<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
x Quarterly report under Section 13 of 15 (d) of the Securities Exchange Act
--- of 1934 for the quarterly period ended June 30, 1997.
Transition report under Section 13 or 15 (d) of the Exchange Act for the
--- transition period from to .
--------- --------
COMMISSION FILE NUMBER 0-18827
FIRST COMMUNITY BANKING SERVICES, INC.
(Exact name of small business issuer as specified in its charter)
Georgia 58-1835725
- ---------------------------------- ---------------------------------------
(State or other Jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
300 South Peachtree Parkway, Peachtree City, Georgia 30269
-----------------------------------------------------------
(Address of principal executive offices)
Issuer's telephone number, including area code: (770)631-2265
--------------------------------------------------------------
Not Applicable
--------------
(Former name, former address and former fiscal year, if changed since last
report)
Check whether the issuer (1) has filed all reports required to be filed by
Section 13 or 15 (d) of the Securities Exchange Act during the preceding 12
months, and (2) has been subject to such filing requirements for the past 90
days.
Yes X No
--- ---
State the number of shares outstanding of each of the issuer's classes of
common equity, as of the latest practicable date:
Class Outstanding at August 10, 1997
- ------------------------------ ------------------------------
Common Stock, $1.00 Par Value 646,062 shares
Transitional Small Business Disclosure Format:
Yes No
----- -----
<PAGE> 2
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
The following financial statements are provided for First Community
Banking Services, Inc. and subsidiary:
A. Consolidated Balance Sheets as of June 30, 1997 and December 31,
1996.
B. Consolidated Statements of Operations for the three and six month
periods ended June 30, 1997 and 1996.
C. Consolidated Statements of Cash Flows for the six month periods
ended June 30, 1997 and 1996.
D. Notes to Consolidated Financial Statements.
2
<PAGE> 3
FIRST COMMUNITY BANKING SERVICES, INC. AND SUBSIDIARY
Consolidated Balance Sheets
June 30, 1997, and December 31, 1996
(Unaudited)
<TABLE>
<CAPTION>
June 30, December 31,
1997 1996
-----------------------------
ASSETS
<S> <C> <C>
Cash and due from banks $ 4,018,523 $ 5,317,785
Federal funds sold 6,970,000 1,860,000
Interest-bearing deposits in other financial institutions 34,416 25,088
Investment securities held to maturity (market value
of $1,670,671 and $1,665,963, respectively 1,659,946 1,659,519
Investment securities available for sale 17,741,329 13,145,260
Other investments 325,500 273,200
Loans, net of deferred loan fees 85,345,764 81,915,981
Less: Allowance for loan losses 1,114,690 1,214,173
------------- -------------
Loans, net 84,231,074 80,701,808
Premises and equipment, net 3,253,270 3,352,404
Other real estate 240,546 399,199
Accrued interest receivable 961,990 885,625
Intangible assets, net of accumulated amortization of
$279,583 and $539,226, respectively 370,417 470,774
Other assets 411,223 463,027
------------- -------------
TOTAL ASSETS $ 120,218,234 $ 108,553,689
============= =============
LIABILITIES AND STOCKHOLDERS' EQUITY
LIABILITIES
Deposits:
Non-interest-bearing demand $ 22,181,347 $ 17,122,818
Interest-bearing demand and money market 23,363,124 19,229,218
Savings 6,120,958 5,666,954
Time deposits of $100,000 or more 13,693,985 15,290,467
Other time deposits 43,800,526 40,834,909
------------- -------------
TOTAL DEPOSITS 109,159,940 98,144,366
Accrued interest payable 896,930 941,468
Other liabilities 316,400 303,139
------------- -------------
TOTAL LIABILITIES 110,373,270 99,388,973
------------- -------------
STOCKHOLDERS' EQUITY
Preferred stock - $1.00 par value: 5,000,000 shares
authorized, no shares issued and outstanding -0- -0-
Common stock - $1.00 par value:
5,000,000 shares authorized, 646,062 shares and
