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Press Release

First Bancorp Reports Second Quarter Results

Company Release - 7/23/2020 4:01 PM ET

SOUTHERN PINES, N.C., July 23, 2020 /PRNewswire/ -- First Bancorp (NASDAQ: FBNC), the parent company of First Bank, announced today net income of $16.4 million, or $0.56 per diluted common share, for the three months ended June 30, 2020 compared to $23.9 million, or $0.80 per diluted common share, recorded in the second quarter of 2019.

For the six months ended June 30, 2020, the Company recorded net income of $34.5 million, or $1.18 per diluted common share compared to $46.1 million, or $1.55 per diluted common share, for the six months ended June 30, 2019.

The decrease in earnings for both periods in 2020 was primarily due to increases in the provisions for loan losses recorded, which were largely related to estimated losses arising from the economic impact of COVID-19.  For the three months ended June 30, 2020, the Company recorded a provision for loan losses of $19.3 million compared to a negative provision of $0.3 million in the second quarter of 2019.  For the six months ended June 30, 2020, the Company recorded a provision for loan losses of $24.9 million compared to $0.2 million for the first six months of 2019.  The impact of the higher provisions for loan losses were partially offset by strong mortgage loan fees, higher SBA consulting fees and significant gains realized from the sales of securities, as described further below.

The Company experienced high balance sheet growth during the second quarter of 2020, with loans growing by $217 million, driven by $245 million in loans originated in the SBA's Paycheck Protection Program ("PPP"), and deposits increasing by $786 million.  Loan growth for the twelve months ended June 30, 2020 was 9.9%, while deposit balances increased 20.4% over that same period.

Net Interest Income and Net Interest Margin

Net interest income for the second quarter of 2020 was $52.6 million, a 3.3% decrease from the $54.4 million recorded in the second quarter of 2019.  Net interest income for the first six months of 2020 was $107.4 million, a 0.4% decrease from the $107.8 million recorded in the comparable period of 2019.  The decreases in net interest income were primarily due to lower net interest margins.

The Company's net interest margin (a non-GAAP measure calculated by dividing tax-equivalent net interest income by average earning assets) for the second quarter of 2020 was 3.49%, which was 57 basis points lower than the 4.06% realized in the second quarter of 2019.  For the six months ended June 30, 2020, the Company's net interest margin was 3.71% compared to 4.06% for the same period in 2019.  The lower margins were primarily due to the impact of lower interest rates.

Since August 2019, the Federal Reserve Board has decreased interest rates by 225 basis points, which has resulted in the Company's interest-earning asset yields declining by more than its cost of funds.  For the six months ended June 30, 2020, the Company's interest-earning asset yield declined by 55 basis points compared to a 22 basis point decline in its cost of funds.  In comparing the second quarter of 2020 to the first quarter of 2020, interest-earning asset yields declined by 66 basis points while the cost of funds only declined by 21 basis points, which resulted in the Company's net interest margin decreasing by 47 basis points, from 3.96% in the first quarter of 2020 to 3.49% in the second quarter of 2020.  The Company's net interest margin was also impacted by high levels of cash that resulted from the strong deposit growth during the quarter.  At June 30, 2020, the Company has interest-bearing cash balances of $584.8 million, a 103.9% increase from a year earlier.

The Company's PPP loans did not significantly impact the net interest margin, with the Company amortizing as interest income $1.3 million of the origination fees, which when added to the interest earned from the stated note rate of 1%, resulted in a 3.97% yield on those loans for the second quarter of 2020.  The Company has $8.8 million in remaining deferred PPP fees that will be recognized over the lives of the loans, with accelerated amortization expected to result from the loan forgiveness process.

Provision for Loan Losses and Asset Quality

As permitted by the Coronavirus Aid, Relief, and Economic Security (CARES) Act enacted in March 2020, the Company elected to defer the implementation of the Current Expected Credit Loss (CECL) methodology.  Accordingly, the Company's allowance for loan losses at each period end is based on the Company's estimate of probable losses that have been incurred at the end of each reporting period, including losses arising from the impact of COVID-19, in accordance with the pre-CECL methodology for determining loan losses.

