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Bar Harbor Bank and Trust

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Bar Harbor Bankshares Reports Second Quarter Results; Declares Dividend

BAR HARBOR, ME / ACCESSWIRE / July 21, 2021 / Bar Harbor Bankshares (NYSE American:BHB) reported second quarter 2021 net income of $9.0 million or $0.60 per share from $8.5 million or $0.55 per share in the same quarter of 2020, an increase of 9% in earnings per share. Core earnings (non-GAAP) were $9.4 million, or $0.63 per share, compared to $8.6 million, or $0.56 per share for the same periods. Non-core items (non-GAAP) reduced net income in the second quarter 2021 by $384 thousand, or $0.02 per share.

SECOND QUARTER FINANCIAL HIGHLIGHTS (compared to the second quarter 2020, unless otherwise noted)

  • 9% growth in earnings per share, 13% growth in core earnings (non-GAAP)
  • 0.97% return on assets; 1.01% core return on assets (non-GAAP)
  • 8% annualized total commercial loan growth, excluding PPP loans
  • 14% annualized increase in core deposits
  • 13% increase in fee income
  • Exceptional credit quality

President and Chief Executive Officer, Curtis C. Simard stated, "We had another quarter of double-digit core earnings growth and core return on assets of over 1.00%. Profitability increased on higher fee income driven from growth in core deposits and assets under management (AUM). Customer service income returned to pre-pandemic levels suggesting a potentially meaningful recovery in regional activity, augmented by a lift from our previously announced fee strategies implemented at the start of this year. The 8% annualized growth in commercial loans during the quarter, excluding PPP, reflects our commitment to meeting the needs of our existing customers and developing new relationships as we navigate past PPP activities. Our Wealth Management business continues to be a significant contributor to total non-interest income while our Retail and Commercial loan teams continue to generate new core deposit accounts, especially in DDA categories. More than 1,000 new banking relationships were created in the second quarter, highlighting both existing customer retention efforts and new customer initiatives. With the increase in mortgage rates late in the first quarter, we chose to opportunistically add balances to the balance sheet which helped stem the attrition. However, a focus on IRR management remains top of mind."

Mr. Simard continued, "We continued to organically grow our capital levels expanding tangible equity to tangible assets (non-GAAP) to 8.23%, while maintaining exceptional credit quality. All credit metrics remain strong and further improved in the quarter, primarily marked by lower past dues, minimal net charge-offs and improved coverage ratios. Overall, we continue to see favorable migration in risk ratings across most loan categories. Loan modification concessions made during the pandemic have essentially all resumed normal repayment schedules as of the end of the quarter."

Mr. Simard stated, "As we think about net interest margin (NIM) quarter over quarter, the second quarter had substantially less PPP fee acceleration and was further impacted by the excess cash on hand. Of note, $105 million of wholesale deposits matured on the last day of the quarter which will benefit our cost of funds going forward. We are starting to see a leveling off of NIM, excluding non-recurring items, as reliance on wholesale borrowings continues to be reduced and DDA growth continues. Given our overall asset sensitive balance sheet position and a more core-funded profile, we are well positioned for when rates start to move back up. Excluding the effects of one-time items, our second quarter NIM was 2.95% compared with the same adjusted metric of 2.86% in the first quarter 2021."

Mr. Simard commented, "In the first quarter, we announced the initiation of a comprehensive review of our non-interest expenses which included an annual reduction to salary and benefits of more than $3.0 million, along with additional cost savings associated with vendor contracts and process efficiencies. While some savings have been immediately realized in our second quarter run-rates, others will be phased in depending on contract timelines. As we continue to resume business-as-usual activities, we are also rolling out cost containment initiatives to absorb any potential increases associated with pandemic-delayed expenses. Lastly, we evaluate profitability at each branch within our footprint, at least annually, taking into consideration the unique geography of Northern New England and our customer needs."

Mr. Simard concluded, "As we move into the second half of the year, we are encouraged by an improving economic outlook and better operating conditions. Our collective resilience has prepared and positioned us to move forward with the same resolve that has sustained us throughout the pandemic. We have a unique complementary footprint that is enabling us to utilize all earnings levers that align with our model and strategy. We look forward to continuing to serve our customers and communities in the way they are accustomed to."

DIVIDEND DECLARED
The Board of Directors voted to declare a cash dividend of $0.24 per share to shareholders of record at the close of business on August 17, 2021, payable on September 17, 2021. This dividend equates to a 3.35% annualized yield based on the $28.62 closing price of the Company's common stock at the end of the second quarter of 2021.

