<PAGE>
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
___________________
FORM 10-QSB
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended
March 31, 1995
___________________
Commission File Number 0-15572
FIRST BANCORP
------------------------------------------------------
(Exact Name of Registrant as Specified in its Charter)
North Carolina 56-1421916
- --------------------------------------- ------------------------
(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification Number)
341 North Main Street, Troy, North Carolina 27371-0508
- -------------------------------------------------- ------------------------
(Address of Principal Executive Offices) (Zip Code)
(Registrant's telephone number, including area code) (910) 576-6171
------------------------
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding twelve months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days.
[ X ] YES [ ] NO
As of March 31, 1995, 1,504,185 shares of the registrant's Common
Stock, $5 par value, were outstanding. The registrant had no other classes of
securities outstanding.
Transitional Small Business Format [ ] YES [ X ] NO
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<PAGE>
INDEX
FIRST BANCORP AND SUBSIDIARIES
Page
Part I. Financial Information
Item 1 - Financial Statements
CONSOLIDATED BALANCE SHEETS -
March 31, 1995 and 1994
(With Comparative Amounts at December 31, 1994) 3
STATEMENTS OF CONSOLIDATED INCOME -
For the Periods Ended March 31, 1995 and 1994 4
STATEMENTS OF CONSOLIDATED CASH FLOWS -
For the Periods Ended March 31, 1995 and 1994 5
STATEMENTS OF CHANGES IN CONSOLIDATED SHAREHOLDERS'EQUITY -
For the Period Ended March 31, 1995
and for the Year Ended December 31, 1994 6
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 7
Item 2 - Management's Discussion and Analysis of Consolidated
Results of Operations and Financial Condition 9
Part II. Other Information
Item 6 - Exhibits and Reports on Form 8-K 18
Signatures 20
Exhibit Cross Reference Index 21
<PAGE>
Part I. Financial Information
Item 1 - Financial Statements
Consolidated Balance Sheets
FIRST BANCORP AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
Mar 31, Dec 31, Mar 31,
($ in thousands) 1995 1994 1994
--------- --------- ---------
<S> <C> <C> <C>
ASSETS
Cash & due from banks, noninterest bearing $ 10,094 $ 12,588 $ 14,378
Federal funds sold 6,262 6,660 1,850
--------- --------- ---------
Total cash and cash equivalents 16,356 19,248 16,228
--------- --------- ---------
Securities available for sale (approximate
costs of $48,152, $47,249 and $54,627) 47,618 46,150 54,399
Securities held-to-maturity (approximate
fair values of $22,236, $20,794 and $18,868) 21,999 20,942 18,229
Presold mortgages in process of settlement 701 631 333
Loans, net of unearned income 186,414 185,749 159,196
Less: Allowance for possible loan losses (4,825) (5,009) (2,862)
--------- --------- ---------
Net loans 181,589 180,740 156,334
--------- --------- ---------
Premises and equipment, net 7,019 7,138 6,021
Accrued interest receivable 2,376 2,235 1,950
Intangible assets 6,136 6,279 730
Other 5,696 6,250 3,941
--------- --------- ---------
Total assets $ 289,490 $ 289,613 $ 258,165
========= ========= =========
LIABILITIES
Deposits: Demand $ 36,655 $ 40,390 $ 30,839
Savings, NOW and money market 102,074 103,879 94,644
Time deposits of $100,000 or more 27,962 24,615 19,058
Other time deposits 90,577 89,546 83,739
--------- --------- ---------
Total deposits 257,268 258,430 228,280
Accrued interest on deposits 1,252 1,144 860
Other 1,411 1,249 1,319
--------- --------- ---------
Total liabilities 259,931 260,823 230,459
--------- --------- ---------
SHAREHOLDERS'EQUITY
Common stock, $5 par value per share
Authorized: 12,500,000 shares
Issued and outstanding: 1,504,185 shares 7,521 7,521 7,521
Capital surplus 11,308 11,308 11,308
Retained earnings 11,084 10,624 9,016
Unrealized loss on securities
available for sale, net of income taxes (354) (663) (139)
--------- --------- ---------
Total shareholders'equity 29,559 28,790 27,706
--------- --------- ---------
Total liabilities and shareholders'equity $ 289,490 $ 289,613 $ 258,165
========= ========= =========
<FN>
See Notes to Consolidated Financial Statements.
</TABLE>
<PAGE>
Statements Of Consolidated Income
FIRST BANCORP AND SUBSIDIARIES
STATEMENTS OF CONSOLIDATED INCOME
<TABLE>
<CAPTION>
Three Months Ended
Mar 31,
($ in thousands except per share data) 1995 1994
--------- ---------
<S> <C> <C>
INTEREST INCOME
Interest and fees on loans $ 4,394 $ 3,320
Interest on investment securities:
Taxable interest income 648 643
Exempt from income taxes 267 244
Other, principally federal funds sold 120 54
--------- ---------
Total interest income 5,429 4,261
--------- ---------
INTEREST EXPENSE
Time deposits of $100,000 or more 359 190
Other time and savings deposits 1,580 1,223
--------- ---------
Total interest expense 1,939 1,413
--------- ---------
NET INTEREST INCOME 3,490 2,848
Provision for possible loan losses 100 137
--------- ---------
NET INTEREST INCOME AFTER PROVISION
FOR POSSIBLE LOAN LOSSES 3,390 2,711
--------- ---------
OTHER INCOME
Service charges on deposit accounts 537 431
Commissions from insurance sales 98 62
Other charges, commissions and fees 214 168
Data processing fees 17 40
Securities gains - 34
--------- ---------
Total other income 866 735
--------- ---------
OTHER EXPENSES
Salaries 1,190 980
Employee benefits 353 286
--------- ---------
Total personnel expense 1,543 1,266
Net occupancy expense 209 179
Equipment related expenses 207 232
Other 1,273 889
--------- ---------
Total other expenses 3,232 2,566
--------- ---------
INCOME BEFORE INCOME TAXES 1,024 880
Income taxes 309 237
--------- ---------
NET INCOME $ 715 $ 643
========= =========
PER SHARE AMOUNTS
Net income $ 0.48 $ 0.43
Cash dividends declared 0.17 0.16
<FN>
See Notes to Consolidated Financial Statements.
