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Bar Harbor Bankshares Reports Fourth Quarter Results

Thursday, 28 January 2021 06:11 PM

Bar Harbor Bank and Trust

Topic:
Earnings

BAR HARBOR, ME / ACCESSWIRE / January 28, 2021 / Bar Harbor Bankshares (NYSE American:BHB) reported fourth quarter 2020 net income of $8.6 million, or $0.58 per share, compared to $4.2 million, or $0.27 per share, in the same quarter of 2019. Core earnings (non-GAAP) in the fourth quarter 2020 increased to $9.2 million compared to $8.8 million in the fourth quarter of 2019, or increased 11% to $0.62 per share, compared to $0.56 per share, respectively. Non-core expenses (non-GAAP) in the fourth quarter 2020 included swap termination costs and profitability initiative costs while the same quarter of 2019 included acquisition, conversion and balance sheet optimization costs.

FOURTH QUARTER FINANCIAL HIGHLIGHTS

  • 11% annualized commercial loan growth, excluding paycheck protection program (PPP) loans
  • 3,200 new low cost core deposit accounts
  • 3.02% net interest margin
  • 0.92% return on assets; 0.98% core return on assets (non-GAAP)
  • 0.33% non-performing assets to total assets ratio
  • Fee income at 37% of total revenue; 30% of core revenue (non-GAAP)

President and Chief Executive Officer, Curtis C. Simard stated, "While this year has had unique challenges across the regional, national and international stages, we leaned on the culture and infrastructure we have established to support our customers, colleagues, and communities, while not abandoning balanced growth expectations across all business lines. We have proven our commitment to risk management as we safely navigated our operations during the pandemic with established protocols and availability to both customers and prospects alike. This risk management culture extended to increasing remote capabilities while also consistently assessing our credit exposure through quarterly stress testing and steady provisioning throughout the year. We understand our customers and their financial needs because our teams have been in the field helping them navigate the changing landscape. Commercial loans remain a leader of balance sheet growth for the quarter and for the year, guided by stress tested underwriting models we employ.

"Positive trends in credit quality during the year continue to affirm our disciplined approach. By year-end, we had lower levels of non-performing loans, significant improvement in past due and deferred commercial loan accounts and we settled all of our other real estate owned at their carrying values. During the fourth quarter, we expanded stress testing of our commercial loans, including the most watched industries of our footprint specifically hospitality, which demonstrated a better than expected summer tourism season for Northern New England. Results of testing included no significant risk-rating downgrades or changes to reserves. Borrowers with COVID loan modifications continue to demonstrate their repayment capacity and/or have sufficient cash reserves to service their pre-forbearance loans without further government stimulus.

"Fee income continues to be a big part of total revenue for the fourth quarter and for the year 2020. Customer service fees have almost returned to pre-pandemic levels in the second half of the year and are expected to rise on an expanded customer base. Throughout the year we opted to sell our fixed rate residential mortgage production in the secondary market in lieu of taking interest rate and credit risk on our balance sheet. This strategy continues to produce significant fee revenue in the current rate environment. As we look forward, we will continue to take advantage of such opportunities while maintaining a focus on our commercial customer base given the associated loan and derivative fees as well as those generated in treasury and cross-sell to retail and wealth business lines. This demonstrated commitment to risk management enables us to confidently experience growth across Northern New England in the interest of diversification in markets, products, and customer type.

"During the fourth quarter, core deposits increased $86.4 million and our retail team opened an impressive 3,200 new accounts, raising the total to more than 13,250 for the year as we continue to reduce cost of funds and transition to a true franchise, core-operating institution. Excess liquidity generated in the quarter was used to further delever our balance sheet with an early pay-off of our PPP lending facility and other reductions to wholesale funding. We view that more favorably to absorbing duration or rate risk associated with securities investments or mortgage refinancing."

Mr. Simard continued, "We were prepared to adopt CECL as of the end of 2020, but elected to close our fourth quarter under the same accounting method and control environment as the rest of 2020. We will adopt January 1, 2021 to allow a more comparable quarterly presentation as we report in 2021. Had we adopted CECL at year end 2020, the loan loss reserve as a percentage of total loans would have been 95 basis points compared to 74 basis points reported under the incurred loss model. The 95 basis points may change in the first quarter of 2021 based primarily on any changes in economic forecasts.

Mr. Simard went on to say, "We are well poised to further help our communities with the second round of PPP loans authorized by the new stimulus bill. That process has begun for both first time PPP draws as well as for customers in need of second round PPP loans. For the remaining first round of PPP loans previously provided in 2020, we have $53.8 million that are pending various stages of forgiveness with $1.4 million of deferred fees. We expect the majority of remaining forgiveness to occur by the end of the second quarter 2021.

Mr. Simard further stated, "In the fourth quarter we continued our return of capital programs in the form of stock repurchases and dividend payments. Stock repurchases totaled 31 thousand shares at a cost of $625 thousand during the fourth quarter and 720 thousand shares at a cost of $13.9 million on a year to date basis. An additional 61 thousand shares are available to be repurchased before the end of March 2021. Last week we declared our first quarter dividend of $0.22 per share and we are committed to dividend policies as part of our efficient use of capital supported by expanding earnings."

