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Bar Harbor Bankshares Reports Fourth Quarter Results; Declares Dividend

Thursday, 19 January 2023 04:10 PM

Bar Harbor Bank and Trust

Topic:
Earnings

BAR HARBOR, ME / ACCESSWIRE / January 19, 2023 / Bar Harbor Bankshares (NYSE American:BHB) (the "Company") reported fourth quarter 2022 net income of $12.5 million or $0.83 per diluted share compared to $9.8 million or $0.65 per diluted share in the same quarter of 2021. Earnings per share in the prior year quarter included a $0.05 per diluted share benefit from Paycheck Protection Program ("PPP") loans. For the full year of 2022, net income was $43.6 million or $2.88 per diluted share compared to $39.3 million and $2.61 per diluted share for 2021, an increase of 11%.

FOURTH QUARTER HIGHLIGHTS (all comparisons to the fourth quarter 2021 unless otherwise noted)

  • 1.30% return on assets, compared to 1.02%
  • 12.73% return on equity, compared to 9.16%
  • 11% annualized commercial loan growth, 19% commercial loan growth for 2022, compared to 2021
  • 3.76% net interest margin, compared to 2.79%
  • 58% efficiency ratio (non-GAAP measure), compared to 61%
  • 0.17% non-performing assets ratio to total assets, compared to 0.27%

Bar Harbor Bankshares' President and Chief Executive Officer, Curtis C. Simard stated, "We are excited about all of our accomplishments in 2022, and most recently, for ending the year with such a strong quarter that demonstrated stable performance across all divisions. The results this past quarter once again highlight the strength of our balance sheet and the ability of our teams to deliver on core deposits, loans and wealth management in our markets. Our performance metrics showed significant favorable expansion throughout all of 2022 and included 19% in total commercial loan growth for the year while adhering to selective criteria and only experienced operators. We ended the year with a return on assets of 1.30% and net income was up 28% over the fourth quarter of 2021. Our credit quality remains solid as we posted net recoveries for the quarter and we continue to diligently manage expenses despite wage inflation while delivering positive operating leverage. Return on equity was 12.73% in the quarter, up from 9.16% in the same quarter of 2021 on higher earnings and a more stable fair market value related to the securities portfolio, which we continue to classify all as held to maturity preserving our flexibility."

Mr. Simard further commented, "While we did see a decline in overall deposit balances during the quarter, it was primarily in institutional accounts with low activity, which tend to be most rate sensitive. We continue to work with each customer on rates rather than make sweeping movements which allows us to focus on expanding those relationships as we review individual requests. Despite the developing rate pressure on deposits, we benefitted from the higher rate environment as our assets repriced, allowing for an additional 29 basis points of expansion in the margin to 3.76%. As we move into 2023, we have organically moved towards a slightly less asset sensitive position given the mix in loan growth during 2022."

Mr. Simard went on to say, "Assets under management increased 7% during the quarter versus the S&P 500 which was up 4% for the same period. Our wealth team added more than $132 million in new account assets this past year. We have a strong, relationship centric wealth management group that we believe has positioned us to realize an organic lift as the market returns."

Mr. Simard concluded, "Looking ahead in 2023, we are well positioned for success regardless of the rate environment. We are proud to be operating as an organization focused in Northern New England, committed to the needs of our customers while delivering shareholder value."

DIVIDEND DECLARED

The Company's Board of Directors voted to declare a cash dividend of $0.26 per share to shareholders of record at the close of business on February 16, 2023 payable on March 16, 2023. This dividend equates to a 3.25% annualized yield based on the $32.04 closing share price of the Company's common stock on December 30, 2022, the last trading day of the fourth quarter 2022.

FINANCIAL CONDITION

The Company had asset growth of 2% or $69 million quarter over quarter to $3.9 billion at the end of fourth quarter 2022. Loans grew 2% or $52 million to $2.9 billion at the end of the fourth quarter driven by an 11% net annualized increase in commercial loans and 1% annualized growth in residential real estate.

Non-accruing loans for the fourth quarter 2022 decreased 16.7% or $1.3 million to $6.5 million from $7.8 million at the end of the third quarter. The ratio of accruing past due loans to total loans decreased to 0.09% of total loans at the end of the fourth quarter 2022 from 0.10% at the end of the third quarter. The fourth quarter 2022 resulted in $155 thousand net recovery of charged off loans compared to a net charge off of $44 thousand in the third quarter. The allowance for credit losses increased $842 thousand to $25.9 million for the fourth quarter, compared to $25.0 million at the end of the third quarter 2022, due largely to significant loan growth during the quarter and growth in commercial construction unused lines of credit.

Total deposits were $3.0 billion at the end of the fourth quarter 2022 down 3% or $92.2 million. Core deposits decreased $81 million or 3% driven by a $55.2 million decrease in business checking, demand deposit accounts and non-personal money market balances. Time deposits decreased $10.8 million during the quarter as customers continue to move funds to transactional accounts upon contractual maturity. Excess cash and short-term borrowings were used as funding during the fourth quarter 2022 as loan growth outpaced deposit growth.

