Bar Harbor Bankshares Reports Second Quarter Results

BAR HARBOR, ME / ACCESSWIRE / July 27, 2020 / Bar Harbor Bankshares (NYSE American:BHB) reported second quarter 2020 net income of $8.5 million or $0.55 per share; up 41% over the same quarter of 2019 of $6.1 million or $0.39 per share. The non-GAAP measure of core earnings in the second quarter 2020 totaled $8.6 million, or $0.56 per share compared to $6.3 million or $0.41 per share of the same quarter of 2019.

SECOND QUARTER FINANCIAL HIGHLIGHTS (compared to the second quarter of 2019, unless otherwise noted)

18% annualized growth in commercial loans, excluding paycheck protection program (PPP) loans
32% annualized growth in total non-maturity deposits, excluding balances from PPP loans
3.00% net interest margin compared to 2.65%
12% increase in non-interest income, excluding $1.4 million in security gains
0.54% non-accruing loans to total loans, excluding PPP loans, compared to 0.66%
0.90% return on assets, compared to 0.67%

President and Chief Executive Officer, Curtis C. Simard stated, "Coming out of the first quarter of uncertainty, our teams communicated directly with their customers to better understand the developing challenges and opportunities. As a result, they took on the economic headwinds in stride while improving profitability during the second quarter 2020. Return on assets improved by a full five basis points to 0.90%, which is a trend we expect will continue as we execute on strategies throughout all aspects of business operations. Commercial loans led the quarter with strong double digit growth even excluding the influx of PPP loans. This demonstrates our understanding of client needs, while creating opportunities with targeted prospects. Given the lower interest rate environment, we tailored our strategy towards leveraging the secondary market sales platform for our mortgage production. We built fee income in lieu of interest income as we allowed residential loan balances on balance sheet to contract. As a result, mortgage banking income doubled compared to any prior quarter."

Mr. Simard continued, "Credit quality remains strong in the current economic cycle. We continue to adhere to our strong credit culture with proven operators who have weathered previous cycles and have diligently managed our underwriting practices during these uncertain times. Risk ratings on loans remained steady with the first quarter 2020 levels with lower past due accounts and net charge-offs near record lows. The Company's second quarter provision for loan losses increased slightly by $243 thousand, which included overall higher economic qualitative factors plus a specific reserve on one long-standing commercial relationship, offset by other credit quality improvements. I'm proud to say our workout team has a strong history of settling non-performing loans for the carrying values or higher."

Mr. Simard further stated, "PPP loan originations leveled off by mid-June for a total of approximately 1,900 loans with a total principal balance of $131.5 million and net unearned fees of $5.3 million. Accretion of the net fees began in the second quarter and is expected to be somewhat accelerated by the end of the year depending on the timing of customer forgiveness and processing by the Small Business Administration (SBA). Throughout the second quarter we modified close to 800 loans totaling about $400.0 million, which were mostly temporary principal deferrals with normal interest accruals. At quarter end almost 20% of the modified loans resumed payments under normalized arrangements with the remaining population expected to migrate to regular payments in the second half of the year. Accrued interest recorded under the modified plans currently totals $2.4 million, all of which is expected to be collected over the remaining lives of the loans."

Mr. Simard went on to say, "Non-maturity deposits were a significant source of funding during the second quarter and were up 32% on an annualized basis, excluding deposits from PPP loans, further reducing reliance on wholesale funding. Excluding the Federal Reserve credit facility for PPP loans, senior borrowings, were down 17%. We continue to actively manage the balance sheet and support net interest margin by locking into lower cost wholesale funding through a mixture of longer durations and derivative instruments, and managing our cost of deposits in line with market expectations. We are also further executing on deleveraging and/or remixing various asset classes, taking advantage of the market disruption. Additionally, the Company continues to have access to a significant amount of funding through diversified sources of liquidity."

"The Company's capital position is strong and risk-weighted capital ratios are quickly approaching levels seen in the third quarter of 2019 prior to the branch acquisition. We also began repurchasing Company stock accumulating 392 thousand shares or $7.3 million at the end of the second quarter. Last week we issued a press release declaring the Company's third quarter dividend to investors. We view dividends as an integral part of maximizing shareholder value and we are proud of the Company's strength and ability to maintain these distributions."

Mr. Simard concluded, "Our commitment to serving our customers throughout the branch footprint continues and our branch lobbies are now fully open adhering to national and state safety standards. As we look to the second half of the year, unknown volatility in economic conditions and financial markets could impact the financial performance of the Company. Given our operating model, disciplined approach to underwriting, and proven execution of delivering on our strategies, we feel well-positioned to handle these potential challenges as they emerge. As we think about the second half of the year, we will be disciplined and nimble, ready to take action as we have in these past few quarters. We remain committed to our profitability and tangible book value growth, navigating expense management and positive operating leverage during this period."

