FIRST BANCORP, INC /ME/ Management's Discussion and Analysis of Financial Condition and Results of Operations (form 10-K)

The First Bancorp, Inc. (the "Company" or "The First Bancorp") was incorporated
in the State of Maine on January 15, 1985, and is the parent holding company of
First National Bank (the "Bank"). On January 28, 2016, the Board of Directors
voted to change the Bank's name to First National Bank from The First, N.A.
The Company generates almost all of its revenues from the Bank, which was
chartered as a national bank under the laws of the United States on May 30,
1864. The Bank, which has eighteen offices along coastal and eastern Maine,
emphasizes personal service to the communities it serves, concentrating
primarily on small businesses and individuals.
The Bank offers a wide variety of traditional banking services and 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.
While net interest income typically increases as earning assets grow, the spread
can vary up or down depending on the level and direction of movements in
interest rates. Management believes the Bank has modest exposure to changes in
interest rates, as discussed in "Interest Rate Risk Management" elsewhere in
Management's Discussion.
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 (previously First Advisors), a division of the Bank.

Forward-Looking Statements

This report contains statements that are "forward-looking statements." We may
also make written or oral forward-looking statements in other documents we file
with the Securities and Exchange Commission ("SEC"), in our annual reports to
shareholders, in press releases and other written materials, and in oral
statements made by our officers, directors or employees. You can identify
forward-looking statements by the use of the words "believe," "expect,"
"anticipate," "intend," "estimate," "assume," "outlook," "will," "should," and
other expressions that predict or indicate future events and trends and which do
not relate to historical matters. You should not rely on forward-looking
statements, because they involve known and unknown risks, uncertainties and
other factors, some of which are beyond the control of the Company. These risks,
uncertainties and other factors may cause the actual results, performance or
achievements of the Company to be materially different from the anticipated
future results, performance or achievements expressed or implied by the
forward-looking statements.

Some of the factors that might cause these differences include the following:
changes in general national, regional or international economic conditions or
conditions affecting the banking or financial services industries or financial
capital markets, volatility and disruption in national and international
financial markets, government intervention in the U.S. financial system,
reductions in net interest income resulting from interest rate volatility as
well as changes in the balance and mix of loans and deposits, reductions in the
market value of wealth management assets under administration, changes in the
value of securities and other assets, reductions in loan demand, changes in loan
collectability, default and charge-off rates, changes in the size and nature of
the Company's competition, changes in legislation or regulation and accounting
principles, policies and guidelines, uncertainties with respect to the nature,
the extent and the duration of the COVID-19 pandemic and its consequences
(including in our market areas or affecting our customers such as protracted
adverse effects on the tourism and hospitality industries), and changes in the
assumptions used in making such forward-looking statements. In addition, the
factors described under "Risk Factors" in Item 1A of this Annual Report on Form
10-K may result in these differences. You should carefully review all of these
factors, and you should be aware that there may be other factors that could
cause these differences. These forward-looking statements were based on
information, plans and estimates at the date of this annual report, and we
assume no obligation to update any forward-looking statements to reflect changes
in underlying assumptions or factors, new information, future events or other
changes.

Although the Company believes that the expectations reflected in such
forward-looking statements are reasonable, actual results may differ materially
from the results discussed in these forward-looking statements. Readers are also
urged to carefully review and consider the various disclosures made by the
Company, which attempt to advise interested parties of the factors that affect
the Company's business.








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Accounting Policies/Critical Accounting Estimates

The Company's significant accounting policies are described in Note 1, "Summary
of Significant Accounting Policies," to the consolidated financial statements
contained in Item 8, "Financial Statements and Supplementary Data," of this Form
10-K. In applying these accounting policies, management is required to exercise
judgment in determining many of the methodologies, assumptions and estimates to
be utilized. Certain of the critical accounting estimates are more dependent on
such judgment and in some cases may contribute to volatility in the Company's
reported financial performance should the assumptions and estimates used be
incorrect or change over time due to changes in circumstances.

Management's discussion and analysis of the Company's financial condition and
results of operations is based on the consolidated financial statements which
are prepared in accordance with accounting principles generally accepted in the
United States of America. The preparation of such financial statements requires
Management to make estimates and assumptions that affect the reported amounts of
assets, liabilities, revenues and expenses and related disclosure of contingent
assets and liabilities. On an ongoing basis, Management evaluates its estimates,
including those related to the allowance for loan losses, fair value of
securities, goodwill, the valuation of mortgage servicing rights, derivative
financial instruments, and other-than-temporary impairment on securities.
Management bases its estimates on historical experience and on various other
assumptions that are believed to be reasonable under the circumstances, the
results of which form the basis for making judgments about the carrying values
of assets that are not readily apparent from other sources. Actual results could
differ from the amounts derived from Management's estimates and assumptions
under different assumptions or conditions.

Allowance for Loan Losses. Calculation of an appropriate level for the allowance
for loan losses is a critical accounting estimate and requires the most
significant estimates and assumptions used in the preparation of the
consolidated financial statements. The allowance for loan losses is based on
Management's evaluation of the level of the allowance required in relation to
the estimated loss exposure in the loan portfolio. Management regularly
evaluates the allowance, typically monthly, to determine the appropriate level
by taking into consideration factors such as the size and growth trajectory of
the portfolio, quality trends as measured by key indicators, prior loan loss
experience in major portfolio segments, local and national business and economic
conditions, the results of any stress testing undertaken during the period, and
Management's estimation of potential losses. The use of different estimates or
assumptions could produce different provisions for loan losses which would
likely result in changes to the Company's net income. Further discussion of the
allowance for loan losses may be found in Note 5, "Loans" and Note 6, "Allowance
for Loan Losses", to the consolidated financial statements contained in Item 8
of the Form 10-K.
Fair Value of Securities. Determining a market price for securities carried at
fair value is a critical accounting estimate in the Company's financial
statements. Pricing of individual securities is subject to a number of factors
including changes in market interest rates, changes in prepayment speeds and
assumptions, changes in market tolerance for risk, and any changes in the risk
profile of the security. The Company subscribes to a widely recognized,
independent pricing service and updates carrying values no less frequently than
monthly. It also validates the values provided by the pricing service no less
frequently than quarterly by measuring against security prices provided by a
secondary source. Results of the validation are reported to the Bank's Asset
Liability Committee each quarter and any variances between the two sources above
defined thresholds are investigated by management. A finding that the Company's
methodology for valuation of its investment securities is materially incorrect
could result in changes to the carrying value of securities on its balance sheet
and corresponding changes in shareholders equity position. Further discussion of
the fair value of securities may be found in Note 3, "Investment Securities", to
the consolidated financial statements contained in Item 8 of the Form 10-K.
Other-Than-Temporary Impairment on Securities. Another critical accounting
estimate related to investment securities is the evaluation of
other-than-temporary impairments. The evaluation of securities for
other-than-temporary impairments is a quantitative and qualitative process,
which is subject to risks and uncertainties and is intended to determine whether
declines in the fair value of investments should be recognized in current period
earnings, and would result in a decline in earnings for the period. The risks
and uncertainties include changes in general economic conditions, the issuer's
financial condition and/or future prospects, the effects of changes in interest
rates or credit spreads and the expected recovery period of unrealized losses.
Securities that are in an unrealized loss position are reviewed at least
quarterly to determine if other-than-temporary impairment is present based on
certain quantitative and qualitative factors and measures. The primary factors
considered in evaluating whether a decline in value of securities is
other-than-temporary include: (a) the length of time and extent to which the
fair value has been less than cost or amortized cost and the expected recovery
period of the security, (b) the financial condition, credit rating and future
prospects of the issuer, (c) whether the debtor is current on contractually
obligated interest and principal payments, (d) the volatility of the securities'
market price, (e) the intent and ability of the Company to retain the investment
for a period of time sufficient to allow for recovery, which may be at maturity,
and (f) any other information and observable data considered relevant in
determining whether other-than-temporary impairment has occurred, including the
expectation of receipt of all principal and interest when due. Further
discussion of other than temporary impairment of securities may be found in Note
3, "Investment Securities", to the consolidated financial statements contained
in Item 8 of the Form 10-K.

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Goodwill. Management utilizes numerous techniques to estimate the value of
various assets held by the Company, including methods to determine the
appropriate carrying value of goodwill as required under FASB ASC Topic 350
"Intangibles - Goodwill and Other." In addition, goodwill from a purchase
acquisition is subject to ongoing periodic impairment tests, which include an
evaluation of the ongoing assets, liabilities and revenues from the acquisition
and an estimation of the impact of business conditions.
Mortgage Servicing Rights. The valuation of mortgage servicing rights is a
critical accounting policy which requires significant estimates and assumptions.
The Bank often sells mortgage loans it originates and retains the ongoing
servicing of such loans, receiving a fee for these services, generally 0.25% of
the outstanding balance of the loan per annum. Mortgage servicing rights are
recognized at fair value when they are acquired through the sale of loans, and
are reported in other assets. They are amortized into non-interest income in
proportion to, and over the period of, the estimated future net servicing income
of the underlying financial assets. The rights are subsequently carried at the
lower of amortized cost or fair value. Management uses an independent firm which
specializes in the valuation of mortgage servicing rights to determine the fair
value. The most important assumption is the anticipated loan prepayment rate,
and increases in prepayment speed and amount result in lower valuations of
mortgage servicing rights. The valuation also includes an evaluation for
impairment based upon the fair value of the rights, which can vary depending
upon current interest rates and prepayment expectations, as compared to
amortized cost. Impairment is determined by stratifying rights by predominant
characteristics, such as interest rates and terms. The use of different
assumptions could produce a different valuation. All of the assumptions are
based on standards the Company believes would be utilized by market participants
in valuing mortgage servicing rights and are consistently derived and/or
benchmarked against independent public sources.
Derivative Financial Instruments Designated as Hedges. The Company recognizes
all derivatives in the consolidated balance sheets at fair value. On the date a
derivative contract is entered into, the derivative is designated as a hedge of
either a forecasted transaction or the variability of cash flows to be received
or paid related to a recognized asset or liability ("cash flow hedge"), a hedge
of the fair value of a recognized asset or liability or of an unrecognized firm
commitment ("fair value hedge"), or a held for trading instrument ("trading
instrument"). The relationships between hedging instruments and hedged items is
formally documented, as is the risk management objectives and strategy for
undertaking various hedge transactions. Both at the hedge's inception and on an
ongoing basis, determination is made as to whether the derivatives that are used
in hedging transactions are effective in offsetting changes in cash flows or
fair values of hedged items. Changes in fair value of a derivative that is
effective and that qualifies as a cash flow hedge are recorded in other
comprehensive income (loss) and are reclassified into earnings when the
forecasted transaction or related cash flows affect earnings. Changes in fair
value of a derivative that qualifies as a fair value hedge and the change in
fair value of the hedged item are both recorded in earnings and offset each
other when the transaction is effective. Those derivatives that are classified
as trading instruments, including customer loan swaps, are recorded at fair
value with changes in fair value recorded in earnings. Hedge accounting is
discontinued when it is determined that the derivative is no longer effective in
offsetting changes in the cash flows of the hedged item, that it is unlikely
that the forecasted transaction will occur, or that the designation of the
derivative as a hedging instrument is no longer appropriate.

