Exhibit 99.1

 

NEWS RELEASE
FOR IMMEDIATE RELEASE:		FOR MORE INFORMATION, CONTACT:
October 27, 2015		David D. Brown
		(276) 326-9000

 

First Community Bancshares, Inc. Announces Third Quarter 2015 Results

And Quarterly Dividend

 

Bluefield, Virginia – First Community Bancshares, Inc. (NASDAQ: FCBC) (www.fcbinc.com) (the “Company”) today announced financial results for the quarter and nine months ended September 30, 2015. The Company reported net income of $6.26 million for the quarter and $18.39 million for the nine months ended September 30, 2015. Net income available to common shareholders totaled $6.26 million, or $0.34 per diluted common share, for the quarter and $18.29 million, or $0.97 per diluted common share, for the nine months ended September 30, 2015. Core earnings totaled $6.24 million for the quarter and $18.35 million for the nine months ended September 30, 2015.

 

The Company also announced today that the Board of Directors declared a quarterly cash dividend to common shareholders of fourteen cents ($0.14) per common share. The quarterly dividend is payable to common shareholders of record on November 6, 2015, and is expected to be paid on or about November 20, 2015. The current year marks the 30^th consecutive year of cash dividends paid to stockholders.

 

Third Quarter 2015 Highlights –

 

·

The third quarter of 2015 marks the 3rd consecutive quarter of growth in linked quarter earnings per share.

·

The Company’s non-covered loan portfolio as of September 30, 2015, increased $35.62 million, or 2.28%, compared with June 30, 2015, and increased $33.10 million, or 2.11%, compared with December 31, 2014.

·

The Company repurchased 334,319 common shares during the third quarter, bringing total repurchased shares to 1,018,726 during the first nine months of 2015.

·

The Company significantly exceeds regulatory “well capitalized” targets as of September 30, 2015.

 

Net Interest Income

 

Net interest income decreased $346 thousand, or 1.57%, to $21.67 million for the third quarter of 2015 compared with the same quarter of 2014. The tax equivalent net interest margin decreased to 4.05% for the third quarter of 2015 compared with 4.06% for the same quarter of 2014. Total interest income decreased $1.40 million, or 5.45%, to $24.35 million for the third quarter of 2015 compared with the same quarter of 2014. The tax equivalent yield on loans increased one basis point to 5.28% while the average loan balance decreased $90.98 million, or 5.15%, to $1.68 billion for the third quarter of 2015 compared with the same quarter of 2014. The decrease in net interest income and the average loan balance is primarily due to loans sold in divestiture activities during the fourth quarter of 2014 and decreases in the covered loan portfolio compared to the third quarter of 2014.

 

Purchased credit impaired (“PCI”) loan interest accretion totaled $8.77 million for the third quarter of 2015, of which $3.33 million was received in cash, compared to accretion income of $8.72 million for the same quarter of 2014, of which $3.21 million was received in cash. The normalized net interest margin, which excludes non-cash loan interest accretion, was 3.59% for the third quarter of 2015 and 3.75% for same quarter of 2014. The normalized yield on loans was 4.84% for the third quarter of 2015 compared to 4.93% for the same quarter of 2014.

 

Total interest expense decreased $1.06 million, or 28.29%, to $2.68 million for the third quarter of 2015 compared with the same quarter of 2014. Deposit costs decreased $398 thousand, or 22.33%, to $1.38 million for the third quarter of 2015 compared with the same quarter of 2014, reflecting a 9 basis point decrease in the average rate paid on interest-bearing deposits. Borrowing costs decreased $659 thousand, or 33.73%, to $1.30 million for the third quarter of 2015 compared with the same quarter of 2014 primarily due to Federal Home Loan Bank (“FHLB”) debt prepayments. The average rate paid on interest-bearing liabilities decreased 19 basis points to 0.63% for the third quarter of 2015 compared with the same quarter of 2014. The average balance of interest-bearing liabilities decreased $121.94 million, or 6.75%, to $1.69 billion for the third quarter of 2015 compared with the same quarter of 2014, which included a $63.93 million decrease in average interest-bearing deposits and a $58.02 million decrease in average total borrowings.

 

  

Noninterest Income

 

Noninterest income decreased $593 thousand, or 7.73%, to $7.07 million for the third quarter of 2015 compared with the same quarter of 2014, which was largely due to a $672 thousand, or 61.31%, increase in the net amortization expense related to the FDIC indemnification asset as a result of continuing better than expected performance in the covered loan portfolio. Wealth management revenues increased $120 thousand, or 17.91%, for the third quarter of 2015 compared with the same quarter of 2014. The Trust and Wealth Management Divisions reported $710 million in combined assets under management as of September 30, 2015. Service charges on deposits and other service charges and fees increased $260 thousand, or 4.76%, to $5.72 million for the third quarter of 2015 compared with the same quarter of 2014. Insurance commissions decreased $45 thousand, or 2.65%, for the third quarter of 2015 compared with the same quarter of 2014. The Company incurred no other-than-temporary impairment charges during the third quarter of 2015 compared to $219 thousand during the same quarter of 2014 related to a non-Agency mortgage-backed security that was sold during the fourth quarter of 2014. The Company realized a $39 thousand net loss on the sale of securities in the third quarter of 2015 compared to a net gain of $320 thousand in the same quarter of 2014. Other operating income decreased $116 thousand, or 13.83%, for the third quarter of 2015 compared with the same quarter of 2014.

