First Community Bancshares, Inc. Announces Fourth Quarter 2009 Results

BLUEFIELD, Va., Jan. 27, 2010 (GLOBE NEWSWIRE) -- First Community Bancshares, Inc. (Nasdaq:FCBC) (http://www.fcbinc.com) today reported operating results for the quarter and year ended December 31, 2009. The results were significantly impacted by the Company's decision to sell and write down certain pooled trust preferred securities affected by continuing weakness in a number of underlying bank issuers.

During fourth quarter 2009, the Company sold four positions from its portfolio of pooled trust preferred securities and realized after-tax losses on the final disposition of $26.78 million to secure tax benefits associated with the sales.  All remaining positions in this sector were written down to nominal fair market values to reflect the Company's view of the current valuation and prospects for these securities.  The cumulative effect of these transactions was a net loss available to common shareholders for the quarter ended December 31, 2009, of $34.56 million, or $1.95 per diluted common share. Net loss available to common shareholders amounted to $40.39 million, or $2.72 per diluted common share for the twelve months ended December 31, 2009.

Core earnings for the fourth quarter of 2009 were $2.27 million, or $0.13 per diluted common share, and $16.71 million, or $1.12 per diluted common share for the twelve months ended December 31, 2009 (see the attached reconciliation of GAAP to core earnings).

The combination of security sales and write-downs have substantially eliminated further exposure to these bonds and positions the Company to move forward without the prospect of further impairment charges related to pooled trust preferred securities.  Commenting on these initiatives, Chief Executive Officer John M. Mendez said, "We can now move beyond the substantial distraction associated with these securities and devote our full attention to the business of banking. We are now positioned with a strong capital base and stronger overall asset quality measures. Following the balance sheet restructuring the Company continues to report capital levels in excess of the regulatory definitions of well capitalized." The sales and write-downs of all pooled trust preferred securities beyond the amounts already included in other comprehensive income resulted in a reduction in tangible book value of approximately $0.76.

Fourth Quarter 2009 Highlights –

• Asset quality metrics continue to compare favorably to peers with a ratio of non-performing assets to total assets at December 31, 2009, of 97 basis points
• Net interest margin increased to 3.92%, up 24 basis points from the quarter ended September 30, 2009
• First Community Bank, N. A. remains "well-capitalized" with a total risk-based capital ratio of 11.9%, Tier 1 risk-based capital ratio of 10.6%, and a Tier 1 leverage ratio of 7.2% at December 31, 2009

Net Interest Income

Tax-equivalent net interest margin for the fourth quarter of 2009 was 3.92%. Net interest income was $18.96 million, an increase of $2.44 million, or 14.73%, from the fourth quarter of 2008. Interest income was $27.75 million, an increase of $517 thousand, or 1.90%, from fourth quarter of 2008. The yield on loans dropped to 6.24% from 6.39% while average loans increased $171.47 million to $1.41 billion from fourth quarter 2008, which also reflects the acquisition of TriStone Community Bank in July 2009. The Company continues to maintain a high level of liquidity with an average federal funds sold position of $32.62 million in the fourth quarter.

Fourth quarter interest expense was $8.79 million, a decrease of $1.92 million, or 17.91%, from the fourth quarter of 2008. Fourth quarter deposit costs decreased $1.09 million compared to the fourth quarter of 2008, while the average rate paid on interest-bearing deposits decreased 66 basis points to 1.68%. Compared to the fourth quarter of 2008, interest costs on borrowings decreased $824 thousand to $2.64 million, while the average balance decreased $53.40 million due to the redemption and restructuring of various wholesale borrowings. The cost of interest-bearing liabilities decreased 67 basis points during the fourth quarter of 2009 compared to the fourth quarter of 2008. Average interest bearing liabilities increased $168.42 million, or 10.33%, compared with the fourth quarter of 2008, and included a decrease of $22.96 million in Federal Home Loan Bank ("FHLB") borrowings.

Non-interest Income

Insurance commissions were $1.47 million for the fourth quarter of 2009, an increase of $207 thousand, or 16.45%, from the same period in 2008. During the fourth quarter of 2009, wealth management revenues decreased $87 thousand, or 7.59%, to $1.06 million, and at December 31, 2009 the Wealth Management Division reported $825 million in assets under management. Service charges on deposit accounts were $3.59 million for the fourth quarter of 2009, a decrease of $112 thousand, or 3.03%, from the fourth quarter of 2008.