Use of Non-GAAP Financial Measures

Certain information in Management's Discussion and Analysis of Financial
Condition and Results of Operations and elsewhere in this Report contains
financial information determined by methods other than in accordance with
accounting principles generally accepted in the United States of America
("GAAP"). Management uses these "non-GAAP" measures in its analysis of the
Company's performance and believes that these non-GAAP financial measures
provide a greater understanding of ongoing operations and enhance comparability
of results with prior periods as well as demonstrating the effects of
significant gains and charges in the current period. The Company believes that a
meaningful analysis of its financial performance requires an understanding of
the factors underlying that performance. Management believes that investors may
use these non-GAAP financial measures to analyze financial performance without
the impact of unusual items that may obscure trends in the Company's underlying
performance. These disclosures should not be viewed as a substitute for
operating results determined in accordance with GAAP, nor are they necessarily
comparable to non-GAAP performance measures that may be presented by other
companies.
In several places in this report, net interest income is presented on a fully
taxable equivalent basis. Specifically included in interest income was
tax-exempt interest income from certain investment securities and loans. An
amount equal to the tax benefit derived from this tax exempt income has been
added back to the interest income total, which adjustments increased net
interest income accordingly. Management believes the disclosure of
tax-equivalent net interest income information improves the clarity of financial
analysis, and is particularly useful to investors in understanding and
evaluating the changes and trends in the Company's results of operations. Other
financial institutions commonly present net interest income on a tax-equivalent
basis. This adjustment is considered helpful in the comparison of one financial
institution's net interest income to that of another institution, as each will
have a different proportion of tax-exempt interest from its earning assets.
Moreover, net interest income is a component of a second financial measure
commonly used by financial institutions, net interest margin, which is the ratio
of net interest income to average earning assets. For purposes of this measure
as well, other financial institutions generally use tax-equivalent net interest
income to provide a better basis of comparison from institution to institution.
The Company follows
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these practices. The following table provides a reconciliation of tax-equivalent
financial information to the Company's consolidated financial statements, which
have been prepared in accordance with GAAP. A Federal income tax rate of 21.0%
was used in 2022 and 2021.
                                            Years ended December 31,
 Dollars in thousands                          2022                 2021
Net interest income as presented      $      76,166              $ 66,303
Effect of tax-exempt income                   2,326                 2,325
Net interest income, tax equivalent   $      78,492              $ 68,628



The Company presents its efficiency ratio using non-GAAP information which is
most commonly used by financial institutions. The GAAP-based efficiency ratio is
noninterest expenses divided by net interest income plus noninterest income from
the Consolidated Statements of Income and Comprehensive Income. The non-GAAP
efficiency ratio excludes securities losses from noninterest expenses, excludes
securities gains from noninterest income, and adds the tax-equivalent adjustment
to net interest income.

The following table provides a reconciliation between the GAAP and non-GAAP
efficiency ratio:
                                                                           Years ended December 31,
Dollars in thousands                                                    2022                       2021
Non-interest expense, as presented                                $     43,904                $    42,148
Net interest income, as presented                                       76,166                     66,303
Effect of tax-exempt income                                              2,326                      2,325
Non-interest income, as presented                                       16,874                     19,383
Effect of non-interest tax-exempt income                                   170                        168
Net securities gains                                                        (7)                       (23)
Adjusted net interest income plus non-interest income             $     95,529                $    88,156
Non-GAAP efficiency ratio                                                45.96   %                  47.81  %
GAAP efficiency ratio                                                    47.19   %                  49.19  %



The Company presents certain information based upon average tangible common
shareholders' equity instead of total average shareholders' equity. The
difference between these two measures is the Company's intangible assets,
specifically goodwill from prior acquisitions. Management, banking regulators
and many stock analysts use the tangible common equity ratio and the tangible
book value per common share in conjunction with more traditional bank capital
ratios to compare the capital adequacy of banking organizations with significant
amounts of goodwill or other intangible assets, typically stemming from the use
of the purchase accounting method in accounting for mergers and acquisitions.
The following table provides a reconciliation of average tangible common
shareholders' equity to the Company's consolidated financial statements, which
have been prepared in accordance with GAAP:
                                                     Years ended December 

31,

 Dollars in thousands                                  2022                

2021

Average shareholders' equity as presented      $     234,521            $ 

236,564

Less intangible assets (average)                     (30,892)             

(30,962)

Average tangible common shareholders' equity   $     203,629            $ 

205,602

To provide period-to-period comparison of operating results prior to
consideration of credit loss provision and income taxes, the non-GAAP measure of
Pre-Tax, Pre-Provision Net Income is presented. The following table provided a
reconciliation to Net Income:
                                                Years ended December 31,
Dollars in thousands                               2022                 2021
Net income, as presented                  $      38,990              $ 36,269
Add: provision (credit) for loan losses           1,750                  

(375)

Add: income taxes                                 8,396                 

7,644

Pre-tax, pre-provision net income         $      49,136              $ 43,538



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To provide period-to-period comparison of the Company's Tangible Common Equity position absent the effects of unrealized gains or losses in the investment portfolio, the following table provides a reconciliation of period ending tangible common equity to the Company's consolidated financial statements, adjusted to remove unrealized losses:

                                                                       Years ended December 31,
Dollars in thousands, except per share data                           2022                     2021
Shareholders' Equity                                          $     228,923               $   245,657
Intangible Assets                                                   (30,856)                  (30,925)
Tangible Common Equity                                              198,067                   214,732

Unrealized Losses on Available for Sale Securities, net of tax

                                                                  44,718                     1,718
Adjusted Tangible Common Equity                               $     242,785               $   216,450
Adjusted Tangible Book Value Per Share                        $       21.98               $     19.68



Executive Summary

The Company posted record annual earnings in 2022, driven primarily by an
increase in net interest income before loan loss provision which resulted from
loan growth. The increase in annual net interest income helped to mitigate a
sharp reduction in mortgage banking revenue from the prior year. Operating costs
remained proportionate to revenue as demonstrated by the Company's efficiency
ratio.
Net income for the year ended December 31, 2022 was $39.0 million, up $2.7
million or 7.5% from the $36.3 million posted for the year ended December 31,
2021. Earnings per common share on a fully diluted basis were $3.53 for the year
ended December 31, 2022, up $0.23 or 7.0% from the $3.30 posted for the year
ended December 31, 2021. Net interest income on a tax-equivalent basis increased
$9.9 million or 14.4% for the year ended December 31, 2022 compared to the year
ended December 31, 2021, with growth in earning assets primarily responsible for
the increase. The Company's tax-equivalent net interest margin was 3.15% in
2022, compared to 2.95% in 2021.
Non-interest income in 2022 was $16.9 million, a decrease of $2.5 million or
12.9% from the $19.4 million reported in 2021. This decrease was primarily due
to a 72.8% reduction in mortgage banking revenue from 2021. Debit card income,
as well as wealth management income, saw increases.
Non-interest expense in 2022 was $43.9 million, an increase of $1.8 million or
4.2% from the $42.1 million reported in 2021. Increases in salaries and employee
benefits as well as occupancy expense, furniture and equipment expense, and FDIC
premiums contributed to the year-to-year change.
Income taxes on operating earnings were $8.4 million for the year ended
December 31, 2022, up $752,000 from the same period in 2021.
During 2022, total assets increased $212.1 million or 8.4%, ending the year at
$2.739 billion. The loan portfolio increased $267.0 million or 16.2% in 2022,
ending the year at $1.915 billion. The investment portfolio was down $13.7
million or 2.0% for the year due to valuation marks on Available for Sale
Securities; cash balances were also reduced. On the liability side of the
balance sheet, low-cost deposits decreased $31.6 million or 2.3%, totaling
$1.319 billion as of December 31, 2022. Certificates of deposit increased $301.5
million or 53.2% from the end of 2021.  Local certificates of deposit (CDs)
increased $58.5 million and wholesale CDs increased $243.0 million at
December 31, 2022 compared to December 31, 2021.
Asset quality continues to be strong and stable. Non-performing loans stood at
0.09% of total loans as of December 31, 2022 - improving from the 0.35% level of
non-performing loans a year ago. Net chargeoffs were $548,000, or 0.03% of
average loans in 2022, compared to $357,000, or 0.02% of average loans for the
year ended December 31, 2021. Past due loans were 0.08% of total loans as of
December 31, 2022, down from 0.26% of total loans at December 31, 2021.The
allowance as a percentage of loans outstanding stood at 0.87% in 2022, down from
0.94% at December 31, 2021. In the fourth quarter of 2021, a block of $14.5
million in commercial loans was sold without recourse to reduce exposures in
certain portfolio segments. This reduction, along with continued strong asset
quality metrics and improving macro-economic factors, led management to release
$2.3 million from the allowance for loan losses in December 2021.
Remaining well capitalized remains a top priority for the Company. The Company's
total risk-based capital ratio was 13.58% as of December 31, 2022, solidly above
the well-capitalized threshold of 10.0% set by the Federal Deposit Insurance
Corporation, the Federal Reserve Board, and the Office of the Comptroller of the
Currency.
The Company's operating ratios remain favorable, with a return on average
tangible common equity of 19.15% for the year ended December 31, 2022 compared
to 17.64% for the year ended December 31, 2021. Our non-GAAP efficiency ratio
continues to be an important component in our overall performance and stood at
45.96% in 2022, improved from the 47.81% posted for 2021.





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Results of Operations

Net Interest Income

Net interest income on a tax-equivalent basis increased 14.4% or $9.9 million to
$78.5 million for the year ended December 31, 2022 from the $68.6 million
reported for the year ended December 31, 2021, with growth in earning assets
responsible for the increase. The Company's tax-equivalent net interest margin
was 3.15% in 2022, compared to 2.95% in 2021.
Total interest income on a tax-equivalent basis in 2022 was $95.4 million, an
increase of $16.0 million or 20.1% from the $79.4 million posted by the Company
in 2021. Interest income in 2022 included $1.2 million in loan fees recognized
from the Payroll Protection Program (PPP), down from the $4.0 million in PPP
fees recognized in interest income in 2021. Total interest expense in 2022 was
$16.9 million, an increase of $6.1 million or 56.5% from the $10.8 million
posted by the Company in 2021. Tax-exempt interest income amounted to $8.8
million for the year ended December 31, 2022, and $8.7 million for the year
ended December 31, 2021.
The following tables present changes in interest income and expense attributable
to changes in interest rates, volume, and rate/volume1 for interest-earning
assets and interest-bearing liabilities. Tax-exempt income is calculated on a
tax-equivalent basis, using a 21.0% Federal income tax rate in 2022 and 2021.

Year ended December 31, 2022 compared to 2021
Dollars in thousands               Volume        Rate        Rate/Volume1        Total
Interest on earning assets
Interest-bearing deposits         $   (44)     $   744      $        (457)     $   243
Investment securities                (214)       2,326                (30)       2,082
Loans held for sale                   (18)          34                (27)         (11)
Loans                               8,562        4,467                612       13,641
Total interest income               8,286        7,571                 98       15,955
Interest expense
Deposits                            1,141        5,972                932        8,045
Borrowings                         (1,573)        (698)               317       (1,954)
Total interest expense               (432)       5,274              1,249        6,091
Change in net interest income     $ 8,718      $ 2,297      $      (1,151)     $ 9,864

1 Represents the change attributable to a combination of change in rate and change in volume.

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The following table presents the interest earned on or paid for each major asset
and liability category, respectively, for the years ended December 31, 2022 and
2021, as well as the average yield for each major asset and liability category,
and the net yield between assets and liabilities. Tax-exempt income has been
calculated on a tax-equivalent basis using a 21% Federal income tax rate in 2022
and 2021. Unrecognized interest on non-accrual loans is not included in the
amount presented, but the average balance of non-accrual loans is included in
the denominator when calculating yields.
                                                                2022                                              2021
                                                Amount of                                         Amount of
Dollars in thousands                            interest            Average Yield/Rate            interest            Average Yield/Rate
Interest-earning assets
Interest-bearing deposits                    $        315                        1.43  %       $         72                        0.13  %
Investment securities                              18,928                        2.76  %             16,846                        2.42  %
Loans held for sale                                    11                        2.48  %                 22                        0.98  %
Loans                                              76,107                        4.26  %             62,466                        3.98  %
Total interest-earning assets                      95,361                        3.82  %             79,406                        3.41  %
Interest-bearing liabilities
Deposits                                           15,359                        0.80  %              7,314                        0.44  %
Borrowings                                          1,510                        1.21  %              3,464                        1.51  %
Total interest-bearing liabilities                 16,869                        0.83  %             10,778                        0.57  %
Net interest income                          $     78,492                                      $     68,628
Interest rate spread                                                             2.99  %                                           2.84  %
Net interest margin                                                              3.15  %                                           2.95  %



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Average Daily Balance Sheets

The following table shows the Company's average daily balance sheets for the years ended December 31, 2022 and 2021:

                                                                             Years ended December 31,
Dollars in thousands                                                      2022                  2021

Assets

Cash and cash equivalents                                           $      23,253          $    23,655
Interest-bearing deposits in other banks                                   22,089               57,208

