FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR
15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 1996
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 No. 0-19618
FIRST COMMUNITY BANCSHARES, INC.
(Exact name of registrant as specified in its charter)
Indiana 35-1833586
(State of Incorporation) (IRS Employer Id. No.)
210 East Harriman
Bargersville, IN 46106
(Address of principal executive offices)
(317) 422-5171
(Registrant's telephone number, including area code)
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Sections 13 or 15 (d) of the Securities Exchange
Act of 1934 during the preceding 12 months, and (2) has been subject to
such filing requirements for the past 90 days.
Yes X No
------ ------
Outstanding Shares of Common Stock on September 30, 1996: 942,825
Exhibit Index: Page 12
<PAGE>
FIRST COMMUNITY BANCSHARES, INC.
FORM 10-Q
INDEX
Page No.
---------
Part I. Financial Information:
Item 1. Financial Statements:
Consolidated Condensed Balance Sheet 3
Consolidated Condensed Statement of Income 4
Consolidated Condensed Statement of Changes
in Stockholder's Equity 5
Consolidated Condensed Statement of Cash Flows 6
Notes to Consolidated Condensed Financial
Statements 7
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 8
Part II. Other Information:
Item 1. Legal Proceedings 10
Item 2. Changes In Securities 10
Item 3. Defaults Upon Senior Securities 10
Item 4. Submission of Matter to a Vote of Security
Holders 10
Item 5. Other Information 10
Item 6. Exhibits and Reports on Form 8-K 10
Signatures 11
<PAGE>
FIRST COMMUNITY BANCSHARES, INC. AND SUBSIDIARY
Consolidated Condensed Balance Sheet
(Unaudited)
<TABLE>
September 30, December 31
1996 1995
-------------- ---------------
<S> <C> <C>
ASSETS
Cash and due from banks $ 975,149 $ 797,727
Short-term interest-bearing deposits 2,299,263 4,853,099
------------ ----------------
Cash and cash equivalents 3,274,412 5,650,826
Investment securities
Available for sale 2,397,567 3,258,343
Held to maturity 2,616,684 3,156,597
------------- --------------
Total investment securities 5,014,251 6,414,940
Loan 63,313,239 54,636,626
Allowance for loan losses (608,205) (518,403)
--------- ----------------
Net Loans 62,705,034 54,118,223
Premises and equipment 1,497,589 1,341,266
Federal Home Loan Bank of Indianapolis stock, at cost 777,800 600,500
Foreclosed real estate 164,905 144,499
Interest receivable 562,394 586,427
Due from broker 2,025,329
Other assets 498,966 510,706
----------- --------------
Total assets $74,495,351 $71,392,716
====== ======
LIABILITIES
Deposits
Noninterest bearing $4,885,101 $5,457,652
Interest bearing 59,732,195 53,705,453
----------------- ---------------
Total deposits 64,617,296 59,163,105
Federal Home Loan Bank of Indianapolis advances and
other borrowings 2,481,830 5,511,453
Interest payable 172,377 174,095
Other liabilities 485,978 101,848
-------------- --------------
Total liabilities 67,757,481 64,950,501
----------- -----------
COMMITMENTS AND CONTINGENT LIABILITIES
STOCKHOLDERS' EQUITY
Preferred stock, no-par value
Authorized and unissued 1,000,000 shares
Common stock, no-par value
Authorized 4,000,000 shares
Issued and outstanding 942,825 and
923,291 shares 6,181,486 6,068,970
Retained earnings and contributed capital 538,073 351,494
Net unrealized gain on securities available for sale 18,311 21,751
---------------- ------------
Total stockholders' equity 6,737,870 6,442,215
---------------- --------------
Total liabilities and stockholders' equity $74,495,351 $71,392,716
======== =======
</TABLE>
See notes to condensed consolidated financial statements
<PAGE>
FIRST COMMUNITY BANCSHARES, INC. AND SUBSIDIARY