FINANCIAL CONDITION
Total assets were $3.6 billion at the end of the second quarter as the Company leveraged excess cash liquidity to reduce maturing brokered deposits of $104.7 million during the quarter. Loans decreased $35.5 million during the quarter, or 6% on an annualized basis, primarily due to PPP loan forgiveness and prepayments on residential loans.

During the quarter we developed 76 new commercial relationships, resulting in commercial real estate loan growth of 6% on an annualized basis and commercial and industrial loan growth 13% on an annualized basis, exclusive of PPP loans. PPP loan balances totaled $65.9 million at quarter-end, consisting of $62.7 million of 2021 originations and $3.2 million from 2020. Unearned deferred fee balances on PPP loans totaled $3.7 million at the end of the quarter. These balances are expected to be realized through early 2022. COVID loan modifications totaled $19.0 million, down from $43.0 million at the end of the first quarter 2021, as 97% of modified loans have resumed normal payment schedules. Total residential loans decreased $47.5 million, which includes $84.0 million of originations, $56.0 million of sales in the secondary market and $75.5 million of prepayments/amortization. Total originations during the quarter included $51.0 million that was sold on the secondary market and $33.0 million that was recorded on the balance sheet.

The allowance for credit losses decreased to $22.8 million during the second quarter due to stronger economic forecasts, offset by changes in overall loan mix. Net charge offs totaled $73 thousand, or less than 0.01% of the total loan portfolio, and non-accruing loans decreased to $13.6 million, or 0.54% of the total loans. The ratio of past due loans to total loans improved to 0.15% of total loans at June 30, 2021, decreasing from 0.44% in the first quarter of 2021. Commercial past due loans totaled $1.9 million at quarter end, which is the lowest level since 2016 when the portfolio was approximately 36% of its current size.

Total deposits decreased $90.0 million to $2.8 billion during the quarter, due to lower time deposits, offset by significant growth in core deposits. Core deposits increased $77.8 million, or 14% on an annualized basis, during the quarter. Over 1,000 new customer relationships were added in the quarter. Time deposits decreased $167.7 million during the quarter, primarily due to $104.7 million of brokered deposits not being replaced upon maturity due to excess liquidity. Retail time deposits decreased $63.0 million as customers moved funds to transactional accounts upon contractual maturity.

The Company's book value per share was $27.76 at June 30, 2021, compared with $27.13 at the end of the first quarter 2021. Tangible book value per share (non-GAAP measure) was $19.30 at the end of the second quarter 2021, compared to $18.64 at the end of the first quarter 2021, equating to an annualized growth rate of 14%. Other comprehensive income included unrealized gains on securities totaling $7.2 million in the second quarter 2021 compared to $4.5 million at the end of the first quarter 2021.

RESULTS OF OPERATIONS
Net income in the second quarter 2021 was $9.0 million, or $0.60 per share, compared to $8.5 million, or $0.55 per share, in the same quarter of 2020. Net income benefited from higher fee income and a credit provision recapture in the quarter. Core earnings totaled $9.4 million or $0.63 per share, compared to $8.6 million, or $0.56 per share, in the same quarter of 2020. Non-core items (non-GAAP) reduced net income by $384 thousand and $119 thousand in second quarters of 2021 and 2020, respectively.

Net interest margin equaled 2.74% compared to 2.93% in the same period of 2020. PPP loans contributed 7 basis points to NIM during the quarter as the majority of the remaining 2020 originations were forgiven. Accretion on PPP loans originated in 2021 are not expected to materially affect NIM until loans are forgiven starting in the third quarter 2021. Interest-bearing cash balances, held mostly at the Federal Reserve Bank, reduced NIM by 19 basis points. The yield on earning assets totaled 3.26% compared to 3.73% in the second quarter 2020. Excluding the impact of PPP and excess cash, the yield on earning assets totaled 3.44% and 3.98% for the same periods. Costs of funds decreased to 0.66% from 0.96% in the second quarter 2020 due to lower deposit rates and reductions to wholesale funding afforded by significant growth in core deposits. Brokered deposits that matured during second quarter carried 9 basis points of the total funding cost.

The provision for credit losses for the quarter was a benefit of $765 thousand, compared to an expense of $1.4 million in the second quarter of 2020. The provision recapture in the second quarter 2021 is attributable to improving economic forecasts and strong credit quality, offset by shifts in our loan mix.

