Press Release

First Bancorp Reports First Quarter Results

Company Release - 4/23/2019 4:01 PM ET

SOUTHERN PINES, N.C., April 23, 2019 /PRNewswire/ -- First Bancorp (NASDAQ: FBNC), the parent company of First Bank, announced today net income available to common shareholders of $22.3 million, or $0.75 per diluted common share, for the three months ended March 31, 2019, an increase of 7.1% in earnings per share from the $20.7 million, or $0.70 per diluted common share, recorded in the first quarter of 2018. 

Net Interest Income and Net Interest Margin

Net interest income for the first quarter of 2019 was $53.4 million, a 5.7% increase from the $50.5 million recorded in the first quarter of 2018.  The increase in net interest income was due to growth in interest-earning assets.

The Company's net interest margin (tax-equivalent net interest income divided by average earning assets) for the first quarter of 2019 was 4.06% compared to 4.17% for the first quarter of 2018.  The decrease in the net interest margin realized in 2019 was primarily due to lower loan discount accretion, significant interest recoveries realized in the prior year and interest bearing liability costs that have increased more than earning asset yields, as discussed in the following paragraph.

The Company recorded loan discount accretion of $1.4 million in the first quarter of 2019, compared to $2.1 million in the first quarter of 2018.  Loan discount accretion had an 11 basis point impact on the net interest margin in the first quarter of 2019 compared to an 18 basis point impact in the first quarter of 2018.  The lower discount accretion in 2019 was attributable to paydowns in the Company's acquired loan portfolios.  Additionally, in the first quarter of 2018, the Company received approximately $750,000 in interest recoveries on loans that had been charged off in the past that added approximately 6 basis points to the net interest margin in the first quarter of 2018.  Finally, over the past year, the Company's interest bearing liability costs have increased more than earning asset yields, with the rate on interest bearing liabilities being 39 basis points higher in the first quarter of 2019 compared to the first quarter of 2018, while earning asset yields increased by approximately 27 basis points for that same period (exclusive of the impact of the loan discount accretion and interest recovery variances).

Excluding the effects of loan discount accretion, the Company's tax-equivalent net interest margin was 3.95% for the first quarter of 2019, 3.99% for the first quarter of 2018, and 3.94% in the fourth quarter of 2018.  See the Financial Summary for a reconciliation of the Company's net interest margin to the net interest margin excluding loan discount accretion, and other information regarding this percentage. 

Provision for Loan Losses and Asset Quality

The Company recorded a provision for loan losses of $0.5 million in the first quarter of 2019 compared to a negative provision for loan losses of $3.7 million (reduction of the allowance for loan losses) in the first quarter of 2018.  In the first quarter of 2018, the Company experienced net loan recoveries of $3.7 million, which drove the negative provision for the quarter.  The Company's provision for loan losses has remained at a low level over the past several years as a result of strong asset quality, including low loan charge-offs.   

The ratio of annualized net charge-offs (recoveries) to average loans for the three months ended March 31, 2019 was 0.04%, compared to (0.36%) for the same period of 2018.   The Company's nonperforming assets to total assets ratio was 0.65% at March 31, 2019 compared to 0.92% at March 31, 2018. 

Noninterest Income

Total noninterest income was $14.9 million and $15.9 million for the three months ended March 31, 2019 and March 31, 2018, respectively. 

Core noninterest income for the first quarter of 2019 was $15.0 million, a decrease of 7.3% from the $16.2 million reported for the first quarter of 2018, which was primarily due to decreases in SBA loan sale gains recorded in 2019 (see additional discussion below).  Core noninterest income includes i) service charges on deposit accounts, ii) other service charges, commissions, and fees, iii) fees from presold mortgage loans, iv) commissions from sales of insurance and financial products, v) SBA consulting fees, vi) SBA loan sale gains, and vii) bank-owned life insurance income. 

Other service charges, commissions, and fees increased in the first quarter of 2019 compared to 2018, primarily as a result of higher debit card and credit card interchange fees associated with increased usage.

