NEWS RELEASE

 

FOR IMMEDIATE RELEASE:	FOR MORE INFORMATION,
July 27, 2012	CONTACT:	David D. Brown
		(276) 326-9000

 

First Community Bancshares, Inc. Announces Second Quarter 2012 Results

 

Bluefield, Virginia – First Community Bancshares, Inc. (NASDAQ: FCBC) (www.fcbinc.com) (the “Company”) today reported net income for the quarter and six months ended June 30, 2012, of $4.08 million and $10.08 million, respectively. Net income available to common shareholders totaled $3.80 million, or $0.20 per diluted common share, for the quarter ended June 30, 2012. Net income available to common shareholders totaled $9.51 million, or $0.52 per diluted common share, for the six months ended June 30, 2012. Net income for the quarter and six months ended June 30, 2012, was impacted by $3.42 million and $3.58 million, respectively, in merger related expenses. Excluding these and other nonrecurring charges, core earnings for the quarter and six months ended June 30, 2012, totaled $6.21 million and $12.28 million, respectively.

 

On July 25, 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 August 10, 2012, and is expected to be paid on or about August 24, 2012. The current year marks the 27^th consecutive year of cash dividends to shareholders.

 

Second Quarter 2012 Highlights –

 

·

The Company completed the acquisition of Peoples Bank of Virginia (“Peoples”) on May 31, 2012, and acquired Waccamaw Bank (“Waccamaw”) on June 8, 2012, in a Federal Deposit Insurance Corporation (“FDIC”) assisted transaction. The Peoples and Waccamaw acquisitions added approximately $276.45 million and $500.43 million in total assets. Total assets increased $645.53 million, or 29.82%, compared with the fourth quarter of 2011.

·

Core earnings were $6.21 million, an increase of $2.50 million, or 67.25%, compared with the second quarter of 2011.

·

Core return on average assets was 1.06% and core return on average tangible common equity was 11.75% for the second quarter of 2012.

·

The tax equivalent net interest margin increased 10 basis points to 3.93% for the second quarter of 2012 compared with the second quarter of 2011.

·

The provision for loan losses was reduced $1.46 million, or 47.39%, compared with the second quarter of 2011.

·

Net charge-offs decreased $1.83 million, or 59.43%, compared with the second quarter of 2011.

·

The efficiency ratio for the second quarter of 2012 showed significant improvement at 57.58% compared to 60.07% for the second quarter of 2011.

 

Net Interest Income

 

Net interest income increased $1.73 million, or 9.74%, to $19.48 million for the second quarter of 2012 compared with the second quarter of 2011. The tax equivalent net interest margin increased 10 basis points to 3.93% for the second quarter of 2012 compared with 3.83% for the second quarter of 2011. Total interest income increased $847 thousand, or 3.63%, to $24.18 million for the second quarter of 2012 compared with the second quarter of 2011. The increase reflects the acquisitions of Peoples and Waccamaw during the second quarter of 2012. The tax equivalent yield on loans decreased to 5.56% while the average loan balance increased $138.46 million, or 10.08%, to $1.51 billion for the second quarter of 2012 compared with the second quarter of 2011.

 

Total interest expense decreased $883 thousand, or 15.82%, to $4.70 million for the second quarter of 2012 compared with the second quarter of 2011. Deposit costs decreased $913 thousand, or 27.89%, to $2.36 million for the second quarter of 2012 compared with the second quarter of 2011, which was primarily due to a 29 basis point decrease in the average rate paid on interest-bearing deposits. Borrowing costs increased $30 thousand, or 1.30%, to $2.34 million for the second quarter of 2012 compared with the second quarter of 2011. The average rate paid on interest-bearing liabilities decreased 24 basis points to 1.09% for the second quarter of 2012 compared with the second quarter of 2011. The average balance of interest-bearing liabilities increased $56.87 million, or 3.38%, to $1.74 billion for the second quarter of 2012 compared with the second quarter of 2011, which included a $51.26 million increase in average interest-bearing deposits and an $8.51 million increase in average Federal Home Loan Bank advances and other borrowings, primarily as a result of the Peoples and Waccamaw acquisitions during the second quarter of 2012.

