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):   January 28, 2016

 

 

 

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:

 

oWritten communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
oSoliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
oPre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
oPre-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 January 28, 2016     Exhibit  

2

 

 

Item 2.02 – Results of Operations and Financial Condition

On January 28, 2016, the Registrant issued a news release to announce its financial results for the three and twelve months ended December 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 December 31, 2015, the Registrant had a remaining loan discount balance of $15.3 million compared to $20.8 million at December 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 January 28, 2016

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
             
   

 

January 28, 2016

 

 

By:

 

 

/s/ Richard H. Moore

            Richard H. Moore
            President and Chief Executive Officer

4

 



 

 

News Release

 

For Immediate Release: For More Information,
January 28, 2016 Contact:  Elaine Pozarycki
  919-834-3090

 

First Bancorp Reports Fourth Quarter and Annual Results

 

SOUTHERN PINES, N.C. – First Bancorp (NASDAQ - FBNC), the parent company of First Bank, announced today net income available to common shareholders of $26.4 million, or $1.30 per diluted common share, for the year ended December 31, 2015, an increase of 9.5% compared to the $24.1 million, or $1.19 per diluted common share, for the year ended December 31, 2014.

 

For the three months ended December 31, 2015, the Company recorded net income available to common shareholders of $6.8 million, or $0.33 per diluted common share, a decrease of 1.7% compared to the $6.9 million, or $0.34 per diluted common share, recorded in the fourth quarter of 2014.

 

Highlights for the quarter and year include:

 

·Legacy loan growth of $41.2 million for the fourth quarter of 2015, which represents 6.9% annualized growth. Legacy loan growth for the year was $147.7 million, an increase of 6.5%.

 

·Deposit growth of $103.5 million for the fourth quarter of 2015, which represents 15.2% annualized growth. Deposit growth for the year amounted to $115.4 million, an increase of 4.3%.

 

·On October 16, 2015, the Company redeemed the remaining $31.5 million of preferred stock associated with its participation in the Treasury’s Small Business Lending Fund. The Company had previously redeemed $32 million in June 2015.

 

 

Net Interest Income and Net Interest Margin

 

Net interest income for the fourth quarter of 2015 amounted to $30.1 million, a 2.8% decrease from the $30.9 million recorded in the fourth quarter of 2014. Net interest income for the year ended December 31, 2015 amounted to $119.7 million, a 9.0% decrease from the $131.6 million recorded in 2014.

 

The Company’s net interest margin (tax-equivalent net interest income divided by average earning assets) in the fourth quarter of 2015 was 4.05% compared to 4.25% for the fourth quarter of 2014. For the year ended December 31, 2015, the Company’s net interest margin was 4.13% compared to 4.58% in 2014. The lower margins in 2015 compared to 2014 were primarily due to lower amounts of discount accretion on loans purchased in failed-bank acquisitions. As shown in the accompanying tables, loan discount accretion amounted to $0.9 million in the fourth quarter of 2015, compared to $2.2 million in the fourth quarter of 2014. For the full year of 2015, loan discount accretion amounted to $4.8 million compared to $16.0 million for 2014. The lower amount of accretion is due to the continued winding down of the unaccreted discount amount that resulted from failed-bank acquisitions in 2009 and 2011.

 

1 

 

Excluding the effects of discount accretion on purchased loans, the Company’s net interest margin has remained stable, amounting to 3.94% for the fourth quarter of 2015 compared to 3.96% for the fourth quarter of 2014. Higher levels of loans and securities in 2015 substantially offset lower earning asset yields. See the Financial Summary for a table that presents the impact of loan discount accretion that affects 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 declined from 0.27% in the fourth quarter of 2014 to 0.24% in the fourth quarter of 2015, which had a positive impact on the Company’s net interest margin.

 

Provision for Loan Losses and Asset Quality

 

The Company recorded negative total provisions for loan losses (reduction of the allowance for loan losses) of $43,000 in the fourth quarter of 2015 compared to provisions for loan losses of $1.5 million in the fourth quarter of 2014. For the year ended December 31, 2015, the Company recorded a negative total provision for loan losses of $0.8 million compared to provision for loan losses of $10.2 million for 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 $0.6 million in the fourth quarter of 2015 compared to $1.3 million in the fourth quarter of 2014. For the full year of 2015, the provision for loan losses on non-covered loans amounted to $2.0 million compared to $7.1 million for 2014. The lower provisions recorded in 2015 were primarily a result of continued favorable credit quality trends and generally improving economic trends.