During the three months ended March 31, 2019 and 2018, the Company realized $2.0 million and $3.8 million in gains on SBA loan sales, respectively.  The decline in the first quarter of 2019 gains was a result of a combination of a lower sales volume and lower premiums realized. 

Noninterest Expenses

Noninterest expenses amounted to $39.6 million in the first quarter of 2019 compared to $43.6 million recorded in the first quarter of 2018.  Most categories of noninterest expense decreased in the first quarter 2019 compared to the first quarter of 2018 due to operating efficiencies realized subsequent to the March 2018 merger conversion of the Asheville Savings Bank operations into First Bank. 

Income Taxes

The Company's effective tax rate for the first quarter of 2019 was 20.9% compared to 22.0% in the first quarter of 2018.  The decline was due to a decrease in the North Carolina corporate income tax rate from 3.0% to 2.5%, as well as the impact of certain merger expenses recorded in 2018 that were not tax deductible.

Balance Sheet and Capital

Total assets at March 31, 2019 amounted to $6.1 billion, a 7.2% increase from a year earlier.  Total loans at March 31, 2019 amounted to $4.3 billion, a 4.6% increase from a year earlier, and total deposits amounted to $4.8 billion at March 31, 2019, a 6.7% increase from a year earlier.

The Company experienced steady organic loan and deposit growth during the first quarter of 2019.  Organic loan growth amounted to $54.7 million, or 5.2% annualized, and organic deposit growth amounted to $137.9 million, or 12.0% annualized.  The Company has ongoing internal initiatives to enhance loan and deposit growth, including the Company's continued expansion into higher growth markets such as Charlotte and Raleigh.

The Company remains well-capitalized by all regulatory standards, with an estimated Total Risk-Based Capital Ratio at March 31, 2019 of 14.25%, an increase from the 12.79% reported at March 31, 2018.  The Company's tangible common equity to tangible assets ratio was 9.21% at March 31, 2019, an increase of 86 basis points from a year earlier. 

Impact of New Lease Accounting Standard

During the first quarter of 2019, the Company adopted new accounting guidance which required the Company to record all long-term leases on its balance sheet.  With the adoption of this guidance, the Company recorded $19.5 million in right-to-use lease assets, which was recorded within premises and equipment, and $19.5 million in lease obligations, which was recorded in other liabilities.  These additions had an insignificant impact on the Company's capital ratios, and there was no impact to the Company's earnings related to the adoption of this new standard.

Comments of the CEO and Other Business Matters

Richard H. Moore, CEO of First Bancorp, commented, "We are pleased with our first quarter results.  Earnings were strong, and we also experienced good balance sheet growth.  We were also pleased that for the second year in a row, our Board of Directors increased the Company's dividend rate.  A dividend rate of 12 cents per share is being paid to shareholders this week, which is 50% higher than the dividend rate paid five quarters ago."

The following is additional discussion of business development and other miscellaneous matters affecting the Company during the first quarter of 2019:

  • On February 5, 2019, the Company announced a quarterly cash dividend of $0.12 per share payable on April 25, 2019 to shareholders of record on March 31, 2019. This dividend rate represents a 20% increase over the dividend rate declared in the first quarter of 2018.

First Bancorp is a bank holding company headquartered in Southern Pines, North Carolina, with total assets of approximately $6.1 billion. Its principal activity is the ownership and operation of First Bank, a state-chartered community bank that operates 101 branches in North Carolina and South Carolina.  First Bank also operates one loan production office in Raleigh, North Carolina.  First Bank Insurance Services is a subsidiary of First Bank and provides insurance products and services to individuals and businesses throughout First Bank's market area.  First Bank also provides SBA loans to customers through its nationwide network of lenders – for more information on First Bank's SBA lending capabilities, please visit www.firstbanksba.com.  First Bancorp's common stock is traded on The NASDAQ Global Select Market under the symbol "FBNC."

Please visit our website at www.LocalFirstBank.com.

