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Press Release

First Bancorp Reports Third Quarter Results

Company Release - 10/26/2020 4:01 PM ET

SOUTHERN PINES, N.C., Oct. 26, 2020 /PRNewswire/ -- First Bancorp (NASDAQ - FBNC), the parent company of First Bank, announced today net income of $23.3 million, or $0.81 per diluted common share, for the three months ended September 30, 2020 compared to $25.0 million, or $0.84 per diluted common share, recorded in the third quarter of 2019.  The earnings per share of $0.81 for the third quarter of 2020 represent a 44.6% increase from the $0.56 reported for the second quarter of 2020.

For the nine months ended September 30, 2020, the Company recorded net income of $57.8 million, or $1.99 per diluted common share compared to $71.2 million, or $2.39 per diluted common share, for the nine months ended September 30, 2019.

Earnings for the periods in 2020 were impacted by provisions for loan losses related to estimated losses arising from the economic impact of COVID-19.  For the three months ended September 30, 2020, the Company recorded a provision for loan losses of $6.1 million compared to a negative provision for loan losses  of $1.1 million in the third quarter of 2019.  For the nine months ended September 30, 2020, the Company recorded a provision for loan losses of $31.0 million compared to a negative provision of $0.9 million for the first nine months of 2019.  The impact of the higher provisions for loan losses were partially offset by higher noninterest income realized in 2020, as described further below.

The Company continued to experience high balance sheet growth during the third quarter of 2020, with total assets increasing by $176 million, or 10.2% on an annualized basis.  The high balance sheet growth was driven by a $229 million increase in deposits during the quarter, or 15.7% on an annualized basis.

Net Interest Income and Net Interest Margin

Net interest income for the third quarter of 2020 was $54.7 million, a 1.8% increase from the $53.8 million recorded in the third quarter of 2019.  Net interest income for the first nine months of 2020 was $162.1 million, a 0.4% increase from the $161.5 million recorded in the comparable period of 2019.  The increases in net interest income were due primarily to growth in interest-earning assets.

The Company's net interest margin (a non-GAAP measure calculated by dividing tax-equivalent net interest income by average earning assets) for the third quarter of 2020 was 3.48%, which was 47 basis points lower than the 3.95% realized in the third quarter of 2019.  For the nine months ended September 30, 2020, the Company's net interest margin was 3.63% compared to 4.02% for the same period in 2019.  The lower margins were primarily due to the impact of lower interest rates. 

From August 2019 to March 2020, the Federal Reserve decreased interest rates by 225 basis points, which resulted in the Company's interest-earning asset yields declining by more than its cost of funds.  For the nine months ended September 30, 2020, the Company's interest-earning asset yield declined by 65 basis points compared to a 29 basis point decline in its cost of funds.  The negative impact of the lower net interest margins in 2020 compared to 2019 was offset by earnings generated from strong growth in interest-earning assets, which were driven by high deposit growth.  Average interest earning assets for the nine months ended September 30, 2020 were 10.8% higher than for the same period in 2019.

In the third quarter of 2020, the Company's interest-earning asset yields and cost of funds each declined by approximately 9 basis points from the second quarter of 2020.  This resulted in a stable linked-quarter net interest margin, which was 3.48% for the third quarter of 2020 compared to 3.49% for the second quarter of 2020.

The Company continues to have $245 million of PPP loans outstanding.  In the third quarter of 2020, the yield earned on those loans was 2.90%, which included $1.2 million of amortization of origination fees, and lowered the reported net interest margin by approximately 2 basis points.  The Company has $7.6 million in remaining deferred PPP origination 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 such 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 $6.1 million in the third quarter of 2020 compared to a negative provision for loan losses (reduction of the allowance for loan losses) of $1.1 million in the third quarter of 2019.  For the nine months ended September 30, 2020, the Company recorded a provision for loan losses of $31.0 million compared to a negative provision for loan losses of $0.9 million for the same period of 2019.  The increases in 2020 are primarily related to estimated probable losses arising from the economic impact of COVID-19.  With the onset of the pandemic in March 2020, the Company worked with many of its borrowers and provided the option of loan payment deferrals, with loans on deferral status amounting to $185 million, or 3.9% of total loans, at September 30, 2020, a decrease from $774 million, or 16.2% of total loans, at June 30, 2020.  See further detail regarding loan deferrals in the accompanying financial schedules.