 

The Company recorded a negative provision for loan losses on covered loans (reduction of allowance for loan losses) of $0.7 million in the fourth quarter of 2015 compared to a $0.2 million provision for loan losses in the fourth quarter of 2014. For the twelve months ended December 31, 2015, the Company recorded a negative provision for loan losses on covered loans of $2.8 million compared to a $3.1 million provision for loan losses in 2014. The negative provisions 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 $0.6 million and $2.3 million that were realized during the three and twelve months ended December 31, 2015, respectively.

 

Total non-covered nonperforming assets declined 19.0% during 2015, amounting to $77.2 million at December 31, 2015 (2.37% of total non-covered assets) compared to $95.3 million at December 31, 2014 (3.09% of total non-covered assets). The decline in non-covered nonperforming assets is primarily due to on-going resolution of nonperforming assets and improving credit quality.

 

Total covered nonperforming assets also declined in 2015, amounting to $12.1 million at December 31, 2015 compared to $18.7 million at December 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.

 

Noninterest Income

 

Total noninterest income was $5.7 million and $4.5 million for the three months ended December 31, 2015 and December 31, 2014, respectively. For the year ended December 31, 2015, noninterest income amounted to $18.8 million compared to $14.4 million for the year ended December 31, 2014.

 

2 

 

Core noninterest income amounted to $7.4 million for both of the three month periods ended December 31, 2015 and 2014. For the full year of 2015, core noninterest income amounted to $29.3 million, a 3.8% decrease from the $30.5 million recorded in 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. Service charges on deposit accounts declined from $3.3 million in the fourth quarter of 2014 to $2.9 million in the fourth quarter of 2015. For the full year of 2015, service charges on deposit accounts amounted to $11.6 million, a $2.1 million decrease from the $13.7 million recorded in 2014.

 

Noncore components of noninterest income resulted in a net decrease to income of $1.7 million in the fourth quarter of 2015 compared to a net decrease to income of $2.9 million in the fourth quarter of 2014. For the year ended December 31, 2015 and 2014, the Company recorded net decreases to income of $10.6 million and $16.1 million, respectively, related to the noncore components of noninterest income. The largest variances in noncore noninterest income related to gains (losses) on covered foreclosed properties and indemnification asset income (expense) – see discussion below.

 

For both of the three month periods ended December 31, 2015 and 2014, the Company recorded gains on covered foreclosed properties of $0.6 million. For the full year of 2015, the Company recorded gains of $1.0 million compared to losses of $1.9 million in 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 result in indemnification expense (income). In the fourth quarter of 2015, the Company recorded $1.5 million in indemnification asset expense compared to $3.1 million in indemnification asset expense in the fourth quarter of 2014. For the year ended December 31, 2015, indemnification asset expense amounted to $8.6 million compared to $12.8 million in indemnification asset expense for 2014. The lower amounts of indemnification expense in 2015 are associated with the significantly lower amounts of loan discount accretion income recorded. Generally, when loan discount interest income is recorded, the Company records indemnification asset expense amounting to approximately 80% of the amount of loan discount accretion. See additional discussion related to this matter in the section below entitled “Note Regarding Components of Earnings.”

 

Noninterest Expenses

 

Noninterest expenses amounted to $25.5 million in the fourth quarter of 2015 compared to $23.0 million recorded in the fourth quarter of 2014. Noninterest expenses for the year ended December 31, 2015 amounted to $98.1 million compared to $97.3 million recorded in 2014.

 

Salaries expense rose in 2015 as a result of the hiring of additional staff to drive growth, as well as higher incentive compensation expense related to the Company’s performance. The line item “Other operating expenses” amounted to $7.9 million for the fourth quarter of 2015 compared $6.7 million in the fourth quarter of 2014. In the fourth quarter of 2014, the Company determined that approximately $1.0 million in collections expenses incurred in prior years associated with covered assets were eligible to be claimed for reimbursement with the FDIC, which resulted in a $1 million reduction in other operating expenses for that quarter.