This press release contains forward-looking statements within the meaning of Section 21E of the Securities Exchange Act of 1934 and the Private Securities Litigation Reform Act of 1995, which statements are inherently subject to risks and uncertainties.  Forward-looking statements are statements that include projections, predictions, expectations or beliefs about future events or results or otherwise are not statements of historical fact.  Such statements are often characterized by the use of qualifying words (and their derivatives) such as "expect," "believe," "estimate," "plan," "project," "anticipate," or other words or phrases concerning opinions or judgments of the Company and its management about future events.  Factors that could influence the accuracy of such forward-looking statements include, but are not limited to, the financial success or changing strategies of the Company's customers, the Company's level of success in integrating acquisitions, actions of government regulators, the level of market interest rates, and general economic conditions.  For additional information about the factors that could affect the matters discussed in this paragraph, see the "Risk Factors" section of the Company's most recent annual report on Form 10-K available at www.sec.gov. Forward-looking statements speak only as of the date they are made, and the Company undertakes no obligation to update or revise forward-looking statements.  The Company is also not responsible for changes made to this press release by wire services, internet services or other media.

 

 


First Bancorp and Subsidiaries
Financial Summary – Page 1



Three Months Ended

March 31,

 

Percent

($ in thousands except per share data – unaudited)

2019


2018

Change






INCOME STATEMENT 










Interest income





   Interest and fees on loans

$          53,960


50,170


   Interest on investment securities

5,074


2,966


   Other interest income

2,701


1,925


      Total interest income

61,735


55,061

12.1%

Interest expense





   Interest on deposits

5,577


2,673


   Interest on borrowings

2,797


1,881


      Total interest expense

8,374


4,554

83.9%

        Net interest income

53,361


50,507

5.7%

Total provision (reversal) for loan losses

500


(3,659)

n/m   

Net interest income after provision for loan losses

52,861


54,166

(2.4%)

Noninterest income





   Service charges on deposit accounts

2,945


3,263


   Other service charges, commissions, and fees

5,547


4,597


   Fees from presold mortgage loans

545


859


   Commissions from sales of insurance and financial products

2,029


1,940


   SBA consulting fees

1,263


1,141


   SBA loan sale gains

2,062


3,802


   Bank-owned life insurance income

646


623


   Foreclosed property gains (losses), net

(245)


(288)


   Securities gains (losses), net



   Other gains (losses), net

82


4


      Total noninterest income

14,874


15,941

(6.7%)

Noninterest expenses





   Salaries expense

18,965


19,398


   Employee benefit expense

4,588


4,607


   Occupancy and equipment related expense

4,123


4,054


   Merger and acquisition expenses

110


2,761


   Intangibles amortization expense

1,631


1,672


   Other operating expenses

10,153


11,106


      Total noninterest expenses

39,570


43,598

(9.2%)

Income before income taxes

28,165


26,509

6.2%

Income tax expense

5,880


5,836

0.8%

Net income available to common shareholders

$           22,285


20,673

7.8%











Earnings per common share – basic

$               0.75


0.70

7.1%

Earnings per common share – diluted

0.75


0.70

7.1%






ADDITIONAL INCOME STATEMENT INFORMATION





   Net interest income, as reported

$           53,361


50,507


   Tax-equivalent adjustment (1)

424


356


   Net interest income, tax-equivalent

$           53,785


50,863

5.7%









(1)

This amount reflects the tax benefit that the Company receives related to its tax-exempt loans and securities, which carry interest rates lower than similar taxable investments due to their tax-exempt status.  This amount has been computed assuming a 23% tax rate and is reduced by the related nondeductible portion of interest expense.


n/m – not meaningful

 

 


First Bancorp and Subsidiaries
Financial Summary – Page 2



Three Months Ended

March 31,

PERFORMANCE RATIOS (annualized)

2019

2018

Return on average assets (1)

1.52%

1.51%

Return on average common equity (2)

11.66%

11.95%

Net interest margin – tax-equivalent (3)

4.06%

4.17%

Net charge-offs (recoveries) to average loans

0.04%

(0.36%)




