Market Overview

First Bancorp Reports Third Quarter Results

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TROY, N.C., Oct. 24, 2012 /PRNewswire/ -- First Bancorp (NASDAQ: FBNC), the parent company of First Bank, announced today net income available to common shareholders of $3.7 million, or $0.22 per diluted common share, for the three months ended September 30, 2012, compared to a net loss of $0.7 million, or ($0.04) per diluted common share, recorded in the third quarter of 2011.  For the nine months ended September 30, 2012, the Company reported net income available to common shareholders of $0.3 million, or $0.01 per diluted common share, compared to net income of $7.3 million, or $0.43 per diluted common share, for the nine months ended September 30, 2011. 

The results for the third quarter of 2011 were negatively impacted by $2.5 million in accelerated accretion of the discount remaining on preferred stock that was redeemed that quarter. Also impacting comparability from 2011 to 2012 was a $10.2 million bargain purchase gain related to the January 2011 acquisition of The Bank of Asheville in Asheville, North Carolina.

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 below, 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 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.

Net Interest Income and Net Interest Margin

Net interest income for the third quarter of 2012 amounted to $34.5 million, a 2.9% increase from the $33.5 million recorded in the third quarter of 2011.  Net interest income for the nine months ended September 30, 2012 amounted to $99.5 million, a 0.8% decrease from the $100.3 million recorded in the comparable period of 2011.

The Company's net interest margin (tax-equivalent net interest income divided by average earning assets) in the third quarter of 2012 was 4.86%, a seven basis point increase compared to the 4.79% margin realized in the third quarter of 2011 and an 18 basis point increase from the 4.68% margin realized in the second quarter of 2012.  The higher margins were primarily a result of higher amounts of discount accretion on loans purchased in failed bank acquisitions recognized during the respective periods, as well as lower overall funding costs.  Excluding the discount accretion on purchase loans, the Company's net interest margin was 4.22% for the third quarter of 2012 compared to the same 4.22% in the second quarter of 2012 and 4.31% in the third quarter of 2011. See the Financial Summary for a table that presents the impact of the loan discount accretion, as well as other purchase accounting adjustments. Also see the Financial Summary for a reconciliation of the Company's net interest margin to the net interest margin excluding the loan discount accretion, and the note thereto that explains why this ratio is presented and caution regarding the use of this non-GAAP performance measure.  The Company's cost of funds has steadily declined from 0.78% in the third quarter of 2011 to 0.57% in the third quarter of 2012.

For the nine month period ended September 30, 2012, the Company's net interest margin was 4.71% compared to 4.77% for the same period in 2011. The lower margin was primarily due to lower loan yields, as well as the mix of the Company's earning assets being more concentrated in lower yielding short-term investments in 2012 compared to a larger concentration of higher yielding loans and securities in 2011. 

Provision for Loan Losses and Asset Quality

The Company recorded total provisions for loan losses of $7.1 million in the third quarter of 2012 compared to $9.1 million for the third quarter of 2011.  For the nine months ended September 30, 2012, the Company recorded total provisions for loan losses of $35.1 million compared to $31.4 million for the comparable period of 2011.

The provision for loan losses on non-covered loans amounted to $6.0 million in the third quarter of 2012 compared to $6.4 million in the third quarter of 2011.  The decline in provision was primarily due to stabilization in the Company's assessment of the losses associated with its nonperforming non-covered loans.  For the first nine months of 2012, provision for loan losses on non-covered loans amounted to $29.7 million compared to $21.6 million for the same period of 2011.  The higher provision for loan losses was primarily a result of an internal review of non-covered loans that occurred in the first quarter of 2012 that applied more conservative assumptions to estimate the probable losses associated with some of the Company's nonperforming loan relationships, which the Company believes may lead to a more timely resolution of the related credits.

The Company's provisions for loan losses for covered loans amounted to $1.1 million and $2.7 million for the three months ended September 30, 2012 and 2011, respectively, and $5.4 million and $9.8 million for the nine months ended September 30, 2012 and 2011, respectively.  The lower provisions in 2012 were also due to stabilization in the Company's assessment of the losses associated with its nonperforming covered loans.  The majority of the provisions for loan losses on covered loans in 2011 and 2012 relate to loans assumed in the Company's June 2009 acquisition of Cooperative Bank.  As previously discussed, the provision for loan losses related to covered loans is offset by an 80% increase to the FDIC indemnification asset, which increases noninterest income.

