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| 8-K - 8-K - First Bancorp, Inc /ME/ | a8-kearnings16q4.htm |
Exhibit 99.1
The First Bancorp Reports Record Results for 2016
DAMARISCOTTA, ME, January 18, 2017 – The First Bancorp (Nasdaq: FNLC), parent company of First National Bank, today announced record operating results for the year ended December 31, 2016. Net income was $18.0 million, up $1.8 million or 11.1% from the $16.2 million reported for the year ended December 31, 2015. Earnings per common share on a fully diluted basis of $1.66 were up $0.15 or 9.9% compared to 2015. The Company also announced operating results for the quarter ended December 31, 2016. Net income was $4.3 million, up $551,000 or 14.6% from the fourth quarter of 2015, and earnings per common share on a fully diluted basis of $0.40 were up $0.05 or 14.3% from the same period in 2015.
“This was the best annual performance in the Company’s history,” observed Tony C. McKim, the Company’s President and Chief Executive Officer. “Increased net interest income was the primary driver for our 2016 performance, the result of continued strong growth in earning assets. At the same time, we saw a modest drop in operating expense in 2016 compared to 2015. We maintained the quarterly dividend at 23 cents per share in the fourth quarter and given our record earnings, we also declared a special cash dividend of 12 cents per share for the same quarter.
“Earning assets increased $142.1 million in 2016,” noted President McKim. “The loan portfolio increased $82.9 million to end the year at $1.07 billion. The commercial loan portfolio was up $56.0 million or 13.2% and residential loans were up $18.3 million or 4.5%. The investment portfolio was up $61.9 million or 13.0% over 2015 despite having a significant volume of securities called by their issuers. On the funding side of the balance sheet, low-cost deposits were up $61.6 million or 10.6% totaling $640.8 as of December 31, 2016 and total deposits were up $199.8 million or 19.1% to $1.24 billion at year-end.
“Net interest income on a tax equivalent basis in 2016 was up $2.1 million or 4.7% from 2015,” President McKim continued, “with growth in earning assets responsible for the increase. Non-interest income in 2016 was up $269,000 or 2.2% over 2015, with a $634,000 increase in mortgage origination income and a $153,000 increase in First Advisors income offsetting th
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e strategic decision to not take gains from sale of securities at the level taken in 2015. Non-interest expense in 2016 was $513,000 or 1.7% below 2015, primarily due to a reduction in other-credit-related costs outside of the provision for loan losses.
“Continued improvement in credit quality was another contributor to our 2016 results,” President McKim said. “Non-performing assets stood at 0.48% of total assets as of December 31, 2016 - well below the 0.57% level of non-performing assets a year ago. Net charge offs were 0.13% of average loans in 2016, down from 0.21% of average loans in 2015. We provisioned $1.6 million for loan losses in 2016, up $50,000 from the amount provisioned in 2015 and the allowance for loan losses stood at 0.95% of total loans as of December 31, 2016, down from 1.0% of total loans a year ago.”
“The strong financial results we posted in 2016 can certainly be seen in our operating ratios,” observed F. Stephen Ward, the Company’s Chief Financial Officer. “Our return on average assets was 1.12% in 2016 compared to a 1.07% return in 2015, and our return on average tangible common equity was 12.42% compared to 11.90% for the same periods, respectively. In comparison, the return on common equity average for the Bank’s UBPR peer group was 9.56% as of September, 2016, placing the Bank in the 83rd percentile. Our efficiency ratio stood at 50.43% for 2016 compared to 54.26% for 2015 and remains well below the Bank’s UBPR peer group average which stood at 63.96% as of September 30, 2016.
“Our stock performance was another major positive in 2016,” Mr. Ward noted. “The First Bancorp ended 2016 at $33.10 per share, up $12.63 from our December 31, 2015, close at $20.47 per share. With dividends reinvested, our total return for 2016 was 68.78%. We outperformed the broad market during this period, as measured by the S&P 500 which had a total return with dividends reinvested of 11.95%, as well the Russell 2000, in which we are included, which had a total return of 21.28%. We also outperformed the banking industry, with total returns year to date of 39.12% for the KBW Regional Bank Index and 37.97% for the Nasdaq Bank Index.”
