EX-99.1 2 ex99-1.txt News Release For Immediate Release: For More Information, July 27, 2006 Contact: James H. Garner 910-576-6171 First Bancorp Reports Second Quarter Results; Record Loan Growth Achieved for Second Consecutive Quarter TROY, N.C. - First Bancorp (NASDAQ - FBNC), the parent company of First Bank, announced net income today of $4,795,000 for the three months ended June 30, 2006, a 3.1% increase over the $4,652,000 reported for the corresponding period of 2005. Diluted earnings per share for the second quarter of 2006 amounted to $0.33, a 3.1% increase over the $0.32 reported for the second quarter of 2005. For the six month period ended June 30, 2006, net income amounted to $9,786,000, a 4.5% increase over the $9,368,000 reported for the first half of 2005. Diluted earnings per share amounted to $0.68 for the first six months of 2006, an increase of 4.6% over the $0.65 reported in the comparable period of 2005. During the second quarter of 2006, loans outstanding grew by $83 million, or 21.3% on an annualized basis, the highest increase ever experienced by the Company in a single quarter (excluding quarters that were impacted by acquisition-related growth). This follows loan growth of $71 million achieved in the first quarter of this year, which was also a record for the Company. Key performance ratios for the three months ended June 30, 2006 include: * Return on average assets of 1.02% * Return on average equity of 11.83% * Net charge-offs to average loans of 0.09% * Net interest margin of 4.22% * Nonperforming assets to total assets at quarter end of 0.30% * Efficiency ratio of 58.29% Total assets at June 30, 2006 amounted to $1.99 billion, 14.6% higher than a year earlier. Total loans at June 30, 2006 amounted to $1.64 billion, a 14.7% increase from a year earlier, and total deposits amounted to $1.59 billion at June 30, 2006, an 8.1% increase from a year earlier. The increase in loans and deposits over the past twelve months resulted in an increase in the Company's net interest income when comparing the three and six month periods of 2006 to comparable periods in 2005. Net interest income for the second quarter of 2006 amounted to $18.4 million, an 8.4% increase over the $17.0 million recorded in the second quarter of 2005. Net interest income for the six months ended June 30, 2006 amounted to $36.3 million, a 9.0% increase over the $33.3 million recorded in the same six month period in 2005. The impact of the growth in loans and deposits on the Company's net interest income was partially offset by declines in the Company's net interest margin (tax-equivalent net interest income divided by average earning assets). The Company's net interest margin for the second quarter of 2006 was 4.22% compared to 4.31% for the second quarter of 2005. The Company's net interest margin for the first six months of 2006 was 4.28% compared to 4.32% for the same six months of 2005. The 4.22% net interest margin realized in the second quarter of 2006 was an 11 basis point decrease from the first quarter of 2006 net interest margin of 4.33%. The compressing margin is primarily due to deposit rates paid by the Company rising by more than loan and investment yields. The Company has also been negatively impacted by customers shifting their funds from low cost deposits to higher cost deposits as rates have risen. The Company's provision for loan losses amounted to $1,400,000 in the second quarter of 2006, an increase of 65.7% over the $845,000 recorded in the second quarter of 2005. The provision for loan losses for the first six months of 2006 was $2,415,000, an increase of 69.5% over the $1,425,000 recorded in first half of 2005. The higher provisions are a result of the strong loan growth realized in 2006, as asset quality ratios have remained stable and compare favorably to peers. Loan growth was $83 million in the second quarter of 2006 compared to $31 million in the second quarter of 2005, while loan growth was $153 million for the first half of 2006 compared to $59 million for the first half of 2005. The Company's ratios of annualized net charge-offs to average loans were 9 basis points and 6 basis points for the three and six month periods in 2006, respectively, compared to 8 basis points for each of the three and six month periods in 2005. The Company's level of nonperforming assets to total assets was 0.30% at June 30, 2006 compared to 0.36% a year earlier. Noninterest income amounted to $3.8 million in the second quarter of 2006, a 3.6% increase from the $3.7 million recorded in the second quarter of 2005. Noninterest income for the six months ended June 30, 2006 amounted to $7.8 million, an increase of 5.1% from the $7.4 million recoded in the first half of 2005. Gains from sales of securities and "other losses" amounted to a net loss of $106,000 in the second quarter of 2006 compared to a net loss of $25,000 in the second quarter of 2005. For the six months ended June 30, 2006, gains from sales of securities and "other losses" amounted to a net loss of $173,000 compared to a net loss $57,000 in the first half of 2005. During the second quarter of 2006, the Company recorded an "other loss" of $230,000 related to a merchant card customer of the Company that sells furniture over the