Total non-covered nonperforming assets amounted to $146 million at September 30, 2012 (4.93% of non-covered total assets) an increase of $27 million from the $119 million recorded at September 30, 2011.  Within nonperforming assets, nonaccrual loans declined by $6 million over that time period and foreclosed real estate increased by approximately that same amount.  The cause for the increase in non-covered nonperforming assets was an increase in troubled debt restructurings (TDRs), which increased by $27 million.  TDRs are accruing loans that the Company has granted concessions to as a result of the borrower's financial difficulties.  As part of a routine regulatory exam that concluded in the third quarter of 2012, the Company reclassified approximately $12 million of performing loans to TDR status in the second quarter of 2012 and another $18 million in the third quarter of 2012.  Of the $38.5 million of TDRs at September 30, 2012, approximately $37.1 million were current or past due less than thirty days.  Other than reclassifying these loans to a nonperforming asset category for disclosure purposes, the reclassifications did not impact the Company's financial statements.

Total covered nonperforming assets have generally declined over that same period, amounting to $114 million at September 30, 2012 compared to $158 million at September 30, 2011.  Within this category, foreclosed real estate has declined from $105 million at September 30, 2011 to $58 million at September 30, 2012.

Noninterest Income

Total noninterest income for the three months ended September 30, 2012 was $2.8 million compared to $3.5 million for the comparable period of 2011.  For the nine months ended September 30, 2012 and 2011, the Company recorded noninterest income of $9.9 million and $22.8 million, respectively.  The significant decrease in noninterest income for the nine month period comparison is primarily the result of the previously discussed $10.2 million bargain purchase gain recorded in the acquisition of The Bank of Asheville during the first quarter of 2011.

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.  Core noninterest income for the third quarter of 2012 was $6.8 million, an increase of 14.9% over the $5.9 million reported for the third quarter of 2011.  Core noninterest income for the nine months ended September 30, 2012 amounted to $18.9 million, an increase of 9.2% for the comparable period of 2011.  These increases were primarily due to higher debit card usage and mortgage loan refinancing activity.

The Company continues to experience losses and write-downs on its foreclosed properties due to declining property values in its market area.  For the third quarter of 2012, these losses amounted to $1.6 million for covered properties compared to $5.2 million in the third quarter of 2011.  For each of the nine month periods ended September 30, 2011 and 2012, losses on covered properties amounted to $12.7 million.

Losses on non-covered foreclosed properties amounted to $1.0 million for each of the third quarters of 2011 and 2012.  For the nine months ended September 30, 2012, losses on non-covered foreclosed properties amounted to $3.0 million compared to $2.5 million for the same period of 2011. 

As previously discussed, indemnification asset income (expense) is recorded to reflect additional (decreased) amounts expected to be received from the FDIC due to covered loan and foreclosed property losses arising during the period.  In the third quarter of 2012, higher loan discount accretion and relatively low levels of loan and foreclosed property losses on covered assets resulted in a net reduction in the indemnification asset, which resulted in $1.6 million of indemnification asset expense compared to $3.6 million in indemnification asset income recorded in the third quarter of 2011.  For the nine months ended September 30, 2012, indemnification asset income amounted to $6.1 million compared to $10.5 million for the same period of 2011.

The Company recorded $0.6 million in gains on sales of securities during the first nine months of 2012 compared to $0.1 million in the comparable period of 2011.

Noninterest Expenses

Noninterest expenses amounted to $23.7 million in the third quarter of 2012, a 1.3% decrease from the $24.0 million recorded in the third quarter of 2011.  Noninterest expenses for the nine months ended September 30, 2012 amounted to $71.5 million, a 0.6% decrease from the $71.9 million recorded in the first nine months of 2011.  During 2012, the Company has emphasized cost control measures to enhance profitability.

Balance Sheet and Capital

Total assets at September 30, 2012 amounted to $3.3 billion, a 0.6% increase from a year earlier.  Total loans at September 30, 2012 amounted to $2.4 billion, a 0.4% increase from a year earlier, and total deposits amounted to $2.8 billion at September 30, 2012, a 3.8% increase from a year earlier.

