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Section 1: 8-K (8-K)

 

 

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

 

 

Form 8-K

 

 

CURRENT REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934

     
Date of Report (Date of earliest event reported):   October 23, 2018

 

 

 

 

First Bancorp

 

(Exact Name of Registrant as Specified in its Charter)

         
North Carolina   0-15572   56-1421916
(State or Other Jurisdiction   (Commission   (I.R.S. Employer
of Incorporation)   File Number)   Identification Number)

 

         

300 SW Main Street,

Southern Pines, North Carolina

     

 

28387

(Address of Principal Executive Offices)       (Zip Code)

 

(910) 246-2500

 

(Registrant’s telephone number, including area code)

 

Not Applicable

 

(Former Name or Former Address, if changed since last report)

 

 

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

 

oWritten communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
oSoliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
oPre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
oPre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

 

Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).

Emerging growth company          

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.           

 

 

 

 

First Bancorp
INDEX

         
    Page
   
         
Item 2.02 – Results of Operations and Financial Condition     3  
         
Item 8.01 – Other Events     3  
         
Item 9.01 – Financial Statements and Exhibits     3  
         
Signatures     4  
         
Exhibit 99.1 News Release dated October 23, 2018    

Exhibit

 

2

 

 

Item 2.02 – Results of Operations and Financial Condition

On October 23, 2018, First Bancorp (the “Registrant” or “Company”) issued a news release to announce its financial results for the three and nine month periods ended September 30, 2018. The news release is attached hereto as Exhibit 99.1.

The news release includes disclosure of net interest income on a tax-equivalent basis, which is a non-GAAP performance measure used by management in operating its business. Management believes that analysis of net interest income on a tax-equivalent basis is useful and appropriate because it allows a comparison of net interest income amounts in different periods without taking into account the different mix of taxable versus non-taxable investments that may have existed during those periods.

 

The news release also includes disclosure of tax-equivalent net interest margin, excluding the impact of loan discount accretion, which is a non-GAAP performance measure. Management believes that it is useful to calculate and present the net interest margin without the impact of loan discount accretion, for the reasons explained in the rest of this paragraph. Loan discount accretion is a non-cash interest income adjustment that is related to the Registrant’s acquisition of loans and represents the portion of the fair value discount that was initially recorded on the acquired loans that is being recognized into income over the lives of the loans. At September 30, 2018, the Registrant had a remaining loan discount balance of $24.3 million compared to $16.9 million at September 30, 2017. 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 believes it is useful to also present this ratio to reflect net interest margin excluding this non-cash, temporary loan discount accretion adjustment to aid investors in comparing financial results between periods.

 

The Registrant cautions that non-GAAP financial measures should be considered in addition to, but not as a substitute for, the reported GAAP results. A reconciliation between the non-GAAP financial measures presented and the most directly comparable financial measure calculated in accordance with GAAP is included in the news release and financial summary attached hereto as Exhibit 99.1.

 

Item 8.01 – Other Events

 

On October 23, 2018, the Registrant issued a news release to announce its financial results for the three and nine month periods ended September 30, 2018. The news release is attached hereto as Exhibit 99.1.

 

Item 9.01 – Financial Statements and Exhibits

(d)Exhibits
  Exhibit No. Description
  99.1 News release issued on October 23, 2018

Disclosures About Forward Looking Statements

This news 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 statements 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. 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 the press release by wire services, internet services or other media.

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Signatures

     Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

             
            First Bancorp
             
   

 

October 23, 2018

 

 

By:

 

 

/s/ Richard H. Moore

            Richard H. Moore
            Chief Executive Officer

 

 

           

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(Back To Top)

Section 2: EX-99.1 (EX-99.1)

 

News Release

 

 

For Immediate Release: For More Information,
October 23, 2018 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 available to common shareholders of $22.0 million, or $0.74 per diluted common share, for the three months ended September 30, 2018, an increase of 39.6% in earnings per share from the $13.1 million, or $0.53 per diluted common share, recorded in the third quarter of 2017.

