<PAGE> 1
FORM 10-Q-QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
(Mark One)
[X] Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934
For the Quarterly Period Ended: March 31, 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: 0-19297
First Community Bancshares, Inc.
(Exact name of registrant as specified in its charter)
Nevada 55-0694814
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
One Community Place, Bluefield, VA 24605-0989
(Address of principal executive offices) (Zip Code)
(540) 326-9000
(Registrant's telephone number, including area code)
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
--- ---
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
Class Outstanding at April 30, 1999
Common Stock, $1 Par Value 8,781,335
-----------------------------
<PAGE> 2
First Community Bancshares, Inc.
FORM 10-Q
For the quarter ended March 31, 1999
INDEX
<TABLE>
<CAPTION>
PART I. FINANCIAL INFORMATION PAGE NUMBER
-----------
<S> <C> <C>
Item 1. Financial Statements
Consolidated Balance Sheets as of March 31, 1999 and
December 31, 1998 3
Consolidated Statements of Income and Comprehensive Income
for the Three Months Ended March 31, 1999 and 1998 4
Consolidated Statements of Cash Flows for the
Three Months Ended March 31, 1999 and 1998 5
Consolidated Statements of Changes in Stockholders'
Equity for the Three Months Ended March 31,
1999 and 1998 6
Notes to Consolidated Financial Statements 7-8
Independent Accountants' Report 9
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 10-17
Item 3. Quantitative and Qualitative Disclosures About Market
Risk 17-18
PART II. OTHER INFORMATION
Item 1. Legal Proceedings 19
Item 2. Changes in Securities and Use of Proceeds 19
Item 3. Defaults Upon Senior Securities 19
Item 4. Submission of Matters to a Vote of 19-20
Security Holders
Item 5. Other Information 20
Item 6. Exhibits and Reports on Form 8-K 20
SIGNATURES 21
</TABLE>
2
<PAGE> 3
ITEM 1. FINANCIAL STATEMENTS
FIRST COMMUNITY BANCSHARES, INC.
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------
(UNAUDITED) MARCH 31 DECEMBER 31
(AMOUNTS IN THOUSANDS, EXCEPT SHARE DATA) 1999 1998
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
ASSETS
CASH AND DUE FROM BANKS $ 34,986 $ 33,943
INTEREST BEARING BALANCES-FHLB 6,177 57,523
FEDERAL FUNDS SOLD 24,527 25,630
SECURITIES AVAILABLE FOR SALE (AMORTIZED COST
OF $239,239 MARCH 31, 1999; $191,131
DECEMBER 31, 1998) 239,474 193,194
INVESTMENT SECURITIES HELD TO MATURITY:
U.S. TREASURY SECURITIES 100 100
U.S. GOVERNMENT AGENCIES AND CORPORATIONS 4,845 7,546
STATES AND POLITICAL SUBDIVISIONS 75,010 75,009
OTHER SECURITIES 1,362 1,361
----------- -----------
TOTAL INVESTMENT SECURITIES (MARKET
VALUE OF $85,146 MARCH 31, 1999; $88,256
DECEMBER 31, 1998) 81,317 84,016
TOTAL LOANS, NET OF UNEARNED INCOME 610,390 611,493
LESS: RESERVE FOR LOAN LOSSES 11,089 11,404
----------- -----------
NET LOANS 599,301 600,089
PREMISES AND EQUIPMENT, NET 19,388 17,986
OTHER REAL ESTATE 2,041 3,547
INTEREST RECEIVABLE 7,371 7,030
OTHER ASSETS 8,699 6,684
INTANGIBLE ASSETS 23,843 24,346
----------- -----------
TOTAL ASSETS $ 1,047,124 $ 1,053,988
=========== ===========
LIABILITIES
DEPOSITS, NON-INTEREST BEARING $ 116,939 $ 123,992
DEPOSITS, INTEREST-BEARING 748,971 752,004
----------- -----------
TOTAL DEPOSITS 865,910 875,996
INTEREST, TAXES AND OTHER LIABILITIES 11,965 10,417
SECURITIES SOLD UNDER AGREEMENT TO REPURCHASE 47,952 47,680
OTHER INDEBTEDNESS 18,102 18,176
----------- -----------
TOTAL LIABILITIES 943,929 952,269
----------- -----------
STOCKHOLDERS' EQUITY
COMMON STOCK, $1 PAR VALUE; 10,000,000 SHARES
AUTHORIZED; 8,992,386 ISSUED IN 1999 AND 1998;
8,781,335 AND 8,767,552 SHARES OUTSTANDING IN
1999 AND 1998 8,992 8,992
ADDITIONAL PAID-IN CAPITAL 34,264 34,306
RETAINED EARNINGS 62,322 60,250
UNALLOCATED COMMON STOCK HELD BY ESOP (722) (1,664)
TREASURY STOCK, AT COST (1,802) (1,403)
ACCUMULATED OTHER COMPREHENSIVE INCOME 141 1,238
----------- -----------
TOTAL STOCKHOLDERS' EQUITY 103,195 101,719
----------- -----------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 1,047,124 $ 1,053,988
=========== ===========
</TABLE>
See Notes to Consolidated Financial Statements.
3
<PAGE> 4
FIRST COMMUNITY BANCSHARES, INC.
CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------
(UNAUDITED)
(AMOUNTS IN THOUSANDS, EXCEPT THREE MONTHS ENDED
SHARE AND PER SHARE DATA) MARCH 31
-----------------------------------------
1999 1998
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C>
INTEREST INCOME:
INTEREST AND FEES ON LOANS $ 13,872 $ 16,066
INTEREST ON SECURITIES AVAILABLE FOR SALE 3,137 2,736
INTEREST ON INVESTMENT SECURITIES:
U.S. TREASURY SECURITIES 1 54
U.S. GOVERNMENT AGENCIES AND CORPORATIONS 93 322
STATES AND POLITICAL SUBDIVISIONS, TAX EXEMPT 992 1,017
OTHER SECURITIES 27 21
INTEREST ON FEDERAL FUNDS SOLD 296 317
INTEREST ON DEPOSITS IN BANKS 318 122
----------- -----------
TOTAL INTEREST INCOME 18,736 20,655
----------- -----------
INTEREST EXPENSE:
INTEREST ON DEPOSITS 7,694 8,623
INTEREST ON BORROWINGS 710 928
----------- -----------
TOTAL INTEREST EXPENSE 8,404 9,551
----------- -----------
NET INTEREST INCOME 10,332 11,104
PROVISION FOR LOAN LOSSES 444 1,287
----------- -----------
NET INTEREST INCOME AFTER PROVISION FOR
LOAN LOSSES 9,888 9,817
----------- -----------
NON-INTEREST INCOME:
FIDUCIARY INCOME 516 454
SERVICE CHARGES ON DEPOSIT ACCOUNTS 878 891
OTHER CHARGES, COMMISSIONS AND FEES 380 737
GAIN ON SETTLEMENT OF PENSION PLAN -- 1,062
OTHER OPERATING INCOME 364 115
----------- -----------
TOTAL NON-INTEREST INCOME 2,138 3,259
----------- -----------
NON-INTEREST EXPENSE:
SALARIES AND EMPLOYEE BENEFITS 3,067 3,148
OCCUPANCY EXPENSE OF BANK PREMISES 503 499
FURNITURE AND EQUIPMENT EXPENSE 458 489
GOODWILL AMORTIZATION 503 535
OTHER OPERATING EXPENSE 1,919 2,667
----------- -----------
TOTAL NON-INTEREST EXPENSE 6,450 7,338
----------- -----------
INCOME BEFORE INCOME TAXES 5,576 5,738
INCOME TAX EXPENSE 1,742 1,784
----------- -----------
NET INCOME $ 3,834 $ 3,954
=========== ===========
OTHER COMPREHENSIVE (LOSS) INCOME (1,097) 119
----------- -----------
COMPREHENSIVE INCOME $ 2,737 $ 4,073
=========== ===========
BASIC AND DILUTED EARNINGS PER COMMON SHARE $ 0.44 $ 0.46
=========== ===========
WEIGHTED AVERAGE SHARES OUTSTANDING 8,788,862 8,828,623
=========== ===========
</TABLE>
See Notes to Consolidated Financial Statements.
4
<PAGE> 5
FIRST COMMUNITY BANCSHARES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------
(UNAUDITED)
(AMOUNTS IN THOUSANDS) THREE MONTHS ENDED
MARCH 31
-----------------------------------------
1999 1998
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
NET INCOME $ 3,834 $ 3,954
ADJUSTMENTS TO RECONCILE NET INCOME TO NET CASH
PROVIDED BY OPERATING ACTIVITIES:
PROVISION FOR POSSIBLE LOAN LOSSES 444 1,287
DEPRECIATION OF PREMISES AND EQUIPMENT 375 367
AMORTIZATION OF INTANGIBLES 491 477
INVESTMENT AMORTIZATION AND ACCRETION, NET 153 (108)
GAIN ON THE SALE OF ASSETS, NET (247) (14)
OTHER LIABILITIES, NET 2,138 2,387
INTEREST RECEIVABLE (341) (140)
OTHER ASSETS, NET (974) 1,157
OTHER, NET (50) 43
--------- ---------
NET CASH PROVIDED BY OPERATING ACTIVITIES 5,823 9,410
--------- ---------
CASH FLOWS FROM INVESTMENT ACTIVITIES:
INCREASE (DECREASE) IN CASH REALIZED FROM:
MATURITIES AND CALLS OF INVESTMENT SECURITIES 2,704 8,386
MATURITIES AND CALLS OF SECURITIES AVAILABLE FOR SALE 11,493 35,826
PURCHASE OF SECURITIES AVAILABLE FOR SALE (59,764) (23,213)
NET DECREASE IN LOANS MADE TO CUSTOMERS 2,233 8,552
PURCHASE OF EQUIPMENT (1,835) (129)
SALES OF EQUIPMENT 5 4
--------- ---------
NET CASH (USED IN) PROVIDED BY INVESTMENT ACTIVITIES (45,164) 29,426
--------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
INCREASE (DECREASE) IN CASH REALIZED FROM:
DEMAND AND SAVINGS DEPOSITS, NET (5,117) 12,944
TIME DEPOSITS, NET (4,968) 8,375
SHORT-TERM BORROWINGS, NET 272 699
ISSUANCE OF LONG-TERM DEBT -- 2,500
PAYMENTS OF LONG-TERM DEBT (74) (3,361)
ACQUISITION OF TREASURY STOCK (399) --
CASH PAID IN LIEU OF FRACTIONAL SHARES (18) (27)
CASH DIVIDENDS PAID (1,761) (1,751)
--------- ---------
NET CASH (USED IN) PROVIDED BY FINANCING ACTIVITIES (12,065) 19,379
--------- ---------
NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS (51,406) 58,215
CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR 117,096 47,123
--------- ---------
CASH AND CASH EQUIVALENTS AT END OF QUARTER $ 65,690 $ 105,338
========= =========
</TABLE>
See Notes to Consolidated Financial Statements.
5
<PAGE> 6
FIRST COMMUNITY BANCSHARES, INC.
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------
(UNAUDITED)
(AMOUNTS IN THOUSANDS, EXCEPT ACCUMULATED
SHARE AND PER SHARE DATA) ADDITIONAL UNALLOCATED OTHER
COMMON PAID-IN RETAINED ESOP TREASURY COMPREHENSIVE
STOCK CAPITAL EARNINGS SHARES STOCK INCOME
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
BALANCE BEGINNING OF
THE PERIOD,
JANUARY 1, 1998 $ 8,992 $ 34,306 $ 54,564 $ -- $ (1,271) $ 1,251
NET INCOME -- -- 3,954 -- -- --
COMMON DIVIDENDS
DECLARED ($.22
PER COMMON SHARE) -- -- (1,752) -- -- --
COMPREHENSIVE INCOME, NET OF TAX -- -- -- -- -- 119
-------- -------- -------- -------- -------- --------
BALANCE, MARCH 31, 1998 $ 8,992 $ 34,306 $ 56,766 $ -- $ (1,271) $ 1,370
======== ======== ======== ======== ======== ========
BALANCE BEGINNING OF
THE PERIOD,
JANUARY 1, 1999 $ 8,992 $ 34,306 $ 60,250 $ (1,664) $ (1,403) $ 1,238
NET INCOME -- -- 3,834 -- -- --
COMMON DIVIDENDS
DECLARED ($.20
PER COMMON SHARE) -- -- (1,762) -- -- --
PURCHASE 14,312 TREASURY SHARES
AT $27.94 PER SHARE -- -- -- -- (399) --
ALLOCATION OF ESOP SHARES -- (42) -- 942 -- --
COMPREHENSIVE LOSS, NET OF TAX -- -- -- -- -- (1,097)
-------- -------- -------- -------- -------- --------
BALANCE, MARCH 31, 1999 $ 8,992 $ 34,264 $ 62,322 $ (722) $ (1,802) $ 141
======== ======== ======== ======== ======== ========
</TABLE>
See Notes to Consolidated Financial Statements.
