SOUTHERN PINES, N.C., April 23, 2019 /PRNewswire/ -- First Bancorp (NASDAQ: FBNC), the parent company of First Bank, announced today net income available to common shareholders of $22.3 million, or $0.75 per diluted common share, for the three months ended March 31, 2019, an increase of 7.1% in earnings per share from the $20.7 million, or $0.70 per diluted common share, recorded in the first quarter of 2018.
Net Interest Income and Net Interest Margin
Net interest income for the first quarter of 2019 was $53.4 million, a 5.7% increase from the $50.5 million recorded in the first quarter of 2018. The increase in net interest income was due to growth in interest-earning assets.
The Company's net interest margin (tax-equivalent net interest income divided by average earning assets) for the first quarter of 2019 was 4.06% compared to 4.17% for the first quarter of 2018. The decrease in the net interest margin realized in 2019 was primarily due to lower loan discount accretion, significant interest recoveries realized in the prior year and interest bearing liability costs that have increased more than earning asset yields, as discussed in the following paragraph.
The Company recorded loan discount accretion of $1.4 million in the first quarter of 2019, compared to $2.1 million in the first quarter of 2018. Loan discount accretion had an 11 basis point impact on the net interest margin in the first quarter of 2019 compared to an 18 basis point impact in the first quarter of 2018. The lower discount accretion in 2019 was attributable to paydowns in the Company's acquired loan portfolios. Additionally, in the first quarter of 2018, the Company received approximately $750,000 in interest recoveries on loans that had been charged off in the past that added approximately 6 basis points to the net interest margin in the first quarter of 2018. Finally, over the past year, the Company's interest bearing liability costs have increased more than earning asset yields, with the rate on interest bearing liabilities being 39 basis points higher in the first quarter of 2019 compared to the first quarter of 2018, while earning asset yields increased by approximately 27 basis points for that same period (exclusive of the impact of the loan discount accretion and interest recovery variances).
Excluding the effects of loan discount accretion, the Company's tax-equivalent net interest margin was 3.95% for the first quarter of 2019, 3.99% for the first quarter of 2018, and 3.94% in the fourth quarter of 2018. See the Financial Summary for a reconciliation of the Company's net interest margin to the net interest margin excluding loan discount accretion, and other information regarding this percentage.
Provision for Loan Losses and Asset Quality
The Company recorded a provision for loan losses of $0.5 million in the first quarter of 2019 compared to a negative provision for loan losses of $3.7 million (reduction of the allowance for loan losses) in the first quarter of 2018. In the first quarter of 2018, the Company experienced net loan recoveries of $3.7 million, which drove the negative provision for the quarter. The Company's provision for loan losses has remained at a low level over the past several years as a result of strong asset quality, including low loan charge-offs.
The ratio of annualized net charge-offs (recoveries) to average loans for the three months ended March 31, 2019 was 0.04%, compared to (0.36%) for the same period of 2018. The Company's nonperforming assets to total assets ratio was 0.65% at March 31, 2019 compared to 0.92% at March 31, 2018.
Noninterest Income
Total noninterest income was $14.9 million and $15.9 million for the three months ended March 31, 2019 and March 31, 2018, respectively.
Core noninterest income for the first quarter of 2019 was $15.0 million, a decrease of 7.3% from the $16.2 million reported for the first quarter of 2018, which was primarily due to decreases in SBA loan sale gains recorded in 2019 (see additional discussion below). Core noninterest income includes i) service charges on deposit accounts, ii) other service charges, commissions, and fees, iii) fees from presold mortgage loans, iv) commissions from sales of insurance and financial products, v) SBA consulting fees, vi) SBA loan sale gains, and vii) bank-owned life insurance income.
Other service charges, commissions, and fees increased in the first quarter of 2019 compared to 2018, primarily as a result of higher debit card and credit card interchange fees associated with increased usage.
During the three months ended March 31, 2019 and 2018, the Company realized $2.0 million and $3.8 million in gains on SBA loan sales, respectively. The decline in the first quarter of 2019 gains was a result of a combination of a lower sales volume and lower premiums realized.
Noninterest Expenses
Noninterest expenses amounted to $39.6 million in the first quarter of 2019 compared to $43.6 million recorded in the first quarter of 2018. Most categories of noninterest expense decreased in the first quarter 2019 compared to the first quarter of 2018 due to operating efficiencies realized subsequent to the March 2018 merger conversion of the Asheville Savings Bank operations into First Bank.
