What changed in First Bancorp, Inc /ME/'s 10-K — 2022 vs 2023
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Paragraph-level year-over-year comparison of First Bancorp, Inc /ME/'s 2022 and 2023 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2023 report.
+348 added−408 removedSource: 10-K (2024-03-08) vs 10-K (2023-03-10)
Top changes in First Bancorp, Inc /ME/'s 2023 10-K
348 paragraphs added · 408 removed · 259 edited across 7 sections
- Item 7. Management's Discussion & Analysis+234 / −280 · 167 edited
- Item 1A. Risk Factors+50 / −63 · 43 edited
- Item 1. Business+42 / −50 · 35 edited
- Item 7A. Quantitative and Qualitative Disclosures About Market Risk+10 / −10 · 9 edited
- Item 5. Market for Registrant's Common Equity+10 / −3 · 3 edited
Item 1. Business
Business — how the company describes what it does
35 edited+7 added−15 removed106 unchanged
Item 1. Business
Business — how the company describes what it does
35 edited+7 added−15 removed106 unchanged
2022 filing
2023 filing
Biggest changeThe individuals employed by the Bank, to a large extent, reside near the branch offices and thus are generally familiar with their communities and customers. This is important in local decision-making and allows the Bank to respond to customer questions and concerns on a timely basis and fosters quality customer service.
Biggest changeThis is important in local decision-making and allows the Bank to respond to customer questions and concerns on a timely basis and fosters quality customer service. The Bank has worked and will continue to work to position itself to be competitive in its market area.
Supplementary Capital elements include, subject to certain limitations, a portion of the allowance for loan losses, perpetual preferred stock that does not qualify for inclusion in Tier 1 capital, long-term preferred stock with an original maturity of at least 20 years and related surplus, certain forms of perpetual debt and mandatory convertible securities, and certain forms of subordinated debt and intermediate-term preferred stock.
Supplementary Capital elements include, subject to certain limitations, a portion of the allowance for credit losses, perpetual preferred stock that does not qualify for inclusion in Tier 1 capital, long-term preferred stock with an original maturity of at least 20 years and related surplus, certain forms of perpetual debt and mandatory convertible securities, and certain forms of subordinated debt and intermediate-term preferred stock.
The FDIC has the power to adjust deposit insurance assessment rates at any time, and the Company is not able to predict the amount or timing of any adjustment. In October 2022 the FDIC announced a uniform deposit insurance premium increase of 2 basis points effective in the second quarter of 2023.
The FDIC has the power to adjust deposit insurance assessment rates at any time, and the Company is not able to predict the amount or timing of any adjustment. In October 2022 the FDIC announced a uniform deposit insurance premium increase of 2 basis points effective in the first quarter of 2023.
For example, the regulations limit the portion of the allowance for loan losses eligible for inclusion in Total Capital to 1.25% of Risk-Weighted Assets. The Federal Reserve Board has established substantially identical risk-based capital requirements, which are applied to BHCs on a consolidated basis.
For example, the regulations limit the portion of the allowance for credit losses eligible for inclusion in Total Capital to 1.25% of Risk-Weighted Assets. The Federal Reserve Board has established substantially identical risk-based capital requirements, which are applied to BHCs on a consolidated basis.
Prompt Corrective Action: The Federal Deposit Insurance Corporation Improvement Act of 1991 ("FDICIA") requires, among other things, that the federal banking regulators take "prompt corrective action" with respect to, and imposes significant restrictions on, any bank that fails to satisfy its applicable minimum capital requirements.
Prompt Corrective Action: The Federal Deposit Insurance Corporation Improvement Act of 1991 ("FDICIA") requires, among other things, that federal banking regulators take "prompt corrective action" with respect to, and impose significant restrictions on, any bank that fails to satisfy its applicable minimum capital requirements.
FDICIA establishes five capital categories consisting of "well capitalized," "adequately capitalized," "undercapitalized," "significantly undercapitalized" and "critically undercapitalized." Under applicable regulations, a bank that has a Total Risk-Based Capital Ratio of 10.0% or greater, a Tier 1 Risk-Based Capital Ratio of 8.0% or greater, a CET1 ratio of 6.5% or greater, and a Leverage Capital Ratio of 5.0% or greater, and is not subject to any written agreement, order, capital directive or prompt corrective action directive to meet and maintain a specific capital level for any capital measure, is deemed to be "well capitalized." A bank that has a Total Risk-Based Capital Ratio of 8.0% or greater, a Tier 1 Risk-Based Capital Ratio of 6.0%, a CET1 ratio of 4.5%, or greater and a Leverage Capital Ratio of 4.0% or greater and does not meet the definition of a well-capitalized bank is considered to be "adequately capitalized." A bank that has a Total Risk-Based Capital Ratio of less than 8.0%, or has a Tier 1 Risk-Based Capital Ratio that is less than 6.0%, or a CET1 ratio of less than 4.5%, or a Leverage Capital Ratio of less than 4.0% is considered "undercapitalized." A bank that has a Total Risk-Based Capital Ratio of less than 8.0%, or a Tier 1 Risk-Based Capital Ratio that is less than 4.0%, or a CET1 ratio of less than 3.0%, or a Leverage Capital Ratio that is less than 3.0% is considered to be "significantly undercapitalized," and a bank that has a ratio of tangible equity to total assets equal to or less than 2% is deemed to be "critically undercapitalized." A bank may be deemed to be in a capital category lower than is indicated The First Bancorp - 2022 Form 10-K - Page 5 by its actual capital position if it is determined to be in an unsafe or unsound condition or receives an unsatisfactory examination rating.
FDICIA establishes five capital categories consisting of "well capitalized," "adequately capitalized," "undercapitalized," "significantly undercapitalized" and "critically undercapitalized." Under applicable regulations, a bank that has a Total Risk-Based Capital Ratio of 10.0% or greater, a Tier 1 Risk-Based Capital Ratio of 8.0% or greater, a CET1 ratio of 6.5% or greater, and a Leverage Capital Ratio of 5.0% or greater, and is not subject to any written agreement, order, capital directive or prompt corrective action directive to meet and maintain a specific capital level for any capital measure, is deemed to be "well capitalized." A bank that has a Total Risk-Based Capital Ratio of 8.0% or greater, a Tier 1 Risk-Based Capital Ratio of 6.0%, a CET1 ratio of 4.5%, or greater and a Leverage Capital Ratio of 4.0% or greater and does not meet the definition of a well-capitalized bank is considered to be "adequately capitalized." A bank that has a Total Risk-Based Capital Ratio of less than 8.0%, or has a Tier 1 Risk-Based Capital Ratio that is less than 6.0%, or a CET1 ratio of less than 4.5%, or a Leverage Capital Ratio of less than 4.0% is considered "undercapitalized." A bank that has a Total Risk-Based Capital Ratio of less than 8.0%, or a Tier 1 Risk-Based Capital Ratio that is less than 4.0%, or a CET1 ratio of less than 3.0%, or a Leverage Capital Ratio that is less than 3.0% is considered to be "significantly undercapitalized," and a bank that has a ratio of tangible equity to total assets equal to or less than 2% is deemed to be "critically undercapitalized." A bank may be deemed to be in a capital category lower than is indicated by its actual capital position if it is determined to be in an unsafe or unsound condition or receives an unsatisfactory examination rating.
Under FDICIA and the applicable implementing regulations, an undercapitalized bank will be (i) subject to increased monitoring by its primary federal banking regulator; (ii) required to submit to its primary federal banking regulator an acceptable capital restoration plan (guaranteed, subject to certain limits, by the bank's holding company) within 45 days of being classified as undercapitalized; (iii) subject to strict asset growth limitations; and (iv) required to obtain prior regulatory approval for certain acquisitions, transactions not in the ordinary course of business, and entries into new lines of business.
Under FDICIA and the applicable implementing regulations, an undercapitalized bank will be (i) subject to increased monitoring by its primary federal banking regulator; (ii) required to submit to its primary federal banking regulator an acceptable capital restoration plan (guaranteed, subject to certain limits, by the bank's holding company) within 45 days of The First Bancorp - 2023 Form 10-K - Page 5 being classified as undercapitalized; (iii) subject to strict asset growth limitations; and (iv) required to obtain prior regulatory approval for certain acquisitions, transactions not in the ordinary course of business, and entries into new lines of business.
Protecting the privacy of our customers’ information as well as the security of the Bank’s systems and networks has long been and will continue to be a priority. The Board is committed to maintaining strong and meaningful privacy and security protections for our customers’ information.
Protecting the privacy of our customers’ information as well as the security of the Bank’s systems and networks has long been and will continue to be a priority. The Board is committed to maintaining strong and meaningful privacy and security protections for our customers’ information. For additional information, see Item 1C.
Because we are a financial holding company, if the Bank receives a rating under the Community Reinvestment Act of 1977, as amended (the "CRA"), of less than satisfactory, the Bank and/or the Company will be prohibited, until the rating is raised to satisfactory or better, from engaging in new activities or acquiring companies other than bank holding companies, banks or savings associations, except that we could engage in new activities, or acquire companies engaged in activities, that The First Bancorp - 2022 Form 10-K - Page 3 are closely related to banking under the BHC Act.
Because we are a financial holding company, if the Bank receives a rating under the Community Reinvestment Act of 1977, as amended (the "CRA"), of less than satisfactory, the Bank and/or the Company will be prohibited, until the rating is raised to satisfactory or better, from engaging in new activities or acquiring companies other than bank holding companies, banks or savings associations, except that we could engage in new activities, or acquire companies engaged in activities, that are closely related to banking under the BHC Act.
Managers conduct periodic coaching meetings with all employees to review progress towards annual goals, and identify areas of opportunity or performance improvement. Formal performance evaluations are conducted semi-annually. A Development Associate position was recently added to our Education & Training department to ensure all employees are provided with development plans that meet their current and future career needs..
Managers conduct periodic coaching meetings with all employees to review progress towards annual goals, and identify areas of opportunity or performance improvement. Formal performance evaluations are conducted semi-annually. Our Education & Training department includes a Development Associate position whose role is to ensure all employees are provided with development plans that meet their current and future career needs.
The Brewer office raised the Bank's branch location count to eighteen, and became its second branch in Penobscot County. As of December 31, 2022, the Company's securities consisted of one class of common stock. At that date, there were 11,045,186 shares of common stock outstanding.
The Brewer office raised the Bank's branch location count to eighteen, and became its second branch in Penobscot County. As of December 31, 2023, the Company's securities consisted of one class of common stock. At that date, there were 11,098,057 shares of common stock outstanding.
Core Capital consists primarily of common stockholders' equity, which generally includes common stock, related surplus and retained earnings, certain non-cumulative perpetual preferred stock and related surplus, and minority interests in the equity accounts of consolidated subsidiaries, and (subject to certain limitations) mortgage servicing rights and purchased credit card relationships, less all other intangible assets (primarily goodwill).
Core Capital consists primarily of common stockholders' equity, which generally includes common stock, related surplus and retained earnings, certain non-cumulative perpetual preferred stock and related surplus, and minority interests in the equity accounts of consolidated subsidiaries, and The First Bancorp - 2023 Form 10-K - Page 4 (subject to certain limitations) mortgage servicing rights and purchased credit card relationships, less all other intangible assets (primarily goodwill).
The First Bancorp - 2022 Form 10-K - Page 8 Consumer Protection Provisions: FDICIA also includes provisions requiring advance notice to regulators and customers for any proposed branch closing and authorizing (subject to future appropriation of the necessary funds) reduced insurance assessments for institutions offering "lifeline" banking accounts or engaged in lending in distressed communities.
Consumer Protection Provisions: FDICIA also includes provisions requiring advance notice to regulators and customers for any proposed branch closing and authorizing (subject to future appropriation of the necessary funds) reduced insurance assessments for institutions offering "lifeline" banking accounts or engaged in lending in distressed communities.
In addition, if the FRB finds that the Bank is not well capitalized or well managed, we would be required to enter into an agreement with the FRB to comply with all applicable capital and management requirements and which may contain additional limitations or conditions.
The Bank is actively reviewing the final rule in anticipation of the compliance date. In addition, if the FRB finds that the Bank is not well capitalized or well managed, we would be required to enter into an agreement with the FRB to comply with all applicable capital and management requirements and which may contain additional limitations or conditions.
Assessments for established small banks range from 1.5 to 30 basis points, after adjustments. Assessment rates specific to the Bank are calculated quarterly based upon its balance sheet and performance metrics as of the prior quarter end.
Assessments for established small banks range from 1.5 to 30 basis points, after adjustments. The First Bancorp - 2023 Form 10-K - Page 6 Assessment rates specific to the Bank are calculated quarterly based upon its balance sheet and performance metrics as of the prior quarter end.
The Bank Secrecy Act: The Bank Secrecy Act (the "BSA") requires all financial institutions, including banks and securities broker-dealers, to, among other things, establish a risk-based system of internal controls reasonably designed to prevent money laundering and the financing of terrorism.
The First Bancorp - 2023 Form 10-K - Page 7 The Bank Secrecy Act: The Bank Secrecy Act (the "BSA") requires all financial institutions, including banks and securities broker-dealers, to, among other things, establish a risk-based system of internal controls reasonably designed to prevent money laundering and the financing of terrorism.
Until corrected, we could be prohibited from engaging in any new activity or acquiring companies engaged in activities that are not closely related to banking under the BHC Act without prior FRB approval.
Until corrected, we could be prohibited from The First Bancorp - 2023 Form 10-K - Page 3 engaging in any new activity or acquiring companies engaged in activities that are not closely related to banking under the BHC Act without prior FRB approval.
The Bank's ability to make decisions close to the marketplace, Management's commitment to providing quality banking products, the caliber of the professional staff, and the community involvement of the Bank's employees are all factors affecting the Bank's ability to be competitive.
The Bank's ability to make decisions close to the marketplace, Management's commitment to providing quality banking products, the caliber of the The First Bancorp - 2023 Form 10-K - Page 1 professional staff, and the community involvement of the Bank's employees are all factors affecting the Bank's ability to be competitive.
On December 31, 2022, the Company's consolidated Total Capital Ratio 13.58%, its CET1 and Tier 1 ratios were 12.70%, and its Leverage Capital Ratio was 9.01%. Based on the above figures and accompanying discussion, the Company exceeds all regulatory capital requirements and is considered well capitalized.
On December 31, 2023, the Company's consolidated Total Capital Ratio was 13.66%, its CET1 and Tier 1 ratios were 12.42%, and its Leverage Capital Ratio was 8.61%. Based on the above figures and accompanying discussion, the Company exceeds all regulatory capital requirements and is considered well capitalized.
See Item 7 - Management's Discussion and Analysis of Financial Condition and Results of Operations and Item 1A - Risk Factors, regarding the Bank's net interest margin and the effect of interest rate volatility on future earnings.
