FIRST COMMUNITY BANK CORP OF AMERICA - FORM 10-Q

FIRST COMMUNITY BANK CORP OF AMERICA - FORM 10-Q - November 13, 2009

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EX-31.2 - SECTION 302 CFO CERTIFICATION - FIRST COMMUNITY BANK CORP OF AMERICA	dex312.htm
EX-32.1 - SECTION 906 CEO CERTIFICATION - FIRST COMMUNITY BANK CORP OF AMERICA	dex321.htm
EX-31.1 - SECTION 302 CEO CERTIFICATION - FIRST COMMUNITY BANK CORP OF AMERICA	dex311.htm
EX-32.2 - SECTION 906 CFO CERTIFICATION - FIRST COMMUNITY BANK CORP OF AMERICA	dex322.htm

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

x	Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the quarterly period ended September 30, 2009

¨	Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the transition period from to

Commission file number 000-50357

FIRST COMMUNITY BANK CORPORATION OF AMERICA

(Exact name of registrant as specified in its charter)

Florida

65-0623023

(State or other jurisdiction of

incorporation or organization)

(I.R.S. Employer

Identification No.)

9001 Belcher Road

Pinellas Park, Florida 33782

(Address of principal executive offices) (Zip Codes)

(727) 520-0987

(Registrant’s telephone number, including area code)

(Former name, former address and former fiscal year, if changed since last report)

Indicated by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days: Yes x No ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company. See the definition of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act (Check one):

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ¨ No x

Indicate the number of shares outstanding of each of the registrant’s classes of common stock, as of the latest practicable date;


Common stock, par value $.05 per share		4,151,431 shares
(class)		Outstanding at November 12, 2009

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes ¨ No ¨

FIRST COMMUNITY BANK CORPORATION OF AMERICA AND SUBSIDIARIES

INDEX


		Page

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

Condensed Consolidated Balance Sheets - At September 30, 2009 (unaudited) and At December 31, 2008		2

Condensed Consolidated Statements of Operations - Three and Nine Months Ended September 30, 2009 and 2008 (unaudited)		3

Condensed Consolidated Statements of Changes in Stockholders’ Equity - Nine Months Ended September 30, 2009 and 2008 (unaudited)		4-5

Condensed Consolidated Statements of Cash Flows - Nine Months Ended September 30, 2009 and 2008 (unaudited)		6-7

Notes to Condensed Consolidated Financial Statements (unaudited)		8-14

Review by Independent Registered Public Accounting Firm		15

Report of Independent Registered Public Accounting Firm		16

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations		17-28

Item 3. Quantitative and Qualitative Disclosures About Market Risk		29

Item 4T. Controls and Procedures		29

PART II. OTHER INFORMATION

Item 1. Legal Proceedings		29

Item 1A. Risk Factors		29

Item 6. Exhibits		30

SIGNATURES		31

FIRST COMMUNITY BANK CORPORATION OF AMERICA AND SUBSIDIARIES

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

Condensed Consolidated Balance Sheets

(In thousands, except share amounts)


	September 30,			December 31,
	2009			2008
	(Unaudited)
Assets

Cash and due from banks	$	5,880		6,873
Interest-bearing deposits with banks		49,867		141
Federal funds sold		1,763		25,444


Cash and cash equivalents		57,510		32,458

Other interest-bearing deposits with banks		491		300
Securities available for sale		51,197		25,227
Securities held to maturity (market value of $7,647 and $7,781)		7,640		8,296
Loans, net of allowance for loan losses of $8,798 and $8,230		408,916		403,855
Federal Home Loan Bank stock, at cost		2,549		2,555
Premises and equipment, net		12,976		12,903
Foreclosed real estate		2,240		1,523
Accrued interest receivable		1,969		1,765
Deferred income taxes		5,214		3,501
Bank owned life insurance		7,892		7,762
Other assets		2,134		1,500


	$	560,728		501,645


Liabilities and Stockholders’ Equity

Liabilities:
Noninterest-bearing demand deposits		37,973		32,796
Savings, NOW and money-market deposits		187,346		123,098
Time deposits		246,978		246,977


Total deposits		472,297		402,871

Federal Home Loan Bank advances		36,000		38,000
Other borrowings		4,174		10,325
Accrued expenses and other liabilities		6,416		5,975


Total liabilities		518,887		457,171


Stockholders’ equity:
Preferred stock, $0.01 par value, 2,000,000 shares authorized, 10,685 shares issued and outstanding, at redemption value		10,685		10,685
Preferred stock discount		(28	)	(33	)
Common stock, $0.05 par value, 20,000,000 shares authorized, 4,151,431 and 4,111,121 shares issued and outstanding		208		205
Additional paid-in capital		30,610		30,388
Retained (deficit) earnings		(119	)	2,843
Accumulated other comprehensive income		485		386


Total equity		41,841		44,474


	$	560,728		501,645

See Accompanying Notes to Condensed Consolidated Financial Statements.

FIRST COMMUNITY BANK CORPORATION OF AMERICA AND SUBSIDIARIES

Condensed Consolidated Statements of Operations (Unaudited)

(In thousands, except per share amounts)


	Three Months Ended September 30,					Nine Months Ended September 30,
	2009			2008		2009		2008
Interest income:
Loans	$	5,796		6,192		17,779		19,207
Securities		566		407		1,596		998
Other interest earning assets		38		86		60		321


Total interest income		6,400		6,685		19,435		20,526


Interest expense:
Deposits		2,491		2,680		7,700		8,166
Other borrowings		349		443		1,065		1,423


Total interest expense		2,840		3,123		8,765		9,589


Net interest income		3,560		3,562		10,670		10,937

Provision for loan losses		4,670		1,246		6,702		2,139


Net interest income after provision for loan losses		(1,110	)	2,316		3,968		8,798


Noninterest income:
Service charges on deposit accounts		200		181		612		591
Other service charges and fees		74		51		241		180
Income from bank owned life insurance		45		383		130		542
Gain on sale of securities		398		—		440		—
Gain on sale of loans held for sale		—		1		2		64
Other		40		88		190		169


Total noninterest income		757		704		1,615		1,546


Noninterest expenses:
Employee compensation and benefits		1,632		1,705		4,753		5,455
Occupancy and equipment		452		417		1,322		1,234
Data processing		374		305		1,085		870
Professional fees		86		84		407		280
Office supplies		63		52		164		164
Insurance		346		124		937		440
Other		505		308		1,174		887


Total noninterest expenses		3,458		2,995		9,842		9,330


Earnings (loss) before income taxes (benefit)		(3,811	)	25		(4,259	)	1,014

Income taxes (benefit)		(1,477	)	(149	)	(1,713	)	133


Net (loss) earnings		(2,334	)	174		(2,546	)	881

Preferred stock dividend requirements and amortization of preferred discount		(132	)	—		(416	)	—


Net (loss) earnings applicable to common stock holders	$	(2,466	)	174		(2,962	)	881


(Loss) earnings per share:
Basic earnings per share	$	(.59	)	0.04		(.71	)	0.21


Diluted earnings per share	$	(.59	)	0.04		(.71	)	0.21


Dividends per share	$	—		—		—		—

See Accompanying Notes to Condensed Consolidated Financial Statements.

