BHB Bar Harbor Bankshares

Bar Harbor Bankshares (NYSE American: BHB) reported net income for third quarter 2018 of $9.0 million, or 58 cents per share, compared with $8.6 million, or 56 cents per share, in the same quarter of 2017.

THIRD QUARTER FINANCIAL HIGHLIGHTS

• 14.3% annualized increase in non-maturity deposit accounts
• 57.9% efficiency ratio (non-GAAP measure)
• 1.01% return on average assets
• 9.92% return on average equity
• 10% annualized growth in tangible book value per share, excluding security adjustments (non-GAAP measure)

President and Chief Executive Officer, Curtis C. Simard stated, “Our third quarter was marked by yet another period of continued focus and execution of our strategies to grow profitability while remaining true to our risk management disciplines including credit. Our GAAP earnings per share this quarter equaled core earnings, which reflect our normalized operations. Tangible book value per share, excluding security adjustments, now exceeds pre-acquisition levels, which were accomplished within two years of the deal closing. We are committed to building long-term shareholder value, as evidenced by continued focus on non-maturity deposits and improvements in our return on assets, return on equity and efficiency ratios.”

“Commercial loans have grown 3% on a year-to-date annualized basis as our teams continue to gain market share within our regions. Commercial loan balances can fluctuate based on timing given some larger deals and a conscious effort to not over extend on terms for the sake of interim periods. We remain true to core banking and cultivating long-term relationships with our customers. Total deposit balances were up 3% on an annualized basis for the quarter including more than a 14% increase in non-maturity deposits. New deposit accounts opened totaled 3,212 for the third quarter and 9,211for the year.”

Mr. Simard went on to say, “We continue to focus on organic growth within our footprint as we expand further into our markets where we see the greatest opportunity to increase shareholder value. We are on track to open our new branch in Manchester, New Hampshire next month with plans for branches in Bedford, New Hampshire and Belfast, Maine next year. These de novo branches will help provide greater service and convenience to our existing customers and the opportunity to further expand our growing deposit base.”

“As you may have read in our press release earlier this month, we announced a strategic expansion with the development of a commercial loan office in Portland, Maine. This opportunity is about being fully engaged in an important commercial market within the state of Maine. We are already actively calling on the commercial accounts in Portland, and by having a physical presence in this market; we will be best positioned to service those needs. To that end, we also announced Daryl Wentworth and Joe Delano have joined our teams, two very seasoned and accomplished leaders in this market. Daryl and Joe combined have over 50 years of experience in both commercial real estate and commercial and industrial lending; they have been recognized as proven idea generators in the middle market space for New England.”

Mr. Simard concluded, “Over the past few quarters we have further defined a culture that cares about our colleagues, customers and community. These ideals, combined with our existing model of balancing growth and earnings while following a steadfast commitment to risk management and controls have given rise to a catalyst for continued financial performance. The measures we have taken are essential to enhancing profitability and achieving our long-term goals. Together and as one team we are focused on providing first class service to our customers and we look forward to a strong close for the year in the fourth quarter.”

RESULTS OF OPERATIONS

Net income was up 5% to $9.0 million, or 58 cents per share, in the third quarter of 2018 compared to $8.6 million, or 56 cents per share, in the same quarter of 2017. Results in the prior year include a $346 thousand charge, or 1 cent per share reduction, from trailing acquisition and conversion costs.

Interest income totaled $32.2 million, up 7% on a year-over-year basis, and yields on loans and investments expanded eleven basis points in total. Net interest margin in the third quarter 2018 decreased to 2.81% from 3.06% in the prior year due to higher cost of funds driven by short-term interest rate hikes. That decrease included a lower contribution from tax-equivalency adjustments of six basis points over the prior year as a result of the lower federal statutory tax rate. The Company's loan to deposit ratio improved 3% over the prior year to 104 at the end of the third quarter. Total deposit growth of 3%, led by 14.3% growth in non-maturity balances, helped to reduce other higher funding cost realized as a result of recent rate increases.

