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| 8-K - 8-K - First Bancorp, Inc /ME/ | a8-kearnings17q1.htm |
Exhibit 99.1
The First Bancorp Reports Record Quarterly Results
DAMARISCOTTA, ME, April 19, 2017 – The First Bancorp (Nasdaq: FNLC), parent company of First National Bank, today announced operating results for the three months ended March 31, 2017. Net income was $4.6 million, up $134,000 or 3.0% from the first three months of 2016 and earnings per common share on a fully diluted basis of $0.43 were up $0.01 or 2.4% from the same period in 2016.
“This was the best quarter in the Company’s history,” Tony C. McKim, the Company’s President and Chief Executive Officer observed. “The spread business - what we earn on loans and investments less what we pay for funding - remains our core business, and increased net interest income resulting from strong growth in earning assets continues to drive our performance. In addition, we achieved these record quarterly earnings without relying on securities gains compared to $536,000 of gains in the first quarter of 2016. We maintained the dividend at 23 cents per share in the first quarter and we continue to pay out more than half of our net income to our shareholders in the form of cash dividends.
“We have seen very strong growth on both sides of the balance sheet in the first quarter and over the past year,” noted President McKim. “Earning assets grew $49.2 million in the first three months of 2017 and are $182.7 million higher than a year ago. Total loans have increased $18.2 million or 1.7% year-to-date, and, year-over-year, are up $84.8 million or 8.4%. The investment portfolio is up $27.6 million or 5.1% year-to-date, and year-over-year, the portfolio is up $99.6 million or 21.3%. On the funding side of the balance sheet, low-cost deposits are up $36.4 million or 5.7% since year end and $115.1 million or 20.5% year-over-year. At the same time, First Advisors’ growth in assets under management resulted in investment management income being up 12.1% for the first three months of 2017 compared to the same period last year.
“Net interest income on a tax-equivalent basis for the first three months of 2017 was up $945,000 or 8.2% from the same period in 2016,” President McKim continued, “with all of the increase attributable to growth in earning assets, which fully offset our net interest margin slipping to 3.05% in 2017 versus 3.13% in 2016. Non-interest income for the first three months of 2017 was down
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$121,000 or 4.1% from the first three months of 2016 due to the lack of gains from sale of securities. This drop was partly offset, however, by a $203,000 or 157.4% increase in mortgage origination income. Non-interest expense for the first three months of 2017 was $498,000 or 6.9% above the same period in 2016, primarily due to higher employee costs and increased FDIC Insurance premiums.
“Our credit quality remains strong,” President McKim noted. “Non-performing assets stood at 0.52% of total assets as of March 31, 2017 - slightly below the 0.53% level of non-performing assets a year ago and up slightly from 0.48% at year end. Past-due loans were 0.96% of total loans at March 31, 2017, down from 1.18% at December 31, 2016 and up from 0.82% a year ago. We provisioned $500,000 for loan losses in the first three months of 2017, up $125,000 from the amount we provisioned in the first three months of 2016. The allowance for loan losses stood at 0.95% of total loans as of March 31, 2017, even with our level at December 31, 2016 and down from 1.02% of total loans at March 31, 2016.”
“The combination of asset growth and strong earnings 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% and our return on average tangible common equity was 12.92% for the first three months of 2017 compared to 1.15% and 12.80%, respectively, for the first three months of 2016. We continue to outperform the Bank’s UPBR peer group, which had a return on average assets of 1.00% and a return on average tangible common equity of 9.55% as of December 31, 2016. Our ratios placed us in the 71st and 82nd percentiles, respectively, compared to peer. Our efficiency ratio stood at 50.17% for the first three months of 2017 compared to 51.45% for the first three months of 2016 and remains well below the Bank’s UBPR peer group average which stood at 63.70% as of December 31, 2016.
“The First Bancorp’s stock closed at $27.25 price per share on March 31, 2017,” Mr. Ward noted. up from $19.51 a year ago and down from our year-end close at $33.10 per share. With dividends reinvested, our 12-month total return was 45.79%. We outperformed the broad market during this period, as measured by the S&P 500 which had a total return with dividends reinvested of 17.16%, as well the Russell 2000, in which we are included, which had a total return of 26.19%. We also outperformed the banking industry, with total returns year to date of 40.76% for the KBW Regional Bank Index and 42.87% for the Nasdaq Bank Index.”
“The Board of Directors maintained the quarterly dividend at 23 cents per share in the first quarter of 2017,” President McKim commented. “Based on the March 31, 2017 closing price of $27.25 per share, our annualized dividend yield is a respectful 3.38%. In managing our capital, we continue to
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balance the dividend payout level with retaining sufficient earnings to remain well capitalized and support future asset growth while remaining mindful that the dividend continues to be one of the major reasons people invest in our stock.
“We are off to an excellent start in 2017,” President McKim concluded. “Continued healthy growth on both sides of the balance sheet led to increased net interest income and we produced this record quarter without reliance on securities gains. We have a tremendous team of people at First National Bank and it is their dedication, hard work and customer focus which ultimately generates these record results and contributes to our ongoing success.”
