Bar Harbor Bankshares Reports Third Quarter Earnings

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Business Wire 19-Oct-2017 5:20 PM
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BAR HARBOR, Maine--(BUSINESS WIRE)-- Bar Harbor Bankshares (NYSE American: BHB) reported third quarter GAAP earnings of $8.6 million, or 56 cents per share. Core earnings totaled $8.8 million or 57 cents per share representing a 10% increase over the prior quarter. This increase reflects the strength of the Company's now expanded footprint and seasoned team.
THIRD QUARTER FINANCIAL HIGHLIGHTS (comparisons are to prior quarter unless otherwise stated):
1.01% core return on assets (non-GAAP measure)
6% increase in non-interest income
22% annualized commercial loan growth
11% annualized total deposit growth
54% efficiency ratio (non-GAAP measure)
9.90% core return on equity (non-GAAP measure)
President and Chief Executive Officer, Curtis C. Simard stated, It was a record quarter for us in both total revenue and earnings. These are remarkable results and demonstrate the stability in our business while now having the platform for even stronger organic growth. We drove core return on assets to 1.01% as we continue to focus on profitable growth and fee income. Our operational improvements resulted in a 54% efficiency ratio for the quarter and significant positive operating leverage. We continue to position our balance sheet to optimize performance, as is evidenced by our strong loan growth this quarter while adhering to superior credit quality. We maintained our loan to deposit ratio flat despite funding significant production for the quarter. I am proud of the job our teams are doing and look forward to a strong finish to 2017."
We are committed to creating shareholder value. The Companys core return on equity ratio is the highest its been in five quarters as we approach the 10% threshold. We continue to earn tangible book value to pre-acquisition levels and believe that can expand even further by adhering to our disciplined model of balancing growth and profitability. The recently announced sale of our insurance business will also be accretive to tangible equity in the fourth quarter. This allows us to focus on investments in the core banking areas that represent the most efficient use of capital, which will ultimately benefit our shareholders and remain consistent with our brand as a true community bank.
RESULTS OF OPERATIONS GAAP earnings increased to $8.6 million in the third quarter from $6.6 million in the linked quarter primarily driven by higher fee income, additional cost saves and lower system conversion expenses. Core earnings (a non-GAAP measure) were $8.8 million in the third quarter compared to $8.1 million in the prior quarter. Yields on loans remained consistent with prior quarter, and include the benefit of purchased loan accretion. Third quarter security yields decreased as prepayment speeds increased, resulting in faster premium amortization. The cost of interest bearing deposits increased as a result of both interest rate hikes and an extension in maturities as we continue to actively manage the balance sheet. The Companys overall cost of funds increased similarly as a result of extending funding maturities, in line with our overall interest rate risk management strategy.
Total non-interest income increased $7.0 million compared to $6.6 million in the prior quarter. The increase is primarily due to an expanded customer base resulting in a higher number of transactions. Mr. Simard stated, "we continue to focus on non-interest income as the key to higher profitability and are currently in the process of expanding treasury management services for our customers. We anticipate a roll-out of our enhanced product offerings by the end of this year. As we continue to expand ROA, investments in fee income businesses such as trust, secondary marketing mortgage operations, and treasury management services will be critical."
Non-interest expense decreased $2.5 million in the current quarter as salary and benefit costs improved by $0.5 million and acquisition related costs declined by $2.1 million. The efficiency ratio was 54% compared to 56% in the prior quarter and 63% in the first quarter of 2017. This positive trend reflects disciplined cost control and realized cost saves with the acquisition.
The effective tax rate was 29.3% in the third quarter as compared to 31.6% in the second quarter. The third quarter rate includes a benefit from certain return to provision adjustments related to amendments for prior year tax filings.
FINANCIAL CONDITION Total assets remained flat at $3.5 billion at the end of the third quarter while total loans grew by $52 million or 9% on an annualized basis. The majority of the loan growth was driven by the commercial portfolio, which grew at an annualized rate of 22%. Investments decreased $7.0 million primarily due to mandatory redemptions of FHLB stock. The loan growth was funded by growth in total deposits, which increased $62.1 million or 11% annualized thereby decreasing our wholesale reliance during the quarter.
The Company's book value per share increased to $22.90 from $22.53 in the second quarter while tangible book value (a non-GAAP measure) increased to $15.84 from $15.44. Asset quality metrics remained strong during the third quarter with a ratio of non-accruing loans to total loans of 0.28% and a ratio of net charge-offs to total loans of 0.01%.
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 This document contains forward-looking statements as defined in the Private Securities Litigation Reform Act of 1995. There are several factors that could cause actual results to differ significantly from expectations described in the forward-looking statements. For a discussion of such factors, please see the Companys most recent reports on Forms 10-K and 10-Q filed with the Securities and Exchange Commission and available on the SECs website at www.sec.gov. The Company does not undertake any obligation to update forward-looking statements.
NON-GAAP FINANCIAL MEASURES This document contains certain non-GAAP financial measures in addition to results presented in accordance with Generally Accepted Accounting Principles (GAAP). These non-GAAP measures provide supplemental perspectives on operating results, performance trends, and financial condition. They are not a substitute for GAAP measures; they should be read and used in conjunction with the Companys GAAP financial information. A reconciliation of non-GAAP financial measures to GAAP measures is included beginning on page J in the accompanying financial tables. In all cases, it should be understood that non-GAAP per share measures do not depict amounts that accrue directly to the benefit of shareholders.
The Company utilizes the non-GAAP measure of core earnings in evaluating operating trends, including components for core revenue and expense. These measures exclude items which the Company does not view as related to its normalized operations. These items include securities gains/losses, acquisition costs, restructuring costs, and systems conversion costs. Non-core adjustments are presented net of an adjustment for income tax expense. This adjustment is determined as the difference between the GAAP tax rate and the effective tax rate applicable to core income. The efficiency ratio is adjusted for non-core revenue and expense items and for tax preference items. The Company also calculates measures related to tangible equity, which adjust equity (and assets where applicable) to exclude intangible assets due to the importance of these measures to the investment community. Charges related to the acquisition of Lake Sunapee Bank Group consists primarily of severance and retention cost, systems conversion and integration costs, and professional fees. The Companys disclosure of organic growth of loans in 2017 is also adjusted for the Lake Sunapee Bank Group acquisition.
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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

