FIRST COMMUNITY BANKSHARES INC /VA/ - FORM 8-K - EX-99.1 - EXHIBIT 99.1

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Exhibit 99.1


NEWS RELEASE
FOR IMMEDIATE RELEASE:		FOR MORE INFORMATION, CONTACT:
April 25, 2017		David D. Brown
		(276) 326-9000

First Community Bancshares, Inc. Announces First Quarter 2017 Results and Quarterly Dividend

Bluefield, Virginia – First Community Bancshares, Inc. (NASDAQ: FCBC) (www.fcbinc.com) (the “Company”) today reported its unaudited results of operations and other financial information for the quarter ended March 31, 2017. The Company reported net income available to common shareholders of $6.20 million, or $0.36 per diluted common share for the quarter ended March 31, 2017, which represents a 5.88% increase in per share diluted earnings compared to the same quarter of 2016.

The Company also announced today that the Board of Directors declared a quarterly cash dividend to common shareholders of sixteen cents ($0.16) per common share, which represents an increase of 14.29% over the first quarter of 2016. The quarterly dividend is payable to common shareholders of record on May 5, 2017, and is expected to be paid on or about May 19, 2017. The current year marks the 32^nd consecutive year of cash dividends paid to stockholders.

First Quarter 2017 Highlights

●	Income Statement

Net income available to common shareholders increased $118 thousand, or 1.94%, to $6.20 million compared to the same quarter of 2016.

Diluted earnings per share increased $0.02, or 5.88%, to $0.36 compared to the same quarter of 2016.

Core, non-GAAP diluted earnings per common share increased $0.03, or 9.09%, to $0.36 compared to the same quarter of 2016.

Net interest margin increased 16 basis points to 4.17%, and normalized net interest margin increased 21 basis points to 3.95% compared to the same quarter of 2016.

●	Balance Sheet

Book value per common share increased $0.23 to $20.18 compared to December 31, 2016.

On January 9, 2017, the Company redeemed all of its previously issued trust preferred securities totaling $15.46 million. The callable trust preferred securities bore an interest rate of three-month LIBOR plus 2.95% with a maturity date of October 8, 2033.

The Company and its subsidiary bank both significantly exceed regulatory “well capitalized” targets as of March 31, 2017.

Non-GAAP Financial Measures

The Company prepares its financial statements in accordance with generally accepted accounting principles in the United States (“GAAP”). This press release also refers to certain non-GAAP financial measures that the Company believes provide investors with important information, when used in conjunction with results presented in accordance with GAAP, regarding its operational performance. The Company’s non-GAAP financial measures presented in this release include core earnings, the efficiency ratio, tangible book value per common share, average tangible common equity, and normalized net interest margin. Management believes that core earnings provide the Company and investors a valuable tool to evaluate the Company’s financial results. Management believes that the efficiency ratio provides important information about the Company’s operating expense control and efficiency of operations. Management also believes this ratio focuses attention on the core operating performance of the Company over time and is highly useful in comparing period-to-period operating performance of core business operations. The efficiency ratio used by the Company may not be comparable to efficiency ratios reported by other financial institutions. The reconciliations of these measures to GAAP measures are provided within this news release.

About First Community Bancshares, Inc.

First Community Bancshares, Inc., a financial holding company headquartered in Bluefield, Virginia, provides banking products and services through its wholly owned subsidiary First Community Bank. First Community Bank operated 45 branch banking locations in Virginia, West Virginia, North Carolina, and Tennessee as of March 31, 2017. First Community Bank provides insurance services through First Community Insurance Services, which operated 6 in-branch locations in Virginia and West Virginia as of March 31, 2017, and offers wealth management and investment advice through its Trust Division and First Community Wealth Management, which collectively managed $906 million in combined assets as of March 31, 2017. The Company reported consolidated assets of $2.43 billion as of March 31, 2017. The Company’s common stock is listed on the NASDAQ Global Select Market under the trading symbol, “FCBC”. 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.

