First Community Bancshares, Inc. Announces Record Third Quarter 2012 Results

First Community Bancshares, Inc. Logo

BLUEFIELD, Va., Nov. 2, 2012 (GLOBE NEWSWIRE) -- First Community Bancshares, Inc. (Nasdaq:FCBC) (www.fcbinc.com) (the "Company") today reported net income for the quarter and nine months ended September 30, 2012, of $10.06 million and $20.14 million, respectively. Net income available to common shareholders totaled $9.84 million, or $0.47 per diluted common share, for the quarter ended September 30, 2012. Net income available to common shareholders totaled $19.35 million, or $1.00 per diluted common share, for the nine months ended September 30, 2012. Net income for the quarter and nine months ended September 30, 2012, was impacted by $645 thousand and $4.23 million, respectively, in merger related expenses. Excluding nonrecurring income and expense items, core earnings for the quarter and nine months ended September 30, 2012, totaled $9.42 million and $21.70 million, respectively.

President and CEO John M. Mendez commented, "We are very pleased with the results of third quarter operations. Significant improvements were seen in a number of areas. Record quarterly earnings include the impact of a favorable conversion adjustment; however, core earnings likewise set new records. Results from our two second quarter acquisitions have exceeded our expectations and are contributing well ahead of plan. Performance in our legacy markets remains solid despite the continued low rate environment. We remain pleased with our performance on all levels including our credit results and we look forward to continued expansion of our leverage position and returns in the coming periods."

On October 23, 2012, the Company announced that the board of directors declared a quarterly cash dividend to common shareholders of eleven cents ($0.11) per common share. The quarterly dividend is payable to common shareholders of record on November 9, 2012, and is expected to be paid on or about November 23, 2012. The current year marks the 27th consecutive year of cash dividends to shareholders.

Third Quarter 2012 Highlights –

  • Core earnings were a record $9.42 million, an increase of $4.04 million, or 75.16%, compared with the third quarter of 2011.
  • Core return on average assets was 1.35% and core return on average tangible common equity was 16.65% for the third quarter of 2012 which are at the highest level since 2007.
  • Third quarter 2012 core diluted earnings per share of $0.44 are the highest since 2008.
  • The tax equivalent net interest margin increased 71 basis points to 4.48% for the third quarter of 2012 compared with the third quarter of 2011.
  • Net interest income was $26.46 million, an increase of $8.73 million, or 49.20%, compared with third quarter 2011.

Net Interest Income

Net interest income increased $8.73 million, or 49.20%, to $26.46 million for the third quarter of 2012 compared with the third quarter of 2011. The tax equivalent net interest margin increased 71 basis points to 4.48% for the third quarter of 2012 compared with 3.77% for the third quarter of 2011. Total interest income increased $8.49 million, or 36.82%, to $31.54 million for the third quarter of 2012 compared with the third quarter of 2011. The increase reflects the increases in loan portfolio balances from the acquisitions of Peoples Bank of Virginia ("Peoples") and Waccamaw Bank ("Waccamaw") during the second quarter of 2012, as well as the associated loan interest accretion stemming from those transactions. Total accretion for the third quarter approximated $3.32 million related to Peoples and Waccamaw. The tax equivalent yield on loans increased to 6.29% while the average loan balance increased $411.35 million, or 29.83%, to $1.79 billion for the third quarter of 2012 compared with the third quarter of 2011. Before the purchase accounting accretion in the Peoples and Waccamaw loan portfolios, the yield on loans and net interest margin for the current quarter were 5.55% and 3.94%, respectively.

Total interest expense decreased $239 thousand, or 4.50%, to $5.08 million for the third quarter of 2012 compared with the third quarter of 2011. Deposit costs decreased $395 thousand, or 13.18%, to $2.60 million for the third quarter of 2012 compared with the third quarter of 2011, which was primarily due to a 28 basis point decrease in the average rate paid on interest-bearing deposits. Borrowing costs increased $156 thousand, or 6.73%, to $2.47 million for the third quarter of 2012 compared with the third quarter of 2011. The average rate paid on interest-bearing liabilities decreased 29 basis points to 0.98% for the third quarter of 2012 compared with the third quarter of 2011. The average balance of interest-bearing liabilities increased $405.26 million, or 24.43%, to $2.06 billion for the third quarter of 2012 compared with the third quarter of 2011, which included a $376.05 million increase in average interest-bearing deposits and a $29.21 million increase in average total borrowings. The increases were primarily the result of the Peoples and Waccamaw acquisitions that occurred during the second quarter of 2012.

