Bar Harbor Bankshares (the “Company”) (NYSE Amex: BHB) the
parent company of Bar Harbor Bank & Trust (the “Bank”), today
announced financial results for the three and twelve-month periods
ended December 31, 2010. Net income available to common
shareholders for the fourth quarter of 2010 amounted to $2.0
million, representing an increase of $437 thousand, or 27.4%,
compared with the fourth quarter of 2009. The Company’s diluted
earnings per share amounted to $0.53 for the quarter compared with
$0.51 in the fourth quarter of 2009, representing an increase of
$0.02, or 3.9%.
For the year ended December 31, 2010, the Company reported
record net income available to common shareholders of $10.0
million, compared with $9.3 million for the year ended December 31,
2009, representing an increase of $693 thousand or 7.4%. The
Company’s diluted earnings per share amounted to $2.61 for 2010
compared with $3.12 in 2009, representing a decline of $0.51, or
16.3%.
The decline in 2010 diluted earnings per share largely reflected
the Company’s previously reported issuance of 882,021 shares of its
common stock in the fourth quarter of 2009 and the first quarter of
2010, the proceeds from which were primarily used to repurchase all
of the shares of Preferred Stock sold to the U.S. Department of the
Treasury (the “Treasury”) in the first quarter of 2009 as part of
the Capital Purchase Program established by the Treasury under the
Emergency Economic Stabilization Act of 2008.
In making the announcement, the Company’s President and Chief
Executive Officer, Joseph M. Murphy commented, “Despite a troubled
economy, high unemployment, depressed real estate markets,
diminished consumer confidence and a painfully slow emergence from
the national economic recession, 2010 marked another successful
year for Bar Harbor Bankshares. We are very pleased to report
record earnings, a growing balance sheet and a very strong capital
position.”
Mr. Murphy continued, “We are also pleased to report solid 2010
loan growth, despite sluggish demand and an uncertain economic
outlook. Our commercial loan portfolio was up $28 million or 8%
compared with year-end 2009, demonstrating our ongoing financial
commitment to the communities served by the Bank. In addition, this
year’s retail deposit growth was the strongest we have experienced
in many years. We believe this growth was largely attributed to new
customer relationships and reflective of the vibrant tourism season
in the markets served by the Bank. We are very pleased to report
2010 retail deposit growth of $58 million, or 10%. All categories
of retail deposits showed meaningful increases.
In concluding, Mr. Murphy added, “While these financial results
are most gratifying, we remain cautious about the year ahead and
the realities facing the banking industry, including the impact of
the recently enacted regulatory reform legislation known as the
Dodd-Frank Wall Street Reform and Consumer Protection Act, which
will add additional complexity and compliance costs to the
operations of all community banks. While emergence from the
national recession continues, we anticipate a prolonged economic
recovery with pockets of continued deterioration in the foreseeable
future. Our balance sheet is supported by a total risk-based
capital ratio of 15.41%, far exceeding regulatory guidelines for
“well capitalized” bank holding companies. This capital strength
was significantly enhanced by the issuance of additional common
stock in late 2009 followed by the redemption of all Preferred
Stock sold to the Treasury in early 2009. While the additional
common equity has caused some earnings per share dilution as
anticipated, we believe our strong capital position provides
exceptional capacity for meaningful business development and other
strategic initiatives.”
Balance Sheet
Assets: Total assets ended the year at $1.1
billion, up $45.6 million, or 4.2%, compared with December 31,
2009. Asset growth was principally attributed to increases in the
Bank’s commercial and consumer loan portfolios.
Loans: Total loans ended the year at $700.7 million, up
$31.2 million, or 4.7%, compared with December 31, 2009. Loan
growth was led by commercial loans, which ended the year at $397.6
million, up $28.3 million or 7.7% compared with year-end 2009.
Commercial loan growth has been generally challenged by a weak
economy, declining loan demand and vigorous competition for quality
loans. Bank management attributes the overall growth in commercial
loans to an effective business banking team, deep local market
knowledge, sustained new business development efforts, and a
resilient local economy that is faring better than the nation as a
whole.
Consumer loans, which principally consist of residential real
estate mortgage loans and home equity loans, increased $4.8
million, or 1.7%, compared with year-end 2009. This increase was
principally attributed to residential real estate mortgage loans,
which were up $5.7 million or 2.5%. Residential mortgage loan
origination activity slowed during 2010 largely reflecting current
economic conditions and uncertainties with respect to further real
estate market declines in the communities served by the Bank, and
to a lesser extent the expiration of the first time home buyers tax
credit. Residential mortgage loan refinancing activity continued at
a brisk pace in 2010, which was attributed to historically low
interest rates.
