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First Bancorp Reports Third Quarter Results

SOUTHERN PINES, N.C., Oct. 24, 2017 /PRNewswire/ -- First Bancorp (NASDAQ – FBNC), the parent company of First Bank, announced today net income available to common shareholders of $13.1 million, or $0.53 per diluted common share, for the three months ended September 30, 2017, an increase of 130% in earnings per share from the $4.6 million, or $0.23 per diluted common share, recorded in the third quarter of 2016. For the nine months ended September 30, 2017, the Company recorded net income available to common shareholders of $31.8 million, or $1.33 per diluted common share, an increase of 43.0% in earnings per share from the $19.0 million, or $0.93 per diluted common share, for the nine months ended September 30, 2016.

The third quarter of 2016 results were impacted by two non-recurring items that impacted diluted earnings per share negatively by a net of $0.17 – 1) the Company's termination of its loss share agreements with the FDIC, which resulted in the Company recording additional indemnification asset expense of $5.7 million during the three months ended September 30, 2016, and 2) an exchange of branches with another community bank that resulted in a gain of $1.4 million.

Comparisons for the financial periods presented are significantly impacted by the Company's March 3, 2017 acquisition of Carolina Bank Holdings, Inc., the parent company of Carolina Bank, which operated eight branches and three mortgage loan offices, primarily in the Triad region of North Carolina. As of the acquisition date, Carolina Bank had total assets of $682 million, including $497 million in loans and $585 million in deposits.

On October 1, 2017, the Company acquired ASB Bancorp, Inc., the parent company of Asheville Savings Bank, SSB, headquartered in Asheville, North Carolina ("Asheville Savings Bank"), which operated through 13 branches in the Asheville area. As of the acquisition date, Asheville Savings Bank reported total assets of approximately $798 million, including $617 million in loans and $679 million in deposits. Because this transaction closed in the fourth quarter, the financial position and earnings for Asheville Savings Bank are not included in the Company's results for this quarter.

Net Interest Income and Net Interest Margin

Net interest income for the third quarter of 2017 was $41.6 million, a 37.2% increase from the $30.4 million recorded in the third quarter of 2016. Net interest income for the first nine months of 2017 amounted to $115.9 million, a 25.8% increase from the $92.1 million recorded in the comparable period of 2016. The increase in net interest income was primarily due to higher amounts of loans outstanding as a result of internal growth, as well as the acquisition of Carolina Bank.

Also contributing to the increase in net interest income was a higher net interest margin for the period. The Company's net interest margin (tax-equivalent net interest income divided by average earning assets) experienced its fourth consecutive quarter of expansion and amounted to 4.16% for the third quarter of 2017 compared to 3.93% for the third quarter of 2016. For the nine month period ended September 30, 2017, the Company's net interest margin was 4.11% compared to 4.07% for the same period in 2016. Asset yields have increased primarily as a result of three Federal Reserve interest rate increases during the past year. Funding costs have also increased, but to a lesser degree.

The net interest margins for both periods were also impacted by higher amounts of loan discount accretion associated with acquired loan portfolios. The Company recorded loan discount accretion amounting to $1.7 million in the third quarter of 2017, compared to $0.8 million in the third quarter of 2016. For the first nine months of 2017 and 2016, loan discount accretion amounted to $5.1 million and $3.6 million, respectively. The increase in loan discount accretion is primarily due to the loan discounts recorded in the acquisition of Carolina Bank. See the Financial Summary for a table that presents the impact of loan discount accretion on net interest income.

Excluding the effects of loan discount accretion, the Company's net interest margin was 3.99% for the third quarter of 2017, compared to 3.88% for the second quarter of 2017 and 3.82% for the third quarter of 2016. 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 ratio.

Provision for Loan Losses and Asset Quality

The Company recorded no provision for loan losses in the third quarters of 2017 or 2016. For the nine months ended September 30, 2017, the Company recorded total provision for loan losses of $0.7 million compared to a total negative provision for loan losses of $23,000 in the same period of 2016.

