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| 8-K - 8-K - FIRST BANCORP /NC/ | firstbancorpform8-kq22.htm |
News Release
For Immediate Release: | For More Information, Contact: | ||
July 23, 2020 | Elaine Pozarycki | ||
919-834-3090 | |||
First Bancorp Reports Second Quarter Results
SOUTHERN PINES, N.C. - First Bancorp (NASDAQ - FBNC), the parent company of First Bank, announced today net income of $16.4 million, or $0.56 per diluted common share, for the three months ended June 30, 2020 compared to $23.9 million, or $0.80 per diluted common share, recorded in the second quarter of 2019.
For the six months ended June 30, 2020, the Company recorded net income of $34.5 million, or $1.18 per diluted common share compared to $46.1 million, or $1.55 per diluted common share, for the six months ended June 30, 2019.
The decrease in earnings for both periods in 2020 was primarily due to increases in the provisions for loan losses recorded, which were largely related to estimated losses arising from the economic impact of COVID-19. For the three months ended June 30, 2020, the Company recorded a provision for loan losses of $19.3 million compared to a negative provision of $0.3 million in the second quarter of 2019. For the six months ended June 30, 2020, the Company recorded a provision for loan losses of $24.9 million compared to $0.2 million for the first six months of 2019. The impact of the higher provisions for loan losses were partially offset by strong mortgage loan fees, higher SBA consulting fees and significant gains realized from the sales of securities, as described further below.
The Company experienced high balance sheet growth during the second quarter of 2020, with loans growing by $217 million, driven by $245 million in loans originated in the SBA’s Paycheck Protection Program ("PPP"), and deposits increasing by $786 million. Loan growth for the twelve months ended June 30, 2020 was 9.9%, while deposit balances increased 20.4% over that same period.
Net Interest Income and Net Interest Margin
Net interest income for the second quarter of 2020 was $52.6 million, a 3.3% decrease from the $54.4 million recorded in the second quarter of 2019. Net interest income for the first six months of 2020 was $107.4 million, a 0.4% decrease from the $107.8 million recorded in the comparable period of 2019. The decreases in net interest income were primarily due to lower net interest margins.
The Company’s net interest margin (a non-GAAP measure calculated by dividing tax-equivalent net interest income by average earning assets) for the second quarter of 2020 was 3.49%, which was 57 basis points lower than the 4.06% realized in the second quarter of 2019. For the six months ended June 30, 2020, the Company's net interest margin was 3.71% compared to 4.06% for the same period in 2019. The lower margins were primarily due to the impact of lower interest rates.
Since August 2019, the Federal Reserve Board has decreased interest rates by 225 basis points, which has resulted in the Company's interest-earning asset yields declining by more than its cost of funds. For the six months
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ended June 30, 2020, the Company's interest-earning asset yield declined by 55 basis points compared to a 22 basis point decline in its cost of funds. In comparing the second quarter of 2020 to the first quarter of 2020, interest-earning asset yields declined by 66 basis points while the cost of funds only declined by 21 basis points, which resulted in the Company's net interest margin decreasing by 47 basis points, from 3.96% in the first quarter of 2020 to 3.49% in the second quarter of 2020. The Company's net interest margin was also impacted by high levels of cash that resulted from the strong deposit growth during the quarter. At June 30, 2020, the Company has interest-bearing cash balances of $584.8 million, a 103.9% increase from a year earlier.
The Company's PPP loans did not significantly impact the net interest margin, with the Company amortizing as interest income $1.3 million of the origination fees, which when added to the interest earned from the stated note rate of 1%, resulted in a 3.97% yield on those loans for the second quarter of 2020. The Company has $8.8 million in remaining deferred PPP fees that will be recognized over the lives of the loans, with accelerated amortization expected to result from the loan forgiveness process.
Provision for Loan Losses and Asset Quality
As permitted by the Coronavirus Aid, Relief, and Economic Security (CARES) Act enacted in March 2020, the Company elected to defer the implementation of the Current Expected Credit Loss (CECL) methodology. Accordingly, the Company's allowance for loan losses at each period end is based on the Company's estimate of probable losses that have been incurred at the end of each reporting period, including losses arising from the impact of COVID-19, in accordance with the pre-CECL methodology for determining loan losses.
