NEWS RELEASE
FOR IMMEDIATE RELEASE:		FOR MORE INFORMATION, CONTACT:
April 29, 2014		David D. Brown
		(276) 326-9000

 

First Community Bancshares, Inc. Announces First Quarter 2014 Results

 

Bluefield, Virginia – First Community Bancshares, Inc. (NASDAQ: FCBC) (www.fcbinc.com) (the “Company”) today reported net income for the quarter ended March 31, 2014, of $5.73 million. Net income available to common shareholders totaled $5.50 million, or $0.29 per diluted common share, for the quarter ended March 31, 2014. Core earnings for the quarter ended March 31, 2014, totaled $5.86 million.

 

First Quarter 2014 Highlights –

 

·

The non-covered loan portfolio increased $29.66 million compared to year-end 2013 and $94.46 million compared to the first quarter of 2013. The increase is primarily attributed to new commercial real estate volume in Southern West Virginia and Central North Carolina. This marks the fourth consecutive quarter non-covered loan growth has exceeded covered loan declines.

·

Annualized growth in the non-covered loan portfolio was 7.71% during the quarter.

·

Non-covered delinquent loans as a percentage of total non-covered loans experienced a significant decrease of 104 basis points, or 36.78%, to 1.79% compared to the first quarter of 2013. The decrease is attributed to declines in both past due and nonaccrual loans.

·

The Company repurchased 131,500 shares during the quarter.

·

The Company significantly exceeds regulatory “well capitalized” targets as of March 31, 2014, with a total risk-based capital ratio of 16.3%, a Tier 1 risk-based capital ratio of 15.0%, and a Tier 1 leverage ratio of 10.1%.

 

Net Interest Income

 

Net interest income decreased $1.34 million, or 5.72%, to $22.03 million for the first quarter of 2014 compared with the same quarter of 2013. The tax equivalent net interest margin decreased 5 basis points to 4.10% for the first quarter of 2014 compared with 4.15% for the same quarter of 2013. Total interest income decreased $1.92 million, or 6.86%, to $26.08 million for the first quarter of 2014 compared with the same quarter of 2013. The tax equivalent yield on loans decreased 52 basis points to 5.40% while the average loan balance increased $11.61 million, or 0.68%, to $1.72 billion for the first quarter of 2014 compared with the same quarter of 2013.

 

Loan interest accretion stemming from the Peoples and Waccamaw acquisitions totaled $3.12 million, of which $600 thousand was received in cash, for the first quarter of 2014 compared to $3.84 million, of which $1.78 million was received in cash, for the same quarter of 2013. The normalized net interest margin for the first quarters of 2014 and 2013, which excludes non-cash loan interest accretion, was 3.64% and 3.80%, respectively. The normalized yield on loans for the first quarters of 2014 and 2013 was 4.81% and 5.43%, respectively.

 

Total interest expense decreased $584 thousand, or 12.58%, to $4.06 million for the first quarter of 2014 compared with the same quarter of 2013. Deposit costs decreased $474 thousand, or 20.07%, to $1.89 million for the first quarter of 2014 compared with the same quarter of 2013, reflecting a 10 basis point decrease in the average rate paid on interest-bearing deposits. Borrowing costs decreased $110 thousand, or 4.82%, to $2.17 million for the first quarter of 2014 compared with the same quarter of 2013. The average rate paid on interest-bearing liabilities decreased 8 basis points to 0.87% for the first quarter of 2014 compared with the same quarter of 2013. The average balance of interest-bearing liabilities decreased $83.54 million, or 4.21%, to $1.90 billion for the first quarter of 2014 compared with the same quarter of 2013, which included a $61.20 million decrease in average interest-bearing deposits and a $22.34 million decrease in average total borrowings.