Financial Performance

CONDENSED CONSOLIDATED STATEMENTS OF INCOME (Unaudited)

	Three Months Ended
	March 31,			December 31,			September 30,			June 30,			March 31,
(Amounts in thousands, except share and per share data)	2017			2016			2016			2016			2016
Interest income
Interest and fees on loans	$	21,827		$	21,956		$	21,952		$	22,237		$	21,573
Interest on securities		1,206			1,362			1,643			1,891			1,957
Interest on deposits in banks		159			98			26			9			20
Total interest income		23,192			23,416			23,621			24,137			23,550
Interest expense
Interest on deposits		1,166			1,145			1,133			1,087			1,114
Interest on borrowings		885			1,314			1,367			1,359			1,325
Total interest expense		2,051			2,459			2,500			2,446			2,439
Net interest income		21,141			20,957			21,121			21,691			21,111
Provision for (recovery of) loan losses		492			500			(1,154	)		722			1,187
Net interest income after provision (recovery)		20,649			20,457			22,275			20,969			19,924
Total noninterest income		5,691			6,238			5,895			7,030			7,903
Total noninterest expense		17,083			16,653			18,557			18,722			18,814
Income before income taxes		9,257			10,042			9,613			9,277			9,013
Income tax expense		3,055			3,638			3,230			3,022			2,929
Net income		6,202			6,404			6,383			6,255			6,084
Dividends on preferred stock		-			-			-			-			-
Net income available to common shareholders	$	6,202		$	6,404		$	6,383		$	6,255		$	6,084

Earnings per common share
Basic	$	0.36		$	0.38		$	0.37		$	0.36		$	0.34
Diluted		0.36			0.38			0.37			0.36			0.34
Cash dividends per common share		0.16			0.16			0.16			0.14			0.14
Weighted average shares outstanding
Basic		16,998,125			16,891,010			17,031,074			17,414,320			17,859,197
Diluted		17,072,174			17,043,869			17,083,526			17,462,845			17,892,531
Performance ratios
Return on average assets		1.06	%		1.05	%		1.03	%		1.02	%		0.99	%
Return on average common equity		7.35	%		7.49	%		7.58	%		7.47	%		7.15	%
Return on average tangible common equity⁽¹⁾		10.50	%		10.75	%		11.07	%		10.88	%		10.34	%

(1)

A non-GAAP financial measure defined as average stockholders’ equity less average goodwill, other intangibles, and preferred stock liquidation preference

RECONCILIATION OF GAAP NET INCOME TO CORE EARNINGS (Unaudited)

	Three Months Ended
	March 31,			December 31,			September 30,			June 30,			March 31,
	2017			2016			2016			2016			2016
(Amounts in thousands, except per share data)
Net income, GAAP	$	6,202		$	6,404		$	6,383		$	6,255		$	6,084
Non-GAAP adjustments:
Net gain on divestitures		-			(619	)		(3,065	)		-			-
Allowance reversal for sold loans		-			-			(1,354	)		-			-
Merger, acquisition, and divestiture expense		-			55			226			410			39
Net (gain) loss on sale of securities		-			(388	)		(25	)		79			(1	)
Net impairment losses		-			-			4,635			11			-
Other non-core items		(18	)		(48	)		(264	)		-			(240	)
Total adjustments to core earnings		(18	)		(1,000	)		153			500			(202	)
Tax effect		(7	)		(708	)		56			184			(74	)
Core earnings, non-GAAP⁽¹⁾	$	6,191		$	6,112		$	6,480		$	6,571		$	5,956

Core diluted earnings per common share	$	0.36		$	0.36		$	0.38		$	0.38		$	0.33
Performance ratios
Core return on average assets		1.06	%		1.01	%		1.05	%		1.07	%		0.97	%
Core return on average common equity		7.33	%		7.15	%		7.70	%		7.85	%		7.00	%
Core return on average tangible common equity⁽²⁾		10.48	%		10.26	%		11.24	%		11.43	%		10.12	%

(1)	Excludes gains, losses, and impairment losses on securities; goodwill and intangible impairment; taxes; and other non-recurring income and expense items from net income
(2)	A non-GAAP financial measure defined as average stockholders’ equity less average goodwill, other intangibles, and preferred stock liquidation preference

Net Interest Income and Margin

AVERAGE BALANCE SHEETS AND NET INTEREST INCOME ANALYSIS (Unaudited)

	Three Months Ended March 31,
	2017							2016
	Average				Average Yield/			Average				Average Yield/
(Amounts in thousands)	Balance		Interest⁽¹⁾		Rate⁽¹⁾			Balance		Interest⁽¹⁾		Rate⁽¹⁾
Assets
Earning assets
Loans⁽²⁾	$	1,838,837	$	21,895		4.83	%	$	1,730,401	$	21,599		5.02	%
Securities available for sale		161,738		1,483		3.72	%		354,582		2,268		2.57	%
Securities held to maturity		47,112		152		1.31	%		72,512		194		1.08	%
Interest-bearing deposits		55,754		159		1.16	%		15,591		20		0.52	%
Total earning assets		2,103,441		23,689		4.57	%		2,173,086		24,081		4.45	%
Other assets		270,597							297,156
Total assets	$	2,374,038						$	2,470,242

