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Press Release

First Bancorp Reports Third Quarter Results

Company Release - 10/23/2019 4:01 PM ET

SOUTHERN PINES, N.C., Oct. 23, 2019 /PRNewswire/ -- First Bancorp (NASDAQ - FBNC), the parent company of First Bank, announced today net income of $25.0 million, or $0.84 per diluted common share, for the three months ended September 30, 2019, an increase of 13.5% in earnings per share from the $22.0 million, or $0.74 per diluted common share, recorded in the third quarter of 2018.

For the nine months ended September 30, 2019, the Company recorded net income of $71.2 million, or $2.39 per diluted common share, an increase of 8.1% in earnings per share from the $65.4 million, or $2.21 per diluted common share, for the nine months ended September 30, 2018.

Net Interest Income and Net Interest Margin

Net interest income for the third quarter of 2019 was $53.8 million, a 3.7% increase from the $51.8 million recorded in the third quarter of 2018.  Net interest income for the first nine months of 2019 amounted to $161.5 million, a 5.2% increase from the $153.6 million recorded in the comparable period of 2018.  The increases in net interest income for the periods presented were primarily due to growth in interest-earning assets, which have increased by approximately 6%-7% over the past year.

The Company's net interest margin (tax-equivalent net interest income divided by average earning assets) for the third quarter of 2019 was 3.95%, which was 8 basis points lower than the 4.03% realized in the third quarter of 2018.  For the nine month period ended September 30, 2019, the Company's net interest margin was 4.02% compared to 4.09% for the same period in 2018.  The lower margins were due to a combination of lower loan discount accretion and funding costs that rose by more than asset yields.

The Company recorded loan discount accretion of $1.3 million in the third quarter of 2019, compared to $1.6 million in the third quarter of 2018.  For the nine months ended September 30, 2019 and 2018, loan discount accretion amounted to $4.5 million and $6.0 million, respectively.  The lower loan discount accretion accounted for approximately 3 basis points out of the 8 basis point decline in the net interest margin when comparing the third quarter of 2019 to 2018 and for 5 basis points of the 7 basis point decline on a year to date basis.  The lower discount accretion was attributable to paydowns in the Company's acquired loan portfolios.

The Company's earning-asset yields, excluding loan discount accretion, increased by 8 basis points when comparing the third quarter of 2019 to the third quarter of 2018.  Total funding costs increased by 15 basis points over that same period.  On a year to date basis, earning-asset yields, excluding loan discount accretion, increased 17 basis points while total funding costs increased 22 basis points.

In the third quarter of 2019, the Federal Reserve cut short-term interest rates by 50 basis points.  The lower interest rates resulted in a 12 basis point reduction in the yield on interest-earning assets in the third quarter of 2019 from the second quarter of 2019 (9 basis points excluding loan discount accretion) and a one basis point reduction in the total cost of funds.  This spread compression resulted in the 11 basis point linked-quarter decrease in net interest margin (7 basis points excluding loan discount accretion).

See the Financial Summary for a reconciliation of the Company's net interest margin to its net interest margin excluding loan discount accretion, and other information regarding this percentage.

Provision for Loan Losses and Asset Quality

The Company recorded a negative provision for loan losses of $1.1 million (reduction of the allowance for loan losses) in the third quarter of 2019 compared to a provision for loan losses of $0.1 million in the third quarter of 2018.  For the nine months ended September 30, 2019, the Company recorded a negative provision for loan losses of $0.9 million compared to a negative provision for loan losses of $4.3 million in the same period of 2018.  In the first quarter of 2018, the Company experienced net loan recoveries of $3.7 million, resulting in the negative provision during 2018.  The Company's provision for loan losses has remained at low levels 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 nine months ended September 30, 2019 was 0.03%, compared to (0.05%) for the same period of 2018.   The Company's nonperforming assets to total assets ratio was 0.56% at September 30, 2019 compared to 0.72% at September 30, 2018.

Noninterest Income

Total noninterest income was $15.6 million and $15.2 million for the three months ended September 30, 2019 and 2018, respectively.  For the nine months ended September 30, 2019, noninterest income amounted to $46.2 million compared to $46.9 million for the same period of 2018.

