FBNC 10-K & 10-Q changes, risk factors and insider trading
First Bancorp · Nasdaq · State Commercial Banks · CIK 811589 · All filings on SEC.gov
At a glance
What changed in the latest 10-K
Risk Factors
Removed heading “Information security risks for financial institutions continue to increase in part because of new technologies, the increased use of the internet and telecommunications technologies (including mobile devices and cloud computing) to conduct financial and other business transactions, political activism, and the increased sophistication and activities of organized crime, perpetrators of fraud, hackers, terrorists and others.”
Removed heading “Failure to keep pace with technological change could adversely affect our business.”
Largest changes
“Federal and state fair lending laws and regulations, such as the Equal Credit Opportunity Act and the Fair Housing Act, impose nondiscriminatory lending requirements on financial institutions. The Department of Justice, the CFPB, and other federal and state agencies are responsible for enforcing these laws and regulations. Private parties may also have the ability to challenge an institution’s performance under fair lending laws in private class action litigation. …”see in full comparison
“We rely on computer systems, hardware, software, technology infrastructure and online sites and networks for both internal and external operations that are critical to our business. Operational risk related to cyberattacks is increasing as cyberattacks evolve and have a greater and more pervasive economic impact. In addition to cyberattacks or other security breaches involving the theft of sensitive and confidential information, hackers have engaged in attacks against financial institutions designed to disrupt key business services, such as customer-facing web sites. …”see in full comparison
“The BSA, the Patriot Act, and other laws and regulations require financial institutions, among other duties, to institute and maintain effective anti-money laundering programs and file suspicious activity and currency transaction reports as appropriate. The FINCEN, established by the Treasury to administer the BSA, is authorized to impose significant civil money penalties for violations of those requirements and has recently engaged in coordinated enforcement efforts with the individual federal banking regulators, as well as with the U.S. …”see in full comparison
We are reliant upon certain external vendors to provide products and services necessary tosee in full comparisonmaintainfacilitate our day-to-dayoperations.operations,We outsource the processing of ourincluding core datasystem,processingas well asand other systems such as onlinebanking, to third party vendors.banking. Accordingly, our operations are exposed to risk that these vendors will not perform in accordance with applicable contractual arrangements or service level agreements. Our vendors could also be the source of an attack on, or breach of, our operational systems. Any failures, interruptions, or security breaches, or any perception that our security measures are deficient, could negatively impact our operations. We maintain a system of policies and procedures designed to monitor vendor risks including, among other things, changes in the vendor’s organizational structure, financial condition, and support for existing products and services. While we believe these policies and procedures help to mitigate risk, and our vendors are not the sole source of service, the failure of an external vendor to perform in accordance with applicable contractual arrangements or the service level agreements could be disruptive to our operations, which could have a material adverse impact on our business and its financial condition and results of operations. Additionally, if our third party vendors encounter difficulties or if we have difficulty in communicating with such thirdparty,parties, it will significantly affect our ability to adequately process and account for customer transactions, which would significantly affect our businessoperations.operations, damage our reputation, result in a loss of customer business, result in a violation of privacy or other laws, and expose us to civil litigation, enforcement actions by governmental agencies, regulatory fine or other damages or losses, including those not covered by insurance.
“Information security risks for financial institutions continue to increase in part because of new technologies, the increased use of the internet and telecommunications technologies (including mobile devices and cloud computing) to conduct financial and other business transactions, political activism, and the increased sophistication and activities of organized crime, perpetrators of fraud, hackers, terrorists and others.”see in full comparison
“We are subject to complex and ever-changing laws and regulations governing the privacy and security of personal information concerning our customers, prospective, current, and former customers, and employees. These federal and state laws and regulations govern our obligations in the event of a security breach, breach of personal information, computer-security incident, and similar events. States have been actively passing new privacy laws, and this trend is likely to continue such that the privacy and security laws and regulations that may apply to us will continue to grow and change.”see in full comparison
Full comparison: every changed paragraph (33)
In addition to other information contained in this Report that may affect us, the risk factors describedsummarized below, as well as any cautionary language in this Report, provide examples of the most significant risks, uncertainties, and events that could have a material adverse effect on our business, including our operating results and financial condition. In addition to the risks and uncertainties described below, other risks and uncertainties not currently known to us, or that we currently deem to be immaterial, also may materially or adversely affect our business, financial condition, and results of operations. The value or market price of our common stock could decline due to any of these identified or other unidentified risks.
Our success is impacted, to a certain extent by global, domestic and local economic and political conditions, as well as governmental monetary policies. More specifically, the local economic conditions of the Carolinas and the specific markets in which we operate have a significant impact on the demand for our products and services, as well as the ability of our customers to repay loans to us. Conditions such as changes in interest rates, money supply, levels of employment and other factors beyond our control may have a negative impact on economic activity. A deterioration in economic conditions, including an economic recession, may adversely affect our asset quality, deposit levels and loan demand and, therefore, our earnings. In particular, interest rates are highly sensitive to many factors that are beyond our control, including global, domestic and local economic conditions and the policies of various governmental and regulatory agencies and, specifically, the Federal Reserve. Throughout 2022 and 2023, the FOMC raised the target range for the federal funds raterate. onDuring eleven2024 separateand occasions. Beginning in September 2024,2025, the FOMC began to lowerlowered the target range for the federal funds rate. As of December 31, 2024,2025, the target range was 4.25%3.50% to 4.50%. In January 2025, the FOMC maintained the target range for the federal funds rate.3.75%. Although economic forecasts vary, the FOMC has indicated an expectation of twoone 25 basis point rate cutscut during 2025.2026. SomeEconomic economistsforecasts areinclude projectinga that,mix dueof to changes in fiscalpositive and economicnegative policies,factors includingconcerning tariffs,unemployment, USinflation, economicreal activityestate mayvalues slowand orother decrease in 2025.components. Economic weaknessweakness, increased unemployment, or persistent inflation could lead to decreased business and consumer confidence and weaker-than-anticipated spending, thereby leading to possible adverse impacts to our business including asset quality, deposit levels, loan demand and results of operations.
We also face credit risk arising from economic and geopolitical conditions, among other forms of risk.risk, that our customers will not repay their loans. As we have a significant amount of real estate loans, decreases in real estate values could adversely affect the value of property used as collateral, which, in turn, can adversely affect the value of our loan and investment portfolios. CRE values continue to fluctuate and the outlook for CRE remains dependent on the broader economic environment and, specifically, how major subsectors respond to ongoing economic and behavioral developments. Some economic indicators suggest that CRE prices remain high relative to fundamentals and US market delinquency rates are elevated. Credit performance over is susceptible to economic and market forces. Instability and uncertainty in the commercial and residential real estate markets, as well as in the broader commercial and retail credit markets, could have a material adverse effect on our financial condition and results of operations. Additionally, inflation risk can have an adverse impact on our customers ability to repay their loans. Our customers may be affected by inflation pressures and the rising costs of goods and services used in their households and businesses, which could have a negative impact on their cash flows and their ability to repay their loans to us.
We offer a variety of loan products, including residential mortgage, consumer, construction, and commercial loans, with a majority of our portfolio consisting of commercial and industrial loans and commercial loans secured by commercial real estate. Most of our commercial business and commercial real estateCRE loans are made to small business or middle-market customers. These businesses generally have fewer financial resources in terms of capital or borrowing capacity than larger entities and have a heightened vulnerability to economic conditions. Additionally, these loans may increase concentration risk as to industry or collateral securing our loans. Future growth or acquisitions of banks with a portfolio composition different from ours could cause our portfolio mix to change.
Lending generally involves various degrees of risk pendingdepending on the facts and circumstances of the loan and borrower. If general economic conditions in the market areas in which we operate negatively impact thisour customer sector,customers, our results of operations and financial condition may be adversely affected. Further, the deterioration of borrowers' businesses (from a variety of factors including, but not limited to: tariff impact, government policy change, change in end customer behavior, etc.) may hinder their ability to repay their loans with the Company, which could have a material adverse effect on our financial condition and results of operations. Risk of loan defaults is unavoidable in the banking industry. We attempt to limit exposure to this risk by monitoring carefully the amount of loans in specific industries and by exercising prudent lending practices. However, the risk that substantial credit losses could result in reduced earnings or losses cannot be eliminated.
CECL requires that estimated credit deteriorationlosses isare reflected in the income statement in the period of origination or acquisition of a loan, with changes in expected credit losses due to further credit deterioration or improvement reflected in the periods in which the expectation changes. CECL also requires significant management judgment that is supported by models, assumptions, and data elements which may be subjective in nature or, as in the case of macroeconomic forecasts, be volatile from period to period. These factors involve model risk and are complex and could impact the Company's results of operations and capital levels, particularly in times of economic uncertainty or other unforeseen circumstances.