For the fifth consecutive quarter, the Company experienced growth in its non-covered loan portfolio, with non-covered loans increasing by $22 million during the three months ended September 30, 2012.  At September 30, 2012, non-covered loans amounted to $2.1 billion, an increase of $78 million, or 3.8%, from a year earlier.  The Company is actively pursuing lending opportunities.

The Company's level of non-interest bearing checking accounts amounted to $398.5 million at September 30, 2012, a 19.3% increase from a year earlier, while interest-bearing checking accounts amounted to $482.6 million, an increase of 28.0% from a year earlier.  Contributing to the increase in interest-bearing checking accounts was a shift into this category from customer repurchase agreements as a result of the repeal of the prohibition on banks paying interest on commercial deposit accounts.  The overall growth in checking and other transaction accounts has allowed the Company to reduce its reliance on higher cost time deposits.

The Company remains well-capitalized by all regulatory standards, with a Total Risk-Based Capital Ratio at September 30, 2012 of 16.26% compared to the 10.00% minimum to be considered well-capitalized.  The Company's tangible common equity to tangible assets ratio was 6.46% at September 30, 2012, a decrease of 29 basis points from a year earlier. 

Comments of the President and Other Business Matters

Richard H. Moore, President and CEO of First Bancorp, commented on today's report, "We are pleased with our Company's performance this quarter.  Our core business continues to grow, and we are working to build on the positive momentum."

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

  • On August 24, 2012, the Company reported that it had completed the acquisition of approximately $9 million in deposits from the Gateway Bank & Trust Co. branch located at 901 Military Cutoff Road, Wilmington, North Carolina.  The acquired accounts were transferred to a nearby branch of First Bank.
  • On September 26, 2012, the Company announced that it had reached an agreement to assume all of the deposits, totaling approximately $64 million, and acquire selected performing loans, totaling approximately $22 million, of the Four Oaks Bank & Trust Company branches located in Southern Pines, North Carolina and Rockingham, North Carolina.  The Company will acquire the Rockingham branch building, while the Southern Pines branch facility will not be acquired.  The deposits and loans of the Southern Pines branch will be initially assigned to the First Bank branch located at nearby Pinecrest Plaza.  The transaction is expected to close in the first quarter of 2013, subject to regulatory approval.
  • The Company is relocating its Biscoe, North Carolina branch and expects to re-open in a new building on December 3, 2012.
  • The Company expects to complete the relocation of its branch in Fort Chiswell, Virginia in the fourth quarter of 2012.
  • The Company is closing its Reynolds branch in Asheville, North Carolina on December 28, 2012.  The Company will continue to serve the Asheville market with four branches.
  • On August 28, 2012, the Company announced a quarterly cash dividend of $0.08 cents per share payable on October 25, 2012 to shareholders of record on September 30, 2012.  This is the same dividend rate as the Company declared in the third quarter of 2011.

First Bancorp is a bank holding company headquartered in Troy, 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 98 branches, with 82 branches operating in North Carolina, 9 branches in South Carolina (Cheraw, Dillon, Florence, Latta, Jefferson, and Little River), and 7 branches in Virginia (Abingdon, Christiansburg, Dublin, Fort Chiswell, Radford, Salem and Wytheville), where First Bank does business as First Bank of Virginia. First Bank also has a loan production office in Blacksburg, Virginia. First Bancorp's common stock is traded on the NASDAQ Global Select Market under the symbol "FBNC."

Please visit our website at www.FirstBancorp.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.


