##### Table of Contents



UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
 WASHINGTON, D.C. 20549
 FORM 10-Q
 QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
 For the quarter ended March 31, 2009
 Commission file number 000-19297
 FIRST COMMUNITY BANCSHARES, INC.
  Nevada
    
    55-0694814(State or other jurisdiction of 
incorporation)
    
    (IRS Employer Identification No.)P.O. Box 989
Bluefield, Virginia
    
    24605-0989(Address of principal executive offices)
    
    (Zip Code)
 (276) 326-9000
 (Registrants telephone number, including area code)
  þ o
  o o
  Large accelerated filer o
    
    Accelerated filer þ
    
    Non-accelerated filer o
    
    Smaller reporting company o(Do not check if a smaller reporting company)
  o þ




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##### 



PART I. FINANCIAL INFORMATIONItem 1. Financial StatementsConsolidated Balance Sheets as of March 31, 2009 (Unaudited) and December 31, 2008
    
    
    3Consolidated Statements of Income for the Three-Month Periods Ended March 31,
2009 and 2008 (Unaudited)
    
    
    4Consolidated Statements of Cash Flows for the Three Months Ended March 31, 2009
and 2008 (Unaudited)
    
    
    5Consolidated Statements of Changes in Stockholders Equity for the Three Months
Ended March 31, 2009 and 2008 (Unaudited)
    
    
    6Notes to Consolidated Financial Statements
    
    
    7Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
    
    
    22Item 3. Quantitative and Qualitative Disclosures about Market Risk
    
    
    32Item 4. Controls and Procedures
    
    
    34PART II. OTHER INFORMATIONItem 1. Legal Proceedings
    
    
    35Item 1A. Risk Factors
    
    
    35Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
    
    
    35Item 3. Defaults Upon Senior Securities
    
    
    35Item 4. Submission of Matters to a Vote of Security Holders
    
    
    35Item 5. Other Information
    
    
    35Item 6. Exhibits
    
    
    36SIGNATURES
    
    
    38EXHIBIT INDEX
    
    
    39EX-31.1EX-31.2EX-32
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##### Table of Contents



PART I. ITEM 1. Financial Statements
 FIRST COMMUNITY BANCSHARES, INC.
 
 CONSOLIDATED BALANCE SHEETS
 March 31,
    
    
    December 31,2009
    
    
    2008*(Dollars in Thousands, Except Per Share Data)
    
    (Unaudited)AssetsCash and due from banks
    
    $
    32,758
    
    
    $
    39,310Interest-bearing balances with banks
    
    
    68,202
    
    
    
    7,129Total cash and cash equivalents
    
    
    100,960
    
    
    
    46,439Securities available-for-sale
    
    
    549,664
    
    
    
    520,723Securities held-to-maturity
    
    
    8,471
    
    
    
    8,670Loans held for sale
    
    
    1,445
    
    
    
    1,024Loans held for investment, net of unearned income
    
    
    1,276,790
    
    
    
    1,298,159Less allowance for loan losses
    
    
    16,555
    
    
    
    15,978Net loans held for investment
    
    
    1,260,235
    
    
    
    1,282,181Premises and equipment
    
    
    54,893
    
    
    
    55,024Other real estate owned
    
    
    3,114
    
    
    
    1,326Interest receivable
    
    
    8,848
    
    
    
    10,084Goodwill and other intangible assets
    
    
    89,338
    
    
    
    89,612Other assets
    
    
    122,173
    
    
    
    118,231Total Assets
    
    $
    2,199,141
    
    
    $
    2,133,314LiabilitiesDeposits:Noninterest-bearing
    
    $
    207,947
    
    
    $
    199,712Interest-bearing
    
    
    1,375,497
    
    
    
    1,304,046Total Deposits
    
    
    1,583,444
    
    
    
    1,503,758Interest, taxes and other liabilities
    
    
    28,293
    
    
    
    27,423Securities sold under agreements to repurchase
    
    
    153,824
    
    
    
    165,914FHLB borrowings and other indebtedness
    
    
    215,870
    
    
    
    215,877Total Liabilities
    
    
    1,981,431
    
    
    
    1,912,972Stockholders EquityPreferred stock, par value undesignated; 1,000,000 shares authorized; 41,500 issued
at March 31, 2009, and December 31, 2008
    
    
    40,471
    
    
    
    40,419Common stock, $1 par value; 25,000,000 shares authorized; 12,051,234 shares
issued at March 31, 2009, and December 31, 2008,
including 454,985
and 483,785 shares in treasury, respectively
    
    
    12,051
    
    
    
    12,051Additional paid-in capital
    
    
    127,992
    
    
    
    128,526Retained earnings
    
    
    118,021
    
    
    
    107,231Treasury stock, at cost
    
    
    (14,453
    )
    
    
    (15,368
    )Accumulated other comprehensive loss
    
    
    (66,372
    )
    
    
    (52,517
    )Total Stockholders Equity
    
    
    217,710
    
    
    
    220,342Total Liabilities and
Stockholders Equity
    
    $
    2,199,141
    
    
    $
    2,133,314
 
 *
    
    Derived from audited financial statements. See Notes to Consolidated Financial Statements.
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##### Table of Contents



FIRST COMMUNITY BANCSHARES, INC.
 
 CONSOLIDATED STATEMENTS OF INCOME (Unaudited)
 Three Months EndedMarch 31,(Dollars in Thousands, Except Per Share Data)
    
    2009
    
    
    2008Interest IncomeInterest and fees on loans held for investment
    
    $
    19,984
    
    
    $
    21,237Interest on securities-taxable
    
    
    5,164
    
    
    
    6,067Interest on securities-nontaxable
    
    
    1,676
    
    
    
    2,063Interest on deposits in banks
    
    
    39
    
    
    
    180Total interest income
    
    
    26,863
    
    
    
    29,547Interest ExpenseInterest on deposits
    
    
    7,567
    
    
    
    8,741Interest on borrowings
    
    
    2,863
    
    
    
    4,446Total interest expense
    
    
    10,430
    
    
    
    13,187Net interest income
    
    
    16,433
    
    
    
    16,360Provision for loan losses
    
    
    2,087
    
    
    
    323Net interest income after provision for loan losses
    
    
    14,346
    
    
    
    16,037Noninterest IncomeWealth management income
    
    
    984
    
    
    
    899Service charges on deposit accounts
    
    
    3,157
    
    
    
    3,099Other service charges, commissions and fees
    
    
    1,178
    
    
    
    1,121Insurance commissions
    
    
    2,317
    
    
    
    1,344Total other-than-temporary impairment losses
    
    
    (209
    )
    
    
    Portion of loss recognized in other comprehensive income
    
    
    
    
    
    
    Net impairment losses recognized in earnings
    
    
    (209
    )
    
    
    Gain on sale of securities
    
    
    411
    
    
    
    1,820Other operating income
    
    
    586
    
    
    
    858Total noninterest income
    
    
    8,424
    
    
    
    9,141Noninterest ExpenseSalaries and employee benefits
    
    
    7,866
    
    
    
    7,790Occupancy expense of bank premises
    
    
    1,603
    
    
    
    1,164Furniture and equipment expense
    
    
    938
    
    
    
    901Intangible amortization
    
    
    245
    
    
    
    160Prepayment penalty on FHLB advance
    
    
    
    
    
    
    1,647Other operating expense
    
    
    4,542
    
    
    
    4,621Total noninterest expense
    
    
    15,194
    
    
    
    16,283Income before income taxes
    
    
    7,576
    
    
    
    8,895Income tax expense
    
    
    2,346
    
    
    
    2,583Net income
    
    
    5,230
    
    
    
    6,312Dividends on preferred stock
    
    
    571
    
    
    
    Net income available to common shareholders
    
    $
    4,659
    
    
    $
    6,312Basic earnings per common share
    
    $
    0.40
    
    
    $
    0.57Diluted earnings per common share
    
    $
    0.40
    
    
    $
    0.57Dividends declared per common share
    
    $
    
    
    
    $
    0.28Weighted average basic shares outstanding
    
    
    11,567,769
    
    
    
    11,029,931Weighted average diluted shares outstanding
    
    
    11,616,568
    
    
    
    11,107,610
 See Notes to Consolidated Financial Statements.
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##### Table of Contents



FIRST COMMUNITY BANCSHARES, INC.
 
 CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
 Three Months EndedMarch 31,2009
    
    
    2008(In Thousands)Operating activities:Net Income
    
    $
    5,230
    
    
    $
    6,312Adjustments to reconcile net income to net cash provided by operating activities:Provision for loan losses
    
    
    2,087
    
    
    
    323Depreciation and amortization of premises and equipment
    
    
    1,096
    
    
    
    889Intangible amortization
    
    
    245
    
    
    
    160Net investment amortization and accretion
    
    
    193
    
    
    
    (340
    )Net gain on the sale of assets
    
    
    (439
    )
    
    
    (1,781
    )Mortgage loans originated for sale
    
    
    (8,481
    )
    
    
    (13,280
    )Proceeds from sales of mortgage loans
    
    
    8,083
    
    
    
    12,058Gain on sales of loans
    
    
    (23
    )
    
    
    (83
    )Deferred income tax benefit
    
    
    (317
    )
    
    
    (149
    )Decrease in interest receivable
    
    
    1,235
    
    
    
    2,723Other operating activities, net
    
    
    1,194
    
    
    
    3,543Net cash provided by operating activities
    
    
    10,103
    
    
    
    10,375Investing activities:Proceeds from sales of securities available-for-sale
    
    
    46,394
    
    
    
    30,797Proceeds from maturities and calls of securities available-for-sale
    
    
    10,346
    
    
    
    37,723Proceeds from maturities and calls of securities held-to-maturity
    
    
    200
    
    
    
    Purchase of securities available-for-sale
    
    
    (97,018
    )
    
    
    (14,118
    )Net decrease in loans held for investment
    
    
    18,065
    
    
    
    45,809Proceeds from the redemption of FHLB stock
    
    
    324
    
    
    
    Proceeds from sales of equipment
    
    
    7
    
    
    
    Purchase of premises and equipment
    
    
    (971
    )
    
    
    (1,952
    )Net cash provided by (used in) investing activities
    
    
    (22,653
    )
    
    
    98,259Financing activities:Net increase (decrease) in demand and savings deposits
    
    
    27,482
    
    
    
    (2,662
    )Net increase (decrease) in time deposits
    
    
    52,204
    
    
    
    (31,828
    )Net decrease in federal funds purchased
    
    
    
    
    
    
    (18,500
    )Net (decrease) increase in securities sold under agreement to repurchase
    
    
    (12,090
    )
    
    
    573Net decrease in FHLB and other borrowings
    
    
    (7
    )
    
    
    (26,674
    )Proceeds from the exercise of stock options
    
    
    
    
    
    
    66Excess tax benefit from stock-based compensation
    
    
    
    
    
    
    10Acquisition of treasury stock
    
    
    
    
    
    
    (2,168
    )Preferred dividends paid
    
    
    (518
    )
    
    
    Common dividends paid
    
    
    
    
    
    
    (3,082
    )Net cash (used in) provided by financing activities
    
    
    67,071
    
    
    
    (84,265
    )Increase in cash and cash equivalents
    
    
    54,521
    
    
    
    24,369Cash and cash equivalents at beginning of period
    
    
    46,439
    
    
    
    52,746Cash and cash equivalents at end of period
    
    $
    100,960
    
    
    $
    77,115Supplemental information  Noncash itemsTransfer of loans to other real estate
    
    $
    2,030
    
    
    $
    282Cumulative
effect adjustment of FAS 115-2, net of tax
    
    $
    6,131
    
    
    $
    
 See Notes to Consolidated Financial Statements.
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FIRST COMMUNITY BANCSHARES, INC.
 
 CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS EQUITY (Unaudited)
 AccumulatedAdditional
    
    
    
    
    
    
    
    
    
    
    OtherPreferred
    
    
    Common
    
    
    Paid-in
    
    
    Retained
    
    
    Treasury
    
    
    ComprehensiveStock
    
    
    Stock
    
    
    Capital
    
    
    Earnings
    
    
    Stock
    
    
    Income (Loss)
    
    
    Total(Dollars in Thousands)Balance January 1, 2008
    
    $
    
    
    
    $
    11,499
    
    
    $
    108,825
    
    
    $
    117,670
    
    
    $
    (13,613
    )
    
    $
    (7,283
    )
    
    $
    217,098Cumulative effect of change in
accounting principle
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (813
    )
    
    
    
    
    
    
    
    
    
    
    (813
    )Comprehensive income:Net income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    6,312
    
    
    
    
    
    
    
    
    
    
    
    6,312Other comprehensive loss, net of tax:Unrealized loss on securities
available for sale
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (7,280
    )
    
    
    (7,280
    )Reclassification adjustment for
gains realized in net income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (534
    )
    
    
    (534
    )Unrealized loss on cash flow hedge
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (950
    )
    
    
    (950
    )Comprehensive loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    6,312
    
    
    
    
    
    
    
    (8,764
    )
    
    
    (2,452
    )Common dividends declared
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (3,082
    )
    
    
    
    
    
    
    
    
    
    
    (3,082
    )Acquisition of 67,300 treasury shares
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (2,168
    )
    
    
    
    
    
    
    (2,168
    )Acquisition of GreenPoint Insurance -
7,728 shares issued
    
    
    
    
    
    
    
    
    
    
    22
    
    
    
    
    
    
    
    245
    
    
    
    
    
    
    
    267Equity-based compensation expense
    
    
    
    
    
    
    
    
    
    
    52
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    52Tax benefit from exercise of stock options
    
    
    
    
    
    
    
    
    
    
    10
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    10Option exercises - 41,470 shares
    
    
    
    
    
    
    
    
    
    
    (13
    )
    
    
    
    
    
    
    79
    
    
    
    
    
    
    
    66Balance March 31, 2008
    
    $
    
    
    
    $
    11,499
    
    
    $
    108,896
    
    
    $
    120,087
    
    
    $
    (15,457
    )
    
    $
    (16,047
    )
    
    $
    208,978Balance January 1, 2009
    
    $
    40,419
    
    
    $
    12,051
    
    
    $
    128,526
    
    
    $
    107,231
    
    
    $
    (15,368
    )
    
    $
    (52,517
    )
    
    $
    220,342Cumulative effect of change in
accounting principle
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    6,131
    
    
    
    
    
    
    
    
    
    
    
    6,131Comprehensive income:Net income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    5,230
    
    
    
    
    
    
    
    
    
    
    
    5,230Other comprehensive loss, net of tax:Unrealized loss on securities
available-for-sale
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (13,863
    )
    
    
    (13,863
    )Reclassification adjustment for
gains realized in net income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (140
    )
    
    
    (140
    )Unrealized gain on cash flow hedge
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    148
    
    
    
    148Comprehensive loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    5,230
    
    
    
    
    
    
    
    (13,855
    )
    
    
    (8,625
    )Preferred dividend, net
    
    
    52
    
    
    
    
    
    
    
    (38
    )
    
    
    (571
    )
    
    
    
    
    
    
    
    
    
    
    (557
    )Equity-based compensation expense
    
    
    
    
    
    
    
    
    
    
    40
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    40Retirement plan contribution -
28,800 shares issued
    
    
    
    
    
    
    
    
    
    
    (536
    )
    
    
    
    
    
    
    915
    
    
    
    
    
    
    
    379Balance March 31, 2009
    
    $
    40,471
    
    
    $
    12,051
    
    
    $
    127,992
    
    
    $
    118,021
    
    
    $
    (14,453
    )
    
    $
    (66,372
    )
    
    $
    217,710
 See Notes to Consolidated Financial Statements.
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##### Table of Contents



