First Bancorp Reports Fourth Quarter and Annual Results
01/24/2023 - 04:05 PM
SOUTHERN PINES, N.C. , Jan. 24, 2023 /PRNewswire/ -- First Bancorp (the "Company") (NASDAQ - FBNC), the parent company of First Bank, announced today net income of $38.4 million , or $1.08 per diluted common share, for the three months ended December 31, 2022 , compared to $37.9 million , or $1.06 per diluted common share for the three months ended September 30, 2022 ("linked quarter") and $10.5 million , or $0.30 per diluted common share, recorded in the fourth quarter of 2021. For the twelve months ended December 31, 2022, the Company recorded net income of $146.9 million , or $4.12 per diluted common share, compared to $95.6 million , or $3.19 per diluted common share for the twelve months ended December 31 , 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. The transaction closed on January 1, 2023 , adding eight branches throughout South Carolina and approximately $1.2 billion in total assets, $1.0 billion in loans, and $1.0 billion in deposits to the Company's balance sheet as of the acquisition date.
Richard H. Moore , CEO and Chairman of the Company, stated, "First Bancorp had another strong year of continued growth as we earned nearly $147 million in net income, grew loans close to 10% , and improved our credit quality metrics over the course of the year. I am proud of our employees for their commitment to the communities we serve and for their continued focus on our customers, shareholders, and each other during our acquisition of GrandSouth and our October 2021 acquisition of Select Bancorp ("Select"). We welcomed our new GrandSouth customers officially as of January 1, 2023 and look forward to system conversion in March 2023 ."
2022 Financial Highlights
Annualized return on average assets ("ROA") of 1.44% and annualized return on average common equity ("ROE") of 15.20% was reported for the quarter ended December 31, 2022. For the year ended December 31, 2022, ROA was reported at 1.39% and ROE was 13.40% , both increasing from the prior year. Total loans outstanding increased $139.9 million (8.5% annualized) during the fourth quarter of 2022, while year-over-year growth was $583.4 million , or 9.6% . Total loans were in excess of $6.6 billion at December 31, 2022 . Credit quality continues to be strong with the nonperforming assets ("NPA") to total assets ratio at 0.36% as of December 31, 2022, down three basis points from the linked quarter, and as compared to 0.50% at December 31, 2021 . Yield on total interest-earning assets increased 15 basis points to 3.64% as compared to the third quarter of 2022 and as compared to 3.20% for the fourth quarter of 2021. For the year ended December 31, 2022 , interest-earning assets yielded 3.41% , up from 3.25% for the prior year. Capital remains strong with a total common equity Tier 1 ratio of 12.68% , up from 12.53% for the prior year, and an estimated total risk-based capital ratio of 14.73% as of December 31, 2022 as compared to 14.67% for the prior year. The following discussions and comparisons to the prior year financial periods presented are impacted by the Company's acquisition of 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 fourth quarter of 2022 was $84.4 million , a 14.3% increase from the $73.8 million recorded in the fourth quarter of 2021 and a decrease of $1.0 million or 1.1% , from the linked quarter. The increase in net interest income from the prior year period was due in large part to higher earning assets year-over-year and the higher net interest margin ("NIM") throughout 2022 as compared to 2021. Average interest-earning assets for the fourth quarter of 2022 increased 7.7% from the comparable period of the prior year, with strong loan growth as the primary driver for the increase.
The Company's tax-equivalent NIM (calculated by dividing tax-equivalent net interest income by average earning assets) for the twelve months ended December 31, 2022 was 3.28% , compared to 3.16% for the prior year. The NIM increase was driven by the rising market interest rates as the Federal Reserve's monetary policies resulted in a 425 basis point rise in short-term rates between March and December 2022 .
The decrease in net interest income in the fourth quarter of 2022 as compared to the third quarter of 2022 was related primarily to an increase in total interest expense of $5.8 million . While the Company's total cost of funds ("COF") remained low at 0.36% for the quarter ended December 31, 2022, COF increased 24 basis points from the linked quarter contributing to the higher interest expense. During the fourth quarter of 2022, the Company experienced some pressure to reprice deposits, primarily money market accounts, and utilized more wholesale funding sources, both of which contributed to the increase in cost of funds.
