FBNC First Bancorp

 

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

Form 8-K

CURRENT REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934

Date of Report (Date of earliest event reported):		April 29, 2015

 

 

 

First Bancorp

(Exact Name of Registrant as Specified in its Charter)

North Carolina		0-15572		56-1421916
(State or Other Jurisdiction		(Commission		(I.R.S. Employer
of Incorporation)		File Number)		Identification Number)

 

300 SW Main Street, Southern Pines, North Carolina				28387
(Address of Principal Executive Offices)				(Zip Code)

 

(910) 246-2500

(Registrant’s telephone number, including area code)

 

Not Applicable

(Former Name or Former Address, if changed since last report)

 

 

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

 

o

Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

o

Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

o

Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

o

Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

 

 

First Bancorp
INDEX

		Page
Item 2.02 – Results of Operations and Financial Condition			3
Item 9.01 – Financial Statements and Exhibits			3
Signatures			4
Exhibit 99.1 News Release dated April 29, 2015			Exhibit

2

 

Item 2.02 – Results of Operations and Financial Condition

On April 29, 2015, the Registrant issued a news release to announce its financial results for the three months ended March 31, 2015. The news release is attached hereto as Exhibit 99.1.

The news release includes disclosure of net interest income on a tax-equivalent basis, which is a non-GAAP performance measure used by management in operating its business. Management believes that analysis of net interest income on a tax-equivalent basis is useful and appropriate because it allows a comparison of net interest income amounts in different periods without taking into account the different mix of taxable versus non-taxable investments that may have existed during those periods.

 

The news release also includes disclosure of tax-equivalent net interest margin, excluding the impact of loan discount accretion, which is a non-GAAP performance measure. Management believes that it is useful to calculate and present the net interest margin without the impact of loan discount accretion, for the reasons explained in the rest of this paragraph. Loan discount accretion is a non-cash interest income adjustment related to the Registrant’s acquisition of two failed banks and represents the portion of the fair value discount that was initially recorded on the acquired loans that is being recognized into income over the lives of the loans. At March 31, 2015, the Registrant had a remaining loan discount balance of $19.1 million compared to $31.2 million at March 31, 2014. 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 believes it is useful to also present this ratio to reflect net interest margin excluding this non-cash, temporary loan discount accretion adjustment to aid investors in comparing financial results between periods.

 

The Registrant cautions that non-GAAP financial measures should be considered in addition to, but not as a substitute for, the reported GAAP results. A reconciliation between the non-GAAP financial measures presented and the most directly comparable financial measure calculated in accordance with GAAP is included in the news release and financial summary attached hereto as Exhibit 99.1.

 

Item 9.01 – Financial Statements and Exhibits

(d)

Exhibits

	Exhibit No.	Description
	99.1	Press release issued on April 29, 2015

Disclosures 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 statements concerning opinions or judgments of the Company and its management about future events. Factors that could influence the accuracy of such forward-looking statements include, but are not limited to, the financial success or changing strategies of the Company’s customers, the Company’s level of success in integrating acquisitions, actions of government regulators, the level of market interest rates, and general economic conditions. For additional information about the factors that could affect the matters discussed in this paragraph, see the “Risk Factors” section of the Company’s most recent annual report on Form 10-K. 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 the press release by wire services, internet services or other media.

3

 

Signatures

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

					First Bancorp
		April 29, 2015		By:	/s/ Richard H. Moore
					Richard H. Moore
					President and Chief Executive Officer

4

 

 

News Release

 

For Immediate Release:	For More Information,
April 29, 2015	Contact:  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 available to common shareholders of $6.8 million, or $0.33 per diluted common share, for the three months ended March 31, 2015, an increase of 24.0% compared to the $5.5 million, or $0.27 per diluted common share, recorded in the first quarter of 2014. The higher earnings were primarily the result of a lower provision for loan losses.