 

First Bancorp and Subsidiaries

Financial Summary – Page 1





Three Months Ended

September 30,

 

Percent

($ in thousands except per share data – unaudited)

2012


2011

Change






INCOME STATEMENT










Interest income





   Interest and fees on loans

$            37,037


37,200


   Interest on investment securities

1,488


1,921


   Other interest income

164


107


      Total interest income

38,689


39,228

(1.4%)

Interest expense





   Interest on deposits

3,769


5,150


   Other, primarily borrowings

447


589


      Total interest expense

4,216


5,739

(26.5%)

        Net interest income

34,473


33,489

2.9%

Provision for loan losses – non-covered loans

5,970


6,441

(7.3%)

Provision for loan losses – covered loans

1,103


2,705

(59.2%)

Total provision for loan losses

7,073


9,146

(22.7%)

Net interest income after provision for loan losses

27,400


24,343

12.6%

Noninterest income





   Service charges on deposit accounts

3,053


3,046


   Other service charges, commissions, and fees

2,275


2,040


   Fees from presold mortgages

785


468


   Commissions from financial product sales

510


383


   Bank-owned life insurance income

207


9


   Foreclosed property losses and write-downs – covered

(1,641)


(5,176)


   Foreclosed property losses and write-downs – non-covered

(1,020)


(919)


   Indemnification asset income (expense), net

(1,569)


3,589


   Securities gains

189



   Other gains

14


46


      Total noninterest income

2,803


3,486

(19.6%)

Noninterest expenses





   Personnel expense

12,909


13,066


   Occupancy and equipment expense

2,988


2,763


   Intangibles amortization

224


226


   Merger expenses


12


   Other operating expenses

7,536


7,891


      Total noninterest expenses

23,657


23,958

(1.3%)

Income before income taxes

6,546


3,871

69.1%

Income taxes

2,123


1,314

61.6%

Net income

4,423


2,557

73.0%






Preferred stock dividends

(688)


(815)


Accretion of preferred stock discount


(2,474)







Net income (loss) available to common shareholders

$             3,735


(732)

n/m











Earnings (loss) per common share – basic

$              0.22


(0.04)

n/m

Earnings (loss) per common share – diluted

0.22


(0.04)

n/m






ADDITIONAL INCOME STATEMENT INFORMATION





   Net interest income, as reported

$            34,473


33,489


   Tax-equivalent adjustment (1)

376


389


   Net interest income, tax-equivalent

$            34,849


33,878

2.9%



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

 

First Bancorp and Subsidiaries

Financial Summary – Page 2





Nine Months Ended

September 30,

 

Percent

($ in thousands except per share data – unaudited)

2012


2011

Change






INCOME STATEMENT










Interest income





   Interest and fees on loans

$          107,715


112,471


   Interest on investment securities

4,879


5,815


   Other interest income

481


300


      Total interest income

113,075


118,586

(4.6%)

Interest expense





   Interest on deposits

12,075


16,684


   Other, primarily borrowings

1,485


1,619


      Total interest expense

13,560


18,303

(25.9%)

        Net interest income

99,515


100,283

(0.8%)

Provision for loan losses – non-covered loans

29,721


21,618

37.5%

Provision for loan losses – covered loans

5,374


9,805

(45.2%)

Total provision for loan losses

35,095


31,423

11.7%

Net interest income after provision for loan losses

64,420


68,860

(6.4%)

Noninterest income





   Service charges on deposit accounts

8,867


8,985


   Other service charges, commissions, and fees

6,634


6,025


   Fees from presold mortgages

1,685


1,109


   Commissions from financial product sales

1,325


1,147


   Bank-owned life insurance income

380


33


   Gain from business acquisition


10,196


   Foreclosed property losses and write-downs – covered

(12,742)


(12,693)


   Foreclosed property losses and write-downs – non-covered

(3,026)


(2,543)


   Indemnification asset income, net

6,094


10,455


   Securities gains

638


74


   Other gains

67


5


      Total noninterest income

9,922


22,793

(56.5%)

Noninterest expenses





   Personnel expense

39,947


38,627


   Occupancy and equipment expense

8,618


8,205


   Intangibles amortization

670


676


   Merger expenses


606


   Other operating expenses

22,245


23,800


      Total noninterest expenses

71,480


71,914

(0.6%)

Income before income taxes

2,862


19,739

(85.5%)

Income taxes

331


7,081

(95.3%)

Net income

2,531


12,658

(80.0%)






Preferred stock dividends

(2,277)


(2,440)


Accretion of preferred stock discount


(2,932)







Net income available to common shareholders

$                 254


7,286

(96.5%)











Earnings per common share – basic

$               0.01


0.43

(97.7%)

Earnings per common share – diluted

0.01


0.43

(97.7%)






