UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM ~~10-Q~~10-Q/A

(Amendment No. 1)

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)

OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarter ended March 31, ~~2010~~2009

Commission file number 000-19297

FIRST COMMUNITY BANCSHARES, INC.

(Exact name of registrant as specified in its charter)


Nevada		55-0694814

(State or other jurisdiction of incorporation)		(IRS Employer Identification No.)

P.O. Box 989 Bluefield, Virginia		24605-0989

~~Bluefield, Virginia~~		~~24605-0989~~
(Address of principal executive offices)		(Zip Code)

(276) 326-9000

(Registrant’s telephone number, including area code)

Indicate 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 the to such filing requirements for the past 90 days.

~~Yes~~

Yesþ Noo

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~~

Yeso Noo

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 definitions 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~~	þ

Large accelerated filero		Accelerated filerþ		Non-accelerated filer	¨o	Smaller reporting companyo
	¨			(Do not check if a smaller reporting company)

~~(Do not check if a smaller reporting company)~~

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

~~Yes~~

Yeso Noþ

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

Class – Common Stock, $1.00 Par Value; ~~17,782,791~~11,596,249 shares outstanding as of ~~April 26, 2010~~May 4, 2009

FIRST COMMUNITY BANCSHARES, INC.

FORM ~~10-Q~~

10-Q/A
For the quarter ended March 31, ~~2010~~

2009

INDEX


PART I.	FINANCIAL INFORMATION

Item 1.	Financial Statements

Consolidated Balance Sheets as of March 31, ~~2010~~2009 (Unaudited) and December ~~31,2009~~31, 2008	3		4

Consolidated Statements of Income for the ~~Three Month~~Three-Month Periods Ended March 31, ~~2010and~~ 2009 and 2008 (Unaudited)	4		5

Consolidated Statements of Cash Flows for the Three Months Ended March 31, ~~2010~~2009 and ~~2009~~2008 (Unaudited)	5		6

Consolidated Statements of Changes in Stockholders’ Equity for the Three Months Ended March 31, ~~2010~~2009 and ~~2009~~2008 (Unaudited)	6
	~~Notes to Consolidated Financial Statements~~	7

Notes to Consolidated Financial Statements			8

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	25

~~Item 3.~~	~~Quantitative and Qualitative Disclosures about Market Risk~~	35

~~Item 4.~~	~~Controls and Procedures~~	36

~~PART II.~~	~~OTHER INFORMATION~~23

Item 1.3. Quantitative and Qualitative Disclosures about Market Risk	~~Legal Proceedings~~	37	33

Item ~~1A.~~4. Controls and Procedures	~~Risk Factors~~	37	35

PART II. OTHER INFORMATION

Item 1. Legal Proceedings			36

Item 1A. Risk Factors			36

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	37		36

Item 3.	Defaults Upon Senior Securities	37		36

Item 4. Submission of Matters to a Vote of Security Holders	~~Reserved~~	38	36

Item 5.	Other Information	38		36

Item 6. Exhibits	~~Exhibits~~	38	37

SIGNATURES	42		39

EXHIBIT INDEX	43		40
EX-31.1
EX-31.2
EX-32

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Explanatory Note

Overview

First Community Bancshares, Inc. (“the Company”) is filing this amendment to its Quarterly Report on Form 10-Q for the quarter ended March 31, 2009 (the “Original Filing”) to amend and restate financial statements and other financial information in the Original Filing as filed with the Securities and Exchange Commission (“SEC”) to reflect the correction of a computational error in its model used to calculate its allowance for loan losses. For the same reason, the Company also is restating the financial statements and other financial information filed with the SEC for the years ended December 31, 2009 and 2008 and each of the quarters ended June 30, 2009, September 30, 2009 and March 31, 2010.

Background

The reason for the restatement is to correct a computational error in the model that the Company used to calculate the quantitative basis for its allowance for loan losses for the periods indicated. The Company identified the computational error as a result of one of its routine internal audits. In connection with its determination of the appropriate loan loss reserves at December 31, 2008, the Company made certain modifications to its loan loss reserves model with respect to a $130.76 million pool of loans. However, in calculating the loan loss reserves for this pool of loans, the computational error resulted in the Company’s historical quarterly net charge-off rates not being annualized.

The Company has corrected the computational error in its model for calculating the allowance for loan losses. Based on the Company’s modeling using the corrected computations, the Company, in consultation with the Audit Committee of its Board of Directors, determined that the amount of the allowance for loan losses should be increased by an aggregate of $2.55 million for the period beginning December 31, 2008 and ending March 31, 2010.

Amendments to the Original Filing

The following sections of this Quarterly Report on Form 10-Q/A have been revised to reflect the restatement: Part I — Item 1 – Financial Statements, Item 2 — Management’s Discussion and Analysis of Financial Condition and Results of Operations, Item 4 — Controls and Procedures, and Part II – Item 6 – Exhibits. Except to the extent relating to the restatement of the Company’s financial statements and other financial information described above, the financial statements and other disclosures in this Quarterly Report on Form 10-Q/A do not reflect any events that have occurred after the Original Filing was filed with the SEC on May 11, 2009. This Quarterly Report on Form 10-Q/A does not modify or update those disclosures affected by subsequent events. Information not affected by the restatement is unchanged and reflects the disclosures made at the time of the Original Filing. Although the Company is amending only certain portions of its Quarterly Report on Form 10-Q for the quarter ended March 31, 2009, for convenience and ease of reference, it is filing the entire Quarterly Report on this Form 10-Q/A.

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PART I. ITEM 1. Financial Statements

FIRST COMMUNITY BANCSHARES, INC.

CONSOLIDATED BALANCE SHEETS


	March 31,			December 31,
	2009			2008*
	(Unaudited)
(Dollars in Thousands, Except Per Share Data)	(Restated)			(Restated)
Assets
Cash and due from banks	$	32,758		$	39,310
Interest-bearing balances with banks		68,202			7,129

Total cash and cash equivalents		100,960			46,439
Securities available-for-sale		549,664			520,723
Securities held-to-maturity		8,471			8,670
Loans held for sale		1,445			1,024
Loans held for investment, net of unearned income		1,276,790			1,298,159
Less allowance for loan losses		18,420			17,782

Net loans held for investment		1,258,370			1,280,377
Premises and equipment		54,893			55,024
Other real estate owned		3,114			1,326
Interest receivable		8,848			10,084
Goodwill and other intangible assets		89,338			89,612
Other assets		122,873			118,908

Total Assets	$	2,197,976		$	2,132,187


Liabilities
Deposits:
Noninterest-bearing	$	207,947		$	199,712
Interest-bearing		1,375,497			1,304,046

Total Deposits		1,583,444			1,503,758
Interest, taxes and other liabilities		28,293			27,423
Securities sold under agreements to repurchase		153,824			165,914
FHLB borrowings and other indebtedness		215,870			215,877

Total Liabilities		1,981,431			1,912,972


Stockholders’ Equity
Preferred stock, par value undesignated; 1,000,000 shares authorized; 41,500 issued at March 31, 2009, and December 31, 2008		40,471			40,419
Common stock, $1 par value; 25,000,000 shares authorized; 12,051,234 shares issued at March 31, 2009, and December 31, 2008, including 454,985 and 483,785 shares in treasury, respectively		12,051			12,051
Additional paid-in capital		127,992			128,526
Retained earnings		116,856			106,104
Treasury stock, at cost		(14,453	)		(15,368	)
Accumulated other comprehensive loss		(66,372	)		(52,517	)

Total Stockholders’ Equity		216,545			219,215

Total Liabilities and Stockholders’ Equity	$	2,197,976		$	2,132,187


*		Derived from audited financial statements.

March 31, December 31,
2010 2009*
(Dollars in Thousands, Except Per Share Data) (Unaudited)
Assets
Cash and due from banks $ 33,071 $ 36,265
Federal funds sold 41,891 61,376
Interest-bearing balances with banks 12,744 3,700
Total cash and cash equivalents 87,706 101,341
Securities available for sale 524,297 486,057
Securities held to maturity 7,155 7,454
Loans held for sale 1,494 11,576
Loans held for investment, net of unearned income 1,390,874 1,393,931
Less allowance for loan losses 21,956 21,725
Net loans held for investment 1,368,918 1,372,206
Premises and equipment, net 56,772 56,946
Other real estate owned 4,740 4,578
Interest receivable 8,630 8,610
Goodwill and other intangible assets 90,805 91,061
Other assets 130,017 135,049
Total Assets $ 2,280,534 $ 2,274,878

Liabilities
Deposits:
Noninterest bearing $ 205,810 $ 208,244
Interest bearing 1,449,801 1,437,716
Total Deposits 1,655,611 1,645,960
Interest, taxes and other liabilities 21,912 22,498
Securities sold under agreements to repurchase 144,381 153,634
FHLB borrowings and other indebtedness 195,873 198,924
Total Liabilities 2,017,777 2,021,016

Stockholders' Equity
Common stock, $1 par value; 25,000,000 shares authorized; 18,082,822 shares issued at March 31, 2010, and December 31, 2009, including 300,031 and 317,658 shares in treasury, respectively 18,083 18,083
Additional paid-in capital 190,650 190,967
Retained earnings 71,857 68,355
Treasury stock, at cost (9,342 ) (9,891 )
Accumulated other comprehensive loss (8,491 ) (13,652 )
Total Stockholders' Equity 262,757 253,862
Total Liabilities and Stockholders' Equity $ 2,280,534 $ 2,274,878

* Derived from audited financial statements.

See Notes to Consolidated Financial Statements.

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~~- 3 - -~~

FIRST COMMUNITY BANCSHARES, INC.

CONSOLIDATED STATEMENTS OF INCOME (Unaudited)


	Three Months Ended
	March 31,
	2009			2008
(Dollars in Thousands, Except Per Share Data)	(Restated)
Interest Income
Interest and fees on loans held for investment	$	19,984		$	21,237
Interest on securities-taxable		5,164			6,067
Interest on securities-nontaxable		1,676			2,063
Interest on deposits in banks		39			180

Total interest income		26,863			29,547
Interest Expense
Interest on deposits		7,567			8,741
Interest on borrowings		2,863			4,446

Total interest expense		10,430			13,187

Net interest income		16,433			16,360
Provision for loan losses		2,148			323

Net interest income after provision for loan losses		14,285			16,037

Noninterest Income
Wealth management income		984			899
Service charges on deposit accounts		3,157			3,099
Other service charges, commissions and fees		1,178			1,121
Insurance commissions		2,317			1,344
Total other-than-temporary impairment losses		(209	)		—
Portion of loss recognized in other comprehensive income		—			—

Net impairment losses recognized in earnings		(209	)		—
Gain on sale of securities		411			1,820
Other operating income		586			858

Total noninterest income		8,424			9,141

Noninterest Expense
Salaries and employee benefits		7,866			7,790
Occupancy expense of bank premises		1,603			1,164
Furniture and equipment expense		938			901
Intangible amortization		245			160
Prepayment penalty on FHLB advance		—			1,647
Other operating expense		4,542			4,621

Total noninterest expense		15,194			16,283

Income before income taxes		7,515			8,895
Income tax expense		2,323			2,583

Net income		5,192			6,312
Dividends on preferred stock		571			—

Net income available to common shareholders	$	4,621		$	6,312


Basic earnings per common share	$	0.40		$	0.57

Diluted earnings per common share	$	0.40		$	0.57


Dividends declared per common share	$	—		$	0.28


Weighted average basic shares outstanding		11,567,769			11,029,931
Weighted average diluted shares outstanding		11,616,568			11,107,610

Three Months Ended
March 31,
(Dollars In Thousands, Except Per Share Data) 2010 2009
Interest Income
Interest and fees on loans held for investment $ 21,354 $ 19,984
Interest on securities-taxable 3,786 5,164
Interest on securities-nontaxable 1,426 1,676
Interest on federal funds sold and deposits in banks 46 39
Total interest income 26,612 26,863
Interest Expense
Interest on deposits 5,502 7,567
Interest on borrowings 2,491 2,863
Total interest expense 7,993 10,430
Net interest income 18,619 16,433
Provision for loan losses 3,665 2,087
Net interest income after provision for loan losses 14,954 14,346
Noninterest Income
Wealth management income 885 984
Service charges on deposit accounts 2,992 3,157
Other service charges and fees 1,281 1,178
Insurance commissions 2,201 2,317
Total impairment losses on securities - (209 )
Portion of loss recognized in other comprehensive income - -
Net impairment losses recognized in earnings - (209 )
Net gains on sale of securities 250 411
Other operating income 969 579
Total noninterest income 8,578 8,417
Noninterest Expense
Salaries and employee benefits 7,969 7,866
Occupancy expense of bank premises 1,709 1,603
Furniture and equipment expense 904 938
Amortization of intangible assets 256 245
FDIC premiums and assessments 701 188
Merger related expenses - 1
Other operating expense 4,533 4,346
Total noninterest expense 16,072 15,187
Income before income taxes 7,460 7,576
Income tax expense 2,182 2,346
Net income 5,278 5,230
Dividends on preferred stock - 571
Net income available to common shareholders $ 5,278 $ 4,659

Basic earnings per common share $ 0.30 $ 0.40
Diluted earnings per common share $ 0.30 $ 0.40

Dividends declared per common share $ 0.10 $ -

Weighted average basic shares outstanding 17,765,556 11,567,769
Weighted average diluted shares outstanding 17,784,449 11,616,568

See Notes to Consolidated Financial Statements.

- 5 -

~~- 4 - -~~

FIRST COMMUNITY BANCSHARES, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)


	Three Months Ended
	March 31,
	2009			2008
(In Thousands)	(Restated)
Operating activities:
Net Income	$	5,192		$	6,312
Adjustments to reconcile net income to net cash provided by operating activities:
Provision for loan losses		2,148			323
Depreciation and amortization of premises and equipment		1,096			889
Intangible amortization		245			160
Net investment amortization and accretion		193			(340	)
Net gain on the sale of assets		(439	)		(1,781	)
Mortgage loans originated for sale		(8,481	)		(13,280	)
Proceeds from sales of mortgage loans		8,083			12,058
Gain on sales of loans		(23	)		(83	)
Deferred income tax benefit		(340	)		(149	)
Decrease in interest receivable		1,235			2,723
Other operating activities, net		1,194			3,543

Net cash provided by operating activities		10,103			10,375


Investing activities:
Proceeds from sales of securities available-for-sale		46,394			30,797
Proceeds from maturities and calls of securities available-for-sale		10,346			37,723
Proceeds from maturities and calls of securities held-to-maturity		200			—
Purchase of securities available-for-sale		(97,018	)		(14,118	)
Net decrease in loans held for investment		18,065			45,809
Proceeds from the redemption of FHLB stock		324			—
Proceeds from sales of equipment		7			—
Purchase of premises and equipment		(971	)		(1,952	)

Net cash provided by (used in) investing activities		(22,653	)		98,259


Financing activities:
Net increase (decrease) in demand and savings deposits		27,482			(2,662	)
Net increase (decrease) in time deposits		52,204			(31,828	)
Net decrease in federal funds purchased		—			(18,500	)
Net (decrease) increase in securities sold under agreement to repurchase		(12,090	)		573
Net decrease in FHLB and other borrowings		(7	)		(26,674	)
Proceeds from the exercise of stock options		—			66
Excess tax benefit from stock-based compensation		—			10
Acquisition of treasury stock		—			(2,168	)
Preferred dividends paid		(518	)		—
Common dividends paid		—			(3,082	)

Net cash (used in) provided by financing activities		67,071			(84,265	)

Increase in cash and cash equivalents		54,521			24,369
Cash and cash equivalents at beginning of period		46,439			52,746

Cash and cash equivalents at end of period	$	100,960		$	77,115

Supplemental information — Noncash items
Transfer of loans to other real estate	$	2,030		$	282
Cumulative effect adjustment of FAS 115-2, net of tax	$	6,131		$	—

Three Months Ended
March 31,
(In Thousands) 2010 2009
Operating activities:
Net income $ 5,278 $ 5,230
Adjustments to reconcile net income to net cash provided by operating activities:
Provision for loan losses 3,665 2,087
Depreciation and amortization of premises and equipment 1,021 1,096
Intangible amortization 256 245
Net investment amortization and accretion 1 193
Net gain on the sale of assets (214 ) (439 )
Mortgage loans originated for sale (7,583 ) (8,481 )
Proceeds from sales of mortgage loans 17,886 8,083
Gain on sales of loans (221 ) (23 )
Equity-based compensation expense 22 40
Deferred income tax expense (benefit) 73 (317 )
(Increase) decrease in interest receivable (20 ) 1,235
Net impairment losses recognized in earnings - 209
Other operating activities, net 1,925 945
Net cash provided by operating activities 22,089 10,103

Investing activities:
Proceeds from sales of securities available-for-sale 11,512 46,394
Proceeds from maturities and calls of securities available-for-sale 23,490 10,346
Proceeds from maturities and calls of securities held-to-maturity 301 200
Purchase of securities available-for-sale (65,168 ) (97,018 )
Net (increase) decrease in loans held for investment (580 ) 18,065
Proceeds from the redemption of FHLB stock - 324
Proceeds from sales of equipment 3 7
Purchase of premises and equipment (853 ) (971 )
Net cash used in investing activities (31,295 ) (22,653 )

Financing activities:
Net increase in demand and savings deposits 58,674 27,482
Net (decrease) increase in time deposits (49,023 ) 52,204
Net decrease in securities sold under agreement to repurchase (9,253 ) (12,090 )
Net decrease in FHLB and other borrowings (3,051 ) (7 )
Preferred dividends paid - (518 )
Common dividends paid (1,776 ) -
Net cash (used in) provided by financing activities (4,429 ) 67,071
(Decrease) increase in cash and cash equivalents (13,635 ) 54,521
Cash and cash equivalents at beginning of period 101,341 46,439
Cash and cash equivalents at end of period $ 87,706 $ 100,960

Supplemental information — Noncash items
Transfer of loans to other real estate $ 1,587 $ 2,030
Cumulative effect adjustment, net of tax* $ - $ 6,131

* In accordance with FASB Accounting Standards Codification Investments — Debt and Equity Securities Topic 320

See Notes to Consolidated Financial Statements.

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~~- 5 - -~~

FIRST COMMUNITY BANCSHARES, INC.

CONSOLIDATED STATEMENTS OF CHANGES IN ~~STOCKHOLDERS'~~STOCKHOLDERS’ EQUITY (Unaudited)


														Accumulated
					Additional									Other
	Preferred		Common		Paid-in			Retained			Treasury			Comprehensive
	Stock		Stock		Capital			Earnings			Stock			Income (Loss)			Total
(Dollars in Thousands)
Balance January 1, 2008	$	—	$	11,499	$	108,825		$	117,670		$	(13,613	)	$	(7,283	)	$	217,098

Cumulative effect of change in accounting principle		—		—		—			(813	)		—			—			(813	)
Comprehensive income:
Net income		—		—		—			6,312			—			—			6,312
Other comprehensive loss, net of tax:
Unrealized loss on securities available for sale		—		—		—			—			—			(7,280	)		(7,280	)
Reclassification adjustment for gains realized in net income															(534	)		(534	)
Unrealized loss on cash flow hedge		—		—		—			—			—			(950	)		(950	)

Comprehensive loss		—		—		—			6,312			—			(8,764	)		(2,452	)

Common dividends declared		—		—		—			(3,082	)		—						(3,082	)
Acquisition of 67,300 treasury shares		—		—		—			—			(2,168	)		—			(2,168	)
Acquisition of GreenPoint Insurance - 7,728 shares issued		—		—		22			—			245			—			267
Equity-based compensation expense		—		—		52			—			—			—			52
Tax benefit from exercise of stock options		—		—		10			—			—			—			10
Option exercises - 41,470 shares		—		—		(13	)		—			79			—			66

Balance March 31, 2008	$	—	$	11,499	$	108,896		$	120,087		$	(15,457	)	$	(16,047	)	$	208,978


Balance January 1, 2009 (restated)	$	40,419	$	12,051	$	128,526		$	106,104		$	(15,368	)	$	(52,517	)	$	219,215

Cumulative effect of change in accounting principle		—		—		—			6,131			—			(6,131	)		0
Comprehensive income:
Net income (restated)		—		—		—			5,192			—			—			5,192
Other comprehensive loss, net of tax:
Unrealized loss on securities available-for-sale		—		—		—			—			—			(7,732	)		(7,732	)
Reclassification adjustment for gains realized in net income		—		—		—			—			—			(140	)		(140	)
Unrealized gain on cash flow hedge		—		—		—			—			—			148			148

Comprehensive loss		—		—		—			11,323			—			(13,855	)		(2,532	)

Preferred dividend, net		52		—		(38	)		(571	)		—			—			(557	)
Equity-based compensation expense		—		—		40			—			—			—			40
Retirement plan contribution - 28,800 shares issued		—		—		(536	)		—			915			—			379

Balance March 31, 2009 (restated)	$	40,471	$	12,051	$	127,992		$	116,856		$	(14,453	)	$	(66,372	)	$	216,545

Accumulated
Additional Other
Preferred Common Paid-in Retained Treasury Comprehensive

Stock

Stock

Capital

Earnings

Stock

Income (Loss)

Total

(Dollars in Thousands)
Balance January 1, 2009 $ 40,419 $ 12,051 $ 128,526 $ 107,231 $ (15,368 ) $ (52,517 ) $ 220,342
Cumulative effect of change in accounting principle - - - 6,131 - (6,131 ) -
Comprehensive income:
Net income - - - 5,230 - - 5,230
Other comprehensive loss — See Note 9 - - - - - (13,855 ) (13,855 )
Comprehensive loss - - - 11,361 - (19,986 ) (8,625 )
Preferred dividend, net 52 - (38 ) (571 ) - - (557 )
Equity-based compensation expense - - 40 - - - 40
Retirement plan contribution — 28,800 shares issued - - (536 ) - 915 - 379
Balance March 31, 2009 $ 40,471 $ 12,051 $ 127,992 $ 129,382 $ (14,453 ) $ (92,489 ) $ 211,579

Balance January 1, 2010 $ - $ 18,083 $ 190,967 $ 68,355 $ (9,891 ) $ (13,652 ) $ 253,862
Comprehensive income:
Net income - - - 5,278 - - 5,278
Other comprehensive income — See Note 9 - - - - - 5,161 5,161
Comprehensive income - - - 5,278 - 5,161 10,439
Common dividends paid - - - (1,776 ) - - (1,776 )
Equity-based compensation expense - - 22 - - - 22
Retirement plan contribution — 17,627 shares issued - - (339 ) - 549 - 210
Balance March 31, 2010 $ - $ 18,083 $ 190,650 $ 71,857 $ (9,342 ) $ (8,491 ) $ 262,757

See Notes to Consolidated Financial Statements.

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~~- 6 - -~~

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Note 1. General

Unaudited Consolidated Financial Statements

The accompanying unaudited consolidated financial statements of First Community Bancshares, Inc. and subsidiaries (“First Community” or the “Company”) have been prepared in accordance with United States generally accepted accounting principles ~~(“GAAP”)~~ for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. In the opinion of management, all adjustments, including normal recurring accruals, necessary for a fair presentation have been made. These results are not necessarily indicative of the results of consolidated operations that might be expected for the full calendar year.

