BHB Bar Harbor Bankshares

Bar Harbor Bankshares (NYSE American: BHB or the “Company”) reported first quarter 2019 net income of $7.3 million or $0.47 diluted earnings per share. Earnings in the same quarter of 2018 totaled $7.8 million or $0.50 diluted earnings per share.

FIRST QUARTER FINANCIAL HIGHLIGHTS

• 6% annualized growth in total loans
• 102% loan to deposit ratio
• 0.66% non-accruing loans to total loans
• 0.03% net charge-offs to average loans
• 11% annualized increase in book value per share

President and Chief Executive Officer, Curtis C. Simard stated, “Earnings for the first quarter were in line with our expectations given the somewhat seasonal nature of our geographic markets and overall economic conditions. The financial performance in the first quarter includes yield expansion, active balance sheet management and continuous execution of our risk centric operating model that balances growth with earnings. Yields from earnings assets increased across the board partially offsetting the rising costs of funds from the December 2018 rate hike. And, we took advantage of the disconnect within funding markets by swapping out short-term borrowings with longer-term fixed interest rates. Our disciplined approach to credit quality and risk mitigation is prevalent as the ratios of non-accruing loans to total loans and net charge-offs to average loans continue to improve on a quarter-over-quarter basis.”

Mr. Simard continued, “Our targeted branch strategy remains on track and we will continue to explore market opportunities within our footprint as it contributes to the Company’s near and long term growth potential. Our Manchester, New Hampshire branch has already started to capture significant market share and we are happy to announce the redesign of our Newport, New Hampshire location, which will create a unique and fulfilling experience for our customers, the community, and our employees. Newport has been an important cornerstone to our mortgage banking operations and is home to our consolidated call center.

Mr. Simard further stated, “With our strong capital position and consistent organic growth in equity, we are excited to announce an increase in our quarterly cash dividend by 10%. The new dividend yield along with continuous double digit growth in book value per share and the previously announced 5% share buyback program is continued proof of our commitment to building shareholder value.”

Mr. Simard concluded, “As we look to the rest of 2019, we are focused on our customers and sales culture that is being driven at every level of leadership. It’s a sales culture with an eye towards repeatable performance and thoughtful solutions to the challenges our customers and prospects face. We have a team who greatly believes in itself and this Company, which ultimately drives shareholder value.”

DIVIDEND INCREASEDOn April 16, 2019, the Board of Directors voted to increase the quarterly cash dividend by $0.02, or 10%, to $0.22 per share to shareholders of record at the close of business May 14, 2019, payable on June 14, 2019. The dividend equates to a 3.4% annualized yield based on a $25.87 closing price at the end of the first quarter 2019.

FINANCIAL CONDITIONTotal assets were $3.6 billion at the end of the first quarter 2019, up $20.7 million from the fourth quarter and $118.2 million from the first quarter 2018. Loan balances in the first quarter 2019 were $2.5 billion increasing $36.7 million from the fourth quarter or 6% annualized. Loan growth is attributed to our expanded branch model and the momentum of our sales culture.

The first quarter 2019 allowance for loan losses to total loans ratio remains strong at 0.55% with a coverage ratio to non-accruing loans at 84%, up from 76% as of year-end. Non-accruing loans decreased $1.6 million in the first quarter 2019 with improvements across most categories. These improvements decreased the ratio of non-accruing loans to average loans to 0.66% from 0.73% at year-end 2018. This positive trend was also seen in the ratio of past due accounts as a percentage of average loans.

The Company’s book value per share was $24.54 at the end of the first quarter 2019 compared to $23.87 at year-end 2018, representing an 11% annualized growth rate. Tangible book value per share (non-GAAP measure) was $17.63 at the end of the first quarter 2019 compared to $16.94 at year-end 2018. Lower long-term rates had a positive impact on the fair value adjustment in the securities portfolio. The fair value adjustment was a loss of $1.8 million in the first quarter 2019 compared $8.7 million in the fourth quarter 2018.