FIRST COMMUNITY BANK CORPORATION OF AMERICA AND SUBSIDIARIES

Condensed Consolidated Statements of Changes in Stockholders’ Equity

Nine Months Ended September 30, 2009 and 2008

(In thousands, except share amounts)


	Preferred Stock				Common Stock				Additional Paid-In Capital		Retained Earnings	Accumulated Other Comprehensive		Total
	Shares	Amount		Discount	Shares		Amount		Additional Paid-In Capital		Retained Earnings	Income (Loss)		Total
Balance at December 31, 2007	—	$	—	—	4,082,002		$	204	30,216		6,478	70		36,968


Comprehensive income:

Net earnings (unaudited)	—		—	—	—			—	—		881	—		881

Net change in unrealized gain on securities available for sale, net of taxes of $26 (unaudited)	—		—	—	—			—	—		—	(43	)	(43	)


Comprehensive income (unaudited)														838


Exercise of stock options (unaudited)	—		—	—	35,141			1	168		—	—		169

Retirement of common stock (unaudited)	—		—	—	(6,022	)		—	(59	)	—	—		(59	)

Share-based compensation expense (unaudited)	—		—	—	—			—	29		—	—		29

Balance at September 30, 2008 (unaudited)	—	$	—	—	4,111,121		$	205	30,354		7,359	27		37,945

(continued)

FIRST COMMUNITY BANK CORPORATION OF AMERICA AND SUBSIDIARIES

Condensed Consolidated Statements of Changes in Stockholders’ Equity, Continued

Nine Months Ended September 30, 2009 and 2008

(In thousands, except share amounts)


	Preferred Stock					Common Stock			Additional Paid-In	Retained Earnings		Accumulated Other Compre- hensive	Total
	Shares	Amount		Discount		Shares	Amount		Capital	Retained Earnings		Income	Total

Balance at December 31, 2008	10,685	$	10,685	(33	)	4,111,121	$	205	30,388	2,843		386	44,474


Comprehensive loss:

Net loss (unaudited)	—		—	—		—		—	—	(2,546	)	—	(2,546	)

Net change in unrealized gain on securities available for sale, net of taxes of $59 (unaudited)	—		—	—		—		—	—	—		99	99


Comprehensive loss (unaudited)													(2,447	)


Exercise of stock options (unaudited)	—		—	—		40,310		3	192	—		—	195

Share-based compensation expense (unaudited)	—		—	—		—		—	30	—		—	30

Dividend on preferred stock to U.S. Treasury (unaudited)	—		—	—		—		—	—	(411	)	—	(411	)

Amortization of common stock warrants issued to U.S. Treasury (unaudited)	—		—	5		—		—	—	(5	)	—	—


Balance at September 30, 2009 (unaudited)	10,685	$	10,685	(28	)	4,151,431	$	208	30,610	(119	)	485	41,841

See Accompanying Notes to Condensed Consolidated Financial Statements.

FIRST COMMUNITY BANK CORPORATION OF AMERICA AND SUBSIDIARIES

Condensed Consolidated Statements of Cash Flows (Unaudited)

(In thousands)


	Nine Months Ended September 30,
	2009			2008
Cash flows from operating activities:
Net (loss) earnings	$	(2,546	)	881
Adjustments to reconcile net (loss) earnings to net cash provided by operating activities:
Provision for loan losses		6,702		2,139
Deferred tax benefit		(1,713	)	—
Depreciation and amortization		467		462
Share-based compensation		30		29
Net amortization of deferred loan fees and costs		(183	)	(239	)
Net amortization of premium and discounts on securities		(46	)	(40	)
Income from bank owned life insurance		(130	)	(542	)
Origination of loans held for sale		—		(4,375	)
Proceeds from sale of loans held for sale		—		4,867
Gain on sale of loans held for sale		—		(64	)
(Increase) decrease in accrued interest receivable		(204	)	197
Write down of foreclosed real estate		140		106
Net gain on sale of foreclosed real estate		42		(43	)
Increase in other assets		(634	)	(1,107	)
Increase in accrued expenses and other liabilities		441		915
Deferred income taxes		—		312
Gain on sale of securities available for sale		(440	)	—


Net cash provided by operating activities		1,926		3,498


Cash flows from investing activities:
Net change in other interest-bearing deposits with banks		(191	)	198
Purchase of securities available for sale		(47,195	)	(21,996	)
Principal payments on securities available for sale		5,711		1,430
Proceeds from calls and maturities of securities available for sale		1,500		1,200
Proceeds from the sale of securities available for sale		14,599		—
Proceeds from maturities of securities held to maturity		500		1,844
Principal payments on securities held to maturity		156		163
Net increase in loans		(13,821	)	(15,653	)
Purchase of premises and equipment, net		(540	)	(1,402	)
Redemption (purchase) of Federal Home Loan Bank stock		6		(172	)
Proceeds from redemption of bank owned life insurance		—		448
Proceeds from sale of foreclosed real estate		1,342		1,745


Net cash used in investing activities		(37,933	)	(32,195	)


Cash flows from financing activities:
Increase in deposits		69,426		43,586
Proceeds from Federal Home Loan Bank advances		—		20,000
Repayment of Federal Home Loan Bank advances		(2,000	)	(18,000	)
Net decrease in other borrowings		(6,151	)	(7,748	)
Proceeds from exercise of stock options		195		169
Retirement of common stock		—		(59	)
Dividend on preferred stock to U.S. Treasury		(411	)


Net cash provided by financing activities		61,059		37,948


Net increase in cash and cash equivalents		25,052		9,251

Cash and cash equivalents at beginning of period		32,458		9,100


Cash and cash equivalents at end of period	$	57,510		18,351

(continued)

FIRST COMMUNITY BANK CORPORATION OF AMERICA AND SUBSIDIARIES

Condensed Consolidated Statements of Cash Flows (Unaudited), Continued

(In thousands)


	Nine Months Ended September 30,
	2009			2008

Supplemental disclosure of cash flow information:
Cash paid (received) during the period for:
Interest, net of capitalized interest of $22 and $194	$	8,709		9,495


Income taxes (refund)	$	(671	)	595


Noncash transactions:
Accumulated other comprehensive income (loss), net change in unrealized gain (loss) on securities available for sale, net of income taxes	$	99		(43	)


Transfer from loans to foreclosed real estate	$	2,241		2,700


Amortization of common stock warrants issued to U.S. treasury	$	(5	)	—

See Accompanying Notes to Condensed Consolidated Financial Statements.

FIRST COMMUNITY BANK CORPORATION OF AMERICA AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements (Unaudited)

1. General. First Community Bank Corporation of America (the “Holding Company”) owns all of the outstanding common stock of First Community Bank of America (the “Bank”) and First Community Lender Services, Inc. (“FCLS”) (collectively, the “Company”). The Holding Company’s primary business activity is the operation of the Bank. The Bank is a federally-chartered stock savings bank providing a variety of banking services to small and middle market businesses and individuals through its four banking offices located in Pinellas County, two banking offices in Pasco County, three banking offices located in Charlotte County, and two offices located in Hillsborough County, Florida. FCLS had minimal activity during the nine months ended September 30, 2009 and 2008.

In the opinion of the management of the Company, the accompanying condensed consolidated financial statements contain all adjustments (consisting principally of normal recurring accruals) necessary to present fairly the financial position at September 30, 2009, the results of operations for the three- and nine-month periods ended September 30, 2009 and 2008 and cash flows for the nine-month periods ended September 30, 2009 and 2008. The results of operations and other data for the three- and nine-month periods ended September 30, 2009 are not necessarily indicative of results that may be expected for the year ending December 31, 2009.