 

 

Provision for Loan Losses

 

The provision for loan losses decreased $1.46 million, or 47.39%, to $1.62 million for the second quarter of 2012 and $2.15 million, or 45.81%, to $2.54 million for the first half of 2012, compared with the same periods of the prior year. The second quarter of 2012 marks the seventh consecutive quarter of provision decreases when compared to the prior year’s comparable quarter.

 

Noninterest Income

 

Noninterest income decreased $3.02 million, or 26.58%, to $8.34 million for the second quarter of 2012 compared with the second quarter of 2011, which was largely due to a reduction in the realized net gain on sale of securities. The Company realized a $9 thousand net loss on sale of securities for the second quarter of 2012, which was $3.23 million less than the net gain reported for the second quarter of 2011. Wealth management revenues remained stable, increasing $10 thousand, or 1.08%, for the second quarter of 2012 compared with the second quarter of 2011. The Trust and Wealth Management Divisions reported $883 million in assets under management as of June 30, 2012. Service charges on deposit accounts remained stable, decreasing $24 thousand for the second quarter of 2012 compared with the second quarter of 2011. Insurance commissions decreased $225 thousand, or 14.41%, to $1.34 million for the second quarter of 2012 compared with the same quarter of 2011, which is reflective of agency offices sold as part of strategic realignment during the third quarter of 2011.

 

Noninterest Expense

 

Noninterest expense increased $2.39 million, or 13.50%, to $20.13 million for the second quarter of 2012 compared with the second quarter of 2011, due largely to merger related costs associated with the Peoples and Waccamaw acquisitions. Salaries and employee benefits increased $207 thousand, or 2.38%, to $8.89 million for the second quarter of 2012 compared with the second quarter of 2011. The Peoples and Waccamaw acquisitions accounted for an increase in salaries and employee benefits of $100 thousand and $392 thousand, respectively, during the second quarter of 2012. Occupancy, furniture, and equipment expense increased $152 thousand, or 6.14%, to $2.63 million for the second quarter of 2012 compared with the second quarter of 2011. FDIC premiums and assessments decreased $124 thousand, or 29.95%, to $290 thousand for the second quarter of 2012 compared with the second quarter of 2011. Other operating expense decreased $1.19 million, or 20.13%, to $4.71 million for the second quarter of 2012 compared with the second quarter of 2011. During the second quarter of 2012, the Company incurred merger related expenses of $3.42 million in connection with the acquisition of Peoples and Waccamaw. Other operating expense included losses on sales and expenses associated with other real estate owned of $270 thousand for the second quarter of 2012 compared to $1.74 million for the second quarter of 2011. The efficiency ratio for the second quarter of 2012 showed significant improvement at 57.58% compared to 60.07% for the second quarter of 2011.

 

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 $26.17 million at June 30, 2012, compared with $26.21 million at December 31, 2011, and $26.48 million at June 30, 2011. The allowance for loan losses on non-covered loans as a percentage of non-covered loans decreased to 1.66% at June 30, 2012, compared with 1.88% at December 31, 2011, and 1.93% at June 30, 2011. For the second quarter of 2012, net charge-offs decreased $1.83 million, or 59.43%, compared with the second quarter of 2011. Annualized net charge-offs as a percentage of average loans were 0.38% for the second quarter of 2012, which represents a decrease of 51 basis points compared with the second quarter of 2011 continuing a general downward trend in net charge-off activity.

 

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 2.64% at June 30, 2012, compared to 2.12% for the same period of the prior year. Non-covered nonaccrual loans increased to $31.27 million at June 30, 2012, compared with $24.49 million at December 31, 2011, and $22.04 million at June 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 2.02% and non-covered nonperforming assets as a percentage of total non-covered assets were 1.43%. Nonperforming assets included $469 thousand in unseasoned, accruing troubled debt restructurings and $10.26 million in other real estate owned, of which $5.33 million was covered by the loss share agreement, at June 30, 2012.

