Unassociated Document
UNITED
STATES
|
SECURITIES
AND EXCHANGE COMMISSION
|
WASHINGTON,
D.C. 20549
|
|
FORM
8-K
|
|
CURRENT
REPORT
|
|
PURSUANT
TO SECTION 13 OR 15(d) OF THE
|
SECURITIES
EXCHANGE ACT OF 1934
|
|
|
|
October
29, 2009
|
|
|
Date
of Report (Date of earliest event reported)
|
|
|
FIRST
COMMUNITY BANCSHARES, INC.
|
|
|
(Exact
name of registrant as specified in its charter)
|
|
Nevada
|
|
000-19297
|
|
55-0694814
|
(State
or other jurisdiction of incorporation)
|
|
(Commission
File Number)
|
|
(IRS
Employer Identification
No.)
|
P.O.
Box 989
Bluefield,
Virginia
|
|
24605-0989
|
(Address
of principal executive offices)
|
|
(Zip
Code)
|
|
(276)
326-9000
|
|
|
(Registrant’s
telephone number, including area code)
|
|
|
|
|
|
|
|
|
|
|
|
Check
the appropriate box below if the Form 8-K filing is intended to
simultaneously satisfy the filing obligation of the registrant under any
of the following provisions:
|
o
|
Written
communications pursuant to Rule 425 under the Securities Act (17 CFR
230.425)
|
|
|
o
|
Soliciting
material pursuant to Rule 14a-12 under the Exchange Act (17 CFR
240.14a-12)
|
|
|
o
|
Pre-commencement
communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR
240.14d-2(b))
|
|
|
o
|
Pre-commencement
communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR
240.13e-4(c))
|
Item
7.01 Regulation FD
Disclosure
On
October 29, 2009, First Community Bancshares, Inc. (the “Company”) held a public
conference call to discuss its financial results for the quarter ended September
30, 2009. The conference call was previously announced in the
earnings release dated October 28, 2009. The following are the
prepared remarks.
John M.
Mendez, President and Chief Executive Officer –
Let me
begin with a review of some of the highlights for the quarter. First
I would like to address the significant OTTI impairment recognized in the third
quarter on our trust preferred portfolio. Certainly this will receive
a great deal of attention; however, we view it as a natural progression, given
that we had previously recognized the significant fair value mark in equity
under accumulated other comprehensive income. Accordingly, it did not
have any material impact on tangible capital or tangible book value which
actually increased to $9.92 per share at September 30 from $9.02 per share at
June 30, 2009. The total charge for the quarter was $30.8
million and that equates to $1.06 per share in diluted EPS. It is a
significant charge, but we view it as a necessary part of the process by which
we are able to put these securities behind us.
Although
we have maintained good credit quality in the loan portfolio throughout this
real estate credit cycle, we have been forced to deal with the real estate and
construction credit issues by proxy, through other banks, by way of our pooled
trust preferred securities. The bulk of our exposure has previously
been dealt with through our OCI charges and we have already taken substantial
reductions in tangible common equity and tangible book value through our balance
sheet valuation of these securities. The good news is that this third
quarter charge does not impact those equity measures and, again, we have
significantly reduced our exposure.
Based on
information that we are able to observe, to date, we feel that we have
conservatively dealt with the valuation of these securities in contrast with
many banks that seem to carry mezzanine tranches of these securities at higher
valuations and with lesser OTTI charges.
Absent
the impairment charges, we continue to produce solid operating results and
earnings. Margin showed improvement over the linked
quarter. Despite an elevated level of credit provisions, increased
FDIC premiums and reductions in FHLB dividends we were able to produce core
earnings of about $4.3 million for the quarter. These earnings were
further supplemented by a FAS 141 gain on the acquisition of TriStone Community
Bank of $4.5 million less $1.5 million in merger-related expenses.
Speaking
of TriStone, I would add that we are very happy with the addition of those
branches in Winston-Salem and extremely pleased with management and staff
additions. We have completed the full integration of TriStone with the data
conversion occurring on September 18. We had a very smooth conversion
with no disruption and operations are working very nicely.
Since the
completion of the transaction on July 31, Skip Brown has led the Winston/Triad
market and we are very encouraged with our enhanced prospects in that
region. We believe this merger has significantly enhanced our
position in the Triad Region and specifically in Winston-Salem, and we believe
this will be a nice catalyst for growth in that market.
