Greetings. Welcome to the First Community Bancshares, Inc. Fourth Quarter 2012 Earnings Conference Call. [Operator Instructions] As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Bob Schumacher, General Counsel for First Community Bancshares. Thank you, Mr. Schumacher, you may now begin.

Thank you for joining us this morning for First Community Bancshares fourth quarter 2012 earnings conference call. Any statements made today that are not historical are forward-looking. Please review the language at the end of this morning’s earnings release regarding forward-looking statements as the same information applies to comments made on today’s call. With us today is President and Chief Executive Officer, John Mendez; Chief Financial Officer, Dave Brown and Chief Credit Officer, Gary Mills. At this time, I will turn the call over to John Mendez.

Thank you, Bob. And good morning to everyone and welcome again for the fourth quarter 2012 earnings call for First Community Bancshares Inc. We’re very pleased to host this call this morning as we briefly discuss our fourth quarter 2012 and our full year 2012 results. This is John Mendez, Chief Executive Officer for First Community Bancshares and I’m joined this morning by our Chief Credit Officer, Gary Mills and our Chief Financial Officer, Dave Brown. And following the call, we’ll be happy to take questions from registered callers. I’d like to begin this morning with some summary comments on the fourth quarter and our full year as well and then I’ll be followed by Dave and Gary who will provide more detailed analysis. To begin this morning, I’d like to say that I’m very pleased with our fourth quarter and our 2012 results. It has been a very busy year and we feel that we’ve achieved most of what we set out to do this year and we made significant progress against our strategic plan. Our operations have progressed nicely. Our asset quality remains strong at $1.37 NPA. And 2 second quarter acquisitions that we completed this year have now been fully integrated. During the second half of the year, we were able to complete conversions of all systems to our new Jack Henry platform and we have now fully consolidated data and operations on a new and advanced technology platform. I’m pleased to report that with this conversion we’ve also upgraded our online and mobile technologies. We’ve implemented new technologies on the front line, the branch, for improved customer service and we will also be in a position to realize improved cost structures in some of our key processing contracts. So many thanks to our Chief Operating Officer…

Thanks John and good morning to everyone and again thank you for joining us. This morning, we reported common net income for the first quarter of 2012 of $8.2 million and $0.39 of diluted share. Core earnings for the quarter remain quite strong at $8.8 million. Our core ROA and ROE were 1.28% and 10.30% respectively. Net non-core items of $541,000 were made up of securities gains and additional merger costs mostly attributable to the Waccamaw conversion. Margin for the quarter was 4.49% that was positively impacted by approximately $3.8 million in loan accretion from the purchased loan portfolios. The increased accretion is due largely to good experience in those acquired loan books. We’ve had roughly $41 million and good payoff since the acquisitions. Unfortunately that cuts both ways; we’re able to recapture some of the credit market put on those loans, but going forward we do lose an earning asset. Net interest margin, ex accretion [ph] for the quarter was approximately 3.84%. I think it’s difficult but not impossible to maintain this level. One of the bright spots in margin for the quarter was that legacy loan yields have actually remained very steady. Fourth quarter legacy yields were about 5.6% which is just a touch above what they were on a year-to-date average. We still have a little room to push CD costs down during the coming quarters as well. We made a $1.2 million provision for loan losses during the fourth quarter, and the real estate cost in that losses amounted to approximately $312,000. The total credit cost was $1.5 million were significantly lower than the $2.4 million reported last quarter and $2.9 million a quarter from a year ago. Wealth revenues you’ll notice that decreased $143,000 or 14% on a linked quarter basis on lower advisory and…

Thank you, David and good morning everyone. During the quarter, we observed a continuing trend of generally improving asset quality for the bank. Net charge-offs for the quarter totaled $1.285 million representing an annualized net charge-off rate of 0.33% as a percentage of average non-covered loans, as compared to 0.76% for the fourth quarter of 2011. Total net charge-offs for the year measured $6.113 million, representing an approximate 35% decline as compared to the $9.324 million in 2011 and an impressive 51% decline from total net charge-offs of $12.5 million booked in 2010. Non-covered nonaccrual loans totaled $23.931 million at quarter-end, representing an approximate $2.6 million decline from third quarter 2012 and an approximate $500,000 decline from the prior year-end 2011. I’m encouraged by the progress the bank is experiencing in the resolution of some of its larger nonaccrual loan relationships. As an example, a $1.5 million nonaccrual loan relationship was result earlier this week through a short sale, which have been negotiated during the fourth quarter. Any potential loss have estimated and booked in the fourth quarter so there will not be any further negative impact in the first quarter as a result of this transaction. The allowance stood at $25.770 million at year-end or 1.7% of total non-covered loans as compared to $26.205 million or 1.88% at year-end in 2011. The allowance as a percentage of legacy loans or loans not acquired through acquisition is 1.88% at year-end. The provision for the fourth quarter was $1.220 million representing roughly 50% decline from the $2.436 million posted in the fourth quarter of 2011. For the year, provision totaled $5.678 million representing a decline of approximately 37% from the 2011 provision of $9.47 million and a decline in excess of 60% from the $14.8 million booked in 2010. You may…

Thank you to both, Gary and Dave. We appreciate those comments and at this time that concludes our prepared remarks as a company, but we would like to turn the call back to the operator and see if we have possibly some questions that are queued up and we’d be happy to try and answer those.

