8-K
First Bancorp, Inc /ME/ (FNLC)
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of report (Date of earliest event reported): October 19, 2022
THE FIRST BANCORP, INC.
(Exact name of Registrant as specified in charter)
Maine
(State or other jurisdiction of incorporation)
| 0-26589 | 01-0404322 | |||||
|---|---|---|---|---|---|---|
| (Commission file number) | (IRS employer identification no.) | Main Street | Damariscotta | Maine | 04543 | |
| --- | --- | --- | --- | |||
| (Address of principal executive offices) | (Zip Code) |
(207) 563-3195
(Registrant's telephone number, including area code)
Check the appropriate box below if the Form 8-K filing is
intended to simultaneously satisfy the filing obligations
of the registrant under any of the following provisions:
☐ Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
☐ Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
☐ Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
☐ Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4 (c))
Securities registered pursuit to Section 12(b) of the Exchange Act: None
Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter). Emerging growth company ☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
TABLE OF CONTENTS
Item 2.02 Results of Operations and Financial Condition Page 1
Item 9.01 Financial Statements and Exhibits. Page 1
Signatures Page 2
Exhibit Index Page 3
Item 2.02 Results of Operations and Financial Condition.
On October 19, 2022, the Registrant issued the press release filed herewith as Exhibit 99.1 with information regarding the results of operations and financial condition of the First Bancorp, Inc. for the quarter ended September 30, 2022.
Item 9.01 Financial Statements and Exhibits.
(d) Exhibits.
The following Exhibit is being furnished herewith:
99.1 Registrant's Press Release dated October 19, 2022
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
THE FIRST BANCORP, INC.
By: /s/ Richard M. Elder
Richard M. Elder
Executive Vice President & Chief Financial Officer
October 19, 2022
Exhibit Index
Exhibit Number Description of Exhibit
99.1 Registrant's Press Release dated October 19, 2022
Document
Exhibit 99.1
The First Bancorp Third Quarter Earnings Increase 11.9%
DAMARISCOTTA, ME--(BUSINESS WIRE)--The First Bancorp (Nasdaq: FNLC), parent company of First National Bank, today announced operating results for the three months ended September 30, 2022. Unaudited net income was $10.1 million, up $1.1 million or 11.9% from the $9.0 million reported for the three months ended September 30, 2021 and represents a new quarterly earnings high mark for the Company. Earnings per common share for the period on a fully diluted basis were up $0.09 to $0.91 per share, an increase of 11.0% from the prior year. The Company also reported results for the nine months ended September 30, 2022. Net income was $29.8 million, up $3.1 million or 11.5% from the first nine months of 2021, with earnings per share on a fully diluted basis of $2.70, up $0.27 or 11.1% from the same period in 2021.
“The First Bancorp continued to perform strongly in the three months ended September 30, 2022, resulting in our fifth consecutive quarter of record earnings", commented Tony C. McKim, the Company’s President and Chief Executive Officer. "Net interest income has been the primary driver of our earnings performance and is up 16.6% year-to-date from the same period in 2021 on a combination of strong earning asset growth and expanded net interest margin. Earning asset growth was focused in the loan portfolio which, excluding Payroll Protection Program loans, has grown $232.3 million year-to-date, or 14.3%. Third 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, "As noted, net interest income in 2022 has been strong year-to-date and in the third quarter was the primary factor in our overall positive performance. Loan growth along with higher interest rates drove a 23.0% increase in interest revenue from the portfolio compared to a year ago, outpacing increased funding costs and contributing to a 13.8% increase in net interest income for the third quarter of 2022 compared to the same period a year ago. Our net interest margin was 3.14% for the third quarter of 2022, up from 2.96% a year ago. Compared to the second quarter of 2022, net interest income increased 3.6% while the margin was in-line with the reported 3.13% for that period. Non-interest income before securities gains or losses increased 4.3% for the quarter ended September 30, 2022 compared to a year ago, and increased 15.4% from the second quarter of 2022, as strong debit card revenue offset an expected decline in mortgage banking revenue. Operating expenses for the period were impacted by one-time charges incurred in a loan sale transaction, leading to an efficiency ratio of 46.02% for the quarter, up modestly from 44.85%
for the same period a year ago, and from 43.49% in the second quarter of 2022. The efficiency ratio year-to-date remains favorable at 44.99% as of September 30, 2022, in line with 45.04% a year earlier."