 

 

Noninterest Income

 

Noninterest income decreased $627 thousand, or 7.98%, to $7.23 million for the first quarter of 2014 compared with the same quarter of 2013, which was largely due to a decrease in other operating income offset by increases in wealth management income and insurance commissions. Other operating income decreased $1.04 million, or 57.40%, for the first quarter of 2014 compared with the same quarter of 2013. The decrease in other operating income included a $301 thousand decrease in secondary market income, a $296 thousand decrease in income from bank owned life insurance policies, and a $392 thousand decrease in gains recognized in 2013 from debt prepayments. Wealth management revenues increased $162 thousand, or 19.15%, for the first quarter of 2014 compared with the same quarter of 2013. The Trust and Wealth Management Divisions reported $697 million in combined assets under management as of March 31, 2014. Insurance commissions increased $298 thousand, or 17.89%, for the first quarter of 2014 compared with the same quarter of 2013. Net amortization expense relating to the FDIC indemnification asset decreased $405 thousand, or 26.32%, during the first quarter of 2014, compared to the same quarter of 2013 as a result of less accretion on non-impaired acquired loans. The Company incurred other-than-temporary impairment charges of $264 thousand during the first quarter of 2014 related to a non-Agency mortgage-backed security and certain equity securities. Service charges on deposits and other service charges and fees experienced a slight decrease of $113 thousand, or 2.28%, for the first quarter of 2014 compared with the same quarter of 2013. The Company realized a $45 thousand net gain on the sale of securities for the first quarter of 2014, which was a decrease of $72 thousand compared to the same quarter of 2013.

 

Noninterest Expense

 

Noninterest expense decreased $364 thousand, or 1.86%, to $19.18 million for the first quarter of 2014 compared with the same quarter of 2013. Salaries and employee benefits decreased $205 thousand, or 2.03%, to $9.91 million for the first quarter of 2014 compared with the same quarter of 2013. The decrease in salaries and employee benefits included a $210 thousand decrease in medical expense coupled with a reduction of 40 full-time equivalent employees. Occupancy, furniture, and equipment expense decreased $226 thousand, or 7.07%, to $2.97 million for the first quarter of 2014 compared with the same quarter of 2013. Other operating expense increased $158 thousand, or 2.85%, to $5.69 million for the first quarter of 2014 compared with the same quarter of 2013, which was primarily due to an increase in ATM processing expense. Other operating expense included a net loss on sales and expenses associated with other real estate owned of $857 thousand for the first quarter of 2014 compared to $625 thousand for the same quarter of 2013. The efficiency ratio for the first quarter of 2014 was 60.79% compared to 59.55% for the first quarter of 2013.

 

Allowance for Loan Losses and Asset Quality

 

The total allowance for loan losses was reduced to $23.80 million as of March 31, 2014, compared with $24.08 million as of December 31, 2013, and $24.85 million as of March 31, 2013. As of March 31, 2014, $23.22 million of the allowance was attributed to the legacy portfolio, $175 thousand was attributed to the acquired Peoples portfolio, and $399 thousand was attributed to the acquired Waccamaw portfolio. Non-covered loans and other real estate owned are those assets not covered by loss share agreements between the FDIC and the Bank in relation to the acquisition of Waccamaw. The allowance for loan losses, excluding purchased credit impaired (“PCI”) loans, as a percentage of non-covered loans was 1.48% as of March 31, 2014, compared with 1.50% as of December 31, 2013, and 1.66% as of March 31, 2013. Activity in the allowance in the first quarter of 2014 included a $651 thousand, or 57.01%, increase in the provision for loan losses charged to operations compared with the same period of the prior year. Allowance activity in the first quarter also included a net recovery of previous impairments recorded through the FDIC indemnification asset of $203 thousand due to better than expected performance in the Waccamaw PCI loan portfolio. Net charge-offs increased $114 thousand, or 6.50%, in the first quarter of 2014 compared with the fourth quarter of 2013 and decreased $193 thousand, or 9.36%, compared with the first quarter of 2013. The ratio of annualized net charge-offs to average non-covered loans improved to 0.48% for the first quarter of 2014, which represents a decrease of 8 basis points compared with 0.56% for the first quarter of 2013.

 

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 showed a significant decrease to 1.79% as of March 31, 2014, compared to 2.83% for the same period of the prior year. Non-covered nonaccrual loans totaled $20.91 million as of March 31, 2014, compared to $19.16 million as of December 31, 2013, and $30.08 million as of March 31, 2013. At quarter end, the Company’s non-covered nonperforming loans as a percentage of total non-covered loans were 1.43% and non-covered nonperforming assets as a percentage of total non-covered assets were 1.16%.

