The First Bancorp (Nasdaq: FNLC), parent company of First
National Bank, today announced operating results for the three
months ended March 31, 2023. Unaudited net income for the period
was $8.0 million representing diluted earnings per share of $0.72,
as compared to net income of $9.7 million and diluted earnings per
share of $0.88 in the first quarter of 2022. Non-recurring revenues
in the first quarter of 2022, including Payroll Protection Program
("PPP") fees and debit card program incentives, accounted for $1.4
million of the year-to-year change, or $0.13 per diluted share, and
a decrease in mortgage banking revenue, another $306,000, or $0.03
per share. Removing these effects, net income was approximately
flat versus the prior year period. Earnings were down from the
fourth quarter of 2022 when the Company reported net income of $9.2
million and diluted earnings per share of $0.83. The primary change
quarter-to-quarter was a decline in net interest income of $2.0
million, or $0.18 per diluted share, the result of margin pressure
on the funding side of the balance sheet. Rate driven competition
for local deposits and rising costs for wholesale funding were the
primary factors behind the margin pressure experienced in the
period.
"The FDIC's well publicized closure and subsequent sale of
several banks in March has cast a spotlight on our industry and
resulted in market turbulence," commented Tony C. McKim, the
Company's President and Chief Executive Officer. "The First Bancorp
and First National Bank are well positioned to withstand these
disruptions. We are well-capitalized, with exceptional asset
quality, and a funding base that is stable and diverse."
Mr. McKim continued, "Contrary to national data showing deposits
leaving the banking system, our total deposits increased in the
first quarter, and we have not had to rely upon borrowings outside
of the normal course of business. The Bank's uninsured deposits
were estimated at just 16.4% of total deposits as of March 31,
2023, with sources of immediately available liquidity sufficient to
cover the entire uninsured total. In addition, with adoption of the
Current Expected Credit Loss ("CECL") methodology this quarter, our
Allowance for Credit Losses ("ACL") has increased to 1.18% of total
loans, adding further strength to our balance sheet as we head into
potential economic uncertainty."
Turning to the first quarter's results, Mr. McKim remarked “The
First Bancorp achieved solid operating results for the first three
months of 2023, though down from the levels posted over the past
several quarters. Our decrease in earnings from the fourth quarter
is the result of a lower net interest margin due to increased
funding costs. We began to experience increased funding cost
pressure late in the fourth quarter of 2022, and that trend has
continued with higher costs year-to-date for both local and
wholesale deposits. Our net interest margin was 2.78% for the first
quarter of 2023, down from the PPP aided 3.24% a year ago, and down
from 3.09% in the fourth quarter of 2022. Earning asset growth
helped to partially offset the effects of margin contraction and
this growth was focused in the loan portfolio, which has grown
$68.2 million year-to-date, an annualized rate of 14.4%. First
quarter growth was centered in commercial loans, commercial real
estate loans and loans secured by one-to-four family residential
real estate. Our pipeline of new loans in process continues to be
healthy."
Mr. McKim continued, "Non-interest income was also under
pressure in the first quarter, down 15.7% compared to a year ago,
and down 7.2% from the fourth quarter of 2022. Compared to a year
ago, mortgage banking revenues fell $306,000 and debit card revenue
fell $245,000; compared to the fourth quarter of 2022, debit card
revenue fell $279,000. Debit card interchange revenue has been
reasonably steady, and the quarterly revenue changes are mostly
attributable to the timing of annual incentive payments. Operating
expenses remain controlled, increasing a modest 1.9% from a year
ago and decreasing 7.4% from the fourth quarter of 2022. Our
efficiency ratio for the quarter was 49.98%, up from 45.42% for the
same period a year ago, and from 48.83% in the fourth quarter of
2022."
FIRST QUARTER 2023 FINANCIAL
HIGHLIGHTS
- Net Income of $8.0 million is a decrease of 17.9% from the
quarter ended March 31, 2022, and a decrease of 13.3% from the
quarter ended December 31, 2022,
- Pre-tax, Pre-Provision ("PTPP") Net Income (non-GAAP) decreased
16.5% compared to the first quarter of 2022 and decreased 12.3%
from the fourth quarter of 2022.
- Loan balances increased $68.2 million in the first quarter to
$1.98 billion.
