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 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 No. 0-19618
FIRST COMMUNITY BANCSHARES, INC.
(Exact name of registrant as specified in its charter)
Indiana 35-1833586
(State or other jurisdiction of (IRS Employer Identification No.)
incorporation or organization)
210 East Harriman
Bargersville, IN 46106
(Address of principal executive offices)
(Zip Code)
(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 May 13, 1999: 1,022,008
<PAGE>
FIRST COMMUNITY BANCSHARES, INC. AND SUBSIDIARIES
FORM 10-Q
INDEX
Page No.
Forward Looking Statement.....................................................3
Part I. Financial Information:
Item 1. Financial Statements:
Consolidated Condensed Balance Sheet.................................4
Consolidated Condensed Statement of Income...........................5
Consolidated Condensed Statement of Comprehensive Income ............6
Consolidated Condensed Statement of Stockholders' Equity.............7
Consolidated Condensed Statement of Cash Flows.......................8
Notes to Consolidated Condensed Financial Statements.................9
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations........................9
Item 3. Quantitative and Qualitative Disclosures About Market Risk......13
Part II. Other Information:
Item 1. Legal Proceedings...............................................16
Item 2. Changes In Securities...........................................16
Item 3. Defaults Upon Senior Securities.................................16
Item 4. Submission of Matters to a Vote of Security Holders.............16
Item 5. Other Information...............................................16
Item 6. Exhibits and Reports on Form 8-K................................16
Signatures...................................................................17
2
<PAGE>
FORWARD LOOKING STATEMENT
This Quarterly Report on Form 10-Q ("Form 10-Q") contains statements which
constitute forward looking statements within the meaning of the Private
Securities Litigation Reform Act of 1995. These statements appear in a number of
places in this Form 10-Q and include statements regarding the intent, belief,
outlook, estimate or expectations of the Company (as defined below), its
directors or its officers primarily with respect to future events and the future
financial performance of the Company. Readers of this Form 10-Q are cautioned
that any such forward looking statements are not guarantees of future events or
performance and involve risks and uncertainties, and that actual results may
differ materially from those in the forward looking statements as a result of
various factors. The accompanying information contained in this Form 10-Q
identifies important factors that could cause such differences. These factors
include changes in interest rates; loss of deposits and loan demand to other
financial institutions; substantial changes in financial markets; changes in
real estate values and the real estate market or regulatory changes.
3
<PAGE>
Item 1 Financial Statements
- ------ --------------------
FIRST COMMUNITY BANCSHARES, INC. AND SUBSIDIARIES
Consolidated Condensed Balance Sheet
(Unaudited)
<TABLE>
<CAPTION>
March 31, December 31,
1999 1998
--------------------------------------
<S> <C> <C>
Assets
Cash and due from banks $ 1,479,198 $ 1,185,790
Short-term interest-bearing deposits 9,451,053 13,106,281
--------------------------------------
Cash and cash equivalents 10,930,250 14,292,071
Investment securities
Available for sale 9,581,423 7,047,098
Held to maturity 662,321 1,032,525
--------------------------------------
Total investment securities 10,243,744 8,079,623
Loans 99,093,728 94,319,271
Allowance for loan losses 997,404 955,099
--------------------------------------
Net Loans 98,096,324 93,364,172
Premises and equipment 3,356,554 3,333,331
Federal Home Loan Bank of Indianapolis stock, at cost 777,800 777,800
Interest receivable 934,491 928,953
Other assets 606,695 495,643
--------------------------------------
Total assets $ 124,945,858 $ 121,271,593
======================================
Liabilities
Deposits
Noninterest-bearing $ 7,241,087 $ 7,976,350
Interest-bearing 100,266,343 98,216,774
--------------------------------------
Total deposits 107,507,430 106,193,124
Federal Home Loan Bank of Indianapolis advances 5,753,457 4,753,457
Other borrowings 2,208,051 1,381,933
Interest payable 342,766 258,867
Other liabilities 386,274 198,107
--------------------------------------
Total liabilities 116,197,978 112,785,488
--------------------------------------
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 - 1,022,008 and 1,011,412 shares 6,973,618 6,869,426
Retained earnings and contributed capital 1,772,155 1,597,830
Accumulated other comprehensive income 2,107 18,849
--------------------------------------
Total stockholders' equity 8,747,880 8,486,105
--------------------------------------
Total liabilities and stockholders' equity $ 124,945,858 $ 121,271,593
======================================
</TABLE>
See notes to consolidated condensed financial statements.