643,062 issued and outstanding 646,062 643,062
Surplus 6,123,901 6,096,901
Retained earnings 3,123,861 2,562,787
Market valuation reserve on investment securities
available for sale (48,860) (138,034)
------------- -------------
TOTAL STOCKHOLDERS' EQUITY 9,844,964 9,164,716
------------- -------------
TOTAL LIABILITIES & STOCKHOLDERS' EQUITY $ 120,218,234 $ 108,553,689
============= =============
See Notes to Consolidated Financial Statements
</TABLE>
3
<PAGE> 4
FIRST COMMUNITY BANKING SERVICES, INC. AND SUBSIDIARY
Consolidated Statements of Operations
For the Three and Six Month Periods Ended June 30,1997 and 1996
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
1997 1996 1997 1996
-------------------------------------------------------------------
<S> <C> <C> <C> <C>
INTEREST INCOME
Interest & fees on loans $ 2,188,420 $ 2,036,906 $ 4,361,192 $ 3,926,610
Interest on taxable securities 270,600 203,243 477,909 383,516
Interest on tax exempt securities 22,666 19,418 42,084 40,213
Interest on federal funds sold 111,250 33,228 150,087 86,061
Interest on deposits with other banks 388 2,684 803 5,339
----------- ----------- ----------- -----------
TOTAL INTEREST INCOME 2,593,324 2,295,479 5,032,075 4,441,739
----------- ----------- ----------- -----------
INTEREST EXPENSE
Interest on deposits:
Demand 143,573 160,566 274,619 324,406
Savings 36,282 37,798 70,302 71,803
Time 879,246 699,375 1,688,479 1,372,689
Interest on federal funds purchased &
securities sold under agreement to
repurchase 3,066 4,656 7,824 5,167
----------- ----------- ----------- -----------
TOTAL INTEREST EXPENSE 1,062,167 902,395 2,041,224 1,774,065
----------- ----------- ----------- -----------
NET INTEREST INCOME 1,531,157 1,393,084 2,990,851 2,667,674
Provision for loan losses 120,000 170,000 240,000 290,000
----------- ----------- ----------- -----------
NET INTEREST INCOME AFTER
PROVISION FOR LOAN LOSSES 1,411,157 1,223,084 2,750,851 2,377,674
----------- ----------- ----------- -----------
OTHER INCOME
Service charges and fees 129,217 118,862 266,365 232,173
Securities gains (losses), net 2,723 17 2,868 (950)
Gains on sale of SBA loans 0 0 60,994 0
Other 22,473 18,443 35,237 38,595
----------- ----------- ----------- -----------
TOTAL OTHER INCOME 154,413 137,322 365,464 269,818
----------- ----------- ----------- -----------
OTHER EXPENSE
Salaries and employee benefits 407,115 392,550 835,638 796,360
Occupancy expense 119,371 108,298 262,027 215,568
Other (Note B) 369,337 340,740 782,258 668,716
----------- ----------- ----------- -----------
TOTAL OTHER EXPENSE 895,823 841,588 1,879,923 1,680,644
----------- ----------- ----------- -----------
INCOME BEFORE INCOME
TAX EXPENSE 669,747 518,818 1,236,392 966,848
INCOME TAX EXPENSE 268,500 211,200 481,500 385,900
----------- ----------- ----------- -----------
NET INCOME $ 401,247 $ 307,618 $ 754,892 $ 580,948
=========== =========== =========== ===========
NET INCOME PER SHARE
(NOTE C) $ 0.58 $ 0.45 $ 1.08 $ 0.85
=========== =========== =========== ===========
WEIGHTED AVG NUMBER
OF SHARES OUTSTANDING 694,207 682,846 696,310 683,305
=========== =========== =========== ===========
</TABLE>
See Notes to Consolidated Financial Statements
4
<PAGE> 5
FIRST COMMUNITY BANKING SERVICES INC. AND SUBSIDIARY
Consolidated Statements of Cash Flow
For the six month periods ended June 30, 1997 and 1996
(Unaudited)
<TABLE>
<CAPTION>
1997 1996
---- ----
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income $ 754,892 $ 580,948
Adjustments to reconcile net income
to net cash provided by operating activities:
Amortization of intangibles 100,357 48,929
Depreciation, amortization and accretion 106,999 93,892
Provision for loan losses 240,000 290,000
Securities gains, net (2,868) 950
Gains on Sales of SBA loans (60,994) -0-
Change in:
(Increase) decrease in interest receivable (76,365) (73,041)
Increase (Decrease) in interest payable (44,538) 14,719