Non-interest income in the second quarter 2021 equaled $9.5 million, compared to $9.7 million in the same quarter of 2020. Non-interest income, excluding gain on sales of securities, increased 13% on higher customer service fees, wealth management income, and gains on loan sales. Wealth management income increased 20% over the same quarter of 2020 as assets under management increased to $2.4 billion or 12% compared to the same period of 2020. Customer service fees increased $818 thousand compared to the second quarter of 2020 as customer activity and transactions now exceed pre-pandemic levels. Mortgage banking activities continue to contribute a significant amount of fee income, increasing to $1.6 million, compared to $1.1 million in the same period of 2020.

Non-interest expense improved to $21.7 million in the second quarter 2021 from $22.3 million in the same quarter of 2020. Salaries and benefits expense decreased 5% due to implementing workforce reduction programs at the beginning of the second quarter. Non-core expenses (non-GAAP) in the second quarter 2021 totaled $553 thousand and were mostly one-time reduction in workforce. In the same quarter of 2020 non-core expenses (non-GAAP) totaled $1.5 million and included costs to consolidate our wealth management systems and a loss on debt extinguishment.

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, 2020 and any subsequently filed Quarterly Reports on Form 10-Q. 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
INDEXCONSOLIDATED FINANCIAL SCHEDULES (UNAUDITED)
ASelected Financial Highlights
BFootnotes to Selected Financial Highlights
CBalance Sheets
DLoan and Deposit Analysis
EStatements of Income
FStatements of Income (Five Quarter Trend)
GAverage Yields and Costs
HAverage Balances
IAsset Quality Analysis
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
Jun 30, Mar 31, Dec 31, Sep 30, Jun 30,
2021 2021 2020 2020 2020
PER SHARE DATA





Net earnings, diluted
$0.60 $0.63 $0.58 $0.56 $0.55
Core earnings, diluted (1) (2)
0.63 0.68 0.62 0.61 0.56
Total book value
27.76 27.13 27.58 27.09 26.56
Tangible book value (2)
19.30 18.64 19.05 18.56 18.18
Market price at period end
28.62 29.42 22.59 20.55 22.39
Dividends
0.24 0.22 0.22 0.22 0.22
PERFORMANCE RATIOS (3)
Return on assets
0.97% 1.03% 0.92% 0.88% 0.90%
Core return on assets (1) (2)
1.01 1.11 0.98 0.96 0.91
Pre-tax, pre-provision return on assets
1.13 1.22 1.30 1.29 1.27
Core pre-tax, pre-provision return on assets (1) (2)
1.18 1.32 1.38 1.39 1.29
Return on equity
8.76 9.45 8.39 8.22 8.40
Core return on equity (1) (2)
9.13 10.13 8.95 8.98 8.52
Return on tangible equity
12.88 14.01 12.45 12.24 12.55
Core return on tangible equity (1) (2)
13.42 15.00 13.27 13.36 12.72
Net interest margin, fully taxable equivalent (FTE) (2) (4)
2.74 2.88 3.02 2.90 2.93
Core net interest margin (1) (2) (5)
2.67 2.78 2.79 2.89 2.92
Efficiency ratio (2)
63.45 61.95 61.98 59.47 60.67
ORGANIC GROWTH (Year-to-date, annualized) (2)
Total commercial loans
9% 14% 17% 27% 33%
Total loans
(4) (2) (3) 3 5
Total deposits
(6) 1 8 12 (0)
FINANCIAL DATA (In millions)
Total assets
$3,640 $3,730 $3,726 $3,860 $3,780
Total earning assets (6)
3,274 3,371 3,360 3,496 3,414
Total investments
636 641 599 619 662
Total loans
2,516 2,551 2,563 2,685 2,706
Allowance for credit losses
23 24 19 18 17
Total goodwill and intangible assets
127 127 127 127 128
Total deposits
2,822 2,912 2,906 2,935 2,695
Total shareholders' equity
416 406 411 404 404
Net income
9 9 9 8 8
Core earnings (1) (2)
9 10 9 9 9
ASSET QUALITY AND CONDITION RATIOS
Net charge-offs (current quarter annualized)/average loans
0.01% 0.03% 0.03% 0.06% 0.02%
Allowance for credit losses/total loans
0.91 0.93 0.74 0.67 0.61
Loans/deposits
89 88 88 91 100
Shareholders' equity to total assets
11.42 10.87 11.04 10.48 10.69
Tangible shareholders' equity to tangible assets
8.23 7.73 7.90 7.42 7.57

(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) Core net interest margin excludes Paycheck Protection Program loans.
(6) Earning assets includes non-accruing loans and interest-bearing deposits with other banks. Securities are valued at amortized cost.