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BAR HARBOR BANKSHARES
SELECTED FINANCIAL HIGHLIGHTS - UNAUDITED

At or for the Quarters Ended (1)(3)
Sep 30,2017 Jun 30,2017 Mar 31,2017 Dec 31,2016 Sep 30,2016
PER SHARE DATA
Net earnings, diluted $ 0.56 $ 0.42 $ 0.29 $ 0.28 $ 0.40
Core earnings, diluted (1) (2) 0.57 0.52 0.43 0.41 0.34
Total book value 22.90 22.53 22.17 17.19 18.09
Tangible book value (2) 15.84 15.44 15.07 16.61 17.51
Market price at period end 31.36 30.82 33.08 31.55 24.48
Dividends 0.19 0.19 0.19 0.19 0.18

PERFORMANCE RATIOS
Return on assets 0.99 % 0.76 % 0.50 % 0.59 % 0.86 %
Core return on assets (1) (2) 1.01 0.94 0.74 0.87 0.73
Return on equity 9.67 7.55 5.34 6.36 8.78
Core return on equity (1) (2) 9.90 9.32 7.88 9.34 7.49
Core return on tangible equity (1) (2) 14.51 13.78 12.24 9.66 7.75
Net interest margin, fully taxable equivalent (FTE) (4) 3.06 3.16 3.11 2.89 2.84
Net interest margin (FTE), excluding purchased loan accretion (4) 2.93 3.02 3.01 2.89 2.84
Efficiency ratio (2) 53.59 54.64 61.62 59.24 61.24

