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

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BLUEFIELD, Va., July 28, 2015 (GLOBE NEWSWIRE) -- First Community Bancshares, Inc. (NASDAQ: FCBC) (www.fcbinc.com) (the "Company") today announced financial results for the quarter and six months ended June 30, 2015. The Company reported net income of $6.18 million for the quarter and $12.13 million for the six months ended June 30, 2015. Net income available to common shareholders totaled $6.18 million, or $0.33 per diluted common share, for the quarter and $12.03 million, or $0.64 per diluted common share, for the six months ended June 30, 2015. Core earnings totaled $6.10 million for the quarter and $12.11 million for the six months ended June 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, an increase of 8% over last quarter and last year. The quarterly dividend is payable to common shareholders of record on August 7, 2015, and is expected to be paid on or about August 21, 2015. The current year marks the 30th consecutive year of cash dividends paid to stockholders and represents average annual increases in the quarterly dividend rate of 8% over the last 5 years.

Second Quarter 2015 Highlights –

  • The Company prepaid an additional $25 million in Federal Home Loan Bank convertible advances during the second quarter. The prepayment was in keeping with the Company's strategic goal of reducing high cost wholesale debt.
  • The Company repurchased 345,173 common shares during the second quarter, bringing total repurchased shares to 684,407 during the first half of 2015.
  • Asset quality metrics continue to be favorable as non-covered nonaccrual loans decreased $1.53 million, or 8.75% in the second quarter of 2015 compared to the same quarter of the prior year.
  • Net charge-offs decreased $758 thousand, or 73.74%, and the ratio of annualized net charge-offs to average non-covered loans improved 19 basis points to 0.07% for the second quarter of 2015 compared to the same quarter of 2014.
  • The Company significantly exceeds regulatory "well capitalized" targets as of June 30, 2015.

Net Interest Income

Net interest income decreased $998 thousand, or 4.52%, to $21.07 million for the second quarter of 2015 compared with the same quarter of 2014. The tax equivalent net interest margin decreased to 3.90% for the second quarter of 2015 compared with 4.08% for the same quarter of 2014. Total interest income decreased $2.11 million, or 8.10%, to $23.98 million for the second quarter of 2015 compared with the same quarter of 2014. The tax equivalent yield on loans decreased 13 basis points to 5.25% and the average loan balance decreased $76.57 million, or 4.38%, to $1.67 billion for the second 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 second quarter of 2014.

Purchased credit impaired ("PCI") loan interest accretion totaled $2.42 million for the second quarter of 2015, of which $1.13 million was received in cash, compared to accretion income of $2.79 million for the same quarter of 2014, of which $1.25 million was received in cash. The normalized net interest margin, which excludes non-cash loan interest accretion, was 3.67% for the second quarter of 2015 and 3.80% for same quarter of 2014. The normalized yield on loans was 4.94% for the second quarter of 2015 compared to 5.03% for the same quarter of 2014.

Total interest expense decreased $1.12 million, or 27.73%, to $2.91 million for the second quarter of 2015 compared with the same quarter of 2014. Deposit costs decreased $273 thousand, or 14.88%, to $1.56 million for the second quarter of 2015 compared with the same quarter of 2014, reflecting a 5 basis point decrease in the average rate paid on interest-bearing deposits. Borrowing costs decreased $843 thousand, or 38.49%, to $1.35 million for the second 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 0.67% for the second quarter of 2015 compared with the same quarter of 2014. The average balance of interest-bearing liabilities decreased $130.55 million, or 6.97%, to $1.74 billion for the second quarter of 2015 compared with the same quarter of 2014, which included a $59.92 million decrease in average interest-bearing deposits and a $70.63 million decrease in average total borrowings.

