This report is an updated version of the report published on 28 October 2022 at 2:43 PM (PDT)

First Bancorp

FBNC Details

First Bancorp (NASDAQ: FBNC) is a bank holding company with its head office based in Southern Pines, North Carolina. FBNC is involved in the ownership and operation of First Bank, a state-chartered community bank with 108 branches in North and South Carolina.

Financial Results for 3Q’FY22

• Loan yields grew to 4.49%, an increase of 25 basis points in 3Q’FY22 over 2Q’FY22, primarily due to the rise in market rate and improved pricing on new loans.
• The cost of funds has remained low at 0.12% for 3Q’FY22 and 0.11% for 3Q’FY21.
• Annualized return on average assets stood at 1.42% (3Q’FY21: 1.32%), and annualized return on average common equity stood at 13.84% (3Q’FY21: 11.93%).
• Quarterly cash dividend declared at $0.22 per share, up 10% YoY.

Outlook

The asset quality remains solid, with annualized net loan charge-offs of 0.04% for Q3'FY22. Total NPAs stood at $40.7 million as of September 30, 2022, or 0.39% of total assets, decreased from $41.1 million in 2Q'FY22 and $40.7 million, or 0.48% of total assets as of September 30, 2021. Further, the company received regulatory approvals to acquire GrandSouth Bancorporation, which is expected to close early in January 2023. However, approval by GrandSouth's shareholders remains pending. GrandSouth operates in 8 branches throughout South Carolina and has $1.3 billion in total assets, $995.1 million in loans, and $1.1 billion in deposits.

Key Risks

Most of the company's lending is directed to small businesses or middle-market customers, who have fewer financial resources in capital or borrowing capacity than larger entities. The company is susceptible to extensive regulation and supervision from the Commissioner and the Federal Reserve. The company faces competition in all areas of its operations from various competitors, mostly having larger and more financial resources.

Valuation Methodology: Price/Book Value Based Relative Valuation (Illustrative)

Stock Recommendation

Over the last three months, the stock has given a return of ~20.12%.

The stock has been valued using P/B multiple-based illustrative relative valuation, and the target price so arrived reflects a fall of low double-digit (in % terms). A slight discount has been applied to P/B Multiple (NTM) (Peer Average), considering that consumer spending might get tempered by higher prices as well as higher interest rates.

Considering the resistance around the range of USD 43 to USD 45, close to target level attainment, RSI almost nearing the overbought zone, current trading levels, risks associated, and volatile market conditions on the back of rising interest rates, a ‘Sell’ rating is assigned to the ‘FBNC’ at the closing market price of USD44.40 (as of 28 October 2022). 

Technical Overview:

Daily Price Chart

Markets are trading in a highly volatile zone currently due to certain macro-economic and geopolitical tensions prevailing. Therefore, it is prudent to follow a cautious approach while investing.

First Bancorp (FBNC) is a part of Kalkine’s Global Big Money Product

Note 1: Past performance is not a reliable indicator of future performance.

Note 2: The reference date for share price chart and all other data such as stock price performance is based on October 28, 2022. The reference data in this report has been partly sourced from REFINITIV.

Note 3: Investment decisions should be made depending on an individual's appetite for upside potential, risks, holding duration, and any previous holdings. An 'Exit' from the stock can be considered if the Target Price mentioned as per the Valuation and or the technical levels provided has been achieved and is subject to the factors discussed above.

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