BLUEFIELD, Va., Oct. 30, 2013 (GLOBE NEWSWIRE) -- First Community Bancshares, Inc. (Nasdaq:FCBC) (www.fcbinc.com) (the "Company") today reported net income for the quarter and nine months ended September 30, 2013, of $5.41 million and $17.99 million, respectively. Net income available to common shareholders totaled $5.15 million, or $0.26 per diluted common share, for the quarter ended September 30, 2013. Net income available to common shareholders totaled $17.22 million, or $0.85 per diluted common share, for the nine months ended September 30, 2013. Excluding nonrecurring income and expense items, core earnings for the quarter and nine months ended September 30, 2013, totaled $6.11 million and $18.46 million, respectively.
On October 22, 2013, the Company announced that the Board of Directors approved a plan to repurchase and hold up to 3.0 million shares, or 15.1%, of its outstanding common stock at September 30, 2013. Considering the 589,849 shares in treasury at September 30, 2013, the new repurchase plan would allow the Company to repurchase approximately 2.4 million additional shares, or 11.5% of as-converted outstanding shares. Additionally, the Board of Directors declared a quarterly cash dividend to common stockholders of 12 cents ($0.12). The year 2013 marks the 28th consecutive year of cash dividends paid to stockholders. The dividend is payable on November 22, 2013, to shareholders of record on November 8, 2013.
Third Quarter 2013 Highlights –
- The non-covered loan portfolio increased $25.85 million compared to the second quarter of 2013 and $15.73 million compared to year end 2012. This marks the second consecutive quarter non-covered loan growth has exceeded covered loan declines. The largest increases in the non-covered portfolio were single family owner occupied and owner occupied construction loans at $19.21 million and $4.07, respectively, compared to the second quarter of 2013. Growth in the non-covered portfolio was seen across all geographical areas of the Company.
- Non-covered nonperforming loans as a percentage of total non-covered loans decreased 10 basis points to 1.87% compared with year end 2012. Non-covered nonperforming loans continue to decrease as a result of successful resolution efforts.
- Annualized net charge-offs to average loans decreased 16 basis points to 0.42% compared with the third quarter of 2012. Year-to-date net charge-offs of $8.60 million have been largely driven by four loan relationships.
- Tangible book value per common share increased $0.15 per share to $11.60 compared with the third quarter of 2012.
- The Company repurchased 204,388 shares during the third quarter and another 93,032 shares during the first 29 days of October 2013.
Net Interest Income
Net interest income decreased $4.13 million, or 15.62%, to $22.33 million for the third quarter of 2013 compared with the third quarter of 2012. The tax equivalent net interest margin decreased 49 basis points to 3.99% for the third quarter of 2013 compared with 4.48% for the third quarter of 2012. Total interest income decreased $4.84 million, or 15.35%, to $26.70 million for the third quarter of 2013 compared with the third quarter of 2012. The tax equivalent yield on loans decreased 79 basis points to 5.50% and the average loan balance decreased $96.25 million, or 5.38%, to $1.69 billion for the third quarter of 2013 compared with the third quarter of 2012. The acquired Peoples Bank of Virginia ("Peoples") and Waccamaw Bank ("Waccamaw") portfolios declined approximately $116.59 million on average between the third quarters of 2013 and 2012 resulting in an increase in non-acquired average loan balances between the comparable quarters.
Loan interest accretion stemming from the Peoples and Waccamaw acquisitions totaled $3.47 million for the third quarter of 2013 compared to $4.71 million for the third quarter of 2012. During the third quarter of 2013, approximately $1.74 million of the $3.47 million in loan interest accretion was actual cash received on the Peoples and Waccamaw portfolios. Normalized net interest margin for the third quarters of 2013 and 2012, which excludes non-cash loan interest accretion, was 3.69% and 4.06%, respectively. Normalized yield on loans for the third quarters of 2013 and 2012 was 5.09% and 5.72%, respectively.
Total interest expense decreased $707 thousand, or 13.93%, to $4.37 million for the third quarter of 2013 compared with the third quarter of 2012. Deposit costs decreased $456 thousand, or 22.10%, to $2.15 million for the third quarter of 2013 compared with the third quarter of 2012, reflecting an 8 basis point decrease in the average rate paid on interest-bearing deposits. Borrowing costs decreased $251 thousand, or 10.15%, to $2.22 million for the third quarter of 2013 compared with the third quarter of 2012. The average rate paid on interest-bearing liabilities decreased 8 basis points to 0.90% for the third quarter of 2013 compared with the third quarter of 2012. The average balance of interest-bearing liabilities decreased $141.69 million, or 6.86%, to $1.92 billion for the third quarter of 2013 compared with the third quarter of 2012, which included a $92.98 million decrease in average interest-bearing deposits and a $48.74 million decrease in average total borrowings.
