FORM 10-Q QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
OR
[_] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from:__________________ to __________________
Commission File Number: 0-19297
First Community Bancshares, Inc.
(Exact name of registrant as specified in its charter)
Nevada 55-0694814
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
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(276) 326-9000
(Registrant's telephone number, including area code)
Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 of 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date.
Class Outstanding at July 31, 2002
Common Stock, $1 Par Value 9,925,982
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First Community Bancshares, Inc.
FORM 10-Q
For the quarter ended June 30, 2002
INDEX
PART I. FINANCIAL INFORMATION REFERENCE
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Item 1. Financial Statements
Consolidated Balance Sheets as of June 30, 2002 and
December 31, 2001 3
Consolidated Statements of Income for the Three and Six
Month Periods Ended June 30, 2002 and 2001 4
Consolidated Statements of Cash Flows for the
Six Month Periods Ended June 30, 2002 and 2001 5
Consolidated Statements of Changes in Stockholders'
Equity for the Six Months Ended June 30,
2002 and 2001 6
Notes to Consolidated Financial Statements 7-12
Independent Accountants' Review Report 13
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 14-22
Item 3. Quantitative and Qualitative Disclosures about 23
Market Risk
PART II. OTHER INFORMATION
Item 1. Legal Proceedings 24
Item 2. Changes in Securities and Use of Proceeds 24
Item 3. Defaults Upon Senior Securities 24
Item 4. Submission of Matters to a Vote of 24
Security Holders
Item 5. Other Information 24
Item 6. Exhibits and Reports on Form 8-K 25
SIGNATURES 26
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PART I. ITEM 1. FINANCIAL STATEMENTS
FIRST COMMUNITY BANCSHARES, INC.
CONSOLIDATED BALANCE SHEETS
(Dollars in Thousands, Except Share Data)
-------------------------------------------------------------------------------------------------------------------------
June 30 December 31
2002 2001
Assets (Unaudited) (Note 1)
------------------ ------------------
Cash and due from banks $ 31,448 $ 47,566
Interest-bearing balances-FHLB 255 249
Securities available for sale (amortized cost of $330,567 at
June 30, 2002; $352,759 at December 31, 2001) 338,572 354,007
Securities held to maturity (fair value of $43,477 at
June 30, 2002; $43,393 at December 31, 2001) 41,327 41,884
Loans held for sale 52,095 65,532
Loans, net of unearned income 928,541 904,496
Less allowance for loan losses 14,194 13,952
------------------ ------------------
Net loans 914,347 890,544
Premises and equipment 22,314 21,713
Other real estate owned 2,452 3,029
Interest receivable 8,330 8,765
Other assets 18,348 18,468
Goodwill and other intangibles 25,846 26,478
------------------ ------------------
Total Assets $ 1,455,334 $ 1,478,235
================== ==================
Liabilities
Deposits:
Noninterest-bearing $ 156,820 $ 161,346
Interest-bearing 924,695 916,914
------------------ ------------------
Total Deposits 1,081,515 1,078,260
Interest, taxes and other liabilities 17,914 16,007
Fed funds purchased 8,950 26,500
Securities sold under agreements to repurchase 83,015 79,262
FHLB borrowings and other indebtedness 120,056 145,165
------------------ ------------------
Total Liabilities 1,311,450 1,345,194
------------------ ------------------
Stockholders' Equity
Common stock, $1 par value; 15,000,000 shares authorized ;
9,956,714 and 9,955,425 issued in 2002 and 2001; and
9,925,982 and 9,936,442 outstanding in 2002 and 2001, respectively 9,957 9,955
Additional paid-in capital 58,600 60,189
Retained earnings 71,394 62,566
Treasury stock, at cost (870) (424)
Accumulated other comprehensive income 4,803 755
------------------ ------------------
Total Stockholders' Equity 143,884 133,041
------------------ ------------------
Total Liabilities and Stockholders' Equity $ 1,455,334 $ 1,478,235
================== ==================
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See Notes to Consolidated Financial Statements.
FIRST COMMUNITY BANCSHARES, INC.
CONSOLIDATED STATEMENTS OF INCOME
(Dollars in Thousands Except Share and Per Share Data) (Unaudited)
-----------------------------------------------------------------------------------------------------------------------------
Six Months Three Months
Ended Ended
June 30 June 30
2002 2001 2002 2001
--------------- ------------- ------------- ----------------
Interest Income:
Interest and fees on loans held for investment $ 36,049 $ 36,391 $ 18,013 $ 18,262
Interest on loans held for sale 1,670 1,347 826 736
Interest on securities-taxable 6,999 4,871 3,621 2,193
Interest on securities-nontaxable 3,422 2,850 1,680 1,465
Interest on federal funds sold and deposits in banks 82 577 39 479
--------------- ------------- ------------- ----------------
Total interest income 48,222 46,036 24,179 23,135
--------------- ------------- ------------- ----------------
Interest Expense:
Interest on deposits 13,397 16,707 6,404 8,296
Interest on borrowings 5,180 5,161 2,603 2,586
--------------- ------------- ------------- ----------------
Total interest expense 18,577 21,868 9,007 10,882
--------------- ------------- ------------- ----------------
Net interest income 29,645 24,168 15,172 12,253
Provision for loan losses 1,959 1,732 1,022 985
--------------- ------------- ------------- ----------------
Net interest income after provision for loan losses 27,686 22,436 14,150 11,268
--------------- ------------- ------------- ----------------
Noninterest Income:
Fiduciary income 844 910 501 501
Service charges on deposit accounts 3,269 2,808 1,806 1,503
Other service charges, commissions and fees 681 676 355 199
Mortgage banking income 5,356 4,289 2,107 2,544
Other operating income 482 494 186 263
Gain on sale of securities 186 44 9 (7)
--------------- ------------- ------------- ----------------
Total noninterest income 10,818 9,221 4,964 5,003
--------------- ------------- ------------- ----------------
Noninterest Expense:
Salaries and employee benefits 11,549 9,665 5,746 4,994
Occupancy expense of bank premises 1,422 1,337 679 675
Furniture and equipment expense 1,065 959 562 496
Goodwill and core deposit amortization 580 1,119 293 563
Other operating expense 6,900 5,501 3,399 2,900
--------------- ------------- ------------- ----------------
Total noninterest expense 21,516 18,581 10,679 9,628
--------------- ------------- ------------- ----------------
Income before income taxes 16,988 13,076 8,435 6,643
Income tax expense 4,914 4,011 2,539 2,034
--------------- ------------- ------------- ----------------
Net Income $ 12,074 $ 9,065 $ 5,896 $ 4,609
=============== ============= ============= ================
Basic and diluted earnings per common share $ 1.21 $ 0.91 $ 0.59 $ 0.46
=============== ============= ============= ================
Weighted average basic shares outstanding 9,939,223 9,946,916 9,945,158 9,948,374
=============== ============= ============= ================
Weighted average diluted shares outstanding 9,985,704 9,964,161 9,993,812 9,976,501
=============== ============= ============= ================
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See Notes to Consolidated Financial Statements.
FIRST COMMUNITY BANCSHARES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars in Thousands) (Unaudited)
----------------------------------------------------------------------------------------------------------------------------
Six Months Ended
June 30
2002 2001
------------------ -------------------
Operating Activities
Cash flows from operating activities:
Net income $ 12,074 $ 9,065
Adjustments to reconcile net income to net cash provided by (used in)
operating activities:
Provision for loan losses 1,959 1,732
Depreciation of premises and equipment 785 743
Amortization of intangible assets 454 1,065
Net investment amortization and accretion 764 95
Net gain on the sale of assets (4,094) (2,486)
Mortgage loans originated for sale (301,189) (254,155)
Proceeds from sale of mortgage loans 319,274 233,933
Increase in interest receivable 435 797
Decrease in other assets (2,464) (482)
(Decrease) Increase in other liabilities 2,993 1,232
Other, net 428 (5)
--------------- ----------------
Net cash provided by (used in) operating activities 31,419 (8,466)
--------------- ----------------
Investing Activities
Cash flows from investing activities:
Proceeds from sales of securities available for sale 13,956 7,471
Proceeds from maturities and calls of securities available for sale 40,171 56,221
Proceeds from maturities and calls of investment securities 568 1,357
Purchase of securities available for sale (32,523) (74,645)
Net increase in loans made to customers (26,207) (35,652)
Purchase of premises and equipment (1,694) (1,478)
--------------- ----------------
Net cash used in investing activities (5,729) (46,726)
--------------- ----------------
Financing Activities
Cash flows from financing activities:
Net increase in demand and savings deposits 24,966 2,434
Net (decrease) increase in time deposits (21,512) 26,181
Net (decrease) increase in FHLB and other indebtedness (38,952) 23,627
Repayment of other borrowings (109) (8)
Acquisition of treasury stock (1,224) (377)
Dividends paid (4,971) (4,171)
--------------- ----------------
Net cash (used in) provided by financing activities (41,802) 47,686
--------------- ----------------
Cash and Cash Equivalents
Net decrease in cash and cash equivalents (16,112) (7,506)
Cash and cash equivalents at beginning of year 47,815 50,243
--------------- ----------------
Cash and cash equivalents at end of year $ 31,703 $ 42,737
=============== ================
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See Notes to Consolidated Financial Statements.
Additional
Common Paid-in Retained
Stock Capital Earnings
Balance January 1, 2001 9,052 35,273 78,097
Comprehensive income:
Net income - - 9,065
Other comprehensive income, net of tax:
Net unrealized gains on
securities available for sale - - -
Comprehensive income - - 9,065
------------ -------------- --------------
Common dividends declared
($.46 per share) - - (4,171)
Purchase 17,780 treasury shares at
$21.19 per share - - -
Treasury share distribution to ESOP 29
------------ ------------ --------------
Balance June 30, 2001 9,052 35,302 82,991
============ ============ ==============
Balance January 1, 2002 9,955 60,189 62,566
Comprehensive income:
Net income - - 12,074
Other comprehensive income, net of tax:
Net unrealized gains on
securities available for sale - - -
Comprehensive income - - 12,074
--------------
Common dividends declared
($.50 per share) - - (4,971)
10% stock dividend and fractional share
adjustment 2 (1,729) 1,725
Purchase 42,844 treasury shares at
$28.52 per share - - -
Treasury share distribution to ESOP 140
------------ ------------ --------------
Balance June 30, 2002 9,957 58,600 71,394
============ ============ ==============
Accumulated
Other
Treasury Comprehensive
Stock (Loss) Income Total
Balance January 1, 2001 (202) (1,538) 120,682
----------------
Comprehensive income:
Net income - - 9,065
Other comprehensive income, net of tax:
Net unrealized gains on
securities available for sale - 2,185 2,185
----------------
Comprehensive income - 2,185 11,250
------------ ---------------- --------------
Common dividends declared
($.46 per share) - - (4,171)
Purchase 17,780 treasury shares at
$21.19 per share (377) - (377)
Treasury share distribution to ESOP 378 407
------------ ---------------- --------------
Balance June 30, 2001 (201) 647 127,791
============ ================ ==============
Balance January 1, 2002 (424) 755 133,041
----------------
Comprehensive income:
Net income - - 12,074
Other comprehensive income, net of tax:
Net unrealized gains on
securities available for sale - 4,048 4,048
----------------
Comprehensive income - 4,048 16,122
----------------
Common dividends declared
($.50 per share) - - (4,971)
10% stock dividend and fractional share
adjustment (14) (16)
Purchase 42,844 treasury shares at
$28.52 per share (1,224) - (1,224)
Treasury share distribution to ESOP 792 932
------------ ---------------- --------------
Balance June 30, 2002 (870) 4,803 143,884
============ ================ ==============
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See Notes to Consolidated Financial Statements.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1. UNAUDITED FINANCIAL STATEMENTS
The unaudited consolidated balance sheet as of June 30, 2002, the unaudited consolidated statements of income for the three and six months ended June 30, 2002 and 2001 and the cash flows and changes in stockholders' equity for the six months ended June 30, 2002 and 2001 have been prepared by the management of First Community Bancshares, Inc. ("FCBI", the "Company", "Registrant" or the "Corporation"). In the opinion of management, all adjustments (including normal recurring accruals) necessary to present fairly the financial position of FCBI and subsidiaries at June 30, 2002 and its results of operations, cash flows, and changes in stockholders' equity for the three and six months ended June 30, 2002 and 2001 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, 2001 has been extracted from audited financial statements included in the Company's 2001 Annual Report to Stockholders. Certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States have been omitted. These financial statements should be read in conjunction with the financial statements and notes thereto included in the 2001 Annual Report of FCBI.
NOTE 2. RECLASSIFICATIONS
Certain amounts reflected in the December 31, 2001 balance sheet have been reclassified to conform to the balance sheet presentation used in preparation of the June 30, 2002 financial statements that are included in this periodic report on Form 10Q. The reclassification had no effect on net income or stockholders equity.
NOTE 3. STOCK DIVIDEND
On February 19, 2002, the Company's Board of Directors declared a 10% stock dividend to shareholders of record as of March 1, 2002, which was distributed March 28, 2002. Average shares outstanding and per share amounts included in the consolidated financial statements have been adjusted to give effect to the stock dividend. Stockholders equity beginning balances as of December 31, 2001 have been adjusted to reflect the effect of the 10% stock dividend. Fractional share adjustments are reflected in the current period ended June 30, 2002.
NOTE 4. MERGERS AND ACQUISITIONS
On December 7, 2001, the Company completed the acquisition of four branches of Branch Banking and Trust Company of Virginia ("BB&T") and F & M Bank - Southern Virginia ("F&M") located in Clifton Forge, Emporia, and Drakes Branch, Virginia. The total consideration paid of $3.6 million resulted in goodwill and identified intangible assets of approximately $3.8 million. The consummation of this transaction resulted in a $77 million cash payment to the Company (buyer) for the assumption of $114 million in new deposits and the purchase of approximately $31 million in loans.
NOTE 5. BORROWINGS
Federal Home Loan Bank ("FHLB") borrowings and other indebtedness are comprised of $100 million in convertible and callable advances and $20 million of noncallable term advances from the Federal Home Loan Bank of Atlanta.
The callable advances may be called (redeemed) in quarterly increments 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, converted to another FHLB credit product, or converted to an adjustable rate advance. The contractual maturity of the callable advances is 2010 and coupon rates are 5.47% to 6.02%.
The above referenced noncallable term borrowings with the FHLB of $20 million as of June 30, 2002 carry terms as follows: $10 million due in December 2002 at 4.30%; $8 million due in September 2003 at 5.95%; and $2 million due in September 2008 at 6.27%.
NOTE 6. COMMITMENTS AND CONTINGENCIES
The Company is currently a defendant in various legal actions and asserted claims involving lending and collection activities and other matters arising in the normal course of business. While the Company and legal counsel are unable to assess the ultimate outcome of each of these matters with certainty, they are of the belief that the resolution of these actions should not have a material adverse effect on the financial position of the Company.
In October 2000, the Circuit Court of Mercer County, West Virginia entered a directed verdict in favor of the Registrant in a case styled "Ann Tierney Smith, as Executrix of the Estate of Katherine B. Tierney, Ann Barclay Smith and Laurence E.
Tierney Smith vs. FCFT, Inc., et al, Civil Action No. 97-CV-408-K". On June 4, 2002, the West Virginia Supreme Court of Appeals, by a vote of 3 to 2, granted Plaintiffs and a defendant, Gentry, Locke, Rakes and Moore, a hearing on an appeal of the Circuit Court's decision. A hearing date for this appeal has not been set. Legal Counsel and management are both confident that the Registrant will prevail in this matter. A motion for one of the Supreme Court Justices to recuse himself from hearing this matter has been filed, due to an alleged conflict of interest stemming from the Justice's personal pending lawsuit against the Registrant as a dissenting shareholder of a predecessor bank acquired by the Registrant.
The Company conducts mortgage banking operations through United First Mortgage, Inc., ("UFM") a wholly-owned subsidiary of First Community Bank, N. A. The majority of loans originated by UFM are sold to larger national investors on a Service Released basis. Loans are sold under a Loan Sales Agreement which contains various repurchase provisions. These repurchase provisions give rise to a contingent liability for loans which may subsequently be submitted to the company for repurchase. The principal events which could result in a repurchase obligation are i.) the discovery of fraud or material inaccuracies in a sold loan file and ii.) a default on the first payment due after a loan is sold to the investor, coupled with a ninety day delinquency in the first year of the life of the loan. Other events and variations of these events could result in a loan repurchase under terms of other Loan Sales Agreements. The volume of loan repurchases is dependent on the quality of loan underwriting and systems employed by UFM for quality control in the production of mortgage loans. To date, only one such loan totaling $140,000 has been submitted for repurchase. Accordingly, loan repurchases have not had a material adverse effect on the financial position of UFM or the Company.
UFM also originates government guaranteed FHA and VA loans which are also sold to third party investors. The department of Housing and Urban Development (HUD) periodically audits loan files of government guaranteed loans and may require UFM to execute indemnification agreements on loans which do not meet certain predefined underwriting guidelines. To date, UFM has been required to execute only three such indemnification agreements for defaults which may occur over the five-year period following the indemnification. No losses have occurred under such agreements; accordingly loan indemnifications have not had a material adverse effect on the financial position of UFM or the Company.
NOTE 7. OTHER COMPREHENSIVE INCOME
The Company currently has one component of other comprehensive income, which includes unrealized gains and losses on securities available for sale and is detailed as follows:
Six Months Ended Three Months Ended
June 30 June 30 June 30 June 30
2002 2001 2002 2001
----------- --------- ----------- ----------
(Amounts in Thousands) (Amounts in Thousands)
Other Comprehensive Income:
Unrealized gains (losses) arising during the period $ 6,943 $ 3,686 $ 8,630 $ (589)
Tax (expense) benefit (2,783) (1,475) (3,452) 233
----------- --------- ----------- ----------
Unrealized gains (losses) arising during the period, net of tax 4,160 2,211 5,178 (356)
Reclassification adjustment for (gains) losses realized in net
income (186) (44) (9) 7
Tax (benefit) expense of reclassification 74 18 3 (2)
----------- --------- ----------- ----------
Other comprehensive income (loss) 4,048 2,185 5,172 (351)
Beginning accumulated other comprehensive gain (loss) 755 (1,538) (369) 998
----------- --------- ----------- ----------
Ending accumulated other comprehensive income $ 4,803 $ 647 $ 4,803 $ 647
=========== ========= =========== ==========
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NOTE 8. SEGMENT INFORMATION
The Company operates two business segments: community banking and mortgage banking. These segments are primarily identified by their products and services and the channels through which they are offered. The Community Banking segment consists of the Company's full-service bank that offers customers traditional banking products and services through various delivery channels.
The Mortgage Banking segment consists of mortgage brokerage facilities that originate, acquire, and sell residential mortgage products into the secondary market. In connection with those mortgage activities, the Company enters into forward commitments or derivatives to manage interest rate risk inherent in interest rate lock commitments made to prospective borrowers. The inventory of loans and loan commitments are hedged to protect the Company from fluctuations in the cash flows derived upon settlement of the loans with secondary market purchasers, and consequently, to achieve a desired margin upon delivery. The hedge transactions are used for risk mitigation and are not for trading purposes. The derivative
financial instruments derived from these hedging transactions are recorded at fair value in the Consolidated Balance Sheets and the changes in fair value are reflected in the Consolidated Statements of Income.
Information for each of the segments is presented below.
Six Months Ended June 30, 2002
(Amounts in Thousands)
Community Mortgage Parent Eliminations Total
Banking Banking
------------- ------------ ------------ ------------- --------------
Net interest income $ 28,980 $ 500 $ 125 $ 40 $ 29,645
Provision for loan losses 1,959 - - - 1,959
------------- ------------ ------------ ------------- --------------
Net interest income after provision
for loan losses 27,021 500 125 40 27,686
Other income 5,237 5,353 391 (163) 10,818
Other expenses 16,684 4,551 404 (123) 21,516
------------- ------------ ------------ ------------- --------------
Income before income taxes 15,574 1,302 112 - 16,988
Income tax expense 4,378 506 30 - 4,914
------------- ------------ ------------ ------------- --------------
Net income $ 11,196 $ 796 $ 82 $ - $ 12,074
============= ============ ============ ============= ==============
Average assets $ 1,456,184 $ 54,375 $ 138,003 $ (188,370) $ 1,460,192
============= ============ ============ ============= ==============
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Six Months Ended June 30, 2001
(Amounts in Thousands)
Community Mortgage Parent Eliminations Total
Banking Banking
------------- ------------ ------------ ------------ --------------
Net interest income $ 23,852 $ 23 $ 154 $ 139 $ 24,168
Provision for loan losses 1,732 - - - 1,732
------------- ------------ ------------ ------------ --------------
Net interest income after provision
for loan losses 22,120 23 154 139 22,436
Other income 5,044 4,289 (6) (106) 9,221
Other expenses 14,647 3,584 317 33 18,581
------------- ------------ ------------ ------------ --------------
Income (loss) before income taxes 12,517 728 (169) - 13,076
Income tax expense (benefit) 3,836 225 (50) - 4,011
------------- ------------ ------------ ------------ --------------
Net income $ 8,681 $ 503 $ (119) $ - $ 9,065
============= ============ ============ ============ ==============
Average assets $ 1,245,665 $ 39,106 $ 125,103 $ (168,086) $ 1,241,788
============= ============ ============ ============ ==============
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NOTE 9. RECENT ACCOUNTING DEVELOPMENTS
On June 29, 2001, the FASB approved Statements of Financial Accounting Standards No. 141, Business Combinations (Statement 141) and No. 142, Goodwill and Other Intangible Assets (Statement 142). These Statements significantly change the accounting for business combinations, goodwill, and intangible assets.
Statement 141 eliminated the pooling-of-interests method of accounting for business combinations except for qualifying business combinations that were initiated prior to July 1, 2001. The requirements of Statement 141 were effective for any business combination accounted for by the purchase method that was completed after June 30, 2001.