FINANCIAL CONDITION

Total assets increased $102.9 million to $3.8 billion from the first quarter of 2020. Loan balances in the second quarter 2020 grew $94.4 million, which is primarily due to a net $127.0 million paycheck PPP originations included in the commercial and industrial category, offset by our strategy to shrink the residential loans portfolio. Commercial and industrial loans excluding PPP loans increased $19.4 million or 24% on an annualized basis. Commercial real estate grew significantly during the quarter at an annualized rate of 14%. Residential real estate loan production was strong led by refinancing activity given the lower interest rate environment. The majority of residential production was sold in the secondary market to generate fee income. Total securities increased modestly $15.6 million in the second quarter as we continued our investment portfolio remix. The loan to deposit ratio was 101% in the second quarter 2020 compared to 98% at year-end, slightly elevated given the surge in PPP loans despite strong growth in relationship deposits which were offset by lower brokered deposit balances.

The second quarter 2020 allowance for loan losses increased $1.2 million to $16.5 million including net charge offs totaling $142 thousand and a provision for loan losses relatively consistent with the first quarter 2020. The allowance for loan losses to total loans ratio for the second quarter expanded to 0.60% from 0.58% in the first quarter 2020. Excluding PPP loan balances, which are backed by the SBA, the allowance for loan losses to total loans increased to 0.63%. Past due and delinquent loans as a percentage of total loans decreased to 0.84% from 1.30% at the end of the first quarter. Commercial non-accrual loans in the second quarter increased $3.9 million primarily due to two commercial loan relationships; one where the existing carrying value is expected to be fully recovered at settlement and another where a $349 thousand specific reserve was recorded to adjust the loan to its net realizable value. There were some residential loans that continue to hover around 90 days past due and we took a conservative approach by placing the loans on non-accrual status. While the impact of COVID-19 and other market conditions remain uncertain, we believe the existing allowance for loan losses is sufficient to absorb inherent losses based on our disciplined credit approach, experienced losses and methodology, and current and ongoing stress testing reviews of the portfolio. We performed a stress test of the commercial portfolio in the second quarter analyzing potentially vulnerable NAICS codes, in addition to our normal migration analysis. The following segments of the commercial loan portfolio were identified for stress testing: hospitality loans with a loan-to-value in excess of 65%, all loans contained in the Company's top 50 relationships, and all loans $1.0 million or greater with risk ratings of special mention or higher. The results of our stress testing did not indicate any meaningful deterioration in the overall quality of the commercial portfolio and any impact was considered in the adequacy of the allowance for loan losses as of June 30, 2020.

The Company's liquidity position remains strong. During the quarter we initiated pandemic-specific liquidity stress tests to analyze potential impacts from payment deferrals, unanticipated use of committed lines of credit, as well as the possibility of required servicer advances on sold loans. At June 30, 2020, available same-day liquidity totaled approximately $1.3 billion, including cash, borrowing capacity at the Federal Home Loan Bank of Boston (FHLB) and the Federal Reserve Discount Window and various lines of credit. Additional sources of liquidity include cash flows from operations, wholesale deposits, cash flow from the Company's amortizing securities and loan portfolios. The Company had unused borrowing capacity at the FHLB of $559.2 million, unused borrowing capacity at the Federal Reserve of $82.4 million and unused lines of credit totaling $51.0 million, in addition to over $200.0 million in unencumbered, liquid investment portfolio assets. The Company has also utilized the Federal Reserve's Paycheck Protection Program Liquidity Facility to provide liquidity to fund PPP loans.

The Company's book value per share was $26.56 at the end of the second quarter 2020 compared to $25.90 at the end of the first quarter 2020. Tangible book value per share (non-GAAP measure) was $18.18 at the end of the second quarter 2020 compared to $17.70 at the first quarter 2020; an annualized growth rate of 11%. The low interest rate environment continues to have a positive impact on the fair value of the Company's securities portfolio. Other comprehensive income included unrealized gains on securities totaling $11.4 million in the second quarter 2020 compared to $9.6 million at the end of the first quarter 2020.

