FBNC First Bancorp

SOUTHERN PINES, N.C., Jan. 29, 2025 /PRNewswire/ -- First Bancorp (the "Company") (NASDAQ - FBNC), the parent company of First Bank, reported unaudited fourth quarter and full year earnings today.  The Company announced net income of $3.6 million, or $0.08 diluted earnings per share ("EPS"), for the three months ended December 31, 2024 compared to $18.7 million, or $0.45 diluted earnings per common share, for the three months ended September 30, 2024 ("linked quarter") and $29.7 million, or $0.72 diluted earnings per common share, for the fourth quarter of 2023 ("like quarter").  For the twelve months ended December 31, 2024, the Company recorded net income of $76.2 million, or $1.84 diluted earnings per common share, compared to $104.1 million, or $2.53 diluted earnings per common share, for the twelve months ended December 31, 2023.  These results include the potential impacts of Hurricane Helene of $13.4 million ($10.3 million after-taxes) as well as the securities loss of $36.8 million ($28.2 million after-taxes) described in the following paragraph.

During the fourth quarter of 2024, to take advantage of the current yields on certain categories of bonds, the Company executed a securities loss-earnback transaction including the sale of $280 million of available-for-sale securities bearing 1.56% at a loss of approximately $36.8 million.  During the fourth quarter of 2024, the Company invested a total of $495 million in available-for-sale securities bearing 5.27%.  Our adjusted net income was $31.7 million, or an adjusted $0.76 diluted earnings per share, for the fourth quarter of 2024, compared to adjusted net income of $29.0 million, or an adjusted $0.70 diluted earnings per share for the linked quarter and net income of $29.7 million, or $0.72 diluted earnings per share for the like quarter.  For the twelve months ended December 31, 2024, our adjusted net income was $114.6 million, or an adjusted $2.77 diluted earnings per share, as compared to net income of $104.1 million, or $2.53 diluted earnings per share. The reconciliation from net income and EPS to adjusted net income and adjusted EPS is presented in Appendix E.

Richard H. Moore, CEO and Chairman of the Company, stated, "I am proud of our Company's results this quarter, in particular our ability to maximize the impact of rate cuts.  We also continued to exhibit our service excellence culture in supporting our teammates, customers and communities in the wake of Hurricane Helene.  We have positive momentum starting 2025 with fourth quarter adjusted net income of  $31.7 million, and adjusted diluted earnings per share of $0.76, both of which are meaningful increases from the third quarter.  We look forward to seeing the benefit of our hard work and strategic balance sheet initiatives that should provide tailwinds for 2025."

Fourth Quarter 2024 Highlights

• Tax equivalent net interest margin ("NIM") increased 17 basis points to 3.07% for the fourth quarter of 2024, up from 2.90% for the linked quarter and 2.88% in the like quarter. For the twelve months ended December 31, 2024, NIM fell to 2.91% from 3.06% in the same period in 2023. The Federal Reserve rate reductions In September, November and December benefited our fourth quarter NIM.
• Total loan yield contracted to 5.47%, down 4 basis points from the linked quarter and expanded 8 basis points from the like quarter. Total cost of funds fell 19 basis points to 1.62% for the quarter ended December 31, 2024 from 1.81% for the linked quarter.
• The securities loss-earnback transaction was executed at the end of November and resulted in an increase of 25 basis points in the yield on the securities portfolio for the fourth quarter of 2024. Because of the timing of the transaction, the increased yield on the new purchases was included for less than half of the fourth quarter.
• Average deposits were $10.6 billion for the fourth quarter of 2024, an increase of $99.4 million from the linked quarter, with average noninterest bearing deposit growth of $51.6 million. Total cost of deposits was 1.57%, a decrease of 19 basis points from 1.76% for the linked quarter and an increase of 16 basis points from 1.41% for the like quarter.
• The Company continues to focus on prudent expense management. Noninterest expenses declined $1.6 million from the linked quarter to $58.3 million for the fourth quarter of 2024. The decrease was driven by a $1.3 million decrease in Total personnel expense. Full-time equivalent employees remained consistent on a linked quarter basis. For the twelve months ended December 31, 2024 noninterest expenses declined $18.8 million, driven by $13.7 million of merger and acquisition expenses in 2023, a decline of $2.8 million in other operating expenses, a $1.4 million decline in amortization expense and a $1.0 million decline in occupancy and equipment related expenses. Total personnel expense remained substantially unchanged year over year. Full time equivalent employees decreased by 50 from 1,421 at December 31, 2023 to 1,371 at December 31, 2024.
• EPS was $0.08 per diluted share for the fourth quarter of 2024 and $1.84 per diluted share for the twelve months ended December 31, 2024. Adjusted diluted EPS for the fourth quarter of 2024 was $0.76, up from the linked quarter's adjusted diluted EPS of $0.70 and increased to an adjusted diluted EPS of $2.77 for the twelve months ended December 31, 2024 from $2.53 for the twelve months ended December 31, 2023. See Appendix E for the components of this calculation.
• Net income was $3.6 million for the fourth quarter of 2024 and $76.2 million for the twelve months ended December 31, 2024. Adjusted net income increased to $114.6 million for the twelve months ended December 31, 2024 from net income of $104.1 million for the twelve months ended December 31, 2023. See Appendix E for the components of this calculation.
• Capital remained strong at year end, despite the recognition of the loss from the securities loss-earnback transaction, with a common equity tier 1 ratio of 14.33% (estimated) and a total risk-based capital ratio of 16.61% (estimated) as of December 31, 2024, both well above regulatory minimums or targets.
• Credit quality remains strong with a nonperforming assets ("NPA") to total assets ratio of 0.39% as of December 31, 2024, an increase of 1 basis point from the linked quarter. During the fourth quarter of 2024, the Company recorded net charge offs of $0.9 million, an annualized 0.04% of average loans.
• Loan growth accelerated during the quarter, with loans totaling $8.1 billion at December 31, 2024, and reflecting growth of $81.1 million, or 4.03%, for the quarter. Consistent with our early 2024 focus on increasing liquidity, loans contracted year-over-year by $55.4 million, or 0.68%.
• Noninterest-bearing demand accounts were 32% of total deposits at December 31, 2024, which is consistent with historical trends. During the fourth quarter of 2024, customer deposits grew $25.5 million and brokered deposits contracted $0.1 million.
• The on-balance sheet liquidity ratio was 17.6% at December 31, 2024, down slightly from 17.7% for the linked quarter. Available off-balance sheet sources totaled $2.4 billion at December 31, 2024, resulting in a total liquidity ratio of 34.9%.