The Company's book value per share was $26.09 at the end of the fourth quarter of 2022, compared with $25.22 at the end of the third quarter. Tangible book value per share (non-GAAP measure) was $17.78 at the end of the fourth quarter 2022, compared to $16.89 at the end of the third quarter, an annualized increase of 21%. Other comprehensive income included unrealized loss on securities totaling $55.2 million in the fourth quarter 2022 compared to $58.7 million at the end of the third quarter.

RESULTS OF OPERATIONS

Net income increased 28% in the fourth quarter 2022 to $12.5 million, or $0.83 per diluted share, compared to $9.8 million, or $0.65 per diluted share, in the same quarter of 2021. PPP income contributed $0.05 to earnings per share in the fourth quarter of 2021.

Net interest margin increased 97 basis points or 34% to 3.76% compared to 2.79% in the same period of 2021. The increase was driven by a 125 basis point increase in average yields as existing variable rate loans repriced along with growth in earning assets, offset in part by a higher cost of funds. PPP loan fee amortization due to forgiveness contributed 10 basis points in the fourth quarter of 2021. In addition, excess interest-bearing cash balances in the fourth quarter of 2021 reduced net interest margin by 27 basis points. The yield on loans was 4.56% in the fourth quarter 2022, up from 3.58% in the same quarter of 2021 or 3.45% when excluding interest from PPP loans. Costs of interest-bearing liabilities increased to 0.78% from 0.41% in the fourth quarter 2021 due primarily to a shift to wholesale borrowings to fund loans as deposit balances declined by 12% from a run-off of larger balance accounts seeking higher interest rates.

The provision for credit losses for the fourth quarter 2022 was $687 thousand, compared to $126 thousand in the fourth quarter of 2021, driven primarily by the 7% annualized loan growth. The provision for credit losses on unfunded commitments increased $1.4 million in the current quarter driven largely by the growth in unfunded commercial construction lines of credit.

Non-interest income in the fourth quarter 2022 was $8.2 million, compared to $11.2 million in the same quarter of 2021. Customer service fees grew to $3.6 million in the fourth quarter of 2022 from $3.5 million in the same quarter of 2021 on a higher number of transactional accounts. Wealth management income in the fourth quarter 2022 was $3.4 million, compared to $3.8 million in prior year due primarily to lower AUM stemming from a decline market valuations. Mortgage banking income was $153 thousand, compared to $1.6 million in the same period of 2021 reflecting increased on balance sheet activity related to higher interest rates. Additionally, the fourth quarter of 2021 included $890 thousand of gains on the sales of securities.

Non-interest expense was $24.6 million in the fourth quarter 2022 and $22.9 million in the same quarter of 2021. Salaries and employee benefits increased by $1.1 million primarily due to the revaluation of long-term incentive accruals driven by the Company's higher stock price at the end of the fourth quarter 2022. The provision for unfunded commitments increased $1.2 million over the prior year quarter due to an increase in commercial construction activity. The efficiency ratio (non-GAAP) in the fourth quarter 2022 was 58%, down from 61%, or 63% excluding PPP loan income in the fourth quarter 2021. Non-core expenses (non-GAAP) in the fourth quarter of 2021 consisted mostly of a $1.1 million prepayment penalty on debt extinguishment and a $515 thousand loss on sale of premises and equipment.

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 135 years. Bar Harbor Bank & Trust 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