"The First Bancorp is honored to be recognized by Piper Sandler Companies in its Sm-All Stars Class of 2022. Recognition as a 2022 Sm-All Star places the Company in a select group of top performing banks nationally as measured by growth, profitability, credit quality and capital strength. Thirty-five banks with market capitalization of $2.5 billion or less made this year's Sm-All Star list, and we were the only banking company in New England to be so honored. This is a significant milestone for The First Bancorp, one made possible by our team of dedicated and talented banking professionals."
Mr. McKim concluded, "In addition to our focus on earning asset growth, action was taken in the third quarter to further enhance the Bank's asset quality. In September we completed the sale of a $5.2 million block of mixed performing residential real estate loans, incurring one-time charges in the quarter of $681,000. The sale bolstered our already favorable asset quality metrics and positions the Bank well for potential economic uncertainty moving forward. Past due loans as of September 30, 2022 stood at 0.08% of the portfolio. In dollar terms, past due loans were at the lowest absolute level in the past six years, and there were no active COVID-19 related loan modifications."
THIRD QUARTER 2022 FINANCIAL HIGHLIGHTS
•Net Income of $10.1 million is an increase of 11.9% from the quarter ended September 30, 2021, an increase of 0.9% from the quarter ended June 30, 2022, and is a new quarterly earnings record for the Company.
•Pre-tax, Pre-Provision ("PTPP") Net Income (non-GAAP) increased 10.9% compared to the third quarter of 2021 and increased 0.8% from the second quarter of 2022.
•Loan balances increased $69.6 million in the third quarter to $1.86 billion.
•Low-cost deposits totaled $1.40 billion as of September 30, 2022, growing 4.0% in the third quarter.
•Net Interest Margin for the quarter ended September 30, 2022, was 3.14%, up from 2.96% for the quarter ended September 30, 2021, and up slightly from 3.13% for the quarter ended June 30, 2022.
•Quarterly shareholder dividend declared of $0.34 per share.
FINANCIAL CONDITION
Total assets at September 30, 2022, were $2.74 billion, up $104.7 million in the third quarter and up $205.5 million from a year ago. Earning assets increased $95.6 million during the quarter comprised primarily of an increase in loans of $69.6 million. As compared to September 30, 2021, earning assets have increased by $188.0 million centered in loan growth of $240.8 million, a decrease in the carrying value of investments of $24.1 million, and a reduction in interest earning cash balances of $28.0 million.
Loan growth in the third quarter was concentrated in the commercial and residential portfolios. Commercial loans increased by $55.7 million during the period, nearly all in the commercial real estate and commercial other sectors. Residential term loans increased by $12.7 million while residential construction loans decreased by $2.4 million. The home equity portfolio increased by $2.2 million, and the consumer loan portfolio decreased by $537,000.
Total deposits at September 30, 2022 were $2.37 billion, up $117.9 million during the quarter, and up $336.7 million or 16.6% from September 30, 2021. Core deposits increased by $36.2 million during the quarter, while low-cost deposits increased by $53.7 million in the third quarter with growth centered in Demand and NOW account balances. Certificates of deposit increased by $81.8 million during the quarter while borrowings decreased by $8.2 million.
The Company’s regulatory capital position remained strong as of September 30, 2022, with an estimated total risk-based capital ratio of 13.53%, and an estimated leverage capital ratio of 8.99%. The leverage capital ratio is an increase from the 8.92% and 8.57% reported as of June 30, 2022, and as of September 30, 2021, respectively. Growth in risk-weighted assets modestly lowered the total capital ratio from 13.63% as of June 30, 2022, and from 14.48% as of September 30, 2021. The Company's tangible book value per share was $17.13 as of September 30, 2022, down from $17.84 at June 30, 2022. The period-to-period change is the result of an increase in the unrealized loss position on available for sale securities. Adjusted to remove unrealized losses, the tangible book value per share (non-GAAP) would have been $21.44 as of September 30, 2022, an increase of 3.0% for the quarter.