The Company recorded a provision for loan losses of $19.3 million in the second quarter of 2020 compared to a negative provision for loan losses (reduction of the allowance for loan losses) of $0.3 million in the second quarter of 2019. For the six months ended June 30, 2020 and 2019, the Company recorded provisions for loan losses of $24.9 million and $0.2 million, respectively. The increases in 2020 are primarily related to estimated probable losses arising from the economic impact of COVID-19. Since the onset of the pandemic in March 2020, the Company has worked with many of its borrowers, including the option of loan payment deferrals, with total loans on deferral status amounting to $774 million at June 30, 2020, or 16% of the loan portfolio. See further detail regarding loan deferrals in the accompanying financial schedules.
Total net charge-offs for the second quarter of 2020 amounted to $1.5 million, or 0.12% of average loans on an annualized basis, compared to no net charge-offs in the second quarter of 2019. For the six months ended June 30, 2020 and 2019, total net charge-offs were $3.9 million and $0.4 million, respectively, which on an annualized basis amounted to 0.17% and 0.02%, respectively.
Total nonperforming assets amounted to $47.8 million at June 30, 2020, or 0.69% of total assets, compared to $34.3 million a year earlier, or 0.57% of total assets.
Noninterest Income
Total noninterest income was $26.2 million and $15.6 million for the three months ended June 30, 2020 and 2019, respectively. For the six months ended June 30, 2020 and 2019, total noninterest income was $39.9 million and $29.7 million, respectively.
Service charges on deposit accounts amounted to $2.3 million for the second quarter of 2020 compared to $3.2 million in the second quarter of 2019. For the first six months of 2020 and 2019, service charges on deposit accounts amounted to $5.6 million and $6.2 million, respectively. The decreases are primarily due to fewer instances of overdraft fees.
Fees from presold mortgages amounted to $3.0 million for the second quarter of 2020 compared to $0.9 million in the second quarter of 2019. For the first six months of 2020 and 2019, fees from presold mortgages amounted to
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$4.9 million and $1.4 million, respectively. The increases in 2020 are primarily due to higher mortgage loan origination volume arising from historically low mortgage loan interest rates.
For the second quarters of 2020 and 2019, SBA consulting fees amounted to $3.7 million and $0.9 million, respectively. For the first six months of 2020 and 2019, SBA consulting fees amounted to $4.8 million and $2.2 million, respectively. The increases in 2020 are due to fees earned in the second quarter by the Company's SBA subsidiary, SBA Complete, related to assisting its third-party client banks with the PPP. SBA Complete recorded approximately $3.0 million in PPP fees in the second quarter of 2020 and also recorded $1.6 million in deferred revenue that will be recorded as income upon the forgiveness portion of the PPP.
SBA loan sale gains amounted to $2.0 million and $2.6 million for the three and six months ended June 30, 2020, respectively, compared to $3.1 million and $5.1 million for the three and six months ended June 30, 2019, respectively. Origination of SBA loans have generally declined due to the economic impact of COVID-19.
During the second quarter of 2020, the Company sold approximately $220 million in mortgage-backed and commercial mortgage-backed securities at a gain of $8.0 million. The securities sold were believed to be favorably impacted by historically low interest rates and Federal Reserve stimulus measures.
Noninterest Expenses
Noninterest expenses amounted to $38.9 million in the second quarter of 2020 compared to $40.1 million recorded in the second quarter of 2019, a decrease of 3.0%. For the six months ended June 30, 2020, noninterest expenses amounted to $79.0 million, an increase of 0.2% from the $78.9 million recorded in the comparable period of 2019. Noninterest expenses in the second quarter of 2020 were impacted by the generally lower economic activity resulting from the pandemic.
Income Taxes
The Company’s effective tax rate was 20.7% and 20.5% for the three and six months ended June 30, 2020, respectively, compared to 21.2% and 21.0% for the three and six months ended June 30, 2019, respectively.
Balance Sheet and Capital
Total assets at June 30, 2020 amounted to $6.9 billion, a 14.6% increase from a year earlier.
Loan growth for the six months ended June 30, 2020 amounted to $316.6 million, including the origination of $244.9 million in PPP loans. Loan growth for the first six months of 2020, excluding PPP loans, was $71.7 million, or 3.2% annualized. Deposit growth for the first six months of 2020 amounted to $899.8 million and was primarily concentrated in transaction based accounts. In addition to deposits arising from PPP loans, this high deposit growth is believed to be due to a combination of stimulus funds and changes in customer behaviors during the pandemic.
