Bar Harbor Bankshares (BHB) 8-K Bar Harbor Bankshares Reports Second Quarter Results; Declares Dividend

Exhibit 99.1

Bar Harbor Bankshares Reports Second Quarter Results; Declares Dividend

BAR HARBOR, MAINE – July 21, 2021 - Bar Harbor Bankshares (NYSE American: BHB) reported second quarter 2021 net income of $9.0 million or $0.60 per share from $8.5 million or $0.55 per share in the same quarter of 2020, an increase of 9% in earnings per share.  Core earnings (non-GAAP) were $9.4 million, or $0.63 per share, compared to $8.6 million, or $0.56 per share for the same periods.  Non-core items (non-GAAP) reduced net income in the second quarter 2021 by $384 thousand, or $0.02 per share.      

SECOND QUARTER FINANCIAL HIGHLIGHTS (compared to the second quarter 2020, unless otherwise noted)

● 9% growth in earnings per share, 13% growth in core earnings (non-GAAP)

● 0.97% return on assets; 1.01% core return on assets (non-GAAP)

● 8% annualized total commercial loan growth, excluding PPP loans

● 14% annualized increase in core deposits

● 13% increase in fee income

● Exceptional credit quality

President and Chief Executive Officer, Curtis C. Simard stated, “We had another quarter of double-digit core earnings growth and core return on assets of over 1.00%.  Profitability increased on higher fee income driven from growth in core deposits and assets under management (AUM). Customer service income returned to pre-pandemic levels suggesting a potentially meaningful recovery in regional activity, augmented by a lift from our previously announced fee strategies implemented at the start of this year. The 8% annualized growth in commercial loans during the quarter, excluding PPP, reflects our commitment to meeting the needs of our existing customers and developing new relationships as we navigate past PPP activities.  Our Wealth Management business continues to be a significant contributor to total non-interest income while our Retail and Commercial loan teams continue to generate new core deposit accounts, especially in DDA categories.  More than 1,000 new banking relationships were created in the second quarter, highlighting both existing customer retention efforts and new customer initiatives. With the increase in mortgage rates late in the first quarter, we chose to opportunistically add balances to the balance sheet which helped stem the attrition. However, a focus on IRR management remains top of mind.”    

Mr. Simard continued, “We continued to organically grow our capital levels expanding tangible equity to tangible assets (non-GAAP) to 8.23%, while maintaining exceptional credit quality. All credit metrics remain strong and further improved in the quarter, primarily marked by lower past dues, minimal net charge-offs and improved coverage ratios.  Overall, we continue to see favorable migration in risk ratings across most loan categories.  Loan modification concessions made during the pandemic have essentially all resumed normal repayment schedules as of the end of the quarter.”

Mr. Simard stated, “As we think about net interest margin (NIM) quarter over quarter, the second quarter had substantially less PPP fee acceleration and was further impacted by the excess cash on hand. Of note, $105 million of wholesale deposits matured on the last day of the quarter which will benefit our cost of funds going forward.  We are starting to see a leveling off of NIM, excluding non-recurring items, as reliance on wholesale borrowings continues to be reduced and DDA growth continues. Given our overall asset sensitive balance sheet position and a more core-funded profile, we are well positioned for when rates start to move back up.  Excluding the effects of one-time items, our second quarter NIM was 2.95% compared with the same adjusted metric of 2.86% in the first quarter 2021.”    

Mr. Simard commented, “In the first quarter, we announced the initiation of a comprehensive review of our non-interest expenses which included an annual reduction to salary and benefits of more than $3.0 million, along with additional cost savings associated with vendor contracts and process efficiencies.  While some savings have been immediately realized in our second quarter run-rates, others will be phased in depending on contract timelines. As we continue to resume business-as-usual activities, we are also rolling out cost containment initiatives to absorb any potential increases associated with pandemic-delayed expenses.  Lastly, we evaluate profitability at each branch within our footprint, at least annually, taking into consideration the unique geography of Northern New England and our customer needs.”

BHB - Bar Harbor Bankshares Page 1 www.barharbor.bank

Mr. Simard concluded, “As we move into the second half of the year, we are encouraged by an improving economic outlook and better operating conditions. Our collective resilience has prepared and positioned us to move forward with the same resolve that has sustained us throughout the pandemic. We have a unique complementary footprint that is enabling us to utilize all earnings levers that align with our model and strategy. We look forward to continuing to serve our customers and communities in the way they are accustomed to.”

DIVIDEND DECLARED

The Board of Directors voted to declare a cash dividend of $0.24 per share to shareholders of record at the close of business on August 17, 2021, payable on September 17, 2021.  This dividend equates to a 3.35% annualized yield based on the $28.62 closing price of the Company's common stock at the end of the second quarter of 2021.  

FINANCIAL CONDITION

Total assets were $3.6 billion at the end of the second quarter as the Company leveraged excess cash liquidity to reduce maturing brokered deposits of $104.7 million during the quarter.  Loans decreased $35.5 million during the quarter, or 6% on an annualized basis, primarily due to PPP loan forgiveness and prepayments on residential loans.

