News Release
For Immediate Release: | For More Information, Contact: | ||
April 28, 2020 | Elaine Pozarycki | ||
919-834-3090 | |||
First Bancorp Reports First Quarter Results
SOUTHERN PINES, N.C. - First Bancorp (NASDAQ - FBNC), the parent company of First Bank, announced today net income of $18.2 million, or $0.62 per diluted common share, for the three months ended March 31, 2020, a decrease of 17.3% in earnings per share from the $22.3 million, or $0.75 per diluted common share, recorded in the first quarter of 2019.
The decrease in earnings was primarily due an increase in the provision for loan losses, which amounted to $5.6 million for the three months ended March 31, 2020 compared to $0.5 million in the first quarter of 2019. The 2020 amount reflects approximately $4.3 million in provision related to COVID-19. As permitted by the Coronavirus Aid, Relief, and Economic Security (CARES) Act, the Company elected to defer the implementation of the Current Expected Credit Loss (CECL) methodology. Accordingly, the Company's provision for loan losses for the first quarter of 2020 is based on the limited information available and the conditions that existed at March 31, 2020 related to COVID-19, according to the pre-CECL incurred loss methodology for determining loan losses. See further discussion below.
Additional COVID-19 Related Impact
The impact of COVID-19 is evolving rapidly and its future effects are uncertain at this time. The actual impact will depend on many factors beyond our Company’s control. However, the Company is taking every step to protect the health and safety of its employees and customers and to work with its customers experiencing economic hardship resulting from the pandemic. The Company has the majority of non-branch personnel working remotely. Branch lobbies are currently closed, but the Company is servicing clients smoothly through its on-line banking capabilities, drive through facilities and ATMs, or by appointment.
The Company remains active in reaching out to customers and has taken many measures to provide relief and support where reasonably possible. Subsequent to quarter end and through April 23, 2020, the Company approved 1,995 loans totaling $208 million to small businesses through the SBA’s Paycheck Protection Program. The Company also initiated an option for borrowers in good-standing to defer interest payments on their loans for 90 days. As of April 23, 2020, the Company had deferred loan payments on 1,062 loans totaling $506 million.
The Company will continue to provide fast and flexible responses to the quickly changing circumstances and is confident it will navigate successfully through these trying times.
Net Interest Income and Net Interest Margin
Net interest income for the first quarter of 2020 was $54.8 million, a 2.6% increase from the $53.4 million recorded in the first quarter of 2019. The increase in net interest income was primarily due to growth in interest-
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earning assets, which have increased by approximately 4% over the past year, but was partially offset by a lower net interest margin.
The Company’s net interest margin (a non-GAAP measure calculated by dividing tax-equivalent net interest income by average earning assets) for the first quarter of 2020 was 3.96%, which was 10 basis points lower than the 4.06% realized in the first quarter of 2019. The lower margin was 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 resulted in asset yields declining by 20 basis points from the first quarter of 2019, while the Company's cost of funds declined by 10 basis points.
In comparing the first quarter of 2020 to the fourth quarter of 2019, asset yields declined by 3 basis points while the cost of funds declined by 7 basis points, which resulted in the Company's net interest margin increasing by three basis points, from 3.93% in the fourth quarter of 2019 to 3.96% in the first quarter of 2020. In each of these quarters, the Company recorded prepayment fees and interest recoveries that positively impacted the net interest margin by 4-5 basis points.
Provision for Loan Losses and Asset Quality
As previously noted, the Company deferred implementation of CECL and recorded a provision for loan losses of $5.6 million in the first quarter of 2020 compared to a provision for loan losses of $0.5 million in the first quarter of 2019. The 2020 amount reflects approximately $4.3 million in provision related to COVID-19 and was based on the limited information available and the conditions that existed at March 31, 2020 related to COVID-19, according to the pre-CECL incurred loss methodology for determining loan losses.
In determining the COVID-19 related provision, the Company reviewed deferrals that had been requested from borrowers and also reviewed the industries most at risk from the immediate impact of the shutdown. In this analysis, the Company identified approximately $553 million of loans to the following industries: hotels, restaurants, retail stores, travel accommodations, child care facilities, arts and entertainment, barber shops and beauty salons, car and boat dealers, and mini-storage facilities, as well as all credit cards. Existing risk grades were adjusted downwards for each of the loans in these industries and historical loss rates were applied.