Core noninterest income, a non-GAAP measure, for the third quarter of 2019 was $15.9 million, a 2.9% increase from the $15.5 million reported for the third quarter of 2018 - see reconciliation of core noninterest income to total noninterest income in the Financial Summary.  The Company experienced strong increases in "Other service charges, commissions, and fees," due to higher debit card and credit card interchange fees associated with increased usage, and "Fees from Presold Mortgages," as a result of higher mortgage loan originations.  Offsetting those increases was lower SBA consulting fee income and lower SBA loan sale gains, which both declined due to lower origination activity.

Core noninterest income for the nine months ended September 30, 2019 was $47.3 million, a 1.5% increase from the $46.6 million reported for the first nine months of 2018.  Higher "Other service charges, commissions and fees" were substantially offset by lower SBA consulting fee income and lower gains on sales of SBA loans.

Other gains (losses) amounted to a loss of $0.3 million in the first nine months of 2019 due to miscellaneous items, whereas in the first nine months of 2018, the Company recorded a net gain of $0.8 million, which included a $0.9 million gain on the sale of a former branch location.

Noninterest Expenses

Noninterest expenses amounted to $38.9 million in the third quarter of 2019, a 0.3% decrease from the $39.0 million recorded in the third quarter of 2018.  Noninterest expenses for the nine months ended September 30, 2019 amounted to $118.6 million compared to $121.2 million in 2018, a decrease of 2.1%.

As a result of FDIC assessment credits allocated to the Company, the Company recorded no FDIC insurance expense in the third quarter of 2019 and reversed a $400,000 accrual from the second quarter of 2019.  The Company expects its remaining credits to result in no insurance expense in the fourth quarter of 2019 and to cover approximately one month of expense in the first quarter of 2020.

Merger and acquisition expenses declined by $3.4 million in the nine months ended September 30, 2019 compared to the same period in 2018.

Income Taxes

The Company's effective tax rate for the third quarter of 2019 was 20.8% compared to 21.2% in the third quarter of 2018.  For the nine months ended September 30, 2019 and 2018, the Company's effective tax rates were 21.0% and 21.8%, 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 September 30, 2019 amounted to $6.1 billion, a 6.3% increase from a year earlier.  Total loans at September 30, 2019 amounted to $4.4 billion, a 4.9% increase from a year earlier, and total deposits amounted to $4.9 billion at September 30, 2019, a 7.7% increase from a year earlier.

Annualized loan growth for the first nine months of 2019 was 4.6%.  Annualized deposit growth for the first nine months of 2019 was 6.2%.  Within deposits, the Company's retail deposits (excludes brokered deposits and internet time deposits) grew at an annualized rate of 9.9% for the first nine months of 2019.  As a result of the strong retail deposit growth, the Company has been able reduce to its level of brokered deposits, which have declined by $128 million, or 50.1%, since September 30, 2018.  Additionally, the Company has paid down its borrowings by $106 million, or 26.0%, over that same time period.

In late 2018 and early 2019, in order to reduce exposure to the possibility of lower interest rates, the Company invested a portion of its interest-bearing cash balances into fixed rate investment securities.  As a result, from September 30, 2018 to September 30, 2019, interest-bearing cash balances have declined by 42.5% and investment securities balances have increased by 70.2%.

The Company remains well-capitalized by all regulatory standards, with an estimated Total Risk-Based Capital Ratio at September 30, 2019 of 14.78%, an increase from the 13.68% reported at September 30, 2018.  The Company's tangible common equity to tangible assets ratio was 10.01% at September 30, 2019, an increase of 106 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 1.65%.  The current interest rate environment is a challenge for banks, but our net interest margin has held up well.  Deposit growth remains strong, and we also saw an increase in loan origination activity during the quarter."