During the quarter we developed 76 new commercial relationships, resulting in commercial real estate loan growth of 6% on an annualized basis and commercial and industrial loan growth 13% on an annualized basis, exclusive of PPP loans. PPP loan balances totaled $65.9 million at quarter-end, consisting of $62.7 million of 2021 originations and $3.2 million from 2020.  Unearned deferred fee balances on PPP loans totaled $3.7 million at the end of the quarter.  These balances are expected to be realized through early 2022.  COVID loan modifications totaled $19.0 million, down from $43.0 million at the end of the first quarter 2021, as 97% of modified loans have resumed normal payment schedules.  Total residential loans decreased $47.5 million, which includes $84.0 million of originations, $56.0 million of sales in the secondary market and $75.5 million of prepayments/amortization. Total originations during the quarter included $51.0 million that was sold on the secondary market and $33.0 million that was recorded on the balance sheet.

The allowance for credit losses decreased to $22.8 million during the second quarter due to stronger economic forecasts, offset by changes in overall loan mix.  Net charge offs totaled $73 thousand, or less than 0.01% of the total loan portfolio, and non-accruing loans decreased to $13.6 million, or 0.54% of the total loans.   The ratio of past due loans to total loans improved to 0.15% of total loans at June 30, 2021, decreasing from 0.44% in the first quarter of 2021.  Commercial past due loans totaled $1.9 million at quarter end, which is the lowest level since 2016 when the portfolio was approximately 36% of its current size.

Total deposits decreased $90.0 million to $2.8 billion during the quarter, due to lower time deposits, offset by significant growth in core deposits. Core deposits increased $77.8 million, or 14% on an annualized basis, during the quarter.  Over 1,000 new customer relationships were added in the quarter.  Time deposits decreased $167.7 million during the quarter, primarily due to $104.7 million of brokered deposits not being replaced upon maturity due to excess liquidity.  Retail time deposits decreased $63.0 million as customers moved funds to transactional accounts upon contractual maturity.

The Company’s book value per share was $27.76 at June 30, 2021, compared with $27.13 at the end of the first quarter 2021. Tangible book value per share (non-GAAP measure) was $19.30 at the end of the second quarter 2021, compared to $18.64 at the end of the first quarter 2021, equating to an annualized growth rate of 14%.  Other comprehensive income included unrealized gains on securities totaling $7.2 million in the second quarter 2021 compared to $4.5 million at the end of the first quarter 2021.

RESULTS OF OPERATIONS

Net income in the second quarter 2021 was $9.0 million, or $0.60 per share, compared to $8.5 million, or $0.55 per share, in the same quarter of 2020.  Net income benefited from higher fee income and a credit provision recapture in the quarter.  Core earnings totaled $9.4 million or $0.63 per share, compared to $8.6 million, or $0.56 per share, in the same quarter of 2020.  Non-core items (non-GAAP) reduced net income by $384 thousand and $119 thousand in second quarters of 2021 and 2020, respectively.

Net interest margin equaled 2.74% compared to 2.93% in the same period of 2020.  PPP loans contributed 7 basis points to NIM during the quarter as the majority of the remaining 2020 originations were forgiven.  Accretion on PPP loans originated in 2021 are not expected to materially affect NIM until loans are forgiven starting in the third quarter 2021.  Interest-bearing cash balances, held mostly at the Federal Reserve Bank, reduced NIM by 19 basis points.  The yield on earning assets totaled 3.26% compared to 3.73% in the second quarter 2020.  Excluding the impact of PPP and excess cash, the yield on earning assets totaled 3.44% and 3.98% for the same periods.  Costs of funds decreased to 0.66% from 0.96% in the second quarter 2020 due to lower deposit rates and reductions to wholesale funding afforded by significant growth in core deposits.  Brokered deposits that matured during second quarter carried 9 basis points of the total funding cost.

BHB - Bar Harbor Bankshares Page 2 www.barharbor.bank

The provision for credit losses for the quarter was a benefit of $765 thousand, compared to an expense of $1.4 million in the second quarter of 2020.  The provision recapture in the second quarter 2021 is attributable to improving economic forecasts and strong credit quality, offset by shifts in our loan mix.    

Non-interest income in the second quarter 2021 equaled $9.5 million, compared to $9.7 million in the same quarter of 2020.  Non-interest income, excluding gain on sales of securities, increased 13% on higher customer service fees, wealth management income, and gains on loan sales.  Wealth management income increased 20% over the same quarter of 2020 as assets under management increased to $2.4 billion or 12% compared to the same period of 2020.  Customer service fees increased $818 thousand compared to the second quarter of 2020 as customer activity and transactions now exceed pre-pandemic levels.  Mortgage banking activities continue to contribute a significant amount of fee income, increasing to $1.6 million, compared to $1.1 million in the same period of 2020.

