Bar Harbor Bankshares
Annual Report 2010

Plain-text annual report

Banking on Community Investing in Prosperity on the Maine Coast 2010 Summary Annual Report Founded in 1887, Bar Harbor Bank & Trust (the “Bank”) is a community bank with 12 locations along the coast of Maine, and offers a full range of financial products and services for families, businesses, municipalities and non-profit organizations. Bar Harbor Trust Services, a subsidiary of the Bank, and Bar Harbor Financial Services, a branch of Infinex Investments, Inc., an independent third party broker, provide retirement planning, investment management, brokerage and insurance services to meet the needs of a wide variety of individual, non-profit and municipal clients. Bar Harbor Bankshares (“BHB” or the “Company”) is the parent company of Bar Harbor Bank & Trust. Year-Over-Year Financial Highlights (Dollars in thousands) Net Income Available to Common Shareholders Diluted Earnings Per Share Net Interest Income Non-interest Income Non-interest Expense Total Assets Total Securities Total Loans Total Deposits Average Shareholders’ Equity 2009 % Change 2010 10,009 2.61 31,709 7,458 22,046 $ $ $ $ $ $ $ $ $ $ 9,316 3.12 33,281 6,022 21,754 $ 1,117,933 $ 1,072,381 $ 357,882 $ 347,026 $ 700,670 $ 669,492 $ 708,328 $ 641,173 $ 105,911 $ 88,846 7.4% –16.3% –4.7% 23.8% 1.3% 4.2% 3.1% 4.7% 10.5% 19.2% 12000 10000 8000 6000 4000 2000 0 4 3 2 1 0 16 12 8 4 0 12,000 10,000 8,000 6,000 4,000 2,000 0 $10,009 4.00 3.00 2.00 1.00 $2.61 6 0 0 2 7 0 0 2 8 0 0 2 9 0 0 2 0 1 0 2 Net Income Available to Common Shareholders ($ in thousands) 6 0 0 2 7 0 0 2 8 0 0 2 9 0 0 2 0 1 0 2 0 Diluted Earnings per Share 16 12 8 4 0 10.07% 6 0 0 2 7 0 0 2 8 0 0 2 9 0 0 2 0 1 0 2 Return on Average Equity Cover Photo: View from Cadillac Mountain in Acadia National Park, Maine. © Greg A. Hartford, AcadiaMagic.com 2010 Summary Annual Report Dear fellow shareholders: We are pleased to provide you with the Bar Harbor Bankshares Summary Annual Report for 2010. We are most pleased to report that net income available to common shareholders for 2010 was a record $10 million, up 7.4% from 2009. This is our fifth consecutive year of record earnings. unique pockets of economic vitality, which supported We are particularly pleased to have sustained this trend some of our optimistic expectations. It is worth noting a through 2008, 2009 and 2010, three of the most chal- few key examples. lenging years in modern banking history. • Bar Harbor Bankshares’ principal economic driver Last year at this time, due to patches of turbulence that remains tourism as our headquarters stands in the lingered in the economy, we were uncertain about what shadow of the heights of Acadia National Park, one the next twelve months might bring although we were of the major tourism destinations on the East Coast. cautiously optimistic that Bar Harbor Bankshares was Acadia National Park reported 2010 visits were up prepared for it. We believe it is fair to say that by year’s about 350,000 (or 15%) over 2009, and local lodging, end, the national and regional economies had experi- hospitality and retail establishments generally have enced a largely sideways movement. However, the coast reported their best year in nearly a decade. Many of of Maine demonstrated some very encouraging and these businesses are our customers and we in turn Bar Harbor Bankshares employees share their energy and enthusiasm with more than 60 non-profit groups and 40 community events each year, touching thousands of lives in the coastal Maine communities where we are fortunate to live, work, and play. Outstanding Corporation of the Year 2010 The Association of Fundraising Professionals—Northern New England Chapter honored BHB as “Outstanding Corporation” of the year in 2010, recognizing our employees for their gifts of time, expertise and dollars. 1 Bar Harbor Bankshares Bowl for Kids’ Sake March 2010 Teach Children to Save April 2010 When a concerned parent cares enough to connect with an organization that embraces the power of friendship…when a child is matched with an ideal mentor…the result is beyond measure—a self-confident child, involved and engaged in school, with a caring friend cheering from the sidelines. That’s the power of Big Brothers Big Sisters. BHB has supported Bowl for Kids’ Sake for many years, and 12 Bank teams raised over $5,000 in 2010. Every April, over 24,000 bankers bring financial lessons to classrooms across the country. In 2010, BHB employees reached over 250 students at eight local schools. A few days after BHB’s Penny Carter and Leita Zeugner visited a 4th grade class, a grateful mom called the teacher to say what an impact it had on her son. “He came home and the first thing he said was that he wanted to open a savings account.” were rewarded with unusually strong seasonal • The Maine wild blueberry industry provides some of increases in deposits as well as added stability in our our largest agricultural customers and comprises wild tourism-dependent loans and related personal debt. blueberry growers and processors. This year saw • Maine’s iconic lobster fishing industry has struggled with difficult challenges for the past several years but 2010 was different. The Maine Department of Marine Resources has reported that the 2010 lobster harvest was the highest on record for both volume and value. Landings were over 93 million pounds with a value of over $308 million compared to over 81 million pounds and a value of $237 million for 2009. As these statis- tics signify, most lobster fishermen enjoyed a sub- some early cautions due to partial crop losses in both Maine and Canada due to untimely frosts. Eventually, domestic growers suffered less damage than did their Canadian competitors. Demand for product remained high due to the weakened overall supply with the result that our customers have reported very strong prices. 2010 brought satisfying profits for most operators in our region and we were able to increase our support to this major local industry. stantially better reward for their efforts than in recent As we have commented many times in our shareholder years. For Bar Harbor Bankshares, this has translated communications, we are fortunate to be a community bank to a healthier portfolio of commercial and personal on the coast of Maine, which has been hospitable to our busi ness within the fishing communities. success over the past several years and was again in 2010. Harding Golf Tournament May 2010 “Food and Fuel for our Neighbors on Mount Desert Island” was the fundraising objective for our 17th annual David R. Harding Memorial Golf Tournament at Kebo Valley. Tourney proceeds of $6,000 were evenly distributed among the Bar Harbor Food Pantry, the Westside Food Pantry, and the MDI Community Campfire Coalition. 2 During 2010, the Company’s assets grew by $45.6 million, or 4.2%, to $1.1 billion. In 2010, many banks were unable to demonstrate growth and we are pleased to have done so in ways that are beneficial to the customers and communities we serve. In 2009’s Summary Annual Report, we noted the national per- ception that “banks are unwilling to lend.” We are delighted to present our bank’s experience as counter to that assertion. During 2008 and 2009, we began to observe that our competitive landscape was changing and that the market was becoming increasingly receptive to an experi- enced and responsive local commu- nity bank as an alternative source to the much larger regional and national banks for business lending. We had been building our business develop- ment and credit administration teams around conservative and consistent credit standards for several years and we were well-prepared to take advantage of these additional oppor- tunities. Despite the specter of dimin- ished overall market demand, we made a conscious strategic decision to deploy our business banking team at increased strength to provide what 2010 Summary Annual Report Relay for Life June 2010 Bar Harbor Bankshares’ “Banking on a Cure” team first participated in Relay in 2001, when a group of four raised $1,460. Since then, BHB’s team has grown to around 50 employees, friends, and family members who have raised over $78,000 to help create a world with less cancer and more birth- days. BHB’s “Banking on a Cure” fundraising begins as soon as the current year’s Relay ends. Our team hosts a Spud-tacular Baked Potato Supper, a Cinco de Mayo lunch, a dance, and several pancake breakfasts to bring in funds for the cause. Relay for Life, the American Cancer Society’s signature activity, raises funds to fight cancer and increase awareness of prevention and treatment options. Teams camp out overnight and take turns walking around the track during an 18-hour period. Each team is asked to have a representative on the track at all times during the event. While doing their part to help find a cure, partici- pants celebrate the lives of those who have battled cancer and remember loved ones lost to the disease. “Banking on a Cure” is one of the top fundraising teams in Hancock County, collecting over $15,000 in 2009 and nearly $14,000 in 2010, more than 10% of the overall local event proceeds. Our employees have also been involved in the Daffodil Days fundraiser for ACS since it began over 25 years ago. The American Cancer Society honored BHB with an Outstanding Income Develop ment Award in 2007 in recognition of the Bank’s longstand- ing partnership in the fight against cancer. 