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

  • On September 13, 2019, the Company announced a quarterly cash dividend of $0.12 per share payable on October 25, 2019 to shareholders of record on September 30, 2019. This dividend rate represents a 20% increase over the dividend rate declared in the third quarter of 2018.
  • During the third quarter of 2019, the Company repurchased 99,625 shares of the Company's common stock at an average price of $34.89, which totaled $3.5 million. For the first nine months of 2019, the Company repurchased 281,593 shares at an average cost of $35.48 for a total of $10 million. The Company has $15 million of remaining repurchase authority and, depending on market conditions, may continue share repurchases up to that limit during the last quarter of 2019.

*   *   *

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

September 30,


Percent


($ in thousands except per share data - unaudited)

2019


2018


Change


INCOME STATEMENT







Interest income







   Interest and fees on loans

$

55,142


52,407




   Interest on investment securities

5,342


2,868




   Other interest income

1,898


2,944




      Total interest income

62,382


58,219


7.2%


Interest expense







   Interest on deposits

6,597


3,906




   Interest on borrowings

2,007


2,468




      Total interest expense

8,604


6,374


35.0%


        Net interest income

53,778


51,845


3.7%


Total provision (reversal) for loan losses

(1,105)


87


n/m


Net interest income after provision for loan losses

54,883


51,758


6.0%


Noninterest income







   Service charges on deposit accounts

3,388


3,221




   Other service charges, commissions, and fees

5,814


4,942




   Fees from presold mortgage loans

1,275


576




   Commissions from sales of insurance and financial products

2,203


2,425




   SBA consulting fees

663


1,287




   SBA loan sale gains

1,917


2,373




   Bank-owned life insurance income

651


641




   Foreclosed property gains (losses), net

(273)


(192)




   Securities gains (losses), net

97





   Other gains (losses), net

(105)


(101)




      Total noninterest income

15,630


15,172


3.0%


Noninterest expenses







   Salaries expense

19,833


18,771




   Employee benefit expense

4,144


4,061




   Occupancy and equipment related expense

4,017


4,180




   Merger and acquisition expenses


167




   Intangibles amortization expense

1,163


1,452




   Other operating expenses

9,763


10,403




      Total noninterest expenses

38,920


39,034


(0.3)%


Income before income taxes

31,593


27,896


13.3%


Income tax expense

6,574


5,905


11.3%


Net income

$

25,019


21,991


13.8%









Earnings per common share - diluted

$

0.84


0.74


13.5%









ADDITIONAL INCOME STATEMENT INFORMATION







   Net interest income, as reported

$

53,778


51,845




   Tax-equivalent adjustment (1)

413


428




   Net interest income, tax-equivalent

$

54,191


52,273


3.7%







(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






Nine Months Ended

September 30,


Percent

($ in thousands except per share data - unaudited)

2019


2018


Change

INCOME STATEMENT






Interest income






   Interest and fees on loans

$

164,754


154,028



   Interest on investment securities

15,679


8,667



   Other interest income

6,705


7,320



      Total interest income

187,138


170,015


10.1%

Interest expense





   Interest on deposits

18,498


9,812



   Interest on borrowings

7,092


6,619



      Total interest expense

25,590


16,431


55.7%

        Net interest income

161,548


153,584


5.2%

Total provision (reversal) for loan losses

(913)


(4,282)


(78.7)%

Net interest income after provision for loan losses

162,461


157,866


2.9%

Noninterest income





   Service charges on deposit accounts

9,543


9,606



   Other service charges, commissions, and fees

16,848


14,101



   Fees from presold mortgage loans

2,677


2,231



   Commissions from sales of insurance and financial products

6,436


6,484



   SBA consulting fees

2,847


3,554



   SBA loan sale gains

7,048


8,773



   Bank-owned life insurance income

1,928


1,892



   Foreclosed property gains (losses), net

(899)


(579)



   Securities gains (losses), net

97




   Other gains (losses), net

(331)


811



      Total noninterest income

46,194


46,873


(1.4)%

Noninterest expenses






   Salaries expense

58,530


56,615



   Employee benefit expense

13,150


12,752



   Occupancy and equipment related expense

12,052


12,018



   Merger and acquisition expenses

213


3,568



   Intangibles amortization expense

3,737


4,518



   Other operating expenses

30,948


31,683



      Total noninterest expenses

118,630


121,154


(2.1)%

Income before income taxes

90,025


83,585


7.7%

Income tax expense

18,862


18,191


3.7%

Net income

$

71,163


65,394


8.8%







Earnings per common share - diluted

$

2.39


2.21


8.1%







ADDITIONAL INCOME STATEMENT INFORMATION






   Net interest income, as reported

$

161,548


153,584



   Tax-equivalent adjustment (1)

1,260


1,151



   Net interest income, tax-equivalent

$

162,808


154,735


5.2%





(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.

