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FORM 10-Q
QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the Quarterly Period Ended: March 31, 2001
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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 Number: 0-19297
First Community Bancshares, Inc.
(Exact name of registrant as specified in its charter)
Nevada 55-0694814
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
One Community Place, Bluefield, Virginia 24605
(Address of principal executive offices) (Zip Code)
(540) 326-9000
(Registrant's telephone number, including area code)
Indicate by check mark whether the Registrant (1) has filed all reports required
to be filed by Section 13 of 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the Registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes __X__ No ____
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
Class Outstanding at April 30, 2001
Common Stock, $1 Par Value 9,043,385
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First Community Bancshares, Inc.
FORM 10-Q
For the quarter ended March 31, 2001
INDEX
PART I. FINANCIAL INFORMATION REFERENCE
---------
Item 1. Financial Statements
Consolidated Balance Sheets as of March 31, 2001 and
December 31, 2000 3
Consolidated Statements of Income for the Three
Months Ended March 31, 2001 and 2000 4
Consolidated Statements of Cash Flows for the
Three Months Ended March 31, 2001 and 2000 5
Consolidated Statements of Changes in Stockholders'
Equity for the Three Months Ended March 31,
2001 and 2000 6
Notes to Consolidated Financial Statements 7-9
Independent Accountants' Review Report 10
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 11-18
Item 3. Quantitative and Qualitative Disclosures about 19
Market Risk
PART II. OTHER INFORMATION
Item 1. Legal Proceedings 19
Item 2. Changes in Securities and Use of Proceeds 20
Item 3. Defaults Upon Senior Securities 20
Item 4. Submission of Matters to a Vote of 20
Security Holders
Item 5. Other Information 21
Item 6. Exhibits and Reports on Form 8-K 21
SIGNATURES 22
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PART I. ITEM 1. FINANCIAL STATEMENTS
FIRST COMMUNITY BANCSHARES, INC.
CONSOLIDATED BALANCE SHEETS
(AMOUNTS IN THOUSANDS, EXCEPT SHARE DATA) (UNAUDITED)
- --------------------------------------------------------------------------------
MARCH 31 DECEMBER 31
2001 2000
(UNAUDITED) (NOTE 1)
----------- -----------
Assets
Cash and due from banks $ 34,139 $ 38,457
Interest-bearing balances-FHLB 36,248 11,786
Securities available for sale (amortized cost of $204,145
March 31, 2001; $210,126, December 31, 2000) 205,808 207,562
Investment securities held to maturity (fair value of $44,611
March 31, 2001; $78,030, December 31, 2000) 42,218 75,736
Loans held for sale 58,889 11,570
Loans, net of unearned income 822,455 811,256
Less reserve for loan losses 12,408 12,303
----------- -----------
Net loans 810,047 798,953
Premises and equipment 19,363 18,786
Other real estate owned 2,591 2,406
Interest receivable 8,104 9,261
Other assets 18,450 19,299
Intangible assets 23,651 24,201
----------- -----------
Total Assets $ 1,259,508 $ 1,218,017
=========== ===========
Liabilities
Deposits:
Noninterest-bearing $ 131,182 $ 128,584
Interest-bearing 795,230 771,319
----------- -----------
Total Deposits 926,412 899,903
Interest, taxes and other liabilities 14,597 13,238
Securities sold under agreements to repurchase 52,617 46,179
FHLB borrowings and other indebtedness 140,109 138,015
----------- -----------
Total Liabilities 1,133,735 1,097,335
----------- -----------
Stockholders' Equity
Common stock, $1 par value; 15,000,000 shares authorized;
9,052,113 issued in 2001 and 2000; 9,049,784 and 9,040,370
shares outstanding in 2001 and 2000, respectively 9,052 9,052
Additional paid-in capital 35,302 35,273
Retained earnings 80,469 78,097
Treasury stock, at cost (48) (202)
Accumulated other comprehensive income (loss) 998 (1,538)
----------- -----------
Total Stockholders' Equity 125,773 120,682
----------- -----------
Total Liabilities and Stockholders' Equity $ 1,259,508 $ 1,218,017
=========== ===========
See Notes to Consolidated Financial Statements.
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FIRST COMMUNITY BANCSHARES, INC.
CONSOLIDATED STATEMENTS OF INCOME
(AMOUNTS IN THOUSANDS EXCEPT SHARE AND PER SHARE DATA) (UNAUDITED)
- --------------------------------------------------------------------------------
THREE MONTHS
ENDED
MARCH 31
2001 2000
---------- ----------
Interest Income:
Interest and fees on loans $ 18,740 $ 15,995
Interest on securities available for sale 3,454 3,260
Interest on investment securities 609 1,061
Interest on federal funds sold and deposits 98 59
---------- ----------
Total interest income 22,901 20,375
---------- ----------
Interest Expense:
Interest on deposits 8,411 7,161
Interest on borrowings 2,575 1,744
---------- ----------
Total interest expense 10,986 8,905
---------- ----------
Net interest income 11,915 11,470
Provision for loan losses 747 662
---------- ----------
Net interest income after provision for loan losses 11,168 10,808
---------- ----------
Noninterest Income:
Fiduciary income 409 500
Service charges on deposit accounts 1,305 812
Other service charges, commissions and fees 477 349
Mortgage banking income 1,745 899
Other operating income 231 204
Gain on sale of securities 51 --
---------- ----------
Total noninterest income 4,218 2,764
---------- ----------
Noninterest Expense:
Salaries and employee benefits 4,671 4,047
Occupancy expense of bank premises 662 640
Furniture and equipment expense 463 478
Goodwill amortization 556 526
Other operating expense 2,601 2,485
---------- ----------
Total noninterest expense 8,953 8,176
---------- ----------
Income before income taxes 6,433 5,396
Income tax expense 1,977 1,718
---------- ----------
Net Income 4,456 3,678
========== ==========
Basic and diluted earnings per common share $ 0.49 $ 0.42
========== ==========
Weighted average basic shares outstanding 9,041,312 8,715,414
========== ==========
Weighted average diluted shares outstanding 9,047,127 8,715,414
========== ==========
See Notes to Consolidated Financial Statements.
