##### 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 September 30, 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 September 30, 2009 (Unaudited) and December 31, 2008
    
    
    3Consolidated Statements of Income for the
Three- and Nine-Month Periods Ended
September 30, 2009 and 2008 (Unaudited)
    
    
    4Consolidated Statements of Cash Flows for
the Nine Months Ended September 30, 2009
and 2008 (Unaudited)
    
    
    5Consolidated Statements of Changes in
Stockholders Equity for the Nine Months
Ended September 30, 2009 and 2008
(Unaudited)
    
    
    6Notes to Consolidated Financial Statements
    
    
    7Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
    
    
    31Item 3. Quantitative and Qualitative Disclosures about Market Risk
    
    
    45Item 4. Controls and Procedures
    
    
    47PART II. OTHER INFORMATIONItem 1. Legal Proceedings
    
    
    47Item 1A. Risk Factors
    
    
    47Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
    
    
    48Item 3. Defaults Upon Senior Securities
    
    
    48Item 4. Submission of Matters to a Vote of Security Holders
    
    
    48Item 5. Other Information
    
    
    48Item 6. Exhibits
    
    
    48SIGNATURES
    
    
    51EXHIBIT INDEX
    
    
    52EX-31.1EX-31.2EX-32
  - 2 -




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##### Table of Contents



PART I. 
 ITEM 1. Financial Statements PART I. ITEM 1. Financial Statements
 FIRST COMMUNITY BANCSHARES, INC.
 
 CONSOLIDATED BALANCE SHEETS
 September 30,
    
    
    December 31,2009
    
    
    2008*(Dollars in Thousands, Except Per Share Data)
    
    (Unaudited)AssetsCash and due from banks
    
    $
    32,017
    
    
    $
    39,310Federal funds sold
    
    
    19,888
    
    
    
    Interest-bearing balances with banks
    
    
    3,352
    
    
    
    7,129Total cash and cash equivalents
    
    
    55,257
    
    
    
    46,439Securities available-for-sale
    
    
    575,800
    
    
    
    520,723Securities held-to-maturity
    
    
    7,452
    
    
    
    8,670Loans held for sale
    
    
    4,376
    
    
    
    1,024Loans held for investment, net of unearned income
    
    
    1,396,617
    
    
    
    1,298,159Less allowance for loan losses
    
    
    17,444
    
    
    
    15,978Net loans held for investment
    
    
    1,379,173
    
    
    
    1,282,181Premises and equipment
    
    
    57,695
    
    
    
    55,024Other real estate owned
    
    
    3,955
    
    
    
    1,326Interest receivable
    
    
    9,046
    
    
    
    10,084Goodwill and other intangible assets
    
    
    90,134
    
    
    
    89,612Other assets
    
    
    115,453
    
    
    
    118,231Total Assets
    
    $
    2,298,341
    
    
    $
    2,133,314LiabilitiesDeposits:Noninterest-bearing
    
    $
    198,107
    
    
    $
    199,712Interest-bearing
    
    
    1,464,350
    
    
    
    1,304,046Total Deposits
    
    
    1,662,457
    
    
    
    1,503,758Interest, taxes and other liabilities
    
    
    24,374
    
    
    
    27,423Securities sold under agreements to repurchase
    
    
    147,042
    
    
    
    165,914FHLB borrowings and other indebtedness
    
    
    198,932
    
    
    
    215,877Total Liabilities
    
    
    2,032,805
    
    
    
    1,912,972Stockholders EquityPreferred stock, par value undesignated; 1,000,000 shares authorized; 0 shares
issued at September 30, 2009, and 41,500 issued December 31, 2008
    
    
    
    
    
    
    40,419Common stock, $1 par value; 25,000,000 shares authorized; 18,082,874 shares
issued at September 30, 2009, and 12,051,234 issued December 31, 2008, including
402,494 and 483,785 shares in treasury, respectively
    
    
    18,083
    
    
    
    12,051Additional paid-in capital
    
    
    192,799
    
    
    
    128,526Retained earnings
    
    
    102,920
    
    
    
    107,231Treasury stock, at cost
    
    
    (12,768
    )
    
    
    (15,368
    )Accumulated other comprehensive loss
    
    
    (35,498
    )
    
    
    (52,517
    )Total Stockholders Equity
    
    
    265,536
    
    
    
    220,342Total Liabilities and Stockholders
Equity
    
    $
    2,298,341
    
    
    $
    2,133,314
 
 *
    
    Derived from audited financial statements. See Notes to Consolidated Financial Statements.
 - 3 -




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##### Table of Contents



FIRST COMMUNITY BANCSHARES, INC.
 
 CONSOLIDATED STATEMENTS OF INCOME/(LOSS) (Unaudited)
 Three Months Ended
    
    
    Nine Months EndedSeptember 30,
    
    
    September 30,(Dollars In Thousands, Except Per Share Data)
    
    2009
    
    
    2008
    
    
    2009
    
    
    2008Interest IncomeInterest and fees on loans held for investment
    
    $
    21,064
    
    
    $
    19,266
    
    
    $
    60,619
    
    
    $
    60,394Interest on securities-taxable
    
    
    4,562
    
    
    
    5,567
    
    
    
    14,903
    
    
    
    17,101Interest on securities-nontaxable
    
    
    1,449
    
    
    
    1,708
    
    
    
    4,527
    
    
    
    5,775Interest on federal funds sold and deposits
    
    
    55
    
    
    
    9
    
    
    
    133
    
    
    
    260Total interest income
    
    
    27,130
    
    
    
    26,550
    
    
    
    80,182
    
    
    
    83,530Interest ExpenseInterest on deposits
    
    
    6,998
    
    
    
    6,684
    
    
    
    21,641
    
    
    
    22,543Interest on borrowings
    
    
    2,596
    
    
    
    3,543
    
    
    
    8,251
    
    
    
    11,679Total interest expense
    
    
    9,594
    
    
    
    10,227
    
    
    
    29,892
    
    
    
    34,222Net interest income
    
    
    17,536
    
    
    
    16,323
    
    
    
    50,290
    
    
    
    49,308Provision for loan losses
    
    
    3,418
    
    
    
    3,461
    
    
    
    8,057
    
    
    
    4,721Net interest income
after provision for
loan losses
    
    
    14,118
    
    
    
    12,862
    
    
    
    42,233
    
    
    
    44,587Noninterest IncomeWealth management income
    
    
    971
    
    
    
    957
    
    
    
    3,088
    
    
    
    2,954Service charges on deposit accounts
    
    
    3,659
    
    
    
    3,808
    
    
    
    10,307
    
    
    
    10,370Other service charges and fees
    
    
    1,156
    
    
    
    1,040
    
    
    
    3,467
    
    
    
    3,225Insurance commissions
    
    
    1,567
    
    
    
    1,240
    
    
    
    5,523
    
    
    
    3,730Total impairment losses on securities
    
    
    (26,405
    )
    
    
    (51
    )
    
    
    (63,180
    )
    
    
    (51
    )Portion of loss recognized in other comprehensive income
    
    
    (4,406
    )
    
    
    
    
    
    
    28,384
    
    
    
    Net impairment losses recognized in earnings
    
    
    (30,811
    )
    
    
    (51
    )
    
    
    (34,796
    )
    
    
    (51
    )Security gains
    
    
    866
    
    
    
    163
    
    
    
    2,930
    
    
    
    2,133Acquisition gain
    
    
    4,493
    
    
    
    
    
    
    
    4,493
    
    
    
    Other operating income
    
    
    815
    
    
    
    675
    
    
    
    1,750
    
    
    
    2,336Total non-interest (loss) income
    
    
    (17,284
    )
    
    
    7,832
    
    
    
    (3,238
    )
    
    
    24,697Noninterest ExpenseSalaries and employee benefits
    
    
    7,860
    
    
    
    7,371
    
    
    
    23,131
    
    
    
    22,741Occupancy expense of bank premises
    
    
    1,266
    
    
    
    1,297
    
    
    
    4,202
    
    
    
    3,717Furniture and equipment expense
    
    
    928
    
    
    
    924
    
    
    
    2,758
    
    
    
    2,798Amortization of intangible assets
    
    
    262
    
    
    
    166
    
    
    
    751
    
    
    
    484FHLB debt prepayment fees
    
    
    
    
    
    
    
    
    
    
    88
    
    
    
    1,647FDIC premiums and assessments
    
    
    1,109
    
    
    
    62
    
    
    
    2,584
    
    
    
    141Merger-related expenses
    
    
    1,505
    
    
    
    
    
    
    
    1,580
    
    
    
    Other operating expense
    
    
    4,838
    
    
    
    4,570
    
    
    
    14,011
    
    
    
    13,904Total noninterest expense
    
    
    17,768
    
    
    
    14,390
    
    
    
    49,105
    
    
    
    45,432(Loss) income before income taxes
    
    
    (20,934
    )
    
    
    6,304
    
    
    
    (10,110
    )
    
    
    23,852Income tax (benefit) expense
    
    
    (9,633
    )
    
    
    1,753
    
    
    
    (6,444
    )
    
    
    6,751Net (loss) income
    
    
    (11,301
    )
    
    
    4,551
    
    
    
    (3,666
    )
    
    
    17,101Dividends on preferred stock
    
    
    1,011
    
    
    
    
    
    
    
    2,160
    
    
    
    Net (loss) income available to common shareholders
    
    $
    (12,312
    )
    
    $
    4,551
    
    
    $
    (5,826
    )
    
    $
    17,101Basic earnings (loss) per common share
    
    $
    (0.71
    )
    
    $
    0.42
    
    
    $
    (0.42
    )
    
    $
    1.56Diluted earnings (loss) per common share
    
    $
    (0.71
    )
    
    $
    0.41
    
    
    $
    (0.42
    )
    
    $
    1.54Dividends declared per common share
    
    $
    0.10
    
    
    $
    0.28
    
    
    $
    0.30
    
    
    $
    0.84Weighted average basic shares outstanding
    
    
    17,427,434
    
    
    
    10,956,867
    
    
    
    13,918,599
    
    
    
    10,992,901Weighted average diluted shares outstanding
    
    
    17,427,434
    
    
    
    11,034,059
    
    
    
    13,918,599
    
    
    
    11,071,925
 See Notes to Consolidated Financial Statements
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##### Table of Contents



FIRST COMMUNITY BANCSHARES, INC.
 
 CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
 Nine Months EndedSeptember 30,(In Thousands)
    
    2009
    
    
    2008Operating activities:Net (loss) income
    
    $
    (3,666
    )
    
    $
    17,101Adjustments to reconcile net income (loss) to net cash provided by operating activities:Provision for loan losses
    
    
    8,057
    
    
    
    4,721Depreciation and amortization of premises and equipment
    
    
    2,986
    
    
    
    2,785Intangible amortization
    
    
    751
    
    
    
    484Net investment amortization and accretion
    
    
    1,024
    
    
    
    (292
    )Net gain on the sale of assets
    
    
    (3,008
    )
    
    
    (2,070
    )Net gain on acquisitions
    
    
    (4,493
    )
    
    
    Mortgage loans originated for sale
    
    
    (26,147
    )
    
    
    (28,299
    )Proceeds from sales of mortgage loans
    
    
    25,538
    
    
    
    29,137Gain on sales of loans
    
    
    (59
    )
    
    
    (167
    )Deferred income tax benefit
    
    
    (17,752
    )
    
    
    (330
    )Decrease in interest receivable
    
    
    1,635
    
    
    
    3,309Net impairment losses recognized in earnings
    
    
    34,796
    
    
    
    51Other operating activities, net
    
    
    3,656
    
    
    
    2,471Net cash provided by operating activities
    
    
    23,318
    
    
    
    28,901Investing activities:Proceeds from sales of securities available-for-sale
    
    
    126,632
    
    
    
    97,232Proceeds from maturities and calls of securities available-for-sale
    
    
    50,334
    
    
    
    80,997Proceeds from maturities and calls of securities held-to-maturity
    
    
    1,238
    
    
    
    3,042Purchase of securities available-for-sale
    
    
    (218,388
    )
    
    
    (108,124
    )Net decrease in loans held for investment
    
    
    19,559
    
    
    
    54,828Proceeds from the redemption of FHLB stock
    
    
    351
    
    
    
    Cash provided by divestures and acquisitions, net
    
    
    21,299
    
    
    
    Proceeds from sales of equipment
    
    
    218
    
    
    
    23Purchase of premises and equipment
    
    
    (3,909
    )
    
    
    (6,002
    )Net cash (used in) provided by investing activities
    
    
    (2,666
    )
    
    
    121,996Financing activities:Net increase in demand and savings deposits
    
    
    15,645
    
    
    
    8,088Net increase (decrease) in time deposits
    
    
    357
    
    
    
    (51,987
    )Net decrease in federal funds purchased
    
    
    
    
    
    
    11,000Net decrease in securities sold under agreement to repurchase
    
    
    (18,872
    )
    
    
    (27,039
    )Net decrease in FHLB and other borrowings
    
    
    (25,122
    )
    
    
    (75,196
    )FHLB debt prepayment fees
    
    
    (88
    )
    
    
    (1,647
    )Net proceeds from the issuance of common stock
    
    
    61,668
    
    
    
    Redemption of preferred stock
    
    
    (41,500
    )
    
    
    Proceeds from the exercise of stock options
    
    
    20
    
    
    
    440Excess tax benefit from stock-based compensation
    
    
    2
    
    
    
    49Acquisition of treasury stock
    
    
    (13
    )
    
    
    (4,222
    )Preferred dividends paid
    
    
    (1,079
    )
    
    
    Common dividends paid
    
    
    (2,852
    )
    
    
    (9,227
    )Net cash used in financing activities
    
    
    (11,834
    )
    
    
    (149,741
    )Increase in cash and cash equivalents
    
    
    8,818
    
    
    
    1,156Cash and cash equivalents at beginning of period
    
    
    46,439
    
    
    
    52,746Cash and cash equivalents at end of period
    
    $
    55,257
    
    
    $
    53,902Supplemental information  Noncash itemsTransfer of loans to other real estate
    
    $
    5,404
    
    
    $
    1,413Cumulative effect adjustment, net of tax*
    
    $
    6,131
    
    
    $
    Dividends declared on common stock
    
    $
    1,764
    
    
    $
    
 
 *
    
    In accordance with FASB Accounting Standards Codification Investments-Debt and Equity Securities Topic 320 See Notes to Consolidated Financial Statements.
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##### Table of Contents



FIRST COMMUNITY BANCSHARES, INC.
 
 CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS EQUITY (Unaudited)
 AccumulatedAdditional
    
    
    
    
    
    
    
    
    
    
    OtherPreferred
    
    
    Common
    
    
    Paid-in
    
    
    Retained
    
    
    Treasury
    
    
    Comprehensive(Dollars in Thousands)
    
    Stock
    
    
    Stock
    
    
    Capital
    
    
    Earnings
    
    
    Stock
    
    
    Income (Loss)
    
    
    TotalBalance January 1, 2008
    
    $
    
    
    
    $
    11,499
    
    
    $
    108,825
    
    
    $
    117,670
    
    
    $
    (13,613
    )
    
    $
    (7,283
    )
    
    $
    217,098Comprehensive income:Net income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    17,101
    
    
    
    
    
    
    
    
    
    
    
    17,101Other
comprehensive loss - See note 9

    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (50,116
    )

 
    
    (50,116
    )Comprehensive loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    17,101
    
    
    
    
    
    
    
    (50,116
    )
    
    
    (33,015
    )Cumulative effect of change in
accounting principle
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (813
    )
    
    
    
    
    
    
    
    
    
    
    (813
    )Common dividends declared
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (9,227
    )
    
    
    
    
    
    
    
    
    
    
    (9,227
    )Acquisition of 132,100 treasury shares
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (4,222
    )
    
    
    
    
    
    
    (4,222
    )Acquisition of GreenPoint Insurance Group -
7,728 shares issued
    
    
    
    
    
    
    
    
    
    
    22
    
    
    
    
    
    
    
    245
    
    
    
    
    
    
    
    267Equity-based compensation expense
    
    
    
    
    
    
    
    
    
    
    161
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    161Tax benefit from exercise of stock options
    
    
    
    
    
    
    
    
    
    
    122
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    122Option exercises - 22,323 shares
    
    
    
    
    
    
    
    
    
    
    (268
    )
    
    
    
    
    
    
    708
    
    
    
    
    
    
    
    440Balance September 30, 2008
    
    $
    
    
    
    $
    11,499
    
    
    $
    108,862
    
    
    $
    124,731
    
    
    $
    (16,882
    )
    
    $
    (57,399
    )
    
    $
    170,811Balance 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
    
    
    
    
    
    
    
    (6,131
    )
    
    
    Comprehensive income:Net income (loss)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (3,666
    )
    
    
    
    
    
    
    
    
    
    
    (3,666
    )Other
comprehensive income - See note 9

    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
 23,150
    
 
    
    23,150Comprehensive income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (3,666
    )
    
    
    
    
    
    
    23,150
    
    
    
    19,484Preferred dividend, net
    
    
    1,081
    
    
    
    
    
    
    
    (37
    )
    
    
    (2,160
    )
    
    
    
    
    
    
    
    
    
    
    (1,116
    )Common dividends declared
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (4,616
    )
    
    
    
    
    
    
    
    
    
    
    (4,616
    )Redemption of preferred stock
    
    
    (41,500
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (41,500
    )Acquisition of 1,000 treasury shares
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (13
    )
    
    
    
    
    
    
    (13
    )Acquisition of TriStone Community
Bank
741,588 shares issued
    
    
    
    
    
    
    742
    
    
    
    9,386
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    10,128Issuance of vested shares - 700 shares
    
    
    
    
    
    
    
    
    
    
    (22
    )
    
    
    
    
    
    
    22
    
    
    
    
    
    
    
    Equity-based compensation expense
    
    
    
    
    
    
    
    
    
    
    105
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    105Common stock issuance -
5,290,000 shares issued
    
    
    
    
    
    
    5,290
    
    
    
    56,378
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    61,668Retirement plan contribution -
79,591 shares issued
    
    
    
    
    
    
    
    
    
    
    (1,495
    )
    
    
    
    
    
    
    2,527
    
    
    
    
    
    
    
    1,032Option exercises - 2,000 shares
    
    
    
    
    
    
    
    
    
    
    (42
    )
    
    
    
    
    
    
    64
    
    
    
    
    
    
    
    22Balance September 30, 2009
    
    $
    
    
    
    $
    18,083
    
    
    $
    192,799
    
    
    $
    102,920
    
    
    $
    (12,768
    )
    
    $
    (35,498
    )
    
    $
    265,536
 See Notes to Consolidated Financial Statements.
 - 6 -




---



##### Table of Contents



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 Note 1. General
 Unaudited Consolidated Financial Statements
     Earnings Per Share
  For the three months
    
    
    For the nine monthsended September 30,
    
    
    ended September 30,(Amounts in Thousands, Except Share and Per Share Data)
    
    2009
    
    
    2008
    
    
    2009
    
    
    2008Net (loss) income available to common shareholders
    
    $
    (12,312
    )
    
    $
    4,551
    
    
    $
    (5,826
    )
    
    $
    17,101Weighted average shares outstanding
    
    
    17,427,434
    
    
    
    10,956,867
    
    
    
    13,918,599
    
    
    
    10,992,901Dilutive shares for stock options
    
    
    
    
    
    
    54,712
    
    
    
    
    
    
    
    56,544Contingently issuable shares
    
    
    
    
    
    
    22,480
    
    
    
    
    
    
    
    22,480Common stock warrants
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Weighted average dilutive shares outstanding
    
    
    17,427,434
    
    
    
    11,034,059
    
    
    
    13,918,599
    
    
    
    11,071,925Basic (loss) earnings per share
    
    $
    (0.71
    )
    
    $
    0.42
    
    
    $
    (0.42
    )
    
    $
    1.56Diluted (loss) earnings per share
    
    $
    (0.71
    )
    
    $
    0.41
    
    
    $
    (0.42
    )
    
    $
    1.54
  - 7 -




---



##### Table of Contents



Recent Accounting Pronouncements
        - 8 -




---



##### Table of Contents



Note 2. Mergers, Acquisitions, and Branching Activity
    Acquisition of TriStone Community Bank
 (In thousands)Consideration:Common Stock - 741,588 shares
    
    $
    10,082Cash paid for dissenting shares
    
    
    649Cash in lieu of fractional shares
    
    
    4Option consideration
    
    
    42Fair value of total consideration paid
    
    $
    10,777Recognized amounts of assets acquired and liabilities assumed:Cash and cash equivalents
    
    $
    21,948Investments
    
    
    8,656Loans, net
    
    
    130,808Premises and equipment, net
    
    
    2,112Other assets
    
    
    1,624Identifiable assets
    
    
    165,148Deposits
    
    
    141,833Other liabilities, primarily FHLB advances
    
    
    8,045Identifiable liabilities
    
    
    149,878Identifiable net assets
    
    
    15,270Gain on purchase
    
    $
    (4,493
    )
 - 9 -




---



##### Table of Contents



For the Nine Months ended September 30, 2009ProForma
    
    
    ProForma(Dollars In Thousands)
    
    First Community
    
    
    TriStone
    
    
    Adjustments
    
    
    CombinedInterest Income
    
    $
    78,847
    
    
    $
    5,453
    
    
    $
    199
    
    
    $
    84,499Interest Expense
    
    
    29,463
    
    
    
    2,466
    
    
    
    (427
    )
    
    
    31,502Net interest income
    
    
    49,384
    
    
    
    2,987
    
    
    
    626
    
    
    
    52,997Provision for loan losses
    
    
    8,057
    
    
    
    175
    
    
    
    
    
    
    
    8,232Net interest income after provision for loan losses
    
    
    41,327
    
    
    
    2,812
    
    
    
    626
    
    
    
    44,765Noninterest Income
    
    
    (3,860
    )
    
    
    929
    
    
    
    4,493
    
    
    
    1,562Noninterest Expense
    
    
    51,161
    
    
    
    3,564
    
    
    
    1,580
    
    
    
    56,305Income (loss) before income taxes
    
    
    (13,694
    )
    
