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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):   January 23, 2019

 

 

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         o

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.          o

 

 

 

 

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 January 23, 2019     Exhibit  

 

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Item 2.02 – Results of Operations and Financial Condition

On January 23, 2019, First Bancorp (the “Registrant” or “Company”) issued a news release to announce its financial results for the three and twelve month periods ended December 31, 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 December 31, 2018, the Registrant had a remaining loan discount balance of $23.0 million compared to $26.9 million at December 31, 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 January 23, 2019, the Registrant issued a news release to announce its financial results for the three and twelve month periods ended December 31, 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 January 23, 2019

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
             
   

 

January 23, 2019

 

 

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,
January 23, 2019 Contact:  Elaine Pozarycki
  919-834-3090

 

First Bancorp Reports Fourth Quarter and Annual Results

SOUTHERN PINES, N.C. – First Bancorp (NASDAQ – FBNC), the parent company of First Bank, announced today net income available to common shareholders of $23.9 million, or $0.80 per diluted common share, for the three months ended December 31, 2018, an increase of 66.7% in earnings per share from the $14.2 million, or $0.48 per diluted common share, recorded in the fourth quarter of 2017.

 

For the year ended December 31, 2018, the Company recorded net income available to common shareholders of $89.3 million, or $3.01 per diluted common share, an increase of 65.4% in earnings per share from the $46.0 million, or $1.82 per diluted common share, for 2017.

 

Comparisons for certain of the financial periods presented were impacted by the Company’s acquisitions of Carolina Bank Holdings, Inc. (“Carolina Bank”) on March 3, 2017 with total assets of $682 million and ASB Bancorp, Inc. (“Asheville Savings Bank”) on October 1, 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 fourth quarter of 2018 was $53.8 million, a 10.2% increase from the $48.9 million recorded in the fourth quarter of 2017. Net interest income for the year ended December 31, 2018 amounted to $207.4 million, a 25.9% increase from the $164.7 million recorded in 2017. The increase in net interest income was due to higher net interest margins realized in 2018 as well growth in interest-earning assets, which for the twelve month period was impacted by assets acquired in the Carolina Bank and Asheville Savings Bank acquisitions.

 

The Company’s net interest margin (tax-equivalent net interest income divided by average earning assets) for the fourth quarter of 2018 was 4.11% compared to 4.01% for the fourth quarter of 2017. For the year ended December 31, 2018, the Company’s net interest margin was 4.12% compared to 4.08% for 2017. The increases in the net interest margins realized in 2018 were a result of asset yields increasing more than liability costs. Interest income for the year ended December 31, 2018 was also 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 $1.8 million in the fourth quarter of 2018, compared to $2.0 million in the fourth quarter of 2017. For the full year of 2018 and 2017, loan discount accretion amounted to $7.8 million and $7.1 million, respectively. See the Financial Summary for a table that presents the impact of loan discount accretion on net interest income.

 

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Excluding the effects of loan discount accretion, the Company’s tax-equivalent net interest margin was 3.97% for the fourth quarter of 2018, compared to 3.84% for the fourth quarter of 2017. The net interest margin excluding loan discount accretion of 3.97% in the fourth quarter of 2018 was a 3 basis point increase from 3.94% in the third 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 $0.7 million in the fourth quarter of 2018 compared to none in the fourth quarter of 2017. For the year ended December 31, 2018, the Company recorded a total negative provision for loan losses of $3.6 million (reduction of the allowance for loan losses) compared to a total provision for loan losses of $0.7 million in 2017. The Company’s provisions for loan losses remain at low levels as a result of strong asset quality, including low loan charge-offs.

 

Total net charge-offs for the fourth quarter of 2018 amounted to $0.2 million compared to net charge-offs of $1.3 million in the fourth quarter of 2017. For the year ended December 31, 2018, the Company experienced net loan recoveries of $1.3 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. For 2017, net loan charge-offs amounted to $1.2 million.

 

The Company’s nonperforming assets to total assets ratio was 0.74% at December 31, 2018 compared to 0.96% at December 31, 2017. The ratio of annualized net charge-offs (recoveries) to average loans for the year ended December 31, 2018 was (0.03%), compared to 0.04% for 2017.