The Company is prepared for CECL implementation but elected to defer its effective date, as permitted by the CARES Act, because of the challenges associated with developing a reliable forecast of losses that may result from the unprecedented COVID-19 pandemic. The Company continues to update its CECL model, which is significantly impacted by forecasted economic conditions. The Company subscribes to Moody's for economic forecasts for use in its CECL model. Using the Moody's "Baseline" scenario as of April 1, 2020, which reflected early estimates of the impact of COVID-19 on economic statistics, the Company would have likely recorded approximately a $20 million provision for loan losses for the first quarter of 2020 compared to the $5.6 million reported. Using the Moody's "Baseline" scenario that was released on April 17, 2020 and which reflected updated estimates of the impact of COVID-19 on economic statistics, the Company would have likely recorded approximately a $43 million provision for loan losses in the first quarter of 2020. These estimated amounts exclude the initial January 1, 2020 adjustment to the allowance for loan losses and shareholders' equity upon the initial adoption of CECL of approximately $22 million.
Total net charge-offs for the first quarter of 2020 amounted to $2.5 million, or 0.22% of average loans, compared to net charge-offs of $0.4 million, or 0.04% of average loans, in the first quarter of 2019. Approximately $1.7 million of the first quarter charge-offs had been previously specifically reserved for at December 31, 2019. Total nonperforming assets amounted to $38.3 million at March 31, 2020 compared to $39.5 million a year earlier.
Noninterest Income
Total noninterest income was $13.7 million and $14.1 million for the three months ended March 31, 2020 and 2019, respectively.
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The line item "Other service charges, commissions, and fees" includes $0.5 million of impairment of the Company's SBA servicing asset due to the lower fair value of that asset resulting from market conditions at March 31, 2020. Fees from presold mortgages amounted to $1.8 million for the first quarter of 2020 compared to $0.5 million in the first quarter of 2019, with the increase being primarily due to lower interest rates that resulted in increases in mortgage loan volume.
SBA loan sale gains amounted to $0.6 million for the first quarter of 2020 compared to $2.1 million in the first quarter of 2019. The Company had intended to sell an additional $18.4 million of SBA loans in the first quarter of 2020, however sales scheduled to occur in late March did not occur due to market conditions. Accordingly, the Company has reflected those loans as "held for sale" in the accompanying Balance Sheet.
Noninterest Expenses
Noninterest expenses amounted to $40.1 million in the first quarter of 2020 compared to $38.8 million recorded in the first quarter of 2019, an increase of 3.4%.
Income Taxes
The Company’s effective tax rate was 20.3% for the first quarter of 2020, compared to 20.9% in the first quarter of 2019.
Balance Sheet and Capital
Total assets at March 31, 2020 amounted to $6.4 billion, a 5.4% increase from a year earlier. Loan growth for the three months ended March 31, 2020 amounted to $99.2 million, or 9.0% annualized, and deposit growth amounted to $113.6 million, or 9.3% annualized.
The Company remains well-capitalized by all regulatory standards, with an estimated Total Risk-Based Capital Ratio at March 31, 2020 of 14.30%, an increase from the 14.21% reported at March 31, 2019. The Company’s tangible common equity to tangible assets ratio was 10.00% at March 31, 2020, an increase of 79 basis points from a year earlier.
Comments of the CEO and Other Business Matters
Richard H. Moore, CEO of First Bancorp, commented, “Our immediate focus is providing excellent service for our customers during the current pandemic and our team has done an outstanding job. I am proud of our hard working associates who have gone above and beyond. I am also pleased that the Company has a strong balance sheet and solid profitability that positions us well during this unprecedented pandemic and beyond. We wish our customers and communities well during these extraordinary times."