Income Taxes
The Company's effective tax rate for the first quarter of 2019 was 20.9% compared to 22.0% in the first quarter of 2018. The decline was due to a decrease in the North Carolina corporate income tax rate from 3.0% to 2.5%, as well as the impact of certain merger expenses recorded in 2018 that were not tax deductible.
Balance Sheet and Capital
Total assets at March 31, 2019 amounted to $6.1 billion, a 7.2% increase from a year earlier. Total loans at March 31, 2019 amounted to $4.3 billion, a 4.6% increase from a year earlier, and total deposits amounted to $4.8 billion at March 31, 2019, a 6.7% increase from a year earlier.
The Company experienced steady organic loan and deposit growth during the first quarter of 2019. Organic loan growth amounted to $54.7 million, or 5.2% annualized, and organic deposit growth amounted to $137.9 million, or 12.0% annualized. The Company has ongoing internal initiatives to enhance loan and deposit growth, including the Company's continued expansion into higher growth markets such as Charlotte and Raleigh.
The Company remains well-capitalized by all regulatory standards, with an estimated Total Risk-Based Capital Ratio at March 31, 2019 of 14.25%, an increase from the 12.79% reported at March 31, 2018. The Company's tangible common equity to tangible assets ratio was 9.21% at March 31, 2019, an increase of 86 basis points from a year earlier.
Impact of New Lease Accounting Standard
During the first quarter of 2019, the Company adopted new accounting guidance which required the Company to record all long-term leases on its balance sheet. With the adoption of this guidance, the Company recorded $19.5 million in right-to-use lease assets, which was recorded within premises and equipment, and $19.5 million in lease obligations, which was recorded in other liabilities. These additions had an insignificant impact on the Company's capital ratios, and there was no impact to the Company's earnings related to the adoption of this new standard.
Comments of the CEO and Other Business Matters
Richard H. Moore, CEO of First Bancorp, commented, "We are pleased with our first quarter results. Earnings were strong, and we also experienced good balance sheet growth. We were also pleased that for the second year in a row, our Board of Directors increased the Company's dividend rate. A dividend rate of 12 cents per share is being paid to shareholders this week, which is 50% higher than the dividend rate paid five quarters ago."
The following is additional discussion of business development and other miscellaneous matters affecting the Company during the first quarter of 2019:
- On February 5, 2019, the Company announced a quarterly cash dividend of $0.12 per share payable on April 25, 2019 to shareholders of record on March 31, 2019. This dividend rate represents a 20% increase over the dividend rate declared in the first quarter of 2018.
First Bancorp is a bank holding company headquartered in Southern Pines, North Carolina, with total assets of approximately $6.1 billion. Its principal activity is the ownership and operation of First Bank, a state-chartered community bank that operates 101 branches in North Carolina and South Carolina. First Bank also operates one loan production office in Raleigh, North Carolina. First Bank Insurance Services is a subsidiary of First Bank and provides insurance products and services to individuals and businesses throughout First Bank's market area. First Bank also provides SBA loans to customers through its nationwide network of lenders – for more information on First Bank's SBA lending capabilities, please visit www.firstbanksba.com. First Bancorp's common stock is traded on The NASDAQ Global Select Market under the symbol "FBNC."
Please visit our website at www.LocalFirstBank.com.
This press release contains forward-looking statements within the meaning of Section 21E of the Securities Exchange Act of 1934 and the Private Securities Litigation Reform Act of 1995, which statements are inherently subject to risks and uncertainties. Forward-looking statements are statements that include projections, predictions, expectations or beliefs about future events or results or otherwise are not statements of historical fact. Such statements are often characterized by the use of qualifying words (and their derivatives) such as "expect," "believe," "estimate," "plan," "project," "anticipate," or other words or phrases concerning opinions or judgments of the Company and its management about future events. Factors that could influence the accuracy of such forward-looking statements include, but are not limited to, the financial success or changing strategies of the Company's customers, the Company's level of success in integrating acquisitions, actions of government regulators, the level of market interest rates, and general economic conditions. For additional information about the factors that could affect the matters discussed in this paragraph, see the "Risk Factors" section of the Company's most recent annual report on Form 10-K available at www.sec.gov. Forward-looking statements speak only as of the date they are made, and the Company undertakes no obligation to update or revise forward-looking statements. The Company is also not responsible for changes made to this press release by wire services, internet services or other media.