 

Noninterest Expense

 

Noninterest expense decreased $2.45 million, or 11.41%, to $19.02 million for the third quarter of 2015 compared with the same quarter of 2014, which was largely due to the absence of FHLB debt prepayment fees. The Company incurred fees of $3.05 million related to the prepayment of FHLB convertible advances during the third quarter of 2014. Salaries and employee benefits increased $47 thousand, or 0.47%, to $9.97 million for the third quarter of 2015 compared with the same quarter of 2014. Full-time equivalent employees totaled 677 as of September 30, 2015, a decrease of 14 employees compared with the same period of the prior year. The decrease was primarily due to branch consolidation and divestiture activities offset by the Bank of America branch acquisition that occurred during the fourth quarter of 2014. Occupancy, furniture, and equipment expenses increased $21 thousand, or 0.78%, to $2.70 million for the third quarter of 2015 compared with the same quarter of 2014. Other operating expenses increased $754 thousand, or 15.28%, to $5.69 million for the third quarter of 2015 compared with the same quarter of 2014, which included a $641 thousand increase in the net loss on sales and expenses associated with other real estate owned (“OREO”). The non-GAAP efficiency ratio for the third quarter of 2015 was 60.26% compared to 58.21% for the same quarter of 2014.

 

Allowance for Loan Losses and Asset Quality

 

The allowance for loan losses totaled $20.13 million as of September 30, 2015, a decrease of $100 thousand compared to $20.23 million as of December 31, 2014, and a decrease of $1.03 million compared to $21.16 million as of September 30, 2014. As of September 30, 2015, $20.11 million of the allowance was attributed to the non-PCI loan portfolio and $20 thousand was attributed to the PCI loan portfolio. Non-covered loans and OREO are those assets not covered by FDIC loss share agreements. The allowance for loan losses, excluding PCI loans, as a percentage of non-covered loans was 1.26% as of September 30, 2015, compared with 1.29% as of December 31, 2014, and 1.28% as of September 30, 2014. Allowance activity in the third quarter of 2015 included a $381 thousand provision for loan losses compared to a $2.44 million recovery of loan losses for the same quarter of 2014. Activity in the allowance also included a recovery of loan losses recorded through the FDIC indemnification asset of $75 thousand in the third quarter of 2015, a decrease of $35 thousand compared to the recovery in the third quarter of 2014. The Company realized net charge-offs of $437 thousand in the third quarter of 2015, an increase of $234 thousand compared to $203 thousand in the same quarter of 2014. The ratio of annualized net charge-offs to average non-covered loans was 0.11% for the third quarter of 2015, which represents an increase of 6 basis points compared with 0.05% for the third quarter of 2014.

 

Non-covered delinquent loans, which are comprised of loans 30 days or more past due and nonaccrual loans, as a percentage of total non-covered loans increased to 1.44% as of September 30, 2015, compared to 1.28% for the same period of the prior year. Non-covered nonaccrual loans totaled $17.10 million as of September 30, 2015, compared to $10.56 million as of December 31, 2014, and $11.48 million as of September 30, 2014. At quarter-end, the Company’s non-covered nonaccrual loans as a percentage of total non-covered loans were 1.07%, compared to 0.67% at year-end 2014 and 0.70% for the same period of the prior year. As of September 30, 2015, the Company’s non-covered nonperforming loans as a percentage of total non-covered loans were 1.07% and non-covered nonperforming assets as a percentage of total non-covered assets were 0.93%.

 

As of September 30, 2015, total nonperforming assets, including the covered and non-covered loan portfolios, consisted of $17.10 million in nonaccrual loans, $3 thousand in accruing loans past due 90 days or more, $74 thousand in unseasoned, accruing troubled debt restructurings, and $5.09 million in OREO. In comparison, total nonperforming assets consisted of $12.99 million in nonaccrual loans, $2.73 million in unseasoned, accruing troubled debt restructurings, and $12.96 million in OREO as of December 31, 2014. In addition, total non-covered nonperforming assets increased $1.72 million, or 8.39%, and total covered nonperforming assets decreased $3.86 million, or 44.07%, as of September 30, 2015, compared to December 31, 2014.

 

  

Balance Sheet and Capital

 

Consolidated assets totaled $2.48 billion as of September 30, 2015, a decrease of $129.82 million, or 4.98%, compared with $2.61 billion as of December 31, 2014. The change in consolidated assets was primarily driven by a $169.76 million, or 86.23%, decrease in federal funds sold as liquidity was used to reduce high cost borrowings and deposits, redeem the Company’s convertible preferred shares and repurchase common stock. As of September 30, 2015, securities available for sale increased $56.10 million and securities held to maturity increased $14.65 million compared to December 31, 2014.