 

3 

 

Balance Sheet and Capital

 

Total assets at December 31, 2015 amounted to $3.4 billion, a 4.5% increase from a year earlier. Total loans at December 31, 2015 amounted to $2.5 billion, a 5.1% increase from a year earlier, and total deposits amounted to $2.8 billion at December 31, 2015, a 4.3% increase from a year earlier.

 

Non-covered loans amounted to $2.42 billion at December 31, 2015, an increase of $147.7 million, or 6.5% from December 31, 2014, as a result of ongoing internal initiatives to drive loan growth. Loans covered by FDIC loss share agreements declined 19.6% in 2015 and are expected to continue to decline as those loans continue to pay down.

 

The increase in total deposits at December 31, 2015 compared to December 31, 2014 was primarily due to increases in checking, money market and savings accounts, which increased in total by $236.5 million, or 12.6%, during 2015. Those increases were partially offset by decreases in time deposits, which declined a total of $121.1 million, or 14.7%, during 2015. Time deposits are generally one of the Company’s most expensive funding sources, and thus the shift from this category has reduced the Company’s overall cost of funds.

 

On June 25, 2015, the Company redeemed $32 million (32,000 shares) of the outstanding Non-Cumulative Perpetual Preferred Stock, Series B (“SBLF Stock”) that had been issued to the United States Secretary of the Treasury in September 2011 related to the Company’s participation in the Small Business Lending Fund. On October 16, 2015, the remaining $31.5 million of SBLF Stock was redeemed, which ended the Company’s participation in the Small Business Lending Fund.

 

The Company remains well-capitalized by all regulatory standards, with a Total Risk-Based Capital Ratio at December 31, 2015 of 14.44% compared to the 10.00% minimum to be considered well-capitalized. The Company’s tangible common equity to tangible assets ratio was 8.13% at December 31, 2015, an increase of 23 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, “2015 was an excellent year for First Bancorp. Ongoing growth initiatives helped drive strong loan and deposit growth, while the core net interest margin remained steady and nonperforming assets continued to decline. We thank our customers for the opportunity to be of service.”

 

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

 

·On January 1, 2016, the Company completed the previously announced acquisition of Bankingport, Inc., an insurance agency based in Sanford, North Carolina. This acquisition provided the Company the opportunity to enhance its product offerings, as well as expand its insurance agency operations into Sanford, a significant banking market for the Company.

 

·On December 15, 2015, the Company announced a quarterly cash dividend of $0.08 per share payable on January 25, 2016 to shareholders of record on December 31, 2015. This is the same dividend rate as the Company declared in the fourth quarter of 2014.

 

 

Note Regarding Components of Earnings

 

The Company’s results of operations 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.

 

4 

 

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 $3.4 billion. Its principal activity is the ownership and operation of First Bank, a state-chartered community bank that operates 88 branches, with 75 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 Charlotte, 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.

 

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First Bancorp and Subsidiaries

Financial Summary – Page 1

 

   Three Months Ended
December 31,
  Percent
($ in thousands except per share data – unaudited)  2015  2014  Change
          
