XNAS:FNLC First Bancorp Inc Quarterly Report 10-Q Filing - 3/31/2012

Effective Date 3/31/2012

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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 March 31, 2012

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 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 May 1, 2012
Common Stock: 9,840,586 shares

 
 

 


Table of Contents
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Part I. Financial Information

Selected Financial Data (Unaudited)
The First Bancorp, Inc. and Subsidiary

Dollars in thousands,
 
As of and for the three months ended March 31,
 
except for per share amounts
 
2012
   
2011
 
             
Summary of Operations
           
Interest Income
  $ 13,106     $ 14,254  
Interest Expense
    3,300       3,749  
Net Interest Income
    9,806       10,505  
Provision for Loan Losses
    2,100       2,100  
Non-Interest Income
    2,168       2,277  
Non-Interest Expense
    6,178       6,488  
Net Income
    2,913       3,143  
Per Common Share Data
               
Basic Earnings per Share
  $ 0.28     $ 0.29  
Diluted Earnings per Share
    0.28       0.29  
Cash Dividends Declared
    0.195       0.195  
Book Value per Common Share
    14.15       12.96  
Tangible Book Value per Common Share
    11.34       10.13  
Market Value
    14.83       15.25  
Financial Ratios
               
Return on Average Equity1
    8.30 %     10.02 %
Return on Average Tangible Equity1,2
    9.68 %     11.43 %
Return on Average Assets1
    0.84 %     0.90 %
Average Equity to Average Assets
    10.95 %     10.76 %
Average Tangible Equity to Average Assets2
    8.98 %     8.80 %
Net Interest Margin Tax-Equivalent1,2
    3.22 %     3.40 %
Dividend Payout Ratio
    69.64 %     67.24 %
Allowance for Loan Losses/Total Loans
    1.49 %     1.56 %
Non-Performing Loans to Total Loans
    2.81 %     2.51 %
Non-Performing Assets to Total Assets
    2.01 %     1.89 %
Efficiency Ratio2
    50.40 %     48.28 %
At Period End
               
Total Assets
  $ 1,423,792     $ 1,431,038  
Total Loans
    870,892       894,684  
Total Investment Securities
    469,540       450,830  
Total Deposits
    1,015,835       1,050,257  
Total Shareholders’ Equity
    151,593       151,544  
1Annualized using a 366-day basis in 2012 and 365-day basis in 2011
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 March 31, 2012 and 2011 and for the three-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

Portland, Maine
May 10, 2012


 
Page 2

 

Consolidated Balance Sheets (Unaudited)
The First Bancorp, Inc. and Subsidiary
   
March 31,
2012
   
December 31,
2011
   
March 31,
 2011
 
Assets
                 
Cash and cash equivalents
  $ 12,123,000     $ 14,115,000     $ 13,700,000  
Interest bearing deposits in other banks
    1,532,000       -       100,000  
Securities available for sale
    317,111,000       286,202,000       325,451,000  
Securities to be held to maturity (fair value of $144,633,000 at March 31, 2012, $130,677,000 at December 31, 2011 and $114,051,000 at March 31, 2011)
    137,606,000       122,661,000       109,936,000  
Federal Reserve Bank stock, at cost
    1,411,000       1,411,000       1,411,000  
Federal Home Loan Bank stock, at cost
    13,412,000       14,032,000       14,032,000  
Loans held for sale
    184,000       -       450,000  
Loans
    870,892,000       864,988,000       894,684,000  
Less allowance for loan losses
    12,954,000       13,000,000       14,000,000  
Net loans
    857,938,000       851,988,000       880,684,000  
Accrued interest receivable
    5,690,000       4,835,000       6,236,000  
Premises and equipment, net
    18,722,000       18,842,000       18,685,000  
Other real estate owned
    4,214,000       4,094,000       4,575,000  
Goodwill
    27,684,000       27,684,000       27,684,000  
Other assets
    26,165,000       27,003,000       28,094,000  
Total assets
  $ 1,423,792,000     $ 1,372,867,000     $ 1,431,038,000  
Liabilities
                       
