10-Q 1 fnlc-20150630x10q.htm 10-Q FNLC-2015.06.30-10Q


UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549




FORM 10-Q

[X] Quarterly Report Pursuant to Section 13 or 15(d) of The Securities Exchange Act of 1934
For the quarterly period ended June 30, 2015

Commission File Number 0-26589




THE FIRST BANCORP, INC.
(Exact name of Registrant as specified in its charter)

MAINE
01-0404322
(State or other jurisdiction of incorporation or organization)
(I.R.S. Employer Identification No.)

MAIN STREET, DAMARISCOTTA,  MAINE
04543
(Address of principal executive offices)
 (Zip code)

(207) 563-3195
Registrant's telephone number, including area code




Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Yes [X]    No[_]

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site,
 if any, every,Interactive Data File required to be submitted and posted pursuant to Rule 405
of Regulation S-T (§232.405 of this chapter) during the preceding 12 months
(or for such shorter period that the registrant was required to submit and post such files).
Yes [X]    No[_]

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of "accelerated filer and large accelerated filer" in Rule 12b-2 of the Exchange Act. (Check one):
Large accelerated filer [_]    Accelerated filer [X]    Non-accelerated filer [_]

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act).
Yes [_]    No [X]


Indicate the number of shares outstanding of each of the registrant's classes of common stock as of July 31, 2015
Common Stock: 10,744,988 shares




Table of Contents








Part I. Financial Information

Selected Financial Data (Unaudited)
The First Bancorp, Inc. and Subsidiary
Dollars in thousands,
As of and for the six months ended June 30,
 
As of and for the quarters ended June 30,
 
except for per share amounts
2015
 
2014
 
2015
 
2014
 
Summary of Operations
 
 
 
 
 
 
 
 
Interest Income
$
24,939

 
$
25,363

 
$
12,574

 
$
12,740

 
Interest Expense
5,159

 
5,817

 
2,496

 
2,905

 
Net Interest Income
19,780

 
19,546

 
10,078

 
9,835

 
Provision for Loan Losses
900

 
500

 
400

 
100

 
Non-Interest Income
6,492

 
4,790

 
2,834

 
2,458

 
Non-Interest Expense
14,245

 
14,543

 
6,980

 
7,291

 
Net Income
8,249

 
7,175

 
4,074

 
3,747

 
Per Common Share Data
 
 
 
 
 
 
 
 
Basic Earnings per Share
$
0.77

 
$
0.67

 
$
0.38

 
$
0.35

 
Diluted Earnings per Share
0.77

 
0.67

 
0.38

 
0.35

 
Cash Dividends Declared
0.430

 
0.410

 
0.220

 
0.210

 
Book Value per Common Share
15.25

 
14.70

 
15.25

 
14.70

 
Tangible Book Value per Common Share2
12.45

 
11.87

 
12.45

 
11.87

 
Market Value
19.44

 
17.46

 
19.44

 
17.46

 
Financial Ratios
 
 
 
 
 
 
 
 
Return on Average Equity1
10.09

%
9.40

%
9.87

%
9.59

%
Return on Average Tangible Common Equity1,2
12.35

%
11.71

%
12.07

%
11.90

%
Return on Average Assets1
1.12

%
0.98

%
1.09

%
1.01

%
Average Equity to Average Assets
11.13

%
10.43

%
11.00

%
10.58

%
Average Tangible Equity to Average Assets2
9.09

%
8.37

%
9.00

%
8.53

%
Net Interest Margin Tax-Equivalent1,2
3.08

%
3.11

%
3.07

%
3.10

%
Dividend Payout Ratio
55.84

%
61.19

%
57.89

%
60.00

%
Allowance for Loan Losses/Total Loans
1.03

%
1.31

%
1.03

%
1.31

%
Non-Performing Loans to Total Loans
0.93

%
1.42

%
0.93

%
1.42

%
Non-Performing Assets to Total Assets
0.72

%
1.16

%
0.72

%
1.16

%
Efficiency Ratio2
53.71

%
55.48

%
50.83

%
55.08

%
At Period End
 
 
 
 
 
 
 
 
Total Assets
$
1,553,340

 
$
1,504,080

 
$
1,553,340

 
$
1,504,080

 
Total Loans
963,109

 
891,864

 
963,109

 
891,864

 
Total Investment Securities
476,976

 
515,927

 
476,976

 
515,927

 
Total Deposits
1,096,323

 
1,033,436

 
1,096,323

 
1,033,436

 
Total Shareholders' Equity
163,809

 
157,449

 
163,809

 
157,449

 
1Annualized using a 365-day basis for both years.
2These ratios use non-GAAP financial measures. See Management's Discussion and Analysis of Financial Condition and Results of Operations for additional disclosures and information.

Page 1



Item 1 – Financial Statements










Report of Independent Registered Public Accounting Firm

The Board of Directors and Shareholders
The First Bancorp, Inc.