6
<PAGE> 7
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1. UNAUDITED FINANCIAL STATEMENTS
The unaudited consolidated balance sheet as of March 31, 1999 and the unaudited
consolidated statements of income and comprehensive income, cash flows and
changes in stockholders' equity for the periods ended March 31, 1999 and 1998
have been prepared by the management of First Community Bancshares, Inc. (FCBI).
In the opinion of management, all adjustments (including normal recurring
accruals) necessary to present fairly the financial position of First Community
Bancshares, Inc. and subsidiaries at March 31, 1999 and its results of
operations, cash flows, and changes in stockholders' equity for the periods
ended March 31, 1999 and 1998, have been made. These results are not necessarily
indicative of the results of consolidated operations for the full calendar year.
The consolidated balance sheet as of December 31, 1998 has been extracted from
audited financial statements included in the Company's 1998 Annual Report to
Shareholders. Certain information and footnote disclosure normally included in
financial statements prepared in accordance with generally accepted accounting
principles have been omitted. It is suggested that these financial statements
should be read in conjunction with the financial statements and notes thereto
included in the 1998 Annual Report of FCBI.
NOTE 2. CASH FLOWS
For the three months ended March 31, 1999 and 1998, for purposes of reporting
cash flows, cash and cash equivalents include cash and due from banks and
interest-bearing balances available for immediate withdrawal of $41.2 million at
March 31, 1999 and $75.9 million at March 31, 1998, and federal funds sold of
$24.5 million at March 31, 1999 and $29.5 million at March 31, 1998.
NOTE 3. COMMITMENTS AND CONTINGENCIES
The Company is currently a defendant in various legal actions and asserted
claims most of which involve lending and collection activities in the normal
course of business, some of which have remained dormant for a number of years.
While the Company and legal counsel are unable to assess the outcome of each of
these matters, they are of the belief that the resolution of these actions
should not have a material adverse affect on the financial position or results
of operations of the Company.
The Company is currently involved in litigation styled Ann Tierney Smith,
Executrix, et al versus FCFT, First Community Bank, Gentry, Locke and William
Gust. In this matter, the plaintiffs are seeking to overturn the establishment
of a charitable foundation established by a customer of the Company's Trust
Division. The court recently ruled in favor of the Company's motion for
dismissal on one key allegation in the complaint, affirming the Trustee's
authority to execute certain estate plans directed by the donor. The plaintiff
subsequently filed a motion requesting an immediate appeal of that ruling to the
state supreme court, however, the court denied this motion in a ruling on April
21, 1999. Discovery and depositions continue in this matter, however, the
Company and legal counsel are of the opinion that it will prevail in this matter
and resolution of this litigation will not have a material adverse effect on the
financial position or results of operations of the Company.
NOTE 4. COMMON STOCK
In the first quarter of 1999, the Company declared a five-for-four stock split
which was effected in the form of a 25% stock dividend on March 31, 1999.
Accordingly, $1.8 million was transferred from additional paid-in capital to
common stock, representing the par value of the new shares issued. Share and per
share amounts for all periods presented have been restated to reflect the stock
split.
7
<PAGE> 8
NOTE 5. RECENT ACCOUNTING PRONOUNCEMENTS
Statement of Financial Accounting Standard (SFAS) No. 133 was issued in June
1998. SFAS No. 133 sets forth a comprehensive approach to addressing the
accounting for derivative instruments, including certain derivative instruments
embedded in other contracts, and hedging activities. This standard addresses the
type of activities which are included within the definition of derivatives and
embedded derivatives and identifies the methods to be used for valuation and
income recognition. In addition to the derivative and hedging activities
addressed, the standard also allows a one-time transfer of securities from the
held-to-maturity to the available-for-sale or the trading category which can
only be applied at the date of initial application of the Statement. This
Statement is effective for all fiscal quarters of all fiscal years beginning
after June 15, 1999. Earlier application of the provisions of this Statement is
encouraged but is permitted only as of the beginning of any fiscal quarter that
begins after issuance of this Statement. Management is currently in the process
of evaluating the impact of this Statement.
In October 1998, the Financial Accounting Standards Board (FASB) issued
Statement of Financial Accounting Standard (SFAS) No. 134. This Statement
addresses the Accounting for Mortgage-Backed Securities Retained after the
Securitization of Mortgage Loans Held for Sale by a Mortgage Banking Enterprise.
This Statement amends FASB Statements No. 65 and No. 115. This Statement is
effective for the first fiscal quarter beginning after December 15, 1998. The
provisions of this Statement are not currently applicable to the business or
operations of the bank.
NOTE 6. OTHER COMPREHENSIVE INCOME
The Company currently has one component of other comprehensive income which
includes unrealized gains and losses on securities available for sale and is
detailed as follows:
<TABLE>
<CAPTION>
March 31
1999 1998
---- ----
(Amounts in Thousands)
<S> <C> <C>
OTHER COMPREHENSIVE INCOME:
Holding (losses) gains arising during the period $(1,828) $ 199
Tax benefit (expense) 731 (80)
------- -------
Holding (losses) gains arising during the period, net of tax (1,097) 119
Reclassification adjustment for (gains) losses realized in
net income, net of tax -- --
Tax expense (benefit) of reclassifications -- --
------- -------
Other comprehensive income (1,097) 119
Beginning accumulated other comprehensive income 1,238 1,251
------- -------
Ending accumulated other comprehensive income $ 141 $ 1,370
======= =======
</TABLE>
NOTE 7. SUBSEQUENT EVENTS
On April 30, 1999 the Company completed the merger of its four bank subsidiaries
into a single nationally chartered bank and on May 1 began operations as First
Community Bank, N.A. The mergers are designed to streamline the Company's
operations and eliminate duplications in accounting, regulating reporting and
associated costs. As of the merger date, all banking operations are supervised
by the Office of the Comptroller of the Currency (OCC).