- Total deposits were $2.47 billion as of March 31, 2023, an
increase of 3.7% from December 31, 2022.
- Asset quality remained very strong as of March 31, 2023 with a
ratio of Non-Performing Assets to Total Assets of just 0.06%, and a
ratio of Past Due Loans to Total Loans of 0.10%.
- A quarterly shareholder dividend of $0.34 per share was
declared.
FINANCIAL CONDITION
Total assets at March 31, 2023, were $2.81 billion, up $72.6
million in the first quarter and up $263.2 million from a year ago.
Earning assets increased $68.9 million during the quarter comprised
primarily of an increase in loans of $68.2 million. As compared to
March 31, 2022, earning assets have increased by $248.5 million
centered in loan growth of $275.5 million, a decrease in the
carrying value of investments of $11.6 million, and a reduction in
interest earning cash balances of $15.7 million.
Loan growth in the first quarter was concentrated in the
commercial and residential portfolios. Commercial loans increased
by $50.6 million during the period, led by increases in
owner-occupied commercial real estate of $28.6 million, non-owner
occupied commercial real estate of $20.8 million and commercial
& industrial loans of $20.3 million; commercial construction
balances decreased by $21.2 million as a number of projects
converted to permanent financing. Residential term loans increased
by $9.4 million in the first quarter while residential construction
loans increased by $2.8 million.
Total deposits at March 31, 2023 were $2.47 billion, up $87.8
million during the quarter, and up $308.2 million or 14.3% from
March 31, 2022. Certificates of deposit increased by $142.0 million
in the first quarter, while low-cost deposits decreased by $55.7
million, centered in Demand and Savings account balances.
Borrowings decreased by $19.6 million. The Bank typically
experiences a modest level of local deposit outflow annually in the
first quarter based upon seasonal factors. Local deposits as of
March 31, 2023 were down 1.75% from 2022 year-end, well within a
normal range.
The Company’s regulatory capital position remained strong as of
March 31, 2023, with an estimated total risk-based capital ratio of
13.81%, in line with the total capital ratio of 13.58% as of
December 31, 2022, and 14.08% as of March 31, 2022. The Company
adopted ASC 326, the CECL standard, in the first quarter of 2023,
incurring a retained earnings adjustment of $6.3 million. This
adjustment resulted in the Company's leverage capital ratio
decreasing to an estimated 8.75% as of March 31, 2023 from the
9.01% and 8.96% reported as of December 31, 2022, and as of March
31, 2022, respectively. The Company's tangible book value per share
after CECL adjustment, which includes unrealized losses on
available for sale securities, was $17.84 as of March 31, 2023,
down modestly from $17.93 at December 31, 2022. The Tangible Common
Equity ratio was 7.11% as of March 31, 2023, down from 7.31% as of
December 31, 2022, with the period-to-period change based mostly in
the CECL adjustment.
ASSET QUALITY & PROVISION FOR
CREDIT LOSSES
Asset quality continues to be very strong. As of March 31, 2023,
the ratio of non-performing assets to total assets was 0.06%, level
with December 31, 2022, and down from 0.20% at March 31, 2022. Net
charge-offs year-to-date in 2023 were an annualized 0.01% of total
loans, as compared to 0.03% in 2022. Past due loans were 0.10% of
total loans as of March 31, 2023, in line with 0.08% of total loans
at December 31, 2022, and improved from 0.25% as of March 31,
2022.
The provision for credit losses totaled $550,000 in the first
quarter of 2023 under CECL methodology, compared with $450,000 for
the same period in 2022 under the incurred loss method. The Company
has modeled its ACL using a discounted cash flow approach applied
to each segment of the loan portfolio. The ACL stood at 1.18% of
total loans and 1,303% of non-performing loans as of March 31,
2023, as compared to an allowance for loan losses of 0.87% of total
loans and 953% of non-performing loans at December 31, 2022, and
0.92% of total loans and 312% of non-performing loans as of March
31, 2022.