With the excess liquidity resulting from the high deposit growth, the Company reduced its level of borrowings by $290 million, or 72.1%, and its level of brokered deposits by $22 million, or 25.1%, at June 30, 2020 compared to March 31, 2020.
The Company remains well-capitalized by all regulatory standards, with an estimated Total Risk-Based Capital Ratio at June 30, 2020 of 15.04%, an increase from the 14.60% reported at June 30, 2019. The Company’s tangible common equity to tangible assets ratio was 9.32% at June 30, 2020, a decrease of 43 basis points from a year earlier.
Comments of the CEO and Other Business Matters
Richard H. Moore, CEO of First Bancorp, commented, “Our continued focus is providing excellent service for our customers during these challenging times and our team continues to do an outstanding job. I am especially
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proud of Forbes recent recognition of First Bank as the number one bank in North Carolina based on customer satisfaction." Mr. Moore also stated, "Our Company has a strong balance sheet and capital level that positions us well during these unprecedented times."
The following is additional discussion of business development and other miscellaneous matters affecting the Company during the second quarter of 2020:
• | On July 1, 2020, the Company reported that Forbes had recognized First Bank as one of America's best banks in its 2020 Best-in-State Banks list for the second year in a row. This year, First Bank was ranked the number one bank in North Carolina, based on an independent survey of more than 25,000 U.S. consumers regarding their overall satisfaction in five service areas. |
• | On June 12, 2020, the Company announced a quarterly cash dividend of $0.18 per share payable on July 24, 2020 to shareholders of record on June 30, 2020. This dividend rate represents a 50% increase over the dividend rate declared in the second quarter of 2019. |
• | During the second quarter of 2020, the Company repurchased 104,289 shares of its common stock valued at $2.4 million, at an average stock price of $23.32 per share. |
* * *
First Bancorp is a bank holding company headquartered in Southern Pines, North Carolina, with total assets of approximately $6.9 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.
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First Bancorp and Subsidiaries Financial Summary - Page 1 |
Three Months Ended June 30, | Percent | |||||||
($ in thousands except per share data - unaudited) | 2020 | 2019 | Change | |||||
INCOME STATEMENT | ||||||||
Interest income | ||||||||
Interest and fees on loans | $ | 51,964 | 55,652 | |||||
Interest on investment securities | 4,888 | 5,264 | ||||||
Other interest income | 788 | 2,106 | ||||||
Total interest income | 57,640 | 63,022 | (8.5)% | |||||
Interest expense | ||||||||
Interest on deposits | 4,074 | 6,324 | ||||||
Interest on borrowings | 942 | 2,289 | ||||||
Total interest expense | 5,016 | 8,613 | (41.8)% | |||||
Net interest income | 52,624 | 54,409 | (3.3)% | |||||
Total provision for loan losses | 19,298 | (308 | ) | n/m | ||||
Net interest income after provision for loan losses | 33,326 | 54,717 | (39.1)% | |||||
Noninterest income | ||||||||
Service charges on deposit accounts | 2,289 | 3,210 | ||||||
Other service charges, commissions, and fees | 4,624 | 5,050 | ||||||
Fees from presold mortgage loans | 3,020 | 857 | ||||||
Commissions from sales of insurance and financial products | 2,090 | 2,204 | ||||||
SBA consulting fees | 3,739 | 921 | ||||||
SBA loan sale gains | 1,965 | 3,069 | ||||||
