e10vq
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
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QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarter ended March 31, 2011
Commission file number 000-19297
FIRST COMMUNITY BANCSHARES, INC.
(Exact name of registrant as specified in its charter)
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Nevada
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55-0694814 |
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(State or other jurisdiction
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(IRS Employer Identification No.) |
of incorporation) |
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P.O. Box 989 |
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Bluefield, Virginia
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24605-0989 |
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(Address of principal executive offices)
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(Zip Code) |
(Registrants telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 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.
þ Yes o No
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every
Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the
registrant was required to submit and post such files).
o Yes o No
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of large accelerated
filer, accelerated filer smaller reporting company in Rule 12b-2 of the Exchange Act. (Check one):
Large accelerated filer o |
Accelerated filer þ |
Non-accelerated filer o (Do not check if a smaller reporting company) |
Smaller reporting company o |
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
o Yes þ No
Indicate the number of shares outstanding of each of the issuers classes of common stock, as of the latest practicable date.
Class Common Stock, $1.00 Par Value; 17,895,599 shares outstanding as of May 6, 2011
FIRST COMMUNITY BANCSHARES, INC.
FORM 10-Q
For the quarter ended March 31, 2011
INDEX
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PART I. |
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FINANCIAL INFORMATION |
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Item 1. |
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Financial Statements |
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Consolidated Balance Sheets as of March 31, 2011 (Unaudited) and December 31, 2010 |
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3 |
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Consolidated Statements of Income for the Three Months Periods Ended March 31, 2011 |
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and 2010 (Unaudited) |
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4 |
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Consolidated Statements of Cash Flows for the Three Months Ended March 31, 2011 and |
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2010 (Unaudited) |
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5 |
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Consolidated Statements of Changes in Stockholders Equity for the Three Months |
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Ended March 31, 2011 and 2010 (Unaudited) |
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6 |
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Notes to Consolidated Financial Statements |
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7 |
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Item 2. |
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Managements Discussion and Analysis of Financial Condition and Results of Operations |
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31 |
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Item 3. |
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Quantitative and Qualitative Disclosures about Market Risk |
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41 |
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Item 4. |
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Controls and Procedures |
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44 |
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PART II. |
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OTHER INFORMATION |
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Item 1. |
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Legal Proceedings |
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44 |
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Item 1A. |
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Risk Factors |
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44 |
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Item 2. |
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Unregistered Sales of Equity Securities and Use of Proceeds |
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44 |
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Item 3. |
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Defaults Upon Senior Securities |
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45 |
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Item 4. |
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Reserved |
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45 |
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Item 5. |
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Other Information |
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45 |
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Item 6. |
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Exhibits |
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45 |
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SIGNATURES |
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48 |
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EXHIBIT INDEX |
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49 |
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-2-
PART I. ITEM 1. Financial Statements
FIRST COMMUNITY BANCSHARES, INC.
CONSOLIDATED BALANCE SHEETS
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March 31, |
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December 31, |
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2011 |
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2010 |
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(Dollars in Thousands) |
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(Unaudited) |
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Assets |
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Cash and due from banks |
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$ |
52,684 |
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$ |
28,816 |
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Federal funds sold |
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121,974 |
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81,526 |
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Interest-bearing balances with banks |
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809 |
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1,847 |
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Total cash and cash equivalents |
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175,467 |
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112,189 |
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Securities available-for-sale |
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430,965 |
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480,064 |
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Securities held-to-maturity |
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4,524 |
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4,637 |
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Loans held for sale |
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2,614 |
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4,694 |
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Loans held for investment, net of unearned income |
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1,375,685 |
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1,386,206 |
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Less allowance for loan losses |
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26,482 |
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26,482 |
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Net loans held for investment |
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1,349,203 |
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1,359,724 |
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Premises and equipment, net |
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56,189 |
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56,244 |
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Other real estate owned |
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5,644 |
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4,910 |
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Interest receivable |
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7,288 |
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7,675 |
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Goodwill and other intangible assets |
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90,396 |
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90,639 |
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Other assets |
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118,690 |
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123,462 |
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Total assets |
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$ |
2,240,980 |
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$ |
2,244,238 |
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Liabilities |
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Deposits: |
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Noninterest-bearing |
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$ |
222,072 |
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$ |
205,151 |
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Interest-bearing |
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1,414,945 |
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1,415,804 |
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Total deposits |
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1,637,017 |
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1,620,955 |
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Interest, taxes and other liabilities |
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20,459 |
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21,318 |
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Securities sold under agreements to repurchase |
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139,472 |
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140,894 |
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FHLB borrowings and other indebtedness |
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166,186 |
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191,193 |
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Total liabilities |
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1,963,134 |
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1,974,360 |
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Stockholders Equity |
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Preferred stock, par value undesignated; 1,000,000 shares authorized; no shares
issued or outstanding at March 31, 2011 or December 31, 2010 |
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Common stock, $1 par value; 50,000,000 shares authorized; 18,082,822 shares
issued at March 31, 2011, and 18,082,822 issued at December 31, 2010,
and 187,923 and 216,487 shares in treasury, respectively |
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18,083 |
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18,083 |
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Additional paid-in capital |
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188,742 |
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189,239 |
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Retained earnings |
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85,450 |
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81,486 |
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Treasury stock, at cost |
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(5,851 |
) |
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(6,740 |
) |
Accumulated other comprehensive loss |
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(8,578 |
) |
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(12,190 |
) |
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Total stockholders equity |
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277,846 |
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269,878 |
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Total liabilities and stockholders equity |
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$ |
2,240,980 |
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$ |
2,244,238 |
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See Notes to Consolidated Financial Statements.
-3-
FIRST COMMUNITY BANCSHARES, INC.
CONSOLIDATED STATEMENTS OF INCOME (Unaudited)
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Three Months Ended |
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March 31, |
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(Dollars In Thousands, Except Share and Per Share Data) |
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2011 |
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2010 |
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Interest Income |
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Interest and fees on loans held for investment |
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$ |
20,455 |
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$ |
21,354 |
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Interest on securities taxable |
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2,533 |
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3,786 |
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Interest on securities nontaxable |
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1,533 |
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1,426 |
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Interest on federal funds sold and deposits in banks |
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69 |
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46 |
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Total interest income |
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24,590 |
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26,612 |
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Interest Expense |
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Interest on deposits |
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3,880 |
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5,502 |
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Interest on borrowings |
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2,435 |
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2,491 |
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Total interest expense |
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6,315 |
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7,993 |
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Net interest income |
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18,275 |
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|
18,619 |
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Provision for loan losses |
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1,612 |
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3,665 |
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Net interest income after provision for loan losses |
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16,663 |
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14,954 |
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Noninterest Income |
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Wealth management income |
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|
894 |
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|
885 |
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Service charges on deposit accounts |
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3,031 |
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2,992 |
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Other service charges and fees |
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|
1,406 |
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1,281 |
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Insurance commissions |
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1,943 |
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2,201 |
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Total impairment losses on securities |
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(527 |
) |
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Portion of loss recognized in other comprehensive income |
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Net impairment losses recognized in earnings |
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(527 |
) |
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Net gains on sale of securities |
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|
1,836 |
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|
250 |
|
Other operating income |
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|
916 |
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|
|
969 |
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|
|
|
|
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|
Total noninterest income |
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|
9,499 |
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|
8,578 |
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Noninterest Expense |
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|
|
|
|
|
|
Salaries and employee benefits |
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|
9,129 |
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|
7,969 |
|
Occupancy expense of bank premises |
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|
1,647 |
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|
|
1,709 |
|
Furniture and equipment expense |
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|
915 |
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|
|
904 |
|
Amortization of intangible assets |
|
|
259 |
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|
256 |
|
FDIC premiums and assessments |
|
|
878 |
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|
|
701 |
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Prepayment penalties on FHLB advances |
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|
471 |
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|
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Other operating expense |
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|
4,764 |
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|
|
4,533 |
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Total noninterest expense |
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|
18,063 |
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|
16,072 |
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|
|
|
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Income before income taxes |
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|
8,099 |
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|
|
7,460 |
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Income tax expense |
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|
2,348 |
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|
|
2,182 |
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Net income available to common shareholders |
|
$ |
5,751 |
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$ |
5,278 |
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Basic earnings per common share |
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$ |
0.32 |
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$ |
0.30 |
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Diluted earnings per common share |
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$ |
0.32 |
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$ |
0.30 |
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Cash dividends per common share |
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$ |
0.10 |
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$ |
0.10 |
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|
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|
|
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Weighted average basic shares outstanding |
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17,867,953 |
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|
17,765,556 |
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Weighted average diluted shares outstanding |
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|
17,887,118 |
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|
17,784,449 |
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See Notes to Consolidated Financial Statements.
-4-
FIRST COMMUNITY BANCSHARES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
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Three Months Ended |
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March 31, |
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(Dollars In Thousands) |
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2011 |
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2010 |
|
Operating activities: |
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Net income |
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$ |
5,751 |
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|
$ |
5,278 |
|
Adjustments to reconcile net income to net cash provided by operating activities: |
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|
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Provision for loan losses |
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|
1,612 |
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|
3,665 |
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Depreciation and amortization of premises and equipment |
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|
1,010 |
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|
1,021 |
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Intangible amortization |
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|
259 |
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|
256 |
|
Net investment amortization and accretion |
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|
599 |
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|
1 |
|
Net gain on the sale of assets and securities |
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|
(1,843 |
) |
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|
(214 |
) |
Mortgage loans originated for sale |
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|
(9,182 |
) |
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|
(7,583 |
) |
Proceeds from sales of mortgage loans |
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|
11,517 |
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|
17,886 |
|
Gain on sales of loans |
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(255 |
) |
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|
(221 |
) |
Equity-based compensation expense |
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|
9 |
|
|
|
22 |
|
Deferred income tax expense |
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|
274 |
|
|
|
73 |
|
Decrease (increase) in interest receivable |
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|
387 |
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|
|
(20 |
) |
FHLB debt prepayment fees |
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|
471 |
|
|
|
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|
Net impairment losses recognized in earnings |
|
|
527 |
|
|
|
|
|
Other operating activities, net |
|
|
1,912 |
|
|
|
1,925 |
|
|
|
|
|
|
|
|
Net cash provided by operating activities |
|
|
13,048 |
|
|
|
22,089 |
|
|
|
|
|
|
|
|
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|
|
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Investing activities: |
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|
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|
|
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Proceeds from sales of securities available-for-sale |
|
|
80,416 |
|
|
|
11,512 |
|
Proceeds from maturities and calls of securities available-for-sale |
|
|
11,937 |
|
|
|
23,490 |
|
Proceeds from maturities and calls of securities held-to-maturity |
|
|
115 |
|
|
|
301 |
|
Purchase of securities available-for-sale |
|
|
(36,830 |
) |
|
|
(65,168 |
) |
Net (increase) decrease in loans held for investment |
|
|
8,118 |
|
|
|
(580 |
) |
Purchase of premises and equipment |
|
|
(1,113 |
) |
|
|
(853 |
) |
Proceeds from sales of equipment |
|
|
175 |
|
|
|
3 |
|
|
|
|
|
|
|
|
Net cash provided by (used in) investing activities |
|
|
62,818 |
|
|
|
(31,295 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Financing activities: |
|
|
|
|
|
|
|
|
Net increase in demand and savings deposits |
|
|
35,441 |
|
|
|
58,674 |
|
Net decrease in time deposits |
|
|
(19,379 |
) |
|
|
(49,023 |
) |
Net decrease in FHLB and other borrowings |
|
|
(25,007 |
) |
|
|
(3,051 |
) |
FHLB debt prepayment fees |
|
|
(471 |
) |
|
|
|
|
Net decrease in securities sold under agreement to repurchase |
|
|
(1,422 |
) |
|
|
(9,253 |
) |
Proceeds from the exercise of stock options |
|
|
32 |
|
|
|
|
|
Excess tax benefit from stock-based compensation |
|
|
5 |
|
|
|
|
|
Common dividends paid |
|
|
(1,787 |
) |
|
|
(1,776 |
) |
|
|
|
|
|
|
|
Net cash used in financing activities |
|
|
(12,588 |
) |
|
|
(4,429 |
) |
|
|
|
|
|
|
|
Increase (decrease) in cash and cash equivalents |
|
|
63,278 |
|
|
|
(13,635 |
) |
Cash and cash equivalents at beginning of period |
|
|
112,189 |
|
|
|
101,341 |
|
|
|
|
|
|
|
|
Cash and cash equivalents at end of period |
|
$ |
175,467 |
|
|
$ |
87,706 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Supplemental information noncash items |
|
|
|
|
|
|
|
|
Transfer of loans to other real estate |
|
$ |
1,763 |
|
|
$ |
1,587 |
|
See Notes to Consolidated Financial Statements.
-5-
FIRST COMMUNITY BANCSHARES, INC.
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS EQUITY (Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accumulated |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Additional |
|
|
|
|
|
|
|
|
|
|
Other |
|
|
|
|
|
|
Preferred |
|
|
Common |
|
|
Paid-in |
|
|
Retained |
|
|
Treasury |
|
|
Comprehensive |
|
|
|
|
|
|
Stock |
|
|
Stock |
|
|
Capital |
|
|
Earnings |
|
|
Stock |
|
|
Income (Loss) |
|
|
Total |
|
(Dollars in Thousands) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance January 1, 2010 |
|
$ |
|
|
|
$ |
18,083 |
|
|
$ |
190,967 |
|
|
$ |
66,760 |
|
|
$ |
(9,891 |
) |
|
$ |
(13,652 |
) |
|
$ |
252,267 |
|
Comprehensive income: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
5,278 |
|
|
|
|
|
|
|
|
|
|
|
5,278 |
|
Other comprehensive income see
note 9 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
5,161 |
|
|
|
5,161 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Comprehensive income |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
5,278 |
|
|
|
|
|
|
|
5,161 |
|
|
|
10,439 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common dividends declared and paid |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1,776 |
) |
|
|
|
|
|
|
|
|
|
|
(1,776 |
) |
Equity-based compensation expense |
|
|
|
|
|
|
|
|
|
|
22 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
22 |
|
Retirement plan contribution
17,627 shares issued |
|
|
|
|
|
|
|
|
|
|
(339 |
) |
|
|
|
|
|
|
549 |
|
|
|
|
|
|
|
210 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance March 31, 2010 |
|
$ |
|
|
|
$ |
18,083 |
|
|
$ |
190,650 |
|
|
$ |
70,262 |
|
|
$ |
(9,342 |
) |
|
$ |
(8,491 |
) |
|
$ |
261,162 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance January 1, 2011 |
|
$ |
|
|
|
$ |
18,083 |
|
|
$ |
189,239 |
|
|
$ |
81,486 |
|
|
$ |
(6,740 |
) |
|
$ |
(12,190 |
) |
|
$ |
269,878 |
|
Comprehensive income: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
5,751 |
|
|
|
|
|
|
|
|
|
|
|
5,751 |
|
Other comprehensive income see
note 9 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3,612 |
|
|
|
3,612 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Comprehensive income |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
5,751 |
|
|
|
|
|
|
|
3,612 |
|
|
|
9,363 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common dividends declared and paid |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1,787 |
) |
|
|
|
|
|
|
|
|
|
|
(1,787 |
) |
Equity-based compensation expense |
|
|
|
|
|
|
|
|
|
|
9 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
9 |
|
Retirement plan contribution
25,595 shares issued |
|
|
|
|
|
|
|
|
|
|
(446 |
) |
|
|
|
|
|
|
797 |
|
|
|
|
|
|
|
351 |
|
Option exercises 2,969 shares |
|
|
|
|
|
|
|
|
|
|
(60 |
) |
|
|
|
|
|
|
92 |
|
|
|
|
|
|
|
32 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance March 31, 2011 |
|
$ |
|
|
|
$ |
18,083 |
|
|
$ |
188,742 |
|
|
$ |
85,450 |
|
|
$ |
(5,851 |
) |
|
$ |
(8,578 |
) |
|
$ |
277,846 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
See Notes to Consolidated Financial Statements.
-6-
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 1. General
Unaudited Consolidated Financial Statements
The accompanying unaudited consolidated financial statements of First Community Bancshares, Inc.
and subsidiaries (First Community or the Company) have been prepared in accordance with United
States generally accepted accounting principles (GAAP) for interim financial information and with
the instructions to Form 10-Q and Article 10 of Regulation S-X. In the opinion of management, all
adjustments, including normal recurring accruals, necessary for a fair presentation have been made.
These results are not necessarily indicative of the results of consolidated operations that might
be expected for the full calendar year.
The consolidated balance sheet as of December 31, 2010, has been derived from the audited
consolidated financial statements included in the Companys 2010 Annual Report on Form 10-K (the
2010 Form 10-K). Certain information and footnote disclosures normally included in annual
consolidated financial statements prepared in accordance with GAAP have been omitted in accordance
with standards for the preparation of interim consolidated financial statements. These consolidated
financial statements should be read in conjunction with the consolidated financial statements and
notes thereto included in the Companys 2010 Form 10-K.
A more complete and detailed description of First Communitys significant accounting policies is
included within Note 1 of Item 8, Financial Statements and Supplementary Data in the Companys
2010 Form 10-K. Further discussion of the Companys application of critical accounting policies is
included within the Application of Critical Accounting Policies section of Part I, Item 2,
Managements Discussion and Analysis of Financial Condition and Results of Operations, included
herein.
The Company operates within two business segments, banking and insurance services. Insurance
services are comprised of agencies which sell property and casualty and life and health insurance
policies and arrangements. All other operations, including commercial and consumer banking, lending
activities, and wealth management are included within the banking segment.
Earnings Per Share
Basic earnings per share are determined by dividing net income available to common shareholders by
the weighted average number of shares outstanding. Diluted earnings per share are determined by
dividing net income available to common shareholders by the weighted average shares outstanding,
which includes the dilutive effect of stock options, warrants and contingently issuable shares.
Basic and diluted net income per common share calculations follow:
|
|
|
|
|
|
|
|
|
|
|
For the Three Months |
|
|
|
ended March 31, |
|
(In Thousands, Except Share and Per Share Data) |
|
2011 |
|
|
2010 |
|
Net income available to common shareholders |
|
$ |
5,751 |
|
|
$ |
5,278 |
|
|
|
|
|
|
|
|
|
|
Weighted average shares outstanding |
|
|
17,867,953 |
|
|
|
17,765,556 |
|
Diluted shares for stock options |
|
|
10,266 |
|
|
|
4,336 |
|
Contingently issuable shares |
|
|
8,899 |
|
|
|
14,557 |
|
|
|
|
|
|
|
|
Weighted average dilutive shares outstanding |
|
|
17,887,118 |
|
|
|
17,784,449 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic earnings per share |
|
$ |
0.32 |
|
|
$ |
0.30 |
|
Diluted earnings per share |
|
$ |
0.32 |
|
|
$ |
0.30 |
|
For the three-month period ended March 31, 2011, options and warrants to purchase 483,558 shares of
common stock were outstanding but were not included in the computation of diluted earnings per
common share because they would have an anti-dilutive effect. Likewise, options and warrants to
purchase 576,962 shares of common stock were excluded from the three-month period ended March 31,
2010, computation of diluted earnings per common share because their effect would be anti-dilutive.
-7-
Recent Accounting Pronouncements
Financial Accounting Standards Board (FASB) Accounting Standard Codification (ASC) Topic 310,
Receivables. New authoritative accounting guidance under ASC Topic 310 amends prior guidance to
provide financial statement users with greater transparency about an entitys allowance for credit
losses and the credit quality of its financing receivables by providing additional information to
assist financial statement users in assessing an entitys credit risk exposures and evaluating the
adequacy of its allowance for credit losses. The Company adopted the provisions of the new
authoritative accounting guidance under ASC Topic 310 during the fourth quarter of 2010. Other than
the additional disclosures, the adoption of the new guidance had no significant impact on the
Companys financial statements.
In April 2011, FASB issued Accounting Standard Update (ASU) 2011-02 A Creditors Determination
of Whether a Restructuring is a Troubled Debt Restructuring, which clarifies when creditors should
classify loan modifications as troubled debt restructurings. The guidance is effective for interim
and annual periods beginning on or after June 15, 2011, and is applied retrospectively to
restructurings at the beginning of the year of adoption. The guidance on measuring the impairment
of a receivable restructured in a troubled restructuring is effective on a prospective basis. The
Company is currently assessing the impact on the financial statements.
Note 2. Mergers, Acquisitions, and Branching Activity
In July 2010, GreenPoint Insurance Group, Inc. (GreenPoint), the Companys
wholly-owned insurance subsidiary, acquired Murphy Insurance Agency, based in Princeton, West
Virginia, issuing cash consideration of approximately $190 thousand. Acquisition terms call for
additional cash consideration if certain operating performance targets are met. The Company has
recorded the fair value of the expected additional cash consideration as $477 thousand in long-term
debt. If those targets are not met, the value of the consideration ultimately paid will decrease
the liability and will be recognized as a gain in the period in which the targets are not met.
Goodwill and other intangibles associated with the acquisition total approximately $667 thousand.