See Item 7 - Management's Discussion and Analysis of Financial Condition The First Bancorp - 2023 Form 10-K - Page 8 and Results of Operations and Item 1A - Risk Factors, regarding the Bank's net interest margin and the effect of interest rate volatility on future earnings.
Diversity and Inclusion: The Company believes that our people are the most valuable asset we have. The collective sum of the individual differences, life experiences, knowledge, inventiveness, innovation, self-expression, unique capabilities, and talent that our employees invest in their work represents a significant part of not only our culture, but our reputation and the Company's achievement as well.
The collective sum of the individual differences, life experiences, knowledge, inventiveness, innovation, self-expression, unique capabilities, and talent that our employees invest in their work represents a significant part of not only our culture, but our reputation and the Company's achievement as well.
In addition, we have a confidential whistleblower program that forwards complaints to the Chair of the Audit Committee of the Board of Directors, and we work to take necessary action as quickly as possible should a complaint be received. Succession Planning: The Company views succession planning as a priority and incorporates it into the strategic planning process.
In addition, we have a confidential whistleblower program that forwards complaints to the Chair of the Audit Committee of the Board of Directors, and we work to take necessary action as quickly as possible should a complaint be received.
The First Bancorp - 2022 Form 10-K - Page 7 Cyber-Security: In November 2021, the U.S. bank regulatory agencies adopted a joint final rule regarding notification requirements for banking organizations related to significant computer security incidents.
Cyber-Security Incident Disclosure: In November 2021, the U.S. bank regulatory agencies adopted a joint final rule regarding notification requirements for banking organizations related to significant computer security incidents.
Many of these entities and institutions have resources substantially greater than those available to the Bank and in some cases are not subject to the same regulatory restrictions as are the Company and the Bank.
Non-banking entities such as brokerage houses, mortgage companies and insurance companies are offering very competitive products. Many of these entities and institutions have resources substantially greater than those available to the Bank and in some cases are not subject to the same regulatory restrictions as are the Company and the Bank.
Professional Development: Employee development is emphasized and extensive training and development opportunities are provided. Opportunities made available to employees may include participation in industry seminars, industry certificate programs, and advanced industry education at regional or national banking schools. The Company has also developed an in-house program targeted to the development of future leaders.
Opportunities made available to employees may include participation in industry seminars, industry certificate programs, and advanced industry education at regional or national banking schools. The Company has also developed an in- The First Bancorp - 2023 Form 10-K - Page 2 house program targeted to the development of future leaders.
Dodd-Frank Wall Street Reform and Consumer Protection Act: The Dodd-Frank Act, enacted on July 21, 2010, resulted in broad changes to the U.S. financial system and was the most significant financial reform legislation enacted since the 1930s.
"Cybersecurity" for a discussion of our cybersecurity risk management and strategy and oversight of risks from cybersecurity threats. Other Dodd-Frank Wall Street Reform and Consumer Protection Act: The Dodd-Frank Act, enacted on July 21, 2010, resulted in broad changes to the U.S. financial system and was the most significant financial reform legislation enacted since the 1930s.
The Federal Reserve Board's guidelines impose substantially similar leverage capital requirements on BHCs on a consolidated basis. It is possible that banking regulators may increase minimum capital requirements for banks should economic conditions worsen.
The Federal Reserve Board's guidelines impose substantially similar leverage capital requirements on BHCs on a consolidated basis. It is possible that banking regulators may increase minimum capital requirements for banks should economic conditions worsen. Risk-Based Capital Requirements: OCC regulations also require national banks to maintain minimum capital levels as a percentage of a bank's risk-adjusted assets.
Most employees live and work in the State of Maine, with a limited number of employees working remotely outside of Maine. Talent Acquisition: To effectively operate, the Company requires employees with a variety of skill sets including customer service delivery, analytical ability, leadership, sales acumen and technical expertise. To attract new employees, the Company considers qualified applicants from all sources.
Talent Acquisition: To effectively operate, the Company requires employees with a variety of skill sets including customer service delivery, analytical ability, leadership, sales acumen and technical expertise. To attract new employees, the Company considers qualified applicants from all sources. Additionally, to both attract and retain employees the Company offers a combination of competitive pay and benefits.
Industry regulators have recently published changes to the definition of brokered deposits; the Company has reviewed new standards and believes it will have no impact upon its business. The Bank currently accepts brokered deposits. Real Estate Lending Standards: FDICIA requires the federal bank regulatory agencies to adopt uniform real estate lending standards.
Industry regulators published changes to the definition of brokered deposits that became effective April 1, 2021; the new standards have had no impact upon the Company's business. The Bank currently accepts brokered deposits. Real Estate Lending Standards: FDICIA requires the federal bank regulatory agencies to adopt uniform real estate lending standards.
Additionally, to both attract and retain employees the Company offers a combination of competitive pay and benefits. Eligible full-time employees and part-time employees who are scheduled to work at least 30 hours per week are provided a flexible benefit plan which includes group life, health, short and long-term disability insurance.
Eligible full-time employees and part-time employees who are scheduled to work at least 30 hours per week are provided a flexible benefit plan which includes group life, health, short and long-term disability insurance. Other benefits include paid vacation, paid sick and personal time and a 401(k) defined contribution plan for eligible employees.
This policy also applies to such areas as educational assistance, employee layoff and recall, social and recreational programs, employee facilities and employee termination. Through the ongoing development of our Affirmative Action plan, we not only comply with appropriate government regulations but also strive to make the best personnel decisions for our Company and our communities.
Through the ongoing development of this plan, we not only comply with appropriate government regulations but also strive to make the best personnel decisions for our Company and our communities. Professional Development: Employee development is emphasized and extensive training and development opportunities are provided.
Large out-of-state banks continue to be a presence; online and mobile banking have become widely accepted and opened the market to new forms of competition. Credit unions have continued to expand their membership and the scope of banking services offered. Non-banking entities such as brokerage houses, mortgage companies and insurance companies are offering very competitive products.
Large out-of-state banks continue to be a presence; adoption rates for online and mobile banking increased during the COVID-19 pandemic and further opened the market to new forms of competition. Credit unions have continued to expand their membership and the scope of banking services offered.
Other benefits include paid vacation, paid sick and personal time and a 401(k) defined contribution plan for eligible employees. The Company participates in annual salary surveys to ensure wages are competitive in the local market, and since 1994 has offered a comprehensive, annual incentive compensation plan to all employees.
The Company participates in annual salary surveys to ensure wages are competitive in the local market, and since 1994 has offered a comprehensive, annual incentive compensation plan to all employees. Diversity and Inclusion: The Company believes that our people are our most valuable asset.
Discrimination on the grounds of race, color, religion, sex, sexual orientation, gender identity, age, national origin, physical or mental disability, or other legally protected status is prohibited.
Discrimination on the grounds of race, color, religion, sex, sexual orientation, gender identity, age, national origin, physical or mental disability, or other legally protected status is prohibited. This policy of non-discrimination applies to all terms, conditions and privileges of employment including, but not limited to, hiring, employment training, placement, employee development, promotion, transfer, compensation and benefits.
Investment continues to be made in enhancing the Bank’s online and mobile offerings to both enhance service delivery and provide additional channels for customers to conduct business with the Bank. Management also makes decisions based upon, among other things, the knowledge of the Bank's employees regarding the communities and customers in the Bank's primary market area.
Investment continues to be made in enhancing the Bank’s online and mobile offerings to both enhance service delivery and provide additional channels for customers to conduct business with the Bank. Additional investment has been made in new software platforms for commercial and residential lending.
Removed
The First Bancorp - 2022 Form 10-K - Page 1 The Bank has worked and will continue to work to position itself to be competitive in its market area.
Added
Management also makes decisions based upon, among other things, the knowledge of the Bank's employees regarding the communities and customers in the Bank's primary market area. The individuals employed by the Bank, to a large extent, reside near the branch offices and thus are generally familiar with their communities and customers.
Removed
The Chief Information Officer regularly provides reports to Senior Management and the Board regarding the Company's ongoing assessment of cybersecurity threats and risks, data security programs designed to prevent and detect threats, attacks, incursions and breaches, as well as management, mitigation and remediation of potential, and any actual, cybersecurity and information technology risks and breaches.
Added
"Cybersecurity" for a discussion of our cybersecurity risk management and strategy, and oversight of risks from cybersecurity threats. Human Capital At December 31, 2023, the Company had 275 employees and full-time equivalency of 271 employees. Most employees live and work in the State of Maine, with a limited number of employees working remotely outside of Maine.
Removed
In addition, the Bank is assessed regularly against robust information security standards and provides training to employees on at least an annual basis. The Audit Committee and Management review reports from the Internal Auditor regarding their evaluation of the Company’s Information Technology department on a regular basis, as well as reports from various configuration and vulnerability assessments.
Added
This policy also applies to such areas as educational assistance, employee layoff and recall, social and recreational programs, employee facilities and employee termination.
Removed
The Bank has not experienced any information security breaches in the past three years. Included in our mitigation strategy is a comprehensive cybersecurity insurance policy.
Added
The Bank has in place a written Affirmative Action program to achieve full utilization of minorities, the handicapped, disabled veterans, Vietnam era veterans, and women at all levels of employment and in all segments of the work force.
Removed
The Board and Management recognize that cybersecurity matters, including expenditure related threats and the impact of incursions or breaches, may implicate the Company's disclosure under SEC rules and regulations, and intend to remain vigilant with respect to the cybersecurity aspects of these obligations. Human Capital At December 31, 2022, the Company had 279 employees and full-time equivalency of 273 employees.
Added
A confidential survey designed to measure employee engagement was conducted on the Company's behalf by a third party provider in the fourth quarter of 2023. Results indicated an above average level of engagement amongst the employee base. Succession Planning: The Company views succession planning as a priority and incorporates it into the strategic planning process.
Removed
This policy of non-discrimination applies to all terms, conditions and privileges of employment including, but not limited to, hiring, employment training, placement, employee The First Bancorp - 2022 Form 10-K - Page 2 development, promotion, transfer, compensation and benefits.
Added
On October 24, 2023 the OCC, the FRB, and the FDIC issued a joint final rule to strengthen and modernize regulations implementing the CRA which had last had major revisions in 1995. The new rule becomes effective on April 1, 2024 with compliance required starting January 1, 2026.
Removed
The Bank's primary regulator, the OCC, issued new CRA rules in June 2020; these rules were rescinded in December 2021, and the 1995 CRA rules jointly issued by the OCC, FRB, and FDIC were restored. The Company will monitor any changes in CRA rules.
Added
In July 2023, the SEC adopted a final rule requiring registrants, like the Company, to disclose material cybersecurity incidents they experience via a Current Report on Form 8-K. Disclosure is required within four business days of a cybersecurity incident being determined to be material. For additional information, see Item 1C.
Removed
The First Bancorp - 2022 Form 10-K - Page 4 Risk-Based Capital Requirements: OCC regulations also require national banks to maintain minimum capital levels as a percentage of a bank's risk-adjusted assets.
Removed
The First Bancorp - 2022 Form 10-K - Page 6 The Federal Deposit Insurance Act ("FDIA"), as amended by the Federal Deposit Insurance Reform Act and the Dodd-Frank Act, established a minimum reserve ratio of the DIF to estimated insured deposits of 1.15% prior to September 2020 and 1.35% thereafter.
Removed
Further, the Dodd-Frank Act required that, in setting assessments, the FDIC offset the effect of the increase in the minimum reserve ratio from 1.15% to 1.35% on banks with less than $10 billion in assets.
Removed
To satisfy these requirements, on March 15, 2016, the FDIC’s Board of Directors approved a final rule to increase the DIF’s reserve ratio to the statutorily required minimum ratio of 1.35% of estimated insured deposits. The final rule imposed a 4.5 basis points surcharge on the quarterly insurance assessments of large banks, which became effective on July 1, 2016.
Removed
The surcharge continued through September 30, 2018, when the reserve ratio reached 1.36% of insured deposits, exceeding the statutorily required minimum reserve ratio of 1.35%. Small banks, such as the Bank, were not required to pay the surcharge.
Removed
To offset the effect of the increase in the reserve ratio on small banks, those banks received credits for the portion of their assessments that helped to raise the reserve ratio from 1.15% to 1.35%.
Removed
Credits were to be applied automatically to reduce a small bank’s regular assessment in each quarter that the reserve ratio is at least 1.38%, up to the entire amount of the credit or assessment.
Removed
For the Bank, credits began to be applied in the third quarter of 2019, and the last of the credits were applied in the first quarter of 2020.
Item 1A. Risk Factors
Risk Factors — what could go wrong, per management
43 edited+7 added−20 removed138 unchanged
Item 1A. Risk Factors
Risk Factors — what could go wrong, per management
43 edited+7 added−20 removed138 unchanged
2022 filing
2023 filing
Biggest changeWe are subject to security, transactional and operational risks relating to the use of technology that could damage our reputation and our business. We rely heavily on communications and information systems to conduct our business, serving both internal and customer constituencies, and substantial investment has been made in these systems in recent years.
Biggest changeTo date, there has been no material adverse effect on our business or operations due to failure of keeping pace with technological change. We are subject to security, transactional and operational risks relating to the use of technology that could damage our reputation and our business.
The Bank maintains an allowance for loan losses based on, among other things, national and regional economic conditions, historical loss experience and delinquency trends. We make various assumptions and judgments about the collectability of our loan portfolio, including the creditworthiness of borrowers and the value of the real estate and other assets serving as collateral for the repayment of loans.
The Bank maintains an allowance for credit losses based on, among other things, national and regional economic conditions, historical loss experience and delinquency trends. We make various assumptions and judgments about the collectability of our loan portfolio, including the creditworthiness of borrowers and the value of the real estate and other assets serving as collateral for the repayment of loans.
Management's Discussion and Analysis of Financial Condition and Results of Operations, located elsewhere in this report, for further discussion related to our process for determining the appropriate level of the allowance for loan losses. The Maine foreclosure process can be lengthy and add additional losses for the Bank. Residential foreclosures in Maine occur through the judicial system.
Management's Discussion and Analysis of Financial Condition and Results of Operations, located elsewhere in this report, for further discussion related to our process for determining the appropriate level of the allowance for credit losses. The Maine foreclosure process can be lengthy and add additional losses for the Bank. Residential foreclosures in Maine occur through the judicial system.
Future disruptions, particularly those that impact the State of Maine's tourism and hospitality industries, or have negative events in the financial markets, that cause adverse changes in payment patterns, leading to increases in delinquencies and default rates, may impact our charge-offs and provision for credit losses.
Future disruptions, pandemic or otherwise, particularly those that impact the State of Maine's tourism and hospitality industries, or have negative events in the financial markets, that cause adverse changes in payment patterns, leading to increases in delinquencies and default rates, may impact our charge-offs and provision for credit losses.