Noninterest Income
Noninterest income decreased $3.05 million, or 27.34%, to $8.11 million for the third quarter of 2013 compared with the third quarter of 2012, which included a $2.39 million out-of-period adjustment recorded during the third quarter of 2012 to correct the overstatement of charge-offs and corresponding understatement of pre-tax income for the years ended December 31, 2009, 2010, and 2011. Wealth management revenues decreased $142 thousand, or 14.13%, for the third quarter of 2013 compared with the third quarter of 2012. The Trust and Wealth Management Divisions reported $891 million in assets under management as of September 30, 2013. Service charges on deposit accounts decreased $313 thousand, or 8.04%, and other service charges and fees increased $146 thousand, or 8.95%, for the third quarter of 2013 compared with the third quarter of 2012. Insurance commissions experienced a slight decrease of $57 thousand, or 3.53%, to $1.56 million for the third quarter of 2013 compared with the same quarter of 2012. The Company realized a $39 thousand net loss on sale of securities for the third quarter of 2013, which was a decrease of $267 thousand compared to a net gain of $228 thousand for the third quarter of 2012. Amortization expense relating to the FDIC indemnification asset totaled $1.09 million during the third quarter of 2013, compared to accretion income of $131 thousand for the third quarter of 2012. Other operating income decreased $2.14 million, or 59.49%, for the third quarter of 2013 compared with the third quarter of 2012, which was primarily due to the $2.39 million out-of-period adjustment recorded during the third quarter of 2012. The Company incurred no other-than-temporary impairment charges during the third quarter of 2013, compared to $942 thousand related to a non-Agency mortgage-backed security for the third quarter of 2012.
Noninterest Expense
Noninterest expense experienced a decrease of $172 thousand to $20.15 million for the third quarter of 2013 compared with the third quarter of 2012. Salaries and employee benefits increased $220 thousand, or 2.03%, to $11.08 million for the third quarter of 2013 compared with the third quarter of 2012, which included a charge during the third quarter of 2013 to accrue for contractual executive severance of $1.07 million. Absent the one-time severance charge, salaries and employee benefits decreased $852 thousand, or 7.85%, from the third quarter of 2012. Salaries and employee benefits attributed to the Peoples and Waccamaw acquisitions totaled $1.15 million during the third quarter of 2013, which represents an increase of $231 thousand for the quarter ended September 30, 2013, compared with the same quarter of 2012. Occupancy, furniture, and equipment expense increased $279 thousand, or 10.30%, to $2.99 million for the third quarter of 2013 compared with the third quarter of 2012. Other operating expense increased $133 thousand to $5.44 million for the third quarter of 2013 compared with the third quarter of 2012. Other operating expense included a net loss on sales and expenses associated with other real estate owned of $272 thousand for the third quarter of 2013 compared to $490 thousand for the third quarter of 2012. The efficiency ratio for the third quarter of 2013 was 60.35% compared to 52.40% for the third quarter of 2012.
Provision for Loan Losses and Asset Quality
The provision for loan losses increased $417 thousand, or 21.76%, to $2.33 million for the third quarter of 2013 and $2.22 million, or 49.84%, to $6.68 million for the nine months ended September 30, 2013, compared with the same periods of the prior year. The provision expense for the third quarter of 2013 included an $812 thousand offset to the FDIC indemnification asset to recognize the portion of losses that are expected to be reimbursed by the FDIC related to the acquisition of Waccamaw. Approximately $390 thousand, or 16.72%, of the provision was attributed to new loan production during the third quarter of 2013.
The allowance for loan losses decreased to $24.67 million at September 30, 2013, compared with $25.77 million at December 31, 2012, and $25.84 million at September 30, 2012. At September 30, 2013, $22.97 million of the allowance was attributed to the legacy portfolio while $366 thousand and $1.33 million were attributed to the acquired Peoples and Waccamaw portfolios, respectively. 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 as a percentage of non-covered loans was 1.61% at September 30, 2013, compared with 1.70% at December 31, 2012, and 1.68% at September 30, 2012. For the third quarter of 2013, net charge-offs increased $317 thousand, or 24.67%, compared with the fourth quarter of 2012, and decreased $650 thousand, or 28.86%, compared with the third quarter of 2012. Annualized net charge-offs were 0.42% for the third quarter of 2013, which represents a decrease of 16 basis points compared with 0.58% for the third quarter of 2012.
Asset quality in the non-covered portfolio continues to improve, as non-covered delinquent loans, which are comprised of loans 30 days or more past due and nonaccrual loans, as a percentage of total non-covered loans decreased to 2.25% at September 30, 2013, compared to 2.52% for the same period of the prior year. Non-covered nonaccrual loans totaled $26.40 million at September 30, 2013, compared to $23.93 million at December 31, 2012, and $26.51 million at September 30, 2012. At quarter end, the Company's non-covered nonperforming loans as a percentage of total non-covered loans were 1.87% and non-covered nonperforming assets as a percentage of total non-covered assets were 1.37%.
Total nonperforming assets, including covered and non-covered loan portfolios, consisted of $29.98 million in nonaccrual loans, $82 thousand in accruing loans past due 90 days or more, $2.23 million in unseasoned, accruing troubled debt restructurings, and $12.83 million in other real estate owned at September 30, 2013. In comparison, total nonperforming assets consisted of $28.25 million in nonaccrual loans, $6.01 million in unseasoned, accruing troubled debt restructurings, and $9.00 million in other real estate owned at December 31, 2012.