 

Total nonperforming assets, including covered and non-covered loan portfolios, consisted of $22.17 million in nonaccrual loans, $109 thousand in accruing loans past due 90 days or more, $1.78 million in unseasoned, accruing troubled debt restructurings, and $14.63 million in other real estate owned as of March 31, 2014. In comparison, total nonperforming assets consisted of $22.51 million in nonaccrual loans, $86 thousand in accruing loans past due 90 days or more, $1.31 million in unseasoned, accruing troubled debt restructurings, and $14.86 million in other real estate owned as of December 31, 2013. In addition, total non-covered nonperforming assets increased $817 thousand, or 2.94%, and total covered nonperforming assets decreased $905 thousand, or 8.24%, as of March 31, 2014, compared to December 31, 2013.

 

 

Balance Sheet and Capital

 

Consolidated assets totaled $2.61 billion as of March 31, 2014, an increase of $7.83 million, or 0.30%, compared with $2.60 billion as of December 31, 2013. The change in consolidated assets was driven by a $22.44 million increase in cash and cash equivalents and a $29.66 million increase in the non-covered loan portfolio, offset by a $35.96 million decrease in available-for-sale securities and an $8.51 million decrease in the covered loan portfolio. Consolidated liabilities totaled $2.28 billion as of March 31, 2014, an increase of $2.53 million, or 0.11%, compared with $2.27 billion as of December 31, 2013. The change in consolidated liabilities was driven by a $23.95 million increase in deposits offset by a $16.00 million decrease in federal funds purchased and a $5.97 million decrease in other borrowings.

 

During the first quarter of 2014, the Company began purchasing medium-term bonds in the held-to-maturity category. It is expected that this portfolio will continue to grow consistently and will provide the funding necessary to extinguish certain wholesale borrowings as they come due.

 

Total stockholders’ equity increased to $333.91 million as of March 31, 2014, compared with $328.61 million as of December 31, 2013. Book value per as-converted common share increased to $17.18 as of March 31, 2014, compared with $16.79 as of December 31, 2013. Tangible book value per common share increased to $11.61 as of March 31, 2014, compared with $11.26 as of December 31, 2013. Additionally, the Company repurchased 131,500 common shares at a weighted average cost of $16.30 per share and paid a cash dividend of $0.12 per common share during the first quarter of 2014.

 

The Company significantly exceeds regulatory “well capitalized” targets as of March 31, 2014, with a total risk-based capital ratio of 16.3%, a Tier 1 risk-based capital ratio of 15.0%, and a Tier 1 leverage ratio of 10.1%.

 

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 that is computed by dividing adjusted noninterest expense by the sum of tax equivalent net interest income and adjusted noninterest income. Management believes this measure provides investors with important information about the Company’s operating expense control and efficiency of operations. Management also believes this ratio focuses attention on the core operating performance of the Company over time and is highly useful in comparing period-to-period operating performance of core business operations. The efficiency ratio used by the Company may not be comparable to efficiency ratios reported by other financial institutions.

 

Tangible book value per common share is a non-GAAP financial measure that is defined as stockholders’ equity less goodwill and other intangibles, divided by as-converted common shares outstanding. Average tangible common equity is a non-GAAP financial measure that is defined as average stockholders’ equity less average goodwill, other intangibles, and the preferred liquidation preference.

 

 