 

 

First Bancorp and Subsidiaries

Financial Summary - Page 3





Three Months Ended

September 30,

Nine Months Ended

September 30,

PERFORMANCE RATIOS (annualized)

2019

2018

2019

2018

Return on average assets (1)

1.65

%

1.53

%

1.59

%

1.55

%

Return on average common equity (2)

12.00

%

11.83

%

11.87

%

12.16

%

Net interest margin - tax-equivalent (3)

3.95

%

4.03

%

4.02

%

4.09

%

Net charge-offs (recoveries) to average loans

0.04

%

0.27

%

0.03

%

(0.05)

%






COMMON SHARE DATA





Cash dividends declared - common

$

0.12


0.10


0.36


0.30


Stated book value - common

28.20


24.99


28.20


24.99


Tangible book value - common

19.66


16.43


19.66


16.43


Common shares outstanding at end of period

29,604,830


29,729,285


29,604,830


29,729,285


Weighted average shares outstanding - diluted

29,684,105


29,621,130


29,759,459


29,639,126







CAPITAL RATIOS





Tangible common equity to tangible assets

10.01

%

8.95

%

10.01

%

8.95

%

Common equity tier I capital ratio - estimated

13.12

%

11.97

%

13.12

%

11.97

%

Tier I leverage ratio - estimated

11.12

%

10.34

%

11.12

%

10.34

%

Tier I risk-based capital ratio - estimated

14.33

%

13.18

%

14.33

%

13.18

%

Total risk-based capital ratio - estimated

14.78

%

13.68

%

14.78

%

13.68

%






AVERAGE BALANCES ($ in thousands)





Total assets

$

6,021,979


5,712,940


5,986,641


5,644,692


Loans

4,354,477


4,191,751


4,322,078


4,141,645


Earning assets

5,440,014


5,143,420


5,410,546


5,057,811


Deposits

4,838,574


4,526,012


4,784,935


4,480,792


Interest-bearing liabilities

3,678,530


3,654,176


3,722,536


3,651,744


Shareholders' equity

826,914


737,560


801,228


718,982









(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

Sept. 30, 2019

June 30, 2019

Mar. 31,  2019

Dec. 31,  2018

Sept. 30,  2018







Net interest income - tax-equivalent (1)

$

54,191


54,832


53,785


54,289


52,273


Taxable equivalent adjustment (1)

413


423


424


443


428


Net interest income

53,778


54,409


53,361


53,846


51,845


Provision (reversal) for loan losses

(1,105)


(308)


500


693


87


Noninterest income

15,630


15,989


14,575


14,114


15,173


Noninterest expense

38,920


40,439


39,271


37,374


39,035


Income before income taxes

31,593


30,267


28,165


29,893


27,896


Income tax expense

6,574


6,408


5,880


5,998


5,905


Net income

25,019


23,859


22,285


23,895


21,991








Earnings per common share - diluted

0.84


0.80


0.75


0.80


0.74








Cash dividends declared per share

0.12


0.12


0.12


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 Sept. 30,

2019


At June 30,

2019


At Dec. 31,

2018


At Sept. 30,

2018


One Year

Change

Assets










Cash and due from banks

$

52,621


52,679


56,050


50,209


4.8

%

Interest-bearing deposits with banks

264,840


286,781


406,848


460,520


(42.5)

%

     Total cash and cash equivalents

317,461


339,460


462,898


510,729


(37.8)

%











Investment securities

779,489


771,021


602,588


457,887


70.2

%

Presold mortgages

16,269


6,222


4,279


6,111


166.2

%











Total loans

4,396,544


4,339,497


4,249,064


4,190,628


4.9

%

Allowance for loan losses

(19,260)


