Executive Summary / Key Takeaways

• First Bancorp (NASDAQ:FBNC) demonstrates robust financial performance, driven by significant net interest income and net interest margin expansion, stemming from proactive interest rate management and a favorable interest rate environment.
• The company maintains a strong capital position and healthy asset quality, with nonperforming assets remaining low despite regional challenges like Hurricane Helene.
• FBNC's community-focused banking model, extensive branch network in the Carolinas, and relationship-based approach provide a distinct competitive advantage against larger regional banks.
• Strategic initiatives, including a specialized interest rate swap program for commercial clients and ongoing efforts to manage deposit costs and loan yields, are enhancing profitability and efficiency.
• Analyst sentiment is positive, with expectations for continued earnings growth and NIM expansion, positioning FBNC as an attractive investment opportunity.

A Community Banking Powerhouse in the Carolinas

First Bancorp, established in 1934 and headquartered in Southern Pines, North Carolina, operates through its wholly-owned subsidiary, First Bank. Since 1935, First Bank has cultivated a community-focused banking model, emphasizing tailored financial solutions and local expertise across its 113 branches in North and South Carolina. This deep regional presence and commitment to relationship-based banking form the bedrock of its strategy, differentiating it within a competitive financial landscape.

The company's history reflects a consistent drive for expansion and adaptation. G. Adam Currie, who joined in 2015 and was recently appointed CEO of First Bank and to the Boards of Directors of First Bancorp in October 2025, has been instrumental in expanding the bank's footprint and fostering innovation. A significant milestone was the acquisition of GrandSouth Bancorporation on January 1, 2023, which substantially bolstered its loan portfolio. This strategic growth, combined with a focus on core banking principles, underpins First Bancorp's market positioning.

Navigating the Competitive Currents

First Bancorp operates in a dynamic regional banking environment, contending with both larger, diversified financial institutions and agile, niche-focused banks. Direct competitors include major regional players like Truist Financial and Regions Financial , as well as more localized rivals such as Pinnacle Financial . First Bancorp's community-centric approach and extensive branch network in its core markets provide a distinct competitive edge, fostering strong customer loyalty and personalized service that larger banks may struggle to replicate.

While larger competitors like Truist Financial (TFC) benefit from extensive scale, broader geographic reach, and advanced technological integration, First Bancorp's strength lies in its localized market expertise and deep community ties. Truist, for instance, often demonstrates stronger revenue growth and profitability margins due to its diversified operations and superior digital banking tools. Regions Financial (RF), another significant regional player, exhibits consistent revenue growth and solid profitability, particularly in middle-market commercial banking, often outpacing First Bancorp in overall financial scale. Pinnacle Financial (PNFP), similar to First Bancorp in its relationship-based focus, has shown notable revenue growth driven by targeted client approaches, potentially leading in innovation speed.

First Bancorp's operational execution in its core regions allows for efficient service delivery and strong customer relationships, which can lead to improved capital efficiency. However, its more concentrated geographic scope and potential gaps in digital innovation compared to its larger rivals present vulnerabilities. These factors could limit its growth trajectory and expose it to competitive pricing pressures and broader market shifts. Indirect competitors, including fintech companies and online banks, further challenge the traditional banking model by offering highly accessible digital solutions, which could erode market share in specific segments and pressure First Bancorp's revenue opportunities.

Innovation in Service and Digital Engagement

In the banking sector, technological differentiation often manifests through enhanced digital platforms and innovative service offerings that streamline operations and improve customer experience. First Bancorp provides a comprehensive suite of digital banking services, including internet and mobile banking, mobile check deposit, cash management, bank-by-phone services, and remote deposit capture. These offerings are crucial for meeting modern customer expectations and maintaining competitive relevance.

A notable innovation in First Bancorp's service delivery is its back-to-back interest rate swap program, implemented in 2023. This program allows the company to enter into interest rate swaps with commercial loan customers, facilitating their risk management strategies, while simultaneously executing offsetting derivatives with third-party dealers to minimize its own net risk exposure. This specialized financial product demonstrates the company's strategic intent to provide sophisticated solutions to its commercial clients, enhancing customer relationships and potentially generating fee income. The strategic intent of these digital services and the swap program is to improve customer retention, attract new commercial clients, and manage financial risks effectively, thereby contributing to its competitive moat and overall financial performance.

