Bar Harbor Bankshares (NYSE MKT: BHB) (the “Company”) the parent
company of Bar Harbor Bank & Trust (the “Bank”), today
announced net income of $3.2 million for the second quarter of
2013, representing an increase of $65 thousand, or 2.1%, compared
with the second quarter of 2012. Diluted earnings per share
amounted to $0.80 for the quarter compared with $0.79 for the
second quarter of 2012, representing an increase of $0.01, or 1.3%.
The Company’s annualized return on average shareholders’ equity
amounted to 9.90% for the quarter, compared with 10.11% in the
second quarter of 2012. The Company’s second quarter return on
average assets amounted to 0.96%, compared with 1.01% in the second
quarter of 2012.
For the six months ended June 30, 2013, the Company reported net
income of $6.4 million, representing an increase of $118 thousand,
or 1.9%, compared with the first six months of 2012. Diluted
earnings per share amounted to $1.62, representing an increase of
$0.01, or 0.6%, compared with the same period in 2012. The
Company’s annualized return on average shareholders’ equity
amounted to 10.02% for the six months ended June 30, 2013, compared
with 10.31% in the first half of 2012. The Company’s annualized
return on average assets amounted to 0.98%, compared with 1.04% in
the first half of 2012.
In making the announcement, the Company’s President and Chief
Executive Officer, Joseph M. Murphy commented, “Looking back at the
first half of 2013, we are pleased with the Company’s earnings
fundamentals, especially in light of declining net interest margins
throughout the banking industry driven by an extended period of
historically low interest rates. Like all banks, we are finding the
current interest rate environment and the continued actions being
taken by the Federal Reserve Board exceptionally challenging.
Despite these challenges, we are pleased that our second quarter
net interest margin has only declined five basis points from the
same quarter last year, while our net interest income was up a
healthy 6.0%.”
Mr. Murphy continued, “Our first half operating results were
also highlighted by further improvements in credit quality,
continued commercial loan growth, and higher levels of non-interest
income. With respect to credit quality, we are pleased to report a
$1.4 million or 14.2% decline in non-performing loans from year-end
2012. At quarter end, our total non-performing loans fell to 0.99%
of total loans, down from 1.21% at year-end 2012. We are also
pleased to report improved loan charge-off experience compared with
the first half of last year.”
In concluding, Mr. Murphy added, “We continue to believe that
our conservative business model, which emphasizes a strong capital
position, superior loan quality, deep local market knowledge, and
responsiveness to our customers’ needs, has positioned us well for
the future. Nonetheless, we, like all banks, face several
continuing challenges including an ever increasing regulatory
burden and the threat to earnings posed by the Federal Reserve’s
current determination to continue its stimulus programs and
maintain interest rates at historically low levels until such time
as the economy shows sufficient improvement. Given our Company’s
strong balance sheet and earnings fundamentals, we believe we
remain well-prepared to deliver respectable returns to our
shareholders despite the frustratingly long road to a national
economic recovery. In this regard, we recently announced our ninth
consecutive quarterly cash dividend increase.”
Balance Sheet Highlights
Assets: The Company’s balance sheet growth
accelerated during the second quarter with total assets increasing
$36.1 million, or 2.8%. At quarter end total assets stood at $1.34
billion, representing an increase of $40.4 million, or 3.1%,
compared with December 31, 2012.
Loans: Total loans ended the quarter at $852.6 million,
up $37.6 million, or 4.6%, compared with December 31, 2012. At
quarter end, the Bank’s commercial loan portfolio stood at $454.1
million, representing an increase of $23.2 million, or 5.4%,
compared with year-end 2012. Consumer loans, which principally
consist of residential real estate mortgages, ended the quarter at
$383.0 million, up $13.6 million or 3.7% compared with year-end
2012, principally reflecting the purchase of a New England based
portfolio of residential mortgage loans during the current quarter.
Tax exempt loans to local municipalities ended the quarter at $15.9
million, up $635 thousand or 4.2% compared with December 31,
2012.