 

 

Balance Sheet and Capital

 

Consolidated assets totaled $2.81 billion as of June 30, 2012, an increase of $645.53 million, or 29.82%, compared with $2.16 billion at December 31, 2011. Consolidated liabilities totaled $2.47 billion as of June 30, 2012, an increase of $609.55 million, or 32.79%, compared with $1.86 billion at December 31, 2011. Total stockholders’ equity increased to $341.71 million as of June 30, 2012, compared with $305.73 million at December 31, 2011. Book value per as-converted common share increased to $16.03 for the quarter ended June 30, 2012, compared with $15.96 for the quarter ended December 31, 2011. Tangible book value per common share decreased $0.35, or 3.07%, to $11.05 compared with the fourth quarter of 2011. During the second quarter of 2012, the Company paid an $0.11 per share cash dividend on common shares, which is a 10% increase over the $0.10 per share cash dividend paid during the first quarter of 2012.

 

The Company significantly exceeds regulatory “well capitalized” targets as of June 30, 2012, with a total risk-based capital ratio of 14.95%, Tier 1 risk-based capital ratio of 13.70%, and a Tier 1 leverage ratio of 11.12%.

 

Business Combinations

 

On June 8, 2012, the Company entered into a purchase and assumption agreement with a loss share arrangement with the FDIC to purchase certain assets and assume substantially all of the customer deposits and certain liabilities of Waccamaw. Waccamaw, a full service community bank headquartered in Whiteville, North Carolina, operated sixteen branches throughout North and South Carolina. At acquisition, Waccamaw had total assets of approximately $500.43 million, loans of approximately $318.32 million, and deposits of approximately $414.13 million. Under the loss share agreements, the FDIC has agreed to cover 80% of most loan and foreclosed real estate losses. All assets acquired and liabilities assumed are recorded at estimated fair value on the date of acquisition. As a result of the acquisition and the preliminary purchase price allocation, approximately $10.12 million was recorded as goodwill, which represents the excess fair market value of the net assets acquired and indentified intangibles over the purchase price. The Company and the FDIC are engaged in ongoing discussions that may impact which assets and liabilities are ultimately acquired or assumed by the Company. 

 

On May 31, 2012, the Company completed the acquisition of Peoples, based in Richmond, Virginia. Peoples, a full service community bank headquartered in Richmond, Virginia, operated four branches throughout the Richmond, Virginia, area. At acquisition, Peoples had total assets of approximately $276.45 million, loans of approximately $184.84 million, and deposits of approximately $232.75 million. Under the terms of the merger agreement, shares of Peoples were exchanged for $6.08 in cash and 1.07 shares of the Company’s common stock, resulting in a purchase price of approximately $40.53 million. As a result of the acquisition and the preliminary purchase price allocation, approximately $8.90 million was recorded as goodwill, which represents the excess fair market value of the net assets acquired and indentified intangibles over the purchase price.

 

The fair value estimates used in each of the Waccamaw and Peoples acquisitions are considered preliminary, and are subject to change for up to one year after the closing date of the acquisition as additional information relative to closing date fair values may become available. The fair value marks applied to both Waccamaw and Peoples’ loan portfolios currently consist of expected credit losses only. The Company is currently in the process of finalizing a fair value mark related to interest rates.

 

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, July 27, 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 second 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 $2.81 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 $883 million as of June 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.

 