 

Consolidated liabilities totaled $2.13 billion as of September 30, 2015, a decrease of $123.27 million, or 5.45%, compared with $2.26 billion as of December 31, 2014. The change in consolidated liabilities was driven by a $97.86 million decrease in deposits and a $27.04 million decrease in FHLB and other borrowings. The Company prepaid an additional $25 million of a $50 million FHLB convertible advance with a May 2017 maturity and 4.15% interest rate during the second quarter of 2015. The prepayment resulted in a pre-tax penalty of $1.70 million.

 

Stockholders’ equity totaled $344.83 million as of September 30, 2015, a decrease of $6.55 million, or 1.86%, compared with $351.37 million as of December 31, 2014. The Company redeemed all outstanding shares of its convertible preferred stock during the first quarter of 2015, resulting in the redemption of 2,367 preferred shares totaling $2.37 million. Additionally, the Company repurchased 1,018,726 common shares at a weighted average cost of $17.13 per share and paid a cash dividend of $0.40 per common share during the first nine months of 2015. Book value per common share increased 4.26% to $18.83 as of September 30, 2015, compared with $18.06 as of December 31, 2014. Tangible book value per common share increased 3.66% to $13.02 as of September 30, 2015, compared with $12.56 as of December 31, 2014.

 

The Company significantly exceeds regulatory “well capitalized” targets as of September 30, 2015.

 

Non-GAAP Financial Measures

 

The Company prepares its financial statements in accordance with generally accepted accounting principles in the United States (“GAAP”). This press release also refers to certain non-GAAP financial measures that the Company believes provide investors with important information, when used in conjunction with results presented in accordance with GAAP, regarding its operational performance.

 

Core earnings are a non-GAAP financial measure that excludes certain items from net income. Excluded items include gains, losses, and impairment losses on securities; goodwill and intangible impairment; amortization of intangibles; taxes; and other nonrecurring income and expense items. Management believes that core earnings provide the Company and investors a valuable tool to evaluate the Company’s financial results.

 

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

 

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

 

The normalized net interest margin and the normalized yield on loans are non-GAAP financial measures that exclude non-cash loan interest accretion related to PCI loans.

 

About First Community Bancshares, Inc.

 

First Community Bancshares, Inc., a financial holding company headquartered in Bluefield, Virginia, provides banking products and services through its wholly-owned subsidiary First Community Bank. First Community Bank operated 52 banking locations throughout Virginia, West Virginia, North Carolina, and Tennessee as of September 30, 2015. First Community Bank offers wealth management and investment services through its wholly-owned subsidiary First Community Wealth Management, a registered investment advisory firm, and the Bank’s Trust Division, which collectively managed $710 million in combined assets as of September 30, 2015. The Company provides insurance services through its wholly-owned subsidiary Greenpoint Insurance Group, Inc., a full-service insurance agency headquartered in High Point, North Carolina, that operated 11 insurance locations throughout Virginia, West Virginia, and North Carolina as of September 30, 2015. The Company’s common stock is listed on the NASDAQ Global Select Market under the trading symbol, “FCBC”. The Company reported consolidated assets of $2.48 billion as of September 30, 2015. Additional investor information is available on the Company’s website at www.fcbinc.com.

 

  

This news release may include forward-looking statements. These forward-looking statements are based on current expectations that involve risks, uncertainties, and assumptions. Should one or more of these risks or uncertainties materialize or should underlying assumptions prove incorrect, actual results may differ materially. These risks include: changes in business or other market conditions; the timely development, production and acceptance of new products and services; the challenge of managing asset/liability levels; the management of credit risk and interest rate risk; the difficulty of keeping expense growth at modest levels while increasing revenues; and other risks detailed from time to time in the Company’s Securities and Exchange Commission reports including, but not limited to, the Annual Report on Form 10-K for the most recent fiscal year end. Pursuant to the Private Securities Litigation Reform Act of 1995, the Company does not undertake to update forward-looking statements to reflect circumstances or events that occur after the date the forward-looking statements are made.

 

  

FIRST COMMUNITY BANCSHARES, INC.

CONDENSED CONSOLIDATED STATEMENTS OF INCOME (Unaudited)

 