Provision for Loan Losses

The provision for loan losses for the third quarter of 2012 was $1.92 million, a slight decrease from same period in the prior year. Provision for the first nine months of 2012 decreased $2.15 million, or 32.57%, to $4.46 million for the first nine months of 2012, compared with the same period of the prior year. The third quarter of 2012 marks the eighth consecutive quarter of provision decreases when compared to the prior year's comparable quarter.

Noninterest Income

Noninterest income increased $3.10 million, or 38.40%, to $11.16 million for the third quarter of 2012 compared with the third quarter of 2011, which was largely due to the $2.39 million correction for the prior periods' understatement of income. The Company realized a $228 thousand net gain on sale of securities for the third quarter of 2012, which was an increase of $50 thousand, or 28.09%, compared to the third quarter of 2011. Wealth management revenues increased $137 thousand, or 15.78%, for the third quarter of 2012 compared with the third quarter of 2011. The Trust and Wealth Management Divisions reported $884 million in assets under management as of September 30, 2012. Service charges on deposit accounts increased $491 thousand, or 14.42%, for the third quarter of 2012 compared with the third quarter of 2011, and are attributable to the addition of Waccamaw. Insurance commissions increased $93 thousand, or 6.11%, to $1.62 million for the third quarter of 2012 compared with the same quarter of 2011. The Company incurred other-than-temporary impairment charges of $942 thousand related to a non-Agency mortgage-backed security for the third quarter of 2012.

The $2.39 million correction included in other noninterest income was discovered through the Company's core operating system conversion completed during the third quarter of 2012. The error was due to overstatement of loan charge-offs in periods from 2007 through 2012 resulting from not recognizing the impact of interest payments that had been applied to principal. The error resulted in overstatements of provision for loan losses and corresponding understatement of pre-tax income of $938 thousand, $639 thousand, and $321 thousand during 2011, 2010, and 2009, respectively. The total of periodic charge-off overstatements from 2007 to 2011 approximated $2.39 million.

Noninterest Expense

Noninterest expense increased $4.27 million, or 26.56%, to $20.33 million for the third quarter of 2012 compared with the third quarter of 2011, due largely to the Peoples and Waccamaw acquisitions. Salaries and employee benefits increased $2.45 million, or 29.15%, to $10.86 million for the third quarter of 2012 compared with the third quarter of 2011. The Peoples and Waccamaw acquisitions accounted for an increase in salaries and employee benefits of $299 thousand and $628 thousand, respectively, during the third quarter of 2012. Occupancy, furniture, and equipment expense increased $371 thousand, or 15.87%, to $2.71 million for the third quarter of 2012 compared with the third quarter of 2011. FDIC premiums and assessments increased $263 thousand, or 75.57%, to $611 thousand for the third quarter of 2012 compared with the third quarter of 2011. During the third quarter of 2012, the Company incurred merger related expenses of $645 thousand in connection with the acquisition of Peoples and Waccamaw. Other operating expense increased $594 thousand, or 12.60%, to $5.31 million for the third quarter of 2012 compared with the third quarter of 2011. Other operating expense included a net loss on sales and expenses associated with other real estate owned of $490 thousand for the third quarter of 2012 compared to $627 thousand for the third quarter of 2011. The efficiency ratio for the third quarter of 2012 showed improvement at 52.40% compared to 57.97% for the third quarter of 2011. Before the effects of loan accretion, the efficiency ratio would have been approximately 57.62%.

Allowance for Loan Losses and Credit Quality on Non-covered Loans

Non-covered loans and other real estate owned are those assets not covered by the loss share agreement between the FDIC and the Bank in relation to the acquisition of Waccamaw. The allowance for loan losses on non-covered loans decreased to $25.84 million at September 30, 2012, compared with $26.21 million at December 31, 2011, and $26.41 million at September 30, 2011. The allowance for loan losses for non-covered loans as a percentage of non-covered loans decreased to 1.68% at September 30, 2012, compared with 1.88% at December 31, 2011, and 1.92% at September 30, 2011. The decrease in the ratio of allowance for loan losses for non-covered loans as a percentage of non-covered loans for the third quarter of 2012 was impacted by loans marked to fair value as part of the Peoples' acquisition. For the third quarter of 2012, net charge-offs increased $257 thousand, or 12.88%, compared with the third quarter of 2011. Annualized net charge-offs as a percentage of average loans were 0.57% for the third quarter of 2012, which represents a slight decrease compared with 0.58% for the third quarter of 2011.

