BLUEFIELD, Va., Oct. 28, 2014 (GLOBE NEWSWIRE) -- First Community Bancshares, Inc. (Nasdaq:FCBC) (www.fcbinc.com) (the "Company") today reported net income of $7.04 million for the quarter and $19.78 million for the nine months ended September 30, 2014. Net income available to common shareholders totaled $6.82 million, or $0.36 per diluted common share, for the quarter and $19.09 million, or $1.02 per diluted common share, for the nine months ended September 30, 2014. Core earnings totaled $9.06 million for the quarter and $21.79 million for the nine months ended September 30, 2014.
The Company also announced today 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 to common shareholders of record on November 7, 2014, and is expected to be paid on or about November 21, 2014. The current year marks the 29th consecutive year of cash dividends paid to stockholders.
Third Quarter 2014 Highlights –
- Diluted earnings per common share of $0.36 represents an increase of 38.5% over $0.26 reported for the third quarter of 2013.
- The non-covered loan portfolio increased $77.1 million compared to year-end 2013 and $102.9 million compared to the third quarter of 2013. This marks the sixth consecutive quarter non-covered loan growth has exceeded covered loan declines.
- Non-covered delinquent loans as a percentage of total non-covered loans experienced a significant decrease of 97 basis points, or 43.11%, to 1.28% compared to the third quarter of 2013. The decrease is attributed to significant declines in non-covered nonaccrual loans. This marks the sixth consecutive quarter the percentage of non-covered delinquent loans to total non-covered loans has improved.
- The Company experienced positive resolution of a sizeable credit during the third quarter, which resulted in the significant recovery of loan loss provision. Additionally, net charge-offs of $203 thousand were a decrease of $825 thousand, or 80.25%, from $1.03 million for the second quarter of 2014 and $1.40 million, or 87.33%, from $1.60 million for the third quarter of 2013.
- The Company prepaid $35 million of a $50 million Federal Home Loan Bank convertible advance. This 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 September 30, 2014, with a total risk-based capital ratio of 16.8%, a Tier 1 risk-based capital ratio of 15.5%, and a Tier 1 leverage ratio of 10.7%.
- The Company announced the pending sale of 13 branches, 10 in the southeastern, coastal region of North Carolina and 3 in South Carolina, with deposits of approximately $230 million and loans of approximately $59 million.
- 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.
Net Interest Income
The tax equivalent net interest margin increased to 4.06% for the third quarter of 2014 compared with 3.99% for the same quarter of 2013. Net interest income decreased $311 thousand, or 1.39%, to $22.02 million for the third quarter of 2014 compared with the same quarter of 2013. Total interest income decreased $945 thousand, or 3.54%, to $25.75 million for the third quarter of 2014 compared with the same quarter of 2013. The tax equivalent yield on loans decreased 23 basis points to 5.27% while the average loan balance increased $72.53 million, or 4.28%, to $1.77 billion for the third quarter of 2014 compared with the same quarter of 2013.
Loan interest accretion stemming from the Peoples and Waccamaw acquisitions totaled $2.81 million for the third quarter of 2014, of which $1.37 million was received in cash, compared to $3.47 million for the same quarter of 2013, of which $1.74 million was received in cash. The normalized net interest margin for the third quarters of 2014 and 2013, which excludes non-cash loan interest accretion, was 3.80% and 3.69%, respectively. The normalized yield on loans for the third quarters of 2014 and 2013 was 4.94% and 5.09%, respectively.
Total interest expense decreased $634 thousand, or 14.51%, to $3.74 million for the third quarter of 2014 compared with the same quarter of 2013. Deposit costs decreased $365 thousand, or 17.00%, to $1.78 million for the third quarter of 2014 compared with the same quarter of 2013, reflecting a 6 basis point decrease in the average rate paid on interest-bearing deposits. Borrowing costs decreased $269 thousand, or 12.10%, to $1.95 million for the third quarter of 2014 compared with the same quarter of 2013. The average rate paid on interest-bearing liabilities decreased 8 basis points to 0.82% for the third quarter of 2014 compared with the same quarter of 2013. The average balance of interest-bearing liabilities decreased $114.71 million, or 5.97%, to $1.81 billion for the third quarter of 2014 compared with the same quarter of 2013, which included a $95.21 million decrease in average interest-bearing deposits and a $19.50 million decrease in average total borrowings.
Noninterest Income
Noninterest income decreased $444 thousand, or 5.47%, to $7.67 million for the third quarter of 2014 compared with the same quarter of 2013, which was largely due to a decrease in other operating income and net impairment losses offset by a net gain on the sale of securities. Other operating income decreased $619 thousand, or 42.46%, for the third quarter of 2014 compared with the same quarter of 2013, primarily due to a $510 thousand decrease in secondary market income. The Company incurred other-than-temporary impairment charges of $219 thousand during the third quarter of 2014 related to a non-Agency mortgage-backed security. The Company realized a $320 thousand net gain on the sale of securities for the third quarter of 2014, which was an increase of $359 thousand compared to a net loss of $39 thousand in the same quarter of 2013.Wealth management revenues decreased $193 thousand, or 22.36%, for the third quarter of 2014 compared with the same quarter of 2013. The Trust and Wealth Management Divisions reported $700 million in combined assets under management as of September 30, 2014. Service charges on deposits and other service charges and fees increased $99 thousand, or 1.85%, for the third quarter of 2014 compared with the same quarter of 2013. Insurance commissions increased $136 thousand, or 8.72%, for the third quarter of 2014 compared with the same quarter of 2013. Net amortization expense relating to the FDIC indemnification asset experienced a slight increase during the third quarter of 2014, compared to the same quarter of 2013.
