The First Bancorp (Nasdaq: FNLC), today announced unaudited results for the year ended December 31, 2012. Net income was $12.8 million, up $418,000 or 3.4% from 2011 and earnings per common share on a fully diluted basis of $1.22 were up $0.08 or 7.0% from 2011. For the quarter ended December 31, 2012, unaudited net income was $3.3 million, up $301,000 or 10.0% from the same period in 2011, and earnings per common share on a fully diluted basis of $0.32 were up $0.03 or 10.3% from the same period in 2011.

"These are the best earnings we have posted in the past three years, both for the year and for the quarter," observed Daniel R. Daigneault, the Company's President & Chief Executive Officer. "Our asset quality is significantly improved, with non-performing assets at 1.89% of total assets as of December 31, 2012, down from 2.32% at the end of 2011 and 2.04% at the end of the previous quarter. Our capital ratios are strong, our key operating ratios remain healthy and good earnings enable us to maintain our generous cash dividend.

"Like most banks in the country, we saw margin compression in 2012 as the unprecedented low interest rate environment enters its fifth straight year," President Daigneault noted. "This resulted in net interest income on a tax-equivalent basis declining $1.7 million in 2012 compared to 2011. Interest income on a tax-equivalent basis declined $3.5 million in 2012 compared to 2011 while interest expense has declined only $1.8 million. The Federal Open Market Committee's quantitative easing has been effective in reducing mid- and longer-term rates while short-term rates have remained near zero.

"The year-over-year decline in net interest income was offset by a lower provision for loan losses," President Daigneault observed, "$7.8 million in 2012 compared to $10.5 million in 2011. Non-interest income was down $479,000 in 2012 compared to 2011, with strong mortgage origination income offsetting lower levels of securities gains. Non-interest expense was virtually unchanged in 2012, with a modest 3.6% increase in employee costs being offset by lower other operating expenses.

"Credit quality improved significantly in 2012," President Daigneault said. "Net loan chargeoffs were $8.3 million or 0.95% of average loans, down $2.5 million from net chargeoffs of $10.9 million or 1.23% of average loans in 2011. The improvement in credit quality enabled a $2.7 million lower provision for loan losses in 2012 compared to 2011, and the allowance for loan losses stood at 1.44% of total loans as of December 31, 2012, compared to 1.50% a year ago. Non-performing assets stood at 1.89% of total assets as of December 31, 2012, well below 2.32% of total assets at December 31, 2011 and just above the 1.87% low in the past three years. Past-due loans were 2.67% of total loans as of December 31, 2012, the lowest year-end total in the past five years and well below 3.07% of total loans as of December 31, 2011."

"We posted good asset growth in 2012, with total assets increasing $42.5 million or 3.1%," observed the Company's Chief Financial Officer, F. Stephen Ward. "The loan portfolio increased $4.3 million or 0.5% - excellent results given the volume of mortgages which refinanced in 2012 to take advantage of record low interest rates. At the same time, the investment portfolio increased $25.1 million or 5.9% in 2012. On the funding side, low-cost deposits were up $59.7 million or 19.1% year to date. We continue to see an inflow of low-cost deposits due to the low interest rate environment and had a $25 million lift in low-cost deposits in the fourth quarter with the acquisition of the former Bank of America branch in Rockland.

"We remain very well capitalized," Mr. Ward said, "with a leverage capital ratio for the Bank of 8.30%, and tier one and tier two risk-based capital ratios of 14.55% and 15.80% as of December 31, 2012. These are all well above the FDIC's well-capitalized requirements. Our core operating ratios remain healthy, with a return on average assets of 0.90% in 2012 and a return on average tangible common equity of 10.42%. These compare to a return on average assets of 0.87% and 0.89%, and a return on average tangible common equity of 11.05% and 10.83% for 2011 and 2010, respectively. Our efficiency ratio remains a critical component in our overall performance and at 50.53% in 2012, is only slightly above the 49.75% and 48.15% posted for 2011 and 2010, respectively and much better than our UBPR peer group average of 66.06%."

"Strong capital ratios and earnings enable us to maintain the dividend at $0.195 per share per quarter or $0.78 per share per year," Mr. Ward observed. "We paid out 63.4% of earnings in 2012 compared to 68.4% in 2011, and our dividend yield was 4.74% at December 31, 2012, based on the year-end closing price of $16.47 per share. Our shareholders saw The First Bancorp's stock increase 7.16% or $1.10 per share in 2012, and when the $0.78 per share annual dividend is added, our total return with dividends reinvested was 12.37%. For the same period, the Russell 2000 and Nasdaq Bank Indices (which we are included in), had total returns with dividends reinvested of 16.35% and 18.69%, respectively. The broad market, as measured by the S&P 500 index, had a total return with dividends reinvested of 16.00%.