Interest rates are highly sensitive to many factors that are beyond our control, including general economic conditions and policies of various governmental and regulatory agencies and, in particular, the Federal Reserve. Changes in monetary policy, including changes in interest rates, influence not only the interest we receive on loans and investments and the amount of interest we pay on deposits and borrowings, but such changes could also affect (i) our ability to originate loans and obtain deposits; (ii) the fair value of our financial assets and liabilities; and (iii) the average duration of our mortgage portfolio and other interest-earning assets. InThroughout January 2022, due to elevated levels of inflation2022 and corresponding pressure to raise interest rates,2023, the FederalFOMC Reserve announced after several periods of historically low federal funds rates and yields on Treasury notes that it would be slowing the pace of its bond purchasing and increasingraised the target range for the federal funds raterate. overDuring time.2024 Therefore,and 2025, the FOMC increased the target range eleven times throughout 2022 and 2023. In the latter months of 2024, due to lower, more consistent inflation levels, the Federal Reserve lowered its federal funds target rate by 100 basis points. As of December 31, 2024, the target range for the federal funds raterate. As of December 31, 2025, the target range was 4.25%3.50% -to 4.50%.3.75%. It remains uncertain whether then FOMC will further decrease the federal funds rate to attain a monetary policy appropriate to keep inflation at normalized levels, leave the rate at its current level for a lengthy period of time or if it will resumeinstead increasingincrease the target range. Additionally, other interest rates may not move in a consistent manner with the federal funds rate.
CybersecurityA incidentsfailure in or other disruptionsbreach of communicationsour operational or informationsecurity systemssystems, or those of our vendors, could disrupt business operations, result in the loss of critical and confidential information, and adversely impact our reputation and results of operations.
WeAs a financial institution, our operations rely heavily on communicationsthe secure data processing, storage and transmission of confidential and other information systems to conduct our business. Our daily operations depend on the operational effectiveness of our technology. Any failure, interruption, or breach in security of our computer systems or outside vendor technology could result in failures or disruptions in general ledger, deposit, loan, customer relationship management, and other systems leading to inaccurate financial records. While we have disaster recovery and other policies and procedures designed to prevent or limit the effect of any failure, interruption, or security breach of our information systems, there can be no assurance that any such failures, interruptions, or security breaches will not occur or, if they do occur, that they will be adequately addressed. The occurrence of any failures, interruptions, or security breaches of our information systems could damage our reputation, result in a loss of customer business, subject us to additional regulatory scrutiny, or expose us to civil litigation and possible financial liability, any of which could have a material adverse effect on our results of operations.
We are reliant upon certain external vendors to provide products and services necessary to maintainfacilitate our day-to-day operations.operations, We outsource the processing of ourincluding core data system,processing as well asand other systems such as online banking, to third party vendors.banking. Accordingly, our operations are exposed to risk that these vendors will not perform in accordance with applicable contractual arrangements or service level agreements. Our vendors could also be the source of an attack on, or breach of, our operational systems. Any failures, interruptions, or security breaches, or any perception that our security measures are deficient, could negatively impact our operations. We maintain a system of policies and procedures designed to monitor vendor risks including, among other things, changes in the vendor’s organizational structure, financial condition, and support for existing products and services. While we believe these policies and procedures help to mitigate risk, and our vendors are not the sole source of service, the failure of an external vendor to perform in accordance with applicable contractual arrangements or the service level agreements could be disruptive to our operations, which could have a material adverse impact on our business and its financial condition and results of operations. Additionally, if our third party vendors encounter difficulties or if we have difficulty in communicating with such third party,parties, it will significantly affect our ability to adequately process and account for customer transactions, which would significantly affect our business operations.operations, damage our reputation, result in a loss of customer business, result in a violation of privacy or other laws, and expose us to civil litigation, enforcement actions by governmental agencies, regulatory fine or other damages or losses, including those not covered by insurance.
Information security risks for financial institutions continue to increase in part because of new technologies, the increased use of the internet and telecommunications technologies (including mobile devices and cloud computing) to conduct financial and other business transactions, political activism, and the increased sophistication and activities of organized crime, perpetrators of fraud, hackers, terrorists and others.
We rely on computer systems, hardware, software, technology infrastructure and online sites and networks for both internal and external operations that are critical to our business. Operational risk related to cyberattacks is increasing as cyberattacks evolve and have a greater and more pervasive economic impact. In addition to cyberattacks or other security breaches involving the theft of sensitive and confidential information, hackers have engaged in attacks against financial institutions designed to disrupt key business services, such as customer-facing web sites. Critical infrastructure sectors, including financial services, increasingly have been the targets of cyberattacks, including attacks emanating from foreign countries. Cyberattacks involving financial institutions, including distributed denial of service attacks designed to disrupt external customer-facing services, nation state cyberattacks and ransomware attacks designed to deny organizations access to key internal resources or systems or other critical data, as well as targeted social engineering and phishing email and text message attacks designed to allow unauthorized persons to obtain access to an institution’s information systems and data or that of its customers, are becoming more common and increasingly sophisticated. Further, threat actors are increasingly seeking to target vulnerabilities in software systems (including bugs, vulnerabilities in third-party systems or software and technical misconfigurations in hardware and software) and weak authentication controls used by large numbers of banking organizations in order to conduct malicious cyber activities. These types of attacks have resulted in increased supply chain and third-party risk. Because the methods of cyberattacks change frequently or, in some cases, are not recognized until launch, we are not able to anticipate or implement effective preventive measures against all possible security breaches and the probability of a successful attack cannot be predicted. Although we employ detection and response mechanisms designed to contain and mitigate security incidents, early detection may be thwarted by persistent sophisticated attacks and malware designed to avoid detection. Our inability to prevent, detect, and respond to cyberattacks may lead to reputational damage, litigation with third parties, and increased cybersecurity protection and remediation costs, which in turn could materially adversely affect our results of operations.
The Bank is subject to extensive regulationregulation, examination, and supervision by various federal and state regulatory agencies, including the Commissioner and the Federal Reserve. This regulationregulation, examination, and supervision is intended primarily to enhance the safe and sound operation of the Bank and for the protection of the DIF and our depositors and borrowers, rather than for holders of our equity securities and creditors. In the past, our business has been materially affected by these regulations.regulations and our compliance with these regulations is costly. Should we fail to comply with our regulatory requirements, federal and state regulators could impose restrictions on our activities, which could materially and adversely affect our operations and financial condition. This trend is likely to continue in the future.
Laws and regulations applicable to the banking industry change frequently and may continue to change, and we cannot predict the effects of any such changes. Regulatory authorities have extensive discretion in their supervisory and enforcement activities, including the imposition of restrictions on operations, the classification of our assets, and the determination of the level of ACL. Changes in the regulations that apply to us, or changes in our compliance with regulations, could have a material impact on our operations.
We are subject to complex and ever-changing laws and regulations governing the privacy and security of personal information concerning our customers, prospective, current, and former customers, and employees. These federal and state laws and regulations govern our obligations in the event of a security breach, breach of personal information, computer-security incident, and similar events. States have been actively passing new privacy laws, and this trend is likely to continue such that the privacy and security laws and regulations that may apply to us will continue to grow and change.
The BSA, the Patriot Act, and other laws and regulations require financial institutions, among other duties, to institute and maintain effective anti-money laundering programs and file suspicious activity and currency transaction reports as appropriate. The FINCEN, established by the Treasury to administer the BSA, is authorized to impose significant civil money penalties for violations of those requirements and has recently engaged in coordinated enforcement efforts with the individual federal banking regulators, as well as with the U.S. Department of Justice, Drug Enforcement Administration, and Internal Revenue Service. There is also increased scrutiny of compliance with the rules enforced by the OFAC. Federal and state bank regulators also focus on compliance with BSA and AML regulations. If our policies, procedures, and systems are deemed deficient or the policies, procedures, and systems of the financial institutions that we have already acquired or may acquire in the future are deficient, we would be subject to liability, including fines and regulatory actions such as restrictions on our ability to pay dividends and the necessity to obtain regulatory approvals to proceed with certain aspects of our business plan, including our acquisition plans, which would negatively impact our business, financial condition, and results of operations. Failure to maintain and implement adequate programs to combat money laundering and terrorist financing also could have serious reputational consequences for us.
Federal and state fair lending laws and regulations, such as the Equal Credit Opportunity Act and the Fair Housing Act, impose nondiscriminatory lending requirements on financial institutions. The Department of Justice, the CFPB, and other federal and state agencies are responsible for enforcing these laws and regulations. Private parties may also have the ability to challenge an institution’s performance under fair lending laws in private class action litigation. A successful challenge to our performance under the fair lending laws and regulations could adversely impact our CRA rating and result in a wide variety of sanctions, including the required payment of damages and civil money penalties, injunctive relief, imposition of restrictions on or delays in approving merger and acquisition activity, and restrictions on expansion activity, which could negatively impact our reputation, business, financial condition, and results of operations.
The banking industry is highly competitive. Technology and other changes are allowing parties to complete financial transactions through alternative methods that historically have involved banks. For example, consumers can now maintain funds that would have historically been held as bank deposits in brokerage accounts, mutual funds, or general-purpose reloadable prepaid cards.cards, Consumersor candigital also complete transactionsassets such as payingstablecoins, billsrather and/or transferring funds directly without the assistance of banks. The process of eliminating banks as intermediaries, known as “disintermediation,” could resultthan in thebank lossdeposit of fee income, as well as the loss of customer deposits and the related income generated from those deposits. The loss of these revenue streams and the lower cost of deposits as a source of funds could have a material adverse effect on our financial condition and results of operations.accounts.
Consumers can also complete transactions such as paying bills and/or transferring funds directly without the assistance of banks. The process of eliminating banks as intermediaries, known as “disintermediation,” could result in the loss of fee income, as well as the loss of customer deposits and the related income generated from those deposits. To the extent that other banks offer products or services that facilitate the minting or issuance of stablecoins backed by customer deposits, customers may convert bank deposits into stablecoins, which could accelerate deposit outflows, increase deposit volatility and heighten liquidity risk, particularly during periods of market stress. The loss of these revenue streams and the lower cost of deposits as a source of funds could have a material adverse effect on our financial condition and results of operations.
