First Community Bancshares, Inc. Announces Fourth Quarter and Full Year 2013 Results

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| Source: First Community Bancshares, Inc.

BLUEFIELD, Va., Jan. 30, 2014 (GLOBE NEWSWIRE) -- First Community Bancshares, Inc. (Nasdaq:FCBC) (www.fcbinc.com) (the "Company") today reported net income for the quarter and year ended December 31, 2013, of $5.32 million and $23.31 million, respectively. Net income available to common shareholders totaled $5.07 million, or $0.26 per diluted common share, for the quarter ended December 31, 2013. Net income available to common shareholders totaled $22.29 million, or $1.11 per diluted common share, for the year ended December 31, 2013. Excluding nonrecurring income and expense items, core earnings for the quarter and year ended December 31, 2013, totaled $6.35 million and $24.80 million, respectively.

On January 28, 2014, the Board of Directors declared a quarterly cash dividend to common stockholders of 12 cents ($0.12). The current year marks the 29th consecutive year of cash dividends paid to stockholders. The dividend is payable on February 21, 2014, to shareholders of record on February 7, 2014.

Fourth Quarter 2013 Highlights –

  • The non-covered loan portfolio increased $25.77 million compared to the third quarter of 2013 and $41.49 million compared to year end 2012. The increase is primarily attributed to new commercial real estate volume in West Virginia, Central North Carolina, and Eastern Virginia. This marks the third consecutive quarter non-covered loan growth has exceeded covered loan declines.
  • Annualized non-covered loan growth was 6.67% during the fourth quarter.
  • Non-covered nonaccrual loans totaled $19.16 million as of December 31, 2013, compared to $23.93 million as of December 31, 2012, which is the lowest level reported since the first quarter of 2011.
  • Non-covered nonperforming loans as a percentage of total non-covered loans decreased 66 basis points to 1.31% compared with year end 2012, which is the lowest level reported since the third quarter of 2009. Non-covered nonperforming loans continue to decrease as a result of successful resolution efforts.
  • The Company incurred expenses of $1.52 million related to the closure/consolidation of seven branches, which are expected to occur during the first half of 2014 and estimated to realize pre-tax annualized net cost savings of over $900 thousand.
  • The Company repurchased 1,404,409 shares during the fourth quarter of 2013 bringing the total number of shares repurchased in 2013 to 1,739,601. The Company continued to repurchase shares in 2014, with 117,500 shares repurchased for $1.92 million through January 29, 2014.

Net Interest Income

Net interest income decreased $3.04 million, or 11.65%, to $23.09 million for the fourth quarter of 2013 compared with the same quarter of 2012. The tax equivalent net interest margin decreased 34 basis points to 4.15% for the fourth quarter of 2013 compared with 4.49% for the same quarter of 2012. Total interest income decreased $3.89 million, or 12.45%, to $27.36 million for the fourth quarter of 2013 compared with the same quarter of 2012. The tax equivalent yield on loans decreased 83 basis points to 5.60% and the average loan balance decreased $39.79 million, or 2.28%, to $1.71 billion for the fourth quarter of 2013 compared with the same quarter of 2012.

Loan interest accretion stemming from the Peoples and Waccamaw acquisitions totaled $4.39 million for the fourth quarter of 2013 compared to $8.16 million for the same quarter of 2012. During the fourth quarter of 2013, approximately $1.80 million of the loan interest accretion from the Peoples and Waccamaw portfolios was received in cash. The normalized net interest margin for the fourth quarters of 2013 and 2012, which excludes non-cash loan interest accretion, was 3.70% and 3.46%, respectively. The normalized yield on loans for the fourth quarters of 2013 and 2012 was 5.00% and 5.03%, respectively.

Total interest expense decreased $848 thousand, or 16.56%, to $4.27 million for the fourth quarter of 2013 compared with the same quarter of 2012. Deposit costs decreased $573 thousand, or 22.00%, to $2.03 million for the fourth quarter of 2013 compared with the same quarter of 2012, reflecting an 11 basis point decrease in the average rate paid on interest-bearing deposits. Borrowing costs decreased $275 thousand, or 10.93%, to $2.24 million for the fourth quarter of 2013 compared with the same quarter of 2012. The average rate paid on interest-bearing liabilities decreased 12 basis points to 0.89% for the fourth quarter of 2013 compared with the same quarter of 2012. The average balance of interest-bearing liabilities decreased $103.56 million, or 5.14%, to $1.91 billion for the fourth quarter of 2013 compared with the same quarter of 2012, which included a $74.57 million decrease in average interest-bearing deposits and a $28.99 million decrease in average total borrowings.

