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First Bancorp Reports Fourth Quarter and Annual Results

Cision

SOUTHERN PINES, N.C. , Jan. 22, 2020 /PRNewswire/ -- 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.

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 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 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

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.

 

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.

 

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.

 

 

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