Noninterest Income

Noninterest income increased $533 thousand, or 7.01%, to $8.14 million for the second quarter of 2015 compared with the same quarter of 2014, which was largely due to a $516 thousand, or 36.65%, increase in other operating income. Other operating income for the second quarter of 2015 included a net death benefit of approximately $1.14 million from the maturity of a life insurance policy. Wealth management revenues increased $57 thousand, or 7.94%, for the second quarter of 2015 compared with the same quarter of 2014. The Trust and Wealth Management Divisions reported $717 million in combined assets under management as of June 30, 2015. Service charges on deposits and other service charges and fees increased $239 thousand, or 4.53%, to $5.51 million for the second quarter of 2015 compared with the same quarter of 2014. Insurance commissions increased $105 thousand, or 7.22%, for the second quarter of 2015 compared with the same quarter of 2014. The Company incurred no other-than-temporary impairment charges during the second quarter of 2015 compared to $254 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 $213 thousand net gain on the sale of securities in the second quarter of 2015 compared to a net loss of $59 thousand in the same quarter of 2014. Net amortization expense related to the FDIC indemnification asset increased $910 thousand, or 97.22%, due to continuing better than expected performance in the covered loan portfolio.

Noninterest Expense

Noninterest expense increased $2.13 million, or 11.71%, to $20.29 million for the second quarter of 2015 compared with the same quarter of 2014, which was largely due to FHLB debt prepayment fees. The Company incurred fees of $1.70 million related to the prepayment of $25 million in FHLB convertible advances. Salaries and employee benefits decreased $350 thousand, or 3.49%, to $9.69 million for the second quarter of 2015 compared with the same quarter of 2014. Full-time equivalent employees totaled 677 as of June 30, 2015, a decrease of 30 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 remained stable at $2.78 million for the second quarter of 2015 compared with the same quarter of 2014. Other operating expenses increased $740 thousand, or 15.74%, to $5.44 million for the second quarter of 2015 compared with the same quarter of 2014, which included  $213 thousand in branch property write-downs and a $162 thousand increase in the net loss on sales and expenses associated with other real estate owned ("OREO"). The non-GAAP efficiency ratio for the second quarter of 2015 was 61.71% compared to 59.40% for the same quarter of 2014.

Allowance for Loan Losses and Asset Quality

The allowance for loan losses totaled $20.26 million as of June 30, 2015, a slight increase of $31 thousand compared to $20.23 million as of December 31, 2014, and a decrease of $3.65 million compared to $23.91 million as of June 30, 2014. As of June 30, 2015, $20.14 million of the allowance was attributed to the non-PCI loan portfolio and $114 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 1.29% as of June 30, 2015, compared with 1.29% as of December 31, 2014, and 1.44% as of June 30, 2014. Allowance activity in the second quarter of 2015 included a $276 thousand provision for loan losses, a decrease of $1.00 million compared to the same quarter of 2014. Activity in the allowance also included a recovery of loan losses recorded through the FDIC indemnification asset of $138 thousand in the second quarter of 2014. The Company realized net charge-offs of $270 thousand in the second quarter of 2015, a decrease of $758 thousand, or 73.74%, compared to $1.03 million in the same quarter of 2014. The ratio of annualized net charge-offs to average non-covered loans improved to 0.07% for the second quarter of 2015, which represents a decrease of 19 basis points compared with 0.26% for the second quarter of 2014.

Asset quality in the non-covered portfolio continues to improve as 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 decreased to 1.39% as of June 30, 2015, compared to 1.67% for the same period of the prior year. Non-covered nonaccrual loans totaled $15.94 million as of June 30, 2015, compared to $10.56 million as of December 31, 2014, and $17.46 million as of June 30, 2014. At quarter-end, the Company's non-covered nonaccrual loans as a percentage of total non-covered loans were 1.02%, compared to 0.67% at year-end 2014 and 1.07% for the same period of the prior year. As of June 30, 2015, the Company's non-covered nonperforming loans as a percentage of total non-covered loans were 1.02% and non-covered nonperforming assets as a percentage of total non-covered assets were 0.98%.

As of June 30, 2015, total nonperforming assets, including the covered and non-covered loan portfolios, consisted of $17.00 million in nonaccrual loans and $12.82 million in OREO. The Company maintained no unseasoned, accruing troubled debt restructurings or accruing loans past due 90 days or more as of June 30, 2015. 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 $3.45 million, or 17.32%, and total covered nonperforming assets decreased $2.32 million, or 26.46%, as of June 30, 2015, compared to December 31, 2014.

