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First Community Bancshares, Inc. Announces Second Quarter 2016 Results and Increased Quarterly Dividend

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BLUEFIELD, Va., July 26, 2016 (GLOBE NEWSWIRE) -- First Community Bancshares, Inc. (NASDAQ: FCBC) (www.fcbinc.com) (the "Company") today reported its unaudited results of operations and other financial information for the quarter and six months ended June 30, 2016. The Company reported net income available to common shareholders of $6.26 million, or $0.36 per diluted common share for the quarter ended June 30, 2016, which represents a 9.09% increase in per share earnings compared to the same quarter of 2015. Net income available to common shareholders was $12.34 million, or $0.70 per diluted common share for the six months ended June 30, 2016, which represents a 9.38% increase in per share earnings compared to the same period of 2015.

The Company also announced today that the Board of Directors declared a quarterly cash dividend to common shareholders of sixteen cents ($0.16) per common share, an increase of 14.29% over the most recent cash dividend. The quarterly dividend is payable to common shareholders of record on August 5, 2016, and is expected to be paid on or about August 19, 2016. The current year marks the 31st consecutive year of cash dividends paid to stockholders.

On July 15, 2016, the Company completed the previously announced branch exchange with First Bank, North Carolina, pursuant to which First Community Bank (the "Bank") sold six branches in the Winston-Salem and Mooresville areas of North Carolina and acquired seven branches in Southwestern Virginia.

Second Quarter 2016 Highlights

  • Income Statement
    • Net income available to common shareholders increased $80 thousand to $6.26 million, or 1.30%, compared to the same quarter of 2015.
    • Diluted earnings per share increased $0.03, or 9.09%, to $0.36 compared to the same quarter of 2015.
    • Core diluted earnings per common share increased $0.06 to $0.38 compared to the same quarter of 2015.
    • Net interest margin increased 18 basis points to 4.08% while normalized net interest margin increased 14 basis points to 3.81% compared to the same quarter of 2015.
    • Second quarter 2016 efficiency ratio was 65.19%, a significant decrease from the same quarter of 2015. The non-GAAP efficiency ratio improved 16 basis points to 61.55% compared to the same quarter of 2015. 
  • Balance Sheet
    • The non-covered loan portfolio increased $109.89 million, or 6.77%, compared to December 31, 2015.
    • Book value per common share increased $0.53 to $19.48 compared to December 31, 2015.
    • The Company repurchased 493,812 common shares during the quarter resulting in 981,551 shares repurchased year-to-date. Since June 30, 2013, the Company has repurchased 4.12 million shares.
    • The Company and its subsidiary bank both significantly exceed regulatory "well capitalized" targets as of June 30, 2016. 
  • Asset Quality
    • Annualized net charge-offs were only 0.02% of average loans compared to 0.06% for the same period of the prior year.
    • Delinquent loans as a percentage of total loans decreased 15 basis points to 1.26% compared to the same period of 2015.
    • Non-covered delinquent loans as a percentage of total non-covered loans decreased 13 basis points to 1.26% compared to the same period of 2015.
    • Total nonperforming assets decreased $3.79 million compared to December 31, 2015, and decreased $6.13 million compared to the same period of 2015.
    • Total non-covered nonperforming assets decreased $1.80 million compared to December 31, 2015, and decreased $2.38 million compared to June 30, 2015.
    • A net loan loss provision of $722 thousand was recognized to cover net charge-offs and the continued loan growth experienced during the quarter.

Financial Performance

CONDENSED STATEMENTS OF INCOME (Unaudited) 
                 
