BHB Bar Harbor Bankshares

Bar Harbor Bankshares (NYSE American: BHB) reported first quarter 2018 GAAP earnings of $7.8 million, or 50 cents per share, compared with $4.2 million, or 29 cents per share in the same quarter of 2017. Core earnings in the first quarter 2018 totaled $8.1 million, or 52 cents per share, up 21% from $6.2 million, or 43 cents in the first quarter of 2017.

FIRST QUARTER FINANCIAL HIGHLIGHTS (comparisons are to the first quarter 2017 unless otherwise noted):

• $29.4 million vs. $27.3 million in total revenue (non-GAAP measure)
• 8% increase in net interest income
• 11% annualized commercial and industrial loan growth
• 0.93% core return on assets (non-GAAP measure)
• 9.31% core return on equity (non-GAAP measure)

President and Chief Executive Officer, Curtis C. Simard stated, “Our teams hit the ground running and have delivered a strong start to this year. We achieved both our revenue and net income expectations for the first quarter of 2018. Total revenue increased 8% and core earnings per share is up 21% year-over-year as we expanded our market presence throughout Northern New England. This is just more proof that we continue to deliver on the commitments made over a year ago as we focus on profitable growth through the use of various revenue streams coupled with disciplined expense management. As we have communicated before, we will continue to hold firm our model of balancing growth and earnings.”

Mr. Simard went on to say, “We have much to be proud about the way our teams performed in the first quarter. While some loan closings were delayed during the first quarter, our loan pipelines remain robust. We opened over 3,200 new deposit accounts while our branch colleagues came together under new leadership, and our wealth management team continued to drive significant fee income. The first quarter also sparked a launch for many growth and strategic initiatives throughout the Company. We rolled out an expanded Treasury Management Services platform in January and we hired a new EVP of Human Resources, John Land, who will focus on the employee experience including total value compensation. We remain committed to our customers, employees and shareholders as we focus on being one of the most profitable banks in New England.”

Mr. Simard further stated, “We have built a strong retail and commercial bank franchise that understands the needs of our customers and is committed to providing solutions while preserving the culture in our communities. Our brand identity is prevalent in the markets we serve, and while the acquisition allowed for some name continuity, we’ve listened to our customers and their preference to consolidate the brand under one name. In recognition of the value proposition we represent, all of our Retail and Commercial business lines will begin operating under the Bar Harbor Bank & Trust name. The teams have expressed great enthusiasm about this milestone, which is expected to strengthen our brand and allow us to both streamline processes and deliver products more efficiently. We expect that the brand consolidation will be completed by the end of the second quarter 2018.”

Mr. Simard also stated “Similar to the brand consolidation, our teams in wealth management are working to migrate Bar Harbor Trust Services and Charter Trust onto a common operating platform. Fee income remains a focus of the Company and wealth management is a strong source of these revenue streams. The combined platform is expected to improve operational efficiencies and deepen customer relationships, allowing for further market penetration and cross-sell opportunities which are central themes to our sales objectives.”

Mr. Simard concluded, “2018 is about continuing to improve performance metrics while fine-tuning and consolidating the way we operate and conduct our business to realize our greatest potential as a true community bank.”

RESULTS OF OPERATIONSGAAP earnings increased to $7.8 million, or 50 cents per share, in the first quarter of 2018 from $4.2 million, or 29 cents per share, in the same period of 2017, primarily as a result of the merger expenses reflected in the previous year. Core earnings were up 21% to $8.1 million, or 52 cents per share, in the first quarter of 2018 compared to $6.2 million, or 43 cents per share, in the first quarter of 2017. The increase in core earnings was driven by greater total revenue resulting from both the growth in earning assets and in yields. Interest income from earning assets increased to a record high for a quarter of $30.8 million with a yield of 3.92%. The decline in yield related to commercial and industrial loans was due to a lower tax-equivalency adjustment on tax exempt loans given the new 2018 Federal tax rate. Net interest income in 2018 increased 8% compared to 2017 despite higher funding costs. Net interest margin for the first quarter was 2.97%, which includes a 5 basis point reduction due to lower tax-equivalency adjustments. We continue to address margin compression and balance sheet rate sensitivity through variable rate loan originations and shifts in funding mix and term. This strategy results in short-term incremental costs, but secures the Company’s longer-term net interest margin goals and funding requirements. Tax savings related to the lower Federal rate in 2018 is solely reflected within income tax expense and represents an effective tax rate for the first quarter of 19.9%. The effective tax rate for the same quarter in 2017 benefited from the acquisition and conversion related costs.