Balance Sheet and Capital

Consolidated assets totaled $2.49 billion as of June 30, 2015, a decrease of $116.14 million, or 4.45%, compared with $2.61 billion as of December 31, 2014. The change in consolidated assets was primarily driven by a $143.85 million, or 73.07%, decrease in federal funds sold as liquidity was deployed to reduce high cost borrowings and deposits, redeem the Company's convertible preferred shares, repurchase common stock, and purchase investment securities to provide the funding necessary to extinguish certain borrowings as they come due. As of June 30, 2015, securities available for sale increased $50.07 million and securities held to maturity increased $14.70 million compared to December 31, 2014.

Consolidated liabilities totaled $2.15 billion as of June 30, 2015, a decrease of $109.33 million, or 4.85%, compared with $2.26 billion as of December 31, 2014. The change in consolidated liabilities was driven by a $70.97 million decrease in deposits, a $5.86 million decrease in repurchase agreements, and a $25.00 million decrease in FHLB 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.

Total stockholders' equity decreased to $344.57 million as of June 30, 2015, 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 683,907 common shares at a weighted average cost of $16.78 per share and paid a cash dividend of $0.26 per common share during the first six months of 2015. Book value per common share increased 2.33% to $18.48 as of June 30, 2015, compared with $18.06 as of December 31, 2014. Tangible book value per common share increased 1.59% to $12.76 as of June 30, 2015, compared with $12.56 as of December 31, 2014.

The Company significantly exceeds regulatory "well capitalized" targets as of June 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.

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 June 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 $717 million in combined assets as of June 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 June 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 $2.49 billion as of June 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 EndedSix Months Ended 
 June 30,June 30, 
(Amounts in thousands, except share and per share data) 2015  2014  2015  2014  
Interest income     
Interest and fees on loans held for investment$  21,826 $  23,410 $  43,740 $  46,244  
Interest on securities -- taxable   1,070    1,537    2,105    3,634  
Interest on securities -- nontaxable   1,003    1,099    2,019    2,221  
Interest on deposits in banks   80    47    213    77  
Total interest income   23,979    26,093    48,077    52,176  
Interest expense     
Interest on deposits   1,562    1,835    3,292    3,723  
Interest on short-term borrowings   499    483    989    985  
Interest on long-term borrowings   848    1,707    1,887    3,375  
Total interest expense   2,909    4,025    6,168    8,083  
Net interest income   21,070    22,068    41,909    44,093  
Provision for loan losses   276    1,279    1,376    3,072  
Net interest income after provision for loan losses   20,794    20,789    40,533    41,021  
Noninterest income     
Wealth management income   775    718    1,441    1,726  
Service charges on deposit accounts   3,507    3,423    6,410    6,493  
Other service charges and fees   2,005    1,850    4,013    3,621  
Insurance commissions   1,559    1,454    3,686    3,418  
Net impairment losses recognized in earnings   -    (254)   -    (518) 
Net gain (loss) on sale of securities   213    (59)   190    (14) 
Net FDIC indemnification asset amortization   (1,846)   (936)   (3,411)   (2,070) 
Net gain on branch divestiture   -    -    -    -  
Other operating income   1,924    1,408    2,644    2,182  
Total noninterest income    8,137    7,604    14,973    14,838  
Noninterest expense     
Salaries and employee benefits   9,693    10,043    19,386    19,948  
Occupancy expense of bank premises   1,427    1,578    2,961    3,356  
Furniture and equipment    1,358    1,205    2,595    2,399  
Amortization of intangible assets   279    178    556    353  
FDIC premiums and assessments   389    458    804    892  
FHLB debt prepayment fees   1,702    -    1,702    -  
Merger, acquisition, and divestiture expense   -    -    86    -  
Other operating expense   5,441    4,701    9,979    10,395  
Total noninterest expense   20,289    18,163    38,069    37,343  
Income before income taxes   8,642    10,230    17,437    18,516  
Income tax expense   2,467    3,223    5,304    5,784  
Net income    6,175    7,007    12,133    12,732  
Dividends on preferred stock   -    227    105    455  
Net income available to common shareholders$  6,175 $  6,780 $  12,028 $  12,277  
      
Basic earnings per common share $  0.33 $  0.37 $  0.64 $  0.67  
Diluted earnings per common share    0.33    0.36    0.64    0.65  
Cash dividends per common share   0.13    0.12    0.26    0.24  
      
Weighted average basic shares outstanding 18,831,742  18,395,996  18,733,288  18,409,414  
Weighted average diluted shares outstanding 18,860,119  19,457,237  19,095,408  19,475,333  
      
