First Bancorp Reports Second Quarter Results

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SOUTHERN PINES, N.C., July 30, 2014 /PRNewswire/ -- First Bancorp FBNC, the parent company of First Bank, announced today net income available to common shareholders of $6.4 million, or $0.32 per diluted common share, for the three months ended June 30, 2014, an increase of 19.7% compared to the $5.4 million, or $0.27 per diluted common share, recorded in the second quarter of 2013.  For the six months ended June 30, 2014, the Company recorded net income available to common shareholders of $11.9 million, or $0.59 per diluted common share, an increase of 44.5% compared to the $8.2 million, or $0.41 per diluted common share, for the six months ended June 30, 2013.  The higher earnings were primarily the result of lower provisions for loan losses.

Net Interest Income and Net Interest Margin

Net interest income for the second quarter of 2014 amounted to $33.8 million, a 5.0% decrease from the $35.6 million recorded in the second quarter of 2013.  Net interest income for the first six months of 2014 amounted to $69.3 million, a 2.7% increase from the $67.5 million recorded in the comparable period of 2013.

The Company's net interest margin (tax-equivalent net interest income divided by average earning assets) in the second quarter of 2014 was 4.65% compared to 5.10% for the second quarter of 2013.  For the six month period ended June 30, 2014, the Company's net interest margin was 4.89% compared to 4.90% for the same period in 2013.  The 4.65% net interest margin for the second quarter of 2014 was a 48 basis point decrease from the 5.13% margin realized in the first quarter of 2014.  The lower margin realized in the second quarter of 2014 was primarily due to a lower amount of discount accretion on loans purchased in failed-bank acquisitions and lower average asset yields – see additional discussion below.  As shown in the accompanying tables, loan discount accretion amounted to $4.9 million in the second quarter of 2014, $6.4 million in the first quarter of 2014, and $6.6 million in the second quarter of 2013.  For the first six months of 2014, loan discount accretion amounted to $11.3 million compared to $10.3 million for the first six months of 2013.

Excluding the effects of discount accretion on purchased loans, the Company's net interest margin amounted to 3.99% for the second quarter of 2014, 4.22% for the first quarter of 2014, and 4.17% for the second quarter of 2013.  The lower margin realized during the second quarter of 2014 was due primarily to lower loan yields and a higher mix of the Company's earning assets being maintained in highly liquid accounts that earn relatively little interest.  See the Financial Summary for a table that presents the impact of loan discount accretion, as well as other purchase accounting adjustments affecting net interest income.  Also 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.  

The Company's cost of funds has steadily declined from 0.41% in the second quarter of 2013 to 0.30% in the second quarter of 2014, which has had a positive impact on the Company's net interest margin.

Provision for Loan Losses and Asset Quality

The Company recorded total provisions for loan losses of $3.7 million in the second quarter of 2014 compared to $5.6 million for the second quarter of 2013.  For the six months ended June 30, 2014, the Company recorded total provisions for loan losses of $7.2 million compared to $16.7 million for the same period of 2013.  As discussed below, the decrease in 2014 was primarily the result of decreased provision for loan losses on non-covered loans recorded in 2014 – see explanation of the terms "non-covered" and "covered" in the section below entitled "Note Regarding Components of Earnings."

The provision for loan losses on non-covered loans amounted to $1.2 million in the second quarter of 2014 compared to $4.0 million in the second quarter of 2013.  For the first six months of 2014, the provision for loan losses on non-covered loans amounted to $4.5 million compared to $9.8 million for the same period of 2013.  The lower provisions recorded in 2014 have been a result of low loan growth and stable asset quality trends.

The provision for loan losses on covered loans amounted to $2.5 million in the second quarter of 2014 compared to $1.5 million in the second quarter of 2013.  The higher provision in 2014 is primarily the result of several large loans that experienced losses during the quarter.  For the six months ended June 30, 2014, the provision for loan losses on covered loans amounted to $2.7 million compared to $6.9 million for the same period of 2013.  The decrease in 2014 was primarily due to lower levels of covered nonperforming loans during the period, stabilization in the underlying collateral values of nonperforming loans, and a $1.9 million recovery that the Company realized in the first quarter of 2014.

