The First Bancorp, Inc. — Form 10-Q Summary
Business context and reporting period
The First Bancorp, Inc. is a Maine-based financial holding company whose principal subsidiary is First National Bank. This report covers the unaudited three months ended March 31, 2024, compared primarily with the three months ended March 31, 2023 and December 31, 2023 balance-sheet data. The interim financial statements received a review, not an audit, from Berry Dunn McNeil & Parker, LLC.
Financial performance and key metrics
| Metric | Q1 2024 | Q1 2023 | Change |
|---|---|---|---|
| Total interest income | $35.0 million | $28.9 million | Up 21.0% |
| Total interest expense | $20.1 million | $11.4 million | Up 75.8% |
| Net interest income | $14.9 million | $17.5 million | Down 14.8% |
| Tax-equivalent net interest margin | 2.22% | 2.78% | Down 56 basis points |
| Provision for credit losses | $(0.5) million | $0.6 million | Improved by $1.1 million |
| Non-interest income | $3.6 million | $3.6 million | Up 2.0% |
| Non-interest expense | $11.8 million | $10.9 million | Up 8.4% |
| Net income | $6.0 million | $8.0 million | Down 24.5% |
| Diluted EPS | $0.54 | $0.72 | Down 25.0% |
| Return on average assets | 0.82% | 1.16% | Down 34 basis points |
| Efficiency ratio, non-GAAP | 61.15% | 49.98% | Higher by 11.17 points |
Net interest income declined because deposit and borrowing costs increased faster than earning-asset yields. Deposit interest expense increased $8.3 million year over year, while loan interest income increased $6.1 million. Salaries and benefits, other operating costs, and FDIC insurance premiums were higher.
Balance sheet, liquidity, capital and cash flow
- Total assets were $2.98 billion at March 31, 2024, up 1.1% from year-end 2023 and 5.9% from March 31, 2023.
- Total loans were $2.17 billion, up 2.1% year to date and 9.6% year over year. Growth was concentrated in commercial real estate, commercial and industrial, multifamily, municipal and residential portfolios.
- Total deposits were $2.55 billion, down 1.9% from year-end 2023 but up 3.3% year over year. Low-cost deposits declined while money-market balances and certificates of deposit increased.
- Borrowed funds were $154.8 million, up $85.1 million from year-end 2023, including increased Federal Home Loan Bank advances and a $25.0 million Federal Reserve Bank term borrowing.
- Cash and cash equivalents ended at $23.9 million, down from $31.9 million at December 31, 2023. Operating activities used $1.5 million, investing activities used $37.1 million, and financing activities provided $30.5 million.
- Management reported primary contingent liquidity of $804.0 million, or 27.3% of total assets, and total liquidity sources of approximately $1.247 billion, or 42.3% of total assets.
- Shareholders’ equity was $242.6 million. The Company’s total risk-based capital ratio was 13.54%, above the 10.0% well-capitalized threshold applicable to the Bank.
- A quarterly cash dividend of $0.35 per share was declared, representing a 63.64% basic EPS payout ratio.
Asset quality, investments and other material items
- The allowance for credit losses on loans was $24.2 million, or 1.11% of total loans, compared with 1.13% at year-end 2023 and 1.18% at March 31, 2023.
- Nonperforming loans were $2.7 million, or 0.12% of total loans, compared with $2.2 million at year-end 2023 and $1.8 million a year earlier.
- Total past-due loans were $2.0 million, or 0.09% of total loans, down from 0.18% at year-end 2023. There were four residential loans in foreclosure totaling $0.5 million and no commercial loans in foreclosure.
- Net recoveries on loans were $78,000 in Q1 2024, compared with net charge-offs of $25,000 in Q1 2023. The filing reports no other real estate owned.
- Total investment securities were $659.8 million, down $10.8 million from year-end 2023. Available-for-sale securities had $54.3 million of unrealized losses, primarily reflecting higher market interest rates. Management stated that the securities were investment grade, fully collectible and intended to be held through recovery or maturity.
- Accumulated other comprehensive income included a $42.8 million net unrealized loss on available-for-sale securities at quarter-end, compared with a $39.6 million loss at year-end 2023.
- Loans to hotels and motels totaled $231.5 million, or 10.65% of total loans, while loans to lessors of residential buildings and dwellings totaled $229.5 million, or 10.56%.
Outlook, management commentary and risks
Management expects interest-rate conditions to remain important to earnings. The filing states that the Federal Open Market Committee has held rates since summer 2023 and that the timing and magnitude of potential rate reductions have become less certain. The Company’s interest-rate simulation projects one-year net interest income would increase 4.1% under a gradual 2.0 percentage-point rate decline, but decrease 7.3% under a gradual 2.0 percentage-point increase. These are hypothetical sensitivity results, not guidance or a forecast.
Management described asset quality as strong and stable and attributed the lower credit-loss provision to improved economic projections and favorable asset-quality trends. Key risks include deposit runoff and repricing, higher funding costs, commercial real estate weakness, inflation, recession, loan collectability, interest-rate volatility, geopolitical conflicts, financial-market disruption and changes in regulatory or accounting requirements.
The filing provides no formal earnings, revenue, loan-growth or margin guidance. Management expects interest rates to increase slightly over the next year and considers the Company’s current interest-rate risk acceptable.
Most important facts for investors to verify
- Whether deposit pricing and migration toward higher-cost products continue to compress net interest margin.
- The sustainability of loan growth relative to deposit growth and increased wholesale borrowings.
- Credit performance in hotel, multifamily, commercial real estate and other concentrated lending sectors.
- Whether the $54.3 million of AFS unrealized losses remain primarily interest-rate related and recover as securities mature or rates decline.
- The adequacy of the $24.2 million loan ACL and $0.9 million off-balance-sheet credit-exposure allowance if economic conditions weaken.
- Capital and liquidity levels after dividends, loan growth, deposit outflows and debt maturities.
- The effect of future interest-rate movements on net interest income, given the reported negative one-year cumulative repricing gap.