4
<PAGE>
FIRST COMMUNITY BANCSHARES, INC. AND SUBSIDIARIES
Consolidated Condensed Statement of Income
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended
March 31
----------------------------------
1999 1998
----------------------------------
<S> <C> <C>
Interest Income
Loans, including fees $ 2,117,149 $ 1,800,939
Investment securities
Taxable 41,302 57,595
Tax exempt 68,588 17,602
Interest-bearing time deposits 82,378 101,154
Dividends 16,802 16,669
----------------------------------
Total interest income 2,326,219 1,993,959
----------------------------------
Interest Expense
Deposits 1,124,906 1,036,089
FHLB advances 76,211 42,382
Other borrowings 27,397
----------------------------------
Total interest expense 1,228,514 1,078,471
----------------------------------
Net Interest Income 1,097,705 915,488
Provision for loan losses 75,000 60,000
----------------------------------
Net Interest Income After Provision for Loan Losses 1,022,705 855,488
----------------------------------
Other Income
Trust fees 3,740 22,595
Service charges on deposit accounts 75,168 72,628
Other operating income 16,222 9,003
----------------------------------
Total other income 95,130 104,226
----------------------------------
Other Expenses
Salaries and employee benefits 381,122 307,859
Premises and equipment 89,824 76,270
Advertising 40,742 26,295
Data processing fees 81,089 65,122
Deposit insurance expense 14,009 12,508
Printing and office supplies 28,700 27,567
Legal and professional fees 39,666 23,565
Telephone expense 23,629 16,849
Other operating expense 133,840 90,830
----------------------------------
Total other expenses 832,621 646,865
----------------------------------
Income Before Income Tax 285,214 312,849
Income tax expense 80,229 104,855
----------------------------------
Net Income $ 204,985 $ 207,994
==================================
Basic earnings per share $ .20 $ .21
Diluted earnings per share .20 .21
</TABLE>
See notes to consolidated condensed financial statements.
5
<PAGE>
FIRST COMMUNITY BANCSHARES, INC. AND SUBSIDIARIES
Consolidated Condensed Statement of Comprehensive Income
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended
March 31,
---------------------------------
1999 1998
---------------------------------
<S> <C> <C>
Net Income
Other comprehensive income, net of tax $204,985 $ 207,994
Unrealized losses on securities available
Unrealized holding losses arising during the period, net of (16,742) (5,932)
tax benefit of $10,981 and $3,891
=================================
Comprehensive income $188,243 $ 202,062
=================================
</TABLE>
6
<PAGE>
FIRST COMMUNITY BANCSHARES, INC AND SUBSIDIARIES
Consolidated Condensed Statement of Stockholders' Equity
For the Three Months Ended March 31, 1999
(Unaudited)
<TABLE>
<CAPTION>
Retained
Common Stock Earnings Accumulated
------------------------------- and Other
Shares Contributed Comprehensive
Outstanding Amount Capital Income Total
-----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Balances, January 1, 1999 1,011,412 $ 6,869,426 $ 1,597,830 $ 18,849 $ 8,486,105
Net income for the period 204,985 204,985
Unrealized losses on securities (16,742) (16,742)
Cash dividend ($.03 per share) (30,660) (30,660)
Rights exercised, net of cost
of $1,768 10,596 104,192 104,192
-----------------------------------------------------------------------------------------
Balances, March 31, 1999 1,022,008 $ 6,973,618 $ 1,772,155 $ 2,107 $ 8,747,880
=========================================================================================
</TABLE>
See notes to consolidated condensed financial statements.
