Company Quick10K Filing
Quick10K
Bar Harbor Bankshares
Closing Price ($) Shares Out (MM) Market Cap ($MM)
$27.19 16 $422
10-Q 2019-03-31 Quarter: 2019-03-31
10-K 2018-12-31 Annual: 2018-12-31
10-Q 2018-09-30 Quarter: 2018-09-30
10-Q 2018-06-30 Quarter: 2018-06-30
10-Q 2018-03-31 Quarter: 2018-03-31
10-K 2017-12-31 Annual: 2017-12-31
10-Q 2017-09-30 Quarter: 2017-09-30
10-Q 2017-06-30 Quarter: 2017-06-30
10-Q 2017-03-31 Quarter: 2017-03-31
10-K 2016-12-31 Annual: 2016-12-31
10-Q 2016-09-30 Quarter: 2016-09-30
10-Q 2016-06-30 Quarter: 2016-06-30
10-Q 2016-03-31 Quarter: 2016-03-31
10-K 2015-12-31 Annual: 2015-12-31
10-Q 2015-09-30 Quarter: 2015-09-30
10-Q 2015-06-30 Quarter: 2015-06-30
10-Q 2015-03-31 Quarter: 2015-03-31
10-K 2014-12-31 Annual: 2014-12-31
10-Q 2014-09-30 Quarter: 2014-09-30
10-Q 2014-06-30 Quarter: 2014-06-30
10-Q 2014-03-31 Quarter: 2014-03-31
10-K 2013-12-31 Annual: 2013-12-31
8-K 2019-05-21 Shareholder Vote
8-K 2019-05-21 Regulation FD, Exhibits
8-K 2019-04-18 Earnings, Other Events, Exhibits
8-K 2019-03-19 Other Events, Exhibits
8-K 2019-01-24 Earnings, Exhibits
8-K 2019-01-24 Earnings, Exhibits
8-K 2019-01-22 Other Events, Exhibits
8-K 2018-12-11 Officers, Exhibits
8-K 2018-11-20 Officers, Exhibits
8-K 2018-10-18 Earnings, Exhibits
8-K 2018-10-16 Other Events, Exhibits
8-K 2018-09-19 Regulation FD, Exhibits
8-K 2018-09-14 Regulation FD, Exhibits
8-K 2018-07-31 Regulation FD, Exhibits
8-K 2018-07-19 Earnings, Exhibits
8-K 2018-07-17 Other Events, Exhibits
8-K 2018-06-14 Regulation FD, Exhibits
8-K 2018-05-15 Shareholder Vote
8-K 2018-04-25 Regulation FD, Exhibits
8-K 2018-04-19 Earnings, Exhibits
8-K 2018-03-15 Regulation FD, Exhibits
8-K 2018-02-22 Officers, Exhibits
8-K 2018-01-25 Earnings, Exhibits
8-K 2018-01-17 Other Events, Exhibits
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PRQR Proqr Therapeutics 431
SLCT Select Bancorp 227
ULBI Ultralife 133
HTGM HTG Molecular Diagnostics 71
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LEADE Leader Capital Holdings 0
BHB 2019-03-31
Part I. Financial Information
Item 1. Consolidated Financial Statements (Unaudited)
Note 1. Basis of Presentation
Note 2. Securities Available for Sale
Note 3. Loans
Note 4. Allowance for Loan Losses
Note 5. Borrowed Funds
Note 6. Deposits
Note 7. Capital Ratios and Shareholders' Equity
Note 8. Earnings per Share
Note 9. Derivative Financial Instruments and Hedging Activities
Note 10. Fair Value Measurements
Note 11. Non-Interest Income
Note 12. Leases
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations
Item 3. Quantitative and Qualitative Disclosures About Market Risk
Item 4. Controls and Procedures
Part II. Other Information
Item 1. Legal Proceedings
Item 1A. Risk Factors
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
Item 6. Exhibits
EX-31.1 exhibit311033119.htm
EX-31.2 exhibit312033119.htm
EX-32.1 exhibit321033119.htm
EX-32.2 exhibit322033119.htm

Bar Harbor Bankshares Earnings 2019-03-31

BHB 10Q Quarterly Report

Balance SheetIncome StatementCash Flow

10-Q 1 bhb033119.htm 10-Q Document

 
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
ý
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended: March 31, 2019
o
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from                    to                  
Commission File Number: 001-13349
bhblogoq318a01.jpg
BAR HARBOR BANKSHARES
(Exact name of registrant as specified in its charter) 
Maine
 
01-0393663
(State or other jurisdiction of incorporation or organization)
 
(I.R.S. Employer Identification No.)
 
 
 
PO Box 400
 
 
82 Main Street, Bar Harbor, ME
 
04609-0400
(Address of principal executive offices)
 
(Zip Code)
Registrant’s telephone number, including area code: (207) 288-3314
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.  Yes ý  No o  
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ý  No o
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company.  See the definition of "large accelerated filer," "accelerated filer", "smaller reporting company", or "emerging growth company" in Rule 12b-2 of the Exchange Act. 
Large Accelerated Filer o        Accelerated Filer ý       Non-Accelerated Filer o      Smaller Reporting Company o        Emerging growth company o
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. o
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act) Yes o  No ý
Securities registered pursuant to Section 12(b) of the Act:
Title of each class
Trading Symbol
Name of each exchange on which registered
Common Stock, par value $2.00 per share
BHB
NYSE American
The Registrant had 15,524,814 shares of common stock, par value $2.00 per share, outstanding as of May 3, 2019.
 