Non-interest expense improved to $21.7 million in the second quarter 2021 from $22.3 million in the same quarter of 2020.  Salaries and benefits expense decreased 5% due to implementing workforce reduction programs at the beginning of the second quarter.  Non-core expenses (non-GAAP) in the second quarter 2021 totaled $553 thousand and were mostly one-time reduction in workforce.  In the same quarter of 2020 non-core expenses (non-GAAP) totaled $1.5 million and included costs to consolidate our wealth management systems and a loss on debt extinguishment.  

BHB - Bar Harbor Bankshares Page 3 www.barharbor.bank

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 130 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.barharbor.bank.

FORWARD LOOKING STATEMENTS

Certain statements under the headings "SECOND QUARTER FINANCIAL HIGHLIGHTS", “FINANCIAL CONDITION” and “RESULTS OF OPERATIONS” 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, 2020 and any subsequently filed Quarterly Reports on Form 10-Q. 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.

BHB - Bar Harbor Bankshares Page 4 www.barharbor.bank

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 gains/losses on securities, premises, equipment and other real estate owned, 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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BHB - Bar Harbor Bankshares Page 5 www.barharbor.bank

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
	Jun 30,			Mar 31,			Dec 31,			Sep 30,			Jun 30,
	2021			2021			2020			2020			2020
PER SHARE DATA
Net earnings, diluted	$	0.60		$	0.63		$	0.58		$	0.56		$	0.55
Core earnings, diluted (1) (2)		0.63			0.68			0.62			0.61			0.56
Total book value		27.76			27.13			27.58			27.09			26.56
Tangible book value (2)		19.30			18.64			19.05			18.56			18.18
Market price at period end		28.62			29.42			22.59			20.55			22.39
Dividends		0.24			0.22			0.22			0.22			0.22
PERFORMANCE RATIOS (3)
Return on assets		0.97	%		1.03	%		0.92	%		0.88	%		0.90	%
Core return on assets (1) (2)		1.01			1.11			0.98			0.96			0.91
Pre-tax, pre-provision return on assets		1.13			1.22			1.30			1.29			1.27
Core pre-tax, pre-provision return on assets (1) (2)		1.18			1.32			1.38			1.39			1.29
Return on equity		8.76			9.45			8.39			8.22			8.40
Core return on equity (1) (2)		9.13			10.13			8.95			8.98			8.52
Return on tangible equity		12.88			14.01			12.45			12.24			12.55
Core return on tangible equity (1) (2)		13.42			15.00			13.27			13.36			12.72
Net interest margin, fully taxable equivalent (FTE) (2) (4)		2.74			2.88			3.02			2.90			2.93
Core net interest margin (1) (2) (5)		2.67			2.78			2.79			2.89			2.92
Efficiency ratio (2)		63.45			61.95			61.98			59.47			60.67
ORGANIC GROWTH (Year-to-date, annualized) (2)
Total commercial loans		9	%		14	%		17	%		27	%		33	%
Total loans		(4)			(2)			(3)			3			5
Total deposits		(6)			1			8			12			(0)
FINANCIAL DATA (In millions)
Total assets	$	3,640		$	3,730		$	3,726		$	3,860		$	3,780
Total earning assets (6)		3,274			3,371			3,360			3,496			3,414
Total investments		636			641			599			619			662
Total loans		2,516			2,551			2,563			2,685			2,706
Allowance for credit losses		23			24			19			18			17
Total goodwill and intangible assets		127			127			127			127			128
Total deposits		2,822			2,912			2,906			2,935			2,695
Total shareholders' equity		416			406			411			404			404
Net income		9			9			9			8			8
Core earnings (1) (2)		9			10			9			9			9
ASSET QUALITY AND CONDITION RATIOS
Net charge-offs (current quarter annualized)/average loans		0.01	%		0.03	%		0.03	%		0.06	%		0.02	%
Allowance for credit losses/total loans		0.91			0.93			0.74			0.67			0.61
Loans/deposits		89			88			88			91			100
Shareholders' equity to total assets		11.42			10.87			11.04			10.48			10.69
Tangible shareholders' equity to tangible assets		8.23			7.73			7.90			7.42			7.57

A

(1) Core measurements are non-GAAP financial measures adjusted to exclude net non-operating charges primarily related to acquisitions, restructurings, system conversions, loss on debt extinguishment and gain or loss on sale of securities, other real estate owned and premises and equipment. 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 based on average balance sheet amounts, where applicable.

(4) Fully taxable equivalent considers the impact of tax-advantaged investment securities and loans.

(5) Core net interest margin excludes Paycheck Protection Program loans.

(6) Earning assets includes non-accruing loans and interest-bearing deposits with other banks. Securities are valued at amortized cost.

