First Bancorp (FBNC): SWOT Analysis [Nov-2025 Updated]

You're looking at First Bancorp (FBNC) and seeing a confusing Q3 2025 report: a fundamentally strong bank with a strategic accounting headache. Honestly, the bank's core engine is running hot, evidenced by the Net Interest Margin (NIM) expanding to 3.46% and annualized loan growth hitting 9.3%, plus capital is rock-solid with a Common Equity Tier 1 (CET1) ratio of 14.35%. But that one-time $27.9 million pre-tax securities loss dragged the diluted EPS down to just $0.49, masking the operational strength. The real analysis centers on how quickly they can earn back that loss and leverage their excess capital, so let's break down the clear near-term risks and opportunities.

First Bancorp (FBNC) - SWOT Analysis: Strengths

You're looking for a clear picture of First Bancorp's financial health, and honestly, their balance sheet shows a lot of discipline. The core strength lies in their ability to generate profit from lending while keeping credit risk tightly managed and their capital position rock solid. It's a classic bank story: strong margins, controlled growth, and a durable deposit base.

Net Interest Margin (NIM) expanded to 3.46% in Q3 2025.

The Net Interest Margin (NIM), which is the difference between the interest income generated and the amount of interest paid out, is a primary indicator of a bank's profitability. First Bancorp expanded its NIM to a strong 3.46% in the third quarter of 2025. This expansion shows their effective asset-liability management, meaning they are successfully pricing their loans higher than the cost of their funding. This is a defintely a competitive advantage in a fluctuating rate environment, translating directly into higher earnings per share.

Annualized loan growth was robust at 9.3% in Q3 2025, reaching $8.42 billion.

Growth is good, but controlled growth is better. First Bancorp achieved a robust annualized loan growth rate of 9.3% in Q3 2025, bringing the total loan portfolio to a significant $8.42 billion. This growth rate is well above the industry average for regional banks, indicating strong demand for their credit products across their North Carolina and South Carolina markets. It shows a successful strategy of deepening customer relationships and capturing market share without sacrificing credit quality.

Here's the quick math on their lending scale:

• Total Loan Portfolio: $8.42 billion
• Annualized Growth Rate: 9.3%
• Loan-to-Deposit Ratio (LDR): Approximately 77.39% ($8.42 billion / $10.88 billion), which is healthy.

Credit quality remains strong with annualized net charge-offs at just 0.14%.

A bank's true strength is often measured by what it loses, not just what it earns. First Bancorp's credit quality is exceptional, with annualized net charge-offs-the percentage of uncollectible debt written off-at a mere 0.14%. This figure is a fraction of what many peers report and reflects a disciplined, conservative underwriting process. Low charge-offs mean less capital is tied up in loan loss reserves and more can be used for lending or returned to shareholders.

Capital is solid, with Common Equity Tier 1 (CET1) ratio at 14.35%.

Capital acts as a buffer against unexpected losses, and First Bancorp is overcapitalized in the best way. Their Common Equity Tier 1 (CET1) ratio, a key measure of a bank's ability to withstand financial stress, stood at a powerful 14.35%. To be fair, the regulatory minimum is significantly lower, so this high ratio provides substantial strategic flexibility. It allows them to pursue accretive acquisitions, increase lending, or boost their dividend, all while maintaining a fortress balance sheet.

Deposit base is durable, with 33% of the $10.88 billion in deposits being noninterest-bearing.

The stability of a bank's funding is paramount. First Bancorp has a highly durable deposit base totaling $10.88 billion. Crucially, 33% of these deposits are noninterest-bearing, meaning the bank pays zero interest on over a third of its funding. This low-cost funding is the engine behind their strong NIM. It shows deep, sticky relationships with commercial and retail customers who use the bank for core transaction accounts, insulating the bank from the high-cost, rate-sensitive funding sources that plague other institutions.

Here is a snapshot of the key financial strengths:

First Bancorp (FBNC) - SWOT Analysis: Weaknesses

Q3 2025 GAAP Diluted EPS was Depressed by a Large Securities Loss

You need to look past the headline numbers sometimes to see the true operating strength, but the reported figures are still what the market reacts to first. First Bancorp's reported GAAP diluted earnings per share (D-EPS) for the third quarter of 2025 was only $0.49 per share. This is a significant drop from the $0.93 reported in the linked second quarter of 2025, which shows the immediate, sharp impact of a strategic but costly balance sheet move. Here's the quick math: if you exclude the one-time securities loss, the adjusted D-EPS was actually a strong $1.01 per share for the quarter.

The core business is performing, but the optics are defintely a weakness in the near term. This lower reported EPS can dampen investor sentiment and temporarily mask the underlying net interest margin (NIM) expansion the company achieved. That's a real challenge for clear communication.

Significant One-Time Pre-Tax Loss on Securities Repositioning

The decision to execute a securities loss-earnback transaction, while strategically sound for future net interest income, created a major financial hit in Q3 2025. The company took a significant one-time pre-tax loss of $27.9 million on the sale of available-for-sale securities. This was a necessary move to sell lower-yielding securities-specifically $194.3 million of assets yielding only 1.63%-and reinvest the proceeds into higher-yielding assets.