Securities available for sale (includes tax exempt securities of $35,759 in 2022 and $34,762 in 2021)

                                      302,019              309,131

Securities to be held to maturity (included tax exempt securities of $254,504 in 2022 and $251,301 in 2021)

                                 379,762              376,991
Restricted equity securities, at cost                                       4,761                9,268
Loans held for sale (fair value approximates cost)                            443                2,248
Loans                                                                   1,784,521            1,569,398
Allowance for loan losses                                                 (16,103)             (17,013)
Net loans                                                               1,768,418            1,552,385
Accrued interest receivable                                                 9,557                9,150
Premises and equipment, net                                                28,828               28,904
Other real estate owned                                                         9                  243
Goodwill                                                                   30,646               30,646
Other assets                                                               54,250               46,227
Total Assets                                                        $   2,624,035          $ 2,446,056
Liabilities & Shareholders' Equity
Demand deposits                                                     $     337,121          $   307,508
NOW deposits                                                              635,172              572,091
Money market deposits                                                     204,279              182,000
Savings deposits                                                          373,604              335,677
Certificates of deposit                                                   695,311              561,080
Total deposits                                                          2,245,487            1,958,356
Borrowed funds - short term                                               124,830              173,717
Borrowed funds - long term                                                     84               55,091
Dividends payable                                                           1,105                  807
Other liabilities                                                          18,008               21,521
Total Liabilities                                                       2,389,514            2,209,492

Shareholders' Equity:

Common stock                                                                  110                  110
Additional paid-in capital                                                 67,566               66,028
Retained earnings                                                         195,673              171,455
Net unrealized gain (loss) on securities available for sale               (29,052)               1,286

Net unrealized gain (loss) on cash flow hedging derivative instruments

                                                                   192               (2,230)

Net unrealized loss on securities transferred from available for sale to held to maturity

                                                      (74)                (113)
Net unrealized gain on postretirement benefit costs                           106                   28
Total Shareholders' Equity                                                234,521              236,564
Total Liabilities & Shareholders' Equity                            $   2,624,035          $ 2,446,056



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Non-Interest Income

Non-interest income in 2022 was $16.9 million, a decrease of $2.5 million or
12.9% from the $19.4 million reported in 2021. The decrease in non-interest
income is primarily attributable to a 72.8% reduction in mortgage banking
revenue from 2021, as higher interest rates dramatically slowed refinance
activity from the elevated levels of the prior two years, and negatively
impacted both gain on sale income and mortgage servicing rights valuation. Debit
card revenue increased $1.1 million or 21.9% year-over-year, while a 1.6%
increase in revenues was achieved by First National Wealth Management, the
Bank's trust and investment management division, despite adverse market
conditions.

Non-Interest Expense

Non-interest expense in 2022 was $43.9 million, an increase of $1.8 million or
4.2% from the $42.1 million reported in 2021. Employee salary and benefit
expense increased 10.2% from the prior year, partially the result of increased
staffing associated with the Bank's opening of a new branch. Occupancy expense,
furniture & equipment expense, and FDIC insurance premiums each had modest
dollar increases from 2021. Other operating expenses decreased 9.1% year-to-year
attributable to loan sale expenses recognized in the fourth quarter of 2021.

Provision to the Allowance for Loan Losses

The Company's provision to the allowance for loan losses was $1.8 million in
2022 compared to $(375,000) in 2021. The sale of $14.5 million in commercial
loans substantially reduced risk exposure in certain segments, which, combined
with strong and stable asset quality, led management to release $2.3 million
from the allowance for loan losses in December 2021. The allowance for loan
losses stood at 0.87% of total loans as of December 31, 2022, compared to 0.94%
as of December 31, 2021.
Net loan charge-offs in 2022 were $548,000 or 0.03% of average loans, up
$191,000 from 2021. Non-performing assets stood at 0.06% of total assets as of
December 31, 2022 compared to 0.23% of total assets at December 31, 2021.
Past-due loans were 0.08% of total loans as of December 31, 2022, down from
0.26% of total loans as of December 31, 2021.

Income Taxes

Income taxes on operating earnings were $8.4 million for the year ended December 31, 2022, up $752,000 from 2021.

Net Income

Net income for 2022 was $39.0 million, up 7.5% or $2.7 million from net income
of $36.3 million that was posted in 2021. Earnings per share on a fully diluted
basis for 2022 were $3.53, up $0.23 or 7.0% from the $3.30 reported for the year
ended December 31, 2021.

Key Ratios

Return on average assets in 2022 was 1.49%, up slightly from the 1.48% posted in
2021. Return on average tangible common equity was 19.15% in 2022, compared to
17.64% in 2021. In 2022, the Company's dividend payout ratio (dividends declared
per share divided by earnings per share) was 37.64%, compared to 38.14% in 2021.
The Company's non-GAAP efficiency ratio - a benchmark measure of the amount
spent to generate a dollar of income - was 45.96% in 2022, improved from 47.81%
in 2021.

Investment Management and Fiduciary Activities

As of December 31, 2022, First National Wealth Management, the Bank's trust and
investment management division, had assets under management or custody with a
market value of $1.179 billion, consisting of 1,233 trust accounts, estate
accounts, agency accounts, and self-directed individual retirement accounts.
This compares to December 31, 2021, when 1,282 accounts with a market value of
$1.310 billion were under management or custody.









                  The First Bancorp - 2022 Form 10-K - Page 30

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Assets and Asset Quality

Total assets of $2.739 billion at December 31, 2022 increased 8.4% or $212.1
million from $2.527 billion at December 31, 2021. The investment portfolio,
including restricted equity securities decreased $13.7 million or 2.0% over
December 31, 2021, and the loan portfolio increased $267.0 million or 16.2%.
Year-over-year, average assets were up $178.0 million in 2022 over 2021. Average
loans in 2022 were $215.1 million higher than in 2021, average investments in
2022 were $4.3 million lower than in 2021, and average interest earning cash
balances were $35.1 million lower than in 2021.
Non-performing assets to total assets stood at 0.06% at December 31, 2022, below
the 0.23% of total assets at December 31, 2021.  In general terms, the Company's
long-standing approach to working with borrowers and ethical loan underwriting
standards helps alleviate some of the payment problems on customers' loans and
minimizes actual loan losses, in Management's opinion. Opportunities were taken
in both 2021 and 2022 to reduce the level of non-performing assets via
no-recourse sales of mostly non-performing commercial and residential mortgage
loans.
Net chargeoffs in 2022 were $548,000 or 0.03% of average loans outstanding, up
$191,000 from 2021. Residential real estate term loans represent 32.1% of the
total loan portfolio, and this loan category generally has a lower level of
losses in comparison to other loan types. In 2022, residential mortgages had a
recovery ratio of 0.003% compared to a loss ratio of 0.03% for the entire loan
portfolio. The Company does not have a credit card portfolio or offer dealer
consumer loans, which generally carry more risk and potentially higher losses
than other types of consumer credit.
The allowance for loan losses ended 2022 at $16.7 million and stood at 0.87% of
total loans outstanding, compared to $15.5 million and 0.94% of total loans
outstanding at December 31, 2021. A $1.8 million provision for losses was made
during the year ended 2022. This provision, coupled with net charge off
activity, resulted in the allowance for loan losses increasing $1.2 million or
7.7% from December 31, 2021.

Investment Activities

During 2022, the investment portfolio, including restricted equity securities,
decreased 2.0% to end the year at $682.3 million, compared to $696.0 million at
December 31, 2021. Average investments in 2022 were $4.3 million lower than in
2021. As of December 31, 2022, mortgage-backed securities had a carrying value
of $289.2 million and a fair value of $277.8 million. Of this total, securities
with a fair value of $79.6 million or 28.7% of the mortgage-backed portfolio
were issued by the Government National Mortgage Association and securities with
a fair value of $198.2 million or 71.3% of the mortgage-backed portfolio were
issued by the Federal Home Loan Mortgage Corporation and the Federal National
Mortgage Association.
The Company's investment securities are classified into three categories:
securities available for sale, securities to be held to maturity and restricted
equity securities. Securities available for sale consist primarily of debt
securities which Management intends to hold for indefinite periods of time. They
may be used as part of the Company's funds management strategy, and may be sold
in response to changes in interest rates, prepayment risk and liquidity needs,
to increase capital ratios, or for other similar reasons. Securities to be held
to maturity consist primarily of debt securities that the Company has acquired
solely for long-term investment purposes, rather than for trading or future
sale. For securities to be categorized as held to maturity, Management must have
the intent and the Company must have the ability to hold such investments until
their respective maturity dates. Restricted equity securities consist of
investments in the stock of the Federal Reserve Bank of Boston and the Federal
Home Loan Bank of Boston; ownership of these securities is required as a
condition of the Bank's membership in the respective banks and these shares are
not able to be pledged or sold. The Company does not hold trading account
securities.
All investment securities are managed in accordance with a written investment
policy adopted by the Board of Directors. It is the Company's general policy
that investments be limited to government debt obligations, time deposits, and
corporate bonds or commercial paper with one of the three highest ratings given
by a nationally recognized rating agency. The portfolio is currently invested
primarily in U.S. Government sponsored agency securities, mortgage-backed
securities and tax-exempt obligations of states and political subdivisions. The
individual securities have been selected to enhance the portfolio's overall
yield while not materially adding to the Company's level of interest rate risk.
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 $64,000, net of taxes, at December 31, 2022. This
compares to $87,000, net of taxes at December 31, 2021. These securities were
transferred as a part of the Company's overall investment and balance sheet
strategies.

                  The First Bancorp - 2022 Form 10-K - Page 31

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The following table sets forth the Company's investment securities at their carrying amounts as of December 31, 2022 and 2021:

Dollars in thousands                    2022           2021

Securities available for sale U.S. Government sponsored agencies $ 19,147 $ 21,899 Mortgage-backed securities

             228,676        254,900

State and political subdivisions 33,191 39,122 Asset-backed securities

                  3,495          4,645

                                       284,509        320,566

Securities to be held to maturity U.S. Government sponsored agencies 40,100 35,600 Mortgage-backed securities

              60,497         60,646
State and political subdivisions       258,549        250,544
Corporate securities                    34,750         23,250
                                       393,896        370,040
Restricted equity securities
Federal Home Loan Bank Stock             2,846          4,328
Federal Reserve Bank Stock               1,037          1,037
                                         3,883          5,365
Total securities                     $ 682,288      $ 695,971

                  The First Bancorp - 2022 Form 10-K - Page 32

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The following table sets forth information on the yields and expected maturities
of the Company's investment securities as of December 31, 2022. Yields on
tax-exempt securities have been computed on a tax-equivalent basis using a tax
rate of 21%. Mortgage-backed securities are presented according to their
contractual maturity date, while the yield takes into effect intermediate
cashflows from repayment of principal which results in a much shorter average
life.
                                                                  Available For Sale                            Held to Maturity
                                                                                 Yield to                                        Yield to
Dollars in thousands                                      Fair Value             maturity             Amortized Cost             maturity
U.S. Government Sponsored Agencies
Due in 1 year or less                                    $        -                   0.00  %       $             -                   0.00  %
Due in 1 to 5 years                                           2,791                   1.83  %                     -                   0.00  %
Due in 5 to 10 years                                          7,848                   1.17  %                13,500                   1.79  %
Due after 10 years                                            8,508                   2.00  %                26,600                   2.00  %
Total                                                        19,147                   1.64  %                40,100                   1.63  %
Mortgage-Backed Securities
Due in 1 year or less                                             -                   0.00  %                     1                   8.76  %
Due in 1 to 5 years                                             253                   2.66  %                     6                   7.72  %
Due in 5 to 10 years                                          3,301                   1.50  %                   169                   7.20  %
Due after 10 years                                          225,122                   2.16  %                60,321                   1.72  %
Total                                                       228,676                   2.15  %                60,497                   1.74  %
State & Political Subdivisions
Due in 1 year or less                                             -                   0.00  %                 1,786                   3.96  %
Due in 1 to 5 years                                             365                   5.06  %                 8,242                   3.93  %
Due in 5 to 10 years                                          4,054                   2.58  %                44,366                   3.54  %
Due after 10 years                                           28,772                   3.25  %               204,155                   2.49  %
Total                                                        33,191                   3.19  %               258,549                   2.73  %
Asset-Backed Securities
Due in 1 year or less                                             -                   0.00  %                     -                   0.00  %
Due in 1 to 5 years                                               -                   0.00  %                     -                   0.00  %
Due in 5 to 10 years                                              -                   0.00  %                     -                   0.00  %
Due after 10 years                                            3,495                   5.57  %                     -                   0.00  %
Total                                                         3,495                   5.57  %                     -                   0.00  %
Corporate Securities
Due in 1 year or less                                             -                   0.00  %                     -                   0.00  %
Due in 1 to 5 years                                               -                   0.00  %                 6,750                   4.54  %
Due in 5 to 10 years                                              -                   0.00  %                28,000                   4.79  %
Due after 10 years                                                -                   0.00  %                     -                   0.00  %
Total                                                             -                   0.00  %                34,750                   4.75  %
                                                         $  284,509                   2.28  %       $       393,896                   2.64  %



