Bar Harbor Bankshares Announces 2013 Earnings

  Bar Harbor Bankshares Announces 2013 Earnings

Business Wire

BAR HARBOR, Maine -- February 3, 2014

Bar Harbor Bankshares (NYSE MKT: BHB) (the “Company”) the parent company of
Bar Harbor Bank & Trust (the “Bank”), today announced record net income of
$13.2 million for the year ended December 31, 2013, representing an increase
of $717 thousand, or 5.8%, compared with 2012. The Company also reported
record diluted earnings per share of $3.34 for 2013, representing an increase
of $0.16, or 5.0%, compared with 2012. The Company’s return on average equity
amounted to 10.52%, up from 9.93% in 2012. The Company’s 2013 return on
average assets amounted to 0.98%, compared with 1.00% in 2012.

The Company also reported net income of $3.3 million for the quarter ended
December 31, 2013, or diluted earnings per share of $0.82, compared with $2.8
million or diluted earnings per share of $0.72 in the fourth quarter of 2012,
representing increases of $434 thousand and $0.10, or 15.3% and 13.9%,
respectively.

“Our 2013 performance continued a long-standing trend of delivering both
growth and solid financial returns,” said Company President and Chief
Executive Officer, Curtis C. Simard. “We are delighted to report our eighth
consecutive year of record earnings. Even with the challenges confronting the
general economy and the financial services industry, our 2013 performance was
highlighted by a $2.1 million or 5.7% increase in net interest income. We view
this as an important metric as continued pressure on our net interest margin
was more than offset with almost $100 million in average earning asset growth.
Led by revenue from the Trust division and other financial services, we also
enjoyed higher levels of fee income compared with last year.”

Mr. Simard continued, “Despite soft demand and competitive pricing pressures,
our commercial and consumer loan portfolios were up $24.7 million and $11.8
million, respectively, from year end 2012. We are also pleased to report
relatively stable credit quality, highlighted by meaningful declines in
non-performing loans and net loan charge-offs, compared with 2012. Expense
control continued to be well demonstrated in 2013, with an efficiency ratio of
55.8%.”

In concluding, Mr. Simard added, “Like most banks, we are challenged by the
current interest rate environment and we expect little relief in 2014 given
the Federal Reserve’s determination to maintain interest rates at historically
low levels for an extended period of time. Defending the net interest margin
will be a top priority for us in 2014, as will be growing our loan portfolio
without sacrificing credit quality. We believe we are prepared for these
challenges and will continue to seek out opportunities to expand our business
and deliver the promise of successful community banking to our customers,
prospects and shareholders alike.”

Balance Sheet

Assets: Total assets ended the year at $1.37 billion, up $71.0 million, or
5.4%, compared with December 31, 2012. The increase in total assets was led by
loan growth and, to a lesser extent, an increase in the Bank’s securities
portfolio.

Loans: Total loans ended the year at $852.9 million, up $37.9 million, or
4.6%, compared with December 31, 2012. At year end, the Bank’s commercial loan
portfolio stood at $455.6 million, representing an increase of $24.7 million,
or 5.7%, compared with year end 2012. Consumer loans, which principally
consist of residential real estate mortgages, ended the year at $381.2
million, representing an increase of $11.8 million or 3.2% compared with year
end 2012. Tax-exempt loans to local municipalities increased $1.1 million
during 2013, or 7.3%

Credit Quality: Total non-performing loans ended the year at $8.8 million,
representing a decline of $1.0 million or 10.4% compared with year-end 2012.
One commercial real estate development loan to a local, non-profit housing
authority in support of an affordable housing project accounted for $1.8
million or 20.9% of total non-performing loans. At December 31, 2013, total
non-performing loans represented 1.04% of total loans, down from 1.21% at year
end 2012. Similarly, the allowance for loan losses expressed as a percentage
of non-performing loans ended the year at 95.9%, up from 82.1% at year end
2012.

The Bank’s loan loss experience improved in 2013 with total net loan
charge-offs amounting to $1.0 million, representing a decline of $736
thousand, or 41.4%, compared with 2012. Total net loan charge offs expressed
as a percentage of average loans outstanding amounted to 0.12% in 2013, down
from 0.23% in 2012. The Bank recorded a provision for loan losses of $1.4
million in 2013, representing a decline of $234 thousand or 14.2% compared
with 2012. The decline in the provision largely reflected stable credit
quality metrics combined with improved loan loss experience.

