BLUEFIELD, Va., Jan. 29, 2015 (GLOBE NEWSWIRE) -- First Community Bancshares, Inc. (Nasdaq:FCBC) (www.fcbinc.com) (the "Company") today reported net income of $5.72 million for the quarter and $25.49 million for the year ended December 31, 2014. Net income available to common shareholders totaled $5.49 million, or $0.29 per diluted common share, for the quarter and $24.58 million, or $1.31 per diluted common share, for the year ended December 31, 2014. Core earnings totaled $8.79 million for the quarter and $30.58 million for the year ended December 31, 2014.
On January 27, 2015, the Company announced that the board of directors declared a quarterly cash dividend to common shareholders of thirteen cents ($0.13) per common share. The quarterly dividend is payable on or about February 20, 2015, to common shareholders of record on February 6, 2015. The current year marks the 30th consecutive year of cash dividends paid to stockholders.
Fourth Quarter 2014 Highlights –
- Diluted earnings per common share of $0.29 represents an increase of 11.54% over $0.26 reported for the fourth quarter of 2013.
- Asset quality metrics continue to improve as non-covered nonaccrual loans decreased $8.61 million, or 44.91%, to $10.56 million in the fourth quarter of 2014 compared to the same quarter of the prior year. Non-covered nonaccrual loans are at their lowest level in over six years.
- The Company prepaid an additional $25 million in Federal Home Loan Bank convertible advances during the fourth quarter bringing total prepayments to $60 million for the year ended December 31, 2014. The prepayment was in keeping with the Company's strategic goal of reducing high cost wholesale debt.
- The Company significantly exceeds regulatory "well capitalized" targets as of December 31, 2014, with a total risk-based capital ratio of 17.9%, a Tier 1 risk-based capital ratio of 16.6%, and a Tier 1 leverage ratio of 10.1%.
- On October 24, 2014, the Company completed the purchase of seven branches in Southwestern Virginia and Central North Carolina from Bank of America, with deposits of approximately $318 million.
- On December 12, 2014, the Company completed the sale of thirteen branches, ten in the Southeastern, coastal region of North Carolina and three in South Carolina, with deposits of approximately $215 million and loans of approximately $71 million. The sale resulted in a net gain of $755 thousand.
- As a result of branch acquisition and divestiture activity, the Company's loan to deposit ratio declined to 84.5%, which is down significantly from recent periods.
Net Interest Income
The tax equivalent net interest margin increased to 4.19% for the fourth quarter of 2014 compared with 4.15% for the same quarter of 2013. Net interest income increased $1.62 million, or 7.01%, to $24.71 million for the fourth quarter of 2014 compared with the same quarter of 2013. Total interest income increased $817 thousand, or 2.99%, to $28.18 million for the fourth quarter of 2014 compared with the same quarter of 2013. The tax equivalent yield on loans increased 29 basis points to 5.89% and the average loan balance increased $39.02 million, or 2.29%, to $1.74 billion for the fourth quarter of 2014 compared with the same quarter of 2013.
Accretion income was enhanced in the fourth quarter of 2014 by discount accretion of $2.59 million related to the positive resolution of a sizable credit. Purchased credit impaired ("PCI") loan interest accretion totaled $2.75 million for the fourth quarter of 2014, of which $1.20 million was received in cash, compared to accretion income of $3.65 million for the same quarter of 2013, of which $1.80 million was received in cash. The normalized net interest margin, which excludes non-cash loan interest accretion and non-recurring discount accretion related to the positive resolution of a sizable credit, was 3.51% for the fourth quarter of 2014 and 3.83% for same quarter of 2013. Normalized net interest margin for the fourth quarter of 2014 was negatively impacted by excess liquidity, which will dissipate as liquidity is converted to loans and investments, from recent branch acquisition and divestiture activity. The normalized yield on loans was 4.95% for the fourth quarter of 2014 and 5.17% for the same quarter of 2013.
Total interest expense decreased $801 thousand, or 18.75%, to $3.47 million for the fourth quarter of 2014 compared with the same quarter of 2013. Deposit costs decreased $228 thousand, or 11.23%, to $1.80 million for the fourth quarter of 2014 compared with the same quarter of 2013, reflecting a 7 basis point decrease in the average rate paid on interest-bearing deposits. Borrowing costs decreased $573 thousand, or 25.57%, to $1.67 million for the fourth quarter of 2014 compared with the same quarter of 2013 due to debt prepayments. The average rate paid on interest-bearing liabilities decreased 17 basis points to 0.72% for the fourth quarter of 2014 compared with the same quarter of 2013. The average balance of interest-bearing liabilities decreased $1.86 million, or 0.10%, to $1.91 billion for the fourth quarter of 2014 compared with the same quarter of 2013, which included a $46.78 million increase in average interest-bearing deposits and a $48.64 million decrease in average total borrowings.
Noninterest Income
Noninterest income increased $547 thousand, or 7.87%, to $7.50 million for the fourth quarter of 2014 compared with the same quarter of 2013, which was largely due to the net gain on branch divestitures. The Company realized a net gain of $755 thousand on the sale of thirteen branches to CresCom Bank during the fourth quarter of 2014. Wealth management revenues decreased $98 thousand, or 13.39%, for the fourth quarter of 2014 compared with the same quarter of 2013. The Trust and Wealth Management Divisions reported $712 million in combined assets under management as of December 31, 2014. Service charges on deposits and other service charges and fees increased $549 thousand, or 10.38%, to $5.84 million for the fourth quarter of 2014 compared with the same quarter of 2013. Insurance commissions increased $42 thousand, or 3.00%, for the fourth quarter of 2014 compared with the same quarter of 2013. The Company realized a $1.69 million net loss on the sale of securities in the fourth quarter of 2014, which included the sale of the only remaining non-Agency mortgage-backed security at a loss of $1.62 million. The Company incurred no other-than-temporary impairment charges during the fourth quarter of 2014 compared to $320 thousand during the same quarter of 2013 related to the sold non-Agency mortgage-backed security. Net amortization expense relating to the FDIC indemnification asset decreased $494 thousand during the fourth quarter of 2014 compared to the same quarter of 2013. Other operating income increased $384 thousand, or 40.42%, for the fourth quarter of 2014 compared with the same quarter of 2013, primarily due to a $400 thousand legal settlement.