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 Note 1. General
 Unaudited Consolidated Financial Statements
     Earnings Per Share
  For the three monthsended March 31,(Amounts in Thousands, Except Share and Per Share Data)
    
    2009
    
    
    2008Net income available to common shareholders
    
    $
    4,659
    
    
    $
    6,312Weighted average shares outstanding
    
    
    11,567,769
    
    
    
    11,029,931Dilutive shares for stock options
    
    
    6,332
    
    
    
    57,040Contingently issuable shares
    
    
    42,467
    
    
    
    20,639Common stock warrants
    
    
    
    
    
    
    Weighted average dilutive shares outstanding
    
    
    11,616,568
    
    
    
    11,107,610Basic earnings per share
    
    $
    0.40
    
    
    $
    0.57Diluted earnings per share
    
    $
    0.40
    
    
    $
    0.57
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##### Table of Contents



Recent Accounting Pronouncements
       Note 2. Mergers, Acquisitions, and Branching Activity
  - 8 -




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##### Table of Contents



Note 3. Investment Securities
  March 31, 2009Amortized
    
    
    Unrealized
    
    
    Unrealized
    
    
    FairCost
    
    
    Gains
    
    
    Losses
    
    
    Value(In Thousands)U.S. Government agency securities
    
    $
    53,425
    
    
    $
    702
    
    
    $
    
    
    
    $
    54,127States and political subdivisions
    
    
    141,536
    
    
    
    2,296
    
    
    
    (2,209
    )
    
    
    141,623Trust-preferred securities
    
    
    148,882
    
    
    
    
    
    
    
    (99,409
    )
    
    
    49,473Mortgage-backed securities
    
    
    303,431
    
    
    
    7,149
    
    
    
    (11,989
    )
    
    
    298,591Equities
    
    
    7,005
    
    
    
    376
    
    
    
    (1,531
    )
    
    
    5,850Total
    
    $
    654,279
    
    
    $
    10,523
    
    
    $
    (115,138
    )
    
    $
    549,664
 December 31, 2008Amortized
    
    
    Unrealized
    
    
    Unrealized
    
    
    FairCost
    
    
    Gains
    
    
    Losses
    
    
    ValueU.S. Government agency securities
    
    $
    53,425
    
    
    $
    1,393
    
    
    $
    
    
    
    $
    54,818States and political subdivisions
    
    
    163,042
    
    
    
    864
    
    
    
    (4,487
    )
    
    
    159,419Trust-preferred securities
    
    
    148,760
    
    
    
    
    
    
    
    (82,707
    )
    
    
    66,053Mortgage-backed securities
    
    
    230,488
    
    
    
    4,649
    
    
    
    (1,659
    )
    
    
    233,478Equities
    
    
    7,979
    
    
    
    357
    
    
    
    (1,381
    )
    
    
    6,955Total
    
    $
    603,694
    
    
    $
    7,263
    
    
    $
    (90,234
    )
    
    $
    520,723
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##### Table of Contents



March 31, 2009Amortized
    
    
    Unrealized
    
    
    Unrealized
    
    
    FairCost
    
    
    Gains
    
    
    Losses
    
    
    Value(In Thousands)States and political subdivisions
    
    $
    8,471
    
    
    $
    149
    
    
    $
    
    
    
    $
    8,620Total
    
    $
    8,471
    
    
    $
    149
    
    
    $
    
    
    
    $
    8,620
 December 31, 2008Amortized
    
    
    Unrealized
    
    
    Unrealized
    
    
    FairCost
    
    
    Gains
    
    
    Losses
    
    
    ValueStates and political subdivisions
    
    $
    8,670
    
    
    $
    133
    
    
    $
    (1
    )
    
    $
    8,802Total
    
    $
    8,670
    
    
    $
    133
    
    
    $
    (1
    )
    
    $
    8,802
  March 31, 2009Less than 12 Months
    
    
    12 Months or longer
    
    
    TotalDescription of Securities
    
    Fair
    
    
    Unrealized
    
    
    Fair
    
    
    Unrealized
    
    
    Fair
    
    
    UnrealizedValue
    
    
    Losses
    
    
    Value
    
    
    Losses
    
    
    Value
    
    
    Losses(In Thousands)U. S. Government agency securities
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    States and political subdivisions
    
    
    43,135
    
    
    
    (1,194
    )
    
    
    11,225
    
    
    
    (1,015
    )
    
    
    54,360
    
    
    
    (2,209
    )Trust-preferred securities
    
    
    
    
    
    
    
    
    
    
    49,473
    
    
    
    (99,409
    )
    
    
    49,473
    
    
    
    (99,409
    )Mortgage-backed securities
    
    
    24,705
    
    
    
    (330
    )
    
    
    16,558
    
    
    
    (11,659
    )
    
    
    41,263
    
    
    
    (11,989
    )Equity securities
    
    
    2,059
    
    
    
    (1,245
    )
    
    
    2,153
    
    
    
    (286
    )
    
    
    4,212
    
    
    
    (1,531
    )Total
    
    $
    69,899
    
    
    $
    (2,769
    )
    
    $
    79,409
    
    
    $
    (112,369
    )
    
    $
    149,308
    
    
    $
    (115,138
    )
 December 31, 2008Less than 12 Months
    
    
    12 Months or longer
    
    
    TotalDescription of Securities
    
    Fair
    
    
    Unrealized
    
    
    Fair
    
    
    Unrealized
    
    
    Fair
    
    
    UnrealizedValue
    
    
    Losses
    
    
    Value
    
    
    Losses
    
    
    Value
    
    
    LossesU. S. Government agency securities
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    States and political subdivisions
    
    
    86,344
    
    
    
    (2,949
    )
    
    
    16,413
    
    
    
    (1,539
    )
    
    
    102,757
    
    
    
    (4,488
    )Trust-preferred securities
    
    
    
    
    
    
    
    
    
    
    60,260
    
    
    
    (82,707
    )
    
    
    60,260
    
    
    
    (82,707
    )Mortgage-backed securities
    
    
    48,440
    
    
    
    (1,658
    )
    
    
    43
    
    
    
    (1
    )
    
    
    48,483
    
    
    
    (1,659
    )Equity securities
    
    
    2,167
    
    
    
    (1,161
    )
    
    
    2,201
    
    
    
    (220
    )
    
    
    4,368
    
    
    
    (1,381
    )Total
    
    $
    136,951
    
    
    $
    (5,768
    )
    
    $
    78,917
    
    
    $
    (84,467
    )
    
    $
    215,868
    
    
    $
    (90,235
    )
   - 10 -




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##### Table of Contents



AmortizedCost
    
    
    Fair Value(Dollars in Thousands)Due within one year
    
    $
    1,378
    
    
    $
    1,399Due after one year but within five years
    
    
    5,222
    
    
    
    5,330Due after five years within ten years
    
    
    75,311
    
    
    
    76,792Due after ten years
    
    
    261,932
    
    
    
    161,702343,843
    
    
    
    245,223Mortgage-backed securities
    
    
    303,431
    
    
    
    298,591Equity securities
    
    
    7,005
    
    
    
    5,850Total
    
    $
    654,279
    
    
    $
    549,664
  AmortizedCost
    
    
    Fair Value(Dollars in Thousands)Due within one year
    
    $
    551
    
    
    $
    556Due after one year but within five years
    
    
    4,116
    
    
    
    4,197Due after five years within ten years
    
    
    3,804
    
    
    
    3,867Due after ten years
    
    
    
    
    
    
    Total
    
    $
    8,471
    
    
    $
    8,620
 - 11 -




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##### Table of Contents



Note 4. Loans
  March 31, 2009
    
    
    December 31, 2008(Dollars in Thousands)
    
    Amount
    
    
    Percent
    
    
    Amount
    
    
    PercentLoans held for investment:Commercial, financial, and agricultural
    
    $
    81,880
    
    
    
    6.41
    %
    
    $
    85,034
    
    
    
    6.55
    %Real estate  commercial
    
    
    405,549
    
    
    
