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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):   July 24, 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:

 

o       Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

o       Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

o       Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

o       Pre-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 July 24, 2019    

Exhibit

 

2

 

 

Item 2.02 – Results of Operations and Financial Condition

On July 24, 2019, First Bancorp (the “Registrant” or “Company”) issued a news release to announce its financial results for the three and six months ended June 30, 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 portions of the loans that results in a discount being recorded on the retained portion of the loans. These discounts are recognized into income over the lives of the loans. At June 30, 2019, the Company had a remaining loan discount balance on acquired loans of $14.8 million compared to $20.3 million at June 30, 2018. At June 30, 2019, the Company had a remaining loan discount balance on SBA loans of $6.9 million compared to $4.7 million at June 30, 2018. For the related loans that perform and pay-down over time, the loan discount will also be reduced, with a corresponding increase to interest income. Therefore, management of the Company believes it is useful to also present this ratio to reflect the Company’s net interest margin excluding this non-cash, temporary loan discount accretion adjustment to aid investors in comparing financial results between periods.

 

The 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 July 24, 2019, the Registrant issued a news release to announce its financial results for the three and six months ended June 30, 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 July 24, 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

3

 

 

 

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.

 

 

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
             
   

 

July 24, 2019

 

 

By:

 

 

/s/ Richard H. Moore

            Richard H. Moore
            Chief Executive Officer

 

 

           

4

 

 

(Back To Top)

Section 2: EX-99.1 (EX-99.1)

 

News Release

 

 

For Immediate Release: For More Information,
July 24, 2019 Contact:  Elaine Pozarycki
  919-834-3090

 

First Bancorp Reports Second Quarter Results

 

SOUTHERN PINES, N.C. – First Bancorp (NASDAQ – FBNC), the parent company of First Bank, announced today net income of $23.9 million, or $0.80 per diluted common share, for the three months ended June 30, 2019, an increase of 3.9% in earnings per share from the $22.7 million, or $0.77 per diluted common share, recorded in the second quarter of 2018.

 

For the six months ended June 30, 2019, the Company recorded net income of $46.1 million, or $1.55 per diluted common share, an increase of 6.2% in earnings per share from the $43.4 million, or $1.46 per diluted common share, for the six months ended June 30, 2018.

 

Net Interest Income and Net Interest Margin

 

Net interest income for the second quarter of 2019 was $54.4 million, a 6.2% increase from the $51.2 million recorded in the second quarter of 2018. Net interest income for the first six months of 2019 amounted to $107.8 million, a 5.9% increase from the $101.7 million recorded in the comparable period 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 second quarter of 2019 was 4.06%, which was unchanged from the first quarter of 2019, and was one basis point lower than the 4.07% realized in the second quarter of 2018. For the six month period ended June 30, 2019, the Company’s net interest margin was 4.06% compared to 4.12% for the same period in 2018. The decreases in the net interest margins realized in 2019 were primarily due to lower loan discount accretion.

 

The Company recorded loan discount accretion of $1.7 million in the second quarter of 2019, compared to $2.3 million in the second quarter of 2018. For the six months ended June 30, 2019 and 2018, loan discount accretion amounted to $3.1 million and $4.4 million, respectively. Loan discount accretion had a 13 basis point impact on the net interest margin in the second quarter of 2019 compared to an 18 basis point impact in the second quarter of 2018. For the first six months of 2019 and 2018, loan discount accretion had a 12 basis point impact and an 18 basis point impact, respectively, on the net interest margin for the periods. The lower discount accretion in 2019 was attributable to paydowns in the Company’s acquired loan portfolios.

 

Excluding the effects of loan discount accretion, the Company’s tax-equivalent net interest margin was 3.93% for the second quarter of 2019, 3.95% for the first quarter of 2019, and 3.89% in the second quarter of 2018. Excluding the effects of loan discount accretion, the Company’s tax-equivalent net interest margin was 3.94% for both six month periods ended June 30, 2019 and 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.

 

 

Over the past year, the impact on the net interest margin of interest-bearing liability costs that have risen by more than earning asset yields has been substantially offset by earnings realized from the 15.1% growth in noninterest-bearing deposits, which has resulted in total funding costs increasing by approximately the same amount as the increase in earning asset yields.

