Attached files
| file | filename |
|---|---|
| 8-K - 8-K - First Bancorp, Inc /ME/ | a8-kearnings18q1.htm |
Exhibit 99.1
The First Bancorp Reports Record Quarterly Results
DAMARISCOTTA, ME, April 18, 2018 – The First Bancorp (Nasdaq: FNLC), parent company of First National Bank, today announced operating results for the three months ended March 31, 2018. Net income was $5.5 million, up $869,000 or 18.7% from the first three months of 2017. Earnings per common share on a fully diluted basis over the same period were up $0.08 to $0.51 per share, an increase of 18.6% from the prior year.
“I’m pleased to announce another quarter of record earnings for The First Bancorp” remarked Tony C. McKim, the Company’s President and Chief Executive Officer. “Our core spread business remains strong, and increased net interest income resulting from growth in earning assets continues to drive our performance. In addition, several of our fee-based business lines enjoyed year-over-year revenue increases highlighted by First Advisors, the Bank’s trust and investment management division, which had revenue growth of 17.3% over the first quarter of 2017. We maintained the dividend at 24 cents per share in the first quarter and we continue to pay out a significant percentage of net income to our shareholders in the form of cash dividends.
“The strong growth on both sides of the balance sheet we experienced in 2017 continued into the first quarter of 2018,” noted President McKim. “Earning assets grew $30.6 million in the first three months of 2018 and are $102.8 million higher than a year ago. Total loans have increased $23.9 million or 2.0% year-to-date, and are up $98.3 million or 9.0% year-over-year. The investment portfolio is up $7.3 million or 1.3% year-to-date, and year-over-year the portfolio is up $7.6 million or 1.3%. On the funding side of the balance sheet, low-cost deposits are down $11.3 million or 1.6% since year end, in-line with our normal seasonal deposit flow pattern. Year-over-year low-cost deposits are up $7.5 million or 1.1%, building upon the exceptionally strong low-cost deposit growth we experienced in the first quarter of 2017.
“Net interest income on a tax-equivalent basis for the first three months of 2018 was up $500,000 or 4.0% from the same period in 2017,” President McKim continued, “with all of the increase attributable to growth in earning assets. This growth fully offset a year-over-year decline in our net interest margin from 3.05% in the first quarter of 2017 to 3.00% in the first quarter of 2018. The
1
margin decrease is primarily attributable to higher funding costs. Non-interest income for the first three months of 2018 was up $289,000 or 10.2% from the first three months of 2017, led by revenue growth at First Advisors and net securities gains. Non-interest expense for the first three months of 2018 was $881,000 or 11.4% above the same period in 2017, primarily due to higher employee costs as we continue to invest in the people and technology to sustain growth. As expected, the Tax Cuts and Jobs Act of 2017 (“the TCJA”) resulted in a significant income tax expense savings from the prior year.
“Our credit quality metrics remain solid,” President McKim commented. “Non-performing assets stood at 0.83% of total assets as of March 31, 2018, above the 0.52% level of non-performing assets a year ago and down from 0.86% at year end. Past-due loans were 1.34% of total loans at March 31, 2018, down from 1.60% at December 31, 2017 and up from 0.96% at March 31, 2017. We provisioned $500,000 for loan losses in the first three months of 2018, level with the amount we provisioned in the first three months of 2017. The allowance for loan losses stood at 0.92% of total loans as of March 31, 2018, level with that reported as of December 31, 2017 and down slightly from 0.95% of total loans at March 31, 2017.”
“The impact of continued asset growth and strong earnings, coupled with the income tax savings from TCJA, is evident in our operating ratios,” observed Richard M. Elder, the Company’s Chief Financial Officer. “Our return on average assets was 1.21% and our return on average tangible common equity was 14.69% for the first three months of 2018, comparing favorably to the 1.07% and 12.92%, respectively, reported for the first three months of 2017. Our efficiency ratio on a tax equivalent basis stood at 53.75% for the first three months of 2018 compared to 50.17% for the first three months of 2017, the increase being attributable to increased operating expenses and a reduction in tax equivalent revenue from the Company’s tax exempt assets, as a result of TCJA.
“The First Bancorp’s stock closed at $27.98 per share on March 29, 2018,” Mr. Elder noted, up from $27.25 a year ago and up from our year-end close at $27.23 per share. “With dividends reinvested, our 3-month total return was 3.65%, and total return over a three year period was 81.25%, outperforming the broad market during these periods, as measured by the S&P 500 which had a total return with dividends reinvested of -0.76% and 35.88% respectively, as well the Russell 2000, in which we are included, with total returns of -0.08% and 27.26% respectively. Our stock has also outperformed the banking industry, where the 3-month total return was 1.42% and 3-year total return was 49.93% for the KBW Regional Bank Index, and total returns of 2.17% and 60.63% over the same periods for the Nasdaq Bank Index.”
2
“As noted above, the Board of Directors maintained the quarterly dividend at 24 cents per share in the first quarter of 2018,” President McKim commented. “Based on the March 29, 2018 closing price of $27.98 per share, our annualized dividend yield is a healthy 3.43%. In managing capital, we continue to 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.