B

BAR HARBOR BANKSHARES

CONSOLIDATED BALANCE SHEETS - UNAUDITED

	Jun 30,		Mar 31,		Dec 31,		Sep 30,		Jun 30,
(in thousands)	2021		2021		2020		2020		2020
Assets
Cash and due from banks	$	41,440	$	39,039	$	27,566	$	22,722	$	24,430
Interest-bearing deposits with other banks		132,278		184,473		198,441		192,935		46,243
Total cash and cash equivalents		173,718		223,512		226,007		215,657		70,673
Securities available for sale		621,849		626,403		585,046		604,529		641,574
Federal Home Loan Bank stock		14,145		14,826		14,036		13,975		20,265
Total securities		635,994		641,229		599,082		618,504		661,839
Loans held for sale		7,942		10,148		23,988		23,721		22,979
Total loans		2,515,560		2,551,064		2,562,885		2,684,970		2,706,438
Less: Allowance for credit losses		(22,815)		(23,653)		(19,082)		(17,907)		(16,509)
Net loans		2,492,745		2,527,411		2,543,803		2,667,063		2,689,929
Premises and equipment, net		51,119		52,253		52,458		51,424		50,464
Other real estate owned		—		—		—		1,983		2,318
Goodwill		119,477		119,477		119,477		119,477		119,477
Other intangible assets		7,198		7,431		7,670		7,913		8,155
Cash surrender value of bank-owned life insurance		78,886		78,388		77,870		77,388		76,896
Deferred tax asset, net		4,349		5,639		1,745		2,180		2,451
Other assets		68,247		64,742		73,662		74,400		75,084
Total assets	$	3,639,675	$	3,730,230	$	3,725,762	$	3,859,710	$	3,780,265
Liabilities and shareholders' equity
Demand and other non-interest bearing deposits	$	599,598	$	586,487	$	544,636	$	515,064	$	504,325
NOW deposits		802,681		761,817		738,849		706,048		642,908
Savings deposits		578,361		560,095		521,638		511,938		466,668
Money market deposits		371,075		365,507		402,731		388,356		402,835
Time deposits		470,758		638,436		698,361		813,509		678,126
Total deposits		2,822,473		2,912,342		2,906,215		2,934,915		2,694,862
Senior borrowings		279,991		292,210		276,062		385,472		546,863
Subordinated borrowings		60,042		60,003		59,961		59,920		59,879
Total borrowings		340,033		352,213		336,023		445,392		606,742
Other liabilities		61,597		60,094		72,183		74,958		74,487
Total liabilities		3,224,103		3,324,649		3,314,421		3,455,265		3,376,091
Total common shareholders' equity		415,572		405,581		411,341		404,445		404,174
Total liabilities and shareholders' equity	$	3,639,675	$	3,730,230	$	3,725,762	$	3,859,710	$	3,780,265
Net shares outstanding		14,972		14,950		14,916		14,929		15,214

C

BAR HARBOR BANKSHARES

CONSOLIDATED LOAN & DEPOSIT ANALYSIS - UNAUDITED

LOAN ANALYSIS

											Annualized
											Growth %
	Jun 30,		Mar 31,		Dec 31,		Sep 30,		Jun 30,		Quarter		Year to
(in thousands)	2021		2021		2020		2020		2020		End		Date
Commercial real estate	$	1,135,857	$	1,118,669	$	1,084,381	$	1,045,635	$	982,070	6	%	9	%
Commercial and industrial		327,729		317,500		323,864		324,647		340,898	13		2
Paycheck Protection Program (PPP)		65,918		77,878		53,774		131,537		131,626	(61)		45
Total commercial loans		1,529,504		1,514,047		1,462,019		1,501,819		1,454,594	4		9
Total commercial loans, excluding PPP		1,463,586		1,436,169		1,408,245		1,370,282		1,322,968	8		8
Residential real estate		822,774		868,084		923,891		997,485		1,060,729	(21)		(22)
Consumer		103,589		106,835		113,544		119,340		124,197	(12)		(18)
Tax exempt and other		59,693		62,098		63,431		66,326		66,918	(15)		(12)
Total loans	$	2,515,560	$	2,551,064	$	2,562,885	$	2,684,970	$	2,706,438	(6)	%	(4)	%

DEPOSIT ANALYSIS

											Annualized
											Growth %
	Jun 30,		Mar 31,		Dec 31,		Sep 30,		Jun 30,		Quarter		Year to
(in thousands)	2021		2021		2020		2020		2020		End		Date
Demand	$	599,598	$	586,487	$	544,636	$	515,064	$	504,325	9	%	20	%
NOW		802,681		761,817		738,849		706,048		642,908	21		17
Savings		578,361		560,095		521,638		511,938		466,668	13		22
Money market		371,075		365,507		402,731		388,356		402,835	6		(16)
Total non-maturity deposits		2,351,715		2,273,906		2,207,854		2,121,406		2,016,736	14		13
Total time deposits		470,758		638,436		698,361		813,509		678,126	*		(65)
Total deposits	$	2,822,473	$	2,912,342	$	2,906,215	$	2,934,915	$	2,694,862	(12)	%	(6)	%

*Indicates ratios of 100% or greater.