Demand deposits
  $ 69,520,000     $ 75,750,000     $ 67,502,000  
NOW deposits
    120,844,000       122,775,000       120,045,000  
Money market deposits
    75,752,000       79,015,000       73,766,000  
Savings deposits
    118,946,000       114,617,000       108,359,000  
Certificates of deposit
    630,773,000       549,176,000       680,585,000  
Total deposits
    1,015,835,000       941,333,000       1,050,257,000  
Borrowed funds – short term
    109,990,000       135,500,000       87,366,000  
Borrowed funds – long term
    130,161,000       130,163,000       130,168,000  
Other liabilities
    16,213,000       15,013,000       11,703,000  
Total liabilities
    1,272,199,000       1,222,009,000       1,279,494,000  
Shareholders’ equity
                       
Preferred stock, $1,000 preference value per share
    12,328,000       12,303,000       24,729,000  
Common stock, one cent par value per share
    98,000       98,000       98,000  
Additional paid-in capital
    46,011,000       45,829,000       45,551,000  
Retained earnings
    86,150,000       85,314,000       82,623,000  
Accumulated other comprehensive income (loss)
                       
  Net unrealized gain (loss) on securities available-for-sale
    7,088,000       7,401,000       (1,389,000 )
  Net unrealized loss on postretirement benefit costs
    (82,000 )     (87,000 )     (68,000 )
Total shareholders’ equity
    151,593,000       150,858,000       151,544,000  
Total liabilities & shareholders’ equity
  $ 1,423,792,000     $ 1,372,867,000     $ 1,431,038,000  
Common Stock
                       
Number of shares authorized
    18,000,000       18,000,000       18,000,000  
Number of shares issued and outstanding
    9,839,760       9,812,180       9,786,964  
Book value per common share
  $ 14.15     $ 14.12     $ 12.96  
Tangible book value per common share
  $ 11.34     $ 11.30     $ 10.13  
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 three months ended March 31,
 
   
2012
   
2011
 
Interest income
           
Interest and fees on loans
  $ 9,392,000     $ 10,173,000  
Interest on deposits with other banks
    -       2,000  
Interest and dividends on investments
    3,714,000       4,079,000  
     Total interest income
    13,106,000       14,254,000  
Interest expense
               
Interest on deposits
    2,193,000       2,563,000  
Interest on borrowed funds
    1,107,000       1,186,000  
     Total interest expense
    3,300,000       3,749,000  
Net interest income
    9,806,000       10,505,000  
Provision for loan losses
    2,100,000       2,100,000  
Net interest income after provision for loan losses
    7,706,000       8,405,000  
Non-interest income
               
Investment management and fiduciary income
    396,000       424,000  
Service charges on deposit accounts
    638,000       640,000  
Net securities gains
    523,000       -  
Mortgage origination and servicing income, net of amortization
    (156,000 )     459,000  
Other operating income
    767,000       754,000  
     Total non-interest income
    2,168,000       2,277,000  
Non-interest expense
               
Salaries and employee benefits
    3,084,000       3,077,000  
Occupancy expense
    414,000       449,000  
Furniture and equipment expense
    573,000       550,000  
FDIC insurance premiums
    301,000       401,000  
Amortization of identified intangibles
    71,000       71,000  
Other operating expense
    1,735,000       1,940,000  
     Total non-interest expense
    6,178,000       6,488,000  
Income before income taxes
    3,696,000       4,194,000  
Applicable income taxes
    783,000       1,051,000  
NET INCOME
  $ 2,913,000     $ 3,143,000  
Basic earnings per common share
  $ 0.28     $ 0.29  
Diluted earnings per common share
  $ 0.28     $ 0.29  
Other comprehensive income (loss), net of tax
               
Net unrealized gain (loss) on securities available for sale,
net of tax benefit of $168,000 in 2012 and taxes of $363,000 in 2011
  $ (313,000 )   $ 668,000  
Unrecognized transition obligation for postretirement benefits, net of taxes of $2,000 in 2012 and $2,000 in 2011
    5,000       5,000  
      Other comprehensive income (loss)
    (308,000 )     673,000  
Comprehensive income
  $ 2,605,000     $ 3,816,000  
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