Allowance for Credit Losses, Provisions for Credit Losses, and Asset Quality
For the three months ended December 31, 2022 , the Company recorded $4.0 million in provision for loan losses. This is compared to $5.1 million provision for loan losses for the linked quarter and a provision of $11.0 million for the fourth quarter of 2021. Fluctuations each period are based on the acquisition of Select in the fourth quarter of 2021, loan growth during each period, changes in the levels of nonperforming loans, economic forecasts impacting loss drivers, and other assumptions and inputs to the Company's CECL model.
Also during the fourth quarter of 2022, the Company recorded $1.0 million in provision for unfunded commitments, compared to a $0.3 million provision for unfunded commitments for the linked quarter and a provision of $2.4 million for the fourth quarter of 2021. Changes each period are related to fluctuations in the level of available credit lines and updated loss drivers. The reserve for unfunded commitments totaled $13.3 million at December 31, 2022 and is included in the line item "Other Liabilities".
Asset quality remained strong with annualized net loan recoveries of (0.02)% for the fourth quarter of 2022 and net charge-offs of 0.01% for the year ended December 31, 2022. Total NPAs amounted to $38.3 million at December 31, 2022, or 0.36% of total assets, down from $40.7 million , 0.39% of total assets, at the end of the linked quarter, and $52.6 million , or 0.50% of total assets, at December 31, 2021.
Noninterest Income
Total noninterest income for the fourth quarter of 2022 was $14.6 million , a 3.3% decrease from the $15.1 million recorded for the fourth quarter of 2021 and a 13.9% decrease from the linked quarter. The primary factors driving fluctuations among the periods presented were as follows:
Declines in "Other service charges, commission and fees" each period were related to lower interchange fees effective in July 2022 as a result of the Company becoming subject to the Durbin Amendment limitations. Lower fees were partially offset by higher volumes of activity in each period. Fees from presold mortgages amounted to $0.2 million for the fourth quarter of 2022, a decrease of 59.8% from the linked quarter, and a decrease of 92.7% from the $2.1 million recorded in the fourth quarter of 2021. Mortgage loan refinancing and origination volumes declined significantly over these periods due to increases in mortgage interest rates. SBA-related revenues, including consulting fees and gain on sales, were down year-over-year as a result of lower PPP-related revenue in 2022 and timing and volume of loan originations available to be sold each period. Other gains amounted to $1.4 million for the fourth quarter of 2022 and $7.3 million for the twelve months ended December 31, 2022 , primarily related to death benefits realized on bank-owned life insurance policies. Noninterest Expenses
Noninterest expenses amounted to $45.7 million for the fourth quarter of 2022, compared to $48.7 million for the linked quarter and $62.8 million for the fourth quarter of 2021. The 27.3% decrease in noninterest expenses from the prior year period was driven by lower merger and acquisition expenses as compared to the fourth quarter of 2021. All other expenses remained essentially the same for the year-over-year quarter comparison other than an increase of employee benefit expenses driven by the fluctuations in the timing and volume of claims paid under the Company's self-insured health insurance plan. The increase in noninterest expenses, exclusive of merger expenses, of 13.3% year-over-year for the twelve months ended December 31, 2022 was driven by higher operating expenses, including additional locations and personnel, resulting from the Select acquisition which occurred in the fourth quarter of 2021.
Balance Sheet and Capital
Total assets at December 31, 2022 were $10.6 billion , an increase of 1.1% from the prior year end with growth in loans offset by reductions in other assets throughout the year.
Total investment securities decreased $288.0 million from December 31, 2021 to total $2.9 billion at December 31, 2022, as the Company is strategically redeploying the cash flows from investments to fund loan growth. Also contributing to the decline year-over-year was the higher level of unrealized losses on available for sale securities which amounted to $444.1 million at December 31, 2022, down $22.7 million from the linked quarter.
Total loans amounted to $6.7 billion at December 31, 2022, an increase of $583.4 million , or 9.6% , from December 31, 2021, due to organic loan growth throughout 2022. Organic net loan growth for the fourth quarter of 2022 amounted to $139.9 million , an annualized growth rate of 8.6% .
Total deposits amounted to $9.2 billion at December 31, 2022, an increase of $102.9 million , or 1.1% , from December 31, 2021. While deposits increased for the year to date period, the fourth quarter of 2022 realized a decline in total deposits of $1.7 million as market rates for deposits became more competitive and customer behaviors shifted from activity experienced during the pandemic.