Increases in the allowance for loan losses typically result in a decrease in net income and capital, and may have a material adverse effect on our financial condition, results of operations and cash flows. See the section captioned "Credit Risk Management and Allowance for Loan Losses" in Item 7.
Increases in the ACL typically result in a decrease in net income and capital, and may have a material adverse effect on our financial condition, results of operations, and cash flows. See the section captioned "Credit Risk Management and Allowance for Credit Losses" in Item 7.
In addition, regulatory agencies review the Bank's allowance for loan losses and may require additions to the allowance based on their judgment about information available to them at the time of their examination. Management could also decide that the allowance for loan losses should be increased.
In addition, regulatory agencies review the Bank's allowance for credit losses and may require additions to the allowance based on their judgment about information available to them at the time of their examination. Management could also decide that the allowance for credit losses should be increased.
In determining the size of the allowance for loan losses, we rely on our experience and our evaluation of economic conditions. However, we cannot predict loan losses with certainty, and we cannot provide assurance that charge-offs in future periods will not exceed the allowance for loan losses.
In determining the size of the allowance for credit losses, we rely on our experience and our evaluation of economic conditions. However, we cannot predict credit losses with certainty, and we cannot provide assurance that charge-offs in future periods will not exceed the allowance for credit losses.
If, as a result of general economic conditions, previously incorrect assumptions or an increase in defaulted loans, we determine that additional increases in the allowance for loan losses are necessary, we will incur additional provision expenses.
If, as a result of general economic conditions, previously incorrect assumptions or an increase in defaulted loans, we determine that additional increases in the allowance for credit losses are necessary, we will incur additional provision expenses.
Although we believe that our underwriting criteria are appropriate for the various kinds of loans we make, we may incur losses on loans that meet our underwriting criteria, and these losses may exceed the amounts set aside as reserves in our allowance for loan losses.
Although we believe that our underwriting criteria are appropriate for the various kinds of loans we make, we may incur losses on loans that meet our underwriting criteria, and these losses may exceed the amounts set aside as reserves in our allowance for credit losses.
Checking and savings, NOW, and money market deposit account balances and other forms of customer deposits can decrease when customers perceive alternative investments, such as the stock market, as providing a better risk/return tradeoff.
Checking and savings, NOW, and money market deposit account balances and other forms of customer deposits can decrease when customers perceive alternative investments, such as the stock market, as providing a better risk/return proposition.
The availability of qualified collateral on the Bank's balance sheet determines the level of advances available from FHLB and a deterioration in quality in the Bank's loan portfolio can adversely impact the availability of this source of funding, which could increase our funding costs and reduce our net interest income. Lack of loan demand may adversely impact net interest income.
The availability of qualified collateral on the Bank's balance sheet determines the level of advances available from FHLB and a deterioration in quality in the Bank's loan portfolio can adversely impact the availability of this source of funding, which could increase our funding costs and reduce our net interest income.
Our recent results may not be indicative of our future results. We may not be able to sustain our historical rate of growth, and may not even be able to grow our business at all. In addition, our recent growth may distort some of our historical financial ratios and statistics.
We may not be able to sustain our historical rate of growth, and may not even be able to grow our business at all. In addition, our recent growth may distort some of our historical financial ratios and statistics.
Our common stock price can fluctuate as a result of many factors which are beyond our control, including: • quarterly fluctuations in our operating and financial results; • operating results that vary from the expectations of investors; • changes in expectations as to our future financial performance, including financial estimates; • events negatively impacting the financial services industry which result in a general decline for the industry; • new laws or regulations or new interpretations of existing laws or regulations applicable to our business; • changes in accounting standards, policies, guidance, interpretations or principles; • general domestic economic and market conditions; and • declines in bank stock prices driven by macro-economic concerns.
Our common stock price can fluctuate as a result of many factors, some of which are beyond our control, including: • quarterly fluctuations in our operating and financial results; • operating results that vary from the expectations of investors; • changes in expectations as to our future financial performance, including financial estimates; • events negatively impacting the financial services industry which result in a general decline for the industry; The First Bancorp - 2023 Form 10-K - Page 16 • new laws or regulations or new interpretations of existing laws or regulations applicable to our business; • changes in accounting standards, policies, guidance, interpretations or principles; • general domestic economic and market conditions; and • declines in bank stock prices driven by macro-economic concerns.
We operate in a highly regulated environment and may be adversely affected by changes in law and regulations. Bank holding companies and nationally chartered banks operate in a highly regulated environment and are subject to supervision and examination by various regulatory agencies. The cost of compliance with regulatory requirements may adversely affect our results of operations or financial condition.
Bank holding companies and nationally chartered banks operate in a highly regulated environment and are subject to supervision and examination by various regulatory agencies. The cost of compliance with regulatory requirements may adversely affect our results of operations or financial condition.
Specific examples of matters being evaluated as part of the investment decision or recommendation by certain investors and influencers include the business risks of climate change and the adequacy of companies’ responses to climate change, diversity of a company's management and/or board of directors, community involvement and charitable giving, and the inclusion of ESG factors in the determination of executive compensation.
Specific examples of matters being evaluated as part of the investment decision or recommendation by certain investors and influencers include the business risks of climate change and the adequacy of companies’ responses to climate change, diversity of a company's The First Bancorp - 2023 Form 10-K - Page 17 management and/or board of directors, community involvement and charitable giving, and the inclusion of ESG factors in the determination of executive compensation.
Interest rates are highly sensitive to many factors that are beyond our control, including general economic conditions, demand for loans, securities and deposits, and policies of various governmental and regulatory agencies and, in particular, the Board of Governors of the Federal Reserve System.
Interest rates are highly sensitive to many factors that are beyond our control, including general economic conditions, demand for loans, securities and deposits, and policies of various governmental and The First Bancorp - 2023 Form 10-K - Page 10 regulatory agencies and, in particular, the Board of Governors of the Federal Reserve System.
These conditions include short-term and long-term interest rates, inflation, money supply, political issues, geopolitical events, legislative and regulatory changes, fluctuations in both debt and equity capital markets, broad trends in industry and finance, unemployment and investor confidence, all of which are beyond our control.
These conditions include short-term and long-term interest rates, inflation, money supply, political issues, geopolitical events such as the ongoing conflicts in Ukraine and the Middle East, legislative and regulatory changes, fluctuations in both debt and equity capital markets, broad trends in industry and finance, unemployment and investor confidence, all of which are beyond our control.
If we issue preferred stock in the future that has a preference over our common stock with respect to the payment of dividends or upon our liquidation, The First Bancorp - 2022 Form 10-K - Page 18 dissolution or winding up, or if we issue preferred stock with voting rights that dilute the voting power of our common stock, the rights of holders of our common stock and the market price of our common stock could be adversely affected.
If we issue preferred stock in the future that has a preference over our common stock with respect to the payment of dividends or upon our liquidation, dissolution or winding up, or if we issue preferred stock with voting rights that dilute the voting power of our common stock, the rights of holders of our common stock and the market price of our common stock could be adversely affected.
Should this happen, net interest income may be negatively impacted if loans are replaced by lower-yielding investment securities or if the balance sheet is allowed to shrink. The First Bancorp - 2022 Form 10-K - Page 12 Operational Risk The soundness of other financial institutions could adversely affect us.
Should this happen, net interest income may be negatively impacted if loans are replaced by lower-yielding investment securities or if the balance sheet is allowed to shrink. Operational Risk The soundness of other financial institutions could adversely affect us.
For the year ended December 31, 2022, the average monthly trading volume of our common stock was 317,421 shares, or approximately 2.88% of the average number of our outstanding common shares. Due to the limited trading volume in our common stock, the intraday spread between bid and ask prices of the shares can be quite high.
For the year ended December 31, 2023, the average monthly trading volume of our common stock was 294,570 shares, or approximately 2.66% of the average number of our outstanding common shares. Due to the limited trading volume in our common stock, the intraday spread between bid and ask prices of the shares can be quite high.
If customers move money out of bank deposits and into other investments, we could lose a relatively low-cost source of funds, increasing our funding costs and reducing our net interest income and net income. Advances from the FHLB are currently a relatively low-cost source of funding.
If customers move money out of bank deposits and into other investments, we could lose a relatively low-cost source of funds, increasing our funding costs and reducing our net interest income and net income. Advances from the FHLB are typically a reliable source of funding and often less expensive than other types of wholesale funding.
Banking regulators and other supervisory authorities, investors and other stakeholders have increasingly viewed financial institutions as important in helping to address the risks related to climate change both directly and with respect to their customers.
The First Bancorp - 2023 Form 10-K - Page 14 Banking regulators and other supervisory authorities, investors and other stakeholders have increasingly viewed financial institutions as important in helping to address the risks related to climate change both directly and with respect to their customers.
As a result, repayment of these loans may, to a greater extent than residential loans, be subject to adverse conditions in the real estate market or the broader economy. Our allowance for loan losses may be insufficient and require additional provision from earnings.
As a result, repayment of these loans may, to a greater extent than residential loans, be subject to adverse conditions in the real estate market or the broader economy. The First Bancorp - 2023 Form 10-K - Page 9 Our Allowance for Credit Losses may be insufficient and require additional provision from earnings.
Our mortgage-backed bond portfolio may be subject to extension risk as interest rates rise, extending the average life of the bonds. As of December 31, 2022, we had $284.5 million and $393.9 million in available for sale and held to maturity investment securities, respectively.
Our mortgage-backed bond portfolio may be subject to extension risk as interest rates rise, extending the average life of the bonds. As of December 31, 2023, we had $282.1 million and $385.7 million in available for sale and held to maturity investment securities, respectively.
The First Bancorp - 2022 Form 10-K - Page 11 If the interest rates paid on deposits and other borrowings increase at a faster rate than the interest rates received on loans and other investments, our net interest income, and therefore our earnings, could be adversely affected.
If the interest rates paid on deposits and other borrowings increase at a faster rate than the interest rates received on loans and other investments, our net interest income, and therefore our earnings, could be adversely affected.
There are inherent risks associated with our lending activities. These risks include, among other things, the impact of changes in interest rates and changes in the economic conditions in the markets where we operate as well as those across the United States and abroad.
These risks include, among other things, the impact of changes in interest rates and changes in the economic conditions in the markets where we operate as well as those across the United States and abroad.
If charge-offs in future periods exceed the allowance for loan losses, we will need additional provisions to increase the allowance for loan losses. Furthermore, growth in the loan portfolio would generally lead to an increase in the provision for loan losses. Finally, our industry is the midst of a methodology change in the calculation of the allowance for loan losses.
If charge-offs in future periods exceed the allowance for credit losses, we will need additional provisions to increase the allowance for credit losses. Furthermore, growth in the loan portfolio would generally lead to an increase in the provision for credit losses.
The price of our common stock on the NASDAQ Global Select Market constantly changes. Price fluctuations may or may not track the general direction of equity markets, and could be significant. We expect the market price of our common stock will continue to fluctuate.
Price fluctuations may or may not track the general direction of equity markets, and could be significant. We expect the market price of our common stock will continue to fluctuate. Holders of our common stock will be subject to the risk of volatility and significant changes in prices.
There can be no assurance that a more robust, active or economical trading market for our common stock will develop. The market value and liquidity of our common stock may, as a result, be adversely affected. The First Bancorp - 2022 Form 10-K - Page 17 The price of our common stock may fluctuate.
There can be no assurance that a more robust, active or economical trading market for our common stock will develop. The market value and liquidity of our common stock may, as a result, be adversely affected. The price of our common stock may fluctuate. The price of our common stock on the NASDAQ Global Select Market constantly changes.
Our loan portfolio includes commercial, commercial real estate and commercial construction loans that may have higher risks than other types of loans. Our commercial, commercial real estate, and commercial construction loans at December 31, 2022 and 2021 were $1.11 billion and $920.1 million, or 58.1% and 55.9% of total loans, respectively.
Our loan portfolio includes commercial, commercial real estate and commercial construction loans that may have higher risks than other types of loans. Our commercial, commercial real estate, and commercial construction loans at December 31, 2023 and 2022 were $760.3 million and $669.9 million, or 35.8% and 35.0% of total loans, respectively.
Ongoing legislative or regulatory The First Bancorp - 2022 Form 10-K - Page 15 uncertainties and changes regarding climate risk management and practices may result in higher regulatory, compliance, credit and reputational risks and costs, and may affect the activities in which we engage and the products that we offer.
Ongoing legislative or regulatory uncertainties and changes regarding climate risk management and practices may result in higher regulatory, compliance, credit and reputational risks and costs, and may affect the activities in which we engage and the products that we offer. Our recent results may not be indicative of our future results.
Loan demand in the Bank's market area may be limited during periods of weak economic conditions. This could have the greatest impact on the commercial loan portfolio.
The First Bancorp - 2023 Form 10-K - Page 11 Lack of loan demand may adversely impact net interest income. Loan demand in the Bank's market area may be limited during periods of weak economic conditions. This could have the greatest impact on the commercial loan portfolio.
While the Company is not aware of any such events, remediation of any identified limitations may be ineffective in improving internal controls. We continually encounter technological change that may be difficult (costly) to keep up with. The financial services industry is continually undergoing technological change with frequent introductions of new technology-driven products and services.
While the Company is not aware of any such events, remediation of any identified limitations may be ineffective in improving internal controls. The First Bancorp - 2023 Form 10-K - Page 12 We continually encounter technological change that may be difficult (costly) to keep up with.
The effective use of technology increases efficiency and enables financial institutions to better serve customers and to reduce costs. Our future success depends, in part, upon our ability to address the needs of our customers by using technology to provide products and services that will satisfy customer demands, as well as to create additional efficiencies in our operations.
Our future success depends, in part, upon our ability to address the needs of our customers by using technology to provide products and services that will satisfy customer demands, as well as to create additional efficiencies in our operations. Our largest competitors have substantially greater resources to invest in technological improvements.
However fraud can still occur online or using fallback transactions, creating potential risk for this type of liability. The First Bancorp - 2022 Form 10-K - Page 14 We are subject to claims and litigation that may impact our earnings and/or our reputation.
In the normal course of business the Bank issues EMV/Chip debit cards to its customers to keep this risk as low as possible. However fraud can still occur online or using fallback transactions, creating potential risk for this type of liability. We are subject to claims and litigation that may impact our earnings and/or our reputation.
Any failure, interruption or breach in security of these systems could result in failures or disruptions in our customer relationship management, general ledger, deposit, loan, and other systems.
We rely heavily on communications and information systems to conduct our business, serving both internal and customer constituencies, and substantial investment has been made in these systems in recent years. Any failure, interruption or breach in security of these systems could result in failures or disruptions in our customer relationship management, general ledger, deposit, loan, and other systems.
