The First Bancorp Announces Third Quarter Results

2024 Q3 Results Driven by Loan Growth, Net Interest Margin Expansion, and Continued Strong Asset Quality

The First Bancorp (NASDAQ:FNLC), ("the Company", "we", "us", "our"), parent company of First National Bank, today reported unaudited net income of $7.6 million with diluted earnings per share of $0.68 for the quarter ended September 30, 2024. The Company also reported results for the nine months ended September 30, 2024. Net income year-to-date in 2024 was $19.8 million, with diluted earnings per share of $1.78.

Third Quarter Notable Items:

• Net Income growth of 22.7% from Q2; diluted EPS growth of 22.6%
• Net Interest Income at its highest level in six quarters
• Net Interest Margin increased by 11 basis points from Q2
• Total assets reached $3.14 billion, an increase of $57.6 million in Q3
• Loan balances grew in Q3 at an annualized rate of 10.6% to $2.31 billion
• Ratio of Non-Performing Assets to Total Assets of 0.08%
• Quarterly shareholder dividend of $0.36 per share

CEO COMMENTS

"I am pleased to report our results for the third quarter," commented Tony C. McKim, the Company's President and Chief Executive Officer. "Net income increased 22.7% from the second quarter of 2024 ("linked quarter"), and diluted earnings per share increased 22.6%.

"A definite bright note for the period was an expansion of 11 basis points in our net interest margin, attributable to rising asset yields and flat funding costs. Coupled with earning asset growth, the expanded margin led to a $1.3 million, or 8.8%, increase in net interest income from the linked quarter. While the Federal Reserve's action to lower short term rates by 0.50% in September had minimal effect on third quarter results, we expect to continue to see gradual margin improvement in coming quarters as pressures on funding costs ease."

Mr. McKim concluded, "Our balance sheet continues to grow in a responsible manner while also displaying strong asset quality, capital, and liquidity positions. Growth remains centered in the loan portfolio with over $129 million in new loans granted in the third quarter. We are proud to strongly support our customers and communities in the Bank's 160th year."

FINANCIAL RESULTS FOR THE QUARTER ENDED SEPTEMBER 30, 2024

Net income was $7.6 million, or $0.68 per diluted share, for the three months ended September 30, 2024. On a Pre-Tax, Pre-Provision ("PTPP") basis, earnings for the quarter were $8.5 million. Results compare favorably to the linked quarter for which net income was $6.2 million, diluted earnings per share were $0.55, and PTPP earnings were $8.0 million. The drivers of third quarter results are discussed in the following sections:

Net Interest Income

Net interest income was $16.4 million for the three months ended September 30, 2024, an increase of $1.3 million or 8.8% from the second quarter of 2024, and the best three-month period since the first quarter of 2023. Net interest margin improved by 11 basis points to 2.32% for the third quarter of 2024, up from 2.21% in the second quarter. The average tax equivalent yield on earning assets increased 6 basis points in the third quarter to 5.28%, while the cost of total liabilities was unchanged at an average of 3.48% for the quarter.

Provision for Credit Losses

A reverse provision for credit losses on loans of $580,000 was recorded in the third quarter of 2024, compared with a provision expense of $539,000 in the second quarter. Models implemented in the third quarter introduced post-pandemic experience into the Bank's discounted cash flow based estimates, a period of strong asset quality for the Bank. This change, coupled with a refresh of peer groups used in our analysis, led to the modest reversal for the period. For the three months ended September 30, 2024 net charge-offs were $113,000; net charge-offs year-to-date in 2024 totaled $89,000, or an annualized 0.005% of total loans. A provision for credit losses on held- to-maturity securities was made in the amount of $76,000 and a reverse provision for off-balance sheet exposures of $134,000 was also recorded.

Non-Interest Income

Total non-interest income was $4.1 million for the three months ended September 30, 2024, level with the linked quarter, and in line with management's expectations. The Bank recorded a quarterly gain of 2.4% in Debit Card income, while revenues from Wealth Management and Service Charges on Deposit Accounts each had small decreases from the prior period.

