EX-99.1 2 ex99-1.htm EX-99.1

News Release

For Immediate Release: | For More Information,
October 23, 2018 | Contact: Elaine Pozarycki
| 919-834-3090

First Bancorp Reports Third Quarter Results

SOUTHERN PINES, N.C. – First Bancorp (NASDAQ – FBNC), the parent company of First Bank, announced today net income available to common shareholders of $22.0 million, or $0.74 per diluted common share, for the three months ended September 30, 2018, an increase of 39.6% in earnings per share from the $13.1 million, or $0.53 per diluted common share, recorded in the third quarter of 2017.

For the nine months ended September 30, 2018, the Company recorded net income available to common shareholders of $65.4 million, or $2.21 per diluted common share, an increase of 66.2% in earnings per share from the $31.8 million, or $1.33 per diluted common share, for the nine months ended September 30, 2017.

Comparisons for the financial periods presented were significantly impacted by the Company’s acquisitions of Carolina Bank Holdings, Inc. (“Carolina Bank”) in March 2017 with total assets of $682 million and ASB Bancorp, Inc. (“Asheville Savings Bank”) in October 2017 with $798 million in total assets. The assets, liabilities and earnings for the acquisitions were recorded beginning on their respective acquisition dates.

Net Interest Income and Net Interest Margin

Net interest income for the third quarter of 2018 was $51.8 million, a 24.5% increase from the $41.6 million recorded in the third quarter of 2017. Net interest income for the first nine months of 2018 amounted to $153.6 million, a 32.6% increase from the $115.9 million recorded in the comparable period of 2017. The increase in net interest income was primarily due to the acquisitions of Carolina Bank and Asheville Savings Bank, as well as higher amounts of loans outstanding as a result of organic growth.

The Company’s net interest margin (tax-equivalent net interest income divided by average earning assets) for the third quarter of 2018 was 4.06% compared to 4.16% for the third quarter of 2017. For the nine month period ended September 30, 2018, the Company’s net interest margin was 4.12% compared to 4.11% for the same period in 2017. Although asset yields increased primarily as a result of several Federal Reserve interest rate increases since January 1, 2017, the Company has also experienced higher funding costs, particularly on the interest rates paid on its borrowings, as these are highly correlated to short-term interest rates set by the Federal Reserve. Interest income for the nine months ended September 30, 2018 was positively impacted by approximately $0.8 million in interest recoveries received in the first quarter, which primarily related to the same loans that experienced significant allowance for loan loss recoveries discussed below in “Provisions for Loan Losses and Asset Quality.”

The net interest margins for the periods were also impacted by loan discount accretion associated with acquired loan portfolios. The Company recorded loan discount accretion amounting to $1.6 million in the third quarter of 2018, compared to $1.7 million in the third quarter of 2017. For the first nine months of 2018 and 2017, loan discount accretion amounted to $6.0 million and $5.1 million, respectively. The increase in loan discount accretion in 2018 was primarily due to the loan discounts recorded in the acquisitions of Carolina Bank and Asheville Savings Bank. See the Financial Summary for a table that presents the impact of loan discount accretion on net interest income.

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Excluding the effects of loan discount accretion, the Company’s tax-equivalent net interest margin was 3.94% for the third quarter of 2018, compared to 3.99% for the third quarter of 2017. The decrease was primarily due to funding costs that exceeded increases in asset yields, as discussed above. The net interest margin excluding loan discount accretion of 3.94% in the third quarter of 2018 was a 2 basis point increase from 3.92% in the second quarter of 2018. See the Financial Summary for a reconciliation of the Company’s net interest margin to the net interest margin excluding loan discount accretion, and other information regarding this percentage.

Provision for Loan Losses and Asset Quality

The Company recorded a provision for loan losses of $0.1 million in the third quarter of 2018, compared to no provision for loan losses in the third quarter of 2017. For the nine months ended September 30, 2018, the Company recorded a total negative provision for loan losses of $4.3 million (reduction of the allowance for loan losses) compared to a total provision for loan losses of $0.7 million in the same period of 2017. The Company’s provisions for loan losses have been favorably impacted by continued improvement in asset quality, including low charge-offs and declining levels of nonperforming assets.

Total net charge-offs for the third quarter of 2018 amounted to $2.8 million in comparison to net recoveries of $0.6 million in the third quarter of 2017. During the third quarter of 2018, the Company completed a loan sale of approximately $5.2 million in smaller balance nonperforming loans that resulted in charge-offs of $2.2 million.

For the first nine months of 2018, the Company experienced net loan recoveries of $1.5 million, including full payoffs received on four loans in the first quarter of 2018 that had been previously charged-down by approximately $3.3 million. The amounts received in excess of the prior charge-downs were recorded as interest income recoveries, and those four loans were primarily responsible for the $0.8 million in interest recoveries previously noted. For the comparable period of 2017, net loan recoveries amounted to $0.1 million.

The Company’s nonperforming assets to total assets ratio was 0.72% at September 30, 2018 compared to 1.16% at September 30, 2017. The ratio of annualized net charge-offs (recoveries) to average loans for the nine months ended September 30, 2018 was (0.05%), compared to 0.00% for the same period of 2017.