“The Board of Directors maintained the quarterly dividend at 23 cents per share in the fourth quarter of 2016,” President McKim commented. “Based on the December 31, 2016 closing price of $33.10 per share, our annualized dividend yield was a respectful 2.78%. In addition to the regular quarterly dividend, the Board of Directors also declared a special cash dividend of 12 cents per share in the fourth quarter. This special dividend is intended to share our record
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operating results in 2016 with our shareholders. With regular quarterly dividends of 91 cents per share and the special cash dividend of 12 cents per share, total dividends declared in 2016 were $1.03 per share which resulted in a dividend payout ratio of 61.31% for the year.
“If I had to sum up 2016 for The First Bancorp in one word, it would be ‘incredible’,” President McKim concluded. “Growth in earning assets of $142.1 million fueled the $2.1 million increase in net interest income on a tax-equivalent basis. Non-interest income was up slightly despite a lower level of gains on sales of securities and non-interest expense actually dropped compared to 2015. These factors enabled us to share this great year with our shareholders in the form of increased cash dividends and our shareholders were further rewarded with an increase of $12.63 per share in the price of our stock. As always, I am most proud of the tremendous team of people we have at First National Bank. We have a dedicated group who are all pulling on the same rope in the same direction, day in and day out, to provide quality service to our customers. It is their positive attitude and tenacity that is ultimately behind the great year we had in 2016.”
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The First Bancorp | ||||||
Consolidated Balance Sheets (Unaudited) | ||||||
In thousands of dollars except common stock data | December 31, 2016 | December 31, 2015 | ||||
Assets | ||||||
Cash and due from banks | $ | 17,366 | $ | 14,299 | ||
Interest-bearing deposits in other banks | 293 | 4,013 | ||||
Securities available for sale | 300,416 | 223,039 | ||||
Securities to be held to maturity | 226,828 | 240,023 | ||||
Restricted equity securities, at cost | 11,930 | 14,257 | ||||
Loans held for sale | 782 | 349 | ||||
Loans | 1,071,526 | 988,638 | ||||
Less allowance for loan losses | 10,138 | 9,916 | ||||
Net loans | 1,061,388 | 978,722 | ||||
Accrued interest receivable | 5,532 | 4,912 | ||||
Premises and equipment | 22,202 | 21,816 | ||||
Other real estate owned | 375 | 1,532 | ||||
Goodwill | 29,805 | 29,805 | ||||
Other assets | 35,958 | 32,043 | ||||
Total assets | $ | 1,712,875 | $ | 1,564,810 | ||
Liabilities | ||||||
Demand deposits | $ | 160,488 | $ | 130,566 | ||
NOW deposits | 262,965 | 242,638 | ||||
Money market deposits | 125,544 | 92,994 | ||||
Savings deposits | 217,340 | 206,009 | ||||
Certificates of deposit | 195,115 | 158,529 | ||||
Certificates $100,000 to $250,000 | 240,904 | 175,077 | ||||
Certificates $250,000 and over | 40,601 | 37,376 | ||||
Total deposits | 1,242,957 | 1,043,189 | ||||
Borrowed funds | 278,901 | 337,457 | ||||
Other liabilities | 18,497 | 16,666 | ||||
Total Liabilities | 1,540,355 | 1,397,312 | ||||
Shareholders' equity | ||||||
Common stock | 108 | 108 | ||||
Additional paid-in capital | 60,723 | 59,862 | ||||
Retained earnings | 111,692 | 106,673 | ||||
Net unrealized gain (loss) on securities available-for-sale | (935 | ) | 1,123 | |||
Net unrealized loss on securities transferred from available for sale to held to maturity | (129 | ) | (112 | ) | ||
Net unrealized gain on cash flow hedging derivative instruments | 1,163 | — | ||||
Net unrealized loss on postretirement benefit costs | (102 | ) | (156 | ) | ||
Total shareholders' equity | 172,520 | 167,498 | ||||
Total liabilities & shareholders' equity | $ | 1,712,875 | $ | 1,564,810 | ||