Non-covered delinquent loans, comprised of loans 30 days or more past due and nonaccrual loans, as a percentage of total non-covered loans measured 2.71% at September 30, 2012, compared to 2.30% for the same period of the prior year. Non-covered nonaccrual loans increased to $26.40 million at September 30, 2012, compared with $24.49 million at December 31, 2011, and $22.88 million at September 30, 2011. The increases in non-covered delinquent and nonaccrual loans are due primarily to the Peoples acquisition. At quarter end, the Company's non-covered nonperforming loans as a percentage of total non-covered loans were 1.72% and non-covered nonperforming assets as a percentage of total non-covered assets were 1.28%. Nonperforming assets included $121 thousand in unseasoned, accruing troubled debt restructurings and $9.51 million in other real estate owned, of which $3.55 million was covered under the loss share agreement, at September 30, 2012.

Balance Sheet and Capital

Consolidated assets totaled $2.77 billion as of September 30, 2012, an increase of $604.00 million, or 27.90%, compared with $2.16 billion at December 31, 2011. Consolidated liabilities totaled $2.42 billion as of September 30, 2012, an increase of $557.92 million, or 30.01%, compared with $1.86 billion at December 31, 2011. Total stockholders' equity increased to $351.81 million as of September 30, 2012, compared with $305.73 million at December 31, 2011. Book value per as-converted common share increased to $16.50 for the quarter ended September 30, 2012, compared with $15.96 for the quarter ended December 31, 2011. Tangible book value per common share decreased $0.28, or 2.46%, to $11.12 compared with the fourth quarter of 2011. During the third quarter of 2012, the Company paid an $0.11 per share cash dividend on common shares.

The Company significantly exceeds regulatory "well capitalized" targets as of September 30, 2012, with a total risk-based capital ratio of 15.62%, Tier 1 risk-based capital ratio of 14.38%, and a Tier 1 leverage ratio of 9.52%.

Non-GAAP Financial Measures

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

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

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

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

Investor Relations

The Company will host an investor and media teleconference and webcast on Friday, November 2, 2012, at 11:00 a.m. To access the teleconference, the toll-free number is (877) 407-8033. Individuals may listen to the live or archived webcast of the conference call. To listen to the webcast, visit www.fcbinc.com and follow the link under the Investor Relations section. The Company's press release and financial summary will be available in this section, as well. Copies of the Company's third quarter 2012 earnings press release and financial summary will be made available upon request via fax, email, or postal service mail. To request a copy, contact David D. Brown, Chief Financial Officer, at (276) 326-9000.

About First Community Bancshares, Inc.

First Community Bancshares, Inc., headquartered in Bluefield, Virginia, is a $2.77 billion financial holding company and the parent company of First Community Bank. First Community Bank operates seventy-four banking locations throughout Virginia, West Virginia, North Carolina, South Carolina, and Tennessee. First Community Bank offers wealth management and investment services through its Trust Division and First Community Wealth Management, a registered investment advisory firm. The Trust Division and First Community Wealth Management managed assets with a market value of $884 million as of September 30, 2012. The Company is also the parent company of Greenpoint Insurance Group, Inc., a full-service insurance agency headquartered in High Point, North Carolina, that operates six insurance offices throughout Virginia, West Virginia, and North Carolina. The Company's common stock is traded on the NASDAQ Global Select Market under the symbol, "FCBC". Additional investor information can be found on the Company's website at www.fcbinc.com.

The First Community Bancshares, Inc. logo is available at http://www.globenewswire.com/newsroom/prs/?pkgid=6960