D

BAR HARBOR BANKSHARES

CONSOLIDATED STATEMENTS OF INCOME – UNAUDITED

	Three Months Ended				Six Months Ended
	June 30,				June 30,
(in thousands, except per share data)	2021		2020		2021		2020
Interest and dividend income
Loans	$	23,191	$	26,493	$	47,396	$	54,480
Securities and other		3,992		4,942		7,971		10,449
Total interest and dividend income		27,183		31,435		55,367		64,929
Interest expense
Deposits		2,603		4,548		5,554		10,568
Borrowings		1,826		2,297		3,637		5,208
Total interest expense		4,429		6,845		9,191		15,776
Net interest income		22,754		24,590		46,176		49,153
Provision for credit losses		(765)		1,354		(1,254)		2,465
Net interest income after provision for credit losses		23,519		23,236		47,430		46,688
Non-interest income
Trust and investment management fee income		3,801		3,159		7,467		6,528
Customer service fees		3,257		2,439		6,227		5,551
Gain on sales of securities, net		50		1,351		50		1,486
Mortgage banking income		1,553		1,124		4,123		1,581
Bank-owned life insurance income		498		496		1,016		1,033
Customer derivative income		86		513		496		1,101
Other income		260		628		374		851
Total non-interest income		9,505		9,710		19,753		18,131
Non-interest expense
Salaries and employee benefits		11,356		11,909		23,532		23,793
Occupancy and equipment		3,894		3,860		8,222		8,280
Loss (gain) on sales of premises and equipment, net		1		(2)		9		90
Outside services		533		442		965		976
Professional services		151		337		709		1,009
Communication		198		194		519		483
Marketing		534		282		824		670
Amortization of intangible assets		233		256		474		512
Loss on debt extinguishment		—		1,351		—		1,351
Acquisition, conversion and other expenses		552		158		1,441		261
Other expenses		4,272		3,479		7,520		7,200
Total non-interest expense		21,724		22,266		44,215		44,625
Income before income taxes		11,300		10,680		22,968		20,194
Income tax expense		2,275		2,199		4,463		3,992
Net income	$	9,025	$	8,481	$	18,505	$	16,202
Earnings per share:
Basic	$	0.60	$	0.55	$	1.24	$	1.05
Diluted		0.60		0.55		1.23		1.04
Weighted average shares outstanding:
Basic		14,965		15,424		14,950		15,500
Diluted		15,042		15,441		15,026		15,523

E

BAR HARBOR BANKSHARES

CONSOLIDATED STATEMENTS OF INCOME (5 Quarter Trend) - UNAUDITED

	Jun 30,		Mar 31,		Dec 31,		Sep 30,		Jun 30,
(in thousands, except per share data)	2021		2021		2020		2020		2020
Interest and dividend income
Loans	$	23,191	$	24,205	$	26,687	$	25,918	$	26,493
Securities and other		3,992		3,979		4,013		4,557		4,942
Total interest and dividend income		27,183		28,184		30,700		30,475		31,435
Interest expense
Deposits		2,603		2,951		3,606		3,869		4,548
Borrowings		1,826		1,811		1,732		1,941		2,297
Total interest expense		4,429		4,762		5,338		5,810		6,845
Net interest income		22,754		23,422		25,362		24,665		24,590
Provision for credit losses		(765)		(489)		1,360		1,800		1,354
Net interest income after provision for credit losses		23,519		23,911		24,002		22,865		23,236
Non-interest income
Trust and investment management fee income		3,801		3,666		3,318		3,532		3,159
Customer service fees		3,257		2,970		2,890		2,886		2,439
Gain on sales of securities, net		50		—		3,959		—		1,351
Mortgage banking income		1,553		2,570		2,654		2,649		1,124
Bank-owned life insurance income		498		518		482		492		496
Customer derivative income		86		410		1,086		316		513
Other income		260		114		334		227		628
Total non-interest income		9,505		10,248		14,723		10,102		9,710
Non-interest expense
Salaries and employee benefits		11,356		12,176		13,318		11,809		11,909
Occupancy and equipment		3,894		4,328		4,192		4,279		3,860
Loss (gain) on sales of premises and equipment, net		1		8		(122)		—		(2)
Outside services		533		432		571		438		442
Professional services		151		558		572		479		337
Communication		198		321		194		215		194
Marketing		534		290		415		300		282
Amortization of intangible assets		233		241		256		256		256
Loss on debt extinguishment		—		—		—		—		1,351
Acquisition, conversion and other expenses		552		889		4,849		691		158
Other expenses		4,272		3,248		3,571		3,952		3,479
Total non-interest expense		21,724		22,491		27,816		22,419		22,266
Income before income taxes		11,300		11,668		10,909		10,548		10,680
Income tax expense		2,275		2,188		2,269		2,146		2,199
Net income	$	9,025	$	9,480	$	8,640	$	8,402	$	8,481
Earnings per share:
Basic	$	0.60	$	0.63	$	0.58	$	0.56	$	0.55
Diluted		0.60		0.63		0.58		0.56		0.55
Weighted average shares outstanding:
Basic		14,965		14,934		14,909		15,079		15,424
Diluted		15,042		15,007		14,952		15,103		15,441

