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Bar Harbor Bankshares Reports Third Quarter Results; Dividend Declared

BAR HARBOR, MAINE / ACCESSWIRE / October 17, 2019 / Bar Harbor Bankshares (NYSE American: BHB or the "Company") reported third quarter 2019 net income of $5.0 million, or $0.32 diluted earnings per share. Net income in the third quarter of 2018 was $9.0 million, or $0.58 diluted earnings per share. The non-GAAP measure of core earnings in the third quarter 2019 totaled $7.3 million, or $0.47 diluted earnings per share, a 15% increase from the prior quarter. Core earnings per share excludes $0.15 per share of non-core charges related to acquisition and restructuring expenses associated with our previously announced strategic review.

THIRD QUARTER FINANCIAL HIGHLIGHTS (compared to prior quarter):

  • 11% annualized growth in commercial loans
  • 29% annualized growth in non-maturity deposits
  • 10 basis point expansion in net interest margin
  • 3% increase in non-interest income
  • 0.53% non-performing assets to total assets

President and Chief Executive Officer, Curtis C. Simard stated, "We are very excited about the direction our Company is headed. It was a good quarter with improvements across our performance metrics driven by a team focused on the profitability of our operations and initiatives to enhance revenue and create expense efficiencies. We continued to actively manage the balance sheet focusing on core operations and taking advantage of the interest rate environment as we executed a planned deleveraging strategy which resulted in decreasing the securities portfolio by nearly $73.0 million and using the proceeds to pay off higher cost borrowings. This resulted in yields from securities expanding 15 basis points and borrowings costs decreasing 12 basis points compared to the prior quarter. Our commercial team once again delivered another quarter of strong double digit growth across our three state footprint including our loan production office in Portland, Maine, which also contributed to significant customer derivative income. Loan quality continues to be strong with net charge-offs close to zero which is indicative of our disciplined approach to credit quality, risk mitigation, and an effort focused on proven operators with appropriate loan structures. Growth in non-maturity deposits was up during the quarter, 29% on an annualized basis. This is the direct result of the sales culture we've been cultivating over the past year under new leadership. All of these efforts in the quarter resulted in a 6% annualized increase to tangible book value per share."

Mr. Simard further stated, "We completed our strategic review in the third quarter which we announced in the second quarter. This review positions us for improved profitability and judicious deployment of capital, while balancing liquidity and core deposit growth. The results of our strategic review included a branch optimization exercise that evaluated fixed assets, staffing models, and business and operational processes. Towards the end of September we announced our intent to close five branches by year-end and identified other non-branch properties to consolidate across our footprint. In addition we continue to consolidate processes within our wealth management businesses to increase efficiency while improving customer service. These strategic decisions along with the elimination of other redundancies and implemented efficiencies are expected to be accretive to earnings in the first quarter of 2020 thereby allowing a platform for profitable growth with positive operating leverage."

Mr. Simard further stated, "We are on track to close our branch acquisition this month. Experienced teams from both sides have been working together to ensure a smooth transition of customer accounts and systems. We are excited to welcome our new customers and colleagues as we build our central Maine franchise. While the acquisition will close mid quarter, we do expect it will be accretive for the period."

Mr. Simard concluded, "From every angle, our teams have embraced our culture and think differently about how we do business, how to serve our customers and how to build and execute strategy. I'm proud of the dedication they've shown throughout this process. Just as we have grown as an organization, so too has our brand. Good things happen when we work together with our customers both internally and externally. In summary, the benefits from our current activities along with future initiatives are expected to enhance the intrinsic value of our stock."

DIVIDEND DECLARED

The Board of Directors voted to declare a cash dividend of $0.22 per share to shareholders of record at the close of business on November 13, 2019, payable on December 13, 2019. This dividend equates to a 3.5% annualized yield based on the $24.93 closing price of the Company's common stock at the end of the third quarter of 2019.

FINANCIAL CONDITION

Total assets decreased in the third quarter by $75.2 million to $3.6 billion primarily due to the balance sheet deleveraging strategy which decreased the security portfolio by $72.9 million as a result of opportunistic sales and natural run-off. The proceeds were used to pay off higher cost wholesale borrowings. Loans in the third quarter 2019 remained flat at $2.6 billion. The strong double digit growth in commercial loans was offset by a decrease in residential loans as a strategic effort was made to shift more production through the secondary market platform given the overall rate environment and initiatives around profitability. Non-maturity deposit balances increased by $106.1 million or 29% annualized. This growth was led by demand deposit and money market accounts due to new accounts, seasonally high balances, and shifts between time deposits to money market accounts. Growth in demand accounts was 19% from the same quarter 2018. The loan to deposit ratio improved, decreasing to 103% in the third quarter 2019 compared to 104% in prior quarter.

