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First Community Bancshares, Inc. Announces Second Quarter 2015 Results and Quarterly Dividend

BLUEFIELD, Va., July 28, 2015 (GLOBE NEWSWIRE) -- First Community Bancshares, Inc. (NASDAQ:FCBC) (www.fcbinc.com) (the “Company”) today announced financial results for the quarter and six months ended June 30, 2015. The Company reported net income of $6.18 million for the quarter and $12.13 million for the six months ended June 30, 2015. Net income available to common shareholders totaled $6.18 million, or $0.33 per diluted common share, for the quarter and $12.03 million, or $0.64 per diluted common share, for the six months ended June 30, 2015. Core earnings totaled $6.10 million for the quarter and $12.11 million for the six months ended June 30, 2015.

The Company also announced today that the Board of Directors declared a quarterly cash dividend to common shareholders of fourteen cents ($0.14) per common share, an increase of 8% over last quarter and last year. The quarterly dividend is payable to common shareholders of record on August 7, 2015, and is expected to be paid on or about August 21, 2015. The current year marks the 30th consecutive year of cash dividends paid to stockholders and represents average annual increases in the quarterly dividend rate of 8% over the last 5 years.

Second Quarter 2015 Highlights –

  • The Company prepaid an additional $25 million in Federal Home Loan Bank convertible advances during the second quarter. The prepayment was in keeping with the Company’s strategic goal of reducing high cost wholesale debt.
  • The Company repurchased 345,173 common shares during the second quarter, bringing total repurchased shares to 684,407 during the first half of 2015.
  • Asset quality metrics continue to be favorable as non-covered nonaccrual loans decreased $1.53 million, or 8.75% in the second quarter of 2015 compared to the same quarter of the prior year.
  • Net charge-offs decreased $758 thousand, or 73.74%, and the ratio of annualized net charge-offs to average non-covered loans improved 19 basis points to 0.07% for the second quarter of 2015 compared to the same quarter of 2014.
  • The Company significantly exceeds regulatory “well capitalized” targets as of June 30, 2015.

Net Interest Income

Net interest income decreased $998 thousand, or 4.52%, to $21.07 million for the second quarter of 2015 compared with the same quarter of 2014. The tax equivalent net interest margin decreased to 3.90% for the second quarter of 2015 compared with 4.08% for the same quarter of 2014. Total interest income decreased $2.11 million, or 8.10%, to $23.98 million for the second quarter of 2015 compared with the same quarter of 2014. The tax equivalent yield on loans decreased 13 basis points to 5.25% and the average loan balance decreased $76.57 million, or 4.38%, to $1.67 billion for the second quarter of 2015 compared with the same quarter of 2014. The decrease in net interest income and the average loan balance is primarily due to loans sold in divestiture activities during the fourth quarter of 2014 and decreases in the covered loan portfolio compared to the second quarter of 2014.

Purchased credit impaired (“PCI”) loan interest accretion totaled $2.42 million for the second quarter of 2015, of which $1.13 million was received in cash, compared to accretion income of $2.79 million for the same quarter of 2014, of which $1.25 million was received in cash. The normalized net interest margin, which excludes non-cash loan interest accretion, was 3.67% for the second quarter of 2015 and 3.80% for same quarter of 2014. The normalized yield on loans was 4.94% for the second quarter of 2015 compared to 5.03% for the same quarter of 2014.

Total interest expense decreased $1.12 million, or 27.73%, to $2.91 million for the second quarter of 2015 compared with the same quarter of 2014. Deposit costs decreased $273 thousand, or 14.88%, to $1.56 million for the second quarter of 2015 compared with the same quarter of 2014, reflecting a 5 basis point decrease in the average rate paid on interest-bearing deposits. Borrowing costs decreased $843 thousand, or 38.49%, to $1.35 million for the second quarter of 2015 compared with the same quarter of 2014 primarily due to Federal Home Loan Bank (“FHLB”) debt prepayments. The average rate paid on interest-bearing liabilities decreased 19 basis points to 0.67% for the second quarter of 2015 compared with the same quarter of 2014. The average balance of interest-bearing liabilities decreased $130.55 million, or 6.97%, to $1.74 billion for the second quarter of 2015 compared with the same quarter of 2014, which included a $59.92 million decrease in average interest-bearing deposits and a $70.63 million decrease in average total borrowings.