 

Net Interest Income and Net Interest Margin

 

Net interest income for the first quarter of 2015 amounted to $29.7 million, a 16.4% decrease from the $35.5 million recorded in the first quarter of 2014.

 

The Company’s net interest margin (tax-equivalent net interest income divided by average earning assets) in the first quarter of 2015 was 4.19% compared to 5.13% for the first quarter of 2014. The 4.19% net interest margin was a six basis point decrease from the 4.25% margin realized in the fourth quarter of 2014. The lower margins are primarily due to lower amounts of discount accretion on loans purchased in failed-bank acquisitions and lower average asset yields – see additional discussion below. As shown in the accompanying tables, loan discount accretion amounted to $1.6 million in the first quarter of 2015, $2.2 million in the fourth quarter of 2014, and $6.4 million in the first quarter of 2014. The lower amount of accretion is due to the unaccreted discount amount that resulted from prior acquisitions continuing to wind down.

 

Excluding the effects of discount accretion on purchased loans, the Company’s net interest margin amounted to 3.98% for the first quarter of 2015, 3.96% for the fourth quarter of 2014, and 4.22% for the first quarter of 2014. The lower margin realized for the first quarter of 2015 compared to the first quarter of 2014 was primarily the result of lower loan yields, which are being impacted by the prolonged low interest rate environment. The two basis point increase in net interest margin compared to the fourth quarter of 2014 was primarily the result of the Company investing approximately $125 million of excess cash balances into higher yielding investment securities late in the fourth quarter of 2014. See the Financial Summary for a table that presents the impact of loan discount accretion, as well as other purchase accounting adjustments affecting net interest income. Also 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 ratio.

 

The Company’s cost of funds has steadily declined from 0.31% in the first quarter of 2014 to 0.26% in the first quarter of 2015, which has had a positive impact on the Company’s net interest margin.

Provision for Loan Losses and Asset Quality

 

The Company recorded a negative provision for loan losses (reduction of the allowance for loan losses) of $0.2 million in the first quarter of 2015 compared to a provision for loan losses of $3.6 million in the first quarter of 2014. As discussed below, the Company records provisions for loan losses related to both non-covered and covered loan portfolios – see explanation of the terms “non-covered” and “covered” in the section below entitled “Note Regarding Components of Earnings.”

 

The provision for loan losses on non-covered loans amounted to $0.1 million in the first quarter of 2015 compared to $3.4 million in the first quarter of 2014. The lower provision recorded in 2015 was primarily a result of improved credit quality trends, minimal loan growth, and generally improving economic trends.

 

The Company recorded a negative provision for loan losses on covered loans of $0.3 million in the first quarter of 2015 compared to a $0.2 million in provision for loan losses in the first quarter of 2014. The negative provision in 2015 primarily resulted from lower levels of covered nonperforming loans, declining levels of total covered loans and net loan recoveries (recoveries, net of charge-offs) of $0.2 million realized during the quarter.

 

Total non-covered nonperforming assets amounted to $90.4 million at March 31, 2015 (2.92% of total non-covered assets), $95.3 million at December 31, 2014 (3.09% of total non-covered assets), and $82.2 million at March 31, 2014 (2.65% of total non-covered assets). The increase in non-covered nonperforming assets when comparing March 31, 2015 to March 31, 2014 was primarily due to the Company transferring $14.8 million in nonperforming assets from covered status to non-covered status on July 1, 2014 upon the scheduled expiration of a loss share agreement with the FDIC associated with those assets.

 

Total covered nonperforming assets have declined in the past year, amounting to $14.5 million at March 31, 2015, $18.7 million at December 31, 2014 and $58.9 million at March 31, 2014. Over the past twelve months, the Company has resolved a significant amount of covered loans and has experienced strong property sales along the North Carolina coast, which is where most of the Company’s covered assets are located. Also, as discussed in the preceding paragraph, on July 1, 2014 the Company transferred $14.8 million in nonperforming assets from covered status to non-covered status upon the expiration of a loss share agreement.

