Another substantial COVID-19 related increase in First Bancorp’s provision for loan losses led to a 31.5% drop in second-quarter net income to $16.3 million.
However, the combination of a surge in federal Paycheck Protection Program loan writing and a major gain from selling mortgage-backed securities served to lessen the bank’s potential profit decline. The bank issued its report after the stock market closed Thursday.
First Bancorp, a $6.9 billion supercommunity bank based in Southern Pines, has increased its Winston-Salem and Triad presence significantly in the past three years with four and 15 branches, respectively.
Diluted earnings were 56 cents a share, down 24 cents from a year ago.
The average earnings forecast was 42 cents by four 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 $19.3 million in the second quarter, up from $5.6 million in the first quarter and a $308,000 recovery in the provision a year ago.
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.
“Since the onset of the pandemic in March, the company has worked with many of its borrowers, including the option of loan payment deferrals, with total loans on deferral status amounting to $774 million at June 30, or 16% of the loan portfolio,” the bank said.
Excluding the provision, First Bancorp had loan revenue of $52.6 million, down 3.3% from a year ago.
Fee revenue surged 67.5% to $26.2 million, in large part by an $8 million gain from selling $220 million in mortgage-backed and commercial mortgage-backed securities.
First Bancorp received a major ancillary benefit from its entrance during the third quarter of 2016 into national Small Business Administration lending business.
The bank reported consulting fees of $3.74 million, compared with $921,000 a year ago. It also had gains of $1.96 million on the sales of the guaranteed portions of SBA loans, down from $3.07 million a year ago.
First Bancorp approved PPP loans worth a combined $245 million. The bank said it has $8.8 million in remaining deferred PPP fees from those loans
Nonperforming assets were at $47.8 million on June 30, compared with $38.3 million on March 31 and $34.3 million on June 30, 2019.
The bank repurchased 104,289 shares in the second quarter worth a combined $2.4 million.