The Company recorded a provision for loan losses of $19.3 million in the second quarter of 2020 compared to a negative provision for loan losses (reduction of the allowance for loan losses) of $0.3 million in the second quarter of 2019.  For the six months ended June 30, 2020 and 2019, the Company recorded provisions for loan losses of $24.9 million and $0.2 million, respectively.  The increases in 2020 are primarily related to estimated probable losses arising from the economic impact of COVID-19.  Since the onset of the pandemic in March 2020, the Company has worked with many of its borrowers, including the option of loan payment deferrals, with total loans on deferral status amounting to $774 million at June 30, 2020, or 16% of the loan portfolio.  See further detail regarding loan deferrals in the accompanying financial schedules.

Total net charge-offs for the second quarter of 2020 amounted to $1.5 million, or 0.12% of average loans on an annualized basis, compared to no net charge-offs in the second quarter of 2019.  For the six months ended June 30, 2020 and 2019, total net charge-offs were $3.9 million and $0.4 million, respectively, which on an annualized basis amounted to 0.17% and 0.02%, respectively.

Total nonperforming assets amounted to $47.8 million at June 30, 2020, or 0.69% of total assets, compared to $34.3 million a year earlier, or 0.57% of total assets.

Noninterest Income

Total noninterest income was $26.2 million and $15.6 million for the three months ended June 30, 2020 and 2019, respectively.  For the six months ended June 30, 2020 and 2019, total noninterest income was $39.9 million and $29.7 million, respectively.

Service charges on deposit accounts amounted to $2.3 million for the second quarter of 2020 compared to $3.2 million in the second quarter of 2019.  For the first six months of 2020 and 2019, service charges on deposit accounts amounted to $5.6 million and $6.2 million, respectively.  The decreases are primarily due to fewer instances of overdraft fees.

Fees from presold mortgages amounted to $3.0 million for the second quarter of 2020 compared to $0.9 million in the second quarter of 2019.  For the first six months of 2020 and 2019, fees from presold mortgages amounted to $4.9 million and $1.4 million, respectively.  The increases in 2020 are primarily due to higher mortgage loan origination volume arising from historically low mortgage loan interest rates.

For the second quarters of 2020 and 2019, SBA consulting fees amounted to $3.7 million and $0.9 million, respectively.  For the first six months of 2020 and 2019, SBA consulting fees amounted to $4.8 million and $2.2 million, respectively.  The increases in 2020 are due to fees earned in the second quarter by the Company's SBA subsidiary, SBA Complete, related to assisting its third-party client banks with the PPP.  SBA Complete recorded approximately $3.0 million in PPP fees in the second quarter of 2020 and also recorded $1.6 million in deferred revenue that will be recorded as income upon the forgiveness portion of the PPP.

SBA loan sale gains amounted to $2.0 million and $2.6 million for the three and six months ended June 30, 2020, respectively, compared to $3.1 million and $5.1 million for the three and six months ended June 30, 2019, respectively.  Origination of SBA loans have generally declined due to the economic impact of COVID-19.

During the second quarter of 2020, the Company sold approximately $220 million in mortgage-backed and commercial mortgage-backed securities at a gain of $8.0 million.  The securities sold were believed to be favorably impacted by historically low interest rates and Federal Reserve stimulus measures.

Noninterest Expenses

Noninterest expenses amounted to $38.9 million in the second quarter of 2020 compared to $40.1 million recorded in the second quarter of 2019, a decrease of 3.0%.  For the six months ended June 30, 2020, noninterest expenses amounted to $79.0 million, an increase of 0.2% from the $78.9 million recorded in the comparable period of 2019.  Noninterest expenses in the second quarter of 2020 were impacted by the generally lower economic activity resulting from the pandemic.

Income Taxes

The Company's effective tax rate was 20.7% and 20.5% for the three and six months ended June 30, 2020, respectively, compared to 21.2% and 21.0% for the three and six months ended June 30, 2019, respectively.

Balance Sheet and Capital

Total assets at June 30, 2020 amounted to $6.9 billion, a 14.6% increase from a year earlier.

Loan growth for the six months ended June 30, 2020 amounted to $316.6 million, including the origination of $244.9 million in PPP loans.  Loan growth for the first six months of 2020, excluding PPP loans, was $71.7 million, or 3.2% annualized.  Deposit growth for the first six months of 2020 amounted to $899.8 million and was primarily concentrated in transaction based accounts.  In addition to deposits arising from PPP loans, this high deposit growth is believed to be due to a combination of stimulus funds and changes in customer behaviors during the pandemic.