OPERATING RESULTS - First Quarter of
2023 vs. Fourth Quarter of 2022
Net Income for the three months ended March 31, 2023, was $8.0
million, a decrease of $1.2 million or 13.3% from the three months
ended December 31, 2022. On a PTPP (non-GAAP) basis, net income for
the period was $10.2 million, down $1.4 million or 12.3%. The
Company’s Return on Average Assets of 1.16% for the quarter was
down from 1.34%; the first quarter 2023 PTPP Return on Average
Assets was 1.49%, down from 1.70% in the prior quarter. Return on
Average Tangible Common Equity was 15.64% for the period, compared
to 18.71%. The Company's Efficiency Ratio (non-GAAP) was 49.98% in
the first quarter of 2023, up modestly from 48.83% in the fourth
quarter of 2022.
Contributing factors to the Company’s operating results in the
three months ended March 31, 2023, included:
- Net interest income was $17.5 million, down $2.0 million or
10.3% from the fourth quarter of 2022.
- Net interest margin for the first quarter of 2023 was 2.78%,
down from 3.09%.
- The average tax equivalent yield on earning assets increased
from 4.26% to 4.54%
- The average cost of total liabilities increased from 1.42% to
2.09%
- Non-interest income before securities gains or losses was $3.6
million, a decrease of $278,000 or 7.2% from the fourth quarter of
2022. In addition to the debit card and mortgage banking factors
mentioned previously, revenue increased $59,000 or 5.4% from the
fourth quarter of 2022 at First National Wealth Management, the
Bank’s trust and investment management division, and service charge
revenue decreased by $30,000.
- Non-interest expense for the quarter ended March 31, 2023 was
$10.9 million, a decrease of $861,000, or 7.4% from the fourth
quarter of 2022. Primary contributors to the expense reduction were
employee expenses and other operating expenses; occupancy expenses
increased due mostly to seasonal factors.
DIVIDEND
On March 30, 2023, the Company's Board of Directors declared a
first quarter dividend of $0.34 per share. The first quarter
dividend represents a payout to shareholders of 46.6% of earnings
per share for the period, and will be paid on April 20, 2023, to
shareholders of record as of April 10, 2023.
ABOUT THE FIRST BANCORP
The First Bancorp, the parent company of First National Bank, is
based in Damariscotta, Maine. Founded in 1864, First National Bank
is a full-service community bank with $2.78 billion in assets. The
Bank provides a complete array of commercial and retail banking
services through eighteen locations in mid-coast and eastern Maine.
First National Wealth Management, a division of the Bank, provides
investment management and trust services to individuals,
businesses, and municipalities. More information about The First
Bancorp, First National Bank and First National Wealth Management
may be found at www.thefirst.com.
The First Bancorp
Consolidated Balance Sheets (Unaudited)
In thousands of dollars, except per share
data
March 31, 2023
December 31, 2022
March 31, 2022
Assets
Cash and due from banks
$
27,458
$
22,728
$
22,051
Interest-bearing deposits in other
banks
2,773
3,693
18,427
Securities available-for-sale
288,242
284,509
313,015
Securities held-to-maturity1
391,845
393,896
377,183
Restricted equity securities, at cost
3,874
3,883
5,402
Loans held for sale
—
275
400
Loans
1,982,847
1,914,674
1,707,348
Less allowance for credit losses
23,458
16,723
15,766
Net loans
1,959,389
1,897,951
1,691,582
Accrued interest receivable
12,142
9,829
9,737
Premises and equipment
28,286
28,277
29,137
Goodwill
30,646
30,646
30,646
Other assets
67,165
63,491
51,027
Total assets
$
2,811,820
$
2,739,178
$
2,548,607
Liabilities
Demand deposits
$
293,123
$
318,626
$
321,971
NOW deposits
623,523
630,416
658,151
Money market deposits
194,183
192,632
197,176
Savings deposits
346,205
369,532
371,294
Certificates of deposit
592,052
489,793
225,304
Certificates $100,000 to $250,000
278,151
259,614
329,790
Certificates $250,000 and over
139,464
118,264
54,853
Total deposits
2,466,701
2,378,877
2,158,539
Borrowed funds
83,881
103,483
133,712
Other liabilities
32,777
27,895
22,710
Total Liabilities
2,583,359