F

BAR HARBOR BANKSHARES

AVERAGE YIELDS AND COSTS (Fully Taxable Equivalent - Annualized) - UNAUDITED

	Quarters Ended
	Jun 30,		Mar 31,		Dec 31,		Sep 30,		Jun 30,
	2021		2021		2020		2020		2020
Earning assets
Interest-bearing deposits with other banks (1)	0.09	%	0.09	%	0.11	%	0.09	%	0.08	%
Securities available for sale and FHLB stock	2.66		2.79		2.97		3.04		3.26
Loans:
Commercial real estate	3.54		3.68		3.74		3.81		4.11
Commercial and industrial	3.60		3.86		3.92		4.39		4.13
Paycheck protection program	5.56		8.12		11.56		3.18		3.34
Residential real estate	3.80		3.76		3.74		3.71		3.81
Consumer	3.44		3.56		3.65		3.42		3.81
Total loans	3.70		3.85		4.03		3.81		3.94
Total earning assets	3.26	%	3.46	%	3.65	%	3.57	%	3.73	%
Funding liabilities
Deposits:
NOW	0.12	%	0.14	%	0.15	%	0.14	%	0.14	%
Savings	0.10		0.13		0.13		0.13		0.15
Money market	0.12		0.14		0.14		0.16		0.40
Time deposits	1.37		1.44		1.64		1.69		1.94
Total interest-bearing deposits	0.45		0.51		0.61		0.66		0.81
Borrowings	2.12		2.16		1.83		1.60		1.51
Total interest-bearing liabilities	0.66	%	0.72	%	0.77	%	0.82	%	0.96	%
Net interest spread	2.60		2.74		2.88		2.75		2.77
Net interest margin (1)	2.74		2.88		3.02		2.90		2.93
Core net interest margin (2)	2.67		2.78		2.79		2.89		2.92

(1) Income from interest-bearing deposits with other banks has been separated from securities and restated for prior periods to conform to the current period presentation.

(2) Core net interest margin excludes Paycheck Protection Program loans.

G

BAR HARBOR BANKSHARES

AVERAGE BALANCES - UNAUDITED

	Quarters Ended
	Jun 30,		Mar 31,		Dec 31,		Sep 30,		Jun 30,
(in thousands)	2021		2021		2020		2020		2020
Assets
Interest-bearing deposits with other banks (1)	$	228,825	$	176,728	$	176,747	$	92,066	$	71,067
Securities available for sale and FHLB stock (2)		635,978		613,459		563,118		627,162		648,185
Loans:
Commercial real estate		1,122,831		1,099,937		1,059,574		1,012,194		952,264
Commercial and industrial		378,634		377,176		386,201		399,734		417,620
Paycheck protection program		76,701		65,149		91,109		131,605		104,740
Residential real estate		850,119		916,633		995,173		1,060,084		1,117,608
Consumer		104,851		109,802		115,876		121,248		126,413
Total loans (3)		2,533,136		2,568,697		2,647,933		2,724,865		2,718,645
Total earning assets		3,397,939		3,358,884		3,387,798		3,444,093		3,437,897
Cash and due from banks		21,414		23,221		22,473		36,521		43,165
Allowance for credit losses		(23,419)		(24,822)		(18,690)		(17,028)		(15,678)
Goodwill and other intangible assets		126,789		127,024		127,264		127,508		127,751
Other assets		223,369		232,477		237,424		223,316		213,986
Total assets	$	3,746,092	$	3,716,784	$	3,756,269	$	3,814,410	$	3,807,121
Liabilities and shareholders' equity
Deposits:
NOW	$	781,836	$	749,100	$	713,464	$	677,706	$	611,860
Savings		568,193		541,203		516,266		488,508		450,621
Money market		368,826		378,743		399,543		396,351		411,232
Time deposits		619,454		675,422		734,523		777,424		776,042
Total interest-bearing deposits		2,338,309		2,344,468		2,363,796		2,339,989		2,249,755
Borrowings		345,896		340,209		376,437		481,687		612,538
Total interest-bearing liabilities		2,684,205		2,684,677		2,740,233		2,821,676		2,862,293
Non-interest-bearing demand deposits		591,982		550,657		535,402		507,844		472,688
Other liabilities		56,630		74,646		71,119		78,072		66,302
Total liabilities		3,332,817		3,309,980		3,346,754		3,407,592		3,401,283
Total shareholders' equity		413,275		406,804		409,515		406,818		405,838
Total liabilities and shareholders' equity	$	3,746,092	$	3,716,784	$	3,756,269	$	3,814,410	$	3,807,121

(1) Total average interest-bearing deposits with other banks is net of Federal Reserve daily cash letter.