</TABLE>
<PAGE>
Statements Of Consolidated Cash Flows
FIRST BANCORP AND SUBSIDIARIES
STATEMENTS OF CONSOLIDATED CASH FLOWS
<TABLE>
<CAPTION>
Three Months Ended
Mar 31,
($ in thousands) 1995 1994
--------- ---------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $ 715 $ 643
Adjustments to reconcile net income to
net cash provided by operations:
Provision for loan losses 100 137
Net security premium amortization/discount accretion 2 9
Loan fees and costs deferred net of amortization (15) -
Depreciation of premises and equipment 184 192
Amortization of intangible assets 143 40
Realized and unrealized other real estate losses 20 -
Provision for deferred income taxes (61) (1)
Gain on sale of investment securities - (34)
Changes in operating assets and liabilities:
Increase in accrued interest receivable (141) (20)
Decrease in other assets 332 123
Increase (decrease) in accrued interest payable 108 (11)
Decrease in other liabilities (245) (900)
Increase in income taxes payable - 222
--------- ---------
Net cash provided by operating activities 1,142 400
--------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of securities available for sale (13,263) (12,841)
Purchase of securities held-to-maturity (1,283) (2,014)
Proceeds from sale of securities available for sale - 715
Proceeds from maturities/issuer calls of securities
available for sale 12,365 6,924
Proceeds from maturities/issuer calls of securities
held-to-maturity 218 130
Net increase in loans (995) (2,028)
Net purchases of premises and equipment (65) (23)
--------- ---------
Net cash used in investing activities (3,023) (9,137)
--------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES
Net increase (decrease) in deposits (1,162) 1,237
Cash dividends paid (256) (226)
--------- ---------
Net cash provided by (used in) financing activities (1,418) 1,011
--------- ---------
DECREASE IN CASH AND CASH EQUIVALENTS (3,299) (7,726)
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD 19,248 23,954
--------- ---------
CASH AND CASH EQUIVALENTS, END OF PERIOD $ 15,949 $ 16,228
========= =========
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
Cash paid during the period for:
Interest $ 1,831 $ 1,424
Income taxes 48 15
Non-cash transactions:
Foreclosed loans transferred to other real estate 61 39
Reclassification of securities available for sale - 49,288
Increase (decrease) in market value of securities
available for sale 564 (229)
<FN>
See Notes to Consolidated Financial Statements.
</TABLE>
<PAGE>
Statements Of Changes In Consolidated Shareholders'Equity
FIRST BANCORP AND SUBSIDIARIES
STATEMENTS OF CHANGES IN CONSOLIDATED SHAREHOLDERS'EQUITY
<TABLE>
<CAPTION>
Common Stock Share-
------------------- Capital Retained holders'
(in thousands) Shares Amount Surplus Earnings Other Equity
--------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
BALANCES,
January 1, 1994 1,504 $ 7,521 $ 11,308 $ 8,614 $ - $ 27,443
Unrealized gain on
securities classified
as available for sale
upon adoption of
SFAS No. 115 254 254
Net income 2,987 2,987
Cash dividends
declared (977) (977)
Net adjustment
for securities
available for sale (917) (917)
--------- --------- --------- --------- --------- ---------
BALANCES,
December 31, 1994 1,504 7,521 11,308 10,624 (663) 28,790
Net income 715 715
Cash dividends
declared (255) (255)
Net adjustment
for securities
available for sale 309 309
--------- --------- --------- --------- --------- ---------
BALANCES,
March 31, 1995 1,504 $ 7,521 $ 11,308 $ 11,084 $ (354)$ 29,559
========= ========= ========= ========= ========= =========
<FN>
See Notes to Consolidated Financial Statements.
</TABLE>
<PAGE>
FIRST BANCORP AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the Periods Ended March 31, 1995 and 1994
NOTE 1
In the opinion of the Company, the accompanying unaudited consolidated
financial statements contain all adjustments (consisting of only normal
recurring accruals) necessary to present fairly the consolidated financial
position of the Company as of March 31, 1995 and 1994 and the consolidated
results of operations and consolidated cash flows for the periods ended
March 31, 1995 and 1994 and changes in consolidated shareholders'equity
for the period ended March 31, 1995. Reference is made to the notes to
consolidated financial statements for the year ended December 31, 1994 filed
with the Annual Report on Form 10-KSB for a discussion of accounting policies
and other relevant information with respect to the financial statements.
