Vermont Business Magazine Bar Harbor Bankshares (NYSE American:BHB), with branches in central Vermont, reported second quarter 2018 GAAP earnings of $8.5 million, or 55 cents per share, compared with $6.6 million, or 42 cents per share in the same quarter of 2017. Core earnings in the second quarter 2018 totaled $8.7 million, or 56 cents per share, up from $8.1 million, or 52 cents in the second quarter of 2017.
SECOND QUARTER FINANCIAL HIGHLIGHTS(comparisons are to the second quarter 2017 unless otherwise noted): • 9% annualized commercial loan growth • 9% increase in non-interest income • 58.8% efficiency ratio (non-GAAP measure) • 1.00% core return on assets (non-GAAP measure) • 9.86% core return on equity (non-GAAP measure) • 9% annualized growth in tangible book value per share, excluding security adjustments (non-GAAP measure)
President and Chief Executive Officer, Curtis C. Simard stated, “Our teams had a successful second quarter as they executed on our strategies and delivered on financial performance. We diversified revenue streams, grew loans under a uniformed brand and banking franchise, adhered to our strong credit culture and maintained a disciplined approach to expense management. As a result, core return on assets improved to 1.00% on stronger core earnings (non-GAAP measure), up 8% on a year-over-year basis. Non-interest income grew by 9% year-over-year on higher customer activity and fees from the build out of our derivatives platform. With the additional talent we’ve hired and evolving needs of our customers, we expanded our derivatives capabilities in the second quarter, which contributed almost 3 cents of earnings per share. We expect this to be a continuing source of non-interest income as we look forward.”
“Our commercial teams continued to gain market share as we grew commercial loans at an annualized rate of 9%. Our pipeline remains robust going into the third quarter, especially in commercial and industrial products.”
Mr. Simard went on to say, “In April, we officially unified the Bar Harbor Bank & Trust brand throughout our footprint as we now operate under one name. Our brand identity as a True Community Bank is at the heart of who we are and has further strengthened us as a result of this unification.”
“In the third quarter, we will convert our current Visa debit card offering to Mastercard for all of our customers. The introduction of this card will allow us to further enhance security and fraud detection for customers to include EMV chips. In addition to the issuance of new cards, a rewards program and instant issuance capabilities will be rolled out at all of our branches and customer driven Bar Harbor card controls will be provided though mobile devices.”
Mr. Simard further stated, “One of the key elements in being a True Community Bank is the donation of time, money and expertise to those within our surrounding communities. In addition to the countless volunteer hours that we have committed to our communities, the Bank has already donated significantly this year to worthy causes in the places we call home. We also rolled out an employee incentive program to encourage charitable donations that will provide meaningful support to non-profit businesses.”
Mr. Simard concluded, “Excluding security adjustments, we are ahead of schedule on the earn-back of dilution to tangible book value per share and anticipate to be at pre-acquisition levels by year-end. We are proud of our key performance metrics and community achievements and are looking forward to the second half of 2018, as we build upon our current momentum and continue to enhance shareholder value.”
RESULTS OF OPERATIONS GAAP earnings increased to $8.5 million, or 55 cents per share, in the second quarter of 2018 from $6.6 million, or 42 cents per share, in the same period of 2017. Core earnings were up 8% to $8.7 million, or 56 cents per share, in the second quarter of 2018 compared to $8.1 million, or 52 cents per share, in the second quarter of 2017. Core revenue totaled $30.1 million and includes the benefit of higher non-interest income from expanded customer activity fees and derivative income. Interest income totaled $31.7 million, up 7% on a year-over-year basis, and yields on loans and investments expanded eight basis points in total. However, net interest margin in the second quarter 2018 decreased to 2.91% from 3.16% in the prior year due to higher cost of funds driven by short-term interest rate hikes. The Company’s loan to deposit ratio improved two basis points over the prior year to 105 at the end of the second quarter. Given the further flattening of the yield curve, the Company did extend liability durations during the quarter in an effort to mitigate the impact of future Federal Reserve tightening. The contribution from tax-equivalency adjustments also declined over the prior year as a result of the lower federal statutory tax rate. The second quarter provision for loan losses was $770 thousand and exceeded net charge-offs, which follows the positive trend in all quarterly periods presented.
Non-interest expense decreased to $18.7 million in the second quarter 2018 compared to $20.0 million in the second quarter of 2017. The decrease primarily relates to lower acquisition, conversion and other expenses, totaling $214 thousand in 2018 compared to $2.5 million in 2017. Offsetting this, brand consolidation costs also increased other expense in the second quarter 2018 by $318 thousand.
The second quarter effective tax rate decreased to 19.9% in 2018 compared with 31.6% in the same quarter of 2017, primarily reflecting a lower federal statutory tax rate. The effective tax rate in 2017 also benefited from the acquisition and conversion related costs.
FINANCIAL CONDITION Total assets were $3.5 billion at the end of the second quarter 2018 increasing $30.1 million primarily due to growth in the loan portfolio. Total loans increased $20.6 million in the second quarter with the majority of the growth driven by commercial products lines. Non-accruing loans increased $1.6 million during the quarter mostly due to the deterioration of one specific residential relationship, which is expected to be settled for the full carrying value of the obligation. Overall, asset quality metrics remain strong with an allowance for credit losses to total loans ratio of 0.53%. Excluding the impact of securities fair value adjustments, earnings grew tangible book value per share (non-GAAP measure) to $16.81 compared from $16.44 in the first of quarter of 2018.
BACKGROUND Bar Harbor Bankshares (NYSE American: BHB) is the parent company of its wholly-owned subsidiary, Bar Harbor Bank & Trust. Founded in 1887, Bar Harbor Bank & Trust is a true community bank serving the financial needs of its clients for over 125 years. Bar Harbor provides full-service community banking with office locations in all three Northern New England states of Maine, New Hampshire and Vermont. For more information, visitwww.bhbt.com.
Source:BAR HARBOR, MAINE - July 19, 2018 -- Bar Harbor Bankshares