PR Newswire | Jan 27, 2021 04:02PM EST

01/27 15:01 CST

First Bancorp Reports Fourth Quarter and Annual Results SOUTHERN PINES, N.C., Jan. 27, 2021

SOUTHERN PINES, N.C., Jan. 27, 2021 /PRNewswire/ -- First Bancorp (NASDAQ - FBNC), the parent company of First Bank, announced today net income of $23.6 million, or $0.83 per diluted common share, for the three months ended December 31, 2020 compared to $20.9 million, or $0.71 per diluted common share, recorded in the fourth quarter of 2019. For the year ended December 31, 2020, the Company recorded net income of $81.5 million, or $2.81 per diluted common share compared to $92.0 million, or $3.10 per diluted common share, for 2019.

Earnings for 2020 were impacted by provisions for loan losses related to estimated losses arising from the economic impact of COVID-19. For the three months ended December 31, 2020, the Company recorded a provision for loan losses of $4.0 million compared to $3.2 million in the fourth quarter of 2019. For the year ended December 31, 2020, the Company recorded a provision for loan losses of $35.0 million compared to $2.3 million for 2019. The impact of the higher provisions for loan losses were partially offset by higher noninterest income realized in 2020, as described further below.

The Company experienced high balance sheet growth during 2020, with total assets increasing by $1.1 billion, or 18.7%. This growth was driven by a $1.3 billion, or 27.2%, increase in deposits during the year.

Net Interest Income and Net Interest Margin

Net interest income for the fourth quarter of 2020 was $56.0 million, a 2.5% increase from the $54.7 million recorded in the fourth quarter of 2019. Net interest income for the year ended December 31, 2020 amounted to $218.1 million, a 0.9% increase from the $216.2 million recorded in 2019. The increases in net interest income for the periods presented were primarily due to growth in average interest-earning assets, which increased by approximately 13.1% in 2020.

The Company's net interest margin (a non-GAAP measure calculated by dividing tax-equivalent net interest income by average earning assets) for the fourth quarter of 2020 was 3.38%, which was 55 basis points lower than the 3.93% realized in the fourth quarter of 2019. In the fourth quarter 2020, the Company realized approximately $500,000 in interest recoveries, which favorably impacted the net interest margin for the quarter by 3 basis points. For the year ended December 31, 2020, the Company's net interest margin was 3.56% compared to 4.00% for 2019.

The lower 2020 margins were primarily due to the impact of lower interest rates and the lower incremental reinvestment rates realized from the funds provided by the high deposit growth. For the year ended December 31, 2020, the Company's interest-earning asset yield declined by 73 basis points compared to a 32 basis point decline in its cost of funds. However, the higher amount of interest-earning assets more than offset the margin compression and resulted in higher net interest income for the three and twelve months ended December 31, 2020, compared to the same periods of 2019.

The Company continued to have $241 million of PPP loans outstanding at December 31, 2020. The SBA began the forgiveness process in the fourth quarter of 2020, with the Company receiving $4 million in PPP forgiveness payoffs. For the three and twelve months ended December 31, 2020, the yield earned on those loans was 3.75% and 3.56%, which included $1.6 million and $4.1 million of amortization of origination fees, respectively. The Company has $6.0 million in remaining deferred PPP origination fees that will be recognized over the lives of the loans, with accelerated amortization expected to result from the loan forgiveness process.

Provision for Loan Losses and Asset Quality

As permitted by COVID-19 relief legislation enacted in March 2020 and December 2020, the Company has elected to defer the implementation of the Current Expected Credit Loss (CECL) methodology until January 1, 2021. Accordingly, the Company's allowance for loan losses at each period end is based on the Company's estimate of probable losses that have been incurred at the end of such period, including losses arising from the impact of COVID-19, in accordance with the pre-CECL methodology for determining loan losses.

The Company recorded a provision for loan losses of $4.0 million in the fourth quarter of 2020 compared to $3.2 million in the fourth quarter of 2019. For the year ended December 31, 2020, the Company recorded a provision for loan losses of $35.0 million compared to $2.3 million for 2019. The increases in 2020 were primarily related to estimated probable losses arising from the economic impact of COVID-19. With the onset of the pandemic in March 2020, the Company worked with many of its borrowers and provided the option of loan payment deferrals, with the Company deferring approximately $774 million loans at June 30, 2020. At December 31, 2020, loans on deferral status amounted to $16.6 million, or 0.4% of total loans.