8
<PAGE> 9
INDEPENDENT ACCOUNTANTS' REPORT
To the Board of Directors and Stockholders
of First Community Bancshares, Inc.
We have reviewed the accompanying consolidated balance sheet of First Community
Bancshares, Inc. and subsidiaries as of March 31, 1999, and the related
consolidated statements of income and comprehensive income, changes in
stockholders' equity and cash flows for the three-month periods ended March 31,
1999 and 1998. These financial statements are the responsibility of the
Corporation's management.
We conducted our review in accordance with standards established by the American
Institute of Certified Public Accountants. A review of interim financial
information consists principally of applying analytical procedures to financial
data and of making inquiries of persons responsible for financial and accounting
matters. It is substantially less in scope than an audit conducted in accordance
with generally accepted auditing standards, the objective of which is the
expression of an opinion regarding the financial statements taken as a whole.
Accordingly, we do not express such an opinion.
Based on our review, we are not aware of any material modifications that should
be made to such consolidated financial statements for them to be in conformity
with generally accepted accounting principles.
We have previously audited, in accordance with generally accepted auditing
standards. the consolidated balance sheet of First Community Bancshares, Inc.
and subsidiaries as of December 31, 1998, and the related consolidated
statements of income and comprehensive income, changes in stockholders' equity,
and cash flows for the year then ended (not presented herein); and in our report
dated January 29, 1999, we expressed an unqualified opinion on those
consolidated financial statements. In our opinion, the information set forth in
the accompanying consolidated balance sheet as of December 31, 1998, is fairly
stated, in all material respects, in relation to the consolidated balance sheet
from which it has been derived.
Deloitte & Touche LLP
Pittsburgh, Pennsylvania
April 30, 1999
9
<PAGE> 10
FIRST COMMUNITY BANCSHARES, INC.
PART 1. ITEM 2.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
The following discussion and analysis is provided to address information about
the Company's financial condition and results of operations which is not
otherwise apparent from the consolidated financial statements incorporated by
reference or included in this report. This discussion and analysis should be
read in conjunction with the 1998 Annual Report to Shareholders and the other
financial information included in this report. Management's discussion and
analysis may contain forward-looking statements that are provided to assist in
the understanding of future financial performance. However, such performance
involves risks and uncertainties, which may cause actual results to differ
materially from those expressed in forward-looking statements.
RESULTS OF OPERATIONS
The Company reported net income of $3.8 million for the quarter ended March 31,
1999, a 3.0% decrease from net income of $4.0 million for the same period in
1998. Basic earnings per common share between the same periods decreased 4.3%,
from $.46 to $.44.
The reduction in net income between the first quarter of 1998 and 1999 is the
result of a non-recurring gain of $1.06 million in 1998 as a result of the
settlement of the Company's defined benefit pension plan. Net of tax, this gain
resulted in an increase in net income of $423,000 in the first quarter of 1998.
On an operational basis (excluding non-recurring gains), earnings in 1999
increased $124,000 or 4% over the corresponding quarter in 1998. Earnings per
share, when reduced by non-recurring items also increased $.02 per share between
the first quarter of 1998 and 1999. The per share amounts presented for 1998
have been restated to reflect the effect of the change in the number of
outstanding shares as a result of the March 31, 1999, five-for-four stock split.
NET INTEREST INCOME
Net interest income, the largest contributor to earnings was $10.3 million for
the first quarter of 1999 as compared with $11.1 million for the corresponding
period in 1998. Tax equivalent net interest income totaled $11.2 million for
1999, a decrease of $.7 million from the $11.9 million reported in the first
quarter of 1998. This decrease in net interest income relates largely to a $60.4
million decrease in average outstanding loans between the two quarters as a
result of the sale of $15 million in credit card receivables and prepayments on
commercial loans in 1998.
The Company's first quarter 1999 tax equivalent net interest margin of 4.77%
reflects a 28 basis point reduction from the 5.05% margin in the first quarter
of 1999 due to a corresponding 73 basis point reduction in the overall asset
yield between the two quarters. The lower asset yield in 1999 reflects a shift
in earning assets from loans to lower yielding assets which absorbed the funds
from loan portfolio reductions and a general decline in the interest rate
environment as dictated by U.S. Treasury yields and the New York prime loan
rate.
10
<PAGE> 11
Loans, the Company's highest yielding asset category, experienced a decrease in
average balances of $60.4 million or 9%, comparing the first quarter of 1999 to
the corresponding period in 1998. Funds from the loan portfolio were reinvested
in federal agency and state and municipal securities as well as increases in the
average outstanding balances in overnight investments. The tax equivalent yield
on the loan portfolio was 9.51% for the first quarter of 1999 as compared with
9.84% for the same period in 1998. The tax equivalent yield on securities
available for sale fell to 6.28% from 7.10% in the corresponding first quarter
of 1998. Investment securities held to maturity experienced a 47 basis points
increase in yield from 7.60% in the first quarter of 1998 to 8.07% for the
corresponding period in 1999 due principally to a shift to tax-free securities
with higher tax equivalent yields.
The Company's cost of funds was reduced from 4.64% in 1998 to 4.19% for the
first quarter of 1999. The reduction in the overall cost was a result of focus
on cost control in this critical area of operations. The 4.19% cost of funds for
the first quarter reverses the early 1998 trend toward rising funds costs which
peaked in the second quarter at 4.64%. Significant reductions in the cost of
money were achieved in all categories of interest-bearing deposits between 1998
and 1999 as indicated in the Net Interest Income Analysis on the following page.