 

Noninterest Income

 

Total noninterest income was $14.4 million and $14.9 million for the three months ended December 31, 2018 and December 31, 2017, respectively. For the year ended December 31, 2018, noninterest income amounted to $61.8 million compared to $48.9 million for 2017.

 

Core noninterest income for the fourth quarter of 2018 was $14.5 million, a decrease of 3.9% from the $15.1 million reported for the fourth quarter of 2017. For 2018, core noninterest income amounted to $61.7 million, a 25.1% increase from the $49.3 million recorded in 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.

 

Other service charges, commissions, and fees increased in 2018 compared to 2017, primarily due to a combination of the aforementioned acquisitions and a result of higher debit card and credit card interchange fees associated with increased usage.

 

During the three and twelve months ended December 31, 2018, the Company realized $1.6 million and $10.4 million in gains on SBA loan sales, respectively. In comparison, during the three and twelve months ended December 31, 2017, the Company realized $2.2 million and $5.5 million in gains on SBA loan sales, respectively. The decline in the fourth quarter of 2018 gain was a result of a combination of a lower sales volume and lower premiums realized. The higher gain realized for calendar year 2018 was a result of a higher sales volume compared to 2017.

 

Fees from presold mortgages amounted to $0.5 million and $2.7 million for the three and twelve month periods ended December 31, 2018, respectively, compared to $1.6 million and $5.7 million for the three and twelve month periods ended December 31, 2017, respectively.  The declines in 2018 were primarily due to slowdowns in the mortgage industry, as well as employee turnover.

 

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Commissions from sales of insurance and financial products amounted to $2.2 million in the fourth quarter of 2018, compared to $2.0 million in the fourth quarter of 2017. For the years ended December 31, 2018 and 2017, the Company recorded $8.7 million and $5.3 million, respectively, in commissions from sales of insurance and financial products. The Company acquired an insurance agency during the third quarter of 2017 that impacts the full year comparison.

 

Noninterest Expenses

 

Noninterest expenses amounted to $37.7 million in the fourth quarter of 2018 compared to $43.6 million recorded in the fourth quarter of 2017, with the majority of the decrease in the fourth quarter of 2018 relating to lower merger and acquisition expenses, as discussed below.

 

Noninterest expenses for the year ended December 31, 2018 amounted to $159.4 million compared to $145.2 million in 2017. Most categories of noninterest expense experienced general increases in 2018 due to the Company’s growth, primarily from the 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.

 

Merger and acquisition expenses amounted to ($1.2 million) and $2.4 million for the three and twelve months ended December 31, 2018, respectively, compared to $3.2 million and $8.1 million for the three and twelve months ended December 31, 2017, respectively. The negative $1.2 million in expense recorded in the fourth quarter of 2018 relates to a downward adjustment to an earn-out liability associated with a prior year acquisition resulting from a lower estimated payout, as well as a decline in the Company’s stock price during the period. The earn-out will be paid in shares of Company stock upon the conclusion of the earn-out period in April 2019.

 

Income Taxes

 

The Company’s effective tax rate for the fourth quarter of 2018 was 20.1% compared to 29.5% in the fourth quarter of 2017. For the year ended December 31, 2018 and 2017, the Company’s effective tax rates were 21.3% and 32.1%, 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 December 31, 2018 amounted to $5.9 billion, a 5.7% increase from a year earlier. Loan growth for the year ended December 31, 2018 amounted to $207 million, or 5.1%, and deposit growth amounted to $252.4 million, or 5.7%. For the fourth quarter of 2018, annualized loan growth was 5.6% and annualized deposit growth was 11.6%. The Company has ongoing internal initiatives to enhance loan and deposit growth, including the Company’s relatively recent expansion into higher growth markets such as Charlotte and Raleigh.

 

The Company remains well-capitalized by all regulatory standards, with an estimated Total Risk-Based Capital Ratio at December 31, 2018 of 13.89%, an increase from the 12.50% reported at December 31, 2017. The Company’s tangible common equity to tangible assets ratio was 9.10% at December 31, 2018, an increase of 87 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 accomplishments for 2018. During the year, we successfully integrated and achieved efficiencies related to our two acquisitions in 2017, while also increasing market share in our legacy markets. These achievements helped drive significant increases in most measures of profitability, including the 65% increase in earnings per share.”