Non-interest income was $6.2 million in the first quarter of 2018, as compared to $5.9 million in the same quarter of 2017. The increase is principally due to higher trust management and customer service fees, both related to a higher volume of customer transactions.

Non-interest expense decreased to $18.9 million in the first quarter 2018 compared to $20.8 million in the first quarter of 2017. The decrease is principally due to lower acquisition, conversion and other expenses, which totaled $335 thousand in 2018 compared to $3.1 million in 2017. Non-interest expenses are slightly elevated in the first quarter compared to the fourth quarter and in line with expectations given higher employer taxes and the additional increases in salary and employee benefits related to employment taxes. The efficiency ratio improved to 60% for the quarter compared to 61% in the first quarter of 2017. That improvement includes realized cost savings from the acquisition partially offset with higher salary and benefit expense due to seasonally higher employer payroll taxes and recent strategic new hires. We continue to focus on profitable growth with disciplined expense management which is evidenced in our profitability metrics for the quarter.

FINANCIAL CONDITIONTotal assets declined $54.2 million during the first quarter in 2018 to $3.5 billion primarily as a result of decreases in loan balances and excess cash. Total loans decreased $21.2 million in the first quarter as certain significant loan closings were delayed into the second quarter. Excess cash was strategically used during the latter part of the first quarter to pay down higher cost borrowings. Non-accruing loans increased by $6.0 million during the quarter mostly due to the deterioration of one specific residential relationship, which is expected to be settled at the full carrying value of the obligation. Overall, asset quality metrics remain strong with an allowance for credit losses to total loans ratio of 0.51%. Total securities increased $1.3 million during the quarter, which reflects purchases of shorter duration investments offset by $10.7 million in fair value adjustments. Excluding the impact of securities fair value adjustments, strong earnings grew tangible book value per share (non-GAAP) to $16.33 compared from $16.13 at the end of 2017.

BACKGROUNDBar Harbor Bankshares (NYSE American: BHB) is the parent company of its wholly-owned subsidiary, Bar Harbor Bank & Trust. Founded in 1887, Bar Harbor Bank & Trust is a true community bank serving the financial needs of its clients for over 125 years. Bar Harbor provides full-service community banking with office locations in all three Northern New England states of Maine, New Hampshire and Vermont. For more information, visit www.bhbt.com.

FORWARD LOOKING STATEMENTSThis document contains forward-looking statements as defined in the Private Securities Litigation Reform Act of 1995. There are several factors that could cause actual results to differ significantly from expectations described in the forward-looking statements. For a discussion of such factors, please see the Company’s most recent reports on Forms 10-K and 10-Q filed with the Securities and Exchange Commission and available on the SEC’s website at www.sec.gov. The Company does not undertake any obligation to update forward-looking statements.

NON-GAAP FINANCIAL MEASURESThis document contains certain non-GAAP financial measures in addition to results presented in accordance with Generally Accepted Accounting Principles (“GAAP”). These non-GAAP measures provide supplemental perspectives on operating results, performance trends, and financial condition. They are not a substitute for GAAP measures; they should be read and used in conjunction with the Company’s GAAP financial information. A reconciliation of non-GAAP financial measures to GAAP measures is included beginning on page J in the accompanying financial tables. In all cases, it should be understood that non-GAAP per share measures do not depict amounts that accrue directly to the benefit of shareholders.

The Company utilizes the non-GAAP measure of core earnings in evaluating operating trends, including components for core revenue and expense. These measures exclude items which the Company does not view as related to its normalized operations. These items include securities gains/losses, acquisition costs, restructuring costs, and systems conversion costs. Non-core adjustments are presented net of an adjustment for income tax expense. This adjustment is determined as the difference between the GAAP tax rate and the effective tax rate applicable to core income. The efficiency ratio, which the Company believes provides important information about its operating efficiency, is adjusted for non-core revenue and expense items and for tax preference items. The Company also calculates measures related to tangible equity, which adjust equity (and assets where applicable) to exclude intangible assets due to the importance of these measures to the investment community. Further detail regarding the computation of the Company's non-GAAP measures is provided in the footnotes to the reconciliation of non-GAAP financial measures to GAAP measures included beginning on page J in the accompanying financial tables.