   Three Months Ended Six Months Ended 
   June 30, March 31, December 31, September 30, June 30, June 30, June 30, 
(Amounts in thousands, except share and per share data) 2016   2016   2015   2015   2015   2016   2015  
Interest income              
 Interest and fees on loans$  22,237  $  21,573  $  21,633  $  22,259  $  21,826  $  43,810  $  43,740  
 Interest on securities   1,891     1,957     2,023     2,056     2,073     3,848     4,124  
 Interest on deposits in banks   9     20     21     33     80     29     213  
Total interest income   24,137     23,550     23,677     24,348     23,979     47,687     48,077  
Interest expense              
 Interest on deposits   1,087     1,114     1,202     1,384     1,562     2,201     3,292  
 Interest on borrowings   1,359     1,325     1,300     1,295     1,347     2,684     2,876  
Total interest expense   2,446     2,439     2,502     2,679     2,909     4,885     6,168  
Net interest income   21,691     21,111     21,175     21,669     21,070     42,802     41,909  
Provision for loan losses   722     1,187     434     381     276     1,909     1,376  
Net interest income after provision   20,969     19,924     20,741     21,288     20,794     40,893     40,533  
Noninterest income              
  Wealth management   810     684     744     790     775     1,494     1,441  
  Service charges on deposits   3,361     3,291     3,563     3,744     3,507     6,652     6,410  
  Other service charges and fees   2,054     2,010     2,058     1,974     2,005     4,064     4,013  
  Insurance commissions   1,600     2,191     1,563     1,650     1,559     3,791     3,686  
  Net impairment losses recognized in earnings   (11)    -     -     -     -     (11)    -  
  Net (loss) gain on sale of securities   (79)    1     (7)    (39)    213     (78)    190  
  Net FDIC indemnification asset amortization   (1,328)    (1,159)    (1,200)    (1,768)    (1,846)    (2,487)    (3,411) 
  Other operating income   623     885     762     723     1,924     1,508     2,644  
Total noninterest income    7,030     7,903     7,483     7,074     8,137     14,933     14,973  
Noninterest expense              
Total noninterest expense   18,722     18,814     19,083     19,019     20,289     37,536     38,069  
Income before income taxes   9,277     9,013     9,141     9,343     8,642     18,290     17,437  
Income tax expense   3,022     2,929     2,993     3,084     2,467     5,951     5,304  
Net income    6,255     6,084     6,148     6,259     6,175     12,339     12,133  
Dividends on preferred stock   -     -     -     -     -     -     105  
Net income available to common shareholders$  6,255  $  6,084  $  6,148  $  6,259  $  6,175  $  12,339  $  12,028  
                 
Earnings per common share              
 Basic$  0.36  $  0.34  $  0.34  $  0.34  $  0.33  $  0.70  $  0.64  
 Diluted   0.36     0.34     0.34     0.34     0.33     0.70     0.64  
Cash dividends per common share   0.14     0.14     0.14     0.14     0.13     0.28     0.26  
Weighted average shares outstanding              
 Basic   17,414,320     17,859,197     18,193,824     18,470,348     18,831,907     17,636,783     18,733,288  
 Diluted   17,462,845     17,892,531     18,226,719     18,500,975     18,860,284     17,675,128     19,095,408  
Performance ratios              
 Return on average assets 1.02%  0.99%  0.99%  1.00%  0.97%  1.00%  0.94% 
 Return on average common equity 7.47%  7.15%  7.05%  7.18%  7.08%  7.31%  7.01% 
 Return on average tangible common equity(1) 10.88%  10.34%  10.17%  10.38%  10.19%  10.60%  10.16% 
                 
 (1)A non-GAAP financial measure defined as average stockholders' equity less average goodwill, other intangibles, and preferred stock liquidation preference. 
                 

 

RECONCILIATION OF GAAP NET INCOME TO CORE EARNINGS (Unaudited)
                
   Three Months Ended Six Months Ended
   June 30, March 31, December 31, September 30, June 30, June 30, June 30,
    2016   2016   2015   2015   2015   2016   2015 
(Amounts in thousands, except per share data)             
Net income, GAAP$  6,255  $  6,084  $  6,148  $  6,259  $  6,175  $  12,339  $  12,133 
Non-GAAP adjustments:             
 Merger, acquisition, and divestiture expense   410     39     -     -     -     449     86 
 Net loss (gain) on sale of securities   79     (1)    7     39     (213)    78     (190)
 FHLB debt prepayment fees   -     -     -     -     1,702     -     1,702 
 Net impairment losses recognized in earnings   11     -     -     -     -     11     - 
 Other non-core, non-recurring items   -     (240)    31     (75)    (930)    (240)    (960)
Total adjustments to core earnings   500     (202)    38     (36)    559     298     638 
Tax effect    184     (74)    14     (13)    631     110     660 
Core earnings, non-GAAP(1)$  6,571  $  5,956  $  6,172  $  6,236  $  6,103  $  12,527  $  12,111 
                