Impaired Securities

The securities portfolio contains certain securities, the amortized cost of
which exceeds fair value, which at December 31, 2022 amounted to an unrealized
loss of $111.7 million, or 15.65% of the amortized cost of the total securities
portfolio. At December 31, 2021 this amount represented an unrealized loss of
$8.4 million, or 1.26% of the total securities portfolio. The position change
since 2021 year-end is the result of the significant increase in market interest
rates during the period.
As a part of the Company's ongoing security monitoring process, the Company
identifies securities in an unrealized loss position that could potentially be
other-than-temporarily impaired. If a decline in the fair value of a debt
security is judged to be other-than-temporary, the decline related to credit
loss is recorded in net realized securities losses while the decline
attributable to other factors is recorded in other comprehensive income or loss.
The Company's evaluation of securities for impairment is a quantitative and
qualitative process intended to determine whether declines in the fair value of
investment securities should be recognized in current period earnings. The
primary factors
                  The First Bancorp - 2022 Form 10-K - Page 33

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considered in evaluating whether a decline in the fair value of securities is
other-than-temporary include: (a) the length of time and extent to which the
fair value has been less than cost or amortized cost and the expected recovery
period of the security, (b) the financial condition, credit rating and future
prospects of the issuer, (c) whether the debtor is current on contractually
obligated interest and principal payments, (d) the volatility of the security's
market price, (e) the intent and ability of the Company to retain the investment
for a period of time sufficient to allow for recovery, which may be at maturity,
and (f) any other information and observable data considered relevant in
determining whether other-than-temporary impairment has occurred.
The Company's best estimate of cash flows uses severe economic recession
assumptions to quantify potential market uncertainty. The Company's assumptions
include but are not limited to delinquencies, foreclosure levels and constant
default rates on the underlying collateral, loss severity ratios, and constant
prepayment rates. If the Company does not expect to receive 100% of future
contractual principal and interest, an other-than-temporary impairment charge is
recognized. Estimating future cash flows is a quantitative and qualitative
process that incorporates information received from third party sources along
with certain internal assumptions and judgments regarding the future performance
of the underlying collateral.
As of December 31, 2022, the Company had temporarily impaired securities with a
fair value of $561.3 million and unrealized losses of $111.7 million, as
identified in the table below. Securities in a continuous unrealized loss
position of 12 months or more amounted to $310.2 million as of December 31,
2022, compared with $55.9 million at December 31, 2021. The Company has
concluded that these securities were not other-than-temporarily impaired. This
conclusion was based on the issuers' continued satisfaction of their obligations
in accordance with their contractual terms and the expectation that the issuers
will continue to do so, Management's intent and ability to hold these securities
for a period of time sufficient to allow for any anticipated recovery in fair
value (which may be at maturity), the expectation that the Company will receive
100% of future contractual cash flows, as well as the evaluation of the
fundamentals of the issuers' financial condition and other objective evidence.
The following table summarizes temporarily impaired securities and their
approximate fair values at December 31, 2022.
                                                   Less than 12 months                     12 months or more                            Total

                                                Fair             Unrealized             Fair            Unrealized             Fair            Unrealized
Dollars in thousands                            Value              Losses              Value              Losses              Value              Losses

U.S. Government-sponsored agencies $ 4,804 $ (675)

$  41,965          $  (16,680)         $  46,769          $  (17,355)
Mortgage-backed securities                      73,509              (6,486)           197,102             (47,353)           270,611             (53,839)
State and political subdivisions               149,517             (13,769)            67,932             (24,247)           217,449             (38,016)
Asset-backed securities                          3,495                 (53)                 -                   -              3,495                 (53)
Corporate securities                            19,857              (2,143)             3,160                (340)            23,017              (2,483)
                                            $  251,182          $  (23,126)         $ 310,159          $  (88,620)         $ 561,341          $ (111,746)

For securities with unrealized losses, the following information was considered in determining that the securities were not other-than-temporarily impaired:

Securities issued by U.S. Government-sponsored agencies. As of December 31,
2022, the total unrealized losses on these securities amounted to $17.4 million,
compared with $2.3 million at December 31, 2021. All of these securities were
credit rated "AAA" or "AA+" by the major credit rating agencies. Management
believes that securities issued by U.S. Government-sponsored agencies and
enterprises have minimal credit risk, as these agencies and enterprises play a
vital role in the nation's financial markets, and does not consider these
securities to be other-than-temporarily impaired at December 31, 2022.

Mortgage-backed securities issued by U.S. Government agencies and U.S.
Government-sponsored enterprises. As of December 31, 2022, the total unrealized
losses on these securities amounted to $53.8 million, compared with $5.7 million
at December 31, 2021. All of these securities were credit rated "AAA" by the
major credit rating agencies. Management believes that securities issued by U.S.
Government agencies bear no credit risk because they are backed by the full
faith and credit of the United States and that securities issued by U.S.
Government-sponsored enterprises have minimal credit risk, as these agencies
enterprises play a vital role in the nation's financial markets. Management
believes that the unrealized losses at December 31, 2022 were attributable to
changes in current market yields and spreads since the dates the underlying
securities were purchased, and does not consider these securities to be
other-than-temporarily impaired at December 31, 2022. The Company also has the
ability and intent to hold these securities until a recovery of their amortized
cost, which may be at maturity.

Obligations of state and political subdivisions. As of December 31, 2022, the
total unrealized losses on municipal securities amounted to $38.0 million,
compared with $390,000 at December 31, 2021. Municipal securities are supported
by the general taxing authority of the municipality and, in the cases of school
districts, are generally supported by state aid. At December 31, 2022, all
municipal bond issuers were current on contractually obligated interest and
principal payments. The Company monitors price changes and changes in credit
quality of municipal issuers on a regular basis as a potential indicator of
                  The First Bancorp - 2022 Form 10-K - Page 34

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temporary impairment. The Company attributes the unrealized losses at December
31, 2022, however, to changes in prevailing market yields and pricing spreads
since the dates the underlying securities were purchased, combined with current
market liquidity conditions and the disruption in the financial markets in
general. Accordingly, the Company does not consider these municipal securities
to be other-than-temporarily impaired at December 31, 2022. The Company also has
the ability and intent to hold these securities until a recovery of their
amortized cost, which may be at maturity.

Asset-backed securities. As of December 31,2022, there were $53,000 of
unrealized losses on these securities compared to none at December 31, 2021.
These securities consist of U.S Government backed student loans along with other
credit enhancements. Management believes that the unrealized losses at December
31, 2022 were attributable to changes in current market yields and spreads since
the date the underlying securities were purchased, and does not consider these
securities to be other-than-temporarily impaired at December 31, 2022.

Corporate securities. As of December 31, 2022, the total unrealized losses on
corporate securities amounted to $2.5 million, compared with $66,000 at December
31, 2021. Corporate securities are dependent on the operating performance of the
issuers. At December 31, 2022, all corporate bond issuers were current on
contractually obligated interest and principal payments. Management believes
that the unrealized losses at December 31, 2022 were attributable to changes in
current market yields and spreads since the date the underlying securities were
purchased, and does not consider these securities to be other-than temporarily
impaired at December 31, 2022.

Federal Home Loan Bank Stock

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 a portion
of its wholesale funding needs. As of December 31, 2022 and 2021, the Bank's
investment in FHLB stock totaled $2.8 million and $4.3 million, respectively.
The year-to-year change was based upon the Bank's level of borrowings from the
FHLB, and by a change in FHLB's minimum ownership requirements. 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
December 31, 2022. The Bank will continue to monitor its investment in FHLB
stock.

Lending Activities

The loan portfolio increased $267.0 million or 16.2% in 2022, with total loans
at $1.915 billion at December 31, 2022, compared to $1.648 billion at December
31, 2021. Commercial loans increased $192.5 million or 20.9% between December
31, 2021 and December 31, 2022. Residential term loans increased by $63.1
million or 11.5% and municipal loans decreased by $7.7 million or 16.0% over the
same period.
Commercial loans are comprised of three major classes: commercial real estate
loans, commercial construction loans and other commercial loans.
Commercial real estate loans consist of mortgage loans to finance investments in
real property such as multi-family residential, commercial/retail, office,
industrial, hotels, educational and other specific or mixed use properties.
Commercial real estate loans are typically written with amortizing payment
structures. Collateral values are determined based on appraisals and evaluations
in accordance with established policy and regulatory guidelines. Commercial real
estate loans typically have a loan-to-value ratio of up to 80% based upon
current valuation information at the time the loan is made. Commercial real
estate loans are primarily paid by the cash flow generated from the real
property, such as operating leases, rents, or other operating cash flows from
the borrower.
Commercial construction loans consist of loans to finance construction in a mix
of owner- and non-owner occupied commercial real estate properties. Commercial
construction loans typically have maturities of less than two years. Payment
structures during the construction period are typically on an interest only
basis, although principal payments may be established depending on the type of
construction project being financed. During the construction phase, commercial
construction loans are primarily paid by cash reserves or other operating cash
flows of the borrower or guarantors, if applicable. At the end of the
construction period, loan repayment typically comes from a third party source in
the event that the Bank will not be providing permanent term financing.
Collateral valuation and loan-to-value guidelines follow those for commercial
real estate loans.
Other commercial loans consist of revolving and term loan obligations extended
to business and corporate enterprises for the purpose of financing working
capital or capital investment. Collateral generally consists of pledges of
business assets including, but not limited to, accounts receivable, inventory,
plant and equipment, and/or real estate, if applicable. Commercial loans are
primarily paid from the operating cash flow of the borrower. Other commercial
loans may be secured or unsecured. Loans granted under the Paycheck Protection
Program ("PPP") are considered other commercial loans.
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Municipal loans are comprised of loans to municipalities in Maine for
capitalized expenditures, construction projects or tax-anticipation notes. All
municipal loans are considered general obligations of the municipality and are
collateralized by the taxing ability of the municipality for repayment of debt.
Residential loans are comprised of two classes: term loans and construction
loans.
Residential term loans consist of residential real estate loans held in the
Company's loan portfolio made to borrowers who demonstrate the ability to make
scheduled payments with full consideration of applicable underwriting factors
comprising the Bank's credit policies. Borrower qualifications include favorable
credit history combined with supportive income requirements and loan-to-value
ratios within established policy and regulatory guidelines. Collateral values
are determined based on appraisals and evaluations in accordance with
established policy and regulatory guidelines. Residential loans typically have a
loan-to-value ratio of up to 80% based on appraisal information at the time the
loan is made. Collateral consists of mortgage liens on one- to four-family
residential properties. Loans are offered with fixed or adjustable rates with
amortization terms of up to thirty years.
Residential construction loans typically consist of loans for the purpose of
constructing single family residences to be owned and occupied by the borrower.
Borrower qualifications include favorable credit history combined with
supportive income requirements and loan-to-value ratios within established
policy and regulatory guidelines. Residential construction loans normally have
construction terms of one year or less and payment during the construction term
is typically on an interest only basis from sources including interest reserves,
borrower liquidity and/or income. Residential construction loans will typically
convert to permanent financing from the Bank or have another financing
commitment in place from an acceptable mortgage lender. Collateral valuation and
loan-to-value guidelines are consistent with those for residential term loans.
Home equity lines of credit are made to qualified individuals and are secured by
senior or junior mortgage liens on owner-occupied one- to four-family homes,
condominiums, or vacation homes. The home equity line of credit typically has a
variable interest rate and is billed as interest-only payments during the draw
period. At the end of the draw period, the home equity line of credit is billed
as a percentage of the principal balance plus all accrued interest. Loan
maturities are normally 25 years. Borrower qualifications include favorable
credit history combined with supportive income requirements and combined
loan-to-value ratios usually not exceeding 80% inclusive of priority liens.
Collateral valuation guidelines follow those for residential real estate loans.
Consumer loan products including personal lines of credit and amortizing loans
are made to qualified individuals for various purposes such as automobiles,
recreational vehicles, debt consolidation, personal expenses or overdraft
protection. Borrower qualifications include favorable credit history combined
with supportive income and collateral requirements within established policy
guidelines. Consumer loans may be secured or unsecured.
Construction loans, both commercial and residential, at 55.8% of capital are
well under the regulatory guidance of 100.0% of capital at December 31, 2022.
Construction loans and non-owner-occupied commercial real estate loans are at
226.3% of total capital at December 31, 2022, well below the regulatory guidance
of 300.0% of capital.