Credit Quality: Total non-performing loans ended the year
at $13.7 million, up $4.7 million on a linked-quarter basis and
representing an increase of $4.5 million or 49.0% compared with
year-end 2009. The increases in non-performing loans were
attributed to a $5.2 million commercial real estate development
loan to a local, non-profit housing authority in support of an
affordable housing project. At December 31, 2010, this loan
represented 38.0% of the Bank’s total non-performing loans.
The Bank’s 2010 loan loss experience exceeded historical norms.
Total net loan charge-offs amounted to $1.6 million in 2010, of
which $867 thousand were recorded in the fourth quarter. Total 2010
net loan charge-offs expressed as a percentage of average loans
outstanding amounted to 0.24%, up from 0.13% in 2009.
For the year ended December 31, 2010, the Bank recorded a
provision for loan losses (the “provision”) of $2.3 million,
representing a decline of $880 thousand or 27.4% compared with
2009. In the fourth quarter of 2010 the Bank recorded a provision
of $827 thousand, up $377 thousand on a linked-quarter basis and
representing an increase of $177 thousand compared with the fourth
quarter of 2009. Despite the year-over-year decline in the
provision, the amounts recorded during 2010 were higher than
historical experience, largely reflecting a continuance in the
overall level of credit deterioration, and elevated levels of net
loan charge-offs and non-performing loans. These factors were
partially mitigated by stabilizing economic conditions and real
estate values, and slowing loan portfolio growth.
The Bank maintains an allowance for loan losses (the
“allowance”) which is available to absorb probable losses on loans.
The allowance is maintained at a level that, in management’s
judgment, is appropriate for the amount of risk inherent in the
current loan portfolio and adequate to provide for estimated
probable losses. At December 31, 2010, the allowance stood at $8.5
million, representing an increase of $686 thousand or 8.8% compared
with December 31, 2009. The allowance expressed as a percentage of
total loans stood at 1.21% at year end, up from 1.17% at December
31, 2009. The increase in the allowance principally reflected
pockets of credit deterioration in the Bank’s loan portfolio,
including elevated levels of non-performing and potential problem
loans.
Securities: Total securities ended the year at $357.9
million, up $10.9 million, or 3.1%, compared with December 31,
2009. Company management has been cautious about leveraging the
securities portfolio in consideration of historically low market
yields and the corresponding interest rate risk should interest
rates begin to rise. While this action inhibited the growth of the
Bank’s net interest income in the near-term, Company management
believes the long-term risks outweigh the short-term rewards.
Securities purchased during 2010 principally consisted of
mortgage-backed securities issued and guaranteed by U.S. Government
agencies and sponsored-enterprises.
Deposits: Total deposits ended the year at $708.3
million, up $67.2 million, or 10.5%, compared with December 31,
2009. Total retail deposits ended the year at $606.7 million, up
$57.6 million or 10.5% compared with year-end 2009. Retail deposit
growth was principally attributed to savings and money market
accounts and NOW accounts, which increased $40.0 million and $8.1
million, or 23.3% and 10.9%, respectively. Demand deposits were up
$2.6 million or 4.5%, while time deposits were up $6.9 million, or
2.8%.
Borrowings: Total borrowings ended the year at $300.0
million, down $11.6 million, or 3.7%, compared December 31, 2009.
The decline in borrowings was principally attributed to strong
retail deposit growth.
Capital: At December 31, 2010, 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, 2010, the Company’s Tier I Leverage, Tier I
Risk-based, and Total Risk-based capital ratios were 9.01%, 13.57%
and 15.41%, respectively.
At December 31, 2010, the Company’s tangible common equity ratio
stood at 9.01%, up from 8.60% at December 31, 2009.
Shareholder Dividends: The Company paid a regular cash
dividend of $0.265 per share of common stock in the fourth quarter
of 2010, representing an increase of $0.005 or 1.9% compared with
the prior quarter, as well as the fourth quarter of 2009. As
previously announced, the Company’s Board of Directors recently
declared a first quarter 2011 regular cash dividend of $0.27 per
share of common stock, representing an increase of $0.01 or 3.8%
compared with the first quarter of 2010. Based on the year-end 2010
price of BHB’s common stock, the dividend yield amounts to
3.72%.
Results of Operations
Net Interest Income: For the year ended December 31,
2010, net interest income on a tax-equivalent basis amounted to
$33.3 million, down $1.5 million, or 4.2%, compared with 2009. The
decline in net interest income was principally attributed to the
Bank’s tax-equivalent net interest margin, which declined 22 basis
points to 3.18%, offset in part by average earning asset growth of
$25.9 million or 2.5%. The decline in the net interest margin was
largely attributed to earning asset yields, which declined 22 basis
points more than the cost of interest bearing liabilities.