All statements, other than statements of historical fact, included in this release that address activities, events or developments that the Company expects, believes or anticipates will or may occur in the future are "forward-looking statements" within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, and are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995, including statements relating to the current economic outlook, potential risks to the economy, future interest rates, our ability to grow in the future, and management's optimism about the Company's market and financial positions. The words "believe," "anticipate," "expect," "may," "will," "assume," "should," "predict," "could," "would," "intend," "targets," "estimates," "projects," "plans," and "potential," and other similar words and expressions of the future, are intended to identify such forward-looking statements, but other statements not based on historical information may also be considered forward-looking, including statements about the Company's wealth management growth when the market returns, 2023 success regardless of the rate environment, future financial and operating results and the Company's plans, objectives, and intentions. All forward-looking statements are subject to risks, uncertainties, and other factors that may cause the actual results, performance, or achievements of the Company to differ materially from any results, performance, or achievements expressed or implied by such forward-looking statements. These forward-looking statements are subject to known and unknown risks, uncertainties and other factors that could cause the actual results to differ materially from the statements, including, but not limited to: (1) deterioration in the financial condition of borrowers of Bar Harbor Bank & Trust, including as a result of the negative impact of inflationary pressures on our customers and their businesses resulting in significant increases in loan losses and provisions for those losses, (2) deterioration in the financial condition of borrowers of Bar Harbor Bank & Trust, including as a result of the negative impact of inflationary pressures on our customers and their businesses resulting in significant increases in loan losses and provisions for those losses, (3) the possibility that our asset quality could decline or that we experience greater loan losses than anticipated, (4) increased levels of other real estate, primarily as a result of foreclosures, (5) the impact of liquidity needs on our results of operations and financial condition, (6) competition from financial institutions and other financial service providers, (7) the effect of interest rate increases on the cost of deposits, (8) unanticipated weakness in loan demand or loan pricing, (9) adverse conditions in the national or local economies including in Bar Harbor Bankshares' markets throughout Northern New England, (10) the effects of new outbreaks of COVID-19, including actions taken by governmental officials to curb the spread of the virus, and the resulting impact on general economic and financial market conditions and on Bar Harbor Bankshares' and its customers' business, results of operations, asset quality and financial condition, (11) the efficacy of vaccines against the COVID-19 virus, including new variants, (12) lack of strategic growth opportunities or our failure to execute on available opportunities, (13) the ability to grow and retain low-cost core deposits and retain large, uninsured deposits, (14) our ability to effectively manage problem credits, (15) our ability to successfully implement efficiency initiatives on time and with the results projected, (16) our ability to successfully develop and market new products and technology, (17) the impact of negative developments in the financial industry and United States and global capital and credit markets, (18) our ability to retain the services of key personnel, (19) our ability to adapt to technological changes, (20) risks associated with litigation, including reputational and financial risks and the applicability of insurance coverage, (21) the vulnerability of the Bar Harbor Bank & Trust's computer and information technology systems and networks, and the systems and networks of third parties with whom the Company or the Bar Harbor Bank & Trust contract, to unauthorized access, computer viruses, phishing schemes, spam attacks, human error, natural disasters, power loss, and other security breaches and interruptions, (22) changes in state and federal laws, rules, regulations, or policies applicable to banks or bank or financial holding companies, including regulatory or legislative developments, (23) adverse impacts (including costs, fines, reputational harm, or other negative effects) from current or future litigation, regulatory examinations, or other legal and/or regulatory actions, (24) our ability to maintain appropriate environmental, social and governance (ESG) practices, oversight, an disclosures; and (25) general competitive, economic, political, and market conditions, including economic conditions in the local markets where we operate. Additional factors which could affect the forward-looking statements can be found in the Company's annual report on Form 10-K, quarterly reports on Form 10-Q, and current reports on Form 8-K filed with the Securities and Exchange Commission (the "SEC") and available on the SEC's website at http://www.sec.gov. The Company believes the forward-looking statements contained herein are reasonable; however, many of such risks, uncertainties, and other factors are beyond the Company's ability to control or predict and undue reliance should not be placed on any forward-looking statements, which are based on current expectations and speak only as of the date that they are made. Therefore, the Company can give no assurance that its future results will be as estimated. The Company does not intend to, and disclaims any obligation to, update or revise any forward-looking statement.

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
INDEXCONSOLIDATED FINANCIAL SCHEDULES (UNAUDITED)
ASelected Financial Highlights
BBalance Sheets
CLoan and Deposit Analysis
DStatements of Income
EStatements of Income (Five Quarter Trend)
FAverage Yields and Costs
GAverage Balances
HAsset Quality Analysis
I-JReconciliation of Non-GAAP Financial Measures (Five Quarter Trend) and Supplementary Data

BAR HARBOR BANKSHARES
SELECTED FINANCIAL HIGHLIGHTS - UNAUDITED

At or for the Quarters Ended
Dec 31, Sep 30, Jun 30, Mar 31, Dec 31,
2022 2022 2022 2022 2021
PER SHARE DATA