7
<PAGE>
FIRST COMMUNITY BANCSHARES, INC. AND SUBSIDIARIES
Consolidated Condensed Statement of Cash Flows
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended
March 31,
------------------------------------
1999 1998
------------------------------------
<S> <C> <C>
Operating Activities
Net income $ 204,985 $ 207,994
Adjustments to reconcile net income to net cash provided by
operating activities
Provision for loan losses 75,000 60,000
Depreciation and amortization 47,179 34,083
Investment securities amortization 14,904 378
Gain on sale of foreclosed real estate (7,241)
Net change in:
Interest receivable (5,538) 26,680
Interest payable 83,899 70,314
Other assets (100,071) (22,463)
Other liabilities 157,506 22,162
------------------------------------
Net cash provided by operating activities 470,623 399,148
------------------------------------
Investing Activities
Purchases of securities available for sale (2,976,747)
Proceeds from maturities of securities available for sale 400,000 35,000
Proceeds from paydowns and maturities of securities held to maturity 370,000 400,000
Net change in loans (4,872,411) (1,969,279)
Proceeds from sale of foreclosed real estate 72,500 56,636
Purchases of property and equipment (70,402) (67,210)
------------------------------------
Net cash used by investing activities (7,077,060) (1,544,853)
------------------------------------
Financing Activities
Net change in
Noninterest-bearing, NOW and savings deposits (7,203,975) (681,711)
Certificates of Deposit 8,518,281 2,011,230
Proceeds from borrowings 1,830,000
Repayment of borrowings (3,882)
Rights exercised, net of costs 104,192
------------------------------------
Net cash provided by financing activities 3,244,616 1,329,519
------------------------------------
Net Change in Cash and Cash Equivalents (3,361,821) 183,814
Cash and Cash Equivalents, Beginning of Period 14,292,071 11,231,228
------------------------------------
Cash and Cash Equivalents, End of Period $ 10,930,250 $ 11,415,042
====================================
Supplemental cash flow disclosures
Interest paid $ 1,144,615 $ 1,008,157
Income tax paid 26,570 113,925
Dividend payable 30,660
</TABLE>
See notes to consolidated condensed financial statements.
8
<PAGE>
FIRST COMMUNITY BANCSHARES, INC. AND SUBSIDIARIES
Notes to Consolidated Condensed Financial Statements
March 31, 1999
(Unaudited)
Note 1: Basis of Presentation
- -----------------------------
The consolidated financial statements include the accounts of First Community
Bancshares, Inc. (the "Company") and its wholly owned subsidiaries, First
Community Bank & Trust, a state chartered bank (the "Bank") and First Community
Real Estate Management, Inc. ("FCREMI"). FCREMI holds and manages real estate
used by the Company and the Bank. A summary of significant accounting policies
is set forth in Note 1 of Notes to Financial Statements included in the December
31, 1998, 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 March 31, 1999, and for the
three months ended March 31, 1999 and 1998, 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.
Note 2: Earnings Per Share
- --------------------------
<TABLE>
<CAPTION>
Three Months Ended Three Months Ended
March 31, 1999 March 31, 1998
-------------- --------------
Weighted Weighted
Average Per Share Average Per Share
Income Shares Amount Income Shares Amount
------ -------- --------- ------ -------- ---------
<S> <C> <C> <C> <C> <C> <C>
Basic earnings per share
Income available to common
shareholders $ 204,985 1,019,864 .20 $207,994 989,848 $ .21
======= ========
Effect of dilutive stock options 7,160 14,498
----------------------- ---------------------
Diluted earnings per share
Income available to common
shareholders and assumed
conversions $ 204,985 1,027,024 .20 $207,994 1,004,346 $ .21
=================================== ===================================
</TABLE>
Item 2 Management's Discussion and Analysis of Financial Condition
and Results of Operations
- ------ -----------------------------------------------------------
General
- -------
The Bank is a subsidiary of the Company and operates as an Indiana commercial
bank. On May 26, 1998, the Company formed a new subsidiary, First Community Real
Estate Management, Inc. whose purpose is to purchase and lease back to the Bank
properties currently owned by the Bank thereby allowing the Bank to redeploy its
capital to other uses. To that end, on July 15, 1998, FCREMI borrowed $800,000
at a rate of 1.125% under prime, adjustable every 5 years for a term of 30
years, from another financial institution in order to purchase the land and
building of the Bank's Bargersville branch office at 210 E. Harriman Ave. in
Bargersville, Indiana and the land and building of its Banta Street office at
597 Banta Street in Franklin, Indiana.
9
<PAGE>
On December 18, 1998, FCREMI borrowed $416,000 at a rate of 7.25% with payments
due in monthly installments through November 2003 with a final balloon payment
due in December 2003, from another financial institution in order to purchase
the land and building of the Bank's Greenwood branch office at 298 State Road
135 North in Greenwood, Indiana. The Bank will make monthly lease payments to
FCREM as lessee of these locations. These lease payments will be sufficient to
service the debt. As a bank holding company, the Company depends upon the
operations of its subsidiaries for all revenue and reports its results of
operations on a consolidated basis with its subsidiaries.
