First Community Bancshares, Inc. Announces First Quarter 2014 Results


BLUEFIELD, Va., April 29, 2014 (GLOBE NEWSWIRE) -- First Community Bancshares, Inc. (Nasdaq:FCBC) (www.fcbinc.com) (the "Company") today reported net income for the quarter ended March 31, 2014, of $5.73 million. Net income available to common shareholders totaled $5.50 million, or $0.29 per diluted common share, for the quarter ended March 31, 2014. Core earnings for the quarter ended March 31, 2014, totaled $5.86 million.

First Quarter 2014 Highlights –

  • The non-covered loan portfolio increased $29.66 million compared to year-end 2013 and $94.46 million compared to the first quarter of 2013. The increase is primarily attributed to new commercial real estate volume in Southern West Virginia and Central North Carolina. This marks the fourth consecutive quarter non-covered loan growth has exceeded covered loan declines.
  • Annualized growth in the non-covered loan portfolio was 7.71% during the quarter.
  • Non-covered delinquent loans as a percentage of total non-covered loans experienced a significant decrease of 104 basis points, or 36.78%, to 1.79% compared to the first quarter of 2013. The decrease is attributed to declines in both past due and nonaccrual loans.
  • The Company repurchased 131,500 shares during the quarter.
  • The Company significantly exceeds regulatory "well capitalized" targets as of March 31, 2014, with a total risk-based capital ratio of 16.3%, a Tier 1 risk-based capital ratio of 15.0%, and a Tier 1 leverage ratio of 10.1%.

Net Interest Income

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

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

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

Noninterest Income

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

Noninterest Expense

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

Allowance for Loan Losses and Asset Quality

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

Asset quality in the non-covered portfolio continues to improve as non-covered delinquent loans, which are comprised of loans 30 days or more past due and nonaccrual loans, as a percentage of total non-covered loans showed a significant decrease to 1.79% as of March 31, 2014, compared to 2.83% for the same period of the prior year. Non-covered nonaccrual loans totaled $20.91 million as of March 31, 2014, compared to $19.16 million as of December 31, 2013, and $30.08 million as of March 31, 2013. At quarter end, the Company's non-covered nonperforming loans as a percentage of total non-covered loans were 1.43% and non-covered nonperforming assets as a percentage of total non-covered assets were 1.16%.

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

Balance Sheet and Capital

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

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

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

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

Non-GAAP Financial Measures

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

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

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

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

About First Community Bancshares, Inc.

First Community Bancshares, Inc., a financial holding company headquartered in Bluefield, Virginia, provides banking products and services through its wholly-owned subsidiary First Community Bank. First Community Bank operated 68 banking locations throughout Virginia, West Virginia, North Carolina, South Carolina, and Tennessee as of March 31, 2014. First Community Bank offers wealth management and investment services through its wholly-owned subsidiary First Community Wealth Management, a registered investment advisory firm, and the Bank's Trust Division, which collectively managed $697 million in combined assets as of March 31, 2014. The Company provides insurance services through its wholly-owned subsidiary Greenpoint Insurance Group, Inc., a full-service insurance agency headquartered in High Point, North Carolina, that operated 9 insurance locations throughout Virginia, West Virginia, and North Carolina as of March 31, 2014. The Company's common stock is listed on the NASDAQ Global Select Market under the trading symbol "FCBC". The Company reported consolidated assets of $2.61 billion as of March 31, 2014. Additional investor information can be found on the Company's website at www.fcbinc.com.

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

FIRST COMMUNITY BANCSHARES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME (Unaudited)
     