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FIRST COMMUNITY BANCSHARES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(AMOUNTS IN THOUSANDS EXCEPT PER SHARE DATA) (UNAUDITED)
- --------------------------------------------------------------------------------
THREE MONTHS ENDED
MARCH 31
2001 2000
--------- --------
Operating Activities
Cash flows from operating activities:
Net income $ 4,456 $ 3,678
Adjustments to reconcile net income to net cash (used in) provided by
operating activities:
Provision for loan losses 747 662
Depreciation of premises and equipment 373 345
Amortization of intangible assets 529 537
Net investment amortization and accretion 31 67
Net gain on the sale of assets (931) (529)
Mortgage loans originated for sale (115,665) (19,721)
Proceeds from sale of mortgage loans 69,239 17,413
Increase in interest receivable 1,157 640
Decrease in other assets (839) (1,835)
Increase in other liabilities 1,765 292
Other, net (4) 70
--------- --------
Net cash (used in) provided by operating activities (39,142) 1,619
--------- --------
Investing Activities
Cash flows from investing activities:
Proceeds from sales of securities available for sale 7,444 1,650
Proceeds from maturities and calls of securities available for sale 31,664 6,924
Proceeds from maturities and calls of investment securities 1,246 160
Purchase of securities available for sale (838) (2,102)
Net increase in loans made to customers (11,978) (18,627)
Purchase of bank-owned life insurance -- (4,100)
Purchase of premises and equipment (1,014) (263)
--------- --------
Net cash provided by (used in) investing activities 26,524 (16,358)
--------- --------
Financing Activities
Cash flows from financing activities:
Net increase in demand and savings deposits 6,579 2,658
Net increase in time deposits 19,958 8,503
Net increase in short-term debt 8,536 15,478
Repayment of long-term debt (4) (6)
Acquisition of treasury stock (223) (1,051)
Dividends paid (2,084) (1,920)
--------- --------
Net cash provided by financing activities 32,762 23,662
--------- --------
Cash and Cash Equivalents
Net increase in cash and cash equivalents 20,144 8,923
Cash and cash equivalents at beginning of year 50,243 37,797
--------- --------
Cash and cash equivalents at end of year $ 70,387 $ 46,720
========= ========
See Notes to Consolidated Financial Statements.
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FIRST COMMUNITY BANCSHARES, INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
- --------------------------------------------------------------------------------
(AMOUNTS IN THOUSANDS, EXCEPT SHARE AND PER SHARE INFORMATION), (UNAUDITED)
ACCUMULATED
ADDITIONAL UNALLOCATED OTHER
COMMON PAID-IN RETAINED TREASURY ESOP COMPREHENSIVE
STOCK CAPITAL EARNINGS STOCK SHARES (LOSS) INCOME TOTAL
----- ------- -------- ----- ------ ------------- -----
Balance January 1, 2000 8,992 34,264 69,372 (2,945) (722) (5,473) 103,488
Comprehensive income:
Net income -- -- 3,678 -- -- -- 3,678
Other comprehensive income:
Unrealized holding losses on
securities available for sale,
net of tax -- -- -- -- -- (243) (243)
------- ------ --------
Comprehensive income -- -- 3,678 -- -- (243) 3,435
Common dividends declared
($.22 per share) -- -- (1,920) -- -- -- (1,920)
Purchase 53,150 treasury shares at
$19.78 per share -- -- -- (1,051) -- -- (1,051)
Allocation of ESOP shares (96) 722 626
------ ------ ------- ------ ---- ------ --------
Balance March 31, 2000 8,992 34,168 71,130 (3,996) -- (5,716) 104,578
====== ====== ======= ====== ==== ====== ========
Balance January 1, 2001 9,052 35,273 78,097 (202) -- (1,538) 120,682
Comprehensive income:
Net income -- -- 4,456 -- -- -- 4,456
Other comprehensive income:
Unrealized holding gains on
securities available for sale,
net of tax -- -- -- -- -- 2,536 2,536
------- ------ --------
Comprehensive income -- -- 4,456 -- -- 2,536 6,992
Common dividends declared
($.23 per share) -- -- (2,084) -- -- -- (2,084)
Purchase 10,381 treasury shares at
$21.51 per share -- -- -- (224) -- -- (224)
Treasury share distribution to ESOP 29 378 -- 407
------ ------ ------- ------ ---- ------ --------
Balance March 31, 2001 9,052 35,302 80,469 (48) -- 998 125,773
====== ====== ======= ====== ==== ====== ========
See Notes to Consolidated Financial Statements.
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1. UNAUDITED FINANCIAL STATEMENTS
The unaudited consolidated balance sheet as of March 31, 2001 and the unaudited
consolidated statements of income, cash flows and changes in stockholders'
equity for the three month periods ended March 31, 2001 and 2000 have been
prepared by the management of First Community Bancshares, Inc. (FCBI, the
"Company"). In the opinion of management, all adjustments (including normal
recurring accruals) necessary to present fairly the financial position of FCBI
and subsidiaries at March 31, 2001 and its results of operations, cash flows,
and changes in stockholders' equity for the three month periods ended March 31,
2001 and 2000 have been made. These results are not necessarily indicative of
the results of consolidated operations for the full calendar year.
The consolidated balance sheet as of December 31, 2000 has been extracted from
audited financial statements included in the Company's 2000 Annual Report to
Stockholders. Certain information and footnote disclosures normally included in
financial statements prepared in accordance with accounting principles generally
accepted in the United States have been omitted. These financial statements
should be read in conjunction with the financial statements and notes thereto
included in the 2000 Annual Report of FCBI.
NOTE 2. ACQUISITIONS
On October 31, 2000, First Community Bank, N.A. ("FCBNA"), the Company's
wholly-owned banking subsidiary acquired 100% of the common stock of Citizens
Southern Bank, Inc. ("Citizens"), headquartered in Beckley, West Virginia.
Citizens, a state-chartered bank when acquired, had assets of approximately
$67.8 million with two Beckley offices. Pursuant to the Agreement, 1.74 shares
of the Company's common stock were exchanged for each of Citizens' 250,000
common shares. The excess of the consideration paid over the identifiable
tangible and intangible assets of approximately $3.3 million is being amortized
on a straight-line basis over a 20-year period. The acquisition was accounted
for under the purchase method of accounting. Accordingly, results of operations
of Citizens are included in the consolidated results from the date of
acquisition.