The following is additional discussion of business development and other miscellaneous matters affecting the Company during the first quarter of 2020:
• | On March 13, 2020, the Company announced a quarterly cash dividend of $0.18 per share payable on April 24, 2020 to shareholders of record on March 31, 2020. This dividend rate represents a 50% increase over the dividend rate declared in the first quarter of 2019. |
• | During the first quarter of 2020, the Company repurchased 576,406 shares of its common stock valued at $20 million, at an average stock price of $34.70 per share. The Company suspended share repurchases in March 2020 for the foreseeable future. |
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First Bancorp is a bank holding company headquartered in Southern Pines, North Carolina, with total assets of approximately $6.4 billion. Its principal activity is the ownership and operation of First Bank, a state-chartered community
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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 March 31, | Percent | |||||||
($ in thousands except per share data - unaudited) | 2020 | 2019 | Change | |||||
INCOME STATEMENT | ||||||||
Interest income | ||||||||
Interest and fees on loans | $ | 55,297 | 53,960 | |||||
Interest on investment securities | 5,638 | 5,074 | ||||||
Other interest income | 1,098 | 2,701 | ||||||
Total interest income | 62,033 | 61,735 | 0.5% | |||||
Interest expense | ||||||||
Interest on deposits | 5,773 | 5,577 | ||||||
Interest on borrowings | 1,501 | 2,797 | ||||||
Total interest expense | 7,274 | 8,374 | (13.1)% | |||||
Net interest income | 54,759 | 53,361 | 2.6% | |||||
Total provision for loan losses | 5,590 | 500 | 1,018.0% | |||||
Net interest income after provision for loan losses | 49,169 | 52,861 | (7.0)% | |||||
Noninterest income | ||||||||
Service charges on deposit accounts | 3,337 | 2,945 | ||||||
Other service charges, commissions, and fees | 4,069 | 4,506 | ||||||
Fees from presold mortgage loans | 1,841 | 545 | ||||||
Commissions from sales of insurance and financial products | 2,068 | 2,029 | ||||||
SBA consulting fees | 1,027 | 1,263 | ||||||
SBA loan sale gains | 647 | 2,062 | ||||||
Bank-owned life insurance income | 642 | 646 | ||||||
Other gains (losses), net | 74 | 82 | ||||||
Total noninterest income | 13,705 | 14,078 | (2.6)% | |||||
Noninterest expenses | ||||||||
Salaries expense | 20,110 | 18,965 | ||||||
Employee benefit expense | 4,547 | 4,588 | ||||||
Occupancy and equipment related expense | 4,103 | 4,123 | ||||||
Merger and acquisition expenses | — | 110 | ||||||
Intangibles amortization expense | 1,055 | 1,332 | ||||||
Foreclosed property gains (losses), net | 159 | 245 | ||||||
Other operating expenses | 10,102 | 9,411 | ||||||
Total noninterest expenses | 40,076 | 38,774 | 3.4% | |||||
Income before income taxes | 22,798 | 28,165 | (19.1)% | |||||
Income tax expense | 4,618 | 5,880 | (21.5)% | |||||
Net income | $ | 18,180 | 22,285 | (18.4)% | ||||
Earnings per common share - diluted | $ | 0.62 | 0.75 | (17.3)% | ||||
ADDITIONAL INCOME STATEMENT INFORMATION | ||||||||
Net interest income, as reported | $ | 54,759 | 53,361 | |||||
Tax-equivalent adjustment (1) | 334 | 424 | ||||||
Net interest income, tax-equivalent | $ | 55,093 | 53,785 | 2.4% | ||||
(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 |
Three Months Ended March 31, | |||||
PERFORMANCE RATIOS (annualized) | 2020 | 2019 | |||
Return on average assets (1) | 1.18 | % | 1.52 | % | |
Return on average common equity (2) | 8.52 | % | 11.66 | % | |
Net interest margin - tax-equivalent (3) | 3.96 | % | 4.06 | % | |
Net charge-offs to average loans | 0.22 | % | 0.04 | % | |
COMMON SHARE DATA | |||||
Cash dividends declared - common | $ | 0.18 | 0.12 | ||
Stated book value - common | 29.69 | 26.50 | |||
Tangible book value - common | 21.09 | 17.94 | |||
Common shares outstanding at end of period | 29,040,827 | 29,746,455 | |||
Weighted average shares outstanding - diluted | 29,399,114 | 29,743,395 | |||
CAPITAL RATIOS | |||||
Tangible common equity to tangible assets | 10.00 | % | 9.21 | % | |
Common equity tier I capital ratio - estimated | 12.68 | % | 12.51 | % | |
Tier I leverage ratio - estimated | 11.05 | % | 10.68 | % | |
Tier I risk-based capital ratio - estimated | 13.77 | % | 13.72 | % | |
Total risk-based capital ratio - estimated | 14.30 | % | 14.21 | % | |
AVERAGE BALANCES ($ in thousands) | |||||
Total assets | $ | 6,183,098 | 5,945,049 | ||
Loans | 4,512,893 | 4,280,272 | |||
Earning assets | 5,595,734 | 5,372,766 | |||
Deposits | 4,950,199 | 4,704,231 | |||
Interest-bearing liabilities | 3,739,467 | 3,773,714 | |||
Shareholders’ equity | 858,592 | 775,059 | |||
(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.
