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First Bancorp Reports Second Quarter Results

·22-min read

SOUTHERN PINES, N.C., July 27, 2022 /PRNewswire/ -- First Bancorp (the "Company") (NASDAQ - FBNC), the parent company of First Bank, announced today net income of $36.6 million, or $1.03 per diluted common share, for the three months ended June 30, 2022, compared to $34.0 million, or $0.95 per diluted common share for the first quarter of 2022 and $29.3 million, or $1.03 per diluted common share, recorded in the second quarter of 2021.  For the six months ended June 30, 2022, the Company recorded net income of $70.6 million, or $1.98 per diluted common share, compared to $57.5 million, or $2.02 per diluted common share for the six months ended June 30, 2021.

On June 21, 2022, the Company announced that it had reached an agreement to acquire GrandSouth Bancorporation ("GrandSouth"), headquartered in Greenville, South Carolina, in an all-stock transaction. This transaction is subject to regulatory approvals and approval of GrandSouth's shareholders, and is expected to close in the late fourth quarter of 2022 or early first quarter of 2023.  GrandSouth operates eight branches throughout South Carolina and currently has $1.2 billion in total assets, $952.8 million in loans, and $1.1 billion in deposits.

Richard H. Moore, CEO and Chairman of the Company, stated, "First Bank had a very strong quarter.  Loan growth exceeded our expectations and we have continued to maintain strong asset quality and are focused on credit discipline.  We are excited about combining with GrandSouth which provides us the opportunity to accelerate First Bank's South Carolina expansion and partner with extremely talented bankers in growth markets."

Second Quarter 2022 Highlights

  • Annualized return on average assets of 1.40% and annualized return on average common equity of 13.45% for the quarter ended June 30, 2022.

  • Tax equivalent net interest margin was 3.18% for the quarter with continued low cost of funds, and net interest income grew 1.8% from the first quarter of 2022 ("the linked quarter").

  • Total noninterest expense was down 4.0% as compared to the first quarter driven by lower merger expenses and operating cost controls.

  • Annualized loan growth for the quarter was 11.8%; credit quality continues to be strong with decreases in nonperforming assets ("NPA") for the third straight quarter. NPA to total assets ratio of 0.39% as of June 30, 2022, down from 0.46% for the linked quarter and 0.51% for the comparable period of 2021.

  • Total common equity Tier 1 ratio of 12.80% and total risk-based capital ratio of 14.91%.

  • Quarterly cash dividend of $0.22 per share declared, a 10.0% increase over the dividend rate in the comparable period of 2021.

The following discussions and comparisons to the prior year financial periods presented are impacted by the Company's acquisition of Select Bancorp, Inc. ("Select") completed in the fourth quarter of 2021 which contributed $1.3 billion in loans and $1.6 billion in deposits as of the acquisition date.

Net Interest Income and Net Interest Margin

Net interest income for the second quarter of 2022 was $78.3 million, a 33.2% increase from the $58.8 million recorded in the second quarter of 2021 and a 1.8% increase from the first quarter of 2022.   The increases in net interest income from the prior year period was driven by higher earning assets related to both organic growth and the Select acquisition, offset somewhat by a reduction in net interest margin ("NIM").

The Company's tax-equivalent NIM (calculated by dividing tax-equivalent net interest income by average earning assets) for the second quarter of 2022 was 3.18%, compared to 3.21% for the linked quarter and 3.22% for the second quarter of 2021.  Contributing to the the reduction in NIM was the payoff of loans during the first quarter of 2022 at higher rates than new originations.  Also contributing to the lower NIM were fluctuations in loan discount accretion which deceased to $2.3 million in the second quarter of 2022 as compared to $3.6 million in the second quarter of 2021.  Average interest-earning assets increased 34.7% from the second quarter of 2021, and 1.4% from the linked quarter with growth in both loans and investment securities.

Allowance for Credit Losses, Provisions for Credit Losses, and Asset Quality

For the three months ended June 30, 2022, the Company did not record any provision for credit losses or provision for unfunded commitments.  This is compared to a provision for credit losses of $3.5 million and a reversal of provision for unfunded commitments of ($1.5) million for the first quarter of 2022.  The first quarter provisions related to updated economic forecasts and recalibration of the CECL model assumptions to include historical loss rates from the Select acquired portfolio.  For the second quarter of 2022, no additional provisions were necessary based on the assumptions and loan mix inputs to the CECL model.  The reserve for unfunded commitments totaled $12.0 million at June 30, 2022 and is included in the line items "Other Liabilities".