The Bank's profitability depends primarily upon the difference between the
income on its loans and investments and the cost of its deposits and borrowings.
This difference is referred to as the spread or net interest margin. The
difference between the amount of interest earned on loans and investments and
the interest incurred on deposits and borrowings is referred to as net interest
income. Interest income from loans and investments is a function of the amount
of loans and investments outstanding during the period and the interest rates
earned. Interest expense related to deposits and borrowings is a function of the
amount of deposits and borrowings outstanding during the period and the interest
rates paid.
Results of Operations
- ---------------------
First Community Bancshares, Inc. had net income of $205,000 and $208,000 for the
three months ending March 31, 1999 and 1998, respectively. Net interest income
was $1.1 million and $915,000 for the three months ending March 31, 1999 and
March 31, 1998, respectively.
Net income decreased $3,000 for the three months ended March 31, 1999, when
compared to the same period in 1998, due primarily to general increases in other
expenses offset by an increase in net interest income. This increase in net
interest income resulted primarily from increases in interest income on loans
and tax exempt investment securities offset by an increase in interest expense.
These increases in interest income and expense resulted primarily from increases
in the volume of these interest-earning assets and interest-bearing liabilities.
The increases in other expenses were directly a result of the overall growth of
the Bank. Income taxes decreased $25,000 for the three months ended March 31,
1999, when compared to the same period in 1998, because of an increase in the
Company's tax exempt securities portfolio.
Balance Sheet
- -------------
Loans and Deposits The Bank had an increase in net loans outstanding from $93.4
million on December 31, 1998 to $98.1 million on March 31, 1999. Deposits
increased from $106.2 million on December 31, 1998 to $107.5 million on March
31, 1999.
These increases in loans and deposits can be attributed to several factors, none
of which can be singled out as the predominant reason for the growth, but each
of which is believed to have contributed to these increases. These factors
include: (i) increased population in the geographic areas serviced; (ii)
increased per-household disposable income in the geographic areas serviced;
(iii) movement of the home office of one of the locally owned banks away from
the city in which the Company is located; and (iv) the acquisition of certain
local financial institutions by larger national and regional banks and the
preference of certain individuals in the service area for dealing with a locally
owned institution.
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 March 31, 1999, the Bank had 1.1 million of loans classified as
substandard,
10
<PAGE>
none as doubtful and none as loss. The allowance for loan losses was $997,000 or
1.0% of net loans receivable at March 31, 1999 compared to $955,000 or 1.0% of
net loans receivable at December 31, 1998. A portion of classified loans are
non-accrual loans. First Community had non-accrual loans totaling $348,000 at
March 31, 1999 compared to $17,000 at December 31, 1998.
Liquidity 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 the Company's need for liquidity
and other short-term obligations.
Management believes that it has adequate liquidity for the Company's short-and
long-term needs. Short-term liquidity needs resulting from normal
deposit/withdrawal functions are provided by the Company retaining a portion of
cash generated from operations in a Federal Home Loan Bank ("FHLB") daily
investment account. This account acts as a short-term liquidity source while
providing interest income to the Company. Long-term liquidity and other
liquidity needs are provided by the ability of the Company to borrow from the
FHLB. The balance of its FHLB advances was $5.8 million and $4.8 million at
March 31, 1999 and December 31, 1998, respectively.
On October 30, 1998, the Company issued rights and warrants to shareholders to
purchase one share of common stock of the Company for every ten shares owned as
of October 29, 1998, subject to a minimum offer and purchase of 100 shares. The
rights were exercisable until March 30, 1999 and the warrants will not become
exercisable until September 15, 1999. The net proceeds to the Company from the
sale of the stock, after deducting the expenses, were $133,000. The purpose of
the rights offering was to raise additional capital for the Bank to support
additional growth and for general corporate purposes.
In addition, on October 30, 1998, the Company commenced the offer and sale of up
to $1 million in unsecured convertible notes, of which all $1 million were sold.