BAR HARBOR BANKSHARES

CONSOLIDATED BALANCE SHEETS - UNAUDITED

Jun 30, Mar 31, Dec 31, Sep 30, Jun 30,
(in thousands)
2021 2021 2020 2020 2020
Assets





Cash and due from banks
$41,440 $39,039 $27,566 $22,722 $24,430
Interest-bearing deposits with other banks
132,278 184,473 198,441 192,935 46,243
Total cash and cash equivalents
173,718 223,512 226,007 215,657 70,673
Securities available for sale
621,849 626,403 585,046 604,529 641,574
Federal Home Loan Bank stock
14,145 14,826 14,036 13,975 20,265
Total securities
635,994 641,229 599,082 618,504 661,839
Loans held for sale
7,942 10,148 23,988 23,721 22,979
Total loans
2,515,560 2,551,064 2,562,885 2,684,970 2,706,438
Less: Allowance for credit losses
(22,815) (23,653) (19,082) (17,907) (16,509)
Net loans
2,492,745 2,527,411 2,543,803 2,667,063 2,689,929
Premises and equipment, net
51,119 52,253 52,458 51,424 50,464
Other real estate owned
- - - 1,983 2,318
Goodwill
119,477 119,477 119,477 119,477 119,477
Other intangible assets
7,198 7,431 7,670 7,913 8,155
Cash surrender value of bank-owned life insurance
78,886 78,388 77,870 77,388 76,896
Deferred tax asset, net
4,349 5,639 1,745 2,180 2,451
Other assets
68,247 64,742 73,662 74,400 75,084
Total assets
$3,639,675 $3,730,230 $3,725,762 $3,859,710 $3,780,265
Liabilities and shareholders' equity
Demand and other non-interest bearing deposits
$599,598 $586,487 $544,636 $515,064 $504,325
NOW deposits
802,681 761,817 738,849 706,048 642,908
Savings deposits
578,361 560,095 521,638 511,938 466,668
Money market deposits
371,075 365,507 402,731 388,356 402,835
Time deposits
470,758 638,436 698,361 813,509 678,126
Total deposits
2,822,473 2,912,342 2,906,215 2,934,915 2,694,862
Senior borrowings
279,991 292,210 276,062 385,472 546,863
Subordinated borrowings
60,042 60,003 59,961 59,920 59,879
Total borrowings
340,033 352,213 336,023 445,392 606,742
Other liabilities
61,597 60,094 72,183 74,958 74,487
Total liabilities
3,224,103 3,324,649 3,314,421 3,455,265 3,376,091
Total common shareholders' equity
415,572 405,581 411,341 404,445 404,174
Total liabilities and shareholders' equity
$3,639,675 $3,730,230 $3,725,762 $3,859,710 $3,780,265
Net shares outstanding
14,972 14,950 14,916 14,929 15,214

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)
2021 2021 2020 2020 2020 End Date
Commercial real estate
$1,135,857 $1,118,669 $1,084,381 $1,045,635 $982,070 6% 9%
Commercial and industrial
327,729 317,500 323,864 324,647 340,898 13 2
Paycheck Protection Program (PPP)
65,918 77,878 53,774 131,537 131,626 (61) 45
Total commercial loans
1,529,504 1,514,047 1,462,019 1,501,819 1,454,594 4 9
Total commercial loans, excluding PPP
1,463,586 1,436,169 1,408,245 1,370,282 1,322,968 8 8
Residential real estate
822,774 868,084 923,891 997,485 1,060,729 (21) (22)
Consumer
103,589 106,835 113,544 119,340 124,197 (12) (18)
Tax exempt and other
59,693 62,098 63,431 66,326 66,918 (15) (12)
Total loans
$2,515,560 $2,551,064 $2,562,885 $2,684,970 $2,706,438 (6)% (4)%

DEPOSIT ANALYSIS






Annualized
Growth %
Jun 30, Mar 31, Dec 31, Sep 30, Jun 30, Quarter Year to
(in thousands)
2021 2021 2020 2020 2020 End Date
Demand
$599,598 $586,487 $544,636 $515,064 $504,325 9% 20%
NOW
802,681 761,817 738,849 706,048 642,908 21 17
Savings
578,361 560,095 521,638 511,938 466,668 13 22
Money market
371,075 365,507 402,731 388,356 402,835 6 (16)
Total non-maturity deposits
2,351,715 2,273,906 2,207,854 2,121,406 2,016,736 14 13
Total time deposits
470,758 638,436 698,361 813,509 678,126 * (65)
Total deposits
$2,822,473 $2,912,342 $2,906,215 $2,934,915 $2,694,862 (12)% (6)%

*Indicates ratios of 100% or greater.

