News Column

The First Bancorp Reports Net Income Up 17.7% Year-to-Date

July 23, 2014

DAMARISCOTTA, Maine--(BUSINESS WIRE)-- The First Bancorp (Nasdaq: FNLC), today announced unaudited results for the six months ended June 30, 2014. Net income was $7.2 million, up $1.1 million or 17.7% from the same period in 2013, and earnings per common share on a fully diluted basis of $0.67 were up $0.11 or 19.6% from the same period in 2013. The Company also announced unaudited results for the quarter ended June 30, 2014. Net income was $3.7 million, up $505,000 or 15.6% from the second quarter of 2013 and earnings per common share on a fully diluted basis of $0.35 were up $0.06 or 20.7% from the second quarter of 2013.

“Net income for the second quarter of 2014 was the third best quarterly income reported in the Company’s history,” Daniel R. Daigneault, the Company’s President and Chief Executive Officer observed, “just $85,000 or 2.2% below the single-quarter record set in the third quarter of 2008. Our strong operating results were driven by three factors: lower credit costs, good asset growth, and an improved net interest margin. In addition, the Board of Directors voted to increase the quarterly dividend in June from 20 cents per share to 21 cents per share.

“The significant improvement seen in credit quality in 2014 can be measured in several ways,” President Daigneault commented. “Non-performing assets stood at 1.16% of total assets as of June 30, 2014 - the lowest level we have seen since the third quarter of 2008. This is well below the 2.32% peak in non-performing assets at December 31, 2011, and down from 1.44% at December 31, 2013. Past-due loans were 1.26% of total loans at June 30, 2014, down from 1.82% of total loans at the end of 2013 and at the lowest level seen since 2007.

“Net chargeoffs for the first six months of 2014 were $370,000 or 0.09% of average loans on an annualized basis, compared to $2.5 million or 0.59% of average loans for the first six months of 2013,” President Daigneault continued. “With significantly lower levels of non-performing assets and net chargeoffs, our provision for loan losses in the first half of 2014 was only $500,000 - a $2.2 million or 81.5% reduction from the $2.7 million we provisioned in the first half of 2013. The $100,000 provision that was made in the second quarter of 2014 is the lowest quarterly provision we have made since the fourth quarter of 2005. The allowance for loan losses stood at 1.31% of total loans as of June 30, 2014, even with December 31, 2013 and down from 1.46% a year ago.

“The lower provision for loan losses more than offset the $2.1 million reduction in non-interest income resulting from reduced securities gains and mortgage origination income in the first half of 2014 compared to the first half of 2013," President Daigneault said. "At the same time, other credit-related costs - including expenses for collections, foreclosure and foreclosed properties - were $607,000 lower in the first half of 2014 compared to the first half of 2013. These were a major factor in the $269,000 reduction in non-interest expense we saw in the first half of 2014 compared to the first half of 2013.

“The Company’s total assets topped $1.5 billion for the first time in the second quarter of 2014,” said President Daigneault. “Loan demand has picked up in 2014, with total loans increasing $15.5 million or 1.8% year-to-date to $891.9 million. At the same time the investment portfolio has increased $26.9 million or 5.5% to $515.9 million. On the funding side of the balance sheet, low-cost deposits are up $20.9 million or 5.2% year-to-date, and borrowed funds have increased $19.4 million or 6.9% year-to-date."

“Net interest income on a tax-equivalent basis for the first six months of 2014 is up $1.4 million compared to the first six months of 2013,” commented F. Stephen Ward, the Company’s Chief Financial Officer. “Higher levels of earning assets were responsible for $891,000 of the increase and $424,000 resulting from an improved net interest margin. After a prolonged period of margin compression which lasted more than five years, we have seen an improving trend over the past four quarters. Our net interest margin was 3.11% for the first six months of 2014 compared to 3.04% for the same period in 2013.