In the
area of management and organization, we have also completed a re-organization
into five new Regions and we have established leadership around five Regional
Presidents who are well known in their markets. This regional
structure will be helpful to us in delivering on our mission of providing local
community banking services.
Late in
the second quarter we further supplemented capital with the exercise of the
greenshoe related to our June common offering. That added about $8.1
million in new common equity. We also repaid our Treasury Preferred
investment in July. We are pleased to have that redemption
completed.
Gary
Mills is also with us today and he will cover our lending and credit activities;
however, I would like to say that we are pleased that our non-performing loan
totals continue to be controlled at good level despite the difficulties in the
real estate and construction markets. As of September 30 we remain at
levels below our year-end 2008 NPL’s and our total NPA’s likewise remain at a
relatively low level versus our peers and the industry in general.
David D.
Brown, Chief Financial Officer –
As you
saw from yesterday’s release, we reported a net loss for the third quarter of
$11.3 million. However, on a core basis we came in at $4.3 million
for the quarter. Obviously, the largest item for the quarter was the
impairment charges we recognized on our pooled trust preferred
holdings. Those charges amounted to $30.5 million pre-tax and $19.2
million on an after-tax basis.
The third
quarter was certainly the worst we have seen for default and deferrals in the
collateral underlying those pools. In fact, most of the deals saw a
30% - 40% increase in defaults and deferrals, with one experiencing a 60%
increase. The actual experience had the most profound impact on our
cash flow projections for this quarter.
After
seeing the actual third quarter performance, we elected to enhance our
assumptions regarding future defaults and deferrals. We want to be as
realistic as possible when it comes to possible losses, so we went into each
pool and developed a broad watch list of “at-risk” issuers. We then
assigned each institution on the watch list a probability of default ranging
from 20% to 100%. At the end of the day, we determined the $30.5
million charge was the most appropriate.
Margin
increased modestly to 3.68% for the third quarter. Asset yields
dropped a little. We also maintained a fairly heavy liquidity
position of $71 million on average through the quarter, which hurt
somewhat. Where we continue to make some headway is in the cost of
the time deposit portfolio, where we dropped to 2.79% from 3.06% last
quarter.
We made a
$3.4 million provision for loan losses during the second quarter, which kept the
allowance at 1.25% of loans. Ex-TriStone, the reserve would have been
built to around 1.37%.
Wealth
revenues showed a minor decrease for the quarter on a linked
basis. Last quarter was a particularly good one for IPC, but both
trust and brokerage had slower third quarters. On a linked-quarter
basis, deposit account service charges increased $168 thousand. As
anticipated, insurance revenues declined slightly from the second quarter, but
stay on track for our estimate of $7.0 million in annual commission
revenues.
We
continue to position the investment portfolio to deploy liquidity in a safe
manner. We continued to do some selling and repositioning in the
investments portfolio through the quarter, and recognized gains of approximately
$866 thousand.
In the
area of non-interest expense, third quarter efficiency ratio was a respectable
59.4%. Salaries and benefits increased $455 thousand on a
linked-quarter basis. The biggest items in that increase were the
$201 thousand from the two months of TriStone branches and $69 thousand from
GreenPoint. Total FTE at quarter-end was 650, an increase of 10 from
last quarter. TriStone added roughly 15 and there was a net decrease
of 5 from other areas of the Company.
On a
linked-quarter basis, other operating expenses were pretty much in line with
last quarter.
We closed
and converted the TriStone deal this past quarter. We are very happy
to have Skip Brown and Mark Evans continue on with us in meaningful
roles. We feel they can really set some good things in motion for us
in the Winston-Salem area. Booking that deal resulted in a
preliminary gain of $4.5 million. Loan valuations are being
finalized, but we don’t expect much to change. We also recognized
approximately $1.5 million in merger-related expenses, which brings the pre-tax
gain on acquisition to approximately $3.0 million.
Total
assets grew to $2.3 billion over the quarter driven by the TriStone
deal. TriStone accounted for roughly $135.4 million of deposits at
September 30, 2009, which means the base bank shed deposits of roughly $20.3
million. That was all in the time portfolio as we continue to allow
high cost money roll off.
