Bar Harbor Bankshares
Annual Report 2012

Plain-text annual report

Relationships connect Our Communities that 2012 SuMMARy ANNuAL REpoRT Founded in 1887, Bar Harbor Bank & Trust (the “Bank”) is a community bank with 15 locations from Lubec to Topsham, 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 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 (BHBT). Year-Over-Year Financial Highlights Net Income Available to Common Shareholders Diluted Earnings per Share Return on Average Equity Net Income Available to Common Shareholders ($ in thousands) Diluted Earnings per Share Return on Average Equity 15 12 9 6 3 0 4 3 2 1 0 12 10 8 6 4 2 0 $15,000 12,000 9,000 6,000 3,000 0 $12,466 $4 3 2 1 0 $3.18 12% 10 8 6 4 2 0 9.93% ’08 ’09 ’10 ’11 ’12 ’08 ’09 ’10 ’11 ’12 ’08 ’09 ’10 ’11 ’12 (Dollars in thousands) Net Income Diluted Earnings Per Share Net Interest Income Non-interest Income Non-interest Expense Total Assets Total Securities Total Loans Total Deposits Total Shareholders’ Equity 2012 2011 % Change $ $ $ $ $ 12,466 3.18 36,971 7,709 25,618 $ $ $ $ $ 11,043 12.9% 2.85 11.6% 34,389 7.5% 6,792 13.5% 23,281 10.0% $ 1,302,935 $ 1,167,466 11.6% $ 418,040 $ 381,880 9.5% $ 815,004 $ 729,003 11.8% $ 795,012 $ 722,890 10.0% $ 128,046 $ 118,250 8.3% 1 2012 AnnuAl RepoRt Dear fellow shareholders: In 2012, we celebrated our 125th anniversary year as a banking institution and our seventh consecutive year of record earnings. Net income for 2012 was $12.5 million, up 12.9% from 2011. In addition to strong earnings growth, we are pleased to report a variety of other components that contributed to our strong 2012 results. For example: n During 2012, diluted earnings per share rose 11.6% to $3.18, another all-time performance record for the Company. n During 2012, BHB’s assets grew by $135.5 million or 11.6% to $1.30 billion. n total loans ended the year at $815.0 million, up $86.0 million or 11.8% compared to December 31, 2011. n During 2012, we increased our trust and financial services revenues by 7.1% over 2011 to $3.3 million. Assets under management at December 31, 2012 stood at $355.5 million, up $21.6 million or 6.5% compared to year-end 2011. n We ended 2012 in a position of strength with a total Risk-Based capital ratio of 15.78%, well above the regulatory standard of 10% for a “well-capitalized” financial institution. n Because of the Company’s balance sheet strength and consistent earnings growth, we have been able to raise the quar- terly dividend six times over the past two years while also allowing for new capital formation. We were pleased to increase the dividend again in the first quarter of 2013. BAR HARBoR BAnKSHAReS 2 2012 Highlights Border Trust Acquisition on August 10, 2012, the Bank acquired substantially all the assets and assumed selected liabilities, including all deposits, of Border trust Company. this transaction provided the Bank with three additional branches in Kennebec and Sagadahoc counties located to the south and west of our primary market area. For several years, the Bank had been building its business banking portfolio in southern Maine. By mid-2012, we had built a portfolio of high-quality commercial loans in excess of $60 million within a twenty-mile radius of the topsham/ Brunswick border, which became a logical location for a branch presence. the Border trust transaction allowed us to accelerate our business plan in that area, providing an excellent platform to enhance our participation in this important region of economic activity. through our three acquired locations, we believe we will be able to nurture a new source of low cost core deposits, provide convenient service to our portfolio of southern and central Maine commercial loan customers, and develop a new and promising market for our trust and financial services businesses. Residential Lending Residential and other consumer loans grew by $55.2 million or 17.6% to $369.4 million, with contributions from the Border trust acquisition and the additional acquisition of a new england-based portfolio of residential loans earlier in the year. this year, we have observed some recovery