 

Provision for Loan Losses and Asset Quality

 

The Company recorded a negative provision for loan losses of $0.3 million (reduction of the allowance for loan losses) in the second quarter of 2019 compared to a negative provision for loan losses of $0.7 million in the second quarter of 2018. For the six months ended June 30, 2019, the Company recorded a provision for loan losses of $0.2 million compared to a negative provision for loan losses of $4.4 million in the same period of 2018. In the first quarter of 2018, the Company experienced net loan recoveries of $3.7 million, which drove the negative provision during the period. 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 six months ended June 30, 2019 was 0.02%, compared to (0.21%) for the same period of 2018. The Company’s nonperforming assets to total assets ratio was 0.57% at June 30, 2019 compared to 0.90% at June 30, 2018.

 

Noninterest Income

 

Total noninterest income was $16.0 million and $15.9 million for the three months ended June 30, 2019 and June 30, 2018, respectively. For the six months ended June 30, 2019, noninterest income amounted to $30.6 million compared to $31.7 million for the same period of 2018.

 

Core noninterest income for the second quarter of 2019 was $16.7 million, a 10.7% increase from the $15.1 million reported for the first quarter of 2018 – see reconciliation of core noninterest income to total noninterest income in the Financial Summary. Increases were experienced in most categories of income, with “Other service charges, commissions, and fees” increasing by $1.1 million, or 23.8%, primarily due to higher debit card and credit card interchange fees associated with increased usage.

 

Core noninterest income for the six months ended June 30, 2019 was $31.4 million, a 0.8% increase from the $31.2 million reported for the first half 2018. Higher “Other service charges, commissions and fees” were substantially offset by lower fees/gains on sales of mortgage loans and SBA loans.

 

Other gains (losses) amounted to a loss of $0.3 million in the second quarter of 2019 due to miscellaneous items, whereas in the second quarter of 2018, the Company recorded a $0.9 million gain on the sale of a former branch location.

 

Noninterest Expenses

 

Noninterest expenses amounted to $40.4 million in the second quarter of 2019, a 4.7% increase over the $38.6 million recorded in the second quarter of 2018. Noninterest expenses for the six months ended June 30, 2019 amounted to $79.7 million compared to $82.1 million in 2018, a decrease of 2.9%.

 

Merger and acquisition expenses declined by $0.5 million in the second quarter of 2019 compared to the second quarter of 2018, and declined by $3.2 million in the six months ended June 30, 2019 compared to the same period in 2018.

 

Income Taxes

 

The Company’s effective tax rate for the second quarter of 2019 was 21.2% compared to 22.1% in the second quarter of 2018. For the six months ended June 30, 2019 and 2018, the Company’s effective tax rates were 21.0% and 22.1%, respectively. The lower 2019 effective tax rates were primarily due to a decrease in the North Carolina corporate income tax rate from 3.0% to 2.5%, which became effective January 1, 2019.

 

 

Balance Sheet and Capital

 

Total assets at June 30, 2019 amounted to $6.0 billion, a 5.1% increase from a year earlier. Total loans at June 30, 2019 amounted to $4.3 billion, a 4.6% increase from a year earlier, and total deposits amounted to $4.8 billion at June 30, 2019, a 6.4% increase from a year earlier.

 

Annualized loan growth for the first half of 2019 was 4.3%. Annualized deposit growth for the first half of 2019 was 8.0%. Within deposits, the Company’s retail deposits (excludes brokered deposits and internet time deposits) grew at an annualized rate of 12.5% for the first six months of 2019. As a result of the strong retail deposit growth, the Company has lowered its level of brokered deposits, which have declined by $87 million, or 36.6%, since June 30, 2018. Additionally, the Company has paid down its borrowings by $106 million, or 26.0%, over that same time period.

 

Over the past twelve months in order to reduce exposure to the possibility of lower interest rates, the Company has invested a portion of its interest-bearing cash balances into fixed rate investment securities. As a result, from June 30, 2018 to June 30, 2019, interest-bearing cash balances have declined by 38% and investment securities balances have increased by 74%.

 

The Company remains well-capitalized by all regulatory standards, with an estimated Total Risk-Based Capital Ratio at June 30, 2019 of 14.55%, an increase from the 13.17% reported at June 30, 2018. The Company’s tangible common equity to tangible assets ratio was 9.75% at June 30, 2019, an increase of 116 basis points from a year earlier.