"As noted previously, in the fourth quarter we completed the acquisition of the former Bank of American branch at 63 Union Street in Rockland, Maine," President Daigneault said. "At the same time, we completed the purchase of the former Camden National building at 145 Exchange Street in Bangor where we are on track to open a full-service de-novo branch in late February as well as our fourth First Advisors office. We see these two purchases as an excellent opportunity to expand our strong presence in the Mid-Coast Maine market and to enter the expanding Northern Maine market.

"We are very pleased with 2012 and see many positives in our operating results," President Daigneault concluded. "Net income is at a three-year high, credit quality is significantly improved, our capital ratios are strong and our shareholders saw a 12.37% total return on their investment for the year. Our results compare favorably to our UBPR peer group, and the national and local economies are relatively stable. We look forward to the new opportunities that Bangor and Rockland will provide in 2013."

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 15 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 three offices in Lincoln and Hancock Counties.

The First Bancorp

Consolidated Balance Sheets (Unaudited)

       
In thousands of dollars   12/31/2012       12/31/2011  
Assets      
Cash and due from banks $14,958 $14,115
Interest-bearing deposits in other banks 1,638 -
Securities available for sale 291,614 286,202
Securities to be held to maturity 143,320 122,661
Restricted equity securities, at cost 14,448 15,443
Loans held for sale 1,035 -
Loans 869,284 864,988
Less allowance for loan losses   12,500       13,000  
Net loans 856,784 851,988
Accrued interest receivable 4,912 4,835
Premises and equipment 23,013 18,842
Other real estate owned 7,593 4,094
Goodwill 27,684 27,684
Other assets   28,402       27,003  
Total assets   $1,415,401       $1,372,867  
Liabilities
Demand deposits $90,252 $75,750
NOW deposits 147,309 122,775
Money market deposits 80,983 79,015
Savings deposits 135,250 114,617
Certificates of deposit 199,265 216,836
Certificates $100,000 to $250,000 277,571 309,841
Certificates $250,000 and over   28,220       22,499  
Total deposits 958,850 941,333
Borrowed funds 282,905 265,663
Other liabilities   17,226       15,013  
Total Liabilities   1,258,981       1,222,009  
Shareholders' equity
Preferred stock 12,402 12,303
Common stock 98 98
Additional paid-in capital 46,314 45,829
Retained earnings 89,789 85,314
Net unrealized gain on securities available-for-sale 7,940 7,401
Net unrealized loss on postretirement benefit costs   (123 )     (87 )
Total shareholders' equity   156,420       150,858  
Total liabilities & shareholders' equity   $1,415,401       $1,372,867  
Common Stock
Number of shares authorized 18,000,000 18,000,000
Number of shares issued and outstanding   9,859,914       9,812,180  
Book value per common share $14.61 $14.12
Tangible book value per common share   $11.80       $11.30  
 
The First Bancorp

Consolidated Statements of Income and Comprehensive Income (Unaudited)

 
 
  For the years ended   For the quarters ended
In thousands of dollars, except per share data   12/31/2012     12/31/2011     12/31/2012     12/31/2011  
Interest income    
Interest and fees on loans $37,026 $39,805 $9,020 $9,717
Interest on deposits with other banks 4 12 1 1
Interest and dividends on investments   14,795     15,885     3,673     3,838  
Total interest income   51,825     55,702     12,694     13,556  
Interest expense
Interest on deposits 8,396 9,746 2,026 2,268
Interest on borrowed funds   4,542     4,963     1,175     1,248  
Total interest expense   12,938     14,709     3,201     3,516  
Net interest income 38,887 40,993 9,493 10,040
Provision for loan losses   7,835     10,550     1,535     4,950  
Net interest income after provision for loan losses   31,052     30,443     7,958     5,090  
Non-interest income
Investment management and fiduciary income 1,636 1,506 406 366
Service charges on deposit accounts 2,671 2,688 676 656
Net securities gains 1,968 3,293 1 3,056
Mortgage origination and servicing income 1,395 1,138 541 293
Other operating income   3,601     3,125     1,091     788  
Total non-interest income   11,271     11,750     2,715     5,159  
Non-interest expense
Salaries and employee benefits 12,691 12,245 3,206 2,990
Occupancy expense 1,641 1,583 394 389
Furniture and equipment expense 2,235 2,144 585 479
FDIC insurance premiums 1,212 1,391 303 286
Amortization of identified intangibles 283 283 71 71
Other operating expense   7,960     8,392     1,960     2,153  
Total non-interest expense   26,022     26,038     6,519     6,368  
Income before income taxes 16,301 16,155 4,154 3,881
Applicable income taxes   3,519     3,791     831     859  
Net Income   $12,782     $12,364     $3,323     $3,022  
Basic earnings per share $1.23 $1.14 $0.32 $0.29
Diluted earnings per share   $1.22     $1.14     $0.32     $0.29  
Other comprehensive income, net of tax
Net unrealized gain (loss) on securities available for sale 539 9,458 (1,548 ) (754 )
Unrecognized postretirement benefit transition obligation   (36 )   (14 )   (51 )   4  
Other comprehensive income   503     9,444     (1,599 )   (750 )
Comprehensive income   $13,285     $21,808     $1,724     $2,272  
 
