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CORRESP
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    Unassociated Document

    November
13, 2009

    Via
EDGAR

    Ms.
Angela Connell

    Reviewing
Accountant

    Division
of Corporation Finance

    U.S.
Securities and Exchange Commission

    100 F
Street, NW

    Washington,
D.C. 20549

    Mail Stop
4720

              Re:

              First
      Community Bancshares, Inc.

    Form
10-Q for the Fiscal Quarter Ended June 30, 2009

    File
No. 000-19297

    Dear Ms.
Connell:

    This
letter is provided on behalf of First Community Bancshares, Inc. (“First
Community,” the “Company,” “we,” or “our”) in response to your letter of October
7, 2009, regarding the Company’s Quarterly Report on Form 10-Q for the fiscal
quarter ended June 30, 2009.

    The
Company acknowledges that:

              ·

              The
      Company is responsible for the adequacy and accuracy of the disclosure in
      the referenced filings;

              ·

              Staff
      comments or changes to disclosures in response to staff comments do not
      foreclose the Securities and Exchange Commission (the “Commission”) from
      taking any action with respect to the referenced filings;
    and

              ·

              The
      Company may not assert staff comments as a defense in any proceeding
      initiated by the Commission or any person under the federal securities
      laws of the United States.

    For your
convenience, we have included in this letter, in bold, each of the comments in
your letter; our responses follow.

    Form 10-Q for Fiscal Quarter
Ended June 30, 2009

    Notes to Consolidated
Financial Statements

    General

              1.

              Please
      revise your future quarterly filings to provide the disclosures required
      by paragraph 20(a) of SFAS 114. Please note that such disclosures are
      required as of each balance sheet date, including quarterly
      periods.

    Beginning
with the Quarterly Report on Form 10-Q for the quarter ended September 30, 2009,
we have provided the disclosures required by paragraph 20(a) of SFAS
114.  The following disclosure was included in the Company’s Quarterly
Report on Form 10-Q for the quarter ended September 30, 2009.

    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
September 30, 2009 and December 31, 2008.

          P.O. Box
989 □ One Community Place □ Bluefield, VA 24605 □ Telephone: 276-326-9000 □ Fax:
276-326-9010 □ www.fcbinc.com

    Ms.
Angela Connell

    November
13, 2009

    Page
2

                    September
      30,

                    December
      31,

                    (In
      Thousands)

                    2009

                    2008

                    Recorded
      investment in loans considered to be impaired:

                     Impaired
      loans with reserves

                  $
                  4,231

                  $
                  4,796

                     Impaired
      loans without reserves

                  10,559

                  8,504

                     Total
      impaired loans

                  14,790

                  13,300

                    Allowance
      for loan losses related to loans considered to be impaired

                  1,221

                  678

                    Interest
      income recognized on impaired loans, year to date

                  397

                  793

    Impaired
loans without reserves at September 30, 2009, include $4.24 million of acquired
loans with credit deterioration.  Interest income realized on impaired
loans is recognized upon receipt if the impaired loan is on a non-accrual
basis.

    Note 3. Investment
Securities, pages 14-15

              2.

              In
      your response to comment 17 of our letter dated June 23, 2009 you stated
      that you would add a column to your investment tables disclosing the
      amount of OTTI recognized in accumulated other comprehensive income. It
      does not appear that you have included this required disclosure in your
      June 30, 2009 Form 10-Q. Accordingly, please revise your future filings to
      include this disclosure as required by paragraph 19 of SFAS 115 as amended
      by FSP FAS 115-2 and 124-2.

    We
included the amount of OTTI recognized in AOCI, as required by paragraph 19 of
SFAS 115, as amended, in our Quarterly Report on Form 10-Q for the quarter ended
September 30, 2009.  The following disclosure was included in the
Company’s Quarterly Report on Form 10-Q for the quarter ended September 30,
2009.

    Ms.
Angela Connell

    November
13, 2009

    Page
3

    As of
September 30, 2009 and December 31, 2008, the amortized cost and estimated fair
value of available-for-sale securities were as follows:

                      September
      30, 2009

                      Amortized

                      Unrealized

                      Unrealized

                      Fair

                      OTTI
      in

                      Cost

                      Gains

                      Losses

                      Value

                      AOCI

                      (In
      Thousands)

                      U.S.
      Government agency securities

                    $
                    66,191

                    $
                    697

                    $
                    -

                    $
                    66,888

                    $
                    -

                      States
      and political subdivisions

                    134,885

                    4,092

                    (481
                    )

                    138,496

                    -

                      Trust
      preferred securities:

                      Single
      issue

                    55,586

                    -

                    (18,132
                    )

                    37,454

                    -

                      Pooled

                    60,116

                    -

                    (37,014
                    )

                    23,102

                    (31,862
                    )

                      Total
      trust preferred securities

                    115,702

                    -

                    (55,146
                    )

                    60,556

                    (31,862
                    )

                      Mortgage-backed
      securities:

                      Agency

                    284,092

                    6,875

                    (361
                    )

                    290,606

                    -

                      Non-Agency
      prime residential

                    6,166

                    -

                    (627
                    )

                    5,539

                    -

                      Non-Agency
      Alt-A residential

                    20,968

                    -

                    (9,437
                    )

                    11,531

                    (9,437
                    )

                      Total
      mortgage-backed securities

                    311,226

                    6,875

                    (10,425
                    )

                    307,676

                    (9,437
                    )

                      Equities

                    2,312

                    208

                    (336
                    )