We repaid
the government capital in third quarter and recognized total preferred dividends
of just over $1 million. $972 thousand of that is a “deemed dividend”
that removed the remaining discount of the preferred issuance from
equity. We were the 34th bank to receive TARP funds and the 32nd bank
to repay the Treasury.
Total
risk-based capital at the holding company is expected to be approximately 12.2%
and at the bank, 11.4%. The Company and the Bank continue to be
well-capitalized and in a strong position.
Gary R.
Mills, Chief Credit Officer –
The total
loan portfolio grew approximately $127.5 million during the quarter to $1.4
billion as of September 30, 2009. The primary contributor to the
portfolio growth was the consummation of the Tri-Stone Community Bank
acquisition. I would note, however, that the FCB portfolio, exclusive
of the Tri-Stone acquisition, grew approximately $7 million during the quarter,
driven primarily by draws on previously booked commercial construction loans and
new originations of owner occupied 1-4 family residential real estate
loans.
Total
delinquency measured 1.62% as of quarter-end as compared to 1.35% as of second
quarter and 1.97% as of year-end 2008. During the quarter loans 30-89
days delinquent increased from a very low 0.44% second quarter posting to 0.75%
as of third quarter; while non-accrual loans declined from 0.92% to
0.88%. The increase in loans 30-89 days delinquent can be primarily
attributed to the residential real estate segment of the portfolio. I
would note that total delinquency within the FCB residential real estate
mortgage portfolio as of quarter-end totaled 1.47%, which compares extremely
well to second quarter FDIC peer total delinquency of 4.93% and the second
quarter Mortgage Bankers Association national survey total delinquency of
9.24%.
Net
charge-offs for the quarter totaled $2.65 million, or 0.77% annualized; as
compared to $2,43 million, or 0.77% annualized for the second
quarter. The largest charge-off during the quarter was $395 thousand
and was the result of a write down on a non-accrual A&D loan that the bank
has been managing through its Special Assets area under a forbearance agreement
since the third quarter of 2008. In anticipation of an early fourth
quarter foreclosure sale, the collateral was re-evaluated during the third
quarter to determine an estimate of net realizable value.
The
annualized net charge-off percentage of 0.77% compares very well to second peer
data of 1.16%. The provision for the quarter totaled $3.42 million,
or 129% of net charge-offs, and took the allowance to $17,44 million, or 1.25%
of total loans. The allowance as of second quarter totaled $16.68
million and was 1.31% of total loans. The decline in the allowance as
a percentage of total loans can be attributed to the purchase accounting of the
Tri-Stone acquisition. Excluding the Tri-Stone loan portfolio, the
allowance as a percentage of total loans would be 1.37%. While we
continue to be pleased with the loan quality metrics of our portfolio, prudence
and our allowance methodology dictate that the bank continue to grow the
allowance.
This
Current Report on Form 8-K contains forward-looking statements. These
forward-looking statements are based on current expectations that involve risks,
uncertainties and assumptions. Should one or more of these risks or
uncertainties materialize or should underlying assumptions prove incorrect,
actual results may differ materially. These risks
include: changes in business or other market conditions; the timely
development, production and acceptance of new products and services; the
challenge of managing asset/liability levels; the management of credit risk and
interest rate risk; the difficulty of keeping expense growth at modest levels
while increasing revenues; and other risks detailed from time to time in the
Company’s Securities and Exchange Commission reports, including but not limited
to the Annual Report on Form 10-K for the most recent year
ended. Pursuant to the Private Securities Litigation Reform Act of
1995, the Company does not undertake to update forward-looking statements
contained within this news release.
In
accordance with General Instruction B.2 of Form 8-K, the information in this
Current Report on Form 8-K shall not be deemed to be “filed” for purposes of
Section 18 of the Securities Exchange Act of 1934, as amended, or otherwise
subject to the liability of that Section, and shall not be incorporated by
reference into any registration statement or other document filed under the
Securities Act of 1933, as amended, except as shall be expressly set forth by
specific reference in such filing or document.
SIGNATURE
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:
|
October
30, 2009
|
|
By:
|
/s/
David D. Brown
|
|
|
|
|
|
David
D. Brown
|
|
|
Chief
Financial Officer
|