Noninterest Income

Noninterest income decreased $1.94 million, or 21.08%, to $7.27 million for the fourth quarter of 2013 compared with the same quarter of 2012, which is largely due to a $320 thousand net impairment loss related to securities and a $1.63 million increase in the net amortization of the FDIC indemnification asset as a result of improved loss estimates. Wealth management revenues decreased $130 thousand, or 15.08%, for the fourth quarter of 2013 compared with the same quarter of 2012. The Trust and Wealth Management Divisions reported $706 million in combined assets under management as of December 31, 2013. Service charges on deposit accounts decreased $333 thousand, or 8.70%, while other service charges and fees increased $113 thousand, or 6.72%, for the fourth quarter of 2013 compared with the same quarter of 2012. Insurance commissions increased $185 thousand, or 15.23%, to $1.40 million for the fourth quarter of 2013 compared with the same quarter of 2012. The Company realized a $208 thousand net gain on sale of securities for the fourth quarter of 2013, which was a slight decrease compared to the same quarter of 2012. Amortization expense relating to the FDIC indemnification asset totaled $1.31 million during the fourth quarter of 2013, compared to accretion income of $327 thousand for the same quarter of 2012. Other operating income increased $182 thousand, or 16.73%, for the fourth quarter of 2013 compared with the same quarter of 2012. The Company incurred other-than-temporary impairment charges of $320 thousand during the fourth quarter of 2013 related to a non-Agency mortgage-backed security.

Noninterest Expense

Noninterest expense experienced a decrease of $658 thousand, or 3.03%, to $21.08 million for the fourth quarter of 2013 compared with the same quarter of 2012. Salaries and employee benefits decreased $608 thousand, or 5.69%, to $10.09 million for the fourth quarter of 2013 compared with the same quarter of 2012. Salaries and employee benefits attributed to the Peoples and Waccamaw branches decreased $559 thousand to $1.33 million for the fourth quarter of 2013 compared with the same quarter of 2012, which was largely due to a $296 thousand decrease in employee salaries and a $176 thousand decrease in employee benefits, primarily medical insurance, coupled with a reduction of 6 full-time equivalent employees. Occupancy, furniture, and equipment expense decreased $624 thousand, or 18.67%, to $2.72 million for the fourth quarter of 2013 compared with the same quarter of 2012. Other operating expense increased $1.52 million, or 24.31%, to $7.77 million for the fourth quarter of 2013 compared with the same quarter of 2012. Other operating expense included a net loss on sales and expenses associated with other real estate owned of $970 thousand for the fourth quarter of 2013 compared to $312 thousand for the same quarter of 2012. The Company incurred $1.52 million in charges related to seven scheduled branch closures/consolidations that are slated to occur during the first half of 2014. The Company anticipates those branch closures/consolidations to result in pre-tax annualized net cost savings of over $900 thousand. The efficiency ratio for the fourth quarter of 2013 was 58.84% compared to 57.43% for the fourth quarter of 2012.

Allowance for Loan Losses and Asset Quality

The allowance for loan losses was reduced to $24.08 million as of December 31, 2013, compared with $25.77 million as of December 31, 2012. As of December 31, 2013, $22.82 million of the allowance was attributed to the legacy portfolio while $183 thousand and $1.07 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 1.54% as of December 31, 2013, compared with 1.70% as of December 31, 2012. Activity in the allowance in the fourth quarter of 2013 included a $308 thousand, or 25.25%, increase in the provision for loan losses charged to operations compared with the same period of the prior year. Activity in the fourth quarter also included a net recovery of previous impairments recorded through the FDIC indemnification asset of $361 thousand as a result of better than expected performance in the Waccamaw purchased credit impaired loan portfolio. There was no provision related to purchased credit impaired loans prior to 2013. Net charge-offs increased $470 thousand, or 36.58%, in the fourth quarter of 2013 compared with the same quarter of 2012. Annualized net charge-offs were 0.45% for the fourth quarter of 2013, which represents an increase of 11 basis points compared with 0.34% for the fourth quarter of 2012. Two loan relationships accounted for 25.68% of annual net charge-offs of $10.35 million in 2013.

Asset quality in the non-covered portfolio continues to improve, as non-covered delinquent loans, which are comprised of loans 30 days or more past due and nonaccrual loans, as a percentage of total non-covered loans decreased to 1.98% as of December 31, 2013, compared to 2.57% for the same period of the prior year. Non-covered nonaccrual loans totaled $19.16 million as of December 31, 2013, compared to $23.93 million as of December 31, 2012, which is the lowest level reported since the first quarter of 2011. At quarter end, the Company's non-covered nonperforming loans as a percentage of total non-covered loans were 1.31% and non-covered nonperforming assets as a percentage of total non-covered assets were 1.14%.