We have reviewed the accompanying interim consolidated financial information of The First Bancorp, Inc. and Subsidiary as of June 30, 2015 and 2014 and for the three-month and six-month periods then ended. These financial statements are the responsibility of the Company's management.
We conducted our reviews in accordance with standards of the Public Company Accounting Oversight Board (United States). A review of interim financial information consists principally of applying analytical procedures to financial data and making inquiries of persons responsible for financial and accounting matters. It is substantially less in scope than an audit in accordance with standards of the Public Company Accounting Oversight Board (United States), the objective of which is to express an opinion regarding the financial statements taken as a whole. Accordingly, we do not express such an opinion.
Based on our reviews, we are not aware of any material modifications that should be made to the accompanying  interim consolidated financial statements for them to be in conformity with accounting principles generally accepted in the United States of America.


/s/ Berry Dunn McNeil & Parker, LLC
Bangor, Maine
August 7, 2015

Page 2



Consolidated Balance Sheets (Unaudited)
The First Bancorp, Inc. and Subsidiary
 
June 30,
2015
 
December 31, 2014
 
June 30,
2014
Assets
 
 
 
 
 
Cash and cash equivalents
$
16,481,000

 
$
13,057,000

 
$
20,416,000

Interest bearing deposits in other banks
24,565,000

 
3,559,000

 
272,000

Securities available for sale
213,814,000

 
185,261,000

 
303,880,000

Securities to be held to maturity (fair value of $248,698,000 at June 30, 2015, $279,704,000 at December 31, 2014 and $195,550,000 at June 30, 2014)
249,250,000

 
275,919,000

 
198,135,000

Restricted equity securities, at cost
13,912,000

 
13,912,000

 
13,912,000

Loans held for sale

 

 
272,000

Loans
963,109,000

 
917,564,000

 
891,864,000

Less allowance for loan losses
9,908,000

 
10,344,000

 
11,644,000

Net loans
953,201,000

 
907,220,000

 
880,220,000

Accrued interest receivable
6,180,000

 
4,748,000

 
6,247,000

Premises and equipment, net
21,946,000

 
22,619,000

 
21,933,000

Other real estate owned
2,192,000

 
3,785,000

 
4,863,000

Goodwill
29,805,000

 
29,805,000

 
29,805,000

Other assets
21,994,000

 
22,246,000

 
24,125,000

Total assets
$
1,553,340,000

 
$
1,482,131,000

 
$
1,504,080,000

Liabilities
 
 
 
 
 
Demand deposits
$
107,244,000

 
$
113,133,000

 
$
99,210,000

NOW deposits
221,964,000

 
199,977,000

 
174,680,000

Money market deposits
102,219,000

 
98,607,000

 
92,060,000

Savings deposits
186,777,000

 
165,601,000

 
153,602,000

Certificates of deposit
478,119,000

 
447,501,000

 
513,884,000

Total deposits
1,096,323,000

 
1,024,819,000

 
1,033,436,000

Borrowed funds – short term
132,876,000

 
189,775,000

 
183,375,000

Borrowed funds – long term
145,137,000

 
90,141,000

 
115,145,000

Other liabilities
15,195,000

 
15,842,000

 
14,675,000

Total liabilities
1,389,531,000

 
1,320,577,000

 
1,346,631,000

Shareholders' equity
 
 
 
 
 
Common stock, one cent par value per share
107,000

 
107,000

 
107,000

Additional paid-in capital
59,475,000

 
59,282,000

 
58,823,000

Retained earnings
103,448,000

 
99,816,000

 
96,785,000

Accumulated other comprehensive income (loss)
 
 
 
 
 
   Net unrealized gain on securities available for sale
988,000

 
2,522,000

 
1,546,000

Net unrealized loss on securities transferred from available for sale to held to maturity
(84,000
)
 
(48,000
)
 

   Net unrealized gain (loss) on postretirement benefit costs
(125,000
)
 
(125,000
)
 
188,000

Total shareholders' equity
163,809,000

 
161,554,000

 
157,449,000

Total liabilities & shareholders' equity
$
1,553,340,000

 
$
1,482,131,000

 
$
1,504,080,000

Common Stock
 
 
 
 
 
Number of shares authorized
18,000,000

 
18,000,000

 
18,000,000

Number of shares issued and outstanding
10,741,228

 
10,724,359

 
10,710,673

Book value per common share
$
15.25

 
$
15.06

 
$
14.70

Tangible book value per common share
$
12.45

 
$
12.25

 
$
11.87

See Report of Independent Registered Public Accounting Firm.
The accompanying notes are an integral part of these consolidated financial statements.

