Bar Harbor Widens Margin as Deposit Costs Ease
The bank’s fully taxable-equivalent net interest margin expanded 7 bps sequentially to 3.61%.
Bar Harbor Bankshares (BHB), the Maine-based community bank, widened its fully taxable-equivalent net interest margin to 3.61% in the second quarter, up 7 bps QoQ and 38 bps YoY. The improvement reflected higher loan and securities yields alongside a 40-bps decline in the cost of interest-bearing deposits to 1.88%.
Funding costs continued to recede, with the cost of interest-bearing liabilities falling 6 bps QoQ to 2.13%. Period-end loans returned to growth, rising $28.9 million to $3.614 billion as commercial real-estate and commercial-and-industrial balances increased. Average loans still declined $22.6 million QoQ, reflecting lower average CRE balances.
Deposits were roughly stable at $3.854 billion, while non-interest-bearing demand deposits increased $26.8 million to $678.1 million, supported by 1,893 new accounts. The renewed loan growth also lifted borrowings by $65.5 million to $281.2 million, reversing the previous quarter’s reduction in wholesale funding.
Fee revenue and expense control provided another lift. Non-interest income rose $7.1 million YoY to $11.7 million, largely because the prior-year quarter included a $4.9 million securities-sale loss. Trust-management fees increased as assets under management grew 12%, while the core efficiency ratio improved 116 bps QoQ and 634 bps YoY to 55.76%.
Tangible capital continued to rebuild. Tangible shareholders’ equity reached 8.56% of tangible assets, up 14 bps QoQ, and tangible book value increased $0.72 to $23.43 a share. The board maintained the quarterly dividend at $0.34 a share after a 6% increase in the first quarter; its existing repurchase authorization covered roughly 837,000 shares, or as much as 5% of shares outstanding.
Credit costs moved higher as the annualized net charge-off rate climbed to 0.38% from zero in the first quarter. The increase largely reflected a $3.3 million partial charge-off on a previously nonaccrual relationship transferred to other real estate owned. The provision for loan losses was $1.3 million, while the allowance declined $2.1 million QoQ and coverage fell 7 bps to 0.89% of loans.
Nonaccrual loans fell by roughly half to $11.4 million as CRE nonaccruals dropped to $0.9 million following that transfer. The quarter left Bar Harbor with a wider margin and renewed period-end loan growth, alongside greater wholesale funding use and higher realized credit costs.