Noninterest Expense
Noninterest expense increased $1.32 million, or 6.53%, to $21.47 million for the third quarter of 2014 compared with the same quarter of 2013, which was largely due to FHLB debt prepayment fees and acquisition and divestiture expenses offset by a decrease in salaries and employee benefits and a decrease in other operating expenses. The Company incurred fees of $3.05 million related to the prepayment of $35 million of a $50 million FHLB convertible advance. Expenses related to the pending seven branch acquisitions and thirteen branch sales totaled $285 thousand in the third quarter of 2014. Salaries and employee benefits decreased $1.16 million, or 10.43%, to $9.92 million for the third quarter of 2014 compared with the same quarter of 2013, which was primarily due to a $1.07 million contractual executive severance charge in the third quarter of 2013. Absent the one-time severance charge, salaries and employee benefits decreased $85 thousand, or 0.85%, from the third quarter of 2013. Full-time equivalent employees totaled 691 as of September 30, 2014, a decrease of 35 employees compared with the same period of the prior year. The decrease in employees was a result of branch consolidation activities during the first half of 2014, as well as general staffing reductions throughout the Company. Other operating expense decreased $508 thousand, or 9.33%, to $4.93 million for the third quarter of 2014 compared with the same quarter of 2013, which was primarily due to decreases in problem loan, marketing, and legal expenses offset by increases in service fees and employee benefit plans. Other operating expense included a net loss on sales and expenses associated with other real estate owned of $580 thousand for the third quarter of 2014 compared to $272 thousand for the same quarter of 2013. Occupancy, furniture, and equipment expenses decreased $307 thousand, or 10.27%, to $2.68 million for the third quarter of 2014 compared with the same quarter of 2013. The efficiency ratio for the third quarter of 2014 was 58.11% compared to 60.35% for the third quarter of 2013.
Allowance for Loan Losses and Asset Quality
The total allowance for loan losses was reduced to $21.16 million as of September 30, 2014, compared with $24.08 million as of December 31, 2013, and $24.67 million as of September 30, 2013. As of September 30, 2014, $20.96 million of the allowance was attributed to the legacy portfolio and $196 thousand was attributed to the acquired Peoples portfolio. Non-covered loans and other real estate owned are those assets not covered by loss share agreements between the FDIC and the Bank in relation to the acquisition of Waccamaw. The allowance for loan losses, excluding purchased credit impaired ("PCI") loans, as a percentage of non-covered loans was 1.28% as of September 30, 2014, compared with 1.50% as of December 31, 2013, and 1.54% as of September 30, 2013. Activity in the allowance in the third quarter of 2014 included a recovery of loan losses previously charged to operations of $2.44 million, a decrease of $4.77 million compared to a net provision of $2.33 million recorded in the same quarter of the prior year, which was primarily due to the release of specific reserves on a problem credit that experienced favorable resolution during the third quarter of 2014. Other allowance activity in the third quarter of 2014 included a net recovery of previous impairments recorded through the FDIC indemnification asset of $110 thousand due to better than expected performance in the Waccamaw PCI loan portfolio. Net charge-offs decreased $1.55 million, or 88.43%, in the third quarter of 2014 compared with the fourth quarter of 2013 and decreased $1.40 million, or 87.33%, compared with the third quarter of 2013. The ratio of annualized net charge-offs to average non-covered loans improved significantly to 0.05% for the third quarter of 2014, which represents a decrease of 37 basis points compared with 0.42% for the third quarter of 2013.
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 1.28% as of September 30, 2014, compared to 2.25% for the same period of the prior year. Non-covered nonaccrual loans totaled $11.48 million as of September 30, 2014, compared to $19.16 million as of December 31, 2013, and $26.40 million as of September 30, 2013. At quarter-end, the Company's non-covered nonperforming loans as a percentage of total non-covered loans were 0.91% and non-covered nonperforming assets as a percentage of total non-covered assets were 0.85%. At quarter-end, the Company's non-covered nonaccrual loans as a percentage of total non-covered loans were 0.70%, compared to 1.72% for the same period of the prior year.
Total nonperforming assets, including covered and non-covered loan portfolios, consisted of $12.61 million in nonaccrual loans, $3.45 million in unseasoned, accruing troubled debt restructurings, and $13.23 million in other real estate owned as of September 30, 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 $7.25 million, or 26.08%, and total covered nonperforming assets decreased $2.23 million, or 20.30%, as of September 30, 2014, compared to December 31, 2013.
Balance Sheet and Capital
Consolidated assets totaled $2.55 billion as of September 30, 2014, a decrease of $52.39 million, or 2.01%, compared with $2.60 billion as of December 31, 2013. The change in consolidated assets was driven by a $168.13 million decrease in available-for-sale securities and a $25.07 million decrease in the covered loan portfolio offset by a $77.14 million increase in the non-covered loan portfolio, a $49.36 million increase in cash and cash equivalents, and a $30.46 million increase in held-to-maturity securities. The decrease in securities available for sale is consistent with the Company's strategic objective of shifting earning asset mix towards loan assets. During the first nine months of 2014, the Company purchased short-term bonds in the held-to-maturity category and it is expected that this portfolio will continue to grow consistently and will provide the funding necessary to extinguish certain wholesale borrowings as they come due.