  Three Months Ended
March 31,
(Amounts in thousands, except share and per share data) 2014 2013
Interest income    
Interest and fees on loans held for investment  $ 22,834  $ 24,844
Interest on securities --- taxable  2,097  1,886
Interest on securities --- nontaxable  1,122  1,208
Interest on deposits in banks  30  66
Total interest income  26,083  28,004
Interest expense    
Interest on deposits  1,888  2,362
Interest on short-term borrowings  502  590
Interest on long-term borrowings  1,668  1,690
Total interest expense  4,058  4,642
Net interest income  22,025  23,362
Provision for loan losses  1,793  1,142
Net interest income after provision for loan losses  20,232  22,220
Noninterest income    
Wealth management income  1,008  846
Service charges on deposit accounts  3,070  3,168
Other service charges and fees  1,771  1,786
Insurance commissions  1,964  1,666
Net impairment losses recognized in earnings  (264)  --
Net gain on sale of securities  45  117
Net FDIC indemnification asset amortization  (1,134)  (1,539)
Other operating income  774  1,817
Total noninterest income   7,234  7,861
Noninterest expense    
Salaries and employee benefits  9,905  10,110
Occupancy expense of bank premises  1,778  1,855
Furniture and equipment   1,194  1,343
Amortization of intangible assets  175  179
FDIC premiums and assessments  434  472
Merger related expense  --  49
Other operating expense  5,694  5,536
Total noninterest expense  19,180  19,544
Income before income taxes  8,286  10,537
Income tax expense  2,561  3,396
Net income   5,725  7,141
Dividends on preferred stock  228  258
Net income available to common shareholders  $ 5,497  $ 6,883
     
Basic earnings per common share   $ 0.30  $ 0.34
Diluted earnings per common share   0.29  0.34
Cash dividends per common share  0.12  0.12
     
Weighted average basic shares outstanding  18,423,123 20,032,694
Weighted average diluted shares outstanding  19,506,647  21,258,490
     
Return on average assets 0.86% 1.03%
Return on average common equity 7.02% 8.11%
 
FIRST COMMUNITY BANCSHARES, INC.
CONDENSED QUARTERLY STATEMENTS OF INCOME (Unaudited)
           
  Quarter Ended
(Amounts in thousands, except share and per share data) March 31,
2014
December 31,
2013
September 30,
2013
June 30,
2013
March 31,
2013
Interest Income          
Interest and fees on loans held for investment  $ 22,834  $ 24,053  $ 23,439  $ 24,264  $ 24,844
Interest on securities --- taxable  2,097  2,121  1,999  1,869  1,886
Interest on securities --- nontaxable  1,122  1,159  1,216  1,207  1,208
Interest on deposits in banks  30  31  42  72  66
Total interest income  26,083  27,364  26,696  27,412  28,004
Interest Expense          
Interest on deposits  1,888  2,031  2,147  2,283  2,362
Interest on short-term borrowings  502  536  517  579  590
Interest on long-term borrowings  1,668  1,705  1,706  1,688  1,690
Total interest expense  4,058  4,272  4,370  4,550  4,642
Net interest income  22,025  23,092  22,326  22,862  23,362
Provision for loan losses  1,793  1,528  2,333  3,205  1,142
Net interest income after provision for loan losses  20,232  21,564  19,993  19,657  22,220
Noninterest Income          
Wealth management income  1,008  732  863  971  846
Service charges on deposit accounts  3,070  3,493  3,582  3,315  3,168
Other service charges and fees  1,771  1,795  1,777  1,793  1,786
Insurance commissions  1,964  1,400  1,559  1,308  1,666
Net impairment losses recognized in earnings  (264)  (320)  --  --  --
Net gain (loss) on sale of securities  45  208  (39)  113  117
Net FDIC indemnification asset amortization  (1,134)  (1,307)  (1,089)  (1,662)  (1,539)
Other operating income  774  1,270  1,458  1,010  1,817
Total noninterest income   7,234  7,271  8,111  6,848  7,861
Noninterest Expense          
Salaries and employee benefits  9,905  10,085  11,080  9,960  10,110
Occupancy expense of bank premises  1,778  1,683  1,700  1,795  1,855
Furniture and equipment  1,194  1,035  1,288  1,300  1,343
Amortization of intangible assets  175  184  183  183  179
FDIC premiums and assessments   434  316  460  469  472
Merger related expense  --  --  --  7  49
Other operating expense  5,694  7,772  5,442  4,819  5,536
Total noninterest expense  19,180  21,075  20,153  18,533  19,544
Income before income taxes  8,286  7,760  7,951  7,972  10,537
Income tax expense  2,561  2,436  2,539  2,537  3,396
Net income   5,725  5,324  5,412  5,435  7,141
Dividends on preferred stock  228  252  261  253  258
Net income available to common shareholders  $ 5,497  $ 5,072  $ 5,151  $ 5,182  $ 6,883
           
