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Table of Contents

 

 

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 March 31, 2011

 

¨ 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 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  ¨ * The registrant has not yet been phased into the interactive data requirements.

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):

 

Large accelerated filer   ¨    Accelerated filer   ¨
Non-accelerated filer   ¨  (Do not check if a smaller reporting company)    Smaller reporting company   x

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

 

8,592,143 shares

(class)   Outstanding at May 12, 2011

 

 

 


Table of Contents

FIRST COMMUNITY BANK CORPORATION OF AMERICA AND SUBSIDIARIES

INDEX

 

     Page  

PART I. FINANCIAL INFORMATION

  

Item 1. Financial Statements

  

Condensed Consolidated Balance Sheets - At March 31, 2011 (unaudited) and At December 31, 2010

     2   

Condensed Consolidated Statements of Operations - Three Months Ended March  31, 2011 and 2010 (unaudited)

     3   

Condensed Consolidated Statements of Changes in Stockholders’ Equity - Three Months Ended March  31, 2011 and 2010 (unaudited)

     4-5   

Condensed Consolidated Statements of Cash Flows - Three Months Ended March  31, 2011 and 2010 (unaudited)

     6-7   

Notes to Condensed Consolidated Financial Statements (unaudited)

     8-24   

Review by Independent Registered Public Accounting Firm

     25   

Report of Independent Registered Public Accounting Firm

     26   

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

     27-37   

Item 3. Quantitative and Qualitative Disclosures About Market Risk

     38   

Item 4T. Controls and Procedures

     38   

PART II. OTHER INFORMATION

  

Item 1. Legal Proceedings

     38   

Item 1A. Risk Factors

     38   

Item 6. Exhibits

     39   

SIGNATURES

     40   

 

1


Table of Contents

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)

 

     March 31,     December 31,  
     2011     2010  
     (Unaudited)        

Assets

    

Cash and due from banks

   $ 5,234        3,513   

Federal funds sold

     98        —     

Interest-bearing deposits with banks

     35,902        44,802   
                

Cash and cash equivalents

     41,234        48,315   

Other interest-bearing deposits with banks

     1,765        1,765   

Securities available for sale

     44,170        45,761   

Loans, net of allowance for loan losses of $11,461 and $11,717

     323,363        332,779   

Federal Home Loan Bank stock, at cost

     3,606        3,606   

Premises and equipment, net

     12,317        12,424   

Foreclosed real estate, net

     11,241        11,385   

Accrued interest receivable

     1,282        1,378   

Bank-owned life insurance

     8,208        8,157   

Prepaid deposit insurance assessment

     3,225        3,627   

Other assets

     1,895        1,490   
                
   $ 452,306        470,687   
                

Liabilities and Stockholders’ Equity

    

Liabilities:

    

Noninterest-bearing demand deposits

     39,166        34,500   

Savings, NOW and money-market deposits

     198,143        216,179   

Time deposits

     123,866        123,975   
                

Total deposits

     361,175        374,654   

Federal Home Loan Bank advances

     60,000        60,000   

Other borrowings

     505        1,764   

Accrued expenses and other liabilities

     5,040        5,511   
                

Total liabilities

     426,720        441,929   
                

Stockholders’ equity:

    

Preferred stock, $0.01 par value, 2,000,000 shares authorized:

    

Series A, 10,685 shares designated, issued and outstanding

     10,685        10,685   

Series A preferred stock discount

     (18     (20

Series B, 720,000 shares designated, 0 and 313,497 shares issued and outstanding

     —          7,837   

Common stock, $0.05 par value, 40,000,000 shares authorized, 8,592,143 and 5,457,173 shares issued and outstanding

     430        273   

Additional paid-in capital

     40,071        32,390   

Accumulated deficit

     (25,420     (22,050

Accumulated other comprehensive loss

     (162     (357
                

Total stockholders’ equity

     25,586        28,758   
                
   $ 452,306        470,687   
                

See Accompanying Notes to Condensed Consolidated Financial Statements.

 

2


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FIRST COMMUNITY BANK CORPORATION OF AMERICA AND SUBSIDIARIES

Condensed Consolidated Statements of Operations (Unaudited)

(In thousands, except per share amounts)

 

     Three Months Ended
March 31,
 
     2011     2010  

Interest income:

    

Loans

   $ 4,285        5,410   

Securities

     348        557   

Other interest earning assets

     33        31   
                

Total interest income

     4,666        5,998   
                

Interest expense:

    

Deposits

     985        2,002   

Other borrowings

     288        342   
                

Total interest expense

     1,273        2,344   
                

Net interest income

     3,393        3,654   

Provision for loan losses

     3,060        3,941   
                

Net interest income (loss) after provision for loan losses

     333        (287
                

Noninterest income:

    

Service charges on deposit accounts

     125        168   

Other service charges and fees

     72        48   

Income from bank-owned life insurance

     51        44   

Net gain on sale of securities

     —          159   

Other

     47        178   
                

Total noninterest income

     295        597   
                

Noninterest expenses:

    

Employee compensation and benefits

     1,261        1,604   

Occupancy and equipment

     384        421   

Data processing

     266        387   

Professional fees

     360        282   

Office supplies

     31        34   

Insurance

     464        314   

Other

     1,230        340   
                

Total noninterest expenses

     3,996        3,382   
                

Loss before income taxes

     (3,368     (3,072

Income tax benefit

     —          (1,200
                

Net loss

     (3,368     (1,872

Preferred stock dividend requirements and amortization of preferred stock discount

     (135     (331
                

Net loss available for common stockholders

   $ (3,503     (2,203
                

Loss per share:

    

Basic and diluted loss per share

   $ (.64     (.42
                

See Accompanying Notes to Condensed Consolidated Financial Statements.

 

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Table of Contents

FIRST COMMUNITY BANK CORPORATION OF AMERICA AND SUBSIDIARIES

Condensed Consolidated Statements of Changes in Stockholders’ Equity

Three Months Ended March 31, 2011 and 2010

(In thousands, except share amounts)

 

                                                          Accumulated
Other
Compre-
hensive
Income
    Total  
                                                           
    Preferred Stock                 Additional
Paid-In
Capital
           
    Series A     Series B     Common Stock       Accumulated
Deficit
     
    Shares     Amount     Discount     Shares     Amount     Shares     Amount          

Balance at December 31, 2009

    10,685      $ 10,685        (27     189,018      $ 4,725        4,938,692      $ 247        32,154        (2,618     335        45,501   
                           

Comprehensive loss:

                     

Net loss (unaudited)

    —          —          —          —          —          —          —          —          (1,872     —          (1,872

Net change in unrealized gain on securities available for sale, net of taxes of $62 (unaudited)

    —          —          —          —          —          —          —          —          —          103        103   
                           

Comprehensive loss (unaudited)

                        (1,769
                           

Issuance of convertible perpetual preferred stock, Series B, net of offering costs of $72 (unaudited)

    —          —          —          124,479        3,112        —          —          542        —          —          3,654   

Issuance of common stock, net of offering costs of $217 (unaudited)

    —          —          —          —          —          518,481        26        180        —          —          206   

Share-based compensation expense (unaudited)

    —          —          —          —          —          —          —          9        —          —          9   

Dividend on cumulative convertible perpetual preferred stock, Series B (unaudited)

    —          —          —          —          —          —          —          —          (196     —          (196

Dividend on preferred stock to U.S. Treasury, Series A (unaudited)

