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, 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 March 31, 1996: 942,825
Exhibit Index: Page 12
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 Stockholders' 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.... 9
Part II. Other Information:
Item 1. Legal Proceedings................................ 11
Item 2. Changes In Securities............................ 11
Item 3. Defaults Upon Senior Securities.................. 11
Item 4. Submission of Matter to a Vote of Security
Holders.......................................... 11
Item 5. Other Information................................ 11
Item 6. Exhibits and Reports on Form 8-K................. 11
Signatures..................................................... 12
FIRST COMMUNITY BANCSHARES, INC. AND SUBSIDIARY
Consolidated Condensed Balance Sheet
(Unaudited)
Three Months Ended
March 31
----------------------------
1996 1995
------------ ------------
ASSETS
Cash and due from banks $ 637,288 $ 797,727
Short-term interest-bearing deposits 7,501,139 4,853,099
----------- -----------
Cash and cash equivalents 8,138,427 5,650,826
Investment securities
Available for sale 2,751,562 3,258,343
Held to maturity 2,728,193 3,156,597
----------- -----------
Total investment securities 5,479,755 6,414,940
Loans 56,646,194 54,636,626
Allowance for loan losses (527,352) (518,403)
----------- -----------
Net Loans 56,118,842 54,118,223
Premises and equipment 1,337,381 1,341,266
Federal Home Loan Bank of Indianapolis
stock, at cost 600,500 600,500
Foreclosed real estate 181,499 144,499
Interest receivable 522,388 586,427
Due from broker 2,025,329
Other assets 464,468 510,706
----------- -----------
Total assets $72,843,260 $71,392,716
============ ============
LIABILITIES
Deposits
Noninterest bearing $ 4,722,135 $ 5,457,652
Interest bearing 56,605,765 53,705,453
------------ ------------
Total deposits 61,327,900 59,163,105
Federal Home Loan Bank of Indianapolis
advances and other borrowings 4,603,315 5,511,453
Interest payable 208,767 174,095
Other liabilities 65,359 101,848
------------ ------------
Total liabilities 66,205,341 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 436,043 351,494
Net unrealized gain on securities available
for sale 20,390 21,751
------------ ------------
Total stockholders' equity 6,637,919 6,442,215
Total liabilities and stockholders'
equity $72,843,260 $71,392,716
============ ============
See notes to consolidated condensed financial statements.
FIRST COMMUNITY BANCSHARES, INC. AND SUBSIDIARY
Consolidated Condensed Statement of Income
(Unaudited)
Three Months Ended
March 31
----------------------------
1996 1995
------------ ------------
Interest Income:
Loans, including fees $1,286,246 $ 928,251
Investment securities
Taxable 57,339 44,720
Tax exempt 31,566 63,112
Interest-bearing time deposits 69,112 83,619
Dividends 12,740 10,464
------------ ------------
Total interest income 1,457,003 1,130,166
Interest Expense:
Deposits 724,226 653,107
FHLB advances 77,323 39,739
------------ ------------
Total interest expense 801,549 692,846
------------ ------------
Net Interest Income 655,454 437,320
Provision for loan losses 52,500 46,000
------------ ------------
Net Interest Income After Provision for
Loan Losses 602,954 391,320
------------ ------------
Other Income
Trust fees 10,693 9,448
Service charges on deposit accounts 39,809 25,223
Net realized gains on sales of securities
available for sale 2,880
Gain on sale of fixed assets 22,000
Other operating income 6,385 9,301
------------ ------------
Total other income 59,767 65,972
------------ ------------
Other Expenses
Salaries and employee benefits 242,911 208,872
Premises and equipment 49,482 40,217
Advertising 22,659 24,141
Data processing fees 46,058 39,003
Deposit insurance expense 31,193 23,113
Printing and office supplies 19,263 14,664
Legal and professional fees 46,456 27,729
Telephone expense 13,912 9,550
Other operating expense 72,387 52,862
------------ ------------
Total other expenses 544,321 440,151
------------ ------------
Income Before Income Tax 118,400 17,141
Income tax expense (credit) 33,851 (21,736)
------------ ------------
Net Income $ 84,549 $ 38,877
============ ============
Net Income Per Share $ .09 $ .04
Weighted Average Shares Outstanding 927,798 923,394
See notes to consolidated condensed financial statements.
FIRST COMMUNITY BANCSHARES, INC. AND SUBSIDIARY
Consolidated Condensed Statement of Changes in Stockholders' Equity
For the Three Months Ended March 31, 1996
(Unaudited)
Shares Contributed Available
Outstanding Amount Capital For Sale Total
----------- ------ ----------- --------- -----
BALANCES, DECEMBER 31, 1995 923,291 $6,068,970 $351,494 $21,751 $6,442,215
Net income for the period 84,549 84,549
Net change in unrealized
gain on securities available
for sale (1,361) (1,361)
Exercise of stock options 19,534 112,516 112,516
-------- --------- -------- -------- ---------
BALANCE, MARCH 31, 1996 942,825 $6,181,486 $436,043 $20,390 $6,637,919
======== ========= ======== ======== =========
See notes to consolidated condensed financial statements.
