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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-K/A

Amendment No. 1

ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF

THE SECURITIES EXCHANGE
ACT OF 1934

For the fiscal year ended December 31, 2016

Commission file number 000-19297

FIRST COMMUNITY BANCSHARES, INC.

(Exact name of registrant as specified in its charter)



|                                                               |  |                                     
|-------------------------------------------------------------- |  | ------------------------------------
|Nevada                                                         |  | 55-0694814                          
|(State or other jurisdiction of
incorporation or organization) |  | (I.R.S. Employer Identification No.)

P.O. Box 989

Bluefield, Virginia 24605-0989

(Address of principal executive offices)
(Zip Code)

Registrants telephone number, including area code: (276)
326-9000

Securities registered pursuant to Section 12(b) of the Act:



|                              |  |                                          
|----------------------------- |  | -----------------------------------------
|Title of each class           |  | Name of each exchange on which registered
|Common Stock, $1.00 par value |  | NASDAQ Global Select                     

Securities registered pursuant to Section 12(g) of the Act: None

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities
Act.    ☐  Yes    ☒  No

Indicate by check mark if the registrant is
not required to file reports pursuant to Section 13 or Section 15(d) of the Act.    ☐  Yes    ☒  No

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for
such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    ☒  Yes    ☐  No

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive
Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required
to submit and post such files).    ☒  Yes    ☐  No

Indicate by check
mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§ 229.405 of this chapter) is not contained herein, and will not be contained, to the best of registrants knowledge,
in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K.  ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a
non-accelerated filer, or a smaller reporting company. See the definitions of large accelerated filer, accelerated filer and smaller reporting company in Rule 12b-2 of the Exchange Act.



|                        |  |                                                  |  |                           |  |  
|----------------------- |  | ------------------------------------------------ |  | ------------------------- |  | -
|Large accelerated filer |  | ☐                                                |  | Accelerated filer         |  | ☒
|                        |  |                                                  | 
|Non-accelerated filer   |  | ☐  (Do not check if a smaller reporting company) |  | Smaller reporting company |  | ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule
12b-2 of the Act).    ☐  Yes    ☒  No

As of June 30, 2016, the aggregate market value of the registrants voting and non-voting common stock held by
non-affiliates was $294.92 million.

As of February 28, 2017, there were 16,994,616 shares
outstanding of the registrants Common Stock, $1.00 par value.

DOCUMENTS INCORPORATED BY REFERENCE

Portions of the Proxy Statement for the Annual Meeting of Stockholders to be held on April 25, 2017, are incorporated by reference in Part III of
this Form 10-K.



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EXPLANATORY NOTE

This Amendment No. 1 on Form 10-K/A amends the Annual Report on Form 10-K of First Community Bancshares, Inc. (the
Company) for the year ended December 31, 2016, filed with the Securities and Exchange Commission on March 3, 2017 (the Original Form 10-K), solely to correct the date of the
Report of Independent Registered Public Accounting Firm on Consolidated Financial Statements of Dixon Hughes Goodman LLP (the Report) from March 4, 2017, to March 3, 2017. The Report of Independent Registered Public Accounting
Firm on Consolidated Financial Statements and the Report of Independent Registered Public Accounting Firm on Managements Assessment of Internal Control Over Financial Reporting with the correct date are filed with this Form 10-K/A.

In accordance with Rule 12b-15 under the Securities
Exchange Act of 1934, as amended, Part II, Item 8 has been amended and restated in its entirety; however, there have been no changes to the text of such Part II, Item 8 other than the change stated in the preceding paragraph. Further, there have
been no changes to the XBRL data filed in Exhibit 101 of the Original Form 10-K. As required by Rule 12b-15, this Form 10-K/A
includes a new consent of the independent registered public accounting firm as Exhibit 23 and new certifications pursuant to Sections 302 and 906 of the Sarbanes-Oxley Act of 2002 as Exhibits 31.1, 31.2, and 32.

Except as described above, this Form 10-K/A does not amend, update, or restate the information in any other Item
of the Original Form 10-K or reflect any events that have occurred after the filing of the Original Form 10-K.



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PART II



|Item 8. | Financial Statements and Supplementary Data.
|------- | --------------------------------------------

FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA INDEX



|                                                                                                                                |  |      |    | 
|------------------------------------------------------------------------------------------------------------------------------- |  | ---- | -- | 
|                                                                                                                                |  | Page |   
|Consolidated Balance Sheets as of December 31, 2016 and 2015                                                                    |  |      | 4  | 
|Consolidated Statements of Income for the years ended December 31, 2016, 2015, and
2014                                         |  |      | 5  | 
|Consolidated Statements of Comprehensive Income (Loss) for the years ended December 
31, 2016, 2015, and 2014                   |  |      | 6  | 
|Consolidated Statements of Changes in Stockholders Equity for the years ended December 
31, 2016, 2015, and 2014               |  |      | 7  | 
|Consolidated Statements of Cash Flows for the years ended December 31, 2016, 2015, and
2014                                     |  |      | 8  | 
|Notes to Consolidated Financial Statements                                                                                      |  |      | 9  | 
|Report of Independent Registered Public Accounting Firm on Consolidated Financial
Statements                                    |  |      | 69 | 
|Managements Assessment of Internal Control Over Financial Reporting                                                            |  |      | 70 | 
|Report of Independent Registered Public Accounting Firm on Managements Assessment of Internal Control Over
Financial Reporting |  |      | 71 | 



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FIRST COMMUNITY BANCSHARES, INC.

CONSOLIDATED BALANCE SHEETS



|                                                                                                                                                                                      |  |              |           |   |      |   |           |  
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ------------ | --------- | - | ---- | - | --------- | -
|                                                                                                                                                                                      |  | December 31, |          
|(Amounts in thousands, except share and per share data)                                                                                                                               |  | 2016         |           |   | 2015 |  
|Assets                                                                                                                                                                                |  |              |           |   |      |   |           |  
|Cash and due from banks                                                                                                                                                               |  | $            | 36,645    |   |      | $ | 37,383    |  
|Federal funds sold                                                                                                                                                                    |  |              | 38,717    |   |      |   | 13,498    |  
|Interest-bearing deposits in banks                                                                                                                                                    |  |              | 945       |   |      |   | 906       |  
|                                                                                                                                                                                      |  |              |           |   |      |   |           |  
|Total cash and cash equivalents                                                                                                                                                       |  |              | 76,307    |   |      |   | 51,787    |  
|Securities available for sale                                                                                                                                                         |  |              | 165,579   |   |      |   | 366,173   |  
|Securities held to maturity                                                                                                                                                           |  |              | 47,133    |   |      |   | 72,541    |  
|Loans held for investment, net of unearned income                                                                                                                                     |  |              |           |   |      |   |           |  
|Non-covered                                                                                                                                                                           |  |              | 1,795,954 |   |      |   | 1,623,506 |  
|Covered                                                                                                                                                                               |  |              | 56,994    |   |      |   | 83,035    |  
|Allowance for loan losses                                                                                                                                                             |  |              | (17,948   | ) |      |   | (20,233   | )
|                                                                                                                                                                                      |  |              |           |   |      |   |           |  
|Loans held for investment, net                                                                                                                                                        |  |              | 1,835,000 |   |      |   | 1,686,308 |  
|FDIC indemnification asset                                                                                                                                                            |  |              | 12,173    |   |      |   | 20,844    |  
|Premises and equipment, net                                                                                                                                                           |  |              | 50,085    |   |      |   | 52,756    |  
|Other real estate owned, non-covered                                                                                                                                                  |  |              | 5,109     |   |      |   | 4,873     |  
|Other real estate owned, covered                                                                                                                                                      |  |              | 276       |   |      |   | 4,034     |  
|Interest receivable                                                                                                                                                                   |  |              | 5,553     |   |      |   | 6,007     |  
|Goodwill                                                                                                                                                                              |  |              | 95,779    |   |      |   | 100,486   |  
|Other intangible assets                                                                                                                                                               |  |              | 7,207     |   |      |   | 5,243     |  
|Other assets                                                                                                                                                                          |  |              | 86,197    |   |      |   | 91,224    |  
|                                                                                                                                                                                      |  |              |           |   |      |   |           |  
|Total assets                                                                                                                                                                          |  | $            | 2,386,398 |   |      | $ | 2,462,276 |  
|                                                                                                                                                                                      |  |              |           |   |      |   |           |  
|Liabilities                                                                                                                                                                           |  |              |           |   |      |   |           |  
|Deposits                                                                                                                                                                              |  |              |           |   |      |   |           |  
|Noninterest-bearing                                                                                                                                                                   |  | $            | 427,705   |   |      | $ | 451,511   |  
|Interest-bearing                                                                                                                                                                      |  |              | 1,413,633 |   |      |   | 1,421,748 |  
|                                                                                                                                                                                      |  |              |           |   |      |   |           |  
|Total deposits                                                                                                                                                                        |  |              | 1,841,338 |   |      |   | 1,873,259 |  
|Securities sold under agreements to repurchase                                                                                                                                        |  |              | 98,005    |   |      |   | 138,614   |  
|FHLB borrowings                                                                                                                                                                       |  |              | 65,000    |   |      |   | 65,000    |  
|Other borrowings                                                                                                                                                                      |  |              | 15,708    |   |      |   | 15,756    |  
|Interest, taxes, and other liabilities                                                                                                                                                |  |              | 27,290    |   |      |   | 26,630    |  
|                                                                                                                                                                                      |  |              |           |   |      |   |           |  
|Total liabilities                                                                                                                                                                     |  |              | 2,047,341 |   |      |   | 2,119,259 |  
|Stockholders equity                                                                                                                                                                  |  |              |           |   |      |   |           |  
|Preferred stock, undesignated par value; 1,000,000 shares authorized; Series A Noncumulative Convertible Preferred Stock, $0.01
par value; 25,000 shares authorized; none outstanding |  |              |          |   |      |   |          |  
|Common stock, $1 par value; 50,000,000 shares authorized; 21,381,779 shares issued at December 31, 2016 and 2015, including
4,387,571 and 3,283,638 shares in treasury, respectively  |  |              | 21,382    |   |      |   | 21,382    |  
|Additional paid-in capital                                                                                                                                                            |  |              | 228,142   |   |      |   | 227,692   |  
|Retained earnings                                                                                                                                                                     |  |              | 170,377   |   |      |   | 155,647   |  
|Treasury stock                                                                                                                                                                        |  |              | (78,833   | ) |      |   | (56,457   | )
|Accumulated other comprehensive loss                                                                                                                                                  |  |              | (2,011    | ) |      |   | (5,247    | )
|                                                                                                                                                                                      |  |              |           |   |      |   |           |  
|Total stockholders equity                                                                                                                                                            |  |              | 339,057   |   |      |   | 343,017   |  
|                                                                                                                                                                                      |  |              |           |   |      |   |           |  
|Total liabilities and stockholders equity                                                                                                                                            |  | $            | 2,386,398 |   |      | $ | 2,462,276 |  
|                                                                                                                                                                                      |  |              |           |   |      |   |           |  

See Notes to Consolidated Financial Statements.



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FIRST COMMUNITY BANCSHARES, INC.

CONSOLIDATED STATEMENTS OF INCOME



|                                                         |  |                         |            |   |      |   |            |      |  |   |            |  
|-------------------------------------------------------- |  | ----------------------- | ---------- | - | ---- | - | ---------- | ---- |  | - | ---------- | -
|                                                         |  | Year Ended December 31, |           
|(Amounts in thousands, except share and per share data)  |  | 2016                    |            |   | 2015 |   |            | 2014 | 
|Interest income                                          |  |                         |            |   |      |   |            |      |  |   |            |  
|Interest and fees on loans                               |  | $                       | 87,718     |   |      | $ | 87,632     |      |  | $ | 95,492     |  
|Interest on securities  taxable                         |  |                         | 3,229      |   |      |   | 4,225      |      |  |   | 5,975      |  
|Interest on securities  tax-exempt                      |  |                         | 3,624      |   |      |   | 3,978      |      |  |   | 4,350      |  
|Interest on deposits in banks                            |  |                         | 153        |   |      |   | 267        |      |  |   | 291        |  
|                                                         |  |                         |            |   |      |   |            |      |  |   |            |  
|Total interest income                                    |  |                         | 94,724     |   |      |   | 96,102     |      |  |   | 106,108    |  
|Interest expense                                         |  |                         |            |   |      |   |            |      |  |   |            |  
|Interest on deposits                                     |  |                         | 4,479      |   |      |   | 5,878      |      |  |   | 7,308      |  
|Interest on short-term borrowings                        |  |                         | 2,101      |   |      |   | 1,952      |      |  |   | 2,024      |  
|Interest on long-term debt                               |  |                         | 3,264      |   |      |   | 3,519      |      |  |   | 5,958      |  
|                                                         |  |                         |            |   |      |   |            |      |  |   |            |  
|Total interest expense                                   |  |                         | 9,844      |   |      |   | 11,349     |      |  |   | 15,290     |  
|                                                         |  |                         |            |   |      |   |            |      |  |   |            |  
|Net interest income                                      |  |                         | 84,880     |   |      |   | 84,753     |      |  |   | 90,818     |  
|Provision for loan losses                                |  |                         | 1,255      |   |      |   | 2,191      |      |  |   | 145        |  
|                                                         |  |                         |            |   |      |   |            |      |  |   |            |  
|Net interest income after provision for loan losses      |  |                         | 83,625     |   |      |   | 82,562     |      |  |   | 90,673     |  
|Noninterest income                                       |  |                         |            |   |      |   |            |      |  |   |            |  
|Wealth management                                        |  |                         | 2,828      |   |      |   | 2,975      |      |  |   | 3,030      |  
|Service charges on deposits                              |  |                         | 13,588     |   |      |   | 13,717     |      |  |   | 13,828     |  
|Other service charges and fees                           |  |                         | 8,102      |   |      |   | 8,045      |      |  |   | 7,581      |  
|Insurance commissions                                    |  |                         | 5,442      |   |      |   | 6,899      |      |  |   | 6,555      |  
|Impairment losses on securities                          |  |                         | (4,646     | ) |      |   |           |      |  |   | (737       | )
|Portion of loss recognized in other comprehensive income |  |                         |           |   |      |   |           |      |  |   |           |  
|                                                         |  |                         |            |   |      |   |            |      |  |   |            |  
|Net impairment losses recognized in earnings             |  |                         | (4,646     | ) |      |   |           |      |  |   | (737       | )
|Net gain (loss) on sale of securities                    |  |                         | 335        |   |      |   | 144        |      |  |   | (1,385     | )
|Net FDIC indemnification asset amortization              |  |                         | (5,474     | ) |      |   | (6,379     | )    |  |   | (3,979     | )
|Net gain on divestitures                                 |  |                         | 3,682      |   |      |   |           |      |  |   | 755        |  
|Other operating income                                   |  |                         | 3,209      |   |      |   | 4,129      |      |  |   | 4,355      |  
|                                                         |  |                         |            |   |      |   |            |      |  |   |            |  
|Total noninterest income                                 |  |                         | 27,066     |   |      |   | 29,530     |      |  |   | 30,003     |  
|Noninterest expense                                      |  |                         |            |   |      |   |            |      |  |   |            |  
|Salaries and employee benefits                           |  |                         | 39,912     |   |      |   | 39,625     |      |  |   | 40,713     |  
|Occupancy expense                                        |  |                         | 5,297      |   |      |   | 5,817      |      |  |   | 6,338      |  
|Furniture and equipment expense                          |  |                         | 4,341      |   |      |   | 5,199      |      |  |   | 4,952      |  
|Amortization of intangibles                              |  |                         | 1,136      |   |      |   | 1,118      |      |  |   | 787        |  
|FDIC premiums and assessments                            |  |                         | 1,383      |   |      |   | 1,513      |      |  |   | 1,672      |  
|FHLB debt prepayment fees                                |  |                         |           |   |      |   | 1,702      |      |  |   | 5,008      |  
|Merger, acquisition, and divestiture expense             |  |                         | 730        |   |      |   | 86         |      |  |   | 1,150      |  
|Other operating expense                                  |  |                         | 19,947     |   |      |   | 21,111     |      |  |   | 22,242     |  
|                                                         |  |                         |            |   |      |   |            |      |  |   |            |  
|Total noninterest expense                                |  |                         | 72,746     |   |      |   | 76,171     |      |  |   | 82,862     |  
|                                                         |  |                         |            |   |      |   |            |      |  |   |            |  
|Income before income taxes                               |  |                         | 37,945     |   |      |   | 35,921     |      |  |   | 37,814     |  
|Income tax expense                                       |  |                         | 12,819     |   |      |   | 11,381     |      |  |   | 12,324     |  
|                                                         |  |                         |            |   |      |   |            |      |  |   |            |  
|Net income                                               |  |                         | 25,126     |   |      |   | 24,540     |      |  |   | 25,490     |  
|Dividends on preferred stock                             |  |                         |           |   |      |   | 105        |      |  |   | 910        |  
|                                                         |  |                         |            |   |      |   |            |      |  |   |            |  
|Net income available to common shareholders              |  | $                       | 25,126     |   |      | $ | 24,435     |      |  | $ | 24,580     |  
|                                                         |  |                         |            |   |      |   |            |      |  |   |            |  
|Earnings per common share                                |  |                         |            |   |      |   |            |      |  |   |            |  
|Basic                                                    |  | $                       | 1.45       |   |      | $ | 1.32       |      |  | $ | 1.34       |  
|Diluted                                                  |  |                         | 1.45       |   |      |   | 1.31       |      |  |   | 1.31       |  
|Cash dividends per common share                          |  |                         | 0.60       |   |      |   | 0.54       |      |  |   | 0.50       |  
|Weighted average shares outstanding                      |  |                         |            |   |      |   |            |      |  |   |            |  
|Basic                                                    |  |                         | 17,319,689 |   |      |   | 18,531,039 |      |  |   | 18,406,363 |  
|Diluted                                                  |  |                         | 17,365,524 |   |      |   | 18,727,464 |      |  |   | 19,483,054 |  

See Notes to Consolidated Financial Statements.



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FIRST COMMUNITY BANCSHARES, INC

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)



|                                                                                                                   |  |                         |        |   |      |   |        |      |  |   |        |  
|------------------------------------------------------------------------------------------------------------------ |  | ----------------------- | ------ | - | ---- | - | ------ | ---- |  | - | ------ | -
|                                                                                                                   |  | Year Ended December 31, |       
|(Amounts in thousands)                                                                                             |  | 2016                    |        |   | 2015 |   |        | 2014 | 
|Net income                                                                                                         |  | $                       | 25,126 |   |      | $ | 24,540 |      |  | $ | 25,490 |  
|Other comprehensive income, before tax                                                                             |  |                         |        |   |      |   |        |      |  |   |        |  
|Available-for-sale securities                                                                                      |  |                         |        |   |      |   |        |      |  |   |        |  
|Change in net unrealized losses on securities with other-than-temporary impairment                                 |  |                         |       |   |      |   |       |      |  |   | (1     | )
|Change in net unrealized gains on securities without other-than-temporary impairment                               |  |                         | 1,035  |   |      |   | 755    |      |  |   | 12,914 |  
|Reclassification adjustment for net (gains) losses recognized in net income                                        |  |                         | (335   | ) |      |   | (144   | )    |  |   | 1,385  |  
|Reclassification adjustment for other-than-temporary impairment losses recognized in net income                    |  |                         | 4,646  |   |      |   |       |      |  |   | 737    |  
|                                                                                                                   |  |                         |        |   |      |   |        |      |  |   |        |  
|Net unrealized gains on available-for-sale
securities                                                              |  |                         | 5,346  |   |      |   | 611    |      |  |   | 15,035 |  
|Employee benefit plans                                                                                             |  |                         |        |   |      |   |        |      |  |   |        |  
|Net actuarial loss                                                                                                 |  |                         | (367   | ) |      |   | (363   | )    |  |   | (642   | )
|Plan change                                                                                                        |  |                         | (69    | ) |      |   |       |      |  |   |       |  
|Reclassification adjustment for amortization of prior service cost and net actuarial loss recognized in net
income |  |                         | 273    |   |      |   | 326    |      |  |   | 260    |  
|                                                                                                                   |  |                         |        |   |      |   |        |      |  |   |        |  
|Net unrealized losses on employee benefit plans                                                                    |  |                         | (163   | ) |      |   | (37    | )    |  |   | (382   | )
|                                                                                                                   |  |                         |        |   |      |   |        |      |  |   |        |  
|Other comprehensive income, before tax                                                                             |  |                         | 5,183  |   |      |   | 574    |      |  |   | 14,653 |  
|Income tax expense                                                                                                 |  |                         | (1,947 | ) |      |   | (216   | )    |  |   | (5,518 | )
|                                                                                                                   |  |                         |        |   |      |   |        |      |  |   |        |  
|Other comprehensive income, net of tax                                                                             |  |                         | 3,236  |   |      |   | 358    |      |  |   | 9,135  |  
|                                                                                                                   |  |                         |        |   |      |   |        |      |  |   |        |  
|Total comprehensive income                                                                                         |  | $                       | 28,362 |   |      | $ | 24,898 |      |  | $ | 34,625 |  
|                                                                                                                   |  |                         |        |   |      |   |        |      |  |   |        |  

See Notes to Consolidated Financial Statements.



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FIRST COMMUNITY BANCSHARES, INC.

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS EQUITY



|                                                                   |  |                |         |   |             |   |        |                          |  |   |                  |   |  |               |         |   |                                            |   |         |       |  |   |         |   |  |   |         |  
|------------------------------------------------------------------ |  | -------------- | ------- | - | ----------- | - | ------ | ------------------------ |  | - | ---------------- | - |  | ------------- | ------- | - | ------------------------------------------ | - | ------- | ----- |  | - | ------- | - |  | - | ------- | -
|(Amounts in thousands,except share and per share data)             |  | PreferredStock |         |   | CommonStock |   |        | AdditionalPaid-inCapital |  |   | RetainedEarnings |   |  | TreasuryStock |         |   | AccumulatedOtherComprehensiveIncome (Loss) |   |         | Total | 
|Balance January 1, 2014                                            |  | $              | 15,251  |   |             | $ | 20,493 |                          |  | $ | 215,663          |   |  | $             | 125,826 |   |                                            | $ | (33,887 | )     |  | $ | (14,740 | ) |  | $ | 328,606 |  
|Net income                                                         |  |                |        |   |             |   |       |                          |  |   |                 |   |  |               | 25,490  |   |                                            |   |        |       |  |   |        |   |  |   | 25,490  |  
|Other comprehensive income                                         |  |                |        |   |             |   |       |                          |  |   |                 |   |  |               |        |   |                                            |   |        |       |  |   | 9,135   |   |  |   | 9,135   |  
|Common dividends declared  $0.50 per share                        |  |                |        |   |             |   |       |                          |  |   |                 |   |  |               | (9,200  | ) |                                            |   |        |       |  |   |        |   |  |   | (9,200  | )
|Preferred dividends declared  $60.00 per share                    |  |                |        |   |             |   |       |                          |  |   |                 |   |  |               | (910    | ) |                                            |   |        |       |  |   |        |   |  |   | (910    | )
|Preferred stock converted to common stock  6,900 shares           |  |                | (100    | ) |             |   | 7      |                          |  |   | 93               |   |  |               |        |   |                                            |   |        |       |  |   |        |   |  |   |        |  
|Equity-based compensation expense                                  |  |                |        |   |             |   |       |                          |  |   | 332              |   |  |               |        |   |                                            |   |        |       |  |   |        |   |  |   | 332     |  
|Common stock options exercised  3,854 shares                      |  |                |        |   |             |   |       |                          |  |   | (13              | ) |  |               |        |   |                                            |   | 66      |       |  |   |        |   |  |   | 53      |  
|Restricted stock awards  13,933 shares                            |  |                |        |   |             |   |       |                          |  |   | (202             | ) |  |               |        |   |                                            |   | 238     |       |  |   |        |   |  |   | 36      |  
|Purchase of treasury shares  132,773 shares at $16.29 per share   |  |                |        |   |             |   |       |                          |  |   |                 |   |  |               |        |   |                                            |   | (2,168  | )     |  |   |        |   |  |   | (2,168  | )
|                                                                   |  |                |         |   |             |   |        |                          |  |   |                  |   |  |               |         |   |                                            |   |         |       |  |   |         |   |  |   |         |  
|Balance December 31, 2014                                          |  | $              | 15,151  |   |             | $ | 20,500 |                          |  | $ | 215,873          |   |  | $             | 141,206 |   |                                            | $ | (35,751 | )     |  | $ | (5,605  | ) |  | $ | 351,374 |  
|                                                                   |  |                |         |   |             |   |        |                          |  |   |                  |   |  |               |         |   |                                            |   |         |       |  |   |         |   |  |   |         |  
|Balance January 1, 2015                                            |  | $              | 15,151  |   |             | $ | 20,500 |                          |  | $ | 215,873          |   |  | $             | 141,206 |   |                                            | $ | (35,751 | )     |  | $ | (5,605  | ) |  | $ | 351,374 |  
|Net income                                                         |  |                |        |   |             |   |       |                          |  |   |                 |   |  |               | 24,540  |   |                                            |   |        |       |  |   |        |   |  |   | 24,540  |  
|Other comprehensive income                                         |  |                |        |   |             |   |       |                          |  |   |                 |   |  |               |        |   |                                            |   |        |       |  |   | 358     |   |  |   | 358     |  
|Common dividends declared  $0.54 per share                        |  |                |        |   |             |   |       |                          |  |   |                 |   |  |               | (9,994  | ) |                                            |   |        |       |  |   |        |   |  |   | (9,994  | )
|Preferred dividends declared  $15.00 per share                    |  |                |        |   |             |   |       |                          |  |   |                 |   |  |               | (105    | ) |                                            |   |        |       |  |   |        |   |  |   | (105    | )
|Preferred stock converted to common stock  882,096 shares         |  |                | (12,784 | ) |             |   | 882    |                          |  |   | 11,902           |   |  |               |        |   |                                            |   |        |       |  |   |        |   |  |   |        |  
|Redemption of preferred stock  2,367 shares                       |  |                | (2,367  | ) |             |   |       |                          |  |   |                 |   |  |               |        |   |                                            |   |        |       |  |   |        |   |  |   | (2,367  | )
|Equity-based compensation expense                                  |  |                |        |   |             |   |       |                          |  |   | 110              |   |  |               |        |   |                                            |   |        |       |  |   |        |   |  |   | 110     |  
|Common stock options exercised  4,323 shares                      |  |                |        |   |             |   |       |                          |  |   | (11              | ) |  |               |        |   |                                            |   | 74      |       |  |   |        |   |  |   | 63      |  
|Restricted stock awards  23,057 shares                            |  |                |        |   |             |   |       |                          |  |   | (191             | ) |  |               |        |   |                                            |   | 391     |       |  |   |        |   |  |   | 200     |  
|Issuance of treasury stock to 401(k) plan  20,745 shares          |  |                |        |   |             |   |       |                          |  |   | 9                |   |  |               |        |   |                                            |   | 354     |       |  |   |        |   |  |   | 363     |  
|Purchase of treasury shares  1,238,299 shares at $17.35 per share |  |                |        |   |             |   |       |                          |  |   |                 |   |  |               |        |   |                                            |   | (21,525 | )     |  |   |        |   |  |   | (21,525 | )
|                                                                   |  |                |         |   |             |   |        |                          |  |   |                  |   |  |               |         |   |                                            |   |         |       |  |   |         |   |  |   |         |  
|Balance December 31, 2015                                          |  | $              |        |   |             | $ | 21,382 |                          |  | $ | 227,692          |   |  | $             | 155,647 |   |                                            | $ | (56,457 | )     |  | $ | (5,247  | ) |  | $ | 343,017 |  
|                                                                   |  |                |         |   |             |   |        |                          |  |   |                  |   |  |               |         |   |                                            |   |         |       |  |   |         |   |  |   |         |  
|Balance January 1, 2016                                            |  | $              |        |   |             | $ | 21,382 |                          |  | $ | 227,692          |   |  | $             | 155,647 |   |                                            | $ | (56,457 | )     |  | $ | (5,247  | ) |  | $ | 343,017 |  
|Net income                                                         |  |                |        |   |             |   |       |                          |  |   |                 |   |  |               | 25,126  |   |                                            |   |        |       |  |   |        |   |  |   | 25,126  |  
|Other comprehensive income                                         |  |                |        |   |             |   |       |                          |  |   |                 |   |  |               |        |   |                                            |   |        |       |  |   | 3,236   |   |  |   | 3,236   |  
|Common dividends declared  $0.60 per share                        |  |                |        |   |             |   |       |                          |  |   |                 |   |  |               | (10,396 | ) |                                            |   |        |       |  |   |        |   |  |   | (10,396 | )
|Equity-based compensation expense                                  |  |                |        |   |             |   |       |                          |  |   | 209              |   |  |               |        |   |                                            |   |        |       |  |   |        |   |  |   | 209     |  
|Common stock options exercised  43,463 shares                     |  |                |        |   |             |   |       |                          |  |   | 146              |   |  |               |        |   |                                            |   | 775     |       |  |   |        |   |  |   | 921     |  
|Restricted stock awards  16,680 shares                            |  |                |        |   |             |   |       |                          |  |   | 32               |   |  |               |        |   |                                            |   | 290     |       |  |   |        |   |  |   | 322     |  
|Issuance of treasury stock to 401(k) plan  18,218 shares          |  |                |        |   |             |   |       |                          |  |   | 63               |   |  |               |        |   |                                            |   | 321     |       |  |   |        |   |  |   | 384     |  
|Purchase of treasury shares  1,182,294 shares at $20.06 per share |  |                |        |   |             |   |       |                          |  |   |                 |   |  |               |        |   |                                            |   | (23,762 | )     |  |   |        |   |  |   | (23,762 | )
|                                                                   |  |                |         |   |             |   |        |                          |  |   |                  |   |  |               |         |   |                                            |   |         |       |  |   |         |   |  |   |         |  
|Balance December 31, 2016                                          |  | $              |        |   |             | $ | 21,382 |                          |  | $ | 228,142          |   |  | $             | 170,377 |   |                                            | $ | (78,833 | )     |  | $ | (2,011  | ) |  | $ | 339,057 |  
|                                                                   |  |                |         |   |             |   |        |                          |  |   |                  |   |  |               |         |   |                                            |   |         |       |  |   |         |   |  |   |         |  

See Notes to Consolidated Financial Statements.



7



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##### Table of Contents

FIRST COMMUNITY BANCSHARES, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS



|                                                                                       |  |                         |          |   |      |   |          |      |  |   |          |  
|-------------------------------------------------------------------------------------- |  | ----------------------- | -------- | - | ---- | - | -------- | ---- |  | - | -------- | -
|                                                                                       |  | Year Ended December 31, |         
|(Amounts in thousands)                                                                 |  | 2016                    |          |   | 2015 |   |          | 2014 | 
|Operating activities                                                                   |  |                         |          |   |      |   |          |      |  |   |          |  
|Net income                                                                             |  | $                       | 25,126   |   |      | $ | 24,540   |      |  | $ | 25,490   |  
|Adjustments to reconcile net income to net cash provided by operating activities       |  |                         |          |   |      |   |          |      |  |   |          |  
|Provision for loan losses                                                              |  |                         | 1,255    |   |      |   | 2,191    |      |  |   | 145      |  
|Depreciation and amortization of property, plant, and equipment                        |  |                         | 3,563    |   |      |   | 4,135    |      |  |   | 4,405    |  
|Amortization of premiums on investments, net                                           |  |                         | 1,066    |   |      |   | 1,375    |      |  |   | 961      |  
|Amortization of FDIC indemnification asset, net                                        |  |                         | 5,474    |   |      |   | 6,379    |      |  |   | 3,979    |  
|Amortization of intangible assets                                                      |  |                         | 1,136    |   |      |   | 1,118    |      |  |   | 787      |  
|Accretion on acquired loans                                                            |  |                         | (4,766   | ) |      |   | (7,109   | )    |  |   | (9,645   | )
|Gain on divestiture, net                                                               |  |                         | (3,682   | ) |      |   |         |      |  |   | (755     | )
|Gain on sale of loans, net                                                             |  |                         |         |   |      |   | (501     | )    |  |   | (671     | )
|Equity-based compensation expense                                                      |  |                         | 209      |   |      |   | 110      |      |  |   | 332      |  
|Restricted stock awards                                                                |  |                         | 322      |   |      |   | 200      |      |  |   | 36       |  
|Issuance of treasury stock to 401(k) plan                                              |  |                         | 384      |   |      |   | 363      |      |  |   |         |  
|Loss (gain) on sale of property, plant, and equipment, net                             |  |                         | 238      |   |      |   | 23       |      |  |   | (113     | )
|Loss on sale of other real estate                                                      |  |                         | 1,495    |   |      |   | 3,002    |      |  |   | 3,227    |  
|(Gain) loss on sale of securities                                                      |  |                         | (335     | ) |      |   | (144     | )    |  |   | 1,385    |  
|Net impairment losses recognized in earnings                                           |  |                         | 4,646    |   |      |   |         |      |  |   | 737      |  
|FHLB debt prepayment fees                                                              |  |                         |         |   |      |   | 1,702    |      |  |   | 5,008    |  
|Proceeds from sale of mortgage loans                                                   |  |                         |         |   |      |   | 21,993   |      |  |   | 28,443   |  
|Originations of mortgage loans                                                         |  |                         |         |   |      |   | (19,700  | )    |  |   | (28,681  | )
|Decrease in accrued interest receivable                                                |  |                         | 454      |   |      |   | 308      |      |  |   | 1,206    |  
|Decrease in other operating activities                                                 |  |                         | 6,503    |   |      |   | 18,534   |      |  |   | 5,413    |  
|                                                                                       |  |                         |          |   |      |   |          |      |  |   |          |  
|Net cash provided by operating activities                                              |  |                         | 43,088   |   |      |   | 58,519   |      |  |   | 41,689   |  
|Investing activities                                                                   |  |                         |          |   |      |   |          |      |  |   |          |  
|Proceeds from sale of securities available for sale                                    |  |                         | 104,928  |   |      |   | 10,999   |      |  |   | 162,443  |  
|Proceeds from maturities, prepayments, and calls of securities available for sale      |  |                         | 99,906   |   |      |   | 29,931   |      |  |   | 48,915   |  
|Proceeds from maturities and calls of securities held to maturity                      |  |                         | 25,190   |   |      |   | 190      |      |  |   | 190      |  
|Payments to acquire securities available for sale                                      |  |                         | (1,174   | ) |      |   | (81,540  | )    |  |   | (6,047   | )
|Payments to acquire securities held to maturity                                        |  |                         |         |   |      |   | (15,003  | )    |  |   | (57,675  | )
|Originations of loans, net                                                             |  |                         | (159,243 | ) |      |   | (24,719  | )    |  |   | (64,115  | )
|Proceeds from FHLB stock, net                                                          |  |                         | 130      |   |      |   | 1,279    |      |  |   | 4,349    |  
|Cash proceeds from (paid in) mergers, acquisitions, and divestitures, net (See Note 2) |  |                         | 29,716   |   |      |   | (88      | )    |  |   | 178,604  |  
|Proceeds from the FDIC                                                                 |  |                         | 4,403    |   |      |   | 2,683    |      |  |   | 4,770    |  
|Payments to acquire property, plant, and equipment, net                                |  |                         | (793     | ) |      |   | (1,239   | )    |  |   | (1,098   | )
|Proceeds from sale of other real estate                                                |  |                         | 7,147    |   |      |   | 6,722    |      |  |   | 10,619   |  
|                                                                                       |  |                         |          |   |      |   |          |      |  |   |          |  
|Net cash provided by (used in) investing activities                                    |  |                         | 110,210  |   |      |   | (70,785  | )    |  |   | 280,955  |  
|Financing activities                                                                   |  |                         |          |   |      |   |          |      |  |   |          |  
|(Decrease) increase in noninterest-bearing deposits, net                               |  |                         | (17,482  | ) |      |   | 33,782   |      |  |   | 68,246   |  
|Decrease in interest-bearing deposits, net                                             |  |                         | (37,576  | ) |      |   | (161,282 | )    |  |   | (121,912 | )
|Decrease in federal funds purchased                                                    |  |                         |         |   |      |   |         |      |  |   | (16,000  | )
|(Repayments of) proceeds from securities sold under agreements to repurchase, net      |  |                         | (40,609  | ) |      |   | 16,872   |      |  |   | 3,432    |  
|Repayments of FHLB and other borrowings, net                                           |  |                         | (48      | ) |      |   | (28,945  | )    |  |   | (63,097  | )
|Redemption of preferred stock                                                          |  |                         |         |   |      |   | (2,367   | )    |  |   |         |  
|Proceeds from stock options exercised                                                  |  |                         | 921      |   |      |   | 63       |      |  |   | 53       |  
|Excess tax benefit from equity-based compensation                                      |  |                         | 174      |   |      |   | 8        |      |  |   | 5        |  
|Payments for repurchase of treasury stock                                              |  |                         | (23,762  | ) |      |   | (21,525  | )    |  |   | (2,168   | )
|Payments of common dividends                                                           |  |                         | (10,396  | ) |      |   | (9,994   | )    |  |   | (9,200   | )
|Payments of preferred dividends                                                        |  |                         |         |   |      |   | (219     | )    |  |   | (910     | )
|                                                                                       |  |                         |          |   |      |   |          |      |  |   |          |  
|Net cash used in financing activities                                                  |  |                         | (128,778 | ) |      |   | (173,607 | )    |  |   | (141,551 | )
|                                                                                       |  |                         |          |   |      |   |          |      |  |   |          |  
|Net increase (decrease) in cash and cash equivalents                                   |  |                         | 24,520   |   |      |   | (185,873 | )    |  |   | 181,093  |  
|Cash and cash equivalents at beginning of period                                       |  |                         | 51,787   |   |      |   | 237,660  |      |  |   | 56,567   |  
|                                                                                       |  |                         |          |   |      |   |          |      |  |   |          |  
|Cash and cash equivalents at end of period                                             |  | $                       | 76,307   |   |      | $ | 51,787   |      |  | $ | 237,660  |  
|                                                                                       |  |                         |          |   |      |   |          |      |  |   |          |  
|Supplemental disclosure  cash flow information                                        |  |                         |          |   |      |   |          |      |  |   |          |  
|Cash paid for interest                                                                 |  | $                       | 9,845    |   |      | $ | 11,757   |      |  | $ | 15,791   |  
|Cash paid for income taxes                                                             |  |                         | 6,588    |   |      |   | 6,900    |      |  |   | 12,552   |  
|                                                                                       |  |                         |         
|Supplemental transactions  noncash items                                              |  |                         |          |   |      |   |          |      |  |   |          |  
|Transfer of loans to other real estate                                                 |  |                         | 5,162    |   |      |   | 6,317    |      |  |   | 12,620   |  
|Loans originated to finance other real estate                                          |  |                         | 57       |   |      |   | 649      |      |  |   | 671      |  

See Notes to Consolidated Financial Statements.



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##### Table of Contents

FIRST COMMUNITY BANCSHARES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS



|Note 1. | Basis of Presentation and Significant Accounting Policies
|------- | ---------------------------------------------------------

Basis of Presentation

First Community Bancshares, Inc. (the Company) is a
financial holding company headquartered in Bluefield, Virginia that provides banking products and services to individuals and commercial customers through its wholly owned subsidiary First Community Bank (the Bank). The Bank offers
insurance products and services through First Community Insurance Services (FCIS) and trust and wealth management services through its Trust Division and wholly owned subsidiary First Community Wealth Management. Unless the context
suggests otherwise, the term Company refers to First Community Bancshares, Inc. and its subsidiaries as a consolidated entity.

Principles of Consolidation

The
Companys accounting and reporting policies conform with U.S. generally accepted accounting principles (GAAP) and prevailing practices in the banking industry. The consolidated financial statements include all accounts of the
Company and its wholly owned subsidiaries and eliminate all intercompany balances and transactions. The Company operates in one business segment, Community Banking, which consists of all operations, including commercial and consumer banking, lending
activities, wealth management, and insurance services.

