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| 8-K - 8-K - First Bancorp, Inc /ME/ | fnlc-20201021.htm |
Exhibit 99.1
The First Bancorp Reports Third Quarter Earnings
DAMARISCOTTA, ME, October 21, 2020 – The First Bancorp (Nasdaq: FNLC), parent company of First National Bank, today announced operating results for the three months ended September 30, 2020. Unaudited net income was $7.1 million, a new quarterly record for the Company, and up $807,000 or 12.8% from the $6.3 million reported for the three months ended September 30, 2019. Earnings per common share for the period on a fully diluted basis were up $0.07 to $0.65 per share, an increase of 12.1% from the prior year. The Company also reported results for the nine months ended September 30, 2020. Net income was $20.2 million, up $1.3 million or 7.0% from the first nine months of 2019, with earnings per share on a fully diluted basis of $1.84, up $0.11 or 6.4% from the same period in 2019.
“With great appreciation for the team of dedicated professionals at The First Bancorp, I'm pleased to report that the Company posted strong operating results in the third quarter", commented Tony C. McKim, the Company’s President and Chief Executive Officer. "Earnings of $7.1 million for the period increased $526,000 from the second quarter, and marked a new quarterly earnings record. Net interest income before loan loss provision increased $254,000 from the second quarter and $1.5 million from the third quarter of 2019. Non-interest revenue increased $204,000 from the second quarter, and $1.3 million, or 36.0%, year-over-year, driven by continued strong mortgage banking revenue. Operating expenses in the third quarter remained controlled as demonstrated by an efficiency ratio of 45.97% for the quarter, down from 52.08% for the same period a year ago."
Mr. McKim continued, "The Company continues to support our customers and community partners in addressing the impact of COVID-19. First National Bank granted over 1,700 Paycheck Protection Program (PPP) loans with more than $97 million disbursed to Maine small businesses at an average loan size of less than $60,000. We are now working with those borrowers and the Small Business Administration towards forgiveness of loan balances per program guidelines. The Bank has also worked with nearly 1,100 borrowers economically impacted by the virus, to modify or defer loan payments during this crisis.
The lobbies of our sixteen banking offices re-opened in mid-June to serve customers under appropriate safety and social distancing protocols; currently approximately 25% of our staff continues to work remotely.
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And lastly, I am excited to share that on September 3rd, 2020 we announced the signing of an agreement to acquire a retail banking branch in Belfast, pending regulatory approval. The branch in Belfast would be our 17th and take us into Waldo County, bridging the gap between Knox and Hancock counties. We look forward to bringing First National Bank's brand of "Dream First" banking to the area later this year."
THIRD QUARTER 2020 FINANCIAL HIGHLIGHTS
•Net income increased 12.8% compared to the third quarter of 2019.
•Pre-tax, pre-provision net income (non-GAAP) increased 33.1% compared to the third quarter of 2019
•Total Assets increased $29.5 million in the third quarter to $2.3 billion.
•Low-cost deposits as of September 30, 2020 totaled $1.0 billion, an increase of $102.7 million in the quarter.
•Tangible Book Value increased to $17.32 per share, up from $17.07 at June 30, 2020 and $16.39 at September 30, 2019.
FINANCIAL CONDITION
Total assets at September 30, 2020 were $2.3 billion, up $29.5 million in the third quarter and up $263.4 million from a year ago. Earning assets increased $31.5 million during the quarter and have increased $258.8 million year-over-year. Loan balances fell $15.0 million in the third quarter, while investments increased $18.6 million. Commercial real estate and construction loans increased $14.8 million during the period, offset by an $18.7 million drop in other commercial loans, a $5.5 million reduction in municipal loans, and a $4.0 million decline in home equity line of credit balances. Overall loan growth excluding PPP has totaled $42.2 million, or 3.26%, year-to-date, and $75.8 million, or 6.0%, year-over-year. PPP loans totaled $97.3 million at the end of the third quarter.
Total deposits at September 30, 2020 were $1.8 billion, up $22.9 million during the quarter, and up $139.8 million or 8.6% from September 30, 2019. Low-cost deposits increased $102.7 million in the third quarter, a level consistent with the seasonal lift experienced in the third quarter over the past several years. The increase in low-cost deposits allowed for a decrease in higher cost funding sources; Certificate of Deposit balances were down $66.7 million for the quarter.