The Company continues to assess loans that may have been impacted by Hurricane Florence and Hurricane Michael. To date, the Company believes that any losses will not require a significant provision for loan losses.

Noninterest Income

Total noninterest income was $15.4 million and $12.4 million for the three months ended September 30, 2018 and September 30, 2017, respectively. For the nine months ended September 30, 2018, noninterest income amounted to $47.4 million compared to $34.0 million for the same period of 2017.

Core noninterest income for the third quarter of 2018 was $15.7 million, an increase of 22.3% from the $12.8 million reported for the third quarter of 2017. For the first nine months of 2018, core noninterest income amounted to $47.2 million, a 37.9% increase from the $34.2 million recorded in the comparable period of 2017. Core noninterest income includes i) service charges on deposit accounts, ii) other service charges, commissions, and fees, iii) fees from presold mortgage loans, iv) commissions from sales of insurance and financial products, v) SBA consulting fees, vi) SBA loan sale gains, and vii) bank-owned life insurance income.

The acquisitions of Carolina Bank and Asheville Savings Bank were significant contributors to the higher core noninterest income in 2018.

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Another significant contributor to the increases in core noninterest income was increased origination and sales of SBA loans. During the three and nine months ended September 30, 2018, the Company realized $2.4 million and $8.8 million in gains on SBA loan sales, respectively. In comparison, during the three and nine months ended September 30, 2017, the Company realized $1.7 million and $3.2 million in gains on SBA loan sales, respectively.

Fees from presold mortgages amounted to $0.6 million and $2.2 million for the three and nine month periods ended September 30, 2018, respectively, compared to $1.8 million and $4.1 million for the three and nine month periods ended September 30, 2017, respectively. The declines in 2018 were primarily due to the Company’s mortgage loan department originating a higher percentage of loans with construction components that are held in the Company’s loan portfolio and not sold, as well as employee turnover.

Commissions from sales of insurance and financial products amounted to $2.4 million in the third quarter of 2018, compared to $1.4 million in the third quarter of 2017. For the nine months ended September 30, 2018 and 2017, the Company recorded $6.5 million and $3.3 million, respectively, in commissions from sales of insurance and financial products. The increase was primarily due to the acquisition of an insurance agency during the third quarter of 2017.

Noninterest Expenses

Noninterest expenses amounted to $39.2 million in the third quarter of 2018 compared to $34.4 million recorded in the third quarter of 2017. Noninterest expenses for the nine months ended September 30, 2018 amounted to $121.7 million compared to $101.5 million in 2017. The increase in noninterest expenses in 2018 related primarily to the Company’s acquisitions of Carolina Bank and Asheville Savings Bank.

Also impacting expenses were other growth initiatives, including continued growth of the Company’s SBA consulting firm and SBA lending division, as well as the acquisition of an insurance agency during the third quarter of 2017.

Income Taxes

The Company’s effective tax rate for the third quarter of 2018 was 21.2% compared to 33.3% in the third quarter of 2017. For the nine months ended September 30, 2018 and 2017, the Company’s effective tax rates were 21.8% and 33.3%, respectively. The lower effective tax rate in 2018 was due to the Tax Cuts and Jobs Act, which was signed into law in December 2017 and reduced the federal corporate tax rate from 35% to 21%.

Balance Sheet and Capital

Total assets at September 30, 2018 amounted to $5.7 billion, a 24.4% increase from a year earlier. Total loans at September 30, 2018 amounted to $4.2 billion, a 22.2% increase from a year earlier, and total deposits amounted to $4.5 billion at September 30, 2018, a 24.0% increase from a year earlier. The significant increases were largely due to the acquisition of Asheville Savings Bank on October 1, 2017.

The Company experienced steady loan and deposit growth during the first nine months of 2018, all of which was organic. Loan growth for the nine months ended September 30, 2018 amounted to $148 million, or 4.9% annualized, and deposit growth amounted to $121.4 million, or 3.7% annualized during that same period. This growth was a result of ongoing internal initiatives to enhance loan and deposit growth, including the Company’s recent expansion into higher growth markets. As anticipated, a $41 million deposit received in the first quarter of 2018 was transferred outside the Company in the third quarter of 2018.

The Company remains well-capitalized by all regulatory standards, with an estimated Total Risk-Based Capital Ratio at September 30, 2018 of 13.48%, an increase from the 12.44% reported at September 30, 2017. The Company’s tangible common equity to tangible assets ratio was 8.95% at September 30, 2018, an increase of 100 basis points from a year earlier.

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Comments of the CEO and Other Business Matters

Richard H. Moore, CEO of First Bancorp, commented, “While our markets experienced a general business slowdown as a result of the hurricanes, we are pleased to have nevertheless achieved another strong quarter.”

The following is additional discussion of business development and other miscellaneous matters affecting the Company during the third quarter of 2018:

| · | On September 15, 2018, the Company announced a quarterly cash dividend of $0.10 per share payable on October 25, 2018 to shareholders of record on September 30, 2018. This dividend rate represents a 25% increase over the dividend rate declared in the third quarter of 2017.