 

Noninterest Income

 

Total noninterest income for the three months ended March 31, 2015 was $4.5 million compared to $0.3 million for the comparable period of 2014.

 

Core noninterest income for the first quarter of 2015 was $7.2 million, a decrease of 3.9% from the $7.5 million reported for the first quarter of 2014. Core noninterest income includes i) service charges on deposit accounts, ii) other service charges, commissions, and fees, iii) fees from presold mortgages, iv) commissions from financial product sales, and v) bank-owned life insurance income. The primary reason for the decrease in core noninterest income in 2015 was lower service charges on deposit accounts, which declined from $3.6 million in the first quarter of 2014 to $2.9 million in the first quarter of 2015. After the elimination of free checking for most customers with low balances in late 2013, monthly fees earned on deposit accounts have gradually declined over the past several quarters as a result of more customers meeting the requirements to have the monthly service charge waived. Fewer instances of fees earned from customers overdrawing their accounts have also impacted this line item.

 

Noncore components of noninterest income resulted in net losses of $2.6 million in the first quarter of 2015 and net losses of $7.2 million in the first quarter of 2014. The largest variances in noncore noninterest income related to gains (losses) on covered foreclosed properties and indemnification asset income (expense) – see discussion below.

 

Gains on covered foreclosed properties were $0.2 million for the three months ended March 31, 2015 compared to losses of $2.1 million recorded for the three months ended March 31, 2014. Losses on covered foreclosed properties have generally declined in recent quarters as a result of significantly lower levels of covered foreclosed properties held by the Company and stabilization in property values.

 

Indemnification asset income (expense) is recorded to reflect additional (decreased) amounts expected to be received from the FDIC during the period related to covered assets. The three primary items that result in recording indemnification asset income (expense) are 1) income from loan discount accretion, which results in indemnification expense, 2) provisions for loan losses on covered loans, which result in indemnification income and 3) foreclosed property gains (losses) on covered assets, which also result in indemnification expense (income). In the first quarter of 2015, the Company recorded $2.4 million in indemnification asset expense compared to $4.9 million in indemnification asset expense in the first quarter of 2014. This variance is primarily due to lower indemnification asset expense associated with the lower loan discount accretion income in the first quarter of 2015. See additional discussion related to this matter in the section below entitled “Note Regarding Components of Earnings.”

 

Noninterest Expenses

 

Noninterest expenses amounted to $23.7 million in the first quarter of 2015 compared to $23.6 million recorded in the first quarter of 2014. In 2015, a lower level of salary expense, resulting from a decline in the number of employees, was offset by miscellaneous items of other operating expense.

 

Balance Sheet and Capital

 

Total assets at March 31, 2015 amounted to $3.2 billion, a 2.9% decrease from a year earlier. Total loans at March 31, 2015 amounted to $2.4 billion, a 2.1% decrease from a year earlier, and total deposits amounted to $2.7 billion at March 31, 2015, a 3.3% decrease from a year earlier.

 

Investment securities totaled $349.0 million at March 31, 2015 compared to $234.1 million at March 31, 2014. In the fourth quarter of 2014, the Company used a portion of its excess cash balances to purchase approximately $125 million in investment securities.

 

Non-covered loans amounted to $2.3 billion at March 31, 2015, an increase of $18.8 million from March 31, 2014. The increase was due to the reclassification of $39.7 million in loans from covered status to non-covered status in connection with the July 1, 2014 expiration of a loss share agreement. Non-covered loans increased $7 million during the first quarter of 2015 as a result of ongoing internal initiatives to drive loan growth. Loans covered by FDIC loss share agreements are expected to continue to decline as those loans continue to pay down.

 

The lower amount of deposits at March 31, 2015 compared to March 31, 2014 was primarily due to declines in retail time deposits (“other time deposits > $100,000” and “other time deposits” in the accompanying tables) and brokered deposits, with increases in checking accounts offsetting a large portion of the decline. Time deposits are generally one of the Company’s most expensive funding sources, and thus the shift from this category has benefited the Company’s overall cost of funds.