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 68 banking locations throughout Virginia, West Virginia, North Carolina, South Carolina, and Tennessee as of March 31, 2014. 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 $697 million in combined assets as of March 31, 2014. 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 March 31, 2014. The Company’s common stock is listed on the NASDAQ Global Select Market under the trading symbol “FCBC”. The Company reported consolidated assets of $2.61 billion as of March 31, 2014. Additional investor information can be found 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
		March 31,
(Amounts in thousands, except share and per share data)		2014				2013
Interest income
Interest and fees on loans held for investment		$	22,834			$	24,844
Interest on securities -- taxable			2,097				1,886
Interest on securities -- nontaxable			1,122				1,208
Interest on deposits in banks			30				66
Total interest income			26,083				28,004
Interest expense
Interest on deposits			1,888				2,362
Interest on short-term borrowings			502				590
Interest on long-term borrowings			1,668				1,690
Total interest expense			4,058				4,642
Net interest income			22,025				23,362
Provision for loan losses			1,793				1,142
Net interest income after provision for loan losses			20,232				22,220
Noninterest income
Wealth management income			1,008				846
Service charges on deposit accounts			3,070				3,168
Other service charges and fees			1,771				1,786
Insurance commissions			1,964				1,666
Net impairment losses recognized in earnings			(264	)			-
Net gain on sale of securities			45				117
Net FDIC indemnification asset amortization			(1,134	)			(1,539	)
Other operating income			774				1,817
Total noninterest income			7,234				7,861
Noninterest expense
Salaries and employee benefits			9,905				10,110
Occupancy expense of bank premises			1,778				1,855
Furniture and equipment			1,194				1,343
Amortization of intangible assets			175				179
FDIC premiums and assessments			434				472
Merger related expense			-				49
Other operating expense			5,694				5,536
Total noninterest expense			19,180				19,544
Income before income taxes			8,286				10,537
Income tax expense			2,561				3,396
Net income			5,725				7,141
Dividends on preferred stock			228				258
Net income available to common shareholders		$	5,497			$	6,883
Basic earnings per common share		$	0.30			$	0.34
Diluted earnings per common share			0.29				0.34
Cash dividends per common share			0.12				0.12
Weighted average basic shares outstanding			18,423,123				20,032,694
Weighted average diluted shares outstanding			19,506,647				21,258,490
Return on average assets			0.86	%			1.03	%
Return on average common equity			7.02	%			8.11	%

 

 

FIRST COMMUNITY BANCSHARES, INC.

CONDENSED QUARTERLY STATEMENTS OF INCOME (Unaudited)

 

		Quarter Ended
		March 31,				December 31,				September 30,				June 30,				March 31,
(Amounts in thousands, except share and per share data)		2014				2013				2013				2013				2013
Interest Income
Interest and fees on loans held for investment		$	22,834			$	24,053			$	23,439			$	24,264			$	24,844
Interest on securities -- taxable			2,097				2,121				1,999				1,869				1,886
Interest on securities -- nontaxable			1,122				1,159				1,216				1,207				1,208
Interest on deposits in banks			30				31				42				72				66
Total interest income			26,083				27,364				26,696				27,412				28,004
Interest Expense
Interest on deposits			1,888				2,031				2,147				2,283				2,362
Interest on short-term borrowings			502				536				517				579				590
Interest on long-term borrowings			1,668				1,705				1,706				1,688				1,690
Total interest expense			4,058				4,272				4,370				4,550				4,642
Net interest income			22,025				23,092				22,326				22,862				23,362
Provision for loan losses			1,793				1,528				2,333				3,205				1,142
Net interest income after provision for loan losses			20,232				21,564				19,993				19,657				22,220
Noninterest Income
Wealth management income			1,008				732				863				971				846
Service charges on deposit accounts			3,070				3,493				3,582				3,315				3,168
Other service charges and fees			1,771				1,795				1,777				1,793				1,786
Insurance commissions			1,964				1,400				1,559				1,308				1,666
Net impairment losses recognized in earnings			(264	)			(320	)			-				-				-
Net gain (loss) on sale of securities			45				208				(39	)			113				117
Net FDIC indemnification asset amortization			(1,134	)			(1,307	)			(1,089	)			(1,662	)			(1,539	)
Other operating income			774				1,270				1,458				1,010				1,817
Total noninterest income			7,234				7,271				8,111				6,848				7,861
Noninterest Expense
Salaries and employee benefits			9,905				10,085				11,080				9,960				10,110
Occupancy expense of bank premises			1,778				1,683				1,700				1,795				1,855
Furniture and equipment			1,194				1,035				1,288				1,300				1,343
Amortization of intangible assets			175				184				183				183				179
FDIC premiums and assessments			434				316				460				469				472
Merger related expense			-				-				-				7				49
Other operating expense			5,694				7,772				5,442				4,819				5,536
Total noninterest expense			19,180				21,075				20,153				18,533				19,544
Income before income taxes			8,286				7,760				7,951				7,972				10,537
Income tax expense			2,561				2,436				2,539				2,537				3,396
Net income			5,725				5,324				5,412				5,435				7,141
Dividends on preferred stock			228				252				261				253				258
Net income available to common shareholders		$	5,497			$	5,072			$	5,151			$	5,182			$	6,883
Basic earnings per common share		$	0.30			$	0.27			$	0.26			$	0.26			$	0.34
Diluted earnings per common share			0.29				0.26				0.26				0.26				0.34
Cash dividends per common share			0.12				0.12				0.12				0.12				0.12
Weighted average basic shares outstanding			18,423,123				19,136,317				20,008,861				19,997,991				20,032,694
Weighted average diluted shares outstanding			19,506,647				20,233,737				21,123,788				21,205,078				21,258,490