The consolidated balance sheet as of December 31, ~~2009,~~2008, has been derived from the restated audited consolidated financial statements included in the Company’s ~~2009~~2008 Annual Report on Form ~~10-K.~~10-K/A (the “2008 Form 10-K/A”). Certain information and footnote disclosures normally included in annual consolidated financial statements prepared in accordance with ~~GAAP~~accounting principles generally accepted in the United States (“GAAP”) have been omitted in accordance with standards for the preparation of interim consolidated financial statements. These consolidated financial statements should be read in conjunction with the consolidated financial statements and notes thereto included in the Company’s ~~2009 Annual Report on~~2008 Form ~~10-K.~~10-K/A.

A more complete and detailed description of First Community’s significant accounting policies is included within Footnote 1 of Item 8, “Financial Statements and Supplementary Data” in the Company’s ~~Annual Report on~~2008 Form ~~10-K for December 31, 2009.~~10-K/A. Further discussion of the Company’s application of critical accounting policies is included within the “Application of Critical Accounting Policies” section of Part I, Item 2, “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” included herein.

The Company operates within two business segments, banking and insurance services. Insurance services are comprised of agencies which sell property and casualty and life and health insurance policies and arrangements. All other operations, including commercial and consumer banking, lending activities, and wealth management are included within the banking segment.

Earnings Per Share

Basic earnings per share is determined by dividing net income available to common shareholders by the weighted average number of shares outstanding. Diluted earnings per share is determined by dividing net income available to common shareholders by the weighted average shares outstanding ~~which includes~~increased by the dilutive effect of stock options, warrants and contingently issuable shares. Basic and diluted net income per common share calculations follow:


	For the three months
	ended March 31,
	2009		2008
(Amounts in Thousands, Except Share and Per Share Data)	(Restated)
Net income available to common shareholders	$	4,621	$	6,312

Weighted average shares outstanding		11,567,769		11,029,931
Dilutive shares for stock options		6,332		57,040
Contingently issuable shares		42,467		20,639
Common stock warrants		—		—

Weighted average dilutive shares outstanding		11,616,568		11,107,610


Basic earnings per share	$	0.40	$	0.57
Diluted earnings per share	$	0.40	$	0.57

For the three months
ended March 31,
2010 2009
(Amounts in Thousands, Except Share and Per Share Data)
Net income available to common shareholders $ 5,278 $ 4,659

Weighted average shares outstanding 17,765,556 11,567,769
Dilutive shares for stock options 4,336 6,332
Contingently issuable shares 14,557 42,467
Weighted average dilutive shares outstanding 17,784,449 11,616,568

Basic earnings per share $ 0.30 $ 0.40
Diluted earnings per share $ 0.30 $ 0.40

For the three ~~month period~~months ended March 31, ~~2010,~~2009, options and warrants to purchase ~~576,962~~391,104 shares of common stock were outstanding but were not included in the computation of diluted earnings per common share because ~~they~~their effect would ~~have an anti-dilutive effect. Likewise,~~be anti-dilutive. This compares to options ~~and warrants~~ to purchase ~~391,104~~10,000 shares of common stock ~~were excluded from~~outstanding but not included in the ~~2009 computations~~computation of diluted earnings per common share because their effect would be ~~anti-dilutive.~~anti-dilutive for the three months ended March 31, 2008.

- 8 -

~~- 7 - -~~

Recent Accounting Pronouncements

In April 2009, the Financial Accounting Standards Board (“FASB”) issued FASB ~~ASC Topic 810, Consolidation.~~ ~~New authoritative accounting guidance under ASC Topic 810 amends prior guidance~~Staff Position (FSP) 107-1 and APB 28-1, “Interim Disclosures about Fair Value of Financial Instruments.” The FSP requires a public entity to change how a company determines when an entity that is insufficiently capitalized or is not controlled through voting (or similar rights) should be consolidated. The determination of whether a company is required to consolidate an entity is based on, among other things, an entity’s purpose and design and a company’s ability to direct the activities of the entity that most significantly impact the entity’s economic performance. The new authoritative accounting guidance requires additionalprovide disclosures about ~~the reporting entity’s involvement~~fair value of financial instruments in interim financial information. The FSP will be effective for interim and annual financial periods ending after June 15, 2009, with ~~variable interest entities and any significant changes in risk exposure due to that involvement as well as its affect on the entity’s financial statements.~~early adoption permitted for periods ending after March 15, 2009. The Company adopted the provisions of FSP FAS 107-1 and APB 28-1 effective January 1, 2009.

In April 2009, the ~~new authoritative accounting~~FASB issued FSP FAS 115-2, FAS 124-2 and EITF 99-20-2, “Recognition and Presentation of Other-Than-Temporary-Impairment.” The FSP (i) changes existing guidance ~~under ASC Topic 810 during~~for determining whether an impairment is other than temporary to debt securities and (ii) replaces the ~~first quarter~~existing requirement that the entity’s management assert it has both the intent and ability to hold an impaired debt security until recovery with a requirement that management assert: (a) it does not have the intent to sell the debt security; and (b) it is more likely than not that it will not have to sell the debt security before recovery of ~~2010.~~its cost basis. Under the FSP, declines in the fair value of held-to-maturity and available-for-sale debt securities below their cost that are deemed to be other than temporary are reflected in earnings as realized losses to the extent the impairment is related to credit losses. The ~~adoption~~amount of impairment related to other factors is recognized in other comprehensive income. The Company adopted the ~~guidance had no~~provisions of FSP FAS 115-2, FAS 124-2 and EITF 99-20-2-1 effective January 1, 2009, and made a cumulative effect credit adjustment in retained earnings of approximately $6.13 million.

In April 2009, the FASB issued FSP FAS 157-4, “Determining Fair Value When the Volume and Level of Activity for the Asset or Liability Have Significantly Decreased and Identifying Transactions That Are Not Orderly.” The FSP affirms the objective of fair value when a market is not active, clarifies and includes additional factors for determining whether there has been a significant decrease in market activity, eliminates the presumption that all transactions are distressed unless proven otherwise, and requires an entity to disclose a change in valuation technique. The Company adopted the provisions of FSP FAS 157-4 effective January 1, 2009, which did not have a material impact on the Company’s financial ~~statements.~~condition or results of operations.

In May 2008, the FASB ~~ASC Topic 820, Fair Value Measurements and Disclosures.~~ ~~New authoritative guidance under ASC Topic 820, “Fair Value Measurements and Disclosures,” amends prior guidance that requires entities~~issued Statement No. 162, “The Hierarchy of Generally Accepted Accounting Principles” (“SFAS 162”). This statement establishes a framework for selecting accounting principles to disclose additional information regarding assets and liabilities that are transferred between levels of the fair value hierarchy. Entities are also required to disclose information in the Level 3 rollforward about purchases, sales, issuances and settlements on a gross basis. In addition to these new disclosure requirements, existing guidance pertaining to the level of disaggregation at which fair value disclosures should be ~~made and the requirements to disclose information about the valuation techniques and inputs~~ used in estimating Level 2 and Level 3 fair value measurements is further clarified. The Company adopted the new authoritative accounting guidance under ASC Topic 820 in the first quarter of 2010 and new disclosurespreparing financial statements that are presented in ~~Note 12 — Fair Value~~conformity with US GAAP. SFAS 162 is effective 60 days following the SEC’s approval of the ~~Notes~~Public Company Accounting Oversight Board Auditing amendments to ~~Consolidated Financial Statements.~~

~~FASB ASC Topic 860, Transfers~~AU Section 411, “The Meaning of Present Fairly in Conformity with Generally Accepted Accounting Principles,” and ~~Servicing.~~ ~~New authoritative accounting guidance under ASC Topic 860, “Transfers and Servicing,” amends prior accounting guidance~~is not expected to ~~enhance reporting about transfers of financial assets, including securitizations, and where companies~~ have continuing exposure to the risks related to transferred financial assets. The authoritative accounting guidance eliminates the concept of a “qualifying special purpose entity” and changes the requirements for derecognizing financial assets. The authoritative accounting guidance also requires additional disclosures about all continuing involvements with transferred financial assets including information about gains and losses resulting from transfers during the period. The Company adopted the new authoritative accounting guidance under ASC Topic 860 effective January 1, 2010, and it did not have a significantan impact on the Company’s consolidated financial statements.

In March 2008, the FASB issued Statement No. 161, “Disclosures about Derivative Instruments and Hedging Activities – an amendment of FASB Statement No. 133” (“SFAS 161”). This statement requires enhanced disclosures about an entity’s derivative and hedging activities in order to improve the transparency of financial reporting. Entities are required to provide enhanced disclosures about (a) how and why an entity uses derivative instruments, (b) how derivative instruments and related hedged items are accounted for under Statement 133 and its related interpretations, and (c) how derivative instruments and related hedged items affect an entity’s financial position, financial performance, and cash flows. The Company adopted SFAS 161 effective January 1, 2009, and the enhanced disclosures are included in Note 12 – Derivatives and Hedging Activities.

In December 2007, the FASB revised Statement No. 141, “Business Combinations” (“SFAS 141R”). This statement requires an acquirer to recognize the assets acquired, the liabilities assumed, and any non-controlling interest in the acquiree at the acquisition date, measured at their fair values as of that date. This statement recognizes and measures the goodwill acquired in the business combination or a gain from a bargain purchase. This statement also defines the acquirer as the entity that obtains control of one or more businesses in the business combination and establishes the acquisition date as the date that the acquiree achieves control. Additionally this statement determines what information to disclose to enable users of the financial statements to evaluate the nature and financial effects of the business combination. In connection with its January 1, 2009, adoption of SFAS 141R, the Company has expensed costs associated with recently announced transactions.

Note 2. Restatement of Consolidated Financial Statements

As a result of a routine internal audit, the Company determined there was a computational error in the model that it uses to calculate the quantitative basis for its allowance for loan losses. In connection with its determination of the appropriate loan loss reserve at December 31, 2008, the Company made certain modifications to its loan loss reserve model with respect to a $130.76 million pool of loans. However, in calculating the loan loss reserves for this pool of loans, the historical quarterly net charge-off rates were not annualized as was the case with all other quarterly loss rates in the model. The Company has corrected the computational error in its model for calculating the allowance for loan losses. Based on the Company’s modeling using the corrected computations, the Company, in consultation with the Audit Committee of its Board of Directors, determined that the amount of the allowance for loan losses should be increased by an aggregate of $2.55 million for the period beginning December 31, 2008 and ending March 31, 2010.

In this Form 10-Q/A, the Company is restating its unaudited consolidated balance sheet, consolidated statement of income, statement of cash flows, and statement of changes in stockholders’ equity for the three months ended March 31, 2009.

In its 2008 Form 10-K/A, which has been filed with the SEC, the Company restated its consolidated balance sheet, statements of income, statements of cash flows and statement of changes in stockholders’ equity at and for the year ended December 31, 2008. For ease of reference, the effects of the restatement on the consolidated balance sheet for the year ended December 31, 2008 is provided below in this Note 2.

The effects of the restatement by line item for the periods presented in this Quarterly Report on Form 10-Q/A follow.


	Impact on Consolidated
	Balance Sheets
	March 31, 2009							December 31, 2008
	As Previously							As Previously
(Amounts in Thousands)	Reported		As Restated		Effect of Change			Reported		As Restated		Effect of Change
Allowance for loan losses	$	16,555	$	18,420	$	1,865		$	15,978	$	17,782	$	1,804
Net loans held for investment		1,260,235		1,258,370		(1,865	)		1,282,181		1,280,377		(1,804	)
Other assets		122,173		122,873		700			118,231		118,908		677
Total assets		2,199,141		2,197,976		(1,165	)		2,133,314		2,132,187		(1,127	)
Retained earnings		118,021		116,856		(1,165	)		107,231		106,104		(1,127	)
Total stockholders’ equity		217,710		216,545		(1,165	)		220,342		219,215		(1,127	)


	Impact on Consolidated
	Statements of Income
	Three Months Ended March 31, 2009
	As Previously				Effect of
(Amounts in Thousands, except per share data)	Reported		As Restated		Change
Provision for loan losses	$	2,087	$	2,148	$	61
Net interest income after provision for loan losses		14,346		14,285		(61	)

Income before income taxes		7,576		7,515		(61	)
Income tax expense		2,346		2,323		(23	)

Net income		5,230		5,192		(38	)
Net income to common shareholders		4,659		4,621		(38	)

Net income per share
Basic	$	0.40	$	0.40	$	—
Diluted	$	0.40	$	0.40	$	—


	Impact on Consolidated
	Statements of Cash Flows
	Three Months Ended March 31, 2009
	As Previously						Effect of
(Amounts in Thousands)	Reported			As Restated			Change
Operating Activities:
Net income	$	5,230		$	5,192		$	(38	)
Provision for loan losses		2,087			2,148			61
Deferred income tax benefit		(317	)		(340	)		(23	)


	Impact on Consolidated
	Statements of
	Changes in Stockholders’ Equity
	Three Months Ended March 31, 2009
	As Previously				Effect of
(Amounts in Thousands)	Reported		As Restated		Change
Total retained earnings, January 1	$	107,231	$	106,104	$	(1,127	)
Net income		5,230		5,192		(38	)
Total retained earnings, March 31		118,021		116,856		(1,165	)

Note 2.3. Mergers, Acquisitions, and Branching Activity

~~In July~~On April 2, 2009, the Company ~~acquired~~signed a definitive agreement providing for the acquisition of TriStone Community Bank (“TriStone”), ~~based~~a $152.42 million state-chartered commercial bank headquartered in Winston-Salem, North Carolina. ~~TriStone had two full service locations in Winston-Salem. At acquisition, TriStone had total assets~~The definitive agreement provides for the exchange of ~~$166.82 million, total loans of $132.23 million and total deposits of $142.27 million. Each outstanding common share of TriStone was exchanged for~~ .5262 shares of the Company’s common stock for each outstanding share of TriStone common stock. TriStone will be merged with and into the ~~overall acquisition cost was approximately $10.78 million.~~Company’s wholly-owned national bank subsidiary, First Community Bank, N. A. The transaction is subject to regulatory approvals and approval by the stockholders of TriStone, and is expected to close in the third quarter of 2009.

- 9 -

On November 14, 2008, the Company completed the acquisition of ~~TriStone significantly augmented~~Coddle Creek Financial Corp. (“Coddle Creek”), based in Mooresville, North Carolina. Coddle Creek had three full service locations in Mooresville, Cornelius, and Huntersville, North Carolina. At acquisition, Coddle Creek had total assets of approximately $158.66 million, loans of approximately $136.99 million, and deposits of approximately $137.06 million. Under the terms of the merger agreement, shares of Coddle Creek were exchanged for .9046 shares of the Company’s common stock and $19.60 in cash, for a total purchase price of approximately $32.29 million. As a result of the acquisition and purchase price allocation, approximately $14.41 million in goodwill was recorded, which represents the excess purchase price over the fair market ~~presence~~value of the net assets acquired and ~~human resources~~identified intangibles.

Since January 1, 2008, GreenPoint Insurance Group, Inc., the Company’s wholly-owned insurance agency subsidiary, has acquired a total of five agencies, issuing cash consideration of approximately $2.04 million. Acquisition terms in all instances call for additional cash consideration if certain operating performance targets are met. If those targets are met, the ~~Winston-Salem, North Carolina market.~~

value of the consideration ultimately paid will be added to the cost of the acquisitions. Goodwill and other intangibles associated with those acquisitions total approximately $2.04 million.

~~- 8 - -~~In May 2008, the Company opened a new branch location in Summersville, West Virginia.

Note 3.4. Investment Securities

As of March 31, ~~2010,~~2009, and December 31, ~~2009,~~2008, the amortized cost and estimated fair value of available-for-sale securities were as follows:


	March 31, 2009
	Amortized		Unrealized		Unrealized			Fair
	Cost		Gains		Losses			Value
(In Thousands)
U.S. Government agency securities	$	53,425	$	702	$	—		$	54,127
States and political subdivisions		141,536		2,296		(2,209	)		141,623
Trust-preferred securities		148,882		—		(99,409	)		49,473
Mortgage-backed securities		303,431		7,149		(11,989	)		298,591
Equities		7,005		376		(1,531	)		5,850

Total	$	654,279	$	10,523	$	(115,138	)	$	549,664

March 31, 2010
Amortized Unrealized Unrealized Fair OTTI in
Cost Gains Losses Value AOCI
(In Thousands)
U.S. Government agency securities $ 50,042 $ 329 $ (97 ) $ 50,274 $ -
States and political subdivisions 130,923 3,732 (848 ) 133,807 -
Trust preferred securities:
Single issue 55,664 - (12,461 ) 43,203 -
Pooled 1,648 1,926 - 3,574 -
Total trust preferred securities 57,312 1,926 (12,461 ) 46,777 -
FDIC-backed securities 25,388 - (71 ) 25,317 -
Mortgage-backed securities:
Agency 243,602 6,962 (616 ) 249,948 -
Non-Agency prime residential 5,286 - (447 ) 4,839 -
Non-Agency Alt-A residential 20,770 - (9,297 ) 11,473 (9,297 )
Total mortgage-backed securities 269,658 6,962 (10,360 ) 266,260 (9,297 )
Equities 1,611 340 (89 ) 1,862 -
Total $ 534,934 $ 13,289 $ (23,926 ) $ 524,297 $ (9,297 )


	December 31, 2008
	Amortized		Unrealized		Unrealized			Fair
	Cost		Gains		Losses			Value
U.S. Government agency securities	$	53,425	$	1,393	$	—		$	54,818
States and political subdivisions		163,042		864		(4,487	)		159,419
Trust-preferred securities		148,760		—		(82,707	)		66,053
Mortgage-backed securities		230,488		4,649		(1,659	)		233,478
Equities		7,979		357		(1,381	)		6,955

Total	$	603,694	$	7,263	$	(90,234	)	$	520,723

December 31, 2009
Amortized Unrealized Unrealized Fair OTTI in
Cost Gains Losses Value AOCI
(In Thousands)
U.S. Government agency securities $ 25,421 $ 10 $ (155 ) $ 25,276 $ -
States and political subdivisions 133,185 3,309 (893 ) 135,601 -
Trust preferred securities:
Single issue 55,624 - (14,514 ) 41,110 -
Pooled 1,648 - - 1,648 -
Total trust preferred securities 57,272 - (14,514 ) 42,758 -
Mortgage-backed securities:
Agency 260,220 5,399 (1,401 ) 264,218 -
Non-Agency prime residential 5,743 - (573 ) 5,170 -
Non-Agency Alt-A residential 20,968 - (9,667 ) 11,301 (9,667 )
Total mortgage-backed securities 286,931 5,399 (11,641 ) 280,689 (9,667 )
Equities 1,717 207 (191 ) 1,733 -
Total $ 504,526 $ 8,925 $ (27,394 ) $ 486,057 $ (9,667 )

- 910 - -

As of March 31, ~~2010,~~2009, and December 31, ~~2009,~~2008, the amortized cost and estimated fair value of held-to-maturity securities were as follows:


	March 31, 2009
	Amortized		Unrealized		Unrealized		Fair
	Cost		Gains		Losses		Value
(In Thousands)
States and political subdivisions	$	8,471	$	149	$	—	$	8,620

Total	$	8,471	$	149	$	—	$	8,620


	December 31, 2008
	Amortized		Unrealized		Unrealized			Fair
	Cost		Gains		Losses			Value
States and political subdivisions	$	8,670	$	133	$	(1	)	$	8,802

Total	$	8,670	$	133	$	(1	)	$	8,802

The following table reflects those investments in an unrealized loss position at March 31, 2009, and December 31, 2008. The Company has the intent and ability to hold until maturity or recovery any security in a continuous unrealized loss position for 12 or more months.


	March 31, 2009
	Less than 12 Months					12 Months or longer					Total
Description of Securities	Fair		Unrealized			Fair		Unrealized			Fair		Unrealized
	Value		Losses			Value		Losses			Value		Losses
(In Thousands)
U. S. Government agency securities	$	—	$	—		$	—	$	—		$	—	$	—
States and political subdivisions		43,135		(1,194	)		11,225		(1,015	)		54,360		(2,209	)
Trust-preferred securities		—		—			49,473		(99,409	)		49,473		(99,409	)
Mortgage-backed securities		24,705		(330	)		16,558		(11,659	)		41,263		(11,989	)
Equity securities		2,059		(1,245	)		2,153		(286	)		4,212		(1,531	)

Total	$	69,899	$	(2,769	)	$	79,409	$	(112,369	)	$	149,308	$	(115,138	)


	December 31, 2008
	Less than 12 Months					12 Months or longer					Total
Description of Securities	Fair		Unrealized			Fair		Unrealized			Fair		Unrealized
	Value		Losses			Value		Losses			Value		Losses
U. S. Government agency securities	$	—	$	—		$	—	$	—		$	—	$	—
States and political subdivisions		86,344		(2,949	)		16,413		(1,539	)		102,757		(4,488	)
Trust-preferred securities		—		—			60,260		(82,707	)		60,260		(82,707	)
Mortgage-backed securities		48,440		(1,658	)		43		(1	)		48,483		(1,659	)
Equity securities		2,167		(1,161	)		2,201		(220	)		4,368		(1,381	)

Total	$	136,951	$	(5,768	)	$	78,917	$	(84,467	)	$	215,868	$	(90,235	)

Included in available-for-sale securities is a portfolio of trust-preferred securities with a total fair value of approximately $49.47 million as of March 31, 2009. That portfolio is comprised of single-issue securities and pooled trust-preferred securities. The single-issue securities had a total fair value of approximately $26.77 million as of March 31, 2009, compared with their adjusted cost basis of approximately $55.52 million.

At March 31, 2009, the total fair value of the pooled trust-preferred securities was approximately $22.71 million, compared with an adjusted cost basis of approximately $93.37 million. The collateral underlying these securities is comprised of 86% of bank trust-preferred securities and subordinated debt issuances of over 500 banks nationwide. The remaining collateral is from insurance companies and real estate investment trusts. During 2008 and 2009, these securities experienced credit rating

- 11 -

downgrades and certain of these securities are on negative watch. As of December 31, 2008, the Company recorded pre-tax other-than-temporary impairment charges of $15.46 million on one of its pooled trust preferred securities which demonstrated a probable adverse change in cash flow. Recent modeling of the expected cash flows from the pooled trust-preferred securities, at present, does not suggest any of the remaining securities will incur credit losses under any of the scenarios modeled due to the existence of other subordinate classes within the pools and on current projections for deferrals and defaults of underlying collateral.