Basic earnings per common share  $ 0.30  $ 0.27  $ 0.26  $ 0.26  $ 0.34
Diluted earnings per common share  0.29  0.26  0.26  0.26  0.34
Cash dividends per common share  0.12  0.12  0.12  0.12  0.12
           
Weighted average basic shares outstanding  18,423,123  19,136,317  20,008,861  19,997,991  20,032,694
Weighted average diluted shares outstanding  19,506,647  20,233,737  21,123,788  21,205,078  21,258,490
 
FIRST COMMUNITY BANCSHARES, INC.
RECONCILIATION OF GAAP NET INCOME TO CORE EARNINGS (Unaudited)
     
  Three Months Ended
March 31,
  2014 2013
(Amounts in thousands, except per share data)    
Net income, GAAP  $ 5,725  $ 7,141
Non-GAAP adjustments:    
Net impairment losses recognized in earnings  264  --
Net gain on sale of securities  (45)  (117)
Net gain on debt prepayment   --  (296)
Merger related expense  --  49
Other noncore, nonrecurring items  --  108
Total adjustments to core earnings  219  (256)
Tax effect   82  (96)
Core earnings, non-GAAP  $ 5,862  $ 6,981
     
Core return on average assets 0.92% 1.05%
Core return on average common equity 7.49% 8.23%
Core return on average tangible common equity 11.36% 12.03%
Core diluted earnings per common share $0.30 $0.33
 
FIRST COMMUNITY BANCSHARES, INC.
EFFICIENCY RATIO CALCULATION (Unaudited)
     
  Three Months Ended
March 31,
  2014 2013
(Amounts in thousands)    
Noninterest expense, GAAP  $ 19,180  $ 19,544
Non-GAAP adjustments:    
Merger related expense  --  (49)
OREO expense and net loss  (857)  (625)
Other noncore, nonrecurring items  --  (108)
Adjusted noninterest expense  18,323  18,762
     
Net interest income, GAAP  22,025  23,362
Noninterest income, GAAP  7,234  7,861
Non-GAAP adjustments:    
Tax equivalency adjustment  663  695
Net impairment losses recognized in earnings  264  --
Net gain on sale of securities  (45)  (117)
Net gain on debt prepayment  --  (296)
Adjusted net interest and noninterest income  30,141  31,505
     
Non-GAAP efficiency ratio 60.79% 59.55%
 
FIRST COMMUNITY BANCSHARES, INC.
CONDENSED QUARTERLY BALANCE SHEETS (Unaudited)
           
  As of the Quarter Ended
  March 31,
2014
December 31,
2013
September 30,
2013
June 30,
2013
March 31,
2013
(Amounts in thousands)          
Cash and due from banks  $ 45,879  $ 43,598  $ 47,982  $ 44,307  $ 41,467
Federal funds sold  22,352  1,817  33,374  22,876  110,544
Interest-bearing deposits in banks  10,771  11,152  11,219  14,936  15,030
Total cash and cash equivalents  79,002  56,567  92,575  82,119  167,041
Securities available-for-sale   483,864  519,820  545,676  550,158  537,507
Securities held-to-maturity   8,161  568  567  627  816
Loans held for sale  1,743  883  825  4,621  2,794
Loans held for investment, net of unearned income:          
Covered under loss share agreements  143,170  151,682  163,425  184,076  195,060
Not covered under loss share agreements  1,588,694  1,559,039  1,533,272  1,507,422  1,494,232
Less allowance for loan losses  (23,798)  (24,077)  (24,665)  (23,122)  (24,850)
Loans, net  1,709,809  1,687,527  1,672,857  1,672,997  1,667,236
FDIC indemnification asset  32,510  34,691  37,102  40,389  43,921
Property, plant, and equipment, net  60,043  61,116  63,526  64,085  64,812
Other real estate owned:          
Covered under loss share agreements  8,705  7,541  7,381  6,407  6,911
Not covered under loss share agreements  5,923  7,318  5,450  4,743  4,439
Interest receivable  6,259  7,521  7,336  8,010  8,166
Goodwill  105,455  105,455  104,892  104,892  104,689
Intangible assets  2,691  2,866  2,976  3,159  3,344
Other assets  107,924  111,524  112,313  113,149  111,409
Total assets  $ 2,610,346  $ 2,602,514  $ 2,652,651  $ 2,650,735  $ 2,720,291
           
