First Bancorp NIM Expands 42 bps YoY as Deposit Costs Fall
The North Carolina community lender's net interest margin widened to 3.67% in the first quarter, its fifth consecutive quarterly expansion, as deposit costs dropped 18 basis points year over year.
First Bancorp (FBNC) posted a 3.67% net interest margin in the first quarter of 2026, up 42 basis points from a year earlier and 9 basis points from the prior quarter, completing a five-quarter streak of NIM expansion that has lifted the metric by a cumulative 42 basis points from 3.25% in the first quarter of 2025. Net interest income rose 15.4% year over year to $107.1 million, aided by a shift in the earning-asset mix toward higher-yielding loans and continued pass-through of Federal Reserve rate cuts to depositors.
The margin gains reflected two reinforcing levers. Average loans grew $674.3 million year over year, pushing the loan share of earning assets to 74.5% from 72.4% a quarter earlier, while the cost of interest-bearing deposits fell 25 basis points year over year to 1.89%. Total deposit costs dropped to 1.28%, down 18 basis points from a year ago, and noninterest-bearing balances edged up to 33% of total deposits from 32% in the fourth quarter. Period-end customer deposits grew $264.0 million in the quarter, reversing a $132.8 million contraction in the prior period.
Loan growth, however, decelerated to 3.3% annualized, or $71.4 million, compared with 14.3% annualized in the fourth quarter; adjusting for a seasonal paydown, management pegged underlying growth at 5.9% annualized. The mix shifted as well: C&I balances fell $46.4 million to $1.0 billion, while CRE non-owner occupied grew $77.7 million to $2.9 billion and construction loans added $68.6 million to $821.8 million.
Credit metrics remained benign. The provision for credit losses fell to $3.1 million from $4.7 million in the fourth quarter, which had included a $1.6 million Hurricane Helene reserve release. Net charge-offs edged up to $1.4 million but the annualized ratio held at 0.06%, well below the 0.17% recorded a year earlier. Nonperforming assets, however, continued a gradual climb, rising to $41.8 million, or 0.32% of total assets, from $33.9 million, or 0.27%, a year ago.
The efficiency ratio improved to 49.05% from 54.51% a year earlier as noninterest expenses fell $1.8 million quarter over quarter to $60.2 million on lower personnel and operating costs. Noninterest income of $15.2 million was down 28.6% from the fourth quarter, which had included a $4.6 million office-building sale gain, but up 17.2% year over year on higher SBA loan sale gains.
Capital ratios held largely steady. The CET1 ratio stood at 14.11%, essentially flat with the prior quarter but down 41 basis points from a year earlier as loan growth outpaced earnings retention. The tangible common equity ratio improved to 9.63% from 8.55% a year ago, helped by reduced unrealized securities losses as loss-earnback transactions ran through the portfolio. The board raised the quarterly dividend to $0.24 a share from $0.23.
Looking ahead, First Bancorp announced an agreement to acquire First Carolina Bancshares Corporation for $166 million in stock and cash, adding roughly $831 million in assets and extending the franchise into South Carolina; the deal is expected to close in the fourth quarter of 2026 or early 2027.