* * *

First Bancorp is a bank holding company headquartered in Southern Pines, North Carolina, with total assets of approximately $5.7 billion. Its principal activity is the ownership and operation of First Bank, a state-chartered community bank that operates 102 branches in North Carolina and South Carolina. First Bank also operates two mortgage loan production offices in the central region of North Carolina. First Bank 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.

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First Bancorp and Subsidiaries Financial Summary – Page 1

|  | Three Months Ended September 30, |  |  | Percent |
($ in thousands except per share data – unaudited) |  | 2018 |  |  | 2017 |  |  | Change |
INCOME STATEMENT |  |  |  |  |  |  |  |  |  |  |  |
Interest income |  |  |  |  |  |  |  |  |  |  |  |
Interest and fees on loans |  | $ | 52,407 |  |  |  | 41,549 |  |  |  |  |
Interest on investment securities |  |  | 2,868 |  |  |  | 2,048 |  |  |  |  |
Other interest income |  |  | 2,944 |  |  |  | 1,414 |  |  |  |  |
Total interest income |  |  | 58,219 |  |  |  | 45,011 |  |  |  | 29.3% |
Interest expense |  |  |  |  |  |  |  |  |  |  |  |
Interest on deposits |  |  | 3,906 |  |  |  | 1,910 |  |  |  |  |
Interest on borrowings |  |  | 2,468 |  |  |  | 1,462 |  |  |  |  |
Total interest expense |  |  | 6,374 |  |  |  | 3,372 |  |  |  | 89.0% |
Net interest income |  |  | 51,845 |  |  |  | 41,639 |  |  |  | 24.5% |
Provision (reversal) for loan losses |  |  | 87 |  |  |  | — |  |  |  | n/m |
Net interest income after provision for loan losses |  |  | 51,758 |  |  |  | 41,639 |  |  |  | 24.3% |
Noninterest income |  |  |  |  |  |  |  |  |  |  |  |
Service charges on deposit accounts |  |  | 3,221 |  |  |  | 2,945 |  |  |  |  |
Other service charges, commissions, and fees |  |  | 5,146 |  |  |  | 3,468 |  |  |  |  |
Fees from presold mortgage loans |  |  | 576 |  |  |  | 1,842 |  |  |  |  |
Commissions from sales of insurance and financial products |  |  | 2,425 |  |  |  | 1,426 |  |  |  |  |
SBA consulting fees |  |  | 1,287 |  |  |  | 864 |  |  |  |  |
SBA loan sale gains |  |  | 2,373 |  |  |  | 1,692 |  |  |  |  |
Bank-owned life insurance income |  |  | 641 |  |  |  | 579 |  |  |  |  |
Foreclosed property gains (losses), net |  |  | (192 | ) |  |  | (216 | ) |  |  |  |
Securities gains (losses), net |  |  | — |  |  |  | — |  |  |  |  |
Other gains (losses), net |  |  | (101 | ) |  |  | (238 | ) |  |  |  |
Total noninterest income |  |  | 15,376 |  |  |  | 12,362 |  |  |  | 24.4% |
Noninterest expenses |  |  |  |  |  |  |  |  |  |  |  |
Salaries expense |  |  | 18,771 |  |  |  | 16,550 |  |  |  |  |
Employee benefit expense |  |  | 4,061 |  |  |  | 3,606 |  |  |  |  |
Occupancy and equipment related expense |  |  | 4,180 |  |  |  | 3,509 |  |  |  |  |
Merger and acquisition expenses |  |  | 167 |  |  |  | 1,329 |  |  |  |  |
Intangibles amortization expense |  |  | 1,656 |  |  |  | 902 |  |  |  |  |
Other operating expenses |  |  | 10,403 |  |  |  | 8,488 |  |  |  |  |
Total noninterest expenses |  |  | 39,238 |  |  |  | 34,384 |  |  |  | 14.1% |
Income before income taxes |  |  | 27,896 |  |  |  | 19,617 |  |  |  | 42.2% |
Income tax expense |  |  | 5,905 |  |  |  | 6,531 |  |  |  | (9.6% | )
Net income available to common shareholders |  | $ | 21,991 |  |  |  | 13,086 |  |  |  | 68.0% |
Earnings per common share – basic |  | $ | 0.74 |  |  |  | 0.53 |  |  |  | 39.6% |
Earnings per common share – diluted |  |  | 0.74 |  |  |  | 0.53 |  |  |  | 39.6% |
ADDITIONAL INCOME STATEMENT INFORMATION |  |  |  |  |  |  |  |  |  |  |  |
Net interest income, as reported |  | $ | 51,845 |  |  |  | 41,639 |  |  |  |  |
Tax-equivalent adjustment (1) |  |  | 428 |  |  |  | 702 |  |  |  |  |
Net interest income, tax-equivalent |  | $ | 52,273 |  |  |  | 42,341 |  |  |  | 23.5% |

(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 23% tax rate and is reduced by the related nondeductible portion of interest expense.

