<PAGE>
===============================================================================
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
June 30, 1996
___________________
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 June 30, 1996, 1,507,085 shares of the registrant's Common
Stock, $5 par value, were outstanding. The registrant had no other classes of
securities outstanding.
Transitional Small Business Format [ ] YES [ X ] NO
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EXHIBIT INDEX BEGINS ON PAGE 20
<PAGE>
INDEX
FIRST BANCORP AND SUBSIDIARIES
Page
Part I. Financial Information
Item 1 - Financial Statements
CONSOLIDATED BALANCE SHEETS -
June 30, 1996 and 1995
(With Comparative Amounts at December 31, 1995) 3
STATEMENTS OF CONSOLIDATED INCOME -
For the Periods Ended June 30, 1996 and 1995 4
STATEMENTS OF CONSOLIDATED CASH FLOWS -
For the Periods Ended June 30, 1996 and 1995 5
STATEMENTS OF CHANGES IN CONSOLIDATED SHAREHOLDERS' EQUITY -
For the Period Ended June 30, 1996
and for the Year Ended December 31, 1995 6
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 7
Item 2 - Management's Discussion and Analysis of Consolidated
Results of Operations and Financial Condition 8
Part II. Other Information
Item 6 - Exhibits and Reports on Form 8-K 16
Signatures 19
Exhibit Cross Reference Index 20
<PAGE>
Part I. Financial Information
Item 1 - Financial Statements
Consolidated Balance Sheets
FIRST BANCORP AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
Jun 30, Dec 31, Jun 30,
($ in thousands) 1996 1995 1995
--------- --------- ---------
<S> <C> <C> <C>
ASSETS
Cash & due from banks, noninterest bearing $ 16,165 $ 12,190 $ 11,907
Federal funds sold 5,125 11,826 662
--------- --------- ---------
Total cash and cash equivalents 21,290 24,016 12,569
--------- --------- ---------
Securities available for sale (approximate
costs of $51,448, $49,297 and $48,027) 51,185 49,657 48,183
Securities held-to-maturity (approximate
fair values of $19,947, $20,374 and $22,152) 19,664 19,740 21,661
Presold mortgages in process of settlement 765 826 1,052
Loans, net of unearned income 219,838 211,522 192,979
Less: Allowance for possible loan losses (4,758) (4,587) (4,853)
--------- --------- ---------
Net loans 215,080 206,935 188,126
--------- --------- ---------
Premises and equipment, net 8,066 8,043 7,500
Accrued interest receivable 2,254 2,372 2,208
Intangible assets 6,119 6,306 5,994
Other 3,167 3,844 4,576
--------- --------- ---------
Total assets $ 327,590 $ 321,739 $ 291,869
========= ========= =========
LIABILITIES
Deposits: Demand $ 44,334 $ 41,941 $ 37,860
Savings, NOW and money market 103,890 106,339 98,070
Time deposits of $100,000 or more 33,864 31,961 24,764
Other time deposits 110,070 107,474 97,315
--------- --------- ---------
Total deposits 292,158 287,715 258,009
Accrued interest on deposits 1,787 1,889 1,458
Other 2,391 1,858 1,838
--------- --------- ---------
Total liabilities 296,336 291,462 261,305
--------- --------- ---------
SHAREHOLDERS' EQUITY
Common stock, $5 par value per share
Authorized: 12,500,000 shares
Issued and outstanding: 1,507,085,
1,507,085 and 1,504,185 shares 7,535 7,535 7,521
Capital surplus 11,355 11,355 11,308
Retained earnings 12,537 11,152 11,632
Unrealized gain (loss) on securities
available for sale, net of income taxes (173) 235 103
--------- --------- ---------
Total shareholders' equity 31,254 30,277 30,564
--------- --------- ---------
Total liabilities and shareholders' equity $ 327,590 $ 321,739 $ 291,869
========= ========= =========
<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 Six Months Ended
Jun 30, Jun 30,
($ in thousands except per share data) 1996 1995 1996 1995
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
INTEREST INCOME
Interest and fees on loans $ 5,259 $ 4,734 $ 10,380 $ 9,128
Interest on investment securities:
Taxable interest income 705 735 1,351 1,383
Exempt from income taxes 267 271 542 538
Other, principally federal funds sold 160 82 326 202
--------- --------- --------- ---------
Total interest income 6,391 5,822 12,599 11,251
--------- --------- --------- ---------
INTEREST EXPENSE
Time deposits of $100,000 or more 445 411 865 770
Other time and savings deposits 2,000 1,811 4,049 3,391
--------- --------- --------- ---------
Total interest expense 2,445 2,222 4,914 4,161