 

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

 

·On December 14, 2018, the Company announced a quarterly cash dividend of $0.10 per share payable on January 25, 2019 to shareholders of record on December 31, 2018. This dividend rate represents a 25% increase over the dividend rate declared in the fourth quarter of 2017.

 

·On December 19, 2018, the Company closed its branch located in Polkton, North Carolina. All deposit and loan accounts were transferred to a nearby branch located in Rockingham, North Carolina.

 

* * *

First Bancorp is a bank holding company headquartered in Southern Pines, North Carolina, with total assets of approximately $5.9 billion. Its principal activity is the ownership and operation of First Bank, a state-chartered community bank that operates 101 branches in North Carolina and South Carolina. First Bank 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.

 

 

 

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First Bancorp and Subsidiaries

Financial Summary – Page 1

 

   Three Months Ended
December 31,
  Percent
($ in thousands except per share data – unaudited)  2018  2017  Change
          
INCOME STATEMENT               
                
Interest income               
   Interest and fees on loans  $54,581    48,830      
   Interest on investment securities   3,453    2,501      
   Other interest income   3,158    1,745      
      Total interest income   61,192    53,076    15.3%
Interest expense               
   Interest on deposits   4,679    2,500      
   Interest on borrowings   2,667    1,716      
      Total interest expense   7,346    4,216    74.2%
        Net interest income   53,846    48,860    10.2%
Provision (reversal) for loan losses   693        n/m 
Net interest income after provision for loan losses   53,153    48,860    8.8%
Noninterest income               
   Service charges on deposit accounts   3,084    3,337      
   Other service charges, commissions, and fees   5,289    4,415      
   Fees from presold mortgage loans   504    1,574      
   Commissions from sales of insurance and financial products   2,247    1,996      
   SBA consulting fees   1,121    850      
   SBA loan sale gains   1,593    2,238      
   Bank-owned life insurance income   642    654      
   Foreclosed property gains (losses), net   14    (92)     
   Securities gains (losses), net             
   Other gains (losses), net   (88)   (110)     
      Total noninterest income   14,406    14,862    (3.1%)
Noninterest expenses               
   Salaries expense   18,462    19,987      
   Employee benefit expense   4,136    3,911      
   Occupancy and equipment related expense   4,402    3,883      
   Merger and acquisition expenses   (1,210)   3,249      
   Intangibles amortization expense   1,690    1,731      
   Other operating expenses   10,186    10,856      
      Total noninterest expenses   37,666    43,617    (13.6%)
Income before income taxes   29,893    20,105    48.7%
Income tax expense   5,998    5,928    1.2%
                
Net income available to common shareholders  $23,895    14,177    68.5%
                
                
Earnings per common share – basic  $0.81    0.48    68.8%
Earnings per common share – diluted   0.80    0.48    66.7%
                
ADDITIONAL INCOME STATEMENT INFORMATION               
   Net interest income, as reported  $53,846    48,860      
   Tax-equivalent adjustment (1)   443    610      
   Net interest income, tax-equivalent  $54,289    49,470    9.7%

 

(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.

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First Bancorp and Subsidiaries

Financial Summary – Page 2

 

   Twelve Months Ended
December 31,
  Percent
($ in thousands except per share data – unaudited)  2018  2017  Change
          