    
    177
    
    
    
    3,539
    
    
    
    (9,978
    )Income tax expense (benefit)
    
    
    (7,529
    )
    
    
    
    
    
    
    1,085
    
    
    
    (6,444
    )Net income (loss)
    
    
    (6,165
    )
    
    
    177
    
    
    
    2,454
    
    
    
    (3,534
    )Dividends on preferred stock
    
    
    2,160
    
    
    
    
    
    
    
    
    
    
    
    2,160Net income (loss) available to common shareholders
    
    $
    (8,325
    )
    
    $
    177
    
    
    $
    2,454
    
    
    $
    (5,694
    )
 For the Nine Months ended September 30, 2008ProForma
    
    
    ProForma(Dollars In Thousands)
    
    First Community
    
    
    TriStone
    
    
    Adjustments
    
    
    CombinedInterest Income
    
    $
    83,530
    
    
    $
    5,644
    
    
    $
    199
    
    
    $
    89,373Interest Expense
    
    
    34,222
    
    
    
    2,890
    
    
    
    (427
    )
    
    
    36,685Net interest income
    
    
    49,308
    
    
    
    2,754
    
    
    
    626
    
    
    
    52,688Provision for loan losses
    
    
    4,721
    
    
    
    537
    
    
    
    
    
    
    
    5,258Net interest income after provision for loan losses
    
    
    44,587
    
    
    
    2,217
    
    
    
    626
    
    
    
    47,430Noninterest Income
    
    
    24,748
    
    
    
    481
    
    
    
    4,493
    
    
    
    29,722Noninterest Expense
    
    
    45,483
    
    
    
    2,974
    
    
    
    1,580
    
    
    
    50,037Income (loss) before income taxes
    
    
    23,852
    
    
    
    (276
    )
    
    
    3,539
    
    
    
    27,115Income tax expense (benefit)
    
    
    6,751
    
    
    
    
    
    
    
    1,085
    
    
    
    7,836Net income (loss)
    
    
    17,101
    
    
    
    (276
    )
    
    
    2,454
    
    
    
    19,279Dividends on preferred stock
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Net income (loss) available to common shareholders
    
    $
    17,101
    
    
    $
    (276
    )
    
    $
    2,454
    
    
    $
    19,279
  - 10 -




---



##### Table of Contents



(In thousands)
    
    July 31, 2009Contractually required principal payments to balance sheet received
    
    $
    124,973Fair value of adjustment for credit, interest rate, and liquidity
    
    
    (472
    )Fair value of loans receivable, with no credit deterioration
    
    $
    124,501
  (In thousands)
    
    July 31, 2009
    
    
    September 30, 2009Contractually required principal payments to balance sheet receivable
    
    $
    6,862
    
    
    $
    5,712Nonaccretable difference
    
    
    (1,670
    )
    
    
    (1,340
    )Present value of cash flows expected to be collected
    
    
    5,192
    
    
    
    4,372Accretable difference
    
    
    (149
    )
    
    
    (135
    )Fair value of acquired impaired loans
    
    $
    5,043
    
    
    $
    4,237
    - 11 -




---



##### Table of Contents



Note 3. Investment Securities
  September 30, 2009Amortized
    
    
    Unrealized
    
    
    Unrealized
    
    
    Fair
    
    
    OTTI in(In thousands)
    
    Cost
    
    
    Gains
    
    
    Losses
    
    
    Value
    
    
    AOCIU.S. Government agency securities
    
    $
    66,191
    
    
    $
    697
    
    
    $
    
    
    
    $
    66,888
    
    
    $
    States and political subdivisions
    
    
    134,885
    
    
    
    4,092
    
    
    
    (481
    )
    
    
    138,496
    
    
    
    Trust preferred securities:Single issue
    
    
    55,586
    
    
    
    
    
    
    
    (18,132
    )
    
    
    37,454
    
    
    
    Pooled
    
    
    60,116
    
    
    
    
    
    
    
    (37,014
    )
    
    
    23,102
    
    
    
    (31,862
    )Total trust preferred securities
    
    
    115,702
    
    
    
    
    
    
    
    (55,146
    )
    
    
    60,556
    
    
    
    (31,862
    )Mortgage-backed securities:Agency
    
    
    284,092
    
    
    
    6,875
    
    
    
    (361
    )
    
    
    290,606
    
    
    
    Non-Agency prime residential
    
    
    6,166
    
    
    
    
    
    
    
    (627
    )
    
    
    5,539
    
    
    
    Non-Agency Alt-A residential
    
    
    20,968
    
    
    
    
    
    
    
    (9,437
    )
    
    
    11,531
    
    
    
    (9,437
    )Total mortgage-backed securities
    
    
    311,226
    
    
    
    6,875
    
    
    
    (10,425
    )
    
    
    307,676
    
    
    
    (9,437
    )Equities
    
    
    2,312
    
    
    
    208
    
    
    
    (336
    )
    
    
    2,184
    
    
    
    Total
    
    $
    630,316
    
    
    $
    11,872
    
    
    $
    (66,388
    )
    
    $
    575,800
    
    
    $
    (41,299
    )
 December 31, 2008Amortized
    
    
    Unrealized
    
    
    Unrealized
    
    
    Fair
    
    
    OTTI in(In thousands)
    
    Cost
    
    
    Gains
    
    
    Losses
    
    
    Value
    
    
    AOCIU.S. Government agency securities
    
    $
    53,425
    
    
    $
    1,393
    
    
    $
    
    
    
    $
    54,818
    
    
    $
    States and political subdivisions
    
    
    163,042
    
    
    
    864
    
    
    
    (4,487
    )
    
    
    159,419
    
    
    
    Trust preferred securities:Single Issue
    
    
    55,491
    
    
    
    
    
    
    
    (21,950
    )
    
    
    33,541
    
    
    
    Pooled
    
    
    93,269
    
    
    
    
    
    
    
    (60,757
    )
    
    
    32,512
    
    
    
    Total trust preferred securities
    
    
    148,760
    
    
    
    
    
    
    
    (82,707
    )
    
    
    66,053
    
    
    
    Mortgage-backed securities:Agency
    
    
    212,315
    
    
    
    4,649
    
    
    
    (2
    )
    
    
    216,962
    
    
    
    Non-Agency prime residential
    
    
    7,423
    
    
    
    
    
    
    
    (1,657
    )
    
    
    5,766
    
    
    
    Non-Agency Alt-A residential
    
    
    10,750
    
    
    
    
    
    
    
    
    
    
    
    10,750
    
    
    
    Total mortgage-backed securities
    
    
    230,488
    
    
    
    4,649
    
    
    
    (1,659
    )
    
    
    233,478
    
    
    
    Equities
    
    
    7,979
    
    
    
    357
    
    
    
    (1,381
    )
    
    
    6,955
    
    
    
    Total
    
    $
    603,694
    
    
    $
    7,263
    
    
    $
    (90,234
    )
    
    $
    520,723
    
    
    $
    
 - 12 -




---



##### Table of Contents



September 30, 2009Amortized
    
    
    Unrealized
    
    
    Unrealized
    
    
    Fair(In thousands)
    
    Cost
    
    
    Gains
    
    
    Losses
    
    
    ValueStates and political subdivisions
    
    $
    7,452
    
    
    $
    143
    
    
    $
    
    
    
    $
    7,595Total
    
    $
    7,452
    
    
    $
    143
    
    
    $
    
    
    
    $
    7,595
 December 31, 2008Amortized
    
    
    Unrealized
    
    
    Unrealized
    
    
    Fair(In thousands)
    
    Cost
    
    
    Gains
    
    
    Losses
    
    
    ValueStates and political subdivisions
    
    $
    8,670
    
    
    $
    133
    
    
    $
    (1
    )
    
    $
    8,802Total
    
    $
    8,670
    
    
    $
    133
    
    
    $
    (1
    )
    
    $
    8,802
  Amortized(In thousands)
    
    Cost
    
    
    Fair ValueDue within one year
    
    $
    1,081
    
    
    $
    1,089Due after one year but within
five years
    
    
    7,125
    
    
    
    7,326Due after five years but within
ten years
    
    
    89,295
    
    
    
    92,201Due after ten years
    
    
    219,277
    
    
    
    165,324316,778
    
    
    
    265,940Mortgage-backed securities
    
    
    311,226
    
    
    
    307,676Equity securities
    
    
    2,312
    
    
    
    2,184Total
    
    $
    630,316
    
    
    $
    575,800
  Amortized(In thousands)
    
    Cost
    
    
    Fair ValueDue within one year
    
    $
    1,091
    
    
    $
    1,103Due after one year but within
five years
    
    
    4,225
    
    
    
    4,312Due after five years but
within ten years
    
    
    2,136
    
    
    
    2,180Due after ten years
    
    
    
    
    
    
    Total
    
    $
    7,452
    
    
    $
    7,595
   - 13 -




---



##### Table of Contents



September 30, 2009Less than 12 Months
    
    
    12 Months or longer
    
    
    TotalDescription of Securities
    
    Fair
    
    
    Unrealized
    
    
    Fair
    
    
    Unrealized
    
    
    Fair
    
    
    Unrealized(In thousands)
    
    Value
    
    
    Losses
    
    
    Value
    
    
    Losses
    
    
    Value
    
    
    LossesStates and political subdivisions
    
    $
    3,706
    
    
    $
    (129
    )
    
    $
    16,297
    
    
    $
    (352
    )
    
    $
    20,003
    
    
    $
    (481
    )Trust preferred securities:Single Issue
    
    
    
    
    
    
    
    
    
    
    37,454
    
    
    
    (18,132
    )
    
    
    37,454
    
    
    
    (18,132
    )Pooled
    
    
    
    
    
    
    
    
    
    
    23,102
    
    
    
    (37,014
    )
    
    
    23,102
    
    
    
    (37,014
    )Total trust preferred securities
    
    
    
    
    
    
    
    
    
    
    60,556
    
    
    
    (55,146
    )
    
    
    60,556
    
    
    
    (55,146
    )Mortgage-backed securities:Agency
    
    
    70,403
    
    
    
    (360
    )
    
    
    41
    
    
    
    (1
    )
    
    
    70,444
    
    
    
    (361
    )Prime residential
    
    
    
    
    
    
    
    
    
    
    5,539
    
    
    
    (627
    )
    
    
    5,539
    
    
    
    (627
    )Alt-A residential
    
    
    11,531
    
    
    
    (9,437
    )
    
    
    
    
    
    
    
    
    
    
    11,531
    
    
    
    (9,437
    )Total mortgage-backed securities
    
    
    81,934
    
    
    
    (9,797
    )
    
    
    5,580
    
    
    
    (628
    )
    
    
    87,514
    
    
    
    (10,425
    )Equity securities
    
    
    452
    
    
    
    (70
    )
    
    
    961
    
    
    
    (266
    )
    
    
    1,413
    
    
    
    (336
    )Total
    
    $
    86,092
    
    
    $
    (9,996
    )
    
    $
    83,394
    
    
    $
    (56,392
    )
    