-8-
Note 3. Investment Securities
As of March 31, 2011, and December 31, 2010, the amortized cost and estimated fair value of
available-for-sale securities were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
March 31, 2011 |
|
|
|
Amortized |
|
|
Unrealized |
|
|
Unrealized |
|
|
Fair |
|
|
OTTI in |
|
(In Thousands) |
|
Cost |
|
|
Gains |
|
|
Losses |
|
|
Value |
|
|
AOCI* |
|
U.S. Government agency securities |
|
$ |
10,000 |
|
|
$ |
|
|
|
$ |
(270 |
) |
|
$ |
9,730 |
|
|
$ |
|
|
States and political subdivisions |
|
|
146,751 |
|
|
|
2,627 |
|
|
|
(2,286 |
) |
|
|
147,092 |
|
|
|
|
|
Trust preferred securities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Single issue |
|
|
55,607 |
|
|
|
|
|
|
|
(10,840 |
) |
|
|
44,767 |
|
|
|
|
|
Pooled |
|
|
23 |
|
|
|
537 |
|
|
|
|
|
|
|
560 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total trust preferred securities |
|
|
55,630 |
|
|
|
537 |
|
|
|
(10,840 |
) |
|
|
45,327 |
|
|
|
|
|
Mortgage-backed securities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Agency |
|
|
211,848 |
|
|
|
5,242 |
|
|
|
(1,111 |
) |
|
|
215,979 |
|
|
|
|
|
Non-Agency Alt-A residential |
|
|
18,487 |
|
|
|
|
|
|
|
(6,267 |
) |
|
|
12,220 |
|
|
|
(6,267 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total mortgage-backed securities |
|
|
230,335 |
|
|
|
5,242 |
|
|
|
(7,378 |
) |
|
|
228,199 |
|
|
|
(6,267 |
) |
Equity securities |
|
|
441 |
|
|
|
217 |
|
|
|
(41 |
) |
|
|
617 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
$ |
443,157 |
|
|
$ |
8,623 |
|
|
$ |
(20,815 |
) |
|
$ |
430,965 |
|
|
$ |
(6,267 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2010 |
|
|
|
Amortized |
|
|
Unrealized |
|
|
Unrealized |
|
|
Fair |
|
|
OTTI in |
|
(In Thousands) |
|
Cost |
|
|
Gains |
|
|
Losses |
|
|
Value |
|
|
AOCI* |
|
U.S. Government agency securities |
|
$ |
10,000 |
|
|
$ |
|
|
|
$ |
(168 |
) |
|
$ |
9,832 |
|
|
$ |
|
|
States and political subdivisions |
|
|
178,149 |
|
|
|
2,649 |
|
|
|
(4,660 |
) |
|
|
176,138 |
|
|
|
|
|
Trust preferred securities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Single issue |
|
|
55,594 |
|
|
|
|
|
|
|
(14,350 |
) |
|
|
41,244 |
|
|
|
|
|
Pooled |
|
|
23 |
|
|
|
241 |
|
|
|
|
|
|
|
264 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total trust preferred securities |
|
|
55,617 |
|
|
|
241 |
|
|
|
(14,350 |
) |
|
|
41,508 |
|
|
|
|
|
Corporate FDIC insured |
|
|
25,282 |
|
|
|
378 |
|
|
|
|
|
|
|
25,660 |
|
|
|
|
|
Mortgage-backed securities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Agency |
|
|
209,281 |
|
|
|
7,039 |
|
|
|
(1,307 |
) |
|
|
215,013 |
|
|
|
|
|
Non-Agency Alt-A residential |
|
|
19,181 |
|
|
|
|
|
|
|
(7,904 |
) |
|
|
11,277 |
|
|
|
(7,904 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total mortgage-backed securities |
|
|
228,462 |
|
|
|
7,039 |
|
|
|
(9,211 |
) |
|
|
226,290 |
|
|
|
(7,904 |
) |
Equity securities |
|
|
495 |
|
|
|
206 |
|
|
|
(65 |
) |
|
|
636 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
$ |
498,005 |
|
|
$ |
10,513 |
|
|
$ |
(28,454 |
) |
|
$ |
480,064 |
|
|
$ |
(7,904 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
* |
|
Other-than-temporary impairment in accumulated other comprehensive income |
-9-
As of March 31, 2011, and December 31, 2010, the amortized cost and estimated fair value of
held-to-maturity securities were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
March 31, 2011 |
|
|
|
Amortized |
|
|
Unrealized |
|
|
Unrealized |
|
|
Fair |
|
(In Thousands) |
|
Cost |
|
|
Gains |
|
|
Losses |
|
|
Value |
|
States and political subdivisions |
|
$ |
4,524 |
|
|
$ |
80 |
|
|
$ |
|
|
|
$ |
4,604 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
$ |
4,524 |
|
|
$ |
80 |
|
|
$ |
|
|
|
$ |
4,604 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2010 |
|
|
|
Amortized |
|
|
Unrealized |
|
|
Unrealized |
|
|
Fair |
|
(In Thousands) |
|
Cost |
|
|
Gains |
|
|
Losses |
|
|
Value |
|
States and political subdivisions |
|
$ |
4,637 |
|
|
$ |
67 |
|
|
$ |
|
|
|
$ |
4,704 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
$ |
4,637 |
|
|
$ |
67 |
|
|
$ |
|
|
|
$ |
4,704 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The amortized cost and estimated fair value of available-for-sale securities by contractual
maturity at March 31, 2011, are shown below. Expected maturities may differ from contractual
maturities because issuers may have the right to call or prepay obligations with or without call or
prepayment penalties.
|
|
|
|
|
|
|
|
|
|
|
Amortized |
|
|
|
|
(In Thousands) |
|
Cost |
|
|
Fair Value |
|
Due within one year |
|
$ |
116 |
|
|
$ |
117 |
|
Due after one year but within
five years |
|
|
15,305 |
|
|
|
15,868 |
|
Due after five years but within
ten years |
|
|
34,035 |
|
|
|
35,455 |
|
Due after ten years |
|
|
162,925 |
|
|
|
150,709 |
|
|
|
|
|
|
|
|
|
|
|
212,381 |
|
|
|
202,149 |
|
Mortgage-backed securities |
|
|
230,335 |
|
|
|
228,199 |
|
Equity securities |
|
|
441 |
|
|
|
617 |
|
|
|
|
|
|
|
|
Total |
|
$ |
443,157 |
|
|
$ |
430,965 |
|
|
|
|
|
|
|
|
The amortized cost and estimated fair value of held-to-maturity securities by contractual maturity
at March 31, 2011, are shown below. Expected maturities may differ from contractual maturities
because issuers may have the right to call or prepay obligations with or without call or prepayment
penalties.
|
|
|
|
|
|
|
|
|
|
|
Amortized |
|
|
|
|
(In Thousands) |
|
Cost |
|
|
Fair Value |
|
Due within one year |
|
$ |
1,426 |
|
|
$ |
1,451 |
|
Due after one year but within
five years |
|
|
2,312 |
|
|
|
2,350 |
|
Due after five years but
within ten years |
|
|
786 |
|
|
|
803 |
|
Due after ten years |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
$ |
4,524 |
|
|
$ |
4,604 |
|
|
|
|
|
|
|
|
The carrying value of securities pledged to secure public deposits as required by law and for other
purposes was $297.65 million and $302.67 million at March 31, 2011, and December 31, 2010,
respectively.
During the three months ended March 31, 2011, gross gains on the sale of securities were $2.36
million while gross losses were $520 thousand. During the three months ended March 31, 2010, gross
gains on the sale of securities were $258 thousand while gross losses were $8 thousand.
-10-
The following tables reflect those investments, both available-for-sale and held-to-maturity, in a
continuous unrealized loss position for less than 12 months and for 12 months or longer at March
31, 2011, and December 31, 2010.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
March 31, 2011 |
|
|
|
Less than 12 Months |
|
|
12 Months or longer |
|
|
Total |
|
|
|
Fair |
|
|
Unrealized |
|
|
Fair |
|
|
Unrealized |
|
|
Fair |
|
|
Unrealized |
|
(In Thousands) |
|
Value |
|
|
Losses |
|
|
Value |
|
|
Losses |
|
|
Value |
|
|
Losses |
|
U.S. Government agency securities |
|
$ |
9,730 |
|
|
$ |
(270 |
) |
|
$ |
|
|
|
$ |
|
|
|
$ |
9,730 |
|
|
$ |
(270 |
) |
States and political subdivisions |
|
|
52,828 |
|
|
|
(2,286 |
) |
|
|
|
|
|
|
|
|
|
|
52,828 |
|
|
|
(2,286 |
) |
Single issue trust preferred
securities |
|
|
|
|
|
|
|
|
|
|
44,767 |
|
|
|
(10,840 |
) |
|
|
44,767 |
|
|
|
(10,840 |
) |
Mortgage-backed securities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Agency |
|
|
102,306 |
|
|
|
(1,104 |
) |
|
|
2,580 |
|
|
|
(7 |
) |
|
|
104,886 |
|
|
|
(1,111 |
) |
Alt-A residential |
|
|
|
|
|
|
|
|
|
|
12,220 |
|
|
|
(6,267 |
) |
|
|
12,220 |
|
|
|
(6,267 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total mortgage-backed securities |
|
|
102,306 |
|
|
|
(1,104 |
) |
|
|
14,800 |
|
|
|
(6,274 |
) |
|
|
117,106 |
|
|
|
(7,378 |
) |
Equity securities |
|
|
123 |
|
|
|
(36 |
) |
|
|
122 |
|
|
|
(5 |
) |
|
|
245 |
|
|
|
(41 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
$ |
164,987 |
|
|
$ |
(3,696 |
) |
|
$ |
59,689 |
|
|
$ |
(17,119 |
) |
|
$ |
224,676 |
|
|
$ |
(20,815 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2010 |
|
|
|
Less than 12 Months |
|
|
12 Months or longer |
|
|
Total |
|
|
|
Fair |
|
|
Unrealized |
|
|
Fair |
|
|
Unrealized |
|
|
Fair |
|
|
Unrealized |
|
(In Thousands) |
|
Value |
|
|
Losses |
|
|
Value |
|
|
Losses |
|
|
Value |
|
|
Losses |
|
U.S. Government agency securities |
|
$ |
9,832 |
|
|
$ |
(168 |
) |
|
$ |
|
|
|
$ |
|
|
|
$ |
9,832 |
|
|
$ |
(168 |
) |
States and political subdivisions |
|
|
80,420 |
|
|
|
(4,660 |
) |
|
|
|
|
|
|
|
|
|
|
80,420 |
|
|
|
(4,660 |
) |
Single issue trust preferred
securities |
|
|
|
|
|
|
|
|
|
|
41,244 |
|
|
|
(14,350 |
) |
|
|
41,244 |
|
|
|
(14,350 |
) |
Mortgage-backed securities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Agency |
|
|
71,613 |
|
|
|
(1,307 |
) |
|
|
18 |
|
|
|
|
|
|
|
71,631 |
|
|
|
(1,307 |
) |
Alt-A residential |
|
|
|
|
|
|
|
|
|
|
11,277 |
|
|
|
(7,904 |
) |
|
|
11,277 |
|
|
|
(7,904 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total mortgage-backed securities |
|
|
71,613 |
|
|
|
(1,307 |
) |
|
|
11,295 |
|
|
|
(7,904 |
) |
|
|
82,908 |
|
|
|
(9,211 |
) |
Equity securities |
|
|
155 |
|
|
|
(55 |
) |
|
|
93 |
|
|
|
(10 |
) |
|
|
248 |
|
|
|
(65 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
$ |
162,020 |
|
|
$ |
(6,190 |
) |
|
$ |
52,632 |
|
|
$ |
(22,264 |
) |
|
$ |
214,652 |
|
|
$ |
(28,454 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
At March 31, 2011, the combined depreciation in value of the 156 individual securities in an
unrealized loss position was approximately 4.83% of the combined reported value of the aggregate
securities portfolio. At December 31, 2010, the combined depreciation in value of the 214
individual securities in an unrealized loss position was approximately 5.93% of the combined
reported value of the aggregate securities portfolio.
The Company reviews its investment portfolio on a quarterly basis for indications of
other-than-temporary impairment (OTTI). The analysis differs depending upon the type of
investment security being analyzed. For debt securities, the Company has determined that, except
for pooled trust preferred securities, it does not intend to sell securities that are impaired and
has asserted that it is not more likely than not that it will have to sell impaired securities
before recovery of the impairment occurs. The Companys assertion is based upon its investment
strategy for the particular type of security and the Companys cash flow needs, liquidity position,
capital adequacy and interest rate risk position.
For non-beneficial interest debt securities, the Company analyzes several qualitative factors such
as the severity and duration of the impairment, adverse conditions within the issuing industry,
prospects for the issuer, performance of the security, changes in rating by rating agencies and
other qualitative factors to determine if the impairment will be recovered. Non-beneficial interest
debt securities consist of U. S. government agency securities, states and political subdivisions,
single issue trust preferred securities, and FDIC-backed securities. If it is determined that there
is evidence that the impairment will not be recovered, the Company performs a present value
calculation to determine the amount of credit related impairment and records any credit related
OTTI through earnings and the non-credit related OTTI through other comprehensive income (OCI).
During the three-month period ended March 31, 2011, the Company incurred no OTTI charges related to
non-beneficial interest debt securities. The temporary impairment on these securities is primarily
related to changes in interest rates, certain disruptions in the credit markets, and other current
economic factors.
-11-
For beneficial interest debt securities, the Company reviews cash flow analyses on each applicable
security to determine if an adverse change in cash flows expected to be collected has occurred.
Beneficial interest debt securities consist of mortgage-backed securities and pooled trust
preferred securities. An adverse change in cash flows expected to be collected has occurred if the
present value of cash flows previously projected is greater than the present value of cash flows
projected at the current reporting date and less than the current book value. If an adverse change in cash flows is deemed
to have occurred, then an OTTI has occurred. The Company then compares the present value of cash
flows using the current yield for the current reporting period to the reference amount, or current
net book value, to determine the credit-related OTTI. The credit-related OTTI is then recorded
through earnings and the non-credit related OTTI is accounted for in OCI.
During the three-month period ended March 31, 2011, the Company incurred credit-related OTTI
charges related to beneficial interest debt securities of $527 thousand. These charges were related
to a non-Agency mortgage-backed security. During the three-month period ended March 31, 2010, the
Company realized no credit-related OTTI charges related to beneficial interest debt securities.
For the non-Agency Alt-A residential MBS, the Company models cash flows using the following
assumptions: voluntary constant prepayment speed of 5, a customized constant default rate scenario
that assumes approximately 25% of the remaining underlying mortgages will default, and a loss
severity of 60.
The table below provides a cumulative roll forward of credit losses recognized in earnings for debt
securities for which a portion of an OTTI is recognized in OCI:
|
|
|
|
|
|
|
For the Three Months |
|
(In Thousands) |
|
Ended March 31, 2011 |
|
Estimated credit losses, beginning balance (1) |
|
$ |
4,251 |
|
Additions for credit losses on securities not previously OTTI |
|
|
|
|
Additions for credit losses on securities previously OTTI |
|
|
527 |
|
Reduction for increases in cash flows |
|
|
|
|
Reduction for securities management no longer intends to hold to
recovery |
|
|
|
|
Reduction for realized losses |
|
|
|
|
|
|
|
|
Estimated credit losses, ending balance |
|
$ |
4,778 |
|
|
|
|
|
|
|
|
(1) |
|
The beginning balance includes credit-related losses included in OTTI charges recognized on debt securities in prior periods. |
For equity securities, the Company reviews for OTTI based upon the prospects of the underlying
companies, analysts expectations, and certain other qualitative factors to determine if impairment
is recoverable over a foreseeable period of time. During the three-month period ended March 31,
2011, the Company did not recognize any OTTI charges on equity securities. For the three-month
period ended March 31, 2010, the Company did not recognize any OTTI charges on its equity
securities.
As a condition to membership in the Federal Home Loan Bank (FHLB) system, the Company is required
to subscribe to a minimum level of stock in the FHLB of Atlanta (FHLBA). The Company feels this
ownership position provides access to relatively inexpensive wholesale and overnight funding. The
Company accounts for FHLBA and Federal Reserve Bank stock as a long-term investment in other
assets. At both March 31, 2011, and December 31, 2010, the Company owned approximately $12.24
million in FHLBA stock, which is classified as other assets. The Companys policy is to review for
impairment of such assets at the end of each reporting period. During the three months ended March
31, 2011, FHLBA paid a quarterly dividend. At March 31, 2011, FHLBA was in compliance with all of its regulatory capital requirements. Based on
its review, the Company believes that as of March 31, 2011, its FHLBA stock was not impaired.
-12-
Note 4. Loans
Loans, net of unearned income, consist of the following:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
March 31, 2011 |
|
|
December 31, 2010 |
|
(Dollars in Thousands) |
|
Amount |
|
|
Percent |
|
|
Amount |
|
|
Percent |
|
Commercial loans |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Construction commercial |
|
$ |
30,758 |
|
|
|
2.24 |
% |
|
$ |
42,694 |
|
|
|
3.08 |
% |
Land development |
|
|
5,781 |
|
|
|
0.42 |
% |
|
|
16,650 |
|
|
|
1.20 |
% |
Other land loans |
|
|
23,959 |
|
|
|
1.74 |
% |
|
|
24,468 |
|
|
|
1.77 |
% |
Commercial and industrial |
|
|
91,964 |
|
|
|
6.68 |
% |
|
|
94,123 |
|
|
|
6.79 |
% |
Multi-family residential |
|
|
75,269 |
|
|
|
5.47 |
% |
|
|
67,824 |
|
|
|
4.89 |
% |
Non-farm, non-residential |
|
|
345,265 |
|
|
|
25.10 |
% |
|
|
351,904 |
|
|
|
25.39 |
% |
Agricultural |
|
|
1,392 |
|
|
|
0.10 |
% |
|
|
1,342 |
|
|
|
0.10 |
% |
Farmland |
|
|
47,228 |
|
|
|
3.43 |
% |
|
|
36,954 |
|
|
|
2.67 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
Total commercial loans |
|
|
621,616 |
|
|
|
45.18 |
% |
|
|
635,959 |
|
|
|
45.89 |
% |
Consumer real estate loans |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Home equity lines |
|
|
111,802 |
|
|
|
8.13 |
% |
|
|
111,620 |
|
|
|
8.05 |
% |
Single family residential mortgage |
|
|
545,316 |
|
|
|
39.64 |
% |
|
|
549,157 |
|
|
|
39.61 |
% |
Owner-occupied construction |
|
|
22,506 |
|
|
|
1.64 |
% |
|
|
18,349 |
|
|
|
1.32 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
Total consumer real estate loans |
|
|
679,624 |
|
|
|
49.41 |
% |
|
|
679,126 |
|
|
|
48.98 |
% |
Consumer and other loans |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consumer loans |
|
|
62,029 |
|
|
|
4.51 |
% |
|
|
63,475 |
|
|
|
4.58 |
% |
Other |
|
|
12,416 |
|
|
|
0.90 |
% |
|
|
7,646 |
|
|
|
0.55 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
Total consumer and other loans |
|
|
74,445 |
|
|
|
5.41 |
% |
|
|
71,121 |
|
|
|
5.13 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
Total loans |
|
$ |
1,375,685 |
|
|
|
100.00 |
% |
|
$ |
1,386,206 |
|
|
|
100.00 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loans held for sale |
|
$ |
2,614 |
|
|
|
|
|
|
$ |
4,694 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Acquired, Impaired Loans
Loans acquired in a business combination are recorded at estimated fair value on their purchase
date and prohibit the carryover of the related allowance for loan losses, when the loans have
evidence of credit deterioration since origination and it is probable at the date of acquisition
that the Company will not collect all contractually required principal and interest payments.
Evidence of credit quality deterioration as of the purchase date may include measures such as
credit scores, decline in collateral value, past due and non-accrual status. The difference between
contractually required payments at acquisition and the cash flows expected to be collected at acquisition is referred to as the nonaccretable
difference which is included in the carrying amount of the loans. Subsequent decreases to the
expected cash flows will generally result in a provision for loan losses. Subsequent increases in
cash flows result in a reversal of the provision for loan losses to the extent of prior charges, or
a reversal of the nonaccretable difference with a positive impact on interest income prospectively.
Further, any excess of cash flows expected at acquisition over the estimated fair value is referred
to as the accretable yield and is recognized in interest income over the remaining life of the loan
when there is a reasonable expectation about the amount and timing of such cash flows. Purchased
performing loans are recorded at fair value, including a credit component. The fair value
adjustment is accreted as an adjustment to yield over the estimated lives of the loans. There is no
allowance for loan losses established at the acquisition date for acquired performing loans. A
provision for loan losses is recorded for any credit deterioration in these loans subsequent to the
acquisition.
-13-
The following table presents the required detail regarding acquired, impaired loans at December 31,
2010, and March 31, 2011. The Company has estimated the cash flows to be collected on the loans and
discounted those cash flows at a market rate of interest. The excess of cash flows expected at
acquisition over the estimated fair value is referred to as the accretable yield and is recognized
into interest income over the remaining life of the loan. The difference between contractually
required payments at acquisition and the cash flows expected to be collected at acquisition,
considering the impact of prepayments, is referred to as the nonaccretable difference. The
nonaccretable difference includes estimated future credit losses expected to be incurred over the
life of the loan. The Company has not noted any further deterioration in the acquired impaired
loans.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Acquired, Impaired Loans |
|
(In thousands) |
|
TriStone |
|
|
Other |
|
|
Total |
|
Balance, January 1, 2010 |
|
$ |
3,838 |
|
|
$ |
4,196 |
|
|
$ |
8,034 |
|
Principal payments received |
|
|
(1,034 |
) |
|
|
(2,900 |
) |
|
|
(3,934 |
) |
Accretion |
|
|
61 |
|
|
|
|
|
|
|
61 |
|
Other |
|
|
448 |
|
|
|
|
|
|
|
448 |
|
Charge-offs |
|
|
(499 |
) |
|
|
(889 |
) |
|
|
(1,388 |
) |
|
|
|
|
|
|
|
|
|
|
Balance, December 31, 2010 |
|
$ |
2,814 |
|
|
$ |
407 |
|
|
$ |
3,221 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, January 1, 2011 |
|
$ |
2,814 |
|
|
$ |
407 |
|
|
$ |
3,221 |
|
Principal payments received |
|
|
(35 |
) |
|
|
|
|
|
|
(35 |
) |
Accretion |
|
|
7 |
|
|
|
|
|
|
|
7 |
|
Other |
|
|
98 |
|
|
|
|
|
|
|
98 |
|
Charge-offs |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, March 31, 2011 |
|
$ |
2,884 |
|
|
$ |
407 |
|
|
$ |
3,291 |
|
|
|
|
|
|
|
|
|
|
|
The remaining balance of the accretable difference at March 31, 2011, and December 31, 2010, was
$937 thousand and $944 thousand, respectively
Off-Balance Sheet Financial Instruments
The Company is a party to financial instruments with off-balance sheet risk in the normal course of
business to meet the financing needs of its customers. These financial instruments include
commitments to extend credit, standby letters of credit and financial guarantees. These instruments involve, to varying degrees, elements of credit and
interest rate risk beyond the amount recognized on the balance sheet. The contractual amounts of
those instruments reflect the extent of involvement the Company has in particular classes of
financial instruments. The Companys exposure to credit loss in the event of non-performance by the
other party to the financial instrument for commitments to extend credit and standby letters of
credit and financial guarantees written is represented by the contractual amount of those
instruments. The Company uses the same credit policies in making commitments and conditional
obligations as it does for on-balance sheet instruments.
