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First Community Bancshares, Inc. Announces Second Quarter 2016 Results and Increased Quarterly Dividend

BLUEFIELD, Va., July 26, 2016 (GLOBE NEWSWIRE) -- First Community Bancshares, Inc. (NASDAQ:FCBC) (www.fcbinc.com) (the “Company”) today reported its unaudited results of operations and other financial information for the quarter and six months ended June 30, 2016. The Company reported net income available to common shareholders of $6.26 million, or $0.36 per diluted common share for the quarter ended June 30, 2016, which represents a 9.09% increase in per share earnings compared to the same quarter of 2015. Net income available to common shareholders was $12.34 million, or $0.70 per diluted common share for the six months ended June 30, 2016, which represents a 9.38% increase in per share earnings compared to the same period of 2015.

The Company also announced today that the Board of Directors declared a quarterly cash dividend to common shareholders of sixteen cents ($0.16) per common share, an increase of 14.29% over the most recent cash dividend. The quarterly dividend is payable to common shareholders of record on August 5, 2016, and is expected to be paid on or about August 19, 2016. The current year marks the 31st consecutive year of cash dividends paid to stockholders.

On July 15, 2016, the Company completed the previously announced branch exchange with First Bank, North Carolina, pursuant to which First Community Bank (the “Bank”) sold six branches in the Winston-Salem and Mooresville areas of North Carolina and acquired seven branches in Southwestern Virginia.

Second Quarter 2016 Highlights

  • Income Statement
    • Net income available to common shareholders increased $80 thousand to $6.26 million, or 1.30%, compared to the same quarter of 2015.
    • Diluted earnings per share increased $0.03, or 9.09%, to $0.36 compared to the same quarter of 2015.
    • Core diluted earnings per common share increased $0.06 to $0.38 compared to the same quarter of 2015.
    • Net interest margin increased 18 basis points to 4.08% while normalized net interest margin increased 14 basis points to 3.81% compared to the same quarter of 2015.
    • Second quarter 2016 efficiency ratio was 65.19%, a significant decrease from the same quarter of 2015. The non-GAAP efficiency ratio improved 16 basis points to 61.55% compared to the same quarter of 2015.
  • Balance Sheet
    • The non-covered loan portfolio increased $109.89 million, or 6.77%, compared to December 31, 2015.
    • Book value per common share increased $0.53 to $19.48 compared to December 31, 2015.
    • The Company repurchased 493,812 common shares during the quarter resulting in 981,551 shares repurchased year-to-date. Since June 30, 2013, the Company has repurchased 4.12 million shares.
    • The Company and its subsidiary bank both significantly exceed regulatory “well capitalized” targets as of June 30, 2016.
  • Asset Quality
    • Annualized net charge-offs were only 0.02% of average loans compared to 0.06% for the same period of the prior year.
    • Delinquent loans as a percentage of total loans decreased 15 basis points to 1.26% compared to the same period of 2015.
    • Non-covered delinquent loans as a percentage of total non-covered loans decreased 13 basis points to 1.26% compared to the same period of 2015.
    • Total nonperforming assets decreased $3.79 million compared to December 31, 2015, and decreased $6.13 million compared to the same period of 2015.
    • Total non-covered nonperforming assets decreased $1.80 million compared to December 31, 2015, and decreased $2.38 million compared to June 30, 2015.
    • A net loan loss provision of $722 thousand was recognized to cover net charge-offs and the continued loan growth experienced during the quarter.