Liabilities and stockholders' equity
Interest-bearing deposits
Demand deposits	$	381,050	$	102		0.11	%	$	342,524	$	57		0.07	%
Savings deposits		525,573		36		0.03	%		535,769		66		0.05	%
Time deposits		515,506		1,028		0.81	%		533,635		991		0.75	%
Total interest-bearing deposits		1,422,129		1,166		0.33	%		1,411,928		1,114		0.32	%
Borrowings
Federal funds purchased		-		-		-			3,424		5		0.59	%
Retail repurchase agreements		66,947		11		0.07	%		77,993		13		0.07	%
Wholesale repurchase agreements		25,000		199		3.23	%		50,000		468		3.76	%
FHLB advances and other borrowings		66,618		675		4.11	%		108,013		839		3.12	%
Total borrowings		158,565		885		2.26	%		239,430		1,325		2.23	%
Total interest-bearing liabilities		1,580,694		2,051		0.53	%		1,651,358		2,439		0.59	%
Noninterest-bearing demand deposits		425,540							448,849
Other liabilities		25,477							27,784
Total liabilities		2,031,711							2,127,991
Stockholders' equity		342,327							342,251
Total liabilities and stockholders' equity	$	2,374,038						$	2,470,242
Net interest income, FTE			$	21,638						$	21,642
Net interest rate spread						4.04	%						3.86	%
Net interest margin						4.17	%						4.01	%

(1)	Fully taxable equivalent ("FTE") basis based on the federal statutory rate of 35%
(2)	Nonaccrual loans are included in average balances; however, no related interest income is recorded during the period of nonaccrual.

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

	Three Months Ended March 31,
	2017					2016
(Amounts in thousands)	Interest⁽¹⁾		Average Yield/ Rate⁽¹⁾			Interest⁽¹⁾		Average Yield/ Rate⁽¹⁾
Earning assets
Loans⁽²⁾	$	21,895		4.83	%	$	21,599		5.02	%
Accretion income		1,784					2,252
Less: cash accretion income		650					805
Non-cash accretion income		1,134					1,447
Loans, normalized⁽³⁾		20,761		4.58	%		20,152		4.68	%
Other earning assets		1,794		2.75	%		2,482		2.26	%
Total earning assets		22,555		4.35	%		22,634		4.18	%
Total interest-bearing liabilities		2,051		0.53	%		2,439		0.59	%
Net interest income, FTE⁽³⁾	$	20,504				$	20,195
Net interest rate spread, normalized⁽³⁾				3.82	%				3.60	%
Net interest margin, normalized⁽³⁾				3.95	%				3.74	%

(1)	FTE basis based on the federal statutory rate of 35%
(2)	Nonaccrual loans are included in average balances; however, no related interest income is recorded during the period of nonaccrual.
(3)	Normalized totals are non-GAAP financial measures that exclude non-cash loan interest accretion related to PCI loans.

Noninterest Income and Expense

CONDENSED QUARTERLY STATEMENTS OF INCOME (Unaudited)

	Three Months Ended
	March 31,			December 31,			September 30,			June 30,			March 31,
(Amounts in thousands)	2017			2016			2016			2016			2016
Noninterest income
Wealth management	$	790		$	681		$	653		$	810		$	684
Service charges on deposits		3,113			3,442			3,494			3,361			3,291
Other service charges and fees		2,078			2,014			2,024			2,054			2,010
Insurance commissions		373			59			1,592			1,600			2,191
Net impairment losses recognized in earnings		-			-			(4,635	)		(11	)		-
Net gain (loss) on sale of securities		-			388			25			(79	)		1
Net FDIC indemnification asset amortization		(1,332	)		(1,618	)		(1,369	)		(1,328	)		(1,159	)
Net gain on divestitures		-			619			3,065			-			-
Other operating income		669			653			1,046			623			885
Total noninterest income		5,691			6,238			5,895			7,030			7,903
Noninterest expense
Salaries and employee benefits		8,884			9,411			9,828			10,198			10,475
Occupancy expense		1,248			1,158			1,249			1,359			1,531
Furniture and equipment expense		1,091			1,070			1,066			1,109			1,096
Amortization of intangibles		261			265			316			277			278
FDIC premiums and assessments		244			274			363			372			374
Merger, acquisition, and divestiture expense		-			55			226			410			39
Other operating expense		5,355			4,420			5,509			4,997			5,021
Total noninterest expense		17,083			16,653			18,557			18,722			18,814

