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, 1996
OR
[....] TRANSITION REPORT PURSUANT TO SECTION 13 OR
15 (D) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to .
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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
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Outstanding Shares of Common Stock on June 30, 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 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
FIRST COMMUNITY BANCSHARES, INC. AND SUBSIDIARY
Consolidated Condensed Balance Sheet
(Unaudited)
June 30, December 31
1996 1995
-------------- ---------------
ASSETS
Cash and due from banks $ 890,206 $ 797,727
Short-term interest-bearing deposits 3,684,373 4,853,099
------------ ----------------
Cash and cash equivalents 4,574,579 5,650,826
Investment securities Available for sale 2,396,993 3,258,343
Held to maturity 2,673,165 3,156,597
------------- --------------
Total investment securities 5,070,158 6,414,940
Loan 59,419,228 54,636,626
Allowance for loan losses (571,254) (518,403)
--------- ----------------
Net Loans 58,847,974 54,118,223
Premises and equipment 1,395,052 1,341,266
Federal Home Loan Bank of Indianapolis stock, at cost 777,800 600,500
Foreclosed real estate 177,000 144,499
Interest receivable 555,026 586,427
Due from broker 2,025,329
Other assets 527,688 510,706
----------- --------------
Total assets $71,925,277 $71,392,716
====== ======
LIABILITIES
Deposits
Noninterest bearing $5,960,879 $5,457,652
Interest bearing 56,190,366 53,705,453
----------------- ---------------
Total deposits 62,151,245 59,163,105
Federal Home Loan Bank of Indianapolis advances and
other borrowings 2,603,315 5,511,453
Interest payable 193,846 174,095
Other liabilities 189,444 101,848
-------------- --------------
Total liabilities 65,137,850 64,950,501
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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 588,143 351,494
Net unrealized gain on securities available for sale 17,798 21,751
---------------- ------------
Total stockholders' equity 6,787,427 6,442,215
---------------- --------------
Total liabilities and stockholders' equity $71,925,277 $71,392,716
======== =======
See notes to condensed consolidated financial statements
FIRST COMMUNITY BANCSHARES, INC. AND SUBSIDIARY
Consolidated Condensed Statement of Income
(Unaudited)
Three Months Ended Six Months Ended
June 30, June 30,
1996 1995 1996 1995
---------------------------------------------------------------
Interest Income:
Loans, including fees $1,341,579 $1,079,020 $2,627,825 $2,007,271
Investment securities
Taxable 55,379 41,993 112,718 86,713
Tax exempt 31,926 68,193 63,492 131,305
Interest-bearing time deposits 73,170 22,826 142,282 106,445
Dividends 14,514 9,603 27,254 20,067
--------------- ------------ ------------ -----------
Total interest income 1,516,568 1,221,635 2,973,571 2,351,801
-------------- ----------- ---------- -----------
Interest Expense:
Deposits 712,506 699,388 1,436,732 1,352,495
FHLB advances 70,179 24,520 147,502 64,259
-------------- ------------ ---------- -----------
Total interest expense 782,685 723,908 1,584,234 1,416,754
-------------- ------------- ---------- -----------
Net Interest Income 733,883 497,727 1,389,337 935,047
Provision for loan losses (54,000) (48,000) (106,500) (94,000)
--------------- ------------ ----------- -----------
Net Interest Income After Provision
for Loan Losses 679,883 449,727 1,282,837 841,047
-------------- ------------- ----------- ------------
Other Income
Trust fees 1,916 7,486 12,609 16,934
Service charges on deposit
accounts 47,158 31,823 86,967 57,046
Net realized gains on sales of securities
available for sale 2,750 5,630
Gain on sale of fixed assets 483 22,483
Other operating income 6,438 9,537 12,823 18,838
-------------- -------------- ------------ -------
Total other income 58,262 49,329 118,029 115,301
--------------- ------------ ---------- ----------
Other Expenses
Salaries and
employee benefits 215,663 191,180 458,574 400,052
Premises and equipment 49,464 45,917 98,946 86,134
Advertising 29,710 26,661 52,369 50,802
Data processing fees 46,414 40,258 92,472 79,261
Deposit insurance expense 32,751 24,724 63,944 47,837
Printing and office supplies 17,759 17,133 37,022 31,797
Legal and professional fees 41,460 37,037 87,916 64,766
Telephone expense 13,118 12,199 27,030 21,749
Other operating expense 83,539 54,969 155,926 107,831
----------- ------------ ----------- -----------
Total other expenses 529,878 450,078 1,074,199 890,229
----------- ------------ ----------- ------------
Income Before Income Tax 208,267 48,978 326,667 66,119
Income tax expense (credit) 56,167 (10,757) 90,018 (32,493)
------------ ------------ ----------- ------------
Net Income $ 152,100 $ 59,735 $ 236,649 $ 98,612
====== ===== ====== ======
Net Income Per Share $ .16 $ .06 $ .25 $ .11
Weighted Average Shares Outstanding 942,825 923,291 935,312 923,291
See notes to consolidated condensed financial statements.
FIRST COMMUNITY BANCSHARES, INC. AND SUBSIDIARY
Consolidated Condensed Statement of Changes in Stockholders' Equity
For the Six Months Ended June 30, 1996
(Unaudited)
Retained Net unrealized
Earnings Gain (Loss) on
Common Stock and Securities
---------------------------
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 236,649 236,649
Net change in unrealized
gain on securities
available for sale (3,953) (3,953)
Exercise of
stock options 19,534 112,516 112,516
-------------- --------- ----------- ----------- -----------
BALANCE,
JUNE 30, 1996 942,825 $ 6,181,486 $ 588,143 $ 17,798 $6,787,427
===== ======= ===== ====== ====
See notes to consolidated condensed financial statements.