(20,789)


(21,039)


(20,546)


(6.3)

%

Net loans

4,377,284


4,318,708


4,228,025


4,170,082


5.0

%











Premises and equipment

136,668


136,901


119,000


116,618


17.2

%

Intangible assets

252,824


253,769


255,480


254,737


(0.8)

%

Foreclosed real estate

4,589


5,107


7,440


6,140


(25.3)

%

Bank-owned life insurance

103,806


103,154


101,878


101,055


2.7

%

Other assets

80,521


77,697


82,528


88,271


(8.8)

%

     Total assets

$

6,068,911


6,012,039


5,864,116


5,711,630


6.3

%











Liabilities










Deposits:










     Noninterest-bearing checking accounts

$

1,491,494


1,441,064


1,320,131


1,280,408


16.5

%

     Interest-bearing checking accounts

894,777


931,945


916,374


870,487


2.8

%

     Money market accounts

1,124,614


1,104,052


1,035,523


1,007,177


11.7

%

     Savings accounts

418,043


413,065


432,389


432,335


(3.3)

%

     Brokered deposits

127,519


150,888


239,875


255,415


(50.1)

%

     Internet time deposits

1,445


1,445


3,428


3,924


(63.2)

%

     Other time deposits > $100,000

557,590


538,401


447,619


409,742


36.1

%

     Other time deposits

259,900


262,194


264,000


268,885


(3.3)

%

          Total deposits

4,875,382


4,843,054


4,659,339


4,528,373


7.7

%











Borrowings

300,656


301,140


406,609


406,593


(26.1)

%

Other liabilities

57,891


52,676


33,938


33,588


72.4

%

     Total liabilities

5,233,929


5,196,870


5,099,886


4,968,554


5.3

%











Shareholders' equity










Common stock

429,136


432,533


434,453


434,227


(1.2)

%

Retained earnings

402,212


380,748


341,738


320,822


25.4

%

Stock in rabbi trust assumed in acquisition

(2,577)


(3,625)


(3,235)


(3,224)


(20.1)

%

Rabbi trust obligation

2,577


3,625


3,235


3,224


(20.1)

%

Accumulated other comprehensive

income (loss)

3,634


1,888


(11,961)


(11,973)


(130.4)

%

     Total shareholders' equity

834,982


815,169


764,230


743,076


12.4

%

Total liabilities and shareholders' equity

$

6,068,911


6,012,039


5,864,116


5,711,630


6.3

%











 

 

First Bancorp and Subsidiaries

Financial Summary - Page 5




For the Three Months Ended

YIELD INFORMATION

Sept. 30, 2019

June 30, 2019

Mar. 31, 2019

Dec. 31, 2018

Sept. 30, 2018







Yield on loans

5.02

%

5.16

%

5.11

%

5.13

%

4.96

%

Yield on securities

2.74

%

2.81

%

2.95

%

2.71

%

2.52

%

Yield on other earning assets

2.42

%

2.51

%

2.77

%

2.29

%

2.33

%

   Yield on all interest-earning assets

4.55

%

4.67

%

4.66

%

4.60

%

4.49

%







Rate on interest bearing deposits

0.77

%

0.75

%

0.67

%

0.56

%

0.48

%

Rate on other interest-bearing liabilities

2.65

%

2.83

%

2.79

%

2.60

%

2.41

%

   Rate on all interest-bearing liabilities

0.93

%

0.93

%

0.90

%

0.79

%

0.69

%

     Total cost of funds

0.66

%

0.67

%

0.66

%

0.58

%

0.51

%







        Net interest margin (1)

3.92

%

4.03

%

4.03

%

4.05

%

4.00

%







        Net interest margin - tax-equivalent (2)

3.95

%

4.06

%

4.06

%

4.08

%

4.03

%







        Average prime rate

5.27

%

5.50

%

5.50

%

5.28

%

5.01

%







(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)

