Bar Harbor Bankshares Reports Third Quarter Results

Rhea-AI Summary

Bar Harbor Bankshares (NYSE American: BHB) reported a strong third quarter 2020 with a net income of $8.4 million, or $0.56 per share, up from $5.0 million in Q3 2019. Core earnings rose 30% to $9.2 million, or $0.61 per share. Key highlights include 13% annualized growth in commercial loans and a net interest margin increase to 2.98%. Non-interest income grew 32% to $10.1 million. The loan-to-deposit ratio improved to 92%, reflecting solid operational performance and effective risk management amidst the COVID-19 pandemic.

Positive

• 30% increase in core earnings year-over-year to $9.2 million.
• 13% annualized growth in commercial loans.
• Net interest margin increased to 2.98% from 2.75% in Q3 2019.
• 32% rise in non-interest income to $10.1 million.
• Loan-to-deposit ratio improved to 92%.

Negative

• Decrease in loan balances by $20.7 million.
• Provision for loan losses increased to $1.8 million from $893 thousand in Q3 2019.

BAR HARBOR, ME/ ACCESSWIRE / October 27, 2020 / Bar Harbor Bankshares (NYSE American: BHB) reported third quarter 2020 net income of $8.4 million or $0.56 per share compared to $5.0 million or $0.32 per share in the same quarter of 2019. The non-GAAP measure of core earnings increased 30% to $9.2 million, or $0.61 per share in the third quarter 2020 compared to $7.3 million or $0.47 per share in the third quarter of 2019.

THIRD QUARTER FINANCIAL HIGHLIGHTS (compared to the third quarter of 2019, unless otherwise noted)

• 13% annualized total commercial loan growth
• 92% loan to deposit ratio
• 2.98% net interest margin compared to 2.75%
• 32% increase in non-interest income
• 0.56% non-accruing loans to total loans, excluding Paycheck Protection Program (PPP) loans
• 0.88% return on assets compared to 0.55%; 0.96% core return on assets compared to 0.80% (non-GAAP)
• 59.5% efficiency ratio compared to 65.0%

President and Chief Executive Officer, Curtis C. Simard stated, "As a direct result of our well executed strategies, the Company expanded all key performance metrics on a year-over-year and linked quarter basis. These strategies not only entailed expense and deleveraging initiatives, but also focused on increasing core deposits thus reducing overall funding costs, and expanding fee income. Core return on assets increased to 0.96% as we continue to achieve positive operating leverage with minimal reliance on accretion from PPP related fees. We continue to see an upswing in customer activity since our state economies re-opened this past summer on a limited basis and a further rebound in branch operations compared to the first half of the year. Our loan to deposit ratio improved to 92% as we continue to grow deposits on relatively flat, total loan growth. Given the current economic environment, we have selectively grown commercial loans by 14% for the quarter, excluding PPP loans, and pushed much of the mortgage production through our secondary market platform. Our teams did a great job of keeping pace with the high demand of the mortgage markets for new and refinanced loans, resulting in over four times the gains compared to the third quarter 2019. We continue to adhere to our risk-based credit philosophy and profitability disciplines as is evidenced by our results this quarter. Excess liquidity generated during the quarter was used to pay down wholesale borrowings as part of on-going initiatives to de-lever and expand net interest margin."

Mr. Simard continued, "One of our greatest strengths is the diversity in capabilities surrounding fee income. Our wealth management business is a significant contributor to fee income, as well as a keystone for deepening customer relationships with $2.1 billion in assets under management. We had previously consolidated leadership and combined operations onto a common platform in our wealth management business, leading to the unifying of policies and sharing of ideas under one environment driven by best practices. I'm now excited to say we are working with our regulators to bring both of our wealth management companies and our brokerage teams under one name Bar Harbor Wealth Management. Bringing this business together under one brand was the logical next step as we align talent, engagement and culture."

Mr. Simard went on to say, "From an asset quality perspective, the Company experienced a significant decrease in loans under COVID-related forbearance since the second quarter. As of September 30, 2020 total outstanding deferrals, which primarily consist of interest only forbearance, were $78.7 million or 3% of total loans, with consumer mortgages representing $4.6 million of the total or less than half a percent of the consumer portfolio. Our third quarter stress testing resulted in no significant risk-rating downgrades or changes to reserves. Our allowance for loan losses is well established to absorb any inherent losses in our portfolio and increased during the quarter on higher commercial loan growth. Our steady allowance levels coupled with an extensive stress testing process speaks to the quality of our credit culture, while we continue to report low levels of net charge-offs and past due accounts. The increase in non-accruing loans for the quarter is due to one additional commercial loan that has since paid off at its carrying value. The hotel industry is one of our bigger credit exposures; however, we have seen minimal degradation as those borrowers are strong, proven operators with an average loan to value ratio of less than 60% for the segment. More so, any individual hotel exposure with a loan to value ratio greater than 65% was specifically included in our stress testing."

