First Bancorp Reports Second Quarter Results

SOUTHERN PINES, N.C., July 24, 2024 /PRNewswire/ -- First Bancorp (the "Company") (NASDAQ - FBNC), the parent company of First Bank, announced today net income of $28.7 million, or $0.70 per diluted common share, for the three months ended June 30, 2024 compared to $25.3 million, or $0.61 per diluted common share, for the three months ended March 31, 2024 ("linked quarter") and $29.4 million, or $0.71 per diluted common share, for the second quarter of 2023 ("like quarter"). For the six months ended June 30, 2024, the Company recorded net income of $54.0 million, or $1.31 per diluted common share, compared to $44.6 million, or $1.08 per diluted common share, for the six months ended June 30, 2023.

Richard H. Moore, CEO and Chairman of the Company, stated, "Our company had strong performance in the second quarter with expanded net interest margin, improved liquidity and increases in all capital levels. We enhanced our funding position with growth in customer deposits and reductions of borrowings and brokered deposits. We also improved our asset yields during the quarter which contributed to the increase in NIM and will benefit us into the future. Our credit quality remains strong with historically low levels of nonperforming assets, and we continue to have no significant exposure to office or hospitality commercial real estate."

Second Quarter 2024 Highlights

• Loans totaled $8.1 billion at June 30, 2024, reflecting a $6.7 million contraction for the quarter, while year-over-year, loans grew $172.2 million.
• Noninterest-bearing demand accounts were 32% of total deposits at June 30, 2024, which is consistent with historical trends. During the second quarter of 2024, customer deposits grew $336.6 million and brokered deposits contracted $152.0 million leading to an increase in total deposits of $184.5 million.
• The tax equivalent net interest margin ("NIM") increased 7 basis points to 2.87% for the second quarter of 2024, up from 2.80% for the linked quarter and down from 3.08% in the like quarter.
• Total loan yield increased to 5.50%, up 5 basis points from the linked quarter and 24 basis points from the like quarter, with accretion on purchased loans contributing 13 basis points to loan yield in the current quarter.
• Total cost of funds remained low at 1.81% for the quarter ended June 30, 2024, up 2 basis points from the linked quarter.
• The on-balance sheet liquidity ratio was 16.3% at June 30, 2024, up from 15.5% for the linked quarter. Available off-balance sheet sources totaled $2.5 billion at June 30, 2024, resulting in a total liquidity ratio of 34.6%.
• Credit quality continued to be strong with a nonperforming assets ("NPA") to total assets ratio of 0.37% as of June 30, 2024, a 2 basis point decrease from the linked quarter.
• Capital grew during the quarter with a total common equity tier 1 ratio of 13.98% (estimated) and a total risk-based capital ratio of 16.23% (estimated) as of June 30, 2024, both increasing from the linked quarter.

Net Interest Income and Net Interest Margin

Net interest income for the second quarter of 2024 was $81.1 million compared to $79.2 million for the linked quarter, reflecting an increase of 2.3%. Net interest income for the second quarter of 2024 decreased 6.8% from the $87.0 million for the like quarter. The increase in net interest income from the linked quarter was driven by an increase in the yields on earning assets, partially offset by an increase in the cost of funds. The decline in net interest income from the like quarter was driven by an increase in the cost of funds, partially offset by an increase in earning assets.

The Company's tax-equivalent NIM was 2.87%, an increase of 7 basis points compared to 2.80% for the linked quarter. Increases in yields on assets and the benefit of asset mix changes and reduction in wholesale funding outpaced the increases in rates on liabilities, which resulted in the increase in net interest income and NIM as compared to the linked period. While the total cost of funds increased from 1.79% to 1.81% for the second quarter of 2024, loan yields rose from 5.45% for the linked quarter to 5.50% for the quarter ended June 30, 2024.

