First National Lincoln Corporation Reports Record Quarter with Earnings Per Share Up 9.4% Over 2006
DAMARISCOTTA, ME, October 24 – First National Lincoln Corporation (Nasdaq: FNLC), today announced unaudited results for the quarter ended September 30, 2007. Earnings per share on a fully diluted basis were $0.35, up $0.03 or 9.4% from the $0.32 reported for the quarter ended September 30, 2006. Net income for the quarter ended September 30, 2007, was $3,414,000, an increase of $237,000 or 7.5% from the $3,177,000 posted for the quarter ended September 30, 2006.
The Company also announced unaudited results for the first nine months of 2007, with earnings per share on a fully diluted basis of $0.98, up $0.04 or 4.3% from the $0.94 reported for the first nine months of 2006. Net income year-to-date was $9,613,000, an increase of $288,000 or 3.1% from the $9,325,000 posted for the same period in 2006.
“The third quarter of 2007 was a record quarter for First National Lincoln Corporation,” noted Daniel R. Daigneault, the Company’s President & Chief Executive Officer. “In addition to the strong increase we posted in net income and earnings per share over the comparable period in 2006, we also saw a similar increase over the prior quarter, with net income up $219,000 or 6.9% and diluted earnings per share up $0.02 or 6.1%.
“The driving force for our increase in earnings is net interest income,” President Daigneault continued, “which was up $419,000 or 5.4% over the same quarter last year and $545,000 or 7.2% over the prior quarter. This was attributable to two factors. First, we saw excellent growth in earning assets during the third quarter, with total loans increasing $14.5 million and investments increasing $19.7 million from June 30, 2007. Second, our net interest margin improved from 3.07% in the second quarter to 3.11% in the third quarter. This was due to lower funding costs, with growth in low-cost deposits from normal seasonal inflows and a restructuring of a significant portion of our wholesale funding.
“Expense control and reduction was the other major driving force for our year-to-date and third-quarter performance,” President Daigneault noted. “Non-interest expense for the first nine months of 2007 was $16.6 million, $150,000 or 0.9% lower than for the same period in 2006, with reductions in employee costs and occupancy expense. For the third quarter, non-interest expense was $235,000 or 3.8% lower than for the third quarter of 2006, with almost all of the reduction in employee costs.
“The impact of higher net interest income and lower operating costs can be seen in our efficiency ratio,” President Daigneault continued. “As we have discussed many times in the past, the efficiency ratio, which measures how much a company spends to generate one dollar in revenue, is a key operating statistic that we closely monitor. Year-to-date, FNLC’s efficiency ratio is 50.96% and for the third quarter it is 51.28%, which compares to 51.97% and 54.08%, respectively, for the same periods last year. With net interest margins continuing to shrink in our industry, we feel that maintaining and/or improving our efficiency ratio will be a vital factor in FNLC’s ongoing financial performance.”
“In addition to our efficiency ratio, the other financial measure we closely monitor is return on average tangible equity,” observed F. Stephen Ward, FNLC’s Treasurer and Chief Financial Officer. “For the first nine months of 2007, our return on average tangible equity stands at 15.71%, and although this is down slightly from 16.07% for the same period last year, it remains above the 15.00% threshold defining high-performance banks. For the third quarter, our return on tangible equity was 16.29%, up from the 16.21% posted for the third quarter last year. Based upon June 30, 2007 data, this places the Company’s return on average tangible equity in the top 20% of all bank holding companies in its peer group.
“Our asset quality continues to remain strong,” Mr. Ward continued. “The ratio of non-performing assets to total assets, at 0.15%, has improved significantly compared to 0.34% a year ago and 0.18% as of the end of the previous quarter. As noted before, we maintain high standards in our loan underwriting – despite an increasingly competitive landscape – and do not compromise quality in order to produce short-term growth at the expense of long-term earnings.
“During the third quarter, the Company again raised its cash dividend from $0.17 to $0.175 per share,” Mr. Ward said. “We have now raised our regular cash dividend for 14 consecutive years and for 48 consecutive quarters, and at an annual rate of $0.70 per share, this results in a very attractive dividend yield of 4.64% based on our quarter-end closing price of $15.08 per share. We continue to increase our quarterly dividend because of the importance of this to the majority of our shareholders, and our payout ratio was 50.0% for the third quarter.”
“The one disappointment this quarter was the price of our stock,” President Daigneault stated, “although the performance of our shares continues to compare well to our industry. As of September 30, 2007, the KBW Regional Bank Index had a year-to-date total return of -9.67% while FNLC’s total return was -7.06% for the same period. Bank stocks have significantly underperformed the overall market in 2007, and we feel that the performance of our stock compared to our peers is reflective of our results in relation to our industry.