Commitments to extend credit are agreements to lend to a customer as long as there is not a
violation of any condition established in the contract. Commitments generally have fixed expiration
dates or other termination clauses and may require payment of a fee. Since many of the commitments
are expected to expire without being drawn upon, the total commitment amounts do not necessarily
represent future cash requirements. The Company evaluates each customers creditworthiness on a
case-by-case basis. The amount of collateral obtained, if deemed necessary by the Company upon
extension of credit, is based on managements credit evaluation of the counterparties. Collateral
held varies but may include accounts receivable, inventory, property, plant and equipment, and
income producing commercial properties.
Standby letters of credit and written financial guarantees are conditional commitments issued by
the Company to guarantee the performance of a customer to a third party. The credit risk involved
in issuing letters of credit is essentially the same as that involved in extending loan facilities
to customers. To the extent deemed necessary, collateral of varying types and amounts is held to
secure customer performance under certain of those letters of credit outstanding.
Financial instruments whose contract amounts represent credit risk are commitments to extend credit
(including availability of lines of credit) of $201.48 million and standby letters of credit and
financial guarantees written of $4.52 million at March 31, 2011. Additionally, the Company had
gross notional amounts of outstanding commitments to lend related to secondary market mortgage
loans of $7.63 million at March 31, 2011.
-14-
Note 5. Allowance for Loan Losses and Credit Quality
The allowance for loan losses is maintained at a level sufficient to absorb probable loan losses
inherent in the loan portfolio. The allowance is increased by charges to earnings in the form of
provision for loan losses and recoveries of prior loan charge-offs, and decreased by loans charged
off. The provision is calculated to bring the allowance to a level which, according to a systematic
process of measurement, reflects the amount management estimates is needed to absorb probable
losses within the portfolio. While management utilizes its best judgment and information available,
the ultimate adequacy of the allowance is dependent upon a variety of factors beyond the Companys
control, including, among other things, the performance of the Companys loan portfolio, the
economy, changes in interest rates and the view of the regulatory authorities toward loan
classifications. The allowance methodology was recently enhanced to further segment the commercial
loan portfolio by risk grade. Historical loss rates by risk grade are adjusted by environmental
factors to estimate the amount of reserve needed by segment. The Company believes this enhancement
will result in increased granularity within the allowance for loan losses and will be more
reflective of improving and/or declining trends within the commercial loan portfolio.
Management performs quarterly assessments to determine the appropriate level of allowance.
Differences between actual loan loss experience and estimates are reflected through adjustments
that are made by either increasing or decreasing the allowance based upon current measurement
criteria. Commercial, consumer real estate, and non-real estate consumer loan portfolios are
evaluated separately for purposes of determining the allowance. The specific components of the
allowance include allocations to individual commercial credits and allocations to the remaining
non-homogeneous and homogeneous pools of loans that have been deemed impaired. Managements general
reserve allocations are based on judgment of qualitative and quantitative factors about both macro
and micro economic conditions reflected within the portfolio of loans and the economy as a whole.
Factors considered in this evaluation include, but are not necessarily limited to, probable losses
from loan and other credit arrangements, general economic conditions, changes in credit
concentrations or pledged collateral, historical loan loss experience, and trends in portfolio
volume, maturities, composition, delinquencies, and non-accruals. While management has allocated
the allowance for loan losses to various portfolio segments, the entire allowance is available for
use against any type of loan loss deemed appropriate by management.
The following tables detail the Companys allowance for loan loss activity, by portfolio segment,
for the three-month periods ended March 31, 2011 and 2010.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Three Months Ended March 31, 2011 |
|
|
|
|
|
|
|
Consumer Real |
|
|
Consumer and |
|
|
|
|
(In Thousands) |
|
Commercial |
|
|
Estate |
|
|
Other |
|
|
Total |
|
Allowance for credit losses: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Beginning balance |
|
$ |
12,300 |
|
|
$ |
12,641 |
|
|
$ |
1,541 |
|
|
$ |
26,482 |
|
Provision for loan losses |
|
|
361 |
|
|
|
1,213 |
|
|
|
38 |
|
|
|
1,612 |
|
Loans charged off |
|
|
(440 |
) |
|
|
(1,372 |
) |
|
|
(215 |
) |
|
|
(2,027 |
) |
Recoveries credited to allowance |
|
|
79 |
|
|
|
159 |
|
|
|
177 |
|
|
|
415 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net charge-offs |
|
|
(361 |
) |
|
|
(1,213 |
) |
|
|
(38 |
) |
|
|
(1,612 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Ending balance |
|
$ |
12,300 |
|
|
$ |
12,641 |
|
|
$ |
1,541 |
|
|
$ |
26,482 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Three Months Ended March 31, 2010 |
|
|
|
|
|
|
|
Consumer Real |
|
|
Consumer and |
|
|
|
|
(In Thousands) |
|
Commercial |
|
|
Estate |
|
|
Other |
|
|
Total |
|
Allowance for credit losses: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Beginning balance |
|
$ |
13,802 |
|
|
$ |
8,457 |
|
|
$ |
2,018 |
|
|
$ |
24,277 |
|
Provision for loan losses |
|
|
2,093 |
|
|
|
1,278 |
|
|
|
294 |
|
|
|
3,665 |
|
Loans charged off |
|
|
(2,079 |
) |
|
|
(1,330 |
) |
|
|
(323 |
) |
|
|
(3,732 |
) |
Recoveries credited to allowance |
|
|
227 |
|
|
|
12 |
|
|
|
59 |
|
|
|
298 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net charge-offs |
|
|
(1,852 |
) |
|
|
(1,318 |
) |
|
|
(264 |
) |
|
|
(3,434 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Ending balance |
|
$ |
14,043 |
|
|
$ |
8,417 |
|
|
$ |
2,048 |
|
|
$ |
24,508 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
-15-
The Company identifies loans for potential impairment through a variety of means including,
but not limited to, ongoing loan review, renewal processes, delinquency data, market
communications, and public information. If it is determined that it is probable that the Company
will not collect all principal and interest amounts contractually due, the loan is generally deemed
to be impaired.
The following table presents the Companys recorded investment in loans considered to be impaired
and related information on those impaired loans for the periods ended March 31, 2011, and December
31, 2010. The table does not include acquired, impaired loans.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
March 31, 2011 |
|
|
|
Recorded |
|
|
Recorded |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Investment |
|
|
Investment |
|
|
Total |
|
|
|
|
|
|
Unpaid |
|
|
Average |
|
|
Interest |
|
|
|
With |
|
|
With No |
|
|
Recorded |
|
|
Related |
|
|
Principal |
|
|
Recorded |
|
|
Income |
|
(Amounts in Thousands) |
|
Allowance |
|
|
Allowance |
|
|
Investment |
|
|
Allowance |
|
|
Balance |
|
|
Investment |
|
|
Recognized |
|
Construction commercial |
|
$ |
|
|
|
$ |
469 |
|
|
$ |
469 |
|
|
$ |
|
|
|
$ |
483 |
|
|
$ |
549 |
|
|
$ |
|
|
Land development |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other land loans |
|
|
113 |
|
|
|
130 |
|
|
|
243 |
|
|
|
5 |
|
|
|
242 |
|
|
|
435 |
|
|
|
1 |
|
Commercial and industrial |
|
|
622 |
|
|
|
990 |
|
|
|
1,612 |
|
|
|
340 |
|
|
|
9,403 |
|
|
|
6,608 |
|
|
|
|
|
Multi-family residential |
|
|
477 |
|
|
|
1,933 |
|
|
|
2,410 |
|
|
|
200 |
|
|
|
2,452 |
|
|
|
2,505 |
|
|
|
13 |
|
Non-farm, non-residential |
|
|
1,564 |
|
|
|
3,388 |
|
|
|
4,952 |
|
|
|
193 |
|
|
|
5,093 |
|
|
|
5,403 |
|
|
|
3 |
|
Home equity lines |
|
|
94 |
|
|
|
1,323 |
|
|
|
1,417 |
|
|
|
34 |
|
|
|
1,447 |
|
|
|
1,507 |
|
|
|
6 |
|
Single family residential mortgage |
|
|
7,844 |
|
|
|
7,795 |
|
|
|
15,639 |
|
|
|
1,298 |
|
|
|
15,861 |
|
|
|
16,763 |
|
|
|
97 |
|
Owner-occupied construction |
|
|
|
|
|
|
126 |
|
|
|
126 |
|
|
|
|
|
|
|
128 |
|
|
|
127 |
|
|
|
1 |
|
Consumer loans |
|
|
|
|
|
|
70 |
|
|
|
70 |
|
|
|
|
|
|
|
72 |
|
|
|
78 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
10,714 |
|
|
$ |
16,224 |
|
|
$ |
26,938 |
|
|
$ |
2,070 |
|
|
$ |
35,181 |
|
|
$ |
33,975 |
|
|
$ |
121 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31. 2010 |
|
|
|
Recorded |
|
|
Recorded |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Investment |
|
|
Investment |
|
|
Total |
|
|
|
|
|
|
Unpaid |
|
|
Average |
|
|
Interest |
|
|
|
With |
|
|
With No |
|
|
Recorded |
|
|
Related |
|
|
Principal |
|
|
Recorded |
|
|
Income |
|
(Amounts in Thousands) |
|
Allowance |
|
|
Allowance |
|
|
Investment |
|
|
Allowance |
|
|
Balance |
|
|
Investment |
|
|
Recognized |
|
Construction commercial |
|
$ |
|
|
|
$ |
285 |
|
|
$ |
285 |
|
|
$ |
|
|
|
$ |
732 |
|
|
$ |
730 |
|
|
$ |
3 |
|
Land development |
|
|
|
|
|
|
50 |
|
|
|
50 |
|
|
|
5 |
|
|
|
144 |
|
|
|
143 |
|
|
|
2 |
|
Other land loans |
|
|
113 |
|
|
|
323 |
|
|
|
436 |
|
|
|
|
|
|
|
855 |
|
|
|
266 |
|
|
|
20 |
|
Commercial and industrial |
|
|
|
|
|
|
3,518 |
|
|
|
3,518 |
|
|
|
|
|
|
|
5,384 |
|
|
|
6,237 |
|
|
|
10 |
|
Multi-family residential |
|
|
723 |
|
|
|
2,526 |
|
|
|
3,249 |
|
|
|
257 |
|
|
|
3,432 |
|
|
|
3,448 |
|
|
|
126 |
|
Non-farm, non-residential |
|
|
1,070 |
|
|
|
3,824 |
|
|
|
4,894 |
|
|
|
158 |
|
|
|
6,125 |
|
|
|
5,809 |
|
|
|
79 |
|
Home equity lines |
|
|
95 |
|
|
|
1,302 |
|
|
|
1,397 |
|
|
|
34 |
|
|
|
1,693 |
|
|
|
1,703 |
|
|
|
40 |
|
Single family residential mortgage |
|
|
8,801 |
|
|
|
7,992 |
|
|
|
16,793 |
|
|
|
1,870 |
|
|
|
18,430 |
|
|
|
18,006 |
|
|
|
640 |
|
Owner-occupied construction |
|
|
|
|
|
|
6 |
|
|
|
6 |
|
|
|
|
|
|
|
6 |
|
|
|
6 |
|
|
|
|
|
Consumer loans |
|
|
|
|
|
|
98 |
|
|
|
98 |
|
|
|
|
|
|
|
102 |
|
|
|
111 |
|
|
|
5 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
10,802 |
|
|
$ |
19,924 |
|
|
$ |
30,726 |
|
|
$ |
2,324 |
|
|
$ |
36,903 |
|
|
$ |
36,459 |
|
|
$ |
925 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As part of the ongoing monitoring of the credit quality of the Companys loan portfolio,
management tracks certain credit quality indicators including trends related to the risk rating of
commercial loans, the level of classified commercial loans, net charge-offs, non-performing loans
and general economic conditions. The Companys loan review function generally reviews all
commercial loan relationships greater than $2.00 million on an annual basis and at various times
through the year. Smaller commercial and retail loans are sampled for review throughout the year by
our internal loan review department. Through the loan review process, loans are identified for
upgrade or downgrade in risk rating and changed to reflect current information as part of the
process.
-16-
The Company utilizes a risk grading matrix to assign a risk grade to each of its loans. A
description of the general characteristics of the risk grades is as follows:
|
|
|
Pass This grade includes loans to borrowers of acceptable credit quality and risk. The
Company further differentiates within this grade based upon borrower characteristics which
include: capital strength, earnings stability, leverage, and industry. |
|
|
|
|
Special Mention This grade includes loans that require more than a normal degree of
supervision and attention. These loans have all the characteristics of an adequate asset,
but due to being adversely affected by economic or financial conditions have a potential
weakness that deserves managements close attention. If left uncorrected, these potential
weaknesses may result in deterioration of the repayment prospects for the loan. Substandard
This grade includes loans that have well defined weaknesses which make payment default
or principal exposure possible, but not yet certain. Such loans are apt to be dependent
upon collateral liquidation, a secondary source of repayment or an event outside of the
normal course of business to meet the repayment terms. |
|
|
|
|
Doubtful This grade includes loans that are placed on non-accrual status. These loans
have all the weaknesses inherent in a substandard loan with the added factor that the
weaknesses are so severe that collection or liquidation in full, on the basis of current
existing facts, conditions and values, is extremely unlikely, but because of certain
specific pending factors, the amount of loss cannot yet be determined. |
|
|
|
|
Loss This grade includes loans that are to be charged-off or charged-down when payment
is acknowledged to be uncertain or when the timing or value of payments cannot be
determined. Loss is not intended to imply that the asset has no recovery or salvage
value, but simply that it is not practical or desirable to defer writing off all or some
portion of the loan, even though partial recovery may be affected in the future. |
The following tables present the Companys investment in loans by internal credit grade indicator
at March 31, 2011, and December 31, 2010.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
March 31, 2011 |
|
|
|
|
|
|
|
Special |
|
|
|
|
|
|
|
|
|
|
|
|
|
(Amounts in Thousands) |
|
Pass |
|
|
Mention |
|
|
Substandard |
|
|
Doubtful |
|
|
Loss |
|
|
Total |
|
Construction commercial |
|
$ |
26,115 |
|
|
$ |
493 |
|
|
$ |
4,150 |
|
|
$ |
|
|
|
$ |
|
|
|
$ |
30,758 |
|
Land development |
|
|
4,865 |
|
|
|
|
|
|
|
916 |
|
|
|
|
|
|
|
|
|
|
|
5,781 |
|
Other land loans |
|
|
19,485 |
|
|
|
480 |
|
|
|
3,994 |
|
|
|
|
|
|
|
|
|
|
|
23,959 |
|
Commercial and industrial |
|
|
85,150 |
|
|
|
977 |
|
|
|
4,855 |
|
|
|
982 |
|
|
|
|
|
|
|
91,964 |
|
Multi-family residential |
|
|
70,399 |
|
|
|
1,560 |
|
|
|
3,310 |
|
|
|
|
|
|
|
|
|
|
|
75,269 |
|
Non-farm, non-residential |
|
|
321,393 |
|
|
|
8,350 |
|
|
|
15,522 |
|
|
|
|
|
|
|
|
|
|
|
345,265 |
|
Agricultural |
|
|
1,367 |
|
|
|
|
|
|
|
25 |
|
|
|
|
|
|
|
|
|
|
|
1,392 |
|
Farmland |
|
|
44,900 |
|
|
|
1,024 |
|
|
|
1,304 |
|
|
|
|
|
|
|
|
|
|
|
47,228 |
|
Home equity lines |
|
|
107,323 |
|
|
|
1,834 |
|
|
|
2,645 |
|
|
|
|
|
|
|
|
|
|
|
111,802 |
|
Single family residential mortgage |
|
|
500,236 |
|
|
|
10,611 |
|
|
|
34,469 |
|
|
|
|
|
|
|
|
|
|
|
545,316 |
|
Owner-occupied construction |
|
|
21,685 |
|
|
|
346 |
|
|
|
475 |
|
|
|
|
|
|
|
|
|
|
|
22,506 |
|
Consumer loans |
|
|
61,414 |
|
|
|
86 |
|
|
|
527 |
|
|
|
|
|
|
|
2 |
|
|
|
62,029 |
|
Other |
|
|
12,416 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
12,416 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total loans |
|
$ |
1,276,748 |
|
|
$ |
25,761 |
|
|
$ |
72,192 |
|
|
$ |
982 |
|
|
$ |
2 |
|
|
$ |
1,375,685 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
-17-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2010 |
|
|
|
|
|
|
|
Special |
|
|
|
|
|
|
|
|
|
|
|
|
|
(Amounts in Thousands) |
|
Pass |
|
|
Mention |
|
|
Substandard |
|
|
Doubtful |
|
|
Loss |
|
|
Total |
|
Construction commercial |
|
$ |
40,497 |
|
|
$ |
663 |
|
|
$ |
1,534 |
|
|
$ |
|
|
|
$ |
|
|
|
$ |
42,694 |
|
Land development |
|
|
14,458 |
|
|
|
1,226 |
|
|
|
966 |
|
|
|
|
|
|
|
|
|
|
|
16,650 |
|
Other land loans |
|
|
16,723 |
|
|
|
6,138 |
|
|
|
1,607 |
|
|
|
|
|
|
|
|
|
|
|
24,468 |
|
Commercial and industrial |
|
|
87,156 |
|
|
|
1,756 |
|
|
|
5,211 |
|
|
|
|
|
|
|
|
|
|
|
94,123 |
|
Multi-family residential |
|
|
61,059 |
|
|
|
2,553 |
|
|
|
4,212 |
|
|
|
|
|
|
|
|
|
|
|
67,824 |
|
Non-farm, non-residential |
|
|
316,026 |
|
|
|
18,942 |
|
|
|
16,936 |
|
|
|
|
|
|
|
|
|
|
|
351,904 |
|
Agricultural |
|
|
1,318 |
|
|
|
|
|
|
|
24 |
|
|
|
|
|
|
|
|
|
|
|
1,342 |
|
Farmland |
|
|
33,042 |
|
|
|
2,569 |
|
|
|
1,343 |
|
|
|
|
|
|
|
|
|
|
|
36,954 |
|
Home equity lines |
|
|
106,803 |
|
|
|
1,923 |
|
|
|
2,894 |
|
|
|
|
|
|
|
|
|
|
|
111,620 |
|
Single family residential mortgage |
|
|
498,830 |
|
|
|
15,224 |
|
|
|
34,449 |
|
|
|
654 |
|
|
|
|
|
|
|
549,157 |
|
Owner-occupied construction |
|
|
17,389 |
|
|
|
789 |
|
|
|
171 |
|
|
|
|
|
|
|
|
|
|
|
18,349 |
|
Consumer loans |
|
|
62,676 |
|
|
|
306 |
|
|
|
493 |
|
|
|
|
|
|
|
|
|
|
|
63,475 |
|
Other |
|
|
7,635 |
|
|
|
11 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
7,646 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total loans |
|
$ |
1,263,612 |
|
|
$ |
52,100 |
|
|
$ |
69,840 |
|
|
$ |
654 |
|
|
$ |
|
|
|
$ |
1,386,206 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The following tables detail the Companys recorded investment in loans related to each segment
in the allowance for possible loan losses by portfolio segment and disaggregated on the basis of
the Companys impairment methodology at March 31, 2011, and December 31, 2010.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
March 31, 2011 |
|
|
|
Loans |
|
|
Allowance |
|
|
Loans |
|
|
Allowance |
|
|
Acquired, |
|
|
Allowance for |
|
|
|
Individually |
|
|
for Loans |
|
|
Collectively |
|
|
for Loans |
|
|
Impaired Loans |
|
|
Acquired, |
|
|
|
Evaluated for |
|
|
Individually |
|
|
Evaluated for |
|
|
Collectively |
|
|
Evaluated for |
|
|
Impaired Loans |
|
(Amounts in Thousands) |
|
Impairment |
|
|
Evaluated |
|
|
Impairment |
|
|
Evaluated |
|
|
Impairment |
|
|
Evaluated |
|
Commercial loans |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Construction commercial |
|
$ |
469 |
|
|
$ |
|
|
|
$ |
30,289 |
|
|
$ |
885 |
|
|
$ |
|
|
|
$ |
|
|
Land development |
|
|
|
|
|
|
|
|
|
|
5,781 |
|
|
|
472 |
|
|
|
|
|
|
|
|
|
Other land loans |
|
|
243 |
|
|
|
5 |
|
|
|
23,204 |
|
|
|
1,356 |
|
|
|
512 |
|
|
|
|
|
Commercial and industrial |
|
|
1,612 |
|
|
|
340 |
|
|
|
89,734 |
|
|
|
1,937 |
|
|
|
618 |
|
|
|
|
|
Multi-family residential |
|
|
2,410 |
|
|
|
200 |
|
|
|
72,859 |
|
|
|
1,593 |
|
|
|
|
|
|
|
|
|
Non-farm, non-residential |
|
|
4,952 |
|
|
|
193 |
|
|
|
339,889 |
|
|
|
4,795 |
|
|
|
424 |
|
|
|
|
|
Agricultural |
|
|
|
|
|
|
|
|
|
|
1,392 |
|
|
|
19 |
|
|
|
|
|
|
|
|
|
Farmland |
|
|
|
|
|
|
|
|
|
|
47,228 |
|
|
|
505 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total commercial loans |
|
|
9,686 |
|
|
|
738 |
|
|
|
610,376 |
|
|
|
11,562 |
|
|
|
1,554 |
|
|
|
|
|
Consumer real estate loans |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Home equity lines |
|
|
1,417 |
|
|
|
34 |
|
|
|
110,385 |
|
|
|
2,056 |
|
|
|
|
|
|
|
|
|
Single family residential mortgage |
|
|
15,639 |
|
|
|
1,298 |
|
|
|
527,940 |
|
|
|
8,923 |
|
|
|
1,737 |
|
|
|
|
|
Owner-occupied construction |
|
|
126 |
|
|
|
|
|
|
|
22,380 |
|
|
|