11
<PAGE> 12
NET INTEREST INCOME ANALYSIS
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------------
THREE MONTHS ENDED THREE MONTHS ENDED
MARCH 31,1999 MARCH 31, 1998
(UNAUDITED) ------------------------------------------ -----------------------------------------
(AMOUNTS IN AVERAGE INTEREST YIELD/RATE AVERAGE INTEREST YIELD/RATE
THOUSANDS) BALANCE (1) (2) (2) BALANCE (1) (2) (2)
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Earning Assets:
Loans (3)
Taxable $ 596,848 $ 13,690 9.30% $ 654,103 $ 15,816 9.81%
Tax-Exempt 10,563 280 10.75% 13,660 385 11.42%
----------- ----------- ----- ----------- -----------
Total 607,411 13,970 9.51% 667,763 16,201 9.84%
Reserve for Possible Loan Losses (10,398) (11,429)
----------- -----------
Net Total 597,013 656,334
Investments Available for Sale:
Taxable 180,931 2,680 6.01% 142,666 2,444 6.95%
Tax-Exempt 37,371 703 7.63% 22,684 449 8.03%
----------- ----------- ----------- -----------
Total 218,302 3,383 6.28% 165,350 2,893 7.10%
Investment Securities Held to Maturity:
Taxable 8,149 138 6.87% 28,341 413 5.91%
Tax-Exempt 74,160 1,500 8.20% 75,888 1,540 8.23%
----------- ----------- ----------- -----------
Total 82,309 1,638 8.07% 104,229 1,953 7.60%
Interest-Bearing Deposits 28,104 318 4.59% 9,093 123 5.49%
Federal Funds Sold 26,635 296 4.51% 23,673 317 5.43%
----------- ----------- ----- ----------- ----------- -----
Total Earning Assets 951,363 19,605 8.36% 958,679 21,487 9.09%
----------- ----- ----------- -----
Other Assets 93,342 94,928
----------- -----------
Total $ 1,044,705 $ 1,053,607
=========== ===========
Interest-Bearing Liabilities:
Interest-bearing Demand Deposits $ 136,301 749 2.23%$ $ 131,161 901 2.79%
Savings Deposits 148,352 902 2.47% 151,457 1,138 3.05%
Time Deposits 464,595 6,044 5.28% 478,516 6,586 5.58%
Short-Term Borrowings 46,603 429 3.73% 50,312 561 4.52%
Other Indebtedness 18,250 280 6.22% 23,483 364 6.29%
----------- ----------- ----- ----------- ----------- -----
Total Interest-Bearing Liabilities 814,101 8,404 4.19% 834,929 9,550 4.64%
----------- ----------- ----- ----------- ----------- -----
Demand Deposits 115,906 105,691
Other Liabilities 11,891 13,238
Stockholders' Equity 102,807 99,749
----------- -----------
Total $ 1,044,705 $ 1,053,607
=========== ===========
Net Interest Earnings $ 11,201 $ 11,937
=========== ===========
Net Interest Spread 4.17% 4.45%
==== ====
Net Interest Margin 4.77% 5.05%
==== ====
</TABLE>
(1) Interest amounts represent taxable equivalent results for the first three
months of 1999 and 1998.
(2) Fully Taxable Equivalent-using the statutory rate of 35%.
(3) Non-accrual loans are included in average balances outstanding with no
related interest income.
12
<PAGE> 13
PROVISION AND RESERVE FOR LOAN LOSSES
In order to maintain a balance in the reserve for loan losses which is
sufficient to absorb loan losses, charges are made to the provision for loan
losses. The provision for loan losses was $444,000 for the first quarter of 1999
compared with $1,287,000 for the corresponding period in 1998. The decrease in
the 1999 provision reflects lower levels of loan delinquencies and significant
reductions in non-performing loans between the first quarter of 1998 and 1999 as
well as the general overall improved quality of the loan portfolio.
Net charge-offs for the first quarter of 1999 were $758,456 as compared with
$750,288 for the corresponding period in 1998. Expressed as a percentage of
average loans, net charge-offs were .13% for the three month period ended March
31, 1999 and .11% for the corresponding period in 1998.
The reserve for loan losses totaled $11.1 million at March 31, 1999 and 11.4
million at December 31, 1998 resulting in reserve to loan ratios of 1.82% and
1.80% for the respective periods.
The loan coverage ratio represents the percentage of non-performing loans and
other real estate covered through available reserves. As of March 31, 1999, this
ratio was 113.6% as compared to 74.2% at March 31, 1998 and 98.0% at December
31, 1998. Management continually evaluates the adequacy of the reserve for loan
losses and makes specific adjustments to it based on the results of risk
analysis in the credit review process, the recommendation of regulatory
agencies, and other factors, such as loan loss experience and prevailing
economic conditions. Management considers the level of reserves adequate based
on the current risk profile in the loan portfolio.
NON-INTEREST INCOME
Non-interest income consists of all revenues which are not included in interest
and fee income related to earning assets. Total non-interest income decreased
$1,121,000, or 34.4% from $3,259,000 for the three months ended March 31, 1998
to $2,138,000 for the corresponding period in 1999. The largest contributor to
the decrease was the recognition of a non-recurring gain on the settlement of
the Company's defined benefit pension plan during the quarter ended March 31,
1998. The gain of $1.826 million is reported in 1998 non-interest income net of
a $764,000 excise tax related to the reversion of trust assets to the Company.
Included in other operating revenue for 1999 is a $274,000 gain on the sale of
foreclosed property. This gain resulted from the sale of a manufacturing plant
in Princeton, West Virginia in March 1999. The sale of the property reduced
other real estate by 43% from $3.5 at December 31, 1998 to $2.0 million at March
31, 1999.
NON-INTEREST EXPENSE
Non-interest expense totaled $6.5 million in the first quarter of 1999
decreasing $888,000 from the corresponding period in 1998. This decrease
includes the effect of the disposition of substantially all credit card
operations and related operating costs in the third and fourth quarters of 1998.
The removal of the credit card processing costs from the current year accounted
for approximately $440,000 or half of the total decline. Other cost control
measures undertaken throughout the remainder of the Company have also helped to
reduce total non-interest expense. These measures include the conversion of the
Company's health insurance to a self-funded, reinsured program, savings in the
cost of supplies and loan collection expenses and overall control of direct
personnel costs through management of the number and cost of full-time
equivalent employees.