Financial Performance

CONDENSED STATEMENTS OF INCOME (Unaudited)
Three Months Ended Six Months Ended
June 30, March 31, December 31, September 30, June 30, June 30, June 30,
(Amounts in thousands, except share and per share data) 2016 2016 2015 2015 2015 2016 2015
Interest income
Interest and fees on loans$ 22,237 $ 21,573 $ 21,633 $ 22,259 $ 21,826 $ 43,810 $ 43,740
Interest on securities 1,891 1,957 2,023 2,056 2,073 3,848 4,124
Interest on deposits in banks 9 20 21 33 80 29 213
Total interest income 24,137 23,550 23,677 24,348 23,979 47,687 48,077
Interest expense
Interest on deposits 1,087 1,114 1,202 1,384 1,562 2,201 3,292
Interest on borrowings 1,359 1,325 1,300 1,295 1,347 2,684 2,876
Total interest expense 2,446 2,439 2,502 2,679 2,909 4,885 6,168
Net interest income 21,691 21,111 21,175 21,669 21,070 42,802 41,909
Provision for loan losses 722 1,187 434 381 276 1,909 1,376
Net interest income after provision 20,969 19,924 20,741 21,288 20,794 40,893 40,533
Noninterest income
Wealth management 810 684 744 790 775 1,494 1,441
Service charges on deposits 3,361 3,291 3,563 3,744 3,507 6,652 6,410
Other service charges and fees 2,054 2,010 2,058 1,974 2,005 4,064 4,013
Insurance commissions 1,600 2,191 1,563 1,650 1,559 3,791 3,686
Net impairment losses recognized in earnings (11) - - - - (11) -
Net (loss) gain on sale of securities (79) 1 (7) (39) 213 (78) 190
Net FDIC indemnification asset amortization (1,328) (1,159) (1,200) (1,768) (1,846) (2,487) (3,411)
Other operating income 623 885 762 723 1,924 1,508 2,644
Total noninterest income 7,030 7,903 7,483 7,074 8,137 14,933 14,973
Noninterest expense
Total noninterest expense 18,722 18,814 19,083 19,019 20,289 37,536 38,069
Income before income taxes 9,277 9,013 9,141 9,343 8,642 18,290 17,437
Income tax expense 3,022 2,929 2,993 3,084 2,467 5,951 5,304
Net income 6,255 6,084 6,148 6,259 6,175 12,339 12,133
Dividends on preferred stock - - - - - - 105
Net income available to common shareholders$ 6,255 $ 6,084 $ 6,148 $ 6,259 $ 6,175 $ 12,339 $ 12,028
Earnings per common share
Basic$ 0.36 $ 0.34 $ 0.34 $ 0.34 $ 0.33 $ 0.70 $ 0.64
Diluted 0.36 0.34 0.34 0.34 0.33 0.70 0.64
Cash dividends per common share 0.14 0.14 0.14 0.14 0.13 0.28 0.26
Weighted average shares outstanding
Basic 17,414,320 17,859,197 18,193,824 18,470,348 18,831,907 17,636,783 18,733,288
Diluted 17,462,845 17,892,531 18,226,719 18,500,975 18,860,284 17,675,128 19,095,408
Performance ratios
Return on average assets 1.02% 0.99% 0.99% 1.00% 0.97% 1.00% 0.94%
Return on average common equity 7.47% 7.15% 7.05% 7.18% 7.08% 7.31% 7.01%
Return on average tangible common equity(1) 10.88% 10.34% 10.17% 10.38% 10.19% 10.60% 10.16%
(1)A non-GAAP financial measure defined as average stockholders’ equity less average goodwill, other intangibles, and preferred stock liquidation preference.

RECONCILIATION OF GAAP NET INCOME TO CORE EARNINGS (Unaudited)
Three Months Ended Six Months Ended
June 30, March 31, December 31, September 30, June 30, June 30, June 30,
2016 2016 2015 2015 2015 2016 2015
(Amounts in thousands, except per share data)
Net income, GAAP$ 6,255 $ 6,084 $ 6,148 $ 6,259 $ 6,175 $ 12,339 $ 12,133
Non-GAAP adjustments:
Merger, acquisition, and divestiture expense 410 39 - - - 449 86
Net loss (gain) on sale of securities 79 (1) 7 39 (213) 78 (190)
FHLB debt prepayment fees - - - - 1,702 - 1,702
Net impairment losses recognized in earnings 11 - - - - 11 -
Other non-core, non-recurring items - (240) 31 (75) (930) (240) (960)
Total adjustments to core earnings 500 (202) 38 (36) 559 298 638
Tax effect 184 (74) 14 (13) 631 110 660
Core earnings, non-GAAP(1)$ 6,571 $ 5,956 $ 6,172 $ 6,236 $ 6,103 $ 12,527 $ 12,111
Core diluted earnings per common share$ 0.38 $ 0.33 $ 0.34 $ 0.34 $ 0.32 $ 0.71 $ 0.63
Performance ratios
Core return on average assets 1.07% 0.97% 0.99% 1.00% 0.96% 1.02% 0.95%
Core return on average common equity 7.85% 7.00% 7.08% 7.16% 7.00% 7.42% 7.06%
Core return on average tangible common equity(2) 11.43% 10.12% 10.21% 10.34% 10.07% 10.77% 10.23%
(1)A non-GAAP financial measure that excludes gains, losses, and impairment losses on securities; goodwill and intangible impairment; taxes; and other non-recurring income and expense items from net income.
(2)A non-GAAP financial measure defined as average stockholders’ equity less average goodwill, other intangibles, and preferred stock liquidation preference.