 

For the nine months ended September 30, 2018, the Company recorded net income available to common shareholders of $65.4 million, or $2.21 per diluted common share, an increase of 66.2% in earnings per share from the $31.8 million, or $1.33 per diluted common share, for the nine months ended September 30, 2017.

 

Comparisons for the financial periods presented were significantly impacted by the Company’s acquisitions of Carolina Bank Holdings, Inc. (“Carolina Bank”) in March 2017 with total assets of $682 million and ASB Bancorp, Inc. (“Asheville Savings Bank”) in October 2017 with $798 million in total assets. The assets, liabilities and earnings for the acquisitions were recorded beginning on their respective acquisition dates.

 

Net Interest Income and Net Interest Margin

 

Net interest income for the third quarter of 2018 was $51.8 million, a 24.5% increase from the $41.6 million recorded in the third quarter of 2017. Net interest income for the first nine months of 2018 amounted to $153.6 million, a 32.6% increase from the $115.9 million recorded in the comparable period of 2017. The increase in net interest income was primarily due to the acquisitions of Carolina Bank and Asheville Savings Bank, as well as higher amounts of loans outstanding as a result of organic growth.

 

The Company’s net interest margin (tax-equivalent net interest income divided by average earning assets) for the third quarter of 2018 was 4.06% compared to 4.16% for the third quarter of 2017. For the nine month period ended September 30, 2018, the Company’s net interest margin was 4.12% compared to 4.11% for the same period in 2017. Although asset yields increased primarily as a result of several Federal Reserve interest rate increases since January 1, 2017, the Company has also experienced higher funding costs, particularly on the interest rates paid on its borrowings, as these are highly correlated to short-term interest rates set by the Federal Reserve. Interest income for the nine months ended September 30, 2018 was positively impacted by approximately $0.8 million in interest recoveries received in the first quarter, which primarily related to the same loans that experienced significant allowance for loan loss recoveries discussed below in “Provisions for Loan Losses and Asset Quality.”

 

The net interest margins for the periods were also impacted by loan discount accretion associated with acquired loan portfolios. The Company recorded loan discount accretion amounting to $1.6 million in the third quarter of 2018, compared to $1.7 million in the third quarter of 2017. For the first nine months of 2018 and 2017, loan discount accretion amounted to $6.0 million and $5.1 million, respectively. The increase in loan discount accretion in 2018 was primarily due to the loan discounts recorded in the acquisitions of Carolina Bank and Asheville Savings Bank. See the Financial Summary for a table that presents the impact of loan discount accretion on net interest income.

 

1 

 

Excluding the effects of loan discount accretion, the Company’s tax-equivalent net interest margin was 3.94% for the third quarter of 2018, compared to 3.99% for the third quarter of 2017. The decrease was primarily due to funding costs that exceeded increases in asset yields, as discussed above. The net interest margin excluding loan discount accretion of 3.94% in the third quarter of 2018 was a 2 basis point increase from 3.92% in the second quarter of 2018. See the Financial Summary for a reconciliation of the Company’s net interest margin to the net interest margin excluding loan discount accretion, and other information regarding this percentage.

 

Provision for Loan Losses and Asset Quality

 

The Company recorded a provision for loan losses of $0.1 million in the third quarter of 2018, compared to no provision for loan losses in the third quarter of 2017. For the nine months ended September 30, 2018, the Company recorded a total negative provision for loan losses of $4.3 million (reduction of the allowance for loan losses) compared to a total provision for loan losses of $0.7 million in the same period of 2017. The Company’s provisions for loan losses have been favorably impacted by continued improvement in asset quality, including low charge-offs and declining levels of nonperforming assets.