BAR HARBOR BANKSHARES AND SUBSIDIARIES
FORM 10-Q
 
INDEX 
 
 
Page
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 

2



The Company conducts business operations principally through Bar Harbor Bank & Trust, which may be referred to as the Bank and which is a subsidiary of Bar Harbor Bankshares. Unless the context requires otherwise, references in this report to "our company, "our," "us," "we" and similar terms refer to Bar Harbor Bankshares and its subsidiaries, including the Bank, collectively.

FORWARD-LOOKING STATEMENTS
Certain statements 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 Form 10-Q 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, 2018. 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.


3


PART I.    FINANCIAL INFORMATION

ITEM 1.     CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

BAR HARBOR BANKSHARES AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
 
(in thousands, except share data)
 
March 31, 2019
 
December 31, 2018
 
Assets
 
 

 
 

 
Cash and due from banks
 
$
37,504

 
$
35,208

 
Interest-bearing deposit with the Federal Reserve Bank
 
16,599

 
63,546

 
Total cash and cash equivalents
 
54,103

 
98,754

 
Securities available for sale, at fair value
 
747,235

 
725,837

 
Federal Home Loan Bank stock
 
35,107

 
35,659

 
Total securities
 
782,342

 
761,496

 
Loans:
 
 
 
 
 
Commercial real estate
 
821,567

 
826,699

 
Commercial and industrial
 
409,937

 
404,870

 
Residential real estate
 
1,184,053

 
1,144,698

 
Consumer
 
111,402

 
113,960

 
Total loans
 
2,526,959

 
2,490,227

 
Less: Allowance for loan losses
 
(13,997
)
 
(13,866
)
 
Net loans
 
2,512,962

 
2,476,361

 
Premises and equipment, net
 
49,661

 
48,804

 
Other real estate owned
 
2,351

 
2,351

 
Goodwill
 
100,085

 
100,085

 
Other intangible assets
 
7,266

 
7,459

 
Cash surrender value of bank-owned life insurance
 
74,352

 
73,810

 
Deferred tax assets, net
 
7,632

 
9,514

 
Other assets
 
38,441

 
29,853

 
Total assets
 
$
3,629,195

 
$
3,608,487

 
 
 
 
 
 
 
Liabilities
 
 

 
 

 
Deposits:
 
 
 
 
 
Demand
 
$
342,030

 
$
370,889

 
NOW
 
470,277

 
484,717

 
Savings
 
346,813

 
358,888

 
Money market
 
349,833

 
335,951

 
Time
 
956,818

 
932,793

 
Total deposits
 
2,465,771

 
2,483,238

 
Borrowings:
 
 
 
 
 
Senior
 
703,283

 
680,823

 
Subordinated
 
42,958

 
42,973

 
Total borrowings
 
746,241

 
723,796

 
Other liabilities
 
36,160

 
30,874

 
Total liabilities
 
3,248,172

 
3,237,908

 
(continued)
 
 
Shareholders’ equity
 
 

 
 

 
Capital stock, par value $2.00; authorized 20,000,000 shares; issued 16,428,388 and 16,428,388 shares at March 31, 2019 and December 31, 2018, respectively
 
32,857

 
32,857

 
Additional paid-in capital
 
187,743

 
187,653

 
Retained earnings
 
170,702

 
166,526

 
Accumulated other comprehensive loss
 
(5,628
)
 
(11,802
)
 
Less: 904,760 and 905,201 shares of treasury stock at March 31, 2019 and December 31, 2018, respectively
 
(4,651
)
 
(4,655
)
 
Total shareholders’ equity
 
381,023

 
370,579

 
Total liabilities and shareholders’ equity
 
$
3,629,195

 
$
3,608,487


The accompanying notes are an integral part of these consolidated financial statements.

4


BAR HARBOR BANKSHARES AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
 
 
Three Months Ended March 31,
(in thousands, except per share data)
 
2019
 
2018
Interest and dividend income
 
 
 
 
Loans
 
$
26,864

 
$
25,126

Securities and other
 
6,363

 
5,651

Total interest and dividend income
 
33,227

 
30,777

Interest expense
 
 

 
 

Deposits
 
6,307

 
3,985

Borrowings
 
5,155

 
3,634

Total interest expense
 
11,462

 
7,619

Net interest income
 
21,765

 
23,158

Provision for loan losses
 
324

 
795

Net interest income after provision for loan losses
 
21,441

 
22,363

Non-interest income
 
 

 
 

Trust and investment management fee income
 
2,757

 
2,962

Customer service fees
 
2,165

 
2,224

Bank-owned life insurance income
 
542

 
446

Other income
 
703

 
606

Total non-interest income
 
6,167

 
6,238

Non-interest expense
 
 

 
 

Salaries and employee benefits
 
10,519

 
10,989

Occupancy and equipment
 
3,386

 
3,073

Outside services
 
411

 
560

Professional services
 
544

 
433

Communication
 
235

 
180

Amortization of intangible assets
 
207

 
207

Acquisition, conversion and other expenses
 

 
335

Other expenses
 
3,322

 
3,075

Total non-interest expense
 
18,624

 
18,852

 
 
 
 
 
Income before income taxes
 
8,984

 
9,749

Income tax expense
 
1,703

 
1,937

Net income
 
$
7,281

 
$
7,812

 
 
 
 
 
Earnings per share:
 
 

 
 

Basic
 
$
0.47

 
$
0.51

Diluted
 
$
0.47

 
$
0.50

 
 
 
 
 
Weighted average common shares outstanding:
 
 
 
 
Basic
 
15,523

 
15,448

Diluted
 
15,587

 
15,553


The accompanying notes are an integral part of these consolidated financial statements.

