Business Overview
First Community Bankshares, Inc. (FCBC) is a financial holding company that provides a wide range of banking products and services through its wholly-owned subsidiary, First Community Bank. With a history dating back to 1874, the company has established itself as a trusted and reliable community banking institution, serving customers across Virginia, West Virginia, North Carolina, and Tennessee.
First Community Bankshares, Inc. was founded in 1989 and reincorporated under the laws of the Commonwealth of Virginia. The company's principal executive office is located in Bluefield, Virginia. First Community Bankshares provides banking products and services to individual and commercial customers through its wholly owned subsidiary, First Community Bank, a Virginia-chartered banking institution founded in 1874.
Over its history, First Community Bankshares has grown through strategic acquisitions of complementary financial institutions. In 2023, the company completed the acquisition of Surrey Bancorp, adding $466 million in assets and expanding its presence in North Carolina. This followed the divestiture of the company's Emporia, Virginia branch in 2022, which resulted in a $1.66 million gain.
Challenges the company has faced include the 2008 financial crisis and the COVID-19 pandemic, which impacted the economic conditions in its regional markets. However, First Community Bankshares has navigated these challenges through prudent risk management and a focus on serving the needs of its local communities. The company has maintained a strong capital position, with a Tier 1 leverage ratio of 10.32% as of December 31, 2023.
Throughout its history, First Community Bankshares has remained committed to its mission of being the bank of choice, employer of choice, and investment of choice in the communities it serves. The company operates 53 branches across Virginia, West Virginia, North Carolina, and Tennessee, offering a full range of commercial and consumer banking services, as well as wealth management and investment advisory services through its Trust Division and First Community Wealth Management subsidiary.
Financial Performance
In the fiscal year ended December 31, 2024, First Community Bankshares reported net income of $51.60 million, or $2.80 per diluted common share. This represents a 7.46% increase in net income compared to the previous year. The company's total revenue for the year was $156.22 million, with net interest income of $126.47 million and noninterest income of $39.39 million.
The company's financial position remains strong, with total assets of $3.26 billion as of December 31, 2024. Its capital ratios are well above regulatory requirements, with a common equity Tier 1 capital ratio of 16.75% and a total risk-based capital ratio of 18.00%. This solid capitalization provides the company with the flexibility to continue investing in growth and enhancing shareholder value.
Operational Highlights
First Community Bankshares has demonstrated a consistent focus on operational efficiency and risk management. In 2024, the company's efficiency ratio, a measure of noninterest expense as a percentage of revenue, was 61.75%, indicating a well-managed cost structure.
The company's asset quality metrics also remain strong, with a nonperforming asset ratio of 0.63% as of December 31, 2024. The allowance for credit losses stood at 1.44% of total loans, reflecting the company's prudent approach to credit risk management.
During the year, First Community Bankshares continued to invest in technology and digital banking capabilities to enhance the customer experience and improve operational efficiency. The company's digital initiatives have been well-received by its clients, contributing to its overall competitive positioning.
Shareholder Returns and Dividends
First Community Bankshares has a long history of rewarding its shareholders through consistent dividend payments. In 2024, the company paid a total of $1.20 per common share in dividends, marking the 40th consecutive year of regular dividend payments.
The company's commitment to shareholder returns is further evidenced by its share repurchase program. In 2024, First Community Bankshares repurchased 257,290 shares of its common stock, returning $8.72 million to shareholders.
Risks and Challenges
Like any financial institution, First Community Bankshares faces a variety of risks, including interest rate risk, credit risk, and operational risk. The company's exposure to these risks is actively managed through a comprehensive risk management framework and conservative underwriting practices.
One potential challenge for the company is the highly competitive nature of the community banking industry. First Community Bankshares must continue to differentiate itself through exceptional customer service, innovative product offerings, and strategic investments in technology to maintain its competitive edge.
Additionally, the company's geographic concentration in the southeastern United States exposes it to regional economic conditions and potential natural disasters, which could impact its operations and financial performance.
Financials
First Community Bankshares reported strong financial results for the fiscal year 2024. The company's annual revenue reached $156.22 million, with a net income of $51.60 million. This performance demonstrates a solid improvement from the previous year, with net income increasing by 7.46%.