The Company’s capital position remained strong as of September 30, 2020, with an estimated total risk-based capital ratio of 15.53%, and an estimated leverage capital ratio of 8.42%. The total capital ratio compares favorably to 15.03% as of June 30, 2020 and 15.44% as of September 30, 2019. The leverage capital ratio is level with the immediate prior quarter end, and is down from
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8.82% at September 30, 2019, the result of asset growth, including the $97.3 million in PPP loan balances. The Company is eligible and enrolled to participate in the Federal Reserve's Paycheck Protection Program Liquidity Facility (PPPLF), but to date has elected not to do so. Had PPPLF been utilized to its fullest extent, the leverage capital ratio as of September 30, 2020 is estimated to have been 8.80%. Each of the Company’s capital ratios remain well in excess of regulatory requirements.
ASSET QUALITY & PROVISION FOR LOAN LOSSES
Asset quality remains stable. As of September 30, 2020, the ratio of non-performing assets to total assets was 0.43%, up slightly from 0.41% at June 30, 2020, and improved from 0.84% at September 30, 2019. Net charge-offs for the quarter were an annualized 0.15% of total loans; the year-to-date annualized charge-off rate of 0.08% of total loans is in line with the 0.07% experienced in the year ended December 31, 2019. Past due loans were 0.89% of total loans as of September 30, 2020, up modestly from 0.66% of total loans at June 30, 2020, and 0.78% as of September 30, 2019.
The provision for loan losses totaled $1.8 million in the third quarter of 2020, compared with $250,000 for the same period in 2019. Despite stable non-performing asset levels, continued positive charge-off metrics, and modest changes in the level of past due loans, management continues to view it prudent to consider the uncertainties brought about by COVID-19 and the potential impact to borrowers in its provision analysis. The allowance for loan losses stood at 1.07% of total loans as of September 30, 2020, up from the 0.97% of total loans at June 30, 2020, and 0.93% of loans at September 30, 2019. If PPP loan balances are excluded, the allowance as of September 30, 2020 would stand at 1.14% of total loans.
Through September 30, 2020, the Bank had processed 996 loan modification requests for interest-only payments or deferred payments in conformance with the CARES Act or inter-agency guidance issued in March, representing $279.7 million in loan balances, or approximately 20.8% of the loan portfolio excluding PPP balances. Of the $279.7 million total, $228.1 million were in the commercial and municipal loan portfolios, $50.5 million were residential real estate secured loans, and $1.1 million were consumer loans.
As of September 30, 2020, loans totaling $81.0 million, or 6% of all loans, remained in either their original modification or a subsequent modification.
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Modification statuses in the two primary segments are summarized below:
| Commercial/Municipal Loan Modifications | ||||||||||||||
| Units | Percentage | Balance (000's) | Percentage | |||||||||||
| Paid Off | 34 | 6% | $6,031 | 3% | ||||||||||
| Subsequent Modification | 41 | 7% | 20,443 | 9% | ||||||||||
| Still in Original Modification | 55 | 9% | 30,188 | 13% | ||||||||||
| Out of Modification | 452 | 78% | 171,407 | 75% | ||||||||||
| Total | 582 | 100% | $228,069 | 100% | ||||||||||
| Residential Real Estate Modifications | ||||||||||||||
| Units | Percentage | Balance (000's) | Percentage | |||||||||||
| Paid Off | 17 | 5% | $3,102 | 6% | ||||||||||
| Subsequent Modification | 97 | 28% | 13,857 | 27% | ||||||||||
| Still in Original Modification | 125 | 35% | 15,565 | 31% | ||||||||||
| Out of Modification | 111 | 32% | 17,949 | 36% | ||||||||||
| Total | 350 | 100% | $50,473 | 100% | ||||||||||
Consumer loans totaling $967,000 also remain in modification as of September 30, 2020.