Balance Sheet and Capital
Consolidated assets totaled $2.65 billion as of September 30, 2013, a decrease of $76.22 million, or 2.79%, compared with $2.73 billion at December 31, 2012. Consolidated liabilities totaled $2.30 billion as of September 30, 2013, a decrease of $70.84 million, or 2.99%, compared with $2.37 billion at December 31, 2012. Total stockholders' equity decreased to $350.95 million as of September 30, 2013, compared with $356.32 million at December 31, 2012. Book value per as-converted common share decreased slightly to $16.75 as of September 30, 2013, compared with $16.76 as of December 31, 2012. Tangible book value per common share decreased to $11.60 as of September 30, 2013, compared with $11.66 as of December 31, 2012. Additionally, the Company repurchased 204,388 common shares at a cost of $3.19 million and paid a cash dividend of $0.12 per common share during the third quarter of 2013.
The Company significantly exceeds regulatory "well capitalized" targets as of September 30, 2013, with a total risk-based capital ratio of 17.80%, Tier 1 risk-based capital ratio of 16.55%, and a Tier 1 leverage ratio of 10.64%.
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 our 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., headquartered in Bluefield, Virginia, is a $2.65 billion financial holding company and the parent company of First Community Bank. First Community Bank operates seventy-two banking locations throughout Virginia, West Virginia, North Carolina, South Carolina, and Tennessee. First Community Bank offers wealth management and investment services through its Trust Division and First Community Wealth Management, a registered investment advisory firm. The Trust Division and First Community Wealth Management managed assets with a market value of $891 million as of September 30, 2013. The Company is also the parent company of Greenpoint Insurance Group, Inc., a full-service insurance agency headquartered in High Point, North Carolina, that operates seven insurance locations throughout Virginia, West Virginia, and North Carolina. The Company's common stock is traded on the NASDAQ Global Select Market under the symbol, "FCBC." 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 year ended. 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) | 2013 | 2012 | 2013 | 2012 |
| Interest income | ||||
| Interest and fees on loans held for investment | $ 23,439 | $ 28,275 | $ 72,547 | $ 68,496 |
| Interest on securities --- taxable | 1,999 | 1,980 | 5,754 | 6,060 |
| Interest on securities --- nontaxable | 1,216 | 1,215 | 3,631 | 3,667 |
| Interest on deposits in banks | 42 | 66 | 180 | 177 |
| Total interest income | 26,696 | 31,536 | 82,112 | 78,400 |
| Interest expense | ||||
| Interest on deposits | 2,147 | 2,603 | 6,792 | 7,368 |
| Interest on short-term borrowings | 517 | 675 | 1,686 | 1,859 |
| Interest on long-term borrowings | 1,706 | 1,799 | 5,084 | 5,253 |
| Total interest expense | 4,370 | 5,077 | 13,562 | 14,480 |
| Net interest income | 22,326 | 26,459 | 68,550 | 63,920 |
| Provision for loan losses | 2,333 | 1,916 | 6,680 | 4,458 |
| Net interest income after provision for loan losses | 19,993 | 24,543 | 61,870 | 59,462 |
| Noninterest income | ||||
| Wealth management income | 863 | 1,005 | 2,680 | 2,839 |
| Service charges on deposit accounts | 3,582 | 3,895 | 10,065 | 10,237 |
| Other service charges and fees | 1,777 | 1,631 | 5,356 | 4,780 |
| Insurance commissions | 1,559 | 1,616 | 4,533 | 4,528 |
| Net impairment losses recognized in earnings | -- | (942) | -- | (942) |
| Net (loss) gain on sale of securities | (39) | 228 | 191 | 270 |
| FDIC indemnification asset (amortization) accretion | (1,089) | 131 | (4,290) | 131 |
| Other operating income | 1,458 | 3,599 | 4,285 | 5,654 |
| Total noninterest income | 8,111 | 11,163 | 22,820 | 27,497 |
| Noninterest expense | ||||
| Salaries and employee benefits | 11,080 | 10,860 | 31,150 | 27,974 |