Deposits:          
Noninterest-bearing   $ 353,137  $ 339,680  $ 353,951  $ 349,972  $ 355,918
Interest-bearing   382,752  361,821  374,546  354,862  377,445
Savings  531,096  524,010  527,887  513,781  513,322
Time  707,704  725,231  740,181  770,081  800,812
Total deposits  1,974,689  1,950,742  1,996,565  1,988,696  2,047,497
Interest, taxes, and other liabilities  23,323  22,770  24,653  23,019  26,740
Federal funds purchased  --  16,000  --  --  --
Securities sold under agreements to repurchase  112,337  118,308  114,647  121,204  121,506
FHLB borrowings  150,000  150,000  150,000  150,000  150,000
Other borrowings  16,087  16,088  15,839  15,877  15,877
Total liabilities  2,276,436  2,273,908  2,301,704  2,298,796  2,361,620
           
Preferred stock  15,151  15,251  15,471  15,921  17,421
Common stock  20,500  20,493  20,478  20,447  20,343
Additional paid-in capital  215,827  215,663  215,671  215,139  213,855
Retained earnings  129,115  125,826  123,018  120,273  117,489
Treasury stock, at cost  (35,996)  (33,887)  (10,946)  (7,763)  (7,517)
Accumulated other comprehensive loss  (10,687)  (14,740)  (12,745)  (12,078)  (2,920)
Total stockholders' equity  333,910  328,606  350,947  351,939  358,671
Total liabilities and stockholders' equity  $ 2,610,346  $ 2,602,514  $ 2,652,651  $ 2,650,735  $ 2,720,291
           
Shares outstanding at period end  18,392,020  18,514,579  19,888,028  20,060,862  19,985,212
Book value per common share at period end(1)  $ 17.18  $ 16.79  $ 16.75  $ 16.63  $ 16.93
Tangible book value per common share at period end(2)  $ 11.61  $ 11.26  $ 11.60  $ 11.53  $ 11.83
           
(1) Book value per common share is defined as stockholders' equity divided by as-converted common shares outstanding.      
(2) Tangible book value per common share is defined as stockholders' equity less goodwill and other intangibles divided by as-converted common shares outstanding.
 
FIRST COMMUNITY BANCSHARES, INC.
SELECTED CREDIT QUALITY INFORMATION (Unaudited)
           
  As of and for the Quarter Ended
(Amounts in thousands) March 31,
2014
December 31,
2013
September 30,
2013
June 30,
2013
March 31,
2013
Allowance for Loan Losses           
Beginning balance  $ 24,077  $ 24,665  $ 23,122  $ 24,850  $ 25,770
Provision for loan losses charged to operations  1,793  1,528  2,333  3,205  1,142
(Recovery of) provision for loan losses recorded through the FDIC indemnification asset  (203)  (361)  812  --  --
Charge-offs  (2,216)  (2,807)  (1,955)  (5,006)  (2,759)
Recoveries  347  1,052  353  73  697
Net charge-offs  (1,869)  (1,755)  (1,602)  (4,933)  (2,062)
Ending balance  $ 23,798  $ 24,077  $ 24,665  $ 23,122  $ 24,850
           
Summary of Asset Quality          
Non-covered nonperforming          
Nonaccrual loans   $ 20,909  $ 19,161  $ 26,397  $ 29,125  $ 30,076
Accruing loans past due 90 days or more  --  --  --  --  --
Troubled debt restructurings ("TDRs")(1)  1,775  1,311  2,228  276  1,596
Total non-covered nonperforming loans  22,684  20,472  28,625  29,401  31,672
Other real estate owned ("OREO") not covered under FDIC loss share agreements  5,923  7,318  5,450  4,743  4,439
Total non-covered nonperforming assets  $ 28,607  $ 27,790  $ 34,075  $ 34,144  $ 36,111
Covered nonperforming          
Nonaccrual loans   $ 1,261  $ 3,353  $ 3,579  $ 3,889  $ 4,567
Accruing loans past due 90 days or more  109  86  82  --  --
Total covered nonperforming loans  1,370  3,439  3,661  3,889  4,567
OREO covered under FDIC loss share agreements  8,705  7,541  7,381  6,407  6,911
Total covered nonperforming assets  10,075  10,980  11,042  10,296  11,478
Total nonperforming assets  $ 38,682  $ 38,770  $ 45,117  $ 44,440  $ 47,589
           