The First Bancorp

Selected Financial Data (Unaudited)

 
                 
Dollars in thousands,   For the years ended   For the quarters ended
except for per share amounts   12/31/2012   12/31/2011   12/31/2012   12/31/2011
   
Summary of Operations
Interest Income $51,825 $55,702 $12,694 $13,556
Interest Expense 12,938 14,709 3,201 3,516
Net Interest Income 38,887 40,993 9,493 10,040
Provision for Loan Losses 7,835 10,550 1,535 4,950
Non-Interest Income 11,271 11,750 2,715 5,159
Non-Interest Expense 26,022 26,038 6,519 6,368
Net Income   12,782   12,364   3,323   3,022
Per Common Share Data
Basic Earnings per Share $1.23 $1.14 $0.32 $0.29
Diluted Earnings per Share 1.22 1.14 0.32 0.29
Cash Dividends Declared 0.780 0.780 0.195 0.195
Book Value per Common Share 14.61 14.12 14.61 14.12
Tangible Book Value per Common Share 11.80 11.30 11.80 11.30
Market Value   16.47   15.37   16.47   15.37
Financial Ratios
Return on Average Equity (a) 8.91% 9.37% 9.05% 8.61%
Return on Average Tangible Common Equity (a) 10.42% 11.05% 10.57% 10.11%
Return on Average Assets (a) 0.90% 0.87% 0.93% 0.86%
Average Equity to Average Assets 10.96% 10.72% 11.14% 10.88%
Average Tangible Equity to Average Assets 9.01% 8.77% 9.19% 8.89%
Net Interest Margin Tax-Equivalent (a) 3.14% 3.27% 3.07% 3.27%
Dividend Payout Ratio 63.41% 68.42% 60.94% 67.24%
Allowance for Loan Losses/Total Loans 1.44% 1.50% 1.44% 1.50%
Non-Performing Loans to Total Loans 2.20% 3.21% 2.20% 3.21%
Non-Performing Assets to Total Assets 1.89% 2.32% 1.89% 2.32%
Efficiency Ratio   50.53%   49.75%   49.93%   49.30%
At Period End
Total Assets $1,415,401 $1,372,867 $1,415,401 $1,372,867
Total Loans 869,284 864,988 869,284 864,988
Total Investment Securities 449,382 424,306 449,382 424,306
Total Deposits 958,850 941,333 958,850 941,333
Total Shareholders' Equity   156,420   150,858   156,420   150,858
(a) Annualized using a 366-day basis in 2012 and 365-day basis in 2011
 

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 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 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 35.0% tax rate was used in both 2012 and 2011.

         
  For the years ended   For the quarters ended
In thousands of dollars   12/31/2012   12/31/2011   12/31/2012   12/31/2011
Net interest income as presented $38,887   $40,993 $9,493   $10,040
Effect of tax-exempt income   3,128   2,710   809   732
Net interest income, tax equivalent   $42,015   $43,703   $10,302   $10,772
 

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:

         
  For the years ended   For the quarters ended
In thousands of dollars   12/31/2012     12/31/2011     12/31/2012     12/31/2011  
Non-interest expense, as presented $26,022   $26,038 $6,519   $6,368
Net securities losses   -     -     -     -  
Adjusted non-interest expense   26,022     26,038     6,519     6,368  
Net interest income, as presented 38,887 40,993 9,493 10,040
Effect of tax-exempt income 3,128 2,710 809 732
Non-interest income, as presented 11,271 11,750 2,715 5,159
Effect of non-interest tax-exempt income 177 182 40 42
Net securities gains   (1,968 )   (3,293 )   (1 )   (3,056 )
Adjusted net interest income plus non-interest income   $51,495     $52,342     $13,056     $12,917  
Non-GAAP efficiency ratio   50.53 %   49.75 %   49.93 %   49.30 %
GAAP efficiency ratio   51.88 %   49.37 %   53.40 %   41.90 %
 

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 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 years ended   For the quarters ended
In thousands of dollars   12/31/2012     12/31/2011     12/31/2012     12/31/2011  
Average shareholders' equity as presented $155,822   $153,327 $158,402   $151,473
Less preferred stock (12,341 ) (24,705 ) (12,378 ) (12,279 )
Less intangible assets   (27,684 )   (27,684 )   (27,684 )   (27,684 )
Tangible average shareholders' equity   $115,797     $100,938     $118,340     $111,510  
 

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.

The First Bancorp
F. Stephen Ward, 207-563-3272
Treasurer & Chief Financial Officer