RESULTS OF OPERATIONSNet income in the first quarter 2019 was $7.3 million, or $0.47 per share, compared to $7.8 million, or $0.50 per share, in the same quarter of 2018. Interest income was up 8% to $33.2 million as quarterly yields on earning assets expanded 27 basis points on a year-over-year basis to 4.19%. Net interest margin in the first quarter 2019 decreased to 2.77% from 2.97% in the same period of 2018. The decrease reflects several short-term interest rate hikes in 2018 and the continued flattening of the yield curve into 2019. We remain focused on balance sheet strategies such as the investment portfolio remix seen in the fourth quarter 2018 and current quarter brokered certificate of deposit hedge, which helps to manage interest rate risk. Our loan to deposit ratio increased to 102% in the first quarter 2019 as deposits are traditionally lower in the beginning of the year.

The first quarter 2019 provision for loan losses decreased to $324 thousand from $795 thousand in the same quarter 2018. We continue to have a positive quarterly trend in both recoveries and charged-off loans. The net charged-off loans to average loans ratio remained low at a 0.03% annualized rate for the first quarter 2019. Asset quality continues to improve with non-accruing loans to total loans at 0.66% in the first quarter 2019 compared to 0.83% in the same quarter of 2018.

Non-interest income and non-interest expense remained relatively flat for the first quarter of 2019 compared to first quarter of 2018. The reduction in salary and benefit expenses were offset by increase in occupancy and equipment based on the new locations in Manchester, New Hampshire and Portland, Maine placed in service during the fourth quarter of 2018.

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 130 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.

NON-GAAP FINANCIAL MEASURESThis 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 core earnings can be of substantial importance to the Company's results for any particular quarter or year. The Company's non-GAAP core 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 core earnings in evaluating operating trends, including components for core 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 core earnings per share based on its measure of core 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 core earnings and core 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  

Mar 31, 2019

   

Dec 31,2018

   

Sep 30,2018

   

Jun 30,2018

   

Mar 31,2018

PER SHARE DATA Net earnings, diluted $ 0.47 $ 0.49 $ 0.58 $ 0.55 $ 0.50 Core earnings, diluted (1) (2) 0.47 0.59 0.58 0.56 0.52 Total book value 24.54 23.87 23.06 22.97 22.78 Tangible book value (2) 17.63 16.94 16.11 16.00 15.78 Market price at period end 25.87 22.43 28.72 30.29 27.72 Dividends 0.20 0.20 0.20 0.20 0.19   PERFORMANCE RATIOS (3) Return on assets 0.83 % 0.85 % 1.01 % 0.97 % 0.90 % Core return on assets (1) (2) 0.83 1.03 1.01 1.00 0.93 Return on equity 7.83 8.31 9.92 9.65 9.01 Core return on equity (1) (2) 7.83 10.01 9.98 9.86 9.31 Core return on tangible equity (1) (2) 11.19 14.46 14.52 14.43 13.72 Net interest margin, fully taxable equivalent (FTE) (2) (4) 2.77 2.78 2.81 2.91 2.97 Net interest margin (FTE), excluding purchased loan accretion (2) (4) 2.67 2.70 2.71 2.80 2.85 Efficiency ratio (2) 63.94 59.91 57.88 58.83 60.44   GROWTH (Year-to-date, annualized) (2) Total commercial loans (3.3 )% 1.4 % 2.8 % 5.7 % 2.2 % Total loans 5.9 0.2 (0.1 ) — (3.4 ) Total deposits (2.8 ) 5.6 2.2 1.9 (1.8 )   FINANCIAL DATA (In millions) Total assets $ 3,629 $ 3,608 $ 3,561 $ 3,541 $ 3,511 Total earning assets (2) (5) 3,312 3,263 3,253 3,250 3,235 Total investments 782 761 747 749 757 Total loans 2,527 2,490 2,484 2,485 2,464 Allowance for loan losses 14 14 13 13 13 Total goodwill and intangible assets 107 108 108 108 108 Total deposits 2,466 2,483 2,390 2,375 2,341 Total shareholders' equity 381 371 358 356 352 Net income 7 8 9 9 8 Core income (1) (2) 7 9 9 9 8   ASSET QUALITY AND CONDITION RATIOS Net charge-offs (current quarter annualized)/average loans 0.03 % 0.03 % 0.04 % 0.06 % 0.07 % Allowance for loan losses/total loans 0.55 0.56 0.54 0.53 0.51 Loans/deposits 102 100 104 105 105 Shareholders' equity to total assets 10.50 10.27 10.04 10.05 10.03 Tangible shareholders' equity to tangible assets     7.77       7.51       7.24       7.22       7.17    