Performing TDRs(2)  $ 11,193  $ 10,900  $ 9,697  $ 10,927  $ 10,272
Total TDRs(3)  12,968  12,211  11,925  11,203  11,868
           
Asset Quality Ratios          
Excluding covered assets           
Nonperforming loans to total loans 1.43% 1.31% 1.87% 1.95% 2.12%
Nonperforming assets to total assets 1.16% 1.14% 1.37% 1.39% 1.43%
Non-PCI allowance for loan losses to nonperforming loans 102.74% 113.92% 82.52% 75.12% 78.46%
Non-PCI allowance to non-covered total loans 1.47% 1.50% 1.54% 1.47% 1.66%
Annualized net charge-offs to average loans 0.48% 0.45% 0.42% 1.31% 0.56%
Including covered assets          
Nonperforming loans to total loans 1.39% 1.40% 1.90% 1.97% 2.15%
Nonperforming assets to total assets 1.48% 1.49% 1.70% 1.68% 1.75%
Nonperforming assets to total loans and other real estate owned 115.74% 145.60% 149.60% 160.70% 166.08%
Allowance for loan losses to nonperforming loans 98.94% 100.69% 76.40% 69.46% 68.57%
Allowance for loan losses to total loans 1.37% 1.41% 1.45% 1.37% 1.47%
           
(1) Accruing TDRs restructured within the past six months or nonperforming      
(2) Accruing TDRs with six months or more of satisfactory payment performance      
(3) Accruing nonperforming and performing TDRs           
 
FIRST COMMUNITY BANCSHARES, INC.
SELECTED FINANCIAL INFORMATION (Unaudited)
           
  As of and for the Quarter Ended
  March 31,
2014
December 31,
2013
September 30,
2013
June 30,
2013
March 31,
2013
Selected Ratios          
Return on average assets 0.86% 0.77% 0.77% 0.78% 1.03%
Return on average common equity 7.02% 6.14% 6.06% 5.97% 8.11%
Core return on average assets, non-GAAP 0.92% 0.96% 0.92% 0.80% 1.05%
Core return on average common equity, non-GAAP 7.49% 7.69% 7.19% 6.19% 8.23%
Net interest margin 4.10% 4.15% 3.99% 4.07% 4.15%
Non-GAAP efficiency ratio quarter-to-date 60.79% 58.84% 60.35% 60.60% 59.55%
Non-GAAP efficiency ratio year-to-date 60.79% 59.82% 60.16% 60.07% 59.55%
Total equity to total assets  12.79% 12.63% 13.23% 13.28% 13.19%
Average earning assets to average assets 86.65% 86.60% 86.51% 86.72% 86.96%
Average loans to average deposits 88.05% 86.53% 85.13% 84.33% 84.98%
           
(Amounts in thousands)          
Average Balances          
Loans   $ 1,717,908  $ 1,705,790  $ 1,694,243  $ 1,692,248  $ 1,706,296
Investment securities  501,218  535,641  548,283  548,101  545,497
Earning assets  2,245,521  2,269,354  2,287,785  2,323,517  2,350,686
Total assets  2,591,540  2,620,543  2,644,632  2,679,295  2,703,029
Total deposits  1,951,027  1,971,358  1,990,163  2,006,626  2,007,840
Interest-bearing deposits  1,615,454  1,625,421  1,641,007  1,662,446  1,675,654
Borrowings  286,990  285,658  281,250  289,289  309,333
Interest-bearing liabilities  1,901,444  1,911,079  1,922,257  1,951,735  1,984,987
Stockholders' equity  332,605  342,912  352,993  365,217  361,549
Tax equivalent net interest income  22,688  23,754  23,017  23,555  24,057
 
FIRST COMMUNITY BANCSHARES, INC.
AVERAGE BALANCE SHEETS AND NET INTEREST INCOME ANALYSIS (Unaudited)
             
