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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):   April 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          

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 April 23, 2019     Exhibit  

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Item 2.02 – Results of Operations and Financial Condition

On April 23, 2019, First Bancorp (the “Registrant” or “Company”) issued a news release to announce its financial results for the three months ended March 31, 2019. 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 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 portion of the loan that results in a discount being recorded on the retained portion of the loan. These discounts are recognized into income over the lives of the loans. At March 31, 2019, the Company had a remaining loan discount balance on acquired loans of $16.1 million compared to $22.3 million at March 31, 2018. At March 31, 2019 the Company had a remaining loan discount balance on SBA loans of $6.2 million compared to $3.2 million at March 31, 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 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 April 23, 2019, the Registrant issued a news release to announce its financial results for the three months ended March 31, 2019. 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 April 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
             
   

 

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

 

First Bancorp Reports First 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 $22.3 million, or $0.75 per diluted common share, for the three months ended March 31, 2019, an increase of 7.1% in earnings per share from the $20.7 million, or $0.70 per diluted common share, recorded in the first quarter of 2018.

 

Net Interest Income and Net Interest Margin

 

Net interest income for the first quarter of 2019 was $53.4 million, a 5.7% increase from the $50.5 million recorded in the first quarter of 2018. The increase in net interest income was due to growth in interest-earning assets.

 

The Company’s net interest margin (tax-equivalent net interest income divided by average earning assets) for the first quarter of 2019 was 4.06% compared to 4.17% for the first quarter of 2018. The decrease in the net interest margin realized in 2019 was primarily due to lower loan discount accretion, significant interest recoveries realized in the prior year and interest bearing liability costs that have increased more than earning asset yields, as discussed in the following paragraph.

 

The Company recorded loan discount accretion of $1.4 million in the first quarter of 2019, compared to $2.1 million in the first quarter of 2018. Loan discount accretion had an 11 basis point impact on the net interest margin in the first quarter of 2019 compared to an 18 basis point impact in the first quarter of 2018. The lower discount accretion in 2019 was attributable to paydowns in the Company’s acquired loan portfolios. Additionally, in the first quarter of 2018, the Company received approximately $750,000 in interest recoveries on loans that had been charged off in the past that added approximately 6 basis points to the net interest margin in the first quarter of 2018. Finally, over the past year, the Company’s interest bearing liability costs have increased more than earning asset yields, with the rate on interest bearing liabilities being 39 basis points higher in the first quarter of 2019 compared to the first quarter of 2018, while earning asset yields increased by approximately 27 basis points for that same period (exclusive of the impact of the loan discount accretion and interest recovery variances).

 

Excluding the effects of loan discount accretion, the Company’s tax-equivalent net interest margin was 3.95% for the first quarter of 2019, 3.99% for the first quarter of 2018, and 3.94% in the fourth 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.

 

 

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Provision for Loan Losses and Asset Quality

 

The Company recorded a provision for loan losses of $0.5 million in the first quarter of 2019 compared to a negative provision for loan losses of $3.7 million (reduction of the allowance for loan losses) in the first quarter of 2018. In the first quarter of 2018, the Company experienced net loan recoveries of $3.7 million, which drove the negative provision for the quarter. The Company’s provision for loan losses has remained at a low level 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 three months ended March 31, 2019 was 0.04%, compared to (0.36%) for the same period of 2018. The Company’s nonperforming assets to total assets ratio was 0.65% at March 31, 2019 compared to 0.92% at March 31, 2018.

 

Noninterest Income

 

Total noninterest income was $14.9 million and $15.9 million for the three months ended March 31, 2019 and March 31, 2018, respectively.

 

Core noninterest income for the first quarter of 2019 was $15.0 million, a decrease of 7.3% from the $16.2 million reported for the first quarter of 2018, which was primarily due to decreases in SBA loan sale gains recorded in 2019 (see additional discussion below). 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 the first quarter of 2019 compared to 2018, primarily as a result of higher debit card and credit card interchange fees associated with increased usage.

 

During the three months ended March 31, 2019 and 2018, the Company realized $2.0 million and $3.8 million in gains on SBA loan sales, respectively. The decline in the first quarter of 2019 gains was a result of a combination of a lower sales volume and lower premiums realized.

