FIRST BANCORP /NC/ Annual Report - Your Investor's Guide to 2025 Performance

Unlock the key insights from FIRST BANCORP /NC/'s latest annual report for the year ending December 31, 2025. This guide breaks down the company's performance and strategic direction in clear, accessible language, helping you understand its financial health and future prospects.

1. Business Overview

FIRST BANCORP /NC/ operates primarily as FirstBank, a financial institution offering a wide array of banking services. Its core business centers on various lending activities, including commercial, residential, and consumer loans, alongside managing an investment portfolio. A key strategic move was the acquisition of GrandSouth, completed on January 1, 2023, which significantly expanded FirstBank's market presence. This review covers the company's operational and financial performance through the end of 2025, drawing insights from comparisons to 2024 and 2023. FirstBank serves individuals, small businesses, and corporations across its operating regions.

2. Financial Performance

FirstBank's financial health largely stems from the interest and fee income it earns from its loans. Other non-operating gains or losses also significantly impact its profitability. The 10-K thoroughly analyzes year-over-year changes in key financial metrics, including:

• Net Interest Income
• Non-Interest Income
• Non-Interest Expense
• Provision for Credit Losses
• Net Income

The report explains the factors behind these fluctuations. To assess growth and shareholder value, it also examines changes in Common Stock, Retained Earnings, and Accumulated Other Comprehensive Income from 2023 to 2025, showing how the company manages its earnings and equity.

3. Risk Factors

Investors should understand several key risks detailed in the 10-K:

• Credit Risk: This is a significant factor, particularly concerning the levels and trends of non-performing loans (loans not performing as expected) in 2025 and 2024.
• Loan Concentration Risk: The company faces concentration in specific loan types across its portfolios, including:
  • Commercial loans
  • Commercial Real Estate (Construction, Owner-Occupied, and Non-Owner-Occupied properties)
  • Residential loans (Home Equity, Fixed-Rate Mortgages, and Construction loans)
  • Consumer loans The reported minimum and maximum ranges for these loan types highlight the varying risk profiles within the portfolio.
• Interest Rate Risk: This risk is inherent given the diverse nature of FirstBank's lending products, directly impacting its net interest margin.

Other typical risks for financial institutions include operational risk, liquidity risk, regulatory risk, and cybersecurity risk.

4. Management Discussion and Analysis (MD&A) Highlights

The Management's Discussion and Analysis (MD&A) offers a comprehensive review of FIRST BANCORP /NC/'s financial condition and operational results. Key highlights include:

• GrandSouth Acquisition: The MD&A details the successful integration and ongoing benefits from the GrandSouth acquisition, which has contributed to strategic expansion and a stronger market presence.
• Income and Expense Trends: It discusses trends in Net Interest Income, driven by changes in interest rates, loan volumes, and funding costs. It also analyzes non-interest income and expense components, such as service charges, fees, and personnel costs.
• Asset Quality: The MD&A addresses the management of non-performing loans and the provision for credit losses, outlining the company's asset quality and credit risk management strategies.
• Strategic Initiatives: It covers strategic initiatives like optimizing loan portfolios, effective capital management, and pursuing growth opportunities, explaining their impact on financial performance.
• Market and Regulatory Influences: The MD&A further examines how broader market trends, economic conditions, interest rate fluctuations, and the regulatory environment influence the company's financial results and outlook. This includes compliance with requirements for assets pledged for public deposits and Federal Reserve borrowings.

5. Financial Health

FIRST BANCORP /NC/'s financial strength is evident in the composition of its "Other Assets" and "Other Liabilities." The company supports its liquidity and capital management with assets designated as collateral for public deposits and Federal Reserve borrowings, ensuring it can meet its obligations. We also assess the quality of its assets through the levels of non-performing loans.

The company maintains a diverse investment portfolio, with holdings reported for both 2025 and 2024, including:

• U.S. Treasury Securities
• U.S. Government-Sponsored Enterprise (GSE) Debt Securities
• Mortgage-Backed Securities
• Corporate Debt Securities
• U.S. States and Political Subdivisions (Municipal) Securities

The 10-K also details capital ratios (e.g., Common Equity Tier 1, Tier 1, and Total Capital Ratios) and their compliance with regulatory requirements, along with the composition of its deposits and funding sources.

6. Future Outlook

Looking ahead, FIRST BANCORP /NC/ plans to continue building on its strategic initiatives, including maximizing the integration benefits from the GrandSouth acquisition. The company remains focused on:

• Prudent management of its loan portfolios
• Maintaining strong asset quality
• Adapting to evolving market conditions to drive sustainable growth and enhance shareholder value

Strategic priorities include optimizing its net interest margin, controlling non-interest expenses, and exploring opportunities for organic growth and potential strategic acquisitions. FirstBank also monitors economic forecasts and regulatory changes to inform its strategic planning and risk management.

7. Competitive Position

FIRST BANCORP /NC/ operates in a highly competitive banking environment. Its diverse loan portfolio, spanning commercial, residential, and consumer segments, allows it to compete effectively across various market niches. The company competes with national, regional, and community banks, as well as credit unions and non-bank financial service providers. FirstBank's ability to maintain and grow its market share depends on:

• Its service offerings
• Competitive interest rates
• Customer relationships
• Technological capabilities
• Branch network

The GrandSouth acquisition has further strengthened its competitive footprint and market share in specific regions.