2024 Journal of Community Bank Case Studies

FIRST PLACE: Commonwealth University of Pennsylvania

explain this decrease in ROE. According to Black, the inverted yield curve has caused pressure on all banks and compressed margins. When the bank acquired MidCoast in 2020, its loan portfolio grew significantly. However, the bank issued these loans at low interest rates as 5-year adjustable-rate loans. In the present high-interest rate environment, those loans now sit at a lower rate than the market, and it will be several years before the loans reprice (Black). In short, FCCB has experienced significant growth over the period despite current challenges with the inverted yield curve compressing margins. Part I.3: Loan Portfolio Composition Examining a bank’s loan portfolio is essential for understanding the types of communities the bank serves. Figure 2 displays the breakdown of FCCB’s loan portfolio compared to PG4 over the past five years. Commercial loans consistently comprised the most significant portion of the overall portfolio throughout this period. Compared to PG4, FCCB stands out in that agricultural loans have been the second-largest portion of its loan portfolio for four of the past five years. For instance, in 2023, agricultural loans constituted 15.4% of FCCB’s

FCCB has experienced significant growth

over the period despite current

challenges with the inverted yield curve compressing margins.

year-over-year (YOY) growth over the past five years. From 2019 to 2020, the year the bank acquired MidCoast, FCCB’s consumer loans more than doubled, and agricultural loans more than tripled. From 2022 to 2023, the year the bank acquired Huntington Valley Bancorp, the bank’s consumer, residential, and construction loans increased by over $100 million. According to the bank’s CEO, these acquisitions allowed FCCB to expand into Delaware markets, with most of the bank’s growth occurring in the Wilmington, DE area following the mergers (Black).

portfolio, compared to only 2.28% for the peer banks in PG4. Regarding FCCB’s portfolio, loan growth is the most significant factor. Table 1 on the following page displays FCCB’s loan portfolio breakdown and

Figure 2: Loan Portfolio Composition FCCB vs PG4

0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%

Other Agricultural Consumer Construc ti on Commercial Residen ti al

FCCB

PG4 FCCB

PG4 FCCB

PG4 FCCB

PG4 FCCB

PG4

2019

2020

2021

2022

2023

Source: FFIEC UBPR Call Reports, FCCB. PGAR, PG4; 2023 SEC 10-K report, CZFS.

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