First Bancorp Reports Third Quarter Results

SOUTHERN PINES, N.C., Oct. 23, 2018 /PRNewswire/ -- First Bancorp (NASDAQ – FBNC), the parent company of First Bank, announced today net income available to common shareholders of $22.0 million, or $0.74 per diluted common share, for the three months ended September 30, 2018, an increase of 39.6% in earnings per share from the $13.1 million, or $0.53 per diluted common share, recorded in the third quarter of 2017. 

For the nine months ended September 30, 2018, the Company recorded net income available to common shareholders of $65.4 million, or $2.21 per diluted common share, an increase of 66.2% in earnings per share from the $31.8 million, or $1.33 per diluted common share, for the nine months ended September 30, 2017. 

Comparisons for the financial periods presented were significantly impacted by the Company's acquisitions of Carolina Bank Holdings, Inc. ("Carolina Bank") in March 2017 with total assets of $682 million and ASB Bancorp, Inc. ("Asheville Savings Bank") in October 2017 with $798 million in total assets.  The assets, liabilities and earnings for the acquisitions were recorded beginning on their respective acquisition dates.

Net Interest Income and Net Interest Margin

Net interest income for the third quarter of 2018 was $51.8 million, a 24.5% increase from the $41.6 million recorded in the third quarter of 2017.  Net interest income for the first nine months of 2018 amounted to $153.6 million, a 32.6% increase from the $115.9 million recorded in the comparable period of 2017.  The increase in net interest income was primarily due to the acquisitions of Carolina Bank and Asheville Savings Bank, as well as higher amounts of loans outstanding as a result of organic growth.

The Company's net interest margin (tax-equivalent net interest income divided by average earning assets) for the third quarter of 2018 was 4.06% compared to 4.16% for the third quarter of 2017.  For the nine month period ended September 30, 2018, the Company's net interest margin was 4.12% compared to 4.11% for the same period in 2017.  Although asset yields increased primarily as a result of several Federal Reserve interest rate increases since January 1, 2017, the Company has also experienced higher funding costs, particularly on the interest rates paid on its borrowings, as these are highly correlated to short-term interest rates set by the Federal Reserve.  Interest income for the nine months ended September 30, 2018 was positively impacted by approximately $0.8 million in interest recoveries received in the first quarter, which primarily related to the same loans that experienced significant allowance for loan loss recoveries discussed below in "Provisions for Loan Losses and Asset Quality."

The net interest margins for the periods were also impacted by loan discount accretion associated with acquired loan portfolios.  The Company recorded loan discount accretion amounting to $1.6 million in the third quarter of 2018, compared to $1.7 million in the third quarter of 2017.  For the first nine months of 2018 and 2017, loan discount accretion amounted to $6.0 million and $5.1 million, respectively.  The increase in loan discount accretion in 2018 was primarily due to the loan discounts recorded in the acquisitions of Carolina Bank and Asheville Savings Bank.  See the Financial Summary for a table that presents the impact of loan discount accretion on net interest income.

Excluding the effects of loan discount accretion, the Company's tax-equivalent net interest margin was 3.94% for the third quarter of 2018, compared to 3.99% for the third quarter of 2017.  The decrease was primarily due to funding costs that exceeded increases in asset yields, as discussed above.  The net interest margin excluding loan discount accretion of 3.94% in the third quarter of 2018 was a 2 basis point increase from 3.92% in the second quarter of 2018.  See the Financial Summary for a reconciliation of the Company's net interest margin to the net interest margin excluding loan discount accretion, and other information regarding this percentage. 

Provision for Loan Losses and Asset Quality

The Company recorded a provision for loan losses of $0.1 million in the third quarter of 2018, compared to no provision for loan losses in the third quarter of 2017.  For the nine months ended September 30, 2018, the Company recorded a total negative provision for loan losses of $4.3 million (reduction of the allowance for loan losses) compared to a total provision for loan losses of $0.7 million in the same period of 2017.  The Company's provisions for loan losses have been favorably impacted by continued improvement in asset quality, including low charge-offs and declining levels of nonperforming assets.  

Total net charge-offs for the third quarter of 2018 amounted to $2.8 million in comparison to net recoveries of $0.6 million in the third quarter of 2017.  During the third quarter of 2018, the Company completed a loan sale of approximately $5.2 million in smaller balance nonperforming loans that resulted in charge-offs of $2.2 million.

For the first nine months of 2018, the Company experienced net loan recoveries of $1.5 million, including full payoffs received on four loans in the first quarter of 2018 that had been previously charged-down by approximately $3.3 million.  The amounts received in excess of the prior charge-downs were recorded as interest income recoveries, and those four loans were primarily responsible for the $0.8 million in interest recoveries previously noted.  For the comparable period of 2017, net loan recoveries amounted to $0.1 million.

The Company's nonperforming assets to total assets ratio was 0.72% at September 30, 2018 compared to 1.16% at September 30, 2017.  The ratio of annualized net charge-offs (recoveries) to average loans for the nine months ended September 30, 2018 was (0.05%), compared to 0.00% for the same period of 2017.

The Company continues to assess loans that may have been impacted by Hurricane Florence and Hurricane Michael.  To date, the Company believes that any losses will not require a significant provision for loan losses.

