**First National Lincoln Corporation Reports Second-Quarter Earnings Per Share Up 3.1% Over 2006**

 

DAMARISCOTTA, ME, July 25 – First National Lincoln Corporation (Nasdaq: FNLC), today announced unaudited results for the quarter ended June 30, 2007. Earnings per share on a fully diluted basis were $0.33, up $0.01 or 3.1% from the $0.32 reported for the quarter ended June 30, 2006. Net income for the quarter ended June 30, 2007, was $3,196,000, an increase of $24,000 or 0.8% from the $3,172,000 posted for the quarter ended June 30, 2006.

The Company also announced unaudited results for the first six months of 2007, with earnings per share on a fully diluted basis of $0.63, up $0.01 or 1.6% from the $0.62 reported for the first six months of 2006. Net income year-to-date was $6,198,000, an increase of $50,000 or 0.8% from the $6,148,000 posted for the same period in 2006.

“We saw good growth in earning assets during the second quarter,” observed Daniel R. Daigneault, President and Chief Executive Officer of FNLC. “Our loan portfolio increased $31.0 million or 3.7% between March 31, 2007, and June 30, 2007, with the majority of this growth – $20.2 million – in commercial loans, our highest-yielding assets. Our loan growth for the quarter is nearly at the dollar level we have seen in the second quarter of each of the last three years and is more than three times higher than loan growth for each of the last three quarters.

“At the same time, the investment portfolio increased $21.8 million or 12.2% during the quarter,” President Daigneault noted. “As a result of the slight steepening in the yield curve in June, we saw opportunity to add to the investment portfolio at levels that have not been available for some time. Year-to-date, our total assets have increased $56.4 million or 5.1%, with the majority of growth coming in the second quarter.

“We funded our second-quarter growth with both deposits and borrowed funds,” President Daigneault continued. “Although we saw the usual seasonal growth in demand deposits, there was further erosion in savings account balances – in our view the result of a combination of higher rates available in certificates of deposit and customers needing additional funds for expenses. The remainder of our funding needs were met with a combination of certificates of deposit – both local and wholesale – as well as borrowed funds.

“Net interest income continues to be the largest component of earnings for FNLC,” observed President Daigneault. “While net interest income was down by $65,000 or 0.4% for the first six months of 2007 compared to the first six months of 2006, it was up $117,000 or 1.6% for the 

second quarter of 2007 compared to the second quarter of 2006. This is consistent with the increase in net interest income compared to the previous quarter – up $47,000 or 0.6% as a result of the growth in earning assets which was previously noted. 

“Given the negative impact that the interest rate policies of the Federal Open Market Committee have had on net interest margins for the banking industry, we view this modest increase in net interest income as a positive factor for FNLC,” President Daigneault went on. “Controlling operating expense is another positive for us, and our employees are very focused on eliminating unnecessary costs given the challenging interest rate climate. This can be seen in our efficiency ratio, which has improved dramatically in the past two-and-a-half years since the FNB Bankshares acquisition and now compares extremely well to our peers.” 

“In addition to our efficiency ratio, we compare well to our peers in our return on average tangible equity,” said F. Stephen Ward, the Company’s Treasurer and Chief Financial Officer. “At 15.7% for the quarter and 15.4% year-to-date, the fact our ROE remains above 15.0% despite our modest growth in earnings is, in our view, a very positive indicator of the Company’s overall performance.

“Our asset quality also remains strong,” Mr. Ward continued, “and the ratio of non-performing assets to total assets improved significantly as of June 30, 2007, compared to a year ago as well as to the previous quarter. We continue to maintain high standards in our loan underwriting – despite an increasingly competitive landscape – and will not compromise quality in order to produce short-term growth at the expense of long-term earnings.

“While the price of our stock remains a challenge,” Mr. Ward noted, “the performance of our stock compares well to our industry. As a benchmark, we use the KBW Regional Bank Index, and as of July 24, 2007, the index was down 13.35% year-to-date while FNLC’s price per share was down only 3.41% during the same period. Although bank stocks have significantly underperformed in comparison to the overall market in 2007, we feel that the performance of our stock compared to our peers is reflective of our results in relation to our industry.