		Three Months Ended								Nine Months Ended
		September 30,								September 30,
(Amounts in thousands, except share and per share data)		2015				2014				2015				2014
Interest income
Interest and fees on loans held for investment		$	22,259			$	23,407			$	65,999			$	69,651
Interest on securities -- taxable			1,062				1,196				3,167				4,830
Interest on securities -- nontaxable			994				1,108				3,013				3,329
Interest on deposits in banks			33				40				246				117
Total interest income			24,348				25,751				72,425				77,927
Interest expense
Interest on deposits			1,384				1,782				4,676				5,505
Interest on short-term borrowings			497				526				1,486				1,511
Interest on long-term borrowings			798				1,428				2,685				4,803
Total interest expense			2,679				3,736				8,847				11,819
Net interest income			21,669				22,015				63,578				66,108
Provision for (recovery of) loan losses			381				(2,439	)			1,757				633
Net interest income after provision for loan losses			21,288				24,454				61,821				65,475
Noninterest income
Wealth management income			790				670				2,231				2,396
Service charges on deposit accounts			3,744				3,606				10,154				10,099
Other service charges and fees			1,974				1,852				5,987				5,473
Insurance commissions			1,650				1,695				5,336				5,113
Net impairment losses recognized in earnings			-				(219	)			-				(737	)
Net (loss) gain on sale of securities			(39	)			320				151				306
Net FDIC indemnification asset amortization			(1,768	)			(1,096	)			(5,179	)			(3,166	)
Other operating income			723				839				3,367				3,021
Total noninterest income			7,074				7,667				22,047				22,505
Noninterest expense
Salaries and employee benefits			9,971				9,924				29,357				29,872
Occupancy expense of bank premises			1,443				1,469				4,404				4,825
Furniture and equipment			1,259				1,212				3,854				3,611
Amortization of intangible assets			281				179				837				532
FDIC premiums and assessments			377				419				1,181				1,311
FHLB debt prepayment fees			-				3,047				1,702				3,047
Merger, acquisition, and divestiture expense			-				285				86				285
Other operating expense			5,688				4,934				15,667				15,329
Total noninterest expense			19,019				21,469				57,088				58,812
Income before income taxes			9,343				10,652				26,780				29,168
Income tax expense			3,084				3,609				8,388				9,393
Net income			6,259				7,043				18,392				19,775
Dividends on preferred stock			-				228				105				683
Net income available to common shareholders		$	6,259			$	6,815			$	18,287			$	19,092
Basic earnings per common share		$	0.34			$	0.37			$	0.98			$	1.04
Diluted earnings per common share			0.34				0.36				0.97				1.02
Cash dividends per common share			0.14				0.13				0.40				0.37
Weighted average basic shares outstanding			18,470,348				18,402,764				18,644,679				18,407,173
Weighted average diluted shares outstanding			18,500,975				19,466,126				18,895,909				19,472,136
Return on average assets			1.00	%			1.06	%			0.96	%			0.99	%
Return on average common equity			7.18	%			8.15	%			7.07	%			7.86	%

 

  

FIRST COMMUNITY BANCSHARES, INC.

CONDENSED QUARTERLY STATEMENTS OF INCOME (Unaudited)

 

		Quarter Ended
		September 30,				June 30,				March 31,				December 31,				September 30,
(Amounts in thousands, except share and per share data)		2015				2015				2015				2014				2014
Interest Income
Interest and fees on loans held for investment		$	22,259			$	21,826			$	21,914			$	25,841			$	23,407
Interest on securities -- taxable			1,062				1,070				1,035				1,145				1,196
Interest on securities -- nontaxable			994				1,003				1,016				1,021				1,108
Interest on deposits in banks			33				80				133				174				40
Total interest income			24,348				23,979				24,098				28,181				25,751
Interest Expense
Interest on deposits			1,384				1,562				1,730				1,803				1,782
Interest on short-term borrowings			497				499				490				513				526
Interest on long-term borrowings			798				848				1,039				1,155				1,428
Total interest expense			2,679				2,909				3,259				3,471				3,736
Net interest income			21,669				21,070				20,839				24,710				22,015
Provision for (recovery of) loan losses			381				276				1,100				(488	)			(2,439	)
Net interest income after provision for loan losses			21,288				20,794				19,739				25,198				24,454
Noninterest Income
Wealth management income			790				775				666				634				670
Service charges on deposit accounts			3,744				3,507				2,903				3,729				3,606
Other service charges and fees			1,974				2,005				2,008				2,108				1,852
Insurance commissions			1,650				1,559				2,127				1,442				1,695
Net impairment losses recognized in earnings			-				-				-				-				(219	)
Net (loss) gain on sale of securities			(39	)			213				(23	)			(1,691	)			320
Net FDIC indemnification asset amortization			(1,768	)			(1,846	)			(1,565	)			(813	)			(1,096	)
Net gain on branch divestiture			-				-				-				755				-
Other operating income			723				1,924				720				1,334				839
Total noninterest income			7,074				8,137				6,836				7,498				7,667
Noninterest Expense
Salaries and employee benefits			9,971				9,693				9,693				10,841				9,924
Occupancy expense of bank premises			1,443				1,427				1,534				1,513				1,469
Furniture and equipment			1,259				1,358				1,237				1,341				1,212
Amortization of intangible assets			281				279				277				255				179
FDIC premiums and assessments			377				389				415				361				419
FHLB debt prepayment fees			-				1,702				-				1,961				3,047
Merger, acquisition, and divestiture expense			-				-				86				865				285
Other operating expense			5,688				5,441				4,538				6,913				4,934
Total noninterest expense			19,019				20,289				17,780				24,050				21,469
Income before income taxes			9,343				8,642				8,795				8,646				10,652
Income tax expense			3,084				2,467				2,837				2,931				3,609
Net income			6,259				6,175				5,958				5,715				7,043
Dividends on preferred stock			-				-				105				227				228
Net income available to common shareholders		$	6,259			$	6,175			$	5,853			$	5,488			$	6,815
Basic earnings per common share		$	0.34			$	0.33			$	0.31			$	0.30			$	0.37
Diluted earnings per common share			0.34				0.33				0.31				0.29				0.36
Cash dividends per common share			0.14				0.13				0.13				0.13				0.13
Weighted average basic shares outstanding			18,470,348				18,831,742				18,633,574				18,403,959				18,402,764
Weighted average diluted shares outstanding			18,500,975				18,860,119				19,344,443				19,482,000				19,466,126

 

  

FIRST COMMUNITY BANCSHARES, INC.