(Increase) decrease in other assets 5,866 22,963
Increase (Decrease) in other liabilities 13,261 (9,600)
------------ ------------
NET CASH PROVIDED BY OPERATING ACTIVITIES 1,036,610 969,760
============ ============
CASH FLOWS FROM INVESTING ACTIVITIES:
Net change in interest-bearing deposits
with other banks (9,328) -0-
Purchases of investment securities available for sale (5,957,261) (6,232,250)
Purchases of other investments (52,300) (22,200)
Proceeds from sales of investment securities
available for sale 1,306,272 1,257,161
Proceeds from maturities of investment securities -0- 200,000
Proceeds from maturities of investment securities
available for sale 200,000 2,250,000
Proceeds from the sale of loans 1,347,286 -0-
Net (increase) decrease in loans (5,296,104) (10,125,580)
Purchase of bank premises and equipment (15,391) (225,387)
Sale of other real estate 399,199 68,931
------------ ------------
NET CASH PROVIDED (USED) BY INVESTING ACTIVITIES (8,077,627) (12,829,325)
------------ ------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net increase (decrease) in Federal Funds purchased
and securities sold under agreements to repurchase -0- (1,161)
Net increase (decrease) in demand and savings
deposits 9,646,439 5,833,920
Net increase (decrease) in time deposits 1,369,135 10,157,762
Proceeds from Stock Sales 30,000 -0-
Cash Dividend Payment (193,819) (183,732)
------------ ------------
NET CASH PROVIDED BY FINANCING ACTIVITIES 10,851,755 15,806,789
------------ ------------
NET INCREASE IN CASH AND CASH EQUIVALENTS 3,810,738 3,947,224
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 7,177,785 5,852,249
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 10,988,523 $ 9,799,473
============ ============
SUPPLEMENTAL DISCLOSURES OF CASH PAID:
Interest $ 2,085,762 $ 1,759,346
============ ============
Income Taxes $ 372,200 $ 419,000
============ ============
SUPPLEMENTAL DISCLOSURES OF NONCASH FINANCING AND
INVESTING ACTIVITIES:
Acquisition of real estate in settlement of loans $ -0- $ 399,199
============ ============
</TABLE>
5
<PAGE> 6
FIRST COMMUNITY BANKING SERVICES, INC. AND SUBSIDIARY
Notes to Consolidated Financial Statements
(Unaudited)
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-QSB and Item 310 (b)
of Regulation S-B of the Securities and Exchange Commission. 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 (consisting of normal recurring accruals)
considered necessary for a fair presentation have been included. Operating
results for the three month period ended June 30, 1997, are not necessarily
indicative of the results that may be expected for the year ended December 31,
1997. For further information refer to the consolidated financial statements and
footnotes thereto included in the Company's Annual Report on Form 10-K for the
year ended December 31, 1996.
ACCOUNTING RULE CHANGES
(Accounting for Transfers and Servicing of Financial Assets and Extinguishments
of Liabilities). The Financial Accounting Standards Board has issued Statement
of Financial Accounting Standards No. 125 (SFAS 125), "Accounting for Transfers
and Servicing of Financial Assets and Extinguishments of Liabilities." SFAS 125
is effective for such transactions entered into subsequent to December 31, 1996,
and for certain excess servicing rights recorded at December 31, 1996. Under
SFAS 125, a company recognizes the financial and servicing assets it controls
and the liabilities it has incurred and derecognizes financial assets when
control has been surrendered and liabilities when extinguished. The Financial
Accounting Standard Board has issued Statement of Financial Accounting Standards
No. 127 (SFAS 127), 'Deferral of the Effective Date of FASB Statements of No.
125, which delays the effective date of certain provisions of SFAS 125 until
1998. The adoption of SFAS 125 and SFAS 127 is not expected to have a
significant impact on the financial conditions or results of operations of the
Company.
