First National Lincoln Corporation Reports Earnings Per Share of $0.32 for the Third Quarter of 2006
DAMARISCOTTA, ME, October 25 – First National Lincoln Corporation (Nasdaq NM: FNLC), today announced unaudited results for the quarter ended September 30, 2006. Earnings per share on a fully diluted basis were $0.32, down $0.02 or 5.9% from the $0.34 reported for the same period in 2005. Net income for the quarter ended September 30, 2006, was $3,177,000, a decrease of $170,000 or 5.1% from the $3,347,000 posted for the third quarter of 2005.
The Company also announced unaudited results for the nine months ended September 30, 2006. Earnings per share on a fully diluted basis were $0.94, down $0.02 or 2.1% from the $0.96 reported for the same period in 2005. Net income for the nine months ended September 30, 2006, was $9,325,000, a decrease of $152,000 or 1.6% from the $9,477,000 posted for the first nine months of 2005.
“The banking industry remains very challenged by Federal policy makers and the continuing flat-to-inverted yield curve,” observed the Company’s President and Chief Executive Officer, Daniel R. Daigneault, “and FNLC is in step with the industry. Although we have had modest growth in earning assets this year, we have experienced margin compression due to the flat-to-inverted yield curve. Our net interest margin on a tax-equivalent basis declined to 3.29% for the first nine months of 2006 from 3.88% for the same period in 2005, which, in turn, has resulted in a modest decline in net interest income.
“Fortunately, we have seen excellent growth in non-interest income in 2006, as well as a slight reduction in non-interest expense,” President Daigneault continued. “Investment management and fiduciary revenues from First Advisors are up $202,000 or 16.2% for the first nine months of 2006 when compared to the same period in 2005, as are fees from deposit accounts, which have increased $275,000 or 15.5% for the first nine months of 2006 when compared to the same period in 2005. On the expense side, the savings are in employee costs, which are down $142,000 or 1.7% for the first nine months of 2006 when compared to the same period in 2005
“The increased revenues and expense savings have more than offset the increased provision to the allowance for loan losses posted in the first nine months of 2006 compared to the same period in 2005,” President Daigneault noted. “This additional provision is not indicative of a significant decline in loan quality – it was to maintain the allowance for loan losses at an
adequate level given continued growth in our loan portfolio and our level of chargeoffs, which remains low.”
“While total assets have increased $53.2 million or 5.1% during the first nine months of 2006, they actually decreased by $5.1 million or 0.5% during the third quarter” said F. Stephen Ward, the Company’s Chief Financial Officer. “We saw this decline in the investment portfolio, which decreased $10.8 million or 5.7% during the third quarter due to security calls and maturities, resulting in total investments being down $5.0 million or 2.7% since year end. The loan portfolio, however, has increased $56.2 million or 7.3% year-to-date, although it was up only $2.8 million or 0.3% during the third quarter. This was the result of softening loan demand in coastal Maine and a large loan maturity that was anticipated.
“On the liability side of the balance sheet,” Mr. Ward continued, “we saw good growth in low-cost deposits (DDAs, NOWs and savings) during the third quarter – up $15.8 million or 6.0% – which is the normal seasonal pattern for the coastal Maine economy. Year-to-date, however, low-cost deposits are down $2.3 million or 0.8%, the result of a shift to certificates of deposit due to higher interest rates. All asset growth this year has been funded from our higher-cost sources – a significant factor in our net interest margin compression.
“Despite the decline in net income in 2006 when compared to 2005, our operating ratios remain very strong,” Mr. Ward continued. “We posted a return on tangible equity of 16.21% for the quarter ended September 30, 2006, and 16.07% for the first nine months of 2006. Although these are slightly lower than the results posted for the same periods in 2005, they remain comfortably above the 15.00% mark, which is considered the threshold defining high-performance banks. Also, our year-to-date efficiency ratio of 51.97% has shown significant improvement when compared to 2005, which demonstrates the impact of lower operating expenses and increased revenues which President Daigneault noted previously.”
“Although our performance has not been at the level we have achieved for the past ten years, in my opinion it is excellent when considering current interest rates and economic conditions,” President Daigneault concluded. “We continue to produce a return on tangible equity that is well above peer, and our improving efficiency ratio demonstrates the focus that all of our employees have had in controlling expenses during a difficult year. We increased our cash dividend again during the third quarter, and the Company has now raised its regular cash dividend for 13 consecutive years and for 44 consecutive quarters. When all of these factors are combined, in my opinion First National Lincoln Corporation remains a very good investment opportunity, especially for the person interested in small, Maine-based companies.”