OPERATING RESULTS
Net Income for the three months ended September 30, 2020 was $7.1 million, up $807,000 or 12.8% from the three months ended September 30, 2019. The Company’s Return on Average Assets of 1.24% for the quarter was level with the third quarter of 2019. On a Pre-Tax, Pre-Provision (non-GAAP) basis, the third quarter 2020 Return on Assets was 1.79%, up from 1.52% the prior year. Return on Average Tangible Common Equity was improved year-over-year, at 14.81% for the third quarter of 2020, up from 14.01% for the third quarter of 2019. The Company's Efficiency Ratio (non-GAAP) was 45.97% in the third quarter of 2020, down from 46.23% in the immediately preceding quarter and from 52.08% in the third quarter of 2019. Year-to-date in 2020, the efficiency ratio (non-GAAP) stands at 50.00%, down from 51.12% for the first nine months of 2019. (GAAP Efficiency Ratio was 47.45% for the three months ended September 30, 2020, and 50.60% for the nine months then ended).
Contributing factors to the Company’s operating results in the three months ended September 30, 2020 included:
•Earning asset growth led to a $1.5 million increase in net interest income from the third quarter of 2019, an increase of 11.5%.
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•Net interest margin for the third quarter of 2020 was 2.82%, down six basis points from the same period in 2019.
•Non-interest income was $4.8 million for the three months ended September 30, 2020, up $1.3 million or 36.0% from the three months ended September 30, 2019. Strong purchase and refinance volume led to secondary market mortgage banking revenue increasing $1.3 million, or 232.3% year-over-year. Revenue increased $87,000, or 10.6% year-over-year, at First National Wealth Management, the Bank’s trust and investment management division. Service charge income and other income were both negatively impacted by lower transaction volume related to COVID-19.
•Non-interest expense for the three months ended September 30, 2020 was $9.3 million, up $236,000 or 2.6% from the three months ended September 30, 2019. Employee salary and benefit expense increased a modest 3.4% from the prior year; a 22.2% period to period increase in Furniture & Equipment expense reflects recent building and technology investments. FDIC insurance premium was fully offset by small bank assessment credits in the third quarter of 2019; all credits having been applied, the year-to-year increase is $189,000. Third quarter 2020 savings in other operating expenses versus the prior year reflect the cost of an asset disposition in 2019.
As mentioned previously, the Bank had $97.3 million in PPP loan balances as of September 30, 2020, comprised of 1,707 loans, representing an average loan size at origination of $56,960. The Company has accrued $3.80 million in associated origination fees, of which $382,000 were recognized in interest income in the second quarter, and $468,000 were recognized in the third quarter.
DIVIDEND
On September 24, 2020 the Company's Board of Directors declared a third quarter dividend of 31 cents per share. The third quarter dividend represents a payout to shareholders of 47.69% of earnings per share for the period, and was paid on October 16, 2020 to shareholders of record as of October 6, 2020.
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ABOUT THE FIRST BANCORP
The First Bancorp, the parent company of First National Bank, is based in Damariscotta, Maine. Founded in 1864, First National Bank is a full-service community bank with $2.27 billion in assets. The Bank provides a complete array of commercial and retail banking services through sixteen locations in mid-coast and eastern Maine. First National Wealth Management, a division of the Bank, provides investment management and trust services to individuals, businesses, and municipalities. More information about The First Bancorp, First National Bank and First National Wealth Management may be found at www.thefirst.com.