                           
Accumulated
       
         
Common stock and
         
other
   
Total
 
   
Preferred
   
additional paid-in capital
   
Retained
   
comprehensive
   
shareholders’
 
   
stock
   
Shares
   
Amount
   
earnings
   
income (loss)
   
equity
 
Balance at December 31, 2010
  $ 24,705,000       9,773,025     $ 45,572,000     $ 81,701,000     $ (2,130,000 )   $ 149,848,000  
Net income
    -       -       -       3,143,000       -       3,143,000  
Net unrealized gain on securities available for sale, net of taxes of $363,000
    -       -       -       -       668,000       668,000  
Unrecognized transition obligation for postretirement benefits, net of taxes of $2,000
    -       -       -       -       5,000       5,000  
Comprehensive income
    -       -       -       3,143,000       673,000       3,816,000  
Cash dividends declared
    -       -       -       (2,221,000 )     -       (2,221,000 )
Equity compensation expense
    -       -       6,000       -       -       6,000  
Amortization of premium for preferred stock issuance
    24,000       -       (24,000 )     -       -       -  
Proceeds from sale of common stock
    -       13,939       95,000       -       -       95,000  
Balance at March 31, 2011
  $ 24,729,000       9,786,964     $ 45,649,000     $ 82,623,000     $ (1,457,000 )   $ 151,544,000  
                                                 
Balance at December 31, 2011
  $ 12,303,000       9,812,180     $ 45,927,000     $ 85,314,000     $ 7,314,000     $ 150,858,000  
Net income
    -       -       -       2,913,000       -       2,913,000  
Net unrealized loss on securities available for sale, net of tax benefit of $168,000
    -       -       -       -       (313,000 )     (313,000 )
Unrecognized transition obligation for postretirement benefits, net of taxes of $2,000
    -       -       -       -       5,000       5,000  
Comprehensive income
    -       -       -       2,913,000       (308,000 )     2,605,000  
Cash dividends declared
    -       -       -       (2,077,000 )     -       (2,077,000 )
Equity compensation expense
    -       -       24,000       -       -       24,000  
Amortization of premium for preferred stock issuance
    25,000       -       (25,000 )     -       -       -  
Proceeds from sale of common stock
    -       27,580       183,000       -       -       183,000  
Balance at March 31, 2012
  $ 12,328,000       9,839,760     $ 46,109,000     $ 86,150,000     $ 7,006,000     $ 151,593,000  
 
 
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 three months ended
 
   
March 31, 2012
   
March 31, 2011
 
Cash flows from operating activities
           
     Net income
  $ 2,913,000     $ 3,143,000  
Adjustments to reconcile net income to net cash provided by operating activities
         
Depreciation
    333,000       341,000  
Change in deferred taxes
    (644,000 )     (238,000 )
Provision for loan losses
    2,100,000       2,100,000  
Loans originated for resale
    (1,704,000 )     (15,794,000 )
Proceeds from sales and transfers of loans
    1,520,000       18,150,000  
Net gain on sale or call of securities
    (523,000 )     -  
Net loss on sale of other real estate owned
    43,000       46,000  
Provision for losses on other real estate owned
    -       68,000  
Equity compensation expense
    24,000       6,000  
Net (increase) decrease in other assets and accrued interest
    417,000       (147,000 )
Net increase in other liabilities
    1,393,000       262,000  
Net loss on disposal of premises and equipment
    -       5,000  
Net amortization of premiums on investments
    697,000       914,000  
Amortization of investment in limited partnership
    119,000       97,000  
Net acquisition amortization
    32,000       32,000  
     Net cash provided by operating activities
    6,720,000       8,985,000  
Cash flows from investing activities
               
Decrease in interest-bearing deposits in other banks
    (1,532,000 )     -  
Proceeds from maturities, payments and calls of securities available for sale
    11,656,000       17,365,000  
Proceeds from sales of securities available for sale
    10,943,000       -  
Proceeds from maturities, payments and calls of securities to be held to maturity
    5,924,000       6,074,000  
Proceeds from sales of other real estate owned
    268,000       779,000  
Purchases of securities available for sale
    (54,096,000 )     (49,309,000 )
Purchases of securities to be held to maturity
    (20,936,000 )     (8,794,000 )
Redemption of Federal Home Loan Bank stock
    620,000       -  
Net increase in loans
    (8,481,000 )     (9,043,000 )
Capital expenditures
    (213,000 )     (51,000 )
     Net cash used in investing activities
    (55,847,000 )     (42,979,000 )
Cash flows from financing activities
               
Net increase (decrease) in demand, savings, and money market accounts
    (7,095,000 )     3,343,000  
Net increase in certificates of deposit
    81,629,000       72,428,000  
Net decrease in short-term borrowings
    (25,505,000 )     (39,789,000 )
Proceeds from sale of common stock
    183,000       95,000  
Dividends paid
    (2,077,000 )     (2,221,000 )
     Net cash provided by financing activities
    47,135,000       33,856,000  
Net decrease in cash and cash equivalents
    (1,992,000 )     (138,000 )
Cash and cash equivalents at beginning of period
    14,115,000       13,838,000  
     Cash and cash equivalents at end of period
  $ 12,123,000     $ 13,700,000  
Interest paid
  $ 3,390,000     $ 3,861,000  
Income taxes paid
    -       -  
Non-cash transactions
               
Net transfer from loans to other real estate owned
  $ 431,000     $ 539,000  
See Report of Independent Registered Public Accounting Firm.
The accompanying notes are an integral part of these consolidated financial statements.