Mr. Simard further stated, "Throughout the year we have supported our customers by originating approximately 1,900 PPP loans totaling $131.6 million. Net unearned fees remaining on PPP loans at the end of the third quarter was $3.8 million and accretion will accelerate as the loans are reimbursed by the Small Business Administration (SBA). At this time we have submitted over 50% of PPP loans to the SBA for forgiveness, pending approval, and our teams continue to work closely with customers on the remaining balance."

Mr. Simard concluded, "Despite the significant challenges posed by the COVID-19 pandemic and related market conditions, we continue to maintain high levels of capital and liquidity, diversified revenue streams, strong credit performance and an exceptional core deposit base. We are confident in our business model to grow investor returns while maintaining our culture and commitment to customers, employees and communities throughout this economic cycle."

FINANCIAL CONDITION

Total assets were $3.9 billion at the end of the third quarter compared to $3.8 billion in the second quarter of 2020. Loan balances in the third quarter 2020 decreased by $20.7 million largely due to secondary market sales and prepayments of residential mortgages offset by total commercial loan growth. Mortgage loan originations totaled $86.5 million from new and refinancing activity given the lower interest rate environment. During the quarter nearly all residential originations were sold in the secondary market to generate fee income. Total commercial loans grew at an annualized rate of 13% led by commercial real estate loans offset by a decrease in commercial and industrial (C&I) loans. The decrease in C&I is primarily due to one customer with loans totaling $39.8 million that were refinanced to a lower principal of $25.0 million along with an open line of credit. Core deposits increased 21% on an annualized basis due to growth from new accounts and an overall decrease in customer spending given current market conditions. As a result the loan to deposit ratio improved to 92% in the third quarter 2020 compared to 101% in the second quarter of 2020. Borrowings decreased by $161.4 million as excess liquidity primarily from higher deposit balances was used to pay down short-term borrowings. As part of the deleveraging strategy, total securities decreased $43.3 million in the third quarter as we allowed for natural run-off of amortizing and maturing fixed rate investments with the pay down of short term borrowings.

The third quarter 2020 allowance for loan losses increased by $1.4 million, which includes a $1.8 million provision for loan loss offset by net charge-offs of $402 thousand. The allowance for loan losses to total loans ratio for the third quarter expanded to 0.66% from 0.60% in the second quarter 2020 based on commercial loan growth and adjustments to reflect current economic conditions. Past due and delinquent loans as a percentage of total loans decreased to 0.77% from 0.83% at the end of the second quarter. The increase in non-accruing loans in the third quarter is primarily due to an additional commercial loan totaling $693 thousand that has subsequently settled at its carrying value. Third quarter stress testing of the Company's commercial loan portfolio included the top 50 relationships, all criticized loans greater than $1.0 million, hospitality loans over $250 thousand with loan to values in excess of 65%, and any seasonal payment, restaurant, or term loans maturing within a year that are greater than $500 thousand. Results of the stress testing led to no significant risk-rating downgrades or changes to reserves. While the impact of COVID-19 and other market conditions remain uncertain, we believe the existing allowance for loan losses is sufficient to absorb inherent losses based on our disciplined credit approach, experienced losses and methodology, and current and ongoing stress testing reviews of the portfolio.

The Company's book value per share was $27.09 at the end of the third quarter 2020 compared to $26.56 at the end of the second quarter 2020. Tangible book value per share (non-GAAP measure) was $18.56 at the end of the third quarter 2020 compared to $18.18 at the second quarter 2020; an annualized growth rate of 8%. A continued low interest rate environment has had a positive impact on the fair value of the Company's securities portfolio. Other comprehensive income included unrealized gains on securities totaling $11.7 million in the third quarter 2020 compared to $11.4 million at the end of the second quarter 2020.

RESULTS OF OPERATIONS

Net income in the third quarter 2020 was $8.4 million, or $0.56 per share, compared to $5.0 million, or $0.32 per share, in the same quarter of 2019. The non-GAAP measure of core earnings in the third quarter 2020 totaled $9.2 million, or $0.61 per share, compared to $7.3 million, or $0.47 per share, in the same quarter of 2019. The improvement in net income is driven by expanded net interest margin and higher non-interest income. Net interest margin in the third quarter 2020 increased to 2.98% from 2.75% in the same period of 2019 primarily due to a lower cost of funds. Costs of funds decreased to 0.82% compared to 1.65% in the third quarter 2019 due to a shift in funding sources from borrowings 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 COVID-19. Additionally, excess liquidity was used to pay off $239.4 million of borrowings since the third quarter of 2019 in connection with deleveraging strategies that further reduced interest expense. Yields from earning assets were 3.67% compared to 4.17% in the third quarter 2019 reflecting loan originations and repricing of variable rate products in a lower interest rate environment. Excluding the effects of PPP loans, the third quarter yield on total earning assets was 3.72%. Net unearned fees on PPP loans at the end of the third quarter was $3.8 million and accretion will accelerate as the loans are reimbursed by the Small Business Administration.