First Bancorp and Subsidiaries |
|||||
Three Months Ended March 31, |
Percent |
||||
($ in thousands except per share data – unaudited) |
2019 |
2018 |
Change |
||
INCOME STATEMENT |
|||||
Interest income |
|||||
Interest and fees on loans |
$ 53,960 |
50,170 |
|||
Interest on investment securities |
5,074 |
2,966 |
|||
Other interest income |
2,701 |
1,925 |
|||
Total interest income |
61,735 |
55,061 |
12.1% |
||
Interest expense |
|||||
Interest on deposits |
5,577 |
2,673 |
|||
Interest on borrowings |
2,797 |
1,881 |
|||
Total interest expense |
8,374 |
4,554 |
83.9% |
||
Net interest income |
53,361 |
50,507 |
5.7% |
||
Total provision (reversal) for loan losses |
500 |
(3,659) |
n/m |
||
Net interest income after provision for loan losses |
52,861 |
54,166 |
(2.4%) |
||
Noninterest income |
|||||
Service charges on deposit accounts |
2,945 |
3,263 |
|||
Other service charges, commissions, and fees |
5,547 |
4,597 |
|||
Fees from presold mortgage loans |
545 |
859 |
|||
Commissions from sales of insurance and financial products |
2,029 |
1,940 |
|||
SBA consulting fees |
1,263 |
1,141 |
|||
SBA loan sale gains |
2,062 |
3,802 |
|||
Bank-owned life insurance income |
646 |
623 |
|||
Foreclosed property gains (losses), net |
(245) |
(288) |
|||
Securities gains (losses), net |
− |
− |
|||
Other gains (losses), net |
82 |
4 |
|||
Total noninterest income |
14,874 |
15,941 |
(6.7%) |
||
Noninterest expenses |
|||||
Salaries expense |
18,965 |
19,398 |
|||
Employee benefit expense |
4,588 |
4,607 |
|||
Occupancy and equipment related expense |
4,123 |
4,054 |
|||
Merger and acquisition expenses |
110 |
2,761 |
|||
Intangibles amortization expense |
1,631 |
1,672 |
|||
Other operating expenses |
10,153 |
11,106 |
|||
Total noninterest expenses |
39,570 |
43,598 |
(9.2%) |
||
Income before income taxes |
28,165 |
26,509 |
6.2% |
||
Income tax expense |
5,880 |
5,836 |
0.8% |
||
Net income available to common shareholders |
$ 22,285 |
20,673 |
7.8% |
||
Earnings per common share – basic |
$ 0.75 |
0.70 |
7.1% |
||
Earnings per common share – diluted |
0.75 |
0.70 |
7.1% |
||
ADDITIONAL INCOME STATEMENT INFORMATION |
|||||
Net interest income, as reported |
$ 53,361 |
50,507 |
|||
Tax-equivalent adjustment (1) |
424 |
356 |
|||
Net interest income, tax-equivalent |
$ 53,785 |
50,863 |
5.7% |
||
(1) |
This amount reflects the tax benefit that the Company receives related to its tax-exempt loans and securities, which carry interest rates lower than similar taxable investments due to their tax-exempt status. This amount has been computed assuming a 23% tax rate and is reduced by the related nondeductible portion of interest expense. |
n/m – not meaningful |
First Bancorp and Subsidiaries |
||
Three Months Ended March 31, |
||
PERFORMANCE RATIOS (annualized) |
2019 |
2018 |
Return on average assets (1) |
1.52% |
1.51% |
Return on average common equity (2) |
11.66% |
11.95% |
Net interest margin – tax-equivalent (3) |
4.06% |
4.17% |
Net charge-offs (recoveries) to average loans |
0.04% |
(0.36%) |
COMMON SHARE DATA |
||
Cash dividends declared – common |
$ 0.12 |
0.10 |
Stated book value – common |
26.50 |
23.79 |
Tangible book value – common |
17.94 |
15.17 |
Common shares outstanding at end of period |
29,746,455 |
29,660,990 |
Weighted average shares outstanding – basic |
29,587,217 |
29,533,869 |
Weighted average shares outstanding – diluted |
29,743,395 |
29,624,150 |
CAPITAL RATIOS |
||
Tangible common equity to tangible assets |
9.21% |
8.35% |
Common equity tier I capital ratio – estimated |
12.54% |
11.01% |