The third quarter provision for loan losses was $643 thousand and exceeded net charge-offs, which follows the positive trend in all quarterly periods presented. Non-interest income increased to $7.1 million or 2.4% from the prior year primarily due to a $685 thousand gain from a partial sale of the Company’s ownership interest in Visa Class B shares. Non-interest expense increased to $17.9 million in the third quarter 2018 from $17.6 million in the same quarter of 2017. The increase is primarily due to higher salary and benefit expense related the build-up of the Company’s talent base with strategic hires. The decrease primarily relates to acquisition, conversion and other expenses, which totaled $70 thousand in 2018 and $346 thousand in 2017. The third quarter effective tax rate decreased to 18.8% in 2018 compared with 29.3% in the same quarter of 2017, reflecting a lower federal statutory tax rate.

FINANCIAL CONDITION

Total assets were $3.6 billion at the end of the third quarter 2018, up $20.0 million from the second quarter 2018. Loan balances in the third quarter 2018 were relatively flat with the second quarter with increases in residential products, which were offset by lower commercial loan balances due to higher prepayments and amortization. Asset quality improved during the third quarter with lower non-accrual loans due to activities associated with commercial workouts. Net loan charge-offs continue to be at historic lows and the ratio of credit losses to total loans improved to 0.54% at the end of the third quarter. The Company’s risk-based capital ratio for the third quarter 2018 is expected to be near 14.0% as tangible book value (non-GAAP measure) continued to expand on a quarter-over-quarter basis. Excluding the impact of securities fair value adjustments, earnings grew tangible book value per share (non-GAAP measure) to $17.22 from $16.81 in the second of quarter of 2018.

BACKGROUND

Bar 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 STATEMENTS

Certain statements contained in this document that are not historical facts may constitute forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended ("Securities Act"), and Section 21E of the Securities Exchange Act of 1934, as amended ("Exchange Act"), and are intended to be covered by the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. When used in this earnings release the words "may," "will," "should," "could," "would," "plan," "potential," "estimate," "project," "believe," "intend," "anticipate," "expect," "target" and similar expressions are intended to identify forward-looking statements, but these terms are not the exclusive means of identifying forward-looking statements. These forward-looking statements are subject to significant risks, assumptions and uncertainties, including among other things, changes in general economic and business conditions, increased competitive pressures, changes in the interest rate environment, legislative and regulatory change, changes in the financial markets, and other risks and uncertainties disclosed from time to time in documents that the Company files with the Securities and Exchange Commission, including but not limited to those discussed in the section titled "Risk Factors" in the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 2017. Because of these and other uncertainties, the Company’s actual results, performance or achievements, or industry results, may be materially different from the results indicated by these forward-looking statements. In addition, the Company’s past results of operations do not necessarily indicate future results. You should not place undue reliance on any of the forward-looking statements, which speak only as of the dates on which they were made. The Company is not undertaking an obligation to update forward-looking statements, even though its situation may change in the future, except as required under federal securities law. The Company qualifies all of its forward-looking statements by these cautionary statements.

NON-GAAP FINANCIAL MEASURES

This document contains certain non-GAAP financial measures in addition to results presented in accordance with accounting principles generally accepted in the United States of America ("GAAP"). These non-GAAP measures are intended to provide the reader with additional supplemental perspectives on operating results, performance trends, and financial condition. Non-GAAP financial measures 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 provided below. In all cases, it should be understood that non-GAAP measures do not depict amounts that accrue directly to the benefit of shareholders. An item which management excludes when computing non-GAAP adjusted earnings can be of substantial importance to the Company's results for any particular quarter or year. The Company's non-GAAP adjusted earnings information set forth is not necessarily comparable to non- GAAP information which may be presented by other companies. Each non-GAAP measure used by the Company in this report as supplemental financial data should be considered in conjunction with the Company's GAAP financial information.

The Company utilizes the non-GAAP measure of adjusted earnings in evaluating operating trends, including components for adjusted revenue and expense. These measures exclude amounts which the Company views as unrelated to its normalized operations, including securities gains/losses, acquisition costs, restructuring costs, legal settlements, and systems conversion costs. Non-GAAP adjustments are presented net of an adjustment for income tax expense.

