Bar Harbor Bankshares (NYSE MKT: BHB) (the “Company”) the parent
company of Bar Harbor Bank & Trust (the “Bank”), today
announced net income of $4.3 million for the second quarter of
2016, representing an increase of $438 thousand or 11.3%, compared
with the second quarter of 2015. The Company also reported diluted
earnings per share of $0.71 for the quarter, representing an
increase of $0.07, or 10.9%, compared with the second quarter of
2015. The Company’s annualized return on average shareholders’
equity amounted to 10.72% for the quarter, up from 10.31% in the
second quarter of 2015. The Company’s second quarter return on
average assets amounted to 1.05%, up from 1.01% in the second
quarter of 2015.
On May 5, 2016, the Company announced the signing of a
definitive agreement and plan of merger pursuant to which the
Company will acquire Lake Sunapee Bank Group (“LSBG”) in an
all-stock transaction valued at approximately $143 million (the
“Merger”). The market expanding Merger is expected to create
efficiencies and strategic growth opportunities for both businesses
through the leveraging of each other’s platforms and capabilities,
and will create the only community bank headquartered in New
England with a market footprint in all three Northern New England
states of Maine, New Hampshire and Vermont. At closing, the
combined institution is expected to have approximately $3.3 billion
in assets, $2.4 billion in loans, $2.2 billion in deposits and over
$2.0 billion in assets under management. The Company will have a
pro forma market cap of approximately $350 million and 50 branches
serving customers and communities across three states. The Merger
is expected to be completed in the fourth quarter of 2016 or the
first quarter of 2017. The consummation of the Merger is subject to
receipt of the requisite approval of the Company's shareholders and
LSBG shareholders, receipt of all required regulatory approvals,
and other customary closing conditions. Included in the Company’s
second quarter non-interest expense was $492 thousand in
non-recurring expenses related to the LSBG Merger, largely legal
and other professional fees.
The Company also announced record net income of $8.7 million for
the six months ended June 30, 2016, representing an increase of
$963 thousand, or 12.4%, compared with the same period in 2015. The
Company reported record year-to-date earnings per share of $1.43,
representing an increase of $0.15 or 11.7%, compared with the six
months ended June 30, 2015. The Company’s annualized return on
average shareholders’ equity amounted to 10.95% for the six months
ended June 30, 2016, up from 10.44% compared with the same period
in 2015. The Company’s annualized return on average assets amounted
to 1.07%, up from 1.04% for the six months ended June 30, 2015.
In making the announcement, the Company’s President and Chief
Executive Officer, Curtis C. Simard, commented, “As we enter the
second half of 2016, we are pleased with the Company’s solid
performance and earnings fundamentals which are rooted in our
consumer and small business relationships. This has culminated in
the announcement of our best year-to-date earnings and earnings per
share on record. The first half of 2016 featured a $76.5 million or
8.1% increase in average loan balances, combined with meaningful
increases in net interest income and non-interest income, compared
with the first six months of last year. Our ability to grow earning
assets was instrumental in offsetting the pressure on our net
interest margin, as long-term interest rates approached all-time
record lows during the second quarter and competition for quality
loans continued to be aggressive.”
Mr. Simard continued, “The credit stability of our loan
portfolio was further evident during the first half of the year,
highlighted by a $1.5 million or 21% decline in non-performing
loans compared with year end 2015. At quarter end, total
non-performing loans to total loans amounted to 0.53%, down from
0.71% at December 31, 2015. We also enjoyed low levels of loan loss
experience during the first half of 2016, with annualized net
charge-offs to average loans outstanding amounting to 0.03%,
compared with 0.16% for the same period last year.”
In concluding, Mr. Simard added, “Competition is strong;
however, our brand remains well received and we continue to focus
on providing exceptional customer experience. Our efforts to
balance growth and earnings are evident in our performance measures
as we continue to deliver attractive and consistent returns for our
shareholders, including our recently announced twenty-first
consecutive quarterly cash dividend increase.”
Based on the June 30, 2016 price of the Company’s common stock
of $35.10 per share, the dividend yield amounted to 3.13%.