Mr. Simard concluded, "Looking back on the last four years as we expanded into new areas of Northern New England, we have built amazing teams that quickly adapt to diversity and change with a commitment to a model of balancing growth with earnings across our markets. We are positioned for a solid start to 2021 as we continue to build on consistent, repeatable earnings while expanding our profitability metrics across all business lines."

FINANCIAL CONDITION

Total assets were $3.7 billion at the end of the fourth quarter compared to $3.9 billion in the third quarter of 2020. Loans in the fourth quarter decreased by $122.1 million largely due to $78.3 million in PPP loan forgiveness payments and $70.4 million in residential loan sales offset in part by growth in commercial real estate loans. As of year-end outstanding pandemic deferrals, which primarily consist of interest only forbearance, were $68.6 million or 3% of total loans, with residential loans representing $5.9 million of the total or less than 1% of total residential loans. Commercial real estate loan growth of $38.7 million consisted of over $90.0 million in new loans offset by principal payments during the quarter. Non-maturity deposits increased by $86.4 million in the quarter due to growth in new customer accounts combined with government stimulus programs and an overall decrease in consumer spending given current market conditions. Senior borrowings were reduced by $109.4 million primarily from the payoff of our PPP lending facility with the Federal Reserve Bank totaling $131.1 million offset by a shift from brokered deposits to FHLB borrowings.

We have elected to defer the implementation of the accounting standard known as CECL until January 1, 2021 as allowed by the Consolidated Appropriations Act, 2021. The effect of the CECL adoption to the allowance for loan losses and unfunded commitments is estimated to be a total of $6.8 million, which will flow entirely through equity net of deferred taxes.

The fourth quarter 2020 allowance for loan losses increased by $1.2 million, which includes a $1.4 million provision for loan loss offset by net charge-offs of $185 thousand. The allowance for loan losses to total loans ratio for the fourth quarter expanded to 0.74% from 0.66% in the third quarter 2020 based on an increased allowance for commercial loan growth and decrease in total loans. Non-accruing loans in the fourth quarter 2020 decreased $2.2 million primarily due to $1.6 million in payoffs during the quarter. The successful resolution in non-accruals combined with the sale of other real estate owned contributed to the improvement of the non-performing assets to total assets ratio of 0.33% from 0.42% in the prior quarter. The increase in 30-day past due accounts for the quarter is attributable to the payment schedules of residential loans and timing due to the quarter ending on a 31 day month. During the fourth quarter we performed stress testing of 54% of our commercial loan portfolio which included the top 50 relationships, all criticized loans greater than $1.0 million, hospitality loans greater than $250 thousand, all loans over $150 thousand with a pandemic modification and any seasonal payment, restaurant, or 2021 maturing term loans that are greater than $500 thousand. Results of the stress testing led to no significant downgrades or changes to reserves.

The Company's book value per share was $27.58 at year end 2020 compared with $27.09 at the end of the third quarter 2020. Tangible book value per share excluding security adjustments (non-GAAP) was $18.38 at the end of the fourth quarter 2020 compared to $17.78 at the end of the third quarter 2020, and $17.98 at the end of the third quarter 2019, prior to the central Maine branch acquisition.

RESULTS OF OPERATIONS

Net income in the fourth quarter 2020 was $8.6 million, or $0.58 per share, compared to $4.2 million, or $0.27 per share, in the same quarter of 2019. The non-GAAP measure of core earnings in the fourth quarter 2020 totaled $9.2 million or $0.62 per share, compared to $8.8 million, or $0.56 per share, in the same quarter of 2019. Net income benefited from an expanded net interest margin and higher non-interest income. Net interest margin in the fourth quarter 2020 increased to 3.02% from 2.94% in the same period of 2019 primarily due to a lower cost of funds and acceleration of PPP loan fee recognition upon forgiveness. Costs of funds decreased to 0.77% compared to 1.42% in the fourth quarter 2019 due to a shift in funding sources to core deposits. Cost of deposits and borrowings also benefited from the Federal Reserve rate cuts in 2020 and other key indexes in response to the pandemic.

Additionally, excess liquidity was used to pay off $520.4 million of wholesale funding since the fourth quarter of 2019 that further reduced interest expense. The yield on earning assets was 3.65% compared to 4.13% in the fourth quarter 2019 reflecting loan originations and repricing of variable rate products in a lower interest rate environment. The fourth quarter core net interest margin was 2.79% compared to 2.94% in the same period of 2019, which included a drag of 16 basis points and one basis point from excess liquidity, respectively.

Non-interest income in the fourth quarter 2020 was $14.7 million compared to $7.8 million in the same quarter in 2019. The increase is primarily due to a $2.1 million increase in mortgage banking income associated with secondary market sales of $70.4 million compared to $26.5 million in the same quarter of 2019. Customer derivative income increased $611 thousand in conjunction with commercial loan growth. We also took advantage of unrealized gains in the securities portfolio in the fourth quarter 2020 by selling certain investments for a net gain of $4.0 million.

Non-interest expense increased to $27.8 million in the fourth quarter 2020 from $26.8 million in the same quarter of 2019. The increase is primarily a result of higher salary and benefit expense due to additional year-end accruals for incentives on improved performance metrics and post-retirement plans on lower discount rates. Operating expenses remained controlled as the efficiency ratio (non-GAAP) improved to 61.98% from 62.56% for the same period a year ago. Non-core expenses (non-GAAP) in the fourth quarter of 2020 primarily consist a $4.0 million loss on termination of a $50.0 million swap on wholesale borrowings and $600 thousand of profitability initiative costs. Non-core expenses in the same quarter of 2019 include a $3.2 million loss on interest rate cap terminations and a $1.1 million loss on extinguishment of debt due to the inflow of liquidity from the 2019 acquisition.