5


BAR HARBOR BANKSHARES AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
 
 
 
Three Months Ended March 31,
(in thousands)
 
2019
 
2018
Net income
 
$
7,281

 
$
7,812

Other comprehensive income (loss), before tax:
 
 
 
 
Changes in unrealized loss on securities available-for-sale
 
8,900

 
(10,702
)
Changes in unrealized loss on cash flow hedging derivatives
 
(845
)
 
654

Changes in unrealized loss on pension
 

 
41

Income taxes related to other comprehensive income:
 
 
 
 
Changes in unrealized loss on securities available-for-sale
 
(2,079
)
 
2,550

Changes in unrealized loss on cash flow hedging derivatives
 
198

 
(155
)
Changes in unrealized loss on pension
 

 
(10
)
Total other comprehensive income (loss)
 
6,174

 
(7,622
)
Total comprehensive income
 
$
13,455

 
$
190


The accompanying notes are an integral part of these consolidated financial statements.
 

6


BAR HARBOR BANKSHARES AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY

(in thousands, except per share data)
 
Common stock amount
 
Additional paid-in capital
 
Retained earnings
 
Accumulated other comprehensive income (loss)
 
Treasury stock
 
Total
Balance at December 31, 2017
 
$
32,857

 
$
186,702

 
$
144,977

 
$
(4,554
)
 
$
(5,341
)
 
$
354,641

Comprehensive income:
 
 
 
 
 
 
 
 
 
 
 
 
Net income
 

 

 
7,812

 

 

 
7,812

Other comprehensive loss
 

 

 

 
(7,622
)
 

 
(7,622
)
Total comprehensive income
 

 

 
7,812

 
(7,622
)
 

 
190

Cash dividends declared ($0.19 per share)
 

 

 
(2,884
)
 

 

 
(2,884
)
Net issuance (16,180 shares) to employee stock plans, including related tax effects
 

 
(112
)
 

 

 
127

 
15

Modified retrospective basis adoption of Revenue Recognition Accounting Codification Standard 606
 

 

 
(184
)
 

 

 
(184
)
Reclassification of the income tax effects of the Tax Cuts and Jobs Act from accumulated other comprehensive income for adoption of ASU 2018-02
 

 

 
980

 
(980
)
 

 

Recognition of stock based compensation
 

 
379

 

 

 

 
379

Balance at March 31, 2018
 
$
32,857

 
$
186,969

 
$
150,701

 
$
(13,156
)
 
$
(5,214
)
 
$
352,157

 
 
 
 
 
 
 
 
 
 
 
 
 
Balance at December 31, 2018
 
$
32,857

 
$
187,653

 
$
166,526

 
$
(11,802
)
 
$
(4,655
)
 
$
370,579

Comprehensive income:
 
 
 
 
 
 
 
 
 
 
 
 
Net income
 

 

 
7,281

 

 

 
7,281

Other comprehensive loss
 

 

 

 
6,174

 

 
6,174

Total comprehensive income
 

 

 
7,281

 
6,174

 

 
13,455

Cash dividends declared ($0.20 per share)
 

 

 
(3,105
)
 

 

 
(3,105
)
Net issuance (441 shares) to employee stock plans, including related tax effects
 

 
(173
)
 

 

 
4

 
(169
)
Recognition of stock based compensation
 

 
263

 

 

 

 
263

Balance at March 31, 2019
 
$
32,857

 
$
187,743

 
$
170,702

 
$
(5,628
)
 
$
(4,651
)
 
$
381,023


The accompanying notes are an integral part of these consolidated financial statements.


7


BAR HARBOR BANKSHARES AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS 
 
 
Three Months Ended March 31,
(in thousands)
 
2019
 
2018
Cash flows from operating activities:
 
 

 
 

Net income
 
$
7,281

 
$
7,812

Adjustments to reconcile net income to net cash provided by operating activities:
 
 
 
 
Provision for loan losses
 
324

 
795

Net amortization of securities
 
693

 
1,059

Change in unamortized net loan costs and premiums
 
(85
)
 
368

Premises and equipment depreciation
 
952

 
841

Stock-based compensation expense
 
90

 
379

Accretion of purchase accounting entries, net
 
(886
)
 
(704
)
Amortization of other intangibles
 
207

 
207

Income from cash surrender value of bank-owned life insurance policies
 
(542
)
 
(446
)
Net change in other assets and liabilities
 
(3,757
)
 
(1,444
)
Net cash provided by operating activities
 
4,277

 
8,867

 
 