BAR HARBOR BANKSHARES

CONSOLIDATED STATEMENTS OF INCOME - UNAUDITED

Three Months Ended Six Months Ended
June 30, June 30,
(in thousands, except per share data)
2021 2020 2021 2020
Interest and dividend income




Loans
$23,191 $26,493 $47,396 $54,480
Securities and other
3,992 4,942 7,971 10,449
Total interest and dividend income
27,183 31,435 55,367 64,929
Interest expense
Deposits
2,603 4,548 5,554 10,568
Borrowings
1,826 2,297 3,637 5,208
Total interest expense
4,429 6,845 9,191 15,776
Net interest income
22,754 24,590 46,176 49,153
Provision for credit losses
(765) 1,354 (1,254) 2,465
Net interest income after provision for credit losses
23,519 23,236 47,430 46,688
Non-interest income
Trust and investment management fee income
3,801 3,159 7,467 6,528
Customer service fees
3,257 2,439 6,227 5,551
Gain on sales of securities, net
50 1,351 50 1,486
Mortgage banking income
1,553 1,124 4,123 1,581
Bank-owned life insurance income
498 496 1,016 1,033
Customer derivative income
86 513 496 1,101
Other income
260 628 374 851
Total non-interest income
9,505 9,710 19,753 18,131
Non-interest expense
Salaries and employee benefits
11,356 11,909 23,532 23,793
Occupancy and equipment
3,894 3,860 8,222 8,280
Loss (gain) on sales of premises and equipment, net
1 (2) 9 90
Outside services
533 442 965 976
Professional services
151 337 709 1,009
Communication
198 194 519 483
Marketing
534 282 824 670
Amortization of intangible assets
233 256 474 512
Loss on debt extinguishment
- 1,351 - 1,351
Acquisition, conversion and other expenses
552 158 1,441 261
Other expenses
4,272 3,479 7,520 7,200
Total non-interest expense
21,724 22,266 44,215 44,625
Income before income taxes
11,300 10,680 22,968 20,194
Income tax expense
2,275 2,199 4,463 3,992
Net income
$9,025 $8,481 $18,505 $16,202
Earnings per share:
Basic
$0.60 $0.55 $1.24 $1.05
Diluted
0.60 0.55 1.23 1.04
Weighted average shares outstanding:
Basic
14,965 15,424 14,950 15,500
Diluted
15,042 15,441 15,026 15,523

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)
2021 2021 2020 2020 2020
Interest and dividend income





Loans
$23,191 $24,205 $26,687 $25,918 $26,493
Securities and other
3,992 3,979 4,013 4,557 4,942
Total interest and dividend income
27,183 28,184 30,700 30,475 31,435
Interest expense
Deposits
2,603 2,951 3,606 3,869 4,548
Borrowings
1,826 1,811 1,732 1,941 2,297
Total interest expense
4,429 4,762 5,338 5,810 6,845
Net interest income
22,754 23,422 25,362 24,665 24,590
Provision for credit losses
(765) (489) 1,360 1,800 1,354
Net interest income after provision for credit losses
23,519 23,911 24,002 22,865 23,236
Non-interest income
Trust and investment management fee income
3,801 3,666 3,318 3,532 3,159
Customer service fees
3,257 2,970 2,890 2,886 2,439
Gain on sales of securities, net
50 - 3,959 - 1,351
Mortgage banking income
1,553 2,570 2,654 2,649 1,124
Bank-owned life insurance income
498 518 482 492 496
Customer derivative income
86 410 1,086 316 513
Other income
260 114 334 227 628
Total non-interest income
9,505 10,248 14,723 10,102 9,710
Non-interest expense
Salaries and employee benefits
11,356 12,176 13,318 11,809 11,909
Occupancy and equipment
3,894 4,328 4,192 4,279 3,860
Loss (gain) on sales of premises and equipment, net
1 8 (122) - (2)
Outside services
533 432 571 438 442
Professional services
151 558 572 479 337
Communication
198 321 194 215 194
Marketing
534 290 415 300 282
Amortization of intangible assets
233 241 256 256 256
Loss on debt extinguishment
- - - - 1,351
Acquisition, conversion and other expenses
552 889 4,849 691 158
Other expenses
4,272 3,248 3,571 3,952 3,479
Total non-interest expense
21,724 22,491 27,816 22,419 22,266
Income before income taxes
11,300 11,668 10,909 10,548 10,680
Income tax expense
2,275 2,188 2,269 2,146 2,199
Net income
$9,025 $9,480 $8,640 $8,402 $8,481
Earnings per share:
Basic
$0.60 $0.63 $0.58 $0.56 $0.55
Diluted
0.60 0.63 0.58 0.56 0.55
Weighted average shares outstanding:
Basic
14,965 14,934 14,909 15,079 15,424
Diluted
15,042 15,007 14,952 15,103 15,441