The following table summarizes the loan portfolio, by class, as of December 31,
2022 and 2021:
                                                  As of December 31,
 Dollars
 in thousands                            2022                          2021
Commercial
Real estate                   $   699,340        36.5  %    $   576,198        35.0  %
Construction                       93,907         4.9  %         79,365         4.8  %
Other                             319,359        16.7  %        264,570        16.1  %
Municipal                          40,619         2.1  %         48,362         2.9  %
Residential
Term                              613,919        32.1  %        550,783        33.4  %
Construction                       49,907         2.6  %         31,763         1.9  %
Home equity line of credit         76,560         4.0  %         73,632         4.5  %
Consumer                           21,063         1.1  %         22,976         1.4  %
Total loans                   $ 1,914,674       100.0  %    $ 1,647,649       100.0  %









                  The First Bancorp - 2022 Form 10-K - Page 36

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The following table sets forth certain information regarding the contractual
maturities of the Bank's loan portfolio as of December 31, 2022:
Dollars in thousands                         < 1 Year           1 - 5 Years           5 - 10 Years           > 10 Years             Total
Commercial
Real estate                                 $  1,075          $     27,705          $      66,078          $   604,482          $   699,340
Construction                                     661                 7,226                 18,896               67,124               93,907
Other                                          1,066               131,836                 78,372              108,085              319,359
Municipal                                          -                15,870                  9,870               14,879               40,619
Residential
Term                                               -                 7,598                 43,134              563,187              613,919
Construction                                      81                 1,735                      -               48,091               49,907
Home equity line of credit                     1,459                 4,696                  1,786               68,619               76,560
Consumer                                       5,692                 7,317                  3,017                5,037               21,063
Total loans                                 $ 10,034          $    203,983          $     221,153          $ 1,479,504          $ 1,914,674

The following table provides a listing of loans, by class, between variable and fixed rates as of December 31, 2022:

                                                 Fixed-Rate                                   Adjustable-Rate                                      Total
Dollars in thousands                   Amount              % of total                 Amount                 % of total               Amount               % of total
Commercial
Real estate                         $  90,812                      4.7  %       $       608,528                     31.8  %       $   699,340                     36.5  %
Construction                           34,304                      1.8  %                59,603                      3.1  %            93,907                      4.9  %
Other                                 122,058                      6.4  %               197,301                     10.3  %           319,359                     16.7  %
Municipal                              40,334                      2.1  %                   285                        -  %            40,619                      2.1  %
Residential
Term                                  436,451                     22.8  %               177,468                      9.3  %           613,919                     32.1  %
Construction                           39,556                      2.1  %                10,351                      0.5  %            49,907                      2.6  %
Home equity line of credit                323                        -  %                76,237                      4.0  %            76,560                      4.0  %
Consumer                               13,824                      0.7  %                 7,239                      0.4  %            21,063                      1.1  %
Total loans                         $ 777,662                     40.6  %       $     1,137,012                     59.4  %       $ 1,914,674                    100.0  %



Loan Concentrations

As of December 31, 2022 and 2021, the Bank had one concentration of loans in one
particular industry that exceeded 10% of its total loan portfolio. Loans to
hotels (except Casino hotels) and motels totaled $206.7 million, or 10.79% of
total loans and $183.4 million, or 11.13% of total loans, respectfully.

Loans Held for Sale

As of December 31, 2022, the Bank had $275,000 in loans held for sale. This compares to $835,000 loans held for sale at December 31, 2021.

Credit Risk Management and Allowance for Loan Losses

Credit risk is the risk of loss arising from the inability of a borrower to meet
its obligations. We manage credit risk by evaluating the risk profile of the
borrower, repayment sources, the nature of the underlying collateral, and other
support given current events, conditions, and expectations. We attempt to manage
the risk characteristics of our loan portfolio through various control
processes, such as credit evaluation of borrowers, establishment of lending
limits, and application of lending procedures, including the holding of adequate
collateral and the maintenance of compensating balances. However, we seek to
rely primarily on the cash flow of our borrowers as the principal source of
repayment. Although credit policies and evaluation processes are designed to
minimize our risk, Management recognizes that loan losses will occur and the
amount of these losses will fluctuate depending on the risk characteristics of
our loan portfolio, as well as general and regional economic conditions.
                  The First Bancorp - 2022 Form 10-K - Page 37

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We provide for loan losses through the establishment of an allowance for loan
losses which represents an estimated reserve for existing losses in the loan
portfolio. The allowance for loan losses is a critical accounting estimate
inherent in the Company's financial statements. We deploy a systematic
methodology for determining our allowance that includes a quarterly review
process, risk rating, and, where appropriate, adjustment to our allowance. We
classify our portfolios as either commercial or residential and consumer and
monitor credit risk separately as discussed below. We evaluate the
appropriateness of our allowance continually based on a review of all
significant loans, with a particular emphasis on non-accruing, past due, and
other loans that we believe require special attention.
The allowance consists of four elements: (1) specific reserves for loans
evaluated individually for impairment; (2) general reserves for types or
portfolios of loans based on historical loan loss experience; (3) qualitative
reserves judgmentally adjusted for local and national economic conditions,
concentrations, portfolio composition, volume and severity of delinquencies and
nonaccrual loans, trends of criticized and classified loans, changes in credit
policies, and underwriting standards, credit administration practices, and other
factors as applicable; and (4) unallocated reserves. All outstanding loans are
considered in evaluating the appropriateness of the allowance.
Appropriateness of the allowance for loan losses is determined using a
consistent, systematic methodology, which analyzes the risk inherent in the loan
portfolio. In addition to evaluating the collectability of specific loans when
determining the appropriateness of the allowance for loan losses, Management
also takes into consideration other factors such as changes in the mix and size
of the loan portfolio, historic loss experience, the amount of delinquencies and
loans adversely classified, economic trends, changes in credit policies, and
experience, ability and depth of lending management. The appropriateness of the
allowance for loan losses is assessed through an allocation process whereby
specific reserve allocations are made against certain impaired loans, and
general reserve allocations are made against segments of the loan portfolio
which have similar attributes. The Company's historical loss experience,
industry trends, and the impact of the local and regional economy on the
Company's borrowers are considered by Management in determining the
appropriateness of the allowance for loan losses.
The allowance for loan losses is increased by provisions charged against current
earnings. Loan losses are charged against the allowance when Management believes
that the collectability of the loan principal is unlikely. Recoveries on loans
previously charged off are credited to the allowance. While Management uses
available information to assess possible losses on loans, future additions to
the allowance may be necessary based on increases in non-performing loans,
changes in economic conditions, growth in loan portfolios, or for other reasons.
Any future additions to the allowance would be recognized in the period in which
they were determined to be necessary. In addition, various regulatory agencies
periodically review the Company's allowance for loan losses as an integral part
of their examination process. Such agencies may require the Company to record
additions to the allowance based on judgments different from those of
Management. No such addition has been required by any agency in over twenty
years.

Commercial

Our commercial portfolio includes all secured and unsecured loans to borrowers
for commercial purposes, including commercial lines of credit and commercial
real estate. Our process for evaluating commercial loans includes performing
updates on loans that we have rated for risk. Our non-performing commercial
loans are generally reviewed individually to determine impairment, accrual
status, and the need for specific reserves. Our methodology incorporates a
variety of risk considerations, both qualitative and quantitative. Quantitative
factors include our historical loss experience by loan type, collateral values,
financial condition of borrowers, and other factors. Qualitative factors include
judgments concerning general economic conditions that may affect credit quality,
credit concentrations, the pace of portfolio growth, and delinquency levels;
these qualitative factors are also considered in connection with the unallocated
portion of our allowance for loan losses.
The process of establishing the allowance with respect to our commercial loan
portfolio begins when a loan officer initially assigns each loan a risk rating,
using established credit criteria. Approximately 60% of a trailing four quarter
average gross commercial portfolio is subject to review and validation annually
by an independent consulting firm, as well as periodically by our internal
credit review function. Our methodology employs Management's judgment as to the
level of losses on existing loans based on our internal review of the loan
portfolio, including an analysis of the borrowers' current financial position,
and the consideration of current and anticipated economic conditions and their
potential effects on specific borrowers and lines of business. In determining
our ability to collect certain loans, we also consider the fair value of any
underlying collateral. We also evaluate credit risk concentrations, including
trends in large dollar exposures to related borrowers, industry and geographic
concentrations, and economic and environmental factors.

Residential, Home Equity and Consumer
Consumer, home equity and residential mortgage loans are generally segregated
into homogeneous pools with similar risk characteristics. Trends and current
conditions in these pools are analyzed and historical loss experience is
adjusted accordingly. Quantitative and qualitative adjustment factors for the
consumer, home equity and residential mortgage portfolios are consistent with
those for the commercial portfolios. Certain loans in the consumer and
residential portfolios identified as having the potential for further
deterioration are analyzed individually to confirm the appropriate risk status
and accrual status, and to determine the need for a specific reserve. Consumer
loans that are greater than 120 days past due are generally charged off.
Residential loans and home equity lines of credit that are greater than 90 days
past due are evaluated for collateral adequacy and if deficient are placed on
non-accrual status. The Bank sells residential loans through the Federal Home
Loan Bank of Boston
                  The First Bancorp - 2022 Form 10-K - Page 38

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Mortgage Partnership Finance program ("MPF") with recourse. Volume sold to MPF continues to be de minimis; therefore, the impact on the allowance is minimal.

Specific Reserves
The allowance for loan losses includes reserve amounts assigned to individual
loans on the basis of loan impairment. Certain loans are evaluated individually
and are judged to be impaired when Management believes it is probable that the
Company will not collect all of the contractual interest and principal payments
as scheduled in the loan agreement. Impaired loans include troubled debt
restructured loans ("TDRs") and loans placed on non-accrual status. A specific
reserve is allocated to an individual loan when that loan has been deemed
impaired and when the amount of a probable loss is estimable on the basis of its
collateral value, the present value of anticipated future cash flows, or its net
realizable value. At December 31, 2022, impaired loans with specific reserves
totaled $1.8 million and the amount of such reserves was $398,000. This compares
to impaired loans with specific reserves of $3.1 million at December 31, 2021,
at which date the amount of such reserves was $576,000.

Unallocated

The unallocated portion of the allowance is intended to provide for losses that
are not identified when establishing the specific and general portions of the
allowance and is based upon Management's evaluation of various conditions that
are not directly measured in the determination of the portfolio and loan
specific allowances. Such conditions may include general economic and business
conditions affecting our lending area, credit quality trends (including trends
in delinquencies and nonperforming loans expected to result from existing
conditions), loan volumes and concentrations, duration of the current business
cycle, bank regulatory examination results, findings of external loan review
examiners, and Management's judgment with respect to various other conditions
including loan administration and management and the quality of risk
identification systems. Management reviews these conditions quarterly. We have
risk management practices designed to ensure timely identification of changes in
loan risk profiles; however, undetected losses may exist inherently within the
loan portfolio. The judgmental aspects involved in applying the risk grading
criteria, analyzing the quality of individual loans, and assessing collateral
values can also contribute to undetected, but probable, losses. Consequently,
there maybe underlying credit risks that have not yet surfaced in the loan-
specific or qualitative metrics the Company uses to estimate its allowance for
loan losses.