The Company also calculates adjusted earnings per share based on its measure of adjusted earnings. The Company views these amounts as important to understanding its operating trends, particularly due to the impact of accounting standards related to acquisition activity. Analysts also rely on these measures in estimating and evaluating the Company's performance. Management also believes that the computation of non-GAAP adjusted earnings and adjusted earnings per share may facilitate the comparison of the Company to other companies in the financial services industry. The Company also adjusts certain equity related measures to exclude intangible assets due to the importance of these measures to the investment community.

         

TABLEINDEX

      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   Sep 30, 2018   Jun 30,2018   Mar 31,2018   Dec 31,2017   Sep 30,2017 PER SHARE DATA Net earnings, diluted $ 0.58 $ 0.55 $ 0.50 $ 0.43 $ 0.56 Core earnings, diluted (1) (2) 0.58 0.56 0.52 0.58 0.57 Total book value 23.06 22.97 22.78 22.96 22.90 Tangible book value (2) 16.11 16.00 15.78 15.94 15.84 Market price at period end 28.72 30.29 27.72 27.01 31.36 Dividends 0.20 0.20 0.19 0.19 0.19   PERFORMANCE RATIOS (3) Return on assets 1.01 % 0.97 % 0.90 % 0.75 % 0.99 % Core return on assets (1) (2) 1.01 1.00 0.93 1.02 1.01 Return on equity 9.92 9.65 9.01 7.35 9.67 Core return on equity (1) (2) 9.98 9.86 9.31 9.97 9.90 Core return on tangible equity (1) (2) 14.52 14.43 13.72 14.56 14.53 Net interest margin, fully taxable equivalent (FTE) (2) (4) 2.81 2.91 2.97 3.04 3.06 Net interest margin (FTE), excluding purchased loan accretion (2) (4) 2.71 2.80 2.85 2.93 2.93 Efficiency ratio (2) 57.88 58.83 60.44 53.02 53.53   GROWTH (Year-to-date, annualized) (2) Total commercial loans 2.8 % 5.7 % 2.2 % 23.8 % 20.5 % Total loans (0.1 ) — (3.4 ) 13.1 12.2 Total deposits 2.2 1.9 (1.8 ) 14.4 10.6   FINANCIAL DATA (In millions) Total assets $ 3,561 $ 3,541 $ 3,511 $ 3,565 $ 3,476 Total earning assets (5) 3,253 3,250 3,235 3,244 3,183 Total investments 747 749 757 755 756 Total loans 2,484 2,485 2,464 2,486 2,429 Allowance for loan losses 13 13 13 12 12 Total goodwill and intangible assets 108 108 108 108 109 Total deposits 2,390 2,375 2,341 2,352 2,275 Total shareholders' equity 358 356 352 355 353 Net income 9 9 8 7 9 Core income (1) (2) 9 9 8 9 9   ASSET QUALITY AND CONDITION RATIOS Net charge-offs (current quarter annualized)/average loans 0.04 % 0.06 % 0.07 % 0.04 % 0.03 % Allowance for loan losses/total loans 0.54 0.53 0.51 0.50 0.49 Loans/deposits 104 105 105 106 107 Shareholders' equity to total assets 10.04 10.05 10.03 9.95 10.17 Tangible shareholders' equity to tangible assets   7.24     7.22     7.17     7.12     7.26  

_____________________________________(1) Core measurements are non-GAAP financial measures that are adjusted to exclude net non-operating charges primarily related to acquisitions, system conversions 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.(5) Earning assets includes non-accruing loans and securities are valued at amortized cost.