Return on average assets 0.98% 1.06% 0.94% 0.95% 
Return on average common equity 7.11% 8.38% 6.92% 7.32% 
      


  
FIRST COMMUNITY BANCSHARES, INC. 
CONDENSED QUARTERLY STATEMENTS OF INCOME (Unaudited) 
       
 Quarter Ended 
 June 30,March 31,December 31,September 30,June 30, 
(Amounts in thousands, except share and per share data) 2015  2015  2014  2014  2014  
Interest Income      
Interest and fees on loans held for investment$  21,826 $  21,914 $  25,841 $  23,407 $  23,410  
Interest on securities -- taxable   1,070    1,035    1,145    1,196    1,537  
Interest on securities -- nontaxable   1,003    1,016    1,021    1,108    1,099  
Interest on deposits in banks   80    133    174    40    47  
Total interest income   23,979    24,098    28,181    25,751    26,093  
Interest Expense      
Interest on deposits   1,562    1,730    1,803    1,782    1,835  
Interest on short-term borrowings   499    490    513    526    483  
Interest on long-term borrowings   848    1,039    1,155    1,428    1,707  
Total interest expense   2,909    3,259    3,471    3,736    4,025  
Net interest income   21,070    20,839    24,710    22,015    22,068  
Provision for (recovery of) loan losses   276    1,100    (488)   (2,439)   1,279  
Net interest income after provision for loan losses   20,794    19,739    25,198    24,454    20,789  
Noninterest Income      
Wealth management income   775    666    634    670    718  
Service charges on deposit accounts   3,507    2,903    3,729    3,606    3,423  
Other service charges and fees   2,005    2,008    2,108    1,852    1,850  
Insurance commissions   1,559    2,127    1,442    1,695    1,454  
Net impairment losses recognized in earnings   -    -    -    (219)   (254) 
Net gain (loss) on sale of securities   213    (23)   (1,691)   320    (59) 
Net FDIC indemnification asset amortization   (1,846)   (1,565)   (813)   (1,096)   (936) 
Net gain on branch divestiture   -    -    755    -    -  
Other operating income   1,924    720    1,334    839    1,408  
Total noninterest income    8,137    6,836    7,498    7,667    7,604  
Noninterest Expense      
Salaries and employee benefits   9,693    9,693    10,841    9,924    10,043  
Occupancy expense of bank premises   1,427    1,534    1,513    1,469    1,578  
Furniture and equipment   1,358    1,237    1,341    1,212    1,205  
Amortization of intangible assets   279    277    255    179    178  
FDIC premiums and assessments    389    415    361    419    458  
FHLB debt prepayment fees   1,702    -    1,961    3,047    -  
Merger, acquisition, and divestiture expense   -    86    865    285    -  
Other operating expense   5,441    4,538    6,913    4,934    4,701  
Total noninterest expense   20,289    17,780    24,050    21,469    18,163  
Income before income taxes   8,642    8,795    8,646    10,652    10,230  
Income tax expense   2,467    2,837    2,931    3,609    3,223  
Net income    6,175    5,958    5,715    7,043    7,007  
Dividends on preferred stock   -    105    227    228    227  
Net income available to common shareholders$  6,175 $  5,853 $  5,488 $  6,815 $  6,780  
       
Basic earnings per common share$  0.33 $  0.31 $  0.30 $  0.37 $  0.37  
Diluted earnings per common share   0.33    0.31    0.29    0.36    0.36  
Cash dividends per common share   0.13    0.13    0.13    0.13    0.12  
       
Weighted average basic shares outstanding   18,831,742    18,633,574    18,403,959    18,402,764    18,395,996  
Weighted average diluted shares outstanding   18,860,119    19,344,443    19,482,000    19,466,126    19,457,237  
       


 
FIRST COMMUNITY BANCSHARES, INC.
RECONCILIATION OF GAAP NET INCOME TO CORE EARNINGS (Unaudited)
      