Total net loan charge-offs (recoveries) for the third quarters of 2020 and 2019 amounted to ($0.8 million) and $0.4 million, respectively, or (0.06%) and 0.04% of average loans on an annualized basis, respectively.  For the nine months ended September 30, 2020 and 2019, total net charge-offs were $3.2 million and $0.9 million, respectively, which on an annualized basis amounted to 0.09% and 0.03%, respectively.

Total nonperforming assets amounted to $44.3 million at September 30, 2020, or 0.63% of total assets, compared to $33.9 million a year earlier, or 0.56% of total assets.

Noninterest Income

Total noninterest income was $21.5 million and $15.2 million for the three months ended September 30, 2020 and 2019, respectively.  For the nine months ended September 30, 2020 and 2019, total noninterest income was $61.4 million and $44.9 million, respectively.

Service charges on deposit accounts amounted to $2.6 million for the third quarter of 2020 compared to $3.4 million in the third quarter of 2019.  For the first nine months of 2020 and 2019, service charges on deposit accounts amounted to $8.2 million and $9.5 million, respectively.  The decreases were primarily due to fewer instances of overdraft fees.

Other service charges, commissions, and fees amounted to $6.2 million in the third quarter of 2020 compared to $5.1 million in the third quarter of 2019.  This same line item amounted to $14.9 million for the nine months ended September 30, 2020 compared to $14.6 million for the first nine months of 2019.  Included in this line item for the third quarter of 2020 was income of $0.6 million due to the reversal of previously recorded impairment of the Company's SBA servicing asset resulting from improved market conditions.  The Company had recorded impairment expense of its SBA servicing asset of $0.5 million in the first quarter of 2020 and $0.1 million in the fourth quarter of 2019.

Fees from presold mortgages amounted to $4.9 million for the third quarter of 2020 compared to $1.3 million in the third quarter of 2019.  For the first nine months of 2020 and 2019, fees from presold mortgages amounted to $9.7 million and $2.7 million, respectively.  The increases in 2020 were primarily due to higher mortgage loan origination volume arising from historically low mortgage loan interest rates.

For the third quarters of 2020 and 2019, SBA consulting fees amounted to $2.0 million and $0.7 million, respectively.  For the first nine months of 2020 and 2019, SBA consulting fees amounted to $6.7 million and $2.8 million, respectively.  The increases in 2020 were due to fees earned in the second and third quarters by the Company's SBA subsidiary, SBA Complete, related to assisting its third-party client banks with the PPP.  SBA Complete recorded approximately $0.8 million and $3.8 million in PPP fees for the three and nine months ended September 30, 2020.  SBA Complete also recorded $1.6 million in the second quarter of 2020 in deferred revenue that will be recorded as income upon the forgiveness portion of the PPP.

SBA loan sale gains amounted to $2.9 million and $1.9 million for the three months ended September 30, 2020 and 2019, respectively, compared to $5.5 million and $7.0 million for the nine months ended September 30, 2020 and 2019, respectively.  Origination of SBA loans generally declined in the first and second quarters of 2020 due to the economic impact of COVID-19, while during the third quarter, SBA loan originations increased due to increased market activity.

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 $40.4 million in the third quarter of 2020 compared to $38.4 million recorded in the third quarter of 2019, an increase of 5.2%.  For the nine months ended September 30, 2020 and 2019, noninterest expenses amounted to $119.4 million and $117.3 million, respectively, an increase of 1.8%.  The increases were primarily due to increased incentive compensation expense related to improvement in financial performance and higher commission expense resulting from increases in mortgage loan volume in 2020.

Income Taxes

The Company's effective tax rate was 21.4% and 20.8% for the three and nine months ended September 30, 2020, respectively, compared to 20.8% and 21.0% for the three and nine months ended September 30, 2019, respectively. 

Balance Sheet and Capital

Total assets at September 30, 2020 amounted to $7.1 billion, a 16.4% increase from a year earlier. 

Loan growth for the third quarter was $44 million, or 3.7% on an annualized basis.  Loan growth for the nine months ended September 30, 2020 was $361 million, or 10.8% on an annualized basis, which includes $245 million in PPP loans.