Credit Quality: Total non-performing loans ended the
quarter at $8.5 million compared with $9.9 million at December 31,
2012, representing a decline of $1.4 million, or 14.2%. One
commercial real estate development loan to a local, non-profit
housing authority in support of an affordable housing project
accounted for $2.0 million, or 24.0%, of the Bank’s total
non-performing loans at quarter-end. Total non-performing loans
expressed as a percentage of total loans ended the quarter at
0.99%, down from 1.21% at year-end 2012. Similarly, the allowance
for loan losses expressed as a percentage of non-performing loans
ended the quarter at 96.4%, up from 82.1% at year-end 2012.
Total net loan charge-offs amounted to $688 thousand in the
first half of 2013, or annualized net charge-offs to average loans
outstanding of 0.17%, down from $742 thousand and 0.20%,
respectively, compared with the same period in 2012. For the three
and six months ended June 30, 2013, the Bank recorded provisions
for loan losses of $405 thousand and $758 thousand, representing
declines of $55 thousand and $117 thousand, or 12.0% and 13.4%,
respectively. The declines in the provision for loan losses largely
reflected an overall improvement in the Bank’s credit quality
metrics.
At June 30, 2013, the Bank’s allowance for loan losses stood at
$8.2 million, up from $8.1 million at December 31, 2012.
Securities: Total securities ended the second quarter at
$416.2 million, representing a decline of $1.8 million or 0.4%,
compared with December 31, 2012.
Deposits: Historically, the banking business in the
Bank’s market area has been seasonal, with lower deposits in the
winter through late spring and higher deposits in summer and
autumn. The timing and extent of these seasonal swings have varied
from year to year and have generally impacted the Bank’s
transactional deposit accounts.
Total deposits ended the second quarter at $854.7 million, up
$59.0 million, or 7.4%, compared with December 31, 2012. Demand
deposits and NOW accounts experienced a combined seasonal decline
of $11.4 million, or 5.8%. This decline was more than offset by a
$17.1 million, or 7.4%, increase in savings and money market
accounts. The Bank’s time deposits were up $53.3 million or 14.4%
compared with year-end 2012, principally reflecting brokered
deposits obtained from the national market. These deposits were
utilized to help fund earning asset growth while reducing
borrowings by $10.5 million, or 2.8%.
Capital: At June 30, 2013, the Company and the Bank
continued to exceed applicable 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 June 30, 2013, the Company’s
Tier I Leverage, Tier I Risk-based, and Total Risk-based capital
ratios were 9.02%, 14.48% and 16.10%, respectively.
Shareholders’ Equity: Total shareholders’ equity ended
the quarter at $120.5 million, down from $128.0 million at December
31, 2012. Likewise, the Company’s book value per share ended the
quarter at $30.64, down from $32.66 at December 31, 2012. The
decline in shareholder’s equity was attributed to an $11.9 million
decline in accumulated other comprehensive income. This decline was
principally the result of a reduction in unrealized gains in the
Bank’s investment securities portfolio, which declined from a tax
effective unrealized gain of $8.1 million at December 31, 2012 to a
tax effected unrealized loss of $3.8 million at June 30, 2013. The
net unrealized losses at June 30, 2013 were attributed to a
significant increase in interest rates during the six months ended
June 30, 2013, which negatively impacted the fair value of the
Bank’s fixed rate securities portfolio.
Shareholder Dividends: The Company paid a regular cash
dividend of $0.31 per share of common stock in the second quarter
of 2013, up $0.005 from the prior quarter and representing an
increase of $0.02 or 6.9% compared with the second quarter of 2012.
The Company’s Board of Directors recently declared a regular cash
dividend of $0.315 per share of common stock for the third quarter
of 2013, representing an increase of $0.02 or 6.8% compared with
the third quarter of 2012. Based on the quarter-end price of BHB’s
common stock of $36.55, the annualized dividend yield amounted to
3.45%.
Results of Operations
Net Interest Income: For the three months ended June 30,
2013, net interest income on a tax-equivalent basis totaled $9.9
million, up $212 thousand or 2.2% on a linked-quarter basis and
representing an increase of $561 thousand or 6.0% compared with the
second quarter of 2012. The increase in second quarter net interest
income compared with the second quarter of 2012 was principally
attributed to average earning asset growth of $90.6 million or
7.7%. The net interest margin amounted to 3.12% for the second
quarter, down three basis points on a linked-quarter basis and
representing a decline of five basis points compared with the
second quarter of 2012.