The third quarter 2019 allowance for loan losses to total loans ratio increased to 0.60% from 0.57% in the previous quarter with a coverage ratio to non-accruing loans of 92%. Non-accruing loans increased $724 thousand due primarily to two commercial real estate relationships which were identified through the Bank's specific reserve process and carry adequate reserves to cover the collateral shortfall. The ratio of non-accruing loans to total loans of 0.65% in the third quarter 2019 was relatively flat compared with the prior quarter of 0.62%.

The Company's book value per share was $25.37 at the end of the third quarter 2019 compared to $25.13 the end of the second quarter 2019, representing a 4% annualized growth rate. Tangible book value per share (non-GAAP measure) was $18.49 at the end of the third quarter 2019 compared to $18.23 at the end of the second quarter 2019, representing a 6% annualized growth rate. In the third quarter, lower long-term interest rates continued to have a positive impact on the fair value adjustment in the securities portfolio. The unrealized gains on securities available for sale net of tax was $8.0 million in the third quarter 2019 compared to unrealized gains of $5.5 million in the second quarter 2019.

RESULTS OF OPERATIONS

Net income in the third quarter 2019 was $5.0 million, or $0.32 per share, compared to $9.0 million, or $0.58 per share, in the same quarter of 2018. The non-GAAP measure of core earnings in the third quarter 2019 was $7.3 million or $0.47 per share, up 15% from the previous quarter. Interest and dividend income was up 6% to $34.3 million as quarterly yields on earning assets expanded 17 basis points on a year-over-year basis and 4 basis points from the prior quarter to 4.17%. Net interest margin in the third quarter 2019 decreased to 2.75% from 2.81% in the same period of 2018 reflecting the fluctuations in short-term interest rates over the last year. On a quarter-over-quarter basis, net interest margin expanded in the third quarter 2019 by 10 basis points to 2.75% due to various balance sheet deleveraging strategies including a decrease of $72.9 million in securities yielding an average of 2.1% and using the proceeds to pay-off wholesale borrowings with an average cost of 2.4%, and adjusting our mortgage strategy to shift more production through the secondary market platform versus portfolio.

The third quarter 2019 provision for loan losses increased to $893 thousand from $643 thousand in the same quarter 2018, which is reflective of the increased commercial loan growth over the last two quarters. The net charged-off loans to average loans ratio is at 0.02% annualized rate for the third quarter 2019 compared to 0.04% in the same quarter 2018. Asset quality continues to be strong with non-accruing loans to total loans at 0.65% in the third quarter 2019, down from 0.88% in the same quarter of 2018.

Non-interest income in the third quarter 2019 increased 7% to $7.6 million from $7.1 million in the same quarter in 2018. The increase was driven by $828 thousand increase in customer derivative income associated with the commercial loan growth and $157 thousand net gain on sales of securities associated with the balance sheet deleverage strategy after considering the $685 thousand gain recorded in the third quarter of 2018 associated with sale of Visa B shares.

Non-interest expense increased to $23.4 million in the third quarter 2019 from $17.9 million in the prior year in part as a result of higher salaries and benefits attributable to previously announced strategic hires and an increase in professional service fees. Acquisition, restructuring, and other expense activity in 2019 totaled $3.0 million and are considered non-core as they do not represent reoccurring costs.

BACKGROUND

Bar Harbor Bankshares (NYSE American: BHB) is the parent company of its wholly-owned subsidiary, Bar Harbor Bank & Trust. Founded in 1887, Bar Harbor Bank & Trust is a true community bank serving the financial needs of its clients for over 130 years. Bar Harbor provides full-service community banking with office locations in all three Northern New England states of Maine, New Hampshire and Vermont. For more information, visit www.barharbor.bank.

FORWARD LOOKING STATEMENTS

Certain statements under the heading "THIRD QUARTER FINANCIAL HIGHLIGHTS" contained in this document that are not historical facts may constitute forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended ("Securities Act"), and Section 21E of the Securities Exchange Act of 1934, as amended ("Exchange Act"), and are intended to be covered by the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. When used in this earnings release the words "may," "will," "should," "could," "would," "plan," "potential," "estimate," "project," "believe," "intend," "anticipate," "expect," "target" and similar expressions are intended to identify forward-looking statements, but these terms are not the exclusive means of identifying forward-looking statements. These forward-looking statements are subject to significant risks, assumptions and uncertainties, including among other things, changes in general economic and business conditions, increased competitive pressures, changes in the interest rate environment, legislative and regulatory change, changes in the financial markets, and other risks and uncertainties disclosed from time to time in documents that the Company files with the Securities and Exchange Commission, including but not limited to those discussed in the section titled "Risk Factors" in the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 2018. Because of these and other uncertainties, the Company's actual results, performance or achievements, or industry results, may be materially different from the results indicated by these forward-looking statements. In addition, the Company's past results of operations do not necessarily indicate future results. You should not place undue reliance on any of the forward-looking statements, which speak only as of the dates on which they were made. The Company is not undertaking an obligation to update forward-looking statements, even though its situation may change in the future, except as required under federal securities law. The Company qualifies all of its forward-looking statements by these cautionary statements.