The after-tax cost of this repositioning was still substantial, totaling $21.4 million, which translated to a negative $0.52 impact on diluted earnings per share. This kind of large, non-recurring charge introduces volatility into the income statement, making quarter-over-quarter comparisons difficult for investors who don't dig into the non-GAAP (Generally Accepted Accounting Principles) adjustments.

Noninterest Income Was Negative in Q3 2025

A direct consequence of the securities loss was the distortion of the noninterest income line item. For the third quarter of 2025, total noninterest income was negative $12.9 million. This is highly unusual for a bank and is a clear weakness in the reported P&L (profit and loss) statement, even if it's purely an accounting artifact.

To be fair, the underlying noninterest income, excluding the $27.9 million securities loss, was actually $15.0 million. This adjusted figure even showed a healthy increase of 10.7% from the like quarter in 2024, driven partly by a $0.7 million increase in gain on the sale of the guaranteed portion of Small Business Administration (SBA) loans. But still, a negative noninterest income figure is a red flag on a quick review.

Geographic Concentration is Limited to North Carolina and South Carolina

First Bancorp operates as a community bank with a focused geographic footprint, which is a structural weakness in terms of risk diversification. The bank's operations are concentrated solely in North Carolina and South Carolina. This limits their exposure to national economic swings, but it makes them highly susceptible to regional economic downturns or localized natural disasters.

The entire branch network consists of only 113 branches across these two states. This concentration means that a severe economic shock in the Carolinas-say, a significant slowdown in the Research Triangle Park or a major hurricane hitting the coast-would disproportionately impact the bank's loan portfolio, deposit base, and overall asset quality. What this estimate hides is the potential for a single regional event to cause a major capital event.

Key indicators of this concentration risk are:

• Total assets of approximately $12.8 billion are tied to a two-state economy.
• The entire network is only 113 branches.
• Exposure to non-owner occupied office loans was approximately 6.2% of the total portfolio as of September 30, 2025, a sector facing headwinds.

First Bancorp (FBNC) - SWOT Analysis: Opportunities

Continued NIM expansion as higher-yielding loans reprice and deposit costs stabilize.

You are seeing a clear inflection point in First Bancorp's Net Interest Margin (NIM) trajectory, which is a major opportunity for earnings growth. The bank has successfully pivoted its asset mix, allowing higher-yielding loans to reprice faster than the increase in funding costs. For the third quarter of 2025, the total loan yield expanded significantly to 5.69%, a jump of 16 basis points from the prior quarter. This is the core engine for future net interest income (NII) growth.

While the total cost of funds did increase slightly-up 3 basis points to 1.51% in Q3 2025-the pace of this increase is slowing, suggesting deposit costs are nearing a plateau. This dynamic creates positive operating leverage. The NII for Q3 2025 was already robust at $102.49 million, and continued repricing of the loan book should push this figure higher into the fourth quarter and 2026.

Full 'loss-earnback' visibility on the securities portfolio to boost future net interest income.

The strategic decision to execute a securities portfolio restructuring in July 2025, often called a 'loss-earnback' transaction, has cleared the deck and is a defintely positive catalyst. This move, while booking a one-time loss, immediately improves the portfolio's yield and reduces future interest rate risk.

Here's the quick math: First Bancorp sold $194.3 million of lower-yielding securities, realizing a one-time loss of $27.9 million. They then reinvested a portion, purchasing $167.4 million in new securities with a much higher weighted average yield of 4.83%. This is a textbook move to accelerate the accretion of capital and NII over the next few years, essentially trading a short-term accounting hit for a long-term earnings benefit. Plus, total unrealized losses on the available-for-sale securities portfolio dropped to $251.8 million at September 30, 2025, down from $298.9 million at June 30, 2025, which strengthens the balance sheet. The drag on capital is visibly shrinking.

Leverage excess capital (CET1 14.35%) for strategic, accretive acquisitions in the region.

First Bancorp is sitting on a significant pile of regulatory capital, giving it a strong hand for strategic growth. As of September 30, 2025, the Common Equity Tier 1 (CET1) capital ratio stood at a very comfortable 14.35%. This level is well above the regulatory minimums and provides substantial dry powder for a bank of this size.

The opportunity here is to deploy this excess capital into accretive mergers and acquisitions (M&A) within its core North and South Carolina markets. With many smaller community banks still facing capital and regulatory pressures, First Bancorp is positioned as a strong buyer. Using a portion of this capital to acquire a bank at a reasonable tangible book value multiple could immediately boost the company's earnings per share (EPS) and further expand its footprint, especially since the bank has a history of successful acquisitions.

New Chief Risk Officer appointed in October 2025 to enhance risk and regulatory compliance.

The appointment of Bridget Welborn as Chief Risk Officer and Head of Legal in October 2025 is a key non-financial opportunity that directly impacts the bank's operational efficiency and stability. Her arrival is a signal that First Bancorp is proactively strengthening its enterprise risk management (ERM) framework.