330 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total consumer real estate loans |
|
|
17,182 |
|
|
|
1,332 |
|
|
|
660,705 |
|
|
|
11,309 |
|
|
|
1,737 |
|
|
|
|
|
Consumer and other loans |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consumer loans |
|
|
70 |
|
|
|
|
|
|
|
61,959 |
|
|
|
1,541 |
|
|
|
|
|
|
|
|
|
Other |
|
|
|
|
|
|
|
|
|
|
12,416 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total consumer and other loans |
|
|
70 |
|
|
|
|
|
|
|
74,375 |
|
|
|
1,541 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total loans |
|
$ |
26,938 |
|
|
$ |
2,070 |
|
|
$ |
1,345,456 |
|
|
$ |
24,412 |
|
|
$ |
3,291 |
|
|
$ |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
-18-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2010 |
|
|
|
Loans |
|
|
Allowance |
|
|
Loans |
|
|
Allowance |
|
|
Acquired, |
|
|
Allowance for |
|
|
|
Individually |
|
|
for Loans |
|
|
Collectively |
|
|
for Loans |
|
|
Impaired Loans |
|
|
Acquired, |
|
|
|
Evaluated for |
|
|
Individually |
|
|
Evaluated for |
|
|
Collectively |
|
|
Evaluated for |
|
|
Impaired Loans |
|
(Amounts in Thousands) |
|
Impairment |
|
|
Evaluated |
|
|
Impairment |
|
|
Evaluated |
|
|
Impairment |
|
|
Evaluated |
|
Commercial loans |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Construction commercial |
|
$ |
285 |
|
|
$ |
|
|
|
$ |
42,409 |
|
|
$ |
1,472 |
|
|
$ |
|
|
|
$ |
|
|
Land development |
|
|
50 |
|
|
|
5 |
|
|
|
16,600 |
|
|
|
1,767 |
|
|
|
|
|
|
|
|
|
Other land loans |
|
|
436 |
|
|
|
|
|
|
|
23,520 |
|
|
|
747 |
|
|
|
512 |
|
|
|
|
|
Commercial and industrial |
|
|
3,518 |
|
|
|
|
|
|
|
90,084 |
|
|
|
4,511 |
|
|
|
521 |
|
|
|
|
|
Multi-family residential |
|
|
3,249 |
|
|
|
257 |
|
|
|
64,575 |
|
|
|
824 |
|
|
|
|
|
|
|
|
|
Non-farm, non-residential |
|
|
4,894 |
|
|
|
158 |
|
|
|
346,586 |
|
|
|
2,688 |
|
|
|
424 |
|
|
|
|
|
Agricultural |
|
|
|
|
|
|
|
|
|
|
1,342 |
|
|
|
19 |
|
|
|
|
|
|
|
|
|
Farmland |
|
|
|
|
|
|
|
|
|
|
36,954 |
|
|
|
70 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total commercial loans |
|
|
12,432 |
|
|
|
420 |
|
|
|
622,070 |
|
|
|
12,098 |
|
|
|
1,457 |
|
|
|
|
|
Consumer real estate loans |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Home equity lines |
|
|
1,397 |
|
|
|
34 |
|
|
|
110,223 |
|
|
|
2,104 |
|
|
|
|
|
|
|
|
|
Single family residential mortgage |
|
|
16,793 |
|
|
|
1,870 |
|
|
|
530,600 |
|
|
|
7,999 |
|
|
|
1,764 |
|
|
|
|
|
Owner-occupied construction |
|
|
6 |
|
|
|
|
|
|
|
18,343 |
|
|
|
193 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total consumer real estate loans |
|
|
18,196 |
|
|
|
1,904 |
|
|
|
659,166 |
|
|
|
10,296 |
|
|
|
1,764 |
|
|
|
|
|
Consumer and other loans |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consumer loans |
|
|
98 |
|
|
|
|
|
|
|
63,377 |
|
|
|
1,764 |
|
|
|
|
|
|
|
|
|
Other |
|
|
|
|
|
|
|
|
|
|
7,646 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total consumer and other loans |
|
|
98 |
|
|
|
|
|
|
|
71,023 |
|
|
|
1,764 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total loans |
|
$ |
30,726 |
|
|
$ |
2,324 |
|
|
$ |
1,352,259 |
|
|
$ |
24,158 |
|
|
$ |
3,221 |
|
|
$ |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-accrual and Past Due Loans
Non-accrual loans, presented by loan class, consisted of the following at March 31, 2011, and
December 31, 2010:
|
|
|
|
|
|
|
|
|
|
|
March 31, |
|
|
December 31, |
|
(Amounts in Thousands) |
|
2011 |
|
|
2010 |
|
Construction commercial |
|
$ |
469 |
|
|
$ |
285 |
|
Land development |
|
|
|
|
|
|
50 |
|
Other land loans |
|
|
130 |
|
|
|
321 |
|
Commercial and industrial |
|
|
3,972 |
|
|
|
3,518 |
|
Multi-family residential |
|
|
1,624 |
|
|
|
2,463 |
|
Non-farm, non-residential |
|
|
4,706 |
|
|
|
4,670 |
|
Home equity lines |
|
|
889 |
|
|
|
868 |
|
Single family residential mortgage |
|
|
4,940 |
|
|
|
6,364 |
|
Owner-occupied construction |
|
|
126 |
|
|
|
6 |
|
Consumer loans |
|
|
70 |
|
|
|
99 |
|
|
|
|
|
|
|
|
Total |
|
|
16,926 |
|
|
|
18,644 |
|
Acquired, impaired loans |
|
|
777 |
|
|
|
770 |
|
|
|
|
|
|
|
|
Total non-accrual loans |
|
$ |
17,703 |
|
|
$ |
19,414 |
|
|
|
|
|
|
|
|
-19-
The following tables present the aging of the recorded investment in past due loans, by loan
class, as of March 31, 2011, and December 31, 2010. There were no loans past due 90 days and still
accruing interest at March 31, 2011 or December 31, 2010. Non-accrual loans, excluding those 0 to
29 days past due, are included in the applicable delinquency category.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
March 31, 2011 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
|
Current |
|
|
Total |
|
(Amounts in Thousands) |
|
30 - 59 Days |
|
|
60 - 89 Days |
|
|
90+ Days |
|
|
Past Due |
|
|
Loans |
|
|
Loans |
|
Construction commercial |
|
$ |
657 |
|
|
$ |
|
|
|
$ |
95 |
|
|
$ |
752 |
|
|
$ |
30,006 |
|
|
$ |
30,758 |
|
Land development |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
5,781 |
|
|
|
5,781 |
|
Other land loans |
|
|
100 |
|
|
|
|
|
|
|
499 |
|
|
|
599 |
|
|
|
23,360 |
|
|
|
23,959 |
|
Commercial and industrial |
|
|
230 |
|
|
|
34 |
|
|
|
3,593 |
|
|
|
3,857 |
|
|
|
88,107 |
|
|
|
91,964 |
|
Multi-family residential |
|
|
1,823 |
|
|
|
|
|
|
|
1,624 |
|
|
|
3,447 |
|
|
|
71,822 |
|
|
|
75,269 |
|
Non-farm, non-residential |
|
|
2,024 |
|
|
|
124 |
|
|
|
3,669 |
|
|
|
5,817 |
|
|
|
339,448 |
|
|
|
345,265 |
|
Agricultural |
|
|
17 |
|
|
|
|
|
|
|
|
|
|
|
17 |
|
|
|
1,375 |
|
|
|
1,392 |
|
Farmland |
|
|
372 |
|
|
|
|
|
|
|
|
|
|
|
372 |
|
|
|
46,856 |
|
|
|
47,228 |
|
Home equity lines |
|
|
475 |
|
|
|
38 |
|
|
|
525 |
|
|
|
1,038 |
|
|
|
110,764 |
|
|
|
111,802 |
|
Single family residential mortgage |
|
|
6,505 |
|
|
|
1,468 |
|
|
|
3,308 |
|
|
|
11,281 |
|
|
|
534,035 |
|
|
|
545,316 |
|
Owner-occupied construction |
|
|
132 |
|
|
|
|
|
|
|
124 |
|
|
|
256 |
|
|
|
22,250 |
|
|
|
22,506 |
|
Consumer loans |
|
|
179 |
|
|
|
7 |
|
|
|
15 |
|
|
|
201 |
|
|
|
61,828 |
|
|
|
62,029 |
|
Other |
|
|
3 |
|
|
|
|
|
|
|
|
|
|
|
3 |
|
|
|
12,413 |
|
|
|
12,416 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total loans |
|
$ |
12,517 |
|
|
$ |
1,671 |
|
|
$ |
13,452 |
|
|
$ |
27,640 |
|
|
$ |
1,348,045 |
|
|
$ |
1,375,685 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2010 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
|
Current |
|
|
Total |
|
(Amounts in Thousands) |
|
30 - 59 Days |
|
|
60 - 89 Days |
|
|
90+ Days |
|
|
Past Due |
|
|
Loans |
|
|
Loans |
|
Construction commercial |
|
$ |
531 |
|
|
$ |
|
|
|
$ |
122 |
|
|
$ |
653 |
|
|
$ |
42,041 |
|
|
$ |
42,694 |
|
Land development |
|
|
|
|
|
|
|
|
|
|
50 |
|
|
|
50 |
|
|
|
16,600 |
|
|
|
16,650 |
|
Other land loans |
|
|
|
|
|
|
|
|
|
|
684 |
|
|
|
684 |
|
|
|
23,784 |
|
|
|
24,468 |
|
Commercial and industrial |
|
|
3,648 |
|
|
|
121 |
|
|
|
356 |
|
|
|
4,125 |
|
|
|
89,998 |
|
|
|
94,123 |
|
Multi-family residential |
|
|
956 |
|
|
|
|
|
|
|
1,793 |
|
|
|
2,749 |
|
|
|
65,075 |
|
|
|
67,824 |
|
Non-farm, non-residential |
|
|
3,251 |
|
|
|
2,056 |
|
|
|
3,249 |
|
|
|
8,556 |
|
|
|
343,348 |
|
|
|
351,904 |
|
Agricultural |
|
|
19 |
|
|
|
|
|
|
|
|
|
|
|
19 |
|
|
|
1,323 |
|
|
|
1,342 |
|
Farmland |
|
|
110 |
|
|
|
|
|
|
|
|
|
|
|
110 |
|
|
|
36,844 |
|
|
|
36,954 |
|
Home equity lines |
|
|
682 |
|
|
|
250 |
|
|
|
608 |
|
|
|
1,540 |
|
|
|
110,080 |
|
|
|
111,620 |
|
Single family residential mortgage |
|
|
10,287 |
|
|
|
1,741 |
|
|
|
4,213 |
|
|
|
16,241 |
|
|
|
532,916 |
|
|
|
549,157 |
|
Owner-occupied construction |
|
|
855 |
|
|
|
326 |
|
|
|
6 |
|
|
|
1,187 |
|
|
|
17,162 |
|
|
|
18,349 |
|
Consumer loans |
|
|
433 |
|
|
|
47 |
|
|
|
31 |
|
|
|
511 |
|
|
|
62,964 |
|
|
|
63,475 |
|
Other |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
7,646 |
|
|
|
7,646 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total loans |
|
$ |
20,772 |
|
|
$ |
4,541 |
|
|
$ |
11,112 |
|
|
$ |
36,425 |
|
|
$ |
1,349,781 |
|
|
$ |
1,386,206 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Note 6. Deposits
The following is a summary of interest-bearing deposits by type as of March 31, 2011, and December
31, 2010.
|
|
|
|
|
|
|
|
|
|
|
March 31, |
|
|
December 31, |
|
(In Thousands) |
|
2011 |
|
|
2010 |
|
Interest-bearing demand deposits |
|
$ |
287,006 |
|
|
$ |
262,420 |
|
Savings and money market deposits |
|
|
420,481 |
|
|
|
426,547 |
|
Certificates of deposit and individual retirement accounts |
|
|
707,458 |
|
|
|
726,837 |
|
|
|
|
|
|
|
|
Total |
|
$ |
1,414,945 |
|
|
$ |
1,415,804 |
|
|
|
|
|
|
|
|
-20-
Note 7. Borrowings
The following schedule details the Companys indebtedness at March 31, 2011, and December 31, 2010.
|
|
|
|
|
|
|
|
|
|
|
March 31, |
|
|
December 31, |
|
(In Thousands) |
|
2011 |
|
|
2010 |
|
Securities sold
under agreements to
repurchase |
|
$ |
139,472 |
|
|
$ |
140,894 |
|
FHLB borrowings |
|
|
150,000 |
|
|
|
175,000 |
|
Subordinated debt |
|
|
15,464 |
|
|
|
15,464 |
|
Other long-term debt |
|
|
722 |
|
|
|
729 |
|
|
|
|
|
|
|
|
Total |
|
$ |
305,658 |
|
|
$ |
332,087 |
|
|
|
|
|
|
|
|
Securities sold under agreements to repurchase consist of $89.47 million and $90.89 million of
retail overnight and term repurchase agreements at March 31, 2011, and December 31, 2010,
respectively, and $50.00 million of wholesale repurchase agreements at both March 31, 2011, and
December 31, 2010.
The Company had a derivative interest rate swap instrument where it received LIBOR-based variable
interest payments and paid fixed interest payments that ended in January 2011. The instrument
effectively fixed $50.00 million of FHLB borrowings at 4.34% for a period of five years. For a more
detailed discussion of activities regarding derivatives, please see Note 13 to the Consolidated
Financial Statements.
FHLB borrowings included $150.00 million in convertible and callable advances at March 31, 2011,
and $175.00 million at December 31, 2010. During the first quarter of 2011, the company prepaid a
$25.00 million FHLB advance with an associated prepayment penalty of $471 thousand. The weighted
average interest rate of all the advances was 4.12% at March 31, 2011, and 2.39% at December 31,
2010.
At March 31, 2011, the FHLB advances have approximate contractual maturities between six and ten
years. The scheduled maturities of the advances are as follows:
|
|
|
|
|
(In Thousands) |
|
Amount |
|
2011 |
|
$ |
|
|
2012 |
|
|
|
|
2013 |
|
|
|
|
2014 |
|
|
|
|
2015 |
|
|
|
|
2016 and thereafter |
|
|
150,000 |
|
|
|
|
|
Total |
|
$ |
150,000 |
|
|
|
|
|
The callable advances may be redeemed at quarterly intervals after various lockout periods. These
call options may substantially shorten the lives of these instruments. If these advances are
called, the debt may be paid in full or converted to another FHLB credit product. Prepayment of the
advances may result in substantial penalties based upon the differential between contractual note
rates and current advance rates for similar maturities. At
March 31, 2011, advances from the FHLB were secured by qualifying loans of
$302.76 million.
Also included in other indebtedness is $15.46 million of junior subordinated debentures (the
Debentures) issued by the Company in October 2003 to an unconsolidated trust subsidiary, FCBI
Capital Trust (the Trust), with an interest rate of three-month LIBOR plus 2.95%. The Trust was
able to purchase the Debentures through the issuance of trust preferred securities which had
substantially identical terms as the Debentures. The Debentures mature on October 8, 2033, and are
currently callable.
The Company has committed to irrevocably and unconditionally guarantee the following payments or
distributions with respect to the preferred securities to the holders thereof to the extent that
the Trust has not made such payments or distributions: (i) accrued and unpaid distributions, (ii)
the redemption price, and (iii) upon a dissolution or termination of the
Trust, the lesser of the liquidation amount and all accrued and unpaid distributions and the amount
of assets of the Trust remaining available for distribution, in each case to the extent the Trust
has funds available.
-21-
Note 8. Net Periodic Benefit Cost-Defined Benefit Plans
The following sets forth the components of the net periodic benefit cost of the Companys domestic
non-contributory, non-qualified defined executive retention plan for the three-month periods ended
March 31, 2011 and 2010.
|
|
|
|
|
|
|
|
|
|
|
For the Three Months |
|
|
|
Ended March 31, |
|
(In Thousands) |
|
2011 |
|
|
2010 |
|
Service cost |
|
$ |
73 |
|
|
$ |
52 |
|
Interest cost |
|
|
55 |
|
|
|
52 |
|
|
|
|
|
|
|
|
Net periodic cost |
|
$ |
128 |
|
|
$ |
104 |
|
|
|
|
|
|
|
|
The following sets forth the components of the net periodic benefit cost of the Companys domestic
non-contributory, non-qualified directors retirement plan for the three-month period ended March
31, 2011.
|
|
|
|
|
|
|
For the Three Months |
|
|
|
Ended March 31, |
|
(In Thousands) |
|
2011 |
|
Service cost |
|
$ |
29 |
|
Interest cost |
|
|
11 |
|
|
|
|
|
Net periodic cost |
|
$ |
40 |
|
|
|
|
|
Note 9. Comprehensive Income
The components of the Companys comprehensive income, net of deferred income taxes, for the
three-month periods ended March 31, 2011 and 2010, are as follows:
|
|
|
|
|
|
|
|
|
|
|
For the Three Months |
|
|
|
Ended March 31, |
|
(In Thousands) |
|
2011 |
|
|
2010 |
|
Net income |
|
$ |
5,751 |
|
|
$ |
5,278 |
|
Other comprehensive income |
|
|
|
|
|
|
|
|
Unrealized loss on securities available-for-sale
with other-than-temporary impairment |
|
|
943 |
|
|
|
|
|
Unrealized loss on securities available-for-sale
without other-than-temporary impairment |
|
|
6,122 |
|
|
|
8,050 |
|
Reclassification adjustment for gains
realized in net income |
|
|
(1,836 |
) |
|
|
(250 |
) |
Reclassification adjustment for credit related
other-than-temporary impairments recognized
in earnings |
|
|
527 |
|
|
|
|
|
Unrealized gain on derivative contract |
|
|
|
|
|
|
424 |
|
Income tax effect |
|
|
(2,144 |
) |
|
|
(3,063 |
) |
|
|
|
|
|
|
|
Total other comprehensive income |
|
|
3,612 |
|
|
|
5,161 |
|
|
|
|
|
|
|
|
Comprehensive income |
|
$ |
9,363 |
|
|
$ |
10,439 |
|
|
|
|
|
|
|
|
Note 10. Commitments and Contingencies
In the normal course of business, the Company is a defendant in various legal actions and asserted
claims. While the Company and its legal counsel are unable to assess the ultimate outcome of each
of these matters with certainty, the Company believes the resolution of these actions, singly or in
the aggregate, should not have a material adverse effect on the financial condition, results of
operations or cash flows of the Company.
-22-
Note 11. Segment Information
The Company operates within two business segments, Community Banking and Insurance Services. The
Community Banking segment includes both commercial and consumer lending and deposit services. This
segment provides customers with such products as commercial loans, real estate loans, business
financing, and consumer loans. This segment also provides customers with a range of deposit
products including demand deposit accounts, savings accounts, and certificates of deposit. In
addition, the Community Banking segment provides wealth management services to a broad range of
customers. The Insurance Services segment is a full-service insurance agency providing commercial
and personal lines of insurance.
The following table sets forth information about the reportable operating segments and
reconciliation of this information to the consolidated financial statements at and for the
three-month periods ended March 31, 2011 and 2010.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Three Months |
|
|
|
Ended March 31, 2011 |
|
|
|
Community |
|
|
Insurance |
|
|
Parent/ |
|
|
|
|
(In Thousands) |
|
Banking |
|
|
Services |
|
|
Elimination |
|
|
Total |
|
Net interest income (loss) |
|
$ |
18,346 |
|
|
$ |
(38 |
) |
|
$ |
(33 |
) |
|
$ |
18,275 |
|
Provision for loan losses |
|
|
1,612 |
|
|
|
|
|
|
|
|
|
|
|
1,612 |
|
Noninterest income (loss) |
|
|
7,804 |
|
|
|
1,966 |
|
|
|
(271 |
) |
|
|
9,499 |
|
Noninterest expense (income) |
|
|
16,936 |
|
|
|
1,525 |
|
|
|
(398 |
) |
|
|
18,063 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income before income taxes |
|
|
7,602 |
|
|
|
403 |
|
|
|
94 |
|
|
|
8,099 |
|
Provision for income taxes |
|
|
2,151 |
|
|
|
159 |
|
|
|
38 |
|
|
|
2,348 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income |
|
$ |
5,451 |
|
|
$ |
244 |
|
|
$ |
56 |
|
|
$ |
5,751 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
End of period goodwill and
other intangibles |
|
$ |
78,518 |
|
|
$ |
11,878 |
|
|
$ |
|
|
|
$ |
90,396 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
End of period assets |
|
$ |
2,223,371 |
|
|
$ |
12,797 |
|
|
$ |
4,812 |
|
|
$ |
2,240,980 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Three Months |
|
|
|
Ended March 31, 2010 |
|
|
|
Community |
|
|
Insurance |
|
|
Parent/ |
|
|
|
|
(In Thousands) |
|
Banking |
|
|
Services |
|
|
Elimination |
|
|
Total |
|
Net interest income (loss) |
|
$ |
18,678 |
|
|
$ |
(33 |
) |
|
$ |
(26 |
) |
|
$ |
18,619 |
|
Provision for loan losses |
|
|
3,665 |
|
|
|
|
|
|
|
|
|
|
|
3,665 |
|
Noninterest income (loss) |
|
|
6,609 |
|
|
|
2,219 |
|
|
|
(250 |
) |
|
|
8,578 |
|
Noninterest expense (income) |
|
|
15,021 |
|
|
|
1,479 |
|
|
|
(428 |
) |
|
|
16,072 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income before income taxes |
|
|
6,601 |
|
|
|
707 |
|
|
|
152 |
|
|
|
7,460 |
|
Provision for income taxes |
|
|
1,869 |
|
|
|
291 |
|
|
|
22 |
|
|
|
2,182 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income |
|
$ |
4,732 |
|
|
$ |
416 |
|
|
$ |
130 |
|
|
$ |
5,278 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
End of period goodwill and other intangibles |
|
$ |
79,237 |
|
|
$ |
11,568 |
|
|
$ |
|
|
|
$ |
90,805 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
End of period assets |
|
$ |
2,252,443 |
|
|
$ |
12,465 |
|
|
$ |
14,031 |
|
|
$ |
2,278,939 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Note 12. Fair Value
Fair value is defined as the price that would be received to sell an asset or paid to transfer a
liability in an orderly transaction between market participants. A fair value measurement assumes
that the transaction to sell the asset or transfer the liability occurs in the principal market for
the asset or liability or, in the absence of a principal market, the most advantageous market for
the asset or liability. The price in the principal, or most advantageous, market used to measure
the fair value of the asset or liability shall not be adjusted for transaction costs. An orderly
transaction is a transaction that assumes exposure to the market for a period prior to the
measurement date to allow for marketing activities that are usual and customary for transactions
involving such assets and liabilities; it is not a forced transaction. Market participants are
buyers and sellers in the principal market that are (i) independent, (ii) knowledgeable, (iii) able
to transact, and (iv) willing to transact.
