First Bancorp Reports Second Quarter Results

TROY, N.C., Aug. 1, 2011 /PRNewswire/ --  First Bancorp (NASDAQ: FBNC), the parent company of First Bank, announced today net income available to common shareholders of $2.7 million, or $0.16 per diluted common share, for the three months ended June 30, 2011, compared to $2.9 million, or $0.17 per diluted common share, recorded in the second quarter of 2010.  For the six months ended June 30, 2011, net income available to common shareholders amounted to $8.0 million, or $0.48 per diluted common share, compared to $6.3 million, or $0.38 per diluted common share, for the six months ended June 30, 2010.

In the first quarter of 2011, the Company realized a $10.2 million bargain purchase gain related to the acquisition of The Bank of Asheville in Asheville, North Carolina.  This gain resulted from the difference between the purchase price and the acquisition-date fair values of the acquired assets and liabilities.  The after-tax impact of this gain was $6.2 million, or $0.37 per diluted common share.  The Bank of Asheville was closed by regulatory authorities on January 19, 2011, and First Bank entered into a loss share purchase and assumption agreement with the FDIC to acquire substantially all of its assets and liabilities.  The Bank of Asheville operated through five branches in Asheville, North Carolina, and had total assets of $198 million, including $161 million in loans and $192 million in deposits.

Note Regarding Components of Earnings

In addition to the gain related to The Bank of Asheville acquisition, the Company's results of operation are significantly affected by the on-going accounting for the two FDIC-assisted failed bank acquisitions that the Company has completed.  In the discussion below, 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.

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 discount accretion. For 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% due to the corresponding adjustments made to the indemnification asset.

Net Interest Income and Net Interest Margin

Net interest income for the second quarter of 2011 amounted to $34.5 million, a 9.3% increase from the $31.5 million recorded in the second quarter of 2010.  Net interest income for the six months ended June 30, 2011 amounted to $66.8 million, a 6.5% increase from the $62.7 million recorded in the comparable period of 2010.  The increases in net interest income have been due to higher net interest margins realized, which were partially offset by lower levels of average earning assets.

The Company's net interest margin (tax-equivalent net interest income divided by average earnings assets) in the second quarter of 2011 was 4.92%, a 57 basis point increase compared to the 4.35% margin realized in the second quarter of 2010.  For the six month period ended June 30, 2011, the Company's net interest margin was 4.77% compared to 4.25% for the same period in 2010.  The higher margins are primarily related to larger amounts of discount accretion on loans purchased in failed bank acquisitions, as well as lower overall funding costs. The Company's cost of funds has steadily declined from 1.11% in the second quarter of 2010 to 0.82% in the second quarter of 2011.  See page 5 of the Financial Summary for a table that presents the impact of the purchase accounting adjustments, including discount accretion on purchased loans.  As previously discussed the amount of discount accretion is offset by a corresponding 80% reduction in indemnification asset income, and therefore the positive impact of the discount accretion on the Company's pretax income is equal to 20% of the amount of the discount accretion.

Provision for Loan Losses and Asset Quality

The Company's provisions for loan losses remain at elevated levels, primarily due to high unemployment rates and declining property values in its market area that negatively impact collateral dependent real estate loans.  The Company's provision for loan losses for non-covered loans amounted to $7.6 million in the second quarter of 2011 compared to $8.0 million in the second quarter of 2010.  For the six months ended June 30, 2011 the provision for loan losses for non-covered loans was $15.2 million compared to $15.6 million for the comparable period of 2010.  

The Company's provisions for loan losses for covered loans amounted to $3.3 million and $7.1 million for the three and six months ended June 30, 2011, whereas the Company did not record any provisions for loan losses for covered loans in the first six months of 2010.  As previously discussed, the provision for loan losses related to covered loans is offset by an 80% increase to the FDIC indemnification asset, which increases noninterest income.