        TABLE

INDEX

    CONSOLIDATED FINANCIAL SCHEDULES (UNAUDITED)

A

   

Selected Financial Highlights

B

Footnotes to Selected Financial Highlights

C

Balance Sheets

D

Loan and Deposit Analysis

E

Statements of Income

F

Statements of Income (Five Quarter Trend)

G

Average Yields and Costs

H

Average Balances

I

Asset Quality Analysis

J

Reconciliation of Non-GAAP Financial Measures (Five Quarter Trend) and Supplementary Data

  BAR HARBOR BANKSHARES SELECTED FINANCIAL HIGHLIGHTS - UNAUDITED     At or for the Quarters Ended   Mar 31, 2018     Dec 31,2017     Sep 30,2017     Jun 30,2017     Mar 31,2017 PER SHARE DATA Net earnings, diluted $ 0.50 $ 0.43 $ 0.56 $ 0.42 $ 0.29 Core earnings, diluted(1) (2) 0.52 0.58 0.57 0.52 0.43 Total book value 22.78 22.96 22.90 22.53 22.17 Tangible book value(2) 15.78 15.94 15.84 15.44 15.07 Market price at period end 27.72 27.01 31.36 30.82 33.08 Dividends 0.19 0.19 0.19 0.19 0.19   PERFORMANCE RATIOS(3) Return on assets 0.90 % 0.75 % 0.99 % 0.76 % 0.50 % Core return on assets(1) (2) 0.93 1.02 1.01 0.94 0.74 Return on equity 9.01 7.35 9.67 7.55 5.34 Core return on equity(1) (2) 9.31 9.97 9.90 9.32 7.88 Core return on tangible equity(1) (2) 13.72 14.56 14.53 13.81 12.27 Net interest margin, fully taxable equivalent (FTE)(2)(4) 2.97 3.04 3.06 3.16 3.11 Net interest margin (FTE), excluding purchased loan accretion(2)(4) 2.85 2.93 2.93 3.02 3.01 Efficiency ratio(2) 60.44 53.02 53.53 54.57 61.21   GROWTH (Year-to-date, annualized)(2) Total commercial loans 2.2 % 23.8 % 20.5 % 7.2 % 20.0 % Total loans (3.4 ) 13.1 12.2 7.0 13.3 Total deposits (1.8 ) 14.4 10.6 2.3 (10.2 )   FINANCIAL DATA (In millions) Total assets $ 3,511 $ 3,565 $ 3,476 $ 3,503 $ 3,427 Total earning assets 3,221 3,241 3,184 3,139 3,139 Total investments 757 755 756 763 767 Total loans 2,464 2,486 2,429 2,377 2,372 Allowance for loan losses 13 12 12 11 11 Total goodwill and intangible assets 108 108 109 109 109 Total deposits 2,341 2,352 2,275 2,213 2,174 Total shareholders' equity 352 355 353 347 341 Net income 8 7 9 7 4 Core income(2) 8 9 9 8 6   ASSET QUALITY AND CONDITION RATIOS Net charge-offs (current quarter annualized)/average loans 0.07 % 0.04 % 0.01 % 0.03 % 0.06 % Allowance for loan losses/total loans 0.51 0.50 0.49 0.48 0.46 Loans/deposits 105 106 107 107 109 Shareholders' equity to total assets 10.03 9.95 10.17 9.91 9.95 Tangible shareholders' equity to tangible assets     7.17       7.12       7.26       7.01       6.99  

_____________________________________

(1) Core measurements are non-GAAP financial measures that are adjusted to exclude net non-operating charges primarily related to acquisitions, and gain on sale of securities. Refer to the Reconciliation of Non-GAAP Financial Measures in table J for additional information.(2) Non-GAAP financial measure.(3) All performance ratios are annualized and are based on average balance sheet amounts, where applicable.(4) Fully taxable equivalent considers the impact of tax-advantaged investment securities and loans.