-23-
The fair value hierarchy is as follows:
|
Level 1 Inputs |
|
Unadjusted quoted prices in active markets for identical assets or
liabilities that the reporting entity has the ability to access at the measurement date. |
|
|
Level 2 Inputs |
|
Inputs other than quoted prices included in Level 1 that are observable
for the asset or liability, either directly or indirectly. These might include quoted
prices for similar assets or liabilities in active markets, quoted prices for identical or
similar assets or liabilities in markets that are not active, inputs other than quoted
prices that are observable for the asset or liability, such as interest rates,
volatilities, prepayment speeds, and credit risks, or inputs that are derived principally
from or corroborated by market data by correlation or other means. |
|
|
Level 3 Inputs |
|
Unobservable inputs for determining the fair values of assets or
liabilities that reflect an entitys own assumptions about the assumptions that market
participants would use in pricing the assets or liabilities. |
A description of the valuation methodologies used for instruments measured at fair value, as well
as the general classification of such instruments pursuant to the valuation hierarchy, is set forth
below. These valuation methodologies were applied to all of the Companys assets and liabilities
carried at fair value. In general, fair value is based upon quoted market prices, where available.
If such quoted market prices are not available, fair value is based upon third party models that
primarily use, as inputs, observable market-based parameters. Valuation adjustments may be made to
ensure that financial instruments are recorded at fair value. These adjustments may include amounts
to reflect counterparty credit quality, the Companys creditworthiness, among other things, as well
as unobservable parameters. Any such valuation adjustments are applied consistently over time. The
Companys valuation methodologies may produce a fair value calculation that may not be indicative
of net realizable value or reflective of future fair values. While management believes the
Companys valuation methodologies are appropriate and consistent with other market participants,
the use of different methodologies or assumptions to determine the fair value of certain financial
instruments could result in a different estimate of fair value at the reporting date.
Securities Available-for-Sale: Securities classified as available-for-sale are reported at fair
value utilizing Level 1 and Level 2 inputs. Securities are classified as Level 1 within the
valuation hierarchy when quoted prices are available in an active market. This includes securities
whose value is based on quoted market prices in active markets for identical assets. The Company
also uses Level 1 inputs for the valuation of equity securities traded in active markets.
Securities are classified as Level 2 within the valuation hierarchy when the Company obtains fair
value measurements from an independent pricing service. The fair value measurements consider
observable data that may include dealer quotes, market spreads, cash flows, the U. S. Treasury
yield curve, live trading levels, trade execution data, market consensus prepayment speeds, credit
information, and the bonds terms and conditions, among other things. Level 2 inputs are used to
value U. S. Agency securities, mortgage-backed securities, municipal securities, single issue trust
preferred securities, pooled trust preferred securities, and certain equity securities that are not
actively traded.
Other Assets and Associated Liabilities: Securities held for trading purposes are recorded at fair
value and included in other assets on the consolidated balance sheets. Securities held for
trading purposes include assets related to employee deferred compensation plans. The assets
associated with these plans are generally invested in equities and classified as Level 1. Deferred
compensation liabilities, also classified as Level 1, are carried at the fair value of the
obligation to the employee, which corresponds to the fair value of the invested assets.
Derivatives: Derivatives are reported at fair value utilizing Level 2 inputs. The Company obtains
dealer quotations based on observable data to value its derivatives.
Impaired Loans: Certain impaired loans are reported at the fair value of the underlying collateral
if repayment is expected solely from the collateral. Collateral values are estimated using Level 3
inputs based on appraisals adjusted for customized discounting criteria.
The Company maintains an active and robust problem credit identification system. When a credit is
identified as exhibiting characteristics of weakening, the Company will assess the credit for
potential impairment. Examples of weakening include delinquency and deterioration of the borrowers
capacity to repay as determined by the Companys regular credit review function. As part of the
impairment review, the Company will evaluate the current collateral value. It is the Companys
-24-
standard practice to obtain updated third party collateral valuations to assist management in
measuring potential impairment of a credit and the amount of the impairment to be recorded.
Internal collateral valuations are generally performed within two to four weeks of the original
identification of potential impairment and receipt of the third party valuation. The internal
valuation is performed by comparing the original appraisal to current local real estate market
conditions and experience with consideration of liquidation costs. The result of the internal
valuation is compared to the outstanding loan balance, and, if warranted, a specific impairment
reserve will be established at the completion of the internal evaluation.
A third party evaluation is typically received within thirty to forty-five days of the completion
of the internal evaluation. Once received, the third party evaluation is reviewed by Special Assets
staff and/or Credit Appraisal staff for reasonableness. Once the evaluation is reviewed and
accepted, discounts to fair market value are applied based upon such factors as the banks
historical liquidation experience of like collateral, and an estimated net realizable value is
established. That estimated net realizable value is then compared to the outstanding loan balance
to determine the amount of specific impairment reserve. The specific impairment reserve, if
necessary, is adjusted to reflect the results of the updated evaluation. A specific impairment
reserve is generally maintained on impaired loans during the time period while awaiting receipt of
the third party evaluation as well as on impaired loans that continue to make some form of payment
and liquidation is not imminent. Impaired loans not meeting the aforementioned criteria and that do
not have a specific impairment reserve have usually been previously written down through a partial
charge-off, to their net realizable value.
Generally, the only difference between current appraised value, adjusted for liquidation costs, and
the carrying amount of the loan less the specific reserve is any downward adjustment to the
appraised value that the Company determines appropriate. These differences generally consist of
costs to sell the property, as well as a deflator for the devaluation of property seen by bank
sellers. The Company considers these factors in fair value adjustments.
In the Companys experience, it rarely returns loans to performing status after they have been
partially charged off. Generally, credits identified as impaired move quickly through the process
towards ultimate resolution.
Other Real Estate Owned. The fair value of the Companys other real estate owned is determined
using current and prior appraisals, estimates of costs to sell, and proprietary qualitative
adjustments. Accordingly, other real estate owned is stated at a Level 3 fair value.
-25-
The following table summarizes financial assets and financial liabilities measured at fair value on
a recurring basis as of March 31, 2011, and December 31, 2010, segregated by the level of the
valuation inputs within the fair value hierarchy utilized to measure fair value:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
March 31, 2011 |
|
|
|
Fair Value Measurements Using |
|
|
Total |
|
(In Thousands) |
|
Level 1 |
|
|
Level 2 |
|
|
Level 3 |
|
|
Fair Value |
|
Available-for-sale securities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Agency securities |
|
$ |
|
|
|
$ |
9,730 |
|
|
$ |
|
|
|
$ |
9,730 |
|
Agency mortgage-backed securities |
|
|
|
|
|
|
215,979 |
|
|
|
|
|
|
|
215,979 |
|
Non-Agency Alt-A residential MBS |
|
|
|
|
|
|
12,220 |
|
|
|
|
|
|
|
12,220 |
|
Municipal securities |
|
|
|
|
|
|
147,092 |
|
|
|
|
|
|
|
147,092 |
|
Single issue trust preferred securities |
|
|
|
|
|
|
44,767 |
|
|
|
|
|
|
|
44,767 |
|
Pooled trust preferred securities |
|
|
|
|
|
|
560 |
|
|
|
|
|
|
|
560 |
|
Equity securities |
|
|
597 |
|
|
|
20 |
|
|
|
|
|
|
|
617 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total available-for-sale securities |
|
$ |
597 |
|
|
$ |
430,368 |
|
|
$ |
|
|
|
$ |
430,965 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Deferred compensation assets |
|
$ |
3,099 |
|
|
$ |
|
|
|
$ |
|
|
|
$ |
3,099 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Derivative assets |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest rate lock commitments |
|
|
|
|
|
|
64 |
|
|
|
|
|
|
|
64 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total derivative assets |
|
$ |
|
|
|
$ |
64 |
|
|
$ |
|
|
|
$ |
64 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Deferred compensation liabilities |
|
$ |
3,099 |
|
|
$ |
|
|
|
$ |
|
|
|
$ |
3,099 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Derivative liabilities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest rate lock commitments |
|
|
|
|
|
|
14 |
|
|
|
|
|
|
|
14 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total derivative liabilities |
|
$ |
|
|
|
$ |
14 |
|
|
$ |
|
|
|
$ |
14 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2010 |
|
|
|
Fair Value Measurements Using |
|
|
Total |
|
(In Thousands) |
|
Level 1 |
|
|
Level 2 |
|
|
Level 3 |
|
|
Fair Value |
|
Available-for-sale securities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Agency securities |
|
$ |
|
|
|
$ |
9,832 |
|
|
$ |
|
|
|
$ |
9,832 |
|
Agency mortgage-backed securities |
|
|
|
|
|
|
215,013 |
|
|
|
|
|
|
|
215,013 |
|
Non-Agency Alt-A residential MBS |
|
|
|
|
|
|
11,277 |
|
|
|
|
|
|
|
11,277 |
|
Municipal securities |
|
|
|
|
|
|
176,138 |
|
|
|
|
|
|
|
176,138 |
|
FDIC-backed securities |
|
|
|
|
|
|
25,660 |
|
|
|
|
|
|
|
25,660 |
|
Single issue trust preferred securities |
|
|
|
|
|
|
41,244 |
|
|
|
|
|
|
|
41,244 |
|
Pooled trust preferred securities |
|
|
|
|
|
|
264 |
|
|
|
|
|
|
|
264 |
|
Equity securities |
|
|
616 |
|
|
|
20 |
|
|
|
|
|
|
|
636 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total available-for-sale securities |
|
$ |
616 |
|
|
$ |
479,448 |
|
|
$ |
|
|
|
$ |
480,064 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Deferred compensation assets |
|
$ |
3,192 |
|
|
$ |
|
|
|
$ |
|
|
|
$ |
3,192 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Derivative assets |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest rate lock commitments |
|
|
|
|
|
|
28 |
|
|
|
|
|
|
|
28 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total derivative assets |
|
$ |
|
|
|
$ |
28 |
|
|
$ |
|
|
|
$ |
28 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Deferred compensation liabilities |
|
$ |
3,192 |
|
|
$ |
|
|
|
$ |
|
|
|
$ |
3,192 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Derivative liabilities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest rate swap |
|
|
|
|
|
|
31 |
|
|
|
|
|
|
|
31 |
|
Interest rate lock commitments |
|
|
|
|
|
|
59 |
|
|
|
|
|
|
|
59 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total derivative liabilities |
|
$ |
|
|
|
$ |
90 |
|
|
$ |
|
|
|
$ |
90 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
-26-
Certain financial and non-financial assets are measured at fair value on a nonrecurring basis;
thus, the instruments are not measured at fair value on an ongoing basis but are subject to fair
value adjustments in certain circumstances, such as, when there is evidence of impairment. Items
subject to nonrecurring fair value adjustments at March 31, 2011, and December 31, 2010, are as
follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
March 31, 2011 |
|
|
Fair Value Measurements Using |
|
Total |
(In Thousands) |
|
Level 1 |
|
Level 2 |
|
Level 3 |
|
Fair Value |
Impaired loans |
|
$ |
|
|
|
$ |
|
|
|
$ |
5,145 |
|
|
$ |
5,145 |
|
Restructured loans |
|
|
|
|
|
|
|
|
|
|
6,520 |
|
|
|
6,520 |
|
Other real estate owned |
|
|
|
|
|
|
|
|
|
|
5,644 |
|
|
|
5,644 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2010 |
|
|
Fair Value Measurements Using |
|
Total |
(In Thousands) |
|
Level 1 |
|
Level 2 |
|
Level 3 |
|
Fair Value |
Impaired loans |
|
$ |
|
|
|
$ |
|
|
|
$ |
10,906 |
|
|
$ |
10,906 |
|
Restructured loans |
|
|
|
|
|
|
|
|
|
|
5,771 |
|
|
|
5,771 |
|
Other real estate owned |
|
|
|
|
|
|
|
|
|
|
4,910 |
|
|
|
4,910 |
|
-27-
Fair Value of Financial Instruments
Fair value information about financial instruments, whether or not recognized in the balance sheet,
for which it is practical to estimate the value is based upon the characteristics of the
instruments and relevant market information. Financial instruments include cash, evidence of
ownership in an entity, or contracts that convey or impose on an entity that contractual right or
obligation to either receive or deliver cash for another financial instrument. Fair value is the
amount at which a financial instrument could be exchanged in a current transaction between willing
parties, other than in a forced sale or liquidation, and is best evidenced by a quoted market price
if one exists.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
March 31, 2011 |
|
December 31, 2010 |
|
|
Carrying |
|
|
|
|
|
Carrying |
|
|
(In Thousands) |
|
Amount |
|
Fair Value |
|
Amount |
|
Fair Value |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Assets |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents |
|
$ |
175,467 |
|
|
$ |
175,467 |
|
|
$ |
112,189 |
|
|
$ |
112,189 |
|
Investment securities |
|
|
435,489 |
|
|
|
435,569 |
|
|
|
484,701 |
|
|
|
484,768 |
|
Loans held for sale |
|
|
2,614 |
|
|
|
2,631 |
|
|
|
4,694 |
|
|
|
4,700 |
|
Loans held for investment, less allowance |
|
|
1,349,203 |
|
|
|
1,361,063 |
|
|
|
1,359,724 |
|
|
|
1,370,173 |
|
Accrued interest receivable |
|
|
7,288 |
|
|
|
7,288 |
|
|
|
7,675 |
|
|
|
7,675 |
|
Bank owned life insurance |
|
|
42,583 |
|
|
|
42,583 |
|
|
|
42,241 |
|
|
|
42,241 |
|
Derivative financial assets |
|
|
64 |
|
|
|
64 |
|
|
|
28 |
|
|
|
28 |
|
Deferred compensation assets |
|
|
3,099 |
|
|
|
3,099 |
|
|
|
3,192 |
|
|
|
3,192 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Demand deposits |
|
$ |
222,072 |
|
|
$ |
222,072 |
|
|
$ |
205,151 |
|
|
$ |
205,151 |
|
Interest-bearing demand deposits |
|
|
287,006 |
|
|
|
287,006 |
|
|
|
262,420 |
|
|
|
262,420 |
|
Savings deposits |
|
|
420,481 |
|
|
|
420,481 |
|
|
|
426,547 |
|
|
|
426,547 |
|
Time deposits |
|
|
707,458 |
|
|
|
714,388 |
|
|
|
726,837 |
|
|
|
735,332 |
|
Securities sold under agreements to repurchase |
|
|
139,472 |
|
|
|
159,687 |
|
|
|
140,894 |
|
|
|
161,100 |
|
Accrued interest payable |
|
|
3,001 |
|
|
|
3,001 |
|
|
|
3,264 |
|
|
|
3,264 |
|
FHLB and other indebtedness |
|
|
166,186 |
|
|
|
176,234 |
|
|
|
191,193 |
|
|
|
203,539 |
|
Derivative financial liabilities |
|
|
14 |
|
|
|
14 |
|
|
|
90 |
|
|
|
90 |
|
Deferred compensation liabilities |
|
|
3,099 |
|
|
|
3,099 |
|
|
|
3,192 |
|
|
|
3,192 |
|
The following summary presents the methodologies and assumptions used to estimate the fair value of
the Companys financial instruments presented below. The information used to determine fair value
is highly subjective and judgmental in nature and, therefore, the results may not be precise.
Subjective factors include, among other things, estimates of cash flows, risk characteristics,
credit quality, and interest rates, all of which are subject to change. Since the fair value is
estimated as of the balance sheet date, the amounts that will actually be realized or paid upon
settlement or maturity on these various instruments could be significantly different.
Cash and Cash Equivalents: The book values of cash and due from banks and federal funds sold and
purchased are considered to be equal to fair value as a result of the short-term nature of these
items.
Investment Securities and Deferred Compensation Assets and Liabilities: Fair values are determined
in the same manner as described above.
Loans: The estimated fair value of loans held for investment is measured based upon discounted
future cash flows using current rates for similar loans. Loans held for sale are recorded at lower
of cost or estimated fair value. The fair value of loans held for sale is determined based upon the
market sales price of similar loans.
Accrued Interest Receivable and Payable: The book value is considered to be equal to the fair value
due to the short-term nature of the instrument.
Bank-owned Life Insurance: The fair value is determined by stated contract values.
-28-
Derivative Financial Instruments: The estimated fair value of derivative financial instruments is
based upon the current market price for similar instruments.
Deposits and Securities Sold Under Agreements to Repurchase: Deposits without a stated maturity,
including demand, interest-bearing demand, and savings accounts, are reported at their carrying
value. No value has been assigned to the franchise value of these deposits. For other types of
deposits and repurchase agreements with fixed maturities and rates, fair value has been estimated
by discounting future cash flows based on interest rates currently being offered on instruments
with similar characteristics and maturities.
FHLB and Other Indebtedness: Fair value has been estimated based on interest rates currently
available to the Company for borrowings with similar characteristics and maturities. The fair value
for trust preferred obligations has been estimated based on credit spreads seen in the marketplace
for like issues.
Commitments to Extend Credit, Standby Letters of Credit, and Financial Guarantees: The amount of
off-balance sheet commitments to extend credit, standby letters of credit, and financial guarantees
is considered equal to fair value. Because of the uncertainty involved in attempting to assess the
likelihood and timing of commitments being drawn upon, coupled with the lack
of an established market and the wide diversity of fee structures, the Company does not believe it
is meaningful to provide an estimate of fair value that differs from the given value of the
commitment.
Note 13. Derivatives and Hedging Activities
The Company, through its mortgage banking and risk management operations, is party to various
derivative instruments that are used for asset and liability management and customers financing
needs. Derivative assets and liabilities are recorded at fair value on the balance sheet.
The primary derivatives that the Company uses are interest rate swaps and interest rate lock
commitments (IRLCs). Generally, these instruments help the Company manage exposure to market
risk and meet customer financing needs. Market risk represents the possibility that economic value
or net interest income will be adversely affected by fluctuations in external factors, such as
interest rates, market-driven loan rates and prices or other economic factors.
The following table presents the aggregate contractual, or notional, amounts of derivative
financial instruments as of the dates indicated:
|
|
|
|
|
|
|
|
|
|
|
|
|
(In Thousands) |
|
March 31, 2011 |
|
December 31, 2010 |
|
March 31, 2010 |
Interest rate swap |
|
$ |
|
|
|
$ |
50,000 |
|
|
$ |
50,000 |
|
IRLCs |
|
|
7,629 |
|
|
|
7,566 |
|
|
|
2,966 |
|
As of March 31, 2011, December 31, 2010, and March 31, 2010, the fair values of the Companys
derivatives were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Asset Derivatives |
|
|
|
March 31, 2011 |
|
|
December 31, 2010 |
|
|
March 31, 2010 |
|
|
|
Balance Sheet |
|
|
Fair |
|
|
Balance Sheet |
|
|
Fair |
|
|
Balance Sheet |
|
|
Fair |
|
(In Thousands) |
|
Location |
|
|
Value |
|
|
Location |
|
|
Value |
|
|
Location |
|
|
Value |
|
Derivatives not designated as hedges |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
IRLCs |
|
Other assets |
|
$ |
64 |
|
|
Other assets |
|
$ |
28 |
|
|
Other assets |
|
$ |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
|
|
|
|
$ |
64 |
|
|
|
|
|
|
$ |
28 |
|
|
|
|
|
|
$ |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
-29-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liability Derivatives |
|
|
|
March 31, 2011 |
|
|
December 31, 2010 |
|
|
March 31, 2010 |
|
|
|
Balance Sheet |
|
|
Fair |
|
|
Balance Sheet |
|
|
Fair |
|
|
Balance Sheet |
|
|
Fair |
|
(In Thousands) |
|
Location |
|
|
Value |
|
|
Location |
|
|
Value |
|
|
Location |
|
|
Value |
|
Derivatives designated as hedges |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest rate swap |
|
Other liabilities |
|
$ |
|
|
|
Other liabilities |
|
$ |
31 |
|
|
Other liabilities |
|
$ |
1,691 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
|
|
|
|
$ |
|
|
|
|
|
|
|
$ |
31 |
|
|
|
|
|
|
$ |
1,691 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Derivatives not designated as hedges |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
IRLCs |
|
Other liabilities |
|
$ |
14 |
|
|
Other liabilities |
|
$ |
59 |
|
|
Other liabilities |
|
$ |
49 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
|
|
|
|
$ |
14 |
|
|
|
|
|
|
$ |
59 |
|
|
|
|
|
|
$ |
49 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total derivatives |
|
|
|
|
|
$ |
14 |
|
|
|
|
|
|
$ |
90 |
|
|
|
|
|
|
$ |
1,740 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest Rate Swaps. The Company uses interest rate swap contracts to modify its exposure to
interest rate risk. The Company had a derivative interest rate swap instrument that ended in
January 2011. The Company employed a cash flow hedging strategy to effectively convert certain
floating-rate liabilities into fixed-rate instruments. The interest rate swap was accounted for
under the short-cut method as required by the Derivatives and Hedging Topic 815 of the ASC.
Changes in fair value of the interest rate swap were reported as a component of other comprehensive
income. The Company does not currently employ fair value hedging strategies.