Consolidated Condensed Statement of Income
(Unaudited)
<TABLE>
Nine Months Ended Nine Months Ended
September 30, September 30,
1996 1995 1996 1995
---------------------------------------------------------------
<S> <C> <C> <C> <C>
Interest Income:
Loans, including fees $1,429,332 $1,174,877 $4,057,157 $3,182,148
Investment securities
Taxable 42,217 33,999 154,935 120,712
Tax exempt 31,167 61,597 94,659 192,902
Interest-bearing time deposits 20,636 34,152 162,918 140,597
Dividends 15,347 12,658 42,601 32,725
--------------- ------------ ------------ -----------
Total interest income 1,538,699 1,317,283 4,512,270 3,669,084
-------------- ----------- ---------- -----------
Interest Expense:
Deposits 721,232 684,361 2,157,964 2,036,856
FHLB advances 36,858 64,858 184,360 129,117
-------------- ------------ ---------- -----------
Total interest expense 758,090 749,219 2,342,324 2,165,973
-------------- ------------- ---------- -----------
Net Interest Income 780,609 568,064 2,169,946 1,503,111
Provision for loan losses (55,500) (61,000) (162,000) (155,000)
--------------- ------------ ----------- -----------
Net Interest Income After Provision
for Loan Losses 725,109 507,064 2,007,946 1,348,111
-------------- ------------- ----------- ------------
Other Income
Trust fees 5,841 2,565 18,450 19,499
Service charges on deposit
accounts 48,106 14,961 135,073 72,007
Net realized gains on sales of securities
available for sale 5,630
Gain on sale of fixed assets 22,483
Other operating income 8,317 27,954 21,140 46,792
-------------- -------------- ------------ -------
Total other income 62,264 45,480 180,293 160,781
--------------- ------------ ---------- ----------
Other Expenses
Salaries and
employee benefits 244,890 205,113 703,464 605,165
Premises and equipment 53,809 43,553 152,755 129,687
Advertising 32,720 24,274 85,089 75,076
Data processing fees 51,500 47,690 143,972 126,951
Deposit insurance expense 378,329 28,318 442,273 76,155
Printing and office supplies 16,980 16,097 54,002 47,874
Legal and professional fees 30,638 22,573 118,554 87,339
Telephone expense 13,924 13,945 40,954 35,694
Other operating expense 65,101 57,337 221,027 165,168
----------- ------------ ----------- -----------
Total other expenses 887,891 458,900 1,962,090 1,349,129
----------- ------------ ----------- ------------
Income (Loss) Before Income Tax (100,518) 93,644 226,149 159,763
Income tax expense (credit) (50,448) 5,098 39,570 (27,395)
------------ ------------ ----------- ------------
Net Income (Loss) $ (50,070) $ 88,546 $ 186,579 $ 187,158
====== ===== ====== ======
Net Income (Loss) Per Share $ (.05) $ .10 $ .20 $ .20
Weighted Average Shares Outstanding 942,825 923,291 937,834 923,291
</TABLE>
See notes to consolidated condensed financial statements.
<PAGE>
FIRST COMMUNITY BANCSHARES, INC. AND SUBSIDIARY
Consolidated Condensed Statement of Changes in Stockholders' Equity
For the Nine Months Ended September 30, 1996
(Unaudited)
<TABLE>
Retained Net unrealized
Earnings Gain (Loss) on
Common Stock and Securities
---------------------------
Shares Contributed Available
Outstanding Amount Capital For Sale Total
<S> <C> <C> <C> <C> <C>
BALANCES,
DECEMBER 31, 1995 923,291 $ 6,068,970 $ 351,494 $ 21,751 $ 6,442,215
Net income for
the period 186,579 186,579
Net change in unrealized
gain (loss) on securities
available for sale (3,440) (3,440)
Exercise of
stock options 19,534 112,516 112,516
-------------- --------- ----------- ----------- -----------
BALANCE,
SEPTEMBER 30, 1996 942,825 $ 6,181,486 $ 538,073 $ 18,311 $6,737,870
===== ======= ===== ====== ====
</TABLE>
See notes to consolidated condensed financial statements.