BAR HARBOR BANKSHARES CONSOLIDATED BALANCE SHEETS - UNAUDITED                     (in thousands) Mar 31,2018 Dec 31,2017 Sep 30,2017 Jun 30,2017 Mar 31,2017 Assets Cash and due from banks $ 35,088 $ 34,262 $ 31,223 $ 28,112 $ 29,245 Interest-bearing deposits with the Federal Reserve Bank 12,725   56,423   17,501   90,881   12,781   Total cash and cash equivalents 47,813 90,685 48,724 118,993 42,026 Securities available for sale, at fair value 718,559 717,242 718,459 718,364 724,224 Federal Home Loan Bank stock 38,105   38,105   37,107   44,168   42,404   Total securities 756,664 755,347 755,566 762,532 766,628 Commercial real estate 824,721 826,746 793,572 738,584 779,635 Commercial and industrial 387,205 379,423 357,072 350,002 309,995 Residential real estate 1,132,977 1,155,682 1,152,628 1,160,832 1,155,436 Consumer 119,516   123,762   125,590   127,229   127,370   Total loans 2,464,419 2,485,613 2,428,862 2,376,647 2,372,436 Less: Allowance for loan losses (12,679 ) (12,325 ) (11,950 ) (11,442 ) (10,884 ) Net loans 2,451,740 2,473,288 2,416,912 2,365,205 2,361,552   Premises and equipment, net 48,464 47,708 48,309 48,590 45,581 Other real estate owned 216 122 122 122 363 Goodwill 100,085 100,085 100,255 100,255 99,901 Other intangible assets 8,152 8,383 8,811 9,047 9,282 Cash surrender value of bank-owned life insurance 58,433 57,997 57,613 57,233 56,627 Deferred tax asset, net 9,627 7,180 13,052 13,211 14,158 Other assets 29,793   24,389   26,368   28,223   31,365   Total assets $ 3,510,987   $ 3,565,184   $ 3,475,732   $ 3,503,411   $ 3,427,483     Liabilities and shareholders' equity Demand and other non-interest bearing deposits $ 342,192 $ 349,055 $ 357,398 $ 332,339 $ 349,896 NOW deposits 448,992 466,610 442,085 451,171 242,876 Savings deposits 361,591 364,799 373,118 360,306 511,091 Money market deposits 303,777 305,275 300,398 285,312 349,491 Time deposits 884,848   866,346   802,110   783,876   720,899   Total deposits 2,341,400 2,352,085 2,275,109 2,213,004 2,174,253   Senior borrowings 742,198 786,688 775,582 872,021 842,150 Subordinated borrowings 43,018   43,033   43,048   43,063   43,078   Total borrowings 785,216 829,721 818,630 915,084 885,228   Other liabilities 32,214   28,737   28,534   28,201   26,954   Total liabilities 3,158,830 3,210,543 3,122,273 3,156,289 3,086,435   Total common shareholders' equity 352,157   354,641   353,459   347,122   341,048   Total liabilities and shareholders' equity $ 3,510,987   $ 3,565,184   $ 3,475,732   $ 3,503,411   $ 3,427,483     Net shares outstanding     15,459       15,443       15,432       15,407       15,385     BAR HARBOR BANKSHARES CONSOLIDATED LOAN & DEPOSIT ANALYSIS - UNAUDITED  

LOAN ANALYSIS

                        Annualized Growth % (in thousands) March 31,2018 December 31,2017 September 30,2017 June 30,2017 March 31,2017

March 31,2018

Commercial real estate $ 824,721 $ 826,746 $ 793,572 $ 738,584 $ 779,635 (1.0 )% Commercial and industrial 301,811   293,707   270,759   269,960   236,526   11.0   Total commercial loans 1,126,532 1,120,453 1,064,331 1,008,544 1,016,161 2.2 Residential real estate 1,132,977 1,155,682 1,152,628 1,160,832 1,155,436 (7.9 ) Consumer 119,516 123,762 125,590 127,229 127,370 (13.7 ) Tax exempt and other 85,394   85,716   86,313   80,042   73,469   (1.5 ) Total loans     $ 2,464,419       $ 2,485,613       $ 2,428,862       $ 2,376,647       $ 2,372,436       (3.4 )%  

DEPOSIT ANALYSIS

                        Annualized Growth % (in thousands) March 31,2018 December 31,2017 September 30,2017 June 30,2017 March 31,2017

