Bar Harbor Bankshares (the �Company�) (NYSE Alternext US: BHB) the
parent company of Bar Harbor Bank & Trust (the �Bank�), today
announced net income of $6.3 million for the nine months ended
September 30, 2008, or fully diluted earnings per share of $2.09,
compared with $5.4 million or fully diluted earnings per share of
$1.72 for the same period in 2007, representing increases of $949
thousand and $0.37, or 17.7% and 21.5%, respectively. The
annualized return on average shareholders� equity (�ROE�) amounted
to 12.78%, compared with 11.52% for the same period in 2007. The
increased level of earnings was attributed to a variety of factors
including: a $3.2 million or 18.8% increase in net interest income;
a $1.3 million increase in net securities gains (losses); a $313
thousand gain representing the proceeds from shares redeemed in
connection with the Visa Inc. initial public offering; and a $170
thousand or 9.7% increase in trust and financial services fees.
Partially offsetting the foregoing revenue increases was a $1.4
million increase in the provision for loan losses and a $2.2
million increase in non-interest expenses, which largely reflected
an increase in salaries and employee benefit expenses and the
recording of a non-recurring $832 thousand expense reduction in the
first quarter of 2007 related to the Company�s settlement of its
limited postretirement benefit program. The Company also announced
net income of $2.3 million for the quarter ended September 30,
2008, or fully diluted earnings per share of $0.78, compared with
$2.1 million or fully diluted earnings per share of $0.69 for the
same quarter in 2007, representing increases of $186 thousand and
$0.09, or 8.7% and 13.0%, respectively. The annualized return on
average shareholders� equity amounted to 14.46%, compared with
13.68% for the same quarter in 2007. The increase in third quarter
2008 earnings compared with the third quarter of 2007 was
principally attributed to a $1.2 million or 20.6% increase in net
interest income, partially offset by a $646 thousand increase in
the provision for loan losses and a $142 thousand decline in
securities gains. In making the announcement, President and Chief
Executive Officer, Joseph M. Murphy commented, �As we enter the
last quarter of 2008, we are pleased with the Company�s earnings
fundamentals and strong financial condition, especially in light of
a weakening economy and the well publicized problems being suffered
by a large segment of the banking and financial services industry.
During the third quarter, we continued to enjoy an expanding net
interest margin and a significant increase in net interest income,
reflecting an interest rate environment favorable to the Bank�s
balance sheet combined with solid earning asset growth. While our
year-to-date loan portfolio growth was up a healthy $44 million or
8%, the better story is that this growth was entirely funded with
retail deposit growth, something we quite frankly did not expect,
but are very pleased to report.� Mr. Murphy continued his remarks
by saying, �Among the many issues being experienced by the banking
industry as a whole, is a serious deterioration in asset quality
involving loans and securities. We are pleased to report that, as
of quarter-end, our non-performing loans remained at relatively low
levels, representing 0.53% of total loans compared with 0.36% at
year-end 2007. Our securities portfolio is comprised of investment
grade securities and does not contain any pools of sub-prime
mortgage backed securities, collateralized debt obligations, or
commercial mortgage-backed securities. Additionally, we do not have
any equity securities or corporate debt exposure in our securities
portfolio, nor do we own any perpetual preferred stock in FHLMC or
FNMA, or any interests in pooled trust preferred securities,
auction rate securities, or credit default swaps.� In concluding,
Mr. Murphy added, �Economic conditions nationally and locally have
deteriorated and are expected to deteriorate further as this
economic cycle and the historic trauma in the financial markets
continues to unfold. Given our strong balance sheet, liquidity
position, earnings fundamentals and capitalization, we believe our
Company is reasonably well positioned to manage through the many
uncertainties that likely lie ahead for the banking industry.�
Financial Condition Assets: Total assets ended the third quarter at
$942 million, representing an increase of $53 million, or 5.9%,
compared with December 31, 2007. This increase was principally
attributed to the growth of the Bank�s loan portfolio. Loans: Total
loans ended the third quarter at $624 million, representing an
increase of $44 million, or 7.7%, compared with December 31, 2007.