INCOME STATEMENT               
                
Interest income               
   Interest and fees on loans  $29,615    31,160      
   Interest on investment securities   2,057    1,408      
   Other interest income   135    259      
      Total interest income   31,807    32,827    (3.1%)
Interest expense               
   Interest on deposits   1,264    1,602      
   Interest on borrowings   490    302      
      Total interest expense   1,754    1,904    (7.9%)
        Net interest income   30,053    30,923    (2.8%)
Provision for loan losses – non-covered loans   636    1,285    (50.5%)
Provision (reversal) for loan losses – covered loans   (679)   191    n/m 
Total provision (reversal) for loan losses   (43)   1,476    n/m 
Net interest income after provision for loan losses   30,096    29,447    2.2%
Noninterest income               
   Service charges on deposit accounts   2,924    3,261      
   Other service charges, commissions, and fees   2,815    2,552      
   Fees from presold mortgages   512    522      
   Commissions from financial product sales   663    748      
   Bank-owned life insurance income   529    355      
   Foreclosed property gains (losses) – non-covered   (572)   (460)     
   Foreclosed property gains (losses) – covered   608    598      
   FDIC indemnification asset income (expense), net   (1,530)   (3,138)     
   Securities gains (losses)             
   Other gains (losses)   (224)   54      
      Total noninterest income   5,725    4,492    27.4%
Noninterest expenses               
   Salaries expense   12,204    11,284      
   Employee benefit expense   2,432    1,939      
   Occupancy and equipment expense   2,798    2,841      
   Intangibles amortization   181    195      
   Other operating expenses   7,888    6,730      
      Total noninterest expenses   25,503    22,989    10.9%
Income before income taxes   10,318    10,950    (5.8%)
Income taxes   3,521    3,855    (8.7%)
Net income   6,797    7,095    (4.2%)
                
Preferred stock dividends   (37)   (217)     
                
Net income available to common shareholders  $6,760    6,878    (1.7%)
                
                
Earnings per common share – basic  $0.34    0.35    (2.9%)
Earnings per common share – diluted   0.33    0.34    (2.9%)
                
ADDITIONAL INCOME STATEMENT INFORMATION               
   Net interest income, as reported  $30,053    30,923      
   Tax-equivalent adjustment (1)   423    376      
   Net interest income, tax-equivalent  $30,476    31,299    (2.6%)
(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 38% tax rate and is reduced by the related nondeductible portion of interest expense.

 

n/m = not meaningful

 

6 

 

First Bancorp and Subsidiaries

Financial Summary – Page 2

 

   Twelve Months Ended
December 31,
  Percent
($ in thousands except per share data – unaudited)  2015  2014  Change
          
INCOME STATEMENT               
                
Interest income               
   Interest and fees on loans  $117,872    133,641      
   Interest on investment securities   8,125    5,342      
   Other interest income   658    849      
      Total interest income   126,655    139,832    (9.4%)
Interest expense               
   Interest on deposits   5,319    7,072      
   Other, primarily borrowings   1,589    1,151      
      Total interest expense   6,908    8,223    (16.0%)
        Net interest income   119,747    131,609    (9.0%)
Provision for loan losses – non-covered loans   2,008    7,087    (71.7%)
Provision (reversal) for loan losses – covered loans   (2,788)   3,108    n/m     
Total provision (reversal) for loan losses   (780)   10,195    n/m     
Net interest income after provision for loan losses   120,527    121,414    (0.7%)
Noninterest income               
   Service charges on deposit accounts   11,648    13,706      
   Other service charges, commissions, and fees   10,906    10,019      
   Fees from presold mortgages   2,532    2,726      
   Commissions from financial product sales   2,580    2,733      
   Bank-owned life insurance income   1,665    1,311      
   Foreclosed property gains (losses) – non-covered   (2,504)   (1,924)     
   Foreclosed property gains (losses) – covered   1,018    (1,919)     
   FDIC indemnification asset income (expense), net   (8,615)   (12,842)     
   Securities gains (losses)   (1)   786      
   Other gains (losses)   (465)   (228)     
      Total noninterest income   18,764    14,368    30.6%
Noninterest expenses               
   Salaries expense   47,660    46,071      
   Employee benefit expense   9,134    9,086      
   Occupancy and equipment expense   11,107    11,293      
   Intangibles amortization   722    777      
   Other operating expenses   29,508    30,024      
      Total noninterest expenses   98,131    97,251    0.9%
Income before income taxes   41,160    38,531    6.8%
Income taxes   14,126    13,535    4.4%
Net income   27,034    24,996    8.2%
                
Preferred stock dividends   (603)   (868)     
                
Net income available to common shareholders  $26,431    24,128    9.5%
                
                
Earnings per common share – basic  $1.34    1.22    9.8%
Earnings per common share – diluted   1.30    1.19    9.2%
                
ADDITIONAL INCOME STATEMENT INFORMATION               
   Net interest income, as reported  $119,747    131,609      
   Tax-equivalent adjustment (1)   1,634    1,502      
   Net interest income, tax-equivalent  $121,381    133,111    (8.8%)
(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 38% tax rate and is reduced by the related nondeductible portion of interest expense.