BAR HARBOR BANKSHARES

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

Quarters Ended
Jun 30, Mar 31, Dec 31, Sep 30, Jun 30,
2021 2021 2020 2020 2020
Earning assets





Interest-bearing deposits with other banks (1)
0.09% 0.09% 0.11% 0.09% 0.08%
Securities available for sale and FHLB stock
2.66 2.79 2.97 3.04 3.26
Loans:
Commercial real estate
3.54 3.68 3.74 3.81 4.11
Commercial and industrial
3.60 3.86 3.92 4.39 4.13
Paycheck protection program
5.56 8.12 11.56 3.18 3.34
Residential real estate
3.80 3.76 3.74 3.71 3.81
Consumer
3.44 3.56 3.65 3.42 3.81
Total loans
3.70 3.85 4.03 3.81 3.94
Total earning assets
3.26% 3.46% 3.65% 3.57% 3.73%
Funding liabilities
Deposits:
NOW
0.12% 0.14% 0.15% 0.14% 0.14%
Savings
0.10 0.13 0.13 0.13 0.15
Money market
0.12 0.14 0.14 0.16 0.40
Time deposits
1.37 1.44 1.64 1.69 1.94
Total interest-bearing deposits
0.45 0.51 0.61 0.66 0.81
Borrowings
2.12 2.16 1.83 1.60 1.51
Total interest-bearing liabilities
0.66% 0.72% 0.77% 0.82% 0.96%
Net interest spread
2.60 2.74 2.88 2.75 2.77
Net interest margin (1)
2.74 2.88 3.02 2.90 2.93
Core net interest margin (2)
2.67 2.78 2.79 2.89 2.92

(1) Income from interest-bearing deposits with other banks has been separated from securities and restated for prior periods to conform to the current period presentation.
(2) Core net interest margin excludes Paycheck Protection Program loans.

BAR HARBOR BANKSHARES

AVERAGE BALANCES - UNAUDITED

Quarters Ended
Jun 30, Mar 31, Dec 31, Sep 30, Jun 30,
(in thousands)
2021 2021 2020 2020 2020
Assets





Interest-bearing deposits with other banks (1)
$228,825 $176,728 $176,747 $92,066 $71,067
Securities available for sale and FHLB stock (2)
635,978 613,459 563,118 627,162 648,185
Loans:
Commercial real estate
1,122,831 1,099,937 1,059,574 1,012,194 952,264
Commercial and industrial
378,634 377,176 386,201 399,734 417,620
Paycheck protection program
76,701 65,149 91,109 131,605 104,740
Residential real estate
850,119 916,633 995,173 1,060,084 1,117,608
Consumer
104,851 109,802 115,876 121,248 126,413
Total loans (3)
2,533,136 2,568,697 2,647,933 2,724,865 2,718,645
Total earning assets
3,397,939 3,358,884 3,387,798 3,444,093 3,437,897
Cash and due from banks
21,414 23,221 22,473 36,521 43,165
Allowance for credit losses
(23,419) (24,822) (18,690) (17,028) (15,678)
Goodwill and other intangible assets
126,789 127,024 127,264 127,508 127,751
Other assets
223,369 232,477 237,424 223,316 213,986
Total assets
$3,746,092 $3,716,784 $3,756,269 $3,814,410 $3,807,121
Liabilities and shareholders' equity
Deposits:
NOW
$781,836 $749,100 $713,464 $677,706 $611,860
Savings
568,193 541,203 516,266 488,508 450,621
Money market
368,826 378,743 399,543 396,351 411,232
Time deposits
619,454 675,422 734,523 777,424 776,042
Total interest-bearing deposits
2,338,309 2,344,468 2,363,796 2,339,989 2,249,755
Borrowings
345,896 340,209 376,437 481,687 612,538
Total interest-bearing liabilities
2,684,205 2,684,677 2,740,233 2,821,676 2,862,293
Non-interest-bearing demand deposits
591,982 550,657 535,402 507,844 472,688
Other liabilities
56,630 74,646 71,119 78,072 66,302
Total liabilities
3,332,817 3,309,980 3,346,754 3,407,592 3,401,283
Total shareholders' equity
413,275 406,804 409,515 406,818 405,838
Total liabilities and shareholders' equity
$3,746,092 $3,716,784 $3,756,269 $3,814,410 $3,807,121