ASSET QUALITY & PROVISION FOR LOAN LOSSES
Asset quality continues to be strong. As of September 30, 2022, the ratio of non-performing assets to total assets was 0.07%, down from 0.18% as of June 30, 2022, and down from 0.25% at September 30, 2021. Net charge-offs year-to-date in 2022 were an annualized 0.03% of total loans,
unchanged from 2021. Past due loans were 0.08% of total loans as of September 30, 2022, improved from 0.18% of total loans at June 30, 2022, and from 0.25% as of September 30, 2021.
The provision for loan losses totaled $400,000 in the third quarter of 2022, compared with $525,000 for the same period in 2021. The allowance for loan losses stood at 0.88% of total loans and 881% of non-performing loans as of September 30, 2022, as compared to 0.91% of total loans and 337% of non-performing loans at June 30, 2022, and 1.08% of total loans and 285% of non-performing loans as of September 30, 2021.
OPERATING RESULTS
Net Income for the three months ended September 30, 2022, was $10.1 million, an increase of $1.1 million or 11.9% from the three months ended September 30, 2021. On a PTPP (non-GAAP) basis net income for the period was $12.7 million, up $1.3 million or 10.9% from a year ago. The Company’s Return on Average Assets of 1.51% for the quarter was up from the 1.44% posted during the third quarter of 2021. The third quarter 2022 PTPP Return on Average Assets was 1.90%, up from 1.83% a year ago. Return on Average Tangible Common Equity was 19.73% for the third quarter of 2022, compared to 17.14% for the third quarter of 2021. The Company's Efficiency Ratio (non-GAAP) was 46.02% in the third quarter of 2022, up from 44.85% in the third quarter of 2021.
Contributing factors to the Company’s operating results in the three months ended September 30, 2022, included:
•Net interest income increased $2.4 million from the third quarter of 2021, an increase of 13.8%, attributable primarily to a rise in revenue from earning asset growth. Net interest income was up $666,000 or 3.6% from the second quarter of 2022.
•Net interest margin for the third quarter of 2022 was 3.14%, up from 2.96% for the same period in 2021.
•Non-interest income before securities gains or losses was $4.7 million, an increase of $192,000 or 4.3% from the quarter ended September 30, 2021, and an increase of $628,000 or 15.4% from the second quarter of 2022.
◦Debit card revenue increased $796,000 or 59.8% from the third quarter of 2021 and increased $802,000 or 60.5% from the second quarter of 2022. The increase from prior periods is primarily due to receipt of one-time program incentive payments.
◦Service charge revenue increased $41,000 from the third quarter of 2021, and decreased $13,000 from the second quarter of 2022.
◦Revenue decreased $48,000 or 4.2% from the third quarter of 2021 and decreased $142,000 or 11.6% from the second quarter of 2022 at First National Wealth Management, the Bank’s trust and investment management division. The revenue decrease from prior periods is attributable to a market-driven decline in assets under management.
◦Mortgage banking revenue decreased $674,000 or 65.4% from the third quarter of 2021, and $24,000 or 6.3% from the second quarter of 2022. The decrease from prior year is attributable to a significant year-to-year decrease in mortgage refinance activity, and a $49,000 mark against mortgage servicing rights recognized in the third quarter of 2022.
•Non-interest expense for the quarter ended September 30, 2022 was $11.4 million, up $1.4 million or 14.5% from the quarter ended September 30, 2021.
◦Occupancy expenses decreased $15,000, or 2.0%, from the third quarter of 2021 and decreased $29,000, or 3.9%, from the second quarter of 2022.
◦Employee salary and benefit expenses increased $333,000, or 6.1% from the third quarter of 2021, and increased $359,000, or 6.7% from the second quarter of 2022.
◦Other Operating Expenses increased $901,000, or 37.4%, from the third quarter of 2021, and increased $767,000 or 30.1% from the second quarter of 2022. These period-to-period increases are largely attributable to one-time charges totaling $681,000 incurred in the residential mortgage sale.
DIVIDEND
On September 21, 2022, the Company's Board of Directors declared a third quarter dividend of $0.34 per share. The third quarter dividend represents a payout to shareholders of 37.0% of earnings per share for the period, and will be paid on October 21, 2022, to shareholders of record as of October 5, 2022.
