Bar Harbor Bankshares, the parent company of Bar Harbor Bank & Trust (the "Bank"), announced record net income of $13.2 million for the year ended December 31, 2013, representing an increase of $717 thousand, or 5.8 percent, compared with 2012.
In a release on February 3, the Company noted earnings details:
The Company also reported record diluted earnings per share of $3.34 for 2013, representing an increase of $0.16, or 5.0 percent, compared with 2012. The Company's return on average equity amounted to 10.52 percent, up from 9.93 percent in 2012. The Company's 2013 return on average assets amounted to 0.98 percent, compared with 1.00 percent in 2012.
The Company also reported net income of $3.3 million for the quarter ended December 31, 2013, or diluted earnings per share of $0.82, compared with $2.8 million or diluted earnings per share of $0.72 in the fourth quarter of 2012, representing increases of $434 thousand and $0.10, or 15.3 percent and 13.9 percent, respectively.
"Our 2013 performance continued a long-standing trend of delivering both growth and solid financial returns," said Company President and CEO, Curtis C. Simard. "We are delighted to report our eighth consecutive year of record earnings. Even with the challenges confronting the general economy and the financial services industry, our 2013 performance was highlighted by a $2.1 million or 5.7 percent increase in net interest income. We view this as an important metric as continued pressure on our net interest margin was more than offset with almost $100 million in average earning asset growth. Led by revenue from the Trust division and other financial services, we also enjoyed higher levels of fee income compared with last year."
Simard continued, "Despite soft demand and competitive pricing pressures, our commercial and consumer loan portfolios were up $24.7 million and $11.8 million, respectively, from year end 2012. We are also pleased to report relatively stable credit quality, highlighted by meaningful declines in non-performing loans and net loan charge- offs, compared with 2012. Expense control continued to be well demonstrated in 2013, with an efficiency ratio of 55.8 percent."
In concluding, Simard added, "Like most banks, we are challenged by the current interest rate environment and we expect little relief in 2014 given the Federal Reserve's determination to maintain interest rates at historically low levels for an extended period of time. Defending the net interest margin will be a top priority for us in 2014, as will be growing our loan portfolio without sacrificing credit quality. We believe we are prepared for these challenges and will continue to seek out opportunities to expand our business and deliver the promise of successful community banking to our customers, prospects and shareholders alike."
Assets: Total assets ended the year at $1.37 billion, up $71.0 million, or 5.4 percent, compared with December 31, 2012. The increase in total assets was led by loan growth and, to a lesser extent, an increase in the Bank's securities portfolio.
Loans: Total loans ended the year at $852.9 million, up $37.9 million, or 4.6 percent, compared with December 31, 2012. At year end, the Bank's commercial loan portfolio stood at $455.6 million, representing an increase of $24.7 million, or 5.7 percent, compared with year end 2012. Consumer loans, which principally consist of residential real estate mortgages, ended the year at $381.2 million, representing an increase of $11.8 million or 3.2 percent compared with year end 2012. Tax-exempt loans to local municipalities increased $1.1 million during 2013, or 7.3 percent
Credit Quality: Total non-performing loans ended the year at $8.8 million, representing a decline of $1.0 million or 10.4 percent compared with year-end 2012. One commercial real estate development loan to a local, non-profit housing authority in support of an affordable housing project accounted for $1.8 million or 20.9 percent of total non-performing loans. At December 31, 2013, total non-performing loans represented 1.04 percent of total loans, down from 1.21 percent at year end 2012. Similarly, the allowance for loan losses expressed as a percentage of non-performing loans ended the year at 95.9 percent, up from 82.1 percent at year end 2012.
The Bank's loan loss experience improved in 2013 with total net loan charge-offs amounting to $1.0 million, representing a decline of $736 thousand, or 41.4 percent, compared with 2012. Total net loan charge offs expressed as a percentage of average loans outstanding amounted to 0.12 percent in 2013, down from 0.23 percent in 2012. The Bank recorded a provision for loan losses of $1.4 million in 2013, representing a decline of $234 thousand or 14.2 percent compared with 2012. The decline in the provision largely reflected stable credit quality metrics combined with improved loan loss experience.