 

Total net charge-offs for the third quarter of 2018 amounted to $2.8 million in comparison to net recoveries of $0.6 million in the third quarter of 2017. During the third quarter of 2018, the Company completed a loan sale of approximately $5.2 million in smaller balance nonperforming loans that resulted in charge-offs of $2.2 million.

 

For the first nine months of 2018, the Company experienced net loan recoveries of $1.5 million, including full payoffs received on four loans in the first quarter of 2018 that had been previously charged-down by approximately $3.3 million. The amounts received in excess of the prior charge-downs were recorded as interest income recoveries, and those four loans were primarily responsible for the $0.8 million in interest recoveries previously noted. For the comparable period of 2017, net loan recoveries amounted to $0.1 million.

 

The Company’s nonperforming assets to total assets ratio was 0.72% at September 30, 2018 compared to 1.16% at September 30, 2017. The ratio of annualized net charge-offs (recoveries) to average loans for the nine months ended September 30, 2018 was (0.05%), compared to 0.00% for the same period of 2017.

 

The Company continues to assess loans that may have been impacted by Hurricane Florence and Hurricane Michael. To date, the Company believes that any losses will not require a significant provision for loan losses.

 

Noninterest Income

 

Total noninterest income was $15.4 million and $12.4 million for the three months ended September 30, 2018 and September 30, 2017, respectively. For the nine months ended September 30, 2018, noninterest income amounted to $47.4 million compared to $34.0 million for the same period of 2017.

 

Core noninterest income for the third quarter of 2018 was $15.7 million, an increase of 22.3% from the $12.8 million reported for the third quarter of 2017. For the first nine months of 2018, core noninterest income amounted to $47.2 million, a 37.9% increase from the $34.2 million recorded in the comparable period of 2017. Core noninterest income includes i) service charges on deposit accounts, ii) other service charges, commissions, and fees, iii) fees from presold mortgage loans, iv) commissions from sales of insurance and financial products, v) SBA consulting fees, vi) SBA loan sale gains, and vii) bank-owned life insurance income.

 

The acquisitions of Carolina Bank and Asheville Savings Bank were significant contributors to the higher core noninterest income in 2018.

 

2 

 

Another significant contributor to the increases in core noninterest income was increased origination and sales of SBA loans. During the three and nine months ended September 30, 2018, the Company realized $2.4 million and $8.8 million in gains on SBA loan sales, respectively. In comparison, during the three and nine months ended September 30, 2017, the Company realized $1.7 million and $3.2 million in gains on SBA loan sales, respectively.

 

Fees from presold mortgages amounted to $0.6 million and $2.2 million for the three and nine month periods ended September 30, 2018, respectively, compared to $1.8 million and $4.1 million for the three and nine month periods ended September 30, 2017, respectively.  The declines in 2018 were primarily due to the Company’s mortgage loan department originating a higher percentage of loans with construction components that are held in the Company’s loan portfolio and not sold, as well as employee turnover.

 

Commissions from sales of insurance and financial products amounted to $2.4 million in the third quarter of 2018, compared to $1.4 million in the third quarter of 2017. For the nine months ended September 30, 2018 and 2017, the Company recorded $6.5 million and $3.3 million, respectively, in commissions from sales of insurance and financial products. The increase was primarily due to the acquisition of an insurance agency during the third quarter of 2017.

 

Noninterest Expenses

 

Noninterest expenses amounted to $39.2 million in the third quarter of 2018 compared to $34.4 million recorded in the third quarter of 2017. Noninterest expenses for the nine months ended September 30, 2018 amounted to $121.7 million compared to $101.5 million in 2017. The increase in noninterest expenses in 2018 related primarily to the Company’s acquisitions of Carolina Bank and Asheville Savings Bank.

 

Also impacting expenses were other growth initiatives, including continued growth of the Company’s SBA consulting firm and SBA lending division, as well as the acquisition of an insurance agency during the third quarter of 2017.