Total net loan charge-offs for the fourth quarters of 2020 and 2019 amounted to $0.9 million and $1.0 million, respectively, or 0.07% and 0.09% of average loans on an annualized basis, respectively. For the year ended December 31, 2020 and 2019, total net charge-offs were $4.0 million and $1.9 million, respectively, or 0.09% and 0.04%, respectively, of average loans.

Total nonperforming loans amounted to $44.6 million at December 31, 2020, or 0.94% of total loans, compared to $33.9 million a year earlier, or 0.76% of total loans.

Noninterest Income

Total noninterest income was $20.0 million and $14.7 million for the three months ended December 31, 2020 and 2019, respectively. For the years ended December 31, 2020 and 2019, total noninterest income was $81.3 million and $59.5 million, respectively.

Service charges on deposit accounts amounted to $2.9 million for the fourth quarter of 2020 compared to $3.4 million in the fourth quarter of 2019. For 2020 and 2019, service charges on deposit accounts amounted to $11.1 million and $13.0 million, respectively. The decreases were primarily due to fewer instances of overdraft fees.

Fees from presold mortgages amounted to $4.5 million for the fourth quarter of 2020 compared to $1.3 million in the fourth quarter of 2019. For the years ended December 31, 2020 and 2019, fees from presold mortgages amounted to $14.2 million and $3.9 million, respectively. The increases in 2020 were primarily due to higher mortgage loan origination volume arising from historically low mortgage loan interest rates.

For the fourth quarters of 2020 and 2019, SBA consulting fees amounted to $1.9 million and $1.0 million, respectively. For 2020 and 2019, SBA consulting fees amounted to $8.6 million and $3.9 million, respectively. The increases in 2020 were due to fees earned by the Company's SBA subsidiary, SBA Complete, related to assisting its third-party client banks with the PPP. SBA Complete recorded approximately $0.9 million and $4.6 million in PPP fees for the three and twelve months ended December 31, 2020. At December 31, 2020, SBA Complete also had $1.4 million in deferred revenue that will be recorded as income upon completing the forgiveness portion of the PPP.

During the second quarter of 2020, the Company sold approximately $220 million in mortgage-backed and commercial mortgage-backed securities at a gain of $8.0 million. The securities sold were believed to be favorably impacted by historically low interest rates and Federal Reserve stimulus measures.

Noninterest Expenses

Noninterest expenses amounted to $41.9 million in the fourth quarter of 2020 compared to $39.9 million recorded in the fourth quarter of 2019, an increase of 5.0%. For the years ended December 31, 2020 and 2019, noninterest expenses amounted to $161.3 million and $157.2 million, respectively, an increase of 2.6%. The increases were primarily due to higher commission expense resulting from increases in mortgage loan volume in 2020.

Income Taxes

The Company's effective tax rate was 21.4% and 21.0% for the three and twelve months ended December 31, 2020, respectively, compared to 20.4% and 20.8% for the three and twelve months ended December 31, 2019, respectively.

Balance Sheet and Capital

Total assets at December 31, 2020 amounted to $7.3 billion, a 18.7% increase from a year earlier. The growth was driven by an increase in deposits.

Deposit growth for the fourth quarter of 2020 was $214 million, or 14.1% on an annualized basis. Deposit growth for the year ended December 31, 2020 was $1.3 billion, or 27.2%. In addition to deposits arising from PPP loans, this high deposit growth is believed to be due to a combination of stimulus funds and changes in customer behaviors during the pandemic.

Loans decreased in the fourth quarter by $83 million. Loan growth for the year ended December 31, 2020 was $278 million, or 6.2%, which includes $241 million in PPP loans. Loan growth in 2020 was impacted by a number of large commercial loan payoffs, as well as high levels of refinanced mortgage loans.

With the excess liquidity resulting from the high deposit growth, the Company reduced its level of borrowings by $239 million, or 79.4%, at December 31, 2020 compared to a year earlier. The Company has also increased its holdings of investment securities to $1.6 billion at December 31, 2020, an increase of $731 million, or 82.1%, compared to a year earlier.

The Company remains well-capitalized by all regulatory standards, with an estimated Total Risk-Based Capital Ratio at December 31, 2020 of 15.41%, an increase from the 14.89% reported at December 31, 2019. The Company's tangible common equity to tangible assets ratio was 9.08% at December 31, 2020, a decrease of 112 basis points from a year earlier, which was impacted by the high balance sheet growth.