The third quarter 2020 provision for loan losses increased to $1.8 million from $893 thousand in the same quarter 2019. While overall credit quality in the loan portfolio remains strong, the increase in the reserve is indicative of the continued commercial loan growth and higher economic adjustments reflecting elevated risk from COVID-19.

Non-interest income in the third quarter 2020 was $10.1 million compared to $7.6 million in the same quarter in 2019. The increase is primarily due to a $2.2 million increase in mortgage banking income associated with secondary market sales of $86.2 million compared to $20.7 million in the same quarter of 2019. Customer service fees increased 13% and trust and investment management fees increased 17% as the result of expanded operations into Central Maine partially offset by lower activity stemming from COVID-19.

Non-interest expense was $22.4 million in the third quarter 2020 compared to $23.4 million in the same quarter of 2019. The decrease is principally due to lower acquisition, conversion and other expenses, which totaled $691 thousand in 2020 compared to $3.0 million in 2019. Salary and benefit expense and occupancy costs were also higher during the third quarter 2020 to support the Company's expanded branch model and wealth management business. Operating expenses remained controlled as demonstrated by the drop in the efficiency ratio to 59.5% compared to 65.0% for the same period a year ago.

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 "THIRD 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
		Sep 30,				Jun 30,				Mar 31,				Dec 31,				Sep 30,
		2020				2020				2020				2019				2019
PER SHARE DATA
Net earnings, diluted		$	0.56			$	0.55			$	0.50			$	0.27			$	0.32
Core earnings, diluted (1) (2)			0.61				0.56				0.50				0.56				0.47
Total book value			27.09				26.56				25.90				25.48				25.37
Tangible book value (2)			18.56				18.18				17.70				17.30				18.49
Market price at period end			20.55				22.39				17.28				25.39				24.93
Dividends			0.22				0.22				0.22				0.22				0.22
PERFORMANCE RATIOS (3)
Return on assets			0.88	%			0.90	%			0.85	%			0.46	%			0.55	%
Core return on assets (1) (2)			0.96				0.91				0.86				0.96				0.80
Return on equity			8.22				8.40				7.64				4.21				5.04
Core return on equity (1) (2)			8.98				8.52				7.71				8.81				7.36
Core return on tangible equity (1) (2)			13.36				12.72				11.54				12.66				10.31
Net interest margin, fully taxable equivalent (FTE) (2) (4)			2.98				3.00				3.06				2.95				2.75
Net interest margin (FTE), excluding purchased loan accretion (2) (4)			2.92				2.88				2.99				2.88				2.65
Efficiency ratio (2)			59.47				60.67				64.82				62.56				65.02
ORGANIC GROWTH (Year-to-date, annualized) (2) (6)
Total commercial loans			27	%			33	%			6	%			6	%			11	%
Total loans			3				7				(1	)			2				5
Total deposits			12				(0	)			(7	)			(2	)			1
FINANCIAL DATA (In millions)
Total assets		$	3,860			$	3,780			$	3,677			$	3,669			$	3,612
Total earning assets (5)			3,312				3,376				3,269				3,336				3,270
Total investments			619				662				646				684				703
Total loans			2,709				2,729				2,635				2,641				2,577
Allowance for loan losses			18				17				15				15				15
Total goodwill and intangible assets			127				128				128				127				107
Total deposits			2,935				2,695				2,651				2,696				2,494
Total shareholders' equity			404				404				404				396				394
Net income			8				8				8				4				5
Core earnings (1) (2)			9				9				8				9				7
ASSET QUALITY AND CONDITION RATIOS
Net charge-offs (current quarter annualized)/average loans			0.06	%			0.02	%			0.18	%			0.08	%			0.02	%
Allowance for loan losses/total loans			0.66				0.60				0.58				0.58				0.60
Loans/deposits			92				101				99				98				103
Shareholders' equity to total assets			10.48				10.69				10.98				10.80				10.92
Tangible shareholders' equity to tangible assets			7.42				7.57				7.77				7.60				8.20

1. Core measurements are non-GAAP financial measures adjusted to exclude net non-operating charges primarily related to acquisitions, restructurings, system conversions, loss on debt extinguishment and gain or loss on sale of securities, other real estate owned and premises and equipment. Refer to the Reconciliation of Non-GAAP Financial Measures in table J for additional information.
2. Non-GAAP financial measure.
3. All performance ratios are based on average balance sheet amounts, where applicable.
4. Fully taxable equivalent considers the impact of tax-advantaged investment securities and loans.
5. Earning assets includes non-accruing loans and securities are valued at amortized cost.
6. Assets acquired from eight branches purchased from People's United Bank, National Association as of October 25, 2019, were excluded from calculation.