Common Stock | ||||||
Number of shares authorized | 18,000,000 | 18,000,000 | ||||
Number of shares issued and outstanding | 10,793,399 | 10,753,855 | ||||
Book value per common share | $ | 15.98 | $ | 15.58 | ||
Tangible book value per common share | $ | 13.20 | $ | 12.78 | ||
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The First Bancorp | ||||||||||||
Consolidated Statements of Income (Unaudited) | ||||||||||||
For the years ended | For the quarters ended | |||||||||||
In thousands of dollars, except per share data | 12/31/2016 | 12/31/2015 | 12/31/2016 | 12/31/2015 | ||||||||
Interest income | ||||||||||||
Interest and fees on loans | $ | 39,996 | $ | 36,620 | 10,237 | 9,373 | ||||||
Interest on deposits with other banks | 22 | 19 | 5 | 3 | ||||||||
Interest and dividends on investments | 13,741 | 14,171 | 3,358 | 3,662 | ||||||||
Total interest income | 53,759 | 50,810 | 13,600 | 13,038 | ||||||||
Interest expense | ||||||||||||
Interest on deposits | 6,028 | 5,285 | 1,646 | 1,290 | ||||||||
Interest on borrowed funds | 4,784 | 4,589 | 1,216 | 1,103 | ||||||||
Total interest expense | 10,812 | 9,874 | 2,862 | 2,393 | ||||||||
Net interest income | 42,947 | 40,936 | 10,738 | 10,645 | ||||||||
Provision for loan losses | 1,600 | 1,550 | 475 | 450 | ||||||||
Net interest income after provision for loan losses | 41,347 | 39,386 | 10,263 | 10,195 | ||||||||
Non-interest income | ||||||||||||
Investment management and fiduciary income | 2,411 | 2,258 | 606 | 552 | ||||||||
Service charges on deposit accounts | 2,237 | 2,384 | 526 | 583 | ||||||||
Net securities gains | 673 | 1,399 | 5 | 3 | ||||||||
Mortgage origination and servicing income | 2,192 | 1,558 | 658 | 465 | ||||||||
Other operating income | 4,986 | 4,631 | 1,265 | 1,160 | ||||||||
Total non-interest income | 12,499 | 12,230 | 3,060 | 2,763 | ||||||||
Non-interest expense | ||||||||||||
Salaries and employee benefits | 15,215 | 15,080 | 4,079 | 4,136 | ||||||||
Occupancy expense | 2,313 | 2,312 | 578 | 540 | ||||||||
Furniture and equipment expense | 3,305 | 3,171 | 889 | 847 | ||||||||
FDIC insurance premiums | 789 | 890 | 158 | 223 | ||||||||
Amortization of identified intangibles | 43 | 58 | 11 | 11 | ||||||||
Other operating expense | 7,718 | 8,385 | 1,818 | 2,187 | ||||||||
Total non-interest expense | 29,383 | 29,896 | 7,533 | 7,944 | ||||||||
Income before income taxes | 24,463 | 21,720 | 5,790 | 5,014 | ||||||||
Applicable income taxes | 6,454 | 5,514 | 1,470 | 1,245 | ||||||||
Net Income | $ | 18,009 | $ | 16,206 | $ | 4,320 | $ | 3,769 | ||||
Basic earnings per share | $ | 1.68 | $ | 1.52 | $ | 0.40 | $ | 0.36 | ||||
Diluted earnings per share | 1.66 | 1.51 | 0.40 | 0.35 | ||||||||
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The First Bancorp | ||||||||||||
Selected Financial Data (Unaudited) | ||||||||||||
Dollars in thousands, | For the years ended | For the quarters ended | ||||||||||
except for per share amounts | 12/31/2016 | 12/31/2015 | 12/31/2016 | 12/31/2015 | ||||||||
Summary of Operations | ||||||||||||
Interest Income | $ | 53,759 | $ | 50,810 | $ | 13,600 | $ | 13,038 | ||||
Interest Expense | 10,812 | 9,874 | 2,862 | 2,393 | ||||||||
Net Interest Income | 42,947 | 40,936 | 10,738 | 10,645 | ||||||||
Provision for Loan Losses | 1,600 | 1,550 | 475 | 450 | ||||||||
Non-Interest Income | 12,499 | 12,230 | 3,060 | 2,763 | ||||||||
Non-Interest Expense | 29,383 | 29,896 | 7,533 | 7,944 | ||||||||
Net Income | 18,009 | 16,206 | 4,320 | 3,769 | ||||||||
Per Common Share Data | ||||||||||||
Basic Earnings per Share | $ | 1.68 | $ | 1.52 | $ | 0.40 | $ | 0.36 | ||||
Diluted Earnings per Share | 1.66 | 1.51 | 0.40 | 0.35 | ||||||||
Cash Dividends Declared | 1.03 | 0.87 | 0.35 | 0.22 | ||||||||
Book Value per Common Share | 15.98 | 15.58 | 15.98 | 15.58 | ||||||||
Tangible Book Value per Common Share | 13.20 | 12.78 | 13.20 | 12.78 | ||||||||