13
<PAGE> 14
FINANCIAL POSITION
SECURITIES
Securities totaled $320.8 million at March 31,1999 and reflect an increase of
$43.6 million from December 31, 1998. This 15.7% increase is the result of the
investment of interest bearing balances held at the Federal Home Loan Bank
(FHLB) as these funds were invested in U.S. agency and state and municipal
securities to achieve higher tax equivalent yields.
Securities available for sale were $239.5 million at March 31, 1999 as compared
to $193.2 million at December 31, 1998. Securities available for sale are
recorded at their fair market value at March 31, 1999 and December 31, 1998. The
unrealized gain or loss, which is the difference between book value and market
value, net of related deferred taxes, is recognized in the Stockholders' Equity
section of the balance sheet as accumulated other comprehensive income. The
unrealized gain after taxes of $1.2 million at December 31, 1998, decreased $1.1
million to an unrealized gain of $0.1 million at March 31, 1999 as market yields
on securities increased in the first quarter of 1999.
Investment securities, which are purchased with the intent to hold until
maturity, totaled $81.3 million at March 31, 1999 as compared to $84.0 million
at December 31, 1998. The market value of investment securities was 105% of book
value at December 31, 1998 and March 31, 1999.
LOANS
The Company's lending strategy stresses quality growth, diversified by product,
geography and industry. All loans within the Company are made subject to a
common credit underwriting structure. Loans are also subject to a quarterly and
annual review process determined by the loan size and type. Total loans
decreased $1.1 million from $611.5 million at December 31, 1998 to $610.4
million at March 31, 1999. However, the loan to deposit ratio increased slightly
from 69.8% at December 31, 1998 to 70.5% at March 31, 1999 in conjunction with a
1.2% decline in total customer deposits during the first quarter of 1999.
Average total loans have decreased $60.4 million between the first quarter of
1998 and 1999 due primarily to the prepayments experienced as a result of the
declining rate environment as well as competition from capital market groups for
certain larger commercial loan customers. The $60.4 million decline also
includes a $15 million reduction due to the sale of substantially all credit
card loans as the Company exited this segment of lending.
The loan portfolio continues to be diversified among loan types and industry
segments. Commercial and commercial real estate loans represent the largest
portion of the portfolio, comprising $251.5 million or 41.2% of total loans at
March 31, 1999 and $247.7 million or 40.5% of total loans at December 31, 1998.
Residential real estate loans remained unchanged as a percentage of the total
portfolio between year-end 1998 and March 31, 1999 and represent 37.2% of the
portfolio at $227 million at quarter-end March 31, 1999. Loans to individuals
decreased slightly from $126.6 million or 20.7% of total loans at December 31,
1998 to $121.5 million or 19.9% of total loans at March 31, 1999.
14
<PAGE> 15
NON-PERFORMING ASSETS
Non-performing assets are comprised of loans on non-accrual status, loans
contractually past due 90 days or more and still accruing interest and other
real estate owned (OREO). Non-performing assets were $9.7 million at March 31,
1999, or 1.6% of total loans and OREO, compared with $11.7 million or 1.9% at
December 31, 1998 and down significantly from $17.7 million (2.7% of loans and
OREO) at March 31, a year ago. The following schedule details non-performing
assets by category at the close of each of the last five quarters:
<TABLE>
<CAPTION>
(In Thousands) March 31 December 31 September 30 June 30 March 31
1999 1998 1998 1998 1998
-------- ----------- ------------ ------- --------
<S> <C> <C> <C> <C> <C>
Non-Accrual $ 7,157 $ 7,763 $ 7,752 $ 8,725 $ 10,832
Ninety Days Past Due 493 377 343 1,740 5,261
Other Real Estate Owned 2,041 3,547 3,811 2,878 1,594
-------- -------- -------- -------- --------
$ 9,691 $ 11,687 $ 11,906 $ 13,343 $ 17,687
======== ======== ======== ======== ========
Restructured loans
performing in accordance
with modified terms $ 524 $ 509 $ 511 $ 517 $ 524
======== ======== ======== ======== ========
</TABLE>
Non-accrual loans decreased $.6 million and when comparing March 31, 1999 and
December 31, 1998. The decrease in non-accrual loans is due in large part to one
loan in the amount of $485,000 which was satisfied through the foreclosure and
sale of the collateral supporting the note. The small increase in the
ninety-days past due category relates to a number of smaller loan relationships.
Management believes that the extent of problem loans at March 31, 1999 is
disclosed as non-performing assets in the preceding chart. However, there can be
no assurance that future circumstances, such as further erosions in economic
conditions and the related potential effect that such erosions may have on
certain borrowers' ability to continue to meet payment obligations, will not
lead to an increase in problem loan totals. Management further believes that
non-performing asset carrying values will be substantially recoverable after
taking into consideration the adequacy of applicable collateral and, in certain
cases, partial writedowns which have been taken and allowances that have been
established.
STOCKHOLDERS' EQUITY
Total stockholders' equity reached $103.2 million at March 31, 1999 increasing
$1.5 million over the $101.7 million reported for December 31, 1998. The
increase in stockholders' equity was the result of earnings, net of dividends,
of $2.1 million. Partially offsetting this increase was a decrease in the
accumulated other comprehensive income from $1,238,000 at December 31, 1998 to
$141,000 at March 31, 1999.
The Federal Reserve's risk based capital guidelines and leverage ratio measure
capital adequacy of banking institutions. Risk-based capital guidelines weight
balance sheet assets and off-balance commitments based on inherent risks
associated with the respective asset types. At March 31, 1999, the Company's
risk adjusted capital-to-asset ratio was 12.3%. The Company's leverage ratio at
March 31, 1999 was 7.77% compared with 7.37% at December 31, 1998. Both the risk
adjusted capital-to-asset ratio and the leverage ratio exceed the current
minimum levels prescribed for bank holding companies of 8% and 3%, respectively.