 

n/m = not meaningful

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First Bancorp and Subsidiaries

Financial Summary – Page 3

 

   Three Months Ended
December 31,
  Twelve Months Ended
December 31,
PERFORMANCE RATIOS (annualized)  2015  2014  2015  2014
Return on average assets (1)   0.82%   0.85%   0.82%   0.75%
Return on average common equity (2)   7.96%   8.56%   8.04%   7.73%
Net interest margin – tax-equivalent (3)   4.05%   4.25%   4.13%   4.58%
Net charge-offs to average loans – non-covered   0.33%   0.78%   0.58%   0.65%
                     
COMMON SHARE DATA                    
Cash dividends declared – common  $0.08    0.08   $0.32    0.32 
Stated book value – common   16.96    16.08    16.96    16.08 
Tangible book value – common   13.56    12.63    13.56    12.63 
Common shares outstanding at end of period   19,747,509    19,709,881    19,747,509    19,709,881 
Weighted average shares outstanding – basic   19,787,459    19,706,926    19,767,470    19,699,801 
Weighted average shares outstanding – diluted   20,522,125    20,440,533    20,499,727    20,434,007 
                     
CAPITAL RATIOS                    
Tangible equity to tangible assets   8.35%   10.15%   8.35%   10.15%
Tangible common equity to tangible assets   8.13%   7.90%   8.13%   7.90%
Tier I leverage ratio   10.38%   11.61%   10.38%   11.61%
Tier I risk-based capital ratio   13.30%   16.35%   13.30%   16.35%
Total risk-based capital ratio   14.44%   17.60%   14.44%   17.60%
                     
AVERAGE BALANCES ($ in thousands)                    
Total assets  $3,282,853   $3,214,302   $3,230,302   $3,219,915 
Loans   2,504,022    2,411,117    2,434,602    2,434,331 
Earning assets   2,982,356    2,920,295    2,936,624    2,907,098 
Deposits   2,732,231    2,691,076    2,687,381    2,723,758 
Interest-bearing liabilities   2,258,911    2,235,758    2,218,246    2,294,330 
Shareholders’ equity   348,777    389,709    376,287    383,055 
                     

(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  December 31,
2015
  September 30,
2015
  June 30,
2015
  March 31,
2015
  December 31,
2014
                
Net interest income – tax-equivalent (1)  $30,476    30,805    30,007    30,093    31,299 
Taxable equivalent adjustment (1)   423    419    402    390    376 
Net interest income   30,053    30,386    29,605    29,703    30,923 
Provision for loan losses – non-covered   636    267    1,001    104    1,285 
Provision (reversal) for loan losses – covered   (679)   (1,681)   (160)   (268)   191 
Noninterest income   5,725    3,506    5,004    4,529    4,492 
Noninterest expense   25,503    24,614    24,300    23,714    22,989 
Income before income taxes   10,318    10,692    9,468    10,682    10,950 
Income tax expense   3,521    3,687    3,224    3,694    3,855 
Net income   6,797    7,005    6,244    6,988    7,095 
Preferred stock dividends   (37)   (137)   (212)   (217)   (217)
Net income available to common shareholders   6,760    6,868    6,032    6,771    6,878 
                          
Earnings per common share – basic   0.34    0.35    0.30    0.34    0.35 
Earnings per common share – diluted   0.33    0.34    0.30    0.33    0.34 
 

 

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

8 

 

 

First Bancorp and Subsidiaries

Financial Summary – Page 4

 

 

CONSOLIDATED BALANCE SHEETS

($ in thousands - unaudited)

  At Dec. 31,
2015
  At Sept. 30,
2015
  At Dec. 31,
2014
  One Year
Change
Assets            
Cash and due from banks  $53,285    52,788    81,068    (34.3%)
Interest bearing deposits with banks   213,983    166,001    172,016    24.4%
     Total cash and cash equivalents   267,268    218,789    253,084    5.6%
                     