Net income available to common shareholders increased $80 thousand, or 1.30%, to $6.26 million for the second quarter of 2016 from $6.18 million for the same quarter of 2015. Diluted earnings per common share increased $0.03 to $0.36 for the second quarter of 2016 from $0.33 for the same quarter of 2015. The increase in net interest income was a result of $621 thousand increase in net interest income and a $1.57 million decrease in noninterest expense offset by a $1.11 million decrease in noninterest income, a $446 thousand increase in the provision for loan losses, and a $555 thousand increase in income tax expense. The increase in net interest income was primarily due to decreases in deposit and borrowing costs. Noninterest income during the second quarter of 2015 included a net death benefit of approximately $1.14 million from the maturity of a life insurance policy.

Net Interest Income and Margin

AVERAGE BALANCE SHEETS AND NET INTEREST INCOME ANALYSIS (Unaudited)
Three Months Ended June 30,
2016 2015
Average Average Yield/ Average Average Yield/
(Amounts in thousands)Balance Interest(1) Rate(1) Balance Interest(1) Rate(1)
Assets
Earning assets
Loans(2)$ 1,775,435 $ 22,263 5.04% $ 1,671,476 $ 21,862 5.25%
Securities available for sale 336,510 2,195 2.62% 362,366 2,418 2.68%
Securities held to maturity 72,331 191 1.06% 72,742 196 1.08%
Interest-bearing deposits 5,184 9 0.70% 120,025 80 0.27%
Total earning assets 2,189,460 24,658 4.53% 2,226,609 24,556 4.42%
Other assets 283,945 311,437
Total assets$ 2,473,405 $ 2,538,046
Liabilities and stockholders' equity
Interest-bearing deposits
Demand deposits $ 339,365 $ 60 0.07% $ 340,517 $ 51 0.06%
Savings deposits 542,238 63 0.05% 538,717 101 0.08%
Time deposits 518,163 964 0.75% 655,243 1,410 0.86%
Total interest-bearing deposits 1,399,766 1,087 0.31% 1,534,477 1,562 0.41%
Borrowings
Federal funds purchased 9,078 14 0.62% - - -
Retail repurchase agreements 65,718 12 0.07% 70,328 17 0.10%
Wholesale repurchase agreements 50,000 469 3.77% 50,000 468 3.75%
FHLB advances and other borrowings 132,459 864 2.62% 86,592 862 3.99%
Total borrowings 257,255 1,359 2.12% 206,920 1,347 2.61%
Total interest-bearing liabilities 1,657,021 2,446 0.59% 1,741,397 2,909 0.67%
Noninterest-bearing demand deposits 460,255 428,442
Other liabilities 19,520 20,072
Total liabilities 2,136,796 2,189,911
Stockholders' equity 336,609 348,135
Total liabilities and stockholders' equity$ 2,473,405 $ 2,538,046
Net interest income, FTE $ 22,212 $ 21,647
Net interest rate spread 3.94% 3.75%
Net interest margin 4.08% 3.90%
(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.