    —          —          —          —          —          —          —          —          (133     —          (133

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

    —          —          2        —          —          —          —          —          (2     —          —     
                                                                                       

Balance at March 31, 2010 (unaudited)

    10,685      $ 10,685        (25     313,497      $ 7,837        5,457,173      $ 273        32,885        (4,821     438        47,272   
                                                                                       

 

(continued)

 

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FIRST COMMUNITY BANK CORPORATION OF AMERICA AND SUBSIDIARIES

Condensed Consolidated Statements of Changes in Stockholders’ Equity, Continued

 

Three Months Ended March 31, 2011 and 2010

(In thousands, except share amounts)

 

                                                                Accumulated
Other
Compre-
hensive
Loss
       
                                                                     
     Preferred Stock                   Additional
Paid-In
Capital
                
     Series A     Series B     Common Stock         Accumulated
Deficit
         
     Shares      Amount      Discount     Shares     Amount     Shares      Amount             Total  

Balance at December 31, 2010

     10,685       $ 10,685         (20     313,497      $ 7,837        5,457,173       $ 273         32,390         (22,050     (357     28,758   
                                 

Comprehensive loss:

                           

Net loss (unaudited)

     —           —           —          —          —          —           —           —           (3,368     —          (3,368

Net change in unrealized gain on securities available for sale (unaudited)

     —           —           —          —          —          —           —           —           —          195        195   
                                 

Comprehensive loss (unaudited)

                              (3,173
                                 

Conversion of convertible perpetual preferred stock, Series B to common stock (unaudited)

     —           —           —          (313,497     (7,837     3,134,970         157         7,680         —          —          —     

Share-based compensation expense (unaudited)

     —           —           —          —          —          —           —           1         —          —          1   

Amortization of common stock warrants issued to U.S. Treasury, Series A (unaudited)

     —           —           2        —          —          —           —           —           (2     —          —     
                                                                                             

Balance at March 31, 2011 (unaudited)

     10,685       $ 10,685         (18     —        $ —          8,592,143       $ 430         40,071         (25,420     (162     25,586   
                                                                                             

See Accompanying Notes to Condensed Consolidated Financial Statements.

 

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Table of Contents

FIRST COMMUNITY BANK CORPORATION OF AMERICA AND SUBSIDIARIES

Condensed Consolidated Statements of Cash Flows (Unaudited)

(In thousands)

 

     Three Months Ended  
     March 31,  
     2011     2010  

Cash flows from operating activities:

    

Net loss

   $ (3,368     (1,872

Adjustments to reconcile net loss to net cash used in operating activities:

    

Provision for loan losses

     3,060        3,941   

Depreciation and amortization

     112        141   

Deferred income tax benefit

     —          573   

Share-based compensation

     1        9   

Net amortization of deferred loan fees and costs

     (9     (61

Net amortization of premium and discounts on securities

     90        103   

Income from bank-owned life insurance

     (51     (43

Decrease in accrued interest receivable

     96        188   

Increase in prepaid deposit insurance assessment and other assets

     (3     (1,577

Decrease in accrued expenses and other liabilities

     (471     (1,698

Net gain on sale of securities

     —          (159

Provision for losses on foreclosed real estate

     115        —     

Net (gain) loss on sale of foreclosed real estate

     (88     36   
                

Net cash used in operating activities

     (516     (419
                

Cash flows from investing activities:

    

Net change in other interest-bearing deposits with banks

     —          220   

Purchase of securities available for sale

     —          (23,707

Principal payments on securities available for sale

     1,696        1,581   

Proceeds from calls and maturities of securities available for sale

     —          7,270   

Proceeds on the sale of securities available for sale

     —          14,980   

Principal payments on securities held to maturity

     —          32   

Proceeds on the sale of securities held to maturity

     —          7,521   

Net decrease in loans

     5,546        1,969   

Purchase of premises and equipment, net

     (5     (12

Proceeds from the sale of foreclosed real estate

     936        1,062   
                

Net cash provided by investing activities

     8,173        10,916   
                

Cash flows from financing activities:

    

Net decrease in deposits

     (13,479     (303

Net (decrease) increase in other borrowings

     (1,259     2,188   

Dividend on preferred stock to U.S. Treasury, Series A

     —          (133

Dividend on cumulative convertible preferred perpetual stock, Series B

     —          (196

Issuance of cumulative convertible preferred perpetual stock, Series B

     —          3,654   

Issuance of common stock

     —          206   
                

Net cash (used in) provided by financing activities

     (14,738     5,416   
                

Net (decrease) increase in cash and cash equivalents

     (7,081     15,913   

Cash and cash equivalents at beginning of period

     48,315        50,697   
                

Cash and cash equivalents at end of period

   $ 41,234        66,610   
                

 

(continued)

 

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FIRST COMMUNITY BANK CORPORATION OF AMERICA AND SUBSIDIARIES

Condensed Consolidated Statements of Cash Flows (Unaudited), Continued

(In thousands)

 

 

     Three Months Ended  
     March 31,  
     2011      2010  

Supplemental disclosure of cash flow information:

     

Cash paid during the period for:

     

Interest, net of capitalized interest

   $ 1,259         2,341   
                 

Noncash transactions:

     

Accumulated other comprehensive income, net change in unrealized gain on securities available for sale, net of income taxes

   $ 195         103   
                 

Transfer from loans to foreclosed real estate

   $ 819         632   
                 

Amortization of common stock warrants issued to U.S. Treasury

   $ 2         2   
                 

See Accompanying Notes to Condensed Consolidated Financial Statements.

 

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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” or “First Community”) owns all of the outstanding common stock of First Community Bank of America (the “Bank” or “First Community 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 three months ended March 31, 2011 and 2010.

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 March 31, 2011 and the results of operations and cash flows for the three-month periods ended March 31, 2011 and 2010. The results of operations and other data for the three- month period ended March 31, 2011 are not necessarily indicative of results that may be expected for the year ending December 31, 2011.

Going Concern. The Company has experienced recent and continuing increases in nonperforming assets, increases in provisions for loan losses, declining net interest margin, continuing high levels of noninterest expenses related to the credit problems and eroding regulatory capital. These factors raise substantial doubt about the Company’s ability to continue as a going concern.

On February 10, 2011, the Holding Company and the Bank entered into an Acquisition Agreement with CBM Florida Holding Company (“CBM Holdings”) and Community Bank & Company, under which the Bank will be merged with and into Community Bank & Company, and the Holding Company will transfer to CBM Holdings all of the shares of FCLS. Under the terms of the Acquisition Agreement, the Holding Company will receive $10 million in cash at closing.

Our Board of Directors, in connection with entering into the Acquisition Agreement, approved a Plan of Complete Liquidation and Dissolution for the Holding Company (the “Plan”). The Plan was approved by the holders of a majority of the outstanding shares of common stock of the Holding Company at a special shareholders meeting held for April 11, 2011. Final regulatory approvals were received on May 10, 2011. It is presently anticipated the transactions will be consummated on May 31, 2011. Following the consummation of the transactions, the Holding Company will be required to wind up of all of its business and distribute thereafter to its common stockholders all of its remaining cash, such distributions will take place towards the end of 2011.

