First Bank(US:FBNC)2022-05-09 16:00Part I. Financial Information Item 1 - Financial Statements This section presents the unaudited consolidated financial statements for First Bancorp as of March 31, 2022, and for the three months ended March 31, 2022 and 2021. It includes the Balance Sheets, Statements of Income, Comprehensive Income, Shareholders' Equity, and Cash Flows, along with detailed Notes to the Financial Statements covering key accounting policies and financial details Consolidated Balance Sheets As of March 31, 2022, First Bancorp's total assets increased to $10.65 billion from $10.51 billion at year-end 2021. The growth was driven by a $260.5 million increase in total deposits, which reached $9.39 billion. Total loans remained relatively stable at $6.06 billion, while total shareholders' equity decreased to $1.12 billion from $1.23 billion, primarily due to a significant increase in accumulated other comprehensive loss Consolidated Balance Sheet Highlights (in thousands) | Account | March 31, 2022 (unaudited) | December 31, 2021 | | :--- | :--- | :--- | | Total Assets | $10,652,060 | $10,508,901 | | Total cash and cash equivalents | $565,759 | $461,162 | | Net loans | $5,982,629 | $6,002,926 | | Securities available for sale | $2,685,048 | $2,630,414 | | Goodwill | $364,263 | $364,263 | | Total Liabilities | $9,534,570 | $9,278,326 | | Total deposits | $9,385,147 | $9,124,629 | | Total Shareholders' Equity | $1,117,490 | $1,230,575 | | Accumulated other comprehensive loss | ($164,955) | ($24,970) | Consolidated Statements of Income For the three months ended March 31, 2022, net income was $34.0 million, an increase from $28.2 million in the same period of 2021. The growth was primarily driven by a 39.2% increase in net interest income to $76.9 million. This was partially offset by a $2.0 million provision for credit losses (compared to none in Q1 2021) and a 6.9% decrease in noninterest income. Diluted EPS was $0.95, compared to $0.99 in Q1 2021, reflecting a higher share count Q1 2022 vs Q1 2021 Income Statement (in thousands, except per share data) | Metric | Three Months Ended March 31, 2022 | Three Months Ended March 31, 2021 | | :--- | :--- | :--- | | Net Interest Income | $76,878 | $55,238 | | Provision for credit losses | $2,000 | $0 | | Noninterest Income | $19,251 | $20,669 | | Noninterest Expenses | $51,465 | $40,065 | | Net Income | $33,969 | $28,194 | | Diluted EPS | $0.95 | $0.99 | | Dividends declared per common share | $0.22 | $0.20 | Consolidated Statements of Cash Flows For the first three months of 2022, net cash provided by operating activities was $100.1 million, a significant increase from $30.7 million in the prior-year period. Net cash used in investing activities was $249.0 million, mainly for purchases of securities. Net cash provided by financing activities was $253.5 million, driven by a $260.8 million net increase in deposits. This resulted in a net increase in cash and cash equivalents of $104.6 million Cash Flow Summary (in thousands) | Activity | Three Months Ended March 31, 2022 | Three Months Ended March 31, 2021 | | :--- | :--- | :--- | | Net cash provided by operating activities | $100,143 | $30,733 | | Net cash used by investing activities | ($249,025) | ($318,053) | | Net cash provided by financing activities | $253,479 | $450,096 | | Increase in cash and cash equivalents | $104,597 | $162,776 | Notes to Consolidated Financial Statements The notes provide detailed explanations of the company's accounting policies and financial data. Key areas include the composition of the securities portfolio, detailed analysis of the loan portfolio and credit quality, goodwill and intangible assets, borrowings, lease obligations, fair value measurements, and revenue recognition. The company adopted no new significant accounting standards in Q1 2022 - The company's securities portfolio totaled $3.2 billion at fair value as of March 31, 2022, with available-for-sale securities at $2.69 billion and held-to-maturity at $0.55 billion. Unrealized losses increased significantly due to rising interest rates34 - Total loans were $6.06 billion, with commercial real estate being the largest category at $3.23 billion (53%). Paycheck