Noninterest Expense
Noninterest expense increased $3.30 million, or 15.88%, to $24.05 million for the fourth quarter of 2014 compared with the same quarter of 2013, which was largely due to FHLB debt prepayment fees, acquisition and divestiture expenses, and an increase in salaries and employee benefits. The Company incurred fees of $1.96 million related to the prepayment of $25 million in FHLB convertible advances. Expenses related to the branch acquisition and divestitures totaled $865 thousand in the fourth quarter of 2014. Salaries and employee benefits increased $756 thousand, or 7.50%, to $10.84 million for the fourth quarter of 2014 compared with the same quarter of 2013. Full-time equivalent employees totaled 725 as of December 31, 2014, a decrease of 4 employees compared with the same period of the prior year. The decrease was primarily due to branch consolidation and divestiture activities offset by the Bank of America branch acquisition. Occupancy, furniture, and equipment expenses increased $136 thousand, or 5.00%, to $2.85 million for the fourth quarter of 2014 compared with the same quarter of 2013. Other operating expense decreased $539 thousand, or 7.23%, to $6.91 million for the fourth quarter of 2014 compared with the same quarter of 2013. The decrease was primarily due to a $567 thousand decrease in the net loss on sales and expenses associated with other real estate owned to $403 thousand for the fourth quarter of 2014 compared to $970 thousand for the same quarter of 2013. The efficiency ratio for the fourth quarter of 2014 was 57.70% compared to 59.27% for the same quarter of 2013.
Allowance for Loan Losses and Asset Quality
The total allowance for loan losses was reduced to $20.23 million as of December 31, 2014, a decrease of $3.85 million, or 15.99%, compared to $24.08 million as of December 31, 2013. As of December 31, 2014, $20.17 million of the allowance was attributed to the legacy portfolio and $58 thousand was attributed to the PCI portfolio. Non-covered loans and other real estate owned are those assets not covered by FDIC loss share agreements. The allowance for loan losses, excluding PCI loans, as a percentage of non-covered loans was 1.29% as of December 31, 2014, compared with 1.50% as of December 31, 2013. Activity in the allowance in the fourth quarter of 2014 included the removal of $682 thousand of the allowance due to loans transferred in the branch divestiture. A recovery of loan losses previously charged to operations of $488 thousand was realized in the fourth quarter of 2014 compared to a provision of $1.53 million recorded in the same quarter of the prior year primarily due to the positive resolution of a sizable credit. Other allowance activity in the fourth quarter of 2014 included a provision for loan losses recorded through the FDIC indemnification asset of $29 thousand. The Company realized net recoveries of $209 thousand in the fourth quarter of 2014 compared to net charge-offs of $1.76 million in the same quarter of 2013, which was driven by the recovery of a sizable credit that had been written down in prior years.
Asset quality in the non-covered portfolio continues to improve as non-covered delinquent loans, which are comprised of loans 30 days or more past due and nonaccrual loans, as a percentage of total non-covered loans decreased to 1.40% as of December 31, 2014, compared to 1.98% for the same period of the prior year. Non-covered nonaccrual loans decreased to $10.56 million as of December 31, 2014, compared to $19.16 million as of December 31, 2013, which is the lowest level of nonaccrual loans in over six years. At quarter-end, the Company's non-covered nonaccrual loans as a percentage of total non-covered loans were 0.66%, compared to 1.23% for the same period of the prior year. The Company's non-covered nonperforming loans as a percentage of total non-covered loans were 0.90% and non-covered nonperforming assets as a percentage of total non-covered assets were 0.83% as of December 31, 2014.
Total nonperforming assets, including covered and non-covered loan portfolios, consisted of $12.99 million in nonaccrual loans, $3.48 million in unseasoned, accruing troubled debt restructurings, and $12.96 million in other real estate owned as of December 31, 2014. In comparison, total nonperforming assets consisted of $22.51 million in nonaccrual loans, $86 thousand in accruing loans past due 90 days or more, $1.31 million in unseasoned, accruing troubled debt restructurings, and $14.86 million in other real estate owned as of December 31, 2013. In addition, total non-covered nonperforming assets decreased $7.12 million, or 25.61%, and total covered nonperforming assets decreased $9.33 million, or 24.08%, as of December 31, 2014, compared to December 31, 2013.
Balance Sheet and Capital
Consolidated assets totaled $2.61 billion as of December 31, 2014, an increase of $5.42 million, or 0.21%, compared with $2.60 billion as of December 31, 2013. The change in consolidated assets was driven by a $195.06 million increase in federal funds sold and a $57.38 million increase in held-to-maturity securities offset by a $193.70 million decrease in available-for-sale securities and a $29.44 million decrease in the covered loan portfolio. Federal funds sold increased as a result of branch acquisition and divestiture activities in the fourth quarter. The decrease in securities available for sale is consistent with the Company's strategic objective of shifting earning asset mix towards loan assets. During 2014, the Company purchased short-term bonds in the held-to-maturity portfolio to provide the funding necessary to extinguish certain wholesale borrowings as they come due.