 Three Months Ended
 June 30,March 31,December 31,September 30,June 30,
  2015  2015  2014  2014  2014 
(Amounts in thousands, except per share data)     
Net income, GAAP$  6,175 $  5,958 $  5,715 $  7,043 $  7,007 
Non-GAAP adjustments:     
Net impairment losses recognized in earnings   -    -    -    219    254 
Net (gain) loss on sale of securities   (213)   23    1,691    (320)   59 
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   (930)   (30)   1,173    -    (536)
Total adjustments to core earnings   559    79    4,935    3,231    (223)
Tax effect    630    29    1,859    1,217    (84)
Core earnings, non-GAAP$  6,104 $  6,008 $  8,791 $  9,057 $  6,868 
      
Core return on average assets 0.96% 0.94% 1.28% 1.41% 1.07%
Core return on average common equity 7.00% 6.90% 10.39% 10.83% 8.49%
Core return on average tangible common equity 10.07% 9.90% 15.50% 16.06% 12.73%
Core diluted earnings per common share$  0.32 $0.31 $0.45 $0.47 $0.35 
      
    Six Months Ended
    June 30,
     2015  2014 
(Amounts in thousands, except per share data)     
Net income, GAAP   $  12,133 $  12,732 
Non-GAAP adjustments:     
Net impairment losses recognized in earnings      -    518 
Net (gain) loss on sale of securities      (190)   14 
FHLB debt prepayment fees      1,702    - 
Merger, acquisition, and divestiture expense      86    - 
Other noncore, nonrecurring items      (960)   (536)
Total adjustments to core earnings      638    (4)
Tax effect       660    (2)
Core earnings, non-GAAP   $  12,111 $  12,730 
      
Core return on average assets    0.95% 0.99%
Core return on average common equity    6.94% 8.00%
Core return on average tangible common equity    9.97% 12.06%
Core diluted earnings per common share   $  0.63 $0.65 


  
FIRST COMMUNITY BANCSHARES, INC. 
EFFICIENCY RATIO CALCULATION (Unaudited) 
       
 Three Months Ended 
 June 30,March 31,December 31,September 30,June 30, 
  2015  2015  2014  2014  2014  
(Amounts in thousands)      
Noninterest expense, GAAP$  20,289 $  17,780 $  24,050 $  21,469 $  18,163  
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   (416)   (327)   (403)   (580)   (254) 
Other noncore, nonrecurring items   (213)   -    (1,573)   -    -  
Adjusted noninterest expense   17,958    17,367    19,248    17,557    17,909  
       
Net interest income, GAAP   21,070    20,839    24,710    22,015    22,068  
Noninterest income, GAAP   8,137    6,836    7,498    7,667    7,604  
Non-GAAP adjustments:      
Tax equivalency adjustment   1,249    588    613    582    699  
Net impairment losses recognized in earnings   -    -    -    219    254  
Net loss (gain) on sale of securities   (213)   23    1,691    (320)   59  
Net gain on branch divestiture   -    -    (755)   -    -  
Other noncore, nonrecurring items   (1,143)   (30)   (400)   -    (536) 
Adjusted net interest and noninterest income   29,100    28,256    33,357    30,163    30,148  
Non-GAAP efficiency ratio 61.71% 61.46% 57.70% 58.21% 59.40% 
GAAP efficiency ratio 69.47% 64.25% 74.67% 72.33% 61.21% 
       
    Six Months Ended 
    June 30, 
     2015  2014  
(Amounts in thousands)      
Noninterest expense, GAAP   $  38,069 $  37,343  
Non-GAAP adjustments:      
FHLB debt prepayment fees      (1,702)   -  
Merger, acquisition, and divestiture expense      (86)   -  
OREO expense and net loss      (743)   (1,111) 
Other noncore, nonrecurring items      (213)   -  
Adjusted noninterest expense      35,325    36,232  
       
Net interest income, GAAP      41,909    44,093  
Noninterest income, GAAP      14,973    14,838  
Non-GAAP adjustments:      
Tax equivalency adjustment      1,837    1,361  
Net impairment losses recognized in earnings      -    518  
Net loss (gain) on sale of securities      (190)   14  
Other noncore, nonrecurring items      (1,173)   (536) 
Adjusted net interest and noninterest income      57,356    60,288  
Non-GAAP efficiency ratio    61.59% 60.10% 
GAAP efficiency ratio    66.93% 63.37% 
       


  
FIRST COMMUNITY BANCSHARES, INC. 
CONDENSED CONSOLIDATED QUARTERLY BALANCE SHEETS (Unaudited) 
       