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| The First Bancorp | |||||||||||
| Consolidated Balance Sheets (Unaudited) | |||||||||||
| In thousands of dollars, except per share data | September 30, 2020 | December 31, 2019 | September 30, 2019 | ||||||||
| Assets | |||||||||||
| Cash and due from banks | $ | 22,742 | $ | 14,433 | $ | 21,418 | |||||
| Interest-bearing deposits in other banks | 48,111 | 11,310 | 16,714 | ||||||||
| Securities available for sale | 340,140 | 360,520 | 326,798 | ||||||||
| Securities to be held to maturity | 331,962 | 281,606 | 298,786 | ||||||||
| Restricted equity securities, at cost | 10,545 | 8,982 | 8,982 | ||||||||
| Loans held for sale | 6,387 | 154 | 852 | ||||||||
| Loans | 1,436,646 | 1,297,075 | 1,263,459 | ||||||||
| Less allowance for loan losses | 15,371 | 11,639 | 11,765 | ||||||||
| Net loans | 1,421,275 | 1,285,436 | 1,251,694 | ||||||||
| Accrued interest receivable | 10,249 | 7,167 | 7,636 | ||||||||
| Premises and equipment | 27,110 | 21,305 | 21,232 | ||||||||
| Other real estate owned | 777 | 279 | 279 | ||||||||
| Goodwill | 29,805 | 29,805 | 29,805 | ||||||||
| Other assets | 47,523 | 47,799 | 49,031 | ||||||||
| Total assets | $ | 2,296,626 | $ | 2,068,796 | $ | 2,033,227 | |||||
| Liabilities | |||||||||||
| Demand deposits | $ | 248,444 | $ | 169,777 | $ | 171,623 | |||||
| NOW deposits | 492,223 | 393,569 | 400,514 | ||||||||
| Money market deposits | 156,948 | 161,000 | 148,689 | ||||||||
| Savings deposits | 275,513 | 236,141 | 240,691 | ||||||||
| Certificates of deposit | 252,461 | 277,225 | 319,292 | ||||||||
| Certificates $100,000 to $250,000 | 269,881 | 345,241 | 278,050 | ||||||||
| Certificates $250,000 and over | 67,589 | 67,513 | 64,431 | ||||||||
| Total deposits | 1,763,059 | 1,650,466 | 1,623,290 | ||||||||
| Borrowed funds | 283,787 | 184,955 | 181,417 | ||||||||
| Other liabilities | 30,340 | 20,867 | 20,031 | ||||||||
| Total Liabilities | 2,077,186 | 1,856,288 | 1,824,738 | ||||||||
| Shareholders' equity | |||||||||||
| Common stock | 109 | 109 | 109 | ||||||||
| Additional paid-in capital | 64,943 | 63,964 | 63,602 | ||||||||
| Retained earnings | 154,783 | 144,839 | 141,509 | ||||||||
| Net unrealized gain on securities available-for-sale | 5,520 | 3,657 | 3,686 | ||||||||
| Net unrealized loss on securities transferred from available for sale to held to maturity | (139) | (182) | (189) | ||||||||
| Net unrealized gain (loss) on cash flow hedging derivative instruments | (5,800) | 97 | (265) | ||||||||
| Net unrealized gain on postretirement costs | 24 | 24 | 37 | ||||||||
| Total shareholders' equity | 219,440 | 212,508 | 208,489 | ||||||||
| Total liabilities & shareholders' equity | $ | 2,296,626 | $ | 2,068,796 | $ | 2,033,227 | |||||
| Common Stock | |||||||||||
| Number of shares authorized | 18,000,000 | 18,000,000 | 18,000,000 | ||||||||
| Number of shares issued and outstanding | 10,942,959 | 10,899,210 | 10,896,331 | ||||||||
| Book value per common share | $ | 20.05 | $ | 19.50 | $ | 19.13 | |||||
| Tangible book value per common share | $ | 17.32 | $ | 16.75 | $ | 16.39 | |||||
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| The First Bancorp | ||||||||||||||
| Consolidated Statements of Income (Unaudited) | ||||||||||||||
| For the nine months ended September 30, | For the quarter ended September 30, | |||||||||||||
| In thousands of dollars, except per share data | 2020 | 2019 | 2020 | 2019 | ||||||||||
| Interest income | ||||||||||||||
| Interest and fees on loans | $ | 44,124 | $ | 44,450 | $ | 14,109 | $ | 14,993 | ||||||
| Interest on deposits with other banks | 87 | 145 | 8 | 48 | ||||||||||
| Interest and dividends on investments | 13,775 | 14,399 | 4,389 | 4,863 | ||||||||||
| Total interest income | 57,986 | 58,994 | 18,506 | 19,904 | ||||||||||
| Interest expense | ||||||||||||||
| Interest on deposits | 11,613 | 17,739 | 2,866 | 5,983 | ||||||||||