For the quarter ended December 31, 2010, net interest income on
a tax-equivalent basis amounted to $8.3 million, down $37 thousand
or 0.4% on a linked quarter basis and representing a decline of
$186 thousand, or 2.2%, compared with the fourth quarter of 2009.
The Bank’s fourth quarter tax-equivalent net-interest margin
amounted to 3.06%, down from 3.27% in the fourth quarter of
2009.
Factors contributing to the net interest margin declines during
the three and twelve months ended December 31, 2010 included the
ongoing competitive re-pricing of certain commercial loans and the
origination and accelerated refinancing of residential mortgage
loans during a period of historically low interest rates. The
replacement of accelerated cash flows from the Bank’s
mortgage-backed securities portfolio also contributed heavily to
the net interest margin declines. The Bank’s 2010 net interest
margin was also impacted by the maturity of a $30 million of
derivative instruments in the form of interest rate floor
agreements, which had been guaranteeing a minimum of 6.00% on a
Prime based portfolio of loans. In addition, as previously
reported, during 2010 the Bank continued protecting future earnings
from interest rate risk by extending a portion of its low cost,
short-term, wholesale funding maturities. While this strategy
pressured the net interest margin in the near-term, the Bank’s
balance sheet has been positioned such that future levels of net
interest income are largely insulated from rising interest
rates.
Non-interest Income: For the year ended December 31,
2010, total non-interest income amounted to $7.5 million, up $1.4
million or 23.8%, compared with 2009.
Trust and other financial services fees amounted to $3.0 million
in 2010, up $540 thousand or 22.1% compared with 2009. Reflecting
additional new business and some recovery in the equity markets, at
December 31, 2010 assets under management stood at $314.2 million,
up $44.1 million or 16.3% compared with year-end 2009.
Total securities gains, net of other-than-temporary impairment
losses, amounted to $1.2 million in 2010, compared with $67
thousand in 2009. Net 2010 securities gains were comprised of
realized gains on the sale of securities amounting to $2.1 million,
offset in part by other-than-temporary impairment losses of $898
thousand on certain available-for-sale, private label residential
mortgage-backed securities.
For the year ended December 31, 2010, credit and debit card
service charges and fees amounted to $1.2 million, up $156 thousand
or 15.5% compared with 2009. 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.
The foregoing increases in 2010 non-interest income were
partially offset by a $393 thousand, or 80.2%, decline in income
from mortgage banking activities. During 2010 substantially all
residential mortgage loan originations were held in the Bank’s loan
portfolio, whereas in 2009 a large portion of residential mortgage
loan originations were sold into the secondary market with customer
servicing retained.
For the quarter ended December 31, 2010, total non-interest
income amounted to $1.7 million, up $555 thousand or 49.0% compared
with the fourth quarter of 2009. The increase in non-interest
income was largely attributed to other-than-temporary impairment
losses on certain private label mortgage-backed securities, which
in the fourth quarter of 2010 amounted to $147 thousand, compared
with $489 thousand in the fourth quarter of 2009. Trust and
financial service fees amounted to $848 thousand in the fourth
quarter, up $209 thousand or 32.7% compared with the fourth quarter
of 2009. Realized gains on the sale of securities amounted to $152
thousand, compared with none in the fourth quarter of 2009. The
foregoing increases in non-interest income were partially offset by
a $161 thousand or 87.0% decline in income from mortgage banking
activities, compared with the fourth quarter of 2009.
Non-interest Expense: For the year ended December 31,
2010, total non-interest expense amounted to $22.0 million, up $292
thousand, or 1.3%, compared with 2009. The increase in non-interest
expense was principally attributed to salaries and employee
benefits, which were up $599 thousand or 5.2% compared with 2009.
The increase in salaries and employee benefits was principally
attributed to increases in employee health insurance premiums,
normal increases in base salaries, as well as changes in staffing
levels and mix. The foregoing increases were partially offset by
$402 thousand of employee health insurance credits attained during
2010, based on favorable claims experience.
FDIC deposit insurance assessments amounted to $1.1 million in
2010, down $354 thousand or 24.9% compared with 2009. This decline
was principally attributed to a $495 thousand special FDIC
assessment recorded in the second quarter of 2009, partially offset
by increased deposit insurance premiums for all FDIC insured banks
as a result of the FDIC’s plan to reestablish the Deposit Insurance
Fund to levels required by the Federal Deposit Reform Act of
2005.