 

 “In my opinion, the second quarter of 2007 was a good quarter for FNLC,” President Daigneault concluded. “Despite continued margin compression, we saw good growth in earning assets which in turn led to increased net interest income. Our efficiency ratio remains excellent, and we continue to share our profits with our shareholders in the form of increased cash dividends. Given these factors, I continue to view First National Lincoln Corporation as a good investment 

 

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opportunity, especially for those interested in Maine-based companies or high-performing community banks.”

First National Lincoln Corporation, headquartered in Damariscotta, Maine, is the holding company for The First, N.A. Founded in 1864, The First is an independent community bank serving Mid-Coast and Down East Maine with 14 offices in Lincoln, Knox, Hancock and Washington Counties. The Bank provides a full range of consumer and commercial banking products and services. First Advisors, a division of The First, provides investment advisory, private banking and trust services from two offices in Lincoln and Hancock Counties.

Forward-looking and cautionary statements: except for the historical information and discussions contained herein, statements contained in this release may constitute “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. These statements involve a number of risks, uncertainties and other factors that could cause actual results and events to differ materially, as discussed in the Company’s filings with the Securities and Exchange Commission. 

For more information, please contact F. Stephen Ward, First National Lincoln Corporation’s Treasurer & Chief Financial Officer, at 207.563.3195 ext. 5001.

 

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| **First National Lincoln Corporation**                                                                                                 |
|----------------------------------------------------------------------------------------------------------------------------------------|
| ***Consolidated Balance Sheets (Unaudited)*****                                                                                        |
| * *                                                                                                                               | * * | * * | * * |
|                                                                                                                                   | **June 30,** | December 31, | June 30, |
| *In thousands of dollars***                                                                                                            | **2007** | 2006 | 2006 |
| **Assets**                                                                                                                             |   |   |   |
| Cash and due from banks                                                                                                                | **$21,349** | $24,188 | $22,606 |
| Overnight funds sold                                                                                                                   | **-** | - | - |
| Securities available for sale                                                                                                          | **43,009** | 44,815 | 50,486 |
| Securities to be held to maturity (fair value $152,876 at June 30, 2007, $134,649 at December 31, 2006, and $136,317 at June 30, 2006) | **157,161** | 135,734 | 139,232 |
| Loans held for sale (fair value approximates cost)                                                                                     | **44** | 460 | 240 |
| Loans                                                                                                                                  | **877,220** | 838,145 | 825,699 |
| Less: allowance for loan losses                                                                                                        | **6,714** | 6,364 | 6,021 |
| Net loans                                                                                                                              | **870,506** | 831,781 | 819,678 |
| Accrued interest receivable                                                                                                            | **7,876** | 6,140 | 6,904 |
| Premises and equipment                                                                                                                 | **15,615** | 15,845 | 16,285 |
| Other real estate owned                                                                                                                | **625** | 1,144 | 1,413 |
| Goodwill                                                                                                                               | **27,684** | 27,684 | 27,684 |
| Other assets                                                                                                                           | **17,405** | 17,078 | 16,055 |
| **Total Assets**                                                                                                                       | **$1,161,274** | $1,104,869 | $1,100,583 |
| **Liabilities**                                                                                                                        |   |   |   |
| Demand deposits                                                                                                                        | **$63,063** | $62,157 | $60,941 |
| NOW deposits                                                                                                                           | **101,908** | 99,612 | 102,618 |
| Money market deposits                                                                                                                  | **121,352** | 137,163 | 110,313 |
| Savings deposits                                                                                                                       | **89,798** | 98,131 | 99,176 |
| Certificates of deposit                                                                                                                | **364,611** | 164,770 | 161,418 |
| Certificates $100,000 and over                                                                                                         | **110,357** | 243,402 | 252,495 |
| Total deposits                                                                                                                         | **851,089** | 805,235 | 786,961 |
| Borrowed funds                                                                                                                         | **188,478** | 179,862 | 196,649 |
| Other liabilities                                                                                                                      | **11,494** | 12,445 | 11,343 |
| Total Liabilities                                                                                                                      | **1,051,061** | 997,542 | 994,953 |
| **Shareholders' Equity**                                                                                                               |   |   |   |
| Common stock                                                                                                                           | **98** | 98 | 99 |
| Additional paid-in capital                                                                                                             | **45,817** | 45,587 | 46,917 |
| Retained earnings                                                                                                                      | **64,213** | 61,298 | 58,202 |
| Net unrealized gains on securities available-for-sale                                                                                  | **428** | 696 | 412 |
| Net unrealized loss on postretirement benefit costs                                                                                    | **(343)** | (352) | - |
| Total Shareholders' Equity                                                                                                             | **110,213** | 107,327 | 105,630 |
| **Total Liabilities & Shareholders' Equity**                                                                                       | **$1,161,274** | $1,104,869 | $1,100,583 |
|  **                                                                                                                               |   |   |   |
| **Common Stock**                                                                                                                       |   |   |   |
| Number of shares authorized                                                                                                            | **18,000,000** | 18,000,000 | 18,000,000 |
| Number of shares issued and outstanding                                                                                                | **9,802,892** | 9,770,792 | 9,817,897 |
| Book value per share                                                                                                                   | **$11.24** | $10.98 | $10.76 |
| Tangible book value per share                                                                                                          | **$8.42** | $8.15 | $7.94 |