With the excess liquidity resulting from the high deposit growth, the Company reduced its level of borrowings by $290 million, or 72.1%, and its level of brokered deposits by $22 million, or 25.1%, at June 30, 2020 compared to March 31, 2020.

The Company remains well-capitalized by all regulatory standards, with an estimated Total Risk-Based Capital Ratio at June 30, 2020 of 15.04%, an increase from the 14.60% reported at June 30, 2019.  The Company's tangible common equity to tangible assets ratio was 9.32% at June 30, 2020, a decrease of 43 basis points from a year earlier.

Comments of the CEO and Other Business Matters

Richard H. Moore, CEO of First Bancorp, commented, "Our continued focus is providing excellent service for our customers during these challenging times and our team continues to do an outstanding job.  I am especially proud of Forbes recent recognition of First Bank as the number one bank in North Carolina based on customer satisfaction."  Mr. Moore also stated, "Our Company has a strong balance sheet and capital level that positions us well during these unprecedented times."

The following is additional discussion of business development and other miscellaneous matters affecting the Company during the second quarter of 2020:

  • On July 1, 2020, the Company reported that Forbes had recognized First Bank as one of America's best banks in its 2020 Best-in-State Banks list for the second year in a row. This year, First Bank was ranked the number one bank in North Carolina, based on an independent survey of more than 25,000 U.S. consumers regarding their overall satisfaction in five service areas.
  • On June 12, 2020, the Company announced a quarterly cash dividend of $0.18 per share payable on July 24, 2020 to shareholders of record on June 30, 2020. This dividend rate represents a 50% increase over the dividend rate declared in the second quarter of 2019.
  • During the second quarter of 2020, the Company repurchased 104,289 shares of its common stock valued at $2.4 million, at an average stock price of $23.32 per share.

First Bancorp is a bank holding company headquartered in Southern Pines, North Carolina, with total assets of approximately $6.9 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 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)

2020


2019

Change

INCOME STATEMENT





Interest income





   Interest and fees on loans

$

51,964


55,652


   Interest on investment securities

4,888


5,264


   Other interest income

788


2,106


      Total interest income

57,640


63,022

(8.5)%

Interest expense





   Interest on deposits

4,074


6,324


   Interest on borrowings

942


2,289


      Total interest expense

5,016


8,613

(41.8)%

        Net interest income

52,624


54,409

(3.3)%

Total provision for loan losses

19,298


(308)

n/m

Net interest income after provision for loan losses

33,326


54,717

(39.1)%

Noninterest income





   Service charges on deposit accounts

2,289


3,210


   Other service charges, commissions, and fees

4,624


5,050


   Fees from presold mortgage loans

3,020


857


   Commissions from sales of insurance and financial products

2,090


2,204


   SBA consulting fees

3,739


921


   SBA loan sale gains

1,965


3,069


   Bank-owned life insurance income

629


631


   Securities gains (losses), net

8,024



   Other gains (losses), net

(187)


(308)


      Total noninterest income

26,193


15,634

67.5%

Noninterest expenses





   Salaries expense

20,606


19,732


   Employee benefit expense

3,847


4,418


   Occupancy and equipment related expense

3,744


3,912


   Merger and acquisition expenses


103


   Intangibles amortization expense

978


1,242


   Foreclosed property losses (gains), net

35


381


   Other operating expenses

9,691


10,296


      Total noninterest expenses

38,901


40,084

(3.0)%

Income before income taxes

20,618


30,267

(31.9)%

Income tax expense

4,266


6,408

(33.4)%

Net income

$

16,352


23,859

(31.5)%






Earnings per common share - diluted

$

0.56


0.80

(30.0)%






ADDITIONAL INCOME STATEMENT INFORMATION





   Net interest income, as reported

$

52,624


54,409


   Tax-equivalent adjustment (1)

330


423


   Net interest income, tax-equivalent

$

52,954


54,832

(3.4)%












(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)

