U.S. Markets open in 35 mins

Bar Harbor Bankshares Reports Third Quarter Earnings

BAR HARBOR, Maine--(BUSINESS WIRE)--

Bar Harbor Bankshares (NYSE American: BHB) reported net income for third quarter 2018 of $9.0 million, or 58 cents per share, compared with $8.6 million, or 56 cents per share, in the same quarter of 2017.

THIRD QUARTER FINANCIAL HIGHLIGHTS

  • 14.3% annualized increase in non-maturity deposit accounts
  • 57.9% efficiency ratio (non-GAAP measure)
  • 1.01% return on average assets
  • 9.92% return on average equity
  • 10% annualized growth in tangible book value per share, excluding security adjustments (non-GAAP measure)

President and Chief Executive Officer, Curtis C. Simard stated, “Our third quarter was marked by yet another period of continued focus and execution of our strategies to grow profitability while remaining true to our risk management disciplines including credit. Our GAAP earnings per share this quarter equaled core earnings, which reflect our normalized operations. Tangible book value per share, excluding security adjustments, now exceeds pre-acquisition levels, which were accomplished within two years of the deal closing. We are committed to building long-term shareholder value, as evidenced by continued focus on non-maturity deposits and improvements in our return on assets, return on equity and efficiency ratios.”

“Commercial loans have grown 3% on a year-to-date annualized basis as our teams continue to gain market share within our regions. Commercial loan balances can fluctuate based on timing given some larger deals and a conscious effort to not over extend on terms for the sake of interim periods. We remain true to core banking and cultivating long-term relationships with our customers. Total deposit balances were up 3% on an annualized basis for the quarter including more than a 14% increase in non-maturity deposits. New deposit accounts opened totaled 3,212 for the third quarter and 9,211for the year.”

Mr. Simard went on to say, “We continue to focus on organic growth within our footprint as we expand further into our markets where we see the greatest opportunity to increase shareholder value. We are on track to open our new branch in Manchester, New Hampshire next month with plans for branches in Bedford, New Hampshire and Belfast, Maine next year. These de novo branches will help provide greater service and convenience to our existing customers and the opportunity to further expand our growing deposit base.”

“As you may have read in our press release earlier this month, we announced a strategic expansion with the development of a commercial loan office in Portland, Maine. This opportunity is about being fully engaged in an important commercial market within the state of Maine. We are already actively calling on the commercial accounts in Portland, and by having a physical presence in this market; we will be best positioned to service those needs. To that end, we also announced Daryl Wentworth and Joe Delano have joined our teams, two very seasoned and accomplished leaders in this market. Daryl and Joe combined have over 50 years of experience in both commercial real estate and commercial and industrial lending; they have been recognized as proven idea generators in the middle market space for New England.”

Mr. Simard concluded, “Over the past few quarters we have further defined a culture that cares about our colleagues, customers and community. These ideals, combined with our existing model of balancing growth and earnings while following a steadfast commitment to risk management and controls have given rise to a catalyst for continued financial performance. The measures we have taken are essential to enhancing profitability and achieving our long-term goals. Together and as one team we are focused on providing first class service to our customers and we look forward to a strong close for the year in the fourth quarter.”

RESULTS OF OPERATIONS

Net income was up 5% to $9.0 million, or 58 cents per share, in the third quarter of 2018 compared to $8.6 million, or 56 cents per share, in the same quarter of 2017. Results in the prior year include a $346 thousand charge, or 1 cent per share reduction, from trailing acquisition and conversion costs.

Interest income totaled $32.2 million, up 7% on a year-over-year basis, and yields on loans and investments expanded eleven basis points in total. Net interest margin in the third quarter 2018 decreased to 2.81% from 3.06% in the prior year due to higher cost of funds driven by short-term interest rate hikes. That decrease included a lower contribution from tax-equivalency adjustments of six basis points over the prior year as a result of the lower federal statutory tax rate. The Company's loan to deposit ratio improved 3% over the prior year to 104 at the end of the third quarter. Total deposit growth of 3%, led by 14.3% growth in non-maturity balances, helped to reduce other higher funding cost realized as a result of recent rate increases.

The third quarter provision for loan losses was $643 thousand and exceeded net charge-offs, which follows the positive trend in all quarterly periods presented. Non-interest income increased to $7.1 million or 2.4% from the prior year primarily due to a $685 thousand gain from a partial sale of the Company’s ownership interest in Visa Class B shares. Non-interest expense increased to $17.9 million in the third quarter 2018 from $17.6 million in the same quarter of 2017. The increase is primarily due to higher salary and benefit expense related the build-up of the Company’s talent base with strategic hires. The decrease primarily relates to acquisition, conversion and other expenses, which totaled $70 thousand in 2018 and $346 thousand in 2017. The third quarter effective tax rate decreased to 18.8% in 2018 compared with 29.3% in the same quarter of 2017, reflecting a lower federal statutory tax rate.