Interest Rate Lock Commitments. In the normal course of business, the Company sells originated
mortgage loans into the secondary mortgage loan market. During the period of loan origination and
prior to the sale of the loans in the secondary market, the Company has exposure to movements in
interest rates associated with mortgage loans that are in the mortgage pipeline. A pipeline loan
is one on which the potential borrower has set the interest rate for the loan by entering into an
IRLC. Once a mortgage loan is closed and funded, it is included within loans held for sale and
awaits sale and delivery into the secondary market. During the term of an IRLC, the Company has the
risk that interest rates will change from the rate quoted to the borrower.
The Companys balance of mortgage loans held for sale is subject to changes in fair value due to
fluctuations in interest rates from the loan closing date through the date of sale of the loan into
the secondary market. Typically, the fair value of these loans declines when interest rates
increase and rises when interest rates decrease.
Effect of Derivatives and Hedging Activities on the Income Statement
For the quarters ended March 31, 2011 and 2010, the Company has determined there was no amount of
ineffectiveness on cash flow hedges. The following table details gains and losses recognized in
income on non-designated hedging instruments for the three-month periods ended March 31, 2011 and
2010.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amount of Gain |
|
Derivatives Not |
|
Location of Gain |
|
|
Recognized in Income on Derivative |
|
Designated as Hedging |
|
Recognized in Income on |
|
|
Three Months Ended March 31, |
|
Instruments |
|
Derivative |
|
|
2011 |
|
|
2010 |
|
(In Thousands) |
|
|
|
|
|
|
|
|
|
|
|
|
IRLCs |
|
Other income |
|
$ |
81 |
|
|
$ |
23 |
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
|
|
|
|
$ |
81 |
|
|
$ |
23 |
|
|
|
|
|
|
|
|
|
|
|
|
Counterparty Credit Risk. Like other financial instruments, derivatives contain an element of
credit risk. Credit risk is the possibility that the Company will incur a loss because a
counterparty, which may be a bank, a broker-dealer or a customer, fails to meet its contractual
obligations. This risk is measured as the expected positive replacement value of contracts. All
derivative contracts may be executed only with exchanges or counterparties approved by the
Companys Asset/Liability Management Committee. The Company reviews its counterparty risk regularly
and has determined that, as of March 31, 2011, there is no significant counterparty credit risk.
-30-
PART I. ITEM 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
Unless the context suggests otherwise, the terms First Community, Company, we, our, and
us refer to First Community Bancshares, Inc. and its subsidiaries as a consolidated entity.
The following discussion and analysis is provided to address information about the Companys
financial condition and results of operations. This discussion and analysis should be read in
conjunction with the Companys 2010 Annual Report on Form 10-K and the other financial information
included in this report.
The Company is a multi-state financial holding company headquartered in Bluefield, Virginia, with
total assets of $2.24 billion at March 31, 2011. Through its community bank subsidiary, First
Community Bank, N. A. (the Bank), the Company provides financial, trust and investment advisory
services to individuals and commercial customers through 56 locations in Virginia, West Virginia,
North Carolina, and Tennessee. The Company is also the parent of GreenPoint Insurance Group, Inc.
(GreenPoint), a North Carolina based full-service insurance agency offering commercial and
personal lines. The Bank is the parent of Investment Planning Consultants, Inc. (IPC), a
registered investment advisory firm that offers wealth management and investment advice. The
Companys common stock is traded on the NASDAQ Global Select Market under the symbol, FCBC.
FORWARD-LOOKING STATEMENTS
The Company may from time to time make written or oral forward-looking statements, including
statements contained in its filings with the Securities and Exchange Commission (SEC) (including
this Quarterly Report on Form 10-Q and the Exhibits hereto and thereto), in its reports to
stockholders and in other communications which are made in good faith by the Company 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 Companys
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 Companys control). The words may, could,
should, would, believe, anticipate, estimate, expect, intend, plan, and similar
expressions are intended to identify forward-looking statements. We caution that the
forward-looking statements are based largely on our expectations and are subject to a number of
known and unknown risks and uncertainties that are subject to change based on factors which are, in
many instances, beyond our control. Actual results, performance or achievements could differ
materially from those contemplated, expressed, or implied by the forward-looking statements. The
following factors, among others, could cause our 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 we conduct operations; |
|
|
|
|
Geopolitical conditions, including acts or threats of terrorism, actions taken by the
United States or other governments in response to acts or threats of terrorism and/or
military conflicts, which could impact business and economic conditions in the United
States and abroad; |
|
|
|
|
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 (the
Federal Reserve); |
|
|
|
|
Inflation, interest rate, market and monetary fluctuations; |
|
|
|
|
The timely development of competitive new products and services and the acceptance of
these products and services by new and existing customers; |
|
|
|
|
The willingness of users to substitute competitors products and services for our
products and services; |
|
|
|
|
The impact of changes in financial services policies, laws and regulations, including
laws, regulations and policies concerning taxes, banking, securities and insurance, and the
application thereof by regulatory bodies; |
|
|
|
|
Technological changes; |
|
|
|
|
The effect of acquisitions we may make, including, without limitation, the failure to
achieve the expected revenue growth and/or expense savings from such acquisitions; |
|
|
|
|
The growth and profitability of noninterest or fee income being less than expected; |
|
|
|
|
Changes in the level of our non-performing assets and charge-offs; |
|
|
|
|
The effect of changes in accounting policies and practices, as may be adopted from time
to time by bank regulatory agencies, the SEC, the Public Company Accounting Oversight
Board, the Financial Accounting Standards Board or other accounting standards setters; |
|
|
|
|
Possible other-than-temporary impairments of securities held by us; |
|
|
|
|
The impact of current governmental efforts to restructure the U. S. financial
regulatory system, including the recent enactment of the Dodd-Frank Wall Street Reform and
Consumer Protection Act; |
-31-
|
|
|
Changes in consumer spending and savings habits; and |
|
|
|
|
Unanticipated regulatory or judicial proceedings. |
If one or more of the factors affecting our forward-looking information and statements proves
incorrect, then our actual results, performance or achievements could differ materially from those
expressed in, or implied by, forward-looking information and statements contained in this Quarterly
Report on Form 10-Q and other reports filed by us with the SEC. Therefore, we caution you not to
place undue reliance on our forward-looking information and statements.
The Company cautions that the foregoing list of important factors is not exclusive. The Company
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 Company. These factors and other risks and
uncertainties are discussed in Item 1A., Risk Factors, in Part II of this Quarterly Report on
Form 10-Q and the Companys 2010 Form 10-K.
APPLICATION OF CRITICAL ACCOUNTING POLICIES
The Companys consolidated financial statements are prepared in accordance with U. S. generally
accepted accounting principles (GAAP) and conform to general practices within the banking
industry. The Companys financial position and results of operations are affected by managements
application of accounting policies, including judgments made to arrive at the carrying value of
assets and liabilities and amounts reported for revenues, expenses and related disclosures.
Different assumptions in the application of these policies could result in material changes in the
Companys consolidated financial position and consolidated results of operations.
Estimates, assumptions, and judgments are necessary principally when assets and liabilities are
required to be recorded at estimated fair value, when a decline in the value of an asset carried on
the financial statements at fair value warrants an impairment write-down or valuation reserve to be
established, or when an asset or liability needs to be recorded based upon the probability of
occurrence of a future event. Carrying assets and liabilities at fair value inherently results in
more financial statement volatility. The fair values and the information used to record valuation
adjustments for certain assets and liabilities are based either on quoted market prices or are
provided by third party sources, when available. When third party information is not available,
valuation adjustments are estimated by management primarily through the use of financial modeling
techniques and appraisal estimates.
The Companys accounting policies are fundamental to understanding Managements Discussion and
Analysis of Financial Condition and Results of Operation. The disclosures presented in the Notes to
the Consolidated Financial Statements and in Managements Discussion and Analysis provide
information on how significant assets and liabilities are valued in the financial statements and
how those values are determined. Based on the valuation techniques used and the sensitivity of
financial statement amounts to the methods, assumptions, and estimates underlying those amounts,
management has identified the accounting for and valuation of investment securities, the
determination of the allowance for loan losses, accounting for acquisitions and intangible assets,
and accounting for income taxes as the four accounting areas that require the most subjective or
complex judgments. The identified critical accounting policies are described in detail in the
Companys 2010 Form 10-K.
COMPANY OVERVIEW
The Company is a financial holding company which operates within the four-state region of Virginia,
West Virginia, North Carolina, and Tennessee. The Company operates through the Bank, IPC, and
GreenPoint to offer a wide range of financial services. The Company reported total assets of $2.24
billion at March 31, 2011.
The Company funds its lending activities primarily through the retail deposit operations of its
branch banking network. Retail and wholesale repurchase agreements and borrowings from the Federal
Home Loan Bank (FHLB) provide additional funding as needed. The Company invests its funds
primarily in loans to retail and commercial customers. In addition to loans, the Company invests a
portion of its funds in various debt securities, including those of United States agencies, state
and political subdivisions, and certain corporate notes and debt instruments. The Company also
maintains overnight interest-bearing balances with the Federal Reserve and other correspondent
banks. The difference between interest earned on assets and interest paid on liabilities is the
Companys primary source of earnings. Net interest income is supplemented by fees for services,
commissions on sales, and various deposit service charges.
The Company also conducts asset management activities through the Banks Trust and Financial
Services Division (Trust Division) and its registered investment advisory firm, IPC. The Banks
Trust Division and IPC manage assets with an
-32-
aggregate market value of $893 million as of March 31, 2011. These assets are not assets of the
Company, but are managed under various fee-based arrangements as fiduciary or agent.
RECENT LEGISLATION
On July 21, 2010, sweeping financial regulatory reform legislation entitled the Dodd-Frank Wall
Street Reform and Consumer Protection Act (the Dodd-Frank Act) was signed into law by President
Obama. The Dodd-Frank Act implements far-reaching changes across the financial regulatory
landscape, including provisions that, among other things, will:
|
|
|
Centralize responsibility for consumer financial protection by creating a new agency,
the Consumer Financial Protection Bureau, responsible for implementing, examining and
enforcing compliance with federal consumer financial laws. |
|
|
|
|
Limit the preemption of state law by federal law and disallow subsidiaries and
affiliates of national banks, such as the Bank, from availing themselves of such
preemption. |
|
|
|
|
Require the Office of the Comptroller of the Currency (the OCC) to seek to make its
capital requirements for national banks, such as the Bank, countercyclical so that capital
requirements increase in times of economic expansion and decrease in times of economic
contraction. |
|
|
|
|
Require financial holding companies, such as First Community, to be well-capitalized and
well-managed as of July 21, 2011. Bank holding companies and banks must also be both
well-capitalized and well-managed in order to engage in interstate bank acquisitions. |
|
|
|
|
Impose comprehensive regulation of the over-the-counter derivatives market, which would
include certain provisions that would effectively prohibit insured depository institutions
from conducting certain derivatives businesses in the institutions themselves. |
|
|
|
|
Implement corporate governance revisions, including with regard to executive
compensation and proxy access by shareholders. |
|
|
|
|
Make permanent the $250,000 limit for federal deposit insurance and increase the cash
limit of Securities Investor Protection Corporation protection from $100,000 to $250,000
and provide unlimited federal deposit insurance until January 1, 2013 for non-interest
bearing demand transaction accounts at all insured depository institutions. |
|
|
|
|
Repeal the federal prohibitions on the payment of interest on demand deposits, thereby
permitting depository institutions to pay interest on business transaction and other
accounts. |
|
|
|
|
Amend the Electronic Fund Transfer Act to, among other things, give the Federal Reserve
the authority to establish rules regarding interchange fees charged for electronic debit
transactions by payment card issuers having assets over $10 billion and to enforce a new
statutory requirement that such fees be reasonable and proportional to the actual cost of a
transaction to the issuer. |
|
|
|
|
Increase the authority of the Federal Reserve to examine bank holding companies, such as
First Community, and their non-bank subsidiaries. |
Many aspects of the Dodd-Frank Act are subject to rulemaking and will take effect over several
years, making it difficult to anticipate the overall financial impact on the Company, its customers
or the financial industry generally. Provisions in the legislation that affect deposit insurance
assessments, payment of interest on demand deposits and interchange fees could increase the costs
associated with deposits as well as place limitations on certain revenues those deposits may
generate.
RESULTS OF OPERATIONS
Overview
The following are some significant developments regarding the Company and its operations in the
first quarter of 2011:
|
|
|
Net income increased $473 thousand, or 8.96%, to $5.75 million for the first quarter
of 2011, as compared to the first quarter of 2010. |
|
|
|
|
Return on average assets for the first quarter of 2011 improved to 1.05%, as
compared to 0.85% for the fourth quarter of 2010. |
|
|
|
|
Loan loss provisions were reduced by $2.07 million for the first quarter of 2011, or
56.27%, from the fourth quarter of 2010. |
|
|
|
|
The allowance for loan losses as a percentage of total loans increased to 1.93% at
March 31, 2011, as compared to 1.91% at December 31, 2010. |
-33-
|
|
|
Net interest income for the first quarter of 2011 increased $176 thousand, or 0.97%,
over the fourth quarter of 2010. |
|
|
|
|
Net interest margin for the first quarter of 2011 increased to 3.96%, or 18 basis
points, over the fourth quarter of 2010. |
|
|
|
|
Net charge-offs for the first quarter of 2011 were $1.61 million, a decrease of
$2.01 million from the fourth quarter of 2010. |
|
|
|
|
Tangible book value per common share increased to $10.48, up $0.45, or 4.49%, from
December 31, 2010. |
|
|
|
|
The ratio of non-performing assets to total assets was 111 basis points, an
improvement of 21 basis points from December 31, 2010. |
Net Income
Net income for the three months ended March 31, 2011, was $5.75 million, or $0.32 per diluted
common share, compared with net income of $5.28 million, or $0.30 per diluted common share, for the
three months ended March 31, 2010, an increase of $473 thousand. Increases in net income were
primarily due to the decrease in the provision for loan losses and the reduction of interest on
deposits and borrowings offset by the increase in salaries and employee benefits.
Net Interest Income Quarterly Comparison (See Table I)
Net interest income, the largest contributor to earnings, was $18.28 million for the three months
ended March 31, 2011, compared with $18.62 million for the corresponding period in 2010, a decrease
of $344 thousand, or 1.85%. Tax-equivalent net interest income totaled $19.14 million for the three
months ended March 31, 2011, a decrease of $291 thousand, or 1.50%, from $19.43 million for the
corresponding period in 2010. The decrease in tax-equivalent net interest income was due primarily
to decreases in interest earned on loans and securities.
Average earning assets increased $1.03 million while average interest-bearing liabilities decreased
$46.41 million during the first quarter of 2011 compared with the same period of 2010. The yield on
average earning assets decreased 41 basis points to 5.26% from 5.67% between the three months ended
March 31, 2011 and 2010, respectively. Total cost of interest-bearing liabilities decreased 34
basis points between the first quarters of 2011 and 2010, which resulted in a net interest rate
spread that was seven basis points lower, at 3.78%, for the first quarter of 2011 compared with
3.85% for the same period last year. The Companys tax-equivalent net interest margin of 3.96% for
the three months ended March 31, 2011, decreased six basis points from 4.02% for the same period of
2010.
The yield on loans decreased 21 basis points to 6.01% from 6.22% for the three months ended March
31, 2011 and 2010, respectively. Tax-equivalent loan interest income for the first quarter of 2011
decreased $902 thousand, or 4.22%, compared with the first quarter of 2010 due to the effect of the
extended low interest rate environment in the United States and reduction in loan volume.
The tax-equivalent yield on available-for-sale securities decreased 75 basis points to 4.17% during
the three months ended March 31, 2011, while the average balance decreased by $14.83 million, or
3.08%, compared with the same period in 2010. The average balance of the held-to-maturity
securities portfolio continued to decline as securities matured or were called and were not
replaced.
Average interest-bearing balances with banks were $108.18 million during the first quarter of 2011,
and the yield was 0.26%. Interest-bearing balances with banks are comprised largely of excess
liquidity kept at the Federal Reserve and bear overnight market rates. The Company maintained high
levels of liquidity during the first three months of 2011 in anticipation of rising interest rates.
The average balances of interest-bearing demand deposits decreased $35.12 million, or 14.85%, while
the average rate paid during the first quarter of 2011 decreased two basis points when compared
with the same period in 2010. During the three months ended March 31, 2011, the average balances of
savings deposits increased $14.69 million, or 3.56%, while the average rate paid decreased 48 basis
points compared to the same period in 2010. Average time deposits decreased $72.36 million, or
9.14%, while the average rate paid on time deposits decreased 42 basis points from 2.29% in the
first quarter of 2010 to 1.87% in the first quarter of 2011. The level of average
noninterest-bearing demand deposits increased $12.83 million, or 6.44%, to $211.89 million during
the quarter ended March 31, 2011, compared with the corresponding period of the prior year. During
the quarter ended March 31, 2011, customers shifted from time accounts into money market and
savings products all while the Company reduced the level of time deposit only customer
relationships.
-34-
The average balance of retail repurchase agreements, which consist of collateralized retail
deposits and commercial treasury accounts, decreased $3.29 million, or 3.58%, to $88.68 million for
the first quarter of 2011, while the rate decreased 43 basis points to 0.79% during the same
period. The decrease in average balance is largely attributed to customers converting retail
repurchase agreements to certificates of deposit and lower business balances in the slow economy.
There were no federal funds purchased on average during the first quarters of 2011 and 2010.
Wholesale repurchase agreements remained unchanged at $50.00 million, while the rate increased
three basis points between the periods due to structure within those borrowings. The average
balance of FHLB borrowings and other long-term debt decreased by $20.56 million, or 10.35%, in the
first quarter of 2011 to $178.18 million, while the rate paid on those borrowings increased 51
basis points. The Company prepaid a $25.00 million FHLB advance paying 4.00% during the first
quarter of 2011.
Table I
AVERAGE BALANCE SHEETS AND NET INTEREST INCOME ANALYSIS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended |
|
|
Three Months Ended |
|
|
|
March 31, 2011 |
|
|
March 31, 2010 |
|
|
|
Average |
|
|
|
|
|
|
Average |
|
|
Average |
|
|
|
|
|
|
Average |
|
(Dollars in Thousands) |
|
Balance |
|
|
Interest (1) |
|
|
Rate (1) |
|
|
Balance |
|
|
Interest (1) |
|
|
Rate (1) |
|
Assets |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earning assets |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loans (2) |
|
$ |
1,382,526 |
|
|
$ |
20,496 |
|
|
|
6.01 |
% |
|
$ |
1,395,669 |
|
|
$ |
21,398 |
|
|
|
6.22 |
% |
Securities available-for-sale |
|
|
466,288 |
|
|
|
4,796 |
|
|
|
4.17 |
% |
|
|
481,116 |
|
|
|
5,833 |
|
|
|
4.92 |
% |
Securities held-to-maturity |
|
|
4,545 |
|
|
|
95 |
|
|
|
8.48 |
% |
|
|
7,139 |
|
|
|
148 |
|
|
|
8.41 |
% |
Interest-bearing deposits |
|
|
108,179 |
|
|
|
69 |
|
|
|
0.26 |
% |
|
|
76,587 |
|
|
|
46 |
|
|
|
0.24 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total earning assets |
|
|
1,961,538 |
|
|
|
25,456 |
|
|
|
5.26 |
% |
|
|
1,960,511 |
|
|
|
27,425 |
|
|
|
5.67 |
% |
Other assets |
|
|
265,717 |
|
|
|
|
|
|
|
|
|
|
|
283,275 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total assets |
|
$ |
2,227,255 |
|
|
|
|
|
|
|
|
|
|
$ |
2,243,786 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest-bearing deposits |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Demand deposits |
|
$ |
271,604 |
|
|
$ |
211 |
|
|
|
0.32 |
% |
|
$ |
236,484 |
|
|
$ |
200 |
|
|
|
0.34 |
% |
Savings deposits |
|
|
427,727 |
|
|
|
356 |
|
|
|
0.34 |
% |
|
|
413,037 |
|
|
|
831 |
|
|
|
0.82 |
% |
Time deposits |
|
|
719,476 |
|
|
|
3,313 |
|
|
|
1.87 |
% |
|
|
791,838 |
|
|
|
4,471 |
|
|
|
2.29 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total interest-bearing deposits |
|
|
1,418,807 |
|
|
|
3,880 |
|
|
|
1.11 |
% |
|
|
1,441,359 |
|
|
|
5,502 |
|
|
|
1.55 |
% |
Borrowings |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Retail repurchase agreements |
|
|
88,684 |
|
|
|
173 |
|
|
|
0.79 |
% |
|
|
91,976 |
|
|
|
276 |
|
|
|
1.22 |
% |
Wholesale repurchase agreements |
|
|
50,000 |
|
|
|
467 |
|
|
|
3.79 |
% |
|
|
50,000 |
|
|
|
463 |
|
|
|
3.76 |
% |
FHLB borrowings and other indebtedness |
|
|
178,180 |
|
|
|
1,795 |
|
|
|
4.09 |
% |
|
|
198,744 |
|
|
|
1,752 |
|
|
|
3.58 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total borrowings |
|
|
316,864 |
|
|
|
2,435 |
|
|
|
3.12 |
% |
|
|
340,720 |
|
|
|
2,491 |
|
|
|
2.97 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total interest-bearing liabilities |
|
|
1,735,671 |
|
|
|
6,315 |
|
|
|
1.48 |
% |
|
|
1,782,079 |
|
|
|
7,993 |
|
|
|
1.82 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Noninterest-bearing demand deposits |
|
|
211,894 |
|
|
|
|
|
|
|
|
|
|
|
199,065 |
|
|
|
|
|
|
|
|
|
Other liabilities |
|
|
4,340 |
|
|
|
|
|
|
|
|
|
|
|
5,223 |
|
|
|
|
|
|
|
|
|
Stockholders equity |
|
|
275,350 |
|
|
|
|
|
|
|
|
|
|
|
257,419 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total liabilities and
stockholders equity |
|
$ |
2,227,255 |
|
|
|
|
|
|
|
|
|
|
$ |
2,243,786 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net interest income, tax-equivalent |
|
|
|
|
|
$ |
19,141 |
|
|
|
|
|
|
|
|
|
|
$ |
19,432 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net interest rate spread (3) |
|
|
|
|
|
|
|
|
|
|
3.78 |
% |
|
|
|
|
|
|
|
|
|
|
3.85 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net interest margin (4) |
|
|
|
|
|
|
|
|
|
|
3.96 |
% |
|
|
|
|
|
|
|
|
|
|
4.02 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
Fully taxable equivalent at the rate of 35% (FTE). The FTE basis adjusts for the tax benefits of income on certain tax-exempt loans and
investments using the federal statutory rate of 35% for each period presented. The Company believes this measure to be the preferred industry
measurement of net interest income and provides relevant comparison between taxable and non-taxable amounts. |
|
(2) |
|
Non-accrual loans are included in average balances outstanding but with no related interest income during the period of non-accrual. |
|
(3) |
|
Represents the difference between the yield on earning assets and cost of funds. |
|
(4) |
|
Represents tax-equivalent net interest income divided by average earning assets. |
-35-
The following table summarizes the changes in tax-equivalent interest earned and paid detailing the
amounts attributable to (i) changes in volume (change in the average volume times the prior years
average rate), (ii) changes in rate (changes in the average rate times the prior years average
volume), and (iii) changes in rate/volume (change in the average volume column times the change in
average rate).
