Bar Harbor Bankshares
Annual Report 2011

Plain-text annual report

a great place 2011 Summary Annual Report Bar Harbor Bankshares Founded in 1887, Bar Harbor Bank & Trust (the “Bank”) is a community bank with 12 locations along the coast of Maine that 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 2011 2010 % Change 10,009 10.3% $ $ $ $ $ 11,043 2.85 34,389 6,792 23,281 $ $ $ $ $ 2.61 31,709 7,458 22,046 $ 1,167,466 $ 1,117,933 $ 381,880 $ 357,882 $ 729,003 $ 700,670 $ 722,890 $ 708,328 9.2% 8.5% (8.9)% 5.6% 4.4% 6.7% 4.0% 2.1% 12000 10000 8000 6000 4000 2000 0 4 3 2 1 0 16 12 8 4 0 Total Shareholders’ Equity $ 118,250 $ 103,608 14.1% 12,000 10,000 8,000 6,000 4,000 2,000 0 $11,043 $2.85 4.00 3.00 2.00 1.00 7 0 0 2 8 0 0 2 9 0 0 2 0 1 0 2 1 1 0 2 Net Income Available to Common Shareholders ($ in thousands) 7 0 0 2 8 0 0 2 9 0 0 2 0 1 0 2 1 1 0 2 0 Diluted Earnings per Share 16 12 8 4 0 9.94% 7 0 0 2 8 0 0 2 9 0 0 2 0 1 0 2 1 1 0 2 Return on Average Equity Cover Photo: Sunrise Frenchman Bay Winter. © Dobbs Productions, www.jeffdobbs.com Dear fellow shareholders, Joseph M. Murphy and Peter Dodge Please join us in celebrating our sixth consecutive year of record earnings at Bar Harbor Bankshares. Net income available to common shareholders for 2011 was $11.0 million, up 10% from 2010. In addition to record net income, we are pleased to point •   Residential mortgage lending was up 3.6%, or $8.4  out several other positive achievements by our team in million, in 2011, despite a generally depressed housing 2011. For a complete discussion of all key performance market. We are pleased to see some improvement  indicators, please refer to the financial section of this in the volume of purchase transactions, which has report, which begins on page nine. helped fuel our growth. •   During 2011, BHB’s assets grew $49.5 million, or  •   Trust and financial services revenues increased 2.6%  4.4%, to $1.17 billion. We are especially gratified to  to $3.1 million in 2011, continuing several quarters of  have generated loan growth of 4.0% overall, with total  growth. Bar Harbor Trust Services grew assets under  loans ending the year at $729.0 million. Despite a diffi- management 6.3%, reaching $333.9 million at year end. cult lending market, this growth demonstrates BHB’s  commitment to satisfy the borrowing needs of our local customers and communities. •   BHB’s business loan portfolio grew by $7.0 million, or  1.8%, compared to 2010, ending the year at $404.6  million. Much of this growth came from existing cus- tomers who are well-capitalized and using the down- turn to increase market share through their own organic expansion or by consolidating smaller opera- tors. We have developed the ability to service the  needs of these highly skilled borrowers, many of whom recognize the attractiveness of experienced We are delighted to provide this performance for our share- holders despite difficult economic conditions which have, especially over the past four years, offered up unusually persistent challenges to bankers across the nation. We believe that our Company’s geographic location pro- vides some distinct advantages to us in delivering the results we have been able to achieve. To that end, we  dedicate our 2011 Summary Annual Report to “A Great  Place,” the coast of Maine. A great place to live and local community banks as a funding alternative When someone thinks of Maine, three things typically  to large regional banks. come to mind—vacations, lobsters, and blueberries. 1 a great place to Work. Those of us fortunate enough to live and work here also  led by creative entrepreneurs, seasoned executives, or think about our small, safe communities, excellent school one fisherman on a boat—have typically been resilient in systems, traffic-free commutes, and the beauty of our hard times. bold coastline. We appreciate the ample opportunities  for outdoor recreation as much as our visitors do. High- quality healthcare resources are readily available, with  excellent local hospitals nearby. A diligent non-profit sec- tor works relentlessly to improve the social and cultural aspects of our hometowns. A vibrant scientific commu- nity with world-class genetic research facilities, a unique  local college in our headquarters town of Bar Harbor,  and an outstanding university system provide intellectual capital and year-round stability to our communities. We  can’t imagine a better place to call home. A great place to do business Our local economy has historically been resistant to the drastic economic swings experienced elsewhere in the nation. Thanks to that fact, our local businesses—whether  All of our branches are located within a half mile of salt  water so it's not surprising that Coastal Maine’s three  most unique industries—tourism, lobster fishing and  wild blueberry production—are well-represented among our customer base. We are pleased to report that all  three sectors had a good year in 2011. A major economic  factor since the late 1800’s, tourism is the leading con- tributor to the coastal economy today. In 2011, despite a week devoted to hosting Hurricane Irene, hoteliers, mer- chants and restaurant operators enjoyed another very  strong season. Our state’s lobster fishing fleet landed  over 100 million pounds of lobster in 2011, the first time in history that threshold was breached, and the Maine Department of Marine Resources has indicated that  strong landings are likely for the next several years. Wild  blueberry production, coastal Maine’s most significant  In 2011, Bar Harbor Bank & Trust was recognized as one of the “Best Places to Work in Maine” based upon feedback from our employees, who said they like the work they do, have a clear understanding of their job role, feel performance expectations are realistic, and would recommend the Bank to others. We consider this award an acknowledgment of the efforts of our entire team to build a better Company together. 2 Bar Harbor Banksharesa great place to Live. 3 2011 Summary Annual Reportagricultural crop, enjoyed another profitable year as  strong product prices and robust demand overcame slightly decreased production. Wild blueberries’ ranking  as highest in antioxidant capacity per serving compared with more than 20 other fruits has rewarded this industry with worldwide opportunities for growth and innovation. We recognize and appreciate that the ongoing success  of our customers has contributed significantly to BHB’s  results for 2011. A great place to visit Thanks to the appeal of our quaint towns and natural  beauty, coastal Maine truly is a great place to visit. We  have a lot of sparkling days here, all year round. Our villages boast some of the most unique shopping and  dining opportunities anywhere. Maine’s granite-lined  coast is ideal for paddling, sailing, nature watching, or just relaxing. Acadia National Park, located on Mount  Desert Island, where we maintain our headquarters,  continues to draw more than two million visitors each year. With 120 miles of hiking trails and 45 miles of car- free gravel carriage roads for biking, horseback riding, or walking, Acadia offers something for everyone. About  120 cruise ships visit Bar Harbor each year, bringing us  guests from around the world. In addition to shopping and outdoor activities, the arts play an important role in our coastal towns, with museums, galleries, concerts, and live theater adding cultural richness to the visitor experience. It’s easy to see why Maine is called  Vacationland. a great place to Visit. 