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								Six Months Ended
		June 30,								June 30,
(Amounts in thousands, except share and per share data)		2012				2011				2012				2011
Interest income
Interest and fees on loans held for investment		$	20,853			$	20,094			$	40,221			$	40,549
Interest on securities — taxable			2,001				1,850				4,080				4,383
Interest on securities — nontaxable			1,256				1,291				2,452				2,824
Interest on deposits in banks			72				100				111				169
Total interest income			24,182				23,335				46,864				47,925
Interest expense
Interest on deposits			2,360				3,273				4,765				7,153
Interest on short-term borrowings			589				621				1,184				1,261
Interest on long-term borrowings			1,749				1,687				3,454				3,482
Total interest expense			4,698				5,581				9,403				11,896
Net interest income			19,484				17,754				37,461				36,029
Provision for loan losses			1,620				3,079				2,542				4,691
Net interest income after provision for loan losses			17,864				14,675				34,919				31,338
Noninterest income
Wealth management income			940				930				1,834				1,824
Service charges on deposit accounts			3,329				3,353				6,342				6,384
Other service charges and fees			1,564				1,461				3,149				2,867
Insurance commissions			1,336				1,561				2,912				3,504
Net impairment losses recognized in earnings			-				-				-				(527	)
Net (loss) gain on sale of securities			(9	)			3,224				42				5,060
Other operating income			1,183				834				2,055				1,750
Total noninterest income			8,343				11,363				16,334				20,862
Noninterest expense
Salaries and employee benefits			8,892				8,685				17,114				17,814
Occupancy expense of bank premises			1,654				1,568				3,180				3,215
Furniture and equipment			975				909				1,786				1,824
Amortization of intangible assets			189				261				422				520
FDIC premiums and assessments			290				414				612				1,292
FHLB debt prepayment fees			-				-				-				471
Merger related expense			3,419				-				3,582				-
Other operating expense			4,713				5,901				9,629				10,665
Total noninterest expense			20,132				17,738				36,325				35,801
Income before income taxes			6,075				8,300				14,928				16,399
Income tax expense			1,997				2,572				4,849				4,920
Net income			4,078				5,728				10,079				11,479
Dividends on preferred stock			283				131				566				131
Net income available to common shareholders		$	3,795			$	5,597			$	9,513			$	11,348
Basic earnings per common share		$	0.20			$	0.31			$	0.52			$	0.63
Diluted earnings per common share		$	0.20			$	0.31			$	0.52			$	0.63
Cash dividends per common share		$	0.11			$	0.10			$	0.21			$	0.20
Weighted average basic shares outstanding			18,561,714				17,895,904				18,205,545				17,882,006
Weighted average diluted shares outstanding			19,909,242				18,534,489				19,549,582				18,200,184
Return on average assets			0.65	%			1.02	%			0.84	%			1.03	%
Return on average common equity			5.00	%			7.91	%			6.41	%			8.18	%

 

 

FIRST COMMUNITY BANCSHARES, INC.

CONDENSED QUARTERLY STATEMENTS OF INCOME (Unaudited)

 

		As of and for the Quarter Ended
		June 30,				March 31,				December 31,				September 30,				June 30,
(Amounts in thousands, except share and per share data)		2012				2012				2011				2011				2011
Interest Income
Interest and fees on loans held for investment		$	20,853			$	19,368			$	19,947			$	20,084			$	20,094
Interest on securities — taxable			2,001				2,079				2,023				1,711				1,850
Interest on securities — nontaxable			1,256				1,196				1,190				1,180				1,291
Interest on deposits in banks			72				39				41				75				100
Total interest income			24,182				22,682				23,201				23,050				23,335
Interest Expense
Interest on deposits			2,360				2,405				2,637				2,998				3,273
Interest on short-term borrowings			589				595				592				611				621
Interest on long-term borrowings			1,749				1,705				1,706				1,707				1,687
Total interest expense			4,698				4,705				4,935				5,316				5,581
Net interest income			19,484				17,977				18,266				17,734				17,754
Provision for loan losses			1,620				922				2,436				1,920				3,079
Net interest income after provision for loan losses			17,864				17,055				15,830				15,814				14,675
Noninterest Income
Wealth management income			940				894				818				868				930
Service charges on deposit accounts			3,329				3,013				3,450				3,404				3,353
Other service charges and fees			1,564				1,585				1,429				1,426				1,461
Insurance commissions			1,336				1,576				1,170				1,523				1,561
Net impairment losses recognized in earnings			-				-				(1,548	)			(210	)			-
Net (loss) gain on sale of securities			(9	)			51				26				178				3,224
Other operating income			1,183				872				1,261				877				834
Total noninterest income			8,343				7,991				6,606				8,066				11,363
Noninterest Expense
Salaries and employee benefits			8,892				8,222				7,903				8,409				8,685
Occupancy expense of bank premises			1,654				1,526				1,589				1,476				1,568
Furniture and equipment			975				811				804				862				909
Amortization of intangible assets			189				233				250				250				261
FDIC premiums and assessments			290				322				344				348				414
Merger related expense			3,419				163				-				-				-
Goodwill impairment			-				-				1,239				-				-
Other operating expense			4,713				4,916				4,925				4,715				5,901
Total noninterest expense			20,132				16,193				17,054				16,060				17,738
Income before income taxes			6,075				8,853				5,382				7,820				8,300
Income tax expense			1,997				2,852				2,151				2,502				2,572
Net income			4,078				6,001				3,231				5,318				5,728
Dividends on preferred stock			283				283				286				286				131
Net income available to common shareholders		$	3,795			$	5,718			$	2,945			$	5,032			$	5,597
Basic earnings per common share		$	0.20			$	0.32			$	0.16			$	0.28			$	0.31
Diluted earnings per common share		$	0.20			$	0.31			$	0.17			$	0.28			$	0.31
Cash dividends per common share		$	0.11			$	0.10			$	0.10			$	0.10			$	0.10
Weighted average basic shares outstanding			18,561,714				17,849,376				17,849,286				17,896,534				17,895,904
Weighted average diluted shares outstanding			19,909,242				19,189,923				19,159,090				19,205,634				18,534,489