    31.76
    %
    
    
    407,638
    
    
    
    31.40
    %Real estate  construction
    
    
    124,320
    
    
    
    9.74
    %
    
    
    130,610
    
    
    
    10.06
    %Real estate  residential
    
    
    597,372
    
    
    
    46.79
    %
    
    
    602,573
    
    
    
    46.42
    %Consumer
    
    
    62,353
    
    
    
    4.88
    %
    
    
    66,258
    
    
    
    5.10
    %Other
    
    
    5,316
    
    
    
    0.42
    %
    
    
    6,046
    
    
    
    0.47
    %Total
    
    $
    1,276,790
    
    
    
    100.00
    %
    
    $
    1,298,159
    
    
    
    100.00
    %Loans held for sale
    
    $
    1,445
    
    
    
    
    
    
    $
    1,024
     Note 5. Allowance for Loan Losses
   - 12 -




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##### Table of Contents



For the Three Months EndedMarch 31,2009
    
    
    2008(In Thousands)Beginning balance
    
    $
    15,978
    
    
    $
    12,833Provision for loan losses
    
    
    2,087
    
    
    
    323Charge-offs
    
    
    (1,730
    )
    
    
    (966
    )Recoveries
    
    
    220
    
    
    
    672Ending balance
    
    $
    16,555
    
    
    $
    12,862
 Note 6. Deposits
  March 31,
    
    
    December 31,(In Thousands)
    
    2009
    
    
    2008Interest-bearing demand deposits
    
    $
    194,934
    
    
    $
    185,117Savings and money market deposits
    
    
    319,007
    
    
    
    309,577Certificates of deposit
    
    
    861,556
    
    
    
    809,352Total
    
    $
    1,375,497
    
    
    $
    1,304,046
 - 13 -




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##### Table of Contents



Note 7. Borrowings
  March 31,
    
    
    December 31,2009
    
    
    2008(In Thousands)FHLB borrowings
    
    $
    200,000
    
    
    $
    200,000Subordinated debt
    
    
    15,464
    
    
    
    15,464Other long-term debt
    
    
    406
    
    
    
    413Total
    
    $
    215,870
    
    
    $
    215,877
    Amount(In Thousands)2009
    
    $
    2010
    
    
    2011
    
    
    2012
    
    
    2013
    
    
    2014 and thereafter
    
    
    200,000Total
    
    $
    200,000
    - 14 -




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##### Table of Contents



Note 8. Commitments and Contingencies
  Note 9. Segment Information
   (In Thousands)
    
    For the Three Months EndedMarch 31, 2009Community
    
    
    Insurance
    
    
    Parent/Banking
    
    
    Services
    
    
    Elimination
    
    
    TotalNet interest income
    
    $
    16,492
    
    
    $
    (18
    )
    
    $
    (41
    )
    
    $
    16,433Provision for loan losses
    
    
    2,087
    
    
    
    
    
    
    
    
    
    
    
    2,087Noninterest income
    
    
    6,124
    
    
    
    2,344
    
    
    
    (44
    )
    
    
    8,424Noninterest expense
    
    
    13,582
    
    
    
    1,638
    
    
    
    (26
    )
    
    
    15,194Income before income taxes
    
    
    6,947
    
    
    
    688
    
    
    
    (59
    )
    
    
    7,576Provision for income taxes
    
    
    1,932
    
    
    
    203
    
    
    
    211
    
    
    
    2,346Net income
    
    $
    5,015
    
    
    $
    485
    
    
    $
    (270
    )
    
    $
    5,230End of period goodwill and other intangibles
    
    $
    78,657
    
    
    $
    10,681
    
    
    $
    
    
    
    
    89,338End of period assets
    
    $
    2,170,694
    
    
    $
    11,698
    
    
    $
    16,749
    
    
    
    2,199,141
 (In Thousands)
    
    For the Three Months EndedMarch 31, 2008Community
    
    
    Insurance
    
    
    Parent/Banking
    
    
    Services
    
    
    Elimination
    
    
    TotalNet interest income
    
    $
    16,635
    
    
    $
    (6
    )
    
    $
    (269
    )
    
    $
    16,360Provision for loan losses
    
    
    323
    
    
    
    
    
    
    
    
    
    
    
    323Noninterest income
    
    
    7,994
    
    
    
    1,344
    
    
    
    (197
    )
    
    
    9,141Noninterest expense
    
    
    15,792
    
    
    
    1,046
    
    
    
    (555
    )
    
    
    16,283Income before income taxes
    
    
    8,514
    
    
    
    292
    
    
    
    89
    
    
    
    8,895Provision for income taxes
    
    
    2,432
    
    
    
    86
    
    
    
    65
    
    
    
    2,583Net income
    
    $
    6,082
    
    
    $
    206
    
    
    $
    24
    
    
    $
    6,312End of period goodwill and other intangibles
    
    $
    62,352
    
    
    $
    8,887
    
    
    $
    
    
    
    
    71,239End of period assets
    
    $
    2,045,941
    
    
    $
    8,900
    
    
    $
    10,272
    
    
    
    2,065,113
 Note 10. Fair Value Disclosures
  - 15 -




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##### Table of Contents



Level 1 Inputs
    
    
    
    Unadjusted quoted prices in active markets for identical assets or
liabilities that the reporting entity has the ability to access at the measurement date.Level 2 Inputs
    
    
    
    Inputs other than quoted prices included in Level 1 that are observable for
the asset or liability, either directly or indirectly. These might include quoted prices
for similar assets or liabilities in active markets, quoted prices for identical or similar
assets or liabilities in markets that are not active, inputs other than quoted prices that
are observable for the asset or liability, such as interest rates, volatilities, prepayment
speeds, and credit risks, or inputs that are derived principally from or corroborated by
market data by correlation or other means.Level 3 Inputs
    
    
    
    Unobservable inputs for determining the fair values of assets or
liabilities that reflect an entitys own assumptions about the assumptions that market
participants would use in pricing the assets or liabilities.
  Securities Available-for-Sale
   - 16 -




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##### Table of Contents



Other Assets and Associated Liabilities
 Derivatives
 Impaired Loans
 Other Real Estate Owned
  (In Thousands)
    
    March 31, 2009Fair Value Measurements Using
    
    TotalLevel 1
    
    Level 2
    
    Level 3
    
    Fair ValueAvailable-for-sale securities
    
    $
    5,706
    
    
    $
    521,253
    
    
    $
    22,705
    
    
    $
    549,664Other assets
    
    
    2,269
    
    
    
    
    
    
    
    
    
    
    
    2,269Derivative assets
    
    
    
    
    
    
    57
    
    
    
    
    
    
    
    57Other liabilities
    
    
    2,269
    
    
    
    
    
    
    
    
    
    
    
    2,269Derivative liabilities
    
    
    
    
    
    
    3,085
    
    
    
    
    
    
    
    3,085
 (In Thousands)
    
    December 31, 2008Fair Value Measurements Using
    
    TotalLevel 1
    
    Level 2
    
    Level 3
    
    Fair ValueAvailable-for-sale securities
    
    $
    6,811
    
    
    $
    485,845
    
    
    $
    28,067
    
    
    $
    520,723Other assets
    
    
    2,637
    
    
    
    
    
    
    
    
    
    
    
    2,637Derivative assets
    
    
    
    
    
    
    39
    
    
    
    
    
    
    
    39Other liabilities
    
    
    2,637
    
    
    
    
    
    
    
    
    
    
    
    2,637Derivative liabilities
    
    
    
    
    
    
    3,343
    
    
    
    
    
    
    
    3,343
 - 17 -




---



##### Table of Contents



(In Thousands)
    
    Available-for-Sale SecuritiesBeginning balance January 1, 2009
    
    $
    28,067Total gains or loss (realized/unrealized)Included in earnings
    
    
    Included in other comprehensive income
    
    
    (7,508
    )Paydowns and maturities
    
    
    (33
    )Transfers into Level 3
    
    
    2,179Ending balance March 31, 2009
    
    $
    22,705
  (In Thousands)
    