 

 

FIRST COMMUNITY BANCSHARES, INC.

RECONCILIATION OF GAAP NET INCOME TO CORE EARNINGS (Unaudited)

 

		Three Months Ended
		March 31,
		2014				2013
(Amounts in thousands, except per share data)
Net income, GAAP		$	5,725			$	7,141
Non-GAAP adjustments:
Net impairment losses recognized in earnings			264				-
Net gain on sale of securities			(45	)			(117	)
Net gain on debt prepayment			-				(296	)
Merger related expense			-				49
Other noncore, nonrecurring items			-				108
Total adjustments to core earnings			219				(256	)
Tax effect			82				(96	)
Core earnings, non-GAAP		$	5,862			$	6,981
Core return on average assets			0.92	%			1.05	%
Core return on average common equity			7.49	%			8.23	%
Core return on average tangible common equity			11.36	%			12.03	%
Core diluted earnings per common share		$	0.30			$	0.33

 

FIRST COMMUNITY BANCSHARES, INC.

EFFICIENCY RATIO CALCULATION (Unaudited)

 

		Three Months Ended
		March 31,
		2014				2013
(Amounts in thousands)
Noninterest expense, GAAP		$	19,180			$	19,544
Non-GAAP adjustments:
Merger related expense			-				(49	)
OREO expense and net loss			(857	)			(625	)
Other noncore, nonrecurring items			-				(108	)
Adjusted noninterest expense			18,323				18,762
Net interest income, GAAP			22,025				23,362
Noninterest income, GAAP			7,234				7,861
Non-GAAP adjustments:
Tax equivalency adjustment			663				695
Net impairment losses recognized in earnings			264				-
Net gain on sale of securities			(45	)			(117	)
Net gain on debt prepayment			-				(296	)
Adjusted net interest and noninterest income			30,141				31,505
Non-GAAP efficiency ratio			60.79	%			59.55	%

 

 

FIRST COMMUNITY BANCSHARES, INC.

CONDENSED QUARTERLY BALANCE SHEETS (Unaudited)

 