The Company maintains investments in variable interest entities (VIEs).
VIEs are legal entities in which equity investors do not have sufficient equity at risk for the entity to independently finance its activities, or as a group, the holders of the equity investment at risk lack the power through voting or similar
rights to direct the activities of the entity that most significantly impact its economic performance, or do not have the obligation to absorb the expected losses of the entity or the right to receive expected residual returns of the entity.
Consolidation of a VIE is required if a reporting entity is the primary beneficiary of the VIE. The Company periodically reviews its VIEs and has determined that it is not the primary beneficiary of any VIE; therefore, the assets and liabilities of
these entities are not consolidated into the financial statements.

Use of Estimates

Preparation of the consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the
reported amounts of assets and liabilities as of the date of the balance sheet and reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Material estimates that require the most
subjective or complex judgments relate to fair value measurements, investment securities, the allowance for loan losses, the Federal Deposit Insurance Corporation (FDIC) indemnification asset, goodwill and other intangible assets, and
income taxes.

Reclassification

Certain amounts reported in prior years have been reclassified to conform to the current years presentation. These reclassifications had no effect on the Companys results of operations,
financial position, or cash flow.

Summary of Significant Accounting Policies

Fair Value Measurements

Fair value is defined as the price that would be received
to sell an asset or paid to transfer a liability, in the principal or most advantageous market for the asset or liability, in an orderly transaction between market participants. Market participants are buyers and sellers in the principal market that
are independent,



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##### Table of Contents

FIRST COMMUNITY BANCSHARES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  (Continued)



knowledgeable, able to transact, and willing to transact. The fair value hierarchy ranks the inputs used in measuring fair value as follows:



| |  |  | Level 1  Observable, unadjusted quoted prices in active markets
| | - |  | ----------------------------------------------------------------



| |  |  | Level 2  Inputs other than quoted prices included in Level 1 that are directly or indirectly observable for the asset or liability
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------



| |  |  | Level 3  Unobservable inputs with little or no market activity that require the Company to use reasonable inputs and assumptions
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------

These valuation methodologies are applied to all the Companys assets and liabilities carried at fair value.
Methodologies used to determine fair value might be highly subjective and judgmental in nature. The Company may record adjustments to certain financial assets and liabilities on a recurring basis. The Company may be required to record certain assets
at fair value on a nonrecurring basis in specific circumstances, such as evidence of impairment. If the Company determines that a valuation technique change is necessary, the change is assumed to have occurred at the end of the respective reporting
period.

Cash and Cash Equivalents

Cash and cash equivalents include cash and due from banks, federal funds sold, and interest-bearing balances on deposit with the Federal Home Loan Bank (FHLB), the Federal Reserve Bank
(FRB), and correspondent banks that are available for immediate withdrawal.

Investment Securities

Management classifies debt and marketable equity securities as
held-to-maturity or available-for-sale based on the intent and ability to hold the
securities to maturity. Debt securities that the Company has the intent and ability to hold to maturity are classified as held-to-maturity securities and carried at
amortized cost. Debt securities not classified as held to maturity and marketable equity securities are classified as available-for-sale securities and carried at
estimated fair value. Available-for-sale securities consist of securities the Company intends to hold for indefinite periods of time including securities to be used as
part of the Companys asset/liability management strategy and securities that may be sold in response to changes in interest rates, prepayment risk, or other similar factors. Unrealized gains and losses on available-for-sale securities are included in accumulated other comprehensive income (AOCI), net of income taxes, in stockholders equity. Gains or losses on calls, maturities, or sales of
investment securities are recorded based on the specific identification method and included in noninterest income. Premiums and discounts are amortized or accreted over the life of a security into interest income. Nonmarketable equity investments
are reported in other assets. The Company performs extensive quarterly reviews of held-to-maturity and
available-for-sale securities to determine if unrealized losses are temporary or other than temporary. If the security is deemed to have other-than-temporary impairment
(OTTI), the amount representing the credit loss is recognized as a charge to noninterest income and the amount representing all other factors is recognized in other comprehensive income (OCI).

Nonmarketable Equity Investments

As a condition of membership in the FHLB and the FRB, the Company is required to hold a minimum level of stock in the FHLB of Atlanta and the FRB of
Richmond. These nonmarketable securities are carried at cost and periodically reviewed for impairment. When evaluating these investments, managements considers publicly available information about the profitability and asset quality of the issuer,
dividend payment history, and redemption experience in determining the recoverability of the investment. The investment in FHLB and FRB stock was $10.60 million as of December 31, 2016, and $10.73 million as of December 31, 2015.



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##### Table of Contents

FIRST COMMUNITY BANCSHARES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  (Continued)



Other Investments

The Company has certain long-term investments that are considered VIEs, including its subsidiary FCBI Capital Trust (the Trust), certain tax credit limited partnerships, and various limited
liability companies that manage real estate investments, facilitate tax credits, and provide title insurance and other related financial services. The Company uses the equity method of accounting if it is able to exercise significant influence over
the entity and records its share of the entitys earnings or losses in noninterest income. The Company uses the cost method of accounting if it is not able to exercise significant influence over the entity. There were no equity investments as
of December 31, 2016, or December 31, 2015. The carrying value and maximum potential loss exposure of VIEs totaled $1.14 million as of December 31, 2016, and $934 thousand as of December 31, 2015.

Business Combinations

The
Company accounts for business combinations using the acquisition method of accounting as outlined in using Topic 805 of the Financial Accounting Standards Boards (FASB) Accounting Standards Codification (ASC). Under
this method, all identifiable assets acquired, including purchased loans, and liabilities assumed are recorded at fair value. Any excess of the purchase price over the fair value of net assets acquired is recorded as goodwill. In instances where the
price of the acquired business is less than the net assets acquired, a gain on the purchase is recorded. Fair values are assigned based on quoted prices for similar assets, if readily available, or appraisals by qualified independent parties for
relevant asset and liability categories. Certain financial assets and liabilities are valued using discount models that apply current discount rates to streams of cash flow. Valuation methods require assumptions, which can result in alternate
valuations, varying levels of goodwill or bargain purchase gains, or amortization expense or accretion income. Management must make estimates for the useful or economic lives of certain acquired assets and liabilities that are used to establish the
amortization or accretion of some intangible assets and liabilities, such as core deposits. Fair values are subject to refinement for up to one year after the closing date of the acquisition as additional information about the closing date fair
values becomes available. Acquisition and divestiture activities are included in the Companys consolidated results of operations from the closing date of the transaction. Acquisition and divestiture related costs are recognized in noninterest
expense as incurred. For additional information, see Purchased Credit Impaired Loans and Intangible Assets below.

Loans Held for Investment

Loans
classified as held for investment are originated with the intent to hold indefinitely, until maturity, or until pay-off. Loans held for investment are carried at the principal amount outstanding, net of
unearned income and any necessary write-downs to reduce individual loans to net realizable value. Interest income on performing loans is recognized as interest income at the contractual rate of interest. Loan origination fees, including loan
commitment and underwriting fees, are reduced by direct costs associated with loan processing, including salaries, legal review, and appraisal fees. Net deferred loan fees are deferred and amortized over the life of the related loan or commitment
period.

Purchased Performing Loans. Purchased loans that are deemed to be performing at the acquisition date are accounted for using
the contractual cash flow method of accounting, which results in the loans being recorded at fair value with a credit discount. The fair value discount is accreted as an adjustment to yield over the estimated contractual lives of the loans. No
allowance for loan losses is recorded at acquisition for purchased loans because the fair values of the acquired loans incorporate credit risk assumptions.

Purchased Credit Impaired (PCI) Loans. When purchased loans exhibit evidence of credit deterioration after the acquisition date, and it is probable at acquisition the Company will not
collect all contractually required principal and interest payments, the loans are referred to as PCI loans. PCI loans are accounted for using Topic



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310-30 of the FASB ASC, formerly the American Institute of Certified Public Accountants Statement of Position
03-3, Accounting for Certain Loans or Debt Securities Acquired in a Transfer. PCI loans are initially measured at fair value, which includes estimated future credit losses expected to be incurred
over the life of the loans. Per the guidance, the Company groups PCI loans that have common risk characteristics into loan pools. Evidence of credit quality deterioration at acquisition may include measures such as nonaccrual status, credit scores,
declines in collateral value, current loan to value percentages, and days past due. The Company considers expected prepayments and estimates the amount and timing of expected principal, interest, and other cash flows for each loan or pool of loans
identified as credit impaired. If contractually required payments at acquisition exceed cash flows expected to be collected, the excess is the non-accretable difference, which is available to absorb credit
losses on those loans or pools of loans. If the cash flows expected at acquisition exceed the estimated fair values, the excess is the accretable yield, which is recognized in interest income over the remaining lives of those loans or pools of loans
when there is a reasonable expectation about the amount and timing of such cash flows.

Impaired Loans and Nonperforming Assets. The
Company maintains an active and robust problem credit identification system through its ongoing credit review function. When a credit is identified as exhibiting characteristics of weakening, the Company assesses the credit for potential impairment.
Loans are considered impaired when, in the opinion of management and based on current information and events, the collection of principal and interest payments due under the contractual terms of the loan agreements are uncertain. The Company
conducts quarterly reviews of loans with balances of $250 thousand or greater that are deemed to be impaired. Factors considered in determining impairment include, but are not limited to, the borrowers cash flow and capacity for debt
repayment, the valuation of collateral, historical loss percentages, and economic conditions. Impairment allowances allocated to individual loans, including individual credit relationships and loan pools grouped by similar risk characteristics, are
reviewed quarterly by management. Interest income realized on impaired loans in nonaccrual status, if any, is recognized upon receipt. The accrual of interest, which is based on the daily amount of principal outstanding, on impaired loans is
generally continued unless the loan becomes delinquent 90 days or more.

Loans are considered past due when either principal or interest
payments become contractually delinquent by 30 days or more. The Companys policy is to discontinue the accrual of interest, if warranted, on loans based on the payment status, evaluation of the related collateral, and the financial strength of
the borrower. Loans that are 90 days or more past due are placed on nonaccrual status. Management may elect to continue the accrual of interest when the loan is well secured and in process of collection. When interest accruals are discontinued,
interest accrued and not collected in the current year is reversed from income, and interest accrued and not collected from prior years is charged to the allowance for loan losses. Nonaccrual loans may be returned to accrual status when all
principal and interest amounts contractually due, including past due payments, are brought current; the ability of the borrower to repay the obligation is reasonably assured; and there is generally a period of at least six months of repayment
performance by the borrower in accordance with the contractual terms.

Seriously delinquent loans are evaluated for loss mitigation options,
including charge-off. Closed-end retail loans are generally charged off against the allowance for loan losses when the loans become 120 days past due. Open-end retail loans and residential real estate secured loans are generally charged off when the loans become 180 days past due. Unsecured loans are generally charged off when the loans become 90 days past due.
All other loans are charged off against the allowance for loan losses after collection attempts have been exhausted, which generally is within 120 days. Recoveries of loans previously charged off are credited to the allowance for loan losses in the
period received.

Loans are considered troubled debt restructurings (TDRs) when the Company grants concessions, for legal or
economic reasons, to borrowers experiencing financial difficulty that would not otherwise be considered. The



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Company generally makes concessions in interest rates, loan terms, and/or amortization terms. All TDRs $250 thousand or greater are evaluated for a specific reserve based on either the
collateral or net present value method, whichever is most applicable. TDRs under $250 thousand are subject to the reserve calculation for classified loans based primarily on the historical loss rate. At the date of modification, nonaccrual
loans are classified as nonaccrual TDRs. TDRs classified as nonperforming at the date of modification are returned to performing status after six months of satisfactory payment performance; however, these loans remain identified as impaired until
full payment or other satisfaction of the obligation occurs.

Other real estate owned (OREO) acquired through foreclosure, or
other settlement, is carried at the lower of cost or fair value less estimated selling costs. The fair value is generally based on current third-party appraisals. When a property is transferred into OREO, any excess of the loan balance over the net
realizable fair value is charged against the allowance for loan losses. Operating expenses, gains, and losses on the sale of OREO are included in other noninterest expense in the Companys consolidated statements of income after any fair value
write-downs are recorded as valuation adjustments.

Allowance for Loan Losses

Management performs quarterly assessments of the allowance for loan losses. The allowance is increased by provisions charged to operations and reduced by
net charge-offs. The provision is calculated and charged to earnings to bring the allowance to a level that, through a systematic process of measurement, reflects the amount management estimates is needed to absorb probable losses in the portfolio.
The Companys allowance for loan losses is segmented into commercial, consumer real estate, and consumer and other loans with each segment divided into classes with similar characteristics, such as the type of loan and collateral. The allowance
for loan losses includes specific allocations related to significant individual loans and credit relationships and general reserves related to loans not individually evaluated. Loans not individually evaluated are grouped into pools based on similar
risk characteristics. A loan that becomes adversely classified or graded is moved into a group of adversely classified or graded loans with similar risk characteristics for evaluation. A provision for loan losses is recorded for any credit
deterioration in purchased performing loans after the acquisition date.

PCI loans are grouped into pools and evaluated separately from the non-PCI portfolio. The Company estimates cash flows to be collected on PCI loans and discounts those cash flows at a market rate of interest. If cash flows for PCI loans are expected to decline, generally a
provision for loan losses is charged to earnings, resulting in an increase to the allowance for loan losses. If cash flows for PCI loans are expected to improve, any previously established allowance is first reversed to the extent of prior charges
and then interest income is increased using the prospective yield adjustment over the remaining life of the loan, or pool of loans. Any provision established for PCI loans covered under the FDIC loss share agreements is offset by an adjustment to
the FDIC indemnification asset to reflect the indemnified portion, 80%, of the post-acquisition exposure. While allocations are made to various portfolio segments, the allowance for loan losses is available for use against any loan loss management
deems appropriate, excluding reserves allocated to specific loans and PCI loan pools.

FDIC Indemnification Asset

The FDIC indemnification asset represents the carrying amount of the right to receive payments from the FDIC for losses incurred on certain loans and OREO
purchased from the FDIC that are covered by loss share agreements. The FDIC indemnification asset is measured separately from related covered assets because it is not contractually embedded in the assets or transferable should the assets be
disposed. Under the acquisition method of accounting, the FDIC indemnification asset is recorded at fair value using projected cash flows based on expected reimbursements and applicable loss share percentages as outlined in the loss share
agreements. The expected reimbursements do not include reimbursable amounts related to future covered expenditures. The cash



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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  (Continued)



flows are discounted to reflect the timing and receipt of reimbursements from the FDIC. The discount is accreted through noninterest income over future periods. Post-acquisition adjustments to
the indemnification asset are measured on the same basis as the underlying covered assets. Increases in the cash flows of covered loans reduce the FDIC indemnification asset balance, which is recognized as amortization through noninterest income
over the shorter of the remaining life of the FDIC indemnification asset or the underlying loans. Decreases in the cash flows of covered loans increase the FDIC indemnification asset balance, which is recognized as accretion through noninterest
income.

Premises and Equipment

Premises, equipment, and capital leases are stated at cost less accumulated depreciation and amortization. Depreciation and amortization are computed using the straight-line method over the estimated
useful lives of the respective assets. Useful lives range from 5 to 10 years for furniture, fixtures, and equipment; 3 to 5 years for software, hardware, and data handling equipment; and 10 to 40 years for buildings and building improvements. Land
improvements are amortized over a period of 20 years and leasehold improvements are amortized over the lesser of the term of the respective leases plus the first optional renewal period, when renewal is reasonably assured, or the estimated useful
lives of the improvements. The Company leases various properties within its branch network. Leases generally have initial terms of up to 20 years and most contain options to renew with reasonable increases in rent. All leases are accounted for as
operating leases. Maintenance and repairs are charged to current operations while improvements that extend the economic useful life of the underlying asset are capitalized. Disposition gains and losses are reflected in current operations.

Intangible Assets

Intangible assets consist of goodwill, core deposit intangible assets, and other identifiable intangible assets that result from business combinations.
Goodwill represents the excess of the purchase price over the fair value of net assets acquired that is allocated to the appropriate reporting unit when acquired. Core deposit intangible assets represent the future earnings potential of
acquired deposit relationships that are amortized over their estimated remaining useful lives. Other identifiable intangible assets primarily represent the rights arising from contractual arrangements that are amortized using the straight-line
method.

Goodwill is tested annually, or more frequently if necessary, using a qualitative assessment to determine if it is more likely than
not that the fair value of a reporting unit is less than its carrying amount. If the Company concludes that it is more likely than not that the fair value of a reporting unit is less than its carrying amount, the
two-step quantitative goodwill impairment test is performed. Step 1 consists of calculating and comparing the fair value of a reporting unit to its carrying amount, including goodwill. If the fair value
of a reporting unit is greater than its book value, no goodwill impairment exists. If the carrying amount of a reporting unit is greater than its calculated fair value, goodwill impairment may exist and Step 2 is required to determine the
amount of the impairment loss.

Securities Sold Under Agreements to Repurchase

Securities sold under agreements to repurchase are generally accounted for as collateralized financing transactions and recognized as short-term
borrowings in the Companys consolidated balance sheets. Securities, generally U.S. government and federal agency securities, pledged as collateral under these arrangements can be sold or repledged only if replaced by the secured party. The
fair value of the collateral provided to a third party is continually monitored and additional collateral is provided as appropriate.



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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  (Continued)



Derivative Instruments

The Company primarily uses derivative instruments to protect against the risk of adverse price or interest rate movements on the value of certain assets and liabilities and on future cash flows.
Derivative instruments represent contracts between parties that usually require little or no initial net investment and result in one party delivering cash or another asset to the other party based on a notional amount and an underlying asset as
specified in the contract such as interest rates, equity security prices, currencies, commodity prices, or credit spreads. These derivative instruments may consist of interest rate swaps, floors, caps, collars, futures, forward contracts, and
written and purchased options. Derivative contracts often involve future commitments to exchange interest payment streams or currencies based on a notional or contractual amount, such as interest rate swaps or currency forwards, or to purchase or
sell other financial instruments at specified terms on a specified date, such as options to buy or sell securities or currencies. Derivative instruments are subject to counterparty credit risk due to the possibility that the Company will incur a
loss because a counterparty, which may be a bank, a broker-dealer or a customer, fails to meet its contractual obligations. This risk is measured as the expected positive replacement value of contracts. Derivative contracts may be executed only with
exchanges or counterparties approved by the Companys Asset/Liability Management Committee.

If certain conditions are met, a derivative
may be designated as a hedge related to fair value, cash flow, or foreign exposure risk. The recognition of changes in the fair value of a derivative instrument varies depending on the intended use of the derivative and the resulting designation.
The Company accounts for hedges of customer loans as fair value hedges. The change in fair value of the hedging derivative and the change in fair value of the hedged exposure are recorded in earnings. Any hedge ineffectiveness is also reflected in
current earnings. Changes in the fair value of derivatives not designated as hedging instruments are recognized as a gain or loss in earnings. The Company formally documents any relationships between hedging instruments and hedged items and the risk
management objective and strategy for undertaking each hedged transaction. All derivative instruments are reported at fair value in the consolidated balance sheets.

Equity-Based Compensation

The cost of employee services received in exchange for
equity instruments, including stock options and restricted stock awards , is generally measured at fair value on the grant date. The Black-Scholes valuation model is used to estimate the fair value of stock options at the grant date while the fair
value of restricted stock awards is based on the market price of the Companys common stock on the grant date. The Black-Scholes model incorporates the following assumptions: the expected volatility is based on the weekly historical volatility
of the Companys common stock price over the expected term of the option; the expected term is generally calculated using the shortcut method; the risk-free interest rate is based on the U.S. Department of the Treasurys
(Treasury) yield curve on the grant date with a term comparable to the grant; and the dividend yield is based on the Companys dividend yield using the most recent dividend rate paid per share and trading price of the Companys
common stock. Compensation cost is recognized over the required service period, generally defined as the vesting period for stock option awards and as the restriction period for restricted stock awards. For awards with graded vesting, compensation
cost is recognized on a straight-line basis over the requisite service period for the entire award.

Advertising Expenses

Advertising costs are generally expensed as incurred. The Company may establish accruals for expected advertising expenses in the
course of a fiscal year.



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Income Taxes

Income tax expense is comprised of the current and deferred tax consequences of events and transactions already recognized. The Company includes interest and penalties related to income tax liabilities in
income tax expense. The effective tax rate, income tax expense as a percent of pre-tax income, may vary significantly from statutory rates due to tax credits and permanent differences. Deferred tax assets and
liabilities are recognized for the estimated future tax consequences attributable to differences between the tax bases of assets and liabilities and their carrying amounts for financial reporting purposes. Deferred tax assets and liabilities are
adjusted through the provision for income taxes as changes in tax laws or rates are enacted.

Per Share Results

Basic earnings per common share is calculated by dividing net income available to common shareholders by the weighted average number of common shares
outstanding during the period. Diluted earnings per common share includes the dilutive effect of potential common stock that could be issued by the Company. Under the treasury stock method of accounting, potential common stock may be issued for
stock options, non-vested restricted stock awards, performance based stock awards, and convertible preferred stock. Diluted earnings per common share is calculated by dividing net income by the weighted
average number of common shares outstanding for the period plus the number of dilutive potential common shares. The calculation of diluted earnings per common share excludes potential common shares that have an exercise price greater than the
average market value of the Companys common stock because the effect would be antidilutive.

Recent Accounting Standards

Standards Adopted

In January 2017, the FASB issued Accounting Standards Update (ASU) 2017-04, Intangibles 
Goodwill and Other (Topic 350): Simplifying the Accounting for Goodwill Impairment. This ASU removes the requirement to perform a hypothetical purchase price allocation to measure goodwill impairment. A goodwill impairment will now be the
amount by which a reporting units carrying value exceeds its fair value, not to exceed the carrying amount of goodwill. ASU 2017-04 is effective for fiscal years beginning after December 15, 2019,
with early adoption permitted. The update should be applied prospectively. The Company early adopted ASU 2017-04 in the first quarter of 2017. The adoption of the standard did not have an effect on the
Companys financial statements.

In January 2017, the FASB issued ASU 2017-03, Accounting Changes and Error Corrections (Topic 250)
and Investments  Equity Method and Joint Ventures (Topic 323): Amendments to SEC Paragraphs Pursuant to Staff Announcements at the September 22, 2016 and November 17, 2016 EITF Meetings. This ASU requires registrants to disclose the
effect that recently issued accounting standards will have on their financial statements when adopted in a future period. In cases where a registrant cannot reasonably estimate the impact of the adoption, additional qualitative disclosures should be
considered to assist the reader in assessing the significance of the standards impact on its financial statements. The Company adopted ASU 2017-03 in the first quarter of 2017. The adoption of the standard resulted in enhanced disclosures
regarding the impact that recently issued accounting standards adopted in a future period will have on the Companys financial statements and disclosures. See Standards Not Yet Adopted below.

In September 2015, the FASB issued ASU 2015-16, Simplifying the Accounting for Measurement Period
Adjustments. This ASU simplifies the accounting for adjustments made to provisional amounts recognized in a business combination by eliminating the requirement to retrospectively account for those adjustments. The Company adopted ASU 2015-16 in the first quarter of 2016. The adoption of the standard did not have an effect on the Companys financial statements.



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In February 2015, the FASB issued ASU 2015-02, Amendments
to the Consolidation Analysis. This ASU changes the analysis that an entity performs to determine whether to consolidate certain legal entities. The Company adopted ASU 2015-02 in the first quarter of 2016. The Company evaluated its
investments in VIEs under the guidance and concluded that not consolidating these entities was still appropriate; therefore, the adoption of the standard did not have an effect on the Companys financial statements.

In June 2014, the FASB issued ASU 2014-12, Accounting for Share-Based Payments When the Terms of an Award
Provide That a Performance Target Could Be Achieved after the Requisite Service Period. This ASU requires that a performance target that affects vesting and that could be achieved after the requisite service period be treated as a performance
condition. An entity should apply guidance in Topic 718 as it relates to awards with performance conditions that affect vesting to account for such awards. As such, the performance target should not be reflected in estimating the grant-date fair
value of the award. Compensation cost should be recognized in the period in which it becomes probable that the performance target will be achieved and should represent the compensation cost attributable to the period for which the service has
already been rendered. The Company adopted ASU 2014-12 in the first quarter of 2016. The adoption of the standard did not have an effect on the Companys financial statements.

Standards Not Yet Adopted

In
November 2016, the FASB issued ASU 2016-18, Statement of Cash Flows (Topic 230): Restricted Cash. This ASU requires that a statement of cash flows explain the change during the period in the total
of cash, cash equivalents, and amounts generally described as restricted cash or restricted cash equivalents. Amounts generally described as restricted cash and restricted cash equivalents should be included with cash and cash equivalents when
reconciling the beginning-of-period and end-of-period total amounts shown on the
statement of cash flows. ASU 2016-18 will be effective for the Company for fiscal years beginning after December 15, 2017. The Company expects to adopt ASU 2016-18
in the first quarter of 2018. The Company is evaluating the impact of the standard and does not expect the guidance to have a material effect on its financial statements.

In August 2016, the FASB issued ASU 2016-15, Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments. This ASU
makes eight targeted changes to how cash receipts and cash payments are presented and classified in the statement of cash flows. ASU 2016-15 will be effective for the Company for the fiscal years beginning
after December 15, 2017, with early adoption permitted. The update should be applied on a retrospective basis, if practicable. The Company expects to adopt ASU 2016-15 in the first quarter of 2018. The
Company is evaluating the impact of the standard and does not expect the guidance to have a material effect on its financial statements.

In
June 2016, the FASB issued ASU 2016-13, Financial Instruments  Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments. This ASU intends to improve financial
reporting by requiring timelier recording of credit losses on loans and other financial instruments held by financial institutions and other organizations. This ASU requires an organization to measure all expected credit losses for financial assets
held at the reporting date based on historical experience, current conditions, and reasonable and supportable forecasts and requires enhanced disclosures related to the significant estimates and judgments used in estimating credit losses, as well as
the credit quality and underwriting standards of an organizations portfolio. In addition, the update amends the accounting for credit losses on available-for-sale
debt securities and purchased financial assets with credit deterioration. ASU 2016-13 will be effective for the Company for the fiscal years beginning after December 15, 2019, with early adoption
permitted for fiscal years beginning after December 15, 2018. The Company expects to adopt ASU 2016-13 in the first quarter of 2020 and recognize a cumulative adjustment to retained earnings as of the
beginning of the year of adoption. The Company is evaluating the impact of the standard.



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In March 2016, the FASB issued ASU 2016-09, Compensation
 Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting. This ASU simplifies several aspects of the accounting for share-based payment award transactions including income tax consequences, classification
of awards as either equity or liabilities, and classification on the statement of cash flows. ASU 2016-09 will be effective for the Company for fiscal years beginning after December 15, 2016, with early
adoption permitted. The Company expects to adopt ASU 2016-09 in the first quarter of 2017. The Company is evaluating the impact of the standard and does not expect the guidance to have a material effect on its
financial statements.

In February 2016, the FASB issued ASU 2016-02, Leases (Topic 842).
This ASU increases transparency and comparability among organizations by recognizing lease assets and lease liabilities on the balance sheet and requiring more disclosures related to leasing transactions. ASU
2016-02 will be effective for the Company for the fiscal years beginning after December 15, 2018, with early adoption permitted. The Company expects to adopt ASU
2016-02 in the first quarter of 2019. The Company is evaluating the impact of the standard and expects a minimal increase in assets and liabilities; however, the Company does not expect the guidance to have a
material effect on its financial statements.

In January 2016, the FASB issued ASU 2016-01,
Financial Instruments  Overall (Subtopic 825-10): Recognition and Measurement of Financial Assets and Financial Liabilities. This ASU significantly revises an entitys accounting related
to (1) the classification and measurement of investments in equity securities and (2) the presentation of certain fair value changes for financial liabilities measured at fair value. The new guidance also amends certain disclosure
requirements associated with the fair value of financial instruments. ASU 2016-01 will be effective for the Company for fiscal years beginning after December 15, 2017, with early adoption permitted for
the instrument-specific credit risk provision. The Company expects to adopt ASU 2016-01 in the first quarter of 2018. The Company is evaluating the impact of the standard and does not expect to recognize a
significant cumulative effect adjustment to retained earnings at the beginning of the year of adoption or expect the guidance to have a material effect on its financial statements. The cumulative-effect adjustment will be dependent on the
composition and fair value of the Companys equity securities portfolio at the adoption date.

In May 2014, the FASB issued ASU 2014-09, Revenue from Contracts with Customers. This ASUs core principle is that an entity will recognize revenue when it transfers promised goods or services to customers in an amount that
reflects the consideration to which the company expects to be entitled in exchange for those goods or services. In doing so, companies will need to use more judgment and make more estimates than under existing guidance. These may include identifying
performance obligations in the contract, estimating the amount of variable consideration to include in the transaction price and allocating the transaction price to each separate performance obligation. In August 2015, the FASB issued ASU 2015-14, Revenue from Contracts with Customers deferring the effective date of ASU 2014-09 for the Company until fiscal years beginning after December 15,
2017, with early adoption permitted for fiscal years beginning after December 15, 2016. Additional revenue related standards to be adopted concurrently with ASU 2014-09 include ASU 2016-20, ASU 2016-12, ASU 2016-10, and ASU 2016-08. The Company expects to adopt ASU 2014-09, and related updates, in the first quarter of 2018 and recognize a cumulative adjustment to retained earnings as of the beginning of the year of adoption. The Companys primary source of revenue is
interest income, which is excluded from the scope of this guidance; however, the Company is evaluating the impact of the standard on other income, which includes fees for services, commissions on sales, and various deposit service charges. The
Company does not expect the guidance to have a material effect on its financial statements.

The Company does not expect other recent
accounting standards issued by the FASB or other standards-setting bodies to have a material impact on the consolidated financial statements.



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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  (Continued)



|Note 2. | Acquisitions and Divestitures
|------- | -----------------------------

The
following table presents the components of net cash received in, or paid for, acquisitions and divestitures, an investing activity in the Companys consolidated statements of cash flows, for the periods indicated:



|                                                          |  |                         |          |   |      |   |      |      |  |   |          |  
|--------------------------------------------------------- |  | ----------------------- | -------- | - | ---- | - | ---- | ---- |  | - | -------- | -
|                                                          |  | Year Ended December 31, |         
|(Amounts in thousands)                                    |  | 2016                    |          |   | 2015 |   |      | 2014 | 
|Acquisitions                                              |  |                         |          |   |      |   |      |      |  |   |          |  
|Fair value of assets and liabilities acquired:            |  |                         |          |   |      |   |      |      |  |   |          |  
|Loans                                                     |  | $                       | 149,122  |   |      | $ |     |      |  | $ | 140      |  
|Premises and equipment                                    |  |                         | 4,829    |   |      |   |     |      |  |   | 4,547    |  
|Other assets                                              |  |                         | 448      |   |      |   |     |      |  |   | 4,563    |  
|Other intangible assets                                   |  |                         | 3,842    |   |      |   |     |      |  |   |         |  
|Deposits                                                  |  |                         | (134,307 | ) |      |   |     |      |  |   | (318,877 | )
|Other liabilities                                         |  |                         | (75      | ) |      |   |     |      |  |   | (76      | )
|Purchase price in excess of net assets acquired           |  |                         | 2,446    |   |      |   | 88   |      |  |   | 1,721    |  
|                                                          |  |                         |          |   |      |   |      |      |  |   |          |  
|Total purchase price                                      |  |                         | 26,305   |   |      |   | 88   |      |  |   | (307,982 | )
|Non-cash purchase price                                   |  |                         |         |   |      |   |     |      |  |   |         |  
|Cash acquired                                             |  |                         |         |   |      |   |     |      |  |   |         |  
|                                                          |  |                         |          |   |      |   |      |      |  |   |          |  
|Net cash paid (received) in acquisitions                  |  |                         | 26,305   |   |      |   | 88   |      |  |   | (307,982 | )
|                                                          |  |                         |         
|Divestitures                                              |  |                         |          |   |      |   |      |      |  |   |          |  
|Book value of assets sold                                 |  |                         | (165,742 | ) |      |   | 389  |      |  |   | (83,283  | )
|Book value of liabilities sold                            |  |                         | 111,198  |   |      |   | (152 | )    |  |   | 215,268  |  
|Sales price in excess of net liabilities assumed          |  |                         | (3,682   | ) |      |   | (6   | )    |  |   | (755     | )
|                                                          |  |                         |          |   |      |   |      |      |  |   |          |  
|Total sales price                                         |  |                         | (58,226  | ) |      |   | 231  |      |  |   | 131,230  |  
|Cash sold                                                 |  |                         |         |   |      |   |     |      |  |   | (1,852   | )
|Amount due remaining on books                             |  |                         | 2,205    |   |      |   | (231 | )    |  |   |         |  
|                                                          |  |                         |          |   |      |   |      |      |  |   |          |  
|Net cash (received) paid in divestitures                  |  |                         | (56,021  | ) |      |   |     |      |  |   | 129,378  |  
|                                                          |  |                         |          |   |      |   |      |      |  |   |          |  
|Net cash (received) paid in acquisitions and divestitures |  | $                       | (29,716  | ) |      | $ | 88   |      |  | $ | (178,604 | )
|                                                          |  |                         |          |   |      |   |      |      |  |   |          |  

Ascension Insurance Agency, Inc.

On October 1, 2016, the Company completed the sale of Greenpoint Insurance Group, Inc. (Greenpoint) to Ascension Insurance Agency, Inc. for $7.11 million, including earn-out payments of $2.21 million to be received over the next three years if certain operating targets are met. The divestiture consisted of two North Carolina offices operating as Greenpoint and two Virginia
offices operating under the trade name Carr & Hyde Insurance. The Company recorded a net gain of $617 thousand in connection with the divestiture and eliminated $6.49 million in goodwill and other intangible assets. The Company
incurred expenses related to the divestiture of $46 thousand in 2016. The transaction did not impact the Companys in-branch insurance offices operating as FCIS in West Virginia and Virginia.

On October 31, 2015, the Company sold one insurance agency for $372 thousand. The Company recorded a net loss of $8 thousand
in connection with the sale and eliminated $385 thousand in goodwill and other intangible assets. In addition, the Company recorded additional goodwill of $88 thousand in 2015 related to contingent
earn-out payments from acquisitions that occurred before 2009.



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##### Table of Contents

FIRST COMMUNITY BANCSHARES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  (Continued)



First Bank

On July 15, 2016, the Company completed the branch exchange with First Bank, North Carolina, pursuant to which the Bank exchanged a portion of its North Carolina branch network for First Banks
Virginia branch network. Under the agreements, the Bank simultaneously sold six branches in the Winston-Salem and Mooresville areas of North Carolina and acquired seven branches in Southwestern Virginia. The branch acquisition complements the
Companys 2014 acquisition of seven branches from Bank of America by expanding the Companys existing presence in Southwest Virginia and affords the opportunity to realize certain operating cost savings.

In connection with the branch exchange, the Company acquired total assets of $160.69 million, including total loans of $149.12 million and
goodwill and other intangibles of $6.29 million, and total liabilities of $134.38 million, including total deposits of $134.31 million. The Company did not acquire any PCI loans. The consideration transferred included the net fair
value of divested assets and a purchase premium of $3.84 million. The Company divested total assets of $162.17 million, including loans of $155.54 million and goodwill and other intangibles of $2.33 million, and total liabilities
of $111.05 million, including deposits of $111.02 million, and received a deposit premium of $4.07 million. In connection with the divestiture, the Company recorded a net gain of $3.07 million. The Company incurred expenses
related to the First Bank transaction of $684 thousand in 2016. The estimated fair values, including identifiable intangible assets, are preliminary and subject to refinement for up to one year after the closing date of the acquisition.

CresCom Bank

On
December 12, 2014, the Company completed the sale of thirteen branches to CresCom Bank, Charleston, South Carolina. The divestiture consisted of ten branches in the Southeastern, Coastal region of North Carolina and three branches in South
Carolina, all of which were previously acquired in the FDIC-assisted acquisition of Waccamaw Bank (Waccamaw) on June 8, 2012. At closing, the Company divested total deposits of $215.19 million and total loans of
$70.04 million. The transaction excluded loans covered under FDIC loss share agreements. The Company recorded a net gain of $755 thousand in connection with the divestiture, which included a deposit premium of $6.45 million and
goodwill allocation of $6.45 million.

Bank of America

On October 24, 2014, the Company completed the acquisition of seven branches from Bank of America, National Association. The acquisition consisted of six branches in Southwestern Virginia and one
branch in Central North Carolina. At acquisition, the Company assumed total deposits of $318.88 million for a premium of $5.79 million. No loans were included in the purchase. The Company purchased the real estate, or assumed the leases,
associated with the branches.