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 "FOURTH QUARTER FINANCIAL HIGHLIGHTS", "FINANCIAL CONDITION" and "RESULTS OF OPERATIONS" contained in this document that are not historical facts may constitute forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended ("Securities Act"), and Section 21E of the Securities Exchange Act of 1934, as amended ("Exchange Act"), and are intended to be covered by the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. When used in this earnings release the words "may," "will," "should," "could," "would," "plan," "potential," "estimate," "project," "believe," "intend," "anticipate," "expect," "target" and similar expressions are intended to identify forward-looking statements, but these terms are not the exclusive means of identifying forward-looking statements. These forward-looking statements are subject to significant risks, assumptions and uncertainties, including among other things, changes in general economic and business conditions, increased competitive pressures, changes in the interest rate environment, legislative and regulatory change, changes in the financial markets, and other risks and uncertainties disclosed from time to time in documents that the Company files with the Securities and Exchange Commission, including but not limited to those discussed in the section titled "Risk Factors" in the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 2019. Because of these and other uncertainties, the Company's actual results, performance or achievements, or industry results, may be materially different from the results indicated by these forward-looking statements. In addition, the Company's past results of operations do not necessarily indicate future results. You should not place undue reliance on any of the forward-looking statements, which speak only as of the dates on which they were made. The Company is not undertaking an obligation to update forward-looking statements, even though its situation may change in the future, except as required under federal securities law. The Company qualifies all of its forward-looking statements by these cautionary statements.

NON-GAAP FINANCIAL MEASURES

This document contains certain non-GAAP financial measures in addition to results presented in accordance with accounting principles generally accepted in the United States of America ("GAAP"). These non-GAAP measures are intended to provide the reader with additional supplemental perspectives on operating results, performance trends, and financial condition. Non-GAAP financial measures are not a substitute for GAAP measures; they should be read and used in conjunction with the Company's GAAP financial information. A reconciliation of non-GAAP financial measures to GAAP measures is provided below. In all cases, it should be understood that non-GAAP measures do not depict amounts that accrue directly to the benefit of shareholders. An item which management excludes when computing non-GAAP core earnings can be of substantial importance to the Company's results for any particular quarter or year. The Company's non-GAAP core earnings information set forth is not necessarily comparable to non- GAAP information which may be presented by other companies. Each non-GAAP measure used by the Company in this report as supplemental financial data should be considered in conjunction with the Company's GAAP financial information.

The Company utilizes the non-GAAP measure of core earnings in evaluating operating trends, including components for core revenue and expense. These measures exclude amounts which the Company views as unrelated to its normalized operations, including gains/losses on securities, premises, equipment and other real estate owned, acquisition costs, restructuring costs, legal settlements, and systems conversion costs. Non-GAAP adjustments are presented net of an adjustment for income tax expense.

The Company also calculates core earnings per share based on its measure of core earnings. The Company views these amounts as important to understanding its operating trends, particularly due to the impact of accounting standards related to acquisition activity. Analysts also rely on these measures in estimating and evaluating the Company's performance. Management also believes that the computation of non-GAAP core earnings and core earnings per share may facilitate the comparison of the Company to other companies in the financial services industry. The Company also adjusts certain equity related measures to exclude intangible assets due to the importance of these measures to the investment community.

CONTACTS

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

   

TABLE

 

INDEX

CONSOLIDATED FINANCIAL SCHEDULES (UNAUDITED)

   

A

Selected Financial Highlights

B

Footnotes to Selected Financial Highlights

C

Balance Sheets

D

Loan and Deposit Analysis

E

Statements of Income

F

Statements of Income (Five Quarter Trend)

G

Average Yields and Costs

H

Average Balances

I

Asset Quality Analysis

J

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

BAR HARBOR BANKSHARES
SELECTED FINANCIAL HIGHLIGHTS - UNAUDITED

 
  At or for the Quarters Ended  
 
  Dec 31,     Sep 30,     Jun 30,     Mar 31,     Dec 31,  
 
  2020     2020     2020     2020     2019  
PER SHARE DATA
                             
Net earnings, diluted
  $ 0.58     $ 0.56     $ 0.55     $ 0.50     $ 0.27  
Core earnings, diluted (1) (2)
    0.62       0.61       0.56       0.50       0.56  
Total book value
    27.58       27.09       26.56       25.90       25.48  
Tangible book value (2)
    19.05       18.56       18.18       17.70       17.30  
Market price at period end
    22.59       20.55       22.39       17.28       25.39  
Dividends
    0.22       0.22       0.22       0.22       0.22  
 
                                       
PERFORMANCE RATIOS (3)
                                       