The Company and Bank complied with the fully phased requirements well in advance of the completion date and continued to do so as of December 31, 2022. In addition, in a weak economic environment, bank regulators may impose capital requirements that are more stringent than those required by applicable existing regulations.
In addition, in a weak economic environment, bank regulators may impose capital requirements that are more stringent than those required by applicable existing regulations.
If any of these risks were to materialize, our business, financial condition or results of operations could be materially and adversely affected. Risk Associated With Our Business COVID-19 Pandemic Our operations, business, and financial condition have been and may continue to be impacted by the COVID-19 pandemic.
If any of these risks were to materialize, our business, financial condition or results of operations could be materially and adversely affected. Risk Associated With Our Business Credit Risks We are subject to credit risk and may incur losses if loans are not repaid. There are inherent risks associated with our lending activities.
Since the introduction of EMV or Chip cards, we have had the ability to charge back fraudulent transactions to the acquiring merchant if that merchant does not have an EMV capable terminal. In the normal course of business the Bank issues EMV/Chip debit cards to its customers to keep this risk as low as possible.
Since the introduction of EMV or Chip cards, we have had the ability to charge back fraudulent transactions to the acquiring merchant if that merchant does not The First Bancorp - 2023 Form 10-K - Page 13 have an EMV capable terminal.
Failure to successfully keep pace with technological change affecting the financial services industry, and increased costs due to efforts to keep pace with change, could have a material adverse effect on us. To date, there has been no material adverse effect on our business or operations due to failure of keeping pace with technological change.
We may not be able to effectively implement new technology-driven products and services or be successful in marketing these products and services to our customers. Failure to successfully keep pace with technological change affecting the financial services industry, and increased costs due to efforts to keep pace with change, could have a material adverse effect on us.
The Dodd-Frank Act created the Consumer Financial Protection Bureau and tightened capital standards, and will continue to result in new laws and regulations that are expected to increase our costs of operations. The Dodd-Frank Act has significantly changed the current bank regulatory structure and affected the lending, deposit, investment, trading and operating activities of financial institutions and their holding companies.
The Dodd-Frank Act significantly changed the current bank regulatory structure and affected the lending, deposit, investment, trading and operating activities of financial institutions and their holding companies.
Higher credit or collateral related losses, or decreases in the value of our investment portfolio or demand for our products and services, could negatively impact our financial condition or results of operations. Reforms to London Interbank Offered Rate ("LIBOR") and other potential replacement indices or alternatives, and related uncertainty, may adversely affect our business, financial condition or results of operations.
Higher credit or collateral related losses, or decreases in the value of our investment portfolio or demand for our products and services, could negatively impact our financial condition or results of operations. We operate in a highly regulated environment and may be adversely affected by changes in law and regulations.
In response the Federal Reserve enacted a series of interest rate increases and other actions designed to rein in inflation, introducing the risk of economic slowdown or recession. COVID-19 has entered into an endemic phase, however, further mutations of the virus could disrupt the economic recovery with consequent negative impacts on our loan portfolio, and our operating results.
In response the Federal Reserve enacted a series of interest rate increases and other actions designed to rein in inflation, and in doing so introduced a risk of economic slowdown or recession if interest rates were to rise too high,or remain elevated for too long that continues to the present.
Removed
The COVID-19 outbreak, which evolved into a worldwide pandemic, has had a myriad of adverse impacts upon society as a whole. The spread of COVID-19 has caused illness, quarantines, cancellation of events and travel, business and school shutdowns, reduction in business activity and financial transactions, supply chain interruptions and overall economic and financial market instability.
Added
The Bank adopted ASC 326, the current expected credit loss ("CECL") standard in the first quarter of 2023, and increased its Allowance for Credit Losses ("ACL") via a one-time charge to retained earnings.
Removed
In response to the COVID-19 pandemic, Federal, State and Local governments took preventative or protective actions, such as imposing restrictions on travel and business operations, advising or requiring individuals to limit or forgo their time outside of their homes, and ordering temporary closures of businesses that have been deemed to be non-essential.
Added
The financial services industry is continually undergoing technological change with frequent introductions of new technology-driven products and services. The effective use of technology increases efficiency and enables financial institutions to better serve customers and to reduce costs.
Removed
The restrictions and other consequences of the pandemic have resulted, and may continue to result, in significant adverse effects for many different types of businesses, including, among others, those in the retail sales, travel, hospitality and food and beverage industries, and resulted in a significant number of layoffs and furloughs of employees nationwide and in the markets in which we operate.
Added
Unprecedented levels of monetary stimulus from the Federal Reserve and fiscal stimulus from the Federal government were enacted ultimately leading to levels of inflationary pressure not seen in the US economy since the 1980's.
Removed
Future impacts of the COVID-19 pandemic on our business are uncertain and outside our control, could be widespread and material, and may include, or exacerbate, among other consequences, the following: • unavailability of key personnel necessary to conduct our business activities; • disruption resulting from having a significant percentage of employees work remotely; • repeated or sustained closures of our branch lobbies; • declines in demand for loans and other banking services; • reduced consumer spending due to job losses or other impacts of the virus; • adverse conditions in financial markets may have a negative impact on our investment portfolio; • adverse economic conditions result in a slowdown in municipal tax collections potentially impacting municipal loans; • investments, and deposit balances; • decline in credit quality of our loan portfolio leading to increased provisions for loan losses; • declines in the value of loan collateral, including residential and commercial real estate; • decline in the liquidity of borrowers and guarantors impairing their ability to honor financial commitments; or • actions of governmental entities to limit business activities.
Added
The First Bancorp - 2023 Form 10-K - Page 15 The Dodd-Frank Act created the Consumer Financial Protection Bureau and tightened capital standards, and continues to result in new laws and regulations that may impact our revenues or increase our costs of operations.
Removed
The First Bancorp - 2022 Form 10-K - Page 9 The significant contribution of tourism and hospitality businesses to the State of Maine's overall economy, and the Company's primary market areas in particular, may result in a disproportionate effect relative to other regions.
Added
The Company and Bank complied with the fully phased requirements well in advance of the completion date and continued to do so as of December 31, 2023. In July 2023 US bank regulators jointly published proposed rulemaking for Basel III Finalization, also referred to as Basel III Endgame or B3E.
Removed
These factors, together or in combination with other events or occurrences related to COVID-19 that may not yet be known or anticipated, may materially and adversely affect our business, financial condition and results of operations. Credit Risks We are subject to credit risk and may incur losses if loans are not repaid.
Added
The proposal significantly alters the regulatory capital regime for US banks, generally increasing required capital levels for banks with $100 billion or more in assets.
Removed
The incurred loss model presently in use will be replaced by a current expected credit loss model (“CECL”). The effective implementation date The First Bancorp - 2022 Form 10-K - Page 10 of CECL for the Company had been January 1, 2020.
Added
Implementation of B3E could have unintended consequences on regional and community banks whose total assets are below threshold, such as the Bank, and result in lower returns on equity, require additional capital, limit lending activities, or limit distributions such as dividends.
Removed
In October 2019, the Financial Accounting Standards Board ("FASB") approved an amendment to ASU 2016-13, the CECL standard, whereby the effective date of ASU 2016-13 was delayed for companies that qualify as a Smaller Reporting Companies ("SRC"). The Company qualified as an SRC and as such our effective implementation date for CECL is now January 1, 2023.
Removed
Substantial progress towards a formal estimate of a required allowance for credit losses to meet the CECL standard has been made, and the Company expects that an increase in the level may be necessary.
Removed
As allowed by CECL implementation rules, any such day one increase will be a one-time capital event with an option to phase-in over three years for regulatory capital purposes, and is not presently expected to materially and adversely impact the Company’s earnings upon adoption.
Removed
Our largest competitors have substantially greater resources to invest in technological The First Bancorp - 2022 Form 10-K - Page 13 improvements. We may not be able to effectively implement new technology-driven products and services or be successful in marketing these products and services to our customers.
Removed
COVID-19 resulted in a broad-based economic slowdown as governments at all levels implemented measures to protect public health that resulted in curtailment of activity across many sectors of the general economy. Unemployment initially rose to record levels and unprecedented levels of monetary stimulus from the Federal Reserve and fiscal stimulus from the Federal government were enacted.
Removed
As progress towards prevention and treatment of COVID-19 was made, restrictions were lifted and near normal economic activity returned. Increased demand for goods coupled with supply chain disruptions contributed to levels of inflationary pressure not seen in the US economy since the 1980's.
Removed
In July 2017, the U.K. Financial Conduct Authority announced that after 2021 it will no longer require banks to submit rates for LIBOR. The U.S Federal Reserve formed the Alternative Reference Rate Committee ("ARRC") to develop a LIBOR alternative.
Removed
ARRC recommended the Secured Overnight Funding Rate ("SOFR") as a replacement for LIBOR, and a market for SOFR based transactions has developed along with related protocols.
Removed
In November 2020, the administrator of LIBOR announced that it would cease to publish one week and two month US Dollar (USD) LIBOR settings immediately after December 31, 2021, and remaining USD LIBOR tenors after June 30, 2023. US banking regulators have required new contracts written subsequent to December 31, 2021 to utilize a reference rate other than LIBOR.
Removed
The Company and Bank have adopted the one month and three month tenors of SOFR published by the Chicago Mercantile Exchange as replacement reference rates for LIBOR; our various counterparties have indicated SOFR is a suitable replacement. Contracts in place prior to December 31, 2021 are expected to be addressed and appropriate amendments executed prior to June 30, 2023.
Removed
This timeline could be hastened in the event the pending discontinuance of LIBOR quotes is found to have a material, adverse effect on the value of, return on and trading market for our financial assets and liabilities that are based on or are linked to LIBOR, including our hedge contracts, or our financial condition or results of operations.
Removed
In addition, we cannot assure that we and other market The First Bancorp - 2022 Form 10-K - Page 16 participants will adequately be prepared for the final discontinuation of LIBOR or other benchmarks, and such discontinuation may have an unpredictable impact on our contracts and/or cause significant disruption to financial markets that are relevant to our business, which may have a material, adverse effect on our financial condition or results of operations.
Removed
Holders of our common stock will be subject to the risk of volatility and significant changes in prices.
Item 2. Properties
Properties — owned and leased real estate
1 edited+0 added−0 removed3 unchanged
Item 2. Properties
Properties — owned and leased real estate
1 edited+0 added−0 removed3 unchanged
2022 filing
2023 filing
Biggest changeThe Company also owns undeveloped land in Belfast. Management believes that the Bank's current facilities are suitable and adequate in light of its current needs and its anticipated needs over the near term. The First Bancorp - 2022 Form 10-K - Page 19
Biggest changeThe Company also owns undeveloped land in Belfast. Management believes that the Bank's current facilities are suitable and adequate in light of its current needs and its anticipated needs over the near term.
Item 3. Legal Proceedings
Legal Proceedings — active lawsuits and investigations
1 edited+0 added−0 removed1 unchanged
Item 3. Legal Proceedings
Legal Proceedings — active lawsuits and investigations
1 edited+0 added−0 removed1 unchanged
2022 filing
2023 filing
Biggest changeNone of these proceedings is expected to have a material effect on the financial condition of the Company or of the Bank. ITEM 4. Mine Safety Disclosures Not applicable.
Biggest changeNone of these proceedings is expected to have a material effect on the financial condition of the Company or of the Bank.
Item 5. Market for Registrant's Common Equity
Market for Common Equity — stock, dividends, buybacks
3 edited+7 added−0 removed0 unchanged
Item 5. Market for Registrant's Common Equity
Market for Common Equity — stock, dividends, buybacks
3 edited+7 added−0 removed0 unchanged
2022 filing
2023 filing
Biggest changeRepurchase of Shares and Use of Proceeds The Company made the following repurchases of its common stock during the year ended December 31, 2022: Month Shares Purchased Average Price Per Share Total shares purchased as part of publicly announced repurchase plans Maximum number of shares that may be purchased under the plans January 2022 3,233 $ 32.56 — — February 2022 5,211 31.76 — — March 2022 — — — — April 2022 196 29.14 — — May 2022 — — — — June 2022 — — — — July 2022 — — — — August 2022 — — — — September 2022 — — — — October 2022 — — — — November 2022 — — — — December 2022 — — — — 8,640 $ 31.15 — — Unregistered Sales of Equity Securities None The First Bancorp - 2022 Form 10-K - Page 20 Securities Authorized for Issuance Under Equity Compensation Plans The following table lists the amount and weighted-average exercise price of securities authorized for issuance under equity compensation plans: Number of securities to be issued upon exercise of outstanding options, warrants and rights Weighted-average exercise price of outstanding options, warrants and rights Number of securities remaining available for future issuance under equity compensation plans (excluding securities reflected in column) Plan category Equity compensation plans approved by security holders — $ — 331,066 Equity compensation plans not approved by security holders — — — Total — $ — 331,066 Performance Graph Set forth below is a line graph comparing the five-year cumulative total return of $100.00 invested in the Company's common stock ("FNLC"), assuming reinvestment of all cash dividends and retention of all stock dividends, with a comparable amount invested in the Standard & Poor's 500 Index ("S&P 500") and the NASDAQ Combined Bank Index ("NASD Bank").
Biggest changeThe Company made the following repurchases of its common stock during the year ended December 31, 2023: Month Shares Purchased Average Price Per Share Total shares purchased as part of publicly announced repurchase plans Maximum number of shares that may be purchased under the plans January 2023 8,090 $ 29.41 — — February 2023 — — — — March 2023 — — — — April 2023 — — — — May 2023 555 23.22 — — June 2023 — — — — July 2023 — — — — August 2023 — — — — September 2023 — — — — October 2023 — — — — November 2023 — — — — December 2023 — — — — 8,645 $ 26.32 — — Unregistered Sales of Equity Securities None Securities Authorized for Issuance Under Equity Compensation Plans Please see Item 12.
ITEM 5. Market for Registrant's Common Equity, Related Shareholder Matters and Issuer Purchases of Equity Securities The last transaction in the Company's stock on NASDAQ during 2022 was on December 31 at $29.94 per share. There are no warrants outstanding with respect to the Company's common stock and the Company has no securities outstanding which are convertible into common equity.
ITEM 5. Market for Registrant's Common Equity, Related Shareholder Matters and Issuer Purchases of Equity Securities Market Information and Holders of Record Shares of the Company's common stock trade on NASDAQ under the symbol "FNLC". The last transaction in the Company's stock on NASDAQ during 2023 was on December 31 at $28.22 per share.
