Bar Harbor Bankshares (NYSE American: BHB) reported fourth quarter net income of $7.6 million, a 15% increase from $6.6 million in the same quarter of 2017. Net income for the full year 2018 was $32.9 million, up 27% compared to $26.0 million in 2017.

FOURTH QUARTER FINANCIAL HIGHLIGHTS

  • 27% annualized increase in non-maturity deposit accounts
  • 100% loan to deposit ratio
  • 7.3% annualized increase in commercial and industrial loans
  • 1.03% core return on assets (non-GAAP measure)
  • 10.01% core return on equity (non-GAAP measure)
  • 0.03% net loan charge-offs/average loans

President and Chief Executive Officer, Curtis C. Simard stated, “We finished 2018 with the same drive and commitment we’ve seen all year as our key performance metrics improved each consecutive quarter while we focused on profitable organic growth. We delivered record core earnings per share of 59 cents this quarter and core return on assets of 1.03%. Core return on equity of 10.01% has exceeded a financial milestone as of year end. Our credit quality remains strong with a 0.03% net charge offs to average loans for the fourth quarter. The retail delivery team was a testament to our dedicated customer service as non-maturity deposits grew by 27% on an annualized basis. This growth further demonstrates the strengthening of both community and customer relationships across our entire footprint. We continued to build shareholder value in 2018 with an 11% increase in tangible book value per share excluding security adjustments, which puts us at a record level.”

Mr. Simard further stated, “Loan growth in the fourth quarter was driven by our commercial and industrial book, which is no surprise given our noted pipeline in the third quarter and the concentrated efforts around this product line. With the expanded roll out of our Treasury Management platform, we’ve seen growth in both related loans and deposits. Our new commercial loan office in Portland, Maine opened in December 2018 and has already contributed to our 2019 goals. The new commercial loan production office is also expected to generate more opportunities for fee income, including but not limited to customer loan derivatives. We’ve brought in strategic recruits in 2018 to complement our existing teams which will help drive revenue as we grow market share across our New England footprint.”

Mr. Simard continued, “2018 was a year marked with active balance sheet management during a tumultuous interest rate environment. We executed an investment remix strategy in the fourth quarter which will be accretive to 2019 while improving our overall liquidity and interest rate risk position. We continue to diligently explore various balance sheet strategies to efficiently use capital and enhance shareholder returns.”

Mr. Simard went on to say, “We are thrilled with the December opening of our newest branch in Manchester, New Hampshire which has already attracted market share given its anticipated arrival. We also look forward to further expanding into Bedford, New Hampshire and Belfast, Maine during 2019. We view these additional markets as providing great opportunity to further build on our franchise while remaining true to the communities we call home.”

Mr. Simard concluded, “We achieved several transformational goals and projects in 2018 that set an organizational roadmap and a strong foundation for future growth. As we enter 2019 with normal seasonal head-winds and an increasing competitive market place, our teams are eager and ready to execute on our strategies building on the momentum we saw in 2018.”

RESULTS OF OPERATIONS
Net income in the fourth quarter was $7.6 million, or 49 cents per share, compared to $6.6 million, or 43 cents per share, in the same quarter of 2017. Fourth quarter net income in 2018 includes $1.5 million of other income related to the sale of Visa B shares, a loss on security sales of $924 thousand and a $1.1 million non-recurring charge related to the conversion from Visa to MasterCard. Net income in the same quarter of 2017 included a $4.0 million revaluation loss on net deferred tax assets triggered by the Tax Cuts and Jobs Act of 2017. In addition, there was a net benefit of $2.6 million in 2017, which reflected a gain on the sale of the Company’s insurance subsidiary offset by other one-time charges.

