Quarterly Earnings Up 9% at Bar Harbor Bankshares

Business Wire,  Oct 31, 2007  

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BAR HARBOR, Maine -- Bar Harbor Bankshares (the "Company") (AMEX:BHB) the parent company of Bar Harbor Bank & Trust (the "Bank"), today announced net income of $2.1 million for the quarter ended September 30, 2007 or fully diluted earnings per share of $0.69, compared with $2.0 million or fully diluted earnings per share of $0.63 for the third quarter of 2006, representing increases of $183 thousand and $0.06, or 9% and 10%, respectively. The increase in third quarter 2007 earnings was principally attributed to a $365 thousand or 7% increase in net interest income; a $190 thousand or 10 % increase in non-interest income; and a $61 thousand or 1% decline in non-interest expenses.

For the nine months ended September 30, 2007, net income amounted to $5.4 million, or fully diluted earnings per share of $1.72, compared with $5.2 million or fully diluted earnings per share of $1.66 for the same period in 2006, representing increases of $192 thousand and $0.06, or 4%. During the nine months ended September 30, 2007, the Company recorded net securities losses amounting to $671 thousand, compared with securities gains of $667 thousand for the same period in 2006, representing a decline of $1.3 million. Partially offsetting the decline in net securities gains was an $832 thousand reduction in non-interest expense recorded in the first quarter of 2007, related to the Company's previously reported settlement of its limited postretirement benefit program.

In making the announcement, President and Chief Executive Officer, Joseph M. Murphy commented, "As we enter the last quarter of 2007, we are pleased with the Company's earnings fundamentals, especially in light of compressed net interest margins throughout the banking industry, softening loan demand and intense competition for core deposits. Excluding the impact of net securities gains and losses and the settlement of our limited postretirement benefit program, we are happy to report a 7% increase in non-interest income and a 2% decline in non-interest expense for the first nine months of 2007, compared with the same period in 2006. Also, despite adverse industry trends, we generated higher levels of net interest income, which during the three and nine months ended September 30, 2007 posted increases of 7% and 3% respectively, compared with the same periods last year. Moreover, we believe the recent action by the Federal Reserve to reduce short-term interest rates will prove beneficial to future levels of net interest income, given the Company's liability sensitive balance sheet." In concluding, Mr. Murphy added, "Despite aggressive competition, we continue to have a good deal of success in growing the Bank's commercial loan portfolio, while enjoying strong credit quality."

Financial Condition

Assets: Total assets ended the third quarter at $859 million representing increases of $34 million and $63 million, or 4% and 8%, compared with December 31, and September 30, 2006, respectively.

Loans: Total loans ended the third quarter at $566 million, representing increases of $11 million and $19 million, or 2% and 3%, compared with December 31 and September 30, 2006, respectively. Commercial loans continued to drive the overall growth of the Bank's loan portfolio, posting increases of $14 million and $20 million, or 6% and 9%, compared with December 31 and September 30, 2006, respectively.

Credit Quality: The Bank's non-performing loans remained at low levels at quarter-end, representing $872 thousand or 0.15% of total loans. The Bank's loan loss experience also continued at low levels during the first nine months of 2007, with net charge-offs amounting to $142 thousand, or annualized net charge-offs to average loans outstanding of 0.03%. For the three and nine months ended September 30, 2007, the Bank recorded provisions for loan losses of $214 thousand and $247 thousand, compared with $81 thousand and $124 thousand during the same periods last year.

Securities: Total securities ended the third quarter at $244 million, representing increases of $31 million and $47 million, or 15% and 24%, compared with December 31 and September 30, 2006, respectively.

In the second quarter of 2007, the Bank completed its previously reported restructuring of a portion of its securities portfolio, selling $46 million in securities with below market yields while paying down short-term borrowings. During the later part of the second quarter, market yields climbed to a five-year high, with the benchmark 10-year U.S. Treasury advancing from 4.63% in mid May to 5.30% in mid June. The significant increase in market yields presented opportunities for replacing the securities sold, increasing the Bank's earning assets, and generating higher levels of net interest income.

Deposits: Total deposits ended the third quarter at $527 million, representing increases of $31 million and $12 million, or 6% and 2%, compared with December 31 and September 30, 2006, respectively. Deposit growth was largely attributed to certificates of deposit obtained in the national market, which were used to help fund the Bank's earning asset growth and replace retail deposit declines.