The NASD Bank index is a capitalization-weighted index designed to measure the performance of all NASDAQ stocks in the banking sector. 2017 2018 2019 2020 2021 2022 FNLC $100.00 $100.20 $120.36 $106.45 $137.59 $137.01 S&P 500 $100.00 $95.61 $125.71 $148.82 $191.50 $156.78 NASD Bank $100.00 $83.83 $104.27 $96.45 $137.83 $112.53 The First Bancorp - 2022 Form 10-K - Page 21 ITEM 6.
The NASD Bank index is a capitalization-weighted index designed to measure the performance of all NASDAQ stocks in the banking sector. 2018 2019 2020 2021 2022 2023 FNLC $100.00 $120.13 $106.24 $137.32 $136.75 $135.95 S&P 500 $100.00 $131.48 $155.66 $200.30 $163.98 $207.05 NASD Bank $100.00 $124.38 $115.05 $164.42 $134.23 $129.62 The First Bancorp - 2023 Form 10-K - Page 21 ITEM 6.
Added
As of February 15, 2024, there were 4,870 stockholders of record of our common stock. There are no warrants outstanding with respect to the Company's common stock and the Company has no securities outstanding which are convertible into common equity.
Added
Dividend Policy The Board declared a quarterly dividend of $0.34 per share on the Company's common stock for the first quarter of the year ended December 31, 2023 and quarterly dividends of $0.35 per share on the Company's common stock for each of the second, third and fourth quarters of the year ended December 31, 2023, resulting in total dividends for the year ended December 31, 2023 of $15.4 million.
Added
The Company expects to continue its policy of paying regular cash dividends on a quarterly basis. However, the quarterly dividends on our common stock are subject to the discretion of the Board and dependent on, among other things, our financial condition, results of operations, capital requirements and other factors that our Board may deem relevant.
Added
In addition, dividends from the Bank are the principal source of funds for the payment of dividends to the Company. See "Supervision and Regulation" in Item 1, and Item 1A, "Risk Factors" for additional information regarding the regulatory restrictions on the payment of dividends by the Bank.
Added
Repurchase of Shares and Use of Proceeds The Company does not currently have an active share repurchase program, nor does it have any active trading plans. In the absence of any programs or plans, share repurchase activity is typically limited and consists of shares repurchased from employees for purposes of paying tax obligations on equity grants that have vested.
Added
Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters under Part III of this Annual Report on Form 10-K for the information required by Item 201(d) of Regulation S-K.
Added
The First Bancorp - 2023 Form 10-K - Page 20 Performance Graph Set forth below is a line graph comparing the five-year cumulative total return of $100.00 invested in the Company's common stock ("FNLC"), assuming reinvestment of all cash dividends and retention of all stock dividends, with a comparable amount invested in the Standard & Poor's 500 Index ("S&P 500") and the NASDAQ Combined Bank Index ("NASD Bank").
Item 7. Management's Discussion & Analysis
Management's Discussion & Analysis (MD&A) — revenue / margin commentary
167 edited+67 added−113 removed46 unchanged
Item 7. Management's Discussion & Analysis
Management's Discussion & Analysis (MD&A) — revenue / margin commentary
167 edited+67 added−113 removed46 unchanged
2022 filing
2023 filing
Biggest changeUnrecognized interest on non-accrual loans is not included in the amount presented, but the average balance of non-accrual loans is included in the denominator when calculating yields. 2022 2021 Dollars in thousands Amount of interest Average Yield/Rate Amount of interest Average Yield/Rate Interest-earning assets Interest-bearing deposits $ 315 1.43 % $ 72 0.13 % Investment securities 18,928 2.76 % 16,846 2.42 % Loans held for sale 11 2.48 % 22 0.98 % Loans 76,107 4.26 % 62,466 3.98 % Total interest-earning assets 95,361 3.82 % 79,406 3.41 % Interest-bearing liabilities Deposits 15,359 0.80 % 7,314 0.44 % Borrowings 1,510 1.21 % 3,464 1.51 % Total interest-bearing liabilities 16,869 0.83 % 10,778 0.57 % Net interest income $ 78,492 $ 68,628 Interest rate spread 2.99 % 2.84 % Net interest margin 3.15 % 2.95 % The First Bancorp - 2022 Form 10-K - Page 28 Average Daily Balance Sheets The following table shows the Company's average daily balance sheets for the years ended December 31, 2022 and 2021: Years ended December 31, Dollars in thousands 2022 2021 Assets Cash and cash equivalents $ 23,253 $ 23,655 Interest-bearing deposits in other banks 22,089 57,208 Securities available for sale (includes tax exempt securities of $35,759 in 2022 and $34,762 in 2021) 302,019 309,131 Securities to be held to maturity (included tax exempt securities of $254,504 in 2022 and $251,301 in 2021) 379,762 376,991 Restricted equity securities, at cost 4,761 9,268 Loans held for sale (fair value approximates cost) 443 2,248 Loans 1,784,521 1,569,398 Allowance for loan losses (16,103) (17,013) Net loans 1,768,418 1,552,385 Accrued interest receivable 9,557 9,150 Premises and equipment, net 28,828 28,904 Other real estate owned 9 243 Goodwill 30,646 30,646 Other assets 54,250 46,227 Total Assets $ 2,624,035 $ 2,446,056 Liabilities & Shareholders' Equity Demand deposits $ 337,121 $ 307,508 NOW deposits 635,172 572,091 Money market deposits 204,279 182,000 Savings deposits 373,604 335,677 Certificates of deposit 695,311 561,080 Total deposits 2,245,487 1,958,356 Borrowed funds – short term 124,830 173,717 Borrowed funds – long term 84 55,091 Dividends payable 1,105 807 Other liabilities 18,008 21,521 Total Liabilities 2,389,514 2,209,492 Shareholders' Equity: Common stock 110 110 Additional paid-in capital 67,566 66,028 Retained earnings 195,673 171,455 Net unrealized gain (loss) on securities available for sale (29,052) 1,286 Net unrealized gain (loss) on cash flow hedging derivative instruments 192 (2,230) Net unrealized loss on securities transferred from available for sale to held to maturity (74) (113) Net unrealized gain on postretirement benefit costs 106 28 Total Shareholders' Equity 234,521 236,564 Total Liabilities & Shareholders' Equity $ 2,624,035 $ 2,446,056 The First Bancorp - 2022 Form 10-K - Page 29 Non-Interest Income Non-interest income in 2022 was $16.9 million, a decrease of $2.5 million or 12.9% from the $19.4 million reported in 2021.
Biggest changeUnrecognized interest on non-accrual loans is not included in the amount presented, but the average balance of non-accrual loans is included in the denominator when calculating yields. 2023 2022 Dollars in thousands Amount of interest Average Yield/Rate Amount of interest Average Yield/Rate Interest-earning assets Interest-bearing deposits $ 517 5.39 % $ 315 1.43 % Investment securities 21,518 3.16 % 18,928 2.76 % Loans held for sale — — % 11 2.48 % Loans 108,783 5.34 % 76,107 4.26 % Total interest-earning assets 130,818 4.80 % 95,361 3.82 % Interest-bearing liabilities Deposits 61,004 2.78 % 15,359 0.80 % Borrowings 1,963 1.87 % 1,510 1.21 % Total interest-bearing liabilities 62,967 2.73 % 16,869 0.83 % Net interest income $ 67,851 $ 78,492 Interest rate spread 2.06 % 2.99 % Net interest margin 2.49 % 3.15 % The First Bancorp - 2023 Form 10-K - Page 28 Average Daily Balance Sheets The following table shows the Company's average daily balance sheets for the years ended December 31, 2023 and 2022: For the years ended December 31, Dollars in thousands 2023 2022 Assets Cash and cash equivalents $ 24,572 $ 23,253 Interest-bearing deposits in other banks 9,600 22,089 Securities available for sale (includes tax exempt securities of $40,413 in 2023 and $35,759 in 2022) 286,518 302,019 Securities to be held to maturity, net of allowance for credit losses of $434 at December 31, 2023 1 (included tax exempt securities of $256,835 in 2023 and $254,504 in 2022) 389,676 379,762 Restricted equity securities, at cost 4,577 4,761 Loans held for sale (fair value approximates cost) 38 443 Loans 2,037,377 1,784,521 Allowance for credit losses (21,990) (16,103) Net loans 2,015,387 1,768,418 Accrued interest receivable 13,082 9,557 Premises and equipment, net 28,299 28,828 Other real estate owned 6 9 Goodwill 30,646 30,646 Other assets 64,958 54,250 Total Assets $ 2,867,359 $ 2,624,035 Liabilities & Shareholders' Equity Demand deposits $ 304,081 $ 337,121 NOW deposits 625,626 635,172 Money market deposits 228,562 204,279 Savings deposits 330,807 373,604 Certificates of deposit 1,013,307 695,311 Total deposits 2,502,383 2,245,487 Borrowed funds – short term 104,999 124,830 Borrowed funds – long term — 84 Dividends payable 983 1,105 Other liabilities 24,514 18,008 Total Liabilities 2,632,879 2,389,514 Shareholders' Equity: Common stock 111 110 Additional paid-in capital 68,975 67,566 Retained earnings 210,266 195,673 Net unrealized loss on securities available for sale (45,339) (29,052) Net unrealized gain on cash flow hedging derivative instruments 253 192 Net unrealized loss on securities transferred from available for sale to held to maturity (59) (74) Net unrealized gain on postretirement benefit costs 273 106 Total Shareholders' Equity 234,480 234,521 Total Liabilities & Shareholders' Equity $ 2,867,359 $ 2,624,035 1 December 31, 2022 had no ACL.
A loan is "in the process of collection" if collection of the loan is proceeding in due course either (1) through legal action, including judgment enforcement procedures, or, (2) in appropriate circumstances, through collection efforts not involving legal action which are reasonably expected to result in repayment of the debt or in its restoration to current status in the near future.
A loan is "in the process of collection" if collection of the loan is proceeding in due course either (1) through legal action, including judgment enforcement procedures, or (2) in appropriate circumstances, through collection efforts not involving legal action which are reasonably expected to result in repayment of the debt or in its restoration to a current status in the near future.
Securities to be held to maturity consist primarily of debt securities that the Company has acquired solely for long-term investment purposes, rather than for trading or future sale. For securities to be categorized as held to maturity, Management must have the intent and the Company must have the ability to hold such investments until their respective maturity dates.
Securities to be held to maturity consist primarily of debt securities that the Company has acquired solely for long-term investment purposes, rather than for trading or future sale. For securities to be categorized as HTM, Management must have the intent and the Company must have the ability to hold such investments until their respective maturity dates.
When a loan becomes nonperforming (generally 90 days past due), it is evaluated for collateral dependency based upon the most recent appraisal or other evaluation method.
Generally, when a loan becomes 90 days past due it is evaluated for collateral dependency based upon the most recent appraisal or other evaluation method.
This cost will be amortized over an average of seven years, adding approximately $150,000 to pre-tax operating costs per year. Goodwill On December 11, 2020, the Bank completed the purchase of a branch at 1B Belmont Avenue in Belfast, Maine, from Bangor Savings Bank ("Bangor Savings").
This cost will be amortized over an average of seven years, adding approximately $172,000 to pre-tax operating costs per year. Goodwill On December 11, 2020, the Bank completed the purchase of a branch at 1B Belmont Avenue in Belfast, Maine, from Bangor Savings Bank ("Bangor Savings").
While net interest income typically increases as earning assets grow, the spread can vary up or down depending on the level and direction of movements in interest rates. Management believes the Bank has modest exposure to changes in interest rates, as discussed in "Interest Rate Risk Management" elsewhere in Management's Discussion.
While net interest income typically increases as earning assets grow, the spread can vary up or down depending on the level and direction of movements in interest rates. Management believes the Bank has moderate exposure to changes in interest rates, as discussed in "Interest Rate Risk Management" elsewhere in Management's Discussion.
Once a loan is placed on nonaccrual, it remains in nonaccrual status until the loan is current as to payment of both principal and interest and the borrower demonstrates the ability to pay and remain current. All payments made on non-accrual loans are applied to the principal balance of the loan.
Once a loan is placed on nonaccrual, it remains in nonaccrual status until the loan is current as to payment of both principal and interest and the borrower demonstrates the ability to pay and remain current. All payments made on nonaccrual loans are applied to the principal balance of the loan.
Municipal securities are supported by the general taxing authority of the municipality and, in the cases of school districts, are generally supported by state aid. At December 31, 2022, all municipal bond issuers were current on contractually obligated interest and principal payments.
Municipal securities are supported by the general taxing authority of the municipality and, in the cases of school districts, are generally supported by state aid. At December 31, 2023, all municipal bond issuers were current on contractually obligated interest and principal payments.
The First Bancorp - 2022 Form 10-K - Page 31 The following table sets forth the Company's investment securities at their carrying amounts as of December 31, 2022 and 2021: Dollars in thousands 2022 2021 Securities available for sale U.S.
The First Bancorp - 2023 Form 10-K - Page 31 The following table sets forth the Company's investment securities at their carrying amounts as of December 31, 2023 and 2022: Dollars in thousands 2023 2022 Securities available for sale U.S.
This conclusion was based on the issuers' continued satisfaction of their obligations in accordance with their contractual terms and the expectation that the issuers will continue to do so, Management's intent and ability to hold these securities for a period of time sufficient to allow for any anticipated recovery in fair value (which may be at maturity), the expectation that the Company will receive 100% of future contractual cash flows, as well as the evaluation of the fundamentals of the issuers' financial condition and other objective evidence.
This conclusion was based on the issuer's continued satisfaction of the securities obligations in accordance with their contractual terms and the expectation that the issuer will continue to do so, Management's intent and ability to hold these securities for a period of time sufficient to allow for any anticipated recovery in fair value which may be at maturity, the expectation that the Company will receive 100% of future contractual cash flows, as well as the evaluation of the fundamentals of the issuer's financial condition and other objective evidence.
The Company's best estimate of cash flows uses severe economic recession assumptions to quantify potential market uncertainty. The Company's assumptions include but are not limited to delinquencies, foreclosure levels and constant default rates on the underlying collateral, loss severity ratios, and constant prepayment rates.
The Company's best estimate of cash flows uses severe economic recession assumptions due to market uncertainty. The Company's assumptions include but are not limited to delinquencies, foreclosure levels and constant default rates on the underlying collateral, loss severity ratios, and constant prepayment rates.
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.
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.
In 2022, residential mortgages had a recovery ratio of 0.003% compared to a loss ratio of 0.03% for the entire loan portfolio. The Company does not have a credit card portfolio or offer dealer consumer loans, which generally carry more risk and potentially higher losses than other types of consumer credit.
In 2023, residential mortgages had a recovery ratio of 0.003% compared to a loss ratio of 0.011% for the entire loan portfolio. The Company does not have a credit card portfolio or offer dealer consumer loans, which generally carry more risk and potentially higher losses than other types of consumer credit.