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

FIRST COMMUNITY BANCSHARES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME (Unaudited)
Three Months Ended Nine Months Ended
September 30, September 30,
(Amounts in thousands, except share and per share data) 2012 2011 2012 2011
Interest income
Interest and fees on loans held for investment $ 28,275 $ 20,084 $ 68,496 $ 60,633
Interest on securities --- taxable 1,980 1,711 6,060 6,094
Interest on securities --- nontaxable 1,215 1,180 3,667 4,004
Interest on deposits in banks 66 75 177 244
Total interest income 31,536 23,050 78,400 70,975
Interest expense
Interest on deposits 2,603 2,998 7,368 10,151
Interest on short-term borrowings 675 611 1,859 1,872
Interest on long-term borrowings 1,799 1,707 5,253 5,189
Total interest expense 5,077 5,316 14,480 17,212
Net interest income 26,459 17,734 63,920 53,763
Provision for loan losses 1,916 1,920 4,458 6,611
Net interest income after provision for loan losses 24,543 15,814 59,462 47,152
Noninterest income
Wealth management income 1,005 868 2,839 2,692
Service charges on deposit accounts 3,895 3,404 10,237 9,788
Other service charges and fees 1,631 1,426 4,780 4,293
Insurance commissions 1,616 1,523 4,528 5,027
Net impairment losses recognized in earnings (942) (210) (942) (737)
Net (loss) gain on sale of securities 228 178 270 5,238
Other operating income 3,730 877 5,785 2,627
Total noninterest income 11,163 8,066 27,497 28,928
Noninterest expense
Salaries and employee benefits 10,860 8,409 27,974 26,223
Occupancy expense of bank premises 1,754 1,476 4,934 4,691
Furniture and equipment 955 862 2,741 2,686
Amortization of intangible assets 191 250 613 770
FDIC premiums and assessments 611 348 1,223 1,640
FHLB debt prepayment fees -- -- -- 471
Merger related expense 645 -- 4,227 --
Other operating expense 5,309 4,715 14,938 15,380
Total noninterest expense 20,325 16,060 56,650 51,861
Income before income taxes 15,381 7,820 30,309 24,219
Income tax expense 5,322 2,502 10,171 7,422
Net income 10,059 5,318 20,138 16,797
Dividends on preferred stock 220 286 786 417
Net income available to common shareholders $ 9,839 $ 5,032 $ 19,352 $ 16,380
Basic earnings per common share $ 0.49 $ 0.28 $ 1.03 $ 0.92
Diluted earnings per common share $ 0.47 $ 0.28 $ 1.00 $ 0.91
Cash dividends per common share $ 0.11 $ 0.20 $ 0.32 $ 0.30
Weighted average basic shares outstanding 20,013,264 17,896,534 18,812,516 17,886,902
Weighted average diluted shares outstanding 21,476,497 19,205,634 20,159,386 18,533,364
Return on average assets 1.41% 0.91% 1.06% 0.99%
Return on average common equity 11.91% 6.94% 8.38% 7.76%
FIRST COMMUNITY BANCSHARES, INC.
CONDENSED QUARTERLY STATEMENTS OF INCOME (Unaudited)
As of and for the Quarter Ended
September 30, June 30, March 31, December 31, September 30,
(Amounts in thousands, except share and per share data) 2012 2012 2012 2011 2011
Interest Income
Interest and fees on loans held for investment $ 28,275 $ 20,853 $ 19,368 $ 19,947 $ 20,084
Interest on securities --- taxable 1,980 2,001 2,079 2,023 1,711
Interest on securities --- nontaxable 1,215 1,256 1,196 1,190 1,180
Interest on deposits in banks 66 72 39 41 75
Total interest income 31,536 24,182 22,682 23,201 23,050
Interest Expense
Interest on deposits 2,603 2,360 2,405 2,637 2,998
Interest on short-term borrowings 675 589 595 592 611
Interest on long-term borrowings 1,799 1,749 1,705 1,706 1,707
Total interest expense 5,077 4,698 4,705 4,935 5,316
Net interest income 26,459 19,484 17,977 18,266 17,734
Provision for loan losses 1,916 1,620 922 2,436 1,920
Net interest income after provision for loan losses 24,543 17,864 17,055 15,830 15,814
Noninterest Income
Wealth management income 1,005 940 894 818 868
Service charges on deposit accounts 3,895 3,329 3,013 3,450 3,404