Deposit growth for the third quarter was $229 million, or 15.7% on an annualized basis.  Deposit growth for the nine months ended September 30, 2020 was $1.1 billion, or 30.5% on an annualized basis.  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 $239 million, or 79.4%, and its level of brokered deposits by $91 million, or 71.2%, at September 30, 2020 compared to a year earlier.

The Company remains well-capitalized by all regulatory standards, with an estimated Total Risk-Based Capital Ratio at September 30, 2020 of 14.90%, an increase from the 14.88% reported at September 30, 2019.  The Company's tangible common equity to tangible assets ratio was 9.18% at September 30, 2020, a decrease of 83 basis points from a year earlier. 

Comments of the CEO and Other Business Matters

Richard H. Moore, CEO of First Bancorp, commented, "Our ongoing focus is to provide excellent service to our customers during these challenging times, and our team continues to do an outstanding job.  During the quarter, we experienced good balance sheet growth and high levels of fee income.  Our balance sheet and capital levels remain strong and position us well for the future."

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

  • On September 1, 2020, the Company completed the acquisition of Magnolia Financial, Inc., a business financing company headquartered in Spartanburg, South Carolina, that makes loans throughout the southeastern United States. In the transaction, the Company acquired $14.6 million in loans and recorded intangible assets of $6.6 million.
  • On September 15, 2020, the Company announced a quarterly cash dividend of $0.18 per share payable on October 23, 2020 to shareholders of record on September 30, 2020. This dividend rate represents a 50% increase over the dividend rate declared in the third quarter of 2019.
  • During the third quarter of 2020, the Company repurchased 305,100 shares of its common stock at an average stock price of $20.55, which totaled $6.3 million.

First Bancorp is a bank holding company headquartered in Southern Pines, North Carolina, with total assets of approximately $7.1 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 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)

2020


2019

Change

INCOME STATEMENT





Interest income





   Interest and fees on loans

$

52,739



55,142



   Interest on investment securities

5,147



5,342



   Other interest income

802



1,898



      Total interest income

58,688



62,382


(5.9)%

Interest expense





   Interest on deposits

3,533



6,597



   Interest on borrowings

422



2,007



      Total interest expense

3,955



8,604


(54.0)%

        Net interest income

54,733



53,778


1.8%

Total provision for loan losses

6,120



(1,105)


n/m

Net interest income after provision for loan losses

48,613



54,883


(11.4)%

Noninterest income





   Service charges on deposit accounts

2,567



3,388



   Other service charges, commissions, and fees

6,190



5,067



   Fees from presold mortgage loans

4,864



1,275



   Commissions from sales of insurance and financial products

2,357



2,203



   SBA consulting fees

1,956



663



   SBA loan sale gains

2,929



1,917



   Bank-owned life insurance income

633



651



   Securities gains (losses), net



97



   Other gains (losses), net

(44)



(105)



      Total noninterest income

21,452



15,156


41.5%

Noninterest expenses





   Salaries expense

22,127



19,833



   Employee benefit expense

3,918



4,144



   Occupancy and equipment related expense

3,905



4,017



   Merger and acquisition expenses





   Intangibles amortization expense

928



1,163



   Foreclosed property losses (gains), net

90



273



   Other operating expenses

9,471



9,016



      Total noninterest expenses

40,439



38,446


5.2%

Income before income taxes

29,626



31,593


(6.2)%

Income tax expense

6,329



6,574


(3.7)%

Net income

$

23,297



25,019


(6.9)%






Earnings per common share - diluted

$

0.81



0.84


(3.6)%






ADDITIONAL INCOME STATEMENT INFORMATION





   Net interest income, as reported

$

54,733



53,778



   Tax-equivalent adjustment (1)

347



413



   Net interest income, tax-equivalent

$

55,080



54,191


1.6%














(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)

2020


2019

Change

INCOME STATEMENT





Interest income





   Interest and fees on loans

$

160,000



164,754



   Interest on investment securities

15,673



15,679



   Other interest income

2,688



6,705



      Total interest income

178,361



187,138


(4.7)%

Interest expense





   Interest on deposits

13,380



18,498



   Interest on borrowings

2,865



7,092



      Total interest expense

16,245



25,590


(36.5)%

        Net interest income

162,116



161,548


0.4%

Total provision for loan losses

31,008



(913)


n/m

Net interest income after provision for loan losses

131,108



162,461


(19.3)%

Noninterest income





   Service charges on deposit accounts

8,193



9,543



   Other service charges, commissions, and fees

14,883



14,623



   Fees from presold mortgage loans

9,725



2,677



   Commissions from sales of insurance and financial products

6,515



6,436



   SBA consulting fees

6,722



2,847



   SBA loan sale gains

5,541



7,048



   Bank-owned life insurance income

1,904



1,928



   Securities gains (losses), net

8,024



97



   Other gains (losses), net

(157)



