SOUTHERN PINES, N.C., April 24, 2024 /PRNewswire/ -- First Bancorp (the "Company") (NASDAQ:FBNC), the parent company of First Bank, announced today net income of $25.3 million, or $0.61 per diluted common share, for the three months ended March 31, 2024 compared to $29.7 million, or $0.72 per diluted common share, for the three months ended December 31, 2023 ("linked quarter") and $15.2 million, or $0.37 per diluted common share, recorded in the first quarter of 2023. Richard H. Moore, CEO and Chairman of the Company, stated, "Your company continues to perform well with increases in our liquidity and capital.  We believe that our balance sheet composition will continue to improve during the year as we work towards reducing borrowings and high-cost deposits while deploying funds to higher yielding assets.  Our credit quality is strong with low levels of nonperforming assets and we have no significant exposure to office or hospitality commercial real estate." First Quarter 2024 Highlights Loans totaled $8.1 billion at March 31, 2024, reflecting a $73.6 million contraction for the quarter, while year-over-year, loans grew $277.5 million. Noninterest-bearing demand accounts were 33% of total deposits at March 31, 2024, which is consistent with historical trends. Total deposits increased $271.7 million during the first quarter of 2024 consisting of market deposit growth of $88.3 million and new short-term brokered deposits totaling $183.5 million. Total loan yield increased to 5.45%, up 23 basis points from the first quarter of 2023, with accretion on purchased loans contributing 15 basis points to loan yield. While deposit and borrowing rates increased during the quarter, total cost of funds remained low at 1.79% for the quarter ended March 31, 2024. The on-balance sheet liquidity ratio was 15.5% at March 31, 2024, up from 14.6% for the linked quarter. Available off-balance sheet sources totaled $2.3 billion at March 31, 2024, resulting in a total liquidity ratio of 31.4%. Credit quality continued to be strong with a nonperforming assets ("NPA") to total assets ratio of 0.39% as of March 31, 2024. Capital remained strong with a total common equity tier 1 ratio of 13.50% (estimated) and a total risk-based capital ratio of 15.85% (estimated) as of March 31, 2024, both increasing from the linked quarter. Net Interest Income and Net Interest Margin Net interest income for the first quarter of 2024 was $79.2 million compared to $92.5 million recorded in the first quarter of 2023, a decrease of 14.3%.  Net interest income for the first quarter of 2024 decreased 3.9% from the $82.5 million reported for the linked quarter.  The declines in net interest income were driven by increases in cost of funds each period which more than offset the increases in earning assets.  The Company's tax-equivalent net interest margin ("NIM") (calculated by dividing tax-equivalent net interest income by average earning assets) declined year-over-year with the first quarter of 2024 reporting a tax-equivalent NIM of 2.80% compared to 3.31% for the first quarter of 2023.  Increases in rates on liabilities driven by current market rates and competition occurred at a more rapid pace than the increase in yields on assets, which resulted in the reduction in net interest income and NIM as compared to the prior periods. While loan yields rose from 5.22% for the first quarter of 2023 to 5.45% for the first quarter of 2024, the total cost of funds increased from 0.94% for the first quarter of 2023 to 1.79% for the quarter ended March 31, 2024.  For the Three Months Ended YIELD INFORMATION March 31, 2024 December 31, 2023 March 31, 2023 Yield on loans 5.45 % 5.39 % 5.22 % Yield on securities 1.79 % 1.76 % 1.78 % Yield on other earning assets 4.30 % 4.49 % 3.47 %    Yield on total interest-earning assets 4.43 % 4.38 % 4.16 % Rate on interest-bearing deposits 2.33 % 2.14 % 1.19 % Rate on other interest-bearing liabilities 5.71 % 6.02 % 5.34 %    Rate on total interest-bearing liabilities 2.59 % 2.43 % 1.46 %      Total cost of funds 1.79 % 1.64 % 0.94 %         Net interest margin (1) 2.77 % 2.85 % 3.28 %         Net interest margin - tax-equivalent (2) 2.80 % 2.88 % 3.31 %         Average prime rate 8.50 % 8.50 % 7.69 % (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. The tax-equivalent 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. Included in interest income for the first quarter of 2024 was total loan discount accretion of $2.9 million compared to $3.6 million for the first quarter of 2023, with the decrease primarily related to the continued amortization of the loan portfolio acquired from GrandSouth Bancorporation ("GrandSouth").  Loan discount accretion had an 10 basis points positive impact on the Company's NIM in the first quarter of 2024 compared to accretion contributing 13 basis points to NIM for the prior year first quarter.  The following table presents the impact to net interest income of the purchase accounting adjustments for each period. For the Three Months Ended NET INTEREST INCOME PURCHASE ACCOUNTING ADJUSTMENTS ($ in thousands) March 31, 2024 December 31, 2023 March 31, 2023 Interest income - increased by accretion of loan discount on acquired loans $               2,437 2,464 3,118 Interest income - increased by accretion of loan discount on retained portions   of SBA loans 444 459 448 Total interest income impact 2,881 2,923 3,566 Interest expense - increased by discount accretion on deposits (283) (495) (1,019) Interest expense - increased by discount accretion on borrowings (189) (207) (82) Total net interest expense impact (472) (702) (1,101)      Total impact on net interest income $               2,409 2,221 2,465 Provision for Credit Losses and Credit Quality For the three months ended March 31, 2024 and March 31, 2023, the Company recorded $1.2 million and $12.5 million in provision for credit losses, respectively.  The provision for the first quarter of 2023 was directly related to the initial provision for non-credit deteriorated loans and unfunded loan commitments acquired from GrandSouth.  