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The First Bancorp | |||||||||
Consolidated Balance Sheets (Unaudited) | |||||||||
In thousands of dollars, except per share data | March 31, 2017 | December 31, 2016 | March 31, 2016 | ||||||
Assets | |||||||||
Cash and due from banks | $ | 17,600 | $ | 17,366 | $ | 14,533 | |||
Interest-bearing deposits in other banks | 3,272 | 293 | 6,372 | ||||||
Securities available for sale | 312,624 | 300,416 | 216,725 | ||||||
Securities to be held to maturity | 240,829 | 226,828 | 236,611 | ||||||
Restricted equity securities, at cost | 13,363 | 11,930 | 13,875 | ||||||
Loans held for sale | 979 | 782 | 224 | ||||||
Loans | 1,089,735 | 1,071,526 | 1,004,942 | ||||||
Less allowance for loan losses | 10,367 | 10,138 | 10,219 | ||||||
Net loans | 1,079,368 | 1,061,388 | 994,723 | ||||||
Accrued interest receivable | 6,854 | 5,532 | 6,271 | ||||||
Premises and equipment | 21,760 | 22,202 | 21,392 | ||||||
Other real estate owned | 525 | 375 | 1,592 | ||||||
Goodwill | 29,805 | 29,805 | 29,805 | ||||||
Other assets | 36,849 | 35,958 | 32,558 | ||||||
Total assets | $ | 1,763,828 | $ | 1,712,875 | $ | 1,574,681 | |||
Liabilities | |||||||||
Demand deposits | $ | 181,188 | $ | 140,482 | $ | 116,756 | |||
NOW deposits | 273,050 | 282,971 | 240,112 | ||||||
Money market deposits | 142,220 | 125,544 | 74,643 | ||||||
Savings deposits | 222,976 | 217,340 | 205,218 | ||||||
Certificates of deposit | 246,792 | 195,115 | 197,006 | ||||||
Certificates $100,000 to $250,000 | 236,971 | 240,904 | 226,644 | ||||||
Certificates $250,000 and over | 43,286 | 40,601 | 49,062 | ||||||
Total deposits | 1,346,483 | 1,242,957 | 1,109,441 | ||||||
Borrowed funds | 226,467 | 278,901 | 276,531 | ||||||
Other liabilities | 15,968 | 18,496 | 17,164 | ||||||
Total Liabilities | 1,588,918 | 1,540,354 | 1,403,136 | ||||||
Shareholders' equity | |||||||||
Common stock | 108 | 108 | 108 | ||||||
Additional paid-in capital | 61,047 | 60,723 | 60,064 | ||||||
Retained earnings | 113,698 | 111,693 | 108,677 | ||||||
Net unrealized loss on securities available-for-sale | (934 | ) | (935 | ) | 2,975 | ||||
Net unrealized loss on transferred securities | (133 | ) | (129 | ) | (123 | ) | |||
Net unrealized gain on cash flow hedging derivative instruments | 1,226 | 1,163 | — | ||||||
Net unrealized loss on postretirement benefit costs | (102 | ) | (102 | ) | (156 | ) | |||
Total shareholders' equity | 174,910 | 172,521 | 171,545 | ||||||
Total liabilities & shareholders' equity | $ | 1,763,828 | $ | 1,712,875 | $ | 1,574,681 | |||
Common Stock | |||||||||
Number of shares authorized | 18,000,000 | 18,000,000 | 18,000,000 | ||||||
Number of shares issued and outstanding | 10,814,132 | 10,793,946 | 10,775,307 | ||||||
Book value per common share | $ | 16.17 | $ | 15.98 | $ | 15.92 | |||
Tangible book value per common share | $ | 13.40 | $ | 13.20 | $ | 13.13 | |||
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The First Bancorp | ||||||
Consolidated Statements of Income (Unaudited) | ||||||
For the three months ended March 31, | ||||||
In thousands of dollars, except per share data | 2017 | 2016 | ||||
Interest income | ||||||
Interest and fees on loans | $ | 10,652 | $ | 9,734 | ||
Interest on deposits with other banks | 15 | 3 | ||||
Interest and dividends on investments | 3,824 | 3,539 | ||||
Total interest income | 14,491 | 13,276 | ||||
Interest expense | ||||||
Interest on deposits | 1,994 | 1,353 | ||||
Interest on borrowed funds | 1,021 | 1,194 | ||||
Total interest expense | 3,015 | 2,547 | ||||
Net interest income | 11,476 | 10,729 | ||||
Provision for loan losses | 500 | 375 | ||||
Net interest income after provision for loan losses | 10,976 | 10,354 | ||||
Non-interest income | ||||||
Investment management and fiduciary income | 631 | 563 | ||||
Service charges on deposit accounts | 502 | 574 | ||||
Net securities gains | 3 | 536 | ||||
Mortgage origination and servicing income | 332 | 129 | ||||
Other operating income | 1,375 | 1,162 | ||||
Total non-interest income | 2,843 | 2,964 | ||||
Non-interest expense | ||||||
Salaries and employee benefits | 3,970 | 3,598 | ||||
Occupancy expense | 624 | 578 | ||||
Furniture and equipment expense | 870 | 796 | ||||
FDIC insurance premiums | 240 | 214 | ||||