Bank-owned life insurance income | 629 | 631 | ||||||
Securities gains (losses), net | 8,024 | — | ||||||
Other gains (losses), net | (187 | ) | (308 | ) | ||||
Total noninterest income | 26,193 | 15,634 | 67.5% | |||||
Noninterest expenses | ||||||||
Salaries expense | 20,606 | 19,732 | ||||||
Employee benefit expense | 3,847 | 4,418 | ||||||
Occupancy and equipment related expense | 3,744 | 3,912 | ||||||
Merger and acquisition expenses | — | 103 | ||||||
Intangibles amortization expense | 978 | 1,242 | ||||||
Foreclosed property losses (gains), net | 35 | 381 | ||||||
Other operating expenses | 9,691 | 10,296 | ||||||
Total noninterest expenses | 38,901 | 40,084 | (3.0)% | |||||
Income before income taxes | 20,618 | 30,267 | (31.9)% | |||||
Income tax expense | 4,266 | 6,408 | (33.4)% | |||||
Net income | $ | 16,352 | 23,859 | (31.5)% | ||||
Earnings per common share - diluted | $ | 0.56 | 0.80 | (30.0)% | ||||
ADDITIONAL INCOME STATEMENT INFORMATION | ||||||||
Net interest income, as reported | $ | 52,624 | 54,409 | |||||
Tax-equivalent adjustment (1) | 330 | 423 | ||||||
Net interest income, tax-equivalent | $ | 52,954 | 54,832 | (3.4)% | ||||
(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. |
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First Bancorp and Subsidiaries Financial Summary - Page 2 | ||||
Six Months Ended June 30, | Percent | |||||||
($ in thousands except per share data - unaudited) | 2020 | 2019 | Change | |||||
INCOME STATEMENT | ||||||||
Interest income | ||||||||
Interest and fees on loans | $ | 107,261 | 109,612 | |||||
Interest on investment securities | 10,526 | 10,338 | ||||||
Other interest income | 1,886 | 4,807 | ||||||
Total interest income | 119,673 | 124,757 | (4.1)% | |||||
Interest expense | ||||||||
Interest on deposits | 9,847 | 11,901 | ||||||
Interest on borrowings | 2,443 | 5,086 | ||||||
Total interest expense | 12,290 | 16,987 | (27.7)% | |||||
Net interest income | 107,383 | 107,770 | (0.4)% | |||||
Total provision for loan losses | 24,888 | 192 | n/m | |||||
Net interest income after provision for loan losses | 82,495 | 107,578 | (23.3)% | |||||
Noninterest income | ||||||||
Service charges on deposit accounts | 5,626 | 6,155 | ||||||
Other service charges, commissions, and fees | 8,693 | 9,556 | ||||||
Fees from presold mortgage loans | 4,861 | 1,402 | ||||||
Commissions from sales of insurance and financial products | 4,158 | 4,233 | ||||||
SBA consulting fees | 4,766 | 2,184 | ||||||
SBA loan sale gains | 2,612 | 5,131 | ||||||
Bank-owned life insurance income | 1,271 | 1,277 | ||||||
Securities gains (losses), net | 8,024 | — | ||||||
Other gains (losses), net | (113 | ) | (226 | ) | ||||
Total noninterest income | 39,898 | 29,712 | 34.3% | |||||
Noninterest expenses | ||||||||
Salaries expense | 40,716 | 38,697 | ||||||
Employee benefit expense | 8,394 | 9,006 | ||||||
Occupancy and equipment related expense | 7,847 | 8,035 | ||||||
Merger and acquisition expenses | — | 213 | ||||||
Intangibles amortization expense | 2,033 | 2,574 | ||||||
Foreclosed property losses (gains), net | 194 | 626 | ||||||
Other operating expenses | 19,793 | 19,707 | ||||||
Total noninterest expenses | 78,977 | 78,858 | 0.2% | |||||
Income before income taxes | 43,416 | 58,432 | (25.7)% | |||||
Income tax expense | 8,884 | 12,288 | (27.7)% | |||||
Net income | $ | 34,532 | 46,144 | (25.2)% | ||||
Earnings per common share - diluted | $ | 1.18 | 1.55 | (23.9)% | ||||
ADDITIONAL INCOME STATEMENT INFORMATION | ||||||||
Net interest income, as reported | $ | 107,383 | 107,770 | |||||