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TREND INFORMATION
($ in thousands except per share data) | For the Three Months Ended | ||||||||||
INCOME STATEMENT | Mar. 31, 2020 | Dec. 31, 2019 | Sept. 30, 2019 | June 30, 2019 | Mar. 31, 2019 | ||||||
Net interest income - tax-equivalent (1) | $ | 55,093 | 55,038 | 54,191 | 54,832 | 53,785 | |||||
Taxable equivalent adjustment (1) | 334 | 382 | 413 | 423 | 424 | ||||||
Net interest income | 54,759 | 54,656 | 53,778 | 54,409 | 53,361 | ||||||
Provision (reversal) for loan losses | 5,590 | 3,176 | (1,105 | ) | (308 | ) | 500 | ||||
Noninterest income | 13,705 | 14,662 | 15,156 | 15,634 | 14,078 | ||||||
Noninterest expense | 40,076 | 39,891 | 38,446 | 40,084 | 38,774 | ||||||
Income before income taxes | 22,798 | 26,251 | 31,593 | 30,267 | 28,165 | ||||||
Income tax expense | 4,618 | 5,368 | 6,574 | 6,408 | 5,880 | ||||||
Net income | 18,180 | 20,883 | 25,019 | 23,859 | 22,285 | ||||||
Earnings per common share - diluted | 0.62 | 0.71 | 0.84 | 0.80 | 0.75 | ||||||
Cash dividends declared per share | 0.18 | 0.18 | 0.12 | 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 3 |
CONSOLIDATED BALANCE SHEETS ($ in thousands - unaudited) | ||||||||||||
At Mar. 31, 2020 | At Dec. 31, 2019 | At Mar. 31, 2019 | One Year Change | |||||||||
Assets | ||||||||||||
Cash and due from banks | $ | 93,666 | 64,519 | 80,620 | 16.2 | % | ||||||
Interest-bearing deposits with banks | 282,683 | 166,783 | 366,187 | (22.8 | )% | |||||||
Total cash and cash equivalents | 376,349 | 231,302 | 446,807 | (15.8 | )% | |||||||
Investment securities | 867,773 | 889,877 | 730,512 | 18.8 | % | |||||||
Presold mortgages | 14,861 | 19,712 | 3,318 | 347.9 | % | |||||||
SBA loans held for sale | 18,449 | — | — | n/m | ||||||||
Total loans | 4,552,708 | 4,453,466 | 4,303,787 | 5.8 | % | |||||||
Allowance for loan losses | (24,498 | ) | (21,398 | ) | (21,095 | ) | 16.1 | % | ||||
Net loans | 4,528,210 | 4,432,068 | 4,282,692 | 5.7 | % | |||||||
Premises and equipment | 113,669 | 114,859 | 118,740 | (4.3 | )% | |||||||
Operating right-of-use lease assets | 19,347 | 19,669 | 18,985 | 1.9 | % | |||||||
Intangible assets | 249,829 | 251,585 | 254,449 | (1.8 | )% | |||||||
Foreclosed real estate | 3,487 | 3,873 | 6,390 | (45.4 | )% | |||||||
Bank-owned life insurance | 105,083 | 104,441 | 102,524 | 2.5 | % | |||||||
Other assets | 79,001 | 76,253 | 85,831 | (8.0 | )% | |||||||
Total assets | $ | 6,376,058 | 6,143,639 | 6,050,248 | 5.4 | % | ||||||
Liabilities | ||||||||||||
Deposits: | ||||||||||||
Noninterest-bearing checking accounts | $ | 1,580,849 | 1,515,977 | 1,390,516 | 13.7 | % | ||||||
Interest-bearing checking accounts | 922,985 | 912,784 | 922,254 | 0.1 | % | |||||||
Money market accounts | 1,224,414 | 1,173,107 | 1,079,002 | 13.5 | % | |||||||
Savings accounts | 431,377 | 424,415 | 417,812 | 3.2 | % | |||||||
Brokered deposits | 85,642 | 86,141 | 216,616 | (60.5 | )% | |||||||
Internet time deposits | 698 | 698 | 3,428 | (79.6 | )% | |||||||
Other time deposits > $100,000 | 553,422 | 563,108 | 506,148 | 9.3 | % | |||||||
Other time deposits | 245,601 | 255,125 | 261,462 | (6.1 | )% | |||||||