| Occupancy expense of bank premises | 1,700 | 1,754 | 5,350 | 4,934 |
| Furniture and equipment | 1,288 | 955 | 3,931 | 2,741 |
| Amortization of intangible assets | 183 | 191 | 545 | 613 |
| FDIC premiums and assessments | 460 | 611 | 1,401 | 1,223 |
| Merger related expense | -- | 645 | 56 | 4,227 |
| Other operating expense | 5,442 | 5,309 | 15,797 | 14,938 |
| Total noninterest expense | 20,153 | 20,325 | 58,230 | 56,650 |
| Income before income taxes | 7,951 | 15,381 | 26,460 | 30,309 |
| Income tax expense | 2,539 | 5,322 | 8,472 | 10,171 |
| Net income | 5,412 | 10,059 | 17,988 | 20,138 |
| Dividends on preferred stock | 261 | 220 | 772 | 786 |
| Net income available to common shareholders | $ 5,151 | $ 9,839 | $ 17,216 | $ 19,352 |
| Basic earnings per common share | $ 0.26 | $ 0.49 | $ 0.86 | $ 1.03 |
| Diluted earnings per common share | $ 0.26 | $ 0.47 | $ 0.85 | $ 1.00 |
| Cash dividends per common share | $ 0.12 | $ 0.11 | $ 0.36 | $ 0.32 |
| Weighted average basic shares outstanding | 20,008,861 | 20,013,264 | 20,013,095 | 18,812,516 |
| Weighted average diluted shares outstanding | 21,136,173 | 21,333,451 | 21,203,481 | 20,123,938 |
| Return on average assets | 0.77% | 1.41% | 0.86% | 1.06% |
| Return on average common equity | 6.06% | 11.91% | 6.71% | 8.38% |
| FIRST COMMUNITY BANCSHARES, INC. | |||||
| CONDENSED QUARTERLY STATEMENTS OF INCOME (Unaudited) | |||||
| As of and for the Quarter Ended | |||||
| September 30, | June 30, | March 31, | December 31, | September 30, | |
| (Amounts in thousands, except share and per share data) | 2013 | 2013 | 2013 | 2012 | 2012 |
| Interest Income | |||||
| Interest and fees on loans held for investment | $ 23,439 | $ 24,264 | $ 24,844 | $ 28,188 | $ 28,275 |
| Interest on securities --- taxable | 1,999 | 1,869 | 1,886 | 1,770 | 1,980 |
| Interest on securities --- nontaxable | 1,216 | 1,207 | 1,208 | 1,216 | 1,215 |
| Interest on deposits in banks | 42 | 72 | 66 | 82 | 66 |
| Total interest income | 26,696 | 27,412 | 28,004 | 31,256 | 31,536 |
| Interest Expense | |||||
| Interest on deposits | 2,147 | 2,283 | 2,362 | 2,604 | 2,603 |
| Interest on short-term borrowings | 517 | 579 | 590 | 656 | 675 |
| Interest on long-term borrowings | 1,706 | 1,688 | 1,690 | 1,860 | 1,799 |
| Total interest expense | 4,370 | 4,550 | 4,642 | 5,120 | 5,077 |
| Net interest income | 22,326 | 22,862 | 23,362 | 26,136 | 26,459 |
| Provision for loan losses | 2,333 | 3,205 | 1,142 | 1,220 | 1,916 |
| Net interest income after provision for loan losses | 19,993 | 19,657 | 22,220 | 24,916 | 24,543 |
| Noninterest Income | |||||
| Wealth management income | 863 | 971 | 846 | 862 | 1,005 |
| Service charges on deposit accounts | 3,582 | 3,315 | 3,168 | 3,826 | 3,895 |
| Other service charges and fees | 1,777 | 1,793 | 1,786 | 1,682 | 1,631 |
| Insurance commissions | 1,559 | 1,308 | 1,666 | 1,215 | 1,616 |
| Net impairment losses recognized in earnings | -- | -- | -- | -- | (942) |
| Net (loss) gain on sale of securities | (39) | 113 | 117 | 213 | 228 |
| FDIC indemnification asset (amortization) accretion | (1,089) | (1,662) | (1,539) | 458 | 131 |
| Other operating income | 1,458 | 1,010 | 1,817 | 957 | 3,599 |
| Total noninterest income | 8,111 | 6,848 | 7,861 | 9,213 | 11,163 |
| Noninterest Expense | |||||
| Salaries and employee benefits | 11,080 | 9,960 | 10,110 | 10,693 | 10,860 |
| Occupancy expense of bank premises | 1,700 | 1,795 | 1,855 | 1,938 | 1,754 |
| Furniture and equipment | 1,288 | 1,300 | 1,343 | 1,404 | 955 |
| Amortization of intangible assets | 183 | 183 | 179 | 191 | 191 |
| FDIC premiums and assessments | 460 | 469 | 472 | 389 | 611 |
| Merger related expense | -- | 7 | 49 | 866 | 645 |
| Other operating expense | 5,442 | 4,819 | 5,536 | 6,252 | 5,309 |
| Total noninterest expense | 20,153 | 18,533 | 19,544 | 21,733 | 20,325 |
| Income before income taxes | 7,951 | 7,972 | 10,537 | 12,396 | 15,381 |
| Income tax expense | 2,539 | 2,537 | 3,396 | 3,957 | 5,322 |