| Interest on borrowed funds | 2,219 | 2,180 | 895 | 695 | ||||||||||
| Total interest expense | 13,832 | 19,919 | 3,761 | 6,678 | ||||||||||
| Net interest income | 44,154 | 39,075 | 14,745 | 13,226 | ||||||||||
| Provision for loan losses | 4,550 | 875 | 1,800 | 250 | ||||||||||
| Net interest income after provision for loan losses | 39,604 | 38,200 | 12,945 | 12,976 | ||||||||||
| Non-interest income | ||||||||||||||
| Investment management and fiduciary income | 2,712 | 2,459 | 909 | 822 | ||||||||||
| Service charges on deposit accounts | 1,257 | 1,747 | 375 | 577 | ||||||||||
| Net securities gains | 1,179 | 15 | — | 15 | ||||||||||
| Mortgage origination and servicing income | 3,802 | 1,227 | 1,914 | 576 | ||||||||||
| Other operating income | 4,677 | 4,833 | 1,607 | 1,542 | ||||||||||
| Total non-interest income | 13,627 | 10,281 | 4,805 | 3,532 | ||||||||||
| Non-interest expense | ||||||||||||||
| Salaries and employee benefits | 14,719 | 13,698 | 5,032 | 4,865 | ||||||||||
| Occupancy expense | 2,117 | 1,931 | 709 | 644 | ||||||||||
| Furniture and equipment expense | 3,438 | 2,969 | 1,184 | 969 | ||||||||||
| FDIC insurance premiums | 548 | 439 | 189 | — | ||||||||||
| Amortization of identified intangibles | 32 | 32 | 10 | 10 | ||||||||||
| Other operating expense | 8,382 | 7,099 | 2,152 | 2,552 | ||||||||||
| Total non-interest expense | 29,236 | 26,168 | 9,276 | 9,040 | ||||||||||
| Income before income taxes | 23,995 | 22,313 | 8,474 | 7,468 | ||||||||||
| Applicable income taxes | 3,836 | 3,474 | 1,379 | 1,180 | ||||||||||
| Net Income | $ | 20,159 | $ | 18,839 | $ | 7,095 | $ | 6,288 | ||||||
| Basic earnings per share | $ | 1.86 | $ | 1.74 | $ | 0.65 | $ | 0.58 | ||||||
| Diluted earnings per share | $ | 1.84 | $ | 1.73 | $ | 0.65 | $ | 0.58 | ||||||
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| The First Bancorp | ||||||||||||||
| Selected Financial Data (Unaudited) | ||||||||||||||
| As of and for the nine months ended September 30, | As of and for the quarter ended September 30, | |||||||||||||
| Dollars in thousands, except for per share amounts | 2020 | 2019 | 2020 | 2019 | ||||||||||
| Summary of Operations | ||||||||||||||
| Interest Income | $ | 57,986 | $ | 58,994 | $ | 18,506 | $ | 19,904 | ||||||
| Interest Expense | 13,832 | 19,919 | 3,761 | 6,678 | ||||||||||
| Net Interest Income | 44,154 | 39,075 | 14,745 | 13,226 | ||||||||||
| Provision for Loan Losses | 4,550 | 875 | 1,800 | 250 | ||||||||||
| Non-Interest Income | 13,627 | 10,281 | 4,805 | 3,532 | ||||||||||
| Non-Interest Expense | 29,236 | 26,168 | 9,276 | 9,040 | ||||||||||
| Net Income | 20,159 | 18,839 | 7,095 | 6,288 | ||||||||||
| Per Common Share Data | ||||||||||||||
| Basic Earnings per Share | $ | 1.86 | $ | 1.74 | $ | 0.65 | $ | 0.58 | ||||||
| Diluted Earnings per Share | 1.84 | 1.73 | 0.65 | 0.58 | ||||||||||
| Cash Dividends Declared | 0.92 | 0.89 | 0.31 | 0.30 | ||||||||||
| Book Value per Common Share | 20.05 | 19.13 | 20.05 | 19.13 | ||||||||||
| Tangible Book Value per Common Share | 17.32 | 16.39 | 17.32 | 16.39 | ||||||||||
| Market Value | 21.07 | 27.49 | 21.07 | 27.49 | ||||||||||
| Financial Ratios | ||||||||||||||
| Return on Average Equity (a) | 12.32 | % | 12.49 | % | 12.80 | % | 11.99 | % | ||||||
| Return on Average Tangible Common Equity (a) | 14.27 | % | 14.67 | % | 14.81 | % | 14.01 | % | ||||||
| Return on Average Assets (a) | 1.22 | % | 1.26 | % | 1.24 | % | 1.24 | % | ||||||
| Average Equity to Average Assets | 9.89 | % | 10.11 | % | 9.65 | % | 10.33 | % | ||||||
| Average Tangible Equity to Average Assets | 8.54 | % | 8.61 | % | 8.34 | % | 8.84 | % | ||||||
| Net Interest Margin Tax-Equivalent (a) | 2.93 | % | 2.90 | % | 2.82 | % | 2.88 | % | ||||||
| Dividend Payout Ratio | 49.46 | % | 51.15 | % | 47.69 | % | 51.72 | % | ||||||
| Allowance for Loan Losses/Total Loans | 1.07 | % | 0.93 | % | 1.07 | % | 0.93 | % | ||||||