Return on assets
    0.92 %     0.88 %     0.90 %     0.85 %     0.46 %
Core return on assets (1) (2)
    0.98       0.96       0.91       0.86       0.96  
Return on equity
    8.39       8.22       8.40       7.64       4.21  
Core return on equity (1) (2)
    8.95       8.98       8.52       7.71       8.81  
Core return on tangible equity (1) (2)
    13.27       13.36       12.72       11.54       12.66  
Net interest margin, fully taxable equivalent (FTE) (2) (4)
    3.02       2.90       2.93       3.04       2.94  
Net interest margin (FTE), excluding purchased loan accretion (2) (4)
    2.98       2.84       2.82       2.98       2.86  
Core net interest margin (1) (5)
    2.79       2.89       2.92       3.04       2.94  
Efficiency ratio (2)
    61.98       59.47       60.67       64.82       62.56  
 
                                       
ORGANIC GROWTH (Year-to-date, annualized) (2) (6)
                                       
Total commercial loans
    17 %     27 %     33 %     6 %     6 %
Total loans
    (3 )     3       5       (2 )     2  
Total deposits
    8       12       (0 )     (7 )     (2 )
 
                                       
FINANCIAL DATA (In millions)
                                       
Total assets
  $ 3,726     $ 3,860     $ 3,780     $ 3,677     $ 3,669  
Total earning assets (7)
    3,360       3,496       3,414       3,313       3,349  
Total investments
    599       619       662       646       684  
Total loans
    2,563       2,685       2,706       2,623       2,635  
Allowance for loan losses
    19       18       17       15       15  
Total goodwill and intangible assets
    127       127       128       128       127  
Total deposits
    2,906       2,935       2,695       2,651       2,696  
Total shareholders' equity
    411       404       404       404       396  
Net income
    9       8       8       8       4  
Core earnings (1) (2)
    9       9       9       8       9  
 
                                       
ASSET QUALITY AND CONDITION RATIOS
                                       
Net charge-offs (current quarter annualized)/average loans
    0.03 %     0.06 %     0.02 %     0.18 %     0.08 %
Allowance for loan losses/total loans
    0.74       0.67       0.61       0.58       0.58  
Loans/deposits
    88       91       100       99       98  
Shareholders' equity to total assets
    11.04       10.48       10.69       10.98       10.80  
Tangible shareholders' equity to tangible assets
    7.90       7.42       7.57       7.77       7.60  

  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. Assets acquired from eight branches purchased from People's United Bank, National Association as of October 25, 2019, were excluded from the December 31, 2019 calculation.
  7. 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

 
  Dec 31,     Sep 30,     Jun 30,     Mar 31,     Dec 31,  
(in thousands)
  2020     2020     2020     2020     2019  
Assets
                             
Cash and due from banks
  $ 27,566     $ 22,722     $ 24,430     $ 42,282     $ 26,485  
Interest-bearing deposits with other banks
    198,441       192,935       46,243       43,373       30,425  
Total cash and cash equivalents
    226,007       215,657       70,673       85,655       56,910  
 
                                       
Securities available for sale
    585,046       604,529       641,574       626,341       663,230  
Federal Home Loan Bank stock
    14,036       13,975       20,265       19,897       20,679  
Total securities
    599,082       618,504       661,839       646,238       683,909  
 
                                       
Loans held for sale
    23,988       23,721       22,979       11,701       6,499  
 
                                       
Total loans
    2,562,885       2,684,970       2,706,438       2,623,282       2,634,593  
Less: Allowance for loan losses
    (19,082 )     (17,907 )     (16,509 )     (15,297 )     (15,353 )
Net loans
    2,543,803       2,667,063       2,689,929       2,607,985       2,619,240  
 
                                       
Premises and equipment, net
    52,458       51,424       50,464       49,978       51,205  
Other real estate owned
    -       1,983       2,318       2,205       2,236  
Goodwill
    119,477       119,477       119,477       119,477       118,649  
Other intangible assets
    7,670       7,913       8,155       8,398       8,641  
Cash surrender value of bank-owned life insurance
    77,870       77,388       76,896       76,400       75,863  
Deferred tax asset, net
    1,745       2,180       2,451       3,166       3,865  
Other assets
    73,662       74,400       75,084       66,139       42,111  
Total assets
  $ 3,725,762     $ 3,859,710     $ 3,780,265     $ 3,677,342     $ 3,669,128  
 
                                       
Liabilities and shareholders' equity
                                       
Demand and other non-interest bearing deposits
  $ 544,636     $ 515,064     $ 504,325     $ 400,410     $ 414,534  
NOW deposits
    738,849       706,048       642,908       578,320       575,809  
Savings deposits
    521,638       511,938       466,668       423,345       388,683  
Money market deposits
    402,731       388,356       402,835       404,385       384,090  
Time deposits
    698,361       813,509       678,126       844,097       932,635  
Total deposits
    2,906,215       2,934,915       2,694,862       2,650,557       2,695,751  
 
                                       
Senior borrowings
    276,062       385,472       546,863       497,580       471,396  
Subordinated borrowings
    59,961       59,920       59,879       59,849       59,920  
Total borrowings
    336,023       445,392       606,742       557,429       531,316  
 
                                       
Other liabilities
    72,183       74,958       74,487       65,601       45,654  
Total liabilities
    3,314,421       3,455,265       3,376,091       3,273,587       3,272,721  
 
                                       
Total common shareholders' equity
    411,341       404,445       404,174       403,755       396,407  
Total liabilities and shareholders' equity
  $ 3,725,762     $ 3,859,710     $ 3,780,265     $ 3,677,342     $ 3,669,128  
 
