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 June 30, 1997
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 June 30, 1997: 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>
June 30, December 31,
1997 1996
-------------- ---------------
<S> <C> <C>
ASSETS
Cash and due from banks $ 954,430 $1,059,473
Short-term interest-bearing deposits 5,991,715 5,975,098
------------ ----------------
Cash and cash equivalents 6,946,145 7,034,571
Investment securities Available for sale 1,887,331 2,386,358
Held to maturity 2,442,908 2,540,803
------------- --------------
Total investment securities 4,330,239 4,927,161
Loans 73,119,241 65,108,481
Allowance for loan losses (718,454) (644,132)
--------- ----------------
Net Loans 72,400,787 64,464,349
Premises and equipment 1,932,086 1,791,873
Federal Home Loan Bank of Indianapolis stock, at cost 777,800 777,800
Foreclosed real estate 139,500
Interest receivable 573,088 526,186
Other assets 431,002 417,268
----------- --------------
Total assets $87,391,147 $80,078,708
====== ======
LIABILITIES
Deposits
Noninterest bearing $5,621,002 $5,833,251
Interest bearing 72,848,164 64,719,018
----------------- ---------------
Total deposits 78,469,166 70,552,269
Federal Home Loan Bank of Indianapolis advances 1,378,830 2,378,830
Interest payable 196,592 187,083
Other liabilities 222,486 74,570
-------------- --------------
Total liabilities 80,267,074 73,192,752
----------- -----------
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 shares 6,181,486 6,181,486
Retained earnings and contributed capital 920,984 692,760
Net unrealized gain on securities available for sale 21,603 11,710
---------------- ------------
Total stockholders' equity 7,124,073 6,885,956
---------------- --------------
Total liabilities and stockholders' equity $87,391,147 $80,078,708
======== =======
</TABLE>
See notes to condensed consolidated financial statements
<PAGE>
FIRST COMMUNITY BANCSHARES, INC. AND SUBSIDIARY
Consolidated Condensed Statement of Income
(Unaudited)
<TABLE>
Three Months Ended Six Months Ended
June 30, June 30,
1997 1996 1997 1996
---------------------------------------------------------------
<S> <C> <C> <C> <C>
Interest Income:
Loans, including fees $1,649,483 $1,341,579 $3,181,392 $2,627,825
Investment securities
Taxable 39,933 55,379 85,177 112,718
Tax exempt 29,067 31,926 58,450 63,492
Interest-bearing time deposits 79,219 73,170 121,110 142,282
Dividends 15,223 14,514 31,471 27,254
--------------- ------------ ------------ -----------
Total interest income 1,812,925 1,516,568 3,477,600 2,973,571
-------------- ----------- ---------- -----------
Interest Expense:
Deposits 909,858 712,506 1,724,352 1,436,732
FHLB advances 36,940 70,179 72,043 147,502
-------------- ------------ ---------- -----------
Total interest expense 946,798 782,685 1,796,395 1,584,234
-------------- ------------- ---------- -----------
Net Interest Income 866,127 733,883 1,681,205 1,389,337
Provision for loan losses (57,000) (54,000) (111,000) (106,500)
--------------- ------------ ----------- -----------
Net Interest Income After Provision
for Loan Losses 809,127 679,883 1,570,205 1,282,837
-------------- ------------- ----------- ------------
Other Income
Trust fees 6,936 1,916 17,776 12,609
Service charges on deposit
accounts 56,236 47,158 111,746 86,967
Net realized gains on sales of securities
available for sale 2,750 5,630
Other operating income 3,082 6,438 10,357 12,823
-------------- -------------- ------------ -------
Total other income 66,254 58,262 139,879 118,029
--------------- ------------ ---------- ----------
Other Expenses
Salaries and
employee benefits 298,820 215,663 586,534 458,574
Premises and equipment 72,763 49,464 140,450 98,946
Advertising 32,412 29,710 60,517 52,369
Data processing fees 56,693 46,414 111,671 92,472
Deposit insurance expense 11,237 32,751 21,527 63,944
Printing and office supplies 17,967 17,759 35,566 37,022
Legal and professional fees 41,197 41,460 80,044 87,916
Telephone expense 17,013 13,118 34,331 27,030
Other operating expense 83,873 83,539 154,967 155,926
----------- ------------ ----------- -----------
Total other expenses 631,975 529,878 1,225,607 1,074,199
----------- ------------ ----------- ------------
Income Before Income Tax 243,406 208,267 484,477 326,667
Income tax expense 84,141 56,167 161,971 90,018
------------ ------------ ----------- ------------
Net Income $ 159,265 $ 152,100 $ 322,506 $ 236,649
====== ===== ====== ======
Net Income Per Share $ .17 $ .16 $ .34 $ .25
Weighted Average Shares Outstanding 942,825 942,825 942,825 935,312
</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 Three Months Ended June 30, 1997
(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, 1996 942,825 $ 6,181,486 $ 692,760 $ 11,710 6,885,956
Net income for
the period 322,506 322,506
Net change in unrealized
gain on securities
available for sale 9,893 9,893
Cash
Dividends (94,282) (94,282)
-------------- --------- ----------- ----------- -----------
BALANCE,
JUNE 30, 1997 942,825 $ 6,181,486 $ 920,984 $ 21,603 $7,124,073
===== ======= ===== ====== ====
</TABLE>
See notes to consolidated condensed financial statements.
