First Bancorp (FBNC) Q1 2024 earnings summary

Executive summary

• Net income was $25.3M, or $0.61 diluted EPS, versus $15.2M and $0.37 in Q1 2023; the prior-year period included GrandSouth acquisition costs and an initial credit provision.

• Rising funding costs outpaced asset-yield increases, compressing net interest income and margin; deposits grew while loans and securities declined from year-end.

• Management cited stronger liquidity and capital and plans to reduce borrowings and high-cost deposits while deploying funds into higher-yielding assets.

Financial highlights

• Net interest income was $79.2M, down 14.3% YoY and 3.9% QoQ; tax-equivalent NIM was 2.80%, versus 3.31% in Q1 2023 and 2.88% in Q4 2023.

• Provision for credit losses was $1.2M versus $12.5M in Q1 2023, which included an initial $12.2M GrandSouth provision.

• Noninterest income was $12.9M, down 4.4% YoY, including a $975K loss on a bond call; noninterest expense fell 20.2% to $59.2M, from $74.2M including $12.2M of GrandSouth-related costs.

• Total assets were $12.1B, down 0.2% from year-end and 2.2% YoY; loans were $8.1B, down $73.6M QoQ and up $277.5M YoY.

• Deposits increased $271.7M QoQ, including $183.5M in brokered deposits and $88.3M in market deposits.

Outlook and guidance

• Management expects balance-sheet composition to improve during 2024 through lower borrowings and high-cost deposits and investment in higher-yielding assets.

• After quarter-end, select available-for-sale securities were put up for sale to restructure the portfolio, repay wholesale funding and invest in higher-yielding assets; beneficial net interest income effects are anticipated upon completion.

• Interest-rate modeling indicates near-term net interest income could decline in both rising- and falling-rate scenarios; outcomes depend on deposit repricing, asset yields and the yield curve.

• Management expected Federal Reserve rate cuts to begin in late 2024 or 2025; lower rates could reduce net interest income if assets reprice downward before deposits.