NOTE 2
The results of operations for the periods ended March 31, 1995 and 1994
are not necessarily indicative of the results to be expected for the full
year. Earnings per share were computed by dividing net income by average
common shares outstanding. Common stock equivalents resulting from the
Company's stock option plan were not considered in the earnings per share
computation due to immateriality.
NOTE 3
Certain amounts reported in the period ended March 31, 1994 have been
reclassified to conform with the presentation for March 31, 1995.
NOTE 4
Based on management's evaluation of the loan portfolio, current economic
conditions and other risk factors, the Company's allowance for possible loan
losses was $4,825,000 as of March 31, 1995 compared to $5,009,000 and
$2,862,000 as of December 31, 1994 and March 31, 1994, respectively.
These reserve levels represented 2.59%, 2.70% and 1.80% of total loans as of
March 31, 1995, December 31, 1994 and March 31, 1994, respectively.
Nonperforming assets are defined as nonaccrual loans, loans past due 90 or
more days and still accruing interest, restructured loans and foreclosed,
repossessed and idled properties. For each of the periods presented, the
Company had no loans past due 90 or more days and still accruing interest.
Nonperforming assets are summarized as follows:
<TABLE>
<CAPTION>
Mar 31, Dec 31, Mar 31,
($ in thousands) 1995 1994 1994
--------- --------- ---------
<S> <C> <C> <C>
Nonperforming loans:
Nonaccrual loans $ 1,374 $ 1,724 $ 2,299
Restructured loans 724 252 538
--------- --------- ---------
Total nonperforming loans 2,098 1,976 2,837
Foreclosed, repossessed and idled
properties (included in other assets) 2,676 2,976 1,791
--------- --------- ---------
Total nonperforming assets $ 4,774 $ 4,952 $ 4,628
========= ========= =========
Nonperforming loans as a percentage of total loans 1.13% 1.06% 1.78%
Allowance for possible loan losses as a percentage
of nonperforming loans 229.98% 253.49% 100.88%
Nonperforming assets as a percentage of loans and
foreclosed, repossessed and idled properties 2.52% 2.62% 2.87%
Nonperforming assets as a percentage of
total assets 1.65% 1.71% 1.79%
</TABLE>
<PAGE>
FIRST BANCORP AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the Periods Ended March 31, 1995 and 1994
NOTE 5
On January 1, 1995, the Company adopted Statement of Financial Accounting
Standards No. 114 ("SFAS No. 114"), "Accounting by Creditors for Impairment
of a Loan." This statement addresses the accounting by creditors for
impairment of certain loans. Under the new statement, the 1995 allowance for
possible loan losses related to loans that are identified for evaluation in
accordance with SFAS No. 114 is based on discounted cash flows using the
loan's initial effective interest rate or the fair value of the collateral
for certain collateral dependent loans. Prior to 1995, the allowance for
possible loan losses related to these loans was based on undiscounted cash
flows or the fair value of the collateral for collateral dependent loans.
As of March 31, 1995, loans included within the scope of SFAS No. 114 and
considered impaired loans totaled approximately $332,000 and had allocated
loan loss reserves of approximately $125,000. No direct write-downs have
been taken on impaired loans as of March 31, 1995. The average quarterly
investment in impaired loans was approximately $244,000. The interest income
that would have been accrued during the quarter on these impaired loans was
insignificant and there was no interest income recognized on these loans.
<PAGE>
Item 2 - Management's Discussion and Analysis of Consolidated
Results of Operations and Financial Condition
RESULTS OF OPERATIONS
Net income for the quarter ended March 31, 1995 increased 11.2% to
$715,000, or $0.48 per share, compared to $643,000, or $0.43 per share,
for the third quarter of 1994. The earnings increase was achieved through
the combination of higher net interest income resulting from increasing loan
volume and higher noninterest income in 1995.
Although not significantly impacting net income, the acquisition of
Central State Bank ("Central") in High Point, North Carolina did increase the
components of net income, specifically net interest income and noninterest
income and expenses. See "Completed Acquisition" below for a discussion of
the terms of the purchase.
Net interest income is the largest component of earnings, representing
the difference between interest and fees generated from earning assets and the
interest costs on deposits and other funds needed to support those assets.
Net interest income increased by $642,000, or 22.5%, when comparing the first
quarter of 1995 with the first quarter of 1994, primarily because of growth
in loan volume. Approximately $402,000 of the increase for the quarter was
attributable to the acquisition of Central. Increases in future market
interest rates could have a negative impact on net interest income if
portfolio mixes are held constant and rate-sensitive liabilities reprice
upward more rapidly than rate-sensitive earning assets. The Company manages
portfolio mixes to minimize changes in net interest income due to changing
rates. The Company continues to experience a change in the loan mix to
variable rate loans from fixed rate loans as well as a shift to savings, NOW
and money market deposits from time deposits.
The provision for possible loan losses for the quarter decreased $37,000
to $100,000. Provisions for possible loan losses are based on management's
evaluation of the loan portfolio, as discussed under "Financial Condition"
below.
Noninterest income increased 17.8% for the first quarter primarily
because of the newly acquired operations in High Point. Data processing fees
declined by $23,000 for the quarter. The Company reported no gains from
the sale of securities in the first quarter of 1995 compared to the $34,000
in securities gains reported in the first quarter of 1994.