Interest income was up 9% to $32.8 million as yields on earning assets expanded 20 basis points on a year-over-year basis. Net interest margin in the fourth quarter 2018 decreased to 2.78% from 3.04% in the same period of 2017. The decrease reflects several short-term interest rate hikes and lower contribution from purchased loan accretion and tax-equivalency adjustments due to a lower 2018 federal tax rate. Excluding purchase loan accretion, net interest margin in the fourth quarter 2018 was 2.70%, which was consistent with the third quarter 2018. Despite higher short-term rates, net interest margin stabilized in the fourth quarter and an investment portfolio remix strategy was executed. Specifically, the Company sold $30.0 million of lower yielding securities in our available for sale portfolio and purchased alternative higher yielding securities with less duration and consistent credit metrics. While the sale of these securities generated a $924 thousand realized loss, the mark to market on these securities had already been recognized in other comprehensive income thus resulting in no impact on tangible book value. The Company's loan to deposit ratio improved to 100% at the end of the fourth quarter 2018 from 106% in the same period of 2017, which helped to reduce cost of funds.

The fourth quarter provision for loan losses is the lowest the Company has experienced in two years, down to $572 thousand from a high of $795 thousand in the first quarter of 2018. We continue to report positive quarterly trends in both recoveries and charged-off loans.

Non-interest income in the fourth quarter increased 14% to $7.5 million from $6.5 million in the prior year. The sale of the Company’s remaining ownership interest in Visa Class B shares contributed $1.5 million in the fourth quarter along with $315 thousand in customer loan derivative fee income.

Non-interest expense increased to $20.1 million in the fourth quarter from $17.9 million in the third quarter 2018 and $14.3 million in the fourth quarter 2017. Salary and benefit expense decreased quarter-over-quarter due to the revaluation of post-retirement liabilities at lower year end discount rates. Acquisition, conversion and other expenses totaled $1.1 million in the fourth quarter of 2018 compared to a net benefit of $2.6 million recorded in same quarter of 2017. The charges in 2018 relates to various operating system conversion rebates previously disclosed. Other non-interest expense increased to $5.1 million from $3.0 million in the third quarter 2018 and fourth quarter 2017. The increase is due to various one-time charges related to upgrades around the Company’s automated teller machines and associated write-offs.

The effective tax rate decreased to 15.8% in the fourth quarter 2018 compared with 18.8% in third quarter 2018 due to higher non-recurring pretax charges as described above. The 56% effective tax rate in the fourth quarter 2017 reflected the $4.0 million charge due to revaluation of net deferred tax assets.

FINANCIAL CONDITION
Total assets were $3.6 billion at the end of the fourth quarter 2018, up $47.0 million from the third quarter 2018 and $43.3 million from year end 2017. Loan balances in the fourth quarter 2018 were $2.5 billion increasing $6.6 million from the third quarter and $4.6 million from 2017. Commercial and industrial loans grew at a rate of 5.4% for the year and 7.3% in the fourth quarter. This growth aligns with our strategy and focus on variable rate yields and the previously announced Treasury Management roll out.

Non-accrual loans in the fourth quarter 2018 decreased $3.5 million primarily due to a $2.3 million commercial relationship that was taken into other real estate owned. The full carrying value of the asset is expected to be recovered upon sale. In the fourth quarter there was an uptick in 30-day past due accounts, principally due to how payment schedules and calendar dates fell at the end of the quarter. This effect can also be seen in the fourth quarter of 2017. Net loan charge-offs continue to be at historic lows and the ratio of the allowance for loan losses to total loans increased to 0.56% in the fourth quarter.

The Company’s risk-based capital ratio strengthened in the fourth quarter 2018 as tangible book value (non-GAAP measure) continued to expand on a quarter-over-quarter basis. Tangible book value per share was $16.94 at the end of the fourth quarter 2018 compared to $16.11 at the end of third quarter. Lower long-term rates had a positive impact on the fair value adjustment to the Company’s securities portfolio recorded in accumulated other comprehensive income. Excluding the impact of security fair value adjustments, tangible book value per share (non-GAAP measure) was $17.50 at the end of the fourth quarter 2018, up from $17.22 in the third of quarter of 2018 on strong earnings per share.

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 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.