Statement 142 superseded APB Opinion No. 17, Intangible Assets. Under Statement 142, certain goodwill and indefinite lived intangible assets are no longer amortized but are reviewed annually for impairment, or more frequently if indications of impairment arise. Goodwill is required to be tested for impairment between the annual tests if an event occurs or circumstances change that more-likely-than-not reduce the fair value of a reporting unit below its carrying value. An indefinite lived intangible asset is required to be tested for impairment between the annual tests if an event occurs or circumstances change indicating that the asset might be impaired. Separable intangible assets that have finite lives continue to be amortized over their useful lives, for which Statement 142 does not impose a limit. Currently, goodwill within the scope of Statement 72 continues to be amortized.
Effective January 1, 2002, FCBI ceased amortization of certain goodwill in accordance with FASB Statement 142. The following table depicts the effect of Statement 142 on earnings and earnings per share for the six and three-month periods ended June 30, 2002 and 2001.
(Amounts in Thousands Except Earnings per Share Amounts)
Six Months Ended Three Months Ended
June 30, June 30,
2002 2001 2002 2001
----------- ------------ ----------- ----------
Reported net income $ 12,074 $ 9,065 $ 5,896 $ 4,609
Add back: goodwill amortization, net of tax - 714 - 359
----------- ------------ ----------- ----------
Adjusted net income $ 12,074 $ 9,779 $ 5,896 $ 4,968
=========== ============ =========== ==========
Basic and diluted earnings per share:
Reported net income per share $ 1.21 $ 0.91 $ 0.59 $ 0.46
Add back: goodwill amortization, net of tax - 0.07 - 0.03
----------- ------------ ----------- ----------
Adjusted net income per share $ 1.21 $ 0.98 $ 0.59 $ 0.49
=========== ============ =========== ==========
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In accordance with the new disclosure requirements of FASB Statement 142, the following information is presented regarding intangibles subject to amortization and those not subject to amortization.
As of December 31, 2001
------------------------------------------------------
(Amounts in Thousands)
Gross Net
Carrying Accumulated Carrying
Amount Amortization Amount
--------------- -------------- -------------
Goodwill subject to amortization $ 13,972 $ 2,761 $ 11,211
Goodwill not subject to amortization 23,259 9,120 14,139
--------------- -------------- -------------
Total goodwill 37,231 11,881 25,350
--------------- -------------- -------------
Core deposit intangibles subject to amortization 2,349 1,221 1,128
--------------- -------------- -------------
Total Goodwill and other intangible assets $ 39,580 $ 13,102 $ 26,478
=============== ============== =============
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The net carrying amount of goodwill of $25,350 as of December 31, 2001 is comprised of goodwill recorded in the community banking segment of $24,347 and goodwill recorded in the mortgage banking segment of $1,003.
The amortization expense for goodwill subject to amortization and core deposit intangibles for each of the next 5 years from December 31, 2001 is as follows:
(Amounts in Thousands) 2002 $ 1,165 2003 $ 1,105 2004 $ 1,086 2005 $ 1,078 2006 $ 1,038 |
FASB Statement 142 requires a transitional impairment test to be applied to all goodwill and other indefinite-lived intangible assets within the first six months after adoption. The impairment test involves identifying separate reporting units based on the reporting structure of the Corporation, then assigning all assets and liabilities, including goodwill, to these units. Goodwill is assigned based on the reporting unit benefiting from the factors that gave rise to the goodwill. Each reporting unit is then tested for goodwill impairment by comparing the fair value of the unit with its book value, including goodwill. If the fair value of the reporting unit is greater than its book value, no goodwill impairment exists. However, if the book value of the reporting unit is greater than its determined fair value, goodwill impairment may exist and further testing is required to determine the amount, if any, of the actual impairment loss. Any impairment loss determined with this transitional test would be reported as a change in accounting principle. The Corporation has completed its transitional impairment test of goodwill and based on current information, does not expect to record an impairment loss as a result of this test.
NOTE 10. EARNINGS PER SHARE
The Company's basic and diluted earnings per share were $0.59 and $1.21 for the three and six months ended June 30, 2002, respectively. For the corresponding periods of 2001, basic and diluted earnings per share were $0.46 and $0.91 (adjusted from $0.51 and $1.00, respectively, to reflect the 10% stock dividend). For the periods ending June 30, 2002, dilutive shares of 48,654 and 46,481 for the three and six month periods, respectively, did not have an impact on the Company's earnings per share.
NOTE 11. PROVISION AND ALLOWANCE FOR LOAN LOSSES
The Company's lending strategy stresses quality growth diversified by product, geography, and industry. All loans made by the Company are subject to a common credit underwriting structure. Loans are also subject to an annual review process based on the loan size and type. The Company also utilizes an ongoing review process to evaluate loans for changes in credit risk. This process serves as the primary means by which the Company evaluates the adequacy of loan loss allowances. The total loan loss allowance is divided into three categories: i) specifically identified loan relationships which are on non-accrual status, ninety days past due or more and loans with elements of credit weakness, ii) formula allowances, and iii) special allocations addressing other qualitative factors including industry concentrations, economic conditions, staffing and other conditions.
Specific allowances are established to cover loan relationships, which are identified with significant cash flow weakness and for which a collateral deficiency may be present. The allowances established under the specific identification method are judged based upon the borrower's estimated cash flow or projected liquidation value of related collateral.
Formula allowances, based on historical loss experience, are available to cover homogeneous groups of loans not individually evaluated. The formula allowance is developed and evaluated against loans in general by specific category (commercial, mortgage, and consumer). To determine the amount of allowance needed for each loan category, an estimated loss percentage is developed based upon historical loss percentages. The calculated percentage is used to determine the estimated allowance excluding any relationships specifically identified and individually evaluated. While allocations are made to specific loans and classifications within the various categories of loans, the allowance is available for all loan losses. In developing the allowance for loan losses, the Company also considers various inherent risk factors, such as current economic conditions, the level of delinquencies and nonaccrual loans, trends in the volume and term of loans, anticipated impact from changes in lending policies and procedures, and any concentration of credits in certain industries or geographic areas.
Management continually evaluates the adequacy of the allowance for loan losses and makes specific adjustments to the reserve based on the results of risk analysis in the credit review process, the recommendation of regulatory agencies, and other factors, such as loan loss experience and prevailing economic conditions. Management considers the level of allowance adequate based on the current risk profile in the loan portfolio.
INDEPENDENT ACCOUNTANTS' REVIEW REPORT
The Audit Committee of the Board of Directors First Community Bancshares, Inc.
We have reviewed the accompanying consolidated balance sheet of First Community Bancshares, Inc. (First Community) as of June 30, 2002 and the related consolidated statements of income for the three and six month periods ended June 30, 2002 and 2001and the consolidated statements of cash flows and changes in stockholders' equity for the six month periods ended June 30, 2002 and 2001. These consolidated financial statements are the responsibility of the Company's management.
We conducted our reviews in accordance with standards established by the American Institute of Certified Public Accountants. A review of interim financial information consists principally of applying analytical procedures to financial data, and making inquiries of persons responsible for financial and accounting matters. It is substantially less in scope than an audit conducted in accordance with auditing standards generally accepted in the United States, which will be performed for the full year with the objective of expressing an opinion regarding the financial statements taken as a whole. Accordingly, we do not express such an opinion.
Based on our reviews, we are not aware of any material modifications that should be made to the accompanying consolidated financial statements referred to above for them to be in conformity with accounting principles generally accepted in the United States.
We have previously audited, in accordance with auditing standards generally accepted in the United States, the consolidated balance sheet of First Community as of December 31, 2001, and the related consolidated statements of income, changes in stockholders' equity, and cash flows for the year then ended (not presented herein); and in our report dated February 8, 2002, we expressed an unqualified opinion on those consolidated financial statements. In our opinion, the information set forth in the accompanying consolidated balance sheet as of December 31, 2001, is fairly stated, in all material respects, in relation to the consolidated balance sheet from which it has been derived.
/s/ Ernst & Young LLP Charleston, West Virginia July 16, 2002 |
FIRST COMMUNITY BANCSHARES, INC.
PART I. ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
The following discussion and analysis is provided to address information about the Company's financial condition and results of operations, which is not otherwise apparent from the consolidated financial statements included in this report. This discussion and analysis should be read in conjunction with the 2001 Annual Report to Shareholders and the other financial information included in this report.
First Community is a multi-state bank holding company headquartered in Bluefield, Virginia with total assets of $1.46 billion at June 30, 2002. First Community through its community banking subsidiary, First Community Bank, N. A. ("FCBNA"), provides financial, mortgage brokerage and origination and trust services to individuals and commercial customers through 38 full-service banking locations in West Virginia, Virginia and North Carolina as well as 11 mortgage brokerage facilities operated by United First Mortgage, Inc. ("UFM") a wholly owned subsidiary of FCBNA.
FORWARD LOOKING STATEMENTS
First Community Bancshares, Inc. ("FCBI", the "Company", "Registrant" or the "Corporation") may from time to time make written or oral "forward-looking statements", including statements contained in the Corporation's filings with the Securities and Exchange Commission (including this Quarterly Report on Form 10-Q and the Exhibits hereto and thereto), in its reports to stockholders and in other communications by the Corporation, which are made in good faith by the Corporation pursuant to the "safe harbor" provisions of the Private Securities Litigation Reform Act of 1995.
These forward-looking statements include, among others, statements with respect to the Corporation's beliefs, plans, objectives, goals, guidelines, expectations, anticipations, estimates and intentions that are subject to significant risks and uncertainties and are subject to change based on various factors (many of which are beyond the Corporation's control). The words "may", "could", "should", "would", "believe", "anticipate", "estimate", "expect", "intend", "plan" and similar expressions are intended to identify forward-looking statements. The following factors, among others, could cause the Corporation's financial performance to differ materially from that expressed in such forward-looking statements: the strength of the United States economy in general and the strength of the local economies in which the Corporation conducts operations; the effects of, and changes in, trade, monetary and fiscal policies and laws, including interest rate policies of the Board of Governors of the Federal Reserve System; inflation, interest rate, market and monetary fluctuations; the timely development of competitive new products and services of the Corporation and the acceptance of these products and services by new and existing customers; the willingness of customers to substitute competitors' products and services for the Corporation's products and services and vice versa; the impact of changes in financial services' laws and regulations (including laws concerning taxes, banking, securities and insurance); technological changes; the effect of acquisitions, including, without limitation, the failure to achieve the expected revenue growth and/or expense savings from such acquisitions; the growth and profitability of the Corporation's noninterest or fee income being less than expected; unanticipated regulatory or judicial proceedings; changes in consumer spending and saving habits; and the success of the Corporation at managing the risks involved in the foregoing.
The Corporation cautions that the foregoing list of important factors is not exclusive. The Corporation does not undertake to update any forward-looking statement, whether written or oral, that may be made from time to time by or on behalf of the Corporation.
RESULTS OF OPERATIONS
Year to date 2002 net income totaled $12.1 million, $3.0 million, or 33% higher than net income of $9.1 million reported for the corresponding period in 2001. Net income for the first six months of the current and prior year resulted in basic and diluted earnings per share of $1.21 versus $0.91 (adjusted for the 10% stock dividend), a 32.97% increase. The largest factors contributing to this increase are a $5.5 million increase in net interest income (largely attributable to a $2.7 million increase in investment security income and a $3.3 million decrease in interest expense), and a $1.1 million increase in mortgage banking income. Partially offsetting these increases was an increase of approximately $1.9 million in salaries and benefits and a $1.4 million increase in other operating expenses.
Net income for the second quarter of 2002 of $5.9 million increased $1.3 million over second quarter 2001 income. Reflected in this increase were a $1.6 million increase in investment security income and a $1.9 million decrease in interest expense, with net interest income increasing by $2.9 million. Total noninterest income decreased slightly but remained relatively consistent with the second quarter 2001 while total noninterest expense increased $1.1 million when comparing the second quarter of 2002 to that of 2001. Basic and diluted earnings per share were $0.59 for the quarter ended June 30, 2002 compared to $0.46 for the same period of 2001.
NET INTEREST INCOME-SIX MONTH COMPARISON (SEE TABLE I)
Net interest income (NII), the largest contributor to earnings was $29.6 million for the six months ended June 30, 2002 compared with $24.2 million for the corresponding period in 2001. For purposes of this discussion, comparison of NII is done on a tax equivalent basis which provides a common basis for comparing yields on earning assets exempt from federal income taxes to those which are fully taxable. Table I on page 16 displays taxable equivalent yields on earning assets and taxable equivalent Net Interest Spread (NIS) and Net Interest Margin (NIM). As indicated on Table I, tax equivalent net interest income totaled $31.6 million for the six months ended June 30, 2002 an increase of $5.8 million from the $25.8 million reported in the first half of 2001. This increase in net interest income stems from an increase in average earning assets of $213.2 million. The yield on earning assets decreased 97 basis points between 2001 and 2002 but was offset by a 127 basis point decline in the cost of funds. The impact of these rate and volume changes was an increase in the net interest rate spread from 3.91% to 4.21% as of June 30, 2002, a 30 basis point increase in the spread between interest earning assets and interest bearing liabilities over June 30, 2001. The Company's tax equivalent net interest margin of 4.70% for June 30, 2002 reflects an increase of 13 basis points compared to the first half of 2001 when the tax equivalent net interest margin for the six months ended was 4.57%.
As indicated in Table I, the overall tax equivalent yield on average earning assets decreased 97 basis points from 8.44% to 7.47% for the six months ended June 30, 2002, compared to June 30, 2001. Compared to the same period of 2001, average loans held for investment for the six months ended June 30, 2002 increased $91.6 million while the overall tax equivalent loan yield decreased 98 basis points from the prior year to 7.96%. Likewise, the average loans held for sale balance increased $12.5 million and the yield decreased by 57 basis points to 6.88%. Decreases in key lending rates, (throughout 2001, there were 11 reductions in the Federal Funds rate with an associated 475 basis point reduction in the prime loan rate) led the reduction in the Company's overall loan yield. The increase in average outstanding loans was funded largely through increases in the level of customer deposits and, to a lesser degree, through wholesale borrowings from the Federal Home Loan Bank.
In addition, the taxable equivalent yields on securities available for sale decreased 70 basis points to 6.06% while the tax equivalent yield on investment securities held to maturity remained almost the same at 8.16%, a 3 basis point decrease. The yield on interest-bearing balances with banks decreased substantially to 1.65% in concert with the above referenced 11 cuts in the Federal Funds rate. The $127.6 million increase in the average balance of securities available for sale when comparing the six months ended June 30, 2002 to 2001, was largely the result of investment of funds received from new deposit growth in existing markets and deposits obtained in the acquisition of the four new BB&T and F&M branches in the last quarter of 2001.
The cost of interest-bearing liabilities decreased by 127 basis points from 4.53% for the first six months of 2001 to 3.26% for the same period of 2002 while the average volume increased $175.5 million. Average FHLB borrowings increased by $8.3 million compared to the prior year while the rate paid decreased 11 basis points to 5.96% from 6.07%. The rate paid on other borrowings remained virtually the same compared to the rate paid in the same period last year. The average balances of interest-bearing demand and savings deposits increased $49.4 and $29.8 million, respectively, while the corresponding average rate on these deposits declined 76 and 38 basis points. Average time deposits increased $60.2 million while the average rate paid decreased 164 basis points from 5.66% in 2001 to 4.02% in 2002. Average Fed Funds and repurchase agreements increased $27.7 million when comparing the six months ended June 30, 2002 to June 30, 2001 while the average rate decreased 176 basis points. Additionally, average noninterest-bearing demand deposits increased $28.8 million in 2002 compared to the six months ended June 30, 2001.
NET INTEREST INCOME -QUARTERLY COMPARISON (SEE TABLE II)
NII for the quarter ended June 30, 2002 was $15.2 million, up $2.9 million from the comparable quarter in 2001 as indicated in the Consolidated Statements of Income. A comparison of the second quarter of 2002 to the second quarter of 2001 on a taxable equivalent basis (refer to Table II) reflects an increase in net interest income of $3.0 million. A 128 basis point decrease in rate paid on interest-bearing liabilities offset an 86 basis point decline in the average rate earned on interest-earning assets, increasing the net interest margin 24 basis points to 4.77% for the quarter ended June 30, 2002. When comparing the two quarters, average earning assets increased $195.3 million in the second quarter of 2002 compared to the second quarter of 2001, which included increases in average securities available for sale of $136.7 million and average loans held for investment of $91.3 million. In the second quarter of 2002, average interest-bearing deposits with banks decreased $34.7 million and average loans held for sale increased $4.7 million when compared to the second quarter of the prior year. Total interest-bearing liabilities increased $164.9 million with average interest-bearing deposits increasing $128.9 million, while the average rate paid on these deposits dropped 140 basis points. For the same periods, average Fed Funds purchased and repurchase agreements increased $29.4 million as the average rate paid decreased 159 basis points.
TABLE I
AVERAGE BALANCE SHEETS AND NET INTEREST INCOME ANALYSIS
(Dollars in Thousands)
Six Months Ended Six Months Ended
June 30, 2002 June 30, 2001
Average Interest Yield/Rate Average Interest Yield/Rate
Balance (1) (2) (2) Balance (1) (2) (2)
--------------------------- ---------- ---------------------------- ----------
Earning Assets:
Loans (3)
Loans Held for Sale $ 48,941 $ 1,670 6.88% $ 36,464 $ 1,347 7.45%
Loans Held for Investment:
Taxable 909,227 35,875 7.96% 816,535 36,125 8.92%
Tax-Exempt 6,452 268 8.38% 7,509 410 11.01%
------------- ------------ ---------- -------------- ------------ ----------
Total 915,679 36,143 7.96% 824,044 36,535 8.94%
Allowance for Loan Losses (14,448) (12,513)
------------- ------------ -------------- ------------
Net Total 901,231 36,143 811,531 36,535
Securities Available For Sale:
Taxable 257,761 6,928 5.42% 152,765 4,768 6.29%
Tax-Exempt 94,219 3,654 7.82% 71,615 2,759 7.77%
------------- ------------ ---------- -------------- ------------ ----------
Total 351,980 10,582 6.06% 224,380 7,527 6.76%
Held to Maturity Securities:
Taxable 1,992 71 7.19% 2,786 103 7.46%
Tax-Exempt 39,563 1,611 8.21% 39,747 1,624 8.24%
------------- ------------ ---------- -------------- ------------ ----------
Total 41,555 1,682 8.16% 42,533 1,727 8.19%
Interest Bearing Deposits 10,025 82 1.65% 25,577 577 4.55%
Fed Funds Sold - - 0.00% - - 0.00%
------------- ------------ ---------- -------------- ------------ ----------
Total Earning Assets 1,353,732 50,159 7.47% 1,140,485 47,713 8.44%
------------- ------------ -------------- ------------
Other Assets 106,460 101,303
------------- --------------
Total $ 1,460,192 $ 1,241,788
============= ==============
Interest-Bearing Liabilities:
Demand Deposits $ 188,700 992 1.06% $ 139,302 1,256 1.82%
Savings Deposits 160,282 923 1.16% 130,472 999 1.54%
Time Deposits 575,339 11,482 4.02% 515,094 14,452 5.66%
Fed Funds Purchased & Repurchase
Agreements 81,939 929 2.29% 54,210 1,090 4.05%
FHLB Convertible, Callable Advances 133,619 3,949 5.96% 125,276 3,770 6.07%
Other Borrowings 10,108 300 5.99% 10,175 301 5.97%
------------- ------------ ---------- -------------- ------------ ----------
Total Interest-bearing Liabilities 1,149,987 18,575 3.26% 974,529 21,868 4.53%
Demand Deposits 155,810 127,053
Other Liabilities 15,592 14,649
Stockholders' Equity 138,803 125,557
------------- --------------
Total $ 1,460,192 $ 1,241,788
============= ==============
Net Interest Income $31,584 $25,845
============ ============
Net Interest Rate Spread (3) 4.21% 3.91%
========== ==========
Net Interest Margin 4.70% 4.57%
========== ==========
|
(1) Interest amounts represent taxable equivalent results for the first six
months of 2002 and 2001.
(2) Fully Taxable Equivalent-Using the Federal statutory rate of 35%.
(3) Nonaccrual loans are included in average balances outstanding with no
related interest income.
TABLE II
AVERAGE BALANCE SHEETS AND NET INTEREST INCOME ANALYSIS
(Dollars in Thousands)
Three Months Ended Three Months Ended
June 30, 2002 June 30, 2001
Average Interest Yield/Rate Average Interest Yield/Rate
Balance (1) (2) (2) Balance (1) (2) (2)
------------------- ---------- --------- -------------- ---------- --------------
Earning Assets:
Loans (3)
Loans Held for Sale $ 49,222 826 6.73% $ 44,559 736 6.63%
Loans Held for Investment:
Taxable 910,759 17,925 7.89% 818,724 $ 18,132 8.88%
Tax-Exempt 6,560 136 8.32% 7,332 200 10.95%
------------------- ---------- -------------- ---------- --------------
Total 917,319 18,061 7.90% 826,056 18,332 8.90%
Reserve for Loan Losses (14,470) (12,617)
------------------- ---------- -------------- ----------
Net Total 902,849 18,061 813,439 18,332
Securities Available For Sale:
Taxable 260,109 3,588 5.53% 140,780 2,148 6.12%
Tax-Exempt 92,612 1,780 7.71% 75,249 1,442 7.69%
------------------- ---------- --------- -------------- ---------- --------------
Total 352,721 5,368 6.10% 216,029 3,590 6.67%
Investment Securities:
Taxable 1,930 33 6.86% 2,393 45 7.54%
Tax-Exempt 39,464 804 8.17% 39,763 812 8.19%
------------------- ---------- --------- -------------- ---------- --------------
Total 41,394 837 8.11% 42,156 857 8.16%
Interest Bearing Deposits 9,655 39 1.62% 44,367 479 4.33%
Fed Funds Sold - - - -
------------------- ---------- --------- -------------- ---------- --------------
Total Earning Assets 1,355,841 25,131 7.43% 1,160,550 23,994 8.29%
Other Assets 107,732 99,617
------------------- --------------
Total $ 1,463,573 $ 1,260,167
=================== ==============
Interest-Bearing Liabilities:
Demand Deposits $ 188,857 502 1.07% $ 140,792 558 1.59%
Savings Deposits 170,077 542 1.28% 130,463 442 1.36%
Time Deposits 567,715 5,361 3.79% 526,449 7,296 5.56%
------------------- ---------- --------- -------------- ---------- --------------
926,649 6,405 2.77% 797,704 8,296 4.17%
Fed Funds Purchased & Repurchase
Agreements 84,958 482 2.28% 55,573 536 3.87%
FHLB Convertible, Callable Advances 132,253 1,971 5.98% 125,549 1,899 6.07%
Other Borrowings 10,058 150 5.98% 10,173 151 5.95%
------------------- ---------- --------- -------------- ---------- --------------
Total Interest-bearing Liabilities 1,153,918 9,008 3.13% 988,999 10,882 4.41%
Demand Deposits 154,667 129,605
Other Liabilities 14,580 14,556
Stockholders' Equity 140,408 127,007
------------------- --------------
Total $ 1,463,573 $ 1,260,167
=================== ==============
Net Interest Income $ 16,123 $ 13,112
========== ==========
Net Interest Rate Spread (3) 4.30% 3.88%
========= ==============
Net Interest Margin 4.77% 4.53%
========= ==============
|
(1) Interest amounts represent taxable equivalent results for the three months
ended June 2002 and 2001.