Noninterest expenses, or overhead, increased 26.0% to $3,232,000 for the
first quarter of 1995, primarily because of the incremental overhead
associated with the acquisition of Central. Driving the quarterly change,
personnel expenses increased $277,000, or 21.9%, of which $224,000 was related
to acquired personnel, and other noninterest expenses increased $389,000, or
29.9%, of which approximately $439,000 was attributable to Central's
operations.
Income taxes increased $72,000, or 30.4%, for the first quarter, while
the effective tax rates were 30.2% and 26.9% for the quarters ended March 31,
1995 and 1994, respectively. The increase was primarily attributable to
larger levels of nondeductible intangible amortization associated with the
acquisition of Central.
<PAGE>
FINANCIAL CONDITION
The Company's total assets were $289.5 million at March 31, 1995, an
increase of $31.3 million, or 12.1%, from March 31, 1994. Interest-earning
assets increased by 12.2% compared to March 31, 1994. Loans, the primary
interest-earning asset, increased by 17.1% during this same period. The
$2 million increase in the allowance for loan losses was largely attributable
to the acquisition of Central. Premises and equipment, intangible assets and
other assets increased $1 million, $5.4 million and $2.2 million,
respectively. Deposits increased $29 million, or 12.7%. The balance sheet
changes were largely attributable to the acquisition of Central. An
estimated $5.8 million intangible asset resulted from the acquisition due to
purchase accounting. The increases in deposits were primarily in the
categories of core deposits and time deposits less than $100,000. The
Company has continued to experience a shift in the mix of its deposits to
savings, NOW and money market accounts away from time deposits. The
Company's cost of funds has remained relatively low compared to that of its
competitors. The Company does not rely heavily on large deposits of $100,000
or more to fund asset growth and has not traditionally engaged in obtaining
deposits through brokers. Since December 31, 1994, the Company experienced
annualized growth of 4.3% in earning assets while total assets and deposits
remain near year-end levels.
<PAGE>
NONPERFORMING ASSETS
Nonperforming assets are defined as nonaccrual loans, loans past due 90
or more days, restructured loans, foreclosed repossessed and idled
properties. The following table summarizes the Company's nonperforming
assets at the dates indicated.
<TABLE>
<CAPTION>
Mar 31, Dec 31, Mar 31,
($ in thousands) 1995 1994 1994
--------- --------- ---------
<S> <C> <C> <C>
Nonperforming loans:
Nonaccrual loans $ 1,374 $ 1,724 $ 2,299
Restructured loans 724 252 538
--------- --------- ---------
Total nonperforming loans 2,098 1,976 2,837
Foreclosed, repossessed and idled
properties (included in other assets) 2,676 2,976 1,791
--------- --------- ---------
Total nonperforming assets $ 4,774 $ 4,952 $ 4,628
========= ========= =========
Nonperforming loans as a percentage of total loans 1.13% 1.06% 1.78%
Allowance for possible loan losses as a percentage
of nonperforming loans 229.98% 253.49% 100.88%
Nonperforming assets as a percentage of loans and
foreclosed, repossessed and idled properties 2.52% 2.62% 2.87%
Nonperforming assets as a percentage of
total assets 1.65% 1.71% 1.79%
</TABLE>
Nonperforming assets were $4,774,000, $4,952,000 and $4,628,000 as of
March 31, 1995, December 31, 1994 and March 31, 1994, respectively.
Nonperforming assets as of March 31, 1995 include approximately $804,000
of nonperforming assets related to Central. Management has reviewed the
collateral for the nonperforming assets, specifically including nonaccrual
loans, and has included this review among the factors considered in the
evaluation of the allowance for possible loan losses discussed below.
A loan is placed on nonaccrual status when, in management's judgment,
the collection of interest appears doubtful. Interest on loans that are
classified as nonaccrual is recognized when received. The accrual of
interest is discontinued on all loans that become 90 days past due with
respect to principal or interest. In some cases, where borrowers are
experiencing financial difficulties, loans may be restructured to provide
terms significantly different from the originally contracted terms. If the
nonaccrual loans and restructured loans as of March 31, 1995 and 1994 had
been current in accordance with their original terms and had been outstanding
throughout the three month period (or since origination or acquisition if held
for part of the three month period), gross interest income in the amounts of
approximately $34,000 and $47,000 for nonaccrual loans and $19,000 and
$9,000 for restructured loans would have been recorded for the three months
ended March 31, 1995 and 1994, respectively. Interest income on such
loans that was actually collected and included in net income in the three
months ended March 31, 1995 and 1994 amounted to approximately $386 and
$336 for nonaccrual loans and $8,000 and $12,000 for restructured loans,
respectively.
<PAGE>
Nonperforming loans are defined as nonaccrual loans, loans past due 90
or more days and restructured loans. As of March 31, 1995, December 31,
1994 and March 31, 1994, nonperforming loans were approximately 1.13%,
1.06% and 1.78%, respectively, of the total loans outstanding at such dates.
Nonaccrual loans decreased $925,000, or 40.2%, to approximately $1,374,000
compared to March 31, 1994 and decreased approximately $350,000, or 20.3%,
since year-end. As of March 31, 1995, the largest nonaccrual loan balance
was $172,000 while the average balance of all nonaccrual loans was
approximately $37,000. Approximately $215,000 in nonperforming loans were
attributable to the Central acquisition. The Company's management believes
that collateral values related to nonperforming loans exceed the loan
balances.