 

(continued)

 

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FIRST COMMUNITY BANK CORPORATION OF AMERICA AND SUBSIDIARIES

 

Notes to Condensed Consolidated Financial Statements (Unaudited)

1. General, Continued.

The completion of the transactions contemplated by the Acquisition Agreement is subject to certain conditions in addition to shareholder approval, including, among others, (i) the receipt of all regulatory approvals; (ii) the absence of any material adverse change in the business of the Bank; (iii) the accuracy of the representations and warranties made by each of the parties, and (iv) the compliance by each of the parties with their respective obligations under the Acquisition Agreement. In the event all conditions are not met and the transaction contemplated by the Acquisition Agreement is not completed, there is no assurance that any other acceptable financing alternative or recapitalization plan would be successfully implemented, or receive regulatory approval.

2. Securities. Securities have been classified according to management’s intent. The carrying amounts of securities and their fair value were as follows (in thousands):

 

            Gross      Gross        
     Amortized      Unrealized      Unrealized     Fair  
     Cost      Gains      Losses     Value  

Available for Sale:

          

At March 31, 2011:

          

U.S. Government agency securities

   $ 7,758         —           (242     7,516   

Mortgage-backed securities

     36,574         265         (185     36,654   
                                  
   $ 44,332         265         (427     44,170   
                                  

At December 31, 2010:

          

U.S. Government agency securities

     7,758         —           (301     7,457   

Mortgage-backed securities

     38,360         246         (302     38,304   
                                  
   $ 46,118         246         (603     45,761   
                                  

 

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FIRST COMMUNITY BANK CORPORATION OF AMERICA AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements (Unaudited)

 

2. Securities, Continued. Available-for-sale securities at March 31, 2011 measured at fair value on a recurring basis are summarized below (in thousands):

 

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

At March 31, 2011:

           

U.S. Government agency securities

   $ 7,516         —           7,516         —     

Mortgage-backed securities

     36,654         —           36,654         —     
                                   

Available-for-sale securities

   $ 44,170         —           44,170         —     
                                   

At December 31, 2010:

           

U.S. Government agency securities

     7,457         —           7,457         —     

Mortgage-backed securities

     38,304         —           38,304         —     
                                   

Available-for-sale securities

   $ 45,761         —           45,761         —     
                                   

There were no transfers of securities between levels of inputs for the three months ended March 31, 2011.

The scheduled maturities of securities at March 31, 2011 were as follows (in thousands):

 

     Available for Sale  
     Amortized      Fair  
     Cost      Value  

After ten years

   $ 7,758         7,516   

Mortgage-backed securities

     36,574         36,654   
                 
   $ 44,332         44,170   
                 

No securities were sold during the three months ended March 31, 2011. Securities sold during the three months ended March 31, 2010 are summarized as follows (in thousands):

 

Principal received from sales

   $ 22,501   
        

Gross gains

     293   

Gross losses

     (134
        

Net gain

   $ 159   
        

Due to a change in the Company’s investment policy, in 2010, the Company sold securities with a book value of $7,552,000 from the held to maturity category resulting in gross gains of $72,000 and gross losses of $103,000. Due to this sale, the Company is prohibited from classifying securities as held to maturity for a period of two years.

 

(continued)

 

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FIRST COMMUNITY BANK CORPORATION OF AMERICA AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements (Unaudited), Continued

 

2. Securities, Continued. Securities with gross unrealized losses at March 31, 2011, aggregated by investment category and length of time that individual securities have been in a continuous loss position, is as follows (in thousands):

 

     Less Than Twelve Months  
     Gross        
     Unrealized     Fair  
     Losses     Value  

Securities Available for Sale:

    

U.S. Government agency securities

   $ (242     7,516   

Mortgage-backed securities

     (185     19,659   
                

Total securities available for sale

   $ (427     27,175   
                

The unrealized losses on fifteen investment securities were caused by interest rate changes. It is expected that the securities would not be settled at a price less than the par value of the investments. Because the decline in fair value is attributable to changes in interest rates and not credit quality, and because the Company has the ability and intent to hold these investments until a market price recovery or maturity, these investments are not considered other-than-temporarily impaired.

As of March 31, 2011 and December 31, 2010, securities with a carrying value of $35,377,000 and $37,872,000, respectively, were pledged for repurchase agreements with customers and for various purposes.

3. Loans. The components of loans are summarized as follows (in thousands):

 

     March 31,     December 31,  
     2011     2010  

Commercial real estate loans

   $ 157,053        161,580   

Residential mortgage loans

     87,243        93,946   

Commercial loans

     17,754        17,706   

Installment loans

     73,307        71,846   
                

Total loans

     335,357        345,078   

Deduct:

    

Allowance for loan losses

     (11,461     (11,717

Net deferred loan fees

     (533     (582
                

Loans, net

   $ 323,363        332,779   
                

 

(continued)

 

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FIRST COMMUNITY BANK CORPORATION OF AMERICA AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements (Unaudited), Continued

 

3. Loans, Continued. An analysis of the change in the allowance for loan losses follows (in thousands):

 

     Three Months Ended March 31,  
     2011        
     Commercial
Real

Estate
    Residential
Real
Estate
    Commercial     Installment     Total     2010  

Beginning balance

   $ 5,939        4,166        211        1,401        11,717        7,830   

Provision for loan losses

     1,836        (511     241        1,494        3,060        3,941   

Charge-offs

     (1,665     (836     (250     (680     (3,431     (3,755

Recoveries

     31        44        —          40        115        8   
                                                

Ending balance

   $ 6,141        2,863        202        2,255        11,461        8,024   
                                                

Individually evaluated for impairment:

            

Recorded investment

   $ 30,296        16,322        1,825        2,823        51,266        54,087   
                                                

Balance in allowance for loan losses

   $ 1,705        1,863        34        350        3,952        690   
                                                

Collectively evaluated for impairment:

            

Recorded investment

   $ 126,757        70,921        15,929        70,484        284,091        347,758   
                                                

Balance in allowance for loan losses

   $ 4,436        1,000        168        1,905        7,509        7,334   
                                                

The following summarizes the loan credit quality (in thousands):

 

    Commercial Real Estate     Residential
Real Estate
    Commercial     Installment        
    Construction     Non-
Residential
    Land     Multi-
Family
    1-4
Family
    Secured     Unsecured     Home
Equity
    Consumer     Total  

At March 31, 2011:

                   

Credit Risk Profile by Internally Assigned Grade:

                   

Grade:

                   

Pass

  $ 268        96,288        15,925        10,325        75,231        15,359        427        33,567        37,270        284,660   

Special mention

    —          9,438        1,314        1,940        —          144        —          —          15        12,851   

Substandard

    —          11,559        8,569        1,418        12,012        1,812        12        2,071        384        37,837   

Doubtful

    —          —          —          9        —          —          —          —          —          9   

Loss

    —          —          —          —          —          —          —          —          —          —     
                                                                               

Total

  $ 268        117,285        25,808        13,692        87,243        17,315        439        35,638        37,669        335,357   
                                                                               

At December 31, 2010:

                   

Credit Risk Profile by Internally Assigned Grade:

                   

Grade:

                   

Pass

    189        96,056        17,882        10,562        84,087        14,790        439        30,030        38,977        293,012   

Special mention

    —          9,369        1,314        1,940        9        139        12        480        17        13,280   

Substandard

    —          14,765        8,510        984        9,850        2,326        —          2,250        92        38,777   

Doubtful

    —          —          —          9        —          —          —          —          —          9   

Loss

    —          —          —          —          —          —          —          —          —          —     
                                                                               

Total

  $ 189        120,190        27,706        13,495        93,946        17,255        451        32,760        39,086        345,078   
                                                                               

 

(continued)

 

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FIRST COMMUNITY BANK CORPORATION OF AMERICA AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements (Unaudited), Continued

 

3. Loans, Continued. Internally assigned loan grades are defined as follows:

Pass – A Pass loan’s primary source of loan repayment is satisfactory, with secondary sources very likely to be realized if necessary.

