2007 summary annual report
well positioned for
the future
financial summary
At or for the year ended December 31
Financial Summary
Total assets (in thousands)
Deposits
Stockholders’ equity
Net income
Per-ShAre DATA
Basic earnings per share
Basic earnings per common
share-continuing operations
Diluted earnings per common share
Diluted earnings per common
share-continuing operations
Cash dividends
Book value at year-end
SeleCTeD rATioS
return on average assets
return on average assets-continuing
return on average equity
return on average equity-continuing
Dividend payout
2007
2006
2005
2004
2003
$2,149,838
1,393,443
217,098
29,632
$2,033,698
1,394,771
212,730
28,948
$1,952,483
1,403,220
194,501
26,303
$1,830,822
1,356,719
183,233
22,364
$1,672,727
1,223,376
175,035
25,238
$ 2.64
$ 2.58
$ 2.33
$ 1.99
$ 2.27
2.64
2.62
2.62
1.08
19.61
1.39%
1.39%
13.54%
13.54%
40.91%
2.58
2.57
2.57
1.04
18.92
1.46%
1.46%
14.32%
14.32%
40.31%
2.35
2.32
2.33
1.02
17.29
1.37%
1.38%
13.79%
13.87%
43.78%
2.32
1.97
2.29
1.00
16.29
1.24%
1.45%
12.53%
14.58%
50.25%
2.41
2.25
2.39
0.98
15.57
1.56%
1.70%
15.13%
16.02%
43.17%
total assets
(iN BillioNS)
net income
(iN MillioNS)
cash dividends
2.5
2.0
1.5
1.0
0.5
0.0
2.50
2.0
1.5
1.0
.5
0
30
25
20
15
10
5
0
30
25
20
15
10
5
0
1.25
1.00
0.75
0.50
0.25
0.00
1.25
1.00
0.75
0.50
0.25
0.00
3
0
0
2
4
0
0
2
5
0
0
2
6
0
0
2
7
0
0
2
3
0
0
2
4
0
0
2
5
0
0
2
6
0
0
2
7
0
0
2
3
0
0
2
4
0
0
2
5
0
0
2
6
0
0
2
7
0
0
2
This report provides an overview of First Community Bancshares’ performance in 2007 and our business strategy as we enter 2008.
Detailed financial results are provided in the First Community Bancshares Form 10-K for 2007 available at www.fcbinc.com or by calling 800 425-0839.
01
First Community Bank
Come join the community.
As we move into 2008, we are clearly focused on our mission:
offering innovative and competitive products
and impeccable service, building financial
partnerships and proving our value every day
as your first financial resource.
dear stockholders and friends,
We are pleased to provide you this report of the outstanding performance of
First Community Bancshares in 2007. As we enter our 136th year as a banking
and financial services organization, we are uniquely positioned to build on our
foundation of strength and to manage our operations for steady growth and sound
performance in 2008 and beyond.
We are especially pleased with our 2007 results in light of the increasingly difficult
environment in which we operate. our adherence to long-held fundamentals of
sound banking and careful execution of our strategic plan for soundness, profitability
and growth have helped ensure our success, even as new obstacles and concerns
have arisen in the economy and the financial services industry.
in 2007, we were successful in achieving improved profitability, a strong balance
sheet, stable operations, improved service delivery, growth in resources and continued
improvement in the quality of our assets. our credit quality is among the best in the
industry and puts us in an enviable position given the current credit problems
experienced by many of our peers and banks throughout the industry.
2007 also represented our 16th consecutive year of dividend increases for our
shareholders, an indication of the continued strong earnings of First Community
Bancshares and our operating companies.
02
in memoriam
billy w arren harvey, sr.
1931 – 2007
First Community said goodbye this year to Bill Harvey, Sr., our Chairman of the Board,
who passed away in December. “Bill Harvey was an insightful leader who worked
tirelessly for the bank…we will miss him,” President and CEO John Mendez said.
Mr. Harvey served on the First Community Bancshares board since January 1990 and
chaired the First Community Bank board since 2002. He was the former president of
Bluefield Supply Company and its subsidiaries. Upon retirement from Bluefield Supply
Company, he founded and was president of Highlands Real Estate Management,
a commercial real estate firm managing retail properties in Southwest Virginia.