[Operator instructions] Our first question is coming from the line of Catherine Mealor of Keefe, Bruyette & Woods.

I see that the core margin was 3.84%, so if that’s into it -- is that you mean that accretable yield this quarter was about 3.8 million. Is that right?

That’s exactly it.

Okay, great. And how should we think about that going forward? Do you have any estimate for at least we could see next quarter maybe into 2013?

Yes, I think there is obviously some room for that to continue. I do expect that it will slowdown lot of the FAS 91 accretion is based on contractual laws and so a lot of times those commercial portfolios, the real contraction life for the loan is relatively short. So I don’t expect the accretion to continue at these levels for too much longer. I will say that this quarter had some real positive impacts on the accretion because of those loan payoffs. And so those loans came back to us at 100 or par, we got -- you’re in the FAS 91 pool you basically take all of that credit mark into income today and so that drove a lot of the accretion beyond what we had kind of expected last time we talked.

Okay, great. And then, is there a negative FDIC indemnification as the amortization in your other fee income so they offset some accretion?

No, there wasn’t.

Okay, so none of that. So what’s your -- the linked quarter decline in other income?

It’s really probably just a lack of some of big things that might hit -- some other investment type of income. Nothing out of the ordinarily, I don’t think, Catherine.

Okay. Okay, great. And then one last question is, now that we’re past conversion on Waccamaw and Peoples, what kind of cost savings do you think you’ll see in the first quarter?

I think first quarter, from a personnel perspective, I’ve been kind of thinking along the lines of this maybe $10 million to $10.5 million in cost a quarter. And a lot of the cost saves that we were able to extract out of the back group [ph] at Waccamaw we redeployed back into lending staff down there. I think we probably hired somewhere around 6 or 7 new lenders to staff that area as well as some of the Lake Norman areas. So we should -- although the expenses will be there, we should begin to see some significant production in the loan origination.

[Operator Instructions] The next question is from the line of William Wallace, Raymond James.

Dave, I’m going dig in a little bit more on the accretion. So of the $3.8 million that was accretion in the quarter, how much of that was accelerated from payoffs?

Wally, I think that number is about $1 million.

Okay. So if we’re modeling we can think of maybe roughly $2.8 million in the fourth quarter was normal or modeled accretion and maybe we can use that as a base for 2013 to think about.

Yes, I think you’re right. The base, but I continue to think about that will decline slightly over time.

As the…

As the balance of the loan.

Yes, right. Okay. And then, I want to follow-up on a couple of Catherine’s questions. So the other income line was down very significantly to $346,000 and so I guess the question is, is that a normal level to think about moving forward, if we were over $1 million 2 quarters ago?

Yes. We had some items going in there past quarters. So I want to say were some OREO gains that we just didn’t have this time around. I can give you some of details Wally.

Okay. And you might have addressed this in your commentary. I apologize if I missed it. But did you comment on the decline in wealth management income in the quarter?

Just to say that it was declines in both the investment advisory portion as well as the trust. Both of those segments were down this quarter. I think there are some level of seasonality in there and I would expect to see those pop back up. I don’t think that we’ve noticed anything. There is nothing odd going on in those businesses that would drive that decline. So I think it’s more of a seasonality issue and trust. Unfortunately if there is -- a lot of the work that they do is to state related and it fluctuates with how their customers are fairing.

Okay. Fair enough. And then just one quick question on the share repurchase. How many shares did you say you repurchased?

67,400.

Okay. And then, John, 1 question for you. We’ve got 2 quarters, 2.5 quarters now with Peoples in the Richmond market, can you talk a little bit about what you’re seeing in that market from a production standpoint?

Well, Wally, we’ve been doing a fair amount of work getting handle on that portfolio but I think we confirmed that we have brought on a substantial seasoned staff over there. We’re continuing to see good deal flow, but although we’re spending a fair amount of time in the early months in acquisition and getting some of these renewals through. But I think that the portfolio is holding up very nicely and I think overall we're very pleased with what we’re seeing out in that team.

Are you looking to grow the team down there at all?

Speaking specifically of the greater Richmond market?

Yes.

We’ll certainly be alert to opportunities. I think we’ve got fair amount of really good qualified commercial staff on the ground. So I don’t think that we have tremendous need but we’re always open to opportunities. One thing that we will be doing in that market as we try and improve our retail presence, we do hope to be adding some additional mortgage lenders in that market.

[Operator Instructions] There are no questions at this time. I would like to turn the floor back to management for further comments.

Thank you. I would like to, once again, thank everyone for joining us this morning and for your interest in First Community Bancshares. We are very pleased with the results and the progress that we’ve made this year and we look forward to continuing that throughout 2013 and look forward to talking to you again when we come back with our first quarter earnings call. Thank you very much and have a great day.

This concludes today’s teleconference. You may disconnect your lines at this time. Thank you for your participation.