(2) Average balances for securities available-for-sale are based on amortized cost.

(3) Total average loans include non-accruing loans and loans held for sale.

H

BAR HARBOR BANKSHARES

ASSET QUALITY ANALYSIS - UNAUDITED

	At or for the Quarters Ended
	Jun 30,			Mar 31,			Dec 31,			Sep 30,			Jun 30,
(in thousands)	2021			2021			2020			2020			2020
NON-PERFORMING ASSETS
Non-accruing loans:
Commercial real estate	$	4,367		$	4,664		$	4,251		$	4,714		$	3,981
Commercial installment		1,370			1,534			1,466			1,820			1,790
Residential real estate		6,788			6,753			5,729			7,154			7,194
Consumer installment		1,054			1,118			742			720			1,023
Total non-accruing loans		13,579			14,069			12,188			14,408			13,988
Other real estate owned		—			—			—			1,983			2,318
Total non-performing assets	$	13,579		$	14,069		$	12,188		$	16,391		$	16,306
Total non-accruing loans/total loans		0.54	%		0.55	%		0.48	%		0.54	%		0.52	%
Total non-performing assets/total assets		0.37			0.38			0.33			0.42			0.43
PROVISION AND ALLOWANCE FOR CREDIT LOSSES
Balance at beginning of period	$	23,653		$	19,082		$	17,907		$	16,509		$	15,297
Impact of CECL adoption		—			5,228			—			—			—
Charged-off loans		(239)			(216)			(297)			(439)			(220)
Recoveries on charged-off loans		166			48			112			37			78
Net loans charged-off		(73)			(168)			(185)			(402)			(142)
Provision for credit losses		(765)			(489)			1,360			1,800			1,354
Balance at end of period	$	22,815		$	23,653		$	19,082		$	17,907		$	16,509
Allowance for credit losses/total loans		0.91	%		0.93	%		0.74	%		0.66	%		0.60	%
Allowance for credit losses/non-accruing loans		168			168			157			124			118
NET LOAN CHARGE-OFFS
Commercial real estate	$	(105)		$	(131)		$	63		$	(252)		$	71
Commercial installment		(7)			1			(228)			(10)			(155)
Residential real estate		88			(28)			(21)			1			(20)
Consumer installment		(49)			(10)			1			(141)			(38)
Total, net	$	(73)		$	(168)		$	(185)		$	(402)		$	(142)
Net charge-offs (QTD annualized)/average loans		0.01	%		0.03	%		0.03	%		0.06	%		0.02	%
Net charge-offs (YTD annualized)/average loans		0.02			0.03			0.07			0.08			0.10
DELINQUENT AND NON-ACCRUING LOANS/ TOTAL LOANS
30-89 Days delinquent		0.13	%		0.43	%		0.58	%		0.16	%		0.28	%
90+ Days delinquent and still accruing		0.02			0.01			—			0.08			0.04
Total accruing delinquent loans		0.15			0.44			0.58			0.24			0.32
Non-accruing loans		0.54			0.55			0.48			0.54			0.52
Total delinquent and non-accruing loans		0.69	%		0.99	%		1.06	%		0.78	%		0.84	%