Consolidated liabilities totaled $2.26 billion as of December 31, 2014, a decrease of $17.35 million, or 0.76%, compared with $2.27 billion as of December 31, 2013. The change in consolidated liabilities was driven by a $60.00 million decrease in FHLB borrowings and a $16.00 million decrease in federal funds purchased offset by a $50.02 million increase in deposits. The Company prepaid the remaining $15 million of a $50 million FHLB convertible advance with a May 2017 maturity and 4.21% interest rate and $10 million of a $50 million FHLB convertible advance with a May 2017 maturity and 4.15% interest rate during the fourth quarter of 2014. The prepayments resulted in a pre-tax penalty of $1.96 million.
Total stockholders' equity increased to $351.37 million as of December 31, 2014, compared with $328.61 million as of December 31, 2013. Book value per as-converted common share increased 7.56% to $18.06 as of December 31, 2014, compared with $16.79 as of December 31, 2013. Tangible book value per common share increased 11.53% to $12.56 as of December 31, 2014, compared with $11.26 as of December 31, 2013. Additionally, the Company repurchased 132,773 common shares at a weighted average cost of $16.29 per share and paid a cash dividend of $0.50 per common share during 2014.
The Company significantly exceeds regulatory "well capitalized" targets as of December 31, 2014, with a total risk-based capital ratio of 17.85%, a Tier 1 risk-based capital ratio of 16.6%, and a Tier 1 leverage ratio of 10.1%.
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 its 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 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 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 defined as average stockholders' equity less average goodwill, other intangibles, and the preferred liquidation preference.
About First Community Bancshares, Inc.
First Community Bancshares, Inc., a financial holding company headquartered in Bluefield, Virginia, provides banking products and services through its wholly-owned subsidiary First Community Bank. First Community Bank operated 53 banking locations throughout Virginia, West Virginia, North Carolina, and Tennessee as of December 31, 2014. First Community Bank offers wealth management and investment services through its wholly-owned subsidiary First Community Wealth Management, a registered investment advisory firm, and the Bank's Trust Division, which collectively managed $712 million in combined assets as of December 31, 2014. The Company provides insurance services through its wholly-owned subsidiary Greenpoint Insurance Group, Inc., a full-service insurance agency headquartered in High Point, North Carolina, that operated 11 insurance locations throughout Virginia, West Virginia, and North Carolina as of December 31, 2014. The Company's common stock is listed on the NASDAQ Global Select Market under the trading symbol, "FCBC". The Company reported consolidated assets of $2.61 billion as of December 31, 2014. Additional investor information is available 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 fiscal year end. 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 | Year Ended | |||
| December 31, | December 31, | |||
| (Amounts in thousands, except share and per share data) | 2014 | 2013 | 2014 | 2013 |
| Interest income | ||||
| Interest and fees on loans held for investment | $ 25,841 | $ 24,053 | $ 95,492 | $ 96,600 |
| Interest on securities -- taxable | 1,145 | 2,121 | 5,975 | 7,875 |
| Interest on securities -- nontaxable | 1,021 | 1,159 | 4,350 | 4,790 |
| Interest on deposits in banks | 174 | 31 | 291 | 211 |
| Total interest income | 28,181 | 27,364 | 106,108 | 109,476 |
| Interest expense | ||||
| Interest on deposits | 1,803 | 2,031 | 7,308 | 8,823 |
| Interest on short-term borrowings | 513 | 536 | 2,024 | 2,222 |
| Interest on long-term borrowings | 1,155 | 1,705 | 5,958 | 6,789 |
| Total interest expense | 3,471 | 4,272 | 15,290 | 17,834 |
| Net interest income | 24,710 | 23,092 | 90,818 | 91,642 |
| (Recovery of) provision for loan losses | (488) | 1,528 | 145 | 8,208 |
| Net interest income after provision for loan losses | 25,198 | 21,564 | 90,673 | 83,434 |
| Noninterest income | ||||
| Wealth management income | 634 | 732 | 3,030 | 3,412 |
| Service charges on deposit accounts | 3,729 | 3,493 | 13,828 | 13,558 |
| Other service charges and fees | 2,108 | 1,795 | 7,581 | 7,151 |
| Insurance commissions | 1,442 | 1,400 | 6,555 | 5,933 |