 

Comments of the CEO and Other Business Matters

 

Richard H. Moore, CEO of First Bancorp, commented, “We are pleased with our results for the quarter, which resulted in a return on average assets of 1.60%. We are also very pleased with our recent recognition by Forbes as being one of the best banks in North Carolina. We extend a special thank you to our customers for your business and your support.”

 

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

 

·On June 14, 2019, the Company announced a quarterly cash dividend of $0.12 per share payable on July 25, 2019 to shareholders of record on June 30, 2019. This dividend rate represents a 20% increase over the dividend rate declared in the second quarter of 2018.

 

·During the second quarter of 2019, the Company repurchased 182,000 shares of the Company’s common stock at an average price of $35.82, which totaled $6.5 million. The Company has $25 million of total repurchase authority and depending on market conditions, may continue share repurchases up to that limit during the remainder of 2019.

 

* * *

First Bancorp is a bank holding company headquartered in Southern Pines, North Carolina, with total assets of approximately $6.0 billion. Its principal activity is the ownership and operation of First Bank, a state-chartered community bank that operates 101 branches in North Carolina and South Carolina. First Bank also operates one loan production office in Raleigh, North Carolina. First Bank Insurance Services is a subsidiary of First Bank and provides insurance products and services to individuals and businesses throughout First Bank’s market area. First Bank also provides SBA loans to customers through its nationwide network of lenders – for more information on First Bank’s SBA lending capabilities, please visit www.firstbanksba.com. First Bancorp’s common stock is traded on The NASDAQ Global Select Market under the symbol “FBNC.”

 

 

Please visit our website at www.LocalFirstBank.com.

 

This press release contains forward-looking statements within the meaning of Section 21E of the Securities Exchange Act of 1934 and the Private Securities Litigation Reform Act of 1995, which statements are inherently subject to risks and uncertainties. Forward-looking statements are statements that include projections, predictions, expectations or beliefs about future events or results or otherwise are not statements of historical fact. Such statements are often characterized by the use of qualifying words (and their derivatives) such as “expect,” “believe,” “estimate,” “plan,” “project,” “anticipate,” or other words or phrases concerning opinions or judgments of the Company and its management about future events. Factors that could influence the accuracy of such forward-looking statements include, but are not limited to, the financial success or changing strategies of the Company’s customers, the Company’s level of success in integrating acquisitions, actions of government regulators, the level of market interest rates, and general economic conditions. For additional information about the factors that could affect the matters discussed in this paragraph, see the “Risk Factors” section of the Company’s most recent annual report on Form 10-K available at www.sec.gov. Forward-looking statements speak only as of the date they are made, and the Company undertakes no obligation to update or revise forward-looking statements. The Company is also not responsible for changes made to this press release by wire services, internet services or other media.

 

 

 

 

 

First Bancorp and Subsidiaries

Financial Summary – Page 1

 

   Three Months Ended
June 30,
   Percent
($ in thousands except per share data – unaudited)  2019   2018   Change
             
INCOME STATEMENT               
                
Interest income               
   Interest and fees on loans  $55,652    51,451      
   Interest on investment securities   5,264    2,833      
   Other interest income   2,106    2,451      
      Total interest income   63,022    56,735    11.1%
Interest expense               
   Interest on deposits   6,324    3,233      
   Interest on borrowings   2,289    2,270      
      Total interest expense   8,613    5,503    56.5%
        Net interest income   54,409    51,232    6.2%
Total provision (reversal) for loan losses   (308)   (710)   n/m 
Net interest income after provision for loan losses   54,717    51,942    5.3%
Noninterest income               
   Service charges on deposit accounts   3,210    3,122      
   Other service charges, commissions, and fees   5,786    4,674      
   Fees from presold mortgage loans   857    796      
   Commissions from sales of insurance and financial products   2,204    2,119      
   SBA consulting fees   921    1,126      
   SBA loan sale gains   3,069    2,598      
   Bank-owned life insurance income   631    628      
   Foreclosed property gains (losses), net   (381)   (99)     
   Securities gains (losses), net             
   Other gains (losses), net   (308)   908      
      Total noninterest income   15,989    15,872    0.7%
Noninterest expenses               
   Salaries expense   19,732    18,446      
   Employee benefit expense   4,418    4,084      
   Occupancy and equipment related expense   3,912    3,784      
   Merger and acquisition expenses   103    640      
   Intangibles amortization expense   1,242    1,506      
   Other operating expenses   11,032    10,174      
      Total noninterest expenses   40,439    38,634    4.7%
Income before income taxes   30,267    29,180    3.7%
Income tax expense   6,408    6,450    (0.7%)
Net income  $23,859    22,730    5.0%
                