		As of the Quarter Ended
		March 31,				December 31,				September 30,				June 30,				March 31,
		2014				2013				2013				2013				2013
(Amounts in thousands)
Cash and due from banks		$	45,879			$	43,598			$	47,982			$	44,307			$	41,467
Federal funds sold			22,352				1,817				33,374				22,876				110,544
Interest-bearing deposits in banks			10,771				11,152				11,219				14,936				15,030
Total cash and cash equivalents			79,002				56,567				92,575				82,119				167,041
Securities available-for-sale			483,864				519,820				545,676				550,158				537,507
Securities held-to-maturity			8,161				568				567				627				816
Loans held for sale			1,743				883				825				4,621				2,794
Loans held for investment, net of unearned income:
Covered under loss share agreements			143,170				151,682				163,425				184,076				195,060
Not covered under loss share agreements			1,588,694				1,559,039				1,533,272				1,507,422				1,494,232
Less allowance for loan losses			(23,798	)			(24,077	)			(24,665	)			(23,122	)			(24,850	)
Loans, net			1,709,809				1,687,527				1,672,857				1,672,997				1,667,236
FDIC indemnification asset			32,510				34,691				37,102				40,389				43,921
Property, plant, and equipment, net			60,043				61,116				63,526				64,085				64,812
Other real estate owned:
Covered under loss share agreements			8,705				7,541				7,381				6,407				6,911
Not covered under loss share agreements			5,923				7,318				5,450				4,743				4,439
Interest receivable			6,259				7,521				7,336				8,010				8,166
Goodwill			105,455				105,455				104,892				104,892				104,689
Intangible assets			2,691				2,866				2,976				3,159				3,344
Other assets			107,924				111,524				112,313				113,149				111,409
Total assets		$	2,610,346			$	2,602,514			$	2,652,651			$	2,650,735			$	2,720,291
Deposits:
Noninterest-bearing		$	353,137			$	339,680			$	353,951			$	349,972			$	355,918
Interest-bearing			382,752				361,821				374,546				354,862				377,445
Savings			531,096				524,010				527,887				513,781				513,322
Time			707,704				725,231				740,181				770,081				800,812
Total deposits			1,974,689				1,950,742				1,996,565				1,988,696				2,047,497
Interest, taxes, and other liabilities			23,323				22,770				24,653				23,019				26,740
Federal funds purchased			-				16,000				-				-				-
Securities sold under agreements to repurchase			112,337				118,308				114,647				121,204				121,506
FHLB borrowings			150,000				150,000				150,000				150,000				150,000
Other borrowings			16,087				16,088				15,839				15,877				15,877
Total liabilities			2,276,436				2,273,908				2,301,704				2,298,796				2,361,620
Preferred stock			15,151				15,251				15,471				15,921				17,421
Common stock			20,500				20,493				20,478				20,447				20,343
Additional paid-in capital			215,827				215,663				215,671				215,139				213,855
Retained earnings			129,115				125,826				123,018				120,273				117,489
Treasury stock, at cost			(35,996	)			(33,887	)			(10,946	)			(7,763	)			(7,517	)
Accumulated other comprehensive loss			(10,687	)			(14,740	)			(12,745	)			(12,078	)			(2,920	)
Total stockholders' equity			333,910				328,606				350,947				351,939				358,671
Total liabilities and stockholders' equity		$	2,610,346			$	2,602,514			$	2,652,651			$	2,650,735			$	2,720,291
Shares outstanding at period end			18,392,020				18,514,579				19,888,028				20,060,862				19,985,212
Book value per common share at period end(1)		$	17.18			$	16.79			$	16.75			$	16.63			$	16.93
Tangible book value per common share at period end(2)		$	11.61			$	11.26			$	11.60			$	11.53			$	11.83

  

(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
		March 31,				December 31,				September 30,				June 30,				March 31,
(Amounts in thousands)		2014				2013				2013				2013				2013
Allowance for Loan Losses
Beginning balance		$	24,077			$	24,665			$	23,122			$	24,850			$	25,770
Provision for loan losses charged to operations			1,793				1,528				2,333				3,205				1,142
(Recovery of) provision for loan losses recorded through the FDIC indemnification asset			(203	)			(361	)			812				-				-
Charge-offs			(2,216	)			(2,807	)			(1,955	)			(5,006	)			(2,759	)
Recoveries			347				1,052				353				73				697
Net charge-offs			(1,869	)			(1,755	)			(1,602	)			(4,933	)			(2,062	)
Ending balance		$	23,798			$	24,077			$	24,665			$	23,122			$	24,850
Summary of Asset Quality
Non-covered nonperforming
Nonaccrual loans		$	20,909			$	19,161			$	26,397			$	29,125			$	30,076
Accruing loans past due 90 days or more			-				-				-				-				-
Troubled debt restructurings ("TDRs")(1)			1,775				1,311				2,228				276				1,596
Total non-covered nonperforming loans			22,684				20,472				28,625				29,401				31,672
Other real estate owned ("OREO") not covered under FDIC loss share agreements			5,923				7,318				5,450				4,743				4,439
Total non-covered nonperforming assets		$	28,607			$	27,790			$	34,075			$	34,144			$	36,111
Covered nonperforming
Nonaccrual loans		$	1,261			$	3,353			$	3,579			$	3,889			$	4,567
Accruing loans past due 90 days or more			109				86				82				-				-
Total covered nonperforming loans			1,370				3,439				3,661				3,889				4,567
OREO covered under FDIC loss share agreements			8,705				7,541				7,381				6,407				6,911
Total covered nonperforming assets			10,075				10,980				11,042				10,296				11,478
Total nonperforming assets		$	38,682			$	38,770			$	45,117			$	44,440			$	47,589
Performing TDRs(2)		$	11,193			$	10,900			$	9,697			$	10,927			$	10,272
Total TDRs(3)			12,968				12,211				11,925				11,203				11,868
Asset Quality Ratios
Excluding covered assets
Nonperforming loans to total loans			1.43	%			1.31	%			1.87	%			1.95	%			2.12	%
Nonperforming assets to total assets			1.16	%			1.14	%			1.37	%			1.39	%			1.43	%
Non-PCI allowance for loan losses to nonperforming loans			102.74	%			113.92	%			82.52	%			75.12	%			78.46	%
Non-PCI allowance to non-covered total loans			1.47	%			1.50	%			1.54	%			1.47	%			1.66	%
Annualized net charge-offs to average loans			0.48	%			0.45	%			0.42	%			1.31	%			0.56	%
Including covered assets
Nonperforming loans to total loans			1.39	%			1.40	%			1.90	%			1.97	%			2.15	%
Nonperforming assets to total assets			1.48	%			1.49	%			1.70	%			1.68	%			1.75	%
Nonperforming assets to total loans and other real estate owned			115.74	%			145.60	%			149.60	%			160.70	%			166.08	%
Allowance for loan losses to nonperforming loans			98.94	%			100.69	%			76.40	%			69.46	%			68.57	%
Allowance for loan losses to total loans			1.37	%			1.41	%			1.45	%			1.37	%			1.47	%

