First Bancorp, Inc /ME/

The First Bancorp, Inc. operates as a financial holding company whose principal asset is the common stock of its wholly owned subsidiary, First National Bank, a national bank chartered under the laws of the United States on May 30, 1864. The Bank offers traditional banking products and services including deposit accounts, cash management and payment processing solutions, and consumer, commercial and mortgage loans, emphasizing personal service to a customer base consisting primarily of small businesses, government entities, non-profit organizations, and individuals located or residing within its markets in Mid-Coast and Eastern Maine. The banking business in the Bank's market area is subject to modest seasonal fluctuations typically consisting of lower deposits in the winter and spring and higher deposits in the summer and fall. The financial services landscape has continued to evolve, with Maine-based community banks being the primary competitors for wallet share, while large out-of-state banks, smaller local credit unions, and non-banking entities such as brokerage houses, mortgage companies and insurance companies also offer competitive products, many with resources substantially greater than those available to the Bank.

Within the Bank's primary market area, Maine-based community banks are the primary competitors for wallet share, while large out-of-state banks continue to be a presence as do smaller, local credit unions offering similar products and services. The introduction and acceptance of various digital currencies represents an emerging form of competition for deposits and payment services. The Company believes there will continue to be a need for a bank with local management having decision-making power and emphasizing loans to small and medium-sized businesses and to individuals. The Bank has concentrated on extending business loans to such customers in its primary market area and to extending investment and trust services to clients with accounts of all sizes. 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 Company generates almost all of its revenues from the Bank, which derives the majority of its revenues from net interest income – the spread between what it earns on loans and investments and what it pays for deposits and borrowed funds. Non-interest income is the Bank's secondary source of revenue and includes fees and service charges on deposit accounts and services, interchange from debit cards, income from the sale and servicing of mortgage loans, and income from investment management and private banking services through First National Wealth Management, an operating division of the Bank. The Bank offers traditional banking products and services including deposit accounts, cash management and payment processing solutions, and consumer, commercial and mortgage loans. In addition to traditional banking services, the Company provides investment management and private banking services through First National Wealth Management, which offers a comprehensive array of private banking, financial planning, investment management and trust services to individuals, businesses, non-profit organizations and municipalities of varying asset size. In 2019, the Bank introduced First National Investment Services, which through a partnership with a third party provider offers additional products such as brokerage, annuity products and certain types of insurance.

The loan portfolio is segmented into eleven classes. Commercial loans comprise six of the classes: commercial real estate owner occupied, commercial real estate non-owner occupied, commercial construction, commercial and industrial, multifamily and agriculture. Residential mortgage loans comprise two of the classes: residential real estate term and residential real estate construction. The remaining classes are municipal loans, home equity loans, and consumer loans. As of December 31, 2025, total loans were $2.394 billion ¹, with commercial loans of $981.4 million ² or 41.0% ³ of total loans, residential term loans of $739.188 million ⁴ or 30.9% ⁵ of total loans, home equity lines of credit of $142.219 million ⁶ or 5.9% ⁷ of total loans, and municipal loans of $52.074 million ⁸ or 2.2% ⁹ of total loans. The Bank had one concentration of loans in one particular industry that exceeded 10% of its total loan portfolio: loans to lessors of residential buildings and dwellings, totaling $266.1 million ¹⁰, or 11.11% ¹¹.

The investment portfolio, including restricted equity securities, totaled $628.683 million ¹² as of December 31, 2025, consisting of securities available for sale of $264.480 million ¹³, securities held to maturity (net of ACL) of $355.928 million ¹⁴, and restricted equity securities of $8.275 million ¹⁵. The securities available for sale portfolio includes U.S. Treasury and Agency securities of $18.072 million ¹⁶, mortgage-backed securities of $210.434 million ¹⁷, state and political subdivisions of $33.990 million ¹⁸, and asset-backed securities of $1.984 million ¹⁹. The securities held to maturity portfolio includes U.S. Treasury and Agency securities of $38.100 million ²⁰, mortgage-backed securities of $48.566 million ²¹, state and political subdivisions of $248.408 million ²², and corporate securities of $21.000 million ²³. As of December 31, 2025, First National Wealth Management had assets under management or custody with a market value of $1.384 billion ²⁴, consisting of 1,306 ²⁵ trust accounts, estate accounts, agency accounts, and self-directed individual retirement accounts.

