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Section 1: 8-K (8-K)

Document
false0000811589 0000811589 2020-01-22 2020-01-22


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 22, 2020
 
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 Broad Street,
 
 
 
Southern Pines,
NC
 
 
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: 
 
Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
 
Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
 
Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
 
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.
Securities registered pursuant to Section 12(b) of the Act:

Title of each class            Trading symbol        Name of each exchange on which registered:
Common Stock, No Par Value        FBNC            The Nasdaq Global Select Market

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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

 
 
5



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Item 2.02 - Results of Operations and Financial Condition
On January 22, 2020, 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, 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 December 31, 2019, the Company had a remaining loan discount balance on acquired loans of $12.7 million compared to $17.3 million at December 31, 2018. At December 31, 2019, the Company had a remaining loan discount balance on SBA loans of $7.1 million compared to $5.7 million at December 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 January 22, 2020, the Registrant issued a news release to announce its financial results for the three and twelve months ended December 31, 2019. The news release is attached hereto as Exhibit 99.1. 

Item 9.01 – Financial Statements and Exhibits
(d) Exhibits
Exhibit 99.1 – News Release issued on January 22, 2020
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 22, 2020
 
 
By:
 
 
/s/ Richard H. Moore
 
 
 
 
 
 
Richard H. Moore
 
 
 
 
 
 
Chief Executive Officer


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Section 2: EX-99.1 (EXHIBIT 99.1)

Exhibit




402393822_fblogoa01.jpg
 

News Release


For Immediate Release:
 
 
For More Information, Contact:
January 22, 2020
 
 
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 of $20.9 million, or $0.71 per diluted common share, for the three months ended December 31, 2019, a decrease of 11.3% in earnings per share from the $23.9 million, or $0.80 per diluted common share, recorded in the fourth quarter of 2018. The decrease was primarily due to an increase in the provision for loan losses recorded for the current period.

For the year ended December 31, 2019, the Company recorded net income of $92.0 million, or $3.10 per diluted common share, an increase of 3.0% in earnings per share from the $89.3 million, or $3.01 per diluted common share, for 2018. The increase was primarily related to higher net interest income associated with the Company's growth.

Net Interest Income and Net Interest Margin

Net interest income for the fourth quarter of 2019 was $54.7 million, a 1.5% increase from the $53.8 million recorded in the fourth quarter of 2018. Net interest income for the year ended December 31, 2019 amounted to $216.2 million, a 4.2% increase from the $207.4 million recorded in 2018. The increases in net interest income for the periods presented were primarily due to growth in interest-earning assets, which have increased by approximately 6% over the past year.

The Company’s net interest margin (a non-GAAP measure calculated by dividing tax-equivalent net interest income by average earning assets) for the fourth quarter of 2019 was 3.93%, which was 15 basis points lower than the 4.08% realized in the fourth quarter of 2018. For the year ended December 31, 2019, the Company’s net interest margin was 4.00% compared to 4.09% for 2018. The lower margins were primarily due to a combination of lower loan discount accretion and lower asset yields.

The Company recorded loan discount accretion of $1.5 million in the fourth quarter of 2019, compared to $1.8 million in the fourth quarter of 2018. For the years ended December 31, 2019 and 2018, loan discount accretion amounted to $6.0 million and $7.8 million, respectively. The lower loan discount accretion accounted for approximately 3 basis points out of the 15 basis point decline in the net interest margin when comparing the fourth quarter of 2019 to 2018 and for 4 basis points of the 9 basis point decline for 2019. The lower discount accretion was attributable to paydowns in the Company’s acquired loan portfolios.

The Company's earning-asset yields, excluding loan discount accretion, decreased by 8 basis points when comparing the fourth quarter of 2019 to the fourth quarter of 2018. Total funding costs increased by 5 basis points over that same period. On a year to date basis, earning-asset yields, excluding loan discount accretion, increased 11 basis points, while total funding costs increased 18 basis points.


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In the second half of 2019, the Federal Reserve cut short-term interest rates by 75 basis points. The lower interest rates resulted in a 6 basis point reduction in the yield on interest-earning assets in the fourth quarter of 2019 from the third quarter of 2019 and a three basis point reduction in the total cost of funds. This spread compression resulted in the 2 basis point linked-quarter decrease in net interest margin. In the fourth quarter of 2019, the Company’s loan yield was favorably impacted by yield adjustments primarily related to prepayment fees realized on the early payoff of a large loan.