Additionally, we face substantial competition in all areas of our operations from a variety of different competitors, both within and beyond our principal markets, many of which are larger and may have more financial resources. Such competitors primarily include national, regional, and internetonline banks within the various markets in which we operate. We also face competition from many other types of financial institutions, including, without limitation, thrifts, credit unions, finance companies, brokerage firms, insurance companies, and other financial intermediaries, such as online lenders and banks.
As customer preferences and expectations continue to evolve, technology has lowered barriers to entry and made it possible for non-banks to offer products and services traditionally provided by banks, such as automatic transfer and automatic payment systems. Banks, securities firms, and insurance companies can merge under the umbrella of a financial holding company, which can offer virtually any type of financial service, including banking, securities underwriting, insurance (both agency and underwriting), and merchant banking. Many of our non-bank competitors have fewer regulatory constraints and may have lower cost structures. Additionally, due to their size, many competitors may be able to achieve economies of scale and, as a result, may offer a broader range of products and services as well as better pricing for those products and services than we can.
•theour ability to develop, maintain, and build upon long-term customer relationships based on top quality service, high ethical standards, and safe, sound assets;
•theour ability to expand our market position;
•customer satisfaction with our level of service; and
•industry and general economic trends.trends; and
•the ability to keep pace with technological change and to invest in technological improvements to meet customer demand and create operational efficiencies.
Failure to keep pace with technological change could adversely affect our business.
The financial services industry is continually undergoing rapid technological change with frequent introductions of new technology-driven products and services. The effective use of technology increases efficiency and enables financial institutions to better serve customers and to reduce costs. Our future success depends, in part, upon our ability to address the needs of our customers by using technology to provide products and services that will satisfy customer demands, as well as to create additional efficiencies in our operations. Many of our competitors have substantially greater resources to invest in technological improvements. We may not be able to effectively implement new technology-driven products and services or be successful in marketing these products and services to our customers. Failure to successfully keep pace with technological change affecting the financial services industry could have a material adverse impact on our business and, in turn, our financial condition and results of operations.
We may be adversely affected by risks associated with potential andor completed acquisitions.
•Acquisitions maytypically also beare subject to various regulatory approvals. If we fail to receive the appropriate regulatory approvals, we will not be able to consummate acquisitions that we believe are in our best interests;
•Payment of a premium over tangible book and market values that may dilute our tangible book value and earnings per share in the short and long term;
•Potential exposure to unknown or contingent liabilities of the target company, including, without limitation, liabilities for regulatory and compliance issues and from potential litigation;
Subject to applicable NASDAQ rules, our Board generally has the authority, without action by or vote of the shareholders, to issue all or part of any authorized but unissued shares of stock for any corporate purpose, including issuances of equity-based incentives under or outside of our equityCapital compensation plans, issuances of equity in business combination transactions, and issuances of equity to raise additional capital to support growth or to otherwise strengthen our balance sheet. Any issuance of additional shares of stock or equity derivative securities will dilute the percentage ownership interest of our shareholders and may dilute the tangible book value per share of our common stock.
Management's Discussion & Analysis (MD&A)
Largest changes
“Net interest income amounted to $398.2 million in 2025, an increase of $66.0 million, or 19.9%, from $332.3 million in 2024. The increase was primarily due to the increase in yields on securities, partially a result of the securities loss-earnback transactions in 2025 and 2024, and the higher volume and yields of average loans outstanding. Additionally, interest expense decreased, primarily due the lower rates on interest-bearing deposits, specifically money market accounts, partially offset by the higher volume of average money market account balances. …”see in full comparison
see in full comparisonRecentEconomiceconomicconditionsactivityduringhas2025showncontinuedresiliencetowithshow resilience, supported by generally positive domestic results, relatively low unemployment andincreasedsustained demand for goods and services.While inflationaryInflationary pressurescontinue,moderated further compared to prior periods, reflecting the impact of monetary policy actions taken by the Federal Reserveoverintherecentlastyears.three years have resulted inHowever, alower inflation rate in 2024. A mixcombination of positive and negative economic indicatorsremainedpersistedpresentthroughoutat the end of 20242025 and there continues to be some uncertainty in economicconditions,conditions andasoutlook. As such, we could besubjectexposed to ongoing risks, which could have a material, adverse effect on our business, financial condition, liquidity, and results of operations.
(3)Includes tax-equivalent adjustmentssee in full comparisonof $3.0 million, $2.7 million and $2.8 million in 2024, 2023, and 2022, respectively,to reflect thefederal and statetax benefit that we receive related to tax-exempt securities andtax-exempt loans, which carry interest rates lower than similar taxable investments/loansdue to their tax exempt status. This amount has been computed assuming a 23% tax rate and isas reduced by the related nondeductible portion of interest expense.
“In the portions of Western North and South Carolina that were significantly impacted by Hurricane Helene in third quarter of 2024, the Company identified borrowers who were potentially impacted. During 2025, the Company evaluated the commercial loan portfolio and adjusted risk ratings and nonaccrual status as applicable. Therefore, for those relationships, for December 31, 2025, the normal reserving process was applied. …”see in full comparison
“In the portions of Western North and South Carolina that were significantly impacted by Hurricane Helene in third quarter of 2024, the Company identified borrowers who were potentially impacted. During 2025, the Company evaluated the commercial loan portfolio and adjusted risk ratings and nonaccrual status as applicable. Therefore, for those relationships, the normal reserving process was applied for December 31, 2025. …”see in full comparison
see in full comparisonThe provision for loan losses was $18.8 million in 2024 and $19.8 million in 2023. The amount of provision recorded in each period was the amount required such that the total ACL reflected the appropriate balance as determined under the CECL model. The primary contributor to the lower provision in 2024 was the initial provision established for acquired non-PCD loans of $12.2 million recorded in 2023 as a result of the acquisition of GrandSouth. The provision for loan losses for 2024 included $13 million related to potential credit exposure from Hurricane Helene.We subscribe to a third-party service which provides quarterly macroeconomic scenarios for the United States economy. For2024,2025, we continue to utilize the baseline forecast, which incorporates an equal probability of the United States economy performing better or worse than the projection. The economic forecasts throughout the year have exhibited general stability of the economy demonstrated in relatively low unemployment rates,solidhealthyGDP,GDPrelatively stable consumer and producer price indices,levels, and mixed results for real estate price indices for commercial and residential properties.These improving economic projections translated to lower forecasted losses in our loan portfolio and, thus a lower estimated ACL, exclusive of portfolio growth and the reserves related to Hurricane Helene.
Full comparison: every changed paragraph (84)
The Company is a bank holding company headquartered in Southern Pines, North Carolina. We provide diversified financial services primarily though the Bank, our principal subsidiary, including commercial and consumer banking services, mortgage lending, SBA lending, accounts receivable financing, and investment advisory services. As of December 31, 2024,2025, the Bank had a 113 branch networkbranches in North Carolina and South Carolina and 1,3711,353 full-time equivalent employees. We have grown organically as well as through strategic acquisitions as discussed previously in "Recent Developments and Acquisitions".
•Return on average assets was 0.63%0.89% for the year ended December 31, 2024,2025, as compared to 0.87%0.63% for the prior year. Return on average common equity of 5.38% was reported7.16% for the year ended December 31, 2024,2025, as compared to 8.05%5.38% for the prior year. As discussed below, the returns for 2025 and 2024 were impacted by securities loss transactions as well as Hurricane Helene provisions.
•Our totalTotal assets at December 31, 20242025 were $12.1$12.7 billion, a 0.3%4.3% increase from a year earlier.
•Total loans outstanding contractedexpanded by $0.1$0.6 billion, or 0.7%,7.8%, during the year. Loans totaled $8.1$8.7 billion at December 31, 2024.2025.
•Credit quality continued to be strong with the NPA to total assets ratio at 0.39%0.30% as of December 31, 2024,2025, asconsistent compared to 0.37% atwith December 31, 2023.2024. Net charge offs as a percentage of average loans were 0.07%0.10% for 2024,2025, as compared to 0.08%0.07% for the prior year.
•Capital remained strong with a total CET1 ratio of 14.35%,14.10%, updown from 13.20%14.35% for the prior year, and total risk-based capital ratio of 16.63%16.12% as of December 31, 2024,2025, ana increasedecrease from 15.54%16.63% for the prior year. The decrease during 2025 in risk-based capital ratios was driven by loan growth, which carries a higher risk weight than short term investments, along with the repayment of $18.0 million of subordinated debt.
•WeNet earnedincome was $111.0 million, or $2.68 diluted EPS, for 2025 compared to net income of $76.2 million, or $1.84 diluted EPS, duringfor 2024 compared to net income of $104.1 million, or $2.53 diluted EPS, in 2023.2024. As noted below, 20242025 results were dampenedimpacted by a $13$71.6 million provision related to potential exposures from Hurricane Helene and a $36.8 millionof securities loss transactionfrom transactions that took place during the third and fourth quarter of 2024.2025 and the $11.1 million reversal of provision related to Hurricane Helene throughout the year. See the following for discussion of changes to net income:
•Net interest income for 20242025 decreasedincreased $14.6$66.0 million, or 4.2%,19.9%, driven by increased interest expenseincome offsetand by higherlower interest income.expense. The NIM on a tax-equivalent basis was 2.91%3.40% for 2024,2025, aan decreaseincrease of 1551 basis points from the prior year. Despite the growth in average earning assets, the market-driven increase in rates on liabilities in the first half of 2024 occurred at a more rapid pace than the increase in yields on assets which resulted in the reduction in NIM for 2024.
