The First Bancorp Reports Second Quarter Results
DAMARISCOTTA, ME, July 22 – The First Bancorp (Nasdaq: FNLC), today announced unaudited results for the quarter ended June 30, 2009, with net income of $3.8 million, an increase of $159,000 or 4.4% from the second quarter of 2008 and up $34,000 or 0.9% from the previous quarter. Earnings per common share on a fully diluted basis were $0.35 for the quarter ended June 30, 2009, down $0.02 or 5.4% from the second quarter of 2008 and from the previous quarter.
The Company also announced unaudited results for the first six months of 2009, with net income of $7.5 million, up $296,000 or 4.1% from the $7.2 million posted for the same period in 2008. Earnings per common share on a fully diluted basis were $0.72 for the six-months ended June 30, 2009, down $0.02 or 2.7% from the $0.74 posted for the same period in 2008.
“We continue to benefit from the current low interest rate environment and the steep yield curve,” noted Daniel R. Daigneault, the Company’s President & Chief Executive Officer. “This is best reflected in net interest income, which was up $4.8 million or 26.8% over the first six months of 2008. While income from earning assets declined by 8.3% compared to the first six months of 2008, funding costs declined 42.7%. As a result, we saw our net interest margin widen from 3.23% for the first six months of 2008 to 3.68% for the first six months of 2009.
“At the same time, we see continued deterioration in credit quality,” President Daigneault went on. “With broad-based weakness in the economy, a continued slump in the housing market and unemployment at 9.4%, which is at the highest level it has been since 1983, we are in the longest and possibly the worst recession since the Great Depression of the 1930’s. Also not reflected in these unemployment numbers is the number of people who have experienced reduced incomes from wage cutbacks and loss of overtime. In Maine, many people are self-employed and are also experiencing a decline in business revenues impacting their individual incomes as well.
“All of these factors have contributed to an increase in the Company’s non-performing loans,” President Daigneault noted, “which stood at 1.57% of total loans as of June 30, 2009, compared to 0.40% a year ago and 1.32% as of March 31, 2009. While this is a large increase in problem loans during the past year, it remains much lower than the average for our peer group, which reported non-performing loans at 2.78% of total loans. It is also much lower than the average for all commercial banks in Maine, with non-performing loans at 2.08% of total loans. These
averages were as of March 31, 2009, the latest peer data available. Past due loans, the other primary indicator of credit quality, were 3.02% of total loans as of June 30, 2009, virtually level for the past six months but up from 1.84% a year ago.
“Given the increase in non-performing loans and the continued weakness in the economy, we provisioned $4.6 million to the allowance for loan losses during the first six months of 2009 compared to $1.4 million for the same period in 2008,” President Daigneault said. “As a result, our allowance for loan losses has increased by $3.0 million in the first six months of 2009 and is now at $11.8 million or 1.20% of total loans compared to 0.82% a year ago and 0.99% at the end of the previous quarter. In our view, the increase in the allowance for loan losses is directionally consistent with the deterioration in credit quality of our loan portfolio, as well as with the performance of the national and local economies, higher levels of unemployment and the outlook for the recession continuing for some time to come. Actual loan losses for the first half of 2009 were $1.6 million or 0.33% of total loans on an annualized basis compared to losses of 0.20% for the first six months of 2008. In comparison, for the year ended December 31, 2008, net chargeoffs were $2.7 million or 0.28% of loans outstanding.”
“In the investment portfolio, we now have only two investment securities totaling $446,000 that are rated sub-investment grade,” observed F. Stephen Ward, The First Bancorp’s Chief Financial Officer. “As of June 30, 2009, corporate securities totaled only $2.0 million or 0.7% of the Company’s $298.3 million investment portfolio, the result of selling almost all of our corporate securities during the past eight months to lower the portfolio’s exposure to credit risk. We have one corporate bond in the portfolio classified as other-than-temporarily-impaired which resulted in a $916,000 pre-tax write down in the first quarter of 2009.