 
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 2012 period is not necessarily indicative of the results that may be expected for the year ending December 31, 2012. 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, 2011.

Subsequent Events
Events occurring subsequent to March 31, 2012, 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 March 31, 2012:

   
Amortized
   
Unrealized
   
Unrealized
   
Fair Value
 
   
Cost
   
Gains
   
Losses
   
(Estimated)
 
Securities available for sale
                       
U.S. Treasury and agency
  $ -     $ -     $ -     $ -  
Mortgage-backed securities
    226,671,000       5,805,000       (361,000 )     232,115,000  
State and political subdivisions
    77,672,000       5,540,000       (50,000 )     83,162,000  
Corporate securities
    -       -       -       -  
Other equity securities
    1,863,000       44,000       (73,000 )     1,834,000  
    $ 306,206,000     $ 11,389,000     $ (484,000 )   $ 317,111,000  
Securities to be held to maturity
                               
U.S. Treasury and agency
  $ 39,694,000     $ 37,000     $ (435,000 )   $ 39,296,000  
Mortgage-backed securities
    52,185,000       3,638,000       -       55,823,000  
State and political subdivisions
    45,427,000       3,941,000       (154,000 )     49,214,000  
Corporate securities
    300,000       -       -       300,000  
    $ 137,606,000     $ 7,616,000     $ (589,000 )   $ 144,633,000  
Non-marketable securities
                               
Federal Home Loan Bank Stock
  $ 13,412,000     $ -     $ -     $ 13,412,000  
Federal Reserve Bank Stock
    1,411,000       -       -       1,411,000  
    $ 14,823,000     $ -     $ -     $ 14,823,000  





 
Page 7

 


The following table summarizes the amortized cost and estimated fair value of investment securities at December 31, 2011:

   
Amortized
   
Unrealized
   
Unrealized
   
Fair Value
 
   
Cost
   
Gains
   
Losses
   
(Estimated)
 
Securities available for sale
                       
U.S. Treasury and agency
  $ -     $ -     $ -     $ -  
Mortgage-backed securities
    191,924,000       6,486,000       (178,000 )     198,232,000  
State and political subdivisions
    80,259,000       5,484,000       (17,000 )     85,726,000  
Corporate securities
    1,098,000       -       (287,000 )     811,000  
Other equity securities
    1,535,000       37,000       (139,000 )     1,433,000  
    $ 274,816,000     $ 12,007,000     $ (621,000 )   $ 286,202,000  
Securities to be held to maturity
                               
U.S. Treasury and agency
  $ 19,390,000     $ 132,000     $ -     $ 19,522,000  
Mortgage-backed securities
    56,800,000       3,900,000       (3,000 )     60,697,000  
State and political subdivisions
    46,171,000       4,159,000       (172,000 )     50,158,000  
Corporate securities
    300,000       -       -       300,000  
    $ 122,661,000     $ 8,191,000     $ (175,000 )   $ 130,677,000  
Non-marketable securities
                               
Federal Home Loan Bank Stock
  $ 14,032,000     $ -     $ -     $ 14,032,000  
Federal Reserve Bank Stock
    1,411,000       -       -       1,411,000  
    $ 15,443,000     $ -     $ -     $ 15,443,000  

The following table summarizes the amortized cost and estimated fair value of investment securities at March 31, 2011:

   
Amortized
   
Unrealized
   
Unrealized
   
Fair Value
 
   
Cost
   
Gains
   
Losses
   
(Estimated)
 