3 Bar Harbor Bankshares we believe to have been exemplary service at a time continued sluggishness in the broader middle market when it was most appreciated by existing customers and where trading-up transactions have become rare. In par- new prospects. This positioning has permitted healthy ticular, since late 2009, we have observed some height- growth during a period of general industry retrenchment. ened interest in high-value vacation and retirement homes We believe this strategy has distinguished us from many along the coast, representing, we believe, an assessment of our competitors. For 2010, business loans were up that values have leveled out for such prop erties and the $28.3 million over 2009, representing growth of 7.7% opportunities available are compelling. We have been for- and ended 2010 at $397.6 million. tunate to be able to provide financing for several of these Residential mortgage loans rose $5.7 million or 2.5% compared to 2009 and, given the overall state of the market, we are pleased to report even that small measure transactions. However, we are very cautious about pro- jecting the rate of progress in the broader housing market from this point forward. of growth. Throughout the nation, banks have struggled While asset quality factors were relatively stable through with a dramatic slowdown in housing sales and dimin- most of 2010, we did experience net charge-offs of 0.24% ishing opportunities to finance homes. Because of the of total average loans for 2010 compared to 0.13% of total slowness in the industry, housing values had decreased loans in 2009. At the end of 2010, non-performing loans dramatically, especially in areas of previously high growth, were 1.95% of total loans up from 1.37% of total loans in and home purchase activity withered from prior levels. 2009, with all of the net increase represented by a single We were not immune along the Maine coast as local $5.2 million loan to a moderate-income housing project housing values also softened here and purchase activity managed by a local not-for-profit agency. While the pace gave way to refinancing of existing homes. In recent of resolution of residential loans in foreclosure in Maine months, we have observed increased interest in both is glacially slow, the pace of our loans entering the fore- the high and entry levels of the mortgage market but closure process is manageable and has not worsened Customer Appreciation Days Summer 2010 We appreciate our customers every day… and sometimes we feed them, too. Whether it’s burgers on a sizzling grill, a 6-foot sub sandwich with all the trimmings, ice cream with homemade blueberry sauce, or root beer floats—we roll out the red carpet and hometown hospitality. Good food, good fellowship, great fun. This is community banking at its most delicious. 4 2010 Summary Annual Report We made a conscious strategic decision to deploy our business banking team at increased strength to provide what we believe to have been exemplary service at a time when it was most appreciated by existing customers and new prospects. This positioning has permitted healthy growth during a period of general industry retrenchment. appreciably relative to our experience in 2009. We con- providers of choice for financial advisory and investment tinue to work with every cooperative borrower to avoid services to a wide variety of individuals and institutional foreclosure whenever possible. clients. At the end of 2010, Bar Harbor Trust Services We are pleased to note that our financial service units, Bar Harbor Trust Services and Bar Harbor Financial reported assets under management of $314.2 million, up $44.1 million or 16.3% from 2009. Services*, continued to grow during 2010. Combined, We are pleased to report an efficiency ratio for 2010 of these units contributed top-line revenues of $3 million 55.5%, very favorable compared to peers. The slippage up 22.1% compared to 2009. These units continue to from 53.2% in 2009 is largely attributable to a 4.7% demonstrate increased acceptance in the local market as decline in net interest income. This decline was principally *Bar Harbor Financial Services is a branch of Infinex Investments, Inc., an independent registered broker-dealer which is not affiliated with the Company or the Bank. 5 due to the refinancing of certain loans into lower rates as well as to accelerated cash flows from the company’s mortgage-backed securi- ties portfolio. Non-interest expenses were up only 1.3% compared to 2009, and were a lesser factor in this ratio for 2010. As part of our strategic plan, we identified the importance of improv- ing the overall banking experience of our existing customers. One aspect of this commitment is to upgrade branch facilities in our largest and busiest locations. In 2010, we reno- vated our Blue Hill and Southwest Harbor branches and launched a project to replace our Ellsworth branch. These three offices are our largest branches aside from our Bar Harbor headquarters and represent valuable franchise assets with growth potential. Another aspect of this commitment was to recognize the popular demand of electronic bank- ing products. In 2010, we completed deployment of a new online bill- payment system, E-statements and E-Choice, our interest-bearing elec- tronic checking account. Bar Harbor Bankshares Bar Harbor Bank & Trust YMCA Half Marathon September 2010 “Gatorade!” “Water!” As runners pass the 5-mile mark, they are greeted with hydration and cheers from an enthusiastic team of BHB volunteers. One of the most scenic race courses in the world, the Half Marathon winds through Acadia National Park and ends up back in town at the Bar Harbor ballfield. With a limited field of only 400 runners, there is always a full roster for this popular event that draws participants from near and far. As title sponsor, BHB has supported this timeless YMCA fundraiser and economy booster since the 1980’s. Walk for Wishes September 2010 When the Make-A-Wish Foundation grants wishes for children with life- threatening medical conditions, the average cost is $6,000. Many children from Maine have benefited, including our own Penny Brady’s step-daughter, Becky, who was present at the 2010 Walk. Becky’s wish of going on a cruise was granted back in 2002 when she was 10 years old and battling a brain tumor. Now she is 19, and majoring in elementary education at Husson University. Ron Hamilton, BHB employee, is a volunteer Wish Granter and organizes our local Walk, which raised nearly $9,000 in 2010. 6 2010 Summary Annual Report The Maine Coast Maine’s coastal economy, with its strengths in tourism, fishing, boat building and blueberry farming, has proven remarkably stable over time. With 12 branches along a 120-mile stretch from Lubec to Rockland, BHB is fortunate to call coastal Maine home. 1 Bar Harbor 2 Blue Hill 3 Deer Isle 4 Ellsworth 5 Lubec 6 Machias 7 Milbridge 8 Northeast Harbor 9 Rockland  Somesville  Southwest Harbor  Winter Harbor We wish to acknowledge a change in our senior manage- Throughout this document we have taken the opportunity ment team. In July of 2010, we welcomed Raymond J. to acknowledge the extraordinary contributions of our Frohnapfel as Senior Vice President of Operations and team members who devote thousands of hours of volun- Information Systems. Mr. Frohnapfel brings over 25 years teer service to a myriad of benefit events and community of experience in banking operations and technology man- causes. Their volunteer efforts are from the heart and agement. Mr. Frohnapfel succeeds David W. Thibault who need no coaching from management. We believe that retired in June of 2010 after nine years of exemplary ser- healthy communities are prosperous communities and vice to the Company. No matter the locale, BHB’s floats are always standouts in our local parades. Shown left to right: Bar Harbor July 4th Parade, Quietside Flamingo Festival, Ellsworth Holiday Parade. 