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FIRST COMMUNITY BANKSHARES INC /VA/

FCBC
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Business Summary

First Community Bankshares, Inc. operates as a financial holding company providing 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. The company serves a diverse base of individuals and businesses across a variety of industries such as education, government and health services, retail trade, construction, manufacturing, tourism, coal mining and gas extraction, and transportation. The financial services industry is highly competitive and constantly evolving, with competition from other commercial banks, thrifts, savings and loan associations, untaxed and lesser regulated credit unions, consumer finance companies, financial technology companies, mortgage banking firms, commercial finance and leasing companies, securities firms, brokerage firms, and insurance companies. The company has positioned itself as a regional community bank that provides an alternative to larger banks and smaller community banks.

The company encounters strong competition in attracting and retaining deposit, loan, and other financial relationships in its market areas. Factors that influence its ability to remain competitive include the ability to develop, maintain, and build long-term customer relationships; the quality, variety, and pricing of products and services; the convenience of banking locations and office hours; technological developments; and industry and general economic conditions. The company seeks to mitigate competitive pressures with its relationship style of banking, competitive pricing, and cost efficiencies. The company's operations are guided by a strategic plan that focuses on organic growth supplemented by strategic acquisitions of complementary financial institutions.

The company's primary source of earnings is net interest income, the difference between interest earned on assets and interest paid on liabilities, which is supplemented by fees for services, commissions on sales, and various deposit service charges. The company funds its lending and investing activities primarily through the retail deposit operations of its branch banking network supplemented by retail and wholesale repurchase agreements and Federal Home Loan Bank borrowings. It invests its funds primarily in loans to retail and commercial customers and various investment securities. The Bank offers wealth management and investment advice through its Trust Division and wholly owned subsidiary First Community Wealth Management.

The company's loan portfolio is grouped into commercial, consumer real estate, and consumer and other loan segments. Commercial loans consist of loans to small and mid-size industrial, commercial, and service companies, including commercial real estate projects representing a variety of sectors. Consumer real estate loans consist largely of loans to individuals within the company's market footprint for home equity loans and lines of credit and for the purpose of financing residential properties. Consumer and other loans consist of loans to individuals that include, but are not limited to, automobile, credit cards, personal lines of credit, boats, mobile homes, and other consumer goods. As of December 31, 2025, commercial business and real estate loans totaled $1.53 billion , or 66.26% , of the total loan portfolio. As of the same date, the largest outstanding commercial business loan was $15.30 million and the largest outstanding commercial real estate loan was $12.30 million . Commercial construction loans totaled $63.90 million , or 2.76% of the total loan portfolio, and the largest outstanding commercial construction loan was $19.90 million .

The Trust Division manages inter vivos trusts and trusts under will, develops and administers employee benefit and individual retirement plans, and manages and settles estates. Revenues consist primarily of commissions on assets under management and investment advisory fees. As of December 31, 2025, the Trust Division and FCWM managed and administered $1.79 billion in combined assets under various fee-based arrangements as fiduciary or agent. Wealth management noninterest income was $4.936 million in 2025, $4.485 million in 2024, and $4.179 million in 2023.

On January 23, 2026, the Company consummated its acquisition of Hometown Bancshares, Inc., the parent company of Union Bank, Inc., a West Virginia chartered bank, with eight branches in the state of West Virginia. Following the acquisition, the company operates 60 branches across the states of Virginia, West Virginia, North Carolina, and Tennessee. The company repurchased 50,338 shares of its common stock in 2025 for a cost of $1.85 million , compared to 257,294 shares purchased in 2024 for a cost of $8.72 million . In September 2023, the Board of Directors approved a repurchase plan to repurchase 2,700,000 shares which expires December 31, 2026 .

Annual net income of $48.79 million , or $2.65 per diluted common share was earned in 2025, a decrease of $2.81 million , or 5.45% , compared to 2024. Net interest income after provision for loan losses increased $1.67 million compared to 2024. Net interest margin remained stable at 4.42% , declining only 0.45% compared to 2024. Noninterest income increased $3.50 million , or 8.88% . Non-interest expense increased $7.74 million , or 8.01% . Annualized return on average assets was 1.52% for the twelve months of 2025 compared to 1.60% for the same period of 2024. Annualized return on average common equity was 9.64% for the twelve months of 2025 compared to 10.03% for the same period of 2024.