Nonperforming asset levels have remained fairly stable over each of the past three quarter ends.  Non-covered nonperforming assets were $116-$120 million over that period, or approximately 4.3% of total non-covered assets.  Covered nonperforming assets have amounted to $164-$169 million over that same period, with the balances at June 30, 2011 and March 31, 2011 being impacted by the nonperforming assets assumed in The Bank of Asheville acquisition.  The Company's outlook for nonperforming assets is consistent with the recent trend, with the Company not expecting material improvement, nor deterioration, in the near future.

Noninterest Income

Total noninterest income was $5.1 million in the second quarter of 2011 compared to $4.5 million for the second quarter of 2010.  For the six months ended June 30, 2011 and 2010, the Company recorded noninterest income of $19.3 million and $10.2 million, respectively.  The significant increase in noninterest income for the six month period comparison is primarily attributable to the aforementioned bargain purchase gain recorded in the first quarter of 2011.

Within noninterest income, service charges on deposits declined for the first six months of 2011 compared to the same period in 2010, amounting to $6.6 million in 2011 and $7.1 million in 2010.  This decline was primarily attributable to lower overdraft fees, which began declining in the second half of 2010 as a result of fewer instances of customers overdrawing their accounts.  This was partially a result of new regulations that took effect in the third quarter of 2010 that limit the Company's ability to charge overdraft fees.  For the second quarter of 2011, service charges on deposit accounts increased to $3.7 million from the $3.6 million recorded in the second quarter of 2010.  This increase was primarily attributable to new fees on deposit accounts that took effect April 1, 2011. In July 2011, in response to additional regulatory guidance, the Company implemented changes to its overdraft policies that are expected to reduce overdraft fees by approximately $75,000 to $100,000 per month.

Other service charges, commissions and fees amounted to $1.7 million in the second quarter of 2011 compared to $1.4 million in the second quarter of 2010.  For the six months ended June 30, 2011, this line item totaled $3.3 million compared to $2.8 million in the comparable period of 2010.  The increases in 2011 are primarily attributable to increased debit card usage by the Company's customers. The Company earns a small fee each time its customers make a debit card transaction. Because the Company has less than $10 billion in assets, it is exempt from recently announced regulatory rules limiting this income.

The Company continues to experience losses and write-downs on its foreclosed properties due to declining property values in its market area.  For the second quarter of 2011, these losses amounted to $2.6 million for covered properties compared to $5.5 million in the second quarter of 2010.  For the first six months of 2011, losses on covered properties amounted to $7.5 million compared to $5.5 million for the same period in 2010.  

Losses on non-covered foreclosed properties amounted to $0.3 million for the second quarter of 2011 compared to $0.1 million in 2010. For the six months ended June 30, 2011, losses on non-covered foreclosed properties amounted to $1.6 million compared to $0.1 million for the same period in 2010.

As previously discussed, indemnification asset income is recorded to reflect additional amounts expected to be received from the FDIC due to covered loan and foreclosed property losses arising during the period.  For the second quarter of 2011, indemnification asset income totaled $1.8 million compared to $4.4 million the second quarter of 2010.  For the six months ended June 30, 2011, indemnification asset income amounted to $6.9 million compared to $4.4 million for the same period of 2010

Noninterest Expenses

Noninterest expenses amounted to $22.9 million in the second quarter of 2011, a 4.4% increase over the $22.0 million recorded in the same period of 2010.  Noninterest expenses for the six months ended June 30, 2011 amounted to $48.0 million, an 8.4% increase from the $44.2 million recorded in the first six months of 2010.

Personnel expense has increased in 2011 due to employees joining the Company in The Bank of Asheville acquisition, as well as higher employee medical expense due to higher claims.  Also, the Company has progressively built its infrastructure to manage increased compliance burdens, collection activities and overall growth of the Company.

Merger expenses associated with The Bank of Asheville acquisition amounted to $243,000 and $594,000 for the three and six months ended June 30, 2011.

For the second quarter of 2011, the Company recorded $7.1 million in other operating expenses, a decline from the $7.6 million recorded in the second quarter of 2010.  This decline was primarily attributable to a decrease in FDIC insurance expense resulting from a change in the methodology that the FDIC uses to assess insurance premiums that was effective on April 1, 2011.