                
Earnings per common share – diluted  $0.80    0.77    3.9%
                
ADDITIONAL INCOME STATEMENT INFORMATION               
   Net interest income, as reported  $54,409    51,232      
   Tax-equivalent adjustment (1)   423    367      
   Net interest income, tax-equivalent  $54,832    51,599    6.3%
                
(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

 

   Six Months Ended
June 30,
   Percent
($ in thousands except per share data – unaudited)  2019   2018   Change
             
INCOME STATEMENT               
                
Interest income               
   Interest and fees on loans  $109,612    101,621      
   Interest on investment securities   10,338    5,799      
   Other interest income   4,807    4,376      
      Total interest income   124,757    111,796    11.6%
Interest expense               
   Interest on deposits   11,901    5,906      
   Interest on borrowings   5,086    4,151      
      Total interest expense   16,897    10,057    68.9%
        Net interest income   107,770    101,739    5.9%
Total provision (reversal) for loan losses   192    (4,369)   n/m 
Net interest income after provision for loan losses   107,578    106,108    1.4%
Noninterest income               
   Service charges on deposit accounts   6,155    6,385      
   Other service charges, commissions, and fees   11,034    9,159      
   Fees from presold mortgage loans   1,402    1,655      
   Commissions from sales of insurance and financial products   4,233    4,059      
   SBA consulting fees   2,184    2,267      
   SBA loan sale gains   5,131    6,400      
   Bank-owned life insurance income   1,277    1,251      
   Foreclosed property gains (losses), net   (626)   (387)     
   Securities gains (losses), net             
   Other gains (losses), net   (226)   912      
      Total noninterest income   30,564    31,701    (3.6%)
Noninterest expenses               
   Salaries expense   38,697    37,844      
   Employee benefit expense   9,006    8,691      
   Occupancy and equipment related expense   8,035    7,838      
   Merger and acquisition expenses   213    3,401      
   Intangibles amortization expense   2,574    3,066      
   Other operating expenses   21,185    21,280      
      Total noninterest expenses   79,710    82,120    (2.9%)
Income before income taxes   58,432    55,689    4.9%
Income tax expense   12,288    12,286    0.0%
Net income  $46,144    43,403    6.3%
                
                
Earnings per common share – diluted  $1.55    1.46    6.2%
                
ADDITIONAL INCOME STATEMENT INFORMATION               
   Net interest income, as reported  $107,770    101,739      
   Tax-equivalent adjustment (1)   847    723      
   Net interest income, tax-equivalent  $108,617    102,462    6.0%
                
(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 3

 

   Three Months Ended
June 30,
  Six Months Ended
June 30,
PERFORMANCE RATIOS (annualized)  2019  2018  2019  2018
Return on average assets (1)   1.60%    1.61%    1.56%    1.56% 
Return on average common equity (2)   11.93%    12.70%    11.80%    12.33% 
Net interest margin – tax-equivalent (3)   4.06%    4.07%    4.06%    4.12% 
Net charge-offs (recoveries) to average loans   0.00%    (0.07%)   0.02%    (0.21%)
                     
COMMON SHARE DATA                    
Cash dividends declared – common  $0.12    0.10    0.24    0.20 
Stated book value – common   27.43    24.20    27.43    24.20 
Tangible book value – common   18.89    15.79    18.89    15.79 
Common shares outstanding at end of period   29,717,223    29,702,912    29,717,223    29,702,912 
Weighted average shares outstanding – diluted   29,796,941    29,632,738    29,808,859    29,630,822 
                     