During 2025, total assets increased $9.3 million ²⁶ or 0.3% ²⁷, ending the year at $3.166 billion ²⁸. The loan portfolio increased $53.2 million ²⁹ or 2.3% ³⁰ in 2025. The investment portfolio was down $22.9 million ³¹ or 3.5% ³². Core deposits increased $77.0 million ³³ or 4.8% ³⁴, to $1.687 billion ³⁵ as of December 31, 2025. Certificates of deposit decreased $137.5 million ³⁶ or 12.3% ³⁷ from the end of 2024. Net income for the year ended December 31, 2025 was $34.394 million ³⁸, up $7.3 million ³⁹ or 27.2% ⁴⁰ from $27.045 million ⁴¹ for the year ended December 31, 2024. Earnings per common share on a fully diluted basis were $3.07 ⁴² and $2.43 ⁴³, respectively, for the same periods, up $0.64 ⁴⁴ or 26.3% ⁴⁵. On a tax-equivalent basis, net interest income increased $13.5 million ⁴⁶ or 20.3% ⁴⁷ for the year ended December 31, 2025 compared to the year ended December 31, 2024. The Company's tax-equivalent net interest margin was 2.63% ⁴⁸ in 2025, compared to 2.29% ⁴⁹ in 2024. Non-interest income in 2025 was $17.340 million ⁵⁰, an increase of $985,000 ⁵¹ or 6.0% ⁵² from the $16.355 million ⁵³ reported in 2024. Non-interest expense in 2025 was $50.928 million ⁵⁴, an increase of $3.8 million ⁵⁵ or 8.0% ⁵⁶ from the $47.156 million ⁵⁷ reported in 2024. Return on average assets was 1.08% ⁵⁸ and return on average tangible common equity was 14.50% ⁵⁹ for the year ended December 31, 2025.

The Company reported net income for the year ended December 31, 2025 of $34.394 million ⁶⁰, up $7.3 million ⁶¹ or 27.2% ⁶² from $27.045 million ⁶³ reported for the year ended December 31, 2024. Earnings per common share on a fully diluted basis were $3.07 ⁶⁴ and $2.43 ⁶⁵, respectively, for the same periods, up $0.64 ⁶⁶ or 26.3% ⁶⁷. Net interest margin expansion, which began in the second half of 2024, continued and accelerated throughout 2025 leading to a significant increase in net interest income and ultimately improved bottom-line profitability. Margin expansion was achieved via a focus on generation of lower-cost local deposits to replace higher-cost wholesale sources, scheduled re-pricing of legacy earning assets, targeted origination of new earning assets, and pricing discipline on both sides of the balance sheet. Total assets increased $9.3 million ⁶⁸ or 0.3% ⁶⁹, ending the year at $3.166 billion ⁷⁰. The loan portfolio increased $53.2 million ⁷¹ or 2.3% ⁷² in 2025, ending the year at $2.394 billion ⁷³. The investment portfolio was down $22.9 million ⁷⁴ or 3.5% ⁷⁵. Core deposits increased $77.0 million ⁷⁶ or 4.8% ⁷⁷, to $1.687 billion ⁷⁸ as of December 31, 2025. Certificates of deposit decreased $137.5 million ⁷⁹ or 12.3% ⁸⁰ from the end of 2024. Asset quality continues to be favorable. Non-performing loans stood at 0.54% ⁸¹ of total loans as of December 31, 2025 up from 0.18% ⁸² of non-performing loans a year ago. Net chargeoffs were $1.6 million ⁸³, or 0.07% ⁸⁴ of average loans in 2025, compared to $463,000 ⁸⁵, or 0.02% ⁸⁶ of average loans for the year ended December 31, 2024. The allowance as a percentage of loans outstanding stood at 1.06% ⁸⁷ in 2025, level with December 31, 2024. The Company's total risk-based capital ratio was 14.02% ⁸⁸ as of December 31, 2025.