Net earnings, diluted
$0.83 $0.76 $0.70 $0.60 $0.65
Core earnings, diluted (1)
0.83 0.76 0.70 0.62 0.68
Total book value
26.09 25.22 26.19 27.11 28.27
Tangible book value (1)
17.78 16.89 17.83 18.72 19.86
Market price at period end
32.04 26.52 25.86 28.62 28.93
Dividends
0.26 0.26 0.26 0.24 0.24
PERFORMANCE RATIOS (2)
Return on assets
1.30% 1.20% 1.14% 1.00% 1.02%
Core return on assets (1)
1.30 1.20 1.14 1.02 1.07
Pre-tax, pre-provision return on assets
1.72 1.65 1.50 1.28 1.26
Core pre-tax, pre-provision return on assets (1)
1.72 1.65 1.50 1.31 1.33
Return on equity
12.73 11.55 10.58 8.89 9.16
Core return on equity (1)
12.72 11.54 10.59 9.07 9.60
Return on tangible equity
19.03 17.25 15.74 13.01 13.30
Core return on tangible equity (1)
19.02 17.24 15.76 13.27 13.93
Net interest margin, fully taxable equivalent (1) (3)
3.76 3.47 3.19 2.95 2.79
Core net interest margin (1) (4)
3.76 3.47 3.19 2.93 2.69
Efficiency ratio (1)
58.19 57.67 59.25 62.40 60.74
FINANCIAL DATA (In millions)
Total assets
$3,910 $3,840 $3,716 $3,692 $3,709
Total earning assets (5)
3,601 3,525 3,399 3,367 3,380
Total investments
574 566 593 611 626
Total loans
2,903 2,850 2,727 2,655 2,532
Allowance for credit losses
26 25 24 23 23
Total goodwill and intangible assets
125 126 126 126 126
Total deposits
3,043 3,136 3,079 3,048 3,049
Total shareholders' equity
393 380 394 407 424
Net income
13 11 11 9 10
Core earnings (1)
13 11 11 9 10
ASSET QUALITY AND CONDITION RATIOS
Net (recoveries) charge-offs (6) /average loans
(0.02)% 0.01% -% (0.01)% (0.02)%
Allowance for credit losses/total loans
0.89 0.88 0.87 0.87 0.90
Loans/deposits
95 91 89 87 83
Shareholders' equity to total assets
10.06 9.89 10.59 11.02 11.43
Tangible shareholders' equity to tangible assets
7.09 6.85 7.46 7.88 8.32

(1) Non-GAAP financial measure. Refer to the Reconciliation of Non-GAAP Financial Measures in tables I-J for additional information.
(2) All performance ratios are based on average balance sheet amounts, where applicable.
(3) Fully taxable equivalent considers the impact of tax-advantaged investment securities and loans.
(4) Core net interest margin excludes Paycheck Protection Program loans.
(5) Earning assets includes non-accruing loans and interest-bearing deposits with other banks. Securities are valued at amortized cost.
(6) Current quarter annualized.

BAR HARBOR BANKSHARES
CONSOLIDATED BALANCE SHEETS - UNAUDITED


Dec 31, Sep 30, Jun 30, Mar 31, Dec 31,
(in thousands)
2022 2022 2022 2022 2021
Assets
Cash and due from banks
$39,933 $50,760 $40,834 $38,656 $33,508
Interest-earning deposits with other banks
52,362 31,305 26,282 72,393 216,881
Total cash and cash equivalents
92,295 82,065 67,116 111,049 250,389

Securities available for sale
559,516 556,752 586,142 603,910 618,276
Federal Home Loan Bank stock
14,893 9,035 6,572 7,384 7,384
Total securities
574,409 565,787 592,714 611,294 625,660

Loans held for sale
- 982 3,539 2,843 5,523

Total loans
2,902,690 2,850,364 2,727,274 2,654,562 2,531,910
Less: Allowance for credit losses
(25,860) (25,018) (23,756) (23,190) (22,718)
Net loans
2,876,830 2,825,346 2,703,518 2,631,372 2,509,192

Premises and equipment, net
47,622 48,010 48,350 48,891 49,382
Other real estate owned
- - - - -
Goodwill
119,477 119,477 119,477 119,477 119,477
Other intangible assets
5,801 6,034 6,267 6,500 6,733
Cash surrender value of bank-owned life insurance
81,197 80,758 80,262 79,861 79,020
Deferred tax asset, net
24,443 25,288 18,405 12,614 5,547
Other assets
87,729 86,499 76,109 68,169 58,310
Total assets
$3,909,803 $3,840,246 $3,715,757 $3,692,070 $3,709,233
Liabilities and shareholders' equity
Demand and other non-interest bearing deposits
$676,350 $700,218 $670,268 $653,471 $664,420
NOW deposits
900,730 918,822 883,239 918,768 940,631
Savings deposits
664,514 669,317 663,676 658,834 628,670
Money market deposits
478,398 513,075 499,456 424,750 389,291
Time deposits
323,439 334,248 361,906 391,940 425,532
Total deposits
3,043,431 3,135,680 3,078,545 3,047,763 3,048,544
Senior borrowings
333,957 188,757 117,347 118,538 118,400
Subordinated borrowings
60,289 60,248 60,206 60,165 60,124
Total borrowings
394,246 249,005 177,553 178,703 178,524
Other liabilities
78,676 75,596 66,062 58,605 58,018
Total liabilities
3,516,353 3,460,281 3,322,160 3,285,071 3,285,086
Total shareholders' equity
393,450 379,965 393,597 406,999 424,147
Total liabilities and shareholders' equity
$3,909,803 $3,840,246 $3,715,757 $3,692,070 $3,709,233
Net shares outstanding
15,083 15,066 15,026 15,013 15,001

