425: First Community Bankshares to Acquire Hometown Bancshares in $41.5 Million All-Stock Merger

First Community Bankshares, Inc. announced a definitive agreement to acquire Hometown Bancshares, Inc. and its subsidiary Union Bank, Inc. in an all-stock transaction valued at approximately $41.5 million, aiming to expand its presence in West Virginia and enhance service offerings.

Summary

• First Community Bankshares, Inc. (FCBC) has entered into a definitive agreement to acquire Hometown Bancshares, Inc. (Hometown) and its wholly-owned subsidiary, Union Bank, Inc.
• The transaction is an all-stock merger valued at approximately $41.5 million, based on FCBC's closing price of $40.33 per share on July 18, 2025.
• Each outstanding share of Hometown common stock will be converted into the right to receive 11.706 shares of FCBC common stock, equating to about $472.10 per Hometown share.
• Upon completion, former Hometown shareholders will own approximately 5.3% of the combined company.
• Union Bank had total assets of approximately $402 million as of June 30, 2025.
• The combined entity is expected to have total consolidated assets of approximately $3.6 billion and 60 branch locations across four states.
• The transaction is expected to be minimally dilutive to tangible book value per share (non-GAAP) for FCBC and provide high-single digit accretion to earnings per share.
• The merger is subject to regulatory approval and approval from Hometown's shareholders, with an expected closing in the first quarter of 2026.

Sentiment

Score: 8

Explanation: The document announces a strategic acquisition with clear financial benefits (earnings accretion, minimal dilution) and strategic alignment (market expansion, deposit growth, enhanced services). While standard merger risks are disclosed, the overall tone and projected outcomes are highly positive for the acquiring company and the combined entity.

Positives

• The transaction will accelerate growth for Hometown Bancshares.
• The merger creates exciting opportunities for Hometown shareholders and employees.
• Hometown's board believes FCBC is well-positioned with significant upside opportunity through stock price appreciation.
• The FCBC platform will allow Hometown to better serve existing customers and communities and expand product offerings.
• First Community Bank will bring new services to Union Bank communities, such as Trust and Wealth Management.
• The collaboration will strengthen FCBC's banking franchise in West Virginia.
• FCBC expects to benefit from Union Bank's strong deposit base.
• Union Bank customers will enjoy increased scale, higher lending limits, and enhanced product and technology offerings from FCBC.
• The transaction is expected to be minimally dilutive to FCBC's tangible book value per share and provide high-single digit accretion to earnings per share.
• The merger aligns with FCBC's strategic focus on growing low-cost core deposits and expanding its presence in the Parkersburg-Marietta-Vienna MSA.

Negatives

• The transaction will result in dilution for First Community Bankshares' existing shareholders due to the issuance of additional shares.
• Integration of the two organizations' businesses carries inherent risks and potential for disruption.
• The transaction is subject to various approvals, including regulatory and shareholder, which are not guaranteed.

Risks

• Cost savings and revenue synergies anticipated from the transaction may not be realized or may take longer than expected.
• Potential disruption from the proposed transaction with customers, suppliers, employees, or other business relationships.
• The Agreement and Plan of Merger could be terminated due to various events, changes, or circumstances.
• Challenges in successfully integrating the businesses of First Community and Hometown.
• Failure of Hometown shareholders to approve the proposed transaction.
• Unforeseen costs, fees, expenses, and charges related to the proposed transaction.
• Inability to obtain required governmental and regulatory approvals for the transaction.
• Reputational risk and potential negative reaction from the parties' customers to the proposed transaction.
• Failure of the conditions to closing of the proposed transaction to be satisfied.
• Integration of Hometown's operations with First Community's may be materially delayed, more costly, or more difficult than expected.
• The proposed transaction may be more expensive to complete than anticipated due to unexpected factors or events.
• Dilution caused by First Community's issuance of additional shares of its common stock in the proposed transaction.
• Changes in management's plans for the future.
• Prevailing economic and political conditions, particularly in the market areas.
• Credit risk associated with lending activities.
• Changes in interest rates, loan demand, real estate values, and competition.
• Changes in accounting principles, policies, or guidelines.
• Changes in applicable laws, rules, or regulations.
• Other competitive, economic, political, and market factors affecting business, operations, pricing, products, and services.

Future Outlook

The merger is expected to close in the first quarter of 2026, subject to regulatory and Hometown shareholder approvals. First Community Bankshares anticipates the transaction to be minimally dilutive to tangible book value per share (non-GAAP) and provide high-single digit accretion to earnings per share. The combined entity is projected to have approximately $3.6 billion in total consolidated assets and 60 branch locations across four states, aligning with First Community's strategy to grow low-cost core deposits and expand its presence in the Parkersburg-Marietta-Vienna MSA.