 

The Company remains well-capitalized by all regulatory standards, with a Total Risk-Based Capital Ratio at March 31, 2015 of 17.66% compared to the 10.00% minimum to be considered well-capitalized. The Company’s tangible common equity to tangible assets ratio was 8.08% at March 31, 2015, an increase of 78 basis points from a year earlier.

Comments of the President and Other Business Matters

 

Richard H. Moore, President and CEO of First Bancorp, commented on today’s report, “I am pleased to report another quarter of strong earnings for the Company. We have now reported eight consecutive quarters of earnings of more than $5 million. Asset quality continues to improve and we are focused on strategic initiatives that we expect will result in future increases in profitability and market share.”

 

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

 

·

On March 16, 2015, the Company announced a quarterly cash dividend of $0.08 cents per share payable on April 24, 2015 to shareholders of record on March 31, 2015. This is the same dividend rate as the Company declared in the first quarter of 2014.

 

·

The Company is currently constructing a new branch facility at 4110 Bradham Drive, Jacksonville, North Carolina. Upon completion, the First Bank branch located on Western Boulevard will be closed and the accounts serviced at that branch will be reassigned to the new and improved branch. This is expected to occur in the second quarter of 2015.

 

Note Regarding Components of Earnings

 

The Company’s results of operation are significantly affected by the on-going accounting for two FDIC-assisted failed bank acquisitions. In the discussion above, the term “covered” is used to describe assets included as part of FDIC loss share agreements, which generally result in the FDIC reimbursing the Company for 80% of losses incurred on those assets. The term “non-covered” refers to the Company’s legacy assets, which are not included in any type of loss share arrangement.

 

For covered loans that deteriorate in terms of repayment expectations, the Company records immediate allowances through the provision for loan losses. For covered loans that experience favorable changes in credit quality compared to what was expected at the acquisition date, including loans that pay off, the Company records positive adjustments to interest income over the life of the respective loan – also referred to as loan discount accretion. For covered foreclosed properties that are sold at gains or losses or that are written down to lower values, the Company records the gains/losses within noninterest income.

 

The adjustments discussed above are recorded within the income statement line items noted without consideration of the FDIC loss share agreements. Because favorable changes in covered assets result in lower expected FDIC claims, and unfavorable changes in covered assets result in higher expected FDIC claims, the FDIC indemnification asset is adjusted to reflect those expectations. The net increase or decrease in the indemnification asset is reflected within noninterest income.

 

The adjustments noted above can result in volatility within individual income statement line items. Because of the FDIC loss share agreements and the associated indemnification asset, pretax income resulting from amounts recorded as provisions for loan losses on covered loans, discount accretion, and losses from covered foreclosed properties is generally only impacted by 20% of these amounts due to the corresponding adjustments made to the indemnification asset.

 

 

First Bancorp is a bank holding company headquartered in Southern Pines, North Carolina with total assets of approximately $3.2 billion. Its principal activity is the ownership and operation of First Bank, a state-chartered community bank that operates 87 branches, with 73 branches operating in North Carolina, 6 branches in South Carolina (Cheraw, Dillon, Florence, and Latta), and 7 branches in Virginia (Abingdon, Blacksburg, Christiansburg, Fort Chiswell, Radford, Salem and Wytheville), where First Bank does business as First Bank of Virginia. First Bank also has loan production offices in Fayetteville, North Carolina, and Greenville, North Carolina. 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 statements concerning opinions or judgments of the Company and its management about future events. Factors that could influence the accuracy of such forward-looking statements include, but are not limited to, the financial success or changing strategies of the Company’s customers, the Company’s level of success in integrating acquisitions, actions of government regulators, the level of market interest rates, and general economic conditions. For additional information about the factors that could affect the matters discussed in this paragraph, see the “Risk Factors” section of the Company’s most recent annual report on Form 10-K 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 the press release by wire services, internet services or other media.

