FIRST BANCORP /NC/FBNC
FIRST BANCORP /NC/ Stock Compensation Disclosure
Stock-Based Compensation
The Company recorded total stock-based compensation expense of $3.4 million, $4.3 million, and $4.6 million for the years ended December 31, 2025, 2024, and 2023, respectively, which is included in "Total personnel expense" on the accompanying consolidated statements of income.
The Company recognized income tax benefits related to stock-based compensation expense in its income statement of $0.8 million, $1.0 million, and $1.1 million for the years ended December 31, 2025, 2024, and 2023, respectively.
At December 31, 2025, the sole equity-based compensation plan for the Company is the First Bancorp 2024 Equity Plan (the "Equity Plan"), which was approved by shareholders on May 31, 2024. As of December 31, 2025, the Equity Plan had 1,826,655 shares remaining available for grant.
The Equity Plan is intended to serve as a means to attract, retain, and motivate key employees and directors and to associate the interests of the Equity Plan's participants with those of the Company and its shareholders. The Equity Plan allows for both grants of stock options and other types of equity-based compensation, including stock appreciation rights, restricted and unrestricted stock, restricted performance stock, and performance units. For the last several years, the only equity-based compensation granted by the Company has been shares of restricted stock, as it relates to employees, and unrestricted stock as it relates to non-employee directors.
Recent restricted stock awards to employees typically include service-related vesting conditions only. Compensation expense for these grants is recorded over the requisite service periods. Upon forfeiture, any previously recognized compensation cost is reversed. Upon a change in control (as defined in the Equity Plan), unless the awards remain outstanding or substitute equivalent awards are provided, the awards become immediately vested.
Certain of the Company’s equity grants contain terms that provide for a graded vesting schedule whereby portions of the award vest in increments over the requisite service period. The Company recognizes compensation expense for awards with graded vesting schedules on a straight-line basis over the requisite service period for each incremental award. Compensation expense is based on the estimated number of stock awards that will ultimately vest. Over the past five years, there have been relatively few forfeitures, and therefore the Company assumes that all awards granted with service conditions will vest. The Company recognizes forfeitures as they occur.
In addition to employee equity awards, the Company's practice is to grant unrestricted common shares to each non-employee director (currently nine in total) in June of each year. The grants were valued at approximately $37,500 in 2025, $37,500 in 2024 and $37,500 in 2023. Compensation expense associated with these director awards is fully recognized by the date of the award since there are no vesting conditions.
The following tables presents information regarding the activity during 2025, 2024 and 2023 related to the Company’s share grant to non-employee directors:
| For the year ended December 31, | Date of grant | Fair market value of common share | Common shares granted | Number of non-employee directors | Common shares granted per non-employee director | Grant expense | ||||||||||||||||||||||||||||||||
| 2025 | June 2, 2025 | $ | 40.63 | 8,307 | 9 | 923 | $ | 337,500 | ||||||||||||||||||||||||||||||
| 2024 | May 31, 2024 | $ | 31.55 | 15,457 | 13 | 1,189 | $ | 487,500 | ||||||||||||||||||||||||||||||
| 2023 | June 1, 2023 | $ | 30.69 | 17,094 | 14 | 1,221 | $ | 525,000 | ||||||||||||||||||||||||||||||
The expense associated with director grants is classified as "Other operating expense" in the consolidated statements of income.
The following table presents information regarding the activity during 2023, 2024, and 2025 related to the Company’s outstanding restricted stock awards:
| Long-Term Restricted Stock Awards | ||||||||||||||
| Shares | Weighted-Average Grant-Date Fair Value | |||||||||||||
| Nonvested at January 1, 2023 | 223,012 | $ | 36.14 | |||||||||||
| Granted during the period | 143,380 | 37.08 | ||||||||||||
| Vested during the period | (74,310) | 29.43 | ||||||||||||
| Forfeited or expired during the period | (791) | 37.88 | ||||||||||||
| Nonvested at December 31, 2023 | 291,291 | 36.14 | ||||||||||||
| Granted during the period | 67,900 | 38.14 | ||||||||||||
| Vested during the period | (119,906) | 41.72 | ||||||||||||
| Forfeited or expired during the period | (2,334) | 42.84 | ||||||||||||
| Nonvested at December 31, 2024 | 236,951 | 36.43 | ||||||||||||
| Granted during the period | 91,723 | 42.06 | ||||||||||||
| Vested during the period | (116,726) | 37.81 | ||||||||||||
| Forfeited or expired during the period | (5,324) | 41.40 | ||||||||||||
| Nonvested at December 31, 2025 | 206,624 | $ | 38.08 | |||||||||||
The total fair value of shares vested during 2025, 2024 and 2023 was $4.4 million, $5.0 million and $2.2 million, respectively. Total unrecognized compensation expense as of December 31, 2025 amounted to $3.6 million with a weighted average remaining term of 2.1 years. For the nonvested awards that were outstanding at December 31, 2025, the Company expects to record $1.8 million in compensation expense in the next twelve months.
