A substantial COVID-19 related increase in First Bancorp’s provision for loan losses led to an 18.8% drop in first-quarter net income to $18.2 million.
First Bancorp, a supercommunity bank based in Southern Pines, released the report after the stock market closed Tuesday. The bank has increased its Winston-Salem and Triad presence significantly in the past three years with four and 15 branches, respectively.
Diluted earnings were 62 cents a share, down 13 cents from a year ago.
The average earnings forecast was 60 cents by five analysts surveyed by Zacks Investment Research. Analysts typically do not include one-time gains and charges in their forecasts.
The bank reported a provision for loan losses of $5.6 million, up from $3.2 million in the fourth quarter and $500,000 a year ago.
First Bancorp said $4.3 million of the provision was related to COVID-19’s impact on the loan portfolio.
The provision offers a glimpse at how a bank expects its loan portfolio and revenue stream to perform as customers struggle to make monthly payments. It has a bottom-line effect on a bank’s profitability.
“In determining the COVID-19 related provision, the company reviewed deferrals that had been requested from borrowers and also reviewed the industries most at-risk from the immediate impact of the shutdown,” the bank said.
“In this analysis, the company identified $553 million of loans to the following industries: hotels, restaurants, retail stores, travel accommodations, child care facilities, arts and entertainment, barber shops and beauty salons, car and boat dealers, and mini-storage facilities, as well as all credit cards.”
First Bancorp is far from alone in making a substantial increase in its provision for the first quarter.
Among First Bancorp’s super-community and regional bank competitors, F.N.B. Corp. placed $47.8 million into its provision, compared with $7.5 million in the fourth quarter and $13.6 million a year ago.
First Horizon National Corp. placed $145 million into its provision, compared with $10 million in the fourth quarter and $9 million a year ago. Pinnacle Financial Partners Inc. took a $99.9 million provision, compared with $4.6 million in the fourth quarter and $7.2 million a year ago.
Excluding the provision, First Bancorp had loan revenue of $54.7 million, up 2.6% from a year ago.
Fee revenue fell 2/6% to $13.7 million.
Other service charges on commissions and fees were the top fee-revenue producer at $4.1 million, followed by $3.3 million from service charges on deposit accounts, and $2.1 million in commissions from sales of insurance and financial products.
Another key factor was the bank’s entrance during the third quarter of 2016 into national Small Business Administration lending business.
For the first quarter, the bank reported consulting fees of $1.03 million and gains of $647.000 on the sales of the guaranteed portions of SBA loans.
First Bancorp approved 1,995 loans worth a combined $208 million in the federal Paycheck Protection Program. As of April 23, the bank had deferred loan payments on 1,062 loans totaling $506 million.
Nonperforming assets were at $38.3 million on March 31, compared with $37.8 million on Dec. 31 and $39.5 million on March 31, 2019.
Total assets were at $6.4 billion on March 31, compared with $6.14 billion on Dec. 31.
The bank repurchased 576,406 shares in the first quarter worth a combined $20 million.
On Nov. 19, 2019, the bank’s board of directors authorized an updated share repurchase program to spend up to $40 million by Dec. 31, 2020.
However, the board suspended share repurchased “for the foreseeable future” in March.