2020


2019

Change

INCOME STATEMENT





Interest income





   Interest and fees on loans

$

107,261


109,612


   Interest on investment securities

10,526


10,338


   Other interest income

1,886


4,807


      Total interest income

119,673


124,757

(4.1)%

Interest expense





   Interest on deposits

9,847


11,901


   Interest on borrowings

2,443


5,086


      Total interest expense

12,290


16,987

(27.7)%

        Net interest income

107,383


107,770

(0.4)%

Total provision for loan losses

24,888


192

n/m

Net interest income after provision for loan losses

82,495


107,578

(23.3)%

Noninterest income





   Service charges on deposit accounts

5,626


6,155


   Other service charges, commissions, and fees

8,693


9,556


   Fees from presold mortgage loans

4,861


1,402


   Commissions from sales of insurance and financial products

4,158


4,233


   SBA consulting fees

4,766


2,184


   SBA loan sale gains

2,612


5,131


   Bank-owned life insurance income

1,271


1,277


   Securities gains (losses), net

8,024



   Other gains (losses), net

(113)


(226)


      Total noninterest income

39,898


29,712

34.3%

Noninterest expenses





   Salaries expense

40,716


38,697


   Employee benefit expense

8,394


9,006


   Occupancy and equipment related expense

7,847


8,035


   Merger and acquisition expenses


213


   Intangibles amortization expense

2,033


2,574


   Foreclosed property losses (gains), net

194


626


   Other operating expenses

19,793


19,707


      Total noninterest expenses

78,977


78,858

0.2%

Income before income taxes

43,416


58,432

(25.7)%

Income tax expense

8,884


12,288

(27.7)%

Net income

$

34,532


46,144

(25.2)%






Earnings per common share - diluted

$

1.18


1.55

(23.9)%






ADDITIONAL INCOME STATEMENT INFORMATION





   Net interest income, as reported

$

107,383


107,770


   Tax-equivalent adjustment (1)

664


847


   Net interest income, tax-equivalent

$

108,047


108,617

(0.5)%












(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)

2020

2019

2020

2019

Return on average assets (1)

0.98

%

1.60

%

1.08

%

1.56

%

Return on average common equity (2)

7.55

%

11.93

%

8.03

%

11.80

%

Net interest margin - tax-equivalent (3)

3.49

%

4.06

%

3.71

%

4.06

%

Net charge-offs to average loans

0.12

%

0.00

%

0.17

%

0.02

%






COMMON SHARE DATA





Cash dividends declared - common

$

0.18


0.12


0.36


0.24


Stated book value - common

29.95


27.43


29.95


27.43


Tangible book value - common

21.36


18.89


21.36


18.89


Common shares outstanding at end of period

28,976,681


29,717,223


28,976,681


29,717,223


Weighted average shares outstanding - diluted

28,969,728


29,796,941


29,184,421


29,808,859







CAPITAL RATIOS





Tangible common equity to tangible assets

9.32

%

9.75

%

9.32

%

9.75

%

Common equity tier I capital ratio - estimated

13.02

%

12.94

%

13.02

%

12.94

%

Tier I leverage ratio - estimated

10.29

%

10.89

%

10.29

%

10.89

%

Tier I risk-based capital ratio - estimated

14.13

%

14.12

%

14.13

%

14.12

%

Total risk-based capital ratio - estimated

15.04

%

14.60

%

15.04

%

14.60

%






AVERAGE BALANCES ($ in thousands)





Total assets

$

6,727,762


5,994,595


6,455,591


5,969,822


Loans

4,738,702


4,329,866


4,625,798


4,305,069


Earning assets

6,102,012


5,417,284


5,848,974


5,395,025


Deposits

5,502,356


4,810,029


5,226,331


4,757,130


Interest-bearing liabilities

3,885,903


3,716,092


3,812,685


3,744,903


Shareholders' equity

871,495


802,131


865,124


788,595








(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, 2020

March 31, 2020

Dec. 31,  2019

Sept. 30, 2019

June 30, 2019







Net interest income - tax-equivalent (1)

$

52,954

55,093

55,038

54,191

54,832

Taxable equivalent adjustment (1)

330

334

382

413

423

Net interest income

52,624

54,759

54,656

53,778

54,409

Provision (reversal) for loan losses

19,298

5,590

3,176

(1,105)

(308)