Consolidated liabilities totaled $2.20 billion as of September 30, 2014, a decrease of $71.02 million, or 3.12%, compared with $2.27 billion as of December 31, 2013. The change in consolidated liabilities was driven by a $35.00 million decrease in FHLB borrowings, an $18.47 million decrease in deposits, and a $16.00 million decrease in federal funds purchased. The Company prepaid $35 million of a $50 million FHLB convertible advance during the third quarter of 2014 that matures in May 2017 and bears an interest rate of 4.21%. The prepayment resulted in a pre-tax penalty of $3.05 million.
Total stockholders' equity increased to $347.24 million as of September 30, 2014, compared with $328.61 million as of December 31, 2013. Book value per as-converted common share increased to $17.85 as of September 30, 2014, compared with $16.79 as of December 31, 2013, an increase of 6.31%. Tangible book value per common share increased to $12.30 as of September 30, 2014, compared with $11.26 as of December 31, 2013, an increase of 9.24%. Additionally, the Company repurchased 132,773 common shares at a weighted average cost of $16.29 per share and paid a cash dividend of $0.37 per common share during the first nine months of 2014.
The Company significantly exceeds regulatory "well capitalized" targets as of September 30, 2014, with a total risk-based capital ratio of 16.8%, a Tier 1 risk-based capital ratio of 15.5%, and a Tier 1 leverage ratio of 10.7%.
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 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.
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 59 banking locations throughout Virginia, West Virginia, North Carolina, South Carolina, and Tennessee as of September 30, 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 $700 million in combined assets as of September 30, 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 September 30, 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 $2.55 billion as of September 30, 2014. Additional investor information can be found on the Company's website at www.fcbinc.com.
This news release may include forward-looking statements. These forward-looking statements are based on current expectations that involve risks, uncertainties, and assumptions. Should one or more of these risks or uncertainties materialize or should underlying assumptions prove incorrect, actual results may differ materially. These risks include: changes in business or other market conditions; the timely development, production and acceptance of new products and services; the challenge of managing asset/liability levels; the management of credit risk and interest rate risk; the difficulty of keeping expense growth at modest levels while increasing revenues; and other risks detailed from time to time in the Company's Securities and Exchange Commission reports including, but not limited to, the Annual Report on Form 10-K for the most recent 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 | Nine Months Ended | |||
| September 30, | September 30, | |||
| (Amounts in thousands, except share and per share data) | 2014 | 2013 | 2014 | 2013 |
| Interest income | ||||
| Interest and fees on loans held for investment | $ 23,407 | $ 23,439 | $ 69,651 | $ 72,547 |
| Interest on securities --- taxable | 1,196 | 1,999 | 4,830 | 5,754 |
| Interest on securities --- nontaxable | 1,108 | 1,216 | 3,329 | 3,631 |
| Interest on deposits in banks | 40 | 42 | 117 | 180 |
| Total interest income | 25,751 | 26,696 | 77,927 | 82,112 |
| Interest expense | ||||
| Interest on deposits | 1,782 | 2,147 | 5,505 | 6,792 |
| Interest on short-term borrowings | 526 | 517 | 1,511 | 1,686 |
| Interest on long-term borrowings | 1,428 | 1,706 | 4,803 | 5,084 |
| Total interest expense | 3,736 | 4,370 | 11,819 | 13,562 |
| Net interest income | 22,015 | 22,326 | 66,108 | 68,550 |
| (Recovery of) provision for loan losses | (2,439) | 2,333 | 633 | 6,680 |
| Net interest income after provision for loan losses | 24,454 | 19,993 | 65,475 | 61,870 |
| Noninterest income | ||||
| Wealth management income | 670 | 863 | 2,396 | 2,680 |
| Service charges on deposit accounts | 3,606 | 3,582 | 10,099 | 10,065 |
| Other service charges and fees | 1,852 | 1,777 | 5,473 | 5,356 |
| Insurance commissions | 1,695 | 1,559 | 5,113 | 4,533 |
| Net impairment losses recognized in earnings | (219) | -- | (737) | -- |
| Net gain (loss) on sale of securities | 320 | (39) | 306 | 191 |