    March 31, 2009Fair Value Measurements Using
    
    TotalLevel 1
    
    Level 2
    
    Level 3
    
    Fair ValueImpaired loans
    
    $
    
    
    
    $
    
    
    
    $
    4,923
    
    
    $
    4,923Other real estate owned
    
    
    
    
    
    
    
    
    
    
    3,114
    
    
    
    3,114
 (In Thousands)
    
    December 31. 2008Fair Value Measurements Using
    
    TotalLevel 1
    
    Level 2
    
    Level 3
    
    Fair ValueImpaired loans
    
    $
    
    
    
    $
    
    
    
    $
    5,980
    
    
    $
    5,980
  - 18 -




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##### Table of Contents



Fair Value of Financial Instruments
  March 31, 2009
    
    December 31, 2008Carrying
    
    
    
    
    
    CarryingAmount
    
    Fair Value
    
    Amount
    
    Fair Value(Amounts in Thousands)AssetsCash and cash equivalents
    
    $
    100,960
    
    
    $
    100,960
    
    
    $
    46,439
    
    
    $
    46,439Investment Securities
    
    
    558,135
    
    
    
    558,284
    
    
    
    529,393
    
    
    
    529,525Loans held for sale
    
    
    1,445
    
    
    
    1,458
    
    
    
    1,024
    
    
    
    1,026Loans held for investment
    
    
    1,260,235
    
    
    
    1,255,995
    
    
    
    1,282,181
    
    
    
    1,276,479Derivative financial assets
    
    
    57
    
    
    
    57
    
    
    
    39
    
    
    
    39Deferred compensation assets
    
    
    2,269
    
    
    
    2,269
    
    
    
    2,637
    
    
    
    2,637LiabilitiesDemand deposits
    
    
    207,947
    
    
    
    207,947
    
    
    
    199,712
    
    
    
    199,712Interest-bearing demand deposits
    
    
    194,934
    
    
    
    194,934
    
    
    
    185,117
    
    
    
    185,117Savings deposits
    
    
    319,007
    
    
    
    319,007
    
    
    
    309,577
    
    
    
    309,577Time deposits
    
    
    861,556
    
    
    
    876,545
    
    
    
    809,352
    
    
    
    824,068Securities sold under agreements to repurchase
    
    
    153,824
    
    
    
    165,340
    
    
    
    165,914
    
    
    
    177,454FHLB and other indebtedness
    
    
    215,870
    
    
    
    236,836
    
    
    
    215,877
    
    
    
    242,223Derivative financial liabilities
    
    
    3,085
    
    
    
    3,085
    
    
    
    3,343
    
    
    
    3,343Deferred compensation liabilities
    
    
    2,269
    
    
    
    2,269
    
    
    
    2,637
    
    
    
    2,637
  Financial Instruments with Book Value Equal to Fair Value:
 Investment Securities and Deferred Compensation Assets and Liabilities:
 Loans:
 Derivative Financial Instruments:
 Deposits and Securities Sold Under Agreements to Repurchase:
 - 19 -




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##### Table of Contents



Other Indebtedness:
 Commitments to Extend Credit, Standby Letters of Credit, and Financial Guarantees:
 Note 11. Derivatives and Hedging Activities
    (In Thousands)
    
    March 31, 2009
    
    December 31, 2008
    
    March 31, 2008Interest rate swap
    
    $
    50,000
    
    
    $
    50,000
    
    
    $
    50,000IRLCs
    
    
    11,300
    
    
    
    10,500
    
    
    
    13,200
  Asset DerivativesMarch 31, 2009
    
    
    December 31, 2008
    
    
    March 31, 2008Balance Sheet
    
    
    Fair
    
    
    Balance Sheet
    
    
    Fair
    
    
    Balance Sheet
    
    
    Fair(In Thousands)
    
    Location
    
    
    Value
    
    
    Location
    
    
    Value
    
    
    Location
    
    
    ValueDerivatives designated as hedgesInterest rate swap
    
    Other assets
    
    $
    
    
    
    Other assets
    
    $
    
    
    
    Other assets
    
    $
    Total
    
    
    
    
    
    $
    
    
    
    
    
    
    
    $
    
    
    
    
    
    
    
    $
    Derivatives not designated as hedgesIRLCs
    
    Other assets
    
    $
    57
    
    
    Other assets
    
    $
    39
    
    
    Other assets
    
    $
    52Total
    
    
    
    
    
    $
    57
    
    
    
    
    
    
    $
    39
    
    
    
    
    
    
    $
    52Total derivatives
    
    
    
    
    
    $
    57
    
    
    
    
    
    
    $
    39
    
    
    
    
    
    
    $
    52
 - 20 -




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##### Table of Contents



Liability DerivativesMarch 31, 2009
    
    
    December 31, 2008
    
    
    March 31, 2008Balance Sheet
    
    
    Fair
    
    
    Balance Sheet
    
    
    Fair
    
    
    Balance Sheet
    
    
    Fair(In Thousands)
    
    Location
    
    
    Value
    
    
    Location
    
    
    Value
    
    
    Location
    
    
    ValueDerivatives designated as hedgesInterest rate swap
    
    Other liabilities
    
    $
    3,081
    
    
    Other liabilities
    
    $
    3,327
    
    
    Other liabilities
    
    $
    2,903Total
    
    
    
    
    
    $
    3,081
    
    
    
    
    
    
    $
    3,327
    
    
    
    
    
    
    $
    2,903Derivatives not designated as hedgesIRLCs
    
    Other liabilities
    
    $
    4
    
    
    Other liabilities
    
    $
    16
    
    
    Other liabilities
    
    $
    14Total
    
    
    
    
    
    $
    4
    
    
    
    
    
    
    $
    16
    
    
    
    
    
    
    $
    14Total derivatives
    
    
    
    
    
    $
    3,085
    
    
    
    
    
    
    $
    3,343
    
    
    
    
    
    
    $
    2,917
 Interest Rate Swaps.
 Interest Rate Lock Commitments.
  Effect of Derivatives and Hedging Activities on the Income Statement
  Derivatives not
    
    
    
    
    
    Amount of Gain/(Loss)designated as hedging
    
    Location of Gain/(Loss)
    
    
    Recognized in Income on Derivativeinstruments under
    
    Recognized in Income on
    
    
    Quarter ended
    
    
    Quarter endedSFAS 133
    
    Derivative
    
    
    March 31, 2009
    
    
    March 31, 2008(Amounts in Thousands)IRLCs
    
    Other income
    
    $
    30
    
    
    $
    30Total
    
    
    
    
    
    $
    30
    
    
    $
    30
 Counterparty Credit Risk.
 - 21 -




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##### Table of Contents



PART I. ITEM 2. Managements Discussion and Analysis of Financial Condition and Results of
Operations
   FORWARD-LOOKING STATEMENTS
    APPLICATION OF CRITICAL ACCOUNTING POLICIES
   -22-




---



##### Table of Contents



COMPANY OVERVIEW
    RECENT MARKET DEVELOPMENTS
  MERGERS, ACQUISITIONS AND BRANCHING ACTIVITY
   -23-




---



##### Table of Contents



RESULTS OF OPERATIONS
 Overview
  Net Interest Income (See Table I)
      -24-




---



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-25-




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##### Table of Contents



Table I
 AVERAGE BALANCE SHEETS AND NET INTEREST INCOME ANALYSIS
 Three Months Ended
    
    
    Three Months EndedMarch 31, 2009
    
    
    March 31, 2008Average
    
    
    
    
    
    
    Yield/
    
    
    Average
    
    
    
    
    
    
    Yield/Balance
    
    
    Interest (1)
    
    
    Rate (1)
    
    
    Balance
    
    
    Interest (1)
    
    
    Rate (1)(Dollars in Thousands)ASSETSEarning AssetsLoans (2)
    
    $
    1,292,179
    
    
    $
    19,997
    
    
    