FINANCIAL CONDITION

Total assets were $3.6 billion at the end of the third quarter 2018, up $20.0 million from the second quarter 2018. Loan balances in the third quarter 2018 were relatively flat with the second quarter with increases in residential products, which were offset by lower commercial loan balances due to higher prepayments and amortization. Asset quality improved during the third quarter with lower non-accrual loans due to activities associated with commercial workouts. Net loan charge-offs continue to be at historic lows and the ratio of credit losses to total loans improved to 0.54% at the end of the third quarter. The Company’s risk-based capital ratio for the third quarter 2018 is expected to be near 14.0% as tangible book value (non-GAAP measure) continued to expand on a quarter-over-quarter basis. Excluding the impact of securities fair value adjustments, earnings grew tangible book value per share (non-GAAP measure) to $17.22 from $16.81 in the second of quarter of 2018.

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 125 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.bhbt.com.

FORWARD LOOKING STATEMENTS

Certain statements 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, 2017. 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 adjusted earnings can be of substantial importance to the Company's results for any particular quarter or year. The Company's non-GAAP adjusted 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 adjusted earnings in evaluating operating trends, including components for adjusted revenue and expense. These measures exclude amounts which the Company views as unrelated to its normalized operations, including securities gains/losses, 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 adjusted earnings per share based on its measure of adjusted 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 adjusted earnings and adjusted 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.

         

TABLE
INDEX

      CONSOLIDATED FINANCIAL SCHEDULES (UNAUDITED)

A

     

Selected Financial Highlights

B

Footnotes to Selected Financial Highlights

C

Balance Sheets

D

Loan and Deposit Analysis

E

Statements of Income

F

Statements of Income (Five Quarter Trend)

G

Average Yields and Costs

H

Average Balances

I

Asset Quality Analysis

J

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

 
 
BAR HARBOR BANKSHARES
SELECTED FINANCIAL HIGHLIGHTS - UNAUDITED
 
At or for the Quarters Ended
  Sep 30,
2018
  Jun 30,
2018
  Mar 31,
2018
  Dec 31,
2017
  Sep 30,
2017
PER SHARE DATA
Net earnings, diluted $ 0.58 $ 0.55 $ 0.50 $ 0.43 $ 0.56
Core earnings, diluted (1) (2) 0.58 0.56 0.52 0.58 0.57
Total book value 23.06 22.97 22.78 22.96 22.90
Tangible book value (2) 16.11 16.00 15.78 15.94 15.84
Market price at period end 28.72 30.29 27.72 27.01 31.36
Dividends 0.20 0.20 0.19 0.19 0.19
 
PERFORMANCE RATIOS (3)
Return on assets 1.01 % 0.97 % 0.90 % 0.75 % 0.99 %
Core return on assets (1) (2) 1.01 1.00 0.93 1.02 1.01
Return on equity 9.92 9.65 9.01 7.35 9.67
Core return on equity (1) (2) 9.98 9.86 9.31 9.97 9.90
Core return on tangible equity (1) (2) 14.52 14.43 13.72 14.56 14.53
Net interest margin, fully taxable equivalent (FTE) (2) (4) 2.81 2.91 2.97 3.04 3.06
Net interest margin (FTE), excluding purchased loan accretion (2) (4) 2.71 2.80 2.85 2.93 2.93
Efficiency ratio (2) 57.88 58.83 60.44 53.02 53.53
 
GROWTH (Year-to-date, annualized) (2)
Total commercial loans 2.8 % 5.7 % 2.2 % 23.8 % 20.5 %
Total loans (0.1 ) (3.4 ) 13.1 12.2
Total deposits 2.2 1.9 (1.8 ) 14.4 10.6
 
FINANCIAL DATA (In millions)
Total assets $ 3,561 $ 3,541 $ 3,511 $ 3,565 $ 3,476
Total earning assets (5) 3,253 3,250 3,235 3,244 3,183
Total investments 747 749 757 755 756
Total loans 2,484 2,485 2,464 2,486 2,429
Allowance for loan losses 13 13 13 12 12
Total goodwill and intangible assets 108 108 108 108 109
Total deposits 2,390 2,375 2,341 2,352 2,275
Total shareholders' equity 358 356 352 355 353
Net income 9 9 8 7 9
Core income (1) (2) 9 9 8 9 9
 
ASSET QUALITY AND CONDITION RATIOS
Net charge-offs (current quarter annualized)/average loans 0.04 % 0.06 % 0.07 % 0.04 % 0.03 %
Allowance for loan losses/total loans 0.54 0.53 0.51 0.50 0.49
Loans/deposits 104 105 105 106 107
Shareholders' equity to total assets 10.04 10.05 10.03 9.95 10.17
Tangible shareholders' equity to tangible assets   7.24     7.22     7.17     7.12     7.26  

_____________________________________
(1) Core measurements are non-GAAP financial measures that are adjusted to exclude net non-operating charges primarily related to acquisitions, system conversions and gain on sale of securities. 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 annualized and are based on average balance sheet amounts, where applicable.
(4) Fully taxable equivalent considers the impact of tax-advantaged investment securities and loans.
(5) Earning assets includes non-accruing loans and securities are valued at amortized cost.