The company's cash flow generation remained robust, with annual operating cash flow of $57.74 million and annual free cash flow of $54.93 million. These figures indicate the company's ability to generate cash from its operations and maintain financial flexibility.
For the most recent quarter (Q4 2024), First Community Bankshares reported revenue of $39.36 million and net income of $13.04 million. The increase in net income was primarily attributed to a decrease in provision for credit losses of $4.39 million compared to the prior year quarter.
The company's loan portfolio totaled $2.42 billion as of December 31, 2024, representing a decrease of 6.07% from the prior year. Despite this decrease, the company maintained strong asset quality, with the allowance for credit losses as a percentage of total loans at 1.44%, slightly up from 1.41% at the end of 2023.
Liquidity
First Community Bankshares maintains a strong liquidity position, which is crucial for its operations and ability to meet financial obligations. As of December 31, 2024, the company reported cash and cash equivalents of $377.45 million, providing a solid foundation for its liquidity needs.
The company's debt-to-equity ratio stands at 0, indicating that First Community Bankshares is well-capitalized with no outstanding debt. This conservative capital structure provides financial stability and flexibility for future growth opportunities.
In terms of available credit, First Community Bankshares has access to $352.32 million from the Federal Home Loan Bank (FHLB), as well as $100 million in available lines from correspondent banks and $5.80 million available from the Federal Reserve Bank (FRB) Discount Window. These credit facilities further enhance the company's liquidity position and provide additional resources if needed.
The company's current ratio of 1.38 and quick ratio of 1.16 as of December 31, 2024, indicate a strong ability to meet short-term obligations. These ratios demonstrate that First Community Bankshares has sufficient liquid assets to cover its near-term liabilities, which is essential for maintaining financial stability and investor confidence.
Business Segment and Market Position
First Community Bankshares operates in one primary business segment: Community Banking. This segment encompasses the company's commercial and consumer banking, lending activities, and wealth management services. The company offers a diverse range of loan products, including commercial and industrial loans, commercial real estate loans, multi-family residential loans, and agricultural loans on the commercial side. For consumers, the loan portfolio primarily consists of home equity lines of credit, single-family owner-occupied mortgages, and other consumer loans.
In addition to traditional banking services, First Community Bank provides wealth management and investment advisory services through its Trust Division and wholly-owned subsidiary, First Community Wealth Management. This diversified service offering allows the company to meet a wide range of customer needs and generate multiple revenue streams.
The company's primary source of earnings is net interest income, which is the difference between interest earned on assets and interest paid on liabilities. This is supplemented by fee income from services, commissions, and deposit account charges. In 2024, while net interest income decreased slightly by 0.95% to $126.47 million due to higher rates paid on interest-bearing deposit liabilities, noninterest income increased by 5.17% to $39.39 million, driven by gains from the sale of branch properties and higher interchange income.
Industry Trends and Market Position
The banking industry has experienced steady growth, with a compound annual growth rate (CAGR) of approximately 5% over the past five years. This growth has been supported by rising interest rates and continued economic recovery. First Community Bankshares has positioned itself well within this growing market, leveraging its strong community presence and diverse product offerings to capture market share.
The company's focus on organic growth, supplemented by strategic acquisitions such as the 2023 acquisition of Surrey Bancorp, has allowed it to expand its presence and compete effectively in its target markets. By maintaining a strong community banking franchise and emphasizing personalized service, First Community Bankshares has differentiated itself in a competitive landscape.
Outlook and Conclusion
Despite the challenges facing the banking industry, First Community Bankshares has demonstrated a consistent ability to navigate changing market conditions and deliver solid financial results. The company's focus on community banking, conservative risk management, and shareholder-friendly policies have contributed to its long-term success.
Looking ahead, the company's strong capital position, diversified revenue streams, and strategic investments in technology and talent position it well to continue delivering value to its shareholders. As First Community Bankshares enters its next chapter, investors can expect the company to remain a reliable and consistent performer in the community banking space.
The absence of major scandals, short seller reports, or CEO departures further underscores the stability and integrity of First Community Bankshares' management and operations. This track record of stability, combined with the company's strong financial performance and market position, suggests a positive outlook for the future as First Community Bankshares continues to serve its communities and create value for its stakeholders.