COMMON SHARE DATA



Cash dividends declared – common

$         0.12

0.10

Stated book value – common

26.50

23.79

Tangible book value – common

17.94

15.17

Common shares outstanding at end of period

29,746,455

29,660,990

Weighted average shares outstanding – basic

29,587,217

29,533,869

Weighted average shares outstanding – diluted

29,743,395

29,624,150




CAPITAL RATIOS



Tangible common equity to tangible assets

9.21%

8.35%

Common equity tier I capital ratio – estimated

12.54%

11.01%

Tier I leverage ratio – estimated

10.69%

9.88%

Tier I risk-based capital ratio – estimated

13.76%

12.23%

Total risk-based capital ratio – estimated

14.25%

12.79%




AVERAGE BALANCES ($ in thousands)



Total assets

$   5,945,049

5,549,516

Loans

4,280,272

4,099,495

Earning assets

5,372,766

4,949,612

Deposits

4,704,231

4,403,805

Interest-bearing liabilities

3,773,714

3,629,364

Shareholders' equity

775,059

701,411




(1)

Calculated by dividing annualized net income available to common shareholders by average assets.

(2)

Calculated by dividing annualized net income available to common shareholders by average common equity.

(3)

See note 1 on the first page of the Financial Summary for discussion of tax-equivalent adjustments.

 

 

TREND INFORMATION

($ in thousands except per share data)

For the Three Months Ended

 

INCOME STATEMENT

Mar. 31, 
2019

Dec. 31, 
2018

Sept. 30, 
2018

June 30, 
2018

Mar. 31, 
2018









Net interest income – tax-equivalent (1)

$     53,785

54,289

52,273

51,599

50,863


Taxable equivalent adjustment (1)

424

443

428

367

356


Net interest income

53,361

53,846

51,845

51,232

50,507


Provision (reversal) for loan losses

500

693

87

(710)

(3,659)


Noninterest income

14,874

14,406

15,376

16,111

15,941


Noninterest expense

39,570

37,666

39,238

38,873

43,598


Income before income taxes

28,165

29,893

27,896

29,180

26,509


Income tax expense

5,880

5,998

5,905

6,450

5,836


Net income

22,285

23,895

21,991

22,730

20,673









Earnings per common share – basic

0.75

0.81

0.74

0.77

0.70


Earnings per common share – diluted

0.75

0.80

0.74

0.77

0.70









Cash dividends declared per share

0.12

0.10

0.10

0.10

0.10



(1)

See note 1 on the first page of this Financial Summary for discussion of tax-equivalent adjustments.


 

 


First Bancorp and Subsidiaries
Financial Summary – Page 3


CONSOLIDATED BALANCE SHEETS 

($ in thousands - unaudited)










At Mar. 31,

2019


At Dec. 31,

2018


At Mar. 31,

2018



One Year

Change

Assets









Cash and due from banks

$        80,620


56,050


78,217



3.1%

Interest bearing deposits with banks

366,187


406,848


448,515



(18.4%)

     Total cash and cash equivalents

446,807


462,898


526,732



(15.2%)










Investment securities

730,512


602,588


453,059



61.2%

Presold mortgages

3,318


4,279


6,029



(45.0%)










Total loans

4,303,787


4,249,064


4,113,785



4.6%

Allowance for loan losses

(21,095)


(21,039)


(23,298)



(9.5%)

Net loans

4,282,692


4,228,025


4,090,487



4.7%










Premises and equipment

137,725


119,000


115,542



19.2%

Intangible assets

254,449


255,480


255,760



(0.5%)

Foreclosed real estate

6,390


7,440


11,307



(43.5%)

Bank-owned life insurance

102,524


101,878


99,786



2.7%

Other assets

85,831


82,528


82,825



3.6%

     Total assets

$   6,050,248


5,864,116


5,641,527



7.2%



















Liabilities









Deposits:









     Noninterest bearing checking accounts

$   1,390,516


1,320,131


1,227,608



13.3%

     Interest bearing checking accounts

922,254


916,374


896,189



2.9%

     Money market accounts

1,079,002


1,035,523


1,026,043



5.2%

     Savings accounts

417,812


432,389


445,405



(6.2%)

     Brokered deposits

216,616


239,875


251,043



(13.7%)

     Internet time deposits

3,428


3,428


7,248



(52.7%)