AVERAGE BALANCE SHEETS AND NET INTEREST INCOME ANALYSIS (Unaudited)
Six Months Ended June 30,
2016 2015
Average Average Yield/ Average Average Yield/
(Amounts in thousands)Balance Interest(1) Rate(1) Balance Interest(1) Rate(1)
Assets
Earning assets
Loans(2)$ 1,752,918 $ 43,862 5.03% $ 1,674,778 $ 43,816 5.28%
Securities available for sale 345,546 4,463 2.60% 346,792 4,831 2.81%
Securities held to maturity 72,421 385 1.07% 69,351 382 1.11%
Interest-bearing deposits 10,388 29 0.56% 164,201 213 0.26%
Total earning assets 2,181,273 48,739 4.49% 2,255,122 49,242 4.40%
Other assets 290,551 315,126
Total assets$ 2,471,824 $ 2,570,248
Liabilities and stockholders' equity
Interest-bearing deposits
Demand deposits $ 340,945 $ 117 0.07% $ 346,099 $ 104 0.06%
Savings deposits 539,004 129 0.05% 532,740 206 0.08%
Time deposits 525,899 1,955 0.75% 676,519 2,982 0.89%
Total interest-bearing deposits 1,405,848 2,201 0.31% 1,555,358 3,292 0.43%
Borrowings
Federal funds purchased 6,251 20 0.64% - - -
Retail repurchase agreements 71,855 25 0.07% 69,097 38 0.11%
Wholesale repurchase agreements 50,000 937 3.77% 50,000 931 3.75%
FHLB advances and other borrowings 120,236 1,702 2.85% 96,551 1,907 3.98%
Total borrowings 248,342 2,684 2.17% 215,648 2,876 2.69%
Total interest-bearing liabilities 1,654,190 4,885 0.59% 1,771,006 6,168 0.70%
Noninterest-bearing demand deposits 454,552 427,881
Other liabilities 23,652 20,696
Total liabilities 2,132,394 2,219,583
Stockholders' equity 339,430 350,665
Total liabilities and stockholders' equity$ 2,471,824 $ 2,570,248
Net interest income, FTE $ 43,854 $ 43,074
Net interest rate spread 3.90% 3.70%
Net interest margin 4.04% 3.85%
(1)Fully taxable equivalent ("FTE") basis based on the federal statutory rate of 35%
(2)Nonaccrual loans are included in average balances; however, no related interest income is recorded during the period of nonaccrual.


RECONCILIATION OF GAAP NET INTEREST MARGIN TO NORMALIZED NET INTEREST MARGIN (Unaudited)
Three Months Ended June 30,
2016 2015
(Amounts in thousands)Interest(1) Average Yield/ Rate(1) Interest(1) Average Yield/ Rate(1)
Earning assets
Loans(2)$ 22,263 5.04% $ 21,862 5.25%
Accretion income 2,248 2,416
Less: cash accretion income 786 1,134
Non-cash accretion income 1,462 1,282
Loans, normalized(3) 20,801 4.71% 20,580 4.94%
Other earning assets 2,395 2.33% 2,694 1.95%
Total earning assets 23,196 4.26% 23,274 4.19%
Total interest-bearing liabilities 2,446 0.59% 2,909 0.67%
Net interest income, FTE(3)$ 20,750 $ 20,365
Net interest rate spread, normalized(3) 3.67% 3.52%
Net interest margin, normalized(3) 3.81% 3.67%
(1)FTE basis based on the federal statutory rate of 35%.
(2)Nonaccrual loans are included in average balances; however, no related interest income is recorded during the period of nonaccrual.
(3)Normalized totals are non-GAAP financial measures that exclude non-cash loan interest accretion related to PCI loans.
Six Months Ended June 30,
2016 2015
(Amounts in thousands)Interest(1) Average Yield/ Rate(1) Interest(1) Average Yield/ Rate(1)
Earning assets
Loans(2)$ 43,862 5.03% $ 43,816 5.28%
Accretion income 4,500 5,255
Less: cash accretion income 1,591 2,230
Non-cash accretion income 2,909 3,025
Loans, normalized(3) 40,953 4.70% 40,791 4.91%
Other earning assets 4,877 2.29% 5,425 1.89%
Total earning assets 45,830 4.23% 46,216 4.13%
Total interest-bearing liabilities 4,885 0.59% 6,168 0.70%
Net interest income, FTE(3)$ 40,945 $ 40,048
Net interest rate spread, normalized(3) 3.63% 3.43%
Net interest margin, normalized(3) 3.77% 3.58%
(1)FTE basis based on the federal statutory rate of 35%��
(2)Nonaccrual loans are included in average balances; however, no related interest income is recorded during the period of nonaccrual.
(3)Normalized totals are non-GAAP financial measures that exclude non-cash loan interest accretion related to PCI loans.