BAR HARBOR BANKSHARES
CONSOLIDATED BALANCE SHEETS - UNAUDITED

		Sep 30,				Jun 30,				Mar 31,				Dec 31,				Sep 30,
(in thousands)		2020				2020				2020				2019				2019
Assets
Cash and due from banks		$	53,173			$	52,776			$	68,481			$	37,261			$	50,032
Interest-bearing deposits with the Federal Reserve Bank			162,484				17,897				17,174				19,649				21,561
Total cash and cash equivalents			215,657				70,673				85,655				56,910				71,593
Securities available for sale, at fair value			604,529				641,574				626,341				663,230				675,675
Federal Home Loan Bank stock			13,975				20,265				19,897				20,679				27,469
Total securities			618,504				661,839				646,238				683,909				703,144
Commercial real estate			1,045,635				982,070				948,178				930,661				923,773
Commercial and industrial			522,510				539,442				426,357				423,291				402,706
Residential real estate			1,021,206				1,083,708				1,132,328				1,151,857				1,143,452
Consumer			119,340				124,197				128,120				135,283				107,375
Total loans			2,708,691				2,729,417				2,634,983				2,641,092				2,577,306
Less: Allowance for loan losses			(17,907	)			(16,509	)			(15,297	)			(15,353	)			(15,353	)
Net loans			2,690,784				2,712,908				2,619,686				2,625,739				2,561,953
Premises and equipment, net			51,424				50,464				49,978				51,205				47,644
Other real estate owned			1,983				2,318				2,205				2,236				2,455
Goodwill			119,477				119,477				119,477				118,649				100,085
Other intangible assets			7,913				8,155				8,398				8,641				6,879
Cash surrender value of bank-owned life insurance			77,388				76,896				76,400				75,863				75,368
Deferred tax asset, net			2,180				2,451				3,166				3,865				4,988
Other assets			74,400				75,084				66,139				42,111				38,365
Total assets		$	3,859,710			$	3,780,265			$	3,677,342			$	3,669,128			$	3,612,474
Liabilities and shareholders' equity
Demand and other non-interest bearing deposits		$	515,064			$	504,325			$	400,410			$	414,534			$	380,707
NOW deposits			706,048				642,908				578,320				575,809				490,315
Savings deposits			511,938				466,668				423,345				388,683				360,570
Money market deposits			388,356				402,835				404,385				384,090				359,328
Time deposits			813,509				678,126				844,097				932,635				902,665
Total deposits			2,934,915				2,694,862				2,650,557				2,695,751				2,493,585
Senior borrowings			385,472				546,863				497,580				471,396				641,819
Subordinated borrowings			59,920				59,879				59,849				59,920				42,928
Total borrowings			445,392				606,742				557,429				531,316				684,747
Other liabilities			74,958				74,487				65,601				45,654				39,683
Total liabilities			3,455,265				3,376,091				3,273,587				3,272,721				3,218,015
Total common shareholders' equity			404,445				404,174				403,755				396,407				394,459
Total liabilities and shareholders' equity		$	3,859,710			$	3,780,265			$	3,677,342			$	3,669,128			$	3,612,474
Net shares outstanding			14,929				15,214				15,587				15,558				15,549

BAR HARBOR BANKSHARES
CONSOLIDATED LOAN & DEPOSIT ANALYSIS - UNAUDITED

LOAN ANALYSIS

																						Annualized
																						Growth %
		Sep 30,				Jun 30,				Mar 31,				Dec 31,				Sep 30,				Quarter				Year to
(in thousands)		2020				2020				2020				2019				2019				End				Date
Commercial real estate		$	1,045,635			$	982,070			$	948,178			$	930,661			$	923,773				26	%			16	%
Commercial and industrial			456,184				472,524				321,605				318,988				301,590				(14	)			57
Total commercial loans			1,501,819				1,454,594				1,269,783				1,249,649				1,225,363				13				27
Residential real estate			1,021,206				1,083,708				1,132,328				1,151,857				1,143,452				(23	)			(15	)
Consumer			119,340				124,197				128,120				135,283				107,375				(16	)			(16	)
Tax exempt and other			66,326				66,918				104,752				104,303				101,116				(4	)			(49	)
Total loans		$	2,708,691			$	2,729,417			$	2,634,983			$	2,641,092			$	2,577,306				(3	)%			3	%