“While assets are up $44.2 million or 3.3% year-to-date,” Mr. Ward observed, “in the second quarter assets decreased $28.5 million or 2.0% due to mortgages refinancing to the secondary market and called securities not being replaced. Year-to-date, the loan portfolio is virtually unchanged, with excellent growth in commercial loans offset by the decline in mortgages. Despite a decline in the second quarter, the investment portfolio is up $35.8 million or 13.6% year-to-date due to the purchase of GNMA securities. Our asset growth in 2009 has been funded with a mix of wholesale deposits and borrowed funds. Low-cost deposits are down $9.6 million or 3.7% year-to-date, however this is in line with our normal seasonal pattern.
“We also added $25.0 million in preferred stock in the first quarter under the U.S. Treasury Capital Purchase Program,” CFO Ward stated. “Our participation in the program provides us with greater ability to ride out the current economic storm, especially if conditions worsen, and also provides greater ability to work with individuals and businesses as they also struggle through these adverse economic conditions. We continue to be considered well-capitalized by FDIC standards with total risk-based capital at nearly 14.0%, well above the well-capitalized threshold of 10.0% set by the FDIC.
“In the first half of 2009, the Bank recognized $630,000 in expense for a one-time special FDIC insurance assessment,” Mr. Ward said. “This special assessment was levied on all banks in the country based upon their size and is in addition to the higher quarterly premiums being charged to the banks to replenish the FDIC insurance fund which has been used to cover the losses of failed banks.”
“Despite the larger than normal provision for loan losses we have made in the first half of 2009, the Company’s operating ratios remain strong.” President Daigneault noted. “Our return on average tangible common equity was 16.18% for the first six months of 2009, well above the 15.0% high-performance threshold. Our efficiency ratio is excellent at 40.78% for the first six months of 2009 compared to 45.97% for the same period in 2008. Maintaining a low efficiency ratio continues to be an important factor in our overall performance and the year-over-year improvement was driven by the significant increase in net interest income while operating expense increased only modestly. As of March 31, 2009, the average efficiency ratio for our peer group was 68.97%.
“Our price per share closed the quarter at $19.47,” President Daigneault observed, “down $0.42 from the December 31, 2008 closing price of $19.89 per share. Because of our market capitalization, we continue to be included in the Russell 2000 and Russell 3000 indices, and on June 27, the day each year these indices are reconstituted, we had a high close for the year of $21.78 per share. Our year-to-date total return with dividends reinvested was -1.0%, which compares to -36.5% for the KBW Regional Bank Index and +2.6% and +4.2% for the Russell 2000 and Russell 3000 indices, respectively.
“Despite the challenges we have faced in the current recession, The First Bancorp has done well in the first half of 2009,” President Daigneault concluded. “Our strong net interest income and mortgage origination income have offset a much higher provision for loan losses, a one-time
special assessment for FDIC insurance and the write down of an investment security for other-than-temporary-impairment. We also remain very well-capitalized, which is an important concern for all banks today. And finally, we have been able to maintain our quarterly dividend at $0.195 per share, which we feel is important to most of our shareholders.”
The First Bancorp, 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, The First Bancorp’s Treasurer & Chief Financial Officer, at 207.563.3195 ext. 5001.