(Accounting for Stock Based Compensation). Effective January 1, 1996, the
Company adopted the disclosure requirements of Statement of Financial Accounting
Standards No. 123 (SFAS 123), "Accounting for Stock-Based Compensation." As
provided by SFAS 123, the Company has elected to continued applying the
provisions of APB 25 in determining its net income relative to stock-based
compensation. The Company has adopted the SFAS 123 requirement that a company
disclose the pro forma net income and pro forma earnings per share, as if the
alternative fair-value-based accounting method in SFAS 123 had been used in
determining net income. The adoption of SFAS 123 did not have a significant
impact on the financial condition or results of operations of the Company.
(Accounting for the Impairment of Long-Lived Assets and Long-Lived Assets to be
Disposed of). Effective January 1, 1996, the Company adopted Statement of
Financial Accounting Standards No. 121 (SFAS 121), "Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed of."
The provisions of SFAS 121 require the Company to review long-lived assets for
impairment whenever events or changes in circumstances indicated that the
carrying amount of an asset may not be recoverable. The adoption of SFAS 121 did
not have a significant impact on the financial condition or results of
operations of the Company.
PENDING ACCOUNTING PRONOUNCEMENTS
The Financial Accounting Standards Board has issued Statement of Financial
Accounting Standards No. 128 (SFAS 128), "Earnings per Share." SFAS 128 is
effective for financial statements issued for periods ending after December 15,
1997. This statement supercedes APB Opinion 15 "Earnings per Share," and
simplifies earnings per share computations by replacing primary EPS with Basic
EPS, which shows no effects from dilutive securities. Entities with complex
capital structures will have to show diluted EPS, which is similar to the fully
diluted EPS computation under APB 15. Had SFAS been effective on June 30, 1997,
the Company would have had basic earnings per share of $.62 and $.48 and diluted
earnings per share of $.58 and $.45 for the three months ending June 30, 1997and
1996, respectively. For the six months ending June 30, 1997 and 1996, basic
earnings per share would have been $1.17 and $.90 and diluted earnings per share
would have been $1.08 and $.85 respectively.
6
<PAGE> 7
The Financial Accounting Standards Board has issued Statement of Financial
Accounting Standards No. 129 "Disclosure of information about capital structure.
SFAS 129 is effective for financial statements issued for periods ending
December 15, 1997. This standard consolidates existing disclosure requirements
on capital structure. The adoption of SFAS 129 is not expected to have a
significant impact on the financial conditions or results of operations of the
Company.
NOTE B
SUPPLEMENTAL FINANCIAL DATA
Components of other operating expenses in excess of 1% of total interest and
other income for the periods ended June 30, 1997 and 1996 are as follows:
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
1997 1996 1997 1996
---------------------------------------------------
<S> <C> <C> <C> <C>
Printing and supplies $ -- $ 37,155 $ 63,143 $ 59,976
Professional fees -- -- 75,088 --
Data Processing fees 81,796 66,689 156,919 132,686
FDIC assessment -- -- -- --
Directors fees -- 25,000 61,150 54,000
Audit and accounting -- -- -- --
Amortization of intangibles -- 24,465 100,357 48,929
</TABLE>
NOTE C
EARNINGS PER SHARE
Earnings per share have been computed on the weighted average number of common
shares outstanding during the period, adjusted for the dilutive effect of the
options.
MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATIONS
The following discussion contains forward-looking statements that involve risks
and uncertainties. The Company's actual results may differ materially from the
results discussed in the forward-looking statements, and the Company's operating
performance each quarter is subject to various risks and uncertainties that are
discussed in detail in the Company's filings with the Securities and Exchange
Commission, including the "Risk Factors" section in the Company's Registration
Statement on Form S-1 (Registration Number 0-18827) as filed with and declared
effective by the Securities and Exchange Commission.