DEPOSIT ANALYSIS

																						Annualized
																						Growth %
		Sep 30,				Jun 30,				Mar 31,				Dec 31,				Sep 30,				Quarter				Year to
(in thousands)		2020				2020				2020				2019				2019				End				Date
Demand		$	515,064			$	504,325			$	400,410			$	414,534			$	380,707				9	%			32	%
NOW			706,048				642,908				578,320				575,809				490,315				39				30
Savings			511,938				466,668				423,345				388,683				360,570				39				42
Money market			388,356				402,835				404,385				384,090				359,328				(14	)			1
Total non-maturity deposits			2,121,406				2,016,736				1,806,460				1,763,116				1,590,920				21				27
Total time deposits			813,509				678,126				844,097				932,635				902,665				80				(17	)
Total deposits		$	2,934,915			$	2,694,862			$	2,650,557			$	2,695,751			$	2,493,585				36	%			12	%

BAR HARBOR BANKSHARES
CONSOLIDATED STATEMENTS OF INCOME - UNAUDITED

		Three Months Ended								Nine Months Ended
		September 30,								September 30,
(in thousands, except per share data)		2020				2019				2020				2019
Interest and dividend income
Loans		$	25,918			$	28,157			$	80,398			$	82,681
Securities and other			4,557				6,105				15,006				18,593
Total interest and dividend income			30,475				34,262				95,404				101,274
Interest expense
Deposits			3,869				7,143				14,437				20,336
Borrowings			1,941				4,674				7,149				15,232
Total interest expense			5,810				11,817				21,586				35,568
Net interest income			24,665				22,445				73,818				65,706
Provision for loan losses			1,800				893				4,265				1,779
Net interest income after provision for loan losses			22,865				21,552				69,553				63,927
Non-interest income
Trust and investment management fee income			3,532				3,013				10,060				8,836
Customer service fees			2,886				2,553				8,437				7,336
Gain on sales of securities, net			-				157				1,486				157
Mortgage banking income			2,649				452				4,230				1,094
Bank-owned life insurance income			492				497				1,525				1,558
Customer derivative income			316				828				1,417				1,553
Other income			227				143				1,078				729
Total non-interest income			10,102				7,643				28,233				21,263
Non-interest expense
Salaries and employee benefits			11,809				11,364				35,602				33,568
Occupancy and equipment			4,279				3,415				12,559				10,101
Loss on sales of premises and equipment, net			-				-				90				21
Outside services			438				424				1,414				1,278
Professional services			479				707				1,488				1,821
Communication			215				189				698				707
Marketing			300				613				970				1,419
Amortization of intangible assets			256				207				768				621
Loss on debt extinguishment			-				-				1,351				-
Acquisition, conversion and other expenses			691				3,039				952				3,319
Other expenses			3,952				3,442				11,152				10,075
Total non-interest expense			22,419				23,400				67,044				62,930
Income before income taxes			10,548				5,795				30,742				22,260
Income tax expense			2,146				780				6,138				3,847
Net income		$	8,402			$	5,015			$	24,604			$	18,413
Earnings per share:
Basic		$	0.56			$	0.32			$	1.60			$	1.19
Diluted			0.56				0.32				1.60				1.18
Weighted average shares outstanding:
Basic			15,079				15,547				15,359				15,536
Diluted			15,103				15,581				15,382				15,582

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

		Sep 30,				Jun 30,				Mar 31,				Dec 31,				Sep 30,
(in thousands, except per share data)		2020				2020				2020				2019				2019
Interest and dividend income
Loans		$	25,918			$	26,493			$	27,987			$	28,361			$	28,157
Securities and other			4,557				4,942				5,507				5,756				6,105
Total interest and dividend income			30,475				31,435				33,494				34,117				34,262
Interest expense
Deposits			3,869				4,548				6,020				6,698				7,143
Borrowings			1,941				2,297				2,911				3,315				4,674
Total interest expense			5,810				6,845				8,931				10,013				11,817
Net interest income			24,665				24,590				24,563				24,104				22,445
Provision for loan losses			1,800				1,354				1,111				538				893
Net interest income after provision for loan losses			22,865				23,236				23,452				23,566				21,552
Non-interest income
Trust and investment management fee income			3,532				3,159				3,369				3,227				3,013
Customer service fees			2,886				2,439				3,112				2,791				2,553
Gain on sales of securities, net			-				1,351				135				80				157
Mortgage banking income			2,649				1,124				457				532				452
Bank-owned life insurance income			492				496				537				495				497
Customer derivative income			316				513				588				475				828
Other income			227				628				223				206				143
Total non-interest income			10,102				9,710				8,421				7,806				7,643
Non-interest expense
Salaries and employee benefits			11,809				11,909				11,884				11,432				11,364
Occupancy and equipment			4,279				3,860				4,420				4,113				3,415
(Gain) loss on sales of premises and equipment, net			-				(2	)			92				(3	)			-
Outside services			438				442				534				540				424
Professional services			479				337				672				370				707
Communication			215				194				289				114				189
Marketing			300				282				388				453				613
Amortization of intangible assets			256				256				256				240				207
Loss on debt extinguishment			-				1,351				-				1,096				-
Acquisition, conversion and other expenses			691				158				103				4,998				3,039
Other expenses			3,952				3,479				3,721				3,450				3,442
Total non-interest expense			22,419				22,266				22,359				26,803				23,400
Income before income taxes			10,548				10,680				9,514				4,569				5,795
Income tax expense			2,146				2,199				1,793				362				780
Net income		$	8,402			$	8,481			$	7,721			$	4,207			$	5,015
Earnings per share:
Basic		$	0.56			$	0.55			$	0.50			$	0.27			$	0.32
Diluted			0.56				0.55				0.50				0.27				0.32
Weighted average shares outstanding:
Basic			15,079				15,424				15,558				15,554				15,547
Diluted			15,103				15,441				15,593				15,602				15,581