 

 

 

 

 

 

 

 

 

 

First Bancorp and Subsidiaries Financial Summary – Page 1

 

		Three Months Ended March 31,								Percent
($ in thousands except per share data – unaudited)		2015				2014				Change
INCOME STATEMENT
Interest income
Interest and fees on loans		$	29,441				36,086
Interest on investment securities			1,822				1,471
Other interest income			195				119
Total interest income			31,458				37,676				(16.5	%)
Interest expense
Interest on deposits			1,458				1,891
Interest on borrowings			297				250
Total interest expense			1,755				2,141				(18.0	%)
Net interest income			29,703				35,535				(16.4	%)
Provision for loan losses – non-covered loans			104				3,365				(96.9	%)
Provision (reversal) for loan losses – covered loans			(268	)			210				n/m
Total provision for loan losses			(164	)			3,575				n/m
Net interest income after provision for loan losses			29,867				31,960				(6.5	%)
Noninterest income
Service charges on deposit accounts			2,892				3,573
Other service charges, commissions, and fees			2,542				2,367
Fees from presold mortgages			808				607
Commissions from financial product sales			561				594
Bank-owned life insurance income			371				327
Foreclosed property gains (losses) – non-covered			(494	)			(156	)
Foreclosed property gains (losses) – covered			237				(2,117	)
FDIC indemnification asset income (expense), net			(2,392	)			(4,916	)
Other gains (losses)			4				19
Total noninterest income			4,529				298				1,419.8	%
Noninterest expenses
Salaries expense			11,497				11,648
Employee benefit expense			2,183				2,311
Occupancy and equipment expense			2,825				2,808
Intangibles amortization			180				194
Other operating expenses			7,029				6,590
Total noninterest expenses			23,714				23,551				0.7	%
Income before income taxes			10,682				8,707				22.7	%
Income taxes			3,694				3,031				21.9	%
Net income			6,988				5,676				23.1	%
Preferred stock dividends			(217	)			(217	)
Net income available to common shareholders		$	6,771				5,459				24.0	%
Earnings per common share – basic		$	0.34				0.28				21.4	%
Earnings per common share – diluted			0.33				0.27				22.2	%
ADDITIONAL INCOME STATEMENT INFORMATION
Net interest income, as reported		$	29,703				35,535
Tax-equivalent adjustment (1)			390				373
Net interest income, tax-equivalent		$	30,093				35,908				(16.2	%)

(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.

 

n/m = not meaningful

 

First Bancorp and Subsidiaries Financial Summary – Page 2

 

		Three Months Ended March 31,
PERFORMANCE RATIOS (annualized)		2015				2014
Return on average assets (1)			0.86%				0.70%
Return on average common equity (2)			8.54%				7.24%
Net interest margin – tax-equivalent (3)			4.19%				5.13%
Net charge-offs to average loans – non-covered			0.84%				0.52%
COMMON SHARE DATA
Cash dividends declared – common		$	0.08				0.08
Stated book value – common			16.34				15.50
Tangible book value – common			12.90				12.02
Common shares outstanding at end of period			19,740,183				19,695,316
Weighted average shares outstanding – basic			19,721,992				19,688,183
Weighted average shares outstanding – diluted			20,454,614				20,424,475
CAPITAL RATIOS
Tangible equity to tangible assets			10.33%				9.48%
Tangible common equity to tangible assets			8.08%				7.30%
Tier I leverage ratio			12.18%				11.27%
Tier I risk-based capital ratio			16.40%				15.57%
Total risk-based capital ratio			17.66%				16.83%
AVERAGE BALANCES ($ in thousands)
Total assets		$	3,194,570				3,178,848
Loans			2,391,071				2,459,368
Earning assets			2,910,732				2,836,806
Deposits			2,688,973				2,739,194
Interest-bearing liabilities			2,210,302				2,294,138
Shareholders’ equity			392,173				376,418

(1) Calculated by dividing annualized net income (loss) available to common shareholders by average assets.