   As of the Quarter Ended 
 June 30,March 31,December 31,September 30,June 30, 
  2015  2015  2014  2014  2014  
(Amounts in thousands)      
Cash and due from banks$  38,200 $  36,222 $  39,450 $  44,703 $  47,869  
Federal funds sold   53,023    169,422    196,873    55,503    38,142  
Interest-bearing deposits in banks   1,379    1,380    1,337    5,716    10,770  
Total cash and cash equivalents   92,602    207,024    237,660    105,922    96,781  
Securities available for sale    376,191    351,454    326,117    351,693    398,425  
Securities held to maturity    72,652    72,897    57,948    31,029    19,398  
Loans held for sale   913    1,174    1,792    1,150    459  
Loans held for investment, net of unearned income:      
Covered under loss share agreements   102,634    112,724    122,240    126,611    132,717  
Not covered under loss share agreements   1,564,655    1,558,310    1,567,176    1,636,181    1,626,707  
Less allowance for loan losses   (20,258)   (20,252)   (20,227)   (21,159)   (23,911) 
Loans, net   1,647,944    1,651,956    1,670,981    1,742,783    1,735,972  
FDIC indemnification asset   23,653    26,053    27,900    29,745    30,908  
Property, plant, and equipment, net   54,112    54,955    55,844    59,283    59,145  
Other real estate owned:      
Covered under loss share agreements   5,382    5,834    6,324    7,620    8,814  
Not covered under loss share agreements   7,434    7,032    6,638    5,612    5,693  
Interest receivable   6,119    6,188    6,315    6,346    6,206  
Goodwill   100,810    100,810    100,722    105,657    105,657  
Intangible assets   5,865    6,144    6,422    2,334    2,512  
Other assets   99,034    95,497    105,065    102,103    105,890  
Total assets$  2,491,798 $  2,585,844 $  2,607,936 $  2,550,127 $  2,575,401  
       
Deposits:      
Noninterest-bearing demand$  424,438 $  433,422 $  417,729 $  397,523 $  357,871  
Interest-bearing demand   329,583    341,300    353,874    347,589    362,318  
Savings   528,003    533,589    525,478    519,902    517,766  
Time   638,197    682,878    703,678    667,261    685,149  
Total deposits   1,920,221    1,991,189    2,000,759    1,932,275    1,923,104  
Interest, taxes, and other liabilities   23,852    24,203    26,062    25,131    23,576  
Securities sold under agreements to repurchase   122,158    116,302    121,742    114,439    120,159  
FHLB borrowings   65,000    90,000    90,000    115,000    150,000  
Other borrowings   15,999    15,999    17,999    16,047    16,087  
Total liabilities   2,147,230    2,237,693    2,256,562    2,202,892    2,232,926  
       
Preferred stock   -    -    15,151    15,151    15,151  
Common stock   21,382    21,382    20,500    20,500    20,500  
Additional paid-in capital   227,616    227,782    215,873    215,729    215,670  
Retained earnings   148,378    144,656    141,206    138,111    133,688  
Treasury stock, at cost   (46,610)   (41,078)   (35,751)   (35,808)   (35,797) 
Accumulated other comprehensive loss   (6,198)   (4,591)   (5,605)   (6,448)   (6,737) 
Total stockholders' equity   344,568    348,151    351,374    347,235    342,475  
Total liabilities and stockholders' equity$  2,491,798 $  2,585,844 $  2,607,936 $  2,550,127 $  2,575,401  
       
Shares outstanding at period-end   18,641,966    18,965,274    18,406,219    18,402,919    18,403,692  
Book value per common share at period-end(1)$  18.48 $  18.36 $  18.06 $  17.85 $  17.61  
Tangible book value per common share at period-end(2)$  12.76 $  12.72 $  12.56 $  12.30 $  12.05  
       