Included in interest income for the second quarter of 2024 was total loan purchase accounting discount accretion of $2.3 million compared to $2.4 million for the linked quarter and $3.2 million for the like quarter, with the decreases related to the continued reduction of the loan portfolio acquired from GrandSouth Bancorporation ("GrandSouth"). Loan discount accretion had a 8 basis point, 9 basis point and 11 basis point positive impact on the Company's NIM in the second quarter of 2024, the linked quarter and the like quarter.

The following table presents the impact to net interest income of the purchase accounting adjustments for each period.

Provision for Credit Losses and Credit Quality

For the three months ended June 30, 2024 and June 30, 2023, the Company recorded $0.5 million and $2.4 million in provision for credit losses, respectively. The provision for the second quarter of 2024 was driven by net charge-offs of $1.5 million partially offset by generally improving updated economic forecasts, which are a key driver in the Company's CECL model as well as a reduction in the level of unfunded commitments.

Asset quality remained strong with annualized net loan charge-offs of 0.07% for the second quarter of 2024. Total NPAs remained at a low level at $44.7 million at June 30, 2024, or 0.37% of total assets, a decrease from 0.39% at March 31, 2024. This is compared to $35.8 million, or 0.30% of total assets, at June 30, 2023 with the increase year-over-year being attributable primarily to activity in the SBA loan portfolio.

The following table presents the summary of NPAs and asset quality ratios for each period.

Noninterest Income

Total noninterest income for the second quarter of 2024 was $14.6 million, a 13.2% increase from the $12.9 million recorded in the linked quarter and a 2.9% increase from the $14.2 million recorded for the like quarter. As compared to the linked quarter, noninterest income was higher, primarily due to lower net losses on securities of $0.8 million and a $0.4 million increase in SBA loan sale gains. The higher noninterest income in the current quarter as compared to the like quarter was primarily driven by a $0.6 million increase in SBA loan sale gains.

Noninterest Expenses

Noninterest expenses amounted to $58.3 million for the second quarter of 2024 compared to $59.2 million for the linked quarter and $61.6 million for the like quarter. The $0.9 million, or 1.5%, decrease in noninterest expense from the linked quarter was driven by a $0.7 million reduction in Occupancy and equipment related expenses and a $0.7 million reduction in Other operating expenses, partially offset by a $0.6 million increase in Salaries and Employee benefits expenses.

The primary contributors to the higher noninterest expense in the second quarter of 2023 were merger and acquisition costs of $1.3 million related to the GrandSouth acquisition as well as Other operating expenses, which were $1.1 million higher in the second quarter of 2023 as compared to the current quarter.

Balance Sheet

Total assets at June 30, 2024 amounted to $12.1 billion, a contraction of $30.8 million, or 1.02% annualized, from the linked quarter and an increase of $27.8 million, or 0.23%, from a year earlier. The decrease from the linked quarter was primarily related to intentional reductions in investment securities, partially offset by higher interest-bearing cash balances.

Quarterly average balances for key balance sheet accounts are presented below.

Total investment securities were $2.4 billion at June 30, 2024, a decrease of $223.3 million from the linked quarter and a reduction of $366.8 million from June 30, 2023. During the second quarter of 2024, the Company made no purchases of investment securities. The Company sold $142.9 million of available for sale investment securities at a $4.7 million loss that was substantially offset by the $4.5 million gain on sale of the VISA B shares during the second quarter of 2024. In addition, the Company continues to utilize cash flows from investment securities to fund earning assets and repay borrowings and brokered deposits. Total unrealized loss on available for sale investment securities was $410.1 million at June 30, 2024, as compared to $418.9 million at March 31, 2024 and $440.1 million at June 30, 2023.