RESULTS OF OPERATIONS
Period ended June 30, 1997
First Community Banking Services, Inc. (the "Company"), reported net income of
$401,247 for the second quarter of 1997, a 30.43% increase as compared to
$307,618 for the same period in 1996. Net earnings per share for the second
quarter of 1997 and 1996 were $.58 and $.45, respectively. The increase in net
income is primarily attributable to the increase in interest income and fees
from loans. Total assets increased $11,664,545 to $120,218,234 between December
31, 1996 and June 30, 1997, an increase of 10.74%.
The return on average assets for the Company was 1.42% for the six month period
ended June 30, 1997, as compared to 1.27% for the same period last year. The
return on average shareholders' equity increased for the first six months of
1997 to 17.24% as compared to 15.64% for the first six months of 1996. Book
value at June 31, 1997, was $15.23, an increase of $.98 from December, 31, 1996.
7
<PAGE> 8
Deposits grew $11,015,574 from December 31, 1996, an increase of 11.09%, to
$110,373,270. Noninterest bearing demand deposits accounted for $5,058,529 of
this increase, or 45.92%. Time deposits over $100,000 decreased $1,596,482 to
$13,693,985, at June 30, 1997. Deposit growth is attributed to Fayette County
Bank (the "Bank") increasing its rates on time deposits in order to fund loan
demand. Loans, net of the allowance for loan losses, increased $3,529,266 during
the six month period ended June 30, 1997. The Bank experienced an increase in
loan demand during the first quarter of 1997.
Deposit funds in excess of those needed to support loan growth were allocated to
purchases of investment securities and to federal funds sold. Fed Funds sold
increased from $1,860,000 at December 31, 1996 to $6,970,000 at June 30, 1997.
Investment securities available-for-sale increased $4,596,069 during the second
quarter of 1997. The Statement of Cash Flows shows the Bank had $200,000 in
available-for-sale securities to mature during the second quarter of 1997, while
the Bank purchased $5,957,261 of available-for-sale securities.
The Bank's increase in earning assets, coupled with the faster repricing of
earning assets than interest-bearing liabilities in an increasing rate
environment, resulted in an increase in the Company's net interest income for
the first three months of 1997 as compared to the first three months of 1996.
Net interest income for the three month period ended June 30, 1997, increased
9.91% to $1,531,157, as compared to $1,393,084 for the same period in 1996. Net
interest income for the six month period ending June 30, 1997 increased 12.11%
to $2,990,851 from $2,667,674 for the same period ending 1996. The interest
margin for the first six months of 1997 declined to 5.73%, as compared to 6.01%
for the same six month period in 1996.
Other income increased to $365,464, from $269,818, for the six month periods
ended June 30, 1997, and 1996, respectively. Service charges on deposit accounts
increased to $266,365, up $34,192 or 14.73% from $232,173 during the first six
months of 1997, as compared to the same period of 1996. This is primarily
attributed to the increase in new accounts during this period. The Bank had
gains on the sale of SBA loans which totaled $60,994 during the first six month
period ending June 30, 1997, and $0 during the second quarter of 1997. Other
miscellaneous income decreased to $35,237, compared to $38,595, for the six
month periods ended June 30, 1997, and 1996, respectively.
Other expenses increased 11.86% or $199,279 to $1,879,923, from $1,680,644, for
the six month periods ended June 30, 1997 and 1996, respectively. Salaries and
employee benefits accounted for approximately $38,000 of this increase. Repairs
to the Bank building accounted for approximately $46,000 of the increase. The
Bank expensed $77,000 of premium when the credit card portfolio was sold during
the first quarter of 1996.
Asset Quality
Nonperforming assets (nonaccrual and restructured loans and real estate acquired
through foreclosure (OREO)) as a percentage of total loans and OREO remained
relatively unchanged at .85% and .88% at June 30, 1997, and December 31, 1996,
respectively.
