FIRST BANCORP /NC/FBNC
FIRST BANCORP /NC/ Fair Value Disclosure
Fair Value of Financial Instruments
Fair value is the exchange price that would be received for an asset or paid to transfer a liability (exit price) in the principal and most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. There are three levels of inputs that may be used to measure fair value:
Level 1: Quoted prices (unadjusted) of identical assets or liabilities in active markets that the entity has the ability to access as of the measurement date.
Level 2: Significant other observable inputs other than Level 1 prices such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data.
Level 3: Significant unobservable inputs that reflect a reporting entity’s own assumptions about the assumptions that market participants would use in pricing an asset or liability.
The following table summarizes the Company’s financial instruments that were measured at fair value on a recurring and nonrecurring basis at December 31, 2025.
Description of Financial Instruments ($ in thousands) | Fair Value at December 31, 2025 | Quoted Prices in Active Markets for Identical Assets (Level 1) | Significant Other Observable Inputs (Level 2) | Significant Unobservable Inputs (Level 3) | ||||||||||||||||||||||
| Recurring | ||||||||||||||||||||||||||
| Securities available for sale: | ||||||||||||||||||||||||||
| U.S. Treasury securities | $ | 168,095 | $ | — | $ | 168,095 | $ | — | ||||||||||||||||||
| Government-sponsored enterprise securities | 1,758 | — | 1,758 | — | ||||||||||||||||||||||
| Mortgage-backed securities | 1,860,357 | — | 1,859,690 | 667 | ||||||||||||||||||||||
| Corporate bonds | 18,346 | — | 17,346 | 1,000 | ||||||||||||||||||||||
| Total available for sale securities | $ | 2,048,556 | $ | — | $ | 2,046,889 | $ | 1,667 | ||||||||||||||||||
| $ | 3,418 | $ | — | $ | 3,418 | $ | — | |||||||||||||||||||
| Presold mortgages in process of settlement | $ | 7,790 | $ | — | $ | 7,790 | $ | — | ||||||||||||||||||
| $ | 3,445 | $ | — | $ | 3,445 | $ | — | |||||||||||||||||||
| Nonrecurring | ||||||||||||||||||||||||||
| Individually evaluated loans | $ | 9,659 | $ | — | $ | — | $ | 9,659 | ||||||||||||||||||
| Foreclosed real estate | $ | 168 | $ | — | $ | — | $ | 168 | ||||||||||||||||||
The following table summarizes the Company’s financial instruments that were measured at fair value on a recurring and nonrecurring basis at December 31, 2024.
Description of Financial Instruments ($ in thousands) | Fair Value at December 31, 2024 | Quoted Prices in Active Markets for Identical Assets (Level 1) | Significant Other Observable Inputs (Level 2) | Significant Unobservable Inputs (Level 3) | ||||||||||||||||||||||
| Recurring | ||||||||||||||||||||||||||
Securities available for sale: | ||||||||||||||||||||||||||
| U.S. Treasury securities | $ | 120,581 | $ | — | $ | 120,581 | $ | — | ||||||||||||||||||
| Government-sponsored enterprise securities | 9,614 | — | 9,614 | — | ||||||||||||||||||||||
| Mortgage-backed securities | 1,897,175 | — | 1,896,469 | 706 | ||||||||||||||||||||||
| Corporate bonds | 15,692 | — | 13,942 | 1,750 | ||||||||||||||||||||||
| Total available for sale securities | $ | 2,043,062 | $ | — | $ | 2,040,606 | $ | 2,456 | ||||||||||||||||||
| $ | 301 | $ | — | $ | 301 | $ | — | |||||||||||||||||||
| Presold Mortgages in process of settlement | $ | 5,942 | $ | — | $ | 5,942 | $ | — | ||||||||||||||||||
| $ | 302 | $ | — | $ | 302 | $ | — | |||||||||||||||||||
| Nonrecurring | ||||||||||||||||||||||||||
| Individually evaluated loans | $ | 879 | $ | — | $ | — | $ | 879 | ||||||||||||||||||
The following is a description of the valuation methodologies used for instruments measured at fair value.