 

(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.

SELECTED FINANCIAL INFORMATION (Unaudited)

 

		As of and for the Quarter Ended
		March 31,				December 31,				September 30,				June 30,				March 31,
		2014				2013				2013				2013				2013
Selected Ratios
Return on average assets			0.86	%			0.77	%			0.77	%			0.78	%			1.03	%
Return on average common equity			7.02	%			6.14	%			6.06	%			5.97	%			8.11	%
Core return on average assets, non-GAAP			0.92	%			0.96	%			0.92	%			0.80	%			1.05	%
Core return on average common equity, non-GAAP			7.49	%			7.69	%			7.19	%			6.19	%			8.23	%
Net interest margin			4.10	%			4.15	%			3.99	%			4.07	%			4.15	%
Non-GAAP efficiency ratio quarter-to-date			60.79	%			58.84	%			60.35	%			60.60	%			59.55	%
Non-GAAP efficiency ratio year-to-date			60.79	%			59.82	%			60.16	%			60.07	%			59.55	%
Total equity to total assets			12.79	%			12.63	%			13.23	%			13.28	%			13.19	%
Average earning assets to average assets			86.65	%			86.60	%			86.51	%			86.72	%			86.96	%
Average loans to average deposits			88.05	%			86.53	%			85.13	%			84.33	%			84.98	%
(Amounts in thousands)
Average Balances
Loans		$	1,717,908			$	1,705,790			$	1,694,243			$	1,692,248			$	1,706,296
Investment securities			501,218				535,641				548,283				548,101				545,497
Earning assets			2,245,521				2,269,354				2,287,785				2,323,517				2,350,686
Total assets			2,591,540				2,620,543				2,644,632				2,679,295				2,703,029
Total deposits			1,951,027				1,971,358				1,990,163				2,006,626				2,007,840
Interest-bearing deposits			1,615,454				1,625,421				1,641,007				1,662,446				1,675,654
Borrowings			286,990				285,658				281,250				289,289				309,333
Interest-bearing liabilities			1,901,444				1,911,079				1,922,257				1,951,735				1,984,987
Stockholders' equity			332,605				342,912				352,993				365,217				361,549
Tax equivalent net interest income			22,688				23,754				23,017				23,555				24,057

 

 

FIRST COMMUNITY BANCSHARES, INC.

