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The First Bancorp Reports Record Net Income of $5.7 Million

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The First Bancorp (NASDAQ:FNLC), parent company of First National Bank,
today announced operating results for the three months ended June 30,
2018. Net income was $5.7 million, up $851,000 or 17.4% from the three
months ended June 30, 2017. Earnings per common share on a fully diluted
basis over the same period were up $0.08 to $0.53 per share, an increase
of 17.8% from the prior year. The Company also announced operating
results for the six months ended June 30, 2018. Net income was $11.2
million, up $1.7 million or 18.1% from the first six months of 2017,
with earnings per share on a fully diluted basis of $1.04, up $0.16 or
18.2% from the same period in 2017.

"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. "Continued growth in earning assets resulted in
increased net interest income despite the headwinds of higher funding
costs. Our fee-based business lines continue to generate year-over-year
revenue growth, led by First Advisors, the Bank's trust and investment
management division, where revenues are up 15% over the first six months
of last year. Based upon the strength of the Company's earnings, we
increased the dividend to 29 cents per share in the second quarter,
representing a payout to our shareholders of 54.72% of net income for
the period."

SECOND QUARTER 2018 FINANCIAL HIGHLIGHTS

  • Net Income for the second quarter of 2018 increased 17.4% over the
    second quarter of 2017 to $5.7 million.
  • Total loans outstanding at June 30, 2018 were $1.2 billion, up $36.4
    million in the second quarter and $103.8 million year-over-year.
  • Efficiency Ratio (non-GAAP) improved to 51.02% in the second quarter,
    down from 53.75% in the first quarter of 2018 (the GAAP Efficiency
    Ratio was 52.92% in the second quarter of 2018, down from 55.20% in
    the first quarter of 2018).
  • The non-performing assets to total assets ratio at June 30, 2018 was
    0.78%, down from 0.83% at March 31, 2018.

FINANCIAL CONDITION

Total assets at June 30, 2018 were $1.91 billion, up $42.1 million for
the quarter and up $118.3 million from the prior year. Growth during the
second quarter was spread primarily amongst commercial loans, up $16.6
million, municipal loans, up $13.4 million, and mortgage loans, up $9.3
million.

Total deposits at June 30, 2018 were $1.42 billion, down $11.5 million
from the quarter ended March 31, 2018 due to normal seasonal deposit
flow patterns, and up $97.4 million from June 30, 2017. Borrowed funds
utilization increased $53.2 million during the quarter to support asset
growth.

The Company's capital position remained strong as of June 30, 2018, with
an estimated total risk-based capital ratio of 15.50%, and an estimated
leverage capital ratio of 8.54%, both well in excess of regulatory
requirements.

ASSET QUALITY

Asset quality continues to be solid. Non-performing assets as a
percentage of total assets fell to 0.78% as of June 30, 2018, down from
0.83% at March 31, 2018, and up from 0.44% a year ago. Past due loans
were 0.61% of total loans at June 30, 2018, down from 1.34% of total
loans at March 31, 2018 and down from 0.87% a year ago. A total of
$500,000 was provisioned for loan losses in the second quarter of 2018,
level with the amount provisioned in the second quarter of 2017. The
allowance for loan losses stood at 0.94% of total loans as of June 30,
2018, up from 0.92% at March 31, 2018, and down marginally from the
0.95% of total loans at June 30, 2017. Annualized charge-offs as a
percentage of loans were 0.042% as of June 30, 2018, down from 0.12% in
calendar year 2017 and 0.13% in 2016.

OPERATING RESULTS

Net Income for the three months ended June 30, 2018 was $5.7 million, up
$851,000 or 17.4% from the three months ended June 30, 2017. On a fully
diluted earnings per share basis, earnings in the second quarter of 2018
were $0.53, up $0.08 or 17.8% from the same period a year ago.
Contributing factors to the Company's second quarter 2018 results
included:

  • Return on Average Assets of 1.22% and Return on Average Tangible
    Common Equity of 14.95% for the three months ended June 30, 2018, up
    from 1.10% and 13.18% respectively for the three months ended June 30,
    2017.
  • Non-interest income up $179,000 or 6.0% in the second quarter of 2018
    as compared to a year ago, with revenue growth led by First Advisors
    and deposit-based charges.
  • Earning asset growth of $41.2 million in the second quarter of 2018
    which resulted in a $133,000 increase in tax-equivalent net interest
    income from the second quarter of 2017 despite a decline in the net
    interest margin period to period from 3.03% to 2.88% due to higher
    non-local funding costs and reduced benefit from tax-exempt assets.
  • Non-interest expense for the period up $536,000 or 7.0% from the
    second quarter of 2017 primarily due to increased employee expense
    incurred to support the Company's growth.
  • Continued benefits from the Tax Cuts and Jobs Act of 2017 which
    reduced income tax expense by $1.1 million for the six months ended
    June 30, 2018 from the same period in 2017.