Balance Sheet Highlights
Assets: Led by growth in the loan and securities
portfolios, total assets ended the second quarter at $1.69 billion,
representing an increase of $107.5 million, or 6.8%, compared with
December 31, 2015.
Loans: The quarter ended with total loans of $1.05
billion, representing an increase of $59.0 million, or 6.0%,
compared with December 31, 2015. At quarter-end the Bank’s
commercial loan portfolio stood at $529.3 million, representing an
increase of $22.5 million, or 4.4%, compared with year-end 2015.
Consumer loans, which principally consist of residential real
estate mortgages, ended the quarter at $503.2 million, representing
an increase of $35.3 million or 7.6% compared with year-end
2015.
Credit Quality: The overall credit quality of the Bank’s
loan portfolio remained stable during the first six months of 2016,
highlighted by a meaningful decline in non-performing loans from
year-end 2015 and relatively low loan loss experience. Total
non-performing loans ended the second quarter at $5.6 million,
compared with $7.0 million at December 31, 2015, representing a
decline of $1.5 million, or 20.8%. Total non-performing loans
expressed as a percentage of total loans ended the quarter at
0.53%, down from 0.71% at year-end 2015. Similarly, the allowance
for loan losses expressed as a ratio to non-performing loans ended
the quarter at 178.1%, up from 134.7% at December 31, 2015.
Total net loan charge-offs amounted to $163 thousand during the
first six months of 2016, or annualized net charge-offs to average
loans outstanding of 0.03%, compared with $765 thousand and 0.16%,
respectively, for the same period in 2015. For the three and six
months ended June 30, 2016, the Bank recorded provisions for loan
losses of $150 thousand and $615 thousand, representing declines of
$250 thousand and $280 thousand, respectively, for the same periods
in 2015. At June 30, 2016, the Bank’s allowance for loan losses
stood at $9.9 million, representing an increase of $452 thousand,
or 4.8%, compared with year-end 2015.
Securities: Total securities ended the second quarter at
$532.6 million, representing an increase of $27.6 million or 5.5%,
compared with December 31, 2015. Securities purchased during the
first six months of 2016 were comprised of mortgage-backed
securities issued and guaranteed by U.S. Government agencies and
sponsored-enterprises and, to a lesser extent, municipal securities
issued by states and political subdivisions thereof.
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 $989.8 million,
representing an increase of $47.0 million, or 5.0%, compared with
December 31, 2015. The Bank’s transaction accounts experienced a
combined seasonal decline of $13.1 million, or 2.4%, compared with
year end 2015. This decline was more than offset with a $60.1
million increase in time deposits obtained from the national
market, which were also utilized to help fund year-to-date earning
asset growth.
Capital: At June 30, 2016, 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 Common
Equity Tier I, Tier I leverage, Tier I Risk-based, and Total
Risk-based ratios of at least 6.5%, 5%, 8% and 10%, respectively.
At June 30, 2016, the Company’s Common Equity Tier I, Tier I
Leverage, Tier I Risk-based, and Total Risk-based capital ratios
were 15.54%, 9.21%, 15.54% and 17.09%, respectively.
Shareholder Dividends: The Company paid a regular cash
dividend of 27.0 cents per share of common stock in the second
quarter of 2016, representing an increase of 2.0 cents, or 8.0%,
compared with the second quarter of 2015. The Company's Board of
Directors recently declared a regular cash dividend of 27.5 cents
per share of common stock for the third quarter of 2016,
representing an increase of 2.0 cents, or 7.8%, compared with the
third quarter of 2015.
Results of Operations
Net Interest Income: For the three months ended June 30,
2016, net interest income on a tax-equivalent basis totaled $11.9
million, representing an increase of $571 thousand, or 5.0%
compared with the second quarter of 2015. The increase in net
interest income was principally attributed to average earning asset
growth of $116.5 million or 8.0%, as the tax-equivalent net
interest margin declined eight basis points to 3.04%. The decline
in the net interest margin was attributed to a three basis point
decline in the weighted average earning asset yield to 3.80%,
combined with a five basis point increase in the weighted average
cost of interest bearing liabilities, largely reflecting the impact
of the Fed Funds rate increase in December of 2015.