| Net income | 5,412 | 5,435 | 7,141 | 8,439 | 10,059 |
| Dividends on preferred stock | 261 | 253 | 258 | 272 | 220 |
| Net income available to common shareholders | $ 5,151 | $ 5,182 | $ 6,883 | $ 8,167 | $ 9,839 |
| Basic earnings per common share | $ 0.26 | $ 0.26 | $ 0.34 | $ 0.41 | $ 0.49 |
| Diluted earnings per common share | $ 0.26 | $ 0.26 | $ 0.34 | $ 0.40 | $ 0.47 |
| Cash dividends per common share | $ 0.12 | $ 0.12 | $ 0.12 | $ 0.11 | $ 0.11 |
| Weighted average basic shares outstanding | 20,008,861 | 19,997,991 | 20,032,694 | 20,063,873 | 20,013,264 |
| Weighted average diluted shares outstanding | 21,136,173 | 21,211,531 | 21,264,228 | 21,319,665 | 21,333,451 |
| FIRST COMMUNITY BANCSHARES, INC. | ||||
| RECONCILIATION OF GAAP NET INCOME TO CORE EARNINGS (Unaudited) | ||||
| Three Months Ended | Nine Months Ended | |||
| September 30, | September 30, | |||
| 2013 | 2012 | 2013 | 2012 | |
| (Amounts in thousands, except per share data) | ||||
| Net income, GAAP | $ 5,412 | $ 10,059 | $ 17,988 | $ 20,138 |
| Non-GAAP adjustments: | ||||
| Net impairment losses recognized in earnings | -- | 942 | -- | 942 |
| Net loss (gain) on sale of securities | 39 | (228) | (191) | (270) |
| Net gain on debt prepayment | -- | -- | (296) | -- |
| Merger related expense | -- | 645 | 56 | 4,227 |
| Prospective correction of prior period understatement | -- | (2,395) | -- | (2,395) |
| Other noncore, nonrecurring items | 1,072 | -- | 1,180 | -- |
| Total adjustments to core earnings | 1,111 | (1,036) | 749 | 2,504 |
| Tax effect | 415 | (392) | 280 | 947 |
| Core earnings, non-GAAP | $ 6,108 | $ 9,415 | $ 18,457 | $ 21,695 |
| Core return on average assets | 0.92% | 1.35% | 0.92% | 1.19% |
| Core return on average common equity | 7.19% | 11.39% | 7.19% | 9.39% |
| Core return on average tangible common equity | 10.57% | 16.65% | 10.51% | 13.63% |
| Core diluted earnings per common share | $0.29 | $0.44 | $0.87 | $1.08 |
| FIRST COMMUNITY BANCSHARES, INC. | ||||
| EFFICIENCY RATIO CALCULATION (Unaudited) | ||||
| Three Months Ended | Nine Months Ended | |||
| September 30, | September 30, | |||
| 2013 | 2012 | 2013 | 2012 | |
| (Amounts in thousands) | ||||
| Noninterest expense, GAAP | $ 20,153 | $ 20,325 | $ 58,230 | $ 56,650 |
| Non-GAAP adjustments: | ||||
| Merger related expense | -- | (645) | (56) | (4,227) |
| OREO expense and net loss | (272) | (490) | (1,067) | (1,581) |
| Other noncore, nonrecurring items | (1,072) | -- | (1,180) | -- |
| Adjusted noninterest expense | 18,809 | 19,190 | 55,927 | 50,842 |
| Net interest income, GAAP | 22,326 | 26,459 | 68,550 | 63,920 |
| Noninterest income, GAAP | 8,111 | 11,163 | 22,820 | 27,497 |
| Non-GAAP adjustments: | ||||
| Tax equivalency adjustment | 691 | 684 | 2,079 | 2,089 |
| Net impairment losses recognized in earnings | -- | 942 | -- | 942 |
| Net loss (gain) on sale of securities | 39 | (228) | (191) | (270) |
| Net gain on debt prepayment | -- | -- | (296) | -- |
| Prospective correction of prior period understatement | -- | (2,395) | -- | (2,395) |
| Other noncore, nonrecurring items | -- | -- | -- | -- |
| Adjusted net interest and noninterest income | 31,167 | 36,625 | 92,962 | 91,783 |
| Non-GAAP efficiency ratio | 60.35% | 52.40% | 60.16% | 55.39% |
| FIRST COMMUNITY BANCSHARES, INC. | |||||
| CONDENSED QUARTERLY BALANCE SHEETS (Unaudited) | |||||
| For the Quarter Ended | |||||
| September 30, | June 30, | March 31, | December 31, | September 30, | |
| 2013 | 2013 | 2013 | 2012 | 2012 | |
| (Amounts in thousands) | |||||
| Cash and due from banks | $ 47,982 | $ 44,307 | $ 41,467 | $ 50,405 | $ 44,865 |
| Federal funds sold | 33,374 | 22,876 | 110,544 | 66,509 | 93,005 |
| Interest-bearing deposits in banks | 11,219 | 14,936 | 15,030 | 27,933 | 27,359 |
| Total cash and cash equivalents | 92,575 | 82,119 | 167,041 | 144,847 | 165,229 |
| Securities available-for-sale | 545,676 | 550,158 | 537,507 | 534,358 | 517,161 |