NON-GAAP FINANCIAL MEASURES

This document contains certain non-GAAP financial measures in addition to results presented in accordance with accounting principles generally accepted in the United States of America ("GAAP"). These non-GAAP measures are intended to provide the reader with additional supplemental perspectives on operating results, performance trends, and financial condition. Non-GAAP financial measures are not a substitute for GAAP measures; they should be read and used in conjunction with the Company's GAAP financial information. A reconciliation of non-GAAP financial measures to GAAP measures is provided below. In all cases, it should be understood that non-GAAP measures do not depict amounts that accrue directly to the benefit of shareholders. An item which management excludes when computing non-GAAP core earnings can be of substantial importance to the Company's results for any particular quarter or year. The Company's non-GAAP core earnings information set forth is not necessarily comparable to non- GAAP information which may be presented by other companies. Each non-GAAP measure used by the Company in this report as supplemental financial data should be considered in conjunction with the Company's GAAP financial information.

The Company utilizes the non-GAAP measure of core earnings in evaluating operating trends, including components for core revenue and expense. These measures exclude amounts which the Company views as unrelated to its normalized operations, including gains/losses on securities, premises, equipment and other real estate owned, acquisition costs, restructuring costs, legal settlements, and systems conversion costs. Non-GAAP adjustments are presented net of an adjustment for income tax expense.

The Company also calculates core earnings per share based on its measure of core earnings. The Company views these amounts as important to understanding its operating trends, particularly due to the impact of accounting standards related to acquisition activity. Analysts also rely on these measures in estimating and evaluating the Company's performance. Management also believes that the computation of non-GAAP core earnings and core earnings per share may facilitate the comparison of the Company to other companies in the financial services industry. The Company also adjusts certain equity related measures to exclude intangible assets due to the importance of these measures to the investment community.

CONTACTS
Josephine Iannelli; EVP, Chief Financial Officer & Treasurer; (207) 288-3314

TABLE
INDEX

CONSOLIDATED FINANCIAL SCHEDULES (UNAUDITED)

  A

Selected Financial Highlights

  B

Footnotes to Selected Financial Highlights

  C

Balance Sheets

  D

Loan and Deposit Analysis

  E

Statements of Income

  F

Statements of Income  (Five Quarter Trend)

  G

Average Yields and Costs

  H

Average Balances

  I

Asset Quality Analysis

  J

Reconciliation of Non-GAAP Financial Measures (Five Quarter Trend) and Supplementary Data

BAR HARBOR BANKSHARES
SELECTED FINANCIAL HIGHLIGHTS - UNAUDITED

   At or for the Quarters Ended 
   Sep 30,
2019
    Jun 30,
2019
    Mar 31,
2019
    Dec 31,
2018
    Sep 30,
2018
 
PER SHARE DATA                        
Net earnings, diluted  0.32    0.39    0.47    0.49    0.58 
Core earnings, diluted (1) (2)    0.47      0.41      0.47      0.59      0.58 
Total book value    25.37      25.13      24.54      23.87      23.06 
Tangible book value (2)    18.49      18.23      17.63      16.94      16.11 
Market price at period end    24.93      26.59      25.87      22.43      28.72 
Dividends    0.22      0.22      0.20      0.20      0.20 
                                        
PERFORMANCE RATIOS (3)                                       
Return on assets    0.55%    0.67%    0.83%    0.85%    1.01%
Core return on assets (1) (2)    0.80      0.70      0.83      1.03      1.01 
Return on equity    5.04      6.33      7.83      8.31      9.92 
Core return on equity (1) (2)    7.36      6.57      7.83      10.01      9.98 
Core return on tangible equity (1) (2)    10.31      9.30      11.19      14.46      14.52 
Net interest margin, fully taxable equivalent (FTE) (2) (4)    2.75      2.65      2.77      2.78      2.81 
Net interest margin (FTE), excluding purchased loan accretion (2) (4)    2.65      2.56      2.67      2.70      2.71 
Efficiency ratio (2)    65.02      68.48      63.94      59.91      57.88 
                                        
GROWTH (Year-to-date, annualized) (2)                                       
Total commercial loans    10.5%    10.1%    (3.3%)    1.4%    2.8%
Total loans    4.7      7.1      5.9      0.2      (0.1)
Total deposits    0.6      (0.1)    (2.8)    5.6      2.2 
                                        