 
 
 
Cash flows from investing activities:
 
 

 
 

Proceeds from maturities, calls and prepayments of securities available for sale
 
21,709

 
23,350

Purchases of securities available for sale
 
(35,290
)
 
(36,428
)
Net change in loans
 
(36,209
)
 
21,033

Purchase of Federal Home Loan Bank stock
 
(5,567
)
 

Proceeds from sale of Federal Home Loan Bank stock
 
6,119

 

Purchase of premises and equipment, net
 
(1,809
)
 
(1,595
)
Net cash (used in) provided by investing activities
 
(51,047
)
 
6,360

 
 
 

 
 

Cash flows from financing activities:
 
 
 
 
Net decrease in deposits
 
(17,260
)
 
(10,740
)
Net change in short-term advances from the Federal Home Loan Bank
 
43,951

 
(50,511
)
Net change in long-term advances from the Federal Home Loan Bank
 
(19,940
)
 
6,021

Net change in short-term other borrowings
 
(1,531
)
 

Proceeds from treasury stock
 
4

 
15

Cash dividends paid on common stock
 
(3,105
)
 
(2,884
)
Net cash provided by (used in) financing activities
 
2,119

 
(58,099
)
 
 
 
 
 
Net change in cash and cash equivalents
 
(44,651
)
 
(42,872
)
Cash and cash equivalents at beginning of year
 
98,754

 
90,685

Cash and cash equivalents at end of year
 
$
54,103

 
$
47,813

 
 
 
 
 
Supplemental cash flow information:
 
 

 
 

Interest paid
 
$
11,490

 
$
7,740

Income taxes paid, net
 
1,506

 
45

 
 
 
 
 
Other non-cash changes:
 
 
 
 
Real estate owned acquired in settlement of loans
 

 
94


The accompanying notes are an integral part of these consolidated financial statements.


8


BAR HARBOR BANKSHARES AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED INTERIM FINANCIAL STATEMENTS

NOTE 1.          BASIS OF PRESENTATION

The consolidated financial statements (the “financial statements”) of Bar Harbor Bankshares and its subsidiaries (the “Company” or “Bar Harbor”) have been prepared in conformity with accounting principles generally accepted in the United States of America (“GAAP”). Bar Harbor Bankshares is a Maine Financial Institution Holding Company for the purposes of the laws of the state of Maine, and as such is subject to the jurisdiction of the Superintendent of the Maine Bureau of Financial Institutions. These financial statements include the accounts of the Company, its wholly-owned subsidiary Bar Harbor Bank & Trust (the "Bank") and the Bank’s consolidated subsidiaries. The results of operations of companies or assets acquired are included only from the dates of acquisition. All material wholly-owned and majority-owned subsidiaries are consolidated unless GAAP requires otherwise.

In addition, these interim financial statements have been prepared in accordance with the instructions to Form 10-Q and Article 10 of Regulation S-X, and accordingly, certain information and footnote disclosures normally included in financial statements prepared according to GAAP have been omitted.

The results for any interim period are not necessarily indicative of results for the full year. These consolidated financial statements should be read in conjunction with the audited financial statements and note disclosures for the Company's Annual Report on Form 10-K for the year ended December 31, 2018 previously filed with the Securities and Exchange Commission (the "SEC").  In management's opinion, all adjustments necessary for a fair statement are reflected in the interim periods presented.



9


Recent Accounting Pronouncements

The following table provides a brief description of recent accounting standards updates ("ASU") that could have a material impact to the Company’s consolidated financial statements upon adoption:
Standard
Description
Required Date of Adoption
Effect on financial statements
Standards Adopted in 2019
ASU 2016-02, Leases
This ASU creates ASU Topic 842, Leases, and supersedes Topic 840, Leases. The new guidance requires lessees to record a right-of-use asset and a corresponding liability equal to the present value of future rental payments on their balance sheets for all leases with a term greater than one year. There are not significant changes to lessor accounting; however, there are certain improvements made to align lessor accounting with the lessee accounting model and Topic 606, Revenue from Contracts with Customers. This guidance expands both quantitative and qualitative required disclosures. This ASU is required to be adopted on a modified retrospective basis and allows for practical expedients and elections in conjunction with implementation. The Company may elect some of the expedients upon the adoption date, which may be applied prospectively or retrospectively.
January 1, 2019
The Company adopted this ASU as of January 1, 2019 including the election of the practical expedients, allowing for existing leases to be accounted for consistent with current guidance, with the exception of balance sheet recognition for lessees. A modified retrospective transition approach was utilized, applying the new standard to all leases existing at the date of initial application. At January 1, 2019 the Company recognized a right-of-use asset and corresponding lease liability of $9.0 million. This computation is based, primarily, on the present value of unpaid future minimum lease payments. Additionally, that amount is impacted by assumptions around renewals and/or extensions, and the interest rate used to discount those future lease obligations. Due to the limited size of the Company's leasing portfolio, many other items related to this standard don't apply, or had an immaterial impact on the Company's consolidated financial statements. For transitional disclosures see Note 12 - Leases.
ASU 2018-11 Practical Expedients to Topic 842, Leases
ASU 2018-20 Scope Improvements for Lessors
ASU 2019-01 Leases: Codification Improvements
ASU 2017-12, Targeted Improvements to Accounting for Hedging Activities
This ASU amends Accounting Standards Codification ("ASC") 815, Derivatives and Hedging to (1) improve the transparency and understandability of information conveyed to financial statement users about an entity's risk management activities by better aligning the entity's financial reporting for hedging relationships with those risk management activities and (2) reduce the complexity of and simplify the application of hedge accounting by preparers.
January 1, 2019
The Company adopted this ASU as of January 1, 2019, although it did not have a material impact on the Company's consolidated financial statements.
ASU 2018-16, Inclusion of Overnight Financing Rate or Overnight Swap Rate as a Benchmark for Hedge Accounting
ASU 2018-07, Share Based Payment Accounting
This ASU expands the scope of Topic 718, Compensation- Stock Compensation to include share-based payments issued to non-employees for goods or services. Consequently, the accounting for share-based payments to non-employees and employees will be substantially aligned. The ASU supersedes Subtopic 505-50, Equity-Based Payments to non-employees.
January 1, 2019
The Company adopted this ASU as of January 1, 2019, with no material impact on the Company's consolidated financial statements.