CAPITAL RATIOS                    
Tangible common equity to tangible assets   9.75%    8.59%    9.75%    8.59% 
Common equity tier I capital ratio - estimated   12.90%    11.40%    12.90%    11.40% 
Tier I leverage ratio – estimated   10.92%    10.05%    10.92%    10.05% 
Tier I risk-based capital ratio - estimated   14.07%    12.61%    14.07%    12.61% 
Total risk-based capital ratio - estimated   14.55%    13.17%    14.55%    13.17% 
                     
AVERAGE BALANCES ($ in thousands)                    
Total assets  $5,994,595    5,671,620    5,969,822    5,610,568 
Loans   4,329,866    4,133,689    4,305,069    4,116,592 
Earning assets   5,417,284    5,080,372    5,395,025    5,014,992 
Deposits   4,810,029    4,512,559    4,757,130    4,458,182 
Interest-bearing liabilities   3,716,092    3,671,692    3,744,903    3,650,528 
Shareholders’ equity   802,131    717,975    788,595    709,693 
                     

(1) Calculated by dividing annualized net income by average assets.

(2) Calculated by dividing annualized net income by average common equity.

(3) See note 1 on the first page of the Financial Summary for discussion of tax-equivalent adjustments.

 

TREND INFORMATION

($ in thousands except per share data)  For the Three Months Ended
INCOME STATEMENT 

June 30,

2019

  Mar. 31,
2019
  Dec. 31,
2018
  Sept. 30,
2018
  June 30,
2018
                
Net interest income – tax-equivalent (1)  $54,832    53,785    54,289    52,273    51,599 
Taxable equivalent adjustment (1)   423    424    443    428    367 
Net interest income   54,409    53,361    53,846    51,845    51,232 
Provision (reversal) for loan losses   (308)   500    693    87    (710)
Noninterest income   15,989    14,575    14,114    15,173    15,872 
Noninterest expense   40,439    39,271    37,374    39,035    38,634 
Income before income taxes   30,267    28,165    29,893    27,896    29,180 
Income tax expense   6,408    5,880    5,998    5,905    6,450 
Net income   23,859    22,285    23,895    21,991    22,730 
                          
Earnings per common share – diluted   0.80    0.75    0.80    0.74    0.77 
                          
Cash dividends declared per share   0.12    0.12    0.10    0.10    0.10 
                          
(1)See note 1 on the first page of this Financial Summary for discussion of tax-equivalent adjustments.

 

 

First Bancorp and Subsidiaries

Financial Summary – Page 4

 

 

CONSOLIDATED BALANCE SHEETS

($ in thousands - unaudited)

                    
   At June 30,
2019
   At Mar. 31,
2019
   At Dec. 31,
2018
   At June 30,
2018
   One Year
Change
Assets                         
Cash and due from banks  $52,679    80,620    56,050    97,163    (45.8%)
Interest-bearing deposits with banks   286,781    366,187    406,848    462,972    (38.1%)
     Total cash and cash equivalents   339,460    446,807    462,898    560,135    (39.4%)
                          
Investment securities   771,021    730,512    602,588    442,333    74.3% 
Presold mortgages   6,222    3,318    4,279    9,311    (33.2%)
                          
Total loans   4,339,497    4,303,787    4,249,064    4,149,390    4.6% 
Allowance for loan losses   (20,789)   (21,095)   (21,039)   (23,298)   (10.8%)
Net loans   4,318,708    4,282,692    4,228,025    4,126,092    4.7% 
                          
Premises and equipment   136,901    137,725    119,000    113,774    20.3% 
Intangible assets   253,769    254,449    255,480    255,610    (0.7%)
Foreclosed real estate   5,107    6,390    7,440    8,296    (38.4%)
Bank-owned life insurance   103,154    102,524    101,878    100,413    2.7% 
Other assets   77,697    85,831    82,528    101,636    (23.6%)
     Total assets  $6,012,039    6,050,248    5,864,116    5,717,600    5.1% 
                          
                          
Liabilities                         
Deposits:                         
     Noninterest-bearing checking accounts  $1,441,064    1,390,516    1,320,131    1,252,214    15.1% 
     Interest-bearing checking accounts   931,945    922,254    916,374    915,666    1.8% 
     Money market accounts   1,104,052    1,079,002    1,035,523    1,021,659    8.1% 
     Savings accounts   413,065    417,812    432,389    440,475    (6.2%)
     Brokered deposits   150,888    216,616    239,875    238,098    (36.6%)
     Internet time deposits   1,445    3,428    3,428    6,999    (79.4%)
     Other time deposits > $100,000   538,401    506,148    447,619    402,109    33.9% 
     Other time deposits   262,194    261,462    264,000    276,401    (5.1%)
          Total deposits   4,843,054    4,797,238    4,659,339    4,553,621    6.4% 
                          