The Company's primary growth vector is the continued expansion of its core deposit base, with a focus on generation of lower-cost local deposits to replace higher-cost wholesale sources. During 2025, core deposit balances increased $77.0 million ⁸⁹ or 4.8% ⁹⁰, focused in money market accounts, while certificates of deposit decreased $137.5 million ⁹¹ or 12.3% ⁹² with the preponderance of the decrease being brokered time deposits. The Bank continually evolves its processes and adapts to new technologies, with recent investments including areas such as mobile and digital banking, commercial loan origination, and document imaging. Additional investment has been made in new software platforms for commercial and residential lending. The Bank also continues to evaluate potential operational, regulatory, data security, and other opportunities and risks associated with AI technologies, having established a cross-functional task force to analyze current and future use cases for AI and to promote effective and secure implementation.

First National Wealth Management represents another growth vector, with revenue growth of $464,000 ⁹³ or 9.3% ⁹⁴ from 2024. As of December 31, 2025, First National Wealth Management had assets under management or custody with a market value of $1.384 billion ⁹⁵, consisting of 1,306 ⁹⁶ trust accounts, estate accounts, agency accounts, and self-directed individual retirement accounts, compared to December 31, 2024, when 1,272 ⁹⁷ accounts with a market value of $1.290 billion ⁹⁸ were under management or custody. The Bank also continues to invest in enhancing its online and mobile offerings to both enhance service delivery and provide additional channels for customers to conduct business with the Bank.

The Company's non-GAAP efficiency ratio improved to 52.09% ⁹⁹ for 2025, compared to 56.66% ¹⁰⁰ in 2024. The GAAP-based efficiency ratio was 53.77% ¹⁰¹ in 2025 compared to 58.75% ¹⁰² in 2024. Employee salary and benefit expense increased $2.8 million ¹⁰³ or 11.4% ¹⁰⁴ from the prior year, attributable to a combination of salary adjustments, incentive compensation accruals, increased benefit costs, and several one-time expenses resulting from retirements. FDIC insurance premiums increased by $331,000 ¹⁰⁵ attributable to various factor changes in the premium calculation. Furniture and equipment expense was up $256,000 ¹⁰⁶ or 4.6% ¹⁰⁷ on higher software costs.

The Company made capital purchases totaling $3.2 million ¹⁰⁸ in 2025 for facility improvements to branch or operations premises and technology investments in various hardware and software, which will be amortized over an average of seven years, adding approximately $200,000 ¹⁰⁹ to pre-tax operating costs per year. As of December 31, 2025, the Company had 283 ¹¹⁰ employees and full-time equivalency of 278 ¹¹¹ 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 available to all employees.

During 2025, the Company declared cash dividends of $0.36 ¹¹² per share in the first quarter and $0.37 ¹¹³ per share in the remaining three quarters, or $1.47 ¹¹⁴ per share for the year, resulting in total dividends for the year ended December 31, 2025 of $16.3 million ¹¹⁵. The dividend payout ratio was 47.39% ¹¹⁶ for the year ended December 31, 2025 compared to 58.44% ¹¹⁷ for the year ended December 31, 2024. The Company does not currently have an active share repurchase program. In 2025, 79,944 ¹¹⁸ shares were issued via employee stock programs, the dividend reinvestment plan, and restricted stock grants, with the Company receiving consideration totaling $916,000 ¹¹⁹. The Company made repurchases of 10,784 ¹²⁰ shares of its common stock during the year ended December 31, 2025 at an average price of $25.74 ¹²¹ per share, consisting of shares repurchased from employees for purposes of paying tax obligations on equity grants that have vested.