Noninterest Income

Noninterest income increased $533 thousand, or 7.01%, to $8.14 million for the second quarter of 2015 compared with the same quarter of 2014, which was largely due to a $516 thousand, or 36.65%, increase in other operating income. Other operating income for the second quarter of 2015 included a net death benefit of approximately $1.14 million from the maturity of a life insurance policy. Wealth management revenues increased $57 thousand, or 7.94%, for the second quarter of 2015 compared with the same quarter of 2014. The Trust and Wealth Management Divisions reported $717 million in combined assets under management as of June 30, 2015. Service charges on deposits and other service charges and fees increased $239 thousand, or 4.53%, to $5.51 million for the second quarter of 2015 compared with the same quarter of 2014. Insurance commissions increased $105 thousand, or 7.22%, for the second quarter of 2015 compared with the same quarter of 2014. The Company incurred no other-than-temporary impairment charges during the second quarter of 2015 compared to $254 thousand during the same quarter of 2014 related to a non-Agency mortgage-backed security that was sold during the fourth quarter of 2014. The Company realized a $213 thousand net gain on the sale of securities in the second quarter of 2015 compared to a net loss of $59 thousand in the same quarter of 2014. Net amortization expense related to the FDIC indemnification asset increased $910 thousand, or 97.22%, due to continuing better than expected performance in the covered loan portfolio.

Noninterest Expense

Noninterest expense increased $2.13 million, or 11.71%, to $20.29 million for the second quarter of 2015 compared with the same quarter of 2014, which was largely due to FHLB debt prepayment fees. The Company incurred fees of $1.70 million related to the prepayment of $25 million in FHLB convertible advances. Salaries and employee benefits decreased $350 thousand, or 3.49%, to $9.69 million for the second quarter of 2015 compared with the same quarter of 2014. Full-time equivalent employees totaled 677 as of June 30, 2015, a decrease of 30 employees compared with the same period of the prior year. The decrease was primarily due to branch consolidation and divestiture activities offset by the Bank of America branch acquisition that occurred during the fourth quarter of 2014. Occupancy, furniture, and equipment expenses remained stable at $2.78 million for the second quarter of 2015 compared with the same quarter of 2014. Other operating expenses increased $740 thousand, or 15.74%, to $5.44 million for the second quarter of 2015 compared with the same quarter of 2014, which included $213 thousand in branch property write-downs and a $162 thousand increase in the net loss on sales and expenses associated with other real estate owned (“OREO”). The non-GAAP efficiency ratio for the second quarter of 2015 was 61.71% compared to 59.40% for the same quarter of 2014.

Allowance for Loan Losses and Asset Quality

The allowance for loan losses totaled $20.26 million as of June 30, 2015, a slight increase of $31 thousand compared to $20.23 million as of December 31, 2014, and a decrease of $3.65 million compared to $23.91 million as of June 30, 2014. As of June 30, 2015, $20.14 million of the allowance was attributed to the non-PCI loan portfolio and $114 thousand was attributed to the PCI loan portfolio. Non-covered loans and OREO are those assets not covered by FDIC loss share agreements. The allowance for loan losses, excluding PCI loans, as a percentage of non-covered loans was 1.29% as of June 30, 2015, compared with 1.29% as of December 31, 2014, and 1.44% as of June 30, 2014. Allowance activity in the second quarter of 2015 included a $276 thousand provision for loan losses, a decrease of $1.00 million compared to the same quarter of 2014. Activity in the allowance also included a recovery of loan losses recorded through the FDIC indemnification asset of $138 thousand in the second quarter of 2014. The Company realized net charge-offs of $270 thousand in the second quarter of 2015, a decrease of $758 thousand, or 73.74%, compared to $1.03 million in the same quarter of 2014. The ratio of annualized net charge-offs to average non-covered loans improved to 0.07% for the second quarter of 2015, which represents a decrease of 19 basis points compared with 0.26% for the second quarter of 2014.

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 1.39% as of June 30, 2015, compared to 1.67% for the same period of the prior year. Non-covered nonaccrual loans totaled $15.94 million as of June 30, 2015, compared to $10.56 million as of December 31, 2014, and $17.46 million as of June 30, 2014. At quarter-end, the Company’s non-covered nonaccrual loans as a percentage of total non-covered loans were 1.02%, compared to 0.67% at year-end 2014 and 1.07% for the same period of the prior year. As of June 30, 2015, the Company’s non-covered nonperforming loans as a percentage of total non-covered loans were 1.02% and non-covered nonperforming assets as a percentage of total non-covered assets were 0.98%.

As of June 30, 2015, total nonperforming assets, including the covered and non-covered loan portfolios, consisted of $17.00 million in nonaccrual loans and $12.82 million in OREO. The Company maintained no unseasoned, accruing troubled debt restructurings or accruing loans past due 90 days or more as of June 30, 2015. In comparison, total nonperforming assets consisted of $12.99 million in nonaccrual loans, $2.73 million in unseasoned, accruing troubled debt restructurings, and $12.96 million in OREO as of December 31, 2014. In addition, total non-covered nonperforming assets increased $3.45 million, or 17.32%, and total covered nonperforming assets decreased $2.32 million, or 26.46%, as of June 30, 2015, compared to December 31, 2014.

