First Bancorp (FBNC)

Regional banking company First Bancorp (NASDAQ:FBNC) reported Q2 CY2025 results exceeding the market’s revenue expectations, with sales up 16% year on year to $111 million. Its non-GAAP profit of $0.87 per share was in line with analysts’ consensus estimates.

Company Overview

Founded during the Great Depression in 1934 and originally known as Montgomery Bancorp, First Bancorp (NASDAQ:FBNC) is a community-oriented commercial bank providing a wide range of financial services to businesses and individuals in North and South Carolina.

Regional banks, financial institutions operating within specific geographic areas, serve as intermediaries between local depositors and borrowers. They benefit from rising interest rates that improve net interest margins (the difference between loan yields and deposit costs), digital transformation reducing operational expenses, and local economic growth driving loan demand. However, these banks face headwinds from fintech competition, deposit outflows to higher-yielding alternatives, credit deterioration (increasing loan defaults) during economic slowdowns, and regulatory compliance costs. Recent concerns about regional bank stability following high-profile failures and significant commercial real estate exposure present additional challenges.

First Bancorp competes with other regional banks operating in North Carolina and South Carolina, including Truist Financial (NYSE:TFC), First Citizens BancShares (NASDAQ:FCNCA), United Community Banks (NASDAQ:UCBI), and South State Corporation (NASDAQ:SSB).

Two primary revenue streams drive bank earnings. While net interest income, which is earned by charging higher rates on loans than paid on deposits, forms the foundation, fee-based services across banking, credit, wealth management, and trading operations provide additional income. Thankfully, First Bancorp’s 5.8% annualized revenue growth over the last five years was decent. Its growth was slightly above the average banking company and shows its offerings resonate with customers.

Long-term growth is the most important, but within financials, a half-decade historical view may miss recent interest rate changes and market returns. First Bancorp’s recent performance marks a sharp pivot from its five-year trend as its revenue has shown annualized declines of 3.7% over the last two years. Note: Quarters not shown were determined to be outliers, impacted by outsized investment gains/losses that are not indicative of the recurring fundamentals of the business.

This quarter, First Bancorp reported year-on-year revenue growth of 16%, and its $111 million of revenue exceeded Wall Street’s estimates by 2.2%.

Net interest income made up 84.7% of the company’s total revenue during the last five years, meaning First Bancorp barely relies on non-interest income to drive its overall growth.

Our experience and research show the market cares primarily about a bank’s net interest income growth as non-interest income is considered a lower-quality and non-recurring revenue source.

The underlying profitability of top-line growth determines the actual bottom-line impact. Banking institutions measure this dynamic using the efficiency ratio, which is calculated by dividing non-interest expenses like personnel, facilities, technology, and marketing by total revenue.

Investors place greater emphasis on efficiency ratio movements than absolute values, understanding that expense structures reflect revenue mix variations. Lower ratios represent better operational performance since they show banks generating more revenue per dollar of expense.

Over the last five years, First Bancorp’s efficiency ratio has increased by 9.3 percentage points, going from 53% to 64.6%. Said differently, the company’s expenses have increased at a faster rate than revenue, which usually raises questions unless the company is in high-growth mode and reinvesting its profits into attractive ventures.

First Bancorp’s efficiency ratio came in at 53.1% this quarter, beating analysts’ expectations by 145.6 basis points (100 basis points = 1 percentage point). This result was 7.8 percentage points better than the same quarter last year.

For the next 12 months, Wall Street expects First Bancorp to rein in some of its expenses as it anticipates an efficiency ratio of 50.7%.

Revenue trends explain a company’s historical growth, but the long-term change in earnings per share (EPS) points to the profitability of that growth – for example, a company could inflate its sales through excessive spending on advertising and promotions.

First Bancorp’s unimpressive 4.3% annual EPS growth over the last five years aligns with its revenue performance. This tells us it maintained its per-share profitability as it expanded.

