<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C., 20549
FORM 10-Q
[X] Quarterly Report Pursuant to Section 13 or 15 (d)
of the Securities Exchange Act of 1934
For the quarterly period ended: June 30, 1999
or
[ ] Transition Report Pursuant to Section 13 or 15 (d)
of the Securities Exchange Act of 1934
For the transition period from____________________to____________________
Commission file number: 0-11671
FIRST CENTURY BANKSHARES, INC.
(Exact name of registrant as specified in its charter)
West Virginia 55-0628089
------------- ----------
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
500 Federal Street, Bluefield, WV 24701
--------------------------------- -----
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (304) 325-8181
--------------
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 X No
--------- ----------
The number of shares outstanding of the registrant's $1.25 par value common
stock, as of August 11, 1999, was 2,000,000 shares.
<PAGE>
FIRST CENTURY BANKSHARES, INC.
AND SUBSIDIARY
INDEX
Page
PART I. FINANCIAL INFORMATION
Financial Statements
Consolidated Statements of Financial Condition.............. 3
Consolidated Statements of Income and Comprehensive Income.. 4
Consolidated Statements of Cash Flows....................... 5
Consolidated Statements of Changes in Stockholders' Equity.. 6
Notes to Consolidated Financial Statements.................... 6 - 9
Management's Discussion and Analysis of Financial Condition
and Results of Operations.................................... 9 - 10
PART II. OTHER INFORMATION
Submission of Matters to a Vote of Security Holders........... 11
Exhibits and Reports on Form 8-K.............................. 11
SIGNATURES.................................................... 11
The total number of pages of the Form 10-Q Quarterly Report is eleven (11)
pages.
2
<PAGE>
FIRST CENTURY BANKSHARES, INC.
AND SUBSIDIARY
<TABLE>
<CAPTION>
PART I. FINANCIAL INFORMATION
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
(Dollars in thousands, except per share data) June 30, December 31,
1999 1998
(Unaudited) (Audited)
----------------- -----------------
<S> <C> <C>
ASSETS
Cash and due from banks $ 13,351 $ 10,473
Interest-bearing balances with banks 3,035 3,275
Securities available for sale: (cost approximated $70,926 at
June 30, 1999, and $45,493 at December 31, 1998) 70,015 45,951
Securities held to maturity: (market value approximated $10,557 at
June 30, 1999 and $14,086 at December 31, 1998) 10,692 13,957
Federal Home Loan Bank and Federal Reserve Bank Stock 1,132 1,028
Federal funds sold 6,600 4,000
Loans 243,079 202,214
Less allowance for loan losses 3,030 2,533
------------- -------------
Net loans 240,049 199,681
Premises and equipment 10,758 9,199
Real estate owned other than bank premises 753 678
Other assets 5,638 4,650
Goodwill and other intangible assets 6,300 1,687
------------- -------------
TOTAL ASSETS $ 368,323 $ 294,579
============= =============
LIABILITIES AND STOCKHOLDERS' EQUITY
Deposits:
Noninterest-bearing $ 36,170 $ 27,847
Interest-bearing 285,153 223,881
------------- -------------
Total deposits 321,323 251,728
Federal funds purchased and securities sold under
agreements to repurchase 13,703 12,612
Demand notes to U. S. Treasury and other
liabilities for borrowed money 2,952 434
Other liabilities 1,959 1,302
------------- -------------
TOTAL LIABILITIES 339,937 266,076
------------- -------------
STOCKHOLDERS' EQUITY
Common stock - par value per share $1.25
Shares authorized: 10,000,000
Shares issued and outstanding: 2,000,000 2,500 2,500
Paid-in capital 785 785
Retained earnings 25,722 24,924
Accumulated other comprehensive income (621) 294
------------- -------------
TOTAL STOCKHOLDERS' EQUITY 28,386 28,503
------------- -------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 368,323 $ 294,579
============= =============
</TABLE>
See accompanying notes to consolidated financial statements
3
<PAGE>
FIRST CENTURY BANKSHARES, INC.
