Bar Harbor Bankshares (NYSE American: BHB or the “Company”) stated 1st quarter 2K19 net income of $7.3M or $0.47 diluted earnings each share. Earnings in the similar quarter of 2K18 totaled $7.8M or $0.50 diluted earnings each share.
President and CEO, Curtis C. Simard stated, “Earnings for the 1st quarter were in line with our expectations given the somewhat seasonal environment of our geographic markets and general economic conditions. The financial performance in the 1st quarter includes yield expansion, effective balance sheet administration and continuous execution of our risk-centric working model that balances development with earnings.
Yields from earnings assets raised across the board partially offsetting the rising costs of funds from the December 2K18 rate hike. And, we took advantage of the disconnect within funding markets by swapping out short-term borrowings with longer-term fixed interest rates. Our disciplined move toward credit quality and risk mitigation is prevalent as the ratios of non-accruing loans to whole loans, and net charge-offs to average loans continue to improve on a quarter-over-quarter basis.”
Mr. Simard continued, “Our targeted branch policy remains on track, and we will continue to explore market opportunities within our footstep as it contributes to the Company’s near and long term development potential.
Our Manchester, New Hampshire branch has before now started to capture notable market share and we are pleased to declare the redesign of our Newport, New Hampshire location, which will create an exclusive and fulfilling experience for our customers, the community, and our employees.
Newport has been an important cornerstone to our mortgage banking operations and is home to our merged call center.
Mr. Simard additional stated, “With our strong capital position and positive organic development in equity, we are excited to declare a raise in our quarterly cash dividend by 10 percent. The current dividend yield together with continuous double-digit development in book value each share and the formerly declared 5 percent share buyback program is continued proof of our commitment to building stockholder value.”
Mr. Simard concluded, “As we look to the rest of 2K19, we are focused on our customers and sales civilization that is being driven at every level of management.
It’s a sales culture with an eye towards repeatable recital and thoughtful solutions to the challenges our customers and forecast face. We have a team who believes in itself and this Company, which eventually drives stockholder value.”
On April 16, 2K19, the Board of Directors voted to raise the quarterly cash dividend by $0.02, or 10 percent, to $0.22 each share to stockholders of record at the close of business May 14, 2K19, payable on June 14, 2K19. The dividend equates to a 3.4 percent annualized yield based on a $25.87 closing price at the end of the 1st quarter 2K19.
Whole assets were $3.6B at the end of the 1st quarter 2K19, up to $20.7M from the 4th quarter and $118.2M from the 1st quarter 2K18. Loan balances in the 1st quarter 2K19 were $2.5B increasing $36.7M from the 4th quarter or 6 percent annualized. Loan development is attributed to our expanded branch model and the momentum of our sales culture.
The 1st quarter 2K19 allowance for loan losses to whole loans ratio remains strong at 0.55 percent with a coverage ratio to non-accruing loans at 84 percent, up from 76 percent as of year-end. Non-accruing loans declined $1.6M in the 1st quarter 2K19 with improvements across most categories. These improvements declined the ratio of non-accruing loans to average loans to 0.66 percent from 0.73 percent at year-end 2K18. This positive trend was also seen in the ratio of past due accounts as a percentage of average loans.
The Company’s book value each share was $24.54 at the end of the 1st quarter 2K19 contrast to $23.87 at year-end 2K18, representing an 11 percent annualized development rate. Tangible book value each share (non-GAAP measure) was $17.63 at the end of the 1st quarter 2K19 contrast to $16.94 at year-end 2K18. Lower long-term rates had a positive impact on the fair value adjustment in the securities portfolio. The fair value adjustment was a loss of $1.8M in the 1st quarter 2K19 contrast $8.7M in the 4th quarter 2K18.
RESULTS OF OPERATIONS
Net income in the 1st quarter 2K19 was $7.3M, or $0.47 each share, a contrast to $7.8M, or $0.50 each share, in the similar quarter of 2K18. Interest income was up 8 percent to $33.2M as quarterly yields on earning assets extended 27 basis points on a year-over-year basis to 4.19 percent. Net interest margin in the 1st quarter 2K19 declined to 2.77 percent from 2.97 percent in the similar period of 2K18.
The decrease reflects several short-term interest rate hikes in 2K18 and the continued flattening of the yield curve into 2K19. We remain focused on balance sheet strategies such as the investment portfolio remix seen in the 4th quarter 2K18 and current quarter brokered certificate of deposit hedge, which assists in managing interest rate risk.
Our loan to deposit ratio raised to 102 percent in the 1st quarter 2K19 as deposits are traditionally lower in the starting of the year.
The 1st quarter 2K19 provision for loan losses declined to $324 thousand from $795 thousand in the similar quarter 2K18. We continue to have a positive quarterly trend in both recoveries and charged-off loans.
The net charged-off loans to average loans ratio remained low at a 0.03 percent annualized rate for the 1st quarter 2K19. Asset quality continues to improve with non-accruing loans to whole loans at 0.66 percent in the 1st quarter 2K19 contrast to 0.83 percent in the similar quarter of 2K18.
Non-interest income and non-interest expense remained relatively flat for the 1st quarter of 2K19 contrast to the 1st quarter of 2K18.
The decrease in salary and benefit expenses were offset by raise in occupancy and equipment based on the new locations in Manchester, New Hampshire, and Portland, Maine placed in service during the 4th quarter of 2K18.