Asset quality continues to improve with annualized net loan recoveries of (0.01%) for the second quarter of 2022 compared to a net charge-off ratio of 0.07% for the same period of 2021.  Total nonperforming assets amounted to $41.1 million at June 30, 2022, or 0.39% of total assets, down from $48.9 million, or 0.46% of total assets for the linked quarter, and $41.8 million, or 0.51% of total assets, at June 30, 2021.

Noninterest Income

Total noninterest income for the second quarter of 2022 was $17.3 million, a 19.2% decrease from the $21.4 million recorded for the second quarter of 2021 and a 10.3% decrease from the linked quarter.  The primary factors driving fluctuations between the comparable periods were as follows:

  • SBA loan sale gains amounted to $0.8 million for the second quarter of 2022 compared to $3.3 million for the linked quarter and $3.0 million in the second quarter of 2021. The decrease was related to the timing of sales and the volume of originated loans available to be sold in each period.

  • Fees from presold mortgages amounted to $0.5 million for the second quarter of 2022, a decrease of 59.5% from the linked quarter, and a decrease of 80.0% from the $2.3 million recorded in the second quarter of 2021. Mortgage loan refinancing and origination volumes have declined significantly due to increases in mortgage interest rates.

  • SBA consulting fees declined $1.5 million for the second quarter of 2022 as compared to the prior year, and are down 9.7% from the linked quarter as a direct result of lower PPP-related revenue.

  • Commissions from sales of insurance and financial products amounted to $1.2 million for the second quarter of 2022, an increase of 21.8% as compared to the linked quarter driven by higher volume of transactions. The decline in the second quarter of 2022 as compared to the $2.5 million recorded in the second quarter of 2021 was due to the sale of substantially all of the assets of the Company's property and casualty insurance agency subsidiary on June 30, 2021.

  • Increases in the second quarter compared to the linked quarter and the prior year period in "Service charges on deposit accounts" and "Other service charges, commissions and fees" were driven by the Select acquisition and related increases in the number of new customers and transaction accounts, combined with continued organic growth in transaction accounts.

  • Other gains amounted to $1.6 million for the second quarter of 2022 and $3.2 million for the first six months of 2022, primarily related to death benefits realized on bank-owned life insurance policies. Gains for the comparable periods of 2021 were driven by the sale of the operations and substantially all of the assets of First Bank Insurance Services in June 2021.

Noninterest Expenses

Noninterest expenses amounted to $49.4 million for  the second quarter of 2022, compared to $51.5 million for the linked quarter and $41.0 million for the second quarter of 2021. The reduction in noninterest expense from the linked quarter is driven by a $2.7 million reduction in merger and acquisition expenses.  The increase in noninterest expenses from the prior year period was driven by higher operating expenses resulting from the Select acquisition.

Income Taxes

The Company's effective tax rates were 20.7% and 21.3% for the second quarter of 2022 and 2021, respectively. The 2022 reduction in effective tax rate was related to higher tax-exempt income relative to taxable income.

Balance Sheet and Capital

Total assets at June 30, 2022 amounted to $10.6 billion, a 28.8% increase from a year earlier. The growth was driven by a combination of organic loan and deposit growth and the acquisition of Select.

Total investment securities increased $672.2 million from June 30, 2021 to total $3.1 billion at June 30, 2022, as the Company invested cash from higher levels of deposits realized in 2021.

Total loans amounted to $6.2 billion at June 30, 2022, an increase of $1.5 billion, or 30.6%, from June 30, 2021, due primarily to the Select acquisition. Loan growth for the second quarter of 2022 amounted to $178.5 million, an annualized growth rate of 11.8%.

Total deposits amounted to $9.4 billion at June 30, 2022, an increase of $2.2 billion, or 30.5%, from June 30, 2021.  Exclusive of deposits acquired from Select, the high core deposit growth is believed to be due to a combination of stimulus funds and changes in customer behaviors during the pandemic, as well as ongoing growth initiatives by the Company.

The Company remains well-capitalized by all regulatory standards, with an estimated Total Risk-Based Capital Ratio at June 30, 2022 of 14.91% compared to 15.27% reported at June 30, 2021.  The decline resulted from the high balance sheet growth experienced between the periods.  The Company's tangible common equity to tangible assets ratio was 6.70% at June 30, 2022, a decrease of 161 basis points from a year earlier, with the decline driven by the higher unrealized loss on available for sale securities included in equity.

First Bancorp is a bank holding company headquartered in Southern Pines, North Carolina, with total assets of $10.6 billion. Its principal activity is the ownership and operation of First Bank, a state-chartered community bank that operates 108 branches in North Carolina and South Carolina.  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.