44 Bar Harbor Bankshares A great place to bank Our customers in coastal Maine expect what every bank’s  customers expect—friendliness, competence and consis- tency…knowing what to do and doing it right the first time with a genuine smile. We pay particular attention  to these expectations as we realize that customers have a choice among banks, and in our markets most are community banks like ourselves. We believe our principal  advantage is a reputation for superior service after the sale. To ensure that we sustain that edge, we have com- mitted significant time and resources to developing high standards and investing in staff development. In addition to service excellence, bank customers expect outstanding products. As increasing numbers of house- holds rely upon online tools as a primary vehicle for finan- cial management, Bar Harbor Bank & Trust has focused  on providing products to meet that demand. We offer a  full suite of electronic tools including online bill pay from a market-leading provider, e-statements and online history, and mobile banking delivered through a wide array of smart phones. BHB also offers customers an all-electronic  checking account (“E-Choice”) which rewards customers  who meet the "online qualifiers" with an exceptional  interest rate on their deposit balances. For our business customers, we offer “remote deposit capture,” which  transmits non-cash deposits through a computer-to- computer communication process. Since this technology  eliminates the need to be physically near a BHB branch,  it has extended the reach of our excellent business bank- ing team to new and existing customers who maintain business locations throughout the state. 5 2011 Summary Annual Reporta great place to Bank. While both service and product are defining factors in the  customer experience, physical facilities are also critically important. With that in mind, during 2011, we made major  progress on improvements to our three Ellsworth locations,  which include our busiest branch, our Operations Center,  and our Trust & Financial Services Center. With over 100  employee work stations, these locations host about half of our work force. We are putting the finishing touches on  a new building to replace our outdated Ellsworth branch,  and we have incorporated features in all three locations to enhance the safety, comfort and convenience of our customers and employees while improving energy effi- ciency and reducing ongoing maintenance challenges. A great place to work Technological innovation, process simplification and a  consistent bias toward doing more with less has helped us achieve an efficiency ratio superior to national and regional peer averages for banks of our size and charac- ter. In 2011, we improved our efficiency ratio to 55.0%,  continuing a positive trend we began several years ago. Our number of FTE (full-time-equivalent) team members  numbered 168 for 2011 compared to 186 in 2002. In other  words, we have 18 fewer employees now than we did nine years ago. In the interval, we have added two branches, extended our geographic reach, and absorbed consider- able new regulatory burdens, while doubling the size of our balance sheet. To ensure that we stay sharp, we have  experimented with LEAN process engineering, a training  and development methodology which engages staff members and helps them deploy products and procedures that minimize bureaucracy and bring genuine value to 6 Bar Harbor Banksharescustomers. Given our early success, we are increasingly  interested in using LEAN as a tool to manage processes  going forward. While the assumption may be that doing more with less  might decrease the satisfaction of our team members, we are honored to report evidence to the contrary. In 2011, Bar Harbor Bank & Trust was selected as one of 28 “Best  Places to Work in Maine” in the under-250-employees  category. The selection was based upon candid feed- back from our employees regarding their job satisfaction  and overall work environment. BHB employees gave the  highest scores in “role satisfaction,” “work environment,”  and “overall engagement,” saying they like the work they  do and feel they are able to maintain a reasonable bal- ance between work life and personal life. They reported  that they have a clear understanding of their job role, feel  performance expectations are realistic, and expressed a willingness to give extra effort to help the Bank succeed.  Perhaps most important, our employees would recom- mend the Bank as a provider of financial services and as  a great employer. We consider this award an acknowl- edgment of the efforts of our entire team to build a better Company together. During 2011, we were privileged to recognize the unique  contributions of several seasoned team members with promotions to positions of increased responsibility. Michael Bonsey, Gregory Dalton and Stephen Leackfeldt were  promoted to Executive Vice President while Cheryl Mullen  significantly to the success of BHB over the past decade  as we sought to raise standards of performance through- out the Company. With their promotions, the technical,  managerial or geographic scope of duties of each has been expanded to match the challenges BHB faces in  continuing to provide exceptional service to our custom- ers and strong earnings to our shareholders. In addition to the four named above, 16 other team members, repre- senting virtually every function of the Company, won  management-level promotions in 2011. We are grateful to  have so many dedicated and talented team members to was promoted to Senior Vice President. All have contributed  represent us. a great place to Invest. 7 2011 Summary Annual Reporta great place to Prosper. Our local economy has historically been resistant to the drastic economic swings experienced elsewhere in the nation. Thanks to that fact, our local businesses—whether led by creative entrepreneurs, seasoned executives, or one fisherman on a boat—have typically been resilient in hard times. A great place to invest We know that the strength of our balance sheet is of par- amount interest to both investors and customers and we are pleased to report that we ended 2011 with strong capital ratios, including a Total Risk-based capital ratio of  16.06%, significantly above regulatory standards for the  designation of “well-capitalized.” This capital permits us  to consider such opportunities as increased business and consumer lending, purchases of existing loan por t- folios, franchise expansion through the building of new branches or the acquisition of existing branches from  other banks, and other strategic initiatives. We are also conscious of giving our shareholders a com- petitive return. During 2011, we raised our dividend three  times and have done so again during the first quarter  In closing, we again salute our home, the coast of Maine— a great place to work, to live, to visit and to do business. We hope you’ll agree that it’s also a great place to bank… a great place to invest…a great place to prosper. On behalf of all Bar Harbor Bankshares team members, we  extend our thanks for your confidence and loyalty. Joseph M. Murphy President & CEO of 2012. The decision to increase dividends demonstrates   our confidence that our balance sheet is strong and that Peter Dodge Chairman our current level of earnings is sustainable. 