March 31, 2010
Amortized Unrealized Unrealized Fair
Cost Gains Losses Value
(In Thousands)
States and political subdivisions $ 7,155 $ 132 $ - $ 7,287
Total $ 7,155 $ 132 $ - $ 7,287
The Company made a cumulative effect adjustment of $6.13 million, $10.22 million pre-tax, as of January 1, 2009, to recognize the portion of non-credit losses associated with a non-agency mortgage-backed security for which the Company recognized a pre-tax other-than-temporary impairment charge of $14.47 million as of December 31, 2008. The Company determined that only $4.25 million of the original impairment charge was due to probable credit losses. The amount due to probable credit losses was determined using customized default and prepayment scenarios.

December 31, 2009
Amortized Unrealized Unrealized Fair
Cost Gains Losses Value
(In Thousands)
States and political subdivisions $ 7,454 $ 125 $ - $ 7,579
Total $ 7,454 $ 125 $ - $ 7,579

At March 31, 2009, the combined depreciation in value of the 193 individual securities in an unrealized loss position was approximately 26.36% of the combined reported value of the aggregate securities portfolio. At December 31, 2008, the combined depreciation in value of the 310 individual securities in an unrealized loss position was approximately 17.04% of the combined reported value of the aggregate securities portfolio. Management does not believe any individual unrealized loss as of March 31, 2009, represents other-than-temporary impairment. The Company intends to hold these securities until recovery or maturity and it is more likely than not that it will not sell these securities before recovery. For the quarter ended March 31, 2009, the Company recognized impairment of $209 thousand on certain of its equity securities holdings.

The amortized cost and estimated fair value of available-for-sale securities by contractual maturity, at March 31, ~~2010,~~2009, are shown below. Expected maturities may differ from contractual maturities because issuers may have the right to call or prepay obligations with or without call or prepayment penalties.

	Amortized
	Cost		Fair Value		Amortized
(In Thousands)
					Cost		Fair Value
					(Dollars in Thousands)
Due within one year	$	72	$	74	$	1,378	$	1,399
Due after one year but within five years		54,140		54,505		5,222		5,330
Due after five years but within ten years		71,647		74,072
Due after five years within ten years						75,311		76,792
Due after ten years		137,806		127,524		261,932		161,702

		263,665		256,175		343,843		245,223
Mortgage-backed securities		269,658		266,260		303,431		298,591
Equity securities		1,611		1,862		7,005		5,850

Total	$	534,934	$	524,297	$	654,279	$	549,664

The amortized cost and estimated fair value of held-to-maturity securities by contractual maturity, at March 31, ~~2010,~~2009, are shown below. Expected maturities may differ from contractual maturities because issuers may have the right to call or prepay obligations with or without call or prepayment penalties.


	Amortized
	Cost		Fair Value
	(Dollars in Thousands)
Due within one year	$	551	$	556
Due after one year but within five years		4,116		4,197
Due after five years within ten years		3,804		3,867
Due after ten years		—		—

Total	$	8,471	$	8,620

Amortized
Cost Fair Value
(In Thousands)
Due within one year $ 905 $ 913
Due after one year but within five years 4,113 4,193
Due after five years but within ten years 2,137 2,181
Due after ten years - -
Total $ 7,155 $ 7,287

The carrying value of securities pledged to secure public deposits and for other purposes required by law was $335.44 million and $354.92 million at March 31, 2010, and December 31, 2009, respectively.

During the three months ended March 31, 2010, net gains on the sale of securities were $250 thousand. Gross gains were $258 thousand while gross losses were $8 thousand. During the three months ended March 31, 2009, net gains on the sale of securities were $411 thousand. Gross gains were $1.17 million while gross losses were $761 thousand.

~~- 10 - -~~

The following tables reflect those investments, both available-for-sale and held-to-maturity, in a continuous unrealized loss position for less than 12 months and for 12 months or longer at March 31, 2010 and December 31, 2009.

March 31, 2010
Less than 12 Months 12 Months or longer Total
Fair Unrealized Fair Unrealized Fair Unrealized
Value Losses Value Losses Value Losses
(In Thousands)
U.S. Government agency securities $ 25,518 $ (97 ) $ - $ - $ 25,518 $ (97 )
States and political subdivisions 10,271 (143 ) 17,924 (705 ) 28,195 (848 )
Single issue trust preferred securities - - 43,204 (12,461 ) 43,204 (12,461 )
FDIC-backed securities 25,317 (71 ) - - 25,317 (71 )
Mortgage-backed securities:
Agency 48,135 (616 ) 33 - 48,168 (616 )
Prime residential - - 4,839 (447 ) 4,839 (447 )
Alt-A residential - - 11,108 (9,297 ) 11,108 (9,297 )
Total mortgage-backed securities 48,135 (616 ) 15,980 (9,744 ) 64,115 (10,360 )
Equity securities 274 (44 ) 187 (45 ) 461 (89 )
Total $ 109,515 $ (971 ) $ 77,295 $ (22,955 ) $ 186,810 $ (23,926 )

December 31, 2009
Less than 12 Months 12 Months or longer Total
Fair Unrealized Fair Unrealized Fair Unrealized
Value Losses Value Losses Value Losses
(In Thousands)
U.S. Government agency securities $ 23,271 $ (155 ) $ - $ - $ 23,271 $ (155 )
States and political subdivisions 13,864 (270 ) 16,285 (623 ) 30,149 (893 )
Single issue trust preferred securities - - 41,111 (14,514 ) 41,111 (14,514 )
Mortgage-backed securities:
Agency 83,491 (1,400 ) 34 (1 ) 83,525 (1,401 )
Prime residential - - 5,169 (573 ) 5,169 (573 )
Alt-A residential 11,301 (9,667 ) - - 11,301 (9,667 )
Total mortgage-backed securities 94,792 (11,067 ) 5,203 (574 ) 99,995 (11,641 )
Equity securities 86 (60 ) 731 (131 ) 817 (191 )
Total $ 132,013 $ (11,552 ) $ 63,330 $ (15,842 ) $ 195,343 $ (27,394 )

At March 31, 2010, the combined depreciation in value of the 85 individual securities in an unrealized loss position was approximately 4.56% of the combined reported value of the aggregate securities portfolio. At December 31, 2009, the combined depreciation in value of the 89 individual securities in an unrealized loss position was approximately 5.64% of the combined reported value of the aggregate securities portfolio.

The Company reviews its investment portfolio on a quarterly basis for indications of other-than-temporary impairment (“OTTI”). The analysis differs depending upon the type of investment security being analyzed. For debt securities, the Company has determined that, except for pooled trust preferred securities, it does not intend to sell securities that are impaired and has asserted that it is not more likely than not that it will have to sell impaired securities before recovery of the impairment occurs. The Company’s assertion is based upon its investment strategy for the particular type of security and the Company’s cash flow needs, liquidity position, capital adequacy and interest rate risk position.

For non-beneficial interest debt securities, the Company analyzes several qualitative factors such as the severity and duration of the impairment, adverse conditions within the issuing industry, prospects for the issuer, performance of the security, changes in rating by rating agencies and other qualitative factors to determine if the impairment will be recovered. Non-beneficial interest debt securities consist of U.S. government agency securities, states and political subdivisions, single issue trust preferred securities, and FDIC-backed securities. If it is determined that there is evidence that the impairment will not be recovered, the Company performs a present value calculation to determine the amount of credit related impairment and record any credit related OTTI through earnings and the non-credit related OTTI through other comprehensive income (“OCI”). During the three month periods ended March 31, 2010 and 2009, respectively, the Company incurred no OTTI charges related to non-beneficial interest debt securities. The temporary impairment on these securities is primarily related to changes in interest rates, certain disruptions in the credit markets, and other current economic factors.

~~- 11 - -~~

For beneficial interest debt securities, the Company reviews cash flow analyses on each applicable security to determine if an adverse change in cash flows expected to be collected has occurred. Beneficial interest debt securities consist of mortgage-backed securities and pooled trust preferred securities. An adverse change in cash flows expected to be collected has occurred if the present value of cash flows previously projected is greater than the present value of cash flows projected at the current reporting date and less than the current book value. If an adverse change in cash flows is deemed to have occurred, then an OTTI has occurred. The Company then compares the present value of cash flows using the current yield for the current reporting period to the reference amount, or current net book value, to determine the credit-related OTTI. The credit-related OTTI is then recorded through earnings and the non-credit related OTTI is accounted for in OCI.

During the three month periods ended March 31, 2010 2009, the Company incurred no credit-related OTTI charges related to beneficial interest debt securities. For the beneficial interest debt securities not deemed to have incurred OTTI, the Company has concluded that the primary difference in the fair value of the securities and credit impairment evident in its cash flow model is the significantly higher rate of return currently demanded by market participants in this illiquid and inactive market as compared to the rate of return that the Company received when it purchased the securities in a normally functioning market.

As of March 31, 2010, the Company cannot assert its intent to hold its remaining pooled trust preferred securities to recovery or maturity and that it is more likely than not it will sell the securities in order to convert deferred tax assets to current tax receivables. Accordingly, the Company carries those securities at the lower of its adjusted cost basis or market value. The securities continue to remain categorized as available for sale.

For the non-Agency Alt-A residential MBS, the Company models cash flows using the following assumptions: constant prepayment speed of 5, a customized constant default rate scenario starting at 15 for the first six quarters ramping down over the course of the next three-and-a-half years to 3 beginning with the fourth year, and a loss severity of 45. For the non-Agency prime residential MBS, the Company models cash flows using the following assumptions: constant prepayment speed of 5, a constant default rate of 5, and a loss severity of 10. The scenarios presented do not indicate OTTI for either security.

~~The table below provides a cumulative roll forward of credit losses recognized in earnings for debt securities for which a portion of an OTTI is recognized in OCI:~~

Three Months Ended
March 31, 2010
(In Thousands)
Estimated credit losses, beginning balance (1) $ 4,251
Additions for credit losses on securities not previously recognized -
Additions for credit losses on securities previously recognized -
Reduction for increases in cash flows -
Reduction for securities management no longer intends to hold to recovery -
Reduction for securities sold/realized losses -
Estimated credit losses as of March 31, 2010 $ 4,251

~~(1) The beginning balance includes credit-related losses included in OTTI charges recognized on debt securities in prior periods.~~

For equity securities, the Company reviews for OTTI based upon the prospects of the underlying companies, analysts’ expectations, and certain other qualitative factors to determine if impairment is recoverable over a foreseeable period of time. During the three months ended March 31, 2010, the Company did not recognize any OTTI charges on equity securities. For the three months ended March 31, 2009, the Company recognized OTTI charges of $209 thousand on certain of its equity positions.

As a condition to membership in the Federal Home Loan Bank (“FHLB”) system, the Company is required to subscribe to a minimum level of stock in the FHLB of Atlanta (“FHLBA”). The Company feels this ownership position provides access to relatively inexpensive wholesale and overnight funding. The Company accounts for FHLBA and Federal Reserve Bank stock as a long-term investment in other assets. At March 31, 2010, and December 31, 2009, the Company owned approximately $13.70 million in FHLBA stock, which is classified as other assets. The Company’s policy is to review for impairment of such assets at the end of each reporting period. During the three months ended March 31, 2010, FHLBA paid quarterly dividends. At March 31, 2010, FHLBA was in compliance with all of its regulatory capital requirements. Based on its review, the Company believes that, as of March 31, 2010, its FHLBA stock was not impaired.

- 12 - -

Note 5. Loans

~~Note 4. Loans~~

Loans, net of unearned income, consist of the following:

March 31, 2010 December 31, 2009
(Dollars in Thousands) Amount Percent Amount Percent
Loans held for investment:
Commercial, financial, and agricultural $ 102,022 7.34 % $ 96,366 6.91 %
Real estate — commercial 461,542 33.18 % 450,611 32.33 %
Real estate — construction (1) 113,139 8.13 % 124,896 8.96 %
Real estate — residential 647,921 46.59 % 657,367 47.16 %
Consumer 60,632 4.36 % 60,090 4.31 %
Other 5,618 0.40 % 4,601 0.33 %
Total $ 1,390,874 100.00 % $ 1,393,931 100.00 %

Loans held for sale $ 1,494 $ 11,576

~~(1) Real estate construction includes land and land development loans.~~


	March 31, 2009					December 31, 2008
(Dollars in Thousands)	Amount		Percent			Amount		Percent
Loans held for investment:
Commercial, financial, and agricultural	$	81,880		6.41	%	$	85,034		6.55	%
Real estate — commercial		405,549		31.76	%		407,638		31.40	%
Real estate — construction		124,320		9.74	%		130,610		10.06	%
Real estate — residential		597,372		46.79	%		602,573		46.42	%
Consumer		62,353		4.88	%		66,258		5.10	%
Other		5,316		0.42	%		6,046		0.47	%

Total	$	1,276,790		100.00	%	$	1,298,159		100.00	%


Loans held for sale	$	1,445				$	1,024

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, standby letters of credit and financial guarantees. These instruments involve, to varying degrees, elements of credit and interest rate risk beyond the amount recognized on the balance sheet. The contractual amounts of those instruments reflect the extent of involvement the Company has in particular classes of financial instruments. The Company’s exposure to credit loss in the event of non-performance by the other party to the financial instrument for commitments to extend credit and standby letters of credit and financial guarantees written is represented by the contractual amount of those instruments. The Company uses the same credit policies in making commitments and conditional obligations as it does for on-balance sheet instruments.

Commitments to extend credit are agreements to lend to a customer as long as there is not a 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 commitment amounts do not necessarily represent future cash requirements. The Company evaluates each customer’s creditworthiness on a case-by-case basis. The amount of collateral obtained, if deemed necessary by the Company upon extension of credit, is based on management’s credit evaluation of the counterparties. Collateral held varies but may include accounts receivable, inventory, property, plant and equipment, and ~~income producing~~income-producing commercial properties.

Standby letters of credit and written financial guarantees are conditional commitments issued by the Company to guarantee the performance of a customer to a third party. The credit risk involved in issuing letters of credit is essentially the same as that involved in extending loan facilities to customers. To the extent deemed necessary, collateral of varying types and amounts is held to secure customer performance under certain of those letters of credit outstanding.

Financial instruments whose contract amounts represent credit risk are commitments to extend credit (including availability of lines of credit) of ~~$232.96~~$157.81 million and standby letters of credit and financial guarantees written of ~~$9.67~~$2.49 million at March 31, ~~2010.~~2009. Additionally, the Company had gross notional ~~amounts~~amount of outstanding commitments to lend related to secondary market mortgage loans of ~~$2.97~~$11.28 million at March 31, ~~2010.~~

2009.

Note 5.6. Allowance for Loan Losses

The allowance for loan losses is maintained at a level sufficient to absorb probable loan losses inherent in the loan portfolio. The allowance is increased by charges to earnings in the form of provision for loan losses and recoveries of prior loan charge-offs, and decreased by loans charged off. The provision is calculated to bring the allowance to a level which, according to a systematic process of measurement, reflects the amount management estimates is needed to absorb probable losses within the portfolio.

~~- 13 - -~~

Management performs periodic assessments to determine the appropriate level of allowance. Differences between actual loan loss experience and estimates are reflected through adjustments that are made by either increasing or decreasing the loss provision based upon current measurement criteria. Commercial, consumer and mortgage loan portfolios are evaluated separately for purposes of determining the allowance. The specific components of the allowance include allocations to individual commercial credits and allocations to the remaining non-homogeneous and homogeneous pools of loans.

- 13 -

Management’s allocations are based on judgment of qualitative and quantitative factors about both macro and micro economic conditions reflected within the portfolio of loans and the economy as a whole. Factors considered in this evaluation include, but are not necessarily limited to, probable losses from loan and other credit arrangements, general economic conditions, changes in credit concentrations or pledged collateral, historical loan loss experience, and trends in portfolio volume, maturities, composition, delinquencies, and non-accruals. While management has allocated the allowance for loan losses to various portfolio segments, the entire allowance is available for use against any type of loan loss deemed appropriate by management.

The following table details the Company’s allowance for loan loss activity for the three-month periods ended March 31, ~~2010~~2009 and ~~2009.~~2008.


	For the Three Months Ended
	March 31,
	2009			2008
(In Thousands)	(Restated)
Beginning balance	$	17,782		$	12,833
Provision for loan losses		2,148			323
Charge-offs		(1,730	)		(966	)
Recoveries		220			672

Ending balance	$	18,420		$	12,862

For the Three Months Ended
March 31,
2010 2009
(In Thousands)
Beginning balance $ 21,725 $ 15,978
Provision for loan losses 3,665 2,087
Charge-offs (3,732 ) (1,730 )
Recoveries 298 220
Ending balance $ 21,956 $ 16,555
Note 7. Deposits

The following table presents the Company’s investment in loans considered to be impaired and related information on those impaired loans for the periods ended March 31, 2010, and December 31, 2009. Interest income realized on impaired loans is recognized upon receipt if the impaired loan is on a non-accrual basis.

March 31, December 31,
(In Thousands) 2010 2009
Recorded investment in loans considered to be impaired:
Recorded investment in impaired loans with related allowance $ 10,771 $ 13,241
Recorded investment in impaired loans with no related allowance 16,739 13,371
Total impaired loans 27,510 26,612
Loans considered to be impaired that were on a non-accrual basis 17,477 17,014
Allowance for loan losses related to loans considered to be impaired 2,113 932
Total interest income recognized on impaired loans, year-to-date 537 663

~~Note 6. Deposits~~

The following is a summary of interest-bearing deposits by type as of March 31, ~~2010,~~2009, and December 31, ~~2009.~~

2008.


	March 31,		December 31,
(In Thousands)	2009		2008
Interest-bearing demand deposits	$	194,934	$	185,117
Savings and money market deposits		319,007		309,577
Certificates of deposit		861,556		809,352

Total	$	1,375,497	$	1,304,046

March 31, December 31,
2010 2009
(In Thousands)
Interest-bearing demand deposits $ 246,513 $ 231,907
Savings and money market deposits 427,883 381,381
Certificates of deposit 775,405 824,428
Total $ 1,449,801 $ 1,437,716

- 14 - -

Note 8. Borrowings

~~Note 7. Borrowings~~

The following schedule details the Company’s ~~FHLB~~Federal Home Loan Bank (“FHLB”) borrowings and other indebtedness at March 31, ~~2010,~~2009, and December 31, ~~2009.~~2008.


	March 31,		December 31,		March 31,		December 31,
	2010		2009		2009		2008
(In Thousands)
FHLB borrowings	$	180,134	$	183,177	$	200,000	$	200,000
Subordinated debt		15,464		15,464		15,464		15,464
Other long-term debt		275		283		406		413

Total	$	195,873	$	198,924	$	215,870	$	215,877

FHLB borrowings ~~included $175.00~~include $200.00 million in convertible and callable advances at March 31, ~~2010, and December 31,~~ 2009. The weighted average interest rate of ~~all the~~ advances was ~~2.41%~~2.95% and 3.70% at March 31, ~~2010,~~2009, and December 31, ~~2009.~~

2008, respectively.

The Company has entered into a derivative interest rate swap instrument where it receives LIBOR-based variable interest payments and pays fixed interest payments. The notional amount of the derivative swap is $50.00 million and effectively fixes ~~the interest rate of~~ a portion of the FHLB borrowings at approximately 4.34%. After considering the effect of the interest rate swap, the effective weighted average interest rate of all FHLB borrowings was ~~3.61%~~3.79% at March 31, ~~2010.~~2009. The fair value of the interest rate swap was a liability of ~~$1.69~~$3.08 million at March 31, ~~2010. The Company maintained a cash deposit with its counterparty to collateralize the interest rate swap of $3.20 million at March 31, 2010, and December 31,~~ 2009.

At March 31, ~~2010,~~2009, the FHLB advances have approximate contractual maturities between ~~four months~~eight and ~~eleven~~twelve years. The scheduled maturities of the advances are as follows:


	Amount		Amount
(In Thousands)
2009			$	—
2010	$	5,134		—
2011		-		—
2012		-		—
2013		-		—
2014		-
2015 and thereafter		175,000
2014 and thereafter				200,000

Total	$	180,134	$	200,000

The callable advances may be redeemed at quarterly intervals after various lockout periods. These call options may substantially shorten the lives of these instruments. If these advances are called, the debt may be paid in full, converted to another FHLB credit product, or converted to a fixed or adjustable rate advance. Prepayment of the advances may result in substantial penalties based upon the differential between contractual note rates and current advance rates for similar maturities. Advances from the FHLB are secured by stock in the FHLB of Atlanta, qualifying loans, mortgage-backed securities, and certain other securities.

Also included in other indebtedness is $15.46 million of junior subordinated debentures (the “Debentures”) issued by the Company in October 2003 to an unconsolidated trust subsidiary, FCBI Capital Trust (the “Trust”), with an interest rate of ~~three month~~three-month LIBOR plus 2.95%. The Trust was able to purchase the Debentures through the issuance of trust preferred securities which had substantially identical terms as the Debentures. The Debentures mature on October 8, 2033, and are currently callable.

The Company has committed to irrevocably and unconditionally guarantee the following payments or distributions with respect to the preferred securities to the holders thereof to the extent that the Trust has not made such payments or distributions: (i) accrued and unpaid distributions, (ii) the redemption price, and (iii) upon a dissolution or termination of the ~~Trust,~~trust, the lesser of the liquidation amount and all accrued and unpaid distributions and the amount of assets of the ~~Trust~~trust remaining available for distribution, in each case to the extent the Trust has funds available.

~~In addition to investment securities, at March 31, 2010, wholesale repurchase agreements were collateralized by $9.27 million of interest bearing balances with banks.~~

- 15 - -

~~Note 8. Net Periodic Benefit Cost-Defined Benefit Plans~~

~~The following sets forth the components of the net periodic benefit cost of the Company’s domestic non-contributory defined benefit plan for the three-month periods ended March 31, 2010 and 2009.~~

Three Months Ended
March 31,
2010 2009
(In Thousands)
Service cost $ 52 $ 53
Interest cost 52 47
Net periodic cost $ 104 $ 100

~~Note 9. Comprehensive Income (Loss)~~

~~The components of the Company’s comprehensive income (loss), net of income taxes, for the three-month periods ended March 31, 2010 and 2009, are as follows:~~

Three Months Ended
March 31,
2010 2009
(In Thousands)
Net income $ 5,278 $ 5,230
Other comprehensive income (loss)
Unrealized gain (loss) on securities available-for-sale without other-than-temporary impairment 8,050 (12,703 )
Reclassification adjustment for gains realized in net income (250 ) (411 )
Reclassification adjustment for credit related other-than-temporary impairments recognized in earnings - 209
Cumulative effect of change in accounting principle - (10,051 )
Unrealized gain on derivative contract 424 243
Income tax effect (3,063 ) 8,858
Total other comprehensive income (loss) 5,161 (13,855 )
Comprehensive income (loss) $ 10,439 $ (8,625 )

Note ~~10.~~9. Commitments and Contingencies

In the normal course of business, the Company is a defendant in various legal actions and asserted claims. While the Company and its legal counsel are unable to assess the ultimate outcome of each of these matters with certainty, the ~~Company does not believe the~~ resolution of these actions, singly or in the aggregate, should not have a material adverse effect on the financial condition, results of operations or cash flows of the Company.