STOCK PERFORMANCE

On June 28, 2018 the Company's Board of Directors declared a dividend
for the second quarter of $0.29 per share, an increase of $0.05 or 21%,
payable on July 31, 2018 to shareholders of record as of July 9, 2018.
The company's stock closed at $28.22 per share on June 29, 2018, up from
$27.57 a year prior and from $27.23 at year-end 2017. With dividends
re-invested, FNLC shares have provided shareholders with a total
annualized return of 5.45% for the six months ended June 29, 2018, and
65.42% over the three years then ended. This return compared favorably
to the broad market as measured by the S&P 500 with returns of 2.65% and
40.57% respectively, and the Russell 2000, in which we are included,
with total returns of 7.67% and 36.58% over the same periods. The First
Bancorp's stock performance also compared favorably to the banking
industry over these same time horizons as measured by the KBW Regional
Bank Index with total returns of 3.77% and 39.38% respectively, and the
NASDAQ Bank Index with total returns of 4.62% and 52.22% respectively.

 

The First Bancorp

Consolidated Balance Sheets (Unaudited)

 
In thousands of dollars, except per share data     June 30, 2018     December 31, 2017     June 30, 2017
Assets            
Cash and due from banks $ 21,056 $ 19,207 $ 20,189
Interest-bearing deposits in other banks 1,616 860 3,820
Securities available for sale 305,048 300,172 308,146
Securities to be held to maturity 260,077 256,567 244,123
Restricted equity securities, at cost 12,363 10,358 12,311
Loans held for sale 481 386 865
Loans 1,224,440 1,164,139 1,120,665
Less allowance for loan losses     11,472       10,729       10,611  
Net loans 1,212,968 1,153,410 1,110,054
Accrued interest receivable 7,723 5,867 7,192
Premises and equipment 21,682 22,502 21,367
Other real estate owned 609 1,012 324
Goodwill 29,805 29,805 29,805
Other assets     40,533       42,784       37,455  
Total assets     $ 1,913,961       $ 1,842,930       $ 1,795,651  
Liabilities
Demand deposits $ 146,964 $ 145,332 $ 137,061
NOW deposits 282,449 318,043 293,553
Money market deposits 100,378 163,898 134,760
Savings deposits 229,464 232,605 226,391
Certificates of deposit 400,680 284,066 270,875
Certificates $100,000 to $250,000 207,365 232,759 212,063
Certificates $250,000 and over     49,346       42,176       44,556  
Total deposits 1,416,646 1,418,879 1,319,259
Borrowed funds 297,455 228,758 282,277
Other liabilities     16,656       13,972       16,578  
Total Liabilities     1,730,657       1,661,609       1,618,114  
Shareholders' equity
Common stock 109 108 108
Additional paid-in capital 62,246 61,747 61,218
Retained earnings 126,464 121,144 115,980
Net unrealized loss on securities available-for-sale (7,245 ) (2,901 ) (585 )
Net unrealized loss on securities transferred from available for
sale to held to maturity
(189 ) (174 ) (137 )
Net unrealized gain on cash flow hedging derivative instruments 2,066 1,544 1,055
Net unrealized loss on postretirement benefit costs     (147 )     (147 )     (102 )
Total shareholders' equity     183,304       181,321       177,537  
Total liabilities & shareholders' equity     $ 1,913,961       $ 1,842,930       $ 1,795,651  
Common Stock
Number of shares authorized 18,000,000 18,000,000 18,000,000
Number of shares issued and outstanding     10,851,917       10,829,918       10,819,443  
Book value per common share $ 16.89 $ 16.74 $ 16.41
Tangible book value per common share     $ 14.13       $ 13.97       $ 13.63  
 
 
The First Bancorp

Consolidated Statements of Income
(Unaudited)

                   
   

For the six months ended
June 30,

   

For the quarter ended
June 30,

In thousands of dollars, except per share data     2018     2017     2018     2017
Interest income            
Interest and fees on loans $ 25,429 $ 21,767 $ 13,038 $ 11,115
Interest on deposits with other banks 17 23 6 8
Interest and dividends on investments     8,210       7,703       4,161       3,879
Total interest income     33,656       29,493       17,205       15,002
Interest expense
Interest on deposits 6,857 4,296 3,758 2,302
Interest on borrowed funds     2,121       2,056       1,178       1,035
Total interest expense     8,978       6,352       4,936       3,337
Net interest income 24,678 23,141 12,269 11,665
Provision for loan losses     1,000       1,000       500       500
Net interest income after provision for loan losses     23,678       22,141       11,769       11,165
Non-interest income
Investment management and fiduciary income 1,542 1,340 802 709
Service charges on deposit accounts 1,097 1,051 570 549
Net securities gains 136 3
Mortgage origination and servicing income 692 761 361 429
Other operating income     2,846       2,690       1,448       1,315
Total non-interest income     6,313       5,845       3,181       3,002
Non-interest expense
Salaries and employee benefits 8,770 7,843 4,280 3,873
Occupancy expense 1,297 1,227 598 603
Furniture and equipment expense 1,844 1,760 915 890
FDIC insurance premiums 613 503 334 263
Amortization of identified intangibles 22 22 11 11
Other operating expense     4,209       3,983       2,038       2,000
Total non-interest expense     16,755       15,338       8,176       7,640
Income before income taxes 13,236 12,648 6,774 6,527
Applicable income taxes     1,996       3,128       1,040       1,644
Net Income     $ 11,240       $ 9,520       $ 5,734       $ 4,883
Basic earnings per share $ 1.04 $ 0.89 $ 0.53 $ 0.45
Diluted earnings per share     $ 1.04       $ 0.88       $ 0.53       $ 0.45
 