(2) Calculated by dividing annualized net income (loss) available to common shareholders by average common equity.

(3) See footnote 1 on page 1 of Financial Summary for discussion of tax-equivalent adjustments.

 

TREND INFORMATION

($ in thousands except per share data)		For the Three Months Ended
INCOME STATEMENT		March 31, 2015				December 31, 2014				September 30, 2014				June 30, 2014				March 31, 2014
Net interest income – tax-equivalent (1)		$	30,093				31,299				31,721				34,183				35,908
Taxable equivalent adjustment (1)			390				376				378				375				373
Net interest income			29,703				30,923				31,343				33,808				35,535
Provision for loan losses – non-covered			104				1,285				1,279				1,158				3,365
Provision (reversal) for loan losses – covered			(268	)			191				206				2,501				210
Noninterest income			4,529				4,492				4,608				4,970				298
Noninterest expense			23,714				22,989				25,931				24,780				23,551
Income before income taxes			10,682				10,950				8,535				10,339				8,707
Income tax expense			3,694				3,855				2,956				3,693				3,031
Net income			6,988				7,095				5,579				6,646				5,676
Preferred stock dividends			(217	)			(217	)			(217	)			(217	)			(217	)
Net income available to common shareholders			6,771				6,878				5,362				6,429				5,459
Earnings per common share – basic			0.34				0.35				0.27				0.33				0.28
Earnings per common share – diluted			0.33				0.34				0.27				0.32				0.27

 

See footnote 1 on page 1 of Financial Summary for discussion of tax-equivalent adjustments.

 

First Bancorp and Subsidiaries Financial Summary – Page 3

 

CONSOLIDATED BALANCE SHEETS ($ in thousands - unaudited)		At March 31, 2015				At Dec. 31, 2014				At March 31, 2014				One Year Change
Assets
Cash and due from banks		$	84,208				81,068				219,779				(61.7	%)
Interest bearing deposits with banks			160,279				172,016				164,310				(2.5	%)
Total cash and cash equivalents			244,487				253,084				384,089				(36.3	%)
Investment securities			348,994				342,721				234,127				49.1	%
Presold mortgages			8,273				6,019				4,587				80.4	%
Loans – non-covered			2,275,570				2,268,580				2,256,726				0.8	%
Loans – covered by FDIC loss share agreements			119,829				127,594				190,551				(37.1	%)
Total loans			2,395,399				2,396,174				2,447,277				(2.1	%)
Allowance for loan losses – non-covered			(33,770	)			(38,345	)			(44,706	)			(24.5	%)
Allowance for loan losses – covered			(2,226	)			(2,281	)			(3,421	)			(34.9	%)
Total allowance for loan losses			(35,996	)			(40,626	)			(48,127	)			(25.2	%)
Net loans			2,359,403				2,355,548				2,399,150				(1.7	%)
Premises and equipment			75,573				75,113				76,970				(1.8	%)
FDIC indemnification asset			18,452				22,569				35,504				(48.0	%)
Intangible assets			67,712				67,893				68,475				(1.1	%)
Foreclosed real estate – non-covered			8,978				9,771				11,740				(23.5	%)
Foreclosed real estate – covered			2,055				2,350				19,504				(89.5	%)
Bank-owned life insurance			55,793				55,421				44,367				25.8	%
Other assets			29,868				27,894				36,310				(17.7	%)
Total assets		$	3,219,588				3,218,383				3,314,823				(2.9	%)
Liabilities
Deposits:
Non-interest bearing checking accounts		$	591,283				560,230				511,612				15.6	%
Interest bearing checking accounts			578,784				583,903				550,702				5.1	%
Money market accounts			568,752				548,255				553,935				2.7	%
Savings accounts			183,036				180,317				177,744				3.0	%
Brokered deposits			62,801				88,375				150,272				(58.2	%)
Internet time deposits			249				747				1,967				(87.3	%)
Other time deposits > $100,000			373,599				384,127				436,245				(14.4	%)
Other time deposits			335,110				349,952				404,247				(17.1	%)
Total deposits			2,693,614				2,695,906				2,786,724				(3.3	%)
Borrowings			116,394				116,394				136,394				(14.7	%)
Other liabilities			16,336				18,384				15,618				4.6	%
Total liabilities			2,826,344				2,830,684				2,938,736				(3.8	%)
Shareholders’ equity
Preferred stock			70,787				70,787				70,787				0.0	%
Common stock			132,752				132,532				132,215				0.4	%
Retained earnings			190,150				184,958				171,021				11.2	%
Accumulated other comprehensive income (loss)			(445	)			(578	)			2,064				n/m
Total shareholders’ equity			393,244				387,699				376,087				4.6	%
Total liabilities and shareholders’ equity		$	3,219,588				3,218,383				3,314,823				(2.9	%)