Other service charges and fees 1,631 1,564 1,585 1,429 1,426
Insurance commissions 1,616 1,336 1,576 1,170 1,523
Net impairment losses recognized in earnings (942) -- -- (1,548) (210)
Net (loss) gain on sale of securities 228 (9) 51 26 178
Other operating income 3,730 1,183 872 1,261 877
Total noninterest income 11,163 8,343 7,991 6,606 8,066
Noninterest Expense
Salaries and employee benefits 10,860 8,892 8,222 7,903 8,409
Occupancy expense of bank premises 1,754 1,654 1,526 1,589 1,476
Furniture and equipment 955 975 811 804 862
Amortization of intangible assets 191 189 233 250 250
FDIC premiums and assessments 611 290 322 344 348
Merger related expense 645 3,419 163 -- --
Goodwill impairment -- -- -- 1,239 --
Other operating expense 5,309 4,713 4,916 4,925 4,715
Total noninterest expense 20,325 20,132 16,193 17,054 16,060
Income before income taxes 15,381 6,075 8,853 5,382 7,820
Income tax expense 5,322 1,997 2,852 2,151 2,502
Net income 10,059 4,078 6,001 3,231 5,318
Dividends on preferred stock 220 283 283 286 286
Net income available to common shareholders $ 9,839 $ 3,795 $ 5,718 $ 2,945 $ 5,032
Basic earnings per common share $ 0.49 $ 0.20 $ 0.32 $ 0.16 $ 0.28
Diluted earnings per common share $ 0.47 $ 0.20 $ 0.31 $ 0.17 $ 0.28
Cash dividends per common share $ 0.11 $ 0.11 $ 0.10 $ 0.10 $ 0.10
Weighted average basic shares outstanding 20,013,264 18,561,714 17,849,376 17,849,286 17,896,534
Weighted average diluted shares outstanding 21,476,497 19,909,242 19,189,923 19,159,090 19,205,634
FIRST COMMUNITY BANCSHARES, INC.
RECONCILIATION OF GAAP NET INCOME TO CORE EARNINGS (Unaudited)
Three Months Ended Nine Months Ended
September 30, September 30,
2012 2011 2012 2011
(Amounts in thousands, except per share data)
Net income, GAAP $ 10,059 $ 5,318 $ 20,138 $ 16,797
Non-GAAP adjustments:
Net impairment losses recognized in earnings 942 210 942 737
Net loss (gain) on sale of securities (228) (178) (270) (5,238)
FHLB debt prepayment fees -- -- -- 471
Merger related expense 645 -- 4,227 --
Prospective correction of prior period understatement (2,395) -- (2,395) --
Other noncore, nonrecurring items -- 59 -- 59
Total adjustments to core earnings (1,036) 91 2,504 (3,971)
Tax effect (392) 34 947 (1,489)
Core earnings, non-GAAP $ 9,415 $ 5,375 $ 21,695 $ 14,315
Core return on average assets 1.35% 0.97% 1.19% 0.87%
Core return on average common equity 11.39% 7.41% 9.39% 6.78%
Core return on average tangible common equity 16.65% 10.73% 13.63% 9.95%
Core diluted earnings per common share $0.44 $0.28 $1.08 $0.77
FIRST COMMUNITY BANCSHARES, INC.
EFFICIENCY RATIO CALCULATION (Unaudited)
Three Months Ended Nine Months Ended
September 30, September 30,
2012 2011 2012 2011
(Amounts in thousands)
Noninterest expense, GAAP $ 20,325 $ 16,060 $ 56,650 $ 51,861
Non-GAAP adjustments:
FHLB debt prepayment fees -- -- -- (471)
Merger related expenses (645) -- (4,227) --
OREO expense and net loss (490) (627) (1,581) (2,626)
Other noncore, nonrecurring items -- (77) -- (77)
Adjusted noninterest expense 19,190 15,356 50,842 48,687
Net interest income, GAAP 26,459 17,734 63,920 53,763
Noninterest income, GAAP 11,163 8,066 27,497 28,928
Non-GAAP adjustments:
Tax equivalency adjustment 680 676 1,934 2,278
Net impairment losses recognized in earnings 942 210 942 737
Net loss (gain) on sale of securities (228) (178) (270) (5,238)
Prospective correction of prior period understatement (2,395) -- (2,395) --
Other noncore, nonrecurring items -- (18) -- (18)
Adjusted net interest and noninterest income 36,621 26,490 91,628 80,450
Efficiency Ratio 52.40% 57.97% 55.49% 60.52%
FIRST COMMUNITY BANCSHARES, INC.
CONDENSED QUARTERLY BALANCE SHEETS (Unaudited)
For the Quarter Ended
September 30, June 30, March 31, December 31, September 30,
2012 2012 2012 2011 2011
(Amounts in thousands)