RESULTS OF OPERATIONS

Net income in the second quarter 2020 was $8.5 million, or $0.55 per share, compared to $6.1 million, or $0.39 per share, in the same quarter of 2019. The non-GAAP measure of core earnings in the second quarter 2020 totaled $8.6 million, or $0.56 diluted earnings per share, compared to $6.3 million or $0.41 per share, in the same quarter of 2019. Net interest margin in the second quarter 2020 increased to 3.00% from 2.65% in the same period of 2019. The increase is primarily driven by lower borrowing levels as the average balance decreased to $612.5 million in the second quarter 2020 from $790.0 million in the second quarter of 2019 due to continued deleveraging strategies. These balance sheet strategies along with federal funds rate cuts that began in the second half of 2019 improved borrowing costs to 1.51% in the second quarter 2020 from 2.74% in same quarter of 2019. Costs of interest-bearing deposits also decreased to 0.81% compared to 1.32% in the second quarter 2019 due to the federal fund rate cuts and lower brokered deposits associated with deleveraging activities. Yields from earning assets were 3.81% compared to 4.13% in the second quarter 2019 reflecting loan originations and repricing of variable rate products in a lower interest rate environment. Excluding the effects of PPP loans, the second quarter yield on total earning assets was 3.89%. PPP loans are expected to increase interest income with accelerated accretion during the second half of 2020 as loans are forgiven by the SBA.

The second quarter 2020 provision for loan losses increased to $1.4 million from $562 thousand in the same quarter 2019. The increase is primarily due to qualitative adjustments made in the general reserve to reflect a downward economic trend that started in the first quarter 2020. Also included in the second quarter 2020 provision is a new $349 thousand specific reserve related to one commercial real estate relationship that is expected to be settled at its carrying value.

Non-interest income in the second quarter 2020 was $9.7 million compared to $7.5 million in the same quarter in 2019. The increase is primarily due to a $704 thousand increase in mortgage banking income associated with secondary market sales and a $1.4 million gain on sales of securities. Trust and investment management fee income contributed with a 3% year-over-year increase based on assets under management reaching $2.0 billion compared to $1.8 billion in the second quarter of 2019. Customer service fees were $2.4 million for the second quarter 2020 compared to $2.6 million from the same quarter of 2019 due to fewer customer transactions in the current economic environment associated with COVID-19.

Non-interest expense was $22.3 million in the second quarter 2020 compared to $20.9 million in the same quarter of 2019. The increase is primarily due to a $1.4 million loss on extinguishment of debt in the second quarter 2020 representing a prepayment penalty on a longer term and higher cost FHLB borrowing. Salary and benefit expense and occupancy and equipment costs were also higher during the second quarter 2020 to support the Company's expanded branch model and wealth management business.

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 headings "SECOND QUARTER FINANCIAL HIGHLIGHTS", "FINANCIAL CONDITION" and "RESULTS OF OPERATIONS" 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, 2019. 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.

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CONTACTS

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

TABLE

INDEX

CONSOLIDATED FINANCIAL SCHEDULES (UNAUDITED)

Selected Financial Highlights

Footnotes to Selected Financial Highlights

Balance Sheets

Loan and Deposit Analysis

Statements of Income

Statements of Income (Five Quarter Trend)

Average Yields and Costs

Average Balances

Asset Quality Analysis

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

Jun 30,

Mar 31,

Dec 31,

Sep 30,

Jun 30,

2020

2020

2019

2019

2019

PER SHARE DATA

Net earnings, diluted

$
0.55

$
0.50

$
0.27

$
0.32

$
0.39

Core earnings, diluted (1) (2)

0.56

0.50

0.56

0.47

0.41

Total book value

26.56

25.90

25.48

25.37

25.13

Tangible book value (2)

18.18

17.70

17.30

18.49

18.23

Market price at period end

22.39

17.28

25.39

24.93

26.59

Dividends

0.22

0.22

0.22

0.22

0.22

PERFORMANCE RATIOS (3)

Return on assets

0.90
%

0.85
%

0.46
%

0.55
%

0.67
%

Core return on assets (1) (2)

0.91

0.86

0.96

0.80

0.70

Return on equity

8.40

7.64

4.21

5.04

6.33

Core return on equity (1) (2)

8.52

7.71

8.81

7.36

6.57

Core return on tangible equity (1) (2)

12.72

11.54

12.66

10.31

9.30

Net interest margin, fully taxable equivalent (FTE) (2) (4)

3.00

3.06

2.95

2.75

2.65

Net interest margin (FTE), excluding purchased loan accretion (2) (4)

2.88

2.99

2.88

2.65

2.56

Efficiency ratio (2)

60.67

64.82

62.56

65.02

68.48

ORGANIC GROWTH (Year-to-date, annualized) (2) (6)

Total commercial loans

33
%

6
%

6
%

11
%

10
%

Total loans

7

(1
)

2

5

7

Total deposits

(0
)

(7
)

(1.8
)

1

(0.1
)

FINANCIAL DATA (In millions)

Total assets

$
3,780

$
3,677

$
3,669

$
3,612

$
3,688

Total earning assets (5)