RECONCILIATION OF GAAP NET INCOME TO CORE EARNINGS (Unaudited)

 

		Three Months Ended
		September 30,				June 30,				March 31,				December 31,				September 30,
(Amounts in thousands, except per share data)		2015				2015				2015				2014				2014
Net income, GAAP		$	6,259			$	6,175			$	5,958			$	5,715			$	7,043
Non-GAAP adjustments:
Net impairment losses recognized in earnings			-				-				-				-				219
Net loss (gain) on sale of securities			39				(213	)			23				1,691				(320	)
Net gain on branch divestiture			-				-				-				(755	)			-
FHLB debt prepayment fees			-				1,702				-				1,961				3,047
Merger, acquisition, and divestiture expense			-				-				86				865				285
Other noncore, nonrecurring items			(75	)			(930	)			(30	)			1,173				-
Total adjustments to core earnings			(36	)			559				79				4,935				3,231
Tax effect			(13	)			630				29				1,859				1,217
Core earnings, non-GAAP		$	6,236			$	6,104			$	6,008			$	8,791			$	9,057
Core return on average assets			1.00	%			0.96	%			0.94	%			1.28	%			1.41	%
Core return on average common equity			7.16	%			7.00	%			7.09	%			10.39	%			10.83	%
Core return on average tangible common equity			10.34	%			10.07	%			10.31	%			15.50	%			16.06	%
Core diluted earnings per common share		$	0.34			$	0.32			$	0.31			$	0.45			$	0.47

 

		Nine Months Ended
		September 30,
(Amounts in thousands, except per share data)		2015				2014
Net income, GAAP		$	18,392			$	19,775
Non-GAAP adjustments:
Net impairment losses recognized in earnings			-				737
Net gain on sale of securities			(151	)			(306	)
FHLB debt prepayment fees			1,702				3,047
Merger, acquisition, and divestiture expense			86				285
Other noncore, nonrecurring items			(1,035	)			(536	)
Total adjustments to core earnings			602				3,227
Tax effect			646				1,215
Core earnings, non-GAAP		$	18,348			$	21,787
Core return on average assets			0.97	%			1.13	%
Core return on average common equity			7.09	%			8.97	%
Core return on average tangible common equity			10.26	%			13.45	%
Core diluted earnings per common share		$	0.97			$	1.12

 

  

FIRST COMMUNITY BANCSHARES, INC.

EFFICIENCY RATIO CALCULATION (Unaudited)

 

		Three Months Ended
		September 30,				June 30,				March 31,				December 31,				September 30,
(Amounts in thousands)		2015				2015				2015				2014				2014
Noninterest expense, GAAP		$	18,600			$	20,289			$	17,780			$	24,050			$	21,469
Non-GAAP adjustments:
FHLB debt prepayment fees			-				(1,702	)			-				(1,961	)			(3,047	)
Merger, acquisition, and divestiture expense			-				-				(86	)			(865	)			(285	)
OREO expense and net loss			(1,220	)			(416	)			(327	)			(403	)			(580	)
Other noncore, nonrecurring items			15				(213	)			-				(1,573	)			-
Adjusted noninterest expense			17,395				17,958				17,367				19,248				17,557
Net interest income, GAAP			21,669				21,070				20,839				24,710				22,015
Noninterest income, GAAP			6,655				8,137				6,836				7,498				7,667
Non-GAAP adjustments:
Tax equivalency adjustment			565				1,249				588				613				582
Net impairment losses recognized in earnings			-				-				-				-				219
Net loss (gain) on sale of securities			39				(213	)			23				1,691				(320	)
Net gain on branch divestiture			-				-				-				(755	)			-
Other noncore, nonrecurring items			(60	)			(1,143	)			(30	)			(400	)			-
Adjusted net interest and noninterest income			28,868				29,100				28,256				33,357				30,163
Non-GAAP efficiency ratio			60.26	%			61.71	%			61.46	%			57.70	%			58.21	%
GAAP efficiency ratio			65.67	%			69.47	%			64.25	%			74.67	%			72.33	%

 

		Nine Months Ended
		September 30,
(Amounts in thousands)		2015				2014
Noninterest expense, GAAP		$	56,669			$	58,812
Non-GAAP adjustments:
FHLB debt prepayment fees			(1,702	)			(3,047	)
Merger, acquisition, and divestiture expense			(86	)			(1,691	)
OREO expense and net loss			(1,963	)			(285	)
Other noncore, nonrecurring items			(198	)			-
Adjusted noninterest expense			52,720				53,789
Net interest income, GAAP			63,578				66,108
Noninterest income, GAAP			21,628				22,505
Non-GAAP adjustments:
Tax equivalency adjustment			2,402				1,943
Net impairment losses recognized in earnings			-				737
Net gain on sale of securities			(151	)			(306	)
Other noncore, nonrecurring items			(1,233	)			(536	)
Adjusted net interest and noninterest income			86,224				90,451
Non-GAAP efficiency ratio			61.14	%			59.47	%
GAAP efficiency ratio			66.51	%			66.37	%

 

  

FIRST COMMUNITY BANCSHARES, INC.