INCOME STATEMENT               
                
Interest income               
   Interest and fees on loans  $208,609    163,738      
   Interest on investment securities   12,120    8,684      
   Other interest income   10,478    4,960      
      Total interest income   231,207    177,382    30.3%
Interest expense               
   Interest on deposits   14,491    7,544      
   Interest on borrowings   9,286    5,127      
      Total interest expense   23,777    12,671    87.6%
        Net interest income   207,430    164,711    25.9%
Total provision (reversal) for loan losses   (3,589)   723    n/m 
Net interest income after provision for loan losses   211,019    163,988    28.7%
Noninterest income               
   Service charges on deposit accounts   12,690    11,862      
   Other service charges, commissions, and fees   19,945    14,610      
   Fees from presold mortgage loans   2,735    5,695      
   Commissions from sales of insurance and financial products   8,731    5,300      
   SBA consulting fees   4,675    4,024      
   SBA loan sale gains   10,366    5,479      
   Bank-owned life insurance income   2,534    2,321      
   Foreclosed property gains (losses), net   (565)   (531)     
   Securities gains (losses), net       (235)     
   Other gains (losses), net   723    383      
      Total noninterest income   61,834    48,908    26.4%
Noninterest expenses               
   Salaries expense   75,077    66,786      
   Employee benefit expense   16,888    15,313      
   Occupancy and equipment related expense   16,420    14,141      
   Merger and acquisition expenses   2,358    8,073      
   Intangibles amortization expense   6,763    4,240      
   Other operating expenses   41,869    36,604      
      Total noninterest expenses   159,375    145,157    9.8%
Income before income taxes   113,478    67,739    67.5%
Income tax expense   24,189    21,767    11.1%
Net income available to common shareholders  $89,289    45,972    94.2%
                
                
Earnings per common share – basic  $3.02    1.82    65.9%
Earnings per common share – diluted   3.01    1.82    65.4%
                
ADDITIONAL INCOME STATEMENT INFORMATION               
   Net interest income, as reported  $207,430    164,711      
   Tax-equivalent adjustment (1)   1,594    2,590      
   Net interest income, tax-equivalent  $209,024    167,301    24.9%

 

(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
December 31,
  Twelve Months Ended
December 31,
PERFORMANCE RATIOS (annualized)  2018  2017  2018  2017
Return on average assets (1)   1.62%    1.01%    1.57%    1.00% 
Return on average common equity (2)   12.56%    8.04%    12.27%    8.62% 
Net interest margin – tax-equivalent (3)   4.11%    4.01%    4.12%    4.08% 
Net charge-offs (recoveries) to average loans   0.02%    0.13%    (0.03%)   0.04% 
                     
COMMON SHARE DATA                    
Cash dividends declared – common  $0.10    0.08    0.40    0.32 
Stated book value – common   25.71    23.38    25.71    23.38 
Tangible book value – common   17.18    14.69    17.18    14.69 
Common shares outstanding at end of period   29,724,874    29,639,374    29,724,874    29,639,374 
Weighted average shares outstanding – basic   29,656,217    29,657,638    29,566,259    25,210,606 
Weighted average shares outstanding – diluted   29,800,342    29,749,378    29,707,431    25,291,382 
                     
CAPITAL RATIOS                    
Tangible common equity to tangible assets   9.10%    8.23%    9.10%    8.23% 
Common equity tier I capital ratio - estimated   12.21%    10.72%    12.21%    10.72% 
Tier I leverage ratio - estimated   10.52%    9.58%    10.52%    9.58% 
Tier I risk-based capital ratio - estimated   13.40%    11.94%    13.40%    11.94% 
Total risk-based capital ratio - estimated   13.89%    12.50%    13.89%    12.50% 
                     
AVERAGE BALANCES ($ in thousands)                    
Total assets  $5,840,964    5,554,545    5,693,760    4,590,786 
Loans   4,222,417    4,048,224    4,161,838    3,420,939 
Earning assets   5,238,827    4,899,421    5,076,335    4,101,949 
Deposits   4,624,868    4,390,879    4,516,811    3,696,730 
Interest-bearing liabilities   3,697,076    3,618,312    3,663,077    3,025,401 
Shareholders’ equity   754,734    699,558    727,920    533,205 

 

(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  Dec. 31,
2018
  Sept. 30,
2018
  June 30,
2018
  Mar. 31,
2018
  Dec. 31,
2017
                
Net interest income – tax-equivalent (1)  $54,289    52,273    51,599    50,863    49,470 
Taxable equivalent adjustment (1)   443    428    367    356    610 
Net interest income   53,846    51,845    51,232    50,507    48,860 
Provision (reversal) for loan losses   693    87    (710)   (3,659)    
Noninterest income   14,406    15,376    16,111    15,941    14,862 
Noninterest expense   37,666    39,238    38,873    43,598    43,617 
Income before income taxes   29,893    27,896    29,180    26,509    20,105 
Income tax expense   5,998    5,905    6,450    5,836    5,928 
Net income   23,895    21,991    22,730    20,673    14,177 
                          