Special Mention – A Special Mention loan has potential weaknesses that deserve management’s close attention. If left uncorrected, these potential weaknesses may result in the deterioration of the repayment prospects for the asset or the Company’s credit position at some future date. Special Mention loans are not adversely classified and do not expose the Company to sufficient risk to warrant adverse classification.

Substandard – A Substandard loan is inadequately protected by the current sound worth and paying capacity of the obligor or of the collateral pledged, if any. Loans so classified must have a well-defined weakness or weaknesses that jeopardize the liquidation of the debt. They are characterized by the distinct possibility that the Company will sustain some loss if the deficiencies are not corrected.

Doubtful – A loan classified Doubtful has all the weaknesses inherent in one classified Substandard with the added characteristics that the weaknesses make collection or liquidation in full, on the basis of currently existing facts, conditions, and values, highly questionable and improbable.

Loss – A loan classified Loss is considered uncollectible and of such little value that continuance as a bankable asset is not warranted. This classification does not mean that the asset has absolutely no recovery or salvage value, but rather it is not practical or desirable to defer writing off this basically worthless asset even though partial recovery may be affected in the future.

The following summarizes the amount of impaired loans (in thousands):

 

     With No Related
Allowance Recorded
     With an Allowance Recorded      Total  
     Recorded
Investment
     Unpaid
Principal
Balance
     Related
Allowance
     Recorded
Investment
     Unpaid
Principal
Balance
     Related
Allowance
     Recorded
Investment
     Unpaid
Principal
Balance
     Related
Allowance
 

At March 31, 2011:

                          

Commercial real estate:

                          

Nonresidential

   $ 12,752         13,615         —           6,254         6,368         312         19,006         19,983         312   

Land

     5,020         7,783         —           4,174         4,796         1,208         9,194         12,579         1,208   

Multi-family

     697         723         —           1,399         2,091         185         2,096         2,814         185   

Residential real estate-

                          

1-4 family

     9,449         10,500         —           6,873         7,506         1,863         16,322         18,006         1,863   

Commercial:

                          

Secured

     949         949         —           864         864         33         1,813         1,813         33   

Unsecured

     —           —           —           12         12         1         12         12         1   

Installment:

                          

Home Equity

     1,183         1,183         —           1,253         1,253         302         2,436         2,436         302   

Consumer

     4         4         —           383         383         48         387         387         48   
                                                                                
   $ 30,054         34,757         —           21,212         23,273         3,952         51,266         58,030         3,952   
                                                                                

 

(continued)

 

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FIRST COMMUNITY BANK CORPORATION OF AMERICA AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements (Unaudited), Continued

 

3. Loans, Continued.

 

     With No Related
Allowance Recorded
     With an Allowance Recorded      Total  
     Recorded
Investment
     Unpaid
Principal
Balance
     Related
Allowance
     Recorded
Investment
     Unpaid
Principal
Balance
     Related
Allowance
     Recorded
Investment
     Unpaid
Principal
Balance
     Related
Allowance
 

At December 31, 2010:

                          

Commercial real estate:

                          

Nonresidential

   $ 14,214         15,479         —           7,649         8,342         538         21,863         23,821         538   

Land

     4,529         5,604         —           4,148         6,230         1,517         8,677         11,834         1,517   

Multi-family

     698         709         —           680         680         14         1,378         1,389         14   

Residential real estate-

                          

1-4 family

     6,668         7,055         —           9,070         10,547         1,707         15,738         17,602         1,707   

Commercial-

                          

Secured

     781         781         —           1,545         1,545         198         2,326         2,326         198   

Consumer:

                          

Home Equity

     2,024         2,024         —           743         756         109         2,767         2,780         109   

Installment

     11         11         —           208         208         25         219         219         25   
                                                                                
   $ 28,925         31,663         —           24,043         28,308         4,108         52,968         59,971         4,108   
                                                                                

 

     Average
Recorded
Investment
     Interest
Income
Recognized
     Interest
Income
Received
 

Three Months Ended March 31, 2011:

        

Commercial real estate:

        

Nonresidential

   $ 19,138         93         137   

Land

     9,382         24         32   

Multi-family

     1,188         6         6   

Residential real estate-

        

1-4 family

     15,343         68         83   

Commercial:

        

Secured

     1,843         —           2   

Unsecured

     12         —           —     

Installment:

        

Home equity

     2,426         9         15   

Consumer

     257         —           —     
                          

Total

   $ 49,589         200         275   
                          

Comparative totals for three months ended March 31, 2010

   $ 49,463         212         254   
                          

 

(continued)

 

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FIRST COMMUNITY BANK CORPORATION OF AMERICA AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements (Unaudited), Continued

 

3. Loans, Continued. Impaired collateral-dependent loans 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):

 

     Fair
Value
     Level 1      Level 2      Level 3      Total
Losses
     Losses
Recorded in
Operations
for the Three
Months Ended
March  31, 2011
 

At March 31, 2011:

                 

Commercial real estate:

                 

Nonresidential

   $ 8,392         —           —           8,392         1,289         116   

Land

     5,621         —           —           5,621         4,593         396   

Multi-family

     2,097         —           —           2,097         902         37   

Residential real estate-

                 

1-4 family

     8,340         —           —           8,340         3,548         567   

Commercial-

                 

Secured

     864         —           —           864         33         —     

Unsecured

     12         —           —           12         1         —     

Installment:

                 

Home equity

     1,253         —           —           1,253         302         165   

Consumer

     383         —           —           383         48         —     
                                                     
   $ 26,962         —           —           26,962         10,716         1,281   
                                                     

Loans with a carrying value of $24,304,000 at March 31, 2011, were measured for impairment using Level 3 inputs and had a fair value in excess of carrying value.

 

     Fair
Value
     Level 1      Level 2      Level 3      Total
Losses
     Losses
Recorded in
Operations
During the
Year
 

At December 31, 2010:

                 

Commercial real estate:

                 

Nonresidential

   $ 12,881         —           —           12,881         2,609         2,065   

Land

     5,666         —           —           5,666         4,737         3,688   

Multi-family

     1,378         —           —           1,378         63         57   

Residential real estate-

                 

1-4 family

     12,398         —           —           12,398         3,727         2,935   

Commercial-

                 

Secured

     1,545         —           —           1,545         198         198   

Installment:

                 

Home equity

     743         —           —           743         122         122   

Consumer

     207         —           —           207         25         25   
                                                     
   $ 34,818         —           —           34,818         11,481         9,090   
                                                     

Loans with a carrying value of $18,150,000 at December 31, 2010, were measured for impairment using Level 3 inputs and had a fair value in excess of carrying value.

