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Form 8-K First Bancorp, Inc /ME/ For: Jan 20

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January 20, 2021 4:20 PM EST

Exhibit 99.1
The First Bancorp Reports Results for 2020
DAMARISCOTTA, ME, January 20, 2021 – The First Bancorp (Nasdaq: FNLC), parent company of First National Bank, today announced operating results for the year ended December 31, 2020. Unaudited net income was $27.1 million, up $1.6 million or 6.3% from the $25.5 million reported for the year ended December 31, 2019. Earnings per common share on a fully diluted basis were up $0.14 to $2.48 per share, an increase of 6.0% from the prior year. The Company also announced operating results for the three months ended December 31, 2020. Unaudited net income was $7.0 million, up $284,000 or 4.2% from the final three months of 2019, with earnings per share on a fully diluted basis of $0.64, up $0.03 or 4.9% from the same period in 2019.

“I'm pleased to report that The First Bancorp had record annual earnings in 2020, an outcome that exceeded our expectations given the ongoing challenges posed by the COVID-19 pandemic", commented Tony C. McKim, the Company’s President and Chief Executive Officer. "Earnings for the year were $27.1 million, up 6.3% from 2019. These results were driven by a 14.0% year-over-year increase in net interest income before loan loss provision, largely the result of a $269.3 million increase in earning assets. In addition, we had a 21.5% year-over-year increase in non-interest revenue before securities gains, stemming from year-over-year increases in mortgage banking and wealth management of 166.4% and 10.3%, respectively. Earnings growth was achieved while at the same time loan loss reserves were increased from 0.90% of total loans at December 31, 2019 to 1.10% of total loans at December 31, 2020, or 1.15% of total loans when excluding SBA PPP balances. We also achieved significant year-over-year improvement in asset quality, demonstrated by a reduction in non-performing assets from 0.82% of total assets at the end of 2019 to 0.32% of total assets as of year-end 2020."
Mr. McKim continued, "The Company continues to support our customers and community partners in addressing the impact of COVID-19. We have worked with over 1,100 borrowers economically impacted by the virus, to modify or defer loan payments during this crisis. First National Bank granted over 1,700 loans in last year's Paycheck Protection Program (PPP), with more than $97 million disbursed to Maine small businesses, at an average loan size of less than $60,000. We are actively working with those borrowers and the Small Business Administration towards forgiveness of loan balances per program guidelines, with approximately $37 million in forgiveness
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payments received through the end of December 2020. Our team stands poised and ready to assist the small businesses of Maine with the just opened second round of PPP.
In December we completed the acquisition of a retail banking branch in Belfast, Maine, our first branch in Waldo County and seventeenth overall. The transaction added approximately $23 million in loans and $19 million in deposits to our balance sheet. We welcome these new customers and employees to First National Bank and are excited to bring FNB's brand of "Dream First" banking to Belfast and Waldo County.
These accomplishments were made possible by the remarkable contributions of our entire team who worked diligently in supporting the Company's customers and strategic vision over the past year. I am very proud of their efforts."
2020 FINANCIAL HIGHLIGHTS
•Net income was an increase of 6.3% over 2019.
•Pre-tax, pre-provision net income (non-GAAP) increased 21.5% compared to 2019
•Total assets increased $292.4 million ending the year at $2.36 billion.
•Total loans outstanding at December 31, 2020 were $1.48 billion, up $179.7 million or 13.9%, year-over-year.
•Low-cost deposits as of December 31, 2020 totaled $1.08 billion, an increase of $275.7 million or 34.5% year-over-year.
•Efficiency Ratio (non-GAAP) was 50.00% for 2020, down from 51.04% in 2019 (the GAAP Efficiency Ratio was 50.87% for the year, down from 52.75% in 2019).
•Tangible Book Value increased to $17.60 per share at December 31, 2020, up from $16.75 at December 31, 2019.
FINANCIAL CONDITION
Total assets at December 31, 2020 were $2.36 billion, up $292.4 million from the prior year end. Earning assets increased $269.3 million year-over-year, with loan growth of $179.7 million and investment portfolio growth of $38.4 million. Commercial real estate and construction loans increased $87.8 million in 2020, including $39.5 million in the fourth quarter. Other commercial loans increased $66.2 million in 2020, residential mortgage and construction loans increased $36.4 million, while home equity line of credit balances fell by $12.6 million. Overall loan growth excluding PPP totaled $119.5 million, or 9.2% for the year. PPP loan balances totaled $60.2 million at the end of the fourth quarter.
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Total deposits at December 31, 2020 were $1.84 billion, up $194.1 million or 11.8% from December 31, 2019. Low-cost deposits increased $275.7 million year-over-year centered in DDA and NOW balances; certificate of deposit balances decreased $84.4 million year-over-year. The increase in low-cost deposits funded earning asset growth, while overall wholesale funding levels were essentially unchanged year-over-year.
The Company’s capital position remained strong as of December 31, 2020, with an estimated total risk-based capital ratio of 15.19%, and an estimated leverage capital ratio of 8.49%. These measures compare to 15.27% and 8.88% respectively as of December 31, 2019. The year-over-year change in the leverage capital ratio is the result of asset growth, including PPP loan balances. Each of the Company’s capital ratios remain well in excess of regulatory requirements.
ASSET QUALITY & PROVISION FOR LOAN LOSSES
Asset quality remains stable. As of December 31, 2020, the ratio of non-performing assets to total assets was 0.32%, improving from 0.82% a year earlier, and the ratio of non-performing loans to total loans stood at 0.46%, improving from 1.28% at December 31, 2019. Net charge-offs as a percentage of loans were 0.10% as of December 31, 2020, up slightly from 0.07% in 2019 and 0.08% in 2018. Past due loans were 0.66% of total loans as of December 31, 2020, down from 1.16% of total loans at December 31, 2019.
The provision for loan losses totaled $6.1 million for the year ended December 31, 2020, compared with total provision of $1.3 million in 2019. Despite improved and stable non-performing asset levels, continued positive charge-off metrics, and a lower level of past due loans, management has continued to consider the uncertainties brought about by COVID-19 and the potential impact to borrowers in its provision analysis. The allowance for loan losses stood at 1.10% of total loans as of December 31, 2020, up from the 0.90% of total loans at December 31, 2019. If PPP loan balances are excluded, the allowance as of December 31, 2020 would stand at 1.15% of total loans.
Excluding loans serviced for the secondary market and through December 31, 2020, the Bank had processed 1,031 loan modification requests for interest-only payments or deferred payments in conformance with the March 2020 inter-agency guidance or the CARES Act, representing $291.1 million in loan balances, or approximately 20.5% of year-end loan balances, excluding PPP. Of the $291.1 million total, $238.4 million were in the commercial and municipal loan portfolios, $51.6 million were residential real estate secured loans, and $1.1 million were consumer loans.