The Company's provision for loan loss levels have been impacted by continued improvement in asset quality. Nonperforming assets amounted to $53.0 million at September 30, 2017, a decrease of 24.4% from the $70.2 million one year earlier. The Company's nonperforming assets to total assets ratio was 1.16% at September 30, 2017 compared to 1.98% at September 30, 2016. Also, the Company's provision for loan loss levels were impacted by lower net loan charge-offs in 2017. The Company experienced net loan recoveries of $0.1 million for the first nine months of 2017, compared to net loan charge-offs of $2.9 million for the first nine months of 2016. The ratio of annualized net charge-offs to average loans for the nine months ended September 30, 2017 was 0.00%, compared to 0.15% for the same period of 2016.

Noninterest Income

Total noninterest income was $12.4 million and $5.2 million for the three months ended September 30, 2017 and September 30, 2016, respectively. For the nine months ended September 30, 2017, noninterest income amounted to $34.0 million compared to $16.1 million for the same period of 2016.

Core noninterest income for the third quarter of 2017 was $12.8 million, an increase of 31.2% from the $9.8 million reported for the third quarter of 2016. For the first nine months of 2017, core noninterest income amounted to $34.2 million, a 35.4% increase from the $25.3 million recorded in the comparable period of 2016. Core noninterest income includes i) service charges on deposit accounts, ii) other service charges, commissions, and fees, iii) fees from presold mortgage loans, iv) commissions from sales of insurance and financial products, v) SBA consulting fees, vi) SBA loan sale gains, and vii) bank-owned life insurance income.

The primary reason for the increase in core noninterest income in 2017 was the acquisition of Carolina Bank, as well as income derived from the Company's SBA consulting fees and SBA loan sale gains, which began in the second and third quarters of 2016.

Fees from presold mortgage loans increased to $1.8 million for the third quarter of 2017 from $0.7 million in the third quarter of 2016. For the first nine months of 2017, fees from presold mortgage loans increased to $4.1 million from the $1.5 million recorded in the comparable period of 2016. The increases were primarily due to the acquisition of Carolina Bank in March 2017, which had a significant mortgage loan operation.

Commissions from sales of insurance and financial products amounted to $1.4 million in the third quarter of 2017 compared to $1.0 million in the third quarter of 2016. The increase was primarily due to the acquisition of an insurance agency during the third quarter of 2017 – see additional discussion below.

In the three and nine months ended September 30, 2017, the Company recorded no indemnification asset expense compared to $5.7 million and $10.3 million in indemnification asset expense in the three and nine months ended September 30, 2016, respectively. In 2016, indemnification asset expense arose from loss-share agreements with the FDIC associated with two failed banked acquisitions. The loss-share agreements were terminated in September 2016, and thus all indemnification asset income/expense ceased at that time.

Other gains and losses for the 2017 periods presented represent the net effects of miscellaneous gains and losses that are non-routine in nature. In the third quarter of 2016, the Company recorded a net gain of $1.4 million as a result of a branch exchange transaction.

Noninterest Expenses

Noninterest expenses amounted to $34.4 million in the third quarter of 2017 compared to $27.7 million recorded in the third quarter of 2016. Noninterest expenses for the nine months ended September 30, 2017 amounted to $101.5 million compared to $78.6 million in 2016. The majority of the increase in noninterest expenses in 2017 relates to the Company's acquisition of Carolina Bank.

Salaries expense increased to $16.6 million in the third quarter of 2017 from the $13.4 million recorded in the third quarter of 2016. Salaries expense for the first nine months of 2017 amounted to $46.8 million compared to $37.5 million in 2016. The primary reason for the increase in salaries expense in 2017 was the addition of personnel acquired in the Carolina Bank acquisition. Also impacting salaries expense is the continued growth of the Company's SBA consulting firm and SBA lending division.

Employee benefits expense was $3.4 million in the third quarter of 2017 compared to $2.6 million in the third quarter of 2016. For the first nine months of 2017, employee benefits expense amounted to $10.7 million compared to $7.9 million in 2016. This increase in 2017 was primarily due to the acquisition and growth initiatives discussed above.

Merger and acquisition expenses amounted to $1.3 million and $0.6 million for the three months ended September 30, 2017 and 2016, respectively. For the nine months ended September 30, 2017 and 2016, merger and acquisition expenses amounted to $4.8 million and $1.3 million, respectively. Merger and acquisition expenses represent transaction related costs associated primarily with the acquisitions of Carolina Bank and Asheville Savings Bank.