Page 3



Consolidated Statements of Income and Comprehensive Income (Unaudited)
The First Bancorp, Inc. and Subsidiary
 
For the six months ended June 30,
 
For the quarters ended June 30,
 
2015
 
2014
 
2015
 
2014
Interest income
 
 
 
 
 
 
 
Interest and fees on loans
$
18,012,000

 
$
17,220,000

 
$
9,157,000

 
$
8,642,000

Interest on deposits with other banks
13,000

 
3,000

 
8,000

 
1,000

Interest and dividends on investments
6,914,000

 
8,140,000

 
3,409,000

 
4,097,000

     Total interest income
24,939,000

 
25,363,000

 
12,574,000

 
12,740,000

Interest expense
 
 
 
 
 
 
 
Interest on deposits
2,759,000

 
3,629,000

 
1,316,000

 
1,804,000

Interest on borrowed funds
2,400,000

 
2,188,000

 
1,180,000

 
1,101,000

     Total interest expense
5,159,000

 
5,817,000

 
2,496,000

 
2,905,000

Net interest income
19,780,000

 
19,546,000

 
10,078,000

 
9,835,000

Provision for loan losses
900,000

 
500,000

 
400,000

 
100,000

Net interest income after provision for loan losses
18,880,000

 
19,046,000

 
9,678,000

 
9,735,000

Non-interest income
 
 
 
 
 
 
 
Investment management and fiduciary income
1,158,000

 
1,102,000

 
617,000

 
585,000

Service charges on deposit accounts
1,237,000

 
1,301,000

 
658,000

 
682,000

Net securities gains
1,395,000

 
40,000

 

 
4,000

Mortgage origination and servicing income, net of amortization
705,000

 
354,000

 
508,000

 
160,000

Other operating income
1,997,000

 
1,993,000

 
1,051,000

 
1,027,000

     Total non-interest income
6,492,000

 
4,790,000

 
2,834,000

 
2,458,000

Non-interest expense
 
 
 
 
 
 
 
Salaries and employee benefits
7,160,000

 
7,220,000

 
3,440,000

 
3,523,000

Occupancy expense
1,216,000

 
1,171,000

 
571,000

 
559,000

Furniture and equipment expense
1,552,000

 
1,372,000

 
782,000

 
675,000

FDIC insurance premiums
446,000

 
519,000

 
216,000

 
254,000

Amortization of identified intangibles
36,000

 
163,000

 
11,000

 
81,000

Other operating expense
3,835,000

 
4,098,000

 
1,960,000

 
2,199,000

     Total non-interest expense
14,245,000

 
14,543,000

 
6,980,000

 
7,291,000

Income before income taxes
11,127,000

 
9,293,000

 
5,532,000

 
4,902,000

Income tax expense
2,878,000

 
2,118,000

 
1,458,000

 
1,155,000

NET INCOME
$
8,249,000

 
$
7,175,000

 
$
4,074,000

 
$
3,747,000

Basic earnings per common share
$
0.77

 
$
0.67

 
$
0.38

 
$
0.35

Diluted earnings per common share
$
0.77

 
$
0.67

 
$
0.38

 
$
0.35

Other comprehensive income (loss) net of tax
 
 
 
 
 
 
 
Net unrealized gain (loss) on securities available for sale
(1,534,000
)
 
8,137,000

 
(1,591,000
)
 
3,313,000

Net unrealized loss on securities transferred from available for sale to held to maturity, net of amortization
(36,000
)
 

 
(84,000
)
 

      Other comprehensive income (loss)
(1,570,000
)
 
8,137,000

 
(1,675,000
)
 
3,313,000

Comprehensive income
$
6,679,000

 
$
15,312,000

 
$
2,399,000

 
$
7,060,000

See Report of Independent Registered Public Accounting Firm.
The accompanying notes are an integral part of these consolidated financial statements.

Page 4



Consolidated Statements of Changes in Shareholders' Equity (Unaudited)
The First Bancorp, Inc. and Subsidiary
 
 
Common stock and
additional paid-in capital
 
Retained
earnings
 
Accumulated
other
comprehensive
income (loss)
 
Total
shareholders'
equity
 
 
Shares
 
Amount
 
 
 
Balance at December 31, 2013
 
10,671,192

 
$
58,501,000

 
$
94,000,000

 
$
(6,403,000
)
 
$
146,098,000

Net income
 

 

 
7,175,000

 

 
7,175,000

Net unrealized gain on securities available for sale, net of tax
 

 

 

 
8,137,000

 
8,137,000

Comprehensive income
 

 

 
7,175,000

 
8,137,000

 
15,312,000

Cash dividends declared ($0.41 per share)
 

 

 
(4,390,000
)
 

 
(4,390,000
)
Equity compensation expense
 

 
205,000

 

 

 
205,000

Issuance of restricted stock
 
25,843

 

 

 

 

Proceeds from sale of common stock
 
13,638

 
224,000

 

 

 
224,000

Balance at June 30, 2014
 
10,710,673

 
$
58,930,000

 
$
96,785,000

 
$
1,734,000

 
$
157,449,000

 
 
 
 
 
 
 
 
 
 
 
Balance at December 31, 2014
 
10,724,359

 
$
59,389,000

 
$
99,816,000

 
$
2,349,000

 
$
161,554,000

Net income
 

 