Non-Interest Expense

Total non-interest expense for the three months ended September 30, 2024 was $12.0 million, an increase of $750,000, or 6.7%, from the three months ended June 30, 2024. The period-to-period change is mostly attributable to employee salaries and benefits, resulting from a decrease in loan-related salary deferrals, seasonal hiring activity and incentive compensation accruals. The Company's efficiency ratio for the third quarter was 56.37%, essentially unchanged from the linked quarter ratio of 56.35%.

Loans, Total Assets & Funding

Total assets at September 30, 2024, were $3.14 billion, up $57.6 million in the third quarter and up $198.4 million from a year ago. Earning assets increased $54.8 million during the quarter comprised primarily of an increase in loans of $59.6 million. Earning assets have increased by $199.6 million since September 30, 2023, centered in loan growth of $227.4 million.

Loan growth in the third quarter was led by commercial credit. Commercial and industrial balances increased $37.9 million and multifamily loan balances increased $4.8 million; commercial real estate balances fell by $1.6 million. The residential term and home equity segments also contributed to loan portfolio growth, up $12.1 million and $4.8 million, respectively, in the quarter.

Total deposits at September 30, 2024 were $2.70 billion, up $124.6 million during the period, and up $102.8 million, or 4.0%, from September 30, 2023. The Bank typically sees a lift in local deposits in the third quarter attributable to seasonal factors. Non-maturity deposits led with an increase of $111.1 million while time deposits increased $13.6 million. The increase in deposit levels allowed for a $79.6 million decrease in borrowings during the period, including the full redemption of a $25 million Bank Term Funding Program advance which was due to mature in the first quarter of 2025. Uninsured deposits as of September 30, 2024, were estimated at 17% of total deposits, and 73% of uninsured deposits were fully collateralized. Available day-one liquidity was $703 million, sufficient to cover 149% of estimated uninsured deposits.

ASSET QUALITY

Asset quality continues to be very strong. As of September 30, 2024, the ratio of non-performing assets to total assets was 0.08%, down slightly from the 0.09% of total assets reported as of June 30, 2024 and September 30, 2023. The ratio of non-performing loans to total loans was 0.11% as of September 30, 2024, consistent with the 0.11% and 0.12% reported as of June 30, 2024 and September 30, 2023, respectively. Past due loans remain low at 0.14% of total loans as of September 30, 2024, a slight decrease from 0.15% of total loans as of June 30, 2024 and a slight increase from 0.10% of total loans as of September 30, 2023.

The Allowance for Credit Losses (ACL) on Loans stood at 1.04% of total loans as of September 30, 2024, as compared to an ACL of 1.10% and 1.12% of total loans as of June 30, 2024, and September 30, 2023, respectively. The loan portfolio continues to be well-diversified with Commercial Real Estate exposures comfortably below regulatory guidance limits, and with very limited exposure in sectors considered to pose potential risks for the industry, such as office space.

CAPITAL

The Company's regulatory capital position remained strong as of September 30, 2024. The Leverage Capital ratio was an estimated 8.53% as of September 30, 2024, as compared to the 8.58% and 8.65% reported as of June 30, 2024, and as of September 30, 2023, respectively, with period-to-period changes attributable primarily to earning asset growth. The estimated Total Risk-Based Capital ratio was 13.11% as of September 30, 2024, as compared to the 13.24% and 13.76% reported as of June 30, 2024, and as of September 30, 2023, respectively. The Company's tangible book value per share was $20.27 as of September 30, 2024, up from $19.20 as of June 30, 2024 and up from $17.66 as of September 30, 2023. Earning asset growth during the quarter, coupled with a smaller unrealized loss position on available-for-sale securities, produced a Tangible Common Equity ratio of 7.26% as of September 30, 2024, as compared to 7.00% as of June 30, 2024 and 6.72% as of September 30, 2023.

DIVIDEND

On September 26, 2024, the Company's Board of Directors declared a third quarter dividend of $0.36 per share. The dividend was paid on October 18, 2024, to shareholders of record as of October 8, 2024.

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 $3.11 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.

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 2024 and 2023.

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 provision for credit losses on securities 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:

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:

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:

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

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