(2) Fully Taxable Equivalent-Using the Federal statutory rate of 35%.
(3) Nonaccrual loans are included in average balances outstanding with no
related interest income.
PROVISION AND ALLOWANCE FOR LOAN LOSSES
The allowance for loan losses was $14.2 million on June 30, 2002, up from $14 million at December 31, 2001 and $12.7 million on June 30, 2001. The provision and underlying allowance for loan losses are quantified through a series of objective measures, review of economic indications, and the estimation of levels of losses within various loans and loan types that portray inherent weaknesses. To maintain a balance in the allowance for loan losses sufficient to absorb probable loan losses, charges are made to the provision for loan losses. The year to date and second quarter 2002 provisions of $2.0 million and $1.0 million, respectively, compare to the $1.7 million and $985,000 for the corresponding periods in 2001. The respective provisions are a result of management's formal analysis to establish the allowance for loan losses at a level sufficient to cover loan growth, absorb current period net charge-offs and to account for an increasing trend in national charge offs as supported by statistically compiled industry data suggesting that current economic conditions will continue to reflect an increase in national loss trends for the near term.
FCBI's allowance for loan loss activity for the three and six month periods ended June 30, 2002 and June 30, 2001 is as follows:
For the Three Months Ended For the Six Months Ended
June 30 June 30
(Amounts in Thousands) (Amounts in Thousands)
2002 2001 2002 2001
------------- ------------ ------------- -------------
Beginning balance $ 14,271 $ 12,408 $ 13,952 $ 12,303
Provision 1,022 985 1,959 1,732
Charge-offs (1,243) (1,045) (2,061) (1,906)
Recoveries 144 340 344 559
------------- ------------ ------------- -------------
Ending Balance $ 14,194 $ 12,688 $ 14,194 $ 12,688
============= ============ ============= =============
|
Based on the allowance for loan losses of approximately $14.2 million and $12.7 million at June 30, 2002 and 2001, respectively, the allowance to loans held for investment ratios were 1.53% and 1.50% at the respective dates.
Net charge-offs for the three and six months of 2002 were $1.1 million and $1.7 million compared with $705,000 and $1.3 million for the corresponding periods in 2001. Expressed as a percentage of average loans held for investment, net charge-offs were .12% and .19% for the three and six month periods of 2002, and .08% and .16% for the same periods of 2001. The $370,000 increase in net charge-offs between the six month periods ended June 30, 2001 and 2002 was largely due to a $273,000 commercial loan charge-off of a loan made to a single borrower in the residential development business. Consumer loan charge offs reflected little change for the comparable periods. As of June 30, 2002, the allowance as a percentage of non-performing loans was 324% compared to 280% at December 31, 2001. The increase in this coverage ratio reflects the $242,000 increase in the allowance for loan losses and a $600,000 decrease in nonperforming loans since December 31, 2001.
Following the events of September 11, 2001 the Company reviewed credits with particular exposure to new weaknesses in the economy. In particular, the Company has reviewed loans to the hospitality industry. The Company currently has $51.2 million in loans to owners/operators of hotels and motels. One credit totaling $5.1 million has displayed signs of weakness and vulnerability to prevailing lower occupancy rates. Although this loan continues to perform, the Company has considered the current inherent risk of this loan in its monthly allowance for the loan loss analysis.
NONINTEREST INCOME
Non-interest income consists of all revenues, which are not included in interest and fee income related to earning assets. Total non-interest income increased approximately $1.6 million, or 17.32% from $9.2 million for the six months ended June 30, 2001 to $10.8 million for the corresponding period in 2002. The largest portion of this increase, $1.1 million, resulted from the mortgage brokerage operations of UFM, which recognized approximately $5.4 million of other income in 2002 versus $4.3 million for the comparable six-month period in 2001. This increase is directly tied to the increased loan production of UFM in late 2001 and the first half of 2002 compared to production in the corresponding period of 2001. When comparing the first six months of 2002 to that of 2001 exclusive of UFM, noninterest income increased $530,000, or 10.75%. This increase is largely attributable to a $461,000, or a 16.42% increase in service charges on deposit accounts (primarily the result of a new customer-sensitive overdraft program that allows well-managed customer deposit accounts greater flexibility in managing overdrafts and that, in turn, produced higher levels of overdraft charges
with minimal charge-offs of overdrawn accounts), and a $142,000 increase in security gains both of which were partially offset by a $66,000 decrease in fiduciary income. Fiduciary earnings correspond to the asset management fees recorded and have declined from the prior year as a direct result of a reduction in estate and trust management activity and lower market values and yields on assets under management. Second quarter trust revenues did, however, return to a level comparable to the second quarter of 2001.
Total noninterest income for the second quarter of 2002 compared to the second quarter of 2001 remained relatively the same, decreasing by only $39,000 (less than 1%), even though certain individual income statement items reflected larger fluctuations. Mortgage banking income and other operating income decreased $437,000 and $77,000, respectively, while service charges on deposit accounts and other service charges, commissions and fees increased $303,000 and $156,000, respectively.
NONINTEREST EXPENSE
Non-interest expense totaled $21.5 million in the first six months of 2002, increasing $2.9 million over the corresponding period in 2001. This increase is primarily attributable to a $1.9 million increase in salaries and benefits, $510,000 of which was due to the acquisition of the four BB&T & F&M branches in the fourth quarter of 2001, along with a $614,000 increase in salaries and commissions in the mortgage operations of UFM (mostly due to increased loan production) and a general increase in salaries as staffing needs at several locations were satisfied in order to support new infrastructure and continued growth.
Also impacting the increase in noninterest expense for the six months ended June 30, 2002 compared to 2001 were increased other operating costs associated with UFM of $347,000 (again, largely tied to increased loan production), increases in other operating expenses of $163,000 and an increase of $92,000 in OREO expenses. Increased costs such as data communications, supplies, advertising and other service fees account for a large portion of the remaining increase.
In the first half of 2002, occupancy expense increased by $85,000 when compared to the first half of 2001, $69,000 of which was due to the new branches while additional occupancy expenses of UFM were largely responsible for the remainder. Furniture, fixtures and equipment expense increased $106,000, $48,000 of which was attributable to the new branches and UFM, with the majority of the remaining increase due to additional depreciation on new software and hardware utilized in the Information Technology department and throughout the Company.
With the adoption of FASB Statement No. 142, the Company ceased amortization of certain goodwill beginning January 1, 2002, as required by the Statement. Cessation of such amortization decreased goodwill expense by $714,000; however, additional amortization associated with the new branches was recorded and resulted in a net decrease of $539,000 during the first six months of 2002 compared to the same period last year. On a quarterly basis, the net effect of the adoption of FASB Statement 142 along with the additional of goodwill associated with the new branches was a decrease in amortization expense of $270,000 in the second quarter of 2002 compared to the same period of 2001.
Noninterest expense for the three months ended June 30, 2002 totaled $10.7 million, a $1.1 million dollar increase over the $9.6 million for the quarter ended June 30, 2001. As in the year to date discussion, the majority of this increase was a $752,000 increase in salaries and employee benefits which is largely attributed to the branches acquired in December 2001 ($278,000), increases due to higher loan origination activity ($91,000) of UFM in 2002 and a general increase in salaries along with the addition of personnel Company-wide accounting for the difference. Other operating expenses increased $499,000 largely due to increased data communication costs and equipment installation at the new branches and increased advertising costs associated with a series of campaigns targeted at increasing deposits and the Company's rollout of its internet banking product.
Furniture and equipment expense increased $66,000 for the quarter ended June 30, 2002 compared to June 30, 2001. As discussed earlier, this additional expense was associated with the new branches and increased costs associated with data processing and communication equipment.
The effective income tax rate has been impacted by the Company's continued emphasis on the utilization of tax-exempt municipal securities and the discontinuance of amortization of goodwill that was not deductible for income tax purposes. Municipal securities have offered an attractive tax equivalent yield, helped counter the effect of the declining interest rate environment and have lowered the Company's effective tax rate.
FINANCIAL POSITION
SECURITIES
Investment securities, which are purchased with the intent to hold until maturity, totaled $41.3 million at June 30, 2002, a decrease of $557,000 from December 31, 2001. This 1.3% decrease is largely the result of maturities and calls within the portfolio during the first half of 2002. The market value of investment securities held to maturity was 105.2% and 103.6% of book value at June 30, 2002 and December 31, 2001, respectively. The market value of fixed rate debt securities reacts
inversely to rising interest rates; consequently, recent trends in interest rates have had a positive effect on the underlying market value since December 31, 2001, due to a general shift in market offering rates for similar securities, and as a result of the securities markets current bias toward the interest rate environment. However, the target Federal Funds rate and the prime loan rates have remained unchanged since year-end 2001.
Securities available for sale were $338.6 million at June 30, 2002 compared to $354.0 million at December 31, 2001, a decrease of $15.4 million. This change reflects the purchase of $32.5 million in securities, $20.5 million in maturities and calls, the sale of $13.9 million in securities as well as the continuation of larger pay-downs on mortgage-backed securities and CMO's triggered by the rate environment. Securities available for sale are recorded at their estimated fair market value. The unrealized gain or loss, which is the difference between amortized cost and market value, net of related deferred taxes, is recognized in the Stockholders' Equity section of the balance sheet as either accumulated other comprehensive income or loss. The unrealized gains after taxes of $4.8 million at June 30, 2002, represents an increase from the $755,000 gain at December 31, 2001 due to market value increases in the first six months of 2002.
LOAN PORTFOLIO
LOANS HELD FOR SALE
The relative size of the portfolio of loans originated by the Company's mortgage brokerage division, UFM, and held for sale was impacted greatly by the refinancing activity that occurred during 2001. Average loans held for sale (see Table I) increased $12.5 million during the first half of 2002 compared to the first half of 2001 due to a substantial increase in mortgage purchase and refinance activity prompted by the lower interest rate environment.
Due to the increased volume of loans delivered to investors in the first six months of 2002, the actual loans funded and in the process of delivery declined from year-end 2001 by $13.4 million to $52.1 million at June 30, 2002 despite the year to date average increase of $12.5 million.
The loan to deposit ratio (including loans held for sale) increased slightly from the year-end 2001 ratio of 89.96% to 90.67% on June 30, 2002, however, both of these ratios remain well below the June 30, 2001 94.75%. The lower levels of loans to deposits are due, in part, to the lower loan to deposit ratios of the branches acquired in the fourth quarter of 2001.
LOANS HELD FOR INVESTMENT
Total loans held for investment increased $24.0 million from $904.5 million at December 31, 2001 to $928.5 million at June 30, 2002. However, the substantial increase in deposits during the latter half of 2001 and the first half of 2002 has lowered the loan to deposit ratio from its June 30, 2001 level. The loan to deposit ratio, using only loans held for investment (excluding loans held for sale), was 85.86% on June 30, 2002, 83.88% on December 31, 2001 and 91.05% on June 30, 2001.
Average loans held for investment (see Table I) increased $91.6 million when comparing the first six months of 2002 to the same period of 2001, the result of sales and marketing efforts, a concentration on relationship management and development, and the acquisition of approximately $31 million of loans in December 2001 as part of the BB&T and F&M branches.
The held for investment loan portfolio continues to be diversified among loan types and industry segments. Commercial and commercial real estate loans represent the largest segment of the portfolio, comprising $406.8 million or 43.82% of total loans at June 30, 2002 compared to $421.9 million or 46.65% of total loans at December 31, 2001. Residential real estate loans increased to $308.0 million or 33.17% of total loans at June 30, 2002 compared to $267.1 million or 29.53% of the total loan portfolio at December 31, 2001. Loans to individuals also decreased slightly to $131.9 million or 14.20% of total loans at June 30, 2002 from $137.1 million or 15.16% of total loans at December 31, 2001. Construction loans were $80.7 million at June 30, 2002 or 8.69% of total loans compared to $77.4 million at December 31, 2001 or 8.56% of total loans. The construction loan segment includes multifamily residential properties and commercial real estate development properties. A portion of these loans will move into the commercial real estate portfolio as the projects are completed. Other loans were $1.2 million at June 30, 2002 compared to $961,000 at December 31, 2001.
Loan Portfolio Overview
(Dollars in Thousands)
June 30, 2002 December 31, 2001 June 30, 2001
---------------------------- ---------------------------- -----------------------------
Amount Percent Amount Percent Amount Percent
-------------- --------- --------------- --------- ---------------- ---------
Loans Held for Investment:
Commercial and Agricultural $ 131,672 14.18% $ 162,173 17.93% $ 93,101 11.01%
Commercial Real Estate 275,155 29.64% 259,717 28.72% 237,775 28.14%
Residential Real Estate 307,990 33.17% 267,139 29.53% 305,358 36.12%
Construction 80,661 8.69% 77,402 8.56% 73,716 8.72%
Consumer 131,879 14.20% 137,104 15.16% 134,780 15.94%
Other 1,184 0.13% 961 0.11% 660 0.08%
---------- --------- ----------- --------- ------------ ---------
Total $ 928,541 100.00% $ 904,496 100.00% $ 845,390 100.00%
========== ========= =========== ========= ============ =========
Loans Held for Sale $ 52,095 $ 65,532 $ 34,303
========== =========== ============
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NON-PERFORMING ASSETS
Non-performing assets are comprised of loans on non-accrual status, loans contractually past due 90 days or more and still accruing interest and other real estate owned ("OREO"). Non-performing assets were $6.8 million at June 30, 2002, $7.4 at March 31, 2002 and $8.0 million at December 31, 2001, or 0.73%, 0.81% and 0.88% of total loans and OREO, respectively. The following schedule details non-performing assets by category at the close of each of the last five quarters:
(In Thousands of Dollars) June 30 March 31 December 31 September 30 June 30 March 31
2002 2002 2001 2001 2001 2001
------------- ------------- -------------- -------------- ------------ ------------
Nonaccrual $ 4,131 $ 4,644 $ 3,633 $ 5,361 $ 5,167 $ 5,192
Ninety Days Past Due 254 192 1,351 1,418 1,442 1,393
Other Real Estate Owned 2,452 2,538 3,029 2,595 2,614 2,591
------------- ------------- -------------- -------------- ------------ ------------
$ 6,837 $ 7,374 $ 8,013 $ 9,374 $ 9,223 $ 9,176
============= ============= ============== ============== ============ ============
Restructured loans
performing in accordance
with modified terms $ 440 $ 523 $ 449 $ 443 $ 445 $ 446
============= ============= ============== ============== ============ ============
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At June 30, 2002, nonaccrual loans decreased $513,000 from March 31, 2002, while ninety day past due loans increased only $62,000. Ongoing activity within the classification and categories of non-performing loans continues to include collections on delinquencies, foreclosures and movements into or out of the non-performing classification as a result of changing customer business conditions. The $513,000 decrease in nonaccrual loans in the second quarter is largely attributable to a single charge off for $227,000. OREO decreased $86,000 during the second quarter of 2002 from March 31, 2002. The decrease in OREO is due to the foreclosure and disposition of several properties with no large additions in the second quarter of 2002. The parcels of other real estate owned are generally carried at the lesser of their estimated realizable fair market value or cost.
STOCKHOLDERS' EQUITY
Total stockholders' equity reached $143.9 million at June 30, 2002 increasing $10.9 million through earnings and comprehensive income (net of dividends of $5.0 million) over the $133.0 million, reported at December 31, 2001. The Federal Reserve's risk based capital guidelines and leverage ratio measure capital adequacy of banking institutions. Risk-based capital guidelines weight balance sheet assets and off-balance sheet commitments based on inherent risks associated with the respective asset types. At June 30, 2002, the Company's total risk adjusted capital-to-asset ratio was 12.91% versus 12.10% in December 31, 2001. The Company's leverage ratio at June 30, 2002 was 7.89% compared with 7.93% at December 31, 2001. Both the risk adjusted capital-to-asset ratio and the leverage ratio exceed the current well-capitalized levels prescribed for banks of 10% and 5%, respectively.
LIQUIDITY
The Company maintains a significant level of liquidity in the form of cash and cash equivalent balances ($31.7 million), investment securities available for sale ($338.6 million) and Federal Home Loan Bank credit availability of approximately $305.9 million. Cash and cash equivalents as well as advances from the Federal Home Loan Bank are immediately available for satisfaction of deposit withdrawals, customer credit needs and operations of the Company. Investment securities available for sale represent a secondary level of liquidity available for conversion to liquid funds in the event of extraordinary needs. The Company also maintains approved lines of credit with correspondent banks as backup liquidity sources.
The Company has adopted a Liquidity Contingency Plan as a means to further manage liquidity risk. The Plan is designed as a tool for the Company to detect liquidity issues promptly in order to protect depositors, creditors and shareholders. The 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 Company's quarterly earnings to a decline in the market price of the Company's stock. The Plan calls for specific responses designed to meet a wide range of liquidity needs based upon assessments on a recurring basis by management and the Board of Directors.
RECENT LEGISLATIVE DEVELOPMENTS
On July 30, 2002, President Bush signed into law the Sarbanes-Oxley Act of 2002 ("Act"). The stated goals of the Act are to increase corporate responsibility, to provide for enhanced penalties for accounting and auditing improprieties at publicly traded companies and to protect investors by improving the accuracy and reliability of corporate disclosures pursuant to the securities laws.
The Act generally applies to all companies, both U.S. and non-U.S., that file or are required to file periodic reports with the Securities and Exchange Commission ("SEC") under the Securities Exchange Act of 1934 ("Exchange Act"). Given the extensive SEC role in implementing rules relating to many of the Act's new requirements, the final scope of these requirements remains to be determined.
The Act includes very specific additional disclosure requirements and new corporate governance rules, requires the SEC and securities exchanges to adopt extensive additional disclosure, corporate governance and other related rules and mandates further studies of certain issues by the SEC and the Comptroller General. The Act represents significant federal involvement in matters traditionally left to state regulatory systems, such as the regulation of the accounting profession, and to state corporate law, such as the relationship between a board of directors and management and between a board of directors and its committees.
This Act addresses, among other matters: audit committees; certification of financial statements by the chief executive officer and the chief financial officer; the forfeiture of bonuses and profits made by directors and senior officers in the twelve month period covered by restated financial statements; a prohibition on insider trading during pension plan black out periods; disclosure of off-balance sheet transactions; a prohibition on personal loans to directors and officers (excluding Federally insured financial institutions); expedited filing requirements for stock transaction reports by officers and directors; disclosure of a code of ethics and filing a Form 8-K for a change or waiver of such code; "real time" filing of periodic reports; the formation of a public accounting oversight board; auditor independence; and various increased criminal penalties for violations of securities laws.
The Act contains provisions which became effective upon enactment on July 30, 2002 and provisions which will become effective from within 30 days to one year from enactment. Effective July 30, 2002, the chief executive officer and chief financial officer of a company must certify in a written statement that its periodic report filed with the SEC, containing financial statements, fully comply with the rules promulgated under the Exchange Act and that the information contained in the report fairly presents, in all material respects, the financial condition and results of operations of the company.
PART I. ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Interest Rate Risk (IRR) and Asset/Liability Management
While the Company continues to strive to decrease its dependence on net interest income, the Bank's profitability is dependent to a large extent upon its ability to manage its net interest margin. The Bank, like other financial institutions, is subject to interest rate risk to the degree that its interest-earning assets reprice differently than its interest-bearing liabilities. The Bank manages its mix of assets and liabilities with the goals of limiting its exposure to interest rate risk, ensuring adequate liquidity, and coordinating its sources and uses of funds. Specific strategies for management of IRR have included shortening the amortized maturity of fixed-rate loans and increasing the volume of adjustable rate loans to reduce the average maturity of the Bank's interest-earning assets.
The Bank seeks to control its IRR exposure to insulate net interest income and net earnings from fluctuations in the general level of interest rates. To measure its exposure to IRR, the Bank performs quarterly simulations using financial models which project net interest income through a range of possible interest rate environments including rising, declining, most likely, and flat rate scenarios. The results of these simulations indicate the existence and severity of IRR in each of those rate environments based upon the current balance sheet position and assumptions as to changes in the volume and mix of interest-earning assets and interest-paying liabilities and management's estimate of yields attainable in those future rate environments and rates which will be paid on various deposit instruments and borrowings.
The Company's risk profile continues to reflect a slightly asset sensitive position. The substantial level of prepayments and calls consistent with the declining rate environment that occurred in the prior year, as well as the success of deposit funding campaigns instituted in the prior year have lead to an increase in the banks overall liquidity position as reflected in the level of cash reserves, due from balances and Fed Funds Sold of approximately $31.7 million. The Company continues to reinvest the funds generated from asset paydowns and prepayments within a framework that attempts to maintain an acceptable net interest margin in the current interest rate environment. In addition, the mortgage operations of UFM use investments commonly referred to as "forward" transactions or derivatives to balance the risk inherent in interest rate lock commitments (also deemed to be derivatives) made to prospective borrowers. The pipeline of loans is hedged to mitigate unusual fluctuations in the cash flows derived upon settlement of the loans with secondary market purchasers and, consequently, to achieve a desired margin upon delivery. The hedge transactions are used for risk mitigation and are not for trading purposes. The derivative financial instruments derived from these hedging transactions are recorded at fair value in the Consolidated Balance Sheets and the changes in fair value are reflected in the Consolidated Statements of Income.