Core diluted earnings per common share$  0.38  $  0.33  $  0.34  $  0.34  $  0.32  $  0.71  $  0.63 
Performance ratios             
 Core return on average assets 1.07%  0.97%  0.99%  1.00%  0.96%  1.02%  0.95%
 Core return on average common equity 7.85%  7.00%  7.08%  7.16%  7.00%  7.42%  7.06%
 Core return on average tangible common equity(2) 11.43%  10.12%  10.21%  10.34%  10.07%  10.77%  10.23%
                
  (1)A non-GAAP financial measure that excludes gains, losses, and impairment losses on securities; goodwill and intangible impairment; taxes; and other non-recurring income and expense items from net income. 

  (2)A non-GAAP financial measure defined as average stockholders' equity less average goodwill, other intangibles, and preferred stock liquidation preference.

                

Net income available to common shareholders increased $80 thousand, or 1.30%, to $6.26 million for the second quarter of 2016 from $6.18 million for the same quarter of 2015. Diluted earnings per common share increased $0.03 to $0.36 for the second quarter of 2016 from $0.33 for the same quarter of 2015. The increase in net interest income was a result of  $621 thousand increase in net interest income and a $1.57 million decrease in noninterest expense offset by a $1.11 million decrease in noninterest income, a $446 thousand increase in the provision for loan losses, and a $555 thousand increase in income tax expense. The increase in net interest income was primarily due to decreases in deposit and borrowing costs. Noninterest income during the second quarter of 2015 included a net death benefit of approximately $1.14 million from the maturity of a life insurance policy.

Net Interest Income and Margin

AVERAGE BALANCE SHEETS AND NET INTEREST INCOME ANALYSIS (Unaudited)
               
   Three Months Ended June 30, 
    2016   2015  
   Average    Average Yield/ Average    Average Yield/ 
(Amounts in thousands)Balance Interest(1) Rate(1) Balance Interest(1) Rate(1) 
Assets            
Earning assets            
 Loans(2)$  1,775,435  $  22,263   5.04% $  1,671,476  $  21,862   5.25% 
 Securities available for sale   336,510     2,195   2.62%    362,366     2,418   2.68% 
 Securities held to maturity   72,331     191   1.06%    72,742     196   1.08% 
 Interest-bearing deposits   5,184     9   0.70%    120,025     80   0.27% 
Total earning assets   2,189,460     24,658   4.53%    2,226,609     24,556   4.42% 
Other assets    283,945         311,437      
Total assets$  2,473,405      $  2,538,046      
               
Liabilities and stockholders' equity            
Interest-bearing deposits            
 Demand deposits $  339,365  $  60   0.07% $  340,517  $  51   0.06% 
 Savings deposits    542,238     63   0.05%    538,717     101   0.08% 
 Time deposits   518,163     964   0.75%    655,243     1,410   0.86% 
Total interest-bearing deposits   1,399,766     1,087   0.31%    1,534,477     1,562   0.41% 
Borrowings            
 Federal funds purchased   9,078     14   0.62%    -     -   -  
 Retail repurchase agreements   65,718     12   0.07%    70,328     17   0.10% 
 Wholesale repurchase agreements   50,000     469   3.77%    50,000     468   3.75% 
 FHLB advances and other borrowings   132,459     864   2.62%    86,592     862   3.99% 
Total borrowings   257,255     1,359   2.12%    206,920     1,347   2.61% 
Total interest-bearing liabilities   1,657,021     2,446   0.59%    1,741,397     2,909   0.67% 
Noninterest-bearing demand deposits   460,255         428,442      
Other liabilities   19,520         20,072      
Total liabilities   2,136,796         2,189,911      
Stockholders' equity   336,609         348,135      
Total liabilities and stockholders' equity$  2,473,405      $  2,538,046      
Net interest income, FTE  $  22,212      $  21,647    
Net interest rate spread     3.94%      3.75% 
Net interest margin     4.08%      3.90% 
               
  (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.