Noninterest Income

Total noninterest income was $15.4 million and $12.4 million for the three months ended September 30, 2018 and September 30, 2017, respectively.  For the nine months ended September 30, 2018, noninterest income amounted to $47.4 million compared to $34.0 million for the same period of 2017.

Core noninterest income for the third quarter of 2018 was $15.7 million, an increase of 22.3% from the $12.8 million reported for the third quarter of 2017.  For the first nine months of 2018, core noninterest income amounted to $47.2 million, a 37.9% increase from the $34.2 million recorded in the comparable period of 2017.  Core noninterest income includes i) service charges on deposit accounts, ii) other service charges, commissions, and fees, iii) fees from presold mortgage loans, iv) commissions from sales of insurance and financial products, v) SBA consulting fees, vi) SBA loan sale gains, and vii) bank-owned life insurance income. 

The acquisitions of Carolina Bank and Asheville Savings Bank were significant contributors to the higher core noninterest income in 2018.

Another significant contributor to the increases in core noninterest income was increased origination and sales of SBA loans.  During the three and nine months ended September 30, 2018, the Company realized $2.4 million and $8.8 million in gains on SBA loan sales, respectively.  In comparison, during the three and nine months ended September 30, 2017, the Company realized $1.7 million and $3.2 million in gains on SBA loan sales, respectively. 

Fees from presold mortgages amounted to $0.6 million and $2.2 million for the three and nine month periods ended September 30, 2018, respectively, compared to $1.8 million and $4.1 million for the three and nine month periods ended September 30, 2017, respectively.  The declines in 2018 were primarily due to the Company's mortgage loan department originating a higher percentage of loans with construction components that are held in the Company's loan portfolio and not sold, as well as employee turnover.

Commissions from sales of insurance and financial products amounted to $2.4 million in the third quarter of 2018, compared to $1.4 million in the third quarter of 2017.  For the nine months ended September 30, 2018 and 2017, the Company recorded $6.5 million and $3.3 million, respectively, in commissions from sales of insurance and financial products.  The increase was primarily due to the acquisition of an insurance agency during the third quarter of 2017.

Noninterest Expenses

Noninterest expenses amounted to $39.2 million in the third quarter of 2018 compared to $34.4 million recorded in the third quarter of 2017.  Noninterest expenses for the nine months ended September 30, 2018 amounted to $121.7 million compared to $101.5 million in 2017.  The increase in noninterest expenses in 2018 related primarily to the Company's acquisitions of Carolina Bank and Asheville Savings Bank. 

Also impacting expenses were other growth initiatives, including continued growth of the Company's SBA consulting firm and SBA lending division, as well as the acquisition of an insurance agency during the third quarter of 2017. 

Income Taxes

The Company's effective tax rate for the third quarter of 2018 was 21.2% compared to 33.3% in the third quarter of 2017.  For the nine months ended September 30, 2018 and 2017, the Company's effective tax rates were 21.8% and 33.3%, respectively.  The lower effective tax rate in 2018 was due to the Tax Cuts and Jobs Act, which was signed into law in December 2017 and reduced the federal corporate tax rate from 35% to 21%. 

Balance Sheet and Capital

Total assets at September 30, 2018 amounted to $5.7 billion, a 24.4% increase from a year earlier.  Total loans at September 30, 2018 amounted to $4.2 billion, a 22.2% increase from a year earlier, and total deposits amounted to $4.5 billion at September 30, 2018, a 24.0% increase from a year earlier.  The significant increases were largely due to the acquisition of Asheville Savings Bank on October 1, 2017.

The Company experienced steady loan and deposit growth during the first nine months of 2018, all of which was organic.  Loan growth for the nine months ended September 30, 2018 amounted to $148 million, or 4.9% annualized, and deposit growth amounted to $121.4 million, or 3.7% annualized during that same period.  This growth was a result of ongoing internal initiatives to enhance loan and deposit growth, including the Company's recent expansion into higher growth markets.  As anticipated, a $41 million deposit received in the first quarter of 2018 was transferred outside the Company in the third quarter of 2018.

The Company remains well-capitalized by all regulatory standards, with an estimated Total Risk-Based Capital Ratio at September 30, 2018 of 13.48%, an increase from the 12.44% reported at September 30, 2017.  The Company's tangible common equity to tangible assets ratio was 8.95% at September 30, 2018, an increase of 100 basis points from a year earlier. 

Comments of the CEO and Other Business Matters

Richard H. Moore, CEO of First Bancorp, commented, "While our markets experienced a general business slowdown as a result of the hurricanes, we are pleased to have nevertheless achieved another strong quarter."

The following is additional discussion of business development and other miscellaneous matters affecting the Company during the third quarter of 2018:

• On September 15, 2018, the Company announced a quarterly cash dividend of $0.10 per share payable on October 25, 2018 to shareholders of record on September 30, 2018. This dividend rate represents a 25% increase over the dividend rate declared in the third quarter of 2017.

*   *   *

First Bancorp is a bank holding company headquartered in Southern Pines, North Carolina, with total assets of approximately $5.7 billion. Its principal activity is the ownership and operation of First Bank, a state-chartered community bank that operates 102 branches in North Carolina and South Carolina.  First Bank also operates two mortgage loan production offices in the central region of North Carolina.  First Bank 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.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

View original content to download multimedia:http://www.prnewswire.com/news-releases/first-bancorp-reports-third-quarter-results-300736468.html

SOURCE First Bancorp