The First Bancorp Reports Record Year in 2015

DAMARISCOTTA, Maine--()--The First Bancorp (Nasdaq: FNLC), today announced unaudited results for the year ended December 31, 2015. Net income was $16.2 million, up $1.5 million or 10.2% from 2014, and earnings per common share on a fully diluted basis of $1.51 were up $0.14 or 10.2% from 2014. The Company also announced unaudited results for the quarter ended December 31, 2015. Net income was $3.8 million, up $343,000 or 10.0% from the fourth quarter of 2014, and earnings per common share on a fully diluted basis of $0.35 were up $0.03 or 9.4% from the fourth quarter of 2014.

“All of these positive factors can be seen in our operating ratios”

“This was by far the best year in the Company’s history, surpassing our previous best year in 2014,” observed Tony C. McKim, the Company’s President and Chief Executive Officer. “The past ten years were extremely challenging for the U.S. economy and the banking industry, and our operating results for the past two years confirm we have finally put the great recession behind us. Our 2015 performance was driven by strong growth in earning assets, lower operating expense, and reduced credit costs. We also increased our quarterly dividend by one cent in the second quarter to 22 cents per share - the third year in a row the dividend has increased.

“Our earning assets grew $84.5 million in 2015, the most significant factor in our 2015 performance and the largest growth we have seen in many years,” noted President McKim. “Total loans increased $71.1 million or 7.7%, while investments and other earning assets increased $13.4 million or 2.7%. Loan demand was very healthy, with the majority of loan growth in commercial loans - typically some of our highest yielding assets. We also saw modest growth in all other loan categories. On the funding side of the balance sheet, low-cost deposits were up $100.5 million or 21.0% in 2015 and our funding mix remains strong, with wholesale funding at 29.3% as of December 31, 2015.

“The growth in earning assets can be seen in 2015’s net interest income on a tax equivalent basis which was up $956,000 over 2014,” President McKim continued. “A $1.5 million increase in loan income and a $1.6 million decrease in funding cost more than offset the $2.1 million drop in investment income resulting from a lower level of investment securities. At the same time, non-interest income for 2015 was $1.2 million or 10.7% above 2014’s net interest income, primarily due to securities gains and mortgage origination income, while non-interest expense was $324,000 or 1.1% below 2014 with positive variances in several categories.

“Credit quality continues on the path of significant improvement that we have seen for the past several quarters” President McKim said. “Non-performing assets stood at 0.57% of total assets as of December 31, 2015. This is the lowest level since the second quarter of 2008 and is well below the 0.97% we saw in non-performing assets a year ago. Past-due loans were 0.84% of total loans at December 31, 2015, a significant drop from 1.29% of total loans at the end of 2014.

“Our provision for loan losses was $1,550,000 in 2015,” President McKim said, “a $400,000 increase from the $1,150,000 we provisioned in 2014. The allowance for loan losses stood at 1.00% of total loans as of December 31, 2015, down from 1.13% a year ago. At the same time, other credit-related costs - including expenses for collections, foreclosure and foreclosed properties - were $958,000 in 2015 compared to $1,559,000 in 2014, a $601,000 or 38.6% reduction. Total credit costs - the provision for loan losses and other credit-related costs - dropped $201,000 or 7.4% in 2015.”

“All of these positive factors can be seen in our operating ratios,” observed F. Stephen Ward, the Company’s Chief Financial Officer. “Our return on average assets was 1.07% for 2015 compared to 0.99% for 2014, and our return on average tangible common equity was 11.90% compared to 11.57% for 2014. At 54.26%, the efficiency ratio dropped more than 2.50% in 2015 from 56.86% in 2014 and remains well below the Bank’s UBPR peer group average which stood at 65.14% as of September 30, 2015.

“The First Bancorp’s price per share ended 2015 at $20.47, up $2.38 from December 31, 2014, and the total return with dividends reinvested was 17.17% for 2015,” Mr. Ward noted. “This was well ahead of the broad market in 2015, as measured by the Dow Jones Industrial Average with a total return of 0.21%, the S&P 500 with a total return of 1.37%, and the Russell 2000 with a total return of -4.41%. Although financial stocks outperformed the broad market in 2015, we have also outperformed the banking industry with total returns of 5.99% for the KBW Regional Bank Index and 8.84% for the Nasdaq Bank Index for the year.”

“The Board of Directors raised the dividend by one cent in the second quarter to 22 cents per share per quarter,” President McKim commented, "and we maintained the dividend at that level in the third and fourth quarters. We continue to pay out more than half of our earnings in dividends with a dividend payout ratio of 57.24% in 2015 compared to 60.14% in 2014. Based on the December 31, 2015 closing price of $20.47 per share, our annualized dividend yield was a very healthy 4.30%. We feel that our generous dividend continues to be one of the major reasons people invest in our stock, and periodically increasing our dividend is consistent with the overall performance we have seen over the past two-to-three years.