Tier I leverage ratio – estimated |
10.69% |
9.88% |
Tier I risk-based capital ratio – estimated |
13.76% |
12.23% |
Total risk-based capital ratio – estimated |
14.25% |
12.79% |
AVERAGE BALANCES ($ in thousands) |
||
Total assets |
$ 5,945,049 |
5,549,516 |
Loans |
4,280,272 |
4,099,495 |
Earning assets |
5,372,766 |
4,949,612 |
Deposits |
4,704,231 |
4,403,805 |
Interest-bearing liabilities |
3,773,714 |
3,629,364 |
Shareholders' equity |
775,059 |
701,411 |
(1) |
Calculated by dividing annualized net income available to common shareholders by average assets. |
(2) |
Calculated by dividing annualized net income available to common shareholders by average common equity. |
(3) |
See note 1 on the first page of the Financial Summary for discussion of tax-equivalent adjustments. |
TREND INFORMATION |
||||||
($ in thousands except per share data) |
For the Three Months Ended |
|||||
INCOME STATEMENT |
Mar. 31, |
Dec. 31, |
Sept. 30, |
June 30, |
Mar. 31, |
|
Net interest income – tax-equivalent (1) |
$ 53,785 |
54,289 |
52,273 |
51,599 |
50,863 |
|
Taxable equivalent adjustment (1) |
424 |
443 |
428 |
367 |
356 |
|
Net interest income |
53,361 |
53,846 |
51,845 |
51,232 |
50,507 |
|
Provision (reversal) for loan losses |
500 |
693 |
87 |
(710) |
(3,659) |
|
Noninterest income |
14,874 |
14,406 |
15,376 |
16,111 |
15,941 |
|
Noninterest expense |
39,570 |
37,666 |
39,238 |
38,873 |
43,598 |
|
Income before income taxes |
28,165 |
29,893 |
27,896 |
29,180 |
26,509 |
|
Income tax expense |
5,880 |
5,998 |
5,905 |
6,450 |
5,836 |
|
Net income |
22,285 |
23,895 |
21,991 |
22,730 |
20,673 |
|
Earnings per common share – basic |
0.75 |
0.81 |
0.74 |
0.77 |
0.70 |
|
Earnings per common share – diluted |
0.75 |
0.80 |
0.74 |
0.77 |
0.70 |
|
Cash dividends declared per share |
0.12 |
0.10 |
0.10 |
0.10 |
0.10 |
|
(1) |
See note 1 on the first page of this Financial Summary for discussion of tax-equivalent adjustments. |
First Bancorp and Subsidiaries |
||||||||
CONSOLIDATED BALANCE SHEETS ($ in thousands - unaudited) |
||||||||
At Mar. 31, 2019 |
At Dec. 31, 2018 |
At Mar. 31, 2018 |
One Year Change |
|||||
Assets |
||||||||
Cash and due from banks |
$ 80,620 |
56,050 |
78,217 |
3.1% |
||||
Interest bearing deposits with banks |
366,187 |
406,848 |
448,515 |
(18.4%) |
||||
Total cash and cash equivalents |
446,807 |
462,898 |
526,732 |
(15.2%) |
||||
Investment securities |
730,512 |
602,588 |
453,059 |
61.2% |
||||
Presold mortgages |
3,318 |
4,279 |
6,029 |
(45.0%) |
||||
Total loans |
4,303,787 |
4,249,064 |
4,113,785 |
4.6% |
||||
Allowance for loan losses |
(21,095) |
(21,039) |
(23,298) |
(9.5%) |
||||
Net loans |
4,282,692 |
4,228,025 |
4,090,487 |
4.7% |
||||
Premises and equipment |
137,725 |
119,000 |
115,542 |
19.2% |
||||
Intangible assets |
254,449 |
255,480 |
255,760 |
(0.5%) |
||||
Foreclosed real estate |
6,390 |
7,440 |
11,307 |
(43.5%) |
||||
Bank-owned life insurance |
102,524 |
101,878 |
99,786 |
2.7% |
||||
Other assets |
85,831 |
82,528 |
82,825 |
3.6% |
||||
Total assets |
$ 6,050,248 |
5,864,116 |
5,641,527 |
7.2% |
||||
Liabilities |
||||||||
Deposits: |
||||||||
Noninterest bearing checking accounts |
$ 1,390,516 |
1,320,131 |
1,227,608 |
13.3% |
||||
Interest bearing checking accounts |
922,254 |
916,374 |
896,189 |
2.9% |
||||
Money market accounts |
1,079,002 |
1,035,523 |
1,026,043 |
5.2% |
||||
Savings accounts |
417,812 |
432,389 |
445,405 |
(6.2%) |
||||
Brokered deposits |
216,616 |
239,875 |
251,043 |
(13.7%) |
||||
Internet time deposits |
3,428 |
3,428 |
7,248 |
(52.7%) |
||||
Other time deposits > $100,000 |
