FIRST BANCORP /NC/FBNC
FIRST BANCORP /NC/ Income Taxes Disclosure
Income Taxes
The components of income tax expense (benefit) for the years ended December 31, 2025, 2024, and 2023 are as follows:
| ($ in thousands) | 2025 | 2024 | 2023 | ||||||||||||||||||||
| Current | - Federal | $ | (2,615) | $ | 23,134 | $ | 24,750 | ||||||||||||||||
| - State | 439 | 3,637 | 3,857 | ||||||||||||||||||||
| Deferred | - Federal | 29,235 | (4,569) | (481) | |||||||||||||||||||
| - State | 1,393 | (300) | (301) | ||||||||||||||||||||
| Total | $ | 28,452 | $ | 21,902 | $ | 27,825 | |||||||||||||||||
Beginning in 2025 on a prospective basis, the Company adopted ASU 2023-09. See Accounting Standards Adopted in 2025 in Note 1 for additional details on the adoption.
The following is a reconciliation of federal income tax expense at the statutory rate of 21% at December 31, 2025 to the income tax provision reported in the financial statements.
| ($ in thousands) | 2025 | |||||||||||||
| Amount | Percent | |||||||||||||
| Tax provision at statutory rate | $ | 29,295 | 21.00 | % | ||||||||||
State and local income taxes, net of federal income tax effect (1) | 1,444 | 1.04 | % | |||||||||||
| Non-taxable / non-deductible items | (2,032) | (1.46) | % | |||||||||||
Tax credits (2) | (828) | (0.59) | % | |||||||||||
| Other adjustments | 573 | 0.41 | % | |||||||||||
| Total provision for income taxes and effective tax rate | $ | 28,452 | 20.40 | % | ||||||||||
(1) - State taxes in North Carolina made up the majority (greater than 50 percent) of this category.
(2) - Net of proportional amortization of qualifying affordable housing investments.
As previously disclosed for the years ended December 31, 2024 and December 31, 2023, the following is a reconciliation of federal income tax expense at the statutory rate of 21% to the income tax provision reported in the financial statements.
| ($ in thousands) | 2024 | 2023 | ||||||||||||
| Tax provision at statutory rate | $ | 20,605 | $ | 27,711 | ||||||||||
| Increase (decrease) in income taxes resulting from: | ||||||||||||||
| Tax-exempt interest income, net | (1,937) | (1,934) | ||||||||||||
| State income taxes, net of federal benefit | 2,928 | 2,809 | ||||||||||||
| Other, net | 306 | (761) | ||||||||||||
| Total | $ | 21,902 | $ | 27,825 | ||||||||||
In the table above, for 2024, the Other, net amount includes $1.7 million related to incremental state tax-related expenses for prior years, net of associated federal benefit amounts and $0.8 million related to deferred tax adjustments.
The following table presents income taxes paid (net of refunds received) for the year ended December 31, 2025.
| ($ in thousands) | 2025 | |||||||
| US Federal | $ | 9,000 | ||||||
| North Carolina | 1,070 | |||||||
| Other US State and Local | 950 | |||||||
| Total | $ | 11,020 | ||||||
The sources and tax effects of temporary differences that give rise to significant portions of the deferred tax assets, which are included in Other assets on the consolidated balance sheets are as follows at December 31, 2025 and 2024:
| ($ in thousands) | 2025 | 2024 | ||||||||||||
| Deferred tax assets: | ||||||||||||||
| Net operating loss carryforwards | $ | 134,335 | $ | — | ||||||||||
| Unrealized losses on securities available for sale | 44,764 | 85,940 | ||||||||||||
| Allowance for credit losses on loans and unfunded commitments | — | 30,257 | ||||||||||||
| Operating lease liability | 3,211 | 3,342 | ||||||||||||
| Purchase accounting adjustments | 1,254 | 3,358 | ||||||||||||
| All other | 7,086 | 8,077 | ||||||||||||
| Gross deferred tax assets | 190,650 | 130,974 | ||||||||||||
| Deferred tax liabilities: | ||||||||||||||
| Security valuation | (58,352) | — | ||||||||||||
| Loan valuation | (72,232) | — | ||||||||||||
| Amortizable basis of intangible assets | (13,427) | (14,442) | ||||||||||||
| Depreciable basis of fixed assets | (5,777) | (4,647) | ||||||||||||
| Right of use lease asset | (3,015) | (3,161) | ||||||||||||
| Loan fees | (2,485) | (2,483) | ||||||||||||
| All other | (882) | (578) | ||||||||||||
| Gross deferred tax liabilities | (156,170) | (25,311) | ||||||||||||
| Net deferred tax asset | $ | 34,480 | $ | 105,663 | ||||||||||
The Company recorded de minimis valuation allowances for 2025 and 2024 related to state net operating loss carryforwards for which the realization of the remaining deferred tax assets is determined to be more likely than not. The Company had no significant uncertain tax positions, and thus no such reserve for uncertain tax positions has been recorded. Additionally, the Company determined that it has no material unrecognized tax benefits that if recognized would affect the effective tax rate. The Company’s general policy is to record tax penalties and interest as a component of “Other operating expenses.”
The Company is subject to routine audits of its tax returns by the Internal Revenue Service and various state taxing authorities. The Company’s tax returns are subject to income tax audit by federal and state agencies beginning with the year 2021. There are no indications of any material adjustments relating to any examination currently being conducted by any taxing authority.
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 Income Taxes Disclosures
The income tax disclosure reveals how much a company actually pays in taxes versus what the statutory rate would predict. Analysts focus on the effective tax rate (ETR) reconciliation, which breaks down every item driving the gap between the 21% federal rate and the company's reported ETR — including R&D credits, foreign rate differentials, and state taxes. Deferred tax assets (DTAs) and their valuation allowances signal management's confidence in future profitability: a rising allowance suggests the company doubts it can use accumulated tax benefits. Uncertain tax benefit (UTB) reserves quantify exposure to IRS challenges on aggressive positions.
Key signals to watch: sudden ETR drops without clear operational reasons, large increases in valuation allowances, growing UTB balances, and significant unremitted foreign earnings. Post-TCJA, pay attention to GILTI and BEAT provisions that affect multinational tax structures. Compare the cash taxes paid (from the cash flow statement) against the income tax provision to gauge earnings quality.