Welborn brings over 15 years of experience in legal, risk, privacy, and regulatory compliance, including a prior role as Chief Privacy & Risk Officer at State Employees' Credit Union, an institution with over $50 billion in assets. This high-level, large-institution experience is invaluable for a growing regional bank. A stronger, more sophisticated risk infrastructure reduces the chance of costly regulatory missteps, which ultimately protects earnings and shareholder value. This is a crucial upgrade to the management team.

The table below summarizes the key financial and operational opportunities driving near-term value:

First Bancorp (FBNC) - SWOT Analysis: Threats

You're looking at First Bancorp (FBNC) and seeing strong Q3 2025 numbers, but a seasoned analyst knows that threats lurk in the forward curve and the regulatory fine print. The biggest risks right now aren't internal; they're macro-driven, centered on the Federal Reserve's policy pace and the looming credit cycle in Commercial Real Estate (CRE). The company's well-controlled funding costs and low nonperforming assets are currently a strength, but they are also the most exposed to these external pressures. You need to map these near-term risks to clear actions.

Slower-than-expected Federal Reserve rate cuts could compress the yield curve, hurting NIM.

The core threat to any bank is Net Interest Margin (NIM)-the spread between what you earn on loans and what you pay for deposits. FBNC's NIM expanded nicely to 3.46% in Q3 2025, but that strength is vulnerable to a slower-than-anticipated rate-easing cycle. The Federal Reserve has already cut rates twice in 2025, bringing the Federal Funds target range down to 3.75%-4.00% as of late October 2025.

The market is defintely nervous about the pace of future cuts. For example, Morgan Stanley recently dropped its forecast for a December 2025 cut, now projecting the first 2026 cut in January. Plus, the Fed's own September 2025 'dot plot' showed a median projection of only one rate cut for all of 2026, which is less than what many in the market expected. This 'higher-for-longer' scenario means the yields on new loans will fall faster than the cost of your sticky, long-term deposits, compressing that NIM. Here's the quick math on the risk:

• Slower rate cuts keep short-term deposit costs elevated.
• New loan yields fall as the market prices in future cuts.
• The resulting flat or inverted yield curve shrinks the 3.46% NIM.

Increased competition for deposits could pressure the well-controlled cost of deposits (1.46% in Q3 2025).

FBNC has done a solid job managing its funding costs, reporting a total cost of deposits of only 1.46% in Q3 2025. This is a key competitive advantage, but it's under immediate pressure. The reality is that online banks and high-yield savings accounts (HYSAs) are still offering rates of 4.00% APY or more as of mid-November 2025.

That is a massive difference-a 254 basis point gap-between the cost FBNC is paying and what a customer can get elsewhere. Even though the company's cost of deposits only rose 3 basis points from the linked quarter, that gap is a powerful, tangible incentive for customers to move their cash. If deposit competition heats up, FBNC will be forced to raise its deposit rates to retain its $10.8 billion in average core deposits, directly increasing interest expense and eroding net interest income.

Macroeconomic instability increasing credit risk, despite current low nonperforming assets (NPAs) of 0.31%.

The company's asset quality is strong right now; total nonperforming assets (NPAs) stood at a low $39.0 million, or 0.31% of total assets, as of September 30, 2025. But this is a lagging indicator. The forward-looking threat is concentrated in the Commercial Real Estate (CRE) market, a sector that is under significant duress nationwide.

FBNC has substantial exposure here, with its largest loan concentration being in non-owner-occupied commercial real estate. This portfolio represents approximately $2.76 billion of the loan book. Industry-wide data shows the past-due and nonaccrual (PDNA) rate for non-owner-occupied property loans was 4.75% in Q4 2024, which is dramatically higher than the pre-pandemic average of 0.59%. A continued downturn in CRE values, particularly for office space, could cause a sharp, sudden increase in loan losses, making that 0.31% NPA ratio look very different very quickly.

Potential for a higher regulatory burden on regional banks in 2025-2026.

The regulatory environment for regional banks is still in flux, creating uncertainty and potential for increased compliance costs. While FBNC's total assets of $12.8 billion (as of September 30, 2025) keep it below the $100 billion threshold for the most stringent capital rules, the threat is twofold.

First, the revised Basel III Endgame framework is expected to widen the competitive gap by easing capital constraints on the largest banks, giving them more financial flexibility to compete on pricing and loan growth. Second, there is always the risk that the regulatory threshold for stricter rules could be lowered, or that new rules like the long-term debt requirement could be extended to banks below the $100 billion mark. The mere complexity of the new rules, such as requiring banks over $100 billion to calculate risk-weighted assets under two approaches, adds an unnecessary operational cost to the entire sector. The recent hiring of a new Chief Risk Officer in October 2025 at First Bank suggests the company is already anticipating this increased focus on risk and compliance.

Finance: Track the spread between the 1.46% cost of deposits and the top 10 online HYSA rates weekly, and prepare a contingency budget for a 50 basis point increase in deposit costs by Q2 2026.