Total nonperforming assets, including covered and non-covered loan portfolios, consisted of $22.51 million in nonaccrual loans, $86 thousand in accruing loans past due 90 days or more, $1.31 million in unseasoned, accruing troubled debt restructurings, and $14.86 million in other real estate owned as of December 31, 2013. In 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 as of December 31, 2012. In addition, total non-covered nonperforming assets decreased $7.90 million, or 22.13%, and total covered nonperforming assets decreased $4.50 million, or 10.39%, as of December 31, 2013, compared to December 31, 2012.

Balance Sheet and Capital

Consolidated assets totaled $2.60 billion as of December 31, 2013, a decrease of $126.35 million, or 4.63%, compared with $2.73 billion as of December 31, 2012. Consolidated liabilities totaled $2.27 billion as of December 31, 2013, a decrease of $98.64 million, or 4.16%, compared with $2.37 billion as of December 31, 2012. Total stockholders' equity decreased to $328.61 million as of December 31, 2013, compared with $356.32 million as of December 31, 2012. Book value per as-converted common share increased to $16.79 as of December 31, 2013, compared with $16.76 as of December 31, 2012. Tangible book value per common share decreased to $11.26 as of December 31, 2013, compared with $11.66 as of December 31, 2012. Additionally, the Company repurchased 1,404,409 common shares for $23.21 million and paid a cash dividend of $0.12 per common share during the fourth quarter of 2013.

The Company significantly exceeds regulatory "well capitalized" targets as of December 31, 2013, with a total risk-based capital ratio of 16.44%, a Tier 1 risk-based capital ratio of 15.19%, and a Tier 1 leverage ratio of 9.95%.

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 $2.60 billion financial holding company and the parent company of First Community Bank. First Community Bank operates seventy-one 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 combined market value of $706 million as of December 31, 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 nine 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 Year Ended
  December 31, December 31,
(Amounts in thousands, except share and per share data) 2013 2012 2013 2012
Interest income        
Interest and fees on loans held for investment  $ 24,053  $ 28,188  $ 96,600  $ 96,684
Interest on securities --- taxable  2,121  1,770  7,875  7,830
Interest on securities --- nontaxable  1,159  1,216  4,790  4,883
Interest on deposits in banks  31  82  211  259
Total interest income  27,364  31,256  109,476  109,656
Interest expense        
Interest on deposits  2,031  2,604  8,823  9,972
Interest on short-term borrowings  536  656  2,222  2,515
Interest on long-term borrowings  1,705  1,860  6,789  7,113
Total interest expense  4,272  5,120  17,834  19,600
Net interest income  23,092  26,136  91,642  90,056
Provision for loan losses  1,528  1,220  8,208  5,678
Net interest income after provision for loan losses  21,564  24,916  83,434  84,378
Noninterest income        
Wealth management income  732  862  3,412  3,701
Service charges on deposit accounts  3,493  3,826  13,558  14,063
Other service charges and fees  1,795  1,682  7,151  6,462
Insurance commissions  1,400  1,215  5,933  5,743
Net impairment losses recognized in earnings  (320)  --  (320)  (942)
Net gain on sale of securities  208  213  399  483
Net FDIC indemnification asset (amortization) accretion  (1,307)  327  (5,597)  458
Other operating income  1,270  1,088  5,555  6,742
Total noninterest income   7,271  9,213  30,091  36,710
Noninterest expense        
Salaries and employee benefits  10,085  10,693  41,235  38,667
Occupancy expense of bank premises  1,683  1,938  7,033  6,872
Furniture and equipment   1,035  1,404  4,966  4,145
Amortization of intangible assets  184  191  729  804
FDIC premiums and assessments  316  389  1,717  1,612
Merger related expense  --  866  56  5,093
Other operating expense  7,772  6,252  23,569  21,190
Total noninterest expense  21,075  21,733  79,305  78,383
Income before income taxes  7,760  12,396  34,220  42,705
Income tax expense  2,436  3,957  10,908  14,128
Net income   5,324  8,439  23,312  28,577
Dividends on preferred stock  252  272  1,024  1,058
Net income available to common shareholders  $ 5,072  $ 8,167  $ 22,288  $ 27,519
         