•Total interest income increased $30.3$38.0 million in 20242025 as compared to 2023,2024, driven by higher interest income on loans of $22.3$21.1 million related to a combination of higher volumes of average balances and increased yields. Interest income on other interest-earning assets, primarily overnight funds,securities increased $12.8$20.5 million, primarily the result of higherincreased volumes.yields driven by the securities loss-earnback transactions in late 2024 and the second half of 2025.
•Interest income on other interest-earning assets, primarily overnight funds, decreased $3.7 million, primarily the result of lower volumes along with the decrease in the federal funds rate.
•The 20242025 increasedecrease in interest expense of $44.9$28.0 million was driven by higherlower money market rates in late 2023 and the first half of 20242025, which resulted in repricing of our deposits and a corresponding $57.2$19.6 million increasedecrease in deposit interest expense, especially in money market accounts which accounted for $47.9$7.4 million of the increase.decrease. Offsetting the increase inAdditionally, interest expense on deposits was a reduction in interest expense on borrowings, whichborrowings fell $12.4$8.4 million, primarily athe result of lower average balances ofon borrowingsoutstanding outstanding.borrowings.
•Provision for credit losses for 2025 of $11.5 million was down from $16.4 million in 2024 due primarily to the $13.0 million provision related to potential exposure from Hurricane Helene in 2024. Offsetting this was higher net charge offs in 2025, provisions for higher loan growth in 2025 and an increase in the level of unfunded commitments. See the "Provision for Loan Losses" section below.
•Provision for credit losses for 2024 of $16.4 million was down from $17.8 million in 2023 due primarily to the initial provision established for acquired non-PCD loans of $12.2 million in 2023, lower organic loan growth in 2024 and generally positive updated economic forecasts, which are a key driver in the Company's CECL model as discussed further in the "Provision for Loan Losses" section below, and a reduction in the level of unfunded commitments. This was partially offset by the $13 million provision related to potential exposure from Hurricane Helene in 2024.
•Noninterest income declined $39.4$25.8 million in 2024,2025, which resulted primarily from the $38.0$71.6 million securities loss,loss $36.8related millionto securities loss-earnback transactions that took place in the third and fourth quarter of which2025. wasNoninterest income in 2024 included a securities loss of $38.0 million related to a securities loss-earnback transactiontransactions that took place in the fourth quarter of 2024. Refer to "Noninterest Income" section below for further discussion.
•Noninterest expense decreasedincreased $18.8$3.7 million in 2024,2025, primarily related to the GrandSouth$4.2 acquisitionmillion completed January 1, 2023, which resultedincrease in mergerTotal personnel expense driven by increased incentives expense arising from the Company's performance. In 2024 and acquisition expense of $13.7 million in 2023. In 2024,2025, the Company actively managed headcount and appliedcontinued to apply additional expense controls. Refer to "Noninterest Expense" section below for further discussion.
•Income tax expense wasincreased down $5.9$6.6 million from the prior year relativeprimarily toresulting lowerfrom higher pre-tax income. The 20242025 effective tax rate of 22.3%20.4% was uplower fromthan the prior year as the result of incrementalnet discrete tax benefits, primarily arising from state tax-relatedtaxes, expensesincluding recordedthe incontinued 2024North relatingCarolina tograduated priortax years.rate reductions.
RecentEconomic economicconditions activityduring has2025 showncontinued resilienceto withshow resilience, supported by generally positive domestic results, relatively low unemployment and increasedsustained demand for goods and services. While inflationaryInflationary pressures continue,moderated further compared to prior periods, reflecting the impact of monetary policy actions taken by the Federal Reserve overin therecent lastyears. three years have resulted inHowever, a lower inflation rate in 2024. A mixcombination of positive and negative economic indicators remainedpersisted presentthroughout at the end of 20242025 and there continues to be some uncertainty in economic conditions,conditions and asoutlook. As such, we could be subjectexposed to ongoing risks, which could have a material, adverse effect on our business, financial condition, liquidity, and results of operations.
Under the range of macroeconomic forecast scenarios considered as of December 31, 2025, use of a "downside"/ more pessimistic scenario would have resulted in an increase to the modeled allowance results of approximately $32 million. This estimate reflects the sensitivity of the modeled allowance estimate to macroeconomic forecast data but does not consider other qualitative adjustments that could increase or decrease modeled loss estimates calculated using this alternative economic scenario.
Net interest income amounted to $398.2 million in 2025, an increase of $66.0 million, or 19.9%, from $332.3 million in 2024. The increase was primarily due to the increase in yields on securities, partially a result of the securities loss-earnback transactions in 2025 and 2024, and the higher volume and yields of average loans outstanding. Additionally, interest expense decreased, primarily due the lower rates on interest-bearing deposits, specifically money market accounts, partially offset by the higher volume of average money market account balances. The average rate on borrowings decreased due to the payoff of borrowings with higher interest rates as well as borrowings with variable interest rates decreasing after the FOMC actions in 2024 and 2025.
Net interest income amounted to $332.3 million in 2024, a decrease of $14.6 million, or 4.2%, from $346.8 million in 2023. The decrease was primarily due to the increase in rates on interest-bearing deposits, specifically money market accounts, partially offset by lower interest expense on borrowings, a result of lower average balances on borrowings. Partially offsetting the increased interest expense was increased interest income, primarily the result of higher average balances on interest-bearing assets. Within interest-bearing assets, interest income was positively impacted by growth in the average balances of loans and other interest-earning assets, primarily overnight funds, partially offset by lower average balances on taxable securities.
InAs linea withresult of the lowerhigher net interest income related to the increase in the yield on interest-bearing assets and the decrease in the cost of interest-bearing liabilities was the compression of ourliabilities, NIM which,expanded on51 abasis tax-equivalent basis, declinedpoints to 2.91%3.40% in 20242025 from 3.06%2.89% in 2023.2024. For internal purposes, we evaluate our NIM on a tax-equivalent basisbasis, which is a non-GAAP financial measure, by adding the tax benefit realized from tax-exempt loans and securities to reported interest income, then dividing by total average earning assets. We believe that analysis of NIM on a tax-equivalent basis is useful and appropriate because it allows a comparison of net interest in different periods without taking into account the different mix of taxable versus non-taxable loans and investments that may have existed during those periods. The following is a reconciliation of reported net interest income to tax-equivalent net interest income and the resulting NIM as reported and on a tax-equivalent basis.
Our total cost of deposits has been more impacted by the FOMC's changes in short term rates than the yield on our interest-earning assets. The target federal funds rate peakedbegan 2024 at 5.50% in July 2023 and remained there until beginning to decrease in September 2024, fallingwhen it was reduced a total of 100 basis points by the end of 2024, helping to increase our NIM (tax-equivalent) to 3.07%3.05% in the fourth quarter of 2024. AsIn shownthe second half of 2025, after a pause in rate changes, the chartFOMC below,made ourfurther NIMrate (tax-equivalent)changes, hasresulting grownin 27an additional 75 basis pointspoint since its recent low for the first quarter of 2024. This NIM (tax-equivalent) expansion is the result of our yield on interest-earning assets continuing to earn at higher rates, increasing 11 basis points during the same period, while our total cost of deposits peaked in the third quarter of 2024, declining to 1.57% for the fourth quarter of 2024.decrease.
As shown in the chart below, our NIM has grown consistently since the first quarter of 2024. This NIM expansion is the result of our yield on interest-earning assets continuing to earn at higher rates, increasing 41 basis points during the same period, while our total cost of deposits peaked in the third quarter of 2024, then declined 44 basis points to 1.32% for the fourth quarter of 2025.
First Bancorp Comparison of Net Interest Margin (Tax-Equivalent),Margin,
The most significant component of the purchase accounting adjustments in each year was loan discount accretion on purchased loans. Generally, the level of loan discount accretion will decline each year after an acquisition due to the natural reduction in the outstanding balance of acquired loans. Alternately, levels of accretion will increase as a result of future acquisitions and related additions to loan discounts on acquired portfolios which are accreted to income as experienced insince 2023 with the GrandSouth acquisition.
At December 31, 20242025 and 2023,2024, unaccreted loan discount on purchased loans amounted to $15.1$8.8 million and $24.0$15.1 million, respectively. The GrandSouth acquired portfolio comprisescomprised the majority of the remaining unaccreted loan discount at December 31, 2024.2025.
The following table presents the major components of the net interest income and NIM.
(1)Average loans include nonaccruing loans, the effect of which is to lower the average rate shown. Interest earned includes recognized net loan fees, including late fees, prepayment fees, and deferred loan (cost)/fee amortization,amortization in the amounts of $(0.8) million, $(1.1) million, $0.5 million, and $3.1$0.5 million for 2025, 2024, and 2023, and 2022, respectively.
(3)Includes tax-equivalent adjustments of $3.0 million, $2.7 million and $2.8 million in 2024, 2023, and 2022, respectively, to reflect the federal and state tax benefit that we receive related to tax-exempt securities and tax-exempt loans, which carry interest rates lower than similar taxable investments/loans due to their tax exempt status. This amount has been computed assuming a 23% tax rate and isas reduced by the related nondeductible portion of interest expense.