     Other time deposits > $100,000

506,148


447,619


357,595



41.5%

     Other time deposits

261,462


264,000


284,577



(8.1%)

          Total deposits

4,797,238


4,659,339


4,495,708



6.7%










Borrowings

406,125


406,609


407,059



(0.2%)

Other liabilities

58,746


33,938


33,110



77.4%

     Total liabilities

5,262,109


5,099,886


4,935,877



6.6%










Shareholders' equity









Common stock

434,948


434,453


433,305



0.4%

Retained earnings

360,455


341,738


282,038



27.8%

Stock in rabbi trust assumed in acquisition

(3,245)


(3,235)


(3,588)



(9.6%)

Rabbi trust obligation

3,245


3,235


3,588



9.6%

Accumulated other comprehensive loss

(7,264)


(11,961)


(9,693)



25.1%

     Total shareholders' equity

788,139


764,230


705,650



11.7%

Total liabilities and shareholders' equity

$   6,050,248


5,864,116


5,641,527



7.2%












 

 


First Bancorp and Subsidiaries
Financial Summary – Page 4



For the Three Months Ended

YIELD INFORMATION

Mar. 31,
2019

Dec. 31,
2018

Sept. 30,
2018

June 30,

2018

Mar. 31,
2018







Yield on loans

5.11%

5.13%

4.96%

4.99%

4.96%

Yield on securities

2.95%

2.71%

2.52%

2.47%

2.60%

Yield on other earning assets

2.77%

2.29%

2.33%

2.02%

2.02%

   Yield on all interest earning assets

4.66%

4.60%

4.49%

4.48%

4.51%







Rate on interest bearing deposits

0.67%

0.56%

0.48%

0.40%

0.34%

Rate on other interest bearing liabilities

2.79%

2.60%

2.41%

2.24%

1.87%

   Rate on all interest bearing liabilities

0.90%

0.79%

0.69%

0.60%

0.51%

     Total cost of funds

0.66%

0.58%

0.51%

0.45%

0.38%







        Net interest margin (1)

4.03%

4.05%

4.00%

4.04%

4.14%







        Net interest margin – tax-equivalent (2)

4.06%

4.08%

4.03%

4.07%

4.17%







        Average prime rate

5.50%

5.28%

5.01%

4.80%

4.53%







(1)

Calculated by dividing annualized net interest income by average earning assets for the period.

(2)

Calculated by dividing annualized tax-equivalent net interest income by average earning assets for the period. See note 1 on the first page of this Financial Summary for discussion of tax-equivalent adjustments.

 

 



For the Three Months Ended

NET INTEREST INCOME PURCHASE 
        ACCOUNTING ADJUSTMENTS

($ in thousands)


 

Mar. 31,
2019


 

Dec. 31,
2018


 

Sept. 30,
2018


 

June 30,
2018


 

Mar. 31,
2018














Interest income – increased by accretion of loan 
        discount on acquired loans


 

$        1,132


 

1,566


 

1,365


 

2,064


 

1,956


Interest income – increased by accretion of loan 
        discount on retained portions of SBA loans


287


264


210


232


155


Interest expense – reduced by premium 
        amortization of deposits


58


71


84


101


116


Interest expense – increased by discount 
        accretion of borrowings


 

(45)


 

(45)


 

(46)


 

(45)


 

(45)


     Impact on net interest income


$        1,432


1,856


1,613


2,352


2,182




 

 


First Bancorp and Subsidiaries
Financial Summary – Page 5


ASSET QUALITY DATA ($ in thousands)

Mar. 31,
2019


Dec. 31,
2018


Sept. 30,
2018


June 30,
2018


Mar. 31,
2018













Nonperforming assets











Nonaccrual loans

$     20,684


22,575


18,231


25,494


21,849


Troubled debt restructurings - accruing

12,457


13,418


16,657


17,386


18,495


Accruing loans > 90 days past due

-


-


-


-


-


Total nonperforming loans

33,141


35,993


34,888


42,880


40,344


Foreclosed real estate

6,390


7,440


6,140


8,296


11,307


Total nonperforming assets

$     39,531


43,433


41,028


51,176


51,651


Purchased credit impaired loans not included 
     above (1)