ADDITIONAL INCOME STATEMENT INFORMATION





   Net interest income, as reported

$            99,515


100,283


   Tax-equivalent adjustment (1)

1,150


1,162


   Net interest income, tax-equivalent

$          100,665


101,445

(0.8%)



(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

September 30,


Nine Months Ended

September 30,

PERFORMANCE RATIOS (annualized)

2012

2011


2012

2011

Return on average assets (1)

0.45%

(0.09%)


0.01%

0.29%

Return on average common equity (2)

5.30%

(1.00%)


0.12%

3.38%

Net interest margin – tax-equivalent (3)

4.86%

4.79%


4.71%

4.77%

Net charge-offs to average loans – non-covered

1.57%

1.26%


1.28%

1.66%







COMMON SHARE DATA






Cash dividends declared – common

$         0.08

0.08


$         0.24

0.24

Stated book value – common

16.42

17.08


16.42

17.08

Tangible book value – common

12.35

12.93


12.35

12.93

Common shares outstanding at end of period

17,013,008

16,884,617


17,013,008

16,884,617

Weighted average shares outstanding – basic

16,988,150

16,875,918


16,955,130

16,843,716

Weighted average shares outstanding – diluted

16,988,150

16,903,031


16,955,130

16,871,010







CAPITAL RATIOS






Tangible equity to tangible assets

8.41%

8.72%


8.41%

8.72%

Tangible common equity to tangible assets

6.46%

6.75%


6.46%

6.75%

Tier I leverage ratio

10.06%

10.26%


10.06%

10.26%

Tier I risk-based capital ratio

14.99%

15.66%


14.99%

15.66%

Total risk-based capital ratio

16.26%

16.91%


16.26%

16.91%







AVERAGE BALANCES ($ in thousands)






Total assets

$ 3,314,887

3,293,758


$ 3,310,241

3,322,562

Loans

2,432,528

2,441,486


2,433,964

2,471,804

Earning assets

2,855,083

2,808,205


2,855,307

2,841,021

Deposits

2,822,388

2,724,418


2,804,524

2,767,222

Interest-bearing liabilities

2,550,689

2,592,873


2,564,113

2,616,157

Shareholders' equity

344,007

355,575


344,851

353,382







(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

September 30, 

2012

June 30, 

2012

March 31, 

2012

December 31, 

2011

September 30, 

2011







Net interest income – tax-equivalent (1)

$    34,849

33,338

32,478

32,314

33,878

Taxable equivalent adjustment (1)

376

387

387

394

389

Net interest income

34,473

32,951

32,091

31,920

33,489

Provision for loan losses – non-covered

5,970

5,194

18,557

6,907

6,441

Provision for loan losses – covered

1,103

1,273

2,998

2,971

2,705

Noninterest income

2,803

1,770

5,349

3,423

3,486

Noninterest expense

23,657

23,448

24,375

24,192

23,958

Income (loss) before income taxes

6,546

4,806

(8,490)

1,273

3,871

Income tax expense (benefit)

2,123

1,516

(3,308)

289

1,314

Net income (loss)

4,423

3,290

(5,182)

984

2,557

Preferred stock dividends

688

829

760

794

815

Accretion of preferred stock discount

2,474

Net income (loss) available to common shareholders

3,735

2,461

(5,942)

190

(732)







Earnings (loss) per common share – basic

0.22

0.15

(0.35)

0.01

(0.04)

Earnings (loss) per common share – diluted

0.22

0.15

(0.35)

0.01

(0.04)


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 Sept. 30,

2012


 

At June 30,

2012


 

At Dec. 31,

2011


 

At Sept. 30,

2011


One Year

Change

Assets










Cash and due from banks

$        79,991


58,872


80,341


75,772


5.6%

Interest bearing deposits with banks

203,212


203,313


135,826


167,712


21.2%

     Total cash and cash equivalents

283,203


262,185


216,167


243,484


16.3%











Investment securities

217,530


228,089


240,614


217,403


0.1%

Presold mortgages

4,380


4,053


6,090


3,823


14.6%











Loans – non-covered

2,137,074


2,114,906


2,069,152


2,058,724


3.8%

Loans – covered by FDIC loss share agreements

303,997


322,895


361,234


373,824


(18.7%)

