The First Bancorp(US:FNLC)2021-05-06 16:00Part I. Financial Information Selected Financial Data (Unaudited) The First Bancorp, Inc. reported significant Q1 2021 year-over-year improvements, with net income up 37.4% to $8.9 million, diluted EPS at $0.81, and improved asset quality and efficiency Q1 2021 vs Q1 2020 Financial Highlights (in thousands USD) | Metric | Q1 2021 | Q1 2020 | Change | | :--- | :--- | :--- | :--- | | Net Income | $8,922,000 | $6,495,000 | +37.4% | | Diluted EPS | $0.81 | $0.60 | +35.0% | | Cash Dividends Declared | $0.31 | $0.30 | +3.3% | | Total Assets | $2,436,868,000 | $2,136,396,000 | +14.1% | | Total Loans | $1,516,772,000 | $1,344,208,000 | +12.8% | | Total Deposits | $1,953,557,000 | $1,644,612,000 | +18.8% | Q1 2021 vs Q1 2020 Key Ratios | Ratio | Q1 2021 | Q1 2020 | | :--- | :--- | :--- | | Return on Average Equity | 15.85% | 12.03% | | Return on Average Assets | 1.54% | 1.24% | | Net Interest Margin (Tax-Equivalent) | 2.99% | 3.12% | | Non-Performing Loans to Total Loans | 0.46% | 0.75% | | Efficiency Ratio (Non-GAAP) | 45.52% | 58.12% | Financial Statements (Unaudited) Unaudited Q1 2021 consolidated financial statements show significant growth and improved profitability, with total assets at $2.44 billion, net income at $8.9 million, and strong cash flows Consolidated Balance Sheets As of March 31, 2021, total assets increased 14.1% to $2.44 billion, driven by growth in net loans to $1.50 billion and total deposits to $1.95 billion Balance Sheet Summary (in thousands) | Account | March 31, 2021 | December 31, 2020 | March 31, 2020 | | :--- | :--- | :--- | :--- | | Total Assets | $2,436,868 | $2,361,236 | $2,136,396 | | Net Loans | $1,500,178 | $1,460,508 | $1,332,350 | | Total Deposits | $1,953,557 | $1,844,611 | $1,644,612 | | Total Shareholders' Equity | $228,184 | $223,726 | $215,257 | Consolidated Statements of Income and Comprehensive Income For Q1 2021, net income increased 37.4% to $8.9 million, driven by a 6.4% rise in net interest income to $15.9 million and a 25.5% increase in non-interest income to $5.3 million Income Statement Summary (in thousands) | Account | Q1 2021 | Q1 2020 | | :--- | :--- | :--- | | Net Interest Income | $15,873 | $14,918 | | Provision for Loan Losses | $525 | $400 | | Total Non-Interest Income | $5,298 | $4,221 | | Total Non-Interest Expense | $9,874 | $11,043 | | Net Income | $8,922 | $6,495 | | Diluted EPS | $0.81 | $0.60 | Consolidated Statements of Cash Flows In Q1 2021, net cash from operating activities significantly increased to $19.0 million, while investing activities used $98.4 million, and financing activities provided $73.1 million, primarily from deposits Cash Flow Summary (in thousands) | Activity | Q1 2021 | Q1 2020 | | :--- | :--- | :--- | | Net Cash from Operating Activities | $19,044 | $2,852 | | Net Cash used by Investing Activities | ($98,353) | ($50,132) | | Net Cash from Financing Activities | $73,126 | $53,964 | | Net (Decrease) in Cash | ($6,183) | $6,684 | Notes to Consolidated Financial Statements Notes detail accounting policies and disclosures, covering the $690 million investment portfolio, improved $1.52 billion loan portfolio credit quality, COVID-19 impacts, and the upcoming LIBOR transition - The company's primary market, the State of Maine, relies significantly on tourism, which was adversely impacted by COVID-19 in 2020. The ongoing impact remains uncertain25 - The company is preparing for the cessation of LIBOR, with a working group formed to manage the transition. Several derivative contracts with notional values totaling $165 million have maturity dates beyond the LIBOR phase-out in June 2023125305 - The company has deferred the adoption of the new Current Expected Credit Loss (CECL) model (ASU 2016-13) as a Smaller Reporting Company, with implementation planned for fiscal years beginning after December 15, 2022159 Management's Discussion and Analysis of Financial Condition and Results of Operations (MD&A) Management reported record Q1 2021 operating results, with net income of $8.9 million, 37.4% YoY growth, improved asset quality, and a well-capitalized balance sheet with $2.44 billion in assets - Net income for Q1 2021 was a record $8.9 million, up 37.4% from Q1 2020, driven by increased net interest income, strong non-interest revenue, and controlled operating expenses181182 - Asset quality showed positive trends, with non-performing assets at 0.30% of total assets as of March 31, 2021, down from 0.49% a year prior186 - The company's non-GAAP efficiency ratio improved significantly to 