As discussed in Note 2, in conjunction with the GrandSouth acquisition, GrandSouth common stock options outstanding at January 1, 2023 became fully vested under the change in control provisions in the GrandSouth option plans and were converted into replacement options to acquire 0.91 shares of the Company's common stock. The Company issues new shares of common stock when options are exercised. No options were granted in 2025.
Stock option activity and related information is presented below as of and for the periods indicated:
| Options Outstanding | ||||||||||||||||||||||||||
| Number of Shares | Weighted- Average Exercise Price | Weighted- Average Remaining Contractual Term (years) | Aggregate Intrinsic Value (thousands) | |||||||||||||||||||||||
| Balance at January 1, 2023 | — | $ | — | |||||||||||||||||||||||
| Replacement options issued in conjunction with acquisition of GrandSouth | 542,345 | $ | 20.14 | |||||||||||||||||||||||
| Exercised during the period | (236,760) | $ | 19.09 | |||||||||||||||||||||||
| Forfeited or expired during the period | — | $ | — | |||||||||||||||||||||||
| Balance at December 31, 2023 | 305,585 | $ | 20.95 | |||||||||||||||||||||||
| Exercised during the period | (194,884) | 21.70 | ||||||||||||||||||||||||
| Forfeited or expired during the period | — | — | ||||||||||||||||||||||||
| Balance at December 31, 2024 | 110,701 | 19.63 | ||||||||||||||||||||||||
| Exercised during the period | (91,483) | 19.79 | ||||||||||||||||||||||||
| Forfeited or expired during the period | — | — | ||||||||||||||||||||||||
| Outstanding at December 31, 2025 | 19,218 | $ | 18.89 | 4.16 | $ | 613 | ||||||||||||||||||||
| Exercisable at December 31, 2025 | 19,218 | $ | 18.89 | 4.16 | $ | 613 | ||||||||||||||||||||
The fair value of the replacement options issued in conjunction with the GrandSouth acquisition as of January 1, 2023 was measured using the Black-Scholes option pricing model. The following table illustrates the assumptions for the Black-Scholes model used in determining the fair value of options granted during the year ended December 31, 2023:
| Fair value per option, weighted average | $ | 24.85 | ||||||
| Expected life (years) | 1.4 - 4.7 | |||||||
| Expected stock price volatility, weighted average | 46.39 | % | ||||||
| Expected dividend yield | 2.05 | % | ||||||
| Risk-free interest rate, weighted average | 4.18 | % | ||||||
| Expected forfeiture rate | 0.00 | % | ||||||
The expected life is based on historical exercises and forfeitures experience of the grantees. The volatility is based on historical price volatility. The risk-free interest rate is based on a U.S. Treasury instrument with a life that is similar to the expected life of the option grant.
At December 31, 2025, the Company had no unrecognized compensation expense related to stock options. All unexercised options expire ten years after the applicable original grant dates under the GrandSouth stock option plan.
About Stock Compensation Disclosures
Stock-based compensation disclosures detail the equity awards granted to employees and executives — including stock options, restricted stock units (RSUs), and performance shares — along with the valuation methods and assumptions used to expense them. This section reveals the true cost of talent retention and the alignment between management incentives and shareholder interests.
Key signals: total unrecognized compensation expense and its expected recognition period signal future earnings headwinds from already-granted awards. For stock options, examine Black-Scholes assumptions — expected volatility, risk-free rate, and expected term — as understating any of these reduces reported compensation expense. Compare stock compensation expense as a percentage of revenue against peers to assess dilution cost. Watch vesting schedules for acceleration clauses tied to change-of-control events. Performance-based awards with undemanding targets may indicate weak governance. Add back stock compensation to operating cash flow to calculate a more conservative free cash flow figure.