--------- --------- --------- ---------
NET INTEREST INCOME 3,946 3,600 7,685 7,090
Provision for possible loan losses 75 160 150 260
--------- --------- --------- ---------
NET INTEREST INCOME AFTER PROVISION
FOR POSSIBLE LOAN LOSSES 3,871 3,440 7,535 6,830
--------- --------- --------- ---------
OTHER INCOME
Service charges on deposit accounts 624 533 1,256 1,070
Commissions from insurance sales 87 97 195 195
Other charges, commissions and fees 233 209 450 423
Data processing fees 62 32 116 49
--------- --------- --------- ---------
Total other income 1,006 871 2,017 1,737
--------- --------- --------- ---------
OTHER EXPENSES
Salaries 1,397 1,260 2,677 2,450
Employee benefits 321 239 648 592
--------- --------- --------- ---------
Total personnel expense 1,718 1,499 3,325 3,042
Net occupancy expense 238 209 474 418
Equipment related expenses 208 199 416 406
Other 1,111 1,208 2,227 2,481
--------- --------- --------- ---------
Total other expenses 3,275 3,115 6,442 6,347
--------- --------- --------- ---------
INCOME BEFORE INCOME TAXES 1,602 1,196 3,110 2,220
Income taxes 559 391 1,062 700
--------- --------- --------- ---------
NET INCOME $ 1,043 $ 805 $ 2,048 $ 1,520
========= ========= ========= =========
PER SHARE AMOUNTS
Net income $ 0.69 $ 0.54 $ 1.36 $ 1.01
Cash dividends declared 0.22 0.17 0.44 0.34
<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>
Six Months Ended
Jun 30,
($ in thousands) 1996 1995
--------- ---------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $ 2,048 $ 1,520
Adjustments to reconcile net income to
net cash provided by operations:
Provision for loan losses 150 260
Net security premium amortization/discount accretion (13) (13)
Loan fees and costs deferred net of amortization (15) (41)
Depreciation of premises and equipment 372 362
Amortization of intangible assets 283 285
Realized and unrealized other real estate losses 49 48
Provision for deferred income taxes 226 (160)
Changes in operating assets and liabilities:
Decrease in accrued interest receivable 118 27
Increase in intangible assets (96) --
Decrease in other assets 1,032 1,078
Increase (decrease) in accrued interest payable (102) 314
Increase in other liabilities 472 589
--------- ---------
Net cash provided by operating activities 4,524 4,269
--------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of securities available for sale (25,956) (17,637)
Purchase of securities held-to-maturity (1,626) (1,283)
Proceeds from maturities/issuer calls of securities
available for sale 23,786 16,894
Proceeds from maturities/issuer calls of securities
held-to-maturity 1,740 542
Net increase in loans (8,639) (7,808)
Net purchases of premises and equipment (395) (724)
--------- ---------
Net cash used in investing activities (11,090) (10,016)
--------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES
Net increase (decrease) in deposits 4,443 (421)
Cash dividends paid (603) (511)
--------- ---------
Net cash provided by (used in) financing activities 3,840 (932)
--------- ---------
DECREASE IN CASH AND CASH EQUIVALENTS (2,726) (6,679)
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD 24,016 19,248
--------- ---------
CASH AND CASH EQUIVALENTS, END OF PERIOD $ 21,290 $ 12,569
========= =========
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
Cash paid during the period for:
Interest $ 5,016 $ 3,847
Income taxes 671 331
Non-cash transactions:
Foreclosed loans transferred to other real estate 359 203
Loans to facilitate the sale of other real estate 93 1,105
Increase (decrease) in market value of securities
available for sale (617) 1,255
<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, 1995 1,504 $ 7,521 $ 11,308 $ 10,624 $ (663)$ 28,790
Net income 1,582 1,582
Cash dividends
declared (1,054) (1,054)
Common stock issued
under stock option
plans 3 14 47 61
Net adjustment
for securities
available for sale 898 898
--------- --------- --------- --------- --------- ---------
BALANCES,
December 31, 1995 1,507 7,535 11,355 11,152 235 30,277
Net income 2,048 2,048
Cash dividends
declared (663) (663)
Net adjustment
for securities
available for sale (408) (408)
--------- --------- --------- --------- --------- ---------
BALANCES,
June 30, 1996 1,507 $ 7,535 $ 11,355 $ 12,537 $ (173)$ 31,254
========= ========= ========= ========= ========= =========
<FN>
See Notes to Consolidated Financial Statements.