Cash and due from banks $ 44,865 $ 54,494 $ 36,555 $ 34,578 $ 38,776
Federal funds sold 93,005 64,815 61,328 1,909 103,179
Interest-bearing deposits in banks 27,359 36,856 11,729 10,807 6,365
Total cash and cash equivalents 165,229 156,165 109,612 47,294 148,320
Securities available-for-sale 517,161 526,607 478,352 482,430 449,387
Securities held-to-maturity 816 1,295 2,874 3,490 3,342
Loans held for sale 4,446 1,179 3,522 5,820 3,575
Loans held for investment, net of unearned income:
Covered under loss share agreements 223,758 238,777 -- -- --
Not covered under loss share agreements 1,539,472 1,568,312 1,386,525 1,396,067 1,374,656
Less allowance for loan losses 25,835 26,171 25,800 26,205 26,407
Loans, net 1,741,841 1,782,097 1,364,247 1,375,682 1,351,824
FDIC receivable under loss share agreements 49,477 52,067 -- -- --
Property, plant, and equipment, net 62,191 60,829 54,616 54,721 54,860
Other real estate owned:
Covered under loss share agreements 3,553 5,325 -- -- --
Not covered under loss share agreements 5,957 4,938 3,829 5,914 5,942
Interest receivable 6,038 8,396 5,886 6,193 6,264
Goodwill 111,001 99,402 83,056 83,056 83,832
Intangible assets 3,713 3,903 4,093 4,326 4,576
Other assets 101,812 109,297 96,704 101,683 111,745
Total assets $ 2,768,789 $ 2,810,321 $ 2,203,269 $ 2,164,789 $ 2,220,092
Deposits:
Noninterest-bearing $ 335,100 $ 340,895 $ 253,352 $ 240,268 $ 233,683
Interest-bearing 360,061 335,686 307,136 275,156 295,804
Savings 496,740 494,516 397,850 394,707 396,767
Time 872,059 934,110 621,412 633,336 664,237
Total deposits 2,063,960 2,105,207 1,579,750 1,543,467 1,590,491
Interest, taxes, and other liabilities 28,249 22,465 23,203 20,452 20,030
Securities sold under agreements to repurchase 146,904 148,367 124,266 129,208 139,510
FHLB advances 161,971 176,653 150,000 150,000 150,000
Other borrowings 15,892 15,918 15,925 15,933 15,941
Total liabilities 2,416,976 2,468,610 1,893,144 1,859,060 1,915,972
Preferred stock 17,921 18,921 18,921 18,921 18,921
Common stock 20,309 20,240 18,083 18,083 18,083
Additional paid-in capital 213,320 212,510 188,149 188,118 188,243
Retained earnings 107,055 99,418 97,588 93,656 92,498
Treasury stock, at cost (5,446) (5,672) (5,721) (5,721) (5,651)
Accumulated other comprehensive loss (1,346) (3,706) (6,895) (7,328) (7,974)
Total stockholders' equity 351,813 341,711 310,125 305,729 304,120
Total liabilities and stockholders' equity $ 2,768,789 $ 2,810,321 $ 2,203,269 $ 2,164,789 $ 2,220,092
Shares outstanding at period end 20,086,404 20,008,181 17,849,376 17,849,376 17,869,514
Book value per common share at period end (1) $ 16.50 $ 16.03 $ 16.19 $ 15.96 $ 15.86
Tangible book value per common share at period end (2) $ 11.12 $ 11.19 $ 11.64 $ 11.40 $ 11.25
(1) Book value per common share is defined as stockholders' equity divided by as-converted common shares outstanding.
(2) Tangible book value per common share is defined as stockholders' equity less goodwill and other intangibles divided by as-converted common shares outstanding.
FIRST COMMUNITY BANCSHARES, INC.
SELECTED CREDIT QUALITY INFORMATION (Unaudited)
As of and for the Quarter Ended
September 30, June 30, March 31, December 31, September 30,
(Amounts in thousands) 2012 2012 2012 2011 2011
Allowance for Loan Losses on Non-covered Loans
Beginning balance $ 26,171 $ 25,800 $ 26,205 $ 26,407 $ 26,482
Provision for loan losses 1,916 1,620 922 2,436 1,920
Charge-offs (2,613) (1,613) (1,562) (2,915) (3,062)
Recoveries 361 364 235 277 1,067
Net charge-offs (2,252) (1,249) (1,327) (2,638) (1,995)
Ending balance $ 25,835 $ 26,171 $ 25,800 $ 26,205 $ 26,407
Summary of Asset Quality
Non-covered loans
Nonaccrual loans $ 26,404 $ 27,947 $ 24,617 $ 24,487 $ 22,877
Accruing loans past due 90 days or more -- -- -- -- --
Troubled debt restructurings ("TDRs") (1) 121 469 2,668 600 964
