NEWS RELEASE

 

FOR IMMEDIATE RELEASE: November 2, 2012		FOR MORE INFORMATION, CONTACT:     David D. Brown
		(276) 326-9000

 

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

Strongest Quarterly Returns on Assets and Equity Since 2007

 

Bluefield, Virginia – 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 27^th 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 increased $0.05, or 0.44%, to $11.45 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 16.01%, Tier 1 risk-based capital ratio of 14.78%, and a Tier 1 leverage ratio of 9.75%.

 

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.

 

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, nonreccuring 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, nonreccuring 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			104,022				99,402				83,056				83,056				83,832
Intangible assets			3,713				3,903				4,093				4,326				4,576
Other assets			108,791				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)		$	11.45			$	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 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 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.