                                       
Net shares outstanding
    14,916       14,929       15,214       15,587       15,558  

BAR HARBOR BANKSHARES
CONSOLIDATED LOAN & DEPOSIT ANALYSIS - UNAUDITED

LOAN ANALYSIS

 
                                Annualized  
 
                                Growth %  
 
  Dec 31,     Sep 30,     Jun 30,     Mar 31,     Dec 31,     Quarter     Year to  
(in thousands)
  2020     2020     2020     2020     2019     End     Date  
Commercial real estate
  $ 1,084,381     $ 1,045,635     $ 982,070     $ 948,178     $ 930,661       15 %     17 %
Commercial and industrial
    323,864       324,647       340,898       321,605       318,988       (1 )     2  
Paycheck Protection Program (PPP)
    53,774       131,537       131,626       -       -       *       *  
Total commercial loans
    1,462,019       1,501,819       1,454,594       1,269,783       1,249,649       (11 )     17  
Total commercial loans, excluding PPP
    1,408,245       1,370,282       1,322,968       1,269,783       1,249,649       11       13  
 
                                                       
Residential real estate
    923,891       997,485       1,060,729       1,120,627       1,145,358       (30 )     (19 )
Consumer
    113,544       119,340       124,197       128,120       135,283       (19 )     (16 )
Tax exempt and other
    63,431       66,326       66,918       104,752       104,303       (17 )     (39 )
Total loans
  $ 2,562,885     $ 2,684,970     $ 2,706,438     $ 2,623,282     $ 2,634,593       (18 )%     (3 )%

*Indicates ratios of 100% or greater.

DEPOSIT ANALYSIS

 
                                Annualized  
 
                                Growth %  
 
  Dec 31,     Sep 30,     Jun 30,     Mar 31,     Dec 31,     Quarter     Year to  
(in thousands)
  2020     2020     2020     2020     2019     End     Date  
Demand
  $ 544,636     $ 515,064     $ 504,325     $ 400,410     $ 414,534       23 %     31 %
NOW
    738,849       706,048       642,908       578,320       575,809       19       28  
Savings
    521,638       511,938       466,668       423,345       388,683       8       34  
Money market
    402,731       388,356       402,835       404,385       384,090       15       5  
Total non-maturity deposits
    2,207,854       2,121,406       2,016,736       1,806,460       1,763,116       16       25  
Total time deposits
    698,361       813,509       678,126       844,097       932,635       (57 )     (25 )
Total deposits
  $ 2,906,215     $ 2,934,915     $ 2,694,862     $ 2,650,557     $ 2,695,751       (4 )%     8 %

BAR HARBOR BANKSHARES
CONSOLIDATED STATEMENTS OF INCOME - UNAUDITED

 
  Three Months Ended     Year Ended  
 
  December 31,     December 31,  
(in thousands, except per share data)
  2020     2019     2020     2019  
Interest and dividend income
                       
Loans
  $ 26,687     $ 28,361     $ 107,085     $ 111,042  
Securities and other
    4,013       5,756       19,019       24,349  
Total interest and dividend income
    30,700       34,117       126,104       135,391  
Interest expense
                               
Deposits
    3,606       6,698       18,043       27,034  
Borrowings
    1,732       3,315       8,881       18,547  
Total interest expense
    5,338       10,013       26,924       45,581  
Net interest income
    25,362       24,104       99,180       89,810  
Provision for loan losses
    1,360       538       5,625       2,317  
Net interest income after provision for loan losses
    24,002       23,566       93,555       87,493  
Non-interest income
                               
Trust and investment management fee income
    3,318       3,227       13,378       12,063  
Customer service fees
    2,890       2,791       11,327       10,127  
Gain on sales of securities, net
    3,959       80       5,445       237  
Mortgage banking income
    2,654       532       6,884       1,626  
Bank-owned life insurance income
    482       495       2,007       2,053  
Customer derivative income
    1,086       475       2,503       2,028  
Other income
    334       206       1,412       935  
Total non-interest income
    14,723       7,806       42,956       29,069  
Non-interest expense
                               
Salaries and employee benefits
    13,318       11,432       48,920       45,000  
Occupancy and equipment
    4,192       4,113       16,751       14,214  
(Gain) loss on sales of premises and equipment, net
    (122 )     (3 )     (32 )     18  
Outside services
    571       540       1,985       1,818  
Professional services
    572       370       2,060       2,191  
Communication
    194       114       892       821  
Marketing
    415       453       1,385       1,872  
Amortization of intangible assets
    256       240       1,024       861  
Loss on debt extinguishment
    -       1,096       1,351       1,096  
Acquisition, conversion and other expenses
    4,849       4,998       5,801       8,317  
Other expenses
    3,571       3,450       14,723       13,525  
Total non-interest expense
    27,816       26,803       94,860       89,733  
Income before income taxes
    10,909       4,569       41,651       26,829  
Income tax expense
    2,269       362       8,407       4,209  
Net income
  $ 8,640     $ 4,207     $ 33,244     $ 22,620  
 
                               
Earnings per share:
                               
Basic
  $ 0.58     $ 0.27     $ 2.18     $ 1.46  
Diluted
    0.58       0.27       2.18       1.45  
 
                               
Weighted average shares outstanding:
                               
Basic
    14,909       15,554       15,246       15,541  
Diluted
    14,952       15,602       15,272       15,587  