| Securities held-to-maturity | 567 | 627 | 816 | 816 | 816 |
| Loans held for sale | 825 | 4,621 | 2,794 | 6,672 | 4,446 |
| Loans held for investment, net of unearned income: | |||||
| Covered under loss share agreements | 163,425 | 184,076 | 195,060 | 207,106 | 221,977 |
| Not covered under loss share agreements | 1,533,272 | 1,507,422 | 1,494,232 | 1,517,547 | 1,541,633 |
| Less allowance for loan losses | (24,665) | (23,122) | (24,850) | (25,770) | (25,835) |
| Loans, net | 1,672,857 | 1,672,997 | 1,667,236 | 1,705,555 | 1,742,221 |
| FDIC indemnification asset | 37,102 | 40,389 | 43,921 | 48,149 | 50,606 |
| Property, plant, and equipment, net | 63,526 | 64,085 | 64,812 | 64,868 | 62,191 |
| Other real estate owned: | |||||
| Covered under loss share agreements | 7,381 | 6,407 | 6,911 | 3,255 | 3,553 |
| Not covered under loss share agreements | 5,450 | 4,743 | 4,439 | 5,749 | 5,957 |
| Interest receivable | 7,336 | 8,010 | 8,166 | 7,842 | 6,038 |
| Goodwill | 104,892 | 104,892 | 104,689 | 104,866 | 104,022 |
| Intangible assets | 2,976 | 3,159 | 3,344 | 3,522 | 3,713 |
| Other assets | 112,313 | 113,149 | 111,409 | 105,040 | 108,143 |
| Total assets | $2,652,651 | $2,650,735 | $2,720,291 | $2,728,867 | $2,769,650 |
| Deposits: | |||||
| Noninterest-bearing | $ 353,951 | $ 349,972 | $ 355,918 | $ 343,352 | $ 335,100 |
| Interest-bearing | 374,546 | 354,862 | 377,445 | 353,321 | 360,061 |
| Savings | 527,887 | 513,781 | 513,322 | 500,276 | 496,740 |
| Time | 740,181 | 770,081 | 800,812 | 833,226 | 872,059 |
| Total deposits | 1,996,565 | 1,988,696 | 2,047,497 | 2,030,175 | 2,063,960 |
| Interest, taxes, and other liabilities | 24,653 | 23,019 | 26,740 | 28,816 | 29,538 |
| Securities sold under agreements to repurchase | 114,647 | 121,204 | 121,506 | 136,118 | 146,904 |
| FHLB borrowings | 150,000 | 150,000 | 150,000 | 161,558 | 161,558 |
| Other borrowings | 15,839 | 15,877 | 15,877 | 15,877 | 15,877 |
| Total liabilities | 2,301,704 | 2,298,796 | 2,361,620 | 2,372,544 | 2,417,837 |
| Preferred stock | 15,471 | 15,921 | 17,421 | 17,421 | 17,921 |
| Common stock | 20,478 | 20,447 | 20,343 | 20,343 | 20,309 |
| Additional paid-in capital | 215,671 | 215,139 | 213,855 | 213,829 | 213,320 |
| Retained earnings | 123,018 | 120,273 | 117,489 | 113,013 | 107,055 |
| Treasury stock, at cost | (10,946) | (7,763) | (7,517) | (6,458) | (5,446) |
| Accumulated other comprehensive loss | (12,745) | (12,078) | (2,920) | (1,825) | (1,346) |
| Total stockholders' equity | 350,947 | 351,939 | 358,671 | 356,323 | 351,813 |
| Total liabilities and stockholders' equity | $2,652,651 | $2,650,735 | $2,720,291 | $2,728,867 | $2,769,650 |
| Shares outstanding at period end | 19,888,028 | 20,060,862 | 19,985,212 | 20,053,466 | 20,086,404 |
| Book value per common share at period end (1) | $ 16.75 | $ 16.63 | $ 16.93 | $ 16.76 | $ 16.50 |
| Tangible book value per common share at period end (2) | $ 11.60 | $ 11.53 | $ 11.83 | $ 11.66 | $ 11.45 |
| (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) | 2013 | 2013 | 2013 | 2012 | 2012 |
| Allowance for Loan Losses | |||||
| Beginning balance | $ 23,122 | $ 24,850 | $ 25,770 | $ 25,835 | $ 26,171 |
| Provision for loan losses charged to operations | 2,333 | 3,205 | 1,142 | 1,220 | 1,916 |
| Provision for loan losses recorded through the FDIC indemnification asset | 812 | -- | -- | -- | -- |
| Charge-offs | (1,955) | (5,006) | (2,759) | (1,717) | (2,613) |
| Recoveries | 353 | 73 | 697 | 432 | 361 |
| Net charge-offs | (1,602) | (4,933) | (2,062) | (1,285) | (2,252) |
| Ending balance | $ 24,665 | $ 23,122 | $ 24,850 | $ 25,770 | $ 25,835 |
| Summary of Asset Quality | |||||
| Non-covered loans | |||||
| Nonaccrual loans | $ 26,397 | $ 29,125 | $ 30,076 | $ 23,931 | $ 26,514 |
| Accruing loans past due 90 days or more | -- | -- | -- | -- | -- |
| Troubled debt restructurings ("TDRs") (1) | 2,228 | 276 | 1,596 | 6,009 | 121 |
| Total non-covered nonperforming loans | 28,625 | 29,401 | 31,672 | 29,940 | 26,635 |