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(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)     Mar 31, 2019     Dec 31,2018     Sep 30,2018     Jun 30,2018    

Mar 31,2018

Assets Cash and due from banks $ 37,504 $ 35,208 $ 53,154 $ 39,327 $ 35,088 Interest-bearing deposits with the Federal Reserve Bank 16,599   63,546   19,420   22,066   12,725   Total cash and cash equivalents 54,103 98,754 72,574 61,393 47,813 Securities available for sale, at fair value 747,235 725,837 712,658 710,147 718,559 Federal Home Loan Bank stock 35,107   35,659   34,154   38,712   38,105   Total securities 782,342 761,496 746,812 748,859 756,664 Commercial real estate 821,567 826,699 840,018 838,546 824,721 Commercial and industrial 409,937 404,870 385,814 400,293 387,205 Residential real estate 1,184,053 1,144,698 1,140,519 1,127,895 1,132,977 Consumer 111,402   113,960   117,239   118,332   119,516   Total loans 2,526,959 2,490,227 2,483,590 2,485,066 2,464,419 Less: Allowance for loan losses (13,997 ) (13,866 ) (13,487 ) (13,090 ) (12,679 ) Net loans 2,512,962 2,476,361 2,470,103 2,471,976 2,451,740   Premises and equipment, net 49,661 48,804 47,621 48,038 48,464 Other real estate owned 2,351 2,351 68 129 216 Goodwill 100,085 100,085 100,085 100,085 100,085 Other intangible assets 7,266 7,459 7,690 7,921 8,152 Cash surrender value of bank-owned life insurance 74,352 73,810 73,316 58,811 58,433 Deferred tax asset, net 7,632 9,514 11,527 10,309 9,627 Other assets 38,441   29,853   31,196   33,534   29,793   Total assets $ 3,629,195   $ 3,608,487   $ 3,560,992   $ 3,541,055   $ 3,510,987     Liabilities and shareholders' equity Demand and other non-interest bearing deposits $ 342,030 $ 370,889 $ 372,358 $ 341,773 $ 342,192 NOW deposits 470,277 484,717 471,326 449,715 448,992 Savings deposits 346,813 358,888 354,908 350,339 361,591 Money market deposits 349,833 335,951 254,142 260,642 303,777 Time deposits 956,818   932,793   937,615   972,252   884,848   Total deposits 2,465,771 2,483,238 2,390,349 2,374,721 2,341,400   Senior borrowings 703,283 680,823 739,224 735,924 742,198 Subordinated borrowings 42,958   42,973   42,988   43,003   43,018   Total borrowings 746,241 723,796 782,212 778,927 785,216   Other liabilities 36,160   30,874   30,746   31,444   32,214   Total liabilities 3,248,172 3,237,908 3,203,307 3,185,092 3,158,830   Total common shareholders' equity 381,023   370,579   357,685   355,963   352,157   Total liabilities and shareholders' equity $ 3,629,195   $ 3,608,487   $ 3,560,992   $ 3,541,055   $ 3,510,987     Net shares outstanding     15,524       15,523       15,509       15,496       15,459       BAR HARBOR BANKSHARES CONSOLIDATED LOAN & DEPOSIT ANALYSIS - UNAUDITED                        

LOAN ANALYSIS

AnnualizedGrowth %

(in thousands)

Mar 31,2019

Dec 31,2018

Sep 30,2018

Jun 30,2018

Mar 31,2018

Mar 31,2019

Commercial real estate $ 821,567 $ 826,699 $ 840,018 $ 838,546 $ 824,721 (2.5 )% Commercial and industrial 305,185   309,544   303,984   313,680   301,811   (5.6 ) Total commercial loans 1,126,752 1,136,243 1,144,002 1,152,226 1,126,532 (3.3 ) Residential real estate 1,184,053 1,144,698 1,140,519 1,127,895 1,132,977 13.8 Consumer 111,402 113,960 117,239 118,332 119,516 (9.0 ) Tax exempt and other 104,752   95,326   81,830   86,613   85,394   39.6   Total loans     $ 2,526,959       $ 2,490,227       $ 2,483,590       $ 2,485,066       $ 2,464,419       5.9 %    

