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Bar Harbor Bankshares Reports Strong Second Quarter Results While Completing Systems Conversion

 Bar Harbor –  Bar Harbor Bankshares (NYSE: BHB) reported second quarter

2017 net income of $6.6 million, or 42 cents per share. Core earnings totaled $8.1 million, or 52 cents per

share. Net income increased 56% over the prior quarter and core earnings increased 21% reflecting the

strength of the expanded operations. Merger-related and systems conversion costs in the second quarter of

2017 totaled $0.10 per share (after-tax).

 

SECOND QUARTER FINANCIAL HIGHLIGHTS (comparisons are to prior quarter unless otherwise stated):

  • 11% increase in net interest income
  • 10% increase in fee income
  • 20 bps improvement in core ROA to .94% (non-GAAP measure)
  • 56.0% efficiency ratio (non-GAAP measure)
  • 7.1% annualized deposit growth
  • 0.22% non-performing loans to total loans

 

President and Chief Executive Officer, Curtis C. Simard stated, “The second quarter results are reflective

of the momentum and drive we experienced across all our markets. We remain focused on executing

profitability strategies while maintaining our commitment to our communities. Not only did we

experience strong and disciplined improvement in all performance metrics, we successfully completed our

systems conversion on time and according to plan. This has been an active quarter in every way, and I am

proud of what our teams have accomplished. It is a direct reflection of our commitment and what defines

our culture.”

 

Mr. Simard further stated “We continue to strengthen our balance sheet by delivering positive operating

leverage through revenue diversification and maximizing operational efficiencies. All the while, our

commitment to credit risk and asset quality remains a top priority as the second quarter ratio of nonperforming

loans to total loans came in at a mere 22 basis points.”

 

RESULTS OF OPERATIONS

GAAP earnings increased to $6.6 million in the second quarter from $4.2 million in the linked quarter

driven by higher interest income and fee income, and lower merger related expenses. Core income, which

is a non-GAAP measure excluding tax-effected acquisition and system related costs, was $8.1 million in

the second quarter compared to $6.2 million in the prior quarter. Second quarter earnings includes a full

quarter earnings from the Lake Sunapee Bank Group merger that closed on January 13, 2017. Net interest

income was affected positively by a 6 basis point increase in net interest spread. The yield on earning

assets also benefited from purchase loan accretion.

 

Total non-interest income increased $0.5 million to $6.6 million compared to $5.9 million in the prior

quarter. Trust and investment management fees increased $0.5 million in the current quarter as we

continue to leverage the expanded operations from the merger. Customer service fees increased $0.6

million compared to the prior quarter as a result of a higher number of ATM transactions and a full quarter

impact from the acquired operations.

 

Non-interest expense decreased $0.8 million in the current quarter primarily due to lower merger related

and system conversion costs. The efficiency ratio (a non-GAAP financial measure) was 56.0% compared

to 63.0% in the prior quarter and 60.0% in the second quarter of 2016. This decrease reflects disciplined

cost control and execution against anticipated cost saves with the acquisition.

 

The effective tax was 31.6% in the second quarter compared to 26.0% in the first quarter, reflecting higher

pretax income. The first quarter also benefited from a merger related discrete tax adjustment that reduced

the quarterly rate based on the revaluation of the Company’s net deferred tax assets to the New Hampshire

state rate.

 

FINANCIAL CONDITION

Total assets measured $3.5 billion at June 30, 2017. While total loan growth was relatively flat due to a

large commercial real estate loan payoff just prior to quarter end, total average balances increased for the

quarter. Commercial and industrial product lines increased 46.3% from the prior quarter, which are

generally variable rate in nature and are favorable in the current interest rate environment.

 

The Company’s book value per share increased to $22.53 from $22.17 in the first quarter while tangible

book value per share, a non-GAAP financial measure, increased to $15.44 from $15.07. The loan to

deposit ratio improved to 107% from 109% in the prior quarter primarily due to growth in time deposits as

we continue to leverage and deepen the expanded customer base. Asset quality continues to be strong as

the ratio of non-accruing loans to total loans decreased to 0.22% from 0.25% in the previous quarter and

net charge-offs to total loans remains close to zero at 0.03%.

 

BACKGROUND

Bar Harbor Bankshares (NYSE MKT: BHB) is the parent company of its wholly owned subsidiary, Bar

Harbor Bank & Trust. Founded in 1887, Bar Harbor Bank & Trust is a true community bank serving the

financial needs of its clients for over 125 years. Bar Harbor provides full service community banking with

office locations in all three Northern New England states of Maine, New Hampshire and Vermont. For more

information, visit www.bhbt.com.

 

FORWARD LOOKING STATEMENTS

This document contains forward-looking statements as defined in the Private Securities Litigation Reform

Act of 1995. There are several factors that could cause actual results to differ significantly from expectations

described in the forward-looking statements. For a discussion of such factors, please see the Company’s most

recent reports on Forms 10-K and 10-Q filed with the Securities and Exchange Commission and available

on the SEC’s website at www.sec.gov. The Company does not undertake any obligation to update forwardlooking

statements.

 

NON-GAAP FINANCIAL MEASURES

This document contains certain non-GAAP financial measures in addition to results presented in accordance

with Generally Accepted Accounting Principles (“GAAP”). These non-GAAP measures provide

supplemental perspectives on operating results, performance trends, and financial condition. They 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 included

beginning on page J in the accompanying financial tables. In all cases, it should be understood that non-

GAAP per share measures do not depict amounts that accrue directly to the benefit of shareholders.

The Company utilizes the non-GAAP measure of core earnings in evaluating operating trends, including

components for core revenue and expense. These measures exclude items which the Company does not view

as related to its normalized operations. These items include securities gains/losses, merger costs, restructuring

costs, and systems conversion costs. Non-core adjustments are presented net of an adjustment for income

tax expense. This adjustment is determined as the difference between the GAAP tax rate and the effective

tax rate applicable to core income. The efficiency ratio is adjusted for non-core revenue and expense items

and for tax preference items. The Company also calculates measures related to tangible equity, which adjust

equity (and assets where applicable) to exclude intangible assets due to the importance of these measures to

the investment community. Charges related to merger of Lake Sunapee Bank Group consists primarily of

severance and retention cost, systems conversion and integration costs, and professional fees. The Company’s

disclosure of organic growth of loans in 2017 is also adjusted for the Lake Sunapee Bank Group merger.

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