  Three Months Ended March 31,
  2014 2013
(Amounts in thousands) Average 
Balance
Interest(1) Average Yield/
Rate(1)
Average 
Balance
Interest(1) Average Yield/
Rate(1)
Assets            
Earning assets            
Loans(2)  $ 1,717,908  $ 22,893 5.40%  $ 1,706,296  $ 24,888 5.92%
Securities available-for-sale  499,851  3,808 3.09%  544,681  3,728 2.78%
Securities held-to-maturity  1,367  15 4.45%  816  17 8.45%
Interest-bearing deposits  26,395  30 0.46%  98,893  66 0.27%
Total earning assets  2,245,521  26,746 4.83%  2,350,686  28,699 4.95%
Other assets   346,019      352,343    
Total assets  $ 2,591,540      $ 2,703,029    
             
Liabilities            
Interest-bearing deposits            
Demand deposits   $ 370,021  $ 54 0.06%  $ 353,677  $ 56 0.06%
Savings deposits   530,031  137 0.10%  505,917  155 0.12%
Time deposits  714,402  1,697 0.96%  816,060  2,151 1.07%
Total interest-bearing deposits  1,614,454  1,888 0.47%  1,675,654  2,362 0.57%
Borrowings            
Federal funds purchased  3,547  3 0.34%  --  --  --
Retail repurchase agreements  67,356  26 0.16%  75,751  105 0.56%
Wholesale repurchase agreements  50,000  463 3.76%  57,645  475 3.34%
FHLB advances and other borrowings  166,087  1,678 4.10%  175,937  1,700 3.92%
Total borrowings  286,990  2,170 3.07%  309,333  2,280 2.99%
Total interest-bearing liabilities  1,901,444  4,058 0.87%  1,984,987  4,642 0.95%
Noninterest-bearing demand deposits  336,573      332,186    
Other liabilities  20,918      24,307    
Total liabilities  2,258,935      2,341,480    
Stockholders' equity  332,605      361,549    
Total liabilities and stockholders' equity  $ 2,591,540      $ 2,703,029    
Net interest income, tax equivalent  $ 22,688      $ 24,057  
Net interest rate spread(3)     3.96%     4.00%
Net interest margin(4)     4.10%     4.15%
             
(1) Fully taxable equivalent at the rate of 35% ("FTE"). The FTE basis adjusts for the tax benefits of income on certain tax exempt loans and investments using the federal statutory rate of 35% for each period presented. The Company believes this measure to be the preferred industry measurement of net interest income and provides relevant comparison between taxable and nontaxable amounts.
(2) Nonaccrual loans are included in average balances outstanding, but with no related interest income during the period of nonaccrual.
(3) Represents the difference between the yield on earning assets and cost of funds.      
(4) Represents tax equivalent net interest income divided by average earning assets.      
 
FIRST COMMUNITY BANCSHARES, INC.
RECONCILIATION OF GAAP NET INTEREST MARGIN TO NORMALIZED NET INTEREST MARGIN (Unaudited)
         
   Three Months Ended March 31, 
  2014 2013
(Amounts in thousands) Interest(1) Average Yield/
Rate(1)
Interest(1) Average Yield/
Rate(1)
Earning assets        
Loans(2)  $ 22,893 5.40%  $ 24,888 5.92%
Accretion income  3,122    3,842  
Less: cash accretion income  600    1,782  
Non-cash accretion income  2,522    2,060  
Loans, excluding non-cash accretion income  20,371 4.81%  22,828 5.43%
Other earning assets  3,853 2.96%  3,811 2.40%
Total earning assets  24,224 4.38%  26,639 4.60%
Total interest-bearing liabilities  4,058 0.87%  4,642 0.95%
Net interest income, tax equivalent  $ 20,166    $ 21,997  
Net interest rate spread(3)   3.51%   3.65%
Net interest margin(4)   3.64%   3.80%
         
(1) Fully taxable equivalent at the rate of 35% ("FTE"). The FTE basis adjusts for the tax benefits of income on certain tax exempt loans and investments using the federal statutory rate of 35% for each period presented. The Company believes this measure to be the preferred industry measurement of net interest income and provides relevant comparison between taxable and nontaxable amounts.
(2) Nonaccrual loans are included in average balances outstanding, but with no related interest income during the period of nonaccrual.
(3) Represents the difference between the yield on earning assets and cost of funds.  
(4) Represents tax equivalent net interest income divided by average earning assets.  


            

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