Nonperforming Assets
<TABLE>
<CAPTION>
June 30, December 31,
1997 1996
---- ----
<S> <C> <C>
Loans on nonaccrual $494,332 $ 14,854
Other real estate owned 240,546 399,199
Restructured/Impaired loans -0- 303,913
-------- --------
Total non-performing assets 734,878 $717,966
Loans ninety days past due $ 66,505 $560,530
Total nonperforming assets as a percentage of total
loans and other real estate .86% .87%
Loans ninety days past due as a percentage of total loans .08% .68%
</TABLE>
8
<PAGE> 9
The allowance for loan losses at June 30, 1997, remained basically unchanged
from December 31, 1996, at $1,114,690. The allowance at June 30, 1997,
represented 1.31% of total loans compared to 1.48% at December 31, 1996. The
allowance at June 30, 1997 represented 151.68% of nonperforming assets
(nonaccrual and restructured) at June 30,1997, compared to 169.11% of
non-performing assets at December 31, 1996.
Analysis of the Allowance for Loan Losses at
June 30, 1997
<TABLE>
<S> <C>
Allowance for loan losses at December 31, 1996 $1,214,173
----------
Charge offs:
Commercial 310,777
Real Estate -0-
Installment 34,043
Credit Card Related 44,170
----------
Total 388,990
Recoveries:
Commercial 31,963
Real Estate -0-
Installment 13,706
Credit card related 3,838
----------
Total 49,507
Net Charge-offs 339,483
----------
Provision charged to income 240,000
----------
Allowance for loan losses at June 30, 1997 $1,114,690
==========
</TABLE>
The loan portfolio is periodically reviewed to evaluate the outstanding loans
and to measure both the performance of the portfolio and the adequacy of the
allowance for loan losses. This analysis includes a review of delinquency
trends, actual losses, and internal credit ratings. Management's judgment as to
the adequacy of the allowance is based upon a number of assumptions about future
events which it believes to be reasonable, but which may or may not be
reasonable. However, because of the inherent uncertainty of assumptions made
during the evaluation process, there can be no assurance that loan losses in
future periods will not exceed the allowance for loan losses or that additional
allocations to the allowance will not be required.
LIQUIDITY AND CAPITAL ADEQUACY
The Bank's net loan to deposit ratio decreased by 6.15% at June 30, 1997, to
77.16%, as compared to 82.22% at December 31, 1996. This change is a result of
the Bank maintaining a level of loan growth below the level of deposit growth.
During the first six months of 1997, deposits grew by more than $11.0 million
while gross loans increased by approximately $3.4 million. The Bank's liquid
assets as a percentage of total deposits were 10.10% at June 30, 1997, compared
to 7.34% at December 31, 1996. Management also analyzes the level of off-balance
sheet assets such as unfunded loan equivalents, liquid investments, and
available fund lines in an attempt to minimize the possibility that a potential
shortfall will exist. Based on this analysis, management believes that the
Company has adequate liquidity to meet short-term operating requirements.
However, no assurances can be given in this regard.
9
<PAGE> 10
Shareholders' equity increased 7.42% from December 31, 1996, to $9,844,964 at
June 30, 1997. The capital of the Company and the Bank exceeded all prescribed
regulatory capital guidelines. Regulations require that the most highly rated
banks maintain a minimum Tier l leverage ratio of 3% plus an additional cushion
of at least 1 to 2 percentage points. Tier 1 capital consists of common
shareholders' equity, less certain intangibles. The Bank's Tier 1 leverage ratio
was 7.9% at June 30, 1997, compared to 8.2% at December 31, 1996. The decline of
the three capital ratios was due to growth in the Bank's assets and risk based
assets. Regulations require that the Bank maintain a minimum total risk-weighted
capital ratio of 8%, with one-half of this amount, or 4%, made up of Tier 1
capital. Risk-weighted assets consist of balance sheet assets adjusted by risk
category, and off-balance sheet asset equivalents similarly adjusted. At June
30, 1997, the Bank had a risk-weighted total capital ratio of 9.7%, compared to
11.4% at December 31, 1996, and a Tier 1 risk-weighted capital ratio of 8.7%,
compared to 10.2% at December 31, 1996.