In addition to the nonperforming loan amounts discussed above,
management believes that an estimated $3,500,000-$3,900,000 of loans that
are currently performing in accordance with their contractual terms may
potentially develop problems depending upon the particular financial
situations of the borrowers and economic conditions in general. These loans
were considered in determining the appropriate level of the allowance for
possible loan losses. See "Summary of Loan Loss Experience" below.
Loans classified for regulatory purposes as loss, doubtful, substandard,
or special mention that have not been disclosed in the problem loan amounts
above do not represent or result from trends or uncertainties which
management reasonably expects will materially impact future operating
results, liquidity, or capital resources, or represent material credits about
which management is aware of any information which causes management to have
serious doubts as to the ability of such borrowers to comply with the loan
repayment terms.
As of March 31, 1995, the Company owned foreclosed and repossessed
assets totaling approximately $2,676,000, which consisted principally of
several parcels of foreclosed real estate. Three parcels with carrying
values of approximately $267,000, $458,000 and $730,000 accounted for 54% of
the total. In addition, approximately $589,000 was added as a result of the
acquisition of Central. The Company's management has reviewed recent
appraisals of these properties and has concluded that their fair values, less
estimated costs to sell, exceeds the respective carrying values at
March 31, 1995. See "Contingent Matters" below for a discussion of legal
matters related to foreclosed properties.
SUMMARY OF LOAN LOSS EXPERIENCE
The allowance for possible loan losses is created by direct charges to
operations. Losses on loans are charged against the allowance in the period
in which such loans, in management's opinion, become uncollectible.
Recoveries during the period are credited to this allowance.
The factors that influence management's judgment in determining the
amount charged to operating expense include past loan loss experience,
composition of the loan portfolio (including off-balance sheet commitments),
evaluation of possible future losses and current economic conditions.
<PAGE>
The Company's bank subsidiary uses a loan analysis and grading program to
facilitate its evaluation of possible future loan losses and the adequacy of
its allowance for possible loan losses, otherwise referred to as its loan loss
reserve. In this program, a "watch list" is prepared and monitored monthly
by management and is tested quarterly by the bank's Internal Audit Department.
The list includes loans that management identifies as having potential credit
weaknesses in addition to loans past due 90 days or more, nonaccrual loans and
remaining unpaid loans identified during previous examinations.
As reflected in the table below, Central's reserve level significantly
increased the post-acquisition loan loss reserves of the Company. The
allowance for loan losses in the amount of approximately $2,487,000 that
Central had recorded prior to the acquisition was based largely on its levels
of nonperforming assets and potential problem loans. Prior to the
acquisition and during the performance of "due diligence" regarding Central,
the Company's management became aware of substantial differences between the
credit underwriting practices of Central and those of the Company.
Management believes the current level of reserves is appropriate and
sufficient to afford the Company the opportunity to conform Central's loan
portfolio to the underwriting standards of the Company.
Based on management's evaluation of the loan portfolio and economic
conditions, a provision for possible loan losses of $100,000 was added to the
allowance for possible loan losses during the first quarter of 1995. The
quarterly provision for loan losses made during 1995 was less than that
made during the corresponding period of 1994 because nonperforming loans and
nonperforming assets, excluding the effect of the Central acquisition,
decreased to amounts of approximately $1,159,000 and $724,000, respectively.
Therefore, this provision was considered adequate in light of the
information available to management. At March 31, 1995, the allowance
allowance stood at $4,825,000, compared to $5,009,000 at December 31, 1994
and $2,862,000 at March 31, 1994. At March 31, 1995, the allowance for
possible loan losses was approximately 230% of total nonperforming loans,
compared to corresponding percentages of 253% at December 31, 1994 and 101%
at March 31, 1994. The increase was caused primarily by the additional loan
loss allowance acquired through the merger with Central.
The allowance for possible loan losses was 2.59%, 2.70% and 1.80% of
total loans as of March 31, 1995, December 31, 1994 and March 31, 1994
respectively. Management considers the reserve levels adequate to cover
possible loan losses on the loans outstanding as of each reporting date. It
must be emphasized, however, that the determination of the reserve using the
Company's procedures and methods rests upon various judgments and assumptions
about future economic conditions and other factors affecting loans. No
assurance can be given that the Company will not in any particular period
sustain loan losses that are sizable in relation to the amounts reserved or
that subsequent evaluations of the loan portfolio, in light of conditions and
factors then prevailing, will not require significant changes in the
allowance for possible loan losses or future charges to earnings. In
addition, various regulatory agencies, as an integral part of their
examination process, periodically review the Company's allowances for
possible loan losses and losses on other real estate. Such agencies may
require the Company to recognize additions to the allowances based on their
judgments about information available at the time of such examinations.
<PAGE>
For the periods indicated, the following table summarizes the Company's
balances of loans outstanding, average loans outstanding, changes in the
allowance arising from charge-offs and recoveries by category, and additions
to the allowance that have been charged to expense.