<PAGE>
FIRST COMMUNITY BANCSHARES, INC. AND SUBSIDIARY
Consolidated Condensed Statements of Cash Flows
(Unaudited)
<TABLE>
Nine Months Ended
September 30,
--------------------------------
1996 1995
-----------------------------------
<S> <C> <C>
Operating Activities:
Net income $ 186,579 $ 187,158
Adjustments to reconcile net income to net
cash provided (used) by operating activities:
Provision for loan losses 162,000 155,000
Depreciation and amortization 58,614 52,915
Securities gains (5,630)
Investment securities amortization 5,140 55,596
Gain on sale of fixed assets (22,483)
Net change in:
Interest receivable 24,033 (161,225)
Interest payable (1,718) 118,040
Other assets 13,996 (30,017)
Other liabilities 384,130 (5,871)
Due from broker 2,025,329
-------------- ----------------
Net cash provided by
operating activities 2,852,473 349,113
-------------- -----------------
Investing Activities:
Proceeds from maturities of securities
available for sale 400,000 230,000
Proceeds from paydowns and maturities of
securities held to maturity 534,853 1,383,699
Proceeds from sales of securities available for sale 460,630
Proceeds from sales of securities held to
maturity 125,000
Purchases of securities available for sale (1,670,000)
Net change in loans (8,774,502) (13,011,317)
Purchases of FHLB Stock (177,300) (87,600)
Proceeds from sale of fixed assets 64,663
Proceeds from sale of foreclosed real estate 5,285
Purchases of property and equipment (214,937) (17,333)
--------------- -----------------
Net cash used by investing activities (7,765,971) (12,982,888)
--------------- -----------------
Financing Activities:
Net change in:
Noninterest-bearing, NOW and savings
deposits 3,644,434 3,905,900
Certificates of Deposit 1,809,757 5,197,184
Short-term borrowings (908,138)
Proceeds from FHLB advances 3,000,000
Repayment of FHLB advances (2,121,485) (3,594,464)
Exercise of stock options 112,516
Cash paid in lieu of issuing fractional shares (876)
-------------- -----------------
Net cash provided by financing
activities 2,537,084 8,507,744
-------------- -----------------
Net Decrease in Cash and Cash
equivalents (2,376,414) (4,126,031)
Cash and Cash equivalents, Beginning of
period 5,650,826 6,442,932
-------------- ----------------
Cash and Cash equivalents, End of period $ 3,274,412 $ 2,316,901
====== ======
Supplemental cash flow disclosures:
Interest paid $ 2,344,042 $ 2,047,933
Taxes paid 55,000
</TABLE>
See notes to consolidated condensed financial statements.
<PAGE>
FIRST COMMUNITY BANCSHARES, INC. AND SUBSIDIARY
Notes to Consolidated Condensed Financial Statements
September 30, 1996
(Unaudited)
Note 1 Basis of Presentation
- --------------------------------------
The consolidated financial statements include the accounts of First Community
Bancshares, Inc. (the "Company") and its wholly owned subsidiary, First
Community Bank & Trust, a state chartered bank (the "Bank"). A summary of
significant accounting policies is set forth in Note 1 of Notes to Financial
Statements included in the December 31, 1995, Annual Report to Shareholders.
All significant intercompany accounts and transactions have been eliminated in
consolidation.
The interim consolidated financial statements have been prepared in accordance
with instructions to Form 10-Q, and therefore do not include all information
and footnotes necessary for a fair presentation of financial position, results
of operations and cash flows in conformity with generally accepted accounting
principles.
The interim consolidated financial statements at September 30, 1996, and for the
three and nine months ended September 30, 1996 and 1995, have not been audited
by independent accountants, but reflect, in the opinion of management, all
adjustments (which include only normal recurring adjustments) necessary to
present fairly the financial position, results of operations and cash flows for
such periods.
Statement of Financial Accounting Standards No. 123, Stock-Based Compensation,
is effective for the Company for 1996. This statement establishes a fair value
based method of accounting for stock-based compensation plans. The Company
intends to account for stock-based compensation as prescribed in Accounting
Principles Board Opinion No. 25, Accounting for Stock Issued to Employees,
with appropriate proforma disclosures made in the notes to the financial
statements.
Note 2 Stock Transactions
- ---------------------------------------
On April 26, 1995, the Board of Directors declared a 5 for 4 stock split
effective June 1, 1995. Net income per share and weighted average shares
outstanding for the three and nine months ended September 30, 1995 have been
restated to reflect this stock split.