Basic earnings per common share   $ 0.27  $ 0.41  $ 1.13  $ 1.44
Diluted earnings per common share   0.26  0.40  1.11  1.40
Cash dividends per common share  0.12  0.11  0.48  0.43
         
Weighted average basic shares outstanding  19,136,317 20,063,873  19,792,099 19,127,065
Weighted average diluted shares outstanding  20,233,737  21,314,023  20,961,800  20,419,569
         
Return on average assets 0.77% 1.19% 0.84% 1.10%
Return on average common equity 6.14% 9.59% 6.57% 8.70%
         
 
 
FIRST COMMUNITY BANCSHARES, INC.
CONDENSED QUARTERLY STATEMENTS OF INCOME (Unaudited)
           
  Quarter Ended
  December 31, September 30, June 30, March 31, December 31,
(Amounts in thousands, except share and per share data) 2013 2013 2013 2013 2012
Interest Income          
Interest and fees on loans held for investment  $ 24,053  $ 23,439  $ 24,264  $ 24,844  $ 28,188
Interest on securities --- taxable  2,121  1,999  1,869  1,886  1,770
Interest on securities --- nontaxable  1,159  1,216  1,207  1,208  1,216
Interest on deposits in banks  31  42  72  66  82
Total interest income  27,364  26,696  27,412  28,004  31,256
Interest Expense          
Interest on deposits  2,031  2,147  2,283  2,362  2,604
Interest on short-term borrowings  536  517  579  590  656
Interest on long-term borrowings  1,705  1,706  1,688  1,690  1,860
Total interest expense  4,272  4,370  4,550  4,642  5,120
Net interest income  23,092  22,326  22,862  23,362  26,136
Provision for loan losses  1,528  2,333  3,205  1,142  1,220
Net interest income after provision for loan losses  21,564  19,993  19,657  22,220  24,916
Noninterest Income          
Wealth management income  732  863  971  846  862
Service charges on deposit accounts  3,493  3,582  3,315  3,168  3,826
Other service charges and fees  1,795  1,777  1,793  1,786  1,682
Insurance commissions  1,400  1,559  1,308  1,666  1,215
Net impairment losses recognized in earnings  (320)  --  --  --  --
Net gain (loss) on sale of securities  208  (39)  113  117  213
Net FDIC indemnification asset (amortization) accretion  (1,307)  (1,089)  (1,662)  (1,539)  327
Other operating income  1,270  1,458  1,010  1,817  1,088
Total noninterest income   7,271  8,111  6,848  7,861  9,213
Noninterest Expense          
Salaries and employee benefits  10,085  11,080  9,960  10,110  10,693
Occupancy expense of bank premises  1,683  1,700  1,795  1,855  1,938
Furniture and equipment  1,035  1,288  1,300  1,343  1,404
Amortization of intangible assets  184  183  183  179  191
FDIC premiums and assessments   316  460  469  472  389
Merger related expense  --  --  7  49  866
Other operating expense  7,772  5,442  4,819  5,536  6,252
Total noninterest expense  21,075  20,153  18,533  19,544  21,733
Income before income taxes  7,760  7,951  7,972  10,537  12,396
Income tax expense  2,436  2,539  2,537  3,396  3,957
Net income   5,324  5,412  5,435  7,141  8,439
Dividends on preferred stock  252  261  253  258  272
Net income available to common shareholders  $ 5,072  $ 5,151  $ 5,182  $ 6,883  $ 8,167
           
Basic earnings per common share  $ 0.27  $ 0.26  $ 0.26  $ 0.34  $ 0.41
Diluted earnings per common share  0.26  0.26  0.26  0.34  0.40
Cash dividends per common share  0.12  0.12  0.12  0.12  0.11
           
Weighted average basic shares outstanding  19,136,317  20,008,861  19,997,991  20,032,694  20,063,873
Weighted average diluted shares outstanding  20,233,737  21,123,788  21,205,078  21,258,490  21,314,023
 
 
FIRST COMMUNITY BANCSHARES, INC.
RECONCILIATION OF GAAP NET INCOME TO CORE EARNINGS (Unaudited)
         
  Three Months Ended Year Ended
  December 31, December 31,
  2013 2012 2013 2012
(Amounts in thousands, except per share data)        
Net income, GAAP  $ 5,324  $ 8,439  $ 23,312  $ 28,577
Non-GAAP adjustments:        
Net impairment losses recognized in earnings  320  --  320  942
Net gain on sale of securities  (208)  (213)  (399)  (483)
Net gain on debt prepayment   --  --  (296)  --
Merger related expense  --  866  56  5,093
Branch closure/consolidation expense  1,520  --  1,520  --
Prospective correction of prior period understatement  --  --  --  (2,395)
Other noncore, nonrecurring items  --  --  1,180  --
Total adjustments to core earnings  1,632  653  2,381  3,157
Tax effect   610  247  889  1,193
Core earnings, non-GAAP  $ 6,346  $ 8,845  $ 24,804  $ 30,541
         