Business lending activity led the overall growth of the loan
portfolio, as residential mortgage loan originations slowed. Credit
Quality: The Bank�s non-performing loans ended the third quarter at
relatively low levels, representing $3.3 million or 0.53% of total
loans, compared with $2.1 million, or 0.36% at December 31, 2007.
For the nine months ended September 30, 2008, net loan charge-offs
amounted to $1.2 million, compared with $101 thousand during the
same period in 2007. For the three and nine months ended September
30, 2008, the Bank recorded provisions for loan losses of $860
thousand and $1.7 million, representing increases of $646 thousand
and $1.4 million compared with the same periods in 2007,
respectively. The increases in the provision were largely
attributed to the increase in net loan charge-offs, growth in the
loan portfolio, generally declining real estate values in the
markets served by the Bank, and other qualitative and environmental
considerations. Securities: Total securities ended the third
quarter at $270 million, representing an increase of $5 million, or
1.9%, compared with December 31, 2007. The Company�s strong
earnings and solid loan growth lessened the need for further
securities leverage. Deposits: Total deposits ended the third
quarter at $578 million, representing an increase of $39 million or
7.2% compared with December 31, 2007. Deposit growth was led by
meaningful increases in retail time deposits and NOW accounts,
offset in part by a $26 million or 24.7% decline in brokered time
deposits. Borrowings: Total borrowings ended the third quarter at
$296 million, representing an increase of $17 million, or 6.0%,
compared with December 31, 2007. The increase in borrowings was
principally used to reduce the Bank�s dependence on higher cost and
more volatile brokered deposits. Capital: Consistent with its
long-term strategy of operating a sound and profitable
organization, the Bank continued to exceed regulatory requirements
for �well-capitalized� institutions. Company management considers
this to be vital in promoting depositor and investor confidence and
providing a solid foundation for future growth. At September 30,
2008, the Bank�s Tier I Leverage, Tier I Risk-based, and Total
Risk-based Capital ratios were 7.05%, 10.55% and 11.78%,
respectively. 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. Cash
Dividends: The Company paid cash dividends of 26.0 cents per share
of common stock in the third quarter of 2008, up 1.0 cents or 4.0%
from the prior quarter and representing an increase of 2.0 cents,
or 8.3%, compared with the same quarter in 2007. The Company�s
Board of Directors recently declared a fourth quarter dividend of
26.0 cents per share, unchanged from the prior quarter, but
representing an increase of 1.5 cents, or 6.1%, compared with the
dividend declared for the same quarter in 2007. Results of
Operations Net Interest Income: For the three months ended
September 30, 2008, net interest income on a fully tax-equivalent
basis amounted to $7.3 million, up $606 thousand or 9.0% on a
linked quarter basis and representing an increase of $1.3 million
or 21.2% compared with the same quarter in 2007. For the nine
months ended September 30, 2008, net interest income on a fully tax
equivalent basis amounted $20.6 million, representing an increase
of $3.3 million, or 19.3%, compared with the same period in 2007.
The increases in net interest income were principally attributed to
an improved net interest margin and average earning asset growth.
The decline in short-term interest rates over the past thirteen
months favorably impacted the Bank�s net interest margin, as the
cost of interest bearing liabilities declined faster and to a
greater degree than the decline in earning asset yields. For the
three months ended September 30, 2008, the fully tax equivalent net
interest margin amounted to 3.22%, up 15 basis points on a linked
quarter basis and representing an improvement of 29 basis points
compared with the third quarter of 2007. In October 2008, the Board
of Governors of the Federal Reserve System reduced short-term
interest rates by an additional 100 basis points. Should interest
rates continue at current levels, Company management anticipates
the Bank�s improving net interest margin trend will continue into
the fourth quarter of 2008. Non-interest Income: For the quarter
ended September 30, 2008, total non-interest income amounted to
$2.2 million, representing a decline of $39 thousand, or 1.7%,
compared with the same quarter in 2007. The decline in non-interest
income was principally attributed to a $142 thousand decline in
securities gains, largely offset by a $75 thousand or 13.3%
increase in trust and other financial services fees. All other
categories of non-interest income posted increases compared with
the third quarter of 2007. For the nine months ended September 30,
2008, total non-interest income amounted to $6.2 million,
representing an increase of $1.9 million, or 44.3%, compared with
the same period in 2007. During the first nine months of 2007 the
Bank restructured a portion of its securities portfolio, recording
net securities losses of $671 thousand, whereas during the same
period in 2008 the Bank recorded securities gains of $604 thousand.