in demand for mortgages for first-time homebuyers as well as for buyers of higher value vacation and retirement homes along the Maine coast. What has been less frequent for several years has been demand among mid-range customers who are moving up into a larger home or one with more amenities. Despite the attractive low rate mortgages that are available today, these potential buyers are often stymied by the need to sell their existing home as a prerequisite to purchasing the new one. We observe that, nationally, this segment appears to be gaining some renewed strength and we are optimistic that our market will benefit from this emerging trend in the future. locally, while most residential transactions continue to be refinances, we have noted an increasing proportion of purchase trans actions. these are encouraging signs. Business Banking In 2012, we achieved moderate year-over-year growth in commercial loans, with the portfolio ending the year at $430.9 million, for an increase of $26.3 million, or 6.5% over year end 2011. Despite the recessionary atmosphere throughout the nation and our region over the past several years, we continue to realize growth in this important segment. We attribute this success to our effective business banking team, consistent underwrit- ing and service standards, and a resilient local economy. Competitive business banking has become a recog- nized hallmark of the Bank throughout our traditional service footprint and precedes us into our new branch platforms in central and southern Maine, where we can already claim a substantial book of high quality busi- ness. these new locations have already contributed modest growth in loans and we are confident that these contributions will continue. Again…A Best Place to Work Bar Harbor Bank & trust was recognized for the second year in a row as one of the “Best places to Work in Maine.” We qualified for this award in the 250-or-fewer-employees category. our selection was based upon candid feedback from our employees in an anonymous survey reflecting their view of the Bank’s work environment and their levels of job satisfaction. As before, our team members 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 3 2012 AnnuAl RepoRt Executive Management (From left to right): Stephen M. leackfeldt, Joseph M. Murphy, Marsha C. Sawyer, Daniel A. Hurley, III, Marcia t. Bender, Gregory W. Dalton, Cheryl l. Mullen, Gerald Shencavitz, Michael W. Bonsey help the Bank succeed. We are pleased that our employees would willingly recommend the Bank as a provider of financial services to family and friends and as an excellent employer. We know that satisfied employees tend to become loyal, longer-term employees and that their job satisfaction translates to customer satisfaction and loyalty. the strongest component of the community banking ethic, we believe, is the bond that forms between our employees and their customers, a bond based upon mutual respect and trust that stands the test of time. In the small coastal towns of Maine, such mutual trust is priceless. Banking Industry Outlook Rate Environment As financial intermediaries, banks are charged with managing interest rate risk by analyzing economic develop- ments and market trends and adjusting investment and loan and deposit pricing decisions in response to those trends. During the past few years, the Federal Reserve Bank’s monetary policies have been orchestrated to keep interest rates low in an attempt to stimulate the general economy and accelerate the financial recovery. the result has been a dramatic decline in both loan rates and deposit rates compared to years past. In order to attract high quality earning assets in the form of business loans and residential mortgages, banks are compelled to compete for new business at rates that represent historical lows. on the deposit side, rates have fallen to be roughly com- petitive to the wholesale borrowing rates available to banks. As short-term deposit rates continue to fall and approach zero, further declines are increasingly impractical. these factors have combined to compress bank net interest margins over