Investment securities   320,224    338,813    336,705    (4.9%)
Presold mortgages   4,323    3,150    6,019    (28.2%)
                     
Loans – non-covered   2,416,285    2,375,094    2,268,580    6.5%
Loans – covered by FDIC loss share agreements   102,641    106,609    127,594    (19.6%)
     Total loans   2,518,926    2,481,703    2,396,174    5.1%
Allowance for loan losses – non-covered   (26,784)   (28,155)   (38,345)   (30.1%)
Allowance for loan losses – covered   (1,799)   (1,900)   (2,281)   (21.1%)
     Total allowance for loan losses   (28,583)   (30,055)   (40,626)   (29.6%)
     Net loans   2,490,343    2,451,648    2,355,548    5.7%
                     
Premises and equipment   74,559    74,839    75,113    (0.7%)
FDIC indemnification asset   8,439    7,649    22,569    (62.6%)
Intangible assets   67,171    67,351    67,893    (1.1%)
Foreclosed real estate – non-covered   9,188    9,304    9,771    (6.0%)
Foreclosed real estate – covered   806    1,569    2,350    (65.7%)
Bank-owned life insurance   72,086    56,557    55,421    30.1%
Other assets   47,658    43,172    33,910    40.5%
     Total assets  $3,362,065    3,272,841    3,218,383    4.5%
                     
                     
Liabilities                    
Deposits:                    
     Non-interest bearing checking accounts  $659,038    635,287    560,230    17.6%
     Interest bearing checking accounts   626,878    609,908    583,903    7.4%
     Money market accounts   636,692    581,644    548,255    16.1%
     Savings accounts   186,616    187,607    180,317    3.5%
     Brokered deposits   76,412    46,692    88,375    (13.5%)
     Internet time deposits           747    (100.0%)
     Other time deposits > $100,000   329,819    338,214    384,127    (14.1%)
     Other time deposits   295,830    308,401    349,952    (15.5%)
          Total deposits   2,811,285    2,707,753    2,695,906    4.3%
                     
Borrowings   186,394    176,394    116,394    60.1%
Other liabilities   22,196    17,520    18,384    20.7%
     Total liabilities   3,019,875    2,901,667    2,830,684    6.7%
                     
Shareholders’ equity                    
Preferred stock   7,287    38,787    70,787    (89.7%)
Common stock   133,393    133,211    132,532    0.6%
Retained earnings   205,060    199,886    184,958    10.9%
Accumulated other comprehensive income (loss)   (3,550)   (710)   (578)        n/m 
     Total shareholders’ equity   342,190    371,174    387,699    (11.7%)
Total liabilities and shareholders’ equity  $3,362,065    3,272,841    3,218,383    4.5%
                     
 

 

 

n/m = not meaningful

 

9 

 

First Bancorp and Subsidiaries

Financial Summary - Page 5

 

 

   For the Three Months Ended
YIELD INFORMATION  December 31, 
2015
  September 30,
2015
  June 30,
2015
  March 31,
2015
  December 31,
2014
                          
Yield on loans   4.69%   4.83%   4.86%   4.99%   5.13%
Yield on securities – tax-equivalent (1)   2.99%   2.75%   2.80%   2.67%   2.95%
Yield on other earning assets   0.36%   0.43%   0.50%   0.43%   0.38%
   Yield on all interest earning assets   4.29%   4.38%   4.38%   4.44%   4.51%
                          
Rate on interest bearing deposits   0.24%   0.24%   0.26%   0.28%   0.30%
Rate on other interest bearing liabilities   1.05%   1.09%   1.04%   1.03%   1.03%
   Rate on all interest bearing liabilities   0.31%   0.31%   0.30%   0.32%   0.34%
     Total cost of funds   0.24%   0.24%   0.24%   0.26%   0.27%
                          
        Net interest margin – tax-equivalent (2)   4.05%   4.14%   4.15%   4.19%   4.25%
        Average prime rate   3.29%   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)

  December 31,
2015
   September 30,
2015
   June 30,
2015
   March 31,
2015
   December 31,
2014
 
                          
Interest income – increased by accretion of loan discount (1)  $854    1,205    1,135    1,557    2,173 
     Impact on net interest income  $854    1,205    1,135    1,557    2,173 

 

(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.