 

(continued)

 

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FIRST COMMUNITY BANK CORPORATION OF AMERICA AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements (Unaudited), Continued

 

3. Loans, Continued. Age analysis of nonaccrual and past due loans were as follows (in thousands):

 

     Accruing Loans                
     30-59
Days
Past Due
     60-89
Days
Past Due
     Greater
Than 90
Days
Past Due
     Total
Past
Due
     Current      Nonaccrual
Loans
     Total
Loans
 

At March 31, 2011:

                    

Commercial real estate:

                    

Construction

   $ —           —           —           —           268         —           268   

Nonresidential

     3,578         83         —           3,661         102,452         11,172         117,285   

Land

     —           —           294         294         18,582         6,932         25,808   

Multi-family

     —           306         —           306         11,959         1,427         13,692   

Residential real estate-

                    

1-4 family

     2,422         1,338         —           3,760         74,854         8,629         87,243   

Commercial:

                    

Secured

     1,057         —           —           1,057         14,446         1,812         17,315   

Unsecured

     —           —           —           —           439         —           439   

Installment:

                    

Home equity

     163         90         —           253         33,789         1,596         35,638   

Consumer

     802         22         —           824         36,461         384         37,669   
                                                              

Total

   $ 8,022         1,839         294         10,155         293,250         31,952         335,357   
                                                              

At December 31, 2010:

                    

Commercial real estate:

                    

Construction

     —           —           —           —           189         —           189   

Nonresidential

     4,088         —           —           4,088         101,591         14,511         120,190   

Land

     1,977         599         —           2,576         18,487         6,643         27,706   

Multi-family

     423         —           —           423         12,365         707         13,495   

Residential real estate-

                    

1-4 family

     1,316         2,583         —           3,899         82,938         7,109         93,946   

Commercial:

                    

Equipment

     28         —           —           28         14,748         2,479         17,255   

Unsecured

     —           —           —           —           451         —           451   

Consumer:

                    

Home equity

     145         400         —           545         29,405         2,810         32,760   

Consumer

     254         192         —           446         38,421         219         39,086   
                                                              

Total

   $ 8,231         3,774         —           12,005         298,595         34,478         345,078   
                                                              

 

(continued)

 

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FIRST COMMUNITY BANK CORPORATION OF AMERICA AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements (Unaudited), Continued

 

4. Loss Per Share. Loss per share (“LPS”) of common stock has been computed on the basis of the weighted-average number of shares of common stock outstanding. Outstanding stock options and warrants are considered anti dilutive securities for purposes of calculating diluted LPS. There were 5,492,006 and 5,287,025 weighted-average shares outstanding for the three months ended March 31, 2011 and 2010, respectively.

5. Share-Based Compensation. The Company currently has one stock option plan for employees of the Company. Under the plan, the total number of options which may be granted to purchase common stock is 516,797 (amended). At March 31, 2011, 313,873 options have been granted, 190,344 options have been exercised and 202,924 options remain available for grant under the employees’ plan. The employees’ options vest over periods up to four years and have terms up to ten years.

A summary of the activity in the Company’s stock option plans is as follows (dollars in thousands, except per share amounts):

 

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

Outstanding at December 31, 2010

     172,157       $ 8.31         

Options forfeited and expired

     48,628         9.18         
                 

Outstanding at March 31, 2011

     123,529       $ 7.98         3.32 years       $ —     
                                   

Exercisable at March 31, 2011

     120,529       $ 7.93         3.22 years       $ —     
                                   

At March 31, 2011, there was approximately $1,000 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 three months. The total fair value of shares vesting and recognized as compensation expense was approximately $1,000 and $9,000 for the three months ended March 31, 2011 and 2010, respectively. There was no associated tax benefit recognized for both the three months ended March 31, 2011 and 2010.

 

(continued)

 

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FIRST COMMUNITY BANK CORPORATION OF AMERICA AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements (Unaudited), Continued

 

6. Regulatory Capital. The Bank is required to maintain certain minimum regulatory capital requirements to be considered Well Capitalized. At March 31, 2011, the Bank was considered Adequately Capitalized. Regulatory capital ratios were as follows:

 

     March 31,      December 31,     

Required to
Be Well

 
     2011      2010      Capitalized  

Total capital to risk weighted assets

     8.90         9.65         10.00   

Tier 1 capital to risk weighted assets

     7.63         8.37         6.00   

Tier 1 capital to total assets

     5.38         5.81         5.00   

7. Foreclosed Real Estate. Expenses applicable to foreclosed assets follow (in thousands):

 

     Three Months Ended
March 31,
 
     2011     2010  

Net (gain) loss on sales of foreclosed assets

   $ (88     36   

Provision for losses

     115        —     

Operating expenses

     98        10   
                

Total included in other noninterest expenses

   $ 125        46   
                

Foreclosed assets are recorded at fair value less estimated selling costs. Foreclosed assets which are measured at fair value on a nonrecurring basis are as follows (in thousands):

 

     Total      Level 1      Level 2      Level 3      Total
Losses
     Losses
Recorded
During
2011
 

March 31, 2011-

                 

Foreclosed real estate, net

   $ 11,241         —           —           11,241         533         115   
                                                     

December 31, 2010-

                 

Foreclosed real estate, net

   $ 11,385         —           —           11,385         418         418   
                                                     

 

(continued)

 

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FIRST COMMUNITY BANK CORPORATION OF AMERICA AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements (Unaudited), Continued

 

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

 

     At March 31, 2011      At December 31, 2010  
     Carrying      Fair      Carrying      Fair  
     Amount      Value      Amount      Value  

Financial assets:

           

Cash and cash equivalents

   $ 41,234         41,234         48,315         48,315   

Other interest-bearing deposits with banks

     1,765         1,765         1,765         1,765   

Securities

     44,170         44,170         45,761         45,761   

Loans

     323,363         316,964         332,779         326,723   

Federal Home Loan Bank stock

     3,606         3,606         3,606         3,606   

Accrued interest receivable

     1,282         1,282         1,378         1,378   

Financial liabilities:

           

Deposits

     361,175         353,445         374,654         368,097   

Federal Home Loan Bank advances

     60,000         59,876         60,000         60,036   

Other borrowings

     505         505         1,764         1,764   

Off-balance sheet financial instruments

     —           —           —           —     

9. Deferred Tax Asset. The Company established an allowance against its deferred tax asset as of June 30, 2010, as it became apparent that the extended deterioration of credit markets would result in the Company recording its fourth consecutive annual loss in 2010.

 

(continued)

 

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FIRST COMMUNITY BANK CORPORATION OF AMERICA AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements (Unaudited), Continued

 

10. Acquisitions and Winding Up of the Company

Acquisition Agreement with CBM Florida Holding Company and Community Bank & Company

As previously announced, on February 10, 2011, First Community and First Community Bank entered into an Acquisition Agreement (referred to in the Company’s December 31, 2010 Form 10-K as the “Acquisition Agreement”) with CBM Florida Holding Company (“CBM Holdings”) and Community Bank & Company (formerly, Community Bank of Manatee), under which First Community Bank will be merged with and into Community Bank & Company, and First Community will transfer to CBM Holdings all of the shares of First Community Lender (these two transactions are referred to in the Form 10-K as the “Disposition”). Under the terms of the Acquisition Agreement, First Community will receive $10 million in cash at the closing of the Disposition.

Our Board of Directors, in connection with entering into the Acquisition Agreement, approved a Plan of Complete Liquidation and Dissolution for First Community (the “Plan”). The Plan was approved by the holders of a majority of the outstanding shares of common stock of First Community at the special shareholders meeting held on April 11, 2011. Following the consummation of the Disposition, First Community will be required to wind up of all of its business and distribute thereafter to its common stockholders all of its remaining cash. It is presently anticipated that, if the Disposition is consummated in May or June 2011, such distributions will take place towards the end of 2011.