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

		Quarters Ended
		Sep 30,				Jun 30,				Mar 31,				Dec 31,				Sep 30,
		2020				2020				2020				2019				2019
Earning assets
Commercial real estate			3.81	%			4.11	%			4.46	%			4.69	%			4.74	%
Commercial and industrial			4.09				3.97				4.89				4.58				4.78
Residential			3.71				3.81				3.84				3.89				3.88
Consumer			3.42				3.81				5.20				4.84				5.13
Total loans			3.81				3.94				4.30				4.33				4.38
Securities and other			3.05				3.26				3.53				3.49				3.44
Total earning assets			3.67	%			3.81	%			4.14	%			4.15	%			4.17	%
Funding liabilities
NOW			0.14	%			0.14	%			0.40	%			0.44	%			0.51	%
Savings			0.13				0.15				0.25				0.20				0.21
Money market			0.16				0.40				1.01				1.17				1.37
Time deposits			1.69				1.94				1.92				2.06				2.16
Total interest-bearing deposits			0.66				0.81				1.08				1.19				1.33
Borrowings			1.60				1.51				2.10				2.30				2.62
Total interest-bearing liabilities			0.82	%			0.96	%			1.28	%			1.42	%			1.65	%
Net interest spread			2.85				2.85				2.86				2.73				2.52
Net interest margin			2.98				3.00				3.06				2.95				2.75

BAR HARBOR BANKSHARES
AVERAGE BALANCES - UNAUDITED

		Quarters Ended
		Sep 30,				Jun 30,				Mar 31,				Dec 31,				Sep 30,
(in thousands)		2020				2020				2020				2019				2019
Assets
Commercial real estate		$	1,012,194			$	952,264			$	945,851			$	928,445			$	900,568
Commercial and industrial			531,339				522,360				423,393				412,595				410,453
Residential real estate			1,060,084				1,117,608				1,141,908				1,156,215				1,154,552
Consumer			121,248				126,413				130,471				127,425				109,562
Total loans (1)			2,724,865				2,718,645				2,641,623				2,624,680				2,575,135
Securities and other (2)			627,162				648,185				661,848				683,939				732,925
Total earning assets			3,352,027				3,366,830				3,303,471				3,308,619				3,308,060
Cash and due from banks			128,587				114,232				57,751				67,642				62,999
Allowance for loan losses			(17,028	)			(15,678	)			(15,242	)			(15,657	)			(14,965	)
Goodwill and other intangible assets			127,508				127,751				128,014				114,537				107,058
Other assets			223,316				213,986				187,765				179,512				178,804
Total assets		$	3,814,410			$	3,807,121			$	3,661,759			$	3,654,653			$	3,641,956
Liabilities and shareholders' equity
NOW		$	677,706			$	611,860			$	570,127			$	551,335			$	487,506
Savings			488,508				450,621				410,931				378,997				359,242
Money market			396,351				411,232				373,650				379,361				338,013
Time deposits			777,424				776,042				892,654				918,528				947,949
Total interest bearing deposits			2,339,989				2,249,755				2,247,362				2,228,221				2,132,710
Borrowings			481,687				612,538				556,824				571,936				708,222
Total interest-bearing liabilities			2,821,676				2,862,293				2,804,186				2,800,157				2,840,932
Non-interest-bearing demand deposits			507,844				472,688				406,951				418,324				368,100
Other liabilities			78,072				66,302				44,343				40,136				37,975
Total liabilities			3,407,592				3,401,283				3,255,480				3,258,617				3,247,007
Total shareholders' equity			406,818				405,838				406,279				396,036				394,949
Total liabilities and shareholders' equity		$	3,814,410			$	3,807,121			$	3,661,759			$	3,654,653			$	3,641,956

---

1. Total loans include non-accruing loans.
2. Average balances for securities available-for-sale are based on amortized cost.