10


Standard
Description
Required Date of Adoption
Effect on financial statements
Standards Not Yet Adopted
ASU 2016-13, Measurement of Credit Losses on Financial Instruments
This ASU amends Topic 326, Financial Instruments- Credit Losses to replace the current incurred loss accounting model with a current expected credit loss approach (CECL) for financial instruments measured at amortized cost and other commitments to extend credit. The amendments require entities to consider all available relevant information when estimating current expected credit losses, including details about past events, current conditions, and reasonable and supportable forecasts. The resulting allowance for credit losses is to reflect the portion of the amortized cost basis that the entity does not expect to collect. The amendments also eliminate the current accounting model for purchased credit impaired loans and certain off-balance sheet exposures. Additional quantitative and qualitative disclosures are required upon adoption.
January 1, 2020
Adoption of this ASU is expected to primarily change how the Company estimates credit losses on loans with the application of the expected credit loss model. Also, for acquired purchased impaired loans it requires the reclassification of the credit portion of the total remaining fair value adjustment directly to the allowance for loan losses. Fair value adjustments on purchased credit impaired loans related to interest rates and fair value adjustments on other acquired loans will continue to be accreted into income over time.
ASU 2018-19, Codification Improvements to ASU 2016-13
 
In addition, the Company expects the ASU to change the presentation of credit losses for AFS debt securities through an allowance method rather than as a direct write-off and may allow for recovery of these amounts in the future.
 
While the CECL model does not apply to available for sale debt securities, the ASU does require entities to record an allowance when recognizing credit losses for available for sale securities with unrealized losses, rather than reduce the amortized cost of the securities by direct write-offs. The guidances will require companies to recognize improvements to estimated credit losses immediately in earning rather than interest income over time.
 
The Company is in the process of evaluating and implementing allowance loan loss estimation models to comply with the guidance under this ASU, which may result in a higher allowance for losses then currently recorded under the existing standard.
 
The ASU should be adopted on a modified retrospective basis. Entities that have loans accounted for under ASC 310-30 at the time of adoption should prospectively apply the guidance in this amendment for purchase credit deteriorated assets.
Early adoption is permitted in 2019
ASU 2017-04, Simplifying the Test for Goodwill Impairment
This ASU amends Topic 350, Intangibles-Goodwill and Other, and eliminates Step 2 from the goodwill impairment test.
January 1, 2020
Adoption of this ASU is not expected to have a material impact on the Company's consolidated financial statements.
Early adoption is permitted.
ASU 2018-13 Changes to Disclosure Requirements Fair Value Measurement, Topic 820
This ASU eliminates, adds and modifies certain disclosure requirements for fair value measurements. Among the changes, entities will no longer be required to disclose the amount and reasons for transfers between Level 1 and Level 2 of the fair value hierarchy, but will be required to disclose the range and weighted average used to develop significant unobservable inputs for Level 3 fair value measurements.
January 1, 2020
Adoption of this ASU is not expected to have a material impact on the Company's consolidated financial statements.
Early adoption is permitted.
ASU 2018-14 Compensation- Disclosure Requirements for Defined Pension Plans Topic 715-20
This ASU makes minor changes to the disclosure requirements for employers that sponsor defined benefit pension and/or other post-retirement benefit plans.
January 1, 2021
Adoption of this ASU is not expected to have a material impact on the Company's consolidated financial statements.
Early adoption is permitted.
NOTE 2.    SECURITIES AVAILABLE FOR SALE

The following is a summary of securities available for sale:
(in thousands)
 
Amortized Cost
 
Gross Unrealized Gains
 
Gross Unrealized Losses
 
Fair Value
March 31, 2019
 
 

 
 

 
 

 
 

Securities available for sale
 
 

 
 

 
 

 
 

Debt securities:
 
 

 
 

 
 

 
 

Mortgage-backed securities:
 
 
 
 
 
 
 