<TABLE>
<CAPTION>
Three Three
Months Year Months
Ended Ended Ended
Mar 31, Dec 31, Mar 31,
($ in thousands) 1995 1994 1994
--------- --------- ---------
<S> <C> <C> <C>
Loans outstanding at period end $ 186,414 $ 185,749 $ 159,196
========= ========= =========
Average loans outstanding during period $ 184,305 $ 168,167 $ 157,109
========= ========= =========
Allowance for possible loan losses at
beginning of period $ 5,009 $ 2,797 $ 2,797
Addition related to acquired bank - 2,487 -
Loans charged off:
Commercial, financial and agricultural (200) (242) -
Real estate - mortgage (60) (207) (60)
Installment loans to individuals (46) (354) (23)
--------- --------- ---------
Total charge-offs (306) (803) (83)
--------- --------- ---------
Recoveries of loans previously charged off:
Commercial, financial and agricultural 3 11 1
Real estate - mortgage 1 79 -
Installment loans to individuals 18 51 10
--------- --------- ---------
Total recoveries 22 141 11
--------- --------- ---------
Net charge-offs (284) (662) (72)
Additions to the allowance charged to expense 100 387 137
--------- --------- ---------
Allowance for possible loan losses at
end of period $ 4,825 $ 5,009 $ 2,862
========= ========= =========
Ratios:
Net charge-offs to average loans during period 0.15% 0.39% 0.05%
Net charge-offs to loans at end of period 0.15% 0.36% 0.05%
Allowance for possible loan losses to
average loans during period 2.62% 2.98% 1.82%
Allowance for possible loan losses to
loans at end of period 2.59% 2.70% 1.80%
Net charge-offs to
allowance for possible loan losses 5.89% 13.22% 2.52%
Net charge-offs to
provision for possible loan losses 284.00% 171.06% 52.55%
</TABLE>
<PAGE>
Based on the results of the aforementioned loan analysis and grading
program and management's evaluation of the allowance for possible loan losses
at March 31, 1995, there have been no material changes to the allocation
of the allowance for possible loan losses among the various categories of
loans since December 31, 1994.
LIQUIDITY
The Company's liquidity is determined by its ability to convert assets to
cash or acquire alternative sources of funds to meet the needs of its
customers who are withdrawing or borrowing funds, and to maintain required
reserve levels, pay expenses and operate the Company on an ongoing basis. The
Company's primary liquidity sources are cash and due from banks, federal funds
sold and other short-term investments. In addition, the Company (through its
bank subsidiary) has the ability, on a short-term basis, to purchase federal
funds from other financial institutions. The Company has not traditionally
had to rely on the purchase of federal funds as a source of liquidity. As
contemplated in the Company's cash acquisition of Central through the Bank,
the loan to deposit ratio has increased to levels more typical of the
Bank's North Carolina peer group. The Company's management believes its
liquidity sources are within acceptable levels and remain adequate to meet
its operating needs.
CAPITAL RESOURCES
The Company is required by its own policies and by applicable federal
regulations to maintain certain capital levels. The Company's ratio of
stated capital to total assets was 10% as of March 31, 1995 and 1994 and
December 31, 1994. In an effort to achieve a measurement of capital adequacy
that is more sensitive to the individual risk profiles of financial
institutions, the various financial institution regulators have adopted
modifications to their minimum capital guidelines that categorize various
components of capital and types of assets and measure capital adequacy in
relation to the financial institution's relative level of those capital
components and the level of risk associated with various types of assets of
that financial institution. The guidelines call for minimum adjusted capital
of 8% of risk-adjusted assets. As of March 31, 1995, the Company's total
risk-based capital ratio was approximately 13.6%.
In addition to the risk-based capital requirements described above, the
Company is subject to a leverage capital requirement, which calls for a
minimum ratio of leverage capital, as defined in the regulations, to quarterly
average total assets of 3-5%. As of March 31, 1995, the Company's leverage
capital ratio was approximately 8.4%.
The Company is not aware of any recommendations of regulatory authorities
or otherwise which, if they were to be implemented, would have a material
effect on its liquidity, capital resources, or operations.
<PAGE>
As of March 31, 1995, December 31, 1994 and March 31, 1994, the Company
was in compliance with all existing capital requirements, as summarized in
the following table:
<TABLE>
<CAPTION>
Mar 31, Dec 31, Mar 31,
($ in thousands) 1995 1994 1994
--------- --------- ---------
<S> <C> <C> <C>
Tier I capital:
Total stated shareholders'equity $ 29,559 $ 28,790 $ 27,706
Less: Intangible assets 6,136 6,279 730
Unrealized holding loss
on securities available for
sale, net of income taxes (354) (663) (139)
--------- --------- ---------
Total Tier I leverage capital 23,777 23,174 27,115
--------- --------- ---------
Tier II capital:
Allowable allowance for loan losses 2,448 2,535 2,208
--------- --------- ---------
Tier II capital additions 2,448 2,535 2,208
--------- --------- ---------
Total capital $ 26,225 $ 25,709 $ 29,323
========= ========= =========
Risk-adjusted assets $ 195,827 $ 208,438 $ 176,624
Tier I risk-adjusted assets (includes Tier I
capital adjustments) 190,045 202,822 176,033
Tier II risk-adjusted assets (includes Tiers I
and II capital adjustments) 192,493 205,357 178,241
Quarterly average total assets 287,487 289,904 253,873
Adjusted quarterly average total assets
(includes Tier I capital adjustments) 281,705 284,288 253,282
Risk-based capital ratios:
Tier I capital 12.51% 11.43% 15.40%
Minimum required Tier I capital 4.00% 4.00% 4.00%
Total risk-based capital 13.62% 12.52% 16.45%
Minimum required total risk-based capital 8.00% 8.00% 8.00%
Leverage capital ratios:
Tier I leverage capital ratio 8.44% 8.15% 10.71%
Minimum required Tier I leverage capital 3-5.00% 3-5.00% 3-5.00%
</TABLE>
COMPLETED ACQUISITION
The Company completed its acquisition of Central State Bank in High
Point, North Carolina, in a cash purchase on August 25, 1994. Pursuant to
the terms of the merger, the shareholders of Central received cash in the
amount of approximately $538.05 per share ($535.50 in purchase price per
share and $2.55 in interest due to a delay in the closing date), making the
total purchase price approximately $6,994,639. The funds used to make the
acquisition were internally generated. As of August 25, 1994, Central's
total assets of approximately $35.1 million included earning assets of
approximately $32.1 million consisting primarily of approximately $26.9
million in loans. In addition, Central had deposits of approximately $32.1
million. The acquisition is described in greater detail in the Company's
filing on Form 8-K filed September 8, 1994.