DEPOSIT ANALYSIS

AnnualizedGrowth %

(in thousands)

Mar 31,2019

Dec 31,2018

Sep 30,2018

Jun 30,2018

Mar 31,2018

Mar 31,2019

Demand $ 342,030 $ 370,889 $ 372,358 $ 341,773 $ 342,192 (31.1 )% NOW 470,277 484,717 471,326 449,715 448,992 (11.9 ) Savings 346,813 358,888 354,908 350,339 361,591 (13.5 ) Money Market 349,833   335,951   254,142   260,642   303,777   16.5   Total non-maturity deposits 1,508,953 1,550,445 1,452,734 1,402,469 1,456,552 (10.7 ) Total time deposits 956,818   932,793   937,615   972,252   884,848   10.3   Total deposits     $ 2,465,771       $ 2,483,238       $ 2,390,349       $ 2,374,721       $ 2,341,400       (2.8 )%     BAR HARBOR BANKSHARES CONSOLIDATED STATEMENTS OF INCOME - UNAUDITED     Three Months Ended March 31, (in thousands, except per share data) 2019     2018 Interest and dividend income Loans $ 26,864 $ 25,126 Securities and other 6,363   5,651 Total interest and dividend income 33,227 30,777 Interest expense Deposits 6,307 3,985 Borrowings 5,155   3,634 Total interest expense 11,462   7,619 Net interest income 21,765 23,158 Provision for loan losses 324   795 Net interest income after provision for loan losses 21,441   22,363 Non-interest income Trust and investment management fee income 2,757 2,962 Customer service fees 2,165 2,224 Bank-owned life insurance income 542 446 Other income 703   606 Total non-interest income 6,167   6,238 Non-interest expense Salaries and employee benefits 10,519 10,989 Occupancy and equipment 3,386 3,073 Outside services 411 560 Professional services 544 433 Communication 235 180 Amortization of intangible assets 207 207 Acquisition, conversion and other expenses — 335 Other expenses 3,322   3,075 Total non-interest expense 18,624   18,852   Income before income taxes 8,984 9,749 Income tax expense 1,703   1,937 Net income     $ 7,281       $ 7,812   Earnings per share: Basic $ 0.47 $ 0.51 Diluted $ 0.47 $ 0.50   Weighted average shares outstanding: Basic 15,523 15,448 Diluted     15,587       15,553     BAR HARBOR BANKSHARES CONSOLIDATED STATEMENTS OF INCOME (5 Quarter Trend) - UNAUDITED (in thousands, except per share data)     Mar 31, 2019     Dec 31,2018     Sep 30,2018     Jun 30,2018     Mar 31,2018 Interest and dividend income Loans $ 26,864 $ 26,743 $ 26,212 $ 25,934 $ 25,126 Securities and other 6,363   6,029   5,972   5,784   5,651 Total interest and dividend income 33,227 32,772 32,184 31,718 30,777 Interest expense Deposits 6,307 5,653 5,478 4,405 3,985 Borrowings 5,155   4,855   4,237   4,321   3,634 Total interest expense 11,462   10,508   9,715   8,726   7,619 Net interest income 21,765 22,264 22,469 22,992 23,158 Provision for loan losses 324   572   643   770   795 Net interest income after provision for loan losses 21,441   21,692   21,826   22,222   22,363 Non-interest income Trust and investment management fee income 2,757 2,949 2,952 3,122 2,962 Customer service fees 2,165 2,477 2,490 2,347 2,224 Gain on sales of securities, net — (924 ) — — — Bank-owned life insurance income 542 493 505 377 446 Other income 703   2,455   1,179   1,275   606 Total non-interest income 6,167   7,450   7,126   7,121   6,238 Non-interest expense Salaries and employee benefits 10,519 9,269 10,331 10,375 10,989 Occupancy and equipment 3,386 3,022 3,366 2,925 3,073 Outside services 411 811 456 581 560 Professional services 544 458 223 360 433 Communication 235 103 217 304 180 Amortization of intangible assets 207 207 207 207 207 Acquisition, conversion, and other expenses — 1,109 70 214 335 Other expenses 3,322   5,117   3,036   3,719   3,075 Total non-interest expense 18,624   20,096   17,906   18,685   18,852   Income before income taxes 8,984 9,046 11,046 10,658 9,749 Income tax expense 1,703   1,426   2,076   2,123   1,937 Net income     $ 7,281       $ 7,620       $ 8,970       $ 8,535       $ 7,812   Earnings per share: Basic $ 0.47 $ 0.49 $ 0.58 $ 0.55 $ 0.51 Diluted $ 0.47 $ 0.49 $ 0.58 $ 0.55 $ 0.50   Weighted average shares outstanding: Basic 15,523 15,516 15,503 15,482 15,448 Diluted     15,587       15,574       15,580       15,571       15,553     BAR HARBOR BANKSHARES AVERAGE YIELDS AND COSTS (Fully Taxable Equivalent - Annualized) - UNAUDITED     Quarters Ended  