At December 31, 2013, the Bank’s allowance for loan losses stood at $8.5
million, representing an increase of $378 thousand or 4.7% compared with year
end 2012. The allowance for loan losses expressed as a percentage of total
loans ended the year at 0.99%, unchanged from year end 2012.

Securities: Total securities ended the year at $450.2 million, up $32.1
million, or 7.7%, compared with year end 2012. Securities purchased during
2013 consisted of mortgage-backed securities issued by U.S. Government
agencies and sponsored-enterprises, as well as municipal securities issued by
states and political subdivisions thereof.

Deposits: Total deposits ended the year at $835.7 million, up $39.9 million,
or 5.0%, compared with year end 2012. Demand, NOW and money market accounts
combined were up $14.9 million or 3.5% compared with year end 2012, while time
deposits were up $25.0 million, or 6.8%.

Capital: At December 31, 2013, the Company and the Bank continued to exceed
regulatory requirements for “well-capitalized” financial institutions. Under
the capital adequacy guidelines administered by the Bank’s principal
regulators, “well-capitalized” institutions are those with Tier I leverage,
Tier I Risk-based, and Total Risk-based ratios of at least 5%, 6% and 10%,
respectively. At December 31, 2013, the Company’s Tier I Leverage, Tier I
Risk-based, and Total Risk-based capital ratios were 9.01%, 14.97% and 16.62%,
respectively.

Shareholders’ Equity: Total shareholders’ equity ended the year at $121.4
million, representing a decline of $6.7 million compared with December 31,
2012. The decline in shareholder’s equity was attributed to a $15.6 million
decline in accumulated other comprehensive income. This decline was
principally the result of a reduction of unrealized gains in the Bank’s
investment securities portfolio, which declined from a tax effected unrealized
gain of $8.1 million at December 31, 2012 to a tax effected unrealized loss of
$7.6 million at December 31, 2013. The net unrealized losses at December 31,
2013 were attributed to a significant increase in interest rates during, 2013,
which negatively impacted the fair value of the Bank’s fixed income securities
portfolio.

Shareholder Dividends: During 2013 the Company paid regular cash dividends on
its common stock in the aggregate amount of $4.92 million, compared with $4.57
million in 2012. The Company’s 2013 dividend payout ratio amounted to 37.3%,
compared with 36.6% in 2012. The total regular cash dividends paid in 2013
amounted to $1.25 per share of common stock, compared with $1.17 per share in
2012, representing an increase of $0.08 per share, or 6.8%.

The Company’s Board of Directors recently declared a first quarter 2014
regular cash dividend of $0.325 per share of common stock, representing an
increase of $0.02 or 6.6% compared with the first quarter of 2013. This
represented the eleventh consecutive quarter where the Company increased its
quarterly cash dividend to shareholders. Based on the year-end 2013 price of
BHB’s common stock of $39.99 per share, the dividend yield amounted to 3.25%.

Results of Operations

Net Interest Income: For the year ended December 31, 2013, net interest income
on a tax-equivalent basis amounted to $40.8 million, up $2.2 million, or 5.8%,
compared with 2012. The increase in net interest income was principally
attributed to average earning asset growth of $99.3 million or 8.3%, offset in
part by an eight basis point decline in the net interest margin. The
tax-equivalent net interest margin amounted to 3.15% in 2013, compared with
3.23% in 2012. The yield on earning assets declined thirty-three basis points
to 4.05%, while the rate paid on interest bearing liabilities declined thirty
basis points to 1.02%.

For the quarter ended December 31, 2013, net interest income on a
tax-equivalent basis amounted to $10.8 million, up $368 thousand or 3.5% on a
linked-quarter basis and representing an increase of $749 thousand, or 7.4%,
compared with the fourth quarter of 2012. The Bank’s fourth quarter
tax-equivalent net-interest margin amounted to 3.21%, representing an
improvement of nine basis points on a linked-quarter basis, but down two basis
points compared with the fourth quarter of 2012. During the fourth quarter of
2013, the weighted average yield on the Bank’s earning assets increased six
basis points, while the weighted average cost of its interest bearing
liabilities declined four basis points from the third quarter. The increase in
fourth quarter earning asset yields was entirely attributed to the securities
portfolio, as the amortization of bond premiums continued to slow.

