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Press Release

First Bancorp Reports Second Quarter Results

Company Release - 7/24/2019 4:01 PM ET

SOUTHERN PINES, N.C., July 24, 2019 /PRNewswire/ -- First Bancorp (NASDAQ: FBNC), the parent company of First Bank, announced today net income of $23.9 million, or $0.80 per diluted common share, for the three months ended June 30, 2019, an increase of 3.9% in earnings per share from the $22.7 million, or $0.77 per diluted common share, recorded in the second quarter of 2018. 

For the six months ended June 30, 2019, the Company recorded net income of $46.1 million, or $1.55 per diluted common share, an increase of 6.2% in earnings per share from the $43.4 million, or $1.46 per diluted common share, for the six months ended June 30, 2018.

Net Interest Income and Net Interest Margin

Net interest income for the second quarter of 2019 was $54.4 million, a 6.2% increase from the $51.2 million recorded in the second quarter of 2018.  Net interest income for the first six months of 2019 amounted to $107.8 million, a 5.9% increase from the $101.7 million recorded in the comparable period 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 second quarter of 2019 was 4.06%, which was unchanged from the first quarter of 2019, and was one basis point lower than the 4.07% realized in the second quarter of 2018.  For the six month period ended June 30, 2019, the Company's net interest margin was 4.06% compared to 4.12% for the same period in 2018.  The decreases in the net interest margins realized in 2019 were primarily due to lower loan discount accretion.

The Company recorded loan discount accretion of $1.7 million in the second quarter of 2019, compared to $2.3 million in the second quarter of 2018.  For the six months ended June 30, 2019 and 2018, loan discount accretion amounted to $3.1 million and $4.4 million, respectively.  Loan discount accretion had a 13 basis point impact on the net interest margin in the second quarter of 2019 compared to an 18 basis point impact in the second quarter of 2018.  For the first six months of 2019 and 2018, loan discount accretion had a 12 basis point impact and an 18 basis point impact, respectively, on the net interest margin for the periods.  The lower discount accretion in 2019 was attributable to paydowns in the Company's acquired loan portfolios. 

Excluding the effects of loan discount accretion, the Company's tax-equivalent net interest margin was 3.93% for the second quarter of 2019, 3.95% for the first quarter of 2019, and 3.89% in the second quarter of 2018.  Excluding the effects of loan discount accretion, the Company's tax-equivalent net interest margin was 3.94% for both six month periods ended June 30, 2019 and 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. 

Over the past year, the impact on the net interest margin of interest-bearing liability costs that have risen by more than earning asset yields has been substantially offset by earnings realized from the 15.1% growth in noninterest-bearing deposits, which has resulted in total funding costs increasing by approximately the same amount as the increase in earning asset yields.

Provision for Loan Losses and Asset Quality

The Company recorded a negative provision for loan losses of $0.3 million (reduction of the allowance for loan losses) in the second quarter of 2019 compared to a negative provision for loan losses of $0.7 million in the second quarter of 2018.  For the six months ended June 30, 2019, the Company recorded a provision for loan losses of $0.2 million compared to a negative provision for loan losses of $4.4 million in the same period of 2018.  In the first quarter of 2018, the Company experienced net loan recoveries of $3.7 million, which drove the negative provision during the period.  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 six months ended June 30, 2019 was 0.02%, compared to (0.21%) for the same period of 2018.   The Company's nonperforming assets to total assets ratio was 0.57% at June 30, 2019 compared to 0.90% at June 30, 2018. 

Noninterest Income

Total noninterest income was $16.0 million and $15.9 million for the three months ended June 30, 2019 and June 30, 2018, respectively.  For the six months ended June 30, 2019, noninterest income amounted to $30.6 million compared to $31.7 million for the same period of 2018. 

Core noninterest income for the second quarter of 2019 was $16.7 million, a 10.7% increase from the $15.1 million reported for the first quarter of 2018 – see reconciliation of core noninterest income to total noninterest income in the Financial Summary.  Increases were experienced in most categories of income, with "Other service charges, commissions, and fees" increasing by $1.1 million, or 23.8%, primarily due to higher debit card and credit card interchange fees associated with increased usage.