 
BAR HARBOR BANKSHARES
CONSOLIDATED BALANCE SHEETS - UNAUDITED
         
(in thousands) Sep 30,
2018
Jun 30,
2018
Mar 31,
2018
Dec 31,
2017
Sep 30,
2017
Assets
Cash and due from banks $ 53,154 $ 39,327 $ 35,088 $ 34,262 $ 31,223
Interest-bearing deposits with the Federal Reserve Bank 19,420   22,066   12,725   56,423   17,501  
Total cash and cash equivalents 72,574 61,393 47,813 90,685 48,724
Securities available for sale, at fair value 712,658 710,147 718,559 717,242 718,459
Federal Home Loan Bank stock 34,154   38,712   38,105   38,105   37,107  
Total securities 746,812 748,859 756,664 755,347 755,566
Commercial real estate 840,018 838,546 824,721 826,746 793,572
Commercial and industrial 385,814 400,293 387,205 379,423 357,072
Residential real estate 1,140,519 1,127,895 1,132,977 1,155,682 1,152,628
Consumer 117,239   118,332   119,516   123,762   125,590  
Total loans 2,483,590 2,485,066 2,464,419 2,485,613 2,428,862
Less: Allowance for loan losses (13,487 ) (13,090 ) (12,679 ) (12,325 ) (11,950 )
Net loans 2,470,103 2,471,976 2,451,740 2,473,288 2,416,912
 
Premises and equipment, net 47,621 48,038 48,464 47,708 48,309
Other real estate owned 68 129 216 122 122
Goodwill 100,085 100,085 100,085 100,085 100,255
Other intangible assets 7,690 7,921 8,152 8,383 8,811
Cash surrender value of bank-owned life insurance 73,316 58,811 58,433 57,997 57,613
Deferred tax asset, net 11,527 10,309 9,627 7,180 13,052
Other assets 31,196   33,534   29,793   24,389   26,368  
Total assets $ 3,560,992   $ 3,541,055   $ 3,510,987   $ 3,565,184   $ 3,475,732  
 
Liabilities and shareholders' equity
Demand and other non-interest bearing deposits $ 372,358 $ 341,773 $ 342,192 $ 349,055 $ 357,398
NOW deposits 471,326 449,715 448,992 466,610 442,085
Savings deposits 354,908 350,339 361,591 364,799 373,118
Money market deposits 254,142 260,642 303,777 305,275 300,398
Time deposits 937,615   972,252   884,848   866,346   802,110  
Total deposits 2,390,349 2,374,721 2,341,400 2,352,085 2,275,109
 
Senior borrowings 739,224 735,924 742,198 786,688 775,582
Subordinated borrowings 42,988   43,003   43,018   43,033   43,048  
Total borrowings 782,212 778,927 785,216 829,721 818,630
 
Other liabilities 30,746   31,444   32,214   28,737   28,534  
Total liabilities 3,203,307 3,185,092 3,158,830 3,210,543 3,122,273
 
Total common shareholders' equity 357,685   355,963   352,157   354,641   353,459  
Total liabilities and shareholders' equity $ 3,560,992   $ 3,541,055   $ 3,510,987   $ 3,565,184   $ 3,475,732  
 
Net shares outstanding   15,509     15,496     15,459     15,443     15,432  
 
 
BAR HARBOR BANKSHARES
CONSOLIDATED LOAN & DEPOSIT ANALYSIS - UNAUDITED
 

LOAN ANALYSIS

           
Annualized Growth %
(in thousands)

Sep 30,
2018

Jun 30,
2018

Mar 31,
2018

Dec 31,
2017

Sep 30,
2017

Quarter
End

 

Year to
Date

Commercial real estate $ 840,018 $ 838,546 $ 824,721 $ 826,746 $ 793,572 0.7 % 2.1 %
Commercial and industrial 303,984   313,680   301,811   293,707   270,759   (12.4 ) 4.7  
Total commercial loans 1,144,002 1,152,226 1,126,532 1,120,453 1,064,331 (2.9 ) 2.8
Residential real estate 1,140,519 1,127,895 1,132,977 1,155,682 1,152,628 4.5 (1.8 )
Consumer 117,239 118,332 119,516 123,762 125,590 (3.7 ) (7.0 )
Tax exempt and other 81,830   86,613   85,394   85,716   86,313   (22.1 ) (6.0 )
Total loans   $ 2,483,590     $ 2,485,066     $ 2,464,419     $ 2,485,613     $ 2,428,862     (0.2 )%   (0.1 )%
 