FIRST COMMUNITY BANCSHARES, INC. AND SUBSIDIARY
Consolidated Condensed Statements of Cash Flows
(Unaudited)
Three Months Ended
March 31
----------------------------
1996 1995
------------ ------------
Operating Activities:
Net income $ 84,549 $ 38,877
Adjustments to reconcile net income to net
cash provided (used) by operating activities:
Provision for loan losses 52,500 46,000
Depreciation and amortization 18,292 17,643
Securities gains (2,880)
Investment securities amortization 2,780 7,068
Gain on sale of fixed assets (22,000)
Net change in:
Interest receivable 64,933 (22,107)
Interest payable 34,672 170,021
Other assets 46,236 (53,581)
Other liabilities (36,489) (41,339)
Due from broker 2,025,329
----------- -----------
Net cash provided by operating
activities 2,289,922 140,582
----------- -----------
Investing Activities:
Proceeds from maturities of securities
available for sale 325,000 95,000
Proceeds from paydowns and maturities of
securities held to maturity 425,152 577,926
Proceeds from sales of securities available
for sale 182,880
Proceeds from sales of securities held to
maturity 125,000
Purchases of securities available for sale (400,000)
Net change in loans (2,090,119) (5,081,142)
Purchases of property and equipment (14,407) (5,638)
----------- -----------
Net cash used by investing activities (1,171,494) (4,688,854)
----------- -----------
Financing Activities:
Net change in:
Noninterest-bearing, NOW and savings
deposits 1,189,923 1,377,246
Certificates of Deposit 974,872 5,493,713
Short-term borrowings (908,138)
Repayment of long-term debt (3,500,000)
Exercise of stock options 112,516
----------- -----------
Net cash provided by financing
activities 1,369,173 3,370,959
----------- -----------
Net Increase (Decrease) in Cash and Cash
equivalents 2,487,601 (1,177,313)
Cash and Cash equivalents, Beginning of
period 5,650,826 6,442,932
Cash and Cash equivalents, End of period $8,138,427 $5,265,619
=========== ===========
Supplemental cash flow disclosures:
Interest paid $ 766,877 $ 522,825
See notes to consolidated condensed financial statements.
FIRST COMMUNITY BANCSHARES, INC. AND SUBSIDIARY
Notes to Consolidated Condensed Financial Statements
March 31, 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 March 31,
1996, and for the three months ended March 31, 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 months
ended March 31, 1995 have been restated to reflect this stock
split.
Note 3 Contingent Liabilities
-----------------------------
The deposits of the Bank are presently insured by the Savings
Association Insurance Fund (the "SAIF"). A recapitalization
plan for the SAIF under consideration by Congress reportedly
provides for a special assessment on all SAIF-insured
institutions to enable the SAIF to achieve its required level
of reserves. If the proposed assessment of .85% was effected
based on deposits as of March 31, 1995 (as originally
proposed), the Bank's special assessment would amount to
approximately $451,000, before taxes. Accordingly, this
special assessment would significantly increase other
expenses and adversely affect results of operations.
Depending upon the capital level and supervisory rating of
the Bank, and assuming the insurance premium levels for
commercial banks and SAIF members are equalized, future
deposit insurance premiums could decrease from the .23% of
deposits currently paid by the Bank. Such reduction in
premiums would reduce other expenses for future 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 $84,549 and $38,877 for the three months ending
March 31, 1996 and 1995, respectively. Net interest income
was $655,454 and $437,320 for the three months ending March
31, 1996 and March 31, 1995, respectively.
Net income increased $45,672 for the three months ended March
31, 1996, when compared to the same period in 1995, 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
three months ended March 31, 1996 increased by $2,009,568
from December 31, 1995. The increase in provision for loan
loss from $46,000 to $52,500 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 $14,586 results from a significant increase in the number
of deposit accounts. The increases in other expenses are
directly a result of the overall growth of the Bank. Income
taxes increased $55,587 for the three months ended March 31,
1996 when compared to the same period in 1995 because of the
increase in the Bank's net income before taxes of $101,259.
Balance Sheet
-------------
Loans and Deposits The Bank had an increase in net loans
------------------
outstanding from $54,118,223 on December 31, 1995 to
$56,118,842 on March 31, 1996. This increase is primarily
due to an ever increasing customer base because the Bank's
branches are located in strong growth markets.
Deposits increased from $59,163,105 on December 31, 1995 to
$61,327,900 on March 31, 1996. This increase as in the
increases in the loan portfolio is due to the strong market
the Bank is located in and a continual increase in customer
base.
The growth of the Bank is attributable to the opening of a
new branch in Greenwood, Indiana in February, 1994 and the
opening of a branch in North Vernon, Indiana in October,
1994, 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
March 31, 1996, the Bank had $257,995 of loans classified as
substandard, none as doubtful and loss. The allowance for
loan losses was $527,352 or .94% of net loans receivable at
March 31, 1996 compared to $518,403 or .96% of net loans
receivable at December 31, 1995. A portion of classified
loans are non-accrual loans. First Community had non-accrual
loans totaling $283,219 at March 31, 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, 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 the 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 $15,663,243 from
the FHLB and the balance of its borrowings was $4,603,315 at
March 31, 1996 and December 31, 1995, respectively.
At March 31, 1996, the Bank's one-year cumulative interest
rate gap was a negative 12.66%. 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 March 31, 1995, the Company and its subsidiary, First
Community Bank & Trust, had core capital of approximately
10.03% and 8.79% 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.
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) Exhibits.
Exhibit 27 Financial Data Schedule
(b) No reports were filed on Form 8-K during the
quarter ended March 31, 1996.
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,
May 13, 1996