  BAR HARBOR BANKSHARES CONSOLIDATED BALANCE SHEETS - UNAUDITED           (in thousands) Sep 30, 2018 Jun 30,2018 Mar 31,2018 Dec 31,2017 Sep 30,2017 Assets Cash and due from banks $ 53,154 $ 39,327 $ 35,088 $ 34,262 $ 31,223 Interest-bearing deposits with the Federal Reserve Bank 19,420   22,066   12,725   56,423   17,501   Total cash and cash equivalents 72,574 61,393 47,813 90,685 48,724 Securities available for sale, at fair value 712,658 710,147 718,559 717,242 718,459 Federal Home Loan Bank stock 34,154   38,712   38,105   38,105   37,107   Total securities 746,812 748,859 756,664 755,347 755,566 Commercial real estate 840,018 838,546 824,721 826,746 793,572 Commercial and industrial 385,814 400,293 387,205 379,423 357,072 Residential real estate 1,140,519 1,127,895 1,132,977 1,155,682 1,152,628 Consumer 117,239   118,332   119,516   123,762   125,590   Total loans 2,483,590 2,485,066 2,464,419 2,485,613 2,428,862 Less: Allowance for loan losses (13,487 ) (13,090 ) (12,679 ) (12,325 ) (11,950 ) Net loans 2,470,103 2,471,976 2,451,740 2,473,288 2,416,912   Premises and equipment, net 47,621 48,038 48,464 47,708 48,309 Other real estate owned 68 129 216 122 122 Goodwill 100,085 100,085 100,085 100,085 100,255 Other intangible assets 7,690 7,921 8,152 8,383 8,811 Cash surrender value of bank-owned life insurance 73,316 58,811 58,433 57,997 57,613 Deferred tax asset, net 11,527 10,309 9,627 7,180 13,052 Other assets 31,196   33,534   29,793   24,389   26,368   Total assets $ 3,560,992   $ 3,541,055   $ 3,510,987   $ 3,565,184   $ 3,475,732     Liabilities and shareholders' equity Demand and other non-interest bearing deposits $ 372,358 $ 341,773 $ 342,192 $ 349,055 $ 357,398 NOW deposits 471,326 449,715 448,992 466,610 442,085 Savings deposits 354,908 350,339 361,591 364,799 373,118 Money market deposits 254,142 260,642 303,777 305,275 300,398 Time deposits 937,615   972,252   884,848   866,346   802,110   Total deposits 2,390,349 2,374,721 2,341,400 2,352,085 2,275,109   Senior borrowings 739,224 735,924 742,198 786,688 775,582 Subordinated borrowings 42,988   43,003   43,018   43,033   43,048   Total borrowings 782,212 778,927 785,216 829,721 818,630   Other liabilities 30,746   31,444   32,214   28,737   28,534   Total liabilities 3,203,307 3,185,092 3,158,830 3,210,543 3,122,273   Total common shareholders' equity 357,685   355,963   352,157   354,641   353,459   Total liabilities and shareholders' equity $ 3,560,992   $ 3,541,055   $ 3,510,987   $ 3,565,184   $ 3,475,732     Net shares outstanding   15,509     15,496     15,459     15,443     15,432       BAR HARBOR BANKSHARES CONSOLIDATED LOAN & DEPOSIT ANALYSIS - UNAUDITED  

LOAN ANALYSIS

            Annualized Growth % (in thousands)

Sep 30,2018

Jun 30,2018

Mar 31,2018

Dec 31,2017

Sep 30,2017

QuarterEnd

 

Year toDate

Commercial real estate $ 840,018 $ 838,546 $ 824,721 $ 826,746 $ 793,572 0.7 % 2.1 % Commercial and industrial 303,984   313,680   301,811   293,707   270,759   (12.4 ) 4.7   Total commercial loans 1,144,002 1,152,226 1,126,532 1,120,453 1,064,331 (2.9 ) 2.8 Residential real estate 1,140,519 1,127,895 1,132,977 1,155,682 1,152,628 4.5 (1.8 ) Consumer 117,239 118,332 119,516 123,762 125,590 (3.7 ) (7.0 ) Tax exempt and other 81,830   86,613   85,394   85,716   86,313   (22.1 ) (6.0 ) Total loans   $ 2,483,590     $ 2,485,066     $ 2,464,419     $ 2,485,613     $ 2,428,862     (0.2 )%   (0.1 )%  

DEPOSIT ANALYSIS

            Annualized Growth % (in thousands)

Sep 30,2018

Jun 30,2018 Mar 31,2018 Dec 31,2017 Sep 30,2017

QuarterEnd

 