The total noninterest expenses in the third quarter of 2017 were $34.4 million compared to the $35.1 million recorded in the second quarter of 2017. As discussed below, on August 4, 2017, the Company completed the system data conversion of the Carolina Bank customer accounts, which resulted in cost efficiencies realized in the second half of the quarter.

Balance Sheet and Capital

Total assets at September 30, 2017 amounted to $4.6 billion, a 29.8% increase from a year earlier. Total loans at September 30, 2017 amounted to $3.4 billion, a 29.4% increase from a year earlier, and total deposits amounted to $3.7 billion at September 30, 2017, a 25.4% increase from a year earlier.

In addition to the growth realized from the acquisition of Carolina Bank in March 2017, the Company has experienced strong organic loan and deposit growth during 2017. For the first nine months of 2017, organic loan growth (i.e. excluding loan balances assumed from Carolina Bank) amounted to $221.7 million, or 10.9% annualized. For the first nine months of 2017, organic deposit growth amounted to $118.5 million, or 5.4% annualized. The strong growth was a result of ongoing internal initiatives to drive loan and deposit growth, including the Company's recent expansion into higher growth markets. The loan growth noted above has been driven by the recently-entered North Carolina markets of Charlotte, Raleigh, and the Triad.

The Company remains well-capitalized by all regulatory standards, with an estimated Total Risk-Based Capital Ratio at September 30, 2017 of 12.48%, a decline from 13.49% at September 30, 2016, but still in excess of the 10.00% minimum to be considered well-capitalized. The Company's tangible common equity to tangible assets ratio was 7.95% at September 30, 2017, a decrease of eight basis points from a year earlier. The decreases in the capital ratios are primarily due to the acquisition of Carolina Bank.

Comments of the CEO and Other Business Matters

Richard H. Moore, CEO of First Bancorp, commented on today's report, "I am pleased to report another quarter of strong earnings and growth. We continue to see good results from our strategic initiatives. Upon the closing of the acquisition of Asheville Savings Bank on October 1, 2017, First Bank's total assets exceeded $5 billion with over 100 branches and further strengthened our position as the leading community bank in the Carolinas." Mr. Moore continued, "We welcome our new associates, shareholders, and customers of Asheville Savings Bank, and thank you for the privilege to serve you."

The following is a list of business development and other miscellaneous matters affecting the Company:

  • On August 4, 2017, the Company converted the data processing systems of Carolina Bank to First Bank, and the former Carolina Bank branches now fully operate under the name "First Bank." As part of this conversion, the Company consolidated four branches into two branches in Winston-Salem and consolidated two branches into one branch in Asheboro.
  • On September 1, 2017, the Company completed the acquisition of Bear Insurance Service, an insurance agency headquartered in Albemarle, North Carolina, with four locations in Stanly, Cabarrus, and Montgomery counties. This acquisition provided the Company the opportunity to enhance its insurance product offerings, as well as complementing its insurance agency operations in these markets and the surrounding areas. In 2016, Bear Insurance Service recorded approximately $4 million in annual insurance commissions.
  • On September 15, 2017, the Company announced a quarterly cash dividend of $0.08 cents per share payable on October 25, 2017 to shareholders of record on September 30, 2017. This is the same dividend rate as the Company declared in the third quarter of 2016.
  • On October 1, 2017, the Company acquired ASB Bancorp, Inc., the parent company of Asheville Savings Bank, headquartered in Asheville, North Carolina, which operated through 13 branches in the Asheville area. As of the acquisition date, Asheville Savings Bank had total assets of $798 million, including $617 million in loans and $679 million in deposits. In connection with the acquisition, the Company paid a total of $17.9 million in cash and issued 4.9 million shares of First Bancorp common stock to the shareholders of ASB Bancorp, Inc. The conversion of Asheville Savings Bank's computer systems to First Bank's systems is scheduled to occur in March 2018. Until that time, the acquired branches will continue to operate under the name "Asheville Savings Bank."

* * *

First Bancorp is a bank holding company headquartered in Southern Pines, North Carolina, with total assets of approximately $5.4 billion. Its principal activity is the ownership and operation of First Bank, a state-chartered community bank that operates 104 branches in North Carolina and South Carolina. First Bank also operates three mortgage loan production offices in the central region of North Carolina. First Bank 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 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 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 the press release by wire services, internet services or other media.

