Bar Harbor Bankshares (AMEX:BHB) the parent company of Bar Harbor
Bank & Trust (the "Bank"), today announced net income of $1.6
million for the quarter ended March 31, 2006 or fully diluted
earnings per share of $0.50, compared with $1.2 million or fully
diluted earnings per share of $0.38 for the first quarter of 2005,
representing increases of 29% and 31%, respectively. In making the
announcement, President and Chief Executive Officer, Joseph M.
Murphy commented, "There were several factors which favorably
contributed to the sizable increase in our first quarter 2006
earnings compared with the same quarter last year. These factors
principally included an increase in securities gains, a gain on the
sale of Bank owned real estate, and the recording of certain
employee severance expenses in the comparable quarter last year.
Despite the flat U.S. Treasury yield curve and the declining net
interest margins being experienced by us and the banking industry
as a whole, the Bank's net interest income was up compared with the
same quarter in 2005. We are pleased with the significant growth of
our loan portfolio, while enjoying strong credit quality and
limited provisioning for loan losses. Managing and containing our
operating expenses continues to be a top priority." In concluding,
Mr. Murphy added, "Given the current interest rate environment and
the prospect of further increases in short-term interest rates by
the Board of Governors of the Federal Reserve System, combined with
intensifying competition for loans and deposits, we anticipate the
balance of the year will undoubtedly prove to be one of the more
challenging periods for community banks in recent history."
Financial Condition Total loans ended the quarter at $529 million,
representing an increase of $14 million or 3% compared with
December 31, 2005, and an increase of $71 million or 16% compared
with the same date last year. Commercial loans continued to drive
the overall growth of the Bank's loan portfolio, posting an
increase of $50 million, or 29%, compared with March 31, 2005. The
Bank's non-performing loans remained at low levels during the
quarter, representing $896 thousand or 0.17% of total loans at
March 31, 2006. Reflecting the continued stable performance of the
loan portfolio, during the first quarter of 2006 the Bank recorded
a provision for loan losses of $28 thousand, compared with none
during the first quarter of 2005. Investment securities totaled
$201 million at March 31, 2006, representing an increase of $18
million or 10% compared with December 31, 2005, and an increase of
$38 million or 23% compared with the same date last year. Market
yields showed meaningful improvement during the first quarter,
presenting opportunities for increasing the Bank's earning assets
and generating higher levels of net interest income. Total deposits
ended the first quarter at $475 million, representing increases of
7% and 24% compared with December 31 and March 31, 2005,
respectively. Deposit growth was largely attributed to brokered
certificates of deposit, as earning asset growth continued to
outpace retail deposit growth. At March 31, 2006, retail deposits
totaled $392 million, representing an increase of $7 million or 2%
compared with December 31, 2005, and an increase of $34 million or
9% compared with the same date last year. Historically, the banking
business in the Bank's market area has been seasonal, with lower
deposits in the winter and spring, and higher deposits in summer
and autumn. During the first quarter of 2006, the Bank's net
deposit outflows were less than historical norms. Management
attributes this to the successful introduction of a new variable
rate money market account product, combined with deposit pricing
strategies designed to satisfy the changing expectations of its
customers, as market interest rates and competitive pricing
pressures continued to escalate. Total borrowings amounted to $244
million at March 31, 2006, representing increases of $4 million and
$25 million, or 2% and 11%, compared with December 31, and March
31, 2005, respectively. The increase in borrowings was principally
utilized to help support the Bank's strong earning asset growth.
The Company continued to exceed regulatory requirements for
well-capitalized institutions, ending the current quarter with a
Tier I Capital Ratio of 7.29%. Results of Operations For the
quarter ended March 31, 2006, net interest income amounted to $5.5
million, representing an increase of $176 thousand or 3% compared
with the first quarter of 2005. The increase in net interest income
was principally attributed to the growth in average earning assets,
as the first quarter 2006 net interest margin of 3.17% was 37 basis
points lower than the same quarter in 2005. As is widely the
situation throughout the banking industry, the decline in the net
interest margin was largely attributed to the steady increases in
short-term interest rates and the flat U.S. Treasury yield curve,
the impact of which has caused the Bank's funding costs to increase
at a faster pace than the yield on its earning asset portfolios.
Total non-interest income amounted to $1.6 million for the quarter
ended March 31, 2006, representing an increase of $501 thousand or
45% compared with the first quarter of 2005. The increase in
non-interest income was principally attributed to gains realized on
the sale of securities, which amounted to $310 thousand during the
first quarter of 2006, compared with $21 thousand during the same
quarter last year. Additionally, the increase in first quarter 2006
other operating income was aided by a $145 thousand gain on the
sale of a parcel of Bank owned real estate. All other categories of
non-interest income showed meaningful increases during the first
quarter, compared with the same quarter in 2005. Total non-interest
expenses amounted to $4.9 million for the quarter ended March 31,
2006, representing an increase of $102 thousand or 2% compared with
the same quarter in 2005. Salaries and employee benefits declined
$170 thousand or 7%, principally attributed to certain employee
severance costs recorded during the first quarter of 2005. The
decline in first quarter salaries and employee benefits expense was
offset, in part, by increased marketing costs and moderate
increases in a variety of other operating expense categories. The
Company's first quarter 2006 earnings reflect the adoption of
Statement of Financial Accounting Standard 123-R, "Accounting for
Share-Based Payments", which mandates the expensing of stock
options and other equity awards. The Company recognized $18
thousand of share-based compensation in salaries and employee
benefits expense. Bar Harbor Bankshares is the parent company of
its wholly owned subsidiary, Bar Harbor Bank & Trust. Bar
Harbor Bank & Trust, founded in 1887, provides full service
community banking with twelve branch office locations serving Down
East and Mid Coast Maine. This earnings release may contain 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. You can identify these forward-looking statements by the use
of words like "strategy," "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, competition, 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. The Company assumes no obligation to update
any forward-looking statements as a result of new information or
future events or developments. -0- *T Bar Harbor Bankshares
Selected Financial Information (dollars in thousands except per
share data) (unaudited) 1st Quarter Period End Average Balance
Sheet Data 3/31/06 3/31/05 2006 2005 Total assets $781,207 $664,527
$756,087 $664,032 Total investment securities 201,129 163,429
191,844 168,907 Total loans 529,119 457,766 520,868 450,943
Allowance for loan losses 4,473 4,799 4,654 4,830 Total deposits
474,752 384,204 454,504 392,587 Borrowings 243,703 219,063 238,640
209,616 Shareholders' equity 55,832 54,994 56,793 56,101 Three
Months Ended Results Of Operations 3/31/06 3/31/05 Interest and
dividend income $10,694 $8,541 Interest expense 5,207 3,230 Net
interest income 5,487 5,311 Provision for loan losses 28 - - Net
interest income after provision for loan losses 5,459 5,311
Non-interest income 1,604 1,103 Non-interest expense 4,885 4,783
Pre-tax income 2,178 1,631 Income tax 615 418 Net income $1,563
$1,213 Earnings per share: Basic $0.51 $0.39 Diluted $0.50 $0.38
Dividends per share $0.22 $0.21 Return on Average Equity 11.16%
8.77% Return on Average Assets 0.84% 0.74% As of March 31: 2006
2005 Tier 1 Leverage Capital Ratio 7.29% 7.80% Book value per share
$18.34 $17.86 Tangible book value per share $17.30 $16.83 Shares
outstanding 3,044,984 3,079,658 *T
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