     
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
  Dec 31,
2018		   Sep 30,
2018		   Jun 30,
2018		   Mar 31,
2018		   Dec 31,
2017
PER SHARE DATA
Net earnings, diluted $ 0.49 $ 0.58 $ 0.55 $ 0.50 $ 0.43
Core earnings, diluted (1) (2) 0.59 0.58 0.56 0.52 0.58
Total book value 23.87 23.06 22.97 22.78 22.96
Tangible book value (2) 16.94 16.11 16.00 15.78 15.94
Market price at period end 22.43 28.72 30.29 27.72 27.01
Dividends 0.20 0.20 0.20 0.19 0.19
 
PERFORMANCE RATIOS (3)
Return on assets 0.85 % 1.01 % 0.97 % 0.90 % 0.75 %
Core return on assets (1) (2) 1.03 1.01 1.00 0.93 1.02
Return on equity 8.31 9.92 9.65 9.01 7.35
Core return on equity (1) (2) 10.01 9.98 9.86 9.31 9.97
Core return on tangible equity (1) (2) 14.46 14.52 14.43 13.72 14.56
Net interest margin, fully taxable equivalent (FTE) (2) (4) 2.78 2.81 2.91 2.97 3.04
Net interest margin (FTE), excluding purchased loan accretion (2) (4) 2.70 2.71 2.80 2.85 2.93
Efficiency ratio (2) 59.91 57.88 58.83 60.44 53.02
 
GROWTH (Year-to-date, annualized) (2)
Total commercial loans 1.4 % 2.8 % 5.7 % 2.2 % 23.8 %
Total loans 0.2 (0.1 ) — (3.4 ) 13.1
Total deposits 5.6 2.2 1.9 (1.8 ) 14.4
 
FINANCIAL DATA (In millions)
Total assets $ 3,608 $ 3,561 $ 3,541 $ 3,511 $ 3,565
Total earning assets (5) 3,263 3,253 3,250 3,235 3,244
Total investments 761 747 749 757 755
Total loans 2,490 2,484 2,485 2,464 2,486
Allowance for loan losses 14 13 13 13 12
Total goodwill and intangible assets 108 108 108 108 108
Total deposits 2,483 2,390 2,375 2,341 2,352
Total shareholders' equity 371 358 356 352 355
Net income 8 9 9 8 7
Core income (1) (2) 9 9 9 8 9
 
ASSET QUALITY AND CONDITION RATIOS
Net charge-offs (current quarter annualized)/average loans 0.03 % 0.04 % 0.06 % 0.07 % 0.04 %
Allowance for loan losses/total loans 0.56 0.54 0.53 0.51 0.50
Loans/deposits 100 104 105 105 106
Shareholders' equity to total assets 10.27 10.04 10.05 10.03 9.95
Tangible shareholders' equity to tangible assets   7.51     7.24     7.22     7.17     7.12  

____________________________________

(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) Dec 31, 2018 Sep 30, 2018 Jun 30, 2018 Mar 31, 2018 Dec 31, 2017
Assets
Cash and due from banks $ 35,208 $ 53,154 $ 39,327 $ 35,088 $ 34,262
Interest-bearing deposits with the Federal Reserve Bank 63,546   19,420   22,066   12,725   56,423  
Total cash and cash equivalents 98,754 72,574 61,393 47,813 90,685
Securities available for sale, at fair value 725,837 712,658 710,147 718,559 717,242
Federal Home Loan Bank stock 35,659   34,154   38,712   38,105   38,105  
Total securities 761,496 746,812 748,859 756,664 755,347
Commercial real estate 826,699 840,018 838,546 824,721 826,746
Commercial and industrial 404,870 385,814 400,293 387,205 379,423
Residential real estate 1,144,698 1,140,519 1,127,895 1,132,977 1,155,682
Consumer 113,960   117,239   118,332   119,516   123,762  
Total loans 2,490,227 2,483,590 2,485,066 2,464,419 2,485,613
Less: Allowance for loan losses (13,866 ) (13,487 ) (13,090 ) (12,679 ) (12,325 )
Net loans 2,476,361 2,470,103 2,471,976 2,451,740 2,473,288
 