Total non-covered nonperforming assets have remained relatively unchanged over the past year, amounting to $84.1 million at June 30, 2014 (2.73% of total non-covered assets), $82.2 million at March 31, 2014 and $79.1 million at June 30, 2013 (2.66% of total non-covered assets).

Total covered nonperforming assets have steadily declined in the past year, amounting to $39.1 million at June 30, 2014 compared to $58.9 million at March 31, 2014 and $89.1 million at June 30, 2013.  Over the past twelve months, the Company has resolved a significant amount of covered loans and has experienced strong property sales along the North Carolina coast, which is where most of the Company's covered assets are located. 

Noninterest Income

Total noninterest income for the three months ended June 30, 2014 was $5.0 million compared to $4.5 million for the comparable period of 2013.  For the six months ended June 30, 2014, noninterest income amounted to $5.3 million compared to $11.6 million for the six months ended June 30, 2013.

Core noninterest income for the second quarter of 2014 was $7.8 million, an increase of 8.6% over the $7.2 million reported for the second quarter of 2013.  For the first six months of 2014, core noninterest income amounted to $15.3 million, an 11.9% increase from the $13.7 million recorded in the comparable period of 2013. Core noninterest income includes i) service charges on deposit accounts, ii) other service charges, commissions, and fees, iii) fees from presold mortgages, iv) commissions from financial product sales, and v) bank-owned life insurance income.  The primary factors that resulted in the increases in core noninterest income in 2014 were higher service charges on deposit accounts and higher debit and credit card interchange fees.  Service charges on deposit accounts have increased primarily as a result of the December 2013 introduction of a new deposit product line-up that simplified the Company's product offering and also altered the fee structure of many accounts.  The increase in debit and credit card interchange fees is due to growth in the number and usage of debit and credit cards.

Noncore components of noninterest income resulted in net losses of $2.9 million in the second quarter of 2014 compared to net losses of $2.7 million in the second quarter of 2013.  For the six months ended June 30, 2014 and 2013, the Company recorded net losses of $10.0 million and $2.1 million, respectively, related to the noncore components of noninterest income.  The largest variances related to foreclosed property gains/losses and indemnification asset income (expense) – see discussion below.

The Company experienced losses on non-covered foreclosed properties of $0.6 million and $0.7 million for the three and six months ended June 30, 2014, respectively, compared to gains of $0.8 million and $1.5 million for the same periods of 2013.  In the second quarter of 2014, the Company had a significant write-down associated with one property and incurred losses on the sale of several of its least desirable properties.  In 2013, the Company experienced several large gains related to the sale of properties along the North Carolina coast that recovered in value.

Losses on covered foreclosed properties were $1.2 million and $3.3 million for the three and six months ended June 30, 2014, respectively, compared to losses of $0.5 million and $5.1 million for the same periods of 2013.  Losses on covered foreclosed properties have generally declined over the past several years as a result of stabilization in property values and declining numbers of properties held by the Company.  In the second quarter of 2014, the Company sold many of its least desirable covered foreclosed properties at amounts that resulted in losses.

Indemnification asset income (expense) is recorded to reflect additional (decreased) amounts expected to be received from the FDIC during the period related to covered assets.  The three primary items that result in recording indemnification asset income (expense) are 1) income from loan discount accretion, which results in indemnification expense, 2) provisions for loan losses on covered loans, which result in indemnification income and 3) foreclosed property losses on covered assets, which also result in indemnification income.  In the second quarter of 2014, the Company recorded $1.6 million in indemnification asset expense compared to $3.4 million in indemnification asset expense in the second quarter of 2013.  The variance was because in the second quarter of 2014, higher amounts of loan and foreclosed property losses resulted in more indemnification income compared to the second quarter of 2013, which lessened the indemnification expense associated with loan discount accretion income to a greater degree.  For the six months ended June 30, 2014, indemnification asset expense amounted to $6.5 million compared to indemnification asset income of $1.5 million for the same period of 2013.  The variance was primarily caused by higher amounts of covered losses experienced in 2013 that resulted in the recording of indemnification income.  See additional discussion related to this matter in the section below entitled "Note Regarding Components of Earnings."