<PAGE>
CONTINGENT MATTERS
During 1994, the Bank vigorously defended a claim by which a plaintiff
homeowners'association sought to nullify the Bank's lien on certain common
areas of a residential development including the water and sewer system. The
Bank's lien secured loans for $819,000. The court granted summary judgment
in favor of the Bank, but the plaintiff has given notice of appeal. The Bank
has foreclosed on the property. Management is of the opinion that an
unfavorable result could reduce the amount that would be collected on the
$819,000 loan, but would not have a material adverse impact on the Bank's
financial position.
In addition, on August 8, 1994, the Bank was named a codefendant in a
lawsuit filed in the United States District Court for the Middle District of
North Carolina. In the lawsuit, the plaintiff alleges that it loaned $4.14
million to one of the other defendants secured by two certificates of deposit
allegedly issued by the Bank in the aggregate face amount of $4.6 million.
The codefendant borrower has defaulted on the loan and the plaintiff has
asserted a claim against the Bank based upon the certificates of deposit.
The Bank's records indicate that the certificates issued to the codefendant
were in the total amount of $4,600. The Bank is in the process of
investigating the circumstances regarding the plaintiff's claims and intends
to defend itself vigorously against the plaintiff's lawsuit. The appropriate
law enforcement, regulatory and insurance authorities have been notified.
Related claims and lawsuits appear to have arisen out of the same
circumstances that gave rise to the lawsuit referred to above. These other
claims and lawsuits are being investigated and defended vigorously as well.
Because of potential losses in connection with these claims, management has
filed and is pursuing a claim under the Bank's fidelity bond, which presently
has a policy limit of $3.7 million. Based on a review of the terms of the
fidelity bond and advice of counsel, and based on the best information
available to management at this time, management is of the opinion that any
losses sustained in connection with the federal lawsuit would be covered up
to the limits set forth in the policy. Resolution of these matters, as well
as fidelity bond coverage, could be affected by future circumstances, the
impact of which on the Bank's financial position and results of operations is
uncertain.
<PAGE>
Part II. Other Information
Item 6 - Exhibits and Reports on Form 8-K
(a) Exhibits
The following exhibits are filed with this report or, as noted, are
incorporated by reference.
3(i) Copy of Articles of Incorporation of the Registrant and amendments
thereto, was filed as Exhibit 3(a) to the Registrant's Registration
Statement Number 33-12692, and is incorporated herein by reference.
(ii) Copy of the Bylaws of the Registrant and amendments thereto, was
filed as Exhibit 3(b) to the Company's Annual Report on Form 10-KSB
for the year ended December 31, 1994, and is incorporated herein by
reference.
10 Material Contracts
(a) Data processing Agreement dated October 1, 1984 by and between Bank
of Montgomery (First Bank) and Montgomery Data Services, Inc. was
filed as Exhibit 10(k) to the Registrant's Registration Statement
Number 33-12692, and is incorporated herein by reference.
(b) First Bank Salary and Incentive Plan, as amended, was filed as
Exhibit 10(m) to the Registrant's Registration Statement Number
33-12692, and is incorporated herein by reference.
(c) First Bancorp Savings Plus and Profit Sharing Plan (401(k) savings
incentive plan and trust), as amended January 25, 1994 and July 19,
1994, was filed as Exhibit 10(c) to the Company's Annual Report on
Form 10-KSB for the year ended December 31, 1994, and is
incorporated herein by reference.
(d) Directors and Officers Liability Insurance Policy of First Bancorp,
dated July 16, 1991, was filed as Exhibit 10(g) to the Company's
Annual Report on Form 10-K for the year ended December 31, 1991,
and is incorporated herein by reference.
(e) Indemnification Agreement between the Company and its Directors and
Officers was filed as Exhibit 10(t) to the Registrant's Registration
Statement Number 33-12692, and is incorporated herein by reference.
(f) Employment and Consulting Agreement between the Company and John C.
Wallace dated January 1, 1993, was filed as Exhibit 10(i) to the
Company's Quarterly Report on Form 10-Q for the quarter ended
June 30, 1993, and is incorporated herein by reference.
(g) First Bancorp Employees'Pension Plan, as amended on August 16,
1994, was filed as Exhibit 10(g) to the Company's Annual Report on
Form 10-KSB for the year ended December 31, 1994, and is
incorporated herein by reference.