Total non-covered nonperforming loans 26,525 28,416 27,285 25,087 23,841
Other real estate owned ("OREO") not covered under FDIC loss share agreements 5,957 4,938 3,829 5,914 5,942
Total non-covered nonperforming assets $ 32,482 $ 33,354 $ 31,114 $ 31,001 $ 29,783
Covered Loans
Nonaccrual loans $ 2,747 $ -- $ -- $ -- $ --
Accruing loans past due 90 days or more -- -- -- -- --
Total covered nonperforming loans 2,747 -- -- -- --
OREO covered under FDIC loss share agreements 3,553 5,325 -- -- --
Total covered nonperforming assets 6,300 5,325 -- -- --
Total nonperforming assets $ 38,782 $ 38,679 $ 31,114 $ 31,001 $ 29,783
Performing TDRs (2) $ 6,742 $ 6,995 $ 7,052 $ 8,854 $ 11,234
Total TDRs (3) $ 6,863 $ 7,464 $ 9,720 $ 9,454 $ 12,198
Asset Quality Ratios
Excluding covered assets
Nonperforming loans to total loans 1.72% 1.81% 1.97% 1.80% 1.73%
Nonperforming assets to total assets 1.28% 1.30% 1.41% 1.43% 1.34%
Allowance for loan losses to nonperforming loans (4) 97.40% 92.10% 94.56% 104.46% 110.76%
Allowance for loan losses to non-covered total loans 1.68% 1.67% 1.86% 1.88% 1.92%
Annualized net charge-offs to average loans 0.57% 0.38% 0.38% 0.76% 0.58%
Including covered assets
Nonperforming loans to total loans 1.66% 1.57% 1.97% 1.80% 1.73%
Nonperforming assets to total assets 1.40% 1.38% 1.41% 1.43% 1.34%
Allowance for loan losses to nonperforming loans 88.26% 92.10% 94.56% 104.46% 110.76%
Allowance for loan losses to total loans 1.47% 1.45% 1.86% 1.88% 1.92%
(1) Accruing TDRs restructured within the past six months
(2) Accruing TDRs with six months or more of satisfactory payment performance
(3) Accruing nonperforming and performing TDRs
(4) In accordance with GAAP, the Company recorded no allowance for the Peoples' loan portfolio because the fair value of the acquired loans incorporates assumptions regarding credit risk. The Company recorded an initial fair value adjustment of approximately $17.43 million on the loans acquired from Peoples in the second quarter of 2012.
FIRST COMMUNITY BANCSHARES, INC.
SELECTED FINANCIAL INFORMATION (Unaudited)
As of and for the Quarter Ended
September 30, June 30, March 31, December 31, September 30,
2012 2012 2012 2011 2011
Selected Ratios
Return on average assets 1.41% 0.65% 1.06% 0.54% 0.91%
Return on average common equity 11.91% 5.00% 7.88% 4.06% 6.94%
Net interest margin 4.48% 3.93% 3.91% 3.93% 3.77%
Efficiency ratio for the quarter 55.49% 57.58% 57.18% 56.73% 57.97%
Efficiency ratio year-to-date 52.40% 57.38% 57.18% 59.56% 60.52%
Total equity to total assets 12.72% 12.16% 14.08% 14.12% 13.70%
Average earning assets to average assets 87.02% 87.68% 88.24% 88.27% 88.39%
Average loans to average deposits 87.88% 88.57% 89.85% 89.45% 87.15%
(Amounts in thousands)
Average Balances
Loans $ 1,790,489 $ 1,512,451 $ 1,394,246 $ 1,392,650 $ 1,379,144
Investment securities 528,126 490,219 481,595 479,638 417,291
Earning assets 2,408,442 2,069,799 1,918,366 1,913,768 1,936,720
Total assets 2,767,790 2,360,567 2,174,004 2,168,166 2,191,145
Total deposits 2,037,467 1,707,613 1,551,728 1,556,990 1,582,481
Interest-bearing deposits 1,733,987 1,437,548 1,312,865 1,320,186 1,357,938
Borrowings 329,958 303,474 290,015 295,303 300,751
Interest-bearing liabilities 2,063,945 1,741,022 1,602,880 1,615,489 1,658,689
Stockholders' equity 347,637 323,994 310,795 306,779 306,524
Tax equivalent net interest income 27,139 20,206 18,660 18,947 18,410
FIRST COMMUNITY BANCSHARES, INC.
AVERAGE BALANCE SHEETS AND NET INTEREST INCOME ANALYSIS (Unaudited)
Three Months Ended September 30,
2012 2011
Average Average Yield/ Average Average Yield/
(Amounts in thousands) Balance Interest (1) Rate (1) Balance Interest (1) Rate (1)
Assets
Earning assets
Loans (2) $ 1,790,489 $ 28,305 6.29% $ 1,379,144 $ 20,126 5.79%
Securities available-for-sale 525,151 3,819 2.89% 413,538 3,447 3.31%