“The Federal Open Market Committee raised the Fed Funds rate by 25 bp in December,” Mr. Ward noted. “This was the FOMC’s first rate increase since 2006, and ironically, seven years to the day that the FOMC lowered the target Fed Funds rate to 0 from 25 bp. In commentary on the rate move, most market experts characterized the language in the FOMC’s statement as ‘more dovish,’ or more accommodating, than expected. The most important comments in the statement were about the future, however - ‘economic conditions will warrant only gradual increases’ and ‘the federal funds rate is likely to remain, for some time, below levels that are expected to prevail in the longer run.’

“For the past two years we have been positioning the Bank’s balance sheet to minimize the impact of FOMC rate increases,” Mr. Ward continued. “That being said, we feel that the FOMC will be slow and measured in future rate increases. This was borne out in the December Wall Street Journal monthly survey of more than 60 economists on major economic indicators which predicted the average Fed Funds rate in December 2016 will be 1.14%, implying only two or three 25 bp rate increases in 2016. Our asset/liability modeling indicates that slow and measured rate increases should have minimal impact on our financial performance.”

“A number of factors came together that produced our record performance in 2015,” President McKim concluded. “We saw excellent loan demand as the Maine economy improved after several years of little or no growth in loans. At the same time we have been very successful on the liability side of the balance sheet with strong local deposit growth in 2015. When these are combined with reduced credit costs and lower operating expense, we have the record operating results which enable us to reward our shareholders with higher cash dividends. While I am very pleased with the results we have produced in my first year as CEO, the real credit goes to the effort and teamwork that our 226 employees showed in 2015 to make these extraordinary results happen.”

 
The First Bancorp
Consolidated Balance Sheets (Unaudited)
 
In thousands of dollars except common stock data     December 31, 2015     December 31, 2014
Assets        
Cash and due from banks $ 14,299 $ 13,057
Interest-bearing deposits in other banks 4,013 3,559
Securities available for sale 223,039 185,261
Securities to be held to maturity 240,023 275,919
Restricted equity securities, at cost 14,257 13,912
Loans held for sale 349
Loans 988,638 917,564
Less allowance for loan losses     9,916       10,344  
Net loans 978,722 907,220
Accrued interest receivable 4,912 4,748
Premises and equipment 21,816 22,619
Other real estate owned 1,532 3,785
Goodwill 29,805 29,805
Other assets     32,043       22,246  
Total assets     $ 1,564,810       $ 1,482,131  
Liabilities
Demand deposits $ 130,566 $ 113,133
NOW deposits 242,638 199,977
Money market deposits 92,994 98,607
Savings deposits 206,009 165,601
Certificates of deposit 158,529 184,471
Certificates $100,000 to $250,000 175,077 221,892
Certificates $250,000 and over     37,376       41,138  
Total deposits 1,043,189 1,024,819
Borrowed funds 337,457 279,916
Other liabilities     16,666       15,842  
Total Liabilities     1,397,312       1,320,577  
Shareholders' equity
Common stock 108 107
Additional paid-in capital 59,862 59,282
Retained earnings 106,673 99,816
Net unrealized gain on securities available-for-sale 1,123 2,522
Net unrealized loss on securities transferred from available for sale to held to maturity (112 ) (48 )
Net unrealized loss on postretirement benefit costs     (156 )     (125 )
Total shareholders' equity     167,498       161,554  
Total liabilities & shareholders' equity     $ 1,564,810       $ 1,482,131  
Common Stock
Number of shares authorized 18,000,000 18,000,000
Number of shares issued and outstanding     10,753,855       10,724,359  
Book value per common share $ 15.58 $ 15.06
Tangible book value per common share     $ 12.78       $ 12.25  
 
 
The First Bancorp
Consolidated Statements of Income and Comprehensive Income (Unaudited)
             
    For the years ended     For the quarters ended
In thousands of dollars, except per share data     12/31/2015     12/31/2014     12/31/2015     12/31/2014
Interest income            
Interest and fees on loans $ 36,620 $ 35,102 9,373 $ 8,982
Interest on deposits with other banks 19 5 3 1
Interest and dividends on investments     14,171       15,915       3,662       3,807
Total interest income     50,810       51,022       13,038       12,790
Interest expense
Interest on deposits 5,285 7,087 1,290 1,681
Interest on borrowed funds     4,589       4,338       1,103       1,062
Total interest expense     9,874       11,425       2,393       2,743
Net interest income 40,936 39,597 10,645 10,047
Provision for loan losses     1,550       1,150       450       300
Net interest income after provision for loan losses     39,386       38,447       10,195       9,747
Non-interest income
Investment management and fiduciary income 2,258 2,139 552 520
Service charges on deposit accounts 2,384 2,505 583 606
Net securities gains 1,399 1,155 3 10
Mortgage origination and servicing income 1,558 979 465 369
Other operating income     4,631       4,270       1,160       1,097
Total non-interest income     12,230       11,048       2,763       2,602
Non-interest expense
Salaries and employee benefits 15,080 14,890 4,136 3,622
Occupancy expense 2,312 2,215 540 527
Furniture and equipment expense 3,171 2,940 847 816
FDIC insurance premiums 890 1,004 223 240
Amortization of identified intangibles 58 326 11 81
Other operating expense     8,385       8,845       2,187       2,589
Total non-interest expense     29,896       30,220       7,944       7,875
Income before income taxes 21,720 19,275 5,014 4,474
Applicable income taxes     5,514       4,566       1,245       1,048
Net Income     $ 16,206       $ 14,709       $ 3,769       $ 3,426
Basic earnings per share $ 1.52 $ 1.38 $ 0.36 $ 0.32
Diluted earnings per share     1.51       1.37       0.35       0.32
 