 

 

FIRST COMMUNITY BANCSHARES, INC.

RECONCILIATION OF GAAP NET INCOME TO CORE EARNINGS (Unaudited)

 

		Three Months Ended								Six Months Ended
		June 30,								June 30,
(Amounts in thousands, except per share data)		2012				2011				2012				2011
Net income, GAAP		$	4,078			$	5,728			$	10,079			$	11,479
Non-GAAP adjustments:
Net impairment losses recognized in earnings			-				-				-				527
Net loss (gain) on sale of securities			9				(3,224	)			(42	)			(5,060	)
FHLB debt prepayment fees			-				-				-				471
Merger related expense			3,419				-				3,582				-
Total adjustments to core earnings			3,428				(3,224	)			3,540				(4,062	)
Tax effect			1,296				(1,209	)			1,338				(1,523	)
Core earnings, non-GAAP		$	6,210			$	3,713			$	12,281			$	8,940
Core return on average assets			1.06	%			0.68	%			1.09	%			0.82	%
Core return on average common equity			8.19	%			5.25	%			8.28	%			6.45	%
Core return on average tangible common equity			11.75	%			7.70	%			11.84	%			9.53	%
Core diluted earnings per common share		$	0.31			$	0.20			$	0.63			$	0.49

 

FIRST COMMUNITY BANCSHARES, INC.

EFFICIENCY RATIO CALCULATION (Unaudited)

 

		Three Months Ended								Six Months Ended
		June 30,								June 30,
(Amounts in thousands)		2012				2011				2012				2011
Noninterest expense, GAAP		$	20,132			$	17,738			$	36,325			$	35,801
Non-GAAP adjustments:
FHLB debt prepayment fees			-				-				-				(471	)
Merger related expenses			(3,419	)			-				(3,582	)			-
OREO expense and net loss			(270	)			(1,743	)			(1,091	)			(1,999	)
Adjusted noninterest expense			16,443				15,995				31,652				33,331
Net interest income, GAAP			19,484				17,754				37,461				36,029
Noninterest income, GAAP			8,343				11,363				16,334				20,862
Non-GAAP adjustments:
Tax equivalency adjustment			722				736				1,405				1,602
Net impairment losses recognized in earnings			-				-				-				527
Net loss (gain) on sale of securities			9				(3,224	)			(42	)			(5,060	)
Adjusted net interest and noninterest income			28,558				26,629				55,158				53,960
Efficiency Ratio			57.58	%			60.07	%			57.38	%			61.77	%

 

 

FIRST COMMUNITY BANCSHARES, INC.

CONDENSED QUARTERLY BALANCE SHEETS (Unaudited)

 