FIRST COMMUNITY BANCSHARES, INC. AND SUBSIDIARY
Consolidated Condensed Statements of Cash Flows
(Unaudited)
Six Months Ended
June 30,
--------------------------------
1996 1995
-----------------------------------
Operating Activities:
Net income $ 236,649 $ 98,612
Adjustments to reconcile net income to net
cash provided (used) by operating activities:
Provision for loan losses 106,500 94,000
Depreciation and amortization 37,650 35,272
Securities gains (5,630)
Investment securities amortization 4,583 21,593
Gain on sale of fixed assets (22,483)
Net change in:
Interest receivable 31,401 (134,106)
Interest payable 19,751 72,402
Other assets (14,388) (64,927)
Other liabilities 87,596 (3,566)
Due from broker 2,025,329
-------------- ----------------
Net cash provided by
operating activities 2,529,441 96,797
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Investing Activities:
Proceeds from maturities of securities
available for sale 400,000 230,000
Proceeds from paydowns and maturities of
securities held to maturity 478,652 1,087,917
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 (1,120,000)
Net change in loans (4,868,752) (9,566,580)
Purchases of FHLB Stock (177,300) (87,600)
Proceeds from sale of fixed assets 64,663
Purchases of property and equipment (91,436) (15,316)
--------------- -----------------
Net cash used by investing activities (3,798,206) (9,281,916)
--------------- -----------------
Financing Activities:
Net change in:
Noninterest-bearing, NOW and savings
deposits 3,937,862 4,476,598
Certificates of Deposit (949,722) 4,369,785
Short-term borrowings (908,138)
Proceeds from FHLB advances 3,000,000
Repayment of FHLB advances (2,000,000) (3,500,000)
Exercise of stock options 112,516
Cash paid in lieu of issuing fractional shares (876)
-------------- -----------------
Net cash provided by financing
activities 192,518 8,345,507
-------------- -----------------
Net Increase (Decrease) in Cash and Cash
equivalents (1,076,247) (839,612)
Cash and Cash equivalents, Beginning of
period 5,650,826 6,442,932
-------------- ----------------
Cash and Cash equivalents, End of period $ 4,574,579 $ 5,603,320
====== ======
Supplemental cash flow disclosures:
Interest paid $ 1,564,483 $ 1,344,352
See notes to consolidated condensed financial statements.
FIRST COMMUNITY BANCSHARES, INC. AND SUBSIDIARY
Notes to Consolidated Condensed Financial Statements
June 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 June 30, 1996, and for the
three months ended June 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 six months ended June 30, 1995 have been restated
to reflect this stock split.
Note 3 Contingent Liabilities
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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
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Results of Operations
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First Community Bancshares, Inc. ("First Community") had net income of $236,649
and $98,612 for the six months ending June 30, 1996 and 1995, respectively.
Net interest income was $1,389,337 and $935,047 for the six months ending June
30, 1996 and June 30, 1995, respectively.
Net income increased $138,037 for the six months ended June 30, 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 six months ended June 30, 1996
increased by $4,782,602 from December 31, 1995. The increase in provision
for loan loss from $94,000 to $106,500 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 $29,921 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 $122,511 for the six months ended June 30, 1996 when compared to
the same period in 1995 because of the increase in the Bank's net income
before taxes of $260,548.
Balance Sheet
- -------------------
Loans and Deposits
- ---------------------------
The Bank had an increase in net loans outstanding from $54,118,223 on December
31, 1995 to $58,847,974 on June 30, 1996. This increase is primarily due to
an 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 $62,151,245 on
June 30, 1996. 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 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 June 30, 1996, the Bank had $297,722 of loans classified
as substandard, none as doubtful and none as loss. The allowance for loan
losses was $571,254 or .97% of net loans receivable at June 30, 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 June 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, 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 $14,224,187 from
the FHLB and the balance of its borrowings was $2,603,315 and $4,603,315 at
June 30, 1996 and December 31, 1995, respectively.
At June 30, 1996, the Bank's one-year cumulative interest rate gap was a
negative 7.31%. 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, 1996, the Company and its subsidiary, First Community Bank &
Trust, had core capital of approximately 9.44% and 9.15% 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.
- ----------------------------------------------------------------------------
On May 15, 1996, the Company held its annual meeting of the
shareholders. A total of 853,199 shares were represented in person or by
proxy at the meeting. Roy Martin Umbarger was elected to the Board of
Directors for a three year term expiring in 1999. 849,923 shares were voted
in favor of the election of the nominee, 3,025 shares were voted against the
nominee and there were 251 abstentions or broker non-votes. Frank Neese was
elected to the Board of Directors for a three year term expiring in 1999.
848,960 shares were voted in favor of the election of the nominee, 3,987
shares were voted against the nominee and there were 252 abstentions or broker
non-votes. The shareholders ratified the appointment of Walter M. Umbarger to
fulfill the unexpired term of Larry Gates position on the Board of Directors.
844,487 shares were voted in favor of the ratification, 3,899 were voted
against the ratification and there were 4,813 abstentions or broker non-votes.
The shareholders approved an amendment to the Company's 1992 Stock Option
Plan. 821,594 shares were voted in favor of the amendment, 22,732 were voted
against the amendment and there were 8,873 abstentions or broker non-votes.
The shareholders also adopted the 1996 Stock Option Plan. 823,531 were voted
in favor of the adoption, 24,107 were voted against the adoption and there
were 5,561 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 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
August 13, 1996