The First reports increased earnings from 2011
Damariscotta — The First Bancorp recently announced unaudited results for the quarter ended Sept. 30,. Net income was $3.2 million, up $217,000 or 7.2 percent from the same period in 2011, and earnings per common share on a fully diluted basis of $0.31 were up $0.04 or 14.8 percent from the same period in 2011. The company also announced unaudited results for the nine months ended Sept. 30. Net income was $9.5 million, up $118,000 or 1.3 percent from the same period in 2011, and earnings per common share on a fully diluted basis of $0.91 were up $0.06 or 7.1 percent from the same period in 2011.
“These are the second-best quarterly earnings we have posted in the past three years,” said Daniel R. Daigneault, the company’s president and chief executive officer, in a news release. “Net income for the third quarter is at the upper end of the $2.9 million to $3.3 million range we have seen over the past 10 quarters. Our asset quality remains steady, with non-performing assets at 2.04 percent of total assets as of Sept. 30, 2012, also at the lower end of the 1.87 percent to 2.32 percent range we have seen over the past 10 quarters. We still see weaknesses in the economy, however, with continued low interest rates leading to margin compression and, therefore, lower net interest income.
“Net interest income on a tax-equivalent basis for the third quarter was $466,000 or 4.3 percent lower than the same period in 2011,” President Daigneault said, “and down $220,000 or 2.1 percent from the previous quarter. Like most banks in the country, we are seeing continued margin compression in this unprecedented low interest rate environment. Interest income on a tax-equivalent basis has declined $2.7 million in the first nine months of 2012 compared to the first nine months of 2011, while interest expense has declined only $1.5 million for the same periods. This is the result of the Federal Open Market Committee’s interest rate policies, with QE2 bringing down middle- and longer-term rates while short-term rates have remained near zero.
“The year-over-year decline in quarterly net interest income was offset by increased non-interest income which was up $412,000 or 19.8 percent compared to the third quarter of 2011. This was attributable to strong mortgage origination income resulting from high levels of mortgage refinancing. We also saw an increase in investment management and fiduciary income. Non-interest expense was $339,000 or 4.9 percent lower than in the same period in 2011, with stable employee costs and lower costs for other real estate owned.
“In the most recent New England Economic Snapshot, published by the Federal Reserve Bank of Boston, it was reported that New England’s unemployment rate increased 0.3 percent in July, ending the month at 7.1 percent after reaching a post-recession low of 6.8 percent in May and June,” President Daigneault said. “Unemployment rates rose over the month in all New England states with the exception of Rhode Island. Unemployment in Maine, at 6.8 percent, is lower than the New England and national averages and even with a year ago.
“This consistent trend in unemployment matches the consistent range in credit quality noted above that we have seen over the past 10 quarters,” President Daigneault said. “Net loan chargeoffs for the nine months ended Sept. 30, were $4.6 million or 0.70 percent of average loans on an annualized basis. This was up $1.0 million from net chargeoffs of $3.6 million or 0.54 percent of average loans for the first nine months of 2011, and is down from 0.81 percent of average loans as of June 30, 2012. We provisioned $6.3 million for loan losses in the first nine months of 2012, up $700,000 from the provision in the first nine months of 2011. The allowance for loan losses increased $1.7 million between Dec. 31, 2011 and Sept. 30, 2012, and is 1.69 percent of loans outstanding compared to 1.50 percent at year end and 1.76 percent a year ago. Total past-due loans were 2.27 percent of total loans as of Sept. 30, well below 3.07 percent of total loans as of Dec. 31, 2011, and slightly above 2.20 percent of total loans as of Sept. 30, 2011.”
“Total assets have increased $50.4 million or 3.7 percent year-to-date and are virtually unchanged from the end of the previous quarter,” said the company’s Chief Financial Officer F. Stephen Ward. “Year-to-date, the loan portfolio has increased $4.9 million or 0.6 percent while the investment portfolio has increased $44.3 million or 10.4 percent. On the funding side, low-cost deposits are up $43.2 million or 13.8 percent year to date, but more importantly, they are running $23.3 million or 7.0 percent above the same time a year ago. We continue to see an inflow of low-cost deposits as well as a move from CDs to checking and savings accounts due to the low interest rate environment.
“We remain very well capitalized,” Ward said, “with a leverage capital ratio for the bank of 8.33 percent, and tier one and tier two risk-based capital ratios of 14.50 percent and 15.76 percent as of Sept. 30. These are all well above the FDIC’s well-capitalized requirements. As noted in previous quarters, strong capital ratios and strong earnings enable us to maintain the dividend at $0.195 per share per quarter or $0.78 per share per year. We paid out 64.3 percent of earnings in the third quarter compared to 68.8 percent for the same period in 2011, and our dividend yield was 4.44 percent at Sept. 30, based on the closing price of $17.55 per share.
“The First Bancorp’s stock closed the quarter at $17.55 per share, up 14.18 percent or $2.18 per share for the first nine months of 2012,” Ward said. “When the $0.78 per share annual dividend is added, our total return with dividends reinvested was 18.42 percent. For the same period, the Russell 2000 and Nasdaq Bank Indices (which we are included in), had annualized total returns with dividends reinvested of 14.23 percent and 18.57 percent, respectively. The broad market, as measured by the S&P 500 index, had an annualized total return with dividends reinvested of 16.45 percent.
“Our core operating ratios were also consistent with the quarterly results posted over the past 10 quarters,” Ward said. “Our return on average assets was 0.90 percent for the quarter while our return on average tangible common equity was 10.25 percent in the third quarter. Our efficiency ratio is a critical component in our overall performance, and at 50.73 percent for the third quarter, compares well to our 10-quarter range of 45.86 percent to 53.06 percent.”
“In July we announced plans to purchase a branch at 63 Union St. in Rockland, as well as a full-service bank building at 145 Exchange St. in Bangor,” Daigneault said. “Regulatory approval has been received for both branches and we expect both transactions to close next week on Oct. 26. The 63 Union St. branch in Rockland will reopen under our name on Monday, Oct. 29, with its customers becoming customers of The First, N.A. It will also enhance our ability to serve our existing Rockland customers from a second location. In Bangor we expect to open a full-service branch in the first quarter of 2013 and see this as an excellent opportunity for us to enter this expanding Northern Maine market.
“I continue to be pleased with the consistent results we are posting,” Daigneault said. “The national and local economies are relatively stable, and while not showing signs of significant improvement, they have not worsened in the past several quarters. Our results compare favorably to our UBPR peer group, and what is most important to many of our shareholders, we continue to maintain our generous cash dividend.”
The First Bancorp, headquartered in Damariscotta, is the holding company for The First, N.A. Founded in 1864, The First is an independent community bank serving Midcoast and Down East Maine with 14 offices in Lincoln, Knox, Hancock and Washington counties.