FINANCIAL DATA (In millions)                                       
Total assets  3,612    3,688    3,629    3,608    3,561 
Total earning assets (2) (5)    3,270      3,355      3,312      3,263      3,253 
Total investments    703      784      782      761      747 
Total loans    2,577      2,578      2,527      2,490      2,484 
Allowance for loan losses    15      15      14      14      13 
Total goodwill and intangible assets    107      107      107      108      108 
Total deposits    2,494      2,481      2,466      2,483      2,390 
Total shareholders' equity    394      391      381      371      358 
Net income    5      6      7      8      9 
Core income (1) (2)    7      6      7      9      9 
                                        
ASSET QUALITY AND CONDITION RATIOS                                       
Net charge-offs (current quarter annualized)/average loans    0.02%    -%    0.03%    0.03%    0.04%
Allowance for loan losses/total loans    0.60      0.57      0.55      0.56      0.54 
Loans/deposits    103      104      102      100      104 
Shareholders' equity to total assets    10.92      10.59      10.50      10.27      10.04 
Tangible shareholders' equity to tangible assets    8.20      7.92      7.77      7.51      7.24 

_____________________________________

(1) Core measurements are non-GAAP financial measures that are adjusted to exclude net non-operating charges primarily related to acquisitions, restructurings, system conversions and gain or loss on sale of securities and premises and equipment. Refer to the Reconciliation of Non-GAAP Financial Measures in table J for additional information.
(2) Non-GAAP financial measure.
(3) All performance ratios are based on average balance sheet amounts, where applicable.
(4) Fully taxable equivalent considers the impact of tax-advantaged investment securities and loans.
(5) Earning assets includes non-accruing loans and securities are valued at amortized cost.

BAR HARBOR BANKSHARES
CONSOLIDATED BALANCE SHEETS - UNAUDITED

(in thousands)  Sep 30,
2019
    Jun 30,
2019
    Mar 31,
2019
    Dec 31,
2018
    Sep 30,
2018
 
Assets                        
Cash and due from banks  50,032    42,657    37,504    35,208    53,154 
Interest-bearing deposits with the Federal Reserve Bank    21,561      17,203      16,599      63,546      19,420 
Total cash and cash equivalents    71,593      59,860      54,103      98,754      72,574 
Securities available for sale, at fair value    675,675      748,560      747,235      725,837      712,658 
Federal Home Loan Bank stock    27,469      35,220      35,107      35,659      34,154 
Total securities    703,144      783,780      782,342      761,496      746,812 
Commercial real estate    923,773      881,479      821,567      826,699      840,018 
Commercial and industrial    402,706      416,725      409,937      404,870      385,814 
Residential real estate    1,143,452      1,167,759      1,184,053      1,144,698      1,140,519 
Consumer    107,375      112,275      111,402      113,960      117,239 
Total loans    2,577,306      2,578,238      2,526,959      2,490,227      2,483,590 
Less: Allowance for loan losses    (15,353)    (14,572)    (13,997)    (13,866)    (13,487)
Net loans    2,561,953      2,563,666      2,512,962      2,476,361      2,470,103 
                                        
Premises and equipment, net    47,644      50,230      49,661      48,804      47,621 
Other real estate owned    2,455      2,351      2,351      2,351      68 
Goodwill    100,085      100,085      100,085      100,085      100,085 
Other intangible assets    6,879      7,072      7,266      7,459      7,690 
Cash surrender value of bank-owned life insurance    75,368      74,871      74,352      73,810      73,316 
Deferred tax asset, net    4,988      5,649      7,632      9,514      11,527 
Other assets    38,365      40,071      38,441      29,853      31,196 
Total assets  3,612,474    3,687,635    3,629,195    3,608,487    3,560,992 
                                        
Liabilities and shareholders' equity                                       
Demand and other non-interest bearing deposits  380,707    354,125    342,030    370,889    372,358 
NOW deposits    490,315      472,576      470,277      484,717      471,326 
Savings deposits    360,570      352,657      346,813      358,888      354,908 
Money market deposits    359,328      305,506      349,833      335,951      254,142 
Time deposits    902,665      996,512      956,818      932,793      937,615 
Total deposits    2,493,585      2,481,376      2,465,771      2,483,238      2,390,349 
                                        
Senior borrowings    641,819      733,084      703,283      680,823      739,224 
Subordinated borrowings    42,928      42,943      42,958      42,973      42,988 
Total borrowings    684,747      776,027      746,241      723,796      782,212 
                                        
Other liabilities    39,683      39,670      36,160      30,874      30,746 
Total liabilities    3,218,015      3,297,073      3,248,172      3,237,908      3,203,307 
                                        
Total shareholders' equity    394,459      390,562      381,023      370,579      357,685 
Total liabilities and shareholders' equity  3,612,474    3,687,635    3,629,195    3,608,487    3,560,992 
                                        