 
               



AVERAGE BALANCE SHEETS AND NET INTEREST INCOME ANALYSIS (Unaudited)
               
   Six Months Ended June 30, 
    2016  2015 
   Average    Average Yield/ Average    Average Yield/ 
(Amounts in thousands)Balance Interest(1) Rate(1) Balance Interest(1) Rate(1) 
Assets            
Earning assets            
 Loans(2)$  1,752,918  $  43,862   5.03% $  1,674,778  $  43,816   5.28% 
 Securities available for sale   345,546     4,463   2.60%    346,792     4,831   2.81% 
 Securities held to maturity   72,421     385   1.07%    69,351     382   1.11% 
 Interest-bearing deposits   10,388     29   0.56%    164,201     213   0.26% 
Total earning assets   2,181,273     48,739   4.49%    2,255,122     49,242   4.40% 
Other assets    290,551         315,126      
Total assets$  2,471,824      $  2,570,248      
               
Liabilities and stockholders' equity            
Interest-bearing deposits            
 Demand deposits $  340,945  $  117   0.07% $  346,099  $  104   0.06% 
 Savings deposits    539,004     129   0.05%    532,740     206   0.08% 
 Time deposits   525,899     1,955   0.75%    676,519     2,982   0.89% 
Total interest-bearing deposits   1,405,848     2,201   0.31%    1,555,358     3,292   0.43% 
Borrowings            
 Federal funds purchased   6,251     20   0.64%    -     -   -  
 Retail repurchase agreements   71,855     25   0.07%    69,097     38   0.11% 
 Wholesale repurchase agreements   50,000     937   3.77%    50,000     931   3.75% 
 FHLB advances and other borrowings   120,236     1,702   2.85%    96,551     1,907   3.98% 
Total borrowings   248,342     2,684   2.17%    215,648     2,876   2.69% 
Total interest-bearing liabilities   1,654,190     4,885   0.59%    1,771,006     6,168   0.70% 
Noninterest-bearing demand deposits   454,552         427,881      
Other liabilities   23,652         20,696      
Total liabilities   2,132,394         2,219,583      
Stockholders' equity   339,430         350,665      
Total liabilities and stockholders' equity$  2,471,824      $  2,570,248      
Net interest income, FTE  $  43,854      $  43,074    
Net interest rate spread     3.90%      3.70% 
Net interest margin     4.04%      3.85% 
               
  (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.

 
               



RECONCILIATION OF GAAP NET INTEREST MARGIN TO NORMALIZED NET INTEREST MARGIN (Unaudited)
           
   Three Months Ended June 30, 
    2016   2015  
(Amounts in thousands)Interest(1) Average Yield/ Rate(1)  Interest(1) Average Yield/ Rate(1)  
Earning assets        
Loans(2)$  22,263   5.04% $  21,862   5.25% 
 Accretion income   2,248       2,416    
 Less: cash accretion income   786       1,134    
 Non-cash accretion income   1,462       1,282    
Loans, normalized(3)   20,801   4.71%    20,580   4.94% 
Other earning assets   2,395   2.33%    2,694   1.95% 
Total earning assets   23,196   4.26%    23,274   4.19% 
Total interest-bearing liabilities   2,446   0.59%    2,909   0.67% 
Net interest income, FTE(3)$  20,750    $  20,365    
Net interest rate spread, normalized(3)   3.67%    3.52% 
Net interest margin, normalized(3)   3.81%    3.67% 
           
  (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.

 
  (3)Normalized totals are non-GAAP financial measures that exclude non-cash loan interest accretion related to PCI loans. 
           
   Six Months Ended June 30, 
    2016  2015 
(Amounts in thousands)Interest(1) Average Yield/ Rate(1)  Interest(1) Average Yield/ Rate(1)  
Earning assets        
Loans(2)$  43,862   5.03% $  43,816   5.28% 
 Accretion income   4,500       5,255    
 Less: cash accretion income   1,591       2,230    
 Non-cash accretion income   2,909       3,025    
Loans, normalized(3)   40,953   4.70%    40,791   4.91% 
Other earning assets   4,877   2.29%    5,425   1.89% 
Total earning assets   45,830   4.23%    46,216   4.13% 
Total interest-bearing liabilities   4,885   0.59%    6,168   0.70% 
Net interest income, FTE(3)$  40,945    $  40,048    
Net interest rate spread, normalized(3)   3.63%    3.43% 
Net interest margin, normalized(3)   3.77%    3.58% 
           
  (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.

  (3)Normalized totals are non-GAAP financial measures that exclude non-cash loan interest accretion related to PCI loans.