     Total loans

2,441,071


2,437,801


2,430,386


2,432,548


0.4%

Allowance for loan losses – non-covered

(45,154)


(47,523)


(35,610)


(34,397)


31.3%

Allowance for loan losses – covered

(4,394)


(5,931)


(5,808)


(3,257)


34.9%

     Total allowance for loan losses

(49,548)


(53,454)


(41,418)


(37,654)


31.6%

     Net loans

2,391,523


2,384,347


2,388,968


2,394,894


(0.1%)











Premises and equipment

74,044


73,642


69,975


69,862


6.0%

FDIC indemnification asset

107,615


116,902


121,677


120,950


(11.0%)

Intangible assets

69,170


69,287


69,732


69,958


(1.1%)

Foreclosed real estate – non-covered

38,065


37,895


37,023


32,673


16.5%

Foreclosed real estate – covered

58,367


70,850


85,272


104,785


(44.3%)

Other assets

78,780


81,505


54,956


44,866


75.6%

     Total assets

$   3,322,677


3,328,755


3,290,474


3,302,698


0.6%





















Liabilities










Deposits:










     Non-interest bearing checking accounts

$      398,527


381,353


335,833


334,109


19.3%

     Interest bearing checking accounts

482,583


472,342


423,452


376,999


28.0%

     Money market accounts

533,462


541,319


509,801


502,235


6.2%

     Savings accounts

159,189


160,137


146,481


146,977


8.3%

     Brokered deposits

146,180


152,087


157,408


157,177


(7.0%)

     Internet time deposits

18,518


23,439


29,902


40,120


(53.8%)

     Other time deposits > $100,000

562,245


557,828


575,408


567,347


(0.9%)

     Other time deposits

533,760


549,793


576,752


604,440


(11.7%)

          Total deposits

2,834,464


2,838,298


2,755,037


2,729,404


3.8%











Repurchase agreements



17,105


60,498


(100.0%)

Borrowings

111,394


111,394


133,925


135,759


(17.9%)

Other liabilities

34,029


38,989


39,257


25,224


34.9%

     Total liabilities

2,979,887


2,988,681


2,945,324


2,950,885


1.0%











Shareholders' equity










Preferred stock

63,500


63,500


63,500


63,500


0.0%

Common stock

105,454


105,437


104,841


105,518


(0.1%)

Retained earnings

181,672


179,298


185,491


186,654


(2.7%)

Accumulated other comprehensive income (loss)

(7,836)


(8,161)


(8,682)


(3,859)


103.1%

     Total shareholders' equity

342,790


340,074


345,150


351,813


(2.6%)

Total liabilities and shareholders' equity

$   3,322,677


3,328,755


3,290,474


3,302,698


0.6%












 

First Bancorp and Subsidiaries

Financial Summary - Page 5



For the Three Months Ended

 

YIELD INFORMATION

September 30,

2012

June 30,

2012

March 31,

2012

December 31,

2011

September 30,

2011







Yield on loans

6.06%

5.88%

5.80%

5.74%

6.04%

Yield on securities – tax-equivalent (1)

3.45%

3.69%

3.84%

3.95%

4.14%

Yield on other earning assets

0.31%

0.35%

0.29%

0.34%

0.29%

   Yield on all interest earning assets

5.44%

5.31%

5.27%

5.29%

5.60%







Rate on interest bearing deposits

0.61%

0.66%

0.71%

0.77%

0.85%

Rate on other interest bearing liabilities

1.60%

1.54%

1.61%

1.27%

1.22%

   Rate on all interest bearing liabilities

0.66%

0.70%

0.76%

0.81%

0.88%

     Total cost of funds

0.57%

0.62%

0.67%

0.72%

0.78%







        Net interest margin – tax-equivalent (2)

4.86%

4.68%

4.59%

4.55%

4.79%

        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

($ in thousands)

 

September 30,

2012


 

June 30,

2012


 

March 31,

2012


 

December 31,

2011


 

September 30,

2011











Interest income – reduced by premium amortization on loans

$          (116)


(116)


(116)


(116)


(116)

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

4,587


3,290


2,578


1,730


3,339

Interest expense – reduced by premium amortization of deposits

 

17


 