internet. The furniture store did not deliver furniture that its customers had ordered and paid for, and was unable to refund their credit card purchases. As the furniture store's credit card processor, the Company became liable for the amounts that were required to be refunded. Through June 30, 2006, the Company had funded $240,000 in customer refunds, while the total exposure is believed to be approximately $1.5 million. The Company is vigorously pursuing repayment of these advances from the furniture store. The furniture store is under new management and intends to repay the Company for all funds advanced. Although the furniture store has begun repaying the Company, the Company determined that recording a $230,000 loss was prudent to reserve for this situation. The Company reports outstanding advances related to this situation as an "other asset," and within the line item - "Other assets - primarily other real estate" in the Asset Quality Data table in the accompanying Financial Summary, while the corresponding reserve is classified as a valuation allowance within other assets. Noninterest expenses amounted to $13.1 million in the second quarter of 2006, a 6.6% increase over the $12.3 million recorded in the comparable period of 2005. Noninterest expenses for the six months ended June 30, 2006 amounted to $25.8 million, a 7.6% increase from the $24.0 million recorded in the first six months of 2005. The increase in noninterest expenses is primarily attributable to costs associated with the Company's overall growth in loans, deposits and branch network. Additionally, in accordance with the new accounting requirements regarding stock-based compensation (FASB Statement 123(r)) that were effective on January 1, 2006, the Company recorded stock option expense of $244,000 ($166,000 after-tax effect) and $291,000 ($212,000 after-tax effect) for the three and six month periods ended June 30, 2006, respectively. Noninterest expenses for the second quarter of 2005 were impacted by several expenses that did not recur in 2006 totaling approximately $500,000, including; immediately vested post-retirement benefits granted to the Company's CEO totaling $196,000, external Sarbanes-Oxley costs related to the prior year SOX certification of $181,000, and public relation expenses of $123,000 associated with the Company's sponsorship of the 2005 U.S. Open Golf Tournament that was held in the Company's largest market - Moore County, North Carolina. The Company's effective tax rate was 38%-39% for each of the three and six month periods in 2005 and 2006. James H. Garner, President and CEO of First Bancorp, commented on the quarter's results, "Like many banks, we have experienced compression in our net interest margin brought on by rising rates, competitive pricing pressure and the flat yield curve. But I am pleased with this quarter's results, especially the strong balance sheet growth that we have achieved thus far in 2006. The record loan growth has negatively impacted earnings in the short term, as we must set aside loss reserves for the new loans. But in the long term, this growth should improve our bottom line." Mr. Garner continued, "I am very excited to report that we are in the final stages of planning for four full-service branches in the high-growth southeastern coastal region of North Carolina, with two branches planned for Wilmington, one for Shallotte, and one for Leland. I am pleased to say that we already have several high-quality employees in place who are eager to begin serving the citizens in these markets as soon as the doors open, which we expect will occur in the fourth quarter of this year. We have operated a loan production office in Wilmington since late last year and have achieved loan growth there beyond our expectations. I believe this area represents a great opportunity of future growth for the Company." Mr. Garner concluded, "I would also like to formally welcome our newest customers in Dublin, Virginia, who joined us two weeks ago when we completed the purchase of their branch from First Citizens Bank. We assumed approximately $20 million in deposits in this branch. We retained all of the top-notch branch staff who continue to provide the best in community banking to their customers. The customers and staff are a perfect fit for our bank, and we are very happy they have joined us." Mr. Garner also noted the following corporate developments: o As previously noted, on July 7, 2006, the Company completed the purchase of a branch in Dublin, Virginia from First Citizens Bank with approximately $20 million in deposits. o On April 26, 2006, the Company announced that it had entered into an agreement to purchase a bank branch from Bank of the Carolinas in Carthage, North Carolina. The branch has approximately $25 million in deposits. The Company has received all regulatory approvals, and the completion of the purchase is expected to occur in September. o On April 20, 2006 the Company opened a loan production office in Shallotte, North Carolina, with plans to upgrade to a full service branch in the fourth quarter of 2006. o During the second quarter of 2006, the Company completed construction of three new branch facilities in Mayodan, Angier and Sanford that replaced existing branches. The