 
           

The tax equivalent net interest margin increased 18 basis points, or 4.62%, to 4.08% and the normalized net interest margin, which excludes non-cash loan interest accretion, increased 14 basis points, or 3.81%, to 3.81% for the second quarter of 2016 compared to the same quarter of 2015. The tax equivalent yield on loans decreased 21 basis points to 5.04% while the average balance increased $103.96 million, or 6.22%, to $1.78 billion. The increase in average loans was primarily due to continued growth in the non-covered loan portfolio. Non-cash purchased credit impaired ("PCI") loan interest accretion increased $180 thousand, or 14.04%, to $1.46 million for the second quarter of 2016 from $1.28 million for the same quarter of 2015 due to several large loan payoffs. The normalized yield on loans decreased 23 basis points to 4.71%. The average rate paid on interest-bearing liabilities decreased 8 basis points to 0.59% and the average balance decreased $84.38 million, or 4.85%, to $1.66 billion. The decrease in average interest-bearing liabilities included a $134.71 million decrease in average interest-bearing deposits, primarily time deposit accounts, offset by a $50.34 million increase in average borrowings. 

Noninterest Income and Expense

CONDENSED QUARTERLY STATEMENTS OF INCOME (Unaudited) 
                
  Three Months Ended Six Months Ended 
  June 30, March 31, December 31, September 30, June 30, June 30, June 30, 
(Amounts in thousands) 2016   2016   2015   2015   2015   2016   2015  
Noninterest income              
 Wealth management   810     684     744     790     775     1,494     1,441  
 Service charges on deposits   3,361     3,291     3,563     3,744     3,507     6,652     6,410  
 Other service charges and fees   2,054     2,010     2,058     1,974     2,005     4,064     4,013  
 Insurance commissions   1,600     2,191     1,563     1,650     1,559     3,791     3,686  
 Net impairment losses recognized in earnings   (11)    -     -     -     -     (11)    -  
 Net (loss) gain on sale of securities   (79)    1     (7)    (39)    213     (78)    190  
 Net FDIC indemnification asset amortization   (1,328)    (1,159)    (1,200)    (1,768)    (1,846)    (2,487)    (3,411) 
 Other operating income   623     885     762     723     1,924     1,508     2,644  
Total noninterest income    7,030     7,903     7,483     7,074     8,137     14,933     14,973  
Noninterest expense              
 Salaries and employee benefits   10,198     10,475     10,268     9,971     9,693     20,673     19,386  
 Occupancy expense   1,359     1,531     1,413     1,443     1,427     2,890     2,961  
 Furniture and equipment expense   1,109     1,096     1,345     1,259     1,358     2,205     2,595  
 Amortization of intangibles   277     278     281     281     279     555     556  
 FDIC premiums and assessments   372     374     332     377     389     746     804  
 FHLB debt prepayment fees   -     -     -     -     1,702     -     1,702  
 Merger, acquisition, and divestiture expense   410     39     -     -     -     449     86  
 Other operating expense   4,997     5,021     5,444     5,688     5,441     10,018     9,979  
Total noninterest expense   18,722     18,814     19,083     19,019     20,289     37,536     38,069  
                

Noninterest income decreased $1.11 million, or 13.60%, for the second quarter of 2016 compared to the same quarter of 2015. The decrease was largely due to a $1.30 million, or 67.62%, decrease in other operating income offset by a $518 thousand decrease in net negative amortization related to the FDIC indemnification asset as a result of continuing better than expected performance in the covered loan portfolio. The Company recognized OTTI charges of $11 thousand associated with certain equity securities. Other operating income included a net death benefit of approximately $1.14 million from the maturity of a life insurance policy during the second quarter of 2015.

Noninterest expense decreased $1.57 million, or 7.72%, for the second quarter of 2016 compared to the same quarter of 2015. The decrease was largely due to FHLB debt prepayment fees of $1.70 million incurred during the second quarter of 2015 coupled with a $444 thousand decrease in other operating expense offset by a $505 thousand increase in salaries and employee benefits and expenses related to the branch swap with First Bank of $410 thousand. The decrease in other operating expense included a $415 thousand decrease in the net loss on sales and expenses associated with other real estate owned ("OREO").