</TABLE>
<PAGE>
FIRST BANCORP AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the Periods Ended June 30, 1996 and 1995
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 June 30, 1996 and 1995 and the consolidated
results of operations and consolidated cash flows for the periods ended
June 30, 1996 and 1995 and changes in consolidated shareholders' equity
for the period ended June 30, 1996. Reference is made to the notes to
consolidated financial statements for the year ended December 31, 1995 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 June 30, 1996 and 1995
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 June 30, 1995 have been
reclassified to conform with the presentation for June 30, 1996. These
reclassifications had no effect on net income or shareholders' equity for
the periods presented.
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 $4,758,000 as of June 30, 1996 compared to $4,587,000 and
$4,853,000 as of December 31, 1995 and June 30, 1995, respectively.
These reserve levels represented 2.16%, 2.17% and 2.51% of total loans as of
June 30, 1996, December 31, 1995 and June 30, 1995, respectively.
Nonperforming assets are defined as nonaccrual loans, loans past due 90 or
more days and still accruing interest, restructured loans and foreclosed,
repossessed and idled properties. For each of the periods presented, the
Company had no loans past due 90 or more days and still accruing interest.
Nonperforming assets are summarized as follows:
<TABLE>
<CAPTION>
Jun 30, Dec 31, Jun 30,
($ in thousands) 1996 1995 1995
--------- --------- ---------
<S> <C> <C> <C>
Nonperforming loans:
Nonaccrual loans $ 1,396 $ 772 $ 1,425
Restructured loans 793 668 704
--------- --------- ---------
Total nonperforming loans 2,189 1,440 2,129
Foreclosed, repossessed and idled
properties (included in other assets) 836 1,393 1,757
--------- --------- ---------
Total nonperforming assets $ 3,025 $ 2,833 $ 3,886
========= ========= =========
Nonperforming loans as a percentage of total loans 1.00% 0.68% 1.10%
Allowance for possible loan losses as a percentage
of nonperforming loans 217.36% 318.54% 227.95%
Nonperforming assets as a percentage of loans and
foreclosed, repossessed and idled properties 1.37% 1.33% 2.00%
Nonperforming assets as a percentage of
total assets 0.92% 0.88% 1.33%
</TABLE>
<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 June 30, 1996 increased 29.6% to
$1,043,000, or $0.69 per share, compared to $805,000, or $0.54 per share, for
the second quarter of 1995. The earnings increase was achieved through the
combination of (i) higher net interest income that resulted from increasing
loan volume, (ii) higher noninterest income in 1996 and (iii) diminished
growth in overhead in 1996. For substantially the same reasons, net income
for the six months ended June 30, 1996 increased 34.7% to $2,048,000, or
$1.36 per share, from $1,520,000, or $1.01 cents per share, for the same
period in 1995.
Although not significantly impacting net income, the December 1995
acquisition of two branches of First Scotland Bank ("First Scotland") in
Laurinburg and Rockingham, 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 of deposits and other funds needed to support those assets.
Net interest income increased by $346,000, or 9.6%, when comparing the second
quarter of 1996 with the second quarter of 1995, primarily because of growth
in loan volume. For substantially the same reasons, net interest income for
the six months ended June 30, 1996 increased by $595,000, or 8.4%, compared
to the same period in 1995. The two branches acquired from First Scotland
added approximately $59,000 and $128,000, respectively, in net interest
income for the second quarter and year-to-date periods of 1996.
Under current conditions, future increases in 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. Generally, the Company's goal is to manage
portfolio mixes to minimize changes in net interest income due to changing
rates. The Company is experiencing a shift to time deposits from savings,
NOW and money market deposits.