Leverage capital of the Company, or total shareholders' equity divided by average total assets for the current quarter less goodwill and any net unrealized gain or loss on securities available for sale and postretirement benefits, stood at 9.01% on December 31, 2022 and 8.63% at December 31, 2021.
Leverage capital of the Company, or total shareholders' equity divided by average total assets for the current quarter less goodwill and any net unrealized gain or loss on securities available for sale and postretirement benefits, stood at 8.61% on December 31, 2023 and 9.01% at December 31, 2022.
Forward-Looking Statements This report contains statements that are "forward-looking statements." We may also make written or oral forward-looking statements in other documents we file with the Securities and Exchange Commission ("SEC"), in our annual reports to shareholders, in press releases and other written materials, and in oral statements made by our officers, directors or employees.
Dollar Forward-Looking Statements This report contains statements that are "forward-looking statements." We may also make written or oral forward-looking statements in other documents we file with the SEC, in our annual reports to shareholders, in press releases and other written materials, and in oral statements made by our officers, directors or employees.
As the sole shareholder of the Bank, the Company is entitled to such dividends when and as declared by the Bank's Board of Directors from legally available funds. For the years ended December 31, 2022, 2021, and 2020 the Bank declared dividends to the Company of $14.0 million, $13.4 million, and $13.3 million, respectively.
As the sole shareholder of the Bank, the Company is entitled to such dividends when and as declared by the Bank's Board of Directors from legally available funds. For the years ended December 31, 2023, 2022 and 2021 the Bank declared dividends to the Company of $14.8 million, $14.0 million and $13.4 million, respectively.
Tax-exempt income is calculated on a tax-equivalent basis, using a 21.0% Federal income tax rate in 2022 and 2021.
Tax-exempt income is calculated on a tax-equivalent basis, using a 21.0% Federal income tax rate in 2023 and 2022.
Tax-exempt income has been calculated on a tax-equivalent basis using a 21% Federal income tax rate in 2022 and 2021.
Tax-exempt income has been calculated on a tax-equivalent basis using a 21% Federal income tax rate in 2023 and 2022.
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 in this report, net interest income is presented on a fully taxable equivalent basis.
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.
Advances from the FHLB are secured with pledged collateral consisting of FHLB stock, funds on deposit with FHLB, U.S. Agency notes, mortgage-backed securities, and qualifying first mortgage loans. FRB Discount Window advances are similarly secured with collateral consisting of FRB stock, funds on deposit at FRB, and qualifying commercial, home equity and construction loans.
Advances from the FHLBB are secured with pledged collateral consisting of FHLBB stock, funds on deposit with FHLBB, U.S. Agency notes, mortgage-backed securities, and qualifying first mortgage loans. FRBB Discount Window advances are similarly secured with collateral consisting of FRBB stock, funds on deposit at FRBB, and qualifying commercial, home equity and construction loans.
The primary factors considered in evaluating whether a decline in value of securities is other-than-temporary include: (a) the length of time and extent to which the fair value has been less than cost or amortized cost and the expected recovery period of the security, (b) the financial condition, credit rating and future prospects of the issuer, (c) whether the debtor is current on contractually obligated interest and principal payments, (d) the volatility of the securities' market price, (e) the intent and ability of the Company to retain the investment for a period of time sufficient to allow for recovery, which may be at maturity, and (f) any other information and observable data considered relevant in determining whether other-than-temporary impairment has occurred, including the expectation of receipt of all principal and interest when due.
The primary factors considered in this evaluation (a) the length of time and extent to which the fair value has been less than cost or amortized cost and the expected recovery period of the security, (b) the financial condition, credit rating and future prospects of the issuer, (c) whether the debtor is current on contractually obligated interest and principal payments, (d) the volatility of the securities' market price, (e) the intent and ability of the Company to retain the investment for a period of time sufficient to allow for recovery, which may be at maturity and (f) any other information and observable data considered relevant, including the expectation of receipt of all principal and interest when due.
The First Bancorp - 2022 Form 10-K - Page 42 Nonperforming Loans Nonperforming loans are comprised of loans for which, based on current information and events, it is probable that we will be unable to collect all amounts due according to the contractual terms of the loan agreement or when principal and interest is 90 days or more past due unless the loan is both well secured and in the process of collection (in which case the loan may continue to accrue interest in spite of its past due status).
Nonperforming Loans Nonperforming loans are comprised of loans, for which based on current information and events, it is probable that we will be unable to collect all amounts due according to the contractual terms of the loan agreement or when principal and interest is 90 days or more past due unless the loan is both well secured and in the process of collection (in which case the loan may continue to accrue interest in spite of its past due status).
The relationships between hedging instruments and hedged items is formally documented, as is the risk management objectives and strategy for undertaking various hedge transactions.
The relationships between hedging instruments and hedged items is formally documented, as is the risk management objective(s) and strategy for undertaking various hedge transactions.
Capital at December 31, 2022 was sufficient to meet the requirements of regulatory authorities.
Capital at December 31, 2023 was sufficient to meet the requirements of regulatory authorities.
The following table provides a reconciliation of average tangible common shareholders' equity to the Company's consolidated financial statements, which have been prepared in accordance with GAAP: Years ended December 31, Dollars in thousands 2022 2021 Average shareholders' equity as presented $ 234,521 $ 236,564 Less intangible assets (average) (30,892) (30,962) Average tangible common shareholders' equity $ 203,629 $ 205,602 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 of average tangible common shareholders' equity to the Company's consolidated financial statements, which have been prepared in accordance with GAAP: Years ended December 31, Dollars in thousands 2023 2022 Average shareholders' equity as presented $ 234,480 $ 234,521 Less intangible assets (average) (30,843) (30,892) Average tangible common shareholders' equity $ 203,637 $ 203,629 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.
If the Company does not expect to receive 100% of future contractual principal and interest, an other-than-temporary impairment charge is recognized. Estimating future cash flows is a quantitative and qualitative process that incorporates information received from third party sources along with certain internal assumptions and judgments regarding the future performance of the underlying collateral.
If the Company does not expect to receive 100% of future contractual principal and interest, a charge against the ACL is recognized. Estimating future cash flows is a quantitative and qualitative process that incorporates information received from third party sources along with certain internal assumptions and judgments regarding the future performance of the underlying collateral.
On an ongoing basis, Management evaluates its estimates, including those related to the allowance for loan losses, fair value of securities, goodwill, the valuation of mortgage servicing rights, derivative financial instruments, and other-than-temporary impairment on securities.
On an ongoing basis, Management evaluates its estimates, including those related to the ACL, fair value of securities, goodwill, the valuation of mortgage servicing rights, derivative financial instruments, and other-than-temporary impairment on securities.
Investment Management and Fiduciary Activities As of December 31, 2022, First National Wealth Management, the Bank's trust and investment management division, had assets under management or custody with a market value of $1.179 billion, consisting of 1,233 trust accounts, estate accounts, agency accounts, and self-directed individual retirement accounts.
Investment Management and Fiduciary Activities As of December 31, 2023, First National Wealth Management, the Bank's trust and investment management division, had assets under management or custody with a market value of $1.254 billion, consisting of 1,249 trust accounts, estate accounts, agency accounts, and self-directed individual retirement accounts.
As of December 31, 2022 and 2021, the Bank held a total of $118.3 million and $55.4 million in certificate of deposit accounts with balances in excess of $250,000, respectively. The following table summarizes the time remaining to maturity for these certificates of deposit.
As of December 31, 2023 and 2022, the Bank held a total of $172.2 million and $118.3 million in certificate of deposit accounts with balances in excess of $250,000, respectively. The following table summarizes the time remaining to maturity for these certificates of deposit.
The First Bancorp - 2022 Form 10-K - Page 22 Accounting Policies/Critical Accounting Estimates The Company's significant accounting policies are described in Note 1, "Summary of Significant Accounting Policies," to the consolidated financial statements contained in Item 8, "Financial Statements and Supplementary Data," of this Form 10-K.
Critical Accounting Policies and Estimates The Company's significant accounting policies are described in Note 1, "Summary of Significant Accounting Policies," to the consolidated financial statements contained in Item 8, "Financial Statements and Supplementary Data," of this Form 10-K.
On an ongoing basis, appraisals or valuations may be obtained periodically on collateral dependent non-performing loans and an additional specific reserve or write down will be made, if appropriate, based on the new collateral value.
On an ongoing basis, appraisals or valuations may be done periodically on collateral dependent nonperforming loans and an additional specific reserve or write down will be made, if appropriate, based on the new collateral value.
The First Bancorp - 2022 Form 10-K - Page 50 Climate Change The Company is mindful of the potential risk of climate change on its operations as well as on its customers, vendors and other stakeholders. The Item 1A Risk Factors section of this 10-K highlights the general nature of climate change related risks.
Climate Change The Company is mindful of the potential risk of climate change on its operations as well as on its customers, vendors and other stakeholders. The Item 1A Risk Factors section of this 10-K highlights the general nature of climate change related risks.
The primary factors The First Bancorp - 2022 Form 10-K - Page 33 considered in evaluating whether a decline in the fair value of securities is other-than-temporary include: (a) the length of time and extent to which the fair value has been less than cost or amortized cost and the expected recovery period of the security, (b) the financial condition, credit rating and future prospects of the issuer, (c) whether the debtor is current on contractually obligated interest and principal payments, (d) the volatility of the security's market price, (e) the intent and ability of the Company to retain the investment for a period of time sufficient to allow for recovery, which may be at maturity, and (f) any other information and observable data considered relevant in determining whether other-than-temporary impairment has occurred.
The primary factors considered in evaluating whether a loss should be recognized include: (a) the length of time and extent to which the fair value has been less than cost or amortized cost and the expected recovery period of the security, (b) the financial condition, credit rating and future prospects of the issuer, (c) whether the debtor is current on contractually obligated interest and principal payments, (d) the volatility of the securities market price, (e) the intent and ability of the Company to retain the investment for a The First Bancorp - 2023 Form 10-K - Page 33 period of time sufficient to allow for recovery, which may be at maturity, and (f) any other information and observable data considered relevant in determining whether full collection of amounts contractually due will be realized.
During the third quarter of 2014, the Company transferred securities with a total amortized cost of $89,780,000 with a corresponding fair value of $89,757,000 from available for sale to held to maturity. The net unrealized loss, net of taxes, on these securities at the date of the transfer was $15,000.
During the third quarter of 2014, the Company transferred securities with a total amortized cost of $89,780,000 with a corresponding fair value of $89,757,000 from AFS to HTM. The net unrealized loss, net of taxes, on these securities at the date of the transfer was $15,000.
Restricted equity securities consist of investments in the stock of the Federal Reserve Bank of Boston and the Federal Home Loan Bank of Boston; ownership of these securities is required as a condition of the Bank's membership in the respective banks and these shares are not able to be pledged or sold. The Company does not hold trading account securities.
Restricted equity securities consist of investments in the stock of the FRBB and the FHLBB; ownership of these securities is required as a condition of the Bank's membership in the respective banks and these shares are not able to be pledged or sold. The Company does not hold trading account securities.
Loans serviced for Freddie Mac and Fannie Mae have been sold without recourse, and the Bank has no liability for these loans in the event of foreclosure. A de minimis volume of loans has been sold to and serviced for MPF to date.
Loans serviced for FHLMC and FNMA have been sold without recourse, and the Bank has no liability for these loans in the event of foreclosure. A de minimis volume of loans has been sold to and serviced for MPF to date.
Nonperforming loans, expressed as a percentage of total loans, totaled 0.09% at December 31, 2022 compared to 0.35% at December 31, 2021.
Nonperforming loans, expressed as a percentage of total loans, totaled 0.10% at December 31, 2023 compared to 0.09% at December 31, 2022.
The portfolio is currently invested primarily in U.S. Government sponsored agency securities, mortgage-backed securities and tax-exempt obligations of states and political subdivisions. The individual securities have been selected to enhance the portfolio's overall yield while not materially adding to the Company's level of interest rate risk.
Government sponsored agency securities, mortgage-backed securities and tax-exempt obligations of states and political subdivisions. The individual securities have been selected to enhance the portfolio's overall yield while not materially adding to the Company's level of interest rate risk.
While Management uses available information to assess possible losses on loans, future additions to the allowance may be necessary based on increases in non-performing loans, changes in economic conditions, growth in loan portfolios, or for other reasons. Any future additions to the allowance would be recognized in the period in which they were determined to be necessary.
While Management uses available information to assess possible losses on loans, future additions to the allowance may be necessary based on increases in non-performing loans, changes in economic conditions, growth in loan portfolios, or for other reasons.
Use of Non-GAAP Financial Measures Certain information in Management's Discussion and Analysis of Financial Condition and Results of Operations and elsewhere in this Report contains financial information determined by methods other than in accordance with accounting principles generally accepted in the United States of America ("GAAP").
Use of Non-GAAP Financial Measures Certain information in Management's Discussion and Analysis of the Financial Condition and Results of Operations and elsewhere in this Report contains financial information determined by methods other than in accordance with GAAP.
The Company follows The First Bancorp - 2022 Form 10-K - Page 24 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 Federal income tax rate of 21.0% was used in 2022 and 2021.
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 Federal income tax rate of 21.0% was used in 2023 and 2022.
The Company also has the ability and intent to hold these securities until a recovery of their amortized cost, which may be at maturity. Obligations of state and political subdivisions. As of December 31, 2022, the total unrealized losses on municipal securities amounted to $38.0 million, compared with $390,000 at December 31, 2021.
The Company also has the ability and intent to hold these securities until a recovery of their amortized cost, which may be at maturity. AFS Obligations of state and political subdivisions. As of December 31, 2023, the total unrealized losses on municipal securities amounted to $5.7 million, compared with $7.3 million at December 31, 2022.
This compares to advances from FHLB totaling $55.1 million, with a weighted average interest rate of 1.38% per annum and remaining maturities ranging from 2.5 to 4 years, as of December 31, 2021. Our FHLB advances are predominantly short term and the year-to-year change in the average interest rate is a function of market conditions.
This compares to advances from FHLBB totaling $39.1 million, with a weighted average interest rate of 4.25% per annum and remaining maturities ranging from 1 day to 1.5 years, as of December 31, 2022. Our FHLBB advances are predominantly short term and the year-to-year change in the average interest rate is a function of market conditions.
Some of the factors that might cause these differences include the following: changes in general national, regional or international economic conditions or conditions affecting the banking or financial services industries or financial capital markets, volatility and disruption in national and international financial markets, government intervention in the U.S. financial system, reductions in net interest income resulting from interest rate volatility as well as changes in the balance and mix of loans and deposits, reductions in the market value of wealth management assets under administration, changes in the value of securities and other assets, reductions in loan demand, changes in loan collectability, default and charge-off rates, changes in the size and nature of the Company's competition, changes in legislation or regulation and accounting principles, policies and guidelines, uncertainties with respect to the nature, the extent and the duration of the COVID-19 pandemic and its consequences (including in our market areas or affecting our customers such as protracted adverse effects on the tourism and hospitality industries), and changes in the assumptions used in making such forward-looking statements.