GROWTH (Year-to-date, annualized)
Total commercial loans (2) 20.5 % 7.2 % 20.0 % 14.9 % 3.3 %
Total loans (2) 12.2 7.0 13.3 15.0 15.0
Total deposits (2) 10.6 2.3 (10.2 ) 6.5 17.7

FINANCIAL DATA (In millions)
Total assets $ 3,476 $ 3,503 $ 3,427 $ 1,755 $ 1,718
Total earning assets 3,184 3,139 3,139 1,683 1,649
Total investments 756 763 767 554 561
Total loans 2,429 2,377 2,372 1,129 1,088
Allowance for loan losses 12 11 11 10 10
Total goodwill and intangible assets 109 109 109 5 5
Total deposits 2,275 2,213 2,174 1,050 1,034
Total shareholders' equity 353 347 341 157 164
Net income 9 7 4 3 4
Core income (2) 9 8 6 4 3

ASSET QUALITY AND CONDITION RATIOS
Net charge-offs (current quarter annualized)/average loans (5) 0.01 % 0.03 % 0.06 % (0.03 )% (0.03 )%
Allowance for loan losses/total loans (5) 0.49 0.48 0.46 0.92 0.93
Loans/deposits 107 107 109 108 105
Shareholders' equity to total assets 10.17 9.91 9.95 8.93 9.57
Tangible shareholders' equity to tangible assets (2) 7.26 7.01 6.99 8.65 9.29
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(1) Adjusted measurements are non-GAAP financial measures that are adjusted to exclude net non-operating charges primarily related to acquisitions, and gain on sale of securities. Refer to the Reconciliation of Non-GAAP Financial Measures in table J for additional information.(2) Non-GAAP financial measure.(3) All performance ratios are annualized and are based on average balance sheet amounts, where applicable.(4) Fully taxable equivalent considers the impact of tax advantaged investment securities and loans.(5) Generally accepted accounting principles require that loans acquired in a business combination be recorded at fair value, whereas loans from business activities are recorded at cost. The fair value of loans acquired in a business combination includes expected loan losses, and there is no loan loss allowance recorded for these loans at the time of acquisition. Accordingly, the ratio of the loan loss allowance to total loans is reduced as a result of the existence of such loans, and this measure is not directly comparable to prior periods. Similarly, net loan charge-offs are normally reduced for loans acquired in a business combination since these loans are recorded net of expected loan losses. Therefore, the ratio of net loan charge-offs to average loans is reduced as a result of the existence of such loans, and this measure is not directly comparable to prior periods. Other institutions may have loans acquired in a business combination, and therefore there may be no direct comparability of these ratios between and among other institutions.
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BAR HARBOR BANKSHARES
CONSOLIDATED BALANCE SHEETS - UNAUDITED

(In thousands) September 30, 2017 June 30, 2017 March 31, 2017 (1) December 31, 2016
Assets
Cash and due from banks $ 31,223 $ 28,112 $ 29,245 $ 8,219
Interest-bearing deposit with the Federal Reserve Bank 17,501 90,881 12,781 220
Total cash and cash equivalents 48,724 118,993 42,026 8,439
Securities available for sale, at fair value 718,459 718,364 724,224 528,856
Federal Home Loan Bank stock 37,107 44,168 42,404 25,331
Total securities 755,566 762,532 766,628 554,187
Commercial real estate 793,572 738,584 779,635 418,119
Commercial and industrial 357,072 350,002 309,995 151,240
Residential real estate 1,152,628 1,160,832 1,155,436 506,612
Consumer 125,590 127,229 127,370 53,093
Total loans 2,428,862 2,376,647 2,372,436 1,129,064
Less: Allowance for loan losses (11,950 ) (11,442 ) (10,884 ) (10,419 )
Net loans 2,416,912 2,365,205 2,361,552 1,118,645