The following table presents additional detail regarding the estimated impact that changes in loaninterest-earning asset and depositinterest-bearing liability volumes and changes in the interest rates we earned/paid had on our net interest income in 20242025 and 2023.2024.
Overall, asAs demonstrated in the above table, net interest income contractedexpanded $14.6$66.0 million in 2024.2025. Higher rates and volumes on interest-bearing assets and lower rates on interest-bearing liabilities were partially offset by higher ratesmoney onmarket interest-earning assets and higher earning asset volumes.volume.
•For 2024,2025, higher loan volume resulted in a $13.2 million increase in interest income while increased market rates contributed to an additional $14.6$7.9 million of loan interest income while higher loan volume resulted in a $7.8 million increase in interest income. Variable rate loans comprised approximately 23%29% of the loan portfolio at December 31, 2024,2025, and, accordingly, the magnitude of the immediate yield impact we experience from each federal funds rate change is limited.
•DecreasesIncreases in the overall volumeyield ofon average investment securities, partiallyalong offsetwith bysomewhat higher yields on the portfolio,volumes, resulted in decreasedincreased interest income of $4.8$20.5 million in 2024.2025. During 2025, $585.1 million of AFS securities were purchased with a weighted average yield of 4.13%.
•HigherLower volumes onof other interest-earning assets (primarily interest-bearing cash balances) along with higherlower yields resulted in ana increasedecrease in interest income of $12.8$3.7 million for the year.
•The increasedecrease of $57.2$19.6 million in interest expense on deposits was driven by higherlower rates on accounts as we repriced deposits during late 2023 and the start of 2024 in response to the market increasesdecreases, andpartially to retain and grow deposits to meet our funding needs, combinedoffset with higher volumes, primarily in money market deposit accounts.
•Lower levelsbalances ofon short-term borrowings, historically comprised of short-term FHLB and Federal Reserve advances to fund loan demand andin excess of deposit fluctuations,growth, contributed $12.6$7.1 million to the decrease in borrowings interest expense, which, in total, decreased $12.4$8.4 million in 2024.2025.
The provision for loan losses was $9.6 million in 2025 and $18.8 million in 2024. The amount of provision recorded in each period was the amount required such that the total ACL reflected the appropriate balance as determined under the CECL model. The primary contributor to the reduction in provision expense was the $13.0 million related to potential credit exposure from Hurricane Helene recognized in 2024.
The provision for loan losses was $18.8 million in 2024 and $19.8 million in 2023. The amount of provision recorded in each period was the amount required such that the total ACL reflected the appropriate balance as determined under the CECL model. The primary contributor to the lower provision in 2024 was the initial provision established for acquired non-PCD loans of $12.2 million recorded in 2023 as a result of the acquisition of GrandSouth. The provision for loan losses for 2024 included $13 million related to potential credit exposure from Hurricane Helene. We subscribe to a third-party service which provides quarterly macroeconomic scenarios for the United States economy. For 2024,2025, we continue to utilize the baseline forecast, which incorporates an equal probability of the United States economy performing better or worse than the projection. The economic forecasts throughout the year have exhibited general stability of the economy demonstrated in relatively low unemployment rates, solidhealthy GDP,GDP relatively stable consumer and producer price indices,levels, and mixed results for real estate price indices for commercial and residential properties. These improving economic projections translated to lower forecasted losses in our loan portfolio and, thus a lower estimated ACL, exclusive of portfolio growth and the reserves related to Hurricane Helene.
AlsoDuring under the CECL method, in 20242025 we recorded a reduction in the provision for unfunded commitments of $2.3$1.9 million compared to a reduction of $1.9$2.3 million for 2023.2024. Changes in the level of provision each year are generally related to fluctuations in the level of available credit lines and updated loss drivers.
In the portions of Western North and South Carolina that were significantly impacted by Hurricane Helene in third quarter of 2024, the Company identified borrowers who were potentially impacted. During 2025, the Company evaluated the commercial loan portfolio and adjusted risk ratings and nonaccrual status as applicable. Therefore, for those relationships, the normal reserving process was applied for December 31, 2025. For the potentially impacted consumer loans, the Company applied increased reserve rates based upon severe economic factors to the approximately $268 million of loans (primarily Residential 1-4 family real estate) in the most impacted path of Hurricane Helene. Due to the potential exposure from Hurricane Helene, the ACL on these impacted consumer loans was $1.9 million as of December 31, 2025, adding 2 basis points to the overall ACL as a percent of total loans, which was 1.42% as of December 31, 2025.
Within the portions of Western North and South Carolina that were significantly impacted by Hurricane Helene, the Company identified borrowers with approximately $744 million of loans outstanding as of December 31, 2024. The Company continues to update analyses to identify impacts from the storm and has applied increased reserve rates based upon severe economic factors to the loans in the path of Helene. Additionally, the Company continues to evaluate the largest commercial loans in that population and applied incremental reserves to those loans that were suspected of having higher potential property damage or economic impact from the storm. The incremental reserve for potential exposure from Hurricane Helene was $13.0 million and added 16 basis points to the Allowance for Credit Losses as of December 31, 2024.
The decreased noninterest income for the year ended December 31, 20242025 as compared to the same period in 20232024 is a result of increased "Securities losses, net" in 2024 and lower "Other income, net," partially offset by increased "SBAOther loangains, sale gains.net." Details of the more significant components of noninterest income are presented in the table below. For the year ended December 31, 2024, the change in "Other income, net" was related to the timing of the recognition of gain and loss from other investment activity, which does not include AFS or HTM securities.
Other service charges and fees - bankcard interchange income, net represents interchange income from debit and credit card transactions, net of associated interchange expense and amounted to $9.3$9.5 million in 2024,2025, a 0.1%1.7% decreaseincrease from the $9.3 million in 2023.2024.
Other service charges - other includes items such as ATM charges, wire transfer fees, safety deposit box rentals, fees from sales of personalized checks, and check cashing fees. Also included in this category are SBA guarantee servicing fees and related servicing rights amortization which fluctuate based on the volume of and prepayment speeds on SBA loans serviced for others. The increase in this itemcategory in 20242025 was of $0.2$2.1 million, or 1.5%.15.9%.
Securities losses, net was $38.0$71.6 million in 2024.2025. Of$27.9 million of this balance,loss $36.8relates to a securities loss-earnback transaction from the third quarter in which the Company sold $194.3 million relatedof AFS securities bearing 1.63% at a loss. Additionally, $43.7 million of this loss relates to a securities loss-earnback transaction from the fourth quarter in which the Company sold $283.8$342.0 million of AFS securities bearing 1.62%1.67% at a loss of approximately $36.8 million and a purchased a total of $494.9 million in AFS securities bearing 5.21%.loss.
Other gains, net amounted to a net gain of $8.7 million for 2025. The majority of the increase from the prior year related to a pretax gain of $4.6 million realized upon the sale of an office building during the fourth quarter.
Other gains, net amounted to a net gain of $1.0 million for 2024. For 2022, the balance consisted primarily of death benefits realized on BOLI policies which were nominal in 2023 and 2024. The decline from 2023 to 2024 was primarily driven by SBA consulting fees, which declined from $2.6 million in 2022 to $0.3 million in 2024 as the Company ceased offering these services in early 2024.
The primary contributors to the $18.8$3.7 millionmillion, decreaseor 1.6%, increase for the year ended December 31, 20242025 as compared to 2024 was the same$4.2 periodmillion increase in 2023Total werepersonnel expense arising from increased incentives due to the $13.7Company's millionfinancial ofperformance, "Mergerpartially andoffset acquisition expenses" recorded in 2023 andby the $1.9$0.9 million decrease in "Non-creditAmortization losses."of intangible assets. For the year ended December 31, 2024,2025, there was ana continued overall effort by management to actively control headcount and expenses.
Noninterest expenses decreased 7.4% from 2023 to 2024. The decrease was driven by the merger and acquisition expenses of $13.7 million recorded in 2023 related to the acquisition of GrandSouth along with other elevated expenses from the acquisition.
Non-credit losses decreased $1.9 million as compared to the prior year driven by the implementation of additional measures to detect and prevent losses that led to a decrease in check fraud losses for 2024. Impacting noninterest expense in 2023 were increases for software costs related to the GrandSouth acquisition, including the transition of new customers. These costs did not continue in 2024. Occupancy and equipment expense in 2023 included elevated expenses related to building repairs and maintenance.
Offsetting the previously discussed decreases in noninterest expenses, was the increase in credit card rewards and other bankcard expenses, which were related to higher volumes of customer accounts and transactions.
We recorded income tax expense of $28.5 million in 2025, $21.9 million in 2024, and $27.8 million in 2023, and $38.3 million in 2022.2023. Our effective tax rates were at20.4% for 2025, 22.3% for 2024, and 21.1% for 2023, and 20.7% for 2022.2023. The slight increase in effective tax rate for 20232025 wasincluded attributableapproximately $2.1 million of net discrete tax benefits, primarily toarising mergerfrom andstate acquisitiontaxes, expensesincluding recordedthe resultingcontinued inNorth non-deductibleCarolina adjustments forgraduated tax purposes.rate reductions. The higher effective tax rate for 2024 was attributable primarily toincluded incremental state tax-related expense related to prior years, changes in state tax income apportionment, and the negative impact of decreasing deferred tax assets related to the North Carolina corporate income tax reduction effective January 1, 2025 and for future years.