Earnings per common share – basic   0.81    0.74    0.77    0.70    0.48 
Earnings per common share – diluted   0.80    0.74    0.77    0.70    0.48 
 
(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 4

 

 

CONSOLIDATED BALANCE SHEETS

($ in thousands - unaudited)

            
   At Dec. 31,
2018
  At Sept. 30,
2018
  At Dec. 31,
2017
  One Year
Change
Assets                    
Cash and due from banks  $56,050    50,209    114,301    (51.0%)
Interest bearing deposits with banks   406,848    460,520    375,189    8.4% 
     Total cash and cash equivalents   462,898    510,729    489,490    (5.4%)
                     
Investment securities   602,588    457,887    461,773    30.5% 
Presold mortgages   4,279    6,111    12,459    (65.7%)
                     
Total loans   4,249,064    4,190,628    4,042,369    5.1% 
Allowance for loan losses   (21,039)   (20,546)   (23,298)   (9.7%)
Net loans   4,228,025    4,170,082    4,019,071    5.2% 
                     
Premises and equipment   119,000    116,618    116,233    2.4% 
Intangible assets   253,570    254,737    257,507    (1.5%)
Foreclosed real estate   7,440    6,140    12,571    (40.8%)
Bank-owned life insurance   101,878    101,055    99,162    2.7% 
Other assets   84,009    88,271    78,771    6.6% 
     Total assets  $5,863,687    5,711,630    5,547,037    5.7% 
                     
                     
Liabilities                    
Deposits:                    
     Noninterest bearing checking accounts  $1,320,131    1,280,408    1,196,161    10.4% 
     Interest bearing checking accounts   916,374    870,487    884,254    3.6% 
     Money market accounts   1,035,523    1,007,177    982,822    5.4% 
     Savings accounts   432,389    432,335    454,860    (4.9%)
     Brokered deposits   239,875    255,415    239,659    0.1% 
     Internet time deposits   3,428    3,924    7,995    (57.1%)
     Other time deposits > $100,000   447,619    409,742    347,862    28.7% 
     Other time deposits   264,000    268,885    293,342    (10.0%)
          Total deposits   4,659,339    4,528,373    4,406,955    5.7% 
                     
Borrowings   406,609    406,593    407,543    (0.2%)
Other liabilities   33,509    33,588    39,560    (15.3%)
     Total liabilities   5,099,457    4,968,554    4,854,058    5.1% 
                     
Shareholders’ equity                    
Common stock   434,453    434,227    432,794    0.4% 
Retained earnings   341,738    320,822    264,331    29.3% 
Stock in rabbi trust assumed in acquisition   (3,235)   (3,224)   (3,581)   9.7% 
Rabbi trust obligation   3,235    3,224    3,581    (9.7%)
Accumulated other comprehensive loss   (11,961)   (11,973)   (4,146)   (188.5%)
     Total shareholders’ equity   764,230    743,076    692,979    10.3% 
Total liabilities and shareholders’ equity  $5,863,687    5,711,630    5,547,037    5.7% 

 

 

 

 

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First Bancorp and Subsidiaries

Financial Summary - Page 5

 

 

   For the Three Months Ended
YIELD INFORMATION  Dec. 31,
2018
  Sept. 30,
2018
  June 30,
2018
  Mar. 31,
2018
  Dec. 31,
2017
                
Yield on loans   5.13%    4.96%    4.99%    4.96%    4.79% 
Yield on securities   2.71%    2.52%    2.47%    2.60%    2.43% 
Yield on other earning assets   2.46%    2.52%    2.19%    2.20%    1.55% 
   Yield on all interest earning assets   4.63%    4.52%    4.51%    4.54%    4.30% 
                          
Rate on interest bearing deposits   0.56%    0.48%    0.40%    0.34%    0.31% 
Rate on other interest bearing liabilities   2.60%    2.41%    2.24%    1.87%    1.62% 
   Rate on all interest bearing liabilities   0.79%    0.69%    0.60%    0.51%    0.46% 
     Total cost of funds   0.58%    0.51%    0.45%    0.38%    0.35% 
                          