“I’m pleased with our start to 2018,” President McKim concluded. “Continued healthy growth on both sides of the balance sheet led to increased net interest income, and fee-based business lines are growing. I couldn’t be more proud of the tremendous team of people we have at First National Bank. Ultimately it is their skill and dedication that generates these record results and contributes to our ongoing success.”
3
The First Bancorp | |||||||||
Consolidated Balance Sheets (Unaudited) | |||||||||
In thousands of dollars, except per share data | March 31, 2018 | December 31, 2017 | March 31, 2017 | ||||||
Assets | |||||||||
Cash and due from banks | $ | 16,559 | $ | 19,207 | $ | 17,600 | |||
Interest-bearing deposits in other banks | 280 | 860 | 3,272 | ||||||
Securities available for sale | 303,769 | 300,172 | 312,624 | ||||||
Securities to be held to maturity | 258,690 | 256,567 | 240,829 | ||||||
Restricted equity securities, at cost | 11,947 | 10,358 | 13,363 | ||||||
Loans held for sale | 284 | 386 | 979 | ||||||
Loans | 1,188,002 | 1,164,139 | 1,089,735 | ||||||
Less allowance for loan losses | 10,957 | 10,729 | 10,367 | ||||||
Net loans | 1,177,045 | 1,153,410 | 1,079,368 | ||||||
Accrued interest receivable | 7,222 | 5,867 | 6,854 | ||||||
Premises and equipment | 22,043 | 22,502 | 21,760 | ||||||
Other real estate owned | 1,121 | 1,012 | 525 | ||||||
Goodwill | 29,805 | 29,805 | 29,805 | ||||||
Other assets | 43,050 | 42,784 | 36,849 | ||||||
Total assets | $ | 1,871,815 | $ | 1,842,930 | $ | 1,763,828 | |||
Liabilities | |||||||||
Demand deposits | $ | 137,674 | $ | 145,332 | $ | 130,319 | |||
NOW deposits | 314,587 | 318,043 | 323,919 | ||||||
Money market deposits | 108,726 | 163,898 | 142,220 | ||||||
Savings deposits | 232,458 | 232,605 | 222,976 | ||||||
Certificates of deposit | 347,010 | 284,066 | 246,792 | ||||||
Certificates $100,000 to $250,000 | 240,492 | 232,759 | 236,971 | ||||||
Certificates $250,000 and over | 47,245 | 42,176 | 43,286 | ||||||
Total deposits | 1,428,192 | 1,418,879 | 1,346,483 | ||||||
Borrowed funds | 244,229 | 228,758 | 226,467 | ||||||
Other liabilities | 18,022 | 13,972 | 16,025 | ||||||
Total Liabilities | 1,690,443 | 1,661,609 | 1,588,975 | ||||||
Shareholders' equity | |||||||||
Common stock | 108 | 108 | 108 | ||||||
Additional paid-in capital | 61,999 | 61,747 | 60,991 | ||||||
Retained earnings | 123,876 | 121,144 | 113,697 | ||||||
Net unrealized loss on securities available-for-sale | (6,210 | ) | (2,901 | ) | (934 | ) | |||
Net unrealized loss on securities transferred from available for sale to held to maturity | (182 | ) | (174 | ) | (133 | ) | |||
Net unrealized gain on cash flow hedging derivative instruments | 1,928 | 1,544 | 1,226 | ||||||
Net unrealized loss on postretirement benefit costs | (147 | ) | (147 | ) | (102 | ) | |||
Total shareholders' equity | 181,372 | 181,321 | 174,853 | ||||||
Total liabilities & shareholders' equity | $ | 1,871,815 | $ | 1,842,930 | $ | 1,763,828 | |||
Common Stock | |||||||||
Number of shares authorized | 18,000,000 | 18,000,000 | 18,000,000 | ||||||
Number of shares issued and outstanding | 10,846,562 | 10,829,918 | 10,814,132 | ||||||
Book value per common share | $ | 16.72 | $ | 16.74 | $ | 16.17 | |||
Tangible book value per common share | $ | 13.95 | $ | 13.97 | $ | 13.39 | |||
4
The First Bancorp | ||||||
Consolidated Statements of Income (Unaudited) | ||||||
For the three months ended March 31, | ||||||
In thousands of dollars, except per share data | 2018 | 2017 | ||||
Interest income | ||||||
Interest and fees on loans | $ | 12,391 | $ | 10,652 | ||
Interest on deposits with other banks | 11 | 15 | ||||
Interest and dividends on investments | 4,049 | 3,824 | ||||
Total interest income | 16,451 | 14,491 | ||||
Interest expense | ||||||
Interest on deposits | 3,099 | 1,994 | ||||
Interest on borrowed funds | 943 | 1,021 | ||||
Total interest expense | 4,042 | 3,015 | ||||
Net interest income | 12,409 | 11,476 | ||||
Provision for loan losses | 500 | 500 | ||||
Net interest income after provision for loan losses | 11,909 | 10,976 | ||||
Non-interest income | ||||||
Investment management and fiduciary income | 740 | 631 | ||||