The following unaudited proforma financial information estimates the effect of
the Citizens' acquisition as if the transaction had been consummated as of
January 1, 2000:
(AMOUNTS IN THOUSANDS)
MARCH 31, MARCH 31,
2001 2000
------- -------
Net interest income ........................... $11,915 $12,030
Net income .................................... 4,456 3,782
Basic and diluted earnings per common share ... 0.49 0.41
NOTE 3. BORROWINGS
Structured term borrowings from the Federal Home Loan Bank (FHLB) of Atlanta of
$125 million in convertible and callable advances are presently being used as
funding vehicles. The structured term borrowings have varying maturities from
two to ten years; however; these advances are callable in quarterly increments
after a predefined lockout period. Contractual maturities are $25 million in
2002 and $100 million in 2010. The Company has additional term borrowings from
the FHLB of $10 million that are included in FHLB borrowings and other
indebtedness.
NOTE 4. COMMITMENTS AND CONTINGENCIES
The Company is currently a defendant in various legal actions and asserted
claims most of which involve lending and collection activities in the normal
course of business. While the Company and legal counsel are unable to assess the
ultimate outcome of each of these matters with certainty, they are of the belief
that the resolution of these actions should not have a material adverse affect
on the financial position or results of operations of the Company.
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NOTE 5. OTHER COMPREHENSIVE INCOME
The Company currently has one component of other comprehensive income, which
includes unrealized gains and losses on securities available for sale and is
detailed as follows:
MARCH 31 MARCH 31
2001 2000
------- -------
(AMOUNTS IN THOUSANDS)
OTHER COMPREHENSIVE INCOME:
Holding gains (losses) arising during the period $ 4,275 $ (406)
Tax (expense) benefit (1,708) 163
------- -------
Holding gains (losses) arising during the period, net of tax 2,567 (243)
Reclassification adjustment for gains realized in net
income, net of tax (51) --
Tax expense of reclassification 20 --
------- -------
Other comprehensive income (loss) 2,536 (243)
Beginning accumulated other comprehensive loss (1,538) (5,473)
------- -------
Ending accumulated other comprehensive income (loss) $ 998 $(5,716)
======= =======
NOTE 6. SEGMENT INFORMATION
The Company operates two business segments: community banking and mortgage
banking. These segments are primarily identified by the products or services
offered and the channels through which they are offered. The community banking
segment consists of the Company's full-service banks that offer customers
traditional banking products and services through various delivery channels. The
mortgage banking segment consists of mortgage brokerage facilities that
originate, acquire, and sell mortgage products. The accounting policies for each
of the business segments are the same as those of the Company.
Information for March 31, 2001 for each of the segments is included below.
Because the mortgage banking segment was not fully operational until the third
quarter of 2000, information for the mortgage banking segment was not material
for the comparative period in 2000 and the consolidated financial information
for the comparable period in 2000, as reported, is reflective of the community
banking segment.
(AMOUNTS IN THOUSANDS)
COMMUNITY MORTGAGE
BANKING BANKING PARENT ELIMINATIONS TOTAL
------- ------- ------ ------------ -----
Net interest income $ 11,792 $ (34) $ 76 $ 81 $ 11,915
Provision for loan losses 747 -- -- -- 747
---------- -------- --------- --------- ----------
Net interest income after provision
for loan losses 11,045 (34) 76 81 11,168
Other income 2,471 1,745 -- -- 4,216
Other expenses 7,273 1,518 79 81 8,951
---------- -------- --------- --------- ----------
Income (loss) before income taxes 6,243 193 (3) -- 6,433
Income tax expense (benefit) 1,921 60 (4) -- 1,977
---------- -------- --------- --------- ----------
Net income $ 4,322 $ 133 $ 1 $ -- $ 4,456
========== ======== ========= ========= ==========
Average assets $1,229,483 $ 30,592 $ 123,648 $(160,512) $1,223,211
========== ======== ========= ========= ==========
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NOTE 7. RECENT ACCOUNTING DEVELOPMENTS
In September 2000, the Financial Accounting Standards Board ("FASB") issued SFAS
No. 140, "Accounting for Transfers and Servicing of Financial Assets and
Extinguishments of Liabilities" ("SFAS No. 140"). SFAS No. 140 replaces SFAS No.
125 "Accounting for Transfers and Servicing of Financial Assets and
Extinguishments of Liabilities" ("SFAS No. 125"), issued in June 1996. It
revises the standards for accounting for securitizations and other transfers of
financial assets and collateral and requires certain disclosures, but it carries
over most of SFAS No. 125's provisions without reconsideration.
SFAS No. 140 is effective for transfers and servicing of financial assets and
extinguishments of liabilities occurring after March 31, 2001. SFAS No. 140
specifies the accounting for recognition and reclassification of collateral and
for disclosures relating to securitization transactions and collateral for
fiscal years ending after December 15, 2000. SFAS No. 140 is to be applied
prospectively with certain exceptions. Implementation of SFAS No. 140 is not
expected to have a material effect on our financial position or results of
operations.
In June 1998, the Financial Accounting Standards Board issued Statement No. 133,
Accounting for Derivative Instruments and Hedging Activities, as amended. The
Statement requires the Company to recognize all derivatives on the balance sheet
at fair value. SFAS No. 133 also specifies new methods of accounting for hedging
transactions, prescribes the items and transactions that may be hedged, and
specifies detailed criteria to be met to qualify for hedge accounting.
Derivatives that are not hedges must be adjusted to fair value through income.
If the derivative is a hedge, depending upon the nature of the hedge, changes in
the fair value of derivatives are either offset against the changes in the fair
value of assets, liabilities or firm commitments through earnings or recognized
in other comprehensive income until the hedged item is recognized in earnings.
The Company adopted SFAS No. 133 on January 1, 2001. Because of the limited use
of derivatives on January 1, 2001, the adoption did not have a material impact
on the Company's financial statements. UFM is currently using investments
commonly referred to as "forward" transactions or derivatives to balance the
risk inherent in interest rate lock commitments made to potential borrowers of
which meet the current definition of a derivative in accordance with SFAS No.
133. The pipeline of loans is hedged to circumvent unusual fluctuations in the
cash flows derived upon settlement of the loans with secondary market purchases
and, consequently, to achieve a desired margin upon delivery. The hedge
transactions are used for risk mitigation and are not for trading purposes.
Since the hedge transactions of UFM are currently considered free standing,
independent instruments and do not presently satisfy the criteria of FAS 133 for
special hedge accounting treatment, they are recorded at fair value and change
in fair value is reflected as adjustments to income. The wholesale mortgage
pipeline of loans is hedged to circumvent unusual fluctuations in the cash flows
derived upon settlement of the loans with the secondary market purchasers and
consequently to achieve a desired margin upon delivery. Additionally, hedge
transactions are used as a management tool to mitigate risk and not for trading
purposes.