At December 31, 2013, the Bank's allowance for loan losses stood at $8.5 million, representing an increase of $378 thousand or 4.7 percent compared with year end 2012. The allowance for loan losses expressed as a percentage of total loans ended the year at 0.99 percent, unchanged from year end 2012.
Securities: Total securities ended the year at $450.2 million, up $32.1 million, or 7.7 percent, compared with year end 2012. Securities purchased during 2013 consisted of mortgage-backed securities issued by U.S. Government agencies and sponsored- enterprises, as well as municipal securities issued by states and political subdivisions thereof.
Deposits: Total deposits ended the year at $835.7 million, up $39.9 million, or 5.0 percent, compared with year end 2012. Demand, NOW and money market accounts combined were up $14.9 million or 3.5 percent compared with year end 2012, while time deposits were up $25.0 million, or 6.8 percent.
Capital: At December 31, 2013, the Company and the Bank continued to exceed regulatory requirements for "well-capitalized" financial institutions. Under the capital adequacy guidelines administered by the Bank's principal regulators, "well-capitalized" institutions are those with Tier I leverage, Tier I Risk-based, and Total Risk-based ratios of at least 5 percent, 6 percent and 10 percent, respectively. At December 31, 2013, the Company's Tier I Leverage, Tier I Risk-based, and Total Risk-based capital ratios were 9.01 percent, 14.97 percent and 16.62 percent, respectively.
Shareholders' Equity: Total shareholders' equity ended the year at $121.4 million, representing a decline of $6.7 million compared with December 31, 2012. The decline in shareholder's equity was attributed to a $15.6 million decline in accumulated other comprehensive income. This decline was principally the result of a reduction of unrealized gains in the Bank's investment securities portfolio, which declined from a tax effected unrealized gain of $8.1 million at December 31, 2012 to a tax effected unrealized loss of $7.6 million at December 31, 2013. The net unrealized losses at December 31, 2013 were attributed to a significant increase in interest rates during, 2013, which negatively impacted the fair value of the Bank's fixed income securities portfolio.
Shareholder Dividends: During 2013 the Company paid regular cash dividends on its common stock in the aggregate amount of $4.92 million, compared with $4.57 million in 2012. The Company's 2013 dividend payout ratio amounted to 37.3 percent, compared with 36.6 percent in 2012. The total regular cash dividends paid in 2013 amounted to $1.25 per share of common stock, compared with $1.17 per share in 2012, representing an increase of $0.08 per share, or 6.8 percent.
The Company's Board of Directors recently declared a first quarter 2014 regular cash dividend of $0.325 per share of common stock, representing an increase of $0.02 or 6.6 percent compared with the first quarter of 2013. This represented the eleventh consecutive quarter where the Company increased its quarterly cash dividend to shareholders. Based on the year-end 2013 price of BHB's common stock of $39.99 per share, the dividend yield amounted to 3.25 percent.
Results of Operations
Net Interest Income: For the year ended December 31, 2013, net interest income on a tax-equivalent basis amounted to $40.8 million, up $2.2 million, or 5.8 percent, compared with 2012. The increase in net interest income was principally attributed to average earning asset growth of $99.3 million or 8.3 percent, offset in part by an eight basis point decline in the net interest margin. The tax- equivalent net interest margin amounted to 3.15 percent in 2013, compared with 3.23 percent in 2012. The yield on earning assets declined thirty-three basis points to 4.05 percent, while the rate paid on interest bearing liabilities declined thirty basis points to 1.02 percent.
For the quarter ended December 31, 2013, net interest income on a tax-equivalent basis amounted to $10.8 million, up $368 thousand or 3.5 percent on a linked-quarter basis and representing an increase of $749 thousand, or 7.4 percent, compared with the fourth quarter of 2012. The Bank's fourth quarter tax-equivalent net-interest margin amounted to 3.21 percent, representing an improvement of nine basis points on a linked-quarter basis, but down two basis points compared with the fourth quarter of 2012. During the fourth quarter of 2013, the weighted average yield on the Bank's earning assets increased six basis points, while the weighted average cost of its interest bearing liabilities declined four basis points from the third quarter. The increase in fourth quarter earning asset yields was entirely attributed to the securities portfolio, as the amortization of bond premiums continued to slow.
