Business Wire | Jan 20, 2021 04:15PM EST

The First Bancorp Reports Results for 2020

Jan. 20, 2021

DAMARISCOTTA, Maine--(BUSINESS WIRE)--Jan. 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 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.

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.

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

Units Percentage Balance Percentage (000's)

Paid Off 61 10% $9,027 4%

Subsequent Modification 54 9% 32,724 14%

Still in Original 16 3% 7,244 3%Modification

Out of Modification 470 78% 189,413 79%

Total 601 100% $238,408 100%



Residential Real Estate Modifications

Units Percentage Balance Percentage (000's)

Paid Off 27 7% $5,930 12%

Subsequent Modification 154 43% 19,468 38%

Still in Original 27 7% 2,615 5%Modification

Out of Modification 154 43% 23,553 45%

Total 362 100% $51,566 100%

Consumer Loan Modifications

Units Percentage Balance Percentage (000's)

Paid Off 11 16% $118 10%

Subsequent Modification 3 4% 104 9%

Still in Original 4 6% 53 5%Modification

Out of Modification 50 74% 854 76%

Total 68 100% $1,129 100%

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 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 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.

The First Bancorp

Consolidated Balance Sheets (Unaudited)



In thousands of dollars, except per share data December 31, December 31, 2020 2019

Assets

Cash and due from banks $ 26,212 $ 14,433

Interest-bearing deposits in other banks 56,151 11,310

Securities available for sale 313,376 360,520

Securities to be held to maturity 365,613 281,606

Restricted equity securities, at cost 10,545 8,982

Loans held for sale 5,855 154

Loans 1,476,761 1,297,075

Less allowance for loan losses 16,253 11,639

Net loans 1,460,508 1,285,436

Accrued interest receivable 9,298 7,167

Premises and equipment 27,251 21,305

Other real estate owned 908 279

Goodwill 30,646 29,805

Other assets 54,873 47,799

Total assets $ 2,361,236 $ 2,068,796

Liabilities

Demand deposits $ 250,219 $ 169,777

NOW deposits 520,385 393,569

Money market deposits 163,819 161,000

Savings deposits 304,603 236,141

Certificates of deposit 246,875 277,225

Certificates $100,000 to $250,000 295,672 345,241

Certificates $250,000 and over 63,038 67,513

Total deposits 1,844,611 1,650,466

Borrowed funds 262,038 184,955

Other liabilities 30,861 20,867

Total Liabilities 2,137,510 1,856,288

Shareholders' equity

Common stock 110 109

Additional paid-in capital 65,285 63,964

Retained earnings 158,359 144,839

Net unrealized gain on securities available for 5,009 3,657 sale

Net unrealized loss on securities transferred (133 ) (182 )from available for sale to held to maturity

Net unrealized gain (loss) on cash flow hedging (4,932 ) 97 derivative instruments

Net unrealized gain on postretirement costs 28 24

Total shareholders' equity 223,726 212,508

Total liabilities & shareholders' equity $ 2,361,236 $ 2,068,796

Common Stock

Number of shares authorized 18,000,000 18,000,000

Number of shares issued and outstanding 10,950,289 10,899,210

Book value per common share $ 20.43 $ 19.50

Tangible book value per common share $ 17.60 $ 16.75

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 data

2020

2019

2020

2019

Interest income

Interest and fees on loans

$

59,059

$

59,239

$

14,935

$

14,789

Interest on deposits with other banks

96

188

9

43

Interest and dividends on investments

17,964

19,224

4,189

4,825

Total interest income

77,119

78,651

19,133

19,657

Interest expense

Interest on deposits

14,139

23,268

2,526

5,529

Interest on borrowed funds

3,147

2,890

928

710

Total interest expense

17,286

26,158

3,454

6,239

Net interest income

59,833

52,493

15,679

13,418

Provision for loan losses

6,050

1,250

1,500

375

Net interest income after provision for loan losses

53,783

51,243

14,179

13,043

Non-interest income

Investment management and fiduciary income

3,660

3,318

948

859

Service charges on deposit accounts

1,648

2,330

391

583

Net securities gains (losses)

1,155

224

(24

)