Net shares outstanding    15,549      15,544      15,524      15,523      15,509 
                     

BAR HARBOR BANKSHARES
CONSOLIDATED LOAN & DEPOSIT ANALYSIS - UNAUDITED

LOAN ANALYSIS

                            September 30, 2019
Annualized Growth %
 
(in thousands)  Sep 30,
2019
    Jun 30,
2019
    Mar 31,
2019
    Dec 31,
2018
    Sep 30,
2018
    Quarter
End
    Year to
Date
 
Commercial real estate  923,773    881,479    821,567    826,699    840,018      19.2%    15.7%
Commercial and industrial    301,590      312,029      305,185      309,544      303,984      (13.4)    (3.4)
Total commercial loans    1,225,363      1,193,508      1,126,752      1,136,243      1,144,002      10.7      10.5 
Residential real estate    1,143,452      1,167,759      1,184,053      1,144,698      1,140,519      (8.3)    (0.1)
Consumer    107,375      112,275      111,402      113,960      117,239      (17.5)    (7.7)
Tax exempt    101,116      104,696      104,752      95,326      81,830      (13.7)    8.1 
Total loans  2,577,306    2,578,238    2,526,959    2,490,227    2,483,590      (0.1)%    4.7%
                             

DEPOSIT ANALYSIS

                            September 30, 2019
Annualized Growth %
 
(in thousands)  Sep 30,
2019
    Jun 30,
2019
    Mar 31,
2019
    Dec 31,
2018
    Sep 30,
2018
    Quarter
End
    Year to
Date
 
Demand  380,707    354,125    342,030    370,889    372,358      30.0%    3.5%
NOW    490,315      472,576      470,277      484,717      471,326      15.0      1.5 
Savings    360,570      352,657      346,813      358,888      354,908      9.0      0.6 
Money Market    359,328      305,506      349,833      335,951      254,142      70.5      9.3 
Total non-maturity deposits    1,590,920      1,484,864      1,508,953      1,550,445      1,452,734      28.6      3.5 
Total time deposits    902,665      996,512      956,818      932,793      937,615      (37.7)    (4.3)
Total deposits  2,493,585    2,481,376    2,465,771    2,483,238    2,390,349      2.0%    0.6%
                             

BAR HARBOR BANKSHARES
CONSOLIDATED STATEMENTS OF INCOME - UNAUDITED

   Three Months Ended
September 30,
    Nine Months Ended
September 30,
 
(in thousands, except per share data)  2019    2018    2019    2018 
Interest and dividend income                   
Loans  28,157    26,212    82,681    77,272 
Securities and other    6,105      5,972      18,593      17,407 
Total interest and dividend income    34,262      32,184      101,274      94,679 
Interest expense                               
Deposits    7,143      5,478      20,336      13,868 
Borrowings    4,674      4,237      15,232      12,192 
Total interest expense    11,817      9,715      35,568      26,060 
Net interest income    22,445      22,469      65,706      68,619 
Provision for loan losses    893      643      1,779      2,208 
Net interest income after provision for loan losses    21,552      21,826      63,927      66,411 
Non-interest income                               
Trust and investment management fee income    3,013      2,952      8,836      9,036 
Customer service fees    2,553      2,490      7,336      7,061 
Gain on sales of securities, net    157      -      157      - 
Bank-owned life insurance income    497      505      1,558      1,328 
Customer derivative income    828      -      1,553      545 
Other income    595      1,179      1,823      2,515 
Total non-interest income    7,643      7,126      21,263      20,485 
Non-interest expense                               
Salaries and employee benefits    11,364      10,331      33,568      31,695 
Occupancy and equipment    3,415      3,366      10,101      9,364 
Loss on sales of premises and equipment, net    -      -      21      - 
Outside services    424      456      1,278      1,597 
Professional services    707      223      1,821      1,016 
Communication    189      217      707      701 
Marketing    613      293      1,419      1,207 
Amortization of intangible assets    207      207      621      621 
Acquisition, restructuring and other expenses    3,039      70      3,319      619 
Other expenses    3,442      2,743      10,075      8,623 
Total non-interest expense    23,400      17,906      62,930      55,443 
                                
Income before income taxes    5,795      11,046      22,260      31,453 
Income tax expense    780      2,076      3,847      6,136 
Net income  5,015    8,970    18,413    25,317 
                                
Earnings per share:                               
Basic  0.32    0.58    1.19    1.64 
Diluted  0.32    0.58      1.18      1.63 
                                
Weighted average shares outstanding:                               
Basic    15,547      15,503      15,536      15,478 
Diluted    15,581      15,580      15,582      15,564 
                 

BAR HARBOR BANKSHARES
CONSOLIDATED STATEMENTS OF INCOME (5 Quarter Trend) - UNAUDITED

(in thousands, except per share data)  Sep 30,
2019
    Jun 30,
2019
    Mar 31,
2019
    Dec 31,
2018
    Sep 30,
2018
 