Balance Sheet and Capital

Total assets at June 30, 2011 amounted to $3.3 billion, a 0.5% increase from a year earlier.  Total loans at June 30, 2011 amounted to $2.4 billion, a 4.4% decrease from a year earlier, and total deposits amounted to $2.7 billion at June 30, 2011, a 1.7% decrease from a year earlier.  

Excluding acquisition growth, the Company continues to experience general declines in loans and deposits, which began with the onset of the recession.  Although the Company originates and renews a significant amount of loans each month, normal paydowns of loans and loan foreclosures have been exceeding new loan growth.  Overall, loan demand remains weak in most of the Company's market areas.  The declining loan balances have provided the Company with the liquidity to lessen its reliance on high cost deposits, which has improved funding costs.

The Company remains well-capitalized by all regulatory standards, with a Total Risk-Based Capital Ratio of 17.00% compared to the 10.00% minimum to be considered well-capitalized.  The Company's tangible common equity to tangible assets ratio was 6.65% at June 30, 2011, an increase of 9 basis points from a year earlier.

The Company continues to maintain $65 million in preferred stock that was issued to the US Treasury in January 2009 under the Capital Purchase Program (TARP).  The Company has applied to participate in the Treasury's Small Business Lending Fund (SBLF), which would result in the repayment of its TARP funding by the simultaneous issuance of a similar amount of preferred stock under the terms of the SBLF.  Participation in the SBLF could result in the dividend rate on the preferred stock being reduced from the current 5% to as low as 1%, depending on our success in meeting certain loan growth targets.  Based on current loan levels, the Company would continue to pay at the 5% rate.  If approved, the switch to the SBLF is expected to occur in the third quarter of 2011.

Comments of the President and Other Business Matters

Jerry L. Ocheltree, President and CEO of First Bancorp, commented on today's report, "I am pleased to report another profitable quarter for the Company. Many of our underlying fundamentals are positive as well, including a strong net interest margin, high capital levels, and low overhead expense. I am especially pleased with our profitability in light of the elevated provisions for loan losses that we continue to record in response to the impact of the weak economy.  We are in a great position to achieve high levels of profit when the economy improves.  The Company's strength also allows us to pursue future growth opportunities."

Mr. Ocheltree noted the following other corporate developments:

  • The Company successfully completed the conversion of The Bank of Asheville's computer systems to First Bank on May 27, 2011.

  • The Company expects to file for regulatory approval to open a branch in Salem, Virginia.  This would represent the Company's seventh branch in southwestern Virginia.

  • The Company was recently recognized in the publication Business North Carolina as the bank having the fourth highest amount of net income in the state in 2010.

  • On May 26, 2011, the Company announced a quarterly cash dividend of $0.08 per share payable on July 25, 2011 to shareholders of record on June 30, 2011. This is the same dividend rate as the Company declared in the second quarter of 2010.

First Bancorp is a bank holding company headquartered in Troy, North Carolina with total assets of approximately $3.3 billion. Its principal activity is the ownership and operation of First Bank, a state-chartered community bank that now operates 97 branches, with 82 branches operating in North Carolina, 9 branches in South Carolina (Cheraw, Dillon, Florence, Latta, Jefferson, and Little River), and 6 branches in Virginia (Abingdon, Christiansburg, Dublin, Fort Chiswell, Radford, and Wytheville), where First Bank does business as First Bank of Virginia. First Bank also has a loan production office in Blacksburg, Virginia. First Bancorp's common stock is traded on the NASDAQ Global Select Market under the symbol "FBNC."

Please visit our website at www.FirstBancorp.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.