BAR HARBOR BANKSHARES
CONSOLIDATED LOAN & DEPOSIT ANALYSIS - UNAUDITED

LOAN ANALYSIS

Annualized
Growth %

Dec 31, Sep 30, Jun 30, Mar 31, Dec 31, Quarter Year
(in thousands)
2022 2022 2022 2022 2021 to Date to Date
Commercial real estate
$1,495,452 $1,421,962 $1,331,860 $1,289,968 $1,210,580 21% 24%
Commercial and industrial
352,735 376,624 360,304 346,394 340,129 (25) 4
Paycheck Protection Program (PPP)
- - 170 1,126 6,669 - *
Total commercial loans
1,848,187 1,798,586 1,692,334 1,637,488 1,557,378 11 19
Total commercial loans, excluding PPP
1,848,187 1,798,586 1,692,164 1,636,362 1,550,709 11 19

Residential real estate
898,192 896,618 876,644 868,382 821,004 1 9
Consumer
100,855 100,822 100,816 96,876 98,949 - 2
Tax exempt and other
55,456 54,338 57,480 51,816 54,579 8 2
Total loans
$2,902,690 $2,850,364 $2,727,274 $2,654,562 $2,531,910 7% 15%

DEPOSIT ANALYSIS

Annualized
Growth %

Dec 31, Sep 30, Jun 30, Mar 31, Dec 31, Quarter Year
(in thousands)
2022 2022 2022 2022 2021 to Date to Date
Demand
$676,350 $700,218 $670,268 $653,471 $664,420 (14)% 2%
NOW
900,730 918,822 883,239 918,768 940,631 (8) (4)
Savings
664,514 669,317 663,676 658,834 628,670 (3) 6
Money market
478,398 513,075 499,456 424,750 389,291 (27) 23
Total non-maturity deposits
2,719,992 2,801,432 2,716,639 2,655,823 2,623,012 (12) 4
Total time deposits
323,439 334,248 361,906 391,940 425,532 (13) (24)
Total deposits
$3,043,431 $3,135,680 $3,078,545 $3,047,763 $3,048,544 (12)% -%

*Indicates ratios of 100% or greater.

BAR HARBOR BANKSHARES
CONSOLIDATED STATEMENTS OF INCOME - UNAUDITED

Three Months Ended Year Ended
December 31, December 31,
(in thousands, except per share data)
2022 2021 2022 2021
Interest and dividend income
Loans
$32,605 $22,746 $107,797 $95,236
Securities and other
5,551 3,776 18,729 15,568
Total interest and dividend income
38,156 26,522 126,526 110,804
Interest expense
Deposits
3,159 1,434 7,344 8,543
Borrowings
2,043 1,273 5,501 6,688
Total interest expense
5,202 2,707 12,845 15,231
Net interest income
32,954 23,815 113,681 95,573
Provision for credit losses
687 126 2,904 (1,302)
Net interest income after provision for credit losses
32,267 23,689 110,777 96,875
Non-interest income
Trust and investment management fee income
3,442 3,844 14,573 15,179
Customer service fees
3,683 3,470 14,791 13,212
Gain on sales of securities, net
- 890 53 2,870
Mortgage banking income
153 1,563 1,580 6,536
Bank-owned life insurance income
499 669 2,000 2,179
Customer derivative income
97 173 310 1,010
Other income
354 549 2,014 1,275
Total non-interest income
8,228 11,158 35,321 42,261
Non-interest expense
Salaries and employee benefits
12,900 11,842 48,657 47,117
Occupancy and equipment
4,321 4,105 17,575 16,356
Loss on sales of premises and equipment, net
75 515 10 378
Outside services
435 431 1,578 1,943
Professional services
490 556 1,612 1,756
Communication
263 205 880 912
Marketing
411 378 1,561 1,541
Amortization of intangible assets
233 233 932 940
Loss on debt extinguishment
- 1,083 - 2,851
Acquisition, conversion and other expenses
(90) (92) 266 1,667
Provision for unfunded commitments
1,413 (49) 1,758 177
Other expenses
4,184 3,714 16,424 14,870
Total non-interest expense
24,635 22,921 91,253 90,508
Income before income taxes
15,860 11,926 54,845 48,628
Income tax expense
3,348 2,160 11,288 9,329
Net income
$12,512 $9,766 $43,557 $39,299
Earnings per share:
Basic
$0.83 $0.65 $2.90 $2.63
Diluted
0.83 0.65 2.88 2.61
Weighted average shares outstanding:
Basic
15,073 14,993 15,040 14,969
Diluted
15,147 15,075 15,112 15,045