First National Lincoln Corporation, headquartered in Damariscotta, Maine, is the holding company for The First, N.A. Founded in 1864, The First is an independent community bank serving Mid-Coast and Down East Maine with 14 offices in Lincoln, Knox, Hancock and Washington Counties. The Bank provides a full range of consumer and commercial banking products and services. First Advisors, a division of The First, provides investment advisory, private banking and trust services from three offices in Lincoln, Cumberland and Hancock Counties.
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.
For more information, please contact F. Stephen Ward, First National Lincoln Corporation’s Treasurer & Chief Financial Officer, at 207.563.3195 ext. 5001.
First National Lincoln Corporation |
Consolidated Balance Sheets (Unaudited) |
| | | |
| September 30, | December 31, | September 30, |
In thousands of dollars | 2006 | 2005 | 2005 |
Assets | | | |
Cash and due from banks | $26,512 | $25,982 | $29,507 |
Overnight funds sold | - | - | 2,500 |
Securities available for sale | 45,190 | 54,743 | 49,171 |
Securities to be held to maturity (fair value $133,015 at September 30, 2006, $128,563 at December 31, 2005, and $114,098 at September 30, 2005) | 133,764 | 129,238 | 114,268 |
Loans held for sale (fair value approximates cost) | - | - | 40 |
Loans | 828,539 | 772,338 | 739,597 |
Less: allowance for loan losses | 6,221 | 6,086 | 6,474 |
Net loans | 822,318 | 766,252 | 733,123 |
Accrued interest receivable | 6,677 | 5,005 | 4,759 |
Bank premises and equipment | 15,697 | 16,712 | 16,987 |
Other real estate owned | 1,413 | - | - |
Goodwill | 27,684 | 27,684 | 27,960 |
Other assets | 16,185 | 16,593 | 15,006 |
Total Assets | $1,095,440 | $1,042,209 | $993,321 |
Liabilities | | | |
Demand deposits | $68,455 | $62,109 | $66,792 |
NOW deposits | 106,785 | 109,124 | 127,312 |
Money market deposits | 143,600 | 127,630 | 119,419 |
Savings deposits | 103,272 | 109,615 | 116,440 |
Certificates of deposit | 178,164 | 125,741 | 140,450 |
Certificates $100,000 and over | 247,772 | 179,745 | 184,911 |
Total deposits | 848,048 | 713,964 | 755,324 |
Borrowed funds | 130,300 | 215,189 | 126,647 |
Other liabilities | 10,428 | 9,604 | 9,506 |
Total Liabilities | 988,776 | 938,757 | 891,477 |
Shareholders' Equity | | | |
Common stock | 98 | 99 | 99 |
Additional paid-in capital | 45,958 | 47,718 | 47,806 |
Retained earnings | 59,859 | 54,901 | 52,798 |
Net unrealized gains on available-for-sale securities | 749 | 734 | 1,141 |
Total Shareholders' Equity | 106,664 | 103,452 | 101,844 |
Total Liabilities & Shareholders' Equity | $1,095,440 | $1,042,209 | $993,321 |
First National Lincoln Corporation |
Consolidated Statements of Income (Unaudited) |
| | | | | |
| For the nine months | | For the quarters |
| ended September 30, | | ended September 30, |
In thousands of dollars | 2006 | 2005 | | 2006 | 2005 |
Interest income | | | | | |
Interest and fees on loans | $40,164 | $30,619 | | $14,253 | $11,157 |
Interest on deposits with other banks | 61 | 9 | | 61 | 5 |
Interest and dividends on investments | 7,250 | 5,701 | | 2,515 | 1,976 |
Total interest income | 47,475 | 36,329 | | 16,829 | 13,138 |
Interest expense | | | | | |
Interest on deposits | 18,539 | 8,978 | | 7,486 | 3,911 |