    $
    169,486
    
    
    $
    (66,388
    )
 December 31, 2008Less than 12 Months
    
    
    12 Months or longer
    
    
    TotalDescription of Securities
    
    Fair
    
    
    Unrealized
    
    
    Fair
    
    
    Unrealized
    
    
    Fair
    
    
    Unrealized(In thousands)
    
    Value
    
    
    Losses
    
    
    Value
    
    
    Losses
    
    
    Value
    
    
    LossesStates and political subdivisions
    
    $
    85,374
    
    
    $
    (2,948
    )
    
    $
    16,413
    
    
    $
    (1,539
    )
    
    $
    101,787
    
    
    $
    (4,487
    )Trust preferred securities:Single Issue
    
    
    
    
    
    
    
    
    
    
    30,693
    
    
    
    (21,950
    )
    
    
    30,693
    
    
    
    (21,950
    )Pooled
    
    
    
    
    
    
    
    
    
    
    29,567
    
    
    
    (60,757
    )
    
    
    29,567
    
    
    
    (60,757
    )Total trust preferred securities
    
    
    
    
    
    
    
    
    
    
    60,260
    
    
    
    (82,707
    )
    
    
    60,260
    
    
    
    (82,707
    )Mortgage-backed securities:Agency
    
    
    42,674
    
    
    
    (1
    )
    
    
    43
    
    
    
    (1
    )
    
    
    42,717
    
    
    
    (2
    )Prime residential
    
    
    5,766
    
    
    
    (1,657
    )
    
    
    
    
    
    
    
    
    
    
    5,766
    
    
    
    (1,657
    )Alt-A residential
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Total 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
    
    $
    135,981
    
    
    $
    (5,767
    )
    
    $
    78,917
    
    
    $
    (84,467
    )
    
    $
    214,898
    
    
    $
    (90,234
    )
    - 14 -




---



##### Table of Contents



- 15 -




---



##### Table of Contents



CurrentQuarter
    
    
    CumulativeCurrent
    
    Credit
    
    
    
    
    
    
    
    
    
    
    
    
    
    Deferrals/Defaults
    
    
    Unrealized
    
    
    Credit-
    
    
    Credit-Credit
    
    Rating at
    
    Issuing
    
    
    Book
    
    
    Fair
    
    
    Actual
    
    
    Percent
    
    
    Loss
    
    
    Related
    
    
    RelatedDeal Name
    
    Rating
    
    Purchase
    
    Banks
    
    
    Value
    
    
    Value
    
    
    Amount
    
    
    of Deal
    
    
    in OCI
    
    
    OTTI
    
    
    OTTI(Dollars In Thousands)Single-issuerBankAmerica Cap
    
    B
    
    A+
    
    
    1
    
    
    $
    3,087
    
    
    $
    2,546
    
    
    None
    
    
    n/a
    
    
    $
    (541
    )
    
    $
    
    
    
    $
    BankBoston Cap
    
    B
    
    A+
    
    
    1
    
    
    
    4,909
    
    
    
    3,667
    
    
    None
    
    
    n/a
    
    
    
    (1,242
    )
    
    
    
    
    
    
    Chase Capital II
    
    BBB+
    
    A
    
    
    1
    
    
    
    3,620
    
    
    
    2,578
    
    
    None
    
    
    n/a
    
    
    
    (1,042
    )
    
    
    
    
    
    
    CoreStates Capital I
    
    A-
    
    A+
    
    
    1
    
    
    
    2,934
    
    
    
    1,817
    
    
    None
    
    
    n/a
    
    
    
    (1,117
    )
    
    
    
    
    
    
    First Chicago NDB CA
    
    BBB+
    
    A
    
    
    1
    
    
    
    1,435
    
    
    
    1,013
    
    
    None
    
    
    n/a
    
    
    
    (422
    )
    
    
    
    
    
    
    JPMorgan Chase Cap X
    
    BBB+
    
    A
    
    
    1
    
    
    
    5,012
    
    
    
    3,292
    
    
    None
    
    
    n/a
    
    
    
    (1,720
    )
    
    
    
    
    
    
    NB-Global
    
    B
    
    A+
    
    
    1
    
    
    
    20,766
    
    
    
    14,600
    
    
    None
    
    
    n/a
    
    
    
    (6,166
    )
    
    
    
    
    
    
    NTC Capital I Float
    
    A-
    
    A2
    
    
    1
    
    
    
    4,007
    
    
    
    2,257
    
    
    None
    
    
    n/a
    
    
    
    (1,750
    )
    
    
    
    
    
    
    SunTrust Banks
    
    BB+
    
    A
    
    
    1
    
    
    
    4,940
    
    
    
    2,589
    
    
    None
    
    
    n/a
    
    
    
    (2,351
    )
    
    
    
    
    
    
    Wachovia Cap II
    
    A-
    
    A+
    
    
    1
    
    
    
    4,876
    
    
    
    3,095
    
    
    None
    
    
    n/a
    
    
    
    (1,781
    )
    
    
    
    
    
    
    $
    55,586
    
    
    $
    37,454
    
    
    
    
    
    
    
    
    
    
    $
    (18,132
    )
    
    $
    
    
    
    $
    PooledPreTSL X B1
    
    Ca
    
    A
    
    
    58
    
    
    $
    5,697
    
    
    $
    2,967
    
    
    $
    146,625
    
    
    
    28.9
    %
    
    $
    (2,730
    )
    
    $
    3,110
    
    
    $
    4,331PreTSL XII B1
    
    Ca
    
    A
    
    
    79
    
    
    
    12,685
    
    
    
    8,016
    
    
    
    184,600
    
    
    
    24.1
    %
    
    
    (4,669
    )
    
    
    6,980
    
    
    
    7,429PreTSL XIV B1
    
    Ca
    
    A
    
    
    64
    
    
    
    8,890
    
    
    
    4,650
    
    
    
    72,000
    
    
    
    15.1
    %
    
    
    (4,240
    )
    
    
    110
    
    
    
    110PreTSL XVI C
    
    Ca
    
    A
    
    
    50
    
    
    
    1,639
    
    
    
    838
    
    
    
    157,150
    
    
    
    25.9
    %
    
    
    (801
    )
    
    
    2,402
    
    
    
    2,402PreTSL XXII C1
    
    Ca
    
    A
    
    
    82
    
    
    
    10,050
    
    
    
    2,575
    
    
    
    317,500
    
    
    
    22.9
    %
    
    
    (7,475
    )
    
    
    2,628
    
    
    
    2,628PreTSL XXIII C1
    
    Caa3
    
    A
    
    
    70
    
    
    
    7,963
    
    
    
    2,811
    
    
    
    237,500
    
    
    
    17.1
    %
    
    
    (5,152
    )
    
    
    
    
    
    
    PreTSL XXVI C1
    
    Ca
    
    A
    
    
    64
    
    
    
    6,102
    
    
    
    1,194
    
    
    
    193,000
    
    
    
    20.0
    %
    
    
    (4,908
    )
    
    
    909
    
    
    
    909SOLOSO 2007 1A A3L
    
    Ca
    
    A
    
    
    56
    
    
    
    
    
    
    
    
    
    
    
    113,000
    
    
    
    27.4
    %
    
    
    
    
    
    
    1,244
    
    
    
    18,400TRAPEZA SER 13A D
    
    C
    
    A
    
    
    63
    
    
    
    7,090
    
    
    
    51
    
    
    
    113,000
    
    
    
    17.8
    %
    
    
    (7,039
    )
    
    
    13,144
    
    
    
    13,144$
    60,116
    
    
    $
    23,102
    
    
    
    
    
    
    
    
    
    
    $
    (37,014
    )
    
    $
    30,527
    
    
    $
    49,353
   Three Months Ended
    
    
    Nine Months Ended(In thousands)
    
    September 30, 2009
    
    
    September 30, 2009Estimated credit losses, beginning balance*
    
    $
    23,077
    
    
    $
    19,707Additions for credit losses not previously recognized
    
    
    19,193
    
    
    
    30,953Additions for credit losses previously recognized
    
    
    11,334
    
    
    
    2,944Reduction for increases in cash flows
    
    
    
    
    
    
    Reduction for realized losses
    
    
    
    
    
    
    Estimated credit losses as of September 30, 2009
    
    $
    53,604
    
    
    $
    53,604
 
 *
    
    The beginning balance includes credit related losses included in OTTI charges recognized on
debt securities in prior periods.  - 16 -




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##### Table of Contents



Note 4. Loans
  September 30, 2009
    
    
    December 31, 2008(Dollars in Thousands)
    
    Amount
    
    
    Percent
    
    
    Amount
    
    
    PercentLoans held for investment:Commercial, financial, and agricultural
    
    $
    86,068
    
    
    
    6.16
    %
    
    $
    85,034
    
    
    
    6.55
    %Real estate  commercial
    
    
    452,670
    
    
    
    32.41
    %
    
    
    407,638
    
    
    
    31.40
    %Real estate  construction
    
    
    137,750
    
    
    
    9.86
    %
    
    
    130,610
    
    
    
    10.06
    %Real estate  residential
    
    
    652,155
    
    
    
    46.70
    %
    
    
    602,573
    
    
    
    46.42
    %Consumer
    
    
    62,995
    
    
    
    4.51
    %
    
    
    66,258
    
    
    
    5.10
    %Other
    
    
    4,979
    
    
    
    0.36
    %
    
    
    6,046
    
    
    
    0.47
    %Total
    
    $
    1,396,617
    
    
    
    100.00
    %
    
    $
    1,298,159
    
    
    
    100.00
    %Loans held for sale
    
    $
    4,376
    
    
    
    
    
    
    $
    1,024
    - 17 -




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##### Table of Contents



Note 5. Allowance for Loan Losses
    For the Three Months Ended
    
    
    For the Nine Months EndedSeptember 30,
    
    
    September 30,(In thousands)
    
    2009
    
    
    2008
    
    
    2009
    
    
    2008Beginning balance
    
    $
    16,678
    
    
    $
    13,433
    
    
    $
    15,978
    
    
    $
    12,833Provision for loan losses
    
    
    3,418
    
    
    
    3,461
    
    
    
    8,057
    
    
    
    4,721Charge-offs
    
    
    (2,993
    )
    
    
    (2,601
    )
    
    
    (7,404
    )
    
    
    (4,765
    )Recoveries
    
    
    341
    
    
    
    217
    
    
    
    813
    
    
    
    1,721Ending balance
    
    $
    17,444
    
    
    $
    14,510
    
    
    $
    17,444
    
    
    $
    14,510
  September 30,
    
    
    December 31,(In thousands)
    
    2009
    
    
    2008Recorded investment in loans considered to be impaired:Impaired loans with reserves
    
    $
    4,231
    
    
    $
    4,796Impaired loans without reserves
    
    
    10,559
    
    
    
    8,504Total impaired loans
    
    
    14,790
    
    
    
    13,300Allowance for loan losses related to loans considered to be impaired
    
    
    1,221
    
    
    
    678Interest income recognized on impaired loans, year to date
    
    
    397
    
    
    
    793
  - 18 -




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##### Table of Contents



Note 6. Deposits
  September 30,
    
    
    December 31,(In thousands)
    
    2009
    
    
    2008Interest-bearing demand deposits
    
    $
    216,184
    
    
    $
    185,117Savings and money market deposits
    
    
    351,450
    
    
    