March 31,2018

Demand $ 342,192 $ 349,055 $ 357,398 $ 332,339 $ 349,896 (7.9 )% NOW 448,992 466,610 442,085 451,171 242,876 (15.1 ) Savings 361,591 364,799 373,118 360,306 511,091 (3.5 ) Money Market 303,777   305,275   300,398   285,312   349,491   (2.0 ) Total non-maturity deposits 1,456,552 1,485,739 1,472,999 1,429,128 1,453,354 (7.9 ) Total time deposits 884,848   866,346   802,110   783,876   720,899   8.5   Total deposits     $ 2,341,400       $ 2,352,085       $ 2,275,109       $ 2,213,004       $ 2,174,253       (1.8 )%   BAR HARBOR BANKSHARES CONSOLIDATED STATEMENTS OF INCOME - UNAUDITED         Three Months Ended March 31, (in thousands, except per share data) 2018 2017 Interest and dividend income Loans $ 25,126 $ 21,194 Securities and other 5,651   4,991 Total interest and dividend income 30,777 26,185 Interest expense Deposits 3,985 2,210 Borrowings 3,634   2,603 Total interest expense 7,619   4,813 Net interest income 23,158   21,372 Provision for loan losses 795 795 Net interest income after provision for loan losses 22,363   20,577 Non-interest income Trust and investment management fee income 2,962 2,864 Insurance brokerage service income — 364 Customer service fees 2,224 1,773 Bank-owned life insurance income 446 399 Other income 606   546 Total non-interest income 6,238   5,946 Non-interest expense Salaries and employee benefits 10,989 10,321 Occupancy and equipment 3,073 2,666 Loss on sales of premises and equipment, net — 95 Outside services 560 597 Professional services 433 440 Communication 180 368 Amortization of intangible assets 207 180 Acquisition, conversion and other expenses 335 3,112 Other expenses 3,075   3,052 Total non-interest expense 18,852   20,831   Income before income taxes 9,749 5,692 Income tax expense 1,937   1,481 Net income     $ 7,812       $ 4,211   Earnings per share: Basic $ 0.51 $ 0.29 Diluted $ 0.50 $ 0.29   Weighted average shares outstanding: Basic 15,448 14,471 Diluted     15,553       14,591   BAR HARBOR BANKSHARES CONSOLIDATED STATEMENTS OF INCOME (5 Quarter Trend) - UNAUDITED                     (in thousands, except per share data) Mar 31, 2018 Dec 31,2017 Sep 30,2017 Jun 30,2017 Mar 31,2017 Interest and dividend income Loans $ 25,126 $ 24,895 $ 24,661 $ 24,226 $ 21,194 Securities and other 5,651   5,261   5,402   5,439   4,991 Total interest and dividend income 30,777 30,156 30,063 29,665 26,185 Interest expense Deposits 3,985 3,381 3,177 2,539 2,210 Borrowings 3,634   3,279   3,408   3,317   2,603 Total interest expense 7,619   6,660   6,585   5,856   4,813 Net interest income 23,158 23,496 23,478 23,809 21,372 Provision for loan losses 795   597   660   736   795 Net interest income after provision for loan losses 22,363   22,899   22,818   23,073   20,577 Non-interest income Trust and investment management fee income 2,962 3,042 3,040 3,324 2,864 Insurance brokerage service income — 77 329 327 364 Customer service fees 2,224 2,495 2,638 1,991 1,773 Gain on sales of securities, net — — 19 — — Bank-owned life insurance income 446 374 380 386 399 Other income 606   530   554   530   546 Total non-interest income 6,238   6,518   6,960   6,558   5,946 Non-interest expense Salaries and employee benefits 10,989 9,524 9,617 10,127 10,321 Occupancy and equipment 3,073 3,060 2,894 3,013 2,666 Loss on sales of premises and equipment,net — — (1 ) — 95 Outside services 560 780 907 716 597 Professional services 433 298 428 489 440 Communication 180 249 382 290 368 Amortization of intangible assets 207 209 212 211 180 Acquisition, conversion, and other expenses 335 (2,615 ) 346 2,459 3,112 Other expenses 3,075   2,758   2,801   2,741   3,052 Total