| Net FDIC indemnification asset amortization | (1,096) | (1,089) | (3,166) | (4,290) |
| Other operating income | 839 | 1,458 | 3,021 | 4,285 |
| Total noninterest income | 7,667 | 8,111 | 22,505 | 22,820 |
| Noninterest expense | ||||
| Salaries and employee benefits | 9,924 | 11,080 | 29,872 | 31,150 |
| Occupancy expense of bank premises | 1,469 | 1,700 | 4,825 | 5,350 |
| Furniture and equipment | 1,212 | 1,288 | 3,611 | 3,931 |
| Amortization of intangible assets | 179 | 183 | 532 | 545 |
| FDIC premiums and assessments | 419 | 460 | 1,311 | 1,401 |
| FHLB debt prepayment fees | 3,047 | -- | 3,047 | -- |
| Merger, acquisition, and divestiture expense | 285 | -- | 285 | 57 |
| Other operating expense | 4,934 | 5,442 | 15,329 | 15,796 |
| Total noninterest expense | 21,469 | 20,153 | 58,812 | 58,230 |
| Income before income taxes | 10,652 | 7,951 | 29,168 | 26,460 |
| Income tax expense | 3,609 | 2,539 | 9,393 | 8,472 |
| Net income | 7,043 | 5,412 | 19,775 | 17,988 |
| Dividends on preferred stock | 228 | 261 | 683 | 772 |
| Net income available to common shareholders | $ 6,815 | $ 5,151 | $ 19,092 | $ 17,216 |
| Basic earnings per common share | $ 0.37 | $ 0.26 | $ 1.04 | $ 0.86 |
| Diluted earnings per common share | 0.36 | 0.26 | 1.02 | 0.85 |
| Cash dividends per common share | 0.13 | 0.12 | 0.37 | 0.36 |
| Weighted average basic shares outstanding | 18,402,764 | 20,008,861 | 18,407,173 | 20,013,095 |
| Weighted average diluted shares outstanding | 19,466,126 | 21,123,788 | 19,472,136 | 21,196,063 |
| Return on average assets | 1.06% | 0.77% | 0.99% | 0.86% |
| Return on average common equity | 8.15% | 6.06% | 7.86% | 6.71% |
| FIRST COMMUNITY BANCSHARES, INC. | |||||
| CONDENSED QUARTERLY STATEMENTS OF INCOME (Unaudited) | |||||
| Quarter Ended | |||||
| September 30, | June 30, | March 31, | December 31, | September 30, | |
| (Amounts in thousands, except share and per share data) | 2014 | 2014 | 2014 | 2013 | 2013 |
| Interest Income | |||||
| Interest and fees on loans held for investment | $ 23,407 | $ 23,410 | $ 22,834 | $ 24,053 | $ 23,439 |
| Interest on securities --- taxable | 1,196 | 1,537 | 2,097 | 2,121 | 1,999 |
| Interest on securities --- nontaxable | 1,108 | 1,099 | 1,122 | 1,159 | 1,216 |
| Interest on deposits in banks | 40 | 47 | 30 | 31 | 42 |
| Total interest income | 25,751 | 26,093 | 26,083 | 27,364 | 26,696 |
| Interest Expense | |||||
| Interest on deposits | 1,782 | 1,835 | 1,888 | 2,031 | 2,147 |
| Interest on short-term borrowings | 526 | 483 | 502 | 536 | 517 |
| Interest on long-term borrowings | 1,428 | 1,707 | 1,668 | 1,705 | 1,706 |
| Total interest expense | 3,736 | 4,025 | 4,058 | 4,272 | 4,370 |
| Net interest income | 22,015 | 22,068 | 22,025 | 23,092 | 22,326 |
| (Recovery of) provision for loan losses | (2,439) | 1,279 | 1,793 | 1,528 | 2,333 |
| Net interest income after provision for loan losses | 24,454 | 20,789 | 20,232 | 21,564 | 19,993 |
| Noninterest Income | |||||
| Wealth management income | 670 | 718 | 1,008 | 732 | 863 |
| Service charges on deposit accounts | 3,606 | 3,423 | 3,070 | 3,493 | 3,582 |
| Other service charges and fees | 1,852 | 1,850 | 1,771 | 1,795 | 1,777 |
| Insurance commissions | 1,695 | 1,454 | 1,964 | 1,400 | 1,559 |
| Net impairment losses recognized in earnings | (219) | (254) | (264) | (320) | -- |
| Net gain (loss) on sale of securities | 320 | (59) | 45 | 208 | (39) |
| Net FDIC indemnification asset amortization | (1,096) | (936) | (1,134) | (1,307) | (1,089) |
| Other operating income | 839 | 1,408 | 774 | 950 | 1,458 |
| Total noninterest income | 7,667 | 7,604 | 7,234 | 6,951 | 8,111 |
| Noninterest Expense | |||||
| Salaries and employee benefits | 9,924 | 10,043 | 9,905 | 10,085 | 11,080 |
| Occupancy expense of bank premises | 1,469 | 1,578 | 1,778 | 1,683 | 1,700 |
| Furniture and equipment | 1,212 | 1,205 | 1,194 | 1,035 | 1,288 |
| Amortization of intangible assets | 179 | 178 | 175 | 184 | 183 |
| FDIC premiums and assessments | 419 | 458 | 434 | 316 | 460 |
| FHLB debt prepayment fees | 3,047 | -- | -- | -- | -- |
| Merger, acquisition, and divestiture expense | 285 | -- | -- | -- | -- |
| Other operating expense | 4,934 | 4,701 | 5,694 | 7,452 | 5,442 |
| Total noninterest expense | 21,469 | 18,163 | 19,180 | 20,755 | 20,153 |
| Income before income taxes | 10,652 | 10,230 | 8,286 | 7,760 | 7,951 |
| Income tax expense | 3,609 | 3,223 | 2,561 | 2,436 | 2,539 |
| Net income | 7,043 | 7,007 | 5,725 | 5,324 | 5,412 |