(331)



      Total noninterest income

61,350



44,868


36.7%

Noninterest expenses





   Salaries expense

62,843



58,530



   Employee benefit expense

12,312



13,150



   Occupancy and equipment related expense

11,752



12,052



   Merger and acquisition expenses



213



   Intangibles amortization expense

2,961



3,737



   Foreclosed property losses (gains), net

284



899



   Other operating expenses

29,264



28,723



      Total noninterest expenses

119,416



117,304


1.8%

Income before income taxes

73,042



90,025


(18.9)%

Income tax expense

15,213



18,862


(19.3)%

Net income

$

57,829



71,163


(18.7)%






Earnings per common share - diluted

$

1.99



2.39


(16.7)%






ADDITIONAL INCOME STATEMENT INFORMATION





   Net interest income, as reported

$

162,116



161,548



   Tax-equivalent adjustment (1)

1,011



1,260



   Net interest income, tax-equivalent

$

163,127



162,808


0.2%














(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.




n/m - not meaningful

 


First Bancorp and Subsidiaries
Financial Summary - Page 3



Three Months Ended

September 30,

Nine Months Ended

September 30,

PERFORMANCE RATIOS (annualized)

2020

2019

2020

2019

Return on average assets (1)

1.34

%

1.65

%

1.17

%

1.59

%

Return on average common equity (2)

10.55

%

12.00

%

8.88

%

11.87

%

Net interest margin - tax-equivalent (3)

3.48

%

3.95

%

3.63

%

4.02

%

Net (recoveries) charge-offs to average loans

(0.06)

%

0.04

%

0.09

%

0.03

%






COMMON SHARE DATA





Cash dividends declared - common

$

0.18


0.12


0.54


0.36


Stated book value - common

30.70


28.20


30.70


28.20


Tangible book value - common

21.80


19.66


21.80


19.66


Common shares outstanding at end of period

28,687,832


29,604,830


28,687,832


29,604,830


Weighted average shares outstanding - diluted

28,940,018


29,684,105


29,102,523


29,759,459







CAPITAL RATIOS





Tangible common equity to tangible assets

9.18

%

10.01

%

9.18

%

10.01

%

Common equity tier I capital ratio - estimated

12.80

%

13.27

%

12.80

%

13.27

%

Tier I leverage ratio - estimated

10.13

%

11.17

%

10.13

%

11.17

%

Tier I risk-based capital ratio - estimated

13.87

%

14.44

%

13.87

%

14.44

%

Total risk-based capital ratio - estimated

14.90

%

14.88

%

14.90

%

14.88

%






AVERAGE BALANCES ($ in thousands)





Total assets

$

6,904,112


6,021,979


6,605,648


5,986,641


Loans

4,785,848


4,354,477


4,679,479


4,322,078


Earning assets

6,294,556


5,440,014


5,998,532


5,410,546


Deposits

5,882,792


4,838,574


5,446,727


4,784,935


Interest-bearing liabilities

3,878,783


3,678,530


3,834,879


3,722,536


Shareholders' equity

878,325


826,914


869,570


801,228











(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, 2020

June 30, 2020

Mar. 31, 2020

Dec. 31,  2019

Sept. 30, 2019







Net interest income - tax-equivalent (1)

$

55,080


52,954


55,093


55,038


54,191


Taxable equivalent adjustment (1)

347


330


334


382


413


Net interest income

54,733


52,624


54,759


54,656


53,778


Provision (reversal) for loan losses

6,120


19,298


5,590


3,176


(1,105)