Tax-equivalent adjustment (1) | 664 | 847 | ||||||
Net interest income, tax-equivalent | $ | 108,047 | 108,617 | (0.5)% | ||||
(1) | This amount reflects the tax benefit that the Company receives related to its tax-exempt loans and securities, which carry interest rates lower than similar taxable investments due to their tax-exempt status. This amount has been computed assuming a 23% tax rate and is reduced by the related nondeductible portion of interest expense. |
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First Bancorp and Subsidiaries Financial Summary - Page 3 |
Three Months Ended June 30, | Six Months Ended June 30, | ||||||||
PERFORMANCE RATIOS (annualized) | 2020 | 2019 | 2020 | 2019 | |||||
Return on average assets (1) | 0.98 | % | 1.60 | % | 1.08 | % | 1.56 | % | |
Return on average common equity (2) | 7.55 | % | 11.93 | % | 8.03 | % | 11.80 | % | |
Net interest margin - tax-equivalent (3) | 3.49 | % | 4.06 | % | 3.71 | % | 4.06 | % | |
Net charge-offs to average loans | 0.12 | % | 0.00 | % | 0.17 | % | 0.02 | % | |
COMMON SHARE DATA | |||||||||
Cash dividends declared - common | $ | 0.18 | 0.12 | 0.36 | 0.24 | ||||
Stated book value - common | 29.95 | 27.43 | 29.95 | 27.43 | |||||
Tangible book value - common | 21.36 | 18.89 | 21.36 | 18.89 | |||||
Common shares outstanding at end of period | 28,976,681 | 29,717,223 | 28,976,681 | 29,717,223 | |||||
Weighted average shares outstanding - diluted | 28,969,728 | 29,796,941 | 29,184,421 | 29,808,859 | |||||
CAPITAL RATIOS | |||||||||
Tangible common equity to tangible assets | 9.32 | % | 9.75 | % | 9.32 | % | 9.75 | % | |
Common equity tier I capital ratio - estimated | 13.02 | % | 12.94 | % | 13.02 | % | 12.94 | % | |
Tier I leverage ratio - estimated | 10.29 | % | 10.89 | % | 10.29 | % | 10.89 | % | |
Tier I risk-based capital ratio - estimated | 14.13 | % | 14.12 | % | 14.13 | % | 14.12 | % | |
Total risk-based capital ratio - estimated | 15.04 | % | 14.60 | % | 15.04 | % | 14.60 | % | |
AVERAGE BALANCES ($ in thousands) | |||||||||
Total assets | $ | 6,727,762 | 5,994,595 | 6,455,591 | 5,969,822 | ||||
Loans | 4,738,702 | 4,329,866 | 4,625,798 | 4,305,069 | |||||
Earning assets | 6,102,012 | 5,417,284 | 5,848,974 | 5,395,025 | |||||
Deposits | 5,502,356 | 4,810,029 | 5,226,331 | 4,757,130 | |||||
Interest-bearing liabilities | 3,885,903 | 3,716,092 | 3,812,685 | 3,744,903 | |||||
Shareholders’ equity | 871,495 | 802,131 | 865,124 | 788,595 | |||||
(1) Calculated by dividing annualized net income by average assets.
(2) Calculated by dividing annualized net income by average common equity.
(3) See note 1 on the first page of the Financial Summary for discussion of tax-equivalent adjustments.
_____________________________________________________________________________________________
TREND INFORMATION
($ in thousands except per share data) | For the Three Months Ended | ||||||||||
INCOME STATEMENT | June 30, 2020 | Mar. 31, 2020 | Dec. 31, 2019 | Sept. 30, 2019 | June 30, 2019 | ||||||
Net interest income - tax-equivalent (1) | $ | 52,954 | 55,093 | 55,038 | 54,191 | 54,832 | |||||
Taxable equivalent adjustment (1) | 330 | 334 | 382 | 413 | 423 | ||||||
Net interest income | 52,624 | 54,759 | 54,656 | 53,778 | 54,409 | ||||||
Provision (reversal) for loan losses | 19,298 | 5,590 | 3,176 | (1,105 | ) | (308 | ) | ||||
Noninterest income | 26,193 | 13,705 | 14,662 | 15,156 | 15,634 | ||||||
Noninterest expense | 38,901 | 40,076 | 39,891 | 38,446 | 40,084 | ||||||
Income before income taxes | 20,618 | 22,798 | 26,251 | 31,593 | 30,267 | ||||||
Income tax expense | 4,266 | 4,618 | 5,368 | 6,574 | 6,408 | ||||||