CONDENSED CONSOLIDATED QUARTERLY BALANCE SHEETS (Unaudited)

 

		As of the Quarter Ended
		September 30,				June 30,				March 31,				December 31,				September 30,
(Amounts in thousands)		2015				2015				2015				2014				2014
Cash and due from banks		$	33,555			$	38,200			$	36,222			$	39,450			$	44,703
Federal funds sold			27,118				53,023				169,422				196,873				55,503
Interest-bearing deposits in banks			1,351				1,379				1,380				1,337				5,716
Total cash and cash equivalents			62,024				92,602				207,024				237,660				105,922
Securities available for sale			382,212				376,191				351,454				326,117				351,693
Securities held to maturity			72,596				72,652				72,897				57,948				31,029
Loans held for sale			523				913				1,174				1,792				1,150
Loans held for investment, net of unearned income:
Covered under loss share agreements			90,203				102,634				112,724				122,240				126,611
Not covered under loss share agreements			1,600,271				1,564,655				1,558,310				1,567,176				1,636,181
Less allowance for loan losses			(20,127	)			(20,258	)			(20,252	)			(20,227	)			(21,159	)
Loans, net			1,670,870				1,647,944				1,651,956				1,670,981				1,742,783
FDIC indemnification asset			22,049				23,653				26,053				27,900				29,745
Property, plant, and equipment, net			53,442				54,112				54,955				55,844				59,283
Other real estate owned:
Covered under loss share agreements			4,079				5,382				5,834				6,324				7,620
Not covered under loss share agreements			5,088				7,434				7,032				6,638				5,612
Interest receivable			5,910				6,119				6,188				6,315				6,346
Goodwill			100,810				100,810				100,810				100,722				105,657
Intangible assets			5,583				5,865				6,144				6,422				2,334
Other assets			93,453				99,034				95,497				105,065				102,103
Total assets		$	2,478,116			$	2,491,798			$	2,585,844			$	2,607,936			$	2,550,127
Deposits:
Noninterest-bearing demand		$	442,021			$	424,438			$	433,422			$	417,729			$	397,523
Interest-bearing demand			343,303				329,583				341,300				353,874				347,589
Savings			526,627				528,003				533,589				525,478				519,902
Time			590,951				638,197				682,878				703,678				667,261
Total deposits			1,902,902				1,920,221				1,991,189				2,000,759				1,932,275
Interest, taxes, and other liabilities			25,356				23,852				24,203				26,062				25,131
Securities sold under agreements to repurchase			124,076				122,158				116,302				121,742				114,439
FHLB borrowings			65,000				65,000				90,000				90,000				115,000
Other borrowings			15,955				15,999				15,999				17,999				16,047
Total liabilities			2,133,289				2,147,230				2,237,693				2,256,562				2,202,892
Preferred stock			-				-				-				15,151				15,151
Common stock			21,382				21,382				21,382				20,500				20,500
Additional paid-in capital			227,621				227,616				227,782				215,873				215,729
Retained earnings			152,046				148,378				144,656				141,206				138,111
Treasury stock, at cost			(52,484	)			(46,610	)			(41,078	)			(35,751	)			(35,808	)
Accumulated other comprehensive loss			(3,738	)			(6,198	)			(4,591	)			(5,605	)			(6,448	)
Total stockholders' equity			344,827				344,568				348,151				351,374				347,235
Total liabilities and stockholders' equity		$	2,478,116			$	2,491,798			$	2,585,844			$	2,607,936			$	2,550,127
Shares outstanding at period-end			18,313,425				18,641,966				18,965,274				18,406,219				18,402,919
Book value per common share at period-end(1)		$	18.83			$	18.48			$	18.36			$	18.06			$	17.85
Tangible book value per common share at period-end(2)		$	13.02			$	12.76			$	12.72			$	12.56			$	12.30

 

(1)

Book value per common share is defined as stockholders' equity divided by as-converted common shares outstanding.

(2)

Tangible book value per common share is defined as stockholders' equity less goodwill and other intangibles divided by as-converted common shares outstanding.

 

  

FIRST COMMUNITY BANCSHARES, INC.