		For the Quarter Ended
		June 30,				March 31,				December 31,				September 30,				June 30,
(Amounts in thousands)		2012				2012				2011				2011				2011
Cash and due from banks		$	54,494			$	36,555			$	34,578			$	38,776			$	31,451
Federal funds sold			64,815				61,328				1,909				103,179				162,629
Interest-bearing deposits in banks			36,856				11,729				10,807				6,365				36,539
Total cash and cash equivalents			156,165				109,612				47,294				148,320				230,619
Securities available-for-sale			523,700				478,352				482,430				449,387				349,976
Securities held-to-maturity			4,202				2,874				3,490				3,342				4,106
Loans held for sale			1,179				3,522				5,820				3,575				920
Loans held for investment, net of unearned income:
Covered under loss share agreements			232,946				-				-				-				-
Not covered under loss share agreements			1,574,427				1,386,525				1,396,067				1,374,656				1,373,944
Less allowance for loan losses			26,171				25,800				26,205				26,407				26,482
Loans, net			1,782,381				1,364,247				1,375,682				1,351,824				1,348,382
Property, plant, and equipment, net			60,829				54,616				54,721				54,860				55,808
Other real estate owned:
Covered under loss share agreements			5,325				-				-				-				-
Not covered under loss share agreements			4,938				3,829				5,914				5,942				5,585
Interest receivable			8,396				5,886				6,193				6,264				6,202
Goodwill			102,234				83,056				83,056				83,832				85,132
Intangible assets			3,903				4,093				4,326				4,576				5,205
Other assets			158,248				96,704				101,683				111,745				115,385
Total assets		$	2,810,321			$	2,203,269			$	2,164,789			$	2,220,092			$	2,206,400
Deposits:
Noninterest-bearing		$	340,895			$	253,352			$	240,268			$	233,683			$	219,488
Interest-bearing			335,686				307,136				275,156				295,804				271,622
Savings			494,516				397,850				394,707				396,767				405,409
Time			934,110				621,412				633,336				664,237				683,157
Total deposits			2,105,207				1,579,750				1,543,467				1,590,491				1,579,676
Interest, taxes, and other liabilities			22,465				23,203				20,452				20,030				20,563
Securities sold under agreements to repurchase			148,367				124,266				129,208				139,510				137,778
FHLB advances			176,000				150,000				150,000				150,000				150,000
Other borrowings			16,571				15,925				15,933				15,941				16,179
Total liabilities			2,468,610				1,893,144				1,859,060				1,915,972				1,904,196
Preferred stock			18,921				18,921				18,921				18,921				18,921
Common stock			20,240				18,083				18,083				18,083				18,083
Additional paid-in capital			212,510				188,149				188,118				188,243				188,278
Retained earnings			99,418				97,588				93,656				92,498				89,257
Treasury stock, at cost			(5,672	)			(5,721	)			(5,721	)			(5,651	)			(5,137	)
Accumulated other comprehensive loss			(3,706	)			(6,895	)			(7,328	)			(7,974	)			(7,198	)
Total stockholders' equity			341,711				310,125				305,729				304,120				302,204
Total liabilities and stockholders' equity		$	2,810,321			$	2,203,269			$	2,164,789			$	2,220,092			$	2,206,400
Shares outstanding at period end			20,008,181				17,849,376				17,849,376				17,869,514				17,917,824
Book value per common share at period end (1)		$	16.03			$	16.19			$	15.96			$	15.86			$	16.87
Tangible book value per common share at period end (2)		$	11.05			$	11.64			$	11.40			$	11.25			$	11.82

 