| Net impairment losses recognized in earnings | -- | (320) | (737) | (320) |
| Net (loss) gain on sale of securities | (1,691) | 208 | (1,385) | 399 |
| Net FDIC indemnification asset amortization | (813) | (1,307) | (3,979) | (5,597) |
| Net gain on branch divestiture | 755 | -- | 755 | -- |
| Other operating income | 1,334 | 950 | 4,355 | 5,235 |
| Total noninterest income | 7,498 | 6,951 | 30,003 | 29,771 |
| Noninterest expense | ||||
| Salaries and employee benefits | 10,841 | 10,085 | 40,713 | 41,235 |
| Occupancy expense of bank premises | 1,513 | 1,683 | 6,338 | 7,033 |
| Furniture and equipment | 1,341 | 1,035 | 4,952 | 4,966 |
| Amortization of intangible assets | 255 | 184 | 787 | 729 |
| FDIC premiums and assessments | 361 | 316 | 1,672 | 1,717 |
| FHLB debt prepayment fees | 1,961 | -- | 5,008 | -- |
| Merger, acquisition, and divestiture expense | 865 | -- | 1,150 | 57 |
| Other operating expense | 6,913 | 7,452 | 22,242 | 23,248 |
| Total noninterest expense | 24,050 | 20,755 | 82,862 | 78,985 |
| Income before income taxes | 8,646 | 7,760 | 37,814 | 34,220 |
| Income tax expense | 2,931 | 2,436 | 12,324 | 10,908 |
| Net income | 5,715 | 5,324 | 25,490 | 23,312 |
| Dividends on preferred stock | 227 | 252 | 910 | 1,024 |
| Net income available to common shareholders | $ 5,488 | $ 5,072 | $ 24,580 | $ 22,288 |
| Basic earnings per common share | $ 0.30 | $ 0.27 | $ 1.34 | $ 1.13 |
| Diluted earnings per common share | 0.29 | 0.26 | 1.31 | 1.11 |
| Cash dividends per common share | 0.13 | 0.12 | 0.50 | 0.48 |
| Weighted average basic shares outstanding | 18,403,959 | 19,136,317 | 18,406,363 | 19,792,099 |
| Weighted average diluted shares outstanding | 19,482,000 | 20,233,737 | 19,483,054 | 20,961,800 |
| Return on average assets | 0.80% | 0.77% | 0.94% | 0.84% |
| Return on average common equity | 6.48% | 6.14% | 7.51% | 6.57% |
| FIRST COMMUNITY BANCSHARES, INC. | |||||
| CONDENSED QUARTERLY STATEMENTS OF INCOME (Unaudited) | |||||
| Quarter Ended | |||||
| December 31, | September 30, | June 30, | March 31, | December 31, | |
| (Amounts in thousands, except share and per share data) | 2014 | 2014 | 2014 | 2014 | 2013 |
| Interest Income | |||||
| Interest and fees on loans held for investment | $ 25,841 | $ 23,407 | $ 23,410 | $ 22,834 | $ 24,053 |
| Interest on securities -- taxable | 1,145 | 1,196 | 1,537 | 2,097 | 2,121 |
| Interest on securities -- nontaxable | 1,021 | 1,108 | 1,099 | 1,122 | 1,159 |
| Interest on deposits in banks | 174 | 40 | 47 | 30 | 31 |
| Total interest income | 28,181 | 25,751 | 26,093 | 26,083 | 27,364 |
| Interest Expense | |||||
| Interest on deposits | 1,803 | 1,782 | 1,835 | 1,888 | 2,031 |
| Interest on short-term borrowings | 513 | 526 | 483 | 502 | 536 |
| Interest on long-term borrowings | 1,155 | 1,428 | 1,707 | 1,668 | 1,705 |
| Total interest expense | 3,471 | 3,736 | 4,025 | 4,058 | 4,272 |
| Net interest income | 24,710 | 22,015 | 22,068 | 22,025 | 23,092 |
| (Recovery of) provision for loan losses | (488) | (2,439) | 1,279 | 1,793 | 1,528 |
| Net interest income after provision for loan losses | 25,198 | 24,454 | 20,789 | 20,232 | 21,564 |
| Noninterest Income | |||||
| Wealth management income | 634 | 670 | 718 | 1,008 | 732 |
| Service charges on deposit accounts | 3,729 | 3,606 | 3,423 | 3,070 | 3,493 |
| Other service charges and fees | 2,108 | 1,852 | 1,850 | 1,771 | 1,795 |
| Insurance commissions | 1,442 | 1,695 | 1,454 | 1,964 | 1,400 |
| Net impairment losses recognized in earnings | -- | (219) | (254) | (264) | (320) |
| Net (loss) gain on sale of securities | (1,691) | 320 | (59) | 45 | 208 |
| Net FDIC indemnification asset amortization | (813) | (1,096) | (936) | (1,134) | (1,307) |
| Net gain on branch divestiture | 755 | -- | -- | -- | -- |
| Other operating income | 1,334 | 839 | 1,408 | 774 | 950 |
| Total noninterest income | 7,498 | 7,667 | 7,604 | 7,234 | 6,951 |
| Noninterest Expense | |||||
| Salaries and employee benefits | 10,841 | 9,924 | 10,043 | 9,905 | 10,085 |
| Occupancy expense of bank premises | 1,513 | 1,469 | 1,578 | 1,778 | 1,683 |
| Furniture and equipment | 1,341 | 1,212 | 1,205 | 1,194 | 1,035 |
| Amortization of intangible assets | 255 | 179 | 178 | 175 | 184 |
| FDIC premiums and assessments | 361 | 419 | 458 | 434 | 316 |
| FHLB debt prepayment fees | 1,961 | 3,047 | -- | -- | -- |
| Merger, acquisition, and divestiture expense | 865 | 285 | -- | -- | -- |