7 Bar Harbor Bankshares We believe that healthy communities are prosperous communities and we recognize there is no better indicator of a healthy community than the unselfish spirit of its people. Throughout this document we acknowledge the extraordinary contributions of our team members who devote thousands of hours of volunteer service to a myriad of community events and causes. we recognize there is no better indicator of a healthy will be manifest in their expectations of banks and finan- community than the unselfish spirit of its people. We are cial services companies. By contrast, we predict a new very proud of our team members and salute their remark- generation of entrepreneurs will emerge, recognizing able commitment. Going forward into 2011 and beyond, we remain cau- tiously optimistic that the broader national economy will eventually strengthen but will be remarkably changed new opportunities and looking for skill, confidence and support from lending institutions. To prosper and flourish, Bar Harbor Bankshares will need to respond to both expectations and we are committed to do so. from the pre-crisis period in ways we do not yet fully Legislative and regulatory expectations are the extreme comprehend. We suspect that a segment of the popula- wild-card in the banking future. While well-intentioned, if tion we serve will become and remain financially more occasionally misguided, regu latory expectations designed conservative than they may have been before and this for large banks do not sit well on the shoulders of smaller Thanksgiving Food Drive November 2010 Through the generosity of our community members, BHB’s 22nd annual food drive, held at grocery stores in Bar Harbor, Blue Hill, Ellsworth, and Machias, brought in more than 2,000 food items and over $2,300. These gifts provided food for the Thanksgiving holiday as well as stocked the shelves of eleven local food pantries for the coming winter months. 8 2010 Summary Annual Report community banks. In the wake of the Dodd-Frank Wall bold steps to acquire and preserve this significant capi- Street Reform and Consumer Protection Act, the com- tal strength and we are committed to use it prudently in munity banking industry is virtually certain to experience pursuit of long term growth and appropriate returns to increased compliance bureaucracy and costs. our shareholders. As evidence of this commitment, we We ended 2010 in a position of strength with a Total Risk- based capital ratio of 15.41%, well above the regulatory were pleased to increase our dividend during the fourth quarter of 2010 and again in the first quarter of 2011. standard of 10% for a well-capitalized financial institution. On behalf of the Board of Directors and all the Bar Going forward, this capital strength will determine both Harbor Bankshares team members, we thank you, our strategic direction and our freedom to act upon our our shareholders, for your confidence and loyalty. strategic intents. In the past two years we have taken Joseph M. Murphy President and Chief Executive Officer Peter Dodge Chairman (center and right photos) Courtesy of Kelly Saunders, Bagaduce Photo. 9 Bar Harbor Bankshares 5-Year Selected Financial Data The following table sets forth selected financial data for the last five years. (In thousands, except share and per share data) 2010 2009 2008 2007 2006 As of and for the Years Ended December 31st Balance Sheet Data: Total assets Total securities Total loans Allowance for loan losses Total deposits Total borrowings Total shareholders’ equity Average assets Average shareholders’ equity Results of Operations: Interest and dividend income Interest expense Net interest income Provision for loan losses Net interest income after provision for loan losses Non-interest income Non-interest expense Income before income taxes Income taxes Net income Preferred stock dividends and accretion of discount $1,117,933 357,882 700,670 (8,500) 708,328 300,014 103,608 1,087,327 105,911 $ 51,141 19,432 31,709 2,327 29,382 7,458 22,046 14,794 4,132 $1,072,381 347,026 669,492 (7,814) 641,173 311,629 113,514 1,052,496 88,846 $ 972,288 290,502 633,603 (5,446) 578,193 323,903 65,445 926,357 65,139 $ 889,472 264,617 579,711 (4,743) 539,116 278,853 65,974 841,206 62,788 $ 824,877 213,252 555,099 (4,525) 496,319 260,712 61,051 788,557 57,579 $ 54,367 21,086 33,281 3,207 $ 53,594 26,403 27,191 1,995 $ 51,809 28,906 22,903 456 $ 46,145 24,449 21,696 131 30,074 25,196 22,447 21,565 6,022 21,754 14,342 3,992 6,432 20,513 11,115 3,384 5,929 18,201 10,175 3,020 6,876 18,677 9,764 2,885 $ 10,662 $ 10,350 $ 7,731 $ 7,155 $ 6,879 653 1,034 — — — Net income available to common shareholders $ 10,009 $ 9,316 $ 7,731 $ 7,155 $ 6,879 Per Common Share Data: Basic earnings per share Diluted earnings per share Cash dividends per share Dividend payout ratio Selected Financial Ratios: Return on total average assets Return on total average equity Tax-equivalent net interest margin Capital Ratios: Tier 1 leverage capital ratio Tier 1 risk-based capital ratio Total risk-based capital ratio Asset Quality Ratios: Net charge-offs to average loans Allowance for loan losses to total loans Allowance for loan losses to non-performing loans Non-performing loans to total loans $ $ $ 2.65 2.61 1.045 39.43% 0.98% 10.07% 3.18% 9.01% 13.57% 15.41% 0.24% 1.21% 62% 1.95% $ $ $ 3.19 3.12 $ $ 2.63 2.57 $ $ 2.36 2.30 $ $ 2.26 2.20 1.040 32.60% $ 1.020 $ 0.955 $ 0.905 38.78% 40.47% 40.04% 0.98% 11.65% 3.40% 10.35% 15.34% 17.14% 0.13% 1.17% 85% 1.37% 0.83% 11.87% 3.13% 6.61% 9.95% 11.60% 0.21% 0.86% 124% 0.70% 0.85% 11.40% 2.91% 7.10% 10.76% 11.59% 0.04% 0.82% 230% 0.36% 0.87% 11.95% 2.98% 7.34% 10.82% 11.65% 0.05% 0.82% 721% 0.11% Refer to the Bar Harbor Bankshares 2010 Annual Report on Form 10-K for a complete set of consolidated audited financial statements. 10 2010 Summary Annual Report Consolidated Balance Sheets (In thousands, except share and per share data) Assets Cash and cash equivalents Securities available for sale, at fair value Federal Home Loan Bank stock Loans Allowance for loan losses Loans, net of allowance for loan losses Premises and equipment, net Goodwill Bank owned life insurance Other assets TOTAL ASSETS Liabilities Deposits: Demand and other non-interest bearing deposits NOW accounts Savings and money market deposits Time deposits Total deposits Short-term borrowings Long-term advances from Federal Home Loan Bank Junior subordinated debentures Other liabilities TOTAL LIABILITIES Shareholders’ equity Capital stock, par value $2.00; authorized 10,000,000 shares; issued 4,525,635 shares at December 31, 2010 and 4,443,614 shares at December 31, 2009 Preferred stock, par value $0; authorized 1,000,000 shares; issued 18,751 shares at December 31, 2009 Surplus Retained earnings Accumulated other comprehensive income: Prior service cost and unamortized net actuarial losses on employee benefit plans, net of tax of ($29) and ($56), at December 31, 2010 and December 31, 2009, respectively Net unrealized appreciation on securities available for sale, net of tax of $445 and $1,074, at December 31, 2010 and December 31, 2009, respectively Portion of OTTI attributable to non-credit losses, net of tax of $270 and $931, at December 31, 2010 and 2009, respectively Net unrealized appreciation on derivative instruments, net of tax of $0 and $209 at December 31, 2010 and December 31, 2009, respectively Total accumulated other comprehensive income Less: cost of 702,690 and 752,431 shares of treasury stock at December 31, 2010 and December 31, 2009, respectively TOTAL SHAREHOLDERS’ EQUITY TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY Refer to the Bar Harbor Bankshares 2010 Annual Report on Form 10-K for a complete set of consolidated audited financial statements. 11 As of December 31st 2010 2009 $ 12,815 357,882 16,068 700,670 (8,500) 692,170 13,505 3,158 7,112 15,223 $ 9,832 347,026 16,068 669,492 (7,814) 661,678 11,927 3,158 6,846 15,846 $ 1,117,933 $ 1,072,381 $ $ 60,350 82,656 211,748 353,574 708,328 119,880 175,134 5,000 5,983 1,014,325 9,051 — 26,165 80,379 (56) 865 (525) — 284 57,743 74,538 171,791 337,101 641,173 91,893 214,736 5,000 6,065 958,867 8,887 18,358 24,360 75,001 (109) 2,084 (1,808) 406 573 (12,271) 103,608 (13,665) 113,514 $ 1,117,933 $ 1,072,381 Bar Harbor Bankshares Consolidated Statements of Income (In thousands, except share and per share data) Interest and dividend income: Interest and fees on loans Interest on securities Dividends on FHLB stock Total interest and dividend income Interest expense: Deposits Short-term borrowings Long-term debt Total interest expense Net interest income Provision for loan losses Net interest income after provision for loan losses Non-interest income: Trust and other financial services Service charges on deposit accounts Mortgage banking activities Credit and debit card service charges and fees Net securities gains (losses) Total other-than-temporary impairment (“OTTI”) losses Non-credit portion of OTTI losses (before taxes) (1) Net OTTI losses recognized in earnings Other operating income Total non-interest income Non-interest expense: Salaries and employee benefits Occupancy expense Furniture and equipment expense Credit and debit card expenses FDIC insurance assessments Other operating expense Total non-interest expenses Income before income taxes Income taxes Net income Preferred stock dividends and accretion of discount For the Years Ended December 31st 2010 2009 2008 $ 34,867 16,274 — 51,141 9,906 284 9,242 19,432 31,709 2,327 29,382 2,984 1,359 115 1,160 2,127 (898) — (898) 611 7,458 12,193 1,357 1,602 295 1,066 5,533 22,046 14,794 4,132 $ 34,797 19,570 — 54,367 10,724 602 9,760 21,086 33,281 3,207 30,074 2,444 1,412 490 1,004 1,521 (2,773) 1,319 (1,454) 605 6,022 11,594 1,329 1,378 332 1,420 5,701 21,754 14,342 3,992 $ 37,653 15,415 526 53,594 14,976 1,421 10,006 26,403 27,191 1,995 25,196 2,513 1,594 15 2,044 (831) — — — 1,097 6,432 10,827 1,387 1,539 1,416 134 5,210 20,513 11,115 3,384 $ 10,662 $ 10,350 $ 7,731 653 1,034 — Net income available to common shareholders $ 10,009 $ 9,316 $ 7,731 Computation of Earnings Per Share: Weighted average number of capital stock shares outstanding Basic Effect of dilutive employee stock options Effect of dilutive warrants Diluted Per Common Share Data: Basic Earnings Per Share Diluted Earnings Per Share Cash Dividends per share 3,782,881 45,821 — 3,828,702 2,916,643 57,182 9,604 2,943,694 63,555 — 2,983,429 3,007,249 $ $ $ 2.65 2.61 1.045 $ $ $ 3.19 3.12 1.040 $ $ $ 2.63 2.57 1.020 (1)Included in other comprehensive income, net of tax. Refer to the Bar Harbor Bankshares 2010 Annual Report on Form 10-K for a complete set of consolidated audited financial statements. 