Interest on borrowed funds | 5,955 | 3,953 | | 1,605 | 1,238 |
Total interest expense | 24,494 | 12,931 | | 9,091 | 5,149 |
Net interest income | 22,981 | 23,398 | | 7,738 | 7,989 |
Provision for loan losses | 900 | 100 | | 300 | - |
Net interest income after provision for loan losses | 22,081 | 23,298 | | 7,438 | 7,989 |
Non-interest income | | | | | |
Investment management and fiduciary income | 1,447 | 1,245 | | 474 | 426 |
Service charges on deposit accounts | 2,054 | 1,779 | | 704 | 628 |
Net securities gains | - | - | | - | - |
Mortgage origination and servicing income | 361 | 481 | | 109 | 106 |
Other operating income | 3,817 | 3,340 | | 1,959 | 1,794 |
Total non-interest income | 7,679 | 6,845 | | 3,246 | 2,954 |
Non-interest expense | | | | | |
Salaries and employee benefits | 8,207 | 8,349 | | 3,037 | 2,875 |
Occupancy expense | 1,058 | 1,016 | | 301 | 319 |
Furniture and equipment expense | 1,557 | 1,564 | | 560 | 529 |
Amortization of identified intangibles | 213 | 200 | | 71 | 71 |
Other operating expense | 5,717 | 5,767 | | 2,266 | 2,460 |
Total non-interest expense | 16,752 | 16,896 | | 6,235 | 6,254 |
Income before income taxes | 13,008 | 13,247 | | 4,449 | 4,689 |
Applicable income taxes | 3,683 | 3,770 | | 1,272 | 1,342 |
NET INCOME | $9,325 | $9,477 | | $3,177 | $3,347 |
| | | | | | | | |
First National Lincoln Corporation |
Selected Financial Data (Unaudited) |
|
| For the nine months ended | For the quarters ended |
Dollars in thousands, | September 30 | September 30 |
except for per share amounts | 2006 | 2005 | 2006 | 2005 |
| | | | |
Summary of Operations | | | | |
Operating Income | $55,154 | $43,174 | $20,075 | $16,092 |
Operating Expense | 42,146 | 29,927 | 15,626 | 11,403 |
Net Interest Income | 22,981 | 23,398 | 7,738 | 7,989 |
Provision for Loan Losses | 900 | 100 | 300 | - |
Net Income | 9,325 | 9,477 | 3,177 | 3,347 |
Per Common Share Data | | | | |
Basic Earnings per Share | $0.95 | $0.98 | $0.32 | $0.34 |
Diluted Earnings per Share | 0.94 | 0.96 | 0.32 | 0.34 |
Cash Dividends Declared | 0.450 | 0.390 | 0.155 | 0.135 |
Book Value | 10.93 | 10.36 | 10.93 | 10.36 |
Market Value | 16.92 | 19.25 | 16.92 | 19.25 |
Financial Ratios | | | | |
Return on Average Equity (a) | 11.85% | 12.97% | 11.95% | 13.14% |
Return on Average Tangible Equity (a) | 16.07% | 17.79% | 16.21% | 18.16% |
Return on Average Assets (a) | 1.16% | 1.37% | 1.17% | 1.37% |
Average Equity to Average Assets | 9.80% | 10.53% | 9.77% | 10.42% |
Average Tangible Equity to Average Assets | 7.22% | 7.69% | 7.20% | 7.54% |
Net Interest Margin Tax-Equivalent (a) | 3.29% | 3.88% | 3.28% | 3.76% |
Dividend Payout Ratio | 47.37% | 39.80% | 48.44% | 39.71% |
Allowance for Loan Losses/Total Loans | 0.75% | 0.88% | 0.75% | 0.88% |
Non-Performing Loans to Total Loans | 0.46% | 0.40% | 0.46% | 0.40% |
Non-Performing Assets to Total Assets | 0.34% | 0.30% | 0.34% | 0.30% |
Efficiency Ratio | 51.97% | 53.31% | 54.08% | 54.64% |
At Period End | | | | |
Total Assets | $1,095,440 | $993,321 | $1,095,440 | $993,321 |
Total Loans | 828,539 | 739,597 | 828,539 | 739,597 |
Total Investment Securities | 178,954 | 163,439 | 178,954 | 163,439 |
Total Deposits | 848,048 | 755,324 | 848,048 | 755,324 |
Total Shareholders’ Equity | 106,664 | 101,844 | 106,664 | 101,844 |
(a) Annualized using a 365-day basis |