3,376

3,269

3,336

3,270

3,355

Total investments

662

646

684

703

784

Total loans

2,729

2,635

2,641

2,577

2,578

Allowance for loan losses

17

15

15

15

15

Total goodwill and intangible assets

128

128

127

107

107

Total deposits

2,695

2,651

2,696

2,494

2,481

Total shareholders' equity

404

404

396

394

391

Net income

8

8

4

5

6

Core earnings (1) (2)

9

8

9

7

6

ASSET QUALITY AND CONDITION RATIOS

Net charge-offs (current quarter annualized)/average loans

0.02
%

0.18
%

0.08
%

0.02
%

–
%

Allowance for loan losses/total loans

0.60

0.58

0.58

0.60

0.57

Loans/deposits

101

99

98

103

104

Shareholders' equity to total assets

10.69

10.98

10.80

10.92

10.59

Tangible shareholders' equity to tangible assets

7.57

7.77

7.60

8.20

7.92

Core measurements are non-GAAP financial measures adjusted to exclude net non-operating charges primarily related to acquisitions, restructurings, system conversions, loss on debt extinguishment and gain or loss on sale of securities, other real estate owned and premises and equipment. Refer to the Reconciliation of Non-GAAP Financial Measures in table J for additional information.
Non-GAAP financial measure.
All performance ratios are based on average balance sheet amounts, where applicable.
Fully taxable equivalent considers the impact of tax-advantaged investment securities and loans.
Earning assets includes non-accruing loans and securities are valued at amortized cost.
Assets acquired from eight branches purchased from People's United Bank, National Association as of October 25, 2019, were excluded from calculation.

BAR HARBOR BANKSHARES
CONSOLIDATED BALANCE SHEETS – UNAUDITED

Jun 30,

Mar 31,

Dec 31,

Sep 30,

Jun 30,

(in thousands)

2020

2020

2019

2019

2019

Assets

Cash and due from banks

$
52,776

$
68,481

$
37,261

$
50,032

$
42,657

Interest-bearing deposits with the Federal Reserve Bank

17,897

17,174

19,649

21,561

17,203

Total cash and cash equivalents

70,673

85,655

56,910

71,593

59,860

Securities available for sale, at fair value

641,574

626,341

663,230

675,675

748,560

Federal Home Loan Bank stock

20,265

19,897

20,679

27,469

35,220

Total securities

661,839

646,238

683,909

703,144

783,780

Commercial real estate

982,070

948,178

930,661

923,773

881,479

Commercial and industrial

539,442

426,357

423,291

402,706

416,725

Residential real estate

1,083,708

1,132,328

1,151,857

1,143,452

1,167,759

Consumer

124,197

128,120

135,283

107,375

112,275

Total loans

2,729,417

2,634,983

2,641,092

2,577,306

2,578,238

Less: Allowance for loan losses

(16,509
)

(15,297
)

(15,353
)

(15,353
)

(14,572
)

Net loans

2,712,908

2,619,686

2,625,739

2,561,953

2,563,666

Premises and equipment, net

50,464

49,978

51,205

47,644

50,230

Other real estate owned

2,318

2,205

2,236

2,455

2,351

Goodwill

119,477

119,477

118,649

100,085

100,085

Other intangible assets

8,155

8,398

8,641

6,879

7,072

Cash surrender value of bank-owned life insurance

76,896

76,400

75,863

75,368

74,871

Deferred tax asset, net

2,451

3,166

3,865

4,988

5,649

Other assets

75,084

66,139

42,111

38,365

40,071

Total assets

$
3,780,265

$
3,677,342

$
3,669,128

$
3,612,474

$
3,687,635

Liabilities and shareholders' equity

Demand and other non-interest bearing deposits

$
504,325

$
400,410

$
414,534

$
380,707

$
354,125

NOW deposits

642,908

578,320

575,809

490,315

472,576

Savings deposits

466,668

423,345

388,683

360,570

352,657

Money market deposits

402,835

404,385

384,090

359,328

305,506

Time deposits

678,126

844,097

932,635

902,665

996,512

Total deposits

2,694,862

2,650,557

2,695,751

2,493,585

2,481,376

Senior borrowings

546,863

497,580

471,396

641,819

733,084

Subordinated borrowings

59,879

59,849

59,920

42,928

42,943

Total borrowings

606,742

557,429

531,316

684,747

776,027

Other liabilities

74,487

65,601

45,654

39,683

39,670

Total liabilities

3,376,091

3,273,587

3,272,721

3,218,015

3,297,073

Total common shareholders' equity

404,174

403,755

396,407

394,459

390,562

Total liabilities and shareholders' equity

$
3,780,265

$
3,677,342

$
3,669,128

$
3,612,474

$
3,687,635

Net shares outstanding

15,214

15,587

15,558

15,549

15,544

BAR HARBOR BANKSHARES
CONSOLIDATED LOAN & DEPOSIT ANALYSIS – UNAUDITED
LOAN ANALYSIS

Annualized

Growth %

Jun 30,

Mar 31,

Dec 31,

Sep 30,

Jun 30,

Quarter

Year to

(in thousands)