 
8,249,000

 

 
8,249,000

Net unrealized loss on securities available for sale, net of tax
 

 

 

 
(1,534,000
)
 
(1,534,000
)
Net unrealized loss on securities transferred from available for sale to held to maturity, net of tax
 

 

 

 
(36,000
)
 
(36,000
)
Comprehensive income
 

 

 
8,249,000

 
(1,570,000
)
 
6,679,000

Cash dividends declared ($0.43 per share)
 

 

 
(4,617,000
)
 

 
(4,617,000
)
Equity compensation expense
 

 
148,000

 

 

 
148,000

Payment for repurchase of common stock
 
(10,138
)
 
(180,000
)
 

 

 
(180,000
)
Issuance of restricted stock
 
13,650

 

 

 

 

Proceeds from sale of common stock
 
13,357

 
225,000

 

 

 
225,000

Balance at June 30, 2015
 
10,741,228

 
$
59,582,000

 
$
103,448,000

 
$
779,000

 
$
163,809,000

See Report of Independent Registered Public Accounting Firm.
The accompanying notes are an integral part of these consolidated financial statements.

Page 5



Consolidated Statements of Cash Flows (Unaudited)
The First Bancorp, Inc. and Subsidiary
 
For the six months ended
 
June 30, 2015
 
June 30, 2014
Cash flows from operating activities
 
 
 
     Net income
$
8,249,000

 
$
7,175,000

Adjustments to reconcile net income to net cash provided by operating activities
 
 
 
Depreciation
851,000

 
837,000

Change in deferred taxes
259,000

 
(251,000
)
Provision for loan losses
900,000

 
500,000

Loans originated for resale
(14,655,000
)
 
(8,156,000
)
Proceeds from sales and transfers of loans
14,988,000

 
8,153,000

Net gain on sales of loans
(333,000
)
 
(186,000
)
Net gain on sale or call of securities
(1,395,000
)
 
(40,000
)
Net amortization of premiums on investments
379,000

 
533,000

Net gain on sale of other real estate owned
(40,000
)
 
(46,000
)
Provision for losses on other real estate owned
21,000

 
99,000

Equity compensation expense
148,000

 
205,000

Net increase in other assets and accrued interest
(1,556,000
)
 
(2,800,000
)
Net increase in other liabilities
91,000

 
839,000

Net loss on disposal of premises and equipment

 
5,000

Amortization of investment in limited partnership
133,000

 
284,000

Net acquisition amortization
36,000

 
163,000

     Net cash provided by operating activities
8,076,000

 
7,314,000

Cash flows from investing activities
 
 
 
(Increase) decrease in interest-bearing deposits in other banks
(21,006,000
)
 
2,290,000

Proceeds from sales of securities available for sale
35,465,000

 

Proceeds from maturities, payments and calls of securities available for sale
15,872,000

 
14,411,000

Proceeds from maturities, payments and calls of securities to be held to maturity
32,414,000

 
6,082,000

Proceeds from sales of other real estate owned
2,129,000

 
1,262,000

Purchases of securities available for sale
(81,335,000
)
 
(501,000
)
Purchases of securities to be held to maturity
(5,644,000
)
 
(34,881,000
)
Net increase in loans
(47,398,000
)
 
(17,238,000
)
Capital expenditures
(178,000
)
 
(396,000
)
Proceeds from disposal of premises and equipment

 
1,237,000

     Net cash used by investing activities
(69,681,000
)
 
(27,734,000
)
Cash flows from financing activities
 
 
 
Net increase in demand, savings, and money market accounts
40,886,000

 
26,272,000

Net increase (decrease) in certificates of deposit
30,618,000

 
(17,235,000
)
Net increase (decrease) in short-term borrowings
(41,903,000
)
 
19,395,000

Advances on long-term borrowings
55,000,000

 

Repayment on long-term borrowings
(15,000,000
)
 

Payment to repurchase common stock
(180,000
)
 

Proceeds from sale of common stock
225,000

 
224,000

Dividends paid
(4,617,000
)
 
(4,390,000
)
     Net cash provided by financing activities
65,029,000

 
24,266,000

Net increase in cash and cash equivalents
3,424,000

 
3,846,000

Cash and cash equivalents at beginning of period
13,057,000

 
16,570,000

     Cash and cash equivalents at end of period
$
16,481,000

 
$
20,416,000

Interest paid
$
5,175,000

 
$
5,807,000

Income taxes paid
1,840,000

 
1,960,000

Non-cash transactions
 
 
 
Net transfer from loans to other real estate owned
$
517,000

 
$
1,371,000


Page 6



Notes to Consolidated Financial Statements
The First Bancorp, Inc. and Subsidiary

Note 1 – Basis of Presentation
The First Bancorp, Inc. ("the Company") is a financial holding company that owns all of the common stock of The First, N.A. ("the Bank"). The accompanying unaudited consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America ("GAAP") for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by GAAP for complete financial statements. In the opinion of Management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. All significant intercompany transactions and balances are eliminated in consolidation. The income reported for the 2015 period is not necessarily indicative of the results that may be expected for the year ending December 31, 2015. For further information, refer to the consolidated financial statements and notes included in the Company's annual report on Form 10-K for the year ended December 31, 2014.
Subsequent Events
Events occurring subsequent to June 30, 2015, have been evaluated as to their potential impact to the financial statements.