 
The First Bancorp
Selected Financial Data (Unaudited)
             
Dollars in thousands,     For the years ended     For the quarters ended
except for per share amounts     12/31/2015     12/31/2014     12/31/2015     12/31/2014
         
Summary of Operations
Interest Income $ 50,810 $ 51,022 $ 13,038 $ 12,790
Interest Expense 9,874 11,425 2,393 2,743
Net Interest Income 40,936 39,597 10,645 10,047
Provision for Loan Losses 1,550 1,150 450 300
Non-Interest Income 12,230 11,048 2,763 2,602
Non-Interest Expense 29,896 30,220 7,944 7,875
Net Income     16,206       14,709       3,769       3,426  
Per Common Share Data
Basic Earnings per Share $ 1.52 $ 1.38 $ 0.36 $ 0.32
Diluted Earnings per Share 1.51 1.37 0.35 0.32
Cash Dividends Declared 0.870 0.830 0.220 0.210
Book Value per Common Share 15.58 15.06 15.58 15.06
Tangible Book Value per Common Share 12.78 12.25 12.78 12.25
Market Value     20.47       18.09       20.47       18.09  
Financial Ratios
Return on Average Equity (a) 9.74 % 9.34 % 8.85 % 8.39 %
Return on Average Tangible Common Equity (a) 11.90 % 11.57 % 10.77 % 10.32 %
Return on Average Assets (a) 1.07 % 0.99 % 0.96 % 0.92 %
Average Equity to Average Assets 11.00 % 10.63 % 10.88 % 10.93 %
Average Tangible Equity to Average Assets 9.01 % 8.58 % 8.94 % 8.88 %
Net Interest Margin Tax-Equivalent (a) 3.10 % 3.10 % 3.11 % 3.09 %
Dividend Payout Ratio 57.24 % 60.14 % 62.86 % 65.63 %
Allowance for Loan Losses/Total Loans 1.00 % 1.13 % 1.00 % 1.13 %
Non-Performing Loans to Total Loans 0.75 % 1.15 % 0.75 % 1.15 %
Non-Performing Assets to Total Assets 0.57 % 0.97 % 0.57 % 0.97 %
Efficiency Ratio     54.26 %     56.86 %     55.69 %     58.36 %
At Period End
Total Assets $ 1,564,810 $ 1,482,131 $ 1,564,810 $ 1,482,131
Total Loans 988,638 917,564 988,638 917,564
Total Investment Securities 477,319 475,092 477,319 475,092
Total Deposits 1,043,189 1,024,819 1,043,189 1,024,819
Total Shareholders' Equity     167,498       161,554       167,498       161,554  
(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 2015 and 2014.

       
For the years ended     For the quarters ended
In thousands of dollars     12/31/2015     12/31/2014     12/31/2015     12/31/2014
Net interest income as presented $ 40,936     $ 39,597 $ 10,645     $ 10,047
Effect of tax-exempt income     3,092       3,475       760       807
Net interest income, tax equivalent     $ 44,028       $ 43,072       $ 11,405       $ 10,854
 

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 years ended For the quarters ended
In thousands of dollars     12/31/2015     12/31/2014     12/31/2015     12/31/2014
Non-interest expense, as presented     $ 29,896       $ 30,220       $ 7,944       $ 7,875  
Net interest income, as presented 40,936     39,597 10,645     10,047
Effect of tax-exempt income 3,092 3,475 760 807
Non-interest income, as presented 12,230 11,048 2,763 2,602
Effect of non-interest tax-exempt income 236 185 100 49
Net securities gains     (1,399 )     (1,155 )     (3 )     (10 )
Adjusted net interest income plus non-interest income     $ 55,095       $ 53,150       $ 14,265       $ 13,495  
Non-GAAP efficiency ratio     54.26 %     56.86 %     55.69 %     58.36 %
GAAP efficiency ratio     56.23 %     59.67 %     59.25 %     62.26 %
 

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 years ended For the quarters ended
In thousands of dollars     12/31/2015     12/31/2014     12/31/2015     12/31/2014
Average shareholders' equity as presented $ 166,319     $ 157,465 $ 168,980     $ 162,067
Less intangible assets     (30,131 )     (30,338 )     (30,125 )     (30,379 )
Tangible average shareholders' equity   $ 136,188       $ 127,127       $ 138,855       $ 131,688  
 

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.

Contacts

The First Bancorp
F. Stephen Ward, 207-563-3272
Treasurer & Chief Financial Officer

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