Securities available for sale
                       
U.S. Treasury and agency
  $ 15,352,000     $ 591,000     $ -     $ 15,943,000  
Mortgage-backed securities
    255,703,000       1,138,000       (3,731,000 )     253,110,000  
State and political subdivisions
    55,040,000       577,000       (536,000 )     55,081,000  
Corporate securities
    1,108,000       -       (185,000 )     923,000  
Other equity securities
    385,000       18,000       (9,000 )     394,000  
    $ 327,588,000     $ 2,324,000     $ (4,461,000 )   $ 325,451,000  
Securities to be held to maturity
                               
U.S. Treasury and agency
  $ 2,936,000     $ -     $ (292,000 )   $ 2,644,000  
Mortgage-backed securities
    59,063,000       3,348,000       (76,000 )     62,335,000  
State and political subdivisions
    47,787,000       1,641,000       (506,000 )     48,922,000  
Corporate securities
    150,000       -       -       150,000  
    $ 109,936,000     $ 4,989,000     $ (874,000 )   $ 114,051,000  
Non-marketable securities
                               
Federal Home Loan Bank Stock
  $ 14,032,000     $ -     $ -     $ 14,032,000  
Federal Reserve Bank Stock
    1,411,000       -       -       1,411,000  
    $ 15,443,000     $ -     $ -     $ 15,443,000  



 
Page 8

 


The following table summarizes the contractual maturities of investment securities at March 31, 2012:

   
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
  $ 5,894,000     $ 5,948,000     $ 4,663,000     $ 4,710,000  
Due in 1 to 5 years
    59,887,000       60,971,000       12,173,000       12,940,000  
Due in 5 to 10 years
    13,014,000       13,442,000       35,563,000       38,100,000  
Due after 10 years
    225,548,000       234,916,000       85,207,000       88,883,000  
Equity securities
    1,863,000       1,834,000       -       -  
    $ 306,206,000     $ 317,111,000     $ 137,606,000     $ 144,633,000  

The following table summarizes the contractual maturities of investment securities at December 31, 2011:

   
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
  $ 6,617,000     $ 6,773,000     $ 5,179,000     $ 5,227,000  
Due in 1 to 5 years
    18,792,000       19,473,000       10,085,000       10,654,000  
Due in 5 to 10 years
    23,219,000       24,065,000       23,027,000       24,694,000  
Due after 10 years
    224,653,000       234,458,000       84,370,000       90,102,000  
Equity securities
    1,535,000       1,433,000       -       -  
    $ 274,816,000     $ 286,202,000     $ 122,661,000     $ 130,677,000  

The following table summarizes the contractual maturities of investment securities at March 31, 2011:

   
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
  $ 212,000     $ 218,000     $ 1,072,000     $ 1,084,000  
Due in 1 to 5 years
    2,818,000       2,964,000       5,629,000       5,948,000  
Due in 5 to 10 years
    4,774,000       4,916,000       16,974,000       17,737,000  
Due after 10 years
    319,399,000       316,959,000       86,261,000       89,282,000  
Equity securities
    385,000       394,000       -       -  
    $ 327,588,000     $ 325,451,000     $ 109,936,000     $ 114,051,000  

At March 31, 2012, securities with a fair value of $136,156,000 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 $141,506,000 as of December 31, 2011 and $121,143,000 at March 31, 2011, pledged for the same purposes.
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 three months ended March 31, 2012 and 2011:

   
For the three months ended
March 31, 2012
   
For the three months ended
 March 31, 2011
 
Proceeds from sales
  $ 10,943,000     $ -  
Gross gains
  $ 812,000     $ -  
Gross losses
  $ (289,000 )   $ -  
Net gain
  $ 523,000     $ -  
Related income taxes
  $ 183,000     $ -  


 
Page 9

 


Management reviews securities with unrealized losses for other than temporary impairment. As of March 31, 2012, there were 42 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 market value, of which 8 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 March 31, 2012 is summarized below:

   
Less than 12 months
   
12 months or more
   
Total
 
   
Fair
   
Unrealized
   
Fair
   
Unrealized
   
Fair
   
Unrealized
 
   
Value
   
Losses
   
Value
   
Losses
   
Value
   
Losses
 
U.S. Treasury and agency
  $ 33,514,000     $ (435,000 )   $ -     $ -     $ 33,514,000     $ (435,000 )
Mortgage-backed securities
    35,242,000       (280,000 )     6,608,000       (81,000 )     41,850,000       (361,000 )
State and political subdivisions
    4,924,000       (204,000 )     -       -       4,924,000       (204,000 )
Corporate securities
    -       -       -       -       -       -  
Other equity securities
    -       -       253,000       (73,000 )     253,000       (73,000 )
    $ 73,680,000     $ (919,000 )   $ 6,861,000     $ (154,000 )   $ 80,541,000     $ (1,073,000 )