The tax equivalent net interest margin increased 18 basis points, or 4.62%, to 4.08% and the normalized net interest margin, which excludes non-cash loan interest accretion, increased 14 basis points, or 3.81%, to 3.81% for the second quarter of 2016 compared to the same quarter of 2015. The tax equivalent yield on loans decreased 21 basis points to 5.04% while the average balance increased $103.96 million, or 6.22%, to $1.78 billion. The increase in average loans was primarily due to continued growth in the non-covered loan portfolio. Non-cash purchased credit impaired (“PCI”) loan interest accretion increased $180 thousand, or 14.04%, to $1.46 million for the second quarter of 2016 from $1.28 million for the same quarter of 2015 due to several large loan payoffs. The normalized yield on loans decreased 23 basis points to 4.71%. The average rate paid on interest-bearing liabilities decreased 8 basis points to 0.59% and the average balance decreased $84.38 million, or 4.85%, to $1.66 billion. The decrease in average interest-bearing liabilities included a $134.71 million decrease in average interest-bearing deposits, primarily time deposit accounts, offset by a $50.34 million increase in average borrowings.

Noninterest Income and Expense

CONDENSED QUARTERLY STATEMENTS OF INCOME (Unaudited)
Three Months Ended Six Months Ended
June 30, March 31, December 31, September 30, June 30, June 30, June 30,
(Amounts in thousands) 2016 2016 2015 2015 2015 2016 2015
Noninterest income
Wealth management 810 684 744 790 775 1,494 1,441
Service charges on deposits 3,361 3,291 3,563 3,744 3,507 6,652 6,410
Other service charges and fees 2,054 2,010 2,058 1,974 2,005 4,064 4,013
Insurance commissions 1,600 2,191 1,563 1,650 1,559 3,791 3,686
Net impairment losses recognized in earnings (11) - - - - (11) -
Net (loss) gain on sale of securities (79) 1 (7) (39) 213 (78) 190
Net FDIC indemnification asset amortization (1,328) (1,159) (1,200) (1,768) (1,846) (2,487) (3,411)
Other operating income 623 885 762 723 1,924 1,508 2,644
Total noninterest income 7,030 7,903 7,483 7,074 8,137 14,933 14,973
Noninterest expense
Salaries and employee benefits 10,198 10,475 10,268 9,971 9,693 20,673 19,386
Occupancy expense 1,359 1,531 1,413 1,443 1,427 2,890 2,961
Furniture and equipment expense 1,109 1,096 1,345 1,259 1,358 2,205 2,595
Amortization of intangibles 277 278 281 281 279 555 556
FDIC premiums and assessments 372 374 332 377 389 746 804
FHLB debt prepayment fees - - - - 1,702 - 1,702
Merger, acquisition, and divestiture expense 410 39 - - - 449 86
Other operating expense 4,997 5,021 5,444 5,688 5,441 10,018 9,979
Total noninterest expense 18,722 18,814 19,083 19,019 20,289 37,536 38,069

Noninterest income decreased $1.11 million, or 13.60%, for the second quarter of 2016 compared to the same quarter of 2015. The decrease was largely due to a $1.30 million, or 67.62%, decrease in other operating income offset by a $518 thousand decrease in net negative amortization related to the FDIC indemnification asset as a result of continuing better than expected performance in the covered loan portfolio. The Company recognized OTTI charges of $11 thousand associated with certain equity securities. Other operating income included a net death benefit of approximately $1.14 million from the maturity of a life insurance policy during the second quarter of 2015.

Noninterest expense decreased $1.57 million, or 7.72%, for the second quarter of 2016 compared to the same quarter of 2015. The decrease was largely due to FHLB debt prepayment fees of $1.70 million incurred during the second quarter of 2015 coupled with a $444 thousand decrease in other operating expense offset by a $505 thousand increase in salaries and employee benefits and expenses related to the branch swap with First Bank of $410 thousand. The decrease in other operating expense included a $415 thousand decrease in the net loss on sales and expenses associated with other real estate owned (“OREO”).