First Bancorp and Subsidiaries

Financial Summary – Page 1





Three Months Ended

September 30,

Percent

($ in thousands except per share data – unaudited)

2017


2016

Change






INCOME STATEMENT










Interest income





Interest and fees on loans

$ 41,549


29,919


Interest on investment securities

2,403


2,123


Other interest income

1,059


213


Total interest income

45,011


32,255

39.5%

Interest expense





Interest on deposits

1,910


1,254


Interest on borrowings

1,462


647


Total interest expense

3,372


1,901

77.4%

Net interest income

41,639


30,354

37.2%

Provision (reversal) for loan losses


n/m

Net interest income after provision for loan losses

41,639


30,354

37.2%

Noninterest income





Service charges on deposit accounts

2,945


2,710


Other service charges, commissions, and fees

3,468


2,996


Fees from presold mortgage loans

1,842


710


Commissions from sales of insurance and financial products

1,426


969


SBA consulting fees

864


1,178


SBA loan sale gains

1,692


694


Bank-owned life insurance income

579


514


Foreclosed property gains (losses), net

(216)


(266)


FDIC indemnification asset expense, net


(5,711)


Securities gains (losses), net



Other gains (losses), net

(238)


1,363


Total noninterest income

12,362


5,157

139.7%

Noninterest expenses





Salaries expense

16,550


13,430


Employee benefit expense

3,375


2,608


Occupancy and equipment related expense

3,509


2,909


Merger and acquisition expenses

1,329


600


Intangibles amortization expense

902


387


Other operating expenses

8,719


7,784


Total noninterest expenses

34,384


27,718

24.0%

Income before income taxes

19,617


7,793

151.7%

Income tax expense

6,531


3,115

109.7%

Net income

13,086


4,678

179.7%

Preferred stock dividends


(58)







Net income available to common shareholders

$ 13,086


4,620

183.2%











Earnings per common share – basic

$ 0.53


0.23

130.4%

Earnings per common share – diluted

0.53


0.23

130.4%






ADDITIONAL INCOME STATEMENT INFORMATION





Net interest income, as reported

$ 41,639


30,354


Tax-equivalent adjustment (1)

702


534


Net interest income, tax-equivalent

$ 42,341


30,888

37.1%










(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 37% tax rate and is reduced by the related nondeductible portion of interest expense.

n/m – not meaningful

First Bancorp and Subsidiaries

Financial Summary – Page 2





Nine Months Ended

September 30,

Percent

($ in thousands except per share data – unaudited)

2017


2016

Change






INCOME STATEMENT










Interest income





Interest and fees on loans

$ 114,908


90,301


Interest on investment securities

7,099


6,784


Other interest income

2,299


612


Total interest income

124,306


97,697

27.2%

Interest expense





Interest on deposits

5,044


3,860


Interest on borrowings

3,411


1,750


Total interest expense

8,455


5,610

50.7%

Net interest income

115,851


92,087

25.8%

Provision (reversal) for loan losses

723


(23)

n/m

Net interest income after provision for loan losses

115,128


92,110

25.0%

Noninterest income





Service charges on deposit accounts

8,525


7,960


Other service charges, commissions, and fees

10,195


8,869


Fees from presold mortgage loans

4,121


1,491


Commissions from sales of insurance and financial products

3,304


2,844


SBA consulting fees

3,174


1,898


SBA loan sale gains

3,241


694


Bank-owned life insurance income

1,667


1,526


Foreclosed property gains (losses), net

(439)


(189)


FDIC indemnification asset expense, net


(10,255)


Securities gains (losses), net

(235)


3


Other gains (losses), net

493


1,237


Total noninterest income

34,046


16,078

111.8%

Noninterest expenses





Salaries expense

46,799


37,465


Employee benefit expense

10,709


7,892


Occupancy and equipment related expense

10,258


8,484


Merger and acquisition expenses

4,824


1,286


Intangibles amortization expense

2,509


834


Other operating expenses

26,441


22,677


Total noninterest expenses

101,540


78,638

29.1%

Income before income taxes

47,634


29,550

61.2%

Income tax expense

15,839


10,396

52.4%

Net income

31,795


19,154

66.0%

Preferred stock dividends


(175)