During the second quarter of 2014, the Company realized $0.8 million in securities gains.

Noninterest Expenses

Noninterest expenses amounted to $24.8 million in the second quarter of 2014 compared to $25.8 million recorded in the second quarter of 2013.  Noninterest expenses for the six months ended June 30, 2014 amounted to $48.3 million compared to $49.0 million recorded in the first half of 2013.  The decreases in 2014 were due primarily to the Company accruing $1.6 million in severance expenses in the second quarter of 2013 (included in "other operating expenses" in the accompanying tables).

Balance Sheet and Capital

Total assets at June 30, 2014 amounted to $3.3 billion, a 0.6% increase from a year earlier.  Total loans at June 30, 2014 amounted to $2.4 billion, a 0.1% increase from a year earlier, and total deposits amounted to $2.8 billion at June 30, 2014, a 2.3% decrease from a year earlier. 

Non-covered loans increased 3.1% from June 30, 2013 to June 30, 2014.  Since January 1, 2014, growth in non-covered loans has slowed, with the progressive decline in covered loans outpacing non-covered loan growth. Strong competition in the marketplace for high quality loans has contributed to the low growth.

The lower amount of deposits at June 30, 2014 compared to June 30, 2013 was primarily due to declines in retail time deposits (called "other time deposits" and "other time deposits > $100,000" in the accompanying tables), with increases in checking accounts offsetting a large portion of the decline.  Retail time deposits are generally one of the Company's most expensive funding sources, and thus the shift from this category benefited the Company's overall cost of funds.

The Company obtained $70 million in new borrowings in the first quarter of 2014 from a low cost funding source in order to offset declines in time deposit balances, and in anticipation of future loan growth.  At June 30, 2014, borrowings totaled $116.4 million, compared to $46.4 million a year earlier.

The Company remains well-capitalized by all regulatory standards, with a Total Risk-Based Capital Ratio at June 30, 2014 of 17.14% compared to the 10.00% minimum to be considered well-capitalized.  The Company's tangible common equity to tangible assets ratio was 7.57% at June 30, 2014, an increase of 64 basis points from a year earlier.

Expiration of Loss-Share Agreement with the FDIC

The Company's loss-sharing agreement with the FDIC related to non-single family loans and foreclosed properties that were assumed in a failed bank acquisition in 2009 expired on July 1, 2014.  The Company will bear all future losses on these assets, however, at present, management does not expect such losses will be materially in excess of related loan loss allowances.  The following presents information related to these assets as of or for the quarter ended June 30, 2014, which continue to be included within the "covered" line items in the accompanying tables.  In the future, these assets will be included in the "non-covered" categories.



As of June 30, 2014


Loans outstanding:

$39.7 million

Nonaccrual loans:

$9.7 million

Troubled debt restructurings - accruing:

$2.1 million

Allowance for loan losses:

$1.7 million

Remaining loan discount:

None

Remaining indemnification asset:

None

Foreclosed properties:

$3.0 million



For the three months ended June 30, 2014


Loan discount accretion income recognized:

$1.7 million

Indemnification asset expense associated


        with the loan discount accretion income recognized:

$1.4 million



The Company continues to have three loss-sharing agreements with the FDIC in place.  The next agreement that expires does so on April 1, 2016.

Comments of the President and Other Business Matters

Richard H. Moore, President and CEO of First Bancorp, commented on today's report, "Today's earnings report reflects another strong quarter for our company.  I am optimistic that this momentum will continue.  We thank our customers for your business, and we continue to work hard to earn that privilege."

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

  • On June 16, 2014, the Company announced a quarterly cash dividend of $0.08 cents per share payable on July 25, 2014 to shareholders of record on June 30, 2014. This is the same dividend rate as the Company declared in the second quarter of 2013.