Item 2. Management's Discussion and Analysis of Financial Condition and
- ------------------------------------------------------------------------------
Results of Operations
- -----------------------------
Results of Operations
- -----------------------------
First Community Bancshares, Inc. ("First Community") had net income of $186,579
and $187,158 for the nine months ending September 30, 1996 and 1995,
respectively. Net interest income was $2,169,946 and $1,503,111 for the nine
months ending September 30, 1996 and September 30, 1995, respectively.
Net income decreased $579 for the nine months ending September 30, 1996, when
compared to the same period in 1995. This decrease in earnings is attributable
directly to the signing of the omnibus appropriations bill on September 30,
1996, which imposes a FDIC special assessment for all institutions with
SAIF-insured deposits. This assessment amounted to $344,105 and is included
in deposit insurance expense for the three months and nine months ended
September 30, 1996. The after-tax effect on net income was $207,805 for the
three months and nine months ended September 30, 1996. The increase in deposit
insurance expense and general increases in other expenses was offset by the
increase in net interest income. The increase in net interest income resulted
primarily from an increase in lending and the income derived therefrom.
Lending for the nine months ended September 30, 1996 increased by $8,676,613
from December 31, 1995. The increase in provision for loan loss from
$155,000 to $162,000 is a reflection of the increase in the loan portfolio
and not a deterioration of same. The increase in income from service charges
on deposit accounts of $63,066 results from a significant increase in the
number of deposit accounts. The increases in other expenses are a direct
result of the FDIC special assessment and the overall growth of the Bank.
Income taxes increased $66,965 for the nine months ended September 30, 1996
when compared to the same period in 1995 because of the increase in the
Bank's net income before taxes of $66,386 and a decrease in tax-exempt income
of $98,243.
Balance Sheet
- -------------------
Loans and Deposits
- ---------------------------
The Bank had an increase in net loans outstanding from $54,118,223 on December
31, 1995 to $62,705,034 on September 30, 1996. This increase is primarily
due to an increasing customer base.
Deposits increased from $59,163,105 on December 31, 1995 to $64,617,296 on
September 30, 1996. This increase, as in the increases in the loan portfolio,
is due to an increase in customer base.
Classification of Assets, Allowance for Loan Losses, and Nonperforming
- ------------------------------------------------------------------------------
Loans
- ----------
The Bank currently classifies loans as substandard, doubtful and loss to
assist management in addressing collection risks and pursuant to regulatory
requirements which are not necessarily consistent with generally accepted
accounting principles. Substandard loans represent credits characterized by
the distinct possibility that some loss will be sustained if deficiencies are
not corrected. Doubtful loans possess the characteristics of substandard
loans, but collection or liquidation in full is doubtful based upon existing
facts, conditions and values. A loan classified as a loss is considered
uncollectible. As of September 30, 1996, the Bank had $726,319 of loans
classified as substandard, none as doubtful and none as loss. The allowance
for loan losses was $608,205 or .96% of loans receivable at September 30,
1996 compared to $518,403 or .95% of net loans receivable at December 31,
1995. A portion of classified loans are non-accrual loans. First Community
had non-accrual loans totaling $238,287 at September 30, 1996 compared to
$228,000 at December 31, 1995.
Liquidity, Interest Rate Sensitivity and Capital Resources
- ---------------------------------------------------------------------------
Liquidity refers to the ability of a financial institution to generate
sufficient cash to fund current loan demand, meet savings deposit withdrawals
and pay operating expenses. The primary sources of liquidity are cash,
interest-bearing deposits in other financial institutions, marketable
securities, loan repayments, increased deposits and total institutional
borrowing capacity.
Cash and interest-bearing deposits, when combined with investments
have remained a relatively constant percent of total assets, while increasing
in dollar volume. Management's goal is to maintain approximately twenty
percent (20%) to twenty-five percent (25%) of total assets in cash,
interest-bearing deposits and investments in order to satisfy First
Community's needs for liquidity and other short-term obligations.
Management believes it has adequate liquidity for First Community's short- and
long-term needs. Short-term liquidity needs resulting from normal
deposit/withdrawal functions are provided by First Community retaining a
portion of cash generated from operations in a FHLB daily investment account.