Noninterest income

21,452


26,193


13,705


14,662


15,156


Noninterest expense

40,439


38,901


40,076


39,891


38,446


Income before income taxes

29,626


20,618


22,798


26,251


31,593


Income tax expense

6,329


4,266


4,618


5,368


6,574


Net income

23,297


16,352


18,180


20,883


25,019








Earnings per common share - diluted

0.81


0.56


0.62


0.71


0.84








Cash dividends declared per share

0.18


0.18


0.18


0.18


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 Sept. 30,
2020


At June 30,
2020


At Dec. 31,
2019


At Sept. 30,
2019


One Year
Change

Assets










Cash and due from banks

$

92,465



94,684



64,519



52,621



75.7

%

Interest-bearing deposits with banks

304,731



584,830



166,783



264,840



15.1

%

     Total cash and cash equivalents

397,196



679,514



231,302



317,461



25.1

%











Investment securities

1,278,906



879,756



889,877



779,489



64.1

%

Presold mortgages

34,028



31,015



19,712



16,269



109.2

%

SBA loans held for sale

15,012



3,382







n/m












Total loans

4,813,736



4,770,063



4,453,466



4,396,544



9.5

%

Allowance for loan losses

(49,226)



(42,342)



(21,398)



(19,260)



155.6

%

Net loans

4,764,510



4,727,721



4,432,068



4,377,284



8.8

%











Premises and equipment

118,568



115,373



114,859



116,060



2.2

%

Operating right-of-use lease assets

18,400



18,833



19,669



20,608



(10.7)

%

Intangible assets

255,489



248,840



251,585



252,824



1.1

%

Foreclosed real estate

2,741



2,987



3,873



4,589



(40.3)

%

Bank-owned life insurance

106,345



105,712



104,441



103,806



2.4

%

Other assets

73,073



75,462



76,253



80,521



(9.2)

%

     Total assets

$

7,064,268



6,888,595



6,143,639



6,068,911



16.4

%











Liabilities










Deposits:










     Noninterest-bearing checking accounts

$

2,121,354



2,041,778



1,515,977



1,491,494



42.2

%

     Interest-bearing checking accounts

1,102,343



1,112,625



912,784



894,777



23.2

%

     Money market accounts

1,524,710



1,353,053



1,173,107



1,124,614



35.6

%

     Savings accounts

492,946



474,455



424,415



418,043



17.9

%

     Brokered deposits

36,736



64,069



86,141



127,519



(71.2)

%

     Internet time deposits

249



698



698



1,445



(82.8)

%

     Other time deposits > $100,000

549,423



545,370



563,108



557,590



(1.5)

%

     Other time deposits

232,465



239,090



255,125



259,900



(10.6)

%

          Total deposits

6,060,226



5,831,138



4,931,355



4,875,382



24.3

%











Borrowings

61,816



112,199



300,671



300,656



(79.4)

%

Operating lease liabilities

18,716



19,109



19,855



20,743



(9.8)

%

Other liabilities

42,692



58,258



39,357



37,148



14.9

%

     Total liabilities

6,183,450



6,020,704



5,291,238



5,233,929



18.1

%











Shareholders' equity










Common stock

403,351



408,699



429,514



429,136



(6.0)

%

Retained earnings

459,988



441,846



417,764



402,212



14.4

%

Stock in rabbi trust assumed in acquisition

(2,230)



(2,217)



(2,587)



(2,577)



(13.5)

%

Rabbi trust obligation

2,230



2,217



2,587



2,577



(13.5)

%

Accumulated other comprehensive income (loss)

17,479



17,346



5,123



3,634



381.0

%

     Total shareholders' equity

880,818



867,891



852,401



834,982



5.5

%

Total liabilities and shareholders' equity

$

7,064,268



6,888,595



6,143,639



6,068,911



16.4

%

 


First Bancorp and Subsidiaries
Financial Summary - Page 5



For the Three Months Ended

YIELD INFORMATION

Sept. 30, 2020

June 30, 2020

Mar. 31, 2020

Dec. 31, 2019

Sept. 30, 2019







Yield on loans

4.38

%

4.41

%

4.93

%

5.03

%

5.02

%

Yield on securities

2.02

%

2.49

%

2.65

%

2.64

%

2.74

%

Yield on other earning assets

0.64

%

0.55

%

1.95

%

1.91

%

2.42

%

   Yield on all interest-earning assets

3.71

%

3.80

%

4.46

%

4.49

%

4.55

%







Rate on interest bearing deposits

0.37

%

0.46

%

0.68

%

0.76

%

0.77

%

Rate on other interest-bearing liabilities

2.06

%

1.31

%

1.91

%

2.31

%

2.65

%

   Rate on all interest-bearing liabilities

0.41

%

0.52

%

0.78

%

0.89

%

0.93

%

     Total cost of funds

0.26

%

0.35

%

0.56

%

0.63

%

0.66

%







        Net interest margin (1)