Business Outlook

The company's operations are guided by a strategic plan that focuses on organic growth supplemented by strategic acquisitions of complementary financial institutions. On January 23, 2026, the Company consummated its acquisition of Hometown Bancshares, Inc., the parent company of Union Bank, Inc., a West Virginia chartered bank, with eight branches in the state of West Virginia. Following the acquisition, the company operates 60 branches across the states of Virginia, West Virginia, North Carolina, and Tennessee.

The company's growth strategy also includes the development of new products and services, as the company faces risks related to the timely development of competitive new products and services and the acceptance of these products and services by new and existing customers. The company also faces risks related to technological changes and the ability to effectively anticipate and implement new technology, as the financial services industry continues to experience rapid technological change with the introduction of new, and increasingly complex, technology-driven products and services.The company maintains a comprehensive risk-based cybersecurity program to identify, measure, manage, and disclose material cybersecurity risks. The company utilizes the Federal Financial Institution Examination Council's Cybersecurity Assessment Tool as a diagnostic test to help identify the company's cyber risk level and determine the maturity of its cybersecurity program. The company employs a team of dedicated, skilled talent to operationalize the cybersecurity strategy, supported by arrangements with a third party to provide continuous endpoint monitoring and incident response. The company's entire workforce receives mandatory cybersecurity training that includes quarterly social engineering exercises and informative online courses.

The company repurchased 50,338 shares of its common stock in 2025 for a cost of $1.85 million . In September 2023, the Board of Directors approved a repurchase plan to repurchase 2,700,000 shares which expires December 31, 2026 . The company paid cash dividends per common share of $4.31 in 2025, $1.20 in 2024, and $1.16 in 2023.

The company faces significant challenges from the current economic environment, as its financial performance is generally highly dependent on the business environment in the markets in which it operates and of the U.S. as a whole. Adverse changes in economic conditions, including inflationary pressures, fluctuations in interest rates, energy price volatility, changes in fiscal and monetary policy, or weakened consumer and business confidence, could negatively affect consumer and business spending, borrowing, and repayment capacity. The company also faces risks related to the repeal of the federal prohibitions on payment of interest on demand deposits, which could increase interest expense.

The company operates in a highly regulated industry subject to examination, supervision, enforcement, and other legal actions by various federal and state governmental authorities. Changes to statutes, regulations, and regulatory policies may cause substantial and unpredictable effects, require additional costs, limit the types of financial services and products offered and fees charged, or allow non-banks to offer competing financial services and products. The company also faces risks related to potential future goodwill impairment, higher FDIC insurance premiums or special assessments, and the need to raise additional capital in the future that may not be available when needed.

Risk Factors

The company's commercial loan portfolio may expose it to increased credit risk, as commercial business and real estate loans generally have a higher risk of loss because loan balances are typically larger and repayment is usually dependent on cash flows from the borrower's business or the property securing the loan. As of December 31, 2025, commercial business and real estate loans totaled $1.53 billion , or 66.26% , of the total loan portfolio. The company faces liquidity risk, as approximately 19.54% of its deposits were uninsured as of December 31, 2025, and it relies on these deposits for liquidity. The company is subject to interest rate risk, as its earnings and cash flows are largely dependent upon net interest income, and changes in monetary policy and interest rates could influence the interest it receives on loans and securities and the amount of interest it pays on deposits and borrowings. The company also faces risks related to the financial condition of other financial institutions, as it has exposure to different industries and counterparties and routinely executes transactions with counterparties in the financial services industry.