The completion of the transactions contemplated by the Acquisition Agreement is subject to certain conditions in addition to shareholder approval, including, among others, (i) the receipt of all regulatory approvals; (ii) the absence of any material adverse change in the business of First Community Bank; (iii) the accuracy of the representations and warranties made by each of the parties, and (iv) the compliance by each of the parties with their respective obligations under the Acquisition Agreement.

Agreement with the U.S. Department of the Treasury Regarding Repurchase of TARP Stock

First Community currently has outstanding 10,685 shares of Fixed-Rate Cumulative Perpetual Preferred Stock, Series A (the “Series A Stock”) that were issued to the U.S. Department of the Treasury under the TARP program on December 23, 2008. The liquidation value of the Series A Stock, including accrued but unpaid dividends, is approximately $11.15 million. While First Community was negotiating the Acquisition Agreement, it began negotiating with the Treasury to repurchase the Series A Stock at a discount. As previously announced, on March 11, 2011, First Community entered into a definitive Securities Purchase Agreement with the U.S. Department of the Treasury relating to the repurchase by First Community of the Series A Stock, as well as a Warrant to purchase 228,312 shares of First Community common stock (the “Warrant”), which was issued by First Community to the Treasury in connection with the issuance of the Series A Stock.

 

(continued)

 

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FIRST COMMUNITY BANK CORPORATION OF AMERICA AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements (Unaudited), Continued

 

10. Acquisitions and Winding Up of the Company, Continued

Subject to, and on the terms and conditions of, the Treasury agreement, effective at the closing of the Disposition, First Community will purchase from the Treasury all of the Series A Stock and the Warrant. The aggregate purchase price for the Series A Stock and the Warrant will be an amount in cash equal to (i) $7,200,000.00 (or 72% of the proceeds to be received from Community Bank & Company upon the closing of the Disposition) plus (ii) seventy-two percent (72%) of all cash assets of First Community at the closing of the Disposition after giving effect to (x) the payment by First Community of any expenses relating to the Disposition (the “Disposition Expenses”), (y) the payment of its debts and liabilities (the “Debt and Liabilities Payment”) and (z) a future distribution to (1) holders of First Community common stock outstanding as of the date of the Agreement plus (2) holders of the 3,132,970 shares of common stock to be issued upon the conversion of First Community’s 10% Cumulative Convertible Perpetual Preferred Stock, Series B, of up to Thirty-Five Cents ($0.35) per share of common stock (the “Distribution”), provided that the sum of the Disposition Expenses, the Debt and Liabilities Payment and the Distribution shall not exceed Three Million Five Hundred Twenty Seven Thousand Two Hundred Fifty Dollars ($3,527,250) in the aggregate.

11. Regulatory Matters

Cease and Desist Orders of the OTS

As previously announced, on February 24, 2011, First Community and First Community Bank each entered into a Stipulation and Consent to the Issuance of Order to Cease and Desist with the Office of Thrift Supervision (“OTS”), and the OTS issued Orders to Cease and Desist to each of First Community and First Community Bank.

Under the terms of the OTS Orders, First Community Bank and First Community are required to, among other things:

within sixty (60) days, submit a written plan for First Community Bank to achieve by June 30, 2011, and thereafter maintain, a Tier 1 Capital Ratio equal to or greater than eight percent (8%) and a Total Risk-Based Capital Ratio equal to or greater than thirteen percent (13%) (the “Bank Capital Plan”);

within sixty (60) days, submit for review and non-objection a written plan for First Community to achieve by June 30, 2011, and thereafter maintain, the capital requirements imposed by the OTS on First Community Bank;

within sixty (60) days, submit for review and non-objection a written business plan for First Community Bank for 2011 and 2012 that addresses all corrective actions in the 2010 OTS examination relating to First Community Bank’s business operations, including First Community Bank’s plans to improve its core earnings and achieve profitability on a consistent basis throughout the term of the Business Plan (the “Bank Business Plan”);

 

(continued)

 

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FIRST COMMUNITY BANK CORPORATION OF AMERICA AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements (Unaudited), Continued

 

11. Regulatory Matters, Continued

within sixty (60) days, submit for review and non-objection a written business plan for First Community for 2011 and 2012 that addresses, among other things, the capital needs and requirements of First Community Bank, the capital necessary to support operations and debt service at First Community, and plans to improve First Community’s core earnings, reduce expenses, and achieve profitability on a consistent basis throughout the term of the Business Plan;

within sixty (60) days, revise First Community Bank’s policies, procedures and methodology relating to the timely establishment and maintenance of an adequate allowance for loan and lease losses (ALLL) level (ALLL Policy) to address all corrective actions set forth in the 2010 OTS Examination relating to ALLL;

within sixty (60) days, submit an updated comprehensive written plan with specific strategies, targets and timeframes to reduce First Community Bank’s level of problem assets;

within sixty (60) days, develop, implement and adhere to a formal written Risk Management Function and Plan for First Community Bank that addresses all corrective actions discussed in the 2010 OTS Examination related to risk management at First Community Bank;

within sixty (60) days, develop, implement and adhere to a formal written Enterprise Risk Management Function and Plan for First Community that addresses all corrective actions discussed in the 2010 OTS Examination related to enterprise risk management;

within sixty (60) days, revise First Community Bank’s liquidity and funds management policies and procedures to address all corrective actions set forth in the 2010 OTS Examination relating to liquidity and funds management;

prepare and provide to the OTS various reports, including progress reports; and

ensure First Community Bank’s compliance with applicable laws, rules, regulations and agency guidelines, including the terms of the Orders.

 

(continued)

 

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FIRST COMMUNITY BANK CORPORATION OF AMERICA AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements (Unaudited), Continued

 

11. Regulatory Matters, Continued

Under the terms of the OTS Orders, First Community Bank and First Community may not:

increase First Community Bank’s total assets during any quarter in excess of an amount equal to net interest credited on deposit liabilities during the prior quarter without the prior written notice of non-objection by the OTS;

incur, issue, renew, or rollover any debt, increase any current lines of credit, or otherwise incur any additional debt without receiving the prior written non-objection of the OTS;

originate or purchase any new nonresidential real estate loans until the OTS approves First Community Bank Capital Plan notifies First Community Bank that it does not object to First Community Bank Business Plan;

appoint any new director or senior executive officer or change the responsibilities of any current senior executive officers without prior notice to the OTS;

enter into, renew, extend or revise any compensation or benefit agreements for directors or senior executive officers without prior notice to the OTS;

pay dividends or make any capital distributions without the prior approval of the OTS;

make any golden parachute payments or prohibited indemnification payments unless they comply with applicable regulations; or

make any incentive compensation payments to any senior executive officers who are directors of First Community Bank without prior approval of the OTS.

All requirements of the OTS orders were met by First Community Bank and First Community as of April 25, 2011. The OTS orders will remain in effect until modified or terminated by the OTS.

All customer deposits remain fully insured to the fullest extent permitted by the FDIC. The Bank expects to continue to serve its customers in all areas including making loans (other than nonresidential real estate loans), establishing lines of credit, accepting deposits and processing banking transactions. Neither First Community nor First Community Bank admitted any wrongdoing in entering into the respective Stipulation and Consent to the Issuance of a Cease and Desist Order. The OTS did not impose or recommend any monetary penalties.