Balance Sheet and Capital

Consolidated assets totaled $2.49 billion as of June 30, 2015, a decrease of $116.14 million, or 4.45%, compared with $2.61 billion as of December 31, 2014. The change in consolidated assets was primarily driven by a $143.85 million, or 73.07%, decrease in federal funds sold as liquidity was deployed to reduce high cost borrowings and deposits, redeem the Company’s convertible preferred shares, repurchase common stock, and purchase investment securities to provide the funding necessary to extinguish certain borrowings as they come due. As of June 30, 2015, securities available for sale increased $50.07 million and securities held to maturity increased $14.70 million compared to December 31, 2014.

Consolidated liabilities totaled $2.15 billion as of June 30, 2015, a decrease of $109.33 million, or 4.85%, compared with $2.26 billion as of December 31, 2014. The change in consolidated liabilities was driven by a $70.97 million decrease in deposits, a $5.86 million decrease in repurchase agreements, and a $25.00 million decrease in FHLB borrowings. The Company prepaid an additional $25 million of a $50 million FHLB convertible advance with a May 2017 maturity and 4.15% interest rate during the second quarter of 2015. The prepayment resulted in a pre-tax penalty of $1.70 million.

Total stockholders’ equity decreased to $344.57 million as of June 30, 2015, compared with $351.37 million as of December 31, 2014. The Company redeemed all outstanding shares of its convertible preferred stock during the first quarter of 2015, resulting in the redemption of 2,367 preferred shares totaling $2.37 million. Additionally, the Company repurchased 683,907 common shares at a weighted average cost of $16.78 per share and paid a cash dividend of $0.26 per common share during the first six months of 2015. Book value per common share increased 2.33% to $18.48 as of June 30, 2015, compared with $18.06 as of December 31, 2014. Tangible book value per common share increased 1.59% to $12.76 as of June 30, 2015, compared with $12.56 as of December 31, 2014.

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

Non-GAAP Financial Measures

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

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

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

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

About First Community Bancshares, Inc.

First Community Bancshares, Inc., a financial holding company headquartered in Bluefield, Virginia, provides banking products and services through its wholly-owned subsidiary First Community Bank. First Community Bank operated 52 banking locations throughout Virginia, West Virginia, North Carolina, and Tennessee as of June 30, 2015. First Community Bank offers wealth management and investment services through its wholly-owned subsidiary First Community Wealth Management, a registered investment advisory firm, and the Bank’s Trust Division, which collectively managed $717 million in combined assets as of June 30, 2015. The Company provides insurance services through its wholly-owned subsidiary Greenpoint Insurance Group, Inc., a full-service insurance agency headquartered in High Point, North Carolina, that operated 11 insurance locations throughout Virginia, West Virginia, and North Carolina as of June 30, 2015. The Company’s common stock is listed on the NASDAQ Global Select Market under the trading symbol, “FCBC”. The Company reported consolidated assets of $2.49 billion as of June 30, 2015. Additional investor information is available on the Company’s website at www.fcbinc.com.

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

FIRST COMMUNITY BANCSHARES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME (Unaudited)
Three Months EndedSix Months Ended
June 30,June 30,
(Amounts in thousands, except share and per share data) 2015 2014 2015 2014
Interest income
Interest and fees on loans held for investment$ 21,826 $ 23,410 $ 43,740 $ 46,244
Interest on securities -- taxable 1,070 1,537 2,105 3,634
Interest on securities -- nontaxable 1,003 1,099 2,019 2,221
Interest on deposits in banks 80 47 213 77
Total interest income 23,979 26,093 48,077 52,176
Interest expense
Interest on deposits 1,562 1,835 3,292 3,723
Interest on short-term borrowings 499 483 989 985
Interest on long-term borrowings 848 1,707 1,887 3,375
Total interest expense 2,909 4,025 6,168 8,083
Net interest income 21,070 22,068 41,909 44,093
Provision for loan losses 276 1,279 1,376 3,072
Net interest income after provision for loan losses 20,794 20,789 40,533 41,021
Noninterest income
Wealth management income 775 718 1,441 1,726
Service charges on deposit accounts 3,507 3,423 6,410 6,493
Other service charges and fees 2,005 1,850 4,013 3,621
Insurance commissions 1,559 1,454 3,686 3,418
Net impairment losses recognized in earnings - (254) - (518)
Net gain (loss) on sale of securities 213 (59) 190 (14)
Net FDIC indemnification asset amortization (1,846) (936) (3,411) (2,070)
Net gain on branch divestiture - - - -
Other operating income 1,924 1,408 2,644 2,182
Total noninterest income 8,137 7,604 14,973 14,838
Noninterest expense
Salaries and employee benefits 9,693 10,043 19,386 19,948
Occupancy expense of bank premises 1,427 1,578 2,961 3,356
Furniture and equipment 1,358 1,205 2,595 2,399
Amortization of intangible assets 279 178 556 353
FDIC premiums and assessments 389 458 804 892
FHLB debt prepayment fees 1,702 - 1,702 -
Merger, acquisition, and divestiture expense - - 86 -
Other operating expense 5,441 4,701 9,979 10,395
Total noninterest expense 20,289 18,163 38,069 37,343
Income before income taxes 8,642 10,230 17,437 18,516
Income tax expense 2,467 3,223 5,304 5,784
Net income 6,175 7,007 12,133 12,732
Dividends on preferred stock - 227 105 455
Net income available to common shareholders$ 6,175 $ 6,780 $ 12,028 $ 12,277
Basic earnings per common share $ 0.33 $ 0.37 $ 0.64 $ 0.67
Diluted earnings per common share 0.33 0.36 0.64 0.65
Cash dividends per common share 0.13 0.12 0.26 0.24
Weighted average basic shares outstanding 18,831,742 18,395,996 18,733,288 18,409,414
Weighted average diluted shares outstanding 18,860,119 19,457,237 19,095,408 19,475,333
Return on average assets 0.98% 1.06% 0.94% 0.95%
Return on average common equity 7.11% 8.38% 6.92% 7.32%