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended |
|
|
|
|
|
|
|
|
|
|
|
March 31, 2011, Compared to 2010 |
|
|
|
|
|
|
|
Dollar Increase (Decrease) due to |
|
|
|
|
|
|
|
|
|
|
|
Rate/ |
|
|
|
|
(In Thousands) |
|
Volume |
|
|
Rate |
|
|
Volume |
|
|
Total |
|
Interest Earned On: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loans (FTE) |
|
$ |
(201 |
) |
|
$ |
(707 |
) |
|
|
6 |
|
|
$ |
(902 |
) |
Securities available-for-sale (FTE) |
|
$ |
(180 |
) |
|
$ |
(885 |
) |
|
|
28 |
|
|
|
(1,037 |
) |
Securities held-to-maturity (FTE) |
|
$ |
(54 |
) |
|
$ |
1 |
|
|
|
(0 |
) |
|
|
(53 |
) |
Interest-bearing deposits with other banks |
|
$ |
19 |
|
|
$ |
3 |
|
|
|
1 |
|
|
|
23 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total interest earning assets |
|
$ |
(416 |
) |
|
|
(1,588 |
) |
|
|
35 |
|
|
|
(1,969 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest Paid On: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Demand deposits |
|
|
30 |
|
|
|
(16 |
) |
|
|
(3 |
) |
|
|
11 |
|
Savings deposits |
|
|
30 |
|
|
|
(487 |
) |
|
|
(18 |
) |
|
|
(475 |
) |
Time deposits |
|
|
(409 |
) |
|
|
(825 |
) |
|
|
76 |
|
|
|
(1,158 |
) |
Retail repurchase agreements |
|
|
(10 |
) |
|
|
(97 |
) |
|
|
4 |
|
|
|
(103 |
) |
Wholesale repurchase
agreement |
|
|
|
|
|
|
4 |
|
|
|
(0 |
) |
|
|
4 |
|
FHLB borrowings and other
long-term debt |
|
|
(181 |
) |
|
|
250 |
|
|
|
(26 |
) |
|
|
43 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total interest-bearing liabilities |
|
|
(540 |
) |
|
|
(1,171 |
) |
|
|
33 |
|
|
|
(1,678 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Change in net interest income,
tax-equivalent |
|
$ |
124 |
|
|
$ |
(417 |
) |
|
$ |
2 |
|
|
$ |
(291 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Provision and Allowance for Loan Losses
During the last three years, there has been significant stress in both commercial and residential
real estate markets, resulting in significant declines in valuations. Decreases in real estate
values adversely affect the value of property used as collateral for loans, including loans
originated by the Company. In addition, adverse changes in the economy, particularly continued high
rates of unemployment may have a negative effect on the ability of the Companys borrowers to make
timely loan payments. A further increase in loan delinquencies could adversely impact loan loss
experience, causing potential increases in the provision and allowance for loan losses.
The Companys allowance for loan losses was $26.48 million at both March 31, 2011, and December 31,
2010, and $24.51 million at March 31, 2010. The Companys allowance for loan loss activity for the
three-month periods ended March 31, 2011 and 2010 is as follows:
|
|
|
|
|
|
|
|
|
|
|
For the Three Months |
|
|
|
Ended March 31, |
|
(In Thousands) |
|
2011 |
|
|
2010 |
|
Allowance for loan losses |
|
|
|
|
|
|
|
|
Beginning balance |
|
$ |
26,482 |
|
|
$ |
24,277 |
|
Provision for loan losses |
|
|
1,612 |
|
|
|
3,665 |
|
Charge-offs |
|
|
(2,027 |
) |
|
|
(3,732 |
) |
Recoveries |
|
|
415 |
|
|
|
298 |
|
|
|
|
|
|
|
|
Net charge-offs |
|
|
(1,612 |
) |
|
|
(3,434 |
) |
|
|
|
|
|
|
|
Ending balance |
|
$ |
26,482 |
|
|
$ |
24,508 |
|
|
|
|
|
|
|
|
The total allowance for loan losses to loans held for investment ratio was 1.93% at March 31, 2011,
compared with 1.91% at December 31, 2010, and 1.80% at March 31, 2010. Management considers the
allowance to be adequate based upon its analysis of the portfolio as of March 31, 2011. Management
believes that it uses relevant information available to make
-36-
determinations about the allowance. If circumstances differ substantially from the assumptions used in making determinations, adjustments
to the allowance may be necessary and results of operations could be affected. Because of events
and conditions affecting borrowers and loan collateral, charge-offs cannot be predicted with
certainty. Accordingly, there can be no assurance that increases to the allowance will not be
necessary should the quality of any loans deteriorate. The methodology for the development of the
allowance for loan losses was recently enhanced to further segment the commercial loan portfolio by
risk grade. Historical loss rates by risk grade are adjusted by environmental factors to estimate
the amount of reserve needed by segment. The Company believes this enhancement will result in
increased granularity within the allowance for loan losses and will be more reflective of trends
within the commercial loan portfolio.
During the first quarter of 2011, the Company incurred net charge-offs of $1.61 million, compared
with $3.43 million in the respective period of 2010. Annualized net charge-offs for the first
quarter of 2011 were 0.47% of the average loan balance. The Company made provisions for loan losses
of $1.61 million for the three-month period ended March 31, 2011, compared to $3.67 million in the
same period of 2010. Provisions for loan losses covered net charge-offs for the three-month period
ended March 31, 2011. The decrease in the loan loss provision for the three months ended March 31,
2011, as compared to the three months ended March 31, 2010, is primarily attributable to the
general decline in net charge-offs throughout the last five quarters.
Total delinquent loans as of March 31, 2011, measured 2.23% of total loans and were comprised of
loans 30-89 days delinquent of 0.94% of total loans and loans in non-accrual status of 1.29% of
total loans. Total delinquency has decreased approximately $5.71 million since December 31, 2010. Non-performing loans, comprised of non-accrual
loans and unseasoned loan restructurings (as the Company does not have any loans that are 90 days
past due and still accruing), as a percentage of total loans were 1.40% at March 31, 2011, 1.78% at
December 31, 2010, and 1.33% at March 31, 2010.
At March 31, 2011, the primary composition of non-accrual loans, including acquired, impaired
non-accrual loans, is 27.91% single family residential mortgage; 26.58% non-farm, non-residential
commercial loans; and 24.74% commercial and industrial loans. Approximately $3.46 million, or
19.56%, of non-accrual loans is attributed to the TriStone loan portfolio that was acquired during
the third quarter of 2009.
Noninterest Income
Noninterest income consists of all revenues that are not included in interest and fee income
related to earning assets. Total noninterest income for the first quarter of 2011 was $9.50 million
compared with noninterest income of $8.58 million in the same period of 2010, an increase of $921
thousand. Exclusive of the impact of other-than-temporary impairment (OTTI) charges and gains on
the sale of securities, noninterest income for the quarter ended March 31, 2011, decreased $138
thousand, or 1.66%, compared to the same period in 2010. Wealth management revenues increased $9
thousand, or 1.02%, to $894 thousand for the three months ended March 31, 2011, compared with the
same period in 2010. Service charges on deposit accounts increased $39 thousand, or 1.30%, to $3.03
million for the three months ended March 31, 2011, compared with the same period in 2010. Other
service charges and fees increased $125 thousand, or 9.76%, to $1.41 million for the three months
ended March 31, 2011, compared with the same period in 2010. Insurance commissions for the first
quarter of 2011 were $1.94 million, a decrease of $258 thousand, or 11.72%, from the comparable
period in 2010. The decrease in insurance commissions reflects the effects of the recent recession,
as well as the soft insurance market. Other operating income totaled $916 thousand for the three
months ended March 31, 2011, a decrease of $53 thousand, or 5.47%, compared with the same period in
2010. For the quarter ended March 31, 2011, the Company recognized $527 thousand of OTTI charges on
a non-agency mortgage-backed security, compared to no impairment losses during the same period of
2010. During the first quarter of 2011, net securities gains of $1.84 million were realized
compared with net gains of $250 thousand in the comparable period in 2010.
For a more detailed discussion of activities regarding investment securities and impairment
charges, please see Note 3 to the Consolidated Financial Statements included in Part I.
Noninterest Expense
Noninterest expense totaled $18.06 million for the quarter ended March 31, 2011, an increase of
$1.99 million, or 12.39%, from the same period in 2010. Salaries and employee benefits for the
first quarter of 2011 increased $1.16 million, or 14.56%, compared to the same period in 2010. The
Company has increased staffing levels in credit administration, marketing, and compliance due to
increasing regulatory burdens. The Company has also been experiencing a significant increase in
health insurance costs in recent quarters. Occupancy and furniture and equipment expenses decreased
$51 thousand, or 1.95%, between the comparable periods. Deposit insurance premiums and assessments
were $878 thousand for the three-month period ended March 31, 2011, an increase of $177 thousand,
or 25.25%, compared to the same period in
-37-
2010. Other operating expense totaled $4.76 million for
the first quarter of 2011, an increase of $231 thousand, or 5.10%, from $4.53 million for the first
quarter of 2010. Increases in consulting and service fees and debit card costs of $401 thousand and
$181 thousand, respectively, were largely offset by a decrease in other real estate expenses of
$355 thousand.
During the first quarter of 2011, the Company prepaid a $25.00 million FHLB advance, and the
expense associated with that prepayment was $471 thousand.
Income Tax Expense
Income tax expense is comprised of federal and state current and deferred income taxes on pre-tax
earnings of the Company. Income taxes as a percentage of pre-tax income may vary significantly from
statutory rates due to items of income and expense which are excluded, by law, from the calculation
of taxable income. These items are commonly referred to as permanent differences. The most
significant permanent differences for the Company include income on municipal securities which are
exempt from federal income tax and the increases in the cash surrender values of life insurance
policies.
For the first quarter of 2011, income taxes were $2.35 million compared with income taxes of $2.18
million for the first quarter of 2010. For the quarters ended March 31, 2011 and 2010, the
effective tax expense rates were 28.99% and 29.25%, respectively.
FINANCIAL CONDITION
Total assets at March 31, 2011, decreased $3.26 million, or 0.15%, to $2.24 billion from December
31, 2010. Cash and cash equivalents increased $63.28 million since year end 2010. Total liabilities
at March 31, 2011, decreased $11.23 million, or 0.57%, to $1.96 billion from December 31, 2010.
Deposits increased $16.06 million, securities sold under agreements to repurchase decreased $1.42
million, and short term borrowings decreased $25.01 million during the first quarter of 2011.
Securities
Available-for-sale securities were $430.97 million at March 31, 2011, compared with $480.06 million
at December 31, 2010, a decrease of $49.10 million, or 10.23%. The market value of securities
available-for-sale as a percentage of amortized cost improved from 96.40% at December 31, 2010, to
97.25% at March 31, 2011, reflecting improved pricing on certain issues. Held-to-maturity
securities declined to $4.52 million at March 31, 2011, compared with $4.64 million at December 31,
2010.
During the first quarter, the Company recognized OTTI charges in earnings related to a non-agency
mortgage-backed security of $527 thousand.
For a more detailed discussion of activities regarding investment securities, please see Note 3 to
the Consolidated Financial Statements included in Part I.
Loan Portfolio
Loans Held for Sale
The $2.61 million balance of loans held for sale at March 31, 2011, represents mortgage loans that
are sold to investors on a best efforts basis. Accordingly, the Company does not retain the
interest rate risk involved in the commitment. The gross notional amount of outstanding commitments
to originate mortgage loans for customers at March 31, 2011, was $7.63 million on 52 loans.
Loans Held for Investment
Total loans held for investment were $1.38 billion at March 31, 2011, representing a decrease of
$10.52 million from December 31, 2010, and a decrease of $15.19 million from March 31, 2010. The
average loan to deposit ratio was 84.78% for the first quarter of 2011, compared with 85.54% for
the fourth quarter of 2010, and 85.08% for the first quarter of 2010. Year-to-date average loans of
$1.38 billion decreased $13.14 million when compared to year-to-date average loans of $1.40 billion
in 2010.
-38-
The held for investment loan portfolio continues to be diversified among loan types and industry
segments. The following table presents the various loan categories and changes in composition as of
March 31, 2011, December 31, 2010, and March 31, 2010.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
March 31, 2011 |
|
|
December 31, 2010 |
|
|
March 31, 2010 |
|
(Dollars in Thousands) |
|
Amount |
|
|
Percent |
|
|
Amount |
|
|
Percent |
|
|
Amount |
|
|
Percent |
|
Loans Held for Investment |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial loans |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Construction commercial |
|
$ |
30,758 |
|
|
|
2.24 |
% |
|
$ |
42,694 |
|
|
|
3.08 |
% |
|
$ |
41,729 |
|
|
|
3.00 |
% |
Land development |
|
|
5,781 |
|
|
|
0.42 |
% |
|
|
16,650 |
|
|
|
1.20 |
% |
|
|
22,122 |
|
|
|
1.59 |
% |
Other land loans |
|
|
23,959 |
|
|
|
1.74 |
% |
|
|
24,468 |
|
|
|
1.77 |
% |
|
|
28,536 |
|
|
|
2.05 |
% |
Commercial and industrial |
|
|
91,964 |
|
|
|
6.68 |
% |
|
|
94,123 |
|
|
|
6.79 |
% |
|
|
100,744 |
|
|
|
7.24 |
% |
Multi-family residential |
|
|
75,269 |
|
|
|
5.47 |
% |
|
|
67,824 |
|
|
|
4.89 |
% |
|
|
70,508 |
|
|
|
5.07 |
% |
Non-farm, non-residential |
|
|
345,265 |
|
|
|
25.10 |
% |
|
|
351,904 |
|
|
|
25.39 |
% |
|
|
351,375 |
|
|
|
25.26 |
% |
Agricultural |
|
|
1,392 |
|
|
|
0.10 |
% |
|
|
1,342 |
|
|
|
0.10 |
% |
|
|
1,278 |
|
|
|
0.09 |
% |
Farmland |
|
|
47,228 |
|
|
|
3.43 |
% |
|
|
36,954 |
|
|
|
2.67 |
% |
|
|
39,659 |
|
|
|
2.85 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total commercial loans |
|
|
621,616 |
|
|
|
45.18 |
% |
|
|
635,959 |
|
|
|
45.89 |
% |
|
|
655,951 |
|
|
|
47.15 |
% |
Consumer real estate loans |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Home equity lines |
|
|
111,802 |
|
|
|
8.13 |
% |
|
|
111,620 |
|
|
|
8.05 |
% |
|
|
110,391 |
|
|
|
7.94 |
% |
Single family residential mortgage |
|
|
545,316 |
|
|
|
39.64 |
% |
|
|
549,157 |
|
|
|
39.61 |
% |
|
|
537,530 |
|
|
|
38.65 |
% |
Owner-occupied construction |
|
|
22,506 |
|
|
|
1.64 |
% |
|
|
18,349 |
|
|
|
1.32 |
% |
|
|
20,753 |
|
|
|
1.49 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total consumer real estate loans |
|
|
679,624 |
|
|
|
49.41 |
% |
|
|
679,126 |
|
|
|
48.98 |
% |
|
|
668,674 |
|
|
|
48.08 |
% |
Consumer and other loans |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consumer loans |
|
|
62,029 |
|
|
|
4.51 |
% |
|
|
63,475 |
|
|
|
4.58 |
% |
|
|
60,632 |
|
|
|
4.36 |
% |
Other |
|
|
12,416 |
|
|
|
0.90 |
% |
|
|
7,646 |
|
|
|
0.55 |
% |
|
|
5,617 |
|
|
|
0.41 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total consumer and other loans |
|
|
74,445 |
|
|
|
5.41 |
% |
|
|
71,121 |
|
|
|
5.13 |
% |
|
|
66,249 |
|
|
|
4.77 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
$ |
1,375,685 |
|
|
|
100.00 |
% |
|
$ |
1,386,206 |
|
|
|
100.00 |
% |
|
$ |
1,390,874 |
|
|
|
100.00 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loans Held for Sale |
|
$ |
2,614 |
|
|
|
|
|
|
$ |
4,694 |
|
|
|
|
|
|
$ |
1,494 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-Performing Assets
Non-performing assets include loans on non-accrual status, unseasoned loan restructurings, loans
contractually past due 90 days or more and still accruing interest, and other real estate owned
(OREO). Non-performing assets were $24.86 million at March 31, 2011, $29.65 million at December
31, 2010, and $23.26 million at March 31, 2010. The percentage of non-performing assets to total
assets was 1.11% at March 31, 2011, 1.32% at December 31, 2010, and 1.02% at March 31, 2010.
-39-
The following table details non-performing assets by category at the close of each of the quarters
ended March 31, 2011, December 31, 2010, and March 31, 2010.
|
|
|
|
|
|
|
|
|
|
|
|
|
(Dollars in Thousands) |
|
March 31, 2011 |
|
|
December 31, 2010 |
|
|
March 31, 2010 |
|
Non-accrual loans |
|
$ |
17,703 |
|
|
$ |
19,414 |
|
|
$ |
17,477 |
|
Restructured loans |
|
|
1,509 |
|
|
|
5,325 |
|
|
|
1,041 |
|
Loans 90 days or more past due and still
accruing interest |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total non-performing loans |
|
|
19,212 |
|
|
|
24,739 |
|
|
|
18,518 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other real estate owned |
|
|
5,644 |
|
|
|
4,910 |
|
|
|
4,740 |
|
|
|
|
|
|
|
|
|
|
|
Total non-performing assets |
|
$ |
24,856 |
|
|
$ |
29,649 |
|
|
$ |
23,258 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Restructured loans performing in accordance with
modified terms |
|
$ |
7,519 |
|
|
$ |
3,911 |
|
|
$ |
2,050 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-performing loans as a percentage of total loans |
|
|
1.40 |
% |
|
|
1.78 |
% |
|
|
1.33 |
% |
Non-performing assets as a percentage of total assets |
|
|
1.11 |
% |
|
|
1.32 |
% |
|
|
1.02 |
% |
Non-performing assets as a percentage of total loans
and other real estate owned |
|
|
1.80 |
% |
|
|
2.13 |
% |
|
|
1.67 |
% |
Allowance for loan losses as a percentage of
non-performing loans |
|
|
137.8 |
% |
|
|
107.0 |
% |
|
|
132.3 |
% |
Ongoing activity within the classification and categories of non-performing loans include
collections on delinquencies, foreclosures, loan restructurings, and movements into or out of the
non-performing classification as a result of changing economic conditions, borrower financial
capacity, and resolution efforts on the part of the Company. There were no loans 90 days past due
and still accruing at March 31, 2011, December 31, 2010, and March 31, 2010. OREO was $5.64 million
at March 31, 2011, an increase of $734 thousand from December 31, 2010, and is carried at the
lesser of estimated net realizable value or cost. OREO increased from December 31, 2010, as a
result of escalation in asset resolution and foreclosure activity. At March 31, 2011, OREO
consisted of 51 properties with an average book value of $175 thousand and an average holding
period of 7 months. During the three-month period ended March 31, 2011, net losses on the sale of
OREO totaled $154 thousand.
The Companys Special Assets staff assumes the management and monitoring of all loans determined to
be seriously delinquent or impaired. When resolution through secondary repayment sources becomes
evident, updated appraisals are ordered and the Company generally begins to complete the tasks
necessary to gain control of the collateral and prepare for liquidation, including, but not limited
to engagement of counsel, inspection of collateral, and continued communication with the borrower,
if appropriate. Special Assets staff also regularly reviews the relationship to identify any
potential adverse developments during this time and continues to seek alternative resolution
processes, where possible.
At March 31, 2011, the allowance for loan losses related to loan restructurings totaled $1.01
million. Total interest income recognized on loan restructurings for the three months ended March
31, 2011, totaled $123 thousand. When restructuring loans for troubled borrowers, the Company
generally makes concessions in interest rates and amortization terms.
Deposits and Other Borrowings
Total deposits increased by $16.06 million, or 0.99%, during the first three months of 2011.
Noninterest-bearing demand deposits increased $16.92 million to $222.07 million at March 31, 2011,
compared with $205.15 million at December 31, 2010. Interest-bearing demand deposits increased
$24.59 million to $287.01 million at March 31, 2011, from December 31, 2010. Savings decreased
$6.07 million, or 1.42%, and time deposits decreased $19.38 million, or 2.67%, during the first
three months of 2011.
Securities sold under repurchase agreements decreased $1.42 million, or 1.01%, in the first three
months of 2011 to $139.47 million. There were no federal funds purchased outstanding at March 31,
2011, as the Company maintained a very strong liquidity position throughout the first three months
of 2011.
-40-
Stockholders Equity
Total stockholders equity increased $7.97 million, or 2.95%, from $269.88 million at December 31,
2010, to $277.85 million at March 31, 2011. Changes in equity were primarily the result of net
income of $5.75 million, an increase in accumulated other comprehensive income of $3.61 million,
and common dividends paid of $1.79 million.