The loan portfolio is the largest category of our earning assets and is comprised of commercial loans, real estate mortgage loans, real estate construction loans, and consumer loans. The majority of our loan portfolio is within our North Carolina and South Carolina market areas. We also have a portfolio of SBA loans that have been made on a nationwidemore dispersed geographic basis. The diversity of the economic bases of our market areas has historically provided a stable lending environment.
Total loans amounted to $8.1$8.7 billion at December 31, 2024,2025, aan decreaseincrease of $55.4$627.7 million, or 0.7%,7.8%, from December 31, 2023.2024. The following table provides a summary of the loan portfolio composition at each of the past five year ends.
The majority of our loan portfolio over the years has been real estate mortgage loans, including commercial and residential mortgages. All loan categories secured by real estate, including construction and land loans, have historically ranged from approximately 82% to 90% of the loan portfolio. Except for construction, land development, and other land loans, the majority of our real estate loans are personalprimarily andsupported commercial loans whereby cash flowflows from the borrower’s occupation or business is the primary repayment source,business, with the real estate pledged providing a secondary repayment source.
The largest component of our portfolio is non-owner occupied commercial real estate loans, followed by residential 1-4 family real estate and owner occupied commercial real estate loans. As demonstrated in the table above, while there have been some variations in the relative percentage of each loan category to the total portfolio over the years, the nature of our portfolio has not changed drastically from the prior year or the historical averages. The higher percentage for commercial and industrial loan category in 2020 was an anomaly related to PPP loans made under the provisions of the CARES Act, which were forgiven in accordance with the PPP loan provisions starting in late 2020 and through early 2022.
Approximately 12% of our accruing loans outstanding at December 31, 20242025 mature within one year and 59%61% of total loans mature within five years. During 2025, the Company continued to focus on shifting more loans to variable rates. As of December 31, 2024,2025, the percentages of variable rate loans and fixed rate loans as compared to total performing loans were 23%29% and 77%,71%, respectively.respectively, During 2024, the Company continuedcompared to focus on shifting more loans to variable rates as the mix was 19%23% variable and 81%77% fixed at December 31, 2023.2024. While fixed rate loans present market interest rate risk, we measuremonitor our interest rate risk closely. Refer to additional discussion in the section “Interest Rate Risk” below.
NPAs include nonaccrual loans, modifications to borrowers in financial distress, loans past due 90 days or more days and still accruing interest, foreclosed real estate and, prior to the adoption of ASU 2022-02, accruing TDRs.
Nonaccrual loans are loans on which interest income is no longer being recognized or accrued because management has determined that the collection of interest is doubtful. Placing loans on nonaccrual status negatively impacts earnings because (1) interest accrued but unpaid as of the date a loan is placed on nonaccrual status is reversed and deducted from interest income; (2) future accruals of interest income are not recognized until it becomes probable that both principal and interest will be paid; and (3) principal charged-off, if appropriate, may necessitate additional provisions for loan losses that are charged against earnings. As a matter of policy, we generally place all loans that are past due 90 or more days on nonaccrual basis. There were no accruing loans that were past due 90 days or more days at December 31, 20242025 and December 31, 2023.2024.
In some cases, where borrowers are experiencing financial difficulties, loans may be restructured to provide terms significantly different from the originally contracted terms.
What changed in the latest 10-Q
Risk Factors
Investing in shares of our common stock involves certain risks, including those identified and described in Item 1A of our Annual Report on Form 10-K for the fiscal year ended December 31, 2025, as well as cautionary statements contained in this Form 10-Q, including those under the caption “Forward-Looking Statements” set forth in the forepart of this Form 10-Q, risks and matters described elsewhere in this Form 10-Q and in our other filings with the SEC. There are no material changes from the risk factors set forth in the Company’s Annual Report on Form 10-K for the year ended December 31, 2025.
No wording changes found in this section.
Full comparison: every changed paragraph (0)
Management's Discussion & Analysis (MD&A)
New heading “Overview and Highlights for the Six Months Ended June 30, 2026”
New heading “Net Interest Income for the Six Months Ended June 30, 2026”
Largest changes
The unrealized loss on AFS securities totaledsee in full comparison$197.7$204.5 million atMarchJune31,30, 2026. Refer to Note 2 to the consolidated financial statements for additional detailed information regarding our mix of investments and the unrealized losses for each category.We evaluated the unrealized losses on individual securities at March 31, 2026 and determined them to be of a temporary nature due primarily to interest rate factors and not credit quality concerns. In arriving at this conclusion, we reviewed third-party credit ratings and considered the severity of the impairment.
“We earned net income of $97.2 million, or $2.35 diluted EPS, during the six months ended June 30, 2026 compared to net income of $75.0 million, or $1.81 diluted EPS, for the six months ended June 30, 2025 (the "like period"). Net interest income increased $28.9 million during the six months ended June 30, 2026 as compared to the like period, driving our increased earnings. This was primarily the result of higher yields on interest earning assets and a lower cost of funds, both of which were driven by this past year's overall interest rate environment.”see in full comparison
“•Interest expense on borrowings decreased $0.9 million for the six months ended June 30, 2026 as compared to the same period in 2025 due to the $17.4 million decrease in the average volume of borrowings between periods, coupled with a 60 basis point decrease in the rates on total borrowings. We repaid fixed rate subordinated debentures in the fourth quarter of 2025. The remaining borrowings are floating rate and therefore have lower interest rates in the current interest rate environment.”see in full comparison
“•Average loan volumes for the six months ended June 30, 2026 were $691.7 million higher than the same period in 2025 due to organic loan growth. In addition, interest rates on loans increased 10 basis points to 5.62% for the six months ended June 30, 2026, collectively resulting in an increase in loan interest income of $23.2 million.”see in full comparison
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Highlights of the results for the firstsecond quarter and year to date period of 2026 are presented below. Refer also to additional discussion in the "Results of Operations" and "Financial Condition" sections following.
Overview and Highlights for the Three Months Ended MarchJune 31,30, 2026
We earned net income of $46.7$50.5 million, or $1.13$1.22 diluted EPS, during the firstsecond quarter of 2026 compared to net income of $36.4$38.6 million, or $0.88$0.93 diluted EPS, for the firstsecond quarter of 2025.2025 (the "like quarter"). Our increased earnings was driven by a $14.3$14.6 million increase in net interest income in the first quarter of 2026 fromover the like quarter, resulting primarily byfrom a combination of 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.
•Net interest income for the firstsecond quarter of 2026 was $107.1$111.3 million, a 15.4%15.1% increase from the $92.8$96.7 million recorded in the firstlike quarter of 2025.quarter. There was a shift in the mix of interest-earning assets between periods, with average loans growing $674.3$708.9 million, while average taxable securities contracted $186.9$313.3 million and short-term investments contracted $226.9$61.1 million.
•Net interest margin ("NIM") increased 4239 basis points to 3.67%3.71% in the firstsecond quarter of 2026 from 3.25%3.32% in the firstlike quarter of 2025 as a result of the higher average balance of loans, improved yields on securities and lower cost of funds, notably money market deposits.
•We remained well-capitalized by all regulatory standards. Risk-based capital ratios contracted slightly during the quarter with a total common equity Tier 1 ratio of 14.13%,14.09%, Tier 1 risk-based capital ratio of 14.87%14.81% and total risk-based capital ratio of 16.12%16.06% at MarchJune 31,30, 2026, all down from MarchJune 31,30, 2025.
•The provision for credit losses for the firstsecond quarter of 2026 was $3.1$1.2 million, drivencompared byto loan growth and $1.4$1.0 million of net charge-offs.
•Noninterest income for the quarter ended MarchJune 31,30, 2026 totaled $15.2$16.0 million, reflecting an increase from the $13.0$14.3 million for the comparablelike prior year period,quarter, primarily from a $0.9 million increase in SBA loan sale gains and a $0.7$1.0 million increase in Other income.income, net.
•Noninterest expense of $60.2$62.8 million increased $2.3$3.8 million, or 4.0%, for the quarter ended March 31, 20266.5%, from the priorlike year.quarter. The increase is attributable to a $1.7$3.3 million increase in Total personnel expenses and a $0.8$1.0 million increase in Other operating expenses.
Overview and Highlights for the Six Months Ended June 30, 2026
We earned net income of $97.2 million, or $2.35 diluted EPS, during the six months ended June 30, 2026 compared to net income of $75.0 million, or $1.81 diluted EPS, for the six months ended June 30, 2025 (the "like period"). Net interest income increased $28.9 million during the six months ended June 30, 2026 as compared to the like period, driving our increased earnings. This was primarily the result of higher yields on interest earning assets and a lower cost of funds, both of which were driven by this past year's overall interest rate environment.
•Net interest income for the six months ended June 30, 2026 was $218.4 million, a 15.2% increase from the $189.5 million recorded for the like period. The increase in net interest income was driven by higher yields on interest earning assets and lower cost of funds.
•NIM increased 41 basis points to 3.69% for the six months ended June 30, 2026 from 3.28% for the like period as a result of the higher average balances on loans, yields on loans and securities and lower cost of funds, particularly money market deposits.