| Other real estate owned ("OREO") not covered under FDIC loss share agreements | 5,450 | 4,743 | 4,439 | 5,749 | 5,957 |
| Total non-covered nonperforming assets | $ 34,075 | $ 34,144 | $ 36,111 | $ 35,689 | $ 32,592 |
| Covered Loans | |||||
| Nonaccrual loans | $ 3,579 | $ 3,889 | $ 4,567 | $ 4,323 | $ 2,849 |
| Accruing loans past due 90 days or more | 82 | -- | -- | -- | -- |
| Total covered nonperforming loans | 3,661 | 3,889 | 4,567 | 4,323 | 2,849 |
| OREO covered under FDIC loss share agreements | 7,381 | 6,407 | 6,911 | 3,255 | 3,553 |
| Total covered nonperforming assets | 11,042 | 10,296 | 11,478 | 7,578 | 6,402 |
| Total nonperforming assets | $ 45,117 | $ 44,440 | $ 47,589 | $ 43,267 | $ 38,994 |
| Performing TDRs (2) | $ 9,697 | $ 10,927 | $ 10,272 | $ 6,038 | $ 6,742 |
| Total TDRs (3) | $ 11,925 | $ 11,203 | $ 11,868 | $ 12,047 | $ 6,863 |
| Asset Quality Ratios | |||||
| Excluding covered assets | |||||
| Nonperforming loans to total loans | 1.87% | 1.95% | 2.12% | 1.97% | 1.73% |
| Nonperforming assets to total assets | 1.37% | 1.39% | 1.43% | 1.42% | 1.28% |
| Allowance for loan losses to nonperforming loans | 86.17% | 78.64% | 78.46% | 86.07% | 97.00% |
| Allowance for loan losses to non-covered total loans | 1.61% | 1.53% | 1.66% | 1.70% | 1.68% |
| Annualized net charge-offs to average loans | 0.42% | 1.31% | 0.56% | 0.34% | 0.58% |
| Including covered assets | |||||
| Nonperforming loans to total loans | 1.90% | 1.97% | 2.15% | 1.99% | 1.67% |
| Nonperforming assets to total assets | 1.70% | 1.68% | 1.75% | 1.59% | 1.41% |
| Allowance for loan losses to nonperforming loans | 76.40% | 69.46% | 68.57% | 75.21% | 87.62% |
| Allowance for loan losses to total loans | 1.45% | 1.37% | 1.47% | 1.49% | 1.46% |
| (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 | |||||
| September 30, | June 30, | March 31, | December 31, | September 30, | |
| 2013 | 2013 | 2013 | 2012 | 2012 | |
| Selected Ratios | |||||
| Return on average assets | 0.77% | 0.78% | 1.03% | 1.19% | 1.41% |
| Return on average common equity | 6.06% | 5.97% | 8.11% | 9.59% | 11.91% |
| Net interest margin | 3.99% | 4.07% | 4.15% | 4.49% | 4.48% |
| Non-GAAP efficiency ratio quarter-to-date | 60.35% | 60.60% | 59.55% | 57.43% | 52.40% |
| Non-GAAP efficiency ratio year-to-date | 60.16% | 60.07% | 59.55% | 55.96% | 55.39% |
| Total equity to total assets | 13.23% | 13.28% | 13.19% | 13.06% | 12.70% |
| Average earning assets to average assets | 86.51% | 86.72% | 86.96% | 86.87% | 87.02% |
| Average loans to average deposits | 85.13% | 84.33% | 84.98% | 85.71% | 87.88% |
| (Amounts in thousands) | |||||
| Average Balances | |||||
| Loans | $ 1,694,243 | $ 1,692,248 | $ 1,706,296 | $ 1,745,584 | $ 1,790,489 |
| Investment securities | 548,283 | 548,101 | 545,497 | 519,798 | 528,126 |
| Earning assets | 2,287,785 | 2,323,517 | 2,350,686 | 2,376,805 | 2,408,442 |
| Total assets | 2,644,632 | 2,679,295 | 2,703,029 | 2,736,037 | 2,767,790 |
| Total deposits | 1,990,163 | 2,006,626 | 2,007,840 | 2,036,697 | 2,037,467 |
| Interest-bearing deposits | 1,641,007 | 1,662,446 | 1,675,654 | 1,699,991 | 1,733,987 |
| Borrowings | 281,250 | 289,289 | 309,333 | 314,645 | 329,958 |
| Interest-bearing liabilities | 1,922,257 | 1,951,735 | 1,984,987 | 2,014,636 | 2,063,945 |
| Stockholders' equity | 352,993 | 365,217 | 361,549 | 356,812 | 347,637 |
| Tax equivalent net interest income | 23,017 | 23,555 | 24,057 | 26,832 | 27,139 |
| FIRST COMMUNITY BANCSHARES, INC. | ||||||
| AVERAGE BALANCE SHEETS AND NET INTEREST INCOME ANALYSIS (Unaudited) | ||||||
| Three Months Ended September 30, | ||||||
| 2013 | 2012 | |||||
| Average | Average Yield/ | Average | Average Yield/ | |||
| (Amounts in thousands) | Balance | Interest (1) | Rate (1) | Balance | Interest (1) | Rate (1) |
| Assets | ||||||
| Earning assets | ||||||
| Loans (2) | $ 1,694,243 | $ 23,476 | 5.50% | $ 1,790,489 | $ 28,305 | 6.29% |