                    2,184

                    -

                      Total

                    $
                    630,316

                    $
                    11,872

                    $
                    (66,388
                    )

                    $
                    575,800

                    $
                    (41,299
                    )

                      December
      31, 2008

                      Amortized

                      Unrealized

                      Unrealized

                      Fair

                      OTTI
      in

                      Cost

                      Gains

                      Losses

                      Value

                      AOCI

                      (In
      Thousands)

                      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:

                      Single
      Issue

                    55,491

                    -

                    (21,950
                    )

                    33,541

                    -

                      Pooled

                    93,269

                    -

                    (60,757
                    )

                    32,512

                    -

                      Total
      trust preferred securities

                    148,760

                    -

                    (82,707
                    )

                    66,053

                    -

                      Mortgage-backed
      securities:

                      Agency

                    212,315

                    4,649

                    (2
                    )

                    216,962

                    -

                      Non-Agency
      prime residential

                    7,423

                    -

                    (1,657
                    )

                    5,766

                    -

                      Non-Agency
      Alt-A residential

                    10,750

                    -

                    -

                    10,750

                    -

                      Total
      mortgage-backed securities

                    230,488

                    4,649

                    (1,659
                    )

                    233,478

                    -

                      Equities

                    7,979

                    357

                    (1,381
                    )

                    6,955

                    -

                      Total

                    $
                    603,694

                    $
                    7,263

                    $
                    (90,234
                    )

                    $
                    520,723

                    $
                    -

              3.

              Refer
      to comment 10 in our letter dated June 23, 2009. Regarding the cumulative
      effect adjustment related to the $15.5 million in other-than-temporary
      impairment (“OTTI”) charges recorded in 2008 on your pooled trust
      preferred securities, you state that you determined the entire amount of
      the impairment to be credit-related based on a review of the cash flow
      projections you used in your determination of whether or not there had
      been an adverse change in cash flow at December 31, 2008 and that you
      enhanced your assumptions to include a continuing element of defaults in
      addition to those projected. Please provide us additional specific details
      regarding how you enhanced your assumptions to include a continuing
      element of defaults in addition to those projected, tell us why you
      believe it was appropriate to revise your cash flow projections and
      provide us the authoritative guidance which you believe supports your
      methodology. It appears that paragraph 45 of FSP FAS 115-2 and 124-2
      requires you to calculate the cumulative adjustment as of the beginning of
      the period in which you adopt the standard and therefore your calculations
      would be based on the unadjusted cash flows expected to be collected used
      in your adverse change in cash flow assessment at December 31,
      2008.

    Ms.
Angela Connell

    November
13, 2009

    Page
4

    At
December 31, 2008, GAAP at that time, as prescribed by EITF 99-20 paragraph
12.b., was to determine if an adverse change in cash flows had
occurred.  Our initial cash flow projections for the SOLOSO 2007
security were based upon actual and projected specific defaults and deferrals
for the underlying collateral, but no assumption for default of banks that were
not specifically identified.  This analysis indicated that a break in
yield was present, and under then-current GAAP, further analysis or
consideration of further projected defaults was unnecessary and was not
performed at that time, as any adverse change in cash flow resulted in an
immediate recognition of the entire unrealized loss as an
other-than-temporary-impairment charge.  Under the GAAP in effect as
of the filing date of our Form 10-K, we appropriately recognized
other-than-temporary impairment of $15.46 million, reducing the carrying value
to approximately $2.94 million.

    Upon the
adoption of FSP 115-2 and 124-2, we reviewed our cash flow projections for the
security as of December 31, 2008.  We determined that we had an
adverse change in cash flows at December 31, 2008, before we completed the full
expected cash flow analysis that was consistent with our analysis for all of our
other pooled trust preferred securities. At that time additional, consistent
analysis would not have provided a different result, as any adverse change in
cash flows would result in the same amount of impairment charge to be taken
through the income statement.  Our process at that time for all of our
other pooled trust preferred securities was to add a continuing element of
default of 75 basis points as a FAS 5 component to overlay the specifically
known and projected defaults and deferrals.  This represents our
enhancement to the original cash flow analysis performed as of December 31,
2008, which we felt was prudent in order to determine whether or not there was
reasonable justification for recording a cost basis in this security that was
above fair value.  We view it not as an enhancement, but a consistent
application of our approach as of December 31, 2008.

    In
accordance with paragraph 25 of FSP 115-2, we considered other factors besides
the discounted cash flow analysis that had an impact on our assessment of
whether the recorded loss was credit related.  As noted in paragraph
25.d., this security has certain structural issues that are different from our
other holdings and that we believe add a greater degree of risk to the
realization of projected cash flows.  For example, this security has a
collateral manager that can swap collateral within the structure without the
approval of the rated security holders.  The collateral manager is
able to replace unrated trust preferred and subordinate debt collateral within
the deal with other more highly rated collateral.  The replacement
collateral, in all likelihood, will pay a lesser amount of periodic interest,
thus decreasing the overall cash flows coming into the deal.  This
introduces an added element of risk and uncertainty to the realization of future
cash flows.

    Additionally,
Like most other pooled trust preferred deals, the SLOSO has the ability to
direct cash flow to the highest rated tranches and decrease the outstanding
principal balance when certain overcollateralization tests are not
met.  Generally, the lower tranches receive a “payment-in-kind” when
this occurs and the interest payment due is effectively capitalized into the
principal amount of the tranche.  This security was deferring interest
payments, which remained contractually due, but the principal balance of t