    309,577Certificates of deposit
    
    
    896,716
    
    
    
    809,352Total
    
    $
    1,464,350
    
    
    $
    1,304,046
 Note 7. Borrowings
  September 30,
    
    
    December 31,(In thousands)
    
    2009
    
    
    2008FHLB borrowings
    
    $
    183,177
    
    
    $
    200,000Subordinated debt
    
    
    15,464
    
    
    
    15,464Other long-term debt
    
    
    291
    
    
    
    413Total
    
    $
    198,932
    
    
    $
    215,877
    (In thousands)
    
    Amount2009
    
    $
    2010
    
    
    8,1772011
    
    
    2012
    
    
    2013
    
    
    2014 and thereafter
    
    
    175,000Total
    
    $
    183,177
   - 19 -




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##### Table of Contents



Note 8. Net Periodic Benefit Cost-Defined Benefit Plans
  Three Months Ended
    
    
    Nine Months Ended(In thousands)
    
    September 30, 2009
    
    
    September 30, 2009Service cost
    
    $
    53
    
    
    $
    159Interest cost
    
    
    47
    
    
    
    141Net periodic cost
    
    $
    100
    
    
    $
    300
 Note 9. Comprehensive Income (Loss)
  Three Months Ended
    
    
    Nine Months EndedSeptember 30,
    
    
    September 30,(In thousands)
    
    2009
    
    
    2008
    
    
    2009
    
    
    2008Net (loss) income
    
    $
    (11,301
    )
    
    $
    4,551
    
    
    $
    (3,666
    )
    
    $
    17,101Other comprehensive income (loss)Unrealized loss on securities available-for-sale
with other-than-temporary impairment
    
    
    (1,652
    )
    
    
    
    
    
    
    (5,683
    )
    
    
    Unrealized gain on securities available-for-sale
without other-than-temporary impairment
    
    
    13,050
    
    
    
    
    
    
    
    9,974
    
    
    
    Unrealized loss on securities available-for-sale
prior to adoption of ASC Topic 320
    
    
    
    
    
    
    (31,744
    )
    
    
    
    
    
    
    (81,802
    )Reclassification adjustment for losses (gains)
realized in net income
    
    
    (865
    )
    
    
    (278
    )
    
    
    (2,930
    )
    
    
    (1,628
    )Reclassification
adjustment for credit related other-than-temporary impairments
recognized in earnings
    
    
    30,811
    
    
    
    
    
    
    
    34,796
    
    
    
    Unrealized (loss) gain on derivative securities
    
    
    187
    
    
    
    (75
    )
    
    
    769
    
    
    
    (97
    )Income tax effect
    
    
    (15,468
    )
    
    
    12,839
    
    
    
    (13,776
    )
    
    
    33,411Total other comprehensive income (loss)
    
    
    26,053
    
    
    
    (19,258
    )
    
    
    23,150
    
    
    
    (50,116
    )Comprehensive income (loss)
    
    $
    14,752
    
    
    $
    (14,707
    )
    
    $
    19,484
    
    
    $
    (33,015
    )
 Note 10. Commitments and Contingencies
  - 20 -




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##### Table of Contents



Note 11. Segment Information
   For the Three MonthsEnded September 30, 2009Community
    
    
    Insurance
    
    
    Parent/(In thousands)
    
    Banking
    
    
    Services
    
    
    Elimination
    
    
    TotalNet interest income
    
    $
    17,538
    
    
    $
    (12
    )
    
    $
    10
    
    
    $
    17,536Provision for loan losses
    
    
    3,418
    
    
    
    
    
    
    
    
    
    
    
    3,418Noninterest income
    
    
    (17,352
    )
    
    
    1,596
    
    
    
    (1,528
    )
    
    
    (17,284
    )Noninterest expense
    
    
    18,129
    
    
    
    1,528
    
    
    
    (1,889
    )
    
    
    17,768Income (loss) before income taxes
    
    
    (21,361
    )
    
    
    56
    
    
    
    371
    
    
    
    (20,934
    )Provision for income taxes (benefit)
    
    
    (10,837
    )
    
    
    165
    
    
    
    1,039
    
    
    
    (9,633
    )Net loss
    
    $
    (10,524
    )
    
    $
    (109
    )
    
    $
    (668
    )
    
    $
    (11,301
    )End of period goodwill and other intangibles
    
    $
    79,127
    
    
    $
    11,007
    
    
    $
    
    
    
    
    90,134End of period assets
    
    $
    2,273,335
    
    
    $
    11,188
    
    
    $
    13,818
    
    
    
    2,298,341
 For the Nine MonthsEnded September 30, 2009Community
    
    
    Insurance
    
    
    Parent/(In thousands)
    
    Banking
    
    
    Services
    
    
    Elimination
    
    
    TotalNet interest income
    
    $
    50,373
    
    
    $
    (46
    )
    
    $
    (37
    )
    
    $
    50,290Provision for loan losses
    
    
    8,057
    
    
    
    
    
    
    
    
    
    
    
    8,057Noninterest income
    
    
    (8,600
    )
    
    
    5,605
    
    
    
    (243
    )
    
    
    (3,238
    )Noninterest expense
    
    
    45,321
    
    
    
    4,640
    
    
    
    (856
    )
    
    
    49,105(Loss) income before income taxes
    
    
    (11,605
    )
    
    
    919
    
    
    
    576
    
    
    
    (10,110
    )Provision for income taxes (benefit)
    
    
    (8,476
    )
    
    
    419
    
    
    
    1,613
    
    
    
    (6,444
    )Net (loss) income
    
    $
    (3,129
    )
    
    $
    500
    
    
    $
    (1,037
    )
    
    $
    (3,666
    )End of period goodwill and other intangibles
    
    $
    79,127
    
    
    $
    11,007
    
    
    $
    
    
    
    
    90,134End of period assets
    
    $
    2,273,335
    
    
    $
    11,188
    
    
    $
    13,818
    
    
    
    2,298,341
 - 21 -




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##### Table of Contents



For the Three MonthsEnded September 30, 2008Community
    
    
    Insurance
    
    
    Parent/(In thousands)
    
    Banking
    
    
    Services
    
    
    Elimination
    
    
    TotalNet interest income
    
    $
    16,559
    
    
    $
    (19
    )
    
    $
    (217
    )
    
    $
    16,323Provision for loan losses
    
    
    3,461
    
    
    
    
    
    
    
    
    
    
    
    3,461Noninterest income
    
    
    3,872
    
    
    
    1,267
    
    
    
    2,693
    
    
    
    7,832Noninterest expense
    
    
    13,584
    
    
    
    1,110
    
    
    
    (304
    )
    
    
    14,390Income before income taxes
    
    
    3,386
    
    
    
    138
    
    
    
    2,780
    
    
    
    6,304Provision for income taxes
    
    
    962
    
    
    
    41
    
    
    
    750
    
    
    
    1,753Net income
    
    $
    2,424
    
    
    $
    97
    
    
    $
    2,030
    
    
    $
    4,551End of period goodwill and other intangibles
    
    $
    62,142
    
    
    $
    10,080
    
    
    $
    
    
    
    
    72,222End of period assets
    
    $
    1,946,454
    
    
    $
    10,889
    
    
    $
    10,114
    
    
    
    1,967,457
 For the Nine MonthsEnded September 30, 2008Community
    
    
    Insurance
    
    
    Parent/(In thousands)
    
    Banking
    
    
    Services
    
    
    Elimination
    
    
    TotalNet interest income
    
    $
    50,034
    
    
    $
    (30
    )
    
    $
    (696
    )
    
    $
    49,308Provision for loan losses
    
    
    4,721
    
    
    
    
    
    
    
    
    
    
    
    4,721Noninterest income
    
    
    18,510
    
    
    
    3,757
    
    
    
    2,430
    
    
    
    24,697Noninterest expense
    
    
    43,422
    
    
    
    3,147
    
    
    
    (1,137
    )
    
    
    45,432Income before income taxes
    
    
    20,401
    
    
    
    580
    
    
    
    2,871
    
    
    
    23,852Provision for income taxes
    
    
    5,763
    
    
    
    171
    
    
    
    817
    
    
    
    6,751Net income
    
    $
    14,638
    
    
    $
    409
    
    
    $
    2,054
    
    
    $
    17,101End of period goodwill and other intangibles
    
    $
    62,142
    
    
    $
    10,080
    
    
    $
    
    
    
    
    72,222End of period assets
    
    $
    1,946,454
    
    
    $
    10,889
    
    
    $
    10,114
    
    
    
    1,967,457
 Note 12. Fair Value
   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.
 - 22 -




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##### Table of Contents



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
    Other Assets and Associated Liabilities
 Derivatives
 - 23 -




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##### Table of Contents



Impaired Loans
    - 24 -




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##### Table of Contents



Other Real Estate Owned
  September 30, 2009Fair Value Measurements Using
    
    
    Total(In thousands)
    
    Level 1
    
    
    Level 2
    
    
    Level 3
    
    
    Fair ValueAvailable-for-sale securities:Agency securities
    
    $
    
    
    
    $
    66,888
    
    
    $
    
    
    
    $
    66,888Agency mortgage-backed securities
    
    
    
    
    
    
    290,606
    
    
    
    
    
    
    
    290,606Non-Agency prime residential MBS
    
    
    
    
    
    
    5,539
    
    
    
    
    
    
    
    5,539Non-Agency Alt-A residential MBS
    
    
    
    
    
    
    11,531
    
    
    
    
    
    
    
    11,531Municipal securities
    
    
    
    
    
    
    138,496
    
    
    
    
    
    
    
    138,496Single-issue trust preferred securities
    
    
    
    
    
    
    37,454
    
    
    
    
    
    
    
    37,454Pooled trust preferred securities
    
    
    
    
    
    
    
    
    
    
    23,102
    
    
    
    23,102Equity securities
    
    
    2,164
    
    
    
    20
    
    
    
    
    
    
    
    2,184Total Available-for-sale securities
    
    
    2,164
    
    
    
    550,534
    
    
    
    23,102
    
    
    
    575,800Other assets
    
    
    2,738
    
    
    
    
    
    
    
    
    
    
    
    2,738Derivative assets
    
    
    
    
    
    
    46
    
    
    
    
    
    
    
    46Other liabilities
    
    
    2,738
    
    
    
    
    
    
    
    
    
    
    
    2,738Derivative liabilities
    
    
    
    
    
    
    2,582
    
    
    
    
    
    
    
    2,582
 December 31, 2008Fair Value Measurements Using
    
    
    Total(In thousands)
    
    Level 1
    
    
    Level 2
    
    
    Level 3
    
    
    Fair ValueAvailable-for-sale securities:Agency securities
    
    $
    
    
    
    $
    54,818
    
    
    $
    
    
    
    $
    54,818Agency mortgage-backed securities
    
    
    
    
    
    
    216,962
    
    
    
    
    
    
    
    216,962Non-Agency prime residential MBS
    
    
    
    
    
    
    5,766
    
    
    
    
    
    
    
    5,766Non-Agency Alt-A residential MBS
    
    
    
    
    
    
    10,750
    
    
    
    
    
    
    