<PAGE>
FIRST COMMUNITY BANCSHARES, INC. AND SUBSIDIARY
Consolidated Condensed Statements of Cash Flows
(Unaudited)
<TABLE>
Six Months Ended
June 30,
--------------------------------
1997 1996
-----------------------------------
<S> <C> <C>
Operating Activities:
Net income $ 322,506 $ 236,649
Adjustments to reconcile net income to net
cash provided (used) by operating activities:
Provision for loan losses 111,000 106,500
Depreciation and amortization 62,496 37,650
Securities gains (5,630)
Investment securities amortization 3,243 4,583
Net change in:
Interest receivable (46,902) 31,401
Interest payable 9,509 19,751
Other assets (20,222) (14,388)
Other liabilities 147,916 87,596
Due from broker 2,025,329
-------------- ----------------
Net cash provided by
operating activities 589,546 2,529,441
-------------- -----------------
Investing Activities:
Proceeds from maturities of securities
available for sale 515,000 400,000
Proceeds from paydowns and maturities of
securities held to maturity 95,060 478,652
Proceeds from sales of securities available for sale 460,630
Net change in loans (8,031,105) (4,868,752)
Purchases of FHLB Stock (177,300)
Proceeds from sale of foreclosed real estate 123,167
Purchases of property and equipment (202,709) (91,436)
--------------- -----------------
Net cash used by investing activities (7,500,587) (3,798,206)
--------------- -----------------
Financing Activities:
Net change in:
Noninterest-bearing, NOW and savings
deposits 412,476 3,937,862
Certificates of Deposit 7,504,421 (949,722)
Short-term borrowings (908,138)
Repayment of FHLB advances (1,000,000) (2,000,000)
Exercise of stock options 112,516
Cash dividends (94,282)
-------------- -----------------
Net cash provided by financing
activities 6,822,615 192,518
-------------- -----------------
Net Decrease in Cash and Cash
equivalents (88,426) (1,076,247)
Cash and Cash equivalents, Beginning of
period 7,034,571 5,650,826
-------------- ----------------
Cash and Cash equivalents, End of period $ 6,946,145 $ 4,574,579
====== ======
Supplemental cash flow disclosures:
Interest paid $ 1,786,886 $ 1,564,483
Income taxes paid 113,904 55,000
</TABLE>
See notes to consolidated condensed financial statements.
<PAGE>
FIRST COMMUNITY BANCSHARES, INC. AND SUBSIDIARY
Notes to Consolidated Condensed Financial Statements
June 30, 1997
(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, 1996, 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 June 30, 1997, and for the
three months ended June 30, 1997 and 1996, 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.
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 $322,506
and $236,649 for the six months ending June 30, 1997 and 1996, respectively.
Net interest income was $1,681,205 and $1,389,337 for the six months ending June
30, 1997 and June 30, 1996, respectively.
Net income increased $85,857 for the six months ended June 30, 1997, when
compared to the same period in 1996, due primarily to the increase in net
interest income offset by general increases in other expenses. The increase
in net interest income resulted primarily from an increase in lending and the
income derived therefrom. Lending for the six months ended June 30, 1997
increased by $8,010,760 from December 31, 1996. The increase in provision
for loan loss from $106,500 to $111,000 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 $24,779 results from a significant
increase in the number of deposit accounts. Salaries and employee
benefits expense increased $127,960 for the six months ended June 30,
1997, when compared to the same period in 1996, due primarily to the
opening of a second branch office in Franklin, Indiana in October, 1996.
In addition, premises and equipment expense increased $41,505 for the
six months ended June 30, 1997, when compared to the same period in
1996, due to the recapitalization of the Savings Association Insurance
fund which ultimately resulted in a decline in the assessment. Other
increases in other expenses are a direct result of the overall growth
of the Bank. Income taxes increased $71,953 for the six months ended
June 30, 1997 when compared to the same perios in 1996 because of the
increase in the Bank's net income before taxes of $157,810.