Premises and equipment, net 48,309 48,590 45,581 23,419
Other real estate owned 122 122 363 90
Goodwill 100,255 100,255 99,901 4,935
Other intangible assets 8,811 9,047 9,282 377
Cash surrender value of bank-owned life insurance 57,613 57,233 56,627 24,450
Deferred tax asset, net 13,052 13,211 14,158 5,990
Other assets 26,368 28,223 31,365 14,817
Total assets $ 3,475,732 $ 3,503,411 $ 3,427,483 $ 1,755,349

Liabilities and shareholders' equity
Demand and other non-interest bearing deposits $ 357,398 $ 332,339 $ 349,896 $ 98,856
NOW deposits 442,085 451,171 242,876 175,150
Savings deposits 373,118 360,306 511,091 77,623
Money market deposits 300,398 285,312 349,491 282,234
Time deposits 802,110 783,876 720,899 416,437
Total deposits 2,275,109 2,213,004 2,174,253 1,050,300

Senior borrowings 775,582 872,021 842,150 531,596
Subordinated borrowings 43,048 43,063 43,078 5,000
Total borrowings 818,630 915,084 885,228 536,596

Other liabilities 28,534 28,201 26,954 11,713
Total liabilities 3,122,273 3,156,289 3,086,435 1,598,609

Total common shareholders' equity 353,459 347,122 341,048 156,740
Total liabilities and shareholders' equity $ 3,475,732 $ 3,503,411 $ 3,427,483 $ 1,755,349

Net shares outstanding (2) 15,432 15,407 15,385 9,116
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(1) The Company completed the acquisition of Lake Sunapee Bank Group on January 13, 2017.(2) Adjusted for 3-for-2 stock-split completed in March 2017.
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BAR HARBOR BANKSHARES
CONSOLIDATED LOAN & DEPOSIT ANALYSIS - UNAUDITED

LOAN ANALYSIS

Organic Annualized Growth % (1) September 30, 2017
(in thousands) Sep 30, 2017 Balance Jun 30, 2017 Balance Mar 31, 2017 Balance Acquired Lake Sunapee Bank Balance (2) Dec 31, 2016 Balance Quarter End Year to Date
Commercial real estate $ 793,572 $ 738,584 $ 779,635 $ 345,586 $ 418,119 29.8 % 10.7 %
Commercial and industrial 270,759 269,960 236,526 89,259 135,564 1.2 50.8
Total commercial loans 1,064,331 1,008,544 1,016,161 434,845 553,683 22.1 20.5
Residential real estate 1,152,628 1,160,832 1,155,436 652,255 506,612 (2.8 ) (1.8 )
Consumer 125,590 127,229 127,370 76,489 53,093 (5.2 ) (11.3 )
Tax exempt and other 86,313 80,042 73,469 44,611 15,676 31.3 249.0
Total loans $ 2,428,862 $ 2,376,647 $ 2,372,436 $ 1,208,200 $ 1,129,064 8.8 % 12.2 %
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(1) Non-GAAP financial measure.(2) Acquired Lake Sunapee Bank loans are as of January 13, 2017.
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DEPOSIT ANALYSIS

Organic Annualized Growth % (1) September 30, 2017
(in thousands) Sep 30, 2017 Balance Jun 30, 2017 Balance Mar 31, 2017 Balance Acquired Lake Sunapee Bank Balance (2) Dec 31, 2016 Balance Quarter End Year to Date
Demand $ 357,398 $ 332,339 $ 349,896 $ 248,051 $ 98,856 30.2 % 15.9 %
NOW 442,085 451,171 242,876 39,999 175,150 (8.1 ) 194.4
Money market 300,398 285,312 349,491 103,142 282,234 21.2 (45.2 )
Savings 373,118 360,306 511,091 467,735 77,623 14.2 (332.8 )
Total non-maturity deposits 1,472,999 1,429,128 1,453,354 858,927 633,863 12.3 (4.7 )
Total time deposits 802,110 783,876 720,899 291,684 416,437 9.3 33.9
Total deposits $ 2,275,109 $ 2,213,004 $ 2,174,253 $ 1,150,611 $ 1,050,300 11.2 % 10.6 %
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(1) Non-GAAP financial measure.(2) Acquired Lake Sunapee Bank deposits are as of January 13, 2017.
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BAR HARBOR BANKSHARES
CONSOLIDATED STATEMENTS OF INCOME - UNAUDITED