Some of the factors that might cause these differences include the following: changes in general national, regional or international economic conditions or conditions affecting the banking or financial services industries or financial capital markets, volatility and disruption in national and international financial markets, government intervention in the U.S. financial system, reductions in net interest income resulting from interest rate volatility as well as changes in the balance and mix of loans and deposits, reductions in the market value of wealth management assets under administration, changes in the value of securities and other assets, reductions in loan demand, changes in loan collectability, default and charge-off rates, changes in the size and nature of the Company's competition, changes in legislation or regulation and accounting principles, policies and guidelines, and changes in the assumptions used in making such forward-looking statements.
Government-sponsored agencies. As of December 31, 2022, the total unrealized losses on these securities amounted to $17.4 million, compared with $2.3 million at December 31, 2021. All of these securities were credit rated "AAA" or "AA+" by the major credit rating agencies. Management believes that securities issued by U.S.
Treasury and U.S. Government-sponsored agencies & enterprises. As of December 31, 2023, the total unrealized losses on these securities amounted to $6.2 million, compared with $6.9 million at December 31, 2022. All of these securities were credit rated "AAA" or "AA+" by the major credit rating agencies. Management believes that securities issued by the U.S. Treasury and U.S.
As of December 31, 2022 Leverage Common Equity Tier 1 Tier 1 Total Risk-Based Bank 8.81 % 12.64 % 12.64 % 13.52 % Company 9.01 % 12.70 % 12.70 % 13.58 % Adequately capitalized ratio 4.00 % 4.50 % 6.00 % 8.00 % Adequately capitalized ratio plus capital conservation buffer n/a % 7.00 % 8.50 % 10.50 % Well capitalized ratio (Bank only) 5.00 % 6.50 % 8.00 % 10.00 % The First Bancorp - 2022 Form 10-K - Page 49 As of December 31, 2021 Leverage Common Equity Tier 1 Tier 1 Total Risk-Based Bank 8.56 % 13.21 % 13.21 % 14.17 % Company 8.63 % 13.31 % 13.31 % 14.27 % Adequately capitalized ratio 4.00 % 4.50 % 6.00 % 8.00 % Adequately capitalized ratio plus capital conservation buffer n/a % 7.00 % 8.50 % 10.50 % Well capitalized ratio (Bank only) 5.00 % 6.50 % 8.00 % 10.00 % Except as identified in Item 1A, "Risk Factors", Management knows of no present trends, events or uncertainties that will have, or are reasonably likely to have, a material effect on the Company's capital resources, liquidity, or results of operations.
As of December 31, 2023 Leverage Common Equity Tier 1 Tier 1 Total Risk-Based Bank 8.43 % 12.37 % 12.37 % 13.62 % Company 8.61 % 12.42 % 12.42 % 13.66 % Adequately capitalized ratio 4.00 % 4.50 % 6.00 % 8.00 % Adequately capitalized ratio plus capital conservation buffer n/a % 7.00 % 8.50 % 10.50 % Well capitalized ratio (Bank only) 5.00 % 6.50 % 8.00 % 10.00 % As of December 31, 2022 Leverage Common Equity Tier 1 Tier 1 Total Risk-Based Bank 8.81 % 12.64 % 12.64 % 13.52 % Company 9.01 % 12.70 % 12.70 % 13.58 % Adequately capitalized ratio 4.00 % 4.50 % 6.00 % 8.00 % Adequately capitalized ratio plus capital conservation buffer n/a % 7.00 % 8.50 % 10.50 % Well capitalized ratio (Bank only) 5.00 % 6.50 % 8.00 % 10.00 % Except as identified in Item 1A, "Risk Factors", Management knows of no present trends, events or uncertainties that will have, or are reasonably likely to have, a material effect on the Company's capital resources, liquidity, or results of operations.
These risks, uncertainties and other factors may cause the actual results, performance or achievements of the Company to be materially different from the anticipated future results, performance or achievements expressed or implied by the forward-looking statements.
These risks, uncertainties and other factors may cause the actual results, performance or The First Bancorp - 2023 Form 10-K - Page 22 achievements of the Company to be materially different from the anticipated future results, performance or achievements expressed or implied by the forward-looking statements.
Years ended December 31, Dollars in thousands 2022 2021 Net interest income as presented $ 76,166 $ 66,303 Effect of tax-exempt income 2,326 2,325 Net interest income, tax equivalent $ 78,492 $ 68,628 The Company presents its efficiency ratio using non-GAAP information which is most commonly used by financial institutions.
Years ended December 31, Dollars in thousands 2023 2022 Net interest income as presented $ 65,207 $ 76,166 Effect of tax-exempt income 2,644 2,326 Net interest income, tax equivalent $ 67,851 $ 78,492 The Company presents its efficiency ratio using non-GAAP information which is most commonly used by financial institutions.
The weighted average interest rates payable under these agreements were 1.04% per annum as of December 31, 2022, compared to 0.47% per annum as of December 31, 2021.
The weighted average interest rates payable under these agreements were 2.42% per annum as of December 31, 2023, compared to 0.47% per annum as of December 31, 2022.
The First Bancorp - 2022 Form 10-K - Page 27 The following table presents the interest earned on or paid for each major asset and liability category, respectively, for the years ended December 31, 2022 and 2021, as well as the average yield for each major asset and liability category, and the net yield between assets and liabilities.
The following table presents the interest earned on or paid for each major asset and liability category, respectively, for the years ended December 31, 2023 and 2022, as well as the average yield for each major asset and liability category, and the net yield between assets and liabilities.
The Company periodically evaluates its investment in FHLB stock for impairment based on, among other factors, the capital adequacy of the FHLB and its overall financial condition. No impairment losses have been recorded through December 31, 2022. The Bank will continue to monitor its investment in FHLB stock.
The Company periodically evaluates its investment in FHLBB and FRBB stock for impairment based on, among other factors, the capital adequacy of the Banks and their overall financial condition. No impairment losses have been recorded through December 31, 2023. The Bank will continue to monitor its investment in these restricted equity securities.
It is Management's opinion that this is an appropriate level. In addition, the Bank has $158.0 million in borrowing capacity under the Federal Reserve Bank of Boston's Borrower in Custody program, $76.0 million in credit lines with correspondent banks, and $187.0 million in other unencumbered securities available as collateral for borrowing.
It is Management's opinion that this is an appropriate level. In addition, the Bank has $168.0 million in borrowing capacity under the FRBB's Borrower in Custody programs, $76.0 million in credit lines with correspondent banks, and $169.0 million in other unencumbered securities available as collateral for borrowing.
Effect of Future Interest Rates on Post-retirement Benefit Liabilities In evaluating the Company's post-retirement benefit liabilities, Management believes changes in discount rates which have occurred pursuant to Federal legislation will not have a significant impact on the Company's future operating results or financial condition.
The Bank also carries $125,000 in goodwill for a de minimis transaction in 2001. Effect of Future Interest Rates on Post-retirement Benefit Liabilities In evaluating the Company's post-retirement benefit liabilities, Management believes changes in discount rates which have occurred pursuant to Federal legislation will not have a significant impact on the Company's future operating results or financial condition.
The dividend payout ratio, which is calculated by dividing dividends declared per share by diluted earnings per share, was 37.64% for the year ended December 31, 2022 compared to 38.14% for the year ended December 31, 2021.
The dividend payout ratio, which is calculated by dividing dividends declared per share by basic earnings per share, was 51.87% for the year ended December 31, 2023 compared to 37.64% for the year ended December 31, 2022.
The amount available for dividends in 2023 is this year's net income plus $49.6 million. In 2022, 55,061 shares were issued via employee stock programs, the dividend reinvestment plan, and restricted stock grants. The Company received consideration totaling $796,000. The following table summarizes the Company's 2022 stock issuances.
The amount available for dividends in 2024 is this year's net income plus $41.5 million. In 2023, 61,516 shares were issued via employee stock programs, the dividend reinvestment plan, and restricted stock grants. The Company received consideration totaling $817,000. The following table summarizes the Company's 2023 stock issuances.
Dividend reinvestment plan 11,326 Employee stock program 14,990 Restricted stock grants 28,745 Total 55,061 Financial institution regulators have established guidelines for minimum capital ratios for banks and bank holding companies. The net unrealized gain or loss on available for sale securities is generally not included in computing regulatory capital.
Dividend reinvestment plan 14,418 Employee stock program 17,472 Restricted stock grants 29,626 Total 61,516 Financial institution regulators have established guidelines for minimum capital ratios for banks and bank holding companies. The net unrealized gain or loss on available for sale securities is generally not included in computing regulatory capital.
Such loans are characterized by weaknesses in the financial condition of borrowers or collateral deficiencies. Based on historical experience, the credit quality of some of these loans may improve due to changes in collateral values or the financial condition of the borrowers, while the credit quality of other loans may deteriorate, resulting in some amount of loss.
Based on historical experience, the credit quality of some of these loans may improve due to improvements in the economy as well as changes in collateral values or the financial condition of the borrowers, while the credit quality of other loans may deteriorate, resulting in some amount of loss.
The Company defines its primary sources of contingent liquidity as cash & equivalents, unencumbered US Government or Agency bond collateral, available capacity at FHLB, and available authorized brokered deposit issuance capacity. As of December 31, 2022, the Bank had primary sources of contingent liquidity of $853.0 million or 31.5% of its total assets.
The Company defines its primary sources of contingent liquidity as cash & equivalents, unencumbered U.S. Government or Agency bond collateral, available capacity at FHLBB, and available authorized brokered deposit issuance capacity. As of December 31, 2023, the Bank had primary sources of contingent liquidity of $895.0 million or 30.7% of its total assets.
Tax-exempt interest income amounted to $8.8 million for the year ended December 31, 2022, and $8.7 million for the year ended December 31, 2021. The following tables present changes in interest income and expense attributable to changes in interest rates, volume, and rate/volume 1 for interest-earning assets and interest-bearing liabilities.
Tax-exempt interest income amounted to $9.9 million for the year ended December 31, 2023, and $8.8 million for the year ended December 31, 2022. The First Bancorp - 2023 Form 10-K - Page 27 The following tables present changes in interest income and expense attributable to changes in interest rates, volume, and rate/volume 1 for interest-earning assets and interest-bearing liabilities.
There were no issues requiring management attention in the most recent review. Servicing for others includes loans sold to Freddie Mac, Fannie Mae, and the Federal Home Loan Bank of Boston through its MPF program. The Bank follows the published guidelines of each investor.
There were no issues requiring management attention in the most recent review. Servicing for others includes loans sold to FHLMC, FNMA, and the FHLBB through its MPF program. The Bank follows the published guidelines of each investor.
Loan losses are charged against the allowance when Management believes that the collectability of the loan principal is unlikely. Recoveries on loans previously charged off are credited to the allowance.
The ACL is increased by provisions charged against current earnings. Loan losses are charged against the allowance when Management believes that the collectibility of the loan principal is unlikely. Recoveries on loans previously charged off are credited to the allowance.
A Notice of Statutory Power of Sale is then prepared. This notice must be published for three consecutive weeks in a newspaper located in the county in which the property is located. A notice also must be issued to the mortgagor and all parties of interest 21 days prior to the sale.
This notice must be published for three consecutive weeks in a newspaper located in the county in which the property is located. A notice also must The First Bancorp - 2023 Form 10-K - Page 42 be issued to the mortgagor and all parties of interest 21 days prior to the sale.
The First Bancorp - 2022 Form 10-K - Page 46 Other Real Estate Owned Other real estate owned and repossessed assets ("OREO") are comprised of properties or other assets acquired through a foreclosure proceeding, or acceptance of a deed or title in lieu of foreclosure.
Other Real Estate Owned OREO and repossessed assets are comprised of properties or other assets acquired through a foreclosure proceeding, or acceptance of a deed or title in lieu of foreclosure.
The Bank's regulator, the OCC, may limit the amount of dividends declared and paid in a calendar year based upon certain factors. Further discussion may be found in Item 1A Risk Factors and in Note 18 of the financial statements.
The Bank's regulator, the OCC, may limit the amount of dividends declared and paid in a calendar year based upon certain factors. Further discussion may be found in Capital Resources below.
The allowance for loan losses ended 2022 at $16.7 million and stood at 0.87% of total loans outstanding, compared to $15.5 million and 0.94% of total loans outstanding at December 31, 2021. A $1.8 million provision for losses was made during the year ended 2022.
The ACL-loans ended 2023 at $24.0 million and stood at 1.13% of total loans outstanding, compared to $16.7 million and 0.87% of total loans outstanding at December 31, 2022. A $1.3 million provision for losses was made during the year ended 2023.
Further discussion of the fair value of securities may be found in Note 3, "Investment Securities", to the consolidated financial statements contained in Item 8 of the Form 10-K. Other-Than-Temporary Impairment on Securities. Another critical accounting estimate related to investment securities is the evaluation of other-than-temporary impairments.
Further discussion of the fair value of securities may be found in Note 3, "Investment Securities", to the consolidated financial statements contained in Item 8 of the Form 10-K. Credit Loss Recognition on Securities. Another significant estimate related to investment securities is the evaluation of potential credit losses on investment securities.
Based on its assessment of the liquidity considerations described above, Management believes the Bank's and the Company's sources of funding will meet anticipated funding needs. The Company is dependent upon the payment of cash dividends by the Bank to service its commitments.
The ALCO establishes guidelines for liquidity in its Asset/Liability policy and monitors internal liquidity measures to manage liquidity exposure. Based on its assessment of the liquidity considerations described above, Management believes the Company's sources of funding will meet anticipated funding needs. The Company is dependent upon the payment of cash dividends by the Bank to service its commitments.
Changes in fair value of a derivative that is effective and that qualifies as a cash flow hedge are recorded in other comprehensive income (loss) and are reclassified into earnings when the forecasted transaction or related cash flows affect earnings.
Changes in fair value of a derivative that is effective and that qualifies as a cash flow hedge are recorded in OCI and are reclassified into earnings when the The First Bancorp - 2023 Form 10-K - Page 24 forecasted transaction or related cash flows affect earnings.
The net unrealized holding loss at the time of transfer continues to be reported in accumulated other comprehensive income (loss), net of tax and is amortized over the remaining lives of the securities as an adjustment of the yield.
The net unrealized holding loss at the time of transfer continues to be reported in AOCI, net of tax and is amortized over the remaining lives of the securities as an adjustment of the yield. The amortization of the net unrealized loss reported in AOCI will offset the effect on interest income of the discount for the transferred securities.