Year toDate

Demand $ 372,358 $ 341,773 $ 342,192 $ 349,055 $ 357,398 35.8 % 8.9 % NOW 471,326 449,715 448,992 466,610 442,085 19.2 1.3 Savings 354,908 350,339 361,591 364,799 373,118 5.2 (3.6 ) Money Market 254,142   260,642   303,777   305,275   300,398   (10.0 ) (22.3 ) Total non-maturity deposits 1,452,734 1,402,469 1,456,552 1,485,739 1,472,999 14.3 (3.0 ) Total time deposits 937,615   972,252   884,848   866,346   802,110   (14.3 ) 11.0   Total deposits   $ 2,390,349     $ 2,374,721     $ 2,341,400     $ 2,352,085     $ 2,275,109     2.6 %   2.2 %     BAR HARBOR BANKSHARES CONSOLIDATED STATEMENTS OF INCOME - UNAUDITED        

Three Months EndedSeptember 30,

Nine Months EndedSeptember 30,

(in thousands, except per share data) 2018 2017 2018 2017 Interest and dividend income Loans $ 26,212 $ 24,661 $ 77,272 $ 70,081 Securities and other 5,972   5,402   17,407   15,832 Total interest and dividend income 32,184 30,063 94,679 85,913 Interest expense Deposits 5,478 3,177 13,868 7,926 Borrowings 4,237   3,408   12,192   9,327 Total interest expense 9,715   6,585   26,060   17,253 Net interest income 22,469 23,478 68,619 68,660 Provision for loan losses 643   660   2,208   2,191 Net interest income after provision for loan losses 21,826   22,818   66,411   66,469 Non-interest income Trust and investment management fee income 2,952 3,040 9,036 9,228 Insurance brokerage service income — 329 — 1,020 Customer service fees 2,490 2,638 7,061 6,402 Gain on sales of securities, net — 19 — 19 Bank-owned life insurance income 505 380 1,328 1,165 Other income 1,179   554   3,060   1,631 Total non-interest income 7,126   6,960   20,485   19,465 Non-interest expense Salaries and employee benefits 10,331 9,617 31,695 30,065 Occupancy and equipment 3,366 2,700 9,364 8,195 Loss on sales of premises and equipment, net — (1 ) — 94 Outside services 456 907 1,597 2,220 Professional services 223 428 1,016 1,357 Communication 217 382 701 1,040 Amortization of intangible assets 207 212 621 603 Acquisition, conversion and other expenses 70 346 619 5,917 Other expenses 3,036   2,995   9,830   8,972 Total non-interest expense 17,906   17,586   55,443   58,463   Income before income taxes 11,046 12,192 31,453 27,471 Income tax expense 2,076   3,575   6,136   8,085 Net income   $ 8,970     $ 8,617     $ 25,317     $ 19,386   Earnings per share: Basic $ 0.58 $ 0.56 $ 1.64 $ 1.27 Diluted $ 0.58 $ 0.56 1.63 1.27   Weighted average shares outstanding: Basic 15,503 15,420 15,478 15,098 Diluted   15,580     15,511     15,564     15,204     BAR HARBOR BANKSHARES CONSOLIDATED STATEMENTS OF INCOME (5 Quarter Trend) - UNAUDITED           (in thousands, except per share data) Sep 30, 2018 Jun 30,2018 Mar 31,2018 Dec 31,2017 Sep 30,2017 Interest and dividend income Loans $ 26,212 $ 25,934 $ 25,126 $ 24,895 $ 24,661 Securities and other 5,972   5,784   5,651   5,261   5,402   Total interest and dividend income 32,184 31,718 30,777 30,156 30,063 Interest expense Deposits 5,478 4,405 3,985 3,381 3,177 Borrowings 4,237   4,321   3,634   3,279   3,408   Total interest expense 9,715   8,726   7,619   6,660   6,585   Net interest income 22,469 22,992 23,158 23,496 23,478 Provision for loan losses 643   770   795   597   660   Net interest income after provision for loan losses 21,826   22,222   22,363   22,899   22,818   Non-interest income Trust and investment management fee income 2,952 3,122 2,962 3,042 3,040 Insurance brokerage service income — — — 77 329 Customer service fees 2,490 2,347 2,224 2,495 2,638 Gain on sales of securities, net — — — — 19 Bank-owned life insurance income 505 377 446 374 380 Other income 1,179   1,275   606   530   554   Total non-interest income 7,126   7,121   6,238   6,518   6,960   Non-interest expense Salaries and employee benefits 10,331 10,375 10,989 9,524 9,617 Occupancy