| Non-Performing Loans to Total Loans | 0.63 | % | 1.33 | % | 0.63 | % | 1.33 | % | ||||||
| Non-Performing Assets to Total Assets | 0.43 | % | 0.84 | % | 0.43 | % | 0.84 | % | ||||||
| Efficiency Ratio | 50.00 | % | 51.12 | % | 45.97 | % | 52.08 | % | ||||||
| At Period End | ||||||||||||||
| Total Assets | $ | 2,296,626 | $ | 2,033,227 | $ | 2,296,626 | $ | 2,033,227 | ||||||
| Total Loans | 1,436,646 | 1,263,459 | 1,436,646 | 1,263,459 | ||||||||||
| Total Investment Securities | 682,647 | 634,566 | 682,647 | 634,566 | ||||||||||
| Total Deposits | 1,763,059 | 1,623,290 | 1,763,059 | 1,623,290 | ||||||||||
| Total Shareholders' Equity | 219,440 | 208,489 | 219,440 | 208,489 | ||||||||||
| (a) Annualized using a 366-day basis for 2020 and a 365-day basis for 2019 | ||||||||||||||
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Use of Non-GAAP Financial Measures
Certain information in this release contains financial information determined by methods other than in accordance with accounting principles generally accepted in the United States of America (“GAAP”). Management uses these “non-GAAP” measures in its analysis of the Company's performance (including for purposes of determining the compensation of certain executive officers and other Company employees) and believes that these non-GAAP financial measures provide a greater understanding of ongoing operations and enhance comparability of results with prior periods and with other financial institutions, as well as demonstrating the effects of significant gains and charges in the current period, in light of the disclosure practices employed by many other publicly-traded financial institutions. The Company believes that a meaningful analysis of its financial performance requires an understanding of the factors underlying that performance. Management believes that investors may use these non-GAAP financial measures to analyze financial performance without the impact of unusual items that may obscure trends in the Company's underlying performance. These disclosures should not be viewed as a substitute for operating results determined in accordance with GAAP, nor are they necessarily comparable to non-GAAP performance measures that may be presented by other companies.
In several places net interest income is calculated on a fully tax-equivalent basis. Specifically included in interest income was tax-exempt interest income from certain investment securities and loans. An amount equal to the tax benefit derived from this tax-exempt income has been added back to the interest income total which, as adjusted, increased net interest income accordingly. Management believes the disclosure of tax-equivalent net interest income information improves the clarity of financial analysis, and is particularly useful to investors in understanding and evaluating the changes and trends in the Company's results of operations. Other financial institutions commonly present net interest income on a tax-equivalent basis. This adjustment is considered helpful in the comparison of one financial institution's net interest income to that of another institution, as each will have a different proportion of tax-exempt interest from its earning assets. Moreover, net interest income is a component of a second financial measure commonly used by financial institutions, net interest margin, which is the ratio of net interest income to average earning assets. For purposes of this measure as well, other financial institutions generally use tax-equivalent net interest income to provide a better basis of comparison from institution to institution. The Company follows these practices.
The following table provides a reconciliation of tax-equivalent financial information to the Company's consolidated financial statements, which have been prepared in accordance with GAAP. A 21.0% tax rate was used in both 2020 and 2019.