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First Bancorp and Subsidiaries Financial Summary – Page 2

|  | Nine Months Ended September 30, |  |  | Percent |
($ in thousands except per share data – unaudited) |  | 2018 |  |  | 2017 |  |  | Change |
INCOME STATEMENT |  |  |  |  |  |  |  |  |  |  |  |
Interest income |  |  |  |  |  |  |  |  |  |  |  |
Interest and fees on loans |  | $ | 154,028 |  |  |  | 114,908 |  |  |  |  |
Interest on investment securities |  |  | 8,667 |  |  |  | 6,183 |  |  |  |  |
Other interest income |  |  | 7,320 |  |  |  | 3,215 |  |  |  |  |
Total interest income |  |  | 170,015 |  |  |  | 124,306 |  |  |  | 36.8% |
Interest expense |  |  |  |  |  |  |  |  |  |  |  |
Interest on deposits |  |  | 9,812 |  |  |  | 5,044 |  |  |  |  |
Interest on borrowings |  |  | 6,619 |  |  |  | 3,411 |  |  |  |  |
Total interest expense |  |  | 16,431 |  |  |  | 8,455 |  |  |  | 94.3% |
Net interest income |  |  | 153,584 |  |  |  | 115,851 |  |  |  | 32.6% |
Total provision (reversal) for loan losses |  |  | (4,282 | ) |  |  | 723 |  |  |  | n/m |
Net interest income after provision for loan losses |  |  | 157,866 |  |  |  | 115,128 |  |  |  | 37.1% |
Noninterest income |  |  |  |  |  |  |  |  |  |  |  |
Service charges on deposit accounts |  |  | 9,606 |  |  |  | 8,525 |  |  |  |  |
Other service charges, commissions, and fees |  |  | 14,656 |  |  |  | 10,195 |  |  |  |  |
Fees from presold mortgage loans |  |  | 2,231 |  |  |  | 4,121 |  |  |  |  |
Commissions from sales of insurance and financial products |  |  | 6,484 |  |  |  | 3,304 |  |  |  |  |
SBA consulting fees |  |  | 3,554 |  |  |  | 3,174 |  |  |  |  |
SBA loan sale gains |  |  | 8,773 |  |  |  | 3,241 |  |  |  |  |
Bank-owned life insurance income |  |  | 1,892 |  |  |  | 1,667 |  |  |  |  |
Foreclosed property gains (losses), net |  |  | (579 | ) |  |  | (439 | ) |  |  |  |
Securities gains (losses), net |  |  | — |  |  |  | (235 | ) |  |  |  |
Other gains (losses), net |  |  | 811 |  |  |  | 493 |  |  |  |  |
Total noninterest income |  |  | 47,428 |  |  |  | 34,046 |  |  |  | 39.3% |
Noninterest expenses |  |  |  |  |  |  |  |  |  |  |  |
Salaries expense |  |  | 56,615 |  |  |  | 46,799 |  |  |  |  |
Employee benefit expense |  |  | 12,752 |  |  |  | 11,402 |  |  |  |  |
Occupancy and equipment related expense |  |  | 12,018 |  |  |  | 10,258 |  |  |  |  |
Merger and acquisition expenses |  |  | 3,568 |  |  |  | 4,824 |  |  |  |  |
Intangibles amortization expense |  |  | 5,073 |  |  |  | 2,509 |  |  |  |  |
Other operating expenses |  |  | 31,683 |  |  |  | 25,748 |  |  |  |  |
Total noninterest expenses |  |  | 121,709 |  |  |  | 101,540 |  |  |  | 19.9% |
Income before income taxes |  |  | 83,585 |  |  |  | 47,634 |  |  |  | 75.5% |
Income tax expense |  |  | 18,191 |  |  |  | 15,839 |  |  |  | 14.8% |
Net income available to common shareholders |  | $ | 65,394 |  |  |  | 31,795 |  |  |  | 105.7% |
Earnings per common share – basic |  | $ | 2.21 |  |  |  | 1.34 |  |  |  | 64.9% |
Earnings per common share – diluted |  |  | 2.21 |  |  |  | 1.33 |  |  |  | 66.2% |
ADDITIONAL INCOME STATEMENT INFORMATION |  |  |  |  |  |  |  |  |  |  |  |
Net interest income, as reported |  | $ | 153,584 |  |  |  | 115,851 |  |  |  |  |
Tax-equivalent adjustment (1) |  |  | 1,151 |  |  |  | 1,979 |  |  |  |  |
Net interest income, tax-equivalent |  | $ | 154,735 |  |  |  | 117,830 |  |  |  | 31.3% |