12 2010 Summary Annual Report 2010 Financial Overview BUSINESS STRATEGY As a diversified financial services provider, Bar Harbor Bankshares pursues a strategy of achieving long-term sustainable growth, profitability, and shareholder value, without sacrificing its soundness. The Company works toward achieving this goal by focusing on increasing its loan and deposit market share in the coastal communities of Maine. The Company believes one of its more unique strengths is an understanding of the financial needs of coastal communities and the businesses vital to Maine’s coastal economy, namely: tourism, hospitality, retail estab- lishments, restaurants, seasonal lodging and campgrounds, fishing, lobstering, boat building, and marine services. 2000 2500 3000 3500 1500 0 500 1000 Operating under a community banking philosophy, the Company’s key strategic focus is vigorous financial stew- ardship, deploying investor capital safely yet efficiently for the best possible returns. The Company strives to pro- vide unmatched service to its customers, while maintain- ing strong asset quality and a focus toward improving operating efficiencies. In managing its earning asset port- folios, the Company seeks to utilize funding and capital resources within well-defined credit, investment, interest- rate and liquidity guidelines. In managing its balance sheet the Company seeks to preserve the sensitivity of net interest income to changes in interest rates, and to enhance profitability through strategies that promise suffi- cient reward for understood and controlled risk. The Company is deliberate in its efforts to maintain adequate liquidity under prevailing and expected conditions, and strives to maintain a balanced and appropriate mix of loans, securities, core deposits, and borrowed funds. 100 200 300 400 500 600 700 800 0 FINANCIAL CONDITION Assets: The Company’s total assets increased $45.6 mil- lion or 4.2% during 2010, ending the year at $1.1 billion. This increase was principally attributed to the growth of the Bank’s commercial and consumer loan portfolios. 16 12 Loans: Consumer loans comprised 41.4% of the Bank’s total loan portfolio at December 31, 2010 and principally consisted of residential real estate mortgage loans and home equity loans. The Bank also serves the small 8 business market throughout downeast and midcoast Maine. It offers business loans to individuals, partner- ships, corporations, and other business entities for capital construction, real estate purchases, working capital, real estate development, and a broad range of other business purposes. At December 31, 2010, commercial business loans represented 56.7% of the Bank’s total loan portfolio. 1,200 1,000 800 600 400 200 0 $1,118 6 0 0 2 7 0 0 2 8 0 0 2 9 0 0 2 0 1 0 2 Assets ($ in millions) 800 600 400 200 0 $701 0.24% 3,500 $2,327 6 0 0 2 7 0 0 2 8 0 0 2 9 0 0 2 0 1 0 2 Loans ($ in millions) 1.95% 2.0 1.5 $8,500 10,000 Total loans ended the year at $700.7 million, representing an increase of $31.2 million, or 4.7%, compared with 8,000 December 31, 2009. Loan growth was led by commercial loans, which ended the year at $397.6 million, represent- 6,000 ing an increase of $28.3 million or 7.7% compared with year-end 2009. Commercial loan growth has been 4,000 generally challenged by a weak economy, declining loan demand and vigorous competition for quality loans. Bank 2,000 management attributes the overall growth in commercial loans to an effective business banking team, deep local market knowledge, sustained new business development efforts, and a resilient local economy that is faring better than the nation as a whole. Non-Performing Loans to Total Loans 8 0 0 2 9 0 0 2 6 0 0 2 7 0 0 2 0 1 0 2 8 0 0 2 9 0 0 2 6 0 0 2 7 0 0 2 0 1 0 2 1.0 0.5 0 0 Allowance for Loan Losses ($ in thousands) 12,000 10,000 4.00 $10,009 Total consumer loans ended the year at $290.1 million, representing an increase of $4.8 million or 1.7% com- pared with year-end 2009. This increase was principally attributed to residential real estate mortgage loans, which 3.00 8,000 were up $5.7 million or 2.5%. Residential mortgage loan origination activity slowed during 2010 largely reflecting 6,000 current economic conditions and uncertainties with $2.61 2.00 4 0 80 60 40 20 0 1.00 6 0 0 2 7 0 0 2 8 0 0 2 9 0 0 2 0 1 0 2 6 0 0 2 7 0 0 2 8 0 0 2 9 0 0 2 0 1 0 2 0 Net Income Available to Common Shareholders ($ in thousands) Diluted Earnings per Share $31,709 8,000 6,000 4,000 2,000 4,000 2,000 0 13 40,000 35,000 30,000 25,000 20,000 15,000 10,000 5,000 0 $7,458 $22,046 55.5% 6 0 0 2 7 0 0 2 8 0 0 2 9 0 0 2 0 1 0 2 6 0 0 2 7 0 0 2 8 0 0 2 9 0 0 2 0 1 0 2 0 Net Interest Income ($ in thousands) Non-Interest Income ($ in thousands) 6 0 0 2 7 0 0 2 8 0 0 2 9 0 0 2 0 1 0 2 0 6 0 0 2 7 0 0 2 8 0 0 2 9 0 0 2 0 1 0 2 Non-Interest Expense Efficiency Ratio ($ in thousands) 0.25 0.20 0.15 0.10 0.05 0 400 300 200 100 0 120 100 80 60 40 20 0 25,000 20,000 15,000 10,000 5,000 6 0 0 2 7 0 0 2 8 0 0 2 9 0 0 2 0 1 0 2 6 0 0 2 7 0 0 2 8 0 0 2 9 0 0 2 0 1 0 2 Net Charge-Offs to Average Loans Provision for Loan Losses ($ in thousands) $358 $708 6 0 0 2 7 0 0 2 8 0 0 2 9 0 0 2 0 1 0 2 6 0 0 2 7 0 0 2 8 0 0 2 9 0 0 2 0 1 0 2 Securities ($ in millions) Deposits ($ in millions) $106 10.07% 6 0 0 2 7 0 0 2 8 0 0 2 9 0 0 2 0 1 0 2 6 0 0 2 7 0 0 2 8 0 0 2 9 0 0 2 0 1 0 2 Average Shareholder Equity ($ in thousands) Return on Average Equity 3,000 2,500 2,000 1,500 1,000 500 0 800 700 600 500 400 300 200 100 0 16 12 8 4 0 80 60 40 20 0 1200 1000 800 600 400 200 0 10000 8000 6000 4000 2000 0 12000 10000 8000 6000 4000 2000 0 40000 35000 30000 25000 20000 15000 10000 5000 0 800 600 400 200 0 2.0 1.5 1.0 0.5 0.0 4 3 2 1 0 8000 6000 4000 2000 0 0.25 0.20 0.15 0.10 0.05 0.00 400 300 200 100 0 120 100 80 60 40 20 0 25000 20000 15000 10000 5000 0 800 600 400 200 0 2.0 1.5 1.0 0.5 0.0 4 3 2 1 0 1200 1000 800 600 400 200 0 10000 8000 6000 4000 2000 0 12000 10000 8000 6000 4000 2000 0 15000 10000 5000 0 $1,118 $701 40000 8000 6 0 0 2 35000 7 0 0 2 8 0 0 2 30000 9 0 0 2 0 1 0 2 6 0 0 2 7 0 0 2 8 0 0 2 6000 9 0 0 2 0 1 0 2 0 Assets 25000 ($ in millions) 20000 Loans ($ in millions) 4000 $8,500 1.95% 2000 0 6 0 0 2 7 0 0 2 8 0 0 2 9 0 0 2 0 1 0 2 0 6 0 0 2 7 0 0 2 8 0 0 2 9 0 0 2 0 1 0 2 Non-Performing Loans to Total Loans Allowance for Loan Losses ($ in thousands) $10,009 $2.61 800 600 400 200 2.0 1.5 1.0 0.5 0 4.00 3.00 2.00 1.00 1,200 1,000 800 600 400 200 0 10,000 8,000 6,000 4,000 2,000 12,000 10,000 8,000 6,000 4,000 2,000 0 40,000 35,000 30,000 25,000 20,000 15,000 10,000 5,000 0 1200 1000 800 600 400 200 0 10000 8000 6000 4000 2000 0 12000 10000 8000 6000 4000 2000 0 40000 35000 30000 25000 20000 15000 10000 5000 0 800 600 400 200 0 2.0 1.5 1.0 0.5 0.0 4 3 2 1 0 8000 6000 4000 2000 0 0.25 0.20 0.15 0.10 0.05 0.00 400 300 200 100 0 120 100 80 60 40 20 0 25000 20000 15000 10000 5000 0 3500 3000 2500 2000 1500 1000 500 0 800 700 600 500 400 300 200 100 0 16 12 8 4 0 80 60 40 20 0 0.25 0.20 0.15 0.10 0.05 0.00 400 300 200 100 0 120 100 80 60 40 20 0 25000 20000 15000 10000 5000 0 3500 3000 2500 2000 1500 1000 500 0 1,200 1,000 800 600 400 200 0 Bar Harbor Bankshares $1,118 $701 0.24% 3,500 $2,327 800 600 400 200 0 2.0 1.5 1.0 0.5 0 6 0 0 2 7 0 0 2 8 0 0 2 9 0 0 2 0 1 0 2 Loans ($ in millions) 1.95% 6 0 0 2 7 0 0 2 8 0 0 2 9 0 0 2 0 1 0 2 6 0 0 2 7 0 0 2 8 0 0 2 9 0 0 2 0 1 0 2 Net Charge-Offs to Average Loans Provision for Loan Losses ($ in thousands) $358 $708 6 0 0 2 7 0 0 2 8 0 0 2 9 0 0 2 0 1 0 2 Non-Performing Loans to Total Loans 6 0 0 2 7 0 0 2 8 0 0 2 9 0 0 2 0 1 0 2 6 0 0 2 7 0 0 2 8 0 0 2 9 0 0 2 0 1 0 2 Securities ($ in millions) Deposits ($ in millions) 6 0 0 2 7 0 0 2 8 0 0 2 9 0 0 2 0 1 0 2 Assets ($ in millions) $8,500 10,000 8,000 6,000 4,000 2,000 6 0 0 2 7 0 0 2 8 0 0 2 9 0 0 2 0 1 0 2 0 Allowance for Loan Losses ($ in thousands) 800 700 respect to further real estate market declines in the com- munities served by the Bank, and to a lesser extent the expiration of the first-time home buyers tax credit. Resi- dential mortgage loan refinancing activity continued at a brisk pace in 2010, which was principally attributed to historically low interest rates. 500 600 400 300 200 100 Credit Quality: At December 31, 2010, the Bank’s total non-performing loans amounted to $13.7 million, up from $9.2 million at December 31, 2009. One commercial real estate development loan to a local, non-profit housing authority in support of an affordable housing project accounted for $5.2 million, or 38.0%, of total year-end 2010 non-performing loans and more than accounted for the year-over-year increase. 