INVESTMENT SECURITIES
At June 30, 1997, the Bank had $17,741,329 in investment securities
available-for-sale and $1,659,946 in securities held-to-maturity. The net
unrealized loss on available-for-sale securities, net of deferred income taxes,
was $48,860 on June 30, 1997. Investment securities comprised approximately 16%
and 14% of the Bank's assets on June 30, 1997 and December 31, 1996
respectively. The Bank invests primarily in obligations of the United States or
obligations guaranteed as to principal and interest by the United States and
other taxable and tax exempt securities. The Bank has included in its investment
portfolio instruments described as a derivative, primarily, structured note
derivatives. Structured notes are debt securities whose cash flow
characteristics depend on one or more indexes. Structured notes carry high
credit ratings and are issued as floating-rate instruments. In a rising interest
rate environment, the market value of these securities can decrease due to the
fact that the embedded options, puts, calls, etc., become evident and in
contrast to predictions. The Bank has one investment totaling $250,000 in the
investment portfolio at June 30, 1997, classified as a structured note. There
can be no assurance that as interest rates change in the future the amount of
unrealized loss will not increase, but if these securities are held until they
mature and are repaid in accordance with their terms, these principal losses
will not be realized. The Bank also engages in Federal Funds transactions with
its principal correspondent banks and primarily acts as a net seller of such
funds. The sale of Federal Funds amounts to a short-term loan from the Bank to
another bank.
10
<PAGE> 11
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
There are no material pending legal proceedings to which the Company is a party
or of which its property is the subject.
Item 2. Changes in Securities
Not Applicable.
Item 3. Defaults Upon Senior Securities
Not applicable.
Item 4. Submission of Matters to a Vote of Security Holders
Submission of matters to a vote of security holders on April 30, 1997, the
Company held its Annual Meeting of Shareholders for the purpose of electing six
directors for three-year terms.
Each nominee for director received the number of affirmative votes of
shareholders required for such nominee's election in accordance with the Bylaws
of the Company, with 348,146 shares voting for each nominee and 27,060 shares
withholding vote out of a total 646,062 outstanding shares. The six nominees
elected at the meeting were Robert W. Bertelsbeck, Joseph S. Black, Robert C.
Gasko, Kirsten M. Gasko, Mukut Gupta, G. Webb Howell. The other directors of the
Company are: Arlie C. Aukerman, Mark A. Jungers, John E. Molis, Richard A.
Parlontieri, Donnie H. Russell, H. Geoffrey Slade, Enrico A. Stanziale, Fred B.
Sheats, John R. Torretto, and Ira P. Shepherd, III.
Item 5. Other information
Not applicable.
Item 6. Exhibits and Report on Form 8-K
a). Exhibits.
<TABLE>
<CAPTION>
Exhibit
Number Description
---------------------------
<S> <C>
3.1* Articles of Incorporation
3.2* Bylaws
10.5*** Settlement Agreement and Release with Fayette County
Bancshares, Inc. and Terry L. Miller as of October 21, 1994.
10.6*** Fayette County Bancshares, Inc. Stock Option Plan.
10.7**** Purchase Agreement-Credit Card Accounts dated January 23,
1997 between Fayette County Bank and Carolina First
11 Computation of Net Income Per Share
21.1** Subsidiaries of the Company
24 Power of Attorney (contained on the Signature Page)
27 Financial Data Schedule (for SEC use only)
* Previously filed as exhibits to the Company's Registration
Statement on Form S-18 (Registration No. 33-6658-A) and
incorporated herein by reference.
** Previously filed as exhibit to the Company's Annual Report
on Form 10-KSB for the year ended December 31, 1990.
*** Previously filed as exhibits to the Company's Annual Report
on Form 10-KSB for the year ended December 31, 1994.
**** Previously filed as exhibit to Company's Form 10-QSB for
quarter ended March 31, 1997.
</TABLE>
b). Reports on Form 8-K.
NONE.
11
<PAGE> 12
SIGNATURES
In accordance with the requirements of the Exchange Act, the registrant has
duly caused this report to be signed on its behalf by the undersigned,
thereunto duly authorized.
FIRST COMMUNITY BANKING SERVICES, INC.
(Registrant)
Date: August 13, 1997 /s/ Ira Pat Shepherd
-----------------------------------
Ira Pat Shepherd,
Principal Executive Officer
Date: August 13, 1997 /s/ Mark Kearsley
----------------------------------
Mark Kearsley,
Principal Financial Officer
12
<PAGE> 13
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
Exhibit
Number Description
- ------ ------------
<S> <C>
3.1 Articles of Incorporation of Company (incorporated by reference to
Exhibit 3.1 of Registration Statement on Form S-18, File No.