<PAGE>
(h) First Bancorp Senior Management Supplemental Executive Retirement
Plan dated May 31, 1993, was filed as Exhibit 10(k) to the
Company's Quarterly Report on Form 10-Q for the quarter ended
June 30, 1993, and is incorporated herein by reference.
(i) First Bancorp Senior Management Split-Dollar Life Insurance
Agreements between the Company and the Executive Officers, as
amended on December 22, 1994, was filed as Exhibit 10(i) to the
Company's Annual Report on Form 10-KSB for the year ended
December 31, 1994, and is incorporated herein by reference.
(j) Software License and Equipment Purchase and Software Maintenance
Agreements between First Bancorp and Systematics, Inc. for the
procurement and use of data processing equipment and software dated
May 17, 1993, was filed as Exhibit 10(m) to the Company's Quarterly
Report on Form 10-Q for the quarter ended June 30, 1993, and is
incorporated herein by reference.
(k) First Bancorp 1994 Stock Option Plan was filed as Exhibit 10(n) to
the Company's Quarterly Report on Form 10-QSB for the quarter ended
March 31, 1994, and is incorporated herein by reference.
(l) Agreement and Plan of Merger between First Bancorp and Central
State Bank, dated March 18, 1994, was filed as Exhibit 10(o) to the
Company's Quarterly Report on Form 10-QSB for the quarter ended
March 31, 1994, and is incorporated herein by reference.
27 Financial Data Schedules pursuant to Article 9 of Regulation S-X.
(b) There were no reports filed on Form 8-K during the quarter ended
March 31, 1995.
<PAGE>
Signatures
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
FIRST BANCORP
May 10, 1995 BY: James A. Gunter
------------------- -----------------------------
James A. Gunter
President
(Principal Executive Officer),
Treasurer and Director
May 10, 1995 BY: Anna G. Hollers
------------------- -----------------------------
Anna G. Hollers
Executive Vice President
and Secretary
May 10, 1995 BY: Kirby A. Tyndall
------------------- -----------------------------
Kirby A. Tyndall
Senior Vice President
and Chief Financial Officer
<PAGE>
EXHIBIT CROSS REFERENCE INDEX
Exhibit Page(s)
3(i) Copy of Articles of Incorporation of the Registrant *
(ii) Copy of the Bylaws of the Registrant *
10(a) Data processing Agreement by and between Bank of
Montgomery (First Bank) and Montgomery Data Services, Inc. *
(b) First Bank Salary and Incentive Plan, as amended *
(c) First Bancorp Savings Plus and Profit Sharing Plan (401(k)
savings incentive plan and trust), as amended *
(d) Directors and Officers Liability Insurance Policy of
First Bancorp *
(e) Indemnification Agreement between the Company and its
Directors and Officers *
(f) Employment and Consulting Agreement between the Company
and John C. Wallace *
(g) First Bancorp Employees'Pension Plan *
(h) First Bancorp Senior Management Supplemental Executive
Retirement Plan *
(i) First Bancorp Senior Management Split-Dollar Life Insurance
Agreements between the Company and the Executive Officers *
(j) Software License and Equipment Purchase and Software
Maintenance Agreements between First Bancorp and
Systematics, Inc. *
(k) First Bancorp 1994 Stock Option Plan *
(l) Agreement and Plan of Merger between First Bancorp and
Central State Bank *
27 Financial Data Schedules pursuant to Article 9 of
Regulation S-X
* Incorporated herein by reference.
<TABLE> <S> <C>
<ARTICLE> 9
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1995
<PERIOD-END> MAR-31-1995
<CASH> 10,094
<INT-BEARING-DEPOSITS> 0
<FED-FUNDS-SOLD> 6,262
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 47,618
<INVESTMENTS-CARRYING> 21,999
<INVESTMENTS-MARKET> 22,236
<LOANS> 186,414
<ALLOWANCE> 4,825
<TOTAL-ASSETS> 289,490
<DEPOSITS> 257,268
<SHORT-TERM> 0
<LIABILITIES-OTHER> 2,663
<LONG-TERM> 0
<COMMON> 7,521
0
0
<OTHER-SE> 22,038
<TOTAL-LIABILITIES-AND-EQUITY> 289,490
<INTEREST-LOAN> 4,394
<INTEREST-INVEST> 915
<INTEREST-OTHER> 120
<INTEREST-TOTAL> 5,429
<INTEREST-DEPOSIT> 1,939
<INTEREST-EXPENSE> 1,939
<INTEREST-INCOME-NET> 3,490
<LOAN-LOSSES> 100
<SECURITIES-GAINS> 0
<EXPENSE-OTHER> 3,232
<INCOME-PRETAX> 1,024
<INCOME-PRE-EXTRAORDINARY> 1,024
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 715
<EPS-PRIMARY> 0.48
<EPS-DILUTED> 0.48
<YIELD-ACTUAL> 0
<LOANS-NON> 1,374
<LOANS-PAST> 0
<LOANS-TROUBLED> 724
<LOANS-PROBLEM> 3,700
<ALLOWANCE-OPEN> 5,009
<CHARGE-OFFS> 306
<RECOVERIES> 22
<ALLOWANCE-CLOSE> 4,825
<ALLOWANCE-DOMESTIC> 4,825
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0
</TABLE>