| Other operating expense | 6,913 | 4,934 | 4,701 | 5,694 | 7,452 |
| Total noninterest expense | 24,050 | 21,469 | 18,163 | 19,180 | 20,755 |
| Income before income taxes | 8,646 | 10,652 | 10,230 | 8,286 | 7,760 |
| Income tax expense | 2,931 | 3,609 | 3,223 | 2,561 | 2,436 |
| Net income | 5,715 | 7,043 | 7,007 | 5,725 | 5,324 |
| Dividends on preferred stock | 227 | 228 | 227 | 228 | 252 |
| Net income available to common shareholders | $ 5,488 | $ 6,815 | $ 6,780 | $ 5,497 | $ 5,072 |
| Basic earnings per common share | $ 0.30 | $ 0.37 | $ 0.37 | $ 0.30 | $ 0.27 |
| Diluted earnings per common share | 0.29 | 0.36 | 0.36 | 0.29 | 0.26 |
| Cash dividends per common share | 0.13 | 0.13 | 0.12 | 0.12 | 0.12 |
| Weighted average basic shares outstanding | 18,403,959 | 18,402,764 | 18,395,996 | 18,423,123 | 19,136,317 |
| Weighted average diluted shares outstanding | 19,482,000 | 19,466,126 | 19,457,237 | 19,506,647 | 20,233,737 |
| FIRST COMMUNITY BANCSHARES, INC. | |||||||
| RECONCILIATION OF GAAP NET INCOME TO CORE EARNINGS (Unaudited) | |||||||
| Three Months Ended | Year Ended | ||||||
| December 31, | September 30, | June 30, | March 31, | December 31, | December 31, | ||
| 2014 | 2014 | 2014 | 2014 | 2013 | 2014 | 2013 | |
| (Amounts in thousands, except per share data) | |||||||
| Net income, GAAP | $ 5,715 | $ 7,043 | $ 7,007 | $ 5,725 | $ 5,324 | $ 25,490 | $ 23,312 |
| Non-GAAP adjustments: | |||||||
| Net impairment losses recognized in earnings | -- | 219 | 254 | 264 | 320 | 737 | 320 |
| Net loss (gain) on sale of securities | 1,691 | (320) | 59 | (45) | (208) | 1,385 | (399) |
| Net gain on debt prepayment | -- | -- | -- | -- | -- | -- | (296) |
| Net gain on branch divestiture | (755) | -- | -- | -- | -- | (755) | -- |
| FHLB debt prepayment fees | 1,961 | 3,047 | -- | -- | -- | 5,008 | -- |
| Merger, acquisition, and divestiture expense | 865 | 285 | -- | -- | -- | 1,150 | 57 |
| Other noncore, nonrecurring items | 1,173 | -- | (536) | -- | -- | 637 | 2,700 |
| Total adjustments to core earnings | 4,935 | 3,231 | (223) | 219 | 112 | 8,162 | 2,382 |
| Tax effect | 1,859 | 1,217 | (84) | 82 | 42 | 3,074 | 890 |
| Core earnings, non-GAAP | $ 8,791 | $ 9,057 | $ 6,868 | $ 5,862 | $ 5,394 | $ 30,578 | $ 24,804 |
| Core return on average assets | 1.28% | 1.41% | 1.07% | 0.92% | 0.96% | 1.17% | 0.93% |
| Core return on average common equity | 10.39% | 10.83% | 8.49% | 7.49% | 7.69% | 9.34% | 7.31% |
| Core return on average tangible common equity | 15.50% | 16.06% | 12.73% | 11.36% | 11.47% | 13.99% | 10.74% |
| Core diluted earnings per common share | $0.45 | $0.47 | $0.35 | $0.30 | $0.31 | $1.57 | $1.18 |
| FIRST COMMUNITY BANCSHARES, INC. | |||||||
| EFFICIENCY RATIO CALCULATION (Unaudited) | |||||||
| Three Months Ended | Year Ended | ||||||
| December 31, | September 30, | June 30, | March 31, | December 31, | December 31, | ||
| 2014 | 2014 | 2014 | 2014 | 2013 | 2014 | 2013 | |
| (Amounts in thousands) | |||||||
| Noninterest expense, GAAP | $ 24,050 | $ 21,469 | $ 18,163 | $ 19,180 | $ 20,755 | $ 82,862 | $ 78,985 |
| Non-GAAP adjustments: | |||||||
| FHLB debt prepayment fees | (1,961) | (3,047) | -- | -- | -- | (5,008) | -- |
| Merger, acquisition, and divestiture expense | (865) | (285) | -- | -- | -- | (1,150) | (57) |
| OREO expense and net loss | (403) | (580) | (254) | (857) | (970) | (2,094) | (2,037) |
| Other noncore, nonrecurring items | (1,573) | -- | -- | -- | -- | (1,573) | (2,700) |
| Adjusted noninterest expense | 19,248 | 17,557 | 17,909 | 18,323 | 18,265 | 73,037 | 74,191 |
| Net interest income, GAAP | 24,710 | 22,015 | 22,068 | 22,025 | 23,092 | 90,818 | 91,642 |
| Noninterest income, GAAP | 7,498 | 7,667 | 7,604 | 7,234 | 6,951 | 30,003 | 29,771 |
| Non-GAAP adjustments: | -- | ||||||
| Tax equivalency adjustment | 613 | 582 | 699 | 663 | 662 | 2,557 | 2,741 |
| Net impairment losses recognized in earnings | -- | 219 | 254 | 264 | 320 | 737 | 320 |
| Net loss (gain) on sale of securities | 1,691 | (320) | 59 | (45) | (208) | 1,385 | (399) |
| Net gain on branch divestiture | (755) | -- | -- | -- | -- | (755) | -- |
| Net gain on debt prepayment | -- | -- | -- | -- | -- | -- | (296) |
| Other noncore, nonrecurring items | (400) | -- | (536) | -- | -- | (936) | -- |
| Adjusted net interest and noninterest income | 33,357 | 30,163 | 30,148 | 30,141 | 30,817 | 123,809 | 123,779 |
| Non-GAAP efficiency ratio | 57.70% | 58.21% | 59.40% | 60.79% | 59.27% | 58.99% | 59.94% |
| FIRST COMMUNITY BANCSHARES, INC. | |||||