AVERAGE BALANCE SHEETS AND NET INTEREST INCOME ANALYSIS (Unaudited)

 

		Three Months Ended March 31,
		2014												2013
		Average								Average Yield/				Average								Average Yield/
(Amounts in thousands)		Balance				Interest(1)				Rate(1)				Balance				Interest(1)				Rate(1)
Assets
Earning assets
Loans(2)		$	1,717,908			$	22,893				5.40	%		$	1,706,296			$	24,888				5.92	%
Securities available-for-sale			499,851				3,808				3.09	%			544,681				3,728				2.78	%
Securities held-to-maturity			1,367				15				4.45	%			816				17				8.45	%
Interest-bearing deposits			26,395				30				0.46	%			98,893				66				0.27	%
Total earning assets			2,245,521				26,746				4.83	%			2,350,686				28,699				4.95	%
Other assets			346,019												352,343
Total assets		$	2,591,540											$	2,703,029
Liabilities
Interest-bearing deposits
Demand deposits		$	370,021			$	54				0.06	%		$	353,677			$	56				0.06	%
Savings deposits			530,031				137				0.10	%			505,917				155				0.12	%
Time deposits			714,402				1,697				0.96	%			816,060				2,151				1.07	%
Total interest-bearing deposits			1,614,454				1,888				0.47	%			1,675,654				2,362				0.57	%
Borrowings
Federal funds purchased			3,547				3				0.34	%			-				-				-
Retail repurchase agreements			67,356				26				0.16	%			75,751				105				0.56	%
Wholesale repurchase agreements			50,000				463				3.76	%			57,645				475				3.34	%
FHLB advances and other borrowings			166,087				1,678				4.10	%			175,937				1,700				3.92	%
Total borrowings			286,990				2,170				3.07	%			309,333				2,280				2.99	%
Total interest-bearing liabilities			1,901,444				4,058				0.87	%			1,984,987				4,642				0.95	%
Noninterest-bearing demand deposits			336,573												332,186
Other liabilities			20,918												24,307
Total liabilities			2,258,935												2,341,480
Stockholders' equity			332,605												361,549
Total liabilities and stockholders' equity		$	2,591,540											$	2,703,029
Net interest income, tax equivalent						$	22,688											$	24,057
Net interest rate spread(3)											3.96	%											4.00	%
Net interest margin(4)											4.10	%											4.15	%

 

(1)

Fully taxable equivalent at the rate of 35% ("FTE"). The FTE basis adjusts for the tax benefits of income on certain tax exempt loans and investments using the federal statutory rate of 35% for each period presented. The Company believes this measure to be the preferred industry measurement of net interest income and provides relevant comparison between taxable and nontaxable amounts.

(2)

Nonaccrual loans are included in average balances outstanding, but with no related interest income during the period of nonaccrual.

(3)

Represents the difference between the yield on earning assets and cost of funds.

(4)

Represents tax equivalent net interest income divided by average earning assets.

 

 

FIRST COMMUNITY BANCSHARES, INC.

RECONCILIATION OF GAAP NET INTEREST MARGIN TO NORMALIZED NET INTEREST MARGIN (Unaudited)

 

		Three Months Ended March 31,
		2014								2013
						Average Yield/								Average Yield/
(Amounts in thousands)		Interest(1)				Rate(1)				Interest(1)				Rate(1)
Earning assets
Loans(2)		$	22,893				5.40	%		$	24,888				5.92	%
Accretion income			3,122								3,842
Less: cash accretion income			600								1,782
Non-cash accretion income			2,522								2,060
Loans, excluding non-cash accretion income			20,371				4.81	%			22,828				5.43	%
Other earning assets			3,853				2.96	%			3,811				2.40	%
Total earning assets			24,224				4.38	%			26,639				4.60	%
Total interest-bearing liabilities			4,058				0.87	%			4,642				0.95	%
Net interest income, tax equivalent		$	20,166							$	21,997
Net interest rate spread(3)							3.51	%							3.65	%
Net interest margin(4)							3.64	%							3.80	%

 

(1)

Fully taxable equivalent at the rate of 35% ("FTE"). The FTE basis adjusts for the tax benefits of income on certain tax exempt loans and investments using the federal statutory rate of 35% for each period presented. The Company believes this measure to be the preferred industry measurement of net interest income and provides relevant comparison between taxable and nontaxable amounts.

(2)

Nonaccrual loans are included in average balances outstanding, but with no related interest income during the period of nonaccrual.

(3)

Represents the difference between the yield on earning assets and cost of funds.

(4)

Represents tax equivalent net interest income divided by average earning assets.