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As of December 31, 2020, loans totaling $62.2 million, or 4.2% of all loans, remained in either their original modification or a subsequent modification, down from $81.0 million, or 6% of all loans as of September 30, 2020.
Modification statuses by portfolio segments are summarized below:
Commercial/Municipal Loan Modifications
UnitsPercentageBalance (000's)Percentage
Paid Off6110%$9,0274%
Subsequent Modification549%32,72414%
Still in Original Modification163%7,2443%
Out of Modification47078%189,41379%
Total601100%$238,408100%
Residential Real Estate Modifications
UnitsPercentageBalance (000's)Percentage
Paid Off277%$5,93012%
Subsequent Modification15443%19,46838%
Still in Original Modification277%2,6155%
Out of Modification15443%23,55345%
Total362100%$51,566100%

Consumer Loan Modifications
UnitsPercentageBalance (000's)Percentage
Paid Off1116%$11810%
Subsequent Modification34%1049%
Still in Original Modification46%535%
Out of Modification5074%85476%
Total68100%$1,129100%

Of the $213.8 million in total loans that are Out of Modification, balances of $972,000 were past due as of December 31, 2020, a past due rate of 0.45%.

OPERATING RESULTS
Net Income for the year ended December 31, 2020 was $27.1 million, up $1.6 million or 6.3% from the year ended December 31, 2019. On a fully diluted earnings per share basis, 2020 earnings were $2.48, up $0.14 or 6.0% from the prior year. The Company’s Return on Average Assets of 1.21% for the year ended December 31, 2020 was down from 1.27% for the year ended December 31, 2019. On a Pre-Tax, Pre-Provision (non-GAAP) basis, 2020 Return on Assets was 1.72%, up from 1.57% the prior year. Return on Average Tangible Common Equity was 14.29% for the year ended December 31, 2020, down from 14.66% for the year ended December 31, 2019. On a
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Pre-Tax, Pre-Provision (non-GAAP) basis, Return on Average Tangible Common Equity for 2020 was 20.18%, up from 18.10% in 2019. The Company's Efficiency Ratio (non-GAAP) was 50.00% for the year ended December 31, 2020, improved from 51.04% in 2019. (GAAP Efficiency Ratio was 50.87% for the year ended December 31, 2020, down from 52.75% in 2019).
Contributing factors to the Company’s 2020 annual and fourth quarter results included:
•Earning asset growth led to a $7.4 million increase in tax-equivalent net interest income year-over-year, an increase of 13.5%. In the fourth quarter of 2020 tax equivalent net interest income was up $2.3 million from the same period in 2019, an increase of 16.3%.
•Net interest margins improved to 2.97% for the quarter ended December 31, 2020 and 2.94% for the year then ended, as compared to 2.87% and 2.89% respectively for the same periods in 2019.
•Non-interest income was $18.1 million for the year ended December 31, 2020, up $3.9 million or 27.7% from 2019. Strong purchase and refinance volume led to secondary market mortgage banking revenue increasing $3.2 million, or 166.4% year-over-year. Revenue increased $342,000, or 10.3% year-over-year, at First National Wealth Management, the Bank’s trust and investment management division. Service charge income was negatively impacted by lower transaction volume related to COVID-19.
•Non-interest expense for 2020 was $39.7 million, up $4.5 million or 12.7% from 2019. Employee salary and benefit expense increased 10.8% from the prior year centered in a larger employee base. Furniture & equipment expense increased 20.3% from 2019 and reflects recent investments to upgrade technology infrastructure. Transaction and data conversion fees related to the Belfast acquisition totaling $310,000 were recognized in the fourth quarter.
As of December 31, 2020, the Bank had $60.2 million in remaining PPP loan balances, down from $97.3 million as of September 30, 2020, the result of loan forgiveness payments being received from the SBA. Forgiveness payments resulted in immediate recognition of accrued origination fees associated with the underlying loans. PPP origination fees totaling $1.4 million were recognized in interest income in the fourth quarter. The Company had $1.6 million of accrued PPP origination fees remaining as of December 31, 2020.
DIVIDEND