(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
Jun 30, Mar 31, Dec 31, Sep 30, Jun 30,
(in thousands)
2021 2021 2020 2020 2020
NON-PERFORMING ASSETS





Non-accruing loans:





Commercial real estate
$4,367 $4,664 $4,251 $4,714 $3,981
Commercial installment
1,370 1,534 1,466 1,820 1,790
Residential real estate
6,788 6,753 5,729 7,154 7,194
Consumer installment
1,054 1,118 742 720 1,023
Total non-accruing loans
13,579 14,069 12,188 14,408 13,988
Other real estate owned
- - - 1,983 2,318
Total non-performing assets
$13,579 $14,069 $12,188 $16,391 $16,306
Total non-accruing loans/total loans
0.54% 0.55% 0.48% 0.54% 0.52%
Total non-performing assets/total assets
0.37 0.38 0.33 0.42 0.43
PROVISION AND ALLOWANCE FOR CREDIT LOSSES
Balance at beginning of period
$23,653 $19,082 $17,907 $16,509 $15,297
Impact of CECL adoption
- 5,228 - - -
Charged-off loans
(239) (216) (297) (439) (220)
Recoveries on charged-off loans
166 48 112 37 78
Net loans charged-off
(73) (168) (185) (402) (142)
Provision for credit losses
(765) (489) 1,360 1,800 1,354
Balance at end of period
$22,815 $23,653 $19,082 $17,907 $16,509
Allowance for credit losses/total loans
0.91% 0.93% 0.74% 0.66% 0.60%
Allowance for credit losses/non-accruing loans
168 168 157 124 118
NET LOAN CHARGE-OFFS
Commercial real estate
$(105) $(131) $63 $(252) $71
Commercial installment
(7) 1 (228) (10) (155)
Residential real estate
88 (28) (21) 1 (20)
Consumer installment
(49) (10) 1 (141) (38)
Total, net
$(73) $(168) $(185) $(402) $(142)
Net charge-offs (QTD annualized)/average loans
0.01% 0.03% 0.03% 0.06% 0.02%
Net charge-offs (YTD annualized)/average loans
0.02 0.03 0.07 0.08 0.10
DELINQUENT AND NON-ACCRUING LOANS/ TOTAL LOANS
30-89 Days delinquent
0.13% 0.43% 0.58% 0.16% 0.28%
90+ Days delinquent and still accruing
0.02 0.01 - 0.08 0.04
Total accruing delinquent loans
0.15 0.44 0.58 0.24 0.32
Non-accruing loans
0.54 0.55 0.48 0.54 0.52
Total delinquent and non-accruing loans
0.69% 0.99% 1.06% 0.78% 0.84%

BAR HARBOR BANKSHARES

RECONCILIATION OF NON-GAAP FINANCIAL MEASURES AND SUPPLEMENTARY DATA - UNAUDITED



At or for the Quarters Ended
(in thousands)

Jun 30,
2021
Mar 31,
2021
Dec 31,
2020
Sep 30,
2020
Jun 30,
2020
Net income
$9,025 $9,480 $8,640 $8,402 $8,481
Non-core items:
(Gain) on sale of securities, net
(50) - (3,959) - (1,351)
Loss (gain) on sale of premises and equipment, net
1 8 (122) - (2)
(Gain) loss on other real estate owned
- - (11) 335 -
Loss on debt extinguishment
- - - - 1,351
Acquisition, conversion and other expenses
552 889 4,849 691 158
Income tax expense (1)
(119) (213) (179) (245) (37)
Total non-core items
384 684 578 781 119
Core earnings (2)
(A)$9,409 $10,164 $9,218 $9,183 $8,600


Net interest income
(B)$22,754 $23,422 $25,362 $24,665 $24,590
Non-interest income
9,505 10,248 14,723 10,102 9,710
Total Revenue

32,259 33,670 40,085 34,767 34,300
(Gain) on sale of securities, net
(50) - (3,959) - (1,351)
Total core revenue (2)
(C)$32,209 $33,670 $36,126 $34,767 $32,949


