First Bank(FBNC)2025-02-26 21:06Acquisitions and Growth - The company acquired GrandSouth Bancorp in January 2023, which had total assets of 1.0 billion, and deposits of 1.8 billion in October 2021 and Magnolia Financial, Inc. for 213.6 million, with a structured approval process for loans exceeding individual lending authority [26]. - The company has a conservative lending policy and regularly reviews its loan portfolio to identify areas of concern and manage risk effectively [24][27]. - The company emphasizes maintaining a comprehensive lending policy that meets the credit needs of the communities it serves, including low- and moderate-income customers [24]. - The company maintains a diversified loan portfolio, providing a broad range of commercial and retail lending services, including commercial business loans and real estate construction loans [21]. - As of December 31, 2024, the largest categories of commercial real estate (CRE) loans were retail at approximately 14%, office (non-owner-occupied at 6% and owner-occupied at 3%), commercial at approximately 7%, and warehouse at approximately 6% [30]. - The total lending exposure in Wake County, North Carolina was 9.7% in 2024, down from 10.1% in 2023, while New Hanover County increased to 8.9% from 8.1% [32]. Risk Management - The company’s internal loan review department conducts ongoing assessments of the loan portfolio to ensure adherence to policies and manage risk effectively [28]. - The company has engaged an independent consulting firm to perform assessments of new loan originations and existing credits, enhancing its risk management practices [29]. - The company’s total loan participations purchased as of December 31, 2024, were nominal, indicating a conservative approach to loan participation [22]. Investment Policies - The bank's investment policy aims to maximize income from funds not needed for loan demand, with investments subject to concentration and maturity limits [34]. - The bank's investment portfolio must consist of "investment-grade" securities, with a limit of 15% for high-quality corporate bonds [35]. - The company’s investment policy aims to maximize income from funds not needed for loan demand, investing in U.S. government bonds and GSEs [33]. Workforce and Human Capital - As of December 31, 2024, the bank had 1,345 full-time and 51 part-time associates, with a workforce consisting of approximately 73% females and 18% minorities [50]. - The bank's 401(k) plan matched 100% of each employee's elective deferral amount, up to the first 4% of their contribution, with a 2% non-elective employer contribution based on eligible compensation [55]. - The bank's human capital management strategy emphasizes attracting and retaining top talent, with a focus on diversity and inclusion [51]. Regulatory Environment - The bank is subject to heightened supervision and regulation due to total assets exceeding $10.0 billion, impacting its business operations [60]. - The Bank's dividends are subject to regulatory limitations, ensuring that they do not deplete the capital base below minimum regulatory requirements [80]. - Under Basel III, the Bank's ability to pay dividends is limited unless its common equity conservation buffer exceeds the minimum required capital ratio by at least 2.5% of risk-weighted assets [81]. - The Company is required to maintain a minimum CET1 capital ratio of at least 6.5% and a total capital ratio of at least 10.0% [96]. - The capital conservation buffer requires a minimum CET1 to risk-weighted assets ratio of at least 7.0% [96]. - The Bank is subject to various federal and state consumer protection laws, with increased examination and enforcement leading to potential penalties for non-compliance [72]. - The Company is subject to regulatory capital requirements under Basel III, which became fully phased-in as of January 1, 2019 [92]. Cybersecurity and Compliance - The SEC adopted new cybersecurity disclosure rules in July 2023, requiring public companies to disclose cybersecurity risk management practices and material incidents within four days [99]. - The Company employs a layered defensive approach to cybersecurity, utilizing various tools to monitor and block suspicious activities [100]. - The Company must notify federal regulators within 36 hours of identifying a significant computer-security incident that could disrupt operations [98]. - The BSA requires financial institutions to establish a risk-based system to prevent money laundering and financing of terrorism, with significant compliance obligations [101]. - The AML aims to modernize anti-money laundering laws, requiring financial institutions to develop standards for evaluating technology and internal processes for compliance [102]. - The company faces potential regulatory sanctions, including financial penalties, if it fails to observe cybersecurity regulatory guidance [97]. Market Competition - Competition for deposits is primarily based on the types of deposits offered and rates paid, with pressure to increase deposit rates to retain and attract customers [48]. - The company expects competition in the industry to remain high, with pressure to increase deposit rates to retain and attract new deposits [48][49]. Community Reinvestment - The Bank's community reinvestment record is evaluated by federal regulators, impacting mergers and acquisitions [73]. - In October 2023, the Federal Reserve, FDIC, and OCC issued a final rule to amend CRA regulations, expected to increase thresholds for large banks to receive "Outstanding" ratings starting January 1, 2026 [105].