Comments of the CEO and Other Business Matters

Richard H. Moore, CEO of First Bancorp, commented, "Although our country continues to be in challenging times, we are pleased with our results for 2020. Our balance sheet and capital levels remain strong and position us well for the future." Mr. Moore also stated, "We remain committed to serving our communities with a high level of service during the ongoing pandemic, with almost all branch lobbies remaining open with safety precautions in place. We've also experienced record levels of usage of our easy-to-use mobile banking app."

The following is additional discussion of business development and other miscellaneous matters affecting the Company during the fourth quarter of 2020:

* On December 15, 2020, the Company announced a quarterly cash dividend of $0.18 per share payable on January 25, 2021 to shareholders of record on December 31, 2020. * During the fourth quarter of 2020, the Company repurchased 131,413 shares of its common stock at an average stock price of $24.10, which totaled $3.2 million. * The Company's Board of Directors has authorized a continuation of its share repurchase program with a maximum repurchase amount of $20 million and an expiration date of December 31, 2021.

First Bancorp is a bank holding company headquartered in Southern Pines, North Carolina, with total assets of approximately $7.3 billion. Its principal activity is the ownership and operation of First Bank, a state-chartered community bank that operates 101 branches in North Carolina and South Carolina. First Bank Insurance Services is a subsidiary of First Bank and provides insurance products and services to individuals and businesses throughout First Bank's market area. 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.

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 - Page 1



Three Months Ended Percent December 31,

($ in thousands except per share data - unaudited) 2020 2019 Change

INCOME STATEMENT

Interest income

Interest and fees on loans $53,09956,030

Interest on investment securities 5,481 5,209

Other interest income 743 1,730

Total interest income 59,323 62,969(5.8)%

Interest expense

Interest on deposits 2,921 6,552

Interest on borrowings 396 1,761

Total interest expense 3,317 8,313 (60.1)%

Net interest income 56,006 54,6562.5%

Total provision for loan losses 4,031 3,176 26.9%

Net interest income after provision for loan losses51,975 51,4801.0%

Noninterest income

Service charges on deposit accounts 2,905 3,427

Other service charges, commissions, and fees 5,214 4,859

Fees from presold mortgage loans 4,458 1,267

Commissions from sales of insurance and 2,333 2,059 financial products

SBA consulting fees 1,922 1,025

SBA loan sale gains 2,432 1,227

Bank-owned life insurance income 629 636

Securities gains (losses), net - -

Other gains (losses), net 103 162

Total noninterest income 19,996 14,66236.4%

Noninterest expenses

Salaries expense 22,098 20,599

Employee benefit expense 3,715 3,694

Occupancy and equipment related expense 3,811 4,093

Merger and acquisition expenses - (21)

Intangibles amortization expense 995 1,121

Foreclosed property losses (gains), net 263 40

Other operating expenses 11,000 10,365

Total noninterest expenses 41,882 39,8915.0%

Income before income taxes 30,089 26,25114.6%

Income tax expense 6,441 5,368 20.0%

Net income $23,64820,88313.2%



Earnings per common share - diluted $0.83 0.71 16.9%



ADDITIONAL INCOME STATEMENT INFORMATION

Net interest income, as reported $56,00654,656

Tax-equivalent adjustment (1) 457 382

Net interest income, tax-equivalent $56,46355,0382.6%



This amount reflects the tax benefit that the Company receives related to its tax-exempt loans and securities, which carry interest rates lower than(1) 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 - Page 2



Twelve Months Ended Percent December 31,

($ in thousands except per share data - 2020 2019 Change unaudited)

INCOME STATEMENT

Interest income

Interest and fees on loans $213,099220,784

Interest on investment securities 21,154 20,888

Other interest income 3,431 8,435

Total interest income 237,684 250,107(5.0)%

Interest expense

Interest on deposits 16,301 25,050

Interest on borrowings 3,261 8,853

Total interest expense 19,562 33,903 (42.3)%

Net interest income 218,122 216,2040.9%

Total provision for loan losses 35,039 2,263 1,448.3%

Net interest income after provision for loan 183,083 213,941(14.4)% losses

Noninterest income

Service charges on deposit accounts 11,098 12,970

Other service charges, commissions, and fees20,097 19,481

Fees from presold mortgage loans 14,183 3,944

Commissions from sales of insurance and 8,848 8,495 financial products

SBA consulting fees 8,644 3,872

SBA loan sale gains 7,973 8,275

Bank-owned life insurance income 2,533 2,564

Securities gains (losses), net 8,024 97

Other gains (losses), net (54) (169)