FIRST COMMUNITY BANCSHARES, INC.
CONDENSED QUARTERLY STATEMENTS OF INCOME (Unaudited)
Quarter Ended
June 30,March 31,December 31,September 30,June 30,
(Amounts in thousands, except share and per share data) 2015 2015 2014 2014 2014
Interest Income
Interest and fees on loans held for investment$ 21,826 $ 21,914 $ 25,841 $ 23,407 $ 23,410
Interest on securities -- taxable 1,070 1,035 1,145 1,196 1,537
Interest on securities -- nontaxable 1,003 1,016 1,021 1,108 1,099
Interest on deposits in banks 80 133 174 40 47
Total interest income 23,979 24,098 28,181 25,751 26,093
Interest Expense
Interest on deposits 1,562 1,730 1,803 1,782 1,835
Interest on short-term borrowings 499 490 513 526 483
Interest on long-term borrowings 848 1,039 1,155 1,428 1,707
Total interest expense 2,909 3,259 3,471 3,736 4,025
Net interest income 21,070 20,839 24,710 22,015 22,068
Provision for (recovery of) loan losses 276 1,100 (488) (2,439) 1,279
Net interest income after provision for loan losses 20,794 19,739 25,198 24,454 20,789
Noninterest Income
Wealth management income 775 666 634 670 718
Service charges on deposit accounts 3,507 2,903 3,729 3,606 3,423
Other service charges and fees 2,005 2,008 2,108 1,852 1,850
Insurance commissions 1,559 2,127 1,442 1,695 1,454
Net impairment losses recognized in earnings - - - (219) (254)
Net gain (loss) on sale of securities 213 (23) (1,691) 320 (59)
Net FDIC indemnification asset amortization (1,846) (1,565) (813) (1,096) (936)
Net gain on branch divestiture - - 755 - -
Other operating income 1,924 720 1,334 839 1,408
Total noninterest income 8,137 6,836 7,498 7,667 7,604
Noninterest Expense
Salaries and employee benefits 9,693 9,693 10,841 9,924 10,043
Occupancy expense of bank premises 1,427 1,534 1,513 1,469 1,578
Furniture and equipment 1,358 1,237 1,341 1,212 1,205
Amortization of intangible assets 279 277 255 179 178
FDIC premiums and assessments 389 415 361 419 458
FHLB debt prepayment fees 1,702 - 1,961 3,047 -
Merger, acquisition, and divestiture expense - 86 865 285 -
Other operating expense 5,441 4,538 6,913 4,934 4,701
Total noninterest expense 20,289 17,780 24,050 21,469 18,163
Income before income taxes 8,642 8,795 8,646 10,652 10,230
Income tax expense 2,467 2,837 2,931 3,609 3,223
Net income 6,175 5,958 5,715 7,043 7,007
Dividends on preferred stock - 105 227 228 227
Net income available to common shareholders$ 6,175 $ 5,853 $ 5,488 $ 6,815 $ 6,780
Basic earnings per common share$ 0.33 $ 0.31 $ 0.30 $ 0.37 $ 0.37
Diluted earnings per common share 0.33 0.31 0.29 0.36 0.36
Cash dividends per common share 0.13 0.13 0.13 0.13 0.12
Weighted average basic shares outstanding 18,831,742 18,633,574 18,403,959 18,402,764 18,395,996
Weighted average diluted shares outstanding 18,860,119 19,344,443 19,482,000 19,466,126 19,457,237