On December 17, 2020, the Company's Board of Directors declared a fourth quarter dividend of 31 cents per share. The fourth quarter dividend represents a payout to shareholders of 48.44% of
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earnings per share for the period, and was paid on January 19, 2021 to shareholders of record as of January 6, 2021.
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 $2.36 billion in assets. The Bank provides a complete array of commercial and retail banking services through seventeen 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.
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The First Bancorp
Consolidated Balance Sheets (Unaudited)
In thousands of dollars, except per share dataDecember 31, 2020December 31, 2019
Assets
Cash and due from banks$26,212 $14,433 
Interest-bearing deposits in other banks56,151 11,310 
Securities available for sale313,376 360,520 
Securities to be held to maturity365,613 281,606 
Restricted equity securities, at cost10,545 8,982 
Loans held for sale5,855 154 
Loans1,476,761 1,297,075 
Less allowance for loan losses16,253 11,639 
Net loans1,460,508 1,285,436 
Accrued interest receivable9,298 7,167 
Premises and equipment27,251 21,305 
Other real estate owned908 279 
Goodwill30,646 29,805 
Other assets54,873 47,799 
Total assets$2,361,236 $2,068,796 
Liabilities
Demand deposits$250,219 $169,777 
NOW deposits520,385 393,569 
Money market deposits163,819 161,000 
Savings deposits304,603 236,141 
Certificates of deposit246,875 277,225 
Certificates $100,000 to $250,000295,672 345,241 
Certificates $250,000 and over63,038 67,513 
Total deposits1,844,611 1,650,466 
Borrowed funds262,038 184,955 
Other liabilities30,861 20,867 
Total Liabilities2,137,510 1,856,288 
Shareholders' equity
Common stock110 109 
Additional paid-in capital65,285 63,964 
Retained earnings158,359 144,839 
Net unrealized gain on securities available for sale5,009 3,657 
Net unrealized loss on securities transferred from available for sale to held to maturity(133)(182)
Net unrealized gain (loss) on cash flow hedging derivative instruments(4,932)97 
Net unrealized gain on postretirement costs28 24 
Total shareholders' equity223,726 212,508 
Total liabilities & shareholders' equity$2,361,236 $2,068,796 
Common Stock
Number of shares authorized18,000,000 18,000,000 
Number of shares issued and outstanding10,950,289 10,899,210 
Book value per common share$20.43 $19.50 
Tangible book value per common share$17.60 $16.75 
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The First Bancorp
Consolidated Statements of Income (Unaudited)
 For the year ended December 31,For the quarter ended December 31,
In thousands of dollars, except per share data2020201920202019
Interest income
Interest and fees on loans$59,059 $59,239 $14,935$14,789
Interest on deposits with other banks96 188 9 43 
Interest and dividends on investments17,964 19,224 4,189 4,825 
     Total interest income77,119 78,651 19,133 19,657 
Interest expense
Interest on deposits14,139 23,268 2,526 5,529 
Interest on borrowed funds3,147 2,890 928 710 
     Total interest expense17,286 26,158 3,454 6,239 
Net interest income59,833 52,493 15,679 13,418 
Provision for loan losses6,050 1,250 1,500 375 
Net interest income after provision for loan losses53,783 51,243 14,179 13,043 
Non-interest income
Investment management and fiduciary income3,660 3,318 948 859 
Service charges on deposit accounts1,648 2,330 391 583 
Net securities gains (losses)1,155 224 (24)209 
Mortgage origination and servicing income5,085 1,909 1,283 682 
Other operating income6,571 6,408 1,894 1,575 
     Total non-interest income18,119 14,189 4,492 3,908 
Non-interest expense
Salaries and employee benefits20,389 18,396 5,670 4,698 
Occupancy expense2,762 2,558 645 627 
Furniture and equipment expense4,801 3,990 1,363 1,021 
FDIC insurance premiums738 439 190 — 
Acquisition-related costs310 — 310 — 
Amortization of identified intangibles43 43 11 11 
Other operating expense10,609 9,746 2,227 2,647 
     Total non-interest expense39,652 35,172 10,416 9,004 
Income before income taxes32,250 30,260 8,255 7,947 
Applicable income taxes5,121 4,735 1,285 1,261 
Net Income$27,129 $25,525 $6,970 $6,686 
Basic earnings per share$2.50 $2.36 $0.64 $0.62 
Diluted earnings per share$2.48 $2.34 $0.64 $0.61 
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The First Bancorp
Selected Financial Data (Unaudited)
   