Amortization of identified intangibles | 11 | 11 | ||||
Other operating expense | 1,983 | 2,003 | ||||
Total non-interest expense | 7,698 | 7,200 | ||||
Income before income taxes | 6,121 | 6,118 | ||||
Applicable income taxes | 1,484 | 1,615 | ||||
Net Income | $ | 4,637 | $ | 4,503 | ||
Basic earnings per share | $ | 0.43 | $ | 0.42 | ||
Diluted earnings per share | $ | 0.43 | $ | 0.42 | ||
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The First Bancorp | ||||||
Selected Financial Data (Unaudited) | ||||||
As of and for the three months ended March 31, | ||||||
Dollars in thousands, except for per share amounts | 2017 | 2016 | ||||
Summary of Operations | ||||||
Interest Income | $ | 14,491 | $ | 13,276 | ||
Interest Expense | 3,015 | 2,547 | ||||
Net Interest Income | 11,476 | 10,729 | ||||
Provision for Loan Losses | 500 | 375 | ||||
Non-Interest Income | 2,843 | 2,964 | ||||
Non-Interest Expense | 7,698 | 7,200 | ||||
Net Income | 4,637 | 4,503 | ||||
Per Common Share Data | ||||||
Basic Earnings per Share | $ | 0.43 | $ | 0.42 | ||
Diluted Earnings per Share | 0.43 | 0.42 | ||||
Cash Dividends Declared | 0.230 | 0.220 | ||||
Book Value per Common Share | 16.17 | 15.92 | ||||
Tangible Book Value per Common Share | 13.40 | 13.13 | ||||
Market Value | 27.25 | 19.51 | ||||
Financial Ratios | ||||||
Return on Average Equity (a) | 10.71 | % | 10.56 | % | ||
Return on Average Tangible Common Equity (a) | 12.92 | % | 12.80 | % | ||
Return on Average Assets (a) | 1.07 | % | 1.15 | % | ||
Average Equity to Average Assets | 10.03 | % | 10.92 | % | ||
Average Tangible Equity to Average Assets | 8.31 | % | 9.00 | % | ||
Net Interest Margin Tax-Equivalent (a) | 3.05 | % | 3.13 | % | ||
Dividend Payout Ratio | 53.49 | % | 52.38 | % | ||
Allowance for Loan Losses/Total Loans | 0.95 | % | 1.02 | % | ||
Non-Performing Loans to Total Loans | 0.78 | % | 0.67 | % | ||
Non-Performing Assets to Total Assets | 0.52 | % | 0.53 | % | ||
Efficiency Ratio | 50.17 | % | 51.45 | % | ||
At Period End | ||||||
Total Assets | $ | 1,763,828 | $ | 1,574,681 | ||
Total Loans | 1,089,735 | 1,004,942 | ||||
Total Investment Securities | 566,816 | 467,211 | ||||
Total Deposits | 1,346,483 | 1,109,441 | ||||
Total Shareholders' Equity | 174,910 | 171,545 | ||||
(a) Annualized using a 365-day basis for 2017 and a 366-day basis for 2016. | ||||||
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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, as adjusted, 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.
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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 2017 and 2016.
For the three months ended | ||||||
In thousands of dollars | March 31, 2017 | March 31, 2016 | ||||
Net interest income as presented | $ | 11,476 | $ | 10,729 | ||
Effect of tax-exempt income | 946 | 748 | ||||
Net interest income, tax equivalent | $ | 12,422 | $ | 11,477 | ||
The Company presents its efficiency ratio using non-GAAP information which is most commonly used by financial institutions. 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 three months ended | ||||||
In thousands of dollars | March 31, 2017 | March 31, 2016 | ||||
Non-interest expense, as presented | $ | 7,698 | $ | 7,200 | ||
Net interest income, as presented | 11,476 | 10,729 | ||||
Effect of tax-exempt income | 946 | 748 | ||||
Non-interest income, as presented | 2,843 | 2,964 | ||||
Effect of non-interest tax-exempt income | 83 | 89 | ||||
Net securities gains | (3 | ) | (536 | ) | ||
Adjusted net interest income plus non-interest income | $ | 15,345 | $ | 13,994 | ||
Non-GAAP efficiency ratio | 50.17 | % | 51.45 | % | ||
GAAP efficiency ratio | 53.76 | % | 52.58 | % | ||
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
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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 three months ended | ||||||
In thousands of dollars | March 31, 2017 | March 31, 2016 | ||||
Average shareholders' equity as presented | $ | 175,597 | $ | 171,554 | ||
Less intangible assets | (30,060 | ) | (30,103 | ) | ||
Tangible average shareholders' equity | $ | 145,537 | $ | 141,451 | ||
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.
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