| CONDENSED QUARTERLY BALANCE SHEETS (Unaudited) | |||||
| As of the Quarter Ended | |||||
| December 31, | September 30, | June 30, | March 31, | December 31, | |
| 2014 | 2014 | 2014 | 2014 | 2013 | |
| (Amounts in thousands) | |||||
| Cash and due from banks | $ 39,450 | $ 44,703 | $ 47,869 | $ 45,879 | $ 43,598 |
| Federal funds sold | 196,873 | 55,503 | 38,142 | 22,352 | 1,817 |
| Interest-bearing deposits in banks | 1,337 | 5,716 | 10,770 | 10,771 | 11,152 |
| Total cash and cash equivalents | 237,660 | 105,922 | 96,781 | 79,002 | 56,567 |
| Securities available for sale | 326,117 | 351,693 | 398,425 | 483,864 | 519,820 |
| Securities held to maturity | 57,948 | 31,029 | 19,398 | 8,161 | 568 |
| Loans held for sale | 1,792 | 1,150 | 459 | 1,743 | 883 |
| Loans held for investment, net of unearned income: | |||||
| Covered under loss share agreements | 122,240 | 126,611 | 132,717 | 143,170 | 151,682 |
| Not covered under loss share agreements | 1,567,176 | 1,636,181 | 1,626,707 | 1,588,694 | 1,559,039 |
| Less allowance for loan losses | (20,227) | (21,159) | (23,911) | (23,798) | (24,077) |
| Loans, net | 1,670,981 | 1,742,783 | 1,735,972 | 1,709,809 | 1,687,527 |
| FDIC indemnification asset | 27,900 | 29,745 | 30,908 | 32,510 | 34,691 |
| Property, plant, and equipment, net | 55,844 | 59,283 | 59,145 | 60,043 | 61,116 |
| Other real estate owned: | |||||
| Covered under loss share agreements | 6,324 | 7,620 | 8,814 | 8,705 | 7,541 |
| Not covered under loss share agreements | 6,638 | 5,612 | 5,693 | 5,923 | 7,318 |
| Interest receivable | 6,315 | 6,346 | 6,206 | 6,259 | 7,521 |
| Goodwill | 100,722 | 105,657 | 105,657 | 105,455 | 105,455 |
| Intangible assets | 6,422 | 2,334 | 2,512 | 2,691 | 2,866 |
| Other assets | 105,065 | 102,103 | 105,890 | 107,924 | 111,524 |
| Total assets | $ 2,607,936 | $ 2,550,127 | $ 2,575,401 | $ 2,610,346 | $ 2,602,514 |
| Deposits: | |||||
| Noninterest-bearing | $ 417,729 | $ 397,523 | $ 357,871 | $ 353,137 | $ 339,680 |
| Interest-bearing | 353,874 | 347,589 | 362,318 | 382,752 | 361,821 |
| Savings | 525,478 | 519,902 | 517,766 | 531,096 | 524,010 |
| Time | 703,678 | 667,261 | 685,149 | 707,704 | 725,231 |
| Total deposits | 2,000,759 | 1,932,275 | 1,923,104 | 1,974,689 | 1,950,742 |
| Interest, taxes, and other liabilities | 26,062 | 25,131 | 23,576 | 23,323 | 22,770 |
| Federal funds purchased | -- | -- | -- | -- | 16,000 |
| Securities sold under agreements to repurchase | 121,742 | 114,439 | 120,159 | 112,337 | 118,308 |
| FHLB borrowings | 90,000 | 115,000 | 150,000 | 150,000 | 150,000 |
| Other borrowings | 17,999 | 16,047 | 16,087 | 16,087 | 16,088 |
| Total liabilities | 2,256,562 | 2,202,892 | 2,232,926 | 2,276,436 | 2,273,908 |
| Preferred stock | 15,151 | 15,151 | 15,151 | 15,151 | 15,251 |
| Common stock | 20,500 | 20,500 | 20,500 | 20,500 | 20,493 |
| Additional paid-in capital | 215,873 | 215,729 | 215,670 | 215,827 | 215,663 |
| Retained earnings | 141,206 | 138,111 | 133,688 | 129,115 | 125,826 |
| Treasury stock, at cost | (35,751) | (35,808) | (35,797) | (35,996) | (33,887) |
| Accumulated other comprehensive loss | (5,605) | (6,448) | (6,737) | (10,687) | (14,740) |
| Total stockholders' equity | 351,374 | 347,235 | 342,475 | 333,910 | 328,606 |
| Total liabilities and stockholders' equity | $ 2,607,936 | $ 2,550,127 | $ 2,575,401 | $ 2,610,346 | $ 2,602,514 |
| Shares outstanding at period-end | 18,406,219 | 18,402,919 | 18,403,692 | 18,392,020 | 18,514,579 |
| Book value per common share at period-end(1) | $ 18.06 | $ 17.85 | $ 17.61 | $ 17.18 | $ 16.79 |
| Tangible book value per common share at period-end(2) | $ 12.56 | $ 12.30 | $ 12.05 | $ 11.61 | $ 11.26 |
| (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 | |||||
| December 31, | September 30, | June 30, | March 31, | December 31, | |
| (Amounts in thousands) | 2014 | 2014 | 2014 | 2014 | 2013 |
| Allowance for Loan Losses | |||||
| Beginning balance | $ 21,159 | $ 23,911 | $ 23,798 | $ 24,077 | $ 24,665 |
| Removal of loans transferred | (682) | -- | -- | -- | -- |
| (Recovery of) provision for loan losses charged to operations | (488) | (2,439) | 1,279 | 1,793 | 1,528 |
| Provision for (recovery of) loan losses recorded through the FDIC indemnification asset | 29 | (110) | (138) | (203) | (361) |
| Charge-offs | (1,362) | (1,118) | (1,785) | (2,216) | (2,807) |
| Recoveries | 1,571 | 915 | 757 | 347 | 1,052 |
| Net recoveries (charge-offs) | 209 | (203) | (1,028) | (1,869) | (1,755) |