 

Income Taxes

 

The Company’s effective tax rate for the third quarter of 2018 was 21.2% compared to 33.3% in the third quarter of 2017. For the nine months ended September 30, 2018 and 2017, the Company’s effective tax rates were 21.8% and 33.3%, respectively. The lower effective tax rate in 2018 was due to the Tax Cuts and Jobs Act, which was signed into law in December 2017 and reduced the federal corporate tax rate from 35% to 21%.

 

Balance Sheet and Capital

 

Total assets at September 30, 2018 amounted to $5.7 billion, a 24.4% increase from a year earlier. Total loans at September 30, 2018 amounted to $4.2 billion, a 22.2% increase from a year earlier, and total deposits amounted to $4.5 billion at September 30, 2018, a 24.0% increase from a year earlier. The significant increases were largely due to the acquisition of Asheville Savings Bank on October 1, 2017.

 

The Company experienced steady loan and deposit growth during the first nine months of 2018, all of which was organic. Loan growth for the nine months ended September 30, 2018 amounted to $148 million, or 4.9% annualized, and deposit growth amounted to $121.4 million, or 3.7% annualized during that same period. This growth was a result of ongoing internal initiatives to enhance loan and deposit growth, including the Company’s recent expansion into higher growth markets. As anticipated, a $41 million deposit received in the first quarter of 2018 was transferred outside the Company in the third quarter of 2018.

 

The Company remains well-capitalized by all regulatory standards, with an estimated Total Risk-Based Capital Ratio at September 30, 2018 of 13.48%, an increase from the 12.44% reported at September 30, 2017. The Company’s tangible common equity to tangible assets ratio was 8.95% at September 30, 2018, an increase of 100 basis points from a year earlier.

 

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Comments of the CEO and Other Business Matters

 

Richard H. Moore, CEO of First Bancorp, commented, “While our markets experienced a general business slowdown as a result of the hurricanes, we are pleased to have nevertheless achieved another strong quarter.”

 

The following is additional discussion of business development and other miscellaneous matters affecting the Company during the third quarter of 2018:

 

·On September 15, 2018, the Company announced a quarterly cash dividend of $0.10 per share payable on October 25, 2018 to shareholders of record on September 30, 2018. This dividend rate represents a 25% increase over the dividend rate declared in the third quarter of 2017.

 

* * *

First Bancorp is a bank holding company headquartered in Southern Pines, North Carolina, with total assets of approximately $5.7 billion. Its principal activity is the ownership and operation of First Bank, a state-chartered community bank that operates 102 branches in North Carolina and South Carolina. First Bank also operates two mortgage loan production offices in the central region of North Carolina. First Bank 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.

 

 

 

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First Bancorp and Subsidiaries

Financial Summary – Page 1

 

   Three Months Ended
September 30,
   Percent 
($ in thousands except per share data – unaudited)  2018   2017   Change 
             
INCOME STATEMENT               
                
Interest income               
   Interest and fees on loans  $52,407    41,549      
   Interest on investment securities   2,868    2,048      
   Other interest income   2,944    1,414      
      Total interest income   58,219    45,011    29.3% 
Interest expense               
   Interest on deposits   3,906    1,910      
   Interest on borrowings   2,468    1,462      
      Total interest expense   6,374    3,372    89.0% 
        Net interest income   51,845    41,639    24.5% 
Provision (reversal) for loan losses   87        n/m 
Net interest income after provision for loan losses   51,758    41,639    24.3% 
Noninterest income               
   Service charges on deposit accounts   3,221    2,945      
   Other service charges, commissions, and fees   5,146    3,468      
   Fees from presold mortgage loans   576    1,842      
   Commissions from sales of insurance and financial products   2,425    1,426      
   SBA consulting fees   1,287    864      
   SBA loan sale gains   2,373    1,692      
   Bank-owned life insurance income   641    579      
   Foreclosed property gains (losses), net   (192)   (216)     
   Securities gains (losses), net             
   Other gains (losses), net   (101)   (238)     
      Total noninterest income   15,376    12,362    24.4% 
Noninterest expenses               
   Salaries expense   18,771    16,550      
   Employee benefit expense   4,061    3,606      
   Occupancy and equipment related expense   4,180    3,509      
   Merger and acquisition expenses   167    1,329      
   Intangibles amortization expense   1,656    902      
   Other operating expenses   10,403    8,488      
      Total noninterest expenses   39,238    34,384    14.1% 
Income before income taxes   27,896    19,617    42.2% 
Income tax expense   5,905    6,531    (9.6%)
                
