Bar Harbor Bankshares Reports Second Quarter Results
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Bar Harbor Bankshares Reports Second Quarter Results

Monday, July 27, 2020 5:50 PM
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Earnings

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.

###

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  
 
  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  

  1. 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.
  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.
  6. 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  

  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  
 
  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  

  1. 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.
  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 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.
  7. 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

Bar Harbor Bank and Trust
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BHB
$19.16
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