See the Financial Summary for a reconciliation of the Company’s net interest margin to its net interest margin excluding loan discount accretion, and other information regarding this percentage.

Provision for Loan Losses and Asset Quality

Total net charge-offs for the fourth quarter of 2019 amounted to $1.0 million, or 0.09% of average loans, compared to net charge-offs of $0.2 million, or 0.02% of average loans, in the fourth quarter of 2018. For the year ended December 31, 2019, the Company experienced net charge-offs of $1.9 million, or 0.04% of average loans, compared to net recoveries of $1.3 million in 2018.

The Company recorded a provision for loan losses of $3.2 million in the fourth quarter of 2019 compared to a provision for loan losses of $0.7 million in the fourth quarter of 2018. For the year ended December 31, 2019, the Company recorded a provision for loan losses of $2.3 million compared to a negative provision for loan losses (reduction of the allowance for loan losses) of $3.6 million in 2018. In the first quarter of 2018, the Company experienced net loan recoveries of $3.7 million, resulting in the negative provision during 2018.

Total nonperforming assets amounted to $37.8 million at December 31, 2019 compared to $43.4 million a year earlier. Within nonperforming assets, nonaccrual loans amounted to $24.9 million at December 31, 2019 compared to $19.7 million at September 30, 2019 and $22.6 million at December 31, 2018.

Noninterest Income

Total noninterest income was $14.6 million and $13.4 million for the three months ended December 31, 2019 and 2018, respectively. For the year ended December 31, 2019, noninterest income amounted to $58.6 million compared to $58.4 million for 2018.

Core noninterest income, a non-GAAP measure, for the fourth quarter of 2019 was $14.5 million, a 7.5% increase from the $13.5 million reported for the fourth quarter of 2018 - see reconciliation of core noninterest income to total noninterest income in the Financial Summary. For the year ended December 31, 2019, core noninterest income amounted to $59.6 million, a 2.4% increase from the $58.2 million reported for 2018.

In 2019, the Company experienced increases in service charges on deposit accounts due to strong deposit growth, "other service charges, commissions, and fees" due to higher interchange income, and "fees from presold mortgages" due to higher mortgage origination activity. Partially offsetting those increases were declines in commissions from sales of insurance and financial products, SBA consulting fees and SBA loan sale gains, which all declined due to lower activity in those lines of business.

Other gains (losses) amounted to a net loss of $0.2 million in calendar year 2019 due to miscellaneous items, whereas in 2018, the Company recorded a net gain of $0.7 million, which included a $0.9 million gain on the sale of a former branch location.

Noninterest Expenses

Noninterest expenses amounted to $39.9 million in the fourth quarter of 2019 compared to $36.7 million recorded in the fourth quarter of 2018, an increase of 8.6%. Noninterest expenses for the year ended December 31, 2019 amounted to $156.3 million compared to $155.9 million in 2018, an increase of 0.2%. The increases in 2019 were primarily due to expenses associated with the Company's growth, which were partially offset by lower FDIC

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assessment premiums due to credits allocated to the Company by the FDIC and operational efficiencies realized by the Company resulting from the operational conversion of an acquired entity in 2018.

Income Taxes

The Company’s effective tax rate for the fourth quarter of 2019 was 20.4% compared to 20.1% in the fourth quarter of 2018. For the year ended December 31, 2019 and 2018, the Company’s effective tax rates were 20.8% and 21.3%, respectively.

Balance Sheet and Capital

Total assets at December 31, 2019 amounted to $6.1 billion, a 4.8% increase from a year earlier. Loan growth for the year ended December 31, 2019 amounted to $204.4 million, or 4.8%, and deposit growth amounted to $272.0 million, or 5.8%. Within deposits, the Company’s retail deposits (excludes brokered deposits and internet time deposits) grew 9.7% during 2019, with 14.8% growth in noninterest-bearing checking accounts. As a result of the strong retail deposit growth, the Company reduced its level of brokered deposits, which declined by $153.7 million, or 64.1%, from December 31, 2018. Additionally, the Company paid down its borrowings by $106 million, or 26.0%, during 2019.