Efficiency Ratio

EFFICIENCY RATIO CALCULATION (Unaudited)

	Three Months Ended
	March 31,			December 31,			September 30,			June 30,			March 31,
	2017			2016			2016			2016			2016
(Amounts in thousands)
Noninterest expense, GAAP	$	17,083		$	16,653		$	18,557		$	18,722		$	18,814
Non-GAAP adjustments
Merger, acquisition, and divestiture expense		-			(55	)		(226	)		(410	)		(39	)
OREO expense and net loss		(328	)		(184	)		(278	)		(247	)		(711	)
Other non-core items		-			8			(168	)		(30	)		(174	)
Adjusted noninterest expense		16,755			16,422			17,885			18,035			17,890

Net interest income, GAAP		21,141			20,957			21,121			21,691			21,111
Noninterest income, GAAP		5,691			6,238			5,895			7,030			7,903
Non-GAAP adjustments
Tax equivalency adjustment		497			520			509			521			531
Net impairment losses		-			-			4,635			11			-
Net (gain) loss on sale of securities		-			(388	)		(25	)		79			(1	)
Net gain on divestitures		-			(619	)		(3,065	)		-			-
Other non-core items		(18	)		(40	)		(432	)		(30	)		(414	)
Adjusted net interest and noninterest income		27,311			26,668			28,638			29,302			29,130

Non-GAAP efficiency ratio⁽¹⁾		61.35	%		61.58	%		62.45	%		61.55	%		61.41	%
GAAP efficiency ratio		63.67	%		61.24	%		68.69	%		65.19	%		64.84	%

(1)

A non-GAAP financial measure computed by dividing adjusted noninterest expense by the sum of tax equivalent net interest income and adjusted noninterest income

Balance Sheet and Capital

CONDENSED CONSOLIDATED QUARTERLY BALANCE SHEETS (Unaudited)

	March 31,			December 31,			September 30,			June 30,			March 31,
(Amounts in thousands, except per share data)	2017			2016			2016			2016			2016
Assets
Total cash and cash equivalents	$	152,851		$	76,307		$	65,929		$	44,301		$	39,587
Securities available for sale		158,685			165,579			220,856			322,699			338,469
Securities held to maturity		47,092			47,133			72,182			72,239			72,485
Loans held for investment, net of unearned income
Non-covered		1,784,371			1,795,954			1,774,547			1,733,398			1,685,891
Covered		51,412			56,994			61,837			68,585			76,538
Less allowance for loan losses		(18,458	)		(17,948	)		(19,633	)		(21,099	)		(20,467	)
Loans held for investment, net		1,817,325			1,835,000			1,816,751			1,780,884			1,741,962
FDIC indemnification asset		9,931			12,173			14,332			16,431			18,787
Premises and equipment, net		50,057			50,085			50,564			50,199			50,799
Other real estate owned, non-covered		4,477			5,109			4,052			4,187			5,313
Other real estate owned, covered		241			276			2,437			2,017			2,279
Interest receivable		5,059			5,553			5,498			6,115			5,968
Goodwill		95,779			95,779			101,776			100,486			100,486
Other intangible assets		6,947			7,207			7,964			4,688			4,965
Other assets		82,069			86,197			87,932			91,082			89,187
Total assets	$	2,430,513		$	2,386,398		$	2,450,273		$	2,495,328		$	2,470,287

Liabilities
Deposits
Noninterest-bearing	$	467,677		$	427,705		$	473,509		$	451,003		$	453,336
Interest-bearing		1,438,917			1,413,633			1,388,390			1,373,412			1,421,329
Total deposits		1,906,594			1,841,338			1,861,899			1,824,415			1,874,665
Federal funds purchased		-			-			-			42,000			18,000
Securities sold under agreements to repurchase		90,653			98,005			118,532			113,392			134,661
FHLB borrowings		65,000			65,000			90,000			140,000			65,000
Other borrowings		244			15,708			15,707			15,756			15,756
Interest, taxes, and other liabilities		24,618			27,290			26,599			25,553			24,576
Total liabilities		2,087,109			2,047,341			2,112,737			2,161,116			2,132,658