 

Noninterest Expenses

 

Noninterest expenses amounted to $39.6 million in the first quarter of 2019 compared to $43.6 million recorded in the first quarter of 2018. Most categories of noninterest expense decreased in the first quarter 2019 compared to the first quarter of 2018 due to operating efficiencies realized subsequent to the March 2018 merger conversion of the Asheville Savings Bank operations into First Bank.

 

Income Taxes

 

The Company’s effective tax rate for the first quarter of 2019 was 20.9% compared to 22.0% in the first quarter of 2018. The decline was due to a decrease in the North Carolina corporate income tax rate from 3.0% to 2.5%, as well as the impact of certain merger expenses recorded in 2018 that were not tax deductible.

 

Balance Sheet and Capital

 

Total assets at March 31, 2019 amounted to $6.1 billion, a 7.2% increase from a year earlier. Total loans at March 31, 2019 amounted to $4.3 billion, a 4.6% increase from a year earlier, and total deposits amounted to $4.8 billion at March 31, 2019, a 6.7% increase from a year earlier.

 

The Company experienced steady organic loan and deposit growth during the first quarter of 2019. Organic loan growth amounted to $54.7 million, or 5.2% annualized, and organic deposit growth amounted to $137.9 million, or 12.0% annualized. The Company has ongoing internal initiatives to enhance loan and deposit growth, including the Company’s continued expansion into higher growth markets such as Charlotte and Raleigh.

 

2 

 

The Company remains well-capitalized by all regulatory standards, with an estimated Total Risk-Based Capital Ratio at March 31, 2019 of 14.25%, an increase from the 12.79% reported at March 31, 2018. The Company’s tangible common equity to tangible assets ratio was 9.21% at March 31, 2019, an increase of 86 basis points from a year earlier.

 

Impact of New Lease Accounting Standard

 

During the first quarter of 2019, the Company adopted new accounting guidance which required the Company to record all long-term leases on its balance sheet. With the adoption of this guidance, the Company recorded $19.5 million in right-to-use lease assets, which was recorded within premises and equipment, and $19.5 million in lease obligations, which was recorded in other liabilities. These additions had an insignificant impact on the Company’s capital ratios, and there was no impact to the Company’s earnings related to the adoption of this new standard.

 

Comments of the CEO and Other Business Matters

 

Richard H. Moore, CEO of First Bancorp, commented, “We are pleased with our first quarter results. Earnings were strong, and we also experienced good balance sheet growth. We were also pleased that for the second year in a row, our Board of Directors increased the Company’s dividend rate. A dividend rate of 12 cents per share is being paid to shareholders this week, which is 50% higher than the dividend rate paid five quarters ago.”

 

The following is additional discussion of business development and other miscellaneous matters affecting the Company during the first quarter of 2019:

 

·On February 5, 2019, the Company announced a quarterly cash dividend of $0.12 per share payable on April 25, 2019 to shareholders of record on March 31, 2019. This dividend rate represents a 20% increase over the dividend rate declared in the first quarter of 2018.

 

* * *

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.

 

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First Bancorp and Subsidiaries

Financial Summary – Page 1

 

   Three Months Ended
March 31,
  Percent
($ in thousands except per share data – unaudited)  2019  2018  Change
          