Caution about Forward-Looking Statements: 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.

First Bancorp and Subsidiaries

Financial Summary


CONSOLIDATED INCOME STATEMENT



Three Months Ended


Six Months Ended

($ in thousands except per share data - unaudited)

June 30,
2022

March 31,
2022

June30,
2021


June 30,
2022

June 30,
2021

Interest income







   Interest and fees on loans

$       65,077

$       64,202

52,295


$    129,279

$    103,368

   Interest on investment securities

14,489

14,258

8,263


28,747

14,499

   Other interest income

881

649

581


1,530

1,281

      Total interest income

80,447

79,109

61,139


159,556

119,148

Interest expense







   Interest on deposits

1,585

1,771

1,999


3,356

4,387

   Interest on borrowings

592

460

381


1,052

764

      Total interest expense

2,177

2,231

2,380


4,408

5,151

        Net interest income

78,270

76,878

58,759


155,148

113,997

Provision for loan losses

3,500


3,500

(Reversal of) provision for unfunded commitments

(1,500)

1,939


(1,500)

1,939

     Total provision for credit losses

2,000

1,939


2,000

1,939

        Net interest income after provision for credit losses

78,270

74,878

56,820


153,148

112,058

Noninterest income







   Service charges on deposit accounts

3,700

3,541

2,824


7,241

5,557

   Other service charges, commissions, and fees

7,882

7,005

6,496


14,887

12,018

   Fees from presold mortgage loans

454

1,121

2,274


1,575

6,818

   Commissions from sales of insurance and financial products

1,151

945

2,466


2,096

4,656

   SBA consulting fees

704

780

2,187


1,484

4,951

   SBA loan sale gains

841

3,261

2,996


4,102

5,326

   Bank-owned life insurance income

942

976

614


1,918

1,234

   Other gains, net

1,590

1,622

1,517


3,212

1,483

      Total noninterest income

17,264

19,251

21,374


36,515

42,043

Noninterest expenses







   Salaries expense

23,799

23,454

21,187


47,253

41,318

   Employee benefit expense

6,310

5,578

4,084


11,888

8,658

   Occupancy and equipment related expense

4,636

4,688

3,721


9,324

7,670

   Merger and acquisition expenses

737

3,484

411


4,221

411

   Intangibles amortization expense

953

1,017

845


1,970

1,742

   Foreclosed property gains, net

(292)

(80)

(173)


(372)

(16)

   Other operating expenses

13,255

13,324

10,910


26,579

21,267

      Total noninterest expenses

49,398

51,465

40,985


100,863

81,050

Income before income taxes

46,136

42,664

37,209


88,800

73,051

Income tax expense

9,551

8,695

7,924


18,246

15,572

Net income

$       36,585

$       33,969

29,285


70,554

57,479








Earnings per common share - diluted

$           1.03

$           0.95

1.03


$           1.98

$           2.02








ADDITIONAL INCOME STATEMENT INFORMATION







   Net interest income, as reported

$       78,270

$       76,878

58,759


$    155,148

$    113,997

   Tax-equivalent adjustment (1)

669

697

517


1,366

959

   Net interest income, tax-equivalent

$       78,939

$       77,575

59,276


156,514

114,956
















(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.

 

First Bancorp and Subsidiaries

Financial Summary


CONSOLIDATED BALANCE SHEETS

($ in thousands)


At June 30,
2022

(unaudited)


At March 31,

2022

(unaudited)


At December 31,
2021

(audited)


At June 30,

2021

(unaudited)

Assets








Cash and due from banks

$             85,139


124,785


128,228


83,851

Interest-bearing deposits with banks

348,964


440,974


332,934


391,375

     Total cash and cash equivalents

434,103


565,759


461,162


475,226









Investment securities

3,079,034


3,231,138


3,144,239


2,406,881

Presold mortgages in process of settlement

4,655


5,672


19,257


13,762

SBA and other  loans held for sale

638


3,630


61,003


5,480









Loans

6,243,170


6,064,698


6,081,715


4,782,064

Allowance for credit losses on loans

(82,181)


(82,069)


(78,789)


(65,022)

Net loans

6,160,989


5,982,629


6,002,926


4,717,042









Premises and equipment

135,143


135,482


136,092


123,395

Operating right-of-use lease assets

19,707


20,380


20,719


16,432

Intangible assets

379,615


381,191


382,090


242,968

Foreclosed properties

658


2,750


3,071


826

Bank-owned life insurance

163,831


164,273


165,786


108,209

Other assets

187,842


159,156


112,556


90,361

     Total assets

$     10,566,215


10,652,060


10,508,901


8,200,582









Liabilities








Deposits:








     Noninterest-bearing checking accounts

$       3,699,725


3,593,642


3,348,622


2,651,143

     Interest-bearing checking accounts

1,537,487


1,577,197


1,593,231


1,378,865

     Money market accounts

2,572,118


2,636,913


2,562,283


1,820,475

     Savings accounts

747,272


735,659


708,054


593,629

     Time deposits > $100,000

521,853


543,542


613,414


510,722

     Other time deposits

281,293


298,194


299,025


216,524

          Total deposits

9,359,748


9,385,147


9,124,629


7,171,358









Borrowings

67,445


67,415


67,386


61,252

Operating lease liabilities

20,280


20,903


21,192


16,893

Other liabilities

56,399


61,105


65,119


46,569

     Total liabilities

9,503,872


9,534,570


9,278,326


7,296,072









Shareholders' equity








Common stock

723,956


723,441


722,671


397,704

Retained earnings

587,739


559,004


532,874


507,531

Stock in rabbi trust assumed in acquisition

(1,573)


(1,814)


(1,803)


(1,928)

Rabbi trust obligation

1,573


1,814


1,803


1,928

Accumulated other comprehensive loss

(249,352)


(164,955)


(24,970)


(725)

     Total shareholders' equity

1,062,343


1,117,490


1,230,575


904,510

Total liabilities and shareholders' equity

$     10,566,215


10,652,060


10,508,901


8,200,582

 

First Bancorp and Subsidiaries

Financial Summary



Three Months Ended


Six Months Ended

PERFORMANCE RATIOS (annualized)

June 30, 2022

March 31,
2022

June 30, 2021


June 30, 2022

June 30, 2021

Return on average assets (1)

1.40 %

1.30 %

1.47 %


1.35 %

1.50 %

Return on average common equity (2)

13.45 %

11.38 %

13.14 %


12.37 %

13.03 %








COMMON SHARE DATA







Cash dividends declared - common

$            0.22

0.22

0.20


0.44

0.40

Stated book value - common

29.77

31.36

31.75


29.77

31.75

Tangible book value - common (non-GAAP)

19.13

20.66

23.22


19.13

23.22

Common shares outstanding at end of period

35,683,595

35,639,889

28,491,633


35,683,595

28,491,633

Weighted average shares outstanding - diluted

35,642,471

35,640,978

28,490,031


35,641,728

28,513,942








CAPITAL RATIOS







Tangible common equity to tangible assets (non-GAAP)

6.70 %

7.17 %

8.31 %


6.70 %

8.31 %

Common equity tier I capital ratio - estimated

12.80 %

12.75 %

13.01 %


12.80 %

13.01 %

Tier I leverage ratio - estimated

9.95 %

9.61 %

9.43 %


9.95 %

9.43 %

Tier I risk-based capital ratio - estimated

13.66 %

13.63 %

14.02 %


13.66 %

14.02 %

Total risk-based capital ratio - estimated

14.91 %

14.87 %

15.27 %


14.91 %

15.27 %








AVERAGE BALANCES ($ in thousands)







Total assets

$ 10,516,748

10,564,419

7,965,781


10,540,065

7,723,284

Loans

6,149,174

6,051,487

4,679,119


6,100,246

4,681,604

Earning assets

9,950,669

9,814,193

7,386,607


9,882,883

7,143,841

Deposits

9,337,615

9,220,352

6,951,524


9,279,314

6,714,168

Interest-bearing liabilities

5,740,269

5,852,296

4,443,875


5,795,973

4,339,386

Shareholders' equity

1,091,077

1,210,122

893,978


1,150,253

889,865








(1)

Calculated by dividing annualized net income by average assets.

(2)

Calculated by dividing annualized net income by average common equity.

 

TREND INFORMATION



($ in thousands except per share data)

For the Three Months Ended

INCOME STATEMENT

June 30, 2022

March 31, 2022

Dec. 31, 2021

Sept. 30, 2021

June 30, 2021







Net interest income - tax-equivalent (1)

$           78,939

77,575

74,552

59,129

59,276

Taxable equivalent adjustment (1)

669

697

707

576

517

Net interest income

78,270

76,878

73,845

58,553

58,759

Provision (reversal) for loan losses

3,500

11,011

(1,400)

(Reversal) provision for unfunded commitments

(1,500)

2,432

1,049

1,939

Noninterest income

17,264

19,251

15,057

16,511

21,374

Noninterest expense

49,398

51,465

62,789

40,817

40,985

Income before income taxes

46,136

42,664

12,670

34,598

37,209

Income tax expense

9,551

8,695

2,148

6,955

7,924

Net income

36,585

33,969

10,522

27,643

29,285







Earnings per common share - diluted

1.03

0.95

0.30

0.97

1.03







Cash dividends declared per share

0.22

0.22

0.20

0.20

0.20

(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.