As of June 30, 2002, UFM held an investment in the underlying notional value of investments in securities ("forward commitments") of $82.0 million and had option adjusted interest rate lock commitments and closed loan inventory being hedged of $84.0 million. As of June 30, 2002 the change in the market value of investments in hedge securities reflected a decline in value of $511,000 while the interest rate lock commitments reflect an appreciation in value of $1,382,000. The combined net change in market values of the commitments on forwards and loan commitments being hedged as of June 30, 2002 and December 31, 2001 are $871,000 and $480,000, respectively. The increase in the fair value is due to an increase in the volume and the change in pricing of the forward commitments from December 31, 2001 to June 30, 2002. This hedging strategy is managed through a series of mathematical tools that are used to quantify the exposure to changes in interest rates and UFM simultaneously enters into forward transactions to minimize the potential volatility to earnings as rates change.
The Company's earnings sensitivity measurements completed on a quarterly basis indicate that the performance criteria, against which sensitivity is measured, are currently within the Company's defined policy limits. A more complete discussion of the overall interest rate risk is included in the Company's annual report for December 31, 2001.
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
(a) The Company is currently a defendant in various legal actions and asserted claims involving lending and collection activities and other matters in the normal course of business. While the Company and legal counsel are unable to assess the ultimate outcome of each of these matters with certainty, they are of the belief that the resolution of these actions should not have a material adverse affect on the financial position of the Company.
In October 2000, the Circuit Court of Mercer County, West Virginia entered a directed verdict in favor of the Registrant in a case styled "Ann Tierney Smith, as Executrix of the Estate of Katherine B. Tierney, Ann Barclay Smith and Laurence E. Tierney Smith vs. FCFT, Inc., et al, Civil Action No. 97-CV-408-K". On June 4, 2002, the West Virginia Supreme Court of Appeals, by a vote of 3 to 2, granted Plaintiffs and a defendant, Gentry, Locke, Rakes and Moore, a hearing on an appeal of the Circuit Court's decision. A hearing date for this appeal has not been set. Legal Counsel and management are both confident that the Registrant will prevail in this matter. A motion for one of the Supreme Court Justices to recuse himself from hearing this matter has been filed, due to an alleged conflict of interest stemming from the Justice's personal pending lawsuit against the Registrant as a dissenting shareholder of a predecessor bank acquired by the Registrant.
Item 2. Changes in Securities and Use of Proceeds
(a) N/A
(b) N/A
(c) On July 10, 2002, the Registrant sold 5,500 shares of common stock then held in Treasury to its Director Emeritus, Sam Clark, pursuant to its Directors' Stock Option Plan (the "Plan") at the stated Plan option price of $23.91 per share. The shares under the Directors' Stock Option Plan had been previously registered under a Form S-8 filed by the Registrant on December 14, 2001. The proceeds of this sale totaled one hundred thirty-one thousand, five hundred five dollars ($131,505). The proceeds were not earmarked for any specific use and remain available for general business needs of the Registrant.
(d) N/A
Item 3. Defaults Upon Senior Securities
(a) N/A
(b) N/A
Item 4. Submission of Matters to a Vote of Security Holders
(a) N/A
(b) N/A
(c) N/A
(d) N/A
Item 5. Other Information
(a) N/A
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
3(i) Articles of Incorporation and Amendments
3(ii) Bylaws and Amendments
10.1 John M. Mendez Employment Contract
10.2 Supplementary Retirement Contract-Director
10.3 Supplementary Executive Retention Contract-Officer
10.4 Stock Option Contract-Director
10.5 Stock Option Contract-Officer
12 Statement regarding computation of ratios-Incorporated by
reference to Note 9 of the Consolidated Financial Statements
within this report.
15 Letter regarding unaudited interim financial information
99.1 CEO Certification of June 30, 2002 10-Q
99.2 CFO Certification of June 30, 2002 10-Q
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(b) Reports on Form 8-K
A report on Form 8-K was filed on July 16, 2002 announcing the Company's second quarter 2002 earnings and depicting certain financial information as of June 30, 2002 and comparative income statements for the three and six month periods ending June 30, 2002 and 2001, respectively.
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: August 14, 2002 /s/ John M. Mendez ------------------------------ John M. Mendez President & Chief Executive Officer (Duly Authorized Officer) DATE: August 14, 2002 /s/ Robert L. Schumacher ------------------------------ Robert L. Schumacher Chief Financial Officer (Principal Accounting Officer) |
Index to Exhibits
Exhibit No.
3(i) Articles of Incorporation and Amendments
3(ii) Bylaws and Amendments
10.1 John M. Mendez Employment Contract
10.2 Supplementary Retirement Contract-Director
10.3 Supplementary Executive Retention Contract-Officer
10.4 Stock Option Contract-Director
10.5 Stock Option Contract-Officer
12 Statement regarding computation of ratios-Incorporated by
reference to Note 9 of the Consolidated Financial Statements
within this report.
15 Letter regarding unaudited interim financial information
99.1 CEO Certification of June 30, 2002 10-Q
99.2 CFO Certification of June 30, 2002 10-Q
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Exhibit 3 (i)
ARTICLES
OF
INCORPORATION
OF
FIRST COMMUNITY BANCSHARES, INC.
FIRST: The name of this corporation is First Community Bancshares, Inc.
SECOND: The registered agent for the corporation is CSC Services of Nevada,
Inc., whose street address and mailing address are 502 East John
Street, Carson City, NV 89706.
THIRD: The purpose or purposes for which this corporation is organized are
as follows:
To own, buy, acquire, sell, exchange, assign, lease and deal in and
with real and personal property and any interest or right therein;
To own, buy, acquire, sell, exchange, assign, pledge and deal with
voting stock, non-voting stock, notes, bonds, evidences of
indebtedness and rights and options in and to other corporate and
non-corporate entities, and to pay therefor in whole or in part in
cash or by exchanging therefor stocks, bonds, or other evidences of
indebtedness or securities of this or any other corporation, and
while the owner or holder of any such stocks, bonds, debentures,
notes, evidences of indebtedness or other securities, contracts, or
obligations, to receive, collect, and dispose of the interest,
dividends and income arising from such property, and to possess and
exercise in respect thereof, all the rights, powers and privileges
of ownership, including all voting powers on any stocks so owned.
To borrow money without limit as to amount; and
To engage in any lawful act or activity for which corporations may
be organized under the laws of the State of Nevada.
FOURTH: The total number of shares of stock which the corporation shall have
authority to issue is Ten Million (10,000,000) shares of Common
Stock, all of a par value of One Dollar ($1.00) each, and One
Million (1,000,000) shares of preferred stock, whose par or face
value, voting powers, designations, preferences, interest rate,
limitations, restrictions and relative rights shall be determined
from time to time by resolution of the Board of Directors of the
corporation.
FIFTH: The name and post office address of the incorporator is as follows:
NAME POST OFFICE ADDRESS
Eugene E. Derryberry P.O. Box 40013
Roanoke, VA 24038
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SIXTH: The members of the corporation's governing board shall be styled as
directors. The initial directors of the corporation shall consist of
12 persons, divided into the aforesaid classes as follows:
Class A
Allen T. Hamner 3 Lincoln Way
Buckhannon, WV 26201
B.W. Harvey c/o Acme Markets
P.O. Box 1457
Bluefield, WV 24701
John M. Mendez #6 Sandrine Pointe
Princeton, WV 24740
Harold Wood Box 97
Flat Top, WV 25841
Class B
Sam Clark State Farm Insurance
Box 700
Oceana, WV 24870
Robert E. Perkinson, Jr. MAPCO Coal, Inc.
P.O. Box 1349
Bluefield, VA 24605
William P. Stafford Princeton Machinery Service
HC 71, Box 6
Princeton, WV 24740
W.W. Tinder, Jr. Tinder Enterprises
P.O. Box 980
Bluefield, WV 24701
Class C
James L. Harrison, Sr. P.O. Box 5462
Princeton, WV 24740
I. Norris Kantor Katz, Kantor & Perkins
P.O. Box 727
Bluefield, WV 24701
A.A. Modena 4 Windsor Circle Drive
Bluefield, VA 24605
William P. Stafford, II Brewster, Morhous & Cameron
P.O. Box 529
Bluefield, WV 24701
The number of directors of the corporation, not less than 12, shall
be fixed in accordance with the Bylaws. Directors shall be divided
into three classes (A, B and C). The initial term of office for
directors in Classes A, B and C shall expire at the Annual Meeting
of Stockholders in 1998, 1999 and 2000, respectively. At each Annual
Meeting of Stockholders, directors for the class whose term then
expires shall be elected for a term of office to expire at the third
succeeding Annual Meeting of Stockholders after election, and shall
continue to hold office until their respective successors are
elected and qualify. In the event of any increase or decrease in the
number of directors fixed by the Bylaws, all classes of directors
shall be increased or decreased as equally as possible. No person
who has attained the age of 70 years shall be elected or appointed
as a director of this corporation; provided, however, that every
person, otherwise eligible, who was serving as a director of the
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corporation on December 31, 1990, shall continue to be eligible for re-election as a director of the corporation regardless of age.
All vacancies on the Board of Directors, including those resulting from an increase in the authorized number of directors, shall be filled by the affirmative vote of a majority of the directors then in office, whether or not a quorum. Each director so chosen shall hold office until the expiration of the term of the class to which his position has been assigned. No decrease in the number of directors constituting the Board of Directors shall shorten the term of any incumbent director. No director may be removed from office except for cause relating to the proper performance of his duties as a director and then only by the affirmative vote of the holders of more than two-thirds of the stock of the corporation then outstanding and entitled to vote thereon (without voting by class) at a meeting duly called for that purpose.
The affirmative vote of the holders of more than two-thirds of the stock of the corporation then outstanding and entitled to vote thereon (without voting by class) shall be required to amend or repeal this Article or adopt any provision inconsistent herewith.
SEVENTH:
Section 1. The corporation shall not be governed by the provisions of Nevada Revised Statutes 78.411 to 78.444, inclusive. The provisions of this Article shall govern in lieu thereof. For the purposes of this Article:
(A) The Term "Business Combination" means any of the following transactions:
(i) Any merger or consolidation of the corporation or any Subsidiary with or into any Interested Stockholder, or
(ii) Any sale, lease, exchange, transfer, or other disposition (in one transaction or a series of related transactions) to or with any Interested Stockholder of any assets of the corporation or any Subsidiary when such assets have an aggregate fair market value of $5,000,000 or more; or
(iii) The issuance or transfer to any Interested Stockholder by the corporation or any Subsidiary (in one transaction or a series of transactions) of any equity securities of the corporation or any Subsidiary where any such equity securities have an aggregate fair market value of $5,000,000 or more; or
(iv) The adoption of any plan or proposal for the liquidation or dissolution of the corporation; or
(v) Any agreement, contract, or other arrangement providing for any of the transactions described in this definition of a "Business Combination".
(B) A "Person" means any individual, firm, corporation, or other entity.
(C) "Interested Stockholder" means (i) any person (other than the corporation, a Subsidiary of the corporation, or any profit-sharing, employee stock ownership or employee benefit plan of the corporation or a Subsidiary of the corporation, or any trustee of a fiduciary with respect to any such plan acting in such capacity) that is the direct or indirect beneficial owner (as defined in Rule 13d-3 and Rule 13d-5 under the Securities Exchange Act of 1934 ("1934 Act") as in effect on January 1, 1990) of 15 percent (15%) or more of the outstanding capital stock of the corporation entitled to vote for the Election of Directors, and (ii) any Affiliate or Associate of any such person, including any corporation which after the transaction in question would be an Interested Stockholder.
(D) "Affiliate" and "Associate" shall have the respective meanings given those terms in Rule 12b-2 of the General Rules and Regulations under the 1934 Act, as in effect on January 1, 1990.
(E) "Subsidiary" means any business entity, fifty percent (50%) or more of which is directly or indirectly owned by the corporation.
(F) "Continuing Director" means any member of the Board of Directors of the corporation who is neither an Interested Stockholder nor affiliated with, proposed or nominated by, or controlled by an Interested Stockholder.
Section 2. If the provisions of Section 3 of this Article have not been satisfied, any Business Combination shall require the affirmative vote, in person or by proxy, of the holders of more than eight-five percent (85%) of the stock, or the maximum allowed by law, if less, of the corporation then outstanding and entitled to vote (without voting by class). Such affirmative vote shall be required notwithstanding the fact that no vote may be required, or that some lesser percentage may be specified, by law or in any agreement of the corporation with any national securities exchange or otherwise.
Section 3. Any Business Combination shall require only such affirmative vote by the holders of all classes of the capital stock of the corporation ("Holders") as is required by applicable law and any other provision of the Certificate of Incorporation of the corporation, exclusive of Section 2 of this Article, if the conditions of either Subparagraph (A) or (B) are met;
(A) The Business Combination has been approved by a vote of a majority of all the directors, and by a vote of a majority of all the Continuing Directors; or
(B) All of the following conditions have been satisfied:
(1) The Holders shall receive an aggregate amount of (i) cash and (ii) fair market value (as of the date of the consummation of the Business Combination) of consideration other than cash, at least equal to the greater of (i) the highest per share price (including any brokerage commissions, transfer taxes, and fees) paid by the Interested Stockholder for any shares of such class or series of stock acquired by the Interested Stockholder, or (ii) in the case of preferred stock, the highest preferential amount per share applicable to such stock; and
(2) The consideration to be received by Holders of any class or series of outstanding common or preferred stock shall be in cash or in the same form as the Interested Stockholder has previously paid for shares of such class or series of stock. If the Interested Stockholder has paid for shares of any class or series of stock with varying forms of consideration, the form of consideration given for such class or series of stock in the Business Combination shall be either cash or the form used to acquire the largest number of shares of such class or series of stock previously acquired by the Interested Stockholder; and
(3) A proxy statement complying with the requirements of the 1934 Act and the rules and regulations thereunder (or any subsequent provisions replacing the 1934 Act and such rules and regulations) shall be mailed to the stockholders of the corporation at least 30 days prior to the holding of any meeting of stockholders of the corporation to vote upon the Business Combination (whether or not such proxy or information statement is required pursuant to the 1934 Act or any subsequent provisions) which shall contain in the forepart thereof in a prominent place any recommendations as to the advisability (or inadvisability) of the Business Combination which the Continuing Directors may choose to state and, if deemed advisable by a majority of the Continuing Directors, an opinion of a reputable investment banking firm as to the fairness (or lack of fairness) of the terms of such Business Combination from the point of view of the Holders of any class of voting stock of the corporation other than the Interested Stockholder (such investment banking firm to be selected by a majority of the Continuing Directors, to be furnished with all information it reasonably requests, and to be paid by the corporation a reasonable fee for its services upon receipt by the corporation of such opinion).
Section 4. A majority of the Continuing Directors shall have the power to make all determinations with respect to this Article including without limitation determining the transactions that are Business Combinations, the persons who are Interested Stockholders, the time at which an Interested Stockholder became an Interested Stockholder, the fair market value of any assets, securities, or other
property, and whether a person is an Affiliate or Associate of
another; and any such determinations of such Continuing Directors
shall be conclusive and binding.
Section 5. Nothing contained in this Article shall be construed to
relieve any Interested Stockholder from any fiduciary obligation
imposed by law.
Section 6. Notwithstanding any other provisions of the Certificate
of Incorporation or of the Bylaws of the corporation (and in
addition to any other vote that may be required by law or of the
Bylaws of the corporation), the affirmative vote of the Holders or
more than 85% of the stock of the corporation then outstanding and
entitled to vote (without voting by class) shall be required in
order to amend or repeal this Article or adopt any provision
inconsistent herewith.
EIGHTH: (a) The corporation shall indemnify any person who was or is a party
or is threatened to be made a party to any threatened, pending or
completed action, suit or proceeding, whether civil, criminal,
administrative or investigative (other than an action by or in the
right of the corporation) by reason of the fact that he is or was a
director, officer, employee or agent of the corporation, or is or
was serving at the request of the corporation as a director,
officer, employee or agent of another corporation, partnership,
joint venture, trust or other enterprise, against expenses
(including attorneys' fees), judgments, fines and amounts paid in
settlement actually and reasonably incurred by him in connection
with such action, suit or proceeding if he acted in good faith and
in a manner he reasonably believed to be in or not opposed to be the
best interests of the corporation, and, with respect to any criminal
action or proceeding, had no reasonable cause to believe his conduct
was unlawful.
(b) The corporation shall indemnify any person who was or is a party
or is threatened to be made a party to any threatened, pending or
completed action or suit by or in the right of the corporation to
procure a judgment in its favor by reason of the fact that he is or
was a director, officer, employee or agent of the corporation, or is
or was serving at the request of the corporation as a director,
officer, employee or agent of another corporation, partnership,
joint venture, trust or other enterprise against expenses (including
amounts paid in settlement and attorneys' fees) actually and
reasonably incurred by him in connection with the defense or
settlement of such action or suit if he acted in good faith and in a
manner he reasonably believed to be in or not opposed to the best
interests of the corporation, except that no indemnification shall
be made in respect of any claim, issue or matter as to which such
person shall have been finally adjudged to be liable to the
corporation unless and only to the extent that an appropriate court
shall determine upon application that, despite the adjudication of
liability but in view of all the circumstances of the case, such
person is fairly and reasonably entitled to indemnify for such
expenses as the court shall deem proper.
(c) Any indemnification under subsections (a) and (b) of this
Article (unless ordered by the court) shall be made by the
corporation only as authorized in the specific case upon a
determination that indemnification of the director, officer,
employee or agent is proper in the circumstances because he has met
the applicable standard of conduct set forth in subsections (a) and
(b) of this Article. Such determination shall be made (1) by the
Board of Directors by a majority vote of a quorum constituting of
directors who were not parties to such action, suit or proceeding,
or (2) if such a quorum is not obtainable, or, even if obtainable a
quorum of disinterested Directors so directs, by independent legal
counsel in a written opinion, or (3) by the stockholders.
(d) Expenses incurred by an officer or director in defending a civil
or criminal action, suit or proceeding shall be paid by the
corporation as incurred and in advance of the final disposition of
such action, suit or proceeding upon receipt of an undertaking by or
on behalf of such director or officer to repay such amount if it
shall ultimately be determined by a court of competent jurisdiction
that he is not entitled to be indemnified by the corporation as
authorized in this section. Such expense incurred by other employees
and agents may be so paid upon such terms and conditions, if any, as
the Board of Directors deems appropriate.
(e) The corporation may (but need not) purchase and maintain
insurance on behalf of any person who is or was a director, officer,
employee or agent of the corporation, or is or was serving at the
request of the corporation as a director, officer, employee or agent
of another corporation, partnership, joint venture, trust or other
enterprise against any liability asserted against him or expenses
incurred by him in any such capacity, or arising out of this status
as such, whether or not the corporation would have the power to
indemnify him against such liability under this section.
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(f) No director of the corporation shall be liable to the corporation or its stockholders for monetary damages for breach of fiduciary duty as a director, provided that such provision shall not eliminate or limit the liability of a director; (i) for any breach of the director's duty of loyalty to the corporation or its stockholders; (ii) for acts or omissions which involve intentional misconduct, fraud or a knowing violation of law; (iii) for the payment of any distribution in violation of Nevada Revised Statute 78.300; or (iv) for any transaction from which the director derived an improper personal benefit.
Date: July 24, 1997 /s/ Eugene E. Derryberry
----------------------------------------
Eugene E. Derryberry,
Incorporator
|
Commonwealth of Virginia
City of Roanoke
Subscribed and sworn to before me in my jurisdiction aforesaid this 25th day of July, 1997.
/s/ Leigh S. Holland ---------------------------------------- Notary Public |
FIRST COMMUNITY BANCSHARES, INC.
CERTIFICATE OF AMENDMENT
1. The name of the corporation is FIRST COMMUNITY BANCSHARES, INC.
2. Article Fourth of the Articles of Incorporation is amended to read as follows:
FOURTH: The total number of shares of stock which the corporation shall have authority to issue is Fifteen Million (15,000,000) shares of Common Stock, all of a par value of One Dollar ($1.00) each, and One Million (1,000,000) shares of preferred stock, whose par or face value, voting powers, designations, preferences, interest rate, limitations, restrictions and relative rights shall be determined from time to time by resolution of the Board of Directors of the corporation.
3. Pursuant to Section 78.390 of the Nevada Revised Statutes, the undersigned President and Secretary of the corporation hereby certify that the holders of 5,828,158 shares voted in favor of the amendment, the holders of 259,051 shares voted against the amendment, and the holders of 1,045 shares abstained. Accordingly, the holders of at least a majority of the voting power did vote in favor of the proposed amendment.
By: /s/James L. Harrison Sr.
------------------------
President
By: /s/John M. Mendez
------------------
Secretary
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FIRST COMMUNITY BANCSHARES, INC.
CERTIFICATE OF AMENDMENT
1. The name of the corporation is FIRST COMMUNITY BANCSHARES, INC.
2. The first two paragraphs of Article Sixth of the Articles of Incorporation are amended to read as follows:
The members of the corporation's governing board shall be styled as directors. The number of directors of the corporation shall be determined in accordance with a bylaw or amendment thereof duly adopted by a majority of the Board of Directors. The Board of Directors of the corporation shall divide the directors into three classes, as nearly equal in number as reasonably possible, designated Class I, Class II and Class III, respectively. Directors shall be assigned to each class consistently with the classes they currently occupy. At each annual meeting of stockholders or special meeting in lieu thereof, directors elected to succeed the directors of the class whose terms expire at such meeting shall be elected for a full term of three years. Each director shall serve until his or her successor is duly elected and qualified or until his or her death, resignation, or removal. No person who has attained the age of 70 years shall be elected or appointed as a director of this corporation; provided, however, that every person otherwise eligible, who was serving as a director of the corporation on December 31, 1990, shall continue to be eligible for re-election as a director of the corporation regardless of age.