time, including ours, and require constant diligence to manage both product pricing and risk underwriting. these challenges appear to be with us throughout 2013 and possibly beyond. BAR HARBoR BAnKSHAReS 4 these circumstances are obviously favorable to qualified borrowers, who benefit from low rates and competing banks. Customers who are both borrowers and depositors can rationalize that the financial products they use are priced reasonably as a bundle of services. Customers who are depositors only, particularly those many deposi- tors who are retired and who formerly depended upon long-term deposits to provide meaningful household income, are profoundly disappointed with today’s low deposit yields. For these customers, in particular, the obligation for banks to provide impeccable service, genuine patience and helpful advice has never been more compelling. In this challenging environment, we are particularly grateful for the many caring professionals among our branch service staff, trust officers and financial consultants who provide these essential services to our customers every day. Regulatory Compliance For several years, annual reports of community banks throughout the nation, including ours, have commented upon the cascade of new and pending banking regulations that have compelled banks to incur growing compli- ance management costs. We have always believed that the new legislation and regulation targets abuses which have played no part in our own banking practices. However, going forward, our shareholders should know that we have embraced the spirit and the letter of known regulatory expectations and have invested significant resources, management focus, and many hundreds of staff training hours to make sure that our team is well- versed in regulatory compliance, which will remain one of our major accountabilities. We believe efficient mas- tery of regulatory expectations will be one of the factors which will distinguish successful community banks in the years ahead. The Key to Our Success—Customer Loyalty Across all of our lines of business and branch locations, we have taken note of how much of our success is the result of the loyalty and stability of our customer base. Whether serving the needs of individual households, small businesses or larger enterprises, the Bank has enjoyed the opportunity to serve multiple generations within families and multiple generations of leadership among business clients, large and small. We know that the hallmark of community banks is the ability to maintain the loyalty of customers over time. this loyalty may begin with the convenience of locations but is sustained by familiar and trusted staff members who deliver outstand- ing service over many years and who have built lasting connections of trust and confidence. throughout this annual report, we present several examples of relationships which have stood the tests of time, changing busi- ness conditions, generations of customers and the development of new communities. these are relationships which we treasure as bankers, neighbors and friends. on behalf of the Company’s Board of Directors and all the Bar Harbor Bankshares team members, it is our privilege and pleasure to thank you, our shareholders, for your confidence and loyalty. Joseph M. Murphy president and Chief executive officer Peter Dodge Chairman 5 2012 AnnuAl RepoRt Board of Directors (From left to right): Scott G. toothaker, Kenneth e. Smith, Constance C. Shea, peter Dodge, Joseph M. Murphy, Gregg S. Hannah, Clyde H. lewis, thomas A. Colwell, Robert C. Carter, lauri e. Fernald, Robert M. phillips, Martha t. Dudman, David B. Woodside Relationships that connect Our Communities Maine is our home, and each year in our annual report, we acknowledge how fortunate we are to live and work here in this matchless place where small towns, safe communities, breathtaking scenery, and creative busi- nesses abound. This year we are grateful to the Witham family, Wyman’s, Friend & Friend, and John Wasileski for allowing us to tell their stories of loyalty, entrepreneurship, longevity, and innovation. Through many years, multiple