2020

2020

2019

2019

2019

End

Date

Commercial real estate

$
982,070

$
948,178

$
930,661

$
923,773

$
881,479

14
%

11
%

Commercial and industrial

472,524

321,605

318,988

301,590

312,029

188

96

Total commercial loans

1,454,594

1,269,783

1,249,649

1,225,363

1,193,508

58

33

Residential real estate

1,083,708

1,132,328

1,151,857

1,143,452

1,167,759

(17
)

(12
)

Consumer

124,197

128,120

135,283

107,375

112,275

(12
)

(16
)

Tax exempt and other

66,918

104,752

104,303

101,116

104,696

(144
)

(72
)

Total loans

$
2,729,417

$
2,634,983

$
2,641,092

$
2,577,306

$
2,578,238

14
%

7
%

DEPOSIT ANALYSIS

Annualized

Growth %

Jun 30,

Mar 31,

Dec 31,

Sep 30,

Jun 30,

Quarter

Year to

(in thousands)

2020

2020

2019

2019

2019

End

Date

Demand

$
504,325

$
400,410

$
414,534

$
380,707

$
354,125

104
%

43
%

NOW

642,908

578,320

575,809

490,315

472,576

45

23

Savings

466,668

423,345

388,683

360,570

352,657

41

40

Money market

402,835

404,385

384,090

359,328

305,506

(2
)

10

Total non-maturity deposits

2,016,736

1,806,460

1,763,116

1,590,920

1,484,864

47

29

Total time deposits

678,126

844,097

932,635

902,665

996,512

(79
)

(55
)

Total deposits

$
2,694,862

$
2,650,557

$
2,695,751

$
2,493,585

$
2,481,376

7
%

(0
)%

BAR HARBOR BANKSHARES
CONSOLIDATED STATEMENTS OF INCOME – UNAUDITED

Three Months Ended

Six Months Ended

June 30,

June 30,

(in thousands, except per share data)

2020

2019

2020

2019

Interest and dividend income

Loans

$
26,493

$
27,660

$
54,480

$
54,524

Securities and other

4,942

6,125

10,449

12,488

Total interest and dividend income

31,435

33,785

64,929

67,012

Interest expense

Deposits

4,548

6,886

10,568

13,193

Borrowings

2,297

5,403

5,208

10,558

Total interest expense

6,845

12,289

15,776

23,751

Net interest income

24,590

21,496

49,153

43,261

Provision for loan losses

1,354

562

2,465

886

Net interest income after provision for loan losses

23,236

20,934

46,688

42,375

Non-interest income

Trust and investment management fee income

3,159

3,066

6,528

5,823

Customer service fees

2,439

2,618

5,551

4,783

Gain on sales of securities, net

1,351

–

1,486

–

Mortgage banking income

1,124

420

1,581

642

Bank-owned life insurance income

496

519

1,033

1,061

Customer derivative income

513

696

1,101

725

Other income

628

134

851

586

Total non-interest income

9,710

7,453

18,131

13,620

Non-interest expense

Salaries and employee benefits

11,909

11,685

23,793

22,204

Occupancy and equipment

3,860

3,300

8,280

6,686

(Gain) loss on sales of premises and equipment, net

(2
)

21

90

21

Outside services

442

443

976

854

Professional services

337

570

1,009

1,114

Communication

194

283

483

518

Marketing

282

511

670

806

Amortization of intangible assets

256

207

512

414

Loss on debt extinguishment

1,351

–

1,351

–

Acquisition, conversion and other expenses

158

280

261

280

Other expenses

3,479

3,606

7,200

6,633

Total non-interest expense

22,266

20,906

44,625

39,530

Income before income taxes

10,680

7,481

20,194

16,465

Income tax expense

2,199

1,364

3,992

3,067

Net income

$
8,481

$
6,117

$
16,202

$
13,398

Earnings per share:

Basic

$
0.55

$
0.39

$
1.05

$
0.86

Diluted

0.55

0.39

1.04

0.86

Weighted average shares outstanding:

Basic

15,424

15,538

15,500

15,531

Diluted

15,441

15,586

15,523

15,582

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

Jun 30,

Mar 31,

Dec 31,

Sep 30,

Jun 30,

(in thousands, except per share data)