For the year ended December 31,For the quarter ended December 31,
Dollars in thousands, except for per share amounts2020201920202019
Summary of Operations
Interest Income$77,119 $78,651 $19,133 $19,657 
Interest Expense17,286 26,158 3,454 6,239 
Net Interest Income59,833 52,493 15,679 13,418 
Provision for Loan Losses6,050 1,250 1,500 375 
Non-Interest Income18,119 14,189 4,492 3,908 
Non-Interest Expense39,652 35,172 10,416 9,004 
Net Income27,129 25,525 6,970 6,686 
Per Common Share Data
Basic Earnings per Share$2.50 $2.36 $0.64 $0.62 
Diluted Earnings per Share2.48 2.34 0.64 0.61 
Cash Dividends Declared1.23 1.19 0.31 0.30 
Book Value per Common Share20.43 19.50 20.43 19.50 
Tangible Book Value per Common Share17.60 16.75 17.60 16.75 
Market Value25.40 30.23 25.40 30.23 
Financial Ratios
Return on Average Equity (a)12.35 %12.51 %12.43 %12.55 %
Return on Average Tangible Common Equity (a)14.29 %14.66 %14.36 %14.63 %
Return on Average Assets (a)1.21 %1.27 %1.21 %1.30 %
Average Equity to Average Assets9.84 %10.17 %9.70 %10.34 %
Average Tangible Equity to Average Assets8.50 %8.68 %8.40 %8.88 %
Net Interest Margin Tax-Equivalent (a)2.94 %2.89 %2.97 %2.87 %
Dividend Payout Ratio49.20 %50.42 %48.44 %48.39 %
Allowance for Loan Losses/Total Loans1.10 %0.90 %1.10 %0.90 %
Non-Performing Loans to Total Loans0.46 %1.28 %0.46 %1.28 %
Non-Performing Assets to Total Assets0.32 %0.82 %0.32 %0.82 %
Efficiency Ratio50.00 %51.04 %50.00 %50.79 %
At Period End
Total Assets$2,361,236 $2,068,796 $2,361,236 $2,068,796 
Total Loans1,476,761 1,297,075 1,476,761 1,297,075 
Total Investment Securities689,534 651,108 689,534 651,108 
Total Deposits1,844,611 1,650,466 1,844,611 1,650,466 
Total Shareholders' Equity223,726 212,508 223,726 212,508 
(a) Annualized using a 366-day basis for 2020 and a 365-day basis for 2019