Mar 31, 2019

    Dec 31, 2018     Sep 30, 2018     Jun 30, 2018     Mar 31, 2018 Earning assets Commercial real estate 4.78 % 4.71 % 4.57 % 4.48 % 4.41 % Commercial and industrial 4.79 4.61 4.59 4.69 4.41 Residential 3.94 3.83 3.83 3.88 3.87 Consumer 5.25   5.07   4.85   4.65   4.47   Total loans 4.42 4.31 4.25 4.25 4.16 Securities and other 3.47   3.28   3.21   3.18   3.16   Total earning assets 4.19 % 4.07 % 4.00 % 3.99 % 3.92 %   Funding liabilities NOW 0.51 % 0.50 % 0.43 % 0.37 % 0.34 % Savings 0.19 0.18 0.17 0.17 0.18 Money market 1.38 0.93 0.76 0.79 0.68 Time deposits 2.00   1.85   1.78   1.51   1.39   Total interest bearing deposits 1.25 1.12 1.06 0.90 0.82 Borrowings 2.74   2.53   2.26   2.07   1.80   Total interest-bearing liabilities 1.66 % 1.50 % 1.38 % 1.25 % 1.11 %                                 Net interest spread 2.53 2.57 2.62 2.74 2.81 Net interest margin     2.77       2.78       2.81       2.91       2.97       BAR HARBOR BANKSHARES AVERAGE BALANCES - UNAUDITED                     Quarters Ended (in thousands) Mar 31, 2019 Dec 31, 2018 Sep 30, 2018 Jun 30, 2018 Mar 31, 2018 Assets Commercial real estate $ 825,596 $ 836,813 $ 837,058 $ 824,356 $ 819,531 Commercial and industrial 405,107 393,396 388,831 396,471 380,029 Residential 1,143,862 1,137,493 1,120,336 1,126,714 1,147,010 Consumer 113,060   114,960   117,735   119,570   121,467   Total loans (1) 2,487,625 2,482,662 2,463,960 2,467,111 2,468,037 Securities and other (2) 777,458   762,901   773,562   767,886   765,328   Total earning assets 3,265,083 3,245,563 3,237,522 3,234,997 3,233,365 Cash and due from banks 50,298 68,904 63,272 50,869 53,151 Allowance for loan losses (14,119 ) (13,922 ) (13,463 ) (13,107 ) (12,589 ) Goodwill and other intangible assets 107,446 107,657 107,887 108,118 108,349 Other assets 152,332   138,074   137,466   131,522   129,525   Total assets $ 3,561,040   $ 3,546,276   $ 3,532,684   $ 3,512,399   $ 3,511,801     Liabilities and shareholders' equity NOW $ 468,392 $ 475,449 $ 461,875 $ 441,645 $ 447,026 Savings 346,707 346,905 356,834 351,712 362,508 Money market 335,882 272,612 259,738 288,169 305,105 Time deposits 894,160   914,674   964,108   872,149   857,796   Total interest bearing deposits 2,045,141 2,009,640 2,042,555 1,953,675 1,972,435 Borrowings 761,885   761,781   744,632   836,295   819,576   Total interest-bearing liabilities 2,807,026 2,771,421 2,787,187 2,789,970 2,792,011 Non-interest-bearing demand deposits 351,362 384,636 357,856 339,374 339,349 Other liabilities 25,520   26,569   28,943   28,386   29,000   Total liabilities 3,183,908 3,182,626 3,173,986 3,157,730 3,160,360   Total shareholders' equity 377,132 363,650 358,698 354,669 351,441             Total liabilities and shareholders' equity     $ 3,561,040       $ 3,546,276       $ 3,532,684       $ 3,512,399       $ 3,511,801    