As of December 31, 2011, there were 29 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 11 had been temporarily impaired for 12 months or more. Information regarding securities temporarily impaired as of December 31, 2011 is summarized below:

   
Less than 12 months
   
12 months or more
   
Total
 
   
Fair
   
Unrealized
   
Fair
   
Unrealized
   
Fair
   
Unrealized
 
   
Value
   
Losses
   
Value
   
Losses
   
Value
   
Losses
 
U.S. Treasury and agency
  $ -     $ -     $ -     $ -     $ -     $ -  
Mortgage-backed securities
    12,489,000       (25,000 )     6,780,000       (156,000 )     19,269,000       (181,000 )
State and political subdivisions
    1,984,000       (17,000 )     1,667,000       (172,000 )     3,651,000       (189,000 )
Corporate securities
    -       -       811,000       (287,000 )     811,000       (287,000 )
Other equity securities
    154,000       (120,000 )     34,000       (19,000 )     188,000       (139,000 )
    $ 14,627,000     $ (162,000 )   $ 9,292,000     $ (634,000 )   $ 23,919,000     $ (796,000 )

As of March 31, 2011, there were 104 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 market value, of which 12 had been temporarily impaired for 12 months or more. Information regarding securities temporarily impaired as of March 31, 2011 is summarized below:

   
Less than 12 months
   
12 months or more
   
Total
 
   
Fair
   
Unrealized
   
Fair
   
Unrealized
   
Fair
   
Unrealized
 
   
Value
   
Losses
   
Value
   
Losses
   
Value
   
Losses
 
U.S. Treasury and agency
  $ 2,645,000     $ (292,000 )   $ -     $ -     $ 2,645,000     $ (292,000 )
Mortgage-backed securities
    187,278,000       (3,471,000 )     6,757,000       (336,000 )     194,035,000       (3,807,000 )
State and political subdivisions
    29,835,000       (659,000 )     1,398,000       (383,000 )     31,233,000       (1,042,000 )
Corporate securities
    -       -       922,000       (185,000 )     922,000       (185,000 )
Other equity securities
    10,000       (2,000 )     47,000       (7,000 )     57,000       (9,000 )
    $ 219,768,000     $ (4,424,000 )   $ 9,124,000     $ (911,000 )   $ 228,892,000     $ (5,335,000 )

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 6 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 March 31, 2012

 
Page 10

 


and 2011, and December 31, 2011, the Bank’s investment in FHLB stock totaled $13.4 million and $14.0 million, respectively. FHLB stock is a non-marketable equity security and therefore is reported at cost, which equals par value.

Note 3 – Loans

The following table shows the composition of the Company’s loan portfolio as of March 31, 2012 and 2011 and at December 31, 2011:

   
March 31, 2012
   
December 31, 2011
   
March 31, 2011
 
Commercial
                                   
   Real estate
  $ 254,708,000       29.3 %   $ 255,424,000       29.5 %   $ 263,800,000       29.5 %
   Construction
    30,828,000       3.5 %     32,574,000       3.8 %     29,316,000       3.3 %
   Other
    85,467,000       9.8 %     86,982,000       10.1 %     101,762,000       11.4 %
Municipal
    15,961,000       1.8 %     16,221,000       1.9 %     20,834,000       2.3 %
Residential
                                               
   Term
    358,394,000       41.2 %     341,286,000       39.5 %     340,841,000       38.1 %
   Construction
    6,451,000       0.7 %     10,469,000       1.2 %     13,370,000       1.5 %
Home equity line of credit
    103,372,000       11.9 %     105,244,000       12.1 %     106,172,000       11.8 %
Consumer
    15,711,000       1.8 %     16,788,000       1.9 %     18,589,000       2.1 %
Total
  $ 870,892,000       100.0 %   $ 864,988,000       100.0 %   $ 894,684,000       100.0 %

