EX-99.1 2 v399787_ex99-1.htm EXHIBIT 99.1

Exhibit 99.1


NEWS RELEASE
FOR IMMEDIATE RELEASE:		FOR MORE INFORMATION, CONTACT:
January 29, 2015		David D. Brown
		(276) 326-9000

First Community Bancshares, Inc. Announces Fourth Quarter and Full Year 2014 Results

and Quarterly Dividend

Bluefield, Virginia – 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 30^th 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.