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(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 31,2019

Dec 31,2018

Sep 30,2018

Jun 30,2018

Mar 31,2018

NON-PERFORMING ASSETS Non-accruing loans: Commercial real estate $ 7,516 $ 8,156 $ 8,348 $ 8,883 $ 8,422 Commercial installment 2,192 2,331 2,303 2,411 2,304 Residential real estate 6,326 7,211 10,396 9,945 8,548 Consumer installment 565   537   727   707   1,065   Total non-accruing loans 16,599 18,235 21,774 21,946 20,339 Other real estate owned 2,351   2,351   68   129   216   Total non-performing assets $ 18,950   $ 20,586   $ 21,842   $ 22,075   $ 20,555     Total non-accruing loans/total loans 0.66 % 0.73 % 0.88 % 0.88 % 0.83 % Total non-performing assets/total assets 0.52 0.57 0.61 0.62 0.59   PROVISION AND ALLOWANCE FOR LOAN LOSSES Balance at beginning of period $ 13,866 $ 13,487 $ 13,090 $ 12,679 $ 12,325 Charged-off loans (231 ) (631 ) (298 ) (517 ) (461 ) Recoveries on charged-off loans 38   438   52   158   20   Net loans charged-off (193 ) (193 ) (246 ) (359 ) (441 ) Provision for loan losses 324   572   643   770   795   Balance at end of period $ 13,997   $ 13,866   $ 13,487   $ 13,090   $ 12,679     Allowance for loan losses/total loans 0.55 % 0.56 % 0.54 % 0.53 % 0.51 % Allowance for loan losses/non-accruing loans 84 76 62 60 62   NET LOAN CHARGE-OFFS Commercial real estate $ (41 ) $ (25 ) $ (27 ) $ (92 ) $ (91 ) Commercial installment (15 ) 53 (53 ) (54 ) (140 ) Residential real estate (86 ) (31 ) (123 ) (64 ) 1 Consumer installment (51 ) (190 ) (43 ) (149 ) (211 ) Total, net $ (193 ) $ (193 ) $ (246 ) $ (359 ) $ (441 )   Net charge-offs (QTD annualized)/average loans 0.03 % 0.03 % 0.04 % 0.06 % 0.07 % Net charge-offs (YTD annualized)/average loans 0.03 0.05 0.06 0.06 0.07   DELINQUENT AND NON-ACCRUING LOANS/TOTAL LOANS 30-89 Days delinquent 0.21 % 0.38 % 0.17 % 0.14 % 0.24 % 90+ Days delinquent and still accruing —   0.01   —   —   —   Total accruing delinquent loans 0.21 0.39 0.17 0.14 0.24 Non-accruing loans 0.66   0.73   0.88   0.88   0.83   Total delinquent and non-accruing loans     0.87 %     1.12 %     1.05 %     1.02 %     1.07 %     BAR HARBOR BANKSHARES RECONCILIATION OF NON-GAAP FINANCIAL MEASURES AND SUPPLEMENTARY DATA- UNAUDITED     At or for the Quarters Ended (in thousands)  

Mar 31, 2019

   