This account acts as a short-term liquidity source while providing interest
income to First Community. Long-term liquidity and other liquidity needs are
provided by the ability of First Community to borrow up to $15,156,605 from
the FHLB and the balance of its borrowings was $2,481,830 and $4,603,315 at
September 30, 1996 and December 31, 1995, respectively.
At September 30, 1996, the Bank's one-year cumulative interest rate gap was a
negative 12.5%. A negative interest rate gap means First Community's earnings
are vulnerable during periods of rising interest rates because during such
periods the interest expense paid on liabilities will generally increase more
rapidly than the interest income earned on assets. Accordingly, this negative
interest rate gap represents substantial risk for First Community in an
environment of rising interest rates. Conversely, in a falling interest rate
environment, the total expense paid on liabilities will generally decrease
more rapidly than the interest income earned on assets. A positive interest
rate gap would have the opposite effect.
At September 30, 1996, the Company and its subsidiary, First Community Bank &
Trust, had core capital of approximately 9.05% and 8.77% respectively. Both
institutions had risk-based capital in excess of 8.0%. The regulatory core
and risk-based capital requirements are 4.0% and 8.0% respectively.
<PAGE>
Part II - Other Information
Item 1.Legal Proceedings.
- ---------------------------------
None.
Item 2.Changes in Securities.
- -------------------------------------
Not applicable.
Item 3.Defaults upon Senior Securities.
- -------------------------------------------------
Not applicable.
Item 4.Submission of matters to a Vote by Security Holders.
- ----------------------------------------------------------------------------
None.
Item 5.Other Information.
- ---------------------------------
None.
Item 6.Exhibits and Reports on Form 8-K.
- -------------------------------------------------------
(a) Exhibit 27...Financial Data Schedule
(b) No reports were filed on Form 8-K during the quarter
ended September 30, 1996.
<PAGE>
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.
By: /s/ Albert R. Jackson, III
--------------------------
Albert R. Jackson III
Chief Executive Officer,
Chief Financial Officer
November 14, 1996
<TABLE> <S> <C>
<ARTICLE> 9
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
REGISTRANTS CONSOLIDATED FINANCIAL STATEMENTS FOR THE NINE MONTHS ENDED
SEPTEMBER 30, 1996, AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS
</LEGEND>
<CIK> 0000877987
<NAME> FIRST COMMUNITY BANCSHARES, INC.
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> SEP-30-1996
<CASH> 975,149
<INT-BEARING-DEPOSITS> 2,299,263
<FED-FUNDS-SOLD> 0
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 2,397,567
<INVESTMENTS-CARRYING> 2,642,684
<INVESTMENTS-MARKET> 2,616,684
<LOANS> 63,313,239
<ALLOWANCE> 608,205
<TOTAL-ASSETS> 74,495,351
<DEPOSITS> 64,617,296
<SHORT-TERM> 2,481,830
<LIABILITIES-OTHER> 485,978
<LONG-TERM> 0
0
0
<COMMON> 6,181,486
<OTHER-SE> 556,384
<TOTAL-LIABILITIES-AND-EQUITY> 74,495,351
<INTEREST-LOAN> 4,057,157
<INTEREST-INVEST> 455,113
<INTEREST-OTHER> 0
<INTEREST-TOTAL> 4,512,270
<INTEREST-DEPOSIT> 2,157,964
<INTEREST-EXPENSE> 2,342,324
<INTEREST-INCOME-NET> 2,169,946
<LOAN-LOSSES> 162,000
<SECURITIES-GAINS> 5,630
<EXPENSE-OTHER> 1,962,090
<INCOME-PRETAX> 226,149
<INCOME-PRE-EXTRAORDINARY> 226,149
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 186,579
<EPS-PRIMARY> .20
<EPS-DILUTED> .20
<YIELD-ACTUAL> 4.06
<LOANS-NON> 238,287
<LOANS-PAST> 0
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 726,319
<ALLOWANCE-OPEN> 518,000
<CHARGE-OFFS> 77,000
<RECOVERIES> 5,000
<ALLOWANCE-CLOSE> 608,000
<ALLOWANCE-DOMESTIC> 608,205
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0
</TABLE>