Note 2 – Investment Securities
The following table summarizes the amortized cost and estimated fair value of investment securities at June 30, 2015:
 
Amortized
Cost
 
Unrealized Gains
 
Unrealized Losses
 
Fair Value (Estimated)
Securities available for sale
 
 
 
 
 
 
 
Mortgage-backed securities
$
184,787,000

 
$
2,040,000

 
$
(1,235,000
)
 
$
185,592,000

State and political subdivisions
24,378,000

 
1,006,000

 
(344,000
)
 
25,040,000

Other equity securities
3,129,000

 
61,000

 
(8,000
)
 
3,182,000

 
$
212,294,000

 
$
3,107,000

 
$
(1,587,000
)
 
$
213,814,000

Securities to be held to maturity
 
 
 
 
 
 
 
U.S. Government-sponsored agencies

$
75,982,000

 
$
45,000

 
$
(3,035,000
)
 
$
72,992,000

Mortgage-backed securities
48,655,000

 
1,650,000

 
(125,000
)
 
50,180,000

State and political subdivisions
124,313,000

 
1,976,000

 
(1,063,000
)
 
125,226,000

Corporate securities
300,000

 

 

 
300,000

 
$
249,250,000

 
$
3,671,000

 
$
(4,223,000
)
 
$
248,698,000

Restricted equity securities
 
 
 
 
 
 
 
Federal Home Loan Bank Stock
$
12,875,000

 
$

 
$

 
$
12,875,000

Federal Reserve Bank Stock
1,037,000

 

 

 
1,037,000

 
$
13,912,000

 
$

 
$

 
$
13,912,000



Page 7



The following table summarizes the amortized cost and estimated fair value of investment securities at December 31, 2014:
 
Amortized
Cost
 
Unrealized Gains
 
Unrealized Losses
 
Fair Value (Estimated)
Securities available for sale
 
 
 
 
 
 
 
Mortgage-backed securities
$
149,796,000

 
$
2,637,000

 
$
(578,000
)
 
$
151,855,000

State and political subdivisions
29,094,000

 
1,865,000

 
(104,000
)
 
30,855,000

Other equity securities
2,490,000

 
65,000

 
(4,000
)
 
2,551,000

 
$
181,380,000

 
$
4,567,000

 
$
(686,000
)
 
$
185,261,000

Securities to be held to maturity
 
 
 
 
 
 
 
U.S. Government-sponsored agencies

$
92,341,000

 
$
54,000

 
$
(2,066,000
)
 
$
90,329,000

Mortgage-backed securities
57,003,000

 
1,830,000

 
(116,000
)
 
58,717,000

State and political subdivisions
126,275,000

 
4,114,000

 
(31,000
)
 
130,358,000

Corporate securities
300,000

 

 

 
300,000

 
$
275,919,000

 
$
5,998,000

 
$
(2,213,000
)
 
$
279,704,000

Restricted equity securities
 
 
 
 
 
 
 
Federal Home Loan Bank Stock
$
12,875,000

 
$

 
$

 
$
12,875,000

Federal Reserve Bank Stock
1,037,000

 

 

 
1,037,000

 
$
13,912,000

 
$

 
$

 
$
13,912,000


The following table summarizes the amortized cost and estimated fair value of investment securities at June 30, 2014:
 
Amortized
Cost
 
Unrealized Gains
 
Unrealized Losses
 
Fair Value (Estimated)
Securities available for sale
 
 
 
 
 
 
 
Mortgage-backed securities
$
165,978,000

 
$
2,417,000

 
$
(1,692,000
)
 
$
166,703,000

State and political subdivisions
133,327,000

 
3,951,000

 
(2,383,000
)
 
134,895,000

Other equity securities
2,196,000

 
87,000

 
(1,000
)
 
2,282,000

 
$
301,501,000

 
$
6,455,000

 
$
(4,076,000
)
 
$
303,880,000

Securities to be held to maturity
 
 
 
 
 
 
 
U.S. Government-sponsored agencies

$
92,324,000

 
$
5,000

 
$
(6,343,000
)
 
$
85,986,000

Mortgage-backed securities
65,835,000

 
1,851,000

 
(526,000
)
 
67,160,000

State and political subdivisions
39,676,000

 
2,459,000

 
(31,000
)
 
42,104,000

Corporate securities
300,000

 

 

 
300,000

 
$
198,135,000

 
$
4,315,000

 
$
(6,900,000
)
 