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 $2.71 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 | September 30, 2022 | December 31, 2021 | September 30, 2021 | |||||||||||||
| Assets | ||||||||||||||||
| Cash and due from banks | $ | 27,408 | $ | 20,634 | $ | 27,126 | ||||||||||
| Interest-bearing deposits in other banks | 65,786 | 66,678 | 93,779 | |||||||||||||
| Securities available for sale | 283,268 | 320,566 | 309,224 | |||||||||||||
| Securities to be held to maturity | 381,906 | 370,040 | 375,699 | |||||||||||||
| Restricted equity securities, at cost | 4,514 | 5,365 | 8,839 | |||||||||||||
| Loans held for sale | — | 835 | 1,437 | |||||||||||||
| Loans | 1,857,975 | 1,647,649 | 1,617,212 | |||||||||||||
| Less allowance for loan losses | 16,387 | 15,521 | 17,507 | |||||||||||||
| Net loans | 1,841,588 | 1,632,128 | 1,599,705 | |||||||||||||
| Accrued interest receivable | 8,176 | 7,544 | 8,380 | |||||||||||||
| Premises and equipment | 28,548 | 28,949 | 29,106 | |||||||||||||
| Goodwill | 30,646 | 30,646 | 30,646 | |||||||||||||
| Other assets | 63,225 | 43,714 | 45,650 | |||||||||||||
| Total assets | $ | 2,735,065 | $ | 2,527,099 | $ | 2,529,591 | ||||||||||
| Liabilities | ||||||||||||||||
| Demand deposits | $ | 356,867 | $ | 334,945 | $ | 354,899 | ||||||||||
| NOW deposits | 656,865 | 655,061 | 625,294 | |||||||||||||
| Money market deposits | 188,729 | 206,901 | 190,420 | |||||||||||||
| Savings deposits | 381,312 | 360,185 | 348,033 | |||||||||||||
| Certificates of deposit | 407,344 | 252,568 | 194,373 | |||||||||||||
| Certificates $100,000 to $250,000 | 295,112 | 258,211 | 263,860 | |||||||||||||
| Certificates $250,000 and over | 83,720 | 55,426 | 56,334 | |||||||||||||
| Total deposits | 2,369,949 | 2,123,297 | 2,033,213 | |||||||||||||
| Borrowed funds | 118,343 | 136,342 | 233,201 | |||||||||||||
| Other liabilities | 26,856 | 21,803 | 24,440 | |||||||||||||
| Total Liabilities | 2,515,148 | 2,281,442 | 2,290,854 | |||||||||||||
| Shareholders' equity | ||||||||||||||||
| Common stock | 110 | 110 | 110 | |||||||||||||
| Additional paid-in capital | 68,028 | 66,830 | 66,471 | |||||||||||||
| Retained earnings | 198,902 | 180,417 | 174,391 | |||||||||||||
| Net unrealized loss on securities available for sale | (47,661) | (1,718) | (627) | |||||||||||||
| Net unrealized loss on securities transferred from available for sale to held to maturity | (67) | (87) | (99) | |||||||||||||
| Net unrealized gain (loss) on cash flow hedging derivative instruments | 500 | — | (1,537) | |||||||||||||
| Net unrealized gain on postretirement costs | 105 | 105 | 28 | |||||||||||||
| Total shareholders' equity | 219,917 | 245,657 | 238,737 | |||||||||||||
| Total liabilities & shareholders' equity | $ | 2,735,065 | $ | 2,527,099 | $ | 2,529,591 | ||||||||||
| Common Stock | ||||||||||||||||
| Number of shares authorized | 18,000,000 | 18,000,000 | 18,000,000 | |||||||||||||
| Number of shares issued and outstanding | 11,038,224 | 10,998,765 | 10,992,950 | |||||||||||||
| Book value per common share | $ | 19.92 | $ | 22.33 | $ | 21.72 | ||||||||||
| Tangible book value per common share | $ | 17.13 | $ | 19.52 | $ | 18.90 | ||||||||||