8 Bar Harbor Bankshares5-Year Selected Financial Data The following table sets forth selected financial data for the last five years. (in thousands, except per share data): 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 As of and for the Years Ended December 31st 2011 2010 2009 2008 2007 $ 1,167,466 381,880 729,003 (8,221) 722,890 320,283 118,250 1,151,163 111,135 $  50,907 16,518 34,389 2,395 31,994 6,792 23,281 15,505 4,462 $ 1,117,933 357,882 700,670 (8,500) 708,328 300,014 103,608 1,087,327 105,911 $ 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 $  51,141 19,432 31,709 2,327 29,382 7,458 22,046 14,794 4,132 $  54,367 21,086 33,281 3,207 30,074 6,022 21,754 14,342 3,992 $  53,594 26,403 27,191 1,995 $  51,809 28,906 22,903 456 25,196 6,432 20,513 11,115 3,384 22,447 5,929 18,201 10,175 3,020 $  11,043 $  10,662 $  10,350 $  7,731 $  7,155 — 653 1,034 — — Net income available to common shareholders $  11,043 $  10,009 $  9,316 $  7,731 $  7,155 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 $  $  $  2.86 2.85 1.095 38.29% 0.96% 9.94% 3.23% 9.32% 14.29% 16.06% 0.37% 1.13% 64% 1.77% $  $  $  2.65 2.61 1.045 39.43% $  $  $  3.19 3.12 $  $  2.63 2.57 $  $  2.36 2.30 1.040 32.60% $  1.020 $  0.955 38.78% 40.47% 0.98% 10.07% 3.18% 9.01% 13.57% 15.41% 0.24% 1.21% 62% 1.95% 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% Refer to the Bar Harbor Bankshares 2011 Annual Report on Form 10-K for a complete set of consolidated audited financial statements. 9 2011 Summary Annual Report Report of Independent Registered Public Accounting Firm The Board of Directors and Shareholders of Bar Harbor Bankshares: We have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States),  the consolidated balance sheets of Bar Harbor Bankshares and subsidiaries as of December 31, 2011 and 2010, and  the related consolidated statements of income, changes in shareholders’ equity, comprehensive income, and cash  flows for each of the years in the three-year period ended December 31, 2011 (not presented herein); and in our report  dated March 15, 2012, we expressed an unqualified opinion on those consolidated financial statements. In our opinion, the information set forth in the accompanying condensed consolidated financial statements is fairly stated, in all material respects, in relation to the consolidated financial statements from which it has been derived. Albany, New York March 15, 2012 10 Bar Harbor Bankshares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, 2011 and December 31, 2010   Surplus   Retained earnings   Accumulated other comprehensive income: Prior service cost and unamortized net actuarial losses on employee  benefit plans, net of tax of ($9) and ($29), at December 31, 2011  and December 31, 2010, respectively  Net unrealized appreciation on securities available for sale, net of tax of $3,845    and $445, at December 31, 2011 and December 31, 2010, respectively  Portion of OTTI attributable to non-credit losses, net of tax of ($218) and ($270),    at December 31, 2011 and 2010, respectively   Total accumulated other comprehensive income Less: cost of 646,742 and 702,690 shares of treasury stock at December 31, 2011    and December 31, 2010, respectively TOTAL SHAREHOLDERS’ EQUITY TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY Refer to the Bar Harbor Bankshares 2011 Annual Report on Form 10-K for a complete set of consolidated audited financial statements. 11 As of December 31st 2011 2010 $  8,720 381,880 16,068 729,003 (8,221) 720,782 16,090 3,158 7,377 13,391 $  12,815 357,882 16,068 700,670 (8,500) 692,170 13,505 3,158 7,112 15,223 $ 1,167,466 $ 1,117,933 $  62,648 99,120 206,704 354,418 722,890 175,813 139,470 5,000 6,043 $  60,350 82,656 211,748 353,574 708,328 119,880 175,134 5,000 5,983 1,049,216 1,014,325 9,051 26,512 86,198 9,051 26,165 80,379 (17) 7,464 (423) 7,024 (56) 865 (525) 284 (10,535) 118,250 (12,271) 103,608 $ 1,167,466 $ 1,117,933 2011 Summary Annual Report                          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 expense Income before income taxes Income taxes Net income Preferred stock dividends and accretion of discount Net income available to common shareholders 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 For the Years Ended December 31st 2011 2010 2009 $34,854 16,006 47 50,907 8,765 260 7,493 16,518 34,389 2,395 31,994 3,061 1,284 80 1,277 2,689 (2,796) 577 (2,219) 620 6,792 12,814 1,514 1,660 310 1,099 5,884 23,281 15,505 4,462 $34,867 16,274 — $34,797 19,570 — 51,141 54,367 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 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 $11,043 $10,662 $10,350 — 653 1,034 $11,043 $10,009 $  9,316 3,860,474 18,140 — 3,782,881 45,821 — 2,916,643 57,182 9,604 3,878,614 3,828,702 2,983,429 $    2.86 $    2.85 $    2.65 $    3.19 $    2.61 $    3.12 (1)Included in other comprehensive income (loss), net of tax. Refer to the Bar Harbor Bankshares 2011 Annual Report on Form 10-K for a complete set of consolidated audited financial statements. 12 Bar Harbor Bankshares 2011 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, wild blueberry production, boat build- ing, and marine services. 0.35 0.40 0.20 0.25 0.30 0.15 800 0.10 0.05 0.00 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  provide unmatched service to its customers, while main- taining 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 sufficient 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 0 FINANCIAL CONDITION Assets: The Company’s total assets increased $49.5  million, or 4.4%, during 2011, ending the year at $1.17 bil- lion. The increase in total assets was led by loan growth  and an increase in the Bank’s securities portfolio. 16 12 Loans: Consumer loans, which principally consisted of  residential real estate mortgage loans and home equity  loans, comprised 43.1% of the Bank’s total loan portfolio  at December 31, 2011. The Bank also serves the small  8 4 0 80 60 40 20 0 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, 2011, commercial business  loans represented 55.5% of the Bank’s total loan portfolio. 1,400 1,200 1,000 800 600 400 200 0 $1,167 7 0 0 2 8 0 0 2 9 0 0 2 0 1 0 2 1 1 0 2 Assets ($ in millions) 800 600 400 200 0 $729 1.77% 0.37% 7 0 0 2 8 0 0 2 9 0 0 2 0 1 0 2 1 1 0 2 Loans ($ in millions) 2.0 1.5 1.0 0.5 0 500 400 300 200 100 0 120 100 80 60 40 20 0 25,000 20,000 15,000 10,000 5,000 7 0 0 2 8 0 0 2 9 0 0 2 0 1 0 2 1 1 0 2 7 0 0 2 8 0 0 2 9 0 0 2 0 1 0 2 1 1 0 2 Non-Performing Loans to Total Loans Net Charge-Offs to Average Loans $382 $723 7 0 0 2 8 0 0 2 9 0 0 2 0 1 0 2 1 1 0 2 7 0 0 2 8 0 0 2 9 0 0 2 0 1 0 2 1 1 0 2 Securities ($ in millions) Deposits ($ in millions) $111 7 0 0 2 8 0 0 2 9 0 0 2 0 1 0 2 1 1 0 2 7 0 0 2 8 0 0 2 9 0 0 2 0 1 0 2 1 1 0 2 Average Shareholders’ Equity ($ in thousands) Return on Average Equity 9.94% 55% 0.40 0.35 0.30 0.25 0.20 0.15 0.10 0.05 0 800 700 600 500 400 300 200 100 0 16 12 8 4 0 80 60 40 20 0 500 2,000 6,000 8,000 4,000 10,000 $2,395 Total loans ended the year at $729.0 million, representing  3,500 an increase of $28.3 million, or 4.0%, compared with  $8,221 3,000 December 31, 2010. The Bank’s residential mortgage  loan portfolio grew $8.4 million, or 3.6%, in 2011, despite  2,500 elevated levels of refinancing activity and a generally 2,000 depressed real estate market. Other consumer loans 1,500 were up $18.5 million in 2011, which was principally  attributed to the purchase of a Maine-based, seasoned 1,000 portfolio of prime consumer loans in the first quarter of  the year. Reflecting diminished business loan demand in  the communities served by the Bank, commercial loan  growth slowed in 2011 to $7.0 million, or 1.8%, following  a $28.3 million, or 7.7%, increase in 2010. Commercial  loan growth has been generally challenged by economic uncertainty, a