The Bank offers securities repurchase agreements to municipal and corporate customers as an alternative to deposits. The balance of these agreements as of December 31, 2022 was $64.4 million, compared to $81.3 million on December 31, 2021.
The First Bancorp - 2023 Form 10-K - Page 44 The Bank offers securities repurchase agreements to municipal and corporate customers as an alternative to deposits. The balance of these agreements as of December 31, 2023 was $49.6 million, compared to $64.4 million on December 31, 2022.
Actual results could differ from the amounts derived from Management's estimates and assumptions under different assumptions or conditions. Allowance for Loan Losses. Calculation of an appropriate level for the allowance for loan losses is a critical accounting estimate and requires the most significant estimates and assumptions used in the preparation of the consolidated financial statements.
Actual results could differ from the amounts derived from Management's estimates and assumptions under different assumptions or conditions. Allowance for Credit Losses. Management believes the ACL requires the most significant estimates and assumptions used in the preparation of the consolidated financial statements.
The allowance for loan losses is based on Management's evaluation of the level of the allowance required in relation to the estimated loss exposure in the loan portfolio.
The ACL is based on Management's evaluation of the level of the allowance required in relation to the estimated loss exposure in the loan portfolio, off-balance sheet commitments, and investment portfolio.
Past due loans were 0.08% of total loans as of December 31, 2022, down from 0.26% of total loans at December 31, 2021.The allowance as a percentage of loans outstanding stood at 0.87% in 2022, down from 0.94% at December 31, 2021.
Past due loans were 0.18% of total loans as of December 31, 2023, a modest increase from 0.08% of total loans at December 31, 2022.The allowance as a percentage of loans outstanding stood at 1.13% in 2023, up from 0.87% at December 31, 2022.
Borrowings supplement deposits as a source of liquidity; our borrowings typically consist of customer repurchase agreements and FHLB advances The Bank tests its borrowing capacity with the Federal Reserve Bank of Boston, the FHLB and Fed Funds lines no less than annually.
Borrowings supplement deposits as a source of liquidity; our borrowings typically consist of customer repurchase agreements and FHLBB advances. The Bank tests its borrowing capacity with the FRBB, the FHLBB and Fed Funds lines with other correspondents no less than annually; each has been tested within the past year.
The Company attributes the unrealized losses at December 31, 2022, however, to changes in prevailing market yields and pricing spreads since the dates the underlying securities were purchased, combined with current market liquidity conditions and the disruption in the financial markets in general. Accordingly, the Company does not consider these municipal securities to be other-than-temporarily impaired at December 31, 2022.
The Company attributes the unrealized losses at December 31, 2023 to changes in prevailing market yields and pricing spreads since the date the underlying securities were purchased, combined with current market liquidity conditions and disruption in the financial markets in general.
The following table provides a reconciliation between the GAAP and non-GAAP efficiency ratio: Years ended December 31, Dollars in thousands 2022 2021 Non-interest expense, as presented $ 43,904 $ 42,148 Net interest income, as presented 76,166 66,303 Effect of tax-exempt income 2,326 2,325 Non-interest income, as presented 16,874 19,383 Effect of non-interest tax-exempt income 170 168 Net securities gains (7) (23) Adjusted net interest income plus non-interest income $ 95,529 $ 88,156 Non-GAAP efficiency ratio 45.96 % 47.81 % GAAP efficiency ratio 47.19 % 49.19 % The Company presents certain information based upon average tangible common shareholders' equity instead of total average shareholders' equity.
The First Bancorp - 2023 Form 10-K - Page 25 The following table provides a reconciliation between the GAAP and non-GAAP efficiency ratio: Years ended December 31, Dollars in thousands 2023 2022 Non-interest expense, as presented $ 43,758 $ 43,904 Net interest income, as presented 65,207 76,166 Effect of tax-exempt income 2,644 2,326 Non-interest income, as presented 15,437 16,874 Effect of non-interest tax-exempt income 176 170 Net securities gains — (7) Adjusted net interest income plus non-interest income $ 83,464 $ 95,529 Non-GAAP efficiency ratio 52.43 % 45.96 % GAAP efficiency ratio 54.26 % 47.19 % The Company presents certain information based upon average tangible common shareholders' equity instead of total average shareholders' equity.
ITEM 7. Management's Discussion and Analysis of Financial Condition and Results of Operations The First Bancorp, Inc. (the "Company" or "The First Bancorp") was incorporated in the State of Maine on January 15, 1985, and is the parent holding company of First National Bank (the "Bank").
ITEM 7. Management's Discussion and Analysis of Financial Condition and Results of Operations The Company was incorporated in the State of Maine on January 15, 1985, and is the parent holding company of Bank. On January 28, 2016, the Board of Directors voted to change the Bank's name to First National Bank from The First, N.A.
This provision, coupled with net charge off activity, resulted in the allowance for loan losses increasing $1.2 million or 7.7% from December 31, 2021. Investment Activities During 2022, the investment portfolio, including restricted equity securities, decreased 2.0% to end the year at $682.3 million, compared to $696.0 million at December 31, 2021.
The one-time CECL adoption adjustments, coupled with the provision and net charge off activity, resulted in the ACL increasing $7.3 million or 43.7% from December 31, 2022. Investment Activities During 2023, the investment portfolio, including restricted equity securities, decreased 1.7% to end the year at $670.7 million, compared to $682.3 million at December 31, 2022.
All investment securities are managed in accordance with a written investment policy adopted by the Board of Directors. It is the Company's general policy that investments be limited to government debt obligations, time deposits, and corporate bonds or commercial paper with one of the three highest ratings given by a nationally recognized rating agency.
It is the Company's general policy that investments for either the AFS or HTM portfolio be limited to government debt obligations, time deposits, and corporate bonds or commercial paper with one of the three highest ratings given by a nationally recognized rating agency. The portfolio is currently invested primarily in U.S.
Goodwill is evaluated annually for possible impairment under the provisions of FASB ASC Topic 350, “Intangibles – Goodwill and Other”. As of December 31, 2022, in accordance with Topic 350, the Company completed its annual review of goodwill and determined there has been no impairment. The Bank also carries $125,000 in goodwill for a de minimis transaction in 2001.
The First Bancorp - 2023 Form 10-K - Page 46 Goodwill is evaluated annually for possible impairment under the provisions of FASB ASC Topic 350, “Intangibles – Goodwill and Other”. As of December 31, 2023, in accordance with Topic 350, the Company completed its annual review of goodwill and determined there has been no impairment.
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Item 7A. Quantitative and Qualitative Disclosures About Market Risk
Market Risk — interest-rate, FX, commodity exposure
9 edited+1 added−1 removed15 unchanged
Item 7A. Quantitative and Qualitative Disclosures About Market Risk
Market Risk — interest-rate, FX, commodity exposure
9 edited+1 added−1 removed15 unchanged
2022 filing
2023 filing
Biggest changeThe First Bancorp - 2022 Form 10-K - Page 51 The Company's summarized static gap, as of December 31, 2022, is presented in the following table: 0-90 90-365 1-5 5+ Dollars in thousands Days Days Years Years Investment securities at amortized cost (HTM) and fair value (AFS) $ 37,496 $ 31,117 $ 149,464 $ 460,328 Restricted equity securities, at cost 2,846 — — 1,037 Loans 463,546 204,376 924,702 322,324 Other interest-earning assets — 26,019 — — Non-rate-sensitive assets 12,876 — — 103,047 Total assets 516,764 261,512 1,074,166 886,736 Interest-bearing deposits 497,194 395,473 329,355 903,577 Borrowed funds 38,990 — 83 — Non-rate-sensitive liabilities and equity — — — 574,506 Total liabilities and equity 536,184 395,473 329,438 1,478,083 Period gap $ (19,420) $ (133,961) $ 744,728 $ (591,347) Percent of total assets (0.71) % (4.89) % 27.19 % (21.59) % Cumulative gap (current) $ (19,420) $ (153,381) $ 591,347 $ — Percent of total assets (0.71) % (5.60) % 21.59 % — % The earnings simulation model forecasts capture the impact of changing interest rates on one-year and two-year net interest income.
Biggest changeThe First Bancorp - 2023 Form 10-K - Page 47 The Company's summarized static gap, as of December 31, 2023, is presented in the following table: 0-90 90-365 1-5 5+ Dollars in thousands Days Days Years Years Investment securities at amortized cost (HTM) and fair value (AFS) $ 45,511 $ 33,919 $ 166,852 $ 421,006 Restricted equity securities, at cost 2,349 — — 1,037 Loans 490,588 260,597 1,051,823 326,445 Other interest-earning assets — 26,681 — — Non-rate-sensitive assets 20,589 — — 99,301 Total assets 559,037 321,197 1,218,675 847,789 Interest-bearing deposits 711,279 489,004 458,212 703,147 Borrowed funds 20,000 76 — — Non-rate-sensitive liabilities and equity — — — 562,421 Total liabilities and equity 731,279 489,080 458,212 1,265,568 Period gap $ (172,242) $ (167,883) $ 760,463 $ (417,779) Percent of total assets (5.85) % (5.70) % 25.81 % (14.18) % Cumulative gap (current) $ (172,242) $ (340,125) $ 420,338 $ 2,559 Percent of total assets (5.85) % (11.54) % 14.26 % 0.09 % The earnings simulation model forecasts capture the impact of changing interest rates on one-year and two-year net interest income.
The modeling process calculates changes in interest income received and interest expense paid on all interest-earning assets and interest-bearing liabilities reflected on the Company's balance sheet. None of the assets used in the simulation are held for trading purposes.
The modeling process calculates changes in interest income received and interest expense paid on all interest-earning assets and interest-bearing liabilities reflected on the Company's consolidated balance sheet. None of the assets used in the simulation are held for trading purposes.
The Company's most recent simulation model calculates projected impact on net interest income in scenarios where short term interest rates gradually decrease by two percentage points, gradually decreases by one percentage point, and where short- term rates gradually increase by two percentage points.
The Company's most recent simulation model calculates projected impact on net interest income in scenarios where short-term interest rates gradually decrease by two percentage points, gradually decrease by one percentage point, and where short- term rates gradually increase by two percentage points.
A summary of the Bank's interest rate risk simulation modeling, as of December 31, 2022 and 2021 is presented in the following table: Changes in Net Interest Income 2022 2021 Year 1 Projected changes if rates decrease by 1.0% 0.2% (1.5)% Projected changes if rates decrease by 2.0% 0.0% n/a Projected change if rates increase by 2.0% (3.8)% (2.8)% Year 2 Projected changes if rates decrease by 1.0% 6.8% (7.3)% Projected changes if rates decrease by 2.0% 5.7% n/a Projected change if rates increase by 2.0% (3.4)% (3.6)% The First Bancorp - 2022 Form 10-K - Page 52 This dynamic simulation model includes assumptions about how the balance sheet is likely to evolve through time and in different interest rate environments.
A summary of the Bank's interest rate risk simulation modeling, as of December 31, 2023 and 2022 is presented in the following table: Changes in Net Interest Income 2023 2022 Year 1 Projected changes if rates decrease by 1.0% 2.0% 0.2% Projected changes if rates decrease by 2.0% 3.7% 0.0% Projected change if rates increase by 2.0% (6.0)% (3.8)% Year 2 Projected changes if rates decrease by 1.0% 20.8% 6.8% Projected changes if rates decrease by 2.0% 23.8% 5.7% Projected change if rates increase by 2.0% 0.7% (3.4)% The First Bancorp - 2023 Form 10-K - Page 48 This dynamic simulation model includes assumptions about how the balance sheet is likely to evolve through time and in different interest rate environments.
It does so by comparing the differences in the repricing characteristics of assets and liabilities. A gap is defined as the difference between the principal amount of assets and liabilities which reprice within a specified time period. The cumulative one-year gap, at December 31, 2022, was (5.60)% of total assets, compared to 7.09% of total assets at December 31, 2021.
It does so by comparing the differences in the repricing characteristics of assets and liabilities. A gap is defined as the difference between the principal amount of assets and liabilities which reprice within a specified time period. The cumulative one-year gap, at December 31, 2023, was (11.54)% of total assets, compared to (5.60)% of total assets at December 31, 2022.
In year two, and assuming no additional movement in rates, the model forecasts that net interest income would be higher than that earned in the first year of a stable rate environment by 5.7% in the two percentage point falling-rate scenario, and higher by 6.8% in the one percentage point falling rate scenario; net interest income would be lower than that earned in a stable rate environment by 3.4% in a two percentage point rising rate scenario, when compared to the year-one base scenario.
In year two, and assuming no additional movement in rates, the model forecasts that net interest income would be higher than that earned in the first year of a stable rate environment by 23.8% in the two percentage point falling-rate scenario, and higher by 20.8% in the one percentage point falling rate scenario; net interest income would be higher than that earned in a stable rate environment by 0.7% in a two percentage point rising rate scenario, when compared to the year-one base scenario.
The Company's modeling as of December 31, 2022 projects net interest income would be unchanged from stable-rate net interest income if short-term rates affected by Federal Open Market Committee actions fall gradually by two percentage points over the next year, and would increase by approximately 0.2% if rates fall gradually by one percentage point over the next year; net interest income would decrease by approximately 3.8% if rates rise gradually by two percentage points over the next year.
The Company's modeling as of December 31, 2023 projects net interest income would increase by approximately 3.7% if short-term rates affected by FOMC actions fall gradually by two percentage points over the next year, and would increase by approximately 2.0% if short term rates gradually fall by one percentage point over the next year; net interest income would decrease by approximately 6.0% if rates rise gradually by two percentage points over the next year.
As of December 31, 2022, there were no significant differences between the views of the independent consultant and Management regarding the Company's interest rate risk exposure. Management expects interest rates will increase in the next year and believes that the current level of interest rate risk is acceptable. The First Bancorp - 2022 Form 10-K - Page 53
As of December 31, 2023, there were no significant differences between the views of the independent consultant and Management regarding the Company's interest rate risk exposure. Management expects interest rates will remain flat or decrease in the next year and believes that the current level of interest rate risk is acceptable.
As of December 31, 2022, the Company had three interest rate swaps with a total notional value of $30 million designed for interest rate risk management. The Company engages an independent consultant to periodically review its interest rate risk position, as well as the effectiveness of simulation modeling and reasonableness of assumptions used.
As of December 31, 2023, the Company was using interest rate swaps for interest rate risk management. See Notes 14 and 19 of the accompanying financial statements for additional discussion of derivative usage. The Company engages an independent consultant to periodically review its interest rate risk position, as well as the effectiveness of simulation modeling and reasonableness of assumptions used.
Removed
The Company does not model for negative interest rates; accordingly a two percentage point decrease scenario was not calculated as of December 31, 2021.
Added
The First Bancorp - 2023 Form 10-K - Page 49