| The First Bancorp | ||||||||||||||||
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | |||||
| Consolidated Statements of Income (Unaudited) | ||||||||||||||||
| In thousands of dollars, except per share data | For the nine months ended | For the quarter ended | ||||||||||||||
| September 30, 2022 | September 30, 2021 | September 30, 2022 | June 30, 2022 | September 30, 2021 | ||||||||||||
| Interest income | ||||||||||||||||
| Interest and fees on loans | $ | 53,463 | $ | 45,864 | $ | 19,564 | $ | 17,286 | $ | 15,905 | ||||||
| Interest on deposits with other banks | 163 | 45 | 92 | 62 | 21 | |||||||||||
| Interest and dividends on investments | 12,329 | 11,173 | 4,335 | 4,083 | 3,662 | |||||||||||
| Total interest income | 65,955 | 57,082 | 23,991 | 21,431 | 19,588 | |||||||||||
| Interest expense | ||||||||||||||||
| Interest on deposits | 8,190 | 5,796 | 4,164 | 2,401 | 1,650 | |||||||||||
| Interest on borrowed funds | 1,083 | 2,679 | 463 | 332 | 927 | |||||||||||
| Total interest expense | 9,273 | 8,475 | 4,627 | 2,733 | 2,577 | |||||||||||
| Net interest income | 56,682 | 48,607 | 19,364 | 18,698 | 17,011 | |||||||||||
| Provision for loan losses | 1,300 | 1,575 | 400 | 450 | 525 | |||||||||||
| Net interest income after provision for loan losses | 55,382 | 47,032 | 18,964 | 18,248 | 16,486 | |||||||||||
| Non-interest income | ||||||||||||||||
| Investment management and fiduciary income | 3,513 | 3,352 | 1,087 | 1,229 | 1,135 | |||||||||||
| Service charges on deposit accounts | 1,358 | 1,132 | 454 | 467 | 413 | |||||||||||
| Net securities gains (losses) | 7 | 22 | 6 | (1) | (142) | |||||||||||
| Mortgage origination and servicing income | 1,234 | 4,351 | 356 | 380 | 1,030 | |||||||||||
| Debit card income | 4,884 | 3,875 | 2,128 | 1,326 | 1,332 | |||||||||||
| Other operating income | 2,031 | 1,852 | 684 | 679 | 607 | |||||||||||
| Total non-interest income | 13,027 | 14,584 | 4,715 | 4,080 | 4,375 | |||||||||||
| Non-interest expense | ||||||||||||||||
| Salaries and employee benefits | 17,092 | 15,600 | 5,757 | 5,398 | 5,424 | |||||||||||
| Occupancy expense | 2,298 | 2,148 | 720 | 749 | 735 | |||||||||||
| Furniture and equipment expense | 3,740 | 3,535 | 1,266 | 1,239 | 1,135 | |||||||||||
| FDIC insurance premiums | 738 | 600 | 298 | 222 | 209 | |||||||||||
| Amortization of identified intangibles | 52 | 52 | 17 | 18 | 17 | |||||||||||
| Other operating expense | 8,273 | 7,367 | 3,313 | 2,546 | 2,412 | |||||||||||
| Total non-interest expense | 32,193 | 29,302 | 11,371 | 10,172 | 9,932 | |||||||||||
| Income before income taxes | 36,216 | 32,314 | 12,308 | 12,156 | 10,929 | |||||||||||
| Applicable income taxes | 6,423 | 5,591 | 2,217 | 2,159 | 1,915 | |||||||||||
| Net Income | $ | 29,793 | $ | 26,723 | $ | 10,091 | $ | 9,997 | $ | 9,014 | ||||||
| Basic earnings per share | $ | 2.73 | $ | 2.45 | $ | 0.92 | $ | 0.91 | $ | 0.83 | ||||||
| Diluted earnings per share | $ | 2.70 | $ | 2.43 | $ | 0.91 | $ | 0.91 | $ | 0.82 | ||||||
| The First Bancorp | ||||||||||||||||
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
| Selected Financial Data (Unaudited) | ||||||||||||||||