Efficiency Ratio

EFFICIENCY RATIO CALCULATION (Unaudited)
Three Months Ended Six Months Ended
June 30, March 31, December 31, September 30, June 30, June 30, June 30,
2016 2016 2015 2015 2015 2016 2015
(Amounts in thousands)
Noninterest expense, GAAP$ 18,722 $ 18,814 $ 19,083 $ 19,019 $ 20,289 $ 37,536 $ 38,069
Non-GAAP adjustments
Merger, acquisition, and divestiture expense (410) (39) - - - (449) (86)
FHLB debt prepayment fees - - - - (1,702) - (1,702)
OREO expense and net loss (247) (711) (475) (1,220) (416) (958) (743)
Other non-core, non-recurring items (30) (174) (61) 15 (213) (204) (213)
Adjusted noninterest expense 18,035 17,890 18,547 17,814 17,958 35,925 35,325
Net interest income, GAAP 21,691 21,111 21,175 21,669 21,070 42,802 41,909
Noninterest income, GAAP 7,030 7,903 7,483 7,074 8,137 14,933 14,973
Non-GAAP adjustments
Tax equivalency adjustment 521 531 548 565 1,249 1,052 1,837
Net impairment losses recognized in earnings 11 - - - - 11 -
Net loss (gain) on sale of securities 79 (1) 7 39 (213) 78 (190)
Other non-core, non-recurring items (30) (414) (30) (60) (1,143) (444) (1,173)
Adjusted net interest and noninterest income 29,302 29,130 29,183 29,287 29,100 58,432 57,356
Non-GAAP efficiency ratio(1) 61.55% 61.41% 63.55% 60.83% 61.71% 61.48% 61.59%
GAAP efficiency ratio 65.19% 64.84% 66.59% 66.17% 69.47% 65.01% 66.93%
(1)A non-GAAP financial measure computed by dividing adjusted noninterest expense by the sum of tax equivalent net interest income and adjusted noninterest income.

Balance Sheet and Capital

CONDENSED CONSOLIDATED QUARTERLY BALANCE SHEETS (Unaudited)
June 30, March 31, December 31, September 30, June 30,
(Amounts in thousands, except per share data) 2016 2016 2015 2015 2015
Assets
Total cash and cash equivalents 44,301 39,587 51,787 62,024 92,602
Securities available for sale 322,699 338,469 366,173 382,212 376,191
Securities held to maturity 72,239 72,485 72,541 72,596 72,652
Loans held for sale - - - 523 913
Loans held for investment, net of unearned income
Non-covered 1,733,398 1,685,891 1,623,506 1,600,271 1,564,655
Covered 68,585 76,538 83,035 90,203 102,634
Less allowance for loan losses (21,099) (20,467) (20,233) (20,127) (20,258)
Loans held for investment, net 1,780,884 1,741,962 1,686,308 1,670,347 1,647,031
FDIC indemnification asset 16,431 18,787 20,844 22,049 23,653
Premises and equipment, net 50,199 50,799 52,756 53,442 54,112
Other real estate owned, non-covered 4,187 5,313 4,873 5,088 7,434
Other real estate owned, covered 2,017 2,279 4,034 4,079 5,382
Interest receivable 6,115 5,968 6,007 5,910 6,119
Goodwill 100,486 100,486 100,486 100,810 100,810
Other intangible assets 4,688 4,965 5,243 5,583 5,865
Other assets 91,082 89,187 91,224 93,453 99,034
Total assets$ 2,495,328 $ 2,470,287 $ 2,462,276 $ 2,478,116 $ 2,491,798
Liabilities
Deposits
Noninterest-bearing$ 451,003 $ 453,336 $ 451,511 $ 442,021 $ 424,438
Interest-bearing 1,373,412 1,421,329 1,421,748 1,460,881 1,495,783
Total deposits 1,824,415 1,874,665 1,873,259 1,902,902 1,920,221
Interest, taxes, and other liabilities 25,553 24,576 26,630 25,356 23,852
Federal funds purchased 42,000 18,000 - - -
Securities sold under agreements to repurchase 113,392 134,661 138,614 124,076 122,158
FHLB borrowings 140,000 65,000 65,000 65,000 65,000
Other borrowings 15,756 15,756 15,756 15,955 15,999
Total liabilities 2,161,116 2,132,658 2,119,259 2,133,289 2,147,230
Stockholders' equity
Common stock 21,382 21,382 21,382 21,382 21,382
Additional paid-in capital 227,791 227,725 227,692 227,621 227,616
Retained earnings 163,030 159,223 155,647 152,046 148,378
Treasury stock, at cost (74,974) (64,968) (56,457) (52,484) (46,610)
Accumulated other comprehensive loss (3,017) (5,733) (5,247) (3,738) (6,198)
Total stockholders' equity 334,212 337,629 343,017 344,827 344,568
Total liabilities and stockholders' equity$ 2,495,328 $ 2,470,287 $ 2,462,276 $ 2,478,116 $ 2,491,798
Shares outstanding at period-end 17,155,322 17,631,011 18,098,141 18,313,425 18,641,966
Book value per common share(1)$ 19.48 $ 19.15 $ 18.95 $ 18.83 $ 18.48
Tangible book value per common share(2) 13.35 13.17 13.11 13.02 12.76
(1)Stockholders' equity divided by as-converted common shares outstanding
(2)A non-GAAP financial measure defined as stockholders’ equity less goodwill and other intangibles, divided by as-converted common shares outstanding.