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

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First Bancorp and Subsidiaries Financial Summary – Page 3

|  | Three Months Ended September 30, |  |  | Nine Months Ended September 30, |
PERFORMANCE RATIOS (annualized) |  | 2018 |  |  | 2017 |  |  | 2018 |  |  | 2017 |
Return on average assets (1) |  |  | 1.53% |  |  |  | 1.15% |  |  |  | 1.55% |  |  |  | 1.00% |
Return on average common equity (2) |  |  | 11.83% |  |  |  | 9.98% |  |  |  | 12.16% |  |  |  | 8.90% |
Net interest margin – tax-equivalent (3) |  |  | 4.06% |  |  |  | 4.16% |  |  |  | 4.12% |  |  |  | 4.11% |
Net charge-offs (recoveries) to average loans |  |  | 0.27% |  |  |  | (0.07% | ) |  |  | (0.05% | ) |  |  | 0.00% |
COMMON SHARE DATA |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Cash dividends declared – common |  | $ | 0.10 |  |  |  | 0.08 |  |  |  | 0.30 |  |  |  | 0.24 |
Stated book value – common |  |  | 24.99 |  |  |  | 20.73 |  |  |  | 24.99 |  |  |  | 20.73 |
Tangible book value – common |  |  | 16.43 |  |  |  | 14.25 |  |  |  | 16.43 |  |  |  | 14.25 |
Common shares outstanding at end of period |  |  | 29,729,285 |  |  |  | 24,723,929 |  |  |  | 29,729,285 |  |  |  | 24,723,929 |
Weighted average shares outstanding – basic |  |  | 29,530,203 |  |  |  | 24,607,516 |  |  |  | 29,536,273 |  |  |  | 23,728,262 |
Weighted average shares outstanding – diluted |  |  | 29,621,130 |  |  |  | 24,695,295 |  |  |  | 29,639,126 |  |  |  | 23,827,011 |
CAPITAL RATIOS |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Tangible common equity to tangible assets |  |  | 8.95% |  |  |  | 7.95% |  |  |  | 8.95% |  |  |  | 7.95% |
Common equity tier I capital ratio - estimated |  |  | 11.79% |  |  |  | 10.30% |  |  |  | 11.79% |  |  |  | 10.30% |
Tier I leverage ratio - estimated |  |  | 10.36% |  |  |  | 9.72% |  |  |  | 10.36% |  |  |  | 9.72% |
Tier I risk-based capital ratio - estimated |  |  | 12.99% |  |  |  | 11.74% |  |  |  | 12.99% |  |  |  | 11.74% |
Total risk-based capital ratio - estimated |  |  | 13.48% |  |  |  | 12.44% |  |  |  | 13.48% |  |  |  | 12.44% |
AVERAGE BALANCES ($ in thousands) |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Total assets |  | $ | 5,712,940 |  |  |  | 4,514,409 |  |  |  | 5,644,692 |  |  |  | 4,269,533 |
Loans |  |  | 4,191,751 |  |  |  | 3,404,862 |  |  |  | 4,141,645 |  |  |  | 3,211,844 |
Earning assets |  |  | 5,105,981 |  |  |  | 4,040,257 |  |  |  | 5,022,171 |  |  |  | 3,836,125 |
Deposits |  |  | 4,526,012 |  |  |  | 3,632,319 |  |  |  | 4,480,792 |  |  |  | 3,465,347 |
Interest-bearing liabilities |  |  | 3,654,176 |  |  |  | 2,958,134 |  |  |  | 3,651,744 |  |  |  | 2,827,764 |
Shareholders’ equity |  |  | 737,560 |  |  |  | 520,432 |  |  |  | 718,982 |  |  |  | 477,754 |

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

TREND INFORMATION

($ in thousands except per share data) |  | For the Three Months Ended |
INCOME STATEMENT |  | Sept. 30, 2018 |  |  | June 30, 2018 |  |  | Mar. 31, 2018 |  |  | Dec. 31, 2017 |  |  | Sept. 30, 2017 |
Net interest income – tax-equivalent (1) |  | $ | 52,273 |  |  |  | 51,599 |  |  |  | 50,863 |  |  |  | 49,470 |  |  |  | 42,341 |
Taxable equivalent adjustment (1) |  |  | 428 |  |  |  | 367 |  |  |  | 356 |  |  |  | 610 |  |  |  | 702 |
Net interest income |  |  | 51,845 |  |  |  | 51,232 |  |  |  | 50,507 |  |  |  | 48,860 |  |  |  | 41,639 |
Provision (reversal) for loan losses |  |  | 87 |  |  |  | (710 | ) |  |  | (3,659 | ) |  |  | — |  |  |  | — |
Noninterest income |  |  | 15,376 |  |  |  | 16,111 |  |  |  | 15,941 |  |  |  | 14,862 |  |  |  | 12,362 |
Noninterest expense |  |  | 39,238 |  |  |  | 38,873 |  |  |  | 43,598 |  |  |  | 43,617 |  |  |  | 34,384 |
Income before income taxes |  |  | 27,896 |  |  |  | 29,180 |  |  |  | 26,509 |  |  |  | 20,105 |  |  |  | 19,617 |
Income tax expense |  |  | 5,905 |  |  |  | 6,450 |  |  |  | 5,836 |  |  |  | 5,928 |  |  |  | 6,531 |
Net income |  |  | 21,991 |  |  |  | 22,730 |  |  |  | 20,673 |  |  |  | 14,177 |  |  |  | 13,086 |
Earnings per common share – basic |  |  | 0.74 |  |  |  | 0.77 |  |  |  | 0.70 |  |  |  | 0.48 |  |  |  | 0.53 |
Earnings per common share – diluted |  |  | 0.74 |  |  |  | 0.77 |  |  |  | 0.70 |  |  |  | 0.48 |  |  |  | 0.53 |