| Securities available-for-sale | 547,686 | 3,857 | 2.79% | 525,151 | 3,819 | 2.89% |
| Securities held-to-maturity | 597 | 12 | 7.97% | 2,975 | 26 | 3.48% |
| Interest-bearing deposits | 45,259 | 42 | 0.37% | 89,827 | 65 | 0.29% |
| Total earning assets | 2,287,785 | 27,387 | 4.75% | 2,408,442 | 32,215 | 5.32% |
| Other assets | 356,847 | 359,348 | ||||
| Total assets | $ 2,644,632 | $ 2,767,790 | ||||
| Liabilities | ||||||
| Interest-bearing deposits | ||||||
| Demand deposits | $ 362,548 | $ 58 | 0.06% | $ 335,299 | $ 49 | 0.06% |
| Savings deposits | 520,884 | 142 | 0.11% | 500,761 | 171 | 0.14% |
| Time deposits | 757,575 | 1,947 | 1.02% | 897,927 | 2,384 | 1.06% |
| Total interest-bearing deposits | 1,641,007 | 2,147 | 0.52% | 1,733,987 | 2,604 | 0.60% |
| Borrowings | ||||||
| Retail repurchase agreements | 65,382 | 34 | 0.21% | 88,484 | 120 | 0.54% |
| Wholesale repurchase agreements | 50,000 | 473 | 3.75% | 58,195 | 544 | 3.72% |
| FHLB advances and other borrowings | 165,868 | 1,716 | 4.10% | 183,279 | 1,808 | 3.92% |
| Total borrowings | 281,250 | 2,223 | 3.14% | 329,958 | 2,472 | 2.98% |
| Total interest-bearing liabilities | 1,922,257 | 4,370 | 0.90% | 2,063,945 | 5,076 | 0.98% |
| Noninterest-bearing demand deposits | 349,156 | 303,480 | ||||
| Other liabilities | 20,226 | 25,728 | ||||
| Total liabilities | 2,291,639 | 2,393,153 | ||||
| Stockholders' equity | 352,993 | 347,637 | ||||
| Total liabilities and stockholders' equity | $ 2,644,632 | $ 2,740,790 | ||||
| Net interest income, tax equivalent | $ 23,017 | $ 27,139 | ||||
| Net interest rate spread (3) | 3.85% | 4.34% | ||||
| Net interest margin(4) | 3.99% | 4.48% | ||||
| (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. | ||||||
| AVERAGE BALANCE SHEETS AND NET INTEREST INCOME ANALYSIS (Unaudited) | ||||||
| Nine Months Ended September 30, | ||||||
| 2013 | 2012 | |||||
| Average | Average Yield/ | Average | Average Yield/ | |||
| (Amounts in thousands) | Balance | Interest (1) | Rate (1) | Balance | Interest (1) | Rate (1) |
| Assets | ||||||
| Earning assets | ||||||
| Loans (2) | $ 1,697,533 | $ 72,671 | 5.72% | $ 1,566,550 | $ 68,610 | 5.85% |
| Securities available-for-sale | 546,603 | 11,297 | 2.76% | 496,854 | 11,547 | 3.10% |
| Securities held-to-maturity | 700 | 43 | 8.21% | 3,228 | 155 | 6.41% |
| Interest-bearing deposits | 75,577 | 180 | 0.32% | 66,579 | 177 | 0.36% |
| Total earning assets | 2,320,413 | 84,191 | 4.85% | 2,133,211 | 80,489 | 5.04% |
| Other assets | 355,025 | 302,136 | ||||
| Total assets | $ 2,675,438 | $ 2,435,347 | ||||
| Liabilities | ||||||
| Interest-bearing deposits | ||||||
| Demand deposits | $ 359,439 | $ 173 | 0.06% | $ 305,055 | $ 123 | 0.05% |
| Savings deposits | 514,447 | 444 | 0.12% | 439,451 | 400 | 0.12% |
| Time deposits | 785,690 | 6,176 | 1.05% | 751,167 | 6,846 | 1.22% |
| Total interest-bearing deposits | 1,659,576 | 6,793 | 0.55% | 1,495,673 | 7,369 | 0.66% |
| Borrowings | ||||||
| Federal funds purchased | -- | -- | 0.00% | 654 | 2 | 0.41% |
| Retail repurchase agreements | 71,476 | 240 | 0.45% | 78,472 | 343 | 0.58% |
| Wholesale repurchase agreements | 52,521 | 1,416 | 3.60% | 54,145 | 1,482 | 3.66% |
| FHLB advances and other borrowings | 169,190 | 5,113 | 4.04% | 174,627 | 5,284 | 4.04% |
| Total borrowings | 293,187 | 6,769 | 3.09% | 307,898 | 7,111 | 3.08% |
| Total interest-bearing liabilities | 1,952,763 | 13,562 | 0.93% | 1,803,571 | 14,480 | 1.07% |
| Noninterest-bearing demand deposits | 341,903 | 279,987 | ||||
| Other liabilities | 20,882 | 24,241 | ||||
| Total liabilities | 2,315,548 | 2,107,799 | ||||
| Stockholders' equity | 359,890 | 327,548 | ||||
| Total liabilities and stockholders' equity | $ 2,675,438 | $ 2,435,347 | ||||
| Net interest income, tax equivalent | $ 70,629 | $ 66,009 | ||||
| Net interest rate spread (3) | 3.92% | 3.97% | ||||
| Net interest margin(4) | 4.07% | 4.13% | ||||
| (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. | ||||||