 

 

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| **First National Lincoln Corporation**                |
|-------------------------------------------------------|
| ***Consolidated Statements of Income (Unaudited)***** |
| * *                                              | * * | * * | * * | * * |
|                                                  | **For the six months ended** | **For the quarters ended** |
|                                                  | **June 30,** | **June 30,** |
| *In thousands of dollars***                           | **2007** | 2006 | **2007** | 2006 |
| **Interest income**                                   |   |   |   |   |
| Interest and fees on loans                            | **$29,405** | $25,910 | **$14,943** | $13,403 |
| Interest on deposits with other banks                 | **-** | - | **-** | - |
| Interest and dividends on investments                 | **5,045** | 4,735 | **2,559** | 2,430 |
| Total interest income                                 | **34,450** | 30,645 | **17,502** | 15,833 |
| **Interest expense**                                  |   |   |   |   |
| Interest on deposits                                  | **14,868** | 11,053 | **7,640** | 5,933 |
| Interest on borrowed funds                            | **4,405** | 4,350 | **2,250** | 2,405 |
| Total interest expense                                | **19,273** | 15,403 | **9,890** | 8,338 |
| Net interest income                                   | **15,177** | 15,242 | **7,612** | 7,495 |
| Provision for loan losses                             | **550** | 600 | **250** | 350 |
| Net interest income after provision for loan losses   | **14,627** | 14,642 | **7,362** | 7,145 |
| **Non-interest income**                               |   |   |   |   |
| Investment management and fiduciary income            | **955** | 973 | **453** | 477 |
| Service charges on deposit accounts                   | **1,400** | 1,350 | **741** | 728 |
| Net securities gains                                  | **-** | - | **-** | - |
| Mortgage origination and servicing income             | **214** | 252 | **114** | 169 |
| Other operating income                                | **2,048** | 1,858 | **1,162** | 986 |
| Total non-interest income                             | **4,617** | 4,433 | **2,470** | 2,360 |
| **Non-interest expense**                              |   |   |   |   |
| Salaries and employee benefits                        | **5,335** | 5,170 | **2,622** | 2,508 |
| Occupancy expense                                     | **748** | 757 | **370** | 382 |
| Furniture and equipment expense                       | **969** | 997 | **495** | 492 |
| Amortization of identified intangibles                | **142** | 142 | **71** | 71 |
| Other operating expense                               | **3,409** | 3,450 | **1,794** | 1,628 |
| Total non-interest expense                            | **10,603** | 10,516 | **5,352** | 5,081 |
| Income before income taxes                            | **8,641** | 8,559 | **4,480** | 4,424 |
| Applicable income taxes                               | **2,443** | 2,411 | **1,284** | 1,252 |
| **NET INCOME**                                        | **$6,198** | $6,148 | **$3,196** | $3,172 |
|  **                                              |   |   |   |   |
| **Earnings per common share:**                        |   |   |   |   |
| Basic earnings per share                              | **$0.63** | $0.62 | **$0.33** | $0.32 |
| Diluted earnings per share                            | **$0.63** | $0.62 | **$0.33** | $0.32 |
| Cash dividends declared per share                     | **$0.335** | $0.295 | **$0.170** | $0.150 |

