First Community Corp (FCCO) Q4 2025 earnings review
Margins Expand for 7th Straight Quarter, But Deposits Stumble
First Community Corporation delivered a strong finish to FY25 with continued core margin expansion and solid loan growth. Net Interest Margin (NIM) hit 3.32%, marking seven consecutive quarters of expansion—a rarity in the current banking environment. While reported Net Income of $4.83M fell sequentially (-7% QoQ) due to merger expenses, core execution remains sharp with record Assets Under Management (AUM). However, a reversal in deposit growth (-1.2% QoQ) and a slight uptick in criticized loans temper the bullish narrative heading into the integration of Signature Bank of Georgia.
🐂 Bull Case
NIM expanded another 5 basis points to 3.32%, the seventh consecutive quarterly increase. Loan yields are outpacing funding costs (Cost of Deposits fell 8 bps to 1.73%), driving Net Interest Income up 17% YoY.
Investment Advisory AUM hit a record $1.17 billion. This segment is becoming a material revenue driver, with advisory fees up 25% YoY to $2.15M in Q4, providing diversification away from spread-based income.
🐻 Bear Case
Total deposits reversed trend, falling $21.6M (-1.2%) sequentially. More concerningly, 'pure deposits' (excluding CDs) dropped $26.4M. Continued shrinkage in core funding could force reliance on more expensive wholesale funding.
While NPAs remain low, 'Other Loans Especially Mentioned' (OLEM) jumped $2.2M to $5.2M due to two specific relationships performing below plan. This early-stage credit migration warrants close monitoring.
⚖️ Verdict: 🟢
Bullish. FCCO is executing exceptionally well on pricing (NIM expansion) and diversifying revenue (Wealth Management). The slight deposit dip is a blemish, but the balance sheet remains robust and the Signature Bank acquisition adds a growth catalyst for FY26.
Key Themes
Net Interest Margin Expansion
Accelerating. FCCO continues to defy industry pressure with a 7th straight quarter of margin expansion, reaching 3.32% (tax equivalent). This was driven by a stable loan yield (5.84%) combined with a surprising 8 basis point drop in deposit costs (1.73%). The bank's hedging strategy (Pay-Fixed Swap) added $150k to interest income this quarter.
Deposit Contraction
Reversing. After quarters of growth, total deposits fell $21.6M sequentially to $1.75B. 'Pure deposits' (excluding CDs) fell sharply by $26.4M. While the bank eliminated $10.4M in brokered deposits YoY (a positive for quality), the sequential decline in core customer funds suggests tightening liquidity conditions or competitive pressure.
Loan Growth & Pipeline
Stable. Loans grew $31.7M in Q4 (+9.8% annualized), pushing the total portfolio to $1.31B. Commercial production remained healthy at $55.3M. The consistent high-single-digit growth rate confirms that demand in FCCO's markets remains resilient despite the rate environment.
Credit Migration (OLEM)
Although Non-Performing Assets (NPAs) are excellent at 0.02%, there is a specific emerging risk: 'Other Loans Especially Mentioned' (OLEM) spiked nearly 73% to $5.2M. Management cited two unrelated relationships underperforming. While no losses are anticipated yet, this is the first crack in an otherwise pristine credit wall.
Wealth Management Scale
Accelerating. The Investment Advisory arm is hitting stride, with AUM reaching a record $1.170 billion (+6% QoQ, +26% YoY). Revenue followed suit, hitting $2.15M in Q4. This non-interest income stream provides a crucial buffer against potential future spread compression.
Other KPIs
Decelerating. Down from $5.19M in Q3 (-7%), largely due to $455k in merger expenses. However, on a YoY basis, earnings are up 14%. Excluding merger costs, core Net Income was $5.36M, showing underlying strength.
Accelerating. Full-year EPS jumped 36.5% from $1.81 in FY24. This reflects the powerful combination of loan growth and margin expansion experienced throughout 2025.
Accelerating. TBV per share increased 4.1% QoQ and 17.2% YoY. The consistent compounding of book value indicates strong capital generation and shareholder value creation.
Guidance
The acquisition closed Jan 8, 2026. Systems conversion is scheduled for mid-March. This adds ~$197M in loans and $235M in deposits, expanding footprint into Atlanta and adding SBA lending capabilities.
The plan expires May 8, 2026. No shares have been repurchased yet, but management explicitly noted this provides flexibility, implying they may step in if the stock price dislocates during the merger integration.
Key Questions
Deposit Flow Reversal
Pure deposits declined $26 million this quarter. Was this driven by specific large commercial outflows or seasonal factors, and do you expect deposit balances to stabilize in Q1?
OLEM Increase Details
OLEM balances increased by $2.2 million driven by two relationships. Can you provide color on the industry or collateral type of these loans, and why you remain confident no losses are anticipated?
Signature Bank Cost Synergies
Now that the Signature Bank deal has closed, what is the timeline for realizing cost saves, and should we expect elevated merger expenses to persist heavily into Q1 and Q2?
NIM Peak?
With 7 quarters of expansion and deposit costs dipping, have we reached the ceiling for NIM, or does the loan repricing pipeline support further expansion into 2026?