3. Pursuant to Section 78.390 of the Nevada Revised Statutes, the undersigned President and Secretary of the corporation hereby certify that the holders of 6,455,433 shares voted in favor of the amendment, the holders of 46,025 shares voted against the amendment, and the holders of 24,222 shares abstained. Accordingly, the holders of at least two-thirds of the voting power did vote in favor of the proposed amendment, as required by Article Sixth.
By /s/ John M. Mendez
------------------
President
By /s/ Robert L. Buzzo
-------------------
Secretary
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Exhibit 3 (ii)
FIRST COMMUNITY BANCSHARES, INC.
BYLAWS
1. Annual Meeting of Stockholders.
The regular Annual Meeting of the Stockholders of the Corporation for the election of directors and the conducting of such other business as may be appropriate shall be held during April of each year, on such date and at such time and place as may be fixed by the Board of Directors. Notice of such meeting, stating the purpose thereof, shall be mailed to all stockholders not less than ten (10) days nor more than sixty (60) days prior to the date thereof.
The stockholders shall meet annually on the day appointed and shall elect a Chairman and Secretary of the meeting. The Chairman, Chief Executive Officer or other Executive Officers of the Holding Corporation shall then submit to the stockholders a clear and concise statement of the financial condition of the Corporation for the preceding year and a review of the business of the Corporation.
A record of the Stockholders' Meeting, giving the number of shares represented by proxy and in person, shall be made and entered in the records of the meeting in the minute book of the Corporation. The stockholders shall proceed to the election of directors and to the transaction of any other business that may properly come before the meeting as prescribed by Nevada law. The record of the meeting shall show the number of shares voting for, voting against or abstaining on each resolution, or voting for, voting against, or withholding authority on each candidate for director. Proxies shall be dated, and shall be filed with the records of the meeting.
Any nominations to the Board of Directors other than those made by or on behalf of the existing management of the Corporation shall be made in writing and shall be delivered or mailed to the Secretary of the Corporation not less than thirty (30) days prior to any meeting of the stockholders calling for the election of directors, provided, however, that if less than thirty (30) days notice of the meeting is given to stockholders, such notice of nomination shall be mailed or delivered to the Secretary of the Corporation no later than the close of business on the seventh day following the day on which the notice of the meeting was mailed. The Chairman of the meeting may disregard nominations not made in accordance herewith, and direct the vote tellers to disregard all votes cast for such nominee.
The Chairman of the meeting shall notify the directors of their election, and the directors shall immediately following the regular Annual Meeting of the Stockholders organize and elect the officers for the current year.
A majority of the shares entitled to vote, represented in person or by proxy, shall constitute a quorum at meetings of the stockholders.
At each election for directors every stockholder entitled to vote at such election shall have one vote for each share of stock held.
The directors so elected shall serve pursuant to the provisions of Article Sixth of the Articles of Incorporation or until their successors are elected and qualify, subject to the further provisions of these Bylaws.
Special meetings of the stockholders may be held at any time on call of the Board of Directors. Notice of such meeting, stating the purpose or purposes, shall be given to all stockholder by mail to their last known address, mailed not less than ten (10) days nor more than sixty (60) days prior to such meeting unless otherwise required by law.
If for any cause the annual election of directors is not held pursuant
to these Bylaws, the directors in office shall order an election to be held on
some other day, of which special notice shall be given in accordance with the
requirements of law, and the meeting conducted according to the provisions of
Section 1 of these Bylaws.
The proceedings of all regular and special meetings of the Board of Directors and of the stockholders and reports of the committees or directors, shall be recorded in the minute book; and the minutes of each meeting shall be signed by the Chairman or the President and attested by the Secretary of the Corporation.
2. Directors.
The members of the Board of Directors shall be stockholders, and every such director shall own in his own right shares of stock of the Corporation of the aggregate par value of not less than One Hundred Dollars ($100.00). The number of directors of the Corporation shall be fixed from time- to- time by resolution of the Board of Directors. Directors shall be divided into three classes, as nearly equal in number as is reasonably possible, designated Class I, Class II and Class III, respectively, and shall be assigned to each class consistently with the classes they occupy as of the date this amended Bylaw is adopted. Each director elected for a full term shall serve for a term of three years, and until his or her successor is duly elected and qualified or until his or her death, resignation, or removal.
No person who has attained the age of 70 years shall be elected or appointed as a director of this corporation; provided, however, that every person otherwise eligible, who was serving as a director of the corporation on December 31, 1990, shall continue to be eligible for re-election as a director of the corporation regardless of age.
All vacancies on the Board of Directors, including those resulting from an increase in the authorized number of directors, shall be filled by the affirmative vote of a majority of the directors then in office, whether or not a quorum. Each director so chosen shall hold office until the expiration of the term of the director, if any, whom he or she has been chosen to succeed, or if none, until the expiration of the term assigned. No decrease in the number of directors constituting the Board of Directors shall shorten the term of any incumbent director.
Directors shall hold regular meetings and shall meet at least once each quarter. The Board of Directors shall have the power to do, or cause to be done, all things that are proper to be done by the Corporation. The directors shall be authorized to appoint a director in lieu of the President to serve as Chairman of the Board, shall define the duties of the Chief Executive Officer of the Corporation, fix the compensation of such officer and may employ and dismiss any officer of the Corporation.
A majority of the Board of Directors shall be necessary to constitute a quorum for the transaction of business, except that those present may adjourn until a quorum is obtained and except as otherwise provided by these Bylaws and by law.
Special meetings of the directors may be called by the Chairman of the Board, by the President or by any four directors.
3. Officers.
The officers of the Corporation shall be a Chairman of the Board, President and Chief Executive Officer, one or more Executive Vice Presidents, Senior Vice Presidents, Vice Presidents, Secretary, and such other officers, including Assistant Vice Presidents, as may be from time to time required for the prompt and orderly transaction of its business, to be elected or appointed by the Board of Directors, by whom their several duties shall be prescribed. At the option of the Board of Directors, any combination of the foregoing offices may be held by the same person.
The Chairman of the Board and the President shall be directors. They shall hold office for the current year for which the Board of Directors was elected, unless either shall resign, become disqualified, or be removed. Any vacancy occurring in the office of the Chairman or the President shall be filled by the Board of Directors. All other officers shall be appointed by the Board of Directors to hold their respective offices at the will and pleasure of the Board of Directors.
The appropriate executive and subordinate officers of the Corporation shall be responsible for any such sums of money, property and valuables of every description which may be entrusted to their care or which may from time to time come into their care by virtue of their respective offices and shall give such bond as shall be required by law and by the Board of Directors, in principal amount and with security to be approved by the Board of Directors, conditioned on the faithful discharge of their respective duties and their faithful and honest application and accounting for all sums of money and other property that may come into their care.
In the absence of the President and Chief Executive Officer, the Executive Vice President, or in his or her absence, a Senior Vice President shall perform all acts and duties pertinent to the offices of the President and Chief Executive Officer, except such acts and duties as the President and Chief Executive Officer only are authorized by law to perform.
There shall be appointed a Secretary of the Corporation, who shall be responsible for the minute book of the Corporation, in which shall be maintained and preserved the Articles of Incorporation, the Bylaws, the returns of elections, the proceedings of regular and special meetings of the Board of Directors, of the stockholders and of all committees established by the Board of Directors.
4. Seal.
The following is an impression of the seal adopted by the Board of Directors of the Corporation:
5. Conveyance of Real Estate.
All transfers and conveyances of real estate shall be made by the Corporation pursuant to resolution of the Board of Directors and shall be signed by the President, Chief Executive Officer, Vice President or such other officer as may be hereafter authorized.
6. Executive Committee.
The Board may appoint an Executive Committee consisting of the Chairman of the Board, the President, the Chief Executive Officer and such other members of the Board of Directors as shall be appointed, which committee shall have full power and authority to do or cause to be done all things which may be done by the Board of Directors, except as otherwise prohibited by law. The proceedings of such committee shall be signed by the Chairman or the President, and recorded in the minute book of the Corporation.
7. Other Committees.
The Board of Directors may establish from time to time such other committees from its members, or otherwise, as are deemed appropriate for the operation and performance of its duties and responsibilities. Committees shall be formed by proper resolutions of the Board of Directors setting forth the duties, responsibilities and operations of such committees. The resolutions of the Board of Directors shall set forth the manner in which the committees are to be formed, the number of persons constituting the committee and such other matters as are deemed proper by the Board of Directors.
The Audit Committee shall consist of three members of the Board of Directors who are not employees of the Corporation, who shall be appointed by and serve at the pleasure of the Board of Directors. The Audit Committee shall meet with the Corporation's independent auditors at least annually and shall be responsible for reviewing the financial records and reports of the Corporation and its subsidiaries, and reporting to the Board of Directors thereon.
All committees established by the Board of Directors may by proper authority of the Board of Directors be permitted to employ personnel to assist in the performance of its duties, and the members of the committee may have compensation fixed for them by the Board of Directors.
8. Transfer of Stock.
The stock of this Corporation shall be assignable and transferable only on the books of the Corporation, subject to the provisions of the laws of the State of Nevada. A transfer book shall be maintained in which all assignments and transfers of stock shall be recorded.
Transfers of stock need not be suspended for the declaration of dividends in cash or stock, nor in case of a new stock issue. In all cases stock of the stockholder of record as of the date fixed by the Board of Directors shall be entitled to such dividends, and the right, if any, to subscribe to a new issue.
Certificates of stock shall be signed by such officers as designated by the Board of Directors by resolution. The certificates shall state upon the face thereof, that the stock is transferable only upon the books of the Corporation and when stock is transferred, the certificates thereof shall be returned to the Corporation, cancelled, preserved and new certificates issued. No certificates for fractional shares shall be issued.
9. Checks and Drafts.
All checks and drafts of the Corporation shall be signed by an officer of officers of the Corporation designated by the Board of Directors.
10. Amendment of Bylaws.
These Bylaws may be amended at any time by vote of a majority of the Board of Directors at a meeting called for that purpose upon notice thereof given in the call for the meeting.
The attached Bylaws were approved by unanimous consent of the Board of Directors of First Community Bancshares, Inc. dated the 30th day of July, 1997.
FIRST COMMUNITY BANCSHARES, INC.
RESOLUTIONS OF THE BOARD OF DIRCTORS
December 18, 2001
ELECTRONIC VOTING AND REPORT SUBMISSION
RESOLVED, that the Bylaws of the Corporation shall be amended by ADDING THE FOLLOWING NEW Article 11:
11. Electronic Voting of Proxies and Submission of Reports.
Notwithstanding anything to the contrary herein, the Corporation is authorized to the fullest extent provided by law, to accept proxy votes electronically for any matter properly under consideration at any regular or special stockholder meeting of the Corporation. Furthermore, the Corporation is authorized to the fullest extent provided by law, to electronically deliver to stockholders annual reports and other documents filed with the Securities and Exchange Commission pursuant to the Securities Exchange Act of 1934.
And be it further
GENERAL RATIFICATION
RESOLVED, that any and all actions heretofore taken by the officers of the Corporation in furtherance of the matters described in the preceding resolution is hereby approved and ratified in all respects.
FIRST COMMUNITY BANCSHARES, INC.
RESOLUTIONS OF THE BOARD OF DIRCTORS
May 21, 2002
RESOLVED, that the Bylaws of the Corporation shall be amended by changing the language as follows in Section 2 paragraph 1 and inserting paragraph 2.
The members of the Board of Directors shall be stockholders, and every such director shall own in his own right shares of stock of the Corporation of the aggregate par value of not less than One Hundred Dollars ($100.00). The number of directors of the Corporation shall be fixed from time to time by resolution of the Board of Directors. Directors shall be divided into three classes, as nearly equal in number as is reasonably possible, designated Class I, Class II and Class III, respectively, and shall be assigned to each class consistently with the classes they occupy as of the date this amended Bylaw is adopted. Each director elected for a full term shall serve for a term of three years, and until his or her successor is duly elected and qualified or until his or her death, resignation, or removal.
No person who has attained the age of 70 years shall be elected or appointed as a director of this corporation; provided, however, that every person otherwise eligible, who was serving as a director of the corporation on December 31, 1990, shall continue to be eligible for re-election as a director of the Corporation regardless of age.
And be it further
GENERAL RATIFICATION
RESOLVED, that any and all actions heretofore taken by the officers of the Corporation in furtherance of the matters described in the preceding resolution is hereby approved and ratified in all respects.
Exhibit 10.1
EMPLOYMENT AGREEMENT
(As Amended on October 17, 2000)
THIS EMPLOYMENT AGREEMENT made and entered into as of the 1st day of January, 2000, and amended on October 17, 2000, by and between JOHN M. MENDEZ, hereinafter referred to as "Employee," and FIRST COMMUNITY BANCSHARES, INC., hereinafter referred to as "the Corporation."
W I T N E S S E T H
WHEREAS, Employee has been employed by the Corporation or its affiliates for 14 years as its Vice President and Chief Financial Officer, pursuant to an agreement entered into between Employee and the Corporation or its affiliates, on April 21, 1992, and currently serves as the President and Chief Executive Officer; and
WHEREAS, the latest of such Employee Agreements, as renewed in accordance with its terms, would otherwise terminate on the 21st of April, 2002; and
WHEREAS, the Board of Directors of the Corporation recognizes the significant contributions which Employee has made to the Corporation and its affiliates during his tenure, and believes it to be in the best interests of the Corporation to provide for stability in its senior management;
NOW, THEREFORE, in consideration of the mutual covenants herein set forth, Employee and the Corporation do agree to amended terms of employment as follows:
1. Employment and Term. The Corporation hereby hires Employee, and Employee hereby agrees to serve as its President and Chief Executive Officer, with such duties as normally attach to such position. Employee shall also serve in such offices for affiliates of the Corporation as its Board of Directors may specify. The term of this Agreement shall be for three years effective February 25, 2000.
2. Compensation and Benefits.
a. Employee's cash compensation shall not be less than $210,000.00, subject to adjustment at each anniversary date. Such adjustment of annual compensation shall be comprised of i) an increase equivalent to the base compensation times the annual percentage increase in the Consumer Price Index for the preceding twelve months and ii) any discretionary increase deemed appropriate by the Compensation Committee to reflect changes in scope of duties and operation, size, and complexity of the Corporation and/or changes in market conditions for executive salaries based on review and analysis of compensation to
executives of companies of similar size, scope and operation. Such cash compensation shall be paid biweekly during the term hereof, and if applicable, during the severance pay period, less all customary withholding.
b. Employee shall be awarded incentive compensation, if any, in an amount determined appropriate by the Compensation Committee of the Corporation based upon an annual evaluation of achievement of key objectives as may be established from time to time by such Committee.
c. Employee shall be entitled to vacation of four (4) weeks per year during the term of this Agreement. He shall be provided the fringe benefits provided all other full-time employees in addition to the use of a Company provided vehicle.
3. Termination for Cause. The Corporation may terminate the employment of Employee only for "Cause," defined herein as the commission of acts, or omissions, by Employee which constitute fraud, dishonesty, excessive absenteeism without approval of the Corporation (provided such absenteeism is not caused by disability), a criminal act involving the person or property of others or the public generally, gross neglect of duty resulting in substantial loss to the Corporation, or willful failure to carry out reasonable and legal duties and responsibilities consistent with his duties as President and Chief Executive Officer of the Corporation, and assigned to him. In the event the Corporation terminates Employee's employment for Cause, then the Corporation shall not be obligated to pay Employee any further compensation after the date of termination.
4. Termination Without Cause. In the event the Corporation shall desire to terminate Employee's employment without Cause, then Employee shall be paid a salary and provided benefits of like kind and equal to his total base compensation at the time of his termination, which said compensation after termination shall be provided for the greater of the balance of the term of this Agreement, as it may be renewed from time to time pursuant to paragraph 9, or 30 months.
5. Change in Control. Employee, upon a change in the ownership or control of the Corporation, may terminate this Agreement at his sole option. In the event of any termination by either party within three years following such a change in ownership or control, Employee shall continue to receive his salary and benefits as in effect at the time of such change in control or ownership, or on the date of termination, if greater, for a period of 35 months after termination. For purposes of this Agreement, change in control shall mean the purchase or other acquisition by any person, entity or group of persons, within the meaning of Section 13(d)(3) of the Securities and Exchange Act of 1934 (the "Act"), or any comparable successor provision, of beneficial ownership within the meaning of Rule 13(d)(3) promulgated under the Act, of 30 percent or more of the outstanding shares of common stock of Bancshares; or the approval by the stockholders of the Corporation of a reorganization, merger, consolidation, share exchange or similar transaction pursuant to which persons who were stockholders of the Corporation immediately prior to the effective date of such transaction do not, immediately after such date, own more than 60 percent of the combined voting
power entitled to vote generally in the election of directors of the surviving or successor corporation; or a liquidation or dissolution of the Corporation; or the sale of all or substantially all of its assets.
6. Covenant Not to Compete; Full-time Employment. During the term of employment and for 36 months after termination of employment (by either party, whether or not for Cause), except with the prior written consent of the Corporation, Employee shall not directly or indirectly engage or participate in, or become a director or officer of, or render advisory or other services to, or become interested in, become an employee of, or make any material financial investment in any firm, corporation, holding company, business entity or other business enterprise competing in any respect with the business of the Corporation or any of its affiliates, whether presently being conducted or hereafter undertaken, from a location within 50 miles of the headquarters of the Corporation, or within 25 miles of any other office of the Corporation or any affiliate from which business is conducted at the time of termination, and shall not, during such period, solicit business or otherwise call on any person or entity which was a customer of the Corporation or any affiliate at the date of termination or at any time within 12 months prior to such date. Employee shall serve the Corporation on a full-time basis, and during the term of this Agreement, shall have no employment contract or other written or oral agreement concerning employment nor perform any services for any entity or person, whether as employee, consultant or otherwise other than the Corporation or its affiliates.
7. Proprietary Information. Employee acknowledges that while providing services hereunder, he will have access to information, including without limitation customer information, strategic plans, management and operating policies and procedures, and similar information, which constitute proprietary information or trade secrets of the Corporation or its affiliates. He shall not at any time, whether during the term of this Agreement or otherwise, disclose any of such proprietary information to any person or entity other than the Corporation, its affiliates and employees.
8. Amendments. The parties shall not make any modification to this Agreement unless the same is in writing, signed by both parties hereto.
9. Renewals. This Agreement shall be automatically renewed for successive additional three-year periods on January 1 in each year hereafter beginning in 2001, in the absence of notice of non-renewal by either party given in writing to the other party no later than September 15 of the preceding year.
10. Applicable Law. This Agreement shall be construed and applied in accordance with the laws of the Commonwealth of Virginia.
WITNESS the following signatures:
FIRST COMMUNITY BANCSHARES, INC.
By: /s/ William P. Stafford, Sr.
-------------------------------
Chairman of the Board
(As Amended on October 17, 2000)
By: /s/ John M. Mendez
-------------------------------
John M. Mendez
(As Amended on October 17, 2000)
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EXHIBIT 10.2 SUMMARY
The following directors are participants in the First Community Bancshares, Inc. Director Supplemental Retirement Plan and as such are parties to Director Supplemental Retirement Plan in the form attached hereto as part of this Exhibit 10.2.
Sam Clark
Allen T. Hamner
B. W. Harvey
I. Norris Kantor
A. A. Modena
Robert E. Perkinson, Jr.
William P. Stafford
William P. Stafford, II
W. W. Tinder, Jr.
EXHIBIT 10.2 DIRECTOR SUPPLEMENTAL RETIREMENT PLAN
AGREEMENT
This Agreement, made and entered into this ____ day of ______________, 2001, by and between First Community Bancshares, Inc., a Holding Company organized and existing under the laws of the United States, (hereinafter referred to as the "Company"), and _____________________, a Director of the Company, (hereinafter referred to as the "Director").
WHEREAS, the Director has been in the service of the Company for several years and has now and for years faithfully served the Company. It is the consensus of the Board of Directors of the Company (hereinafter referred to as the "Board") that the Director's services have been of exceptional merit, in excess of the compensation paid and an invaluable contribution to the profits and position of the Company in its field of activity. The Board further believes that the Director's experience, knowledge of corporate affairs, reputation and industry contacts are of such value and his continued services are so essential to the Company's future growth and profits that it would suffer severe financial loss should the Director terminate the Director's services.
ACCORDINGLY, the Board has adopted the First Community Bancshares, Inc. Director Supplemental Retirement Plan (hereinafter referred to as the "Director Plan") and it is the desire of the Company and the Director to enter into this Agreement under which the Company will agree to make certain payments to the Director upon the Director's retirement or to the Director's beneficiary(ies) in the event of the Director's death pursuant to the Director Plan;
FURTHERMORE, it is the intent of the parties hereto that this Director Plan be considered an unfunded arrangement maintained primarily to provide supplemental retirement benefits for the Director, and be considered a non-qualified benefit plan for purposes of the Employee Retirement Security Act of 1974, as amended ("ERISA"). The Director is fully advised of the Company's financial status and has had substantial input in the design and operation of this benefit plan; and
NOW THEREFORE, in consideration of services the Director has performed in the past and those to be performed in the future, and based upon the mutual promises and covenants herein contained, the Company and the Director agree as follows:
I. DEFINITIONS
A. Effective Date:
The Effective Date of the Director Plan shall be November 2, 2001.
B. Plan Year:
Any reference to "Plan Year" shall mean a calendar year from January 1 to December 31. In the year of implementation, the term "Plan Year" shall mean the period from the Effective Date to December 31 of the year of the Effective Date.
C. Retirement Date:
Retirement Date shall mean retirement from service with the Company which becomes effective on the first day of the calendar month following the month in which the Director reaches the Director's seventy-fifth (75th) birthday or such later date as the Director may actually retire.