~~- 16 - -~~

Note ~~11.~~10. Segment Information

The Company operates ~~within~~in two ~~business segments,~~segments: Community Banking and Insurance Services. The Community Banking segment includes both commercial and consumer lending and deposit services. This segment provides customers with such products as commercial loans, real estate loans, business financing and consumer loans. This segment also provides customers with several choices of deposit products including demand deposit accounts, savings accounts and certificates of deposit. In addition, the Community Banking segment provides wealth management services to a broad range of customers. The Insurance Services segment is a full-service insurance agency providing commercial and personal lines of insurance.

The following table sets forth information about the reportable operating segments and reconciliation of this information to the consolidated financial statements at and for the ~~three-month~~three periods ended March 31, ~~2010 and~~ 2009.


(In Thousands)	For the Three Months Ended
	March 31, 2009
	Community		Insurance			Parent/
	Banking		Services			Elimination			Total
	(Restated)								(Restated)
Net interest income	$	16,492	$	(18	)	$	(41	)	$	16,433
Provision for loan losses		2,148		—			—			2,148
Noninterest income		6,124		2,344			(44	)		8,424
Noninterest expense		13,582		1,638			(26	)		15,194

Income before income taxes		6,886		688			(59	)		7,515
Provision for income taxes		1,909		203			211			2,323

Net income	$	4,977	$	485		$	(270	)	$	5,192

End of period goodwill and other intangibles	$	78,657	$	10,681		$	—			89,338

End of period assets	$	2,169,529	$	11,698		$	16,749			2,197,976


(In Thousands)	For the Three Months Ended
	March 31, 2008
	Community		Insurance			Parent/
	Banking		Services			Elimination			Total
Net interest income	$	16,635	$	(6	)	$	(269	)	$	16,360
Provision for loan losses		323		—			—			323
Noninterest income		7,994		1,344			(197	)		9,141
Noninterest expense		15,792		1,046			(555	)		16,283

Income before income taxes		8,514		292			89			8,895
Provision for income taxes		2,432		86			65			2,583

Net income	$	6,082	$	206		$	24		$	6,312

End of period goodwill and other intangibles	$	62,352	$	8,887		$	—			71,239

End of period assets	$	2,045,941	$	8,900		$	10,272			2,065,113

For the Three Months
Ended March 31, 2010
Community Insurance Parent/
Banking Services Elimination Total
(In Thousands)
Net interest income (loss) $ 18,678 $ (33 ) $ (26 ) $ 18,619
Provision for loan losses 3,665 - - 3,665
Noninterest income (loss) 6,609 2,219 (250 ) 8,578
Noninterest expense (income) 15,021 1,479 (428 ) 16,072
Income before income taxes 6,601 707 152 7,460
Provision for income taxes 1,869 291 22 2,182
Net income $ 4,732 $ 416 $ 130 $ 5,278
End of period goodwill and other intangibles $ 79,237 $ 11,568 $ - $ 90,805
End of period assets $ 2,254,038 $ 12,465 $ 14,031 $ 2,280,534

For the Three Months
Ended March 31, 2009
Community Insurance Parent/
Banking Services Elimination Total
(In Thousands)
Net interest income (loss) $ 16,492 $ (18 ) $ (41 ) $ 16,433
Provision for loan losses 2,087 - - 2,087
Noninterest income (loss) 6,124 2,344 (44 ) 8,424
Noninterest expense (income) 13,582 1,638 (26 ) 15,194
(Loss) income before income taxes 6,947 688 (59 ) 7,576
Provision for income taxes 1,932 203 211 2,346
Net income (loss) $ 5,015 $ 485 $ (270 ) $ 5,230
End of period goodwill and other intangibles $ 78,657 $ 10,681 $ - $ 89,338
End of period assets $ 2,170,694 $ 11,698 $ 16,749 $ 2,199,141

Note ~~12.~~11. Fair Value

Disclosures

~~Under ASC Topic 820,~~Effective January 1, 2008, the Company adopted the provisions of SFAS No. 157, “Fair Value Measurements,” (“SFAS 157”) for financial assets and ~~Disclosures,~~financial liabilities. In accordance with FASB Staff Position No. 157-2, “Effective Date of FASB Statement No. 157,” the Company delayed application of SFAS 157 for non-financial assets and non-financial liabilities until January 1, 2009. SFAS 157, as amended, defines fair value, ~~is defined~~establishes a framework for measuring fair value in generally accepted accounting principles and expands disclosures about fair value measurements.

- 16 -

SFAS 157 defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants. A fair value measurement assumes that the transaction to sell the asset or transfer the liability occurs in the principal market for the asset or liability or, in the absence of a principal market, the most advantageous market for the asset or liability. The price in the principal, or most advantageous, market used to measure the fair value of the asset or liability shall not be adjusted for transaction costs. An orderly transaction is a transaction that assumes exposure to the market for a period prior to the measurement date to allow for marketing activities that are usual and customary for transactions involving such assets and liabilities; it is not a forced transaction. Market participants are buyers and sellers in the principal market that are (i) independent, (ii) knowledgeable, (iii) able to transact, and (iv) willing to transact.

~~- 17 - -~~

SFAS 157 establishes a fair value hierarchy for valuation inputs that gives the highest priority to quoted prices in active markets for identical assets or liabilities and the lowest priority to unobservable inputs. The fair value hierarchy ~~under ASC Topic 820~~ is as follows:


		Level 1 Inputs		–		Unadjusted quoted prices in active markets for identical assets or liabilities that the reporting entity has the ability to access at the measurement date.


		Level 2 Inputs		–		Inputs other than quoted prices included in Level 1 that are observable for the asset or liability, either directly or indirectly. These might include quoted prices for similar assets or liabilities in active markets, quoted prices for identical or similar assets or liabilities in markets that are not active, inputs other than quoted prices that are observable for the asset or liability, such as interest rates, volatilities, prepayment speeds, and credit risks, or inputs that are derived principally from or corroborated by market data by correlation or other means.


		Level 3 Inputs		–		Unobservable inputs for determining the fair values of assets or liabilities that reflect an entity’s own assumptions about the assumptions that market participants would use in pricing the assets or liabilities.

A description of the valuation methodologies used for instruments measured at fair value, as well as the general classification of such instruments pursuant to the valuation hierarchy, is set forth below. These valuation methodologies were applied to all of the Company’s financial assets and financial liabilities carried at fair value. In general, fair value is based upon quoted market prices, where available. If such quoted market prices are not available, fair value is based upon third party models that primarily use, as inputs, observable market-based parameters. Valuation adjustments may be made to ensure that financial instruments are recorded at fair value. These adjustments may include amounts to reflect counterparty credit quality, the Company’s creditworthiness, among other things, as well as unobservable parameters. Any such valuation adjustments are applied consistently over time. The Company’s valuation methodologies may produce a fair value calculation that may not be indicative of net realizable value or reflective of future fair values. While management believes the Company’s valuation methodologies are appropriate and consistent with other market participants, the use of different methodologies or assumptions to determine the fair value of certain financial instruments could result in a different estimate of fair value at the reporting date.

Securities ~~Available-for-Sale:~~Available-for-Sale: Securities classified as available-for-sale are reported at fair value utilizing Level 1, Level 2, and Level 3 inputs. Securities are classified as Level 1 within the valuation hierarchy when quoted prices are available in an active market. This includes securities, such as U.S. Treasuries, whose value is based on quoted market prices in active markets for identical assets. ~~The Company also uses Level 1 inputs for the valuation of equity securities traded in active markets.~~

Securities are classified as Level 2 within the valuation hierarchy when the Company obtains fair value measurements from an independent pricing service. The fair value measurements consider observable data that may include dealer quotes, market spreads, cash flows, the U.S. Treasury yield curve, live trading levels, trade execution data, market consensus prepayment speeds, credit information, and the bond’s terms and conditions, among other things. Level 2 inputs are used to value U.S. Agency securities, mortgage-backed securities, municipal securities, single issue trust preferred securities, certain pooled trust preferred securities, and certain equity securities that are not actively traded.

Securities are classified as Level 3 within the valuation hierarchy in certain cases when there is limited activity or less transparency to the valuation inputs. These securities include certain pooled trust preferred securities. In the absence of observable or corroborated market data, internally developed estimates that incorporate market-based assumptions are used when such information is available. The Level 3 inputs used to value pooled trust preferred security holdings are weighted between discounted cash flow model results and actual trades of the same and similar securities in the inactive trust preferred market. The cash flow modeling uses discount rates based upon observable market expectations, known defaults and deferrals, projected future defaults and deferrals, and projected prepayments to arrive at fair value.

- 17 -

Fair value models may be required when trading activity has declined significantly or does not exist, prices are not current or pricing variations are significant. The Company’s fair value from third party models ~~utilizes~~utilize modeling software that uses market participant data and knowledge of the structures of each individual security to develop cash flows specific to each security. The fair values of the securities are determined by using the cash flows developed by the fair value model and applying appropriate market observable discount rates. The discount rates are developed by determining credit spreads above a benchmark rate, such as LIBOR, and adding premiums for illiquidity developed based on a comparison of initial issuance spread to LIBOR versus a financial sector curve for recently issued debt to LIBOR. Specific securities that have increased uncertainty regarding the receipt of cash flows are discounted at higher rates due to the addition of a deal specific credit premium. Finally, internal fair value model pricing and external pricing observations are combined by assigning weights to each pricing observation. Pricing is reviewed for reasonableness based on the direction of the specific markets and the general economic indicators.

~~- 18 - -~~

Other Assets and Associated ~~Liabilities:~~Liabilities: Securities held for trading purposes are recorded at fair value and included in “other assets” on the consolidated balance sheets. Securities held for trading purposes include assets related to employee deferred compensation plans. The assets associated with these plans are generally invested in equities and classified as Level 1. Deferred compensation liabilities, also classified as Level 1, are carried at the fair value of the obligation to the employee, which corresponds to the fair value of the invested assets.

~~Derivatives:~~Derivatives: Derivatives are reported at fair value utilizing Level 2 inputs. The Company obtains dealer quotations based on observable data to value its derivatives.

Impaired ~~Loans:~~Loans: Certain impaired loans are reported at the fair value of the underlying collateral if repayment is expected solely from the collateral. Collateral values are estimated using Level 3 inputs based on ~~appraisals adjusted for~~ customized discounting criteria.

The Company maintains an active and robust problem credit identification system. When a credit is identified as exhibiting characteristics of weakening, the Company will assess the credit for potential impairment. Examples of weakening include delinquency and deterioration of the borrower’s capacity to repay as determined by the Company’s regular credit review function. As part of the impairment review, the Company will evaluate the current collateral value. It is the Company’s standard practice to obtain updated third party collateral valuations to assist management in measuring potential impairment of a credit and the amount of the impairment to be recorded.

Internal collateral valuations are generally performed within two to four weeks of the original identification of potential impairment and receipt of the third party valuation. The internal valuation is performed by comparing the original appraisal to current local real estate market conditions and experience and considers liquidation costs. The result of the internal valuation is compared to the outstanding loan balance, and, if warranted, a specific impairment reserve will be established at the completion of the internal evaluation.

A third party evaluation is typically received within thirty to forty-five days of the completion of the internal evaluation. Once received, the third party evaluation is reviewed by Special Assets staff and/or Credit Appraisal staff for reasonableness. Once the evaluation is reviewed and accepted, discounts to fair market value are applied based upon such factors as the bank’s historical liquidation experience of like collateral, and an estimated net realizable value is established. That estimated net realizable value is then compared to the outstanding loan balance to determine the amount of specific impairment reserve. The specific impairment reserve, if necessary, is adjusted to reflect the results of the updated evaluation. A specific impairment reserve is generally maintained on impaired loans during the time period while awaiting receipt of the third party evaluation as well as on impaired loans that continue to make some form of payment and liquidation is not imminent. Impaired loans not meeting the aforementioned criteria and that do not have a specific impairment reserve have usually been previously written down through a partial charge-off, to their net realizable value.

The Company’s Special Assets staff assumes the management and monitoring of all loans determined to be impaired. While awaiting the completion of the third party appraisal, the Company generally begins to complete the tasks necessary to gain control of the collateral and prepare for liquidation, including, but not limited to engagement of counsel, inspection of collateral, and continued communication with the borrower, if appropriate. Special Assets staff also regularly reviews the relationship to identify any potential adverse developments during this time.

Generally, the only difference between current appraised value, adjusted for liquidation costs, and the carrying amount of the loan less the specific reserve is any downward adjustment to the appraised value that the Company’s Special Assets staff determines appropriate. These differences generally consist of costs to sell the property, as well as a deflator for the devaluation of property seen when banks are the sellers, and the Company deemed these adjustments as fair value adjustments.

In the Company’s experience, it rarely returns loans to performing status after they have been partially charged off. Generally, credits identified as impaired move quickly through the process towards ultimate resolution of the problem credit.

Other Real Estate Owned. The fair value of the Company’s other real estate owned is determined using current and prior appraisals, estimates of costs to sell, and proprietary ~~qualitative~~ adjustments. Accordingly, other real estate owned is stated at a Level 3 fair value.

~~- 19 - -~~

The following table summarizes financial assets and financial liabilities measured at fair value on a recurring basis as of March 31, ~~2010,~~2009, and December 31, ~~2009,~~2008, segregated by the level of the valuation inputs within the fair value hierarchy utilized to measure fair value:


(In Thousands)	March 31, 2009
	Fair Value Measurements Using						Total
	Level 1		Level 2		Level 3		Fair Value
Available-for-sale securities	$	5,706	$	521,253	$	22,705	$	549,664
Other assets		2,269		—		—		2,269
Derivative assets		—		57		—		57
Other liabilities		2,269		—		—		2,269
Derivative liabilities		—		3,085		—		3,085


(In Thousands)	December 31, 2008
	Fair Value Measurements Using						Total
	Level 1		Level 2		Level 3		Fair Value
Available-for-sale securities	$	6,811	$	485,845	$	28,067	$	520,723
Other assets		2,637		—		—		2,637
Derivative assets		—		39		—		39
Other liabilities		2,637		—		—		2,637
Derivative liabilities		—		3,343		—		3,343

March 31, 2010
Fair Value Measurements Using Total
(In Thousands) Level 1 Level 2 Level 3 Fair Value
Available-for-sale securities:
Agency securities $ - $ 50,274 $ - $ 50,274
Agency mortgage-backed securities - 249,948 - 249,948
Non-Agency prime residential MBS - 4,839 - 4,839
Non-Agency Alt-A residential MBS - 11,473 - 11,473
Municipal securities - 133,807 - 133,807
FDIC-backed securities - 25,317 - 25,317
Single issue trust preferred securities - 43,203 - 43,203
Pooled trust preferred securities - 3,574 - 3,574
Equity securities 1,842 20 - 1,862
Total available-for-sale securities 1,842 522,455 - 524,297
Deferred compensation assets 2,924 - - 2,924
Deferred compensation liabilities 2,924 - - 2,924
Derivative liabilities
Interest rate swap - 1,691 - 1,691
Interest rate lock commitments - 49 - 49
Total derivative liabilities - 1,740 - 1,740
Total $ 7,690 $ 524,195 $ - $ 531,885

December 31, 2009
Fair Value Measurements Using Total
Level 1 Level 2 Level 3 Fair Value
(In Thousands)
Available-for-sale securities:
Agency securities $ - $ 25,276 $ - $ 25,276
Agency mortgage-backed securities - 264,218 - 264,218
Non-Agency prime residential MBS - 5,170 - 5,170
Non-Agency Alt-A residential MBS - 11,301 - 11,301
Municipal securities - 135,601 - 135,601
Single issue trust preferred securities - 41,110 - 41,110
Pooled trust preferred securities - - 1,648 1,648
Equity securities 1,713 20 - 1,733
Total available-for-sale securities 1,713 482,696 1,648 486,057
Deferred compensation assets 2,872 - - 2,872
Derivative assets
Interest rate lock commitments - 2 - 2
Total derivative assets - 2 - 2
Deferred compensation liabilities 2,872 - - 2,872
Derivative liabilities
Interest rate swap - 2,117 - 2,117
Interest rate lock commitments - 74 - 74
Total derivative liabilities - 2,191 - 2,191
Total $ 7,457 $ 484,889 $ 1,648 $ 493,994

- 2018 - -

The following table ~~presents additional information about financial~~shows a reconciliation of the beginning and ending balances for fair valued assets ~~and liabilities~~ measured ~~at fair value for the three months ended March 31, 2010,~~ on a recurring basis ~~and for which~~using significant unobservable inputs. There were no financial assets or liabilities stated at Level 3 ~~inputs are utilized to determine fair value:~~

Fair Value Measurements
Using Significant
Unobservable Inputs

Available-for-Sale Securities
Pooled Trust Preferred Securities
(In Thousands)
Balance, January 1, 2010 $ 1,648
Transfers into Level 3 -
Transfers out of Level 3 (3,574 )
Total gains or losses
Included in earnings (or changes in net assets) -
Included in other comprehensive income 1,926
Purchases, issuances, sales, and settlements
Purchases -
Issuances -
Sales -
Settlements -
Balance, March 31, 2010 $ -

~~The Company transferred $3.57 million out of Level 3 for the three month period ended~~at March 31, 2010. During this period, the Company changed the fair value of pooled trust preferred securities from Level 3 to Level 2 pricing. The Company has been successful in obtaining a quote from a qualified market participant, and although the market for these securities is increasing, it still remains inactive.2008.


(In Thousands)	Available-for-
	Sale Securities
Beginning balance January 1, 2009	$	28,067
Total gains or loss (realized/unrealized)
Included in earnings		—
Included in other comprehensive income		(7,508	)
Paydowns and maturities		(33	)
Transfers into Level 3		2,179

Ending balance March 31, 2009	$	22,705

Certain financial assets and ~~non-financial assets~~financial liabilities are measured at fair value on a nonrecurring basis; that is, the instruments are not measured at fair value on an ongoing basis but are subject to fair value adjustments in certain circumstances, for example, when there is evidence of impairment. Items subjected to nonrecurring fair value adjustments at March 31, ~~2010,~~2009, and December 31, ~~2009,~~2008, are as follows:


(In Thousands)	March 31, 2009
	Fair Value Measurements Using						Total
	Level 1		Level 2		Level 3		Fair Value
Impaired loans	$	—	$	—	$	4,923	$	4,923
Other real estate owned		—		—		3,114		3,114


(In Thousands)	December 31. 2008
	Fair Value Measurements Using						Total
	Level 1		Level 2		Level 3		Fair Value
Impaired loans	$	—	$	—	$	5,980	$	5,980

Certain non-financial assets and non-financial liabilities measured at fair value on a recurring basis include reporting units measured at fair value in the first step of a goodwill impairment test. Certain non-financial assets measured at fair value on a non-recurring basis include non-financial assets and non-financial liabilities measured at fair value in the second step of a goodwill impairment test, as well as intangible assets and other non-financial long-lived assets measured at fair value for impairment assessment.

- 19 -

March 31, 2010
Fair Value Measurements Using Total
Level 1 Level 2 Level 3 Fair Value
(In Thousands)
Impaired loans $ - $ - $ 10,207 $ 10,207
Other real estate owned - - 4,740 4,740

December 31, 2009
Fair Value Measurements Using Total
Level 1 Level 2 Level 3 Fair Value
(In Thousands)
Impaired loans $ - $ - $ 11,702 $ 11,702
Other real estate owned - - 4,578 4,578

~~- 21 - -~~

Fair Value of Financial Instruments

Fair value information about financial instruments, whether or not recognized in the balance sheet, for which it is practical to estimate the value is based upon the characteristics of the instruments and relevant market information. Financial instruments include cash, evidence of ownership in an entity, or contracts that convey or impose on an entity that contractual right or obligation to either receive or deliver cash for another financial instrument. Fair value is the amount at which a financial instrument could be exchanged in a current transaction between willing parties, other than in a forced sale or liquidation, and is best evidenced by a quoted market price if one exists.


	March 31, 2009				December 31, 2008
	Carrying				Carrying
	Amount		Fair Value		Amount		Fair Value
			(Amounts in Thousands)
Assets
Cash and cash equivalents	$	100,960	$	100,960	$	46,439	$	46,439
Investment Securities		558,135		558,284		529,393		529,525
Loans held for sale		1,445		1,458		1,024		1,026
Loans held for investment (restated)		1,258,370		1,254,130		1,280,377		1,274,675
Derivative financial assets		57		57		39		39
Deferred compensation assets		2,269		2,269		2,637		2,637

Liabilities
Demand deposits		207,947		207,947		199,712		199,712
Interest-bearing demand deposits		194,934		194,934		185,117		185,117
Savings deposits		319,007		319,007		309,577		309,577
Time deposits		861,556		876,545		809,352		824,068
Securities sold under agreements to repurchase		153,824		165,340		165,914		177,454
FHLB and other indebtedness		215,870		236,836		215,877		242,223
Derivative financial liabilities		3,085		3,085		3,343		3,343
Deferred compensation liabilities		2,269		2,269		2,637		2,637

March 31, 2010 December 31, 2009
Carrying Carrying
Amount Fair Value Amount Fair Value
(In Thousands)
Assets
Cash and cash equivalents $ 87,706 $ 87,706 $ 101,341 $ 101,341
Investment securities 531,452 531,584 493,511 493,636
Loans held for sale 1,494 1,495 11,576 11,580
Loans held for investment 1,368,918 1,360,094 1,372,206 1,365,366
Accrued interest receivable 8,630 8,630 8,610 8,610
Bank owned life insurance 41,213 41,213 40,972 40,972
Derivative financial assets - - 2 2
Deferred compensation assets 2,924 2,924 2,872 2,872

Liabilities
Demand deposits $ 205,810 $ 205,810 208,244 208,244
Interest-bearing demand deposits 246,513 246,513 231,907 231,907
Savings deposits 427,883 427,883 381,381 381,381
Time deposits 775,405 784,244 824,428 834,546
Securities sold under agreements to repurchase 144,381 153,152 153,634 156,653
Accrued interest payable 3,671 3,671 4,130 4,130
FHLB and other indebtedness 195,873 205,748 198,924 208,334
Derivative financial liabilities 1,740 1,740 2,191 2,191
Deferred compensation liabilities 2,924 2,924 2,872 2,872

The following summary presents the methodologies and assumptions used to estimate the fair value of the Company’s financial instruments presented below. The information used to determine fair value is highly subjective and judgmental in nature and, therefore, the results may not be precise. Subjective factors include, among other things, estimates of cash flows, risk characteristics, credit quality, and interest rates, all of which are subject to change. Since the fair value is estimated as of the balance sheet date, the amounts that will actually be realized or paid upon settlement or maturity on these various instruments could be significantly different.

~~Cash and Cash Equivalents:~~Financial Instruments with Book Value Equal to Fair Value:The book values of cash and due from banks and federal funds sold and purchased are considered to be equal to fair value as a result of the short-term nature of these items.

Investment Securities and Deferred Compensation Assets and Liabilities:Fair values are determined in the same manner as described ~~above under ASC Topic 820.~~above.