| Dollars in thousands, except for per share amounts | As of and for the nine months ended | As of and for the quarter ended | ||||||||||||||
| September 30, 2022 | September 30, 2021 | September 30, 2022 | June 30, 2022 | September 30, 2021 | ||||||||||||
| Summary of Operations | ||||||||||||||||
| Interest Income | $ | 65,955 | $ | 57,082 | $ | 23,991 | $ | 21,431 | $ | 19,588 | ||||||
| Interest Expense | 9,273 | 8,475 | 4,627 | 2,733 | 2,577 | |||||||||||
| Net Interest Income | 56,682 | 48,607 | 19,364 | 18,698 | 17,011 | |||||||||||
| Provision for Loan Losses | 1,300 | 1,575 | 400 | 450 | 525 | |||||||||||
| Non-Interest Income | 13,027 | 14,584 | 4,715 | 4,080 | 4,375 | |||||||||||
| Non-Interest Expense | 32,193 | 29,302 | 11,371 | 10,172 | 9,932 | |||||||||||
| Net Income | 29,793 | 26,723 | 10,091 | 9,997 | 9,014 | |||||||||||
| Per Common Share Data | ||||||||||||||||
| Basic Earnings per Share | $ | 2.73 | $ | 2.45 | $ | 0.92 | $ | 0.91 | $ | 0.83 | ||||||
| Diluted Earnings per Share | 2.70 | 2.43 | 0.91 | 0.91 | 0.82 | |||||||||||
| Cash Dividends Declared | 1.00 | 0.95 | 0.34 | 0.34 | 0.32 | |||||||||||
| Book Value per Common Share | 19.92 | 21.72 | 19.92 | 20.64 | 21.72 | |||||||||||
| Tangible Book Value per Common Share | 17.13 | 18.90 | 17.13 | 17.84 | 18.90 | |||||||||||
| Market Value | 27.55 | 29.14 | 27.55 | 30.13 | 29.14 | |||||||||||
| Financial Ratios | ||||||||||||||||
| Return on Average Equity(a) | 16.78 | % | 15.28 | % | 17.13 | % | 17.29 | % | 14.92 | % | ||||||
| Return on Average Tangible Common Equity(a) | 19.29 | % | 17.62 | % | 19.73 | % | 19.94 | % | 17.14 | % | ||||||
| Return on Average Assets(a) | 1.54 | % | 1.48 | % | 1.51 | % | 1.54 | % | 1.44 | % | ||||||
| Average Equity to Average Assets | 9.16 | % | 9.68 | % | 8.80 | % | 8.91 | % | 9.66 | % | ||||||
| Average Tangible Equity to Average Assets | 7.96 | % | 8.40 | % | 7.64 | % | 7.73 | % | 8.41 | % | ||||||
| Net Interest Margin Tax-Equivalent(a) | 3.17 | % | 2.94 | % | 3.14 | % | 3.13 | % | 2.96 | % | ||||||
| Dividend Payout Ratio | 36.63 | % | 38.78 | % | 36.96 | % | 37.36 | % | 38.55 | % | ||||||
| Allowance for Loan Losses/Total Loans | 0.88 | % | 1.08 | % | 0.88 | % | 0.91 | % | 1.08 | % | ||||||
| Non-Performing Loans to Total Loans | 0.10 | % | 0.39 | % | 0.10 | % | 0.27 | % | 0.39 | % | ||||||
| Non-Performing Assets to Total Assets | 0.07 | % | 0.25 | % | 0.07 | % | 0.18 | % | 0.25 | % | ||||||
| Efficiency Ratio | 44.99 | % | 45.04 | % | 46.02 | % | 43.49 | % | 44.85 | % | ||||||
| At Period End | ||||||||||||||||
| Total Assets | $ | 2,735,065 | $ | 2,529,591 | $ | 2,735,065 | $ | 2,630,354 | $ | 2,529,591 | ||||||
| Total Loans | 1,857,975 | 1,617,212 | 1,857,975 | 1,788,355 | 1,617,212 | |||||||||||
| Total Investment Securities | 669,688 | 693,762 | 669,688 | 686,150 | 693,762 | |||||||||||
| Total Deposits | 2,369,949 | 2,033,213 | 2,369,949 | 2,252,022 | 2,033,213 | |||||||||||
| Total Shareholders' Equity | 219,917 | 238,737 | 219,917 | 227,685 | 238,737 | |||||||||||
| (a) Annualized using a 365-day basis for both 2022 and 2021. |
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 2022 and 2021.