new Mayodan branch was constructed on an adjacent lot to the previous facility and opened on April 24, 2006. The new Angier branch located at 415 North Raleigh Street opened on May 1, 2006, and replaced the existing location at 20 North Broad Street. The new Sanford location on Spring Lane (next to Applebee's), opened on June 5, 2006, and replaced the nearby branch located in the Spring Lane Galleria. o On April 10, 2006, the Company upgraded its Mooresville loan production office located in the Mooresville Plaza Shopping Center to a full service bank branch. The loan production office opened on October 15, 2005 and quickly grew to a level that necessitated this upgrade in service in order to better serve its customers. o On May 24, 2006, the Company announced a quarterly dividend of 18 cents per share payable on July 25, 2006 to shareholders of record on June 30, 2006. The current dividend rate is an increase of 5.9% over the dividend rate paid in the same period of 2005. o The Company repurchased 53,000 shares of First Bancorp stock during the second quarter of 2006 at an average price of $20.97 per share. First Bancorp is a bank holding company based in Troy, North Carolina with total assets of approximately $2.0 billion. Its principal activity is the ownership and operation of First Bank, a state-chartered community bank that operates 63 branch offices, with 56 branches operating in a nineteen county market area in the central piedmont region of North Carolina, 3 branches in Dillon County, South Carolina, and 4 branches in Virginia (Abingdon, Dublin, Radford, and Wytheville), where First Bank does business as First Bank of Virginia. The Company also has loan production offices in Wilmington, North Carolina and Blacksburg, Virginia. First Bancorp's common stock is traded on the NASDAQ National Market under the symbol FBNC. Please visit our website at www.firstbancorp.com. For additional financial data, please see the attached Financial Summary. This press release contains statements that could be deemed 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," 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. Additional discussion about the risk factors associated with the Company's business and the factors that could influence forward-looking statements is included in the Company's periodic filings with the Securities and Exchange Commission, including the "Risk Factors" section of the Annual Report on Form 10-K.
========================================================================================== First Bancorp and Subsidiaries Financial Summary ========================================================================================== Three Months Ended June 30, -------------------- Percent ($ in thousands except per share data - unaudited) 2006 2005 Change ----------------------------------------------------------------------------------------- INCOME STATEMENT Interest income --------------- Interest and fees on loans $ 29,215 22,732 Interest on investment securities 1,529 1,528 Other interest income 571 447 -------- -------- Total interest income 31,315 24,707 26.7% -------- -------- Interest expense ---------------- Interest on deposits 10,813 6,690 Other, primarily borrowings 2,058 1,010 -------- -------- Total interest expense 12,871 7,700 67.2% -------- -------- Net interest income 18,444 17,007 8.4% Provision for loan losses 1,400 845 65.7% -------- -------- Net interest income after provision for loan losses 17,044 16,162 5.5% -------- -------- Noninterest income ------------------ Service charges on deposit accounts 2,225 2,145 Other service charges, commissions, and fees 1,119 935 Fees from presold mortgages 244 285 Commissions from financial product sales 325 314 Data processing fees 37 58 Securities gains 205 2 Other gains (losses) (311) (27) -------- -------- Total noninterest income 3,844 3,712 3.6% -------- -------- Noninterest expenses -------------------- Personnel expense 7,520 7,184 Occupancy and equipment expense 1,676 1,491 Intangibles amortization 60 73 Other operating expenses 3,808 3,512 -------- -------- Total noninterest expenses 13,064 12,260 6.6% -------- -------- Income before income taxes 7,824 7,614 2.8% Income taxes 3,029 2,962 2.3% -------- -------- Net income $ 4,795 4,652 3.1% ======== ======== Earnings per share - basic $ 0.34 0.33 3.0% Earnings per share - diluted 0.33 0.32 3.1% ADDITIONAL INCOME STATEMENT INFORMATION --------------------------------------- Net interest income, as reported $ 18,444 17,007 Tax-equivalent adjustment (1) 125 111 -------- -------- Net interest income, tax-equivalent $ 18,569 17,118 8.5% ======== ======== -----------------------------------------------------------------------------------------