NOTE 8. EARNINGS PER SHARE
The Company's basic and diluted earnings per share were $0.49 and $0.42 for the
quarters ending March 31, 2001 and 2000, respectively. The current impact of the
dilutive shares attributable to the Company's stock option plan is immaterial;
however, the Company currently reflects 5,815 dilutive option shares. There were
no dilutive shares attributable to the stock option plan in the prior year for
the corresponding quarter.
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INDEPENDENT ACCOUNTANTS' REVIEW REPORT
The Audit Committee of the Board of Directors
First Community Bancshares, Inc.
We have reviewed the accompanying consolidated balance sheet of First Community
Bancshares, Inc. (First Community) as of March 31, 2001 and the related
consolidated statements of income, cash flows and changes in stockholders'
equity for the three month periods ended March 31, 2001 and 2000. These
consolidated financial statements are the responsibility of the Company's
management.
We conducted our review in accordance with standards established by the American
Institute of Certified Public Accountants. A review of interim financial
information consists principally of applying analytical procedures to financial
data, and making inquiries of persons responsible for financial and accounting
matters. It is substantially less in scope than an audit conducted in accordance
with auditing standards generally accepted in the United States, which will be
performed for the full year with the objective of expressing an opinion
regarding the financial statements taken as a whole. Accordingly, we do not
express such an opinion.
Based on our reviews, we are not aware of any material modifications that should
be made to the accompanying consolidated balance sheet of First Community as of
March 31, 2001 and the related consolidated statements of income, cash flows and
changes in stockholders' equity for the three month periods ended March 31, 2001
and 2000, for them to be in conformity with accounting principles generally
accepted in the United States.
We have previously audited, in accordance with auditing standards generally
accepted in the United States, the consolidated balance sheet of First Community
Bancshares, Inc. and subsidiaries as of December 31, 2000, and the related
consolidated statements of income and comprehensive income, changes in
stockholders' equity, and cash flows for the year then ended (not presented
herein); and in our report dated January 26, 2001, we expressed an unqualified
opinion on those consolidated financial statements. In our opinion, the
information set forth in the accompanying consolidated balance sheet as of
December 31, 2000, is fairly stated in all material respects, in relation to the
consolidated balance sheet from which it has been derived.
/s/ Ernst & Young LLP
Charleston, West Virginia
April 20, 2001
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FIRST COMMUNITY BANCSHARES, INC.
ITEM 2.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
The following discussion and analysis is provided to address information about
the Company's financial condition and results of operations, which is not
otherwise apparent from the consolidated financial statements included in this
report. This discussion and analysis should be read in conjunction with the 2000
Annual Report to Shareholders and the other financial information included in
this report.
First Community is a multi-state holding company headquartered in Bluefield,
Virginia. With total assets of $1.26 billion at March 31, 2001. First Community
through its community banking subsidiary, First Community Bank, N. A. ("FCBNA"),
provides financial, mortgage brokerage and origination and trust services to
individuals and commercial customers through 33 full-service banking locations
in West Virginia, Virginia and North Carolina as well as ten mortgage brokerage
facilities operated by United First Mortgage, Inc. ("UFM".) UFM is a wholly
owned subsidiary of FCBNA.
FORWARD LOOKING STATEMENTS
First Community Bancshares, Inc. (the "Corporation", "FCBI", or "First
Community") may from time to time make written or oral "forward-looking
statements", including statements contained in the Corporation's filings with
the Securities and Exchange Commission (including this Quarterly Report on Form
10-Q and the Exhibits hereto and thereto), in its reports to stockholders and in
other communications by the Corporation, which are made in good faith by the
Corporation pursuant to the "safe harbor" provisions of the Private Securities
Litigation Reform Act of 1995.
These forward-looking statements include, among others, statements with respect
to the Corporation's beliefs, plans, objectives, goals, guidelines,
expectations, anticipations, estimates and intentions that are subject to
significant risks and uncertainties and are subject to change based on various
factors (many of which are beyond the Corporation's control). The words "may",
"could", "should", "would", "believe", "anticipate", "estimate", "expect",
"intend", "plan" and similar expressions are intended to identify
forward-looking statements. The following factors, among others, could cause the
Corporation's financial performance to differ materially from that expressed in
such forward-looking statements: the strength of the United States economy in
general and the strength of the local economies in which the Corporation
conducts operations; the effects of, and changes in, trade, monetary and fiscal
policies and laws, including interest rate policies of the Board of Governors of
the Federal Reserve System; inflation, interest rate, market and monetary
fluctuations; the timely development of competitive new products and services of
the Corporation and the acceptance of these products and services by new and
existing customers; the willingness of customers to substitute competitors'
products and services for the Corporation's products and services and vice
versa; the impact of changes in financial services' laws and regulations
(including laws concerning taxes, banking, securities and insurance);
technological changes; the effect of acquisitions, including, without
limitation, the failure to achieve the expected revenue growth and/or expense
savings from such acquisitions; the growth and profitability of the
Corporation's noninterest or fee income being less than expected; unanticipated
regulatory or judicial proceedings; changes in consumer spending and saving
habits; and the success of the Corporation at managing the risks involved in the
foregoing.
The Corporation cautions that the foregoing list of important factors is not
exclusive. The Corporation does not undertake to update any forward-looking
statement, whether written or oral, that may be made from time to time by or on
behalf of the Corporation.
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RESULTS OF OPERATIONS
Net income for the first quarter of 2001 totaled $4.5 million; $778,000, or
21.2% higher than net earnings of $3.7 million reported for the corresponding
first quarter of 2000. Net income for the first quarters of the current and
prior year resulted in basic and diluted earnings per share of $0.49 versus
$0.42, a 16.67% increase, for the three months ended March 31, 2001 in
comparison to the comparable period in the prior year. The improvement in
earnings for 2001 is primarily a result of a $2.7 million increase in loan
interest income due to continued growth in the loan portfolio, a $1.5 million
increase in non-interest income which was primarily attributable to UFM's
wholesale mortgage origination operations established in the third quarter of
2000, as well as new fee revenues from the Company's restructured deposit
product set. The impact of increased loan volume and higher yields on the
available for sale and investment security portfolio was partially offset by the
higher cost of funds and other borrowings resulting in a 38 basis point decline
in net interest margin to 4.61%. Additionally, the increases in interest income
and noninterest income noted were partially offset by a slight increase in loan
loss provision as a result of the overall growth in the loan portfolio,
additional salaries and benefits and other operating costs.