0 16 The Bank’s 2010 loan loss experience exceeded historical norms. Total net loan charge-offs amounted to $1.6 million in 2010, up from $839 thousand in 2009. Total 2010 net loan charge-offs expressed as a percentage of average loans outstanding amounted to 0.24%, up from 0.13% in 2009. 12 8 4 0.24% 3,500 0.25 0.20 0.15 0.10 0.05 0 80 6 0 0 2 7 0 0 2 8 0 0 2 9 0 0 2 60 0 1 0 2 0 Net Charge-Offs to Average Loans 40 3,000 2,500 2,000 1,500 1,000 500 0 $2,327 6 0 0 2 7 0 0 2 8 0 0 2 9 0 0 2 0 1 0 2 Provision for Loan Losses ($ in thousands) 0 20 800 700 600 500 $358 $708 400 For the year ended December 31, 2010, the Bank recorded a provision for loan losses (the “provision”) of $2.3 million, 300 representing a decline of $880 thousand or 27.4% compared with 2009. Despite the year-over-year decline in the provision, the amounts recorded during 2010 were 200 higher than historical experience, largely reflecting a con- tinuance in the overall level of credit deterioration, and 100 elevated levels of net loan charge-offs and non-perform- ing loans. These factors were partially mitigated by stabi- lizing economic conditions and real estate values, and slowing loan portfolio growth. 8 0 0 2 9 0 0 2 6 0 0 2 7 0 0 2 0 1 0 2 8 0 0 2 9 0 0 2 6 0 0 2 7 0 0 2 0 1 0 2 400 100 200 300 0 0 Securities ($ in millions) Deposits ($ in millions) 3.00 4.00 2.00 8,000 6,000 4,000 $10,009 12,000 The Bank maintains an allowance for loan losses (the 10,000 “allowance”) which is available to absorb probable losses on loans. The allowance is maintained at a level that, in $2.61 management’s judgment, is appropriate for the amount of risk inherent in the current loan portfolio and adequate to provide for estimated probable losses. At December 31, 2010, the allowance stood at $8.5 million, representing an increase of $686 thousand or 8.8% compared with December 31, 2009. The allowance expressed as a per- centage of total loans stood at 1.21% at year end, up from 1.17% at December 31, 2009. The increase in the allowance principally reflected pockets of credit deteriora- tion in the Bank’s loan portfolio, including elevated levels of non-performing and potential problem loans. Net Income Available to Common Shareholders ($ in thousands) Diluted Earnings per Share 2,000 1.00 8 0 0 2 9 0 0 2 6 0 0 2 7 0 0 2 0 1 0 2 8 0 0 2 9 0 0 2 6 0 0 2 7 0 0 2 0 1 0 2 0 0 4,000 6,000 8,000 $7,458 $31,709 40,000 Investment Securities: During 2010 the securities portfolio continued to serve as a key source of earning assets and 35,000 liquidity for the Bank. Total securities ended the year at 30,000 $357.9 million, representing an increase of $10.9 million, 25,000 or 3.1%, compared with December 31, 2009. Company 20,000 management has been cautious about leveraging the securities portfolio in consideration of historically low 15,000 market yields and the corresponding interest rate risk 10,000 should interest rates begin to rise. While this action inhib- ited the growth of the Bank’s net interest income in the near-term, Company management believes the long-term risks outweigh the short-term rewards. Securities purchased Non-Interest Income ($ in thousands) during 2010 principally consisted of mortgage-backed securities issued and guaranteed by U.S. Govern ment agencies and sponsored-enterprises. Net Interest Income ($ in thousands) 2,000 5,000 8 0 0 2 9 0 0 2 6 0 0 2 7 0 0 2 0 1 0 2 8 0 0 2 9 0 0 2 6 0 0 2 7 0 0 2 0 1 0 2 0 0 0.25 0.20 0.15 0.10 0.05 0 400 300 200 100 0 120 100 80 60 40 20 0 25,000 20,000 15,000 10,000 5,000 3,000 2,500 2,000 1,500 1,000 500 0 800 700 600 500 400 300 200 100 0 16 12 8 4 0 80 60 40 20 0 $106 10.07% 6 0 0 2 7 0 0 2 8 0 0 2 9 0 0 2 0 1 0 2 6 0 0 2 7 0 0 2 8 0 0 2 9 0 0 2 0 1 0 2 Average Shareholder Equity ($ in thousands) Return on Average Equity $22,046 55.5% 6 0 0 2 7 0 0 2 8 0 0 2 9 0 0 2 0 1 0 2 0 6 0 0 2 7 0 0 2 8 0 0 2 9 0 0 2 0 1 0 2 Non-Interest Expense Efficiency Ratio ($ in thousands) 14 10.07% 120 100 80 60 40 20 0 25,000 20,000 15,000 10,000 5,000 $106 16 12 8 4 0 80 60 40 20 0 6 0 0 2 7 0 0 2 8 0 0 2 9 0 0 2 0 1 0 2 6 0 0 2 7 0 0 2 8 0 0 2 9 0 0 2 0 1 0 2 0 Net Income Available Diluted Earnings to Common Shareholders per Share ($ in thousands) 6 0 0 2 7 0 0 2 8 0 0 2 9 0 0 2 0 1 0 2 6 0 0 2 7 0 0 2 8 0 0 2 9 0 0 2 0 1 0 2 Average Shareholder Equity ($ in thousands) Return on Average Equity $7,458 $22,046 55.5% $31,709 8,000 6,000 4,000 2,000 6 0 0 2 7 0 0 2 8 0 0 2 9 0 0 2 0 1 0 2 6 0 0 2 7 0 0 2 8 0 0 2 9 0 0 2 0 1 0 2 0 Net Interest Income ($ in thousands) Non-Interest Income ($ in thousands) 6 0 0 2 7 0 0 2 8 0 0 2 9 0 0 2 0 1 0 2 0 6 0 0 2 7 0 0 2 8 0 0 2 9 0 0 2 0 1 0 2 Non-Interest Expense Efficiency Ratio ($ in thousands) $1,118 $701 0.24% 3,500 1200 1000 800 600 400 200 0 10000 8000 6000 4000 2000 0 12000 10000 8000 6000 4000 2000 0 40000 35000 30000 25000 20000 15000 10000 5000 0 800 600 400 200 0 2.0 1.5 1.0 0.5 0.0 4 3 2 1 0 8000 6000 4000 2000 0 0.25 0.20 0.15 0.10 0.05 0.00 400 300 200 100 0 120 100 80 60 40 20 0 25000 20000 15000 10000 5000 0 3500 3000 2500 2000 1500 1000 500 0 800 700 600 500 400 300 200 100 0 16 12 8 4 0 80 60 40 20 0 1,200 1,000 800 600 400 200 0 10,000 8,000 6,000 4,000 2,000 12,000 10,000 8,000 6,000 4,000 2,000 0 40,000 35,000 30,000 25,000 20,000 15,000 10,000 5,000 0 800 600 400 200 0 2.0 1.5 1.0 0.5 0 4.00 3.00 2.00 1.00 6 0 0 2 7 0 0 2 8 0 0 2 9 0 0 2 0 1 0 2 6 0 0 2 7 0 0 2 8 0 0 2 9 0 0 2 0 1 0 2 Assets 1200 ($ in millions) Loans 800 ($ in millions) $8,500 1.95% 6 0 0 2 7 0 0 2 8 0 0 2 9 0 0 2 0 1 0 2 0 6 0 0 2 7 0 0 2 8 0 0 2 9 0 0 2 0 1 0 2 Non-Performing 2.0 Loans to Total Loans Allowance for 10000 Loan Losses ($ in thousands) 8000 6000 $10,009 $2.61 6 0 0 2 7 0 0 2 8 0 0 2 9 0 0 2 0 1 0 2 6 0 0 2 7 0 0 2 8 0 0 2 9 0 0 2 0 1 0 2 0 Net Income Available 12000 Diluted Earnings 4 to Common Shareholders per Share ($ in thousands) 10000 $7,458 $31,709 8,000 6,000 4,000 2,000 6 0 0 2 7 0 0 2 8 0 0 2 9 0 0 2 0 1 0 2 6 0 0 2 7 0 0 2 8 0 0 2 9 0 0 2 0 1 0 2 0 Net Interest Income 40000 ($ in thousands) Non-Interest Income 8000 ($ in thousands) 1000 800 600 400 200 0 4000 2000 0 8000 6000 4000 2000 0 35000 30000 25000 20000 15000 10000 5000 0 600 400 200 0 1.5 1.0 0.5 0.0 3 2 1 0 6000 4000 2000 0 0.25 0.20 0.15 0.10 0.05 0.00 400 300 200 100 0 120 100 80 60 40 20 0 25000 20000 15000 10000 5000 0 $2,327 6 0 0 2 7 0 0 2 8 0 0 2 9 0 0 2 0 1 0 2 2010 Summary Annual Report 0.25 0.20 0.15 0.10 0.05 0 400 300 200 100 0 6 0 0 2 7 0 0 2 8 0 0 2 9 0 0 2 0 1 0 2 3500 Net Charge-Offs to Average Loans $358 3000 2500 2000 1500 1000 500 0 6 0 0 2 7 0 0 2 8 0 0 2 9 0 0 2 0 1 0 2 Securities ($ in millions) 800 700 3,000 2,500 2,000 1,500 1,000 500 0 800 700 600 500 400 300 200 100 0 Provision for Loan Losses ($ in thousands) $708 6 0 0 2 7 0 0 2 8 0 0 2 9 0 0 2 0 1 0 2 Deposits ($ in millions) 600 16 120 Deposits: During 2010, the most significant funding source for the Bank’s earning assets continued to be retail 100 deposits, gathered through its network of twelve banking offices throughout downeast and midcoast Maine. $106 12 400 500 10.07% 80 300 0 200 100 8 4 0 60 40 20 0 1 0 2 7 0 0 2 6 0 0 2 9 0 0 2 8 0 0 2 Total deposits ended the year at $708.3 million, repre- senting an increase of $67.2 million, or 10.5%, compared with December 31, 2009. All categories of deposits posted meaningful increases in 2010. The Bank’s deposit growth was principally attributed to savings and money market accounts which ended the year at $211.7 million, representing an increase of $40.0 million, or 23.3%. The Bank’s NOW accounts were up $8.1 million or 10.9% in 2010, while demand deposits increased $2.6 million, or 4.5%. The Bank’s total time deposits, which include certificates of deposit obtained from the national market, ended the year at $353.6 million, representing an increase of $16.5 million, or 4.9%, compared with year-end 2009. Average Shareholder Equity ($ in thousands) Return on Average Equity $22,046 8 0 0 2 9 0 0 2 6 0 0 2 7 0 0 2 0 1 0 2 80 0 12 16 8 25,000 20,000 60 55.5% 15,000 Borrowings: Borrowed funds principally consist of advances from the Federal Home Loan Bank of Boston. The Bank utilizes borrowed funds in leveraging its strong capital position and supporting its earning asset portfolios. 40 4 0 10,000 20 80 0 0 0 1 0 2 7 0 0 2 6 0 0 2 9 0 0 2 0 1 0 2 7 0 0 2 6 0 0 2 9 0 0 2 8 0 0 2 8 0 0 2 Total borrowings ended the year at $300.0 million, down 5,000 $11.6 million, or 3.7%, compared with December 31, 2009. The decline in borrowings was principally attributed to strong retail deposit growth. Non-Interest Expense ($ in thousands) Capital: Consistent with its long-term strategy of operat- ing a sound and profitable organization, at December 31, 2010, the Company and the Bank continued to exceed regulatory requirements for “well-capitalized” financial institutions. Company management considers this to be vital in promoting depositor and investor confidence and providing a solid foundation for future growth. Under the Efficiency Ratio 40 60 1,200 1,000 $1,118 800 $701 600 800 600 capital adequacy guidelines administered by the Bank’s principal regulators, “well-capitalized” institutions are those with Tier I leverage, Tier I Risk-based, and Total Risk-based ratios of at least 5%, 6% and 10%, respec- tively. At December 31, 2010, the Company’s Tier I Lever- age, Tier I Risk-based, and Total Risk-based capital ratios were 9.01%, 13.57% and 15.41%, respectively. 