Risk-Based Capital
Risk-based capital guidelines promulgated by federal banking agencies weight balance sheet assets
and off-balance sheet commitments based on inherent risks associated with the respective asset
types. At March 31, 2011, the Companys total risk-based capital ratio was 15.81% compared with
15.33% at December 31, 2010. The Companys Tier 1 risk-based capital ratio was 14.55% at March 31,
2011, compared with 14.07% at December 31, 2010. The Companys Tier 1 leverage ratio at March 31,
2011, was 9.66% compared with 9.44% at December 31, 2010. All of the Companys regulatory capital
ratios exceed the current well-capitalized levels.
During the second quarter of 2010, the OCC issued an Individual Minimum Capital Ratio to the Bank
which requires it to maintain a total risk-based capital ratio of 11.50%, a Tier 1 risk-based
capital ratio of 10.00%, and a Tier 1 leverage ratio of 7.50%. The Banks total risk-based capital,
Tier 1 risk-based capital, and Tier 1 leverage ratios were 14.65%, 13.40%, and 8.87%, respectively,
at March 31, 2011.
Liquidity and Capital Resources
At March 31, 2011, the Company maintained liquidity in the form of cash and cash equivalent
balances of $175.47 million, unpledged securities available-for-sale of $133.31 million, and total
FHLB credit availability of approximately $202.28 million. Cash and cash equivalents as well as
advances from the FHLB 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. The Company also maintains approved lines of credit with correspondent banks as backup
liquidity sources.
The Company is a holding company, which is a separate legal entity from the Bank, and at March 31,
2011, maintained cash balances of $10.04 million. As a result of investment securities impairments
in 2009, the Bank is limited as to the dividends it can pay. Accordingly, the Bank would need
permission from the OCC prior to paying dividends to the Company. The cash reserves and investments
held by the Company, as well as management fee arrangements, provide adequate working capital to
meet its obligations and projected dividends to shareholders for the next twelve months and through
the projected period of dividend restrictions.
The Company maintains a liquidity policy as a means to manage liquidity and the associated risk.
The policy includes a Liquidity Contingency Plan (the Liquidity Plan) that is designed as a tool
for the Company to detect liquidity issues promptly in order to protect depositors, creditors and
shareholders. The Liquidity Plan includes monitoring various internal and external indicators such
as changes in core deposits and changes in market conditions. It provides for timely responses to a
wide variety of funding scenarios ranging from changes in loan demand to a decline in the Companys
quarterly earnings to a decline in the market price of the Companys stock. The Liquidity Plan
calls for specific responses designed to meet a wide range of liquidity needs based upon
assessments on a recurring basis by the Company and its Board of Directors.
PART I. ITEM 3. Quantitative and Qualitative Disclosures about Market Risk
Interest Rate Risk and Asset/Liability Management
The Companys profitability is dependent to a large extent upon its net interest income, 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 Company, like other financial institutions, is subject to interest rate risk to the
degree that interest-earning assets reprice differently than interest-bearing liabilities. The
Company 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
while maintaining an acceptable level of net interest income given the current interest rate
environment.
The Companys primary component of operational revenue, net interest income, is subject to
variation as a result of changes in interest rate environments in conjunction with unbalanced
repricing opportunities on earning assets and interest-bearing liabilities. Interest rate risk has
four primary components: repricing risk, basis risk, yield curve risk and option risk. Repricing
risk occurs when earning assets and paying liabilities reprice at differing times as interest rates
change. Basis risk occurs
-41-
when the underlying rates on the assets and liabilities the institution
holds change at different levels or in varying degrees. Yield curve risk is the risk of adverse
consequences as a result of unequal changes in the spread between two or more rates for different
maturities for the same instrument. Lastly, option risk is due to embedded options, often put or
call options, given or sold to holders of financial instruments.
In order to mitigate the effect of changes in the general level of interest rates, the Company
manages repricing opportunities and thus, its interest rate sensitivity. The Company seeks to
control its interest rate risk exposure to insulate net interest income and net earnings from
fluctuations in the general level of interest rates. To measure its exposure to interest rate risk,
quarterly simulations of net interest income are performed using financial models that project net
interest income through a range of possible interest rate environments including rising, declining,
most likely and flat rate scenarios. The simulation model used by the Company captures all earning
assets, interest-bearing liabilities and off-balance sheet financial instruments and combines the
various factors affecting rate sensitivity into an earnings outlook and estimates the economic
value of equity for a range of assumed interest rate scenarios. The results of these simulations
indicate the existence and severity of interest rate risk in each of those rate environments based
upon the current balance sheet position, assumptions as to changes in the volume and mix of
interest-earning assets and interest-paying liabilities and the Companys estimate of yields to be
attained in those future rate environments and rates that will be paid on various deposit
instruments and borrowings. These assumptions are inherently uncertain and, as a result, the model
cannot precisely predict the impact of fluctuations in interest rates on net interest income.
Actual results will differ from simulated results due to timing, magnitude, and frequency of
interest rate changes, as well as changes in market conditions and the Companys strategies.
However, the earnings simulation model is currently the best tool available to the Company and the
industry for managing interest rate risk.
Specific strategies for management of interest rate risk have included shortening the amortized
maturity of new fixed-rate loans, increasing the volume of adjustable-rate loans to reduce the
average maturity of the Companys interest-earning assets, and monitoring the term and structure of
liabilities to maintain a balanced mix of maturity and repricing structures to mitigate potential
exposure. At March 31, 2011, modeling indicates that the Company is in a relatively neutral
position with respect to sensitivity to interest rate changes.
The Company has established policy limits for tolerance of interest rate risk in various interest
rate scenarios. In addition, the policy addresses exposure limits to changes in the economic value
of equity according to predefined policy guidelines. The most recent simulation indicates that
current exposure to interest rate risk is within the Companys defined policy limits.
-42-
The following table summarizes the projected impact on the next twelve months net interest
income and the economic value of equity as of March 31, 2011, and December 31, 2010, of immediate
and sustained rate shocks in the interest rate environments of plus 300 to minus 100 basis points
from the base case rate simulation, assuming no remedial measures are affected. At March 31, 2011,
the Federal Open Market Committee maintained a target range for federal funds of 0 to 25 basis
points, rendering complete downward shocks greater than 100 basis points unrealistic and not
meaningful. In the downward rate shocks presented, benchmark interest rates are dropped with floors
near 0%.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Rate Sensitivity Analysis |
|
|
March 31, 2011 |
(Dollars in Thousands) |
|
Change in |
|
|
|
|
|
Change in |
|
|
Increase (Decrease) in |
|
Net Interest |
|
Percent |
|
Economic Value |
|
Percent |
Interest Rates (Basis Points) |
|
Income |
|
Change |
|
of Equity |
|
Change |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
300 |
|
$ |
2,926 |
|
|
|
4.0 |
|
|
$ |
(3,690 |
) |
|
|
(1.1 |
) |
200 |
|
|
1,659 |
|
|
|
2.3 |
|
|
|
489 |
|
|
|
0.2 |
|
100 |
|
|
735 |
|
|
|
1.0 |
|
|
|
3,137 |
|
|
|
1.0 |
|
(100) |
|
|
(351 |
) |
|
|
(0.5 |
) |
|
|
(14,237 |
) |
|
|
(4.4 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2010 |
(Dollars in Thousands) |
|
Change in |
|
|
|
|
|
Change in |
|
|
Increase (Decrease) in |
|
Net Interest |
|
Percent |
|
Economic Value |
|
Percent |
Interest Rates (Basis Points) |
|
Income |
|
Change |
|
of Equity |
|
Change |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
300 |
|
$ |
932 |
|
|
|
1.2 |
|
|
$ |
(10,634 |
) |
|
|
(3.6 |
) |
200 |
|
|
121 |
|
|
|
0.2 |
|
|
|
(1,530 |
) |
|
|
(0.5 |
) |
100 |
|
|
329 |
|
|
|
0.4 |
|
|
|
4,734 |
|
|
|
1.6 |
|
(100) |
|
|
(105 |
) |
|
|
(0.1 |
) |
|
|
(21,503 |
) |
|
|
(7.3 |
) |
The economic value of equity is a measure which reflects the impact of changing rates on the
underlying values of the Companys assets and liabilities in various rate scenarios. The scenarios
illustrate the potential estimated impact of instantaneous rate shocks on the underlying value of
equity. The economic value of equity is based on the present value of all the future cash flows
under the different rate scenarios.
-43-
PART I. ITEM 4. Controls and Procedures
Disclosure Controls and Procedures
As of the end of the period covered by this report, the Company carried out an evaluation, under
the supervision and with the participation of the Companys management, including the Companys
Chief Executive Officer (CEO) along with the Companys Chief Financial Officer (CFO), of the
effectiveness of the Companys disclosure controls and procedures pursuant to the Securities
Exchange Act of 1934 (Exchange Act) Rule 13a-15(b). Based on that evaluation, the Companys CEO
along with the Companys CFO concluded that the Companys disclosure controls and procedures are
effective in timely alerting them to material information relating to the Company (including its
consolidated subsidiaries) required to be included in the Companys periodic SEC filings.
The Companys management, including the CEO and CFO, does not expect that the Companys disclosure
controls and internal controls will prevent all errors and all fraud. A control system, no matter
how well conceived and operated, can provide only reasonable, not absolute, assurance that the
objectives of the control system are met. Because of the inherent limitations in all control
systems, no evaluation of controls can provide absolute assurance that all control issues and
instances of fraud, if any, within the Company have been detected. These inherent limitations
include the realities that judgments in decision making can be faulty, and that breakdowns can
occur because of simple error or mistake. Additionally, controls can be circumvented by the
individual acts of some persons, by collusion of two or more people, or by management override of
the controls.
Changes in Internal Control over Financial Reporting
The Company assesses the adequacy of its internal control over financial reporting quarterly and
enhances its controls in response to internal control assessments and internal and external audit
and regulatory recommendations. There were no changes in the Companys internal control over
financial reporting during the quarter ended March 31, 2011, that have materially affected, or is
reasonably likely to materially affect, the Companys internal control over financial reporting.
PART II. OTHER INFORMATION
ITEM 1. Legal Proceedings
The Company is currently a defendant in various legal actions and asserted claims in the normal
course of business. Although 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, results of
operations, or cash flows of the Company.
ITEM 1A. Risk Factors
There were no material changes to the risk factors as previously disclosed under Item 1A. of the
Companys Annual Report on Form 10-K for the year ended December 31, 2010.
ITEM 2. Unregistered Sales of Equity Securities and Use of Proceeds
(a) Not Applicable
(b) Not Applicable
(c) Issuer Purchases of Equity Securities
-44-
The following table provides information with respect to purchases made by or on behalf of the
Company or any affiliated purchaser (as defined in Rule 10b-18(a)(3) under the Securities
Exchange Act of 1934) of the Companys Common Stock during the first quarter of 2011.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Number |
|
|
Maximum |
|
|
|
Total |
|
|
|
|
|
|
of Shares |
|
|
Number of |
|
|
|
Number of |
|
|
Average |
|
|
Purchased as |
|
|
Shares That May |
|
|
|
Shares |
|
|
Price Paid |
|
|
Part of a Publicly |
|
|
Yet be Purchased |
|
|
|
Purchased |
|
|
per Share |
|
|
Announced Plan |
|
|
Under the Plan (1) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
January 1-31, 2011 |
|
|
|
|
|
$ |
|
|
|
|
|
|
|
|
884,513 |
|
February 1-28, 2011 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
885,851 |
|
March 1-31, 2011 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
912,077 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
|
|
|
|
$ |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
The Companys stock repurchase plan, as amended, allows the purchase and retention of up
to 1,100,000 shares. The plan has no expiration date, remains open and no plans have expired during
the reporting period covered by this table. No determination has been made to terminate the plan or
to cease making purchases. The Company held 187,923 shares in treasury at March 31, 2011. |
ITEM 3. Defaults Upon Senior Securities
Not Applicable
ITEM 4. Reserved
ITEM 5. Other Information
Not Applicable
ITEM 6. Exhibits
(a) Exhibits
|
|
|
Exhibit |
|
|
No. |
|
Exhibit |
|
|
|
3(i)
|
|
Articles of Incorporation of First Community Bancshares, Inc. (31) |
3(ii)
|
|
Bylaws of First Community Bancshares, Inc., as amended. (17) |
3.1
|
|
Reserved. |
4.1
|
|
Specimen stock certificate of First Community Bancshares, Inc. (3) |
4.2
|
|
Indenture Agreement dated September 25, 2003. (11) |
4.3
|
|
Amended and Restated Declaration of Trust of FCBI Capital Trust dated September 25, 2003. (11) |
4.4
|
|
Preferred Securities Guarantee Agreement dated September 25, 2003. (11) |
4.5
|
|
Reserved. |
4.6
|
|
Warrant to purchase 88,273 shares of Common Stock of First Community Bancshares, Inc. (29) |
4.7
|
|
Reserved. |
4.8
|
|
Reserved. |
10.1**
|
|
First Community Bancshares, Inc. 1999 Stock Option Contracts (2) and Plan. (4) |
10.1.1**
|
|
Amendment to First Community Bancshares, Inc. 1999 Stock Option Plan, as amended. (18) |
10.2**
|
|
First Community Bancshares, Inc. 2001 Non-Qualified Directors Stock Option Plan. (5) |
10.3**
|
|
Employment Agreement dated December 16, 2008, between First Community Bancshares, Inc. and
John M. Mendez. (6) and Waiver Agreement (27) |
10.4**
|
|
First Community Bancshares, Inc. 2000 Executive Retention Plan, as amended. (24) |
10.5**
|
|
First Community Bancshares, Inc. Split Dollar Plan and Agreement. (8) |
10.6**
|
|
First Community Bancshares, Inc. 2001 Directors Supplemental Retirement Plan, as amended. (24) |
10.6.1**
|
|
Reserved. |
10.7**
|
|
First Community Bancshares, Inc. Wrap Plan. (7) |
10.8
|
|
Reserved. |
-45-
|
|
|
Exhibit |
|
|
No. |
|
Exhibit |
|
|
|
10.9**
|
|
Form of Indemnification Agreement between First Community Bancshares, Inc., its Directors
and Certain Executive Officers. (9) |
10.10**
|
|
Form of Indemnification Agreement between First Community Bank, N. A, its Directors and
Certain Executive Officers. (9) |
10.11
|
|
Reserved. |
10.12**
|
|
First Community Bancshares, Inc. 2004 Omnibus Stock Option Plan (10) and Form of Award
Agreement. (13) |
10.13
|
|
Reserved. |
10.14**
|
|
First Community Bancshares, Inc. Directors Deferred Compensation Plan. (7) |
10.15**
|
|
Reserved. |
10.16**
|
|
Employment Agreement dated November 30, 2006, between First Community Bank, N. A. and
Ronald L. Campbell. (19) |
10.17**
|
|
Employment Agreement dated September 28, 2007, between GreenPoint Insurance Group, Inc.
and Shawn C. Cummings. (20) |
10.18
|
|
Securities Purchase Agreement by and between the United States Department of the Treasury
and First Community Bancshares, Inc. dated November 21, 2008. (22) |
10.19**
|
|
Employment Agreement dated December 16, 2008, between First Community Bancshares, Inc. and
David D. Brown. (23) |
10.20**
|
|
Employment Agreement dated December 16, 2008, between First Community Bancshares, Inc. and
Robert L. Buzzo. (26) |
10.21**
|
|
Employment Agreement dated December 16, 2008, between First Community Bancshares, Inc. and
E. Stephen Lilly. (26) |
10.22**
|
|
Employment Agreement dated December 16, 2008, between First Community Bank, N. A. and Gary
R. Mills. (26) |
10.23**
|
|
Employment Agreement dated December 16, 2008, between First Community Bank, N. A. and
Martyn A. Pell. (26) |
10.24**
|
|
Employment Agreement dated December 16, 2008, between First Community Bank, N. A. and
Robert. L. Schumacher. (26) |
10.25**
|
|
Employment Agreement dated July 31, 2009, between First Community Bank, N. A. and Simpson
O. Brown. (25) |
10.26**
|
|
Employment Agreement dated July 31, 2009, between First Community Bank, N. A. and Mark R.
Evans. (25) |
11
|
|
Statement regarding computation of earnings per share. (16) |
31.1*
|
|
Rule 13a-14(a)/15d-14(a) Certification of Chief Executive Officer. |
31.2*
|
|
Rule 13a-14(a)/15d-14(a) Certification of Chief Financial Officer. |
32*
|
|
Certification of Chief Executive Officer and Chief Financial Officer pursuant to 18 U.S.C.
Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. |
|
|
|
* |
|
Furnished herewith. |
|
** |
|
Indicates a management contract or compensation plan. |
|
(1) |
|
Incorporated by reference from the Quarterly Report on Form 10-Q for the period ended June
30, 2010, filed on August 16, 2010 |
|
(2) |
|
Incorporated by reference from the Quarterly Report on Form 10-Q for the period ended June
30, 2002, filed on August 14, 2002. |
|
(3) |
|
Incorporated by reference from the Annual Report on Form 10-K for the period ended December
31, 2002, filed on March 25, 2003, as amended on March 31, 2003. |
|
(4) |
|
Incorporated by reference from the Annual Report on Form 10-K for the period ended December
31, 1999, filed on March 30, 2000, as amended April 13, 2000. |
|
(5) |
|
The option agreements entered into pursuant to the 1999 Stock Option Plan and the 2001
Non-Qualified Directors Stock Option Plan are incorporated by reference from the Quarterly
Report on Form 10-Q for the period ended June 30, 2002, filed on August 14, 2002. |
|
(6) |
|
Incorporated by reference from Exhibit 10.1 of the Current Report on Form 8-K dated and filed
December 16, 2008. The Registrant has entered into substantially identical agreements with
Robert L. Buzzo and E. Stephen Lilly, with the only differences being with respect to title
and salary. |
|
(7) |
|
Incorporated by reference from Item 1.01 of the Current Report on Form 8-K dated August 22,
2006, and filed August 23, 2006. |
|
(8) |
|
Incorporated by reference from Exhibit 10.5 of the Annual Report on Form 10-K for the period
ended December 31, 1999, and filed on April 4, 2000, and amended on April 13, 2000. |
-46-
|
|
|
(9) |
|
Form of indemnification agreement entered into by the Company and by First Community Bank, N.
A. with their respective directors and certain officers of each including, for the Registrant
and Bank: John M. Mendez, Robert L. Schumacher, Robert L. Buzzo, E. Stephen Lilly, David D.
Brown, and Gary R. Mills. Incorporated by reference from the Annual Report on Form 10-K for
the period ended December 31, 2003, filed on March 15, 2004, and amended on May 19, 2004. |
|
(10) |
|
Incorporated by reference from the 2004 First Community Bancshares, Inc. Definitive Proxy
filed on March 15, 2004. |
|
(11) |
|
Incorporated by reference from the Quarterly Report on Form 10-Q for the period ended
September 30, 2003, filed on November 10, 2003. |
|
(12) |
|
Incorporated by reference from the Quarterly Report on Form 10-Q for the period ended March
31, 2004, filed on May 7, 2004. |
|
(13) |
|
Incorporated by reference from the Quarterly Report on Form 10-Q for the period ended June
30, 2004, filed on August 6, 2004. |
|
(14) |
|
Incorporated by reference from the Annual Report on Form 10-K for the period ended December
31, 2004, and filed on March 16, 2005. Amendments in substantially similar form were executed
for Directors Clark, Kantor, Hamner, Modena, Perkinson, Stafford, and Stafford II. |
|
(15) |
|
Incorporated by reference from the Current Report on Form 8-K dated October 24, 2006, and
filed October 25, 2006. |
|
(16) |
|
Incorporated by reference from Note 1 of the Notes to Consolidated Financial Statements
included herein. |
|
(17) |
|
Incorporated by reference from Exhibit 3.1 of the Current Report on Form 8-K dated February
14, 2008, filed on February 20, 2008. |
|
(18) |
|
Incorporated by reference from Exhibit 10.1.1 of the Quarterly Report on Form 10-Q for the
period ended March 31, 2004, filed on May 7, 2004. |
|
(19) |
|
Incorporated by reference from Exhibit 2.1 of the Form S-3 registration statement filed May
2, 2007. |
|
(20) |
|
Incorporated by reference from the Exhibit 10.17 of the Annual Report on Form 10-K for the
period ended December 31, 2007, filed on March 13, 2008. |
|
(21) |
|
Reserved. |
|
(22) |
|
Reserved. |
|
(23) |
|
Incorporated by reference from Exhibit 10.2 of the Current Report on Form 8-K dated and filed
December 16, 2008. |
|
(24) |
|
Incorporated by reference from Exhibit 10.3 of the Current Report on Form 8-K dated December
16, 2010, and filed December 17, 2010. |
|
(25) |
|
Incorporated by reference from Exhibit 2.1 of the Current Report on Form 8-K dated April 2,
2009 and filed April 3, 2009. |
|
(26) |
|
Incorporated by reference from the Current Report on Form 8-K dated and filed July 6, 2009. |
|
(27) |
|
Incorporated by reference from Exhibit 10.2 on Form 8-K dated December 16, 2010, and filed
December 17, 2010. |
|
(28) |
|
Reserved. |
|
(29) |
|
Reserved. |
|
(30) |
|
Reserved. |
|
(31) |
|
Incorporated by reference from Exhibit 3(i) of the Quarterly Report on Form 10-Q for the
period dated June 30, 2010, and filed August 16, 2010. |
-47-
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 9, 20110
|
|
|
| |
/s/ John M. Mendez
|
| |
John M. Mendez |
| |
President & Chief Executive Officer
(Principal Executive Officer) |
| |
|
/s/ David D. Brown
|
| |
David D. Brown |
| |
Chief Financial Officer
(Principal Accounting Officer) |
| |
-48-
EXHIBIT INDEX
|
|
|
Exhibit No. |
|
Exhibit |
|
|
|
31.1
|
|
Rule 13a-14(a)/15d-14(a) Certification of Chief Executive Officer. |
31.2
|
|
Rule 13a-14(a)/15d-14(a) Certification of Chief Financial Officer. |
32
|
|
Certification of Chief Executive Officer and Chief Financial
Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant
to Section 906 of the Sarbanes-Oxley Act of 2002. |
-49-