First Community Bancshares achieved record profitability in 2007 with
annual earnings of $29.63 million, or $2.62 diluted earnings per share, up
2.36% from 2006. return on average assets in 2007 was 1.39% compared
to 1.46% for 2006. return on average equity was 13.54% compared to
14.32% for 2006. on a core earnings basis, which excludes after-tax
non-recurring gains of $253 thousand in 2007 and $735 thousand in 2006,
earnings increased 4.13% over the prior year.
in keeping with our goal of lessening our dependence on interest income,
we increased our non-interest income by $3.51 million, or 16.45%, to
$24.83 million. income from our wealth management business — an area of
increased emphasis as more clients turn to us as their single source for diverse
financial services — improved by $1.07 million, or 38.03%. Service charges
on deposit accounts increased by $1.15 million, or 11.18%, and other
service charges and fees improved by $608 thousand, or 20.32%. Non-interest
income included $1.14 million in insurance commission revenues gained in
the fourth quarter from GreenPoint insurance Group, a full-service insurance
agency acquired by First Community Bancshares in September 2007.
We continue to be diligent in managing our asset quality, a critically important
measure of both our current financial strength and our future viability. We have
kept our sharp focus on protecting and enhancing the quality of our investments,
credit portfolio and other assets rather than being tempted by income opportunities
we consider to be short-sighted, irrational and not up to the high standards we
have set for First Community Bancshares.
our careful adherence to prudent credit policies enabled us to keep
non-performing assets at historically low levels. We have strategically avoided
exposure to alternative mortgage structures and high-risk development lending
through disciplined underwriting and strong approval processes. At year-end,
non-accrual loans stood at $2.92 million, or 0.24% of total loans, down from
0.30% in 2006. Total delinquencies did increase during the latter months
of the year but remained at a relatively low 0.98%. in the fourth quarter we
increased our loan loss provision for possible loan losses emanating from the
weakened real estate market as well as a slowing economy.
strategic initiatives for success
First Community’s strategy for future success has been
built on a firm foundation of service and quality. We are
committed to protecting and enhancing shareholder value
while also building strong and enduring customer relation-
ships, providing consultative assistance and effective
products and services at appropriate prices, delivered
with impeccable service.
in 2007, significant progress was made in our strategy
to strengthen the resources and infrastructure of First
Community while improving our service delivery. Strategic
initiatives include programs to improve our efficiency,
enhance our capabilities and expand our network.
efficiency improvements
Strengthening the efficiency of our operations is a priority
for First Community, which was ranked as one of the
nation’s top 100 most efficient banks in a report released
by American Banker in 2007. our efficiency ratio stood
at 51.20% at year-end, a mark that is desired by many,
but attained by few.
We have made great strides in improving our efficiency
by leveraging our processing capacity and technological
capability and streamlining our organizational structure
for maximum effectiveness. These changes have been
made only after careful review and evaluation of the
possible impact of these efforts on our balance sheet,
our results of operations and, most importantly, our
customer relationships.
We are working with our financial center staffs and
management teams to ensure that customers receive
superior personal service by making sure that staffing
levels, responsibilities and skill sets match customer
needs and expectations. Activities that can be handled
more efficiently outside of the financial centers, typically
in centralized locations, are being moved to give personal
bankers, commercial relationship managers and other
customer contact personnel more time and opportunity
to serve our customers.
03
Throughout our organization we are consolidating
business processes to achieve economies, control costs
and improve our ability to provide the quality products
and services our customers need and want, at the
appropriate price.
Enhanced capabilities
Expanded network
We continue to enhance our network of offices, both in the communities that
we have been privileged to serve for many years and in strategically targeted
areas including the richmond, Va., metro area and the Piedmont Triad area
of North Carolina, which includes our regional headquarters city of Winston-
Salem. A map of our total network is provided on Page 4.
our customers — individuals and families, businesses and
organizations — depend on us to provide the products,
services and advice they need to make the most of their
financial resources. A few examples of the many ways we
have enhanced our capabilities include:
Seven new financial centers and a new loan production office were added in
2007 and early 2008. We also improved customer convenience at our financial
centers by moving our daily cutoff time to 6 p.m. weekdays, expanding
Saturday banking hours and ensuring that our financial centers are designed
to meet customers’ needs.
– For our personal banking customers, we have restruc-
tured our deposit services to create a streamlined collection
of checking and savings accounts to better meet their
needs. We are continuing to expand our retail service
offerings, improve our service delivery and increase
our marketing efforts.