(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
 June 30,March 31,December 31,September 30,June 30,
(Amounts in thousands) 2015  2015  2014  2014  2014 
Allowance for Loan Losses      
Beginning balance$  20,252 $  20,227 $  21,159 $  23,911 $  23,798 
Removal of loans transferred    -    -    (682)   -    - 
Provision for (recovery of) loan losses charged to operations   276    1,100    (488)   (2,439)   1,279 
Provision for (recovery of) loan losses recorded through the FDIC indemnification asset   -    46    29    (110)   (138)
Charge-offs   (673)   (1,578)   (1,362)   (1,118)   (1,785)
Recoveries   403    457    1,571    915    757 
Net (charge-offs) recoveries    (270)   (1,121)   209    (203)   (1,028)
Ending balance$  20,258 $  20,252 $  20,227 $  21,159 $  23,911 
      
Summary of Asset Quality     
Non-covered nonperforming     
Nonaccrual loans $  15,936 $  15,387 $  10,556 $  11,480 $  17,464 
Accruing loans past due 90 days or more   -    -    -    -    - 
Troubled debt restructurings ("TDRs")(1)   -    -    2,726    3,450    1,877 
Total non-covered nonperforming loans   15,936    15,387    13,282    14,930    19,341 
OREO not covered under FDIC loss share agreements   7,434    7,032    6,638    5,612    5,693 
Total non-covered nonperforming assets$  23,370 $  22,419 $  19,920 $  20,542 $  25,034 
Covered nonperforming     
Nonaccrual loans $  1,062 $  2,780 $  2,438 $  1,131 $  955 
Accruing loans past due 90 days or more   -    60    -    -    109 
Total covered nonperforming loans   1,062    2,840    2,438    1,131    1,064 
OREO covered under FDIC loss share agreements   5,382    5,834    6,324    7,620    8,814 
Total covered nonperforming assets$  6,444 $  8,674 $  8,762 $  8,751 $  9,878 
      
Additional Information     
Performing TDRs(2)$  13,841 $  14,025 $  11,808 $  11,701 $  11,029 
Total TDRs(3)   13,841    14,025    14,534    15,151    12,906 
      
Asset Quality Ratios     
Non-covered      
Nonperforming loans to total loans 1.02% 0.99% 0.85% 0.91% 1.19%
Nonperforming assets to total assets 0.98% 0.91% 0.80% 0.85% 1.03%
Non-PCI allowance to nonperforming loans 126.41% 130.88% 151.85% 140.35% 121.47%
Non-PCI allowance to total loans 1.29% 1.29% 1.29% 1.28% 1.44%
Annualized net charge-offs to average loans 0.07% 0.29%NM 0.05% 0.26%
Non-covered and covered     
Nonperforming loans to total loans 1.02% 1.09% 0.93% 0.91% 1.16%
Nonperforming assets to total assets 1.20% 1.20% 1.10% 1.15% 1.36%
Nonperforming assets to total loans and OREO 1.77% 1.85% 1.68% 1.65% 1.97%
Allowance for loan losses to nonperforming loans 119.18% 111.11% 128.67% 131.74% 117.18%
Allowance for loan losses to total loans 1.22% 1.21% 1.20% 1.20% 1.36%
      
(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 June 30,
  2015  2014 
 Average  Average Yield/Average  Average Yield/
(Amounts in thousands)BalanceInterest(1)Rate(1)BalanceInterest(1)Rate(1)
Assets      
Earning assets      
Loans(2)$  1,671,476 $  21,862  5.25%$  1,748,048 $  23,467  5.38%
Securities available-for-sale   362,366    2,418  2.68%   428,111    3,239  3.03%
Securities held-to-maturity   72,742    196  1.08%   12,767    39  1.23%
Interest-bearing deposits   120,025    80  0.27%   49,325    47  0.38%
Total earning assets   2,226,609    24,556  4.42%   2,238,251    26,792  4.80%
Other assets    311,437      334,279   
Total assets$  2,538,046   $  2,572,530   
       
Liabilities      
Interest-bearing deposits      
Demand deposits $  340,517 $  51  0.06%$  372,536 $  52  0.06%
Savings deposits    538,717    101  0.08%   524,539    128  0.10%
Time deposits   655,243    1,410  0.86%   697,326    1,655  0.95%
Total interest-bearing deposits   1,534,477    1,562  0.41%   1,594,401    1,835  0.46%
Borrowings      
Retail repurchase agreements   70,328    17  0.10%   61,458    24  0.16%
Wholesale repurchase agreements   50,000    468  3.75%   50,000    468  3.75%
FHLB advances and other borrowings   86,592    862  3.99%   166,087    1,698  4.10%
Total borrowings   206,920    1,347  2.61%   277,545    2,190  3.16%
Total interest-bearing liabilities   1,741,397    2,909  0.67%   1,871,946    4,025  0.86%
Noninterest-bearing demand deposits   428,442      344,485   
Other liabilities   20,072      16,490   
Total liabilities   2,189,911      2,232,921   
Stockholders' equity   348,135      339,609   
Total liabilities and stockholders' equity$  2,538,046   $  2,572,530   
Net interest income, FTE $  21,647   $  22,767  
Net interest rate spread   3.75%   3.94%
Net interest margin   3.90%   4.08%
       