AND SUBSIDIARY
<TABLE>
<CAPTION>
CONSOLIDATED STATEMENTS OF INCOME
AND COMPREHENSIVE INCOME
(Unaudited) Three Months Ended Six Months Ended
June 30, June 30,
------------------ ----------------
(Dollars in thousands, except per share data)
1999 1998 1999 1998
------------ ------------- ------------- -------------
<S> <C> <C> <C> <C>
INTEREST INCOME
Interest and fees on loans $ 4,634 $ 4,735 $ 9,012 $ 9,268
Interest on balances with banks 66 45 132 62
Interest and dividends from securities available
for sale:
Taxable 887 645 1,644 1,225
Interest and dividends from securities held to
maturity:
Taxable 55 97 120 238
Tax-exempt 98 82 185 159
Interest on federal funds sold 105 127 195 170
------------ ------------- ------------- -------------
TOTAL INTEREST INCOME 5,845 5,731 11,288 11,122
INTEREST EXPENSE
Interest on time certificates of $100,000 or more 334 321 645 601
Interest on other deposits 2,100 2,034 4,062 3,891
Interest on federal funds purchased and
securities sold under agreements to repurchase 127 146 260 288
Interest on demand notes to U. S. Treasury
and other liabilities for borrowed money 14 17 26 39
------------ ------------- ------------- -------------
TOTAL INTEREST EXPENSE 2,575 2,518 4,993 4,819
------------ ------------- ------------- -------------
Net interest income 3,270 3,213 6,295 6,303
Provision for loan losses 120 133 165 321
------------ ------------- ------------- -------------
Net interest income after provision for loan losses 3,150 3,080 6,130 5,982
NONINTEREST INCOME
Income from fiduciary activities 300 330 525 510
Other operating income 459 409 850 774
Securities losses -- -- -- (14)
------------ ------------- ------------- -------------
TOTAL NONINTEREST INCOME 759 739 1,375 1,270
NONINTEREST EXPENSE
Salaries, wages, and other employee benefits 1,246 1,181 2,457 2,320
Premises and equipment expense 382 326 751 629
Other noninterest expense 928 958 1,821 1,819
------------ ------------- ------------- -------------
TOTAL NONINTEREST EXPENSE 2,556 2,465 5,029 4,768
------------ ------------- ------------- -------------
Income before income taxes 1,353 1,354 2,476 2,484
Provision for income taxes 471 490 878 895
------------ ------------- ------------- -------------
NET INCOME 882 864 1,598 1,589
------------ ------------- ------------- -------------
Other comprehensive income (loss), net of tax (648) 23 (915) 27
------------ ------------- ------------- -------------
COMPREHENSIVE INCOME $ 234 $ 887 $ 683 $ 1,616
============ ============= ============= =============
NET INCOME PER COMMON SHARE:
Basic $ 0.44 $ 0.43 $ 0.80 $ 0.79
Diluted $ 0.44 $ 0.43 $ 0.80 $ 0.79
AVERAGE SHARES OUTSTANDING:
Basic 2,000,000 2,000,000 2,000,000 2,000,000
Diluted 2,001,954 2,000,000 2,003,815 2,000,000
</TABLE>
See accompanying notes to consolidated financial statements
4
<PAGE>
FIRST CENTURY BANKSHARES, INC.
AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
Six Months Ended
June 30,
----------------
(Dollars in thousands)
1999 1998
------- -------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $ 1,598 $ 1,589
Adjustments to reconcile net income to net cash
provided by operating activities:
Provision for loan losses 165 321
Depreciation and amortization 444 354
Securities losses -- 14
Net investment amortization and accretion 100 63
(Increase) decrease in interest receivable and other assets (1,019) (279)
Increase in interest payable and other liabilities 442 616
------- -------
NET CASH PROVIDED BY OPERATING ACTIVITIES 1,730 2,678
CASH FLOWS FROM INVESTING ACTIVITIES
Net increase in federal funds sold (2,600) (6,600)
Purchases of securities held to maturity (1,158) (1,430)
Purchases of securities available for sale (35,995) (10,003)
Purchases of Federal Home Loan Bank Stock (37) --
Purchases of Federal Reserve Bank Stock (68) --
Proceeds from maturities and calls of securities held to
maturity 4,380 5,739
Proceeds from maturities and calls of securities available
for sale 10,504 3,274
Proceeds from sales of securities available for sale -- 883
Net increase in loans (1,054) (5,272)
Net cash received from branch acquisition 14,727 8,510
Acquisition of fixed assets (237) (638)
------- -------
NET CASH USED BY INVESTING ACTIVITIES (11,538) (5,537)
------- -------
CASH FLOWS FROM FINANCING ACTIVITIES
Net increase in demand and savings deposits 4,833 6,896
Net increase in time deposits 4,804 1,664
Net increase in short-term borrowings 3,609 5,120
Cash dividends paid (800) (600)
------- -------
NET CASH PROVIDED BY FINANCING ACTIVITIES 12,446 13,080
------- -------
NET INCREASE IN CASH AND CASH EQUIVALENTS 2,638 10,221
CASH AND CASH EQUIVALENTS AT JANUARY 1, 13,748 10,896
------- -------
CASH AND CASH EQUIVALENTS AT JUNE 30, $16,386 $21,117
======= =======
Supplemental disclosures of cash flow information:
Cash paid during the period for:
Interest $ 4,732 $ 4,508
Income taxes 988 929
</TABLE>
See accompanying notes to consolidated financial statements
5
<PAGE>
FIRST CENTURY BANKSHARES, INC.
AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CHANGES
IN STOCKHOLDERS' EQUITY
(Unaudited)
<TABLE>
<CAPTION>
Six Months Ended
June 30,
-----------------------------------
(Dollars in thousands)
1999 1998
------------- -------------
<S> <C> <C>
BALANCE, JANUARY 1, $28,503 $26,589
Net income 1,598 1,589
Cash dividends declared - $0.40 per share in 1999
and $0.30 per share in 1998 800 600
Other comprehensive income (loss), net of tax (915) 27
------------- -------------
BALANCE, JUNE 30, $28,386 $27,605
============= =============
</TABLE>
See accompanying notes to consolidated financial statements
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
June 30, 1999
NOTE A - BASIS OF PRESENTATION
The accompanying unaudited consolidated financial statements have been prepared
in accordance with generally accepted accounting principles for interim
financial information and with the instructions to Form 10-Q and Rule 10-01 of
Rule S-X. Accordingly, they do not include all of the information and footnotes
required by generally accepted accounting principles for complete financial
statements. In the opinion of management, all adjustments considered necessary
for a fair presentation have been included. All such adjustments were of a
normal recurring nature. Certain reclassifications have been made to the prior
period's financial statements to place them on a comparable basis with the
current period's financial statements. Operating results are for the six-month
period ended June 30, 1999, and are not necessarily indicative of the results
that may be expected for the year ending December 31, 1999. For further
information refer to the financial statements and footnotes thereto included as
Exhibit 13 to Corporation's annual report on Form 10-K for the year ended
December 31, 1998.
NOTE B OTHER COMPREHENSIVE INCOME
Comprehensive income is defined as net income plus transactions and other
occurrences that are the result of nonowner changes in equity. Other
comprehensive income is defined as comprehensive income exclusive of net income.
Unrealized gains and losses on available for sale investment securities
represent the sole component of the Corporation's other comprehensive income.