“The improvement in credit quality and net interest margin can be seen in our operating ratios,” Mr. Ward continued. “As we grow into the higher expense base attributable to the Rockland and Bangor offices that we opened in 2012 and 2013, our efficiency ratio dropped to 55.48% for the first six months of 2014 from 57.26% for the first six months of 2013. The efficiency ratio remains well below the Bank’s UBPR peer group average which stood at 67.93% as of March 31, 2014. Our return on average assets was 0.98% for the first six months of 2014 compared to 0.87% for the first six months of 2013, and our return on average tangible common equity was 11.71% compared to 9.70% for the same periods, respectively.

“The First Bancorp’s price per share was $17.46 at June 30, 2014, up $0.04 or 0.23% from December 31, 2013,” Mr. Ward noted. “When dividends are added, our total return was 2.64% year-to-date. This lagged the broad market, as measured by the S&P 500 with a total return of 7.13% for the period, and was just slightly below the Russell 2000 index that we are included in, which had a total return of 3.19%. We outperformed the banking industry, however, with total returns for the period of -1.05% for the KBW Regional Bank index and 1.14% for the Nasdaq Bank Index.”

“After raising the dividend in 2013 for the first time in more than five years, the Board of Directors voted to raise the dividend by one cent in the second quarter of 2014 to 21 cents per share per quarter,” President Daigneault commented. “With improved credit quality and other key metrics, increasing the dividend again is consistent with the overall performance we have seen over the past year. Our generous dividend continues to be one of the major reasons people invest in our stock, especially with a dividend payout ratio of 61.19% and an annualized dividend yield of 4.81% based on the quarter-end closing price of $17.46 per share.”

“I am pleased that our strong performance in the first half of 2014 was driven by multiple factors,” President Daigneault concluded, “lower credit costs, good asset growth, and an improved net interest margin. While the economy may not be at the levels experienced in the early 2000s, it has rebounded considerably in the past year, as seen in our year-over-year performance. Continuing to share our operating results with our shareholders in the form of higher cash dividends remains a priority for Management and the Board of Directors, and we are very mindful of the importance this has in the overall performance of our stock.”

 
 
The First Bancorp

Consolidated Balance Sheets (Unaudited)

 
In thousands of dollars, except per share data     June 30, 2014       December 31, 2013       June 30, 2013
Assets                
Cash and due from banks $20,416 $ 16,570 $ 18,683
Interest-bearing deposits in other banks 272 2,562 334
Securities available for sale 303,880 305,824 287,735
Securities to be held to maturity 198,135 169,277 177,264
Restricted equity securities, at cost 13,912 13,912 13,912
Loans held for sale 272 83 1,047
Loans 891,864 876,367 866,071
Less allowance for loan losses     11,644         11,514         12,670  
Net loans 880,220 864,853 853,401
Accrued interest receivable 6,247 5,038 6,443
Premises and equipment 21,933 23,616 23,913
Other real estate owned 4,863 4,807 5,826
Goodwill 29,805 29,805 29,805
Other assets     24,125         27,616         26,133  
Total assets     $1,504,080         $ 1,463,963         $ 1,444,496  
Liabilities
Demand deposits $99,210 $ 106,125 $ 88,540
NOW deposits 174,680 151,322 139,022
Money market deposits 92,060 86,730 87,993
Savings deposits 153,602 149,103 142,718
Certificates of deposit 220,360 210,321 197,888
Certificates $100,000 to $250,000253,185 278,674 334,361
Certificates $250,000 and over     40,339         42,124         37,160  
Total deposits 1,033,436 1,024,399 1,027,682
Borrowed funds 298,520 279,125 257,108
Other liabilities     14,675         14,341         13,734  
Total Liabilities     1,346,631         1,317,865         1,298,524  
Shareholders' equity
Common stock 107 106 106
Additional paid-in capital 58,823 58,395 58,066
Retained earnings 96,785 94,000 91,348
Net unrealized gain/(loss) on securities available-for-sale 1,546 (6,591 ) (3,433 )
Net unrealized gain/(loss) on postretirement benefit costs     188         188         (115 )
Total shareholders' equity     157,449         146,098         145,972  
Total liabilities & shareholders' equity     $1,504,080         $ 1,463,963         $ 1,444,496  
Common Stock
Number of shares authorized 18,000,000 18,000,000 18,000,000
Number of shares issued and outstanding     10,710,673         10,671,192         10,659,764  
Book value per common share $14.70 $ 13.69 $ 13.69
Tangible book value per common share     $11.87         $ 10.83         $ 10.82  
 