The Company remains well-capitalized by all regulatory standards, with an estimated Total Risk-Based Capital Ratio at December 31, 2022 of 14.73% compared to 14.67% reported at December 31, 2021. The Company's tangible common equity ("TCE") to tangible assets ratio was 6.39% at December 31, 2022, an increase from 5.98% for the linked quarter and a decrease of 199 basis points from a year earlier. Fluctuations in the TCE ratio were driven by the changes in the 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 approximately $11.8 billion . Its principal activity is the ownership and operation of First Bank, a state-chartered community bank that operates 118 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
Twelve Months Ended
($ in thousands except per share data - unaudited)
December 31, 2022
September 30, 2022
December 31, 2021
December 31, 2022
December 31, 2021
Interest income
Interest and fees on loans
$ 76,509
72,239
64,688
$ 278,027
219,013
Interest on investment securities
14,611
14,565
10,910
57,923
34,478
Other interest income
1,991
1,486
618
5,007
2,427
Total interest income
93,111
88,290
76,216
340,957
255,918
Interest expense
Interest on deposits
6,145
1,848
1,868
11,349
7,881
Interest on borrowings
2,594
1,108
503
4,754
1,642
Total interest expense
8,739
2,956
2,371
16,103
9,523
Net interest income
84,372
85,334
73,845
324,854
246,395
Provision for loan losses
4,000
5,100
11,011
12,600
9,611
Provision for (reversal of) unfunded commitments
1,000
300
2,432
(200)
5,420
Total provision for credit losses
5,000
5,400
13,443
12,400
15,031
Net interest income after provision for credit losses
79,372
79,934
60,402
312,454
231,364
Noninterest income
Service charges on deposit accounts
4,116
4,166
3,551
15,523
12,317
Other service charges, commissions, and fees
5,094
6,312
7,034
26,294
25,516
Fees from presold mortgage loans
151
376
2,061
2,102
10,975
Commissions from sales of insurance & financial products
1,708
1,391
1,093
5,195
6,947
SBA consulting fees
645
479
1,152
2,608
7,231
SBA loan sale gains
495
479
348
5,076
7,329
Bank-owned life insurance income
967
962
940
3,847
2,885
Securities losses, net
—
—
(1,237)
—
(1,237)
Other gains, net
1,382
2,747
115
7,340
1,648
Total noninterest income
14,558
16,912
15,057
67,985
73,611
Noninterest expenses
Salaries expense
24,652
24,416
24,846
96,321
86,815
Employee benefit expense
5,353
4,156
3,329
21,397
16,434
Occupancy and equipment related expense
4,433
4,847
4,607
18,604
16,020
Merger and acquisition expenses
303
548
16,180
5,072
16,845
Intangibles amortization expense
825
889
1,094
3,684
3,531
Foreclosed property net (gains) losses
—
—
17
(372)
24
Other operating expenses
10,091
13,844
12,716
50,514
44,987
Total noninterest expenses
45,657
48,700
62,789
195,220
184,656
Income before income taxes
48,273
48,146
12,670
185,219
120,319
Income tax expense
9,840
10,197
2,148
38,283
24,675
Net income
$ 38,433
37,949
10,522
$ 146,936
95,644
Earnings per common share - diluted
$ 1.08
1.06
0.30
$ 4.12
3.19
ADDITIONAL INCOME STATEMENT INFORMATION
Net interest income, as reported
$ 84,372
85,334
73,845
$ 324,854
246,395
Tax-equivalent adjustment (1)
722
692
707
2,780
2,243
Net interest income, tax-equivalent
$ 85,094
86,026
74,552
327,634
248,638
(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 December 31, 2022
(unaudited)
At September 30, 2022
(unaudited)
At December 31, 2021
(audited)
Assets