  • On May 19, 2014, the Company opened a full-service branch in Fuquay-Varina, North Carolina. The new branch is located at 125 North Main Street.

  • The Company is planning to construct a new branch facility at 4110 Bradham Drive, Jacksonville, North Carolina. Upon completion, the First Bank branch located on Western Boulevard will be closed and the accounts serviced at that branch will be reassigned to the new and improved branch. This is expected to occur in the first quarter of 2015 and is subject to regulatory approval.

Note Regarding Components of Earnings

The Company's results of operation are significantly affected by the on-going accounting for two FDIC-assisted failed bank acquisitions.  In the discussion above, the term "covered" is used to describe assets included as part of FDIC loss share agreements, which generally result in the FDIC reimbursing the Company for 80% of losses incurred on those assets.  The term "non-covered" refers to the Company's legacy assets, which are not included in any type of loss share arrangement.

For covered loans that deteriorate in terms of repayment expectations, the Company records immediate allowances through the provision for loan losses.  For covered loans that experience favorable changes in credit quality compared to what was expected at the acquisition date, including loans that payoff, the Company records positive adjustments to interest income over the life of the respective loan – also referred to as loan discount accretion.  For covered foreclosed properties that are sold at gains or losses or that are written down to lower values, the Company records the gains/losses within noninterest income. 

The adjustments discussed above are recorded within the income statement line items noted without consideration of the FDIC loss share agreements.  Because favorable changes in covered assets result in lower expected FDIC claims, and unfavorable changes in covered assets result in higher expected FDIC claims, the FDIC indemnification asset is adjusted to reflect those expectations.  The net increase or decrease in the indemnification asset is reflected within noninterest income.

The adjustments noted above can result in volatility within individual income statement line items.  Because of the FDIC loss share agreements and the associated indemnification asset, pretax income resulting from amounts recorded as provisions for loan losses on covered loans, discount accretion, and losses from covered foreclosed properties is generally only impacted by 20% of these amounts due to the corresponding adjustments made to the indemnification asset.

First Bancorp is a bank holding company headquartered in Southern Pines, North Carolina with total assets of approximately $3.3 billion.  Its principal activity is the ownership and operation of First Bank, a state-chartered community bank that operates 96 branches, with 81 branches operating in North Carolina, 7 branches in South Carolina (Cheraw, Dillon, Florence, and Latta), and 8 branches in Virginia (Abingdon, Blacksburg, Christiansburg, Dublin, Fort Chiswell, Radford, Salem and Wytheville), where First Bank does business as First Bank of Virginia. First Bank also has loan production offices in Fayetteville, North Carolina, and Greenville, North Carolina. 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
June 30,

 

Percent

($ in thousands except per share data – unaudited)

2014


2013

Change






INCOME STATEMENT










Interest income





   Interest and fees on loans

$            34,376


37,030


   Interest on investment securities

1,347


1,301


   Other interest income

232


173


      Total interest income

35,955


38,504

(6.6%)

Interest expense





   Interest on deposits

1,850


2,646


   Other, primarily borrowings

297


256


      Total interest expense

2,147


2,902

(26.0%)

        Net interest income

33,808


35,602

(5.0%)

Provision for loan losses – non-covered loans

1,158


4,043

(71.4%)

Provision for loan losses – covered loans

2,501


1,548

61.6%

Total provision for loan losses

3,659


5,591

(34.6%)

Net interest income after provision for loan losses

30,149


30,011

0.5%

Noninterest income





   Service charges on deposit accounts

3,446


3,254


   Other service charges, commissions, and fees

2,562


2,340


   Fees from presold mortgages

790


820


   Commissions from financial product sales

706


579


   Bank-owned life insurance income

318


212


   Foreclosed property gains (losses) – non-covered

(551)


777


   Foreclosed property gains (losses) – covered

(1,173)


(520)


   FDIC indemnification asset income (expense), net

(1,578)


(3,407)


   Securities gains

786


7


   Other gains (losses)

(336)