Loans:The estimated fair value of loans held for investment is measured based upon discounted future cash flows using current rates for similar ~~loans.~~loans, applying a discount for illiquidity. Loans held for sale are recorded at lower of cost or estimated fair value. The fair value of loans held for sale is determined based upon the market sales price of similar loans.

~~Accrued Interest Receivable and Payable:~~ ~~The book value is considered to be equal to the fair value due to the short-term nature of the instrument.~~

~~Bank-owned Life Insurance:~~ ~~The fair value is determined by stated contract values.~~

~~- 22 - -~~

Derivative Financial Instruments:The estimated fair value of derivative financial instruments is based upon the current market price for similar instruments.

Deposits and Securities Sold Under Agreements to Repurchase:Deposits without a stated maturity, including demand, ~~interest bearing~~interest-bearing demand, and savings accounts, are reported at their carrying ~~value.~~value in accordance with SFAS 107. No value has been assigned to the franchise value of these deposits. For other types of deposits and repurchase agreements with fixed maturities and rates, fair value has been estimated by discounting future cash flows based on interest rates currently being offered on instruments with similar characteristics and maturities.

- 20 -

~~FHLB and~~ Other Indebtedness:Fair value has been estimated based on interest rates currently available to the Company for borrowings with similar characteristics and maturities. ~~The fair value for trust preferred obligations has been estimated based on credit spreads seen in the marketplace for like issues.~~

Commitments to Extend Credit, Standby Letters of Credit, and Financial Guarantees:The amount of off-balance sheet commitments to extend credit, standby letters of credit, and financial guarantees is considered equal to fair value. Because of the uncertainty involved in attempting to assess the likelihood and timing of commitments being drawn upon, coupled with the lack of an established market and the wide diversity of fee structures, the Company does not believe it is meaningful to provide an estimate of fair value that differs from the given value of the commitment.

Note ~~13.~~12. Derivatives and Hedging Activities

The Company, through its mortgage banking and risk management operations, is party to various derivative instruments that are used for asset and liability management and customers’ financing needs. Derivative assets and liabilities are recorded at fair value on the balance sheet.

The primary derivatives that the Company uses are interest rate swaps and interest rate lock commitments (“~~IRLC’s”~~IRLCs”). Generally, these instruments help the Company manage exposure to market risk and meet customer financing needs. Market risk represents the possibility that economic value or net interest income will be adversely affected by fluctuations in external factors, such as interest rates, market-driven loan rates and prices or other economic factors.

The following table presents the aggregate contractual, or notional, amounts of derivative financial instruments as of the dates indicated:

	March 31, 2010		December 31, 2009		March 31, 2009
(In Thousands)							March 31, 2009		December 31, 2008		March 31, 2008
Interest rate swap	$	50,000	$	50,000	$	50,000	$	50,000	$	50,000	$	50,000
IRLC's		2,966		4,636		11,300
IRLC’s								11,300		10,500		13,200

As of March 31, ~~2010,~~2009, December 31, ~~2009,~~2008 and March 31, ~~2009,~~2008, the fair values of the Company’s derivatives were as follows:


	Asset Derivatives
	March 31, 2009			December 31, 2008			March 31, 2008
	Balance Sheet	Fair		Balance Sheet	Fair		Balance Sheet	Fair
(In Thousands)	Location	Value		Location	Value		Location	Value
Derivatives designated as hedges
Interest rate swap	Other assets	$	—	Other assets	$	—	Other assets	$	—

Total		$	—		$	—		$	—


Derivatives not designated as hedges
IRLC’s	Other assets	$	57	Other assets	$	39	Other assets	$	52

Total		$	57		$	39		$	52


Total derivatives		$	57		$	39		$	52

- 21 -


	Liability Derivatives
	March 31, 2009			December 31, 2008			March 31, 2008
	Balance Sheet	Fair		Balance Sheet	Fair		Balance Sheet	Fair
(In Thousands)	Location	Value		Location	Value		Location	Value
Derivatives designated as hedges
Interest rate swap	Other liabilities	$	3,081	Other liabilities	$	3,327	Other liabilities	$	2,903

Total		$	3,081		$	3,327		$	2,903


Derivatives not designated as hedges
IRLC’s	Other liabilities	$	4	Other liabilities	$	16	Other liabilities	$	14

Total		$	4		$	16		$	14


Total derivatives		$	3,085		$	3,343		$	2,917

Asset Derivatives

March 31, 2010

December 31, 2009

March 31, 2009

Balance Sheet Fair Balance Sheet Fair Balance Sheet Fair

Location

Value

Location

Value

Location

Value

(In Thousands)
Derivatives not designated as hedges
IRLC's Other assets $ - Other assets $ 2 Other assets $ 57
Total $ - $ 2 $ 57

~~- 23 - -~~

Liability Derivatives

March 31, 2010

December 31, 2009

March 31, 2009

Balance Sheet Fair Balance Sheet Fair Balance Sheet Fair

Location

Value

Location

Value

Location

Value

(In Thousands)
Derivatives designated as hedges Interest rate swap Other liabilities $ 1,691 Other liabilities $ 2,117 Other liabilities $ 3,081
Total $ 1,691 $ 2,117 $ 3,081

Derivatives not designated as hedges IRLC's Other liabilities $ 49 Other liabilities $ 74 Other liabilities $ 4
Total $ 49 $ 74 $ 4

Total derivatives $ 1,740 $ 2,191 $ 3,085

Interest Rate Swaps.The Company uses interest rate swap contracts to modify its exposure to interest rate risk. The Company currently employs a cash flow hedging strategy to effectively convert certain floating-rate liabilities into fixed-rate instruments. The interest rate swap is accounted for under the “short-cut” method ~~as required by the Derivatives and Hedging Topic 815 of the ASC.~~in SFAS 133. Changes in fair value of the interest rate swap are reported as a component of other comprehensive income. The Company does not currently employ fair value hedging strategies.

Interest Rate Lock Commitments.In the normal course of business, the Company sells originated mortgage loans into the secondary mortgage loan market. During the period of loan origination and prior to the sale of the loans in the secondary market, the Company has exposure to movements in interest rates associated with mortgage loans that are in the “mortgage pipeline.” A pipeline loan is one on which the potential borrower has set the interest rate for the loan by entering into an ~~IRLC.~~interest rate lock commitment (“IRLC”). Once a mortgage loan is closed and funded, it is included within loans held for sale and awaits sale and delivery into the secondary market. During the term of an IRLC, the Company has the risk that interest rates will change from the rate quoted to the borrower.

The Company’s balance of mortgage loans held for sale is subject to changes in fair value, due to fluctuations in interest rates from the loan closing date through the date of sale of the loan into the secondary market. Typically, the fair value of ~~these loans decline~~the warehouse declines in value when interest rates increase and ~~rise~~rises in value when interest rates decrease.

Effect of Derivatives and Hedging Activities on the Income Statement

For the quarters ended March 31, ~~2010~~2009 and ~~2009,~~2008, the Company has determined there was no amount of ineffectiveness on cash flow hedges. The following table details gains and losses recognized in income on non-designated hedging instruments under SFAS 133 for the ~~three-month periods~~quarters ended March 31, ~~2010~~2009 and ~~2009.~~2008.

Derivatives not

Amount of Gain/(Loss)

designated as hedging

Location of Gain/(Loss)

Recognized in Income on Derivative

instruments under

Recognized in Income on

Quarter ended

SFAS 133

Derivative

March 31, 2009

March 31, 2008

(Amounts in Thousands)

IRLC’s

Other income

Total

(In Thousands) Amount of Gain/(Loss)
Derivatives Not Location of Gain/(Loss) Recognized in Income on Derivative
Designated as Hedging Recognized in Income on Three Months Ended March 31,
Instruments Derivative 2010 2009

IRLC's Other income $ 23 $ 30
Total $ 23 $ 30

Counterparty Credit Risk.Like other financial instruments, derivatives contain an element of “credit risk.” Credit risk is the possibility that the Company will incur a loss because a counterparty, which may be a bank, a broker-dealer or a customer, fails to meet its contractual obligations. This risk is measured as the expected positive replacement value of contracts. All derivative contracts may be executed only with exchanges or counterparties approved by the Company’s ~~Asset/~~Asset and Liability Management Committee. The Company reviews its counterparty risk regularly and has determined that, as of March 31, ~~2010,~~2009, there is no significant counterparty credit risk.

- 22 -

~~- 24 - -~~

PART I. ITEM 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

Unless the context suggests otherwise, the terms “First Community”, “Company”, “we”, “our”, and “us” refer to First Community Bancshares, Inc. and its subsidiaries as a consolidated entity.

The following discussion and analysis is provided to address information about the ~~Company’s~~Company financial condition and results of operations. This discussion and analysis should be read in conjunction with the Company’s ~~2009 Annual Report on~~2008 Form ~~10-K~~10-K/A and the other financial information included in this report. The following information has been adjusted to reflect the restatement of the our financial results for the year ended December 31, 2008, and the three month period ended March 31, 2009, which is more fully described in the “Explanatory Note” immediately preceding Part I, Item 1 and in Note 2. Restatement of Consolidated Financial Statements of the Notes to Consolidated Financial Statements of this
Quarterly Report on Form 10-Q/A.

The Company is a multi-state financial holding company headquartered in Bluefield, Virginia, with total assets of ~~$2.28~~$2.20 billion at March 31, ~~2010.~~2009. Through its community bank subsidiary, First Community Bank, N. A. (the “Bank”), the Company provides financial, trust and investment advisory services to individuals and commercial customers through more than ~~sixty~~fifty locations in Virginia, West Virginia, North Carolina, South Carolina, and Tennessee. The Company is also the parent of GreenPoint Insurance Group, Inc. ~~(“GreenPoint”)~~, a North Carolina-based full-service insurance agency offering commercial and personal ~~lines.~~lines (“GreenPoint”). The Bank is the parent of Investment Planning Consultants, Inc. (“IPC”), a registered investment advisory firm that offers wealth management and investment advice. The Company’s common stock is traded on the NASDAQ Global Select Market under the symbol, “FCBC”.

Restatement

As a result of a routine internal audit, the Company determined there was a computational error in the model that it uses to calculate the quantitative basis for its allowance for loan losses. In connection with its determination of the appropriate loan loss reserve at December 31, 2008, the Company made certain modifications to its loan loss reserve model with respect to a $130.76 million pool of loans. However, in calculating the loan loss reserves for this pool of loans, the historical quarterly net charge-off rates were not annualized as was the case with all other quarterly loss rates in the model. The Company has corrected the computational error in its model for calculating the allowance for loan losses. The financial information for the quarter ended March 31, 2009 provided in this Management’s Discussion and Analysis of Financial Condition and Results of Operations has been restated to reflect the correction of the computational error. For additional information, see the Explanatory Note immediately preceding Part I, Item 1 and Note 2. — Restatement of Consolidated Financial Statements of the Notes to Consolidated Financial Statements of this Quarterly Report onForm 10-Q/A.

FORWARD-LOOKING STATEMENTS

The Company may from time to time make written or oral “forward-looking statements”, including statements contained in its filings with the SEC (including this Quarterly Report on Form ~~10-Q~~10-Q/A and the Exhibits hereto and thereto), in its reports to stockholders and in other communications which are made in good faith by the Company pursuant to the “safe harbor” provisions of the Private Securities Litigation Reform Act of 1995.

These forward-looking statements include, among others, statements with respect to the Company’s beliefs, plans, objectives, goals, guidelines, expectations, anticipations, estimates and intentions that are subject to significant risks and uncertainties and are subject to change based on various factors (many of which are beyond the Company’s control). The words “may,” “could,” “should,” “would,” “believe,” “anticipate,” “estimate,” “expect,” “intend,” “plan,” and similar expressions are intended to identify forward-looking statements. We caution that the forward-looking statements are based largely on our expectations and are subject to a number of known and unknown risks and uncertainties that are subject to change based on factors which are, in many instances, beyond our control. Actual results, performance or achievements could differ materially from those contemplated, expressed, or implied by the forward-looking statements. The following factors, among others, could cause ~~our~~the Company’s financial performance to differ materially from that expressed in such forward-looking statements:

~~The~~ the strength of the United States economy in general and the strength of the local economies in which ~~we conduct~~the Company conducts operations;

~~Geopolitical conditions, including acts or threats of terrorism, actions taken by~~ the ~~United States or other governments in response to acts or threats of terrorism and/or military conflicts, which could impact business and economic conditions in the United States and abroad;~~

~~The~~ effects of, and changes in, trade, monetary and fiscal policies and laws, including interest rate policies of the Board of Governors of the Federal Reserve System;

~~Inflation,~~ inflation, interest rate, market and monetary fluctuations;

~~The~~ the timely development of competitive new products and services of the Company and the acceptance of these products and services by new and existing customers;

~~The~~ the willingness of ~~users~~customers to substitute competitors’ products and services for ~~our~~the Company’s products and ~~services;~~

~~The~~services and vice versa; the impact of changes in financial ~~services policies,~~services’ laws and regulations ~~including~~(including laws ~~regulations and policies~~ concerning taxes, banking, securities and ~~insurance, and~~insurance); technological changes; the ~~application thereof by regulatory bodies;~~

~~Technological changes;~~

~~The~~ effect of acquisitions, ~~we may make,~~ including, without limitation, the failure to achieve the expected revenue growth and/or expense savings from such acquisitions;

~~The~~ the growth and profitability of ~~noninterest~~the Company’s non-interest or fee income being less than expected;

~~Changes in the level of our non-performing assets and charge-offs;~~

~~The effect of~~ unanticipated regulatory or judicial proceedings; changes in accounting policies and practices, as may be adopted from time-to-time by bank regulatory agencies, the SEC, the Public Company Accounting Oversight Board, the FASB or other accounting standards setters;

~~Possible other-than-temporary impairments of securities held by us;~~

~~The impact of current governmental efforts to restructure the U.S. financial regulatory system;~~

~~Changes~~ in consumer spending and ~~savings~~saving habits; and

~~- 25 - -~~

~~Unanticipated regulatory or judicial proceedings.~~

~~If one or more~~ the success of the ~~factors affecting our forward-looking information and statements proves incorrect, then our actual results, performance or achievements could differ materially from those expressed~~Company at managing the risks involved in ~~or implied by, forward-looking information and statements contained in this Quarterly Report on Form 10-Q and other reports filed by us with~~ the ~~SEC. Therefore, we caution you not to place undue reliance on our forward-looking information and statements.~~foregoing.

The Company cautions that the foregoing list of important factors is not exclusive. The Company does not undertake to update any forward-looking statement, whether written or oral, that may be made from time to time by or on behalf of the Company. These factors ~~and other risks and uncertainties~~ are ~~discussed~~described in greater detail in Item 1A.~~, “Risk~~ Risk Factors,” in ~~Part II of this Quarterly Report on Form 10-Q and~~ the Company’s ~~Annual Report on~~2008 Form ~~10-K for the year ended December 31, 2009.~~10-K/A.

APPLICATION OF CRITICAL ACCOUNTING POLICIES

The Company’s consolidated financial statements are prepared in accordance with GAAP and conform to general practices within the banking industry. The Company’s financial position and results of operations are affected by management’s application of accounting policies, including judgments made to arrive at the carrying value of assets and liabilities and amounts reported for revenues, expenses and related disclosures. Different assumptions in the application of these policies could result in material changes in the Company’s consolidated financial position and consolidated results of operations.

Estimates, assumptions, and judgments are necessary principally when assets and liabilities are required to be recorded at estimated fair value, when a decline in the value of an asset carried on the financial statements at fair value warrants an impairment write-down or valuation reserve to be established, or when an asset or liability needs to be recorded based upon the probability of occurrence of a future event. Carrying assets and liabilities at fair value inherently results in more financial statement volatility. The fair values and the information used to record valuation adjustments for certain assets and liabilities are based either on quoted market prices or are provided by third party sources, when available. When third party information is not available, valuation adjustments are estimated by management primarily through the use of internal modeling techniques and appraisal estimates.

- 23 -

The Company’s accounting policies are fundamental to understanding Management’s Discussion and Analysis of Financial Condition and Results of Operation. The disclosures presented in the Notes to the Consolidated Financial Statements and in Management’s Discussion and Analysis provide information on how significant assets and liabilities are valued in the financial statements and how those values are determined. Based on the valuation techniques used and the sensitivity of financial statement amounts to the methods, assumptions, and estimates underlying those amounts, management has identified the accounting for and valuation of investment securities, the determination of the allowance for loan losses, accounting for acquisitions and intangible assets, and accounting for income taxes as the four accounting areas that require the most subjective or complex judgments. The identified critical accounting policies are described in detail in the Company’s ~~2009 Annual Report on~~2008 Form ~~10-K.~~10-K/A.

COMPANY OVERVIEW

The Company is a financial holding company which operates within the five-state region of Virginia, West Virginia, North Carolina, South Carolina, and Tennessee. The Company operates through the Bank, ~~IPC,~~Investment Planning Consultants, and GreenPoint to offer a wide range of financial services. The Company reported total assets of ~~$2.28~~$2.20 billion at March 31, ~~2010.~~

2009.

The Company funds its lending activities primarily through the retail deposit operations of its branch banking network. Retail and wholesale repurchase agreements and borrowings from the Federal Home Loan Bank (“FHLB”) provide additional funding as needed. The Company invests its funds primarily in loans to retail and commercial customers. In addition to loans, the Company invests a portion of its funds in various debt securities, including those of United States agencies, state and political subdivisions, and certain corporate notes and debt instruments. The Company also maintains overnight interest-bearing balances with the FHLB and correspondent banks. The difference between interest earned on assets and interest paid on liabilities is the Company’s primary source of earnings. Net interest income is supplemented by fees for services, commissions on sales, and various deposit service charges.

The Company also conducts asset management activities through the Bank’s Trust and Financial Services Division (“Trust Division”) and its registered investment advisory firm, IPC. The Bank’s Trust Division and IPC manage assets with an aggregate market value of ~~$831 million as of March 31, 2010.~~$791 million. These assets are not assets of the Company, but are managed under various fee-based arrangements as fiduciary or agent.

~~- 26 - -~~

RECENT MARKET DEVELOPMENTS

The global and U.S. economies ~~have experienced~~continue to experience significantly reduced business activity as a result of recessionary economic conditions and disruptions in the financial ~~system.~~system during the past eighteen months. Dramatic declines in the housing market during the past eighteen months, with falling home prices and increasing foreclosures and unemployment, have resulted in significant write-downs of asset values by financial institutions, including government-sponsored entities and major commercial and investment banks. These write-downs, initially of mortgage-backed securities but spreading to credit default swaps, other derivative securities, and to loan portfolios, have caused many financial institutions to seek additional capital, to merge with larger and stronger institutions and, in some cases, to fail. ~~In recent months, positive economic developments have been reported; however, further~~Further adverse effects could have an adverse impact on the Company and its business.

MERGERS, ACQUISITIONS AND BRANCHING ACTIVITY

~~In July~~On April 2, 2009, the Company ~~acquired~~signed a definitive agreement providing for the acquisition of TriStone Community Bank (“TriStone”)~~, based~~ a $152.42 million state-chartered commercial bank headquartered in Winston-Salem, North Carolina. ~~TriStone had two full service locations in Winston-Salem. At acquisition, TriStone had total assets~~The definitive agreement provides for the exchange of ~~$166.82 million, total loans of $132.23 million and total deposits of $142.27 million. Each outstanding common share of TriStone was exchanged for~~ .5262 shares of the Company’s common stock for each outstanding share of TriStone common stock. TriStone will be merged with and into the ~~overall acquisition cost was approximately $10.78 million.~~Bank. The transaction is subject to regulatory approvals and approval by the stockholders of TriStone, and is expected to close in the third quarter of 2009.

- 24 -

Since January 1, 2008, GreenPoint has acquired a total of five agencies, issuing cash consideration of approximately $2.04 million. Acquisition terms in all instances call for additional cash consideration if certain operating performance targets are met. If those targets are met, the ~~Winston-Salem, North Carolina market.~~

~~RESULTS OF OPERATIONS~~

~~Overview~~

value of the consideration ultimately paid will be added to the cost of the acquisitions. Goodwill and other intangibles associated with GreenPoint’s acquisitions total approximately $2.04 million.

The Company ~~experienced the following developments~~opened a new branch location in ~~the first quarter of 2010:~~Summersville, West Virginia, in May 2008.

RESULTS OF OPERATIONS

~~For the first quarter of 2010, net income increased $619 thousand from the comparable period in 2009.~~

Overview

~~Net interest margin, on a tax-equivalent basis, increased 29 basis points to 4.02% for the three months ended March 31, 2010, as compared to the three month period ended March 31, 2009.~~

~~Net interest income increased $2.19 million, or 13.30%, from the first quarter of 2009.~~

~~Tangible book value per common share increased to $9.67, up $0.51 from the quarter ended December 31, 2009.~~

~~The allowance for loan losses as a percentage of total loans increased to 1.58% in the first quarter of 2010, as compared to 1.30% in the first quarter of 2009.~~

Average shareholders’ equity increased $39.36 million, or 17.92%, from first quarter 2009, primarily due to the sale of 5.29 million shares of common stock in June 2009, which generated net proceeds of approximately $61.67 million.

Net income available to common shareholders for the three months ended March 31, ~~2010,~~2009, was ~~$5.28 million, or $0.30 per diluted common share, compared with net income of $4.66~~$4.62 million, or $0.40 per basic and diluted ~~common~~share, compared with $6.31 million, or $0.57 per basic and diluted share, for the three months ended March 31, ~~2009, an increase~~2008, a decrease of ~~$619 thousand. Net income available to common stockholders~~$1.69 million, or 26.79%. Return on average assets was 0.86% for the three ~~month~~months ended March 31, 2009, compared with 1.21% for the same period in 2008. Return on average common equity for the three months ended March 31, 2009, was ~~impacted by~~10.59% compared with 11.66% for the ~~required payment of dividends on preferred stock totaling $571 thousand. On July 8, 2009,~~three months ended March 31, 2008. The main reason for the ~~Company repurchased and retired the $41.5 million of Series A perpetual preferred stock from the Treasury.~~decrease in net income was increased provisions for loan losses.

Net Interest Income ~~— Quarterly Comparison~~ (See Table I)

Net interest income, the largest contributor to earnings, was ~~$18.62~~$16.43 million for the three months ended March 31, ~~2010,~~2009, compared with ~~$16.43~~$16.36 million for the corresponding period in ~~2009,~~2008, an increase of ~~$2.19 million,~~$73 thousand, or ~~13.30%~~0.45%. Tax-equivalent net interest income totaled ~~$19.43~~$17.35 million for the three months ended March 31, ~~2010, an increase~~2009, a decrease of ~~$2.08 million, or 12.01%,~~$142 thousand from ~~$17.35~~$17.49 million for the first quarter of ~~2009.~~2008. The ~~increase~~decrease in tax-equivalent net interest income was due primarily to ~~increases in total earning assets, largely from the TriStone acquisition, and~~ decreases in ~~deposit~~loan and ~~borrowing costs.~~

investment yields as a result of the precipitous declines in benchmark interest rates, including the New York Prime Rate, since late 2007.