Securities Available for Sale — When quoted market prices are available in an active market, the securities are classified as Level 1 in the valuation hierarchy. If quoted market prices are not available, but fair values can be estimated by observing quoted prices of securities with similar characteristics, the securities are classified as Level 2 on the valuation hierarchy. Most of the fair values for the Company’s Level 2 securities are determined by the Company's third-party bond accounting provider using matrix pricing. Matrix pricing is a mathematical technique widely used in the industry to value debt securities without relying exclusively on
quoted prices for the specific securities but rather by relying on the securities’ relationship to other benchmark quoted securities. For the Company, Level 2 securities include US Treasury securities, mortgage-backed securities, commercial mortgage-backed obligations, government-sponsored enterprise securities, and corporate bonds. In cases where Level 1 or Level 2 inputs are not available, securities may be classified within Level 3 of the hierarchy.
The Company reviews the pricing methodologies utilized by the bond accounting provider to ensure the fair value determination is consistent with the applicable accounting guidance and that the investments are properly classified in the fair value hierarchy.
Presold Mortgages in Process of Settlement - The fair value is based on the committed price that an investor has agreed to pay for the loan which is considered a Level 2 input.
Derivative financial assets and liabilities - The fair values of interest rate swaps are determined using the market standard methodology of netting the discounted future fixed cash receipts (or payments) and the discounted expected variable cash payments (or receipts). The variable cash payments (or receipts) are based on an expectation of future interest rates (forward curves) derived from observable market interest rate curves. These are considered a Level 2 input.
Individually evaluated loans — Fair values for individually evaluated loans are measured on a non-recurring basis and are based on the underlying collateral values securing the loans, adjusted for estimated selling costs, or the net present value of the cash flows expected to be received for such loans. Collateral may be in the form of real estate or business assets including equipment, inventory and accounts receivable. The vast majority of the collateral is real estate. The value of real estate collateral is generally determined by third-party appraisers using an income or market valuation approach based on an appraisal conducted by an independent, licensed third party appraiser (Level 3). The value of business equipment is based upon an outside appraisal if deemed significant, or the net book value on the applicable borrower’s financial statements if not considered significant. Likewise, values for inventory and accounts receivable collateral are based on borrower financial statement balances or aging reports on a discounted basis as appropriate (Level 3). Appraisals used in this analysis are generally obtained at least annually based on when the loans first became impaired, and thus the appraisals are not necessarily as of the period ends presented. Any fair value adjustments are recorded in the period incurred as provision for credit losses on the consolidated statements of income.
Foreclosed real estate – Foreclosed real estate, consisting of properties obtained through foreclosure or in satisfaction of loans, is reported at the lower of cost or fair value. Fair value is measured on a non-recurring basis and is based upon independent market prices or current appraisals that are generally prepared using an income or market valuation approach and conducted by an independent, licensed third party appraiser, adjusted for estimated selling costs (Level 3). Appraisals used in this analysis are generally obtained at least annually based on when the assets were acquired, and thus the appraisals are not necessarily as of the period ends presented. At the time of foreclosure, any excess of the loan balance over the fair value of the real estate held as collateral is treated as a charge against the allowance for loan losses. For any real estate valuations subsequent to foreclosure, any excess of the real estate recorded value over the fair value of the real estate is treated as a foreclosed real estate write-down on the consolidated statements of income.
There were no significant changes in the reported amount of Level 3 assets and liabilities measured at fair value on either a recurring or a nonrecurring basis as of December 31, 2025.