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| **First National Lincoln Corporation**      |
|---------------------------------------------|
| ***Selected Financial Data (Unaudited)***** |
|                                        |
|                                        | **For the six months ended** | **For the quarters ended** |
| *Dollars in thousands,***                   | **June 30** | **June 30** |
| *except for per share amounts***            | **2007** | 2006 | **2007** | 2006 |
|                                        |   |   |   |   |
| ***Summary of Operations*****               |   |   |   |   |
| Interest Income                             | **$34,450** | $30,645 | **$17,502** | $15,833 |
| Interest Expense                            | **19,273** | 15,403 | **9,890** | 8,338 |
| Net Interest Income                         | **15,177** | 15,242 | **7,612** | 7,495 |
| Provision for Loan Losses                   | **550** | 600 | **250** | 350 |
| Non-Interest Income                         | **4,617** | 4,433 | **2,470** | 2,360 |
| Non-Interest Expense                        | **10,603** | 10,516 | **5,352** | 5,081 |
| Net Income                                  | **6,198** | 6,148 | **3,196** | 3,172 |
| ***Per Common Share Data*****               |   |   |   |   |
| Basic Earnings per Share                    | **$0.63** | $0.62 | **$0.33** | $0.32 |
| Diluted Earnings per Share                  | **0.63** | 0.62 | **0.33** | 0.32 |
| Cash Dividends Declared                     | **0.335** | 0.295 | **0.170** | 0.150 |
| Book Value                                  | **11.24** | 10.76 | **11.24** | 10.76 |
| Tangible Book Value                         | **8.42** | 7.94 | **8.42** | 7.94 |
| Market Value                                | **17.00** | 16.83 | **17.00** | 16.83 |
| ***Financial Ratios*****                    |   |   |   |   |
| Return on Average Equity (a)                | **11.49%** | 11.83% | **11.72%** | 12.10% |
| Return on Average Tangible Equity (a)       | **15.41%** | 16.07% | **15.70%** | 16.42% |
| Return on Average Assets (a)                | **1.12%** | 1.17% | **1.13%** | 1.19% |
| Average Equity to Average Assets            | **9.72%** | 9.86% | **9.67%** | 9.81% |
| Average Tangible Equity to Average Assets   | **7.25%** | 7.26% | **7.22%** | 7.23% |
| Net Interest Margin Tax-Equivalent (a)      | **3.12%** | 3.33% | **3.07%** | 3.21% |
| Dividend Payout Ratio                       | **53.17%** | 47.58% | **51.52%** | 46.88% |
| Allowance for Loan Losses/Total Loans       | **0.77%** | 0.73% | **0.77%** | 0.73% |
| Non-Performing Loans to Total Loans         | **0.24%** | 0.31% | **0.24%** | 0.31% |
| Non-Performing Assets to Total Assets       | **0.18%** | 0.23% | **0.18%** | 0.23% |
| Efficiency Ratio                            | **50.79%** | 50.80% | **50.41%** | 48.99% |
| ***At  Period End*****                      |   |   |   |   |
| Total Assets                                | **$1,161,274** | $1,100,583 | **$1,161,274** | $1,100,583 |
| Total Loans                                 | **877,220** | 825,699 | **877,220** | 825,699 |
| Total Investment Securities                 | **200,170** | 189,718 | **200,170** | 189,718 |
| Total Deposits                              | **851,089** | 786,961 | **851,089** | 786,961 |
| Total Shareholders’ Equity             | **110,213** | 105,630 | **110,213** | 105,630 |
| *(a) Annualized using a 365-day basis***    |

 

 

 

 

 

 

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