Net income available to common shareholders  $21,991    13,086    68.0% 
                
                
Earnings per common share – basic  $0.74    0.53    39.6% 
Earnings per common share – diluted   0.74    0.53    39.6% 
                
ADDITIONAL INCOME STATEMENT INFORMATION               
   Net interest income, as reported  $51,845    41,639      
   Tax-equivalent adjustment (1)   428    702      
   Net interest income, tax-equivalent  $52,273    42,341    23.5% 
                
                
(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.

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First Bancorp and Subsidiaries

Financial Summary – Page 2

 

   Nine Months Ended
September 30,
   Percent 
($ in thousands except per share data – unaudited)  2018   2017   Change 
             
INCOME STATEMENT               
                
Interest income               
   Interest and fees on loans  $154,028    114,908      
   Interest on investment securities   8,667    6,183      
   Other interest income   7,320    3,215      
      Total interest income   170,015    124,306    36.8% 
Interest expense               
   Interest on deposits   9,812    5,044      
   Interest on borrowings   6,619    3,411      
      Total interest expense   16,431    8,455    94.3% 
        Net interest income   153,584    115,851    32.6% 
Total provision (reversal) for loan losses   (4,282)   723    n/m 
Net interest income after provision for loan losses   157,866    115,128    37.1% 
Noninterest income               
   Service charges on deposit accounts   9,606    8,525      
   Other service charges, commissions, and fees   14,656    10,195      
   Fees from presold mortgage loans   2,231    4,121      
   Commissions from sales of insurance and financial products   6,484    3,304      
   SBA consulting fees   3,554    3,174      
   SBA loan sale gains   8,773    3,241      
   Bank-owned life insurance income   1,892    1,667      
   Foreclosed property gains (losses), net   (579)   (439)     
   Securities gains (losses), net       (235)     
   Other gains (losses), net   811    493      
      Total noninterest income   47,428    34,046    39.3% 
Noninterest expenses               
   Salaries expense   56,615    46,799      
   Employee benefit expense   12,752    11,402      
   Occupancy and equipment related expense   12,018    10,258      
   Merger and acquisition expenses   3,568    4,824      
   Intangibles amortization expense   5,073    2,509      
   Other operating expenses   31,683    25,748      
      Total noninterest expenses   121,709    101,540    19.9% 
Income before income taxes   83,585    47,634    75.5% 
Income tax expense   18,191    15,839    14.8% 
Net income available to common shareholders  $65,394    31,795    105.7% 
                
                
Earnings per common share – basic  $2.21    1.34    64.9% 
Earnings per common share – diluted   2.21    1.33    66.2% 
                
ADDITIONAL INCOME STATEMENT INFORMATION               
   Net interest income, as reported  $153,584    115,851      
   Tax-equivalent adjustment (1)   1,151    1,979      
   Net interest income, tax-equivalent  $154,735    117,830    31.3% 
                
(1)See note 1 on the first page of the Financial Summary for discussion of tax-equivalent adjustments.