15
<PAGE> 16
LIQUIDITY
The Company maintains a significant level of liquidity in the form of cash and
due from bank balances ($41.2 million), investment securities available for sale
($239.5 million), federal funds sold ($24.5 million), and Federal Home Loan Bank
credit availability of approximately $140 million. Cash advances from the
Federal Home Loan Bank are immediately available for satisfaction of deposit
withdrawals, customer credit needs and operations of the Company. Investment
securities available for sale represent a secondary level of liquidity available
for conversion to liquid funds in the event of extraordinary needs.
YEAR 2000
The arrival of January 1, 2000 is expected to cause disruption in some computer
systems with two-digit year fields, which cannot distinguish between the years
1900 and 2000. In response to this potential threat, First Community Bancshares,
Inc. and affiliates have established an oversight committee to assess its
systems and to direct and monitor its Year 2000 readiness project. As of March
31, 1999 and the date of this report, the project is proceeding on schedule. The
principal purpose of the project is to address issues or potential issues
involving computer programs and imbedded computer chips which may be unable to
distinguish between the Year 1900 and the Year 2000. The Project Committee is
comprised of key management and operational personnel within the Company. This
committee which has been appointed by the Company's Board of Directors has full
authority to direct resources as necessary to ensure that project objectives are
achieved and completed within prescribed time frames and well in advance of the
millennium date change. The committee has completed work in the awareness and
assessment phases by identifying those computer systems which the Company uses
to process important information, and those other systems which may have
embedded computer chips which are subject to Year 2000 problems, such as
security systems, elevators and bank vaults. The Committee then determined which
of such systems should be considered "mission critical". The remediation phase
involves upgrading or replacing of hardware, software and other systems which
could be affected by Year 2000 problems. In order to determine the Company's
exposure due to potential third-party Year 2000 problems, the oversight
committee coordinated the risk assessment of significant loan relationships and
suppliers, in order to evaluate the state of readiness of these entities to deal
with Year 2000 problems. The remediation phase is complete. Additional testing
may be required for vendor provided releases as they are made available
throughout the remainder of 1999. Other systems which are not considered mission
critical remain in the remediation phase with completion of remediation and
testing planned for the end of the second quarter of 1999. Additionally,
year 2000 compliant systems will be implemented by the end of the second quarter
of 1999.
Risks
The failure to correct a material Year 2000 problem could result in an
interruption in, or a failure of, certain normal business activities or
operations. Such failures could materially and adversely effect the Company's
results of operations, liquidity and financial condition. For example, if
significant loan customers experience severe Year 2000 problems, their ability
to repay their loan obligations in a timely manner would be adversely affected.
Due to the general uncertainty inherent in the Year 2000 problem, resulting in
part from the uncertainty of the Year 2000 readiness of certain third party
suppliers and customers, the Company is unable to determine at this time whether
the consequences of Year 2000 failures will have a material impact on the
Company's results of operations, liquidity or financial condition, however, risk
assessments, stratification of relationships and follow up assessments have been
completed to help reduce the likelihood of problems with the relationships.
Additionally, loan review procedures and assessment of year 2000 readiness of
new loan relationships have been implemented. Completion of the Year 2000
project is expected to significantly reduce the Company's level of uncertainty
about the Year 2000 problem and, in particular, about the Year 2000 compliance
and readiness of its material external agents and customers.
16
<PAGE> 17
Costs
The projected cost of the Year 2000 project (excluding allocation of
administrative time) is approximately $150,000. The total amount expended on the
project through March 31, 1999 is approximately $112,000 and includes a portion
of the cost of existing operational and Information Systems staff in the
assessment, testing and verification of systems. These costs, which have been
charged to operations, are comprised primarily of salaries of existing personnel
who have redirected portions of their normal work schedule to complete testing
and validation. The total remaining cost of the Year 2000 project is estimated
at $38,000. Approximately $29,000 is for new software and hardware purchases
which will be capitalized as these systems are acquired.
The costs of the project, the dates on which with Company plans to complete Year
2000 modifications, and the impact of third party compliance are based on
management's best estimates which were derived utilizing certain assumptions as
to future events including the availability of outside resources, cooperation
from third parties and external agents of the Company as well as the level of
Year 2000 readiness by various vendors and customers. Some of these assumptions
involve contingencies which are beyond the control of the Company. Accordingly,
the actual cost and impact of Year 2000 problems which the Company may
experience, particularly those caused by third-party difficulties, can only be
estimated at this time.
Contingency Planning
The Company has developed a contingency plan for mission critical systems
designed to allow it to avoid significant business interruption in the event
current systems are affected by Year 2000 issues. This Contingency Plan involves
the maintenance of alternate processing sites, acquisition and development of
additional human resources which and is prepared for additional remediation, if
necessary, throughout 1999 the first quarter of year, as well as the development
of alternate manual procedures which can be employed as back-up processes for
existing automated business processes. The Company is currently validating its
Contingency Plan to assure its effectiveness as viable business recovery tool.
The plan will be continually evaluated and updated in light of changing
circumstances.
PART I. ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Interest Rate Risk (IRR) and Asset/Liability Management
The Bank's profitability is dependent to a large extent upon its net interest
income (NII), which is the difference between its interest income on
interest-earning assets, such as loans and securities, and its interest expense
on interest-bearing liabilities, such as deposits and borrowings. The Bank, like
other financial institutions, is subject to interest rate risk to the degree
that its interest-earning assets reprice differently than its interest-bearing
liabilities. The Bank manages its mix of assets and liabilities with the goals
of limiting its exposure to interest rate risk, ensuring adequate liquidity, and
coordinating its sources and uses of funds. Specific strategies for management
of IRR have included shortening the amortized maturity of fixed-rate loans and
increasing the volume of adjustable rate loans to reduce the average maturity of
the Bank's interest-earning assets.
The Bank seeks to control its interest rate risk (IRR) exposure to insulate net
interest income and net earnings from fluctuations in the general level of
interest rates. To measure its exposure to IRR, the bank performs quarterly
simulations of NII using financial models which project NII through a range of
possible interest rate environments including rising, declining, most likely and
flat rate scenarios. The results of these simulations indicate the existence and
severity of IRR in each of those rate environments based upon the current
balance sheet position and assumptions as to changes in the volume and mix of
interest-earning assets and interest-paying liabilities and management's
estimate of yields attained in those future rate environments and rates which
will be paid on various deposit instruments and borrowings.