In order to reduce exposure to the possibility of lower interest rates, the Company invested portions of its interest-bearing cash balances during 2019 into fixed rate investment securities. As a result, from December 31, 2018 to December 31, 2019, interest-bearing cash balances declined by 59.0% and investment securities balances increased by 47.7%.

The Company remains well-capitalized by all regulatory standards, with an estimated Total Risk-Based Capital Ratio at December 31, 2019 of 15.12%, an increase from the 13.97% reported at December 31, 2018. The Company’s tangible common equity to tangible assets ratio was 10.20% at December 31, 2019, an increase of 113 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 2019. Profitability was strong, with a return on average assets of 1.53%, and we experienced solid balance sheet growth, especially in retail deposits, which grew nearly 10%. We were also pleased that our strong capital levels provided the opportunity to increase our dividend rate again this year. The dividend rate of 18 cents per share being paid to shareholders this week represents an 80% increase from the rate paid a year ago.”


* * *
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 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

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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.



4




First Bancorp and Subsidiaries
Financial Summary - Page 1
 
Three Months Ended
December 31,
Percent
($ in thousands except per share data - unaudited)
2019
 
2018
Change
INCOME STATEMENT
 
 
 
 
Interest income
 
 
 
 
   Interest and fees on loans
$
56,030

 
54,581

 
   Interest on investment securities
5,209

 
3,453

 
   Other interest income
1,730

 
3,158

 
      Total interest income
62,969

 
61,192

2.9%
Interest expense
 
 
 
 
   Interest on deposits
6,552

 
4,679

 
   Interest on borrowings
1,761

 
2,667

 
      Total interest expense
8,313

 
7,346

13.2%
        Net interest income
54,656

 
53,846

1.5%
Total provision (reversal) for loan losses
3,176

 
693

358.3%
Net interest income after provision for loan losses
51,480

 
53,153

(3.1)%
Noninterest income
 
 
 
 
   Service charges on deposit accounts
3,427

 
3,084

 
   Other service charges, commissions, and fees
4,859

 
4,302

 
   Fees from presold mortgage loans
1,267

 
504

 
   Commissions from sales of insurance and financial products
2,059

 
2,247

 
   SBA consulting fees
1,025

 
1,121

 
   SBA loan sale gains
1,227

 
1,593

 
   Bank-owned life insurance income
636

 
642

 
   Foreclosed property gains (losses), net
(40
)
 
14

 
   Securities gains (losses), net

 

 
   Other gains (losses), net
162

 
(88
)
 
      Total noninterest income
14,622

 
13,419

9.0%
Noninterest expenses
 
 
 
 
   Salaries expense
20,599

 
18,462

 
   Employee benefit expense
3,694

 
4,136

 
   Occupancy and equipment related expense
4,093

 
4,402

 
   Merger and acquisition expenses
(21
)
 
(1,210
)
 
   Intangibles amortization expense
1,121

 
1,398

 
   Other operating expenses
10,365

 
9,491

 
      Total noninterest expenses
39,851

 
36,679

8.6%
Income before income taxes
26,251

 
29,893

(12.2)%
Income tax expense
5,368

 
5,998

(10.5)%
Net income
$
20,883

 
23,895

(12.6)%
 
 
 
 
 
Earnings per common share - diluted
$
0.71

 
0.80

(11.3)%
 
 
 
 
 
ADDITIONAL INCOME STATEMENT INFORMATION
 
 
 
 
   Net interest income, as reported
$
54,656

 
53,846

 
   Tax-equivalent adjustment (1)
382

 
443

 
   Net interest income, tax-equivalent
$
55,038

 
54,289

1.4%
 
 
(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.