Efficiency Ratio

EFFICIENCY RATIO CALCULATION (Unaudited) 
                 
   Three Months Ended Six Months Ended 
   June 30, March 31, December 31, September 30, June 30, June 30, June 30, 
    2016   2016   2015   2015   2015   2016   2015  
(Amounts in thousands)              
Noninterest expense, GAAP$  18,722  $  18,814  $  19,083  $  19,019  $  20,289  $  37,536  $  38,069  
Non-GAAP adjustments              
 Merger, acquisition, and divestiture expense   (410)    (39)    -     -     -     (449)    (86) 
 FHLB debt prepayment fees   -     -     -     -     (1,702)    -     (1,702) 
 OREO expense and net loss   (247)    (711)    (475)    (1,220)    (416)    (958)    (743) 
 Other non-core, non-recurring items   (30)    (174)    (61)    15     (213)    (204)    (213) 
Adjusted noninterest expense   18,035     17,890     18,547     17,814     17,958     35,925     35,325  
                 
Net interest income, GAAP   21,691     21,111     21,175     21,669     21,070     42,802     41,909  
Noninterest income, GAAP   7,030     7,903     7,483     7,074     8,137     14,933     14,973  
Non-GAAP adjustments              
 Tax equivalency adjustment   521     531     548     565     1,249     1,052     1,837  
 Net impairment losses recognized in earnings   11     -     -     -     -     11     -  
 Net loss (gain) on sale of securities   79     (1)    7     39     (213)    78     (190) 
 Other non-core, non-recurring items   (30)    (414)    (30)    (60)    (1,143)    (444)    (1,173) 
Adjusted net interest and noninterest income   29,302     29,130     29,183     29,287     29,100     58,432     57,356  
                 
Non-GAAP efficiency ratio(1) 61.55%  61.41%  63.55%  60.83%  61.71%  61.48%  61.59% 
GAAP efficiency ratio 65.19%  64.84%  66.59%  66.17%  69.47%  65.01%  66.93% 
                 
  (1)A non-GAAP financial measure computed by dividing adjusted noninterest expense by the sum of tax equivalent net interest income and adjusted noninterest income. 

 
                 

Balance Sheet and Capital

CONDENSED CONSOLIDATED QUARTERLY BALANCE SHEETS (Unaudited)
            
   June 30, March 31, December 31, September 30, June 30,
(Amounts in thousands, except per share data) 2016   2016   2015   2015   2015 
Assets         
Total cash and cash equivalents   44,301     39,587     51,787     62,024     92,602 
Securities available for sale    322,699     338,469     366,173     382,212     376,191 
Securities held to maturity    72,239     72,485     72,541     72,596     72,652 
Loans held for sale   -     -     -     523     913 
Loans held for investment, net of unearned income         
 Non-covered   1,733,398     1,685,891     1,623,506     1,600,271     1,564,655 
 Covered   68,585     76,538     83,035     90,203     102,634 
 Less allowance for loan losses   (21,099)    (20,467)    (20,233)    (20,127)    (20,258)
Loans held for investment, net   1,780,884     1,741,962     1,686,308     1,670,347     1,647,031 
FDIC indemnification asset   16,431     18,787     20,844     22,049     23,653 
Premises and equipment, net   50,199     50,799     52,756     53,442     54,112 
Other real estate owned, non-covered   4,187     5,313     4,873     5,088     7,434 
Other real estate owned, covered   2,017     2,279     4,034     4,079     5,382 
Interest receivable   6,115     5,968     6,007     5,910     6,119 
Goodwill   100,486     100,486     100,486     100,810     100,810 
Other intangible assets   4,688     4,965     5,243     5,583     5,865 
Other assets   91,082     89,187     91,224     93,453     99,034 
Total assets$  2,495,328  $  2,470,287  $  2,462,276  $  2,478,116  $  2,491,798 
            
Liabilities         
Deposits         
 Noninterest-bearing$  451,003  $  453,336  $  451,511  $  442,021  $  424,438 
 Interest-bearing   1,373,412     1,421,329     1,421,748     1,460,881     1,495,783 
Total deposits   1,824,415     1,874,665     1,873,259     1,902,902     1,920,221 
Interest, taxes, and other liabilities   25,553     24,576     26,630     25,356     23,852 
Federal funds purchased   42,000     18,000     -     -     - 
Securities sold under agreements to repurchase   113,392     134,661     138,614     124,076     122,158 
FHLB borrowings   140,000     65,000     65,000     65,000     65,000 
Other borrowings   15,756     15,756     15,756     15,955     15,999 
Total liabilities   2,161,116     2,132,658     2,119,259     2,133,289     2,147,230 
            