generations, and an undying commitment to community, these customers represent Maine business at its finest. BAR HARBoR BAnKSHAReS 6 Witham Fishing Family Green Island, Maine Bert Witham’s family has been fishing family-owned Big Green Island since the late 1800’s. Bert’s grandfather was one of the owners of Rackcliff and Witham’s wholesale lobster company until the 1960’s. they did business with president Roosevelt and were the first to air freight lobsters, delivering them all over the country. the Witham family owned Witham’s lobster pound restaurant in Rockport. Bert’s father lobstered as a young man, and later ran a sardine factory, Green Island packing, with his brother. there are nine relatives still working the waters today. While “it’s in the blood” usually indicates a strong genetic propensity toward something, you might instead wonder if the Withams have salt water coursing through their veins. Bert’s wife, Donni, jokes that she dreads family gatherings because all they talk about is fishing—rules, regulations, and new products, with a dash of gossip mixed in for good measure. Despite the 3:00 a.m. wakeup time and the sometimes brutal weather, Bert feels blessed in his water-based profession, where enormous sea turtles, breaching whales, and breathtaking sunrises are all in a day’s work. He enjoys being his own boss and the freedom that it allows. Carrying on the family tradition, Bert’s sons Jason and taylor are also lobstermen. It’s too early to know if grandson Bodie will follow suit, but it certainly won’t be a surprise if he pulls on Grundens when he’s a bit older. Bert says, “We chose Bar Harbor Bank & trust because they’re family- oriented. they take the time to have one-on-one conversations and get to know us. they understand us and our business. We switched from a bigger bank, and the difference is undeniable.” our success comes from honest work (Left to right) Jason Witham holding son, Bodie, taylor Witham, Bert Witham 7 2012 AnnuAl RepoRt Jasper Wyman & Son Milbridge, Maine Wyman’s®, family owned and headquartered in Milbridge, Maine, has been in business since 1874 and a Bar Harbor Bank & trust customer for longer than anyone can remember. Wyman’s owns and leases more than 10,000 acres of the world’s most productive blueberry barrens both in Maine and Canada, and produces approximately 20%–25% of the world’s wild blueberry crop. Wild blueberries, nature’s no. 1 antioxidant fruit, differ from cultivated blueberries in several ways. Smaller, with a tart but sweet flavor, they are not planted but grow naturally in rocky open fields (“barrens”) in northeastern north America. Wild blueberries grow low to the ground in clusters on the stems, and are harvested through a combination of mechanical harvesters and traditional hand raking crews. Wyman’s three state-of-the-art processing, packing, and storage facilities run 24/7 during the season, quick-freezing the berries within 24 hours of harvest to lock in fresh fruit flavor and character. In recent years, Wyman’s has begun sourcing other fruits, including cranberries, strawberries, blackberries and raspberries. they sell their products on a non-branded commodity, private label, and company-branded basis to major manufac- turers and marketers of consumer food products, foodservice distributors, and retail consumers. Bob Mancini, Wyman’s Vp and Chief Financial officer, says “Bar Harbor Bank & trust’s people are wonderful to work with. From management to the branch team, they are very proactive and have a great appreciation for what Wyman’s does. BHBt has stood with Wyman’s through the best and worst of times, and I expect this relationship to endure for generations to come.” growwhere local businesses (Left to right) edward R. Flanagan—president & Ceo, Robert J. Mancini—Vp & Chief Financial officer BAR HARBoR BAnKSHAReS 8 Friend & Friend, “The Boys with the Toys” ellsworth and orono, Maine Cooper Friend’s grandfather and great-grandfather began selling cars in 1916 at Friend & Friend in newport, Maine. the rest is family history. Cooper’s dad added motorcycles to the mix in 1964 and Cooper opened the