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“On August 16, 2007, the Company announced a new buyback program to repurchase up to 300,000 shares of the Company’s common stock or approximately 3.1% of the outstanding shares,” President Daigneault said. “Repurchasing our shares continues to be in the best interest of our shareholders, and our Board of Directors sees stock repurchases as an appropriate use of capital. With the recent decline in stock prices for the banking industry, this was an excellent time to re-up our program and increase the number of shares we are interested in repurchasing.
“In my opinion, the third quarter of 2007 was a very good quarter for FNLC,” President Daigneault concluded. “We saw good growth in earning assets and a higher net interest margin which in turn led to increased net interest income. Our efficiency ratio has improved over last year, and we continue to share our profits with our shareholders in the form of increased cash dividends. I view First National Lincoln Corporation as a good investment opportunity, especially for those interested in Maine-based companies or high-performing community banks.”
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 two offices in Lincoln 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.
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First National Lincoln Corporation |
Consolidated Balance Sheets (Unaudited) |
| | | |
| September 30, | December 31, | September 30, |
In thousands of dollars | 2007 | 2006 | 2006 |
Assets | | | |
Cash and due from banks | $27,339 | $24,188 | $26,512 |
Overnight funds sold | - | - | - |
Securities available for sale | 44,430 | 44,815 | 45,190 |
Securities to be held to maturity (fair value $171,645 at September 30, 2007, $134,649 at December 31, 2006, and $133,015 at September 30, 2006) | 175,425 | 135,734 | 133,764 |
Loans held for sale (fair value approximates cost) | 1,313 | 460 | - |
Loans | 891,675 | 838,145 | 828,539 |
Less: allowance for loan losses | 6,714 | 6,364 | 6,221 |
Net loans | 884,961 | 831,781 | 822,318 |
Accrued interest receivable | 7,360 | 6,140 | 6,677 |
Premises and equipment | 15,526 | 15,845 | 15,697 |
Other real estate owned | 625 | 1,144 | 1,413 |
Goodwill | 27,684 | 27,684 | 27,684 |
Other assets | 17,916 | 17,078 | 16,185 |
Total Assets | $1,202,579 | $1,104,869 | $1,095,440 |
Liabilities | | | |
Demand deposits | $72,597 | $62,157 | $68,455 |
NOW deposits | 110,051 | 99,612 | 106,785 |
Money market deposits | 114,620 | 137,163 | 143,600 |
Savings deposits | 91,708 | 98,131 | 103,272 |
Certificates of deposit | 311,773 | 164,770 | 178,164 |
Certificates $100,000 and over | 110,646 | 243,402 | 247,772 |
Total deposits | 811,395 | 805,235 | 848,048 |
Borrowed funds | 267,011 | 179,862 | 130,300 |
Other liabilities | 12,068 | 12,445 | 10,428 |
Total Liabilities | 1,090,474 | 997,542 | 988,776 |
Shareholders' Equity | | | |
Common stock | 98 | 98 | 98 |
Additional paid-in capital | 45,926 | 45,587 | 45,958 |
Retained earnings | 65,911 | 61,298 | 59,859 |
Net unrealized gains on securities available-for-sale | 507 | 696 | 749 |
Net unrealized loss on postretirement benefit costs | (337) | (352) | - |
Total Shareholders' Equity | 112,105 | 107,327 | 106,664 |
Total Liabilities & Shareholders' Equity | $1,202,579 | $1,104,869 | $1,095,440 |
| | | |
Common Stock | | | |
Number of shares authorized | 18,000,000 | 18,000,000 | 18,000,000 |
Number of shares issued and outstanding | 9,810,329 | 9,770,792 | 9,762,868 |
Book value per share | $11.43 | $10.98 | $10.93 |
Tangible book value per share | $8.61 | $8.15 | $8.09 |
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First National Lincoln Corporation |
Consolidated Statements of Income (Unaudited) |
| | | | |
| For the nine months ended | For the quarters ended |
| September 30, | September 30, |
In thousands of dollars | 2007 | 2006 | 2007 | 2006 |
Interest income | | | | |