D. Termination of Service:
Termination of Service shall mean voluntary resignation of service by the Director or the Company's discharge of the Director without cause, prior to the Retirement Date (Subparagraph I [C]).
E. Index Retirement Benefit:
The Index Retirement Benefit for the Director for each plan year shall be equal to the excess (if any) of the Index (Subparagraph I [F]) for that Plan Year over the Cost of Funds Expense (Subparagraph I [G]) for that Plan Year, divided by a factor equal to 1.06 minus the marginal tax rate.
F. Index:
The Index for any Plan Year shall be the aggregate annual after-tax income from the life insurance contract(s) described hereinafter as defined by FASB Technical Bulletin 85-4. This Index shall be applied as if such insurance contracts were purchased on the Effective Date hereof.
Insurance Company:
Policy Form:
Policy Name:
Insured's Age and Sex:
Riders:
Ratings:
Option:
Face Amount:
Premiums Paid:
Number of Premium Payments:
Assumed Purchase Date:
If such contracts of life insurance are actually purchased by the Company, then the actual policies as of the dates they were purchased shall be used in calculations under this Director Plan. If such contracts of life insurance are not purchased or are subsequently surrendered or lapsed, then the Company shall receive annual policy illustrations that assume the above-described policies were purchased or had not subsequently surrendered or lapsed. Said illustrations shall be received from the respective insurance companies and will indicate the increase in policy values for purposes of calculating the amount of the Index.
In either case, references to the life insurance contract are merely for purposes of calculating a benefit. The Company has no obligation to purchase such life insurance and, if purchased, the Director and the Director's beneficiary(ies) shall have no ownership interest in such policy and shall always have no greater interest in the benefits under this Agreement than that of an unsecured general creditor of the Company.
G. Cost of Funds Expense:
The Cost of Funds Expense for any Plan Year shall be calculated by taking the sum of the amount of premiums for the life insurance policies described in the definition of "Index" plus the amount of any after-tax benefits paid to the Director pursuant to the Director Plan (Paragraph II hereinafter) plus the amount of all previous years' after-tax Costs of Funds Expense, and multiplying that sum by the Average After-Tax Cost of Funds (Subparagraph I [K]).
H. Change of Control:
For purposes of this Supplemental Retirement Plan Agreement, change of control shall mean the purchase or other acquisition by any person, entity or group of persons, within the meaning of Section 13(d)(3) of the Securities Exchange Act of 1934 (the "Act"), or any comparable successor provision, of beneficial ownership within the meaning of Rule 13d-3 promulgated under the Act, within any twelve month period, of 30 percent or more of the outstanding shares of common stock of First Community Bancshares, Inc. (the "Holding Company"); or the approval by the stockholders of the Holding Company of a reorganization, merger, consolidation, share exchange or similar transaction pursuant to which persons who were stockholders of the Holding Company immediately prior to the effective date of such transaction do not, immediately after such date, own more than 60 percent of the combined voting power entitled to vote generally in the election of directors of the surviving or successor corporation; or a liquidation or dissolution of the Holding Company; or the sale of all or substantially all of its assets.
I. Normal Retirement Age:
Normal Retirement Age shall mean the date on which the Director attains age seventy-five (75).
J. Benefit Accounting:
The Company shall account for the benefit provided herein
using the regulatory accounting principles of the Company's
primary federal regulator. The Company shall establish an
accrued liability retirement account for the Director into
which appropriate reserves shall be accrued.
K. Average After-Tax Cost of Funds:
Average After-Tax Cost of Funds means, at any particular time,
a ratio, the numerator of which is the total annualized
interest expense as set forth on Schedule RI-Income Statement
of the Company's most recently filed Consolidated Report of
Condition and Income (the "Call Report") and the denominator
of which is an amount equal to: (i) the amount of deposits in
domestic offices (sum of total of columns A and C from
Schedule RC-E of the Call Report), plus (ii) the amount of
Federal funds purchased and securities sold under agreements
to repurchase, as set forth on Schedule RC-Balance Sheet of
the Call Report, times the inverse of the Company's combined
marginal income tax rate. However, if the Company is being
taxed as an S-corporation, the ratio as set forth hereinabove,
shall be times the inverse of the highest combined personal
federal and state income tax rate as determined for the state
where the Company is located.
II. BENEFITS
A. Retirement Benefits:
Subject to Subparagraph II (D), hereinafter, should the Director continue to serve the Company until "Normal Retirement Age" defined in Subparagraph I (I), the Director shall be entitled to receive an annual benefit equal to the amount set forth in Exhibit "A-1". Said payments shall be made monthly (1/12th of the annual benefit) and shall commence thirty (30) days following the Director's retirement and shall continue until the Director attains age eighty-one (81). Upon completion of the aforestated payments and commencing subsequent thereto and subject to Subparagraph II (A)(i) hereinbelow, the Index Retirement Benefit (Subparagraph I [E]) shall be paid to the Director until the Director's death. Said benefits set forth in this Subparagraph II (A) may continue after the Director's death to the Director's beneficiary(ies) as set forth in Subparagraph II (B) hereinafter.
(i) Index Retirement Benefit Adjustment:
The Index Retirement Benefit payment as set forth hereinabove
for the first Plan Year subsequent to the Director attaining age
eighty-one (81) shall be adjusted according to a number equal to
the aggregate of the Index Retirement Benefit (Subparagraph I [E])
for each Plan Year from the Effective Date of this agreement until
the Plan Year subsequent to the Director attaining age eighty-one
(81) over the aggregate of the benefit payments the Director
actually received under the terms of this Director Plan through
that date. For example, if the Director retires at age sixty-five
(65) and the aggregate annual benefits received by the Director
until the Plan Year the Director attains age eighty-one (81) were
$900,000.00, and the aggregate Index Retirement Benefits for each
Plan Year from the Effective Date of this agreement to the Plan
Year the Director's attains age eighty-one (81) were $1,000,000.00
then the Director's Index Retirement Benefit in the first Plan
Year said payment is payable to the Director would be increased by
$100,000.00. If said number is a deficit, then the Index
Retirement Benefit for the Plan Year when the Director attains age
eighty-one (81) and each subsequent Plan Year's benefit (if
necessary) shall be reduced until the entire deficit has been
recovered by the Company. For each year thereafter, the Index
Retirement Benefit payment shall be paid as set forth in
Subparagraph I (E). For example, if the Director retires at age
sixty-five (65) and the aggregate annual benefits to be received
by the Director until the Plan Year the Director attains age
eighty-one (81) were $1,000,000.00, and the aggregate Index
Retirement Benefits for each Plan year from the Effective Date of
this agreement to the Plan Year the Director attains age
eighty-one (81) were $900,000.00 and the Director's Index
Retirement Benefit was $90,000.00 in the first year, then the
Director would not receive any Index Retirement Benefit in the
first year, and the second years' Index Retirement benefit would
be reduced by $10,000.00.
B. Death:
Should the Director die prior to having received a total of ten (10) annual benefit payments as set forth in Subparagraph II (A) (i.e. defined benefit payments solely or combined with Index Retirement Benefit Payments for a total of ten (10) annual benefit payments) then the Director's designated beneficiary shall receive an amount of money equal to what the Director's benefits would have been had the Director received a total of ten (10) benefit plan payments. This amount of money shall be paid at the times and in the amounts that the Director would have received said benefit payments. In any event, in the absence of or a failure to designate a beneficiary, the amounts described herein shall be paid to the personal representative of the Director's estate.
C. Termination of Service and Discharge for Cause:
Should the Director suffer a Termination of Service (Subparagraph I [D]) or be Discharged for Cause at any time, all benefits under this Director Plan shall be forfeited. The term "for cause" shall mean any of the following that result in an adverse effect on the Company: (i) gross negligence or gross neglect; (ii) the conviction of a felony or misdemeanor involving moral turpitude, fraud, or dishonesty; (iii) the willful violation of any law, rule, or regulation (other than a traffic violation or similar offense); (iv) an intentional failure to perform stated duties; or (v) a breach of fiduciary duty involving personal profit. If a dispute arises as to discharge "for cause," such dispute shall be resolved by arbitration as set forth in this Director Plan.
D. Death Benefit:
Except as set forth above, there is no death benefit provided under this Agreement.
III. RESTRICTIONS UPON FUNDING
The Company shall have no obligation to set aside, earmark or entrust any fund or money with which to pay its obligations under this Agreement. The Director, the Director's beneficiary(ies) or any successor in interest to the Director shall be and remain simply a general creditor of the Company in the same manner as any other creditor having a general claim for matured and unpaid compensation.
The Company reserves the absolute right, at its sole discretion, to either fund the obligations undertaken by this Agreement or to refrain from funding the same and to determine the exact nature and method of such funding. Should the Company elect to fund this Agreement, in whole or in part, through the purchase of life insurance, mutual funds, disability policies or annuities, the Company reserves the absolute right, in its sole discretion, to terminate such funding at any time, in whole or in part. At no time shall the Director be deemed to have any lien or right, title or interest in or to any specific funding investment or to any assets of the Company.
If the Company elects to invest in a life insurance, disability or annuity policy upon the life of the Director, then the Director shall assist the Company by freely submitting to a physical exam and supplying such additional information necessary to obtain such insurance or annuities.
IV. CHANGE OF CONTROL
Upon a Change of Control (Subparagraph I [H]), if the Director subsequently suffers a Termination of Service (Subparagraph I [D]), then the Director shall be entitled to receive the amount in the Director's Accrued Liability Retirement Account as of the date of Termination of Service paid in a lump sum thirty (30) days following said Termination of Service. The Director will also remain eligible for all promised death benefits in this Director Plan. In addition, no sale, merger, or consolidation of the Company shall take place unless the new or surviving entity expressly acknowledges the obligations of this Director Plan and agrees to abide by its terms.
V. MISCELLANEOUS
A. Alienability and Assignment Prohibition:
Neither the Director, his/her surviving spouse nor any other beneficiary under this Agreement shall have any power or right to transfer, assign, anticipate, hypothecate, mortgage, commute, modify or otherwise encumber in advance any of the benefits payable hereunder nor shall any of
said benefits be subject to seizure for the payment of any debts, judgments, alimony or separate maintenance owed by the Director or the Director's beneficiary(ies), nor be transferable by operation of law in the event of bankruptcy, insolvency or otherwise. In the event the Director or any beneficiary attempts assignment, commutation, hypothecation, transfer or disposal of the benefits hereunder, the Company's liabilities shall forthwith cease and terminate.
B. Binding Obligation of the Company and any Successor in Interest:
The Company shall not merge or consolidate into or with another company or sell substantially all of its assets to another company, firm or person until such company, firm or person expressly agree, in writing, to assume and discharge the duties and obligations of the Company under this Director Plan. This Director Plan shall be binding upon the parties hereto, their successors, beneficiaries, heirs and personal representatives.
C. Amendment or Revocation:
It is agreed by and between the parties hereto that, during the lifetime of the Director, this Director Plan may be amended or revoked at any time or times, in whole or in part, by the mutual written consent of the Director and the Company.
D. Gender:
Whenever in this Director Plan words are used in the masculine or neuter gender, they shall be read and construed as in the masculine, feminine or neuter gender, whenever they should so apply.
E. Effect on Other Company Benefit Plans:
Nothing contained in this Director Plan shall affect the right of the Director to participate in or be covered by any qualified or non-qualified pension, profit-sharing, group, bonus or other supplemental compensation or fringe benefit plan constituting a part of the Company's existing or future compensation structure.
F. Headings:
Headings and subheadings in this Director Plan are inserted for reference and convenience only and shall not be deemed a part of this Director Plan.
G. Applicable Law:
The validity and interpretation of this Agreement shall be governed by the laws of the Commonwealth of Virginia notwithstanding the conflict of any other laws.
H. 12 U.S.C. Section 1828(k):
Any payments made to the Director pursuant to this Director
Plan, or otherwise, are subject to and conditioned upon their
compliance with 12 U.S.C. Section 1828(k) or any regulations
promulgated thereunder.
I. Partial Invalidity:
If any term, provision, covenant, or condition of this
Director Plan is determined by an arbitrator or a court, as
the case may be, to be invalid, void, or unenforceable, such
determination shall not render any other term, provision,
covenant, or condition invalid, void, or unenforceable, and
the Director Plan shall remain in full force and effect
notwithstanding such partial invalidity.
VI. ERISA PROVISION
A. Named Fiduciary and Plan Administrator:
The "Named Fiduciary and Plan Administrator" of this Director Plan shall be First Community Bank, N.A., until its resignation or removal by the Board. As Named Fiduciary and Plan Administrator, the Company shall be responsible for the management, control and administration of the Director Plan. The Named Fiduciary may delegate to others certain aspects of the
management and operation responsibilities of the Director Plan including the employment of advisors and the delegation of ministerial duties to qualified individuals.
B. Claims Procedure and Arbitration:
In the event a dispute arises over benefits under this Director Plan and benefits are not paid to the Director (or to the Director's beneficiary(ies) in the case of the Director's death) and such claimants feel they are entitled to receive such benefits, then a written claim must be made to the Named Fiduciary and Plan Administrator named above within.sixty (60) days from the date payments are refused. The Named Fiduciary and Plan Administrator shall review the written claim and if the claim is denied, in whole or in part, they shall provide in writing within sixty (60) days of receipt of such claim the specific reasons for such denial, reference to the provisions of this Director Plan upon which the denial is based and any additional material or information necessary to perfect the claim. Such written notice shall further indicate the additional steps to be taken by claimants if a further review of the claim denial is desired. A claim shall be deemed denied if the Named Fiduciary and Plan Administrator fail to take any action within the aforesaid sixty-day period.
If claimants desire a second review they shall notify the
Named Fiduciary and Plan Administrator in writing within sixty
(60) days of the first claim denial. Claimants may review this
Director Plan or any documents relating thereto and submit any
written issues and comments it may feel appropriate. In their
sole discretion, the Named Fiduciary and Plan Administrator
shall then review the second claim and provide a written
decision within sixty (60) days of receipt of such claim. This
decision shall likewise state the specific reasons for the
decision and shall include reference to specific provisions of
the Plan Agreement upon which the decision is based.
If claimants continue to dispute the benefit denial based upon completed performance of this Director Plan or the meaning and effect of the terms and conditions thereof, then claimants may submit the dispute to an arbitrator for final arbitration. The arbitrator shall be selected by mutual agreement of the Company and the claimants. The arbitrator shall operate under any generally recognized set of arbitration rules. The parties hereto agree that they and their heirs, personal representatives, successors and assigns shall be bound by the decision of such arbitrator with respect to any controversy properly submitted to it for determination.
Where a dispute arises as to the Company's discharge of the Director "for cause," such dispute shall likewise be submitted to arbitration as above described and the parties hereto agree to be bound by the decision thereunder.
VII. TERMINATION OR MODIFICATION OF AGREEMENT BY REASON OF CHANGES IN THE LAW, RULES OR REGULATIONS
The Company is entering into this Agreement upon the assumption that certain existing tax laws, rules and regulations will continue in effect in their current form. If any said assumptions should change and said change has a detrimental effect on this Director Plan, then the Company reserves the right to terminate or modify this Agreement accordingly. Upon a Change of Control (Subparagraph I [J]), this paragraph shall become null and void effective immediately upon said Change of Control.
IN witness whereof, the parties hereto acknowledge that each has carefully read this Agreement and executed the original thereof on the first day set forth hereinabove, and that upon execution, each has received a conforming copy.
FIRST COMMUNITY BANCSHARES, INC.
Bluefield, VA
By:
------------------------------------- -------------------------------------
Witness Title
------------------------------------- -------------------------------------
Witness Director
|
BENEFICIARY DESIGNATION FORM
FOR THE DIRECTOR SUPPLEMENTAL
RETIREMENT PLAN AGREEMENT
PRIMARY DESIGNATION:
SECONDARY (CONTINGENT) DESIGNATION:
All sums payable under the Director Supplemental Retirement Plan Agreement by reason of my death shall be paid to the Primary Beneficiary, if he or she survives me, and if no Primary Beneficiary shall survive me, then to the Secondary (Contingent) Beneficiary.
AMENDMENT
TO THE LIFE INSURANCE ENDORSEMENT
METHOD SPLIT DOLLAR PLAN AGREEMENT
DATED November 26, 2001
This Amendment, made and entered into this ______ day of _____________, 2002, by and between First Community Bancshares, Inc., a Bank Holding Company organized and existing under the laws of State of Nevada, hereinafter referred to as "Bancshares," and William P. Stafford, II, a Director of Bancshares, hereinafter referred to as the "Director," shall effectively amend the Life Insurance Endorsement Method Split Dollar Agreement dated November 26, 2001, as specifically set forth herein. Said Agreement shall be amended as follows:
1.) The following "Policy Number" for Jefferson Pilot Life Insurance Company shall be deleted in its entirety on page (1) of said agreement, JP5145732, and replaced with the following:
Policy Number: JP5145733
This Amendment shall be effective the 26th day of November, 2001. To the extent that any term, provision, or paragraph of said agreement is not specifically amended herein, or in any other amendment thereto, said term, provision, or paragraph shall remain in full force and effect as set forth in said November 26, 2001 Agreement.
IN WITNESS WHEREOF, the parties hereto acknowledge that each has carefully read this Amendment and executed the original thereof on the first day set forth hereinabove, and that, upon execution, each has received a conforming copy.
FIRST COMMUNITY BANCSHARES, INC.
Bluefield, Virginia
By:
------------------------------------- -------------------------------------
Witness Title
|
EXHIBIT 10.3 SUMMARY
The following officers and employees are participants in the First Community Bancshares, Inc. Executive Retention Plan and as such are parties to Executive Retention Agreements in the form attached hereto as part of this Exhibit 10.3.
OFFICER NAME POSITION
------------ --------
Robert L. Buzzo Vice President & Secretary
First Community Bancshares, Inc.
President
First Community Bank, N. A.
E. Stephen Lilly Chief Operating Officer
First Community Bancshares, Inc.
Senior Vice President & Chief
Operating Officer, First Community
Bank, N. A.
John M. Mendez President & Chief Executive Officer
First Community Bancshares, Inc.
Executive Vice President
First Community Bank, N. A.
Janice K. Miller Senior Vice President - Marketing
First Community Bank, N. A.
Robert L. Schumacher Chief Financial Officer
First Community Bancshares, Inc.
Senior Vice President - Finance &
Secretary, First Community Bank,
N. A.
Stephen H. Warden Senior Vice President & Senior
Lending Officer, First Community
Bank, N. A.
Ruth A. White Administrative Assistant
First Community Bank, N. A.
|
Exhibit 10.3
FIRST COMMUNITY BANCSHARES, INC. AND AFFILIATES
EXECUTIVE RETENTION PLAN
AND AGREEMENT
THIS PLAN AND AGREEMENT is made and entered into this 2nd day of February, 2000, by and between First Community Bancshares, Inc., a corporation, organized and existing under the laws of the State of Nevada, (hereinafter, collectively with its affiliates, referred to as the "Company"), and ____________________, an Executive of the Company (hereinafter referred to as the "Executive").
WHEREAS, the Executive has faithfully served the Company and it is the consensus of the Board of Directors (hereinafter referred to as the "Board"), that the Executive's services have been of exceptional merit, in excess of the compensation paid and an invaluable contribution to the profits and position of the Company in its field of activity. The Board further believes that the Executive's experience, knowledge of corporate affairs, reputation and industry contacts are of such value, and the Executive's continued services so essential to the Company's future growth and profits, that it would suffer severe financial loss should the Executive terminate his service with the Company.
WHEREAS, the Board has adopted this First Community Bancshares, Inc.. Executive Retention Plan and Agreement (hereinafter referred to as the "Retention Plan and Agreement") and it is the desire of the Company and Executive to enter into this plan and agreement by which the Company will agree to make certain payments to the Executive upon the Executive's retirement or disability and to the Executive's beneficiary(ies) in the event of the Executive's death.
WHEREAS, it is the intent of the parties hereto that this Retention Plan and Agreement be considered an unfunded arrangement maintained primarily to provide supplemental retirement benefits for the Executive, and to be considered a non-qualified benefit plan for purposes of the Employee Retirement Income Security Act of 1974, as amended ("ERISA"). The Executive is fully advised of the Company's financial status and has had substantial input in the design and operation of this benefit plan.
NOW THEREFORE, in consideration of services the Executive has performed in the past and those to be performed in the future, and based upon the mutual promises and covenants herein contained, the Company and the Executive agree as follows:
I. DEFINITIONS
A. Effective Date:
The Effective Date of the Plan shall be February 2, 2000.
B. Plan Year:
Any reference to the "Plan Year" shall mean a calendar year from January 1st to December 31st.
C. Retirement Date:
Retirement Date shall mean retirement from service with the Company which becomes effective on the first day of the calendar month following the month in which the Executive reaches age sixty two (62) or such later date as the Executive may actually retire.
D. Termination of Service:
Termination of Service shall mean the Executive's voluntary resignation or the Company's discharge of the Executive, in either case, prior to Normal Retirement Age, death or disability.
E. Pre-Retirement Account:
A Pre-Retirement Account shall be established as a liability reserve account on the books of the Company for the benefit of the Executive. Prior to the Executive's Termination of Service or the Executive's Retirement, whichever event shall first occur, or Prior to the Executive's Retirement Date, such liability reserve account shall be increased or decreased each Plan Year, until the aforestated event occurs, by the Index Retirement Benefit. For further reference on the definition(s) as set forth herein, please see Exhibit "A" attached hereto. Said Exhibit "A" is referred to herein for illustrative purposes only. The Company does not promise any amounts as set forth in Exhibit "A".
F. Index Retirement Benefit:
The Index Retirement Benefit for each Executive in the Retention Plan for each Plan Year shall be equal to the excess (if any) of the Index for that Plan Year over the Cost of Funds Expense for that Plan Year. For further reference on the definition(s) as set forth herein, please see Exhibit "A" attached hereto. Said Exhibit "A" is referred to herein for illustrative purposes only. The Company does not promise any amounts as set forth in Exhibit "A".
G. Index:
The Index for any Plan Year shall be the aggregate annual after-tax income from the life insurance contract(s) described hereinafter as defined by FASB Technical Bulletin 85-4. This Index shall be applied as if such insurance contract(s) were purchased on the Effective Date of the Executive Plan.