    6.28
    %
    
    $
    1,205,481
    
    
    $
    21,258
    
    
    
    7.09
    %Securities available for sale
    
    
    513,300
    
    
    
    7,571
    
    
    
    5.98
    %
    
    
    623,275
    
    
    
    8,998
    
    
    
    5.81
    %Securities held to maturity
    
    
    8,473
    
    
    
    172
    
    
    
    8.23
    %
    
    
    12,075
    
    
    
    242
    
    
    
    8.06
    %Interest-bearing deposits
    
    
    73,628
    
    
    
    39
    
    
    
    0.21
    %
    
    
    22,602
    
    
    
    180
    
    
    
    3.20
    %Total Earning Assets
    
    
    1,887,580
    
    
    
    27,779
    
    
    
    5.97
    %
    
    
    1,863,433
    
    
    
    30,678
    
    
    
    6.62
    %Other assets
    
    
    290,182
    
    
    
    
    
    
    
    
    
    
    
    227,964TOTAL ASSETS
    
    $
    2,177,762
    
    
    
    
    
    
    
    
    
    
    $
    2,091,397LIABILITIESInterest-bearing deposits:Demand deposits
    
    $
    190,215
    
    
    $
    79
    
    
    
    0.17
    %
    
    $
    162,175
    
    
    $
    76
    
    
    
    0.19
    %Savings deposits
    
    
    312,563
    
    
    
    656
    
    
    
    0.85
    %
    
    
    327,061
    
    
    
    1,487
    
    
    
    1.83
    %Time deposits
    
    
    858,020
    
    
    
    6,832
    
    
    
    3.23
    %
    
    
    672,645
    
    
    
    7,178
    
    
    
    4.29
    %Total interest-bearing deposits
    
    
    1,360,798
    
    
    
    7,567
    
    
    
    2.26
    %
    
    
    1,161,881
    
    
    
    8,741
    
    
    
    3.03
    %Borrowings:Federal funds purchased
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,819
    
    
    
    18
    
    
    
    3.98
    %Retail repurchase agreements
    
    
    106,469
    
    
    
    390
    
    
    
    1.49
    %
    
    
    149,581
    
    
    
    1,022
    
    
    
    2.75
    %Wholesale repurchase agreements
    
    
    50,000
    
    
    
    510
    
    
    
    4.14
    %
    
    
    50,000
    
    
    
    473
    
    
    
    3.80
    %FHLB borrowings and other indebtedness
    
    
    215,813
    
    
    
    1,963
    
    
    
    3.69
    %
    
    
    276,503
    
    
    
    2,933
    
    
    
    4.27
    %Total borrowings
    
    
    372,282
    
    
    
    2,863
    
    
    
    3.12
    %
    
    
    477,903
    
    
    
    4,446
    
    
    
    3.74
    %Total interest-bearing liabilities
    
    
    1,733,080
    
    
    
    10,430
    
    
    
    2.44
    %
    
    
    1,639,784
    
    
    
    13,187
    
    
    
    3.23
    %Non-interestbearing demand deposits
    
    
    199,311
    
    
    
    
    
    
    
    
    
    
    
    212,972Other liabilities
    
    
    25,718
    
    
    
    
    
    
    
    
    
    
    
    20,962Stockholders Equity
    
    
    219,653
    
    
    
    
    
    
    
    
    
    
    
    217,679TOTAL LIABILITIES AND
STOCKHOLDERS EQUITY
    
    $
    2,177,762
    
    
    
    
    
    
    
    
    
    
    $
    2,091,397Net Interest Income, Tax Equivalent
    
    
    
    
    
    $
    17,349
    
    
    
    
    
    
    
    
    
    
    $
    17,491Net Interest Rate Spread (3)
    
    
    
    
    
    
    
    
    
    
    3.53
    %
    
    
    
    
    
    
    
    
    
    
    3.39
    %Net Interest Margin (4)
    
    
    
    
    
    
    
    
    
    
    3.73
    %
    
    
    
    
    
    
    
    
    
    
    3.78
    %
 
 (1)
    
    Fully Taxable Equivalent (FTE) at the rate of 35%. The FTE basis adjusts for the tax
benefits of income on certain tax-exempt loans and investments using the federal
statutory rate of 35% for each period presented. The Company believes this measure to
be the preferred industry measurement of net interest income and provides relevant
comparison between taxable and non-taxable amounts.(2)
    
    Non-accrual loans are included in average balances outstanding but with no related
interest income during the period of non-accrual.(3)
    
    Represents the difference between the yield on earning assets and cost of funds.(4)
    
    Represents tax equivalent net interest income divided by average interest-earning assets. -26-




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##### Table of Contents



Three Months EndedMarch 31, 2009Compared to 2008$ Increase/(Decrease) due to(In Thousands)
    
    Volume
    
    
    Rate
    
    
    TotalInterest Earned On:Loans (1)
    
    $
    2,100
    
    
    $
    (3,361
    )
    
    $
    (1,261
    )Securities available-for-sale (1)
    
    
    (1,722
    )
    
    
    295
    
    
    
    (1,427
    )Securities held-to-maturity (1)
    
    
    (75
    )
    
    
    5
    
    
    
    (70
    )Interest-bearing deposits with other banks
    
    
    136
    
    
    
    (277
    )
    
    
    (141
    )Total interest-earning assets
    
    
    439
    
    
    
    (3,338
    )
    
    
    (2,899
    )Interest Paid On:Demand deposits
    
    
    8
    
    
    
    (5
    )
    
    
    3Savings deposits
    
    
    (64
    )
    
    
    (767
    )
    
    
    (831
    )Time deposits
    
    
    1,675
    
    
    
    (2,021
    )
    
    
    (346
    )Fed funds purchased
    
    
    (9
    )
    
    
    (9
    )
    
    
    (18
    )Retail repurchase agreements
    
    
    (244
    )
    
    
    (388
    )
    
    
    (632
    )Wholesale repurchase agreements
    
    
    
    
    
    
    37
    
    
    
    37FHLB borrowings and other long-term debt
    
    
    (600
    )
    
    
    (370
    )
    
    
    (970
    )Total interest-bearing liabilities
    
    
    766
    
    
    
    (3,523
    )
    
    
    (2,757
    )Change in net interest income,
tax-equivalent
    
    $
    (327
    )
    
    $
    185
    
    
    $
    (142
    )
 
 (1)
    
    Fully taxable equivalent using a rate of 35%. Provision and Allowance for Loan Losses
  -27-




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##### Table of Contents



For the Three Months EndedMarch 31,(In Thousands)
    
    2009
    
    
    2008Allowance for loan lossesBeginning balance
    
    $
    15,978
    
    
    $
    12,833Provision for loan losses
    
    
    2,087
    
    
    
    323Charge-offs
    
    
    (1,730
    )
    
    
    (966
    )Recoveries
    
    
    220
    
    
    
    672Net charge-offs
    
    
    (1,510
    )
    
    
    (294
    )Ending balance
    
    $
    16,555
    
    
    $
    12,862
   Noninterest Income
  Noninterest Expense
  -28-




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##### Table of Contents



Income Tax Expense
   FINANCIAL CONDITION
  Securities
      -29-




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##### Table of Contents



UnrealizedGains/(Losses)Par
    
    
    Fair
    
    
    Amortized
    
    
    Recognized
    
    
    CumulativeValue
    
    
    Value
    
    
    Cost
    
    
    in OCL
    
    
    OTTI(Amounts in Thousands)Available for saleAgency securities
    
    $
    53,435
    
    
    $
    54,127
    
    
    $
    53,425
    
    
    $
    702
    
    
    $
    Agency mortgage-backed securities
    
    
    273,870
    
    
    
    282,075
    
    
    
    275,257
    
    
    
    6,818
    
    
    
    Non-Agency mortgage-backed securities:AAA
    
    
    7,250
    
    
    
    5,786
    
    
    
    7,206
    
    
    
    (1,420
    )
    
    
    B
    
    
    25,000
    
    
    