Noninterest income

26,193

13,705

14,662

15,156

15,634

Noninterest expense

38,901

40,076

39,891

38,446

40,084

Income before income taxes

20,618

22,798

26,251

31,593

30,267

Income tax expense

4,266

4,618

5,368

6,574

6,408

Net income

16,352

18,180

20,883

25,019

23,859







Earnings per common share - diluted

0.56

0.62

0.71

0.84

0.80







Cash dividends declared per share

0.18

0.18

0.18

0.12

0.12


(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,
2020


At Mar. 31,
2020


At Dec. 31,
2019


At June 30,
2019


One Year
Change

Assets










Cash and due from banks

$

94,684


93,666


64,519


52,679


79.7%

Interest-bearing deposits with banks

584,830


282,683


166,783


286,781


103.9%

     Total cash and cash equivalents

679,514


376,349


231,302


339,460


100.2%











Investment securities

879,756


867,773


889,877


771,021


14.1%

Presold mortgages

31,015


14,861


19,712


6,222


398.5%

SBA loans held for sale

3,382


18,449




n/m











Total loans

4,770,063


4,552,708


4,453,466


4,339,497


9.9%

Allowance for loan losses

(42,342)


(24,498)


(21,398)


(20,789)


103.7%

Net loans

4,727,721


4,528,210


4,432,068


4,318,708


9.5%











Premises and equipment

115,373


113,669


114,859


117,759


(2.0)%

Operating right-of-use lease assets

18,833


19,347


19,669


19,142


(1.6)%

Intangible assets

248,840


249,829


251,585


253,769


(1.9)%

Foreclosed real estate

2,987


3,487


3,873


5,107


(41.5)%

Bank-owned life insurance

105,712


105,083


104,441


103,154


2.5%

Other assets

75,462


79,001


76,253


77,697


(2.9)%

     Total assets

$

6,888,595


6,376,058


6,143,639


6,012,039


14.6%











Liabilities










Deposits:










     Noninterest-bearing checking accounts

$

2,041,778


1,580,849


1,515,977


1,441,064


41.7%

     Interest-bearing checking accounts

1,112,625


922,985


912,784


931,945


19.4%

     Money market accounts

1,353,053


1,224,414


1,173,107


1,104,052


22.6%

     Savings accounts

474,455


431,377


424,415


413,065


14.9%

     Brokered deposits

64,069


85,642


86,141


150,888


(57.5)%

     Internet time deposits

698


698


698


1,445


(51.7)%

     Other time deposits > $100,000

545,370


553,422


563,108


538,401


1.3%

     Other time deposits

239,090


245,601


255,125


262,194


(8.8)%

          Total deposits

5,831,138


5,044,988


4,931,355


4,843,054


20.4%











Borrowings

112,199


402,185


300,671


301,140


(62.7)%

Operating lease liabilities

19,109


19,578


19,855


19,233


(0.6)%

Other liabilities

58,258


47,109


39,357


33,443


74.2%

     Total liabilities

6,020,704


5,513,860


5,291,238


5,196,870


15.9%











Shareholders' equity










Common stock

408,699


410,236


429,514


432,533


(5.5)%

Retained earnings

441,846


430,709


417,764


380,748


16.0%

Stock in rabbi trust assumed in acquisition

(2,217)


(2,602)


(2,587)


(3,625)


(38.8)%

Rabbi trust obligation

2,217


2,602


2,587


3,625


(38.8)%

Accumulated other comprehensive income (loss)

17,346


21,253


5,123


1,888


818.8%

     Total shareholders' equity

867,891


862,198


852,401


815,169


6.5%

Total liabilities and shareholders' equity

$

6,888,595


6,376,058


6,143,639


6,012,039


14.6%


 

First Bancorp and Subsidiaries
Financial Summary - Page 5




For the Three Months Ended

YIELD INFORMATION

June 30,
2020

March 31,
2020

Dec. 31,
2019

Sept. 30,
2019

June 30,
2019







Yield on loans

4.41%

4.93%

5.03%

5.02%

5.16%

Yield on securities

2.49%

2.65%

2.64%

2.74%

2.81%

Yield on other earning assets

0.55%

1.95%

1.91%

2.42%

2.51%

   Yield on all interest-earning assets

3.80%

4.46%

4.49%

4.55%

4.67%







Rate on interest bearing deposits

0.46%

0.68%

0.76%

0.77%

0.75%

Rate on other interest-bearing liabilities

1.31%

1.91%

2.31%

2.65%

2.83%

   Rate on all interest-bearing liabilities

0.52%

0.78%

0.89%

0.93%

0.93%

     Total cost of funds

0.35%

0.56%

0.63%

0.66%

0.67%







        Net interest margin (1)