Management has evaluated events occurring subsequent to the balance sheet date through November 13, 2009 (the financial statement issuance date), determining no events require additional disclosure in these consolidated condensed financial statements.

2. Loan Impairment and Loan Losses. The activity in the allowance for loan losses is as follows (in thousands):


	Three Months Ended September 30,					Nine Months Ended September 30,
	2009			2008		2009		2008

Balance at beginning of period	$	7,844		3,883		8,230		4,479
Provision for loan losses		4,670		1,246		6,702		2,139
Charge-offs		(3,746	)	(1,204	)	(6,215	)	(2,694	)
Recoveries		30		1		81		2


Balance at end of period	$	8,798		3,926		8,798		3,926

(continued)

FIRST COMMUNITY BANK CORPORATION OF AMERICA AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements (Unaudited), Continued

2. Loan Impairment and Loan Losses, Continued. Impaired loans are as follows (in thousands):


	At September 30,
	2009			2008

Loans identified as impaired:
Troubled debt restructurings	$	21,925	⁽¹⁾	1,833	⁽¹⁾
Gross collateral dependent loans with no related allowance for loan losses		19,417	⁽²⁾	10,857	⁽²⁾
Gross collateral dependent loans with related allowance for losses recorded		4,098		1,295
Less: Allowances on these loans		(2,035	)	(374	)


Net investment in impaired loans	$	43,405		13,611

⁽¹⁾	Charge-offs related to these loans were $500,000 and $89,000, respectively.

⁽²⁾	Charge-offs related to these loans were $3,624,000 and $418,000, respectively.


	Nine Months Ended September 30,
	2009		2008

Average investment in impaired loans	$	35,226	8,565

Interest income recognized on impaired loans	$	617	—

Interest income received on impaired loans	$	738	17

Nonaccrual and past due loans were as follows (in thousands):


	At September 30,
	2009		2008

Nonaccrual loans	$	29,262	12,054
Past due ninety days or more, still accruing		—	—


	$	29,262	12,054

(continued)

FIRST COMMUNITY BANK CORPORATION OF AMERICA AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements (Unaudited), Continued

3. Earnings Per Share (“EPS”). Earnings (loss) per share (“EPS”) of common stock has been computed on the basis of the weighted-average number of shares of common stock outstanding in 2008. Outstanding stock options were considered dilutive securities for purposes of calculating diluted EPS which is computed using the treasury stock method. During 2009, outstanding stock options were not dilutive because of the Company’s loss position. The following tables present the calculations of EPS (dollars in thousands, except per share amounts):


	2009							2008
	Earnings			Weighted- Average Shares	Per Share Amount			Earnings		Weighted- Average Shares	Per Share Amount
*Three Months Ended September 30:*
Basic EPS-
Net earnings available to common stockholders	$	(2,469	)	4,151,431	$	(0.59	)	$	174	4,111,121	$	0.04


Effect of dilutive securities-
Incremental shares from assumed conversion of options				—						104,399


Diluted EPS-
Net earnings available to common stockholders and assumed conversions	$	(2,469	)	4,151,431	$	(0.59	)	$	174	4,215,520	$	0.04


*Nine Months Ended September 30:*
Basic EPS-
Net earnings available to common stockholders		(2,962	)	4,152,012	$	(0.71	)		881	4,111,802	$	0.21


Effect of dilutive securities-
Incremental shares from assumed conversion of options				—						128,820


Diluted EPS-
Net earnings available to common stockholders and assumed conversions	$	(2,962	)	4,152,012	$	(0.71	)	$	881	4,240,622	$	0.21

(continued)

FIRST COMMUNITY BANK CORPORATION OF AMERICA AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements (Unaudited), Continued

3. Earnings Per Share (“EPS”), Continued. The following options were excluded from the calculation of EPS for the three- and nine-months ended September 30, 2008 due to the exercise price being above the average market price:


	Number Outstanding	Year Granted	Exercise Price		Expire

Options	220,500	2005	$	16.31	2011
	16,538	2004		13.53	2010-2014
	15,750	2005		15.24	2011-2015
	19,688	2005		15.36	2011
	12,602	2005		16.31	2011
	788	2005		16.80	2011
	6,300	2006		19.23	2012-2016
	5,250	2006		19.52	2012-2016
	10,500	2006		20.00	2012-2016
	4,200	2006		20.00	2016
	10,500	2007		18.71	2017
	6,850	2007		18.57	2017
	5,000	2007		14.75	2017

4. Stock-Based Compensation. The Company currently has two stock option plans for directors and employees of the Company. Under the plans, the total number of options which may be granted to purchase common stock is 620,156 (amended) for directors and 516,797 (amended) for employees. At September 30, 2009, no options remain available for grant under the directors’ plan and 71,032 options remain available for grant under the employees’ plan. The directors’ options vest immediately and have a life of five years. The employees’ options vest over periods up to four years and have terms up to 10 years.

The 2005 Stock Plan approved by shareholders in April 2006 was terminated by the Board of Directors and the options covering 220,500 shares were cancelled effective February 17, 2009 due to erratic market conditions, the conditions of the national, state and local economies, and out of a desire to evaluate and consider compensation plan options more appropriate to the current economy and regulatory environment.

(continued)

FIRST COMMUNITY BANK CORPORATION OF AMERICA AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements (Unaudited), Continued

4. Stock-Based Compensation, Continued. A summary of the activity in the Company’s stock option plans is as follows:


	Number of Options		Weighted- Average Exercise Price		Weighted- Average Remaining Contractual Term	Aggregate Intrinsic Value

Outstanding at December 31, 2008	661,881		$	10.79
Options exercised	(40,310	)		4.84
Options forfeited	(42,293	)		11.10
Options terminated	(220,500	)		16.31


Outstanding at September 30, 2009	358,778		$	8.02	2.5 years	$	—


Exercisable at September 30, 2009	348,842		$	7.86	2.3 years	$	—

The total intrinsic value of options exercised during the nine-months ended September 30, 2009 and 2008 was $0 and $222,000, respectively. At September 30, 2009, there was approximately $44,000 of total unrecognized compensation expense related to nonvested share-based compensation arrangements granted under the plans. The cost is expected to be recognized over a weighted-average period of fourteen months. The total fair value of shares vesting and recognized as compensation expense was approximately $29,000 for both the nine-months ended September 30, 2009 and 2008, respectively. There was no associated tax benefit recognized for both the nine-months ended September 30, 2009 and 2008.

5. Regulatory Capital. The Bank is required to maintain certain minimum regulatory capital requirements. At September 30, 2009, the Bank was in compliance with its regulatory capital requirements.

6. Fair Value Measurements. Securities as of September 30, 2009 subject to fair value measurements on a recurring basis are as follows (in thousands):


	Fair Value		Fair Value Measurements at Reporting Date Using
	Fair Value		Quoted Prices In Active Markets for Identical Assets (Level 1)	Significant Other Observable Inputs (Level 2)	Significant Unobservable Inputs (Level 3)

Available for sale securities	$	51,197	—	51,197	—

(continued)

FIRST COMMUNITY BANK CORPORATION OF AMERICA AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements (Unaudited), Continued

6. Fair Value Measurements, Continued. Impaired collateral-dependent loans and foreclosed real estate are carried at fair value when the current collateral value is lower than the carrying value of the loan. Those impaired collateral-dependent loans which are measured at fair value on a nonrecurring basis are as follows (in thousands):


	At September 30, 2009						Losses Recorded in Operations For the Period Ended September 30, 2009
	Fair Value		Level 1	Level 2	Level 3	Total Losses

Impaired loans ⁽¹⁾	$	27,607	—	—	27,607	7,066	5,738


Foreclosed real estate	$	2,240	—	—	2,240	—	—

⁽¹⁾	Loans with a carrying value of $15,798,000 at September 30, 2009 were measured for impairment using Level 3 inputs and had a fair value in excess of carrying value.