The provision for possible loan losses for the second quarter decreased
$85,000 to $75,000 from $160,000 for the second quarter of 1995. For the
six months ended June 30, 1996, provisions for possible loan losses decreased
by $110,000, or 42.3%. Provisions for possible loan losses are based on
management's evaluation of the loan portfolio, as discussed under "Financial
Condition" below.
Noninterest income increased 15.5% for the second quarter, primarily
because of growth in service charges on deposit accounts. Growth in data
processing fees contributed as well. For the six months ended June 30, 1996,
noninterest income increased $280,000, or 16.1%, for substantially the same
reasons. Transaction deposit accounts acquired from First Scotland provided
increases of $64,000 and $136,000, respectively, in deposit fees for the
quarterly and year-to-date periods ended June 30, 1996. The Company sold no
securities in the second quarters of 1996 or 1995.
<PAGE>
Noninterest expenses, or overhead, increased 5.1% to $3,275,000 for the
second quarter of 1996, primarily because of increased personnel expenses
associated with expanding operations. This increase was partially offset by
substantial reductions in deposit insurance premiums and litigation expenses.
Personnel expenses increased $219,000, or 14.6%, of which $56,000 was
attributable to personnel acquired from First Scotland. Other noninterest
expenses decreased $97,000, or 8%, mainly due to the reductions in deposit
insurance premiums and legal fees mentioned above. For substantially the
same reasons, noninterest expenses increased by $95,000, or 1.5%, for the
six months ended June 30, 1996. Year-to-date personnel expenses increased
$283,000, or 9.3%, of which approximately $111,000 was attributable to
personnel acquired from First Scotland.
Income taxes increased $168,000, or 43.0%, for the second quarter, while
the effective tax rates were 34.9% and 32.7% for the quarters ended
June 30, 1996 and 1995, respectively. The increase in the effective tax rate
was primarily attributable to larger levels of nondeductible intangible
amortization. For substantially the same reasons, income taxes for the six
months ended June 30, 1996 increased $362,000, or 51.7%, resulting in an
effective tax rate of 34.1% compared to 31.5% for the same six month period
of 1995.
FINANCIAL CONDITION
The Company's total assets were $327.6 million at June 30, 1996, an
increase of $35.7 million, or 12.2%, from June 30, 1995. Interest-earning
assets increased by 12.3% compared to June 30, 1995. Loans, the primary
interest-earning asset, increased by 13.9% during this same period.
Deposits increased $34.1 million, or 13.2% to support the asset growth.
The increases in deposits were primarily in the categories of time deposits.
The Company is experiencing a shift in the mix of its deposits to time
deposits from savings, NOW and money market accounts. 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. In December of 1995, the Company acquired two branch offices of
First Scotland Bank which added assets, earning assets and deposits of
approximately $15.8 million, $14.2 million and $15 million, respectively.
Since December 31, 1995, the Company experienced annualized growth of 2.1%,
3.6% and 3.1% in earning assets, total assets and deposits, respectively.
<PAGE>
NONPERFORMING ASSETS
Nonperforming assets are defined as nonaccrual loans, loans past due 90
or more days, restructured loans and foreclosed, repossessed and idled
properties. The following table summarizes the Company's nonperforming
assets at the dates indicated.
<TABLE>
<CAPTION>
Jun 30, Dec 31, Jun 30,
($ in thousands) 1996 1995 1995
--------- --------- ---------
<S> <C> <C> <C>
Nonperforming loans:
Nonaccrual loans $ 1,396 $ 772 $ 1,425
Restructured loans 793 668 704
--------- --------- ---------
Total nonperforming loans 2,189 1,440 2,129
Foreclosed, repossessed and idled
properties (included in other assets) 836 1,393 1,757
--------- --------- ---------
Total nonperforming assets $ 3,025 $ 2,833 $ 3,886
========= ========= =========
Nonperforming loans as a percentage of total loans 1.00% 0.68% 1.10%
Allowance for possible loan losses as a percentage
of nonperforming loans 217.36% 318.54% 227.95%
Nonperforming assets as a percentage of loans and
foreclosed, repossessed and idled properties 1.37% 1.33% 2.00%
Nonperforming assets as a percentage of
total assets 0.92% 0.88% 1.33%
</TABLE>
Nonperforming assets were $3,025,000, $2,833,000 and $3,886,000 as of
June 30, 1996, December 31, 1995 and June 30, 1995, respectively.