All of these analyses are reviewed and discussed by the Directors' Loan
Committee, and recommendations from these processes provide Management and the
Board of Directors with independent information on loan portfolio condition. Our
total allowance at December 31, 2022 is considered by Management to be
appropriate to address the credit losses inherent in the loan portfolio at that
date. However, our determination of the appropriate allowance level is based
upon a number of assumptions we make about future events, which we believe are
reasonable, but which may or may not prove valid. Thus, there can be no
assurance that our charge-offs in future periods will not exceed our allowance
for loan losses or that we will not need to make additional increases in our
allowance for loan losses.

                  The First Bancorp - 2022 Form 10-K - Page 39

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The following table summarizes our allocation of allowance by loan class as of
December 31, 2022 and 2021. The percentages are the portion of each loan type to
total loans:
                                               As of December 31,
Dollars in thousands                   2022                       2021
Commercial
Real estate                   $  6,116        36.5  %    $  5,367        35.0  %
Construction                       821         4.9  %         746         4.8  %
Other                            3,097        16.7  %       2,830        16.1  %
Municipal                          162         2.1  %         157         2.9  %
Residential
Term                             2,559        32.1  %       2,733        33.4  %
Construction                       199         2.6  %         148         1.9  %
Home equity line of credit       1,029         4.0  %         925         4.5  %
Consumer                         1,062         1.1  %         833         1.4  %
Unallocated                      1,678           -  %       1,782           -  %
Total                         $ 16,723       100.0  %    $ 15,521       100.0  %



The allowance for loan losses totaled $16.7 million at December 31, 2022,
compared to $15.5 million at December 31, 2021. Management's ongoing application
of methodologies to establish the allowance include an evaluation of non-accrual
loans and troubled debt restructured loans for specific reserves. These specific
reserves decreased $178,000 in 2022 from $576,000 at December 31, 2021 to
$398,000 at December 31, 2022. The specific loans that make up those categories
change from period to period. Impairment on those loans, which would be
reflected in the allowance for loan losses, might or might not exist, depending
on the specific circumstances of each loan. The portion of the reserve based on
historical loss experience of homogeneous pools of loans increased by $172,000
in 2022. The portion of the reserve based on qualitative factors increased by
$1.3 million during 2022 due to a mix of factors. These factors included changes
in various macroeconomic measures used in the qualitative model, volume changes
in certain portfolio segments, ongoing analysis of the loan portfolio in
multiple stress scenarios, and performance of COVID-19 related loan
modifications. Unallocated reserves, which were $1.8 million, or 11.5% of the
total reserve at December 31, 2021, decreased to $1.7 million or 10.0% of the
total reserve at December 31, 2022. Management considers these levels
appropriate as they supported general imprecision related to portfolio growth
and included considerations of general economic and business conditions
affecting our lending area, credit quality trends (including trends in
delinquencies and nonperforming loans expected to result from existing
conditions), loan volumes and concentrations, duration of the current business
cycle, duration of the pandemic, bank regulatory examination results, findings
of external loan review examiners, and Management's judgment with respect to
various other conditions including loan administration and management and the
quality of risk identification systems. Consequently, there may be underlying
credit risks that have not yet surfaced in the loan specific or qualitative
metrics the Company uses to estimate its allowance for loan losses that are
reflected in the unallocated component.
                  The First Bancorp - 2022 Form 10-K - Page 40

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A breakdown of the allowance for loan losses as of December 31, 2022, by loan class, and allowance element, is presented in the following table:

                                                                      General
                                                Specific            Reserves on
                                              Reserves on          Loans Based on
                                            Loans Evaluated          Historical           Reserves for
                                            Individually for            Loss               Qualitative            Unallocated             Total
Dollars in thousands                           Impairment            Experience              Factors                Reserves             Reserves
Commercial
Real estate                                 $           -          $       974          $        5,142          $           -          $   6,116
Construction                                            -                  131                     690                      -                821
Other                                                 298                  446                   2,353                      -              3,097
Municipal                                               -                    -                     162                      -                162
Residential
Term                                                  100                   83                   2,376                      -              2,559
Construction                                            -                    7                     192                      -                199
Home equity line of credit                              -                  101                     928                      -              1,029
Consumer                                                -                  286                     776                      -              1,062
Unallocated                                             -                    -                       -                  1,678              1,678
                                            $         398          $     2,028          $       12,619          $       1,678          $  16,723



Based upon Management's evaluation, provisions are made to maintain the
allowance as a best estimate of inherent losses within the portfolio. The net
provision for loan losses was $1.8 million in 2022 compared to $(375,000) in
2021. A reversal of $2.3 million was recorded in December 2021 reflecting
reductions in certain risk categories resulting from the sale of commercial
loans. Net charge offs were $548,000 in 2022 compared to net charge offs of
$357,000 in 2021. The allowance as a percentage of loans outstanding stood at
0.87% at December 31, 2022 compared to 0.94% at December 31, 2021.
                  The First Bancorp - 2022 Form 10-K - Page 41

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The following table summarizes the activities in our allowance for loan losses as of December 31, 2022 and 2021:

                                                                     As of December 31,
Dollars in thousands                                               2022           2021
Balance at beginning of year                                    $ 15,521       $ 16,253
Loans charged off:
Commercial
Real estate                                                            -            106
Construction                                                           -              -
Other                                                                309            288
Municipal                                                              -              -
Residential
Term                                                                   8             42
Construction                                                           -              -
Home equity line of credit                                            29              -
Consumer                                                             412            312
Total                                                                758            748
Recoveries on loans previously charged off
Commercial
Real estate                                                           20             95
Construction                                                           -              -
Other                                                                 13             84
Municipal                                                              -              -
Residential
Term                                                                  29             66
Construction                                                           -              -
Home equity line of credit                                             4             61
Consumer                                                             144             85
Total                                                                210            391
Net loans charged off                                                548            357
Provision (credit) for loan losses                                 1,750    

(375)

Balance at end of period                                        $ 16,723       $ 15,521
Ratio of net loans charged off to average loans outstanding         0.03  %        0.02  %
Ratio of allowance for loan losses to total loans outstanding       0.87  % 

0.94 %

Management believes the allowance for loan losses is appropriate as of December
31, 2022. The level of the provision for loan losses is directionally consistent
with the overall credit quality of our loan portfolio and corresponding levels
of nonperforming loans, as well as with the performance of the national and
local economies, including effects of the COVID-19 pandemic.

COVID-19 Impact on Loan Portfolio

First National Bank is a designated SBA preferred lender and participated in
both the 2020 (PPP1) and 2021 (PPP2) rounds of the PPP. Under PPP1, 1,718 loans
were granted totaling $97.8 million in funds disbursed to qualified small
businesses and under PPP2 there were 1,263 loans granted totaling $52.1 million.
The Bank worked actively with borrowers to process applications for forgiveness
per PPP guidelines. As of December 31, 2022, remaining PPP balances totaled
$12,000. The State of Maine, where most of the Bank's customers reside and/or
operate businesses, has re-opened its economy. The emergence of COVID-19 virus
variants has not resulted in new restrictions or curtailment of economic
activity, but COVID-19 remains a threat to economic normalization and could
ultimately have a negative impact on the Bank's borrowers.


                  The First Bancorp - 2022 Form 10-K - Page 42

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Nonperforming Loans

Nonperforming loans are comprised of loans for which, based on current
information and events, it is probable that we will be unable to collect all
amounts due according to the contractual terms of the loan agreement or when
principal and interest is 90 days or more past due unless the loan is both well
secured and in the process of collection (in which case the loan may continue to
accrue interest in spite of its past due status). A loan is "well secured" if it
is secured (1) by collateral in the form of liens on or pledges of real or
personal property, including securities, that have a realizable value sufficient
to discharge the debt (including accrued interest) in full, or (2) by the
guarantee of a financially responsible party. A loan is "in the process of
collection" if collection of the loan is proceeding in due course either (1)
through legal action, including judgment enforcement procedures, or, (2) in
appropriate circumstances, through collection efforts not involving legal action
which are reasonably expected to result in repayment of the debt or in its
restoration to current status in the near future.
When a loan becomes nonperforming (generally 90 days past due), it is evaluated
for collateral dependency based upon the most recent appraisal or other
evaluation method. If the collateral value is lower than the outstanding loan
balance plus accrued interest and estimated selling costs, the loan is placed on
non-accrual status, all accrued interest is reversed from interest income, and a
specific reserve is established for the difference between the loan balance and
the collateral value less selling costs or, in certain situations, the
difference between the loan balance and the collateral value less selling costs
is written off. Concurrently, a new appraisal or valuation may be ordered,
depending on collateral type, currency of the most recent valuation, the size of
the loan, and other factors appropriate to the loan. Upon receipt and acceptance
of the new valuation, the loan may have an additional specific reserve or write
down based on the updated collateral value. On an ongoing basis, appraisals or
valuations may be obtained periodically on collateral dependent non-performing
loans and an additional specific reserve or write down will be made, if
appropriate, based on the new collateral value.
Once a loan is placed on nonaccrual, it remains in nonaccrual status until the
loan is current as to payment of both principal and interest and the borrower
demonstrates the ability to pay and remain current. All payments made on
non-accrual loans are applied to the principal balance of the loan.
Nonperforming loans, expressed as a percentage of total loans, totaled 0.09% at
December 31, 2022 compared to 0.35% at December 31, 2021. As a result of both
the dollar increase in the allowance for loan losses and a dollar decrease in
non-performing loans in 2022 from 2021, the ratio of allowance for loan losses
to non-performing loans increased materially, to 952.9% at year-end 2022 from
277.1% at year-end 2021.

The following table shows the distribution of nonperforming loans by class as of December 31, 2022 and 2021:

                                                                         As of December 31,
Dollars in thousands                                            2022                      2021
Commercial
Real estate                                             $             193          $            242
Construction                                                           23                        27
Other                                                                 663                     1,068
Municipal                                                               -                         -
Residential
Term                                                                  572                     3,808
Construction                                                            -                         -
Home equity line of credit                                            304                       457
Consumer                                                                -                         -
Total non-performing loans                              $           1,755          $          5,602
Allowance for loan losses as a percentage of
nonperforming loans                                                 952.9  %                  277.1  %



Total nonperforming loans do not include loans 90 or more days past due and
still accruing interest. These are loans in which we expect to collect all
amounts due, including past-due interest. As of December 31, 2022, loans 90 or
more days past due and still accruing interest totaled $241,000, compared to
$32,000 at December 31, 2021.
As of December 31, 2022, five  loans with a balance of $339,000 were
non-performing and also classified as TDR. This compares to 20 loans with a
balance of $1.9 million as of December 31, 2021.






                  The First Bancorp - 2022 Form 10-K - Page 43

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Troubled Debt Restructured

A TDR constitutes a restructuring of debt if the Bank, for economic or legal
reasons related to the borrower's financial difficulties, grants a concession to
the borrower that it would not otherwise consider. To determine whether or not a
loan should be classified as a TDR, Management evaluates a loan based upon the
following criteria:
•The borrower demonstrates financial difficulty; common indicators include past
due status with bank obligations, substandard credit bureau reports, or an
inability to refinance with another lender, and
•The Bank has granted a concession; common concession types include maturity
date extension, interest rate adjustments to below market pricing, and deferral
of payments.

As of December 31, 2022 there were 29 loans with an aggregate outstanding
balance of $4.7 million that have been restructured. This compares to 60 loans
with amounts totaling $8.3 million that had been restructured as of December 31,
2021. The following table shows the activity in loans classified as TDRs between
December 31, 2021 and December 31, 2022.