| Dividends on preferred stock | 228 | 227 | 228 | 252 | 261 |
| Net income available to common shareholders | $ 6,815 | $ 6,780 | $ 5,497 | $ 5,072 | $ 5,151 |
| Basic earnings per common share | $ 0.37 | $ 0.37 | $ 0.30 | $ 0.27 | $ 0.26 |
| Diluted earnings per common share | 0.36 | 0.36 | 0.29 | 0.26 | 0.26 |
| Cash dividends per common share | 0.13 | 0.12 | 0.12 | 0.12 | 0.12 |
| Weighted average basic shares outstanding | 18,402,764 | 18,395,996 | 18,423,123 | 19,136,317 | 20,008,861 |
| Weighted average diluted shares outstanding | 19,466,126 | 19,457,237 | 19,506,647 | 20,233,737 | 21,123,788 |
| FIRST COMMUNITY BANCSHARES, INC. | |||||||
| RECONCILIATION OF GAAP NET INCOME TO CORE EARNINGS (Unaudited) | |||||||
| Three Months Ended | Nine Months Ended | ||||||
| September 30, | June 30, | March 31, | December 31, | September 30, | September 30, | ||
| 2014 | 2014 | 2014 | 2013 | 2013 | 2014 | 2013 | |
| (Amounts in thousands, except per share data) | |||||||
| Net income, GAAP | $ 7,043 | $ 7,007 | $ 5,725 | $ 5,324 | $ 5,412 | $ 19,775 | $ 17,988 |
| Non-GAAP adjustments: | |||||||
| Net impairment losses recognized in earnings | 219 | 254 | 264 | 320 | -- | 737 | -- |
| Net (gain) loss on sale of securities | (320) | 59 | (45) | (208) | 39 | (306) | (191) |
| Net gain on debt prepayment | -- | -- | -- | -- | -- | -- | (296) |
| FHLB debt prepayment fees | 3,047 | -- | -- | -- | -- | 3,047 | -- |
| Merger, acquisition, and divestiture expense | 285 | -- | -- | -- | -- | 285 | 57 |
| Branch closure/consolidation expense | -- | -- | -- | 1,520 | -- | -- | -- |
| Other noncore, nonrecurring items | -- | (536) | -- | -- | 1,072 | (536) | 1,180 |
| Total adjustments to core earnings | 3,231 | (223) | 219 | 1,632 | 1,111 | 3,227 | 750 |
| Tax effect | 1,217 | (84) | 82 | 610 | 415 | 1,215 | 280 |
| Core earnings, non-GAAP | $ 9,057 | $ 6,868 | $ 5,862 | $ 6,346 | $ 6,108 | $ 21,787 | $ 18,458 |
| Core return on average assets | 1.41% | 1.07% | 0.92% | 0.96% | 0.92% | 1.13% | 0.92% |
| Core return on average common equity | 10.83% | 8.49% | 7.49% | 7.69% | 7.19% | 8.97% | 7.19% |
| Core return on average tangible common equity | 16.06% | 12.73% | 11.36% | 11.47% | 10.57% | 13.45% | 10.51% |
| Core diluted earnings per common share | $0.47 | $0.35 | $0.30 | $0.31 | $0.29 | $1.12 | $0.87 |
| FIRST COMMUNITY BANCSHARES, INC. | |||||||
| EFFICIENCY RATIO CALCULATION (Unaudited) | |||||||
| Three Months Ended | Nine Months Ended | ||||||
| September 30, | June 30, | March 31, | December 31, | September 30, | September 30, | ||
| 2014 | 2014 | 2014 | 2013 | 2013 | 2014 | 2013 | |
| (Amounts in thousands) | |||||||
| Noninterest expense, GAAP | $ 21,469 | $ 18,163 | $ 19,180 | $ 20,755 | $ 20,153 | $ 58,812 | $ 58,230 |
| Non-GAAP adjustments: | |||||||
| FHLB debt prepayment fees | (3,047) | -- | -- | -- | -- | (3,047) | -- |
| OREO expense and net loss | (580) | (254) | (857) | (970) | (272) | (1,691) | (1,067) |
| Merger, acquisition, and divestiture expense | (285) | -- | -- | -- | -- | (285) | (57) |
| Branch acquisition/divestiture expense | -- | -- | -- | -- | -- | -- | -- |
| Branch closure/consolidation expense | -- | -- | -- | (1,520) | -- | -- | -- |
| Other noncore, nonrecurring items | -- | -- | -- | -- | (1,072) | -- | (1,180) |
| Adjusted noninterest expense | 17,557 | 17,909 | 18,323 | 18,265 | 18,809 | 53,789 | 55,926 |
| Net interest income, GAAP | 22,015 | 22,068 | 22,025 | 23,092 | 22,326 | 66,108 | 68,550 |
| Noninterest income, GAAP | 7,667 | 7,604 | 7,234 | 6,951 | 8,111 | 22,505 | 22,820 |
| Non-GAAP adjustments: | |||||||
| Tax equivalency adjustment | 633 | 699 | 663 | 662 | 691 | 1,943 | 2,079 |
| Net impairment losses recognized in earnings | 219 | 254 | 264 | 320 | -- | 737 | -- |
| Net (gain) loss on sale of securities | (320) | 59 | (45) | (208) | 39 | (306) | (191) |
| Net gain on debt prepayment | -- | -- | -- | -- | -- | -- | (296) |
| Other noncore, nonrecurring items | -- | (536) | -- | -- | -- | (536) | -- |
| Adjusted net interest and noninterest income | 30,214 | 30,148 | 30,141 | 30,817 | 31,167 | 90,451 | 92,962 |
| Non-GAAP efficiency ratio | 58.11% | 59.40% | 60.79% | 59.27% | 60.35% | 59.47% | 60.16% |
| FIRST COMMUNITY BANCSHARES, INC. | |||||
| CONDENSED QUARTERLY BALANCE SHEETS (Unaudited) | |||||
| As of the Quarter Ended | |||||
| September 30, | June 30, | March 31, | December 31, | September 30, | |