Consolidated assets increased $33.05 million, or 1.34%, as of June 30, 2016, compared to December 31, 2015. The change in consolidated assets was primarily driven by a $94.58 million increase in net loans offset by a $43.47 million decrease in securities available for sale and a $7.49 million decrease in cash and cash equivalents. Consolidated liabilities increased $41.86 million, or 1.98%, as of June 30, 2016, compared to December 31, 2015. The change in consolidated liabilities was driven by a $75.00 million increase in FHLB borrowings and $42.00 million increase in federal funds purchased offset by a $48.84 million decrease in total deposits, primarily due to time deposits, and $25.22 million decrease in securities sold under agreements to repurchase.

Stockholders’ equity decreased $8.81 million, or 2.57%, as of June 30, 2016, compared to December 31, 2015. The Company repurchased 981,551 common shares at a weighted average cost of $19.52 per share and paid a cash dividend of $0.28 per common share during the first six months of 2016. Book value per common share increased $0.53 to $19.48 and tangible book value per common share increased $0.24 to $13.35 as of June 30, 2016, compared to December 31, 2015. The Company significantly exceeds regulatory “well capitalized” targets as of June 30, 2016.

Asset Quality

SELECTED CREDIT QUALITY INFORMATION (Unaudited)
June 30, March 31, December 31, September 30, June 30,
(Amounts in thousands) 2016 2016 2015 2015 2015
Allowance for Loan Losses
Beginning balance$ 20,467 $ 20,233 $ 20,127 $ 20,258 $ 20,252
Provision for loan losses charged
to operations 722 1,187 434 381 276
(Recovery of) provision for loan losses recorded
through the FDIC indemnification asset (10) 9 - (75) -
Charge-offs (691) (1,228) (805) (689) (673)
Recoveries 611 266 477 252 403
Net charge-offs (80) (962) (328) (437) (270)
Ending balance$ 21,099 $ 20,467 $ 20,233 $ 20,127 $ 20,258
Nonperforming Assets
Non-covered nonperforming assets
Nonaccrual loans $ 16,626 $ 16,196 $ 17,847 $ 17,100 $ 15,936
Accruing loans past due 90 days or more 64 243 - 3 -
Troubled debt restructurings ("TDRs")(1) 115 158 73 74 -
Total non-covered nonperforming loans 16,805 16,597 17,920 17,177 15,936
OREO 4,187 5,313 4,873 5,088 7,434
Total non-covered nonperforming assets$ 20,992 $ 21,910 $ 22,793 $ 22,265 $ 23,370
Covered nonperforming assets
Nonaccrual loans $ 680 $ 1,955 $ 647 $ 815 $ 1,062
Accruing loans past due 90 days or more - - - - -
Total covered nonperforming loans 680 1,955 647 815 1,062
OREO 2,017 2,279 4,034 4,079 5,382
Total covered nonperforming assets$ 2,697 $ 4,234 $ 4,681 $ 4,894 $ 6,444
Additional Information
Performing TDRs(2)$ 13,562 $ 13,474 $ 13,889 $ 13,965 $ 13,841
Total TDRs(3) 13,677 13,632 13,962 14,039 13,841
Non-covered ratios
Nonperforming loans to total loans 0.97% 0.98% 1.10% 1.07% 1.02%
Nonperforming assets to total assets 0.87% 0.92% 0.96% 0.93% 0.98%
Non-PCI allowance to nonperforming loans 125.48% 123.17% 112.61% 117.06% 126.41%
Non-PCI allowance to total loans 1.22% 1.21% 1.24% 1.26% 1.29%
Annualized net charge-offs to average loans 0.02% 0.23% 0.08% 0.11% 0.07%
Total ratios
Nonperforming loans to total loans 0.97% 1.05% 1.09% 1.06% 1.02%
Nonperforming assets to total assets 0.95% 1.06% 1.12% 1.10% 1.20%
Allowance for loan losses to nonperforming loans 120.67% 110.32% 108.97% 111.87% 119.18%
Allowance for loan losses to total loans 1.17% 1.16% 1.19% 1.19% 1.22%
Annualized net charge-off to average loans 0.02% 0.22% 0.08% 0.10% 0.06%
(1)Accruing TDRs restructured within the past six months or nonperforming
(2)Accruing TDRs with six months or more of satisfactory payment performance
(3)Accruing total TDRs

