FIRST BANCORP /NC/ (FBNC) stock intrinsic value fair value estimate & owner earnings analysis

First Bancorp owns First Bank, a $13 billion community bank with branches across North Carolina and a growing presence in South Carolina. Like any bank, it earns the spread between what it collects on loans and bonds and what it pays depositors, less operating costs and credit losses. Its loan book of about $9 billion is weighted toward commercial real estate, with investor-owned properties the largest category, followed by home mortgages and owner-occupied business property. It is funded almost entirely by $11.1 billion of local deposits; borrowings are only about $75 million. How we measured earnings. We built the bank's cash earnings from its cash-flow statements for 2016 through 2025. We left credit-loss provisions, bond premium amortization and deferred taxes in as real costs. We stripped out the cash swings from mortgage and SBA loans that are originated and sold within weeks. We also removed the deliberate bond-sale losses of 2024 ($38 million) and 2025 ($72 million). Those losses came from selling old bonds yielding about 1.7% and reinvesting at current rates; they were a one-time restructuring, not an operating cost. On that basis, per-share earnings were $2.85 in 2021, $4.04 in 2022, $2.52 in 2023, $2.56 in 2024 and $3.91 in 2025. 2022 was an unrepeatable peak, with near-zero deposit costs and almost no loan losses. 2023 and 2024 were the trough of the rate cycle and also carried the costs of the GrandSouth merger. Share counts doubled across this period through stock-funded acquisitions, so older years describe a smaller bank. The earnings level. The median of the full 2021-2025 rate cycle is $2.85. We set the base level higher, at $3.50 a share. The reason is specific: the bond restructuring permanently replaced low-yielding securities, and three straight quarters (late 2025 and the first half of 2026) have confirmed the higher run rate. Second-quarter 2026 earnings were $1.22 a share, with a 3.71% interest margin and deposit costs down to 1.31%. We stopped well short of the roughly $4.70 annualized first-half pace for two reasons. Net charge-offs are running at 0.04% of loans, far below what this book has historically lost. And the margin is near the top of its decade range. Base case: $62 a share. Earnings start at $3.50 and grow 2% a year. That is the bank's demonstrated pace of organic loan and deposit growth in its existing Carolinas markets, retained from its own earnings. Year-one growth is set well below 2025's reported jump, which was mostly the restructuring rolling through. We kept back enough each year to hold capital steady as the balance sheet grows, so the distributable cash is about $2.90 a share in year one. Future acquisitions are not credited. They have been the main growth engine, but they are paid for in new shares and each deal is a separate bet. The pending First Carolina Bancshares purchase (about $831 million of assets in Florence, South Carolina, paid 75% in stock, expected to close around the turn of 2027) is not in any case. Amortization of acquired deposit relationships is small (about $6 million a year) and running off, so it does not mask a fading asset. Bear case: $40 a share. Earnings slip to $3.30 next year as the margin gives back part of its gain. Then the commercial real estate book goes through a credit cycle like the one Carolinas community banks suffered in 2009-2011. Cumulative pretax losses run to about 4-5% of loans over three years, and earnings fall to about $1.00, then a loss of $0.50, then $1.50 a share. That is about $7.90 a share of lost earnings. After that the bank settles at $2.70 with no growth, permanently less profitable. Capital can absorb this. Total risk-based capital is 16.1% and common equity tier 1 is 14.1%, so the losses would leave the bank above its regulatory requirements without selling shares at depressed prices. This case is worth more than tangible book value of $29.84 because the bank keeps a low-cost local deposit franchise that still earns money through the downturn. It also carries about $207 million of pretax unrealized losses on available-for-sale bonds, already counted in tangible book; if they had to be realized, that would further reduce the cushion. Bull case: $86 a share. Earnings hold near $4.40, close to today's run rate with charge-offs drifting to a more normal level. They grow 4% a year as the bank keeps the faster loan growth it showed in the first half of 2026 (9% annualized) in the Charlotte, Raleigh and Charleston markets, while keeping back more capital to fund it. Debt. Because deposits and borrowings are the bank's raw material, its earnings are valued after interest and no debt is subtracted. Its holding-company debt is minor. The bank paid down $18 million of subordinated debentures in 2025 and has almost no outstanding advances from the Federal Home Loan Bank. The margin-of-safety price. We are fairly confident in a $3.30-3.90 earnings range today, but less sure how long the current low loss rate lasts. The largest risk is concentration in investor commercial real estate, including office buildings, in a few fast-growing metro areas. A severe regional property downturn is survivable given the capital levels, but it would cut several years of earnings in half and would likely push the shares to a steep discount to book while it happened. If we are wrong about both the margin and credit at once, the shares are worth roughly the bear figure of about $40. That is a business worth having but not one that compounds. At $30, about tangible book, our base level of cash earnings is roughly 11-12% of the price, plus a dividend of $0.96 a share (about 3%) paid during the holding period. Over an assumed four-to-five-year holding period, a return toward the base value implies about 20% a year, and the bear case implies no loss from that price. The margin-of-safety price is $30. Our previous estimates used a different method and are not comparable to these figures; the business itself has improved since then through a wider margin and continued loan growth.