Compared with the first quarter of ~~2009,~~2008, average earning assets increased ~~$72.93~~$24.15 million while interest-bearing liabilities increased ~~$49.00 million.~~$93.30 million during the three months ended March 31, 2009. The changes include the impact of the ~~July 2009 TriStone acquisition.~~Coddle Creek acquisition in November 2008. The yield on average earning assets decreased 30by 65 basis points to ~~5.67%~~5.97% from ~~5.97%~~6.62% between the three months ended March 31, ~~2010~~2009 and ~~2009,~~2008, respectively. Total cost of interest-bearing liabilities decreased 6279 basis points between the first quarters of ~~2009~~2008 and ~~2010,~~2009, which resulted in a net interest rate spread that was 3214 basis points higher at ~~3.85%,~~3.53% for the first quarter of ~~2010~~2008 compared with ~~3.53%~~3.39% for the same period last year. The Company’s tax-equivalent net interest margin of ~~4.02%~~3.73% for the three months ended March 31, ~~2010 increased 29~~2009, decreased five basis points from ~~3.73%~~3.78% for the same period of ~~2009.~~2008.

~~- 27 - -~~

The ~~yield~~rate earned on loans decreased 681 basis points to ~~6.22%~~6.28% from ~~6.28%~~7.09% for the three months ended March 31, ~~2010~~2009 and ~~2009,~~2008, respectively. The effect of the ~~extended low interest rate environment~~cuts in the ~~United States was offset~~target federal funds rate by the ~~addition of TriStone, which resulted~~Federal Open Market Committee and the associated decline in the Prime rate had a profound impact on loan yields throughout 2008 and 2009, resulting in a net ~~increase~~decrease of ~~$1.40~~$1.26 million, or ~~7.00%~~5.93%, in tax-equivalent loan interest income for the first quarter of ~~2010~~2009 compared with the first quarter of ~~2009.~~

2008.

During the three months ended March 31, ~~2010,~~2009, the tax-equivalent yield on available-for-sale securities ~~decreased 106~~increased 17 basis points to ~~4.92%~~5.98%, while the average balance decreased by ~~$32.18~~$109.98 million, or ~~6.27%~~17.64%, compared with the same period in ~~2009.~~2008. The decline in average balance was due ~~largely~~ to declines in the fair value of available-for-sale securities. The average balance of the held-to-maturity securities portfolio continued to decline as securities matured or were called and were not replaced.

~~Average~~Compared with the first quarter of 2008, average interest-bearing balances with banks ~~were $76.59~~increased to $73.63 million during the first quarter of ~~2010, and~~2008, as the yield ~~was 0.24%.~~decreased 299 basis points to 0.21% during the same period. Interest-bearing balances with banks ~~are~~is comprised largely of excess liquidity bearing overnight market rates. The rate earned on these overnight balances during the first quarter of 2008 decreased along with decreases in short-term benchmark interest rates. The Company maintained a strong liquidity position in the first ~~quarter.~~quarter to balance the risks associated with the fed funds market and general economic conditions.

- 25 -

Compared with the same period in ~~2009,~~2008, the average balances of interest-bearing demand deposits increased ~~$46.27~~$28.04 million, or ~~24.32%~~17.29%, while the average rate paid during the first quarter of ~~2010 increased~~2009 decreased by 17two basis points. During the three months ended March 31, ~~2010,~~2009, the average balances of savings deposits ~~increased $100.47~~decreased $14.50 million, or ~~32.15%~~4.43%, while the average rate paid decreased ~~three~~98 basis points compared to the same period in ~~2009.~~2008. Average time deposits ~~decreased $66.18~~increased $185.38 million, or ~~7.71%~~27.56%, while the average rate paid on time deposits decreased 94106 basis points from 4.29% in the first quarter of 2008 to 3.23% in the first quarter of ~~2009 to 2.29% in the first quarter of 2010.~~2009. The level of average ~~noninterest-bearing~~non-interest-bearing demand deposits decreased ~~$246 thousand,~~$13.66 million, or ~~0.12%~~6.41%, to ~~$199.07~~$199.31 million during the quarter ended March 31, ~~2010,~~2009, compared with the corresponding period of the prior year. The overall increase in the level of average deposits reflects the addition of ~~TriStone.~~

Coddle Creek. Movements within the deposit types reflect customers seeking yield enhancement within FDIC insured products.

Retail repurchase agreements, which consist of collateralized retail deposits and commercial treasury accounts, decreased ~~$14.49~~$43.11 million, or ~~13.61%~~28.82%, to ~~$91.98~~$106.47 million for the first quarter of ~~2010,~~2009, while the rate decreased 27126 basis points to ~~1.22%~~1.49% during the same period. The decrease in average balance can be largely attributed to the customers converting retail repurchase agreements to certificates of ~~deposit and businesses using cash during more difficult economic times.~~deposit. There were no ~~federal~~fed funds purchased on average during the first ~~quarters~~quarter of ~~2010 and 2009.~~2009, compared with $1.82 million in the same period in 2008. Wholesale repurchase agreements remained unchanged at $50.00 million, while the rate ~~decreased 38~~increased 34 basis points between the two ~~periods due to structure within those borrowings.~~periods. The average balance of FHLB borrowings and other long-term debt decreased by ~~$17.07~~$60.69 million, or ~~7.91%~~21.95%, in the first quarter of ~~2010~~2009 to ~~$198.74~~$215.81 million, while the rate paid on those borrowings decreased 1158 basis points.

-26-

~~- 28 - -~~

Table I

AVERAGE BALANCE SHEETS AND NET INTEREST INCOME ANALYSIS


	Three Months Ended								Three Months Ended
	March 31, 2009								March 31, 2008
	Average					Yield/			Average				Yield/
	Balance			Interest (1)		Rate (1)			Balance		Interest (1)		Rate (1)
	(Restated)		(Dollars in Thousands)

ASSETS
Earning Assets
Loans (2)	$	1,292,179		$	19,997		6.28	%	$	1,205,481	$	21,258		7.09	%
Securities available for sale		513,300			7,571		5.98	%		623,275		8,998		5.81	%
Securities held to maturity		8,473			172		8.23	%		12,075		242		8.06	%
Interest-bearing deposits		73,628			39		0.21	%		22,602		180		3.20	%

Total Earning Assets		1,887,580			27,779		5.97	%		1,863,433		30,678		6.62	%
Other assets		289,055								227,964

TOTAL ASSETS	$	2,176,635							$	2,091,397


LIABILITIES
Interest-bearing deposits:
Demand deposits	$	190,215		$	79		0.17	%	$	162,175	$	76		0.19	%
Savings deposits		312,563			656		0.85	%		327,061		1,487		1.83	%
Time deposits		858,020			6,832		3.23	%		672,645		7,178		4.29	%

Total interest-bearing deposits		1,360,798			7,567		2.26	%		1,161,881		8,741		3.03	%
Borrowings:
Federal funds purchased		—			—					1,819		18		3.98	%
Retail repurchase agreements		106,469			390		1.49	%		149,581		1,022		2.75	%
Wholesale repurchase agreements		50,000			510		4.14	%		50,000		473		3.80	%
FHLB borrowings and other indebtedness		215,813			1,963		3.69	%		276,503		2,933		4.27	%

Total borrowings		372,282			2,863		3.12	%		477,903		4,446		3.74	%

Total interest-bearing liabilities		1,733,080			10,430		2.44	%		1,639,784		13,187		3.23	%

Non-interestbearing demand deposits		199,311								212,972
Other liabilities		25,718								20,962
Stockholders’ Equity		218,526								217,679

TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY	$	2,176,635							$	2,091,397

Net Interest Income, Tax Equivalent				$	17,349						$	17,491

Net Interest Rate Spread (3)							3.53	%						3.39	%

Net Interest Margin (4)							3.73	%						3.78	%

Three Months Ended Three Months Ended

March 31, 2010

March 31, 2009

Average Yield/ Average Yield/
(Dollars in Thousands)
Balance

Interest (1)

Rate (1)

Balance

Interest (1)

Rate (1)

ASSETS
Earning assets
Loans (2) $ 1,395,669 $ 21,398 6.22 % $ 1,292,179 $ 19,997 6.28 %
Securities available-for- sale 481,116 5,833 4.92 % 513,300 7,571 5.98 %
Securities held-to-maturity 7,139 148 8.41 % 8,473 172 8.23 %
Interest bearing deposits 76,587 46 0.24 % 73,628 39 0.21 %
Total earning assets 1,960,511 27,425 5.67 % 1,887,580 27,779 5.97 %
Other assets 284,870 290,182
TOTAL ASSETS $ 2,245,381 $ 2,177,762

LIABILITIES
Interest-bearing deposits
Demand deposits $ 236,484 $ 200 0.34 % $ 190,215 $ 79 0.17 %
Savings deposits 413,037 831 0.82 % 312,563 656 0.85 %
Time deposits 791,838 4,471 2.29 % 858,020 6,832 3.23 %
Total interest bearing deposits 1,441,359 5,502 1.55 % 1,360,798 7,567 2.26 %
Borrowings
Retail repurchase agreements 91,976 276 1.22 % 106,469 390 1.49 %
Wholesale repurchase agreements 50,000 463 3.76 % 50,000 510 4.14 %
FHLB borrowings and other indebtedness 198,744 1,752 3.58 % 215,813 1,963 3.69 %
Total borrowings 340,720 2,491 2.97 % 372,282 2,863 3.12 %
Total interest bearing liabilities 1,782,079 7,993 1.82 % 1,733,080 10,430 2.44 %
Noninterest bearing demand deposits 199,065 199,311
Other liabilities 5,223 25,718
Stockholders' equity 259,014 219,653
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 2,245,381 $ 2,177,762
Net interest income, tax equivalent $ 19,432 $ 17,349
Net interest rate spread (3) 3.85 % 3.53 %
Net interest margin (4) 4.02 % 3.73 %


(1)		Fully ~~taxable equivalent ("FTE"~~Taxable Equivalent (“FTE”) at the rate of 35%. The FTE basis adjusts for the tax benefits of income on certain tax-exempt loans and investments using the federal statutory rate of 35% for each period presented. The Company believes this measure to be the preferred industry measurement of net interest income and provides relevant comparison between taxable and non-taxable amounts.


(2)		Non-accrual loans are included in average balances outstanding but with no related interest income during the period of non-accrual.


(3)		Represents the difference between the yield on earning assets and cost of funds.


(4)		Represents tax equivalent net interest income divided by average interest-earning assets.

- 2927 - -

The following table summarizes the changes in tax-equivalent interest earned and paid ~~detailing the amounts attributable to (i)~~resulting from changes in the volume ~~(change in the average volume times the prior year’s average rate), (ii)~~of earning assets and paying liabilities and changes in ~~rate (changes in the average rate times the prior year’s average volume), and (iii)~~their interest rates. The changes in ~~rate/~~interest due to both rate and volume ~~(change~~have been allocated to the volume and rate columns in ~~the average column times the change in average rate)~~proportion to dollar amounts.


	Three Months Ended
	March 31, 2009
	Compared to 2008
	$ Increase/(Decrease) due to
(In Thousands)	Volume			Rate			Total
Interest Earned On:
Loans (1)	$	2,100		$	(3,361	)	$	(1,261	)
Securities available-for-sale (1)		(1,722	)		295			(1,427	)
Securities held-to-maturity (1)		(75	)		5			(70	)
Interest-bearing deposits with other banks		136			(277	)		(141	)

Total interest-earning assets		439			(3,338	)		(2,899	)


Interest Paid On:
Demand deposits		8			(5	)		3
Savings deposits		(64	)		(767	)		(831	)
Time deposits		1,675			(2,021	)		(346	)
Fed funds purchased		(9	)		(9	)		(18	)
Retail repurchase agreements		(244	)		(388	)		(632	)
Wholesale repurchase agreements		—			37			37
FHLB borrowings and other long-term debt		(600	)		(370	)		(970	)

Total interest-bearing liabilities		766			(3,523	)		(2,757	)


Change in net interest income, tax-equivalent	$	(327	)	$	185		$	(142	)

Three Months Ended
March 31, 2010 Compared to 2009
$ Increase/(Decrease) due to
Rate/
(In Thousands) Volume Rate Volume Total
Interest Earned On:
Loans (1) $ 1,602 $ (186 ) $ (15 ) $ 1,401
Securities available-for-sale (1) (475 ) (1,348 ) 85 (1,738 )
Securities held-to-maturity (1) (27 ) 4 (1 ) (24 )
Interest bearing deposits with other banks 2 5 - 7
Total interest earning assets 1,102 (1,525 ) 69 (354 )

Interest Paid On:
Demand deposits 19 82 20 121
Savings deposits 211 (27 ) (9 ) 175
Time deposits (527 ) (1,987 ) 153 (2,361 )
Retail repurchase agreements (53 ) (71 ) 10 (114 )
Wholesale repurchase agreement - (47 ) 0 (47 )
FHLB borrowings and other long-term debt (155 ) (61 ) 5 (211 )
Total interest bearing liabilities (505 ) (2,111 ) 179 (2,437 )

Change in net interest income, tax-equivalent $ 1,607 $ 586 $ (110 ) $ 2,083


(1)		Fully taxable equivalent using a rate of 35%.

Provision and Allowance for Loan Losses

~~During~~There was significant disruption and volatility in the ~~last~~financial and capital markets during 2008 and the first three ~~years, there~~months of 2009. Turmoil in the mortgage market adversely impacted both domestic and global markets, resulting in a credit and liquidity crisis. The disruption has been ~~significant turmoil in the commercial and residential real estate markets, resulting in~~exacerbated by significant declines in valuations inwithin the real estate and housing markets. Decreases in real estate values could adversely affect the value of property used as collateral for loans, including loans originated by the Company. ~~In addition, adverse~~Adverse changes in the economy ~~particularly continued high rates of unemployment~~ may have a negative effect on the ability of the Company’s borrowers to make timely loan payments, which would have an adverse impact on the Company’s earnings. A further increase in loan delinquencies could adversely impact loan loss experience, causing potential increases in the provision and allowance for loan losses.

- 28 -

The ~~Company’s~~ allowance for loan losses was ~~$21.96~~$18.42 million at March 31, ~~2010, $21.73~~2009, $17.78 million at December 31, ~~2009~~2008 and ~~$16.56~~$12.86 million at March 31, ~~2009.~~2008. The Company’s allowance for loan loss activity for the ~~three-month periods~~quarters ended March 31, ~~2010~~2009 and ~~2009~~2008, is as follows:

~~- 30 - -~~


	For the Three Months Ended
	March 31,
	2009			2008
(In Thousands)	(Restated)
Allowance for loan losses
Beginning balance	$	17,782		$	12,833
Provision for loan losses		2,148			323
Charge-offs		(1,730	)		(966	)
Recoveries		220			672

Net charge-offs		(1,510	)		(294	)

Ending balance	$	18,420		$	12,862

For the Three Months Ended
March 31,
(In Thousands) 2010 2009
Allowance for loan losses
Beginning balance $ 21,725 $ 15,978
Provision for loan losses 3,665 2,087
Charge-offs (3,732 ) (1,730 )
Recoveries 298 220
Net charge-offs (3,434 ) (1,510 )
Ending balance $ 21,956 $ 16,555

The total allowance for loan losses to loans held for investment ratio was ~~1.58%~~1.44% at March 31, ~~2010,~~2009, compared with ~~1.56%~~1.37% at December 31, ~~2009,~~2008, and ~~1.30%~~1.09% at March 31, ~~2009.~~2008. Management considers the allowance ~~to be~~ adequate based upon its analysis of the portfolio as of March 31, ~~2010. Management believes~~2009. However, no assurances can be made that ~~it uses relevant information available to make determinations about the allowance. If circumstances differ substantially from the assumptions used in making determinations,~~future adjustments to the allowance may be necessary and results of operations could be affected. Because events affecting borrowers and collateral charge-offs cannot be predicted with certainty, there can be no assurance that increases to the allowancefor loan losses will not be necessary ~~should the quality~~as a result of ~~any~~increases in non-performing loans ~~deteriorate.~~and other factors.

~~During~~

Throughout the first quarter of ~~2010,~~2009, the Company incurred net charge-offs of ~~$3.43~~$1.51 million compared with ~~$1.51 million~~$294 thousand in ~~the respective period of 2009.~~2008. Annualized net charge-offs for the first quarter of 2009 were ~~1.00% of average loan balances.~~0.47%. The Company made provisions for loan losses of ~~$3.67~~$2.15 million for the first quarter of 2009 compared to ~~$2.09 million~~$323 thousand in ~~the respective period of 2009. Provisions for loan losses covered 106.73% of net charge-offs for the three month period ended March 31, 2010.~~2008. The increase in loan loss provision is primarily attributable to rising loss factors as net charge-offs were higher than in ~~2009, reflective of increases in unemployment and the general impact of recessionary conditions and stress in the residential real estate market.~~2008. Qualitative risk factors were also higher, reflective of the higher risk of inherent loan losses due to rising unemployment, recessionary pressures, and devaluation of various categories of ~~collateral, including residential and commercial real estate.~~collateral.

Total delinquent loans as of March 31, 2010, measured 2.35% of total loans and were comprised of loans 30-89 days delinquent of 1.09% of total loans and loans in non-accrual status of 1.26% of total loans. Total delinquency has remained relatively steady since December 31, 2009. Non-performing loans, comprised entirely of non-accrual loans as the Company does not have any loans that are 90 days past due and still accruing, as a percentage of total loans remained in a fairly tight range as they have measured 1.26%, 1.26%, and 0.88% of total loans as of March 31, 2010, December 31, 2009 and September 30, 2009, respectively.

The primary composition of non-performing loans is 32.20% residential real estate; 22.66% construction, land development, and vacant land; and 20.43% owner occupied commercial real estate. Approximately $4.87 million, or 27.85%, of non-performing loans is attributed to the TriStone loan portfolio that was acquired during the third quarter of 2009.

Noninterest Income

Noninterest income consists of all revenues that are not included in interest and fee income related to earning assets. ~~Total noninterest~~Noninterest income for the first quarter of ~~2010~~2009 was ~~$8.58~~$8.42 million compared with ~~noninterest income of $8.42~~$9.14 million in the same period of ~~2009, an increase~~2008, a decrease of $161 thousand. Exclusive of the impact of other-than-temporary impairment (“OTTI”) charges and gains on the sale of securities, noninterest income for the quarter ended March 31, 2010, increased $113$717 thousand, or ~~1.38%, compared to the same period in 2009.~~7.84%. Wealth management revenues ~~decreased $99~~increased $85 thousand, or ~~10.06%~~9.45%, to ~~$885~~$984 thousand for the three months ended March 31, ~~2010,~~2009, compared with the same period in ~~2009.~~2008. IPC added several large accounts during 2008. Service charges on deposit accounts ~~decreased $165~~increased $58 thousand, or ~~5.23%~~1.87%, to ~~$2.99~~$3.16 million for the three months ended March 31, ~~2010,~~2009, compared with the same period in ~~2009. Management attributes the decrease to be~~2008. The increase is smaller than recent quarters’ increases due to lower ~~overall~~ consumer spending ~~leading to lower levels~~and a generally higher rate of ~~certain activity charges.~~savings. Other service charges, commissions, and fees increased ~~$103~~$57 thousand, or ~~8.74%~~5.08%, to ~~$1.28~~$1.18 million for the three months ended March 31, ~~2010,~~2009, compared with the same period in ~~2009.~~2008. Insurance commissions for the first quarter of ~~2010~~2009 were ~~$2.20~~$2.32 million, ~~a decrease~~an increase of ~~$116~~$973 thousand, or ~~5.01%~~41.99%, ~~from 2009.~~over 2008. Increased insurance commissions reflect revenue increases associated with agency acquisitions made by GreenPoint throughout 2008. Other operating income was ~~$969~~$586 thousand for the three months ended March 31, ~~2010, an increase~~2009, a decrease of ~~$390~~$272 thousand, or ~~67.36%~~46.42%, compared with the same period in ~~2009. The increase is primarily attributed~~2008. Other operating income was down due largely to ~~the higher volumes of loans sold~~decreases in ~~the secondary mortgage market and a small litigation settlement.~~dividends on FHLB stock. At March 31, ~~2010,~~2009, the Company recognized ~~no other-than-temporary impairments on securities compared to~~ $209 thousand ~~in 2009.~~of other-than-temporary impairment on several smaller equity security holdings. During the first quarter of ~~2010,~~2009, securities gains of ~~$250~~$411 thousand were realized, compared with a gain of ~~$411 thousand~~$1.82 million in the comparable period in ~~2009.~~

2008.

~~- 31 - -~~

Noninterest Expense

Noninterest expense totaled ~~$16.07~~$15.19 million for the quarter ended March 31, ~~2010, an increase~~2009, a decrease of ~~$885 thousand,~~$1.09 million, or ~~5.83%~~6.69%, from the same period in ~~2009.~~2008. Salaries and ~~employee~~ benefits for the first quarter of ~~2010~~2009 increased ~~$103~~$76 thousand, or ~~1.31%~~0.98%, compared to the same period in ~~2009. TriStone branches accounted for an increase in salaries~~2008. Salaries and ~~employee~~ benefits at GreenPoint increased $438 thousand over the prior first quarter, a result of ~~$326 thousand. The remainder of the Company showed an overall decrease in~~new agency acquisitions, and salaries and benefits ~~of $223~~at the new branches from Coddle Creek were $341 thousand. Decreases in general bank staffing levels and benefits largely offset the increases. Occupancy and furniture and ~~equipment~~fixtures expenses increased ~~$106 thousand~~ between the comparable ~~periods.~~periods with the addition of GreenPoint and the Coddle Creek branches. Other ~~operating~~non- interest expense totaled ~~$4.53~~$4.54 million for the first quarter of ~~2010, an increase~~2009, a decrease of ~~$187~~$79 thousand, or ~~4.30%~~1.71%, from ~~$4.35~~$4.62 million for the first quarter of ~~2009.~~2008.

- 29 -

~~During 2009,~~Over the course of the last two quarters, the FDIC has announced increases in deposit insurance premiums, ~~levied~~as well as proposals to levy special ~~assessments, and shifted to a three-year prepaid collection versus payment in arrears. Deposit insurance premiums and assessments were $701 thousand for the three-month period ended March 31, 2010.~~assessments. The Company expects the ~~remainder of~~increased deposit insurance premiums will add approximately $400 thousand in quarterly expense and the ~~quarterly premium accruals for 2010 to~~FDIC’s proposed special assessment could approximate ~~$2.25 million.~~$3.20 million, depending on the final special assessment level determined by the FDIC.

Income Tax Expense

Income tax expense is comprised of federal and state current and deferred income taxes on pre-tax earnings of the Company. Income taxes as a percentage of pre-tax income may vary significantly from statutory rates due to items of income and expense which are excluded, by law, from the calculation of taxable income. These items are commonly referred to as permanent differences. The most significant permanent differences for the Company include income on state and municipal securities which are exempt from federal income tax, certain dividend payments which are deductible by the Company, and ~~the increases~~tax credits generated by investments in ~~the cash surrender values of life insurance policies.~~low income housing and historic rehabilitations.