Investment Securities Impairment Charges

The Company maintains a portfolio of investment securities that include pooled trust preferred securities. These securities generally represent obligations of banks and, to a lesser extent, insurance companies and real estate investment trusts. During the fourth quarter of 2009, the Company recognized pre-tax credit related net impairment losses on its pooled trust preferred securities of $43.70 million, or $1.54 per common share on an after-tax basis. The impairment charges reflect the Company's change in its intent to hold the securities to recovery. The Company's remaining exposure to these investment securities is reduced to only $1.65 million at December 31, 2009. The Company also recognized additional impairment of $369 thousand on four equity security positions at December 31, 2009.

Non-interest Expenses

Non-interest expenses for the fourth quarter of 2009 increased $2.54 million, or 16.87%, from the fourth quarter of 2008. The large increase was due to increased Federal Deposit Insurance Corporation ("FDIC") deposit insurance premiums, salaries and employee benefits, and furniture and equipment expense. Salaries and employee benefits increased $1.86 million, or 26.00%, from the fourth quarter of 2008.  Coddle Creek Financial branches accounted for an increase in salaries and employee benefits of $78 thousand, TriStone Community Bank branches accounted for an increase of $390 thousand, and GreenPoint Insurance Group's acquisitions accounted for an increase of $234 thousand. The remainder of the Company showed an overall increase in salaries and benefits of $1.15 million. Fourth quarter 2008 expenses were significantly reduced by the reversal of all incentive compensation accruals. Other operating expenses decreased $1.29 million, or 24.09%, compared to the fourth quarter of 2008. The fourth quarter of 2009 efficiency ratio was 61.29% compared to 57.97% in the fourth quarter of 2008.

Credit Quality

The Company's loan quality measures at December 31, 2009, continue to compare favorably to the Company's Federal Reserve peer group of bank holding companies with total assets between $1 and $3 billion. Total loan delinquencies of 30 days or more, including non-accrual loans, as a percent of total loans were 2.32% at December 31, 2009, compared to 4.65% for the Federal Reserve peer group at September 30, 2009, and the ratio of allowance for loan losses as a percent of loans held for investment was 1.56%. The increase in non-accrual loans from September 30, 2009, was due largely to increases in the residential real estate portfolio. Substantially all of the increase in non-accrual single-family real estate loans was due to loans in the Richmond, Virginia, and Winston-Salem, North Carolina, markets. The increase in multi-family non-accrual loans is attributed to one loan relationship in the southern West Virginia market.

Non-performing assets increased to $22.11 million at December 31, 2009, or 0.97% of total assets and non-performing loans as a percentage of loans held for investment was 1.26% at December 31, 2009. The Federal Reserve peer group reported non-performing assets to total assets of 3.23% and non-performing loans to total loans held for investment of 3.52% at September 30, 2009.

Balance Sheet

Since December 31, 2008, consolidated assets have increased $141.56 million to $2.27 billion at December 31, 2009, due to the acquisition of TriStone Community Bank, an increasing deposit base, and $61.67 million in new capital from the June 2009 equity offering. Total stockholders' equity for the Company was $253.86 million, resulting in a book value per common share outstanding of $14.29 at December 31, 2009, compared to $220.34 million and $15.46 per common share at December 31, 2008.

The Company will host an investor and media teleconference and webcast on Thursday, January 28, 2010 at 11:00 a.m. To access the teleconference, the toll-free number is (877) 407-8033. Alternatively, 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 Current News Releases section. The Company's press release and financial summary will be available in this section, as well. Copies of the Company's fourth quarter 2009 earnings press release and financial summary will also be made available upon request via fax, email or postal service mail. To request a copy, contact David D. Brown, Chief Financial Officer, at (800) 425-0839.

First Community Bancshares, Inc., headquartered in Bluefield, Virginia, is a $2.27 billion financial holding company and is the parent company of First Community Bank, N. A. First Community Bank, N. A. operates through fifty-nine locations in the five states of Virginia, West Virginia, North Carolina, South Carolina, and Tennessee. First Community Bank, N. A. offers wealth management services through its Trust & Financial Services Division and Investment Planning Consultants, Inc., a registered investment advisory firm which offers wealth management and investment advice. The Company's Wealth Management Division managed assets with a market value of $825 million at December 31, 2009. First Community is also the parent company of GreenPoint Insurance Group, Inc., a full-service insurance agency located in High Point, North Carolina. First Community Bancshares, Inc.'s common stock is traded on the NASDAQ Global Select Market under the symbol, "FCBC". Additional investor information can be found on the Internet 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 contained within this news release.