Cash and due from banks
$ 101,133
83,050
128,228
Interest-bearing deposits with banks
169,185
186,465
332,934
Total cash and cash equivalents
270,318
269,515
461,162
Investment securities
2,856,193
2,882,408
3,144,239
Presold mortgages in process of settlement
1,282
3,233
19,257
SBA and other loans held for sale
—
477
61,003
Loans
6,665,145
6,525,286
6,081,715
Allowance for credit losses on loans
(90,967)
(86,587)
(78,789)
Net loans
6,574,178
6,438,699
6,002,926
Premises and equipment
134,187
134,288
136,092
Operating right-of-use lease assets
18,733
19,230
20,719
Intangible assets
376,938
378,150
382,090
Foreclosed properties
658
658
3,071
Bank-owned life insurance
164,592
164,793
165,786
Other assets
227,970
224,411
112,556
Total assets
$ 10,625,049
10,515,862
10,508,901
Liabilities
Deposits:
Noninterest-bearing deposit accounts
$ 3,566,003
3,748,207
3,348,622
Interest-bearing deposit accounts
5,661,526
5,481,064
5,776,007
Total deposits
9,227,529
9,229,271
9,124,629
Borrowings
287,507
226,476
67,386
Operating lease liabilities
19,391
19,847
21,192
Other liabilities
59,026
55,771
65,119
Total liabilities
9,593,453
9,531,365
9,278,326
Shareholders' equity
Common stock
725,153
724,694
722,671
Retained earnings
648,418
617,839
532,874
Accumulated other comprehensive loss
(341,975)
(358,036)
(24,970)
Total shareholders' equity
1,031,596
984,497
1,230,575
Total liabilities and shareholders' equity
$ 10,625,049
10,515,862
10,508,901
First Bancorp and Subsidiaries
Financial Summary
Three Months Ended
Twelve Months Ended
PERFORMANCE RATIOS (annualized)
December 31, 2022
September 30, 2022
December 31, 2021
December 31, 2022
December 31, 2021
Return on average assets (1)
1.44 %
1.42 %
0.41 %
1.39 %
1.13 %
Return on average common equity (2)
15.20 %
13.84 %
3.55 %
13.40 %
9.86 %
Return on average tangible common equity (3)
20.96 %
21.25 %
4.64 %
20.48 %
13.79 %
COMMON SHARE DATA
Cash dividends declared - common
$ 0.22
0.22
0.20
0.88
0.80
Stated book value - common
28.89
27.57
34.54
28.89
34.54
Tangible book value - common (non-GAAP)
18.34
16.98
23.81
18.34
23.81
Common shares outstanding at end of period
35,704,154
35,711,754
35,629,177
35,704,154
35,629,117
Weighted average shares outstanding - diluted
35,614,972
35,703,446
34,567,927
35,674,730
30,027,785
CAPITAL RATIOS
Tangible common equity to tangible assets (non-GAAP)
6.39 %
5.98 %
8.38 %
6.39 %
8.38 %
Common equity tier I capital ratio (4)
12.68 %
12.76 %
12.53 %
12.68 %
12.53 %
Tier I leverage ratio (4)
10.51 %
10.21 %
9.39 %
10.51 %
9.39 %
Tier I risk-based capital ratio (4)
13.48 %
13.59 %
13.42 %
13.48 %
13.42 %
Total risk-based capital ratio (4)
14.73 %
14.84 %
14.67 %
14.73 %
14.67 %
AVERAGE BALANCES ($ in thousands)
Total assets
$ 10,579,187
10,567,133
10,191,402
10,556,230
8,459,645
Loans
6,576,415
6,389,996
5,879,373
6,293,280
5,018,391
Earning assets
10,161,108
10,028,388
9,438,263
9,989,185
7,871,319
Deposits
9,275,909
9,299,277
8,878,141
9,283,505
7,401,910
Interest-bearing liabilities
5,779,958
5,661,339
5,641,358
5,758,001
4,736,343
Shareholders' equity
1,003,031
1,087,763
1,177,374
1,096,913
969,775
(1)
Calculated by dividing annualized net income by average assets.
(2)
Calculated by dividing annualized net income by average common equity.
(3)
Calculated by dividing annualized net income by average tangible common equity.
(4)
Capital ratios as of December 31, 2022 are estimated.