For the six months ended June 30, 2013, net interest income on a
tax-equivalent basis totaled $19.6 million, representing an
increase of $876 thousand or 4.7% compared with the same period in
2012. The increase in net interest income was principally
attributed to average earning asset growth of $97.0 million or
8.3%, offset in part by a ten basis point decline in the net
interest margin. For the six months ended June 30, 2013, the Bank’s
net interest margin amounted to 3.14% compared with 3.24% for the
same period in 2012. The yield on earning assets declined
thirty-four basis points to 4.11%, while the rate paid on interest
bearing liabilities declined twenty-eight basis points to
1.10%.
The continued decline in the Bank’s earning asset yields was
principally attributed to the extended period of historically low
interest rates, causing an elevated level of residential mortgage
loan refinancing activity as well as the origination and
competitive re-pricing of certain commercial loans. The continued
decline in mortgage-backed securities yields was attributed to
historically low interest rates, and has been exacerbated by
accelerated securitized loan refinancing activity driven by a
variety of government stimulus programs and quantitative easing
efforts by the Federal Reserve, as well as continuing credit
defaults.
Non-interest Income: For the three months ended June 30,
2013, total non-interest income amounted to $1.9 million, down $100
thousand or 5.1% compared with the second quarter of 2012. The
decline in non-interest income was principally attributed to a $193
thousand or 57.8% decline in realized securities gains net of
other-than-temporary impairment (“OTTI”) losses on certain private
label mortgage-backed securities. Trust and other financial
services fees were up $12 thousand or 1.4% compared with second
quarter of 2012, while service charges on deposit accounts were up
$35 thousand, or 12.2%. Credit and debit card service charges and
fees also posted meaningful increases, up $56 thousand or 16.5%
compared with the second quarter of 2012.
For the six months ended June 30, 2013, total non-interest
income amounted to $3.8 million, up $150 thousand or 4.1% compared
with the same period in 2012. The increase in non-interest income
was largely attributed to trust and other financial service fees
amounting to $1.8 million, up $139 thousand or 8.6% compared with
the first six months of 2012. Reflecting additional new business
and some strength in the equity markets, at June 30, 2013 assets
under management stood at $373.2 million, up $17.7 million or 5.0%
from year-end 2012 and representing an increase of $22.4 million or
6.4% compared with June 30, 2012.
Income generated from service charges on deposit accounts
amounted to $616 thousand in the first half of 2013, representing
an increase of $80 thousand, or 14.9%, compared with the same
period in 2012. The increase in service charges on deposit accounts
was largely attributed to customer overdraft fee increases
instituted in the third quarter of 2012 as well as increased
customer overdraft activity.
Income generated from credit and debit card service charges and
fees amounted to $732 thousand in the first half of 2013, up $76
thousand or 11.6% compared with the same period in 2012. This
increase was principally attributed to continued growth of the
Bank’s retail deposit base and continued success with a program
that offers rewards for certain debit card transactions.
For the six months ended June 30, 2013, realized securities
gains net of OTTI amounted to $406 thousand, representing a decline
of $151 or 27.1% compared with the same period in 2012. Securities
gains recorded during the first half of 2013 were comprised of
realized gains on the sale of securities amounting to $521
thousand, offset by other-than-temporary losses of $115 thousand on
certain, private label, mortgage-backed securities.
Non-interest Expense: For the three and six months ended
June 30, 2013, total non-interest expense amounted to $6.6 million
and $12.9 million, representing increases of $438 thousand and $937
thousand, or 7.1% and 7.8%, compared with the same periods in 2012,
respectively.
For the three and six months ended June 30, 2013, total salaries
and employee benefits amounted to $3.7 million and $7.3 million,
representing increases of $387 thousand and $812 thousand, or 11.7%
and 12.5%, compared with the same periods in 2012, respectively.
The increases in salaries and employee benefits were 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 increases in salaries and
employee benefits also reflected the Bank’s previously reported
acquisition of three branch offices in the third quarter of 2012.
Year-to-date salaries and employee benefits also included expenses
related to certain restricted stock awards to the Company’s Board
of Directors and the recently-appointed President and CEO of the
Bank.
For the three and six months ended June 30, 2013, total
occupancy expenses amounted to $493 thousand and $977 thousand,
representing increases of $123 thousand and $202 thousand, or 33.2%
and 26.1%, compared with the same periods in 2012, respectively.