INCOME STATEMENT               
                
Interest income               
   Interest and fees on loans  $53,960    50,170      
   Interest on investment securities   5,074    2,966      
   Other interest income   2,701    1,925      
      Total interest income   61,735    55,061    12.1% 
Interest expense               
   Interest on deposits   5,577    2,673      
   Interest on borrowings   2,797    1,881      
      Total interest expense   8,374    4,554    83.9% 
        Net interest income   53,361    50,507    5.7% 
Total provision (reversal) for loan losses   500    (3,659)   n/m 
Net interest income after provision for loan losses   52,861    54,166    (2.4%)
Noninterest income               
   Service charges on deposit accounts   2,945    3,263      
   Other service charges, commissions, and fees   5,547    4,597      
   Fees from presold mortgage loans   545    859      
   Commissions from sales of insurance and financial products   2,029    1,940      
   SBA consulting fees   1,263    1,141      
   SBA loan sale gains   2,062    3,802      
   Bank-owned life insurance income   646    623      
   Foreclosed property gains (losses), net   (245)   (288)     
   Securities gains (losses), net             
   Other gains (losses), net   82    4      
      Total noninterest income   14,874    15,941    (6.7%)
Noninterest expenses               
   Salaries expense   18,965    19,398      
   Employee benefit expense   4,588    4,607      
   Occupancy and equipment related expense   4,123    4,054      
   Merger and acquisition expenses   110    2,761      
   Intangibles amortization expense   1,631    1,672      
   Other operating expenses   10,153    11,106      
      Total noninterest expenses   39,570    43,598    (9.2%)
Income before income taxes   28,165    26,509    6.2% 
Income tax expense   5,880    5,836    0.8% 
Net income available to common shareholders  $22,285    20,673    7.8% 
                
                
Earnings per common share – basic  $0.75    0.70    7.1% 
Earnings per common share – diluted   0.75    0.70    7.1% 
                
ADDITIONAL INCOME STATEMENT INFORMATION               
   Net interest income, as reported  $53,361    50,507      
   Tax-equivalent adjustment (1)   424    356      
   Net interest income, tax-equivalent  $53,785    50,863    5.7% 
                
(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

 

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First Bancorp and Subsidiaries

Financial Summary – Page 2

 

   Three Months Ended
March 31,
PERFORMANCE RATIOS (annualized)  2019  2018
Return on average assets (1)   1.52%    1.51% 
Return on average common equity (2)   11.66%    11.95% 
Net interest margin – tax-equivalent (3)   4.06%    4.17% 
Net charge-offs (recoveries) to average loans   0.04%    (0.36%)
           
COMMON SHARE DATA          
Cash dividends declared – common  $0.12    0.10 
Stated book value – common   26.50    23.79 
Tangible book value – common   17.94    15.17 
Common shares outstanding at end of period   29,746,455    29,660,990 
Weighted average shares outstanding – basic   29,587,217    29,533,869 
Weighted average shares outstanding – diluted   29,743,395    29,624,150 
           
CAPITAL RATIOS          
Tangible common equity to tangible assets   9.21%    8.35% 
Common equity tier I capital ratio – estimated   12.54%    11.01% 
Tier I leverage ratio – estimated   10.69%    9.88% 
Tier I risk-based capital ratio – estimated   13.76%    12.23% 
Total risk-based capital ratio – estimated   14.25%    12.79% 
           
AVERAGE BALANCES ($ in thousands)          
Total assets  $5,945,049    5,549,516 
Loans   4,280,272    4,099,495 
Earning assets   5,372,766    4,949,612 
Deposits   4,704,231    4,403,805 
Interest-bearing liabilities   3,773,714    3,629,364 
Shareholders’ equity   775,059    701,411 
           

(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  Mar. 31,
2019
  Dec. 31,
2018
  Sept. 30,
2018
  June 30,
2018
  Mar. 31,
2018
                
Net interest income – tax-equivalent (1)  $53,785    54,289    52,273    51,599    50,863 
Taxable equivalent adjustment (1)   424    443    428    367    356 
Net interest income   53,361    53,846    51,845    51,232    50,507 
Provision (reversal) for loan losses   500    693    87    (710)   (3,659)
Noninterest income   14,874    14,406    15,376    16,111    15,941 
Noninterest expense   39,570    37,666    39,238    38,873    43,598 
Income before income taxes   28,165    29,893    27,896    29,180    26,509 
Income tax expense   5,880    5,998    5,905    6,450    5,836 
Net income   22,285    23,895    21,991    22,730    20,673 
                          
Earnings per common share – basic   0.75    0.81    0.74    0.77    0.70 
Earnings per common share – diluted   0.75    0.80    0.74    0.77    0.70 
                          
Cash dividends declared per share   0.12    0.10    0.10    0.10    0.10 
                          
(1) See note 1 on the first page of this Financial Summary for discussion of tax-equivalent adjustments.