Core return on average assets 0.96% 1.29% 0.93% 1.22%
Core return on average common equity 7.69% 10.38% 7.31% 9.66%
Core return on average tangible common equity 11.47% 15.22% 10.74% 13.98%
Core diluted earnings per common share $0.31 $0.41 $1.18 $1.50
 
 
FIRST COMMUNITY BANCSHARES, INC.
EFFICIENCY RATIO CALCULATION (Unaudited)
         
  Three Months Ended Year Ended
  December 31, December 31,
  2013 2012 2013 2012
(Amounts in thousands)        
Noninterest expense, GAAP  $ 21,075  $ 21,733  $ 79,305  $ 78,383
Non-GAAP adjustments:        
Merger related expense  --  (866)  (56)  (5,093)
OREO expense and net loss  (970)  (312)  (2,037)  (1,893)
Branch closure/consolidation expense  (1,520)  --  (1,520)  --
Other noncore, nonrecurring items  --  --  (1,180)  --
Adjusted noninterest expense  18,585  20,555  74,512  71,397
         
Net interest income, GAAP  23,092  26,136  91,642  90,056
Noninterest income, GAAP  7,722  9,213  30,542  36,710
Non-GAAP adjustments:        
Tax equivalency adjustment  662  658  2,741  2,747
Net impairment losses recognized in earnings  320  --  320  942
Net gain on sale of securities  (208)  (213)  (399)  (483)
Net gain on debt prepayment  --  --  (296)  --
Prospective correction of prior period understatement  --  --  --  (2,395)
Adjusted net interest and noninterest income  31,588  35,794  124,550  127,577
         
Non-GAAP efficiency ratio 58.84% 57.43% 59.82% 55.96%
 
 
FIRST COMMUNITY BANCSHARES, INC.
CONDENSED QUARTERLY BALANCE SHEETS (Unaudited)
           
   As of the Quarter Ended
  December 31, September 30, June 30, March 31, December 31,
  2013 2013 2013 2013 2012
(Amounts in thousands)          
Cash and due from banks  $ 43,598  $ 47,982  $ 44,307  $ 41,467  $ 50,405
Federal funds sold  1,817  33,374  22,876  110,544  66,509
Interest-bearing deposits in banks  11,152  11,219  14,936  15,030  27,933
Total cash and cash equivalents  56,567  92,575  82,119  167,041  144,847
Securities available-for-sale   519,820  545,676  550,158  537,507  534,358
Securities held-to-maturity   568  567  627  816  816
Loans held for sale  883  825  4,621  2,794  6,672
Loans held for investment, net of unearned income:          
Covered under loss share agreements  151,682  163,425  184,076  195,060  207,106
Not covered under loss share agreements  1,559,039  1,533,272  1,507,422  1,494,232  1,517,547
Less allowance for loan losses  (24,077)  (24,665)  (23,122)  (24,850)  (25,770)
Loans, net  1,687,527  1,672,857  1,672,997  1,667,236  1,705,555
FDIC indemnification asset  34,691  37,102  40,389  43,921  48,149
Property, plant, and equipment, net  61,116  63,526  64,085  64,812  64,868
Other real estate owned:          
Covered under loss share agreements  7,541  7,381  6,407  6,911  3,255
Not covered under loss share agreements  7,318  5,450  4,743  4,439  5,749
Interest receivable  7,521  7,336  8,010  8,166  7,842
Goodwill  105,455  104,892  104,892  104,689  104,866
Intangible assets  2,866  2,976  3,159  3,344  3,522
Other assets  111,524  112,313  113,149  111,409  105,040
Total assets  $ 2,602,514  $ 2,652,651  $ 2,650,735  $ 2,720,291  $ 2,728,867
           