Nonperforming assets as of June 30, 1996 include approximately $621,000
of loans acquired from First Scotland that have been placed on nonaccrual
status since December 31, 1995. 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 June 30, 1996 and 1995 had
been current in accordance with their original terms and had been outstanding
throughout the six month periods (or since origination or acquisition if held
for part of the six month periods), gross interest income in the amounts of
approximately $70,000 and $72,000 for nonaccrual loans and $36,000 and
$36,000 for restructured loans would have been recorded for the six months
ended June 30, 1996 and 1995, respectively. Interest income on such
loans that was actually collected and included in net income in the six
months ended June 30, 1996 and 1995 amounted to approximately $8,000 and
$10,000 for nonaccrual loans and $30,000 and $22,000 for restructured loans
loans respectively.
<PAGE>
Nonperforming loans are defined as nonaccrual loans, loans past due 90
or more days and restructured loans. As of June 30, 1996, December 31,
1995 and June 30, 1995, nonperforming loans were approximately 1.00%,
0.68% and 1.10%, respectively, of the total loans outstanding at such dates.
Nonaccrual loans decreased $29,000, or 2%, to approximately $1,396,000
compared to June 30, 1995 and increased approximately $624,000, or 80.8%,
since year-end. Approximately $621,000 in loans acquired from First Scotland
were placed on nonaccrual status in 1996. As of June 30, 1996, the borrower
with the largest outstanding nonaccrual loans owed an aggregate of $482,000
on such loans while the average balance of all nonaccrual loans was
approximately $28,000. 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 $2,400,000-$2,600,000 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 June 30, 1996, the Company owned foreclosed and repossessed
assets totaling approximately $836,000, which consisted principally of
several parcels of foreclosed real estate. Three parcels with carrying
values of approximately $184,000, $218,000 and $129,000 accounted for 64% of
the total. The Company's management has reviewed recent appraisals of these
properties and has concluded that their fair values, less estimated costs to
sell, exceed their respective carrying values at June 30, 1996.
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, 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.
Based on management's evaluation of the loan portfolio and economic
conditions, a provision for possible loan losses of $75,000 was added to the
allowance for possible loan losses during the second quarter of 1996, which
brought the year-to-date provision to $150,000. At June 30, 1996, the
allowance stood at $4,758,000, compared to $4,587,000 at December 31, 1995
and $4,853,000 at June 30, 1995. At June 30, 1996, the allowance for
possible loan losses was approximately 217% of total nonperforming loans,
compared to corresponding percentages of 319% at December 31, 1995 and 228%
at June 30, 1995.
The allowance for possible loan losses was 2.16%, 2.17% and 2.51% of
total loans as of June 30, 1996, December 31, 1995 and June 30, 1995
respectively. Management considers the reserve levels adequate to cover
possible loan losses on the loans outstanding as of each reporting date. It
must be emphasized, however, that the determination of the reserve using the
Company's procedures and methods rests upon various judgments and assumptions
about future economic conditions and other factors affecting loans. No
assurance can be given that the Company will not in any particular period
sustain loan losses that are sizable in relation to the amounts reserved or
that subsequent evaluations of the loan portfolio, in light of conditions and
factors then prevailing, will not require significant changes in the
allowance for possible loan losses or future charges to earnings. In
addition, various regulatory agencies, as an integral part of their
examination process, periodically review the Company's allowances for
possible loan losses and losses on other real estate. Such agencies may
require the Company to recognize additions to the allowances based on their
judgments about information available at the time of such examinations.
For the periods indicated, the following table summarizes the Company's
balances of loans outstanding, average loans outstanding, changes in the
allowance arising from charge-offs and recoveries by category, and additions
to the allowance that have been charged to expense.