209

Mortgage origination and servicing income

5,085

1,909

1,283

682

Other operating income

6,571

6,408

1,894

1,575

Total non-interest income

18,119

14,189

4,492

3,908

Non-interest expense

Salaries and employee benefits

20,389

18,396

5,670

4,698

Occupancy expense

2,762

2,558

645

627

Furniture and equipment expense

4,801

3,990

1,363

1,021

FDIC insurance premiums

738

439

190

-

Acquisition-related costs

310

-

310

-

Amortization of identified intangibles

43

43

11

11

Other operating expense

10,609

9,746

2,227

2,647

Total non-interest expense

39,652

35,172

10,416

9,004

Income before income taxes

32,250

30,260

8,255

7,947

Applicable income taxes

5,121

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

The First Bancorp

Consolidated Statements of Income (Unaudited)



For the year ended For the quarter ended December 31, December 31,

In thousands of dollars, except 2020 2019 2020 2019per share data

Interest income

Interest and fees on loans $ 59,059 $ 59,239 $ 14,935 $ 14,789

Interest on deposits with other 96 188 9 43banks

Interest and dividends on 17,964 19,224 4,189 4,825investments

Total interest income 77,119 78,651 19,133 19,657

Interest expense

Interest on deposits 14,139 23,268 2,526 5,529

Interest on borrowed funds 3,147 2,890 928 710

Total interest expense 17,286 26,158 3,454 6,239

Net interest income 59,833 52,493 15,679 13,418

Provision for loan losses 6,050 1,250 1,500 375

Net interest income after 53,783 51,243 14,179 13,043provision for loan losses

Non-interest income

Investment management and 3,660 3,318 948 859fiduciary income

Service charges on deposit 1,648 2,330 391 583accounts

Net securities gains (losses) 1,155 224 (24 ) 209

Mortgage origination and 5,085 1,909 1,283 682servicing income

Other operating income 6,571 6,408 1,894 1,575

Total non-interest income 18,119 14,189 4,492 3,908

Non-interest expense

Salaries and employee benefits 20,389 18,396 5,670 4,698

Occupancy expense 2,762 2,558 645 627

Furniture and equipment expense 4,801 3,990 1,363 1,021

FDIC insurance premiums 738 439 190 -

Acquisition-related costs 310 - 310 -

Amortization of identified 43 43 11 11intangibles

Other operating expense 10,609 9,746 2,227 2,647

Total non-interest expense 39,652 35,172 10,416 9,004

Income before income taxes 32,250 30,260 8,255 7,947

Applicable income taxes 5,121 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



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 amounts

2020

2019

2020

2019

Summary of Operations

Interest Income

$

77,119

$

78,651

$

19,133

$

19,657

Interest Expense

17,286

26,158

3,454

6,239

Net Interest Income

59,833

52,493

15,679

13,418

Provision for Loan Losses

6,050

1,250

1,500

375

Non-Interest Income

18,119

14,189

4,492

3,908

Non-Interest Expense

39,652

35,172

10,416

9,004

Net Income

27,129

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 Share

2.48

2.34

0.64

0.61

Cash Dividends Declared

1.23

1.19

0.31

0.30

Book Value per Common Share

20.43

19.50

20.43

19.50

Tangible Book Value per Common Share

17.60

16.75

17.60

16.75

Market Value

25.40

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 Assets

9.84

%

10.17

%

9.70

%

10.34

%

Average Tangible Equity to Average Assets

8.50

%

8.68

%

8.40

%

8.88

%

Net Interest Margin Tax-Equivalent (a)

2.94

%

2.89

%

2.97

%

2.87

%

Dividend Payout Ratio

49.20

%

50.42

%

48.44

%

48.39

%

Allowance for Loan Losses/Total Loans

1.10

%

0.90

%

1.10

%

0.90

%

Non-Performing Loans to Total Loans

0.46

%

1.28

%

0.46

%

1.28

%

Non-Performing Assets to Total Assets

0.32

%

0.82

%

0.32

%

0.82

%

Efficiency Ratio

50.00

%

51.04

%

50.00

%

50.79

%

At Period End

Total Assets

$

2,361,236

$

2,068,796

$

2,361,236

$

2,068,796

Total Loans

1,476,761

1,297,075

1,476,761

1,297,075

Total Investment Securities

689,534

651,108

689,534

651,108

Total Deposits

1,844,611

1,650,466

1,844,611

1,650,466

Total Shareholders' Equity

223,726

212,508

223,726

212,508

(a) Annualized using a 366-day basis for 2020 and a 365-day basis for 2019

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.