17
<PAGE> 18
The overall interest rate environment has remained relatively flat during the
first three months of 1999. The New York prime rate has remained consistent
while the treasury yield curve has experienced slight increases. Additionally,
no significant changes in the level of IRR have been experienced during the
first quarter of 1999. A more complete discussion of the overall interest rate
risk is included in the Company's annual report on Form 10-K for December 31,
1998.
18
<PAGE> 19
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
(a) In the matter of Ann Tierney Smith, Executrix, et al versus FCFT,
First Community Bank, Gentry, Locke and William Gust, the court has
ruled in favor of the Company's motion for dismissal on one key
allegation in the complaint, affirming the Trustee's authority to
execute certain estate plans directed by the donor. The plaintiff
filed a motion requesting an immediate appeal of that ruling to the
state supreme court, however, the court denied this motion in a
ruling on April 21, 1999. Discovery and depositions continue in
this matter, however, the Company and legal counsel are of the
opinion that it will prevail in this matter and resolution of this
litigation will not have a material adverse effect on the financial
position or results of operations of the Company.
Item 2. Changes in Securities
(a) N/A
(b) N/A
(c) N/A
(d) N/A
Item 3. Defaults Upon Senior Securities
(a) N/A
(b) N/A
Item 4. Submission of Matters to a Vote of Security Holders
(a) The Annual Meeting of Stockholders was held on April 13, 1999.
(b) N/A
(c) The following directors were elected to serve a three-year term
through the date of the 2001 Annual Meeting of Stockholders.
Sam Clark, Robert E. Perkinson, William P. Stafford and W.W.
Tinder, Jr.
Two proposals were voted upon at the annual meeting, which included
the election of the aforementioned directors and the ratification
of Deloitte & Touche LLP as independent auditors for the
corporation for the fiscal year ending December 31, 1999. The
results of the proposals and voting are as follows:
Proposal 1. Election of Directors
<TABLE>
<CAPTION>
Votes For Votes Against Votes Withheld
--------- ------------- --------------
<S> <C> <C> <C>
Sam Clark 4,615,100 68,581 0
Robert E. Perkinson, Jr. 4,623,886 59,795 0
William P. Stafford 4,623,222 60,459 0
W.W. Tinder, Jr. 4,615,421 68,260 0
</TABLE>
19
<PAGE> 20
Proposal 2. Ratification of Deloitte & Touche LLP
Votes For 4,619,007
Votes Against 64,674
Votes Withheld 0
(d) N/A
Item 5. Other Information
(a) N/A
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
Exhibit 15- Letter regarding unaudited interim financial information
Exhibit 27- Financial Data Schedule
(b) Reports on Form 8-K
No reports on Form 8-K were filed during the first quarter of 1999.
20
<PAGE> 21
SIGNATURES
Pursuant to the requirements 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.
First Community Bancshares, Inc.
DATE: May 11, 1999
/s/ James L. Harrison, Sr.
- ------------------------------
James L. Harrison, Sr.
President & Chief Executive Officer
(Duly Authorized Officer)
DATE: May 11, 1999
/s/ John M. Mendez
- ------------------------------
John M. Mendez
Vice President & Chief Financial Officer
(Principal Accounting Officer)
21
<PAGE> 1
Exhibit 15
May 12, 1999
To the Board of Directors and Stockholders
of First Community Bancshares, Inc.
Dear Sirs:
We have made a review, in accordance with standards established by the American
Institute of Certified Public Accountants, of the unaudited interim financial
information of First Community Bancshares, Inc. and subsidiaries for the periods
ended March 31, 1999 and 1998, as indicated in our report dated April 30, 1999;
because we did not perform an audit, we expressed no opinion on that
information.
We are aware that our report referred to above, which is included in your
Quarterly Report on Form 10-Q for the quarter ended March 31, 1999, is
incorporated by reference in Registration Statement No. 333-63865 on Form S-8.
We also are aware that the aforementioned report, pursuant to Rule 436(c) under
the Securities Act of 1933, is not considered a part of the Registration
Statement prepared or certified by an accountant or a report prepared or
certified by an accountant within the meaning of Sections 7 and 11 of that Act.
Yours truly,
/s/ Deloitte & Touche LLP
Deloitte & Touche LLP
Pittsburgh, Pennsylvania
<TABLE> <S> <C>
<ARTICLE> 9
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1999
<PERIOD-END> MAR-31-1999
<CASH> 34,986
<INT-BEARING-DEPOSITS> 6,177
<FED-FUNDS-SOLD> 24,527
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 239,474
<INVESTMENTS-CARRYING> 81,317
<INVESTMENTS-MARKET> 85,146
<LOANS> 610,390
<ALLOWANCE> 11,089
<TOTAL-ASSETS> 1,047,124
<DEPOSITS> 865,910
<SHORT-TERM> 47,952
<LIABILITIES-OTHER> 11,965
<LONG-TERM> 18,102
0
0
<COMMON> 8,992
<OTHER-SE> 94,203
<TOTAL-LIABILITIES-AND-EQUITY> 1,047,124
<INTEREST-LOAN> 13,872
<INTEREST-INVEST> 4,250
<INTEREST-OTHER> 614
<INTEREST-TOTAL> 18,736
<INTEREST-DEPOSIT> 7,694
<INTEREST-EXPENSE> 8,404
<INTEREST-INCOME-NET> 10,332
<LOAN-LOSSES> 444
<SECURITIES-GAINS> 0
<EXPENSE-OTHER> 6,450
<INCOME-PRETAX> 5,576
<INCOME-PRE-EXTRAORDINARY> 5,576
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 3,834
<EPS-PRIMARY> .44
<EPS-DILUTED> .44
<YIELD-ACTUAL> 5.05
<LOANS-NON> 7,157
<LOANS-PAST> 493
<LOANS-TROUBLED> 524
<LOANS-PROBLEM> 7,650
<ALLOWANCE-OPEN> 11,404
<CHARGE-OFFS> 908
<RECOVERIES> 149
<ALLOWANCE-CLOSE> 11,089
<ALLOWANCE-DOMESTIC> 1,850
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 9,239
</TABLE>