Dec 31,2018

    Sep 30,2018     Jun 30,2018     Mar 31,2018 Net income $ 7,281 $ 7,620 $ 8,970 $ 8,535 $ 7,812 Plus (less): Loss on sale of securities, net — 924 — — — Loss (gain) on other real estate owned — 5 (8 ) 23 — Acquisition, conversion and other expenses — 1,109 70 214 335 Income tax (expense) (1)   —   (485 ) (12 ) (57 ) (81 ) Total core income (2) (A) $ 7,281   $ 9,173   $ 9,020   $ 8,715   $ 8,066     Net-interest income (B) $ 21,765 $ 22,264 $ 22,469 $ 22,992 $ 23,158 Plus: Non-interest income   6,167   7,450   7,126   7,121   6,238   Total Revenue 27,932 29,714 29,595 30,113 29,396 Plus: Loss on sale of securities, net   —   924   —   —   —   Total core revenue (2) (C) $ 27,932   $ 30,638   $ 29,595   $ 30,113   $ 29,396     Total non-interest expense 18,624 20,096 17,906 18,685 18,852 Less: Loss on other real estate owned — (5 ) 8 (23 ) — Less: Acquisition, conversion and other expenses   —   (1,109 ) (70 ) (214 ) (335 ) Core non-interest expense (2) (D) $ 18,624   $ 18,982   $ 17,844   $ 18,448   $ 18,517     (in millions) Total average earning assets (E) $ 3,265 $ 3,246 $ 3,238 $ 3,235 $ 3,233 Total average assets (F) 3,561 3,546 3,533 3,512 3,512 Total average shareholders' equity (G) 377 364 359 355 351 Total average tangible shareholders' equity (2) (3) (H) 270 256 251 247 243 Total tangible shareholders' equity, period-end (2) (3) (I) 274 263 250 248 244 Total tangible assets, period-end (2) (3) (J) 3,522 3,501 3,453 3,433 3,403   (in thousands) Total common shares outstanding, period-end (K) 15,524 15,523 15,509 15,496 15,459 Average diluted shares outstanding (L) 15,587 15,574 15,580 15,571 15,553   Core earnings per share, diluted (2) (A/L) $ 0.47 $ 0.59 $ 0.58 $ 0.56 $ 0.52 Tangible book value per share, period-end (2) (I/K) 17.63 16.94 16.11 16.00 15.78 Securities adjustment, net of tax (1) (4) (M) (1,842 ) (8,663 ) (17,152 ) (12,594 ) (10,237 ) Tangible book value per share, excluding securities adjustment (2) (I+M)/K 17.75 17.50 17.22 16.81 16.44 Total tangible shareholders' equity/total tangible assets (2) (I/J) 7.77 7.51 7.24 7.22 7.17   Performance ratios GAAP return on assets 0.83 % 0.85 % 1.01 % 0.97 % 0.90 % Core return on assets (2) (A/F) 0.83 1.03 1.01 1.00 0.93 GAAP return on equity 7.83 8.31 9.92 9.65 9.01 Core return on equity (2) (A/G) 7.83 10.01 9.98 9.86 9.31 Core return on tangible equity (2) (5) (A+Q)/H 11.19 14.46 14.52 14.43 13.72 Efficiency ratio (2) (6) (D-O-Q)/(C+N) 63.94 59.91 57.88 58.83 60.44 Net interest margin (B+P)/E 2.77 2.78 2.81 2.91 2.97 Supplementary data (in thousands) Taxable equivalent adjustment for efficiency ratio (N) $ 684 $ 633 $ 654 $ 622 $ 645 Franchise taxes included in non-interest expense (O) 120 39 129 159 152 Tax equivalent adjustment for net interest margin (P) 515 488 493 502 503 Intangible amortization   (Q)   207       207       207       207       207    

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(1) Assumes a marginal tax rate of 23.78% in 2019. A marginal tax rate of 24.15% was used in the first and second quarter of 2018 and 23.78% was used in the third and fourth quarter of 2018. (2) Non-GAAP financial measure. (3) Tangible shareholders' equity is computed by taking total shareholders' equity less the intangible assets at period-end. 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 2019, 24.15% in the first and second quarter of 2018 and 23.78% in the third and fourth quarter of 2018, by tangible equity. (6) Efficiency ratio is computed by dividing adjusted non-interest expense by the sum of net interest income on a fully taxable equivalent basis and adjusted non-interest income.  

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Josephine Iannelli; EVP, Chief Financial Officer & Treasurer; (207) 288-3314