 
The First Bancorp

Selected Financial Data (Unaudited)

                   
   

As of and for the six months
ended June 30,

   

As of and for the quarters
ended June 30,

Dollars in thousands, except for per share amounts     2018     2017     2018     2017
           
Summary of Operations
Interest Income $ 33,656 $ 29,493 $ 17,205 $ 15,002
Interest Expense 8,978 6,352 4,936 3,337
Net Interest Income 24,678 23,141 12,269 11,665
Provision for Loan Losses 1,000 1,000 500 500
Non-Interest Income 6,313 5,845 3,181 3,002
Non-Interest Expense 16,755 15,338 8,176 7,640
Net Income     11,240       9,520       5,734       4,883  
Per Common Share Data
Basic Earnings per Share $ 1.04 $ 0.89 $ 0.53 $ 0.45
Diluted Earnings per Share 1.04 0.88 0.53 0.45
Cash Dividends Declared 0.53 0.47 0.29 0.24
Book Value per Common Share 16.89 16.41 16.89 16.41
Tangible Book Value per Common Share 14.13 13.63 14.13 13.63
Market Value     28.22       27.06       28.22       27.06  
Financial Ratios
Return on Average Equity (a) 12.39 % 10.84 % 12.51 % 10.96 %
Return on Average Tangible Common Equity (a) 14.82 % 13.05 % 14.95 % 13.18 %
Return on Average Assets (a) 1.21 % 1.09 % 1.22 % 1.10 %
Average Equity to Average Assets 9.79 % 10.04 % 9.75 % 10.05 %
Average Tangible Equity to Average Assets 8.18 % 8.34 % 8.16 % 8.36 %
Net Interest Margin Tax-Equivalent (a) 2.94 % 3.04 % 2.88 % 3.03 %
Dividend Payout Ratio 50.96 % 52.81 % 54.72 % 53.33 %
Allowance for Loan Losses/Total Loans 0.94 % 0.95 % 0.94 % 0.95 %
Non-Performing Loans to Total Loans 1.17 % 0.66 % 1.17 % 0.66 %
Non-Performing Assets to Total Assets 0.78 % 0.44 % 0.78 % 0.44 %
Efficiency Ratio     52.39 %     49.32 %     51.02 %     48.50 %
At Period End
Total Assets $ 1,913,961 $ 1,795,651 $ 1,913,961 $ 1,795,651
Total Loans 1,224,440 1,120,665 1,224,440 1,120,665
Total Investment Securities 577,488 564,580 577,488 564,580
Total Deposits 1,416,646 1,319,259 1,416,646 1,319,259
Total Shareholders' Equity     183,304       177,537       183,304       177,537  
(a) Annualized using a 365-day basis for both 2018 and 2017
 

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 2018 and 35.0% tax rate in 2017.

             
    For the six months ended     For the quarters ended
In thousands of dollars     June 30, 2018     June 30, 2017     June 30, 2018     June 30, 2017
Net interest income as presented $ 24,678     $ 23,141     $ 12,269     $ 11,665
Effect of tax-exempt income     1,046       1,951       533       1,004
Net interest income, tax equivalent     $ 25,724       $ 25,092       $ 12,802       $ 12,669
 

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 six months ended     For the quarters ended
In thousands of dollars     June 30, 2018     June 30, 2017     June 30, 2018     June 30, 2017
Non-interest expense, as presented     $ 16,755       $ 15,338       $ 8,176       $ 7,640  
Net interest income, as presented 24,678     23,141     12,269     11,665
Effect of tax-exempt interest income 1,046 1,951 533 1,004
Non-interest income, as presented 6,313 5,845 3,181 3,002
Effect of non-interest tax-exempt income 83 165 41 83
Net securities gains     (136 )     (3 )            
Adjusted net interest income plus non-interest income     $ 31,984       $ 31,099       $ 16,024       $ 15,754  
Non-GAAP efficiency ratio     52.39 %     49.32 %     51.02 %     48.50 %
GAAP efficiency ratio     54.06 %     52.92 %     52.92 %     52.09 %
 

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 Company's consolidated financial statements, which have
been prepared in accordance with U.S. generally accepted accounting
principles:

             
    For the six months ended     For the quarters ended
In thousands of dollars     June 30, 2018     June 30, 2017     June 30, 2018     June 30, 2017
Average shareholders' equity as presented $ 182,979     $ 177,122     $ 183,898     $ 178,628
Less intangible assets     (30,011 )     (30,055 )     (30,021 )     (30,060 )
Tangible average shareholders' equity     $ 152,968       $ 147,067       $ 153,877       $ 148,568  
 

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.

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