45.52% for Q1 2021, compared to 58.12% for the same period in 2020, which was elevated due to one-time charges188 Critical Accounting Policies Management identifies critical accounting policies requiring significant estimates, including allowance for loan losses, goodwill, MSRs, and derivatives, with MSR valuation sensitive to prepayment rates and ongoing COVID-19 risks - The most significant estimates and assumptions are related to the Allowance for Loan Losses, Goodwill, Mortgage Servicing Rights, Fair Value of Securities, and Derivative Financial Instruments166167168170171 - The valuation of mortgage servicing rights is highly dependent on the anticipated loan prepayment rate assumption; an increase in prepayment speed lowers the MSR valuation170 Results of Operations In Q1 2021, net interest income rose 6.4% to $15.9 million, non-interest income surged 25.5% to $5.3 million driven by mortgage banking, and non-interest expense decreased 10.6% to $9.9 million - Net interest income on a tax-equivalent basis increased by $1.0 million (6.3%) YoY, driven by earning asset growth and recognition of PPP loan origination fees183 - Non-interest income increased by $1.1 million (25.5%) YoY, led by a $1.5 million (290.3%) increase in mortgage banking revenue184197 - Non-interest expense decreased by $1.2 million (10.6%) YoY, mainly due to $1.76 million in one-time charges in Q1 2020 related to restructuring interest rate swaps185120198 Financial Condition As of March 31, 2021, financial condition strengthened with total assets at $2.44 billion, loan portfolio growth of 2.7%, improved credit quality, strong liquidity from 18.8% deposit growth, and well-capitalized ratios - The loan portfolio increased by $40.0 million (2.7%) in Q1 2021, with growth centered in commercial real estate and other commercial loans, including PPP loans187218 - Low-cost deposits (demand, NOW, savings) grew by $68.1 million (6.3%) in Q1 2021 and $370.9 million (48.0%) year-over-year, largely due to economic stimulus programs187284 - The company remains well-capitalized, with a total risk-based capital ratio of 14.83% as of March 31, 2021, comfortably exceeding the 10.0% well-capitalized threshold187289290 Quantitative and Qualitative Disclosures About Market Risk The company manages interest rate risk via ALCO, using gap analysis and simulations; a 200 basis point rate increase projects a 0.1% rise in net interest income, while a 100 basis point decrease projects a 1.5% decline Interest Rate Sensitivity Analysis (Change in Net Interest Income) | Scenario | Year 1 Projection | Year 2 Projection | | :--- | :--- | :--- | | Rates Decrease by 1.0% | -1.5% | -9.3% | | Rates Increase by 2.0% | +0.1% | +1.0% | - The company's interest rate risk exposure is considered reasonable and is well within the ALCO's policy limit of a maximum 10.0% decrease in net interest income for a 2.0% rate move301 Controls and Procedures As of March 31, 2021, management concluded the company's disclosure controls and procedures were effective at a reasonable assurance level, with no material changes to internal control over financial reporting - Management concluded that the Company's disclosure controls and procedures were effective at the reasonable assurance level as of March 31, 2021307 - There were no changes in the Company's internal control over financial reporting during the quarter that materially affected, or are reasonably likely to materially affect, these controls307 Part II. Other Information Risk Factors The primary risk factor is the ongoing COVID-19 pandemic, posing risks to business operations, loan quality, and the investment portfolio, particularly impacting Maine's tourism-reliant economy - The COVID-19 pandemic continues to pose significant risks, including potential declines in credit quality, reduced loan demand, and negative impacts on the investment portfolio310311313 - The company's primary market in Maine is heavily reliant on tourism, which makes the regional economy particularly vulnerable to pandemic-related disruptions, potentially leading to a disproportionate adverse effect on the company312 Unregistered Sales of Equity Securities and Use of Proceeds During Q1 2021, the company repurchased 8,557 shares of common stock at an average price of $25.03 per share, outside of a publicly announced plan Common Stock Repurchases Q1 2021 | Month | Shares Purchased | Average Price Per Share | | :--- | :--- | :--- | | January 2021 | 5,776 | $24.40 | | February 2021 | 1,175 | $25.10 | | March 2021 | 1,606 | $28.70 | | Total | 8,557 | $25.03 |