– Numerous efforts are under way to ensure that we are
building strong, long-term relationships with current
and new business clients, providing the consultative
assistance as well as the products and services they
need for the growth and success of their businesses. our
core group of successful relationship managers is being
expanded to include additional bankers with the skills and
experience required to understand and meet the financial
needs of businesses. More relationship managers are being
our network now includes the offices of investment Planning Consultants
and GreenPoint insurance with 10 offices designed to deliver these critical
financial services to individuals and businesses. We also have expanded our
Trust Division by adding a Trust Administrative officer in roanoke, Va.
well positioned for the future
As we move confidently into 2008, we recognize that many economic
challenges that arose in 2007 have not yet been resolved, and the possibility
exists that some will become even more complex. Despite the uncertainty,
First Community Bancshares is well positioned to overcome the challenges,
maximize the opportunities and continue our strong trend of growth and success.
even if this environment of adversity persists throughout the new year and
beyond, we have the financial strength and determination to continue to
thrive for the benefit of those individuals and firms that own this organization
and for the customers and communities we are privileged to serve.
first community’s strategy for future success has
been built on a firm foundation of service and quality.
placed throughout our existing service areas including
strategic growth markets such as richmond, Va., the
Piedmont area of North Carolina, east Tennessee and
Greenville, S.C.
All of us at First Community wish to thank you for the opportunity to serve
you and for your enthusiastic support and encouragement as our shareholders
and customers. We appreciate the enduring relationships we have developed
through the years and remain excited about the future that lies before us.
– our wealth management capabilities have been expanded
to include the services of investment Planning
Consultants, a wealth and investment advisory business
that joined us in 2006. We will continue to increase
the number of investment advisors available to clients
throughout our First Community Bank network.
– The addition of GreenPoint insurance Group, a full-service
insurance agency acquired in 2007, enhances our ability
to provide insurance and risk management services
to individuals and commercial customers. We plan to
continue to expand these insurance agency services
throughout our network. With the addition of GreenPoint,
First Community now provides a full range of financial
services including banking, investments, insurance,
wealth management and trust.
Sincerely,
John m. mendez
President and Chief Executive Officer
First Community Bancshares, Inc.
04
our locations
WeST
VirGiNiA
VirGiNiA
TeNNeSSee
NorTh
CAroliNA
north carolina
Charlotte
tennessee
Fall Branch
Clemmons
Johnson City
elkin
hays
Sparta
Taylorsville
Winston-Salem
Piney Flats
(People’s Community
Bank is a subsidiary of
First Community Bank,
N.A.)
virginia
Bluefield
Clintwood
emporia
Max Meadows
Mechanicsville
Pound
richlands
richmond
roanoke
Tazewell
Wytheville
west virginia
Athens
Beckley
Bluefield
Bluewell
Bridgeport
Buckhannon
Cowen
Craigsville
Daniels
Grafton
hinton
lindside
Man
oceana
Pineville
Princeton
richwood
Summersville
executive management team
John M. Mendez
President and
Chief Executive Officer
e. Stephen lilly
Chief Operating Officer
David D. Brown V
Chief Financial Officer
robert l. Buzzo
Vice President
and Secretary
05
board of directors
William P. Stafford
Chairman
William P. Stafford ii
Vice Chairman
i. Norris Kantor
John M. Mendez
A. A. Modena
Franklin P. hall
robert e. Perkinson, Jr.
Allen T. hamner
corporate information
corporate headquarters
one Community Place
Po Box 989
Bluefield, VA 24605-0989
800 425-0839
276 326-9000
stock registrar and transfer agent
BNY Mellon Shareowner Services
P.o. Box 358010
Pittsburgh, PA 15252
financial contact
David D. Brown V
Chief Financial officer
First Community Bancshares, inc.
Po Box 989
Bluefield, VA 24605-0989
800 425-0839
276 326-9000
internet access
www.fcbinc.com
email: ir@fcbinc.com
www.fcbresource.com
email: marketing@fcbinc.com
form 10-k
The annual report on Form 10-K, filed with the Securities and exchange
Commission, is available to shareholders upon request to the Chief Financial
officer of First Community Bancshares, inc., or through the company’s
web site.
This report may include forward-looking statements. These forward-looking
statements are based on current expectations that involve risks, uncertainties
and assumptions. Should one or more of these risks or uncertainties
materialize, or should underlying assumptions prove incorrect, actual
results may differ materially. These risks include: the timely development,
production and acceptance of new products and services and their feature
sets; the challenge of managing asset/liability levels; the management of
credit risk and interest rate risk; the difficulty of keeping expense growth
at modest levels while increasing revenues; and other risks detailed from
time to time in the Company’s Securities and exchange Commission
reports, including but not limited to the Annual report on Form 10-K
for the most recent year ended. Pursuant to the Private Securities
litigation reform Act of 1995, the Company does not undertake to
update forward-looking statements contained within this report.
corporate headquarters
one Community Place
Po Box 989
Bluefield, VA 24605-0989
800 425-0839
276 326-9000