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

Dec 31, Sep 30, Jun 30, Mar 31, Dec 31,
(in thousands, except per share data)
2022 2022 2022 2022 2021
Interest and dividend income
Loans
$32,605 $27,940 $24,581 $22,671 $22,746
Securities and other
5,551 5,145 4,207 3,826 3,776
Total interest and dividend income
38,156 33,085 28,788 26,497 26,522
Interest expense
Deposits
3,159 1,801 1,195 1,189 1,434
Borrowings
2,043 1,374 1,074 1,010 1,273
Total interest expense
5,202 3,175 2,269 2,199 2,707
Net interest income
32,954 29,910 26,519 24,298 23,815
Provision for credit losses
687 1,306 534 377 126
Net interest income after provision for credit losses
32,267 28,604 25,985 23,921 23,689
Non-interest income
Trust and investment management fee income
3,442 3,548 3,829 3,754 3,844
Customer service fees
3,683 3,836 3,656 3,616 3,470
Gain on sales of securities, net
- 44 - 9 890
Mortgage banking income
153 315 488 624 1,563
Bank-owned life insurance income
499 496 504 501 669
Customer derivative income
97 58 137 18 173
Other income
354 526 347 787 549
Total non-interest income
8,228 8,823 8,961 9,309 11,158
Non-interest expense
Salaries and employee benefits
12,900 12,242 11,368 12,147 11,842
Occupancy and equipment
4,321 4,458 4,373 4,423 4,105
Loss (gain) on sales of premises and equipment, net
75 - 10 (75) 515
Outside services
435 393 410 340 431
Professional services
490 421 528 173 556
Communication
263 204 188 225 205
Marketing
411 518 369 263 378
Amortization of intangible assets
233 233 233 233 233
Loss on debt extinguishment
- - - - 1,083
Acquisition, conversion and other expenses
(90) 31 - 325 (92)
Provision for unfunded commitments
1,413 (26) 45 326 (49)
Other expenses
4,184 4,558 4,176 3,506 3,714
Total non-interest expense
24,635 23,032 21,700 21,886 22,921
Income before income taxes
15,860 14,395 13,246 11,344 11,926
Income tax expense
3,348 2,965 2,743 2,232 2,160
Net income
$12,512 $11,430 $10,503 $9,112 $9,766
Earnings per share:
Basic
$0.83 $0.76 $0.70 $0.61 $0.65
Diluted
0.83 0.76 0.70 0.60 0.65
Weighted average shares outstanding:
Basic
15,073 15,058 15,018 15,011 14,993
Diluted
15,147 15,113 15,077 15,102 15,075

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

Quarters Ended
Dec 31, Sep 30, Jun 30, Mar 31, Dec 31,
2022 2022 2022 2022 2021
Earning assets





Interest-earning deposits with other banks
4.00% 2.13% 0.80% 0.16% 0.16%
Securities available for sale and FHLB stock
3.40 3.12 2.69 2.55 2.66
Loans:
Commercial real estate
4.81 4.26 3.82 3.50 3.40
Commercial and industrial
5.43 4.46 3.67 3.46 3.23
Paycheck protection program
- - 13.99 26.49 26.25
Residential real estate
3.63 3.45 3.55 3.55 3.61
Consumer
5.79 4.55 3.82 3.51 3.49
Total loans
4.56 4.04 3.71 3.54 3.58
Total earning assets
4.35% 3.84% 3.46% 3.21% 3.10%

Funding liabilities
Deposits:
NOW
0.22% 0.16% 0.14% 0.14% 0.14%
Savings
0.16 0.08 0.08 0.09 0.08
Money market
1.42 0.65 0.19 0.12 0.12
Time deposits
0.69 0.55 0.58 0.62 0.77
Total interest-bearing deposits
0.52 0.30 0.20 0.20 0.24
Borrowings
3.23 2.69 2.41 2.29 2.17
Total interest-bearing liabilities
0.78% 0.48% 0.36% 0.35% 0.41%

Net interest spread
3.57 3.36 3.10 2.86 2.69
Net interest margin, fully taxable equivalent (1)
3.76 3.47 3.19 2.95 2.79
Core net interest margin (1)
3.76 3.47 3.19 2.93 2.69

(1) Non-GAAP financial measure. Refer to the Reconciliation of Non-GAAP Financial Measures in tables I-J for additional information.