Premises and equipment, net 48,804 47,621 48,038 48,464 47,708
Other real estate owned 2,351 68 129 216 122
Goodwill 100,085 100,085 100,085 100,085 100,085
Other intangible assets 7,459 7,690 7,921 8,152 8,383
Cash surrender value of bank-owned life insurance 73,810 73,316 58,811 58,433 57,997
Deferred tax asset, net 9,514 11,527 10,309 9,627 7,180
Other assets 29,853   31,196   33,534   29,793   24,389  
Total assets $ 3,608,487   $ 3,560,992   $ 3,541,055   $ 3,510,987   $ 3,565,184  
 
Liabilities and shareholders' equity
Demand and other non-interest bearing deposits $ 370,889 $ 372,358 $ 341,773 $ 342,192 $ 349,055
NOW deposits 484,717 471,326 449,715 448,992 466,610
Savings deposits 358,888 354,908 350,339 361,591 364,799
Money market deposits 335,951 254,142 260,642 303,777 305,275
Time deposits 932,793   937,615   972,252   884,848   866,346  
Total deposits 2,483,238 2,390,349 2,374,721 2,341,400 2,352,085
 
Senior borrowings 680,823 739,224 735,924 742,198 786,688
Subordinated borrowings 42,973   42,988   43,003   43,018   43,033  
Total borrowings 723,796 782,212 778,927 785,216 829,721
 
Other liabilities 30,874   30,746   31,444   32,214   28,737  
Total liabilities 3,237,908 3,203,307 3,185,092 3,158,830 3,210,543
 
Total common shareholders' equity 370,579   357,685   355,963   352,157   354,641  
Total liabilities and shareholders' equity $ 3,608,487   $ 3,560,992   $ 3,541,055   $ 3,510,987   $ 3,565,184  
 
Net shares outstanding   15,523     15,509     15,496     15,459     15,443  
 
BAR HARBOR BANKSHARES
CONSOLIDATED LOAN & DEPOSIT ANALYSIS - UNAUDITED
 

LOAN ANALYSIS

           
Annualized Growth %
(in thousands) Dec 31,
2018		 Sep 30,
2018		 Jun 30,
2018		 Mar 31,
2018		 Dec 31,
2017		 Quarter End   Year to Date
Commercial real estate $ 826,699 $ 840,018 $ 838,546 $ 824,721 $ 826,746 (6.3 )% — %
Commercial and industrial 309,544   303,984   313,680   301,811   293,707   7.3   5.4  
Total commercial loans 1,136,243 1,144,002 1,152,226 1,126,532 1,120,453 (2.7 ) 1.4
Residential real estate 1,144,698 1,140,519 1,127,895 1,132,977 1,155,682 1.5 (1.0 )
Consumer 113,960 117,239 118,332 119,516 123,762 (11.2 ) (7.9 )
Tax exempt and other 95,326   81,830   86,613   85,394   85,716   66.0   11.2  
Total loans   $ 2,490,227     $ 2,483,590     $ 2,485,066     $ 2,464,419     $ 2,485,613     1.1 %   0.2 %
 

DEPOSIT ANALYSIS

           
Annualized Growth %
(in thousands) Dec 31,
2018		 Sep 30,
2018		 Jun 30,
2018		 Mar 31,
2018		 Dec 31,
2017		 Quarter End   Year to Date
Demand $ 370,889 $ 372,358 $ 341,773 $ 342,192 $ 349,055 (1.6 )% 6.3 %
NOW 484,717 471,326 449,715 448,992 466,610 11.4 3.9
Savings 358,888 354,908 350,339 361,591 364,799 4.5 (1.6 )
Money market 335,951   254,142   260,642   303,777   305,275   128.8   10.0  
Total non-maturity deposits 1,550,445 1,452,734 1,402,469 1,456,552 1,485,739 26.9 4.4
Total time deposits 932,793   937,615   972,252   884,848   866,346   (2.1 ) 7.7  
Total deposits   $ 2,483,238     $ 2,390,349     $ 2,374,721     $ 2,341,400     $ 2,352,085     15.5 %   5.6 %
 