Balance Sheet
- -------------------
Loans and Deposits
- ---------------------------
The Bank had an increase in net loans outstanding from $64,464,349 on December
31, 1996 to $72,400,787 on June 30, 1997. This increase is primarily due to
an increasing customer base because the Bank's branches are located in strong
growth markets.
Deposits increased from $70,552,269 on December 31, 1996 to $78,469,166 on
June 30, 1997. This increase, as in the increases in the loan portfolio, is
due to the strong markets the Bank is located in and an increase in customer
base.
The growth of the Bank has been positively affected by the opening of a new
branch in Greenwood, Indiana in February, 1994, the opening of a branch
in North Vernon, Indiana in October, 1994, and the opening of a second
branch in Franklin, Indiana in October, 1996, as well as general
acceptance by the public of the community philosophy of the Bank.
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 June 30, 1997, the Bank had $811,916 of loans classified
as substandard, none as doubtful and none as loss. The allowance for loan
losses was $718,454 or .98% of net loans receivable at June 30, 1997 compared
to $644,132 or .99% of net loans receivable at December 31, 1996. A portion
of classified loans are non-accrual loans. First Community had non-accrual
loans totaling $174,614 at June 30, 1997 compared to $99,000 at December
31, 1996.
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, if any,
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 $18,464,980 from
the FHLB and the balance of its borrowings was $1,378,830 and $2,378,830 at
June 30, 1997 and December 31, 1996, respectively.
At June 30, 1997, the Bank's one-year cumulative interest rate gap was a
negative 18.13%. 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 June 30, 1997, the Company and its subsidiary, First Community Bank &
Trust, had core capital of approximately 8.2% and 7.9% 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.
- ----------------------------------------------------------------------------
On May 21, 1997, the Company held its annual meeting of the
shareholders. A total of 829,662 shares were represented in person or by
proxy at the meeting. Merrill M. Wesemann was elected to the Board of
Directors for a three year term expiring in 2000. 823,208 shares were voted
in favor of the election of the nominee, 3,025 shares were voted against the
nominee and there were 3,429 abstentions or broker non-votes. Albert
R. Jackson, III was elected to the Board of Directors for a three year
term expiring in 2000. 822,791 shares were voted in favor of the
election of the nominee, 3,384 shares were voted against the nominee
and there were 3,487 abstentions or broker non-votes.
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 June 30, 1997.
<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
August 14, 1997
<TABLE> <S> <C>
<ARTICLE> 9
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
REGISTRANTS CONSOLIDATED FINANCIAL STATEMENTS FOR THE SIX MONTHS ENDED
JUNE 30, 1997, AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS
</LEGEND>
<CIK> 0000877987
<NAME> FIRST COMMUNITY BANCSHARES, INC.
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> JUN-30-1997
<CASH> 954,430
<INT-BEARING-DEPOSITS> 5,991,715
<FED-FUNDS-SOLD> 0
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 1,887,331
<INVESTMENTS-CARRYING> 2,442,908
<INVESTMENTS-MARKET> 2,416,000
<LOANS> 73,119,241
<ALLOWANCE> 718,454
<TOTAL-ASSETS> 87,391,147
<DEPOSITS> 78,469,166
<SHORT-TERM> 1,378,830
<LIABILITIES-OTHER> 419,078
<LONG-TERM> 0
0
0
<COMMON> 6,181,486
<OTHER-SE> 920,984
<TOTAL-LIABILITIES-AND-EQUITY> 87,391,147
<INTEREST-LOAN> 3,181,392
<INTEREST-INVEST> 296,208
<INTEREST-OTHER> 0
<INTEREST-TOTAL> 3,447,600
<INTEREST-DEPOSIT> 1,724,352
<INTEREST-EXPENSE> 1,796,395
<INTEREST-INCOME-NET> 1,681,205
<LOAN-LOSSES> 111,000
<SECURITIES-GAINS> 0
<EXPENSE-OTHER> 1,225,607
<INCOME-PRETAX> 484,477
<INCOME-PRE-EXTRAORDINARY> 484,477
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 322,506
<EPS-PRIMARY> 0.34
<EPS-DILUTED> 0.34
<YIELD-ACTUAL> 4.29
<LOANS-NON> 175,000
<LOANS-PAST> 0
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 811,916
<ALLOWANCE-OPEN> 644,000
<CHARGE-OFFS> 45,000
<RECOVERIES> 8,000
<ALLOWANCE-CLOSE> 718,000
<ALLOWANCE-DOMESTIC> 718,000
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0
</TABLE>