Balance in Thousands of Dollars Number of Loans Aggregate Balance

Total at December 31, 2021                  60           $            8,341
Added in 2022                                1                           38

Loans paid off in 2022                     (32)                      (3,404)
Repayments in 2022                           -                         (231)
Total at December 31, 2022                  29           $            4,744



As of December 31, 2022, 24 loans with an aggregate balance of $4.4 million were
performing under the modified terms, no loans were more than 30 days past due
and accruing, and five loans with an aggregate balance of $339,000 were on
nonaccrual. As a percentage of aggregate outstanding balance, 92.9% were
performing under the modified terms, 0.00% were more than 30 days past due and
accruing and 7.1% were on nonaccrual.
The performance status of all TDRs as of December 31, 2022, as well as the
associated specific reserve in the allowance for loan losses, is summarized by
class of loan in the following table.
                                Performing        30+ Days Past Due           On            All
 In thousands of dollars       As Modified          and Accruing          Nonaccrual        TDRs
Commercial
Real estate                   $     1,044       $            -           $       -       $ 1,044
Construction                          661                    -                   -           661
Other                                 183                    -                 178           361
Municipal                               -                    -                   -             -
Residential
Term                                2,517                    -                 161         2,678
Construction                            -                    -                   -             -
Home equity line of credit              -                    -                   -             -
Consumer                                -                    -                   -             -
                              $     4,405       $            -           $     339       $ 4,744
Percent of balance                   92.9  %                 -      %          7.1  %      100.0  %
Number of loans                        24                    -                   5            29
Associated specific reserve   $       100       $            -           $      81       $   181



Residential TDRs as of December 31, 2022 included 20 loans with an aggregate
balance of $2.7 million and the modifications granted fell into four major
categories. Loans totaling $1.5 million had an extension of term, allowing the
borrower to repay over an extended number of years and lowering the monthly
payment to a level the borrower can afford. Loans totaling $1.0 million had
interest capitalized, allowing the borrower to become current after unpaid
interest was added to the balance of the loan and re-amortized over the
remaining life of the loan. Short-term rate concessions were granted on loans
totaling $205,000. Loans with an aggregate balance of $531,000 were involved in
bankruptcy. Certain residential TDRs had more than one modification.
                  The First Bancorp - 2022 Form 10-K - Page 44

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Commercial TDRs as of December 31, 2022 were comprised of nine loans with a
balance of $2.1 million. Of this total, three loans with an aggregate balance of
$943,000 had an extended period of interest-only payments, deferring the start
of principal repayment. Two loans with an aggregate balance of $163,000 had a
deferral of payment. The remaining four loans with an aggregate balance of
$1.0 million had several different modifications.
In each case when a loan was modified, Management determined it was in the
Bank's best interest to work with the borrower with modified terms rather than
to proceed to foreclosure. Once a loan is classified as a TDR, however, it
remains classified as such until the balance is fully repaid, despite whether
the loan is performing under the modified terms. As of December 31, 2022,
Management is aware of four loans classified as TDRs that are involved in
bankruptcy proceedings with an aggregate outstanding balance of $550,000. There
were also five loans with an outstanding balance of $339,000 that were
classified as TDRs and on non-accrual status, of which no loans were in the
process of foreclosure.

Impaired Loans

Impaired loans include TDRs and loans placed on non-accrual status when, based
on current information and events, it is probable that we will be unable to
collect all amounts due according to the contractual terms of the loan
agreement. These loans are measured at the present value of expected future cash
flows discounted at the loan's effective interest rate or at the fair value of
the collateral less estimated selling costs if the loan is collateral dependent.
If the measure of an impaired loan is lower than the recorded investment in the
loan, a specific reserve is established for the difference. Impaired loans
totaled $6.2 million at December 31, 2022, and have decreased $5.9 million from
December 31, 2021. The number of impaired loans decreased by 48 loans from 107
to 59 during the same period. Impaired commercial loans decreased $653,000 from
December 31, 2021 to December 31, 2022. The specific allowance for impaired
commercial loans decreased from $439,000 at December 31, 2021 to $298,000 as of
December 31, 2022, which represented the fair value deficiencies for those loans
for which the net fair value of the collateral was estimated at less than our
carrying amount of the loan. From December 31, 2021 to December 31, 2022,
impaired residential loans decreased $5.1 million and impaired home equity lines
of credit decreased $153,000.

The following table sets forth impaired loans as of December 31, 2022 and 2021:

                                  As of December 31,
    Dollars in thousands         2022           2021
Commercial
Real estate                  $    1,236      $  1,428
Construction                        685           689
Other                               846         1,303
Municipal                             -             -
Residential
Term                              3,089         8,173
Construction                          -             -
Home equity line of credit          304           457
Consumer                              -             2
Total                        $    6,160      $ 12,052



















                  The First Bancorp - 2022 Form 10-K - Page 45

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Past Due Loans

The Bank's overall loan delinquency ratio was 0.08% at December 31, 2022, versus
0.26% at December 31, 2021. Loans 90 days delinquent and accruing increased from
$32,000 at December 31, 2021 to $241,000 as of December 31, 2022. The year-end
2022 total is made up of four loans; we expect to collect all amounts due on
each, including interest.
The following table sets forth loan delinquencies as of December 31, 2022 and
2021:
                                                             As of December 31,
Dollars in thousands                                        2022           2021
Commercial
Real estate                                             $     193       $   440
Construction                                                    -            24
Other                                                         226           157
Municipal                                                       -             -
Residential
Term                                                          452         2,297
Construction                                                    -             -
Home equity line of credit                                    421         1,035
Consumer                                                      167           392
Total                                                   $   1,459       $ 4,345
Loans 30-89 days past due to total loans                     0.04  %       0.13  %
Loans 90+ days past due and accruing to total loans          0.01  %       0.00  %
Loans 90+ days past due on non-accrual to total loans        0.02  %       0.13  %
Total past due loans to total loans                          0.08  %       

0.26 %

Potential Problem Loans and Loans in Process of Foreclosure

Potential problem loans consist of classified accruing commercial and commercial
real estate loans that were between 30 and 89 days past due. Such loans are
characterized by weaknesses in the financial condition of borrowers or
collateral deficiencies. Based on historical experience, the credit quality of
some of these loans may improve due to changes in collateral values or the
financial condition of the borrowers, while the credit quality of other loans
may deteriorate, resulting in some amount of loss. At December 31, 2022 and
2021, there were no potential problem loans.
As of December 31, 2022, there were three loans in the process of foreclosure
with a total balance of $356,000. The Bank's residential foreclosure process
begins when a loan becomes 75 days past due at which time a Demand/Breach Letter
is sent to the borrower. If the loan becomes 120 days past due, copies of the
promissory note and mortgage deed are forwarded to the Bank's attorney for
review and a complaint for foreclosure is then prepared. An authorized Bank
officer signs the affidavit certifying the validity of the documents and
verification of the past due amount which is then forwarded to the court. Once a
Motion for Summary Judgment is granted, a Period of Redemption ("POR") begins
which gives the customer 90 days to cure the default. A foreclosure auction date
is then set 30 days from the POR expiration date if the default is not cured.
The Bank's commercial foreclosure process begins when a loan becomes 60 days
past due, at which time a default letter is issued. At expiration of the period
to cure default, which lasts 12 days after the issuing of the default letter,
copies of the promissory note and mortgage deed are forwarded to the Bank's
attorney for review. A Notice of Statutory Power of Sale is then prepared. This
notice must be published for three consecutive weeks in a newspaper located in
the county in which the property is located. A notice also must be issued to the
mortgagor and all parties of interest 21 days prior to the sale. The foreclosure
auction occurs and the Affidavit of Sale is recorded within the appropriate
county within 30 days of the sale.
The Bank's written policies and procedures for foreclosures, along with
implementation of same, are subject to annual review by its internal audit
provider. The scope of this review includes loans held in portfolio and loans
serviced for others. There were no issues requiring management attention in the
most recent review. Servicing for others includes loans sold to Freddie Mac,
Fannie Mae, and the Federal Home Loan Bank of Boston through its MPF program.
The Bank follows the published guidelines of each investor. Loans serviced for
Freddie Mac and Fannie Mae have been sold without recourse, and the Bank has no
liability for these loans in the event of foreclosure. A de minimis volume of
loans has been sold to and serviced for MPF to date. The Bank retains a second
loss layer credit enhancement obligation; no losses have been recorded on this
credit enhancement obligation since the Bank started selling loans to MPF in
2013.

                  The First Bancorp - 2022 Form 10-K - Page 46

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Other Real Estate Owned

Other real estate owned and repossessed assets ("OREO") are comprised of
properties or other assets acquired through a foreclosure proceeding, or
acceptance of a deed or title in lieu of foreclosure. Real estate acquired
through foreclosure is carried at the lower of cost or fair value less estimated
cost to sell. At December 31, 2022 and 2021, there were no OREO properties owned
and no allowance for OREO losses.

Funding, Liquidity and Capital Resources

Liquidity is the ability of a financial institution to meet maturing liability
obligations and customer loan demand. The Bank's lead source of liquidity is
deposits, including brokered deposits, which funded 85.6% of total average
assets in 2022. Other sources of funding include discretionary use of purchased
liabilities (e.g., FHLB term or overnight advances, and other borrowings), cash
flows from the securities portfolio and loan repayments. Securities designated
as available for sale may also be sold in response to short-term or long-term
liquidity needs, although Management has no intention to do so at this time.
While the generally preferred funding strategy is to attract and retain low cost
deposits, our ability to do so is affected by competitive interest rates and
terms in the marketplace.

The Bank has a detailed liquidity funding policy and a contingency funding plan
that provide for prompt and comprehensive responses to unexpected demands for
liquidity. Management has developed quantitative models to estimate needs for
contingent funding that could result from unexpected outflows of funds in excess
of "business as usual" cash flows. In Management's estimation, risks are
concentrated amongst several major categories: runoff of in-market deposit
balances, an inability to renew wholesale sources of funding, and materially
increased utilization of available credit lines by borrowers. Of these,
potential runoff of deposit balances would have the most significant impact on
contingent liquidity. Our modeling attempts to quantify deposits at risk over
selected time horizons. In addition to these outflow risks, several other
"business as usual" factors enter into the calculation of the adequacy of
contingent liquidity, including payment proceeds from loans and investment
securities, maturing debt obligations and maturing time deposits. Stress testing
analysis of liquidity resources under various scenarios is conducted no less
than quarterly and results are reported to the Bank's Asset/Liability Committee
("ALCO"). Borrowings supplement deposits as a source of liquidity; our
borrowings typically consist of customer repurchase agreements and FHLB advances
The Bank tests its borrowing capacity with the Federal Reserve Bank of Boston,
the FHLB and Fed Funds lines no less than annually.

The Company defines its primary sources of contingent liquidity as cash &
equivalents, unencumbered US Government or Agency bond collateral, available
capacity at FHLB, and available authorized brokered deposit issuance capacity.
As of December 31, 2022, the Bank had primary sources of contingent liquidity of
$853.0 million or 31.5% of its total assets. It is Management's opinion that
this is an appropriate level. In addition, the Bank has $158.0 million in
borrowing capacity under the Federal Reserve Bank of Boston's Borrower in
Custody program, $76.0 million in credit lines with correspondent banks, and
$187.0 million in other unencumbered securities available as collateral for
borrowing. These bring the Bank's total sources of liquidity to $1.274 billion
or 47.0% of its total assets. The ALCO establishes guidelines for liquidity in
its Asset/Liability policy and monitors internal liquidity measures to manage
liquidity exposure. Based on its assessment of the liquidity considerations
described above, Management believes the Bank's and the Company's sources of
funding will meet anticipated funding needs.

The Company is dependent upon the payment of cash dividends by the Bank to
service its commitments. As the sole shareholder of the Bank, the Company is
entitled to such dividends when and as declared by the Bank's Board of Directors
from legally available funds. For the years ended December 31, 2022, 2021, and
2020 the Bank declared dividends to the Company of $14.0 million, $13.4 million,
and $13.3 million, respectively. The Bank's regulator, the OCC, may limit the
amount of dividends declared and paid in a calendar year based upon certain
factors. Further discussion may be found in Item 1A Risk Factors and in Note 18
of the financial statements.