For the six months ended June 30, 2016, net interest income on a
tax-equivalent basis totaled $23.8 million, representing an
increase of $993 thousand, or 4.4%, compared with the same period
in 2015. The increase was principally attributed to average earning
asset growth of $120.1 million, or 8.3%, as the net interest margin
declined 12 basis points to 3.07% compared with the first half of
2015. The decline in the net interest margin was attributed to a 10
basis point decline in the weighted average earning asset yield,
combined with a three basis point increase in the weighted average
cost of interest bearing liabilities. Earning asset yields
continued to be impacted by still-historically low interest rates
as well as competitive pricing pressures for quality loans.
Non-interest Income: For the three and six months ended
June 30, 2016, total non-interest income amounted to $3.6 million
and $6.9 million, representing increases of $1.1 million and $2.1
million, or 44.4% and 43.3%, respectively, compared with the same
periods in 2015. The increases in non-interest income were
principally attributed to realized securities gains, which for the
three and six months ended June 30, 2016 increased $1.1 million and
$1.9 million, respectively, compared with the same periods in 2015.
During the first half of 2016, long-term interest rates declined to
near record lows providing a meaningful opportunity to realize
attractive securities gains while continuing a strategy of lowering
the duration of the securities portfolio and the Bank’s overall
interest rate risk profile.
For the three and six months ended June 30, 2016, income from
trust and other financial services declined $30 thousand and $27
thousand, or 3.0% and 1.4%, respectively, compared with the same
periods in 2015, largely reflecting lower levels of retail
brokerage activity as well as broad declines in the equity markets.
Income from debit card service charges and fees increased $28
thousand and $62 thousand for the three and six months ended June
30, 2016, or 7.0% and 8.1%, respectively, compared with the same
periods in 2015, largely reflecting the continued growth of the
Bank’s retail deposit base and continued success with a program
that offers rewards for certain debit card transactions.
Year-to-date other operating income increased $123 thousand, or
25.2%, reflecting higher levels of income from Bank Owned Life
Insurance compared with the same period in 2015.
Non-interest Expense: For the three and six months ended
June 30, 2016, total non-interest expense amounted to $8.7 million
and $16.7 million, representing increases of $1.1 million and $1.8
million, or 14.9% and 12.0%, respectively, compared with the same
periods in 2015. Included in second quarter and year-to-date
non-interest expense was $492 thousand in non-recurring expenses
related to the LSBG acquisition, largely legal and other
professional fees.
For the three and six months ended June 30, 2016 total salaries
and benefits amounted to $4.8 million and $9.8 million,
representing increases of $530 thousand and $1.2 million, or 12.4%
and 13.9%, respectively, compared with the same periods in 2015.
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 and equity compensation, higher
levels of employee health insurance, as well as increases in
staffing levels and strategic changes in staffing mix.
Additionally, over the past year the Company strengthened its risk
management and information technology staff resources in
anticipation of future growth.
Efficiency Ratio
The Company’s efficiency ratio, or non-interest operating
expenses divided tax-equivalent income other than net securities
gains and other significant non-recurring expenses, measures the
relationship of operating expenses to revenues. For the three and
six months ended June 30, 2016 the Company’s efficiency ratios
amounted to 58.8% and 58.0%, compared with 56.5% and 55.8% for the
same periods in 2015. 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. Bar Harbor Bank &
Trust, founded in 1887, provides full service community banking
with fourteen branch office locations serving downeast, midcoast
and central Maine.