Core noninterest income for the six months ended June 30, 2019 was $31.4 million, a 0.8% increase from the $31.2 million reported for the first half 2018.  Higher "Other service charges, commissions and fees" were substantially offset by lower fees/gains on sales of mortgage loans and SBA loans.

Other gains (losses) amounted to a loss of $0.3 million in the second quarter of 2019 due to miscellaneous items, whereas in the second quarter of 2018, the Company recorded a $0.9 million gain on the sale of a former branch location.

Noninterest Expenses

Noninterest expenses amounted to $40.4 million in the second quarter of 2019, a 4.7% increase over the $38.6 million recorded in the second quarter of 2018.  Noninterest expenses for the six months ended June 30, 2019 amounted to $79.7 million compared to $82.1 million in 2018, a decrease of 2.9%. 

Merger and acquisition expenses declined by $0.5 million in the second quarter of 2019 compared to the second quarter of 2018, and declined by $3.2 million in the six months ended June 30, 2019 compared to the same period in 2018.

Income Taxes

The Company's effective tax rate for the second quarter of 2019 was 21.2% compared to 22.1% in the second quarter of 2018.  For the six months ended June 30, 2019 and 2018, the Company's effective tax rates were 21.0% and 22.1%, respectively.  The lower 2019 effective tax rates were primarily due to a decrease in the North Carolina corporate income tax rate from 3.0% to 2.5%, which became effective January 1, 2019.

Balance Sheet and Capital

Total assets at June 30, 2019 amounted to $6.0 billion, a 5.1% increase from a year earlier.  Total loans at June 30, 2019 amounted to $4.3 billion, a 4.6% increase from a year earlier, and total deposits amounted to $4.8 billion at June 30, 2019, a 6.4% increase from a year earlier.

Annualized loan growth for the first half of 2019 was 4.3%.  Annualized deposit growth for the first half of 2019 was 8.0%.  Within deposits, the Company's retail deposits (excludes brokered deposits and internet time deposits) grew at an annualized rate of 12.5% for the first six months of 2019.  As a result of the strong retail deposit growth, the Company has lowered its level of brokered deposits, which have declined by $87 million, or 36.6%, since June 30, 2018.  Additionally, the Company has paid down its borrowings by $106 million, or 26.0%, over that same time period.

Over the past twelve months in order to reduce exposure to the possibility of lower interest rates, the Company has invested a portion of its interest-bearing cash balances into fixed rate investment securities.  As a result, from June 30, 2018 to June 30, 2019, interest-bearing cash balances have declined by 38% and investment securities balances have increased by 74%.

The Company remains well-capitalized by all regulatory standards, with an estimated Total Risk-Based Capital Ratio at June 30, 2019 of 14.55%, an increase from the 13.17% reported at June 30, 2018.  The Company's tangible common equity to tangible assets ratio was 9.75% at June 30, 2019, an increase of 116 basis points from a year earlier. 

Comments of the CEO and Other Business Matters

Richard H. Moore, CEO of First Bancorp, commented, "We are pleased with our results for the quarter, which resulted in a return on average assets of 1.60%.  We are also very pleased with our recent recognition by Forbes as being one of the best banks in North Carolina.  We extend a special thank you to our customers for your business and your support."

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

  • On June 14, 2019, the Company announced a quarterly cash dividend of $0.12 per share payable on July 25, 2019 to shareholders of record on June 30, 2019. This dividend rate represents a 20% increase over the dividend rate declared in the second quarter of 2018.
  • During the second quarter of 2019, the Company repurchased 182,000 shares of the Company's common stock at an average price of $35.82, which totaled $6.5 million. The Company has $25 million of total repurchase authority and depending on market conditions, may continue share repurchases up to that limit during the remainder of 2019.