20



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##### Table of Contents

FIRST COMMUNITY BANCSHARES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  (Continued)



|Note 3. | Investment Securities
|------- | ---------------------

The following
tables present the amortized cost and fair value of available-for-sale securities, including gross unrealized gains and losses, as of the dates indicated:



|                                        |  |                   |         |  |                 |   |       |                  |  |   |           |   |  |   |         | 
|--------------------------------------- |  | ----------------- | ------- |  | --------------- | - | ----- | ---------------- |  | - | --------- | - |  | - | ------- | 
|                                        |  | December 31, 2016 |        
|(Amounts in thousands)                  |  | AmortizedCost     |         |  | UnrealizedGains |   |       | UnrealizedLosses |  |   | FairValue |  
|U.S. Agency securities                  |  | $                 | 1,342   |  |                 | $ | 3     |                  |  | $ |          |   |  | $ | 1,345   | 
|Municipal securities                    |  |                   | 111,659 |  |                 |   | 2,258 |                  |  |   | (586      | ) |  |   | 113,331 | 
|Single issue trust preferred securities |  |                   | 22,104  |  |                 |   |      |                  |  |   | (2,165    | ) |  |   | 19,939  | 
|Mortgage-backed Agency securities       |  |                   | 31,290  |  |                 |   | 66    |                  |  |   | (465      | ) |  |   | 30,891  | 
|Equity securities                       |  |                   | 55      |  |                 |   | 18    |                  |  |   |          |   |  |   | 73      | 
|                                        |  |                   |         |  |                 |   |       |                  |  |   |           |   |  |   |         | 
|Total securities available for sale     |  | $                 | 166,450 |  |                 | $ | 2,345 |                  |  | $ | (3,216    | ) |  | $ | 165,579 | 
|                                        |  |                   |         |  |                 |   |       |                  |  |   |           |   |  |   |         | 
|                                        | 
|                                        |  | December 31, 2015 |        
|(Amounts in thousands)                  |  | AmortizedCost     |         |  | UnrealizedGains |   |       | UnrealizedLosses |  |   | FairValue |  
|U.S. Agency securities                  |  | $                 | 31,414  |  |                 | $ | 39    |                  |  | $ | (751      | ) |  | $ | 30,702  | 
|Municipal securities                    |  |                   | 124,880 |  |                 |   | 4,155 |                  |  |   | (357      | ) |  |   | 128,678 | 
|Single issue trust preferred securities |  |                   | 55,882  |  |                 |   |      |                  |  |   | (8,050    | ) |  |   | 47,832  | 
|Corporate securities                    |  |                   | 70,571  |  |                 |   |      |                  |  |   | (238      | ) |  |   | 70,333  | 
|Certificates of deposit                 |  |                   | 5,000   |  |                 |   |      |                  |  |   |          |   |  |   | 5,000   | 
|Mortgage-backed Agency securities       |  |                   | 84,576  |  |                 |   | 155   |                  |  |   | (1,175    | ) |  |   | 83,556  | 
|Equity securities                       |  |                   | 66      |  |                 |   | 6     |                  |  |   |          |   |  |   | 72      | 
|                                        |  |                   |         |  |                 |   |       |                  |  |   |           |   |  |   |         | 
|Total securities available for sale     |  | $                 | 372,389 |  |                 | $ | 4,355 |                  |  | $ | (10,571   | ) |  | $ | 366,173 | 
|                                        |  |                   |         |  |                 |   |       |                  |  |   |           |   |  |   |         | 



21



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##### Table of Contents

FIRST COMMUNITY BANCSHARES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  (Continued)



The following table presents the amortized cost and fair value of available-for-sale securities, by contractual maturity, as of December 31, 2016. Actual maturities could differ from contractual maturities because issuers may have the right to call or prepay
obligations with or without penalties.



|                                   |  |                       |       |  |                     |   |         |                 |  |   |        |  |  |   |         | 
|---------------------------------- |  | --------------------- | ----- |  | ------------------- | - | ------- | --------------- |  | - | ------ |  |  | - | ------- | 
|(Amounts in thousands)             |  | U.S. AgencySecurities |       |  | MunicipalSecurities |   |         | Corporate Notes |  |   | Total  | 
|Amortized cost maturity:           |  |                       |       |  |                     |   |         |                 |  |   |        |  |  |   |         | 
|One year or less                   |  | $                     |      |  |                     | $ | 1,135   |                 |  | $ |       |  |  | $ | 1,135   | 
|After one year through five years  |  |                       | 1     |  |                     |   | 1,035   |                 |  |   |       |  |  |   | 1,036   | 
|After five years through ten years |  |                       |      |  |                     |   | 88,449  |                 |  |   |       |  |  |   | 88,449  | 
|After ten years                    |  |                       | 1,341 |  |                     |   | 21,040  |                 |  |   | 22,104 |  |  |   | 44,485  | 
|                                   |  |                       |       |  |                     |   |         |                 |  |   |        |  |  |   |         | 
|Amortized cost                     |  | $                     | 1,342 |  |                     | $ | 111,659 |                 |  | $ | 22,104 |  |  |   | 135,105 | 
|                                   |  |                       |       |  |                     |   |         |                 |  |   |        |  |  |   |         | 
|Mortgage-backed securities         |  |                       |       |  |                     |   |         |                 |  |   |        |  |  |   | 31,290  | 
|Equity securities                  |  |                       |       |  |                     |   |         |                 |  |   |        |  |  |   | 55      | 
|                                   |  |                       |       |  |                     |   |         |                 |  |   |        |  |  |   |         | 
|Total amortized cost               |  |                       |       |  |                     |   |         |                 |  |   |        |  |  | $ | 166,450 | 
|                                   |  |                       |       |  |                     |   |         |                 |  |   |        |  |  |   |         | 
|Fair value maturity:               |  |                       |       |  |                     |   |         |                 |  |   |        |  |  |   |         | 
|One year or less                   |  | $                     |      |  |                     | $ | 1,141   |                 |  | $ |       |  |  | $ | 1,141   | 
|After one year through five years  |  |                       | 1     |  |                     |   | 1,059   |                 |  |   |       |  |  |   | 1,060   | 
|After five years through ten years |  |                       |      |  |                     |   | 90,360  |                 |  |   |       |  |  |   | 90,360  | 
|After ten years                    |  |                       | 1,344 |  |                     |   | 20,771  |                 |  |   | 19,939 |  |  |   | 42,054  | 
|                                   |  |                       |       |  |                     |   |         |                 |  |   |        |  |  |   |         | 
|Fair value                         |  | $                     | 1,345 |  |                     | $ | 113,331 |                 |  | $ | 19,939 |  |  |   | 134,615 | 
|                                   |  |                       |       |  |                     |   |         |                 |  |   |        |  |  |   |         | 
|Mortgage-backed securities         |  |                       |       |  |                     |   |         |                 |  |   |        |  |  |   | 30,891  | 
|Equity securities                  |  |                       |       |  |                     |   |         |                 |  |   |        |  |  |   | 73      | 
|                                   |  |                       |       |  |                     |   |         |                 |  |   |        |  |  |   |         | 
|Total fair value                   |  |                       |       |  |                     |   |         |                 |  |   |        |  |  | $ | 165,579 | 
|                                   |  |                       |       |  |                     |   |         |                 |  |   |        |  |  |   |         | 

The following tables present the amortized cost and fair value of held-to-maturity securities, including gross unrealized gains and losses, as of the dates indicated:



|                                  |  |                   |        |  |                 |   |     |                  |  |   |           |   |  |   |        | 
|--------------------------------- |  | ----------------- | ------ |  | --------------- | - | --- | ---------------- |  | - | --------- | - |  | - | ------ | 
|                                  |  | December 31, 2016 |       
|(Amounts in thousands)            |  | AmortizedCost     |        |  | UnrealizedGains |   |     | UnrealizedLosses |  |   | FairValue |  
|U.S. Agency securities            |  | $                 | 36,741 |  |                 | $ | 124 |                  |  | $ |          |   |  | $ | 36,865 | 
|Corporate securities              |  |                   | 10,392 |  |                 |   | 11  |                  |  |   | (2        | ) |  |   | 10,401 | 
|                                  |  |                   |        |  |                 |   |     |                  |  |   |           |   |  |   |        | 
|Total securities held to maturity |  | $                 | 47,133 |  |                 | $ | 135 |                  |  | $ | (2        | ) |  | $ | 47,266 | 
|                                  |  |                   |        |  |                 |   |     |                  |  |   |           |   |  |   |        | 
|                                  | 
|                                  |  | December 31, 2015 |       
|(Amounts in thousands)            |  | AmortizedCost     |        |  | UnrealizedGains |   |     | UnrealizedLosses |  |   | FairValue |  
|U.S. Agency securities            |  | $                 | 61,863 |  |                 | $ | 75  |                  |  | $ | (106      | ) |  | $ | 61,832 | 
|Municipal securities              |  |                   | 190    |  |                 |   | 3   |                  |  |   |          |   |  |   | 193    | 
|Corporate securities              |  |                   | 10,488 |  |                 |   |    |                  |  |   | (23       | ) |  |   | 10,465 | 
|                                  |  |                   |        |  |                 |   |     |                  |  |   |           |   |  |   |        | 
|Total securities held to maturity |  | $                 | 72,541 |  |                 | $ | 78  |                  |  | $ | (129      | ) |  | $ | 72,490 | 
|                                  |  |                   |        |  |                 |   |     |                  |  |   |           |   |  |   |        | 



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##### Table of Contents

FIRST COMMUNITY BANCSHARES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  (Continued)



The following table presents the amortized cost and fair value of held-to-maturity securities, by contractual maturity, as of December 31, 2016. Actual maturities could differ from contractual maturities because issuers may have the right to call or prepay obligations
with or without penalties.



|                                   |  |                       |        |  |                 |   |        |       |  |   |        | 
|---------------------------------- |  | --------------------- | ------ |  | --------------- | - | ------ | ----- |  | - | ------ | 
|(Amounts in thousands)             |  | U.S. AgencySecurities |        |  | Corporate Notes |   |        | Total | 
|Amortized cost maturity:           |  |                       |        |  |                 |   |        |       |  |   |        | 
|One year or less                   |  | $                     | 18,756 |  |                 | $ | 3,095  |       |  | $ | 21,851 | 
|After one year through five years  |  |                       | 17,985 |  |                 |   | 7,297  |       |  |   | 25,282 | 
|After five years through ten years |  |                       |       |  |                 |   |       |       |  |   |       | 
|After ten years                    |  |                       |       |  |                 |   |       |       |  |   |       | 
|                                   |  |                       |        |  |                 |   |        |       |  |   |        | 
|Total amortized cost               |  | $                     | 36,741 |  |                 | $ | 10,392 |       |  | $ | 47,133 | 
|                                   |  |                       |        |  |                 |   |        |       |  |   |        | 
|Fair value maturity:               |  |                       |        |  |                 |   |        |       |  |   |        | 
|One year or less                   |  | $                     | 18,768 |  |                 | $ | 3,096  |       |  | $ | 21,864 | 
|After one year through five years  |  |                       | 18,097 |  |                 |   | 7,305  |       |  |   | 25,402 | 
|After five years through ten years |  |                       |       |  |                 |   |       |       |  |   |       | 
|After ten years                    |  |                       |       |  |                 |   |       |       |  |   |       | 
|                                   |  |                       |        |  |                 |   |        |       |  |   |        | 
|Total fair value                   |  | $                     | 36,865 |  |                 | $ | 10,401 |       |  | $ | 47,266 | 
|                                   |  |                       |        |  |                 |   |        |       |  |   |        | 



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##### Table of Contents

FIRST COMMUNITY BANCSHARES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  (Continued)



The following tables present municipal securities, by state, for the states where the largest volume of
these securities are held in the Companys portfolio. The tables also present the amortized cost and fair value of the municipal securities, including gross unrealized gains and losses, as of the dates indicated.



|                       |  |                               |        |   |                |   |         |                  |  |   |                   |  |  |            |      |   |  |   |         | 
|---------------------- |  | ----------------------------- | ------ | - | -------------- | - | ------- | ---------------- |  | - | ----------------- |  |  | ---------- | ---- | - |  | - | ------- | 
|                       |  | December 31, 2016             |       
|(Amounts in thousands) |  | Percent ofMunicipal Portfolio |        |   | Amortized Cost |   |         | Unrealized Gains |  |   | Unrealized Losses |  |  | Fair Value |     
|New York               |  |                               | 11.66  | % |                | $ | 12,876  |                  |  | $ | 334               |  |  | $          |     |   |  | $ | 13,210  | 
|Minnesota              |  |                               | 9.70   | % |                |   | 10,796  |                  |  |   | 232               |  |  |            | (40  | ) |  |   | 10,988  | 
|Wisconsin              |  |                               | 8.66   | % |                |   | 9,786   |                  |  |   | 74                |  |  |            | (42  | ) |  |   | 9,818   | 
|Ohio                   |  |                               | 8.50   | % |                |   | 9,599   |                  |  |   | 125               |  |  |            | (88  | ) |  |   | 9,636   | 
|Massachusetts          |  |                               | 8.45   | % |                |   | 9,355   |                  |  |   | 229               |  |  |            | (10  | ) |  |   | 9,574   | 
|New Jersey             |  |                               | 7.14   | % |                |   | 7,891   |                  |  |   | 202               |  |  |            |     |   |  |   | 8,093   | 
|Connecticut            |  |                               | 6.90   | % |                |   | 7,628   |                  |  |   | 190               |  |  |            |     |   |  |   | 7,818   | 
|Texas                  |  |                               | 6.55   | % |                |   | 7,397   |                  |  |   | 130               |  |  |            | (103 | ) |  |   | 7,424   | 
|Iowa                   |  |                               | 5.66   | % |                |   | 6,467   |                  |  |   | 36                |  |  |            | (88  | ) |  |   | 6,415   | 
|Other                  |  |                               | 26.78  | % |                |   | 29,864  |                  |  |   | 706               |  |  |            | (215 | ) |  |   | 30,355  | 
|                       |  |                               |        |   |                |   |         |                  |  |   |                   |  |  |            |      |   |  |   |         | 
|Total                  |  |                               | 100.00 | % |                | $ | 111,659 |                  |  | $ | 2,258             |  |  | $          | (586 | ) |  | $ | 113,331 | 
|                       |  |                               |        |   |                |   |         |                  |  |   |                   |  |  |            |      |   |  |   |         | 
|                       | 
|                       |  | December 31, 2015             |       
|(Amounts in thousands) |  | Percent ofMunicipal Portfolio |        |   | Amortized Cost |   |         | Unrealized Gains |  |   | Unrealized Losses |  |  | Fair Value |     
|New York               |  |                               | 11.38  | % |                | $ | 14,062  |                  |  | $ | 602               |  |  | $          |     |   |  | $ | 14,664  | 
|Minnesota              |  |                               | 8.72   | % |                |   | 11,011  |                  |  |   | 283               |  |  |            | (64  | ) |  |   | 11,230  | 
|Wisconsin              |  |                               | 8.69   | % |                |   | 10,797  |                  |  |   | 420               |  |  |            | (14  | ) |  |   | 11,203  | 
|Ohio                   |  |                               | 8.38   | % |                |   | 10,416  |                  |  |   | 388               |  |  |            |     |   |  |   | 10,804  | 
|Connecticut            |  |                               | 7.76   | % |                |   | 9,786   |                  |  |   | 217               |  |  |            | (5   | ) |  |   | 9,998   | 
|New Jersey             |  |                               | 7.69   | % |                |   | 9,554   |                  |  |   | 378               |  |  |            | (22  | ) |  |   | 9,910   | 
|Massachusetts          |  |                               | 7.60   | % |                |   | 9,479   |                  |  |   | 315               |  |  |            |     |   |  |   | 9,794   | 
|Texas                  |  |                               | 6.04   | % |                |   | 7,651   |                  |  |   | 208               |  |  |            | (75  | ) |  |   | 7,784   | 
|Other                  |  |                               | 5.03   | % |                |   | 6,471   |                  |  |   | 75                |  |  |            | (60  | ) |  |   | 6,486   | 
|Total                  |  |                               | 28.71  | % |                |   | 35,843  |                  |  |   | 1,272             |  |  |            | (117 | ) |  |   | 36,998  | 
|                       |  |                               |        |   |                |   |         |                  |  |   |                   |  |  |            |      |   |  |   |         | 
|                       |  |                               | 100.00 | % |                | $ | 125,070 |                  |  | $ | 4,158             |  |  | $          | (357 | ) |  | $ | 128,871 | 
|                       |  |                               |        |   |                |   |         |                  |  |   |                   |  |  |            |      |   |  |   |         | 



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##### Table of Contents

FIRST COMMUNITY BANCSHARES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  (Continued)



The following tables present the fair values and unrealized losses for available-for-sale securities in a continuous unrealized loss position for less than 12 months and for 12 months or longer as of the dates indicated:



|                                        |  |                     |         |  |                     |   |      |       |  |   |            |  |  |       |         |   |            |   |         |  |  |   |         |  
|--------------------------------------- |  | ------------------- | ------- |  | ------------------- | - | ---- | ----- |  | - | ---------- |  |  | ----- | ------- | - | ---------- | - | ------- |  |  | - | ------- | -
|                                        |  | December 31, 2016   |        
|                                        |  | Less than 12 Months |         |  | 12 Months or Longer |   |      | Total | 
|                                        |  | Fair                |         |  | Unrealized          |   |      | Fair  |  |   | Unrealized |  |  | Fair  |         |   | Unrealized |  
|(Amounts in thousands)                  |  | Value               |         |  | Losses              |   |      | Value |  |   | Losses     |  |  | Value |         |   | Losses     |  
|Municipal securities                    |  | $                   | 24,252  |  |                     | $ | (527 | )     |  | $ | 715        |  |  | $     | (59     | ) |            | $ | 24,967  |  |  | $ | (586    | )
|Single issue trust preferred securities |  |                     |        |  |                     |   |     |       |  |   | 19,939     |  |  |       | (2,165  | ) |            |   | 19,939  |  |  |   | (2,165  | )
|Mortgage-backed Agency securities       |  |                     | 12,834  |  |                     |   | (166 | )     |  |   | 11,851     |  |  |       | (299    | ) |            |   | 24,685  |  |  |   | (465    | )
|                                        |  |                     |         |  |                     |   |      |       |  |   |            |  |  |       |         |   |            |   |         |  |  |   |         |  
|Total                                   |  | $                   | 37,086  |  |                     | $ | (693 | )     |  | $ | 32,505     |  |  | $     | (2,523  | ) |            | $ | 69,591  |  |  | $ | (3,216  | )
|                                        |  |                     |         |  |                     |   |      |       |  |   |            |  |  |       |         |   |            |   |         |  |  |   |         |  
|                                        | 
|                                        |  | December 31, 2015   |        
|                                        |  | Less than 12 Months |         |  | 12 Months or Longer |   |      | Total | 
|                                        |  | Fair                |         |  | Unrealized          |   |      | Fair  |  |   | Unrealized |  |  | Fair  |         |   | Unrealized |  
|(Amounts in thousands)                  |  | Value               |         |  | Losses              |   |      | Value |  |   | Losses     |  |  | Value |         |   | Losses     |  
|U.S. Agency securities                  |  | $                   | 4,441   |  |                     | $ | (5   | )     |  | $ | 23,922     |  |  | $     | (746    | ) |            | $ | 28,363  |  |  | $ | (751    | )
|Municipal securities                    |  |                     | 8,126   |  |                     |   | (48  | )     |  |   | 10,393     |  |  |       | (309    | ) |            |   | 18,519  |  |  |   | (357    | )
|Single issue trust preferred securities |  |                     |        |  |                     |   |     |       |  |   | 47,832     |  |  |       | (8,050  | ) |            |   | 47,832  |  |  |   | (8,050  | )
|Corporate securities                    |  |                     | 70,333  |  |                     |   | (238 | )     |  |   |           |  |  |       |        |   |            |   | 70,333  |  |  |   | (238    | )
|Mortgage-backed Agency securities       |  |                     | 27,050  |  |                     |   | (253 | )     |  |   | 37,291     |  |  |       | (922    | ) |            |   | 64,341  |  |  |   | (1,175  | )
|                                        |  |                     |         |  |                     |   |      |       |  |   |            |  |  |       |         |   |            |   |         |  |  |   |         |  
|Total                                   |  | $                   | 109,950 |  |                     | $ | (544 | )     |  | $ | 119,438    |  |  | $     | (10,027 | ) |            | $ | 229,388 |  |  | $ | (10,571 | )
|                                        |  |                     |         |  |                     |   |      |       |  |   |            |  |  |       |         |   |            |   |         |  |  |   |         |  

The following tables present the fair values and unrealized losses for held-to-maturity securities in a continuous unrealized loss position for less than 12 months and for 12 months or longer as of the dates indicated:



|                       |  |                     |       |  |                     |   |    |       |  |   |            |  |  |       |   |  |            |   |       |  |  |   |    |  
|---------------------- |  | ------------------- | ----- |  | ------------------- | - | -- | ----- |  | - | ---------- |  |  | ----- | - |  | ---------- | - | ----- |  |  | - | -- | -
|                       |  | December 31, 2016   |      
|                       |  | Less than 12 Months |       |  | 12 Months or Longer |   |    | Total | 
|                       |  | Fair                |       |  | Unrealized          |   |    | Fair  |  |   | Unrealized |  |  | Fair  |   |  | Unrealized |  
|(Amounts in thousands) |  | Value               |       |  | Losses              |   |    | Value |  |   | Losses     |  |  | Value |   |  | Losses     |  
|Corporate securities   |  | $                   | 3,533 |  |                     | $ | (2 | )     |  | $ |           |  |  | $     |  |  |            | $ | 3,533 |  |  | $ | (2 | )
|                       |  |                     |       |  |                     |   |    |       |  |   |            |  |  |       |   |  |            |   |       |  |  |   |    |  
|Total                  |  | $                   | 3,533 |  |                     | $ | (2 | )     |  | $ |           |  |  | $     |  |  |            | $ | 3,533 |  |  | $ | (2 | )
|                       |  |                     |       |  |                     |   |    |       |  |   |            |  |  |       |   |  |            |   |       |  |  |   |    |  



|                       |  |                     |        |  |                     |   |      |       |  |   |            |  |  |       |   |  |            |   |        |  |  |   |      |  
|---------------------- |  | ------------------- | ------ |  | ------------------- | - | ---- | ----- |  | - | ---------- |  |  | ----- | - |  | ---------- | - | ------ |  |  | - | ---- | -
|                       |  | December 31, 2015   |       
|                       |  | Less than 12 Months |        |  | 12 Months or Longer |   |      | Total | 
|                       |  | Fair                |        |  | Unrealized          |   |      | Fair  |  |   | Unrealized |  |  | Fair  |   |  | Unrealized |  
|(Amounts in thousands) |  | Value               |        |  | Losses              |   |      | Value |  |   | Losses     |  |  | Value |   |  | Losses     |  
|U.S. Agency securities |  | $                   | 43,723 |  |                     | $ | (106 | )     |  | $ |           |  |  | $     |  |  |            | $ | 43,723 |  |  | $ | (106 | )
|Corporate securities   |  |                     | 6,851  |  |                     |   | (23  | )     |  |   |           |  |  |       |  |  |            |   | 6,851  |  |  |   | (23  | )
|                       |  |                     |        |  |                     |   |      |       |  |   |            |  |  |       |   |  |            |   |        |  |  |   |      |  
|Total                  |  | $                   | 50,574 |  |                     | $ | (129 | )     |  | $ |           |  |  | $     |  |  |            | $ | 50,574 |  |  | $ | (129 | )
|                       |  |                     |        |  |                     |   |      |       |  |   |            |  |  |       |   |  |            |   |        |  |  |   |      |  

There were 82 individual securities in an unrealized loss position as of December 31, 2016, and their combined
depreciation in value represented 1.51% of the investment securities portfolio. These securities included 15 securities in a continuous unrealized loss position for 12 months or longer that the Company does not intend to



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FIRST COMMUNITY BANCSHARES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  (Continued)



sell, and that it has determined is not more likely than not going to be required to sell, prior to maturity or recovery.There were 107 individual securities in an unrealized loss
position as of December 31, 2015, and their combined depreciation in value represented 2.44% of the investment securities portfolio.

The
Company reviews its investment portfolio quarterly for indications of OTTI. The initial indicator of OTTI for both debt and equity securities is a decline in fair value below book value and the severity and duration of the decline. For debt
securities, the credit-related OTTI is recognized as a charge to noninterest income and the noncredit-related OTTI is recognized in OCI. The Company incurred credit-related OTTI charges on debt securities of $4.64 million in 2016 related to the
Companys change in intent to hold certain securities to recovery. The intent was changed to sell specific trust preferred securities in the Companys investment portfolio primarily to reduce credit concentrations with two issuers. The
Company incurred credit-related OTTI charges on debt securities of $705 thousand in 2014 related to a non-Agency mortgage-backed security that was sold in November 2014. Temporary impairment on debt
securities is primarily related to changes in benchmark interest rates, changes in pricing in the credit markets, and other current economic factors. For equity securities, the OTTI is recognized as a charge to noninterest income. The Company
incurred OTTI charges related to equity securities of $11 thousand in 2016 and $32 thousand in 2014. There were no OTTI charges recognized in 2015.

The following table presents the changes in credit-related losses recognized in earnings on debt securities where a portion of the impairment was recognized in OCI during the periods indicated:



|                                                                    |  |                         |        |   |      |   |   |      |  |   |        |  
|------------------------------------------------------------------- |  | ----------------------- | ------ | - | ---- | - | - | ---- |  | - | ------ | -
|                                                                    |  | Year Ended December 31, |       
|(Amounts in thousands)                                              |  | 2016                    |        |   | 2015 |   |   | 2014 | 
|Beginning balance(1)                                                |  | $                       |       |   |      | $ |  |      |  | $ | 7,798  |  
|Additions for credit losses on securities not previously recognized |  |                         | 4,646  |   |      |   |  |      |  |   |       |  
|Additions for credit losses on securities previously recognized     |  |                         |       |   |      |   |  |      |  |   | 705    |  
|Reduction for securities sold/realized losses                       |  |                         | (4,646 | ) |      |   |  |      |  |   | (8,503 | )
|                                                                    |  |                         |        |   |      |   |   |      |  |   |        |  
|Ending balance                                                      |  | $                       |       |   |      | $ |  |      |  | $ |       |  
|                                                                    |  |                         |        |   |      |   |   |      |  |   |        |  



|(1) | The beginning balance includes credit-related losses included in OTTI charges recognized on debt securities in prior periods.
|--- | -----------------------------------------------------------------------------------------------------------------------------

The carrying amount of securities pledged for various purposes totaled $139.75 million as of December 31, 2016, and $236.73 million as of
December 31, 2015.

The following table presents the gross realized gains and losses from the sale of available-for-sale securities for the periods indicated:



|                                      |  |                         |      |   |      |   |      |      |  |   |        |  
|------------------------------------- |  | ----------------------- | ---- | - | ---- | - | ---- | ---- |  | - | ------ | -
|                                      |  | Year Ended December 31, |     
|(Amounts in thousands)                |  | 2016                    |      |   | 2015 |   |      | 2014 | 
|Gross realized gains                  |  | $                       | 757  |   |      | $ | 363  |      |  | $ | 2,257  |  
|Gross realized losses                 |  |                         | (422 | ) |      |   | (219 | )    |  |   | (3,642 | )
|                                      |  |                         |      |   |      |   |      |      |  |   |        |  
|Net gain (loss) on sale of securities |  | $                       | 335  |   |      | $ | 144  |      |  | $ | (1,385 | )
|                                      |  |                         |      |   |      |   |      |      |  |   |        |  



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FIRST COMMUNITY BANCSHARES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  (Continued)



|Note 4. | Loans
|------- | -----

The Company groups loans held for
investment into three segments (commercial loans, consumer real estate loans, and consumer and other loans) with each segment divided into various classes. Covered loans are those loans acquired in FDIC assisted transactions that are covered by loss
share agreements. Customer overdrafts reclassified as loans totaled $1.41 million as of December 31, 2016, and $1.24 million as of December 31, 2015. Deferred loan fees totaled $3.90 million in 2016, $3.78 million in
2015, and $3.39 million in 2014. For information about off-balance sheet financing, see Note 20, Litigation, Commitments, and Contingencies, to the Consolidated Financial Statements of this
report.

The following table presents loans, net of unearned income with non-covered loans and by loan
class, as of the dates indicated:



|                                                        |  |              |           |  |         |  |        |        |  |   |           |  |  |  |        |  
|------------------------------------------------------- |  | ------------ | --------- |  | ------- |  | ------ | ------ |  | - | --------- |  |  |  | ------ | -
|                                                        |  | December 31, |          
|                                                        |  | 2016         |           |  | 2015    | 
|(Amounts in thousands)                                  |  | Amount       |           |  | Percent |  |        | Amount |  |   | Percent   | 
|Non-covered loans held for investment                   |  |              |           |  |         |  |        |        |  |   |           |  |  |  |        |  
|Commercial loans                                        |  |              |           |  |         |  |        |        |  |   |           |  |  |  |        |  
|Construction, development, and other land               |  | $            | 56,948    |  |         |  | 3.07   | %      |  | $ | 48,896    |  |  |  | 2.86   | %
|Commercial and industrial                               |  |              | 92,204    |  |         |  | 4.98   | %      |  |   | 88,903    |  |  |  | 5.21   | %
|Multi-family residential                                |  |              | 134,228   |  |         |  | 7.24   | %      |  |   | 95,026    |  |  |  | 5.57   | %
|Single family non-owner occupied                        |  |              | 142,965   |  |         |  | 7.72   | %      |  |   | 149,351   |  |  |  | 8.75   | %
|Non-farm, non-residential                               |  |              | 598,674   |  |         |  | 32.31  | %      |  |   | 485,460   |  |  |  | 28.45  | %
|Agricultural                                            |  |              | 6,003     |  |         |  | 0.32   | %      |  |   | 2,911     |  |  |  | 0.17   | %
|Farmland                                                |  |              | 31,729    |  |         |  | 1.71   | %      |  |   | 27,540    |  |  |  | 1.61   | %
|                                                        |  |              |           |  |         |  |        |        |  |   |           |  |  |  |        |  
|Total commercial loans                                  |  |              | 1,062,751 |  |         |  | 57.35  | %      |  |   | 898,087   |  |  |  | 52.62  | %
|Consumer real estate loans                              |  |              |           |  |         |  |        |        |  |   |           |  |  |  |        |  
|Home equity lines                                       |  |              | 106,361   |  |         |  | 5.74   | %      |  |   | 107,367   |  |  |  | 6.29   | %
|Single family owner occupied                            |  |              | 500,891   |  |         |  | 27.03  | %      |  |   | 495,209   |  |  |  | 29.02  | %
|Owner occupied construction                             |  |              | 44,535    |  |         |  | 2.41   | %      |  |   | 43,505    |  |  |  | 2.55   | %
|                                                        |  |              |           |  |         |  |        |        |  |   |           |  |  |  |        |  
|Total consumer real estate loans                        |  |              | 651,787   |  |         |  | 35.18  | %      |  |   | 646,081   |  |  |  | 37.86  | %
|Consumer and other loans                                |  |              |           |  |         |  |        |        |  |   |           |  |  |  |        |  
|Consumer loans                                          |  |              | 77,445    |  |         |  | 4.18   | %      |  |   | 72,000    |  |  |  | 4.22   | %
|Other                                                   |  |              | 3,971     |  |         |  | 0.21   | %      |  |   | 7,338     |  |  |  | 0.43   | %
|                                                        |  |              |           |  |         |  |        |        |  |   |           |  |  |  |        |  
|Total consumer and other loans                          |  |              | 81,416    |  |         |  | 4.39   | %      |  |   | 79,338    |  |  |  | 4.65   | %
|                                                        |  |              |           |  |         |  |        |        |  |   |           |  |  |  |        |  
|Total non-covered loans                                 |  |              | 1,795,954 |  |         |  | 96.92  | %      |  |   | 1,623,506 |  |  |  | 95.13  | %
|Total covered loans                                     |  |              | 56,994    |  |         |  | 3.08   | %      |  |   | 83,035    |  |  |  | 4.87   | %
|                                                        |  |              |           |  |         |  |        |        |  |   |           |  |  |  |        |  
|Total loans held for investment, net of unearned income |  | $            | 1,852,948 |  |         |  | 100.00 | %      |  | $ | 1,706,541 |  |  |  | 100.00 | %
|                                                        |  |              |           |  |         |  |        |        |  |   |           |  |  |  |        |  



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FIRST COMMUNITY BANCSHARES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  (Continued)



The following table presents the covered loan portfolio, by loan class, as of the dates indicated:



|                                          |  |              |        |  |      |   |        | 
|----------------------------------------- |  | ------------ | ------ |  | ---- | - | ------ | 
|                                          |  | December 31, |       
|(Amounts in thousands)                    |  | 2016         |        |  | 2015 |  
|Covered loans                             |  |              |        |  |      |   |        | 
|Commercial loans                          |  |              |        |  |      |   |        | 
|Construction, development, and other land |  | $            | 4,570  |  |      | $ | 6,303  | 
|Commercial and industrial                 |  |              | 895    |  |      |   | 1,170  | 
|Multi-family residential                  |  |              | 8      |  |      |   | 640    | 
|Single family non-owner occupied          |  |              | 962    |  |      |   | 2,674  | 
|Non-farm, non-residential                 |  |              | 7,512  |  |      |   | 14,065 | 
|Agricultural                              |  |              | 25     |  |      |   | 34     | 
|Farmland                                  |  |              | 397    |  |      |   | 643    | 
|                                          |  |              |        |  |      |   |        | 
|Total commercial loans                    |  |              | 14,369 |  |      |   | 25,529 | 
|Consumer real estate loans                |  |              |        |  |      |   |        | 
|Home equity lines                         |  |              | 35,817 |  |      |   | 48,565 | 
|Single family owner occupied              |  |              | 6,729  |  |      |   | 8,595  | 
|Owner occupied construction               |  |              |       |  |      |   | 262    | 
|                                          |  |              |        |  |      |   |        | 
|Total consumer real estate loans          |  |              | 42,546 |  |      |   | 57,422 | 
|Consumer and other loans                  |  |              |        |  |      |   |        | 
|Consumer loans                            |  |              | 79     |  |      |   | 84     | 
|                                          |  |              |        |  |      |   |        | 
|Total covered loans                       |  | $            | 56,994 |  |      | $ | 83,035 | 
|                                          |  |              |        |  |      |   |        | 

The Company identifies certain purchased loans as impaired when fair values are established at acquisition and groups
those PCI loans into loan pools with common risk characteristics. The Company estimates cash flows to be collected on PCI loans and discounts those cash flows at a market rate of interest. The following table presents the recorded investment and
contractual unpaid principal balance of PCI loans, by acquisition, as of the dates indicated:



|                          |  |                     |        |  |                         |   |        |                     |  |   |                         |  |  |   |        | 
|------------------------- |  | ------------------- | ------ |  | ----------------------- | - | ------ | ------------------- |  | - | ----------------------- |  |  | - | ------ | 
|                          |  | December 31,        |       
|                          |  | 2016                |        |  | 2015                    |  
|(Amounts in thousands)    |  | Recorded Investment |        |  | Unpaid PrincipalBalance |   |        | Recorded Investment |  |   | Unpaid PrincipalBalance | 
|PCI Loans, by acquisition |  |                     |        |  |                         |   |        |                     |  |   |                         |  |  |   |        | 
|Peoples                   |  | $                   | 5,576  |  |                         | $ | 9,397  |                     |  | $ | 6,681                   |  |  | $ | 11,249 | 
|Waccamaw                  |  |                     | 21,758 |  |                         |   | 45,030 |                     |  |   | 34,707                  |  |  |   | 63,151 | 
|Other acquired            |  |                     | 1,095  |  |                         |   | 1,121  |                     |  |   | 1,254                   |  |  |   | 1,297  | 
|                          |  |                     |        |  |                         |   |        |                     |  |   |                         |  |  |   |        | 
|Total PCI Loans           |  | $                   | 28,429 |  |                         | $ | 55,548 |                     |  | $ | 42,642                  |  |  | $ | 75,697 | 
|                          |  |                     |        |  |                         |   |        |                     |  |   |                         |  |  |   |        | 



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FIRST COMMUNITY BANCSHARES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  (Continued)



The following table presents the changes in the accretable yield on PCI loans, by acquisition, during
the periods indicated:



|                                                |  |         |        |   |          |   |        |       |  |   |       |   |  |   |        |  
|----------------------------------------------- |  | ------- | ------ | - | -------- | - | ------ | ----- |  | - | ----- | - |  | - | ------ | -
|(Amounts in thousands)                          |  | Peoples |        |   | Waccamaw |   |        | Other |  |   | Total |  
|Balance January 1, 2014                         |  | $       | 5,294  |   |          | $ | 10,338 |       |  | $ | 8     |   |  | $ | 15,640 |  
|Additions                                       |  |         | 267    |   |          |   | 26     |       |  |   |      |   |  |   | 293    |  
|Accretion                                       |  |         | (2,147 | ) |          |   | (6,118 | )     |  |   | (37   | ) |  |   | (8,302 | )
|Reclassifications from nonaccretable difference |  |         | 1,912  |   |          |   | 16,400 |       |  |   | 29    |   |  |   | 18,341 |  
|Other changes, net                              |  |         | (581   | ) |          |   | (1,598 | )     |  |   |      |   |  |   | (2,179 | )
|                                                |  |         |        |   |          |   |        |       |  |   |       |   |  |   |        |  
|Balance December 31, 2014                       |  | $       | 4,745  |   |          | $ | 19,048 |       |  | $ |      |   |  | $ | 23,793 |  
|                                                |  |         |        |   |          |   |        |       |  |   |       |   |  |   |        |  
|Balance January 1, 2015                         |  | $       | 4,745  |   |          | $ | 19,048 |       |  | $ |      |   |  | $ | 23,793 |  
|Additions                                       |  |         |       |   |          |   | 2      |       |  |   |      |   |  |   | 2      |  
|Accretion                                       |  |         | (2,712 | ) |          |   | (6,459 | )     |  |   |      |   |  |   | (9,171 | )
|Reclassifications from nonaccretable difference |  |         | 1,283  |   |          |   | 6,564  |       |  |   |      |   |  |   | 7,847  |  
|Other changes, net                              |  |         | 273    |   |          |   | 6,954  |       |  |   |      |   |  |   | 7,227  |  
|                                                |  |         |        |   |          |   |        |       |  |   |       |   |  |   |        |  
|Balance December 31, 2015                       |  | $       | 3,589  |   |          | $ | 26,109 |       |  | $ |      |   |  | $ | 29,698 |  
|                                                |  |         |        |   |          |   |        |       |  |   |       |   |  |   |        |  
|Balance January 1, 2016                         |  | $       | 3,589  |   |          | $ | 26,109 |       |  | $ |      |   |  | $ | 29,698 |  
|Accretion                                       |  |         | (1,237 | ) |          |   | (5,380 | )     |  |   |      |   |  |   | (6,617 | )
|Reclassifications from nonaccretable difference |  |         | 287    |   |          |   | 1,620  |       |  |   |      |   |  |   | 1,907  |  
|Other changes, net                              |  |         | 1,753  |   |          |   | (515   | )     |  |   |      |   |  |   | 1,238  |  
|                                                |  |         |        |   |          |   |        |       |  |   |       |   |  |   |        |  
|Balance December 31, 2016                       |  | $       | 4,392  |   |          | $ | 21,834 |       |  | $ |      |   |  | $ | 26,226 |  
|                                                |  |         |        |   |          |   |        |       |  |   |       |   |  |   |        |  



|Note 5. | Credit Quality
|------- | --------------

The Company uses a risk
grading matrix to assign a risk grade to each loan in its portfolio. Loan risk ratings may be upgraded or downgraded to reflect current information identified during the loan review process. The general characteristics of each risk grade are as
follows:



| |  |  | Pass  This grade is assigned to loans with acceptable credit quality and risk. The Company further segments this grade based on borrower
characteristics that include capital strength, earnings stability, liquidity, leverage, and industry conditions.
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Special Mention  This grade is assigned to loans that require an above average degree of supervision and attention. These loans have the
characteristics of an asset with acceptable credit quality and risk; however, adverse economic or financial conditions exist that create potential weaknesses deserving of managements close attention. If potential weaknesses are not corrected,
the prospect of repayment may worsen.
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Substandard  This grade is assigned to loans that have well defined weaknesses that may make payment default, or principal exposure, possible.
These loans will likely be dependent on collateral liquidation, secondary repayment sources, or events outside the normal course of business to meet repayment terms.
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Doubtful  This grade is assigned to loans that have the weaknesses inherent in substandard loans; however, the weaknesses are so severe that
collection or liquidation in full is unlikely based on current facts, conditions, and values. Due to certain specific pending factors, the amount of loss cannot yet be determined.
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Loss  This grade is assigned to loans that will be charged off or charged down when payments, including the timing and value of payments, are
uncertain. This risk grade does not imply that the asset has no recovery or salvage value, but simply means that it is not practical or desirable to defer writing off, either all or a portion of, the loan balance even though partial recovery may be
realized in the future.
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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FIRST COMMUNITY BANCSHARES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  (Continued)



The following tables present the recorded investment of the loan portfolio, by loan class and credit
quality, as of the dates indicated. Losses on covered loans are generally reimbursable by the FDIC at the applicable loss share percentage, 80%; therefore, covered loans are disclosed separately.