 

(continued)

 

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FIRST COMMUNITY BANK CORPORATION OF AMERICA AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements (Unaudited), Continued

 

12. Suspension of Preferred Stock Dividends. The Board of Directors has suspended dividend payments on both the Preferred Stock Series A (TARP) and the Preferred Stock Series B shares.

The Office of Thrift Supervision, the Bank’s primary regulator, under the Cease and Desist Order, must approve quarterly dividends.

13. Conversion of Series B Preferred Stock into Common Stock. On March 31, 2011, each outstanding share of 10% Cumulative Convertible Perpetual Preferred Stock, Series B (the “Series B Stock”), of First Community was mandatorily converted into ten (10) shares of common stock, pursuant to the terms of Section 4 of the Company’s Amended and Restated Articles of Incorporation designating and governing the Series B Stock (which Amended and Restated Articles were filed with the Secretary of State of Florida on December 39, 2009), as a result of First Community’s inability to declare and pay dividends on the Series B Stock for the four (4) consecutive quarters ending March 31, 2011. Following the conversion, there are 8,592,143 shares outstanding of First Community’s common stock.

 

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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 March 31, 2011, and for the three-month periods ended March 31, 2011 and 2010 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.

 

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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 March 31, 2011 and the related condensed consolidated statements of operations, changes in stockholders’ equity and cash flows for the three-month periods ended March 31, 2011 and 2010. 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, 2010, and the related consolidated statements of operations, changes in stockholders’ equity and cash flows for the year then ended (not presented herein); and in our report dated March 30, 2011, we expressed a qualified opinion on those consolidated financial statements. Those consolidated financial statements had been prepared assuming that the Company will continue as a going concern. As discussed in Note 1 to the consolidated financial statements, the Company’s recent and continuing increases in nonperforming assets, increases in provisions for loan losses, declining net interest margin, continuing high levels of noninterest expenses related to the credit problems and eroding regulatory capital raise substantial doubt about the Company’s ability to continue as a going concern. Management’s plans are described in Note 1. The financial statements do not include any adjustments that might result from the outcome of this uncertainty. In our opinion, the information set forth in the accompanying condensed consolidated balance sheet as of December 31, 2010, 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

May 12, 2011

 

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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 three months ended March 31, 2011 and 2010.

Liquidity and Capital Resources

The Company’s primary source of cash during the three months ended March 31, 2011 was core deposits. The Bank considers savings, NOW, money-market, and noninterest-bearing demand deposits as core deposits. There was a $13 million decrease in deposits resulting from the implementation of the Dodd-Frank Act and the Bank’s strategy of lowering levels of brokered and high costs certificates of deposit. The Bank maintained a $24.6 million balance deposited at the Federal Reserve Bank on March 31, 2011.

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.

 

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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 March 31, 2011, follows (in thousands):

 

     Contract
Amount
 

Commitments to extend credit

   $ 823   
        

Unused lines of credit

   $ 19,675   
        

Standby letters of credit

   $ 548   
        

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.

 

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FIRST COMMUNITY BANK CORPORATION OF AMERICA AND SUBSIDIARIES

 

Selected Financial Information

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

 

     Three Months
Ended
March 31,
2011
    Year Ended
December 31,
2010
    Three Months
Ended
March 31,
2010
 

Average equity as a percentage of average assets

     5.85     7.43     8.55

Equity to total assets at end of period

     5.66     6.11     8.60

Return on average assets (1)

     (2.98 )%      (3.62 )%      (1.62 )% 

Return on common average equity (1)

     (124.02 )%      (92.20 )%      (30.47 )% 

Noninterest expenses to average assets

     3.62     2.65     2.48

Nonperforming assets as a percentage of total assets at end of period

     9.55     9.74     6.11

 

(1) Annualized for the three months ended March 31.

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.

 

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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 70% of charge-off activity. Commercial related charge-off’s to date are 26% 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 noncollateral 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 selling costs. 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.

 

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

 

     $      %  

March 31, 2010:

     

Residential mortgages

   $ 13,966         3.48   

Commercial real estate

     21,459         5.34   

Land and lots

     8,455         2.10   

Commercial loans

     1,326         0.33   

Installments

     605         0.15   
           

Total

   $ 45,811      
           

June 30, 2010:

     

Residential mortgages

   $ 13,719         3.71   

Commercial real estate

     17,621         4.76   

Land and lots

     9,024         2.44   

Commercial loans

     796         0.22   

Installments

     212         0.06   
           

Total

   $ 41,372      
           

September 30, 2010:

     

Residential mortgages

   $ 12,187         3.44   

Commercial real estate

     16,651         4.70   

Land and lots

     7,594         2.14   

Commercial loans

     1,702         0.48   

Installments

     433         0.12   
           

Total

   $ 38,567      
           

December 31, 2010:

     

Residential mortgages

   $ 13,118         3.79   

Commercial real estate

     16,351         4.73   

Land and lots

     8,438         2.44   

Commercial loans

     2,466         0.71   

Installments

     659         0.19   
           

Total

   $ 41,032      
           

March 31, 2011:

     

Residential mortgages

   $ 12,111         3.61   

Commercial real estate

     15,451         4.61   

Land and lots

     6,659         1.99   

Commercial loans

     2,675         0.80   

Installments

     2,601         0.78   
           

Total

   $ 39,497      
           

 

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

 

     Nonaccrual      REO  
     #      $      #      $  

March 31, 2010:

           

Residential mortgages

     42         9,208         7         875   

Commercial real estate

     20         13,599         3         535   

Land and lots

     29         7,653         10         942   

Commercial loans

     5         584         —           —     

Installments

     5         128         2         74   
                                   

Total

     101         31,172         22         2,426   
                                   

June 30, 2010:

           

Residential mortgages

     48         10,528         10         1,356   

Commercial real estate

     19         11,283         10         4,619   

Land and lots

     26         5,226         14         1,610   

Commercial loans

     5         495         —           —     

Installments

     5         112         3         105   
                                   

Total

     103         27,644         37         7,690   
                                   

September 30, 2010:

           

Residential mortgages

     44         10,857         19         1,749   

Commercial real estate

     20         11,846         9         4,374   

Land and lots

     24         6,250         20         1,710   

Commercial loans

     8         814         —           —     

Installments

     4         144         2         92   
                                   

Total

     100         29,911         50         7,925   
                                   

December 31, 2010:

           

Residential mortgages

     44         9,919         24         3,793   

Commercial real estate

     29         15,218         13         5,140   

Land and lots

     26         6,643         23         2,282   

Commercial loans

     9         2,479         —           —     

Installments

     4         219         4         170   
                                   

Total

     112         34,478         64         11,385   
                                   

March 31, 2011:

           

Residential mortgages

     40         8,629         21         3,640   

Commercial real estate

     27         12,599         14         5,322   

Land and lots

     28         6,932         23         2,051   

Commercial loans

     6         1,812         —           —     

Installments

     15         1,980         5         228   
                                   

Total

     116         31,952         63         11,241   
                                   

 

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The following chart illustrates the combination of allowance and charge-off compared to related loans at March 31, 2011 and for the three months then ended (in thousands):

 

     Nonimpaired
Loans
    Impaired
Loans
    Total  

Allowance for loan losses:

      