Protection Program (PPP) loans decreased to $15.6 million from $39.0 million at year-end 202144 - Nonperforming assets decreased to $48.9 million (0.46% of total assets) from $52.6 million at year-end 2021. The allowance for credit losses on loans was $82.1 million, or 1.35% of total loans5169 - Goodwill remained unchanged at $364.3 million. Amortizable intangible assets, primarily core deposit intangibles, had a net book value of $16.9 million87 Management's Discussion and Analysis of Results of Operations and Financial Condition Management discusses the financial results for Q1 2022, highlighting a 39.2% increase in net interest income to $76.9 million, driven by the Select Bancorp acquisition and organic growth. Net income rose to $34.0 million. The report details performance in key areas including net interest margin, noninterest income and expenses, credit quality, and capital adequacy. The company remains well-capitalized, with a Common Equity Tier 1 ratio of 12.85%. Management also addresses the ongoing, though lessening, impact of COVID-19 and the critical accounting policies related to the allowance for credit losses and goodwill Overview and Highlights In Q1 2022, net income reached $34.0 million ($0.95 diluted EPS), up from $28.2 million in Q1 2021. The increase was driven by a 39.2% rise in net interest income, largely due to the Select Bancorp acquisition. Total assets grew to $10.7 billion, and deposits increased by 2.9% to $9.4 billion. The company remains well-capitalized with a CET1 ratio of 12.85% - The acquisition of Select Bancorp, Inc. on October 15, 2021, significantly impacted year-over-year financial comparisons, contributing $1.8 billion in assets, $1.3 billion in loans, and $1.6 billion in deposits at the acquisition date150 Q1 2022 Financial Highlights vs. Q1 2021 | Metric | Q1 2022 | Q1 2021 | | :--- | :--- | :--- | | Net Income | $34.0M | $28.2M | | Diluted EPS | $0.95 | $0.99 | | Net Interest Income | $76.9M | $55.2M | | Noninterest Income | $19.3M | $20.7M | | Noninterest Expense | $51.5M | $40.1M | - Total assets reached $10.7 billion, a 1.4% increase from year-end 2021, while deposits grew 2.9% to $9.4 billion during the quarter156157 Results of Operations Net interest income grew 39.2% to $76.9 million in Q1 2022, driven by higher earning asset volumes from the Select acquisition and organic growth, despite a slight compression in the tax-equivalent net interest margin to 3.21%. Noninterest income decreased by 6.9% to $19.3 million, mainly due to lower mortgage banking and SBA consulting fees. Noninterest expenses rose 28.5% to $51.5 million, including $3.5 million in merger-related costs Net Interest Income Analysis (Tax-Equivalent) | Metric | Q1 2022 | Q1 2021 | | :--- | :--- | :--- | | Net Interest Income (Tax-Equivalent) | $77.6M | $55.7M | | Net Interest Margin (Tax-Equivalent) | 3.21% | 3.27% | - Noninterest income declined primarily due to a $3.4 million decrease in mortgage fees, a $2.0 million decrease in SBA consulting fees, and a $1.2 million decrease in insurance commissions following the sale of an insurance subsidiary197198199 - Noninterest expenses increased by $11.4 million, which included $3.5 million in merger and acquisition expenses. The remaining increase was driven by higher operating costs from the expanded operations post-Select acquisition201202 - The effective tax rate for Q1 2022 was 20.4%, down from 21.3% in Q1 2021, due to a higher proportion of tax-exempt income206 Financial Condition As of March 31, 2022, total assets stood at $10.7 billion. Total loans were stable at $6.1 billion, as core growth was offset by PPP loan forgiveness. Total deposits grew by $260.5 million (2.9%) during the quarter to $9.4 billion, primarily in transaction accounts. Nonperforming assets improved, decreasing to 0.46% of total assets. The allowance for credit losses (ACL) was 1.35% of total loans. The company remains well-capitalized, with all regulatory capital ratios exceeding minimum requirements - Total loans decreased by $17.0 million (0.3%) in Q1 2022, mainly due to the forgiveness of PPP loans offsetting organic growth in commercial real estate and residential mortgages208 - Total deposits increased by $260.5 million (2.9%) from year-end 2021, reaching $9.4 billion, with growth concentrated in transaction accounts209 Asset Quality Ratios | Ratio | March 31, 2022 | December 31, 2021 | | :--- | :--- | :--- | | Nonperforming assets to total assets | 0.46% | 0.50% | | Allowance for credit losses to total loans | 1.35% | 1.30% | Regulatory Capital Ratios | Ratio | March 31, 2022 | Minimum Required | | :--- | :--- | :--- | | Common Equity Tier 1 (CET1) | 12.85% | 7.00% | | Tier 1 Capital | 13.74% | 8.50% | | Total Risk-Based Capital | 14.99% | 10.50% | Quantitative and Qualitative Disclosures About Market Risk The company identifies interest rate risk as its most significant market risk, as net interest income is its largest earnings component. Management uses gap reports and earnings simulation models to analyze this risk. As of March 31, 2022, the company is liability-sensitive over a one-year horizon based on a static gap analysis, but asset-sensitive in the short-term (less than 12 months) due to the repricing characteristics of its assets and liabilities. Management expects to benefit from the anticipated rise in interest rates in the near-term, assuming stable funding costs, but notes that a flat yield curve presents an unfavorable environment - Interest rate risk is the company's most significant market risk, managed through analysis of asset/liability repricing and maturity schedules241 - In the short-term (less than twelve months), the company is generally asset-sensitive, meaning net interest income benefits from rising interest rates. This is because interest-sensitive assets tend to reprice faster and more fully than interest-sensitive liabilities245 - The company anticipates that rising short-term rates in 2022 may benefit its net interest margin, provided funding costs remain stable. However, a flat long-term yield curve and market competition for loans could continue to pressure margins247249 Controls and Procedures Based on an evaluation conducted by management, including the CEO and CFO, as of the end of the period covered by this report, the company's disclosure controls and procedures were concluded to be effective. There were no material changes in internal control over financial reporting during the quarter - The CEO and CFO concluded that the company's disclosure controls and procedures are effective for ensuring timely and accurate reporting as required by the SEC251 - No changes occurred during the quarter that materially affected, or are reasonably likely to materially affect, the company's internal control over financial reporting251 Part II. Other Information Legal Proceedings The company and its subsidiaries are not involved in any pending legal proceedings that management believes would be material to the company's consolidated financial position - There are no material pending legal proceedings against the Company or its subsidiaries252 Risk Factors There have been no material changes from the risk factors previously disclosed in the company's Annual Report on Form 10-K for the year ended December 31, 2021 - No material changes have been identified from the risk factors set forth in the Company's 2021 Annual Report on Form 10-K253 Unregistered Sales of Equity Securities and Use of Proceeds The company did not repurchase any of its common stock during the first quarter of 2022. On February 7, 2022, a new $40 million share repurchase program was authorized, expiring on December 31, 2022. As of March 31, 2022, the full $40 million authorization remained available - The Company did not repurchase any shares during the first three months of 2022131255 - A $40 million share repurchase program was authorized on February 7, 2022. As of March 31, 2022, the full $40 million was available for repurchase255 Exhibits This section lists the exhibits filed with the Form 10-Q, including certifications by the CEO and CFO, and XBRL data files. Various agreements are incorporated by reference from previous filings - The report includes required certifications from the Chief Executive Officer and Chief Financial Officer pursuant to the Sarbanes-Oxley Act of 2002258 - Financial statements and notes are provided in XBRL format as part of the filing258