weak economy and vigorous competition 12,000 for quality loans. Bank management attributes the contin- ued growth of its commercial loan portfolio to an effective 10,000 $2.85 business banking team, deep local market knowledge, 8,000 sustained new business development efforts, and a resil- ient local economy that has been faring better than the 6,000 nation as a whole. Allowance for Loan Losses ($ in thousands) Provision for Loan Losses ($ in thousands) $11,043 2.00 4.00 3.00 9 0 0 2 0 1 0 2 7 0 0 2 8 0 0 2 1 1 0 2 9 0 0 2 0 1 0 2 7 0 0 2 8 0 0 2 1 1 0 2 0 0 4,000 2,000 1.00 13 0 7 0 0 2 8 0 0 2 9 0 0 2 0 1 0 2 1 1 0 2 7 0 0 2 8 0 0 2 9 0 0 2 0 1 0 2 1 1 0 2 0 Net Income Available to Common Shareholders Diluted Earnings per Share ($ in thousands) 40,000 35,000 30,000 25,000 20,000 15,000 10,000 5,000 0 8,000 6,000 4,000 2,000 $35,860 $6,792 $23,281 7 0 0 2 8 0 0 2 9 0 0 2 0 1 0 2 1 1 0 2 7 0 0 2 8 0 0 2 9 0 0 2 0 1 0 2 1 1 0 2 0 Tax-Equivalent Net Interest Income ($ in thousands) Non-Interest Income ($ in thousands) 7 0 0 2 8 0 0 2 9 0 0 2 0 1 0 2 1 1 0 2 0 7 0 0 2 8 0 0 2 9 0 0 2 0 1 0 2 1 1 0 2 Non-Interest Expense Efficiency Ratio ($ in thousands) 1400 1200 1000 800 600 400 200 0 3500 3000 2500 2000 1500 1000 500 0 12000 10000 8000 6000 4000 2000 0 40000 35000 30000 25000 20000 15000 10000 5000 0 800 600 400 200 0 10000 8000 6000 4000 2000 0 4 3 2 1 0 8000 6000 4000 2000 0 2.0 1.5 1.0 0.5 0.0 500 400 300 200 100 0 120 100 80 60 40 20 0 25000 20000 15000 10000 5000 0 2011 Summary Annual Report2.0 1.5 1.0 0.5 0.0 500 400 300 200 100 0 120 100 80 60 40 20 0 25000 20000 15000 10000 5000 0 800 600 400 200 0 10000 8000 6000 4000 2000 0 4 1 0 1400 1200 1000 800 600 400 200 0 3500 3000 2500 2000 1500 1000 500 0 12000 10000 4000 2000 0 15000 10000 5000 0 $1,167 $729 7 0 0 2 8 0 0 8000 2 9 0 0 2 0 1 0 2 1 1 0 2 7 0 0 2 8 0 0 2 3 9 0 0 2 0 1 0 2 1 1 0 2 Assets 6000 ($ in millions) Loans 2 ($ in millions) $2,395 $8,221 40000 8000 35000 8 0 0 2 30000 9 0 0 2 7 0 0 2 0 1 0 2 1 1 0 2 Provision for 25000 Loan Losses 20000 ($ in thousands) $11,043 7 0 0 2 8 0 0 2 9 0 0 2 6000 0 1 0 2 1 1 0 2 0 Allowance for Loan Losses 4000 ($ in thousands) 2000 0 $2.85 7 0 0 2 8 0 0 2 9 0 0 2 0 1 0 2 1 1 0 2 7 0 0 2 8 0 0 2 9 0 0 2 0 1 0 2 1 1 0 2 0 Net Income Available Diluted Earnings to Common Shareholders per Share ($ in thousands) $35,860 $6,792 800 600 400 200 0 10,000 8,000 6,000 4,000 2,000 4.00 3.00 2.00 1.00 8,000 6,000 4,000 2,000 1,400 1,200 1,000 800 600 400 200 0 3,500 3,000 2,500 2,000 1,500 1,000 500 0 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 1400 1200 1000 800 600 400 200 0 3500 3000 2500 2000 1500 1000 500 0 12000 10000 8000 6000 4000 2000 0 40000 35000 30000 25000 20000 15000 10000 5000 0 800 600 400 200 0 10000 8000 6000 4000 2000 0 4 3 2 1 0 8000 6000 4000 2000 0 2.0 1.5 1.0 0.5 0.0 500 400 300 200 100 0 120 100 80 60 40 20 0 25000 20000 15000 10000 5000 0 0.40 0.35 0.30 0.25 0.20 0.15 0.10 0.05 0.00 800 700 600 500 400 300 200 100 0 16 12 8 4 0 80 60 40 20 0 2.0 1.5 1.0 0.5 0 500 400 300 200 100 0 120 100 80 60 40 20 0 25,000 20,000 15,000 10,000 5,000 0.40 0.35 0.30 0.25 0.20 0.15 0.10 0.05 0 800 700 600 500 400 300 200 100 0 16 12 8 4 0 80 60 40 20 0 7 0 0 2 8 0 0 2 9 0 0 2 0 1 0 2 1 1 0 2 7 0 0 2 8 0 0 2 9 0 0 2 0 1 0 2 1 1 0 2 Non-Performing Loans to Total Loans Net Charge-Offs to Average Loans $382 $723 7 0 0 2 8 0 0 2 9 0 0 2 0 1 0 2 1 1 0 2 7 0 0 2 8 0 0 2 9 0 0 2 0 1 0 2 1 1 0 2 Securities ($ in millions) Deposits ($ in millions) $111 9.94% 7 0 0 2 8 0 0 2 9 0 0 2 0 1 0 2 1 1 0 2 7 0 0 2 8 0 0 2 9 0 0 2 0 1 0 2 1 1 0 2 Average Shareholders’ Equity ($ in thousands) Return on Average Equity $23,281 55% 7 0 0 2 8 0 0 2 9 0 0 2 0 1 0 2 1 1 0 2 0 7 0 0 2 8 0 0 2 9 0 0 2 0 1 0 2 1 1 0 2 Non-Interest Expense Efficiency Ratio ($ in thousands) $1,167 $729 1.77% 0.37% 0.40 0.35 0.30 0.25 0.20 0.15 0.10 0.05 1,400 1,200 1,000 800 600 400 200 800 600 400 200 800 0.00 Credit Quality: Total non-performing loans ended the year  at $12.9 million, representing a decline of $770 thousand,  or 5.6%, compared with December 31, 2010. One com- mercial real estate development loan to a local non-profit housing authority in support of an affordable housing project accounted for $2.8 million of total non-performing  loans, down from $5.2 million at December 31, 2010.  During 2011, the Bank charged off $1.8 million of this loan.  Total net loan charge-offs amounted to $2.7 million in  2011, or 0.37% of total average loans outstanding, com- pared with $1.6 million and 0.24% in 2010, respectively. 400 500 600 700 300 1.77% 200 100 0 16 7 0 0 2 8 0 0 2 12 9 0 0 2 0 1 0 2 1 1 0 2 2.0 1.5 1.0 0.5 0 0.40 0.35 0.30 0.25 0.20 0.15 0.10 0.05 0 0.37% 7 0 0 2 8 0 0 2 9 0 0 2 0 1 0 2 1 1 0 2 Non-Performing Loans to Total Loans 8 Net Charge-Offs to Average Loans 4 800 500 0 300 700 600 400 $382 $723 For the year ended December 31, 2011, the Bank recorded  a provision for loan losses (the “provision”) of $2.4 million,  representing an increase of $68 thousand or 2.9% com- pared with 2010. The provisions recorded in 2011 and  2010 were higher than historical experience, largely reflecting elevated levels of non-performing and potential problem loans, and elevated levels of net loan charge- offs. These factors were partially mitigated by stabilizing  economic conditions and real estate values, and slowing loan portfolio growth. 100 200 300 400 500 100 200 80 7 0 0 2 8 0 0 2 9 0 0 2 60 0 1 0 2 1 1 0 2 0 7 0 0 2 8 0 0 2 9 0 0 2 0 1 0 2 1 1 0 2 0 40 Deposits ($ in millions) Securities ($ in millions) The Bank maintains an allowance for loan losses (the  “allowance”) which is available to absorb probable losses  on loans. The allowance is maintained at a level that, in  management’s judgment, is appropriate for the amount  16 120 of risk inherent in the current loan portfolio and adequate  to provide for estimated probable losses. At December  100 31, 2011, the allowance stood at $8.2 million, represent- 12 ing a decline of $279 thousand, or 3.3%, compared with  $111 20 0 80 9.94% 7 0 0 2 8 0 0 2 9 0 0 2 0 1 0 2 1 1 0 2 7 0 0 2 8 0 0 2 9 0 0 2 0 1 0 2 1 1 0 2 0 December 31, 2010. The allowance expressed as a per- centage of total loans stood at 1.13% at year end, down  from 1.21% at December 31, 2010. Assets ($ in millions) Loans ($ in millions) 0 3,500 3,000 2,500 2,000 1,500 1,000 500 0 $8,221 $2,395 10,000 8,000 6,000 4,000 2,000 7 0 0 2 8 0 0 2 9 0 0 2 0 1 0 2 1 1 0 2 7 0 0 2 8 0 0 2 9 0 0 2 0 1 0 2 1 1 0 2 0 Provision for Loan Losses ($ in thousands) Allowance for Loan Losses ($ in thousands) 4.00 8,000 $11,043 12,000 Investment Securities: During 2011 the securities portfolio  continued to serve as a key source of earning assets and 10,000 $2.85 liquidity for the Bank. Total securities ended the year at  $381.9 million, representing an increase of $24.0 million,  or 6.7%, compared with December 31, 2010. Securities  purchased during 2011 principally consisted of mortgage- backed securities issued and guaranteed by U.S. Govern- ment agencies and Government-sponsored enterprises. 