BAR HARBOR BANKSHARES
CONSOLIDATED STATEMENTS OF INCOME - UNAUDITED
       

Three Months Ended December 31,

Twelve Months Ended December 31,
(in thousands, except per share data) 2018 2017 2018 2017
Interest and dividend income
Loans $ 26,743 $ 24,895 $ 104,015 $ 94,976
Securities and other 6,029   5,261   23,436   21,093
Total interest and dividend income 32,772 30,156 127,451 116,069
Interest expense
Deposits 5,653 3,381 19,521 11,307
Borrowings 4,855   3,279   17,047   12,607
Total interest expense 10,508   6,660   36,568   23,914
Net interest income 22,264 23,496 90,883 92,155
Provision for loan losses 572   597   2,780   2,788
Net interest income after provision for loan losses 21,692   22,899   88,103   89,367
Non-interest income
Trust and investment management fee income 2,949 3,042 11,985 12,270
Insurance brokerage service income — 77 — 1,097
Customer service fees 2,477 2,495 9,538 8,484
Loss on sales of securities, net (924 ) — (924 ) 19
Bank-owned life insurance income 493 374 1,821 1,539
Other income 2,455   530   5,515   2,573
Total non-interest income 7,450   6,518   27,935   25,982
Non-interest expense
Salaries and employee benefits 9,269 9,524 40,964 39,589
Occupancy and equipment 3,022 2,866 12,386 11,061
Loss on sales of premises and equipment, net — — — 94
Outside services 811 780 2,408 3,000
Professional services 458 298 1,474 1,655
Communication 103 249 804 1,289
Amortization of intangible assets 207 209 828 812
Acquisition, conversion and other expenses 1,109 (2,615 ) 1,728 3,302
Other expenses 5,117   2,952   14,947   11,924
Total non-interest expense 20,096   14,263   75,539   72,726
 
Income before income taxes 9,046 15,154 40,499 42,623
Income tax expense 1,426   8,545   7,562   16,630
Net income   $ 7,620     $ 6,609     $ 32,937     $ 25,993
 
Earnings per share:
Basic $ 0.49 $ 0.43 $ 2.13 $ 1.71
Diluted 0.49 0.43 2.12 1.70
 
Weighted average shares outstanding:
Basic 15,516 15,437 15,488 15,184
Diluted   15,574     15,537     15,564     15,290
 
BAR HARBOR BANKSHARES
CONSOLIDATED STATEMENTS OF INCOME (5 Quarter Trend) - UNAUDITED
         
(in thousands, except per share data) Dec 31,
2018		 Sep 30,
2018		 Jun 30,
2018		 Mar 31,
2018		 Dec 31,
2017
Interest and dividend income
Loans $ 26,743 $ 26,212 $ 25,934 $ 25,126 $ 24,895
Securities and other 6,029   5,972   5,784   5,651   5,261  
Total interest and dividend income 32,772 32,184 31,718 30,777 30,156
Interest expense
Deposits 5,653 5,478 4,405 3,985 3,381
Borrowings 4,855   4,237   4,321   3,634   3,279  
Total interest expense 10,508   9,715   8,726   7,619   6,660  
Net interest income 22,264 22,469 22,992 23,158 23,496
Provision for loan losses 572   643   770   795   597  
Net interest income after provision for loan losses 21,692   21,826   22,222   22,363   22,899  
Non-interest income
Trust and investment management fee income 2,949 2,952 3,122 2,962 3,042
Insurance brokerage service income — — — — 77
Customer service fees 2,477 2,490 2,347 2,224 2,495
Loss on sales of securities, net (924 ) — — — —
Bank-owned life insurance income 493 505 377 446 374
Other income 2,455   1,179   1,275   606   530  
Total non-interest income 7,450   7,126   7,121   6,238   6,518  
Non-interest expense
Salaries and employee benefits 9,269 10,331 10,375 10,989 9,524
Occupancy and equipment 3,022 3,366 2,925 3,073 2,866
Loss on sales of premises and equipment, net — — — — —
Outside services 811 456 581 560 780
Professional services 458 223 360 433 298
Communication 103 217 304 180 249
Amortization of intangible assets 207 207 207 207 209
Acquisition, conversion and other expenses 1,109 70 214 335 (2,615 )
Other expenses 5,117   3,036   3,719   3,075   2,952  
Total non-interest expense 20,096   17,906   18,685   18,852   14,263  
 