22


 

33


 

58


 

96

Interest expense – reduced by premium amortization of borrowings

 


 


 

30


 

35


 

37

     Impact on net interest income

$         4,488


3,196


2,525


1,707


3,356


(1) Indemnification asset income is reduced by 80% of the amount of the accretion of loan discount, 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)

Sept. 30, 2012


June 30,

2012


March 31, 2012


Dec. 31, 2011


Sept. 30, 2011













Non-covered nonperforming assets











Nonaccrual loans

$      69,413


73,918


69,665


73,566


75,013


Troubled debt restructurings - accruing

38,522


20,684


10,619


11,720


11,257


Accruing loans > 90 days past due

-


-


-


-


-


     Total non-covered nonperforming loans

107,935


94,602


80,284


85,286


86,270


Foreclosed real estate

38,065


37,895


36,838


37,023


32,673


Total non-covered nonperforming assets

$    146,000


132,497


117,122


122,309


118,943













Covered nonperforming assets (1)











Nonaccrual loans (2)

$      37,619


39,075


42,369


41,472


36,536


Troubled debt restructurings - accruing

17,945


19,054


13,158


14,218


16,912


Accruing loans > 90 days past due

-


-


-


-


-


     Total covered nonperforming loans

55,564


58,129


55,527


55,690


53,448


Foreclosed real estate

58,367


70,850


79,535


85,272


104,785


Total covered nonperforming assets

$   113,931


128,979


135,062


140,962


158,233













     Total nonperforming assets

$   259,931


261,476


252,184


263,271


277,176


 

Asset Quality Ratios – All Assets











Net charge-offs to average loans - annualized

1.80%


0.96%


1.68%


1.00%


1.87%


Nonperforming loans to total loans

6.70%


6.27%


5.57%


5.80%


5.74%


Nonperforming assets to total assets

7.82%


7.86%


7.56%


8.00%


8.39%


Allowance for loan losses to total loans

2.03%


2.19%


2.17%


1.70%


1.55%













Asset Quality Ratios – Based on Non-covered Assets only



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

1.57%


0.79%


1.49%


1.09%


1.26%


Non-covered nonperforming loans to non-covered loans

5.05%


4.47%


3.83%


4.12%


4.19%


Non-covered nonperforming assets to total non-covered assets

4.93%


4.51%


4.02%


4.30%


4.21%


Allowance for loan losses to non-covered loans

2.11%


2.25%


2.22%


1.72%


1.67%













___________________________________________________________________________________________________________________

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

(2)  At September 30, 2012, the contractual balance of the nonaccrual loans covered by the FDIC loss share agreements was $67.9 million.

 

First Bancorp and Subsidiaries

Financial Summary - Page 7



For the Three Months Ended

NET INTEREST MARGIN, EXCLUDING LOAN DISCOUNT ACCRETION – RECONCILIATION    

($ in thousands)

 

 

September 30, 2012


 

 

June 30, 2012


 

 

March 31, 2012


 

 

Dec. 31,    2011


 

 

September 30,

2011











Net interest income, as reported

$        34,473


32,951


32,091


31,920


33,489

Tax-equivalent adjustment

376


387


387


394


389

Net interest income, tax-equivalent (A)

$        34,849


33,338


32,478


32,314


33,878

 

Average earning assets (B)

 

$   2,855,083


 

2,863,866


 

2,846,972


 

2,816,689


 

2,808,205

Tax-equivalent net interest

margin, annualized – as reported –  (A)/(B)

 

4.86%


 

4.68%


 

4.59%


 

4.55%


 

4.79%











Net interest income, tax-equivalent

$         34,849


33,338


32,478


32,314


33,878

Loan discount accretion

4,587


3,290


2,578


1,730


3,339

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

 

$         30,262


 

30,048


 

29,900


 

30,584


 

30,539

Average earnings assets  (B)

 

$    2,855,083


 

2,863,866


 

2,846,972


 

2,816,689


 

2,808,205

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

 

4.22%


 

4.22%


 

4.22%


 

4.31%


 

4.31%


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 September 30, 2012, the Company had a remaining loan discount balance of $85.9 million compared to $110.5 million at September 30, 2011. As the balances of the acquired loans 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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