200 400 200 400 6 0 0 2 7 0 0 2 8 0 0 2 9 0 0 2 0 1 0 2 0 6 0 0 2 7 0 0 2 8 0 0 2 9 0 0 2 0 1 0 2 0 At December 31, 2010, the Company’s tangible common equity ratio stood at 9.01%, up from 8.60% at December 31, 2009. Assets ($ in millions) Loans ($ in millions) 10,000 Shareholder Dividends: The Company paid regular cash dividends of $1.045 per share of common stock in 2010, compared with $1.040 in 2009. $8,500 1.95% 2.0 8,000 1.5 1.0 RESULTS OF OPERATIONS 6,000 2,000 4,000 Earnings and Earnings Per Share: For the year ended December 31, 2010, the Company reported record net income available to common shareholders of $10.0 mil- lion, compared with $9.3 million for the year ended December 31, 2009, representing an increase of $693 thousand or 7.4%. The Company’s diluted earnings per Non-Performing share amounted to $2.61 for 2010 compared with $3.12 Loans to Total Loans in 2009, representing a decline of $0.51, or 16.3%. 8 0 0 2 9 0 0 2 6 0 0 2 7 0 0 2 0 1 0 2 8 0 0 2 9 0 0 2 6 0 0 2 7 0 0 2 0 1 0 2 0.5 0 0 Allowance for Loan Losses ($ in thousands) 12,000 10,000 8,000 6,000 4,000 2,000 0 $10,009 4.00 3.00 2.00 1.00 $2.61 10.07% 6 0 0 2 7 0 0 2 8 0 0 2 9 0 0 2 0 1 0 2 6 0 0 2 7 0 0 2 8 0 0 2 9 0 0 2 0 1 0 2 0 Net Income Available to Common Shareholders ($ in thousands) Diluted Earnings per Share 8,000 35,000 30,000 40,000 $7,458 $31,709 The decline in 2010 diluted earnings per share largely reflected the Company’s previously reported issuance of 882,021 shares of its common stock in the fourth quarter of 2009 and the first quarter of 2010, the proceeds from which were primarily used to repurchase all of the shares of Preferred Stock sold to the U.S. Department of the Treasury (the “Treasury”) in the first quarter of 2009 as 25,000 20,000 4,000 6,000 15,000 0.25 0.20 0.15 0.10 0.05 0 400 300 200 100 0 120 100 80 60 40 20 0 25,000 20,000 15,000 10,000 5,000 0.24% 3,500 $2,327 6 0 0 2 7 0 0 2 8 0 0 2 9 0 0 2 0 1 0 2 6 0 0 2 7 0 0 2 8 0 0 2 9 0 0 2 0 1 0 2 Net Charge-Offs to Average Loans Provision for Loan Losses ($ in thousands) $358 $708 6 0 0 2 7 0 0 2 8 0 0 2 9 0 0 2 0 1 0 2 6 0 0 2 7 0 0 2 8 0 0 2 9 0 0 2 0 1 0 2 Securities ($ in millions) Deposits ($ in millions) $106 6 0 0 2 7 0 0 2 8 0 0 2 9 0 0 2 0 1 0 2 6 0 0 2 7 0 0 2 8 0 0 2 9 0 0 2 0 1 0 2 Average Shareholder Equity ($ in thousands) Return on Average Equity $22,046 55.5% 3,000 2,500 2,000 1,500 1,000 500 0 800 700 600 500 400 300 200 100 0 16 12 8 4 0 80 60 40 20 0 20 0 10,000 5,000 0 2,000 6 0 0 2 7 0 0 2 8 0 0 2 9 0 0 2 0 1 0 2 6 0 0 2 7 0 0 2 8 0 0 2 9 0 0 2 0 1 0 2 0 15 Net Interest Income ($ in thousands) Non-Interest Income ($ in thousands) 6 0 0 2 7 0 0 2 8 0 0 2 9 0 0 2 0 1 0 2 0 6 0 0 2 7 0 0 2 8 0 0 2 9 0 0 2 0 1 0 2 Non-Interest Expense Efficiency Ratio ($ in thousands) 1200 1000 800 600 400 200 0 10000 8000 6000 4000 2000 0 12000 10000 8000 6000 4000 2000 0 40000 35000 30000 25000 20000 15000 10000 5000 0 800 600 400 200 0 2.0 1.5 1.0 0.5 0.0 4 3 2 1 0 8000 6000 4000 2000 0 0.25 0.20 0.15 0.10 0.05 0.00 400 300 200 100 0 120 100 80 60 40 20 0 25000 20000 15000 10000 5000 0 3500 3000 2500 2000 1500 1000 500 0 800 700 600 500 400 300 200 100 0 16 12 8 4 0 80 60 40 20 0 0.25 0.20 0.15 0.10 0.05 0.00 400 300 200 100 0 120 100 80 60 40 20 0 25000 20000 15000 10000 5000 0 800 600 400 200 0 2.0 1.5 4 3 1 0 8000 6000 8 0 0 2 4000 800 600 400 200 0 2.0 1.5 1.0 0.5 0 4.00 3.00 2.00 1.00 1200 1000 800 600 400 200 0 10000 8000 6000 12000 10000 8000 40000 35000 30000 5000 0 1,200 1,000 800 600 400 200 0 8,000 6,000 4,000 2,000 10,000 8,000 6,000 4,000 2,000 40,000 35,000 30,000 25,000 20,000 15,000 10,000 5,000 0 6 0 0 2 7 0 0 2 4000 8 0 0 2 9 0 0 2 0 1 0 2 6 0 0 2 7 1.0 0 0 2 8 0 0 2 9 0 0 2 0 1 0 2 Assets ($ in millions) 2000 Loans 0.5 ($ in millions) 10,000 0 0.0 1.95% $8,500 6 0 0 2 6000 7 0 0 2 8 0 0 2 9 0 0 2 0 1 0 2 0 6 0 0 2 7 0 0 2 8 0 2 0 2 9 0 0 2 0 1 0 2 Non-Performing Loans to Total Loans 4000 Allowance for Loan Losses 2000 ($ in thousands) 12,000 0 $10,009 $2.61 6 0 0 2 25000 7 0 0 2 8 0 0 2 20000 0 9 0 0 2 0 1 0 2 6 0 0 2 7 0 0 2 0 9 0 0 2 0 1 0 2 Net Income Available 15000 to Common Shareholders 10000 ($ in thousands) Diluted Earnings per Share 2000 0 $7,458 $31,709 8,000 6,000 4,000 2,000 6 0 0 2 7 0 0 2 8 0 0 2 9 0 0 2 0 1 0 2 6 0 0 2 7 0 0 2 8 0 0 2 9 0 0 2 0 1 0 2 0 Net Interest Income ($ in thousands) Non-Interest Income ($ in thousands) $1,118 $701 0.24% 3,500 $2,327 $1,118 $701 0.24% 3,500 6 0 0 2 7 0 0 2 8 0 0 2 9 0 0 2 0 1 0 2 6 0 0 2 7 0 0 2 8 0 0 2 9 0 0 2 0 1 0 2 6 0 0 2 7 0 0 2 8 0 0 2 9 0 0 2 0 1 0 2 6 0 0 2 7 0 0 2 8 0 0 2 9 0 0 2 0 1 0 2 $2,327 Assets ($ in millions) Loans ($ in millions) $8,500 1.95% Net Charge-Offs to Average Loans Provision for Loan Losses ($ in thousands) $358 $708 3500 3000 2500 2000 1500 1000 500 0 800 700 600 500 0.25 0.20 0.15 0.10 0.05 6 0 0 2 7 0 0 2 400 8 0 0 2 300 0 9 0 0 2 0 1 0 2 Net Charge-Offs to Average Loans 200 100 0 $358 400 300 3,000 2,500 2,000 1,500 1,000 500 0 800 700 600 1,200 1,000 800 600 400 200 0 10,000 8,000 6,000 4,000 6 0 0 2 7 0 0 2 8 0 0 2 9 0 0 2 0 1 0 2 Provision for Loan Losses ($ in thousands) Bar Harbor Bankshares 2,000 6 0 0 2 7 0 0 2 8 0 0 2 9 0 0 2 0 1 0 2 0 800 600 400 200 0 2.0 1.5 1.0 0.5 0 $708 6 0 0 2 7 0 0 2 8 0 0 2 9 0 0 2 0 1 0 2 Non-Performing Loans to Total Loans 6 0 0 2 7 0 0 2 8 0 0 2 9 0 0 2 0 1 0 2 6 0 0 2 7 0 0 2 8 0 0 2 9 0 0 2 0 1 0 2 Securities ($ in millions) Deposits ($ in millions) 0.25 0.20 0.15 0.10 0.05 0 400 300 200 100 0 120 100 80 60 40 20 0 25,000 20,000 15,000 10,000 5,000 3,000 2,500 2,000 1,500 1,000 500 0 800 700 600 500 400 300 200 100 0 16 12 8 4 0 80 60 40 20 0 $106 10.07% 6 0 0 2 7 0 0 2 8 0 0 2 9 0 0 2 0 1 0 2 6 0 0 2 7 0 0 2 8 0 0 2 9 0 0 2 0 1 0 2 Average Shareholder Equity ($ in thousands) Return on Average Equity $22,046 55.5% part of the Capital Purchase Program established by the Treasury under the Emergency Economic Stabilization Act of 2008. 400 500 200 16 300 12 100 200 Return on Average Equity: The Company’s total average shareholders’ equity amounted to $105.9 million in 2010, representing an increase of $17.1 million, or 19.2%, compared with 2009. The Company’s return on average shareholders’ equity amounted to 10.07% in 2010, com- pared with 11.65% in 2009. 9 0 0 2 6 0 0 2 7 0 0 2 0 1 0 2 8 0 0 2 9 0 0 2 6 0 0 2 7 0 0 2 0 1 0 2 8 0 0 2 100 0 0 8 Deposits ($ in millions) Securities ($ in millions) 4 16 12 8 4 0 120 100 80 60 40 20 0 $106 0 80 60 6 0 0 2 7 0 0 2 8 0 0 2 9 0 0 2 40 0 1 0 2 Average Shareholder Equity ($ in thousands) 20 10.07% 6 0 0 2 7 0 0 2 8 0 0 2 9 0 0 2 0 1 0 2 Return on Average Equity 0 80 $22,046 Net Interest Income: Net interest income is the principal 25,000 component of the Company’s income stream and repre- sents the difference or spread between interest generated 20,000 from earning assets and the interest expense paid on deposits and borrowed funds. Fluctuations in market inter- 15,000 est rates, as well as volume and mix changes in earning assets and interest bearing liabilities, can materially 10,000 impact net interest income. 55.5% 40 60 20 0 0 0 1 0 2 7 0 0 2 9 0 0 2 8 0 0 2 6 0 0 2 0 1 0 2 7 0 0 2 6 0 0 2 9 0 0 2 8 0 0 2 Efficiency Ratio Non-Interest Expense ($ in thousands) 5,000 For the year ended December 31, 2010, net interest income on a tax-equivalent basis amounted to $33.3 mil- lion, representing a decline of $1.5 million, or 4.2%, com- pared with 2009. The decline in net interest income was principally attributed to the Bank’s tax-equivalent net interest margin, which declined 22 basis points to 3.18%, offset in part by average earning asset growth of $25.9 million or 2.5%. The decline in the net interest margin was largely attributed to earning asset yields, which declined 22 basis points more than the cost of interest bearing liabilities. Allowance for Loan Losses ($ in thousands) 3.00 4.00 8,000 6,000 $10,009 Factors contributing to the 2010 net interest margin 12,000 decline included the ongoing competitive re-pricing of certain commercial loans and the origination and acceler- 10,000 ated refinancing of residential mortgage loans during a period of historically low interest rates. The replacement $2.61 of accelerated cash flows from the Bank’s mortgage- backed securities portfolio also contributed heavily to the net interest margin decline. In addition, as previously reported, during 2010 the Bank continued protecting future earnings from interest rate risk by extending a por- tion of its low cost, short-term, wholesale funding maturi- ties. While this strategy pressured the net interest margin in the near-term, the Bank’s balance sheet has been Diluted Earnings positioned such that future levels of net interest income per Share are largely insulated from rising interest rates. Net Income Available to Common Shareholders ($ in thousands) 4,000 2,000 1.00 2.00 9 0 0 2 8 0 0 2 6 0 0 2 7 0 0 2 0 1 0 2 8 0 0 2 9 0 0 2 6 0 0 2 7 0 0 2 0 1 0 2 0 0 40,000 35,000 30,000 25,000 20,000 15,000 10,000 5,000 0 8,000 $7,458 $31,709 6,000 4,000 2,000 6 0 0 2 7 0 0 2 8 0 0 2 9 0 0 2 0 1 0 2 6 0 0 2 7 0 0 2 8 0 0 2 9 0 0 2 0 1 0 2 0 Net Interest Income ($ in thousands) Non-Interest Income ($ in thousands) 6 0 0 2 7 0 0 2 8 0 0 2 9 0 0 2 0 1 0 2 0 6 0 0 2 7 0 0 2 8 0 0 2 9 0 0 2 0 1 0 2 Non-Interest Expense Efficiency Ratio ($ in thousands) Non-interest Income: In addition to net interest income, non-interest income is a significant source of revenue for the Company and an important factor in its results of operations. Non-interest income is principally derived from financial services including trust and investment management activities, as well as service charges on deposit accounts, mortgage banking and servicing activities fees, credit and debit card service charges and processing fees, net securities gains, and a variety of other product and service fees. For the year ended December 31, 2010, total non-interest income amounted to $7.5 million, representing an increase of $1.4 million or 23.8%, compared with 2009. 