Stockholders' equity         
Common stock   21,382     21,382     21,382     21,382     21,382 
Additional paid-in capital   227,791     227,725     227,692     227,621     227,616 
Retained earnings   163,030     159,223     155,647     152,046     148,378 
Treasury stock, at cost   (74,974)    (64,968)    (56,457)    (52,484)    (46,610)
Accumulated other comprehensive loss   (3,017)    (5,733)    (5,247)    (3,738)    (6,198)
Total stockholders' equity   334,212     337,629     343,017     344,827     344,568 
Total liabilities and stockholders' equity$  2,495,328  $  2,470,287  $  2,462,276  $  2,478,116  $  2,491,798 
            
Shares outstanding at period-end   17,155,322     17,631,011     18,098,141     18,313,425     18,641,966 
Book value per common share(1)$  19.48  $  19.15  $  18.95  $  18.83  $  18.48 
Tangible book value per common share(2)   13.35     13.17     13.11     13.02     12.76 
            
  (1)Stockholders' equity divided by as-converted common shares outstanding

  (2)A non-GAAP financial measure defined as stockholders' equity less goodwill and other intangibles, divided by as-converted common shares outstanding.

            

Consolidated assets increased $33.05 million, or 1.34%, as of June 30, 2016, compared to December 31, 2015. The change in consolidated assets was primarily driven by a $94.58 million increase in net loans offset by a $43.47 million decrease in securities available for sale and a $7.49 million decrease in cash and cash equivalents. Consolidated liabilities increased $41.86 million, or 1.98%, as of June 30, 2016, compared to December 31, 2015. The change in consolidated liabilities was driven by a $75.00 million increase in FHLB borrowings and $42.00 million increase in federal funds purchased offset by a $48.84 million decrease in total deposits, primarily due to time deposits, and $25.22 million decrease in securities sold under agreements to repurchase.

Stockholders' equity decreased $8.81 million, or 2.57%, as of June 30, 2016, compared to December 31, 2015. The Company repurchased 981,551 common shares at a weighted average cost of $19.52 per share and paid a cash dividend of $0.28 per common share during the first six months of 2016. Book value per common share increased $0.53 to $19.48 and tangible book value per common share increased $0.24 to $13.35 as of June 30, 2016, compared to December 31, 2015. The Company significantly exceeds regulatory "well capitalized" targets as of June 30, 2016.

Asset Quality

SELECTED CREDIT QUALITY INFORMATION (Unaudited)
            
   June 30, March 31, December 31, September 30, June 30,
(Amounts in thousands) 2016   2016   2015   2015   2015 
Allowance for Loan Losses          
Beginning balance$  20,467  $  20,233  $  20,127  $  20,258  $  20,252 
Provision for loan losses charged         
 to operations   722     1,187     434     381     276 
(Recovery of) provision for loan losses recorded         
 through the FDIC indemnification asset   (10)    9     -     (75)    - 
Charge-offs   (691)    (1,228)    (805)    (689)    (673)
Recoveries   611     266     477     252     403 
Net charge-offs   (80)    (962)    (328)    (437)    (270)
Ending balance$  21,099  $  20,467  $  20,233  $  20,127  $  20,258 
            
Nonperforming Assets         
Non-covered nonperforming assets         
Nonaccrual loans $  16,626  $  16,196  $  17,847  $  17,100  $  15,936 
Accruing loans past due 90 days or more   64     243     -     3     - 
Troubled debt restructurings ("TDRs")(1)   115     158     73     74     - 
Total non-covered nonperforming loans   16,805     16,597     17,920     17,177     15,936 
OREO   4,187     5,313     4,873     5,088     7,434 
Total non-covered nonperforming assets$  20,992  $  21,910  $  22,793  $  22,265  $  23,370 
            
Covered nonperforming assets         
Nonaccrual loans $  680  $  1,955  $  647  $  815  $  1,062 
Accruing loans past due 90 days or more   -     -     -     -     - 
Total covered nonperforming loans   680     1,955     647     815     1,062 
OREO   2,017     2,279     4,034     4,079     5,382 
Total covered nonperforming assets$  2,697  $  4,234  $  4,681  $  4,894  $  6,444 
            
