Evaluating First Bancorp's Dividend Resilience Amid Economic Uncertainty

Regional banking stocks have long been scrutinized for their dividend stability, particularly during economic downturns. First Bancorp (FBNC), a regional bank holding company, offers a compelling case study in balancing dividend growth with financial prudence. This analysis evaluates FBNC's dividend resilience by examining its historical performance during crises, recent financial metrics, and comparative sector positioning.

Historical Dividend Behavior During Crises

First Bancorp's dividend history reveals a pattern of adaptability. During the 2008-2009 financial crisis, the company paid a quarterly dividend of $1.05 per share, a level that declined sharply to $0.03 by 2018 amid shifting economic conditions First Bancorp - Stock Info - Dividend History^[5]. However, the 2020 pandemic presented a different trajectory: while the dividend dropped to $0.18 per share in 2020, it was restored and gradually increased, reaching $0.23 per share by June 2025 FBNC - First Bancorp stock dividend history, payout ratio & dates^[6]. This contrast underscores FBNC's evolving approach to capital preservation versus shareholder returns.

According to data from financial tracking platforms, FBNC's dividend payout ratio during the 2020 downturn spiked to 47.56%, reflecting a temporary alignment with earnings contraction First Bancorp (FBNC) Financial Ratios - Stock Analysis^[4]. However, by 2024, the company's payout ratio had stabilized at 38.46%, significantly lower than the Financial Services sector average, while its free cash flow payout ratio remained at a conservative 18.39% FBNC - First Bancorp stock dividend history, payout ratio & dates^[6]. These metrics suggest a deliberate shift toward sustainability, ensuring dividends remain viable even during moderate economic stress.

Recent Financial Performance and Capital Strength

First Bancorp's 2024 annual results highlight its financial resilience. The company reported net income of $27.0 million for the year, with a CET1 capital ratio of 14.52%—a buffer that supports continued dividend payments The First Bancorp Announces Fourth Quarter and 2024 Annual Results^[1]. Quarterly earnings per share grew 8.5% year-over-year to $0.65, while operating cash flow surged to $52.6 million in Q1 2025, reversing a prior-year outflow First Bancorp (FBNC) Financial Ratios - Stock Analysis^[4]. This cash flow improvement, coupled with a 25% quarterly payout ratio, reinforces the argument that FBNC's dividend is well-anchored to its operational performance.

Notably, FBNC has raised dividends for two consecutive years, achieving a 17.68% average annual growth rate over the past three years First Financial Bancorp. (FFBC) Stock Dividend History & Growth^[2]. While this growth appears robust, investors should contextualize it against broader industry trends. During the 2008-2009 crisis, over 200 U.S. firms cut dividends, and in 2020, 213 companies reduced payouts amid pandemic-driven uncertainty The impact of the COVID-19 pandemic on dividends - PMC^[3]. FBNC's ability to avoid prolonged cuts—despite navigating both crises—positions it as a relative standout in the regional banking sector.

Risks and Sector Comparisons

Despite its strengths, FBNC's dividend strategy is not without risks. The company's 2024 annual net income declined 8.4% compared to 2023, a trend that could test its payout sustainability if prolonged The First Bancorp Announces Fourth Quarter and 2024 Annual Results^[1]. Additionally, while its current dividend yield of 1.87% is modest compared to high-yield sectors, it aligns with the conservative approach typical of regional banks FBNC - First Bancorp stock dividend history, payout ratio & dates^[6]. Investors seeking aggressive income growth may find FBNC underwhelming, but those prioritizing stability will appreciate its disciplined capital management.

Conclusion: A Prudent Bet for Defensive Investors

First Bancorp's dividend resilience stems from a combination of conservative payout ratios, improving cash flow, and a history of post-crisis recovery. While its dividend yield is unexciting, its structural safeguards—such as a CET1 ratio of 14.52% and a free cash flow payout ratio of 18.39%—provide a buffer against near-term volatility First Bancorp (FBNC) Financial Ratios - Stock Analysis^[4]. For investors prioritizing income stability over aggressive growth, FBNC represents a cautiously optimistic choice, particularly in an economic climate where regional banks face renewed scrutiny.