5




First Bancorp and Subsidiaries
Financial Summary - Page 2
 
Twelve Months Ended
December 31,
Percent
($ in thousands except per share data - unaudited)
2019
 
2018
Change
INCOME STATEMENT
 
 
 
 
Interest income
 
 
 
 
   Interest and fees on loans
$
220,784

 
208,609

 
   Interest on investment securities
20,888

 
12,120

 
   Other interest income
8,435

 
10,478

 
      Total interest income
250,107

 
231,207

8.2%
Interest expense
 
 
 
 
   Interest on deposits
25,050

 
14,491

 
   Interest on borrowings
8,853

 
9,286

 
      Total interest expense
33,903

 
23,777

42.6%
        Net interest income
216,204

 
207,430

4.2%
Total provision (reversal) for loan losses
2,263

 
(3,589
)
(163.1)%
Net interest income after provision for loan losses
213,941

 
211,019

1.4%
Noninterest income
 
 
 
 
   Service charges on deposit accounts
12,970

 
12,690

 
   Other service charges, commissions, and fees
19,481

 
16,488

 
   Fees from presold mortgage loans
3,944

 
2,735

 
   Commissions from sales of insurance and financial products
8,495

 
8,731

 
   SBA consulting fees
3,872

 
4,675

 
   SBA loan sale gains
8,275

 
10,366

 
   Bank-owned life insurance income
2,564

 
2,534

 
   Foreclosed property gains (losses), net
(939
)
 
(565
)
 
   Securities gains (losses), net
97

 

 
   Other gains (losses), net
(169
)
 
723

 
      Total noninterest income
58,590

 
58,377

0.4%
Noninterest expenses
 
 
 
 
   Salaries expense
79,129

 
75,077

 
   Employee benefit expense
16,844

 
16,888

 
   Occupancy and equipment related expense
16,145

 
16,420

 
   Merger and acquisition expenses
192

 
2,358

 
   Intangibles amortization expense
4,858

 
5,917

 
   Other operating expenses
39,087

 
39,258

 
      Total noninterest expenses
156,255

 
155,918

0.2%
Income before income taxes
116,276

 
113,478

2.5%
Income tax expense
24,230

 
24,189

0.2%
Net income
$
92,046

 
89,289

3.1%
 
 
 
 
 
Earnings per common share - diluted
$
3.10

 
3.01

3.0%
 
 
 
 
 
ADDITIONAL INCOME STATEMENT INFORMATION
 
 
 
 
   Net interest income, as reported
$
216,204

 
207,430

 
   Tax-equivalent adjustment (1)
1,641

 
1,594

 
   Net interest income, tax-equivalent
$
217,845

 
209,024

4.2%
 
 
(1) This amount reflects the tax benefit that the Company receives related to its tax-exempt loans and securities, which carry interest rates lower than similar taxable investments due to their tax-exempt status. This amount has been computed assuming a 23% tax rate and is reduced by the related nondeductible portion of interest expense.



6




First Bancorp and Subsidiaries
Financial Summary - Page 3
 
Three Months Ended
December 31,
Twelve Months Ended
December 31,
PERFORMANCE RATIOS (annualized)
2019
2018
2019
2018
Return on average assets (1)
1.35
%
1.62
%
1.53
%
1.57
 %
Return on average common equity (2)
9.78
%
12.56
%
11.32
%
12.27
 %
Net interest margin - tax-equivalent (3)
3.93
%
4.08
%
4.00
%
4.09
 %
Net charge-offs (recoveries) to average loans
0.09
%
0.02
%
0.04
%
(0.03
)%
 
 
 
 
 
COMMON SHARE DATA
 
 
 
 
Cash dividends declared - common
$
0.18

0.10

0.54

0.40

Stated book value - common
28.80

25.71

28.80

25.71

Tangible book value - common
20.30

17.12

20.30

17.12

Common shares outstanding at end of period
29,601,264

29,724,874

29,601,264

29,724,874

Weighted average shares outstanding - diluted
29,603,816

29,800,342

29,720,499

29,707,431

 
 
 
 
 
CAPITAL RATIOS
 
 
 
 
Tangible common equity to tangible assets
10.20
%
9.07
%
10.20
%
9.07
 %
Common equity tier I capital ratio - estimated
13.48
%
12.28
%
13.48
%
12.28
 %
Tier I leverage ratio - estimated
11.19
%
10.47
%
11.19
%
10.47
 %
Tier I risk-based capital ratio - estimated
14.63
%
13.48
%
14.63
%
13.48
 %
Total risk-based capital ratio - estimated
15.12
%
13.97
%
15.12
%
13.97
 %
 
 
 
 
 
AVERAGE BALANCES ($ in thousands)
 