| 2014 | 2014 | 2014 | 2013 | 2013 | |
| (Amounts in thousands) | |||||
| Cash and due from banks | $ 44,703 | $ 47,869 | $ 45,879 | $ 43,598 | $ 47,982 |
| Federal funds sold | 55,503 | 38,142 | 22,352 | 1,817 | 33,374 |
| Interest-bearing deposits in banks | 5,716 | 10,770 | 10,771 | 11,152 | 11,219 |
| Total cash and cash equivalents | 105,922 | 96,781 | 79,002 | 56,567 | 92,575 |
| Securities available for sale | 351,693 | 398,425 | 483,864 | 519,820 | 545,676 |
| Securities held to maturity | 31,029 | 19,398 | 8,161 | 568 | 567 |
| Loans held for sale | 1,150 | 459 | 1,743 | 883 | 825 |
| Loans held for investment, net of unearned income: | |||||
| Covered under loss share agreements | 126,611 | 132,717 | 143,170 | 151,682 | 163,425 |
| Not covered under loss share agreements | 1,636,181 | 1,626,707 | 1,588,694 | 1,559,039 | 1,533,272 |
| Less allowance for loan losses | (21,159) | (23,911) | (23,798) | (24,077) | (24,665) |
| Loans, net | 1,742,783 | 1,735,972 | 1,709,809 | 1,687,527 | 1,672,857 |
| FDIC indemnification asset | 29,745 | 30,908 | 32,510 | 34,691 | 37,102 |
| Property, plant, and equipment, net | 59,283 | 59,145 | 60,043 | 61,116 | 63,526 |
| Other real estate owned: | |||||
| Covered under loss share agreements | 7,620 | 8,814 | 8,705 | 7,541 | 7,381 |
| Not covered under loss share agreements | 5,612 | 5,693 | 5,923 | 7,318 | 5,450 |
| Interest receivable | 6,346 | 6,206 | 6,259 | 7,521 | 7,336 |
| Goodwill | 105,657 | 105,657 | 105,455 | 105,455 | 104,892 |
| Intangible assets | 2,334 | 2,512 | 2,691 | 2,866 | 2,976 |
| Other assets | 102,103 | 105,890 | 107,924 | 111,524 | 112,313 |
| Total assets | $2,550,127 | $2,575,401 | $2,610,346 | $2,602,514 | $2,652,651 |
| Deposits: | |||||
| Noninterest-bearing | $ 397,523 | $ 357,871 | $ 353,137 | $ 339,680 | $ 353,951 |
| Interest-bearing | 347,589 | 362,318 | 382,752 | 361,821 | 374,546 |
| Savings | 519,902 | 517,766 | 531,096 | 524,010 | 527,887 |
| Time | 667,261 | 685,149 | 707,704 | 725,231 | 740,181 |
| Total deposits | 1,932,275 | 1,923,104 | 1,974,689 | 1,950,742 | 1,996,565 |
| Interest, taxes, and other liabilities | 25,131 | 23,576 | 23,323 | 22,770 | 24,653 |
| Federal funds purchased | -- | -- | -- | 16,000 | -- |
| Securities sold under agreements to repurchase | 114,439 | 120,159 | 112,337 | 118,308 | 114,647 |
| FHLB borrowings | 115,000 | 150,000 | 150,000 | 150,000 | 150,000 |
| Other borrowings | 16,047 | 16,087 | 16,087 | 16,088 | 15,839 |
| Total liabilities | 2,202,892 | 2,232,926 | 2,276,436 | 2,273,908 | 2,301,704 |
| Preferred stock | 15,151 | 15,151 | 15,151 | 15,251 | 15,471 |
| Common stock | 20,500 | 20,500 | 20,500 | 20,493 | 20,478 |
| Additional paid-in capital | 215,729 | 215,670 | 215,827 | 215,663 | 215,671 |
| Retained earnings | 138,111 | 133,688 | 129,115 | 125,826 | 123,018 |
| Treasury stock, at cost | (35,808) | (35,797) | (35,996) | (33,887) | (10,946) |
| Accumulated other comprehensive loss | (6,448) | (6,737) | (10,687) | (14,740) | (12,745) |
| Total stockholders' equity | 347,235 | 342,475 | 333,910 | 328,606 | 350,947 |
| Total liabilities and stockholders' equity | $2,550,127 | $2,575,401 | $2,610,346 | $2,602,514 | $2,652,651 |
| Shares outstanding at period end | 18,402,919 | 18,403,692 | 18,392,020 | 18,514,579 | 19,888,028 |
| Book value per common share at period end(1) | $ 17.85 | $ 17.61 | $ 17.18 | $ 16.79 | $ 16.75 |
| Tangible book value per common share at period end(2) | $ 12.30 | $ 12.05 | $ 11.61 | $ 11.26 | $ 11.60 |
| (1) Book value per common share is defined as stockholders' equity divided by as-converted common shares outstanding. | |||||
| (2) Tangible book value per common share is defined as stockholders' equity less goodwill and other intangibles divided by as-converted common shares outstanding. | |||||
| FIRST COMMUNITY BANCSHARES, INC. | |||||
| SELECTED CREDIT QUALITY INFORMATION (Unaudited) | |||||
| As of and for the Quarter Ended | |||||
| September 30, | June 30, | March 31, | December 31, | September 30, | |
| (Amounts in thousands) | 2014 | 2014 | 2014 | 2013 | 2013 |
| Allowance for Loan Losses | |||||
| Beginning balance | $ 23,911 | $ 23,798 | $ 24,077 | $ 24,665 | $ 23,122 |
| (Recovery of) provision for loan losses charged to operations | (2,439) | 1,279 | 1,793 | 1,528 | 2,333 |
| (Recovery of) provision for loan losses recorded through the FDIC indemnification asset | (110) | (138) | (203) | (361) | 812 |
| Charge-offs | (1,118) | (1,785) | (2,216) | (2,807) | (1,955) |