Financial Strength and Prudent Management

First Bancorp's recent financial performance underscores its operational effectiveness and strategic responses to market dynamics. For the third quarter of 2025, the company reported net income of $20.40 million, or $0.49 diluted earnings per share (EPS), an increase from $18.70 million, or $0.45 diluted EPS, in the third quarter of 2024. Adjusting for a $27.90 million loss related to a securities loss-earnback transaction, adjusted net income for the third quarter of 2025 was $41.80 million, or $1.01 per diluted share. This adjustment highlights the underlying profitability of its core operations.

Net interest income, the company's primary revenue driver, surged by 23.40% to $102.50 million in the third quarter of 2025, up from $83.00 million in the prior-year period. This significant increase was "driven primarily by a higher yield on interest earning assets and a lower cost of funds, both of which were driven by the overall interest rate environment throughout the past year". The net interest margin (NIM) expanded by 58 basis points to 3.46% in the third quarter of 2025 from 2.88% in the third quarter of 2024, a direct result of "higher yields on loans and securities and lower cost of funds". Over the nine months ended September 30, 2025, net interest income grew 20% to $292.00 million, with NIM increasing 51 basis points to 3.34%. These improvements reflect management's focused efforts to increase loan yields on new originations and enhance securities yields through loss-earnback transactions, alongside a reduced reliance on short-term borrowings due to deposit growth.

Total assets reached $12.80 billion at September 30, 2025, a 5% increase from December 31, 2024, primarily fueled by deposit growth that was deployed into interest-bearing cash, securities, and loans. Total loans increased 4% to $8.40 billion, while total deposits grew 3.33% to $10.90 billion, with growth split between noninterest-bearing and interest-bearing accounts. The company maintains a "diversified and granular deposit base which has remained stable with continued growth in customer deposits, primarily Noninterest-bearing checking accounts and Money market accounts". Approximately 66% of total deposits were insured or collateralized as of September 30, 2025.

Asset quality remains strong, with nonperforming assets (NPAs) at 0.31% of total assets as of September 30, 2025, a slight increase of 1 basis point from December 31, 2024. The provision for credit losses for the third quarter of 2025 was $3.40 million, driven by loan growth and $3.00 million of net charge-offs, partially offset by a $4.00 million reduction in the incremental allowance for credit losses related to Hurricane Helene. The company has proactively reserved for potential impacts from Hurricane Helene, with an allowance for credit losses (ACL) of $3.50 million on affected loans as of September 30, 2025, adding 5 basis points to the overall ACL as a percent of total loans.

First Bancorp is also asset-sensitive to interest rate changes, with net interest income expected to increase by 3.80% in a +100 basis point rate scenario over a one-year period. While the economic value of equity (EVE) generally declines in rising rate scenarios due to the composition of fixed-rate loans and mortgage-backed securities, management actively manages its balance sheet to mitigate interest rate risk. The company remains "well-capitalized by all regulatory standards", with a Common Equity Tier 1 ratio of 14.35% and a Total Risk-Based Capital ratio of 16.58% at September 30, 2025. The tangible common equity (TCE) ratio improved to 9.12% at September 30, 2025, from 8.22% at December 31, 2024.

Outlook and Strategic Momentum

The outlook for First Bancorp is positive, with analysts anticipating continued earnings growth. The Zacks Consensus Estimate for 2025 EPS is $3.54, representing a year-over-year growth rate of 27.80%. This positive sentiment is reflected in a recent upgrade to a Zacks Rank #1 (Strong Buy), indicating an upward trend in earnings estimates. Analysts expect ongoing asset repricing to drive further NIM expansion and higher return on equity (ROE), enhancing profitability as efficiency initiatives take hold.

The company's strategic focus on expanding its presence in North and South Carolina, coupled with its commitment to innovation in customer service, positions it for sustained growth. Management's proactive approach to interest rate management, including the successful execution of securities loss-earnback transactions, demonstrates its ability to adapt to changing market conditions and optimize profitability. The stable and diversified deposit base provides a strong foundation for funding future loan growth and reducing reliance on higher-cost borrowings.

Conclusion

First Bancorp presents a compelling investment thesis, rooted in its robust financial performance, strong asset quality, and strategic focus on community banking in the Carolinas. The company's ability to expand its net interest margin and grow its loan and deposit base, even amidst fluctuating interest rates and regional challenges, highlights its operational resilience and effective management. While facing competition from larger and more technologically advanced institutions, First Bancorp's emphasis on relationship-based banking and innovative service offerings, such as its interest rate swap program, provides a defensible competitive moat. With a healthy capital position and positive analyst outlook for continued earnings growth, First Bancorp is well-positioned to deliver sustained shareholder value in the evolving regional banking landscape.