$
195,550,000

Restricted equity securities
 
 
 
 
 
 
 
Federal Home Loan Bank Stock
$
12,875,000

 
$

 
$

 
$
12,875,000

Federal Reserve Bank Stock
1,037,000

 

 

 
1,037,000

 
$
13,912,000

 
$

 
$

 
$
13,912,000



Page 8



The following table summarizes the contractual maturities of investment securities at June 30, 2015:
 
Securities available for sale
 
Securities to be held to maturity
 
Amortized
Cost
 
Fair Value (Estimated)
 
Amortized
Cost
 
Fair Value (Estimated)
Due in 1 year or less
$
2,396,000

 
$
2,389,000

 
$
1,044,000

 
$
1,056,000

Due in 1 to 5 years
22,945,000

 
22,860,000

 
12,532,000

 
12,740,000

Due in 5 to 10 years
8,993,000

 
9,355,000

 
45,958,000

 
47,525,000

Due after 10 years
174,831,000

 
176,028,000

 
189,716,000

 
187,377,000

Equity securities
3,129,000

 
3,182,000

 

 

 
$
212,294,000

 
$
213,814,000

 
$
249,250,000

 
$
248,698,000


The following table summarizes the contractual maturities of investment securities at December 31, 2014:
 
Securities available for sale
 
Securities to be held to maturity
 
Amortized
Cost
 
Fair Value (Estimated)
 
Amortized
Cost
 
Fair Value (Estimated)
Due in 1 year or less
$
2,309,000

 
$
2,329,000

 
$
1,693,000

 
$
1,713,000

Due in 1 to 5 years
15,200,000

 
15,499,000

 
8,467,000

 
8,702,000

Due in 5 to 10 years
18,547,000

 
19,124,000

 
50,629,000

 
52,717,000

Due after 10 years
142,834,000

 
145,758,000

 
215,130,000

 
216,572,000

Equity securities
2,490,000

 
2,551,000

 

 

 
$
181,380,000

 
$
185,261,000

 
$
275,919,000

 
$
279,704,000


The following table summarizes the contractual maturities of investment securities at June 30, 2014:
 
Securities available for sale
 
Securities to be held to maturity
 
Amortized
Cost
 
Fair Value (Estimated)
 
Amortized
Cost
 
Fair Value (Estimated)
Due in 1 year or less
$

 
$

 
$

 
$

Due in 1 to 5 years
20,101,000

 
20,557,000

 
11,326,000

 
11,610,000

Due in 5 to 10 years
28,261,000

 
28,483,000

 
44,528,000

 
46,301,000

Due after 10 years
250,943,000

 
252,558,000

 
142,281,000

 
137,639,000

Equity securities
2,196,000

 
2,282,000

 

 

 
$
301,501,000

 
$
303,880,000

 
$
198,135,000

 
$
195,550,000

At June 30, 2015, securities with a fair value of $194,337,000 were pledged to secure public deposits, repurchase agreements, and for other purposes as required by law. This compares to securities with a fair value of $164,919,000 as of December 31, 2014 and $131,869,000 at June 30, 2014, pledged for the same purposes.

Page 9




Gains and losses on the sale of securities available for sale are computed by subtracting the amortized cost at the time of sale from the security's selling price, net of accrued interest to be received. The following table shows securities gains and losses for the six months and quarters ended June 30, 2015 and 2014:
 
For the six months ended June 30,
 
For the quarters ended June 30,
 
2015
 
2014
 
2015
 
2014
Proceeds from sales of securities
$
35,465,000

 
$

 
$

 
$

Gross realized gains
1,395,000

 
40,000

 

 
4,000

Gross realized losses

 

 

 

Net gain
$
1,395,000

 
$
40,000

 
$

 
$
4,000

Related income taxes
$
488,000

 
$
14,000

 
$

 
$
1,000


Management reviews securities with unrealized losses for other than temporary impairment. As of June 30, 2015, there were 295 securities with unrealized losses held in the Company's portfolio. These securities were temporarily impaired as a result of changes in interest rates reducing their fair value, of which 14 had been temporarily impaired for 12 months or more. At the present time, there have been no material changes in the credit quality of these securities resulting in other than temporary impairment, and in Management's opinion, no additional write-down for other-than-temporary impairment is warranted. Information regarding securities temporarily impaired as of June 30, 2015 is summarized below:
 
Less than 12 months
 
12 months or more
 
Total
 
Fair Value (Estimated)
 
Unrealized Losses
 
Fair Value (Estimated)
 
Unrealized Losses
 
Fair Value (Estimated)
 
Unrealized Losses
U.S. Government-sponsored agencies

$
55,147,000

 
$
(1,988,000
)
 
$
16,953,000

 
$
(1,047,000
)
 
$
72,100,000

 
$
(3,035,000
)
Mortgage-backed securities
89,332,000

 
(1,280,000
)
 
1,194,000

 
(80,000
)
 