Borrowings   301,140    406,125    406,609    407,076    (26.0%)
Other liabilities   52,676    58,746    33,938    32,181    63.7% 
     Total liabilities   5,196,870    5,262,109    5,099,886    4,992,878    4.1% 
                          
Shareholders’ equity                         
Common stock   432,533    434,948    434,453    434,117    (0.4%)
Retained earnings   380,748    360,455    341,738    301,800    26.2% 
Stock in rabbi trust assumed in acquisition   (3,625)   (3,245)   (3,235)   (3,214)   (12.8%)
Rabbi trust obligation   3,625    3,245    3,235    3,214    12.8% 
Accumulated other comprehensive income (loss)   1,888    (7,264)   (11,961)   (11,195)   

n/m

 
     Total shareholders’ equity   815,169    788,139    764,230    724,722    12.5% 
Total liabilities and shareholders’ equity  $6,012,039    6,050,248    5,864,116    5,717,600    5.1% 

 

 

 

 

First Bancorp and Subsidiaries

Financial Summary – Page 5

 

 

   For the Three Months Ended
YIELD INFORMATION  June 30,
2019
  Mar. 31,
2019
  Dec. 31,
2018
  Sept. 30,
2018
  June 30,
2018
                
Yield on loans   5.16%    5.11%    5.13%    4.96%    4.99% 
Yield on securities   2.81%    2.95%    2.71%    2.52%    2.47% 
Yield on other earning assets   2.51%    2.77%    2.29%    2.33%    2.02% 
   Yield on all interest-earning assets   4.67%    4.66%    4.60%    4.49%    4.48% 
                          
Rate on interest bearing deposits   0.75%    0.67%    0.56%    0.48%    0.40% 
Rate on other interest-bearing liabilities   2.83%    2.79%    2.60%    2.41%    2.24% 
   Rate on all interest-bearing liabilities   0.93%    0.90%    0.79%    0.69%    0.60% 
     Total cost of funds   0.67%    0.66%    0.58%    0.51%    0.45% 
                          
        Net interest margin (1)   4.03%    4.03%    4.05%    4.00%    4.04% 
                          
        Net interest margin – tax-equivalent (2)   4.06%    4.06%    4.08%    4.03%    4.07% 
                          
        Average prime rate   5.50%    5.50%    5.28%    5.01%    4.80% 
                          
(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)

  June 30,
2019
   Mar. 31,
2019
   Dec. 31,
2018
   Sept. 30,
2018
   June 30,
2018
 
                     
Interest income – increased by accretion of loan discount on acquired loans  $1,336    1,132    1,566    1,365    2,064 
Interest income – increased by accretion of loan discount on retained portions of SBA loans   394    287    264    210    232 
Interest expense – reduced by premium amortization of deposits   50    58    71    84    101 
Interest expense – increased by discount accretion of borrowings   (45)   (45)   (45)   (46)   (45)
     Impact on net interest income  $1,735    1,432    1,856    1,613    2,352 

 

 

 

First Bancorp and Subsidiaries

Financial Summary – Page 6

 

 

 

ASSET QUALITY DATA ($ in thousands)

  June 30,
2019
   Mar. 31,
2019
   Dec. 31,
2018
   Sept. 30,
2018
   June 30,
2018
 
                     
Nonperforming assets                    
Nonaccrual loans  $17,375    20,684    22,575    18,231    25,494 
Troubled debt restructurings - accruing   11,890    12,457    13,418    16,657    17,386 
Accruing loans > 90 days past due                    
Total nonperforming loans   29,265    33,141    35,993    34,888    42,880 
Foreclosed real estate   5,107    6,390    7,440    6,140    8,296 
Total nonperforming assets  $34,372    39,531    43,433    41,028    51,176 
Purchased credit impaired loans not included above (1)  $14,175    15,867    17,393    20,189    20,832 

 

