- Bar Harbor Bankshares reported YOY net income growth of 21.6%.
- The bank's dividend payout ratio and net income growth confirm my belief that the stock is a long-term buy.
- In addition to the bank's impressive earnings, continued improvements in nonperforming assets show that management is unwilling to cut any corners.
I could say that Bar Harbor Bankshares (NYSEMKT:BHB) beat earnings estimates, but part of the reason why shares still trade at an attractive price is that nobody is looking. Net income for the quarter was up 21.6% YOY to $3.857 million. At the current pace, the bank is on track to turn in another year with record earnings, a consistent streak that started even before the financial crisis.
The bank's dividend payout has increased, and the current 3.44% yield looks sound, with earnings this last quarter covering them three times over. In addition to a sound dividend, the bank's nonperforming asset ratio improved and allowances now cover all non-performing loans by 111.5%. A significant feat compared to several other regional banks that have only been able to accomplish this by increasing charge-offs.
Going forward, the bank's profitability is still tied to net interest growth (which was up 14.5% YOY), but it appears non-interest income is also picking up (up 22.4% YOY), and encouragingly it has come from more consistent lines like trust and investment fees. I think investors would be happy with last year's earnings, but management can't deny its hunger for record earnings, and that is exactly why I don't plan on selling shares anytime soon.
Disclosure: The author is long BHB. The author wrote this article themselves, and it expresses their own opinions. The author is not receiving compensation for it (other than from Seeking Alpha). The author has no business relationship with any company whose stock is mentioned in this article.