(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)		2012				2012				2011				2011				2011
Allowance for Loan Losses on Non-covered Loans
Beginning balance		$	25,800			$	26,205			$	26,407			$	26,482			$	26,482
Provision for loan losses			1,620				922				2,436				1,920				3,079
Charge-offs			(1,613	)			(1,562	)			(2,915	)			(3,062	)			(3,456	)
Recoveries			364				235				277				1,067				377
Net charge-offs			(1,249	)			(1,327	)			(2,638	)			(1,995	)			(3,079	)
Ending balance		$	26,171			$	25,800			$	26,205			$	26,407			$	26,482
Summary of Asset Quality
Non-covered portfolio
Nonaccrual loans		$	31,274			$	24,617			$	24,487			$	22,877			$	22,037
Accruing loans past due 90 days or more			-				-				-				-				-
Troubled debt restructurings ("TDRs") (1)			469				2,668				600				964				878
Total non-covered nonperforming loans			31,743				27,285				25,087				23,841				22,915
Other real estate owned ("OREO") not covered  under FDIC loss share agreements			4,938				3,829				5,914				5,942				5,585
Total non-covered nonperforming assets		$	36,681			$	31,114			$	31,001			$	29,783			$	28,500
Covered portfolio
Nonaccrual loans		$	28,890			$	-			$	-			$	-			$	-
Accruing loans past due 90 days or more			-				-				-				-				-
Total covered nonperforming loans			28,890				-				-				-				-
OREO covered under FDIC loss share agreements			5,325				-				-				-				-
Total covered nonperforming assets			34,215				-				-				-				-
Total nonperforming assets		$	70,896			$	31,114			$	31,001			$	29,783			$	28,500
Performing TDRs (2)		$	6,995			$	7,052			$	8,854			$	11,234			$	16,233
Total TDRs (3)		$	7,464			$	9,720			$	9,454			$	12,198			$	17,111
Asset Quality Ratios
Excluding covered assets
Nonperforming loans to total loans			2.02	%			1.97	%			1.80	%			1.73	%			1.67	%
Nonperforming assets to total assets			1.43	%			1.41	%			1.43	%			1.34	%			1.29	%
Allowance for loan losses to nonperforming loans (4)			82.45	%			94.56	%			104.46	%			110.76	%			115.57	%
Allowance for loan losses to non-covered total loans			1.66	%			1.86	%			1.88	%			1.92	%			1.93	%
Annualized net charge-offs to average loans			0.38	%			0.38	%			0.76	%			0.58	%			0.90	%
Including covered assets
Nonperforming loans to total loans			3.35	%			1.97	%			1.80	%			1.73	%			1.67	%
Nonperforming assets to total assets			2.52	%			1.41	%			1.43	%			1.34	%			1.29	%
Allowance for loan losses to nonperforming loans			43.16	%			94.56	%			104.46	%			110.76	%			115.57	%
Allowance for loan losses to total loans			1.45	%			1.86	%			1.88	%			1.92	%			1.93	%

 

(1)

Accruing TDRs restructured within the past six months

(2)

Accruing TDRs with six months or more of satisfactory payment performace

(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 a downward 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
		June 30,				March 31,				December 31,				September 30,				June 30,
		2012				2012				2011				2011				2011
Selected Ratios
Return on average assets			0.65	%			1.06	%			0.54	%			0.91	%			1.02	%
Return on average common equity			5.00	%			7.88	%			4.06	%			6.94	%			7.91	%
Net interest margin			3.93	%			3.91	%			3.93	%			3.77	%			3.83	%
Efficiency ratio for the quarter			57.58	%			57.18	%			56.73	%			57.97	%			60.07	%
Efficiency ratio year-to-date			57.38	%			57.18	%			59.56	%			60.52	%			61.77	%
Total equity to total assets			12.16	%			14.08	%			14.12	%			13.70	%			13.70	%
Average earning assets to average assets			87.68	%			88.24	%			88.27	%			88.39	%			88.11	%
Average loans to average deposits			88.57	%			89.85	%			89.45	%			87.15	%			85.57	%
(Amounts in thousands)
Average Balances
Loans		$	1,512,451			$	1,394,246			$	1,392,650			$	1,379,144			$	1,373,988
Investment securities			490,219				481,595				479,638				417,291				386,706
Earning assets			2,069,799				1,918,366				1,913,768				1,936,720				1,935,470
Total assets			2,360,567				2,174,004				2,168,166				2,191,145				2,196,691
Total deposits			1,707,613				1,551,728				1,556,990				1,582,481				1,605,694
Interest-bearing deposits			1,437,548				1,312,865				1,320,186				1,357,938				1,386,292
Borrowings			303,474				290,015				295,303				300,751				297,857
Interest-bearing liabilities			1,741,022				1,602,880				1,615,489				1,658,689				1,684,149
Stockholders' equity			323,994				310,795				306,779				306,524				291,474
Tax equivalent net interest income			20,206				18,660				18,947				18,410				18,490

 

 

FIRST COMMUNITY BANCSHARES, INC.

AVERAGE BALANCE SHEETS AND NET INTEREST INCOME ANALYSIS (Unaudited)

 