4,000 6,000 2.00 3.00 1.00 2,000 0 0 1 1 0 2 1 1 0 2 8 0 0 2 7 0 0 2 0 1 0 2 9 0 0 2 8 0 0 2 7 0 0 2 0 1 0 2 9 0 0 2 8,000 $35,860 Diluted Earnings per Share Net Income Available to Common Shareholders ($ in thousands) Bank management considers securities a relatively  attractive means to effectively leverage the Bank’s strong  capital position, as securities are typically assigned a significantly lower risk weighting for the purpose of calcu- lating the Bank’s and the Company’s risk-based capital  ratios. The overall objectives of the Bank’s strategy for  the securities portfolio include maintaining appropriate 40,000 liquidity reserves, diversifying earning assets, managing  $6,792 35,000 interest rate risk, leveraging the Bank’s strong capital  30,000 position, and generating acceptable levels of net interest income. The securities portfolio is comprised of mortgage- 25,000 backed securities issued by U.S. Government agencies,  20,000 U.S. Government-sponsored enterprises, and other non- 15,000 agency, private-label issuers. The securities portfolio also  10,000 includes tax-exempt obligations of state and political subdivisions, and obligations of other U.S. Government- sponsored enterprises. 2,000 4,000 6,000 5,000 9 0 0 2 0 1 0 2 7 0 0 2 8 0 0 2 9 0 0 2 0 1 0 2 7 0 0 2 8 0 0 2 1 1 0 2 1 1 0 2 0 0 Tax-Equivalent Net Interest Income ($ in thousands) Non-Interest Income ($ in thousands) 7 0 0 2 8 0 0 2 9 0 0 2 0 1 0 2 1 1 0 2 Average Shareholders’ Equity ($ in thousands) $23,281 60 40 20 0 25,000 20,000 15,000 10,000 5,000 8 4 0 80 60 40 20 0 7 0 0 2 8 0 0 2 9 0 0 2 0 1 0 2 1 1 0 2 Return on Average Equity 14 55% 7 0 0 2 8 0 0 2 9 0 0 2 0 1 0 2 1 1 0 2 7 0 0 2 8 0 0 2 9 0 0 2 0 1 0 2 1 1 0 2 0 Tax-Equivalent Net Interest Income ($ in thousands) Non-Interest Income ($ in thousands) 7 0 0 2 8 0 0 2 9 0 0 2 0 1 0 2 1 1 0 2 0 7 0 0 2 8 0 0 2 9 0 0 2 0 1 0 2 1 1 0 2 Non-Interest Expense Efficiency Ratio ($ in thousands) Bar Harbor Bankshares1400 1200 1000 800 600 400 200 0 3500 3000 2500 2000 1500 1000 500 0 12000 10000 8000 6000 4000 2000 0 40000 35000 30000 25000 20000 15000 10000 5000 0 800 600 400 200 0 10000 8000 6000 4000 2000 0 4 3 2 1 0 8000 6000 4000 2000 0 2.0 1.5 1.0 0.5 0.0 500 400 300 200 100 0 120 100 80 60 40 20 0 25000 20000 15000 10000 5000 0 0.40 0.35 0.30 0.25 0.20 0.15 0.10 0.05 0.00 800 700 600 500 400 300 200 100 0 16 12 8 4 0 80 60 40 20 0 1,400 1,200 1,000 800 600 400 200 0 3,500 3,000 2,500 2,000 1,500 1,000 500 0 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 10,000 8,000 6,000 4,000 2,000 4.00 3.00 2.00 1.00 8,000 6,000 4,000 2,000 7 0 0 2 8 0 0 2 9 0 0 2 0 1 0 2 1 1 0 2 7 0 0 2 8 0 0 2 9 0 0 2 0 1 0 2 1 1 0 2 Assets ($ in millions) Loans ($ in millions) $2,395 $8,221 7 0 0 2 8 0 0 2 9 0 0 2 0 1 0 2 1 1 0 2 7 0 0 2 8 0 0 2 9 0 0 2 0 1 0 2 1 1 0 2 0 Provision for Loan Losses ($ in thousands) $11,043 Allowance for Loan Losses ($ in thousands) $2.85 7 0 0 2 8 0 0 2 9 0 0 2 0 1 0 2 1 1 0 2 7 0 0 2 8 0 0 2 9 0 0 2 0 1 0 2 1 1 0 2 0 Net Income Available Diluted Earnings to Common Shareholders per Share ($ in thousands) $35,860 $6,792 7 0 0 2 8 0 0 2 9 0 0 2 0 1 0 2 1 1 0 2 7 0 0 2 8 0 0 2 9 0 0 2 0 1 0 2 1 1 0 2 0 Tax-Equivalent Net Interest Income ($ in thousands) Non-Interest Income ($ in thousands) $1,167 $729 1.77% 0.37% 2.0 1.5 1.0 0.5 0 500 400 300 200 100 0 0.40 0.35 0.30 0.25 0.20 0.15 0.10 0.05 0 7 0 0 2 8 0 0 2 9 0 0 2 0 1 0 2 1 1 0 2 7 0 0 2 8 0 0 2 9 0 0 2 0 1 0 2 1 1 0 2 Non-Performing Loans to Total Loans Net Charge-Offs to Average Loans 800 700 600 500 400 300 200 100 0 $382 7 0 0 2 8 0 0 2 9 0 0 2 0 1 0 2 1 1 0 2 Securities ($ in millions) $723 7 0 0 2 8 0 0 2 9 0 0 2 0 1 0 2 1 1 0 2 Deposits ($ in millions) Deposits: During 2011, the most significant funding source  120 for the Bank’s earning assets continued to be retail depos- 100 its, gathered through its network of twelve banking offices throughout downeast and midcoast Maine. $111 12 16 80 9.94% 0 8 4 0 60 40 20 1 1 0 2 8 0 0 2 7 0 0 2 0 1 0 2 9 0 0 2 1 1 0 2 8 0 0 2 7 0 0 2 0 1 0 2 9 0 0 2 Average Shareholders’ Equity ($ in thousands) Total deposits ended the year at $722.9 million, up $14.6  million, or 2.1%, compared with December 31, 2010. The  Bank’s low cost NOW accounts and demand deposits  posted meaningful increases in 2011, up $16.5 million and  $2.3 million, or 19.9% and 3.8%, respectively. Company  management largely attributes the increase in demand deposits to a strong tourism season in the local commu- nities served by the Bank, combined with new customer  relationships. Time certificates of deposit were up less  than 1% in 2011 as the Bank lowered its level of time  deposits obtained from the national markets. Savings  and money market accounts declined $5.0 million, or  2.4%, in 2011, which was in part attributed to a $5.5 mil- lion decline in money market accounts offered to clients of Trust Services, reflecting a reallocation of cash within  certain managed asset portfolios in the normal course of business. Management also attributes the decline to historically low interest rates and competitive pricing considerations. Return on Average Equity $23,281 55% 40 60 80 25,000 20,000 15,000 10,000 20 5,000 Borrowings: Borrowed funds principally consist of  advances from the Federal Home Loan Bank of Boston.  The Bank utilizes borrowed funds in leveraging its strong  capital position and supporting its earning asset portfolios. Efficiency Ratio 9 0 0 2 0 1 0 2 7 0 0 2 8 0 0 2 1 1 0 2 9 0 0 2 0 1 0 2 7 0 0 2 8 0 0 2 1 1 0 2 0 0 Non-Interest Expense ($ in thousands) Total borrowings ended the year at $320.3 million,  representing an increase of $20.3 million, or 6.8%,  compared with December 31, 2010. The increase in  bor rowings was utilized to help support the Bank’s 2011  earning asset growth. 15 Capital: Consistent with its long-term strategy of operating  a sound and profitable organization, at December 31,  2011, 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  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%, respectively.  At December 31, 2011, the Company’s Tier I Leverage,  Tier I Risk-based, and Total Risk-based capital ratios  were 9.32%, 14.29% and 16.06%, respectively. At December 31, 2011, the Company’s tangible common  equity ratio stood at 9.89%, up from 9.01% at December  31, 2010. Shareholder Dividends: During 2011 the Company paid  regular cash dividends on its common stock in the aggre- gate amount of $4.23 million, compared with $3.96 mil- lion in 2010. The Company’s 2011 dividend payout ratio  amounted to 38.3%, compared with 39.4% in 2010. The  total regular cash dividends paid in 2011 amounted to $1.095 per share of common stock, compared with $1.045  per share in 2010, representing an increase of $0.05 per  share, or 4.8%. The Company’s Board of Directors also declared a first  quarter 2012 regular cash dividend of $0.285 per share  of common stock, representing an increase of $0.015, or  5.6%, compared with the first quarter of 2011. Based on  the December 31, 2011 price of BHB’s common stock of  $29.98 per share, the dividend yield amounted to 3.80%. RESULTS OF OPERATIONS Earnings and Earnings Per Share: For the year ended December 31, 2011, the Company reported record net  income available to common shareholders of $11.0 mil- lion, compared with $10.0 million for the year ended  December 31, 2010, representing an increase of $1.0  million, or 10.3%. The Company’s diluted earnings per  share amounted to $2.85 for 2011 compared with $2.61  in 2010, representing an increase of $0.24, or 9.2%. The  Company’s 2011 earnings performance was highlighted  by a $2.7 million, or 8.5%, increase in net interest income,  which was driven by an improved net interest margin and continued earning asset growth. 