Service charges on deposit accounts | 527 | 502 | ||||
Net securities gains | 136 | 3 | ||||
Mortgage origination and servicing income | 331 | 332 | ||||
Other operating income | 1,398 | 1,375 | ||||
Total non-interest income | 3,132 | 2,843 | ||||
Non-interest expense | ||||||
Salaries and employee benefits | 4,490 | 3,970 | ||||
Occupancy expense | 699 | 624 | ||||
Furniture and equipment expense | 929 | 870 | ||||
FDIC insurance premiums | 279 | 240 | ||||
Amortization of identified intangibles | 11 | 11 | ||||
Other operating expense | 2,171 | 1,983 | ||||
Total non-interest expense | 8,579 | 7,698 | ||||
Income before income taxes | 6,462 | 6,121 | ||||
Applicable income taxes | 956 | 1,484 | ||||
Net Income | $ | 5,506 | $ | 4,637 | ||
Basic earnings per share | $ | 0.51 | $ | 0.43 | ||
Diluted earnings per share | $ | 0.51 | $ | 0.43 | ||
5
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 | 2018 | 2017 | ||||
Summary of Operations | ||||||
Interest Income | $ | 16,451 | $ | 14,491 | ||
Interest Expense | 4,042 | 3,015 | ||||
Net Interest Income | 12,409 | 11,476 | ||||
Provision for Loan Losses | 500 | 500 | ||||
Non-Interest Income | 3,132 | 2,843 | ||||
Non-Interest Expense | 8,579 | 7,698 | ||||
Net Income | 5,506 | 4,637 | ||||
Per Common Share Data | ||||||
Basic Earnings per Share | $ | 0.51 | $ | 0.43 | ||
Diluted Earnings per Share | 0.51 | 0.43 | ||||
Cash Dividends Declared | 0.24 | 0.23 | ||||
Book Value per Common Share | 16.72 | 16.17 | ||||
Tangible Book Value per Common Share | 13.95 | 13.39 | ||||
Market Value | 27.98 | 27.25 | ||||
Financial Ratios | ||||||
Return on Average Equity (a) | 12.27 | % | 10.71 | % | ||
Return on Average Tangible Common Equity (a) | 14.69 | % | 12.92 | % | ||
Return on Average Assets (a) | 1.21 | % | 1.07 | % | ||
Average Equity to Average Assets | 9.83 | % | 10.03 | % | ||
Average Tangible Equity to Average Assets | 8.21 | % | 8.31 | % | ||
Net Interest Margin Tax-Equivalent (a) | 3.00 | % | 3.05 | % | ||
Dividend Payout Ratio | 47.06 | % | 53.49 | % | ||
Allowance for Loan Losses/Total Loans | 0.92 | % | 0.95 | % | ||
Non-Performing Loans to Total Loans | 1.20 | % | 0.78 | % | ||
Non-Performing Assets to Total Assets | 0.83 | % | 0.52 | % | ||
Efficiency Ratio | 53.75 | % | 50.17 | % | ||
At Period End | ||||||
Total Assets | $ | 1,871,815 | $ | 1,763,828 | ||
Total Loans | 1,188,002 | 1,089,735 | ||||
Total Investment Securities | 574,406 | 566,816 | ||||
Total Deposits | 1,428,192 | 1,346,483 | ||||
Total Shareholders' Equity | 181,372 | 174,853 | ||||
(a) Annualized using a 365-day basis for both 2018 and 2017 | ||||||
6
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.
7
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 21.0% tax rate was used in 2018 and 35.0% tax rate in 2017.
For the three months ended | ||||||
In thousands of dollars | March 31, 2018 | March 31, 2017 | ||||
Net interest income as presented | $ | 12,409 | $ | 11,476 | ||
Effect of tax-exempt income | 513 | 946 | ||||
Net interest income, tax equivalent | $ | 12,922 | $ | 12,422 | ||
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, 2018 | March 31, 2017 | ||||
Non-interest expense, as presented | $ | 8,579 | $ | 7,698 | ||
Net interest income, as presented | 12,409 | 11,476 | ||||
Effect of tax-exempt interest income | 513 | 946 | ||||
Non-interest income, as presented | 3,132 | 2,843 | ||||
Effect of non-interest tax-exempt income | 41 | 83 | ||||
Net securities gains | (136 | ) | (3 | ) | ||
Adjusted net interest income plus non-interest income | $ | 15,959 | $ | 15,345 | ||
Non-GAAP efficiency ratio | 53.75 | % | 50.17 | % | ||
GAAP efficiency ratio | 55.20 | % | 53.76 | % | ||
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 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
8
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, 2018 | March 31, 2017 | ||||
Average shareholders' equity as presented | $ | 182,054 | $ | 175,597 | ||
Less intangible assets | (30,017 | ) | (30,060 | ) | ||
Tangible average shareholders' equity | $ | 152,037 | $ | 145,537 | ||
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 Richard M. Elder, The First Bancorp's Treasurer & Chief Financial Officer, at 207.563.3195.
9