SELECTED CREDIT QUALITY INFORMATION (Unaudited)

 

		As of and for the Quarter Ended
		September 30,				June 30,				March 31,				December 31,				September 30,
(Amounts in thousands)		2015				2015				2015				2014				2014
Allowance for Loan Losses
Beginning balance		$	20,258			$	20,252			$	20,227			$	21,159			$	23,911
Removal of loans transferred			-				-				-				(682	)			-
Provision for (recovery of) loan losses charged to operations			381				276				1,100				(488	)			(2,439	)
(Recovery of) provision for loan losses recorded through the FDIC indemnification asset			(75	)			-				46				29				(110	)
Charge-offs			(689	)			(673	)			(1,578	)			(1,362	)			(1,118	)
Recoveries			252				403				457				1,571				915
Net (charge-offs) recoveries			(437	)			(270	)			(1,121	)			209				(203	)
Ending balance		$	20,127			$	20,258			$	20,252			$	20,227			$	21,159
Summary of Asset Quality
Non-covered nonperforming
Nonaccrual loans		$	17,100			$	15,936			$	15,387			$	10,556			$	11,480
Accruing loans past due 90 days or more			3				-				-				-				-
Troubled debt restructurings ("TDRs")(1)			74				-				-				2,726				3,450
Total non-covered nonperforming loans			17,177				15,936				15,387				13,282				14,930
OREO not covered under FDIC loss share agreements			5,088				7,434				7,032				6,638				5,612
Total non-covered nonperforming assets		$	22,265			$	23,370			$	22,419			$	19,920			$	20,542
Covered nonperforming
Nonaccrual loans		$	815			$	1,062			$	2,780			$	2,438			$	1,131
Accruing loans past due 90 days or more			-				-				60				-				-
Total covered nonperforming loans			815				1,062				2,840				2,438				1,131
OREO covered under FDIC loss share agreements			4,079				5,382				5,834				6,324				7,620
Total covered nonperforming assets		$	4,894			$	6,444			$	8,674			$	8,762			$	8,751
Additional Information
Performing TDRs(2)		$	13,965			$	13,841			$	14,025			$	11,808			$	11,701
Total TDRs(3)			14,039				13,841				14,025				14,534				15,151
Asset Quality Ratios
Non-covered
Nonperforming loans to total loans			1.07	%			1.02	%			0.99	%			0.85	%			0.91	%
Nonperforming assets to total assets			0.93	%			0.98	%			0.91	%			0.80	%			0.85	%
Non-PCI allowance to nonperforming loans			117.06	%			126.41	%			130.88	%			151.85	%			140.35	%
Non-PCI allowance to total loans			1.26	%			1.29	%			1.29	%			1.29	%			1.28	%
Annualized net charge-offs to average loans			0.11	%			0.07	%			0.29	%			NM				0.05	%
Non-covered and covered
Nonperforming loans to total loans			1.06	%			1.02	%			1.09	%			0.93	%			0.91	%
Nonperforming assets to total assets			1.10	%			1.20	%			1.20	%			1.10	%			1.15	%
Nonperforming assets to total loans and OREO			1.60	%			1.77	%			1.85	%			1.68	%			1.65	%
Allowance for loan losses to nonperforming loans			111.87	%			119.18	%			111.11	%			128.67	%			131.74	%
Allowance for loan losses to total loans			1.19	%			1.22	%			1.21	%			1.20	%			1.20	%

 

(1)

Accruing TDRs restructured within the past six months or nonperforming

(2)

Accruing TDRs with six months or more of satisfactory payment performance

(3)

Accruing nonperforming and performing TDRs

 

  

FIRST COMMUNITY BANCSHARES, INC.

AVERAGE BALANCE SHEETS AND NET INTEREST INCOME ANALYSIS (Unaudited)

 

		Three Months Ended September 30,
		2015												2014
		Average								Average Yield/				Average								Average Yield/
(Amounts in thousands)		Balance				Interest(1)				Rate(1)				Balance				Interest(1)				Rate(1)
Assets
Earning assets
Loans(2)		$	1,675,787			$	22,291				5.28	%		$	1,766,769			$	23,460				5.27	%
Securities available-for-sale			382,099				2,394				2.49	%			376,778				2,811				2.96	%
Securities held-to-maturity			72,624				195				1.07	%			24,189				73				1.20	%
Interest-bearing deposits			48,750				33				0.27	%			45,826				40				0.35	%
Total earning assets			2,179,260				24,913				4.53	%			2,213,562				26,384				4.73	%
Other assets			305,331												331,771
Total assets		$	2,484,591											$	2,545,333
Liabilities
Interest-bearing deposits
Demand deposits		$	335,831			$	52				0.06	%		$	349,013			$	49				0.06	%
Savings deposits			532,445				83				0.06	%			521,334				121				0.09	%
Time deposits			613,598				1,249				0.81	%			675,454				1,612				0.95	%
Total interest-bearing deposits			1,481,874				1,384				0.37	%			1,545,801				1,782				0.46	%
Borrowings
Federal funds purchased			7				-				0.00	%			69				-				0.00	%
Retail repurchase agreements			72,740				16				0.09	%			69,565				23				0.13	%
Wholesale repurchase agreements			50,000				473				3.75	%			50,000				474				3.76	%
FHLB advances and other borrowings			80,985				806				3.95	%			142,115				1,457				4.07	%
Total borrowings			203,732				1,295				2.52	%			261,749				1,954				2.96	%
Total interest-bearing liabilities			1,685,606				2,679				0.63	%			1,807,550				3,736				0.82	%
Noninterest-bearing demand deposits			433,164												371,877
Other liabilities			20,028												18,888
Total liabilities			2,138,798												2,198,315
Stockholders' equity			345,793												347,018
Total liabilities and stockholders' equity		$	2,484,591											$	2,545,333
Net interest income, FTE						$	22,234											$	22,648
Net interest rate spread											3.90	%											3.91	%
Net interest margin											4.05	%											4.06	%

 

(1)

Fully taxable equivalent ("FTE") basis based on the federal statutory rate of 35%

(2)

Nonaccrual loans are included in average balances; however, no related interest income is recorded during the period of nonaccrual.