33-26658-A).
3.2 Bylaws of Company (incorporated by reference to Exhibit 3.2 of
Registration Statement on Form S-18, File No. 33-26658-A).
10.1 Settlement Agreement and Release with Company and Terry L. Miller as
of October 21, 1994, (incorporated by reference to Exhibit 10.5 on the
Annual Report on Form 10-K for the year ended December 31, 1994).
10.2 Company Stock Option Plan (incorporated by reference to Exhibit 10.6
of the Annual Report on Form 10-K for the year ended December 31,
1994).
11 Computation of Earnings Per Share
27 Financial Data Schedule (for SEC use only)
</TABLE>
13
<PAGE> 1
FIRST COMMUNITY BANKING SERVICES, INC. AND SUBSIDIARY
EXHIBIT 11 - COMPUTATION OF NET INCOME PER SHARE
<TABLE>
<CAPTION>
1997 1996
---- ----
<S> <C> <C>
For the Three Months Ended June 30,
- -----------------------------------
Net Income $401,247 $307,618
======== ========
Weighted average of common shares outstanding 646,062 643,062
Add Common Stock equivalents determined using the
"Treasury Stock" method representing shares issuable
upon exercise of director and employee stock options
using annual average market price 48,145 39,784
-------- --------
Weighted average number of shares used in calculation
of primary earnings per share 694,207 682,846
======== ========
Primary earnings per share $ 0.58 $ 0.45
======== ========
For the Six Months Ended June 30,
- ---------------------------------
Net Income $754,892 $580,948
======== ========
Weighted average of common shares outstanding 646,062 643,062
Add Common Stock equivalents determined using the
"Treasury Stock" method representing shares issuable
upon exercise of director and employee stock options
annual average market price 50,248 40,243
-------- --------
Weighted average number of shares used in calculation
of primary earnings per share 696,310 683,305
======== ========
Primary earnings per share $ 1.08 $ 0.85
======== ========
</TABLE>
14
<TABLE> <S> <C>
<ARTICLE> 9
<MULTIPLIER> 1
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> JUN-30-1997
<EXCHANGE-RATE> 1
<CASH> 4,018,523
<INT-BEARING-DEPOSITS> 34,416
<FED-FUNDS-SOLD> 6,970,000
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 17,741,329
<INVESTMENTS-CARRYING> 1,659,946
<INVESTMENTS-MARKET> 1,670,671
<LOANS> 85,345,764
<ALLOWANCE> 1,114,690
<TOTAL-ASSETS> 120,218,234
<DEPOSITS> 109,159,940
<SHORT-TERM> 0
<LIABILITIES-OTHER> 316,400
<LONG-TERM> 0
0
0
<COMMON> 646,062
<OTHER-SE> 9,198,902
<TOTAL-LIABILITIES-AND-EQUITY> 120,218,234
<INTEREST-LOAN> 4,361,192
<INTEREST-INVEST> 519,993
<INTEREST-OTHER> 150,890
<INTEREST-TOTAL> 5,032,075
<INTEREST-DEPOSIT> 2,033,400
<INTEREST-EXPENSE> 2,041,224
<INTEREST-INCOME-NET> 2,990,851
<LOAN-LOSSES> 240,000
<SECURITIES-GAINS> 2,868
<EXPENSE-OTHER> 1,879,923
<INCOME-PRETAX> 1,236,392
<INCOME-PRE-EXTRAORDINARY> 754,892
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 754,892
<EPS-PRIMARY> 1.08
<EPS-DILUTED> 0
<YIELD-ACTUAL> 0
<LOANS-NON> 494,332
<LOANS-PAST> 66,505
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 1,214,173
<CHARGE-OFFS> 388,990
<RECOVERIES> 49,507
<ALLOWANCE-CLOSE> 1,114,690
<ALLOWANCE-DOMESTIC> 1,114,690
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0
</TABLE>