Net income | 16,352 | 18,180 | 20,883 | 25,019 | 23,859 | ||||||
Earnings per common share - diluted | 0.56 | 0.62 | 0.71 | 0.84 | 0.80 | ||||||
Cash dividends declared per share | 0.18 | 0.18 | 0.18 | 0.12 | 0.12 | ||||||
(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 June 30, 2020 | At Mar. 31, 2020 | At Dec. 31, 2019 | At June 30, 2019 | One Year Change | |||||||||||
Assets | |||||||||||||||
Cash and due from banks | $ | 94,684 | 93,666 | 64,519 | 52,679 | 79.7 | % | ||||||||
Interest-bearing deposits with banks | 584,830 | 282,683 | 166,783 | 286,781 | 103.9 | % | |||||||||
Total cash and cash equivalents | 679,514 | 376,349 | 231,302 | 339,460 | 100.2 | % | |||||||||
Investment securities | 879,756 | 867,773 | 889,877 | 771,021 | 14.1 | % | |||||||||
Presold mortgages | 31,015 | 14,861 | 19,712 | 6,222 | 398.5 | % | |||||||||
SBA loans held for sale | 3,382 | 18,449 | — | — | n/m | ||||||||||
Total loans | 4,770,063 | 4,552,708 | 4,453,466 | 4,339,497 | 9.9 | % | |||||||||
Allowance for loan losses | (42,342 | ) | (24,498 | ) | (21,398 | ) | (20,789 | ) | 103.7 | % | |||||
Net loans | 4,727,721 | 4,528,210 | 4,432,068 | 4,318,708 | 9.5 | % | |||||||||
Premises and equipment | 115,373 | 113,669 | 114,859 | 117,759 | (2.0 | )% | |||||||||
Operating right-of-use lease assets | 18,833 | 19,347 | 19,669 | 19,142 | (1.6 | )% | |||||||||
Intangible assets | 248,840 | 249,829 | 251,585 | 253,769 | (1.9 | )% | |||||||||
Foreclosed real estate | 2,987 | 3,487 | 3,873 | 5,107 | (41.5 | )% | |||||||||
Bank-owned life insurance | 105,712 | 105,083 | 104,441 | 103,154 | 2.5 | % | |||||||||
Other assets | 75,462 | 79,001 | 76,253 | 77,697 | (2.9 | )% | |||||||||
Total assets | $ | 6,888,595 | 6,376,058 | 6,143,639 | 6,012,039 | 14.6 | % | ||||||||
Liabilities | |||||||||||||||
Deposits: | |||||||||||||||
Noninterest-bearing checking accounts | $ | 2,041,778 | 1,580,849 | 1,515,977 | 1,441,064 | 41.7 | % | ||||||||
Interest-bearing checking accounts | 1,112,625 | 922,985 | 912,784 | 931,945 | 19.4 | % | |||||||||
Money market accounts | 1,353,053 | 1,224,414 | 1,173,107 | 1,104,052 | 22.6 | % | |||||||||
Savings accounts | 474,455 | 431,377 | 424,415 | 413,065 | 14.9 | % | |||||||||
Brokered deposits | 64,069 | 85,642 | 86,141 | 150,888 | (57.5 | )% | |||||||||
Internet time deposits | 698 | 698 | 698 | 1,445 | (51.7 | )% | |||||||||
Other time deposits > $100,000 | 545,370 | 553,422 | 563,108 | 538,401 | 1.3 | % | |||||||||
Other time deposits | 239,090 | 245,601 | 255,125 | 262,194 | (8.8 | )% | |||||||||
Total deposits | 5,831,138 | 5,044,988 | 4,931,355 | 4,843,054 | 20.4 | % | |||||||||
Borrowings | 112,199 | 402,185 | 300,671 | 301,140 | (62.7 | )% | |||||||||
Operating lease liabilities | 19,109 | 19,578 | 19,855 | 19,233 | (0.6 | )% | |||||||||
Other liabilities | 58,258 | 47,109 | 39,357 | 33,443 | 74.2 | % | |||||||||
Total liabilities | 6,020,704 | 5,513,860 | 5,291,238 | 5,196,870 | 15.9 | % | |||||||||
Shareholders’ equity | |||||||||||||||
Common stock | 408,699 | 410,236 | 429,514 | 432,533 | (5.5 | )% | |||||||||
Retained earnings | 441,846 | 430,709 | 417,764 | 380,748 | 16.0 | % | |||||||||
Stock in rabbi trust assumed in acquisition | (2,217 | ) | (2,602 | ) | (2,587 | ) | (3,625 | ) | (38.8 | )% | |||||
Rabbi trust obligation | 2,217 | 2,602 | 2,587 | 3,625 | (38.8 | )% | |||||||||
Accumulated other comprehensive income (loss) | 17,346 | 21,253 | 5,123 | 1,888 | 818.8 | % | |||||||||
Total shareholders’ equity | 867,891 | 862,198 | 852,401 | 815,169 | 6.5 | % | |||||||||