7. Fair Value of Financial Instruments. The estimated fair values of the Company’s financial instruments were as follows (in thousands):


	At September 30, 2009			At December 31, 2008
	Carrying Amount		Fair Value	Carrying Amount	Fair Value
Financial assets:
Cash and cash equivalents	$	57,510	57,510	32,458	32,458
Other interest-bearing deposits with banks		491	491	300	300
Securities		58,837	58,844	33,523	33,008
Loans		408,916	405,278	403,855	408,245
Federal Home Loan Bank stock		2,549	2,549	2,555	2,555
Accrued interest receivable		1,969	1,969	1,765	1,765

Financial liabilities:
Deposits		472,297	473,215	402,871	406,011
Federal Home Loan Bank advances		36,000	38,058	38,000	40,756
Other borrowings		4,174	4,174	10,325	10,325

Off-Balance Sheet Financial Instruments		—	—	—	—

(continued)

FIRST COMMUNITY BANK CORPORATION OF AMERICA AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements (Unaudited), Continued

8. Deferred Tax Asset. The Company believes it is more likely than not that it will realize the deferred tax asset and that no allowance is necessary at September 30, 2009. The Company has available $1.8 million Federal taxes paid in 2007 which it expects to recover in 2010. The Company expects to realize an additional $3.4 million based on forecast taxable income by 2012. This forecast is supported by a strong earnings history exclusive of the loan losses incurred in 2008 and 2009 which created the future deductible amount. Management believes the magnitude of these loan losses occurred because of the current economic downturn and the situation is unusual and infrequent and an aberration rather than a continuing condition.

9. Regulatory Matters. As a result of an examination by the Office of Thrift Supervision (the “OTS”), the Bank and the Holding Company entered into separate memorandums of understanding (the “Memorandums”) with the OTS in October 2009 with the intent to protect the interests of the Company’s depositors, customers and shareholders. The Memorandums provided, among other things, that the Boards of Directors will or will cause the Company to 1) Prepare and monitor comprehensive business plans, 2) Adopt detailed capital plans, 3) Not negotiate, purchase or commit to any land acquisition, development or construction loans until the comprehensive business plan has been approved by the OTS, 4) Take steps to identify, evaluate and reduce the level of problem assets, 5) Limit asset growth until it obtains OTS approval of the Bank’s comprehensive business plan, 6) Not pay or declare dividends without OTS approval, 7) Not continue to roll or accept brokered deposits without OTS approval and must submit plan to OTS to reduce brokered deposits, 8) Prepare and adopt a written plan detailing the Company’s obligations with receipt of funds under Troubled Asset Relief Program, and 9) Submit variance reports on the Company’s compliance with various plans required by the Memorandums.

Management plans to vigorously seek compliance with the Memorandums. At this time, the financial impact, if any, of regulatory sanctions that may result if the Company fails to comply with the Memorandums requirements described above is not known. Management feels that the terms of the agreement will not have a material impact on the strategy of the Bank. The OTS has provided a temporary extension of the Bank’s use of customer driven CDARs deposits which technically fall under the brokered deposit classification.

FIRST COMMUNITY BANK CORPORATION OF AMERICA AND SUBSIDIARIES

Review by Independent Registered Public Accounting Firm

Hacker, Johnson & Smith PA, the Company’s independent registered public accounting firm, have made a limited review of the financial data as of September 30, 2009, and for the three- and nine-month periods ended September 30, 2009 and 2008 presented in this document, in accordance with standards established by the Public Company Accounting Oversight Board.

Their report furnished pursuant to Article 10 of Regulation S-X is included herein.

Report of Independent Registered Public Accounting Firm

The Board of Directors and Stockholders

First Community Bank Corporation of America

Pinellas Park, Florida:

We have reviewed the accompanying condensed consolidated balance sheet of First Community Bank Corporation of America and Subsidiaries (the “Company”) as of September 30, 2009, the related condensed consolidated statements of operations for the three- and nine-month periods ended September 30, 2009 and 2008 and the related condensed consolidated statements of changes in stockholders’ equity and cash flows for the nine-month periods ended September 30, 2009 and 2008. These interim financial statements are the responsibility of the Company’s management.

We conducted our reviews in accordance with the standards of the Public Company Accounting Oversight Board (United States). A review of interim financial information consists principally of applying analytical procedures and making inquiries of persons responsible for financial and accounting matters. It is substantially less in scope than an audit conducted in accordance with the standards of the Public Company Accounting Oversight Board, the objective of which is the expression of an opinion regarding the financial statements taken as a whole. Accordingly, we do not express such an opinion.

Based on our reviews, we are not aware of any material modifications that should be made to the accompanying condensed consolidated financial statements for them to be in conformity with U.S. generally accepted accounting principles.

We have previously audited, in accordance with the standards of the Public Company Accounting Oversight Board, the consolidated balance sheet of the Company as of December 31, 2008, and the related consolidated statements of operations, changes in stockholders’ equity and cash flow for the year then ended (not presented herein); and in our report dated March 24, 2009, we expressed an unqualified opinion on those consolidated financial statements. In our opinion, the information set forth in the accompanying condensed consolidated balance sheet as of December 31, 2008, is fairly stated, in all material respects, in relation to the consolidated balance sheet from which it has been derived.

/s/ Hacker, Johnson & Smith PA

HACKER, JOHNSON & SMITH PA

Tampa, Florida

November 13, 2009

FIRST COMMUNITY BANK CORPORATION OF AMERICA AND SUBSIDIARIES

Item 2. Management’s Discussion and Analysis of

Financial Condition and Results of Operations

Forward Looking Statements

This document contains forward-looking statements as defined by Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. These forward-looking statements involve substantial risks and uncertainties. When used in this document, or in the documents incorporated by reference, the words “anticipate,” “believe,” “estimate,” “may,” “intend” and “expect” and similar expressions are some of the forward-looking statements used in these documents. Actual results, performance, or achievements could differ materially from those contemplated, expressed or implied by the forward-looking statements. Factors which may cause results to change materially include competition, inflation, general economic conditions, changes in interest rates, and changes in the value of collateral securing loans First Community Bank Corporation of America has made, among other things.

General

First Community Bank Corporation of America (the “Holding Company”) owns all of the outstanding common stock of First Community Bank of America (the “Bank”) and First Community Lender Services, Inc. (“FCLS”) (collectively, the “Company”). The Holding Company’s primary business activity is the operation of the Bank. The Bank is a federally-chartered stock savings bank providing a variety of banking services to small and middle market businesses and individuals through its four banking offices located in Pinellas County, two banking offices located in Pasco County, three banking offices located in Charlotte County and two offices located in Hillsborough County, Florida. FCLS had minimal activity during the nine months ended September 30, 2009 and 2008.

Liquidity and Capital Resources

The Company’s primary source of cash during the nine months ended September 30, 2009, was from net deposit inflows of approximately $69 million. Cash was used primarily to increase securities $25 million and to increase loans by $5 million. The remaining cash increase is deposited at the Federal Reserve Bank.