(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)
       
 Six Months Ended June 30,
  2015  2014 
 Average  Average Yield/Average  Average Yield/
(Amounts in thousands)BalanceInterest(1)Rate(1)BalanceInterest(1)Rate(1)
Assets      
Earning assets      
Loans(2)$  1,674,778 $  43,816  5.28%$  1,733,061 $  46,359  5.39%
Securities available-for-sale   346,792    4,831  2.81%   463,783    7,047  3.06%
Securities held-to-maturity   69,351    382  1.11%   7,098    54  1.53%
Interest-bearing deposits   164,201    213  0.26%   37,924    77  0.41%
Total earning assets   2,255,122    49,242  4.40%   2,241,866    53,537  4.82%
Other assets    315,126      340,117   
Total assets$  2,570,248   $  2,581,983   
       
Liabilities      
Interest-bearing deposits      
Demand deposits $  346,099 $  104  0.06%$  371,286 $  106  0.06%
Savings deposits    532,740    206  0.08%   527,270    265  0.10%
Time deposits   676,519    2,982  0.89%   705,817    3,352  0.96%
Total interest-bearing deposits   1,555,358    3,292  0.43%   1,604,373    3,723  0.47%
Borrowings      
Federal funds purchased   -    -  -    1,763    3  0.34%
Retail repurchase agreements   69,097    38  0.11%   64,391    51  0.16%
Wholesale repurchase agreements   50,000    931  3.75%   50,000    931  3.75%
FHLB advances and other borrowings   96,551    1,907  3.98%   166,087    3,375  4.10%
Total borrowings   215,648    2,876  2.69%   282,241    4,360  3.12%
Total interest-bearing liabilities   1,771,006    6,168  0.70%   1,886,614    8,083  0.87%
Noninterest-bearing demand deposits   427,881      340,550   
Other liabilities   20,696      18,692   
Total liabilities   2,219,583      2,245,856   
Stockholders' equity   350,665      336,127   
Total liabilities and stockholders' equity$  2,570,248   $  2,581,983   
Net interest income, FTE $  43,074   $  45,454  
Net interest rate spread   3.70%   3.95%
Net interest margin   3.85%   4.09%
       
(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 June 30, 
  2015  2014 
  Average Yield/ Average Yield/
(Amounts in thousands)Interest(1)Rate(1)Interest(1)Rate(1)
Earning assets    
Loans(2)$  21,863  5.25%$  23,467  5.38%
Accretion income   2,416     2,789  
Less: cash accretion income   1,134     1,247  
Non-cash accretion income   1,282     1,542  
Loans, excluding non-cash accretion income   20,581  4.94%   21,925  5.03%
Other earning assets   2,693  1.95%   3,325  2.72%
Total earning assets   23,274  4.19%   25,250  4.52%
Total interest-bearing liabilities   2,909  0.67%   4,025  0.86%
Net interest income, FTE$  20,365  $  21,225  
Net interest rate spread  3.52%  3.66%
Net interest margin  3.67%  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.
     
  Six 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)$  43,816  5.28%$  46,359  5.39%
Accretion income   5,255     5,912  
Less: cash accretion income   2,230     1,848  
Non-cash accretion income   3,025     4,064  
Loans, excluding non-cash accretion income   40,791  4.91%   42,295  4.92%
Other earning assets   5,425  1.89%   7,178  2.84%
Total earning assets   46,216  4.13%   49,473  4.45%
Total interest-bearing liabilities   6,167  0.70%   8,083  0.86%
Net interest income, FTE$  40,049  $  41,390  
Net interest rate spread  3.43%  3.59%
Net interest margin  3.58%  3.73%
     
(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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