Income before income taxes 9,046 11,046 10,658 9,749 15,154
Income tax expense 1,426   2,076   2,123   1,937   8,545  
Net income   $ 7,620     $ 8,970     $ 8,535     $ 7,812     $ 6,609  
 
Earnings per share:
Basic $ 0.49 $ 0.58 $ 0.55 $ 0.51 $ 0.43
Diluted 0.49 0.58 0.55 0.50 0.43
 
Weighted average shares outstanding:
Basic 15,516 15,503 15,482 15,448 15,437
Diluted   15,574     15,580     15,571     15,553     15,537  
 
BAR HARBOR BANKSHARES
AVERAGE YIELDS AND COSTS (Fully Taxable Equivalent - Annualized) - UNAUDITED
         
Quarters Ended
  Dec 31,
2018		 Sep 30,
2018		 Jun 30,
2018		 Mar 31,
2018		 Dec 31,
2017
Earning assets
Commercial real estate 4.71 % 4.57 % 4.48 % 4.41 % 4.30 %
Commercial and industrial 4.61 4.59 4.69 4.41 4.77
Residential 3.83 3.83 3.88 3.87 3.78
Consumer 5.07   4.85   4.65   4.47   4.17  
Total loans 4.31 4.25 4.25 4.16 4.12
Securities and other 3.28   3.21   3.18   3.16   3.06  
Total earning assets 4.07 % 4.00 % 3.99 % 3.92 % 3.87 %
 
Funding liabilities
NOW 0.50 % 0.43 % 0.37 % 0.34 % 0.31 %
Savings 0.18 0.17 0.17 0.18 0.19
Money market 0.93 0.76 0.79 0.68 0.58
Time deposits 1.85   1.78   1.51   1.39   1.19  
Total interest bearing deposits 1.12 1.06 0.90 0.82 0.70
Borrowings 2.53   2.26   2.07   1.80   1.62  
Total interest-bearing liabilities 1.50 % 1.38 % 1.25 % 1.11 % 0.97 %
                     
Net interest spread 2.57 2.62 2.74 2.81 2.90
Net interest margin   2.78     2.81     2.91     2.97     3.04  
 
BAR HARBOR BANKSHARES
AVERAGE BALANCES - UNAUDITED
         
Quarters Ended
(in thousands) Dec 31,
2018		 Sep 30,
2018		 Jun 30,
2018		 Mar 31,
2018		 Dec 31,
2017
Assets
Commercial real estate $ 836,813 $ 837,058 $ 824,356 $ 819,531 $ 783,730
Commercial and industrial 393,396 388,831 396,471 380,029 362,881
Residential 1,137,493 1,120,336 1,126,714 1,147,010 1,161,865
Consumer 114,960   117,735   119,570   121,467   125,109  
Total loans (1) 2,482,662 2,463,960 2,467,111 2,468,037 2,433,585
Securities and other (2) 762,901   773,562   767,886   765,328   753,282  
Total earning assets 3,245,563 3,237,522 3,234,997 3,233,365 3,186,867
Cash and due from banks 68,904 63,272 50,869 53,151 65,145
Allowance for loan losses (13,922 ) (13,463 ) (13,107 ) (12,589 ) (12,202 )
Goodwill and other intangible assets 107,657 107,887 108,118 108,349 108,769
Other assets 138,074   137,466   131,522   129,525   144,359  
Total assets $ 3,546,276   $ 3,532,684   $ 3,512,399   $ 3,511,801   $ 3,492,938  
 
Liabilities and shareholders' equity
NOW $ 475,449 $ 461,875 $ 441,645 $ 447,026 $ 449,669
Savings 346,905 356,834 351,712 362,508 368,714
Money market 272,612 259,738 288,169 305,105 308,071
Time deposits 914,674   964,108   872,149   857,796   799,348  
Total interest bearing deposits 2,009,640 2,042,555 1,953,675 1,972,435 1,925,802
Borrowings 761,781   744,632   836,295   819,576   803,469  
Total interest-bearing liabilities 2,771,421 2,787,187 2,789,970 2,792,011 2,729,271
Non-interest-bearing demand deposits 384,636 357,856 339,374 339,349 376,066
Other liabilities 26,569   28,943   28,386   29,000   30,971  
Total liabilities 3,182,626 3,173,986 3,157,730 3,160,360 3,136,308
 
