Introduction
First Bancorp (FBNC) is a bank holding company headquartered in Southern Pines, North Carolina, with a rich history spanning over a century. Founded in 1934, the company has grown from a small community bank to a regional powerhouse, serving customers across North and South Carolina through its subsidiary, First Bank. Despite facing various challenges over the years, including the recent impact of Hurricane Helene, First Bancorp has demonstrated its resilience and commitment to serving its local communities.
Historical Background
First Bancorp's journey began with the establishment of First Bank in 1935, just a year after the parent company's founding. Over the decades, the company has shown remarkable growth and adaptability. In the 1950s and 1960s, First Bank embarked on a significant expansion, extending its branch network across central North Carolina. This period of growth laid the foundation for the company's strong regional presence.
The 1970s and 1980s brought economic challenges, including the savings and loan crisis. However, First Bancorp weathered these storms by maintaining a conservative lending approach and solid capital position. This prudent strategy enabled the company to emerge stronger and continue its growth trajectory.
The 1990s and 2000s marked a period of strategic expansion for First Bancorp. The company pursued a targeted acquisition strategy, focusing on high-growth regions in North and South Carolina. Notable acquisitions during this time included Bankstock, Inc. in 1998, which further solidified the company's market position. More recently, in 2023, First Bancorp completed the acquisition of GrandSouth Bancorporation, significantly expanding its footprint and diversifying its loan portfolio.
Operational Challenges and Achievements
Throughout its history, First Bancorp has faced and overcome various operational challenges. The company successfully navigated the 2008 financial crisis, demonstrating its resilience in the face of severe economic downturns. Additionally, First Bancorp has had to address the impact of natural disasters on its markets, showcasing its ability to adapt and support its communities in times of need. In 2020, the company achieved a significant milestone with the successful integration of the GrandSouth Bancorporation acquisition, further expanding its presence in the Carolinas.
Financials
In the latest quarter, First Bancorp reported net income of $72.70 million, or $1.76 per diluted share, compared to $74.50 million, or $1.81 per diluted share, in the same period of the prior year. The decrease in net income was primarily driven by a higher provision for credit losses, which included a $13.00 million provision related to the potential impact of Hurricane Helene. Adjusting for this one-time charge, the company's adjusted net income for the nine months ended September 30, 2024, was $83.00 million, or $2.01 per diluted share.
Net interest income for the nine-month period declined 7.90% to $243.40 million, compared to $264.20 million in the prior-year period. This decrease was primarily due to higher cost of funds, partially offset by increased yields on interest-earning assets. The company's net interest margin on a tax-equivalent basis decreased to 2.86% for the nine months ended September 30, 2024, from 3.12% in the same period of the prior year.
Noninterest income for the nine-month period totaled $41.10 million, a decrease of 4.40% from the comparable period of 2023. This decline was largely attributable to decreased Other income, net, and increased securities losses, partially offset by higher SBA loan sale gains.
Noninterest expense decreased 10.40% to $177.30 million for the nine months ended September 30, 2024, compared to the prior-year period. This was primarily driven by a $13.50 million decrease in merger expenses and a $4.70 million decrease in other operating expenses.
For the fiscal year 2023, First Bancorp reported revenue of $404.30 million, net income of $104.13 million, operating cash flow of $131.40 million, and free cash flow of $126.97 million. In the most recent quarter (Q3 2024), the company's revenue was $131.409 million, representing a 6.1% increase compared to Q3 2023. However, net income decreased by 37.6% to $18.68 million, primarily due to a $14.2 million increase in provision for credit losses, of which $13 million was related to the anticipated impact from Hurricane Helene. Operating cash flow decreased by 31.9% to $44.268 million, while free cash flow increased by 45.8% to $47.454 million.
Liquidity and Capital Position
As of September 30, 2024, First Bancorp's total assets amounted to $12.20 billion, a 0.30% increase from December 31, 2023. Total loans decreased by 1.70% to $8.00 billion, while total deposits increased by 4.72% to $10.50 billion. The company's credit quality remained strong, with nonperforming assets at 0.38% of total assets as of September 30, 2024, up slightly from 0.37% at the end of 2023.
First Bancorp's capital position also remained robust, with a total common equity Tier 1 ratio of 14.37%, a Tier 1 risk-based capital ratio of 15.19%, and a total risk-based capital ratio of 16.65% as of September 30, 2024. These ratios exceeded the regulatory minimum requirements, demonstrating the company's strong financial footing.
The company's liquidity position remains solid, with cash and cash equivalents of $744.44 million as of September 30, 2024. First Bancorp has access to several credit lines, including a $1.3 billion borrowing capacity with the Federal Home Loan Bank (FHLB), of which only $814,000 was outstanding. Additionally, the company has $265 million in federal funds lines with correspondent banks and a $799.6 million line of credit with the Federal Reserve, both of which were fully available.
First Bancorp's debt-to-equity ratio stood at 0.06205918681578992 as of September 30, 2024, indicating a conservative approach to leverage. The company's current ratio and quick ratio were both 0.10074331571852373, reflecting its ability to meet short-term obligations.
Business Overview and Market Position
First Bancorp operates primarily as a traditional community bank, focusing on providing banking products and services such as loans, deposits, and other financial services to its customers in North and South Carolina. The company's loan portfolio, totaling $8.01 billion as of September 30, 2024, is diversified across commercial and industrial, commercial real estate, residential real estate, and consumer loans. Commercial and industrial loans represent the largest category at 11% of total loans.
The company's deposit base, which grew to $10.50 billion as of September 30, 2024, is composed primarily of noninterest-bearing checking accounts (32%), interest-bearing checking accounts (13%), money market accounts (40%), and time deposits (10%). This diverse deposit mix provides a stable funding source for the bank's operations.
First Bancorp's primary source of revenue is net interest income, which is the difference between interest earned on interest-earning assets and interest paid on interest-bearing liabilities. For the three months ended September 30, 2024, the company reported net interest income of $83.0 million, a 2.0% decrease from the same period in 2023, primarily due to higher cost of funds, partially offset by higher yields on earning assets.
The company's operations are concentrated in North Carolina and South Carolina, with the majority of its business activities and customer base located within these markets. First Bancorp does not break out performance metrics by specific geographic regions within these states.
Conclusion
The company's performance during the first nine months of 2024 highlights its ability to navigate challenging market conditions, including the impact of Hurricane Helene. First Bancorp's focus on serving its local communities, maintaining a strong balance sheet, and prudent risk management has enabled it to weather the storm and continue delivering value to its shareholders.
Looking ahead, First Bancorp remains well-positioned to capitalize on growth opportunities in its markets. The company's diversified business model, disciplined approach to credit risk, and commitment to operational excellence position it to navigate the evolving banking landscape and continue its legacy of serving the needs of its customers and communities.