FIRST COMMUNITY BANCSHARES, INC.
RECONCILIATION OF GAAP NET INCOME TO CORE EARNINGS (Unaudited)
Three Months Ended
June 30,March 31,December 31,September 30,June 30,
2015 2015 2014 2014 2014
(Amounts in thousands, except per share data)
Net income, GAAP$ 6,175 $ 5,958 $ 5,715 $ 7,043 $ 7,007
Non-GAAP adjustments:
Net impairment losses recognized in earnings - - - 219 254
Net (gain) loss on sale of securities (213) 23 1,691 (320) 59
Net gain on branch divestiture - - (755) - -
FHLB debt prepayment fees 1,702 - 1,961 3,047 -
Merger, acquisition, and divestiture expense - 86 865 285 -
Other noncore, nonrecurring items (930) (30) 1,173 - (536)
Total adjustments to core earnings 559 79 4,935 3,231 (223)
Tax effect 630 29 1,859 1,217 (84)
Core earnings, non-GAAP$ 6,104 $ 6,008 $ 8,791 $ 9,057 $ 6,868
Core return on average assets 0.96% 0.94% 1.28% 1.41% 1.07%
Core return on average common equity 7.00% 6.90% 10.39% 10.83% 8.49%
Core return on average tangible common equity 10.07% 9.90% 15.50% 16.06% 12.73%
Core diluted earnings per common share$ 0.32 $0.31 $0.45 $0.47 $0.35
Six Months Ended
June 30,
2015 2014
(Amounts in thousands, except per share data)
Net income, GAAP $ 12,133 $ 12,732
Non-GAAP adjustments:
Net impairment losses recognized in earnings - 518
Net (gain) loss on sale of securities (190) 14
FHLB debt prepayment fees 1,702 -
Merger, acquisition, and divestiture expense 86 -
Other noncore, nonrecurring items (960) (536)
Total adjustments to core earnings 638 (4)
Tax effect 660 (2)
Core earnings, non-GAAP $ 12,111 $ 12,730
Core return on average assets 0.95% 0.99%
Core return on average common equity 6.94% 8.00%
Core return on average tangible common equity 9.97% 12.06%
Core diluted earnings per common share $ 0.63 $0.65


FIRST COMMUNITY BANCSHARES, INC.
EFFICIENCY RATIO CALCULATION (Unaudited)
Three Months Ended
June 30,March 31,December 31,September 30,June 30,
2015 2015 2014 2014 2014
(Amounts in thousands)
Noninterest expense, GAAP$ 20,289 $ 17,780 $ 24,050 $ 21,469 $ 18,163
Non-GAAP adjustments:
FHLB debt prepayment fees (1,702) - (1,961) (3,047) -
Merger, acquisition, and divestiture expense - (86) (865) (285) -
OREO expense and net loss (416) (327) (403) (580) (254)
Other noncore, nonrecurring items (213) - (1,573) - -
Adjusted noninterest expense 17,958 17,367 19,248 17,557 17,909
Net interest income, GAAP 21,070 20,839 24,710 22,015 22,068
Noninterest income, GAAP 8,137 6,836 7,498 7,667 7,604
Non-GAAP adjustments:
Tax equivalency adjustment 1,249 588 613 582 699
Net impairment losses recognized in earnings - - - 219 254
Net loss (gain) on sale of securities (213) 23 1,691 (320) 59
Net gain on branch divestiture - - (755) - -
Other noncore, nonrecurring items (1,143) (30) (400) - (536)
Adjusted net interest and noninterest income 29,100 28,256 33,357 30,163 30,148
Non-GAAP efficiency ratio 61.71% 61.46% 57.70% 58.21% 59.40%
GAAP efficiency ratio 69.47% 64.25% 74.67% 72.33% 61.21%
Six Months Ended
June 30,
2015 2014
(Amounts in thousands)
Noninterest expense, GAAP $ 38,069 $ 37,343
Non-GAAP adjustments:
FHLB debt prepayment fees (1,702) -
Merger, acquisition, and divestiture expense (86) -
OREO expense and net loss (743) (1,111)
Other noncore, nonrecurring items (213) -
Adjusted noninterest expense 35,325 36,232
Net interest income, GAAP 41,909 44,093
Noninterest income, GAAP 14,973 14,838
Non-GAAP adjustments:
Tax equivalency adjustment 1,837 1,361
Net impairment losses recognized in earnings - 518
Net loss (gain) on sale of securities (190) 14
Other noncore, nonrecurring items (1,173) (536)
Adjusted net interest and noninterest income 57,356 60,288
Non-GAAP efficiency ratio 61.59% 60.10%
GAAP efficiency ratio 66.93% 63.37%