3.46

%

3.47

%

3.94

%

3.90

%

3.92

%







        Net interest margin - tax-equivalent (2)

3.48

%

3.49

%

3.96

%

3.93

%

3.95

%







        Average prime rate

3.25

%

3.25

%

4.42

%

4.83

%

5.27

%











(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,
2020


June 30,
2020


Mar. 31,
2020


Dec. 31,
2019


Sept. 30,
2019











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

$

972



802



1,241



1,161



959


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

583



591



600



340



365


Interest expense - reduced by premium amortization of deposits

23



26



31



38



44


Interest expense - increased by discount accretion
of borrowings

(45)



(45)



(45)



(45)



(46)


     Impact on net interest income

$

1,533



1,374



1,827



1,494



1,322


 


First Bancorp and Subsidiaries
Financial Summary - Page 6


 

ASSET QUALITY DATA ($ in thousands)

Sept. 30, 2020


June 30, 2020


Mar. 31, 2020


Dec. 31, 2019


Sept. 30, 2019











Nonperforming assets










Nonaccrual loans

$

31,656



34,922



25,066



24,866



19,720


Troubled debt restructurings - accruing

9,896



9,867



9,747



9,053



9,566


Accruing loans > 90 days past due










Total nonperforming loans

41,552



44,789



34,813



33,919



29,286


Foreclosed real estate

2,741



2,987



3,487



3,873



4,589


Total nonperforming assets

$

44,293



47,776



38,300



37,792



33,875


Purchased credit impaired loans not included above (1)

$

9,616



9,742



9,839



12,664



13,798


Asset Quality Ratios










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

(0.06)

%


0.12

%


0.22

%


0.09

%


0.04

%

Nonperforming loans to total loans

0.86

%


0.94

%


0.76

%


0.76

%


0.67

%

Nonperforming assets to total assets

0.63

%


0.69

%


0.60

%


0.62

%


0.56

%

Allowance for loan losses to total loans

1.02

%


0.89

%


0.54

%


0.48

%


0.44

%



(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 September 30, 2020


Deferrals


 Total Loans


Percentage
Deferred

Construction Loans


$

1,764



653,120



0.3%

Farmland and Agriculture


881



32,966



2.7%

Home equity loans


206



310,326



0.1%

Residential first lien loans


8,027



1,011,829



0.8%

Multifamily loans


23,441



197,424



11.9%

Owner-Occupied Commercial Real Estate


21,094



745,770



2.8%

Non-Owner-Occupied Commercial Real Estate


120,811



1,007,643



12.0%

Commercial & Industrial Loans


9,208



648,792



1.4%

Loans to Municipalities




138,353



—%

Consumer Loans


190



50,189



0.4%

Other Loans




17,324



—%



$

185,622



4,813,736



3.9%

 


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, 2020


June 30, 2020


Mar. 31, 2020


Dec. 31, 2019


Sept. 30, 2019











Net interest income, as reported

$

54,733



52,624



54,759



54,656



53,778


Tax-equivalent adjustment

347



330



334



382



413


Net interest income, tax-equivalent (A)

$

55,080



52,954



55,093



55,038



54,191


Average earning assets (B)

$

6,294,556



6,102,012



5,595,734



5,560,099



5,440,014


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

3.48

%


3.49

%


3.96

%


3.93

%


3.95

%











Net interest income, tax-equivalent

$

55,080



52,954



55,093



55,038



54,191


Loan discount accretion

1,555



1,393



1,841



1,501



1,324


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

$

53,525



51,561



53,252



53,537



52,867


Average earnings assets  (B)

$

6,294,556



6,102,012



5,595,734



5,560,099



5,440,014


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

3.38

%


3.40

%


3.83

%


3.82

%


3.86

%


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, 2020, the Company had a remaining loan discount balance on acquired loans of $9.7 million compared to $13.8 million at September 30, 2019.  At September 30, 2020, the Company had a remaining loan discount balance on SBA loans of $7.1 million compared to $7.2 million at September 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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SOURCE First Bancorp