    10,750Municipal securities
    
    
    
    
    
    
    159,419
    
    
    
    
    
    
    
    159,419Single-issue trust preferred securities
    
    
    
    
    
    
    33,541
    
    
    
    
    
    
    
    33,541Pooled trust preferred securities
    
    
    
    
    
    
    4,445
    
    
    
    28,067
    
    
    
    32,512Equity securities
    
    
    6,811
    
    
    
    144
    
    
    
    
    
    
    
    6,955Total Available-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
 - 25 -




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##### Table of Contents



Available-for-Sale SecuritiesThree Months Ended
    
    
    Nine Months Ended(In thousands)
    
    September 30, 2009
    
    
    September 30, 2009Beginning balance
    
    $
    28,150
    
    
    $
    28,067Total gains or loss (realized/unrealized)Included in earnings
    
    
    (30,527
    )
    
    
    (33,897
    )Included in other comprehensive income
    
    
    24,536
    
    
    
    25,843Paydowns and maturities
    
    
    
    
    
    
    (33
    )Transfers into Level 3
    
    
    943
    
    
    
    3,122Ending balance September 30, 2009
    
    $
    23,102
    
    
    $
    23,102
  September 30, 2009Fair Value Measurements Using
    
    Total(In thousands)
    
    Level 1
    
    Level 2
    
    Level 3
    
    Fair ValueImpaired loans
    
    $
    
    
    
    $
    
    
    
    $
    8,503
    
    
    $
    8,503Other real estate owned
    
    
    
    
    
    
    
    
    
    
    3,955
    
    
    
    3,955
 December 31. 2008Fair Value Measurements Using
    
    Total(In thousands)
    
    Level 1
    
    Level 2
    
    Level 3
    
    Fair ValueImpaired loans
    
    $
    
    
    
    $
    
    
    
    $
    5,980
    
 
    $
    5,980
 - 26 -




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##### Table of Contents



Fair Value of Financial Instruments
  September 30, 2009
    
    December 31, 2008Carrying
    
    
    
    
    
    CarryingAmount
    
    Fair Value
    
    Amount
    
    Fair Value(In Thousands)AssetsCash and cash equivalents
    
    $
    55,257
    
    
    $
    55,257
    
    
    $
    46,439
    
    
    $
    46,439Investment Securities
    
    
    583,252
    
    
    
    583,395
    
    
    
    529,393
    
    
    
    529,525Loans held for sale
    
    
    4,376
    
    
    
    4,376
    
    
    
    1,024
    
    
    
    1,026Loans held for investment
    
    
    1,379,173
    
    
    
    1,376,908
    
    
    
    1,282,181
    
    
    
    1,276,479Accrued interest receivable
    
    
    9,046
    
    
    
    9,046
    
    
    
    10,084
    
    
    
    10,084Bank owned life insurance
    
    
    40,510
    
    
    
    40,510
    
    
    
    40,784
    
    
    
    40,784Derivative financial assets
    
    
    46
    
    
    
    46
    
    
    
    39
    
    
    
    39Deferred compensation assets
    
    
    2,738
    
    
    
    2,738
    
    
    
    2,637
    
    
    
    2,637LiabilitiesDemand deposits
    
    $
    198,107
    
    
    $
    198,107
    
    
    $
    199,712
    
    
    $
    199,712Interest-bearing demand deposits
    
    
    216,184
    
    
    
    216,184
    
    
    
    185,117
    
    
    
    185,117Savings deposits
    
    
    351,450
    
    
    
    351,450
    
    
    
    309,577
    
    
    
    309,577Time deposits
    
    
    896,716
    
    
    
    910,428
    
    
    
    809,352
    
    
    
    824,068Securities sold under agreements to repurchase
    
    
    147,042
    
    
    
    157,446
    
    
    
    165,914
    
    
    
    177,454Accrued interest payable
    
    
    4,805
    
    
    
    4,805
    
    
    
    5,326
    
    
    
    5,326FHLB and other indebtedness
    
    
    198,932
    
    
    
    213,654
    
    
    
    215,877
    
    
    
    242,223Derivative financial liabilities
    
    
    2,582
    
    
    
    2,582
    
    
    
    3,343
    
    
    
    3,343Deferred compensation liabilities
    
    
    2,738
    
    
    
    2,738
    
    
    
    2,637
    
    
    
    2,637
  Cash and Cash Equivalents:
 Investment Securities and Deferred Compensation Assets and Liabilities:
 Loans:
 Accrued Interest Receivable and Payable:
 - 27 -




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##### Table of Contents



Bank-owned Life Insurance:
 Derivative Financial Instruments:
 Deposits and Securities Sold Under Agreements to Repurchase:
 FHLB and Other Indebtedness:
 Commitments to Extend Credit, Standby Letters of Credit, and Financial Guarantees:
 Note 13. Derivatives and Hedging Activities
    (In thousands)
    
    September 30, 2009
    
    December 31, 2008
    
    September 30, 2008Interest rate swap
    
    $
    50,000
    
    
    $
    50,000
    
    
    $
    50,000IRLCs
    
    
    9,529
    
    
    
    10,500
    
    
    
    4,356
 - 28 -




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##### Table of Contents



Asset DerivativesSeptember 30, 2009
    
    
    December 31, 2008
    
    
    September 30, 2008Balance Sheet
    
    
    Fair
    
    
    Balance Sheet
    
    
    Fair
    
    
    Balance Sheet
    
    
    Fair(In thousands)
    
    Location
    
    
    Value
    
    
    Location
    
    
    Value
    
    
    Location
    
    
    ValueDerivatives not
designated as hedgesIRLCs
    
    Other assets
    
    $
    46
    
    
    Other assets
    
    $
    39
    
    
    Other assets
    
    $
    3Total
    
    
    
    
    
    $
    46
    
    
    
    
    
    
    $
    39
    
    
    
    
    
    
    $
    3
 Liability DerivativesSeptember 30, 2009
    
    
    December 31, 2008
    
    
    September 30, 2008Balance Sheet
    
    
    Fair
    
    
    Balance Sheet
    
    
    Fair
    
    
    Balance Sheet
    
    
    Fair(In thousands)
    
    Location
    
    
    Value
    
    
    Location
    
    
    Value
    
    
    Location
    
    
    ValueDerivatives designated as hedgesInterest rate swap
    
    Other liabilities
    
    $
    2,558
    
    
    Other liabilities
    
    $
    3,327
    
    
    Other liabilities
    
    $
    1,417Total
    
    
    
    
    
    $
    2,558
    
    
    
    
    
    
    $
    3,327
    
    
    
    
    
    
    $
    1,417Derivatives not designated as hedgesIRLCs
    
    Other liabilities
    
    $
    24
    
    
    Other liabilities
    
    $
    16
    
    
    Other liabilities
    
    $
    27Total
    
    
    
    
    
    $
    24
    
    
    
    
    
    
    $
    16
    
    
    
    
    
    
    $
    27Total derivatives
    
    
    
    
    
    $
    2,582
    
    
    
    
    
    
    $
    3,343
    
    
    
    
    
    
    $
    1,444
 Interest Rate Swaps.
 Interest Rate Lock Commitments.
  - 29 -




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##### Table of Contents



Effect of Derivatives and Hedging Activities on the Income Statement
  Amount of Gain/(Loss)Derivatives not
    
    Location of Gain/(Loss)
    
    
    Recognized in Income on Derivativedesignated as hedging
    
    Recognized in Income on
    
    
    Three Months Ended September 30,
    
    
    Nine Months Ended September 30,instruments
    
    Derivative
    
    
    2009
    
    
    2008
    
    
    2009
    
    
    2008(In Thousands)IRLCs
    
    Other income
    
    $
    46
    
    
    $
    1
    
    
    $
    (2
    )
    
    $
    (32
    )Total
    
    
    
    
    
    $
    46
    
    
    $
    1
    
    
    $
    (2
    )
    
    $
    (32
    )
 Counterparty Credit Risk.
 Note 14. Subsequent Events
  - 30 -




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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
   
    
    The strength of the United States economy in general and the strength of the local
economies in which we conduct operations;
    
    Geopolitical conditions, including acts or threats of terrorism, actions taken by the
United States or other governments in response to acts or threats of terrorism and/or
military conflicts, which could impact business and economic conditions in the United
States and abroad;
    
    The effects of, and changes in, trade, monetary and fiscal policies and laws, including
interest rate policies of the Board of Governors of the Federal Reserve System;
    
    Inflation, interest rate, market and monetary fluctuations;
    
    The timely development of competitive new products and services and the acceptance of
these products and services by new and existing customers;
    
    The willingness of users to substitute competitors products and services for our
products and services;
    
    The impact of changes in financial services policies, laws and regulations, including
laws, regulations and policies concerning taxes, banking, securities and insurance, and the
application thereof by regulatory bodies;
    
    Technological changes;
    
    The effect of acquisitions we may make, including, without limitation, the failure to
achieve the expected revenue growth and/or expense savings from such acquisitions;
    
    The growth and profitability of non-interest or fee income being less than expected;
    
    Changes in the level of our non-performing assets and charge-offs;
    
    The effect of changes in accounting policies and practices, as may be adopted from
time-to-time by bank regulatory agencies, the SEC, the Public Company Accounting Oversight
Board, the FASB or other accounting standards setters;
    
    Possible other-than-temporary impairments of securities held by us;
    
    The impact of current governmental efforts to restructure the U.S. financial regulatory
system;
    
    Changes in consumer spending and savings habits; and
    
    Unanticipated regulatory or judicial proceedings.
 
 - 31 -




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APPLICATION OF CRITICAL ACCOUNTING POLICIES
    COMPANY OVERVIEW
    - 32 -




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##### Table of Contents



RECENT MARKET DEVELOPMENTS
  MERGERS, ACQUISITIONS AND BRANCHING ACTIVITY
     RESULTS OF OPERATIONS
 Overview
  
    
    For the third quarter of 2009 net income decreased to a loss of $11.30 million and net
income available to common shareholders decreased to a loss of $12.31 million from the
comparable period in 2008. Net income is reduced by accrued and deemed preferred stock
dividends and amortization of a preferred stock discount to arrive at net income available
to common shareholders.
 
    
    Impairment losses of $30.81 million and $34.80 million were recorded on collateralized
debt obligations and bank equity securities for the three- and nine-month periods ended
September 30, 2009.
 
    
    Net interest margin, on a tax equivalent basis, decreased 22 basis points to 3.68% for
the three-months ended September 30, 2009 and 19 basis points to 3.68% for the nine-months
ended September 30, 2009, as compared to the three- and nine- month periods ended September
30, 2008.
 
    
    For the three- and nine-month periods ended September 30, 2009, earnings per common
share decreased to a loss of $0.71 and $0.42, respectively, as compared to earnings of
$0.42 and $1.56 in the comparable periods in the prior year. Diluted earnings per share
for the three- and nine-month periods ended September 30, 2009 reflects an increase in
common shares issued and outstanding due to the issuance of 741,588 shares related to the
TriStone merger in July 2009, an accelerated deemed dividend related to the prepayment of
$41.5 million of preferred stock, and cash dividends paid on preferred stock.
 
