Bar Harbor Bankshares(BHB) - 2022 Q1 - Quarterly Report

Financial Performance - Net earnings per diluted share decreased to $0.60 from $0.63 year-over-year, while adjusted earnings per diluted share were $0.62 compared to $0.68[170] - The return on assets was 1.00%, down from 1.03% in the prior year, while the return on equity decreased to 8.89% from 9.45%[170] - The efficiency ratio increased to 62.40% compared to 61.95% in the previous year[170] - Total revenue for the period was $33,607 thousand, with non-interest income contributing $9,309 thousand[182] - Adjusted earnings increased to $9,297 thousand, while total adjusted revenue remained stable at $33,598 thousand[182] - Net income for Q1 2022 was $9.1 million or $0.60 per diluted share, compared to $9.5 million or $0.63 per diluted share in Q1 2021[184] - Adjusted earnings per diluted share (non-GAAP) were $0.62 for Q1 2022, down from $0.68 in Q1 2021[184] - Non-interest income for Q1 2022 was $9.3 million, a decrease from $10.2 million in Q1 2021, with customer service fees increasing to $3.6 million from $3.0 million due to over 3,000 net core accounts opened[200] - Non-interest expense decreased to $21.9 million in Q1 2022 from $22.5 million in Q1 2021, with salaries and benefits expense slightly down to $12.1 million from $12.2 million[201] Asset and Liability Management - Total assets as of March 31, 2022, were $3.7 billion, with a market capitalization of $430 million[169] - Total liabilities amounted to $3,296,382 thousand, with total shareholders' equity at $415,636 thousand[174] - Average shareholders' equity increased to $416,000 thousand, reflecting a strong capital position[182] - The allowance for credit losses to total loans ratio improved to 0.87% from 0.93%[170] - The allowance for credit losses was $23.2 million, with a coverage ratio of 0.87% compared to 0.90% at year-end 2021[193] - The Bank's liquidity position is deemed sufficient to meet current and future funding requirements, although changes in economic conditions could impact this[206] - As of March 31, 2022, available same-day liquidity totaled approximately $1.1 billion, including cash and borrowing capacity at FHLB and the Federal Reserve[205] - The Bank had unused borrowing capacity of $436 million at FHLB, $87 million at the Federal Reserve, and $51 million in lines of credit, along with over $200 million in unencumbered liquid investment portfolio assets[205] Loan and Deposit Growth - Total loans increased to $2.65 billion, reflecting a 19% annualized growth rate[171] - Total loans increased to $2,615,402 thousand with a net interest income of $24,298 thousand, reflecting a yield of 3.54%[174] - Commercial real estate loans grew by 26% year-over-year, reaching $1.29 billion[171] - Total loans increased by $122.7 million to $2.6 billion at quarter-end, with commercial loans up by $80.1 million[192] - Total deposits were $3.05 billion, showing a slight decrease from the previous quarter[172] - Total deposits remained flat at $3.0 billion, with core deposits growing by $32.8 million or 5% annualized[195] Interest Rate Risk Management - The most significant market risk affecting the company is interest rate risk, which arises from the imbalance in the re-pricing, maturity, and cash flow characteristics of assets and liabilities[216][218] - Interest rate sensitivity modeling indicates that the Bank's balance sheet was asset sensitive over the one- and two-year horizons as of March 31, 2022[224] - A 100 basis point decline in interest rates is projected to decrease net interest income by $4.176 million (3.9%) over the first year and $8.892 million (8.0%) over the second year[225] - A 200 basis point increase in interest rates is expected to improve net interest income by $7.101 million (6.6%) over the first year and $18.216 million (16.4%) over the second year[226] - The company's interest rate risk management techniques incorporate modeling under multiple interest rate scenarios to evaluate potential impacts on net interest income[219] - The sensitivity analysis does not represent a forecast and is based on numerous assumptions regarding interest rate levels and customer behavior[228] - Actual results may differ from the sensitivity analysis due to various factors, including prepayment levels and changes in customer preferences[229] Operational Efficiency - The net interest margin was 2.95%, up from 2.88% year-over-year[170] - The net interest spread was reported at 2.86%, indicating a slight improvement from the previous period[174] - Average earning assets rose to $3,386,000 thousand, with an adjusted net interest margin of 2.93%[174] - Fee-based income increased by 11% year-over-year, driven by growth in trust and investment management fees[189] - The efficiency ratio excluding PPP effects improved to 62.76% in Q1 2022 from 64.40% in Q1 2021[201] Compliance and Governance - As of March 31, 2022, the company's disclosure controls and procedures were effective in ensuring timely reporting of required information[231] - There were no changes in internal control over financial reporting during the last fiscal quarter that materially affected the company's financial reporting[232] - The company is involved in ordinary routine litigation that is not expected to materially affect its consolidated financial statements[233] - The Asset and Liability Committee (ALCO) regularly reviews the balance sheet structure and formulates strategies to manage interest rate risk[217]