Three Months Ended September 30, Nine Months Ended September 30,
(In thousands, except per share data) 2017 2016 2017 2016
Interest and dividend income
Loans $ 24,661 $ 10,295 $ 70,081 $ 30,627
Securities and other 5,402 3,828 15,832 12,014
Total interest and dividend income 30,063 14,123 85,913 42,641
Interest expense
Deposits 3,177 1,755 7,926 4,931
Borrowings 3,408 1,369 9,327 3,993
Total interest expense 6,585 3,124 17,253 8,924
Net interest income 23,478 10,999 68,660 33,717
Provision for loan losses 660 139 2,191 754
Net interest income after provision for loan losses 22,818 10,860 66,469 32,963
Non-interest income
Trust and investment management fee income 3,040 975 9,228 2,878
Insurance and brokerage service income 329 1,020
Customer service fees 2,638 706 5,990 1,999
Gain on sales of securities, net 19 1,354 19 4,489
Bank-owned life insurance income 380 197 1,165 540
Other income 554 140 2,043 408
Total non-interest income 6,960 3,372 19,465 10,314
Non-interest expense
Salaries and employee benefits 9,617 4,832 30,065 14,648
Occupancy and equipment 2,894 1,156 8,573 3,466
Loss on sales of premises and equipment, net (1 ) 216 94 216
Outside services 907 181 2,220 430
Professional services 428 250 1,357 1,084
Communication 382 128 1,040 492
Amortization of intangible assets 189 1 534 25
Acquisition expenses 346 320 5,917 812
Other expenses 2,824 1,666 8,663 4,305
Total non-interest expense 17,586 8,750 58,463 25,478

Income before income taxes 12,192 5,482 27,471 17,799
Income tax expense 3,575 1,850 8,085 5,450
Net income $ 8,617 $ 3,632 $ 19,386 $ 12,349

Earnings per share:
Basic (1) $ 0.56 $ 0.40 $ 1.27 $ 1.37
Diluted (1) 0.56 0.40 1.27 1.35

Weighted average shares outstanding:
Basic (1) 15,420 9,064 15,098 9,037
Diluted (1) 15,511 9,162 15,204 9,138
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(1) Adjusted for 3-for-2 stock-split completed in March 2017.
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BAR HARBOR BANKSHARES
CONSOLIDATED STATEMENTS OF INCOME (5 Quarter Trend) - UNAUDITED

(In thousands, except per share data) Sep 30,2017 Jun 30,2017 Mar 31,2017 Dec 31,2016 Sep 30,2016
Interest and dividend income
Loans $ 24,661 $ 24,226 $ 21,194 $ 11,026 $ 10,295
Securities and other 5,402 5,439 4,991 3,820 3,828
Total interest and dividend income 30,063 29,665 26,185 14,846 14,123
Interest expense
Deposits 3,177 2,539 2,210 1,768 1,755
Borrowings 3,408 3,317 2,603 1,421 1,369
Total interest expense 6,585 5,856 4,813 3,189 3,124
Net interest income 23,478 23,809 21,372 11,657 10,999
Provision for loan losses 660 736 795 225 139
Net interest income after provision for loan losses 22,818 23,073 20,577 11,432 10,860
Non-interest income
Trust and investment management fee income 3,040 3,324 2,864 951 975
Insurance and brokerage service income 329 327 364
Customer service fees 2,638 1,991 1,360 649 706
Gain on sales of securities, net 19 9 1,354
Bank-owned life insurance income 380 386 399 163 197
Other income 554 530 959 263 140
Total non-interest income 6,960 6,558 5,946 2,035 3,372
Non-interest expense
Salaries and employee benefits 9,617 10,127 10,321 5,127 4,832
Occupancy and equipment 2,894 3,013 2,666 1,144 1,156
Loss on sales of premises and equipment,net (1 ) 95 32 216
Outside services 907 716 597 337 181
Professional services 428 489 440 405 250
Communication 382 290 368 94 128
Amortization of intangible assets 189 188 157 1 1
Acquisition expenses 346 2,459 3,112 1,838 320
Other expenses 2,824 2,764 3,075 1,479 1,666
Total non-interest expense 17,586 20,046 20,831 10,457 8,750