The First Bancorp |
Consolidated Balance Sheets (Unaudited) |
| | | |
In thousands of dollars | 6/30/2009 | 12/31/2008 | 6/30/2008 |
Assets | | | |
Cash and due from banks | $ 18,575 | $ 16,856 | $ 19,997 |
Overnight funds sold | - | - | - |
Securities available for sale | 50,665 | 27,765 | 36,850 |
Securities to be held to maturity | 247,627 | 234,767 | 209,528 |
Loans held for sale | 3,162 | 1,298 | 2,253 |
Loans | 982,336 | 979,273 | 951,814 |
Less allowance for loan losses | 11,752 | 8,800 | 7,800 |
Net loans | 970,584 | 970,473 | 944,014 |
Accrued interest receivable | 7,140 | 5,783 | 7,886 |
Premises and equipment | 18,610 | 16,028 | 16,046 |
Other real estate owned | 2,797 | 2,428 | 1,558 |
Goodwill | 27,684 | 27,684 | 27,684 |
Other assets | 23,142 | 22,662 | 19,557 |
Total assets | $ 1,369,986 | $ 1,325,744 | $ 1,285,373 |
Liabilities | | | |
Demand deposits | $ 63,266 | $ 68,399 | $ 62,755 |
NOW deposits | 100,283 | 108,188 | 108,543 |
Money market deposits | 104,803 | 129,333 | 114,096 |
Savings deposits | 86,305 | 82,867 | 87,023 |
Certificates of deposit | 202,039 | 246,152 | 339,620 |
Certificates $100,000 and over | 357,253 | 290,797 | 130,083 |
Total deposits | 913,949 | 925,736 | 842,120 |
Borrowed funds | 297,361 | 272,074 | 317,055 |
Other liabilities | 12,478 | 10,753 | 11,440 |
Total Liabilities | 1,223,788 | 1,208,563 | 1,170,615 |
Shareholders' equity | | | |
Preferred stock | 24,557 | - | - |
Common stock | 97 | 97 | 97 |
Additional paid-in capital | 44,958 | 44,117 | 44,030 |
Retained earnings | 77,320 | 74,057 | 70,996 |
Net unrealized gains on securities available-for-sale | (472) | (819) | (100) |
Net unrealized loss on postretirement benefit costs | (262) | (271) | (265) |
Total shareholders' equity | 146,198 | 117,181 | 114,758 |
Total liabilities & shareholders' equity | $ 1,369,986 | $ 1,325,744 | $ 1,285,373 |
Common Stock | | | |
Number of shares authorized | 18,000,000 | 18,000,000 | 18,000,000 |
Number of shares issued and outstanding | 9,722,204 | 9,696,397 | 9,690,182 |
Book value per share | $12.51 | $12.09 | $11.84 |
Tangible book value per share | $9.66 | $9.23 | $8.99 |
The First Bancorp |
Consolidated Statements of Income (Unaudited) |
| | | | |
| For the six months ended | For the quarters ended |
In thousands of dollars | 6/30/2009 | 6/30/2008 | 6/30/2009 | 6/30/2008 |
Interest income | | | | |
Interest and fees on loans | $25,533 | $29,649 | $12,606 | $14,357 |
Interest on deposits with other banks | - | - | - | - |
Interest and dividends on investments | 7,336 | 6,195 | 3,645 | 3,157 |
Total interest income | 32,869 | 35,844 | 16,251 | 17,514 |
Interest expense | | | | |
Interest on deposits | 6,694 | 12,349 | 3,049 | 5,910 |
Interest on borrowed funds | 3,665 | 5,736 | 1,765 | 2,662 |
Total interest expense | 10,359 | 18,085 | 4,814 | 8,572 |
Net interest income | 22,510 | 17,759 | 11,437 | 8,942 |
Provision for loan losses | 4,600 | 1,439 | 2,950 | 939 |
Net interest income after provision for loan losses | 17,910 | 16,320 | 8,487 | 8,003 |
Non-interest income | | | | |
Investment management and fiduciary income | 678 | 780 | 353 | 390 |
Service charges on deposit accounts | 1,158 | 1,488 | 600 | 805 |
Net securities gains | - | 28 | - | - |
Mortgage origination and servicing income | 1,543 | 216 | 862 | 123 |
Other operating income | 2,170 | 2,182 | 1,148 | 1,200 |