2011 Summary Annual Report1,400 1,200 1,000 800 600 400 200 0 3,500 3,000 2,500 2,000 1,500 1,000 2.0 500 0 1.5 1.0 12,000 0.5 10,000 8,000 0 6,000 4,000 500 2,000 400 0 300 200 2.0 1.5 1.0 0.5 0.0 500 400 300 200 100 0 120 100 80 60 40 20 0 25000 20000 15000 10000 5000 0 1400 1200 1000 800 600 400 200 0 3500 3000 2500 2000 1500 1000 0.40 500 0.35 0 0.30 0.25 0.20 12000 0.15 10000 0.10 0.05 8000 0.00 6000 4000 2000 0 600 800 700 500 400 300 40000 200 35000 100 30000 0 25000 20000 15000 10000 5000 0 16 12 8 4 0 80 60 40 20 0 800 600 400 200 0 10000 8000 6000 4000 2000 0 4 3 2 1 0 8000 6000 4000 2000 0 800 600 400 200 0 0.40 0.35 0.30 0.25 0.20 0.15 0.10 0.05 0.00 10000 8000 4000 600 6000 300 2000 800 700 500 400 200 100 0 4 3 0 0 8000 6000 4000 16 12 7 0 0 2 4 0 80 20 0 800 600 400 200 0 10,000 8,000 6,000 4,000 2,000 4.00 3.00 2.00 1.00 8,000 6,000 4,000 2,000 $1,167 0 $729 7 0 0 80 6000 2 8 0 0 2 9 0 0 2 0 1 0 2 1 1 0 2 8 0 2 0 2 9 0 0 2 0 1 0 2 1 1 0 2 60 Assets 4000 ($ in millions) 8 Loans ($ in millions) 1 $2,395 $8,221 7 20000 0 0 2 8 0 0 2 25000 9 0 0 2 0 1 0 2 1 1 0 2 7 0 0 2 60 8 0 0 2 9 0 0 2 0 1 0 2 1 1 0 2 0 20000 Provision for 15000 15000 Loan Losses ($ in thousands) 10000 10000 $11,043 12,000 10,000 5000 5000 0 8,000 0 Allowance for Loan Losses 40 ($ in thousands) 2000 $2.85 7 0 0 2 8 0 0 2 9 0 0 2 0 1 0 2 1 1 0 2 7 0 0 2 8 0 0 2 9 0 0 2 0 1 0 2 1 1 0 2 0 Net Income Available Diluted Earnings to Common Shareholders per Share ($ in thousands) $35,860 $6,792 1200 2.0 1400 1000 1.5 800 600 400 200 0 1.0 0.5 0.0 400 200 3000 500 300 1500 3500 2500 2000 1000 500 0 12000 120 10000 100 8000 40 2000 20 0 0 1,400 100 1,200 1,000 0 800 600 400 200 0 3,500 3,000 2,500 2,000 1,500 40000 1,000 35000 25000 30000 500 0 6,000 4,000 2,000 0 40,000 35,000 30,000 25,000 20,000 15,000 10,000 5,000 0 1400 1200 1000 800 600 400 200 0 3500 3000 2500 2000 1500 1000 500 0 12000 10000 8000 6000 4000 2000 0 40000 35000 30000 25000 20000 15000 10000 5000 0 800 600 400 200 0 10000 8000 6000 4000 2000 0 4 3 2 1 0 8000 6000 4000 2000 0 2.0 1.5 1.0 0.5 0.0 500 400 300 200 100 0 120 100 80 60 40 20 0 25000 20000 15000 10000 5000 0 $1,167 $729 $1,167 2.0 $729 1.77% 0.37% 1.77% 0.37% 7 0 0 2 8 0 0 2 9 0 0 2 0 1 0 2 1 1 0 2 7 0 0 2 8 0 0 2 9 0 0 2 0 1 0 2 1 1 0 2 7 0 0 2 8 0 0 2 9 0 0 2 0 1 0 2 1 1 0 2 7 0 0 2 8 0 0 2 9 0 0 2 0 1 0 2 1 1 0 2 7 0 0 2 8 0 0 2 9 0 0 2 0 1 0 2 1 1 0 2 7 0 0 2 8 0 0 2 9 0 0 2 0 1 0 2 1 1 0 2 Assets ($ in millions) Loans ($ in millions) Assets ($ in millions) 0 7 0 0 2 8 0 0 2 9 0 0 Loans 2 0 1 0 2 1 1 0 2 ($ in millions) Non-Performing Loans to Total Loans 10,000 7 0 0 2 8 0 0 2 9 0 0 2 0 1 0 2 1 1 0 2 Net Charge-Offs to Average Loans Non-Performing Loans to Total Loans Net Charge-Offs to Average Loans $8,221 $2,395 $8,221 800 $382 $723 $382 800 600 400 200 0 1.5 1.0 0.5 500 8,000 400 6,000 300 4,000 200 2,000 800 600 400 200 0 $2,395 10,000 8,000 6,000 4,000 2,000 0.40 0.40 0.35 0.30 0.25 0.20 0.15 0.10 0.05 0.00 800 700 600 500 400 300 200 100 0 7 0 0 2 8 0 0 2 9 0 0 2 0 1 0 2 1 1 0 2 1,400 1,200 1,000 800 600 400 200 0 3,500 3,000 2,500 2,000 1,500 1,000 500 0 7 0 0 2 8 0 0 2 9 0 0 2 0 1 0 2 1 1 0 2 100 Provision for Loan Losses ($ in thousands) 0 12,000 $11,043 0 7 0 0 2 1 1 0 2 8 0 0 2 9 0 0 2 0 1 0 2 Allowance for Loan Losses ($ in thousands) Securities ($ in millions) 4.00 0.40 0.35 0.30 0.25 0.20 0.15 0.10 0.05 0 700 600 500 400 300 200 100 0 2.0 1.5 1.0 0.5 0 500 400 300 200 100 0 120 100 80 60 40 20 0 25,000 20,000 15,000 10,000 5,000 0.40 0.35 0.30 0.25 0.20 0.15 0.10 0.05 0 800 700 600 500 400 300 200 100 0 16 12 8 4 0 80 60 40 20 0 $723 9.94% 7 0 0 2 8 0 0 2 9 0 0 2 0 1 0 2 1 1 0 2 7 0 0 2 8 0 0 2 9 0 0 2 0 1 0 2 1 1 0 2 Securities ($ in millions) Deposits ($ in millions) $111 7 0 0 2 8 0 0 2 9 0 0 2 0 1 0 2 1 1 0 2 7 0 0 2 8 0 0 2 9 0 0 2 0 1 0 2 1 1 0 2 Average Shareholders’ Equity ($ in thousands) Return on Average Equity $23,281 55% 7 0 0 2 8 0 0 2 9 0 0 2 0 1 0 2 1 1 0 2 0 7 0 0 2 8 0 0 2 9 0 0 2 0 1 0 2 1 1 0 2 Non-Interest Expense Efficiency Ratio ($ in thousands) 1.77% 7 0 0 2 8 0 0 2 9 0 0 2 0 1 0 2 1 1 0 2 Provision for Loan Losses ($ in thousands) 16 $11,043 12 7 0 0 2 8 0 0 2 8 9 0 0 2 0 1 0 2 1 1 0 2 0.37% 7 0 0 2 8 0 0 2 9 0 0 2 0 1 0 2 1 1 0 2 Allowance for Loan Losses ($ in thousands) 7 0 0 2 8 0 0 2 9 0 0 2 0 1 0 2 $2.85 1 1 0 2 0.35 0 0.30 0.25 0.20 4.00 0.15 0.10 3.00 0.05 0 Non-Performing Loans to Total Loans 4 2.00 Net Charge-Offs to Average Loans 7 0 0 2 8 0 0 2 0 9 0 0 2 0 1 0 2 1 1 0 2 $382 Net Income Available to Common Shareholders ($ in thousands) 80 1.00 800 7 0 0 2 700 0 600 $723 8 0 0 2 9 0 0 2 0 1 0 2 1 1 0 2 Diluted Earnings per Share 500 400 300 60 200 8,000 $35,860 Return on Average Equity: At December 31, 2011, the  40,000 100 Company’s total shareholders’ equity stood at $118.3 mil- $6,792 35,000 lion, representing an increase of $14.6 million, or 14.1%,  30,000 0 compared with 2010. The Company’s return on average  shareholders’ equity amounted to 9.94% in 2011, com- 25,000 Securities pared with 10.07% in 2010. ($ in millions) Deposits ($ in millions) 6,000 9 0 0 2 0 1 0 2 7 0 0 2 8 0 0 2 1 1 0 2 1 1 0 2 9 0 0 2 0 1 0 2 7 0 0 2 8 0 0 2 100 0 40 20,000 4,000 15,000 120 10,000 100 5,000 0 80 20 0 9 0 0 2 $111 0 1 0 2 1 1 0 2 7 0 0 2 8 0 0 2 60 40 20 0 Tax-Equivalent Net Interest Income ($ in thousands) 7 0 0 2 8 0 0 2 9 0 0 2 0 1 0 2 1 1 0 2 Average Shareholders’ Equity ($ in thousands) 16 2,000 12 0 8 4 0 7 0 0 2 8 0 0 2 9 0 0 2 0 1 0 2 1 1 0 2 9.94% Non-Interest Income ($ in thousands) 7 0 0 2 8 0 0 2 9 0 0 2 0 1 0 2 1 1 0 2 Return on Average Equity 7 0 0 2 8 0 0 2 9 0 0 2 0 1 0 2 1 1 0 2 Deposits ($ in millions) 9.94% 8 0 0 2 9 0 0 2 0 1 0 2 1 1 0 2 12 2.00 3.00 8,000 6,000 4,000 $111 16 $2.85 For the year ended December 31, 2011, net interest  120 10,000 income on a tax-equivalent basis amounted to $35.9  million, up $2.5 million, or 7.6%, compared with 2010.  100 This increase was principally attributed to average earning  80 asset growth of $61.9 million, or 5.9%, combined with a  five basis point improvement in the Bank’s tax-equivalent  net interest margin. The tax-equivalent net interest margin  amounted to 3.23% in 2011, compared with 3.18% in  40 4 2010. The improvement in the 2011 net interest margin  20 compared with 2010 was principally attributed to the Bank’s weighted average cost of interest bearing funds,  Diluted Earnings Net Income Available 0 0 per Share to Common Shareholders which declined ten basis points more than the weighted ($ in thousands) average yield on its earning asset portfolios. 2,000 1.00 9 0 0 2 0 1 0 2 7 0 0 2 8 0 0 2 1 1 0 2 9 0 0 2 0 1 0 2 7 0 0 2 8 0 0 2 9 0 0 2 0 1 0 2 7 0 0 2 8 0 0 2 1 1 0 2 1 1 0 2 60 0 8 0 7 0 0 2 40,000 35,000 30,000 25,000 20,000 15,000 10,000 5,000 0 $35,860 25,000 20,000 4,000 15,000 10,000 2,000 Return on Average Equity Average Shareholders’ Equity ($ in thousands) 8,000 $6,792 80 $23,281 6,000 55% 60 40 20 7 0 0 2 8 0 0 2 9 0 0 2 0 1 0 2 1 1 0 2 7 0 0 2 8 0 0 2 9 0 0 2 0 1 0 2 1 1 0 2 5,000 Tax-Equivalent Net Interest Income ($ in thousands) 0 0 7 0 0 2 8 0 0 2 9 0 0 2 0 1 0 2 1 1 0 2 Non-Interest Income ($ in thousands) 7 0 0 2 8 0 0 2 9 0 0 2 0 1 0 2 1 1 0 2 0 Efficiency Ratio Non-Interest Expense ($ 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, investment man- agement and brokerage activities, as well as service charges on deposit accounts, mortgage banking and servicing fees, credit and debit card processing fees, net securities gains, and a variety of other product and service fees. For the year ended December 31, 2011, total non-interest  income amounted to $6.8 million, down $666 thousand,  or 8.9%, compared with 2010. The decline in 2011 non- interest income was entirely attributed to a $759 thousand  decline in securities gains, net of other-than-temporary 80 $23,281 Net Interest Income: Net interest income is the principal  25,000 component of the Company’s income stream and repre- sents the difference or spread between interest generated 20,000 from earning assets and the interest expense paid on deposits and borrowed funds. Fluctuations in market 15,000 interest rates, as well as volume and mix changes in earning assets and interest bearing liabilities, can mate- 10,000 rially impact net interest income. 