506,148 |
447,619 |
357,595 |
41.5% |
||||
Other time deposits |
261,462 |
264,000 |
284,577 |
(8.1%) |
||||
Total deposits |
4,797,238 |
4,659,339 |
4,495,708 |
6.7% |
||||
Borrowings |
406,125 |
406,609 |
407,059 |
(0.2%) |
||||
Other liabilities |
58,746 |
33,938 |
33,110 |
77.4% |
||||
Total liabilities |
5,262,109 |
5,099,886 |
4,935,877 |
6.6% |
||||
Shareholders' equity |
||||||||
Common stock |
434,948 |
434,453 |
433,305 |
0.4% |
||||
Retained earnings |
360,455 |
341,738 |
282,038 |
27.8% |
||||
Stock in rabbi trust assumed in acquisition |
(3,245) |
(3,235) |
(3,588) |
(9.6%) |
||||
Rabbi trust obligation |
3,245 |
3,235 |
3,588 |
9.6% |
||||
Accumulated other comprehensive loss |
(7,264) |
(11,961) |
(9,693) |
25.1% |
||||
Total shareholders' equity |
788,139 |
764,230 |
705,650 |
11.7% |
||||
Total liabilities and shareholders' equity |
$ 6,050,248 |
5,864,116 |
5,641,527 |
7.2% |
||||
First Bancorp and Subsidiaries |
|||||
For the Three Months Ended |
|||||
YIELD INFORMATION |
Mar. 31, |
Dec. 31, |
Sept. 30, |
June 30, 2018 |
Mar. 31, |
Yield on loans |
5.11% |
5.13% |
4.96% |
4.99% |
4.96% |
Yield on securities |
2.95% |
2.71% |
2.52% |
2.47% |
2.60% |
Yield on other earning assets |
2.77% |
2.29% |
2.33% |
2.02% |
2.02% |
Yield on all interest earning assets |
4.66% |
4.60% |
4.49% |
4.48% |
4.51% |
Rate on interest bearing deposits |
0.67% |
0.56% |
0.48% |
0.40% |
0.34% |
Rate on other interest bearing liabilities |
2.79% |
2.60% |
2.41% |
2.24% |
1.87% |
Rate on all interest bearing liabilities |
0.90% |
0.79% |
0.69% |
0.60% |
0.51% |
Total cost of funds |
0.66% |
0.58% |
0.51% |
0.45% |
0.38% |
Net interest margin (1) |
4.03% |
4.05% |
4.00% |
4.04% |
4.14% |
Net interest margin – tax-equivalent (2) |
4.06% |
4.08% |
4.03% |
4.07% |
4.17% |
Average prime rate |
5.50% |
5.28% |
5.01% |
4.80% |
4.53% |
(1) |
Calculated by dividing annualized net interest income by average earning assets for the period. |
(2) |
Calculated by dividing annualized tax-equivalent net interest income by average earning assets for the period. See note 1 on the first page of this Financial Summary for discussion of tax-equivalent adjustments. |
For the Three Months Ended |
|||||||||||
NET INTEREST INCOME PURCHASE ($ in thousands) |
Mar. 31, |
Dec. 31, |
Sept. 30, |
June 30, |
Mar. 31, |
||||||
Interest income – increased by accretion of loan |
$ 1,132 |
1,566 |
1,365 |
2,064 |
1,956 |
||||||
Interest income – increased by accretion of loan |
287 |
264 |
210 |
232 |
155 |
||||||
Interest expense – reduced by premium |
58 |
71 |
84 |
101 |
116 |
||||||
Interest expense – increased by discount |
(45) |
(45) |
(46) |
(45) |
(45) |
||||||
Impact on net interest income |
$ 1,432 |
1,856 |
1,613 |
2,352 |
2,182 |
||||||
First Bancorp and Subsidiaries |
||||||||||
ASSET QUALITY DATA ($ in thousands) |
Mar. 31, |
Dec. 31, |
Sept. 30, |
June 30, |
Mar. 31, |
|||||
Nonperforming assets |
||||||||||
Nonaccrual loans |
$ 20,684 |
22,575 |
18,231 |
25,494 |
21,849 |
|||||
Troubled debt restructurings - accruing |
12,457 |
13,418 |
16,657 |
17,386 |
18,495 |
|||||
Accruing loans > 90 days past due |
- |
- |
- |
- |
- |
|||||
Total nonperforming loans |
33,141 |
35,993 |
34,888 |
42,880 |
40,344 |
|||||
Foreclosed real estate |
6,390 |
7,440 |
6,140 |
8,296 |
11,307 |
|||||
Total nonperforming assets |
$ 39,531 |
43,433 |
41,028 |
51,176 |
51,651 |
|||||
Purchased credit impaired loans not included |
$ 15,867 |
17,393 |
20,189 |
20,832 |
22,147 |
|||||
Asset Quality Ratios |
||||||||||
Net quarterly charge-offs (recoveries) to average |
