First Bancorp Reports Third Quarter Results

SOUTHERN PINES, N.C., Oct. 25, 2023

On January 1, 2023, the Company completed its acquisition of GrandSouth Bancorporation ("GrandSouth").  Comparisons for the financial periods presented are impacted by the GrandSouth acquisition which contributed $1.02 billion in loans and $1.05 billion in deposits.  The results for the nine months ended September 30, 2023 include merger expenses totaling $13.5 million and an initial loan loss provision of $12.2 million for acquired loans.

Richard H. Moore, CEO and Chairman of the Company, stated, "Our Company has demonstrated once again that our deposit base is very stable, comparatively low cost, diversified and growing.  We are a relationship-driven bank and it has paid off in this market.  When you consider our deposit base, our low loan-to-deposit ratio, strong credit quality, and almost no large office building credit exposure, we are confident about our ability to stay well-positioned for the remainder of the year and into next year."

Third Quarter 2023 Highlights

• Loans totaled $8.0 billion at September 30, 2023, with growth for the quarter of $129.4 million, an annualized growth rate of 6.5%.
• Total market deposits (exclusive of brokered deposits) grew $66.7 million for the quarter, an annualized growth rate of 2.6%.
• Noninterest-bearing demand accounts remained strong at 34% of total deposits at quarter end.
• Total loan yield increased to 5.32%, up 83 basis points from the third quarter of 2022, with accretion on purchased loans contributing 16 basis points to loan yield.
• While deposit rates increased during the quarter, total cost of funds remained low at 1.46% for the quarter ended September 30, 2023.
• The on-balance sheet liquidity ratio was 14.4% at September 30, 2023. Available off-balance sheet sources totaled $2.2 billion at quarter end, resulting in a total liquidity ratio of 30.2%.
• Credit quality continued to be strong with a nonperforming assets ("NPA") to total assets ratio of 0.32% as of September 30, 2023, down from 0.39% for the comparable period of 2022.
• Capital remained strong with a total common equity tier 1 ratio of 12.93% (estimated) and a total risk-based capital ratio of 15.26% (estimated) as of September 30, 2023.

Net Interest Income and Net Interest Margin

Net interest income for the third quarter of 2023 was $84.7 million compared to $85.3 million recorded in the third quarter of 2022, a nominal decrease of 0.7%.  Net interest income for the current quarter decreased 2.6% from the $87.0 million reported for the linked quarter.  Average interest-earning assets for the third quarter of 2023 increased 13.7% from the comparable period of the prior year, with growth primarily in loans resulting from both organic growth and the GrandSouth acquisition.

Despite the higher level of earning assets, the market-driven increases in rates on liabilities, which have occurred at a more rapid pace than increased yields on assets, resulted in the reduction in net interest income and net interest margin ("NIM") as compared to the prior periods.