2020

2020

2019

2019

2019

Interest and dividend income

Loans

$
26,493

$
27,987

$
28,361

$
28,157

$
27,660

Securities and other

4,942

5,507

5,756

6,105

6,125

Total interest and dividend income

31,435

33,494

34,117

34,262

33,785

Interest expense

Deposits

4,548

6,020

6,698

7,143

6,886

Borrowings

2,297

2,911

3,315

4,674

5,403

Total interest expense

6,845

8,931

10,013

11,817

12,289

Net interest income

24,590

24,563

24,104

22,445

21,496

Provision for loan losses

1,354

1,111

538

893

562

Net interest income after provision for loan losses

23,236

23,452

23,566

21,552

20,934

Non-interest income

Trust and investment management fee income

3,159

3,369

3,227

3,013

3,066

Customer service fees

2,439

3,112

2,791

2,553

2,618

Gain on sales of securities, net

1,351

135

80

157

–

Mortgage banking income

1,124

457

532

452

420

Bank-owned life insurance income

496

537

495

497

519

Customer derivative income

513

588

475

828

696

Other income

628

223

206

143

134

Total non-interest income

9,710

8,421

7,806

7,643

7,453

Non-interest expense

Salaries and employee benefits

11,909

11,884

11,432

11,364

11,685

Occupancy and equipment

3,860

4,420

4,113

3,415

3,300

(Gain) loss on sales of premises and equipment, net

(2
)

92

(3
)

–

21

Outside services

442

534

540

424

443

Professional services

337

672

370

707

570

Communication

194

289

114

189

283

Marketing

282

388

453

613

511

Amortization of intangible assets

256

256

240

207

207

Loss on debt extinguishment

1,351

–

1,096

–

–

Acquisition, conversion and other expenses

158

103

4,998

3,039

280

Other expenses

3,479

3,721

3,450

3,442

3,606

Total non-interest expense

22,266

22,359

26,803

23,400

20,906

Income before income taxes

10,680

9,514

4,569

5,795

7,481

Income tax expense

2,199

1,793

362

780

1,364

Net income

$
8,481

$
7,721

$
4,207

$
5,015

$
6,117

Earnings per share:

Basic

$
0.55

$
0.50

$
0.27

$
0.32

$
0.39

Diluted

0.55

0.50

0.27

0.32

0.39

Weighted average shares outstanding:

Basic

15,424

15,558

15,554

15,547

15,538

Diluted

15,441

15,593

15,602

15,581

15,586

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

Quarters Ended

Jun 30,

Mar 31,

Dec 31,

Sep 30,

Jun 30,

2020

2020

2019

2019

2019

Earning assets

Commercial real estate

4.11
%

4.46
%

4.69
%

4.74
%

4.74
%

Commercial and industrial

3.97

4.89

4.58

4.78

4.75

Residential

3.81

3.84

3.89

3.88

3.93

Consumer

3.81

5.20

4.84

5.13

5.21

Total loans

3.94

4.30

4.33

4.38

4.39

Securities and other

3.26

3.53

3.49

3.44

3.29

Total earning assets

3.81
%

4.14
%

4.15
%

4.17
%

4.13
%

Funding liabilities

NOW

0.14
%

0.40
%

0.44
%

0.51
%

0.49
%

Savings

0.15

0.25

0.20

0.21

0.21

Money market

0.40

1.01

1.17

1.37

1.44

Time deposits

1.94

1.92

2.06

2.16

2.11

Total interest-bearing deposits

0.81

1.08

1.19

1.33

1.32

Borrowings

1.51

2.10

2.30

2.62

2.74

Total interest-bearing liabilities

0.96
%

1.28
%

1.42
%

1.65
%

1.71
%

Net interest spread

2.85

2.86

2.73

2.52

2.42

Net interest margin

3.00

3.06

2.95

2.75

2.65

BAR HARBOR BANKSHARES
AVERAGE BALANCES – UNAUDITED

Quarters Ended

Jun 30,

Mar 31,

Dec 31,

Sep 30,

Jun 30,

(in thousands)

2020

2020

2019

2019

2019

Assets

Commercial real estate

$
952,264

$
945,851

$
928,445

$
900,568

$
846,921

Commercial and industrial

522,360

423,393

412,595

410,453

416,000

Residential real estate

1,117,608

1,141,908

1,156,215

1,154,552

1,176,583

Consumer

126,413

130,471

127,425

109,562

111,641

Total loans (1)

2,718,645

2,641,623

2,624,680

2,575,135

2,551,145

Securities and other (2)

648,185

661,848

683,939

732,925

779,072

Total earning assets

3,366,830

3,303,471

3,308,619

3,308,060

3,330,217

Cash and due from banks

114,232

57,751

67,642

62,999

52,728

Allowance for loan losses

(15,678
)

(15,242
)

(15,657
)

(14,965
)

(14,459
)