 
 
 
Total assets
$
6,159,232

5,840,964

6,027,047

5,693,760

Loans
4,419,982

4,222,417

4,346,331

4,161,838

Earning assets
5,560,099

5,276,311

5,447,817

5,112,805

Deposits
4,939,182

4,624,868

4,824,216

4,516,811

Interest-bearing liabilities
3,716,248

3,697,076

3,720,536

3,663,077

Shareholders’ equity
847,317

754,734

812,823

727,920

 
 
 
 
 
(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
Dec. 31, 2019
Sept. 30, 2019
June 30, 2019
Mar. 31, 2019
Dec. 31, 2018
 
 
 
 
 
 
Net interest income - tax-equivalent (1)
$
55,038

54,191

54,832

53,785

54,289

Taxable equivalent adjustment (1)
382

413

423

424

443

Net interest income
54,656

53,778

54,409

53,361

53,846

Provision (reversal) for loan losses
3,176

(1,105
)
(308
)
500

693

Noninterest income
14,622

14,883

15,253

13,833

13,419

Noninterest expense
39,851

38,173

39,703

38,529

36,679

Income before income taxes
26,251

31,593

30,267

28,165

29,893

Income tax expense
5,368

6,574

6,408

5,880

5,998

Net income
20,883

25,019

23,859

22,285

23,895

 
 
 
 
 
 
Earnings per common share - diluted
0.71

0.84

0.80

0.75

0.80

 
 
 
 
 
 
Cash dividends declared per share
0.18

0.12

0.12

0.12

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 4
CONSOLIDATED BALANCE SHEETS 
($ in thousands - unaudited)
 
 
 
 
 
 
 
 
At Dec. 31,
2019
 
At Sept. 30,
2019
 
At Dec. 31,
2018
 
One Year
Change
Assets
 
 
 
 
 
 
 
Cash and due from banks
$
64,519

 
52,621

 
56,050

 
15.1
 %
Interest-bearing deposits with banks
166,783

 
264,840

 
406,848

 
(59.0
)%
     Total cash and cash equivalents
231,302

 
317,461

 
462,898

 
(50.0
)%
 
 
 
 
 
 
 
 
Investment securities
889,877

 
779,489

 
602,588

 
47.7
 %
Presold mortgages
19,712

 
16,269

 
4,279

 
360.7
 %
 
 
 
 
 
 
 
 
Total loans
4,453,466

 
4,396,544

 
4,249,064

 
4.8
 %
Allowance for loan losses
(21,398
)
 
(19,260
)
 
(21,039
)
 
1.7
 %
Net loans
4,432,068

 
4,377,284

 
4,228,025

 
4.8
 %
 
 
 
 
 
 
 
 
Premises and equipment
134,528

 
136,668

 
119,000

 
13.0
 %
Intangible assets
251,585

 
252,824

 
255,480

 
(1.5
)%
Foreclosed real estate
3,873

 
4,589

 
7,440

 
(47.9
)%
Bank-owned life insurance
104,441

 
103,806

 
101,878

 
2.5
 %
Other assets
76,253

 
80,521

 
82,528

 
(7.6
)%
     Total assets
$
6,143,639

 
6,068,911

 
5,864,116

 
4.8
 %
 
 
 
 
 
 
 
 
Liabilities
 
 
 
 
 
 
 
Deposits:
 
 
 
 
 
 
 
     Noninterest-bearing checking accounts
$
1,515,977

 
1,491,494

 
1,320,131

 
14.8
 %
     Interest-bearing checking accounts
912,784

 
894,777

 
916,374

 
(0.4
)%
     Money market accounts
1,173,107

 
1,124,614

 
1,035,523

 
13.3
 %
     Savings accounts
424,415

 
418,043

 
432,389

 
(1.8
)%
     Brokered deposits
86,141

 
127,519

 
239,875

 
(64.1
)%
     Internet time deposits
698

 
1,445

 
3,428

 
(79.6
)%
     Other time deposits > $100,000
563,108

 
557,590

 
447,619

 
25.8
 %
     Other time deposits
255,125

 
259,900

 
264,000

 
(3.4
)%
          Total deposits
4,931,355

 
4,875,382

 
4,659,339

 
5.8
 %
 
 
 