BAR HARBOR BANKSHARES
AVERAGE BALANCES - UNAUDITED

Quarters Ended
Dec 31, Sep 30, Jun 30, Mar 31, Dec 31,
(in thousands)
2022 2022 2022 2022 2021
Assets
Interest-earning deposits with other banks (1)
$26,360 $59,556 $63,317 $140,383 $325,260
Securities available for sale and FHLB stock (2)
641,787 642,475 637,881 629,811 578,323
Loans:
Commercial real estate
1,447,384 1,351,599 1,296,162 1,264,798 1,189,803
Commercial and industrial
403,304 421,963 412,518 393,759 386,156
Paycheck protection program
- 94 788 2,999 14,824
Residential real estate
897,637 882,158 863,172 856,252 844,872
Consumer
100,182 101,175 98,588 97,594 100,723
Total loans (3)
2,848,507 2,756,989 2,671,228 2,615,402 2,536,378
Total earning assets
3,516,654 3,459,020 3,372,426 3,385,596 3,439,961
Cash and due from banks
36,891 40,330 35,051 32,742 37,818
Allowance for credit losses
(25,497) (24,061) (23,228) (23,256) (22,525)
Goodwill and other intangible assets
125,391 125,626 126,090 126,090 126,324
Other assets
164,749 171,394 178,037 190,846 200,097
Total assets
$3,818,188 $3,772,309 $3,688,376 $3,712,018 $3,781,675
Liabilities and shareholders' equity
Deposits:
NOW
$899,388 $905,668 $893,239 $930,556 $913,326
Savings
664,016 668,255 657,047 640,672 620,599
Money market
501,564 491,683 457,088 414,130 395,341
Time deposits
334,297 349,787 375,782 406,730 450,559
Total interest-bearing deposits
2,399,265 2,415,393 2,383,156 2,392,088 2,379,825
Borrowings
251,263 202,296 178,519 178,958 232,492
Total interest-bearing liabilities
2,650,528 2,617,689 2,561,675 2,571,046 2,612,317
Non-interest-bearing demand deposits
703,471 690,134 661,412 660,717 684,895
Other liabilities
74,276 71,934 67,069 64,619 61,480
Total liabilities
3,428,275 3,379,757 3,290,156 3,296,382 3,358,692
Total shareholders' equity
389,913 392,552 398,220 415,636 422,983
Total liabilities and shareholders' equity
$3,818,188 $3,772,309 $3,688,376 $3,712,018 $3,781,675

(1) Total average interest-bearing deposits with other banks is net of Federal Reserve daily cash letter.
(2) Average balances for securities available-for-sale are based on amortized cost.
(3) Total average loans include non-accruing loans and loans held for sale.

BAR HARBOR BANKSHARES
ASSET QUALITY ANALYSIS - UNAUDITED

At or for the Quarters Ended
Dec 31, Sep 30, Jun 30, Mar 31, Dec 31,
(in thousands)
2022 2022 2022 2022 2021
NON-PERFORMING ASSETS
Non-accruing loans:





Commercial real estate
$1,222 $1,587 $1,483 $1,633 $2,890
Commercial installment
264 348 632 905 1,056
Residential real estate
4,151 4,858 4,882 5,612 5,192
Consumer installment
911 981 881 1,063 1,053
Total non-accruing loans
6,548 7,774 7,878 9,213 10,191
Other real estate owned
- - - - -
Total non-performing assets
$6,548 $7,774 $7,878 $9,213 $10,191
Total non-accruing loans/total loans
0.23% 0.27% 0.29% 0.35% 0.40%
Total non-performing assets/total assets
0.17 0.20 0.21 0.25 0.27
PROVISION AND ALLOWANCE FOR CREDIT LOSSES
Balance at beginning of period
$25,018 $23,756 $23,190 $22,718 $22,448
Charged-off loans
(136) (85) (62) (83) (154)
Recoveries on charged-off loans
291 41 94 178 298
Net loans recovered (charged-off)
155 (44) 32 95 144
Provision for credit losses
687 1,306 534 377 126
Balance at end of period
$25,860 $25,018 $23,756 $23,190 $22,718
Allowance for credit losses/total loans
0.89% 0.88% 0.87% 0.87% 0.90%
Allowance for credit losses/non-accruing loans
395 322 300 252 223
NET LOAN RECOVERIES (CHARGE-OFFS)
Commercial real estate
$- $7 $59 $54 $216
Commercial installment
285 12 12 25 53
Residential real estate
(56) (5) 6 76 8
Consumer installment
(74) (58) (45) (60) (133)
Total, net
$155 $(44)$32 $95 $144
Net (recoveries) charge-offs (QTD annualized)/average loans
(0.02)% 0.01% -% (0.01)% (0.02)%
Net (recoveries) charge-offs (YTD annualized)/average loans
(0.01) - (0.01) (0.01) 0.01
DELINQUENT AND NON-ACCRUING LOANS/ TOTAL LOANS
30-89 Days delinquent
0.08% 0.09% 0.09% 0.22% 0.31%
90+ Days delinquent and still accruing
0.01 0.01 0.03 0.03 0.01
Total accruing delinquent loans
0.09 0.10 0.12 0.25 0.32
Non-accruing loans
0.23 0.27 0.29 0.35 0.40
Total delinquent and non-accruing loans
0.32% 0.37% 0.41% 0.60% 0.72%