(1) This amount reflects the tax benefit that the Company receives related to its tax-exempt loans and securities, which carry interest rates lower than similar taxable investments due to their tax exempt status. This amount has been computed assuming a 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) 2006 2005 Change ----------------------------------------------------------------------------------------- INCOME STATEMENT Interest income --------------- Interest and fees on loans $ 55,977 44,091 Interest on investment securities 2,985 2,812 Other interest income 1,068 719 -------- -------- Total interest income 60,030 47,622 26.1% -------- -------- Interest expense ---------------- Interest on deposits 20,255 12,390 Other, primarily borrowings 3,478 1,940 -------- -------- Total interest expense 23,733 14,330 65.6% -------- -------- Net interest income 36,297 33,292 9.0% Provision for loan losses 2,415 1,425 69.5% -------- -------- Net interest income after provision for loan losses 33,882 31,867 6.3% -------- -------- Noninterest income ------------------ Service charges on deposit accounts 4,299 4,153 Other service charges, commissions, and fees 2,324 1,989 Fees from presold mortgages 511 523 Commissions from financial product sales 764 609 Data processing fees 73 205 Securities gains 205 2 Other gains (losses) (378) (59) -------- -------- Total noninterest income 7,798 7,422 5.1% -------- -------- Noninterest expenses -------------------- Personnel expense 15,086 14,070 Occupancy and equipment expense 3,303 2,925 Intangibles amortization 121 146 Other operating expenses 7,283 6,834 -------- -------- Total noninterest expenses 25,793 23,975 7.6% -------- -------- Income before income taxes 15,887 15,314 3.7% Income taxes 6,101 5,946 2.6% -------- -------- Net income $ 9,786 9,368 4.5% ======== ======== Earnings per share - basic $ 0.69 0.66 4.5% Earnings per share - diluted 0.68 0.65 4.6% ADDITIONAL INCOME STATEMENT INFORMATION --------------------------------------- Net interest income, as reported $ 36,297 33,292 Tax-equivalent adjustment (1) 251 224 -------- -------- Net interest income, tax-equivalent $ 36,548 33,516 9.0% ======== ======== -----------------------------------------------------------------------------------------
(1) See footnote 1 on page 1 of Financial Summary for discussion of tax-equivalent adjustments
======================================================================================================== First Bancorp and Subsidiaries Financial Summary - page 3 ======================================================================================================== Three Months Ended Six Months Ended June 30, June 30, ------------------------ ----------------------- PERFORMANCE RATIOS (annualized) 2006 2005 2006 2005 ---------------------------------------------------- Return on average assets 1.02% 1.09% 1.07% 1.13% Return on average equity 11.83% 12.07% 12.30% 12.32% Net interest margin - tax equivalent (1) 4.22% 4.31% 4.28% 4.32% Efficiency ratio - tax equivalent (1) (2) 58.29% 58.86% 58.16% 58.56% Net charge-offs to average loans 0.09% 0.08% 0.06% 0.08% Nonperforming assets to total assets (period 0.30% 0.36% 0.30% 0.36% end) SHARE DATA Cash dividends declared $ 0.18 0.17 $ 0.36 0.34 Stated book value 11.20 10.88 11.20 10.88 Tangible book value 7.76 7.40 7.76 7.40 Common shares outstanding at end of period 14,279,847 14,170,722 14,279,847 14,170,722 Weighted average shares outstanding - basic 14,296,159 14,159,117 14,275,472 14,132,347 Weighted average shares outstanding - diluted 14,433,830 14,345,013 14,425,500 14,354,852 Shareholders' equity to assets 8.03% 8.87% 8.03% 8.87% AVERAGE BALANCES (in thousands) Total assets $1,886,234 1,707,112 $1,844,773 1,678,868 Loans 1,593,070 1,409,118 1,554,763 1,396,167 Earning assets 1,764,227 1,592,845 1,723,381 1,565,005 Deposits 1,569,781 1,466,893 1,547,474 1,440,807 Interest-bearing liabilities 1,501,670 1,361,365 1,466,803 1,340,048 Shareholders' equity 162,526 154,540 160,453 153,351 -------------------------------------------------------------------------------------------------------- (1) See footnote 1 on page 1 of Financial Summary for discussion of tax-equivalent adjustments. (2) Calculated by dividing noninterest expense by the sum of tax-equivalent net interest income plus noninterest income. TREND INFORMATION ($ in thousands except per share data) For the Three Months Ended June 30, March 31, December 31, September 30, June 30, INCOME STATEMENT 2006 2006 2005 (3) 2005 (2) 2005 ------- ------- ------- ------- ------- Net interest income - tax equivalent (1) $18,569 17,979 18,060 17,463 17,118 Taxable equivalent adjustment (1) 125 126 113 111 111 Net interest income 18,444 17,853 17,947 17,352 17,007 Provision for loan losses 1,400 1,015 925 690 845 Noninterest income 3,844 3,954 3,803 3,779 3,712 Noninterest expense 13,064 12,729 12,175 11,486 12,260 Income before income taxes 7,824 8,063 8,650 8,955 7,614 Income taxes 3,029 3,072 1,237 9,646 2,962 Net income 4,795 4,991 7,413 (691) 4,652 Earnings per share - basic 0.34 0.35 0.52 (0.05) 0.33 Earnings per share - diluted 0.33 0.35 0.52 (0.05) 0.32 =======================================================================================================
(1) See footnote 1 on page 1 of Financial Summary for discussion of tax-equivalent adjustments. (2) Net income for the three months ended September 30, 2005 was significantly impacted by a contingency tax loss accrual amounting to $6,320,000, or $0.44 per share (which increased income tax expense). (3) Net income for the three months ended December 31, 2005 was significantly impacted by the reversal of a portion of the accrual noted in (2) above, amounting to $1,982,000, or $0.14 per share (which decreased income tax expense).
