interest income, FTE  $  87,031      $  93,375   
Net interest rate spread     3.78%      3.97%
Net interest margin     3.93%      4.11%
            
            
(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 December 31, 
  2015   2014 
   Average Yield/   Average Yield/
(Amounts in thousands)Interest(1) Rate(1) Interest(1) Rate(1)
Earning assets       
Loans(2)$  21,661   5.07% $  25,889   5.89%
Accretion income   2,493       2,745   
Less: cash accretion income   824       1,198   
Non-cash accretion income   1,669       1,547   
Non-recurring discount accretion   -       2,588   
Loans, excluding non-cash, non-recurring accretion income   19,992   4.68%    21,754   4.95%
Other earning assets   2,564   2.17%    2,906   1.77%
Total earning assets   22,556   4.13%    24,660   4.08%
Total interest-bearing liabilities   2,502   0.60%    3,471   0.72%
Net interest income, FTE$  20,054    $  21,189   
Net interest rate spread   3.53%    3.36%
Net interest margin   3.68%    3.51%
        
        
(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.
        
  Year Ended December 31, 
  2015   2014 
   Average Yield/   Average Yield/
(Amounts in thousands)Interest(1) Rate(1) Interest(1) Rate(1)
Earning assets       
Loans(2)$  87,768   5.22% $  95,707   5.49%
Accretion income   11,258       11,469   
Less: cash accretion income   4,149       4,412   
Non-cash accretion income   7,109       7,057   
Non-recurring discount accretion   -       2,588   
Loans, excluding non-cash, non-recurring accretion income   80,659   4.80%    86,062   4.93%
Other earning assets   10,612   1.99%    12,958   2.45%
Total earning assets   91,271   4.12%    99,020   4.36%
Total interest-bearing liabilities   11,349   0.66%    15,290   0.81%
Net interest income, FTE$  79,922    $  83,730   
Net interest rate spread   3.46%    3.55%
Net interest margin   3.61%    3.68%
        
        
(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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