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

At or for the Quarters Ended
Dec 31, Sep 30, Jun 30, Mar 31, Dec 31,
(in thousands)
2022 2022 2022 2022 2021
Net income
$12,512 $11,430 $10,503 $9,112 $9,766
Non-core items:
Gain on sale of securities, net
- (44) - (9) (890)
Loss (gain) on sale of premises and equipment, net
75 - 10 (75) 515
Loss on debt extinguishment
- - - - 1,083
Acquisition, conversion and other expenses
(90) 31 - 325 (92)
Income tax expense (1)
4 3 (2) (56) (144)
Total non-core items
(11) (10) 8 185 472
Core earnings (2)
(A)
$12,501 $11,420 $10,511 $9,297 $10,238
Net interest income
(B)
$32,954 $29,910 $26,519 $24,298 $23,815
Non-interest income
8,228 8,823 8,961 9,309 11,158
Total revenue
41,182 38,733 35,480 33,607 34,973
Gain on sale of securities, net
- (44) - (9) (890)
Total core revenue (2)
(C)
$41,182 $38,689 $35,480 $33,598 $34,083
Total non-interest expense
24,635 23,032 21,700 21,886 22,921
Non-core expenses:
(Loss) gain on sale of premises and equipment, net
(75) - (10) 75 (515)
Loss on debt extinguishment
- - - - (1,083)
Acquisition, conversion and other expenses
90 (31) - (325) 92
Total non-core expenses
15 (31) (10) (250) (1,506)
Core non-interest expense (2)
(D)
$24,650 $23,001 $21,690 $21,636 $21,415
Total revenue
41,182 38,733 35,480 33,607 34,973
Total non-interest expense
24,635 23,032 21,700 21,886 22,921
Pre-tax, pre-provision net revenue
$16,547 $15,701 $13,780 $11,721 $12,052
Core revenue (2)
41,182 38,689 35,480 33,598 34,083
Core non-interest expense (2)
24,650 23,001 21,690 21,636 21,415
Core pre-tax, pre-provision net revenue (2)
(U)
$16,532 $15,688 $13,790 $11,962 $12,668
(in millions)
Average earning assets
(E)
$3,517 $3,459 $3,372 $3,386 $3,440
Average paycheck protection program (PPP) loans
(R)
- - 1 3 15
Average earning assets, excluding PPP loans
(S)
3,517 3,459 3,371 3,383 3,425
Average assets
(F)
3,818 3,772 3,688 3,712 3,782
Average shareholders' equity
(G)
390 393 398 416 423
Average tangible shareholders' equity (2) (3)
(H)
265 267 272 290 297
Tangible shareholders' equity, period-end (2) (3)
(I)
268 254 268 281 298
Tangible assets, period-end (2) (3)
(J)
3,785 3,715 3,587 3,566 3,583

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

At or for the Quarters Ended
Dec 31, Sep 30, Jun 30, Mar 31, Dec 31,
(in thousands)
2022 2022 2022 2022 2021
Common shares outstanding, period-end
(K) 15,083 15,066 15,026 15,013 15,001
Average diluted shares outstanding
(L) 15,147 15,113 15,077 15,102 15,075
Core earnings per share, diluted (2)
(A/L)$0.83 $0.76 $0.70 $0.62 $0.68
Tangible book value per share, period-end (2)
(I/K) 17.78 16.89 17.83 18.72 19.86
Securities adjustment, net of tax (1) (4)
(M) (55,246) (58,715) (38,304) (20,225) 1,985
Tangible book value per share, excluding securities adjustment (2) (4)
(I+M)/K 21.44 20.79 20.38 20.07 19.73
Tangible shareholders' equity/total tangible assets (2)
(I/J) 7.09 6.85 7.47 7.88 8.32
Performance ratios (5)
GAAP return on assets
1.30% 1.20% 1.14% 1.00% 1.02%
Core return on assets (2)
(A/F) 1.30 1.20 1.14 1.02 1.07
Pre-tax, pre-provision return on assets
1.72 1.65 1.50 1.28 1.26
Core pre-tax, pre-provision return on assets (2)
(U/F) 1.72 1.65 1.50 1.31 1.33
GAAP return on equity
12.73 11.55 10.58 8.89 9.16
Core return on equity (2)
(A/G) 12.72 11.54 10.59 9.07 9.60
Return on tangible equity
19.03 17.25 15.74 13.01 13.30
Core return on tangible equity (1) (2)
(A+Q)/H 19.02 17.24 15.76 13.27 13.93
Efficiency ratio (2) (6)
(D-O-Q)/(C+N) 58.19 57.67 59.25 62.40 60.74
Net interest margin, fully taxable equivalent (2)
(B+P)/E 3.76 3.47 3.19 2.95 2.79
Core net interest margin (2) (7)
(B+P-T)/S 3.76 3.47 3.19 2.93 2.69
Supplementary data (in thousands)
Taxable equivalent adjustment for efficiency ratio
(N)$520 $533 $491 $476 $573
Franchise taxes included in non-interest expense
(O) 149 149 144 141 132
Tax equivalent adjustment for net interest margin
(P) 365 379 334 320 369
Intangible amortization
(Q) 233 233 233 233 233
Interest and fees on PPP loans
(T) - - 27 196 981

(1) Assumes a marginal tax rate of 23.53% in the fourth quarter of 2022 and 23.41% for the previous four quarters.
(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) 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.
(7) Core net interest margin excludes Paycheck Protection Program loans.

SOURCE: Bar Harbor Bank and Trust

Topic:
Earnings
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