•For the six months ended June 30, 2026, the Company recorded $4.3 million in provision for credit losses as compared to $3.3 million for the like period. The lower provision in the like period was significantly impacted by the $5.5 million release of provision related to Hurricane Helene (the release represented a benefit of $4.2 million after-taxes or $0.10 per diluted share). The provision for credit losses in 2026 was impacted by loan growth in 2026 and net charge off activity of $2.4 million.
•Noninterest income for the six months ended June 30, 2026 totaled $31.2 million, an increase of $4.0 million, from the like period primarily related to the $1.7 million increase in Other income, net and the $1.2 million increase in SBA loan sale gains.
•Noninterest expense increased $6.1 million to $123.0 million for the six months ended June 30, 2026 as compared to the like period, primarily driven by a $5.0 million increase in Personnel expenses and a $1.7 million increase in Other operating expenses.
Total assets were $12.9$13.0 billion at MarchJune 31,30, 2026, a 2.2%2.9% increase from December 31, 2025. The increase was driven primarily by deposit growth generating investable funds that were deployed ininto loans and interest-bearing cash and loan balances.cash. The primary balance sheet changes are presented below.
•Total cash and cash equivalents amounted to $598.0$550.3 million at MarchJune 31,30, 2026, representing a $288.4$240.7 million increase from December 31, 2025. Interest-bearing cash increased $300.0$259.1 million and was partially offset by an $11.6$18.3 million decrease in noninterest-bearing cash.
•AFS securities increaseddecreased $69.0$109.5 million, or 3.4%,5.3%, during the threesix months ended MarchJune 31,30, 2026.
•Total loans amounted to $8.8$9.0 billion at MarchJune 31,30, 2026, reflecting an increase of $71.4$266.3 million, or 0.8%,3.1%, from December 31, 2025.
•Total deposits were $11.0$11.1 billion at MarchJune 31,30, 2026, an increase of $264.1$336.4 million, or 2.46%,3.13%, from December 31, 2025. Deposit growth during the period wasarose splitfrom betweenboth noninterest-bearing deposits, which increased $109.6$110.6 million, and interest-bearing deposits, which increased $154.4$225.9 million.
•Credit quality continued to be strong at MarchJune 31,30, 2026, with NPAs of 0.32%0.34% of total assets as of MarchJune 31,30, 2026, up 24 basis points from 0.30% at December 31, 2025.
•Our on-balance sheet liquidity ratio was 16.7%15.7% at MarchJune 31,30, 2026. Available off-balance sheet sources totaled $2.5$2.4 billion at quarter end, resulting in a total liquidity ratio of 34.0%.32.8%.
Net Interest Income for the Three Months Ended MarchJune 31,30, 2026
Net interest income for the firstsecond quarter of 2026 amounted to $107.1$111.3 million, an increase of $14.3$14.6 million, or 15.4%,15.1%, from the $92.8$96.7 million recorded in the firstsecond quarter of 2025. The increase was primarily driven by higher yields on interest-earning assets and lower cost of funds.
For the firstsecond quarter of 2026, average interest-earning assets increased $256.3$330.4 million, or 2.2%,2.8%, from the comparable period of the prior year, with average loans growing $674.3$708.9 million, while average securities and short term investments declined by $191.1$317.5 million and $226.9$61.1 million respectively.
The cost of interest bearing deposits decreased 2520 basis points from the firstsecond quarter of 2025, with the biggest decrease coming from the cost of Money market deposits, which decreased 3833 basis points and the cost of Time deposits > $250,000, which decreased 2922 basis points.
These changes resulted in the 4239 basis point improvement in our NIM (see discussion below) from the like quarter to 3.67%3.71% for the firstsecond quarter of 2026.
The following table presents an analysis of net interest income for the firstsecond quarter of 2026 and 2025:
(2) Includes accretion of discount on acquired loans of $1.1 million and $1.8$1.5 million for three months ended MarchJune 31,30, 2026 and 2025, respectively.
Overall, as demonstrated in the table above, the growth in earning assets, a shift in the mix of those earning assets from lower-yielding assets to higher-yielding assets, increased yield on assets and a decrease in the cost of liabilities drove the expansion in NIM and net interest income.
•Net interest income for the firstsecond quarter of 2026 was $107.1$111.3 million, an increase of $14.3$14.6 million from the like quarter. The increase in net interest income was primarily driven by our focused efforts to increase interest-earning assets, to improve the mix of earning assets and to manage deposit costs after the rate cuts by the Federal Reserve between September and December of 2024, which saw the federal funds rate fall 50 basis points and additional rate cuts totaling 75 basis points in the second half of 2025. We also focused on increasing loan yields as new originations were at higher rates than older loans. Further, securities yields increased as a result of the loss-earnback transactions in the third and fourth quarters of 2025 along with continued paydowns and payoffs on lower-yielding bonds.
•The Company’s NIM for the firstsecond quarter of 2026 was 3.67%,3.71%, an increase of 4239 basis points from the like quarter. Within interest-earning assets, the 2025 securities loss-earnback transactions referenced above resulted in an increase of 4630 basis points on the yield on total securities as compared to the like quarter. In addition, loan yields increased 614 basis points to 5.58%.5.67%. Following the rate cuts by the Federal Reserve in late 2024 and the second half of 2025, the rate on interest-bearing deposits fell 2520 basis points from the like quarter.
•Average interest-bearinginterest-earning assets increased $256.3$330.4 million for the three months ended MarchJune 31,30, 2026, including a shift in interest-bearing assets from lower-yielding assets to higher-yielding assets. Average loans for the three months ended MarchJune 31,30, 2026 were $674.3$708.9 million higher than the same period in 2025. In addition, interest rates on loans increased 614 basis points to 5.58%5.67% for the firstsecond quarter of 2026, collectively resulting in an increase of $10.3$12.9 million in interest income on loans.
•Average securities for the three months ended MarchJune 31,30, 2026 contracted $191.1$317.5 million from the like quarter, but the yields on securities increased 0.46%0.30% to 2.74%2.70% for the firstsecond quarter of 2026, resulting in an increase in interest income on securities of $2.0$0.1 million.
•Average short-term investments for the three months ended MarchJune 31,30, 2026 contracted $226.9$61.1 million from the same period in 2025 and yields fell 0.06%0.64% to 4.36%,3.99%, resulting in a $2.5$1.4 million decrease in interest income on short-term investments.
•Due to the impact of the aforementioned Federal Reserve rate cuts in 2024 and 2025 and the resulting decreased market rates partially offset by higher average balances, deposit interest expense for the three months ended MarchJune 31,30, 2026 decreased $4.1$2.6 million compared to the same period in 2025. Average interest-bearing deposit balances increased $87.3$192.7 million while rates on those deposits decreased 2520 basis points as compared to the like quarter. The deposit changes were driven primarily by money market deposits as the average balance increased $228.8$307.2 million while the rate on those deposits fell 3833 basis points, together accounting for $2.7$1.7 million of the decrease in interest expense.
Net Interest Income for the Six Months Ended June 30, 2026
Net interest income for the six months ended June 30, 2026 amounted to $218.4 million, an increase of $28.9 million, or 15.2%, from the $189.5 million recorded in the six months ended June 30, 2025. As described above, the rate cuts by the Federal Reserve in the second half of 2024 and third quarter of 2025 decreased market rates which had resulting impacts on the rates we paid or received in 2024 and 2025. Similar to the impact during the three months ended June 30, 2026, the increase in net interest income for the six months ended June 30, 2026 was also driven by lower cost of funds, and increased yields on interest-earning assets. Our NIM increased to 3.69% for the six months ended June 30, 2026 from 3.28% for the six months ended June 30, 2025.
The following table presents an analysis of net interest income for the six months ended June 30, 2026 and 2025.
(1) Average loans include nonaccruing loans, the effect of which is to lower the average rate shown.
(2) Includes accretion of discount on acquired loans of $2.1 million and $3.2 million for six months ended June 30, 2026 and 2025, respectively.
(3) Includes tax-equivalent adjustments to reflect the tax benefit that we receive related to tax-exempt securities and loans as reduced by the related nondeductible portion of interest expense.
Overall, as demonstrated in the table above, the expansion in NIM, coupled with increased earning asset volumes, drove the increase in net interest income.
•During the second half of 2025, the Federal Reserve decreased the fed funds rate a total of 75 basis points. The average prime rate was 6.75% for the six months ended June 30, 2026, compared to 7.50% for the prior year period. During 2025 and 2026, the yield curve has been positively sloping beyond three years, although longer term treasury rates are still fairly close to fed funds rates.
•Average loan volumes for the six months ended June 30, 2026 were $691.7 million higher than the same period in 2025 due to organic loan growth. In addition, interest rates on loans increased 10 basis points to 5.62% for the six months ended June 30, 2026, collectively resulting in an increase in loan interest income of $23.2 million.
•Due to lower market rates partially offset by an overall growth of deposits, interest expense on deposits for the six months ended June 30, 2026 decreased $6.7 million compared to the same period in 2025. Average total interest-bearing deposit balances increased $140.3 million while rates on those deposits decreased 22 basis points as compared to the prior year period. Within this population, average balances on Money market deposits increased $268.2 million while rates on those accounts decreased 35 basis points as compared to the prior year, resulting in a $4.3 million decrease in interest expense. Average balances on Time deposits >$250,000 decreased $39.7 million and rates on these accounts decreased 26 basis points as compared to the prior year, collectively resulting in a $1.0 million decrease in interest expense.