Net Interest Income and Net Interest Margin

Net interest income for the fourth quarter of 2024 was $88.8 million compared to $83.0 million for the linked quarter, reflecting an increase of 7.0%, and $82.5 million for the like quarter, reflecting an increase of 7.6%.  The increase in net interest income from the linked and like quarters was driven by the increased yield on the securities portfolio from the loss-earnback transaction along with the Company's focused efforts to manage deposit costs.

The Company's tax-equivalent NIM for the fourth quarter of 2024 was 3.07%, an increase of 17 basis points compared to 2.90% for the linked quarter.  Within interest-earning assets, the loss-earnback transaction in the securities portfolio during the quarter resulted in an increase of 25 basis points as compared to the linked quarter. This was partially offset by a decrease of 4 basis points in loan yields. With the three rate cuts by the Federal Reserve between September and December, the rate on interest-bearing deposits fell 28 basis points during the quarter ended December 31, 2024.  The like quarter expansion of tax-equivalent NIM of 19 basis points was also the result of the securities loss-earnback transaction and an increase of 8 basis points in loan yields, partially offset by an increase of 17 basis points in the rate on interest-bearing deposits.

Included in interest income for the fourth quarter of 2024 was loan purchase accounting discount accretion of $2.2 million compared to $2.0 million for the linked quarter and $2.5 million for the like quarter, with the activity related to the continued repayments/reduction of the loan portfolio acquired from GrandSouth Bancorporation in January of 2023.  Loan discount accretion had positive impacts of 6 basis points, 6 basis points and 11 basis points, respectively, on the Company's NIM in the fourth 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 December 31, 2024 and December 31, 2023, the Company recorded $0.5 million and $3.0 million in provision for credit losses, respectively. The provision for the fourth quarter of 2024 was driven by loan growth of $81.1 million and net charge-offs of $0.9 million partially offset by generally positive 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.  Within the portions of Western North and South Carolina that were significantly impacted by Hurricane Helene, the Company identified borrowers with approximately $744 million of loans outstanding as of December 31, 2024. Consistent with the end of the third quarter, the Company continues to update analyses to identify impacts from the storm and has applied increased reserve rates based upon severe economic factors to the loans in the path of Helene.  Additionally, the Company continues to evaluate the largest commercial loans in that population and applied incremental reserves to those loans that were suspected of having higher potential property damage or economic impact from the storm.  The incremental reserve for potential exposure from Hurricane Helene was $13.0 million, consistent with September 30, 2024, and added 16 basis points to the Allowance for Credit Losses as of December 31, 2024.

Asset quality remained strong with annualized net loan charge-offs of 0.04% for the fourth quarter of 2024.  Total NPAs remained at a low level at $46.9 million at December 31, 2024, or 0.39% of total assets, up slightly from  0.38% at September 30, 2024.  At December 31, 2023, total NPAs were $44.8 million, or 0.37% of total assets,with the increase year-over-year being attributable primarily to additions to foreclosed real estate, partially offset by a decrease in nonperforming loans. Of the $3.4 million net increase in foreclosed real estate during the fourth quarter of 2024, $3.0 million was attributable to one property.

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

Noninterest Income

Total noninterest income for the fourth quarter of 2024 was negative $23.2 million, reflecting the inclusion of the $36.8 million loss on securities.  Excluding the loss on securities, noninterest income totaled $13.6 million during the fourth quarter of 2024, a 0.5% increase from the $13.6 million recorded for the linked quarter.  As compared to the like quarter, noninterest income, excluding the loss on securities, was 5.9% lower primarily due to a reduction of  $1.6 million in Other income, net.