Income before income taxes 12,192 9,585 5,692 3,010 5,482
Income tax expense 3,575 3,029 1,481 426 1,850
Net income $ 8,617 $ 6,556 $ 4,211 $ 2,584 $ 3,632

Earnings per share:
Basic (1) $ 0.56 $ 0.43 $ 0.29 $ 0.28 $ 0.40
Diluted (1) 0.56 0.42 0.29 0.28 0.40

Weighted average shares outstanding:
Basic (1) 15,420 15,393 14,471 9,096 9,064
Diluted (1) 15,511 15,506 14,591 9,215 9,162
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(1) Adjusted for 3-for-2 stock split completed in March 2017.
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BAR HARBOR BANKSHARES
AVERAGE YIELDS AND COSTS (Fully Taxable Equivalent - Annualized) - UNAUDITED

Quarters Ended
Sep 30,2017 Jun 30,2017 Mar 31,2017 Dec 31,2016 Sep 30,2016
Earning assets
Loans 4.13 % 4.14 % 4.00 % 3.94 % 3.89 %
Securities and other 3.13 3.19 3.01 3.01 3.07
Total earning assets 3.89 % 3.91 % 3.76 % 3.65 % 3.62 %

Funding liabilities
Interest bearing deposits 0.66 % 0.56 % 0.52 % 0.76 % 0.78 %
Borrowings 1.66 1.41 1.25 1.05 1.06
Total interest-bearing liabilities 0.96 % 0.85 % 0.76 % 0.86 % 0.88 %

Net interest spread 2.93 3.06 3.00 2.79 2.74
Net interest margin 3.06 3.16 3.11 2.89 2.84

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BAR HARBOR BANKSHARES
AVERAGE BALANCES - UNAUDITED

Quarters Ended
(In thousands) Sep 30,2017 Jun 30,2017 Mar 31,2017 Dec 31,2016 Sep 30,2016
Assets
Total loans (1) $ 2,402,171 $ 2,377,141 $ 2,346,340 $ 1,119,065 $ 1,058,253
Securities and other (2) 754,450 761,546 746,653 556,365 551,456
Total earning assets 3,156,621 3,138,687 3,092,993 1,675,430 1,609,709
Cash and due from banks 49,169 87,332 25,556 5,976 5,819
Allowance for loan losses (11,786 ) (11,292 ) (10,584 ) (10,336 ) (10,095 )
Goodwill and other intangible assets 109,147 109,108 109,261 5,324 5,347
Other assets 149,394 110,129 122,396 71,807 78,755
Total assets $ 3,452,545 $ 3,433,964 $ 3,339,622 $ 1,748,201 $ 1,689,535

Liabilities and shareholders' equity
Total interest-bearing deposits $ 1,901,501 $ 1,811,226 $ 1,798,014 $ 930,983 $ 897,703
Borrowings 812,938 941,789 856,328 537,818 514,999
Total interest-bearing liabilities 2,714,439 2,753,015 2,654,342 1,468,801 1,412,702
Non-interest-bearing demand deposits 354,470 320,503 350,497 108,961 103,971
Other liabilities 30,079 13,145 19,334 7,929 7,376
Total liabilities 3,098,988 3,086,663 3,024,173 1,585,691 1,524,049