•Interest expense on borrowings decreased $0.9 million for the six months ended June 30, 2026 as compared to the same period in 2025 due to the $17.4 million decrease in the average volume of borrowings between periods, coupled with a 60 basis point decrease in the rates on total borrowings. We repaid fixed rate subordinated debentures in the fourth quarter of 2025. The remaining borrowings are floating rate and therefore have lower interest rates in the current interest rate environment.
•Collectively, these changes resulted in an increase of 41 basis points in NIM.
The following is a reconciliation of reported net interest income to tax-equivalent net interest income and the resulting NIM to NIM-T/E.
At MarchJune 31,30, 2026 and 2025, unaccreted loan discounts on purchased loans amounted to $7.7$6.6 million and $13.3$11.8 million, respectively. The portfolio acquired with the GrandSouth Bancorporation acquisition on January 1, 2023 comprised the majority of the remaining unaccreted loan discount.
In addition to the loan discount accretion recorded on acquired loans, we recorded accretion on the discounts associated with the retained unguaranteed portions of SBA loans for which the guaranteed portion was sold in the secondary market. The level of SBA loan discount accretion will fluctuate relative to the SBA loan portfolio balances. At March 31, 2026 and 2025, the unaccreted loan discounts on SBA loans amounted to $2.1 million and $2.5 million, respectively.
The provision for credit losses was $3.1$1.2 million and $1.1$2.2 million for the three months ended MarchJune 31,30, 2026 and 2025, respectively, and $4.3 million and $3.3 million for the six months ended June 30, 2026 and 2025, respectively. The firstsecond quarter of 2026 included a provision for loan losses of $2.6$1.1 million and a provision for unfunded commitments expense of $0.5$22 million.thousand. The firstsecond quarter of 2025 included a provision for loan losses of $1.4$1.1 million and a provision for unfunded commitments reversal of $0.3$1.1 million. In the like quarter, the provision for loan losses included thea $2.0$3.5 million release of the allowance specifically attributed to Hurricane Helene. The six months ended June 30, 2026 included a provision for loan losses of $3.7 million and a provision for unfunded commitments expense of $0.6 million. The six months ended June 30, 2025 included a provision for loan losses of $2.5 million and a provision for unfunded commitments of $0.9 million. In the six months ended June 30, 2025, the provision for loan losses included a $5.5 million release of the allowance specifically attributed to Hurricane Helene.
Total noninterest income for the three months ended MarchJune 31,30, 2026 was $15.2$16.0 million, a 17.2%12.2% increase from the $13.0$14.3 million recorded for the three months ended MarchJune 31,30, 2025. As compared to the firstsecond quarter of 2025, SBA loan sale gains increased $0.9 million and Other Income, net increased $0.7$1.0 million and Other service charges, commissions and fees decreased $0.6 million.
For the six months ended June 30, 2026 and 2025, total noninterest income was $31.2 million and $27.2 million, respectively. For the year to date periods, a $1.7 million increase in Other income, net coupled with a $1.2 million increase in SBA loan sale gains account for a majority of the change.
Total noninterest expenses totaled $60.2$62.8 million and $57.9$58.9 million for the three months ended MarchJune 31,30, 2026 and 2025, respectively, increasing $2.3$3.8 million, or 4.0%.6.5%. This was primarily attributable to a $1.7$3.3 million increase in Total personnel expense primarily due to the timing of annual raises in the second quarter each year and a $0.8$0.4 million increase in Professional fees. Total noninterest expenses totaled $123.0 million and $116.8 million for the six months ended June 30, 2026 and 2025, respectively, increasing $6.1 million, or 5.3%. This was primarily attributable to a $5.0 million increase in Total personnel expense also primarily due to annual raises and a $1.1 million increase in Software licenses and other software costs.costs, partially offset by a $0.5 million decrease in Intangibles amortization expense.
We recorded income tax expense of $12.3$12.9 million and $10.4$11.3 million for the three months ended MarchJune 31,30, 2026 and 2025, respectively, resulting in effective tax rates of 20.9%20.3% and 22.2%.22.6%. For the six months ended June 30, 2026 and 2025, we recorded tax expense of $25.2 million and $21.6 million, resulting in effective tax rates of 20.6% and 22.4%, respectively.
Total assets at MarchJune 31,30, 2026 amounted to $12.9$13.0 billion, a $279.4$373.3 million, or 2.2%,2.9%, increase from December 31, 2025 and was primarily related to higher interest-bearing cashloans and loans,interest-bearing cash, partially offset by a contraction in the balance of AFS securities.
Total loans at MarchJune 31,30, 2026 were $8.8$9.0 billion, an increase of $71.4$266.3 million, or 0.8%,3.1%, from December 31, 2025. The mix of our loan portfolio remained relatively unchanged from December 31, 2025 to MarchJune 31,30, 2026. Note 3 to the consolidated financial statements presents additional detail regarding our mix of loans. At MarchJune 31,30, 2026, we had no notable concentrations in geographies or industries, including in office or hospitality categories. The Company's exposure to non-owner occupied commercial office loans represented approximately 6.5%6.2% of the total portfolio at MarchJune 31,30, 2026, with the largest loan being $33.0 million and the average outstanding loan balance being $1.4 million. Non-owner occupied office loans were generally in non-metro markets and the 10 largest loans in this category represented less than 2% of the total loan portfolio at MarchJune 31,30, 2026.
Total investment securities were $2.5$2.4 billion at MarchJune 31,30, 2026, a decrease of $70.6$112.9 million from December 31, 2025, drivenas bywe did not reinvest all proceeds from prepayments and maturities. The composition of our investment portfolio remained substantially the same at MarchJune 31,30, 2026 as at December 31, 2025.
FBNC insider buying and selling (Form 4)
Since 2026-04-11, insiders reported open-market purchases in 1 Form 4 filing (1 insider, 1 trade date, 231 shares, about $14.8K) and open-market sales in 2 filings (2 insiders, 3 trade dates, 67,667 shares, about $4.1M). Net open-market shares: -67,436 (purchases minus sales); net value about -$4.0M.Totals add up every open-market (code P and S) line in those filings, using the prices reported in the filings. Awards, option exercises, tax withholding and gifts are listed below but not counted.
| Trade date | Insider | Transaction | Shares | Price | Value |
|---|---|---|---|---|---|
| 2026-09-29 | Moore Richard H |
Open-market sale | 7,343 | $62.17 | $456.5K |
| 2026-09-28 | Moore Richard H |
Open-market sale | 16,000 | $63.17 | $1.0M |
| 2026-09-11 | Nevin Katharine Caldwell |
Open-market purchase | 231 | $64.23 | $14.8K |
| 2026-06-29 | Moore Richard H |
Shares withheld for tax | 6,878 | $63.53 | $437.0K |
| 2026-06-29 | Currie Gregory A |
Shares withheld for tax | 2,096 | $63.53 | $133.2K |
| 2026-06-29 | Bostian Elizabeth B |
Shares withheld for tax | 1,887 | $63.53 | $119.9K |
| 2026-06-29 | Moore Richard H |
Shares withheld for tax | 2,096 | $63.53 | $133.2K |
| 2026-06-29 | Currie Gregory A |
Shares withheld for tax | 2,096 | $63.53 | $133.2K |
| 2026-06-29 | Bostian Elizabeth B |
Shares withheld for tax | 1,887 | $63.53 | $119.9K |
| 2026-06-23 | Hicks Thomas Brent |
Grant/award | 1,087 | $62.03 | $67.4K |
| 2026-06-23 | Wilson Christian Anthony |
Grant/award | 2,902 | $62.03 | $180.0K |
| 2026-06-23 | Bostian Elizabeth B |
Grant/award | 3,386 | $62.03 | $210.0K |
| 2026-06-23 | Currie Gregory A |
Grant/award | 7,739 | $62.03 | $480.1K |
| 2026-06-23 | Moore Richard H |
Grant/award | 9,673 | $62.03 | $600.0K |
| 2026-06-15 | Hans Peter |
Grant/award | 863 | $57.99 | $50.0K |
| 2026-06-15 | Nevin Katharine Caldwell |
Grant/award | 863 | $57.99 | $50.0K |
| 2026-06-01 | Mclamb Carlie C Jr |
Grant/award | 863 | $57.99 | $50.0K |
| 2026-06-01 | Deferie Suzanne S |
Grant/award | 863 | $57.99 | $50.0K |
| 2026-06-01 | Mayer Michael Goodwin |
Grant/award | 863 | $57.99 | $50.0K |
| 2026-06-01 | Crawford James C Iii |
Grant/award | 863 | $57.99 | $50.0K |
| 2026-06-01 | Taylor Frederick Leslie |
Grant/award | 863 | $57.99 | $50.0K |
| 2026-06-01 | Sloan O. Temple Iii |
Grant/award | 863 | $57.99 | $50.0K |
| 2026-06-01 | Perry Dexter V |
Grant/award | 863 | $57.99 | $50.0K |
| 2026-06-01 | Mccauley John W |
Grant/award | 863 | $57.99 | $50.0K |
| 2026-06-01 | Donnelly Abby Jill |
Grant/award | 863 | $57.99 | $50.0K |
| 2026-05-20 | Mayer Michael Goodwin |
Open-market sale | 44,324 | $58.58 | $2.6M |
Well-known investors holding FBNC (13F)
None of the 59 investors we track reported a position in their latest 13F.