Total deposits | 5,044,988 | 4,931,355 | 4,797,238 | 5.2 | % | |||||||
Borrowings | 402,185 | 300,671 | 406,125 | (1.0 | )% | |||||||
Operating lease liabilities | 19,578 | 19,855 | 18,976 | 3.2 | % | |||||||
Other liabilities | 47,109 | 39,357 | 39,770 | 18.5 | % | |||||||
Total liabilities | 5,513,860 | 5,291,238 | 5,262,109 | 4.8 | % | |||||||
Shareholders’ equity | ||||||||||||
Common stock | 410,236 | 429,514 | 434,948 | (5.7 | )% | |||||||
Retained earnings | 430,709 | 417,764 | 360,455 | 19.5 | % | |||||||
Stock in rabbi trust assumed in acquisition | (2,602 | ) | (2,587 | ) | (3,245 | ) | (19.8 | )% | ||||
Rabbi trust obligation | 2,602 | 2,587 | 3,245 | (19.8 | )% | |||||||
Accumulated other comprehensive income (loss) | 21,253 | 5,123 | (7,264 | ) | (392.6 | )% | ||||||
Total shareholders’ equity | 862,198 | 852,401 | 788,139 | 9.4 | % | |||||||
Total liabilities and shareholders’ equity | $ | 6,376,058 | 6,143,639 | 6,050,248 | 5.4 | % | ||||||
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First Bancorp and Subsidiaries Financial Summary - Page 4 |
For the Three Months Ended | ||||||||||
YIELD INFORMATION | Mar. 31, 2020 | Dec. 31, 2019 | Sept. 30, 2019 | June 30, 2019 | Mar. 31, 2019 | |||||
Yield on loans | 4.93 | % | 5.03 | % | 5.02 | % | 5.16 | % | 5.11 | % |
Yield on securities | 2.65 | % | 2.64 | % | 2.74 | % | 2.81 | % | 2.95 | % |
Yield on other earning assets | 1.95 | % | 1.91 | % | 2.42 | % | 2.51 | % | 2.77 | % |
Yield on all interest-earning assets | 4.46 | % | 4.49 | % | 4.55 | % | 4.67 | % | 4.66 | % |
Rate on interest bearing deposits | 0.68 | % | 0.76 | % | 0.77 | % | 0.75 | % | 0.67 | % |
Rate on other interest-bearing liabilities | 1.91 | % | 2.31 | % | 2.65 | % | 2.83 | % | 2.79 | % |
Rate on all interest-bearing liabilities | 0.78 | % | 0.89 | % | 0.93 | % | 0.93 | % | 0.90 | % |
Total cost of funds | 0.56 | % | 0.63 | % | 0.66 | % | 0.67 | % | 0.66 | % |
Net interest margin (1) | 3.94 | % | 3.90 | % | 3.92 | % | 4.03 | % | 4.03 | % |
Net interest margin - tax-equivalent (2) | 3.96 | % | 3.93 | % | 3.95 | % | 4.06 | % | 4.06 | % |
Average prime rate | 4.42 | % | 4.83 | % | 5.27 | % | 5.50 | % | 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) | Mar. 31, 2020 | Dec. 31, 2019 | Sept. 30, 2019 | June 30, 2019 | Mar. 31, 2019 | ||||||||||
Interest income - increased by accretion of loan discount on acquired loans | $ | 1,241 | 1,161 | 959 | 1,336 | 1,132 | |||||||||
Interest income - increased by accretion of loan discount on retained portions of SBA loans | 600 | 340 | 365 | 394 | 287 | ||||||||||
Interest expense - reduced by premium amortization of deposits | 31 | 38 | 44 | 50 | 58 | ||||||||||
Interest expense - increased by discount accretion of borrowings | (45 | ) | (45 | ) | (46 | ) | (45 | ) | (45 | ) | |||||
Impact on net interest income | $ | 1,827 | 1,494 | 1,322 | 1,735 | 1,432 | |||||||||
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First Bancorp and Subsidiaries Financial Summary - Page 5 |
ASSET QUALITY DATA ($ in thousands) | Mar. 31, 2020 | Dec. 31, 2019 | Sept. 30, 2019 | June 30, 2019 | Mar. 31, 2019 | ||||||||||
Nonperforming assets | |||||||||||||||