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First Bancorp and Subsidiaries

Financial Summary – Page 3

 

   Three Months Ended
September 30,
   Nine Months Ended
September 30,
 
PERFORMANCE RATIOS (annualized)  2018   2017   2018   2017 
Return on average assets (1)   1.53%    1.15%    1.55%    1.00% 
Return on average common equity (2)   11.83%    9.98%    12.16%    8.90% 
Net interest margin – tax-equivalent (3)   4.06%    4.16%    4.12%    4.11% 
Net charge-offs (recoveries) to average loans   0.27%    (0.07%)   (0.05%)   0.00% 
                     
COMMON SHARE DATA                    
Cash dividends declared – common  $0.10    0.08    0.30    0.24 
Stated book value – common   24.99    20.73    24.99    20.73 
Tangible book value – common   16.43    14.25    16.43    14.25 
Common shares outstanding at end of period   29,729,285    24,723,929    29,729,285    24,723,929 
Weighted average shares outstanding – basic   29,530,203    24,607,516    29,536,273    23,728,262 
Weighted average shares outstanding – diluted   29,621,130    24,695,295    29,639,126    23,827,011 
                     
CAPITAL RATIOS                    
Tangible common equity to tangible assets   8.95%    7.95%    8.95%    7.95% 
Common equity tier I capital ratio - estimated   11.79%    10.30%    11.79%    10.30% 
Tier I leverage ratio - estimated   10.36%    9.72%    10.36%    9.72% 
Tier I risk-based capital ratio - estimated   12.99%    11.74%    12.99%    11.74% 
Total risk-based capital ratio - estimated   13.48%    12.44%    13.48%    12.44% 
                     
AVERAGE BALANCES ($ in thousands)                    
Total assets  $5,712,940    4,514,409    5,644,692    4,269,533 
Loans   4,191,751    3,404,862    4,141,645    3,211,844 
Earning assets   5,105,981    4,040,257    5,022,171    3,836,125 
Deposits   4,526,012    3,632,319    4,480,792    3,465,347 
Interest-bearing liabilities   3,654,176    2,958,134    3,651,744    2,827,764 
Shareholders’ equity   737,560    520,432    718,982    477,754 
                     

(1) Calculated by dividing annualized net income available to common shareholders by average assets.

(2) Calculated by dividing annualized net income available to common shareholders 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,
2018
   June 30,
2018
   Mar. 31,
2018
   Dec. 31,
2017
   Sept. 30,
2017
 
                     
Net interest income – tax-equivalent (1)  $52,273    51,599    50,863    49,470    42,341 
Taxable equivalent adjustment (1)   428    367    356    610    702 
Net interest income   51,845    51,232    50,507    48,860    41,639 
Provision (reversal) for loan losses   87    (710)   (3,659)        
Noninterest income   15,376    16,111    15,941    14,862    12,362 
Noninterest expense   39,238    38,873    43,598    43,617    34,384 
Income before income taxes   27,896    29,180    26,509    20,105    19,617 
Income tax expense   5,905    6,450    5,836    5,928    6,531 
Net income   21,991    22,730    20,673    14,177    13,086 
                          
Earnings per common share – basic   0.74    0.77    0.70    0.48    0.53 
Earnings per common share – diluted   0.74    0.77    0.70    0.48    0.53 
 
(1)See note 1 on the first page of the Financial Summary for discussion of tax-equivalent adjustments.

7 

 

 

First Bancorp and Subsidiaries

Financial Summary – Page 4

 

 

CONSOLIDATED BALANCE SHEETS

($ in thousands - unaudited)

                    
   At Sept. 30,
2018
   At June 30,
2018
   At Dec. 31,
2017
   At Sept. 30,
2017
   One Year
Change
 
Assets                         
Cash and due from banks  $50,209    97,163    114,301    82,758    (39.3%)
Interest bearing deposits with banks   460,520    462,972    375,189    326,089    41.2% 
     Total cash and cash equivalents   510,729    560,135    489,490    408,847    24.9% 
                          
Investment securities   457,887    442,333    461,773    322,080    42.2% 
Presold mortgages   6,111    9,311    12,459    17,426    (64.9%)
                          