The allowance for loan losses increased $866 thousand, or 4.28%, to $21.10 million as of June 30, 2016, compared to December 31, 2015. As of June 30, 2016, $21.09 million of the allowance was attributed to the non-PCI loan portfolio and $12 thousand was attributed to the PCI loan portfolio.

The provision for loan losses charged to operations increased $446 thousand to $722 thousand, for the second quarter of 2016 compared to the same quarter of 2015. The recovery of loan losses recorded through the FDIC indemnification asset totaled $10 thousand during the second quarter of 2016 compared to no activity for the same quarter of 2015. Net charge-offs decreased $190 thousand, or 70.37%, for the second quarter of 2016, compared to the same quarter of 2015. Annualized net charge-offs to average non-covered loans improved 5 basis points to 0.02% for the second quarter of 2016 compared to the same quarter of 2015. Non-covered loans and OREO are those assets not covered by FDIC loss share agreements.

Non-covered nonaccrual loans decreased $1.22 million, or 6.84%, as of June 30, 2016, compared to December 31, 2015. Non-covered nonaccrual loans as a percentage of total non-covered loans improved 14 basis points to 0.96% as of June 30, 2016, compared to December 31, 2015. 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 improved 46 basis points to 1.26% as of June 30, 2016, from 1.72% as of December 31, 2015.

Non-covered nonperforming assets decreased $1.80 million, or 7.90%, as of June 30, 2016, compared to December 31, 2015, and non-covered assets as a percent of total non-covered assets improved 9 basis points to 0.87%. As of June 30, 2016, total nonperforming assets consisted of $17.31 million in nonaccrual loans, $64 thousand in accruing loans 90 days or more past due, $115 thousand in unseasoned, accruing troubled debt restructurings, and $6.20 million in OREO. In comparison, total nonperforming assets consisted of $18.49 million in nonaccrual loans, $73 thousand in unseasoned, accruing troubled debt restructurings, and $8.91 million in OREO as of December 31, 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. The Company’s non-GAAP financial measure presented in this release include core earnings, the efficiency ratio, tangible book value per common share, average tangible common equity, and normalized net interest margin. Management believes that core earnings provide the Company and investors a valuable tool to evaluate the Company’s financial results. Management believes that the efficiency ratio provides important information about the Company’s operating expense control and efficiency of operations. Management also believes this ratio focuses attention on the core operating performance of the Company over time and is highly useful in comparing period-to-period operating performance of core business operations. The efficiency ratio used by the Company may not be comparable to efficiency ratios reported by other financial institutions. The reconciliations of these measures to GAAP measures are provided within this news release.

About First Community Bancshares, Inc.

First Community Bancshares, Inc., a financial holding company headquartered in Bluefield, Virginia, provides banking products and services through its wholly-owned subsidiary First Community Bank. First Community Bank operated 48 branch banking locations throughout Virginia, West Virginia, North Carolina, and Tennessee as of June 30, 2016. First Community Bank offers wealth management and investment services through its wholly-owned subsidiary First Community Wealth Management and the Bank’s Trust Division, which collectively managed $770 million in combined assets as of June 30, 2016. 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 June 30, 2016. The Company’s common stock is listed on the NASDAQ Global Select Market under the trading symbol, “FCBC”. The Company reported consolidated assets of $2.50 billion as of June 30, 2016. 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.

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

Source:First Community Bancshares, Inc.