BAR HARBOR BANKSHARES
ASSET QUALITY ANALYSIS - UNAUDITED

		At or for the Quarters Ended
		Sep 30,				Jun 30,				Mar 31,				Dec 31,				Sep 30,
(in thousands)		2020				2020				2020				2019				2019
NON-PERFORMING ASSETS
Non-accruing loans:
Commercial real estate		$	4,714			$	3,981			$	2,227			$	3,489			$	8,519
Commercial installment			1,820				1,790				1,996				1,836				2,077
Residential real estate			7,154				7,194				5,089				5,335				5,340
Consumer installment			720				1,023				744				890				743
Total non-accruing loans			14,408				13,988				10,056				11,550				16,679
Other real estate owned			1,983				2,318				2,205				2,236				2,455
Total non-performing assets		$	16,391			$	16,306			$	12,261			$	13,786			$	19,134
Total non-accruing loans/total loans			0.53	%			0.51	%			0.38	%			0.44	%			0.65	%
Total non-performing assets/total assets			0.42				0.43				0.33				0.38				0.53
PROVISION AND ALLOWANCE FOR LOAN LOSSES
Balance at beginning of period		$	16,509			$	15,297			$	15,353			$	15,353			$	14,572
Charged-off loans			(439	)			(220	)			(1,211	)			(603	)			(215	)
Recoveries on charged-off loans			37				78				44				65				103
Net loans charged-off			(402	)			(142	)			(1,167	)			(538	)			(112	)
Provision for loan losses			1,800				1,354				1,111				538				893
Balance at end of period		$	17,907			$	16,509			$	15,297			$	15,353			$	15,353
Allowance for loan losses/total loans			0.66	%			0.60	%			0.58	%			0.58	%			0.60	%
Allowance for loan losses/non-accruing loans			124				118				152				133				92
NET LOAN CHARGE-OFFS
Commercial real estate		$	(252	)		$	71			$	(846	)		$	(92	)		$	1
Commercial installment			(10	)			(155	)			(170	)			(331	)			62
Residential real estate			1				(20	)			(1	)			(16	)			(124	)
Consumer installment			(141	)			(38	)			(150	)			(99	)			(51	)
Total, net		$	(402	)		$	(142	)		$	(1,167	)		$	(538	)		$	(112	)
Net charge-offs (QTD annualized)/average loans			0.06	%			0.02	%			0.18	%			0.08	%			0.02	%
Net charge-offs (YTD annualized)/average loans			0.08				0.10				0.18				0.03				0.02
DELINQUENT AND NON-ACCRUING LOANS/ TOTAL LOANS
30-89 Days delinquent			0.16	%			0.28	%			0.84	%			0.74	%			0.18	%
90+ Days delinquent and still accruing			0.08				0.04				0.08				0.01				0.03
Total accruing delinquent loans			0.24				0.32				0.92				0.75				0.21
Non-accruing loans			0.53				0.51				0.38				0.44				0.65
Total delinquent and non-accruing loans			0.77	%			0.83	%			1.30	%			1.19	%			0.86	%