Non-interest Income: For the year ended December 31, 2013, total non-interest
income amounted to $7.6 million compared with $7.7 million in 2012,
representing a decline of $143 thousand, or 1.9%. The decline in non-interest
income was entirely attributed to a $658 thousand decline in realized
securities gains net of other-than-temporary impairment losses.

Trust and other financial services fees amounted to $3.6 million in 2013,
representing an increase of $356 thousand, or 10.9%, compared with 2012. This
increase was principally attributed to increases in the value of assets under
management and higher levels of fee income from retail brokerage activities.
Reflecting new client relationships and strength in the equity markets, at
December 31, 2013, assets under management stood at $387.6 million, up $32.2
million or 9.1% compared with year-end 2012.

For the year ended December 31, 2013, income generated from service charges on
deposit accounts amounted to $1.2 million, representing an increase of $52
thousand, or 4.3%, compared with 2012. The increase in service charges on
deposits was largely attributed to customer overdraft fee increases instituted
in the third quarter of 2012 combined with increased customer overdraft
activity.

For the year ended December 31, 2013, credit and debit card service charges
and fees amounted to $1.6 million, representing an increase of $110 thousand
or 7.5%, compared with 2012. This increase was principally attributed to
continued growth of the Bank’s retail deposit base, higher levels of merchant
credit card processing volumes, and continued success with a program that
offers rewards for certain debit card transactions.

Total securities gains, net of other-than-temporary impairment losses,
amounted to $427 in 2013, representing a decline of $658 thousand, or 60.6%,
compared with 2012. Net 2013 securities gains were comprised of realized gains
on the sale of securities amounting to $676 thousand, offset in part by
other-than-temporary impairment losses of $249 thousand on certain
available-for-sale, private label residential mortgage-backed securities.

Non-interest Expense: For the year ended December 31, 2013, total non-interest
expense amounted to $26.9 million, up $1.2 million, or 4.8%, compared with
2012.

The increase in non-interest expense was almost entirely attributed to a $1.2
million or 8.6% increase in salaries and employee benefits. The increase in
salaries and employee benefits was attributed to a variety of factors
including normal increases in base salaries, higher levels of employee
incentive compensation, as well as changes in staffing levels and mix. The
increase in salaries and benefits also reflected the Bank’s acquisition of
three branch offices in the third quarter of 2012. Also contributing to the
increase were expenses related to certain equity awards to members of the
Company’s Board of Directors and the newly-appointed President and CEO of the
Company.

Total occupancy expense amounted to $2.0 million in 2013, up $286 thousand or
17.0%, compared with 2012. This increase was largely attributed to the
acquisition of three branch offices in the third quarter of 2012, two of which
are leased properties. The increase in occupancy expense was also attributed
to the Bank’s substantial reconfiguration of its Ellsworth campus including
the replacement of its Ellsworth retail banking office, which was put in
service in the third quarter of 2012.

Total other operating expenses amounted to $6.6 million in 2013, down $331
thousand, or 4.8%, compared with 2012. This decline was principally attributed
to certain non-recurring expenses related to the Bank’s acquisition of three
branch offices in 2012, including fees for professional services and a wide
variety of conversion and integration related expenses.

Efficiency Ratio: The Company’s efficiency ratio, or non-interest operating
expenses divided by the sum of tax-equivalent net interest income and
non-interest income other than net securities gains and other-than-temporary
impairments, measures the relationship of operating expenses to revenues. For
the year ended December 31, 2013, the Company’s efficiency ratio amounted to
55.8%, compared with the 54.6% for 2012. These ratios compared favorably to
peer and industry averages.

About Bar Harbor Bankshares

Bar Harbor Bankshares is the parent company of its wholly owned subsidiary,
Bar Harbor Bank & Trust. Founded in 1887, Bar Harbor Bank & Trust provides
full service community banking with fifteen branch office locations serving
downeast, midcoast and central Maine.

