10-K: First Community Bankshares Reports 2025 Results

First Community Bankshares, Inc. reported a slight decline in 2025 net income to $48.79 million, or $2.65 per diluted share, alongside strong credit quality and a completed acquisition.

Summary

• Net income for 2025 was $48.79 million, a decrease of $2.81 million or 5.45% compared to $51.60 million in 2024.
• Diluted earnings per common share for 2025 was $2.65, down $0.15 or 5.36% from $2.80 in 2024.
• Adjusted annual net income for 2025, excluding merger and non-recurring expenses, was $51.12 million, reflecting a modest year-over-year decline of $1.23 million or 2.34%.
• Net interest income decreased by $1.85 million or 1.47% to $124.61 million in 2025.
• Noninterest income increased by $3.50 million or 8.88% to $42.89 million, primarily driven by a $3.39 million increase in service charges on deposits and other service fees.
• Noninterest expense increased by $7.74 million or 8.01% to $104.30 million, mainly due to higher salaries and employee benefits ($4.73 million) and merger-related expenses ($2.91 million).
• The acquisition of Hometown Bancshares, Inc. was completed on January 23, 2026, adding 8 branches, approximately $415 million in assets, $172 million in loans, and $376 million in deposits.
• Total assets as of December 31, 2025, decreased slightly by $1.57 million or 0.05% to $3.26 billion.
• Total loans held for investment, net of unearned income, decreased by $101.33 million or 4.19% to $2.31 billion.
• Total deposits decreased by $5.92 million or 0.22% to $2.69 billion.
• Book value per share on December 31, 2025, was $27.30, a decrease of $1.43 from year-end 2024, primarily due to two special dividends totaling $3.07 per common share.
• The Company and its subsidiary Bank maintained strong capital ratios and were classified as 'well-capitalized' under regulatory frameworks as of December 31, 2025.

Sentiment

Score: 5

Explanation: StockSavvy.ai views this as a mixed report. While credit quality and capital remain strong, and a strategic acquisition was completed, the decline in net income, EPS, and the loan portfolio, coupled with increased expenses, indicates some operational headwinds.

Positives

• Noninterest income increased by $3.50 million (8.88%), primarily driven by a $3.39 million increase in service charges on deposits and other service charge fees.
• Net interest spread increased 1 basis point to 4.04% from 4.03% in 2024.
• Non-performing loans to total loans decreased to 0.61% in 2025, a 0.22% reduction compared to 2024, indicating improved credit quality.
• Net charge-offs to annualized average loans decreased to $4.12 million (0.18%) in 2025, compared to $5.37 million (0.22%) for the same period in 2024.
• The allowance for credit losses to nonperforming loans increased to 217.35% on December 31, 2025, from 173.97% on December 31, 2024, demonstrating stronger loss coverage.
• Delinquent loans (30 days or more past due and nonaccrual) decreased by $9.70 million (25.83%) to $27.85 million as of December 31, 2025.
• The Company and the Bank continued to meet all capital adequacy requirements and were classified as 'well-capitalized' under regulatory frameworks, exceeding minimum Basel III requirements.
• The acquisition of Hometown Bancshares, Inc. was completed on January 23, 2026, expanding the branch network and market presence across Virginia, West Virginia, North Carolina, and Tennessee.
• A strong liquidity position is maintained with $512.24 million in unencumbered cash, $301.81 million in unused borrowing capacity from the FHLB, $5.85 million available credit from the FRB Discount Window, and $100.00 million in available lines from correspondent banks.

Negatives

• Annual net income decreased by $2.81 million (5.45%) to $48.79 million in 2025 compared to 2024.
• Diluted earnings per common share decreased by $0.15 (5.36%) to $2.65 in 2025.
• Adjusted annual net income (excluding merger and non-recurring expenses) also experienced a decline of $1.23 million (2.34%) in 2025.
• Net interest income decreased by $1.85 million (1.47%) in 2025.
• Net interest margin declined 2 basis points to 4.42% in 2025.
• Noninterest expense increased significantly by $7.74 million (8.01%), driven by higher salaries and employee benefits ($4.73 million) and merger-related expenses ($2.91 million).
• Average earning assets decreased by $27.32 million (0.96%) in 2025.
• The average balance of loans decreased by $127.67 million (5.15%) in 2025.
• The average balance of securities available-for-sale decreased by $31.80 million (18.59%) in 2025.
• Book value per share decreased $1.43 to $27.30 as of December 31, 2025, primarily due to two special dividends totaling $3.07 per common share.
• Total loans held for investment decreased $101.33 million (4.19%) as of December 31, 2025.
• Total deposits decreased $5.92 million (0.22%) as of December 31, 2025.
• Approximately 19.54% of deposits were uninsured as of December 31, 2025, which could pose a liquidity risk during periods of financial stress.