non-interest expense 18,852   14,263   17,586   20,046   20,831   Income before income taxes 9,749 15,154 12,192 9,585 5,692 Income tax expense 1,937   8,545   3,575   3,029   1,481 Net income     $ 7,812       $ 6,609       $ 8,617       $ 6,556       $ 4,211   Earnings per share: Basic $ 0.51 $ 0.43 $ 0.56 $ 0.43 $ 0.29 Diluted $ 0.50 $ 0.43 $ 0.56 $ 0.42 $ 0.29   Weighted average shares outstanding: Basic 15,448 15,437 15,420 15,393 14,471 Diluted     15,553       15,537       15,511       15,506       14,591   BAR HARBOR BANKSHARES AVERAGE YIELDS AND COSTS (Fully Taxable Equivalent - Annualized) - UNAUDITED                     Quarters Ended   Mar 31, 2018 Dec 31, 2017 Sep 30, 2017 Jun 30, 2017 Mar 31, 2017 Earning assets Commercial real estate 4.41 % 4.30 % 4.28 % 4.24 % 4.24 % Commercial and industrial 4.41 4.77 4.84 4.77 4.73 Residential 3.87 3.78 3.79 3.83 3.74 Consumer 4.47   4.17   4.34   4.71   4.16   Total loans 4.16 4.12 4.13 4.14 4.00 Securities and other 3.16   3.06   3.13   3.19   3.01   Total earning assets 3.92 % 3.87 % 3.89 % 3.91 % 3.76 %   Funding liabilities NOW 0.34 % 0.31 % 0.32 % 0.25 % 0.14 % Savings 0.18 0.19 0.18 0.13 0.14 Money market 0.68 0.58 0.52 0.45 0.40 Time deposits 1.39   1.19   1.13   1.01   0.98   Total interest bearing deposits 0.82 0.70 0.66 0.56 0.52 Borrowings 1.80   1.62   1.66   1.41   1.25   Total interest-bearing liabilities 1.11 % 0.97 % 0.96 % 0.85 % 0.76 %                                 Net interest spread 2.81 2.90 2.93 3.06 3.00 Net interest margin     2.97       3.04       3.06       3.16       3.11     BAR HARBOR BANKSHARES AVERAGE BALANCES - UNAUDITED                     Quarters Ended (in thousands) Mar 31, 2018 Dec 31, 2017 Sep 30, 2017 Jun 30, 2017 Mar 31, 2017 Assets Commercial real estate $ 819,531 $ 783,730 $ 764,770 $ 767,669 $ 762,676 Commercial and industrial 380,029 362,881 353,194 322,147 293,903 Residential 1,147,010 1,161,865 1,158,069 1,159,714 1,161,911 Consumer 121,467   125,109   126,138   127,611   127,850   Total loans (1) 2,468,037 2,433,585 2,402,171 2,377,141 2,346,340 Securities and other (2) 765,328   753,282   754,450   761,546   746,653   Total earning assets 3,233,365 3,186,867 3,156,621 3,138,687 3,092,993 Cash and due from banks 53,151 65,145 49,169 87,332 25,556 Allowance for loan losses (12,589 ) (12,202 ) (11,786 ) (11,292 ) (10,584 ) Goodwill and other intangible assets 108,349 108,769 109,147 109,108 109,261 Other assets 129,525   144,359   149,394   110,129   122,396   Total assets $ 3,511,801   $ 3,492,938   $ 3,452,545   $ 3,433,964   $ 3,339,622     Liabilities and shareholders' equity NOW $ 447,026 $ 449,669 $ 447,459 $ 440,452 $ 456,967 Savings 362,508 368,714 368,443 362,899 340,555 Money market 305,105 308,071 292,110 275,687 334,225 Time deposits 857,796   799,348   793,489   732,188   666,267   Total interest bearing deposits 1,972,435 1,925,802 1,901,501 1,811,226 1,798,014 Borrowings 819,576   803,469   812,938   941,789   856,328   Total interest-bearing liabilities 2,792,011 2,729,271 2,714,439 2,753,015 2,654,342 Non-interest-bearing demand deposits 339,349 376,066 354,470 320,503 350,497 Other liabilities 29,000   30,971   30,079   13,145   19,334   Total liabilities 3,160,360 3,136,308 3,098,988 3,086,663 3,024,173   Total shareholders' equity 351,441 356,630 353,557 347,301 315,449             Total liabilities and shareholders' equity     $ 3,511,801       $ 3,492,938       $ 3,452,545       $ 3,433,964       $ 3,339,622  

_____________________________________

(1) Total loans include non-accruing loans.(2) Average balances for securities available-for-sale are based on amortized cost.