55% 40 60 7 0 0 2 8 0 0 2 9 0 0 2 0 1 0 2 1 1 0 2 7 0 0 2 8 0 0 2 9 0 0 2 0 1 0 2 1 1 0 2 0 Tax-Equivalent Net Interest Income ($ in thousands) Non-Interest Income ($ in thousands) 5,000 7 0 0 2 8 0 0 2 9 0 0 2 0 1 0 2 1 1 0 2 0 Non-Interest Expense ($ in thousands) 20 0 7 0 0 2 8 0 0 2 9 0 0 2 0 1 0 2 1 1 0 2 Efficiency Ratio 16 Bar Harbor Bankshares1400 1200 1000 800 600 400 200 0 3500 3000 2500 2000 1500 1000 500 0 12000 10000 8000 6000 4000 2000 0 40000 35000 30000 25000 20000 15000 10000 5000 0 800 600 400 200 0 10000 8000 6000 4000 2000 0 4 3 2 1 0 8000 6000 4000 2000 0 2.0 1.5 1.0 0.5 0.0 500 400 300 200 100 0 120 100 80 60 40 20 0 25000 20000 15000 10000 5000 0 0.40 0.35 0.30 0.25 0.20 0.15 0.10 0.05 0.00 800 700 600 500 400 300 200 100 0 16 12 8 4 0 80 60 40 20 0 $1,167 $729 1.77% 0.37% 7 0 0 2 8 0 0 2 9 0 0 2 0 1 0 2 1 1 0 2 7 0 0 2 8 0 0 2 9 0 0 2 0 1 0 2 1 1 0 2 7 0 0 2 8 0 0 2 9 0 0 2 0 1 0 2 1 1 0 2 7 0 0 2 8 0 0 2 9 0 0 2 0 1 0 2 1 1 0 2 Assets ($ in millions) Loans ($ in millions) Non-Performing Loans to Total Loans Net Charge-Offs to Average Loans $2,395 $8,221 $382 $723 0.40 0.35 0.30 0.25 0.20 0.15 0.10 0.05 0 800 700 600 500 400 300 200 100 0 800 600 400 200 0 10,000 8,000 6,000 4,000 2,000 4.00 3.00 2.00 Allowance for Loan Losses ($ in thousands) $2.85 Provision for Loan Losses ($ in thousands) $11,043 7 0 0 2 8 0 0 2 9 0 0 2 0 1 0 2 1 1 0 2 7 0 0 2 8 0 0 2 9 0 0 2 0 1 0 2 1 1 0 2 0 2.0 1.5 1.0 0.5 0 500 400 300 200 100 0 120 100 80 60 7 0 0 2 8 0 0 2 9 0 0 2 0 1 0 2 1 1 0 2 7 0 0 2 8 0 0 2 9 0 0 2 0 1 0 2 1 1 0 2 Securities ($ in millions) Deposits ($ in millions) $111 16 12 8 9.94% 1,400 1,200 1,000 800 600 400 200 0 3,500 3,000 2,500 2,000 1,500 1,000 500 0 12,000 10,000 8,000 6,000 4,000 2,000 4 40 20 Other factors contributing to the 2011 increase in non- interest expense included higher levels of occupancy related expenses including the disposal of certain fixed assets. The Company also experienced higher levels of  depreciation and equipment expenses, audit and regu- latory examination fees, loan collection expenses, mar- Average Shareholders’ Equity keting expenses, charitable contributions and fees for ($ in thousands) professional services. Return on Average Equity 9 0 0 2 0 1 0 2 7 0 0 2 8 0 0 2 1 1 0 2 9 0 0 2 0 1 0 2 7 0 0 2 8 0 0 2 1 1 0 2 0 0 $23,281 25,000 20,000 15,000 10,000 5,000 7 0 0 2 8 0 0 2 9 0 0 2 0 1 0 2 1 1 0 2 0 Non-Interest Expense ($ in thousands) 80 60 40 20 0 55% 7 0 0 2 8 0 0 2 9 0 0 2 0 1 0 2 1 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, 2011, the Company’s effi- ciency ratio amounted to 55.0%, representing a modest  improvement compared with the 55.5% reported in 2010. Income Taxes: For the year ended December 31, 2011,  total income taxes amounted to $4.5 million, representing  an increase of $330 thousand, or 8.0%, compared with  2010. The Company’s effective tax rate amounted to 28.8%  in 2011, compared with 27.9% in 2010. Fluctuations in the  Company’s effective tax rate are generally attributed to  increases in the level of non-taxable income in relation to taxable income. 7 0 0 2 8 0 0 2 9 0 0 2 0 1 0 2 0 Net Income Available to Common Shareholders ($ in thousands) 40,000 35,000 30,000 25,000 20,000 15,000 10,000 5,000 0 7 0 0 2 8 0 0 2 9 0 0 2 0 1 0 2 Tax-Equivalent Net Interest Income ($ in thousands) 1.00 impairment losses. Net 2011 securities gains of $470  thousand were comprised of realized gains on the sale of securities amounting to $2.7 million, offset in part by  other-than-temporary impairment losses of $2.2 million  on certain available-for-sale, private-label residential mortgage-backed securities. Diluted Earnings per Share 9 0 0 2 0 1 0 2 7 0 0 2 8 0 0 2 1 1 0 2 1 1 0 2 0 Trust and other financial services fees amounted to $3.1  million in 2011, representing an increase of $77 thousand  or 2.6% compared with 2010. Reflecting additional new  business, at December 31, 2011 assets under manage- $35,860 ment stood at $333.9 million, up $19.7 million, or 6.3%,  compared with year-end 2010. $6,792 8,000 6,000 4,000 Service charges on deposit accounts amounted to $1.3  million in 2011, representing a decline of $75 thousand, or  5.5%, compared with 2010. This decrease was principally  attributed to a decline in deposit account overdraft fees, reflecting reduced overdraft activity and the impact of new regulations that limit the ability of a bank to offer overdraft protection to deposit customers without their consent and to derive fees from overdraft programs. 2,000 9 0 0 2 0 1 0 2 7 0 0 2 8 0 0 2 1 1 0 2 1 1 0 2 0 Non-Interest Income ($ in thousands) Credit and debit card service charges and fees amounted  to $1.3 million in 2011, representing an increase of $117  thousand, or 10.1%, compared with 2010. This increase  was principally attributed to continued growth of the Bank’s  retail deposit base, higher levels of merchant credit card processing volumes, and continued success with a pro- gram that offers rewards for certain debit card transactions. Non-Interest Expense: For the year ended December 31,  2011, total non-interest expense amounted to $23.3 mil- lion, up $1.2 million, or 5.6%, compared with 2010. The  increase in non-interest expense was largely attributed to salaries and employee benefits, which were up $621  thousand, or 5.1%, compared with 2010. The increase in  salaries and employee benefits was principally attributed to normal increases in base salaries, increases in employee health insurance premiums, employee severance payments as well as changes in staffing levels and mix. The year- over-year increase in salaries and employee benefits also reflects $402 thousand of employee health insurance  credits attained during 2010 based on favorable claims experience. 17 2011 Summary Annual Report   5 6 8 9    2 7   Board of Directors We salute our home—the coast of Maine—a great place to work, to live, to visit and to do business. On behalf of all Bar Harbor Bankshares team members, we extend our thanks for your confidence and loyalty.    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 Vice Chairman of the Board Retired President, Colwell Bros., Inc.    