The effective income tax rate was slightly lower in the first quarter of 2001,
(31% vs. 32%) as a result of tax planning strategies implemented in the latter
part of 2000.
NET INTEREST INCOME
Net interest income, the largest contributor to earnings was $11.9 million for
the first three months of 2001 compared with $11.5 million for the corresponding
period in 2000. Tax equivalent net interest income totaled $12.7 million for the
first three months of 2001, an increase of $444,000 from the $12.3 million
reported in the first three months of 2000. This increase in net interest income
relates largely to the $137.7 million increase in average loans between the two
periods as a result of increased marketing efforts, effective utilization of
sales management and strong customer relationship building.
The Company's tax equivalent net interest margin of 4.61% for the first three
months of 2001 reflects a decrease of 38 basis points in comparison to the first
three months of 2000 when the tax equivalent net interest margin was 4.99%.
Average loan balances increased $137.7 million while the overall tax equivalent
loan yield decreased 10 basis points from the prior year. The taxable equivalent
yields on securities available for sale and investment securities increased 14
and 13 basis points to 6.86% and 8.22%, respectively, while the yield on
interest-bearing balances with banks decreased 27 basis points to 6.04%. The
overall yield on average earning assets remained relatively the same, reflecting
tax-equivalent yields of 8.59% and 8.60% for the three months ended March 31,
2001 and March 31, 2000, respectively. Alternatively, the cost of
interest-bearing liabilities increased by 47 basis points from 4.17% in 2000 to
4.64% in 2001 due to competitive pricing pressure on deposits and short-term
borrowings.
The overall loan yield decreased due to decreases in the prime loan rate and
marginal pricing on certain large new loan relationships. The increase in
average outstanding loans was funded through investment portfolio roll-off,
increases in the level of deposits and increased wholesale funding through the
FHLB.
The tax equivalent yield on securities available for sale increased 14 basis
points to 6.86% in the first three months of 2001 compared to 6.72% for the
three months ended March 31, 2000. Average balances in securities available for
sale increased $23.6 million when comparing the three months ended March 31,
2001 to 2000. This increase is the result of several increases and decreases
including the addition of $4.1 million in securities as a result of the
acquisition of Citizens Southern Bank in the fourth quarter of 2000,
reclassification of held to maturity securities to available for sale in January
2001 of approximately $32 million in conjunction with the implementation of
Financial Accounting Standards Board (FASB) Statement 133, the sale of
approximately $7.4 million in securities available for sale in the first quarter
2001, and increased prepayments and calls experienced in the declining rate
environment throughout the first quarter 2001. The tax-equivalent yield on
investment securities (held to maturity) increased 13 basis points from March
2000 to 2001. Additionally, the average investment portfolio decreased in the
first quarter of 2001 by $35.8 million due to the aforementioned
reclassification, several maturities and an increased number of calls and
principal pay-downs due to the increased prepayment incentives created by the
declining rate environment experienced in the first quarter 2001.
The overall cost of funding increased by 47 basis points. Average short-term and
FHLB borrowings increased by $48.5 million in 2001 while the rate paid increased
58 basis points to 5.53%. The rate paid on long-term debt increased by 3 basis
points. The cost of interest-bearing demand and savings deposits decreased 14
and 39 basis points, respectively. Alternately, the cost of time deposits
increased 66 basis points from 5.11% in 2000 to 5.76% in 2001 as average
interest-bearing deposit balances increased $51.6 million in total while average
noninterest-bearing demand deposits increased $10.7 million. Additional funding
needed to facilitate loan growth is currently being provided through increased
deposit levels whereas short-term
12
13
borrowings were obtained in the prior year through the Federal Home Loan Bank in
the form of callable term advances and is reflected in the increase. The usage
of FHLB credit programs is a significant component of the Company's overall
liquidity and funding strategy.
13
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AVERAGE BALANCE SHEETS AND
NET INTEREST INCOME ANALYSIS
- --------------------------------------------------------------------------------
(AMOUNTS IN THOUSANDS)
THREE MONTHS ENDED THREE MONTHS ENDED
MARCH 31, 2001 MARCH 31, 2000
AVERAGE INTEREST YIELD/RATE AVERAGE INTEREST YIELD/RATE
BALANCE (1) (2) (2) BALANCE (1) (2) (2)
-------------------------- ---------- -------------- ----------- -----------
Earning Assets:
Loans (3)
Taxable $ 842,601 $18,604 8.95% $ 704,122 $15,853 9.06%
Tax-Exempt 7,688 210 11.08% 8,477 219 10.39%
---------- ------- ------ ---------- ------- ------
Total 850,289 18,814 8.97% 712,599 16,072 9.07%
Reserve for Loan Losses (12,407) (11,925)
---------- ------- ---------- -------
Net Total 837,882 18,814 700,674 16,072
Securities Available For Sale:
Taxable 164,869 2,621 6.45% 176,024 2,824 6.45%
Tax-Exempt 67,942 1,317 7.86% 33,164 670 8.13%
---------- ------- ------ ---------- ------- ------
Total 232,811 3,938 6.86% 209,188 3,494 6.72%
Investment Securities:
Taxable 3,184 58 7.39% 5,061 89 7.07%
Tax-Exempt 39,731 812 8.29% 73,641 1,495 8.17%
---------- ------- ------ ---------- ------- ------
Total 42,915 870 8.22% 78,702 1,584 8.09%
Interest Bearing Deposits 6,579 98 6.04% 2,866 45 6.32%
Fed Funds Sold -- -- 0.00% 2 -- 0.00%
---------- ------- ------ ---------- ------- ------
Total Earning Assets 1,120,187 23,720 8.59% 991,432 21,195 8.60%
------- -------
Other Assets 103,024 99,096
---------- ----------
Total $1,223,211 $1,090,528
========== ==========
Interest-Bearing Liabilities:
Demand Deposits $ 137,795 698 2.05% $ 131,873 719 2.19%
Savings Deposits 130,480 557 1.73% 138,634 732 2.12%
Time Deposits 503,614 7,156 5.76% 449,748 5,710 5.11%
Short-term Borrowings 177,832 2,425 5.53% 129,368 1,593 4.95%
Long-term Borrowings 10,177 150 5.98% 10,214 151 5.95%
---------- ------- ------ ---------- ------- ------
Total Interest-bearing Liabilities 959,898 10,986 4.64% 859,837 8,905 4.17%
Demand Deposits 124,472 113,804
Other Liabilities 14,757 12,554
Stockholders' Equity 124,084 104,333
---------- ----------
Total $1,223,211 $1,090,528
---------- ----------
Net Interest Income 12,734 12,290
======= =======
Net Interest Rate Spread (3) 3.95% 4.43%
====== ======
Net Interest Margin 4.61% 4.99%
====== ======
(1) Interest amounts represent taxable equivalent results for the first three
months of 2001 and 2000.