| For the nine months ended | For the quarters ended | |||||||||
|---|---|---|---|---|---|---|---|---|---|---|
| In thousands of dollars | September 30, 2022 | September 30, 2021 | September 30, 2022 | June 30, 2022 | September 30, 2021 | |||||
| Net interest income as presented | $ | 56,682 | $ | 48,607 | $ | 19,364 | $ | 18,698 | $ | 17,011 |
| Effect of tax-exempt income | 1,719 | 1,762 | 592 | $ | 570 | 574 | ||||
| Net interest income, tax equivalent | $ | 58,401 | $ | 50,369 | $ | 19,956 | $ | 19,268 | $ | 17,585 |
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 nine months ended | For the quarters ended | ||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| In thousands of dollars | September 30, 2022 | September 30, 2021 | September 30, 2022 | June 30, 2022 | September 30, 2021 | ||||||||||
| Non-interest expense, as presented | $ | 32,193 | $ | 29,302 | $ | 11,371 | $ | 10,172 | $ | 9,932 | |||||
| Net interest income, as presented | 56,682 | 48,607 | 19,364 | 18,698 | 17,011 | ||||||||||
| Effect of tax-exempt interest income | 1,719 | 1,762 | 592 | 570 | 574 | ||||||||||
| Non-interest income, as presented | 13,027 | 14,584 | 4,715 | 4,080 | 4,375 | ||||||||||
| Effect of non-interest tax-exempt income | 127 | 124 | 43 | 43 | 41 | ||||||||||
| Net securities (gains) losses | (7) | (22) | (6) | 1 | 142 | ||||||||||
| Adjusted net interest income plus non-interest income | $ | 71,548 | $ | 65,055 | $ | 24,708 | $ | 23,392 | $ | 22,143 | |||||
| Non-GAAP efficiency ratio | 44.99 | % | 45.04 | % | 46.02 | % | 43.49 | % | 44.85 | % | |||||
| GAAP efficiency ratio | 46.18 | % | 46.37 | % | 47.22 | % | 44.66 | % | 46.44 | % |
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 nine months ended | For the quarters ended | |||||||||
|---|---|---|---|---|---|---|---|---|---|---|
| In thousands of dollars | September 30, 2022 | September 30, 2021 | September 30, 2022 | June 30, 2022 | September 30, 2021 | |||||
| Average shareholders' equity as presented | $ | 237,412 | $ | 233,763 | $ | 233,763 | $ | 231,980 | $ | 239,672 |
| Less intangible assets | (30,901) | (30,971) | (30,884) | (30,919) | (30,994) | |||||
| Tangible average shareholders' equity | $ | 206,511 | $ | 202,792 | $ | 202,879 | $ | 201,061 | $ | 208,678 |
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 | September 30, 2022 | June 30, 2022 | September 30, 2021 |
| Shareholders' Equity | |||
| Less Intangible Assets | (30,873) | (30,890) | (30,942) |
| Tangible Common Equity | 189,044 | 196,795 | 207,795 |
| Add Unrealized Losses on Available for Sale Securities, net of tax | 47,661 | 32,795 | 627 |
| Adjusted Tangible Common Equity | |||
| Adjusted Tangible Book Value Per Share | 21.44 | 20.81 | 18.96 |
All values are in US Dollars.
To provide period-to-period comparison of operating results prior to consideration of credit loss provision and income taxes, the non-GAAP measure of Pre-Tax, Pre-Provision Net Income is presented. The following table provides a reconciliation to Net Income:
| For the nine months ended | For the quarters ended | |||||||||
|---|---|---|---|---|---|---|---|---|---|---|
| In thousands of dollars | September 30, 2022 | September 30, 2021 | September 30, 2022 | June 30, 2022 | September 30, 2021 | |||||
| Net Income, as presented | $ | 29,793 | $ | 26,723 | $ | 10,091 | $ | 9,997 | $ | 9,014 |
| Add: provision for loan losses | 1,300 | 1,575 | 400 | 450 | 525 | |||||
| Add: income taxes | 6,423 | 5,591 | 2,217 | 2,159 | 1,915 | |||||
| Pre-Tax, pre-provision net income | $ | 37,516 | $ | 33,889 | $ | 12,708 | $ | 12,606 | $ | 11,454 |
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
The First Bancorp
Richard M. Elder, EVP, Chief Financial Officer
207-563-3195
rick.elder@thefirst.com
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