Goodwill and other intangible assets

127,751

128,014

114,537

107,058

107,252

Other assets

213,986

187,765

179,512

178,804

170,340

Total assets

$
3,807,121

$
3,661,759

$
3,654,653

$
3,641,956

$
3,646,078

Liabilities and shareholders' equity

NOW

$
611,860

$
570,127

$
551,335

$
487,506

$
459,572

Savings

450,621

410,931

378,997

359,242

352,733

Money market

411,232

373,650

379,361

338,013

338,095

Time deposits

776,042

892,654

918,528

947,949

935,616

Total interest bearing deposits

2,249,755

2,247,362

2,228,221

2,132,710

2,086,016

Borrowings

612,538

556,824

571,936

708,222

789,953

Total interest-bearing liabilities

2,862,293

2,804,186

2,800,157

2,840,932

2,875,969

Non-interest-bearing demand deposits

472,688

406,951

418,324

368,100

349,322

Other liabilities

66,302

44,343

40,136

37,975

33,107

Total liabilities

3,401,283

3,255,480

3,258,617

3,247,007

3,258,398

Total shareholders' equity

405,838

406,279

396,036

394,949

387,680

Total liabilities and shareholders' equity

$
3,807,121

$
3,661,759

$
3,654,653

$
3,641,956

$
3,646,078

Total loans include non-accruing loans.
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

Jun 30,

Mar 31,

Dec 31,

Sep 30,

Jun 30,

(in thousands)

2020

2020

2019

2019

2019

NON-PERFORMING ASSETS

Non-accruing loans:

Commercial real estate

$
3,981

$
2,227

$
3,489

$
8,519

$
7,048

Commercial installment

1,790

1,996

1,836

2,077

2,081

Residential real estate

7,194

5,089

5,335

5,340

5,965

Consumer installment

1,023

744

890

743

861

Total non-accruing loans

13,988

10,056

11,550

16,679

15,955

Other real estate owned

2,318

2,205

2,236

2,455

2,351

Total non-performing assets

$
16,306

$
12,261

$
13,786

$
19,134

$
18,306

Total non-accruing loans/total loans

0.51
%

0.38
%

0.44
%

0.65
%

0.62
%

Total non-performing assets/total assets

0.43

0.33

0.38

0.53

0.50

PROVISION AND ALLOWANCE FOR LOAN LOSSES

Balance at beginning of period

$
15,297

$
15,353

$
15,353

$
14,572

$
13,997

Charged-off loans

(220
)

(1,211
)

(603
)

(215
)

(104
)

Recoveries on charged-off loans

78

44

65

103

117

Net loans charged-off

(142
)

(1,167
)

(538
)

(112
)

13

Provision for loan losses

1,354

1,111

538

893

562

Balance at end of period

$
16,509

$
15,297

$
15,353

$
15,353

$
14,572

Allowance for loan losses/total loans

0.60
%

0.58
%

0.58
%

0.60
%

0.57
%

Allowance for loan losses/non-accruing loans

118

152

133

92

91

NET LOAN CHARGE-OFFS

Commercial real estate

$
71

$
(846
)

$
(92
)

$
1

$
114

Commercial installment

(155
)

(170
)

(331
)

62

(12
)

Residential real estate

(20
)

(1
)

(16
)

(124
)

(65
)

Consumer installment

(38
)

(150
)

(99
)

(51
)

(24
)

Total, net

$
(142
)

$
(1,167
)

$
(538
)

$
(112
)

$
13

Net charge-offs (QTD annualized)/average loans

0.02
%

0.18
%

0.08
%

0.02
%

0.03
%

Net charge-offs (YTD annualized)/average loans

0.10

0.18

0.03

0.02

0.01

DELINQUENT AND NON-ACCRUING LOANS/ TOTAL LOANS

30-89 Days delinquent

0.28
%

0.84
%

0.74
%

0.18
%

0.29
%

90+ Days delinquent and still accruing

0.04

0.08

0.01

0.03

–

Total accruing delinquent loans

0.32

0.92

0.75

0.21

0.29

Non-accruing loans

0.51

0.38

0.44

0.65

0.62

Total delinquent and non-accruing loans

0.83
%

1.30
%

1.19
%

0.86
%

0.91
%

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

At or for the Quarters Ended

Jun 30,

Mar 31,

Dec 31,

Sep 30,

Jun 30,

(in thousands)

2020

2020

2019

2019

2019

Net income

$
8,481

$
7,721

$
4,207

$
5,015

$
6,117

Plus (less):

Gain on sale of securities, net

(1,351
)

(135
)

(80
)

(157
)

–

(Gain) loss on sale of premises and equipment, net

(2
)

92

(3
)