 
 
 
 
 
Borrowings
300,671

 
300,656

 
406,609

 
(26.1
)%
Other liabilities
59,212

 
57,891

 
33,938

 
74.5
 %
     Total liabilities
5,291,238

 
5,233,929

 
5,099,886

 
3.8
 %
 
 
 
 
 
 
 
 
Shareholders’ equity
 
 
 
 
 
 
 
Common stock
429,514

 
429,136

 
434,453

 
(1.1
)%
Retained earnings
417,764

 
402,212

 
341,738

 
22.2
 %
Stock in rabbi trust assumed in acquisition
(2,587
)
 
(2,577
)
 
(3,235
)
 
(20.0
)%
Rabbi trust obligation
2,587

 
2,577

 
3,235

 
(20.0
)%
Accumulated other comprehensive
income (loss)
5,123

 
3,634

 
(11,961
)
 
(142.8
)%
     Total shareholders’ equity
852,401

 
834,982

 
764,230

 
11.5
 %
Total liabilities and shareholders’ equity
$
6,143,639

 
6,068,911

 
5,864,116

 
4.8
 %
 
 
 
 
 
 
 
 


8




First Bancorp and Subsidiaries
Financial Summary - Page 5
 
For the Three Months Ended
YIELD INFORMATION
Dec. 31, 2019
Sept. 30, 2019
June 30, 2019
Mar. 31, 2019
Dec. 31, 2018
 
 
 
 
 
 
Yield on loans
5.03
%
5.02
%
5.16
%
5.11
%
5.13
%
Yield on securities
2.64
%
2.74
%
2.81
%
2.95
%
2.71
%
Yield on other earning assets
1.91
%
2.42
%
2.51
%
2.77
%
2.29
%
   Yield on all interest-earning assets
4.49
%
4.55
%
4.67
%
4.66
%
4.60
%
 
 
 
 
 
 
Rate on interest bearing deposits
0.76
%
0.77
%
0.75
%
0.67
%
0.56
%
Rate on other interest-bearing liabilities
2.31
%
2.65
%
2.83
%
2.79
%
2.60
%
   Rate on all interest-bearing liabilities
0.89
%
0.93
%
0.93
%
0.90
%
0.79
%
     Total cost of funds
0.63
%
0.66
%
0.67
%
0.66
%
0.58
%
 
 
 
 
 
 
        Net interest margin (1)
3.90
%
3.92
%
4.03
%
4.03
%
4.05
%
 
 
 
 
 
 
        Net interest margin - tax-equivalent (2)
3.93
%
3.95
%
4.06
%
4.06
%
4.08
%
 
 
 
 
 
 
        Average prime rate
4.83
%
5.27
%
5.50
%
5.50
%
5.28
%
 
 
 
 
 
 

(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)
Dec. 31, 2019
 
Sept. 30, 2019
 
June 30, 2019
 
Mar. 31, 2019
 
Dec. 31, 2018
 
 
 
 
 
 
 
 
 
 
Interest income - increased by accretion of loan discount on acquired loans
$
1,161

 
959

 
1,336

 
1,132

 
1,566

Interest income - increased by accretion of loan discount on retained portions of SBA loans
340

 
365

 
394

 
287

 
264

Interest expense - reduced by premium amortization of deposits
38

 
44

 
50

 
58

 
71

Interest expense - increased by discount accretion of borrowings
(45
)
 
(46
)
 
(45
)
 
(45
)
 
(45
)
     Impact on net interest income
$
1,494

 
1,322

 
1,735

 
1,432

 
1,856





9




First Bancorp and Subsidiaries
Financial Summary - Page 6


ASSET QUALITY DATA ($ in thousands)
Dec. 31, 2019
 
Sept. 30, 2019
 
June 30, 2019
 
Mar. 31, 2019
 
Dec. 31, 2018
 
 
 
 
 
 
 
 
 
 
Nonperforming assets
 
 
 
 
 
 
 
 
 
Nonaccrual loans
$
24,866

 
19,720

 
17,375

 
20,684

 
22,575

Troubled debt restructurings - accruing
9,053

 
9,566

 
11,890

 
12,457

 
13,418

Accruing loans > 90 days past due

 

 