425


      Total noninterest income

4,970


4,487

10.8%

Noninterest expenses





   Salaries expense

11,366


11,003


   Employee benefit expense

2,286


2,546


   Occupancy and equipment expense

2,828


2,865


   Intangibles amortization

194


220


   Other operating expenses

8,106


9,122


      Total noninterest expenses

24,780


25,756

(3.8%)

Income before income taxes

10,339


8,742

18.3%

Income taxes

3,693


3,154

17.1%

Net income

6,646


5,588

18.9%






Preferred stock dividends

(217)


(217)







Net income available to common shareholders

$              6,429


5,371

19.7%











Earnings per common share – basic

$               0.33


0.27

22.2%

Earnings per common share – diluted

0.32


0.27

18.5%






ADDITIONAL INCOME STATEMENT INFORMATION





   Net interest income, as reported

$            33,808


35,602


   Tax-equivalent adjustment (1)

375


373


   Net interest income, tax-equivalent

$            34,183


35,975

(5.0%)




(1)

This amount reflects the tax benefit that the Company receives related to its tax-exempt loans and securities, which carry interest rates lower than similar taxable investments due to their tax-exempt status.  This amount has been computed assuming a 39% tax rate and is reduced by the related nondeductible portion of interest expense.

 

 

First Bancorp and Subsidiaries

Financial Summary – Page 2



Six Months Ended
June 30,

 

Percent

($ in thousands except per share data – unaudited)

2014


2013

Change






INCOME STATEMENT










Interest income





   Interest and fees on loans

$            70,462


70,581


   Interest on investment securities

2,818


2,685


   Other interest income

351


327


      Total interest income

73,631


73,593

0.1%

Interest expense





   Interest on deposits

3,741


5,558


   Other, primarily borrowings

547


512


      Total interest expense

4,288


6,070

(29.4%)

        Net interest income

69,343


67,523

2.7%

Provision for loan losses – non-covered loans

4,523


9,814

(53.9%)

Provision for loan losses – covered loans

2,711


6,926

(60.9%)

Total provision for loan losses

7,234


16,740

(56.8%)

Net interest income after provision for loan losses

62,109


50,783

22.3%

Noninterest income





   Service charges on deposit accounts

7,019


6,189


   Other service charges, commissions, and fees

4,929


4,515


   Fees from presold mortgages

1,397


1,567


   Commissions from financial product sales

1,300


978


   Bank-owned life insurance income

645


420


   Foreclosed property gains (losses) – non-covered

(707)


1,535


   Foreclosed property gains (losses) – covered

(3,290)


(5,136)


   FDIC indemnification asset income (expense), net

(6,494)


1,490


   Securities gains

786


7


   Other gains (losses)

(317)


30


      Total noninterest income

5,268


11,595

(54.6%)

Noninterest expenses





   Salaries expense

23,014


21,680


   Employee benefit expense

4,597


5,173


   Occupancy and equipment expense

5,636


5,627


   Intangibles amortization

388


419


   Other operating expenses

14,696


16,081


      Total noninterest expenses

48,331


48,980

(1.3%)

Income before income taxes

19,046


13,398

42.2%

Income taxes

6,724


4,710

42.8%

Net income

12,322


8,688

41.8%






Preferred stock dividends

(434)


(462)







Net income available to common shareholders

$             11,888


8,226

44.5%











Earnings per common share – basic

$               0.60


0.42

42.9%

Earnings per common share – diluted

0.59


0.41

43.9%






ADDITIONAL INCOME STATEMENT INFORMATION





   Net interest income, as reported

$            69,343


67,523


   Tax-equivalent adjustment (1)

749


745


   Net interest income, tax-equivalent

$            70,092


68,268

2.7%




(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 39% tax rate and is reduced by the related nondeductible portion of interest expense.