Interest and dividend income                        
Loans  28,157    27,660    26,864    26,743    26,212 
Securities and other    6,105      6,125      6,363      6,029      5,972 
Total interest and dividend income    34,262      33,785      33,227      32,772      32,184 
Interest expense                                       
Deposits    7,143      6,886      6,307      5,653      5,478 
Borrowings    4,674      5,403      5,155      4,855      4,237 
Total interest expense    11,817      12,289      11,462      10,508      9,715 
Net interest income    22,445      21,496      21,765      22,264      22,469 
Provision for loan losses    893      562      324      572      643 
Net interest income after provision for loan losses    21,552      20,934      21,441      21,692      21,826 
Non-interest income                                       
Trust and investment management fee income    3,013      3,066      2,757      2,949      2,952 
Customer service fees    2,553      2,618      2,165      2,477      2,490 
Gain (loss) on sales of securities, net    157      -      -      (924)    - 
Bank-owned life insurance income    497      519      542      493      505 
Customer derivative income    828      696      29      315      - 
Other income    595      554      674      2,140      1,179 
Total non-interest income    7,643      7,453      6,167      7,450      7,126 
Non-interest expense                                       
Salaries and employee benefits    11,364      11,685      10,519      9,269      10,331 
Occupancy and equipment    3,415      3,300      3,386      3,022      3,366 
Loss on sales of premises and equipment, net    -      21      -      -      - 
Outside services    424      443      411      811      456 
Professional services    707      570      544      458      223 
Communication    189      283      235      103      217 
Marketing    613      511      295      536      293 
Amortization of intangible assets    207      207      207      207      207 
Acquisition, restructuring and other expenses    3,039      280      -      1,109      70 
Other expenses    3,442      3,606      3,027      4,581      2,743 
Total non-interest expense    23,400      20,906      18,624      20,096      17,906 
                                        
Income before income taxes    5,795      7,481      8,984      9,046      11,046 
Income tax expense    780      1,364      1,703      1,426      2,076 
Net income  5,015    6,117    7,281    7,620    8,970 
                                        
Earnings per share:                                       
Basic  0.32    0.39    0.47    0.49    0.58 
Diluted  0.32    0.39    0.47    0.49    0.58 
                                        
Weighted average shares outstanding:                                       
Basic    15,547      15,538      15,523      15,516      15,503 
Diluted    15,581      15,586      15,587      15,574      15,580 
                     

BAR HARBOR BANKSHARES
AVERAGE YIELDS AND COSTS (Fully Taxable Equivalent - Annualized) - UNAUDITED

   Quarters Ended 
   Sep 30,
2019
    Jun 30,
2019
    Mar 31,
2019
    Dec 31,
2018
    Sep 30,
2018
 
Earning assets                        
Commercial real estate    4.74%    4.74%    4.78%    4.71%    4.57%
Commercial and industrial    4.78      4.75      4.79      4.61      4.59 
Residential    3.88      3.93      3.94      3.83      3.83 
Consumer    5.13      5.21      5.25      5.07      4.85 
Total loans    4.38      4.39      4.42      4.31      4.25 
Securities and other    3.44      3.29      3.47      3.28      3.21 
Total earning assets    4.17%    4.13%    4.19%    4.07%    4.00%
                                        
Funding liabilities                                       
NOW    0.51%    0.49%    0.51%    0.50%    0.43%
Savings    0.21      0.21      0.19      0.18      0.17 
Money market    1.37      1.44      1.38      0.93      0.76 
Time deposits    2.16      2.11      2.00      1.85      1.78 
Total interest bearing deposits    1.33      1.32      1.25      1.12      1.06 
Borrowings    2.62      2.74      2.74      2.53      2.26 
Total interest-bearing liabilities    1.65%    1.71%    1.66%    1.50%    1.38%
                                        
Net interest spread    2.52      2.42      2.53      2.57      2.62 
Net interest margin    2.75      2.65      2.77      2.78      2.81 
                     

BAR HARBOR BANKSHARES
AVERAGE BALANCES - UNAUDITED

   Quarters Ended 
(in thousands)  Sep 30,
2019
    Jun 30,
2019
    Mar 31,
2019
    Dec 31,
2018
    Sep 30,
2018
 
Assets                        
Commercial real estate  900,568    846,921    825,596    836,813    837,058 
Commercial and industrial    410,453      416,000      405,107      393,396      388,831 
Residential    1,154,552      1,176,583      1,143,862      1,137,493      1,120,336 
Consumer    109,562      111,641      113,060      114,960      117,735 
Total loans (1)    2,575,135      2,551,145      2,487,625      2,482,662      2,463,960 
Securities and other (2)    732,925      779,072      777,458      762,901      773,562 
Total earning assets    3,308,060      3,330,217      3,265,083      3,245,563      3,237,522 
Cash and due from banks    62,999      52,728      50,298      68,904      63,272 
Allowance for loan losses    (14,965)    (14,459)    (14,119)    (13,922)    (13,463)
Goodwill and other intangible assets    107,058      107,252      107,446      107,657      107,887 
Other assets    178,804      170,340      152,332      138,074      137,466 
Total assets  3,641,956    3,646,078    3,561,040    3,546,276    3,532,684 
                                        