| Recoveries | 915 | 757 | 347 | 1,052 | 353 |
| Net charge-offs | (203) | (1,028) | (1,869) | (1,755) | (1,602) |
| Ending balance | $ 21,159 | $ 23,911 | $ 23,798 | $ 24,077 | $ 24,665 |
| Summary of Asset Quality | |||||
| Non-covered nonperforming | |||||
| Nonaccrual loans | $ 11,480 | $ 17,464 | $ 20,909 | $ 19,161 | $ 26,397 |
| Accruing loans past due 90 days or more | -- | -- | -- | -- | -- |
| Troubled debt restructurings ("TDRs")(1) | 3,450 | 1,877 | 1,775 | 1,311 | 2,228 |
| Total non-covered nonperforming loans | 14,930 | 19,341 | 22,684 | 20,472 | 28,625 |
| Other real estate owned ("OREO") not covered under FDIC loss share agreements | 5,612 | 5,693 | 5,923 | 7,318 | 5,450 |
| Total non-covered nonperforming assets | $ 20,542 | $ 25,034 | $ 28,607 | $ 27,790 | $ 34,075 |
| Covered nonperforming | |||||
| Nonaccrual loans | $ 1,131 | $ 955 | $ 1,261 | $ 3,353 | $ 3,579 |
| Accruing loans past due 90 days or more | -- | 109 | 109 | 86 | 82 |
| Total covered nonperforming loans | 1,131 | 1,064 | 1,370 | 3,439 | 3,661 |
| OREO covered under FDIC loss share agreements | 7,620 | 8,814 | 8,705 | 7,541 | 7,381 |
| Total covered nonperforming assets | 8,751 | 9,878 | 10,075 | 10,980 | 11,042 |
| Total nonperforming assets | $ 29,293 | $ 34,912 | $ 38,682 | $ 38,770 | $ 45,117 |
| Performing TDRs(2) | $ 11,701 | $ 11,029 | $ 11,193 | $ 10,900 | $ 9,697 |
| Total TDRs(3) | 15,151 | 12,906 | 12,968 | 12,211 | 11,925 |
| Asset Quality Ratios | |||||
| Excluding covered assets | |||||
| Nonperforming loans to total loans | 0.91% | 1.19% | 1.43% | 1.31% | 1.87% |
| Nonperforming assets to total assets | 0.85% | 1.03% | 1.16% | 1.14% | 1.37% |
| Non-PCI allowance for loan losses to nonperforming loans | 140.35% | 121.47% | 102.74% | 113.92% | 82.52% |
| Non-PCI allowance to non-covered total loans | 1.28% | 1.44% | 1.47% | 1.50% | 1.54% |
| Annualized net charge-offs to average loans | 0.05% | 0.26% | 0.48% | 0.45% | 0.42% |
| Including covered assets | |||||
| Nonperforming loans to total loans | 0.91% | 1.16% | 1.39% | 1.40% | 1.90% |
| Nonperforming assets to total assets | 1.15% | 1.36% | 1.48% | 1.49% | 1.70% |
| Nonperforming assets to total loans and other real estate owned | 114.84% | 112.07% | 115.74% | 145.60% | 149.60% |
| Allowance for loan losses to nonperforming loans | 131.74% | 117.18% | 98.94% | 100.69% | 76.40% |
| Allowance for loan losses to total loans | 1.20% | 1.36% | 1.37% | 1.41% | 1.45% |
| (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 September 30, | ||||||
| 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) | $ 1,766,769 | $ 23,460 | 5.27% | $ 1,694,243 | $ 23,476 | 5.50% |
| Securities available-for-sale | 376,778 | 2,811 | 2.96% | 547,686 | 3,857 | 2.79% |
| Securities held-to-maturity | 24,189 | 73 | 1.20% | 597 | 12 | 7.97% |
| Interest-bearing deposits | 45,826 | 40 | 0.35% | 45,259 | 42 | 0.37% |
| Total earning assets | 2,213,562 | 26,384 | 4.73% | 2,287,785 | 27,387 | 4.75% |
| Other assets | 331,771 | 356,847 | ||||
| Total assets | $ 2,545,333 | $ 2,644,632 | ||||
| Liabilities | ||||||
| Interest-bearing deposits | ||||||
| Demand deposits | $ 349,013 | $ 49 | 0.06% | $ 362,548 | $ 58 | 0.06% |
| Savings deposits | 521,334 | 121 | 0.09% | 520,884 | 142 | 0.11% |
| Time deposits | 675,454 | 1,612 | 0.95% | 757,575 | 1,947 | 1.02% |
| Total interest-bearing deposits | 1,545,801 | 1,782 | 0.46% | 1,641,007 | 2,147 | 0.52% |
| Borrowings | ||||||
| Federal funds purchased | 69 | -- | 0.00% | -- | -- | -- |
| Retail repurchase agreements | 69,565 | 23 | 0.13% | 65,382 | 34 | 0.21% |
| Wholesale repurchase agreements | 50,000 | 474 | 3.76% | 50,000 | 473 | 3.75% |
| FHLB advances and other borrowings | 142,115 | 1,457 | 4.07% | 165,868 | 1,716 | 4.10% |
| Total borrowings | 261,749 | 1,954 | 2.96% | 281,250 | 2,223 | 3.14% |
| Total interest-bearing liabilities | 1,807,550 | 3,736 | 0.82% | 1,922,257 | 4,370 | 0.90% |
| Noninterest-bearing demand deposits | 371,877 | 349,156 | ||||
| Other liabilities | 18,888 | 20,226 | ||||
| Total liabilities | 2,198,315 | 2,291,639 | ||||
| Stockholders' equity | 347,018 | 352,993 | ||||
| Total liabilities and stockholders' equity | $ 2,545,333 | $ 2,644,632 | ||||
| Net interest income, tax equivalent | $ 22,648 | $ 23,017 | ||||
| Net interest rate spread(3) | 3.91% | 3.85% | ||||
| Net interest margin(4) | 4.06% | 3.99% | ||||
