The First Bancorp Reports Second Quarter Results



DAMARISCOTTA, ME, July 22  The First Bancorp (Nasdaq: FNLC), today announced unaudited results for the quarter ended June 30, 2009, with net income of $3.8 million, an increase of $159,000 or 4.4% from the second quarter of 2008 and up $34,000 or 0.9% from the previous quarter. Earnings per common share on a fully diluted basis were $0.35 for the quarter ended June 30, 2009, down $0.02 or 5.4% from the second quarter of 2008 and from the previous quarter.

The Company also announced unaudited results for the first six months of 2009, with net income of $7.5 million, up $296,000 or 4.1% from the $7.2 million posted for the same period in 2008. Earnings per common share on a fully diluted basis were $0.72 for the six-months ended June 30, 2009, down $0.02 or 2.7% from the $0.74 posted for the same period in 2008.

We continue to benefit from the current low interest rate environment and the steep yield curve, noted Daniel R. Daigneault, the Companys President & Chief Executive Officer. This is best reflected in net interest income, which was up $4.8 million or 26.8% over the first six months of 2008. While income from earning assets declined by 8.3% compared to the first six months of 2008, funding costs declined 42.7%. As a result, we saw our net interest margin widen from 3.23% for the first six months of 2008 to 3.68% for the first six months of 2009.

At the same time, we see continued deterioration in credit quality, President Daigneault went on. With broad-based weakness in the economy, a continued slump in the housing market and unemployment at 9.4%, which is at the highest level it has been since 1983, we are in the longest and possibly the worst recession since the Great Depression of the 1930s. Also not reflected in these unemployment numbers is the number of people who have experienced reduced incomes from wage cutbacks and loss of overtime. In Maine, many people are self-employed and are also experiencing a decline in business revenues impacting their individual incomes as well.

All of these factors have contributed to an increase in the Companys non-performing loans, President Daigneault noted, which stood at 1.57% of total loans as of June 30, 2009, compared to 0.40% a year ago and 1.32% as of March 31, 2009. While this is a large increase in problem loans during the past year, it remains much lower than the average for our peer group, which reported non-performing loans at 2.78% of total loans. It is also much lower than the average for all commercial banks in Maine, with non-performing loans at 2.08% of total loans. These






averages were as of March 31, 2009, the latest peer data available. Past due loans, the other primary indicator of credit quality, were 3.02% of total loans as of June 30, 2009, virtually level for the past six months but up from 1.84% a year ago.

Given the increase in non-performing loans and the continued weakness in the economy, we provisioned $4.6 million to the allowance for loan losses during the first six months of 2009 compared to $1.4 million for the same period in 2008, President Daigneault said. As a result, our allowance for loan losses has increased by $3.0 million in the first six months of 2009 and is now at $11.8 million or 1.20% of total loans compared to 0.82% a year ago and 0.99% at the end of the previous quarter. In our view, the increase in the allowance for loan losses is directionally consistent with the deterioration in credit quality of our loan portfolio, as well as with the performance of the national and local economies, higher levels of unemployment and the outlook for the recession continuing for some time to come.  Actual loan losses for the first half of 2009 were
$1.6 million or 0.33% of total loans on an annualized basis compared to losses of 0.20% for the first six months of 2008.  In comparison, for the year ended December 31, 2008, net chargeoffs were $2.7 million or 0.28% of loans outstanding.

In the investment portfolio, we now have only two investment securities totaling $446,000 that are rated sub-investment grade, observed F. Stephen Ward, The First Bancorps Chief Financial Officer. As of June 30, 2009, corporate securities totaled only $2.0 million or 0.7% of the Companys $298.3 million investment portfolio, the result of selling almost all of our corporate securities during the past eight months to lower the portfolios exposure to credit risk. We have one corporate bond in the portfolio classified as other-than-temporarily-impaired which resulted in a $916,000 pre-tax write down in the first quarter of 2009.

While assets are up $44.2 million or 3.3% year-to-date, Mr. Ward observed, in the second quarter assets decreased $28.5 million or 2.0% due to mortgages refinancing to the secondary market and called securities not being replaced. Year-to-date, the loan portfolio is virtually unchanged, with excellent growth in commercial loans offset by the decline in mortgages. Despite a decline in the second quarter, the investment portfolio is up $35.8 million or 13.6% year-to-date due to the purchase of GNMA securities. Our asset growth in 2009 has been funded with a mix of wholesale deposits and borrowed funds. Low-cost deposits are down $9.6 million or 3.7% year-to-date, however this is in line with our normal seasonal pattern.






We also added $25.0 million in preferred stock in the first quarter under the U.S. Treasury Capital Purchase Program, CFO Ward stated. Our participation in the program provides us with greater ability to ride out the current economic storm, especially if conditions worsen, and also provides greater ability to work with individuals and businesses as they also struggle through these adverse economic conditions. We continue to be considered well-capitalized by FDIC standards with total risk-based capital at nearly 14.0%, well above the well-capitalized threshold of 10.0% set by the FDIC.