These increases were largely attributed to the acquisition of three
branch offices in the third quarter of 2012, two of which are
leased properties. The increases in occupancy expense were 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.
For the six months ended June 30, 2013, total other operating
expenses amounted to $3.1 million, down $133 thousand or 4.1%
compared with the first half of 2012. This decline was largely
attributed to lower levels of loan collection and other real estate
owned expenses, as well as certain non-recurring branch acquisition
expenses recorded in the first half of 2012.
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 three and six months ended June 30, 2013, the Company’s
efficiency ratio amounted to 56.5% and 55.9%, which 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. Bar Harbor Bank &
Trust, founded in 1887, 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 per share
data)
(unaudited)
Period End 2nd Quarter Average
Balance Sheet Data 6/30/2013 12/31/2012
2013 2012 Total assets $ 1,343,322 $
1,302,935 $ 1,325,713 $ 1,236,198 Total securities 416,237 418,040
421,921 394,933 Total loans 852,572 815,004 833,696 770,893
Allowance for loan losses 8,167 8,097 8,166 8,434 Total deposits
854,719 795,765 840,052 735,121 Total Borrowings 361,051 371,567
352,944 371,644 Shareholders' equity 120,464 128,046 128,372
123,522
Three Months Ended Six Months Ended
Results Of Operations 6/30/2013 6/30/2012
6/30/2013 6/30/2012 Interest and dividend
income $ 12,474 $ 12,418 $ 24,839 $ 25,005 Interest expense 2,991
3,465 6,067 7,035 Net interest income 9,483 8,953 18,772 17,970
Provision for loan losses 405 460 758 875 Net interest income after
provision for loan losses 9,078 8,493 18,014 17,095
Non-interest income 1,874 1,974 3,824 3,674 Non-interest expense
6,595 6,157 12,902
11,965 Income before income taxes 4,357 4,310
8,936 8,804 Income taxes 1,187 1,205
2,550 2,536 Net
income $ 3,170 $ 3,105 $ 6,386 $
6,268
Share and Per Common Share Data
Period-end shares outstanding 3,931,137 3,906,074 3,931,137
3,906,074 Basic average shares outstanding 3,929,592 3,891,476
3,926,671 3,885,764 Diluted average shares outstanding 3,948,083
3,918,852 3,945,265 3,904,527 Basic earnings per share $
0.81 $ 0.80 $ 1.63 $ 1.61 Diluted earnings per share $ 0.80 $ 0.79
$ 1.62 $ 1.61 Cash dividends $ 0.310 $ 0.290 $ 0.615 $ 0.575
Book value $ 30.64 $ 31.89 $ 30.64 $ 31.89 Tangible book value $
29.21 $ 31.08 $ 29.21 $ 31.08
Selected Financial
Ratios Return on Average Assets 0.96 % 1.01 % 0.98 %
1.04 % Return on Average Equity 9.90 % 10.11 % 10.02 % 10.31 %
Tax-equivalent Net Interest Margin 3.12 % 3.17 % 3.14 % 3.24 %
Efficiency Ratio (1) 56.5 % 55.9 % 55.9 % 54.6 %
At or for theSix Months
Ended
At or for theYear Ended
June 30, December 31, 2013 2012
2012 Asset Quality Net charge-offs to average
loans 0.17 % 0.20 % 0.23 % Allowance for loan losses to total loans
0.96 % 1.08 % 0.99 % Allowance for loan losses to non-performing
loans 96.4 % 76.4 % 82.1 % Non-performing loans to total loans 0.99
% 1.41 % 1.21 % Non-performing assets to total assets 0.80 % 1.11 %
0.97 %
Capital Ratios Tier 1 leverage capital
9.02 % 9.15 % 8.87 % Tier 1 risk-based capital 14.48 % 14.31 %
14.15 % Total risk-based capital 16.10 % 16.01 % 15.78 % Tangible
equity to total assets 8.55 % 9.77 % 9.39 % Tangible common equity
(2) 8.58 % 9.80 % 9.43 %
(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.
(2) Computed by dividing the total common shareholders' equity,
less goodwill and other intangible assets, by total assets, less
goodwill and other intangible assets.
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.
(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.
Bar Harbor BanksharesGerald Shencavitz,
207-288-3314EVP and Chief Financial Officer
Bar Harbor Bankshares (AMEX:BHB)
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