The provision for the first quarter of 2024 was determined based on updated economic forecasts, which are a key assumption in the CECL model and which indicated a continued deterioration of the commercial real estate index, thus projecting a higher allowance for credit losses balance, partially offset by reductions in loan balances and the lower level of unfunded commitments.  Asset quality remained strong with annualized net loan charge-offs of 0.08% for the first quarter of 2024.  Total NPAs remained at a low level at $47.5 million at March 31, 2024, or 0.39% of total assets.  This is compared to $31.1 million, or 0.25% of total assets, at March 31, 2023 with the increase year-over-year being attributable primarily to activity from acquired loan portfolios and the SBA loan portfolio.  The increase in nonaccrual loans from the linked quarter was primarily related to several SBA loans, all of which carry a guarantee from the SBA for a majority of the balance. The following table presents the summary of NPAs and asset quality ratios for each period. ASSET QUALITY DATA ($ in thousands) March 31, 2024 December 31, 2023 March 31, 2023 Nonperforming assets Nonaccrual loans $          35,622 32,208 28,059 Modifications to borrowers in financial distress 10,999 11,719 2,224 Total nonperforming loans 46,621 43,927 30,283 Foreclosed real estate 926 862 789 Total nonperforming assets $          47,547 44,789 31,072 Asset Quality Ratios Quarterly net charge-offs to average loans - annualized 0.08 % 0.09 % 0.09 % Nonperforming loans to total loans 0.58 % 0.54 % 0.39 % Nonperforming assets to total assets 0.39 % 0.37 % 0.25 % Allowance for credit losses to total loans 1.36 % 1.35 % 1.36 % Noninterest Income Total noninterest income for the first quarter of 2024 was $12.9 million, a 4.4% decrease from the $13.5 million recorded for the first quarter of 2023 and an 11.0% decrease from the linked quarter.  The lower noninterest income in the current quarter was primarily driven by a $1.0 million loss on the call of a bond with an unamortized premium balance.  In addition, Other gains net, decreased $0.8 million from the linked quarter due to gains recorded on the disposal of property recorded in the fourth quarter of 2023.   Noninterest Expenses Noninterest expenses amounted to $59.2 million for the first quarter of 2024 compared to $56.4 million for the linked quarter and $74.2 million for the first quarter of 2023.  The $2.8 million, or 5.0%, increase in noninterest expense from the linked quarter was driven by year end adjustments to the Company's pension plan recorded in the fourth quarter of 2023 which resulted in reducing expense in the linked quarter approximately $2.2 million during the period.  In addition, bonus accrual reductions were recorded in the fourth quarter of 2023 lowering the total salary expense for the linked quarter.  The primary contributors to the higher noninterest expense in the first quarter of 2023 were merger and acquisition costs of $12.2 million related to the GrandSouth acquisition as well as overlapping expenses which were eliminated upon core processing system conversion in mid-March 2023. Balance Sheet Total assets at March 31, 2024 amounted to $12.1 billion, a decrease of $23.3 million, or 0.2%, from the linked quarter and a contraction of $271.6 million, or 2.2%, from a year earlier.  The decrease from the linked quarter was primarily related to intentional reductions in investment securities and loan balances, partially offset by higher interest-bearing cash balances. Quarterly average balances for key balance sheet accounts are presented below. For the Three Months Ended AVERAGE BALANCES ($ in thousands) March 31, 2024 December 31, 2023 March 31, 2023 Change 1Q24 vs 1Q23 Total assets $      12,111,201 12,026,195 12,042,298 0.6 % Investment securities, at amortized cost 3,108,464 3,143,756 3,321,240 (6.4) % Loans 8,103,387 8,087,450 7,728,424 4.9 % Earning assets 11,489,796 11,477,007 11,428,789 0.5 % Deposits 10,078,835 10,131,094 10,216,908 (1.4) % Interest-bearing liabilities 7,343,934 7,204,165 6,866,646 7.0 % Shareholders' equity 1,375,490 1,280,812 1,273,435 8.0 % Total investment securities were $2.6 billion at March 31, 2024, a decrease of $108.9 million from the linked quarter and a reduction of $216.0 million from March 31, 2023.  The Company made no purchases of investment securities during the first quarter of 2024 and continues to utilize cash flows from amortizing investments to fund loan growth and fluctuations in deposits.  Total unrealized loss on available for sale investment securities was $418.9 million at March 31, 2024.  Total loans amounted to $8.1 billion at March 31, 2024, a decrease of $73.6 million from the linked quarter and an increase of $277.5 million, or 3.6%, from March 31, 2023.  As presented below, our total loan portfolio mix has remained consistent.  As of March 31, 2024, there were no notable concentrations in geographies 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 5.7% of the total portfolio at March 31, 2024, with the largest loan being $27.0 million and an average loan outstanding amount of $1.3 million.  Non-owner occupied office loans are generally in non-metro markets and the 10 largest loans in this category represent less than 2% of the total loan portfolio. The following table presents the balance and portfolio percentage by loan category for each period. March 31, 2024 December 31, 2023 March 31, 2023 ($ in thousands) Amount Percentage Amount Percentage Amount Percentage Commercial and industrial $      872,623 11 % 905,862 11 % 885,032 11 % Construction, development & other land    loans 904,216 11 % 992,980 12 % 1,092,026 14 % Commercial real estate - owner occupied 1,238,759 15 % 1,259,022 16 % 1,200,744 16 % Commercial real estate - non-owner    occupied 2,524,221 31 % 2,528,060 31 % 2,429,941 31 % Multi-family real estate 457,142 6 % 421,376 5 % 395,573 5 % Residential 1-4 family real estate 1,684,173 21 % 1,639,469 20 % 1,386,580 18 % Home equity loans/lines of credit 328,466 4 % 335,068 4 %