Total loans   4,190,628    4,149,390    4,042,369    3,429,755    22.2% 
Allowance for loan losses   (20,546)   (23,298)   (23,298)   (24,593)   (16.5%)
Net loans   4,170,082    4,126,092    4,019,071    3,405,162    22.5% 
                          
Premises and equipment   116,618    113,774    116,233    95,762    21.8% 
Intangible assets   254,737    255,610    257,507    160,301    58.9% 
Foreclosed real estate   6,140    8,296    12,571    9,356    (34.4%)
Bank-owned life insurance   101,055    100,413    99,162    88,081    14.7% 
Other assets   88,271    101,636    78,771    84,132    4.9% 
     Total assets  $5,711,630    5,717,600    5,547,037    4,591,147    24.4% 
                          
                          
Liabilities                         
Deposits:                         
     Noninterest bearing checking accounts  $1,280,408    1,252,214    1,196,161    1,016,947    25.9% 
     Interest bearing checking accounts   870,487    915,666    884,254    683,113    27.4% 
     Money market accounts   1,007,177    1,021,659    982,822    793,919    26.9% 
     Savings accounts   432,335    440,475    454,860    396,192    9.1% 
     Brokered deposits   255,415    238,098    239,659    215,615    18.5% 
     Internet time deposits   3,924    6,999    7,995    7,995    (50.9%)
     Other time deposits > $100,000   409,742    402,109    347,862    296,006    38.4% 
     Other time deposits   268,885    276,401    293,342    241,454    11.4% 
          Total deposits   4,528,373    4,553,621    4,406,955    3,651,241    24.0% 
                          
Borrowings   406,593    407,076    407,543    397,525    2.3% 
Other liabilities   33,588    32,181    39,560    29,880    12.4% 
     Total liabilities   4,968,554    4,992,878    4,854,058    4,078,646    21.8% 
                          
Shareholders’ equity                         
Common stock   434,227    434,117    432,794    263,493    64.8% 
Retained earnings   320,822    301,800    264,331    251,790    27.4% 
Stock in rabbi trust assumed in acquisition   (3,224)   (3,214)   (3,581)   (3,571)   9.7% 
Rabbi trust obligation   3,224    3,214    3,581    3,571    (9.7%)
Accumulated other comprehensive loss   (11,973)   (11,195)   (4,146)   (2,782)   (330.4%)
     Total shareholders’ equity   743,076    724,722    692,979    512,501    45.0% 
Total liabilities and shareholders’ equity  $5,711,630    5,717,600    5,547,037    4,591,147    24.4% 

 

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First Bancorp and Subsidiaries

Financial Summary - Page 5

 

 

   For the Three Months Ended 
YIELD INFORMATION  Sept. 30,
2018
   June 30,
2018
   Mar. 31,
2018
   Dec. 31,
2017
   Sept. 30,
2017
 
                     
Yield on loans   4.96%    4.99%    4.96%    4.79%    4.84% 
Yield on securities   2.52%    2.47%    2.60%    2.43%    2.46% 
Yield on other earning assets   2.52%    2.19%    2.20%    1.55%    1.84% 
   Yield on all interest earning assets   4.52%    4.51%    4.54%    4.30%    4.42% 
                          
Rate on interest bearing deposits   0.48%    0.40%    0.34%    0.31%    0.29% 
Rate on other interest bearing liabilities   2.41%    2.24%    1.87%    1.62%    1.75% 
   Rate on all interest bearing liabilities   0.69%    0.60%    0.51%    0.46%    0.45% 
     Total cost of funds   0.51%    0.45%    0.38%    0.35%    0.34% 
                          
        Net interest margin (1)   4.03%    4.07%    4.17%    3.96%    4.09% 
                          
        Net interest margin – tax-equivalent (2)   4.06%    4.10%    4.19%    4.01%    4.16% 
                          
        Average prime rate   5.01%    4.80%    4.53%    4.30%    4.25% 
                          
                          
(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 the Financial Summary for discussion of tax-equivalent adjustments.