First Bancorp is a bank holding company headquartered in Southern Pines, North Carolina, with total assets of approximately $6.0 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

June 30,

 

Percent

($ in thousands except per share data – unaudited)

2019


2018

Change






INCOME STATEMENT 










Interest income





   Interest and fees on loans

$          55,652


51,451


   Interest on investment securities

5,264


2,833


   Other interest income

2,106


2,451


      Total interest income

63,022


56,735

11.1%

Interest expense





   Interest on deposits

6,324


3,233


   Interest on borrowings

2,289


2,270


      Total interest expense

8,613


5,503

56.5%

        Net interest income

54,409


51,232

6.2%

Total provision (reversal) for loan losses

(308)


(710)

n/m   

Net interest income after provision for loan losses

54,717


51,942

5.3%

Noninterest income





   Service charges on deposit accounts

3,210


3,122


   Other service charges, commissions, and fees

5,786


4,674


   Fees from presold mortgage loans

857


796


   Commissions from sales of insurance and financial products

2,204


2,119


   SBA consulting fees

921


1,126


   SBA loan sale gains

3,069


2,598


   Bank-owned life insurance income

631


628


   Foreclosed property gains (losses), net

(381)


(99)


   Securities gains (losses), net



   Other gains (losses), net

(308)


908


       Total noninterest income

15,989


15,872

0.7%

Noninterest expenses





   Salaries expense

19,732


18,446


   Employee benefit expense

4,418


4,084


   Occupancy and equipment related expense

3,912


3,784


   Merger and acquisition expenses

103


640


   Intangibles amortization expense

1,242


1,506


   Other operating expenses

11,032


10,174


      Total noninterest expenses

40,439


38,634

4.7%

Income before income taxes

30,267


29,180

3.7%

Income tax expense

6,408


6,450

(0.7%)

Net income

$           23,859


22,730

5.0%











Earnings per common share – diluted

$               0.80


0.77

3.9%






ADDITIONAL INCOME STATEMENT INFORMATION





   Net interest income, as reported

$           54,409


51,232


   Tax-equivalent adjustment (1)

423


367


   Net interest income, tax-equivalent

$           54,832


51,599

6.3%









(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





Six Months Ended

June 30,

 

Percent

($ in thousands except per share data – unaudited)

2019


2018

Change






INCOME STATEMENT 










Interest income





   Interest and fees on loans

$         109,612


101,621


   Interest on investment securities

10,338


5,799


   Other interest income

4,807


4,376


      Total interest income

124,757


111,796

11.6%

Interest expense





   Interest on deposits

11,901


5,906


   Interest on borrowings

5,086


4,151


      Total interest expense

16,897


10,057

68.9%

        Net interest income

107,770


101,739

5.9%

Total provision (reversal) for loan losses

192


(4,369)

n/m   

Net interest income after provision for loan losses

107,578


106,108

1.4%

Noninterest income





   Service charges on deposit accounts

6,155


6,385


   Other service charges, commissions, and fees

11,034


9,159


   Fees from presold mortgage loans

1,402


1,655


   Commissions from sales of insurance and financial products

4,233


4,059


   SBA consulting fees

2,184


2,267


   SBA loan sale gains

5,131


6,400


   Bank-owned life insurance income

1,277


1,251


   Foreclosed property gains (losses), net

(626)


(387)


   Securities gains (losses), net



   Other gains (losses), net

(226)


912


      Total noninterest income

30,564


31,701

(3.6%)

Noninterest expenses





   Salaries expense

38,697


37,844


   Employee benefit expense

9,006


8,691


   Occupancy and equipment related expense

8,035


7,838


   Merger and acquisition expenses

213


3,401


   Intangibles amortization expense

2,574


3,066


   Other operating expenses

21,185


21,280


      Total noninterest expenses

79,710


82,120

(2.9%)

Income before income taxes

58,432


55,689

4.9%

Income tax expense

12,288


12,286

0.0%

Net income

$           46,144


43,403

6.3%











Earnings per common share – diluted

$               1.55


1.46

6.2%






ADDITIONAL INCOME STATEMENT INFORMATION





   Net interest income, as reported

$         107,770


101,739


   Tax-equivalent adjustment (1)