The First Bancorp

Selected Financial Data (Unaudited)



For the year ended December For the quarter ended 31, December 31,

Dollars inthousands, 2020 2019 2020 2019except for pershare amounts



Summary of Operations

Interest Income $ 77,119 $ 78,651 $ 19,133 $ 19,657

Interest Expense 17,286 26,158 3,454 6,239

Net Interest 59,833 52,493 15,679 13,418 Income

Provision for 6,050 1,250 1,500 375 Loan Losses

Non-Interest 18,119 14,189 4,492 3,908 Income

Non-Interest 39,652 35,172 10,416 9,004 Expense

Net Income 27,129 25,525 6,970 6,686

Per Common Share Data

Basic Earnings $ 2.50 $ 2.36 $ 0.64 $ 0.62 per Share

Diluted Earnings 2.48 2.34 0.64 0.61 per Share

Cash Dividends 1.23 1.19 0.31 0.30 Declared

Book Value per 20.43 19.50 20.43 19.50 Common Share

Tangible BookValue per Common 17.60 16.75 17.60 16.75 Share

Market Value 25.40 30.23 25.40 30.23

Financial Ratios

Return onAverage Equity 12.35 % 12.51 % 12.43 % 12.55 %(a)

Return onAverage Tangible 14.29 % 14.66 % 14.36 % 14.63 %Common Equity(a)

Return onAverage Assets 1.21 % 1.27 % 1.21 % 1.30 %(a)

Average Equityto Average 9.84 % 10.17 % 9.70 % 10.34 %Assets

Average TangibleEquity to 8.50 % 8.68 % 8.40 % 8.88 %Average Assets

Net InterestMargin 2.94 % 2.89 % 2.97 % 2.87 %Tax-Equivalent(a)

Dividend Payout 49.20 % 50.42 % 48.44 % 48.39 %Ratio

Allowance forLoan Losses/ 1.10 % 0.90 % 1.10 % 0.90 %Total Loans

Non-PerformingLoans to Total 0.46 % 1.28 % 0.46 % 1.28 %Loans

Non-PerformingAssets to Total 0.32 % 0.82 % 0.32 % 0.82 %Assets

Efficiency Ratio 50.00 % 51.04 % 50.00 % 50.79 %

At Period End

Total Assets $ 2,361,236 $ 2,068,796 $ 2,361,236 $ 2,068,796

Total Loans 1,476,761 1,297,075 1,476,761 1,297,075

Total Investment 689,534 651,108 689,534 651,108 Securities

Total Deposits 1,844,611 1,650,466 1,844,611 1,650,466

TotalShareholders' 223,726 212,508 223,726 212,508 Equity

(a) Annualized using a 366-day basis for 2020 and a 365-day basis for 2019

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 For the quarter ended December 31, December 31,

In thousands of dollars 2020 2019 2020 2019

Net interest income as $ 59,833 $ 52,493 $ 15,679 $ 13,418presented

Effect of tax-exempt 2,336 2,295 594 573income

Net interest income, tax $ 62,169 $ 54,788 $ 16,273 $ 13,991equivalent

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 For the quarter ended December 31, December 31,

In thousands of dollars 2020 2019 2020 2019

Non-interest expense, as $ 39,652 $ 35,172 $ 10,416 $ 9,004 presented

Net interest income, as 59,833 52,493 15,679 13,418 presented

Effect of tax-exempt interest 2,336 2,295 594 573 income

Non-interest income, as 18,119 14,189 4,492 3,908 presented

Effect of non-interest 167 163 42 38 tax-exempt income

Net securities (gains) losses (1,155 ) (224 ) 24 (209 )

Adjusted net interest income $ 79,300 $ 68,916 $ 20,831 $ 17,728 plus non-interest income

Non-GAAP efficiency ratio 50.00 % 51.04 % 50.00 % 50.79 %

GAAP efficiency ratio 50.87 % 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 For the quarter ended December 31, December 31,

In thousands of dollars 2020 2019 2020 2019

Average shareholders' $ 219,729 $ 204,092 $ 223,091 $ 211,321 equity as presented

Less intangible assets (29,918 ) (29,957 ) (29,943 ) (29,978 )

Tangible average $ 189,811 $ 174,135 $ 193,148 $ 181,343 shareholders' equity

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 For the quarter ended December 31, December 31,

In thousands of dollars 2020 2019 2020 2019

Net Income, as presented $ 27,129 $ 25,525 $ 6,970 $ 6,686

Add: provision for loan 6,050 1,250 1,500 375losses

Add: income taxes 5,121 4,735 1,285 1,261

Pre-Tax, pre-provision $ 38,300 $ 31,510 $ 9,755 $ 8,322net income

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.

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CONTACT: Richard M. Elder The First Bancorp's Treasurer & Chief Financial Officer 207.563.3195