 

  

FIRST COMMUNITY BANCSHARES, INC.

AVERAGE BALANCE SHEETS AND NET INTEREST INCOME ANALYSIS (Unaudited)

 

		Nine Months Ended September 30,
		2015												2014
		Average								Average Yield/				Average								Average Yield/
(Amounts in thousands)		Balance				Interest(1)				Rate(1)				Balance				Interest(1)				Rate(1)
Assets
Earning assets
Loans(2)		$	1,675,118			$	66,107				5.28	%		$	1,744,422			$	69,818				5.35	%
Securities available-for-sale			358,690				7,225				2.69	%			434,462				9,808				3.02	%
Securities held-to-maturity			70,454				577				1.09	%			12,858				127				1.32	%
Interest-bearing deposits			125,295				246				0.26	%			40,587				117				0.39	%
Total earning assets			2,229,557				74,155				4.45	%			2,232,329				79,870				4.78	%
Other assets			311,825												337,298
Total assets		$	2,541,382											$	2,569,627
Liabilities
Interest-bearing deposits
Demand deposits		$	342,639			$	156				0.06	%		$	363,780			$	154				0.06	%
Savings deposits			532,641				289				0.07	%			525,269				387				0.10	%
Time deposits			655,314				4,231				0.86	%			695,585				4,964				0.95	%
Total interest-bearing deposits			1,530,594				4,676				0.41	%			1,584,634				5,505				0.46	%
Borrowings
Federal funds purchased			2				-				0.00	%			1,192				3				0.34	%
Retail repurchase agreements			70,325				53				0.10	%			73,669				74				0.13	%
Wholesale repurchase agreements			50,000				1,405				3.76	%			50,000				1,405				3.76	%
FHLB advances and other borrowings			91,305				2,713				3.97	%			158,009				4,832				4.09	%
Total borrowings			211,632				4,171				2.64	%			282,870				6,314				2.98	%
Total interest-bearing liabilities			1,742,226				8,847				0.68	%			1,867,504				11,819				0.85	%
Noninterest-bearing demand deposits			429,661												343,568
Other liabilities			20,472												18,758
Total liabilities			2,192,359												2,229,830
Stockholders' equity			349,023												339,797
Total liabilities and stockholders' equity		$	2,541,382											$	2,569,627
Net interest income, FTE						$	65,308											$	68,051
Net interest rate spread											3.77	%											3.93	%
Net interest margin											3.92	%											4.08	%

 

(1)

FTE basis based on the federal statutory rate of 35%

(2)

Nonaccrual loans are included in average balances; however, no related interest income is recorded during the period of nonaccrual.

 

  

FIRST COMMUNITY BANCSHARES, INC.

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

 

		Three Months Ended September 30,
		2015								2014
						Average Yield/								Average Yield/
(Amounts in thousands)		Interest(1)				Rate(1)				Interest(1)				Rate(1)
Earning assets
Loans(2)		$	22,291				5.28	%		$	23,460				5.27	%
Accretion income			2,930								2,813
Less: cash accretion income			903								1,367
Non-cash accretion income			2,027								1,446
Loans, excluding non-cash accretion income			20,264				4.80	%			22,014				4.94	%
Other earning assets			2,622				2.07	%			2,924				2.60	%
Total earning assets			22,886				4.17	%			24,938				4.47	%
Total interest-bearing liabilities			2,679				0.63	%			3,736				0.82	%
Net interest income, FTE		$	20,207							$	21,202
Net interest rate spread							3.54	%							3.65	%
Net interest margin							3.68	%							3.80	%

 

(1)

FTE basis based on the federal statutory rate of 35%

(2)

Nonaccrual loans are included in average balances; however, no related interest income is recorded during the period of nonaccrual.

 

		Nine Months Ended June 30,
		2015								2014
						Average Yield/								Average Yield/
(Amounts in thousands)		Interest(1)				Rate(1)				Interest(1)				Rate(1)
Earning assets
Loans(2)		$	66,107				5.28	%		$	69,818				5.35	%
Accretion income			8,765								8,724
Less: cash accretion income			3,326								3,214
Non-cash accretion income			5,439								5,510
Loans, excluding non-cash accretion income			60,668				4.84	%			64,308				4.93	%
Other earning assets			8,048				1.94	%			10,052				2.75	%
Total earning assets			68,716				4.12	%			74,360				4.45	%
Total interest-bearing liabilities			8,847				0.68	%			11,819				0.85	%
Net interest income, FTE		$	59,869							$	62,541
Net interest rate spread							3.44	%							3.60	%
Net interest margin							3.59	%							3.75	%

 

(1)

FTE basis based on the federal statutory rate of 35%

(2)

Nonaccrual loans are included in average balances; however, no related interest income is recorded during the period of nonaccrual.