90,526,000

 
(1,360,000
)
State and political subdivisions
72,217,000

 
(1,202,000
)
 
2,299,000

 
(205,000
)
 
74,516,000

 
(1,407,000
)
Other equity securities
64,000

 
(7,000
)
 
51,000

 
(1,000
)
 
115,000

 
(8,000
)
 
$
216,760,000

 
$
(4,477,000
)
 
$
20,497,000

 
$
(1,333,000
)
 
$
237,257,000

 
$
(5,810,000
)

As of December 31, 2014, there were 56 securities with unrealized losses held in the Company's portfolio. These securities were temporarily impaired as a result of changes in interest rates reducing their fair value, of which 36 had been temporarily impaired for 12 months or more. Information regarding securities temporarily impaired as of December 31, 2014 is summarized below:
 
Less than 12 months
 
12 months or more
 
Total
 
Fair Value (Estimated)
 
Unrealized Losses
 
Fair Value (Estimated)
 
Unrealized Losses
 
Fair Value (Estimated)
 
Unrealized Losses
U.S. Government-sponsored agencies

$

 
$

 
$
79,444,000

 
$
(2,066,000
)
 
$
79,444,000

 
$
(2,066,000
)
Mortgage-backed securities
13,878,000

 
(40,000
)
 
29,182,000

 
(654,000
)
 
43,060,000

 
(694,000
)
State and political subdivisions
3,352,000

 
(31,000
)
 
3,017,000

 
(104,000
)
 
6,369,000

 
(135,000
)
Other equity securities
68,000

 
(3,000
)
 
51,000

 
(1,000
)
 
119,000

 
(4,000
)
 
$
17,298,000

 
$
(74,000
)
 
$
111,694,000

 
$
(2,825,000
)
 
$
128,992,000

 
$
(2,899,000
)

Page 10



As of June 30, 2014, there were 197 securities with unrealized losses held in the Company's portfolio. These securities were temporarily impaired as a result of changes in interest rates reducing their fair value, of which 175 had been temporarily impaired for 12 months or more. Information regarding securities temporarily impaired as of June 30, 2014 is summarized below:
 
Less than 12 months
 
12 months or more
 
Total
 
Fair Value (Estimated)
 
Unrealized Losses
 
Fair Value (Estimated)
 
Unrealized Losses
 
Fair Value (Estimated)
 
Unrealized Losses
U.S. Government-sponsored agencies

$

 
$

 
$
85,167,000

 
$
(6,343,000
)
 
$
85,167,000

 
$
(6,343,000
)
Mortgage-backed securities
39,436,000

 
(668,000
)
 
32,975,000

 
(1,550,000
)
 
72,411,000

 
(2,218,000
)
State and political subdivisions
8,122,000

 
(71,000
)
 
45,718,000

 
(2,343,000
)
 
53,840,000

 
(2,414,000
)
Other equity securities

 

 
52,000

 
(1,000
)
 
52,000

 
(1,000
)
 
$
47,558,000

 
$
(739,000
)
 
$
163,912,000

 
$
(10,237,000
)
 
$
211,470,000

 
$
(10,976,000
)

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 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. 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 amortization of the net unrealized loss reported in accumulated other comprehensive income (loss) will offset the effect on interest income of the discount for the transferred securities. The remaining unamortized balance of the net unrealized losses for the securities transferred from available for sale to held to maturity was $84,000 at June 30, 2015. These securities were transferred as a part of the Company's overall investment and balance sheet strategies.
The Bank is a member of the Federal Home Loan Bank ("FHLB") of Boston, a cooperatively owned wholesale bank for housing and finance in the six New England States. As a requirement of membership in the FHLB, the Bank must own a minimum required amount of FHLB stock, calculated periodically based primarily on its level of borrowings from the FHLB. The Bank uses the FHLB for much of its wholesale funding needs. As of June 30, 2015, and 2014, and December 31, 2014, the Bank's investment in FHLB stock totaled $12,875,000. FHLB stock is a non-marketable equity security and therefore is reported at cost, which equals par value. 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 June 30, 2015. The Bank will continue to monitor its investment in FHLB stock.

Note 3 – Loans
The following table shows the composition of the Company's loan portfolio as of June 30, 2015 and 2014 and at December 31, 2014:
 
June 30, 2015
 
December 31, 2014
 
June 30, 2014
 
Commercial
 
 
 
 
 
 
 
 
 
 
 
 
   Real estate
$
249,414,000

 
25.9
%
$
242,311,000

 
26.4
%
$
245,660,000

 
27.5
%
   Construction
39,504,000

 
4.1
%
30,932,000

 
3.4
%
17,084,000

 
1.9
%
   Other
128,249,000

 
13.3
%
104,531,000

 
11.4
%
104,234,000

 
11.7
%
Municipal
22,821,000

 
2.4
%
20,424,000

 
2.2
%
17,893,000

 
2.0
%
Residential
 
 
 
 
 