Safe Harbor Statement: 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. The factors that could cause actual results to
differ materially from current expectations include failure to
complete the proposed LSBG Merger, the imposition of adverse
regulatory conditions in connection with regulatory approval of the
proposed LSBG Merger, disruption to the parties’ businesses as a
result of the announcement and pendency of the LSBG Merger, the
inability to realize expected cost savings or to implement
integration plans and other adverse consequences associated with
the LSBG Merger, changes in general economic conditions, changes in
interest rates, changes in competitive product and pricing
pressures among financial institutions within the Company's
markets, changes in the financial condition of the Company's
borrowers and other factors discussed in the reports that the
Company files with the Securities and Exchange Commission. The
forward-looking statements contained herein represent the Company's
judgment as of the date of this report, and the Company cautions
readers not to place undue reliance on such statements. 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 Securities Exchange Commission. 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 6/30/2016 12/31/2015
2016 2015 Total assets $ 1,687,549 $
1,580,055 $ 1,651,576 $ 1,533,041 Total securities 532,590 504,969
521,373 481,947 Total loans 1,049,022 990,070 1,028,748 953,800
Allowance for loan losses 9,891 9,439 10,036 9,416 Total deposits
989,816 942,787 925,161 876,487 Total borrowings 525,102 474,791
557,593 499,293 Shareholders' equity 165,231 154,152 161,675
150,654
Three Months Ended Six Months Ended
Results Of Operations 6/30/2016 6/30/2015
6/30/2016 6/30/2015 Interest and dividend
income $ 14,354 $ 13,472 $ 28,518 $ 27,005 Interest expense 2,972
2,586 5,800 5,121 Net interest income 11,382 10,886 22,718 21,884
Provision for loan losses 150 400 615 895 Net interest income after
provision for loan losses 11,232 10,486 22,103 20,989
Non-interest income 3,614 2,503 6,942 4,845 Non-interest expense
8,731 7,601 16,728
14,934 Income before income taxes 6,115 5,388 12,317 10,900
Income taxes 1,804 1,515 3,600
3,146 Net income $ 4,311 $ 3,873
$ 8,717 $ 7,754
At or for theThree Months
Ended
At or for theSix Months
Ended
Share and Per Common Share Data June 30, June
30, 2016 2015 2016 2015
Period-end shares outstanding 6,029,685 5,984,956 6,029,685
5,984,956 Basic average shares outstanding 6,021,316 5,973,758
6,015,257 5,963,704 Diluted average shares outstanding 6,086,301
6,064,413 6,083,367 6,050,122 Basic earnings per share $
0.72 $ 0.65 $ 1.45 $ 1.30 Diluted earnings per share $ 0.71 $ 0.64
$ 1.43 $ 1.28 Cash dividends $ 0.2700 $ 0.2500 $ 0.5350 $
0.4950 Book value $ 27.40 $ 24.84 $ 27.40 $ 24.84 Tangible book
value $ 26.51 $ 23.93 $ 26.51 $ 23.93
Selected Financial
Ratios Return on Average Assets 1.05 % 1.01 % 1.07 %
1.04 % Return on Average Equity 10.72 % 10.31 % 10.95 % 10.44 %
Tax-equivalent Net Interest Margin 3.04 % 3.12 % 3.07 % 3.19 %
Efficiency Ratio (1) 58.8 % 56.5 % 58.0 % 55.8 %
At or
for the Six Months Ended At or for the Year Ended
June 30, December 31, 2016 2015
2015 Asset Quality Net charge-offs
(recoveries) to average loans 0.03 % 0.16 % 0.14 % Allowance for
loan losses to total loans 0.94 % 0.93 % 0.95 % Allowance for loan
losses to non-performing loans 178.1 % 102.9 % 134.7 %
Non-performing loans to total loans 0.53 % 0.90 % 0.71 %
Non-performing assets to total assets 0.34 % 0.59 % 0.46 %
Capital Ratios Common equity tier 1 capital
15.54 % 14.84 % 15.55 % Tier 1 leverage capital 9.21 % 9.17 % 9.37
% Tier 1 risk-based capital 15.54 % 14.84 % 15.55 % Total
risk-based capital 17.21 % 16.34 % 17.12 % Tangible equity to total
assets 9.47 % 9.18 % 9.41 % Tangible common equity (2) 9.50 % 9.21
% 9.45 %
(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 other significant non-recurring expenses.
Second quarter and year-to-date non-recurring expenses amounted to
$492, all of which were associated with the Lake Sunapee Bank Group
acquisition.
(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 tax-equivalent net interest income other
than net securities gains and other significant non-recurring
expenses. 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 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.
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Bar Harbor BanksharesGerald Shencavitz,
207-288-3314EVP and Chief Financial Officer
Bar Harbor Bankshares (AMEX:BHB)
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