Total non-interest income | 5,549 | 4,694 | 2,963 | 2,518 |
Non-interest expense | | | | |
Salaries and employee benefits | 5,152 | 5,680 | 2,563 | 2,755 |
Occupancy expense | 834 | 774 | 393 | 363 |
Furniture and equipment expense | 1,138 | 942 | 569 | 452 |
Net securities losses | 148 | - | 6 | - |
Other than temporary impairment charge | 916 | - | - | - |
Amortization of identified intangibles | 142 | 142 | 71 | 71 |
Other operating expense | 4,691 | 3,336 | 2,632 | 1,784 |
Total non-interest expense | 13,021 | 10,874 | 6,234 | 5,425 |
Income before income taxes | 10,438 | 10,140 | 5,216 | 5,096 |
Applicable income taxes | 2,948 | 2,946 | 1,454 | 1,493 |
NET INCOME | $7,490 | $7,194 | $3,762 | $3,603 |
Earnings per common share | | | | |
Net income, as reported | $7,490 | $7,194 | $3,762 | $3,603 |
Less dividends and amortization of premium on preferred stock | 487 | - | 337 | - |
Net income available to common | $7,004 | $7,194 | $3,425 | $3,603 |
Basic earnings per share | $0.72 | $0.74 | $0.35 | $0.37 |
Diluted earnings per share | $0.72 | $0.74 | $0.35 | $0.37 |
Weighted average number of shares outstanding | 9,712,252 | 9,711,869 | 9,718,650 | 9,707,568 |
Incremental shares | 16,951 | 19,377 | 21,626 | 20,298 |
The First Bancorp |
Selected Financial Data (Unaudited) |
|
| | | | |
Dollars in thousands, | For the six months ended | For the quarters ended |
except for per share amounts | 6/30/2009 | 6/30/2008 | 6/30/2009 | 6/30/2008 |
| | | | |
Summary of Operations | | | | |
Interest Income | $32,869 | $35,844 | $16,251 | $17,514 |
Interest Expense | 10,359 | 18,085 | 4,814 | 8,572 |
Net Interest Income | 22,510 | 17,759 | 11,437 | 8,942 |
Provision for Loan Losses | 4,600 | 1,439 | 2,950 | 939 |
Non-Interest Income | 5,549 | 4,694 | 2,963 | 2,518 |
Non-Interest Expense | 13,021 | 10,874 | 6,234 | 5,425 |
Net Income | 7,490 | 7,194 | 3,762 | 3,603 |
Per Common Share Data | | | | |
Basic Earnings per Share | $0.72 | $0.74 | $0.35 | $0.37 |
Diluted Earnings per Share | 0.72 | 0.74 | 0.35 | 0.37 |
Cash Dividends Declared | 0.390 | 0.375 | 0.195 | 0.190 |
Book Value | 12.51 | 11.84 | 12.51 | 11.84 |
Tangible Book Value | 9.66 | 8.99 | 9.66 | 8.99 |
Market Value | $19.47 | $13.65 | $19.47 | $13.65 |
Financial Ratios | | | | |
Return on Average Equity (a) | 12.48% | 12.68% | 12.60% | 12.63% |
Return on Average Tangible Equity (a) | 16.18% | 16.76% | 16.40% | 16.66% |
Return on Average Assets (a) | 1.10% | 1.16% | 1.11% | 1.15% |
Average Equity to Average Assets | 10.54% | 9.17% | 10.46% | 9.13% |
Average Tangible Equity to Average Assets | 8.52% | 6.94% | 8.43% | 6.92% |
Net Interest Margin Tax-Equivalent (a) | 3.68% | 3.23% | 3.76% | 3.21% |
Dividend Payout Ratio | 54.17% | 50.68% | 55.71% | 51.35% |
Allowance for Loan Losses/Total Loans | 1.20% | 0.82% | 1.20% | 0.82% |
Non-Performing Loans to Total Loans | 1.57% | 0.40% | 1.57% | 0.40% |
Non-Performing Assets to Total Assets | 1.36% | 0.29% | 1.36% | 0.29% |
Efficiency Ratio | 40.78% | 45.97% | 41.40% | 45.02% |
At Period End | | | | |
Total Assets | $1,369,986 | $1,285,373 | $1,369,986 | $1,285,373 |
Total Loans | 982,336 | 951,814 | 982,336 | 951,814 |
Total Investment Securities | 298,292 | 246,378 | 298,292 | 246,378 |
Total Deposits | 913,949 | 842,120 | 913,949 | 842,120 |
Total Shareholders’ Equity | 146,198 | 114,758 | 146,198 | 114,758 |
(a) Annualized using a 365-day basis in 2009 and 366-day basis in 2008 |