Total shareholders' equity 353,557 347,301 315,449 162,510 165,486

Total liabilities and shareholders' equity $ 3,452,545 $ 3,433,964 $ 3,339,622 $ 1,748,201 $ 1,689,535
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(1) Total loans include non-accruing loans.(2) Average balances for securities available-for-sale are based on amortized cost.
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BAR HARBOR BANKSHARES
ASSET QUALITY ANALYSIS - UNAUDITED

At or for the Quarters Ended
(in thousands) Sep 30,2017 Jun 30,2017 Mar 31,2017 Dec 31,2016 Sep 30,2016
NON-PERFORMING ASSETS
Non-accruing loans:
Commercial real estate $ 2,467 $ 2,090 $ 2,354 $ 2,564 $ 2,478
Commercial installment 236 270 451 315 276
Residential real estate 3,619 2,783 3,066 3,419 3,429
Consumer installment 496 160 160 198 219
Total non-accruing loans 6,818 5,303 6,031 6,496 6,402
Other real estate owned 122 122 363 90 189
Total non-performing assets $ 6,940 $ 5,425 $ 6,394 $ 6,586 $ 6,591

Total non-accruing loans/total loans 0.28 % 0.22 % 0.25 % 0.58 % 0.59 %
Total non-performing assets/total assets 0.20 0.15 0.19 0.38 0.38

PROVISION AND ALLOWANCE FOR LOAN LOSSES
Balance at beginning of period $ 11,442 $ 10,884 $ 10,419 $ 10,103 $ 9,891
Charged-off loans (297 ) (213 ) (344 ) (28 ) (120 )
Recoveries on charged-off loans 145 35 14 119 193
Net loans charged-off (152 ) (178 ) (330 ) 91 73
Provision for loan losses 660 736 795 225 139
Balance at end of period $ 11,950 $ 11,442 $ 10,884 $ 10,419 $ 10,103

Allowance for loan losses/total loans 0.49 % 0.48 % 0.46 % 0.92 % 0.93 %
Allowance for loan losses/non-accruing loans 175 216 180 160 158

NET LOAN CHARGE-OFFS
Commercial real estate $ (16 ) $ (6 ) $ (103 ) $ 5 $ (77 )
Commercial installment 6 (138 ) (17 ) 89 156
Residential real estate (79 ) (13 ) (198 ) 8 (11 )
Consumer installment (63 ) (21 ) (12 ) (11 ) 5
Total, net $ (152 ) $ (178 ) $ (330 ) $ 91 $ 73

Net charge-offs (QTD annualized)/average loans 0.01 % 0.03 % 0.06 % (0.03 )% (0.03 )%
Net charge-offs (YTD annualized)/average loans 0.02 0.04 0.06 (0.03 ) 0.01

DELINQUENT AND NON-ACCRUING LOANS/TOTAL LOANS
30-89 Days delinquent 0.35 % 0.55 % 0.33 % 0.54 % 0.15 %
90+ Days delinquent and still accruing 0.01
Total accruing delinquent loans 0.35 0.55 0.33 0.54 0.15
Non-accruing loans 0.28 0.22 0.25 0.58 0.59
Total delinquent and non-accruing loans 0.63 % 0.77 % 0.58 % 1.12 % 0.74 %

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BAR HARBOR BANKSHARES
RECONCILIATION OF NON-GAAP FINANCIAL MEASURES AND SUPPLEMENTARY DATA- UNAUDITED
At or for the Quarters Ended
(in thousands) Sep 30,2017 Jun 30,2017 Mar 31,2017 Dec 31,2016 Sep 30,2016
Net income $ 8,617 $ 6,556 $ 4,211 $ 2,584 $ 3,632
Adj: Security Gains (19 ) (9 ) (1,354 )
Adj: Loss on sale of fixed assets, net (1 ) 95 32 216
Adj: Acquisition expenses 346 2,459 3,112 1,838 320
Adj: Income taxes (37.57% in 2017, 35.0% in 2016) (122 ) (924 ) (1,205 ) (651 ) 286
Total core income (4) (A) $ 8,821 $ 8,091 $ 6,213 $ 3,794 $ 3,100