FIRST COMMUNITY BANCSHARES, INC.
CONDENSED CONSOLIDATED QUARTERLY BALANCE SHEETS (Unaudited)
As of the Quarter Ended
June 30,March 31,December 31,September 30,June 30,
2015 2015 2014 2014 2014
(Amounts in thousands)
Cash and due from banks$ 38,200 $ 36,222 $ 39,450 $ 44,703 $ 47,869
Federal funds sold 53,023 169,422 196,873 55,503 38,142
Interest-bearing deposits in banks 1,379 1,380 1,337 5,716 10,770
Total cash and cash equivalents 92,602 207,024 237,660 105,922 96,781
Securities available for sale 376,191 351,454 326,117 351,693 398,425
Securities held to maturity 72,652 72,897 57,948 31,029 19,398
Loans held for sale 913 1,174 1,792 1,150 459
Loans held for investment, net of unearned income:
Covered under loss share agreements 102,634 112,724 122,240 126,611 132,717
Not covered under loss share agreements 1,564,655 1,558,310 1,567,176 1,636,181 1,626,707
Less allowance for loan losses (20,258) (20,252) (20,227) (21,159) (23,911)
Loans, net 1,647,944 1,651,956 1,670,981 1,742,783 1,735,972
FDIC indemnification asset 23,653 26,053 27,900 29,745 30,908
Property, plant, and equipment, net 54,112 54,955 55,844 59,283 59,145
Other real estate owned:
Covered under loss share agreements 5,382 5,834 6,324 7,620 8,814
Not covered under loss share agreements 7,434 7,032 6,638 5,612 5,693
Interest receivable 6,119 6,188 6,315 6,346 6,206
Goodwill 100,810 100,810 100,722 105,657 105,657
Intangible assets 5,865 6,144 6,422 2,334 2,512
Other assets 99,034 95,497 105,065 102,103 105,890
Total assets$ 2,491,798 $ 2,585,844 $ 2,607,936 $ 2,550,127 $ 2,575,401
Deposits:
Noninterest-bearing demand$ 424,438 $ 433,422 $ 417,729 $ 397,523 $ 357,871
Interest-bearing demand 329,583 341,300 353,874 347,589 362,318
Savings 528,003 533,589 525,478 519,902 517,766
Time 638,197 682,878 703,678 667,261 685,149
Total deposits 1,920,221 1,991,189 2,000,759 1,932,275 1,923,104
Interest, taxes, and other liabilities 23,852 24,203 26,062 25,131 23,576
Securities sold under agreements to repurchase 122,158 116,302 121,742 114,439 120,159
FHLB borrowings 65,000 90,000 90,000 115,000 150,000
Other borrowings 15,999 15,999 17,999 16,047 16,087
Total liabilities 2,147,230 2,237,693 2,256,562 2,202,892 2,232,926
Preferred stock - - 15,151 15,151 15,151
Common stock 21,382 21,382 20,500 20,500 20,500
Additional paid-in capital 227,616 227,782 215,873 215,729 215,670
Retained earnings 148,378 144,656 141,206 138,111 133,688
Treasury stock, at cost (46,610) (41,078) (35,751) (35,808) (35,797)
Accumulated other comprehensive loss (6,198) (4,591) (5,605) (6,448) (6,737)
Total stockholders' equity 344,568 348,151 351,374 347,235 342,475
Total liabilities and stockholders' equity$ 2,491,798 $ 2,585,844 $ 2,607,936 $ 2,550,127 $ 2,575,401
Shares outstanding at period-end 18,641,966 18,965,274 18,406,219 18,402,919 18,403,692
Book value per common share at period-end(1)$ 18.48 $ 18.36 $ 18.06 $ 17.85 $ 17.61
Tangible book value per common share at period-end(2)$ 12.76 $ 12.72 $ 12.56 $ 12.30 $ 12.05
(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
June 30,March 31,December 31,September 30,June 30,
(Amounts in thousands) 2015 2015 2014 2014 2014
Allowance for Loan Losses
Beginning balance$ 20,252 $ 20,227 $ 21,159 $ 23,911 $ 23,798
Removal of loans transferred - - (682) - -
Provision for (recovery of) loan losses charged to operations 276 1,100 (488) (2,439) 1,279
Provision for (recovery of) loan losses recorded through the FDIC indemnification asset - 46 29 (110) (138)
Charge-offs (673) (1,578) (1,362) (1,118) (1,785)
Recoveries 403 457 1,571 915 757
Net (charge-offs) recoveries (270) (1,121) 209 (203) (1,028)
Ending balance$ 20,258 $ 20,252 $ 20,227 $ 21,159 $ 23,911
Summary of Asset Quality
Non-covered nonperforming
Nonaccrual loans $ 15,936 $ 15,387 $ 10,556 $ 11,480 $ 17,464
Accruing loans past due 90 days or more - - - - -
Troubled debt restructurings ("TDRs")(1) - - 2,726 3,450 1,877
Total non-covered nonperforming loans 15,936 15,387 13,282 14,930 19,341
OREO not covered under FDIC loss share agreements 7,434 7,032 6,638 5,612 5,693
Total non-covered nonperforming assets$ 23,370 $ 22,419 $ 19,920 $ 20,542 $ 25,034
Covered nonperforming
Nonaccrual loans $ 1,062 $ 2,780 $ 2,438 $ 1,131 $ 955
Accruing loans past due 90 days or more - 60 - - 109
Total covered nonperforming loans 1,062 2,840 2,438 1,131 1,064
OREO covered under FDIC loss share agreements 5,382 5,834 6,324 7,620 8,814
Total covered nonperforming assets$ 6,444 $ 8,674 $ 8,762 $ 8,751 $ 9,878
Additional Information
Performing TDRs(2)$ 13,841 $ 14,025 $ 11,808 $ 11,701 $ 11,029
Total TDRs(3) 13,841 14,025 14,534 15,151 12,906
Asset Quality Ratios
Non-covered
Nonperforming loans to total loans 1.02% 0.99% 0.85% 0.91% 1.19%
Nonperforming assets to total assets 0.98% 0.91% 0.80% 0.85% 1.03%
Non-PCI allowance to nonperforming loans 126.41% 130.88% 151.85% 140.35% 121.47%
Non-PCI allowance to total loans 1.29% 1.29% 1.29% 1.28% 1.44%
Annualized net charge-offs to average loans 0.07% 0.29%NM 0.05% 0.26%
Non-covered and covered
Nonperforming loans to total loans 1.02% 1.09% 0.93% 0.91% 1.16%
Nonperforming assets to total assets 1.20% 1.20% 1.10% 1.15% 1.36%
Nonperforming assets to total loans and OREO 1.77% 1.85% 1.68% 1.65% 1.97%
Allowance for loan losses to nonperforming loans 119.18% 111.11% 128.67% 131.74% 117.18%
Allowance for loan losses to total loans 1.22% 1.21% 1.20% 1.20% 1.36%
(1) Accruing TDRs restructured within the past six months or nonperforming
(2) Accruing TDRs with six months or more of satisfactory payment performance
(3) Accruing nonperforming and performing TDRs