 

 

Total nonperforming loans
33,919

 
29,286

 
29,265

 
33,141

 
35,993

Foreclosed real estate
3,873

 
4,589

 
5,107

 
6,390

 
7,440

Total nonperforming assets
$
37,792

 
33,875

 
34,372

 
39,531

 
43,433

Purchased credit impaired loans not included above (1)
$
12,664

 
13,798

 
14,175

 
15,867

 
17,393

Asset Quality Ratios
 
 
 
 
 
 
 
 
 
Net quarterly charge-offs (recoveries) to average loans - annualized
0.09
%
 
0.04
%
 
%
 
0.04
%
 
0.02
%
Nonperforming loans to total loans
0.76
%
 
0.67
%
 
0.67
%
 
0.77
%
 
0.85
%
Nonperforming assets to total assets
0.62
%
 
0.56
%
 
0.57
%
 
0.65
%
 
0.74
%
Allowance for loan losses to total loans
0.48
%
 
0.44
%
 
0.48
%
 
0.49
%
 
0.50
%
(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)
Dec. 31, 2019
 
Sept. 30, 2019
 
June 30, 2019
 
Mar. 31, 2019
 
Dec. 31, 2018
 
 
 
 
 
 
 
 
 
 
Net interest income, as reported
$
54,656

 
53,778

 
54,409

 
53,361

 
53,846

Tax-equivalent adjustment
382

 
413

 
423

 
424

 
443

Net interest income, tax-equivalent (A)
$
55,038

 
54,191

 
54,832

 
53,785

 
54,289

Average earning assets (B)
$
5,560,099

 
5,440,014

 
5,417,284

 
5,372,766

 
5,276,311

Tax-equivalent net interest margin, annualized - as reported - (A)/(B)
3.93
%
 
3.95
%
 
4.06
%
 
4.06
%
 
4.08
%
 
 
 
 
 
 
 
 
 
 
Net interest income, tax-equivalent
$
55,038

 
54,191

 
54,832

 
53,785

 
54,289

Loan discount accretion
1,501

 
1,324

 
1,730

 
1,419

 
1,830

Net interest income, tax-equivalent, excluding loan discount accretion (A)
$
53,537

 
52,867

 
53,102

 
52,366

 
52,459

Average earnings assets (B)
$
5,560,099

 
5,440,014

 
5,417,284

 
5,372,766

 
5,276,311

Tax-equivalent net interest margin, excluding impact of loan discount accretion, annualized - (A) / (B)
3.82
%
 
3.86
%
 
3.93
%
 
3.95
%
 
3.94
%

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 December 31, 2019, the Company had a remaining loan discount balance on acquired loans of $12.7 million compared to $17.3 million at December 31, 2018. At December 31, 2019, the Company had a remaining loan discount balance on SBA loans of $7.1 million compared to $5.7 million at December 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.

 
For the Three Months Ended
 
For the Twelve Months Ended
RECONCILIATION OF CORE NONINTEREST INCOME TO TOTAL NONINTEREST INCOME
($ in thousands)
Dec. 31, 2019
 
Dec. 31, 2018
 
Dec. 31, 2019
 
Dec. 31, 2018
Noninterest income
 
 
 
 
 
 
 
   Service charges on deposit accounts
$
3,427

 
3,084

 
12,970

 
12,690

   Other service charges, commissions, and fees
4,859

 
4,302

 
19,481

 
16,488

   Fees from presold mortgage loans
1,267

 
504

 
3,944

 
2,735

   Commissions from sales of insurance and financial products
2,059

 
2,247

 
8,495

 
8,731

   SBA consulting fees
1,025

 
1,121

 
3,872

 
4,675

   SBA loan sale gains
1,227

 
1,593

 
8,275

 
10,366

   Bank-owned life insurance income
636

 
642

 
2,564

 
2,534

         Core noninterest income
14,500

 
13,493

 
59,601

 
58,219

   Foreclosed property gains (losses), net
(40
)
 
14

 
(939
)
 
(565
)
   Securities gains (losses), net

 

 
97

 

   Other gains (losses), net
162

 
(88
)
 
(169
)
 
723

         Total noninterest income
$
14,622

 
13,419

 
58,590

 
58,377



11
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