In the first half of 2009, the Bank recognized $630,000 in expense for a one-time special FDIC insurance assessment, Mr. Ward said. This special assessment was levied on all banks in the country based upon their size and is in addition to the higher quarterly premiums being charged to the banks to replenish the FDIC insurance fund which has been used to cover the losses of failed banks.

Despite the larger than normal provision for loan losses we have made in the first half of 2009, the Companys operating ratios remain strong. President Daigneault noted. Our return on average tangible common equity was 16.18% for the first six months of 2009, well above the 15.0% high-performance threshold. Our efficiency ratio is excellent at 40.78% for the first six months of 2009 compared to 45.97% for the same period in 2008. Maintaining a low efficiency ratio continues to be an important factor in our overall performance and the year-over-year improvement was driven by the significant increase in net interest income while operating expense increased only modestly. As of March 31, 2009, the average efficiency ratio for our peer group was 68.97%.

Our price per share closed the quarter at $19.47, President Daigneault observed, down $0.42 from the December 31, 2008 closing price of $19.89 per share. Because of our market capitalization, we continue to be included in the Russell 2000 and Russell 3000 indices, and on June 27, the day each year these indices are reconstituted, we had a high close for the year of $21.78 per share. Our year-to-date total return with dividends reinvested was -1.0%, which compares to -36.5% for the KBW Regional Bank Index and +2.6% and +4.2% for the Russell 2000 and Russell 3000 indices, respectively.

Despite the challenges we have faced in the current recession, The First Bancorp has done well in the first half of 2009, President Daigneault concluded. Our strong net interest income and mortgage origination income have offset a much higher provision for loan losses, a one-time






special assessment for FDIC insurance and the write down of an investment security for other-than-temporary-impairment. We also remain very well-capitalized, which is an important concern for all banks today. And finally, we have been able to maintain our quarterly dividend at $0.195 per share, which we feel is important to most of our shareholders.

The First Bancorp, 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, The First Bancorps Treasurer & Chief Financial Officer, at 207.563.3195 ext. 5001.








The First BancorpConsolidated Balance Sheets (Unaudited)In thousands of dollars

        6/30/2009

        12/31/2008

        6/30/2008AssetsCash and due from banks

        $ 18,575

        $ 16,856

        $ 19,997Overnight funds sold

        -

        -

        -Securities available for sale

        50,665

        27,765

        36,850Securities to be held to maturity

        247,627

        234,767

        209,528Loans held for sale

        3,162

        1,298

        2,253Loans

        982,336

        979,273

        951,814Less allowance for loan losses

        11,752

        8,800

        7,800Net loans

        970,584

        970,473

        944,014Accrued interest receivable

        7,140

        5,783

        7,886Premises and equipment

        18,610

        16,028

        16,046Other real estate owned

        2,797

        2,428

        1,558Goodwill

        27,684

        27,684

        27,684Other assets

        23,142

        22,662

        19,557Total assets

        $ 1,369,986

        $ 1,325,744

        $ 1,285,373LiabilitiesDemand deposits

        $ 63,266

        $ 68,399

        $ 62,755NOW deposits

        100,283

        108,188

        108,543Money market deposits

        104,803

        129,333

        114,096Savings deposits

        86,305

        82,867

        87,023Certificates of deposit

        202,039

        246,152

        339,620Certificates $100,000 and over

        357,253

        290,797

        130,083Total deposits

        913,949

        925,736

        842,120Borrowed funds

        297,361

        272,074

        317,055Other liabilities

        12,478

        10,753

        11,440Total Liabilities

        1,223,788

        1,208,563

        1,170,615Shareholders' equityPreferred stock

        24,557

        -

        -Common stock

        97

        97

        97Additional paid-in capital

        44,958

        44,117

        44,030Retained earnings

        77,320

        74,057

        70,996Net unrealized gains on securities available-for-sale

        (472)

        (819)

        (100)Net unrealized loss on postretirement benefit costs

        (262)

        (271)

        (265)Total shareholders' equity

        146,198

        117,181

        114,758Total liabilities & shareholders' equity

        $ 1,369,986

        $ 1,325,744

        $ 1,285,373Common StockNumber of shares authorized

        18,000,000

        18,000,000

        18,000,000Number of shares issued and outstanding

        9,722,204

        9,696,397

        9,690,182Book value per share

        $12.51

        $12.09

        $11.84Tangible book value per share

        $9.66

        $9.23

        $8.99











The First BancorpConsolidated Statements of Income (Unaudited)For the six months ended