Total loans amounted to $8.1 billion at June 30, 2024, a decrease of $6.7 million from March 31, 2024 and an increase of $172.2 million, or 2.2%, from June 30, 2023. As presented below, our total loan portfolio mix has remained relatively consistent with the exception of Construction, development & other land loans, which, as a percentage of the loan portfolio, has fallen from 14% at June 30, 2023 to 9% at June 30, 2024. As of June 30, 2024, there were no notable concentrations in geographies or industries, including in office or hospitality categories, which are included in the "commercial real estate - non-owner occupied" category in the table below. The Company's exposure to non-owner occupied office loans represented approximately 5.7% of the total portfolio at June 30, 2024, with the largest loan being $26.8 million and an average loan outstanding balance of $1.3 million. Non-owner occupied office loans are generally in non-metro markets and the 10 largest loans in this category represent less than 2% of the total loan portfolio.

The following table presents the balance and portfolio percentage by loan category for each period.

Total deposits were $10.5 billion at June 30, 2024, an increase of $184.5 million, or 7.2%, from March 31, 2024 and an increase of $319.3 million, or 3.1%, from June 30, 2023. The quarter-to-date deposit growth is comprised of organic growth of customer deposits of $336.6 million, partially offset by a contraction of $152.0 million in short-term brokered deposits.

The Company has a diversified and granular deposit base which has remained a stable funding source with noninterest-bearing deposits comprising 32% of total deposits at June 30, 2024. Our deposit mix has remained consistent historically and has not changed significantly, with the exception of increased growth in money market accounts, as presented in the table below.

As of June 30, 2024 and March 31, 2024, estimated insured deposits totaled $6.4 billion, or 61.3%, and $6.4 billion, or 61.8%, respectively, of total deposits. In addition, at June 30, 2024 and March 31, 2024, there were collateralized deposits of $762.2 million and $757.0 million, respectively, such that approximately 68.6% and 69.2%, respectively, of our total deposits were insured or collateralized at the current quarter end.

Capital

The Company remains well-capitalized by all regulatory standards, with an estimated total risk-based capital ratio at June 30, 2024 of 16.23%, up from both the linked quarter ratio of 15.85% and like quarter ratio of 15.09%. The increase in risk-based capital ratio was driven by increased shareholders' equity with additional impact from shifts in the balance sheet with the reduction in loans being more than offset by higher cash balances which carry a lower risk-weighting.

The Company has elected to exclude accumulated other comprehensive income ("AOCI") related primarily to available for sale securities from common equity tier 1 capital. AOCI is included in the Company's tangible common equity ("TCE") to tangible assets ratio (a non-GAAP financial measure) which was 7.76% at June 30, 2024, an increase of 28 basis points from the linked quarter and an increase of 97 basis points from June 30, 2023. The increases in TCE for the current quarter and year-over-year were driven by earnings and improvements in the level of unrealized losses on the available for sale investment portfolio for the period. Refer to Appendix B for a reconciliation of common equity to TCE and Appendix D for a calculation of the TCE ratio.

Liquidity

Liquidity is evaluated as both on-balance sheet (primarily cash and cash-equivalents, unpledged securities, and other marketable assets) and off-balance sheet (readily available lines of credit or other funding sources). The Company continues to manage liquidity sources, including unused lines of credit, at levels believed to be adequate to meet its operating needs for the foreseeable future.

The Company's on-balance sheet liquidity ratio (net liquid assets as a percent of net liabilities) at June 30, 2024 was 16.3%. In addition, the Company had approximately $2.5 billion in available lines of credit at that date resulting in a total liquidity ratio of 34.6%.

About First Bancorp

First Bancorp is a bank holding company headquartered in Southern Pines, North Carolina, with total assets of $12.1 billion. Its principal activity is the ownership and operation of First Bank, a state-chartered community bank that operates 113 branches in North Carolina and South Carolina. Since 1935, First Bank has taken a tailored approach to banking, combining best-in-class financial solutions, helpful local expertise, and technology to manage a home or business. First Bank also provides SBA loans to customers through its nationwide network of lenders.

Please visit our website at www.LocalFirstBank.com for more information.

First Bancorp's common stock is traded on The NASDAQ Global Select Market under the symbol "FBNC." Member FDIC, Equal Housing Lender.

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.

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