ellsworth shop in 1976 after finishing college. Since then, the business has grown to include two massive stores chock full of dependable and fun toys—motorcycles, AtV’s, snowmobiles, and all the trimmings. Cooper also owns Harley-Davidson stores in lewiston, Maine and new Rochelle, new York, and sold another in Burlington, Vermont. His son, Coop, a 2006 university of Maine graduate, recently joined the business, making it a five-generation enterprise. After a competitive soccer career and working in the ski industry, Coop brings a new generation of leadership with high energy and fresh thinking. With service as their focus, the “Boys with the toys” ride, race, and own what they sell and are zealous about matching every customer with the best vehicle for his or her needs and experience level. After all these years, they’re still shifting gears. Cooper says, “We’ve been in business for nearly 100 years, and we fully expect to be around for at least 100 more. Bar Harbor Bank & trust has been beside me since my early years and has helped me out at every turn. I’ve been around a lot of banks and I’ve never seen anything like the care and sincerity they show. they are genuinely interested in me and I honestly feel they are almost as passionate about my business as I am.” where our relationships last (Left to right) Cooper F. Friend, with son, “Coop” Cooper Friend, Jr. 9 2012 AnnuAl RepoRt John Wasileski, Sea Coast Management Company the Highlands of topsham | Highland Green | oceanView at Falmouth Convenience, connections, conservation, and choice…words that best describe John Wasileski’s Maine retirement communities. Wasileski, Maine resident and founder/owner of Sea Coast Management Company, operates Highland Green and the Highlands in topsham and oceanView at Falmouth. Whether seeking an active adult neighborhood, carefree apartment living, assisted living, or memory care, seniors can satisfy any life- style preference at his one-of-a-kind communities. A visionary passionate about environmental responsibility and historic preservation, Wasileski recently earned the Governor’s Award for Business excellence. His latest project, in the works for over five years, is the purchase of two schools adjacent to oceanView at Falmouth. He plans to build 36 luxury apartments and 35 highly energy-efficient homes on the 20-acre property as well as a medical arts space and adult day care facility. A new auditorium and a community center in the former school buildings are being designed in cooperation with the town of Falmouth. A hands-on leader, John makes a point to know every resident by name. that’s a tall order given that he owns three retirement communities with over 1,000 residents. His belief that “our residents want to be part of the community, not apart from it,” drives the development of communities that offer nearby access to shopping, recreation, nature, all senior services, colleges, and cultural attractions. Wasileski says, “I’m pleased to partner with Bar Harbor Bank & trust, a Maine community bank, where our residents can utilize services. In turn, these deposits generate capital BHBt can lend to businesses that create jobs in Maine. the money originates, stays, and circulates within the Maine economy.” and our communities thrive John B. Wasileski—owner, Developer, and Manager BAR HARBoR BAnKSHAReS 10 5-Year Selected Financial Data the following table sets forth selected financial data for the last five years. (in thousands, except per share data): 2012 2011 2010 2009 2008 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 $ 1,302,935 418,040 815,004 (8,097) 795,012 371,567 128,046 1,252,390 125,600 $ 1,167,466 381,880 729,003 (8,221) 722,890 320,283 118,250 1,151,163 111,135 $ 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 $ 50,838 13,867 36,971 1,652 35,319 7,709 25,618 17,410 4,944 $ 50,907 16,518 34,389 2,395 31,994 6,792 23,281 15,505 4,462 $ 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 $ 972,288 290,502 633,603 (5,446) 578,193 323,903 65,445 926,357 65,139 $ 53,594 26,403 27,191 1,995 25,196 6,432 20,513 11,115 3,384 $ 12,466 $ 11,043 $ 10,662 $ 10,350 $ 7,731 — — 653 1,034 — net income available to common shareholders $ 12,466 $ 11,043 $ 10,009 $ 9,316 $ 7,731 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 $ $ $ 3.20 3.18 1.17 36.62% 1.00% 9.93% 3.23% 8.87% 14.15% 15.78% 0.23% 0.99% 82.1% 1.21% $ $ $ 2.86 2.85 1.10 38.29% $ $ $ 2.65 2.61 1.05 39.43% $ $ $ 3.19 3.12 1.04 32.60% $ $ $ 2.63 2.57 1.02 38.78% 0.96% 9.94% 3.23% 9.32% 14.29% 16.06% 0.37% 1.13% 63.7% 1.77% 0.98% 10.07% 3.18% 9.01% 13.57% 15.41% 0.24% 1.21% 62.1% 1.95% 0.98% 11.65% 3.40% 10.35% 15.34% 17.14% 0.13% 1.17% 85.2% 1.37% 0.83% 11.87% 3.13% 6.61% 9.95% 11.60% 0.21% 0.86% 123.7% 0.70% Refer to the Bar Harbor Bankshares 2012 Annual Report on Form 10-K for a complete set of consolidated audited financial statements and accompany- ing notes. 11 2012 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, 2012 and 2011, and the related consolidated statements of income, comprehensive income, changes in shareholders’ equity, and cash flows for each of the years in the three-year period ended December 31, 2012 (not presented herein); and in our report dated March 18, 2013, 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. Boston, Massachusetts March 18, 2013 BAR HARBoR BAnKSHAReS 12 Consolidated Balance Sheets (in thousands, except share and per share data) Assets Cash and cash equivalents Securities available for sale, at fair value (cost of $405,769 and $371,211, respectively) 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, 2012 and December 31, 2011 Surplus Retained earnings Accumulated other comprehensive income: prior service cost and unamortized net actuarial losses on employee benefit plans, net of tax of ($207) and ($9), at December 31, 2012 and December 31, 2011, respectively net unrealized appreciation on securities available for sale, net of tax of $4,099 and $3,845, at December 31, 2012 and December 31, 2011, respectively portion of ottI attributable to non-credit gains (losses), net of tax of $74 and ($218), at December 31, 2012 and December 31, 2011, respectively total accumulated other comprehensive income less: cost of 605,591 and 646,742 shares of treasury stock at December 31, 2012 and December 31, 2011, respectively totAl SHAReHolDeRS’ eQuItY totAl lIABIlItIeS AnD SHAReHolDeRS’ eQuItY December 31, 2012 December 31, 2011 $ 14,992 418,040 18,189 815,004 (8,097) $ 8,720 381,880 16,068 729,003 (8,221) 806,907 19,255 4,935 7,633 12,984 720,782 16,090 3,158 7,377 13,391 $1,302,935 $1,167,466 $ 71,865 122,750 229,986 370,411 795,012 224,077 142,490 5,000 8,310 $ 62,648 99,120 206,704 354,418 722,890 175,813 139,470 5,000 6,043 1,174,889 1,049,216 9,051 26,693 93,900 9,051 26,512 86,198 (401) 7,954 144 7,697 (17) 7,464 (423) 7,024 (9,295) 128,046 (10,535) 118,250 $1,302,935 $1,167,466 Refer to the Bar Harbor Bankshares 2012 Annual Report on Form 10-K for a complete set of consolidated audited financial statements and accompany- ing notes. 13 2012 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 Credit and debit card service charges and fees net securities gains 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 Diluted Per Common Share Data: Basic earnings per Share Diluted earnings per Share Years ended December 31, 2012 2011 2010 $36,579 14,173 86 50,838 7,707 436 5,724 13,867 36,971 1,652 35,319 3,278 1,196 1,462 1,938 (1,170) 317 (853) 688 7,709 14,027 1,682 1,778 367 853 6,911 25,618 17,410 4,944 $34,854 16,006 47 $34,867 16,274 — 50,907 51,141 8,765 260 7,493 16,518 34,389 2,395 31,994 3,061 1,284 1,277 2,689 (2,796) 577 (2,219) 700 6,792 12,814 1,514 1,660 310 1,099 5,884 23,281 15,505 4,462 9,906 284 9,242 19,432 31,709 2,327 29,382 2,984 1,359 1,160 2,127 (898) — (898) 726 7,458 12,193 1,357 1,602 295 1,066 5,533 22,046 14,794 4,132 $12,466 $11,043 $10,662 — — 653 $12,466 $11,043 $10,009 3,901,118 18,651 3,860,474 3,782,881 45,821 18,140 3,919,769 3,878,614 3,828,702 $ 3.20 $ 3.18 $ 2.86 $ 2.65 $ 2.85 $ 2.61 (1)Included in other comprehensive income, net of taxes Refer to the Bar Harbor Bankshares 2012 Annual Report on Form 10-K for a complete set of consolidated audited financial statements and accompany- ing notes. BAR HARBoR BAnKSHAReS 14 2012 Financial Overview BUSINESS STRATEGY As a diversified financial services provider, Bar Harbor Bankshares pursues a strategy of achieving long-term sus- tainable growth, profitability, and shareholder value, without sacrificing its soundness. the Company works toward achieving these goals by focusing on increasing its loan and deposit market share in downeast, midcoast and central 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. 