  US Government-sponsored enterprises
 
$
404,713

 
$
1,975

 
$
5,410

 
$
401,278

  US Government agency
 
123,984

 
981

 
1,219

 
123,746

  Private label
 
20,342

 
78

 
150

 
20,270

Obligations of states and political subdivisions thereof
 
128,666

 
2,106

 
824

 
129,948

Corporate bonds
 
71,934

 
441

 
382

 
71,993

Total securities available for sale
 
$
749,639

 
$
5,581

 
$
7,985

 
$
747,235

 
 
 
 
 
 
 
 
 
December 31, 2018
 
 

 
 

 
 

 
 

Securities available for sale
 
 

 
 

 
 

 
 

Debt securities:
 
 

 
 

 
 

 
 

Mortgage-backed securities:
 
 
 
 
 
 
 
 
  US Government-sponsored enterprises
 
$
413,492

 
$
904

 
$
9,444

 
$
404,952

  US Government agency
 
111,938

 
509

 
1,935

 
110,512

  Private label
 
20,353

 
113

 
84

 
20,382

Obligations of states and political subdivisions thereof
 
133,260

 
1,081

 
2,076

 
132,265

Corporate bonds
 
58,098

 
264

 
636

 
57,726

Total securities available for sale
 
$
737,141

 
$
2,871

 
$
14,175

 
$
725,837


The amortized cost and estimated fair value of available for sale (“AFS”) securities segregated by contractual maturity at March 31, 2019 are presented below. Expected maturities may differ from contractual maturities because issuers may have the right to call or prepay obligations. Mortgage-backed securities are shown in total, as their maturities are highly variable.
 
 
Available for sale
(in thousands)
 
Amortized Cost
 
Fair Value
Within 1 year
 
$
420

 
$
421

Over 1 year to 5 years
 
34,117

 
34,365

Over 5 years to 10 years
 
65,026

 
65,440

Over 10 years
 
101,037

 
101,715

Total bonds and obligations
 
200,600

 
201,941

Mortgage-backed securities
 
549,039

 
545,294

Total securities available for sale
 
$
749,639

 
$
747,235



11


Securities with unrealized losses, segregated by the duration of their continuous unrealized loss positions, are summarized as follows:
 
 
Less Than Twelve Months
 
Over Twelve Months
 
Total
(In thousands)
 
Gross
Unrealized
Losses
 
Fair
Value
 
Gross
Unrealized
Losses
 
Fair
Value
 
Gross
Unrealized
Losses
 
Fair
Value
March 31, 2019
 
 

 
 

 
 

 
 

 
 

 
 

Securities available for sale
 
 

 
 

 
 

 
 

 
 

 
 

Debt securities:
 
 

 
 

 
 

 
 

 
 

 
 

Mortgage-backed securities:
 
 
 
 
 
 
 
 
 
 
 


  US Government-sponsored enterprises
 
$
15

 
$
5,958

 
$
5,395

 
$
259,984

 
$
5,410

 
$
265,942

  US Government agency
 
17

 
6,784

 
1,202

 
60,359

 
1,219

 
67,143

  Private label
 
145

 
19,905

 
5

 
45

 
150

 
19,950

Obligations of states and political subdivisions thereof
 

 

 
824

 
32,301

 
824

 
32,301

Corporate bonds
 
282

 
13,898

 
100

 
4,897

 
382

 
18,795

Total securities available for sale
 
$
459

 
$
46,545

 
$
7,526

 
$
357,586

 
$
7,985

 
$
404,131

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
December 31, 2018
 
 

 
 

 
 

 
 

 
 

 
 

Securities available for sale
 
 

 
 

 
 

 
 

 
 

 
 

Debt securities:
 
 
 
 
 
 
 
 
 
 
 
 
Mortgage-backed securities:
 
 
 
 
 
 
 
 
 
 
 
 
  US Government-sponsored enterprises
 
$
155

 
$
19,367

 
$
9,289

 
$
297,569

 
$
9,444

 
$
316,936

  US Government agency
 
16

 
2,570

 
1,919

 
68,266

 
1,935

 
70,836

  Private label
 
79

 
10,393

 
5

 
47

 
84

 
10,440

Obligations of states and political subdivisions thereof
 
43

 
6,784

 
2,033

 
47,930

 
2,076

 
54,714

Corporate bonds
 
224

 
11,759

 
412

 
14,460

 
636

 
26,219

Total securities available for sale
 
$
517

 
$
50,873

 
$
13,658

 
$
428,272

 
$
14,175

 
$
479,145


Securities Impairment: As a part of the Company’s ongoing security monitoring process, the Company identifies securities in an unrealized loss position that could potentially be other-than-temporarily impaired.  For the three months ended March 31, 2019 and 2018 the Company did not record any other-than-temporary impairment (“OTTI”) losses.
 
 
Three Months Ended March 31,
 
 
2019
 
2018
Estimated credit losses as of prior year-end
 
$
1,697

 
$
1,697

Reductions for securities paid off during the period
 

 

Estimated credit losses at end of the period
 
$
1,697

 
$
1,697


The Company expects to recover its amortized cost basis on all securities in its AFS portfolio. Furthermore, the Company does not intend to sell nor does it anticipate that it will be required to sell any of its securities in an unrealized loss position as of March 31, 2019, prior to this recovery. The Company’s ability and intent to hold these securities until recovery is supported by the Company’s strong capital and liquidity positions as well as its historically low portfolio turnover.