Information concerning the Corporation's other comprehensive income for the
three and six-month periods ended June 30, 1999 and 1998 is as follows:
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
----------------------------- -----------------------------
(Dollars in thousands)
1999 1998 1999 1998
----------- ---------- ----------- ----------
<S> <C> <C> <C> <C>
Unrealized holding gains (losses) arising during $ (971) $ 36 $ (1,371) $ 15
the period
Reclassification adjustment for losses
included in net income -- -- -- 19
------ ------ -------- -----
Other comprehensive income (loss) before tax (971) 36 (1,371) 34
Income tax (expense) benefit related to other
comprehensive income (loss) 323 (13) 456 (7)
Other comprehensive income (loss) $ (648) $ 23 $ (915) $ 27
====== ===== ======== =====
</TABLE>
6
<PAGE>
FIRST CENTURY BANKSHARES, INC.
AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
June 30, 1999
NOTE C - EARNINGS PER SHARE
The following tables reconcile the numerator and denominator of the basic and
diluted computations for income from continuing operations for the three and
six-month periods ended June 30, 1999:
<TABLE>
<CAPTION>
For the three months ended June 30, 1999
------------------------------------------
Income Shares Per-Share
(Numerator) (Denominator) Amount
-------------- -------------- ----------
<S> <C> <C> <C>
Basic EPS
Income available to
common shareholders $ 882,000 2,000,000 $0.44
==========
Effect of dilutive securities -
Stock options 0 1,954
---------- ---------
Diluted EPS
Income available to common
shareholders and assumed conversions $ 882,000 2,001,954 $0.44
========== ========= ==========
</TABLE>
<TABLE>
<CAPTION>
For the six months ended June 30, 1999
----------------------------------------
Income Shares Per-Share
(Numerator) (Denominator) Amount
------------- ------------- ----------
<S> <C> <C> <C>
Basic EPS
Income available to
common shareholders $1,598,000 2,000,000 $0.80
==========
Effect of dilutive securities -
Stock options 0 3,815
---------- ---------
Diluted EPS
Income available to common
shareholders and assumed conversions $1,598,000 2,003,815 $0.80
========== ========= ==========
</TABLE>
For periods ending prior to July 1, 1998, there were no adjustments to either
the numerator or denominator for the purpose of calculating diluted earnings per
share as the Corporation had no dilutive securities.
NOTE D COMPENSATION PLANS
The Corporation has two stock option plans. The 1998 Officer Stock Option Plan
(the "Officer Plan") provides for the issuance of options to purchase shares of
the Corporation's common stock to officers of the Corporation and its
subsidiaries. The options have an original term of ten years with an exercise
price equal to the market price of the common stock on the date of grant, as
defined by the plan. The options vest 20% per year after their date of grant.
During the six months ended June 30, 1999, no options were granted under the
Officer Plan. The weighted average remaining contractual life of currently
outstanding options is 108 months. At June 30, 1999, 58,470 options were
outstanding and options for 111,530 shares of common stock were reserved for
future issuance for the Officer Plan. As of June 30, 1999, no options had been
exercised under the Officer Plan.
7
<PAGE>
FIRST CENTURY BANKSHARES, INC.
AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
June 30, 1999
NOTE D - COMPENSATION PLANS (Continued)
The Corporation's second plan, the 1998 Director Stock Option Plan (the
"Director Plan"), provides for the issuance of options to purchase shares of the
Corporation's common stock to directors of the Corporation and its subsidiaries.
The options have an original term of ten years with an exercise price equal to
the market price of the common stock on the date of grant, as defined by the
plan. The options are fully vested upon their date of grant. During the six
months ended June 30, 1999, no options were granted under the Director Plan.
The weighted average remaining contractual life of currently outstanding options
is 108 months. At June 30, 1999, 20,000 options were outstanding and options
for 10,000 shares of common stock were reserved for future issuance for the
Director Plan. As of June 30, 1999, no options had been exercised under the
Director Plan.
The Corporation accounts for the Officer Plan and the Director Plan under the
provision of SFAS No. 123, "Accounting for Stock Based Compensation". As
permitted by SFAS No. 123, the Corporation has chosen to apply APB Opinion No.