3.47%

3.94%

3,90%

3.92%

4.03%







        Net interest margin - tax-equivalent (2)

3.49%

3.96%

3.93%

3.95%

4.06%







        Average prime rate

3.25%

4.42%

4.83%

5.27%

5.50%








 

 

(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, 2020


March 31, 2020


Dec. 31, 2019


Sept. 30, 2019


June 30, 2019











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

$

802


1,241


1,161


959


1,336

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

591


600


340


365


394

Interest expense - reduced by premium amortization of deposits

26


31


38


44


50

Interest expense - increased by discount accretion of borrowings

(45)


(45)


(45)


(46)


(45)

     Impact on net interest income

$

1,374


1,827


1,494


1,322


1,735

 

First Bancorp and Subsidiaries

Financial Summary - Page 6











 

ASSET QUALITY DATA ($ in thousands)

June 30,
2020


March 31,
2020


Dec. 31,
2019


Sept. 30,
2019


June 30,
2019











Nonperforming assets










Nonaccrual loans

$

34,922



25,066



24,866



19,720



17,375


Troubled debt restructurings - accruing

9,867



9,747



9,053



9,566



11,890


Accruing loans > 90 days past due










Total nonperforming loans

44,789



34,813



33,919



29,286



29,265


Foreclosed real estate

2,987



3,487



3,873



4,589



5,107


Total nonperforming assets

$

47,776



38,300



37,792



33,875



34,372


Purchased credit impaired loans not included above (1)

$

9,742



9,839



12,664



13,798



14,175


Asset Quality Ratios










Net quarterly charge-offs to average loans - annualized

0.12

%


0.22

%


0.09

%


0.04

%


0.00

%

Nonperforming loans to total loans

0.94

%


0.76

%


0.76

%


0.67

%


0.67

%

Nonperforming assets to total assets

0.69

%


0.60

%


0.62

%


0.56

%


0.57

%

Allowance for loan losses to total loans

0.89

%


0.54

%


0.48

%


0.44

%


0.48

%

(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.

 

COVID-19 Loan Deferral Information at June 30, 2020

Deferrals


 Total Loans


Percentage Deferred

Construction Loans

$

38,658


648,590


6.0%

Farmland and Agriculture

1,432


36,361


3.9%

Home equity loans

2,511


318,618


0.8%

Residential first lien loans

85,536


1,072,945


8.0%

Multifamily loans

31,220


182,255


17.1%

Owner-Occupied Commercial Real Estate

186,098


742,204


25.1%

Non-Owner-Occupied Commercial Real Estate

369,112


999,679


36.9%

Commercial & Industrial Loans

57,735


552,881


10.4%

Loans to Municipalities


147,187


—%

Consumer Loans

1,241


51,161


2.4%

Other Loans

678


18,182


3.7%


$

774,221


4,770,063


16.2%

 

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,
2020


March 31,
2020


Dec. 31,
2019


Sept. 30,
2019


June 30,
2019











Net interest income, as reported

$

52,624


54,759


54,656


53,778


54,409

Tax-equivalent adjustment

330


334


382


413


423

Net interest income, tax-equivalent (A)

$

52,954


55,093


55,038


54,191


54,832

Average earning assets (B)

$

6,102,012


5,595,734


5,560,099


5,440,014


5,417,284

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

3.49%


3.96%


3.93%


3.95%


4.06%











Net interest income, tax-equivalent

$

52,954


55,093


55,038


54,191


54,832

Loan discount accretion

1,393


1,841


1,501


1,324


1,730

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

$

51,561


53,252


53,537


52,867


53,102

Average earnings assets  (B)

$

6,102,012


5,595,734


5,560,099


5,440,014


5,417,284

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

3.40%


3.83%


3.82%


3.86%


3.93%












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, 2020, the Company had a remaining loan discount balance on acquired loans of $10.6 million compared to $14.8 million at June 30,
2019.  At June 30, 2020, the Company had a remaining loan discount balance on SBA loans of $6.8 million compared to $6.9 million at June
30, 2019.  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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