Deposits

During 2022, total deposits increased by $255.6 million, ending the year at
$2.379 billion compared to $2.123 billion at December 31, 2021. Low-cost
deposits (demand, NOW, and savings accounts) decreased by $31.6 million or 2.3%
during the year, money market deposits decreased $14.3 million or 6.9%, and
certificates of deposit increased $301.5 million or 53.2%. After increasing
throughout 2020 and 2021, largely the result of COVID-19 economic stimulus
dollars, low-cost deposits began to level off and fell modestly by year-end
2022. To replace these funds and to support earning asset growth, certificates
of deposit were utilized in the form of local market specials and issuances in
the wholesale markets. Estimated uninsured deposits totaled $173.5 million and
$228.4 million at December 31, 2022 and 2021, respectively.


                  The First Bancorp - 2022 Form 10-K - Page 47

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Average deposits increased $287.1 million in 2022, as shown in the following table, which sets forth the average daily balance for the Bank's principal deposit categories for each period:

                               Years ended December 31,           % change
Dollars in thousands           2022              2021                         2022 vs 2021
Demand deposits           $     337,121      $   307,508                            9.63  %
NOW accounts                    635,172          572,091                           11.03  %
Money market accounts           204,279          182,000                           12.24  %
Savings                         373,604          335,677                           11.30  %
Certificates of deposit         695,311          561,080                           23.92  %
Total deposits            $   2,245,487      $ 1,958,356                           14.66  %

The average cost of deposits (including non-interest-bearing accounts) was 0.68% for the year ended December 31, 2022, compared to 0.37% for the year ended December 31, 2021. The following table sets forth the average cost of each category of interest-bearing deposits for the periods indicated.

                                          Years ended December 31,
                                            2022                 2021
NOW                                                 0.53  %     0.33  %
Money market                                        0.86  %     0.24  %
Savings                                             0.11  %     0.07  %
Certificates of deposit                             1.41  %     0.85  %
Total interest-bearing deposits                     0.80  %     0.44  %



Of all certificates of deposit, $541.2 million or 62.37% will mature by December
31, 2023. As of December 31, 2022 and 2021, the Bank held a total of $118.3
million and $55.4 million in certificate of deposit accounts with balances in
excess of $250,000, respectively. The following table summarizes the time
remaining to maturity for these certificates of deposit.
                                 As of December 31,
Dollars in thousands             2022           2021
Within 3 Months              $   13,144      $ 10,311
3 Months through 6 months        14,556        14,313
6 months through 12 months       14,836         6,304
Over 12 months                   75,728        24,498
Total                        $  118,264      $ 55,426



Borrowed Funds

Borrowed funds consists of advances from the FHLB, advances from the FRB
Discount Window, and securities repurchase agreements with customers. Advances
from the FHLB are secured with pledged collateral consisting of FHLB stock,
funds on deposit with FHLB, U.S. Agency notes, mortgage-backed securities, and
qualifying first mortgage loans. FRB Discount Window advances are similarly
secured with collateral consisting of FRB stock, funds on deposit at FRB, and
qualifying commercial, home equity and construction loans. As of December 31,
2022, advances from FHLB totaled $39.1 million, with a weighted average interest
rate of 4.25% per annum and remaining maturities ranging from 1 day to 1.5
years. This compares to advances from FHLB totaling $55.1 million, with a
weighted average interest rate of 1.38% per annum and remaining maturities
ranging from 2.5 to 4 years, as of December 31, 2021. Our FHLB advances are
predominantly short term and the year-to-year change in the average interest
rate is a function of market conditions.
The Bank offers securities repurchase agreements to municipal and corporate
customers as an alternative to deposits. The balance of these agreements as of
December 31, 2022 was $64.4 million, compared to $81.3 million on December 31,
2021. The weighted average interest rates payable under these agreements were
1.04% per annum as of December 31, 2022, compared to 0.47% per annum as of
December 31, 2021.
The maximum amount of borrowed funds outstanding at any month-end during each of
the last two years was $152.6 million at the end of May in 2022 and $238.5
million at the end of August in 2021. The average amount outstanding during
                  The First Bancorp - 2022 Form 10-K - Page 48

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2022 was $124.9 million with a weighted average interest rate of 1.21% per annum. This compares to an average outstanding amount of $228.8 million with a weighted average interest rate of 1.51% per annum in 2021.

Capital Resources

Shareholders' equity as of December 31, 2022 was $228.9 million, compared to
$245.7 million as of December 31, 2021.
During 2022, the Company declared cash dividends of $0.32 per share in the first
quarter and $0.34 per share in the remaining three quarters, or $1.34 per share
for the year. The dividend payout ratio, which is calculated by dividing
dividends declared per share by diluted earnings per share, was 37.64% for the
year ended December 31, 2022 compared to 38.14% for the year ended December 31,
2021. In determining future dividend payout levels, the Board of Directors
carefully analyzes capital requirements and earnings retention, as set forth in
the Company's Dividend Policy. The ability of the Company to pay cash dividends
to its shareholders depends on receipt of dividends from its subsidiary, the
Bank. The subsidiary may pay dividends to its parent out of so much of its net
profits as the Bank's directors deem appropriate, subject to the limitation that
the total of all dividends declared by the Bank in any calendar year may not
exceed the total of its net profits of that year combined with its retained net
profits of the preceding two years. The amount available for dividends in 2023
is this year's net income plus $49.6 million.
In 2022, 55,061 shares were issued via employee stock programs, the dividend
reinvestment plan, and restricted stock grants. The Company received
consideration totaling $796,000.  The following table summarizes the Company's
2022 stock issuances.

Dividend reinvestment plan      11,326
Employee stock program          14,990
Restricted stock grants         28,745
Total                           55,061



Financial institution regulators have established guidelines for minimum capital
ratios for banks and bank holding companies. The net unrealized gain or loss on
available for sale securities is generally not included in computing regulatory
capital. During the first quarter of 2015, the Company adopted the new Basel III
regulatory capital framework as approved by the federal banking agencies. In
order to avoid limitations on capital distributions, including dividend
payments, the Company must hold a capital conservation buffer of 2.5% above the
adequately capitalized risk-based capital ratios.
Capital at December 31, 2022 was sufficient to meet the requirements of
regulatory authorities. Leverage capital of the Company, or total shareholders'
equity divided by average total assets for the current quarter less goodwill and
any net unrealized gain or loss on securities available for sale and
postretirement benefits, stood at 9.01% on December 31, 2022 and 8.63% at
December 31, 2021. To be rated "well-capitalized", regulatory requirements call
for a minimum leverage capital ratio of 5.00%. Given its capital structure,
regulatory Tier 1 capital and Common Equity Tier 1 (CET1) are equal. At December
31, 2022, the Company had CET1 and tier-one risk-based capital ratios of 12.70%,
and a tier-two, or total, risk-based capital ratio of 13.58%, versus 13.31% and
14.27%, respectively, at December 31, 2021. To be rated "well-capitalized",
regulatory requirements call for a minimum leverage capital ratio of 5.00%, and
minimum CET1, tier-one and tier-two risk-based capital ratios of 6.50%, 8.00%
and 10.00%, respectively. The Company's actual levels of capitalization were
comfortably above the standards to be rated "well-capitalized" by regulatory
authorities.
The Company met each of the well-capitalized ratio guidelines at December 31,
2022. The following tables indicate the capital ratios for the Bank and the
Company at December 31, 2022 and December 31, 2021.

As of December 31, 2022                   Leverage             Common Equity Tier 1              Tier 1              Total Risk-Based
Bank                                         8.81           %          12.64               %      12.64          %         13.52              %
Company                                      9.01           %          12.70               %      12.70          %         13.58              %
Adequately capitalized ratio                 4.00           %           4.50               %       6.00          %          8.00              %
Adequately capitalized ratio plus                  n/a      %           7.00               %       8.50          %         10.50              %
capital conservation buffer
Well capitalized ratio (Bank only)           5.00           %           6.50               %       8.00          %         10.00              %


                  The First Bancorp - 2022 Form 10-K - Page 49

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As of December 31, 2021                   Leverage             Common Equity Tier 1              Tier 1              Total Risk-Based
Bank                                         8.56      %               13.21          %           13.21     %              14.17         %
Company                                      8.63      %               13.31          %           13.31     %              14.27         %
Adequately capitalized ratio                 4.00      %                4.50          %            6.00     %               8.00         %
Adequately capitalized ratio plus                  n/a %                7.00          %            8.50     %              10.50         %
capital conservation buffer
Well capitalized ratio (Bank only)           5.00      %                6.50          %            8.00     %              10.00         %

Except as identified in Item 1A, "Risk Factors", Management knows of no present trends, events or uncertainties that will have, or are reasonably likely to have, a material effect on the Company's capital resources, liquidity, or results of operations.

Contractual Obligations

The following table sets forth the contractual obligations of the Company as of December 31, 2022:

                                    Less than

Dollars in thousands Total 1 year 1-3 years 3-5 years More than 5 years

Operating leases        $ 863      $      113      $      200      $      119                     431

Total                   $ 863      $      113      $      200      $      119      $              431



Capital Purchases

In 2022, the Company made capital purchases totaling $1.1 million for real
estate improvements for branch or operations premises and equipment related to
technology. This cost will be amortized over an average of seven years, adding
approximately $150,000 to pre-tax operating costs per year.

Goodwill

On December 11, 2020, the Bank completed the purchase of a branch at 1B Belmont
Avenue in Belfast, Maine, from Bangor Savings Bank ("Bangor Savings"). The
branch is one of six branches Bangor Savings acquired from Damariscotta Bank &
Trust Company ("DB&T"), and this branch was divested by Bangor Savings to
resolve competitive concerns in that market raised by the U.S. Department of
Justice's Antitrust Division. The transaction value was approximately $25.2
million consisting of loans, the building, equipment, core deposit intangible
and goodwill. Goodwill totaled $841,000; this amount is not amortizable under
GAAP but is amortizable for tax purposes.
On October 26, 2012, the Bank completed the purchase of a branch at 63 Union
Street in Rockland, Maine, from Camden National Bank that was formerly operated
by Bank of America. As part of the transaction, the Bank acquired approximately
$32.3 million in deposits as well as a small volume of loans. The excess of the
purchase price over the fair value of the assets acquired, liabilities assumed,
and the amount allocated for core deposit intangible totaled $2.1 million and
was recorded as goodwill. The goodwill is not amortizable under GAAP but is
amortizable for tax purposes.
On January 14, 2005, the Company acquired FNB Bankshares ("FNB") of Bar Harbor,
Maine, and its subsidiary, The First National Bank of Bar Harbor. The total
value of the transaction was $48.0 million, and all of the voting equity
interest of FNB was acquired in the transaction. The transaction was accounted
for as a purchase and the excess of purchase price over the fair value of net
identifiable assets acquired equaled $27.6 million and was recorded as goodwill,
none of which was deductible for tax purposes. The portion of the purchase price
related to the core deposit intangible was amortized over its expected economic
life.
Goodwill is evaluated annually for possible impairment under the provisions of
FASB ASC Topic 350, "Intangibles - Goodwill and Other". As of December 31, 2022,
in accordance with Topic 350, the Company completed its annual review of
goodwill and determined there has been no impairment. The Bank also carries
$125,000 in goodwill for a de minimis transaction in 2001.
Effect of Future Interest Rates on Post-retirement Benefit Liabilities

In evaluating the Company's post-retirement benefit liabilities, Management believes changes in discount rates which have occurred pursuant to Federal legislation will not have a significant impact on the Company's future operating results or financial condition.

The First Bancorp - 2022 Form 10-K - Page 50

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Climate Change

The Company is mindful of the potential risk of climate change on its operations
as well as on its customers, vendors and other stakeholders. The Item 1A Risk
Factors section of this 10-K highlights the general nature of climate change
related risks. We expect these risks to increase over time, and expect that
there may be a material financial impact, the extent of which cannot be
reasonably estimated at this time. Increased regulation related to measurement
and reporting of climate change risk may increase our operating costs, though we
are unable to estimate the added cost at this time. We consider the potential
impact that our own expenditures may have on climate change. When making
expenditures to upgrade and maintain our facilities, we may consider energy
efficiency as one of many factors in our purchasing decisions. Similarly, we
recognize our clients may make climate change in their own purchasing decisions.
We currently lend to clients working on climate change issues and our wealth
management division works with clients who seek to direct their investments to
be compatible with ESG investing objectives. We continue to monitor the impact
that climate change may have on our clients' demands and the ability of our
product offerings to meet those demands.

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