Net income available to common shareholders

$ 31,795


18,979

67.5%











Earnings per common share – basic

$ 1.34


0.95

41.1%

Earnings per common share – diluted

1.33


0.93

43.0%






ADDITIONAL INCOME STATEMENT INFORMATION





Net interest income, as reported

$ 115,851


92,087


Tax-equivalent adjustment (1)

1,979


1,510


Net interest income, tax-equivalent

$ 117,830


93,597

25.9%










(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 37% tax rate and is reduced by the related nondeductible portion of interest expense

n/m - not meaningful

First Bancorp and Subsidiaries

Financial Summary – Page 3



Three Months Ended

September 30,


Nine Months Ended

September 30,

PERFORMANCE RATIOS (annualized)

2017

2016


2017

2016

Return on average assets (1)

1.15%

0.53%


1.00%

0.75%

Return on average common equity (2)

9.98%

5.13%


8.90%

7.23%

Net interest margin – tax-equivalent (3)

4.16%

3.93%


4.11%

4.07%

Net charge-offs (recoveries) to average loans

-0.07%

0.06%


0.00%

0.15%







COMMON SHARE DATA






Cash dividends declared – common

$ 0.08

0.08


$ 0.24

0.24

Stated book value – common

20.73

17.78


20.73

17.78

Tangible book value – common

14.25

13.80


14.25

13.80

Common shares outstanding at end of period

24,723,929

20,119,411


24,723,929

20,119,411

Weighted average shares outstanding – basic

24,607,516

20,007,518


23,728,262

19,904,226

Weighted average shares outstanding – diluted

24,695,295

20,785,689


23,827,011

20,697,125







CAPITAL RATIOS






Tangible common equity to tangible assets

7.95%

8.03%


7.95%

8.03%

Common equity tier I capital ratio - estimated

10.33%

10.67%


10.33%

10.67%

Tier I leverage ratio

9.69%

10.22%


9.69%

10.22%

Tier I risk-based capital ratio - estimated

11.78%

12.57%


11.78%

12.57%

Total risk-based capital ratio - estimated

12.48%

13.49%


12.48%

13.49%







AVERAGE BALANCES ($ in thousands)






Total assets

$ 4,514,409

3,443,737


$ 4,269,533

3,383,253

Loans

3,404,862

2,635,707


3,211,844

2,576,605

Earning assets

4,040,257

3,127,219


3,836,125

3,073,651

Deposits

3,632,319

2,823,255


3,465,347

2,801,517

Interest-bearing liabilities

2,958,134

2,319,008


2,827,764

2,306,226

Shareholders' equity

520,432

365,753


477,754

357,941








(1)

Calculated by dividing annualized net income available to common shareholders by average assets.

(2)

Calculated by dividing annualized net income available to common shareholders by average common equity.

(3)

See footnote 1 on page 1 of Financial Summary for discussion of tax-equivalent adjustments.



TREND INFORMATION

($ in thousands except per share data)

For the Three Months Ended

INCOME STATEMENT

Sept. 30,
2017

June 30,
2017

Mar. 31,
2017

Dec. 31,
2016

Sept. 30,
2016









Net interest income – tax-equivalent (1)

$ 42,341

40,609

34,881

31,837

30,888


Taxable equivalent adjustment (1)

702

693

585

544

534


Net interest income

41,639

39,916

34,296

31,293

30,354


Provision for loan losses

723


Noninterest income

12,362

11,875

9,809

9,473

5,157


Noninterest expense

34,384

35,084

32,072

28,183

27,718


Income before income taxes

19,617

16,707

11,310

12,583

7,793


Income tax expense

6,531

5,553

3,755

4,228

3,115


Net income

13,086

11,154

7,555

8,355

4,678


Preferred stock dividends

(58)


Net income available to common shareholders

13,086

11,154

7,555

8,355

4,620









Earnings per common share – basic

0.53

0.45

0.34

0.41

0.23


Earnings per common share – diluted

0.53

0.45

0.34

0.40

0.23









(1) See footnote 1 on page 1 of Financial Summary for discussion of tax-equivalent adjustments.