Additional Information         
Performing TDRs(2)$  13,562  $  13,474  $  13,889  $  13,965  $  13,841 
Total TDRs(3)   13,677     13,632     13,962     14,039     13,841 
            
Non-covered ratios         
Nonperforming loans to total loans 0.97%  0.98%  1.10%  1.07%  1.02%
Nonperforming assets to total assets 0.87%  0.92%  0.96%  0.93%  0.98%
Non-PCI allowance to nonperforming loans 125.48%  123.17%  112.61%  117.06%  126.41%
Non-PCI allowance to total loans 1.22%  1.21%  1.24%  1.26%  1.29%
Annualized net charge-offs to average loans 0.02%  0.23%  0.08%  0.11%  0.07%
            
Total ratios         
Nonperforming loans to total loans 0.97%  1.05%  1.09%  1.06%  1.02%
Nonperforming assets to total assets 0.95%  1.06%  1.12%  1.10%  1.20%
Allowance for loan losses to nonperforming loans 120.67%  110.32%  108.97%  111.87%  119.18%
Allowance for loan losses to total loans 1.17%  1.16%  1.19%  1.19%  1.22%
Annualized net charge-off to average loans 0.02%  0.22%  0.08%  0.10%  0.06%
            
  (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 total TDRs 

            

The allowance for loan losses increased $866 thousand, or 4.28%, to $21.10 million as of June 30, 2016, compared to December 31, 2015. As of June 30, 2016, $21.09 million of the allowance was attributed to the non-PCI loan portfolio and $12 thousand was attributed to the PCI loan portfolio.

The provision for loan losses charged to operations increased $446 thousand to $722 thousand, for the second quarter of 2016 compared to the same quarter of 2015. The recovery of loan losses recorded through the FDIC indemnification asset totaled $10 thousand during the second quarter of 2016 compared to no activity for the same quarter of 2015. Net charge-offs decreased $190 thousand, or 70.37%, for the second quarter of 2016, compared to the same quarter of 2015. Annualized net charge-offs to average non-covered loans improved 5 basis points to 0.02% for the second quarter of 2016 compared to the same quarter of 2015. Non-covered loans and OREO are those assets not covered by FDIC loss share agreements.

Non-covered nonaccrual loans decreased $1.22 million, or 6.84%, as of June 30, 2016, compared to December 31, 2015. Non-covered nonaccrual loans as a percentage of total non-covered loans improved 14 basis points to 0.96% as of June 30, 2016, compared to December 31, 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 improved 46 basis points to 1.26% as of June 30, 2016, from 1.72% as of December 31, 2015.

Non-covered nonperforming assets decreased $1.80 million, or 7.90%, as of June 30, 2016, compared to December 31, 2015, and non-covered assets as a percent of total non-covered assets improved 9 basis points to 0.87%. As of June 30, 2016, total nonperforming assets consisted of $17.31 million in nonaccrual loans, $64 thousand in accruing loans 90 days or more past due, $115 thousand in unseasoned, accruing troubled debt restructurings, and $6.20 million in OREO. In comparison, total nonperforming assets consisted of $18.49 million in nonaccrual loans, $73 thousand in unseasoned, accruing troubled debt restructurings, and $8.91 million in OREO 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. The Company's non-GAAP financial measure presented in this release include core earnings, the efficiency ratio, tangible book value per common share, average tangible common equity, and normalized net interest margin. Management believes that core earnings provide the Company and investors a valuable tool to evaluate the Company's financial results. Management believes that the efficiency ratio provides 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. The reconciliations of these measures to GAAP measures are provided within this news release.

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 48 branch banking locations throughout Virginia, West Virginia, North Carolina, and Tennessee as of June 30, 2016. First Community Bank offers wealth management and investment services through its wholly-owned subsidiary First Community Wealth Management and the Bank's Trust Division, which collectively managed $770 million in combined assets as of June 30, 2016. 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 June 30, 2016. The Company's common stock is listed on the NASDAQ Global Select Market under the trading symbol, "FCBC". The Company reported consolidated assets of $2.50 billion as of June 30, 2016. 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.

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

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