(2) Fully Taxable Equivalent-Using the Federal statutory rate of 35%.
(3) Nonaccrual loans are included in average balances outstanding with no
related interest income.
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PROVISION AND ALLOWANCE FOR LOAN LOSSES
To maintain a balance in the allowance for loan losses sufficient to absorb
known and estimable loan losses, charges are made to the provision for loan
losses. The $747,000 provision made in the first three months of 2001 compared
to the $662,000 for the corresponding period in 2000 reflect additional
provisions to cover significant average loan growth of $58.5 million from
December 2000.
The Company consistently applies a monthly review process to evaluate loans for
changes in credit risk. This process serves as the primary means by which the
Company evaluates the adequacy of loan loss allowances. The total loan loss
allowance is divided into two categories which apply to: i) specifically
identified loan relationships which are on non-accrual status, ninety days past
due or more and loans with elements of credit weakness and ii) formula reserves.
Specific reserves are targeted to cover loan relationships, which are identified
with significant cash flow weakness and for which a collateral deficiency may be
present. The reserves established under the specific identification method are
judged based upon the borrower's estimated cash flow or projected liquidation
value of related collateral.
Formula reserves, based on historical loss experience, are available to cover
the homogeneous loans not individually evaluated. The formula reserve is
developed and evaluated against loans in general by specific category
(commercial, mortgage, and consumer). To determine the amount of reserve needed
for each loan category, an estimated loss percentage is developed based upon
historical loss percentages. The calculated percentage is used to determine the
estimated reserve excluding any relationships specifically identified and
individually evaluated. While allocations are made to specific loans and
classifications within the various categories of loans, the reserve is available
for all loan losses.
First Community's allowance for loan loss activity for the three month periods
ended March 31, 2001 and March 31, 2000 is as follows:
FOR THE THREE MONTHS ENDED
MARCH 31
(AMOUNTS IN THOUSANDS)
2001 2000
-------- --------
Beginning balance $ 12,303 $ 11,900
Provision 747 662
Charge-offs (861) (910)
Recoveries 219 199
-------- --------
Ending Balance $ 12,408 $ 11,851
======== ========
The allowance for loan losses of approximately $12.4 million and $11.9 million
at March 31, 2001 and 2000, respectively, resulting in reserve to loans held for
investment ratios of 1.51% and 1.52% at the respective dates.
Net charge-offs for the first three months of 2001 were $642,000 compared with
$711,000 for the corresponding period in 2000. Expressed as a percentage of
average loans, net charge-offs were .08% for the three month period ended March
31, 2001 and .10% for the corresponding period in 2000. As of March 31, 2001,
the reserve as a percentage of non-performing loans was 188.4% as compared to
186.3% at December 31, 2000.
Management continually evaluates the adequacy of the allowance for loan losses
and makes specific adjustments to it based on the results of risk analysis in
the credit review process, the recommendation of regulatory agencies, and other
factors, such as loan loss experience and prevailing economic conditions.
Management considers the level of reserves adequate based on the current risk
profile in the loan portfolio.
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NON-INTEREST INCOME
Non-interest income consists of all revenues, which are not included in interest
and fee income related to earning assets. Total non-interest income increased
approximately $1.4 million, or 52.6% from $2.8 million for the three months
ended March 31, 2000 to $4.2 million for the corresponding period in 2001. The
largest portion of this increase resulted from the mortgage brokerage operations
of UFM, which added approximately $1,745,000 of other income in 2001 versus
$899,000 for the comparable three-month period in 2000. When comparing the first
quarter 2001 to the first quarter of 2000 exclusive of UFM, non-interest income
increased $608,000. The majority of this increase was a $493,000 increase in
service charges on deposit accounts, primarily the result of a new
customer-sensitive overdraft program implemented in the fourth quarter of 2000
that allows well-managed customer deposit accounts greater flexibility in
managing overdrafts and, in turn, has achieved higher levels of overdraft
charges with minimal charge-offs of overdrawn accounts. The remainder of the
increase was largely due to other service charges commissions and fees and other
operating income of $128,000 and $27,000, respectively. Fiduciary earnings
correspond to the asset management fees recorded and have declined from the
prior year by $91,000 as a direct result of a reduction in new estate and trust
management activity in the current year. Also first quarter 2001 reflected
$51,000 in gains on the sale of securities while none were reported in the March
2000 quarter.
NON-INTEREST EXPENSE
Non-interest expense totaled $9.0 million in the first three months of 2001,
increasing $777,000 over the corresponding period in 2000. This increase is
primarily attributable to a $624,000 increase in salaries and benefits, $137,000
of which was due to the acquisition of Citizens Southern in the latter half of
2000, a $182,000 in the mortgage brokerage operations of UFM (because of the
implementation of a wholesale origination operation) and a general increase in
salaries cost as staffing needs at several locations were satisfied in order to
support new infrastructure and growth. Other operating expenses increased
$213,000 in March 2001 compared to March 2000 with increased other operating
costs associated with UFM of $132,000 being the largest component of the change.
Occupancy and furniture fixtures expense increased slightly by $7,000 (expenses
exclusive of UFM and Citizens Southern acquisition actually decreased by
$64,000), while goodwill increased by approximately $30,000 due to the Citizens
acquisition. Additionally, other real estate expense decreased $97,000.
FINANCIAL POSITION
SECURITIES
Investment securities, which are purchased with the intent to hold until
maturity, totaled $42.2 million at March 31, 2001, a decrease of $33.5 million
from December 31, 2000. This 44.3% decrease is almost exclusively the net result
of a one-time transfer of held-to-maturity securities to the available for sale
category in conjunction with the implementation of FAS 133. The market value of
investment securities held to maturity was 105.7% and 103.0% of book value at
March 31, 2001 and December 31, 2000, respectively. The market value of fixed
rate debt securities reacts inversely to rising interest rates; consequently,
recent trends in interest rates have had a positive effect on the underlying
market value since December 31, 2000 due to a general decline in market offering
rates and prices for similar securities as a result of the declining rate
environment experienced throughout the first quarter of 2001.