|                                          |  |                   |           |  |         |   |        |             |  |   |          |  |  |      |     |  |       |   |   |  |  |   |           | 
|----------------------------------------- |  | ----------------- | --------- |  | ------- | - | ------ | ----------- |  | - | -------- |  |  | ---- | --- |  | ----- | - | - |  |  | - | --------- | 
|                                          |  | December 31, 2016 |          
|                                          |  |                   |           |  | Special |   |        |             |  |   |          |  |  |      |     |  |       |  
|(Amounts in thousands)                    |  | Pass              |           |  | Mention |   |        | Substandard |  |   | Doubtful |  |  | Loss |     |  | Total |  
|Non-covered loans                         |  |                   |           |  |         |   |        |             |  |   |          |  |  |      |     |  |       |   |   |  |  |   |           | 
|Commercial loans                          |  |                   |           |  |         |   |        |             |  |   |          |  |  |      |     |  |       |   |   |  |  |   |           | 
|Construction, development, and other land |  | $                 | 55,188    |  |         | $ | 980    |             |  | $ | 780      |  |  | $    |    |  |       | $ |  |  |  | $ | 56,948    | 
|Commercial and industrial                 |  |                   | 87,581    |  |         |   | 3,483  |             |  |   | 1,137    |  |  |      |    |  |       |   | 3 |  |  |   | 92,204    | 
|Multi-family residential                  |  |                   | 126,468   |  |         |   | 6,992  |             |  |   | 768      |  |  |      |    |  |       |   |  |  |  |   | 134,228   | 
|Single family non-owner occupied          |  |                   | 131,934   |  |         |   | 5,466  |             |  |   | 5,565    |  |  |      |    |  |       |   |  |  |  |   | 142,965   | 
|Non-farm, non-residential                 |  |                   | 579,134   |  |         |   | 10,236 |             |  |   | 9,102    |  |  |      | 202 |  |       |   |  |  |  |   | 598,674   | 
|Agricultural                              |  |                   | 5,839     |  |         |   | 164    |             |  |   |         |  |  |      |    |  |       |   |  |  |  |   | 6,003     | 
|Farmland                                  |  |                   | 28,887    |  |         |   | 1,223  |             |  |   | 1,619    |  |  |      |    |  |       |   |  |  |  |   | 31,729    | 
|Consumer real estate loans                |  |                   |           |  |         |   |        |             |  |   |          |  |  |      |     |  |       |   |   |  |  |   |           | 
|Home equity lines                         |  |                   | 104,033   |  |         |   | 871    |             |  |   | 1,457    |  |  |      |    |  |       |   |  |  |  |   | 106,361   | 
|Single family owner occupied              |  |                   | 475,402   |  |         |   | 4,636  |             |  |   | 20,381   |  |  |      | 472 |  |       |   |  |  |  |   | 500,891   | 
|Owner occupied construction               |  |                   | 43,833    |  |         |   |       |             |  |   | 702      |  |  |      |    |  |       |   |  |  |  |   | 44,535    | 
|Consumer and other loans                  |  |                   |           |  |         |   |        |             |  |   |          |  |  |      |     |  |       |   |   |  |  |   |           | 
|Consumer loans                            |  |                   | 77,218    |  |         |   | 11     |             |  |   | 216      |  |  |      |    |  |       |   |  |  |  |   | 77,445    | 
|Other                                     |  |                   | 3,971     |  |         |   |       |             |  |   |         |  |  |      |    |  |       |   |  |  |  |   | 3,971     | 
|                                          |  |                   |           |  |         |   |        |             |  |   |          |  |  |      |     |  |       |   |   |  |  |   |           | 
|Total non-covered loans                   |  |                   | 1,719,488 |  |         |   | 34,062 |             |  |   | 41,727   |  |  |      | 674 |  |       |   | 3 |  |  |   | 1,795,954 | 
|Covered loans                             |  |                   |           |  |         |   |        |             |  |   |          |  |  |      |     |  |       |   |   |  |  |   |           | 
|Commercial loans                          |  |                   |           |  |         |   |        |             |  |   |          |  |  |      |     |  |       |   |   |  |  |   |           | 
|Construction, development, and other land |  |                   | 2,768     |  |         |   | 803    |             |  |   | 999      |  |  |      |    |  |       |   |  |  |  |   | 4,570     | 
|Commercial and industrial                 |  |                   | 882       |  |         |   |       |             |  |   | 13       |  |  |      |    |  |       |   |  |  |  |   | 895       | 
|Multi-family residential                  |  |                   |          |  |         |   |       |             |  |   | 8        |  |  |      |    |  |       |   |  |  |  |   | 8         | 
|Single family non-owner occupied          |  |                   | 796       |  |         |   | 63     |             |  |   | 103      |  |  |      |    |  |       |   |  |  |  |   | 962       | 
|Non-farm, non-residential                 |  |                   | 6,423     |  |         |   | 537    |             |  |   | 552      |  |  |      |    |  |       |   |  |  |  |   | 7,512     | 
|Agricultural                              |  |                   | 25        |  |         |   |       |             |  |   |         |  |  |      |    |  |       |   |  |  |  |   | 25        | 
|Farmland                                  |  |                   | 132       |  |         |   |       |             |  |   | 265      |  |  |      |    |  |       |   |  |  |  |   | 397       | 
|Consumer real estate loans                |  |                   |           |  |         |   |        |             |  |   |          |  |  |      |     |  |       |   |   |  |  |   |           | 
|Home equity lines                         |  |                   | 14,283    |  |         |   | 20,763 |             |  |   | 771      |  |  |      |    |  |       |   |  |  |  |   | 35,817    | 
|Single family owner occupied              |  |                   | 4,601     |  |         |   | 928    |             |  |   | 1,200    |  |  |      |    |  |       |   |  |  |  |   | 6,729     | 
|Consumer and other loans                  |  |                   |           |  |         |   |        |             |  |   |          |  |  |      |     |  |       |   |   |  |  |   |           | 
|Consumer loans                            |  |                   | 79        |  |         |   |       |             |  |   |         |  |  |      |    |  |       |   |  |  |  |   | 79        | 
|                                          |  |                   |           |  |         |   |        |             |  |   |          |  |  |      |     |  |       |   |   |  |  |   |           | 
|Total covered loans                       |  |                   | 29,989    |  |         |   | 23,094 |             |  |   | 3,911    |  |  |      |    |  |       |   |  |  |  |   | 56,994    | 
|                                          |  |                   |           |  |         |   |        |             |  |   |          |  |  |      |     |  |       |   |   |  |  |   |           | 
|Total loans                               |  | $                 | 1,749,477 |  |         | $ | 57,156 |             |  | $ | 45,638   |  |  | $    | 674 |  |       | $ | 3 |  |  | $ | 1,852,948 | 
|                                          |  |                   |           |  |         |   |        |             |  |   |          |  |  |      |     |  |       |   |   |  |  |   |           | 



30



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##### Table of Contents

FIRST COMMUNITY BANCSHARES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  (Continued)



|                                          |  |                   |           |  |         |   |        |             |  |   |          |  |  |      |   |  |       |   |   |  |  |   |           | 
|----------------------------------------- |  | ----------------- | --------- |  | ------- | - | ------ | ----------- |  | - | -------- |  |  | ---- | - |  | ----- | - | - |  |  | - | --------- | 
|                                          |  | December 31, 2015 |          
|                                          |  |                   |           |  | Special |   |        |             |  |   |          |  |  |      |   |  |       |  
|(Amounts in thousands)                    |  | Pass              |           |  | Mention |   |        | Substandard |  |   | Doubtful |  |  | Loss |   |  | Total |  
|Non-covered loans                         |  |                   |           |  |         |   |        |             |  |   |          |  |  |      |   |  |       |   |   |  |  |   |           | 
|Commercial loans                          |  |                   |           |  |         |   |        |             |  |   |          |  |  |      |   |  |       |   |   |  |  |   |           | 
|Construction, development, and other land |  | $                 | 46,816    |  |         | $ | 974    |             |  | $ | 1,106    |  |  | $    |  |  |       | $ |  |  |  | $ | 48,896    | 
|Commercial and industrial                 |  |                   | 87,223    |  |         |   | 663    |             |  |   | 1,017    |  |  |      |  |  |       |   |  |  |  |   | 88,903    | 
|Multi-family residential                  |  |                   | 81,168    |  |         |   | 12,969 |             |  |   | 889      |  |  |      |  |  |       |   |  |  |  |   | 95,026    | 
|Single family non-owner occupied          |  |                   | 139,680   |  |         |   | 3,976  |             |  |   | 5,695    |  |  |      |  |  |       |   |  |  |  |   | 149,351   | 
|Non-farm, non-residential                 |  |                   | 454,906   |  |         |   | 15,170 |             |  |   | 15,384   |  |  |      |  |  |       |   |  |  |  |   | 485,460   | 
|Agricultural                              |  |                   | 2,886     |  |         |   | 25     |             |  |   |         |  |  |      |  |  |       |   |  |  |  |   | 2,911     | 
|Farmland                                  |  |                   | 25,855    |  |         |   | 1,427  |             |  |   | 258      |  |  |      |  |  |       |   |  |  |  |   | 27,540    | 
|Consumer real estate loans                |  |                   |           |  |         |   |        |             |  |   |          |  |  |      |   |  |       |   |   |  |  |   |           | 
|Home equity lines                         |  |                   | 104,897   |  |         |   | 1,083  |             |  |   | 1,387    |  |  |      |  |  |       |   |  |  |  |   | 107,367   | 
|Single family owner occupied              |  |                   | 468,155   |  |         |   | 6,686  |             |  |   | 20,368   |  |  |      |  |  |       |   |  |  |  |   | 495,209   | 
|Owner occupied construction               |  |                   | 42,783    |  |         |   |       |             |  |   | 722      |  |  |      |  |  |       |   |  |  |  |   | 43,505    | 
|Consumer and other loans                  |  |                   |           |  |         |   |        |             |  |   |          |  |  |      |   |  |       |   |   |  |  |   |           | 
|Consumer loans                            |  |                   | 71,685    |  |         |   | 61     |             |  |   | 254      |  |  |      |  |  |       |   |  |  |  |   | 72,000    | 
|Other                                     |  |                   | 7,338     |  |         |   |       |             |  |   |         |  |  |      |  |  |       |   |  |  |  |   | 7,338     | 
|                                          |  |                   |           |  |         |   |        |             |  |   |          |  |  |      |   |  |       |   |   |  |  |   |           | 
|Total non-covered loans                   |  |                   | 1,533,392 |  |         |   | 43,034 |             |  |   | 47,080   |  |  |      |  |  |       |   |  |  |  |   | 1,623,506 | 
|Covered loans                             |  |                   |           |  |         |   |        |             |  |   |          |  |  |      |   |  |       |   |   |  |  |   |           | 
|Commercial loans                          |  |                   |           |  |         |   |        |             |  |   |          |  |  |      |   |  |       |   |   |  |  |   |           | 
|Construction, development, and other land |  |                   | 3,908     |  |         |   | 1,261  |             |  |   | 1,134    |  |  |      |  |  |       |   |  |  |  |   | 6,303     | 
|Commercial and industrial                 |  |                   | 1,144     |  |         |   | 4      |             |  |   | 22       |  |  |      |  |  |       |   |  |  |  |   | 1,170     | 
|Multi-family residential                  |  |                   | 460       |  |         |   |       |             |  |   | 180      |  |  |      |  |  |       |   |  |  |  |   | 640       | 
|Single family non-owner occupied          |  |                   | 1,808     |  |         |   | 457    |             |  |   | 409      |  |  |      |  |  |       |   |  |  |  |   | 2,674     | 
|Non-farm, non-residential                 |  |                   | 9,192     |  |         |   | 2,044  |             |  |   | 2,829    |  |  |      |  |  |       |   |  |  |  |   | 14,065    | 
|Agricultural                              |  |                   | 34        |  |         |   |       |             |  |   |         |  |  |      |  |  |       |   |  |  |  |   | 34        | 
|Farmland                                  |  |                   | 364       |  |         |   |       |             |  |   | 279      |  |  |      |  |  |       |   |  |  |  |   | 643       | 
|Consumer real estate loans                |  |                   |           |  |         |   |        |             |  |   |          |  |  |      |   |  |       |   |   |  |  |   |           | 
|Home equity lines                         |  |                   | 17,893    |  |         |   | 29,823 |             |  |   | 849      |  |  |      |  |  |       |   |  |  |  |   | 48,565    | 
|Single family owner occupied              |  |                   | 5,102     |  |         |   | 1,963  |             |  |   | 1,530    |  |  |      |  |  |       |   |  |  |  |   | 8,595     | 
|Owner occupied construction               |  |                   | 112       |  |         |   | 51     |             |  |   | 99       |  |  |      |  |  |       |   |  |  |  |   | 262       | 
|Consumer and other loans                  |  |                   |           |  |         |   |        |             |  |   |          |  |  |      |   |  |       |   |   |  |  |   |           | 
|Consumer loans                            |  |                   | 84        |  |         |   |       |             |  |   |         |  |  |      |  |  |       |   |  |  |  |   | 84        | 
|                                          |  |                   |           |  |         |   |        |             |  |   |          |  |  |      |   |  |       |   |   |  |  |   |           | 
|Total covered loans                       |  |                   | 40,101    |  |         |   | 35,603 |             |  |   | 7,331    |  |  |      |  |  |       |   |  |  |  |   | 83,035    | 
|                                          |  |                   |           |  |         |   |        |             |  |   |          |  |  |      |   |  |       |   |   |  |  |   |           | 
|Total loans                               |  | $                 | 1,573,493 |  |         | $ | 78,637 |             |  | $ | 54,411   |  |  | $    |  |  |       | $ |  |  |  | $ | 1,706,541 | 
|                                          |  |                   |           |  |         |   |        |             |  |   |          |  |  |      |   |  |       |   |   |  |  |   |           | 

The Company identifies loans for potential impairment through a variety of means, including, but not limited to, ongoing
loan review, renewal processes, delinquency data, market communications, and public information. If the Company determines that it is probable all principal and interest amounts contractually due will not be collected, the loan is generally deemed
impaired.



31



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FIRST COMMUNITY BANCSHARES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  (Continued)



The following table presents the recorded investment, unpaid principal balance, and related allowance
for loan losses for impaired loans, excluding PCI loans, as of the dates indicated:



|                                          |  |                   |        |  |                   |   |        |           |  |   |            |  |  |           |        |  |           |   |        |  |  |   |       | 
|----------------------------------------- |  | ----------------- | ------ |  | ----------------- | - | ------ | --------- |  | - | ---------- |  |  | --------- | ------ |  | --------- | - | ------ |  |  | - | ----- | 
|                                          |  | December 31, 2016 |        |  | December 31, 2015 |  
|                                          |  |                   |        |  | Unpaid            |   |        |           |  |   |            |  |  | Unpaid    |        |  |           |  
|                                          |  | Recorded          |        |  | Principal         |   |        | Related   |  |   | Recorded   |  |  | Principal |        |  | Related   |  
|(Amounts in thousands)                    |  | Investment        |        |  | Balance           |   |        | Allowance |  |   | Investment |  |  | Balance   |        |  | Allowance |  
|Impaired loans with no related allowance  |  |                   |        |  |                   |   |        |           |  |   |            |  |  |           |        |  |           |   |        |  |  |   |       | 
|Commercial loans                          |  |                   |        |  |                   |   |        |           |  |   |            |  |  |           |        |  |           |   |        |  |  |   |       | 
|Construction, development, and other land |  | $                 | 33     |  |                   | $ | 35     |           |  | $ |           |  |  | $         | 57     |  |           | $ | 57     |  |  | $ |      | 
|Commercial and industrial                 |  |                   | 346    |  |                   |   | 383    |           |  |   |           |  |  |           | 16     |  |           |   | 23     |  |  |   |      | 
|Multi-family residential                  |  |                   | 294    |  |                   |   | 369    |           |  |   |           |  |  |           | 84     |  |           |   | 94     |  |  |   |      | 
|Single family non-owner occupied          |  |                   | 3,084  |  |                   |   | 3,334  |           |  |   |           |  |  |           | 2,095  |  |           |   | 2,239  |  |  |   |      | 
|Non-farm, non-residential                 |  |                   | 3,829  |  |                   |   | 4,534  |           |  |   |           |  |  |           | 10,369 |  |           |   | 11,055 |  |  |   |      | 
|Agricultural                              |  |                   |       |  |                   |   |       |           |  |   |           |  |  |           |       |  |           |   |       |  |  |   |      | 
|Farmland                                  |  |                   | 1,161  |  |                   |   | 1,188  |           |  |   |           |  |  |           | 310    |  |           |   | 326    |  |  |   |      | 
|Consumer real estate loans                |  |                   |        |  |                   |   |        |           |  |   |            |  |  |           |        |  |           |   |        |  |  |   |       | 
|Home equity lines                         |  |                   | 913    |  |                   |   | 968    |           |  |   |           |  |  |           | 868    |  |           |   | 898    |  |  |   |      | 
|Single family owner occupied              |  |                   | 11,779 |  |                   |   | 12,630 |           |  |   |           |  |  |           | 11,289 |  |           |   | 11,996 |  |  |   |      | 
|Owner occupied construction               |  |                   | 573    |  |                   |   | 589    |           |  |   |           |  |  |           | 243    |  |           |   | 243    |  |  |   |      | 
|Consumer and other loans                  |  |                   |        |  |                   |   |        |           |  |   |            |  |  |           |        |  |           |   |        |  |  |   |       | 
|Consumer loans                            |  |                   | 62     |  |                   |   | 103    |           |  |   |           |  |  |           | 71     |  |           |   | 74     |  |  |   |      | 
|Other                                     |  |                   |       |  |                   |   |       |           |  |   |           |  |  |           |       |  |           |   |       |  |  |   |      | 
|                                          |  |                   |        |  |                   |   |        |           |  |   |            |  |  |           |        |  |           |   |        |  |  |   |       | 
|Total impaired loans with no allowance    |  |                   | 22,074 |  |                   |   | 24,133 |           |  |   |           |  |  |           | 25,402 |  |           |   | 27,005 |  |  |   |      | 
|                                          |  |                   |        |  |                   |  
|Impaired loans with a related allowance   |  |                   |        |  |                   |   |        |           |  |   |            |  |  |           |        |  |           |   |        |  |  |   |       | 
|Commercial loans                          |  |                   |        |  |                   |   |        |           |  |   |            |  |  |           |        |  |           |   |        |  |  |   |       | 
|Single family non-owner occupied          |  |                   | 351    |  |                   |   | 351    |           |  |   | 31         |  |  |           | 619    |  |           |   | 623    |  |  |   | 124   | 
|Non-farm, non-residential                 |  |                   |       |  |                   |   |       |           |  |   |           |  |  |           | 5,667  |  |           |   | 5,673  |  |  |   | 1,568 | 
|Farmland                                  |  |                   | 430    |  |                   |   | 430    |           |  |   | 18         |  |  |           |       |  |           |   |       |  |  |   |      | 
|Consumer real estate loans                |  |                   |        |  |                   |   |        |           |  |   |            |  |  |           |        |  |           |   |        |  |  |   |       | 
|Single family owner occupied              |  |                   | 4,118  |  |                   |   | 4,174  |           |  |   | 770        |  |  |           | 4,899  |  |           |   | 4,907  |  |  |   | 672   | 
|Owner occupied construction               |  |                   |       |  |                   |   |       |           |  |   |           |  |  |           | 349    |  |           |   | 355    |  |  |   | 7     | 
|                                          |  |                   |        |  |                   |   |        |           |  |   |            |  |  |           |        |  |           |   |        |  |  |   |       | 
|Total impaired loans with an allowance    |  |                   | 4,899  |  |                   |   | 4,955  |           |  |   | 819        |  |  |           | 11,534 |  |           |   | 11,558 |  |  |   | 2,371 | 
|                                          |  |                   |        |  |                   |   |        |           |  |   |            |  |  |           |        |  |           |   |        |  |  |   |       | 
|Total impaired loans(1)                   |  | $                 | 26,973 |  |                   | $ | 29,088 |           |  | $ | 819        |  |  | $         | 36,936 |  |           | $ | 38,563 |  |  | $ | 2,371 | 
|                                          |  |                   |        |  |                   |   |        |           |  |   |            |  |  |           |        |  |           |   |        |  |  |   |       | 



|(1) | Includes loans totaling $16.89 million as of December 31, 2016, and $14.22 million as of December 31, 2015, that do not meet the Companys
evaluation threshold for individual impairment and are therefore collectively evaluated for impairment
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



32



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FIRST COMMUNITY BANCSHARES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  (Continued)



The following table presents the average recorded investment and interest income recognized on impaired
loans, excluding PCI loans, for the periods indicated:



|                                               |  |                          |       |  |                           |   |        |                          |  |   |                           |  |  |                          |        |  |                           |   |       |  |  |   |        | 
|---------------------------------------------- |  | ------------------------ | ----- |  | ------------------------- | - | ------ | ------------------------ |  | - | ------------------------- |  |  | ------------------------ | ------ |  | ------------------------- | - | ----- |  |  | - | ------ | 
|                                               |  | Year Ended December 31,  |      
|                                               |  | 2016                     |       |  | 2015                      |   |        | 2014                     | 
|(Amounts in thousands)                         |  | InterestIncomeRecognized |       |  | AverageRecordedInvestment |   |        | InterestIncomeRecognized |  |   | AverageRecordedInvestment |  |  | InterestIncomeRecognized |        |  | AverageRecordedInvestment |  
|Impaired loans with no related allowance:      |  |                          |       |  |                           |   |        |                          |  |   |                           |  |  |                          |        |  |                           |   |       |  |  |   |        | 
|Commercial loans                               |  |                          |       |  |                           |   |        |                          |  |   |                           |  |  |                          |        |  |                           |   |       |  |  |   |        | 
|Construction, development, and other land      |  | $                        | 22    |  |                           | $ | 344    |                          |  | $ | 5                         |  |  | $                        | 481    |  |                           | $ | 8     |  |  | $ | 607    | 
|Commercial and industrial                      |  |                          | 16    |  |                           |   | 646    |                          |  |   |                          |  |  |                          | 324    |  |                           |   | 18    |  |  |   | 1,627  | 
|Multi-family residential                       |  |                          | 21    |  |                           |   | 308    |                          |  |   | 4                         |  |  |                          | 269    |  |                           |   | 21    |  |  |   | 162    | 
|Single family non-owner occupied               |  |                          | 178   |  |                           |   | 3,076  |                          |  |   | 88                        |  |  |                          | 2,140  |  |                           |   | 60    |  |  |   | 1,629  | 
|Non-farm, non-residential                      |  |                          | 307   |  |                           |   | 8,573  |                          |  |   | 312                       |  |  |                          | 11,677 |  |                           |   | 353   |  |  |   | 8,248  | 
|Agricultural                                   |  |                          |      |  |                           |   |       |                          |  |   |                          |  |  |                          |       |  |                           |   |      |  |  |   | 1      | 
|Farmland                                       |  |                          | 55    |  |                           |   | 437    |                          |  |   | 16                        |  |  |                          | 195    |  |                           |   | 6     |  |  |   | 315    | 
|Consumer real estate loans                     |  |                          |       |  |                           |   |        |                          |  |   |                           |  |  |                          |        |  |                           |   |       |  |  |   |        | 
|Home equity lines                              |  |                          | 30    |  |                           |   | 1,223  |                          |  |   | 36                        |  |  |                          | 813    |  |                           |   | 22    |  |  |   | 686    | 
|Single family owner occupied                   |  |                          | 343   |  |                           |   | 12,330 |                          |  |   | 356                       |  |  |                          | 12,708 |  |                           |   | 404   |  |  |   | 11,486 | 
|Owner occupied construction                    |  |                          | 9     |  |                           |   | 497    |                          |  |   | 10                        |  |  |                          | 359    |  |                           |   | 5     |  |  |   | 259    | 
|Consumer and other loans                       |  |                          |       |  |                           |   |        |                          |  |   |                           |  |  |                          |        |  |                           |   |       |  |  |   |        | 
|Consumer loans                                 |  |                          | 5     |  |                           |   | 60     |                          |  |   | 8                         |  |  |                          | 98     |  |                           |   | 5     |  |  |   | 108    | 
|                                               |  |                          |       |  |                           |   |        |                          |  |   |                           |  |  |                          |        |  |                           |   |       |  |  |   |        | 
|Total impaired loans with no related allowance |  |                          | 986   |  |                           |   | 27,494 |                          |  |   | 835                       |  |  |                          | 29,064 |  |                           |   | 902   |  |  |   | 25,128 | 
|                                               |  |                          |       |  |                           |  
|Impaired loans with a related allowance:       |  |                          |       |  |                           |   |        |                          |  |   |                           |  |  |                          |        |  |                           |   |       |  |  |   |        | 
|Commercial loans                               |  |                          |       |  |                           |   |        |                          |  |   |                           |  |  |                          |        |  |                           |   |       |  |  |   |        | 
|Commercial and industrial                      |  |                          |      |  |                           |   |       |                          |  |   |                          |  |  |                          |       |  |                           |   | 47    |  |  |   | 2,199  | 
|Multi-family residential                       |  |                          |      |  |                           |   |       |                          |  |   |                          |  |  |                          |       |  |                           |   | 23    |  |  |   | 4,190  | 
|Single family non-owner occupied               |  |                          | 23    |  |                           |   | 518    |                          |  |   | 25                        |  |  |                          | 575    |  |                           |   | 2     |  |  |   | 369    | 
|Non-farm, non-residential                      |  |                          | 215   |  |                           |   | 3,831  |                          |  |   | 65                        |  |  |                          | 4,987  |  |                           |   | 31    |  |  |   | 3,386  | 
|Farmland                                       |  |                          | 14    |  |                           |   | 108    |                          |  |   |                          |  |  |                          |       |  |                           |   |      |  |  |   |       | 
|Consumer real estate loans                     |  |                          |       |  |                           |   |        |                          |  |   |                           |  |  |                          |        |  |                           |   |       |  |  |   |        | 
|Home equity lines                              |  |                          |      |  |                           |   |       |                          |  |   |                          |  |  |                          |       |  |                           |   | 1     |  |  |   | 57     | 
|Single family owner occupied                   |  |                          | 118   |  |                           |   | 4,452  |                          |  |   | 26                        |  |  |                          | 3,731  |  |                           |   | 48    |  |  |   | 3,897  | 
|Owner occupied construction                    |  |                          |      |  |                           |   | 87     |                          |  |   | 1                         |  |  |                          | 178    |  |                           |   |      |  |  |   |       | 
|                                               |  |                          |       |  |                           |   |        |                          |  |   |                           |  |  |                          |        |  |                           |   |       |  |  |   |        | 
|Total impaired loans with a related allowance  |  |                          | 370   |  |                           |   | 8,996  |                          |  |   | 117                       |  |  |                          | 9,471  |  |                           |   | 152   |  |  |   | 14,098 | 
|                                               |  |                          |       |  |                           |   |        |                          |  |   |                           |  |  |                          |        |  |                           |   |       |  |  |   |        | 
|Total impaired loans                           |  | $                        | 1,356 |  |                           | $ | 36,490 |                          |  | $ | 952                       |  |  | $                        | 38,535 |  |                           | $ | 1,054 |  |  | $ | 39,226 | 
|                                               |  |                          |       |  |                           |   |        |                          |  |   |                           |  |  |                          |        |  |                           |   |       |  |  |   |        | 

The following tables provide information on impaired PCI loan pools as of and for the dates indicated:



|                                                    |  |              |       |  |      |   |       | 
|--------------------------------------------------- |  | ------------ | ----- |  | ---- | - | ----- | 
|                                                    |  | December 31, |      
|(Amounts in thousands, except impaired loan pools)  |  | 2016         |       |  | 2015 |  
|Unpaid principal balance                            |  | $            | 1,086 |  |      | $ | 3,759 | 
|Recorded investment                                 |  |              | 1,085 |  |      |   | 2,834 | 
|Allowance for loan losses related to PCI loan pools |  |              | 12    |  |      |   | 54    | 
|Impaired PCI loan pools                             |  |              | 1     |  |      |   | 2     | 



|                            |  |                         |       |  |      |   |       |      |  |   |        | 
|--------------------------- |  | ----------------------- | ----- |  | ---- | - | ----- | ---- |  | - | ------ | 
|                            |  | Year Ended December 31, |      
|(Amounts in thousands)      |  | 2016                    |       |  | 2015 |   |       | 2014 | 
|Interest income recognized  |  | $                       | 142   |  |      | $ | 364   |      |  | $ | 3,081  | 
|Average recorded investment |  |                         | 1,929 |  |      |   | 3,309 |      |  |   | 30,007 | 



33



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FIRST COMMUNITY BANCSHARES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  (Continued)



The Company generally places a loan on nonaccrual status when it is 90 days or more past due. PCI loans
are generally not classified as nonaccrual due to the accrual of interest income under the accretion method of accounting. The following table presents nonaccrual loans, by loan class, as of the dates indicated:



|                                          |  |              |        |  |         |   |     |       |  |   |             |  |  |         |        |  |       |   |     |  |  |   |        | 
|----------------------------------------- |  | ------------ | ------ |  | ------- | - | --- | ----- |  | - | ----------- |  |  | ------- | ------ |  | ----- | - | --- |  |  | - | ------ | 
|                                          |  | December 31, |       
|                                          |  | 2016         |        |  | 2015    |  
|(Amounts in thousands)                    |  | Non-covered  |        |  | Covered |   |     | Total |  |   | Non-covered |  |  | Covered |        |  | Total |  
|Commercial loans                          |  |              |        |  |         |   |     |       |  |   |             |  |  |         |        |  |       |   |     |  |  |   |        | 
|Construction, development, and other land |  | $            | 72     |  |         | $ | 32  |       |  | $ | 104         |  |  | $       | 39     |  |       | $ | 54  |  |  | $ | 93     | 
|Commercial and industrial                 |  |              | 332    |  |         |   | 13  |       |  |   | 345         |  |  |         |       |  |       |   | 16  |  |  |   | 16     | 
|Multi-family residential                  |  |              | 294    |  |         |   |    |       |  |   | 294         |  |  |         | 84     |  |       |   |    |  |  |   | 84     | 
|Single family non-owner occupied          |  |              | 1,242  |  |         |   | 24  |       |  |   | 1,266       |  |  |         | 1,850  |  |       |   | 29  |  |  |   | 1,879  | 
|Non-farm, non-residential                 |  |              | 3,295  |  |         |   | 30  |       |  |   | 3,325       |  |  |         | 7,150  |  |       |   | 39  |  |  |   | 7,189  | 
|Farmland                                  |  |              | 1,591  |  |         |   |    |       |  |   | 1,591       |  |  |         | 234    |  |       |   |    |  |  |   | 234    | 
|Consumer real estate loans                |  |              |        |  |         |   |     |       |  |   |             |  |  |         |        |  |       |   |     |  |  |   |        | 
|Home equity lines                         |  |              | 705    |  |         |   | 400 |       |  |   | 1,105       |  |  |         | 825    |  |       |   | 413 |  |  |   | 1,238  | 
|Single family owner occupied              |  |              | 7,924  |  |         |   | 109 |       |  |   | 8,033       |  |  |         | 7,245  |  |       |   | 96  |  |  |   | 7,341  | 
|Owner occupied construction               |  |              | 336    |  |         |   |    |       |  |   | 336         |  |  |         | 349    |  |       |   |    |  |  |   | 349    | 
|Consumer and other loans                  |  |              |        |  |         |   |     |       |  |   |             |  |  |         |        |  |       |   |     |  |  |   |        | 
|Consumer loans                            |  |              | 63     |  |         |   |    |       |  |   | 63          |  |  |         | 71     |  |       |   |    |  |  |   | 71     | 
|                                          |  |              |        |  |         |   |     |       |  |   |             |  |  |         |        |  |       |   |     |  |  |   |        | 
|Total nonaccrual loans                    |  | $            | 15,854 |  |         | $ | 608 |       |  | $ | 16,462      |  |  | $       | 17,847 |  |       | $ | 647 |  |  | $ | 18,494 | 
|                                          |  |              |        |  |         |   |     |       |  |   |             |  |  |         |        |  |       |   |     |  |  |   |        | 



34



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FIRST COMMUNITY BANCSHARES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  (Continued)



The following tables present the aging of past due loans, by loan class, as of the dates indicated.
Nonaccrual loans 30 days or more past due are included in the applicable delinquency category. Loans acquired with credit deterioration, with a discount, continue to accrue interest based on expected cash flows; therefore, PCI loans are not
generally considered nonaccrual. There were no non-covered accruing loans contractually past due 90 days or more as of December 31, 2016, or December 31, 2015.



|                                          |  |                   |       |  |              |   |       |          |  |   |          |  |  |         |        |  |       |   |           |  |  |   |           | 
|----------------------------------------- |  | ----------------- | ----- |  | ------------ | - | ----- | -------- |  | - | -------- |  |  | ------- | ------ |  | ----- | - | --------- |  |  | - | --------- | 
|                                          |  | December 31, 2016 |      
|                                          |  | 30 - 59 Days      |       |  | 60 - 89 Days |   |       | 90+ Days |  |   | Total    |  |  | Current |        |  | Total |  
|(Amounts in thousands)                    |  | Past Due          |       |  | Past Due     |   |       | Past Due |  |   | Past Due |  |  | Loans   |        |  | Loans |  
|Non-covered loans                         |  |                   |       |  |              |   |       |          |  |   |          |  |  |         |        |  |       |   |           |  |  |   |           | 
|Commercial loans                          |  |                   |       |  |              |   |       |          |  |   |          |  |  |         |        |  |       |   |           |  |  |   |           | 
|Construction, development, and other land |  | $                 | 33    |  |              | $ | 5     |          |  | $ | 17       |  |  | $       | 55     |  |       | $ | 56,893    |  |  | $ | 56,948    | 
|Commercial and industrial                 |  |                   | 174   |  |              |   | 30    |          |  |   | 149      |  |  |         | 353    |  |       |   | 91,851    |  |  |   | 92,204    | 
|Multi-family residential                  |  |                   | 163   |  |              |   |      |          |  |   | 281      |  |  |         | 444    |  |       |   | 133,784   |  |  |   | 134,228   | 
|Single family non-owner occupied          |  |                   | 1,302 |  |              |   | 159   |          |  |   | 835      |  |  |         | 2,296  |  |       |   | 140,669   |  |  |   | 142,965   | 
|Non-farm, non-residential                 |  |                   | 1,235 |  |              |   | 332   |          |  |   | 2,169    |  |  |         | 3,736  |  |       |   | 594,938   |  |  |   | 598,674   | 
|Agricultural                              |  |                   |      |  |              |   | 5     |          |  |   |         |  |  |         | 5      |  |       |   | 5,998     |  |  |   | 6,003     | 
|Farmland                                  |  |                   | 224   |  |              |   | 343   |          |  |   | 565      |  |  |         | 1,132  |  |       |   | 30,597    |  |  |   | 31,729    | 
|Consumer real estate loans                |  |                   |       |  |              |   |       |          |  |   |          |  |  |         |        |  |       |   |           |  |  |   |           | 
|Home equity lines                         |  |                   | 78    |  |              |   | 136   |          |  |   | 658      |  |  |         | 872    |  |       |   | 105,489   |  |  |   | 106,361   | 
|Single family owner occupied              |  |                   | 4,777 |  |              |   | 2,408 |          |  |   | 3,311    |  |  |         | 10,496 |  |       |   | 490,395   |  |  |   | 500,891   | 
|Owner occupied construction               |  |                   | 342   |  |              |   | 336   |          |  |   |         |  |  |         | 678    |  |       |   | 43,857    |  |  |   | 44,535    | 
|Consumer and other loans                  |  |                   |       |  |              |   |       |          |  |   |          |  |  |         |        |  |       |   |           |  |  |   |           | 
|Consumer loans                            |  |                   | 371   |  |              |   | 90    |          |  |   | 15       |  |  |         | 476    |  |       |   | 76,969    |  |  |   | 77,445    | 
|Other                                     |  |                   |      |  |              |   |      |          |  |   |         |  |  |         |       |  |       |   | 3,971     |  |  |   | 3,971     | 
|                                          |  |                   |       |  |              |   |       |          |  |   |          |  |  |         |        |  |       |   |           |  |  |   |           | 
|Total non-covered loans                   |  |                   | 8,699 |  |              |   | 3,844 |          |  |   | 8,000    |  |  |         | 20,543 |  |       |   | 1,775,411 |  |  |   | 1,795,954 | 
|Covered loans                             |  |                   |       |  |              |   |       |          |  |   |          |  |  |         |        |  |       |   |           |  |  |   |           | 
|Commercial loans                          |  |                   |       |  |              |   |       |          |  |   |          |  |  |         |        |  |       |   |           |  |  |   |           | 
|Construction, development, and other land |  |                   | 434   |  |              |   |      |          |  |   | 32       |  |  |         | 466    |  |       |   | 4,104     |  |  |   | 4,570     | 
|Commercial and industrial                 |  |                   |      |  |              |   |      |          |  |   |         |  |  |         |       |  |       |   | 895       |  |  |   | 895       | 
|Multi-family residential                  |  |                   |      |  |              |   |      |          |  |   |         |  |  |         |       |  |       |   | 8         |  |  |   | 8         | 
|Single family non-owner occupied          |  |                   | 24    |  |              |   |      |          |  |   |         |  |  |         | 24     |  |       |   | 938       |  |  |   | 962       | 
|Non-farm, non-residential                 |  |                   | 32    |  |              |   |      |          |  |   |         |  |  |         | 32     |  |       |   | 7,480     |  |  |   | 7,512     | 
|Agricultural                              |  |                   |      |  |              |   |      |          |  |   |         |  |  |         |       |  |       |   | 25        |  |  |   | 25        | 
|Farmland                                  |  |                   |      |  |              |   |      |          |  |   |         |  |  |         |       |  |       |   | 397       |  |  |   | 397       | 
|Consumer real estate loans                |  |                   |       |  |              |   |       |          |  |   |          |  |  |         |        |  |       |   |           |  |  |   |           | 
|Home equity lines                         |  |                   | 108   |  |              |   | 146   |          |  |   | 62       |  |  |         | 316    |  |       |   | 35,501    |  |  |   | 35,817    | 
|Single family owner occupied              |  |                   | 58    |  |              |   |      |          |  |   | 39       |  |  |         | 97     |  |       |   | 6,632     |  |  |   | 6,729     | 
|Owner occupied construction               |  |                   |      |  |              |   |      |          |  |   |         |  |  |         |       |  |       |   |          |  |  |   |          | 
|Consumer and other loans                  |  |                   |       |  |              |   |       |          |  |   |          |  |  |         |        |  |       |   |           |  |  |   |           | 
|Consumer loans                            |  |                   |      |  |              |   |      |          |  |   |         |  |  |         |       |  |       |   | 79        |  |  |   | 79        | 
|                                          |  |                   |       |  |              |   |       |          |  |   |          |  |  |         |        |  |       |   |           |  |  |   |           | 
|Total covered loans                       |  |                   | 656   |  |              |   | 146   |          |  |   | 133      |  |  |         | 935    |  |       |   | 56,059    |  |  |   | 56,994    | 
|                                          |  |                   |       |  |              |   |       |          |  |   |          |  |  |         |        |  |       |   |           |  |  |   |           | 
|Total loans                               |  | $                 | 9,355 |  |              | $ | 3,990 |          |  | $ | 8,133    |  |  | $       | 21,478 |  |       | $ | 1,831,470 |  |  | $ | 1,852,948 | 
|                                          |  |                   |       |  |              |   |       |          |  |   |          |  |  |         |        |  |       |   |           |  |  |   |           | 



35



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##### Table of Contents

FIRST COMMUNITY BANCSHARES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  (Continued)



|                                          |  |                      |        |  |                      |   |       |                  |  |   |               |  |  |              |        |  |            |   |           |  |  |   |           | 
|----------------------------------------- |  | -------------------- | ------ |  | -------------------- | - | ----- | ---------------- |  | - | ------------- |  |  | ------------ | ------ |  | ---------- | - | --------- |  |  | - | --------- | 
|                                          |  | December 31, 2015    |       
|                                          |  | 30 - 59 DaysPast Due |        |  | 60 - 89 DaysPast Due |   |       | 90+ DaysPast
Due |  |   | TotalPast
Due |  |  | CurrentLoans |        |  | TotalLoans |  
|(Amounts in thousands)                    |  |                      |        |  |                      |  
|Non-covered loans                         |  |                      |        |  |                      |   |       |                  |  |   |               |  |  |              |        |  |            |   |           |  |  |   |           | 
|Commercial loans                          |  |                      |        |  |                      |   |       |                  |  |   |               |  |  |              |        |  |            |   |           |  |  |   |           | 
|Construction, development, and other land |  | $                    |       |  |                      | $ |      |                  |  | $ | 39            |  |  | $            | 39     |  |            | $ | 48,857    |  |  | $ | 48,896    | 
|Commercial and industrial                 |  |                      | 281    |  |                      |   | 66    |                  |  |   |              |  |  |              | 347    |  |            |   | 88,556    |  |  |   | 88,903    | 
|Multi-family residential                  |  |                      | 302    |  |                      |   | 76    |                  |  |   | 84            |  |  |              | 462    |  |            |   | 94,564    |  |  |   | 95,026    | 
|Single family non-owner occupied          |  |                      | 748    |  |                      |   | 120   |                  |  |   | 929           |  |  |              | 1,797  |  |            |   | 147,554   |  |  |   | 149,351   | 
|Non-farm, non-residential                 |  |                      | 347    |  |                      |   | 676   |                  |  |   | 4,940         |  |  |              | 5,963  |  |            |   | 479,497   |  |  |   | 485,460   | 
|Agricultural                              |  |                      |       |  |                      |   |      |                  |  |   |              |  |  |              |       |  |            |   | 2,911     |  |  |   | 2,911     | 
|Farmland                                  |  |                      | 585    |  |                      |   | 11    |                  |  |   | 234           |  |  |              | 830    |  |            |   | 26,710    |  |  |   | 27,540    | 
|Consumer real estate loans                |  |                      |        |  |                      |   |       |                  |  |   |               |  |  |              |        |  |            |   |           |  |  |   |           | 
|Home equity lines                         |  |                      | 668    |  |                      |   | 195   |                  |  |   | 468           |  |  |              | 1,331  |  |            |   | 106,036   |  |  |   | 107,367   | 
|Single family owner occupied              |  |                      | 6,122  |  |                      |   | 1,943 |                  |  |   | 3,191         |  |  |              | 11,256 |  |            |   | 483,953   |  |  |   | 495,209   | 
|Owner occupied construction               |  |                      |       |  |                      |   |      |                  |  |   |              |  |  |              |       |  |            |   | 43,505    |  |  |   | 43,505    | 
|Consumer and other loans                  |  |                      |        |  |                      |   |       |                  |  |   |               |  |  |              |        |  |            |   |           |  |  |   |           | 
|Consumer loans                            |  |                      | 278    |  |                      |   | 71    |                  |  |   | 23            |  |  |              | 372    |  |            |   | 71,628    |  |  |   | 72,000    | 
|Other                                     |  |                      |       |  |                      |   |      |                  |  |   |              |  |  |              |       |  |            |   | 7,338     |  |  |   | 7,338     | 
|                                          |  |                      |        |  |                      |   |       |                  |  |   |               |  |  |              |        |  |            |   |           |  |  |   |           | 
|Total non-covered loans                   |  |                      | 9,331  |  |                      |   | 3,158 |                  |  |   | 9,908         |  |  |              | 22,397 |  |            |   | 1,601,109 |  |  |   | 1,623,506 | 
|Covered loans                             |  |                      |        |  |                      |   |       |                  |  |   |               |  |  |              |        |  |            |   |           |  |  |   |           | 
|Commercial loans                          |  |                      |        |  |                      |   |       |                  |  |   |               |  |  |              |        |  |            |   |           |  |  |   |           | 
|Construction, development, and other land |  |                      | 96     |  |                      |   |      |                  |  |   | 42            |  |  |              | 138    |  |            |   | 6,165     |  |  |   | 6,303     | 
|Commercial and industrial                 |  |                      |       |  |                      |   |      |                  |  |   | 16            |  |  |              | 16     |  |            |   | 1,154     |  |  |   | 1,170     | 
|Multi-family residential                  |  |                      |       |  |                      |   |      |                  |  |   |              |  |  |              |       |  |            |   | 640       |  |  |   | 640       | 
|Single family non-owner occupied          |  |                      | 1,422  |  |                      |   |      |                  |  |   |              |  |  |              | 1,422  |  |            |   | 1,252     |  |  |   | 2,674     | 
|Non-farm, non-residential                 |  |                      |       |  |                      |   |      |                  |  |   | 39            |  |  |              | 39     |  |            |   | 14,026    |  |  |   | 14,065    | 
|Agricultural                              |  |                      |       |  |                      |   |      |                  |  |   |              |  |  |              |       |  |            |   | 34        |  |  |   | 34        | 
|Farmland                                  |  |                      |       |  |                      |   |      |                  |  |   |              |  |  |              |       |  |            |   | 643       |  |  |   | 643       | 
|Consumer real estate loans                |  |                      |        |  |                      |   |       |                  |  |   |               |  |  |              |        |  |            |   |           |  |  |   |           | 
|Home equity lines                         |  |                      | 489    |  |                      |   | 37    |                  |  |   | 225           |  |  |              | 751    |  |            |   | 47,814    |  |  |   | 48,565    | 
|Single family owner occupied              |  |                      | 274    |  |                      |   |      |                  |  |   | 42            |  |  |              | 316    |  |            |   | 8,279     |  |  |   | 8,595     | 
|Owner occupied construction               |  |                      |       |  |                      |   |      |                  |  |   |              |  |  |              |       |  |            |   | 262       |  |  |   | 262       | 
|Consumer and other loans                  |  |                      |        |  |                      |   |       |                  |  |   |               |  |  |              |        |  |            |   |           |  |  |   |           | 
|Consumer loans                            |  |                      |       |  |                      |   |      |                  |  |   |              |  |  |              |       |  |            |   | 84        |  |  |   | 84        | 
|                                          |  |                      |        |  |                      |   |       |                  |  |   |               |  |  |              |        |  |            |   |           |  |  |   |           | 
|Total covered loans                       |  |                      | 2,281  |  |                      |   | 37    |                  |  |   | 364           |  |  |              | 2,682  |  |            |   | 80,353    |  |  |   | 83,035    | 
|                                          |  |                      |        |  |                      |   |       |                  |  |   |               |  |  |              |        |  |            |   |           |  |  |   |           | 
|Total loans                               |  | $                    | 11,612 |  |                      | $ | 3,195 |                  |  | $ | 10,272        |  |  | $            | 25,079 |  |            | $ | 1,681,462 |  |  | $ | 1,706,541 | 
|                                          |  |                      |        |  |                      |   |       |                  |  |   |               |  |  |              |        |  |            |   |           |  |  |   |           | 



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FIRST COMMUNITY BANCSHARES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  (Continued)



The Company may make concessions in interest rates, loan terms and/or amortization terms when
restructuring loans for borrowers experiencing financial difficulty. Restructured loans in excess of $250 thousand are evaluated for a specific reserve based on either the collateral or net present value method, whichever is most applicable.
Restructured loans under $250 thousand are subject to the reserve calculation at the historical loss rate for classified loans. Certain TDRs are classified as nonperforming at the time of restructuring and are returned to performing status
after six months of satisfactory payment performance; however, these loans remain identified as impaired until full payment or other satisfaction of the obligation occurs. PCI loans are generally not considered TDRs as long as the loans remain in
the assigned loan pool. No covered loans were recorded as TDRs as of December 31, 2016, or December 31, 2015.