This earnings release contains certain forward-looking statements with respect
to the financial condition, results of operations and business of Bar Harbor
Bankshares (the “Company”) for which the Company claims the protection of the
safe harbor provided by the Private Securities Litigation Reform Act of 1995,
as amended. You can identify these forward-looking statements by the use of
words like “strategy,” “anticipates” “expects,” “plans,” “believes,” “will,”
“estimates,” “intends,” “projects,” “goals,” “targets,” and other words of
similar meaning. You can also identify them by the fact that they do not
relate strictly to historical or current facts. Forward-looking statements
include, but are not limited to, those made in connection with estimates with
respect to the future results of operation, financial condition, and the
business of the Company which are subject to change based on the impact of
various factors that could cause actual results to differ materially from
those projected or suggested due to certain risks and uncertainties. These
risks and uncertainties include, but are not limited to, changes in general
economic conditions, interest rates, deposit flows, loan demand, internal
controls, legislation or regulation and accounting principles, policies or
guidelines, as well as other economic, competitive, governmental, regulatory
and accounting and technological factors affecting the Company’s operations.
For more information about these risks and uncertainties and other factors,
please see the Company’s Annual Report on Form 10-K, as updated by the
Company’s Quarterly Reports on Form 10-Q and other filings on file with the
SEC. All of these factors should be carefully reviewed, and readers should not
place undue reliance on these forward-looking statements. The Company assumes
no obligation to update any forward-looking statements as a result of new
information or future events or developments.

Bar Harbor Bankshares
Selected Financial Information
(dollars in thousands except share and per share data)
(unaudited)
                                                  
                   Period End                          4th Quarter Average
Balance Sheet      12/31/2013      12/31/2012        2013            2012
Data
                                                                         
Total assets       $ 1,373,893       $ 1,302,935       $ 1,379,442       $ 1,298,932
Total                450,170           418,040           464,953           414,289
securities
Total loans          852,857           815,004           851,640           806,014
Allowance for        8,475             8,097             8,526             8,333
loan losses
Total deposits       835,651           795,765           865,256           805,021
Total                409,445           371,567           381,972           355,846
Borrowings
Shareholders'        121,379           128,046           124,994           130,011
equity
                                                                         
                   Three Months Ended                  Years Ended
Results Of         12/31/2013        12/31/2012        12/31/2013        12/31/2012
Operations
                                                                         
Interest and
dividend           $ 13,076          $ 12,957          $ 50,749          $ 50,838
income
Interest             2,731             3,370             11,663            13,867
expense
Net interest         10,345            9,587             39,086            36,971
income
Provision for        490               350               1,418             1,652
loan losses
Net interest
income after
provision for        9,855             9,237             37,668            35,319
loan losses
                                                                         
Non-interest         1,817             1,737             7,566             7,709
income
Non-interest        7,123           7,094           26,860          25,618    
expense
Income before        4,549             3,880             18,374            17,410
income taxes
Income taxes        1,285           1,050           5,191           4,944     
                                                                         
Net income         $ 3,264          $ 2,830          $ 13,183         $ 12,466    
                                                                         
                                                                         
Share and Per
Common Share
Data
                                                                         
Period-end
shares               3,939,075         3,920,044         3,939,075         3,920,044
outstanding
Basic average
shares               3,938,556         3,920,373         3,932,051         3,901,118
outstanding
Diluted
average shares       3,962,042         3,935,886         3,952,293         3,919,769
outstanding
                                                                         
Basic earnings     $ 0.83            $ 0.72            $ 3.35            $ 3.20
per share
Diluted
earnings per       $ 0.82            $ 0.72            $ 3.34            $ 3.18
share
                                                                         
Cash dividends     $ 0.320           $ 0.300           $ 1.250           $ 1.170
Book value         $ 30.81           $ 32.66           $ 30.81           $ 32.66
(period end)
Tangible book
value (period      $ 29.39           $ 31.20           $ 29.39           $ 31.20
end)
                                                                         
Selected
Financial
Ratios
                                                                         
Return on            0.94      %       0.87      %       0.98      %       1.00      %
Average Assets
Return on            10.36     %       8.66      %       10.52     %       9.93      %
Average Equity
Tax-equivalent
Net Interest         3.21      %       3.23      %       3.15      %       3.23      %
Margin
Efficiency           56.1      %       59.8      %       55.8      %       54.6      %
Ratio (1)
                                                                                     
                                                                                     