The Company faces structural headwinds from the competitive landscape, as the financial services industry is continually undergoing technological change with frequent introductions of new technology driven products and services, and the Company's largest competitors have substantially greater resources to invest in technological improvements. The introduction and growing acceptance of digital currencies represents an emerging form of competition for deposits and payment services. Additionally, the Company's business and earnings are affected significantly by the fiscal and monetary policies of the federal government and its agencies, particularly the policies of the Federal Reserve Board, which regulates the supply of money and credit in the United States. The Company's earnings and cash flows are largely dependent upon net interest income, which is highly sensitive to interest rate changes that are beyond the Company's control.

The Company's primary market area is Mid-Coast and Eastern Maine, and as a result of this geographic concentration, a significant broad-based deterioration in economic conditions in this area of Northern New England could have a material adverse impact on the quality of the Bank's loan portfolio. The Bank's loan portfolio is largely secured by real estate collateral located in this region, and conditions in the real estate market strongly influence the level of non-performing loans and results of operations. The Maine foreclosure process can be lengthy, with residential foreclosures occurring through the judicial system, potentially taking up to two years or longer if contested, which can result in additional legal fees and other costs for the Bank.

The Company faces material credit risk from its commercial, commercial real estate, and commercial construction loan portfolio, which totaled $981.4 million ¹²² or 41.0% ¹²³ of total loans at December 31, 2025, as these loans generally carry larger balances and can involve a greater degree of financial and credit risk than other types of loans. The Bank's loan portfolio is largely secured by real estate collateral located in Mid-Coast and Eastern Maine, creating a geographic concentration risk where a significant broad-based deterioration in economic conditions or real estate values in this primary market area could have a material adverse impact on loan quality and results of operations. Changes in interest rates have and could continue to adversely affect net interest income and profitability, as the Company's earnings and cash flows are largely dependent upon net interest income, which is highly sensitive to many factors beyond the Company's control including general economic conditions and policies of the Federal Reserve System. The Company's earnings simulation model as of December 31, 2025 projects that net interest income would decrease by approximately 4.0% ¹²⁴ if short-term rates rise gradually by two percentage points over the next year. The Company also faces liquidity risk, as an inability to raise funds through traditional deposits, brokered deposit issuance, secured or unsecured borrowings, or the sale of securities could have a substantial negative effect on liquidity, and if the Bank falls below the FDIC's thresholds to be considered 'well capitalized', it will be unable to issue new brokered deposits or continue to roll over or renew brokered funds.

Management's message emphasizes that earnings for the Company rebounded strongly in 2025, with net interest margin expansion that began in the second half of 2024 continuing and accelerating throughout 2025, leading to a significant increase in net interest income and ultimately improved bottom-line profitability for the Bank and Company. Management states that margin expansion was achieved via a focus on generation of lower-cost local deposits to replace higher-cost wholesale sources, scheduled re-pricing of legacy earning assets, targeted origination of new earning assets, and pricing discipline on both sides of the balance sheet. The key strategic priorities emphasized for the period ahead include continuing to focus on core deposit generation to replace higher-cost wholesale funding, maintaining pricing discipline on both sides of the balance sheet, and managing asset quality, as non-performing loans stood at 0.54% ¹²⁵ of total loans as of December 31, 2025, up from 0.18% ¹²⁶ a year ago, but remaining below long-term averages. Management also notes that the Company's capital position improved in 2025, the result of improved profitability and a slower rate of balance sheet expansion, with the total risk-based capital ratio at 14.02% ¹²⁷ as of December 31, 2025, solidly above the well-capitalized threshold of 10.0% ¹²⁸ set by the FDIC, the FRB, and the OCC.