        Net interest margin (1)   4.08%    4.03%    4.07%    4.17%    3.96% 
                          
        Net interest margin – tax-equivalent (2)   4.11%    4.06%    4.10%    4.19%    4.01% 
                          
        Average prime rate   5.28%    5.01%    4.80%    4.53%    4.30% 
                          
___________________________________________________________________________________________________________________________
(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)

  Dec. 31,
2018
   Sept. 30,
2018
   June 30,
2018
   Mar. 31,
2018
   Dec. 31,
2017
 
                     
Interest income – increased by accretion of loan discount  $1,830    1,575    2,296    2,111    2,003 
Interest expense – reduced by premium amortization of deposits   71    84    101    116    140 
Interest expense – increased by discount accretion of borrowings   (45)   (46)   (45)   (45)   (46)
     Impact on net interest income  $1,856    1,613    2,352    2,182    2,097 
 

 

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First Bancorp and Subsidiaries

Financial Summary – Page 6

 

 

 

ASSET QUALITY DATA ($ in thousands)

  Dec. 31,
2018
   Sept. 30,
2018
   June 30,
2018
   Mar. 31,
2018
   Dec. 31,
2017
 
                     
Nonperforming assets                         
Nonaccrual loans  $22,575    18,231    25,494    21,849    20,968 
Troubled debt restructurings - accruing   13,418    16,657    17,386    18,495    19,834 
Accruing loans > 90 days past due                    
Total nonperforming loans   35,993    34,888    42,880    40,344    40,802 
Foreclosed real estate   7,440    6,140    8,296    11,307    12,571 
Total nonperforming assets  $43,433    41,028    51,176    51,651    53,373 
Purchased credit impaired loans not included above (1)  $17,393    20,189    20,832    22,147    23,165 

 

Asset Quality Ratios

                         
Net quarterly charge-offs (recoveries) to average loans – annualized   0.02%    0.27%    (0.07%)   (0.36%)   0.13% 
Nonperforming loans to total loans   0.85%    0.83%    1.03%    0.98%    1.01% 
Nonperforming assets to total assets   0.74%    0.72%    0.90%    0.92%    0.96% 
Allowance for loan losses to total loans   0.50%    0.49%    0.56%    0.57%    0.58% 
Allowance for loan losses + unaccreted discount to total loans   1.04%    1.07%    1.16%    1.20%    1.24% 

 

(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.

 

 

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First Bancorp and Subsidiaries

Financial Summary - Page 7

 

   For the Three Months Ended 

NET INTEREST MARGIN, EXCLUDING
LOAN DISCOUNT ACCRETION –
RECONCILIATION

($ in thousands)

  Dec. 31,
2018
   Sept. 30,
2018
   June 30,
2018
   Mar. 31,
2018
   Dec. 31,
2017
 
                     
Net interest income, as reported  $53,846    51,845    51,232    50,507    48,860 
Tax-equivalent adjustment   443    428    367    356    610 
Net interest income, tax-equivalent (A)  $54,289    52,273    51,599    50,863    49,470 
 Average earning assets (B)  $5,238,827    5,105,981    5,042,904    4,917,628    4,899,421 
Tax-equivalent net interest margin, annualized – as reported –  (A)/(B)   4.11%    4.06%    4.10%    4.19%    4.01% 
                          
Net interest income, tax-equivalent  $54,289    52,273    51,599    50,863    49,470 
Loan discount accretion   1,830    1,575    2,296    2,111    2,003 
Net interest income, tax-equivalent, excluding loan discount accretion  (A)  $52,459    50,698    49,303    48,752    47,467 
 Average earnings assets (B)  $5,238,827    5,105,981    5,042,904    4,917,628    4,899,421 
Tax-equivalent net interest margin, excluding impact of loan discount accretion, annualized – (A) / (B)   3.97%    3.94%    3.92%    4.02%    3.84% 

 

 

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 December 31, 2018, the Company had a remaining loan discount balance of $23.0 million compared to $26.9 million at December 31, 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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