 
 
 
The First Bancorp

Consolidated Statements of Income (Unaudited)

                       
      For the six months ended June 30,     For the quarters ended June 30,
In thousands of dollars, except per share data       2014       2013       2014       2013
Interest income                
Interest and fees on loans $17,220 $ 17,530 $8,642 $ 8,738
Interest on deposits with other banks 3 4 1 2
Interest and dividends on investments       8,140       6,980       4,097       3,509
Total interest income       25,363       24,514       12,740       12,249
Interest expense
Interest on deposits 3,629 4,012 1,804 2,025
Interest on borrowed funds       2,188       2,228       1,101       1,113
Total interest expense       5,817       6,240       2,905       3,138
Net interest income 19,546 18,274 9,835 9,111
Provision for loan losses       500       2,700       100       1,200
Net interest income after provision for loan losses       19,046       15,574       9,735       7,911
Non-interest income
Investment management and fiduciary income 1,102 968 585 519
Service charges on deposit accounts 1,301 1,423 682 775
Net securities gains 40 1,087 4 788
Mortgage origination and servicing income 354 1,387 160 491
Other operating income       1,993       2,002       1,027       1,006
Total non-interest income       4,790       6,867       2,458       3,579
Non-interest expense
Salaries and employee benefits 7,220 6,994 3,523 3,520
Occupancy expense 1,171 1,069 559 522
Furniture and equipment expense 1,372 1,310 675 688
FDIC insurance premiums 519 584 254 294
Amortization of identified intangibles 163 163 81 81
Other operating expense       4,098       4,692       2,199       2,318
Total non-interest expense       14,543       14,812       7,291       7,423
Income before income taxes 9,293 7,629 4,902 4,067
Applicable income taxes       2,118       1,531       1,155       825
Net Income       $7,175       $ 6,098       $3,747       $ 3,242
Basic earnings per share $0.67 $ 0.56 $0.35 $ 0.29
Diluted earnings per share       $0.67       $ 0.56       $0.35       $ 0.29
 
 
 
 
The First Bancorp

Selected Financial Data (Unaudited)

                         
      As of and for the six months ended June 30,     As of and for the quarters ended June 30,
Dollars in thousands, except for per share amounts       2014       2013       2014       2013  
           