Off-Balance Sheet Arrangements

The Company is a party to financial instruments with off-balance-sheet risk in the normal course of business to meet the financing needs of its customers. These financial instruments include commitments to extend credit, unused lines of credit and standby letters of credit. These instruments involve, to varying degrees, elements of credit and interest-rate risk in excess of the amounts recognized in the condensed consolidated balance sheet. The contract amounts of these instruments reflect the extent of the Company’s involvement in particular classes of financial instruments.

FIRST COMMUNITY BANK CORPORATION OF AMERICA AND SUBSIDIARIES

The Company’s exposure to credit loss in the event of nonperformance by the other party to the financial instrument for commitments to extend credit, unused lines of credit and standby letters of credit is represented by the contractual amount of those instruments. The Company uses the same credit policies in making commitments as it does for on-balance-sheet instruments.

Commitments to extend credit are agreements to lend to a customer as long as there is no violation of any condition established in the contract. Commitments generally have fixed expiration dates or other termination clauses and may require payment of a fee. Since many of the commitments are expected to expire without being drawn upon, the total committed amounts do not necessarily represent future cash requirements. The Company evaluates each customer’s credit worthiness on a case-by-case basis. The amount of collateral obtained, if it is deemed necessary by the Company upon extension of credit, is based on management’s credit evaluation of the counter party.

Standby letters of credit are conditional lending commitments issued by the Company to guarantee the performance of a customer to a third party and to support public and private borrowing arrangements. Essentially all letters of credit issued have expiration dates within one year. The credit risk involved in issuing letters-of-credit is essentially the same as that involved in extending loan facilities to customers. The Company generally holds collateral supporting these commitments.

Unused lines of credit and commitments to extend credit typically result in loans with a market interest rate.

A summary of the amounts of the Company’s financial instruments, with off-balance sheet risk at September 30, 2009, follows (in thousands):


	Contract
	Amount

Commitments to extend credit	$	7,601


Unused lines of credit	$	31,901


Standby letters of credit	$	9,468

Management believes that the Company has adequate resources to fund all of its commitments and that substantially all its existing commitments will be funded within the next twelve months.

FIRST COMMUNITY BANK CORPORATION OF AMERICA AND SUBSIDIARIES

Selected Financial Information

The following rates are presented for the dates and periods indicated:


	Nine Months Ended September 30, 2009		Year Ended December 31, 2008		Nine Months Ended September 30, 2008
Average equity as a percentage of average assets	8.11	%	8.03	%	8.12	%

Equity to total assets at end of period	7.46	%	8.87	%	7.97	%

Return on average assets (1)	(1.74	)%	(0.78	)%	0.25	%

Return on common average equity (1)	(28.35	)%	(9.74	)%	3.13	%

Noninterest expenses to average assets	2.58	%	2.83	%	2.69	%

Nonperforming assets as a percentage of total assets at end of period	5.62	%	2.93	%	2.83	%

(1)	Annualized for the nine months ended September 30.

Local Economic Conditions

The Bank operates in two distinct geographic markets on the West Coast of Florida, the Tampa Bay region in West Central Florida and the Port Charlotte Region in southwest Florida. Three of the Bank’s markets are located around Tampa Bay (Pinellas County, Pasco County and Hillsborough County). The fourth market is located in Charlotte County. The economy in Florida has been hard hit by the decline in real estate values resulting from an over supply of residential housing units, a significant reduction in development activity and reductions in sales activity. The lack of absorption of vacant land, lots and certain single family and condominium product has continued to feed the decline in values. The Tampa Bay region is more diversified with other service and manufacturing industry than the Port Charlotte region which had been primarily dependent on residential real estate development and the retiree industry. Although the Tampa Market has shown decreased values in single family homes and condominiums it has not suffered as severely as the Port Charlotte market. Housing values have dropped approximately 40-50% from the height of activity in 2005 – 2006. Similarly vacant land and lot values have fallen 60-70%. The drop in values continues to contribute to the delinquency or default of borrowers in that market. Correspondently the Tampa market has seen a drop in values for single family of 25- 35%, however condominiums and luxury homes have experienced larger decreases. Land and lot values have diminished by 30-40%. The Bank has experienced continued losses in vacant residential lot loans and single family homes. A predominant portion of these losses are in the Port Charlotte market. Unemployment in Port Charlotte is purported to be in the 10-15% range, thus many borrowers struggle to maintain a positive payment history.

FIRST COMMUNITY BANK CORPORATION OF AMERICA AND SUBSIDIARIES

The commercial real estate market in the Tampa Bay area is showing signs of weakness especially in the multifamily, office rental and retail rental market. The Bank does not have a large concentration in these areas, however, is experiencing increased delinquency trends in that market. Commercial real estate in Port Charlotte is also experiencing significant weakness, however, the Bank has minimal holdings in that product type.

In light of these real estate trends the Bank has experienced an increase in its problem assets specifically in vacant residential lots and single family which has comprised 75% of charge-off activity. Commercial real estate related charge-off’s to date are 21% of total charge-offs. The remaining charge-offs have been consumer loans.

Determining Loan Losses

A loan is classified impaired when, based on current information and events; it is probable the Bank will be unable to collect all amounts due according to the contractual terms of the loan agreement. All amounts due according to the contractual terms means both the contractual interest payments and contractual principal payments will be collected as scheduled in the loan agreement. Once a loan is considered impaired and is collateral dependent, an analysis of the loan will be performed to determine a fair value estimate. Fair value will be determined by a current appraisal or using a reasonable discount of the appraisal using comparable data given the existing economic conditions. If the loan is collateral dependent, the loss will be determined by deducting selling costs from the fair value of the collateral. The difference between the loan balance and the fair value less selling cost is the loss. The loss will be charged-off when it has been determined. A loan that is impaired and non-collateral dependent will be treated in accordance with regulatory guidelines for retail loans. Closed end retail loans will be charged off when delinquent 120 days and open end loans will be charged off when 180 days delinquent. Commercial loans that are non-collateral dependent will be charged off between 90 and 120 days delinquent. If the loan is considered impaired as a Troubled Debt Restructure, it is treated as required under FASB 114. The discounted cash flow of revised payment stream is discounted at the original loan rate and the difference is determined to be the loss.

The Bank obtains external appraisals on commercial real estate loans considered collateral dependent and on commercial foreclosed real estate on an annual basis. Once the appraisal is in hand, the Bank will evaluate and if required will write-down the loan. The Bank obtains a brokers price opinion or other valuation service estimate every six months on any impaired collateral dependent single family, residential or vacant lot loans, and foreclosed real estate and a write-down is made as required. A formal appraisal is ordered to evaluate the fair value when the foreclosure process is completed and the property title is being transferred to the Bank as foreclosed real estate. The foreclosed real estate is initially valued at the appraised value less estimated costs to sell. Once the property is in foreclosed real estate, after six months a broker’s price opinion or valuation service model will be used to evaluate the current value. An allowance is established for any additional losses. In addition, management continuously evaluates its impaired loan portfolio.