Thomas A. Colwell, Deer Isle, ME    Robert C. Carter, Machias, ME    Jacquelyn S. Dearborn, Holden, ME Retired Owner of Machias Motor Inn Mediator for the Ellsworth and Bangor Court System, Treasurer of Joel A. Dearborn, Esq., PA Consultant to the Wild Blueberry Industry Real Estate Broker and Former Owner of Lynam Real Estate    Robert M. Phillips, Sullivan, ME    Constance C. Shea, Mt. Desert, ME    Kenneth E. Smith, Bar Harbor, ME    Scott G. Toothaker, Ellsworth, ME    David B. Woodside, Bar Harbor, ME Principal and Vice President of Melanson Heath & Co. Owner and Innkeeper of Manor House Inn Chief Executive Officer and General Manager of Acadia Corporation Certified Funeral Service Provider, President and an Owner in Jordan-Fernald Funeral Home Northeast Harbor, ME President of Dudman Communications Corporation and Author    Martha T. Dudman,     Lauri E. Fernald, Mt. Desert, ME    Gregg S. Hannah, Surry, ME    Clyde H. Lewis, Sullivan, ME    Joseph M. Murphy, Mt. Desert, ME Former Treasurer of a marketing consulting firm and past Associate Professor of Business Management at Nichols College Retired Vice President and General Manager, Morrison Chevrolet, Inc. President and Chief Executive Officer of the Company and the Bank 18 Bar Harbor Bankshares 2  5 4 6 8 7 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 Executive Vice President & Chief Risk Officer Executive Vice President, Chief Financial Officer & Chief Operating Officer    Joseph M. Murphy    Gerald Shencavitz    Michael W. Bonsey*    Gregory W. Dalton*    Stephen M. Leackfeldt*    Daniel A. Hurley, III    Cheryl L. Mullen     Marsha C. Sawyer Executive Vice President, Retail Banking & Operations Executive Vice President, Business Banking Senior Vice Presidents Bar Harbor Trust Services Sales & Marketing Human Resources Management and Staff Regional Vice Presidents Wilfred R. Hatt Business Banking, Greater Ellsworth & Bangor R. Todd Starbird Business Banking, Knox County Vice Presidents Judi L. Anderson Credit Administration Karri A. Bailey Managed Assets & Credit Administration Michelle R. Bannister Staff Development & Training Steven W. Blackett Credit Administration Marcia T. Bender Senior Operations Officer Penny L. Carter Retail & Residential Lending David S. Cohen Controller & Assistant Treasurer Dawn L. Crabtree Operations Audrey H. Eaton Retail & Residential Lending Ward A. Grant, II Corporate Compliance Joseph E. Hackett Business Banking Adam L. Robertson Business Banking Vicki L. Hall Business Banking Lisa A. Holmes Retail & Residential Lending Branch Relationship Manager, Machias Robert J. Lavoie Information Systems Maureen T. Lord Regional Branch Relationship Manager, Machias & Lubec Carolyn R. Lynch Internal Audit Elena M. Martin Electronic Banking Samuel S. McGee Business Banking J. Paul Michaud Application Support & Process Innovation Lisa L. Parsons Regional Branch Relationship Manager, Northeast Harbor, Southwest Harbor & Somesville Russell A. Patton Risk & Information Security Carol J. Pye Retail & Residential Lending Lisa F. Veazie Regional Branch Relationship Manager, Blue Hill & Deer Isle J. Christopher Young Regional Branch Relationship Manager, Ellsworth, Milbridge & Winter Harbor Leita K. Zeugner Deposit Services Assistant Vice Presidents Stacie J. Alley Managed Assets Marjorie E. Gray Product Development & Research Donna B. Hutton Customer Service—Direct James W. Lacasse Business Banking Colleen E. Maynard Branch Relationship Manager, Southwest Harbor Debra S. Mitchell-Dow Branch Relationship Manager, Bar Harbor Lucas G. Morris Credit Administration Judith L. Newenham Retail Lending Support *Named executive officers 19 2011 Summary Annual ReportCatherine M. Planchart Corporate Communications & Community Relations Bonnie A. Poland Retail Lending Support Lester L. Porter Assistant Controller Lottie B. Stevens Operations Terry E. Tracy Retail Banking Operations Ann G. Upham Retail & Residential Lending Jody C. Warren Branch Relationship Manager, Ellsworth Officers Faye M. Allen Deposit Services Judith W. Fuller Corporate Secretary Deborah A. Maffucci Finance Managers Dylan A. Mooney Assistant Manager, Finance Debbie B. Norwood Regional Customer Service Manager, Northeast Harbor & Somesville Andrea L. Parker Accounts & Transaction Processing 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 Melanie J. Bowden Trust Officer Faye A. Geel Trust Officer Lara K. Horner Trust Operations Susan L. Albee Customer Service Manager, Machias Sarah C. Robinson Trust Officer Holly J. Archer Branch Relationship Manager, Milbridge Scott C. Storgaard Trust Investment Officer Laura A. Bridges Servicing & Quality Assurance Officer Brenda B. Colwell Human Resources Brenda J. Condon Customer Service Manager, Blue Hill Krystal E. Jordan Branch Relationship Manager, Winter Harbor Rebecca H. Emerson Branch Relationship Manager, Deer Isle Gregory S. Jones Branch Relationship Manager, Rockland Wendy R. MacLaughlin Human Resources Operations Virginia L. MacLeod Customer Service Manager, Southwest Harbor Julie B. Zimmerman Trust Officer Supervisor Pamela L. Curativo Trust Operations Bar Harbor Financial Services** Sonya L. Mitchell Program Manager, Vice President & Financial Consultant Ronald L. Hamilton Vice President & Financial Consultant Dennis M. Kinghorn Vice President & Financial Consultant Employees (As of 3/14/2012) Abbott, Gwen M. Abbott, Jennifer C. Allen, Deena M. Andrews, Holly M. Atherton, June G. Austin, Vicki J. Barnes, Virginia H. Barton, Hannah R. Bates-Mitchell, Kristi L. Beal, Charleen L. Beal, Jessica L. Beal, Karen C. Bogue, Amy W. Boudreau, Alain R. Brady, Penny S. Brown, Heather L. Bryer, Katy A. Capristo, Kim E. Carroll, Heidi K. Carter, Hillary A. Case, Crystal N. Colson, Theresa L. Coombs, April E. Cormier, Sarah A. Crandall, Kevin J. Crosby, Lisa L. Culshaw, Geneva E. Curtis, Cheryl D. Curtis, Michelle E. Danielson, Laura H. Davis, Sharon J. Douglass, Joanne M. Eaton, Julie M. Ellis, Theresa M. Farnsworth, Pamela J. Fernandez, Rebecca R. Foskett, Amy N. Gatcomb, Dena M. Ginn, Candy A. Gray, Shelley E. Griffin, Susanne M. Haley, Andrew J. Hall, Kelli M. Hamilton, Kirsten M. Hanscom, Betsy B. Hastings, Nancy B. Hays, Mary D. Heal, Ivy M. Hepburn, Barbara F. Higgins, Cathy A. Hinckley, Melissa S. Hinkel, Nicole S. Howie, Jeanette L. Huffman, Lynn L. Hunt, Marianne Hutchinson, Margaret L. Jipson, Bruce W. Kane, Hildie L. Kane, Maureen E. Kent, Rebecca H. Kief, Kathryn M. Lachance, Janice E. Lambert, Jane E. Lamoureux, Paula M. Lare, Marissa L. Leblanc, Bonnie S. Liang, Xin Linscott, Lacy R. Lloyd, Marlene A. Magee, Gabriella M. Marshall, Carol M. Matthews, Ashley S. Miller, Kara M. Minctons, Anna M. Mitchell, J. Aaron Moore, Nichole L. Morrison, Michele L. Nason, Dawn B. Norton, Jennifer I. Norwood, Nichole D. Ohmeis, Amanda R. Ohmeis, Claire C. Orcutt, Alexandra Pagan, Joseph F. Parker, Jane M. Parlee, Deborah I. Patton, Ebony A. Perkins, Jon B. Rafferty, Michelle P. Ratner, Mary C. Redman, Julie A. Richards, Judy A. Robbins, Amanda L. Robinson, Jane M. Rogers, Jennifer A. Santerre, Alicia M. Saunders, Jennifer M. Schaefer, Frank J. Schwartz, Edith E. Scott-Henderson, Debra L. Shuster, Stephanie M. Smith, Samantha A. Snow, Andrea L. Stanley, Angela M. Stover, Teri A. Swanberg, Peter M. Thibault, David W. Thompson, Dianne B. Timmons, Bristol N. Tripp, Brenda D. Tripp, Erin F. Tucker, Jennifer M. Tucker, Jyl E. Urquhart, Kirstie A. Wallace, Allyson M. Wasson, Krystal E. Webster, Paula R. Weeks, Jeanne L. Wiberg, Katie G. **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 Bar Harbor Bankshares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 15, 2012 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, LLC 6201 15th Avenue Brooklyn, New York 11219 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, 2011 for detailed financial 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, 2011. 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 Photo credits: Pages 4, 5, and 7 (except man holding lobster) © Dobbs Productions, www.jeffdobbs.com Board, Management, and “Best Places” award on Page 2 © Chris Pinchbeck, www.pinchbeckphoto.com Kids on pages 3 and 4 courtesy Downeast Family YMCA, Ellsworth, www.defymca.org Business Banking, Trust & Financial Services Offices Bangor One Cumberland Place Suite 100 Bangor, ME 04401 Ellsworth 135 High Street Ellsworth, ME 04605 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 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 125 High Street Ellsworth, ME 04605 Lubec 68 Washington Street Lubec, ME 04652 Machias 41 Main Street Machias, ME 04654 FSC LOGO 

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