                                                      At or for the
                                                   
                                                      Year Ended
                                                      December 31,
                                                              
                                                      2013       2012
Asset Quality
                                                                 
Net charge-offs to average loans                      0.12%      0.23%
Allowance for loan losses to total loans              0.99%      0.99%
Allowance for loan losses to non-performing loans     95.9%      82.1%
Non-performing loans to total loans                   1.04%      1.21%
Non-performing assets to total assets                 0.76%      0.97%
                                                                 
Capital Ratios
                                                                 
Tier 1 leverage capital                               9.01%      8.87%
Tier 1 risk-based capital                             14.97%     14.15%
Total risk-based capital                              16.62%     15.78%
Tangible equity to total assets                       8.43%      9.39%
Tangible common equity (2)                            8.46%      9.43%
                                                                 
                                                                 

Use of non-GAAP Financial Measures

Certain information in this press release contains financial information
determined by methods other than in accordance with accounting principles
generally accepted in the United States of America (“GAAP”). Management uses
these “non-GAAP” measures in its analysis of the Company’s performance and
believes these non-GAAP financial measures provide a greater understanding of
ongoing operations and enhance comparability of results with prior periods as
well as demonstrating the effects of significant gains and charges in the
current period. The Company believes that a meaningful analysis of its
financial performance requires an understanding of the factors underlying that
performance. Management believes that investors may use these non-GAAP
financial measures to analyze financial performance without the impact of
unusual items that may obscure trends in the Company’s underlying performance.
These disclosures should not be viewed as a substitute for operating results
determined in accordance with GAAP, nor are they necessarily comparable to
non-GAAP performance measures that may be presented by other companies.

(1) In certain places in this press release net interest income and the net
interest margin is calculated and discussed on a fully tax-equivalent basis.
Specifically included in interest income was tax-exempt interest income from
certain investment securities and loans. An amount equal to the tax benefit
derived from this tax-exempt income has been added back to the interest income
total, which increased net interest income accordingly. Management believes
the disclosure of tax-equivalent net interest income information improves the
clarity of financial analysis, and is particularly useful to investors in
understanding and evaluating the changes and trends in the Company’s results
of operations. Other financial institutions commonly present net interest
income on a tax-equivalent basis. This adjustment is considered helpful in the
comparison of one financial institution’s net interest income to that of
another institution, as each will have a different proportion of tax-exempt
interest from its earning assets. Moreover, net interest income is a component
of a second financial measure commonly used by financial institutions, net
interest margin, which is the ratio of net interest income to average earning
assets. For purposes of this measure as well, other financial institutions
generally use tax-equivalent net interest income to provide a better basis of
comparison from institution to institution. The Company follows these
practices.

(2) The Company presents its efficiency ratio using non-GAAP information. The
GAAP efficiency ratio is computed by dividing non-interest expense by the sum
of tax-equivalent net interest income and non-interest income. The non-GAAP
efficiency ratio presented in this press release is computed by dividing
non-interest expense by the sum of tax-equivalent net interest income and
non-interest income other than net securities gains and OTTI, and other
significant non-recurring expenses. Fourth quarter and year-to-date
non-recurring expenses amounted to $34 and $863, all of which were associated
with the Border Trust transaction.

(3) The Company presents certain information based upon tangible common equity
instead of total shareholders’ equity in accordance with GAAP. The difference
between these two measures is the Company’s intangible assets, specifically
goodwill and core deposit intangibles from prior acquisitions. Management,
banking regulators and many stock analysts use the tangible common equity
ratio, the tangible equity to total assets ratio and the tangible book value
per common share in conjunction with more traditional bank capital ratios to,
among other things, compare the capital adequacy of banking organizations with
significant amounts of goodwill or other intangible assets, typically stemming
from the use of the purchase accounting method in accounting for mergers and
acquisitions. The tangible common equity ratio is computed by dividing the
total common shareholders' equity, less goodwill and other intangible assets,
by total assets, less goodwill and other intangible assets. The tangible
equity to total assets ratio is computed by dividing total shareholders'
equity, less goodwill and other intangible assets, by total assets at period
end. The tangible book value ratio is computed by dividing total shareholders’
equity, less goodwill and other intangible assets, by period end total
outstanding shares of common stock.

Contact:

Bar Harbor Bankshares
Gerald Shencavitz, 207-288-3314
EVP and Chief Financial Officer
 
Press spacebar to pause and continue. Press esc to stop.