FIRST COMMUNITY BANCSHARES, INC.
AVERAGE BALANCE SHEETS AND NET INTEREST INCOME ANALYSIS (Unaudited)
Three Months Ended June 30,
2015 2014
Average Average Yield/Average Average Yield/
(Amounts in thousands)BalanceInterest(1)Rate(1)BalanceInterest(1)Rate(1)
Assets
Earning assets
Loans(2)$ 1,671,476 $ 21,862 5.25%$ 1,748,048 $ 23,467 5.38%
Securities available-for-sale 362,366 2,418 2.68% 428,111 3,239 3.03%
Securities held-to-maturity 72,742 196 1.08% 12,767 39 1.23%
Interest-bearing deposits 120,025 80 0.27% 49,325 47 0.38%
Total earning assets 2,226,609 24,556 4.42% 2,238,251 26,792 4.80%
Other assets 311,437 334,279
Total assets$ 2,538,046 $ 2,572,530
Liabilities
Interest-bearing deposits
Demand deposits $ 340,517 $ 51 0.06%$ 372,536 $ 52 0.06%
Savings deposits 538,717 101 0.08% 524,539 128 0.10%
Time deposits 655,243 1,410 0.86% 697,326 1,655 0.95%
Total interest-bearing deposits 1,534,477 1,562 0.41% 1,594,401 1,835 0.46%
Borrowings
Retail repurchase agreements 70,328 17 0.10% 61,458 24 0.16%
Wholesale repurchase agreements 50,000 468 3.75% 50,000 468 3.75%
FHLB advances and other borrowings 86,592 862 3.99% 166,087 1,698 4.10%
Total borrowings 206,920 1,347 2.61% 277,545 2,190 3.16%
Total interest-bearing liabilities 1,741,397 2,909 0.67% 1,871,946 4,025 0.86%
Noninterest-bearing demand deposits 428,442 344,485
Other liabilities 20,072 16,490
Total liabilities 2,189,911 2,232,921
Stockholders' equity 348,135 339,609
Total liabilities and stockholders' equity$ 2,538,046 $ 2,572,530
Net interest income, FTE $ 21,647 $ 22,767
Net interest rate spread 3.75% 3.94%
Net interest margin 3.90% 4.08%
(1) Fully taxable equivalent ("FTE") basis based on the federal statutory rate of 35%
(2) Nonaccrual loans are included in average balances; however, no related interest income is recorded during the period of nonaccrual.


