First Bancorp (FBNC)

Regional banking company First Bancorp (NASDAQ:FBNC) reported Q3 CY2025 results beating Wall Street’s revenue expectations, with sales up 21.1% year on year to $117.9 million. Its non-GAAP profit of $1.01 per share was 9.5% above 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).

Net interest income and and fee-based revenue are the two pillars supporting bank earnings. The former captures profit from the gap between lending rates and deposit costs, while the latter encompasses charges for banking services, credit products, wealth management, and trading activities. Regrettably, First Bancorp’s revenue grew at a mediocre 8.2% compounded annual growth rate over the last five years. This was below our standard for the banking sector and is a poor baseline for our analysis.

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 shows its demand has slowed as its annualized revenue growth of 2% over the last two years was below its five-year trend. 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 robust year-on-year revenue growth of 21.1%, and its $117.9 million of revenue topped Wall Street estimates by 3.6%.

Net interest income made up 84.1% 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.

While banks generate revenue from multiple sources, investors view net interest income as the cornerstone - its predictable, recurring characteristics stand in sharp contrast to the volatility of non-interest income.

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 11.3 percentage points, going from 53.4% to 66%. 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 67.2% this quarter, falling short of analysts’ expectations by 1,447.3 basis points (100 basis points = 1 percentage point). This result was 5.2 percentage points worse 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 49.2%.

We track the long-term change in earnings per share (EPS) for the same reason as long-term revenue growth. Compared to revenue, however, EPS highlights whether a company’s growth is profitable.

First Bancorp’s unimpressive 6.5% annual EPS growth over the last five years aligns with its revenue performance. On the bright side, this tells us its incremental sales were profitable.

Like with revenue, we analyze EPS over a shorter period to see if we are missing a change in the business.

For First Bancorp, EPS didn’t budge over the last two years, a regression from its five-year trend. We hope it can revert to earnings growth in the coming years.

In Q3, First Bancorp reported adjusted EPS of $1.01, up from $0.70 in the same quarter last year. This print beat analysts’ estimates by 9.5%. Over the next 12 months, Wall Street expects First Bancorp’s full-year EPS of $3.48 to grow 22.4%.

Banks are balance sheet-driven businesses because they generate earnings primarily through borrowing and lending. They’re also valued based on their balance sheet strength and ability to compound book value (another name for shareholders’ equity) over time.

This explains why tangible book value per share (TBVPS) stands as the premier banking metric. TBVPS strips away questionable intangible assets, revealing concrete per-share net worth that investors can trust. 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 mediocre 4.2% annual clip over the last five years. However, TBVPS growth has accelerated recently, growing by 21.8% annually over the last two years from $18.20 to $26.98 per share.

Over the next 12 months, Consensus estimates call for First Bancorp’s TBVPS to grow by 13.1% to $30.52, decent 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 14.5%, which is considered safe and well capitalized in the event that macro or market conditions suddenly deteriorate.

Return on equity, or ROE, quantifies bank profitability relative to shareholder equity - an essential capital source for these institutions. Over extended periods, superior ROE performance drives faster shareholder wealth compounding through reinvestment, share repurchases, and dividend growth.

Over the last five years, First Bancorp has averaged an ROE of 9.4%, uninspiring for a company operating in a sector where the average shakes out around 7.5%.

We enjoyed seeing First Bancorp beat analysts’ revenue expectations this quarter. We were also glad its net interest income outperformed Wall Street’s estimates. Zooming out, we think this quarter featured some important positives. The stock remained flat at $53.52 immediately following the results.

Updated: January 12, 2026 at 11:35 PM EST

When considering an investment in First Bancorp, investors should account for its valuation and business qualities as well as what’s happened in the latest quarter.

First Bancorp’s business quality ultimately falls short of our standards. To begin with, its revenue growth was mediocre 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 worsening efficiency ratio shows the business has become less productive. On top of that, its unimpressive EPS growth over the last five years shows it’s failed to produce meaningful profits for shareholders.

First Bancorp’s P/B ratio based on the next 12 months is 1.4x. While this valuation is fair, the upside isn’t great compared to the potential downside. We're pretty confident there are superior stocks to buy right now.

Wall Street analysts have a consensus one-year price target of $60.20 on the company (compared to the current share price of $53.52).