<PAGE>
<TABLE>
<CAPTION>
Six Six
Months Year Months
Ended Ended Ended
Jun 30, Dec 31, Jun 30,
($ in thousands) 1996 1995 1995
--------- --------- ---------
<S> <C> <C> <C>
Loans outstanding at period end $ 219,838 $ 211,522 $ 192,979
========= ========= =========
Average loans outstanding during period $ 215,676 $ 192,035 $ 186,369
========= ========= =========
Allowance for possible loan losses at
beginning of period $ 4,587 $ 5,009 $ 5,009
Addition related to acquired bank -- 187 --
Loans charged off:
Commercial, financial and agricultural (45) (885) (260)
Real estate - mortgage (104) (184) (67)
Installment loans to individuals (155) (531) (127)
--------- --------- ---------
Total charge-offs (304) (1,600) (454)
--------- --------- ---------
Recoveries of loans previously charged off:
Commercial, financial and agricultural 63 23 6
Real estate - mortgage 118 6 1
Installment loans to individuals 59 62 31
Other 85 -- --
--------- --------- ---------
Total recoveries 325 91 38
--------- --------- ---------
Net recoveries (charge-offs) 21 (1,509) (416)
Additions to the allowance charged to expense 150 900 260
--------- --------- ---------
Allowance for possible loan losses at
end of period $ 4,758 $ 4,587 $ 4,853
========= ========= =========
Ratios:
Annualized net charge-offs (recoveries)
to average loans during period -0.02% 0.79% 0.45%
Annualized net charge-offs (recoveries)
to loans at end of period -0.02% 0.71% 0.43%
Allowance for possible loan losses to
average loans during period 2.21% 2.39% 2.60%
Allowance for possible loan losses to
loans at end of period 2.16% 2.17% 2.51%
Annualized net charge-offs (recoveries)
to allowance for possible loan losses -0.88% 32.90% 17.14%
Annualized net charge-offs (recoveries)
to provision for possible loan losses -28.00% 167.67% 320.00%
</TABLE>
Based on the results of the aforementioned loan analysis and grading
program and management's evaluation of the allowance for possible loan losses
at June 30, 1996, 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, 1995.
<PAGE>
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. The
Company has increased it loan to deposit ratio to a level more typical of the
Bank's North Carolina peer group. The Company's management believes its
liquidity sources are at an acceptable level 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 equaled or exceeded 10% as of June 30, 1996
and 1995 and December 31, 1995. In an effort to achieve a measurement of
capital adequacy that is sensitive to the individual risk profiles of
financial institutions, the various financial institution regulators have
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 June 30, 1996, the Company's total risk-based capital
ratio was approximately 12.6%.
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 June 30, 1996, the Company's
leverage capital ratio was approximately 7.9%.
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.
As of June 30, 1996, December 31, 1995 and June 30, 1995, the
Company was in compliance with all existing capital requirements, as
summarized in the following table:
<PAGE>
<TABLE>
<CAPTION>
Jun 30, Dec 31, Jun 30,
($ in thousands) 1996 1995 1995
--------- --------- ---------
<S> <C> <C> <C>
Tier I capital:
Total stated shareholders' equity $ 31,254 $ 30,277 $ 30,564
Less: Intangible assets 6,119 6,306 5,994
Unrealized holding gain (loss)
on securities available for
sale, net of income taxes (173) 235 103
--------- --------- ---------
Total Tier I leverage capital 25,308 23,736 24,467
--------- --------- ---------
Tier II capital:
Allowable allowance for loan losses 2,838 2,661 2,506
--------- --------- ---------
Tier II capital additions 2,838 2,661 2,506
--------- --------- ---------
Total capital $ 28,146 $ 26,397 $ 26,973
========= ========= =========
Risk-adjusted assets $ 227,059 $ 219,439 $ 200,469
Tier I risk-adjusted assets (includes Tier I
capital adjustments) 221,113 212,898 194,372
Tier II risk-adjusted assets (includes Tiers I
and II capital adjustments) 223,951 215,559 196,878
Quarterly average total assets 325,912 309,996 291,981
Adjusted quarterly average total assets
(includes Tier I capital adjustments) 319,966 303,455 285,884
Risk-based capital ratios:
Tier I capital 11.45% 11.15% 12.59%
Minimum required Tier I capital 4.00% 4.00% 4.00%
Total risk-based capital 12.57% 12.25% 13.70%
Minimum required total risk-based capital 8.00% 8.00% 8.00%
Leverage capital ratios:
Tier I leverage capital ratio 7.91% 7.82% 8.56%
Minimum required Tier I leverage capital 3-5.00% 3-5.00% 3-5.00%
</TABLE>
COMPLETED ACQUISITION
On December 15, 1995, First Bank completed its cash acquisition of the
Laurinburg and Rockingham branch offices of First Scotland Bank. As of
December 15, 1995, assets acquired were approximately $15.8 million. The
acquisition included earning assets of approximately $14.2 million, of which
approximately $8.9 million were loans. Deposit liabilities assumed were
approximately $15 million.
