Bar Harbor Bankshares — 2022 Form 10-K
Business context and reporting period. Bar Harbor Bankshares is the parent of Bar Harbor Bank & Trust, a community bank operating in Maine, New Hampshire, and Vermont. This annual report covers the fiscal year ended December 31, 2022; comparisons below are primarily with 2021.
Key financial results and condition
| Metric | 2022 | 2021 |
|---|---|---|
| Net income | $43.6 million | $39.3 million |
| Diluted earnings per share | $2.88 | $2.61 |
| Net interest income | $113.7 million | $95.6 million |
| Net interest margin | 3.36% | 2.88% |
| Noninterest income | $35.3 million | $42.3 million |
| Noninterest expense | $91.3 million | $90.5 million |
| Provision for credit losses | $2.9 million expense | $1.3 million benefit |
| Total assets | $3.91 billion | $3.71 billion |
| Total loans | $2.90 billion | $2.53 billion |
| Total deposits | $3.04 billion | $3.05 billion |
| Total borrowings | $394.2 million | $178.5 million |
| Shareholders’ equity | $393.5 million | $424.1 million |
Return on assets rose to 1.16% from 1.06%, and return on equity increased to 10.91% from 9.50%. The efficiency ratio improved to 59.26% from 61.29%. The filing reports no standalone operating margin measure.
Net cash provided by operating activities was $57.6 million. Investing activities used $410.6 million, principally reflecting $371.3 million of net loan growth; financing activities provided $194.9 million. Cash and cash equivalents fell by $158.1 million to $92.3 million.
The allowance for credit losses was $25.9 million, or 0.89% of loans, versus $22.7 million, or 0.90%, in 2021. Nonaccruing loans declined to $6.5 million (0.23% of loans) from $10.2 million (0.40%). The company and bank remained well-capitalized; year-end total risk-based capital ratios were 13.50% and 13.29%, respectively.
Material changes versus 2021
- Net income rose 11%, mainly on higher net interest income from asset repricing and loan growth, together with expense-management benefits.
- Total loans increased 15%; commercial loans grew particularly strongly. Deposits were nearly flat, while borrowings increased by $215.7 million as funding supported loan growth.
- Net interest margin expanded 48 basis points to 3.36%. The increase in rates also contributed to higher funding costs late in the year and substantially lower securities fair values.
- Noninterest income fell $6.9 million, principally because mortgage banking income declined to $1.6 million from $6.5 million and 2021 securities-sale gains did not recur at a comparable level.
- Available-for-sale securities had net unrealized losses of $71.8 million, compared with net unrealized gains of $2.6 million in 2021. Accumulated other comprehensive loss reached $58.3 million; book value per share fell to $26.09 from $28.27. Management said securities remained available for sale and it did not intend, or expect to be required, to sell loss-position securities before recovery.
- Annual dividends were $1.02 per share, up from $0.94. The board authorized a plan to repurchase up to 5% of outstanding shares; no shares were repurchased in the fourth quarter.
Outlook, risks, contingencies, and unusual items
- Outlook: The filing provides no numerical earnings or revenue guidance. Management stated that available liquidity was sufficient for anticipated needs for at least 12 months and described Northern New England markets as resilient, while noting economic uncertainty.
- Liquidity and funding: Management reported approximately $1.0 billion of available same-day liquidity, including cash, borrowing capacity, and unencumbered liquid securities. The bank’s liquidity policy targets at least 8% of total assets. Deposit outflows, rate competition, reliance on short-term borrowing, and access to wholesale funding remain relevant risks.
- Interest-rate sensitivity: The balance sheet was asset-sensitive over one- and two-year horizons in the company’s modeling. A parallel +100-basis-point rate scenario indicated net interest income increases of 1.2% over 1–12 months and 3.6% over 13–24 months; a −100-basis-point scenario indicated decreases of 1.6% and 5.2%. These are hypothetical model estimates, not forecasts.
- Credit and concentration risks: Commercial real estate, commercial and industrial, and construction loans represented approximately 64% of the portfolio. Real estate and rental/leasing was the largest commercial industry exposure; hospitality loans were $336.4 million, or 12% of total loans. Management cited inflation, recession risk, higher rates, real estate values, and borrower performance as uncertainties.
- Other risks: The filing highlights cybersecurity and vendor dependence, competition, regulatory and compliance requirements, employee retention, climate-related impacts, and volatility in wealth-management assets and related fees. It also notes that overdraft-related fees are subject to increased supervisory scrutiny.
- Unusual items: Provision expense increased primarily with loan growth; 2021 included a $2.9 million debt-extinguishment loss and $2.9 million of securities gains. The filing reports no significant subsequent events through issuance. No material pending legal proceeding was identified by management.
- Audit and controls: The auditor issued unqualified opinions on the financial statements and internal control over financial reporting. The allowance for credit losses was identified as a critical audit matter, involving judgment about economic forecasts, loss modeling, and qualitative adjustments.
Important facts for investors to verify
- Whether deposit balances and funding costs stabilize, and how much short-term borrowing is outstanding and reprices or matures in the near term.
- Whether loan growth—especially commercial real estate and hospitality exposure—continues without deterioration in delinquencies, criticized credits, or losses.
- How available-for-sale securities losses, duration, and any potential sales affect tangible equity, regulatory capital, and liquidity.
- Whether forecast rate changes translate into actual net interest income and margin results as deposit pricing and customer behavior adjust.
- Whether wealth-management fees, mortgage banking income, and customer service fees meet management’s expectations amid market and rate changes.
- Dividend sustainability and the status of the authorized share-repurchase plan, subject to regulatory and capital constraints.