 

 

First Bancorp and Subsidiaries

Financial Summary – Page 3



Three Months Ended
June 30,


Six Months Ended
June 30,

PERFORMANCE RATIOS (annualized)

2014

2013


2014

2013

Return on average assets (1)

0.79%

0.66%


0.74%

0.51%

Return on average common equity (2)

8.32%

7.42%


7.79%

5.73%

Net interest margin – tax-equivalent (3)

4.65%

5.10%


4.89%

4.90%

Net charge-offs to average loans – non-covered

0.69%

0.74%


0.61%

0.63%







COMMON SHARE DATA






Cash dividends declared – common

$         0.08

0.08


$         0.16

0.16

Stated book value – common

15.75

14.70


15.75

14.70

Tangible book value – common

12.28

11.19


12.28

11.19

Common shares outstanding at end of period

19,705,381

19,679,659


19,705,381

19,679,659

Weighted average shares outstanding – basic

19,698,581

19,673,634


19,693,382

19,671,468

Weighted average shares outstanding – diluted

20,434,263

20,415,103


20,428,861

20,412,456







CAPITAL RATIOS






Tangible equity to tangible assets

9.78%

9.16%


9.78%

9.16%

Tangible common equity to tangible assets

7.57%

6.93%


7.57%

6.93%

Tier I leverage ratio

11.15%

10.63%


11.15%

10.63%

Tier I risk-based capital rati0o

15.88%

15.32%


15.88%

15.32%

Total risk-based capital ratio

17.14%

16.58%


17.14%

16.58%







AVERAGE BALANCES ($ in thousands)






Total assets

$  3,259,550

3,244,775


$  3,219,199

3,236,619

Loans

2,438,364

2,409,037


2,448,866

2,395,949

Earning assets

2,946,586

2,827,171


2,891,696

2,808,958

Deposits

2,751,466

2,818,247


2,745,330

2,810,746

Interest-bearing liabilities

2,354,768

2,423,297


2,324,453

2,431,596

Shareholders' equity

380,542

361,224


378,480

360,293




(1)

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

(2)

Calculated by dividing annualized net income (loss) 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

June 30,
2014

March 31,
2014

December 31,
2013

September 30,
2013

June 30,
2013







Net interest income – tax-equivalent (1)

$    34,183

35,908

35,662

34,107

35,975

Taxable equivalent adjustment (1)

375

373

386

380

373

Net interest income

33,808

35,535

35,276

33,727

35,602

Provision for loan losses – non-covered

1,158

3,365

4,965

3,487

4,043

Provision for loan losses – covered

2,501

210

3,931

1,493

1,548

Noninterest income

4,970

298

6,286

5,608

4,487

Noninterest expense

24,780

23,551

23,935

23,704

25,756

Income before income taxes

10,339

8,707

8,731

10,651

8,742

Income tax expense

3,693

3,031

3,053

4,318

3,154

Net income

6,646

5,676

5,678

6,333

5,588

Preferred stock dividends

(217)

(217)

(217)

(216)

(217)

Net income available to common shareholders

6,429

5,459

5,461

6,117

5,371







Earnings per common share – basic

0.33

0.28

0.28

0.31

0.27

Earnings per common share – diluted

0.32

0.27

0.27

0.30

0.27



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)

At June 30,
2014


At Mar. 31,
2014


At Dec. 31,
2013


At June 30,
2013


One
Year
Change

Assets










Cash and due from banks

$      92,633


219,779


83,881


82,798


11.9%

Interest bearing deposits with banks

314,649


164,310


139,393


154,802


103.3%

     Total cash and cash equivalents

407,282


384,089


223,274


237,600


71.4%











Investment securities

177,957


234,127


227,036


240,995


(26.2%)

Presold mortgages

5,926


4,587


5,422


4,552


30.2%











Loans – non-covered

2,257,530


2,256,726


2,252,885


2,190,583


3.1%

Loans – covered by FDIC loss share agreements

176,855


190,551


210,309


240,279


(26.4%)

     Total loans

2,434,385


2,447,277


2,463,194


2,430,862


0.1%

Allowance for loan losses – non-covered

(41,966)


(44,706)


(44,263)


(44,816)


(6.4%)

Allowance for loan losses – covered

(3,830)


(3,421)