Summary of Operations
Interest Income $25,363 $ 24,514 $12,740 $ 12,249
Interest Expense 5,817 6,240 2,905 3,138
Net Interest Income 19,546 18,274 9,835 9,111
Provision for Loan Losses 500 2,700 100 1,200
Non-Interest Income 4,790 6,867 2,458 3,579
Non-Interest Expense 14,543 14,812 7,291 7,423
Net Income       7,175       6,098       3,747       3,242  
Per Common Share Data
Basic Earnings per Share $0.67 $ 0.56 $0.35 $ 0.29
Diluted Earnings per Share 0.67 0.56 0.35 0.29
Cash Dividends Declared 0.410 0.390 0.210 0.195
Book Value per Common Share 14.70 13.69 14.70 13.69
Tangible Book Value per Common Share 11.87 10.82 11.87 10.82
Market Value       17.46       17.48       17.46       17.48  
Financial Ratios
Return on Average Equity (a) 9.40% 8.18 % 9.59% 8.38 %
Return on Average Tangible Common Equity (a) 11.71% 9.70 % 11.90% 9.93 %
Return on Average Assets (a) 0.98% 0.87 % 1.01% 0.92 %
Average Equity to Average Assets 10.43% 11.18 % 10.58% 11.23 %
Average Tangible Equity to Average Assets 8.37% 9.01 % 8.52% 9.06 %
Net Interest Margin Tax-Equivalent (a) 3.11% 3.04 % 3.10% 3.02 %
Dividend Payout Ratio 61.19% 69.64 % 60.00% 67.24 %
Allowance for Loan Losses/Total Loans 1.31% 1.46 % 1.31% 1.46 %
Non-Performing Loans to Total Loans 1.42% 2.25 % 1.42% 2.25 %
Non-Performing Assets to Total Assets 1.16% 1.75 % 1.16% 1.75 %
Efficiency Ratio       55.48     % 57.26 %     55.08     % 57.90 %
At Period End
Total Assets $1,504,080 $ 1,444,496 $1,504,080 $ 1,444,496
Total Loans 891,864 866,071 891,864 866,071
Total Investment Securities515,927 478,911 515,927 478,911
Total Deposits 1,033,436 1,027,682 1,033,436 1,027,682
Total Shareholders' Equity       157,449       145,972       157,449       145,972  
(a) Annualized using a 365-day basis for both years
 
 


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 and believes that these non-GAAP financial measures provide a greater understanding of ongoing operations and enhance comparability of results with prior periods as well as demonstrating the effects of significant gains and charges in the current period. 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 adjustments 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 35.0% tax rate was used in both 2014 and 2013.

         
 
For the six months ended     For the quarters ended
In thousands of dollars       June 30, 2014     June 30, 2013     June 30, 2014     June 30, 2013
Net interest income as presented $19,546     $ 18,274 $9,835     $ 9,111
Effect of tax-exempt income       1,825       1,726       903       875
Net interest income, tax equivalent       $21,371       $ 20,000       $10,738       $ 9,986
 
 


The Company presents its efficiency ratio using non-GAAP information. The GAAP-based efficiency ratio is noninterest expenses divided by net interest income plus noninterest income from the Consolidated Statements of Income. The non-GAAP efficiency ratio excludes securities losses and other-than-temporary impairment charges from noninterest expenses, excludes securities gains from noninterest income, and adds the tax-equivalent adjustment to net interest income. The following table provides a reconciliation between the GAAP and non-GAAP efficiency ratio:

         
 
For the six months ended     For the quarters ended
In thousands of dollars       June 30, 2014     June 30, 2013     June 30, 2014     June 30, 2013
Non-interest expense, as presented       $14,543       $ 14,812       $7,291       $ 7,423  
Net interest income, as presented 19,546     18,274 9,835     9,111
Effect of tax-exempt income 1,825 1,726 903 875
Non-interest income, as presented 4,790 6,867 2,458 3,579
Effect of non-interest tax-exempt income 91 89 45 44
Net securities gains       (40)     (1,087 )     (4)     (788 )
Adjusted net interest income plus non-interest income       $26,212       $ 25,869       $13,237       $ 12,821  
Non-GAAP efficiency ratio       55.48%     57.26 %     55.08%     57.90 %
GAAP efficiency ratio       59.76%     58.92 %     59.31%     58.49 %
 
 


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 preferred stock and 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 six months ended     For the quarters ended
In thousands of dollars     June 30, 2014     June 30, 2013     June 30, 2014     June 30, 2013
Average shareholders' equity as presented 153,988     158,472     156,724     159,092
Less preferred stock (8,106 ) (3,994 )
Less intangible assets     (30,420)     (30,746 )     (30,420)     (30,746 )
Tangible average shareholders' equity     123,568       119,620       126,304       124,352  


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 F. Stephen Ward, The First Bancorp's Treasurer & Chief Financial Officer, at 207.563.3272.




The First Bancorp

F. Stephen Ward, 207-563-3272

Treasurer & Chief Financial Officer

Source: The First Bancorp


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