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)
  2020     2020     2020     2020     2019  
Interest and dividend income
                             
Loans
  $ 26,687     $ 25,918     $ 26,493     $ 27,987     $ 28,361  
Securities and other
    4,013       4,557       4,942       5,507       5,756  
Total interest and dividend income
    30,700       30,475       31,435       33,494       34,117  
Interest expense
                                       
Deposits
    3,606       3,869       4,548       6,020       6,698  
Borrowings
    1,732       1,941       2,297       2,911       3,315  
Total interest expense
    5,338       5,810       6,845       8,931       10,013  
Net interest income
    25,362       24,665       24,590       24,563       24,104  
Provision for loan losses
    1,360       1,800       1,354       1,111       538  
Net interest income after provision for loan losses
    24,002       22,865       23,236       23,452       23,566  
Non-interest income
                                       
Trust and investment management fee income
    3,318       3,532       3,159       3,369       3,227  
Customer service fees
    2,890       2,886       2,439       3,112       2,791  
Gain on sales of securities, net
    3,959       -       1,351       135       80  
Mortgage banking income
    2,654       2,649       1,124       457       532  
Bank-owned life insurance income
    482       492       496       537       495  
Customer derivative income
    1,086       316       513       588       475  
Other income
    334       227       628       223       206  
Total non-interest income
    14,723       10,102       9,710       8,421       7,806  
Non-interest expense
                                       
Salaries and employee benefits
    13,318       11,809       11,909       11,884       11,432  
Occupancy and equipment
    4,192       4,279       3,860       4,420       4,113  
(Gain) loss on sales of premises and equipment, net
    (122 )     -       (2 )     92       (3 )
Outside services
    571       438       442       534       540  
Professional services
    572       479       337       672       370  
Communication
    194       215       194       289       114  
Marketing
    415       300       282       388       453  
Amortization of intangible assets
    256       256       256       256       240  
Loss on debt extinguishment
    -       -       1,351       -       1,096  
Acquisition, conversion and other expenses
    4,849       691       158       103       4,998  
Other expenses
    3,571       3,952       3,479       3,721       3,450  
Total non-interest expense
    27,816       22,419       22,266       22,359       26,803  
Income before income taxes
    10,909       10,548       10,680       9,514       4,569  
Income tax expense
    2,269       2,146       2,199       1,793       362  
Net income
  $ 8,640     $ 8,402     $ 8,481     $ 7,721     $ 4,207  
 
                                       
Earnings per share:
                                       
Basic
  $ 0.58     $ 0.56     $ 0.55     $ 0.50     $ 0.27  
Diluted
    0.58       0.56       0.55       0.50       0.27  
 
                                       
Weighted average shares outstanding:
                                       
Basic
    14,909       15,079       15,424       15,558       15,554  
Diluted
    14,952       15,103       15,441       15,593       15,602  

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

 
  Quarters Ended  
 
  Dec 31,     Sep 30,     Jun 30,     Mar 31,     Dec 31,  
 
  2020     2020     2020     2020     2019  
Earning assets
                             
Interest-bearing deposits with other banks (1)
    0.11 %     0.09 %     0.08 %     1.16 %     1.96 %
Securities available for sale and FHLB stock (1)
    2.97       3.04       3.26       3.50       3.45  
Loans:
                                       
Commercial real estate
    3.74       3.81       4.11       4.46       4.69  
Commercial and industrial
    3.92       4.39       4.13       4.89       4.58  
Paycheck protection program
    11.56       3.18       3.34       -       -  
Residential
    3.74       3.71       3.81       3.84       3.89  
Consumer
    3.65       3.42       3.81       5.20       4.84  
Total loans
    4.03       3.81       3.94       4.30       4.33  
Total earning assets
    3.65 %     3.57 %     3.73 %     4.12 %     4.13 %
 
                                       
Funding liabilities
                                       
Deposits:
                                       
NOW
    0.15 %     0.14 %     0.14 %     0.40 %     0.44 %
Savings
    0.13       0.13       0.15       0.25       0.20  
Money market
    0.14       0.16       0.40       1.01       1.17  
Time deposits
    1.64       1.69       1.94       1.92       2.06  
Total interest-bearing deposits
    0.61       0.66       0.81       1.08       1.19  
Borrowings
    1.83       1.60       1.51       2.10       2.30  
Total interest-bearing liabilities
    0.77 %     0.82 %     0.96 %     1.28 %     1.42 %
 
                                       
Net interest spread
    2.88       2.75       2.77       2.84       2.71  
Net interest margin (1)
    3.02       2.90       2.93       3.04       2.94  
Core net interest margin (2)
    2.79       2.89       2.92       3.04       2.94  
  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  
 
  Dec 31,     Sep 30,     Jun 30,     Mar 31,     Dec 31,  
(in thousands)
  2020     2020     2020     2020     2019  
Assets
                             
Interest-bearing deposits with other banks (1)
  $ 176,747     $ 92,066     $ 71,067     $ 16,933     $ 14,554  
Securities available for sale and FHLB stock (2)
    563,118       627,162       648,185       661,848       683,939  
Loans:
                                       