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First Bancorp and Subsidiaries

Financial Summary – Page 3

 

 

CONSOLIDATED BALANCE SHEETS

($ in thousands - unaudited)

            
   At Mar. 31,
2019
  At Dec. 31,
2018
  At Mar. 31,
2018
  One Year
Change
Assets                    
Cash and due from banks  $80,620    56,050    78,217    3.1% 
Interest bearing deposits with banks   366,187    406,848    448,515    (18.4%)
     Total cash and cash equivalents   446,807    462,898    526,732    (15.2%)
                     
Investment securities   730,512    602,588    453,059    61.2% 
Presold mortgages   3,318    4,279    6,029    (45.0%)
                     
Total loans   4,303,787    4,249,064    4,113,785    4.6% 
Allowance for loan losses   (21,095)   (21,039)   (23,298)   (9.5%)
Net loans   4,282,692    4,228,025    4,090,487    4.7% 
                     
Premises and equipment   137,725    119,000    115,542    19.2% 
Intangible assets   254,449    255,480    255,760    (0.5%)
Foreclosed real estate   6,390    7,440    11,307    (43.5%)
Bank-owned life insurance   102,524    101,878    99,786    2.7% 
Other assets   85,831    82,528    82,825    3.6% 
     Total assets  $6,050,248    5,864,116    5,641,527    7.2% 
                     
                     
Liabilities                    
Deposits:                    
     Noninterest bearing checking accounts  $1,390,516    1,320,131    1,227,608    13.3% 
     Interest bearing checking accounts   922,254    916,374    896,189    2.9% 
     Money market accounts   1,079,002    1,035,523    1,026,043    5.2% 
     Savings accounts   417,812    432,389    445,405    (6.2%)
     Brokered deposits   216,616    239,875    251,043    (13.7%)
     Internet time deposits   3,428    3,428    7,248    (52.7%)
     Other time deposits > $100,000   506,148    447,619    357,595    41.5% 
     Other time deposits   261,462    264,000    284,577    (8.1%)
          Total deposits   4,797,238    4,659,339    4,495,708    6.7% 
                     
Borrowings   406,125    406,609    407,059    (0.2%)
Other liabilities   58,746    33,938    33,110    77.4% 
     Total liabilities   5,262,109    5,099,886    4,935,877    6.6% 
                     
Shareholders’ equity                    
Common stock   434,948    434,453    433,305    0.4% 
Retained earnings   360,455    341,738    282,038    27.8% 
Stock in rabbi trust assumed in acquisition   (3,245)   (3,235)   (3,588)   (9.6%)
Rabbi trust obligation   3,245    3,235    3,588    9.6% 
Accumulated other comprehensive loss   (7,264)   (11,961)   (9,693)   25.1% 
     Total shareholders’ equity   788,139    764,230    705,650    11.7% 
Total liabilities and shareholders’ equity  $6,050,248    5,864,116    5,641,527    7.2% 

 

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First Bancorp and Subsidiaries

Financial Summary – Page 4

 

 

   For the Three Months Ended
YIELD INFORMATION  Mar. 31,
2019
  Dec. 31,
2018
  Sept. 30,
2018
  June 30,
2018
  Mar. 31,
2018
                
Yield on loans   5.11%    5.13%    4.96%    4.99%    4.96% 
Yield on securities   2.95%    2.71%    2.52%    2.47%    2.60% 
Yield on other earning assets   2.77%    2.29%    2.33%    2.02%    2.02% 
   Yield on all interest earning assets   4.66%    4.60%    4.49%    4.48%    4.51% 
                          
Rate on interest bearing deposits   0.67%    0.56%    0.48%    0.40%    0.34% 
Rate on other interest bearing liabilities   2.79%    2.60%    2.41%    2.24%    1.87% 
   Rate on all interest bearing liabilities   0.90%    0.79%    0.69%    0.60%    0.51% 
     Total cost of funds   0.66%    0.58%    0.51%    0.45%    0.38% 
                          
        Net interest margin (1)   4.03%    4.05%    4.00%    4.04%    4.14% 
                          
        Net interest margin – tax-equivalent (2)   4.06%    4.08%    4.03%    4.07%    4.17% 
                          