Like with revenue, we analyze EPS over a more recent period because it can provide insight into an emerging theme or development for the business.

For First Bancorp, its two-year annual EPS declines of 8.4% show it’s continued to underperform. These results were bad no matter how you slice the data.

In Q2, First Bancorp reported adjusted EPS of $0.87, up from $0.70 in the same quarter last year. This print was close to analysts’ estimates. Over the next 12 months, Wall Street expects First Bancorp’s full-year EPS of $3.17 to grow 14.6%.

Banks operate as balance sheet businesses, with profits generated through borrowing and lending activities. Valuations reflect this reality, emphasizing balance sheet strength and long-term book value compounding ability.

When analyzing banks, tangible book value per share (TBVPS) takes precedence over many other metrics. This measure isolates genuine per-share value by removing intangible assets of debatable liquidation worth. EPS can become murky due to acquisition impacts or accounting flexibility around loan provisions, and TBVPS resists financial engineering manipulation.

First Bancorp’s TBVPS grew at a tepid 3.4% annual clip over the last five years. However, TBVPS growth has accelerated recently, growing by 15.5% annually over the last two years from $19.12 to $25.50 per share.

Over the next 12 months, Consensus estimates call for First Bancorp’s TBVPS to grow by 12.3% to $28.65, top-notch growth rate.

Leverage is core to a financial firm’s business model (loans funded by deposits). To ensure economic stability and avoid a repeat of the 2008 GFC, regulators require certain levels of capital and liquidity, focusing on the Tier 1 capital ratio.

Tier 1 capital is the highest-quality capital that a firm holds, consisting primarily of common stock and retained earnings, but also physical gold. It serves as the primary cushion against losses and is the first line of defense in times of financial distress.

This capital is divided by risk-weighted assets to derive the Tier 1 capital ratio. Risk-weighted means that cash and US treasury securities are assigned little risk while unsecured consumer loans and equity investments get much higher risk weights, for example.

New regulation after the 2008 financial crisis requires that all firms must maintain a Tier 1 capital ratio greater than 4.5%. On top of this, there are additional buffers based on scale, risk profile, and other regulatory classifications, so that at the end of the day, firms generally must maintain a 7-10% ratio at minimum.

Over the last two years, First Bancorp has averaged a Tier 1 capital ratio of 14.3%, which is considered safe and well capitalized in the event that macro or market conditions suddenly deteriorate.

Return on equity (ROE) reveals the profit generated per dollar of shareholder equity, which represents a key source of bank funding. Banks maintaining elevated ROE levels tend to accelerate wealth creation for shareholders via earnings retention, buybacks, and distributions.

Over the last five years, First Bancorp has averaged an ROE of 9.6%, healthy for a company operating in a sector where the average shakes out around 7.5% and those putting up 15%+ are greatly admired. This is a bright spot for First Bancorp.

It was encouraging to see First Bancorp beat analysts’ revenue expectations this quarter. We were also happy its net interest income outperformed Wall Street’s estimates. On the other hand, its EPS was in line. Zooming out, we think this was a mixed quarter. The stock remained flat at $53.28 immediately following the results.

Updated: December 3, 2025 at 11:47 PM EST

Before making an investment decision, investors should account for First Bancorp’s business fundamentals and valuation in addition to what happened in the latest quarter.

First Bancorp isn’t a terrible business, but it isn’t one of our picks. To kick things off, its revenue growth was uninspiring over the last five years. And while its anticipated efficiency ratio over the next year signals it will gain leverage on its fixed costs, the downside is its weak EPS growth over the last five years shows it’s failed to produce meaningful profits for shareholders. On top of that, its worsening efficiency ratio shows the business has become less productive.

First Bancorp’s P/B ratio based on the next 12 months is 1.3x. Investors with a higher risk tolerance might like the company, but we don’t really see a big opportunity at the moment. We're fairly confident there are better investments elsewhere.

Wall Street analysts have a consensus one-year price target of $58.75 on the company (compared to the current share price of $51.71).