The notes are due December 31, 2008, bear interest at the rate of 7% per annum
and, at the option of the holder, are convertible to common stock of the Company
at the conversion price of $11.00 per share. The net proceeds of this offering
will be used to provide capital to FCREM to acquire and lease branch facilities
to the Bank and to provide additional capital to the Bank to support asset
growth.
At March 31, 1999, the Bank had core capital of approximately 7.7% and
risk-based capital in excess of 8.0%. The regulatory core and risk-based capital
requirements are 4.0% and 8.0% respectively.
Impact of Inflation and Changing Prices
- ---------------------------------------
The financial statements and related data presented herein have been prepared in
accordance with generally accepted accounting principles. These principles
require the measurement of financial position and operating results in terms of
historical dollars, without considering changes in the relative purchasing power
of money over time due to inflation.
11
<PAGE>
The primary assets and liabilities of the Company are monetary in nature.
Consequently, interest rates generally have a more significant impact on
performance than the effects of inflation. Interest rates, however, do not
necessarily move in the same direction or with the same magnitude as the price
of goods and services. In a period of rapidly rising interest rates, the
liquidity and the maturity structure of the Company's assets and liabilities are
critical to the maintenance of acceptable performance levels.
Other
- -----
The Securities and Exchange Commission maintains a Web site that contains
reports, proxy information statements, and other information regarding
registrants that file electronically with the Commission, including the Company.
The address is (http://www.sec.gov).
Year 2000 Compliance
- --------------------
The Company's lending and deposit activities, like those of most financial
institutions, depend significantly upon computer systems. The Company is
addressing the potential problems associated with the possibility that the
computers which control its systems, facilities and infrastructure may not be
programmed to read four digit date codes. This could cause some computer
applications to be unable to recognize the change from the year 1999 to the year
2000, which could cause computer systems to generate erroneous data or to fail.
Management recognizes the possibility of certain risks associated with Year 2000
and is continuing to evaluate appropriate courses of corrective action. As of
December 31, 1998, the Company had completed an inventory of all hardware and
software systems and had made all mission critical classifications. The Company
has implemented both an employee awareness program and a customer awareness
program aimed at educating people about the efforts being made by the Company as
well as bank regulators regarding the Year 2000 Issue.
The Company's data processing is performed primarily by a third party servicer.
The Company was informed by its primary service provider that all reprogramming
efforts were completed at December 31, 1998, allowing the Company adequate time
for testing. The Company had completed testing by March 31, 1999.
The Company also uses software and hardware which are covered under maintenance
agreements with third party vendors. Consequently, the Company is dependent on
the vendors to conduct its business. The Company has contacted each vendor to
request time tables for Year 2000 compliance and the expected costs, if any, to
be passed along to the Company. Most of the Company's vendors have provided
responses as to where they stand regarding Year 2000 readiness. Those who have
not responded to the Company's status requests are being contacted again.
Depending on the responses received from the third party vendors, the Company
will make decisions as to whether to continue those relationships or to search
for new providers of those services.
In addition to possible expenses related to the Company's own systems and those
of its service providers, the Company could be affected by the Year 2000
problems affecting any of its depositors or borrowers. Such problems could
include delayed loan payments due to Year 2000 problems affecting the borrower.
Selected borrowers have been sent questionnaires to assess their readiness. The
Company is still in the process of collecting that information.
At this time, it is estimated that costs associated with Year 2000 issues will
not be material in 1999. Although management believes it is taking the necessary
steps to address the Year 2000 compliance issue, no assurances can be given that
some problems will not occur. The Company may ultimately be required to purchase
replacement computer systems, programs and equipment, or to incur substantial
expenses to make its current systems, program and equipment Year 2000 compliant.
Failure to do so could adversely impact its financial position and results of
operation. Amounts expensed in 1999 and 1998 were immaterial.
12
<PAGE>
Item 3 Quantitative and Qualitative Disclosures About Market Risk
- ------ ----------------------------------------------------------
One of the actions undertaken by the Company's management has been to adopt
asset/liability management policies in an attempt to reduce the susceptibility
of the Company's net interest spread to the adverse impact of volatile interest
rates by attempting to match maturities (or time-to-repricing) of assets with
maturities or repricing of liabilities and then actively managing any mismatch.