(4,242)


(6,035)


(36.5%)

     Total allowance for loan losses

(45,796)


(48,127)


(48,505)


(50,851)


(9.9%)

     Net loans

2,388,589


2,399,150


2,414,689


2,380,011


0.4%











Premises and equipment

76,705


76,970


77,448


77,597


(1.1%)

FDIC indemnification asset

29,406


35,504


48,622


92,950


(68.4%)

Intangible assets

68,281


68,475


68,669


69,109


(1.2%)

Foreclosed real estate – non-covered

9,346


11,740


12,251


15,425


(39.4%)

Foreclosed real estate – covered

9,934


19,504


24,497


32,005


(69.0%)

Bank-owned life insurance

44,685


44,367


44,040


43,276


3.3%

Other assets

48,388


36,310


39,122


53,890


(10.2%)

     Total assets

$   3,266,499


3,314,823


3,185,070


3,247,410


0.6%





















Liabilities










Deposits:










     Non-interest bearing checking accounts

$      525,332


511,612


482,650


454,785


15.5%

     Interest bearing checking accounts

551,577


550,702


557,413


546,203


1.0%

     Money market accounts

554,731


553,935


547,556


560,612


(1.0%)

     Savings accounts

175,084


177,744


169,023


166,497


5.2%

     Brokered deposits

135,300


150,272


116,087


109,510


23.6%

     Internet time deposits

2,216


1,967


1,319


6,847


(67.6%)

     Other time deposits > $100,000

421,255


436,245


451,741


501,811


(16.1%)

     Other time deposits

389,084


404,247


425,230


472,088


(17.6%)

          Total deposits

2,754,579


2,786,724


2,751,019


2,818,353


(2.3%)











Borrowings

116,394


136,394


46,394


46,394


150.9%

Other liabilities

14,433


15,618


15,735


22,558


(36.0%)

     Total liabilities

2,885,406


2,938,736


2,813,148


2,887,305


(0.1%)











Shareholders' equity










Preferred stock

70,787


70,787


70,787


70,787


0.0%

Common stock

132,417


132,215


132,099


132,097


0.2%

Retained earnings

175,871


171,021


167,136


158,708


10.8%

Accumulated other comprehensive income (loss)

2,018


2,064


1,900


(1,487)


     n/m

     Total shareholders' equity

381,093


376,087


371,922


360,105


5.8%

Total liabilities and shareholders' equity

$   3,266,499


3,314,823


3,185,070


3,247,410


0.6%













n/m = not meaningful

 

 

First Bancorp and Subsidiaries

Financial Summary - Page 5



For the Three Months Ended

 

YIELD INFORMATION

June 30,
2014


March 31,
2014


December 31,
2013


September 30,
2013


June 30,
2013











Yield on loans

5.65%


5.95%


5.85%


5.68%


6.17%

Yield on securities – tax-equivalent (1)

3.00%


3.19%


2.96%


2.81%


2.88%

Yield on other earning assets

0.33%


0.34%


0.36%


0.46%


0.38%

   Yield on all interest earning assets

4.95%


5.44%


5.37%


5.21%


5.52%











Rate on interest bearing deposits

0.33%


0.34%


0.36%


0.40%


0.45%

Rate on other interest bearing liabilities

1.02%


2.14%


2.18%


2.21%


2.21%

   Rate on all interest bearing liabilities

0.37%


0.38%


0.40%


0.44%


0.48%

     Total cost of funds

0.30%


0.31%


0.33%


0.37%


0.41%











        Net interest margin – tax-equivalent (2)

4.65%


5.13%


5.04%


4.84%


5.10%

        Average prime rate

3.25%


3.25%


3.25%


3.25%


3.25%


(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

June 30,


March 31,


December 31,


September 30,


June 30,

($ in thousands)

2014


2014


2013


2013


2013











Interest income – reduced by premium
        amortization on loans

$        (49)


(49)


(49)


(105)


(116)

Interest income – increased by accretion of
        loan discount (1)

 

4,851


 

6,408


 

5,605


 

4,325


 

6,612

Interest expense – reduced by premium
        amortization of deposits

 

4


 

3


 

5


 

7


 

8

     Impact on net interest income

$       4,806


6,362


5,561


4,227


6,504


(1) Corresponding indemnification asset expense is recorded for approximately 80% of this amount, and therefore
      the net effect is that pretax income is positively impacted by 20% of the amounts in this line item.