2,510,255
2,314,961
Shareholders' equity
Common stock
111
110
110
Additional paid-in capital
68,830
68,435
67,246
Retained earnings
202,036
204,343
186,324
Net unrealized loss on securities
available-for-sale
(40,537
)
(44,718
)
(20,061
)
Net unrealized loss on securities
transferred from available-for-sale to held-to-maturity
(60
)
(64
)
(78
)
Net unrealized gain (loss) on hedging
derivative instruments
(2,192
)
544
—
Net unrealized gain on postretirement
costs
273
273
105
Total shareholders' equity
228,461
228,923
233,646
Total liabilities & shareholders'
equity
$
2,811,820
$
2,739,178
$
2,548,607
Common Stock
Number of shares authorized
18,000,000
18,000,000
18,000,000
Number of shares issued and
outstanding
11,074,182
11,045,186
11,024,086
Book value per common share
$
20.63
$
20.73
$
21.19
Tangible book value per common share
$
17.84
$
17.93
$
18.39
1March 31, 2023 net of allowance for
credit losses
The First Bancorp
Consolidated Statements of Income
(Unaudited)
In thousands of dollars, except per share
data
For the quarter ended
March 31, 2023
December 31, 2022
March 31, 2022
Interest income
Interest and fees on loans
$
24,125
$
22,342
$
16,613
Interest on deposits with other banks
40
152
9
Interest and dividends on investments
4,749
4,586
3,911
Total interest income
28,914
27,080
20,533
Interest expense
Interest on deposits
10,917
7,169
1,625
Interest on borrowed funds
522
427
288
Total interest expense
11,439
7,596
1,913
Net interest income
17,475
19,484
18,620
Provision for credit losses
550
450
450
Net interest income after provision for
credit losses
16,925
19,034
18,170
Non-interest income
Investment management and fiduciary
income
1,146
1,087
1,197
Service charges on deposit accounts
437
467
437
Net securities gains
—
—
2
Mortgage origination and servicing
income
192
190
498
Debit card income
1,185
1,464
1,430
Other operating income
609
639
668
Total non-interest income
3,569
3,847
4,232
Non-interest expense
Salaries and employee benefits
5,720
6,224
5,937
Occupancy expense
868
754
829
Furniture and equipment expense
1,303
1,318
1,235
FDIC insurance premiums
344
330
218
Amortization of identified intangibles
7
17
17
Other operating expense
2,608
3,068
2,414
Total non-interest expense
10,850
11,711
10,650
Income before income taxes
9,644
11,170
11,752
Applicable income taxes
1,673
1,973
2,047
Net Income
$
7,971
$
9,197
$
9,705
Basic earnings per share
$
0.73
$
0.84
$
0.89
Diluted earnings per share
$
0.72
$
0.83
$
0.88
The First Bancorp
Selected
Financial Data (Unaudited)
Dollars in thousands, except for per share
amounts
As of and for the quarter
ended
March 31, 2023
December 31, 2022
March 31, 2022
Summary of Operations
Interest Income
$
28,914
$
27,080
$
20,533
Interest Expense
11,439
7,596
1,913
Net Interest Income
17,475
19,484
18,620
Provision for Credit Losses
550
450
450
Non-Interest Income
3,569
3,847
4,232
Non-Interest Expense
10,850
11,711
10,650
Net Income
7,971
9,197
9,705
Per Common Share Data
Basic Earnings per Share
$
0.73
$
0.84
$
0.89
Diluted Earnings per Share
0.72
0.83
0.88
Cash Dividends Declared
0.34
0.34
0.32
Book Value per Common Share
20.63
20.73
21.19
Tangible Book Value per Common Share
17.84
17.93
18.39
Market Value
25.89
29.94
30.08
Financial Ratios
Return on Average Equity1
13.61
%
16.15
%
15.96
%
Return on Average Tangible Common
Equity1
15.64
%
18.71
%
18.25
%
Return on Average Assets1
1.16
%
1.34
%
1.56
%
Average Equity to Average Assets
8.56
%
8.32
%
9.80
%
Average Tangible Equity to Average
Assets
7.45
%
7.18
%
8.57
%
Net Interest Margin Tax-Equivalent1
2.78
%
3.09
%
3.24
%
Dividend Payout Ratio
46.58
%
40.48
%
35.96
%
Allowance for Credit Losses/Total
Loans
1.18
%
0.87
%
0.92
%
Non-Performing Loans to Total Loans
0.09
%
0.09
%
0.30
%
Non-Performing Assets to Total Assets
0.06
%
0.06
%
0.20
%
Efficiency Ratio
49.98
%
48.83
%
45.42
%
At Period End
Total Assets
$
2,811,820
$
2,739,178
$
2,548,607
Total Loans
1,982,847
1,914,674
1,707,348
Total Investment Securities
683,961
682,288
695,600
Total Deposits
2,466,701
2,378,877
2,158,539
Total Shareholders' Equity
228,461
228,923
233,646
1Annualized using a 365-day basis for both
2023 and 2022.