Beginning balance

   $ 7,609        4,108        11,717   

Provision

     1,250        1,810        3,060   

Charge-offs

     (1,465     (1,966     (3,431

Recoveries

     115        —          115   
                        

Ending balance

   $ 7,509        3,952        11,461   
                        

Loss allowance

     7,509        3,952        11,461   

Partial charge-offs of loans currently in portfolio

     —          6,764        6,764   
                        

Total

   $ 7,509        10,716        18,225   
                        

Total loans

   $ 284,091        51,266        335,357   
                        

Allowance for loss and charge-offs as a percentage of total loans at March 31, 2011

     2.64     20.90     5.43 %
                        

Allowance for loss and charge-offs as a percentage of total loans at December 31, 2010

     2.60     20.98     5.43 %
                        

 

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     At March 31,  
     2011  

Collateral dependent impaired loans with partial charge-offs or specific reserves:

  

Fair value of collateral

   $ 26,226   

Estimated selling costs

     (3,216
        

Fair value less selling costs

     23,010   
        

Gross impaired loans prior to charge-offs

     33,726   

Partial charge-offs of impaired loans

     (6,764

Loss allowance

     (3,952
        

Book value of impaired loans with partial charge-offs

     23,010   
        

Fair value less selling costs in excess of book value

   $ —     
        

Collateral dependent impaired loans without partial charge-offs or specific reserves:

  

Fair value of collateral

     32,486   

Estimated selling costs

     (3,249
        

Fair value less selling costs

     29,237   
        

Impaired loans

     24,288   

Loss allowance

     —     

Book value of impaired loans

     24,288   
        

Fair value less selling costs in excess of book value

   $ 4,949   
        

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.

 

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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 March 31,  
     2011     2010  
     Interest
Average
Balance
     Average
and
Dividends
     Yield/
Rate
    Interest
Average
Balance
     Average
and
Dividends
     Yield/
Rate
 
     (Dollars in thousands)  

Interest-earning assets:

                

Loans (1)

   $ 328,744         4,285         5.21   $ 397,711         5,410         5.44

Securities

     44,826         348         3.11        62,265         557         3.58   

Other interest-earning assets (2)

     39,199         33         0.34        46,006         31         0.27   
                                        

Total interest-earning assets

     412,769         4,666         4.52        505,982         5,998         4.74   
                            

Noninterest-earning assets

     45,692              47,039         
                            

Total assets

   $ 458,461            $ 553,021         
                            

Interest-bearing liabilities:

                

Savings, NOW, money-market deposit accounts

     202,380         395         0.78        217,807         736         1.35   

Time deposits

     126,857         590         1.86        208,748         1,266         2.43   
                                        

Total interest-bearing deposits

     329,237         985         1.20        426,555         2,002         1.88   

Other interest-bearing liabilities (3)

     61,027         288         1.89        40,066         342         3.41   
                            

Total interest-bearing liabilities

     390,264         1,273         1.30        466,621         2,344         2.01   
                            

Noninterest-bearing liabilities

     41,379              39,130         

Stockholders’ common equity

     26,818              47,270         
                            

Total liabilities and stockholders’ equity

   $ 458,461            $ 553,021         
                            

Net interest income

      $ 3,393            $ 3,654      
                            

Interest-rate spread (4)

           3.22           2.73
                            

Net interest margin (5)

           3.29           2.89
                            

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

     1.06              1.08         
                            

 

(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.

 

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Comparison of the Three-Month Periods Ended March 31, 2011 and 2010

General. First Community Bank Corporation of America recorded a net loss for the first quarter ended March 31, 2011 of $3.4 million compared to a net loss of $1.9 million for the same period in 2010. The increase in losses was due to a decrease in net interest income to increased expenses related to problem assets.

The company recorded a net loss available to common stockholders, after preferred stock dividends requirements and amortization of preferred discount, for the three-months ended March 31, 2011 of $3.5 million or $(0.64) per basic share compared to a net loss of $2.2 million or $(0.42) per basic share for the three-months ended march 31, 2010.

The first quarter 2011 reflected a $984,000 increase in other non-interest expenses related to problem assets.

Net Interest Income. Interest income decreased to $4.7 million during the three-months ended March 31, 2011 compared to $6.0 million during the three-months ended March 31, 2010. Interest on loans for the three-months ended March 31, 2011 decreased to $4.3 million from $5.4 million for the three-months ended March 31, 2010. The decrease in interest income on loans was attributable to a decline in the average balance on loans to $329 million for the three-months ended March 31, 2011 from $398 million for the three-months ended March 31, 2010 combined with a decrease in the rate earned on the loan portfolio. Interest on securities decreased to $348,000 for the three-months ended March 31, 2011 from $557,000 for the three-months ended March 31, 2010. The decrease in interest income on securities was due to a decrease in the average balance to $44.8 million for the three-months ended March 31, 2011 from $62.3 for the three-months ended March 31, 2010 along with a decrease in the rate earned on the portfolio.

Interest expense on interest-bearing deposit accounts decreased to $1.0 million for the three-months ended March 31, 2011, compared to $2.0 million for the three-months ended March 31, 2010. The decrease was due to a decrease in the rate paid to 1.20% for the three-months ended March 31, 2011, from 1.88% for the three-months ended March 31, 2010 along with a decrease in the average deposit balance. Interest expense on other borrowings decreased to $288,000 for the three-months ended March 31, 2011, compared to $342,000 for the three-months ended March 31, 2010. The decrease in interest expenses on other borrowings was due to a decrease in the average yield to 1.89% for the three-months ended March 31, 2011 from 3.41% for the three-months ended March 31, 2010.

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.

Our 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 our experience. The methodology includes an unallocated portion (qualitative factors) justified by current general market conditions, trends in performance (delinquency), economic and political trends.

 

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Comparison of the Three-Month Periods Ended March 31, 2011 and 2010, Continued

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.

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.

The provision for loan losses was $3.1 million for the three-months ended March 31, 2011, compared to $3.9 million for the three-months ended March 31, 2010. Economic weakness has continued to stress the loan portfolio which has attributed to the augmented level of nonperforming loans which has continued to result in declining home values and higher unemployment rates in the four markets that the Company serves.

The allowance for loan losses was $11.5 million at March 31, 2011. While management believes that its allowance for loan losses is adequate as of March 31, 2011, future adjustments to the allowance for loan losses may be necessary as economic conditions dictate.

Noninterest Income. Noninterest income decreased to $389,000 for the three-months ended March 31, 2011, from $597,000 for the three-months ended March 31, 2010. The decrease was primarily due to $159,000 in security gains recorded for the three-months ended March 31, 2010 with no corresponding amount in 2011.

Noninterest Expenses. Total noninterest expenses for the three-months ended March 31, 2011 were $4.0 million compared to $3.4 million for the three-months ended March 31, 2010. The increase was primarily due to expenses related to impaired loans and foreclosed real estate.

Income Taxes (Benefit). Income taxes for the three-months ended March 31, 2011, were $0.0 compared to a benefit of $(1.2) million for the three-months ended March 31, 2010.

 

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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

 

a. 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 Principal 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 Principal Financial officers.

PART II. OTHER INFORMATION

Item 1. Legal Proceedings

There are no materials 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, 2010.

 

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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.
***** Exhibits marked with quintuple asterisk are filed with the Company’s filing Form 10-Q on August 12, 2010.

 

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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:  

May 12, 2011

    By:  

/s/ Kenneth P. Cherven

        Kenneth P. Cherven, President and Chief
        Executive Officer
Date:  

May 12, 2011

    By:  

/s/ Cheryl R. Bryan

        Cheryl R. Bryan, Principal Financial and
        Principal Accounting Officer

 

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