 

 

10 

 

 

First Bancorp and Subsidiaries

Financial Summary - Page 6

 

 

 

ASSET QUALITY DATA ($ in thousands)

  Dec. 31,
2015
   Sept. 30,
2015
   June 30,
2015
   March 31,
2015
   Dec. 31,
2014
 
                     
Non-covered nonperforming assets                         
Nonaccrual loans  $39,994    42,347    44,123    47,416    50,066 
Troubled debt restructurings - accruing   28,011    29,250    32,059    33,997    35,493 
Accruing loans > 90 days past due                    
     Total non-covered nonperforming loans   68,005    71,597    76,182    81,413    85,559 
Foreclosed real estate   9,188    9,304    9,954    8,978    9,771 
Total non-covered nonperforming assets  $77,193    80,901    86,136    90,391    95,330 
                          
Covered nonperforming assets (1)                         
Nonaccrual loans  $7,816    5,373    7,378    8,596    10,508 
Troubled debt restructurings - accruing   3,478    3,825    3,910    3,874    5,823 
Accruing loans > 90 days past due                    
     Total covered nonperforming loans   11,294    9,198    11,288    12,470    16,331 
Foreclosed real estate   806    1,569    1,945    2,055    2,350 
Total covered nonperforming assets  $12,100    10,767    13,233    14,525    18,681 
                          
     Total nonperforming assets  $89,293    91,668    99,369    104,916    114,011 

 

Asset Quality Ratios – All Assets

                         
Net quarterly charge-offs to average loans - annualized   0.23%   0.10%   0.80%   0.76%   0.82%
Nonperforming loans to total loans   3.15%   3.26%   3.63%   3.92%   4.25%
Nonperforming assets to total assets   2.66%   2.80%   3.09%   3.26%   3.54%
Allowance for loan losses to total loans   1.13%   1.21%   1.33%   1.50%   1.70%
                          
Asset Quality Ratios – Based on Non-covered Assets only                         
Net quarterly charge-offs to average non-covered loans - annualized   0.33%   0.38%   0.81%   0.84%   0.78%
Non-covered nonperforming loans to non-covered loans   2.81%   3.01%   3.31%   3.58%   3.77%
Non-covered nonperforming assets to total non-covered assets   2.37%   2.56%   2.78%   2.92%   3.09%
Allowance for loan losses (non-covered) to non-covered loans   1.11%   1.19%   1.31%   1.48%   1.69%

 

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

 

 

11 

 

First Bancorp and Subsidiaries

Financial Summary - Page 7

 

   For the Three Months Ended 

NET INTEREST MARGIN, EXCLUDING
LOAN DISCOUNT ACCRETION –
RECONCILIATION

($ in thousands)

  Dec. 31,
2015
   Sept. 30,
2015
   June 30,
2015
   March 31,
2015
   Dec. 31,
2014
 
                     
Net interest income, as reported  $30,053    30,386    29,605    29,703    30,923 
Tax-equivalent adjustment   423    419    402    390    376 
Net interest income, tax-equivalent (A)  $30,476    30,805    30,007    30,093    31,299 
                          
Average earning assets (B)  $2,982,356    2,951,638    2,901,770    2,910,732    2,920,295 
Tax-equivalent net interest margin, annualized – as reported –  (A)/(B)   4.05%   4.14%   4.15%   4.19%   4.25%
                          
Net interest income, tax-equivalent  $30,476    30,805    30,007    30,093    31,299 
Loan discount accretion   854    1,205    1,135    1,557    2,173 
Net interest income, tax-equivalent, excluding loan discount accretion  (A)  $29,622    29,600    28,872    28,536    29,126 
                          
Average earnings assets (B)  $2,982,356    2,951,638    2,901,770    2,910,732    2,920,295 
Tax-equivalent net interest margin, excluding impact of loan discount accretion, annualized – (A) / (B)   3.94%   3.98%   3.99%   3.98%   3.96%

 

 

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 December 31, 2015, the Company had a remaining loan discount balance of $15.3 million compared to $20.8 million at December 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.

12 

 

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