BAR HARBOR BANKSHARES - FORM 8-K - EX-99.1 - EXHIBIT 99.1

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8-K - 8-K - BAR HARBOR BANKSHARES	q42018bhb8-kearningsrelease.htm

Bar Harbor Bankshares Reports Fourth Quarter Earnings

BAR HARBOR, MAINE - January 24, 2019 -- 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.”



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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.



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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.



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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.



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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.



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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.

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CONTACTS

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



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
	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

_____________________________________


(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



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
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

______________________________________


(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.

BAR HARBOR BANKSHARES - FORM 8-K - EX-99.1 - EXHIBIT 99.1 - January 24, 2019

Attached files

BAR HARBOR BANKSHARES Reports