847


723


   Net interest income, tax-equivalent

$         108,617


102,462

6.0%









(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 3



Three Months Ended

June 30,

Six Months Ended

June 30,

PERFORMANCE RATIOS (annualized)

2019

2018

2019

2018

Return on average assets (1)

1.60%

1.61%

1.56%

1.56%

Return on average common equity (2)

11.93%

12.70%

11.80%

12.33%

Net interest margin – tax-equivalent (3)

4.06%

4.07%

4.06%

4.12%

Net charge-offs (recoveries) to average loans

0.00%

(0.07%)

0.02%

(0.21%)






COMMON SHARE DATA





Cash dividends declared – common

$         0.12

0.10

0.24

0.20

Stated book value – common

27.43

24.20

27.43

24.20

Tangible book value – common

18.89

15.79

18.89

15.79

Common shares outstanding at end of period

29,717,223

29,702,912

29,717,223

29,702,912

Weighted average shares outstanding – diluted

29,796,941

29,632,738

29,808,859

29,630,822






CAPITAL RATIOS





Tangible common equity to tangible assets

9.75%

8.59%

9.75%

8.59%

Common equity tier I capital ratio - estimated

12.90%

11.40%

12.90%

11.40%

Tier I leverage ratio – estimated

10.92%

10.05%

10.92%

10.05%

Tier I risk-based capital ratio - estimated

14.07%

12.61%

14.07%

12.61%

Total risk-based capital ratio - estimated

14.55%

13.17%

14.55%

13.17%






AVERAGE BALANCES ($ in thousands)





Total assets

$  5,994,595

5,671,620

5,969,822

5,610,568

Loans

4,329,866

4,133,689

4,305,069

4,116,592

Earning assets

5,417,284

5,080,372

5,395,025

5,014,992

Deposits

4,810,029

4,512,559

4,757,130

4,458,182

Interest-bearing liabilities

3,716,092

3,671,692

3,744,903

3,650,528

Shareholders' equity

802,131

717,975

788,595

709,693








(1)

Calculated by dividing annualized net income by average assets.

(2)

Calculated by dividing annualized net income 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

June 30, 
2019

Mar. 31,
2019

Dec. 31,
2018

Sept. 30,
2018

June 30,
2018









Net interest income – tax-equivalent (1)

$     54,832

53,785

54,289

52,273

51,599


Taxable equivalent adjustment (1)

423

424

443

428

367


Net interest income

54,409

53,361

53,846

51,845

51,232


Provision (reversal) for loan losses

(308)

500

693

87

(710)


Noninterest income

15,989

14,575

14,114

15,173

15,872


Noninterest expense

40,439

39,271

37,374

39,035

38,634


Income before income taxes

30,267

28,165

29,893

27,896

29,180


Income tax expense

6,408

5,880

5,998

5,905

6,450


Net income

23,859

22,285

23,895

21,991

22,730









Earnings per common share – diluted

0.80

0.75

0.80

0.74

0.77









Cash dividends declared per share

0.12

0.12

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 4












CONSOLIDATED BALANCE SHEETS 

($ in thousands - unaudited)












At June 30,

2019


At Mar. 31,

2019


At Dec. 31,

2018


At June 30,

2018



One Year

Change

Assets











Cash and due from banks

$        52,679


80,620


56,050


97,163



(45.8%)

Interest-bearing deposits with banks

286,781


366,187


406,848


462,972



(38.1%)

     Total cash and cash equivalents

339,460


446,807


462,898


560,135



(39.4%)












Investment securities

771,021


730,512


602,588


442,333



74.3%

Presold mortgages

6,222


3,318


4,279


9,311



(33.2%)












Total loans

4,339,497


4,303,787


4,249,064


4,149,390



4.6%

Allowance for loan losses

(20,789)


(21,095)


(21,039)


(23,298)



(10.8%)

Net loans

4,318,708


4,282,692


4,228,025


4,126,092



4.7%












Premises and equipment

136,901


137,725


119,000


113,774



20.3%

Intangible assets

253,769


254,449


255,480


255,610



(0.7%)