Total liabilities and shareholders’ equity | $ | 6,888,595 | 6,376,058 | 6,143,639 | 6,012,039 | 14.6 | % | ||||||||
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First Bancorp and Subsidiaries Financial Summary - Page 5 |
For the Three Months Ended | ||||||||||
YIELD INFORMATION | June 30, 2020 | Mar. 31, 2020 | Dec. 31, 2019 | Sept. 30, 2019 | June 30, 2019 | |||||
Yield on loans | 4.41 | % | 4.93 | % | 5.03 | % | 5.02 | % | 5.16 | % |
Yield on securities | 2.49 | % | 2.65 | % | 2.64 | % | 2.74 | % | 2.81 | % |
Yield on other earning assets | 0.55 | % | 1.95 | % | 1.91 | % | 2.42 | % | 2.51 | % |
Yield on all interest-earning assets | 3.80 | % | 4.46 | % | 4.49 | % | 4.55 | % | 4.67 | % |
Rate on interest bearing deposits | 0.46 | % | 0.68 | % | 0.76 | % | 0.77 | % | 0.75 | % |
Rate on other interest-bearing liabilities | 1.31 | % | 1.91 | % | 2.31 | % | 2.65 | % | 2.83 | % |
Rate on all interest-bearing liabilities | 0.52 | % | 0.78 | % | 0.89 | % | 0.93 | % | 0.93 | % |
Total cost of funds | 0.35 | % | 0.56 | % | 0.63 | % | 0.66 | % | 0.67 | % |
Net interest margin (1) | 3.47 | % | 3.94 | % | 3.90 | % | 3.92 | % | 4.03 | % |
Net interest margin - tax-equivalent (2) | 3.49 | % | 3.96 | % | 3.93 | % | 3.95 | % | 4.06 | % |
Average prime rate | 3.25 | % | 4.42 | % | 4.83 | % | 5.27 | % | 5.50 | % |
(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.
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For the Three Months Ended | |||||||||||||||
NET INTEREST INCOME PURCHASE ACCOUNTING ADJUSTMENTS ($ in thousands) | June 30, 2020 | Mar. 31, 2020 | Dec. 31, 2019 | Sept. 30, 2019 | June 30, 2019 | ||||||||||
Interest income - increased by accretion of loan discount on acquired loans | $ | 802 | 1,241 | 1,161 | 959 | 1,336 | |||||||||
Interest income - increased by accretion of loan discount on retained portions of SBA loans | 591 | 600 | 340 | 365 | 394 | ||||||||||
Interest expense - reduced by premium amortization of deposits | 26 | 31 | 38 | 44 | 50 | ||||||||||
Interest expense - increased by discount accretion of borrowings | (45 | ) | (45 | ) | (45 | ) | (46 | ) | (45 | ) | |||||
Impact on net interest income | $ | 1,374 | 1,827 | 1,494 | 1,322 | 1,735 | |||||||||
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First Bancorp and Subsidiaries Financial Summary - Page 6 |
ASSET QUALITY DATA ($ in thousands) | June 30, 2020 | Mar. 31, 2020 | Dec. 31, 2019 | Sept. 30, 2019 | June 30, 2019 | ||||||||||
Nonperforming assets | |||||||||||||||
Nonaccrual loans | $ | 34,922 | 25,066 | 24,866 | 19,720 | 17,375 | |||||||||
Troubled debt restructurings - accruing | 9,867 | 9,747 | 9,053 | 9,566 | 11,890 | ||||||||||
Accruing loans > 90 days past due | — | — | — | — | — | ||||||||||
Total nonperforming loans | 44,789 | 34,813 | 33,919 | 29,286 | 29,265 | ||||||||||
Foreclosed real estate | 2,987 | 3,487 | 3,873 | 4,589 | 5,107 | ||||||||||
Total nonperforming assets | $ | 47,776 | 38,300 | 37,792 | 33,875 | 34,372 | |||||||||
Purchased credit impaired loans not included above (1) | $ | 9,742 | 9,839 | 12,664 | 13,798 | 14,175 | |||||||||
Asset Quality Ratios | |||||||||||||||
Net quarterly charge-offs to average loans - annualized | 0.12 | % | 0.22 | % | 0.09 | % | 0.04 | % | 0.00 | % | |||||
Nonperforming loans to total loans | 0.94 | % | 0.76 | % | 0.76 | % | 0.67 | % | 0.67 | % | |||||
Nonperforming assets to total assets | 0.69 | % | 0.60 | % | 0.62 | % | 0.56 | % | 0.57 | % | |||||
Allowance for loan losses to total loans | 0.89 | % | 0.54 | % | 0.48 | % | 0.44 | % | 0.48 | % | |||||
(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.