DEPOSIT ANALYSIS

           
Annualized Growth %
(in thousands)

Sep 30,
2018

Jun 30,
2018
Mar 31,
2018
Dec 31,
2017
Sep 30,
2017

Quarter
End

 

Year to
Date

Demand $ 372,358 $ 341,773 $ 342,192 $ 349,055 $ 357,398 35.8 % 8.9 %
NOW 471,326 449,715 448,992 466,610 442,085 19.2 1.3
Savings 354,908 350,339 361,591 364,799 373,118 5.2 (3.6 )
Money Market 254,142   260,642   303,777   305,275   300,398   (10.0 ) (22.3 )
Total non-maturity deposits 1,452,734 1,402,469 1,456,552 1,485,739 1,472,999 14.3 (3.0 )
Total time deposits 937,615   972,252   884,848   866,346   802,110   (14.3 ) 11.0  
Total deposits   $ 2,390,349     $ 2,374,721     $ 2,341,400     $ 2,352,085     $ 2,275,109     2.6 %   2.2 %
 
 
BAR HARBOR BANKSHARES
CONSOLIDATED STATEMENTS OF INCOME - UNAUDITED
       

Three Months Ended
September 30,

Nine Months Ended
September 30,

(in thousands, except per share data) 2018 2017 2018 2017
Interest and dividend income
Loans $ 26,212 $ 24,661 $ 77,272 $ 70,081
Securities and other 5,972   5,402   17,407   15,832
Total interest and dividend income 32,184 30,063 94,679 85,913
Interest expense
Deposits 5,478 3,177 13,868 7,926
Borrowings 4,237   3,408   12,192   9,327
Total interest expense 9,715   6,585   26,060   17,253
Net interest income 22,469 23,478 68,619 68,660
Provision for loan losses 643   660   2,208   2,191
Net interest income after provision for loan losses 21,826   22,818   66,411   66,469
Non-interest income
Trust and investment management fee income 2,952 3,040 9,036 9,228
Insurance brokerage service income 329 1,020
Customer service fees 2,490 2,638 7,061 6,402
Gain on sales of securities, net 19 19
Bank-owned life insurance income 505 380 1,328 1,165
Other income 1,179   554   3,060   1,631
Total non-interest income 7,126   6,960   20,485   19,465
Non-interest expense
Salaries and employee benefits 10,331 9,617 31,695 30,065
Occupancy and equipment 3,366 2,700 9,364 8,195
Loss on sales of premises and equipment, net (1 ) 94
Outside services 456 907 1,597 2,220
Professional services 223 428 1,016 1,357
Communication 217 382 701 1,040
Amortization of intangible assets 207 212 621 603
Acquisition, conversion and other expenses 70 346 619 5,917
Other expenses 3,036   2,995   9,830   8,972
Total non-interest expense 17,906   17,586   55,443   58,463
 
Income before income taxes 11,046 12,192 31,453 27,471
Income tax expense 2,076   3,575   6,136   8,085
Net income   $ 8,970     $ 8,617     $ 25,317     $ 19,386
 
Earnings per share:
Basic $ 0.58 $ 0.56 $ 1.64 $ 1.27
Diluted $ 0.58 $ 0.56 1.63 1.27
 
Weighted average shares outstanding:
Basic 15,503 15,420 15,478 15,098
Diluted   15,580     15,511     15,564     15,204
 
null
 
BAR HARBOR BANKSHARES
CONSOLIDATED STATEMENTS OF INCOME (5 Quarter Trend) - UNAUDITED
         
(in thousands, except per share data) Sep 30,
2018
Jun 30,
2018
Mar 31,
2018
Dec 31,
2017
Sep 30,
2017
Interest and dividend income
Loans $ 26,212 $ 25,934 $ 25,126 $ 24,895 $ 24,661
Securities and other 5,972   5,784   5,651   5,261   5,402  
Total interest and dividend income 32,184 31,718 30,777 30,156 30,063
Interest expense
Deposits 5,478 4,405 3,985 3,381 3,177
Borrowings 4,237   4,321   3,634   3,279   3,408  
Total interest expense 9,715   8,726   7,619   6,660   6,585  
Net interest income 22,469 22,992 23,158 23,496 23,478
Provision for loan losses 643   770   795   597   660  
Net interest income after provision for loan losses 21,826   22,222   22,363   22,899   22,818  
Non-interest income
Trust and investment management fee income 2,952 3,122 2,962 3,042 3,040
Insurance brokerage service income 77 329
Customer service fees 2,490 2,347