Insurance Company:
Policy Form:
Policy Name:
Insured's Age and Sex:
Riders:
Ratings:
Option:
Face Amount:
Premiums Paid:
Number of Premium Payments:
Purchase Date
If such contracts of life insurance are not purchased or are subsequently surrendered or lapsed, then the Bank shall receive annual policy illustrations that assume the above-described policies were purchased or had not subsequently been surrendered or lapsed, which illustration will be received from the respective insurance companies and will indicate the increase in policy values for purposes of calculating the amount of the Index.
In either case, references to the life insurance contracts are merely for purposes of calculating a benefit. The Bank has no obligation to purchase such life insurance and, if purchased, the Executives and their beneficiary(ies) shall have no ownership interest in such policy and shall never have a greater interest in the benefits under this Retention Plan and Agreement than that of an unsecured creditor of the Bank.
H. Opportunity Cost :
The Opportunity Cost for any Plan Year shall be calculated by taking the sum of the amount of premiums for the life insurance policies described in the definition of "Index" plus the amount of any after- tax benefits paid to any Executive pursuant to the Retention Plan and Agreement (Paragraph II hereinafter) plus the amount of all previous years after-tax Opportunity Costs, and multiplying that sum by the Average Opportunity Cost. For further reference on the definition(s) as set forth herein, please see Exhibit "A" attached hereto. Said Exhibit "A" is referred to herein for illustrative purposes only. The Company does not promise any amounts as set forth in Exhibit "A".
I. Change of Control:
For purposes of this Retention Plan and Agreement, change of control shall mean the purchase or other acquisition by any person, entity or group of persons, within the meaning of Section 13(d)(3) of the Securities Exchange Act of 1934 (the "Act"), or any comparable successor provision, of beneficial ownership within the meaning of Rule 13d-3 promulgated under the Act, within any twelve month period, of 30 percent or more of the outstanding shares of common stock of First Community Bancshares, Inc. (the
"Holding Company"); or the approval by the stockholders of the Holding Company of a reorganization, merger, consolidation, share exchange or similar transaction pursuant to which persons who were stockholders of the Holding Company immediately prior to the effective date of such transaction do not, immediately after such date, own more than 60 percent of the combined voting power entitled to vote generally in the election of directors of the surviving or successor corporation; or a liquidation or dissolution of the Holding Company; or the sale of all or substantially all of its assets.
J. Normal Retirement Age:
Normal Retirement Age shall mean the date on which the Executive attains age sixty-two (62).
K. Average Opportunity Cost:
Average Opportunity Cost is the average annual after tax cost of interest-bearing deposit liabilities computed on a calendar year basis.
L. For Cause:
The term for "cause" shall mean the commission of acts or omissions by the executive which constitute fraud, dishonesty, excessive absenteeism without approval of the employer (provided such absenteeism is not caused by disability), a criminal act involving the person or property of others or the public generally, gross neglect of duty resulting in substantial loss to the employer or any affiliate, or willful failure to carry out reasonable and legal duties and responsibilities consistent with his duties. If a dispute arises as to discharge for "cause", such dispute shall be resolved by arbitration as set forth in this Retention Plan and Agreement.
II. INDEX BENEFITS
A. Retirement Benefits:
An Executive who remains employed by the Company until the Normal Retirement Age shall be entitled to receive the balance in the Pre-Retirement Account in one hundred twenty (120) equal monthly installments commencing thirty (30) days following the Executive's retirement. In addition to these payments and commencing in conjunction therewith, the Index Retirement Benefit, if any, for each Plan Year subsequent to the Executive's retirement, and including the remaining portion of the Plan Year following said retirement, shall be paid to the Executive until the Executive's death.
B. Termination of Employment:
No benefits will be paid to the Executive or his beneficiary(ies) in the event of termination of employment for any reason other than the retirement, disability or death of the Executive or pursuant to Article IV, hereinafter.
C. Death:
Should the Executive die prior to having received the balance of the Pre-Retirement Account payable to the Executive under the terms of this Retention Plan, the unpaid balance shall be paid in a lump sum to the individual or individuals the Executive may have designated in writing and filed with the Company. In the absence of any effective designation of beneficiary(ies), the unpaid balance shall be paid as set forth herein to the duly qualified executor or administrator of the Executive's estate. Said payment due hereunder shall be made the first day of the second month following the death of the Executive.
D. Death Benefits:
Except as set forth above, there is no death benefit provided under this Agreement.
III. RESTRICTION UPON FUNDING
The Company shall have no obligation to set aside, earmark or entrust any fund or money with which to pay its obligations under this Retention Plan and Agreement. The Executive, his/her beneficiary(ies), or any successor in interest shall be and remain simply a general creditor of the Company in the same manner as any other creditor having a general claim for matured and unpaid compensation. The Company reserves the absolute right, at its sole discretion, to either fund the obligations undertaken by this Retention Plan and Agreement or to refrain from funding the same and to determine the extent, nature and method of such funding. Should the Company elect to fund this Retention Plan, in whole or in part, at no time shall any Executive be deemed to have any lien nor right, title or interest in or to any specific funding investment or to any assets of the Company.
If the Company elects to invest in a life insurance, disability or annuity policy upon the life of the Executive, then the Executive shall assist the Company by freely submitting to a physical exam and supplying such additional information necessary to obtain such insurance or annuities.
IV. TERMINATION OF SERVICE AFTER A CHANGE OF CONTROL
If the Executive suffers a Termination of Service, other than for cause, during the twelve months prior to a Change in Control, or at anytime thereafter, (unless the Executive voluntarily terminates his employment within 90 days following the effective date of the change in control), then the Executive shall receive all benefits provided for in this Retention Plan and Agreement upon death (if applicable), disability or attaining Normal Retirement Age, as if the Executive had been continuously employed by the Company until such event.
V. COMPETITION AFTER TERMINATION OF SERVICE
No benefits shall be payable if, at anytime within three (3) years following the Executive's Termination of Service or Retirement, the Executive, without the prior written consent of the Company, engages in, becomes interested in, directly or indirectly, as a sole proprietor, as a partner in a partnership, or as a substantial shareholder in a corporation, or becomes associated with, in the capacity of employee, director, officer, principal, agent, trustee or in any other capacity whatsoever, any enterprise conducted in the trading area (within a 50 mile radius from the Company's main office and 25 miles from any branch office) of the business of the Company, which enterprise is, or may be deemed to be, competitive with any business carried on by the Company as of the date of the Executive's Termination of Employment or retirement.
VI. SOLICIATION AFTER TERMINATION OF EMPLOYMENT
No benefits shall be payable if, at anytime within five (5) years following the Executive's Termination of Service or Retirement, the Executive, without prior written consent of the Company, solicits any employee of the Company for the purpose of hiring such employee away from the Company. Likewise, no benefits shall be payable if, during such five year period, the Executive, without the prior written consent of the Company, solicits any entity or person that was a customer of the Company within twelve months prior to such termination for the purpose of obtaining such customer's business relationship. VII. MISCELLANEOUS
A. Alienability and Assignment Prohibition:
Neither the Executive, nor the Executive's surviving spouse, nor any other beneficiary(ies) under this Retention Plan shall have any power or right to transfer, assign, anticipate, hypothecate, mortgage, commute, modify or otherwise encumber in advance any of the benefits payable hereunder nor shall any of said benefits be subject to seizure for the payment of any debts, judgments, alimony or separate maintenance owed by the Executive or the Executive's beneficiary(ies), nor be transferable by operation of law in the event of bankruptcy, insolvency or otherwise. In the event the Executive or any beneficiary attempts assignment, commutation, hypothecation, transfer or disposal of the benefits hereunder, the Company's liabilities hereunder shall forthwith cease and terminate.
B. Binding Obligation of the Bank and any Successor in Interest:
The Company shall not merge or consolidate into or with another bank or holding company or sell substantially all of its assets to another bank, firm or person until such bank, firm or person expressly agrees, in writing, to assume and discharge the duties and obligations of the Company under this Retention Plan. This Retention Plan shall be binding upon the parties hereto, their successors, beneficiaries, heirs and personal representatives.
C. Amendment or Revocation:
It is agreed by and between the parties hereto that, during the lifetime of the Executive, this Retention Plan may be amended or revoked at any time or times, in whole or in part, by the mutual written consent of the Executive and the Company.
D. Gender:
Whenever in this Retention Plan and Agreement words are used in the masculine or feminine gender, they shall be read and construed as in the masculine or feminine gender, whenever they should so apply.
E. Effect on Other Bank Benefit Plans:
Nothing contained in this Retention Plan and Agreement shall affect the right of the Executive to participate in or be covered by any qualified or non-qualified pension, profit-sharing, group, bonus or other supplemental compensation or fringe benefit plan constituting a part of the Company's existing or future compensation structure.
F. Headings:
Headings and subheadings in this Retention Plan and Agreement are inserted for reference and convenience only and shall not be deemed a part of this Retention Plan and Agreement.
G. Applicable Law:
The validity and interpretation of this Retention Plan and Agreement shall be governed by the laws of the Commonwealth of Virginia.
H. 12 U.S.C.Section 1828(k):
Any payments made to the Executive pursuant to this Retention Plan and Agreement, or otherwise, are subject to and conditioned upon their compliance with 12 U.S.C.Section 1828(k) or any regulations promulgated thereunder.
I. Partial Invalidity:
If any term, provision, covenant, or condition of this Retention Plan and Agreement is determined by an arbitrator or a court, as the case may be, to be invalid, void, or unenforceable, such determination shall not render any other term, provision, covenant, or condition invalid, void, or unenforceable, and the Retention Plan and Agreement shall remain in full force and effect notwithstanding such partial invalidity.
J. Employment:
No provision of this Retention Plan and Agreement shall be deemed to restrict or limit any existing employment agreement by and between the Company and the Executive, nor shall any conditions herein create specific employment rights to the Executive nor limit the right of the Employer to discharge the Executive with or without cause. In a similar fashion, no provision shall limit the Executive's rights to voluntarily sever the Executive's employment at any time.
K. Exhibit A:
For further reference on the definition(s) as set forth herein, please see Exhibit "A" attached hereto. Said Exhibit "A" is referred to herein for illustrative purposes only. The Company does not promise any amounts as set forth in Exhibit "A".
VIII. ERISA PROVISION
A. Named Fiduciary and Plan Administrator:
The "Named Fiduciary and Plan Administrator" of this Retention Plan and Agreement shall be First Community Bank, N.A., until its resignation or removal by the Board. As Named Fiduciary and Plan Administrator, the Bank shall be responsible for the management, control and administration of the Retention Plan and Agreement. The Named Fiduciary may delegate to others certain aspects of the management and operation responsibilities of the Retention Plan and Agreement including the employment of advisors and the delegation of ministerial duties to qualified individuals.
B. Claims Procedure and Arbitration:
In the event a dispute arises over benefits under this Retention Plan and Agreement and benefits are not paid to the Executive (or to the Executive's beneficiary(ies) in the case of the Executive's death) and such claimants feel they are entitled to receive such benefits, then a written claim must be made to the Named Fiduciary and Plan Administrator named above within sixty (60) days from the date payments are refused. The Named Fiduciary and Plan Administrator shall review the written claim and if the claim is denied, in whole or in part, they shall provide in writing within sixty (60) days of receipt of such claim its specific reasons for such denial, reference to the provisions of this Retention Plan and Agreement upon which the denial is based and any additional material or information necessary to perfect the claim. Such written notice shall further indicate the additional steps to be taken by claimants if a further review of the claim denial is desired. A claim shall be deemed denied if the Named Fiduciary and Plan Administrator fail to take any action within the aforesaid sixty-day period.
If claimants dispute the benefit denial based upon completed performance of this Retention Plan and Agreement or the meaning and effect of the terms and conditions thereof, then claimants may submit the dispute to an Arbitrator for final arbitration. The Arbitrator shall be selected by mutual agreement of the Company and the claimants. The Arbitrator shall operate under any generally recognized set of arbitration rules. The parties hereto agree that they and their heirs, personal representatives, successors and assigns shall be bound by the decision of such Arbitrator with respect to any controversy properly submitted to it for determination.
Where a dispute arises as to the Company's discharge of the Executive for
"Cause", such dispute shall likewise be submitted to arbitration as
above-described; and the parties hereto agree to be bound by the decision
thereunder.
IN WITNESS WHEREOF, the parties hereto acknowledge that each
has carefully read this Retention Plan and Agreement and executed the
original thereof on the ______ day of _________, ______, and that, upon
execution, each has received a conforming copy.
FIRST COMMUNITY BANCSHARES, INC.
BLUEFIELD, VIRGINIA
AMENDMENT
TO THE FIRST COMMUNITY BANCSHARES, INC.
AND AFFILIATES EXECUTIVE RETENTION PLAN AND
AGREEMENT
This Amendment made and entered into on the 11th day of May 2000, by and between First Community Bancshares, Inc., a Bank organized and existing under the laws of the State of Nevada, hereinafter referred to as the, "Bank", and _______________, a Key Employee and Executive of the Bank, hereinafter referred to as the, "Executive", shall effectively amend the First Community Bancshares, Inc. and Affiliates Executive Retention Plan Agreement as specifically set forth herein pursuant to Subparagraph VII(C) of said Agreement. Subparagraph I(G) titled, "Index", of the agreement shall be amended to include the following information:
Insurance Company Jefferson Pilot Life Insurance Company Policy Form: Flexible Premium Adjustable Life Policy Name: Executive Security Plan VI Insured's Age and Sex: __/______ Riders: None Ratings: According to the health of the proposed insured Option: Level Face Amount: $768,000 Premiums Paid: $300,000 Number of Premium Payments Single Purchase Date February 2, 2000 Insurance Company Massachusetts Mutual Life Insurance Company Policy Form: Flexible Premium Adjustable Life Policy Name: Strategic Life Exec Insured's Age and Sex: __/_____ Riders: None Ratings: According to the health of the proposed insured Option: Level Face Amount: $804,000 Premiums Paid: $300,000 Number of Premium Payments Single Purchase Date February 3, 2000 |
This Amendment shall be effective the 11th day of May, 2000, and the information set forth hereinabove shall be inserted in Subparagraph I(G) of said participant agreement. To the extent that any term, provision, or paragraph of said agreement is not specifically amended herein, or in any other amendment thereto, said term, provision or paragraph shall remain in full force and effect as set forth in said agreement.
IN WITHNESS WHEREOF, the parties hereto acknowledge that each has carefully read this Amendment and executed the original thereof on the 11th day of May, 2000, and that, upon execution, each has received a conforming copy.
First Community Bancshares, Inc.
-------------------------- ----------------------------------
Witness By
-------------------------- ----------------------------------
Witness Executive
|
BENEFICIARY DESIGNATION FORM
FOR THE EXECUTIVE
RETENTION PLAN AND AGREEMENT
PRIMARY DESIGNATION:
SECONDARY (CONTINGENT) DESIGNATION:
All sums payable under the Executive Retention Plan and Agreement, by reason of my death, shall be paid to the Primary Beneficiary, if he, she or they survive me, and if no Primary Beneficiary shall survive me, then to the Secondary (Contingent) Beneficiary.
FIRST COMMUNITY BANCSHARES, INC.
LIFE INSURANCE
ENDORSEMENT METHOD SPLIT DOLLAR PLAN
AND AGREEMENT
Insurer: Jefferson Pilot Life Insurance Company
Massachusetts Mutual Life Insurance
Policy Number: JP5098233
0 036 131
Company: First Community Bancshares, Inc.
and it's Affiliates
Insured:
Relationship of Insured
to Company: Executive
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The respective rights and duties of the Company and the Insured in the above-referenced policy shall be pursuant to the terms set forth below:
I. DEFINITIONS
Refer to the policy contract for the definition of all terms in this Plan and Agreement not defined herein.
II. POLICY TITLE AND OWNERSHIP
Title and ownership shall reside in the Company for its use and for the use of the Insured all in accordance with this Plan and Agreement. Where the Company and the Insured (or assignee, with the consent of the Insured) mutually agree to exercise the right to increase the coverage under the subject Split Dollar policy, then, in such event, the rights, duties and benefits of the parties to such increased coverage shall continue to be subject to the terms of this Plan and Agreement.
III. BENEFICIARY DESIGNATION RIGHTS
The Insured (or assignee) shall have the right and power to designate a beneficiary or beneficiaries to receive the Insured's share of the proceeds payable upon the death of the Insured, and to elect and change a payment option for such beneficiary, subject to any right or interest the Company may have in such proceeds, as provided in this Plan and Agreement.
IV. PREMIUM PAYMENT METHOD
The Company shall pay, in a single deposit, an amount equal to the premiums calculated under provisions of the Executive Retention Plan and Agreement.
V. TAXABLE BENEFIT
Annually the Insured will receive a taxable benefit equal to the assumed cost of insurance as required by the Internal Revenue Service. The Company (or its administrator) will report to the Insured the amount of imputed income each year on Form W-2 or its equivalent.
VI. ENTITLEMENT TO THE CASH SURRENDER VALUE OF THE POLICY
The Company shall be entitled to an amount equal to the policy's cash value, as that term is defined in the policy contract, less any applicable surrender charges. Such cash value shall be determined and paid as of the date of death.
VII. DIVISION OF DEATH PROCEEDS
Subject to Paragraphs VI, IX, and XIV herein, the division of the death proceeds of the policy is as follows:
A. Should the Insured be employed by the Company, disabled or retired on the date of death, the Insured's beneficiary(ies), designated in accordance with Paragraph III, shall be entitled to an
amount equal to eighty percent (80%) of the net at risk insurance portion of the proceeds. The net at risk insurance portion is the total proceeds less the cash value of the policy.
B. The Company shall be entitled to the remainder of such proceeds.
C. Should the Insured not be employed by the Company for reasons other than disability or retirement at the time of his death, no benefits will be paid the insured's beneficiary(ies).
D. The Company and the Insured (or assignees) shall share in any interest due on the death proceeds on a pro rata basis as the proceeds due each respectively bears to the total proceeds, excluding any such interest.
VIII. TERMINATION OF PLAN AND AGREEMENT
This Plan and Agreement shall terminate upon the insured leaving the employment of the Company (voluntarily or involuntarily).
Except as provided above, this Plan and Agreement shall terminate upon distribution of the death benefit proceeds and the cash value in accordance with Paragraph VI and VII above.
IX. INSURED'S OR ASSIGNEE'S ASSIGNMENT RIGHTS
The Insured may not, without the written consent of the Company, assign to any individual, trust or other organization, any right, title or interest in the subject policy nor any rights, options, privileges or duties created under this Plan and Agreement.
X. PLAN AND AGREEMENT BINDING UPON THE PARTIES
This Plan and Agreement shall bind the Insured and the Company, their heirs, successors, personal representatives and assigns.
XI. ERISA PROVISIONS
The following provisions are part of this Plan and Agreement and are intended to
meet the requirements of the Employee Retirement Income Security Act of 1974
("ERISA"):
A. Named Fiduciary and Plan Administrator.
The "Named Fiduciary and Plan Administrator" of this Endorsement Method Split
Dollar Plan and Agreement shall be First Community Bank, N.A. until resignation
or removal by the Board of Directors. As Named Fiduciary and Plan Administrator,
the Bank shall be responsible for the management, control and administration of
this Split Dollar Plan and Agreement as established herein. The Named Fiduciary
may delegate to others certain aspects of the management and operation
responsibilities of the Plan, including the employment of advisors and the
delegation of any ministerial duties to qualified individuals.
B. Funding Policy.
The funding policy for this Split Dollar Plan and Agreement shall be to maintain
the subject policy in force by purchasing a single premium insurance product.
C. Basis of Payment of Benefits.
Direct payment by the Insurer is the basis of payment of benefits under this
Plan and Agreement, with those benefits in turn being based on the payment of
premiums as provided in the Executive Retention Plan and Agreement.
D. Claim Procedures.
Claim forms or claim information as to the subject policy can be obtained by contacting Benmark, 1100 Circle 75 Parkway, Suite 300, Atlanta, Georgia 30339. When the Named Fiduciary has a claim which may be covered under the provisions described in the insurance policy, they should contact the office named above, and they will either complete a claim form and forward it to an authorized representative of the Insurer or advise the named Fiduciary what further requirements are necessary. The Insurer will evaluate and make a decision as to payment. If the claim is payable, a benefit check will be issued in accordance with the terms of this Plan and Agreement.
In the event that a claim is not eligible under the policy, the Insurer will notify the Named Fiduciary of the denial pursuant to the requirements under the terms of the policy. If the Named Fiduciary is dissatisfied with the denial of the claim and wishes to contest such claim denial, they should contact the office named above and they will assist in making inquiry to the Insurer. All objections to the Insurer's actions should be in writing and submitted to the office named above for transmittal to the Insurer.
XII. GENDER
Whenever in this Plan and Agreement words are used in the masculine or neuter gender, they shall be read and construed as in the masculine, feminine or neuter gender, whenever they should so apply.
XIII. INSURANCE COMPANY NOT A PARTY TO THIS PLAN AND AGREEMENT
The Insurer shall not be deemed a party to this Plan and Agreement, but will respect the rights of the parties as herein developed upon receiving an executed copy of this Plan and Agreement. Payment or other performance in accordance with the policy provisions shall fully discharge the Insurer for any and all liability.
XIV. CHANGE OF CONTROL
For purposes of this Plan and Agreement, Change of Control shall mean the purchase or other acquisition by any person, entity or group of persons, within the meaning of Section 13(d)(3) of the Securities Exchange Act of 1934 (the "Act"), or any comparable successor provision, of beneficial ownership within the meaning of Rule 13d-3 promulgated under the Act, within any twelve month period, of 30 percent or more of the outstanding shares of common stock of First Community Bancshares, Inc. (the "Holding Company"); or the approval by the stockholders of the Holding Company of a reorganization, merger, consolidation, share exchange or similar transaction pursuant to which persons who were stockholders of the Holding Company immediately prior to the effective date of such transaction or series of transactions do not, immediately after such date, own more than 60 percent of the combined voting power entitled to vote generally in the election of directors of the surviving or successor corporation; or a liquidation or dissolution of the Holding Company; or the sale of all or substantially all of its assets.