25, "Accounting for Stock Issued to Employees" and related interpretations in
accounting for its plans. Accordingly, no compensation cost had been recognized
for options granted under the plans. Had compensation cost for the
Corporation's plans been determined based on the fair value at the grant dates
for awards under the plans consistent with the method of SFAS No. 123, the
Corporation's net income and net income per share would have been decreased to
the pro forma amounts indicated below. The Corporation did not award any option
grants prior to July 1, 1998, therefore, there are no pro forma amounts for
prior periods.
<TABLE>
<CAPTION>
3 Months Ended June 30, 1999 6 Months Ended June 30, 1999
---------------------------- ----------------------------
As Reported Pro Forma As Reported Pro Forma
-------------- ------------ ------------- -------------
<S> <C> <C> <C> <C>
Net income $882,000 $878,000 $1,598,000 $1,590,000
======== ======== ========== ==========
Net income per share - basic $ 0.44 $ 0.44 $ 0.80 $ 0.80
======== ======== ========== ==========
</TABLE>
The fair value of each option grant is estimated on the date of grant using the
Black-Scholes option pricing model with the following weighted-average
assumptions used for the 1998 grants; 8% dividend yield; expected volatility of
3.31%; risk-free interest rate of 5.46%; and expected life of six years for
directors and seven years for officers.
NOTE E - BRANCH ACQUISITION
Effective June 11, 1999, First Century Bank, N.A., the sole subsidiary of the
Corporation completed the acquisition of the Hinton, West Virginia branch of
City National Bank of West Virginia. The transaction was accounted for as a
purchase; accordingly, operating results of the Hinton Branch have been included
in the consolidated financial statements since the date of acquisition. The
purchase price was based on a premium on deposits of 8.4% and was allocated
based on preliminary estimates of fair value. The allocation of the purchase
price was as follows:
<TABLE>
<CAPTION>
<S> <C>
Cash $14,727
Net loans 39,337
Premises and equipment 1,620
Interest receivable and other assets 160
Goodwill 4,681
-------
Total assets acquired $60,525
=======
Deposits $59,958
Interest payable and other liabilities 567
-------
Total liabilities assumed $60,525
=======
</TABLE>
Goodwill established from this acquisition is being amortized over an estimated
useful life of 15 years.
8
<PAGE>
FIRST CENTURY BANKSHARES, INC.
AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
June 30, 1999
NOTE F - REGULATORY CAPITAL REQUIREMENTS
Regulators of the Corporation and its subsidiaries have implemented risk-based
capital guidelines which require the maintenance of certain minimum capital as a
percent of assets and certain off-balance sheet items adjusted for predefined
credit risk factors. The regulatory minimums as defined by regulation for Tier
1 and combined Tier 1 and Tier 2 capital ratios were 4.0% and 8.0% respectively.
Tier 1 capital includes tangible common shareholders' equity reduced by goodwill
and certain other intangibles. Tier 2 capital includes portions of the
allowance for loan losses, not to exceed Tier 1 capital. In addition to the
risk-based guidelines, a minimum leverage ratio (Tier 1 capital as a percentage
of average total consolidated assets) of 4% is required. The following table
contains the capital ratios for the Corporation and each subsidiary as of March
31, 1999 and 1998.
<TABLE>
<CAPTION>
1999 1998
-------------------------------------- ---------------------------------------
Combined Capital Combined Capital
Entity Tier 1 (Tier 1 and Tier 2) Leverage Tier 1 (Tier 1 and Tier 2) Leverage
<S> <C> <C> <C> <C> <C> <C>
Consolidated.............. 9.21% 10.44% 7.20% 11.99% 13.16% 8.88%
First Century Bank, N.A... 9.07% 10.31% 7.07% 11.62% 12.79% 8.43%
First Century Bank........ --- --- --- 12.22% 13.42% 9.36%
</TABLE>
NOTE G - NEW ACCOUNTING PRONOUNCEMENT
In July 1999, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standard ("SFAS") No. 137, "Accounting for Derivative
Instruments and Hedging Activities - Deferral of the Effective Date of FASB
Statement No. 133". SFAS No. 137 makes SFAS No. 133 effective for all fiscal
quarters beginning after June 15, 2000.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
During the second quarter of 1999 net income increased $18,000 or 2.1% from the
$864,000 earned during the second three months of 1998, to $882,000 earned
during the same period in 1999. This improvement was primarily the result of
increases in the interest margin of $57,000, or 1.8%, and in noninterest income
of $20,000, or 2.7%. The increase in noninterest income was primarily
attributable to an increase in other operating income of approximately $50,000.