TREND INFORMATION
($ in thousands except per share data)
For the Three Months Ended
INCOME STATEMENT
December 31, 2022
September 30, 2022
June 30, 2022
March 31, 2022
December 31, 2021
Net interest income - tax-equivalent (1)
$ 85,094
86,026
78,939
77,575
74,552
Taxable equivalent adjustment (1)
722
692
669
697
707
Net interest income
84,372
85,334
78,270
76,878
73,845
Provision for loan losses
4,000
5,100
—
3,500
11,011
Provision for (reversal of) unfunded commitments
1,000
300
—
(1,500)
2,432
Noninterest income
14,558
16,912
17,264
19,251
15,057
Noninterest expense
45,657
48,700
49,398
51,465
62,789
Income before income taxes
48,273
48,146
46,136
42,664
12,670
Income tax expense
9,840
10,197
9,551
8,695
2,148
Net income
38,433
37,949
36,585
33,969
10,522
Earnings per common share - diluted
1.08
1.06
1.03
0.95
0.30
Cash dividends declared per share
0.22
0.22
0.22
0.22
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
December 31, 2022
September 30, 2022
June 30, 2022
March 31, 2022
December 31, 2021
Yield on loans
4.62 %
4.49 %
4.24 %
4.30 %
4.37 %
Yield on securities
1.74 %
1.71 %
1.69 %
1.76 %
1.45 %
Yield on other earning assets
3.05 %
2.27 %
0.97 %
0.55 %
0.42 %
Yield on all interest-earning assets
3.64 %
3.49 %
3.24 %
3.27 %
3.20 %
Rate on interest bearing deposits
0.44 %
0.13 %
0.11 %
0.12 %
0.13 %
Rate on other interest-bearing liabilities
4.58 %
3.99 %
3.52 %
2.77 %
2.88 %
Rate on all interest-bearing liabilities
0.60 %
0.21 %
0.15 %
0.15 %
0.17 %
Total cost of funds
0.36 %
0.12 %
0.09 %
0.10 %
0.11 %
Net interest margin (1)
3.29 %
3.38 %
3.16 %
3.18 %
3.10 %
Net interest margin - tax-equivalent (2)
3.32 %
3.40 %
3.18 %
3.21 %
3.13 %
Average prime rate
6.82 %
5.35 %
3.94 %
3.29 %
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)
December 31, 2022
September 30, 2022
June 30, 2022
March 31, 2022
December 31, 2021
Interest income - increased by accretion of loan discount on acquired loans
$ 886
1,519
1,545
1,671
1,912
Interest income - increased by accretion of loan discount on retained portions of SBA loans
427
1,032
730
667
703
Total interest income impact
1,313
2,551
2,275
2,338
2,615
Interest expense - reduced by premium amortization of deposits
70
121
168
234
261
Interest expense - increased by discount accretion of borrowings
(64)
(64)
(53)
(73)
(116)
Total net interest expense impact
6
57
115
161
145
Total impact on net interest income
$ 1,319
2,608
2,390
2,499
2,760
As of / for the Three Months Ended
PAYCHECK PROTECTION PROGRAM (PPP) LOANS
($ in thousands - unaudited)
December 31, 2022
September 30, 2022
June 30, 2022
March 31, 2022
December 31, 2021
PPP loans outstanding
$ 35
38
3,000
15,623
38,979
PPP fee amortization
—
284
1,008
1,324
1,676
First Bancorp and Subsidiaries
Financial Summary
ASSET QUALITY DATA ($ in thousands)
December 31, 2022
September 30, 2022
June 30, 2022
March 31, 2022
December 31, 2021
Nonperforming assets
Nonaccrual loans
$ 28,514
28,669
28,715
33,460
34,696
Troubled debt restructurings - accruing
9,121
11,355
11,771
12,727
13,866
Accruing loans > 90 days past due
—
—
—
—
1,004
Total nonperforming loans
37,635
40,024
40,486
46,187
49,566
Foreclosed real estate
658
658
658
2,750
3,071
Total nonperforming assets
$ 38,293
40,682
41,144
48,937
52,637
Asset Quality Ratios
Quarterly net (recoveries) charge-offs to average loans - annualized
(0.02) %
0.04 %
(0.01) %
0.01 %
0.05 %
Nonperforming loans to total loans
0.56 %
0.61 %
0.65 %
0.76 %
0.82 %
Nonperforming assets to total assets
0.36 %
0.39 %
0.39 %
0.46 %
0.50 %
Allowance for credit losses to total loans
1.36 %
1.33 %
1.32 %
1.35 %
1.30 %
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SOURCE First Bancorp