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Analyst Blog

On Aug 27, Zacks Investment Research upgraded First Community Bancshares, Inc. (FCBC - Snapshot Report) to a Zacks Rank #1 (Strong Buy).

Why the Upgrade?

The rank upgrade of this Virginia-based bank was primarily driven by strong estimate revisions on the back of impressive second-quarter 2014 results, a recent dividend hike and acquisition announcement.

On Jul 29, First Community released its second-quarter 2014 results. Core earnings of 35 cents per share outpaced the Zacks Consensus Estimate by 20.7%. With this, the company has delivered positive earnings surprises in 3 of the trailing 4 quarters with an average beat of 4.7%. The figure also came in higher than the prior-year quarter core earnings of 25 cents per share

Results benefited from higher non-interest income, significantly lower provision for credit losses and lower expenses, partially offset by lower net interest income.  A strong capital position, improving credit quality and higher net loan balance were among the other positives in the quarter.

Moreover, on Jul 22, First Community declared an 8% hike on its quarterly cash dividend to 13 cents per share. The increased dividend was paid on Aug 15 to common shareholders of record on Aug 1. Notably, 2014 marks the 29th consecutive year of cash dividend payment to shareholders, fortifying the bank’s reputation as a steady dividend payer.

Furthermore, on Jun 10, First Community announced a deal to acquire seven branches of Bank of America Corporation (BAC - Analyst Report). Of this, six branches taken over will enhance the bank’s footprint in southwestern Virginia while the seventh one will be an addition to its current network in the Piedmont Region in North Carolina.
 
The deal is expected to close in the latter part of 2014. First Community will assume deposits of around $440 million while the deal excludes loan balance.

The Zacks Consensus Estimate for 2014 advanced 10% to $1.32 per share over the past 30 days. Also, for 2015, the consensus moved north by 6.2% to $1.38 per share.

Other Stocks to Consider

Other stocks worth considering in the South-East Banks space include Bank of the Ozarks, Inc. (OZRK - Snapshot Report) and Farmers Capital Bank Corporation (FFKT - Snapshot Report). Both the stocks hold the same rank as First Community.

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