Upon a Change of Control, if the Insured's employment is subsequently terminated, except for Cause, then the Insured shall be one hundred percent (100%) vested in the benefits promised in this Plan and Agreement. Therefore, upon the death of the Insured, the Insured's beneficiary(ies) (designated in accordance with Paragraph III) shall receive the death benefit provided herein as if the Insured had died while employed by the Company, whether or not such Insured remains employed by the Company.
Cause for this Plan and Agreement shall mean, any of the following that result in a material adverse effect on the Company: (i) gross negligence or gross neglect; (ii) conviction for a felony involving fraud or dishonesty; (iii) a breach of fiduciary duty involving personal profit; or (iv) excessive absenteeism without approval of the employer (provided such absenteeism is not caused by disability). If a dispute arises as to discharge for "cause", such dispute shall be resolved by arbitration as set forth in the Executive Retention Plan and Agreement.
XV. AMENDMENT OR REVOCATION
It is agreed by and between the parties hereto that, during the lifetime of the Insured, this Plan and Agreement may be amended or revoked at any time or times, in whole or in part, by the mutual written consent of the Insured and the Company.
XVI. EFFECTIVE DATE
The Effective Date of this Plan and Agreement shall be ____________________.
XVII. SEVERABILITY AND INTERPRETATION
If a provision of this Plan and Agreement is held to be invalid or unenforceable, the remaining provisions shall nonetheless be enforceable according to their terms. Further, in the event that any provision is held to be overbroad as written, such provision shall be deemed amended to narrow its application to the extent necessary to make the provision enforceable according to law and enforced as amended.
XVIII. APPLICABLE LAW
The validity and interpretation of this Plan and Agreement shall be governed by the laws of the Commonwealth of Virginia.
Executed at ____________, ____________ this ______ day of _____________, ______.
FIRST COMMUNITY BANCSHARES, INC.
Bluefield, Virginia
By:
--------------------------- ---------------------------------
Witness Title
-------------------------- ------------------------------------
Witness Insured
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BENEFICIARY DESIGNATION FORM
FOR THE INSURANCE ENDORSEMENT METHOD
SPLIT DOLLAR PLAN AND AGREEMENT
PRIMARY DESIGNATION:
SECONDARY (CONTINGENT) DESIGNATION:
All sums payable under the Life Insurance Endorsement Method Split Dollar Plan and Agreement by reason of my death shall be paid to the Primary Beneficiary, if he or she survives me, and if no Primary Beneficiary shall survive me, then to the Secondary (Contingent) Beneficiary.
EXHIBIT 10.4 SUMMARY
The following directors are participants in the First Community Bancshares, Inc. 2001 Director Stock Option Plan. As part of the Plan, each of the listed directors have executed a Stock Option Agreement (in the form attached hereto as part of Exhibit 10.4) pursuant to the Plan which Agreement grants 5,500 options to each director listed below at the option price of $23.91 with a grant date of November 12, 2001:
Sam Clark
Allen T. Hamner
B. W. Harvey
I. Norris Kantor
A. A. Modena
Robert E. Perkinson, Jr.
William P. Stafford
William P. Stafford, II
W. W. Tinder, Jr.
Exhibit 10.4
THE SECURITIES ISSUABLE PURSUANT TO THIS OPTION AGREEMENT MAY NOT BE SOLD OR OTHERWISE TRANSFERRED EXCEPT IN A TRANSACTION WHICH IN THE OPINION OF COUNSEL FOR THE OPTIONEE REASONABLY SATISFACTORY TO THE CORPORATION AND ITS COUNSEL, IS IN COMPLIANCE WITH THE SECURITIES ACT OF 1933 AND APPLICABLE STATE SECURITIES LAWS.
FIRST COMMUNITY BANCSHARES, INC.
DIRECTOR'S STOCK OPTION AGREEMENT
THIS DIRECTOR'S STOCK OPTION AGREEMENT, effective as of the close of business November 12, 2001, by and between First Community Bancshares, Inc., a Nevada corporation (herein referred to as the "Corporation") and _________ (herein referred to as the "Optionee").
W I T N E S S E T H
WHEREAS, the Board of Directors of the Corporation (hereinafter referred to as the "Board") has adopted the First Community Bancshares, Inc. 2001 Directors Stock Option Plan (hereinafter the "Plan") to encourage and facilitate investment in the common stock of the Corporation by nonemployee directors of the Corporation, whose efforts are expected to contribute to its future growth and continued success;
WHEREAS, the Plan is administered by the Board; and
WHEREAS, the Board has voted to grant the Optionee options to purchase common stock in the Corporation pursuant to the terms of the Plan; and has further authorized the execution and delivery of this Agreement.
NOW THEREFORE, in consideration of the premises and other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, it is hereby agreed as follows:
1. Grant of Option. Subject to the provisions set forth herein and the terms and conditions of the Plan, the terms of which are hereby incorporated by reference, the Corporation hereby grants to the Optionee an option to purchase from the Corporation the number of shares of common stock, par value $1.00 per share (the "Shares"), at the option price per share, and on the schedule, all as set forth below. At the time of exercise of the option, payments of the purchase price must be made in cash, or if the Board in its discretion agrees to so accept, then by the delivery to the Corporation of other common stock owned by the Optionee, valued at its fair market value on the date of exercise, or in some combination of cash and such common stock so valued.
(a) Number of Shares Subject to Option: _________.
(b) Option Price Per Share: $______.
(c) Date of Grant: _____________.
(d) Vesting: 100 percent on December 17, 2001.
2. Conditions to Exercise of Option. The exercise of the option is conditioned upon the acceptance by the Optionee of the terms hereof as evidenced by his or her execution of this Agreement in the space provided therefor at the end hereof and the return of an executed copy to the Secretary of the Corporation no later than December 31, 2001. Notwithstanding any other provision of this Plan, no option may be exercised after the tenth anniversary of the Date of Grant.
3. Exercise of Option. Subject to paragraph 2 hereof, this Option may be exercised at any time through the period ending two years after the date the Optionee ceases to serve as a director of the Corporation.
In the event of a change in control, all options previously granted to a noncontinuing director but not vested shall continue to vest as if the Optionee had remained a director. All options held by such person shall be exercisable at any time after such termination (subject to any vesting requirements) until the second anniversary of the date the Optionee ceases to serve as a director or one year after his or her death, whichever first occurs. Upon the conclusion of such post-termination exercise period, this option shall be deemed cancelled with respect to all remaining Shares.
Written notice of an election to exercise any portion of the option specifying the portion thereof being exercised and the exercise date, shall be given by the Optionee or his lawfully appointed personal representative in the event of the Optionee's death (a) by delivering such notice to the principal executive offices of the Corporation no later than the exercise date, or (b) by mailing such notice, postage prepaid, addressed to the Secretary of the Corporation at the principal executive offices of the
Corporation, at least three business days prior to the exercise date, in either case accompanied by payment in full of the exercise price.
4. Limitation of Exercise of Option. The option may be exercised only by the Optionee or in the event of death, by his or her personal representative, and may not be transferred other than by will or the applicable laws of descent or distribution. The option shall not otherwise be transferred, assigned, pledged, or hypothecated for any purpose whatsoever and is not subject, in whole or in part, to execution, attachment, or similar process. Any attempted assignment, transfer, pledge or hypothecation or other disposition of the option other than in accordance with the terms set forth herein, shall be null and void and of no effect.
5. Option Holder Not Stockholder. Neither the Optionee nor any other person entitled to exercise the option under the terms hereof shall be, or have any of the rights or privileges of, a shareholder of the Corporation in respect to any of the Shares issuable on exercise of the option, unless and until the purchase price for such Shares is paid in full and certificates representing such Shares are issued.
6. Adjustment To Stock Option Agreement. In the event the option shall be exercised in whole, this Agreement shall be surrendered to the Corporation for cancellation. In the event the option shall be exercised in part, or a change in the number or designation of the common stock shall be made, this Agreement shall be delivered by the Optionee to the Corporation for the purpose of making appropriate notation thereon, reflecting the partial exercise or the change in the number or designation of the Shares.
7. Proprietary Information. The Optionee, while providing services as a director hereunder, will have access to information, including without limitation customer information, strategic plans, management and operating policies and procedures, and similar information, which constitute proprietary information or trade secrets of the Corporation or its affiliates. The Optionee shall not, at any time, whether during the term of this Agreement or otherwise, disclose any of such proprietary information to any person or entity other than the Corporation, its affiliates and employees.
8. Plan and Plan Interpretations as Controlling. This option and the terms and conditions herein set forth are subject in all respects to the definitions, terms and conditions of the Plan, which are incorporated herein by reference as if set forth herein and shall be controlling. All determinations and interpretations of the Board shall be binding and conclusive upon the Optionee or his or her legal representatives with regard to any question arising hereunder or under the Plan, to the extent not inconsistent with Section 83 of the Internal Revenue Code and regulations issued thereunder.
9. Legending of Shares. Each certificate representing any Shares issuable upon exercise of this option shall bear a legend indicating that such shares may not be transferred in the absence of an opinion of counsel that such transfer complies with all applicable securities laws.
11. Governing Law. The option and this agreement shall be construed and applied in accordance with the laws of the State of Nevada as to corporate law issues, and otherwise by the laws of the Commonwealth of Virginia, in each case to the extent not inconsistent with Section 83 of the Internal Revenue Code and regulations issued thereunder.
IN WITNESS WHEREOF, the Corporation has caused this option to be granted and this agreement to be executed on behalf of the Corporation on the date first above written.
First Community Bancshares, Inc.
The undersigned hereby accepts the option granted hereby and agrees to comply fully with the terms and conditions hereof.
EXHIBIT 10.5 (SUMMARY)
The following officers and employees are participants in the First Community Bancshares, Inc. Stock Option Plan. As part of the Plan, each listed officer or employee has executed a Stock Option Agreement pursuant to the Plan, which agreement is in the form attached as part of this Exhibit 10.5, and which grants options as follows:
Deemed Grant Date
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Officer Name Position 01/01/99 01/01/00 01/01/01 01/01/02 01/01/03
------------ -------- -------- -------- -------- -------- --------
John M. Mendez President & CEO 12,826 12,826 12,826 12,826 12,826
Robert L. Buzzo Vice President/Secretary 6,875 6,875 6,875 6,875 6,875
E. Stephen Lilly Chief Operating Officer 6,864 6,864 6,864 6,864 6,864
Robert L. Schumacher Chief Financial Officer 8,424 8,424 8,424 8,424 8,424
Janice K. Miller Vice President - Marketing 4,137 4,137 4,137 4,137 4,137
Ruth White Administrative Assistant to President 3,096 3,096 3,096 3,096 3,096
Samuel L. Elmore Chief Credit Officer -- -- 2,750 2,750 2,750
S. Michael Feola CEO - Upshur County -- -- 2,750 2,750 2,750
Donald W. Macaulay CEO - North Carolina -- -- 2,750 2,750 2,750
Gary R. Mills CEO - Princeton -- -- 2,750 2,750 2,750
Gregory L. Nestor CEO - Southside Virginia -- -- 2,750 2,750 2,750
Dorwin D. Byrd CEO - Bluewell -- -- 1,375 1,375 1,375
Kenneth P. Mulkey CFO - First Community Bank, N. A. -- -- 1,375 1,375 1,375
Beverley K. Neal Information Technology Director -- -- 1,375 1,375 1,375
Martyn A. Pell CEO - Taylor County -- -- 1,375 1,375 1,375
Monte K. Rife CEO - Southwest Virginia -- -- 1,375 1,375 1,375
Stephen H. Warden SVP - First Community Bank, N. A. -- -- 1,375 1,375 1,375
Harold L. Wright CEO - Wyoming County -- -- 1,375 1,375 1,375
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Exhibit 10.5
THE SECURITIES ISSUABLE PURSUANT TO THIS OPTION AGREEMENT HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"). WHEN ISSUED, SUCH SECURITIES MAY NOT BE SOLD OR OTHERWISE TRANSFERRED IN THE ABSENCE OF REGISTRATION UNDER THE ACT AND APPLICABLE STATE SECURITIES LAWS, OR IN A TRANSACTION WHICH IN THE OPINION OF COUNSEL FOR THE OPTIONEE, WHICH OPINION SHALL BE REASONABLY SATISFACTORY TO THE CORPORATION AND ITS COUNSEL, IS EXEMPT FROM REGISTRATION UNDER THE ACT AND APPLICABLE STATE SECURITIES LAWS.
FIRST COMMUNITY BANCSHARES, INC.
STOCK OPTION AGREEMENT
THIS STOCK OPTION AGREEMENT, effective as of January 1, 2001, by and between First Community Bancshares, Inc., a Nevada corporation (herein referred to as the "Corporation") and ____________ (herein referred to as the "Optionee").
W I T N E S S E T H
WHEREAS, the Board of Directors of the Corporation (hereinafter referred to as the "Board") has adopted the First Community Bancshares, Inc. 1999 Stock Option Plan (hereinafter the "Plan") to encourage and facilitate investment in the common stock of the Corporation by those individuals whose efforts will determine the future growth and continued success of the Corporation; and
WHEREAS, the Plan is administered by the Board; and
WHEREAS, the Board has voted to grant the Optionee options to purchase common stock in the Corporation pursuant to the terms of the Plan; and has further authorized the execution and delivery of this Agreement.
NOW THEREFORE, in consideration of the premises and other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, it is hereby agreed as follows:
1. Grant of Option. Subject to the provisions set forth herein and the terms and conditions of the Plan, the terms of which are hereby incorporated by reference, the Corporation hereby grants to Optionee an option to purchase from the Corporation the number of shares of common stock, par value $1.00 per share (the "Shares"), at the option price per share, and on the schedule, all as set forth below. At the time of exercise of the option, payments of the purchase price must be made in cash, or if the Board in its discretion agrees to so accept, then by the delivery to the Corporation of other common stock owned by Optionee, valued at its fair market value on the date of exercise, or in some combination of cash and such common stock so valued.
(d) Number of Shares Subject to Option: __________.
(e) Option Price Per Share: Pursuant to Annual Advice
(f) Date of Initial Grant: _______________________.
(d) Granting and Vesting Schedule: See following Table and Exhibit I.
Date of Deemed Grant # of Shares Granted Date of 100% Vesting Exercise Period
-----------------------------------------------------------------------------------------------
________________ ________ _______ All vested options
________________ ________ _______ are exercisable as
________________ ________ _______ set forth in paragraph
3 below
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2. Conditions to Exercise of Option. The exercise of the option is conditioned upon the acceptance by Optionee of the terms hereof as evidenced by his or her execution of this Agreement in the space provided therefor at the end hereof and the return of an executed copy to the Secretary of the Corporation no later than _________________.
3. Exercise of Option. If Optionee remains employed by the Corporation or any affiliate until he or she attains age 62, all vested options shall be exercisable at any time after Optionee's 62nd birthday and before the fifth anniversary of termination of employment. If Optionee's employment with the Corporation is terminated due to disability (as determined by the Board) or death, all vested options previously granted to Optionee shall be exercisable at any time within five years after the
date of such termination. If Optionee's employment is terminated for any reason other than death, disability (as determined by the Board) or retirement at or after age 62, no further vesting shall occur following termination, and any vested options must be exercised within 90 days after such termination of employment.
In the event of any change in control, options previously granted to (a) any participant who is terminated without cause by the Corporation, its successor or any affiliate during the 12 months preceding or at any time following the change in control, and (b) any participant who remains employed by the Corporation or its successor during the 90-day period following the change of control and thereafter resigns, shall continue to be deemed granted and shall vest as if Optionee remained employed. Such options shall be exercisable at any time after such termination (subject to vesting requirements) until five years after Optionee's 62nd birthday or death, whichever first occurs. Upon the conclusion of such post-termination exercise period, this option shall be cancelled with respect to all remaining Shares. Written notice of an election to exercise any portion of the option specifying the portion thereof being exercised and the exercise date, shall be given by Optionee or his lawfully appointed personal representative in the event of Optionee's death (a) by delivering such notice to the principal executive offices of the Corporation no later than the exercise date, or (b) by mailing such notice, postage prepaid, addressed to the Secretary of the Corporation at the principal executive offices of the Corporation, at least three business days prior to the exercise date, in either case accompanied by payment of the exercise price.
4. Limitation of Exercise of Option. The option may be exercised only by Optionee during his or her lifetime and may not be transferred other than by will or the applicable laws of descent or distribution. The option shall not otherwise be transferred, assigned, pledged, or hypothecated for any purpose whatsoever and is not subject, in whole or in part, to execution, attachment, or similar process. Any attempted assignment, transfer, pledge or hypothecation or other disposition of the option other than in accordance with the terms set forth herein, shall be null and void and of no effect.
5. Option Holder Not Stockholder. Neither Optionee nor any other person entitled to exercise the option under the terms hereof shall be, or have any of the rights or privileges of, a shareholder of the Corporation in respect to any of the Shares issuable on exercise of the option, unless and until the purchase price for such Shares is paid in full and certificates representing such Shares are issued.
6. Adjustment To Stock Option Agreement. In the event the option shall be exercised in whole, this agreement shall be surrendered to the Corporation for cancellation. In the event the option shall be exercised in part, or a change in the number or designation of the common stock shall be made, this agreement shall be delivered by Optionee to the Corporation for the purpose of making appropriate notation thereon, or if otherwise reflecting in such manner as the Corporation shall determine, the partial exercise or the change in the number or designation of the Shares.
7. Proprietary Information. Optionee, while providing services hereunder, will have access to information, including without limitation customer information, strategic plans, management and operating policies and procedures, and similar information, which constitute proprietary information or trade secrets of the Corporation or its affiliates. Optionee shall not, at any time, whether during the term of this Agreement or otherwise, disclose any of such proprietary information to any person or entity other than the Corporation, its affiliates and employees.
8. Covenant not to Compete. During the term of employment hereunder and for 36 months after termination of employment (by either party, whether or not for cause), except with the prior written consent of the Corporation, Optionee shall not directly or indirectly engage or participate in, or become a director or officer of, or render advisory or other services to, or become interested in, become an employee of, or make any financial investment in any firm, corporation, holding company, business entity or other business enterprise competing in any respect with the business of the Corporation or any of its affiliates, whether presently being conducted or hereafter undertaken, from a location within 50 miles of the headquarters of the Corporation, or within 25 miles of any other office of the Corporation or any affiliate from which business is conducted at the time of termination, and shall not, during such period, solicit business or otherwise call on any person or entity which was a customer of the Corporation or any affiliate at the date of termination or at any time within 12 months prior to such date.
9. Plan and Plan Interpretations as Controlling. This option and the terms and conditions herein set forth are subject in all respects to the definitions, terms and conditions of the Plan, which are incorporated herein by reference as if set forth herein and shall be controlling. All determinations and interpretations of the Board shall be binding and conclusive upon the Optionee or his or her legal representatives with regard to any question arising hereunder or under the Plan to the extent not inconsistent with Section 83 of the Internal Revenue Code and regulations issued thereunder.
10. Delivery and Registration of Shares. Notwithstanding the provisions contained herein to the contrary, the Corporation's obligation to deliver the Shares hereunder shall be conditioned upon the receipt of a representation as to the investment intention of the Optionee or any other person to whom such shares are to be delivered, in such form as the Board shall determine to be necessary or advisable to comply with the provisions of the Securities Act of 1933, as amended, or any other federal, state or local securities rules or regulations. Each certificate representing any Shares issuable upon exercise of this option shall bear a legend indicating that such shares have not been registered under any securities laws and may not be transferred in the absence of registration under such laws or an opinion of counsel that such transfer is exempt from registration.
11. Governing Law. The option and this agreement shall be construed, administered and governed in all respects under and by the laws of the Commonwealth of Virginia to the extent not inconsistent with Section 83 of the Internal Revenue Code and regulations issued thereunder.
IN WITNESS WHEREOF, the Corporation has caused this option to be granted and this agreement to be executed on behalf of the Corporation on the date first above written.
First Community Bancshares, Inc.
The undersigned hereby accepts the option granted hereby and agrees to comply fully with the terms and conditions hereof.
Exhibit 15
July 16, 2002
To the Board of Directors of First Community Bancshares, Inc.
We are aware of the incorporation by reference in the Registration Statement Nos. 333-63865, 333-31338 and 333-75222 of First Community Bancshares, Inc. relating to the unaudited consolidated interim financial statements of First Community Bancshares that are included in its Forms 10-Q for the quarter ended June 30, 2002.
/s/ Ernst & Young LLP Charleston, West Virginia |
Exhibit 99.1
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Quarterly Report of First Community Bancshares, Inc. ("FCBI") on Form 10-Q for the six month period ending June 30, 2002, as filed with the Securities and Exchange Commission on the date hereof (the "Report"), the undersigned hereby certifies, pursuant to 18 U.S.C. section 1350, as adopted pursuant to section 906 of the Sarbanes-Oxley Act of 2002, that to the undersigned's best knowledge and belief:
(1) The Report fully complies with the requirements of Section 13 (a) or 15 (d) of the Securities Exchange Act of 1934; and
(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of FCBI.
Dated this 14th day of August, 2002.
First Community Bancshares, Inc.
/s/ John M. Mendez ------------------ John M. Mendez President & Chief Executive Officer |
Exhibit 99.2
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Quarterly Report of First Community Bancshares, Inc. ("FCBI") on Form 10-Q for the six month period ending June 30, 2002, as filed with the Securities and Exchange Commission on the date hereof (the "Report"), the undersigned hereby certifies, pursuant to 18 U.S.C. section 1350, as adopted pursuant to section 906 of the Sarbanes-Oxley Act of 2002, that to the undersigned's best knowledge and belief:
(1) The Report fully complies with the requirements of Section 13 (a) or 15 (d) of the Securities Exchange Act of 1934; and
(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of FCBI.
Dated this 14th day of August, 2002.
First Community Bancshares, Inc.
/s/ Robert L. Schumacher Robert L. Schumacher Chief Financial Officer |