Accomplishing this objective requires attention to both the asset and liability
sides of the balance sheet. The difference between maturity of assets and
maturity of liabilities is measured by the interest-rate gap.
At March 31, 1999, the Company's one-year cumulative interest-rate gap as a
percent of total assets was a negative 19.16%. This negative interest-rate gap
represents substantial risk for the Company in an environment of rising interest
rates. A negative interest-rate gap means the Company's earnings are vulnerable
in 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. Conversely, in a falling interest-rate
environment, the total interest 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.
Asset management goals have been directed toward obtaining a suitable balance of
asset quality, liquidity and diversification in order to stabilize and improve
earnings. The asset management strategy has concentrated on shortening the
maturity of its loan portfolio by increasing adjustable-rate loans and
short-term installment and commercial loans. However, increasing short-term
installment and commercial loans increases the overall risk of the loan
portfolio. Such risk relates primarily to collection and to the loans that often
are secured by rapidly depreciating assets. The Company's ratio of
non-performing assets to total assets was .42% at March 31, 1999 and .45% at
December 31, 1998.
The primary goal in the management of liabilities has been to extend the
maturities and improve the stability of deposit accounts. Management has
attempted to combine a policy for controlled growth with a strong, loyal
customer base to control interest expense.
The following schedule illustrates the interest-rate sensitivity of
interest-earning assets and interest-bearing liabilities at March 31, 1999.
Mortgages which have adjustable or renegotiable interest rates are shown as
subject to change every one to three years based upon the contracted-for
adjustment period. This schedule does not reflect the effects of possible
prepayments on enforcement of due-on-sale clauses.
13
<PAGE>
<TABLE>
<CAPTION>
At March 31, 1999 Maturing or Repricing
--------------------------------------------------------------------
One Year 1 - 3 3 - 5 Over 5
or Less Years Years Years Total
------------- ------------- ------------- ------------ -------------
(Dollars in 000's)
<S> <C> <C> <C> <C> <C>
Interest-earning assets:
Adjustable rate mortgages $ 11,742 $ 4,676 $ 7,959 $ 24,377
Fixed rate mortgages 5,015 2,485 2,360 $13,606 23,466
Commercial loans 13,691 2,576 1,283 246 17,796
Consumer loans 12,208 11,880 5,306 738 30,032
Tax-exempt loans and leases 3,297 3,297
Investments 1,102 1,737 2,594 4,810 10,243
FHLB stock 778 778
Interest-bearing deposits 9,451 9,451
------------- ------------- ------------- ------------ -------------
Total interest-earning assets 53,987 23,354 19,402 22,697 119,440
------------- ------------- ------------- ------------ -------------
Interest-bearing liabilities:
Fixed maturity deposits 42,419 19,155 3,328 27 64,929
Other deposits 35,337 35,337
FHLB advances 156 1,760 3,837 5,753
Other Borrowings 18 40 1,150 1,000 2,208
------------- ------------- ------------- ------------ -------------
Total interest-bearing liabilities 77,930 20,955 8,315 1,027 108,227
------------- ------------- ------------- ------------ -------------
Excess (deficiency) of interest-earning (23,943) 2,399 11,087 21,670 11,213
assets over interest-bearing liabilities
Cumulative excess (deficiency) of (23,943) (21,544) (10,457) 11,213
interest-earning assets over
interest-bearing liabilities
Cumulative ratio at March 31, 1999 as a (19.16)% (17.24)% (8.37)% 8.97%
percent of total assets
</TABLE>
14
<PAGE>
The following table provides information about the Company's significant
financial instruments at March 31, 1999 that are sensitive to changes in
interest rates. The table presents principal cash flows and related weighted
average interest rates (on a tax equivalent basis) by expected maturity dates.