| Ending balance | $ 20,227 | $ 21,159 | $ 23,911 | $ 23,798 | $ 24,077 |
| Summary of Asset Quality | |||||
| Non-covered nonperforming | |||||
| Nonaccrual loans | $ 10,556 | $ 11,480 | $ 17,464 | $ 20,909 | $ 19,161 |
| Accruing loans past due 90 days or more | -- | -- | -- | -- | -- |
| Troubled debt restructurings ("TDRs")(1) | 3,480 | 3,450 | 1,877 | 1,775 | 1,311 |
| Total non-covered nonperforming loans | 14,036 | 14,930 | 19,341 | 22,684 | 20,472 |
| Other real estate owned ("OREO") not covered under FDIC loss share agreements | 6,638 | 5,612 | 5,693 | 5,923 | 7,318 |
| Total non-covered nonperforming assets | $ 20,674 | $ 20,542 | $ 25,034 | $ 28,607 | $ 27,790 |
| Covered nonperforming | |||||
| Nonaccrual loans | $ 2,438 | $ 1,131 | $ 955 | $ 1,261 | $ 3,353 |
| Accruing loans past due 90 days or more | -- | -- | 109 | 109 | 86 |
| Total covered nonperforming loans | 2,438 | 1,131 | 1,064 | 1,370 | 3,439 |
| OREO covered under FDIC loss share agreements | 6,324 | 7,620 | 8,814 | 8,705 | 7,541 |
| Total covered nonperforming assets | 8,762 | 8,751 | 9,878 | 10,075 | 10,980 |
| Total nonperforming assets | $ 29,436 | $ 29,293 | $ 34,912 | $ 38,682 | $ 38,770 |
| Performing TDRs(2) | $ 11,054 | $ 11,701 | $ 11,029 | $ 11,193 | $ 10,900 |
| Total TDRs(3) | 14,534 | 15,151 | 12,906 | 12,968 | 12,211 |
| Asset Quality Ratios | |||||
| Excluding covered assets | |||||
| Nonperforming loans to total loans | 0.90% | 0.91% | 1.19% | 1.43% | 1.31% |
| Nonperforming assets to total assets | 0.83% | 0.85% | 1.03% | 1.16% | 1.14% |
| Non-PCI allowance for loan losses to nonperforming loans | 143.69% | 140.35% | 121.47% | 102.74% | 113.92% |
| Non-PCI allowance to non-covered total loans | 1.29% | 1.28% | 1.44% | 1.47% | 1.50% |
| Annualized net charge-offs to average loans | NM | 0.05% | 0.26% | 0.48% | 0.45% |
| Including covered assets | |||||
| Nonperforming loans to total loans | 0.98% | 0.91% | 1.16% | 1.39% | 1.40% |
| Nonperforming assets to total assets | 1.13% | 1.15% | 1.36% | 1.48% | 1.49% |
| Nonperforming assets to total loans and | |||||
| other real estate owned | 138.55% | 114.84% | 112.07% | 115.74% | 145.60% |
| Allowance for loan losses to nonperforming loans | 122.78% | 131.74% | 117.18% | 98.94% | 100.69% |
| Allowance for loan losses to total loans | 1.20% | 1.20% | 1.36% | 1.37% | 1.41% |
| (1) Accruing TDRs restructured within the past six months or nonperforming | |||||
| (2) Accruing TDRs with six months or more of satisfactory payment performance | |||||
| (3) Accruing nonperforming and performing TDRs | |||||
| FIRST COMMUNITY BANCSHARES, INC. | ||||||
| AVERAGE BALANCE SHEETS AND NET INTEREST INCOME ANALYSIS (Unaudited) | ||||||
| Three Months Ended December 31, | ||||||
| 2014 | 2013 | |||||
| Average | Average Yield/ | Average | Average Yield/ | |||
| (Amounts in thousands) | Balance | Interest(1) | Rate(1) | Balance | Interest(1) | Rate(1) |
| Assets | ||||||
| Earning assets | ||||||
| Loans(2) | $ 1,744,810 | $ 25,889 | 5.89% | $ 1,705,790 | $ 24,097 | 5.60% |
| Securities available-for-sale | 337,952 | 2,592 | 3.04% | 535,074 | 3,887 | 2.88% |
| Securities held-to-maturity | 44,538 | 140 | 1.25% | 567 | 11 | 7.70% |
| Interest-bearing deposits | 268,724 | 174 | 0.26% | 27,923 | 31 | 0.44% |
| Total earning assets | 2,396,024 | 28,795 | 4.77% | 2,269,354 | 28,026 | 4.90% |
| Other assets | 328,105 | 351,189 | ||||
| Total assets | $ 2,724,129 | $ 2,620,543 | ||||
| Liabilities | ||||||
| Interest-bearing deposits | ||||||
| Demand deposits | $ 376,285 | $ 52 | 0.05% | $ 369,516 | $ 66 | 0.07% |
| Savings deposits | 564,892 | 127 | 0.09% | 521,589 | 140 | 0.11% |
| Time deposits | 731,026 | 1,624 | 0.88% | 734,316 | 1,825 | 0.99% |
| Total interest-bearing deposits | 1,672,203 | 1,803 | 0.43% | 1,625,421 | 2,031 | 0.50% |
| Borrowings | ||||||
| Federal funds purchased | -- | -- | 0.00% | 2,505 | 2 | 0.32% |
| Retail repurchase agreements | 70,686 | 23 | 0.13% | 62,212 | 25 | 0.16% |
| Wholesale repurchase agreements | 50,000 | 473 | 3.75% | 50,000 | 473 | 3.76% |
| FHLB advances and other borrowings | 116,333 | 1,172 | 4.00% | 170,941 | 1,741 | 4.04% |
| Total borrowings | 237,019 | 1,668 | 2.79% | 285,658 | 2,241 | 3.11% |
| Total interest-bearing liabilities | 1,909,222 | 3,471 | 0.72% | 1,911,079 | 4,272 | 0.89% |
| Noninterest-bearing demand deposits | 437,781 | 345,937 | ||||
| Other liabilities | 26,133 | 20,615 | ||||