First Bancorp and Subsidiaries

Financial Summary




Three Months Ended

June 30,


Percent

($ in thousands except per share data - unaudited)

2011

2010

Change






INCOME STATEMENT










Interest income





  Interest and fees on loans

$           38,464


37,609


  Interest on investment securities

1,962


1,988


  Other interest income

103


121


     Total interest income

40,529


39,718

2.0%

Interest expense





  Interest on deposits

5,531


7,671


  Other, primarily borrowings

518


511


     Total interest expense

6,049


8,182

(26.1%)

       Net interest income

34,480


31,536

9.3%

Provision for loan losses – non-covered loans

7,607


8,003

(4.9%)

Provision for loan losses – covered loans

3,327


n/m

Total provision for loan losses

10,934


8,003

36.6%

Net interest income after provision for loan losses

23,546


23,533

0.1%

Noninterest income





  Service charges on deposit accounts

3,655


3,593


  Other service charges, commissions, and fees

1,709


1,378


  Fees from presold mortgages

346


440


  Commissions from financial product sales

409


340


  Foreclosed property losses and write-downs – covered

(2,583)


(5,495)


  Foreclosed property losses and write-downs – non-covered

(271)


(96)


  Indemnification asset income, net

1,826


4,396


  Securities gains

60


15


  Other gains (losses)

(37)


(34)


     Total noninterest income

5,114


4,537

12.7%

Noninterest expenses





  Personnel expense

12,648


11,324


  Occupancy and equipment expense

2,708


2,815


  Intangibles amortization

226


220


  Merger expenses

243



  Other operating expenses

7,088


7,598


     Total noninterest expenses

22,913


21,957

4.4%

Income before income taxes

5,747


6,113

(6.0%)

Income taxes

2,021


2,172

(7.0%)

Net income

3,726


3,941

(5.5%)






Preferred stock dividends and accretion

(1,041)


(1,026)







Net income available to common shareholders

$              2,685


2,915

(7.9%)











Earnings per common share – basic

$               0.16


0.17

(5.9%)

Earnings per common share – diluted

0.16


0.17

(5.9%)






ADDITIONAL INCOME STATEMENT INFORMATION





  Net interest income, as reported

$            34,480


31,536


  Tax-equivalent adjustment (1)

388


331


  Net interest income, tax-equivalent

$            34,868


31,867

9.4%


(1) This amount reflects the tax benefit that the Company receives related to its tax-

exempt loans and securities, which carry interest rates lower than similar taxable

investments due to their tax-exempt status.  This amount has been computed assuming a

39% tax rate and is reduced by the related nondeductible portion of interest expense.



First Bancorp and Subsidiaries

Financial Summary - Page 2




Six Months Ended

June 30,


Percent

($ in thousands except per share data - unaudited)

2011


2010

Change






INCOME STATEMENT










Interest income





  Interest and fees on loans

$       75,271


75,827


  Interest on investment securities

3,894


3,872


  Other interest income

193


328


     Total interest income

79,358


80,027

(0.8%)

Interest expense





  Interest on deposits

11,534


16,231


  Other, primarily borrowings

1,030


1,083


     Total interest expense

12,564


17,314

(27.4%)

       Net interest income

66,794


62,713

6.5%

Provision for loan losses – non-covered

15,177


15,626

(2.9%)

Provision for loan losses – covered

7,100


n/m

Total provision for loan losses

22,277


15,626

42.6%

Net interest income after provision for loan losses

44,517


47,087

(5.5%)

Noninterest income





  Service charges on deposit accounts

6,609


7,058


  Other service charges, commissions, and fees

3,315


2,755


  Fees from presold mortgages

641


812


  Commissions from financial product sales

764


762


  Gain from acquisition

10,196



  Foreclosed property losses and write-downs – covered

(7,517)


(5,495)


  Foreclosed property losses and write-downs – non-covered

(1,624)


(51)


  Indemnification asset income, net

6,866


4,396


  Securities gains

74


24


  Other gains (losses)

(17)


(30)


     Total noninterest income

19,307


10,231

88.7%

Noninterest expenses





  Personnel expense

25,561


22,424


  Occupancy and equipment expense

5,442


5,842


  Intangibles amortization

450


435


  Merger expenses

594



  Other operating expenses

15,909


15,536


     Total noninterest expenses

47,956


44,237

8.4%

Income before income taxes

15,868


13,081

21.3%

Income taxes

5,767


4,702

22.6%

Net income

$       10,101


8,379

20.6%






Preferred stock dividends and accretion

(2,083)