    10,730
    
    
    
    20,968
    
    
    
    (10,238
    )
    
    
    4,252Total
    
    
    32,250
    
    
    
    16,516
    
    
    
    28,174
    
    
    
    (11,658
    )
    
    
    4,252Municipals:AAA
    
    
    5,955
    
    
    
    6,043
    
    
    
    5,956
    
    
    
    87
    
    
    
    AA
    
    
    54,230
    
    
    
    54,739
    
    
    
    54,261
    
    
    
    478
    
    
    
    A
    
    
    46,282
    
    
    
    46,394
    
    
    
    46,284
    
    
    
    110
    
    
    
    BBB
    
    
    30,005
    
    
    
    28,788
    
    
    
    29,106
    
    
    
    (318
    )
    
    
    Not rated
    
    
    5,920
    
    
    
    5,659
    
    
    
    5,929
    
    
    
    (270
    )
    
    
    Total
    
    
    142,392
    
    
    
    141,623
    
    
    
    141,536
    
    
    
    87
    
    
    
    Single issuer bank trust preferred securities:AA
    
    
    10,300
    
    
    
    4,171
    
    
    
    10,064
    
    
    
    (5,893
    )
    
    
    A
    
    
    17,130
    
    
    
    8,852
    
    
    
    16,750
    
    
    
    (7,898
    )
    
    
    BB
    
    
    29,125
    
    
    
    13,745
    
    
    
    28,703
    
    
    
    (14,958
    )
    
    
    Total
    
    
    56,555
    
    
    
    26,768
    
    
    
    55,517
    
    
    
    (28,749
    )
    
    
    Pooled trust preferred securities:A
    
    
    20,000
    
    
    
    935
    
    
    
    20,000
    
    
    
    (19,065
    )
    
    
    15,456CCC
    
    
    88,659
    
    
    
    21,770
    
    
    
    73,367
    
    
    
    (51,597
    )
    
    
    Total
    
    
    108,659
    
    
    
    22,705
    
    
    
    93,367
    
    
    
    (70,662
    )
    
    
    15,456Equity securities
    
    
    
    
    
    
    5,850
    
    
    
    7,006
    
    
    
    (1,156
    )
    
    
    209Total
    
    $
    667,161
    
    
    $
    549,664
    
    
    $
    654,282
    
    
    $
    (104,618
    )
    
    $
    19,917Held to maturityMunicipals:AA
    
    $
    3,680
    
    
    $
    3,727
    
    
    $
    3,665
    
    
    $
    
    
    
    $
    A
    
    
    3,670
    
    
    
    3,566
    
    
    
    3,491
    
    
    
    
    
    
    
    BBB
    
    
    1,395
    
    
    
    1,327
    
    
    
    1,315
    
    
    
    
    
    
    
    Total
    
    $
    8,745
    
    
    $
    8,620
    
    
    $
    8,471
    
    
    $
    
    
    
    $
    
  -30-




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##### Table of Contents



Loan Portfolio
 Loans Held for Sale:
 Loans Held for Investment:
   March 31 , 2009
    
    
    December 31, 2008
    
    
    March 31 , 2008(Dollars in Thousands)
    
    Amount
    
    
    Percent
    
    
    Amount
    
    
    Percent
    
    
    Amount
    
    
    PercentLoans Held for InvestmentCommercial and agricultural
    
    $
    81,880
    
    
    
    6.41
    %
    
    $
    85,034
    
    
    
    6.55
    %
    
    $
    88,532
    
    
    
    7.51
    %Commercial real estate
    
    
    405,549
    
    
    
    31.76
    %
    
    
    407,638
    
    
    
    31.40
    %
    
    
    376,087
    
    
    
    31.89
    %Residential real estate
    
    
    597,372
    
    
    
    46.79
    %
    
    
    602,573
    
    
    
    46.42
    %
    
    
    488,860
    
    
    
    41.45
    %Construction
    
    
    124,320
    
    
    
    9.74
    %
    
    
    130,610
    
    
    
    10.06
    %
    
    
    151,242
    
    
    
    12.82
    %Consumer
    
    
    62,353
    
    
    
    4.88
    %
    
    
    66,258
    
    
    
    5.10
    %
    
    
    69,377
    
    
    
    5.88
    %Other
    
    
    5,316
    
    
    
    0.42
    %
    
    
    6,046
    
    
    
    0.47
    %
    
    
    5,406
    
    
    
    0.46
    %Total
    
    $
    1,276,790
    
    
    
    100.00
    %
    
    $
    1,298,159
    
    
    
    100.00
    %
    
    $
    1,179,504
    
    
    
    100.01
    %Loans Held for Sale
    
    $
    1,445
    
    
    
    
    
    
    $
    1,024
    
    
    
    
    
    
    $
    2,116
 Non-Performing Assets
   March 31,
    
    
    December 31,
    
    
    March 31,(In Thousands)
    
    2009
    
    
    2008
    
    
    2008Non-accrual
    
    $
    10,628
    
    
    $
    12,763
    
    
    $
    3,137Ninety days past due and accruing
    
    
    
    
    
    
    
    
    
    
    Other real estate owned
    
    
    3,114
    
    
    
    1,326
    
    
    
    400Total non-performing assets
    
    $
    13,742
    
    
    $
    14,089
    
    
    $
    3,537
  -31-




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##### Table of Contents



Deposits and Other Borrowings
   Stockholders Equity
   Risk-Based Capital
  
 PART I. ITEM 3. Quantitative and Qualitative Disclosures about Market Risk
 Liquidity and Capital Resources
   -32-




---



##### Table of Contents



Interest Rate Risk and Asset/Liability Management
      -33-




---



##### Table of Contents



Rate Sensitivity Analysis
 (Dollars in Thousands)
    
    March 31, 2009Change in
    
    
    
    
    
    Change inIncrease (Decrease) in
    
    Net Interest
    
    %
    
    Econcomic Value
    
    %Interest Rates (Basis Points)
    
    Income
    
    Change
    
    of Equity
    
    Change200
    
    $
    (370
    )
    
    
    (0.6
    )
    
    $
    11,911
    
    
    
    5.0100
    
    
    (575
    )
    
    
    (0.9
    )
    
    
    15,508
    
    
    
    6.5(100)
    
    
    176
    
    
    
    0.3
    
    
    
    (26,274
    )
    
    
    (11.0
    )
 December 31, 2008Change in
    
    
    
    
    
    Change inIncrease (Decrease) in
    
    Net Interest
    
    %
    
    Econcomic Value
    
    %Interest Rates (Basis Points)
    
    Income
    
    Change
    
    of Equity
    
    Change200
    
    $
    1,479
    
    
    
    2.3
    
    
    $
    (8,040
    )
    
    
    (3.7
    )100
    
    
    1,493
    
    
    
    2.3
    
    
    
    719
    
    
    
    0.3(100)
    
    
    1,874
    
    
    
    2.9
    
    
    
    (21,443
    )
    
    
    (9.9
    )
 
 PART I. ITEM 4. Controls and Procedures
 Disclosure Controls and Procedures
   -34-




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##### Table of Contents



Changes in Internal Control Over Financial Reporting
  
 PART II. OTHER INFORMATION
 
 ITEM 1. Legal Proceedings
  
 ITEM 1A. Risk Factors
  
 ITEM 2. Unregistered Sales of Equity Securities and Use of Proceeds
 (a)
    
    Not Applicable(b)
    
    Not Applicable(c)
    
    Issuer Purchases of Equity Securities
  
 ITEM 3. Defaults Upon Senior Securities
  
 ITEM 4. Submission of Matters to a Vote of Security Holders
  
 ITEM 5. Other Information
  -35-




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##### Table of Contents



ITEM 6. Exhibits
 (a)
    
    Exhibits
 ExhibitNo.
    