		Three Months Ended June 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)		$	1,512,451			$	20,897				5.56	%		$	1,373,988			$	20,134				5.88	%
Securities available-for-sale			486,742				3,872				3.20	%			382,385				3,747				3.93	%
Securities held-to-maturity			3,477				63				7.29	%			4,321				90				8.35	%
Interest-bearing deposits			67,129				72				0.43	%			174,776				100				0.23	%
Total earning assets			2,069,799				24,904				4.84	%			1,935,470				24,071				4.99	%
Other assets			290,768												261,221
Total assets		$	2,360,567											$	2,196,691
Liabilities
Interest-bearing deposits
Demand deposits		$	296,647			$	43				0.06	%		$	279,912			$	113				0.16	%
Savings deposits			421,331				119				0.11	%			414,439				241				0.23	%
Time deposits			719,570				2,198				1.23	%			691,941				2,919				1.69	%
Total interest-bearing deposits			1,437,548				2,360				0.66	%			1,386,292				3,273				0.95	%
Borrowings
Retail repurchase agreements			74,651				110				0.59	%			81,736				141				0.69	%
Wholesale repurchase agreements			54,194				469				3.48	%			50,000				468				3.75	%
FHLB advances and other borrowings			174,629				1,759				4.05	%			166,121				1,699				4.10	%
Total borrowings			303,474				2,338				3.10	%			297,857				2,308				3.11	%
Total interest-bearing liabilities			1,741,022				4,698				1.09	%			1,684,149				5,581				1.33	%
Noninterest-bearing demand deposits			270,065												219,402
Other liabilities			25,486												1,666
Total liabilities			2,036,573												1,905,217
Stockholders' equity			323,994												291,474
Total liabilities and stockholders' equity		$	2,360,567											$	2,196,691
Net interest income, tax equivalent						$	20,206											$	18,490
Net interest rate spread (3)											3.75	%											3.66	%
Net interest margin (4)											3.93	%											3.83	%

 

(1)

Fully taxable equivalent at the rate of 35% ("FTE"). The FTE basis adjusts for the tax benefits of income on certain tax exempt loans and investments using the federal statutory rate of 35% for each period presented. The Company believes this measure to be the preferred industry measurement of net interest income and provides relevant comparison between taxable and nontaxable amounts.

(2)

Nonaccrual loans are included in average balances outstanding, but with no related interest income during the period of nonaccrual.

(3)

Represents the difference between the yield on earning assets and cost of funds.

(4)

Represents tax equivalent net interest income divided by average earning assets.

 

 

FIRST COMMUNITY BANCSHARES, INC.

AVERAGE BALANCE SHEETS AND NET INTEREST INCOME ANALYSIS (Unaudited)

 

		Six Months Ended June 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)		$	1,453,348			$	40,304				5.58	%		$	1,378,233			$	40,629				5.94	%
Securities available-for-sale			482,550				7,729				3.22	%			424,104				8,544				4.06	%
Securities held-to-maturity			3,357				125				7.49	%			4,432				185				8.42	%
Interest-bearing deposits			54,827				111				0.41	%			141,662				169				0.24	%
Total earning assets			1,994,082				48,269				4.87	%			1,948,431				49,527				5.13	%
Other assets			273,203												263,457
Total assets		$	2,267,285											$	2,211,888
Liabilities
Interest-bearing deposits
Demand deposits		$	289,767			$	74				0.05	%		$	275,781			$	324				0.24	%
Savings deposits			408,459				229				0.11	%			421,046				598				0.29	%
Time deposits			676,980				4,462				1.33	%			705,632				6,231				1.78	%
Total interest-bearing deposits			1,375,206				4,765				0.70	%			1,402,459				7,153				1.03	%
Borrowings
Federal funds purchased			985				2				0.41	%			-				-				0.00	%
Retail repurchase agreements			73,411				224				0.61	%			85,191				314				0.74	%
Wholesale repurchase agreements			52,097				938				3.62	%			50,000				935				3.77	%
FHLB advances and other borrowings			170,252				3,474				4.10	%			172,117				3,494				4.09	%
Total borrowings			296,745				4,638				3.14	%			307,308				4,743				3.11	%
Total interest-bearing liabilities			1,671,951				9,403				1.13	%			1,709,767				11,896				1.40	%
Noninterest-bearing demand deposits			254,464												215,669
Other liabilities			23,476												2,995
Total liabilities			1,949,891												1,928,431
Stockholders' equity			317,394												283,457
Total liabilities and stockholders' equity		$	2,267,285											$	2,211,888
Net interest income, tax equivalent						$	38,866											$	37,631
Net interest rate spread (3)											3.74	%											3.73	%
Net interest margin (4)											3.92	%											3.89	%

 

(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.