Interest and fees on loans | $44,959 | $40,164 | $15,554 | $14,253 |
Interest on deposits with other banks | - | 61 | - | 61 |
Interest and dividends on investments | 8,030 | 7,250 | 2,984 | 2,515 |
Total interest income | 52,989 | 47,475 | 18,538 | 16,829 |
Interest expense | | | | |
Interest on deposits | 22,661 | 18,539 | 7,792 | 7,486 |
Interest on borrowed funds | 6,994 | 5,955 | 2,589 | 1,605 |
Total interest expense | 29,655 | 24,494 | 10,381 | 9,091 |
Net interest income | 23,334 | 22,981 | 8,157 | 7,738 |
Provision for loan losses | 850 | 900 | 300 | 300 |
Net interest income after provision for loan losses | 22,484 | 22,081 | 7,857 | 7,438 |
Non-interest income | | | | |
Investment management and fiduciary income | 1,345 | 1,447 | 389 | 474 |
Service charges on deposit accounts | 2,059 | 2,054 | 659 | 704 |
Net securities gains | - | - | - | - |
Mortgage origination and servicing income | 378 | 361 | 164 | 109 |
Other operating income | 3,821 | 3,817 | 1,773 | 1,959 |
Total non-interest income | 7,603 | 7,679 | 2,985 | 3,246 |
Non-interest expense | | | | |
Salaries and employee benefits | 8,153 | 8,207 | 2,819 | 3,037 |
Occupancy expense | 1,089 | 1,058 | 341 | 301 |
Furniture and equipment expense | 1,456 | 1,557 | 487 | 560 |
Amortization of identified intangibles | 213 | 213 | 71 | 71 |
Other operating expense | 5,691 | 5,717 | 2,282 | 2,266 |
Total non-interest expense | 16,602 | 16,752 | 6,000 | 6,235 |
Income before income taxes | 13,485 | 13,008 | 4,842 | 4,449 |
Applicable income taxes | 3,872 | 3,683 | 1,428 | 1,272 |
NET INCOME | $9,613 | $9,325 | $3,414 | $3,177 |
| | | | |
Earnings per common share: | | | | |
Basic earnings per share | $0.98 | $0.95 | $0.35 | $0.32 |
Diluted earnings per share | $0.98 | $0.94 | $0.35 | $0.32 |
Cash dividends declared per share | $0.510 | $0.450 | $0.175 | $0.155 |
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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 | 2007 | 2006 | 2007 | 2006 |
| | | | |
Summary of Operations | | | | |
Interest Income | $52,989 | $47,475 | $18,538 | $16,829 |
Interest Expense | 29,655 | 24,494 | 10,381 | 9,091 |
Net Interest Income | 23,334 | 22,981 | 8,157 | 7,738 |
Provision for Loan Losses | 850 | 900 | 300 | 300 |
Non-Interest Income | 7,603 | 7,679 | 2,985 | 3,246 |
Non-Interest Expense | 16,602 | 16,752 | 6,000 | 6,235 |
Net Income | 9,613 | 9,325 | 3,414 | 3,177 |
Per Common Share Data | | | | |
Basic Earnings per Share | $0.98 | $0.95 | $0.35 | $0.32 |
Diluted Earnings per Share | 0.98 | 0.94 | 0.35 | 0.32 |
Cash Dividends Declared | 0.510 | 0.450 | 0.175 | 0.155 |
Book Value | 11.43 | 10.93 | 11.43 | 10.93 |
Tangible Book Value | 8.61 | 8.09 | 8.61 | 8.09 |
Market Value | 15.08 | 16.92 | 15.08 | 16.92 |
Financial Ratios | | | | |
Return on Average Equity (a) | 11.74% | 11.85% | 12.22% | 11.95% |
Return on Average Tangible Equity (a) | 15.71% | 16.07% | 16.29% | 16.21% |
Return on Average Assets (a) | 1.13% | 1.16% | 1.15% | 1.17% |
Average Equity to Average Assets | 9.60% | 9.80% | 9.38% | 9.77% |
Average Tangible Equity to Average Assets | 7.17% | 7.22% | 7.03% | 7.20% |
Net Interest Margin Tax-Equivalent (a) | 3.11% | 3.29% | 3.11% | 3.28% |
Dividend Payout Ratio | 52.04% | 47.37% | 50.00% | 48.44% |
Allowance for Loan Losses/Total Loans | 0.75% | 0.75% | 0.75% | 0.75% |
Non-Performing Loans to Total Loans | 0.20% | 0.46% | 0.20% | 0.46% |
Non-Performing Assets to Total Assets | 0.15% | 0.34% | 0.15% | 0.34% |
Efficiency Ratio | 50.96% | 51.97% | 51.28% | 54.08% |
At Period End | | | | |
Total Assets | $1,202,579 | $1,095,440 | $1,202,579 | $1,095,440 |
Total Loans | 891,675 | 828,539 | 891,675 | 828,539 |
Total Investment Securities | 219,855 | 178,954 | 219,855 | 178,954 |
Total Deposits | 811,395 | 848,048 | 811,395 | 848,048 |
Total Shareholders’ Equity | 112,105 | 106,664 | 112,105 | 106,664 |
(a) Annualized using a 365-day basis |
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