 

 


First Bancorp and Subsidiaries

Financial Summary - Page 6











ASSET QUALITY DATA ($ in thousands)

June 30,
2014


March 31,
2014


Dec. 31,
2013


Sept. 30,
2013


June 30,
2013











Non-covered nonperforming assets










Nonaccrual loans

$      47,533


44,129


41,938


40,711


42,338

Troubled debt restructurings - accruing

27,250


26,335


27,776


27,656


21,333

Accruing loans > 90 days past due

-


-


-


-


-

     Total non-covered nonperforming loans

74,783


70,464


69,714


68,367


63,671

Foreclosed real estate

9,346


11,740


12,251


15,098


15,425

Total non-covered nonperforming assets

$      84,129


82,204


81,965


83,465


79,096











Covered nonperforming assets (1)










Nonaccrual loans

$      20,938


31,986


37,217


47,233


50,346

Troubled debt restructurings - accruing

8,193


7,429


8,909


6,537


6,790

Accruing loans > 90 days past due

-


-


-


-


-

     Total covered nonperforming loans

29,131


39,415


46,126


53,770


57,136

Foreclosed real estate

9,934


19,504


24,497


29,193


32,005

Total covered nonperforming assets

$      39,065


58,919


70,623


82,963


89,141











     Total nonperforming assets

$   123,194


141,123


152,588


166,428


168,237

 

Asset Quality Ratios – All Assets










Net quarterly charge-offs to average loans - annualized

0.99%


0.65%


1.31%


1.33%


0.75%

Nonperforming loans to total loans

4.27%


4.49%


4.70%


5.00%


4.97%

Nonperforming assets to total assets

3.77%


4.26%


4.79%


5.25%


5.18%

Allowance for loan losses to total loans

1.88%


1.97%


1.97%


1.95%


2.09%











Asset Quality Ratios – Based on Non-covered Assets only










Net quarterly charge-offs to average non-covered loans - annualized

0.69%


0.52%


0.74%


0.87%


0.74%

Non-covered nonperforming loans to non-covered loans

3.31%


3.12%


3.09%


3.09%


2.91%

Non-covered nonperforming assets to total non-covered assets

2.73%


2.65%


2.78%


2.86%


2.66%

Allowance for loan losses to non-covered loans

1.86%


1.98%


1.96%


1.96%


2.05%












(1) Covered nonperforming assets consist of assets that are included in loss-share agreements with the FDIC.

 

 

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,
2014


March 31,
2014


Dec. 31,
2013


Sept. 30,
2013


June 30,
2013











Net interest income, as reported

$       33,808


35,535


35,276


33,727


35,602

Tax-equivalent adjustment

375


373


386


380


373

Net interest income, tax-equivalent (A)

$       34,183


35,908


35,662


34,107


35,975

 

Average earning assets (B)

 

$  2,946,586


 

2,836,806


2,807,461


2,795,071


 

2,827,171

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

 

4.65%


 

5.13%


 

5.04%


 

4.84%


 

5.10%











Net interest income, tax-equivalent

$       34,183


35,908


35,662


34,107


35,975

Loan discount accretion

4,851


6,408


5,605


4,325


6,612

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

$       29,332


29,500


 

30,057


29,782


 

29,363

 

Average earnings assets  (B)

$  2,946,586


2,836,806


 

2,807,461


 

2,795,071


 

2,827,171

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

3.99%


4.22%


4.25%


4.23%


4.17%


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 two failed banks 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 June 30, 2014, the Company had a remaining loan discount balance of $25.8 million compared to $53.3 million at June 30, 2013. 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.

 

 

SOURCE First Bancorp

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