The following table
presents loans modified as TDRs, by loan class and accrual status, as of the dates indicated:



|                                          |  |               |       |  |          |   |        |       |  |   |               |  |  |          |       |  |       |   |        |  |  |   |        | 
|----------------------------------------- |  | ------------- | ----- |  | -------- | - | ------ | ----- |  | - | ------------- |  |  | -------- | ----- |  | ----- | - | ------ |  |  | - | ------ | 
|                                          |  | December 31,  |      
|                                          |  | 2016          |       |  | 2015     |  
|(Amounts in thousands)                    |  | Nonaccrual(1) |       |  | Accruing |   |        | Total |  |   | Nonaccrual(1) |  |  | Accruing |       |  | Total |  
|Commercial loans                          |  |               |       |  |          |   |        |       |  |   |               |  |  |          |       |  |       |   |        |  |  |   |        | 
|Single family non-owner occupied          |  | $             | 38    |  |          | $ | 892    |       |  | $ | 930           |  |  | $        | 130   |  |       | $ | 820    |  |  | $ | 950    | 
|Non-farm, non-residential                 |  |               |      |  |          |   | 4,160  |       |  |   | 4,160         |  |  |          |      |  |       |   | 4,600  |  |  |   | 4,600  | 
|Consumer real estate loans                |  |               |       |  |          |   |        |       |  |   |               |  |  |          |       |  |       |   |        |  |  |   |        | 
|Home equity lines                         |  |               |      |  |          |   | 158    |       |  |   | 158           |  |  |          | 127   |  |       |   | 43     |  |  |   | 170    | 
|Single family owner occupied              |  |               | 905   |  |          |   | 7,503  |       |  |   | 8,408         |  |  |          | 733   |  |       |   | 8,256  |  |  |   | 8,989  | 
|Owner occupied construction               |  |               | 341   |  |          |   | 239    |       |  |   | 580           |  |  |          | 349   |  |       |   | 243    |  |  |   | 592    | 
|                                          |  |               |       |  |          |   |        |       |  |   |               |  |  |          |       |  |       |   |        |  |  |   |        | 
|Total TDRs                                |  | $             | 1,284 |  |          | $ | 12,952 |       |  | $ | 14,236        |  |  | $        | 1,339 |  |       | $ | 13,962 |  |  | $ | 15,301 | 
|                                          |  |               |       |  |          |   |        |       |  |   |               |  |  |          |       |  |       |   |        |  |  |   |        | 
|Allowance for loan losses related to TDRs |  |               |       |  |          |   |        |       |  | $ | 670           |  |  |          |       |  |       |   |        |  |  | $ | 590    | 
|                                          |  |               |       |  |          |   |        |       |  |   |               |  |  |          |       |  |       |   |        |  |  |   |        | 



|(1) | Nonaccrual TDRs are included in total nonaccrual loans disclosed in the nonaccrual table above.
|--- | -----------------------------------------------------------------------------------------------

The following table presents interest income recognized on TDRs for the periods indicated:



|                           |  |                         |     |  |      |   |     |      |  |   |     | 
|-------------------------- |  | ----------------------- | --- |  | ---- | - | --- | ---- |  | - | --- | 
|                           |  | Year Ended December 31, |    
|(Amounts in thousands)     |  | 2016                    |     |  | 2015 |   |     | 2014 | 
|Interest income recognized |  | $                       | 424 |  |      | $ | 608 |      |  | $ | 597 | 



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FIRST COMMUNITY BANCSHARES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  (Continued)



The following table presents loans modified as TDRs, by type of concession made and loan class, that
were restructured during the periods indicated. The post-modification recorded investment represents the loan balance immediately following modification.



|                                                                                  |  |                         |   |  |                                    |   |     |                                     |  |   |                |  |  |                                    |   |  |                                     |   |     |  |  |   |     | 
|--------------------------------------------------------------------------------- |  | ----------------------- | - |  | ---------------------------------- | - | --- | ----------------------------------- |  | - | -------------- |  |  | ---------------------------------- | - |  | ----------------------------------- | - | --- |  |  | - | --- | 
|                                                                                  |  | Year Ended December 31, |  
|                                                                                  |  | 2016                    |   |  | 2015                               |  
|(Amounts in thousands)                                                            |  | TotalContracts          |   |  | Pre-ModificationRecordedInvestment |   |     | Post-ModificationRecordedInvestment |  |   | TotalContracts |  |  | Pre-ModificationRecordedInvestment |   |  | Post-ModificationRecordedInvestment |  
|Below market interest rate and extended payment term Single family owner occupied |  |                         | 1 |  |                                    | $ | 115 |                                     |  | $ | 115            |  |  |                                    | 5 |  |                                     | $ | 342 |  |  | $ | 342 | 
|                                                                                  |  |                         |   |  |                                    |   |     |                                     |  |   |                |  |  |                                    |   |  |                                     |   |     |  |  |   |     | 
|Total                                                                             |  |                         | 1 |  |                                    | $ | 115 |                                     |  | $ | 115            |  |  |                                    | 5 |  |                                     | $ | 342 |  |  | $ | 342 | 
|                                                                                  |  |                         |   |  |                                    |   |     |                                     |  |   |                |  |  |                                    |   |  |                                     |   |     |  |  |   |     | 

There were no payment defaults on loans modified as TDRs that were restructured within the previous 12 months as of
December 31, 2016 and 2015.

The following table provides information about OREO, which consists of properties acquired through
foreclosure, as of the dates indicated:



|                                                            |  |              |       |  |      |   |       | 
|----------------------------------------------------------- |  | ------------ | ----- |  | ---- | - | ----- | 
|                                                            |  | December 31, |      
|(Amounts in thousands)                                      |  | 2016         |       |  | 2015 |  
|Non-covered OREO                                            |  | $            | 5,109 |  |      | $ | 4,873 | 
|Covered OREO                                                |  |              | 276   |  |      |   | 4,034 | 
|                                                            |  |              |       |  |      |   |       | 
|Total OREO                                                  |  | $            | 5,385 |  |      | $ | 8,907 | 
|                                                            |  |              |       |  |      |   |       | 
|Non-covered OREO secured by residential real estate         |  | $            | 1,746 |  |      | $ | 2,677 | 
|Residential real estate loans in the foreclosure process(1) |  |              | 2,539 |  |      |   | 2,727 | 



|(1) | The recorded investment in consumer mortgage loans collateralized by residential real estate that are in the process of foreclosure according to local requirements of
the applicable jurisdiction.
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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FIRST COMMUNITY BANCSHARES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  (Continued)



|Note 6. | Allowance for Loan Losses
|------- | -------------------------

The following
tables present the changes in the allowance for loan losses, by loan segment, during the periods indicated:



|                                                                        |  |                              |        |   |                     |   |        |                   |  |   |                |   |  |   |        |  
|----------------------------------------------------------------------- |  | ---------------------------- | ------ | - | ------------------- | - | ------ | ----------------- |  | - | -------------- | - |  | - | ------ | -
|                                                                        |  | Year Ended December 31, 2016 |       
|(Amounts in thousands)                                                  |  | Commercial                   |        |   | Consumer RealEstate |   |        | Consumerand Other |  |   | TotalAllowance |  
|Allowance, excluding PCI                                                |  |                              |        |   |                     |   |        |                   |  |   |                |   |  |   |        |  
|Beginning balance                                                       |  | $                            | 13,133 |   |                     | $ | 6,356  |                   |  | $ | 690            |   |  | $ | 20,179 |  
|Provision for loan losses charged to operations                         |  |                              | 30     |   |                     |   | 385    |                   |  |   | 881            |   |  |   | 1,296  |  
|Charge-offs                                                             |  |                              | (2,392 | ) |                     |   | (1,612 | )                 |  |   | (1,172         | ) |  |   | (5,176 | )
|Recoveries                                                              |  |                              | 919    |   |                     |   | 358    |                   |  |   | 360            |   |  |   | 1,637  |  
|                                                                        |  |                              |        |   |                     |   |        |                   |  |   |                |   |  |   |        |  
|Net charge-offs                                                         |  |                              | (1,473 | ) |                     |   | (1,254 | )                 |  |   | (812           | ) |  |   | (3,539 | )
|                                                                        |  |                              |        |   |                     |   |        |                   |  |   |                |   |  |   |        |  
|Ending balance                                                          |  | $                            | 11,690 |   |                     | $ | 5,487  |                   |  | $ | 759            |   |  | $ | 17,936 |  
|                                                                        |  |                              |        |   |                     |   |        |                   |  |   |                |   |  |   |        |  
|PCI allowance                                                           |  |                              |        |   |                     |   |        |                   |  |   |                |   |  |   |        |  
|Beginning balance                                                       |  | $                            |       |   |                     | $ | 54     |                   |  | $ |               |   |  | $ | 54     |  
|Recovery of loan losses                                                 |  |                              |       |   |                     |   | (42    | )                 |  |   |               |   |  |   | (42    | )
|Benefit attributable to the FDIC indemnification asset                  |  |                              |       |   |                     |   | 1      |                   |  |   |               |   |  |   | 1      |  
|                                                                        |  |                              |        |   |                     |   |        |                   |  |   |                |   |  |   |        |  
|Recovery of loan losses charged to operations                           |  |                              |       |   |                     |   | (41    | )                 |  |   |               |   |  |   | (41    | )
|Recovery of loan losses recorded through the FDIC indemnification asset |  |                              |       |   |                     |   | (1     | )                 |  |   |               |   |  |   | (1     | )
|                                                                        |  |                              |        |   |                     |   |        |                   |  |   |                |   |  |   |        |  
|Ending balance                                                          |  | $                            |       |   |                     | $ | 12     |                   |  | $ |               |   |  | $ | 12     |  
|                                                                        |  |                              |        |   |                     |   |        |                   |  |   |                |   |  |   |        |  
|Total allowance                                                         |  |                              |        |   |                     |   |        |                   |  |   |                |   |  |   |        |  
|Beginning balance                                                       |  | $                            | 13,133 |   |                     | $ | 6,410  |                   |  | $ | 690            |   |  | $ | 20,233 |  
|Provision for loan losses                                               |  |                              | 30     |   |                     |   | 343    |                   |  |   | 881            |   |  |   | 1,254  |  
|Benefit attributable to the FDIC indemnification asset                  |  |                              |       |   |                     |   | 1      |                   |  |   |               |   |  |   | 1      |  
|                                                                        |  |                              |        |   |                     |   |        |                   |  |   |                |   |  |   |        |  
|Provision for loan losses charged to operations                         |  |                              | 30     |   |                     |   | 344    |                   |  |   | 881            |   |  |   | 1,255  |  
|Recovery of loan losses recorded through the FDIC indemnification asset |  |                              |       |   |                     |   | (1     | )                 |  |   |               |   |  |   | (1     | )
|Charge-offs                                                             |  |                              | (2,392 | ) |                     |   | (1,612 | )                 |  |   | (1,172         | ) |  |   | (5,176 | )
|Recoveries                                                              |  |                              | 919    |   |                     |   | 358    |                   |  |   | 360            |   |  |   | 1,637  |  
|                                                                        |  |                              |        |   |                     |   |        |                   |  |   |                |   |  |   |        |  
|Net charge-offs                                                         |  |                              | (1,473 | ) |                     |   | (1,254 | )                 |  |   | (812           | ) |  |   | (3,539 | )
|                                                                        |  |                              |        |   |                     |   |        |                   |  |   |                |   |  |   |        |  
|Ending balance                                                          |  | $                            | 11,690 |   |                     | $ | 5,499  |                   |  | $ | 759            |   |  | $ | 17,948 |  
|                                                                        |  |                              |        |   |                     |   |        |                   |  |   |                |   |  |   |        |  



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FIRST COMMUNITY BANCSHARES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  (Continued)



|                                                                        |  |                              |        |   |                     |   |       |                   |  |   |                |   |  |   |        |  
|----------------------------------------------------------------------- |  | ---------------------------- | ------ | - | ------------------- | - | ----- | ----------------- |  | - | -------------- | - |  | - | ------ | -
|                                                                        |  | Year Ended December 31, 2015 |       
|(Amounts in thousands)                                                  |  | Commercial                   |        |   | Consumer RealEstate |   |       | Consumer andOther |  |   | TotalAllowance |  
|Allowance, excluding PCI                                                |  |                              |        |   |                     |   |       |                   |  |   |                |   |  |   |        |  
|Beginning balance                                                       |  | $                            | 13,010 |   |                     | $ | 6,489 |                   |  | $ | 670            |   |  | $ | 20,169 |  
|Provision for loan losses charged to operations                         |  |                              | 931    |   |                     |   | 95    |                   |  |   | 1,140          |   |  |   | 2,166  |  
|Charge-offs                                                             |  |                              | (1,282 | ) |                     |   | (906  | )                 |  |   | (1,557         | ) |  |   | (3,745 | )
|Recoveries                                                              |  |                              | 474    |   |                     |   | 678   |                   |  |   | 437            |   |  |   | 1,589  |  
|                                                                        |  |                              |        |   |                     |   |       |                   |  |   |                |   |  |   |        |  
|Net charge-offs                                                         |  |                              | (808   | ) |                     |   | (228  | )                 |  |   | (1,120         | ) |  |   | (2,156 | )
|                                                                        |  |                              |        |   |                     |   |       |                   |  |   |                |   |  |   |        |  
|Ending balance                                                          |  | $                            | 13,133 |   |                     | $ | 6,356 |                   |  | $ | 690            |   |  | $ | 20,179 |  
|                                                                        |  |                              |        |   |                     |   |       |                   |  |   |                |   |  |   |        |  
|PCI allowance                                                           |  |                              |        |   |                     |   |       |                   |  |   |                |   |  |   |        |  
|Beginning balance                                                       |  | $                            | 37     |   |                     | $ | 21    |                   |  | $ |               |   |  | $ | 58     |  
|(Recovery of) provision for loan losses                                 |  |                              | (37    | ) |                     |   | 33    |                   |  |   |               |   |  |   | (4     | )
|Benefit attributable to the FDIC indemnification asset                  |  |                              | 29     |   |                     |   |      |                   |  |   |               |   |  |   | 29     |  
|                                                                        |  |                              |        |   |                     |   |       |                   |  |   |                |   |  |   |        |  
|(Recovery of) provision for loan losses charged to operations           |  |                              | (8     | ) |                     |   | 33    |                   |  |   |               |   |  |   | 25     |  
|Recovery of loan losses recorded through the FDIC indemnification asset |  |                              | (29    | ) |                     |   |      |                   |  |   |               |   |  |   | (29    | )
|                                                                        |  |                              |        |   |                     |   |       |                   |  |   |                |   |  |   |        |  
|Ending balance                                                          |  | $                            |       |   |                     | $ | 54    |                   |  | $ |               |   |  | $ | 54     |  
|                                                                        |  |                              |        |   |                     |   |       |                   |  |   |                |   |  |   |        |  
|Total allowance                                                         |  |                              |        |   |                     |   |       |                   |  |   |                |   |  |   |        |  
|Beginning balance                                                       |  | $                            | 13,047 |   |                     | $ | 6,510 |                   |  | $ | 670            |   |  | $ | 20,227 |  
|Provision for loan losses                                               |  |                              | 894    |   |                     |   | 128   |                   |  |   | 1,140          |   |  |   | 2,162  |  
|Benefit attributable to the FDIC indemnification asset                  |  |                              | 29     |   |                     |   |      |                   |  |   |               |   |  |   | 29     |  
|                                                                        |  |                              |        |   |                     |   |       |                   |  |   |                |   |  |   |        |  
|Provision for loan losses charged to operations                         |  |                              | 923    |   |                     |   | 128   |                   |  |   | 1,140          |   |  |   | 2,191  |  
|Recovery of loan losses recorded through the FDIC indemnification asset |  |                              | (29    | ) |                     |   |      |                   |  |   |               |   |  |   | (29    | )
|Charge-offs                                                             |  |                              | (1,282 | ) |                     |   | (906  | )                 |  |   | (1,557         | ) |  |   | (3,745 | )
|Recoveries                                                              |  |                              | 474    |   |                     |   | 678   |                   |  |   | 437            |   |  |   | 1,589  |  
|                                                                        |  |                              |        |   |                     |   |       |                   |  |   |                |   |  |   |        |  
|Net charge-offs                                                         |  |                              | (808   | ) |                     |   | (228  | )                 |  |   | (1,120         | ) |  |   | (2,156 | )
|                                                                        |  |                              |        |   |                     |   |       |                   |  |   |                |   |  |   |        |  
|Ending balance                                                          |  | $                            | 13,133 |   |                     | $ | 6,410 |                   |  | $ | 690            |   |  | $ | 20,233 |  
|                                                                        |  |                              |        |   |                     |   |       |                   |  |   |                |   |  |   |        |  



40



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FIRST COMMUNITY BANCSHARES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  (Continued)



The following tables present the allowance for loan losses and recorded investment in loans evaluated
for impairment, excluding PCI loans, by loan class, as of the dates indicated:



|                                          |  |                                           |        |  |                                         |   |     |                                           |  |   |                                          |  |  |   |        | 
|----------------------------------------- |  | ----------------------------------------- | ------ |  | --------------------------------------- | - | --- | ----------------------------------------- |  | - | ---------------------------------------- |  |  | - | ------ | 
|                                          |  | December 31, 2016                         |       
|(Amounts in thousands)                    |  | LoansIndividuallyEvaluated 
forImpairment |        |  | Allowance forLoansIndividuallyEvaluated |   |     | LoansCollectivelyEvaluated 
forImpairment |  |   | Allowancefor 
LoansCollectivelyEvaluated | 
|Commercial loans                          |  |                                           |        |  |                                         |   |     |                                           |  |   |                                          |  |  |   |        | 
|Construction, development, and other land |  | $                                         |       |  |                                         | $ |    |                                           |  | $ | 60,281                                   |  |  | $ | 889    | 
|Commercial and industrial                 |  |                                           |       |  |                                         |   |    |                                           |  |   | 93,099                                   |  |  |   | 495    | 
|Multi-family residential                  |  |                                           | 281    |  |                                         |   |    |                                           |  |   | 133,947                                  |  |  |   | 1,157  | 
|Single family non-owner occupied          |  |                                           | 1,910  |  |                                         |   | 31  |                                           |  |   | 139,711                                  |  |  |   | 2,721  | 
|Non-farm, non-residential                 |  |                                           | 1,454  |  |                                         |   |    |                                           |  |   | 600,915                                  |  |  |   | 6,185  | 
|Agricultural                              |  |                                           |       |  |                                         |   |    |                                           |  |   | 6,028                                    |  |  |   | 43     | 
|Farmland                                  |  |                                           | 981    |  |                                         |   | 18  |                                           |  |   | 31,145                                   |  |  |   | 151    | 
|                                          |  |                                           |        |  |                                         |   |     |                                           |  |   |                                          |  |  |   |        | 
|Total commercial loans                    |  |                                           | 4,626  |  |                                         |   | 49  |                                           |  |   | 1,065,126                                |  |  |   | 11,641 | 
|Consumer real estate loans                |  |                                           |        |  |                                         |   |     |                                           |  |   |                                          |  |  |   |        | 
|Home equity lines                         |  |                                           |       |  |                                         |   |    |                                           |  |   | 122,000                                  |  |  |   | 895    | 
|Single family owner occupied              |  |                                           | 5,120  |  |                                         |   | 770 |                                           |  |   | 501,617                                  |  |  |   | 3,594  | 
|Owner occupied construction               |  |                                           | 336    |  |                                         |   |    |                                           |  |   | 44,199                                   |  |  |   | 228    | 
|                                          |  |                                           |        |  |                                         |   |     |                                           |  |   |                                          |  |  |   |        | 
|Total consumer real estate loans          |  |                                           | 5,456  |  |                                         |   | 770 |                                           |  |   | 667,816                                  |  |  |   | 4,717  | 
|Consumer and other loans                  |  |                                           |        |  |                                         |   |     |                                           |  |   |                                          |  |  |   |        | 
|Consumer loans                            |  |                                           |       |  |                                         |   |    |                                           |  |   | 77,524                                   |  |  |   | 759    | 
|Other                                     |  |                                           |       |  |                                         |   |    |                                           |  |   | 3,971                                    |  |  |   |       | 
|                                          |  |                                           |        |  |                                         |   |     |                                           |  |   |                                          |  |  |   |        | 
|Total consumer and other loans            |  |                                           |       |  |                                         |   |    |                                           |  |   | 81,495                                   |  |  |   | 759    | 
|                                          |  |                                           |        |  |                                         |   |     |                                           |  |   |                                          |  |  |   |        | 
|Total loans, excluding PCI loans          |  | $                                         | 10,082 |  |                                         | $ | 819 |                                           |  | $ | 1,814,437                                |  |  | $ | 17,117 | 
|                                          |  |                                           |        |  |                                         |   |     |                                           |  |   |                                          |  |  |   |        | 



|                                          |  |                                           |        |  |                                          |   |       |                                           |  |   |                                          |  |  |   |        | 
|----------------------------------------- |  | ----------------------------------------- | ------ |  | ---------------------------------------- | - | ----- | ----------------------------------------- |  | - | ---------------------------------------- |  |  | - | ------ | 
|                                          |  | December 31, 2015                         |       
|(Amounts in thousands)                    |  | LoansIndividuallyEvaluated 
forImpairment |        |  | Allowancefor 
LoansIndividuallyEvaluated |   |       | LoansCollectivelyEvaluated 
forImpairment |  |   | Allowancefor 
LoansCollectivelyEvaluated | 
|Commercial loans                          |  |                                           |        |  |                                          |   |       |                                           |  |   |                                          |  |  |   |        | 
|Construction, development, and other land |  | $                                         |       |  |                                          | $ |      |                                           |  | $ | 53,437                                   |  |  | $ | 1,119  | 
|Commercial and industrial                 |  |                                           |       |  |                                          |   |      |                                           |  |   | 89,885                                   |  |  |   | 504    | 
|Multi-family residential                  |  |                                           |       |  |                                          |   |      |                                           |  |   | 95,486                                   |  |  |   | 1,535  | 
|Single family non-owner occupied          |  |                                           | 1,401  |  |                                          |   | 124   |                                           |  |   | 147,209                                  |  |  |   | 3,245  | 
|Non-farm, non-residential                 |  |                                           | 14,094 |  |                                          |   | 1,568 |                                           |  |   | 478,839                                  |  |  |   | 4,825  | 
|Agricultural                              |  |                                           |       |  |                                          |   |      |                                           |  |   | 2,945                                    |  |  |   | 22     | 
|Farmland                                  |  |                                           |       |  |                                          |   |      |                                           |  |   | 28,183                                   |  |  |   | 190    | 
|                                          |  |                                           |        |  |                                          |   |       |                                           |  |   |                                          |  |  |   |        | 
|Total commercial loans                    |  |                                           | 15,495 |  |                                          |   | 1,692 |                                           |  |   | 895,984                                  |  |  |   | 11,440 | 
|Consumer real estate loans                |  |                                           |        |  |                                          |   |       |                                           |  |   |                                          |  |  |   |        | 
|Home equity lines                         |  |                                           |       |  |                                          |   |      |                                           |  |   | 126,691                                  |  |  |   | 1,091  | 
|Single family owner occupied              |  |                                           | 6,874  |  |                                          |   | 672   |                                           |  |   | 495,761                                  |  |  |   | 4,297  | 
|Owner occupied construction               |  |                                           | 349    |  |                                          |   | 7     |                                           |  |   | 43,323                                   |  |  |   | 290    | 
|                                          |  |                                           |        |  |                                          |   |       |                                           |  |   |                                          |  |  |   |        | 
|Total consumer real estate loans          |  |                                           | 7,223  |  |                                          |   | 679   |                                           |  |   | 665,775                                  |  |  |   | 5,678  | 
|Consumer and other loans                  |  |                                           |        |  |                                          |   |       |                                           |  |   |                                          |  |  |   |        | 
|Consumer loans                            |  |                                           |       |  |                                          |   |      |                                           |  |   | 72,084                                   |  |  |   | 690    | 
|Other                                     |  |                                           |       |  |                                          |   |      |                                           |  |   | 7,338                                    |  |  |   |       | 
|                                          |  |                                           |        |  |                                          |   |       |                                           |  |   |                                          |  |  |   |        | 
|Total consumer and other loans            |  |                                           |       |  |                                          |   |      |                                           |  |   | 79,422                                   |  |  |   | 690    | 
|                                          |  |                                           |        |  |                                          |   |       |                                           |  |   |                                          |  |  |   |        | 
|Total loans, excluding PCI loans          |  | $                                         | 22,718 |  |                                          | $ | 2,371 |                                           |  | $ | 1,641,181                                |  |  | $ | 17,808 | 
|                                          |  |                                           |        |  |                                          |   |       |                                           |  |   |                                          |  |  |   |        | 



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FIRST COMMUNITY BANCSHARES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  (Continued)



The following table presents the allowance for loan losses on PCI loans and recorded investment in PCI
loans, by loan pool, as of the dates indicated:



|                                    |  |                    |        |  |                                       |   |    |                    |  |   |                                       |  |  |   |    | 
|----------------------------------- |  | ------------------ | ------ |  | ------------------------------------- | - | -- | ------------------ |  | - | ------------------------------------- |  |  | - | -- | 
|                                    |  | December 31, 2016  |        |  | December 31, 2015                     |  
|(Amounts in thousands)              |  | RecordedInvestment |        |  | Allowancefor LoanPools
WithImpairment |   |    | RecordedInvestment |  |   | Allowance forLoan PoolsWithImpairment | 
|Commercial loans                    |  |                    |        |  |                                       |   |    |                    |  |   |                                       |  |  |   |    | 
|Waccamaw commercial                 |  | $                  | 260    |  |                                       | $ |   |                    |  | $ | 3,788                                 |  |  | $ |   | 
|Peoples commercial                  |  |                    | 4,491  |  |                                       |   |   |                    |  |   | 5,525                                 |  |  |   |   | 
|Other                               |  |                    | 1,095  |  |                                       |   |   |                    |  |   | 1,254                                 |  |  |   |   | 
|                                    |  |                    |        |  |                                       |   |    |                    |  |   |                                       |  |  |   |    | 
|Total commercial loans              |  |                    | 5,846  |  |                                       |   |   |                    |  |   | 10,567                                |  |  |   |   | 
|Consumer real estate loans          |  |                    |        |  |                                       |   |    |                    |  |   |                                       |  |  |   |    | 
|Waccamaw serviced home equity lines |  |                    | 20,178 |  |                                       |   |   |                    |  |   | 29,241                                |  |  |   |   | 
|Waccamaw residential                |  |                    | 1,320  |  |                                       |   |   |                    |  |   | 1,678                                 |  |  |   | 1  | 
|Peoples residential                 |  |                    | 1,085  |  |                                       |   | 12 |                    |  |   | 1,156                                 |  |  |   | 53 | 
|                                    |  |                    |        |  |                                       |   |    |                    |  |   |                                       |  |  |   |    | 
|Total consumer real estate loans    |  |                    | 22,583 |  |                                       |   | 12 |                    |  |   | 32,075                                |  |  |   | 54 | 
|                                    |  |                    |        |  |                                       |   |    |                    |  |   |                                       |  |  |   |    | 
|Total PCI loans                     |  | $                  | 28,429 |  |                                       | $ | 12 |                    |  | $ | 42,642                                |  |  | $ | 54 | 
|                                    |  |                    |        |  |                                       |   |    |                    |  |   |                                       |  |  |   |    | 

Management believed the allowance was adequate to absorb probable loan losses inherent in the loan portfolio as of
December 31, 2016.



|Note 7. | FDIC Indemnification Asset
|------- | --------------------------

In connection
with the FDIC-assisted acquisition of Waccamaw in 2012, the Company entered into loss share agreements with the FDIC that covered $56.99 million of loans and $276 thousand of OREO as of December 31, 2016, compared to
$83.04 million of loans and $4.03 million of OREO as of December 31, 2015. Under the loss share agreements, the FDIC agrees to cover 80% of most loan and foreclosed real estate losses and reimburse certain expenses incurred in
relation to these covered assets. Loss share coverage will expire June 30, 2017, for commercial loans, with recoveries continuing until June 30, 2019. Loss share coverage will expire June 30, 2022, for single family loans. The
Companys consolidated statements of income include the expense on covered assets net of estimated reimbursements. The following table presents the changes in the FDIC indemnification asset during the periods indicated:



|                                              |  |                         |        |   |      |   |        |  
|--------------------------------------------- |  | ----------------------- | ------ | - | ---- | - | ------ | -
|                                              |  | Year Ended December 31, |       
|(Amounts in thousands)                        |  | 2016                    |        |   | 2015 |  
|Beginning balance                             |  | $                       | 20,844 |   |      | $ | 27,900 |  
|Decrease in estimated losses on covered loans |  |                         | (1     | ) |      |   | (28    | )
|Increase in estimated losses on covered OREO  |  |                         | 1,045  |   |      |   | 1,489  |  
|Reimbursable expenses from the FDIC           |  |                         | 162    |   |      |   | 545    |  
|Net amortization                              |  |                         | (5,474 | ) |      |   | (6,379 | )
|Reimbursements from the FDIC                  |  |                         | (4,403 | ) |      |   | (2,683 | )
|                                              |  |                         |        |   |      |   |        |  
|Ending balance                                |  | $                       | 12,173 |   |      | $ | 20,844 |  
|                                              |  |                         |        |   |      |   |        |  



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FIRST COMMUNITY BANCSHARES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  (Continued)



|Note 8. | Premises, Equipment, and Leases
|------- | -------------------------------

Premises and Equipment

The following
table presents the components of premises and equipment as of the dates indicated:



|                                          |  |              |         |   |      |   |         |  
|----------------------------------------- |  | ------------ | ------- | - | ---- | - | ------- | -
|                                          |  | December 31, |        
|(Amounts in thousands)                    |  | 2016         |         |   | 2015 |  
|Land                                      |  | $            | 18,987  |   |      | $ | 19,155  |  
|Buildings and leasehold improvements      |  |              | 46,740  |   |      |   | 50,776  |  
|Equipment                                 |  |              | 32,519  |   |      |   | 36,709  |  
|                                          |  |              |         |   |      |   |         |  
|Total premises and equipment              |  |              | 98,246  |   |      |   | 106,640 |  
|Accumulated depreciation and amortization |  |              | (48,161 | ) |      |   | (53,884 | )
|                                          |  |              |         |   |      |   |         |  
|Total premises and equipment, net         |  | $            | 50,085  |   |      | $ | 52,756  |  
|                                          |  |              |         |   |      |   |         |  

Impairment charges related to certain long-term investments in land and buildings totaled $364 thousand in 2016,
$259 thousand in 2015, and $935 thousand in 2014. Depreciation and amortization expense for premises and equipment was $3.56 million in 2016, $4.14 million in 2015, and $4.41 million in 2014.

Leases

The Company enters into various
noncancelable operating leases. The following schedule presents the future minimum lease payments required under noncancelable operating leases, with initial or remaining terms in excess of one year, by year, as of December 31, 2016:



|                       |  |   |       | 
|---------------------- |  | - | ----- | 
|(Amounts in thousands) |  |   |      
|2017                   |  | $ | 341   | 
|2018                   |  |   | 199   | 
|2019                   |  |   | 110   | 
|2020                   |  |   | 97    | 
|2021                   |  |   | 97    | 
|2022 and thereafter    |  |   | 791   | 
|                       |  |   |       | 
|                       |  | $ | 1,635 | 
|                       |  |   |       | 

Lease expense was $784 thousand in 2016, $862 thousand in 2015, and $1.06 million in 2014. Certain
portions of the Companys leases have been sublet to third parties for properties not currently being used by the Company. Future minimum lease payments to be received under noncancelable subleases totaled $1 thousand as of
December 31, 2016.



|Note 9. | Goodwill and Other Intangible Assets
|------- | ------------------------------------

Goodwill

The company has one reporting
unit for goodwill impairment testing purposes  Community Banking. Prior to October 2016, the Company maintained two reporting units  Community Banking and Insurance Services. The Insurance Services reporting unit consisted of the
Companys wholly owned subsidiary Greenpoint, which was sold in October 2016. The Company performed its annual qualitative assessment of goodwill as of October 31, 2016, and concluded that no impairment charge was necessary. No events have
occurred after the 2016 analysis to indicate potential impairment.