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

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First Bancorp and Subsidiaries Financial Summary – Page 4

CONSOLIDATED BALANCE SHEETS ($ in thousands - unaudited) |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
|  | At Sept. 30, 2018 |  |  | At June 30, 2018 |  |  | At Dec. 31, 2017 |  |  | At Sept. 30, 2017 |  |  | One Year Change |
Assets |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Cash and due from banks |  | $ | 50,209 |  |  |  | 97,163 |  |  |  | 114,301 |  |  |  | 82,758 |  |  |  | (39.3% | )
Interest bearing deposits with banks |  |  | 460,520 |  |  |  | 462,972 |  |  |  | 375,189 |  |  |  | 326,089 |  |  |  | 41.2% |
Total cash and cash equivalents |  |  | 510,729 |  |  |  | 560,135 |  |  |  | 489,490 |  |  |  | 408,847 |  |  |  | 24.9% |
Investment securities |  |  | 457,887 |  |  |  | 442,333 |  |  |  | 461,773 |  |  |  | 322,080 |  |  |  | 42.2% |
Presold mortgages |  |  | 6,111 |  |  |  | 9,311 |  |  |  | 12,459 |  |  |  | 17,426 |  |  |  | (64.9% | )
Total loans |  |  | 4,190,628 |  |  |  | 4,149,390 |  |  |  | 4,042,369 |  |  |  | 3,429,755 |  |  |  | 22.2% |
Allowance for loan losses |  |  | (20,546 | ) |  |  | (23,298 | ) |  |  | (23,298 | ) |  |  | (24,593 | ) |  |  | (16.5% | )
Net loans |  |  | 4,170,082 |  |  |  | 4,126,092 |  |  |  | 4,019,071 |  |  |  | 3,405,162 |  |  |  | 22.5% |
Premises and equipment |  |  | 116,618 |  |  |  | 113,774 |  |  |  | 116,233 |  |  |  | 95,762 |  |  |  | 21.8% |
Intangible assets |  |  | 254,737 |  |  |  | 255,610 |  |  |  | 257,507 |  |  |  | 160,301 |  |  |  | 58.9% |
Foreclosed real estate |  |  | 6,140 |  |  |  | 8,296 |  |  |  | 12,571 |  |  |  | 9,356 |  |  |  | (34.4% | )
Bank-owned life insurance |  |  | 101,055 |  |  |  | 100,413 |  |  |  | 99,162 |  |  |  | 88,081 |  |  |  | 14.7% |
Other assets |  |  | 88,271 |  |  |  | 101,636 |  |  |  | 78,771 |  |  |  | 84,132 |  |  |  | 4.9% |
Total assets |  | $ | 5,711,630 |  |  |  | 5,717,600 |  |  |  | 5,547,037 |  |  |  | 4,591,147 |  |  |  | 24.4% |
Liabilities |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Deposits: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Noninterest bearing checking accounts |  | $ | 1,280,408 |  |  |  | 1,252,214 |  |  |  | 1,196,161 |  |  |  | 1,016,947 |  |  |  | 25.9% |
Interest bearing checking accounts |  |  | 870,487 |  |  |  | 915,666 |  |  |  | 884,254 |  |  |  | 683,113 |  |  |  | 27.4% |
Money market accounts |  |  | 1,007,177 |  |  |  | 1,021,659 |  |  |  | 982,822 |  |  |  | 793,919 |  |  |  | 26.9% |
Savings accounts |  |  | 432,335 |  |  |  | 440,475 |  |  |  | 454,860 |  |  |  | 396,192 |  |  |  | 9.1% |
Brokered deposits |  |  | 255,415 |  |  |  | 238,098 |  |  |  | 239,659 |  |  |  | 215,615 |  |  |  | 18.5% |
Internet time deposits |  |  | 3,924 |  |  |  | 6,999 |  |  |  | 7,995 |  |  |  | 7,995 |  |  |  | (50.9% | )
Other time deposits > $100,000 |  |  | 409,742 |  |  |  | 402,109 |  |  |  | 347,862 |  |  |  | 296,006 |  |  |  | 38.4% |
Other time deposits |  |  | 268,885 |  |  |  | 276,401 |  |  |  | 293,342 |  |  |  | 241,454 |  |  |  | 11.4% |
Total deposits |  |  | 4,528,373 |  |  |  | 4,553,621 |  |  |  | 4,406,955 |  |  |  | 3,651,241 |  |  |  | 24.0% |
Borrowings |  |  | 406,593 |  |  |  | 407,076 |  |  |  | 407,543 |  |  |  | 397,525 |  |  |  | 2.3% |
Other liabilities |  |  | 33,588 |  |  |  | 32,181 |  |  |  | 39,560 |  |  |  | 29,880 |  |  |  | 12.4% |
Total liabilities |  |  | 4,968,554 |  |  |  | 4,992,878 |  |  |  | 4,854,058 |  |  |  | 4,078,646 |  |  |  | 21.8% |
Shareholders’ equity |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Common stock |  |  | 434,227 |  |  |  | 434,117 |  |  |  | 432,794 |  |  |  | 263,493 |  |  |  | 64.8% |
Retained earnings |  |  | 320,822 |  |  |  | 301,800 |  |  |  | 264,331 |  |  |  | 251,790 |  |  |  | 27.4% |
Stock in rabbi trust assumed in acquisition |  |  | (3,224 | ) |  |  | (3,214 | ) |  |  | (3,581 | ) |  |  | (3,571 | ) |  |  | 9.7% |
Rabbi trust obligation |  |  | 3,224 |  |  |  | 3,214 |  |  |  | 3,581 |  |  |  | 3,571 |  |  |  | (9.7% | )
Accumulated other comprehensive loss |  |  | (11,973 | ) |  |  | (11,195 | ) |  |  | (4,146 | ) |  |  | (2,782 | ) |  |  | (330.4% | )
Total shareholders’ equity |  |  | 743,076 |  |  |  | 724,722 |  |  |  | 692,979 |  |  |  | 512,501 |  |  |  | 45.0% |
Total liabilities and shareholders’ equity |  | $ | 5,711,630 |  |  |  | 5,717,600 |  |  |  | 5,547,037 |  |  |  | 4,591,147 |  |  |  | 24.4% |

