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The First Bancorp Reports 2010 Results

^{Published on 2011-01-19 13:21:06 - Market Wire}
 

DAMARISCOTTA, Maine--([ BUSINESS WIRE ])--The First Bancorp (Nasdaq: FNLC), today announced unaudited results for the year ended December 31, 2010. Net income was $12.1 million, down $926,000 or 7.1% from 2009. Earnings per common share on a fully diluted basis were $1.10 for the year ended December 31, 2010, down $0.12 or 9.8% from the $1.22 posted in 2009.

"We provisioned $8.4 million for loan losses in 2010"

The Company also announced unaudited results for the quarter ended December 31, 2010. Net income was $3.1 million, up $415,000 or 15.6% from the same period in 2009, and earnings per common share on a fully diluted basis of $0.28 were up $0.04 or 16.7% from the same period in 2009. Compared to the previous quarter, net income was down $118,000 or 3.7% and earnings per common share on a fully diluted basis were down $0.01 to $0.28 from $0.29.

aThis was an extremely challenging year for all banks, including The First Bancorp,a observed Daniel R. Daigneault, the Companya™s President & Chief Executive Officer. aThe economic downturn is now in its third year, and although there are a few signs of improvement, unemployment and lower housing prices continue to have a significant impact on the United States economy, and to a lesser extent, the Maine economy. Despite this, our financial performance in 2010 was quite good, and while slightly lower than in recent years, we continue to significantly outperform our national peer group.

aNet interest income declined by $3.1 million in 2010 compared to 2009, almost all due to our net interest margin dropping to 3.38% from 3.66% in 2009,a President Daigneault continued. aMargin compression was responsible for approximately $1.1 million of this change while $2.0 million was attributable to lengthening the maturity of our liabilities to reduce interest rate risk. The decision to extend liabilities early in the year was not taken easily, knowing that we would be paying up in the short term to reduce interest rate risk in the long term. That being said, our overall risk profile during this period of heightened credit risk necessitated this action.

aNon-interest income was down $3.6 million or 28.4% in 2010 compared to 2009,a President Daigneault noted. aThe sale of the merchant credit card portfolio in 2009 was responsible for $2.1 million of this decline, however this was virtually offset by a comparable drop in non-interest expense. Mortgage origination income was also lower in 2010 as a result of a lower level of loans sold to the secondary market compared to 2009. Non-interest expense was down $1.5 million or 5.7% in 2010 compared to 2009. This was attributable to the decline in merchant credit card expense noted above.

aNon-performing loans stood at 2.39% of total loans at December 31, 2010 compared to 2.36% of total loans at September 30, 2010 and 1.95% at December 31, 2009,a President Daigneault said. aThis compares favorably to non-performing loans at 3.66% for our peer group as of September 30, 2010, the latest peer data available. Net chargeoffs were $8.7 million or 0.94% of average loans in 2010 compared to net chargeoffs of $7.3 million or 0.75% of average loans in 2009.

aWe provisioned $8.4 million for loan losses in 2010,a President Daigneault stated, adown $3.8 million or 30.9% from 2009. Although the allowance for loan losses decreased $321,000 during the year, it stands at 1.50% of outstanding loans at December 31, 2010 compared to 1.43% of outstanding loans at December 31, 2009. In Managementa™s opinion, the level of the allowance for loan losses is adequate, and the change in the level of the allowance is directionally consistent with the level of loans outstanding and shifts in economic conditions.a

aDuring 2010, total assets increased $62.4 million or 4.7%,a observed the Companya™s Chief Financial Officer, F. Stephen Ward. aThe investment portfolio provided all of our growth, with total investments increasing $128.2 million or 44.6%, with almost all of this increase in GNMA mortgage-backed securities, which have no credit risk since they are fully backed by the U.S. Government. The loan portfolio was down $64.9 million or 6.8%, with a decline in commercial loans, municipal loans and mortgages and an increase in home equity loans. On the liability side of the balance sheet, it was a good year for low-cost deposits which posted an increase of $22.6 million or 8.3%, and local certificates of deposit were up $8.2 million or 3.6%.

aIn this period of prolonged economic weakness, remaining well capitalized has been a top priority,a Mr. Ward said. aOur total risk-based capital is in excess of 15.0%, well above the well-capitalized threshold of 10.0% set by the FDIC. We actually added $3.7 million to regulatory capital in 2010, primarily through retained earnings, and strong capital enabled the Company to maintain the dividend at 19.5 cents per share per quarter or 78 cents per share for the year. We paid out 70.9% of earnings in 2010 compared to 63.9% in 2009, and our dividend yield was 4.94% at December 31, 2010, based on the closing price of $15.79 per share.

aAt year end, The First Bancorpa™s shares were trading at a very healthy 1.58 times tangible book value,a Mr. Ward observed. aThe December 31, 2010 closing price of $15.79 was up $0.37 or 2.40% over the closing price on December 31, 2009, and with dividends reinvested, our total return for the year was 8.14%. While we view this as a very respectable return, it lagged the broad market, as measured by the S&P 500, which had a total return of 15.06%, and our industry, with the NASD Bank Index posting a total return with dividends reinvested of 14.15%.a

aOur core operating ratios in 2010 were very good,a said President Daigneault, aespecially when compared to peer. While our return on average tangible common equity was 10.83% in 2010 compared to 12.54% in 2009, we were in the top 30% of all banks in our peer group, which had an average return of 2.81% as of September 30, 2010. Our efficiency ratio continues to be an important component in our overall performance, although it slipped to 48.15% in 2010 compared to 43.39% in 2009. This was the result of lower revenues and not due to a significant increase in operating expenses.

aGiven the challenges presented by the weak economy in 2010, we are pleased with our performance for the year,a President Daigneault concluded. aWhile asset quality is not at the levels of a few years ago a" as measured by past-due and non-performing loans a" it has been relatively stable for the past year. Our financial performance continues to be much stronger than our peers, and with good earnings we are adding to capital and posting a return on assets and a return on equity well above the peer group. We remain well capitalized, and with these solid earnings, we are able to maintain the dividend at $0.78 per share for the year.a

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.

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 (aGAAPa). Management uses these anon-GAAPa measures in its analysis of the Companya™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 Companya™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 Companya™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 institutiona™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 Companya™s consolidated financial statements, which have been prepared in accordance with GAAP. A 35.0% tax rate was used in both 2010 and 2009.

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 of between the GAAP and non-GAAP efficiency ratio:

The Company presents certain information based upon average tangible common equity instead of total average shareholdersa™ equity. The difference between these two measures is the Companya™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 Companya™s consolidated financial statements, which have been prepared in accordance with U.S. generally accepted accounting principles:

Forward-Looking and Cautionary Statements

Except for the historical information and discussions contained herein, statements contained in this release may constitute aforward-looking statementsa 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 Companya™s filings with the Securities and Exchange Commission.