12


The following summarizes, by investment security type, the basis for the conclusion that securities in an unrealized loss position were not other-than-temporarily impaired at March 31, 2019:

US Government-sponsored enterprises
378 out of the total 754 securities in the Company’s portfolios of AFS US Government-sponsored enterprises were in unrealized loss positions. Aggregate unrealized losses represented 2.0% of the amortized cost of securities in unrealized loss positions. The FNMA and FHLMC guarantee the contractual cash flows of all of the Company’s US Government-sponsored enterprises. The securities are investment grade rated and there were no material underlying credit downgrades during the quarter. All securities are performing.

US Government agency
96 out of the total 198 securities in the Company’s portfolios of AFS US Government agency securities were in unrealized loss positions. Aggregate unrealized losses represented 1.8% of the amortized cost of securities in unrealized loss positions. The Government National Mortgage Association (“GNMA”) guarantees the contractual cash flows of all of the Company’s US Government agency securities. The securities are investment grade rated and there were no material underlying credit downgrades during the quarter. All securities are performing.

Private label
Nine of the total 21 securities in the Company’s portfolio of AFS private label mortgage-backed securities were in unrealized loss positions. Aggregate unrealized losses represented 0.7% of the amortized cost of securities in unrealized loss positions. Based upon the expectation that the Company will receive all of the future contractual cash flows related to the amortized cost on these securities, the Company does not consider there to be any additional other-than-temporary impairment with respect to these securities.

Obligations of states and political subdivisions thereof
64 of the total 249 securities in the Company’s portfolio of AFS municipal bonds and obligations were in unrealized loss positions. Aggregate unrealized losses represented 2.5% of the amortized cost of securities in unrealized loss positions. The Company continually monitors the municipal bond sector of the market carefully and periodically evaluates the appropriate level of exposure to the market. At this time, the Company feels the bonds in this portfolio carry minimal risk of default and the Company is appropriately compensated for the risk. There were no material underlying credit downgrades during the quarter. All securities are performing.

Corporate bonds
Eight out of the total 26 securities in the Company’s portfolio of AFS corporate bonds were in an unrealized loss position. The aggregate unrealized loss represents 2.0% of the amortized cost of bonds in unrealized loss positions. The Company reviews the financial strength of all of these bonds and has concluded that the amortized cost remains supported by the expected future cash flows of these securities.




13


NOTE 3.    LOANS

The Company’s loan portfolio is comprised of the following segments: commercial real estate, commercial and industrial, residential real estate, and consumer loans. Commercial real estate loans include multi-family, commercial construction and land development, and other commercial real estate classes. Commercial and industrial loans include loans to commercial and agricultural businesses and tax exempt entities. Residential real estate loans consist of mortgages for 1-to-4 family housing. Consumer loans include home equity loans, auto and other installment loans.

The Company’s lending activities are principally conducted in Maine, New Hampshire, and Vermont.

Total loans include business activity loans and acquired loans. Acquired loans are those loans previously acquired from other institutions. The following is a summary of total loans:
 
 
March 31, 2019
 
December 31, 2018
(in thousands)
 
Business Activities Loans
 
Acquired
Loans
 
Total
 
Business
Activities  Loans
 
Acquired
Loans
 
Total
Commercial real estate:
 
 

 
 

 
 

 
 

 
 

 
 

Construction and land development
 
$
34,782

 
$
2,851

 
$
37,633

 
$
23,754

 
$
2,890

 
$
26,644

Other commercial real estate
 
545,151

 
238,783

 
783,934

 
555,980

 
244,075

 
800,055

Total commercial real estate
 
579,933

 
241,634

 
821,567

 
579,734

 
246,965

 
826,699

 
 
 
 
 
 
 
 
 
 
 
 
 
Commercial and industrial:
 
 

 
 

 
 

 
 

 
 

 
 

Commercial
 
236,068

 
46,909

 
282,977

 
234,757

 
52,470

 
287,227

Agricultural
 
22,208

 

 
22,208

 
22,317

 

 
22,317

Tax exempt
 
66,727

 
38,025

 
104,752

 
56,588

 
38,738

 
95,326

Total commercial and industrial
 
325,003

 
84,934

 
409,937

 
313,662

 
91,208

 
404,870

 
 
 
 
 
 
 
 
 
 
 
 
 
Total commercial loans
 
904,936

 
326,568

 
1,231,504

 
893,396

 
338,173

 
1,231,569

 
 
 
 
 
 
 
 
 
 
 
 
 
Residential real estate:
 
 

 
 

 
 

 
 

 
 

 
 

Residential mortgages
 
723,425

 
460,628

 
1,184,053

 
670,189

 
474,509

 
1,144,698

Total residential real estate
 
723,425

 
460,628

 
1,184,053

 
670,189

 
474,509

 
1,144,698

 
 
 
 
 
 
 
 
 
 
 
 
 
Consumer:
 
 

 
 
 
 

 
 

 
 

 
 

Home equity
 
58,696

 
42,683

 
101,379

 
57,898

 
45,291

 
103,189

Other consumer
 
8,812

 
1,211

 
10,023

 
9,414

 
1,357

 
10,771

Total consumer
 
67,508

 
43,894

 
111,402

 
67,312

 
46,648

 
113,960

 
 
 
 
 
 
 
 
 
 
 
 
 
Total loans
 
$
1,695,869

 
$
831,090

 
$
2,526,959

 
$
1,630,897

 
$
859,330

 
$
2,490,227


The carrying amount of the acquired loans at March 31, 2019 totaled $831.1 million. A subset of these loans was determined to have evidence of credit deterioration at acquisition date, which is accounted for in accordance with ASC 310-30. These purchased credit-impaired loans presently maintain a carrying value of $10.0 million (and total note balances of $13.6 million). These loans are evaluated for impairment through the periodic reforecasting of expected cash flows. Acquired loans considered not impaired at acquisition date had a carrying amount of $821.1 million as of March 31, 2019.