First Bancorp and Subsidiaries

Financial Summary – Page 4

CONSOLIDATED BALANCE SHEETS

($ in thousands - unaudited)

At Sept. 30,

2017


At June 30,

2017


At Dec. 31,

2016


At Sept. 30,

2016


One
Year

Change

Assets










Cash and due from banks

$ 82,758


80,234


71,645


64,145


29.0%

Interest bearing deposits with banks

326,089


337,326


234,348


217,188


50.1%

Total cash and cash equivalents

408,847


417,560


305,993


281,333


45.3%











Investment securities

322,080


335,362


329,042


334,964


(3.8%)

Presold mortgages

17,426


13,071


2,116


4,094


325.6%











Total loans

3,429,755


3,375,976


2,710,712


2,651,459


29.4%

Allowance for loan losses

(24,593)


(24,025)


(23,781)


(24,575)


(0.1%)

Net loans

3,405,162


3,351,951


2,686,931


2,626,884


29.6%











Premises and equipment

95,762


96,605


75,351


76,731


24.8%

Intangible assets

160,301


151,256


79,475


79,995


100.4%

Foreclosed real estate

9,356


11,196


9,532


10,103


(7.4%)

Bank-owned life insurance

88,081


87,501


74,138


73,613


19.7%

Other assets

83,822


64,118


52,284


49,530


69.2%

Total assets

$ 4,590,837


4,528,620


3,614,862


3,537,247


29.8%





















Liabilities










Deposits:










Non-interest bearing checking accounts

$ 1,016,947


990,004


756,003


749,256


35.7%

Interest bearing checking accounts

683,113


728,973


635,431


593,065


15.2%

Money market accounts

793,919


781,086


683,680


658,166


20.6%

Savings accounts

396,192


411,814


209,074


207,494


90.9%

Brokered deposits

215,615


167,669


136,466


147,406


46.3%

Internet time deposits

7,995


9,779




n/m

Other time deposits > $100,000

296,006


304,716


287,939


306,041


(3.3%)

Other time deposits

241,454


250,289


238,760


249,412


(3.2%)

Total deposits

3,651,241


3,644,330


2,947,353


2,910,840


25.4%











Borrowings

397,215


355,405


271,394


236,394


68.0%

Other liabilities

29,880


28,234


28,014


25,065


19.2%

Total liabilities

4,078,336


4,027,969


3,246,761


3,172,299


28.6%











Shareholders' equity










Preferred stock




7,287


n/m

Common stock

263,493


262,901


147,287


139,979


88.2%

Retained earnings

251,790


240,682


225,921


219,233


14.9%

Stock in rabbi trust assumed in acquisition

(3,571)


(4,257)




n/m

Rabbi trust obligation

3,571


4,257




n/m

Accumulated other comprehensive loss

(2,782)


(2,932)


(5,107)


(1,551)


79.4%

Total shareholders' equity

512,501


500,651


368,101


364,948


40.4%

Total liabilities and shareholders' equity

$ 4,590,837


4,528,620


3,614,862


3,537,247


29.8%





















n/m = not meaningful



First Bancorp and Subsidiaries

Financial Summary - Page 5


For the Three Months Ended

YIELD INFORMATION

Sept. 30,
2017

June 30,
2017

Mar. 31,
2017

Dec. 31,
2016

Sept. 30,
2016









Yield on loans

4.84%

4.78%

4.71%

4.60%

4.52%


Yield on securities – tax-equivalent (1)

3.73%

3.55%

3.41%

3.09%

3.05%


Yield on other earning assets

1.38%

0.96%

0.86%

0.53%

0.58%


Yield on all interest earning assets

4.49%

4.38%

4.32%

4.19%

4.17%









Rate on interest bearing deposits

0.29%

0.26%

0.24%

0.24%

0.24%


Rate on other interest bearing liabilities

1.75%

1.54%

1.28%

1.15%

1.13%


Rate on all interest bearing liabilities

0.45%

0.40%

0.34%

0.33%

0.33%


Total cost of funds

0.34%

0.30%

0.26%

0.25%

0.25%









Net interest margin – tax-equivalent (2)

4.16%

4.08%

4.07%

3.94%

3.93%


Average prime rate

4.25%

4.04%

3.79%

3.55%

3.50%










(1)

See footnote 1 on page 1 of Financial Summary for discussion of tax-equivalent adjustments.

(2)

Calculated by dividing annualized tax-equivalent net interest income by average earning assets for the period. See footnote 1 on page 1 of Financial Summary for discussion of tax-equivalent adjustments.