    
    The allowance for loan losses as a percentage of total loans increased to 1.25% in the
third quarter of 2009, as compared to 1.24% in the third quarter of 2008.
 - 33 -




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##### Table of Contents




    
    Average shareholders equity increased $67.38 million, or 34.96%, from third quarter
2008 primarily due to the sale of 5.29 million shares of common stock in June 2009, which
generated net proceeds of approximately $61.67 million.
   Net Interest Income  Quarterly Comparison (See Table I)
       - 34 -




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##### Table of Contents



Net Interest Income  Year-to-Date Comparison (See Table II)
        - 35 -




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- 36 -




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##### Table of Contents



Table I
 AVERAGE BALANCE SHEETS AND NET INTEREST INCOME ANALYSIS
 Three Months Ended
    
    
    Three Months EndedSeptember 30, 2009
    
    
    September 30, 2008Average
    
    
    
    
    
    
    Yield/
    
    
    Average
    
    
    
    
    
    
    Yield/Balance
    
    
    Interest (1)
    
    
    Rate (1)
    
    
    Balance
    
    
    Interest (1)
    
    
    Rate (1)(Dollars in Thousands)ASSETSEarning assetsLoans (2)
    
    $
    1,362,603
    
    
    $
    21,078
    
    
    
    6.14
    %
    
    $
    1,174,855
    
    
    $
    19,286
    
    
    
    6.53
    %Securities available for sale
    
    
    536,485
    
    
    
    6,636
    
    
    
    4.91
    %
    
    
    573,046
    
    
    
    8,035
    
    
    
    5.58
    %Securities held to maturity
    
    
    7,575
    
    
    
    154
    
    
    
    8.07
    %
    
    
    9,559
    
    
    
    161
    
    
    
    6.70
    %Interest-bearing deposits
    
    
    71,963
    
    
    
    55
    
    
    
    0.30
    %
    
    
    1,435
    
    
    
    9
    
    
    
    2.50
    %Total earning assets
    
    
    1,978,626
    
    
    
    27,923
    
    
    
    5.60
    %
    
    
    1,758,895
    
    
    
    27,491
    
    
    
    6.22
    %Other assets
    
    
    291,966
    
    
    
    
    
    
    
    
    
    
    
    242,296TOTAL ASSETS
    
    $
    2,270,592
    
    
    
    
    
    
    
    
    
    
    $
    2,001,191LIABILITIESInterest-bearing depositsDemand deposits
    
    $
    209,569
    
    
    $
    110
    
    
    
    0.21
    %
    
    $
    178,632
    
    
    $
    73
    
    
    
    0.16
    %Savings deposits
    
    
    339,601
    
    
    
    639
    
    
    
    0.75
    %
    
    
    309,364
    
    
    
    1,172
    
    
    
    1.51
    %Time deposits
    
    
    888,593
    
    
    
    6,249
    
    
    
    2.79
    %
    
    
    632,142
    
    
    
    5,439
    
    
    
    3.42
    %Total interest-bearing deposits
    
    
    1,437,763
    
    
    
    6,998
    
    
    
    1.93
    %
    
    
    1,120,138
    
    
    
    6,684
    
    
    
    2.37
    %BorrowingsFederal funds purchased
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    42,702
    
    
    
    251
    
    
    
    2.34
    %Retail repurchase agreements
    
    
    101,065
    
    
    
    333
    
    
    
    1.31
    %
    
    
    149,984
    
    
    
    730
    
    
    
    1.94
    %Wholesale repurchase agreements
    
    
    50,000
    
    
    
    474
    
    
    
    3.76
    %
    
    
    50,000
    
    
    
    389
    
    
    
    3.10
    %FHLB borrowings and other indebtedness
    
    
    196,227
    
    
    
    1,789
    
    
    
    3.62
    %
    
    
    216,789
    
    
    
    2,173
    
    
    
    3.99
    %Total borrowings
    
    
    347,292
    
    
    
    2,596
    
    
    
    2.97
    %
    
    
    459,475
    
    
    
    3,543
    
    
    
    3.07
    %Total interest-bearing liabilities
    
    
    1,785,055
    
    
    
    9,594
    
    
    
    2.13
    %
    
    
    1,579,613
    
    
    
    10,227
    
    
    
    2.58
    %Non-interestbearing demand deposits
    
    
    198,981
    
    
    
    
    
    
    
    
    
    
    
    211,155Other liabilities
    
    
    26,430
    
    
    
    
    
    
    
    
    
    
    
    17,680Stockholders equity
    
    
    260,126
    
    
    
    
    
    
    
    
    
    
    
    192,743TOTAL LIABILITIES AND
STOCKHOLDERS EQUITY
    
    $
    2,270,592
    
    
    
    
    
    
    
    
    
    
    $
    2,001,191Net interest income, tax equivalent
    
    
    
    
    
    $
    18,329
    
    
    
    
    
    
    
    
    
    
    $
    17,264Net interest rate spread (3)
    
    
    
    
    
    
    
    
    
    
    3.47
    %
    
    
    
    
    
    
    
    
    
    
    3.64
    %Net interest margin (4)
    
    
    
    
    
    
    
    
    
    
    3.68
    %
    
    
    
    
    
    
    
    
    
    
    3.90
    %
 
 (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. - 37 -




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##### Table of Contents



Table II
 AVERAGE BALANCE SHEETS AND NET INTEREST INCOME ANALYSIS
 Nine Months Ended
    
    
    Nine Months EndedSeptember 30, 2009
    
    
    September 30, 2008Average
    
    
    
    
    
    
    Yield/
    
    
    Average
    
    
    
    
    
    
    Yield/Balance
    
    
    Interest (1)
    
    
    Rate (1)
    
    
    Balance
    
    
    Interest (1)
    
    
    Rate (1)(Dollars in Thousands)ASSETSEarning assetsLoans (2)
    
    $
    1,308,380
    
    
    $
    60,663
    
    
    
    6.20
    %
    
    $
    1,187,006
    
    
    $
    60,456
    
    
    
    6.80
    %Securities available for sale
    
    
    535,710
    
    
    
    21,378
    
    
    
    5.34
    %
    
    
    602,802
    
    
    
    25,310
    
    
    
    5.61
    %Securities held to maturity
    
    
    7,954
    
    
    
    490
    
    
    
    8.24
    %
    
    
    10,849
    
    
    
    675
    
    
    
    8.31
    %Interest-bearing deposits
    
    
    67,819
    
    
    
    133
    
    
    
    0.26
    %
    
    
    12,363
    
    
    
    260
    
    
    
    2.81
    %Total earning assets
    
    
    1,919,863
    
    
    
    82,664
    
    
    
    5.76
    %
    
    
    1,813,020
    
    
    
    86,701
    
    
    
    6.39
    %Other assets
    
    
    290,180
    
    
    
    
    
    
    
    
    
    
    
    232,933TOTAL ASSETS
    
    $
    2,210,043
    
    
    
    
    
    
    
    
    
    
    $
    2,045,953LIABILITIESInterest-bearing depositsDemand deposits
    
    $
    199,235
    
    
    $
    270
    
    
    
    0.18
    %
    
    $
    171,661
    
    
    $
    213
    
    
    
    0.17
    %Savings deposits
    
    
    323,387
    
    
    
    1,836
    
    
    
    0.76
    %
    
    
    314,903
    
    
    
    3,847
    
    
    
    1.63
    %Time deposits
    
    
    864,503
    
    
    
    19,535
    
    
    
    3.02
    %
    
    
    648,282
    
    
    
    18,483
    
    
    
    3.81
    %Total interest-bearing deposits
    
    
    1,387,125
    
    
    
    21,641
    
    
    
    2.09
    %
    
    
    1,134,846
    
    
    
    22,543
    
    
    
    2.65
    %BorrowingsFederal funds purchased
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    18,241
    
    
    
    330
    
    
    
    2.42
    %Retail repurchase agreements
    
    
    103,000
    
    
    
    1,057
    
    
    
    1.37
    %
    
    
    151,107
    
    
    
    2,540
    
    
    
    2.25
    %Wholesale repurchase agreements
    
    
    50,000
    
    
    
    1,449
    
    
    
    3.87
    %
    
    
    50,000
    
    
    
    1,077
    
    
    
    2.88
    %FHLB borrowings and other indebtedness
    
    
    206,643
    
    
    
    5,745
    
    
    
    3.72
    %
    
    
    252,520
    
    
    
    7,732
    
    
    
    4.09
    %Total borrowings
    
    
    359,643
    
    
    
    8,251
    
    
    
    3.07
    %
    
    
    471,868
    
    
    
    11,679
    
    
    
    3.31
    %Total interest-bearing liabilities
    
    
    1,746,768
    
    
    
    29,892
    
    
    
    2.29
    %
    
    
    1,606,714
    
    
    
    34,222
    
    
    
    2.85
    %Non-interestbearing demand deposits
    
    
    199,986
    
    
    
    
    
    
    
    
    
    
    
    213,934Other liabilities
    
    
    25,517
    
    
    
    
    
    
    
    
    
    
    
    19,326Stockholders equity
    
    
    237,772
    
    
    
    
    
    
    
    
    
    
    
    205,979TOTAL LIABILITIES AND
STOCKHOLDERS EQUITY
    
    $
    2,210,043
    
    
    
    
    
    
    
    
    
    
    $
    2,045,953Net interest income, tax equivalent
    
    
    
    
    
    $
    52,772
    
    
    
    
    
    
    
    
    
    
    $
    52,479Net interest rate spread (3)
    
    
    
    
    
    
    
    
    
    
    3.47
    %
    
    
    
    
    
    
    
    
    
    
    3.54
    %Net interest margin (4)
    
    
    
    
    
    
    
    
    
    
    3.68
    %
    
    
    
    
    
    
    
    
    
    
    3.87
    %
 
 (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. - 38 -




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##### Table of Contents



Three Months Ended
    
    
    Nine Months EndedSeptember 30, 2009 Compared to 2008
    
    
    September 30, 2009 Compared to 2008$ Increase/(Decrease) due to
    
    
    $ Increase/(Decrease) due toRate/
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Rate/(In thousands)
    
    Volume
    
    
    Rate
    
    
    Volume
    
    
    Total
    
    
    Volume
    
    
    Rate
    
    
    Volume
    
    
    TotalInterest Earned On:Loans (1)
    
    $
    3,057
    
    
    $
    (1,152
    )
    
    $
    (112
    )
    
    $
    1,792
    
    
    $
    4,095
    
    
    $
    (3,557
    )
    
    $
    (331
    )
    
    $
    207Securities available-for-sale (1)
    
    
    (508
    )
    
    
    (958
    )
    
    
    68
    
    
    
    (1,399
    )
    
    
    (1,866
    )
    
    
    (816
    )
    
    
    (1,250
    )
    
    
    (3,932
    )Securities held-to-maturity (1)
    
    
    (33
    )
    
    
    33
    
    
    
    (7
    )
    
    
    (7
    )
    
    
    (119
    )
    
    
    (4
    )
    
    
    (62
    )
    
    
    (185
    )Interest-bearing deposits
with other banks
    
    
    438
    
    
    
    (8
    )
    
    
    (385
    )
    
    
    46
    
    
    
    481
    
    
    