Total shareholders' equity 363,650 358,698 354,669 351,441 356,630
           
Total liabilities and shareholders' equity   $ 3,546,276     $ 3,532,684     $ 3,512,399     $ 3,511,801     $ 3,492,938  

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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) Dec 31,
2018		 Sep 30,
2018		 Jun 30,
2018		 Mar 31,
2018		 Dec 31,
2017
NON-PERFORMING ASSETS
Non-accruing loans:
Commercial real estate $ 8,156 $ 8,348 $ 8,883 $ 8,422 $ 8,343
Commercial installment 2,331 2,303 2,411 2,304 1,209
Residential real estate 7,211 10,396 9,945 8,548 4,266
Consumer installment 537   727   707   1,065   500  
Total non-accruing loans 18,235 21,774 21,946 20,339 14,318
Other real estate owned 2,351   68   129   216   122  
Total non-performing assets $ 20,586   $ 21,842   $ 22,075   $ 20,555   $ 14,440  
 
Total non-accruing loans/total loans 0.73 % 0.88 % 0.88 % 0.83 % 0.58 %
Total non-performing assets/total assets 0.57 0.61 0.62 0.59 0.41
 
PROVISION AND ALLOWANCE FOR LOAN LOSSES
Balance at beginning of period $ 13,487 $ 13,090 $ 12,679 $ 12,325 $ 11,950
Charged-off loans (631 ) (298 ) (517 ) (461 ) (277 )
Recoveries on charged-off loans 438   52   158   20   55  
Net loans charged-off (193 ) (246 ) (359 ) (441 ) (222 )
Provision for loan losses 572   643   770   795   597  
Balance at end of period $ 13,866   $ 13,487   $ 13,090   $ 12,679   $ 12,325  
 
Allowance for loan losses/total loans 0.56 % 0.54 % 0.53 % 0.51 % 0.50 %
Allowance for loan losses/non-accruing loans 76 62 60 62 86
 
NET LOAN CHARGE-OFFS
Commercial real estate $ (25 ) $ (27 ) $ (92 ) $ (91 ) $ (92 )
Commercial installment 53 (53 ) (54 ) (140 ) 1
Residential real estate (31 ) (123 ) (64 ) 1 —
Consumer installment (190 ) (43 ) (149 ) (211 ) (131 )
Total, net $ (193 ) $ (246 ) $ (359 ) $ (441 ) $ (222 )
 
Net charge-offs (QTD annualized)/average loans 0.03 % 0.04 % 0.06 % 0.07 % 0.04 %
Net charge-offs (YTD annualized)/average loans 0.05 0.06 0.06 0.07 0.04
 
DELINQUENT AND NON-ACCRUING LOANS/TOTAL LOANS
30-89 Days delinquent 0.38 % 0.17 % 0.14 % 0.24 % 0.37 %
90+ Days delinquent and still accruing 0.01   —   —   —   0.02  
Total accruing delinquent loans 0.39 0.17 0.14 0.24 0.39
Non-accruing loans 0.73   0.88   0.88   0.83   0.58  
Total delinquent and non-accruing loans   1.12 %   1.05 %   1.02 %   1.07 %   0.97 %
BAR HARBOR BANKSHARES
RECONCILIATION OF NON-GAAP FINANCIAL MEASURES AND SUPPLEMENTARY DATA - UNAUDITED
  At or for the Quarters Ended
(in thousands)   Dec 31,
2018		   Sep 30,
2018		   Jun 30,
2018		   Mar 31,
2018		   Dec 31,
2017
Net income $ 7,620 $ 8,970 $ 8,535 $ 7,812 $ 6,609
Adj: Loss on sale of securities, net 924 — — — —
Adj: Loss (gain) on other real estate owned 5 (8 ) 23 — —
Adj: Acquisition, conversion and other expenses 1,109 70 214 335 (2,615 )
Adj: Income taxes (1) (485 ) (12 ) (57 ) (81 ) 982
Adj: Tax reform charge   —   —   —   —   3,988  
Total core income (2) (A) $ 9,173   $ 9,020   $ 8,715   $ 8,066   $ 8,964  
 