Management Priorities

Management's message emphasizes the company's commitment to being the bank of choice, employer of choice, and investment of choice in the communities in which it operates. The company's mission includes understanding and anticipating customer and community financial needs, helping customers achieve financial goals, recruiting and retaining talented employees, and allocating shareholder resources by pursuing investments and business opportunities that provide a superior risk-assessed return. Management highlights the company's strategic focus on organic growth supplemented by strategic acquisitions of complementary financial institutions, as demonstrated by the acquisition of Hometown Bancshares, Inc. completed on January 23, 2026. Management notes that when adjusted for merger and non-recurring expenses, adjusted annual net income for 2025 was $51.12 million , reflecting a modest year over year decline of $1.23 million , or 2.34% . Return on average tangible common equity continues to remain strong at 13.92% for the full year.

View Source Annual Report on SEC.gov ↗

References

  1. [1] Item 1, Business — Competition
  2. [2] Item 1A, Risk Factors — Our commercial loan portfolio may expose us to increased credit risk
  3. [3] Item 1A, Risk Factors — Our commercial loan portfolio may expose us to increased credit risk
  4. [4] Item 1A, Risk Factors — Our commercial loan portfolio may expose us to increased credit risk
  5. [5] Item 1A, Risk Factors — Our commercial loan portfolio may expose us to increased credit risk
  6. [6] Item 1A, Risk Factors — Our commercial loan portfolio may expose us to increased credit risk
  7. [7] Item 1A, Risk Factors — Our commercial loan portfolio may expose us to increased credit risk
  8. [8] Item 7, MD&A — Executive Overview
  9. [9] Item 7, MD&A — Noninterest Income
  10. [10] Item 7, MD&A — Noninterest Income
  11. [11] Item 7, MD&A — Noninterest Income
  12. [12] Item 1, Business — General
  13. [13] Item 5, Market for Registrant's Common Equity — Purchases of Equity Securities
  14. [14] Item 7, MD&A — Performance Overview
  15. [15] Item 5, Market for Registrant's Common Equity — Purchases of Equity Securities
  16. [16] Item 7, MD&A — Performance Overview
  17. [17] Item 5, Market for Registrant's Common Equity — Purchases of Equity Securities
  18. [18] Item 5, Market for Registrant's Common Equity — Purchases of Equity Securities
  19. [19] Item 7, MD&A — Performance Overview
  20. [20] Item 7, MD&A — Performance Overview
  21. [21] Item 7, MD&A — Performance Overview
  22. [22] Item 7, MD&A — Performance Overview
  23. [23] Item 7, MD&A — Performance Overview
  24. [24] Item 7, MD&A — Performance Overview
  25. [25] Item 7, MD&A — Performance Overview
  26. [26] Item 7, MD&A — Performance Overview
  27. [27] Item 7, MD&A — Performance Overview
  28. [28] Item 7, MD&A — Performance Overview
  29. [29] Item 7, MD&A — Performance Overview
  30. [30] Item 7, MD&A — Performance Overview
  31. [31] Item 7, MD&A — Performance Overview
  32. [32] Item 7, MD&A — Performance Overview
  33. [33] Item 7, MD&A — Performance Overview
  34. [34] Item 1, Business — General
  35. [35] Item 5, Market for Registrant's Common Equity — Purchases of Equity Securities
  36. [36] Item 7, MD&A — Performance Overview
  37. [37] Item 5, Market for Registrant's Common Equity — Purchases of Equity Securities
  38. [38] Item 5, Market for Registrant's Common Equity — Purchases of Equity Securities
  39. [39] Item 8, Consolidated Statements of Income
  40. [40] Item 8, Consolidated Statements of Income
  41. [41] Item 8, Consolidated Statements of Income
  42. [42] Item 1A, Risk Factors — Our commercial loan portfolio may expose us to increased credit risk