FIRST COMMUNITY BANK CORPORATION OF AMERICA AND SUBSIDIARIES

The chart below summarizes the 30+ days delinquency by loan category for the dates indicated ($ in thousands):


	December 2008			March 2009		June 2009		September 2009
	$		%	$	%	$	%	$	%

Residential mortgages	$	4,994	1.21	6,466	1.53	7,962	1.88	15,654	3.73
Commercial real estate		6,462	1.57	6,473	1.53	15,081	3.56	15,452	3.69
Land and lots		4,577	1.11	4,945	1.17	8,319	1.96	6,295	1.50
Commercial loans		394	0.10	4,293	1.01	407	0.10	698	0.17
Installments		180	0.04	95	0.02	150	0.04	412	0.10


Total	$	16,607		22,272		31,918		38,511

The Bank’s nonaccrual loans and Foreclosed Real Estate (“REO”) is comprised of the following ($ in thousands):


	December 2008				March 2009				June 2009				September 2009
	Nonaccrual		REO		Nonaccrual		REO		Nonaccrual		REO		Nonaccrual		REO
	#	$	#	$	#	$	#	$	#	$	#	$	#	$	#	$
Residential mortgages	10	3,216	3	234	13	2,762	10	1,784	26	5,378	3	1,481	32	7,724	2	1,283
Commercial real estate	5	6,069	1	391	9	6,077	1	391	12	10,935	1	391	17	14,193	—	—
Land and lots	15	3,667	10	699	20	4,762	9	629	33	7,663	14	822	29	6,926	19	877
Commercial loans	1	74	—	—	—	—	—	—	2	700	—	—	3	408	—	—
Installment	2	138	3	199	2	18	3	194	2	12	3	194	2	11	2	80


Total	33	13,164	17	1,523	44	13,619	23	2,998	75	24,688	21	2,888	83	29,262	23	2,240

At fiscal year end December 2008 the Bank provision was increased to build up the loan loss allowance. A number of loans were charged-off in the fourth quarter of 2008 and the first quarter of 2009. The following chart illustrates the combination of allowance and charge-off compared to related loans at September 30, 2009 (in thousands):


	Nonimpaired Loans			Impaired Loans		Total
Allowance for loan losses:
Beginning balance	$	8,134		96		8,230
Provision		640		6,062		6,702
Charge-offs		(2,091	)	(4,124	)	(6,215	)
Recoveries		80		1		81


Ending balance	$	6,763		2,035		8,798


Loss allowance		6,763		2,035		8,798
Partial charge-offs of loans currently in portfolio		38		5,031		5,068

Total	$	6,801		7,066		13,866


Total loans	$	374,309		43,405		417,714


Allowance for loss and charge-offs as a percentage of total loans at September 30, 2009		1.82	%	16.28	%	3.32	%


Allowance for loss and charge-offs as a percentage of total loans at June 30, 2009		2.01	%	7.20	%	2.56	%

FIRST COMMUNITY BANK CORPORATION OF AMERICA AND SUBSIDIARIES


	At September 30, 2009
*Impaired loans with partial charge-offs:*
Fair value of collateral	$	34,753
Estimated selling costs		(5,112	)

Fair value less selling costs		29,641


Gross impaired loans prior to charge-offs		34,671
Partial charge-offs of impaired loans		(5,030	)

Book value of impaired loans with partial charge-offs		29,641


Fair value less selling costs in excess of book value	$	—


*Impaired loans without partial charge-offs:*
Fair value of collateral		22,351
Estimated selling costs		(2,913	)

Fair value less selling costs		19,438


Impaired loans		15,798
Loss allowance		(2,035	)

Book value of impaired loans		13,763


Fair value less selling costs in excess of book value	$	5,675

The increase in nonperforming assets correlates with the real estate related delinquencies being experienced by the Bank in the Port Charlotte market, and the Tampa Bay market. Predominantly the nonperforming assets are vacant residential lots, single family homes, multifamily and small office properties.

Retail credit is the primary reason for the build up in impaired loans. The subsequent move to charge off is rapid and is not reflected as a specific reserve. The Bank recognizes these losses as they become apparent.

The Bank initially will try and work with any borrower with an impaired loan. Should negotiations fail, then legal action occurs. The foreclosure process in Florida has continued to lengthen given the large number of cases in process. This delay has inhibited the Bank’s ability to get back real estate in a timely manner; the average is now between twelve and eighteen months. The Bank currently has two special assets officers, one devoted to retail and one devoted to commercial. In addition, we have a person who assists in handling other real estate owned by the Bank.

FIRST COMMUNITY BANK CORPORATION OF AMERICA AND SUBSIDIARIES

Results of Operations

The following table sets forth, for the periods indicated, information regarding (i) the total dollar amount of interest and dividend income of the Company from interest-earning assets and the resultant average yields; (ii) the total dollar amount of interest expense on interest-bearing liabilities and the resultant average cost; (iii) net interest income; (iv) interest-rate spread; and (v) net interest margin.


	Three Months Ended September 30,
	2009						2008
	Average Balance		Interest and Dividends		Average Yield/ Rate		Average Balance		Interest And Dividends		Average Yield/ Rate
	(Dollars in thousands)
Interest-earning assets:
Loans (1)	$	414,331		5,796	5.60	%	$	388,277		6,192	6.38	%
Securities		57,325		566	3.95			33,741		407	4.82
Other interest-earning assets (2)		59,640		38	0.25			2,295		86	14.99


Total interest-earning assets		531,296		6,400	4.82			424,313		6,685	6.30


Noninterest-earning assets		31,150						48,899


Total assets	$	562,446					$	473,212


Interest-bearing liabilities:
Savings, NOW, money-market deposit accounts		183,622		757	1.65			136,665		625	1.83
Time deposits		252,161		1,734	2.75			207,828		2,055	3.96


Total interest-bearing deposits		435,783		2,491	2.29			344,493		2,680	3.11

Other borrowings (3)		39,613		349	3.52			51,539		443	3.44


Total interest-bearing liabilities		475,396		2,840	2.39			396,032		3,123	3.15


Noninterest-bearing liabilities		44,334						39,524
Net preferred stock		10,657						—
Stockholders’ equity		32,059						37,656


Total liabilities and stockholders’ equity	$	562,446					$	473,212


Net interest income			$	3,560					$	3,562


Interest-rate spread (4)					2.43	%					3.15	%


Net interest margin (5)					2.68	%					3.36	%


Ratio of average interest-earning assets to average interest-bearing liabilities		1.01						1.07

(1)	Includes nonperforming loans.

(2)	Includes Federal Home Loan Bank stock and interest-bearing deposits with banks.

(3)	Includes Federal Home Loan Bank advances and other borrowings.

(4)	Interest-rate spread represents the difference between the average yield on interest-earning assets and the average rate of interest-bearing liabilities.

(5)	Net interest margin is net interest income divided by average interest-earning assets.

FIRST COMMUNITY BANK CORPORATION OF AMERICA AND SUBSIDIARIES


	Nine Months Ended September 30,
	2009						2008
	Average Balance		Interest and Dividends		Average Yield/ Rate		Average Balance		Interest and Dividends		Average Yield/ Rate
	(Dollars in thousands)
Interest-earning assets:
Loans (1)	$	413,831		17,779	5.73	%	$	385,946		19,207	6.64	%
Securities		50,970		1,596	4.18			27,338		998	4.87
Other interest-earning assets (2)		38454		60	0.21			7,440		321	5.75


Total interest-earning assets		503,255		19,435	5.15			420,724		20,526	6.50


Noninterest-earning assets		39,503						42,980


Total assets	$	542,758					$	463,704


Interest-bearing liabilities:
Savings, NOW, money-market deposit accounts		161,066		2,048	1.70			131,304		1,856	1.88
Time deposits		253,768		5,652	2.97			199,628		6,310	4.21


Total interest-bearing deposits		414,834		7,700	2.47			330,932		8,166	3.29

Other borrowings (3)		41,852		1,065	3.39			54,451		1,423	3.48


Total interest-bearing liabilities		456,686		8,765	2.56			385,383		9,589	3.32


Noninterest-bearing liabilities		42,028						40,679
Net preferred stock		10,655						—
Stockholders’ equity		33,389						37,642


Total liabilities and stockholders’ equity	$	542,758					$	463,704


Net interest income			$	10,670					$	10,937


Interest-rate spread (4)					2,59	%					3.19	%


Net interest margin (5)					2,83	%					3.47	%


Ratio of average interest-earning assets to average interest-bearing liabilities		1.06						1.09

(1)	Includes nonperforming loans.