Securities available for sale were $205.8 million at March 31, 2001 compared to
$207.6 million at December 31, 2000. This change reflected the reclassification
of held to maturity securities to available for sale, certain maturities and
calls, and several large pay-downs triggered by the declining rate environment,
as well as the sale of approximately $7.4 million in securities during the first
quarter 2001. The cash flow from these investments is currently being reinvested
into the higher yielding loans while excess funds are being sold to the FHLB.
Securities available for sale are recorded at their estimated fair market value.
The unrealized gain or loss, which is the difference between amortized cost and
market value, net of related deferred taxes, is recognized in the Stockholders'
Equity section of the balance sheet as either accumulated other comprehensive
income or loss. The unrealized loss after taxes of $1.5 million at December 31,
2000, can be compared to a $998,000 gain at March 31, 2001 due to market
increases in the first three months of 2001.
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LOANS
The Company's lending strategy stresses quality growth, diversified by product,
geography, and industry. All loans made by the Company are subject to a common
credit underwriting structure. Loans are also subject to a quarterly and annual
review process based on the loan size and type. Total loans increased $58.5
million from $822.8 million at December 31, 2000 to $881.3 million at March 31,
2001. The majority of this increase, $47.3 million, was in loans held for sale
which were originated by the Company's mortgage brokerage division, UFM. The
loan to deposit ratio increased from 91.4% at December 31, 2000 to 95.1% at
March 31, 2001. Excluding loans held for sale, loans would have increased $11.2
million for the first quarter of 2001 and loan to deposit ratios would be 88.78%
and 90.15% for the March 31, 2001 and December 31, 2000 periods, respectively.
The increase in the loan to deposit ratio has increased the Company's funding
dependency on wholesale funding through the FHLB. Average total loans have
increased $137.7 million when comparing the first three months of 2000 and 2001,
due primarily to extensive sales and marketing efforts as well as the
acquisition of Citizens Southern Bank, Inc. in the fourth quarter of 2000 which
added an additional $48 million in loans.
The loan portfolio continues to be diversified among loan types and industry
segments. Commercial and commercial real estate loans represent the largest
segment of the portfolio, comprising $308.1 million or 34.96% of total loans at
March 31, 2001 compared to $297.9 million or 36.0% of total loans at December
31, 2000. Residential real estate loans decreased to $303.2 million or 34.40% of
total loans at March 31, 2001 compared to $305.3 million or 37.10% of the total
loan portfolio at December 31, 2000. Loans to individuals also decreased
slightly to $132.9 million or 15.08% of total loans at March 31, 2001 from
$134.3 million or 16.33% of total loans at December 31, 2000. Construction loans
grew to $77.5 million at March 31, 2001 or 8.79% of total loans from $73.1
million at December 31, 2000 or 8.88% of total loans. Growth in the construction
loan segment includes multifamily residential properties and other commercial
real estate development properties. A portion of these loans will move into the
commercial real estate portfolio as the projects are completed. Loans held for
sale increased to $58.9 million or 6.68% of the total loan portfolio from $11.6
or 1.41% of the portfolio in December 31, 2000 as a result of seasonal and more
favorable market rate conditions.
LOAN PORTFOLIO OVERVIEW
(AMOUNTS IN THOUSANDS)
MARCH 31, 2001 DECEMBER 31, 2000
---------------------- ---------------------
AMOUNT PERCENT AMOUNT PERCENT
-------- ------- -------- -------
Commercial and Agricultural $ 84,821 9.62% $ 75,317 9.15%
Commercial Real Estate 223,272 25.34% 222,571 27.05%
Residential Real Estate 303,155 34.40% 305,302 37.10%
Construction 77,510 8.79% 73,087 8.88%
Consumer 132,934 15.08% 134,330 16.33%
Other 763 0.09% 649 0.08%
Loans Held for Sale 58,889 6.68% 11,570 1.41%
-------- ------ -------- ------
Total $881,344 100.00% $822,826 100.00%
======== ====== ======== ======
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NON-PERFORMING ASSETS
Non-performing assets are comprised of loans on non-accrual status, loans
contractually past due 90 days or more and still accruing interest and other
real estate owned (OREO). Non-performing assets were $9.2 million at March 31,
2001 and $9.0 at December 31, 2000, or 1.0% and 1.1% of total loans and OREO,
respectively. The following schedule details non-performing assets by category
at the close of each of the last five quarters:
(IN THOUSANDS OF DOLLARS) MARCH 31 DECEMBER 31 SEPTEMBER 30 JUNE 30 MARCH 31
2001 2000 2000 2000 2000
------ ------ ------ ------- -------
Nonaccrual $5,192 $5,397 $5,939 $ 5,359 $ 7,455
Ninety Days Past Due 1,393 1,208 1,182 1,323 1,090
Other Real Estate Owned $2,591 2,406 2,780 2,463 2,422
------ ------ ------ ------- -------
9,176 $9,011 $9,901 $ 9,145 $10,967
====== ====== ====== ======= =======
Restructured loans
performing in accordance
with modified terms $ 446 $ 437 $ 448 $ 448 $ 449
====== ====== ====== ======= =======
Non-accrual loans decreased $205,000 during the first quarter of 2001. Ninety
day past due loans increased slightly during the first quarter by $185,000 while
other real estate owned also increased by $185,000. Included in the ninety days
past due category are two loans with FmHA and SBA guarantees comprising $958,000
of the balance in that category of non-performing loans. Ongoing activity within
the classification and categories of non-performing loans continues to include
collections on delinquencies, foreclosures and movements into or out of the
non-performing classification as a result of changing customer business
conditions. The increase in other real estate owned is due to the foreclosure
and disposition of several properties with the largest foreclosure having a
balance of $108,000. The parcels of other real estate owned are generally
carried at the lesser of their estimated fair market value or cost.
STOCKHOLDERS' EQUITY
Total stockholders' equity reached $125.8 million at March 31, 2001 increasing
$5.1 million over the $120.7 million reported at December 31, 2000. The Federal
Reserve's risk based capital guidelines and leverage ratio measure capital
adequacy of banking institutions. Risk-based capital guidelines weight balance
sheet assets and off-balance sheet commitments based on inherent risks
associated with the respective asset types. At March 31, 2001, the Company's
total risk adjusted capital-to-asset ratio was 12.92%. The Company's leverage
ratio at March 31, 2001 was 8.43% compared with 8.37% at December 31, 2000. Both
the risk adjusted capital-to-asset ratio and the leverage ratio exceed the
current well-capitalized levels prescribed for bank holding companies of 10% and
5%, respectively.