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First Bancorp and Subsidiaries Financial Summary - Page 5

|  | For the Three Months Ended |
YIELD INFORMATION |  | Sept. 30, 2018 |  |  | June 30, 2018 |  |  | Mar. 31, 2018 |  |  | Dec. 31, 2017 |  |  | Sept. 30, 2017 |
Yield on loans |  |  | 4.96% |  |  |  | 4.99% |  |  |  | 4.96% |  |  |  | 4.79% |  |  |  | 4.84% |
Yield on securities |  |  | 2.52% |  |  |  | 2.47% |  |  |  | 2.60% |  |  |  | 2.43% |  |  |  | 2.46% |
Yield on other earning assets |  |  | 2.52% |  |  |  | 2.19% |  |  |  | 2.20% |  |  |  | 1.55% |  |  |  | 1.84% |
Yield on all interest earning assets |  |  | 4.52% |  |  |  | 4.51% |  |  |  | 4.54% |  |  |  | 4.30% |  |  |  | 4.42% |
Rate on interest bearing deposits |  |  | 0.48% |  |  |  | 0.40% |  |  |  | 0.34% |  |  |  | 0.31% |  |  |  | 0.29% |
Rate on other interest bearing liabilities |  |  | 2.41% |  |  |  | 2.24% |  |  |  | 1.87% |  |  |  | 1.62% |  |  |  | 1.75% |
Rate on all interest bearing liabilities |  |  | 0.69% |  |  |  | 0.60% |  |  |  | 0.51% |  |  |  | 0.46% |  |  |  | 0.45% |
Total cost of funds |  |  | 0.51% |  |  |  | 0.45% |  |  |  | 0.38% |  |  |  | 0.35% |  |  |  | 0.34% |
Net interest margin (1) |  |  | 4.03% |  |  |  | 4.07% |  |  |  | 4.17% |  |  |  | 3.96% |  |  |  | 4.09% |
Net interest margin – tax-equivalent (2) |  |  | 4.06% |  |  |  | 4.10% |  |  |  | 4.19% |  |  |  | 4.01% |  |  |  | 4.16% |
Average prime rate |  |  | 5.01% |  |  |  | 4.80% |  |  |  | 4.53% |  |  |  | 4.30% |  |  |  | 4.25% |

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

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

|  | For the Three Months Ended |
NET INTEREST INCOME PURCHASE ACCOUNTING ADJUSTMENTS ($ in thousands) |  | Sept. 30, 2018 |  |  | June 30, 2018 |  |  | Mar. 31, 2018 |  |  | Dec. 31, 2017 |  |  | Sept. 30, 2017 |
Interest income – increased by accretion of loan discount |  | $ | 1,575 |  |  |  | 2,296 |  |  |  | 2,111 |  |  |  | 2,003 |  |  |  | 1,745 |
Interest expense – reduced by premium amortization of deposits |  |  | 84 |  |  |  | 101 |  |  |  | 116 |  |  |  | 140 |  |  |  | 85 |
Interest expense – increased by discount accretion of borrowings |  |  | (46 | ) |  |  | (45 | ) |  |  | (45 | ) |  |  | (46 | ) |  |  | (43 | )
Impact on net interest income |  | $ | 1,613 |  |  |  | 2,352 |  |  |  | 2,182 |  |  |  | 2,097 |  |  |  | 1,787 |

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First Bancorp and Subsidiaries Financial Summary – Page 6