Net interest income (B) $ 22,264 $ 22,469 $ 22,992 $ 23,158 $ 23,496
Plus: Non-interest income   7,450   7,126   7,121   6,238   6,518  
Total Revenue(2) 29,714 29,595 30,113 29,396 30,014
Adj: Loss on sale of securities, net   924   —   —   —   —  
Total core revenue (2) (C) $ 30,638   $ 29,595   $ 30,113   $ 29,396   $ 30,014  
 
Total non-interest expense 20,096 17,906 18,685 18,852 14,263
Less: (Loss) gain on other real estate owned (5 ) 8 (23 ) — —
Less: Acquisition, conversion and other expenses   (1,109 ) (70 ) (214 ) (335 ) 2,615  
Core non-interest expense (2) (D) $ 18,982   $ 17,844   $ 18,448   $ 18,517   $ 16,878  
 
(in millions)
Total average earning assets (E) $ 3,246 $ 3,238 $ 3,235 $ 3,233 $ 3,187
Total average assets (F) 3,546 3,533 3,512 3,512 3,493
Total average shareholders' equity (G) 364 359 355 351 357
Total average tangible shareholders' equity (2) (3) (H) 256 251 247 243 248
Total tangible shareholders' equity, period-end (2)(3) (I) 263 250 248 244 246
Total tangible assets, period-end (2) (3) (J) 3,501 3,453 3,433 3,403 3,457
 
(in thousands)
Total common shares outstanding, period-end (K) 15,523 15,509 15,496 15,459 15,443
Average diluted shares outstanding (L) 15,574 15,580 15,571 15,553 15,537
 
Core earnings per share, diluted (A/L) $ 0.59 $ 0.58 $ 0.56 $ 0.52 $ 0.58
Tangible book value per share, period-end (2) (I/K) 16.94 16.11 16.00 15.78 15.94
Securities adjustment, net of tax(4) (M) (8,663 ) (17,152 ) (12,594 ) (10,237 ) 1,711
Tangible book value per share, excluding securities adjustment(4) (I+M)/K 17.50 17.22 16.81 16.44 15.83
Total tangible shareholders' equity/total tangible assets(2) (I/J) 7.51 7.24 7.22 7.17 7.12
 
Performance ratios
Return on assets 0.85 % 1.01 % 0.97 % 0.90 % 0.75 %
Core return on assets (2) (A/F) 1.03 1.01 1.00 0.93 1.02
Return on equity 8.31 9.92 9.65 9.01 7.35
Core return on equity (2) (A/G) 10.01 9.98 9.86 9.31 9.97
Core return on tangible equity (2) (5) (A/H) 14.46 14.52 14.43 13.72 14.56
Efficiency ratio (2)(6) (D-O-Q)/(C+N) 59.91 57.88 58.83 60.44 53.02
Net interest margin(2) (B+P)/E 2.78 2.81 2.91 2.97 3.04
 
Supplementary data (in thousands)
Taxable equivalent adjustment for efficiency ratio (N) $ 633 $ 654 $ 622 $ 645 $ 1,122
Franchise taxes included in non-interest expense (O) 39 129 159 152 161
Tax equivalent adjustment for net interest margin (P) 488 493 502 503 897
Intangible amortization (Q)   207     207     207     207     209  

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(1) A marginal tax rate was used of 23.78% in third and fourth quarter 2018, 24.15% for the first and second quarter of 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) 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) Core 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 and fourth quarter 2018, 24.15% in first and second quarter 2018 and 37.57% in 2017, by average tangible equity.
(6) Efficiency ratio is computed by dividing total adjusted tangible non-interest expense by the sum of total net interest income on a fully taxable equivalent basis and total adjusted non-interest income.