  43. [43] Item 1A, Risk Factors — Our commercial loan portfolio may expose us to increased credit risk
  44. [44] Item 1A, Risk Factors — Liquidity risk could impair our ability to fund operations
  45. [45] Item 7, MD&A — Performance Overview
  46. [46] Item 7, MD&A — Performance Overview
  47. [47] Item 7, MD&A — Performance Overview
  48. [48] Item 7, MD&A — Performance Overview
  49. [49] Item 8, Consolidated Statements of Income
  50. [50] Item 8, Consolidated Statements of Income
  51. [51] Item 8, Consolidated Statements of Income
  52. [52] Item 8, Consolidated Statements of Income
  53. [53] Item 8, Consolidated Statements of Income
  54. [54] Item 8, Consolidated Statements of Income
  55. [55] Item 8, Consolidated Statements of Income
  56. [56] Item 8, Consolidated Statements of Income
  57. [57] Item 8, Consolidated Statements of Income
  58. [58] Item 8, Consolidated Statements of Income
  59. [59] Item 8, Consolidated Statements of Income
  60. [60] Item 8, Consolidated Statements of Income
  61. [61] Item 8, Consolidated Statements of Income
  62. [62] Item 8, Consolidated Statements of Income
  63. [63] Item 8, Consolidated Statements of Income
  64. [64] Item 8, Consolidated Statements of Income
  65. [65] Item 8, Consolidated Statements of Income
  66. [66] Item 8, Consolidated Statements of Income
  67. [67] Item 8, Consolidated Statements of Income
  68. [68] Item 8, Consolidated Statements of Income
  69. [69] Item 8, Consolidated Statements of Income
  70. [70] Item 8, Consolidated Statements of Income
  71. [71] Item 8, Consolidated Statements of Income
  72. [72] Item 8, Consolidated Statements of Income
  73. [73] Item 8, Consolidated Statements of Income
  74. [74] Item 8, Consolidated Statements of Income
  75. [75] Item 8, Consolidated Statements of Income
  76. [76] Item 7, MD&A — Income Tax Expense
  77. [77] Item 7, MD&A — Income Tax Expense
  78. [78] Item 7, MD&A — Income Tax Expense
  79. [79] Item 7, MD&A — Non-GAAP Financial Measures
  80. [80] Item 7, MD&A — Non-GAAP Financial Measures
  81. [81] Item 7, MD&A — Non-GAAP Financial Measures
  82. [82] Item 7, MD&A — Non-GAAP Financial Measures
  83. [83] Item 7, MD&A — Non-GAAP Financial Measures
  84. [84] Item 7, MD&A — Non-GAAP Financial Measures
  85. [85] Item 7, MD&A — Performance Overview
  86. [86] Item 7, MD&A — Performance Overview
  87. [87] Item 7, MD&A — Results of Operations
  88. [88] Item 7, MD&A — Performance Overview
  89. [89] Item 7, MD&A — Performance Overview
  90. [90] Item 7, MD&A — Results of Operations
  91. [91] Item 8, Consolidated Balance Sheets
  92. [92] Item 8, Consolidated Balance Sheets
  93. [93] Item 7, MD&A — Performance Overview
  94. [94] Item 7, MD&A — Performance Overview
  95. [95] Item 7, MD&A — Performance Overview
  96. [96] Item 7, MD&A — Performance Overview
  97. [97] Item 7, MD&A — Performance Overview
  98. [98] Item 7, MD&A — Performance Overview
  99. [99] Item 7, MD&A — Performance Overview
  100. [100] Item 7, MD&A — Performance Overview
  101. [101] Item 7, MD&A — Capital Adequacy Requirements
  102. [102] Item 7, MD&A — Capital Adequacy Requirements
  103. [103] Item 7, MD&A — Capital Adequacy Requirements
  104. [104] Item 7, MD&A — Capital Adequacy Requirements
  105. [105] Item 7, MD&A — Capital Adequacy Requirements
  106. [106] Item 7, MD&A — Capital Adequacy Requirements
  107. [107] Item 7, MD&A — Capital Adequacy Requirements
  108. [108] Item 7, MD&A — Capital Adequacy Requirements
  109. [109] Item 7, MD&A — Noninterest Expense
  110. [110] Item 7, MD&A — Noninterest Expense
  111. [111] Item 7, MD&A — Noninterest Expense
  112. [112] Item 7, MD&A — Noninterest Expense
  113. [113] Item 7, MD&A — Noninterest Expense
  114. [114] Item 7, MD&A — Noninterest Expense

Analysis on 6/21/2026