Securities held-to-maturity 2,975 26 3.48% 3,753 78 8.25%
Interest-bearing deposits 89,827 65 0.29% 140,285 75 0.21%
Total earning assets 2,408,442 32,215 5.32% 1,936,720 23,726 4.86%
Other assets 359,348 254,425
Total assets $ 2,767,790 $ 2,191,145
Liabilities
Interest-bearing deposits
Demand deposits $ 335,299 $ 49 0.06% $ 279,722 $ 80 0.11%
Savings deposits 500,761 171 0.14% 403,688 171 0.17%
Time deposits 897,927 2,384 1.06% 674,528 2,747 1.62%
Total interest-bearing deposits 1,733,987 2,604 0.60% 1,357,938 2,998 0.88%
Borrowings
Retail repurchase agreements 88,484 120 0.54% 84,813 126 0.59%
Wholesale repurchase agreements 58,195 544 3.72% 50,000 474 3.76%
FHLB advances and other borrowings 183,279 1,808 3.92% 165,938 1,718 4.11%
Total borrowings 329,958 2,472 2.98% 300,751 2,318 3.06%
Total interest-bearing liabilities 2,063,945 5,076 0.98% 1,658,689 5,316 1.27%
Noninterest-bearing demand deposits 303,480 224,543
Other liabilities 25,728 1,389
Total liabilities 2,393,153 1,884,621
Stockholders' equity 347,637 306,524
Total liabilities and stockholders' equity $ 2,740,790 $ 2,191,145
Net interest income, tax equivalent $ 27,139 $ 18,410
Net interest rate spread (3) 4.34% 3.59%
Net interest margin (4) 4.48% 3.77%
(1) Fully taxable equivalent at the rate of 35% ("FTE"). The FTE basis adjusts for the tax benefits of income on certain tax exempt loans and investments using the federal statutory rate of 35% for each period presented. The Company believes this measure to be the preferred industry measurement of net interest income and provides relevant comparison between taxable and nontaxable amounts.
(2) Nonaccrual loans are included in average balances outstanding, but with no related interest income during the period of nonaccrual.
(3) Represents the difference between the yield on earning assets and cost of funds.
(4) Represents tax equivalent net interest income divided by average earning assets.
FIRST COMMUNITY BANCSHARES, INC.
AVERAGE BALANCE SHEETS AND NET INTEREST INCOME ANALYSIS (Unaudited)
Nine Months Ended September 30,
2012 2011
Average Average Yield/ Average Average Yield/
(Amounts in thousands) Balance Interest (1) Rate (1) Balance Interest (1) Rate (1)
Assets
Earning assets
Loans (2) $ 1,566,550 $ 68,610 5.85% $ 1,378,540 $ 60,755 5.89%
Securities available-for-sale 496,854 11,547 3.10% 420,544 11,991 3.81%
Securities held-to-maturity 3,228 155 6.41% 4,203 263 8.37%
Interest-bearing deposits 66,579 177 0.36% 141,198 244 0.23%
Total earning assets 2,133,211 80,489 5.04% 1,944,485 73,253 5.04%
Other assets 302,136 260,413
Total assets $ 2,435,347 $ 2,204,898
Liabilities
Interest-bearing deposits
Demand deposits $ 305,055 $ 123 0.05% $ 277,109 $ 404 0.19%
Savings deposits 439,451 400 0.12% 415,197 769 0.25%
Time deposits 751,167 6,846 1.22% 695,150 8,978 1.73%
Total interest-bearing deposits 1,495,673 7,369 0.66% 1,387,456 10,151 0.98%
Borrowings
Federal funds purchased 654 2 0.41% -- -- 0.00%
Retail repurchase agreements 78,472 343 0.58% 85,064 440 0.69%
Wholesale repurchase agreements 54,145 1,482 3.66% 50,000 1,409 3.77%
FHLB advances and other borrowings 174,627 5,284 4.04% 170,034 5,212 4.10%
Total borrowings 307,898 7,111 3.08% 305,098 7,061 3.09%
Total interest-bearing liabilities 1,803,571 14,480 1.07% 1,692,554 17,212 1.36%
Noninterest-bearing demand deposits 279,987 218,659
Other liabilities 24,241 2,454
Total liabilities 2,107,799 1,913,667
Stockholders' equity 327,548 291,231
Total liabilities and stockholders' equity $ 2,435,347 $ 2,204,898
Net interest income, tax equivalent $ 66,009 $ 56,041
Net interest rate spread (3) 3.97% 3.68%
Net interest margin (4) 4.13% 3.85%
(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.
CONTACT: David D. Brown (276) 326-9000

Source:First Community Bancshares, Inc.