BLUEFIELD, Va., July 27, 2012 (GLOBE NEWSWIRE) -- 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 27th 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.
The First Community Bancshares, Inc. logo is available at http://www.globenewswire.com/newsroom/prs/?pkgid=6960
This news release may include forward-looking statements. These forward-looking statements are based on current expectations that involve risks, uncertainties, and assumptions. Should one or more of these risks or uncertainties materialize or should underlying assumptions prove incorrect, actual results may differ materially. These risks include: changes in business or other market conditions; the timely development, production and acceptance of new products and services; the challenge of managing asset/liability levels; the management of credit risk and interest rate risk; the difficulty of keeping expense growth at modest levels while increasing revenues; and other risks detailed from time to time in the Company's Securities and Exchange Commission reports including, but not limited to, the Annual Report on Form 10-K for the most recent year ended. Pursuant to the Private Securities Litigation Reform Act of 1995, the Company does not undertake to update forward-looking statements to reflect circumstances or events that occur after the date the forward-looking statements are made.
| FIRST COMMUNITY BANCSHARES, INC. | ||||
| CONDENSED CONSOLIDATED STATEMENTS OF INCOME (Unaudited) | ||||
| Three Months Ended | 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, | |||
| 2012 | 2011 | 2012 | 2011 | |
| (Amounts in thousands, except per share data) | ||||
| 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, | |||
| 2012 | 2011 | 2012 | 2011 | |
| (Amounts in thousands) | ||||
| 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, | |
| 2012 | 2012 | 2011 | 2011 | 2011 | |
| (Amounts in thousands) | |||||
| 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. | ||||||