Management Comments

• "I am very pleased to announce that on July 19, 2025, Hometown Bancshares, Inc. (Hometown Bancshares) entered into a definitive agreement with First Community Bankshares, Inc. (NASDAQ: FCBC) (FCBC), the holding company for First Community Bank, pursuant to which Hometown Bancshares will merge with FCBC." Tim Aiken, President, Hometown Bancshares, Inc.
• "The transaction will accelerate our ability to grow and we believe creates an exciting opportunity for our shareholders and employees." Tim Aiken, President, Hometown Bancshares, Inc.
• "The Hometown board of directors believes FCBC is well positioned and has significant upside opportunity through stock price appreciation." Tim Aiken, President, Hometown Bancshares, Inc.
• "The FCBC platform will allow Hometown to better serve our existing customers and communities, as well as expand into other product offerings." Tim Aiken, President, Hometown Bancshares, Inc.
• "I am confident that this transaction will enhance our shareholders upside opportunity for stock price appreciation, and we are truly excited about joining forces with FCBC." Tim Aiken, President, Hometown Bancshares, Inc.
• "When considering a long-term partner, we sought a community-minded bank that shares our commitment to providing top-tier banking services with that personal touch. Also, First Community Bank will bring services to our communities that Union Bank currently does not provide, such as Trust and Wealth Management services." Tim Aiken, President, CEO and Director of Hometown and Union Bank.
• "Our partnership with Hometown and Union Bank is a natural expansion into West Virginia markets that are similar in size and makeup to the locations where weve had great success across our broader banking footprint. We look forward to bringing the two franchises together to better serve our customers and local communities." Gary R. Mills, President and CEO of First Community Bank.
• "We are pleased to announce our partnership with Union Bank. This collaboration will further strengthen our robust banking franchise in West Virginia. We believe First Community will benefit from Unions strong deposit base, while Unions customers will enjoy the advantages of increased scale, higher lending limits, and enhanced product and technology offerings from First Community." William (Will) P. Stafford, II, Chairman and Chief Executive Officer of First Community.

Industry Context

This merger represents a continuation of consolidation trends within the community banking sector, driven by the desire for increased scale, expanded geographic reach, and enhanced product offerings. By acquiring Hometown Bancshares and Union Bank, First Community Bankshares is strategically expanding its footprint in West Virginia, particularly in markets similar to its existing successful locations, and aiming to grow its low-cost core deposits. This move allows the combined entity to offer a broader range of services, such as Trust and Wealth Management, which smaller community banks like Union Bank may not currently provide, thereby enhancing competitiveness against larger regional and national banks.

Comparison to Industry Standards

• The acquisition of a smaller community bank by a larger regional bank is a common strategy in the banking industry for achieving growth, expanding market share, and gaining access to new deposit bases.
• The stated financial impacts, including minimal dilution to tangible book value and high-single digit earnings per share accretion, are generally considered favorable metrics for an acquiring bank in such transactions, indicating a financially sound deal structure.
• The combined entity's expected total assets of approximately $3.6 billion positions it as a significant regional player, though still smaller than major national banks. For comparison, regional banks like Truist Financial Corporation (TRU) or PNC Financial Services Group (PNC) have assets in the hundreds of billions or trillions, while smaller regional banks like United Community Banks, Inc. (UCBI) or SouthState Corporation (SSB) operate in the tens of billions. This acquisition helps FCBC move towards the larger end of the community bank spectrum.
• The focus on growing low-cost core deposits aligns with a key industry objective, as these deposits provide a stable and inexpensive funding source for lending activities, improving net interest margin.

Management Changes

Corporate Governance

Stakeholder Impact

• Shareholders (Hometown): Will receive FCBC common stock, expected to benefit from FCBC's stock price appreciation and the combined entity's growth. Will own approximately 5.3% of the combined company.
• Shareholders (FCBC): Expected to benefit from high-single digit earnings per share accretion, but will experience minimal dilution to tangible book value per share due to new share issuance.
• Employees (Hometown/Union Bank): Anticipated to join the First Community team, with Tim Aiken specifically mentioned. The document suggests exciting opportunities.
• Customers (Hometown/Union Bank): Will gain access to increased scale, higher lending limits, and enhanced product and technology offerings, including Trust and Wealth Management services not currently provided by Union Bank.
• Communities (Hometown/Union Bank): Expected to benefit from enhanced banking services and continued community-minded approach.

Next Steps

• First Community will file a registration statement on Form S-4 with the SEC, which will contain the proxy statement of Hometown and a prospectus of First Community.
• Hometown shareholders will receive additional communication, including the proxy statement/prospectus, over the coming months.
• Hometown shareholders will need to approve the proposed transaction at a shareholder meeting.
• The transaction is subject to receipt of all required regulatory approvals.
• The merger is expected to be consummated in the first quarter of 2026.
• Tim Aiken, Union Bank's Chief Executive Officer, is anticipated to join the First Community team upon completion of the transaction.

Key Dates

Recommendation

Keywords

bank merger, financial services, community banking, acquisition, FCBC, Hometown Bancshares, Union Bank, West Virginia, Virginia, North Carolina, Tennessee, bank assets, shareholder approval, regulatory approval, stock transaction, earnings accretion, tangible book value dilution