(2,053)







Net income available to common shareholders

$        8,018


6,326

26.7%











Earnings per share - basic

$         0.48


0.38

26.3%

Earnings per share - diluted

0.48


0.38

26.3%






ADDITIONAL INCOME STATEMENT INFORMATION





  Net interest income, as reported

$    66,794


62,713


  Tax-equivalent adjustment (1)

773


626


  Net interest income, tax-equivalent

$    67,567


63,339

6.7%


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



First Bancorp and Subsidiaries

Financial Summary - Page 3



Three Months Ended

June 30,


Six Months Ended

June 30,

PERFORMANCE RATIOS (annualized)

2011

2010


2011

2010

Return on average assets (1)

0.32%

0.35%


0.48%

0.38%

Return on average common equity (2)

3.74%

4.11%


5.63%

4.51%

Net interest margin – tax-equivalent (3)

4.92%

4.35%


4.77%

4.25%

Net charge-offs to average loans – non-covered

1.75%

1.05%


1.87%

1.03%







COMMON SHARE DATA






Cash dividends declared – common

$         0.08

0.08


$         0.16

0.16

Stated book value – common

17.04

16.92


17.04

16.92

Tangible book value – common

12.88

12.70


12.88

12.70

Common shares outstanding at end of period

16,862,536

16,770,119


16,862,536

16,770,119

Weighted average shares outstanding – basic

16,841,289

16,751,962


16,827,615

16,742,240

Weighted average shares outstanding – diluted

16,868,571

16,784,126


16,855,027

16,772,969







CAPITAL RATIOS






Tangible equity to tangible assets

8.64%

8.56%


8.64%

8.56%

Tangible common equity to tangible assets

6.65%

6.56%


6.65%

6.56%

Tier I leverage ratio

10.17%

10.04%


10.17%

10.04%

Tier I risk-based capital ratio

15.74%

15.17%


15.74%

15.17%

Total risk-based capital ratio

17.00%

16.43%


17.00%

16.43%







AVERAGE BALANCES ($ in thousands)






Total assets

$ 3,327,238

3,316,971


$ 3,336,964

3,378,754

Loans

2,471,915

2,575,926


2,486,963

2,601,782

Earning assets

2,842,817

2,939,478


2,857,429

3,002,306

Deposits

2,785,998

2,818,581


2,788,624

2,864,562

Interest-bearing liabilities

2,617,122

2,664,399


2,627,799

2,731,974

Shareholders' equity

352,619

349,330


352,285

347,928







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

(2)  Calculated by dividing annualized net income 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

June 30,  

2011



March 31,

2011



December 31,

2010




September 30,

2010



June 30,

2010











Net interest income – tax-equivalent (1)

$     34,868


32,699


33,931


31,401


31,867

Taxable equivalent adjustment (1)

388


385


361


330


331

Net interest income

34,480


32,314


33,570


31,071


31,536

Provision for loan losses – non-covered

7,607


7,570


9,629


8,391


8,003

Provision for loan losses – covered

3,327


3,773


20,916



Noninterest income

5,114


14,193


14,918


3,957


4,537

Noninterest expense

22,913


25,043


22,008


20,711


21,957

Income (loss) before income taxes

5,747


10,121


(4,065)


5,926


6,113

Income tax expense (benefit)

2,021


3,746


(1,820)


2,078


2,172

Net income (loss)

3,726


6,375


(2,245)


3,848


3,941

Preferred stock dividends and accretion

1,041


1,042


1,027


1,027


1,026

Net income (loss) available to common shareholders

2,685


5,333


(3,272)


2,821


2,915











Earnings (loss) per common share – basic

0.16


0.32


(0.19)


0.17


0.17

Earnings (loss) per common share – diluted

0.16


0.32


(0.19)


0.17


0.17


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



First Bancorp and Subsidiaries

Financial Summary - Page 4



CONSOLIDATED BALANCE SHEETS

($ in thousands)