Net-interest income (B) $ 23,478 $ 23,809 $ 21,372 $ 11,657 $ 10,999
Plus: Non-interest income 6,960 6,558 5,946 2,035 3,372
Total Revenue 30,438 30,367 27,318 13,692 14,371
Adj: Net security gains (19 ) (9 ) (1,354 )
Total core revenue (4) (C) $ 30,419 $ 30,367 $ 27,318 $ 13,683 $ 13,017

Total non-interest expense $ 17,586 $ 20,046 $ 20,831 $ 10,457 $ 8,750
Less: Acquisition expenses (346 ) (2,459 ) (3,112 ) (1,838 ) (320 )
Core non-interest expense (4) (D) $ 17,240 $ 17,587 $ 17,719 $ 8,619 $ 8,430

(in millions)
Total average earning assets (E) $ 3,157 $ 3,139 $ 3,093 $ 1,675 $ 1,610
Total average assets (F) 3,453 3,434 3,340 1,748 1,690
Total average shareholders' equity (G) 354 347 315 163 165
Total average tangible shareholders' equity (H) 244 238 206 157 160
Total tangible shareholders' equity, period-end (1) (I) 244 238 232 151 159
Total tangible assets, period-end (1) (J) 3,367 3,394 3,318 1,750 1,713

(in thousands)
Total common shares outstanding, period-end (K) 15,432 15,407 15,385 9,116 9,084
Average diluted shares outstanding (L) 15,511 15,506 14,591 9,215 9,162

Core earnings per share, diluted (A/L) $ 0.57 $ 0.52 $ 0.43 $ 0.41 $ 0.34
Tangible book value per share, period-end (I/K) 15.84 15.44 15.07 16.61 17.51
Total tangible shareholders' equity/total tangible assets (H/J) 7.26 7.01 6.99 8.65 9.29

Performance ratios (2)
GAAP return on assets 0.99 % 0.76 % 0.50 % 0.59 % 0.86 %
Core return on assets (4) (A/F) 1.01 0.94 0.74 0.87 0.73
GAAP return on equity 9.67 7.55 5.34 6.36 8.78
Core return on equity (4) (A/G) 9.90 9.32 7.88 9.34 7.49
Core return on tangible equity (3) (4) (A/I) 14.51 13.79 12.24 9.66 7.75
Efficiency ratio (4)(5) (D-N-P)/(C+M) 53.59 54.64 61.62 59.24 61.24
Net interest margin (B+O)/E 3.06 3.16 3.11 2.89 2.84

[End Table]
[Start Table]
Supplementary data (in thousands)
Taxable equivalent adjustment for efficiency ratio (M) 1,107 1,185 977 538 434
Franchise taxes included in non-interest expense (N) 154 158 126 37 36
Tax equivalent adjustment for net interest margin (O) 878 936 754 182 168
Intangible amortization (P) 189 188 157 157 157
[End Table]
(1) 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.(2) Ratios are annualized and based on average balance sheet amounts, where applicable. Quarterly data may not sum to year-to-date data due to rounding.(3) 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 37.57% in 2017 and 35.0% in 2016, by tangible equity.(4) Non-GAAP financial measure.(5) Efficiency ratio is computed by dividing total core tangible non-interest expense by the sum of total net interest income on a fully taxable equivalent basis and total core non-interest income. The Company uses this non-GAAP measure to provide important information about its operating efficiency.

View source version on businesswire.com: http://www.businesswire.com/news/home/20171019006598/en/
Bar Harbor Bankshares Josephine Iannelli, 207-288-3314EVP, Chief Financial Officer & TreasurerorMarsha Sawyer, 207-288-3314EVP, Investor Relations
Source: Bar Harbor Bankshares