16 1200 1000 800 600 400 200 0 10000 8000 6000 4000 2000 0 12000 10000 8000 6000 4000 2000 0 40000 35000 30000 25000 20000 15000 10000 5000 0 800 600 400 200 0 2.0 1.5 1.0 0.5 0.0 4 3 2 1 0 8000 6000 4000 2000 0 0.25 0.20 0.15 0.10 0.05 0.00 400 300 200 100 0 120 100 80 60 40 20 0 25000 20000 15000 10000 5000 0 3500 3000 2500 2000 1500 1000 500 0 800 700 600 500 400 300 200 100 0 16 12 8 4 0 80 60 40 20 0 $1,118 $701 0.24% 3,500 $2,327 6 0 0 2 7 0 0 2 8 0 0 2 9 0 0 2 0 1 0 2 6 0 0 2 7 0 0 2 8 0 0 2 9 0 0 2 0 1 0 2 6 0 0 2 7 0 0 2 8 0 0 2 9 0 0 2 0 1 0 2 6 0 0 2 7 0 0 2 8 0 0 2 9 0 0 2 0 1 0 2 Assets ($ in millions) Loans ($ in millions) $8,500 1.95% Net Charge-Offs to Average Loans Provision for Loan Losses ($ in thousands) $358 $708 0.25 0.20 0.15 0.10 0.05 0 400 300 200 100 0 3,000 2,500 2,000 1,500 1,000 500 0 800 700 600 500 400 300 200 100 0 6 0 0 2 7 0 0 2 8 0 0 2 9 0 0 2 0 1 0 2 0 6 0 0 2 7 0 0 2 8 0 0 2 9 0 0 2 0 1 0 2 Non-Performing Loans to Total Loans 6 0 0 2 7 0 0 2 8 0 0 2 9 0 0 2 0 1 0 2 6 0 0 2 7 0 0 2 8 0 0 2 9 0 0 2 0 1 0 2 Securities ($ in millions) Deposits ($ in millions) 800 600 400 200 0 2.0 1.5 1.0 0.5 0 4.00 3.00 Allowance for Loan Losses ($ in thousands) $10,009 120 2010 Summary Annual Report 100 $2.61 80 $106 16 12 10.07% 1,200 1,000 800 600 400 200 0 10,000 8,000 6,000 4,000 2,000 12,000 10,000 8,000 6,000 4,000 2,000 8 40 20 60 FDIC deposit insurance assessments amounted to $1.1 million in 2010, representing a decline of $354 thousand, or 24.9%, compared with the same period in 2009. This decline was principally attributed to a $495 thousand special FDIC assessment recorded in the second quarter of 2009, partially offset by increased deposit insurance premiums for all FDIC insured banks as a result of the FDIC’s plan to reestablish the Deposit Insurance Fund to levels required by the Federal Deposit Reform Act of 2005. Average Shareholder Equity ($ in thousands) Return on Average Equity 8 0 0 2 9 0 0 2 6 0 0 2 7 0 0 2 0 1 0 2 8 0 0 2 9 0 0 2 6 0 0 2 7 0 0 2 0 1 0 2 0 0 4 $22,046 25,000 20,000 15,000 10,000 5,000 6 0 0 2 7 0 0 2 8 0 0 2 9 0 0 2 0 1 0 2 0 Non-Interest Expense ($ in thousands) 80 60 40 20 0 55.5% 6 0 0 2 7 0 0 2 8 0 0 2 9 0 0 2 0 1 0 2 Efficiency Ratio Efficiency Ratio: The Company’s efficiency ratio, or non- interest operating expenses divided by the sum of tax- equivalent net interest income and non-interest income other than net securities gains and other-than-temporary impairments, measures the relationship of operating expenses to revenues. Low efficiency ratios are typically a key factor for high performing financial institutions. For the year ended December 31, 2010, the Company’s effi- ciency ratio amounted to 55.5%, which compared favor- ably to peer and industry averages. Income Taxes: For the year ended December 31, 2010, total income taxes amounted to $4.1 million, representing an increase of $140 thousand, or 3.5%, compared with 2009. The Company’s effective tax rate amounted to 27.9% in 2010, compared with 27.8% in 2009. Fluctu a tions in the Company’s effective tax rate are generally attrib- uted to increases in the level of non-taxable income in relation to taxable income. 6 0 0 2 7 0 0 2 8 0 0 2 0 9 0 0 2 Net Income Available to Common Shareholders ($ in thousands) 0 0 1 0 2 7 0 0 2 6 0 0 2 9 0 0 2 8 0 0 2 0 1 0 2 2.00 1.00 Trust and other financial services fees amounted to $3.0 million in 2010, representing an increase of $540 thou- sand, or 22.1%, compared with 2009. Reflecting addi- tional new business and some recovery in the equity markets, at December 31, 2010 assets under manage- ment stood at $314.2 million, up $44.1 million or 16.3% compared with year-end 2009. Diluted Earnings per Share Total securities gains, net of other-than-temporary impair- ment losses, amounted to $1.2 million in 2010, compared with $67 thousand in 2009. Net 2010 securities gains were comprised of realized gains on the sale of securities $7,458 amounting to $2.1 million, offset in part by other-than- temporary impairment losses of $898 thousand on certain available-for-sale, private label, residential mortgage- backed securities. $31,709 8,000 6,000 4,000 2,000 For the year ended December 31, 2010, credit and debit card service charges and fees amounted to $1.2 million, up $156 thousand or 15.5% compared with 2009. This increase was principally attributed to continued growth of the Bank’s retail deposit base, higher levels of mer- chant credit card processing volumes, and continued success with a program that offers rewards for certain debit card transactions. Non-Interest Income ($ in thousands) 8 0 0 2 9 0 0 2 6 0 0 2 7 0 0 2 0 1 0 2 0 1 0 2 0 9 0 0 2 40,000 35,000 30,000 25,000 20,000 15,000 10,000 5,000 0 6 0 0 2 7 0 0 2 8 0 0 2 Net Interest Income ($ in thousands) The foregoing increases in 2010 non-interest income were partially offset by a $375 thousand, or 76.5%, decline in income from mortgage banking activities. During 2010 substantially all residential mortgage loan originations were held in the Bank’s loan portfolio, whereas in 2009 a large portion of residential mortgage loan originations were sold into the secondary market with customer servicing retained. Non-interest Expense: For the year ended December 31, 2010, total non-interest expense amounted to $22.0 mil- lion, representing an increase of $292 thousand, or 1.3%, compared with 2009. The increase in non-interest expense was principally attributed to salaries and employee bene- fits, which were up $599 thousand or 5.2% compared with 2009. The increase in salaries and employee benefits was principally attributed to increases in employee health insurance premiums, normal increases in base salaries, as well as changes in staffing levels and mix. The forego- ing increases were partially offset by $402 thousand of employee health insurance credits attained during 2010, based on favorable claims experience. 17 Bar Harbor Bankshares Board of Directors Our Board of Directors, our officers and all our team members are committed to a simple, defining principle: absolute appreciation and respect for the contributions of all stakeholders. At Bar Harbor Bankshares, there is no such thing as a small shareholder, a small customer or a team member with a small job.  Peter Dodge, Blue Hill, ME Chairman of the Board President and Insurance Agent, Peter Dodge Agency d/b/a Merle B. Grindle Agency, John R. Crooker Agency, and The Endicott Agency 1 Thomas A. Colwell, Deer Isle, ME Vice Chairman of the Board Retired President, Colwell Bros., Inc. 3 Robert C. Carter, Machias, ME Retired Owner of Machias Motor Inn  Jacquelyn S. Dearborn, Holden, ME Mediator for the Ellsworth and Bangor Court System, Treasurer of Joel A. Dearborn, Esq., PA, former President of C.K. Foster, Co., Inc.  Martha T. Dudman, Northeast Harbor, ME President of Dudman Communications Corporation and Author  Lauri E. Fernald, Mt. Desert, ME Certified Funeral Service Provider, President and an Owner in Jordan-Fernald Funeral Home 5 Gregg S. Hannah, Surry, ME Former Treasurer of a marketing consulting firm and past Associate Professor of Business Management at Nichols College 9 Clyde H. Lewis, Sullivan, ME Vice President and General Manager, Morrison Chevrolet, Inc.  