 

 

n/m = not meaningful

 

First Bancorp and Subsidiaries Financial Summary - Page 4

 

 

		For the Three Months Ended
YIELD INFORMATION		March 31, 2015				December 31, 2014				September 30, 2014				June 30, 2014				March 31, 2014
Yield on loans			4.99%				5.13%				5.23%				5.65%				5.95%
Yield on securities – tax-equivalent (1)			2.67%				2.95%				3.25%				3.00%				3.19%
Yield on other earning assets			0.43%				0.38%				0.30%				0.33%				0.34%
Yield on all interest earning assets			4.44%				4.51%				4.58%				4.95%				5.44%
Rate on interest bearing deposits			0.28%				0.30%				0.32%				0.33%				0.34%
Rate on other interest bearing liabilities			1.03%				1.03%				1.03%				1.02%				2.14%
Rate on all interest bearing liabilities			0.32%				0.34%				0.35%				0.37%				0.38%
Total cost of funds			0.26%				0.27%				0.28%				0.30%				0.31%
Net interest margin – tax-equivalent (2)			4.19%				4.25%				4.30%				4.65%				5.13%
Average prime rate			3.25%				3.25%				3.25%				3.25%				3.25%

 

(1)	See footnote 1 on page 1 of Financial Summary for discussion of tax-equivalent adjustments.

(2)	Calculated by dividing annualized tax-equivalent net interest income by average earning assets for the period. See footnote 1 on page 1 of Financial Summary for discussion of tax-equivalent adjustments.

 

 

		For the Three Months Ended
NET INTEREST INCOME PURCHASE ACCOUNTING ADJUSTMENTS ($ in thousands)		March 31, 2015				December 31, 2014				September 30, 2014				June 30, 2014				March 31, 2014
Interest income – reduced by premium amortization on loans		$	—				—				—				(49	)			(49	)
Interest income – increased by accretion of loan discount (1)			1,557				2,173				2,577				4,851				6,408
Interest expense – reduced by premium amortization of deposits			—				—				—				4				3
Impact on net interest income		$	1,557				2,173				2,577				4,806				6,362

 

(1)

Corresponding indemnification asset expense is recorded for approximately 80% of this amount, and therefore the net effect is that pretax income is positively impacted by 20% of the amounts in this line item.