–

21

Loss on other real estate owned

–

31

20

146

–

Loss on debt extinguishment

1,351

–

1,096

–

–

Acquisition, restructuring and other expenses

158

103

4,998

3,039

280

Income tax expense (1)

(37
)

(22
)

(1,440
)

(720
)

(72
)

Total core earnings (2)

(A)

$
8,600

$
7,790

$
8,798

$
7,323

$
6,346

Net interest income

(B)

$
24,590

$
24,563

$
24,104

$
22,445

$
21,496

Plus: Non-interest income

9,710

8,421

7,806

7,643

7,453

Total Revenue

34,300

32,984

31,910

30,088

28,949

Adj: Gain on sale of securities, net

(1,351
)

(135
)

(80
)

(157
)

–

Total core revenue (2)

(C)

$
32,949

$
32,849

$
31,830

$
29,931

$
28,949

Total non-interest expense

22,266

22,359

26,803

23,400

20,906

Less: Gain (loss) on sale of premises and equipment, net

2

(92
)

3

–

(21
)

Less: Loss on other real estate owned

–

(31
)

(20
)

(146
)

–

Less: Loss on debt extinguishment

(1,351
)

–

(1,096
)

–

–

Less: Acquisition, conversion and other expenses

(158
)

(103
)

(4,998
)

(3,039
)

(280
)

Core non-interest expense (2)

(D)

$
20,759

$
22,133

$
20,692

$
20,215

$
20,605

(in millions)

Total average earning assets

(E)

$
3,367

$
3,306

$
3,309

$
3,308

$
3,330

Total average assets

(F)

3,807

3,662

3,655

3,642

3,646

Total average shareholders' equity

(G)

406

406

396

395

388

Total average tangible shareholders' equity (2) (3)

(H)

278

278

281

288

280

Total tangible shareholders' equity, period-end (2) (3)

(I)

277

276

269

287

283

Total tangible assets, period-end (2) (3)

(J)

3,653

3,549

3,542

3,506

3,580

(in thousands)

Total common shares outstanding, period-end

(K)

15,214

15,587

15,558

15,549

15,544

Average diluted shares outstanding

(L)

15,441

15,593

15,602

15,581

15,586

Core earnings per share, diluted (2)

(A/L)

$
0.56

$
0.50

$
0.56

$
0.47

$
0.41

Tangible book value per share, period-end (2)

(I/K)

18.18

17.70

17.30

18.49

18.23

Securities adjustment, net of tax (1) (4)

(M)

11,412

9,560

5,549

8,002

5,550

Tangible book value per share, excluding securities adjustment (2)

(I+M)/K

17.43

17.09

16.94

17.98

17.88

Total tangible shareholders' equity/total tangible assets (2)

(I/J)

7.57

7.77

7.60

8.20

7.92

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

At or for the Quarters Ended

Jun 30,

Mar 31,

Dec 31,

Sep 30,

Jun 30,

(in thousands)

2020

2020

2019

2019

2019

Performance ratios (5)

GAAP return on assets

0.90
%

0.85
%

0.46
%

0.55
%

0.67
%

Core return on assets (2)

(A/F)

0.91

0.86

0.96

0.80

0.70

GAAP return on equity

8.40

7.64

4.21

5.04

6.33

Core return on equity (2)

(A/G)

8.52

7.71

8.81

7.36

6.57

Core return on tangible equity (2) (6)

(A+Q)/H

12.72

11.54

12.66

10.31

9.30

Efficiency ratio (2) (7)

(D-O-Q)/(C+N)

60.67

64.82

62.56

65.02

68.48

Net interest margin

(B+P)/E

3.00

3.06

2.95

2.75

2.65

Supplementary data (in thousands)

Taxable equivalent adjustment for efficiency ratio

(N)

$
646

$
719

$
674

$
658

$
676

Franchise taxes included in non-interest expense

(O)

120

119

119

119

111

Tax equivalent adjustment for net interest margin

(P)

490

551

516

503

514

Intangible amortization

(Q)

256

256

240

207

207

Assumes a marginal tax rate of 23.87% for the first half of 2020 and the fourth quarter of 2019 and 23.78% in the first three quarters of 2019.
Non-GAAP financial measure.
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.
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.
All performance ratios are based on average balance sheet amounts, where applicable.
Adjusted return on tangible equity is computed by taking core earnings divided by shareholders' equity less the tax-effected amortization of intangible assets, assuming a marginal rate of 23.87% for the first half of 2020 and the fourth quarter of 2019, and 23.78% in the first three quarters of 2019.
Efficiency ratio is computed by dividing core non-interest expense net of franchise taxes and intangible amortization divided by core revenue on a fully taxable equivalent basis.

SOURCE: Bar Harbor Bank and Trust

ReleaseID: 599098

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