Total non-interest expense

21,724 22,491 27,816 22,419 22,266
Non-core expenses:

(Loss) gain on sale of premises and equipment, net
(1) (8) 122 - 2
Gain (loss) on other real estate owned
- - 11 (335) -
Loss on debt extinguishment
- - - - (1,351)
Acquisition, conversion and other expenses
(552) (889) (4,849) (691) (158)
Total non-core expenses
(553) (897) (4,716) (1,026) (1,507)
Core non-interest expense (2)
(D)$21,171 $21,594 $23,100 $21,393 $20,759


Total revenue
32,259 33,670 40,085 34,767 34,300
Total non-interest expense
21,724 22,491 27,816 22,419 22,266
Pre-tax, pre-provision net revenue
$10,535 $11,179 $12,269 $12,348 $12,034


Core revenue

32,209 33,670 36,126 34,767 32,949
Core non-interest expense
21,171 21,594 23,100 21,393 20,759
Core pre-tax, pre-provision net revenue
(U)$11,038 $12,076 $13,026 $13,374 $12,190


(in millions)

Average earning assets
(E)$3,398 $3,359 $3,388 $3,444 $3,438
Average paycheck protection program (PPP) loans
(R) 77 65 91 132 105
Average earning assets, excluding PPP loans
(S) 3,321 3,294 3,297 3,312 3,333
Average assets
(F) 3,746 3,717 3,756 3,814 3,807
Average shareholders' equity
(G) 413 407 410 407 406
Average tangible shareholders' equity (2) (3)
(H) 287 280 282 279 278
Tangible shareholders' equity, period-end (2) (3)
(I) 289 279 284 277 277
Tangible assets, period-end (2) (3)
(J) 3,513 3,603 3,598 3,732 3,653


BAR HARBOR BANKSHARES

RECONCILIATION OF NON-GAAP FINANCIAL MEASURES AND SUPPLEMENTARY DATA - UNAUDITED


At or for the Quarters Ended
(in thousands)
Jun 30,
2021
Mar 31,
2021
Dec 31,
2020
Sep 30,
2020
Jun 30,
2020
Common shares outstanding, period-end
(K) 14,972 14,950 14,916 14,929 15,214
Average diluted shares outstanding
(L) 15,042 15,007 14,952 15,103 15,441

Core earnings per share, diluted (2)
(A/L) $0.63 $0.68 $0.62 $0.61 $0.56
Tangible book value per share, period-end (2)
(I/K) 19.30 18.64 19.05 18.56 18.18
Securities adjustment, net of tax (1) (4)
(M) 7,237 4,510 10,023 11,681 11,412
Tangible book value per share, excluding securities adjustment (2) (4)
(I+M)/K 18.81 18.34 18.38 17.78 17.43
Tangible shareholders' equity/total tangible assets (2)
(I/J) 8.22 7.73 7.90 7.42 7.57

Performance ratios (5)
GAAP return on assets
0.97% 1.03% 0.92% 0.88% 0.90%
Core return on assets (2)
(A/F) 1.01 1.11 0.98 0.96 0.91
Pre-tax, pre-provision return on assets
1.13 1.22 1.30 1.29 1.27
Core pre-tax, pre-provision return on assets (2)
(U/F) 1.18 1.32 1.38 1.39 1.29
GAAP return on equity
8.76 9.45 8.39 8.22 8.40
Core return on equity (2)
(A/G) 9.13 10.13 8.95 8.98 8.52
Return on tangible equity
12.88 14.01 12.45 12.24 12.55
Core return on tangible equity (1) (2)
(A+Q)/H 13.42 15.00 13.27 13.36 12.72
Efficiency ratio (2) (6)
(D-O-Q) /(C+N) 63.45 61.95 61.98 59.47 60.67
Net interest margin
(B+P)/E 2.74 2.88 3.02 2.90 3.04
Core net interest margin (2) (7)
(B+P-T)/S 2.67 2.78 2.79 2.89 2.92

Supplementary data (in thousands)
Taxable equivalent adjustment for efficiency ratio
(N) $586 $595 $542 $570 $646
Franchise taxes included in non-interest expense
(O) 128 125 117 121 120
Tax equivalent adjustment for net interest margin
(P) 430 433 396 416 490
Intangible amortization
(Q) 233 241 256 256 256
Interest and fees on PPP loans
(T) 1,064 1,304 2,648 1,052 869

(1) Assumes a marginal tax rate of 23.71% in the first and second quarter of 2021 and fourth quarter of 2020 and 23.87% for the first three quarters of 2020.
(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



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