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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 (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 2020 and 2019.
 For the year ended December 31,For the quarter ended December 31,
In thousands of dollars2020201920202019
Net interest income as presented$59,833 $52,493 $15,679 $13,418 
Effect of tax-exempt income2,336 2,295 594 573 
Net interest income, tax equivalent$62,169 $54,788 $16,273 $13,991 




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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 year ended December 31,For the quarter ended December 31,
In thousands of dollars2020201920202019
Non-interest expense, as presented$39,652 $35,172 $10,416 $9,004 
Net interest income, as presented59,833 52,493 15,679 13,418 
Effect of tax-exempt interest income2,336 2,295 594 573 
Non-interest income, as presented18,119 14,189 4,492 3,908 
Effect of non-interest tax-exempt income167 163 42 38 
Net securities (gains) losses(1,155)(224)24 (209)
Adjusted net interest income plus non-interest income$79,300 $68,916 $20,831 $17,728 
Non-GAAP efficiency ratio50.00 %51.04 %50.00 %50.79 %
GAAP efficiency ratio50.87 %52.75 %51.64 %51.97 %
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 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 year ended December 31,For the quarter ended December 31,
In thousands of dollars2020201920202019
Average shareholders' equity as presented$219,729 $204,092 $223,091 $211,321 
Less intangible assets(29,918)(29,957)(29,943)(29,978)
Tangible average shareholders' equity$189,811 $174,135 $193,148 $181,343 





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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 year ended December 31,For the quarter ended December 31,
In thousands of dollars2020201920202019
Net Income, as presented$27,129 $25,525 $6,970 $6,686 
Add: provision for loan losses6,050 1,250 1,500 375 
Add: income taxes5,121 4,735 1,285 1,261 
Pre-Tax, pre-provision net income$38,300 $31,510 $9,755 $8,322 


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 Richard M. Elder, The First Bancorp's Treasurer & Chief Financial Officer, at 207.563.3195.
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