Additionally, the provision for loan losses decreased $13,000, or 9.8%, all
attributed to a reduction in net charge-offs for the quarter. These
improvements were offset by an increase in noninterest expenses of $91,000, or
3.7%. Earnings per share for the second quarter of 1999 were $0.44 compared to
$0.43 per share for the second quarter of 1998.
When compared to the first quarter of 1999, net income increased $166,000, from
$716,000 for the quarter ended March 31, 1999, to $882,000 for the quarter ended
June 30, 1999. This was attributable to increases in the interest margin of
$245,000, or 8.1%, and in noninterest income of $143,000, or 23.2%. These
increases were offset by an increase in the provision for loan losses of
$75,000, along with an increase in noninterest expenses of $83,000 when compared
with the first quarter of 1999. Earnings per share increased $0.08 per share
from $0.36 per share for the quarter ended March 31, 1999, to $0.44 per share
for the quarter ended June 30, 1999.
9
<PAGE>
FIRST CENTURY BANKSHARES, INC.
AND SUBSIDIARY
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS (Continued)
June 30, 1999
Net income was $1,598,000 for the first six months of 1999 which was an increase
of $9,000, or less than 1%, over the 1998 level of $1,589,000. The interest
margin remained essentially unchanged, reflecting the declining loan demand in
the Corporation's primary markets and the deployment of funds in the investment
portfolio. Noninterest income increased $105,000, or 8.3%. All components of
noninterest income improved, reflecting enhanced pricing strategies for the
Corporation's products and services. Noninterest expenses increased $261,000,
or 5.5%, to $5,029,000 for the six months ended June 30, 1999, from $4,768,000
for the same period in 1998. This increase is reflected in the additional cost
of personnel due to expanding markets and additional costs of technology and
facilities.
Earnings per share for the six-month period ended June 30, 1999 were $0.80
compared to $0.79 per share for 1998. The Corporation's performance through
June 30, 1999 reflects an annualized return on average assets of 1.01% and a
return on average equity of 11.16%.
Total assets at June 30, 1999 were $368.3 million as compared to $294.6 million
at December 31, 1998. Total assets increased approximately $73.7 million from
December 31, 1998 to June 30, 1999. Approximately $60.5 million of this growth
was the result of the completion of an acquisition of the Hinton, West Virginia
branch of City National Bank of West Virginia, during the second quarter of
1999. This acquisition was accounted for as a purchase by the Corporation. The
purchase price was based on an 8.4% deposit premium that resulted in
approximately $4.7 million in goodwill reflected in the Corporation's
Consolidated Statements of Financial Condition. Refer to Note E for a further
description of this transaction. The loan portfolio grew during this six-month
period to $243.1 million or an increase of $40.9 million or 20.2%.
Approximately $39.8 million of the increase was attributable to loans that were
acquired with the Hinton Branch. The investment portfolio increased
approximately $20.9 million, or 34.3%, during the first six months of 1999 as
liquidity from the Hinton Branch acquisition was deployed in the available-for-
sale portfolio until such time as it was needed for new loans. As previously
discussed, total deposits increased approximately $69.6 million during the first
half of 1999, with most of this increase occurring in the interest-bearing
category.
The Year 2000 (Y2K) problem continues to be a major focus of the financial
services industry. The Corporation has been working diligently on this problem
for many months. A member of senior management is directing this effort.