Deposits:          
Noninterest-bearing   $ 339,680  $ 353,951  $ 349,972  $ 355,918  $ 343,352
Interest-bearing   361,821  374,546  354,862  377,445  353,321
Savings  524,010  527,887  513,781  513,322  500,276
Time  725,231  740,181  770,081  800,812  833,226
Total deposits  1,950,742  1,996,565  1,988,696  2,047,497  2,030,175
Interest, taxes, and other liabilities  22,770  24,653  23,019  26,740  28,816
Federal funds purchased  16,000  --  --  --  --
Securities sold under agreements to repurchase  118,308  114,647  121,204  121,506  136,118
FHLB borrowings  150,000  150,000  150,000  150,000  161,558
Other borrowings  16,088  15,839  15,877  15,877  15,877
Total liabilities  2,273,908  2,301,704  2,298,796  2,361,620  2,372,544
           
Preferred stock  15,251  15,471  15,921  17,421  17,421
Common stock  20,493  20,478  20,447  20,343  20,343
Additional paid-in capital  215,663  215,671  215,139  213,855  213,829
Retained earnings  125,826  123,018  120,273  117,489  113,013
Treasury stock, at cost  (33,887)  (10,946)  (7,763)  (7,517)  (6,458)
Accumulated other comprehensive loss  (14,740)  (12,745)  (12,078)  (2,920)  (1,825)
Total stockholders' equity  328,606  350,947  351,939  358,671  356,323
Total liabilities and stockholders' equity  $ 2,602,514  $ 2,652,651  $ 2,650,735  $ 2,720,291  $ 2,728,867
           
Shares outstanding at period end  18,514,579  19,888,028  20,060,862  19,985,212  20,053,466
Book value per common share at period end(1)  $ 16.79  $ 16.75  $ 16.63  $ 16.93  $ 16.76
Tangible book value per common share at period end(2)  $ 11.26  $ 11.60  $ 11.53  $ 11.83  $ 11.66
           
(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
  December 31, September 30, June 30, March 31, December 31,
(Amounts in thousands) 2013 2013 2013 2013 2012
Allowance for Loan Losses           
Beginning balance  $ 24,665  $ 23,122  $ 24,850  $ 25,770  $ 25,835
Provision for loan losses charged to operations  1,528  2,333  3,205  1,142  1,220
(Recovery of) provision for loan losses recorded through the FDIC indemnification asset  (361)  812  --  --  --
Charge-offs  (2,807)  (1,955)  (5,006)  (2,759)  (1,717)
Recoveries  1,052  353  73  697  432
Net charge-offs  (1,755)  (1,602)  (4,933)  (2,062)  (1,285)
Ending balance  $ 24,077  $ 24,665  $ 23,122  $ 24,850  $ 25,770
           
Summary of Asset Quality          
Non-covered loans          
Nonaccrual loans   $ 19,161  $ 26,397  $ 29,125  $ 30,076  $ 23,931
Accruing loans past due 90 days or more  --  --  --  --  --
Troubled debt restructurings ("TDRs")(1)  1,311  2,228  276  1,596  6,009
Total non-covered nonperforming loans  20,472  28,625  29,401  31,672  29,940
Other real estate owned ("OREO") not covered under FDIC loss share agreements  7,318  5,450  4,743  4,439  5,749
Total non-covered nonperforming assets  $ 27,790  $ 34,075  $ 34,144  $ 36,111  $ 35,689
Covered Loans          
Nonaccrual loans   $ 3,353  $ 3,579  $ 3,889  $ 4,567  $ 4,323
Accruing loans past due 90 days or more  86  82  --  --  --
Total covered nonperforming loans  3,439  3,661  3,889  4,567  4,323
OREO covered under FDIC loss share agreements  7,541  7,381  6,407  6,911  3,255
Total covered nonperforming assets  10,980  11,042  10,296  11,478  7,578
Total nonperforming assets  $ 38,770  $ 45,117  $ 44,440  $ 47,589  $ 43,267
           
Performing TDRs(2)  $ 10,900  $ 9,697  $ 10,927  $ 10,272  $ 6,038
Total TDRs(3)  12,211  11,925  11,203  11,868  12,047
           
Asset Quality Ratios          
Excluding covered assets           
Nonperforming loans to total loans 1.31% 1.87% 1.95% 2.12% 1.97%
Nonperforming assets to total assets 1.14% 1.37% 1.39% 1.43% 1.42%
Allowance for loan losses to nonperforming loans 117.61% 86.17% 78.64% 78.46% 86.07%
Allowance for loan losses to non-covered total loans 1.54% 1.61% 1.53% 1.66% 1.70%
Annualized net charge-offs to average loans 0.45% 0.42% 1.31% 0.56% 0.34%
Including covered assets          
Nonperforming loans to total loans 1.40% 1.90% 1.97% 2.15% 1.99%
Nonperforming assets to total assets 1.49% 1.70% 1.68% 1.75% 1.59%
Nonperforming assets to total loans and other real estate owned 145.60% 149.60% 160.70% 166.08% 232.81%
Allowance for loan losses to nonperforming loans 100.69% 76.40% 69.46% 68.57% 75.21%
Allowance for loan losses to total loans 1.41% 1.45% 1.37% 1.47% 1.49%
           