Asset Quality Ratios

                         
Net quarterly charge-offs (recoveries) to average loans – annualized   0.00%    0.04%    0.02%    0.27%    (0.07%)
Nonperforming loans to total loans   0.67%    0.77%    0.85%    0.83%    1.03% 
Nonperforming assets to total assets   0.57%    0.65%    0.74%    0.72%    0.90% 
Allowance for loan losses to total loans   0.48%    0.49%    0.50%    0.49%    0.56% 
Allowance for loan losses + unaccreted discount on acquired loans to total loans   0.82%    0.86%    0.90%    0.94%    1.05% 

 

(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)

  June 30,
2019
   Mar. 31,
2019
   Dec. 31,
2018
   Sept. 30,
2018
   June 30,
2018
 
                     
Net interest income, as reported  $54,409    53,361    53,846    51,845    51,232 
Tax-equivalent adjustment   423    424    443    428    367 
Net interest income, tax-equivalent (A)  $54,832    53,785    54,289    52,273    51,599 
 Average earning assets (B)  $5,417,284    5,372,766    5,276,311    5,143,449    5,080,372 
Tax-equivalent net interest  margin, annualized – as reported –  (A)/(B)   4.06%    4.06%    4.08%    4.03%    4.07% 
                          
Net interest income, tax-equivalent  $54,832    53,785    54,289    52,273    51,599 
Loan discount accretion   1,730    1,419    1,830    1,575    2,296 
Net interest income, tax-equivalent, excluding loan discount accretion  (A)  $53,102    52,366    52,459    50,698    49,303 
 Average earnings assets (B)  $5,417,284    5,372,766    5,276,311    5,143,449    5,080,372 
Tax-equivalent net interest margin, excluding impact of loan discount accretion, annualized – (A) / (B)   3.93%    3.95%    3.94%    3.91%    3.89% 

 

Note: The measure “tax-equivalent net interest margin, excluding impact of loan discount accretion” is a non-GAAP performance measure. Management of the Company believes that it is useful to calculate and present the Company’s net interest margin without the impact of loan discount accretion for the reasons explained in the remainder of this Note. Loan discount accretion is a non-cash interest income adjustment that is related to 1) the Company’s acquisition of loans and represents the portion of the fair value discount that was initially recorded on the acquired loans, and 2) the Company’s origination of SBA loans and the subsequent sale of the guaranteed portions of the loans that results in a discount being recorded on the retained portion of the loans. These discounts are recognized into income over the lives of the loans. At June 30, 2019, the Company had a remaining loan discount balance on acquired loans of $14.8 million compared to $20.3 million at June 30, 2018. At June 30, 2019, the Company had a remaining loan discount balance on SBA loans of $6.9 million compared to $4.7 million at June 30, 2018. For the related loans that perform and pay-down over time, the loan discount will also be reduced, with a corresponding increase to interest income. Therefore, management of the Company believes it is useful to also present this ratio to reflect the Company’s net interest margin excluding this non-cash, temporary loan discount accretion adjustment to aid investors in comparing financial results between periods. The Company cautions that non-GAAP financial measures should be considered in addition to, but not as a substitute for, the Company’s reported GAAP results.

 

 

Reconciliation of Core Noninterest Income to

Total Noninterest Income

($ in thousands)

  Three Months
Ended June 30,
2019
   Three Months
Ended June 30,
2018
   Six Months
Ended June 30,
2019
   Six Months
Ended June 30,
2018
 
Noninterest income                    
   Service charges on deposit accounts  $3,210    3,122    6,155    6,385 
   Other service charges, commissions, and fees   5,786    4,674    11,034    9,159 
   Fees from presold mortgage loans   857    796    1,402    1,655 
   Commissions from sales of insurance and financial products   2,204    2,119    4,233    4,059 
   SBA consulting fees   921    1,126    2,184    2,267 
   SBA loan sale gains   3,069    2,598    5,131    6,400 
   Bank-owned life insurance income   631    628    1,277    1,251 
         Core noninterest Income   16,678    15,063    31,416    31,176 
   Foreclosed property gains (losses), net   (381)   (99)   (626)   (387)
   Securities gains (losses), net                
   Other gains (losses), net   (308)   908    (226)   912 
         Total noninterest income  $15,989    15,872    30,564    31,701 

 

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