Risks

• Financial performance is highly dependent on the strength of the U.S. economy and local economies, with adverse changes (inflation, interest rates, energy prices, fiscal/monetary policy) potentially reducing demand for services, deteriorating credit quality, and increasing delinquencies.
• Operating in a highly regulated industry means changes in banking laws, regulations, or policies, or non-compliance, could result in substantial costs, sanctions, and adverse effects on reputation and financial condition.
• The Bank's ability to pay dividends to the Company is subject to regulatory limitations, which may affect the Company's ability to pay operating expenses and dividends to shareholders.
• Exposure to interest rate risk, where interest-earning assets and interest-bearing liabilities reprice at differing times, could adversely affect net interest income and earnings.
• A decline in the estimated fair value of the investment portfolio may reduce stockholders' equity, book value per common share, and tangible book value per common share.
• The repeal of federal prohibitions on payment of interest on demand deposits could increase interest expense and decrease net interest margin if competitive rates are offered.
• Accounting estimates and risk management processes rely on analytical and forecasting models that may not be accurate, particularly in times of market stress, potentially leading to inadequate allowance for credit losses or inaccurate fair value measurements.
• Credit risk associated with the financial condition of other financial institutions (brokers, dealers, banks) could lead to losses from routine funding transactions if counterparties default.
• The commercial loan portfolio, particularly commercial business and real estate loans, generally carries a higher risk of loss due to larger balances and dependence on borrower business cash flows or property values.
• Strong competition from other financial institutions, financial service companies, and non-bank competitors (fintechs/wealthtechs) with greater resources and fewer regulatory constraints could weaken the competitive position and reduce profitability.
• Liquidity risk, including the inability to raise funds through deposits or borrowings, or deposit outflows due to negative news or failures of other financial institutions, could materially and adversely affect operations.
• The Company may require additional capital in the future that may not be available when needed or on acceptable terms, impacting growth objectives and financial stability.
• Future goodwill impairment charges could occur if unfavorable economic or market conditions indicate that the fair value of the Community Banking reporting unit is less than its carrying amount.
• Potential for higher FDIC insurance premiums or special assessments if the Deposit Insurance Fund (DIF) is depleted or assessment rates are revised.
• Reliance on internal and third-party electronic communications and information systems exposes the Company to risks of operational failures, service interruptions, misconduct, and cybersecurity incidents.
• Cybersecurity risks, including denial of service attacks, hacking, malware, and identity theft, could result in disclosure of confidential information, operational disruption, reputational damage, and significant legal and financial exposure.
• Increasing fraud risk, including cyber fraud, identity theft, and account takeover, could lead to financial losses, increased operational costs, legal exposure, and reputational harm.
• The development and use of artificial intelligence (AI) present new operational, compliance, reputational, and legal risks, including disruption of business models, increased competition, exposure of sensitive data, and evolving regulatory standards.
• Failure to effectively anticipate and implement new technology, or insufficient investment in technology solutions, could adversely affect the ability to compete with technologically advanced competitors and fintechs.
• Potential claims and litigation pertaining to intellectual property could result in expensive, time-consuming litigation, substantial damages, or increased operating expenses.
• The market price of common stock may be volatile due to various factors, including financial results, analyst recommendations, industry news, acquisitions, regulatory changes, and geopolitical conditions.
• Lower trading volume in common stock compared to larger financial services companies could cause the stock price to fall with significant sales.
• There is no assurance of continued common stock dividends in the future, which could adversely affect the market price of common stock.
• Environmental liability risk is associated with lending activities, particularly real property collateral, potentially leading to remediation costs and other liabilities.
• Potential acquisitions may disrupt business, dilute stockholder value, expose the Company to unknown liabilities, and divert management's time and attention.
• The unexpected loss of key management personnel could have a material adverse impact on the business.
• Internal controls and procedures may fail or be circumvented, leading to material adverse effects on business, reputation, results of operations, and financial condition.
• Environmental, social, and governance (ESG) risks, including climate change and social justice issues, could adversely affect reputation, market price, and the economic viability of customers in carbon-intensive industries.