Stockholders' equity
Common stock		21,382			21,382			21,382			21,382			21,382
Additional paid-in capital		228,176			228,142			227,884			227,791			227,725
Retained earnings		173,860			170,377			166,689			163,030			159,223
Treasury stock, at cost		(78,533	)		(78,833	)		(78,789	)		(74,974	)		(64,968	)
Accumulated other comprehensive (loss) income		(1,481	)		(2,011	)		370			(3,017	)		(5,733	)
Total stockholders' equity		343,404			339,057			337,536			334,212			337,629
Total liabilities and stockholders' equity	$	2,430,513		$	2,386,398		$	2,450,273		$	2,495,328		$	2,470,287

Shares outstanding at period-end		17,013,185			16,994,208			16,988,972			17,155,322			17,631,011
Book value per common share⁽¹⁾	$	20.18		$	19.95		$	19.87		$	19.48		$	19.15
Tangible book value per common share⁽²⁾		14.15			13.89			13.41			13.35			13.17

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

Asset Quality

SELECTED CREDIT QUALITY INFORMATION (Unaudited)

	March 31,			December 31,			September 30,			June 30,			March 31,
(Amounts in thousands)	2017			2016			2016			2016			2016
Allowance for Loan Losses
Beginning balance	$	17,948		$	19,633		$	21,099		$	20,467		$	20,233
Provision for (recovery of) loan losses charged to operations		492			500			(1,154	)		722			1,187
(Recovery of) provision for loan losses recorded through the FDIC indemnification asset		-			-			-			(10	)		9
Charge-offs		(357	)		(2,485	)		(772	)		(691	)		(1,228	)
Recoveries		375			300			460			611			266
Net recoveries (charge-offs)		18			(2,185	)		(312	)		(80	)		(962	)
Ending balance	$	18,458		$	17,948		$	19,633		$	21,099		$	20,467

Nonperforming Assets
Non-covered nonperforming assets
Nonaccrual loans	$	18,537		$	15,854		$	17,487		$	16,626		$	16,196
Accruing loans past due 90 days or more		20			-			62			64			243
Troubled debt restructurings ("TDRs")⁽¹⁾		-			114			115			115			158
Total non-covered nonperforming loans		18,557			15,968			17,664			16,805			16,597
OREO		4,477			5,109			4,052			4,187			5,313
Total non-covered nonperforming assets	$	23,034		$	21,077		$	21,716		$	20,992		$	21,910

Covered nonperforming assets
Nonaccrual loans	$	918		$	608		$	688		$	680		$	1,955
Total covered nonperforming loans		918			608			688			680			1,955
OREO		241			276			2,437			2,017			2,279
Total covered nonperforming assets	$	1,159		$	884		$	3,125		$	2,697		$	4,234

Additional Information
Performing TDRs⁽²⁾	$	8,593		$	12,838		$	13,336		$	13,562		$	13,474
Total TDRs⁽³⁾		8,593			12,952			13,451			13,677			13,632

Non-covered ratios
Nonperforming loans to total loans		1.04	%		0.89	%		1.00	%		0.97	%		0.98	%
Nonperforming assets to total assets		0.97	%		0.90	%		0.91	%		0.87	%		0.92	%
Non-PCI allowance to nonperforming loans		99.40	%		112.32	%		111.08	%		125.48	%		123.17	%
Non-PCI allowance to total loans		1.03	%		1.00	%		1.11	%		1.22	%		1.21	%
Annualized net charge-offs to average loans		0.00	%		0.49	%		0.07	%		0.02	%		0.23	%

Total ratios
Nonperforming loans to total loans		1.06	%		0.89	%		1.00	%		0.97	%		1.05	%
Nonperforming assets to total assets		1.00	%		0.92	%		1.01	%		0.95	%		1.06	%
Allowance for loan losses to nonperforming loans		94.78	%		108.28	%		106.98	%		120.67	%		110.32	%
Allowance for loan losses to total loans		1.01	%		0.97	%		1.07	%		1.17	%		1.16	%
Annualized net charge-offs to average loans		0.00	%		0.47	%		0.07	%		0.02	%		0.22	%

(1)	Accruing TDRs restructured within the past six months or nonperforming
(2)	Accruing TDRs with six months or more of satisfactory payment performance
(3)	Accruing total TDRs

FIRST COMMUNITY BANKSHARES INC /VA/ - FORM 8-K - EX-99.1 - EXHIBIT 99.1 - April 26, 2017

Attached files

FIRST COMMUNITY BANKSHARES INC /VA/ Reports