For the quarter ended December 31, 2010, total non-interest
expense amounted to $5.9 million, up $413 thousand or 7.5% on a
linked-quarter basis, but representing a decline of $140 thousand,
or 2.3%, compared with the fourth quarter of 2009. The
linked-quarter increase in non-interest expense was largely
attributed to a $329 thousand increase in salaries and employee
benefits, principally reflecting higher levels of incentive
compensation and, to a lesser extent, employee severance costs.
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, 2010, the Company’s efficiency ratio
amounted to 55.5%, which compared favorably to peer and industry
averages.
Income Taxes: For the year ended December 31, 2010, total
income taxes amounted to $4.1 million, representing an increase of
$140 thousand, or 3.5%, compared with 2009. The Company’s effective
tax rate amounted to 27.9% in 2010, compared with 27.8% in 2009.
Fluctuations in the Company’s effective tax rate are generally
attributed to increases in the level of non-taxable income in
relation to taxable income.
About Bar Harbor Bankshares
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 downeast and midcoast
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 per share
data)
(unaudited)
Period End 4th Quarter Average
Balance Sheet Data 12/31/2010
12/31/2009 2010 2009 Total
assets $ 1,117,933 $ 1,072,381 $ 1,115,494 $ 1,063,952 Total
securities 357,882 347,026 364,404 353,741 Total loans 700,670
669,492 694,615 659,536 Allowance for loan losses 8,500 7,814 8,559
7,606 Total deposits 708,328 641,173 715,515 659,439 Total
Borrowings 300,014 311,629 287,605 301,835 Shareholders' equity
103,608 113,514 107,097 96,695
Three Months Ended
Year Ended Results Of Operations 12/31/2010
12/31/2009 12/31/2010 12/31/2009
Interest and dividend income $ 12,703 $ 13,233 $ 51,141 $ 54,367
Interest expense 4,793 5,167 19,432 21,086 Net interest income
7,910 8,066 31,709 33,281 Provision for loan losses 827 650 2,327
3,207 Net interest income after provision for loan losses 7,083
7,416 29,382 30,074 Non-interest income 1,688 1,133 7,458
6,022 Non-interest expense 5,931 6,071 22,046 21,754 Income before
income taxes 2,840 2,478 14,794
14,342 Income taxes 811
614 4,132 3,992 Net
income $ 2,029 $ 1,864 $ 10,662 $ 10,350 Preferred stock
dividends and accretion of discount - 272
653 1,034 Net income available
to common shareholders $ 2,029 $ 1,592 $ 10,009
$ 9,316
Share and Per Common Share Data
Period-end shares outstanding 3,822,945 3,691,183 3,822,945
3,691,183 Basic average shares outstanding 3,815,458 3,039,009
3,782,881 2,916,643 Diluted average shares outstanding 3,855,842
3,109,217 3,828,702 2,983,429 Basic earnings per share $
0.53 $ 0.52 $ 2.65 $ 3.19 Diluted earnings per share $ 0.53 $ 0.51
$ 2.61 $ 3.12 Cash dividends $ 0.265 $ 0.260 $ 1.045 $ 1.040
Book value $ 27.10 $ 30.75 $ 27.10 $ 30.75 Tangible book value $
26.28 $ 24.92 $ 26.28 $ 24.92
Selected Financial
Ratios Return on Average Assets 0.72 % 0.70 % 0.98 %
0.98 % Return on Average Equity 7.52 % 7.65 % 10.07 % 11.65 %
Tax-equivalent Net Interest Margin 3.06 % 3.27 % 3.18 % 3.40 %
Efficiency Ratio (1) 59.2 % 59.8 % 55.5 % 53.2 %
At or
for the Year Ended December 31, 2010
2009 Asset Quality Net charge-offs to average
loans, annualized 0.24 % 0.13 % Allowance for loan losses to total
loans 1.21 % 1.17 % Allowance for loan losses to non-performing
loans 62 % 85 % Non-performing loans to total loans 1.95 % 1.37 %
Non-performing assets to total assets 1.28 % 0.94 %
Capital Ratios Tier 1 leverage capital ratio 9.01 %
10.35 % Tier 1 risk-based capital ratio 13.57 % 15.34 % Total
risk-based capital ratio 15.41 % 17.14 % Tangible equity to total
assets 8.99 % 10.29 % Tangible common equity (2) 9.01 % 8.60 %
(1) 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. Includes $495 special FDIC
assessment recorded in the second quarter of 2009.
(2) Computed by dividing the total common shareholders' equity,
less goodwill and other intangible assets, by total assets, less
goodwill and other intangible assets.
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