$     15,867


17,393


20,189


20,832


22,147


 

Asset Quality Ratios











Net quarterly charge-offs (recoveries) to average
loans – annualized

0.04%


0.02%


0.27%


(0.07%)


(0.36%)


Nonperforming loans to total loans

0.77%


0.85%


0.83%


1.03%


0.98%


Nonperforming assets to total assets

0.65%


0.74%


0.72%


0.90%


0.92%


Allowance for loan losses to total loans

0.49%


0.50%


0.49%


0.56%


0.57%


Allowance for loan losses + unaccreted discount
on acquired loans to total loans

0.86%


0.90%


0.94%


1.05%


1.11%




(1)

In the March 3, 2017 acquisition of Carolina Bank and the October 1, 2017 acquisition of Asheville Savings Bank, the Company acquired $19.3 million and $9.9 million, respectively, in purchased credit impaired loans in accordance with ASC 310-30 accounting guidance.  These loans are excluded from the nonperforming loan amounts.

 

 


First Bancorp and Subsidiaries
Financial Summary - Page 6



For the Three Months Ended

NET INTEREST MARGIN, EXCLUDING
LOAN DISCOUNT ACCRETION –
RECONCILIATION    

($ in thousands)

 

 

Mar. 31,
2019


 

 

Dec. 31,
2018


 

 

Sept. 30,
2018


 

 

June 30,
2018


 

 

Mar. 31,
2018













Net interest income, as reported

$      53,361


53,846


51,845


51,232


50,507


Tax-equivalent adjustment

424


443


428


367


356


Net interest income, tax-equivalent (A)

$      53,785


54,289


52,273


51,599


50,863


 

Average earning assets (B)

$ 5,372,766


5,276,311


5,143,449


5,080,372


4,949,612


Tax-equivalent net interest 
     margin, annualized – as reported –  (A)/(B)

 

4.06%


 

4.08%


 

4.03%


 

4.07%


 

4.17%













Net interest income, tax-equivalent

$      53,785


54,289


52,273


51,599


50,863


Loan discount accretion

1,419


1,830


1,575


2,296


2,111


Net interest income, tax-equivalent, excluding 
     loan discount accretion  (A)

$      52,366


52,459


50,698


49,303


48,752


 

Average earnings assets  (B)

$ 5,372,766


5,276,311


5,143,449


5,080,372


4,949,612


Tax-equivalent net interest margin, excluding 
     impact of loan discount accretion, 
     annualized – (A) / (B)

3.95%


3.94%


3.91%


3.89%


3.99%


Note:  The measure "tax-equivalent net interest margin, excluding impact of loan discount accretion" is a non-GAAP performance measure.  Management of the Company believes that it is useful to calculate and present the Company's net interest margin without the impact of loan discount accretion for the reasons explained in the remainder of this note.  Loan discount accretion is a non-cash interest income adjustment that is related to 1) the Company's acquisition of loans and represents the portion of the fair value discount that was initially recorded on the acquired loans, and 2) the Company's origination of SBA loans and the subsequent sale of the guaranteed portion of the loan that results in a discount being recorded on the retained portion of the loan.  These discounts are recognized into income over the lives of the loans.  At March 31, 2019, the Company had a remaining loan discount balance on acquired loans of $16.1 million compared to $22.3 million at March 31, 2018.  At March 31, 2019 the Company had a remaining loan discount balance on SBA loans of $6.2 million compared to $3.2 million at March 31, 2018.  For the related loans that perform and pay-down over time, the loan discount will also be reduced, with a corresponding increase to interest income.  Therefore, management of the Company believes it is useful to also present this ratio to reflect the Company's net interest margin excluding this non-cash, temporary loan discount accretion adjustment to aid investors in comparing financial results between periods.  The Company cautions that non-GAAP financial measures should be considered in addition to, but not as a substitute for, the Company's reported GAAP results.

(PRNewsfoto/First Bancorp)

 

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SOURCE First Bancorp