For the Three Months Ended

NET INTEREST INCOME PURCHASE
ACCOUNTING ADJUSTMENTS

($ in thousands)

Sept. 30,
2017


June 30,
2017


Mar. 31,
2017


Dec. 31,
2016


Sept. 30,
2016













Interest income – increased by accretion of loan
discount

$ 1,745


1,968


1,360


898


822


Interest expense – reduced by premium
amortization of deposits

85


103


57


38


38


Interest expense – increased by discount
accretion of borrowings

(43)


(29)


(9)




Impact on net interest income

$ 1,787


2,042


1,408


936


860





First Bancorp and Subsidiaries

Financial Summary – Page 6












ASSET QUALITY DATA ($ in thousands)

Sept. 30,
2017


June 30,
2017


Mar. 31,
2017


Dec. 31,
2016


Sept. 30,
2016













Nonperforming assets











Nonaccrual loans

$ 23,350


22,795


25,684


27,468


32,796


Troubled debt restructurings - accruing

20,330


21,019


21,559


22,138


27,273


Accruing loans > 90 days past due

-


-


-


-


-


Total nonperforming loans

43,680


43,814


47,243


49,606


60,069


Foreclosed real estate

9,356


11,196


12,789


9,532


10,103


Total nonperforming assets

$ 53,036


55,010


60,032


59,138


70,172


Purchased credit impaired loans not included
above (1)

$ 15,034


16,846


19,167


-


-


Asset Quality Ratios











Net quarterly charge-offs to average loans -
annualized

-0.07%


-0.06%


0.13%


0.12%


0.06%


Nonperforming loans to total loans

1.27%


1.30%


1.44%


1.83%


2.27%


Nonperforming assets to total assets

1.16%


1.21%


1.35%


1.64%


1.98%


Allowance for loan losses to total loans

0.72%


0.71%


0.72%


0.88%


0.93%




(1)

In the March 3, 2017 acquisition of Carolina Bank Holdings, Inc., the Company acquired $19.3 million in purchased credit impaired loans in accordance with ASC 310-30 accounting guidance. These loans are excluded from the nonperforming loan amounts.

First Bancorp and Subsidiaries

Financial Summary - Page 7




For the Three Months Ended

NET INTEREST MARGIN, EXCLUDING
LOAN DISCOUNT ACCRETION –
RECONCILIATION

($ in thousands)

Sept. 30,
2017


June 30,
2017


Mar. 31,
2017


Dec. 31,
2016


Sept. 30,
2016













Net interest income, as reported

$ 41,639


39,916


34,296


31,293


30,354


Tax-equivalent adjustment

702


693


585


544


534


Net interest income, tax-equivalent (A)

$ 42,341


40,609


34,881


31,837


30,888


Average earning assets (B)

$ 4,040,257


3,989,593


3,478,525


3,214,719


3,127,219


Tax-equivalent net interest
margin, annualized – as reported – (A)/(B)

4.16%


4.08%


4.07%


3.94%


3.93%













Net interest income, tax-equivalent

$ 42,341


40,609


34,881


31,837


30,888


Loan discount accretion

1,745


1,968


1,360


898


822


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

$ 40,596


38,641


33,521


30,939


30,066


Average earnings assets (B)

$ 4,040,257


3,989,593


3,478,525


3,214,719


3,127,219


Tax-equivalent net interest margin, excluding
impact of loan discount accretion,
annualized – (A) / (B)

3.99%


3.88%


3.91%


3.83%


3.82%




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 paragraph. Loan discount accretion is a non-cash interest income adjustment related to the Company's acquisition of loans and represents the portion of the fair value discount that was initially recorded on the acquired loans that is being recognized into income over the lives of the loans. At September 30, 2017, the Company had a remaining loan discount balance of $16.9 million compared to $13.2 million at September 30, 2016. For the related loans that perform and pay-down over time, the loan discount will also be reduced, with a corresponding increase to interest income. Therefore management of the Company believes it is useful to also present this ratio to reflect the Company's net interest margin excluding this non-cash, temporary loan discount accretion adjustment to aid investors in comparing financial results between periods. The Company cautions that non-GAAP financial measures should be considered in addition to, but not as a substitute for, the Company's reported GAAP results.

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SOURCE First Bancorp