Non-interest Income: For the year ended December 31, 2013, total non-interest income amounted to $7.6 million compared with $7.7 million in 2012, representing a decline of $143 thousand, or 1.9 percent. The decline in non-interest income was entirely attributed to a $658 thousand decline in realized securities gains net of other- than-temporary impairment losses.
Trust and other financial services fees amounted to $3.6 million in 2013, representing an increase of $356 thousand, or 10.9 percent, compared with 2012. This increase was principally attributed to increases in the value of assets under management and higher levels of fee income from retail brokerage activities. Reflecting new client relationships and strength in the equity markets, at December 31, 2013, assets under management stood at $387.6 million, up $32.2 million or 9.1 percent compared with year-end 2012.
For the year ended December 31, 2013, income generated from service charges on deposit accounts amounted to $1.2 million, representing an increase of $52 thousand, or 4.3 percent, compared with 2012. The increase in service charges on deposits was largely attributed to customer overdraft fee increases instituted in the third quarter of 2012 combined with increased customer overdraft activity.
For the year ended December 31, 2013, credit and debit card service charges and fees amounted to $1.6 million, representing an increase of $110 thousand or 7.5 percent, compared with 2012. This increase was principally attributed to continued growth of the Bank's retail deposit base, higher levels of merchant credit card processing volumes, and continued success with a program that offers rewards for certain debit card transactions.
Total securities gains, net of other-than-temporary impairment losses, amounted to $427 in 2013, representing a decline of $658 thousand, or 60.6 percent, compared with 2012. Net 2013 securities gains were comprised of realized gains on the sale of securities amounting to $676 thousand, offset in part by other-than-temporary impairment losses of $249 thousand on certain available-for-sale, private label residential mortgage-backed securities.
Non-interest Expense: For the year ended December 31, 2013, total non-interest expense amounted to $26.9 million, up $1.2 million, or 4.8 percent, compared with 2012.
The increase in non-interest expense was almost entirely attributed to a $1.2 million or 8.6 percent increase in salaries and employee benefits. The increase in salaries and employee benefits was attributed to a variety of factors including normal increases in base salaries, higher levels of employee incentive compensation, as well as changes in staffing levels and mix. The increase in salaries and benefits also reflected the Bank's acquisition of three branch offices in the third quarter of 2012. Also contributing to the increase were expenses related to certain equity awards to members of the Company's Board of Directors and the newly-appointed President and CEO of the Company.
Total occupancy expense amounted to $2.0 million in 2013, up $286 thousand or 17.0 percent, compared with 2012. This increase was largely attributed to the acquisition of three branch offices in the third quarter of 2012, two of which are leased properties. The increase in occupancy expense was also attributed to the Bank's substantial reconfiguration of its Ellsworth campus including the replacement of its Ellsworth retail banking office, which was put in service in the third quarter of 2012.
Total other operating expenses amounted to $6.6 million in 2013, down $331 thousand, or 4.8 percent, compared with 2012. This decline was principally attributed to certain non-recurring expenses related to the Bank's acquisition of three branch offices in 2012, including fees for professional services and a wide variety of conversion and integration related expenses.
Efficiency Ratio: The Company's efficiency ratio, or non- interest operating expenses divided by the sum of tax-equivalent net interest income and non-interest income other than net securities gains and other-than-temporary impairments, measures the relationship of operating expenses to revenues. For the year ended December 31, 2013, the Company's efficiency ratio amounted to 55.8 percent, compared with the 54.6 percent for 2012. These ratios compared favorably to peer and industry averages.
Bar Harbor Bankshares is the parent company of its subsidiary, Bar Harbor Bank & Trust. Bar Harbor Bank & Trust provides full service community banking with fifteen branch office locations serving downeast, midcoast and central Maine.
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