<PAGE>
Part II. Other Information
Item 4 - Submission of Matters to a Vote of Shareholders
The following proposals were considered and acted upon at the annual
meeting of shareholders of the Company held on April 25, 1996:
Proposal 1
A proposal to elect the following thirteen (13) nominees to the
Board of Directors to serve until the 1997 Annual Meeting of
Shareholders, or until their successors are elected and qualified:
Voted Withheld
For Authority
Jack D. Briggs 1,256,239 5,802
David L. Burns 1,257,419 4,622
Jesse S. Capel 1,257,419 4,622
James H. Garner 1,257,419 4,622
Jack L. Harper 1,257,419 4,622
George R. Perkins, Jr. 1,257,419 4,622
G. T. Rabe, Jr. 1,257,419 4,622
John J. Russell 1,257,419 4,622
Frederick H. Taylor 1,257,419 4,622
Edward T. Taws 1,257,419 4,622
John C. Wallace 1,257,419 4,622
A. Jordan Washburn 1,257,419 4,622
John C. Willis 1,257,419 4,622
Proposal 2
A proposal to ratify the appointment of KPMG Peat Marwick LLP as
independent auditors of the Company for the current fiscal year.
For 1,259,765 Against 1,411 Abstain 865
No other business came before the meeting, or any adjournment or
adjournments thereof.
<PAGE>
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 Purchase and Assumption Agreement between First Bank and Cabarrus
Bank of North Carolina was filed as Exhibit 10(l) to the Company's
Quarterly Report on Form 10-QSB for the quarter ended March 31,
1996, 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
June 30, 1996.
<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
August 12, 1996 BY: James H. Garner
------------------- -----------------------------
James H. Garner
President
(Principal Executive Officer),
Treasurer and Director
August 12, 1996 BY: Anna G. Hollers
------------------- -----------------------------
Anna G. Hollers
Executive Vice President
and Secretary
August 12, 1996 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 Purchase and Assumption Agreement between First Bank and
Cabarrus Bank of North Carolina *
27 Financial Data Schedules pursuant to Article 9 of
Regulation S-X 21
* Incorporated herein by reference.
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 9
<MULTIPLIER> 1,000
<PERIOD-START> JAN-01-1996
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> JUN-30-1996
<S> <C>
<CASH> 16,165
<INT-BEARING-DEPOSITS> 0
<FED-FUNDS-SOLD> 5,125
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 51,185
<INVESTMENTS-CARRYING> 19,664
<INVESTMENTS-MARKET> 19,947
<LOANS> 219,838
<ALLOWANCE> 4,758
<TOTAL-ASSETS> 327,590
<DEPOSITS> 292,158
<SHORT-TERM> 0
<LIABILITIES-OTHER> 4,178
<LONG-TERM> 0
<COMMON> 7,535
0
0
<OTHER-SE> 23,719
<TOTAL-LIABILITIES-AND-EQUITY> 327,590
<INTEREST-LOAN> 10,380
<INTEREST-INVEST> 1,893
<INTEREST-OTHER> 326
<INTEREST-TOTAL> 12,599
<INTEREST-DEPOSIT> 4,914
<INTEREST-EXPENSE> 4,914
<INTEREST-INCOME-NET> 7,685
<LOAN-LOSSES> 150
<SECURITIES-GAINS> 0
<EXPENSE-OTHER> 6,442
<INCOME-PRETAX> 3,110
<INCOME-PRE-EXTRAORDINARY> 3,110
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2,048
<EPS-PRIMARY> 1.36
<EPS-DILUTED> 1.36
<YIELD-ACTUAL> 5.48
<LOANS-NON> 1,396
<LOANS-PAST> 0
<LOANS-TROUBLED> 793
<LOANS-PROBLEM> 2,500
<ALLOWANCE-OPEN> 4,587
<CHARGE-OFFS> 304
<RECOVERIES> 325
<ALLOWANCE-CLOSE> 4,758
<ALLOWANCE-DOMESTIC> 4,758
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0
</TABLE>