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FIRST COMMUNITY BANCSHARES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  (Continued)



The following table presents the changes in goodwill, by reporting unit, during the periods indicated:



|                                   |  |                  |        |   |                   |   |        |       |  |   |         |  
|---------------------------------- |  | ---------------- | ------ | - | ----------------- | - | ------ | ----- |  | - | ------- | -
|(Amounts in thousands)             |  | CommunityBanking |        |   | InsuranceServices |   |        | Total | 
|Balance January 1, 2014            |  | $                | 96,541 |   |                   | $ | 8,914  |       |  | $ | 105,455 |  
|Acquisitions and dispositions, net |  |                  | (6,454 | ) |                   |   |       |       |  |   | (6,454  | )
|Cash consideration paid            |  |                  | 1,368  |   |                   |   | 353    |       |  |   | 1,721   |  
|                                   |  |                  |        |   |                   |   |        |       |  |   |         |  
|Balance December 31, 2014          |  | $                | 91,455 |   |                   | $ | 9,267  |       |  | $ | 100,722 |  
|                                   |  |                  |        |   |                   |   |        |       |  |   |         |  
|Balance January 1, 2015            |  | $                | 91,455 |   |                   | $ | 9,267  |       |  | $ | 100,722 |  
|Acquisitions and dispositions, net |  |                  |       |   |                   |   | (324   | )     |  |   | (324    | )
|Cash consideration paid            |  |                  |       |   |                   |   | 88     |       |  |   | 88      |  
|                                   |  |                  |        |   |                   |   |        |       |  |   |         |  
|Balance December 31, 2015          |  | $                | 91,455 |   |                   | $ | 9,031  |       |  | $ | 100,486 |  
|                                   |  |                  |        |   |                   |   |        |       |  |   |         |  
|Balance January 1, 2016            |  | $                | 91,455 |   |                   | $ | 9,031  |       |  | $ | 100,486 |  
|Acquisitions and dispositions, net |  |                  | 1,290  |   |                   |   | (5,997 | )     |  |   | (4,707  | )
|Other(1)                           |  |                  | 3,034  |   |                   |   | (3,034 | )     |  |   |        |  
|                                   |  |                  |        |   |                   |   |        |       |  |   |         |  
|Balance December 31, 2016          |  | $                | 95,779 |   |                   | $ |       |       |  | $ | 95,779  |  
|                                   |  |                  |        |   |                   |   |        |       |  |   |         |  



|(1) | Represents the transfer of goodwill after the sale of Greenpoint to one reporting unit
|--- | --------------------------------------------------------------------------------------

Other Intangible Assets

The Companys other intangible assets include core deposit
and other identifiable intangibles. As of December 31, 2016, the remaining lives of core deposit intangibles ranged from 6 years to 9 years and the weighted average remaining life was 7 years. Other identifiable intangibles consist primarily of
the value assigned to contractual rights arising from insurance agency acquisitions. The following table presents the components of other intangible assets, by reporting unit, as of the dates indicated:



|                                    |  |              |        |   |                  |   |        |                   |  |   |        |   |  |   |        |  
|----------------------------------- |  | ------------ | ------ | - | ---------------- | - | ------ | ----------------- |  | - | ------ | - |  | - | ------ | -
|                                    |  | December 31, |       
|                                    |  | 2016         |        |   | 2015             |  
|(Amounts in thousands)              |  | Total        |        |   | CommunityBanking |   |        | InsuranceServices |  |   | Total  |  
|Core deposit intangibles            |  | $            | 11,536 |   |                  | $ | 12,282 |                   |  | $ |       |   |  | $ | 12,282 |  
|Accumulated amortization            |  |              | (4,515 | ) |                  |   | (7,958 | )                 |  |   |       |   |  |   | (7,958 | )
|                                    |  |              |        |   |                  |   |        |                   |  |   |        |   |  |   |        |  
|Core deposit intangibles, net       |  |              | 7,021  |   |                  |   | 4,324  |                   |  |   |       |   |  |   | 4,324  |  
|Other identifiable intangibles      |  |              | 3,508  |   |                  |   | 535    |                   |  |   | 3,711  |   |  |   | 4,246  |  
|Accumulated amortization            |  |              | (3,322 | ) |                  |   | (464   | )                 |  |   | (2,863 | ) |  |   | (3,327 | )
|                                    |  |              |        |   |                  |   |        |                   |  |   |        |   |  |   |        |  
|Other identifiable intangibles, net |  |              | 186    |   |                  |   | 71     |                   |  |   | 848    |   |  |   | 919    |  
|                                    |  |              |        |   |                  |   |        |                   |  |   |        |   |  |   |        |  
|Total other intangible assets, net  |  | $            | 7,207  |   |                  | $ | 4,395  |                   |  | $ | 848    |   |  | $ | 5,243  |  
|                                    |  |              |        |   |                  |   |        |                   |  |   |        |   |  |   |        |  



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FIRST COMMUNITY BANCSHARES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  (Continued)



Amortization expense for other intangible assets was $1.14 million in 2016, $1.12 million in
2015, and $787 thousand in 2014. The following schedule presents the estimated amortization expense for intangible assets, by year, as of December 31, 2016:



|                       |  |   |       | 
|---------------------- |  | - | ----- | 
|(Amounts in thousands) |  |   |      
|2017                   |  | $ | 1,029 | 
|2018                   |  |   | 1,029 | 
|2019                   |  |   | 1,029 | 
|2020                   |  |   | 1,029 | 
|2021                   |  |   | 1,015 | 
|2022 and thereafter    |  |   | 2,034 | 
|                       |  |   |       | 
|                       |  | $ | 7,165 | 
|                       |  |   |       | 



|Note 10. | Deposits
|-------- | --------

The following table presents
the components of deposits as of the dates indicated:



|                                    |  |              |           |  |      |   |           | 
|----------------------------------- |  | ------------ | --------- |  | ---- | - | --------- | 
|                                    |  | December 31, |          
|(Amounts in thousands)              |  | 2016         |           |  | 2015 |  
|Noninterest-bearing demand deposits |  | $            | 427,705   |  |      | $ | 451,511   | 
|Interest-bearing deposits:          |  |              |           |  |      |   |           | 
|Interest-bearing demand deposits    |  |              | 378,339   |  |      |   | 347,705   | 
|Money market accounts               |  |              | 196,997   |  |      |   | 213,982   | 
|Savings deposits                    |  |              | 326,263   |  |      |   | 316,603   | 
|Certificates of deposit             |  |              | 382,503   |  |      |   | 408,519   | 
|Individual retirement accounts      |  |              | 129,531   |  |      |   | 134,939   | 
|                                    |  |              |           |  |      |   |           | 
|Total interest-bearing deposits     |  |              | 1,413,633 |  |      |   | 1,421,748 | 
|                                    |  |              |           |  |      |   |           | 
|Total deposits                      |  | $            | 1,841,338 |  |      | $ | 1,873,259 | 
|                                    |  |              |           |  |      |   |           | 

The following schedule presents the contractual maturities of time deposits, by year, as of December 31, 2016:



|                       |  |   |         | 
|---------------------- |  | - | ------- | 
|(Amounts in thousands) |  |   |        
|2017                   |  | $ | 254,738 | 
|2018                   |  |   | 88,596  | 
|2019                   |  |   | 53,400  | 
|2020                   |  |   | 68,644  | 
|2021                   |  |   | 44,968  | 
|2022 and thereafter    |  |   | 1,688   | 
|                       |  |   |         | 
|                       |  | $ | 512,034 | 
|                       |  |   |         | 



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FIRST COMMUNITY BANCSHARES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  (Continued)



Time deposits of $250 thousand or more totaled $41.55 million as of December 31, 2016,
and $41.35 million as of December 31, 2015. The following schedule presents the contractual maturities of time deposits of $250 thousand or more as of December 31, 2016:



|                               |  |   |        | 
|------------------------------ |  | - | ------ | 
|(Amounts in thousands)         |  |   |       
|Three months or less           |  | $ | 6,274  | 
|Over three through six months  |  |   | 2,687  | 
|Over six through twelve months |  |   | 10,890 | 
|Over twelve months             |  |   | 21,698 | 
|                               |  |   |        | 
|                               |  | $ | 41,549 | 
|                               |  |   |        | 



|Note 11. | Borrowings
|-------- | ----------

The following table presents
the components of borrowings as of the dates indicated:



|                                |  |              |         |  |                      |  |      |         |  |   |                      |  |  |  |      |  
|------------------------------- |  | ------------ | ------- |  | -------------------- |  | ---- | ------- |  | - | -------------------- |  |  |  | ---- | -
|                                |  | December 31, |        
|                                |  | 2016         |         |  | 2015                 | 
|(Amounts in thousands)          |  | Balance      |         |  | WeightedAverage Rate |  |      | Balance |  |   | WeightedAverage Rate | 
|Short-term borrowings           |  |              |         |  |                      |  |      |         |  |   |                      |  |  |  |      |  
|Retail repurchase agreements    |  | $            | 73,005  |  |                      |  | 0.07 | %       |  | $ | 88,614               |  |  |  | 0.10 | %
|Long-term borrowings            |  |              |         |  |                      |  |      |         |  |   |                      |  |  |  |      |  
|Wholesale repurchase agreements |  |              | 25,000  |  |                      |  | 3.18 | %       |  |   | 50,000               |  |  |  | 3.71 | %
|Long-term FHLB advances         |  |              | 65,000  |  |                      |  | 4.04 | %       |  |   | 65,000               |  |  |  | 4.04 | %
|Other borrowings                |  |              |         |  |                      |  |      |         |  |   |                      |  |  |  |      |  
|Subordinated debt               |  |              | 15,464  |  |                      |  | 3.65 | %       |  |   | 15,464               |  |  |  | 3.23 | %
|Other debt                      |  |              | 244     |  |                      |  |      |         |  |   | 292                  |  |  |  |      |  
|                                |  |              |         |  |                      |  |      |         |  |   |                      |  |  |  |      |  
|Total borrowings                |  | $            | 178,713 |  |                      |  |      |         |  | $ | 219,370              |  |  |  |      |  
|                                |  |              |         |  |                      |  |      |         |  |   |                      |  |  |  |      |  

The following schedule presents the contractual and weighted average maturities of long-term borrowings, by year, as of
December 31, 2016:



|                                     |  |                                |        |  |                |   |        |       |  |   |        | 
|------------------------------------ |  | ------------------------------ | ------ |  | -------------- | - | ------ | ----- |  | - | ------ | 
|(Amounts in thousands)               |  | Wholesale RepurchaseAgreements |        |  | FHLBBorrowings |   |        | Total | 
|2017                                 |  | $                              |       |  |                | $ | 15,000 |       |  | $ | 15,000 | 
|2018                                 |  |                                |       |  |                |   |       |       |  |   |       | 
|2019                                 |  |                                | 25,000 |  |                |   |       |       |  |   | 25,000 | 
|2020                                 |  |                                |       |  |                |   |       |       |  |   |       | 
|2021                                 |  |                                |       |  |                |   | 50,000 |       |  |   | 50,000 | 
|2022 and thereafter                  |  |                                |       |  |                |   |       |       |  |   |       | 
|                                     |  |                                |        |  |                |   |        |       |  |   |        | 
|                                     |  | $                              | 25,000 |  |                | $ | 65,000 |       |  | $ | 90,000 | 
|                                     |  |                                |        |  |                |   |        |       |  |   |        | 
|Weighted average maturity (in years) |  |                                | 2.15   |  |                |   | 3.17   |       |  |   | 2.89   | 

The FHLB may redeem callable advances at quarterly intervals, which could substantially shorten the advances lives.
If called, the advance may be paid in full or converted into another FHLB credit product. Prepayment of an advance may result in substantial penalties based on the differential between the contractual note and current advance rate for similar
maturities. The Company pledged certain loans to secure FHLB advances and letters of



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FIRST COMMUNITY BANCSHARES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  (Continued)



credit totaling $1.03 billion as of December 31, 2016. Unused borrowing capacity with the FHLB totaled $558.75 million, net of FHLB letters of credit $75.72 million, as of
December 31, 2016. The FHLB letters of credit provide an attractive alternative to pledging securities for public unit deposits.

Investment securities pledged to secure repurchase agreements remain under the Companys control during the agreements terms. The
counterparties may redeem callable repurchase agreements, which could substantially shorten the borrowings lives. The prepayment or unwind of a repurchase agreement may result in substantial penalties based on market conditions.

The following schedule presents the contractual maturities of repurchase agreements, by type of collateral pledged, as of December 31, 2016:



|                         |  |                        |        |  |                      |   |        |                                  |  |   |        |  |  |   |        | 
|------------------------ |  | ---------------------- | ------ |  | -------------------- | - | ------ | -------------------------------- |  | - | ------ |  |  | - | ------ | 
|(Amounts in thousands)   |  | U.S. 
AgencySecurities |        |  | Municipal Securities |   |        | Mortgage-backedAgency Securities |  |   | Total  | 
|Overnight and continuous |  | $                      | 18,680 |  |                      | $ | 44,414 |                                  |  | $ | 7,821  |  |  | $ | 70,915 | 
|Up to 30 days            |  |                        |       |  |                      |   |       |                                  |  |   |       |  |  |   |       | 
|30  90 days             |  |                        |       |  |                      |   |       |                                  |  |   |       |  |  |   |       | 
|Greater than 90 days     |  |                        |       |  |                      |   | 1,204  |                                  |  |   | 25,886 |  |  |   | 27,090 | 
|                         |  |                        |        |  |                      |   |        |                                  |  |   |        |  |  |   |        | 
|                         |  | $                      | 18,680 |  |                      | $ | 45,618 |                                  |  | $ | 33,707 |  |  | $ | 98,005 | 
|                         |  |                        |        |  |                      |   |        |                                  |  |   |        |  |  |   |        | 

Subordinated debt consists of $15.46 million of junior subordinated debentures (Debentures) the Company
issued to the Trust in October 2003 with an interest rate of three-month London InterBank Offered Rate (LIBOR) plus 2.95%. The Debentures mature on October 8, 2033, and are callable quarterly. The Trust purchased the Debentures
through the issuance of trust preferred securities, which had substantially identical terms as the Debentures. Net proceeds from the offering were contributed as capital to the Bank to support further growth. The Companys obligations under the
Debentures and other relevant Trust agreements, in aggregate, constitute a full and unconditional guarantee of the Trusts obligations. The preferred securities issued by the Trust are not included in the consolidated balance sheets; however,
these securities qualify as Tier 1 capital for regulatory purposes, subject to guidelines issued by the Board of Governors of the Federal Reserve System (Federal Reserve). The Federal Reserves quantitative limits did not prevent
the Company from including all $15.46 million in trust preferred securities outstanding in Tier 1 capital as of December 31, 2016 and 2015. On January 9, 2017, the Company redeemed all of its trust preferred securities.

In addition, the Company maintains a $15.00 million unsecured, committed line of credit with an unrelated financial institution with an interest
rate of one-month LIBOR plus 2.00% and an April 2017 maturity. There was no outstanding balance on the line as of December 31, 2016, or December 31, 2015.



|Note 12. | Derivative Instruments and Hedging Activities
|-------- | ---------------------------------------------

As of December 31, 2016, the Companys derivative instruments consisted of interest rate swaps. Generally, derivative instruments help the Company manage exposure to market risk and meet
customer financing needs. Market risk represents the possibility that fluctuations in external factors such as interest rates, market-driven loan rates, prices, or other economic factors will adversely affect economic value or net interest income.

The Company uses interest rate swap contracts to modify its exposure to interest rate risk caused by changes in the LIBOR curve in relation
to certain designated fixed rate loans. These instruments are used to convert these fixed rate loans to an effective floating rate. If the LIBOR rate falls below the loans stated fixed rate for a given period, the Company will owe the floating
rate payer the notional amount times the difference between LIBOR



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FIRST COMMUNITY BANCSHARES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  (Continued)



and the stated fixed rate. If LIBOR is above the stated rate for a given period, the Company will receive payments based on the notional amount times the difference between LIBOR and the stated
fixed rate. The Companys interest rate swaps qualify as fair value hedging instruments; therefore, fair value changes in the derivative and hedged item attributable to the hedged risk are recognized in earnings in the same period.

The Companys interest rate swaps include a fourteen-year, $1.20 million notional interest rate swap agreement entered into in March 2015 and a
fifteen-year, $4.37 million notional interest rate swap agreement entered into in February 2014. The swap agreements, which are accounted for as fair value hedges, and the loans hedged by the agreements are recorded at fair value. The fair
value hedges were effective as of December 31, 2016. The following table presents the notional, or contractual, amounts and fair values of derivative instruments as of the dates indicated:



|                                 |  |                              |       |  |                  |   |   |                       |  |   |                              |  |  |                  |       |  |                       |   |   |  |  |   |     | 
|-------------------------------- |  | ---------------------------- | ----- |  | ---------------- | - | - | --------------------- |  | - | ---------------------------- |  |  | ---------------- | ----- |  | --------------------- | - | - |  |  | - | --- | 
|                                 |  | December 31,                 |      
|                                 |  | 2016                         |       |  | 2015             |  
|(Amounts in thousands)           |  | Notional orContractualAmount |       |  | DerivativeAssets |   |   | DerivativeLiabilities |  |   | Notional orContractualAmount |  |  | DerivativeAssets |       |  | DerivativeLiabilities |  
|Derivatives designated as hedges |  |                              |       |  |                  |   |   |                       |  |   |                              |  |  |                  |       |  |                       |   |   |  |  |   |     | 
|Interest rate swaps              |  | $                            | 4,835 |  |                  | $ |  |                       |  | $ | 167                          |  |  | $                | 5,151 |  |                       | $ |  |  |  | $ | 251 | 
|                                 |  |                              |       |  |                  |   |   |                       |  |   |                              |  |  |                  |       |  |                       |   |   |  |  |   |     | 
|Total derivatives                |  | $                            | 4,835 |  |                  | $ |  |                       |  | $ | 167                          |  |  | $                | 5,151 |  |                       | $ |  |  |  | $ | 251 | 
|                                 |  |                              |       |  |                  |   |   |                       |  |   |                              |  |  |                  |       |  |                       |   |   |  |  |   |     | 

The following table presents the effect of derivative and hedging activity, if applicable, on the consolidated statements
of income for the periods indicated:



|                                 |  |                         |     |  |      |   |     |      |  |   |                           |  |  |  |                            | 
|-------------------------------- |  | ----------------------- | --- |  | ---- | - | --- | ---- |  | - | ------------------------- |  |  |  | -------------------------- | 
|                                 |  | Year Ended December 31, |     |  |      |  
|(Amounts in thousands)           |  | 2016                    |     |  | 2015 |   |     | 2014 |  |   | Income Statement Location | 
|Derivatives designated as hedges |  |                         |     |  |      |   |     |      |  |   |                           |  |  |  |                            | 
|Interest rate swaps              |  | $                       | 116 |  |      | $ | 122 |      |  | $ | 162                       |  |  |  | Interest and fees on loans | 
|                                 |  |                         |     |  |      |   |     |      |  |   |                           |  |  |  |                            | 
|Total derivatives                |  | $                       | 116 |  |      | $ | 122 |      |  | $ | 162                       |  |  |  |                            | 
|                                 |  |                         |     |  |      |   |     |      |  |   |                           |  |  |  |                            | 



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FIRST COMMUNITY BANCSHARES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  (Continued)



|Note 13. | Employee Benefit Plans
|-------- | ----------------------

Defined
Benefit Plans

The Company maintains two nonqualified domestic, noncontributory defined benefit plans (the Benefit Plans) for
key members of senior management and non-management directors. The Companys unfunded Benefit Plans include the Supplemental Executive Retention Plan (SERP) and the Directors
Supplemental Retirement Plan (Directors Plan). The SERP provides for a defined benefit, at normal retirement age, targeted at 35% of the participants projected final average compensation, subject to a defined maximum annual
benefit. Benefits under the SERP generally become payable at age 62. The Directors Plan provides for a defined benefit, at normal retirement age, up to 100% of the participants highest consecutive three-year average compensation.
Benefits under the Directors Plan generally become payable at age 70. The following table presents the changes in the aggregate actuarial benefit obligation during the periods indicated:



|                       |  |              |       |   |      |   |       |  
|---------------------- |  | ------------ | ----- | - | ---- | - | ----- | -
|                       |  | December 31, |      
|(Amounts in thousands) |  | 2016         |       |   | 2015 |  
|Beginning balance      |  | $            | 8,390 |   |      | $ | 7,631 |  
|Plan change            |  |              | 69    |   |      |   |      |  
|Service cost           |  |              | 184   |   |      |   | 180   |  
|Interest cost          |  |              | 382   |   |      |   | 334   |  
|Actuarial loss         |  |              | 367   |   |      |   | 363   |  
|Benefits paid          |  |              | (211  | ) |      |   | (118  | )
|                       |  |              |       |   |      |   |       |  
|Ending balance         |  | $            | 9,181 |   |      | $ | 8,390 |  
|                       |  |              |       |   |      |   |       |  

The following table presents the components of net periodic pension cost and the assumed discount rate for the periods
indicated:



|                                             |  |                         |      |   |      |   |      |      |  |   |      |  
|-------------------------------------------- |  | ----------------------- | ---- | - | ---- | - | ---- | ---- |  | - | ---- | -
|                                             |  | Year Ended December 31, |     
|(Amounts in thousands, except discount rate) |  | 2016                    |      |   | 2015 |   |      | 2014 | 
|Service cost                                 |  | $                       | 184  |   |      | $ | 180  |      |  | $ | 128  |  
|Interest cost                                |  |                         | 382  |   |      |   | 334  |      |  |   | 336  |  
|Amortization of prior service cost           |  |                         | 226  |   |      |   | 260  |      |  |   | 260  |  
|Amortization of losses                       |  |                         | 47   |   |      |   | 66   |      |  |   |     |  
|                                             |  |                         |      |   |      |   |      |      |  |   |      |  
|Net periodic cost                            |  | $                       | 839  |   |      | $ | 840  |      |  | $ | 724  |  
|                                             |  |                         |      |   |      |   |      |      |  |   |      |  
|Assumed discount rate                        |  |                         | 4.22 | % |      |   | 4.62 | %    |  |   | 4.41 | %

The following schedule presents the projected benefit payments to be paid under the Benefit Plans, by year, as of
December 31, 2016:



|                       |  |   |       | 
|---------------------- |  | - | ----- | 
|(Amounts in thousands) |  |   |      
|2017                   |  | $ | 465   | 
|2018                   |  |   | 462   | 
|2019                   |  |   | 458   | 
|2020                   |  |   | 529   | 
|2021                   |  |   | 587   | 
|2022 through 2026      |  |   | 2,937 | 



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FIRST COMMUNITY BANCSHARES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  (Continued)



Employee Welfare Plan

The Company provides various medical, dental, vision, life, accidental death and dismemberment, and long-term disability insurance benefits to all full-time employees who elect coverage under this
program. A third-party administrator manages the health plan. Monthly employer and employee contributions are made to a tax-exempt employee benefits trust where the third-party administrator processes and pays
claims. As of December 31, 2016, stop-loss insurance coverage generally limits the Companys risk of loss to $125 thousand for individual claims and $3.92 million for aggregate claims. Expenses related to the health plan totaled
$3.48 million in 2016, $3.06 million in 2015, and $2.88 million in 2014.

Deferred Compensation Plan

The Company maintains deferred compensation agreements with certain current and former officers that provide benefit payments, over various periods,
commencing at retirement or death. Accrued benefits are based on the present values of expected payments and estimated life expectancies and totaled $458 thousand as of December 31, 2016 and 2015. Expenses related to the deferred
compensation plan totaled $60 thousand in each of the three years ended December 31, 2016.

Employee Stock Ownership and Savings
Plan

The Company maintains the Employee Stock Ownership and Savings Plan (KSOP) that consists of a 401(k) savings feature that
covers all employees that meet minimum eligibility requirements. The Company matches employee contributions at levels determined by the Board of Directors annually. These contributions are made in the first quarter following each plan year and
employees must be employed on the last day of the plan year to be eligible. Matching contributions to qualified deferrals under the 401(k) savings component of the KSOP totaled $1.50 million in 2016, $1.53 million in 2015, and
$1.58 million in 2014. The KSOP held 410,384 shares of the Companys common stock as of December 31, 2016, 428,785 shares as of December 31, 2015, and 457,765 shares as of December 31, 2014. Substantially all plan assets are
invested in the Companys common stock.

Equity-Based Compensation Plans

The Company maintains equity-based compensation plans to promote the long-term success of the Company by encouraging officers, employees, directors, and other individuals performing services for the
Company to focus on critical long-range objectives. The Companys equity-based compensation plans include the 2012 Omnibus Equity Compensation Plan (2012 Plan), 2004 Omnibus Stock Option Plan, 2001 Directors Option Plan, 1999
Stock Option Plan, and various other plans obtained through acquisitions. As of December 31, 2016, the 2012 Plan was the only plan available for the issuance of future grants. All plans issued or obtained before the 2012 Plan are frozen and no
new grants may be issued; however, any options or awards unexercised and outstanding under those plans remain in effect per their respective terms. The 2012 Plan authorized 600,000 shares available for potential grants of incentive stock options,
nonqualified stock options, performance awards, restricted stock, restricted stock units, stock appreciation rights, bonus stock, and stock awards. Grants issued under the 2012 Plan state the period of time the grant may be exercised, not to exceed
more than ten years from the date granted. The Companys Compensation and Retirement Committee determines the vesting period for each grant; however, if no vesting period is specified the vesting occurs in 25% increments on the first four
anniversaries of the grant date.



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##### Table of Contents

FIRST COMMUNITY BANCSHARES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  (Continued)



The following table presents the pre-tax compensation expense
and excess tax benefit recognized in earnings for all equity-based compensation plans for the periods indicated:



|                             |  |                         |     |  |      |   |     |      |  |   |     | 
|---------------------------- |  | ----------------------- | --- |  | ---- | - | --- | ---- |  | - | --- | 
|                             |  | Year Ended December 31, |    
|(Amounts in thousands)       |  | 2016                    |     |  | 2015 |   |     | 2014 | 
|Pre-tax compensation expense |  | $                       | 209 |  |      | $ | 110 |      |  | $ | 332 | 
|Excess tax benefit           |  |                         | 174 |  |      |   | 8   |      |  |   | 5   | 

Stock Options

The following table presents stock option activity and related information for the year ended December 31, 2016:



|                                                        |        |        |         |           |                                |   |              |                                       |  |       |                    |  |  |   |       | 
|------------------------------------------------------- | ------ | ------ | ------- | --------- | ------------------------------ | - | ------------ | ------------------------------------- |  | ----- | ------------------ |  |  | - | ----- | 
|(Amounts in thousands, except share and per share data) |        | Option |         |           | Weighted AverageExercise Price |   |              | Weighted AverageRemaining Contractual |  |       | AggregateIntrinsic | 
|                                                        | Shares |        |         | Per Share |                                |   | Term (Years) |                                       |  | Value |                   
|Outstanding, January 1, 2016                            |        |        | 236,404 |           |                                | $ | 20.17        |                                       |  |       |                    |  |  |   |       | 
|Granted                                                 |        |        | 32,768  |           |                                |   | 20.15        |                                       |  |       |                    |  |  |   |       | 
|Exercised                                               |        |        | (43,463 | )         |                                |   | 17.26        |                                       |  |       |                    |  |  |   |       | 
|Canceled                                                |        |        | (25,313 | )         |                                |   | 28.56        |                                       |  |       |                    |  |  |   |       | 
|                                                        |        |        |         |           |                                |   |              |                                       |  |       |                    |  |  |   |       | 
|Outstanding, December 31, 2016                          |        |        | 200,396 |           |                                | $ | 19.73        |                                       |  |       | 6.1                |  |  | $ | 2,123 | 
|                                                        |        |        |         |           |                                |   |              |                                       |  |       |                    |  |  |   |       | 
|Exercisable, December 31, 2016                          |        |        | 167,628 |           |                                | $ | 19.65        |                                       |  |       | 5.5                |  |  | $ | 1,790 | 
|                                                        |        |        |         |           |                                |   |              |                                       |  |       |                    |  |  |   |       | 

The following table presents the total options granted and the weighted average assumptions used to estimate the fair
value of those options during the periods indicated:



|                                |  |                         |        |   |      |   |   |      |  |   |   | 
|------------------------------- |  | ----------------------- | ------ | - | ---- | - | - | ---- |  | - | - | 
|                                |  | Year Ended December 31, |       
|                                |  | 2016                    |        |   | 2015 |   |   | 2014 | 
|Stock options granted           |  | $                       | 32,768 |   |      | $ |  |      |  | $ |  | 
|Grant-date fair value per share |  |                         | 10.16  |   |      |   |  |      |  |   |  | 
|Volatility                      |  |                         | 25.04  | % |      |   |  |      |  |   |  | 
|Risk-free rate                  |  |                         | 1.56   | % |      |   |  |      |  |   |  | 
|Expected dividend yield         |  |                         | 3.09   | % |      |   |  |      |  |   |  | 
|Expected term (in years)        |  |                         | 6.50   |   |      |   |  |      |  |   |  | 

The intrinsic value of options exercised totaled $434 thousand in 2016, $20 thousand in 2015, and
$13 thousand in 2014. As of December 31, 2016, unrecognized compensation cost related to nonvested stock options was $101 thousand with an expected weighted average recognition period of 1.11 years. The actual compensation cost
recognized might differ from this estimate due to various items, including new grants and changes in estimated forfeitures.



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FIRST COMMUNITY BANCSHARES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  (Continued)



Restricted Stock Awards

The following table presents restricted stock activity and related information for the year ended December 31, 2016:



|                             |  |        |         |   |                      |   |       | 
|---------------------------- |  | ------ | ------- | - | -------------------- | - | ----- | 
|                             |  |        |         |   | Weighted Average     |  
|                             |  | Shares |         |   | Grant-DateFair Value |  
|Nonvested, January 1, 2016   |  |        | 5,327   |   |                      | $ | 16.85 | 
|Granted                      |  |        | 46,033  |   |                      |   | 19.97 | 
|Vested                       |  |        | (21,533 | ) |                      |   | 17.90 | 
|Canceled                     |  |        | (2,024  | ) |                      |   | 19.27 | 
|                             |  |        |         |   |                      |   |       | 
|Nonvested, December 31, 2016 |  |        | 27,803  |   |                      | $ | 20.59 | 
|                             |  |        |         |   |                      |   |       | 

As of December 31, 2016, unrecognized compensation cost related to nonvested restricted stock awards was
$447 thousand with an expected weighted average recognition period of 2.03 years. The actual compensation cost recognized might differ from this estimate due to various items, including new awards granted and changes in estimated forfeitures.

Performance Stock Awards

Performance stock awards represent restricted stock that may be issuable in the future if specific performance criteria are met. The following table presents performance stock activity and related
information for the year ended December 31, 2016:



|                             |  |        |        |   |                                       |   |       | 
|---------------------------- |  | ------ | ------ | - | ------------------------------------- | - | ----- | 
|                             |  | Shares |        |   | Weighted AverageGrant-DateFair 
Value |  
|Nonvested, January 1, 2016   |  |        | 9,848  |   |                                       | $ | 15.83 | 
|Granted                      |  |        |       |   |                                       |   |      | 
|Vested                       |  |        | (9,848 | ) |                                       |   | 15.83 | 
|Canceled                     |  |        |       |   |                                       |   |      | 
|                             |  |        |        |   |                                       |   |       | 
|Nonvested, December 31, 2016 |  |        |       |   |                                       | $ |      | 
|                             |  |        |        |   |                                       |   |       | 

As of December 31, 2016, there was no unrecognized compensation cost related to nonvested performance stock awards.
The actual compensation cost recognized might differ from this estimate due to various items, including new awards granted, changes in estimated forfeitures, and resolution of performance contingencies.



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FIRST COMMUNITY BANCSHARES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  (Continued)



|Note 14. | Other Operating Income and Expense
|-------- | ----------------------------------

The
following table presents the components of other operating income and expense for the periods indicated:



|                                  |  |                         |        |  |      |   |        |      |  |   |        | 
|--------------------------------- |  | ----------------------- | ------ |  | ---- | - | ------ | ---- |  | - | ------ | 
|                                  |  | Year Ended December 31, |       
|(Amounts in thousands)            |  | 2016                    |        |  | 2015 |   |        | 2014 | 
|Other operating income            |  |                         |        |  |      |   |        |      |  |   |        | 
|Bank owned life insurance         |  | $                       | 955    |  |      | $ | 1,971  |      |  | $ | 1,587  | 
|Other(1)                          |  |                         | 2,254  |  |      |   | 2,158  |      |  |   | 2,768  | 
|                                  |  |                         |        |  |      |   |        |      |  |   |        | 
|Total other operating income      |  | $                       | 3,209  |  |      | $ | 4,129  |      |  | $ | 4,355  | 
|                                  |  |                         |        |  |      |   |        |      |  |   |        | 
|Other operating expense           |  |                         |        |  |      |   |        |      |  |   |        | 
|Service fees                      |  | $                       | 3,641  |  |      | $ | 3,401  |      |  | $ | 3,856  | 
|ATM processing expenses           |  |                         | 2,024  |  |      |   | 2,407  |      |  |   | 2,102  | 
|Telephone and data communications |  |                         | 1,598  |  |      |   | 1,595  |      |  |   | 1,715  | 
|Advertising and public relations  |  |                         | 1,532  |  |      |   | 1,309  |      |  |   | 1,001  | 
|Professional fees                 |  |                         | 1,501  |  |      |   | 1,272  |      |  |   | 1,436  | 
|OREO expense and net loss         |  |                         | 1,420  |  |      |   | 2,438  |      |  |   | 2,094  | 
|Office supplies                   |  |                         | 1,220  |  |      |   | 1,228  |      |  |   | 1,514  | 
|Other(1)                          |  |                         | 7,011  |  |      |   | 7,461  |      |  |   | 8,524  | 
|                                  |  |                         |        |  |      |   |        |      |  |   |        | 
|Total other operating expense     |  | $                       | 19,947 |  |      | $ | 21,111 |      |  | $ | 22,242 | 
|                                  |  |                         |        |  |      |   |        |      |  |   |        | 



|(1) | Other components of other operating income or expense that do not exceed 1% of total income.
|--- | --------------------------------------------------------------------------------------------



|Note 15. | Income Taxes
|-------- | ------------

Income tax expense is
comprised of current and deferred, federal and state income taxes on the Companys pre-tax earnings. The following table presents the components of the income tax provision for the periods indicated:



|                                     |  |                         |        |   |      |   |        |      |  |   |        | 
|------------------------------------ |  | ----------------------- | ------ | - | ---- | - | ------ | ---- |  | - | ------ | 
|                                     |  | Year Ended December 31, |       
|(Amounts in thousands)               |  | 2016                    |        |   | 2015 |   |        | 2014 | 
|Current tax expense (benefit):       |  |                         |        |   |      |   |        |      |  |   |        | 
|Federal                              |  | $                       | 13,634 |   |      | $ | (254   | )    |  | $ | 7,234  | 
|State                                |  |                         | 675    |   |      |   | 581    |      |  |   | 1,325  | 
|                                     |  |                         |        |   |      |   |        |      |  |   |        | 
|Total current tax expense            |  |                         | 14,309 |   |      |   | 327    |      |  |   | 8,559  | 
|Deferred tax expense (benefit):      |  |                         |        |   |      |   |        |      |  |   |        | 
|Federal                              |  |                         | (1,480 | ) |      |   | 10,034 |      |  |   | 2,971  | 
|State                                |  |                         | (10    | ) |      |   | 1,020  |      |  |   | 794    | 
|                                     |  |                         |        |   |      |   |        |      |  |   |        | 
|Total deferred tax expense (benefit) |  |                         | (1,490 | ) |      |   | 11,054 |      |  |   | 3,765  | 
|                                     |  |                         |        |   |      |   |        |      |  |   |        | 
|Total income tax expense             |  | $                       | 12,819 |   |      | $ | 11,381 |      |  | $ | 12,324 | 
|                                     |  |                         |        |   |      |   |        |      |  |   |        | 



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FIRST COMMUNITY BANCSHARES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  (Continued)



The Companys effective tax rate, income tax as a percent of
pre-tax income, may vary significantly from the statutory rate due to permanent differences and available tax credits. Permanent differences are income and expense items excluded by law in the calculation of
taxable income. The Companys most significant permanent differences generally include interest income on municipal securities and increases in the cash surrender value of life insurance policies. The following table reconciles the
Companys income tax expense to the amount computed by applying the federal statutory tax rate to pre-tax income for the periods indicated:



|                                           |  |                         |        |   |         |  |       |        |  |   |         |   |  |        |       |   |         |   |        |   |  |  |       |  
|------------------------------------------ |  | ----------------------- | ------ | - | ------- |  | ----- | ------ |  | - | ------- | - |  | ------ | ----- | - | ------- | - | ------ | - |  |  | ----- | -
|                                           |  | Year Ended December 31, |       
|                                           |  | 2016                    |        |   | 2015    |  |       | 2014   | 
|(Amounts in thousands)                     |  | Amount                  |        |   | Percent |  |       | Amount |  |   | Percent |   |  | Amount |       |   | Percent |  
|Income tax at the federal statutory rate   |  | $                       | 13,281 |   |         |  | 35.00 | %      |  | $ | 12,572  |   |  |        | 35.00 | % |         | $ | 13,235 |   |  |  | 35.00 | %
|State income taxes, net of federal benefit |  |                         | 598    |   |         |  | 1.58  | %      |  |   | 639     |   |  |        | 1.78  | % |         |   | 1,006  |   |  |  | 2.66  | %
|                                           |  |                         |        |   |         |  |       |        |  |   |         |   |  |        |       |   |         |   |        |   |  |  |       |  
|                                           |  |                         | 13,878 |   |         |  | 36.58 | %      |  |   | 13,212  |   |  |        | 36.78 | % |         |   | 14,241 |   |  |  | 37.66 | %
|Increase (decrease) resulting from:        |  |                         |        |   |         |  |       |        |  |   |         |   |  |        |       |   |         |   |        |   |  |  |       |  
|Tax-exempt interest income                 |  |                         | (1,336 | ) |         |  | -3.52 | %      |  |   | (1,463  | ) |  |        | -4.07 | % |         |   | (1,645 | ) |  |  | -4.35 | %
|Nondeductible goodwill                     |  |                         | 340    |   |         |  | 0.89  | %      |  |   |        |   |  |        |      |   |         |   |       |   |  |  |      |  
|Bank owned life insurance                  |  |                         | (335   | ) |         |  | -0.88 | %      |  |   | (690    | ) |  |        | -1.92 | % |         |   | (555   | ) |  |  | -1.47 | %
|Other items, net                           |  |                         | 271    |   |         |  | 0.71  | %      |  |   | 322     |   |  |        | 0.89  | % |         |   | 283    |   |  |  | 0.75  | %
|                                           |  |                         |        |   |         |  |       |        |  |   |         |   |  |        |       |   |         |   |        |   |  |  |       |  
|Income tax at the effective tax rate       |  | $                       | 12,819 |   |         |  | 33.78 | %      |  | $ | 11,381  |   |  |        | 31.68 | % |         | $ | 12,324 |   |  |  | 32.59 | %
|                                           |  |                         |        |   |         |  |       |        |  |   |         |   |  |        |       |   |         |   |        |   |  |  |       |  

Deferred taxes derived from continuing operations reflect the net effect of temporary differences between the carrying
amounts of assets and liabilities for financial reporting purposes and amounts used for tax purposes. The following table presents the significant components of the net deferred tax asset as of the dates indicated:



|                                                   |  |              |        |  |      |   |        | 
|-------------------------------------------------- |  | ------------ | ------ |  | ---- | - | ------ | 
|                                                   |  | December 31, |       
|(Amounts in thousands)                             |  | 2016         |        |  | 2015 |  
|Deferred tax assets                                |  |              |        |  |      |   |        | 
|Allowance for loan losses                          |  | $            | 6,644  |  |      | $ | 7,741  | 
|Unrealized losses on available-for-sale
securities |  |              | 326    |  |      |   | 2,331  | 
|Unrealized asset losses                            |  |              | 913    |  |      |   | 1,506  | 
|Purchase accounting                                |  |              | 5,384  |  |      |   | 5,014  | 
|FDIC assisted transactions                         |  |              | 6,540  |  |      |   | 6,551  | 
|Intangible assets                                  |  |              | 4,062  |  |      |   | 4,082  | 
|Deferred compensation assets                       |  |              | 4,669  |  |      |   | 4,529  | 
|Deferred loan fees                                 |  |              | 1,979  |  |      |   | 1,402  | 
|Other deferred tax assets                          |  |              | 825    |  |      |   | 1,181  | 
|                                                   |  |              |        |  |      |   |        | 
|Total deferred tax assets                          |  |              | 31,342 |  |      |   | 34,337 | 
|Deferred tax liabilities                           |  |              |        |  |      |   |        | 
|FDIC indemnification asset                         |  |              | 11,927 |  |      |   | 13,162 | 
|Fixed assets                                       |  |              | 2,042  |  |      |   | 2,658  | 
|Odd days interest deferral                         |  |              | 1,283  |  |      |   | 1,975  | 
|Other                                              |  |              | 347    |  |      |   | 347    | 
|                                                   |  |              |        |  |      |   |        | 
|Total deferred tax liabilities                     |  |              | 15,599 |  |      |   | 18,142 | 
|                                                   |  |              |        |  |      |   |        | 
|Net deferred tax asset                             |  | $            | 15,743 |  |      | $ | 16,195 | 
|                                                   |  |              |        |  |      |   |        | 

The Company had no unrecognized tax benefits or accrued interest and penalties as of December 31, 2016 or 2015.