| For the nine months ended | For the quarters ended | |||||||||||||
| In thousands of dollars | September 30, 2020 | September 30, 2019 | September 30, 2020 | September 30, 2019 | ||||||||||
| Net interest income as presented | $ | 44,154 | $ | 39,075 | $ | 14,745 | $ | 13,226 | ||||||
| Effect of tax-exempt income | 1,741 | 1,723 | 587 | 572 | ||||||||||
| Net interest income, tax equivalent | $ | 45,895 | $ | 40,798 | $ | 15,332 | $ | 13,798 | ||||||
The Company presents its efficiency ratio using non-GAAP information which is most commonly used by financial institutions. The GAAP-based efficiency ratio is non-interest expenses divided by net interest income plus non-interest income from the Consolidated Statements of Income. The non-GAAP efficiency ratio excludes securities losses and other-than-temporary impairment charges from non-interest expenses, excludes securities gains from non-interest income, and adds the tax-
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equivalent adjustment to net interest income. The following table provides a reconciliation between the GAAP and non-GAAP efficiency ratio:
| For the nine months ended | For the quarters ended | |||||||||||||
| In thousands of dollars | September 30, 2020 | September 30, 2019 | September 30, 2020 | September 30, 2019 | ||||||||||
| Non-interest expense, as presented | $ | 29,236 | $ | 26,168 | $ | 9,276 | $ | 9,040 | ||||||
| Net interest income, as presented | 44,154 | 39,075 | 14,745 | 13,226 | ||||||||||
| Effect of tax-exempt interest income | 1,741 | 1,723 | 587 | 572 | ||||||||||
| Non-interest income, as presented | 13,627 | 10,281 | 4,805 | 3,532 | ||||||||||
| Effect of non-interest tax-exempt income | 124 | 124 | 41 | 41 | ||||||||||
| Net securities gains | (1,179) | (15) | — | (15) | ||||||||||
| Adjusted net interest income plus non-interest income | $ | 58,467 | $ | 51,188 | $ | 20,178 | $ | 17,356 | ||||||
| Non-GAAP efficiency ratio | 50.00 | % | 51.12 | % | 45.97 | % | 52.08 | % | ||||||
| GAAP efficiency ratio | 50.60 | % | 53.02 | % | 47.45 | % | 53.94 | % | ||||||
The Company presents certain information based upon average tangible common equity instead of total average shareholders' equity. The difference between these two measures is the Company's intangible assets, specifically goodwill from prior acquisitions. Management, banking regulators and many stock analysts use the tangible common equity ratio and the tangible book value per common share in conjunction with more traditional bank capital ratios to compare the capital adequacy of banking organizations with significant amounts of goodwill or other intangible assets, typically stemming from the use of the purchase accounting method in accounting for mergers and acquisitions. The following table provides a reconciliation of average tangible common equity to the Company's consolidated financial statements, which have been prepared in accordance with U.S. generally accepted accounting principles:
| For the nine months ended | For the quarters ended | |||||||||||||
| In thousands of dollars | September 30, 2020 | September 30, 2019 | September 30, 2020 | September 30, 2019 | ||||||||||
| Average shareholders' equity as presented | $ | 218,603 | $ | 201,655 | $ | 220,465 | $ | 208,040 | ||||||
| Less intangible assets | (29,920) | (29,963) | (29,934) | (29,978) | ||||||||||
| Tangible average shareholders' equity | $ | 188,683 | $ | 171,692 | $ | 190,531 | $ | 178,062 | ||||||
To provide period-to-period comparison of operating results prior to consideration of credit loss provision and income taxes, the non-GAAP measure of Pre-Tax, Pre-Provision Net Income is presented. The following table provides a reconciliation to Net Income:
| For the nine months ended | For the quarters ended | |||||||||||||
| In thousands of dollars | September 30, 2020 | September 30, 2019 | September 30, 2020 | September 30, 2019 | ||||||||||
| Net Income, as presented | $ | 20,159 | $ | 18,839 | $ | 7,095 | $ | 6,288 | ||||||
| Add: provision for loan losses | 4,550 | 875 | 1,800 | 250 | ||||||||||
| Add: income taxes | 3,836 | 3,474 | 1,379 | 1,180 | ||||||||||
| Pre-Tax, pre-provision net income | $ | 28,545 | $ | 23,188 | $ | 10,274 | $ | 7,718 | ||||||
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Forward-Looking and Cautionary Statements
Except for the historical information and discussions contained herein, statements contained in this release may constitute “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. These statements involve a number of risks, uncertainties and other factors that could cause actual results and events to differ materially, as discussed in the Company's filings with the Securities and Exchange Commission.
Additional Information
For more information, please contact Richard M. Elder, The First Bancorp's Treasurer & Chief Financial Officer, at 207.563.3195.
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