    (149
    )
    
    
    (459
    )
    
    
    (127
    )Total interest-earning assets
    
    
    2,954
    
    
    
    (2,086
    )
    
    
    (436
    )
    
    
    432
    
    
    
    2,590
    
    
    
    (4,526
    )
    
    
    (2,101
    )
    
    
    (4,037
    )Interest Paid On:Demand deposits
    
    
    13
    
    
    
    20
    
    
    
    4
    
    
    
    37
    
    
    
    26
    
    
    
    10
    
    
    
    21
    
    
    
    57Savings deposits
    
    
    114
    
    
    
    (587
    )
    
    
    (60
    )
    
    
    (533
    )
    
    
    46
    
    
    
    (1,352
    )
    
    
    (704
    )
    
    
    (2,011
    )Time deposits
    
    
    2,189
    
    
    
    (997
    )
    
    
    (381
    )
    
    
    810
    
    
    
    3,881
    
    
    
    (2,408
    )
    
    
    (420
    )
    
    
    1,052Fed funds purchased
    
    
    (249
    )
    
    
    
    
    
    
    (2
    )
    
    
    (251
    )
    
    
    (219
    )
    
    
    
    
    
    
    (111
    )
    
    
    (330
    )Retail repurchase agreements
    
    
    (236
    )
    
    
    (235
    )
    
    
    74
    
    
    
    (397
    )
    
    
    (540
    )
    
    
    (651
    )
    
    
    (293
    )
    
    
    (1,483
    )Wholesale repurchase
agreement
    
    
    
    
    
    
    85
    
    
    
    
    
    
    
    85
    
    
    
    
    
    
    
    372
    
    
    
    
    
    
    
    372FHLB borrowings and other
long-term debt
    
    
    (204
    )
    
    
    (200
    )
    
    
    21
    
    
    
    (384
    )
    
    
    (1,210
    )
    
    
    (134
    )
    
    
    (643
    )
    
    
    (1,987
    )Total interest-bearing liabilities
    
    
    1,625
    
    
    
    (1,914
    )
    
    
    (344
    )
    
    
    (633
    )
    
    
    1,983
    
    
    
    (4,163
    )
    
    
    (2,150
    )
    
    
    (4,330
    )Change in net interest income,
tax-equivalent
    
    $
    1,329
    
    
    $
    (172
    )
    
    $
    (92
    )
    
    $
    1,065
    
    
    $
    607
    
    
    $
    (363
    )
    
    $
    49
    
    
    $
    293
 
 (1)
    
    Fully taxable equivalent using a rate of 35%. Provision and Allowance for Loan Losses
  - 39 -




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##### Table of Contents



For the Three Months Ended
    
    
    For the Nine Months EndedSeptember 30,
    
    
    September 30,(In thousands)
    
    2009
    
    
    2008
    
    
    2009
    
    
    2008Allowance for loan lossesBeginning balance
    
    $
    16,678
    
    
    $
    13,433
    
    
    $
    15,978
    
    
    $
    12,833Provision for loan losses
    
    
    3,418
    
    
    
    3,461
    
    
    
    8,057
    
    
    
    4,721Charge-offs
    
    
    (2,993
    )
    
    
    (2,601
    )
    
    
    (7,404
    )
    
    
    (4,765
    )Recoveries
    
    
    341
    
    
    
    217
    
    
    
    813
    
    
    
    1,721Net charge-offs
    
    
    (2,652
    )
    
    
    (2,384
    )
    
    
    (6,591
    )
    
    
    (3,044
    )Ending balance
    
    $
    17,444
    
    
    $
    14,510
    
    
    $
    17,444
    
    
    $
    14,510
     - 40 -




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##### Table of Contents



Noninterest Income
     Noninterest Expense
  - 41 -




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##### Table of Contents



Income Tax Expense
   FINANCIAL CONDITION
  Securities
   - 42 -




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##### Table of Contents



Loan Portfolio
 Loans Held for Sale:
 Loans Held for Investment:
   September 30 , 2009
    
    
    December 31, 2008
    
    
    September 30 , 2008(Dollars in Thousands)
    
    Amount
    
    
    Percent
    
    
    Amount
    
    
    Percent
    
    
    Amount
    
    
    PercentLoans Held for InvestmentCommercial and agricultural
    
    $
    86,068
    
    
    
    6.16
    %
    
    $
    85,034
    
    
    
    6.55
    %
    
    $
    83,271
    
    
    
    7.13
    %Commercial real estate
    
    
    452,670
    
    
    
    32.41
    %
    
    
    407,638
    
    
    
    31.40
    %
    
    
    386,287
    
    
    
    33.06
    %Residential real estate
    
    
    652,155
    
    
    
    46.70
    %
    
    
    602,573
    
    
    
    46.42
    %
    
    
    498,721
    
    
    
    42.69
    %Construction
    
    
    137,750
    
    
    
    9.86
    %
    
    
    130,610
    
    
    
    10.06
    %
    
    
    127,076
    
    
    
    10.88
    %Consumer
    
    
    62,995
    
    
    
    4.51
    %
    
    
    66,258
    
    
    
    5.10
    %
    
    
    66,333
    
    
    
    5.68
    %Other
    
    
    4,979
    
    
    
    0.36
    %
    
    
    6,046
    
    
    
    0.47
    %
    
    
    6,598
    
    
    
    0.56
    %Total
    
    $
    1,396,617
    
    
    
    100.00
    %
    
    $
    1,298,159
    
    
    
    100.00
    %
    
    $
    1,168,286
    
    
    
    100.00
    %Loans Held for Sale
    
    $
    4,376
    
    
    
    
    
    
    $
    1,024
    
    
    
    
    
    
    $
    140
 Non-Performing Assets
   - 43 -




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##### Table of Contents



September 30,
    
    
    December 31,
    
    
    September 30,(In thousands)
    
    2009
    
    
    2008
    
    
    2008Non-accrual
    
    $
    12,278
    
    
    $
    12,763
    
    
    $
    6,997Ninety days past due and accruing
    
    
    
    
    
    
    
    
    
    
    Other real estate owned
    
    
    3,955
    
    
    
    1,326
    
    
    
    896Total non-performing assets
    
    $
    16,233
    
    
    $
    14,089
    
    
    $
    7,893Non-performing loans as a percentage of: loans held for investment
    
    
    0.88
    %
    
    
    0.98
    %
    
    
    0.60
    %Non-performing assets as a percentage
of total assets
    
    
    0.71
    %
    
    
    0.66
    %
    
    
    0.40
    %Non-performing assets as a percentage
of total loans and OREO
    
    
    1.16
    %
    
    
    1.08
    %
    
    
    0.68
    %
   Deposits and Other Borrowings
   Stockholders Equity
   - 44 -




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##### Table of Contents



Risk-Based Capital
  
 PART I. ITEM 3. Quantitative and Qualitative Disclosures about Market Risk
 Liquidity and Capital Resources
    Interest Rate Risk and Asset/Liability Management
    - 45 -




---



##### Table of Contents



Rate Sensitivity Analysis
  (Dollars in Thousands)
    
    September 30, 2009Change in
    
    
    
    
    
    Change inIncrease (Decrease) in
    
    Net Interest
    
    %
    
    Econcomic Value
    
    %Interest Rates (Basis Points)
    
    Income
    
    Change
    
    of Equity
    
    Change200
    
    $
    (3,020
    )
    
    
    (4.0
    )
    
    $
    (24,523
    )
    
    
    (8.8
    )100
    
    
    (1,687
    )
    
    
    (2.2
    )
    
    
    (5,453
    )
    
    
    (2.0
    )(100)
    
    
    1,327
    
    
    
    1.8
    
    
    
    16,382
    
    
    
    5.9
 (Dollars in Thousands)
    
    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
    )
 - 46 -




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##### Table of Contents



PART I. ITEM 4. Controls and Procedures
 Disclosure Controls and Procedures
   Changes in Internal Control Over Financial Reporting
  
 PART II. OTHER INFORMATION
 
 ITEM 1. Legal Proceedings
  
 ITEM 1A. Risk Factors
  Higher FDIC deposit insurance premiums and assessments could adversely affect our financial condition.
   - 47 -




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##### Table of Contents



ITEM 2. Unregistered Sales of Equity Securities and Use of Proceeds
 (a)
    
    Not Applicable(b)
    
    Not Applicable(c)
    
    Issuer Purchases of Equity Securities
 
 Total Number
    
    
    MaximumTotal
    
    
    
    
    
    
    of Shares
    
    
    Number ofNumber of
    
    
    Average
    
    
    Purchased as
    
    
    Shares That MayShares
    
    
    Price Paid
    
    
    Part of a Publicly
    
    
    Yet be PurchasedPurchased
    
    
    per Share
    
    
    Announced Plan
    
    
    Under the PlanJuly 1-31, 2009
    
    
    
    
    
    $
    
    
    
    
    
    
    
    
    668,358August 1-31, 2009
    
    
    1,000
    
    
    $
    12.72
    
    
    
    1,000
    
    
    
    667,358September 1-30, 2009
    
    
    
    
    
    $
    
    
    
    
    
    
    
    
    697,506Total
    
    
    1,000
    
    
    $
    12.72
    
    
    
    1,000
  
 ITEM 3. Defaults Upon Senior Securities
  
 ITEM 4. Submission of Matters to a Vote of Security Holders
  
 ITEM 5. Other Information
  
 ITEM 6. Exhibits
 (a)
    
    Exhibits
 ExhibitNo.
    
    Exhibit2.1
    
    Reserved.2.2
    
    Reserved.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
    
    Reserved.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)
 - 48 -




---



##### Table of Contents



ExhibitNo.
    
    Exhibit10.1.1
    
    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)10.20
    
    Employment Agreement dated December 16, 2008, between First Community Bancshares, Inc. and Robert L.
Buzzo (26)10.21
    
    Employment Agreement dated December 16, 2008, between First Community Bancshares, Inc. and E. Stephen
Lilly (26)10.22
    
    Employment Agreement dated December 16, 2008, between First Community Bank, N. A. and Gary R. Mills (26)10.23
    
    Employment Agreement dated December 16, 2008, between First Community Bank, N. A. and Martyn A. Pell (26)10.24
    
    Employment Agreement dated December 16, 2008, between First Community Bank, N. A. and Robert L.
Schumacher (26)10.25
    
    Employment Agreement dated July 31, 2009, between First Community Bank, N. A. and Simpson O. Brown (25)10.25
    
    Employment Agreement dated July 31, 2009, between First Community Bank, N. A. and Mark R. Evans (25)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.(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. - 49 -




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##### Table of Contents



(6)
    
    Incorporated by reference from Exhibit 10.1 of the Current Report on Form 8-K dated and filed December
16, 2008.(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)
    
    Reserved.(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.(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.(25)
    
    Reserved.(26)
    
    Incorporated by reference from the Current Report on Form 8-K dated and filed July 6, 2009. - 50 -




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##### Table of Contents



/s/ John M. Mendez

John M. MendezPresident & Chief Executive Officer(Principal Executive Officer)
  /s/ David D. Brown

David D. BrownChief Financial Officer(Principal Accounting Officer)
 - 51 -




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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
 - 52 -