Total noninterest income 81,346 59,529 36.6%

Noninterest expenses

Salaries expense 84,941 79,129

Employee benefit expense 16,027 16,844

Occupancy and equipment related expense 15,563 16,145

Merger and acquisition expenses - 192

Intangibles amortization expense 3,956 4,858

Foreclosed property losses (gains), net 547 939

Other operating expenses 40,264 39,087

Total noninterest expenses 161,298 157,1942.6%

Income before income taxes 103,131 116,276(11.3)%

Income tax expense 21,654 24,230 (10.6)%

Net income $81,477 92,046 (11.5)%



Earnings per common share - diluted $2.81 3.10 (9.4)%



ADDITIONAL INCOME STATEMENT INFORMATION

Net interest income, as reported $218,122216,204

Tax-equivalent adjustment (1) 1,468 1,641

Net interest income, tax-equivalent $219,590217,8450.8%



This amount reflects the tax benefit that the Company receives related to its tax-exempt loans and securities, which carry interest rates lower than(1) 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 - Page 3



Three Months Ended Twelve Months Ended December 31, December 31,

PERFORMANCE RATIOS 2020 2019 2020 2019 (annualized)

Return on average assets1.30 %1.35 %1.20 %1.53 %(1)

Return on average common10.58 %9.78 %9.32 %11.32 %equity (2)

Net interest margin - 3.38 %3.93 %3.56 %4.00 %tax-equivalent (3)

Net (recoveries) charge-offs to average 0.07 %0.09 %0.09 %0.04 %loans



COMMON SHARE DATA

Cash dividends declared $0.18 0.18 0.72 0.54 - common

Stated book value - 31.26 28.80 31.26 28.80 common

Tangible book value - 22.35 20.30 22.35 20.30 common

Common shares outstanding at end of 28,579,335 29,601,264 28,579,335 29,601,264 period

Weighted average shares 28,617,409 29,603,816 28,981,567 29,720,499 outstanding - diluted



CAPITAL RATIOS

Tangible common equity 9.08 %10.20 %9.08 %10.20 %to tangible assets

Common equity tier I capital ratio - 13.22 %13.28 %13.22 %13.28 %estimated

Tier I leverage ratio - 9.88 %11.19 %9.88 %11.19 %estimated

Tier I risk-based capital ratio - 14.31 %14.41 %14.31 %14.41 %estimated

Total risk-based capital15.41 %14.89 %15.41 %14.89 %ratio - estimated



AVERAGE BALANCES ($ in thousands)

Total assets $7,240,685 6,159,232 6,765,998 6,027,047

Loans 4,771,446 4,419,982 4,702,743 4,346,331

Earning assets 6,640,732 5,560,099 6,160,100 5,448,400

Deposits 6,232,692 4,939,182 5,644,290 4,824,216

Interest-bearing 4,085,619 3,716,248 3,897,912 3,720,536 liabilities

Shareholders' equity 889,481 847,317 874,532 812,823



(1) Calculated by dividing annualized net income by average assets.

(2) Calculated by dividing annualized net income by average common equity.

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







TREND INFORMATION



($ in thousands For the Three Months Ended except per share data)

INCOME Dec. 31, 2020Sept. 30, 2020June 30, 2020Mar. 31, 2020Dec. 31, 2019STATEMENT



Net interest income - $ 56,463 55,080 52,954 55,093 55,038 tax-equivalent (1)

Taxable equivalent 457 347 330 334 382 adjustment (1)

Net interest 56,006 54,733 52,624 54,759 54,656 income

Provision for 4,031 6,120 19,298 5,590 3,176 loan losses

Noninterest 19,996 21,452 26,193 13,705 14,662 income

Noninterest 41,882 40,439 38,901 40,076 39,891 expense

Income before 30,089 29,626 20,618 22,798 26,251 income taxes

Income tax 6,441 6,329 4,266 4,618 5,368 expense

Net income 23,648 23,297 16,352 18,180 20,883



Earnings per common share -0.83 0.81 0.56 0.62 0.71 diluted



Cash dividends declared per 0.18 0.18 0.18 0.18 0.18 share

(1) See note 1 on the first page of this Financial Summary for discussion of tax-equivalent adjustments.