BAR HARBOR BANKSHARES ASSET QUALITY ANALYSIS - UNAUDITED                     At or for the Quarters Ended (in thousands) Mar 31, 2018 Dec 31, 2017 Sep 30, 2017 Jun 30, 2017 Mar 31, 2017 NON-PERFORMING ASSETS Non-accruing loans: Commercial real estate $ 8,422 $ 8,343 $ 2,467 $ 2,090 $ 2,354 Commercial installment 2,304 1,209 236 270 451 Residential real estate 8,548 4,266 3,619 2,783 3,066 Consumer installment 1,065   500   496   160   160   Total non-accruing loans 20,339 14,318 6,818 5,303 6,031 Other real estate owned 216   122   122   122   363   Total non-performing assets $ 20,555   $ 14,440   $ 6,940   $ 5,425   $ 6,394     Total non-accruing loans/total loans 0.83 % 0.58 % 0.28 % 0.22 % 0.25 % Total non-performing assets/total assets 0.59 0.41 0.20 0.15 0.19   PROVISION AND ALLOWANCE FOR LOAN LOSSES Balance at beginning of period $ 12,325 $ 11,950 $ 11,442 $ 10,884 $ 10,419 Charged-off loans (461 ) (277 ) (297 ) (213 ) (344 ) Recoveries on charged-off loans 20   55   145   35   14   Net loans charged-off (441 ) (222 ) (152 ) (178 ) (330 ) Provision for loan losses 795   597   660   736   795   Balance at end of period $ 12,679   $ 12,325   $ 11,950   $ 11,442   $ 10,884     Allowance for loan losses/total loans 0.51 % 0.50 % 0.49 % 0.48 % 0.46 % Allowance for loan losses/non-accruing loans 62 86 175 216 180   NET LOAN CHARGE-OFFS Commercial real estate $ (91 ) $ (92 ) $ (16 ) $ (6 ) $ (103 ) Commercial installment (140 ) 1 6 (138 ) (17 ) Residential real estate 1 — (79 ) (13 ) (198 ) Consumer installment (211 ) (131 ) (63 ) (21 ) (12 ) Total, net $ (441 ) $ (222 ) $ (152 ) $ (178 ) $ (330 )   Net charge-offs (QTD annualized)/average loans 0.07 % 0.04 % 0.01 % 0.03 % 0.06 % Net charge-offs (YTD annualized)/average loans 0.07 0.04 0.04 0.04 0.06   DELINQUENT AND NON-ACCRUING LOANS/TOTAL LOANS 30-89 Days delinquent 0.24 % 0.37 % 0.35 % 0.55 % 0.33 % 90+ Days delinquent and still accruing —   0.02   0.01   —   —   Total accruing delinquent loans 0.24 0.39 0.36 0.55 0.33 Non-accruing loans 0.83   0.58   0.28   0.22   0.25   Total delinquent and non-accruing loans     1.07 %     0.97 %     0.64 %     0.77 %     0.58 %   BAR HARBOR BANKSHARES RECONCILIATION OF NON-GAAP FINANCIAL MEASURES AND SUPPLEMENTARY DATA- UNAUDITED         At or for the Quarters Ended (in thousands)       Mar 31, 2018     Dec 31,2017     Sep 30,2017     Jun 30,2017     Mar 31,2017 Net income $ 7,812 $ 6,609 $ 8,617 $ 6,556 $ 4,211 Adj: Security Gains — — (19 ) — — Adj: Loss on sale of fixed assets, net — — (1 ) — 95 Adj: Acquisition, conversion and other expenses 335 (2,615 ) 346 2,459 3,112 Adj: Income taxes (1) (81 ) 982 (122 ) (924 ) (1,205 ) Adj: Tax reform charge       —   3,988   —   —   —   Total core income (2)     (A) $ 8,066   $ 8,964   $ 8,821   $ 8,091   $ 6,213     Net-interest income (B) $ 23,158 $ 23,496 $ 23,478 $ 23,809 $ 21,372 Plus: Non-interest income       6,238   6,518   6,960   6,558   5,946   Total Revenue 29,396 30,014 30,438 30,367 27,318 Adj: Net security gains       —   —   (19 ) —   —   Total core revenue (2)     (C) $ 29,396   $ 30,014   $ 30,419   $ 30,367   $ 27,318     Total non-interest expense 18,852 14,263 17,586 20,046 20,831 Less: Loss on sale of fixed assets, net — — 1 — (95 ) Less: Acquisition, conversion and other expenses       (335 ) 2,615   (346 ) (2,459 ) (3,112 ) Core non-interest expense (2)     (D) $ 18,517   $ 16,878   $ 17,241   $ 17,587   $ 17,624     (in millions) Total average earning assets (E) $ 3,233 $ 3,187 $ 3,157 $ 3,139 $ 3,093 Total average assets (F) 3,512 3,493 3,453 3,434 3,340 Total average shareholders' equity (G) 351 357 354 347 315 Total average tangible shareholders' equity (2) (3) (H) 243 248 244 238 206 Total tangible shareholders' equity, period-end (2)(3) (I) 244 246 244 238 232 Total tangible assets, period-end (2) (3) (J) 3,403 3,457 3,367 3,394 3,318   (in thousands) Total common shares outstanding, period-end (K) 15,459 15,443 15,432 15,407 15,385 Average diluted shares outstanding (L) 15,553 15,537 15,511 15,506 14,591   Core earnings per share, diluted (A/L) $ 0.52 $ 0.58 $ 0.57 $ 0.52 $ 0.43 Tangible book value per share, period-end (2) (I/K) 15.78 15.94 15.84 15.44 15.07 Securities adjustment, net of tax (M) (8,526 ) (2,867 ) 320 2,193 768 Tangible book value per share, excluding securities adjustment (I+M)/K 16.33 16.13 15.82 15.29 15.02 Total tangible shareholders' equity/total tangible assets(2) (H/J) 7.17 7.12 7.26 7.01 6.99   Performance ratios GAAP return on assets 0.90 % 0.75 % 0.99 % 0.76 % 0.50 % Core return on assets (2) (A/F) 0.93 1.02 1.01 0.94 0.74 GAAP return on equity 9.01 7.35 9.67 7.55 5.34 Core return on equity (2) (A/G) 9.31 9.97 9.90 9.32 7.88 Core return on tangible equity (2) (4) (A/I) 13.72 14.56 14.53 13.81 12.27 Efficiency ratio (2)(5) (D-O-Q)/(C+N) 60.44 53.02 53.53 54.57 61.21 Net interest margin (B+P)/E 2.97 3.04 3.06 3.16 3.11 Supplementary data (in thousands) Taxable equivalent adjustment for efficiency ratio (N) $ 645 $ 1,122 $ 1,107 $ 1,185 $ 977 Franchise taxes included in non-interest expense (O) 152 161 154 158 126 Tax equivalent adjustment for net interest margin (P) 503 897 878 936 754 Intangible amortization     (Q)     207       209       212       211       180  

_____________________________________

(1) Assumes a marginal tax rate of 24.15% in 2018 and 37.57% in 2017.(2) Non-GAAP financial measure.(3) Total tangible shareholders' equity is computed by taking total shareholders' equity less the intangible assets at period-end. Total tangible assets is computed by taking total assets less the intangible assets at period-end.(4) Adjusted return on tangible equity is computed by dividing the total core income adjusted for the tax-effected amortization of intangible assets, assuming a marginal rate of 24.15% in 2018 and 37.57% in 2017, by tangible equity.(5) Efficiency ratio is computed by dividing total core tangible non-interest expense by the sum of total net interest income on a fully taxable equivalent basis and total core non-interest income. The Company uses this non-GAAP measure to provide important information about its operating efficiency.

View source version on businesswire.com: https://www.businesswire.com/news/home/20180419006451/en/

Bar Harbor BanksharesJosephine Iannelli, 207-288-3314EVP, Chief Financial Officer & TreasurerorKim Ilg, 603-865-6085VP, Investor Relations