14


The following table summarizes activity in the accretable yield for the acquired loan portfolio that falls under the purview of ASC 310-30, Accounting for Certain Loans or Debt Securities Acquired in a Transfer:
 
 
Three Months Ended March 31,
(in thousands)
 
2019
 
2018
Balance at beginning of period
 
$
4,377

 
$
3,509

Reclassification from non-accretable difference for loans with improved cash flows
 
222

 
199

Accretion
 
(449
)
 
(361
)
Balance at end of period
 
$
4,150

 
$
3,347


The following is a summary of past due loans at March 31, 2019 and December 31, 2018:

Business Activities Loans
(in thousands)
 
30-59 Days
Past Due
 
60-89 Days
Past Due
 
90 Days or Greater Past Due
 
Total Past
Due
 
Current
 
Total Loans
 
Past Due >
90 days and
Accruing
March 31, 2019
 
 

 
 

 
 

 
 

 
 

 
 

 
 

Commercial real estate:
 
 

 
 

 
 

 
 

 
 

 
 

 
 

Construction and land development
 
$
1

 
$
73

 
$

 
$
74

 
$
34,708

 
$
34,782

 
$

Other commercial real estate
 
1,635

 
503

 
5,382

 
7,520

 
537,631

 
545,151

 

Total commercial real estate
 
1,636

 
576

 
5,382

 
7,594

 
572,339

 
579,933

 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Commercial and industrial:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Commercial
 
182

 
32

 
599

 
813

 
235,255

 
236,068

 
14

Agricultural
 
82

 

 
57

 
139

 
22,069

 
22,208

 

Tax exempt
 

 

 

 

 
66,727

 
66,727

 

Total commercial and industrial
 
264

 
32

 
656

 
952

 
324,051

 
325,003

 
14

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Total commercial loans
 
1,900

 
608

 
6,038

 
8,546

 
896,390

 
904,936

 
14

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Residential real estate:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Residential mortgages
 
1,234

 
167

 
1,357

 
2,758

 
720,667

 
723,425

 

Total residential real estate
 
1,234

 
167

 
1,357

 
2,758

 
720,667

 
723,425

 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Consumer:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Home equity
 
40

 
23

 
64

 
127

 
58,569

 
58,696

 

Other consumer
 
9

 
6

 
11

 
26

 
8,786

 
8,812

 

Total consumer
 
49

 
29

 
75

 
153

 
67,355

 
67,508

 

 
 
 
 
 
 
 
 
 
 
 
 
 
 

Total loans
 
$
3,183

 
$
804

 
$
7,470

 
$
11,457

 
$
1,684,412

 
$
1,695,869

 
$
14




15


Business Activities Loans
(in thousands)
 
30-59 Days
Past Due
 
60-89 Days
Past Due
 
90 Days or Greater Past Due
 
Total Past
Due
 
Current
 
Total Loans
 
Past Due >
90 days and
Accruing
December 31, 2018
 
 

 
 

 
 

 
 

 
 

 
 

 
 

Commercial real estate:
 
 

 
 

 
 

 
 

 
 

 
 

 
 

Construction and land development
 
$

 
$

 
$

 
$

 
$
23,754

 
$
23,754

 
$

Other commercial real estate
 
1,146

 

 
6,725

 
7,871

 
548,109

 
555,980

 

Total commercial real estate
 
1,146

 

 
6,725

 
7,871

 
571,863

 
579,734

 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Commercial and industrial:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Commercial
 
395

 
60

 
402

 
857

 
233,900

 
234,757

 
50

Agricultural
 
65

 
6

 
25

 
96

 
22,221

 
22,317

 

Tax exempt
 

 

 

 

 
56,588

 
56,588

 

Total commercial and industrial
 
460

 
66

 
427

 
953

 
312,709

 
313,662

 
50

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Total commercial loans
 
1,606

 
66

 
7,152

 
8,824

 
884,572

 
893,396

 
50

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Residential real estate:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Residential mortgages
 
3,565

 
641

 
1,309

 
5,515

 
664,674

 
670,189

 

Total residential real estate
 
3,565

 
641

 
1,309

 
5,515

 
664,674

 
670,189

 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Consumer:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Home equity
 
72

 

 

 
72

 
57,826

 
57,898

 

Other consumer
 
17

 

 
11

 
28

 
9,386

 
9,414

 

Total consumer
 
89

 

 
11

 
100

 
67,212

 
67,312

 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Total loans
 
$
5,260

 
$
707

 
$
8,472

 
$
14,439

 
$
1,616,458

 
$
1,630,897