================================================================================================================================== First Bancorp and Subsidiaries Financial Summary - page 4 ================================================================================================================================== June 30, March 31, December 31, June 30, One Year PERIOD END BALANCES ($ in thousands) 2006 2006 2005 2005 Change ---------- --------- --------- --------- --------- Assets $1,992,709 1,907,887 1,801,050 1,738,597 14.6% Securities 129,912 128,026 127,785 132,536 -2.0% Loans 1,635,899 1,553,371 1,482,611 1,425,856 14.7% Allowance for loan losses 17,642 16,610 15,716 15,622 12.9% Intangible assets 49,070 49,131 49,227 49,373 -0.6% Deposits 1,590,668 1,565,040 1,494,577 1,470,880 8.1% Borrowings 195,013 131,739 100,239 101,239 92.6% Shareholders' equity 159,915 158,971 155,728 154,202 3.7% ---------------------------------------------------------------------------------------------------------------------------------- For the Three Months Ended -------------------------- June 30, March 31, December 31, September 30, June 30, YIELD INFORMATION 2006 2006 2005 2005 2005 ---------- --------- ----------- ------------ --------- Yield on loans 7.36% 7.16% 6.99% 6.71% 6.47% Yield on securities - tax equivalent (1) 5.09% 5.06% 4.82% 4.72% 5.06% Yield on other earning assets 5.60% 5.12% 4.39% 3.84% 3.33% Yield on all interest earning assets 7.15% 6.95% 6.74% 6.47% 6.25% Rate on interest bearing deposits 3.18% 2.88% 2.61% 2.35% 2.09% Rate on other interest bearing liabilities 5.96% 5.54% 5.30% 5.22% 5.27% Rate on all interest bearing liabilities 3.44% 3.08% 2.79% 2.53% 2.27% Interest rate spread - tax equivalent (1) 3.71% 3.87% 3.95% 3.94% 3.98% Net interest margin - tax equivalent (2) 4.22% 4.33% 4.37% 4.32% 4.31% Average prime rate 7.90% 7.42% 6.96% 6.42% 5.91% (1) See footnote 1 on page 1 of Financial Summary for discussion of tax-equivalent adjustments. (2) Calculated by dividing annualized tax equivalent net interest income by average earning assets for the period. See footnote 1 on page 1 of Financial Summary for discussion of tax-equivalent adjustments. June 30, March 31, December 31, September 30, June 30, ASSET QUALITY DATA ($ in thousands) 2006 2006 2005 2005 2005 ---------- --------- --------- --------- --------- Nonaccrual loans $ 3,973 3,283 1,640 3,330 3,806 Restructured loans 12 12 13 14 15 Accruing loans > 90 days past due -- -- -- -- -- ---------- --------- --------- --------- --------- Total nonperforming loans 3,985 3,295 1,653 3,344 3,821 Other assets - primarily other real estate 2,024 1,451 1,421 2,023 2,520 ---------- --------- --------- --------- --------- Total nonperforming assets $ 6,009 4,746 3,074 5,367 6,341 ========== ========= ========= ========= ========= Net charge-offs to average loans - annualized 0.09% 0.03% 0.29% 0.12% 0.08% Nonperforming loans to total loans 0.24% 0.21% 0.11% 0.23% 0.27% Nonperforming assets to total assets 0.30% 0.25% 0.17% 0.31% 0.36% Allowance for loan losses to total loans 1.08% 1.07% 1.06% 1.10% 1.10% ==================================================================================================================================