 

First Bancorp and Subsidiaries

Financial Summary



For the Three Months Ended

YIELD INFORMATION

June 30,
2022

March 31,
2022

Dec. 31,
2021

Sept. 30,
2021

June 30,
2021







Yield on loans

4.24 %

4.30 %

4.37 %

4.19 %

4.48 %

Yield on securities

1.69 %

1.76 %

1.45 %

1.46 %

1.45 %

Yield on other earning assets

0.97 %

0.55 %

0.42 %

0.47 %

0.56 %

   Yield on all interest-earning assets

3.24 %

3.27 %

3.20 %

3.11 %

3.32 %







Rate on interest bearing deposits

0.11 %

0.12 %

0.13 %

0.14 %

0.18 %

Rate on other interest-bearing liabilities

3.52 %

2.77 %

2.88 %

2.45 %

2.49 %

   Rate on all interest-bearing liabilities

0.15 %

0.15 %

0.17 %

0.17 %

0.21 %

     Total cost of funds

0.09 %

0.10 %

0.11 %

0.11 %

0.14 %







        Net interest margin (1)

3.15 %

3.18 %

3.10 %

3.00 %

3.19 %

        Net interest margin - tax-equivalent (2)

3.18 %

3.21 %

3.13 %

3.03 %

3.22 %







        Average prime rate

3.94 %

3.29 %

3.25 %

3.25 %

3.25 %



(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.

 



For the Three Months Ended

NET INTEREST INCOME PURCHASE ACCOUNTING
ADJUSTMENTS

($ in thousands - unaudited)

June 30,
2022


March 31,

2022


Dec. 31,
2021


Sept. 30,
2021


June 30,
2021











Interest income - increased by accretion of loan
discount on acquired loans

$           1,545


1,671


1,912


530


2,913

Interest income - increased by accretion of loan
discount on retained portions of SBA loans

730


667


703


697


718

Total interest income impact

2,275


2,338


2,615


1,227


3,631

Interest expense - reduced by premium
amortization of deposits

168


234


261


8


11

Interest expense - increased by discount accretion
of borrowings

(53)


(73)


(116)


(45)


(44)

Total net interest expense impact

115


161


145


(37)


(33)

     Total impact on net interest income

$           2,390


2,499


2,760


1,190


3,598

 



As of / for the Three Months Ended

PAYCHECK PROTECTION PROGRAM (PPP) LOANS

($ in thousands - unaudited)

June 30,
2022


March 31,
2022


Dec. 31,
2021


Sept. 30,
2021


June 30,
2021











PPP loans outstanding

$           3,000


15,623


38,979


66,876


155,515

PPP fee amortization

1,008


1,324


1,676


2,093


2,696

 

First Bancorp and Subsidiaries

Financial Summary

 

ASSET QUALITY DATA ($ in thousands)

June 30,
2022


March 31,
2022


Dec. 31,
2021


Sept. 30,
2021


June 30,
2021











Nonperforming assets










Nonaccrual loans

$      28,715


33,460


34,696


31,268


32,993

Troubled debt restructurings - accruing

11,771


12,727


13,866


7,600


8,026

Accruing loans > 90 days past due



1,004



Total nonperforming loans

40,486


46,187


49,566


38,868


41,019

Foreclosed real estate

658


2,750


3,071


1,819


826

Total nonperforming assets

$      41,144


48,937


52,637


40,687


41,845











Asset Quality Ratios










Net quarterly (recoveries) charge-offs to average
loans - annualized

(0.01) %


0.01 %


0.05 %


— %


0.07 %

Nonperforming loans to total loans

0.65 %


0.76 %


0.82 %


0.80 %


0.86 %

Nonperforming assets to total assets

0.39 %


0.46 %


0.50 %


0.48 %


0.51 %

Allowance for loan losses to total loans

1.32 %


1.35 %


1.30 %


1.31 %


1.36 %

 

Corporate holding logo (PRNewsfoto/First Bancorp)
Corporate holding logo (PRNewsfoto/First Bancorp)

 

Cision
Cision

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SOURCE First Bancorp