 

 

First Bancorp and Subsidiaries Financial Summary - Page 5

 

 

ASSET QUALITY DATA ($ in thousands)		March 31, 2015				Dec. 31, 2014				Sept. 30, 2014				June 30, 2014				March 31, 2014
Non-covered nonperforming assets
Nonaccrual loans		$	47,416				50,066				53,620				47,533				44,129
Troubled debt restructurings - accruing			33,997				35,493				31,501				27,250				26,335
Accruing loans > 90 days past due			—				—				—				—				—
Total non-covered nonperforming loans			81,413				85,559				85,121				74,783				70,464
Foreclosed real estate			8,978				9,771				11,705				9,346				11,740
Total non-covered nonperforming assets		$	90,391				95,330				96,826				84,129				82,204
Covered nonperforming assets (1)
Nonaccrual loans		$	8,596				10,508				10,478				20,938				31,986
Troubled debt restructurings - accruing			3,874				5,823				6,273				8,193				7,429
Accruing loans > 90 days past due			—				—				—				—				—
Total covered nonperforming loans			12,470				16,331				16,751				29,131				39,415
Foreclosed real estate			2,055				2,350				3,237				9,934				19,504
Total covered nonperforming assets		$	14,525				18,681				19,988				39,065				58,919
Total nonperforming assets		$	104,916				114,011				116,814				123,194				141,123
Asset Quality Ratios – All Assets
Net quarterly charge-offs to average loans - annualized			0.76%				0.82%				0.51%				0.99%				0.65%
Nonperforming loans to total loans			3.92%				4.25%				4.20%				4.27%				4.49%
Nonperforming assets to total assets			3.26%				3.54%				3.66%				3.77%				4.26%
Allowance for loan losses to total loans			1.50%				1.70%				1.82%				1.88%				1.97%
Asset Quality Ratios – Based on Non-covered Assets only
Net quarterly charge-offs to average non-covered loans - annualized			0.84%				0.78%				0.60%				0.69%				0.52%
Non-covered nonperforming loans to non-covered loans			3.58%				3.77%				3.71%				3.31%				3.12%
Non-covered nonperforming assets to total non-covered assets			2.92%				3.09%				3.17%				2.73%				2.65%
Allowance for loan losses to non-covered loans			1.48%				1.69%				1.81%				1.86%				1.98%

 

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

 

 

First Bancorp and Subsidiaries Financial Summary - Page 6

 

		For the Three Months Ended
NET INTEREST MARGIN, EXCLUDING LOAN DISCOUNT ACCRETION – RECONCILIATION ($ in thousands)		March 31, 2015				Dec. 31, 2014				Sept. 30, 2014				June 30, 2014				March 31, 2014
Net interest income, as reported		$	29,703				30,923				31,343				33,808				35,535
Tax-equivalent adjustment			390				376				378				375				373
Net interest income, tax-equivalent (A)		$	30,093				31,299				31,721				34,183				35,908
Average earning assets (B)		$	2,910,732				2,920,295				2,924,705				2,946,586				2,836,806
Tax-equivalent net interest margin, annualized – as reported –  (A)/(B)			4.19%				4.25%				4.30%				4.65%				5.13%
Net interest income, tax-equivalent		$	30,093				31,299				31,721				34,183				35,908
Loan discount accretion			1,557				2,173				2,577				4,851				6,408
Net interest income, tax-equivalent, excluding loan discount accretion  (A)		$	28,536				29,126				29,144				29,332				29,500
Average earnings assets (B)		$	2,910,732				2,920,295				2,924,705				2,946,586				2,836,806
Tax-equivalent net interest margin, excluding impact of loan discount accretion, annualized – (A) / (B)			3.98%				3.96%				3.95%				3.99%				4.22%

 

 

Note: The measure “tax-equivalent net interest margin, excluding impact of loan discount accretion” is a non-GAAP performance measure. Management of the Company believes that it is useful to calculate and present the Company’s net interest margin without the impact of loan discount accretion for the reasons explained in the remainder of this paragraph. Loan discount accretion is a non-cash interest income adjustment related to the Company’s acquisition of two failed banks and represents the portion of the fair value discount that was initially recorded on the acquired loans that is being recognized into income over the lives of the loans. At March 31, 2015, the Company had a remaining loan discount balance of $19.1 million compared to $31.2 million at March 31, 2014. 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.