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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  (Continued)



|Note 16. | Accumulated Other Comprehensive Income
|-------- | --------------------------------------

The following table presents the changes in AOCI, net of tax and by component, during the periods indicated:



|                                                           |  |                                                          |         |   |                      |   |        |       |  |   |         |  
|---------------------------------------------------------- |  | -------------------------------------------------------- | ------- | - | -------------------- | - | ------ | ----- |  | - | ------- | -
|(Amounts in thousands)                                     |  | Unrealized Gains (Losses)on
Available-for-SaleSecurities |         |   | EmployeeBenefitPlans |   |        | Total | 
|Balance January 1, 2014                                    |  | $                                                        | (13,640 | ) |                      | $ | (1,100 | )     |  | $ | (14,740 | )
|Other comprehensive income (loss) before reclassifications |  |                                                          | 8,051   |   |                      |   | (401   | )     |  |   | 7,650   |  
|Reclassified from AOCI                                     |  |                                                          | 1,323   |   |                      |   | 162    |       |  |   | 1,485   |  
|                                                           |  |                                                          |         |   |                      |   |        |       |  |   |         |  
|Other comprehensive income (loss), net                     |  |                                                          | 9,374   |   |                      |   | (239   | )     |  |   | 9,135   |  
|                                                           |  |                                                          |         |   |                      |   |        |       |  |   |         |  
|Balance December 31, 2014                                  |  | $                                                        | (4,266  | ) |                      | $ | (1,339 | )     |  | $ | (5,605  | )
|                                                           |  |                                                          |         |   |                      |   |        |       |  |   |         |  
|Balance January 1, 2015                                    |  | $                                                        | (4,266  | ) |                      | $ | (1,339 | )     |  | $ | (5,605  | )
|Other comprehensive income (loss) before reclassifications |  |                                                          | 471     |   |                      |   | (226   | )     |  |   | 245     |  
|Reclassified from AOCI                                     |  |                                                          | (90     | ) |                      |   | 203    |       |  |   | 113     |  
|                                                           |  |                                                          |         |   |                      |   |        |       |  |   |         |  
|Other comprehensive income (loss), net                     |  |                                                          | 381     |   |                      |   | (23    | )     |  |   | 358     |  
|                                                           |  |                                                          |         |   |                      |   |        |       |  |   |         |  
|Balance December 31, 2015                                  |  | $                                                        | (3,885  | ) |                      | $ | (1,362 | )     |  | $ | (5,247  | )
|                                                           |  |                                                          |         |   |                      |   |        |       |  |   |         |  
|Balance January 1, 2016                                    |  | $                                                        | (3,885  | ) |                      | $ | (1,362 | )     |  | $ | (5,247  | )
|Other comprehensive income (loss) before reclassifications |  |                                                          | 647     |   |                      |   | (276   | )     |  |   | 371     |  
|Reclassified from AOCI                                     |  |                                                          | 2,694   |   |                      |   | 171    |       |  |   | 2,865   |  
|                                                           |  |                                                          |         |   |                      |   |        |       |  |   |         |  
|Other comprehensive income (loss), net                     |  |                                                          | 3,341   |   |                      |   | (105   | )     |  |   | 3,236   |  
|                                                           |  |                                                          |         |   |                      |   |        |       |  |   |         |  
|Balance December 31, 2016                                  |  | $                                                        | (544    | ) |                      | $ | (1,467 | )     |  | $ | (2,011  | )
|                                                           |  |                                                          |         |   |                      |   |        |       |  |   |         |  



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FIRST COMMUNITY BANCSHARES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  (Continued)



The following table presents reclassifications out of AOCI, by component, during the periods indicated:



|                                           |  |                         |        |   |                  |   |      |      |  |   |                    |   |  |                                             
|------------------------------------------ |  | ----------------------- | ------ | - | ---------------- | - | ---- | ---- |  | - | ------------------ | - |  | --------------------------------------------
|                                           |  | Year Ended December 31, |        |   | Income Statement
|(Amounts in thousands)                     |  | 2016                    |        |   | 2015             |   |      | 2014 |  |   | Line Item Affected
|Available-for-sale securities              |  |                         |        |   |                  |   |      |      |  |   |                    |   |  |                                             
|(Gains) losses recognized                  |  |                         | (335   | ) |                  |   | (144 | )    |  |   | 1,385              |   |  | Net gain (loss) on sale of securities       
|OTTI recognized                            |  |                         | 4,646  |   |                  |   |     |      |  |   | 737                |   |  | Net impairment losses recognized in earnings
|                                           |  |                         |        |   |                  |   |      |      |  |   |                    |   |  |                                             
|Reclassified out of AOCI, before tax       |  |                         | 4,311  |   |                  |   | (144 | )    |  |   | 2,122              |   |  | Income before income taxes                  
|Income tax (expense) benefit               |  |                         | (1,617 | ) |                  |   | 54   |      |  |   | (799               | ) |  | Income tax expense                          
|                                           |  |                         |        |   |                  |   |      |      |  |   |                    |   |  |                                             
|Reclassified out of AOCI, net of tax       |  |                         | 2,694  |   |                  |   | (90  | )    |  |   | 1,323              |   |  | Net income                                  
|Employee benefit plans                     |  |                         |        |   |                  |   |      |      |  |   |                    |   |  |                                             
|Amortization of prior service cost         |  |                         | 226    |   |                  |   | 260  |      |  |   | 260                |   |  | (1)                                         
|Amortization of net actuarial loss         |  |                         | 47     |   |                  |   | 66   |      |  |   |                   |   |  | (1)                                         
|                                           |  |                         |        |   |                  |   |      |      |  |   |                    |   |  |                                             
|Reclassified out of AOCI, before tax       |  |                         | 273    |   |                  |   | 326  |      |  |   | 260                |   |  | Income before income taxes                  
|Income tax expense                         |  |                         | (102   | ) |                  |   | (123 | )    |  |   | (98                | ) |  | Income tax expense                          
|                                           |  |                         |        |   |                  |   |      |      |  |   |                    |   |  |                                             
|Reclassified out of AOCI, net of tax       |  |                         | 171    |   |                  |   | 203  |      |  |   | 162                |   |  | Net income                                  
|                                           |  |                         |        |   |                  |   |      |      |  |   |                    |   |  |                                             
|Total reclassified out of AOCI, net of tax |  | $                       | 2,865  |   |                  | $ | 113  |      |  | $ | 1,485              |   |  | Net income                                  
|                                           |  |                         |        |   |                  |   |      |      |  |   |                    |   |  |                                             



|(1) | Amortization is included in net periodic pension cost. See Note 13, Employee Benefit Plans
|--- | --------------------------------------------------------------------------------------------



|Note 17. | Fair Value
|-------- | ----------

Financial Instruments
Measured at Fair Value

The following discussion describes the valuation methodologies used for instruments measured at fair value, as well
as the general classification of such instruments under the valuation hierarchy.

Assets and Liabilities Reported at Fair Value on a
Recurring Basis

Available-for-Sale Securities.
Securities available for sale are reported at fair value on a recurring basis. The fair value of Level 1 securities is based on quoted market prices in active markets, if available. The Company also uses Level 1 inputs to value equity
securities that are traded in active markets. If quoted market prices are not available, fair values are measured utilizing independent valuation techniques of identical or similar securities for which significant assumptions are primarily derived
from or corroborated by observable market data. Level 2 securities use fair value measurements from independent pricing services obtained by the Company. These fair value measurements consider observable data that may include dealer quotes,
market spreads, cash flows, the Treasury yield curve, live trading levels, trade execution data, market consensus prepayment speeds, credit information, and bond terms and conditions. The Companys Level 2 securities include Treasury
securities, single issue trust preferred securities, corporate securities, mortgage-backed securities, and certain equity securities that are not actively traded. Securities are based on Level 3 inputs when there is limited activity or less
transparency to the valuation inputs. In the absence of observable or corroborated market data, internally developed estimates that incorporate market-based assumptions are used when such information is available.

Fair value models may be required when trading activity has declined significantly or does not exist, prices are not current, or pricing variations are
significant. For Level 3 securities, the Company obtains the cash flow of



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FIRST COMMUNITY BANCSHARES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  (Continued)



specific securities from third parties that use modeling software to determine cash flows based on market participant data and knowledge of the structures of each individual security. The fair
values of Level 3 securities are determined by applying proper market observable discount rates to the cash flow derived from third-party models. Discount rates are developed by determining credit spreads above a benchmark rate, such as LIBOR,
and adding premiums for illiquidity, which are based on a comparison of initial issuance spread to LIBOR versus a financial sector curve for recently issued debt to LIBOR. Securities with increased uncertainty about the receipt of cash flows are
discounted at higher rates due to the addition of a deal specific credit premium based on assumptions about the performance of the underlying collateral. Finally, internal fair value model pricing and external pricing observations are combined by
assigning weights to each pricing observation. Pricing is reviewed for reasonableness based on the direction of specific markets and the general economic indicators.

Loans Held for Investment. Loans held for investment are reported at fair value using discounted future cash flows that apply current interest rates for loans with similar terms and borrower credit
quality. Loans related to fair value hedges are recorded at fair value on a recurring basis.

Deferred Compensation Assets and
Liabilities. Securities held for trading purposes are recorded at fair value on a recurring basis and included in other assets in the consolidated balance sheets. These securities include assets related to employee deferred compensation plans,
which are generally invested in Level 1 equity securities. The liability associated with these deferred compensation plans is carried at the fair value of the obligation to the employee, which corresponds to the fair value of the invested
assets.

Derivative Assets and Liabilities. Derivatives are recorded at fair value on a recurring basis. The Company obtains dealer
quotes, Level 2 inputs, based on observable data to value derivatives.

The following tables summarize financial assets and liabilities
recorded at fair value on a recurring basis, by the level of valuation inputs in the fair value hierarchy, as of the dates indicated:



|                                        |  |                   |         |  |                              |         |       |  |         |   |         |  |  |   |   | 
|--------------------------------------- |  | ----------------- | ------- |  | ---------------------------- | ------- | ----- |  | ------- | - | ------- |  |  | - | - | 
|                                        |  | December 31, 2016 |        
|                                        |  | TotalFair 
Value  |         |  | Fair Value MeasurementsUsing |        
|(Amounts in thousands)                  |  |                   | Level 1 |  |                              | Level 2 |       |  | Level 3 |  
|Available-for-sale securities           |  |                   |         |  |                              |         |       |  |         |   |         |  |  |   |   | 
|U.S. Agency securities                  |  | $                 | 1,345   |  |                              | $       |      |  |         | $ | 1,345   |  |  | $ |  | 
|Municipal securities                    |  |                   | 113,331 |  |                              |         |      |  |         |   | 113,331 |  |  |   |  | 
|Single issue trust preferred securities |  |                   | 19,939  |  |                              |         |      |  |         |   | 19,939  |  |  |   |  | 
|Mortgage-backed Agency securities       |  |                   | 30,891  |  |                              |         |      |  |         |   | 30,891  |  |  |   |  | 
|Equity securities                       |  |                   | 73      |  |                              |         | 55    |  |         |   | 18      |  |  |   |  | 
|                                        |  |                   |         |  |                              |         |       |  |         |   |         |  |  |   |   | 
|Total available-for-sale
securities     |  |                   | 165,579 |  |                              |         | 55    |  |         |   | 165,524 |  |  |   |  | 
|Fair value loans                        |  |                   | 4,701   |  |                              |         |      |  |         |   | 4,701   |  |  |   |  | 
|Deferred compensation assets            |  |                   | 3,224   |  |                              |         | 3,224 |  |         |   |        |  |  |   |  | 
|Deferred compensation liabilities       |  |                   | 3,224   |  |                              |         | 3,224 |  |         |   |        |  |  |   |  | 
|Derivative liabilities                  |  |                   | 167     |  |                              |         |      |  |         |   | 167     |  |  |   |  | 



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FIRST COMMUNITY BANCSHARES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  (Continued)



|                                        |  |                   |         |  |                               |         |       |  |         |   |         |  |  |   |   | 
|--------------------------------------- |  | ----------------- | ------- |  | ----------------------------- | ------- | ----- |  | ------- | - | ------- |  |  | - | - | 
|                                        |  | December 31, 2015 |        
|                                        |  | TotalFair
Value   |         |  | Fair Value Measurements Using |        
|(Amounts in thousands)                  |  |                   | Level 1 |  |                               | Level 2 |       |  | Level 3 |  
|Available-for-sale securities           |  |                   |         |  |                               |         |       |  |         |   |         |  |  |   |   | 
|U.S. Agency securities                  |  | $                 | 30,702  |  |                               | $       |      |  |         | $ | 30,702  |  |  | $ |  | 
|Municipal securities                    |  |                   | 128,678 |  |                               |         |      |  |         |   | 128,678 |  |  |   |  | 
|Single issue trust preferred securities |  |                   | 47,832  |  |                               |         |      |  |         |   | 47,832  |  |  |   |  | 
|Corporate securities                    |  |                   | 70,333  |  |                               |         |      |  |         |   | 70,333  |  |  |   |  | 
|Certificates of deposit                 |  |                   | 5,000   |  |                               |         |      |  |         |   | 5,000   |  |  |   |  | 
|Mortgage-backed Agency securities       |  |                   | 83,556  |  |                               |         |      |  |         |   | 83,556  |  |  |   |  | 
|Equity securities                       |  |                   | 72      |  |                               |         | 54    |  |         |   | 18      |  |  |   |  | 
|                                        |  |                   |         |  |                               |         |       |  |         |   |         |  |  |   |   | 
|Total available-for-sale
securities     |  |                   | 366,173 |  |                               |         | 54    |  |         |   | 366,119 |  |  |   |  | 
|Fair value loans                        |  |                   | 4,886   |  |                               |         |      |  |         |   | 4,886   |  |  |   |  | 
|Deferred compensation assets            |  |                   | 3,464   |  |                               |         | 3,464 |  |         |   |        |  |  |   |  | 
|Deferred compensation liabilities       |  |                   | 3,464   |  |                               |         | 3,464 |  |         |   |        |  |  |   |  | 
|Derivative liabilities                  |  |                   | 251     |  |                               |         |      |  |         |   | 251     |  |  |   |  | 

No changes in valuation techniques or transfers into or out of Level 3 of the fair value hierarchy occurred during
the years ended December 31, 2016 or 2015.

Assets Measured at Fair Value on a Nonrecurring Basis

Impaired Loans. Impaired loans are recorded at fair value on a nonrecurring basis when repayment is expected solely from the sale of the
loans collateral. Fair value is based on appraised value adjusted for customized discounting criteria, Level 3 inputs.

The Company
maintains an active and robust problem credit identification system. The impairment review includes obtaining third-party collateral valuations to help management identify potential credit impairment and determine the amount of impairment to record.
The Companys Special Assets staff manages and monitors all impaired loans. Internal collateral valuations are generally performed within two to four weeks of identifying the initial potential impairment. The internal valuation compares the
original appraisal to current local real estate market conditions and considers experience and expected liquidation costs. The Company typically receives a third-party valuation within thirty to forty-five days of completing the internal valuation.
When a third-party valuation is received, it is reviewed for reasonableness. Once the valuation is reviewed and accepted, discounts are applied to fair market value, based on, but not limited to, our historical liquidation experience for like
collateral, resulting in an estimated net realizable value. The estimated net realizable value is compared to the outstanding loan balance to determine the appropriate amount of specific impairment reserve.

Specific reserves are generally recorded for impaired loans while third-party valuations are in process and for impaired loans that continue to make some
form of payment. While waiting to receive the third-party appraisal, the Company regularly reviews the relationship to identify any potential adverse developments and begins the tasks necessary to gain control of the collateral and prepare it for
liquidation, including, but not limited to, engagement of counsel, inspection of collateral, and continued communication with the borrower. Generally, the only difference between the current appraised value, less liquidation costs, and the carrying
amount of the loan, less the specific reserve, is any downward adjustment to the appraised value that the Company deems appropriate, such as the costs to sell the property. Impaired loans that do not meet certain criteria and do not have a specific
reserve have typically been written down through partial charge-offs to net realizable value. Based on prior experience, the Company rarely returns loans to performing status after they have been partially charged off. Credits identified as impaired
move quickly through the process towards ultimate resolution, except in cases involving bankruptcy and various state judicial processes that may extend the time for ultimate resolution.



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FIRST COMMUNITY BANCSHARES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  (Continued)



OREO. OREO is recorded at fair value on a nonrecurring basis using Level 3 inputs. The
Company calculates the fair value of OREO from current or prior appraisals that have been adjusted for valuation declines, estimated selling costs, and other proprietary qualitative adjustments that are deemed necessary.

The following tables present assets measured at fair value on a nonrecurring basis, by the level of valuation inputs in the fair value hierarchy, as of
the dates indicated:



|                            |  |                   |         |  |                               |         |   |  |         |   |   |  |  |   |       | 
|--------------------------- |  | ----------------- | ------- |  | ----------------------------- | ------- | - |  | ------- | - | - |  |  | - | ----- | 
|                            |  | December 31, 2016 |        
|                            |  | TotalFair 
Value  |         |  | Fair Value Measurements Using |        
|(Amounts in thousands)      |  |                   | Level 1 |  |                               | Level 2 |   |  | Level 3 |  
|Impaired loans, non-covered |  | $                 | 4,078   |  |                               | $       |  |  |         | $ |  |  |  | $ | 4,078 | 
|OREO, non-covered           |  |                   | 5,109   |  |                               |         |  |  |         |   |  |  |  |   | 5,109 | 
|OREO, covered               |  |                   | 265     |  |                               |         |  |  |         |   |  |  |  |   | 265   | 
|                            | 
|                            |  | December 31, 2015 |        
|                            |  | TotalFair
Value   |         |  | Fair Value Measurements Using |        
|                            |  |                   | Level 1 |  |                               | Level 2 |   |  | Level 3 |  
|(Amounts in thousands)      |  |                   |         |  |                               |         |   |  |         |   |   | 
|Impaired loans, non-covered |  | $                 | 9,164   |  |                               | $       |  |  |         | $ |  |  |  | $ | 9,164 | 
|OREO, non-covered           |  |                   | 4,819   |  |                               |         |  |  |         |   |  |  |  |   | 4,819 | 
|OREO, covered               |  |                   | 4,034   |  |                               |         |  |  |         |   |  |  |  |   | 4,034 | 

Quantitative Information about Level 3 Fair Value Measurements

The following table provides quantitative information for assets measured at fair value on a nonrecurring basis using Level 3 valuation inputs as of
the dates indicated:



|                            |  |                          |  |                          |  |                                   |                   |  |  |  |                  | 
|--------------------------- |  | ------------------------ |  | ------------------------ |  | --------------------------------- | ----------------- |  |  |  | ---------------- | 
|                            |  | Valuation
Technique      |  | Unobservable
Input       |  | Discount Range (Weighted Average) |                  
|                            |  |                          |  | December 31, 2016        |  |                                   | December 31, 2015 | 
|Impaired loans, non-covered |  | Discounted appraisals(1) |  | Appraisal adjustments(2) |  |                                   | 3% to 39% (17%)   |  |  |  | 1% to 39% (21%)  | 
|OREO, non-covered           |  | Discounted appraisals(1) |  | Appraisal adjustments(2) |  |                                   | 0% to 88% (30%)   |  |  |  | 1% to 100% (33%) | 
|OREO, covered               |  | Discounted appraisals(1) |  | Appraisal adjustments(2) |  |                                   | 0% to 44% (40%)   |  |  |  | 21% to 65% (46%) | 



|(1) | Fair value is generally based on appraisals of the underlying collateral.
|--- | -------------------------------------------------------------------------

|(2) | Appraisals may be adjusted by management for customized discounting criteria, estimated sales costs, and proprietary qualitative adjustments.
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------

Fair Value of Financial Instruments

The Company uses various methodologies and assumptions to estimate the fair value of certain financial instruments. A description of valuation methodologies used for instruments not previously discussed
is as follows:

Cash and Cash Equivalents. Cash and cash equivalents are reported at their carrying amount, which is considered a
reasonable estimate due to the short-term nature of these instruments.

Held-to-Maturity Securities. Securities held to maturity are
reported at fair value using quoted market prices or dealer quotes.



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FIRST COMMUNITY BANCSHARES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  (Continued)



FDIC Indemnification Asset. The FDIC indemnification asset is reported at fair value using
discounted future cash flows that apply current discount rates.

Accrued Interest Receivable/Payable. Accrued interest
receivable/payable is reported at their carrying amount, which is considered a reasonable estimate due to the short-term nature of these instruments.

Deposits and Securities Sold Under Agreements to Repurchase. Deposits without a stated maturity, such as demand, interest-bearing demand, and savings, are reported at their carrying amount, the
amount payable on demand as of the reporting date, which is considered a reasonable estimate of fair value. Deposits and repurchase agreements with fixed maturities and rates are reported at fair value using discounted future cash flows that apply
interest rates available in the market for instruments with similar characteristics and maturities.

FHLB and Other Borrowings. FHLB
and other borrowings are reported at fair value using discounted future cash flows that apply interest rates available to the Company for borrowings with similar characteristics and maturities. Trust preferred obligations are reported at fair value
using current credit spreads in the market for similar issues.

Off-Balance Sheet Instruments.
The Company believes that fair values of unfunded commitments to extend credit, standby letters of credit, and financial guarantees are not meaningful; therefore, off-balance sheet instruments are not
addressed in the fair value disclosures. The Company believes it is not feasible or practical to accurately disclose the fair values of off-balance sheet instruments due to the uncertainty and difficulty in
assessing the likelihood and timing of advancing available proceeds, the lack of an established market for these instruments, and the diversity in fee structures. For additional information about the unfunded, contractual value of off-balance sheet financial instruments, see Note 20, Litigation, Commitments, and Contingencies, to the Consolidated Financial Statements of this report.

The following tables present the carrying amounts and fair values of financial instruments, by the level of valuation inputs in the fair value hierarchy,
as of the dates indicated:



|                                               |  |                   |           |         |            |   |           |                               |  |         |        |  |  |   |         |  |  |   |           | 
|---------------------------------------------- |  | ----------------- | --------- | ------- | ---------- | - | --------- | ----------------------------- |  | ------- | ------ |  |  | - | ------- |  |  | - | --------- | 
|                                               |  | December 31, 2016 |          
|                                               |  | CarryingAmount    |           |         | Fair Value |   |           | Fair Value Measurements Using | 
|(Amounts in thousands)                         |  |                   |           | Level 1 |            |   | Level 2   |                               |  | Level 3 |       
|Assets                                         |  |                   |           |         |            |   |           |                               |  |         |        |  |  |   |         |  |  |   |           | 
|Cash and cash equivalents                      |  | $                 | 76,307    |         |            | $ | 76,307    |                               |  | $       | 76,307 |  |  | $ |        |  |  | $ |          | 
|Securities available for sale                  |  |                   | 165,579   |         |            |   | 165,579   |                               |  |         | 55     |  |  |   | 165,524 |  |  |   |          | 
|Securities held to maturity                    |  |                   | 47,133    |         |            |   | 47,266    |                               |  |         |       |  |  |   | 47,266  |  |  |   |          | 
|Loans held for investment, net of allowance    |  |                   | 1,835,000 |         |            |   | 1,805,999 |                               |  |         |       |  |  |   | 4,701   |  |  |   | 1,801,298 | 
|FDIC indemnification asset                     |  |                   | 12,173    |         |            |   | 8,112     |                               |  |         |       |  |  |   |        |  |  |   | 8,112     | 
|Interest receivable                            |  |                   | 5,553     |         |            |   | 5,553     |                               |  |         |       |  |  |   | 5,553   |  |  |   |          | 
|Deferred compensation assets                   |  |                   | 3,224     |         |            |   | 3,224     |                               |  |         | 3,224  |  |  |   |        |  |  |   |          | 
|                                               |  |                   |           |         |           
|Liabilities                                    |  |                   |           |         |            |   |           |                               |  |         |        |  |  |   |         |  |  |   |           | 
|Demand deposits                                |  |                   | 427,705   |         |            |   | 427,705   |                               |  |         |       |  |  |   | 427,705 |  |  |   |          | 
|Interest-bearing demand deposits               |  |                   | 378,339   |         |            |   | 378,339   |                               |  |         |       |  |  |   | 378,339 |  |  |   |          | 
|Savings deposits                               |  |                   | 523,260   |         |            |   | 523,260   |                               |  |         |       |  |  |   | 523,260 |  |  |   |          | 
|Time deposits                                  |  |                   | 512,034   |         |            |   | 507,917   |                               |  |         |       |  |  |   | 507,917 |  |  |   |          | 
|Securities sold under agreements to repurchase |  |                   | 98,005    |         |            |   | 98,879    |                               |  |         |       |  |  |   | 98,879  |  |  |   |          | 
|Interest payable                               |  |                   | 1,280     |         |            |   | 1,280     |                               |  |         |       |  |  |   | 1,280   |  |  |   |          | 
|FHLB and other borrowings                      |  |                   | 80,708    |         |            |   | 83,551    |                               |  |         |       |  |  |   | 83,551  |  |  |   |          | 
|Derivative financial liabilities               |  |                   | 167       |         |            |   | 167       |                               |  |         |       |  |  |   | 167     |  |  |   |          | 
|Deferred compensation liabilities              |  |                   | 3,224     |         |            |   | 3,224     |                               |  |         | 3,224  |  |  |   |        |  |  |   |          | 



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FIRST COMMUNITY BANCSHARES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  (Continued)



|                                               |  |                   |           |         |            |   |           |                               |  |         |        |  |  |   |         |  |  |   |           | 
|---------------------------------------------- |  | ----------------- | --------- | ------- | ---------- | - | --------- | ----------------------------- |  | ------- | ------ |  |  | - | ------- |  |  | - | --------- | 
|                                               |  | December 31, 2015 |          
|                                               |  | CarryingAmount    |           |         | Fair Value |   |           | Fair Value Measurements Using | 
|(Amounts in thousands)                         |  |                   |           | Level 1 |            |   | Level 2   |                               |  | Level 3 |       
|Assets                                         |  |                   |           |         |            |   |           |                               |  |         |        |  |  |   |         |  |  |   |           | 
|Cash and cash equivalents                      |  | $                 | 51,787    |         |            | $ | 51,787    |                               |  | $       | 51,787 |  |  | $ |        |  |  | $ |          | 
|Securities available for sale                  |  |                   | 366,173   |         |            |   | 366,173   |                               |  |         | 54     |  |  |   | 366,119 |  |  |   |          | 
|Securities held to maturity                    |  |                   | 72,541    |         |            |   | 72,490    |                               |  |         |       |  |  |   | 72,490  |  |  |   |          | 
|Loans held for investment, net of allowance    |  |                   | 1,686,308 |         |            |   | 1,685,061 |                               |  |         |       |  |  |   | 4,886   |  |  |   | 1,680,175 | 
|FDIC indemnification asset                     |  |                   | 20,844    |         |            |   | 10,753    |                               |  |         |       |  |  |   |        |  |  |   | 10,753    | 
|Interest receivable                            |  |                   | 6,007     |         |            |   | 6,007     |                               |  |         |       |  |  |   | 6,007   |  |  |   |          | 
|Deferred compensation assets                   |  |                   | 3,464     |         |            |   | 3,464     |                               |  |         | 3,464  |  |  |   |        |  |  |   |          | 
|                                               |  |                   |           |         |           
|Liabilities                                    |  |                   |           |         |            |   |           |                               |  |         |        |  |  |   |         |  |  |   |           | 
|Demand deposits                                |  |                   | 451,511   |         |            |   | 451,511   |                               |  |         |       |  |  |   | 451,511 |  |  |   |          | 
|Interest-bearing demand deposits               |  |                   | 347,705   |         |            |   | 347,705   |                               |  |         |       |  |  |   | 347,705 |  |  |   |          | 
|Savings deposits                               |  |                   | 530,585   |         |            |   | 530,585   |                               |  |         |       |  |  |   | 530,585 |  |  |   |          | 
|Time deposits                                  |  |                   | 543,458   |         |            |   | 541,059   |                               |  |         |       |  |  |   | 541,059 |  |  |   |          | 
|Securities sold under agreements to repurchase |  |                   | 138,614   |         |            |   | 140,880   |                               |  |         |       |  |  |   | 140,880 |  |  |   |          | 
|Interest payable                               |  |                   | 1,260     |         |            |   | 1,260     |                               |  |         |       |  |  |   | 1,260   |  |  |   |          | 
|FHLB and other borrowings                      |  |                   | 80,756    |         |            |   | 85,774    |                               |  |         |       |  |  |   | 85,774  |  |  |   |          | 
|Derivative financial liabilities               |  |                   | 251       |         |            |   | 251       |                               |  |         |       |  |  |   | 251     |  |  |   |          | 
|Deferred compensation liabilities              |  |                   | 3,464     |         |            |   | 3,464     |                               |  |         | 3,464  |  |  |   |        |  |  |   |          | 



|Note 18. | Earnings per Share
|-------- | ------------------

The following table
presents the calculation of basic and diluted earnings per common share for the periods indicated:



|                                                        |  |                         |            |  |      |   |            |      |  |   |            | 
|------------------------------------------------------- |  | ----------------------- | ---------- |  | ---- | - | ---------- | ---- |  | - | ---------- | 
|                                                        |  | Year Ended December 31, |           
|(Amounts in thousands, except share and per share data) |  | 2016                    |            |  | 2015 |   |            | 2014 | 
|Net income                                              |  | $                       | 25,126     |  |      | $ | 24,540     |      |  | $ | 25,490     | 
|Dividends on preferred stock                            |  |                         |           |  |      |   | 105        |      |  |   | 910        | 
|                                                        |  |                         |            |  |      |   |            |      |  |   |            | 
|Net income available to common shareholders             |  | $                       | 25,126     |  |      | $ | 24,435     |      |  | $ | 24,580     | 
|                                                        |  |                         |            |  |      |   |            |      |  |   |            | 
|Weighted average common shares outstanding, basic       |  |                         | 17,319,689 |  |      |   | 18,531,039 |      |  |   | 18,406,363 | 
|Dilutive effect of potential common shares              |  |                         |            |  |      |   |            |      |  |   |            | 
|Stock options                                           |  |                         | 34,530     |  |      |   | 26,487     |      |  |   | 18,607     | 
|Restricted stock                                        |  |                         | 11,305     |  |      |   | 2,996      |      |  |   | 461        | 
|Convertible preferred stock                             |  |                         |           |  |      |   | 166,942    |      |  |   | 1,046,175  | 
|Contingently issuable shares                            |  |                         |           |  |      |   |           |      |  |   | 11,448     | 
|                                                        |  |                         |            |  |      |   |            |      |  |   |            | 
|Total dilutive effect of potential common shares        |  |                         | 45,835     |  |      |   | 196,425    |      |  |   | 1,076,691  | 
|                                                        |  |                         |            |  |      |   |            |      |  |   |            | 
|Weighted average common shares outstanding, diluted     |  |                         | 17,365,524 |  |      |   | 18,727,464 |      |  |   | 19,483,054 | 
|                                                        |  |                         |            |  |      |   |            |      |  |   |            | 
|Basic earnings per common share                         |  | $                       | 1.45       |  |      | $ | 1.32       |      |  | $ | 1.34       | 
|Diluted earnings per common share                       |  |                         | 1.45       |  |      |   | 1.31       |      |  |   | 1.31       | 
|Antidilutive potential common shares                    |  |                         |            |  |      |   |            |      |  |   |            | 
|Stock options                                           |  |                         | 107,592    |  |      |   | 127,882    |      |  |   | 222,651    | 
|Restricted stock                                        |  |                         | 3,279      |  |      |   |           |      |  |   |           | 
|                                                        |  |                         |            |  |      |   |            |      |  |   |            | 
|Total potential antidilutive shares                     |  |                         | 110,871    |  |      |   | 127,882    |      |  |   | 222,651    | 
|                                                        |  |                         |            |  |      |   |            |      |  |   |            | 



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FIRST COMMUNITY BANCSHARES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  (Continued)



The Company redeemed all outstanding shares of its 6% Series A Noncumulative Convertible Preferred Stock
(Series A Preferred Stock) in 2015. Before redemption, holders converted 12,784 shares of Series A Preferred Stock with each share convertible into 69 shares of the Companys common stock. The Company redeemed the remaining 2,367
shares for $2.37 million along with accrued and unpaid dividends of $9 thousand.



|Note 19. | Related Party Transactions
|-------- | --------------------------

The Company
engages in transactions with related parties in the normal course of business. Related parties include directors, executive officers, and principal shareholders and their immediate family members, business interests, and affiliates. All related
party transactions are made on terms that are substantially the same as those prevailing at the time for similar transactions with unrelated parties, including interest rates and collateral. The following table presents the changes in loans with
related parties during the periods indicated:



|                       |  |                         |        |   |      |   |        |  
|---------------------- |  | ----------------------- | ------ | - | ---- | - | ------ | -
|                       |  | Year Ended December 31, |       
|(Amounts in thousands) |  | 2016                    |        |   | 2015 |  
|Beginning balance      |  | $                       | 21,886 |   |      | $ | 22,826 |  
|New loans and advances |  |                         | 559    |   |      |   | 1,066  |  
|Loan repayments        |  |                         | (4,418 | ) |      |   | (2,006 | )
|Reclassifications(1)   |  |                         | 333    |   |      |   |       |  
|                       |  |                         |        |   |      |   |        |  
|Ending balance         |  | $                       | 18,360 |   |      | $ | 21,886 |  
|                       |  |                         |        |   |      |   |        |  



|(1) | Changes related to the composition of the Companys directors and executive officers
|--- | ------------------------------------------------------------------------------------

Deposits with related parties totaled $5.45 million as of December 31, 2016, and $6.55 million as of December 31, 2015. Legal fees paid to related parties totaled $104 thousand in
2016, $88 thousand in 2015, and $27 thousand in 2014. Lease expense paid to related parties totaled $95 thousand in 2016, $95 thousand in 2015, and $92 thousand in 2014. Other expense paid to related parties totaled
$34 thousand in 2016 and $21 thousand in 2015. In addition, the Company repurchased 200,000 shares of its common stock from a related party in 2016 for $4.20 million, which represented the stocks fair market value as of the date
of the transaction.



|Note 20. | Litigation, Commitments, and Contingencies
|-------- | ------------------------------------------

Litigation

In the normal course of
business, the Company is a defendant in various legal actions and asserted claims. While the Company and its legal counsel are unable to assess the ultimate outcome of each of these matters with certainty, the Company believes the resolution of
these actions, singly or in the aggregate, should not have a material adverse effect on its financial condition, results of operations, or cash flows.

Commitments and Contingencies

The Company is a party to financial instruments with off-balance sheet risk in the normal course of business to meet the financing needs of its customers. These financial instruments include commitments to extend credit, standby letters of credit, and financial
guarantees. These instruments involve, to varying degrees, elements of credit and interest rate risk beyond the amount recognized in the consolidated balance sheets. The contractual amounts of these instruments reflect the extent of involvement the
Company has in particular classes of financial instruments. If the other party to a financial instrument does not perform, the Companys credit loss exposure is the same as the contractual amount of the instrument. The Company uses the same
credit policies in making commitments and conditional obligations as it does for on-balance sheet instruments.



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FIRST COMMUNITY BANCSHARES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  (Continued)



Commitments to extend credit are agreements to lend to a customer as long as there is no violation
of any condition established in the contract. Commitments generally have fixed expiration dates or other termination clauses and may require payment of a fee. Since many commitments are expected to expire without being drawn on, the total
commitment amounts do not necessarily represent future cash requirements. The amount of collateral obtained, if deemed necessary, is based on managements credit evaluation of each customer on a case-by-case basis. Collateral may include accounts receivable, inventory, property, plant and equipment, and income producing commercial properties. The Company maintains a reserve for the risk inherent in
unfunded lending commitments, which is included in other liabilities in the consolidated balance sheets.

Standby letters of credit and
financial guarantees are conditional commitments issued by the Company to guarantee the performance of a customer to a third party. The credit risk involved in issuing letters of credit is essentially the same as that involved in extending credit to
customers. The amount of collateral obtained, if deemed necessary, to secure the customers performance under certain letters of credit is based on managements credit evaluation of the customer.

The following table presents the off-balance sheet financial instruments as of the dates indicated:



|                                                   |  |              |         |  |      |   |         | 
|-------------------------------------------------- |  | ------------ | ------- |  | ---- | - | ------- | 
|                                                   |  | December 31, |        
|(Amounts in thousands)                             |  | 2016         |         |  | 2015 |  
|Commitments to extend credit                       |  | $            | 261,801 |  |      | $ | 235,302 | 
|Standby letters of credit and financial guarantees |  |              | 8,180   |  |      |   | 7,765   | 
|                                                   |  |              |         |  |      |   |         | 
|Total off-balance sheet risk                       |  |              | 269,981 |  |      |   | 243,067 | 
|                                                   |  |              |         |  |      |   |         | 
|Reserve for unfunded commitments                   |  | $            | 326     |  |      | $ | 326     | 

In connection with the private placement of $15.46 million of trust preferred securities through the Trust, the
Company irrevocably and unconditionally guarantees the following payments or distributions to holders of the trust preferred securities, to the extent the Trust has not made such payments or distributions and the Company has the funds available:
accrued and unpaid distributions, the redemption price, and, upon dissolution or termination of the Trust, the lesser of the liquidation amount and all accrued and unpaid distributions and the amount of assets of the Trust remaining available for
distribution.



|Note 21. | Regulatory Requirements and Restrictions
|-------- | ----------------------------------------

The Company and the Bank are subject to various regulatory capital requirements administered by state and federal banking agencies. Failure to meet
minimum capital requirements can initiate certain mandatory and possibly additional discretionary actions by regulators that, if undertaken, could have a direct material effect on the Companys consolidated financial statements. Under the
capital adequacy guidelines and the regulatory framework for prompt corrective action, which applies only to the Bank, the Bank must meet specific capital guidelines that involve quantitative measures of the entitys balance sheet assets and off-balance sheet items as calculated under regulatory accounting practices. The Banks capital amounts and classifications are also subject to qualitative judgments by the regulators about components, risk
weightings, and other factors. In addition, the Company and the Bank are subject to various regulatory restrictions related to the payment of dividends, including requirements to maintain capital at or above regulatory minimums.

The current risk-based capital requirements, based on the international capital standards known as Basel III, requires the Company and the Bank to
maintain minimum amounts and ratios of Common Equity Tier 1 capital, Tier 1 capital, and total capital to risk-weighted assets, and of Tier 1 capital to average consolidated assets (Tier 1 leverage ratio), as defined in the regulations.
On January 1, 2016, Basel IIIs capital conservation buffer,



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FIRST COMMUNITY BANCSHARES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  (Continued)



which is intended to absorb losses during periods of economic stress, became effective at 0.625%, and will be phased in over a four-year period (increasing by an additional 0.625% each year until
it reaches 2.5% on January 1, 2019). As of December 31, 2016, the capital conservation buffer was 5.29% for the Company and 3.48% for the Bank, which exceeds the required capital conservation buffer on a fully phased-in basis.