For the first quarter of ~~2010,~~2009, income taxes were ~~$2.18~~$2.32 million compared with ~~$2.35~~$2.58 million for the first quarter of ~~2009.~~2008. For the quarters ended March 31, ~~2010~~2009 and ~~2009,~~2008, the effective tax ~~expense~~ rates were ~~29.25%~~30.91% and ~~30.97%~~28.44%, respectively. The increase in the effective tax rate is due largely to decreases in tax-free municipal security income.

FINANCIAL CONDITION

Total assets at March 31, ~~2010,~~2009, increased ~~slightly by $5.66~~$65.79 million, or ~~0.25%~~3.09%, to ~~$2.28~~$2.20 billion from December 31, ~~2009. Deposits grew by $9.65 million which was offset by~~2008. The increase reflects net increases in the securities portfolio, continued loan payoffs, and higher levels of customer deposits as a ~~$9.25 million drop in repurchase agreements. An $8.90 million increase in equity led by retained earnings~~result of deposit campaigns and ~~OCI on securities valuation led to the increase in total assets for the quarter.~~a general movement of funds into FDIC insured products.

Securities

Available-for-sale securities were ~~$524.30~~$549.66 million at March 31, ~~2010,~~2009, compared with ~~$486.06~~$520.72 million at December 31, ~~2009,~~2008, an increase of ~~$38.24~~$28.94 million, or ~~7.87%~~5.56%. The market value of securities available-for-sale as a percentage of amortized cost improved from 96.34% at December 31, 2009, to 98.01% at March 31, 2010, reflecting improved pricing on certain issues. Held-to-maturity securities declined to ~~$7.16~~$8.47 million at March 31, ~~2010,~~2009, compared with ~~$7.45~~$8.67 million at December 31, ~~2009.~~2008.

Available-for-sale and held-to-maturity securities are reviewed quarterly for possible other-than-temporary impairment. This review includes an analysis of the facts and circumstances of each individual investment such as the length of time the fair value has been below cost, timing and amount of contractual cash flows, the expectation for that security’s performance, the creditworthiness of the issuer and the Company’s intent and ability to hold the security to recovery or maturity. The portion of a decline in value associated with probable credit losses, if any, would be recorded as a loss within noninterest income in the Consolidated Statements of Income. The Company does not believe any unrealized loss remaining in the investment portfolio, individually or in the aggregate, as of March 31, 2009, represents other-than-temporary impairment. The Company intends to hold these securities until recovery or maturity and it is more likely than not that it will not sell these securities before recovery.

~~For~~Included in available-for-sale securities is a ~~more detailed discussion~~portfolio of ~~activities regarding~~trust-preferred securities with a total market value of approximately $49.47 million as of March 31, 2009. That portfolio is comprised of single-issue securities and pooled trust-preferred securities. The single-issue securities had a total market value of approximately $26.77 million as of March 31, 2009, compared with their adjusted cost basis of approximately $55.52 million.

At March 31, 2009, the total market value of the pooled trust-preferred securities was approximately $22.71 million, compared with an adjusted cost basis of approximately $93.37 million. The collateral underlying these securities is comprised of 86% of bank trust-preferred securities and subordinated debt issuances of over 500 banks nationwide. The remaining collateral is from insurance companies and real estate investment trusts. The securities ~~please see Note 3~~carry variable rate structures that float at a prescribed margin over 3-month LIBOR. During 2008 and 2009, these securities experienced credit rating downgrades, and certain of these securities are on negative watch. As of December 31, 2008, the Company recorded pre-tax other-than-temporary impairment charges of $15.46 million for one of its pooled trust preferred securities with demonstrated a probable adverse change in cash flow. Recent modeling of the expected cash flows from the pooled trust-preferred securities, at present, does not suggest any of the remaining securities will have an adverse cash flow effect under any of the scenarios modeled due to the ~~Consolidated Financial Statements.~~existence of other subordinate classes within the pools.

The Company made a cumulative effect adjustment of $6.13 million as of January 1, 2009, to recognize the portion of non-credit losses associated with a non-agency mortgage-backed security for which the Company recognized a pre-tax other-than-temporary impairment charge of $14.47 million as of December 31, 2008. The Company determined that only $4.25 million of the original impairment charge was due to probable credit losses.

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The following table provides details regarding the type and credit ratings within the securities portfolios as of March 31, 2009. In the case of multiple ratings, the lower rating was utilized.


							Unrealized
							Gains/(Losses)
	Par		Fair		Amortized		Recognized			Cumulative
	Value		Value		Cost		in OCL			OTTI
	(Amounts in Thousands)
Available for sale
Agency securities	$	53,435	$	54,127	$	53,425	$	702		$	—
Agency mortgage-backed securities		273,870		282,075		275,257		6,818			—
Non-Agency mortgage-backed securities:
AAA		7,250		5,786		7,206		(1,420	)		—
B		25,000		10,730		20,968		(10,238	)		4,252

Total		32,250		16,516		28,174		(11,658	)		4,252
Municipals:
AAA		5,955		6,043		5,956		87			—
AA		54,230		54,739		54,261		478			—
A		46,282		46,394		46,284		110			—
BBB		30,005		28,788		29,106		(318	)		—
Not rated		5,920		5,659		5,929		(270	)		—

Total		142,392		141,623		141,536		87			—
Single issuer bank trust preferred securities:
AA		10,300		4,171		10,064		(5,893	)		—
A		17,130		8,852		16,750		(7,898	)		—
BB		29,125		13,745		28,703		(14,958	)		—

Total		56,555		26,768		55,517		(28,749	)		—
Pooled trust preferred securities:
A		20,000		935		20,000		(19,065	)		15,456
CCC		88,659		21,770		73,367		(51,597	)		—

Total		108,659		22,705		93,367		(70,662	)		15,456
Equity securities				5,850		7,006		(1,156	)		209

Total	$	667,161	$	549,664	$	654,282	$	(104,618	)	$	19,917


Held to maturity
Municipals:
AA	$	3,680	$	3,727	$	3,665	$	—		$	—
A		3,670		3,566		3,491		—			—
BBB		1,395		1,327		1,315		—			—

Total	$	8,745	$	8,620	$	8,471	$	—		$	—

The Company closely monitors this portfolio due to the substantial market discounts. The market discounts reflect the credit market disruption in bank subordinated debt instruments and the possibility of future negative credit events within the banking sector, which could affect collateral within certain of the pooled and single-issue securities. Monitoring for other-than-temporary impairment (“OTI”) is dependent on the aforementioned assumptions regarding future credit events and the general strength of the banking industry as it deals with credit losses in the current recessionary real estate market. Acceleration of bank losses and the possibility of unforeseen bank failures could result in changes in the Company’s outlook for these securities and possible future OTI. Accordingly, there can be no assurance that continued deterioration of credit portfolios within certain of those banks will not lead to unanticipated deferrals of interest payments and defaults beyond those assumed in the Company’s impairment testing. At present, cash flow modeling indicates varying ability to absorb additional deferrals and defaults before incurring breaks in interest or principal for the various pools.

- 31 -

Loan Portfolio

Loans Held for ~~Sale~~

Sale:The ~~$1.49~~$1.45 million balance of loans held for sale at March 31, ~~2010,~~2009, represents mortgage loans that are sold to investors on a best efforts basis. Accordingly, the Company does not retain the interest rate risk involved in the commitment. The gross notional amount of outstanding commitments ~~to originate mortgage loans for customers~~ at March 31, ~~2010,~~2009, was ~~$2.97~~$11.28 million on 2571 loans.

~~- 32 - -~~

Loans Held for ~~Investment~~

Investment:Total loans held for investment were ~~$1.39~~$1.28 billion at March 31, ~~2010,~~2009, representing a ~~decrease~~decline of ~~$3.06~~$21.37 million from December 31, ~~2009~~2008, and an increase of ~~$114.08~~$97.29 million from March 31, ~~2009. The increase over the comparable quarter of 2009 is due primarily to the acquisition of TriStone in the third quarter of 2009.~~2008. The average loan to deposit ratio ~~was 85.08% for the first quarter of 2010, compared with 85.13% for the fourth quarter of 2009 and~~decreased to 82.83% for the first quarter of ~~2009.~~2009, compared with 86.01% for the fourth quarter of 2008 and 87.68% for the first quarter of 2008. Year-to-date average loans of ~~$1.40~~$1.29 billion increased ~~$103.49~~$86.70 million when compared to ~~2009 average loans~~2008.

Over the course of ~~$1.29 billion.~~

the last three years, the Company has taken measures to enhance its commercial underwriting standards. The more stringent underwriting has led to improved credit quality, and coupled with a reduced complement of commercial loan officers, has resulted in decreases in the loan portfolio. The Company also continues to realize net payoffs in the area of consumer finance, as it competes with credit card lenders and captive automobile finance companies.

The held for investment loan portfolio continues to be diversified among loan types and industry segments. The following table presents the various loan categories and changes in composition as of March 31, ~~2010,~~2009, December 31, ~~2009,~~2008, and March 31, ~~2009.~~2008.


	March 31 , 2009					December 31, 2008					March 31 , 2008
(Dollars in Thousands)	Amount		Percent			Amount		Percent			Amount		Percent
Loans Held for Investment
Commercial and agricultural	$	81,880		6.41	%	$	85,034		6.55	%	$	88,532		7.51	%
Commercial real estate		405,549		31.76	%		407,638		31.40	%		376,087		31.89	%
Residential real estate		597,372		46.79	%		602,573		46.42	%		488,860		41.45	%
Construction		124,320		9.74	%		130,610		10.06	%		151,242		12.82	%
Consumer		62,353		4.88	%		66,258		5.10	%		69,377		5.88	%
Other		5,316		0.42	%		6,046		0.47	%		5,406		0.46	%

Total	$	1,276,790		100.00	%	$	1,298,159		100.00	%	$	1,179,504		100.01	%


Loans Held for Sale	$	1,445				$	1,024				$	2,116

March 31, 2010 December 31, 2009 March 31, 2009
(Dollars in Thousands) Amount Percent Amount Percent Amount Percent
Loans Held for Investment
Commercial, financial and agricultural $ 102,022 7.34 % $ 96,366 6.91 % $ 81,880 6.41 %
Real estate — commercial 461,542 33.18 % 450,611 32.33 % 405,549 31.76 %
Real estate — residential 647,921 46.59 % 657,367 47.16 % 597,372 46.79 %
Real estate — construction (1) 113,139 8.13 % 124,896 8.96 % 124,320 9.74 %
Consumer 60,632 4.36 % 60,090 4.31 % 62,353 4.88 %
Other 5,618 0.40 % 4,601 0.33 % 5,316 0.42 %
Total $ 1,390,874 100.00 % $ 1,393,931 100.00 % $ 1,276,790 100.00 %

Loans Held for Sale $ 1,494 $ 11,576 $ 1,445

~~(1)~~

~~Real estate construction includes land and land development loans.~~

Non-Performing Assets

Non-performing assets include loans on non-accrual status, loans contractually past due 90 days or more and still accruing interest, and other real estate owned (“OREO”). Non-performing assets were ~~$22.22 million at March 31, 2010, $22.11 million at December 31, 2009, and~~ $13.74 million at March 31, ~~2009.~~2009, $14.09 million at December 31, 2008, and $3.54 million at March 31, 2008. The percentage of non-performing assets to total loans and OREO was ~~1.59%~~1.07% at March 31, ~~2010, 1.58%~~2009, 1.08% at December 31, ~~2009,~~2008, and ~~1.09%~~0.30% at March 31, ~~2009.~~
2008.

~~- 33 - -~~

The following schedule details non-performing assets by category at the close of each of the quarters ended March 31, ~~2010~~2009 and ~~2009,~~2008, and December 31, ~~2009.~~2008.

March 31, 2010 December 31, 2009 March 31, 2009
(Dollars in Thousands)

Non-accrual loans $ 17,477 $ 17,527 $ 10,628
Loans 90 days or more past due and still accruing interest - - -
Total non-performing loans 17,477 17,527 10,628

Other real estate owned 4,740 4,578 3,114
Total non-performing assets $ 22,217 $ 22,105 $ 13,742

Non-performing loans as a percentage of total loans 1.26 % 1.26 % 0.84 %
Non-performing assets as a percentage of total loans and other real estate owned 1.59 % 1.58 % 1.09 %
Allowance for loan losses as a percentage of non-performing loans 125.6 % 124.0 % 155.8 %

Restructured loans performing in accordance with modified terms $ 3,091 $ 3,565 $ 614


	March 31,		December 31,		March 31,
(In Thousands)	2009		2008		2008
Non-accrual	$	10,628	$	12,763	$	3,137
Ninety days past due and accruing		—		—		—
Other real estate owned		3,114		1,326		400

Total non-performing assets	$	13,742	$	14,089	$	3,537

Ongoing activity within the classification and categories of non-performing loans includes collections on delinquencies, foreclosures and movements into or out of the non-performing classification as a result of changing customer business conditions. ~~There were no loans 90 days past due and still accruing at March 31, 2010, December 31, 2009, and March 31, 2009.~~ OREO was ~~$4.74~~$3.11 million at March ~~31, 2010, an increase of $162 thousand from December~~ 31, 2009, and is carried at the lesser of estimated net realizable value or cost. OREO increased from December 31, 2009, as non-performing loans were converted to foreclosed real estate. At March 31, 2010, OREO consisted of 53 properties with an average value of $146 thousand and an average age of 7 months. During the three months ended March 31, 2010, net losses on the sale of OREO totaled $268 thousand.

- 32 -

Deposits and Other Borrowings

Total deposits increased by ~~$9.65~~$79.69 million, or ~~0.59%~~5.30%, during the first three months of ~~2010. Noninterest-bearing~~2009. Non interest-bearing demand deposits ~~decreased $2.43~~increased $8.24 million to ~~$205.81~~$207.95 million at March 31, ~~2010,~~2009, compared with ~~$208.24~~$199.71 million at December 31, ~~2009.~~2008. Interest-bearing demand deposits increased ~~$14.61~~$9.82 million to ~~$246.51~~$194.93 million at March 31, ~~2010 from December 31,~~ 2009. Savings increased ~~$46.50~~$9.43 million, or ~~12.19%~~3.05%, and time deposits ~~decreased $49.02~~increased $52.20 million, or ~~5.95%~~6.45%, during the first three months of ~~2010.~~

2009. The Company’s increase in deposits is likely due to increasing customer household savings and a desire for FDIC insured deposit products.

Securities sold under repurchase agreements decreased ~~$9.25~~$12.09 million, or ~~6.02%~~7.29%, in the first ~~three months of 2010~~quarter 2009 to ~~$144.38~~$153.82 million. There were no federal funds purchased outstanding at March 31, ~~2010,~~2009, as the Company maintained strong liquidity ~~and overnight funds sold throughout~~through the first ~~quarter of 2010.~~quarter.

Stockholders’ Equity

Total stockholders’ equity ~~increased $8.90~~decreased $2.67 million, or ~~3.50%~~1.22%, from ~~$253.86~~$219.22 million at December 31, ~~2009,~~2008, to ~~$262.76~~$216.55 million at March 31, ~~2010. Changes~~2009, as the Company experienced increases in other comprehensive losses associated with the Company’s investment portfolio. The change in equity ~~were~~was the result of net ~~income~~earnings of ~~$5.28~~$5.19 million, ~~common~~less preferred dividends ~~paid~~ of ~~$1.78~~$571 thousand, the cumulative effect adjustment of $6.13 million, and other comprehensive ~~income~~loss of ~~$10.44~~$13.86 million.

During the first quarter, the Company common stock traded at a level below its book value per share, and as a result, the Company performed a level one goodwill evaluation for each of its segments. The results of the level one evaluation did not provide evidence of impairment of goodwill in either of the Company’s segments.

Risk-Based Capital

Risk-based capital guidelines promulgated by federal banking agencies weight balance sheet assets and off-balance sheet commitments based on inherent risks associated with the respective asset types. At March 31, ~~2010,~~2009, the Company’s total capital to risk-weighted assets ratio was ~~14.03%~~12.68% compared with ~~13.90%~~12.94% at December 31, ~~2009.~~2008. The Company’s Tier 1 capital to risk-weighted assets ratio was ~~12.77%~~11.63% at March 31, ~~2010,~~2009, compared with ~~12.65%~~11.84% at December 31, ~~2009.~~2008. The Company’s Tier 1 ~~capital to average assets (leverage)~~leverage ratio at March 31, ~~2010,~~2009, was ~~8.99%~~9.71% compared with ~~8.58%~~9.70% at December 31, ~~2009.~~2008. All of the Company’s regulatory capital ratios exceed the current ~~“well-capitalized”~~well-capitalized levels.

Regulatory capital ratios declined from December 31, 2008, primarily because of the treatment of collateralized mortgage obligations and collateralized debt obligations when rated below investment grade.

~~- 34 - -~~

PART I. ITEM 3. Quantitative and Qualitative Disclosures about Market Risk

Liquidity and Capital Resources

At March 31, ~~2010,~~2009, the Company maintained liquidity in the form of cash and cash equivalent balances of ~~$87.71~~$100.96 million, unpledged securities available-for-sale of ~~$188.86~~$183.90 million, and total FHLB credit availability of approximately ~~$220.27~~$143.9 million. Cash and cash equivalents as well as advances from the FHLB are immediately available for satisfaction of deposit withdrawals, customer credit needs and operations of the Company. Investment securities available-for-sale ~~represent~~represents a secondary level of liquidity available for conversion to liquid funds in the event of extraordinary needs. The Company also maintains approved lines of credit with correspondent banks as backup liquidity sources.

The Company is a holding company, which is a separate legal entity from the Bank, and at March 31, 2010, maintained cash balances of $8.93 million. As a result of investment securities impairments recognized in 2008 and 2009, the Bank is currently restricted from paying dividends to the Parent Company. The Company believes the cash reserves and investments it holds provide adequate working capital to meet its obligations for the next 12 months and through the projected period of dividend restrictions.

The Company maintains a liquidity policy as a means to manage liquidity and the associated risk. The policy includes a Liquidity Contingency Plan (the “Liquidity Plan”) that is designed as a tool for the Company to detect liquidity issues promptly in order to protect depositors, creditors and shareholders. The Liquidity Plan includes monitoring various internal and external indicators such as changes in core deposits and changes in market conditions. It provides for timely responses to a wide variety of funding scenarios ranging from changes in loan demand to a decline in the Company’s quarterly earnings to a decline in the market price of the Company’s stock. The Liquidity Plan calls for specific responses designed to meet a wide range of liquidity needs based upon assessments on a recurring basis by the Company and its Board of Directors.

- 33 -

Interest Rate Risk and Asset/Liability Management

The Company’s profitability is dependent to a large extent upon its net interest income, which is the difference between its interest income on interest-earning assets, such as loans and securities, and its interest expense on interest-bearing liabilities, such as deposits and borrowings. The Company, like other financial institutions, is subject to interest rate risk to the degree that interest-earning assets reprice differently than interest-bearing liabilities. The Company manages its mix of assets and liabilities with the goals of limiting its exposure to interest rate risk, ensuring adequate liquidity, and coordinating its sources and uses of funds while maintaining an acceptable level of net interest income given the current interest rate environment.

The Company’s primary component of operational revenue, net interest income, is subject to variation as a result of changes in interest rate environments in conjunction with unbalanced repricing opportunities on earning assets and interest-bearing liabilities. Interest rate risk has four primary components: repricing risk, basis risk, yield curve risk and option risk. Repricing risk occurs when earning assets and paying liabilities reprice at differing times as interest rates change. Basis risk occurs when the underlying rates on the assets and liabilities the institution holds change at different levels or in varying degrees. Yield curve risk is the risk of adverse consequences as a result of unequal changes in the spread between two or more rates for different maturities for the same instrument. Lastly, option risk is due to embedded options, often put or call options, given or sold to holders of financial instruments.

In order to mitigate the effect of changes in the general level of interest rates, the Company manages repricing opportunities and thus, its interest rate sensitivity. The Company seeks to control its interest rate risk exposure to insulate net interest income and net earnings from fluctuations in the general level of interest rates. To measure its exposure to interest rate risk, quarterly simulations of net interest income are performed using financial models that project net interest income through a range of possible interest rate environments including rising, declining, most likely and flat rate scenarios. The simulation model used by the Company captures all earning assets, interest-bearing liabilities and off-balance sheet financial instruments and combines the various factors affecting rate sensitivity into an earnings outlook. The results of these simulations indicate the existence and severity of interest rate risk in each of those rate environments based upon the current balance sheet position, assumptions as to changes in the volume and mix of interest-earning assets and interest-paying liabilities and the Company’s estimate of yields to be attained in those future rate environments and rates that will be paid on various deposit instruments and borrowings. These assumptions are inherently uncertain and, as a result, the model cannot precisely predict the impact of fluctuations in interest rates on net interest income. Actual results will differ from simulated results due to timing, magnitude, and frequency of interest rate changes, as well as changes in market conditions and the Company’s strategies. However, the earnings simulation model is currently the best tool available to the Company for managing interest rate risk.

~~- 35 - -~~

Specific strategies for management of interest rate risk have included shortening the amortized maturity of new fixed-rate loans, increasing the volume of adjustable-rate loans to reduce the average maturity of the Company’s interest-earning assets, and monitoring the term and structure of liabilities to maintain a balanced mix of maturity and repricing structures to mitigate potential exposure. At March 31, ~~2010,~~2009, net interest income modeling shows the Company to be in a ~~slightly liability sensitive~~relatively neutral position.

Additionally, structure in the Company’s assets and liabilities creates a situation where net interest income decreases in a sustained increasing rate environment.

The Company has established policy limits for tolerance of interest rate risk that allow for no more than a 10% reduction in projected net interest income for the next twelve months based on a comparison of net interest income simulations in various interest rate scenarios. In addition, the policy addresses exposure limits to changes in the economic value of equity according to predefined policy guidelines. The most recent simulation indicates that current exposure to interest rate risk is within the Company’s defined policy limits.

- 34 -

The following table summarizes the projected impact on the next twelve months’ net interest income and the economic value of equity as of March 31, ~~2010,~~2009, and December 31, ~~2009,~~2008, of immediate and sustained rate shocks in the interest rate environments of plus and minus 100 and 200 basis points from the base simulation, assuming no remedial measures are ~~affected.~~effected. As of March 31, ~~2010,~~2009, the Federal Open Market Committee ~~maintains~~set a target range for federal funds of 0 to 25 basis points, rendering a complete downward shock of 200 basis points ~~unrealistic~~not realistic and not meaningful. In the downward rate shocks presented, benchmark interest rates are dropped with floors near 0%.

The economic value of equity is a measure which reflects the impact of changing rates on the underlying values of the Company’s assets and liabilities in various rate scenarios. The scenarios illustrate the potential estimated impact of instantaneous rate shocks on the underlying value of equity. The economic value of the equity is based on the present value of all the future cash flows under the different rate scenarios.