LIQUIDITY
The Company maintains a significant level of liquidity in the form of cash and
cash equivalent balances ($70.4 million), investment securities available for
sale ($205.8 million) and Federal Home Loan Bank credit availability of
approximately $116.9 million. Cash and cash equivalents as well as advances from
the Federal Home Loan Bank are immediately available for satisfaction of deposit
withdrawals, customer credit needs and operations of the Company. Investment
securities available for sale represent a secondary level of liquidity available
for conversion to liquid funds in the event of extraordinary needs.
18
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PART I. ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Interest Rate Risk (IRR) and Asset/Liability Management
The Bank's profitability is dependent to a large extent upon its net interest
income (NII), which is the difference between its interest income on
interest-earning assets, such as loans and securities, and its interest expense
on interest-bearing liabilities, such as deposits and borrowings. The Bank, like
other financial institutions, is subject to interest rate risk to the degree
that its interest-earning assets reprice differently than its interest-bearing
liabilities. The Bank manages its mix of assets and liabilities with the goals
of limiting its exposure to interest rate risk, ensuring adequate liquidity, and
coordinating its sources and uses of funds. Specific strategies for management
of IRR have included shortening the amortized maturity of fixed-rate loans and
increasing the volume of adjustable rate loans to reduce the average maturity of
the Bank's interest-earning assets.
The Bank seeks to control its interest rate risk (IRR) exposure to insulate net
interest income and net earnings from fluctuations in the general level of
interest rates. To measure its exposure to IRR, the bank performs quarterly
simulations of NII using financial models which project NII through a range of
possible interest rate environments including rising, declining, most likely,
and flat rate scenarios. The results of these simulations indicate the existence
and severity of IRR in each of those rate environments based upon the current
balance sheet position and assumptions as to changes in the volume and mix of
interest-earning assets and interest-paying liabilities and management's
estimate of yields attainable in those future rate environments and rates which
will be paid on various deposit instruments and borrowings.
Changes to the Company's risk profile since December 31, 2000 reflect a change
in the balance sheet toward an asset sensitive position and a general decline in
the duration of equity. The shift in the balance sheet is the result of an
increase in the level of prepayments and calls occurring within the bank's
portfolio assets of loans and securities. The substantial level of prepayments
and calls as well as the success of a deposit funding campaign instituted in the
first quarter 2001 have lead to an increase in the banks overall liquidity
position as reflected in the level of cash reserves of approximately $70.4
million. In addition, the mortgage operations of UFM began using investments
commonly referred to as "forward" transactions or derivatives to balance the
risk inherent in interest rate lock commitments (also deemed to be derivatives)
made to potential borrowers. The pipeline of loans is hedged to circumvent
unusual fluctuations in the cash flows derived upon settlement of the loans with
secondary market purchases and, consequently, to achieve a desired margin upon
delivery. The hedge transactions are used for risk mitigation and are not for
trading purposes.
The earnings sensitivity measurements completed on a quarterly basis indicate
that the performance criteria against which sensitivity is measured, are
currently within the Company's defined policy limits. A more complete discussion
of the overall interest rate risk is included in the Company's annual report for
December 31, 2000.
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
(a) The Company is currently a defendant in various legal actions and
asserted claims most of which involve lending and collection activities
in the normal course of business. While the Company and legal counsel
are unable to assess the ultimate outcome of each of these matters with
certainty, they are of the belief that the resolution of these actions
should not have a material adverse affect on the financial position or
results of operations of the Company.
The most significant matter of litigation against the Company was
resolved in October 2000, when the Circuit Court of Mercer County ruled
in favor of the Company in a three-year contest by heirs of a
benefactor who established a charitable foundation in the bank's Trust
and Financial Services Division. The heirs objected to the continuation
of the charitable foundation established by the trust customer prior to
her death. The bank prevailed in protecting the interest of its client
and was also awarded its out-of-pocket costs in its successful defense
of the matter. Although an appeal of the court's rulings is possible,
both management and the company's legal counsel believe that even a
successful appeal by plaintiffs would be successfully defended and have
no material adverse impact on the Company's financial condition.
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Item 2. Changes in Securities and Use of Proceeds
(a) N/A
(b) N/A
(c) N/A
(d) N/A
Item 3. Defaults Upon Senior Securities
(a) N/A
(b) N/A
Item 4. Submission of Matters to a Vote of Security Holders
(a) The Annual Meeting of Stockholders was held on April 24, 2001.
(b) The following directors were elected to serve a three-year term
through the date of the 2004 Annual Meeting of Stockholders.
Allen T. Hamner, B. W. Harvey, and John M. Mendez.
(c) Three proposals were voted upon at the annual meeting, which included:
1) the election of the aforementioned directors as Class of 2004; 2)
the removal of James L. Harrison, Sr. as a director of the Corporation
for cause; and 3) ratification of the selection of Ernst & Young,
Charleston, West Virginia, as independent auditors for the year ending
December 31, 2001. The results of the proposals and voting are as
follows:
Proposal 1. Election of Directors.
Votes For Votes Against Votes Abstained
--------- ------------- ---------------
Allen T. Hamner 6,674,827 7,279 1,754
B. W. Harvey 6,670,851 11,256 1,754
John M. Mendez 6,674,377 7,730 1,754
Proposal 2. Removal of James L. Harrison, Sr. as a director of the
Corporation for cause.
Votes For 6,396,877
Votes Against 130,986
Votes Abstained 155,998
Proposal 3. Ratification of the selection of Ernst & Young LLP.
Votes For 6,654,697
Votes Against 3,253
Votes Abstained 25,910
(d) N/A
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Item 5. Other Information
(a) N/A
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
Exhibit 3 - Articles of Incorporation and amendments previously filed
Exhibit 15 - Letter regarding unaudited interim financial information
(b) Reports on Form 8-K
A report on Form 8-K was filed on April 24, 2001 announcing the
Company's quarterly earnings and depicting certain financial
information as of March 31, 2001 and December 31, 2000 and comparative
income statements for the three-month periods ending March 31, 2001
and 2000, respectively.
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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 14, 2001
/s/ John M. Mendez
- ------------------------------
John M. Mendez
President & Chief Executive Officer
(Duly Authorized Officer)
DATE: May 14, 2001
/s/ Kenneth P. Mulkey
- ------------------------------
Kenneth P. Mulkey
Acting Chief Financial Officer
(Principal Accounting Officer)
22