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

			At or for the Quarters Ended
			Sep 30,				Jun 30,				Mar 31,				Dec 31,				Sep 30,
(in thousands)			2020				2020				2020				2019				2019
Net income			$	8,402			$	8,481			$	7,721			$	4,207			$	5,015
Plus (less):
Gain on sale of securities, net				-				(1,351	)			(135	)			(80	)			(157	)
(Gain) loss on sale of premises and equipment, net				-				(2	)			92				(3	)			-
Loss on other real estate owned				335				-				31				20				146
Loss on debt extinguishment				-				1,351				-				1,096				-
Acquisition, conversion and other expenses				691				158				103				4,998				3,039
Income tax expense (1)				(245	)			(37	)			(22	)			(1,440	)			(720	)
Total core earnings (2)	(A)		$	9,183			$	8,600			$	7,790			$	8,798			$	7,323
Net interest income	(B)		$	24,665			$	24,590			$	24,563			$	24,104			$	22,445
Plus: Non-interest income				10,102				9,710				8,421				7,806				7,643
Total Revenue				34,767				34,300				32,984				31,910				30,088
Adj: Gain on sale of securities, net				-				(1,351	)			(135	)			(80	)			(157	)
Total core revenue (2)	(C)		$	34,767			$	32,949			$	32,849			$	31,830			$	29,931
Total non-interest expense				22,419				22,266				22,359				26,803				23,400
Less: Gain (loss) on sale of premises and equipment, net				-				2				(92	)			3				-
Less: Loss on other real estate owned				(335	)			-				(31	)			(20	)			(146	)
Less: Loss on debt extinguishment				-				(1,351	)			-				(1,096	)			-
Less: Acquisition, conversion and other expenses				(691	)			(158	)			(103	)			(4,998	)			(3,039	)
Core non-interest expense (2)	(D)		$	21,393			$	20,759			$	22,133			$	20,692			$	20,215
(in millions)
Total average earning assets	(E)		$	3,352			$	3,367			$	3,306			$	3,309			$	3,308
Total average assets	(F)			3,814				3,807				3,662				3,655				3,642
Total average shareholders' equity	(G)			407				406				406				396				395
Total average tangible shareholders' equity (2) (3)	(H)			279				278				278				281				288
Total tangible shareholders' equity, period-end (2) (3)	(I)			277				277				276				269				287
Total tangible assets, period-end (2) (3)	(J)			3,732				3,653				3,549				3,542				3,506
(in thousands)
Total common shares outstanding, period-end	(K)			14,929				15,214				15,587				15,558				15,549
Average diluted shares outstanding	(L)			15,103				15,441				15,593				15,602				15,581
Core earnings per share, diluted (2)	(A/L)		$	0.61			$	0.56			$	0.50			$	0.56			$	0.47
Tangible book value per share, period-end (2)	(I/K)			18.56				18.18				17.70				17.30				18.49
Securities adjustment, net of tax (1) (4)	(M)			11,681				11,412				9,560				5,549				8,002
Tangible book value per share, excluding securities adjustment (2)	(I+M)/K			17.78				17.43				17.09				16.94				17.98
Total tangible shareholders' equity/total tangible assets (2)	(I/J)			7.42				7.57				7.77				7.60				8.20

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

						At or for the Quarters Ended
						Sep 30,				Jun 30,				Mar 31,				Dec 31,				Sep 30,
(in thousands)						2020				2020				2020				2019				2019
Performance ratios (5)
GAAP return on assets							0.88	%			0.90	%			0.85	%			0.46	%			0.55	%
Core return on assets (2)			(A/F)				0.96				0.91				0.86				0.96				0.80
GAAP return on equity							8.22				8.40				7.64				4.21				5.04
Core return on equity (2)			(A/G)				8.98				8.52				7.71				8.81				7.36
Core return on tangible equity (2) (6)			(A+Q)/H				13.36				12.72				11.54				12.66				10.31
Efficiency ratio (2) (7)		(D-O-Q)/(C+N)					59.47				60.67				64.82				62.56				65.02
Net interest margin			(B+P)/E				2.98				3.00				3.06				2.95				2.75
Supplementary data (in thousands)
Taxable equivalent adjustment for efficiency ratio		(N)				$	570			$	646			$	719			$	674			$	658
Franchise taxes included in non-interest expense		(O)					121				120				119				119				119
Tax equivalent adjustment for net interest margin		(P)					416				490				551				516				503
Intangible amortization		(Q)					256				256				256				240				207

1. Assumes a marginal tax rate of 23.87% for the first three quarters of 2020 and the fourth quarter of 2019 and 23.78% in the first three quarters of 2019.
2. Non-GAAP financial measure.
3. Tangible shareholders' equity is computed by taking total shareholders' equity less the intangible assets at period-end. Tangible assets is computed by taking total assets less the intangible assets at period-end.
4. Securities adjustment, net of tax represents the total unrealized loss on available-for-sale securities recorded on the Company's consolidated balance sheets within total common shareholders' equity.
5. All performance ratios are based on average balance sheet amounts, where applicable.
6. Adjusted return on tangible equity is computed by taking core earnings divided by shareholders' equity less the tax-effected amortization of intangible assets, assuming a marginal rate of 23.87% for the first three quarters of 2020 and the fourth quarter of 2019, and 23.78% in the first three quarters of 2019.
7. Efficiency ratio is computed by dividing core non-interest expense net of franchise taxes and intangible amortization divided by core revenue on a fully taxable equivalent basis.

SOURCE: Bar Harbor Bank and Trust

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FAQ

What were Bar Harbor Bankshares' earnings per share in Q3 2020?

Bar Harbor Bankshares reported earnings of $0.56 per share in Q3 2020.

How did core earnings for Bar Harbor Bankshares change in Q3 2020?

Core earnings increased by 30% to $9.2 million, or $0.61 per share.

What was the loan-to-deposit ratio for Bar Harbor Bankshares in Q3 2020?

The loan-to-deposit ratio improved to 92% in Q3 2020.

What is Bar Harbor Bankshares' net interest margin for Q3 2020?

The net interest margin for Q3 2020 was 2.98%.

How much did non-interest income increase for Bar Harbor Bankshares in Q3 2020?

Non-interest income increased by 32% to $10.1 million in Q3 2020.