<TABLE>
<CAPTION>
Maturing in years ending March 31,
-----------------------------------------------------------------------------------------
2000 2001 2002 2003 2004 Thereafter Total Fair Value
----------- ----------- --------- ---------- --------- ----------- ----------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Assets
- ------
Investment securities
available for sale
Fixed rate $ 837 $ 989 $ 643 $1,370 $ 972 $ 4,750 $ 9,581 $ 9,581
Average interest rate 8.92% 5.31% 5.92% 5.68% 5.77% 6.13% 6.18%
Investment securities held to
maturity
Fixed rate 265 105 232 60 662 687
Average interest rate 6.40% 6.85% 7.11% 7.37% 6.81%
Loans
Fixed rate 18,111 9,211 7,356 5,169 3,244 17,887 60,978 61,811
Average interest rate 8.78% 9.06% 8.79% 8.56% 8.27% 7.77% 8.48%
Variable rate 10,192 2,701 2,608 1,122 1,185 20,182 37,990 38,353
Average interest rate 9.23% 9.19% 9.12% 8.72% 8.99% 8.13% 8.61%
Liabilities
- -----------
Deposits
NOW, Money Market and
Savings Deposits
Variable rate 35,337 35,337 35,337
Average interest rate 3.33% 3.33%
Certificates of Deposit
Fixed rate 42,419 18,271 884 1,463 1,865 27 64,929 65,300
Average interest rate 5.51% 5.46% 5.90% 6.06% 5.80% 6.10% 5.52%
FHLB advances
Fixed rate 156 638 1,122 2,603 1,234 5,753 5,739
Average interest rate 6.01% 6.05% 6.01% 5.55% 5.49% 5.69%
Other borrowings
Fixed rate 10 11 11 12 370 1,000 1,414 1,394
Average interest rate 7.25% 7.25% 7.25% 7.25% 7.25% 7.00% 7.07%
Variable rate 8 9 9 10 758 794 788
Average interest rate 7.38% 7.38% 7.38% 7.38% 7.38% 7.38%
</TABLE>
15
<PAGE>
Part II - Other Information
Item 1. Legal Proceedings.
- ------- ------------------
None.
Item 2. Changes in Securities.
- ------- ----------------------
On February 3, 1999, Albert R. Jackson, III, was granted an
Option to purchase 2,500 shares of common stock of the
Company, and Linda J. Janesik and two other officers were each
granted Options to purchase 1,000 shares of common stock of
the Company at a purchase price of $9.125 per share. These
Options vested at the time of grant and expire February 3,
2009. The Options were granted in reliance upon Section 4(2)
of the Securities Act of 1933.
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 March 31, 1999.
16
<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.
Date: May 17, 1999 By: /s/ Albert R. Jackson, III
------------ --------------------------------
Albert R. Jackson, III
Chief Executive Officer and Director
Date: May 17, 1999 By: /s/ Linda J. Janesik
------------ --------------------------------
Linda J. Janesik, Chief Financial
Officer
17
<TABLE> <S> <C>
<ARTICLE> 9
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
REGISTRANT'S CONSOLIDATED FINANCIAL STATEMENTS FOR THE THREE MONTHS ENDED
MARCH 31, 1999 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> MAR-31-1999
<CASH> 1,479
<INT-BEARING-DEPOSITS> 9,451
<FED-FUNDS-SOLD> 0
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 9,581
<INVESTMENTS-CARRYING> 662
<INVESTMENTS-MARKET> 687
<LOANS> 99,094
<ALLOWANCE> 997
<TOTAL-ASSETS> 124,946
<DEPOSITS> 107,507
<SHORT-TERM> 174
<LIABILITIES-OTHER> 729
<LONG-TERM> 7,788
0
0
<COMMON> 6,794
<OTHER-SE> 1,774
<TOTAL-LIABILITIES-AND-EQUITY> 124,946
<INTEREST-LOAN> 2,117
<INTEREST-INVEST> 110
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<INTEREST-TOTAL> 2,326
<INTEREST-DEPOSIT> 1,125
<INTEREST-EXPENSE> 1,228
<INTEREST-INCOME-NET> 1,098
<LOAN-LOSSES> 75
<SECURITIES-GAINS> 0
<EXPENSE-OTHER> 833
<INCOME-PRETAX> 285
<INCOME-PRE-EXTRAORDINARY> 285
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 205
<EPS-PRIMARY> .20
<EPS-DILUTED> .20
<YIELD-ACTUAL> 3.8
<LOANS-NON> 348
<LOANS-PAST> 172
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 536
<ALLOWANCE-OPEN> 955
<CHARGE-OFFS> 42
<RECOVERIES> 9
<ALLOWANCE-CLOSE> 997
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<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0
</TABLE>