Loan balances include net deferred loan costs of $1,520,000 as of March 31, 2012 and $1,386,000 as of December 31, 2011, and $1,366,000 as of March 31, 2011. Pursuant to collateral agreements, qualifying first mortgage loans, which were valued at $229,448,000 at March 31, 2012, $211,597,000 at December 31, 2011, and $201,069,000 at March 31, 2011, were used to collateralize borrowings from the Federal Home Loan Bank of Boston. In addition, commercial, construction and home equity loans totaling $227,022,000 at March 31, 2012, $218,417,000 at December 31, 2011, and $346,424,000 at March 31, 2011, were used to collateralize a standby line of credit at the Federal Reserve Bank of Boston that is currently unused.
Loans on non-accrual status totaled $24,438,000 at March 31, 2012, $27,806,000 at December 31, 2011 and $22,498,000 at March 31, 2011. Loans past due 90 days or greater which are accruing interest totaled $1,955,000 at March 31, 2012, $1,170,000 at December 31, 2011 and $291,000 at March 31, 2011. The Company continues to accrue interest on these loans because it believes collection of principal and interest is reasonably assured.

 
Page 11

 


Information on the past-due status of loans by class of financing receivable as of March 31, 2012, is presented in the following table:

   
30-89 Days
Past Due
   
90+ Days
Past Due
   
All
Past Due
   
Current
   
Total
   
90+ Days
& Accruing
 
Commercial
                                   
   Real estate
  $ 623,000     $ 4,526,000     $ 5,149,000     $ 249,559,000     $ 254,708,000     $ 1,025,000  
   Construction
    1,951,000       35,000       1,986,000       28,842,000       30,828,000       -  
   Other
    1,578,000       1,869,000       3,447,000       82,020,000       85,467,000       563,000  
Municipal
    -       -       -       15,961,000       15,961,000       -  
Residential
                                               
   Term
    3,324,000       9,299,000       12,623,000       345,771,000       358,394,000       359,000  
   Construction
    492,000       1,454,000       1,946,000       4,505,000       6,451,000       -  
Home equity line of credit
    86,000       1,156,000       1,242,000       102,130,000       103,372,000       -  
Consumer
    173,000       8,000       181,000       15,530,000       15,711,000       8,000  
Total
  $ 8,227,000     $ 18,347,000     $ 26,574,000     $ 844,318,000     $ 870,892,000     $ 1,955,000  

Information on the past-due status of loans by class of financing receivable as of December 31, 2011, is presented in the following table:

   
30-89 Days
Past Due
   
90+ Days
Past Due
   
All
Past Due
   
Current
   
Total
   
90+ Days
& Accruing
 
Commercial
                                   
   Real estate
  $ 2,872,000     $ 3,992,000     $ 6,864,000     $ 248,560,000     $ 255,424,000     $ -  
   Construction
    174,000       1,603,000       1,777,000       30,797,000       32,574,000       -  
   Other
    1,431,000       1,192,000       2,623,000       84,359,000       86,982,000       52,000  
Municipal
    -       -       -       16,221,000       16,221,000       -  
Residential
                                               
   Term
    3,331,000       8,843,000       12,174,000       329,112,000       341,286,000       1,118,000  
   Construction
    -       1,198,000       1,198,000       9,271,000       10,469,000       -  
Home equity line of credit
    480,000       1,134,000       1,614,000       103,630,000       105,244,000       -  
Consumer
    331,000       16,000       347,000       16,441,000       16,788,000       -  
Total
  $ 8,619,000     $ 17,978,000     $ 26,597,000     $ 838,391,000     $ 864,988,000     $ 1,170,000  

Information on the past-due status of loans by class of financing receivable as of March 31, 2011, is presented in the following table:

   
30-89 Days
Past Due
   
90+ Days
Past Due
   
All
Past Due
   
Current
   
Total
   
90+ Days & Accruing
 
Commercial
                                   
   Real estate
  $ 682,000     $ 6,431,000     $ 7,113,000     $ 256,687,000     $ 263,800,000     $ 270,000  
   Construction
    65,000       256,000       321,000       28,995,000       29,316,000       -  
   Other
    858,000       563,000       1,421,000       100,341,000       101,762,000       2,000  
Municipal
    -       -       -       20,834,000       20,834,000       -  
Residential
                                               
   Term
    5,456,000       8,623,000       14,079,000       326,762,000       340,841,000       -  
   Construction
    -       2,247,000       2,247,000       11,123,000       13,370,000       -  
Home equity line of credit
    759,000       604,000       1,363,000       104,809,000       106,172,000       -  
Consumer
    250,000       19,000       269,000       18,320,000       18,589,000       19,000  
Total
  $ 8,070,000     $ 18,743,000     $ 26,813,000     $