(2)	Includes Federal Home Loan Bank stock and interest-bearing deposits with banks.

(3)	Includes Federal Home Loan Bank advances and other borrowings.

(4)	Interest-rate spread represents the difference between the average yield on interest-earning assets and the average rate of interest-bearing liabilities.

(5)	Net interest margin is net interest income divided by average interest-earning assets.

FIRST COMMUNITY BANK CORPORATION OF AMERICA AND SUBSIDIARIES

Comparison of the Three-Month Periods Ended September 30, 2009 and 2008

General. First Community Bank Corporation of America recorded a net loss for the third quarter ended September 30, 2009 of $(2,334,000) compared to net earnings of $174,000 for the same period in 2008. The decline in earnings was due to increased credit losses.

The Company recorded a net loss available to common stockholders, after preferred stock dividends and amortization of preferred discount, for the three-months ended September 30, 2009 of $(2,466,000) or $(.59) per basic share and $(.59) earnings per diluted share compared to $174,000 or $.04 earnings per basic share and $.04 earnings per diluted share for the three-months ended September 30, 2008.

The third quarter 2009 reflected a $3,424,000 increase in provision for loan losses and a $463,000 increase in noninterest expense reflecting a $121,000 increase in other real estate writedowns and expenses.

Net Interest Income. Interest income decreased to $6.4 million during the three-months ended September 30, 2009, from $6.7 million in 2008. Interest on loans for the three-months ended September 30, 2009 decreased to $5.8 million from $6.2 million for the three-months ended September 30, 2008. This decrease was also due to a decrease in the average yield earned to 5.60% for the three-months ended September 30, 2009 from 6.38% for the three-months ended September 30, 2008. Interest on securities increased to $566,000 during the three-months ended September 30, 2009 from $407,000 for the three-months ended September 30, 2008. The increase in interest income on securities was due to an increase in the average balance of securities from $33.7 million in 2008 to $57.3 million in 2009.

Interest expense on interest-bearing deposit accounts decreased to $2.5 million during the three-months ended September 30, 2009, compared to $2.7 million during the three-months ended September 30, 2008. The decrease was due to a decrease in the rate paid to 2.29% during the three-months ended September 30, 2009 from 3.11% during the three-months ended September 30, 2008. Interest expense on other borrowings decreased to $349,000 during the three-months ended September 30, 2009, compared to $443,000 during the three-months ended September 30, 2008. The decrease was due to a decrease in the average balance of other borrowings to $39.6 million in 2009 from $51.5 million in 2008. The average rate paid on other borrowings increased to 3.52% during the three-months ended September 30, 2009 compared to 3.44% during the three-months ended September 30, 2008.

Provision for Loan Losses. Provisions for loan losses are based on our review of the historical loan loss experience and such factors which, in management’s judgment, deserve consideration under existing economic conditions in estimating probable credit losses. The allowance is based on ongoing assessments of the estimated losses inherent in the loan portfolio. Our methodology for assessing the appropriate allowance level consists of several key elements described below.

Larger commercial loans that exhibit probable or observed credit weaknesses are subject to individual review. Where appropriate, the allowance is allocated to individual loans based on our estimate of the borrower’s ability to repay the loan given the availability of collateral, other sources of cash flows and available legal options. Included in the review of individual loans are those that are impaired. Any specific reserves for impaired loans are measured based on the fair value of the underlying collateral. The collectability of both principal and interest is evaluated when assessing the allowance. Historical loss rates are applied to other commercial loans not subject to specific allocations.

FIRST COMMUNITY BANK CORPORATION OF AMERICA AND SUBSIDIARIES

Comparison of the Three-Month Periods Ended September 30, 2009 and 2008, Continued

Provision for Loan Losses, Continued. Homogenous loans, such as installment and residential mortgage loans, are not individually reviewed by management. The allowance is established for each pool of loans based on the expected net charge-offs. Loss rates are based on the average net charge-off history by loan category.

Historical loss rates for commercial and consumer loans may be adjusted for significant factors that, in management’s judgment, reflect the impact of any current conditions on loss recognition. Factors which management considers in the analysis include the effects of the local economy, trends in the nature and volume of loans (delinquencies, charge-offs, nonaccrual and problem loans), changes in the internal lending policies and credit standards, collection practices, and examination results from bank regulatory agencies and our internal credit review function. The allowance relating to individual loans and historical loss rates are reviewed throughout the year and adjusted as necessary based on changing borrower and collateral conditions and actual collection and charge-off experience.

Prior to 2007, historical losses were minimal. During 2007, we changed our overall approach in the determination of the allowances for loan losses. A new methodology was created to be in compliance with the guidance issued by the federal agencies in December of 2006. This methodology incorporated the calculation of loans considered impaired and allocations for performing portfolio categories based on applying historical charge off data for loans categorized by similar risk characteristics based on the Company’s experience. The methodology includes an unallocated portion (qualitative factors) justified by current general market conditions, trends in performance (delinquency), economic and political trends.

The provision for loan losses was $4,670,000 for the three-months ended September 30, 2009 compared to $1,246,000 for the three-months ended September 30, 2008. Economic weakness has continued to stress our loan portfolio and has affected the levels of nonperforming assets and charge-offs. Management believes that it is judicious in recognizing problem assets and recording an appropriate allowance for loan losses reflecting the current circumstances.

The allowance for loan losses is $8.8 million at September 30, 2009. While management believes that its allowance for loan losses is adequate as of September 30, 2009, future adjustments to the Company’s allowance for loan losses may be necessary as economic conditions could dictate.

Noninterest Income. Noninterest income increased to $757,000 in 2009 from $704,000 for the three-months ended September 30, 2008. The increase was primarily due to $398,000 in security gains recorded during the third quarter of 2009, partially offset by a $338,000 decline in income from bank owned life insurance resulting from a death benefit collected in 2008.

Noninterest Expense. Total noninterest expenses increased to $3.5 million for the three-months ended September 30, 2009 from $3.0 million for the comparable period ended September 30, 2008, resulting from a $216,000 increase in FDIC premiums, $121,000 increase in other real estate expense and a $69,000 increase in data processing expenses.

Income Taxes (Benefit). Income taxes (benefit) for the three-months ended September 30, 2009 was $(1,477,000) compared to $(149,000) for the period ended September 30, 2008.

FIRST COMMUNITY BANK CORPORATION OF AMERICA AND SUBSIDIARIES

Comparison of the Nine-Month Periods Ended September 30, 2009 and 2008

General. First Community Bank Corporation of America recorded a net loss for the nine-months ended September 30, 2009 of $(2,546,000) compared to net earnings of $881,000 for the same period in 2008. The decline in earnings was due to increased credit losses.

The Company recorded a net loss available to common stockholders, after preferred stock dividends and amortization of preferred discount, for the nine-months ended September 30, 2009 of $(2,962,000) or $(.71) earnings per basic share and $(.71) earnings per diluted share compared to $881,000 or $.21 earnings per basic share and $.21 earnings per diluted share for the nine-months ended September 30, 2008.