| Total liabilities | 2,373,136 | 2,277,631 | ||||
| Stockholders' equity | 350,993 | 342,912 | ||||
| Total liabilities and stockholders' equity | $ 2,724,129 | $ 2,620,543 | ||||
| Net interest income, tax equivalent | $ 25,324 | $ 23,754 | ||||
| Net interest rate spread(3) | 4.05% | 4.01% | ||||
| Net interest margin(4) | 4.19% | 4.15% | ||||
| (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) | ||||||
| Year Ended December 31, | ||||||
| 2014 | 2013 | |||||
| Average | Average Yield/ | Average | Average Yield/ | |||
| (Amounts in thousands) | Balance | Interest(1) | Rate(1) | Balance | Interest(1) | Rate(1) |
| Assets | ||||||
| Earning assets | ||||||
| Loans(2) | $ 1,744,520 | $ 95,707 | 5.49% | $ 1,699,614 | $ 96,768 | 5.69% |
| Securities available-for-sale | 410,136 | 12,400 | 3.02% | 543,697 | 15,184 | 2.79% |
| Securities held-to-maturity | 20,843 | 267 | 1.28% | 667 | 54 | 8.10% |
| Interest-bearing deposits | 98,090 | 291 | 0.30% | 63,566 | 211 | 0.33% |
| Total earning assets | 2,273,589 | 108,665 | 4.78% | 2,307,544 | 112,217 | 4.86% |
| Other assets | 334,981 | 354,058 | ||||
| Total assets | $ 2,608,570 | $ 2,661,602 | ||||
| Liabilities | ||||||
| Interest-bearing deposits | ||||||
| Demand deposits | $ 366,932 | $ 206 | 0.06% | $ 361,979 | $ 240 | 0.07% |
| Savings deposits | 535,256 | 514 | 0.10% | 516,247 | 584 | 0.11% |
| Time deposits | 704,518 | 6,588 | 0.94% | 772,741 | 7,999 | 1.04% |
| Total interest-bearing deposits | 1,606,706 | 7,308 | 0.45% | 1,650,967 | 8,823 | 0.53% |
| Borrowings | ||||||
| Federal funds purchased | 892 | 3 | 0.34% | 632 | 2 | 0.32% |
| Retail repurchase agreements | 72,917 | 97 | 0.13% | 69,141 | 265 | 0.38% |
| Wholesale repurchase agreements | 50,000 | 1,878 | 3.76% | 53,118 | 1,890 | 3.56% |
| FHLB advances and other borrowings | 147,504 | 6,004 | 4.07% | 168,399 | 6,854 | 4.07% |
| Total borrowings | 271,313 | 7,982 | 2.94% | 291,290 | 9,011 | 3.09% |
| Total interest-bearing liabilities | 1,878,019 | 15,290 | 0.81% | 1,942,257 | 17,834 | 0.92% |
| Noninterest-bearing demand deposits | 367,315 | 342,919 | ||||
| Other liabilities | 20,617 | 20,815 | ||||
| Total liabilities | 2,265,951 | 2,305,991 | ||||
| Stockholders' equity | 342,619 | 355,611 | ||||
| Total liabilities and stockholders' equity | $ 2,608,570 | $ 2,661,602 | ||||
| Net interest income, tax equivalent | $ 93,375 | $ 94,383 | ||||
| Net interest rate spread(3) | 3.97% | 3.94% | ||||
| Net interest margin(4) | 4.11% | 4.09% | ||||
| (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. | ||||
| RECONCILIATION OF GAAP NET INTEREST MARGIN TO NORMALIZED NET INTEREST MARGIN (Unaudited) | ||||
| Three Months Ended December 31, | ||||
| 2014 | 2013 | |||
| Average Yield/ | Average Yield/ | |||
| (Amounts in thousands) | Interest(1) | Rate(1) | Interest(1) | Rate(1) |
| Earning assets | ||||
| Loans(2) | $ 25,889 | 5.89% | $ 24,097 | 5.60% |
| PCI accretion income | 2,745 | 3,649 | ||
| Less: cash PCI accretion income | 1,198 | 1,796 | ||
| Non-cash PCI accretion income | 1,547 | 1,853 | ||
| Non-recurring discount accretion | 2,588 | -- | ||
| Loans, excluding non-cash PCI accretion income | 21,754 | 4.95% | 22,244 | 5.17% |
| Other earning assets | 2,906 | 1.77% | 3,929 | 2.77% |
| Total earning assets | 24,660 | 4.08% | 26,173 | 4.58% |
| Total interest-bearing liabilities | 3,471 | 0.72% | 4,272 | 0.89% |
| Net interest income, tax equivalent | $ 21,189 | $ 21,901 | ||
| Net interest rate spread(3) | 3.36% | 3.69% | ||
| Net interest margin(4) | 3.51% | 3.83% | ||
| Year Ended December 31, | ||||
| 2014 | 2013 | |||
| Average Yield/ | Average Yield/ | |||
| (Amounts in thousands) | Interest(1) | Rate(1) | Interest(1) | Rate(1) |
| Earning assets | ||||
| Loans(2) | $ 95,707 | 5.49% | $ 96,768 | 5.69% |
| PCI accretion income | 11,469 | 14,726 | ||
| Less: cash PCI accretion income | 4,412 | 7,023 | ||
| Non-cash PCI accretion income | 7,057 | 7,703 | ||
| Non-recurring discount accretion | 2,588 | -- | ||
| Loans, excluding non-cash PCI accretion income | 86,062 | 4.93% | 89,065 | 5.24% |
| Other earning assets | 12,958 | 2.45% | 15,449 | 2.54% |
| Total earning assets | 99,020 | 4.36% | 104,514 | 4.53% |
| Total interest-bearing liabilities | 15,290 | 0.81% | 17,834 | 0.92% |
| Net interest income, tax equivalent | $ 83,730 | $ 86,680 | ||
| Net interest rate spread(3) | 3.55% | 3.61% | ||
| Net interest margin(4) | 3.68% | 3.76% | ||
| (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. | ||||