Commercial real estate
    1,059,574       1,012,194       952,264       945,851       928,445  
Commercial and industrial
    386,201       399,734       417,620       423,393       412,595  
Paycheck protection program
    91,109       131,605       104,740       -       -  
Residential real estate
    995,173       1,060,084       1,117,608       1,141,908       1,156,215  
Consumer
    115,876       121,248       126,413       130,471       127,425  
Total loans (3)
    2,647,933       2,724,865       2,718,645       2,641,623       2,624,680  
Total earning assets
    3,387,798       3,444,093       3,437,897       3,320,404       3,323,173  
Cash and due from banks
    22,473       36,521       43,165       40,818       53,088  
Allowance for loan losses
    (18,690 )     (17,028 )     (15,678 )     (15,242 )     (15,657 )
Goodwill and other intangible assets
    127,264       127,508       127,751       128,014       114,537  
Other assets
    237,424       223,316       213,986       187,765       179,512  
Total assets
  $ 3,756,269     $ 3,814,410     $ 3,807,121     $ 3,661,759     $ 3,654,653  
 
                                       
Liabilities and shareholders' equity
                                       
Deposits:
                                       
NOW
  $ 713,464     $ 677,706     $ 611,860     $ 570,127     $ 551,335  
Savings
    516,266       488,508       450,621       410,931       378,997  
Money market
    399,543       396,351       411,232       373,650       379,361  
Time deposits
    734,523       777,424       776,042       892,654       918,528  
Total interest-bearing deposits
    2,363,796       2,339,989       2,249,755       2,247,362       2,228,221  
Borrowings
    376,437       481,687       612,538       556,824       571,936  
Total interest-bearing liabilities
    2,740,233       2,821,676       2,862,293       2,804,186       2,800,157  
Non-interest-bearing demand deposits
    535,402       507,844       472,688       406,951       418,324  
Other liabilities
    71,119       78,072       66,302       44,343       40,136  
Total liabilities
    3,346,754       3,407,592       3,401,283       3,255,480       3,258,617  
Total shareholders' equity
    409,515       406,818       405,838       406,279       396,036  
Total liabilities and shareholders' equity
  $ 3,756,269     $ 3,814,410     $ 3,807,121     $ 3,661,759     $ 3,654,653  

  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)
  2020     2020     2020     2020     2019  
NON-PERFORMING ASSETS
                             
Non-accruing loans:
                             
Commercial real estate
  $ 4,251     $ 4,714     $ 3,981     $ 2,227     $ 3,489  
Commercial installment
    1,466       1,820       1,790       1,996       1,836  
Residential real estate
    5,729       7,154       7,194       5,089       5,335  
Consumer installment
    742       720       1,023       744       890  
Total non-accruing loans
    12,188       14,408       13,988       10,056       11,550  
Other real estate owned
    -       1,983       2,318       2,205       2,236  
Total non-performing assets
  $ 12,188     $ 16,391     $ 16,306     $ 12,261     $ 13,786  
 
                                       
Total non-accruing loans/total loans
    0.48 %     0.54 %     0.52 %     0.38 %     0.44 %
Total non-performing assets/total assets
    0.33       0.42       0.43       0.33       0.38  
 
                                       
PROVISION AND ALLOWANCE FOR LOAN LOSSES
                                       
Balance at beginning of period
  $ 17,907     $ 16,509     $ 15,297     $ 15,353     $ 15,353  
Charged-off loans
    (297 )     (439 )     (220 )     (1,211 )     (603 )
Recoveries on charged-off loans
    112       37       78       44       65  
Net loans charged-off
    (185 )     (402 )     (142 )     (1,167 )     (538 )
Provision for loan losses
    1,360       1,800       1,354       1,111       538  
Balance at end of period
  $ 19,082     $ 17,907     $ 16,509     $ 15,297     $ 15,353  
 
                                       
Allowance for loan losses/total loans
    0.74 %     0.66 %     0.60 %     0.58 %     0.58 %
Allowance for loan losses/non-accruing loans
    157       124       118       152       133  
 
                                       
NET LOAN CHARGE-OFFS
                                       
Commercial real estate
  $ 63     $ (252 )   $ 71     $ (846 )   $ (92 )
Commercial installment
    (228 )     (10 )     (155 )     (170 )     (331 )
Residential real estate
    (21 )     1       (20 )     (1 )     (16 )
Consumer installment
    1       (141 )     (38 )     (150 )     (99 )
Total, net
  $ (185 )   $ (402 )   $ (142 )   $ (1,167 )   $ (538 )
 
                                       
Net charge-offs (QTD annualized)/average loans
    0.03 %     0.06 %     0.02 %     0.18 %     0.08 %
Net charge-offs (YTD annualized)/average loans
    0.07       0.08       0.10       0.18       0.03  
 
                                       
DELINQUENT AND NON-ACCRUING LOANS/ TOTAL LOANS
                                       
30-89 Days delinquent
    0.58 %     0.16 %     0.28 %     0.84 %     0.74 %
90+ Days delinquent and still accruing
    -       0.08       0.04       0.08       0.01  
Total accruing delinquent loans
    0.58       0.24       0.32       0.92       0.75  
Non-accruing loans
    0.48       0.53       0.51       0.38       0.44  
Total delinquent and non-accruing loans
    1.06 %     0.77 %     0.83 %     1.30 %     1.19 %

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)
 
  2020     2020     2020     2020     2019  
Net income
 
  8,640     8,402     8,481     7,721     4,207  
(Gain) on sale of securities, net
 