Foreclosed real estate

5,107


6,390


7,440


8,296



(38.4%)

Bank-owned life insurance

103,154


102,524


101,878


100,413



2.7%

Other assets

77,697


85,831


82,528


101,636



(23.6%)

     Total assets

$   6,012,039


6,050,248


5,864,116


5,717,600



5.1%























Liabilities











Deposits:











     Noninterest-bearing checking accounts

$   1,441,064


1,390,516


1,320,131


1,252,214



15.1%

     Interest-bearing checking accounts

931,945


922,254


916,374


915,666



1.8%

     Money market accounts

1,104,052


1,079,002


1,035,523


1,021,659



8.1%

     Savings accounts

413,065


417,812


432,389


440,475



(6.2%)

     Brokered deposits

150,888


216,616


239,875


238,098



(36.6%)

     Internet time deposits

1,445


3,428


3,428


6,999



(79.4%)

     Other time deposits > $100,000

538,401


506,148


447,619


402,109



33.9%

     Other time deposits

262,194


261,462


264,000


276,401



(5.1%)

          Total deposits

4,843,054


4,797,238


4,659,339


4,553,621



6.4%












Borrowings

301,140


406,125


406,609


407,076



(26.0%)

Other liabilities

52,676


58,746


33,938


32,181



63.7%

     Total liabilities

5,196,870


5,262,109


5,099,886


4,992,878



4.1%












Shareholders' equity











Common stock

432,533


434,948


434,453


434,117



(0.4%)

Retained earnings

380,748


360,455


341,738


301,800



26.2%

Stock in rabbi trust assumed in acquisition

(3,625)


(3,245)


(3,235)


(3,214)



(12.8%)

Rabbi trust obligation

3,625


3,245


3,235


3,214



12.8%

Accumulated other comprehensive

income (loss)

 

1,888


 

(7,264)


 

(11,961)


 

(11,195)



 

n/m

     Total shareholders' equity

815,169


788,139


764,230


724,722



12.5%

Total liabilities and shareholders' equity

$   6,012,039


6,050,248


5,864,116


5,717,600



5.1%



 

 

First Bancorp and Subsidiaries

Financial Summary – Page 5



For the Three Months Ended

 

YIELD INFORMATION

June 30, 
2019

Mar. 31,
2019

Dec. 31,
2018

Sept. 30,
2018

June 30,

2018









Yield on loans

5.16%

5.11%

5.13%

4.96%

4.99%


Yield on securities

2.81%

2.95%

2.71%

2.52%

2.47%


Yield on other earning assets

2.51%

2.77%

2.29%

2.33%

2.02%


   Yield on all interest-earning assets

4.67%

4.66%

4.60%

4.49%

4.48%









Rate on interest bearing deposits

0.75%

0.67%

0.56%

0.48%

0.40%


Rate on other interest-bearing liabilities

2.83%

2.79%

2.60%

2.41%

2.24%


   Rate on all interest-bearing liabilities

0.93%

0.90%

0.79%

0.69%

0.60%


     Total cost of funds

0.67%

0.66%

0.58%

0.51%

0.45%









        Net interest margin (1)

4.03%

4.03%

4.05%

4.00%

4.04%









        Net interest margin – tax-equivalent (2)

4.06%

4.06%

4.08%

4.03%

4.07%









        Average prime rate

5.50%

5.50%

5.28%

5.01%

4.80%









(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)


 

June 30,
2019


 

Mar. 31,
2019


 

Dec. 31,
2018


 

Sept. 30,
2018


 

June 30,
2018













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

 

$        1,336


 

1,132


 

1,566


 

1,365


 

2,064


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

394


287


264


210


232


Interest expense – reduced by premium 
     amortization of deposits

50


58


71


84


101


Interest expense – increased by discount 
     accretion of borrowings

(45)


(45)


(45)


(46)


(45)


     Impact on net interest income

$        1,735


1,432


1,856


1,613


2,352













 

 

First Bancorp and Subsidiaries

Financial Summary – Page 6


 