Also included in non-interest income was a $313 thousand gain
recorded in the first quarter of 2008 representing the proceeds
from shares redeemed in connection with the Visa, Inc. initial
public offering. For the nine months ended September 30, 2008,
trust and other financial services fees and credit and debit card
fees were up $170 thousand and $137 thousand, or 9.7% and 8.7%,
respectively, compared with the same period last year. Non-interest
Expense: For the quarter ended September 30, 2008, total
non-interest expense amounted to $5.1 million representing an
increase of $316 thousand or 6.6%, compared with the same quarter
in 2007. The increase in non-interest expense was principally
attributed to a $206 thousand, or 8.6%, increase in salaries and
employee benefits, due to a variety of factors enumerated below.
Also, in connection with the previously reported Visa
Reorganization, in the third quarter of 2008 the Bank increased its
Visa indemnification and covered litigation liability by $68
thousand, based upon the terms of Visa�s recent settlement in
principle with Discover Financial Services. The Bank anticipates
recovery of this amount in the fourth quarter of 2008 using Loss
Shares that will be issued by VISA. For the nine months ended
September 30, 2008, total non-interest expense amounted to $15.3
million, representing an increase of $2.2 million, or 16.6%,
compared with the same period in 2007. The increase in non-interest
expense was largely attributed to the settlement of the Company�s
limited postretirement program in the first quarter of 2007, which
reduced that reporting period�s non-interest expense by $832
thousand. The increase in non-interest expense was also attributed
to higher levels of salaries and employee benefits, which were up
$1.0 million or 15.2% compared with the first nine months of 2007.
The increase in salaries and employee benefits was attributed to a
variety of factors including: strategic additions to staff; normal
increases in base salaries; higher levels of accrued incentive
compensation; certain employee severance payments; and a
non-recurring employee health insurance expense credit attained in
the second quarter of 2007 based on favorable claims experience.
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 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.
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. 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 per share data) (unaudited) � � � � �
� Period End 3rd Quarter Average Balance Sheet Data 9/30/2008
12/31/2007 2008 2007 � Total assets $ 942,004 $ 889,472 $ 937,749 $
853,969 Total securities 269,609 264,617 276,515 246,222 Total
loans 624,205 579,711 616,413 559,499 Allowance for loan losses
5,220 4,743 5,411 4,547 Total deposits 578,163 539,116 580,766
524,790 Borrowings 295,572 278,853 287,681 246,367 Shareholders'
equity 62,671 65,974 64,190 62,245 � Three Months Ended Nine Months
Ended Results Of Operations 9/30/2008 9/30/2007 9/30/2008 9/30/2007
� Interest and dividend income $ 13,515 $ 13,366 $ 40,110 $ 38,332
Interest expense 6,387 7,453 20,158 21,541 Net interest income
7,128 5,913 19,952 16,791 Provision for loan losses 860 214 1,669
247 Net interest income after provision for loan losses 6,268 5,699
18,283 16,544 � Non-interest income 2,224 2,263 6,205 4,299
Non-interest expense 5,112 4,796 15,334 13,146 Income before income
taxes 3,380 3,166 9,154 7,697 Income taxes 1,047 1,019 2,840 2,332
� Net income $ 2,333 $ 2,147 $ 6,314 $ 5,365 � Earnings per share:
Basic $ 0.80 $ 0.71 $ 2.13 $ 1.76 Diluted $ 0.78 $ 0.69 $ 2.09 $
1.72 � Cash dividends per share $ 0.260 $ 0.240 $ 0.760 $ 0.710 �
Return on Average Equity 14.46 % 13.68 % 12.78 % 11.52 % Return on
Average Assets 0.99 % 1.00 % 0.92 % 0.86 %
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