2024 Journal of Community Bank Case Studies

2024 COMMUNITY BANK CASE STUDY COMPETITION

FCCB provides various lines of credit to individuals via credit cards, commercial loans, business loans, agricultural loans, and mortgage loans.

overall financial performance over the past five years, we look at three key ratios: the return on equity (ROE), the return on assets (ROA), and the net interest margin (NIM). Each of these ratios provides insight into the profitability of the bank in a different way. The ROE measures total capital over net income, while the ROA measures total assets over net income. The NIM, on the other hand, measures net interest income over total earning assets. This ratio is valuable for financial institutions with interest revenue received from loans as a primary source of income. Figure 1 displays FCCB’s ROE, ROA, and NIM against its peer group over the past five years. Notably, the bank’s ROA remains consistent and has been greater than PG4 for four out of the five years. Similarly, the bank’s NIM has exceeded its peers in all five years. The ROE, however, has fluctuated dramatically. From 2019 to 2022, it increased steadily, from 13.25% in 2019 to 15.19% in 2022. In 2023, however, the ratio decreased drastically, falling to just 6.21%, considerably lower than PG4. We find that the challenges the bank experienced with the interest rate cycle

Part I: Financial Analysis Part I.1: Overview & Peer Group Discussion

In conducting this financial analysis, we utilize CZFS’s most recent 10-K reports and FFIEC Uniform Bank Performance Reports (UBPR). 10-K reports allow us to evaluate the BHC’s overall financial performance. Alternatively, UBPRs allow us to evaluate the bank’s financial performance relative to its peer group over the last five years. FCCB is a member of peer group 4 (PG4). PG4 consists of 519 commercial banks across the US with assets ranging from $1 to $3 billion (FFIEC). By comparing FCCB to PG4, we can assess FCCB against peer institutions of similar size. Furthermore, we utilize interviews with the bank’s Chief Executive Officer (CEO), Randy Black; Chief Operating Officer (COO), Mick Jones; and Chief Financial Officer (CFO), Steve Guillaume, to confirm our findings and

gain insights into the overall financial performance and strategy of the bank. Part I.2: Earnings Performance In recent years, FCCB has expanded into new markets, grown interest income, and outperformed peers in many profitability measures. To analyze FCCB’s

Figure 1: Profitability Ratios FCCB vs PG4

10.50% 12.00% 13.50% 15.00%

0.00% 1.50% 3.00% 4.50% 6.00% 7.50% 9.00%

ROE ROA NIM

FCCB

PG4 FCCB

PG4 FCCB

PG4 FCCB

PG4 FCCB

PG4

2019

2020

2021

2022

2023

Source: FFIEC UBPR Call Reports, FCCB. PGAR, PG4.

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