Liabilities and shareholders' equity                                       
NOW  487,506    459,572    468,392    475,449    461,875 
Savings    359,242      352,733      346,707      346,905      356,834 
Money market    338,013      338,095      335,882      272,612      259,738 
Time deposits    947,949      935,616      894,160      914,674      964,108 
Total interest bearing deposits    2,132,710      2,086,016      2,045,141      2,009,640      2,042,555 
Borrowings    708,222      789,953      761,885      761,781      744,632 
Total interest-bearing liabilities    2,840,932      2,875,969      2,807,026      2,771,421      2,787,187 
Non-interest-bearing demand deposits    368,100      349,322      351,362      384,636      357,856 
Other liabilities    37,975      33,107      25,520      26,569      28,943 
Total liabilities    3,247,007      3,258,398      3,183,908      3,182,626      3,173,986 
                                        
Total shareholders' equity    394,949      387,680      377,132      363,650      358,698 
                                        
Total liabilities and shareholders' equity  3,641,956    3,646,078    3,561,040    3,546,276    3,532,684 
                     

_____________________________________

(1) Total loans include non-accruing loans.
(2) Average balances for securities available-for-sale are based on amortized cost.

BAR HARBOR BANKSHARES
ASSET QUALITY ANALYSIS - UNAUDITED

   At or for the Quarters Ended 
(in thousands)  Sep 30,
2019
    Jun 30,
2019
    Mar 31,
2019
    Dec 31,
2018
    Sep 30,
2018
 
NON-PERFORMING ASSETS                        
Non-accruing loans:                        
Commercial real estate  8,519    7,048    7,516    8,156    8,348 
Commercial installment    2,077      2,081      2,192      2,331      2,303 
Residential real estate    5,340      5,965      6,326      7,210      10,396 
Consumer installment    743      861      565      538      727 
Total non-accruing loans    16,679      15,955      16,599      18,235      21,774 
Other real estate owned    2,455      2,351      2,351      2,351      68 
Total non-performing assets  19,134    18,306    18,950    20,586    21,842 
                                        
Total non-accruing loans/total loans    0.65%    0.62%    0.66%    0.73%    0.88%
Total non-performing assets/total assets    0.53      0.50      0.52      0.57      0.61 
                                        
PROVISION AND ALLOWANCE FOR LOAN LOSSES                                       
Balance at beginning of period  14,572    13,997    13,866    13,487    13,090 
Charged-off loans    (215)    (104)    (231)    (631)    (298)
Recoveries on charged-off loans    103      117      38      438      52 
Net loans charged-off    (112)    13      (193)    (193)    (246)
Provision for loan losses    893      562      324      572      643 
Balance at end of period  15,353    14,572    13,997    13,866    13,487 
                                        
Allowance for loan losses/total loans    0.60%    0.57%    0.55%    0.56%    0.54%
Allowance for loan losses/non-accruing loans    92      91      84      76      62 
                                        
NET LOAN CHARGE-OFFS                                       
Commercial real estate  1    114    (41)  (25)  (27)
Commercial installment    62      (12)    (15)    53      (53)
Residential real estate    (124)    (65)    (86)    (31)    (123)
Consumer installment    (51)    (24)    (51)    (190)    (43)
Total, net  (112)  13    (193)  (193)  (246)
                                        
Net charge-offs (QTD annualized)/average loans    0.02%    -%    0.03%    0.03%    0.04%
Net charge-offs (YTD annualized)/average loans    0.02      0.01      0.03      0.05      0.06 
                                        
DELINQUENT AND NON-ACCRUING LOANS/TOTAL LOANS                                       
30-89 Days delinquent    0.18%    0.29%    0.21%    0.38%    0.17%
90+ Days delinquent and still accruing    0.03      -      -      0.01      - 
Total accruing delinquent loans    0.21      0.29      0.21      0.39      0.17 
Non-accruing loans    0.65      0.62      0.66      0.73      0.88 
Total delinquent and non-accruing loans    0.86%    0.91%    0.87%    1.12%    1.05%
                     

BAR HARBOR BANKSHARES
RECONCILIATION OF NON-GAAP FINANCIAL MEASURES AND SUPPLEMENTARY DATA - UNAUDITED

        At or for the Quarters Ended 
(in thousands)       Sep 30,
2019
    Jun 30,
2019
    Mar 31,
2019
    Dec 31,
2018
    Sep 30,
2018
 