The carrying amounts and estimated fair values of financial instruments not carried at fair value as of December 31, 2025 and 2024 are as follows:
| December 31, 2025 | December 31, 2024 | |||||||||||||||||||||||||||||||
| ($ in thousands) | Level in Fair Value Hierarchy | Carrying Amount | Estimated Fair Value | Carrying Amount | Estimated Fair Value | |||||||||||||||||||||||||||
Cash and due from banks, noninterest-bearing | Level 1 | $ | 146,759 | $ | 146,759 | $ | 78,596 | $ | 78,596 | |||||||||||||||||||||||
Due from banks, interest-bearing | Level 1 | 162,836 | 162,836 | 428,911 | 428,911 | |||||||||||||||||||||||||||
Securities held to maturity | Level 2 | 513,099 | 448,452 | 519,998 | 428,571 | |||||||||||||||||||||||||||
Total loans, net of allowance | Level 3 | 8,598,838 | 8,259,890 | 7,972,104 | 7,514,505 | |||||||||||||||||||||||||||
| SBA servicing asset | Level 3 | 1,747 | 2,963 | 2,604 | 3,746 | |||||||||||||||||||||||||||
| Demand deposits, money market and savings | Level 1 | 9,944,779 | 9,944,779 | 9,593,557 | 9,593,557 | |||||||||||||||||||||||||||
| Time deposits | Level 2 | 803,642 | 801,150 | 936,968 | 933,523 | |||||||||||||||||||||||||||
Borrowings | Level 2 | 74,569 | 69,421 | 91,876 | 81,216 | |||||||||||||||||||||||||||
Fair value estimates are made at a specific point in time, based on relevant market information and information about the financial instrument. These estimates do not reflect any premium or discount that could result from offering for sale at one time the Company’s entire holdings of a particular financial instrument. Because no highly liquid market exists for a significant portion of the Company’s financial instruments, fair value estimates are based on judgments regarding future expected loss experience, current economic conditions, risk characteristics of various financial instruments, and other factors. These estimates are subjective in nature and involve uncertainties and matters of significant judgment and therefore cannot be determined with precision. Changes in assumptions could significantly affect the estimates.
Fair value estimates are based on existing on- and off-balance sheet financial instruments without attempting to estimate the value of anticipated future business and the value of assets and liabilities that are not considered financial instruments. Significant assets and liabilities that are not considered financial assets or liabilities include net premises and equipment, intangible and other assets such as deferred income taxes, prepaid expense accounts, income taxes currently payable, and other various accrued expenses. In addition, the income tax ramifications related to the realization of the unrealized gains and losses can have a significant effect on fair value estimates and have not been considered in any of the estimates.
Historical Timeline
| Fiscal Year | Filed | |
|---|---|---|
| 2025 | Feb 25, 2026 | Showing above |
| 2024 | Feb 26, 2025 | |
| 2023 | Feb 28, 2024 | |
| 2022 | Feb 28, 2023 | |
| 2021 | Mar 1, 2022 | |
| 2020 | Feb 26, 2021 | |
| 2019 | Feb 28, 2020 | |
| 2018 | Mar 1, 2019 | |
| 2017 | Mar 1, 2018 | |
| 2016 | Mar 15, 2017 | |
| 2015 | Mar 14, 2016 | |
About Fair Value Disclosures
Fair value disclosures classify all assets and liabilities measured at fair value into a three-level hierarchy: Level 1 (quoted market prices), Level 2 (observable inputs like yield curves), and Level 3 (unobservable inputs requiring management estimates). The proportion of Level 3 assets directly reflects how much of the balance sheet depends on internal models rather than market evidence.
Key signals: a growing Level 3 balance relative to total fair-value assets increases valuation uncertainty and earnings volatility risk. Watch for transfers between levels — assets moving from Level 2 to Level 3 often signal deteriorating market liquidity. Unrealized gains and losses on Level 3 positions flow through earnings or other comprehensive income, so large swings deserve scrutiny. For financial institutions, examine the sensitivity disclosures that show how Level 3 valuations change under alternative assumptions. Compare the fair value of debt against its carrying amount to gauge hidden leverage.