Sept. 30,
2019


June 30,
2019


Mar. 31,
2019


Dec. 31,
2018


Sept. 30,
2018











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

$

959


1,336


1,132


1,566


1,365

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

365


394


287


264


210

Interest expense - reduced by premium amortization of deposits

44


50


58


71


84

Interest expense - increased by discount accretion of borrowings

(46)


(45)


(45)


(45)


(46)

     Impact on net interest income

$

1,322


1,735


1,432


1,856


1,613

 

 

First Bancorp and Subsidiaries

Financial Summary - Page 6


ASSET QUALITY DATA ($ in thousands)

Sept. 30,
2019


June 30,
2019


Mar. 31,
2019


Dec. 31,
2018


Sept. 30,
2018











Nonperforming assets










Nonaccrual loans

$

19,720



17,375



20,684



22,575



18,231


Troubled debt restructurings - accruing

9,566



11,890



12,457



13,418



16,657


Accruing loans > 90 days past due










Total nonperforming loans

29,286



29,265



33,141



35,993



34,888


Foreclosed real estate

4,589



5,107



6,390



7,440



6,140


Total nonperforming assets

$

33,875



34,372



39,531



43,433



41,028


Purchased credit impaired loans not included above (1)

$

13,798



14,175



15,867



17,393



20,189


Asset Quality Ratios










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

0.04

%


%


0.04

%


0.02

%


0.27

%

Nonperforming loans to total loans

0.67

%


0.67

%


0.77

%


0.85

%


0.83

%

Nonperforming assets to total assets

0.56

%


0.57

%


0.65

%


0.74

%


0.72

%

Allowance for loan losses to total loans

0.44

%


0.48

%


0.49

%


0.5

%


0.49

%


(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)

Sept. 30,
2019


June 30,
2019


Mar. 31,
2019


Dec. 31,
2018


Sept. 30,
2018











Net interest income, as reported

$

53,778



54,409



53,361



53,846



51,845


Tax-equivalent adjustment

413



423



424



443



428


Net interest income, tax-equivalent (A)

$

54,191



54,832



53,785



54,289



52,273


Average earning assets (B)

$

5,440,014



5,417,284



5,372,766



5,276,311



5,143,449


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

3.95

%


4.06

%


4.06

%


4.08

%


4.03

%











Net interest income, tax-equivalent

$

54,191



54,832



53,785



54,289



52,273


Loan discount accretion

1,324



1,730



1,419



1,830



1,575


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

$

52,867



53,102



52,366



52,459



50,698


Average earnings assets  (B)

$

5,440,014



5,417,284



5,372,766



5,276,311



5,143,449


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

3.86

%


3.93

%


3.95

%


3.94

%


3.91

%


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 September 30, 2019, the Company had a remaining loan discount balance on acquired loans of $13.8 million compared to $18.9 million at September 30, 2018.  At September 30, 2019, the Company had a remaining loan discount balance on SBA loans of $7.2 million compared to $5.4 million at September 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.



For the Three Months Ended


For the Nine Months Ended

RECONCILIATION OF CORE NONINTEREST INCOME TO TOTAL NONINTEREST INCOME

($ in thousands)

Sept. 30,
2019


Sept. 30,
2018


Sept. 30,
2019


Sept. 30,
2018

Noninterest income








   Service charges on deposit accounts

$

3,388


3,221


9,543


9,606

   Other service charges, commissions, and fees

5,814


4,942


16,848


14,101

   Fees from presold mortgage loans

1,275


576


2,677


2,231

   Commissions from sales of insurance and financial products

2,203


2,425


6,436


6,484

   SBA consulting fees

663


1,287


2,847


3,554

   SBA loan sale gains

1,917


2,373


7,048


8,773

   Bank-owned life insurance income

651


641


1,928


1,892

         Core noninterest income

15,911


15,465


47,327


46,641

   Foreclosed property gains (losses), net

(273)


(192)


(899)


(579)

   Securities gains (losses), net

97



97


   Other gains (losses), net

(105)


(101)


(331)


811

         Total noninterest income

$

15,630


15,172


46,194


46,873

 

(PRNewsfoto/First Bancorp)

 

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SOURCE First Bancorp