Net income     5,015    6,117    7,281    7,620    8,970 
Plus (less):                                          
(Gain) loss on sale of securities, net       (157)    -      -      924      - 
Loss on sale of premises and equipment, net       -      21      -      -      - 
Loss (gain) on other real estate owned       146      -      -      5      (8)
Acquisition, restructuring and other expenses       3,039      280      -      1,109      70 
Income tax expense (1)       (720)    (72)    -      (485)    (12)
Total core earnings (2)     7,323    6,346    7,281    9,173    9,020 
                                           
Net-interest income  (B)    22,445    21,496    21,765    22,264    22,469 
Plus: Non-interest income         7,643      7,453      6,167      7,450      7,126 
Total Revenue         30,088      28,949      27,932      29,714      29,595 
Plus: (Gain) loss on sale of securities, net         (157)    -      -      924      - 
Total core revenue (2)  (C)    29,931    28,949    27,932    30,638    29,595 
                                             
Total non-interest expense     23,400   20,906   18,624   20,096   17,906 
Less: Loss on sale of premises and equipment, net     -   (21)  -   -   - 
Less: (Loss) gain on other real estate owned     (146)  -   -   (5)  8 
Less: Acquisition, restructuring and other expenses         (3,039)    (280)    -      (1,109)    (70)
Core non-interest expense (2)  (D)    20,215    20,605    18,624    18,982    17,844 
                                             
(in millions)                       
Total average earning assets  (E)    3,308    3,330    3,265    3,246    3,238 
Total average assets  (F)      3,642      3,646      3,561      3,546      3,533 
Total average shareholders' equity  (G)      395      388      377      364      359 
Total average tangible shareholders' equity (2) (3)  (H)      288      280      270      256      251 
Total tangible shareholders' equity, period-end (2) (3)  (I)      287      283      274      263      250 
Total tangible assets, period-end (2) (3)  (J)      3,506      3,580      3,522      3,501      3,453 
                                             
(in thousands)                                              
Total common shares outstanding, period-end  (K)      15,549      15,544      15,524      15,523      15,509 
Weighted average diluted shares outstanding  (L)      15,581      15,586      15,587      15,574      15,580 
                                             
Core earnings per share, diluted (2)    (A/L)    0.47    0.41    0.47    0.59    0.58 
Tangible book value per share, period-end (2)    (I/K)      18.49      18.23      17.63      16.94      16.11 
Securities adjustment, net of tax (1) (4)  (M)      8,002      5,550      (1,842)    (8,663)    (17,152)
Tangible book value per share, excluding securities adjustment (2)    (I+M)/K      17.98      17.88      17.75      17.50      17.22 
Total tangible shareholders' equity/total tangible assets (2)    (I/J)      8.20      7.92      7.77      7.51      7.24 
                                                
Performance ratios (5)                                               
GAAP return on assets            0.55%    0.67%    0.83%    0.85%    1.01%
Core return on assets (2)    (A/F)      0.80      0.70      0.83      1.03      1.01 
GAAP return on equity            5.04      6.33      7.83      8.31      9.92 
Core return on equity (2)    (A/G)      7.36      6.57      7.83      10.01      9.98 
Core return on tangible equity (2) (6)    (A+Q)/H      10.31      9.30      11.19      14.46      14.52 
Efficiency ratio (2) (7)  (D-O-Q)/(C+N)      65.02      68.48      63.94      59.91      57.88 
Net interest margin    (B+P)/E      2.75      2.65      2.77      2.78      2.81 
Supplementary data (in thousands)                                               
Taxable equivalent adjustment for efficiency ratio  (N)    658    676    684    633    654 
Franchise taxes included in non-interest expense  (O)      119      111      120      39      129 
Tax equivalent adjustment for net interest margin  (P)      503      514      515      488      493 
Intangible amortization  (Q)      207      207      207      207      207 

_____________________________________

(1) Assumes a marginal tax rate of 23.78% in 2019. A marginal tax rate of 23.78% was used in the third and fourth quarter of 2018.
(2) Non-GAAP financial measure.
(3) Tangible shareholders' equity is computed by taking total shareholders' equity less the intangible assets at period-end. Tangible assets is computed by taking total assets less the intangible assets at period-end.
(4) Securities adjustment, net of tax represents the total unrealized loss on available-for-sale securities recorded on the Company's consolidated balance sheets within total common shareholders' equity.
(5) All performance ratios are based on average balance sheet amounts, where applicable.
(6) Adjusted return on tangible equity is computed by dividing the total core income adjusted for the tax-effected amortization of intangible assets, assuming a marginal rate of 23.78% in 2019 and 23.78% in the third and fourth quarter of 2018, by tangible equity.
(7) Efficiency ratio is computed by dividing adjusted non-interest expense by the sum of net interest income on a fully taxable equivalent basis and adjusted non-interest income.

SOURCE: Bar Harbor Bankshares



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