0.04% |
0.02% |
0.27% |
(0.07%) |
(0.36%) |
|||||
Nonperforming loans to total loans |
0.77% |
0.85% |
0.83% |
1.03% |
0.98% |
|||||
Nonperforming assets to total assets |
0.65% |
0.74% |
0.72% |
0.90% |
0.92% |
|||||
Allowance for loan losses to total loans |
0.49% |
0.50% |
0.49% |
0.56% |
0.57% |
|||||
Allowance for loan losses + unaccreted discount |
0.86% |
0.90% |
0.94% |
1.05% |
1.11% |
|||||
(1) |
In the March 3, 2017 acquisition of Carolina Bank and the October 1, 2017 acquisition of Asheville Savings Bank, the Company acquired $19.3 million and $9.9 million, respectively, in purchased credit impaired loans in accordance with ASC 310-30 accounting guidance. These loans are excluded from the nonperforming loan amounts. |
First Bancorp and Subsidiaries |
||||||||||
For the Three Months Ended |
||||||||||
NET INTEREST MARGIN, EXCLUDING ($ in thousands) |
Mar. 31, |
Dec. 31, |
Sept. 30, |
June 30, |
Mar. 31, |
|||||
Net interest income, as reported |
$ 53,361 |
53,846 |
51,845 |
51,232 |
50,507 |
|||||
Tax-equivalent adjustment |
424 |
443 |
428 |
367 |
356 |
|||||
Net interest income, tax-equivalent (A) |
$ 53,785 |
54,289 |
52,273 |
51,599 |
50,863 |
|||||
Average earning assets (B) |
$ 5,372,766 |
5,276,311 |
5,143,449 |
5,080,372 |
4,949,612 |
|||||
Tax-equivalent net interest |
4.06% |
4.08% |
4.03% |
4.07% |
4.17% |
|||||
Net interest income, tax-equivalent |
$ 53,785 |
54,289 |
52,273 |
51,599 |
50,863 |
|||||
Loan discount accretion |
1,419 |
1,830 |
1,575 |
2,296 |
2,111 |
|||||
Net interest income, tax-equivalent, excluding |
$ 52,366 |
52,459 |
50,698 |
49,303 |
48,752 |
|||||
Average earnings assets (B) |
$ 5,372,766 |
5,276,311 |
5,143,449 |
5,080,372 |
4,949,612 |
|||||
Tax-equivalent net interest margin, excluding |
3.95% |
3.94% |
3.91% |
3.89% |
3.99% |
Note: The measure "tax-equivalent net interest margin, excluding impact of loan discount accretion" is a non-GAAP performance measure. Management of the Company believes that it is useful to calculate and present the Company's net interest margin without the impact of loan discount accretion for the reasons explained in the remainder of this note. Loan discount accretion is a non-cash interest income adjustment that is related to 1) the Company's acquisition of loans and represents the portion of the fair value discount that was initially recorded on the acquired loans, and 2) the Company's origination of SBA loans and the subsequent sale of the guaranteed portion of the loan that results in a discount being recorded on the retained portion of the loan. These discounts are recognized into income over the lives of the loans. At March 31, 2019, the Company had a remaining loan discount balance on acquired loans of $16.1 million compared to $22.3 million at March 31, 2018. At March 31, 2019 the Company had a remaining loan discount balance on SBA loans of $6.2 million compared to $3.2 million at March 31, 2018. For the related loans that perform and pay-down over time, the loan discount will also be reduced, with a corresponding increase to interest income. Therefore, management of the Company believes it is useful to also present this ratio to reflect the Company's net interest margin excluding this non-cash, temporary loan discount accretion adjustment to aid investors in comparing financial results between periods. The Company cautions that non-GAAP financial measures should be considered in addition to, but not as a substitute for, the Company's reported GAAP results.
SOURCE First Bancorp
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