        Average prime rate   5.50%    5.28%    5.01%    4.80%    4.53% 
                          
(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)

  Mar. 31,
2019
  Dec. 31,
2018
  Sept. 30,
2018
  June 30,
2018
  Mar. 31,
2018
                
Interest income – increased by accretion of loan discount on acquired loans  $1,132    1,566    1,365    2,064    1,956 
Interest income – increased by accretion of loan discount on retained portions of SBA loans   287    264    210    232    155 
Interest expense – reduced by premium amortization of deposits   58    71    84    101    116 
Interest expense – increased by discount accretion of borrowings   (45)   (45)   (46)   (45)   (45)
     Impact on net interest income  $1,432    1,856    1,613    2,352    2,182 

 

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First Bancorp and Subsidiaries

Financial Summary – Page 5

 

 

 

ASSET QUALITY DATA ($ in thousands)

  Mar. 31,
2019
  Dec. 31,
2018
  Sept. 30,
2018
  June 30,
2018
  Mar. 31,
2018
                
Nonperforming assets                         
Nonaccrual loans  $20,684    22,575    18,231    25,494    21,849 
Troubled debt restructurings - accruing   12,457    13,418    16,657    17,386    18,495 
Accruing loans > 90 days past due                    
Total nonperforming loans   33,141    35,993    34,888    42,880    40,344 
Foreclosed real estate   6,390    7,440    6,140    8,296    11,307 
Total nonperforming assets  $39,531    43,433    41,028    51,176    51,651 
Purchased credit impaired loans not included above (1)  $15,867    17,393    20,189    20,832    22,147 

 

Asset Quality Ratios

                         
Net quarterly charge-offs (recoveries) to average loans – annualized   0.04%    0.02%    0.27%    (0.07%)   (0.36%)
Nonperforming loans to total loans   0.77%    0.85%    0.83%    1.03%    0.98% 
Nonperforming assets to total assets   0.65%    0.74%    0.72%    0.90%    0.92% 
Allowance for loan losses to total loans   0.49%    0.50%    0.49%    0.56%    0.57% 
Allowance for loan losses + unaccreted discount on acquired loans to total loans   0.86%    0.90%    0.94%    1.05%    1.11% 

 

(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 6

 

   For the Three Months Ended

NET INTEREST MARGIN, EXCLUDING
LOAN DISCOUNT ACCRETION –
RECONCILIATION

($ in thousands)

  Mar. 31,
2019
  Dec. 31,
2018
  Sept. 30,
2018
  June 30,
2018
  Mar. 31,
2018
                
Net interest income, as reported  $53,361    53,846    51,845    51,232    50,507 
Tax-equivalent adjustment   424    443    428    367    356 
Net interest income, tax-equivalent (A)  $53,785    54,289    52,273    51,599    50,863 
Average earning assets (B)  $5,372,766    5,276,311    5,143,449    5,080,372    4,949,612 
Tax-equivalent net interest margin, annualized – as reported –  (A)/(B)   4.06%    4.08%    4.03%    4.07%    4.17% 
                          
Net interest income, tax-equivalent  $53,785    54,289    52,273    51,599    50,863 
Loan discount accretion   1,419    1,830    1,575    2,296    2,111 
Net interest income, tax-equivalent, excluding loan discount accretion  (A)  $52,366    52,459    50,698    49,303    48,752 
 Average earnings assets (B)  $5,372,766    5,276,311    5,143,449    5,080,372    4,949,612 
Tax-equivalent net interest margin, excluding impact of loan discount accretion, annualized – (A) / (B)   3.95%    3.94%    3.91%    3.89%    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 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 portion of the loan that results in a discount being recorded on the retained portion of the loan. These discounts are recognized into income over the lives of the loans. At March 31, 2019, the Company had a remaining loan discount balance on acquired loans of $16.1 million compared to $22.3 million at March 31, 2018. At March 31, 2019 the Company had a remaining loan discount balance on SBA loans of $6.2 million compared to $3.2 million at March 31, 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.

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