FIRST COMMUNITY BANCSHARES, INC.
AVERAGE BALANCE SHEETS AND NET INTEREST INCOME ANALYSIS (Unaudited)
Six Months Ended June 30,
2015 2014
Average Average Yield/Average Average Yield/
(Amounts in thousands)BalanceInterest(1)Rate(1)BalanceInterest(1)Rate(1)
Assets
Earning assets
Loans(2)$ 1,674,778 $ 43,816 5.28%$ 1,733,061 $ 46,359 5.39%
Securities available-for-sale 346,792 4,831 2.81% 463,783 7,047 3.06%
Securities held-to-maturity 69,351 382 1.11% 7,098 54 1.53%
Interest-bearing deposits 164,201 213 0.26% 37,924 77 0.41%
Total earning assets 2,255,122 49,242 4.40% 2,241,866 53,537 4.82%
Other assets 315,126 340,117
Total assets$ 2,570,248 $ 2,581,983
Liabilities
Interest-bearing deposits
Demand deposits $ 346,099 $ 104 0.06%$ 371,286 $ 106 0.06%
Savings deposits 532,740 206 0.08% 527,270 265 0.10%
Time deposits 676,519 2,982 0.89% 705,817 3,352 0.96%
Total interest-bearing deposits 1,555,358 3,292 0.43% 1,604,373 3,723 0.47%
Borrowings
Federal funds purchased - - - 1,763 3 0.34%
Retail repurchase agreements 69,097 38 0.11% 64,391 51 0.16%
Wholesale repurchase agreements 50,000 931 3.75% 50,000 931 3.75%
FHLB advances and other borrowings 96,551 1,907 3.98% 166,087 3,375 4.10%
Total borrowings 215,648 2,876 2.69% 282,241 4,360 3.12%
Total interest-bearing liabilities 1,771,006 6,168 0.70% 1,886,614 8,083 0.87%
Noninterest-bearing demand deposits 427,881 340,550
Other liabilities 20,696 18,692
Total liabilities 2,219,583 2,245,856
Stockholders' equity 350,665 336,127
Total liabilities and stockholders' equity$ 2,570,248 $ 2,581,983
Net interest income, FTE $ 43,074 $ 45,454
Net interest rate spread 3.70% 3.95%
Net interest margin 3.85% 4.09%
(1) FTE basis based on the federal statutory rate of 35%
(2) Nonaccrual loans are included in average balances; however, no related interest income is recorded during the period of nonaccrual.


FIRST COMMUNITY BANCSHARES, INC.
RECONCILIATION OF GAAP NET INTEREST MARGIN TO NORMALIZED NET INTEREST MARGIN (Unaudited)
Three Months Ended June 30,
2015 2014
Average Yield/ Average Yield/
(Amounts in thousands)Interest(1)Rate(1)Interest(1)Rate(1)
Earning assets
Loans(2)$ 21,863 5.25%$ 23,467 5.38%
Accretion income 2,416 2,789
Less: cash accretion income 1,134 1,247
Non-cash accretion income 1,282 1,542
Loans, excluding non-cash accretion income 20,581 4.94% 21,925 5.03%
Other earning assets 2,693 1.95% 3,325 2.72%
Total earning assets 23,274 4.19% 25,250 4.52%
Total interest-bearing liabilities 2,909 0.67% 4,025 0.86%
Net interest income, FTE$ 20,365 $ 21,225
Net interest rate spread 3.52% 3.66%
Net interest margin 3.67% 3.80%
(1) FTE basis based on the federal statutory rate of 35%
(2) Nonaccrual loans are included in average balances; however, no related interest income is recorded during the period of nonaccrual.
Six Months Ended June 30,
2015 2014
Average Yield/ Average Yield/
(Amounts in thousands)Interest(1)Rate(1)Interest(1)Rate(1)
Earning assets
Loans(2)$ 43,816 5.28%$ 46,359 5.39%
Accretion income 5,255 5,912
Less: cash accretion income 2,230 1,848
Non-cash accretion income 3,025 4,064
Loans, excluding non-cash accretion income 40,791 4.91% 42,295 4.92%
Other earning assets 5,425 1.89% 7,178 2.84%
Total earning assets 46,216 4.13% 49,473 4.45%
Total interest-bearing liabilities 6,167 0.70% 8,083 0.86%
Net interest income, FTE$ 40,049 $ 41,390
Net interest rate spread 3.43% 3.59%
Net interest margin 3.58% 3.73%
(1) FTE basis based on the federal statutory rate of 35%
(2) Nonaccrual loans are included in average balances; however, no related interest income is recorded during the period of nonaccrual.

FOR MORE INFORMATION, CONTACT: David D. Brown (276) 326-9000

Source:First Community Bancshares, Inc.