I

BAR HARBOR BANKSHARES

RECONCILIATION OF NON-GAAP FINANCIAL MEASURES AND SUPPLEMENTARY DATA – UNAUDITED

		At or for the Quarters Ended
		Jun 30,		Mar 31,		Dec 31,		Sep 30,		Jun 30,
(in thousands)		2021		2021		2020		2020		2020
Net income		$	9,025	$	9,480	$	8,640	$	8,402	$	8,481
Non-core items:
(Gain) on sale of securities, net			(50)		—		(3,959)		—		(1,351)
Loss (gain) on sale of premises and equipment, net			1		8		(122)		—		(2)
(Gain) loss on other real estate owned			—		—		(11)		335		—
Loss on debt extinguishment			—		—		—		—		1,351
Acquisition, conversion and other expenses			552		889		4,849		691		158
Income tax expense (1)			(119)		(213)		(179)		(245)		(37)
Total non-core items			384		684		578		781		119
Core earnings (2)	(A)	$	9,409	$	10,164	$	9,218	$	9,183	$	8,600
Net interest income	(B)	$	22,754	$	23,422	$	25,362	$	24,665	$	24,590
Non-interest income			9,505		10,248		14,723		10,102		9,710
Total Revenue			32,259		33,670		40,085		34,767		34,300
(Gain) on sale of securities, net			(50)		—		(3,959)		—		(1,351)
Total core revenue (2)	(C)	$	32,209	$	33,670	$	36,126	$	34,767	$	32,949
Total non-interest expense			21,724		22,491		27,816		22,419		22,266
Non-core expenses:
(Loss) gain on sale of premises and equipment, net			(1)		(8)		122		—		2
Gain (loss) on other real estate owned			—		—		11		(335)		—
Loss on debt extinguishment			—		—		—		—		(1,351)
Acquisition, conversion and other expenses			(552)		(889)		(4,849)		(691)		(158)
Total non-core expenses			(553)		(897)		(4,716)		(1,026)		(1,507)
Core non-interest expense (2)	(D)	$	21,171	$	21,594	$	23,100	$	21,393	$	20,759
Total revenue			32,259		33,670		40,085		34,767		34,300
Total non-interest expense			21,724		22,491		27,816		22,419		22,266
Pre-tax, pre-provision net revenue		$	10,535	$	11,179	$	12,269	$	12,348	$	12,034
Core revenue			32,209		33,670		36,126		34,767		32,949
Core non-interest expense			21,171		21,594		23,100		21,393		20,759
Core pre-tax, pre-provision net revenue	(U)	$	11,038	$	12,076	$	13,026	$	13,374	$	12,190
(in millions)
Average earning assets	(E)	$	3,398	$	3,359	$	3,388	$	3,444	$	3,438
Average paycheck protection program (PPP) loans	(R)		77		65		91		132		105
Average earning assets, excluding PPP loans	(S)		3,321		3,294		3,297		3,312		3,333
Average assets	(F)		3,746		3,717		3,756		3,814		3,807
Average shareholders' equity	(G)		413		407		410		407		406
Average tangible shareholders' equity (2) (3)	(H)		287		280		282		279		278
Tangible shareholders' equity, period-end (2) (3)	(I)		289		279		284		277		277
Tangible assets, period-end (2) (3)	(J)		3,513		3,603		3,598		3,732		3,653

J

BAR HARBOR BANKSHARES

RECONCILIATION OF NON-GAAP FINANCIAL MEASURES AND SUPPLEMENTARY DATA – UNAUDITED

		At or for the Quarters Ended
		Jun 30,			Mar 31,			Dec 31,			Sep 30,			Jun 30,
(in thousands)		2021			2021			2020			2020			2020
Common shares outstanding, period-end	(K)		14,972			14,950			14,916			14,929			15,214
Average diluted shares outstanding	(L)		15,042			15,007			14,952			15,103			15,441
Core earnings per share, diluted (2)	(A/L)	$	0.63		$	0.68		$	0.62		$	0.61		$	0.56
Tangible book value per share, period-end (2)	(I/K)		19.30			18.64			19.05			18.56			18.18
Securities adjustment, net of tax (1) (4)	(M)		7,237			4,510			10,023			11,681			11,412
Tangible book value per share, excluding securities adjustment (2) (4)	(I+M)/K		18.81			18.34			18.38			17.78			17.43
Tangible shareholders' equity/total tangible assets (2)	(I/J)		8.22			7.73			7.90			7.42			7.57
Performance ratios (5)
GAAP return on assets			0.97	%		1.03	%		0.92	%		0.88	%		0.90	%
Core return on assets (2)	(A/F)		1.01			1.11			0.98			0.96			0.91
Pre-tax, pre-provision return on assets			1.13			1.22			1.30			1.29			1.27
Core pre-tax, pre-provision return on assets (2)	(U/F)		1.18			1.32			1.38			1.39			1.29
GAAP return on equity			8.76			9.45			8.39			8.22			8.40
Core return on equity (2)	(A/G)		9.13			10.13			8.95			8.98			8.52
Return on tangible equity			12.88			14.01			12.45			12.24			12.55
Core return on tangible equity (1) (2)	(A+Q)/H		13.42			15.00			13.27			13.36			12.72
Efficiency ratio (2) (6)	(D-O-Q)/(C+N)		63.45			61.95			61.98			59.47			60.67
Net interest margin	(B+P)/E		2.74			2.88			3.02			2.90			3.04
Core net interest margin (2) (7)	(B+P-T)/S		2.67			2.78			2.79			2.89			2.92
Supplementary data (in thousands)
Taxable equivalent adjustment for efficiency ratio	(N)	$	586		$	595		$	542		$	570		$	646
Franchise taxes included in non-interest expense	(O)		128			125			117			121			120
Tax equivalent adjustment for net interest margin	(P)		430			433			396			416			490
Intangible amortization	(Q)		233			241			256			256			256
Interest and fees on PPP loans	(T)		1,064			1,304			2,648			1,052			869

(1) Assumes a marginal tax rate of 23.71% in the first and second quarter of 2021 and fourth quarter of 2020 and 23.87% for the first three quarters of 2020.

(2) Non-GAAP financial measure.

(3) Tangible shareholders' equity is computed by taking total shareholders' equity less the intangible assets at period-end. 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) All performance ratios are based on average balance sheet amounts, where applicable.

(6) Efficiency ratio is computed by dividing core non-interest expense net of franchise taxes and intangible amortization divided by core revenue on a fully taxable equivalent basis.

(7) Core net interest margin excludes Paycheck Protection Program loans.

K