Nonaccrual loans | $ | 25,066 | 24,866 | 19,720 | 17,375 | 20,684 | |||||||||
Troubled debt restructurings - accruing | 9,747 | 9,053 | 9,566 | 11,890 | 12,457 | ||||||||||
Accruing loans > 90 days past due | — | — | — | — | — | ||||||||||
Total nonperforming loans | 34,813 | 33,919 | 29,286 | 29,265 | 33,141 | ||||||||||
Foreclosed real estate | 3,487 | 3,873 | 4,589 | 5,107 | 6,390 | ||||||||||
Total nonperforming assets | $ | 38,300 | 37,792 | 33,875 | 34,372 | 39,531 | |||||||||
Purchased credit impaired loans not included above (1) | $ | 9,839 | 12,664 | 13,798 | 14,175 | 15,867 | |||||||||
Asset Quality Ratios | |||||||||||||||
Net quarterly charge-offs to average loans - annualized | 0.22 | % | 0.09 | % | 0.04 | % | — | % | 0.04 | % | |||||
Nonperforming loans to total loans | 0.76 | % | 0.76 | % | 0.67 | % | 0.67 | % | 0.77 | % | |||||
Nonperforming assets to total assets | 0.60 | % | 0.62 | % | 0.56 | % | 0.57 | % | 0.65 | % | |||||
Allowance for loan losses to total loans | 0.54 | % | 0.48 | % | 0.44 | % | 0.48 | % | 0.49 | % | |||||
(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 $9.9 million, respectively, in purchased credit impaired loans in accordance with ASC 310-30 accounting guidance. These loans are excluded from the nonperforming loan amounts.
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First Bancorp and Subsidiaries Financial Summary - Page 6 |
For the Three Months Ended | |||||||||||||||
NET INTEREST MARGIN, EXCLUDING LOAN DISCOUNT ACCRETION - RECONCILIATION ($ in thousands) | Mar. 31, 2020 | Dec. 31, 2019 | Sept. 30, 2019 | June 30, 2019 | Mar. 31, 2019 | ||||||||||
Net interest income, as reported | $ | 54,759 | 54,656 | 53,778 | 54,409 | 53,361 | |||||||||
Tax-equivalent adjustment | 334 | 382 | 413 | 423 | 424 | ||||||||||
Net interest income, tax-equivalent (A) | $ | 55,093 | 55,038 | 54,191 | 54,832 | 53,785 | |||||||||
Average earning assets (B) | $ | 5,595,734 | 5,560,099 | 5,440,014 | 5,417,284 | 5,372,766 | |||||||||
Tax-equivalent net interest margin, annualized - as reported - (A)/(B) | 3.96 | % | 3.93 | % | 3.95 | % | 4.06 | % | 4.06 | % | |||||
Net interest income, tax-equivalent | $ | 55,093 | 55,038 | 54,191 | 54,832 | 53,785 | |||||||||
Loan discount accretion | 1,841 | 1,501 | 1,324 | 1,730 | 1,419 | ||||||||||
Net interest income, tax-equivalent, excluding loan discount accretion (A) | $ | 53,252 | 53,537 | 52,867 | 53,102 | 52,366 | |||||||||
Average earnings assets (B) | $ | 5,595,734 | 5,560,099 | 5,440,014 | 5,417,284 | 5,372,766 | |||||||||
Tax-equivalent net interest margin, excluding impact of loan discount accretion, annualized - (A) / (B) | 3.83 | % | 3.82 | % | 3.86 | % | 3.93 | % | 3.95 | % | |||||
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 March 31, 2020, the Company had a remaining loan discount balance on acquired loans of $11.5 million compared to $16.1 million at March 31, 2019. At March 31, 2020, the Company had a remaining loan discount balance on SBA loans of $6.8 million compared to $6.2 million at March 31, 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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