ASSET QUALITY DATA ($ in thousands)

June 30,
2019


Mar. 31,
2019


Dec. 31,
2018


Sept. 30,
2018


June 30,
2018













Nonperforming assets











Nonaccrual loans

$     17,375


20,684


22,575


18,231


25,494


Troubled debt restructurings - accruing

11,890


12,457


13,418


16,657


17,386


Accruing loans > 90 days past due

-


-


-


-


-


Total nonperforming loans

29,265


33,141


35,993


34,888


42,880


Foreclosed real estate

5,107


6,390


7,440


6,140


8,296


Total nonperforming assets

$     34,372


39,531


43,433


41,028


51,176


Purchased credit impaired loans not included 
     above (1)

$     14,175


15,867


17,393


20,189


20,832


 

Asset Quality Ratios











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

0.00%


0.04%


0.02%


0.27%


(0.07%)


Nonperforming loans to total loans

0.67%


0.77%


0.85%


0.83%


1.03%


Nonperforming assets to total assets

0.57%


0.65%


0.74%


0.72%


0.90%


Allowance for loan losses to total loans

0.48%


0.49%


0.50%


0.49%


0.56%


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

0.82%


0.86%


0.90%


0.94%


1.05%




(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 7



For the Three Months Ended

NET INTEREST MARGIN, EXCLUDING
LOAN DISCOUNT ACCRETION –
RECONCILIATION    

($ in thousands)

 

 

June 30,
2019


 

 

Mar. 31,
2019


 

 

Dec. 31,
2018


 

 

Sept. 30,
2018


 

 

June 30,
2018













Net interest income, as reported

$      54,409


53,361


53,846


51,845


51,232


Tax-equivalent adjustment

423


424


443


428


367


Net interest income, tax-equivalent (A)

$      54,832


53,785


54,289


52,273


51,599


 

Average earning assets (B)

$ 5,417,284


5,372,766


5,276,311


5,143,449


5,080,372


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

 

4.06%


 

4.06%


 

4.08%


 

4.03%


 

4.07%













Net interest income, tax-equivalent

$      54,832


53,785


54,289


52,273


51,599


Loan discount accretion

1,730


1,419


1,830


1,575


2,296


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

$      53,102


52,366


52,459


50,698


49,303


 

Average earnings assets  (B)

$ 5,417,284


5,372,766


5,276,311


5,143,449


5,080,372


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

3.93%


3.95%


3.94%


3.91%


3.89%



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 portions of the loans that results in a discount being recorded on the retained portion of the loans.  These discounts are recognized into income over the lives of the loans.  At June 30, 2019, the Company had a remaining loan discount balance on acquired loans of $14.8 million compared to $20.3 million at June 30, 2018.  At June 30, 2019, the Company had a remaining loan discount balance on SBA loans of $6.9 million compared to $4.7 million at June 30, 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.



Reconciliation of Core Noninterest Income to

Total Noninterest Income

($ in thousands)

Three Months
Ended June 30,
2019


Three Months
Ended June 30,
2018


Six Months
Ended June 30,
2019


Six Months
Ended June 30,
2018


Noninterest income









   Service charges on deposit accounts

$             3,210


3,122


6,155


6,385


   Other service charges, commissions, and fees

5,786


4,674


11,034


9,159


   Fees from presold mortgage loans

857


796


1,402


1,655


   Commissions from sales of insurance and financial products

2,204


2,119


4,233


4,059


   SBA consulting fees

921


1,126


2,184


2,267


   SBA loan sale gains

3,069


2,598


5,131


6,400


   Bank-owned life insurance income

631


628


1,277


1,251


         Core noninterest Income

16,678


15,063


31,416


31,176


   Foreclosed property gains (losses), net

(381)


(99)


(626)


(387)


   Securities gains (losses), net





   Other gains (losses), net

(308)


908


(226)


912


         Total noninterest income

$         15,989


15,872


30,564


31,701


 

(PRNewsfoto/First Bancorp)

 

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SOURCE First Bancorp