First Bancorp and Subsidiaries

Financial Summary - Page 4



CONSOLIDATED BALANCE SHEETS ($ in thousands - unaudited)

At Dec. 31, At Sept. 30,At Dec. 31,One Year 2020 2020 2019 Change

Assets

Cash and due from banks $93,724 92,465 64,519 45.3 %

Interest-bearing deposits 273,566 304,731 166,783 64.0 %with banks

Total cash and cash 367,290 397,196 231,302 58.8 %equivalents



Investment securities 1,620,683 1,278,906 889,877 82.1 %

Presold mortgages 42,271 34,028 19,712 114.4 %

SBA loans held for sale 6,077 15,012 - n/m



Total loans 4,731,315 4,813,736 4,453,466 6.2 %

Allowance for loan losses (52,388) (49,226) (21,398) 144.8 %

Net loans 4,678,927 4,764,510 4,432,068 5.6 %



Premises and equipment 120,502 118,568 114,859 4.9 %

Operating right-of-use lease17,514 18,400 19,669 (11.0)%assets

Intangible assets 254,638 255,489 251,585 1.2 %

Foreclosed real estate 2,424 2,741 3,873 (37.4)%

Bank-owned life insurance 106,974 106,345 104,441 2.4 %

Other assets 72,451 73,073 76,253 (5.0) %

Total assets $7,289,7517,064,268 6,143,639 18.7 %



Liabilities

Deposits:

Noninterest-bearing $2,210,0122,121,354 1,515,977 45.8 %checking accounts

Interest-bearing 1,172,022 1,102,343 912,784 28.4 %checking accounts

Money market accounts 1,581,364 1,524,710 1,173,107 34.8 %

Savings accounts 519,266 492,946 424,415 22.3 %

Brokered deposits 20,222 36,736 86,141 (76.5)%

Internet time deposits 249 249 698 (64.3)%

Other time deposits > 543,894 549,423 563,108 (3.4) %$100,000

Other time deposits 226,567 232,465 255,125 (11.2)%

Total deposits 6,273,596 6,060,226 4,931,355 27.2 %



Borrowings 61,829 61,816 300,671 (79.4)%

Operating lease liabilities 17,868 18,716 19,855 (10.0)%

Other liabilities 43,037 42,692 39,357 9.4 %

Total liabilities 6,396,330 6,183,450 5,291,238 20.9 %



Shareholders' equity

Common stock 400,582 403,351 429,514 (6.7) %

Retained earnings 478,489 459,988 417,764 14.5 %

Stock in rabbi trust assumed(2,243) (2,230) (2,587) (13.3)%in acquisition

Rabbi trust obligation 2,243 2,230 2,587 (13.3)%

Accumulated other 14,350 17,479 5,123 180.1 %comprehensive income (loss)

Total shareholders' 893,421 880,818 852,401 4.8 %equity

Total liabilities and $7,289,7517,064,268 6,143,639 18.7 %shareholders' equity

n/m - not meaningful

First Bancorp and Subsidiaries

Financial Summary - Page 5



For the Three Months Ended

YIELD Dec. 31, 2020Sept. 30, 2020June 30, 2020Mar. 31, 2020Dec. 31, 2019INFORMATION



Yield on loans 4.42 % 4.38 % 4.41 % 4.93 % 5.03 %

Yield on 1.62 % 2.02 % 2.49 % 2.65 % 2.64 % securities

Yield on other 0.57 % 0.64 % 0.55 % 1.95 % 1.91 % earning assets

Yield on all interest-earning3.55 % 3.71 % 3.80 % 4.46 % 4.49 % assets



Rate on interest0.29 % 0.37 % 0.46 % 0.68 % 0.76 % bearing deposits

Rate on other interest-bearing2.55 % 2.06 % 1.31 % 1.91 % 2.31 % liabilities

Rate on all interest-bearing0.32 % 0.41 % 0.52 % 0.78 % 0.89 % liabilities

Total cost 0.21 % 0.26 % 0.35 % 0.56 % 0.63 % of funds



Net interest margin 3.35 % 3.46 % 3.47 % 3.94 % 3.90 % (1)



Net interest margin 3.38 % 3.48 % 3.49 % 3.96 % 3.93 % - tax-equivalent (2)



Average 3.25 % 3.25 % 3.25 % 4.42 % 4.83 % prime rate



(1) Calculated by dividing annualized net interest income by average earning assets for the period.