 

 

   For the Three Months Ended 

NET INTEREST INCOME PURCHASE
ACCOUNTING ADJUSTMENTS

($ in thousands)

  Sept. 30,
2018
   June 30,
2018
   Mar. 31,
2018
   Dec. 31,
2017
   Sept. 30,
2017
 
                     
Interest income – increased by accretion of loan discount  $1,575    2,296    2,111    2,003    1,745 
Interest expense – reduced by premium amortization of deposits   84    101    116    140    85 
Interest expense – increased by discount accretion of borrowings   (46)   (45)   (45)   (46)   (43)
     Impact on net interest income  $1,613    2,352    2,182    2,097    1,787 

 

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First Bancorp and Subsidiaries

Financial Summary – Page 6

 

 

 

ASSET QUALITY DATA ($ in thousands)

  Sept. 30,
2018
   June 30,
2018
   Mar. 31,
2018
   Dec. 31,
2017
   Sept. 30,
2017
 
                     
Nonperforming assets                         
Nonaccrual loans  $18,231    25,494    21,849    20,968    23,350 
Troubled debt restructurings - accruing   16,657    17,386    18,495    19,834    20,330 
Accruing loans > 90 days past due                    
Total nonperforming loans   34,888    42,880    40,344    40,802    43,680 
Foreclosed real estate   6,140    8,296    11,307    12,571    9,356 
Total nonperforming assets  $41,028    51,176    51,651    53,373    53,036 
Purchased credit impaired loans not included above (1)  $20,189    20,832    22,147    23,165    15,034 

 

Asset Quality Ratios

                         
Net quarterly charge-offs (recoveries) to average loans - annualized   0.27%    (0.07%)   (0.36%)   0.13%    (0.07%)
Nonperforming loans to total loans   0.83%    1.03%    0.98%    1.01%    1.27% 
Nonperforming assets to total assets   0.72%    0.90%    0.92%    0.96%    1.16% 
Allowance for loan losses to total loans   0.49%    0.56%    0.57%    0.58%    0.72% 
Allowance for loan losses + unaccreted discount to total loans   1.07%    1.16%    1.20%    1.24%    1.21% 

 

  (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.  

 

 

10 

 

 

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,
2018
   June 30,
2018
   Mar. 31,
2018
   Dec. 31,
2017
   Sept. 30,
2017
 
                     
Net interest income, as reported  $51,845    51,232    50,507    48,860    41,639 
Tax-equivalent adjustment   428    367    356    610    702 
Net interest income, tax-equivalent (A)  $52,273    51,599    50,863    49,470    42,341 
Average earning assets (B)  $5,105,981    5,042,904    4,917,628    4,899,421    4,040,257 
Tax-equivalent net interest margin, annualized – as reported –  (A)/(B)   4.06%    4.10%    4.19%    4.01%    4.16% 
                          
Net interest income, tax-equivalent  $52,273    51,599    50,863    49,470    42,341 
Loan discount accretion   1,575    2,296    2,111    2,003    1,745 
Net interest income, tax-equivalent, excluding loan discount accretion  (A)  $50,698    49,303    48,752    47,467    40,596 
Average earnings assets (B)  $5,105,981    5,042,904    4,917,628    4,899,421    4,040,257 
Tax-equivalent net interest margin, excluding impact of loan discount accretion, annualized – (A) / (B)   3.94%    3.92%    4.02%    3.84%    3.99% 

 

 

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 primarily related to the Company’s acquisition of loans and represents the portion of the fair value discount that was initially recorded on the acquired loans that is being recognized into income over the lives of the loans. At September 30, 2018, the Company had a remaining loan discount balance of $24.3 million compared to $16.9 million at September 30, 2017. 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.

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