 
 
 
 
 
 
 
   Term
378,090,000

 
39.2
%
384,032,000

 
41.9
%
379,027,000

 
42.5
%
   Construction
14,215,000

 
1.5
%
12,160,000

 
1.3
%
13,253,000

 
1.5
%
Home equity line of credit
108,788,000

 
11.3
%
103,521,000

 
11.3
%
97,821,000

 
11.0
%
Consumer
22,028,000

 
2.3
%
19,653,000

 
2.1
%
16,892,000

 
1.9
%
Total
$
963,109,000

 
100.0
%
$
917,564,000

 
100.0
%
$
891,864,000

 
100.0
%
Loan balances include net deferred loan costs of $3,246,000 as of June 30, 2015, $2,729,000 as of December 31, 2014, and $2,463,000 as of June 30, 2014. Pursuant to collateral agreements, qualifying first mortgage loans, which totaled $284,707,000

Page 11



at June 30, 2015, $266,716,000 at December 31, 2014, and $270,701,000 at June 30, 2014, were used to collateralize borrowings from the FHLB. In addition, commercial, construction and home equity loans totaling $278,235,000 at June 30, 2015, $240,943,000 at December 31, 2014, and $233,544,000 at June 30, 2014, were used to collateralize a standby line of credit at the Federal Reserve Bank of Boston that is currently unused.
For all loan classes, loans over 30 days past due are considered delinquent. Information on the past-due status of loans by class of financing receivable as of June 30, 2015, is presented in the following table:
 
30-59 Days
Past Due
 
60-89 Days
Past Due
 
90+ Days
Past Due
 
All
Past Due
 
Current
 
Total
 
90+ Days
& Accruing
Commercial
 
 
 
 
 
 
 
 
 
 
 
 
 
   Real estate
$
1,850,000

 
$

 
$
264,000

 
$
2,114,000

 
$
247,300,000

 
$
249,414,000

 
$

   Construction

 

 
208,000

 
208,000

 
39,296,000

 
39,504,000

 

   Other
124,000

 

 
138,000

 
262,000

 
127,987,000

 
128,249,000

 

Municipal

 

 

 

 
22,821,000

 
22,821,000

 

Residential
 
 
 
 
 
 
 
 
 
 
 
 
 
   Term
810,000

 
2,314,000

 
3,146,000

 
6,270,000

 
371,820,000

 
378,090,000

 
90,000

   Construction
160,000

 

 

 
160,000

 
14,055,000

 
14,215,000

 

Home equity line of credit
649,000

 
122,000

 
838,000

 
1,609,000

 
107,179,000

 
108,788,000

 
35,000

Consumer
152,000

 
130,000

 
111,000

 
393,000

 
21,635,000

 
22,028,000

 
111,000

Total
$
3,745,000

 
$
2,566,000

 
$
4,705,000

 
$
11,016,000

 
$
952,093,000

 
$
963,109,000

 
$
236,000

Information on the past-due status of loans by class of financing receivable as of December 31, 2014, is presented in the following table:
 
30-59 Days
Past Due
 
60-89 Days
Past Due
 
90+ Days
Past Due
 
All
Past Due
 
Current
 
Total
 
90+ Days
& Accruing
Commercial
 
 
 
 
 
 
 
 
 
 
 
 
 
   Real estate
$
346,000

 
$
107,000

 
$
407,000

 
$
860,000

 
$
241,451,000

 
$
242,311,000

 
$

   Construction

 
41,000

 
208,000

 
249,000

 
30,683,000

 
30,932,000

 

   Other
336,000

 
543,000

 
314,000

 
1,193,000

 
103,338,000

 
104,531,000

 

Municipal

 

 

 

 
20,424,000

 
20,424,000

 

Residential
 
 
 
 
 
 
 
 
 
 
 
 
 
   Term
1,140,000

 
2,118,000

 
3,745,000

 
7,003,000

 
377,029,000

 
384,032,000

 
101,000

   Construction

 

 

 

 
12,160,000

 
12,160,000

 

Home equity line of credit
621,000

 
769,000

 
732,000

 
2,122,000

 
101,399,000

 
103,521,000

 

Consumer
303,000

 
53,000

 
80,000

 
436,000

 
19,217,000

 
19,653,000

 
80,000

Total
$
2,746,000

 
$
3,631,000

 
$
5,486,000

 
$
11,863,000

 
$
905,701,000

 
$
917,564,000

 
$
181,000


Page 12



Information on the past-due status of loans by class of financing receivable as of June 30, 2014, is presented in the following table:
 
30-59 Days
Past Due
 
60-89 Days
Past Due
 
90+ Days
Past Due
 
All
Past Due
 
Current
 
Total
 
90+ Days
& Accruing
Commercial
 
 
 
 
 
 
 
 
 
 
 
 
 
   Real estate
$
925,000

 
$

 
$
1,157,000

 
$
2,082,000

 
$
243,578,000

 
$