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







For the Three Months Ended

NET INTEREST INCOME PURCHASE ACCOUNTING Dec. 31, 2020Sept. 30, 2020June 30, 2020Mar. 31, 2020Dec. 31, 2019ADJUSTMENTS ($ in thousands)



Interest income - increased by accretion of$ 802 972 802 1,241 1,161 loan discount on acquired loans

Interest income - increased by accretion of loan 737 583 591 600 340 discount on retained portions of SBA loans

Interest expense - reduced by 19 23 26 31 38 premium amortization of deposits

Interest expense - increased by(45) (45) (45) (45) (45) discount accretion of borrowings

Impact on net $ 1,513 1,533 1,374 1,827 1,494 interest income







First Bancorp and Subsidiaries

Financial Summary - Page 6



ASSET QUALITY DATA ($ in Dec. 31, 2020Sept. 30, 2020June 30, 2020Mar. 31, 2020Dec. 31, 2019thousands)



Nonperforming assets

Nonaccrual $35,076 31,656 34,922 25,066 24,866 loans

Troubled debt restructurings9,497 9,896 9,867 9,747 9,053 - accruing

Accruing loans > 90 days past- - - - - due

Total nonperforming 44,573 41,552 44,789 34,813 33,919 loans

Foreclosed 2,424 2,741 2,987 3,487 3,873 real estate

Total nonperforming $46,997 44,293 47,776 38,300 37,792 assets

Purchased credit impaired loans$8,591 9,616 9,742 9,839 12,664 not included above (1)

Asset Quality Ratios

Net quarterly (recoveries) charge-offs to0.07 %(0.06) %0.12 %0.22 %0.09 %average loans - annualized

Nonperforming loans to total0.94 %0.86 %0.94 %0.76 %0.76 %loans

Nonperforming assets to 0.64 %0.63 %0.69 %0.60 %0.62 %total assets

Allowance for loan losses to1.11 %1.02 %0.89 %0.54 %0.48 %total loans

In the March 3, 2017 acquisition of Carolina Bank and the October 1, 2017 acquisition of Asheville Savings Bank, the Company acquired $19.3 million(1) and $9.9 million, respectively, in purchased credit impaired loans in accordance with ASC 310-30 accounting guidance. These loans are excluded from the nonperforming loan amounts.







First Bancorp and Subsidiaries

Financial Summary - Page 7



For the Three Months Ended

NET INTEREST MARGIN, EXCLUDING LOAN DISCOUNT ACCRETION - Dec. 31, 2020Sept. 30, 2020June 30, 2020Mar. 31, 2020Dec. 31, 2019RECONCILIATION ($ in thousands)



Net interest income, as $56,006 54,733 52,624 54,759 54,656 reported

Tax-equivalent adjustment457 347 330 334 382

Net interest income, $56,463 55,080 52,954 55,093 55,038 tax-equivalent (A)

Average earning assets $6,640,732 6,294,556 6,102,012 5,595,734 5,560,099 (B)

Tax-equivalent net interest margin, 3.38 %3.48 %3.49 %3.96 %3.93 %annualized - as reported - (A)/(B)



Net interest income, $56,463 55,080 52,954 55,093 55,038 tax-equivalent

Loan discount accretion 1,539 1,555 1,393 1,841 1,501

Net interest income, tax-equivalent, excluding$54,924 53,525 51,561 53,252 53,537 loan discount accretion (A)

Average earnings assets $6,640,732 6,294,556 6,102,012 5,595,734 5,560,099 (B)

Tax-equivalent net interest margin, excluding impact of loan 3.29 %3.38 %3.40 %3.83 %3.82 %discount accretion, annualized - (A) / (B)

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 Note. Loan discount accretion is a non-cash interest income adjustment that is related to 1) the Company's acquisition of loans and represents the portion of the fair value discount that was initially recorded on the acquired loans, and 2) the Company's origination of SBA loans and the subsequent sale of the guaranteed portions of the loans that results in a discount being recorded on the retained portion of the loans. These discounts are recognized into income over the lives of the loans. At December 31, 2020, the Company had a remaining loan discount balance on acquired loans of $8.9 million compared to $12.7 million at December 31, 2019. At December 31, 2020, the Company had a remaining loan discount balance on SBA loans of $7.3 million compared to $7.1 million at December 31, 2019. 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.

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SOURCE First Bancorp