Future Outlook

Management believes that the Company and the Bank's current capital levels exceed the required capital amounts to be considered well-capitalized and also meet the fully phased-in minimum capital requirements, including the related capital conservation buffers, as required by the Basel III Capital Rules as of December 31, 2025. Management considered the allowance for credit losses adequate as of December 31, 2025, but notes that additions may be required in future periods. As of December 31, 2025, management is not aware of any events reasonably likely to have a material adverse effect on liquidity, capital resources, or operations, and believes exposure to interest rate risk was adequately mitigated. The Company expects to early adopt ASU No. 2025-08 in 2026, and does not expect other recent accounting standards (ASU No. 2025-09, ASU No. 2025-11, ASU No. 2025-12) to have a material impact on financial statements.

Management Comments

• We're committed to the passionate pursuit of excellence in community banking and we've set our sights on being the bank of choice, employer of choice, and investment of choice in the communities in which we operate.
• Our mission is to understand and anticipate customer and community financial needs and preferences by learning from our customers and engaging with our communities.
• Our mission is to help our customers and communities achieve their financial goals and objectives by providing workable solutions delivered in a professional manner by friendly, knowledgeable people and convenient, reliable systems.
• Our mission is to recruit, retain, and develop talented and resourceful employees by providing competitive compensation and benefits; offering first-rate continuing education; and fostering a team environment that empowers employees, encourages growth, and recognizes and rewards achievement.
• Our mission is to allocate shareholder resources by pursuing those investments and business opportunities that provide a superior risk-assessed return.
• Management believes that the Company and the Bank's current capital levels exceed the required capital amounts to the considered well-capitalized and also meet the fully phased-in minimum capital requirements, including the related capital conservation buffers, as required by the Basel III Capital Rules as of December 31, 2025.
• Management considered the allowance adequate as of December 31, 2025; however, no assurance can be made that additions to the allowance will not be required in future periods.
• As of December 31, 2025, management is not aware of any events that are reasonably likely to have a material adverse effect on our liquidity, capital resources or operations.
• As of December 31, 2025, we feel our exposure to interest rate risk was adequately mitigated for the scenarios presented.

Industry Context

StockSavvy.ai notes that First Community Bankshares operates within a highly competitive and rapidly evolving financial services industry, facing challenges from traditional commercial banks, thrifts, credit unions, and increasingly, financial technology (fintech) companies. The company positions itself as a regional community bank, aiming to offer a more personal alternative to larger institutions while possessing greater resources than smaller community banks. The filing highlights industry-wide concerns such as the impact of technological change, the growth of fintechs, and the potential for deposit outflows following failures of other financial institutions, as experienced in 2023. Regulatory changes, including the ongoing developments around the Community Reinvestment Act (CRA) modernization rule, underscore the dynamic compliance landscape. Furthermore, the company acknowledges the growing importance of Environmental, Social, and Governance (ESG) risks, particularly for customers in carbon-intensive sectors like coal, oil, and gas, which are relevant to its market footprint.

Comparison to Industry Standards

• First Community Bankshares' cumulative total shareholder return of 195.35% for the five years ended December 31, 2025, outperformed the S&P Global Asset Size & Regional Peer Group (161.37%) and the NASDAQ Composite Index (187.14%), indicating strong relative stock performance within its peer group and broader tech-heavy market.
• The company's return on average assets (ROA) of 1.52% and return on average common equity (ROE) of 9.64% in 2025, while slightly lower than 2024, remain competitive for a regional bank, especially when considering the strong return on average tangible common equity of 13.92%.
• Credit quality metrics, such as nonperforming loans to total loans at 0.61% and net charge-offs to annualized average loans at 0.18% in 2025, demonstrate a robust loan portfolio performance, generally better than many industry averages during periods of economic uncertainty.
• The Company's Common Equity Tier 1 (CET1) ratio of 16.10% and the Bank's CET1 ratio of 14.46% as of December 31, 2025, significantly exceed the Basel III minimum requirement of 7.00% (including the capital conservation buffer), positioning the company as 'well-capitalized' and indicating a very strong capital buffer compared to global benchmarks.