At June 30,

2011





At March 31,

2011





At Dec. 31,

2010





At June 30,

2010





One Year

Change

Assets










Cash and due from banks

$         73,676


59,985


56,821


59,944


22.9%

Interest bearing deposits with banks

164,571


197,035


155,181


153,630


7.1%

    Total cash and cash equivalents

238,247


257,020


212,002


213,574


11.6%











Investment securities

229,437


249,815


235,200


210,629


8.9%

Presold mortgages

2,466


2,696


3,962


3,123


-21.0%











Loans – non-covered

2,040,714


2,045,998


2,083,004


2,099,099


-2.8%

Loans – covered by FDIC loss share agreements

401,726


440,212


371,128


455,477


-11.8%

    Total loans

2,442,440


2,486,210


2,454,132


2,554,576


-4.4%

Allowance for loan losses – non-covered

(34,465)


(35,773)


(38,275)


(42,215)


-18.4%

Allowance for loan losses – covered

(5,540)


(7,002)


(11,155)


−    


n/m

    Total allowance for loan losses

(40,005)


(42,775)


(49,430)


(42,215)


-5.2%

    Net loans

2,402,435


2,443,435


2,404,702


2,512,361


-4.4%











Premises and equipment

68,898


67,879


67,741


54,026


27.5%

FDIC indemnification asset

142,894


140,937


123,719


118,072


21.0%

Intangible assets

70,184


70,410


70,358


70,797


-0.9%

Other real estate owned – non-covered

31,849


26,961


21,081


14,690


116.8%

Other real estate owned – covered

102,883


95,868


94,891


80,074


28.5%

Other assets

44,456


47,442


45,276


40,996


8.4%

    Total assets

$    3,333,749


3,402,463


3,278,932


3,318,342


0.5%





















Liabilities










Deposits:










    Non-interest bearing demand

$       323,223


332,168


292,759


293,555


10.1%

    NOW accounts

371,693


349,677


292,623


356,626


4.2%

    Money market accounts

497,112


513,553


498,312


494,979


0.4%

    Savings accounts

145,576


161,869


153,325


157,343


-7.5%

    Brokered deposits

175,161


194,178


143,554


91,195


92.1%

    Internet time deposits

40,677


51,075


46,801


54,535


-25.4%

    Other time deposits > $100,000

567,722


593,625


602,371


668,044


-15.0%

    Other time deposits

626,254


648,296


622,768


678,611


-7.7%

         Total deposits

2,747,418


2,844,441


2,652,513


2,794,888


-1.7%











Repurchase agreements

68,608


72,951


54,460


61,766


11.1%

Borrowings

138,796


108,833


196,870


76,579


81.2%

Other liabilities

26,629


26,848


30,486


36,371


-26.8%

    Total liabilities

2,981,451


3,053,073


2,934,329


2,969,604


0.4%











Shareholders' equity










Preferred stock

65,000


65,000


65,000


65,000


0.0%

Discount on preferred stock

(2,474)


(2,703)


(2,932)


(3,361)


-26.4%

Common stock

100,549


99,989


99,615


98,973


1.6%

Common stock warrants

4,592


4,592


4,592


4,592


0.0%

Retained earnings

188,737


187,401


183,413


186,552


1.2%

Accumulated other comprehensive income

(4,106)


(4,889)


(5,085)


(3,018)


-36.1%

    Total shareholders' equity

352,298


349,390


344,603


348,738


1.0%

Total liabilities and shareholders' equity

$    3,333,749


3,402,463


3,278,932


3,318,342


0.5%










First Bancorp and Subsidiaries

Financial Summary- Page 5



For the Three Months Ended


YIELD INFORMATION

June 30,  

2011



March 31,

2011


December 31,

2010




September 30,

2010



June 30,

2010











Yield on loans

6.24%


5.97%


6.16%


5.79%


5.86%

Yield on securities – tax-equivalent (1)