and equipment 3,366 2,925 3,073 2,866 2,700 Gain on sales of premises and equipment, net — — — — (1 ) Outside services 456 581 560 780 907 Professional services 223 360 433 298 428 Communication 217 304 180 249 382 Amortization of intangible assets 207 207 207 209 212 Acquisition, conversion, and other expenses 70 214 335 (2,615 ) 346 Other expenses 3,036   3,719   3,075   2,952   2,995   Total non-interest expense 17,906   18,685   18,852   14,263   17,586     Income before income taxes 11,046 10,658 9,749 15,154 12,192 Income tax expense 2,076   2,123   1,937   8,545   3,575   Net income   $ 8,970     $ 8,535     $ 7,812     $ 6,609     $ 8,617     Earnings per share: Basic $ 0.58 $ 0.55 $ 0.51 $ 0.43 $ 0.56 Diluted $ 0.58 $ 0.55 $ 0.50 $ 0.43 $ 0.56   Weighted average shares outstanding: Basic 15,503 15,482 15,448 15,437 15,420 Diluted   15,580     15,571     15,553     15,537     15,511     BAR HARBOR BANKSHARES AVERAGE YIELDS AND COSTS (Fully Taxable Equivalent - Annualized) - UNAUDITED           Quarters Ended   Sep 30, 2018 Jun 30, 2018 Mar 31, 2018 Dec 31, 2017 Sep 30, 2017 Earning assets Commercial real estate 4.57 % 4.48 % 4.41 % 4.30 % 4.28 % Commercial and industrial 4.59 4.69 4.41 4.77 4.84 Residential 3.83 3.88 3.87 3.78 3.79 Consumer 4.85   4.65   4.47   4.17   4.34   Total loans 4.25 4.25 4.16 4.12 4.13 Securities and other 3.21   3.18   3.16   3.06   3.13   Total earning assets 4.00 % 3.99 % 3.92 % 3.87 % 3.89 %   Funding liabilities NOW 0.43 % 0.37 % 0.34 % 0.31 % 0.32 % Savings 0.17 0.17 0.18 0.19 0.18 Money market 0.76 0.79 0.68 0.58 0.52 Time deposits 1.78   1.51   1.39   1.19   1.13   Total interest bearing deposits 1.06 0.90 0.82 0.70 0.66 Borrowings 2.26   2.07   1.80   1.62   1.66   Total interest-bearing liabilities 1.38 % 1.25 % 1.11 % 0.97 % 0.96 %                       Net interest spread 2.62 2.74 2.81 2.90 2.93 Net interest margin   2.81     2.91     2.97     3.04     3.06       BAR HARBOR BANKSHARES AVERAGE BALANCES - UNAUDITED           Quarters Ended (in thousands) Sep 30, 2018 Jun 30, 2018 Mar 31, 2018 Dec 31, 2017 Sep 30, 2017 Assets Commercial real estate $ 837,058 $ 824,356 $ 819,531 $ 783,730 $ 764,770 Commercial and industrial 388,831 396,471 380,029 362,881 353,194 Residential 1,120,336 1,126,714 1,147,010 1,161,865 1,158,069 Consumer 117,735   119,570   121,467   125,109   126,138   Total loans (1) 2,463,960 2,467,111 2,468,037 2,433,585 2,402,171 Securities and other (2) 773,562   767,886   765,328   753,282   754,450   Total earning assets 3,237,522 3,234,997 3,233,365 3,186,867 3,156,621 Cash and due from banks 63,272 50,869 53,151 65,145 49,169 Allowance for loan losses (13,463 ) (13,107 ) (12,589 ) (12,202 ) (11,786 ) Goodwill and other intangible assets 107,887 108,118 108,349 108,769 109,147 Other assets 137,466   131,522   129,525   144,359   149,394   Total assets $ 3,532,684   $ 3,512,399   $ 3,511,801   $ 3,492,938   $ 3,452,545     Liabilities and shareholders' equity NOW $ 461,875 $ 441,645 $ 447,026 $ 449,669 $ 447,459 Savings 356,834 351,712 362,508 368,714 368,443 Money market 259,738 288,169 305,105 308,071 292,110 Time deposits 964,108   872,149   857,796   799,348   793,489   Total interest bearing deposits 2,042,555 1,953,675 1,972,435 1,925,802 1,901,501 Borrowings 744,632   836,295   819,576   803,469   812,938   Total interest-bearing liabilities 2,787,187 2,789,970 2,792,011 2,729,271 2,714,439 Non-interest-bearing demand deposits 357,856 339,374 339,349 376,066 354,470 Other liabilities 28,943   28,386   29,000   30,971   30,079   Total liabilities 3,173,986 3,157,730 3,160,360 3,136,308 3,098,988   Total shareholders' equity 358,698 354,669 351,441 356,630 353,557             Total liabilities and shareholders' equity   $ 3,532,684     $ 3,512,399     $ 3,511,801     $ 3,492,938     $ 3,452,545  