Corporate Governance

Legal Proceedings

• On May 6, 2024, the Bank agreed to settle a putative class action lawsuit, filed on June 24, 2022, in the United States District Court for the Southern District of West Virginia. The lawsuit alleged the Bank breached deposit account agreements and was unjustly enriched by collecting overdraft fees and assessing multiple non-sufficient funds fees.
• The settlement involves the Bank establishing a $4.80 million settlement fund and forgiving up to $500,000 in assessed but unpaid fees. The Bank denied wrongdoing and will receive a complete release of all claims upon court approval.
• The Company and its subsidiaries are currently involved in various other legal actions and asserted claims in the normal course of business, which are not expected to have a material adverse effect on financial position, results of operations, or cash flows.

Related Party Transactions

• Loans to principal officers, directors, and their affiliates increased from $25.55 million as of December 31, 2024, to $26.45 million as of December 31, 2025.
• Deposits from related parties totaled $18.44 million as of December 31, 2025, up from $15.16 million as of December 31, 2024.
• Legal fees paid to related parties were $28 thousand in 2025, $81 thousand in 2024, and $41 thousand in 2023.
• Lease payments of $15 thousand were paid to related parties in 2025, with no such payments in 2024 or 2023.
• Other expenses paid to related parties totaled $18 thousand in 2025, $6 thousand in 2024, and $53 thousand in 2023.

Stakeholder Impact

• Shareholders: Experienced a decrease in net income and diluted EPS, and a decline in book value per share due to special dividends, but the stock outperformed regional peers in total shareholder return over five years. A stock repurchase plan is in place.
• Employees: The Company is committed to recruiting, retaining, and developing talented employees through competitive compensation, benefits, ongoing education, and a 401(k) plan with company matching contributions, aligning employee and stockholder interests.
• Customers: The Company aims to understand and anticipate customer financial needs, providing workable solutions and building financial partnerships. Enhanced cybersecurity measures are in place to protect customer information, though fraud risks remain.
• Communities: The Company's mission includes engaging with communities and helping them achieve financial goals, supported by a 'satisfactory' rating under the Community Reinvestment Act.
• Creditors: Strong capital ratios and a robust liquidity position provide assurance regarding the Company's ability to meet its financial obligations.
• Regulators: The Company is subject to extensive federal and state regulation, including capital adequacy, CRA, BSA/AML, OFAC, and cybersecurity requirements, with ongoing compliance efforts and oversight.

Next Steps

• The Annual Meeting of Shareholders is scheduled to be held on April 28, 2026.
• The Company will proceed with the integration of Hometown Bancshares, Inc. following its acquisition on January 23, 2026.
• Management will continue to focus on organic growth supplemented by strategic acquisitions of complementary financial institutions.
• Ongoing monitoring and evaluation of threats, events, and business operations will continue, with risk mitigation activities adapted accordingly.
• The Company expects to early adopt ASU No. 2025-08, 'Financial InstrumentsCredit Losses (Topic 326): Purchased Loans', in 2026.

Key Dates

Recommendation

First Community Bankshares demonstrates solid credit quality and robust capital levels, exceeding regulatory requirements, and has expanded its footprint through a strategic acquisition. However, the reported decline in net income and diluted EPS for 2025, alongside an increase in noninterest expenses, indicates some pressure on profitability. The decrease in book value per share, while partly due to special dividends, warrants caution. A 'hold' recommendation is appropriate as investors should monitor the integration of the recent acquisition and the company's ability to reverse the negative earnings trend and manage operating costs in a competitive and evolving financial landscape.

Keywords

Banking, Financial Services, Community Bank, 10-K, Annual Report, Net Income, Earnings Per Share, Loans, Deposits, Credit Quality, Capital Ratios, Acquisition, Hometown Bancshares, Wealth Management, Interest Rates, Cybersecurity, ESG, Risk Management, Stock Repurchase, Dividends, FCBC