Joseph M. Murphy, Mt. Desert, ME President and Chief Executive Officer of the Company and the Bank 6 Robert M. Phillips, Sullivan, ME Consultant to the Wild Blueberry Industry 7 Constance C. Shea, Mt. Desert, ME Real Estate Broker and Former Owner of Lynam Real Estate  Kenneth E. Smith, Bar Harbor, ME Owner and Innkeeper of Manor House Inn  Scott G. Toothaker, Ellsworth, ME Principal and Vice President of Melanson Heath & Co. 8 David B. Woodside, Bar Harbor, ME Chief Executive Officer and General Manager of Acadia Corporation 1 3  6 7    9 2 5 8   18 2010 Summary Annual Report Management and Staff Bar Harbor Bankshares Management Joseph M. Murphy* President & Chief Executive Officer Gerald Shencavitz* Executive Vice President, Chief Financial Officer & Treasurer President & Chief Executive Officer Bar Harbor Bank & Trust Management 5 Joseph M. Murphy 4 Gerald Shencavitz Executive Vice President, Chief Financial Officer & Chief Operating Officer Credit Administration Senior Vice Presidents Marketing, Research & Community Relations 1 Michael W. Bonsey* 2 Cheryl D. Curtis 6 Gregory W. Dalton* 8 Raymond J. Frohnapfel 3 Daniel A. Hurley, III Business Banking Operations & Information Systems Bar Harbor Trust Services 9 Stephen M. Leackfeldt* 7 Marsha C. Sawyer Retail Banking & Consumer Lending Human Resources Vice Presidents Judi L. Anderson Credit Administration Karri A. Bailey Credit Administration Michelle R. Bannister Staff Development & Training Marcia T. Bender Branch Operations Penny L. Carter Retail & Residential Lending David S. Cohen Controller & Assistant Treasurer Dawn L. Crabtree Operations Audrey H. Eaton Retail & Residential Lending Domenic A. Efter Branch Relationship Manager, Ellsworth Ward A. Grant, II Corporate Compliance Officer 1 3 5 4 6 7 Joseph E. Hackett Business Banking Vicki L. Hall Business Banking Carol J. Pye Retail & Residential Lending Adam L. Robertson Business Banking Wilfred R. Hatt Regional VP—Business Banking Andrew X. Sankey General Services Lisa A. Holmes Retail & Residential Lending R. Todd Starbird Regional VP—Business Banking Robert J. Lavoie Information Systems Maureen T. Lord Regional Branch Relationship Manager, Washington County Carolyn R. Lynch Internal Audit Elena M. Martin Electronic Banking J. Paul Michaud Application Support & Project Management Cheryl L. Mullen Retail Sales and Service & Branch Administration Lisa L. Parsons Regional Branch Relationship Manager, Northeast Harbor & Somesville Russell A. Patton Information Security 9 Leita K. Zeugner Deposit Services Assistant Vice Presidents Stacie J. Alley Managed Assets Steven W. Blackett Credit Administration Marjorie E. Gray Branch Relationship Manager, Blue Hill Donna B. Hutton Customer Service—Direct Colleen E. Maynard Branch Relationship Manager, Southwest Harbor Samuel S. McGee Business Banking Debra S. Mitchell-Dow Branch Relationship Manager, Bar Harbor Judith L. Newenham Retail Lending Bonnie A. Poland Consumer Lending Support Lester L. Porter Assistant Controller Ann G. Upham Mortgage Originator *Named executive officers 2 8 19 Bar Harbor Bankshares Lisa F. Veazie Branch Relationship Manager, Deer Isle Officers Judith W. Fuller Corporate Secretary James W. Lacasse Business Banking Deborah A. Maffucci Finance Catherine M. Planchart Community Relations Managers Susan L. Albee Customer Service Manager, Machias Laura A. Bridges Quality Assurance Brenda B. Colwell Human Resources Brenda J. Condon Customer Service Manager, Blue Hill Jacqueline M.B. Curtis Human Resources Krystal E. Dorr Regional Assistant Manager, Northeast Harbor & Somesville Rebecca H.S. Emerson Customer Service Manager, Deer Isle Annette J. Guertin Purchasing Holly M. Johnston Branch Relationship Manager, Milbridge Gregory S. Jones Customer Service Manager, Rockland Wendy R. MacLaughlin Human Resources Operations Jody C. McFadden Branch Relationship Manager, Winter Harbor Dylan A. Mooney Assistant Manager, Finance Andrea L. Parker Accounts & Transaction Processing Lottie B. Stevens Operations Peter M. Swanberg Servicing Terry E. Tracy Branch Administration Mary E. Watkins Customer Service Manager, Ellsworth Bar Harbor Trust Services Daniel A. Hurley, III President Gerald Shencavitz Chief Financial Officer Joshua A. Radel Chief Investment Officer Joseph M. Pratt Managing Director & Trust Officer Vice Presidents Mischelle E. Adams Trust Officer Melanie J. Bowden Trust Officer Faye A. Geel Trust Officer Lara K. Horner Trust Operations Sarah C. Robinson Trust Officer Scott C. Storgaard Trust Investment Officer Officer Julie B. Zimmerman Trust Officer Supervisor Pamela L. Curativo Trust Operations Bar Harbor Financial Services** Craig D. Worcester Managing Director Ronald L. Hamilton Vice President, Financial Consultant Dennis M. Kinghorn Vice President, Financial Consultant Sonya L. Mitchell Vice President, Financial Consultant Diane M. Rimm Vice President, Operations Employees (As of 01/15/2011) Gwen M. Abbott Jennifer C. Abbott Deena M. Allen Faye M. Allen Holly M. Andrews June G. Atherton Vicki J. Austin Virginia H. Barnes Kristi Bates-Mitchell Charleen L. Beal Karen C. Beal Penny S. Brady Heather L. Brown Katy A. Bryer Heidi K. Carroll Hillary A. Carter Crystal N. Case Theresa L. Colson April E. Coombs Sarah A. Cormier Kevin J. Crandall Lisa L. Crosby Geneva E. Culshaw Laura H. Danielson Logan-Ashlee Davis Sharon J. Davis Joanne M. Douglass Julie M. Eaton Theresa M. Ellis Pamela J. Farnsworth Amy N. Foskett Dena M. Gatcomb Candy A. Ginn Dawn F. Gray Shelley E. Gray Susanne M. Griffin Samantha E. Hagerthy Andrew J. Haley Kelli M. Hall Kirsten M. Hamilton Betsy B. Hanscom Casey E. Hardwick Nancy B. Hastings Mary D. Hays Ivy M. Heal Barbara F. Hepburn Holly B. Hersom Cathy A. Higgins Melissa S. Hinckley Nicole S. Hinkel Sharon E. Hobbs Jeanette L. Howie Lynn L. Huffman Margaret L. Hutchinson Meagan L. Jordan Hildie L. Kane Maureen E. Kane Rebecca H. Kent Kathryn M. Kief Ebony A. Kramp Janice E. Lachance Jane E. Lambert Paula M. Lamoureux Bonnie S. Leblanc Xin Liang Marlene A. Lloyd Jonathan W. Long Virginia L. Macleod Carol M. Marshall Ashley S. Matthews Kara M. Miller Anna M. Minctons J. Aaron Mitchell Nichole L. Moore Michele L. Morrison Dawn B. Nason Mary Beth Nichols Jennifer I. Norton Debbie B. Norwood Nichole D. Norwood Amanda R. Ohmeis Alexandra Orcutt Joseph F. Pagan Jane M. Parker Deborah I. Parlee Jon B. Perkins Michelle P. Rafferty Mary C. Ratner Julie A. Redman Judy A. Richards Amanda L. Robbins Jane M. Robinson Alicia M. Santerre Jennifer M. Saunders Frank J. Schaefer Edith E. Schwartz Debra L. Scott-Henderson Stephanie M. Shuster Samantha A. Smith Andrea L. Snow Angela M. Stanley Teri A. Stover Dianne B. Thompson Bristol N. Timmons Erin F. Tripp Jennifer M. Tucker Jyl E. Tucker Allyson M. Wallace David M. Walton Paula R. Webster Jeanne L. F. Weeks Katie G. Wiberg **Bar Harbor Financial Services is a branch of Infinex Investments, Inc., an independent registered broker-dealer which is not affiliated with the Company or the Bank. 20 Corporate Information Annual Meeting Form 10-K Annual Report The Annual Meeting of shareholders of Bar Harbor Bankshares will be held at 11:00 a.m. on Tuesday May 17, 2011 at the Bar Harbor Club located on West Street in Bar Harbor, Maine. Financial Information Shareholders, analysts and other investors seeking financial information about Bar Harbor Bankshares should contact Gerald Shencavitz, Executive Vice President, Chief Financial Officer and Treasurer, at 207-288-3314. Internet Bar Harbor Bank & Trust information, as well as Bar Harbor Bankshares Form 10-K, is available at www.BHBT.com. Shareholder Assistance Questions concerning your shareholder account, including change of address forms, records or information about lost certificates or dividend checks, should be directed to our transfer agent: American Stock Transfer & Trust Company 59 Maiden Lane, Plaza Level New York, NY 10038 800-937-5449 / www.amstock.com Stock Exchange Listing Bar Harbor Bankshares common stock is traded on the NYSE Amex Exchange (www.nyse.com), under the symbol BHB. The Company refers you to its Annual Report on Form 10-K for fiscal year ended December 31, 2010 for detailed finan- cial data, management’s discussion and analysis of financial condition and results of oper ations, disclosures about market risk, market information including stock graphs, descriptions of the business of the Company and its products and services, and a listing of its executive officers. Mailing Address If you need to contact our corporate headquarters office, write: Bar Harbor Bankshares Post Office Box 400 82 Main Street Bar Harbor, Maine 04609-0400 207-288-3314 • 888-853-7100 Printed Financial Information We will provide, without charge, and upon written request, a copy of the Bar Harbor Bankshares Annual Report to the Securities and Exchange Commission on Form 10-K. The Bank will also provide, upon request, Annual Disclosure Statements for Bar Harbor Bank & Trust as of December 31, 2010. Please contact Marsha C. Sawyer, Bar Harbor Bankshares Clerk, at 207-288-3314 or the above address. Annual Report Design by Curran & Connors, Inc. / www.curran-connors.com FPO 1-888-853-7100 www.BHBT.com Bar Harbor 82 Main Street Bar Harbor, ME 04609 Blue Hill 21 Main Street Blue Hill, ME 04614 Deer Isle 25 Church Street Deer Isle, ME 04627 Ellsworth 137 High Street Ellsworth, ME 04605 Lubec 68 Washington Street Lubec, ME 04652 Machias 41 Main Street Machias, ME 04654 Milbridge 2 Bridge Street Milbridge, ME 04658 Northeast Harbor 111 Main Street Northeast Harbor, ME 04662 Rockland 245 Camden Street Rockland, ME 04841 Somesville 1055 Main Street Mt. Desert, ME 04660 Southwest Harbor 314 Main Street Southwest Harbor, ME 04679 Winter Harbor 385 Main Street Winter Harbor, ME 04693 Business Banking, Trust & Financial Services Offices Bangor One Cumberland Place Suite 100 Bangor, ME 04401 945-5244 Ellsworth 135 High Street Ellsworth, ME 04605 667-3883 

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