fblogo.jpg
 

News Release


For Immediate Release:                            For More Information,
October 23, 2019                                Contact: Elaine Pozarycki
919-834-3090

First Bancorp Reports Third Quarter Results

SOUTHERN PINES, N.C. - 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




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