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 (including for purposes of
determining the compensation of certain executive officers and
other Company employees) and believes that these non-GAAP financial
measures provide a greater understanding of ongoing operations and
enhance comparability of results with prior periods and with other
financial institutions, as well as demonstrating the effects of
significant gains and charges in the current period, in light of
the disclosure practices employed by many other publicly-traded
financial institutions. 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.
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 both 2023 and 2022.
For the quarters ended
In thousands of dollars
March 31, 2023
December 31, 2022
March 31, 2022
Net interest income as presented
$
17,475
$
19,484
$
18,620
Effect of tax-exempt income
620
$
607
557
Net interest income, tax equivalent
$
18,095
$
20,091
$
19,177
The Company presents its efficiency ratio using non-GAAP
information which is most commonly used by financial institutions.
The GAAP-based efficiency ratio is non-interest expenses divided by
net interest income plus non-interest income from the Consolidated
Statements of Income. The non-GAAP efficiency ratio excludes
securities losses and other-than-temporary impairment charges from
non-interest expenses, excludes securities gains from non-interest
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 quarters ended
In thousands of dollars
March 31, 2023
December 31, 2022
March 31, 2022
Non-interest expense, as presented
$
10,850
$
11,711
$
10,650
Net interest income, as presented
17,475
19,484
18,620
Effect of tax-exempt interest income
620
607
557
Non-interest income, as presented
3,569
3,847
4,232
Effect of non-interest tax-exempt
income
44
43
42
Net securities gains
—
—
(2
)
Adjusted net interest income plus
non-interest income
$
21,708
$
23,981
$
23,449
Non-GAAP efficiency ratio
49.98
%
48.83
%
45.42
%
GAAP efficiency ratio
51.56
%
50.20
%
46.60
%
The Company presents certain information based upon tangible
common equity instead of total 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 Company's consolidated
financial statements, which have been prepared in accordance with
U.S. GAAP:
For the quarters ended
In thousands of dollars
March 31, 2023
December 31, 2022
March 31, 2022
Average shareholders' equity as
presented
$
237,518
$
225,940
$
246,635
Less intangible assets
(30,853
)
(30,884
)
(30,919
)
Tangible average shareholders' equity
$
206,665
$
195,056
$
215,716
The following table provides a reconciliation of period ending
tangible common equity to the Company's consolidated financial
statements:
Period Ending
In thousands of dollars, except per share
data
March 31, 2023
December 31, 2022
March 31, 2022
Shareholders' equity
$
228,461
$
228,923
$
233,646
Less intangible assets
(30,849
)
(30,856
)
(30,856
)
Tangible common equity
197,612
198,067
202,790
Add unrealized losses on
available-for-sale securities, net of tax
40,537
44,718
20,061
Adjusted tangible common equity
$
238,149
$
242,785
$
222,851
Adjusted tangible book value per share
$
21.50
$
21.98
$
20.21
To provide period-to-period comparison of operating results
prior to consideration of credit loss provision and income taxes,
the non-GAAP measure of PTPP Net Income is presented. The following
table provides a reconciliation to Net Income:
For the quarters ended
In thousands of dollars
March 31, 2023
December 31, 2022
March 31, 2022
Net Income, as presented
$
7,971
$
9,197
$
9,705
Add: provision for credit losses
550
450
450
Add: income taxes
1,673
1,973
2,047
Pre-Tax, pre-provision net income
$
10,194
$
11,620
$
12,202
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.
Category: Earnings
Source: The First Bancorp
View source
version on businesswire.com: https://www.businesswire.com/news/home/20230419006000/en/
The First Bancorp Richard M. Elder, EVP, Chief Financial Officer
207-563-3195 rick.elder@thefirst.com
First Bancorp (NASDAQ:FNLC)
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