Internal reviews of all software and hardware have now been completed. Internal
test and contingency plans have been developed for all mission critical
applications and testing on these systems has been completed as of December 31,
1998. Contingency plans for other areas deemed not to be mission critical have
been developed. Additionally, the Corporation's subsidiary bank is undergoing
quarterly reviews by its primary regulator. Management is very focused on its
efforts to provide for minimal disruptions to its operations as a result of this
problem. The total cost associated with the corporation's plan to be Year 2000
compliant, a significant portion of which is consulting fees of $2,000 per
month, is not expected to be material to the Corporation's financial position.
The failure to correct a material Y2K problem could result in an interruption
in, or a failure of, normal business activities. However, management believes a
significant risk to the Corporation is in the efforts of its loan customers to
become Y2K compliant. Failure to do so could result in a customer's inability
to repay its contractual loan obligations, the Corporation's largest asset.
Additionally, as was previously mentioned, another significant risk to the
Corporation is in the public perception of the soundness of the banking system
and the fear that may result in significantly reduced levels of deposits in
banks. The Corporation is continuing its undertaking to inform and assist key
customers in their Y2K compliance efforts. Also, an educational program
including brochures and seminars for customers is ongoing. By helping its
customers understand the significance of Year 2000, and the ongoing preparations
by the Corporation, management believes it will further reduce the Corporation's
exposure to loss.
10
<PAGE>
FIRST CENTURY BANKSHARES, INC.
AND SUBSIDIARIES
PART II. OTHER INFORMATION
Item 4 - Submission of Matters to a Vote of Security Holders.
The Annual Meeting of Stockholders was held on April 20, 1999. Total
outstanding shares were 2,000,000 at April 20, 1999. Matters brought before the
stockholders and the voting results are as follows:
(1) To elect fourteen (14) nominees for director to serve for a term of one
year.
<TABLE>
<CAPTION>
Nominee Shares For Shares Against Abstentions
- ---------------------------- ---------- -------------- -----------
<S> <C> <C> <C>
Paul Cole, Jr. 1,752,894 22,940 --
Eustace Frederick 1,751,370 24,464 --
B. L. Jackson, Jr. 1,755,486 20,348 --
Robert M. Jones, Jr., M.D. 1,758,190 17,644 --
Harold L. Miller 1,749,142 26,692 --
Charles A. Peters 1,755,486 20,348 --
C. E. Richner 1,748,990 26,844 --
Byron K. Satterfield 1,758,186 17,648 --
John H. Shott 1,755,590 20,244 --
Scott H. Shott 1,748,994 26,840 --
Walter L. Sowers 1,758,190 17,644 --
J. Brookins Taylor, M.D. 1,754,990 20,844 --
Frank W. Wilkinson 1,758,186 17,648 --
R. W. Wilkinson 1,758,186 17,648 --
</TABLE>
(2) To approve an amendment to the Corporation's Articles of Incorporation
changing the Corporation's name from Pocahontas Bankshares Corporation to
First Century Bankshares, Inc. Shares for: 1,756,869; Shares against:
18,309; Abstentions: 657.
(3) To ratify the selection of PricewaterhouseCoopers, LLP to serve as
independent auditors for the registrant for the year ending December 31,
1999. Shares for: 1,775,330; Shares against: 0; Abstentions: 504.
Item 6 - Exhibits and Reports on Form 8-K.
(a.) Exhibit 27 - Financial Data Schedule
(b.) None
SIGNATURES
Pursuant to the requirements of Section 13 or 15 (d) of the Securities
and Exchange Act of 1934, the registrant has duly caused this report to be
signed on its behalf by the undersigned, thereunto duly authorized.
(Registrant) First Century Bankshares, Inc.
------------------------------
By: /s/ J. Ronald Hypes
----------------------------------
J. Ronald Hypes, Treasurer
(Principal Accounting and Financial Officer)
Date: August 11, 1999
-------------------------
11
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 9
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