(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
  December 31, September 30, June 30, March 31, December 31,
  2013 2013 2013 2013 2012
Selected Ratios          
Return on average assets 0.77% 0.77% 0.78% 1.03% 1.19%
Return on average common equity 6.14% 6.06% 5.97% 8.11% 9.59%
Core return on average assets, non-GAAP 0.96% 0.92% 0.80% 1.05% 1.29%
Core return on average common equity, non-GAAP 7.69% 7.19% 6.19% 8.23% 10.38%
Net interest margin 4.15% 3.99% 4.07% 4.15% 4.49%
Non-GAAP efficiency ratio quarter-to-date 58.84% 60.35% 60.60% 59.55% 57.43%
Non-GAAP efficiency ratio year-to-date 59.82% 60.16% 60.07% 59.55% 55.96%
Total equity to total assets  12.63% 13.23% 13.28% 13.19% 13.06%
Average earning assets to average assets 86.60% 86.51% 86.72% 86.96% 86.87%
Average loans to average deposits 86.53% 85.13% 84.33% 84.98% 85.71%
           
(Amounts in thousands)          
Average Balances          
Loans   $ 1,705,790  $ 1,694,243  $ 1,692,248  $ 1,706,296  $ 1,745,584
Investment securities  535,641  548,283  548,101  545,497  519,798
Earning assets  2,269,354  2,287,785  2,323,517  2,350,686  2,376,805
Total assets  2,620,543  2,644,632  2,679,295  2,703,029  2,736,037
Total deposits  1,971,358  1,990,163  2,006,626  2,007,840  2,036,697
Interest-bearing deposits  1,625,421  1,641,007  1,662,446  1,675,654  1,699,991
Borrowings  285,658  281,250  289,289  309,333  314,645
Interest-bearing liabilities  1,911,079  1,922,257  1,951,735  1,984,987  2,014,636
Stockholders' equity  342,912  352,993  365,217  361,549  356,812
Tax equivalent net interest income  23,754  23,017  23,555  24,057  26,832
 
 
FIRST COMMUNITY BANCSHARES, INC.
AVERAGE BALANCE SHEETS AND NET INTEREST INCOME ANALYSIS (Unaudited)
             
  Three Months Ended December 31,
  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)  $ 1,705,790  $ 24,097 5.60%  $ 1,745,584  $ 28,231 6.43%
Securities available-for-sale  535,074  3,887 2.88%  518,982  3,623 2.78%
Securities held-to-maturity  567  11 7.70%  816  16 7.80%
Interest-bearing deposits  27,923  31 0.44%  111,423  82 0.29%
Total earning assets  2,269,354  28,026 4.90%  2,376,805  31,952 5.35%
Other assets   351,189      359,232    
Total assets  $ 2,620,543      $ 2,736,037    
             
Liabilities            
Interest-bearing deposits            
Demand deposits   $ 369,516  $ 66 0.07%  $ 351,329  $ 62 0.07%
Savings deposits   521,589  140 0.11%  495,116  156 0.13%
Time deposits  734,316  1,825 0.99%  853,546  2,386 1.11%
Total interest-bearing deposits  1,625,421  2,031 0.50%  1,699,991  2,604 0.61%
Borrowings            
Federal funds purchased  2,505  2 0.32%  --  --  --
Retail repurchase agreements  62,212  25 0.16%  79,014  105 0.53%
Wholesale repurchase agreements  50,000  473 3.76%  58,196  540 3.69%
FHLB advances and other borrowings  170,941  1,741 4.04%  177,435  1,871 4.19%
Total borrowings  285,658  2,241 3.11%  314,645  2,516 3.18%
Total interest-bearing liabilities  1,911,079  4,272 0.89%  2,014,636  5,120 1.01%
Noninterest-bearing demand deposits  345,937      336,706    
Other liabilities  20,615      27,883    
Total liabilities  2,277,631      2,379,225    
Stockholders' equity  342,912      356,812    
Total liabilities and stockholders' equity  $ 2,620,543      $ 2,736,037    
Net interest income, tax equivalent    $ 23,754      $ 26,832  
Net interest rate spread(3)     4.01%     4.34%
Net interest margin(4)     4.15%     4.49%
             
(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)
             