    (3,959 )     -       (1,351 )     (135 )     (80 )
(Gain) loss on sale of premises and equipment, net
 
    (122 )     -       (2 )     92       (3 )
(Gain) loss on other real estate owned
 
    (11 )     335       -       31       20  
Loss on debt extinguishment
 
    -       -       1,351       -       1,096  
Acquisition, conversion and other expenses
 
    4,849       691       158       103       4,998  
Income tax expense (1)
 
    (179 )     (245 )     (37 )     (22 )     (1,440 )
Core earnings (2)
(A)
  9,218     9,183     8,600     7,790     8,798  
 
                                       
Net interest income
(B)
  25,362     24,665     24,590     24,563     24,104  
Non-interest income
 
    14,723       10,102       9,710       8,421       7,806  
Total Revenue
 
    40,085       34,767       34,300       32,984       31,910  
(Gain) on sale of securities, net
 
    (3,959 )     -       (1,351 )     (135 )     (80 )
Total core revenue (2)
(C)
  36,126     34,767     32,949     32,849     31,830  
 
                                       
Total non-interest expense
 
    27,816       22,419       22,266       22,359       26,803  
Gain (loss) on sale of premises and equipment, net
 
    122       -       2       (92 )     3  
Gain (loss) on other real estate owned
 
    11       (335 )     -       (31 )     (20 )
Loss on debt extinguishment
 
    -       -       (1,351 )     -       (1,096 )
Acquisition, conversion and other expenses
 
    (4,849 )     (691 )     (158 )     (103 )     (4,998 )
Core non-interest expense (2)
(D)
  23,100     21,393     20,759     22,133     20,692  
 
                                       
(in millions)
 
                                       
Average earning assets
(E)
  3,388     3,444     3,438     3,320     3,323  
Average paycheck protection program (PPP) loans
(R)
    91       132       105       -       -  
Average earning assets, excluding PPP loans
(S)
    3,297       3,312       3,333       3,320       3,323  
Average assets
(F)
    3,756       3,814       3,807       3,662       3,655  
Average shareholders' equity
(G)
    410       407       406       406       396  
Average tangible shareholders' equity (2) (3)
(H)
    282       279       278       278       281  
Tangible shareholders' equity, period-end (2) (3)
(I)
    284       277       277       276       269  
Tangible assets, period-end (2) (3)
(J)
    3,598       3,732       3,653       3,549       3,542  
 
                                       
(in thousands)
 
                                       
Common shares outstanding, period-end
(K)
    14,916       14,929       15,214       15,587       15,558  
Average diluted shares outstanding
(L)
    14,952       15,103       15,441       15,593       15,602  
 
                                       
Core earnings per share, diluted (2)
(A/L)
  0.62     0.61     0.56     0.50     0.56  
Tangible book value per share, period-end (2)
(I/K)
    19.05       18.56       18.18       17.70       17.30  
Securities adjustment, net of tax (1) (4)
(M)
    10,023       11,681       11,412       9,560       5,549  
Tangible book value per share, excluding securities adjustment (2) (4)
(I+M)/K
    18.38       17.78       17.43       17.09       16.94  
Tangible shareholders' equity/total tangible assets (2)
(I/J)
    7.90       7.42       7.57       7.77       7.60  

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)
        2020     2020     2020     2020     2019  
Performance ratios (5)
                                   
GAAP return on assets
          0.92 %     0.88 %     0.90 %     0.85 %     0.46 %
Core return on assets (2)
    (A/F)       0.98       0.96       0.91       0.86       0.96  
GAAP return on equity
            8.39       8.22       8.40       7.64       4.21  
Core return on equity (2)
    (A/G)       8.95       8.98       8.52       7.71       8.81  
Core return on tangible equity (1) (2)
    (A+Q)/H       13.27       13.36       12.72       11.54       12.66  
Efficiency ratio (2) (6)
  (D-O-Q)/(C+N)       61.98       59.47       60.67       64.82       62.56  
Net interest margin
    (B+P)/E       3.02       2.90       2.93       3.04       2.94  
Core net interest margin (2) (7)
    (B+P-T)/S       2.79       2.89       2.92       3.04       2.94  
 
                                               
Supplementary data (in thousands)
                                               
Taxable equivalent adjustment for efficiency ratio
  (N)     $ 542     $ 570     $ 646     $ 719     $ 674  
Franchise taxes included in non-interest expense
  (O)       117       121       120       119       119  
Tax equivalent adjustment for net interest margin
  (P)       396       416       490       551       516  
Intangible amortization
  (Q)       256       256       256       256       240  
Interest and fees on PPP loans
  (T)       2,648       1,052       869       -       -  

  1. Assumes a marginal tax rate of 23.71% in the fourth quarter of 2020 and 23.87% for the first three quarters of 2020 and the fourth quarter of 2019.
  2. Non-GAAP financial measure.
  3. Tangible shareholders' equity is computed by taking total shareholders' equity less the intangible assets at period-end. Tangible assets is computed by taking total assets less the intangible assets at period-end.
  4. Securities adjustment, net of tax represents the total unrealized loss on available-for-sale securities recorded on the Company's consolidated balance sheets within total common shareholders' equity.
  5. All performance ratios are based on average balance sheet amounts, where applicable.
  6. 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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