    Exhibit2.1
    
    Agreement and Plan of Merger dated July 31, 2008, among First Community Bancshares, Inc.
and Coddle Creek Financial Corp. (21)3(i)
    
    Articles of Incorporation of First Community Bancshares, Inc., as amended. (1)3(ii)
    
    Certificate of Designation Series A Preferred Stock (22)3(iii)
    
    Bylaws of First Community Bancshares, Inc., as amended. (17)4.1
    
    Specimen stock certificate of First Community Bancshares, Inc. (3)4.2
    
    Indenture Agreement dated September 25, 2003. (11)4.3
    
    Amended and Restated Declaration of Trust of FCBI Capital Trust dated September 25, 2003. (11)4.4
    
    Preferred Securities Guarantee Agreement dated September 25, 2003. (11)4.5
    
    Form of Certificate for the Series A Preferred Stock (22)4.6
    
    Warrant to purchase 176,546 shares of common stock of First Community Bancshares, Inc (22)10.1
    
    First Community Bancshares, Inc. 1999 Stock Option Contracts (2) and Plan. (4)10.1.1
    
    Amendment to First Community Bancshares, Inc. 1999 Stock Option Plan. (11)10.2
    
    First Community Bancshares, Inc. 2001 Non-Qualified Directors Stock Option Plan. (5)10.3
    
    Employment Agreement dated December 16, 2008, between First Community Bancshares, Inc. and
John M. Mendez. (6)10.4
    
    First Community Bancshares, Inc. 2000 Executive Retention Plan, as amended. (24)10.5
    
    First Community Bancshares, Inc. Split Dollar Plan and Agreement. (2)10.6
    
    First Community Bancshares, Inc. 2001 Directors Supplemental Retirement Plan. (2)10.6.1
    
    First Community Bancshares, Inc. 2001 Directors Supplemental Retirement Plan. Second
Amendment (B.W. Harvey, Sr.  October 19, 2004). (14)10.7
    
    First Community Bancshares, Inc. Wrap Plan. (7)10.8
    
    Reserved.10.9
    
    Form of Indemnification Agreement between First Community Bancshares, Inc., its Directors
and Certain Executive Officers. (9)10.10
    
    Form of Indemnification Agreement between First Community Bank, N. A, its Directors and
Certain Executive Officers. (9)10.11
    
    Reserved.10.12
    
    First Community Bancshares, Inc. 2004 Omnibus Stock Option Plan (10) and Award Agreement. (13)10.13
    
    Reserved.10.14
    
    First Community Bancshares, Inc. Directors Deferred Compensation Plan. (7)10.15
    
    First Community Bancshares, Inc. Deferred Compensation and Supplemental Bonus Plan For Key
Employees. (15)10.16
    
    Employment Agreement dated November 30, 2006, between First Community Bank, N. A. and
Ronald L. Campbell. (19)10.17
    
    Employment Agreement dated September 28, 2007, between GreenPoint Insurance Group, Inc.
and Shawn C. Cummings. (20)10.18
    
    Securities Purchase Agreement by and between the United States Department of the Treasury
and First Community Bancshares, Inc. dated November 21, 2008. (22)10.19
    
    Employment Agreement dated December 16, 2008, between First Community Bancshares, Inc. and
David D. Brown. (23)31.1*
    
    Rule 13a-14(a)/a5d-14(a) Certification of Chief Executive Officer.31.2*
    
    Rule 13a-14(a)/a5d-14(a) Certification of Chief Financial Officer.32*
    
    Certification of Chief Executive Officer and Chief Financial Officer Section 1350.
 
 *
    
    Furnished herewith.(1)
    
    Incorporated by reference from the Quarterly Report on Form 10-Q for the period ended June
30, 2005, filed on August 5, 2005.(2)
    
    Incorporated by reference from the Quarterly Report on Form 10-Q for the period ended June
30, 2002, filed on August 14, 2002.(3)
    
    Incorporated by reference from the Annual Report on Form 10-K for the period ended December
31, 2002, filed on March 25, 2003, as amended on March 31, 2003. -36-




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##### Table of Contents



(4)
    
    Incorporated by reference from the Annual Report on Form 10-K for the period ended December
31, 1999, filed on March 30, 2000, as amended April 13, 2000.(5)
    
    The option agreements entered into pursuant to the 1999 Stock Option Plan and the 2001
Non-Qualified Directors Stock Option Plan are incorporated by reference from the Quarterly
Report on Form 10-Q for the period ended June 30, 2002, filed on August 14, 2002.(6)
    
    Incorporated by reference from Exhibit 10.1 of the Current Report on Form 8-K dated and
filed December 16, 2008. The Registrant has entered into substantially identical agreements
with Robert L. Buzzo and E. Stephen Lilly, with the only differences being with respect to
title and salary.(7)
    
    Incorporated by reference from the Current Report on Form 8-K dated August 22, 2006, and
filed August 23, 2006.(8)
    
    Reserved.(9)
    
    Form of indemnification agreement entered into by the Company and by First Community Bank,
N. A. with their respective directors and certain officers of each including, for the
Registrant and Bank: John M. Mendez, Robert L. Schumacher, Robert L. Buzzo, E. Stephen Lilly,
David D. Brown, and Gary R. Mills. Incorporated by reference from the Annual Report on Form
10-K for the period ended December 31, 2003, filed on March 15, 2004, and amended on May 19,
2004.(10)
    
    Incorporated by reference from the 2004 First Community Bancshares, Inc. Definitive Proxy
filed on March 19, 2004.(11)
    
    Incorporated by reference from the Quarterly Report on Form 10-Q for the period ended
September 30, 2003, filed on November 10, 2003.(12)
    
    Incorporated by reference from the Quarterly Report on Form 10-Q for the period ended March
31, 2004, filed on May 7, 2004.(13)
    
    Incorporated by reference from the Quarterly Report on Form 10-Q for the period ended June
30, 2004, filed on August 6, 2004.(14)
    
    Incorporated by reference from the Annual Report on Form 10-K for the period ended December
31, 2004, and filed on March 16, 2005. Amendments in substantially similar form were
executed for Directors Clark, Kantor, Hamner, Modena, Perkinson,
Stafford, and Stafford II.(15)
    
    Incorporated by reference from the Current Report on Form 8-K dated October 24, 2006, and
filed October 25, 2006.(16)
    
    Reserved.(17)
    
    Incorporated by reference from Exhibit 3.1 of the Current Report on Form 8-K dated February
14, 2008, filed on February 20, 2008.(18)
    
    Reserved(19)
    
    Incorporated by reference from Exhibit 2.1 of the Form S-3 registration statement filed May
2, 2007.(20)
    
    Incorporated by reference from the Annual Report on Form 10-K for the period ended December
31, 2007, filed on March 13, 2008.(21)
    
    Incorporated by reference from Exhibit 2.1 of the Current Report on Form 8-K dated and
filed July 31, 2008.(22)
    
    Incorporated by reference from the Current Report on Form 8-K dated November 21, 2008, and
filed November 24, 2008.(23)
    
    Incorporated by reference from Exhibit 10.2 of the Current Report on Form 8-K dated and
filed December 16, 2008. The Registrant has entered into substantially identical agreements
with Gary R. Mills, Martyn A. Pell, and Robert L. Schumacher, with the only differences being
with respect to title, salary, term, and payment upon termination after a change in control.(24)
    
    Incorporated by reference from Exhibit 10.1 of the Current Report on Form 8-K dated
December 30, 2008, and filed January 5, 2009. -37-




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##### Table of Contents



/s/ John M. MendezJohn M. MendezPresident & Chief Executive Officer(Principal Executive Officer)
  /s/ David D. BrownDavid D. BrownChief Financial Officer(Principal Accounting Officer)
 -38-




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##### Table of Contents



EXHIBIT INDEX
 Exhibit No.
    
    Exhibit31.1
    
    Rule 13a-14(a)/15d-14(a) Certification of Chief Executive Officer31.2
    
    Rule 13a-14(a)/15d-14(a) Certification of Chief Financial Officer32
    
    Certification of Chief Executive and Chief Financial Officer pursuant to 18 USC Section 1350
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