ASSET QUALITY DATA ($ in thousands) |  | Sept. 30, 2018 |  |  | June 30, 2018 |  |  | Mar. 31, 2018 |  |  | Dec. 31, 2017 |  |  | Sept. 30, 2017 |
Nonperforming assets |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Nonaccrual loans |  | $ | 18,231 |  |  |  | 25,494 |  |  |  | 21,849 |  |  |  | 20,968 |  |  |  | 23,350 |
Troubled debt restructurings - accruing |  |  | 16,657 |  |  |  | 17,386 |  |  |  | 18,495 |  |  |  | 19,834 |  |  |  | 20,330 |
Accruing loans > 90 days past due |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |
Total nonperforming loans |  |  | 34,888 |  |  |  | 42,880 |  |  |  | 40,344 |  |  |  | 40,802 |  |  |  | 43,680 |
Foreclosed real estate |  |  | 6,140 |  |  |  | 8,296 |  |  |  | 11,307 |  |  |  | 12,571 |  |  |  | 9,356 |
Total nonperforming assets |  | $ | 41,028 |  |  |  | 51,176 |  |  |  | 51,651 |  |  |  | 53,373 |  |  |  | 53,036 |
Purchased credit impaired loans not included above (1) |  | $ | 20,189 |  |  |  | 20,832 |  |  |  | 22,147 |  |  |  | 23,165 |  |  |  | 15,034 |
Asset Quality Ratios |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Net quarterly charge-offs (recoveries) to average loans - annualized |  |  | 0.27% |  |  |  | (0.07% | ) |  |  | (0.36% | ) |  |  | 0.13% |  |  |  | (0.07% | )
Nonperforming loans to total loans |  |  | 0.83% |  |  |  | 1.03% |  |  |  | 0.98% |  |  |  | 1.01% |  |  |  | 1.27% |
Nonperforming assets to total assets |  |  | 0.72% |  |  |  | 0.90% |  |  |  | 0.92% |  |  |  | 0.96% |  |  |  | 1.16% |
Allowance for loan losses to total loans |  |  | 0.49% |  |  |  | 0.56% |  |  |  | 0.57% |  |  |  | 0.58% |  |  |  | 0.72% |
Allowance for loan losses + unaccreted discount to total loans |  |  | 1.07% |  |  |  | 1.16% |  |  |  | 1.20% |  |  |  | 1.24% |  |  |  | 1.21% |

| (1) | 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 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.

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First Bancorp and Subsidiaries Financial Summary - Page 7

|  | For the Three Months Ended |
NET INTEREST MARGIN, EXCLUDING LOAN DISCOUNT ACCRETION – RECONCILIATION ($ in thousands) |  | Sept. 30, 2018 |  |  | June 30, 2018 |  |  | Mar. 31, 2018 |  |  | Dec. 31, 2017 |  |  | Sept. 30, 2017 |
Net interest income, as reported |  | $ | 51,845 |  |  |  | 51,232 |  |  |  | 50,507 |  |  |  | 48,860 |  |  |  | 41,639 |
Tax-equivalent adjustment |  |  | 428 |  |  |  | 367 |  |  |  | 356 |  |  |  | 610 |  |  |  | 702 |
Net interest income, tax-equivalent (A) |  | $ | 52,273 |  |  |  | 51,599 |  |  |  | 50,863 |  |  |  | 49,470 |  |  |  | 42,341 |
Average earning assets (B) |  | $ | 5,105,981 |  |  |  | 5,042,904 |  |  |  | 4,917,628 |  |  |  | 4,899,421 |  |  |  | 4,040,257 |
Tax-equivalent net interest margin, annualized – as reported – (A)/(B) |  |  | 4.06% |  |  |  | 4.10% |  |  |  | 4.19% |  |  |  | 4.01% |  |  |  | 4.16% |
Net interest income, tax-equivalent |  | $ | 52,273 |  |  |  | 51,599 |  |  |  | 50,863 |  |  |  | 49,470 |  |  |  | 42,341 |
Loan discount accretion |  |  | 1,575 |  |  |  | 2,296 |  |  |  | 2,111 |  |  |  | 2,003 |  |  |  | 1,745 |
Net interest income, tax-equivalent, excluding loan discount accretion (A) |  | $ | 50,698 |  |  |  | 49,303 |  |  |  | 48,752 |  |  |  | 47,467 |  |  |  | 40,596 |
Average earnings assets (B) |  | $ | 5,105,981 |  |  |  | 5,042,904 |  |  |  | 4,917,628 |  |  |  | 4,899,421 |  |  |  | 4,040,257 |
Tax-equivalent net interest margin, excluding impact of loan discount accretion, annualized – (A) / (B) |  |  | 3.94% |  |  |  | 3.92% |  |  |  | 4.02% |  |  |  | 3.84% |  |  |  | 3.99% |

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 primarily related to the Company’s acquisition of loans and represents the portion of the fair value discount that was initially recorded on the acquired loans that is being recognized into income over the lives of the loans. At September 30, 2018, the Company had a remaining loan discount balance of $24.3 million compared to $16.9 million at September 30, 2017. 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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