Noninterest Expenses

Noninterest expenses amounted to $58.3 million for the fourth quarter of 2024 compared to $59.9 million for the linked quarter and $56.4 million for the like quarter.  The $1.6 million, or 2.6%, decrease in noninterest expense from the linked quarter was driven by a $1.5 million decrease in Salaries, incentives and commissions expense, as the Company continues to actively manage headcount and variable compensation declined from third quarter to fourth quarter.

As compared to the like quarter, the increases in Salaries, incentives and commissions expense of $1.4 million and Other operating expenses of $1.8 million were partially offset by a decrease in Occupancy and equipment related expenses of $1.3 million.  The increase in Salaries, incentives and commissions was driven by prior year reductions in variable compensation related to 2023 performance results.  The decrease in other operating expenses is the result of a one-time pension related benefit in the like quarter.  The like quarter Occupancy and equipment expense included elevated expenses related to building repairs and maintenance.

Income Taxes

Income tax expense totaled $3.3 million for the fourth quarter of 2024 compared to $3.9 million for the linked quarter and $8.0 million for the like quarter. These equated to effective tax rates of 48.4%, 17.2% and 21.3%.  The fourth quarter of 2024 included $2.4 million of incremental state tax-related expense related to prior years, changes in state tax apportionment, and the negative impact of decreasing deferred tax assets related to the NC corporate income tax reduction effective January 1, 2025 and for future years. 

Income tax expense for the year ended December 31, 2024 was $21.9 million compared to $27.8 million for the previous year.  These equated to effective tax rates of 22.3% and 21.1%.  The primary contributor to the increased effective tax rate was the aforementioned incremental state tax-related expense items.

Balance Sheet

Total assets at December 31, 2024 amounted to $12.1 billion, a decrease of $5.7 million, or 0.19% annualized, from the linked quarter and an increase of $32.8 million, or 0.27%, from a year earlier.  The slight decrease from the linked quarter was primarily related to lower interest-bearing cash balances, partially offset by higher investment securities and loan balances.

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

Driven by additional purchases and the loss-earnback transaction in the securities portfolio during the fourth quarter of 2024, and partially offset by increased unrealized losses on the available for sale securities portfolio, total investment securities increased to $2.6 billion at  December 31, 2024, reflecting a $133.8 million increase from the linked quarter.  Total unrealized loss on available for sale investment securities was $368.1 million at December 31, 2024, as compared to $331.5 million at September 30, 2024 and $400.7 million at December 31, 2023.  As part of the loss-earnback transaction in the securities portfolio, $283.8 million of securities were sold at a loss of $36.8 million and $495.0 million of securities were purchased, with a weighted average yield of 5.27%.

Total loans amounted to $8.1 billion at December 31, 2024, an increase of $81.1 million, or 4.0%, from  September 30, 2024 and a decrease of $55.4 million, or 0.7%, from December 31, 2023.  As presented below, the 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 12% at December 31, 2023 to 8% at December 31, 2024.  As of December 31, 2024, there were no notable concentrations in geographies within North Carolina and South Carolina 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 5.6% of the total portfolio at December 31, 2024, with the largest loan being $26.5 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 December 31, 2024, an increase of $25.6 million, or 1.0%, from  September 30, 2024 and an increase of $498.9 million, or 5.0%, from December 31, 2023. The quarter-to-date deposit growth is comprised of organic growth of customer deposits of $25.5 million, partially offset by a contraction of $0.1 million in 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 December 31, 2024.  Our deposit mix has remained relatively consistent, with the exception of increased growth in money market accounts, as presented in the table below.

As of December 31, 2024 and September 30, 2024, estimated insured deposits totaled $6.4 billion, or 61.0%, and $6.5 billion, or 61.8%, respectively, of total deposits.  In addition, at December 31, 2024 and September 30, 2024, there were collateralized deposits of $690.5 million and $730.8 million, respectively, such that approximately 67.6% and 68.7%, 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 December 31, 2024 of 16.61%, down from  the linked quarter ratio of 16.65% and up from the like quarter ratio of 15.54%.   The decrease during the fourth quarter of 2024 in risk-based capital ratios was driven by the securities loss-earnback transaction during the quarter with additional impacts from shifts in the balance sheet with a decrease in interest earning cash and increases in loans and securities that carry higher regulatory risk-weightings.

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 8.22% at December 31, 2024, a decrease of 25 basis points from the linked quarter and an increase of 66 basis points from December 31, 2023.  The decrease in TCE during the fourth quarter of 2024 was driven by the securities loss-earnback transaction and an increase in the level of unrealized losses on the available for sale securities portfolio during the quarter. The increase in TCE as compared to the like period was driven by earnings and improvements in the level of unrealized losses on the available for sale investment portfolio since that date.  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 and 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 December 31, 2024 was 17.6%.  In addition, the Company had approximately $2.4 billion in available lines of credit at that date resulting in a total liquidity ratio of 34.9%. 

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. Member FDIC, Equal Housing Lender.

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."

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.