Rate Sensitivity Analysis


(Dollars in Thousands)	March 31, 2009
	Change in						Change in
Increase (Decrease) in	Net Interest			%			Economic Value			%
Interest Rates (Basis Points)	Income			Change			of Equity			Change
200	$	(370	)		(0.6	)	$	11,911			5.0
100		(575	)		(0.9	)		15,508			6.5
(100)		176			0.3			(26,274	)		(11.0	)


	December 31, 2008
	Change in				Change in
Increase (Decrease) in	Net Interest		%		Economic Value			%
Interest Rates (Basis Points)	Income		Change		of Equity			Change
200	$	1,479		2.3	$	(8,040	)		(3.7	)
100		1,493		2.3		719			0.3
(100)		1,874		2.9		(21,443	)		(9.9	)

March 31, 2010
(Dollars in Thousands) Change in Change in
Increase (Decrease) in Net Interest % Econcomic Value %
Interest Rates (Basis Points) Income Change of Equity Change

200 $ (632 ) (0.9 ) $ (9,561 ) (3.4 )
100 (468 ) (0.6 ) (2,351 ) (0.8 )
(100) 1,951 2.6 (16,067 ) (5.7 )

December 31, 2009
(Dollars in Thousands) Change in Change in
Increase (Decrease) in Net Interest % Econcomic Value %
Interest Rates (Basis Points) Income Change of Equity Change

200 $ (1,405 ) (1.9 ) $ (18,634 ) (6.9 )
100 (866 ) (1.2 ) (7,715 ) (2.9 )
(100) 2,117 2.9 16,087 5.9

PART I. ITEM 4. Controls and Procedures

Disclosure Controls and Procedures

As of the end of the period covered by this report, the Company carried out an evaluation, under the supervision and with the participation of the Company’s management, including the Company’s Chief Executive Officer (“CEO”) along with the Company’s Chief Financial Officer (“CFO”), of the effectiveness of the Company’s disclosure controls and procedures pursuant to the Securities Exchange Act of 1934 (“Exchange Act”) Rule 13a-15(b). ~~Based~~As a result of the restatement described in Note 2. Restatement of Consolidated Financial Statements of the Notes to Consolidated Financial Statements of this Quarterly Report on Form 10-Q/A, management concluded that, ~~evaluation,~~as of March 31, 2009, the ~~Company’s CEO along with~~Company did not maintain effective controls to ensure the ~~Company’s CFO~~appropriate calculation of its allowance for loan losses. Specifically, during a process enhancement to the model that calculates the allowance for loan losses, the quarterly average loss rate was not annualized. Control procedures in place for reviewing the quantitative model for calculating the allowance for loan losses did not timely identify this error. Solely because of this material weakness, management has concluded that the Company’s disclosure controls and procedures ~~are~~were not effective ~~in timely alerting them to material information relating to~~as of March 31, 2009. As of July 27, 2010, the Company ~~(including~~has corrected the computational error in its ~~consolidated subsidiaries) required to be included in~~model for calculating the ~~Company’s periodic SEC filings.~~

allowance for loan losses.

~~- 36 - -~~

The Company’s management, including the CEO and CFO, does not expect that the Company’s disclosure controls and internal controls will prevent all errors and all fraud. A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within the Company have been detected. These inherent limitations include the realities that judgments in decision making can be faulty, and that breakdowns can occur because of simple error or mistake. Additionally, controls can be circumvented by the individual acts of some persons, by collusion of two or more people, or by management override of the controls.

- 35 -

Changes in Internal Control Over Financial Reporting

~~There have not been any~~The Company assesses the adequacy of its internal control over financial reporting quarterly and enhances its controls in response to internal control assessments and internal and external audit and regulatory recommendations. Except for the foregoing, there were no changes in the Company’s internal ~~controls~~control over financial reporting ~~during~~for the quarter ended March 31, ~~2010,~~2009, that ~~have~~has materially affected, or ~~are~~is reasonably likely to materially affect, the Company’s internal ~~controls~~control over financial reporting.

PART II. OTHER INFORMATION

ITEM 1. Legal Proceedings

The Company is currently a defendant in various legal actions and asserted claims in the normal course of business. Although the Company and legal counsel are unable to assess the ultimate outcome of each of these matters with certainty, they are of the belief that the resolution of these actions should not have a material adverse affect on the financial position, results of operations, or cash flows of the Company.

ITEM 1A. Risk Factors

There were no material changes to the risk factors as presented in the Company’s Annual Report on Form ~~10-K~~10-K/A for the year ended December 31, ~~2009.~~

2008.

ITEM 2. Unregistered Sales of Equity Securities and Use of Proceeds

(a)

Not Applicable


	(b)		Not Applicable


	(c)		Issuer Purchases of Equity Securities

~~The following table provides information with respect to~~There were no open market purchases ~~made~~ by ~~or on behalf of~~ the Company ~~or any “affiliated purchaser” (as defined in Rule 10b-18(a)(3) under the Securities Exchange Act~~ of ~~1934) of the Company’s Common Stock~~its equity securities during the ~~first quarter~~three months ended March 31, 2009. The maximum number of ~~2010.~~

~~Total Number~~

~~Maximum~~

~~Total~~

~~of Shares~~

~~Number of~~

~~Average~~

~~Purchased as~~

~~Shares That May~~

~~Shares~~

~~Price Paid~~

~~Part of a Publicly~~

~~Yet be Purchased~~

~~Purchased~~

~~per Share~~

~~Announced Plan~~

~~Under the Plan (1)~~

~~January 1-31, 2010~~

~~782,342~~

~~February 1-28, 2010~~

~~782,342~~

~~March 1-31, 2010~~

~~799,969~~

~~Total~~

~~(1)~~shares that may yet be purchased under a publicly announced plan at March 31, 2009, was 645,015 shares. The Company’s stock repurchase plan ~~as amended,~~ allows for the purchase and retention of up to 1,100,000 shares. The plan has no expiration date and remains ~~open and no plans have expired during the reporting period covered by this table. No determination has been made to terminate the plan or to cease making purchases.~~open. The Company held ~~300,031~~454,985 shares in treasury at March 31, ~~2010.~~2009.

ITEM 3. Defaults Upon Senior Securities

Not Applicable

~~- 37 - -~~

ITEM 4. ~~Reserved~~Submission of Matters to a Vote of Security Holders

Not Applicable

ITEM 5. Other Information

Not Applicable

- 36 -

ITEM 6. Exhibits

(a)

Exhibits

~~- 38 - -~~


Exhibit
No.		Exhibit
2.1		Agreement and Plan of Merger dated July 31, 2008, among First Community Bancshares, Inc. and Coddle Creek FinancialCorp. (21)

	~~2.1~~		~~Reserved.~~
	~~2.2~~		~~Reserved.~~
	3(i)		Articles of Incorporation of First Community Bancshares, Inc., as amended. (1)

3(ii)		Certificate of Designation Series A Preferred ~~Stock.~~Stock (22)

3(iii)		Bylaws of First Community Bancshares, Inc., as amended. (17)

4.1		Specimen stock certificate of First Community Bancshares, Inc. (3)

4.2		Indenture Agreement dated September 25, 2003. (11)

4.3		Amended and Restated Declaration of Trust of FCBI Capital Trust dated September 25, 2003. (11)

4.4		Preferred Securities Guarantee Agreement dated September 25, 2003. (11)

4.5		~~Reserved.~~Form of Certificate for the Series A Preferred Stock (22)

4.6		Warrant to purchase 176,546 shares of ~~Common Stock~~common stock of First Community Bancshares, ~~Inc.~~Inc (22)
	~~4.7~~		~~Form of Indenture for Senior Debt Securities (27)~~
	~~4.8~~		~~Form of Indenture for Subordinated Debt Securities (28)~~
	10.1**		First Community Bancshares, Inc. 1999 Stock Option Contracts (2) and Plan. (4)

10.1.1**		Amendment to First Community Bancshares, Inc. 1999 Stock Option Plan. (11)

10.2**		First Community Bancshares, Inc. 2001 Non-Qualified Directors Stock Option Plan. (5)

10.3**		Employment Agreement dated December 16, 2008, between First Community Bancshares, Inc. and John M. Mendez. (6)

10.4**		First Community Bancshares, Inc. 2000 Executive Retention Plan, as amended. (24)

10.5**		First Community Bancshares, Inc. Split Dollar Plan and Agreement. (2)

10.6**		First Community Bancshares, Inc. 2001 Directors Supplemental Retirement Plan. (2)

10.6.1**		First Community Bancshares, Inc. 2001 Directors Supplemental Retirement Plan. Second Amendment (B.W. Harvey, Sr. –— October 19, 2004). (14)

10.7**		First Community Bancshares, Inc. Wrap Plan. (7)

10.8		Reserved.
	~~10.9~~
10.9**		Form of Indemnification Agreement between First Community Bancshares, Inc., its Directors and Certain Executive Officers. (9)
	~~10.10~~
10.10**		Form of Indemnification Agreement between First Community Bank, N. A, its Directors and Certain Executive Officers. (9)

10.11		Reserved.

10.12**		First Community Bancshares, Inc. 2004 Omnibus Stock Option Plan (10) and Award Agreement. (13)

10.13		Reserved.

10.14**		First Community Bancshares, Inc. Directors Deferred Compensation Plan. (7)

10.15**		First Community Bancshares, Inc. Deferred Compensation and Supplemental Bonus Plan For Key Employees. (15)

10.16**		Employment Agreement dated November 30, 2006, between First Community Bank, N. A. and Ronald L. Campbell. (19)

10.17**		Employment Agreement dated September 28, 2007, between GreenPoint Insurance Group, Inc. and Shawn C. Cummings. (20)

10.18		Securities Purchase Agreement by and between the United States Department of the Treasury and First Community Bancshares, Inc. dated November 21, 2008. (22)

10.19**		Employment Agreement dated December 16, 2008, between First Community Bancshares, Inc. and David D. Brown. (23)
	10.20**		~~Employment Agreement dated December 16, 2008, between First Community Bancshares, Inc. and Robert L. Buzzo. (26)~~
	10.21**		~~Employment Agreement dated December 16, 2008, between First Community Bancshares, Inc. and E. Stephen Lilly. (26)~~
	10.22**		~~Employment Agreement dated December 16, 2008, between First Community Bank, N. A. and Gary R. Mills. (26)~~
	10.23**		~~Employment Agreement dated December 16, 2008, between First Community Bank, N. A. and Martyn A. Pell. (26)~~
	10.24**		~~Employment Agreement dated December 16, 2008, between First Community Bank, N. A. and Robert. L. Schumacher. (26)~~
	10.25**		~~Employment Agreement dated July 31, 2009, between First Community Bank, N. A. and Simpson O. Brown. (25)~~

~~- 39 - -~~

	10.25**		~~Employment Agreement dated July 31, 2009, between First Community Bank, N. A. and Mark R. Evans. (25)~~
	11		~~Statement regarding computation of earnings per share. (16)~~
	12		~~Computation of Ratios. (27)~~
	21		~~Subsidiaries of Registrant – Reference is made to “Item 1. Business” for the required information.~~
	~~23.1~~		~~Consent of Dixon Hughes PLLC, Independent Registered Public Accounting Firm for First Community Bancshares, Inc. (27)~~
	31.1*		Rule 13a-14(a)/~~15d-14(a)~~a5d-14(a) Certification of Chief Executive Officer.

31.2*		Rule 13a-14(a)/~~15d-14(a)~~a5d-14(a) Certification of Chief Financial Officer.

32*		Certification of Chief Executive Officer and Chief Financial Officer Section 1350. ~~(27)~~


*		Furnished herewith.


**		Indicates a management contract or compensation plan.


(1)		Incorporated by reference from the Quarterly Report on Form 10-Q for the period ended June 30, 2005, filed on August 5, ~~2005, and as amended on Form 8-K filed on April 27, 2010.~~2005.


(2)		Incorporated by reference from the Quarterly Report on Form 10-Q for the period ended June 30, 2002, filed on August 14, 2002.


(3)		Incorporated by reference from the Annual Report on Form 10-K for the period ended December 31, 2002, filed on March 25, 2003, as amended on March 31, 2003.

- 37 -


(4)		Incorporated by reference from the Annual Report on Form 10-K for the period ended December 31, 1999, filed on March 30, 2000, as amended April 13, 2000.


(5)		The option agreements entered into pursuant to the 1999 Stock Option Plan and the 2001 Non-Qualified Directors Stock Option Plan are incorporated by reference from the Quarterly Report on Form 10-Q for the period ended June 30, 2002, filed on August 14, 2002.


(6)		Incorporated by reference from Exhibit 10.1 of the Current Report on Form 8-K dated and filed December 16, 2008. The Registrant has entered into substantially identical agreements with Robert L. Buzzo and E. Stephen Lilly, with the only differences being with respect to title and salary.


(7)		Incorporated by reference from the Current Report on Form 8-K dated August 22, 2006, and filed August 23, 2006.


(8)		Reserved.


(9)		Form of indemnification agreement entered into by the Company and by First Community Bank, N. A. with their respective directors and certain officers of each including, for the Registrant and Bank: John M. Mendez, Robert L. Schumacher, Robert L. Buzzo, E. Stephen Lilly, David D. Brown, and Gary R. Mills. Incorporated by reference from the Annual Report on Form 10-K for the period ended December 31, 2003, filed on March 15, 2004, and amended on May 19, 2004.


(10)		Incorporated by reference from the 2004 First Community Bancshares, Inc. Definitive Proxy filed on March ~~15,~~19, 2004.


(11)		Incorporated by reference from the Quarterly Report on Form 10-Q for the period ended September 30, 2003, filed on November 10, 2003.


(12)		Incorporated by reference from the Quarterly Report on Form 10-Q for the period ended March 31, 2004, filed on May 7, 2004.


(13)		Incorporated by reference from the Quarterly Report on Form 10-Q for the period ended June 30, 2004, filed on August 6, 2004.


(14)		Incorporated by reference from the Annual Report on Form 10-K for the period ended December 31, 2004, and filed on March 16, 2005. Amendments in substantially similar form were executed for Directors Clark, Kantor, Hamner, Modena, Perkinson, Stafford, and Stafford II.


(15)		Incorporated by reference from the Current Report on Form 8-K dated October 24, 2006, and filed October 25, 2006.


(16)	~~Incorporated by reference from Footnote 1 of the Notes to Consolidated Financial Statements included herein.~~	Reserved.


(17)		Incorporated by reference from Exhibit 3.1 of the Current Report on Form 8-K dated February 14, 2008, filed on February 20, 2008.


(18)		Reserved


(19)		Incorporated by reference from Exhibit 2.1 of the Form S-3 registration statement ~~File No. 333-142558,~~ filed May 2, 2007.


(20)		Incorporated by reference from the Annual Report on Form 10-K for the period ended December 31, 2007, filed on March 13, 2008.


(21)	~~Reserved.~~	Incorporated by reference from Exhibit 2.1 of the Current Report on Form 8-K dated and filed July 31, 2008.


(22)		Incorporated by reference from the Current Report on Form 8-K dated November 21, 2008, and filed November 24, 2008.

~~- 40 - -~~


(23)		Incorporated by reference from Exhibit 10.2 of the Current Report on Form 8-K dated and filed December 16, 2008. The Registrant has entered into substantially identical agreements with Gary R. Mills, Martyn A. Pell, and Robert L. Schumacher, with the only differences being with respect to title, salary, term, and payment upon termination after a change in control.


(24)		Incorporated by reference from Exhibit 10.1 of the Current Report on Form 8-K dated December 30, 2008, and filed January 5, 2009.

- 38 -

~~(25)~~

~~Incorporated by reference from Exhibit 2.2 of the Current Report on Form 8-K dated April 2, 2009 and filed April 3, 2009.~~

~~(26)~~

~~Incorporated by reference from the Current Report on Form 8-K dated and filed July 6, 2009.~~

~~(27)~~

~~Incorporated by reference from Exhibit 4.4 of Form S-3 registration statement, File No. 333-165965, filed April 8, 2010.~~

~~(28)~~

~~Incorporated by reference from Exhibit 4.5 of the Form S-3 registration statement, File No. 333-165965, filed April 8, 2010.~~

~~- 41 - -~~

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 Bancshares, Inc.

DATE: August 16, 2010

~~First Community Bancshares, Inc.~~

~~DATE: May 7, 2010~~

/s/ John M. Mendez
John M. Mendez
President & Chief Executive Officer
(Principal Executive Officer)

DATE: August 16, 2010


/s/ David D. Brown
David D. Brown
Chief Financial Officer
(Principal Accounting Officer)

- 39 -

~~- 42 - -~~

EXHIBIT INDEX


Exhibit No.		Exhibit

31.1		Rule 13a-14(a)/15d-14(a) Certification ~~as Adopted Pursuant to Section 302(a)~~ of ~~the Sarbanes-Oxley Act of 2002 by~~ Chief Executive ~~Officer.~~Officer

31.2		Rule 13a-14(a)/15d-14(a) Certification ~~as Adopted Pursuant to Section 302(a)~~ of ~~the Sarbanes-Oxley Act of 2002 by~~ Chief Financial ~~Officer.~~Officer

32		Certification ~~Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906~~ of ~~the Sarbanes-Oxley Act of 2002 by~~ Chief Executive ~~Officer~~ and Chief Financial ~~Officer.~~Officer pursuant to 18 USC Section 1350

- 4340 - -

	Three Months Ended
	March 31,
(Dollars In Thousands, Except Per Share Data)	2010		2009
Interest Income
Interest and fees on loans held for investment	$	21,354	$	19,984
Interest on securities-taxable		3,786		5,164
Interest on securities-nontaxable		1,426		1,676
Interest on federal funds sold and deposits in banks		46		39
Total interest income		26,612		26,863
Interest Expense
Interest on deposits		5,502		7,567
Interest on borrowings		2,491		2,863
Total interest expense		7,993		10,430
Net interest income		18,619		16,433
Provision for loan losses		3,665		2,087
Net interest income after provision for loan losses		14,954		14,346
Noninterest Income
Wealth management income		885		984
Service charges on deposit accounts		2,992		3,157
Other service charges and fees		1,281		1,178
Insurance commissions		2,201		2,317
Total impairment losses on securities		-		(209	)
Portion of loss recognized in other comprehensive income		-		-
Net impairment losses recognized in earnings		-		(209	)
Net gains on sale of securities		250		411
Other operating income		969		579
Total noninterest income		8,578		8,417
Noninterest Expense
Salaries and employee benefits		7,969		7,866
Occupancy expense of bank premises		1,709		1,603
Furniture and equipment expense		904		938
Amortization of intangible assets		256		245
FDIC premiums and assessments		701		188
Merger related expenses		-		1
Other operating expense		4,533		4,346
Total noninterest expense		16,072		15,187
Income before income taxes		7,460		7,576
Income tax expense		2,182		2,346
Net income		5,278		5,230
Dividends on preferred stock		-		571
Net income available to common shareholders	$	5,278	$	4,659

Basic earnings per common share	$	0.30	$	0.40
Diluted earnings per common share	$	0.30	$	0.40

Dividends declared per common share	$	0.10	$	-

Weighted average basic shares outstanding		17,765,556		11,567,769
Weighted average diluted shares outstanding		17,784,449		11,616,568

	March 31, 2010					December 31, 2009
(Dollars in Thousands)	Amount		Percent			Amount		Percent
Loans held for investment:
Commercial, financial, and agricultural	$	102,022		7.34	%	$	96,366		6.91	%
Real estate — commercial		461,542		33.18	%		450,611		32.33	%
Real estate — construction (1)		113,139		8.13	%		124,896		8.96	%
Real estate — residential		647,921		46.59	%		657,367		47.16	%
Consumer		60,632		4.36	%		60,090		4.31	%
Other		5,618		0.40	%		4,601		0.33	%
Total	$	1,390,874		100.00	%	$	1,393,931		100.00	%

Loans held for sale	$	1,494				$	11,576

	For the Three Months
	Ended March 31, 2010
	Community		Insurance			Parent/
	Banking		Services			Elimination			Total
(In Thousands)
Net interest income (loss)	$	18,678	$	(33	)	$	(26	)	$	18,619
Provision for loan losses		3,665		-			-			3,665
Noninterest income (loss)		6,609		2,219			(250	)		8,578
Noninterest expense (income)		15,021		1,479			(428	)		16,072
Income before income taxes		6,601		707			152			7,460
Provision for income taxes		1,869		291			22			2,182
Net income	$	4,732	$	416		$	130		$	5,278
End of period goodwill and other intangibles	$	79,237	$	11,568		$	-		$	90,805
End of period assets	$	2,254,038	$	12,465		$	14,031		$	2,280,534

	For the Three Months
	Ended March 31, 2009
	Community		Insurance			Parent/
	Banking		Services			Elimination			Total
(In Thousands)
Net interest income (loss)	$	16,492	$	(18	)	$	(41	)	$	16,433
Provision for loan losses		2,087		-			-			2,087
Noninterest income (loss)		6,124		2,344			(44	)		8,424
Noninterest expense (income)		13,582		1,638			(26	)		15,194
(Loss) income before income taxes		6,947		688			(59	)		7,576
Provision for income taxes		1,932		203			211			2,346
Net income (loss)	$	5,015	$	485		$	(270	)	$	5,230
End of period goodwill and other intangibles	$	78,657	$	10,681		$	-		$	89,338
End of period assets	$	2,170,694	$	11,698		$	16,749		$	2,199,141

	Fair Value Measurements Using Significant Unobservable Inputs
	Available-for-Sale Securities
	Pooled Trust Preferred Securities
(In Thousands)
Balance, January 1, 2010	$	1,648
Transfers into Level 3		-
Transfers out of Level 3		(3,574	)
Total gains or losses
Included in earnings (or changes in net assets)		-
Included in other comprehensive income		1,926
Purchases, issuances, sales, and settlements
Purchases		-
Issuances		-
Sales		-
Settlements		-
Balance, March 31, 2010	$	-

	Three Months Ended
	March 31, 2010 Compared to 2009
	$ Increase/(Decrease) due to
							Rate/
(In Thousands)	Volume			Rate			Volume			Total
Interest Earned On:
Loans (1)	$	1,602		$	(186	)	$	(15	)	$	1,401
Securities available-for-sale (1)		(475	)		(1,348	)		85			(1,738	)
Securities held-to-maturity (1)		(27	)		4			(1	)		(24	)
Interest bearing deposits with other banks		2			5			-			7
Total interest earning assets		1,102			(1,525	)		69			(354	)

Interest Paid On:
Demand deposits		19			82			20			121
Savings deposits		211			(27	)		(9	)		175
Time deposits		(527	)		(1,987	)		153			(2,361	)
Retail repurchase agreements		(53	)		(71	)		10			(114	)
Wholesale repurchase agreement		-			(47	)		0			(47	)
FHLB borrowings and other long-term debt		(155	)		(61	)		5			(211	)
Total interest bearing liabilities		(505	)		(2,111	)		179			(2,437	)

Change in net interest income, tax-equivalent	$	1,607		$	586		$	(110	)	$	2,083