| (1) Fully taxable equivalent at the rate of 35% ("FTE"). The FTE basis adjusts for the tax benefits of income on certain tax exempt loans and investments using the federal statutory rate of 35% for each period presented. The Company believes this measure to be the preferred industry measurement of net interest income and provides relevant comparison between taxable and nontaxable amounts. | ||||||
| (2) Nonaccrual loans are included in average balances outstanding, but with no related interest income during the period of nonaccrual. | ||||||
| (3) Represents the difference between the yield on earning assets and cost of funds. | ||||||
| (4) Represents tax equivalent net interest income divided by average earning assets. | ||||||
| FIRST COMMUNITY BANCSHARES, INC. | ||||||
| AVERAGE BALANCE SHEETS AND NET INTEREST INCOME ANALYSIS (Unaudited) | ||||||
| Nine Months Ended September 30, | ||||||
| 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) | $ 1,744,422 | $ 69,818 | 5.35% | $ 1,697,533 | $ 72,671 | 5.72% |
| Securities available-for-sale | 434,462 | 9,808 | 3.02% | 546,603 | 11,297 | 2.76% |
| Securities held-to-maturity | 12,858 | 127 | 1.32% | 700 | 43 | 8.21% |
| Interest-bearing deposits | 40,587 | 117 | 0.39% | 75,577 | 180 | 0.32% |
| Total earning assets | 2,232,329 | 79,870 | 4.78% | 2,320,413 | 84,191 | 4.85% |
| Other assets | 337,298 | 355,025 | ||||
| Total assets | $ 2,569,627 | $ 2,675,438 | ||||
| Liabilities | ||||||
| Interest-bearing deposits | ||||||
| Demand deposits | $ 363,780 | $ 154 | 0.06% | $ 359,439 | $ 173 | 0.06% |
| Savings deposits | 525,269 | 387 | 0.10% | 514,447 | 444 | 0.12% |
| Time deposits | 695,585 | 4,964 | 0.95% | 785,690 | 6,176 | 1.05% |
| Total interest-bearing deposits | 1,584,634 | 5,505 | 0.46% | 1,659,576 | 6,793 | 0.55% |
| Borrowings | ||||||
| Federal funds purchased | 1,192 | 3 | 0.34% | -- | -- | -- |
| Retail repurchase agreements | 73,669 | 74 | 0.13% | 71,476 | 240 | 0.45% |
| Wholesale repurchase agreements | 50,000 | 1,405 | 3.76% | 52,521 | 1,416 | 3.60% |
| FHLB advances and other borrowings | 158,009 | 4,832 | 4.09% | 169,190 | 5,113 | 4.04% |
| Total borrowings | 282,870 | 6,314 | 2.98% | 293,187 | 6,769 | 3.09% |
| Total interest-bearing liabilities | 1,867,504 | 11,819 | 0.85% | 1,952,763 | 13,562 | 0.93% |
| Noninterest-bearing demand deposits | 343,568 | 341,903 | ||||
| Other liabilities | 18,758 | 20,882 | ||||
| Total liabilities | 2,229,830 | 2,315,548 | ||||
| Stockholders' equity | 339,797 | 359,890 | ||||
| Total liabilities and stockholders' equity | $ 2,569,627 | $ 2,675,438 | ||||
| Net interest income, tax equivalent | $ 68,051 | $ 70,629 | ||||
| Net interest rate spread(3) | 3.93% | 3.92% | ||||
| Net interest margin(4) | 4.08% | 4.07% | ||||
| (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 September 30, | ||||
| 2014 | 2013 | |||
| Average Yield/ | Average Yield/ | |||
| (Amounts in thousands) | Interest(1) | Rate(1) | Interest(1) | Rate(1) |
| Earning assets | ||||
| Loans(2) | $ 23,460 | 5.27% | $ 23,476 | 5.50% |
| Accretion income | 2,813 | 3,472 | ||
| Less: cash accretion income | 1,367 | 1,737 | ||
| Non-cash accretion income | 1,446 | 1,735 | ||
| Loans, excluding non-cash accretion income | 22,014 | 4.94% | 21,741 | 5.09% |
| Other earning assets | 2,924 | 2.60% | 3,911 | 2.61% |
| Total earning assets | 24,938 | 4.47% | 25,652 | 4.45% |
| Total interest-bearing liabilities | 3,736 | 0.82% | 4,370 | 0.90% |
| Net interest income, tax equivalent | $ 21,202 | $ 21,282 | ||
| Net interest rate spread(3) | 3.65% | 3.55% | ||
| Net interest margin(4) | 3.80% | 3.69% | ||
| Nine Months Ended September 30, | ||||
| 2014 | 2013 | |||
| Average Yield/ | Average Yield/ | |||
| (Amounts in thousands) | Interest(1) | Rate(1) | Interest(1) | Rate(1) |
| Earning assets | ||||
| Loans(2) | $ 69,818 | 5.35% | $ 72,671 | 5.72% |
| Accretion income | 8,724 | 11,077 | ||
| Less: cash accretion income | 3,214 | 5,227 | ||
| Non-cash accretion income | 5,510 | 5,850 | ||
| Loans, excluding non-cash accretion income | 64,308 | 4.93% | 66,821 | 5.26% |
| Other earning assets | 10,052 | 2.75% | 11,520 | 2.47% |
| Total earning assets | 74,360 | 4.46% | 78,341 | 4.51% |
| Total interest-bearing liabilities | 11,819 | 0.85% | 13,562 | 0.93% |
| Net interest income, tax equivalent | $ 62,541 | $ 64,779 | ||
| Net interest rate spread(3) | 3.61% | 3.59% | ||
| Net interest margin(4) | 3.75% | 3.73% | ||
| (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. | ||||