_____________________________________(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)

Sep 30,2018

Jun 30,2018

Mar 31,2018

Dec 31,2017

Sep 30,2017

NON-PERFORMING ASSETS Non-accruing loans: Commercial real estate $ 8,348 $ 8,883 $ 8,422 $ 8,343 $ 2,467 Commercial installment 2,303 2,411 2,304 1,209 236 Residential real estate 10,396 9,945 8,548 4,266 3,619 Consumer installment 727   707   1,065   500   496   Total non-accruing loans 21,774 21,946 20,339 14,318 6,818 Other real estate owned 68   129   216   122   122   Total non-performing assets $ 21,842   $ 22,075   $ 20,555   $ 14,440   $ 6,940     Total non-accruing loans/total loans 0.88 % 0.88 % 0.83 % 0.58 % 0.28 % Total non-performing assets/total assets 0.61 0.62 0.59 0.41 0.20   PROVISION AND ALLOWANCE FOR LOAN LOSSES Balance at beginning of period $ 13,090 $ 12,679 $ 12,325 $ 11,950 $ 11,442 Charged-off loans (298 ) (517 ) (461 ) (277 ) (297 ) Recoveries on charged-off loans 52   158   20   55   145   Net loans charged-off (246 ) (359 ) (441 ) (222 ) (152 ) Provision for loan losses 643   770   795   597   660   Balance at end of period $ 13,487   $ 13,090   $ 12,679   $ 12,325   $ 11,950     Allowance for loan losses/total loans 0.54 % 0.53 % 0.51 % 0.50 % 0.49 % Allowance for loan losses/non-accruing loans 62 60 62 86 175   NET LOAN CHARGE-OFFS Commercial real estate $ (27 ) $ (92 ) $ (91 ) $ (92 ) $ (16 ) Commercial installment (53 ) (54 ) (140 ) 1 6 Residential real estate (123 ) (64 ) 1 — (79 ) Consumer installment (43 ) (149 ) (211 ) (131 ) (63 ) Total, net $ (246 ) $ (359 ) $ (441 ) $ (222 ) $ (152 )   Net charge-offs (QTD annualized)/average loans 0.04 % 0.06 % 0.07 % 0.04 % 0.03 % Net charge-offs (YTD annualized)/average loans 0.06 0.06 0.07 0.04 0.04   DELINQUENT AND NON-ACCRUING LOANS/TOTAL LOANS 30-89 Days delinquent 0.17 % 0.14 % 0.24 % 0.37 % 0.35 % 90+ Days delinquent and still accruing —   —   —   0.02   0.01   Total accruing delinquent loans 0.17 0.14 0.24 0.39 0.36 Non-accruing loans 0.88   0.88   0.83   0.58   0.28   Total delinquent and non-accruing loans   1.05 %   1.02 %   1.07 %   0.97 %   0.64 %     BAR HARBOR BANKSHARES RECONCILIATION OF NON-GAAP FINANCIAL MEASURES AND SUPPLEMENTARY DATA- UNAUDITED     At or for the Quarters Ended (in thousands)     Sep 30, 2018   Jun 30,2018   Mar 31,2018   Dec 31,2017   Sep 30,2017 Net income $ 8,970 $ 8,535 $ 7,812 $ 6,609 $ 8,617 Adj: Security Gains — — — — (19 ) Adj: Gain on sale of fixed assets, net — — — — (1 ) Adj: Loss on other real estate owned (8 ) 23 — — — Adj: Acquisition, conversion and other expenses 70 214 335 (2,615 ) 346 Adj: Income taxes (1) (12 ) (57 ) (81 ) 982 (122 ) Adj: Tax reform charge     —   —   —   3,988   —   Total core income (2)   (A) $ 9,020   $ 8,715   $ 8,066   $ 8,964   $ 8,821     Net-interest income (B) $22,469 $22,992 $23,158 $23,496 $23,478 Plus: Non-interest income     7,126   7,121   6,238   6,518   6,960   Total Revenue 29,595 30,113 29,396 30,014 30,438 Adj: Net security gains     —   —   —   —   (19 ) Total core revenue (2)   (C) $29,595   $30,113   $29,396   $30,014   $30,419     Total non-interest expense 17,906 18,685 18,852 14,263 17,586 Less: Gain on sale of fixed assets, net — — — — 1 Less: Loss on other real estate owned 8 (23 ) — — — Less: Acquisition, conversion and other expenses     (70 ) (214 ) (335 ) 2,615   (346 ) Core non-interest expense (2)   (D) $17,844   $18,448   $18,517   $16,878   $17,241     (in millions) Total average earning assets (E) $ 3,238 $ 3,235 $ 3,233 $ 3,187 $ 3,157 Total average assets (F) 3,533 3,512 3,512 3,493 3,453 Total average shareholders' equity (G) 359 355 351 357 354 Total average tangible shareholders' equity (2) (3) (H) 251 247 243 248 244 Total tangible shareholders' equity, period-end (2) (3) (I) 250 248 244 246 244 Total tangible assets, period-end (2) (3) (J) 3,453 3,433 3,403 3,457 3,367   (in thousands) Total common shares outstanding, period-end (K) 15,509 15,496 15,459 15,443 15,432 Average diluted shares outstanding (L) 15,580 15,571 15,553 15,537 15,511   Core earnings per share, diluted (2) (A/L) $ 0.58 $ 0.56 $ 0.52 $ 0.58 $ 0.57 Tangible book value per share, period-end (2) (I/K) 16.11 16.00 15.78 15.94 15.84 Securities adjustment, net of tax (1)(4) (M) (17,152 ) (12,594 ) (10,237 ) 1,711 (1,155 ) Tangible book value per share, excluding securities adjustment (2) (I+M)/K 17.22 16.81 16.44 15.83 15.91 Total tangible shareholders' equity/total tangible assets (2) (I/J) 7.24 7.22 7.17 7.12 7.26   Performance ratios GAAP return on assets 1.01 % 0.97 % 0.90 % 0.75 % 0.99 % Core return on assets (2) (A/F) 1.01 1.00 0.93 1.02 1.01 GAAP return on equity 9.92 9.65 9.01 7.35 9.67 Core return on equity (2) (A/G) 9.98 9.86 9.31 9.97 9.90 Core return on tangible equity (2) (5) (A/I) 14.52 14.43 13.72 14.56 14.53 Efficiency ratio (2) (6) (D-O-Q)/(C+N) 57.88 58.83 60.44 53.02 53.53 Net interest margin (B+P)/E 2.81 2.91 2.97 3.04 3.06 Supplementary data (in thousands) Taxable equivalent adjustment for efficiency ratio (N) $ 654 $ 622 $ 645 $ 1,122 $ 1,107 Franchise taxes included in non-interest expense (O) 129 159 152 161 154 Tax equivalent adjustment for net interest margin (P) 493 502 503 897 878 Intangible amortization   (Q)   207     207     207     209     212  

_____________________________________(1) Assumes a marginal tax rate of 23.78% in third quarter 2018 net of adjustment for first and second quarter 2018, which was recorded at a marginal rate of 24.15%. A marginal tax rate of 37.57% was used 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) Securities adjustment, net of tax represents the total unrealized loss on available-for-sale securities recorded on the Company's consolidated balance sheets within total common shareholders' equity.(5) 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 23.78% in third quarter 2018, 24.15% in first and second quarter 2018 and 37.57% in 2017, by tangible equity.(6) 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.

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Bar Harbor BanksharesJosephine Iannelli, 207-288-3314EVP, Chief Financial Officer & Treasurer