COVID-19 Loan Deferral Information at June 30, 2020 | Deferrals | Total Loans | Percentage Deferred | ||||||
Construction Loans | $ | 38,658 | 648,590 | 6.0 | % | ||||
Farmland and Agriculture | 1,432 | 36,361 | 3.9 | % | |||||
Home equity loans | 2,511 | 318,618 | 0.8 | % | |||||
Residential first lien loans | 85,536 | 1,072,945 | 8.0 | % | |||||
Multifamily loans | 31,220 | 182,255 | 17.1 | % | |||||
Owner-Occupied Commercial Real Estate | 186,098 | 742,204 | 25.1 | % | |||||
Non-Owner-Occupied Commercial Real Estate | 369,112 | 999,679 | 36.9 | % | |||||
Commercial & Industrial Loans | 57,735 | 552,881 | 10.4 | % | |||||
Loans to Municipalities | — | 147,187 | — | % | |||||
Consumer Loans | 1,241 | 51,161 | 2.4 | % | |||||
Other Loans | 678 | 18,182 | 3.7 | % | |||||
$ | 774,221 | 4,770,063 | 16.2 | % | |||||
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First Bancorp and Subsidiaries Financial Summary - Page 7 |
For the Three Months Ended | |||||||||||||||
NET INTEREST MARGIN, EXCLUDING LOAN DISCOUNT ACCRETION - RECONCILIATION ($ in thousands) | June 30, 2020 | Mar. 31, 2020 | Dec. 31, 2019 | Sept. 30, 2019 | June 30, 2019 | ||||||||||
Net interest income, as reported | $ | 52,624 | 54,759 | 54,656 | 53,778 | 54,409 | |||||||||
Tax-equivalent adjustment | 330 | 334 | 382 | 413 | 423 | ||||||||||
Net interest income, tax-equivalent (A) | $ | 52,954 | 55,093 | 55,038 | 54,191 | 54,832 | |||||||||
Average earning assets (B) | $ | 6,102,012 | 5,595,734 | 5,560,099 | 5,440,014 | 5,417,284 | |||||||||
Tax-equivalent net interest margin, annualized - as reported - (A)/(B) | 3.49 | % | 3.96 | % | 3.93 | % | 3.95 | % | 4.06 | % | |||||
Net interest income, tax-equivalent | $ | 52,954 | 55,093 | 55,038 | 54,191 | 54,832 | |||||||||
Loan discount accretion | 1,393 | 1,841 | 1,501 | 1,324 | 1,730 | ||||||||||
Net interest income, tax-equivalent, excluding loan discount accretion (A) | $ | 51,561 | 53,252 | 53,537 | 52,867 | 53,102 | |||||||||
Average earnings assets (B) | $ | 6,102,012 | 5,595,734 | 5,560,099 | 5,440,014 | 5,417,284 | |||||||||
Tax-equivalent net interest margin, excluding impact of loan discount accretion, annualized - (A) / (B) | 3.40 | % | 3.83 | % | 3.82 | % | 3.86 | % | 3.93 | % | |||||
Note: The measure “tax-equivalent net interest margin, excluding impact of loan discount accretion” is a non-GAAP performance measure. Management of the Company believes that it is useful to calculate and present the Company’s net interest margin without the impact of loan discount accretion for the reasons explained in the remainder of this Note. Loan discount accretion is a non-cash interest income adjustment that is related to 1) the Company’s acquisition of loans and represents the portion of the fair value discount that was initially recorded on the acquired loans, and 2) the Company’s origination of SBA loans and the subsequent sale of the guaranteed portions of the loans that results in a discount being recorded on the retained portion of the loans. These discounts are recognized into income over the lives of the loans. At June 30, 2020, the Company had a remaining loan discount balance on acquired loans of $10.6 million compared to $14.8 million at June 30, 2019. At June 30, 2020, the Company had a remaining loan discount balance on SBA loans of $6.8 million compared to $6.9 million at June 30, 2019. 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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