        For the quarters endedIn thousands of dollars

        6/30/2009

        6/30/2008

        6/30/2009

        6/30/2008Interest incomeInterest and fees on loans

        $25,533

        $29,649

        $12,606

        $14,357Interest on deposits with other banks

        -

        -

        -

        -Interest and dividends on investments

        7,336

        6,195

        3,645

        3,157Total interest income

        32,869

        35,844

        16,251

        17,514Interest expenseInterest on deposits

        6,694

        12,349

        3,049

        5,910Interest on borrowed funds

        3,665

        5,736

        1,765

        2,662Total interest expense

        10,359

        18,085

        4,814

        8,572Net interest income

        22,510

        17,759

        11,437

        8,942Provision for loan losses

        4,600

        1,439

        2,950

        939Net interest income after provision for loan losses

        17,910

        16,320

        8,487

        8,003Non-interest incomeInvestment management and fiduciary income

        678

        780

        353

        390Service charges on deposit accounts

        1,158

        1,488

        600

        805Net securities gains

        -

        28

        -

        -Mortgage origination and servicing income

        1,543

        216

        862

        123Other operating income

        2,170

        2,182

        1,148

        1,200Total non-interest income

        5,549

        4,694

        2,963

        2,518Non-interest expenseSalaries and employee benefits

        5,152

        5,680

        2,563

        2,755Occupancy expense

        834

        774

        393

        363Furniture and equipment expense

        1,138

        942

        569

        452Net securities losses

        148

        -

        6

        -Other than temporary impairment charge

        916

        -

        -

        -Amortization of identified intangibles

        142

        142

        71

        71Other operating expense

        4,691

        3,336

        2,632

        1,784Total non-interest expense

        13,021

        10,874

        6,234

        5,425Income before income taxes

        10,438

        10,140

        5,216

        5,096Applicable income taxes

        2,948

        2,946

        1,454

        1,493NET INCOME

        $7,490

        $7,194

        $3,762

        $3,603Earnings per common shareNet income, as reported

        $7,490

        $7,194

        $3,762

        $3,603Less dividends and amortization of premium
on preferred stock

        487

        -

        337

        -Net income available to common

        $7,004

        $7,194

        $3,425

        $3,603Basic earnings per share

        $0.72

        $0.74

        $0.35

        $0.37Diluted earnings per share

        $0.72

        $0.74

        $0.35

        $0.37Weighted average number of shares outstanding

        9,712,252

        9,711,869

        9,718,650

        9,707,568Incremental shares

        16,951

        19,377

        21,626

        20,298











The First BancorpSelected Financial Data (Unaudited)Dollars in thousands,

        For the six months ended

        For the quarters endedexcept for per share amounts

        6/30/2009

        6/30/2008

        6/30/2009

        6/30/2008Summary of OperationsInterest Income

        $32,869

        $35,844

        $16,251

        $17,514Interest Expense

        10,359

        18,085

        4,814

        8,572Net Interest Income

        22,510

        17,759

        11,437

        8,942Provision for Loan Losses

        4,600

        1,439

        2,950

        939Non-Interest Income

        5,549

        4,694

        2,963

        2,518Non-Interest Expense

        13,021

        10,874

        6,234

        5,425Net Income

        7,490

        7,194

        3,762

        3,603Per Common Share DataBasic Earnings per Share

        $0.72

        $0.74

        $0.35

        $0.37Diluted Earnings per Share

        0.72

        0.74

        0.35

        0.37Cash Dividends Declared

        0.390

        0.375

        0.195

        0.190Book Value

        12.51

        11.84

        12.51

        11.84Tangible Book Value

        9.66

        8.99

        9.66

        8.99Market Value

        $19.47

        $13.65

        $19.47

        $13.65Financial RatiosReturn on Average Equity (a)

        12.48%

        12.68%

        12.60%

        12.63%Return on Average Tangible Equity (a)

        16.18%

        16.76%

        16.40%

        16.66%Return on Average Assets (a)

        1.10%

        1.16%

        1.11%

        1.15%Average Equity to Average Assets

        10.54%

        9.17%

        10.46%

        9.13%Average Tangible Equity to Average Assets

        8.52%

        6.94%

        8.43%

        6.92%Net Interest Margin Tax-Equivalent (a)

        3.68%

        3.23%

        3.76%

        3.21%Dividend Payout Ratio

        54.17%

        50.68%

        55.71%

        51.35%Allowance for Loan Losses/Total Loans

        1.20%

        0.82%

        1.20%

        0.82%Non-Performing Loans to Total Loans

        1.57%

        0.40%

        1.57%

        0.40%Non-Performing Assets to Total Assets

        1.36%

        0.29%

        1.36%

        0.29%Efficiency Ratio

        40.78%

        45.97%

        41.40%

        45.02%At  Period EndTotal Assets

        $1,369,986

        $1,285,373

        $1,369,986

        $1,285,373Total Loans

        982,336

        951,814

        982,336

        951,814Total Investment Securities

        298,292

        246,378

        298,292

        246,378Total Deposits

        913,949

        842,120

        913,949

        842,120Total Shareholders Equity

        146,198

        114,758

        146,198

        114,758(a) Annualized using a 365-day basis in 2009 and 366-day basis in 2008