The following tables present actual and required capital ratios, under Basel III capital
rules, as of the dates indicated:



|                                |  |                   |         |  |                              |  |       |                                               |  |   |                                |  |  |        |      |   |       |   |         |        |  |  |       |   |  |   |         |  |  |  |       |  
|------------------------------- |  | ----------------- | ------- |  | ---------------------------- |  | ----- | --------------------------------------------- |  | - | ------------------------------ |  |  | ------ | ---- | - | ----- | - | ------- | ------ |  |  | ----- | - |  | - | ------- |  |  |  | ----- | -
|                                |  | December 31, 2016 |        
|                                |  | Actual            |         |  | Minimum Basel IIIRequirement |  |       | Minimum Basel IIIRequirement -
FullyPhased-In |  |   | Well CapitalizedRequirement(1) | 
|(Amounts in thousands)          |  | Amount            |         |  | Ratio                        |  |       | Amount                                        |  |   | Ratio                          |  |  | Amount |      |   | Ratio |   |         | Amount |  |  | Ratio |  
|The Company                     |  |                   |         |  |                              |  |       |                                               |  |   |                                |  |  |        |      |   |       |   |         |        |  |  |       |   |  |   |         |  |  |  |       |  
|Common equity Tier 1 ratio      |  | $                 | 241,671 |  |                              |  | 13.88 | %                                             |  | $ | 78,362                         |  |  |        | 4.50 | % |       | $ | 121,897 |        |  |  | 7.00  | % |  |   | N/A     |  |  |  | N/A   |  
|Tier 1 risk-based capital ratio |  |                   | 256,671 |  |                              |  | 14.74 | %                                             |  |   | 104,483                        |  |  |        | 6.00 | % |       |   | 148,018 |        |  |  | 8.50  | % |  |   | N/A     |  |  |  | N/A   |  
|Total risk-based capital ratio  |  |                   | 274,953 |  |                              |  | 15.79 | %                                             |  |   | 139,311                        |  |  |        | 8.00 | % |       |   | 182,846 |        |  |  | 10.50 | % |  |   | N/A     |  |  |  | N/A   |  
|Tier 1 Leverage ratio           |  |                   | 256,671 |  |                              |  | 11.07 | %                                             |  |   | 92,742                         |  |  |        | 4.00 | % |       |   | 92,742  |        |  |  | 4.00  | % |  |   | N/A     |  |  |  | N/A   |  
|                                |  |                   |         |  |                              |  |       |                                              
|The Bank                        |  |                   |         |  |                              |  |       |                                               |  |   |                                |  |  |        |      |   |       |   |         |        |  |  |       |   |  |   |         |  |  |  |       |  
|Common equity Tier 1 ratio      |  | $                 | 223,944 |  |                              |  | 12.93 | %                                             |  | $ | 77,956                         |  |  |        | 4.50 | % |       | $ | 121,264 |        |  |  | 7.00  | % |  | $ | 112,603 |  |  |  | 6.50  | %
|Tier 1 risk-based capital ratio |  |                   | 223,944 |  |                              |  | 12.93 | %                                             |  |   | 103,941                        |  |  |        | 6.00 | % |       |   | 147,249 |        |  |  | 8.50  | % |  |   | 138,588 |  |  |  | 8.00  | %
|Total risk-based capital ratio  |  |                   | 242,218 |  |                              |  | 13.98 | %                                             |  |   | 138,588                        |  |  |        | 8.00 | % |       |   | 181,897 |        |  |  | 10.50 | % |  |   | 173,235 |  |  |  | 10.00 | %
|Tier 1 Leverage ratio           |  |                   | 223,944 |  |                              |  | 9.71  | %                                             |  |   | 92,274                         |  |  |        | 4.00 | % |       |   | 92,274  |        |  |  | 4.00  | % |  |   | 115,343 |  |  |  | 5.00  | %



|(1) | Based on prompt corrective action provisions
|--- | --------------------------------------------



|                                |  |                   |         |  |                              |  |       |                                               |  |   |                                |  |  |        |      |   |       |   |         |        |  |  |       |   |  |   |         |  |  |  |       |  
|------------------------------- |  | ----------------- | ------- |  | ---------------------------- |  | ----- | --------------------------------------------- |  | - | ------------------------------ |  |  | ------ | ---- | - | ----- | - | ------- | ------ |  |  | ----- | - |  | - | ------- |  |  |  | ----- | -
|                                |  | December 31, 2015 |        
|                                |  | Actual            |         |  | Minimum Basel IIIRequirement |  |       | Minimum Basel IIIRequirement -
FullyPhased-In |  |   | Well CapitalizedRequirement(1) | 
|(Amounts in thousands)          |  | Amount            |         |  | Ratio                        |  |       | Amount                                        |  |   | Ratio                          |  |  | Amount |      |   | Ratio |   |         | Amount |  |  | Ratio |  
|The Company                     |  |                   |         |  |                              |  |       |                                               |  |   |                                |  |  |        |      |   |       |   |         |        |  |  |       |   |  |   |         |  |  |  |       |  
|Common equity Tier 1 ratio      |  | $                 | 246,237 |  |                              |  | 14.54 | %                                             |  | $ | 76,196                         |  |  |        | 4.50 | % |       | $ | 118,527 |        |  |  | 7.00  | % |  |   | N/A     |  |  |  | N/A   |  
|Tier 1 risk-based capital ratio |  |                   | 249,436 |  |                              |  | 14.73 | %                                             |  |   | 101,595                        |  |  |        | 6.00 | % |       |   | 143,926 |        |  |  | 8.50  | % |  |   | N/A     |  |  |  | N/A   |  
|Total risk-based capital ratio  |  |                   | 269,998 |  |                              |  | 15.95 | %                                             |  |   | 135,459                        |  |  |        | 8.00 | % |       |   | 177,791 |        |  |  | 10.50 | % |  |   | N/A     |  |  |  | N/A   |  
|Tier 1 Leverage ratio           |  |                   | 249,436 |  |                              |  | 10.62 | %                                             |  |   | 93,935                         |  |  |        | 4.00 | % |       |   | 93,935  |        |  |  | 4.00  | % |  |   | N/A     |  |  |  | N/A   |  
|                                |  |                   |         |  |                              |  |       |                                              
|The Bank                        |  |                   |         |  |                              |  |       |                                               |  |   |                                |  |  |        |      |   |       |   |         |        |  |  |       |   |  |   |         |  |  |  |       |  
|Common equity Tier 1 ratio      |  | $                 | 228,669 |  |                              |  | 13.60 | %                                             |  | $ | 75,682                         |  |  |        | 4.50 | % |       | $ | 117,728 |        |  |  | 7.00  | % |  | $ | 109,319 |  |  |  | 6.50  | %
|Tier 1 risk-based capital ratio |  |                   | 228,669 |  |                              |  | 13.60 | %                                             |  |   | 100,910                        |  |  |        | 6.00 | % |       |   | 142,955 |        |  |  | 8.50  | % |  |   | 134,546 |  |  |  | 8.00  | %
|Total risk-based capital ratio  |  |                   | 249,228 |  |                              |  | 14.82 | %                                             |  |   | 134,546                        |  |  |        | 8.00 | % |       |   | 176,592 |        |  |  | 10.50 | % |  |   | 168,183 |  |  |  | 10.00 | %
|Tier 1 Leverage ratio           |  |                   | 228,669 |  |                              |  | 9.77  | %                                             |  |   | 93,616                         |  |  |        | 4.00 | % |       |   | 93,616  |        |  |  | 4.00  | % |  |   | 117,020 |  |  |  | 5.00  | %



|(1) | Based on prompt corrective action provisions
|--- | --------------------------------------------



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FIRST COMMUNITY BANCSHARES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  (Continued)



Note 22. Parent Company Financial Information

The following tables present condensed financial information for the parent company, First Community Bancshares, Inc., as of and for the dates indicated:



|                                           |  |                          |         |   |      |   |         |  
|------------------------------------------ |  | ------------------------ | ------- | - | ---- | - | ------- | -
|                                           |  | CONDENSED BALANCE SHEETS |        
|                                           |  | December 31,             |        
|(Amounts in thousands)                     |  | 2016                     |         |   | 2015 |  
|Assets                                     |  |                          |         |   |      |   |         |  
|Cash and due from banks                    |  | $                        | 23,561  |   |      | $ | 8,367   |  
|Securities available for sale              |  |                          | 17      |   |      |   | 8,459   |  
|Loans to affiliates                        |  |                          | 228     |   |      |   |        |  
|Investment in subsidiaries                 |  |                          | 321,389 |   |      |   | 336,311 |  
|Other assets                               |  |                          | 9,560   |   |      |   | 5,489   |  
|                                           |  |                          |         |   |      |   |         |  
|Total assets                               |  | $                        | 354,755 |   |      | $ | 358,626 |  
|                                           |  |                          |         |   |      |   |         |  
|Liabilities                                |  |                          |         |   |      |   |         |  
|Subordinated debt                          |  | $                        | 15,464  |   |      | $ | 15,464  |  
|Other liabilities                          |  |                          | 234     |   |      |   | 145     |  
|                                           |  |                          |         |   |      |   |         |  
|Total liabilities                          |  |                          | 15,698  |   |      |   | 15,609  |  
|                                           |  |                         
|Stockholders equity                       |  |                          |         |   |      |   |         |  
|Preferred stock                            |  |                          |        |   |      |   |        |  
|Common stock                               |  |                          | 21,382  |   |      |   | 21,382  |  
|Additional paid-in capital                 |  |                          | 228,142 |   |      |   | 227,692 |  
|Retained earnings                          |  |                          | 170,377 |   |      |   | 154,550 |  
|Treasury stock                             |  |                          | (78,833 | ) |      |   | (56,457 | )
|Accumulated other comprehensive loss       |  |                          | (2,011  | ) |      |   | (4,150  | )
|                                           |  |                          |         |   |      |   |         |  
|Total stockholders equity                 |  |                          | 339,057 |   |      |   | 343,017 |  
|                                           |  |                          |         |   |      |   |         |  
|Total liabilities and stockholders equity |  | $                        | 354,755 |   |      | $ | 358,626 |  
|                                           |  |                          |         |   |      |   |         |  



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FIRST COMMUNITY BANCSHARES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  (Continued)



|                                                                                         |  |                                |        |   |      |   |        |      |  |   |        |  
|---------------------------------------------------------------------------------------- |  | ------------------------------ | ------ | - | ---- | - | ------ | ---- |  | - | ------ | -
|                                                                                         |  | CONDENSED STATEMENTS OF INCOME |       
|                                                                                         |  | Year Ended December 31,        |       
|(Amounts in thousands)                                                                   |  | 2016                           |        |   | 2015 |   |        | 2014 | 
|Cash dividends received from subsidiary bank                                             |  | $                              | 32,000 |   |      | $ | 22,970 |      |  | $ | 14,148 |  
|Other income                                                                             |  |                                | (1,121 | ) |      |   | 1,039  |      |  |   | 515    |  
|Other operating expense                                                                  |  |                                | 2,097  |   |      |   | 2,080  |      |  |   | 1,793  |  
|                                                                                         |  |                                |        |   |      |   |        |      |  |   |        |  
|Income before income taxes and equity in undistributed net (loss) income of subsidiaries |  |                                | 28,782 |   |      |   | 21,929 |      |  |   | 12,870 |  
|Income tax benefit                                                                       |  |                                | (1,287 | ) |      |   | (616   | )    |  |   | (511   | )
|                                                                                         |  |                                |        |   |      |   |        |      |  |   |        |  
|Income before equity in undistributed net income of subsidiaries                         |  |                                | 30,069 |   |      |   | 22,545 |      |  |   | 13,381 |  
|(Dividends in excess of) equity in undistributed net income of subsidiaries              |  |                                | (4,943 | ) |      |   | 1,995  |      |  |   | 12,109 |  
|                                                                                         |  |                                |        |   |      |   |        |      |  |   |        |  
|Net income                                                                               |  |                                | 25,126 |   |      |   | 24,540 |      |  |   | 25,490 |  
|Dividends on preferred stock                                                             |  |                                |       |   |      |   | 105    |      |  |   | 910    |  
|                                                                                         |  |                                |        |   |      |   |        |      |  |   |        |  
|Net income available to common shareholders                                              |  | $                              | 25,126 |   |      | $ | 24,435 |      |  | $ | 24,580 |  
|                                                                                         |  |                                |        |   |      |   |        |      |  |   |        |  



66



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FIRST COMMUNITY BANCSHARES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  (Continued)



|                                                                                 |  |                                    |         |   |      |   |         |      |  |   |         |  
|-------------------------------------------------------------------------------- |  | ---------------------------------- | ------- | - | ---- | - | ------- | ---- |  | - | ------- | -
|                                                                                 |  | CONDENSED STATEMENTS OF CASH FLOWS |        
|                                                                                 |  | Year Ended December 31,            |        
|(Amounts in thousands)                                                           |  | 2016                               |         |   | 2015 |   |         | 2014 | 
|Operating activities                                                             |  |                                    |         |   |      |   |         |      |  |   |         |  
|Net income                                                                       |  | $                                  | 25,126  |   |      | $ | 24,540  |      |  | $ | 25,490  |  
|Adjustments to reconcile net income to net cash provided by operating activities |  |                                    |         |   |      |   |         |      |  |   |         |  
|Equity in undistributed net income of subsidiaries                               |  |                                    |        |   |      |   | (1,995  | )    |  |   | (12,109 | )
|(Gain) loss on sale of securities                                                |  |                                    | (65     | ) |      |   | (38     | )    |  |   | 2       |  
|Net change in other operating activities                                         |  |                                    | 397     |   |      |   | (626    | )    |  |   | 4,212   |  
|                                                                                 |  |                                    |         |   |      |   |         |      |  |   |         |  
|Net cash provided by operating activities                                        |  |                                    | 25,458  |   |      |   | 21,881  |      |  |   | 17,595  |  
|Investing activities                                                             |  |                                    |         |   |      |   |         |      |  |   |         |  
|Proceeds from sale of securities available for sale                              |  |                                    | 8,660   |   |      |   | 199     |      |  |   | 5,030   |  
|Proceeds from divestitures                                                       |  |                                    | 4,900   |   |      |   |        |      |  |   |        |  
|Return of capital from (investment in) subsidiaries                              |  |                                    | 3,654   |   |      |   |        |      |  |   | (2,000  | )
|Dividends in excess of undistributed net income of subsidiaries                  |  |                                    | 4,943   |   |      |   |        |      |  |   |        |  
|Net change in other investing activities                                         |  |                                    | (98     | ) |      |   |        |      |  |   |        |  
|                                                                                 |  |                                    |         |   |      |   |         |      |  |   |         |  
|Net cash provided by investing activities                                        |  |                                    | 22,059  |   |      |   | 199     |      |  |   | 3,030   |  
|Financing activities                                                             |  |                                    |         |   |      |   |         |      |  |   |         |  
|(Repayments of) proceeds from other debt                                         |  |                                    |        |   |      |   | (2,000  | )    |  |   | 2,000   |  
|Redemption of preferred stock                                                    |  |                                    |        |   |      |   | (2,367  | )    |  |   |        |  
|Proceeds from issuance of common stock                                           |  |                                    | 1,243   |   |      |   | 264     |      |  |   | 89      |  
|Payments for repurchase of treasury stock                                        |  |                                    | (23,762 | ) |      |   | (21,525 | )    |  |   | (2,168  | )
|Payments of common dividends                                                     |  |                                    | (10,396 | ) |      |   | (9,994  | )    |  |   | (9,200  | )
|Payments of preferred dividends                                                  |  |                                    |        |   |      |   | (219    | )    |  |   | (910    | )
|Net change in other financing activities                                         |  |                                    | 592     |   |      |   | 482     |      |  |   | 338     |  
|                                                                                 |  |                                    |         |   |      |   |         |      |  |   |         |  
|Net cash used in financing activities                                            |  |                                    | (32,323 | ) |      |   | (35,359 | )    |  |   | (9,851  | )
|                                                                                 |  |                                    |         |   |      |   |         |      |  |   |         |  
|Net increase (decrease) in cash and cash equivalents                             |  |                                    | 15,194  |   |      |   | (13,279 | )    |  |   | 10,774  |  
|Cash and cash equivalents at beginning of period                                 |  |                                    | 8,367   |   |      |   | 21,646  |      |  |   | 10,872  |  
|                                                                                 |  |                                    |         |   |      |   |         |      |  |   |         |  
|Cash and cash equivalents at end of period                                       |  | $                                  | 23,561  |   |      | $ | 8,367   |      |  | $ | 21,646  |  
|                                                                                 |  |                                    |         |   |      |   |         |      |  |   |         |  



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FIRST COMMUNITY BANCSHARES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  (Continued)



|Note 23. | Quarterly Financial Data (Unaudited)
|-------- | ------------------------------------

The
following tables present selected financial data for the periods indicated:



|                                                                    |  |                              |            |   |               |   |            |              |  |   |               |   |  |   |            |  
|------------------------------------------------------------------- |  | ---------------------------- | ---------- | - | ------------- | - | ---------- | ------------ |  | - | ------------- | - |  | - | ---------- | -
|                                                                    |  | Year Ended December 31, 2016 |           
|                                                                    |  | FirstQuarter                 |            |   | SecondQuarter |   |            | ThirdQuarter |  |   | FourthQuarter |  
|(Amounts in thousands, except share and per share data)             |  |                              |            |  
|Interest income                                                     |  | $                            | 23,550     |   |               | $ | 24,137     |              |  | $ | 23,621        |   |  | $ | 23,416     |  
|Interest expense                                                    |  |                              | 2,439      |   |               |   | 2,446      |              |  |   | 2,500         |   |  |   | 2,459      |  
|                                                                    |  |                              |            |   |               |   |            |              |  |   |               |   |  |   |            |  
|Net interest income                                                 |  |                              | 21,111     |   |               |   | 21,691     |              |  |   | 21,121        |   |  |   | 20,957     |  
|Provision for (recovery of) loan losses                             |  |                              | 1,187      |   |               |   | 722        |              |  |   | (1,154        | ) |  |   | 500        |  
|                                                                    |  |                              |            |   |               |   |            |              |  |   |               |   |  |   |            |  
|Net interest income after provision (recovery)                      |  |                              | 19,924     |   |               |   | 20,969     |              |  |   | 22,275        |   |  |   | 20,457     |  
|Noninterest income, excluding net gain (loss) on sale of securities |  |                              | 7,902      |   |               |   | 7,109      |              |  |   | 5,870         |   |  |   | 5,850      |  
|Net gain (loss) on sale of securities                               |  |                              | 1          |   |               |   | (79        | )            |  |   | 25            |   |  |   | 388        |  
|Noninterest expense                                                 |  |                              | 18,814     |   |               |   | 18,722     |              |  |   | 18,557        |   |  |   | 16,653     |  
|                                                                    |  |                              |            |   |               |   |            |              |  |   |               |   |  |   |            |  
|Income before income taxes                                          |  |                              | 9,013      |   |               |   | 9,277      |              |  |   | 9,613         |   |  |   | 10,042     |  
|Income tax expense                                                  |  |                              | 2,929      |   |               |   | 3,022      |              |  |   | 3,230         |   |  |   | 3,638      |  
|                                                                    |  |                              |            |   |               |   |            |              |  |   |               |   |  |   |            |  
|Net income available to common shareholders                         |  | $                            | 6,084      |   |               | $ | 6,255      |              |  | $ | 6,383         |   |  | $ | 6,404      |  
|                                                                    |  |                              |            |   |               |   |            |              |  |   |               |   |  |   |            |  
|Basic earnings per common share                                     |  | $                            | 0.34       |   |               | $ | 0.36       |              |  | $ | 0.37          |   |  | $ | 0.38       |  
|Diluted earnings per common share                                   |  |                              | 0.34       |   |               |   | 0.36       |              |  |   | 0.37          |   |  |   | 0.38       |  
|Dividend per common share                                           |  |                              | 0.14       |   |               |   | 0.14       |              |  |   | 0.16          |   |  |   | 0.16       |  
|Weighted average basic shares outstanding                           |  |                              | 17,859,197 |   |               |   | 17,414,320 |              |  |   | 17,031,074    |   |  |   | 16,981,010 |  
|Weighted average diluted shares outstanding                         |  |                              | 17,892,531 |   |               |   | 17,462,845 |              |  |   | 17,083,526    |   |  |   | 17,043,869 |  
|                                                                    | 
|                                                                    |  | Year Ended December 31, 2015 |           
|                                                                    |  | FirstQuarter                 |            |   | SecondQuarter |   |            | ThirdQuarter |  |   | FourthQuarter |  
|(Amounts in thousands, except share and per share data)             |  |                              |            |  
|Interest income                                                     |  | $                            | 24,098     |   |               | $ | 23,979     |              |  | $ | 24,348        |   |  | $ | 23,677     |  
|Interest expense                                                    |  |                              | 3,259      |   |               |   | 2,909      |              |  |   | 2,679         |   |  |   | 2,502      |  
|                                                                    |  |                              |            |   |               |   |            |              |  |   |               |   |  |   |            |  
|Net interest income                                                 |  |                              | 20,839     |   |               |   | 21,070     |              |  |   | 21,669        |   |  |   | 21,175     |  
|Provision for loan losses                                           |  |                              | 1,100      |   |               |   | 276        |              |  |   | 381           |   |  |   | 434        |  
|                                                                    |  |                              |            |   |               |   |            |              |  |   |               |   |  |   |            |  
|Net interest income after provision                                 |  |                              | 19,739     |   |               |   | 20,794     |              |  |   | 21,288        |   |  |   | 20,741     |  
|Noninterest income, excluding net (loss) gain on sale of securities |  |                              | 6,859      |   |               |   | 7,924      |              |  |   | 7,113         |   |  |   | 7,490      |  
|Net (loss) gain on sale of securities                               |  |                              | (23        | ) |               |   | 213        |              |  |   | (39           | ) |  |   | (7         | )
|Noninterest expense                                                 |  |                              | 17,780     |   |               |   | 20,289     |              |  |   | 19,019        |   |  |   | 19,083     |  
|                                                                    |  |                              |            |   |               |   |            |              |  |   |               |   |  |   |            |  
|Income before income taxes                                          |  |                              | 8,795      |   |               |   | 8,642      |              |  |   | 9,343         |   |  |   | 9,141      |  
|Income tax expense                                                  |  |                              | 2,837      |   |               |   | 2,467      |              |  |   | 3,084         |   |  |   | 2,993      |  
|                                                                    |  |                              |            |   |               |   |            |              |  |   |               |   |  |   |            |  
|Net income                                                          |  |                              | 5,958      |   |               |   | 6,175      |              |  |   | 6,259         |   |  |   | 6,148      |  
|Dividends on preferred stock                                        |  |                              | 105        |   |               |   |           |              |  |   |              |   |  |   |           |  
|                                                                    |  |                              |            |   |               |   |            |              |  |   |               |   |  |   |            |  
|Net income available to common shareholders                         |  | $                            | 5,853      |   |               | $ | 6,175      |              |  | $ | 6,259         |   |  | $ | 6,148      |  
|                                                                    |  |                              |            |   |               |   |            |              |  |   |               |   |  |   |            |  
|Basic earnings per common share                                     |  | $                            | 0.31       |   |               | $ | 0.33       |              |  | $ | 0.34          |   |  | $ | 0.34       |  
|Diluted earnings per common share                                   |  |                              | 0.31       |   |               |   | 0.33       |              |  |   | 0.34          |   |  |   | 0.34       |  
|Dividend per common share                                           |  |                              | 0.13       |   |               |   | 0.13       |              |  |   | 0.14          |   |  |   | 0.14       |  
|Weighted average basic shares outstanding                           |  |                              | 18,633,574 |   |               |   | 18,831,742 |              |  |   | 18,470,348    |   |  |   | 18,193,824 |  
|Weighted average diluted shares outstanding                         |  |                              | 19,344,443 |   |               |   | 18,860,119 |              |  |   | 18,500,975    |   |  |   | 18,226,719 |  



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- Report of Independent Registered Public Accounting Firm
-

Audit Committee of the Board of Directors and the Stockholders

First Community Bancshares, Inc.

We have audited the accompanying consolidated balance sheets of
First Community Bancshares, Inc. and Subsidiaries (the Company) as of December 31, 2016 and 2015, and the related consolidated statements of income, comprehensive income (loss), changes in stockholders equity and cash flows
for each of the years in the three-year period ended December 31, 2016. These consolidated financial statements are the responsibility of the Companys management. Our responsibility is to express an opinion on these financial statements
based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United
States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the
amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that
our audits provide a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of First Community Bancshares, Inc. and its Subsidiaries as of December 31, 2016 and 2015, and the results of their operations and their cash flows for each of the years in the three-year
period ended December 31, 2016 in conformity with accounting principles generally accepted in the United States of America.

We also have
audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the Companys internal control over financial reporting as of December 31, 2016, based on criteria established in Internal
Control-Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO), and our report dated March 3, 2017 expressed an unqualified opinion on the effectiveness of the Companys
internal control over financial reporting.



|                            
|----------------------------
|/s/ Dixon Hughes Goodman LLP
|                            
|Asheville, North Carolina   
|March 3, 2017               



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- Managements Assessment of Internal
Control over Financial Reporting -

First Community Bancshares, Inc. (the Company) is responsible for the preparation,
integrity, and fair presentation of the consolidated financial statements included in this Annual Report on Form 10-K. The consolidated financial statements and notes included in this Annual Report on Form 10-K have been prepared in conformity with U.S. generally accepted accounting principles and necessarily include some amounts that are based on managements best estimates and judgments.

We, as management of the Company, are responsible for establishing and maintaining effective internal control over financial reporting that is designed
to produce reliable financial statements in conformity with U.S. generally accepted accounting principles. The system of internal control over financial reporting as it relates to the financial statements is evaluated for effectiveness by management
and tested for reliability. Any system of internal control, no matter how well designed, has inherent limitations, including the possibility that a control can be circumvented or overridden and misstatements due to error or fraud may occur and not
be detected. Also, because of changes in conditions, internal control effectiveness may vary over time. Accordingly, even an effective system of internal control will provide only reasonable assurance with respect to financial statement preparation.

Management conducted an assessment of the effectiveness of the Companys internal control over financial reporting based on the
framework in the Internal Control-Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission. Based on this assessment, management concluded that its system of internal control over
financial reporting was effective as of December 31, 2016.

Dixon Hughes Goodman LLP, independent registered public accounting firm, has
issued an attestation report on the effectiveness of the Companys internal control over financial reporting as of December 31, 2016. The Report of Independent Registered Public Accounting Firm, which expresses an unqualified opinion on
the effectiveness of the Companys internal control over financial reporting as of December 31, 2016, appears hereafter in Item 8 of this Annual Report on Form 10-K.

Dated this 3rdday of March, 2017.



|                            |  |  |  |                        
|--------------------------- |  |  |  | -----------------------
|/s/ William P. Stafford, II |  |  |  | /s/ David D. Brown     
|                            |  | 
|William P. Stafford, II     |  |  |  | David D. Brown         
|Chief Executive Officer     |  |  |  | Chief Financial Officer



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- Report of Independent Registered Public Accounting Firm
-

Audit Committee of the Board of Directors and the Stockholders

First Community Bancshares, Inc.

We have audited First Community Bancshares, Inc. and
Subsidiaries (the Company) internal control overfinancial reporting as of December 31, 2016, based on criteria established inInternal Control-Integrated Framework (2013) issued by the Committee of
Sponsoring Organizations of the Treadway Commission. The Companys management is responsible for maintaining effective internal control overfinancial reporting and for its assessment of the effectiveness of internal control overfinancial reporting, included in the accompanying Managements Assessment of Internal Control over Financial Reporting. Our responsibility is to express an opinion on the Companys internal control overfinancial reporting based
on our audit.

We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those
standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal
control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audit also included performing such other
procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.

A
companys internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with
generally accepted accounting principles. A companys internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect
the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting
principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of
unauthorized acquisition, use, or disposition of the companys assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any
evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

In our opinion, First Community Bancshares, Inc. maintained, in all material respects, effective internal control over financial reporting as of
December 31, 2016, based on criteria established in Internal Control-Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission.

We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the consolidated financial
statements of First Community Bancshares, Inc. as of and for the year ended December 31, 2016, and our report, dated March 3, 2017 expressed an unqualified opinion on those consolidated financial statements.



|                            
|----------------------------
|/s/ Dixon Hughes Goodman LLP
|                            
|Asheville, North Carolina   
|March 3, 2017               



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PART IV



|Item 15. | Exhibits, Financial Statement Schedules.
|-------- | ----------------------------------------



|(a) | Documents Filed as Part of this Report
|--- | --------------------------------------



| | (1) | Financial Statements
| | --- | --------------------

The
financial statements required in this item are incorporated by reference to Item 8, Financial Statements and Supplementary Data, in Part II of this report.



| | (2) | Financial Statement Schedules
| | --- | -----------------------------

The schedules required in this item are omitted because they are not applicable or the required information is included in the consolidated financial statements or related notes.



| | (3) | Exhibits
| | --- | --------

The exhibits
required in this item are incorporated by reference to the Exhibit Index of this report.



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SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized on the 7th day of March, 2017.

First Community Bancshares, Inc.

(Registrant)



|    |  |                                                       |  |  |  |     |  |                                                                                       
|--- |  | ----------------------------------------------------- |  |  |  | --- |  | --------------------------------------------------------------------------------------
|By: |  | /s/ William P. Stafford, II                           |  |  |  | By: |  | /s/ David D. Brown                                                                    
|    |  |                                                       |  | 
|    |  | William P. Stafford, II                               |  |  |  |     |  | David D. Brown                                                                        
|    |  | Chief Executive Officer
(Principal Executive Officer) |  |  |  |     |  | Chief Financial Officer
(Principal Financial Officer and Principal Accounting Officer)



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##### Table of Contents

EXHIBIT INDEX



|            |  |                                                                                                                                                                                                                                                                                                                                                                                                           
|----------- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit
No. |  | Exhibit                                                                                                                                                                                                                                                                                                                                                                                                   
|            | 
|2.1         |  | Purchase and Assumption Agreement between First Community Bank and First Bank, incorporated by reference to Exhibit 2.1 of the Current Report on Form
8-K dated March 3, 2016, filed on March 4, 2016                                                                                                                                                                                                     
|            | 
|2.2         |  | Purchase and Assumption Agreement between First Bank and First Community Bank, incorporated by reference to Exhibit 2.2 of the Current Report on Form
8-K dated March 3, 2016, filed on March 4, 2016                                                                                                                                                                                                     
|            | 
|3.1         |  | Articles of Incorporation of First Community Bancshares, Inc., as amended, incorporated by reference to Exhibit 3(i) of the Quarterly Report on Form
10-Q for the period ended June 30, 2010, filed on August 16, 2010                                                                                                                                                                                    
|            | 
|3.2         |  | Amended and Restated Bylaws of First Community Bancshares, Inc., incorporated by reference to Exhibit 3.1 of the Current Report on Form 8-K
dated February 23, 2016, filed on February 25, 2016                                                                                                                                                                                                           
|            | 
|4.1         |  | Specimen stock certificate of First Community Bancshares, Inc., incorporated by reference to Exhibit 4.1 of the Annual Report on Form 10-K
for the period ended December 31, 2002, filed on March 25, 2003, amended on June 30, 2003                                                                                                                                                                      
|            | 
|4.2         |  | Indenture Agreement dated September 25, 2003, incorporated by reference to Exhibit 4.2 of the Quarterly Report on Form 10-Q for the
period ended September 30, 2003, filed on November 10, 2003                                                                                                                                                                                                           
|            | 
|4.3         |  | Declaration of Trust of FCBI Capital Trust dated September 25, 2003, as amended and restated, incorporated by reference to Exhibit 4.3 of the Quarterly Report on Form 10-Q for the period ended September 30, 2003, filed on November 10, 2003                                                                                                                                                           
|            | 
|4.4         |  | Preferred Securities Guarantee Agreement dated September 25, 2003, incorporated by reference to Exhibit 4.4 of the Quarterly Report on Form
10-Q for the period ended September 30, 2003, filed on November 10, 2003                                                                                                                                                                                      
|            | 
|10.1**      |  | First Community Bancshares, Inc. 1999 Stock Option Plan, incorporated by reference to Exhibit 10.1 of the Annual Report on Form 10-K for the
period ended December 31, 1999, filed on March 30, 2000, amended on April 13, 2000, and Amendment One, incorporated by reference to Exhibit 10.1.1 of the Quarterly Report on Form 10-Q for the
period ended June 30, 2004, filed on May 7, 2004             
|            | 
|10.2**      |  | First Community Bancshares, Inc. 1999 Stock Option Agreement, incorporated by reference to Exhibit 10.5 of the Quarterly Report on Form 10-Q
for the period ended June 30, 2002, filed on August 14, 2002                                                                                                                                                                                                 
|            | 
|10.3**      |  | First Community Bancshares, Inc. 2001 Nonqualified Director Stock Option Plan, incorporated by reference to Exhibit 10.4 of the Quarterly Report on Form 10-Q for the period ended June 30, 2002, filed on August 14, 2002                                                                                                                                                                                
|            | 
|10.4**      |  | Employment Agreement between First Community Bancshares, Inc. and John M. Mendez dated December 16, 2008, as amended and restated, incorporated by reference to Exhibit 10.1 of
the Current Report on Form 8-K dated and filed on December 16, 2008, and Waiver Agreement, incorporated by reference to Exhibit 10.2 of the Current Report on Form
8-K dated December 16, 2010, filed on December 17, 2010
|            | 
|10.5**      |  | First Community Bancshares, Inc. and Affiliates Executive Retention Plan, incorporated by reference to Exhibit 10.1 of the Current Report on Form
8-K dated December 30, 2008, filed on January 5, 2009; Amendment #1, incorporated by reference to Exhibit 10.3 of the Current Report on Form
8-K                                                                                                        



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##### Table of Contents

|            |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|----------- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit
No. |  | Exhibit                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|            |  | dated December 16, 2010, filed on December 17, 2010; Amendment #2, incorporated by reference to Exhibit 10.1 of the Current Report on Form
8-K dated February 21, 2013, filed on February 25, 2013; Amendment #3, incorporated by reference to Exhibit 10.1 of the Current Report on Form 8-K dated
May 24, 2016, filed on May 27, 2016; and Amendment #4, incorporated by reference to Exhibit 10.1 of the Current Report on Form 8-K dated and filed on February 28, 2017
|            | 
|10.6**      |  | First Community Bancshares, Inc. Split Dollar Plan and Agreement, incorporated by reference to Exhibit 10.5 of the Annual Report on Form 10-K
for the period ended December 31, 1999, filed on March 30, 2000, amended on April 13, 2000                                                                                                                                                                                                                                   
|            | 
|10.7**      |  | First Community Bancshares, Inc. Supplemental Directors Retirement Plan, as amended and restated, incorporated by reference to Exhibit 10.1 of the Current Report on Form 8-K dated December 16, 2010, filed on December 17, 2010, and Amendment #2, incorporated by reference to Exhibit 10.2 of the Current Report on Form 8-K dated
May 24, 2016, filed on May 31, 2016                                                                                                 
|            | 
|10.8**      |  | First Community Bancshares, Inc. Nonqualified Supplemental Cash or Deferred Retirement Plan, as amended and restated, incorporated by reference to Exhibit 99.1 of the Current Report
on Form 8-K dated August 22, 2006, filed on August 23, 2006, and Amendment #2, incorporated by reference to Exhibit 10.2 of the Current Report on Form 8-K dated and filed on February 28,
2017                                                                                      
|            | 
|10.9**      |  | First Community Bancshares, Inc. 2004 Omnibus Stock Option Plan, incorporated by reference to Annex B to the 2004 First Community Bancshares, Inc. Definitive Proxy Statement filed
on March 15, 2004, and Stock Award Agreement, incorporated by reference to Exhibit 10.13 of the Quarterly Report on Form 10-Q for the period ended June 30, 2004, filed on August 6,
2004                                                                                              
|            | 
|10.10**     |  | First Community Bancshares, Inc. 2012 Omnibus Equity Compensation Plan, incorporated by reference to the 2012 First Community Bancshares, Inc. Definitive Proxy Statement filed on
March 7, 2012                                                                                                                                                                                                                                                                           
|            | 
|10.11**     |  | First Community Bancshares, Inc. Directors Deferred Compensation Plan, as amended and restated, incorporated by reference to Exhibit 99.2 of the Current Report on Form 8-K dated August 22, 2006, filed on August 23, 2006                                                                                                                                                                                                                                                
|            | 
|10.12**     |  | Employment Agreement between First Community Bancshares, Inc. and David D. Brown dated April 16, 2015, incorporated by reference to Exhibit 10.3 of the Current Report on Form 8-K dated and filed on April 16, 2015                                                                                                                                                                                                                                                       
|            | 
|10.13**     |  | Employment Agreement between First Community Bancshares, Inc. and E. Stephen Lilly dated April 16, 2015, incorporated by reference to Exhibit 10.5 of the Current Report on Form
8-K dated and filed on April 16, 2015                                                                                                                                                                                                                                                     
|            | 
|10.14**     |  | Employment Agreement between First Community Bancshares, Inc. and Gary R. Mills dated April 16, 2015, incorporated by reference to Exhibit 10.2 of the Current Report on Form 8-K dated and filed on April 16, 2015                                                                                                                                                                                                                                                        
|            | 
|10.15**     |  | Employment Agreement between First Community Bancshares, Inc. and Martyn A. Pell dated April 16, 2015, incorporated by reference to Exhibit 10.4 of the Current Report on Form 8-K dated and filed on April 16, 2015, and Amendment #1 dated May 27, 2016, incorporated by reference to Exhibit 10.1 of the Current Report on Form 8-K dated
May 24, 2016, filed on May 27, 2016                                                                                           
|            | 
|10.16**     |  | Employment Agreement between First Community Bank and Robert L. Schumacher dated April 16, 2015, incorporated by reference to the Current Report on Form 8-K dated and filed on April 16, 2015                                                                                                                                                                                                                                                                             
|            | 
|10.17**     |  | Employment Agreement between First Community Bancshares, Inc. and William P. Stafford, II dated April 16, 2015, incorporated by reference to Exhibit 10.1 of the Current Report
on Form 8-K dated and filed on April 16, 2015                                                                                                                                                                                                                                              



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##### Table of Contents

|            |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|----------- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit
No. |  | Exhibit                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|            | 
|10.18**     |  | Employment Agreement between First Community Bank and Mark R. Evans dated July 31, 2009, incorporated by reference to Exhibit 2.1 of the Current Report on Form 8-K dated April 2, 2009, filed on April 3, 2009                                                                                                                                                                                                                                                                                                                                                                                             
|            | 
|10.19**     |  | Form of Restricted Stock Grant Agreement under First Community Bancshares, Inc. 2012 Omnibus Equity Compensation Plan, incorporated by reference to Exhibit 99.1 of the Current
Report on Form 8-K dated and filed May 28, 2013                                                                                                                                                                                                                                                                                                                                                                             
|            | 
|10.20**     |  | Separation Agreement and Release between First Community Bancshares, Inc. and John M. Mendez dated August 28, 2013, incorporated by reference to Exhibit 99.1 of the Current
Report on Form 8-K/A dated August 12, 2013, filed on September 3, 2013                                                                                                                                                                                                                                                                                                                                                         
|            | 
|11          |  | Statement Regarding Computation of Earnings per Share, incorporated by reference to Note 18 of the Notes to Condensed Consolidated Financial Statements in Part II, Item 8 of this
report                                                                                                                                                                                                                                                                                                                                                                                                                   
|            | 
|12***       |  | Statement Regarding Computation of Ratios                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|            | 
|21***       |  | Subsidiaries of the Registrant                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|            | 
|23*         |  | Consent of Independent Public Accounting Firm                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|            | 
|31.1*       |  | Rule 13a-14(a)/15d-14(a) Certification of Chief Executive Officer                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|            | 
|31.2*       |  | Rule 13a-14(a)/15d-14(a) Certification of Chief Financial Officer                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|            | 
|32*         |  | Certification of Chief Executive Officer and Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of
2002                                                                                                                                                                                                                                                                                                                                                                                                                               
|            | 
|101***      |  | Interactive data files pursuant to Rule 405 of Regulation S-T: (i) Consolidated Balance Sheets as of December 31, 2016 and 2015;
(ii) Consolidated Statements of Income for the years ended December 31, 2016, 2015, and 2014; (iii) Consolidated Statements of Comprehensive Income for the years ended December 31, 2016, 2015, and 2014; (iv) Consolidated Statements of
Stockholders Equity for the years ended December 31, 2016, 2015, and 2014; (v) Consolidated Statements of Cash Flows for the years ended December 31, 2016, 2015, and 2014; and (vi) Notes to Consolidated Financial
Statements



|* | Filed herewith
|- | --------------

|** | Indicates a management contract or compensation plan or agreement
|-- | -----------------------------------------------------------------

|*** | Previously filed with the Annual Report on Form 10-K for the year ended December 31, 2016, on March 3, 2017
|--- | -----------------------------------------------------------------------------------------------------------



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