The first nine months of 2009 reflected a $4,563,000 increase in provision for loan losses and a $512,000 increase in noninterest expense reflecting a $156,000 increase in other real estate writedowns and expenses.

Net Interest Income. Interest income decreased to $19.4 million during the nine-months ended September 30, 2009, from $20.5 million in 2008. Interest on loans for the nine-months ended September 30, 2009 decreased to $17.8 million from $19.2 million for the nine-months ended September 30, 2008. The decrease was also due to a decrease in the average yield earned on loans declined to 5.73% from 6.64% for the same period in 2008. Interest on securities increased to $1.6 million during the nine-months ended September 30, 2009 from $1 million for the nine-months ended September 30, 2008. The increase in interest income on securities was due to an increase in the average balance of securities from $27.3 million in 2008 to $50.9 million in 2009.

Interest expense on interest-bearing deposit accounts decreased to $7.7 million during the nine-months ended September 30, 2009, compared to $8.2 million during the nine-months ended September 30, 2008. The decrease was due to a decrease in the rate paid to 2.47% during the nine-months ended September 30, 2009 from 3.29% during the nine-months ended September 30, 2008. Interest expense on other borrowings decreased to $1.1 million during the nine-months ended September 30, 2009, compared to $1.4 million during the nine-months ended September 30, 2008. The decrease was due to a decrease in the average balance of other borrowings to $41.8 million in 2009 from $54.5 million in 2008. The average rate paid on other borrowings declined to 3.39% during the nine-months ended September 30, 2009 compared to 3.48% during the nine-months ended September 30, 2008.

FIRST COMMUNITY BANK CORPORATION OF AMERICA AND SUBSIDIARIES

Comparison of the Nine-Month Periods Ended September 30, 2009 and 2008, Continued

The provision for loan losses was $6,702,000 for the nine-months ended September 30, 2009 compared to $2,139,000 for the nine-months ended September 30, 2008. Economic weakness has continued to stress our loan portfolio and has affected the levels of nonperforming assets and charge-offs. Management believes that it is judicious in recognizing problem assets and recorded an appropriate allowance for loan loss reflecting the current circumstances.

Noninterest Income. Noninterest income increased to $1,615,000 in 2009 from $1,546,000 for the nine-months ended September 30, 2008. The increase was primarily due to $440,000 in security gains recorded during the nine-months ended September 30, 2009, partially offset by a $412,000 decline in income from bank owned life insurance resulting from a death benefit collected in 2008.

Noninterest Expenses. Total noninterest expenses increased to $9.8 million for the nine-months ended September 30, 2009 from $9.3 million for the comparable period ended September 30, 2008 resulting from a $491,000 increase in FDIC insurance, $156,000 increase in other real estate expense and a $215,000 increase in data processing expense.

Income Taxes (Benefit). Income taxes (benefit) for the nine-months ended September 30, 2009, were $(1,713,000) compared to $133,000 for the period ended September 30, 2008.

FIRST COMMUNITY BANK CORPORATION OF AMERICA AND SUBSIDIARIES

Item 3. Quantitative and Qualitative Disclosures about Market Risk

Market risk is the risk of loss from adverse changes in market prices and rates. The Company’s market risk arises primarily from interest-rate risk inherent in its lending, investment and deposit taking activities. The Company has little or no risk related to trading accounts, commodities or foreign exchange.

Management actively monitors and manages its interest-rate risk exposure. The primary objective in managing interest-rate risk is to limit, within established guidelines, the adverse impact of changes in interest rates on the Company’s net interest income and capital, while adjusting the Company’s asset-liability structure to obtain the maximum yield-cost spread on that structure. Management relies primarily on its asset-liability structure to control interest rate risk. However, a sudden and substantial increase in interest rates could adversely impact the Company’s earnings, to the extent that the interest rates borne by assets and liabilities do not change at the same speed, to the same extent, or on the same basis. The Company is managing through the impact of recent declining interest rates and the subsequent pressure on spreads.

Item 4T. Controls and Procedures

Evaluation of disclosure controls and procedures. The Company maintains controls and procedures designed to ensure that information required to be disclosed in the reports that the Company files or submits under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported within the time periods specified in the rules and forms of the Securities and Exchange Commission. Based upon their evaluation of those controls and procedures performed within 90 days of the filing date of this report, the Chief Executive and Chief Financial officers of the Company concluded that the Company’s disclosure controls and procedures were effective to ensure that the information required to be disclosed by the Company in the reports that it files or submits under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported within the time periods specified in the U.S. Securities and Exchange Commission’s rules and forms.

b.	Changes in internal controls. The Company made no significant changes in its internal controls or in other factors that could significantly affect these controls subsequent to the date of the evaluation of those controls by the Chief Executive and Chief Financial officers.

PART II. OTHER INFORMATION

Item 1. Legal Proceedings

There are no material pending legal proceeding to which First Community Bank Corporation of America and Subsidiaries, is a party or to which any of their property is subject.

Item 1A. Risk Factors

There have been no material changes to the risk factors disclosed in Item 1A “Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2008.

FIRST COMMUNITY BANK CORPORATION OF AMERICA AND SUBSIDIARIES

PART II. OTHER INFORMATION, CONTINUED

Item 6. Exhibits

Exhibits. The following exhibits were filed with the Securities and Exchange Commission.


Exhibit No.		Description of Exhibit

*	3.1	Amended and Restated Articles of Incorporation

*	3.2	Bylaws

*	4.1	Specimen Common Stock Certificate

*	4.3	Warrant Certificate

**	10.1	Employment Agreement of Kenneth P. Cherven dated June 16, 2002

*	10.2	First Amended and Restated Non-Employee Director Stock Option Plan

*	10.3	Long-Term Incentive Plan

*	10.4	Incentive Compensation Plan

***	10.5	Employment Agreement of Kenneth P. Cherven dated November 29, 2004

****	10.6	Deferred Compensation Plan of Kenneth P. Cherven dated January 1, 2005.

	31.1	Certification of Chief Executive Officer required by Rule 13a- 14(a)/15d-14(a) under the Exchange Act

	31.2	Certification of Chief Financial Officer required by Rule 13a- 14(a)/15d-14(a) under the Exchange Act

	32.1	Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of Sarbanes-Oxley Act of 2002

	32.2	Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of Sarbanes-Oxley Act of 2002

**	99.5	Audit Committee Charter

*	Exhibits marked with an asterisk were submitted with the Company’s original filing of Form SB-2 on April 7, 2003.

**	Exhibits marked with a double asterisk were submitted with the Company’s filing of its Amendment One to Form SB-2 on May 8, 2003.

***	Exhibits marked with triple asterisk were submitted with the Company’s filing of Form 10-QSB on May 13, 2005.

****	Exhibits marked with quadruple asterisk were submitted with the Company’s filing of Form 10-QSB on August 12, 2005.

FIRST COMMUNITY BANK CORPORATION OF AMERICA AND SUBSIDIARIES

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.


	FIRST COMMUNITY BANK CORPORATION OF AMERICA
	(Registrant)

Date: November 13, 2009	By:	/S/ KENNETH P. CHERVEN
		Kenneth P. Cherven,
		President and Chief Executive Officer

Date: November 13, 2009	By:	/S/ STAN B. MCCLELLAND
		Stan B. McClelland,
		Chief Financial Officer

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