Market Value | 33.10 | 20.47 | 33.10 | 20.47 | ||||||||
Financial Ratios | ||||||||||||
Return on Average Equity (a) | 10.28 | % | 9.74 | % | 9.70 | % | 8.85 | % | ||||
Return on Average Tangible Common Equity (a) | 12.42 | % | 11.90 | % | 11.68 | % | 10.77 | % | ||||
Return on Average Assets (a) | 1.12 | % | 1.07 | % | 1.03 | % | 0.96 | % | ||||
Average Equity to Average Assets | 10.86 | % | 11.00 | % | 10.63 | % | 10.88 | % | ||||
Average Tangible Equity to Average Assets | 9.00 | % | 9.01 | % | 8.83 | % | 8.94 | % | ||||
Net Interest Margin Tax-Equivalent (a) | 3.05 | % | 3.10 | % | 2.94 | % | 3.11 | % | ||||
Dividend Payout Ratio | 61.31 | % | 57.24 | % | 87.50 | % | 62.86 | % | ||||
Allowance for Loan Losses/Total Loans | 0.95 | % | 1.00 | % | 0.95 | % | 1.00 | % | ||||
Non-Performing Loans to Total Loans | 0.73 | % | 0.75 | % | 0.73 | % | 0.75 | % | ||||
Non-Performing Assets to Total Assets | 0.48 | % | 0.57 | % | 0.48 | % | 0.57 | % | ||||
Efficiency Ratio | 50.43 | % | 54.26 | % | 51.14 | % | 55.69 | % | ||||
At Period End | ||||||||||||
Total Assets | $ | 1,712,875 | $ | 1,564,810 | $ | 1,712,875 | $ | 1,564,810 | ||||
Total Loans | 1,071,526 | 988,638 | 1,071,526 | 988,638 | ||||||||
Total Investment Securities | 539,174 | 477,319 | 539,174 | 477,319 | ||||||||
Total Deposits | 1,242,957 | 1,043,189 | 1,242,957 | 1,043,189 | ||||||||
Total Shareholders' Equity | 172,520 | 167,498 | 172,520 | 167,498 | ||||||||
(a) Annualized using a 365-day basis for both years | ||||||||||||
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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.
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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 2016 and 2015.
For the years ended | For the quarters ended | |||||||||||
In thousands of dollars | 12/31/2016 | 12/31/2015 | 12/31/2016 | 12/31/2015 | ||||||||
Net interest income as presented | $ | 42,947 | $ | 40,936 | $ | 10,738 | $ | 10,645 | ||||
Effect of tax-exempt income | 3,150 | 3,092 | 859 | 760 | ||||||||
Net interest income, tax equivalent | $ | 46,097 | $ | 44,028 | $ | 11,597 | $ | 11,405 | ||||
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 between the GAAP and non-GAAP efficiency ratio:
For the years ended | For the quarters ended | |||||||||||
In thousands of dollars | 12/31/2016 | 12/31/2015 | 12/31/2016 | 12/31/2015 | ||||||||
Non-interest expense, as presented | $ | 29,383 | $ | 29,896 | $ | 7,533 | $ | 7,944 | ||||
Net interest income, as presented | 42,947 | 40,936 | 10,738 | 10,645 | ||||||||
Effect of tax-exempt income | 3,150 | 3,092 | 859 | 760 | ||||||||
Non-interest income, as presented | 12,499 | 12,230 | 3,060 | 2,763 | ||||||||
Effect of non-interest tax-exempt income | 345 | 236 | 78 | 100 | ||||||||
Net securities gains | (673 | ) | (1,399 | ) | (5 | ) | (3 | ) | ||||
Adjusted net interest income plus non-interest income | $ | 58,268 | $ | 55,095 | $ | 14,730 | $ | 14,265 | ||||
Non-GAAP efficiency ratio | 50.43 | % | 54.26 | % | 51.14 | % | 55.69 | % | ||||
GAAP efficiency ratio | 52.99 | % | 56.23 | % | 54.59 | % | 59.25 | % | ||||
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
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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 | 12/31/2016 | 12/31/2015 | 12/31/2016 | 12/31/2015 | ||||||||
Average shareholders' equity as presented | $ | 175,119 | $ | 166,319 | $ | 177,225 | $ | 168,980 | ||||
Less intangible assets | (30,087 | ) | (30,131 | ) | (30,082 | ) | (30,125 | ) | ||||
Tangible average shareholders' equity | $ | 145,032 | $ | 136,188 | $ | 147,143 | $ | 138,855 | ||||
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.
Additional Information
For more information, please contact F. Stephen Ward, The First Bancorp's Treasurer & Chief Financial Officer, at 207.563.3272.
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