3.90%


3.87%


4.00%


4.26%


4.38%

Yield on other earning assets

0.32%


0.29%


0.41%


0.32%


0.32%

  Yield on all interest earning assets

5.77%


5.54%


5.75%


5.36%


5.46%











Rate on interest bearing deposits

0.91%


0.99%


1.06%


1.16%


1.22%

Rate on other interest bearing liabilities

1.25%


1.24%


1.30%


1.52%


1.54%

  Rate on all interest bearing liabilities

0.93%


1.00%


1.07%


1.17%


1.23%

    Total cost of funds

0.82%


0.89%


0.96%


1.06%


1.11%











       Net interest margin – tax-equivalent (2)

4.92%


4.62%


4.79%


4.30%


4.35%

       Average prime rate

3.25%


3.25%


3.25%


3.25%


3.25%







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

(2)  Calculated by dividing annualized tax-equivalent net interest income by average earning assets for the

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





For the Three Months Ended

NET INTEREST INCOME PURCHASE ACCOUNTING ADJUSTMENTS

June 30,

 2011


March 31,

2011


December 31,

2010


September 30,

2010


June 30,

2010


Positive (negative) impact on net interest income











Interest income – reduced by premium amortization on loans


$          (116)




(105)




         (49)




         (49)




         (49)

Interest income – increased by accretion of loan discount (1)


4,014




2,515




3,233




1,231




1,659

Interest expense – reduced by premium amortization of deposits


130




53







296




731

Interest expense – reduced by premium amortization of borrowings


37




37




37




72




116

    Impact on net interest income

$         4,065


2,500


3,221


1,550


2,457


(1)  Indemnification asset income is reduced by 80% of the amount of the accretion of loan discount, and

therefore the net effect is that pretax income is positively impacted by 20% of the amounts in this line item.



First Bancorp and Subsidiaries

Financial Summary - Page 6













ASSET QUALITY DATA ($ in thousands)

June 30,

2011


March 31,

2011



Dec. 31,

2010


Sept. 30,

2010


June 30,

2010











Non-covered nonperforming assets










Nonaccrual loans

$     71,570


69,250


62,326


80,318


73,152

Restructured loans

16,893


19,843


33,677


20,447


20,392

Accruing loans > 90 days past due





    Total non-covered nonperforming loans

88,463


89,093


96,003


100,765


93,544

Other real estate

31,849


26,961


21,081


17,475


14,690

Total non-covered nonperforming assets

$   120,312


116,054


117,084


118,240


108,234











Covered nonperforming assets (1)










Nonaccrual loans (2)

$    37,057


56,862


58,466


75,116


98,669

Restructured loans

24,325


16,238


14,359


4,160


8,450

Accruing loans > 90 days past due





    Total covered nonperforming loans

61,382


73,100


72,825


79,276


107,119

Other real estate

102,883


95,868


94,891


101,389


80,074

Total covered nonperforming assets

$  164,265


168,968


167,716


180,665


187,193











    Total nonperforming assets

$  284,577


285,022


284,800


298,905


295,427


Asset Quality Ratios – All Assets










Net charge-offs to average loans - annualized

2.22%


2.92%


4.17%


0.88%


0.85%

Nonperforming loans to total loans

6.14%


6.52%


6.88%


7.17%


7.86%

Nonperforming assets to total assets

8.54%


8.38%


8.69%


8.90%


8.90%

Allowance for loan losses to total loans

1.64%


1.72%


2.01%


1.79%


1.65%











Asset Quality Ratios – Based on Non-covered Assets only










Net charge-offs to average non-covered loans - annualized

1.75%


1.97%


3.10%


1.06%


1.04%

Non-covered nonperforming loans to non-covered loans

4.33%


4.35%


4.61%


4.81%


4.46%

Non-covered nonperforming assets to total non-covered assets

4.25%


4.05%


4.16%


4.16%


3.89%

Allowance for loan losses to non-covered loans

1.69%


1.75%


1.84%


2.15%


2.01%


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

(2)  At June 30, 2011, the contractual balance of the nonaccrual loans covered by the FDIC loss share agreements was $69.4 million.



SOURCE First Bancorp



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