  Year Ended December 31,
  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)  $ 1,699,614  $ 96,768 5.69%  $ 1,611,557  $ 96,803 6.01%
Securities available-for-sale  543,697  15,184 2.79%  502,416  15,170 3.02%
Securities held-to-maturity  667  54 8.10%  2,622  171 6.52%
Interest-bearing deposits  63,566  211 0.33%  77,851  259 0.33%
Total earning assets  2,307,544  112,217 4.86%  2,194,446  112,403 5.12%
Other assets   354,058      316,485    
Total assets  $ 2,661,602      $ 2,510,931    
             
Liabilities            
Interest-bearing deposits            
Demand deposits   $ 361,979  $ 240 0.07%  $ 306,019  $ 185 0.06%
Savings deposits   516,247  584 0.11%  471,406  556 0.12%
Time deposits  772,741  7,999 1.04%  776,901  9,231 1.19%
Total interest-bearing deposits  1,650,967  8,823 0.53%  1,554,326  9,972 0.64%
Borrowings            
Federal funds purchased  632  2 0.32%  490  2 0.41%
Retail repurchase agreements  69,141  265 0.38%  78,608  449 0.57%
Wholesale repurchase agreements  51,885  1,890 3.64%  55,163  2,023 3.67%
FHLB advances and other borrowings  169,632  6,854 4.04%  175,333  7,154 4.08%
Total borrowings  291,290  9,011 3.09%  309,594  9,628 3.11%
Total interest-bearing liabilities  1,942,257  17,834 0.92%  1,863,920  19,600 1.05%
Noninterest-bearing demand deposits  342,919      286,950    
Other liabilities  20,815      25,160    
Total liabilities  2,305,991      2,176,030    
Stockholders' equity  355,611      334,901    
Total liabilities and stockholders' equity  $ 2,661,602      $ 2,510,931    
Net interest income, tax equivalent    $ 94,383      $ 92,803  
Net interest rate spread(3)     3.94%     4.07%
Net interest margin(4)     4.09%     4.23%
             
(1) Fully taxable equivalent at the rate of 35% ("FTE"). The FTE basis adjusts for the tax benefits of income on certain tax exempt loans and investments using the federal statutory rate of 35% for each period presented. The Company believes this measure to be the preferred industry measurement of net interest income and provides relevant comparison between taxable and nontaxable amounts.
(2) Nonaccrual loans are included in average balances outstanding, but with no related interest income during the period of nonaccrual.
(3) Represents the difference between the yield on earning assets and cost of funds.
(4) Represents tax equivalent net interest income divided by average earning assets.
 
 
FIRST COMMUNITY BANCSHARES, INC.
RECONCILIATION OF GAAP NET INTEREST MARGIN TO NORMALIZED NET INTEREST MARGIN (Unaudited)
         
   Three Months Ended December 31, 
  2013 2012
    Average Yield/   Average Yield/
(Amounts in thousands) Interest(1) Rate(1) Interest(1) Rate(1)
Earning assets      
Loans(2)  $ 24,097 5.60%  $ 28,231 6.43%
Accretion income  4,395    8,160  
Less: cash accretion income  1,796    2,020  
Non-cash accretion income  2,599    6,140  
Loans, excluding non-cash accretion income  21,498 5.00%  22,091 5.03%
Other earning assets  3,929 2.77%  3,721 2.35%
Total earning assets  25,427 4.45%  25,812 4.32%
Total interest-bearing liabilities  4,272 0.89%  5,120 1.01%
Net interest income, tax equivalent  $ 21,155    $ 20,692  
Net interest rate spread(3) 3.56%   3.31%
Net interest margin(4) 3.70%   3.46%
         
   Year Ended December 31, 
  2013 2012
    Average Yield/   Average Yield/
  Interest(1) Rate(1) Interest(1) Rate(1)
Earning assets      
Loans(2)  $ 96,768 5.69%  $ 96,803 6.01%
Accretion income  15,472    12,871  
Less: cash accretion  7,023    4,158  
Non-cash accretion  8,449    8,713  
Loans, excluding non-cash accretion  88,319 5.20%  88,090 6.01%
Other earning assets  15,449 2.54%  15,600 2.68%
Total earning assets  103,768 4.50%  103,690 4.73%
Total interest-bearing liabilities  17,834 0.92%  19,600 1.05%
Normalized net interest income, tax equivalent  $ 85,934    $ 84,090  
Normalized net interest rate spread(3) 3.58%   3.67%
Normalized net interest margin(4) 3.72%   3.83%
         
(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.
David D. Brown
(276) 326-9000