150 120 90 60 30 0 0 8000 6000 4000 2000 4.00 operating under a community banking philosophy, the Average Shareholders’ Equity Company’s key strategic focus is vigorous financial steward- ($ in thousands) ship, deploying investor capital safely yet efficiently for the best possible returns. the Company strives to provide unmatched service to its customers, while maintaining strong asset quality and a focus toward improving operating efficiencies. In managing its earning asset portfolios, 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 profit- ability 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. Non-Interest Income ($ in thousands) BUSINESS COMBINATIONS on August 10, 2012 the Bank acquired substantially all assets and assumed certain liabilities of Border trust Company (“Border trust”), a subsidiary of Border Bancshares, Inc., headquartered in Augusta, Maine. the Bank acquired $38.5 million of deposits and $33.6 million in loans, as well as three branch offices located in Kennebec and Sagadahoc counties. the Bank paid a core deposit premium of 3.85%, or $1.1 million, and purchased the loan portfolio, excluding selected non-performing loans, at a discount of 2.16%, or Net Income Available $749 thousand. In connection with this transaction, the to Common Shareholders Bank recorded goodwill of $1.8 million and a core deposit ($ in thousands) intangible of $783 thousand, or 2.7% of core deposits. the Bank recorded $863 thousand in non-recurring expenses in 2012 related to this transaction, including professional fees, employee severance and other conversion and integration related expenses. Diluted Earnings per Share $12,466 1.00% $3.18 1.00 2.00 3.00 2 1 0 2 2 1 0 2 0 1 0 2 1 1 0 2 8 0 0 2 9 0 0 2 0 1 0 2 1 1 0 2 8 0 0 2 9 0 0 2 0 0 1000 800 600 400 200 $3.18 15,000 12,000 9,000 6,000 3,000 $12,466 4.00 3.00 2.00 1.00 8 0 0 2 9 0 0 2 0 1 0 2 1 1 0 2 2 1 0 2 0 8 0 0 2 9 0 0 2 0 1 0 2 1 1 0 2 2 1 0 2 0 Net Income Available to Common Shareholders ($ in thousands) Diluted Earnings per Share 0.75 1.00 1.00% RESULTS OF OPERATIONS Earnings and Earnings per Share: For the year ended December 31, 2012, the Company reported record net income of $12.5 million, representing an increase of $1.4 million, or 12.9%, compared with 2011. the Company also reported record diluted earnings per share of $3.18 for 2012, representing an increase of $0.33, or 11.6%, com- pared with 2011. the Company’s 2012 earnings perfor- mance was highlighted by a $2.7 million or 7.6% increase in tax-equivalent net interest income, which was driven by a stable net interest margin and strong earning asset growth. 0.25 0.50 8 0 0 2 9 0 0 2 0 1 0 2 1 1 0 2 2 1 0 2 16 0 Return on Average Assets 9.93% $25,618 9 0 0 2 0 1 0 2 1 1 0 2 2 1 0 2 12 8 30,000 4 25,000 8 0 0 2 0 20,000 Return on Average Equity 15,000 10,000 150 120 90 60 80 30 60 0 40 $126 8 0 0 2 9 0 0 2 0 1 0 2 1 1 0 2 2 1 0 2 54.6% Average Shareholders’ Equity ($ in thousands) 5,000 Return on Average Equity and Average Assets: At December 31, 2012, the Company’s total shareholders’ equity stood at $128.0 million, compared with $118.3 million at year 40,000 end 2011, representing an increase of $9.8 million, or 35,000 $38,599 $7,709 8,000 2 1 0 2 2 1 0 2 0 1 0 2 1 1 0 2 8 0 0 2 9 0 0 2 0 1 0 2 1 1 0 2 8 0 0 2 9 0 0 2 20 0 0 16 12 8 4 0 40,000 35,000 30,000 25,000 20,000 15,000 10,000 5,000 0 1,400 1,200 1,000 800 600 400 200 0 $126 9.93% 8 0 0 2 9 0 0 2 0 1 0 2 1 1 0 2 2 1 0 2 8 0 0 2 9 0 0 2 0 1 0 2 1 1 0 2 2 1 0 2 Return on Average Equity Average Shareholders’ Equity ($ in thousands) $38,599 8,000 $7,709 8 0 0 2 9 0 0 2 0 1 0 2 1 1 0 2 2 1 0 2 8 0 0 2 9 0 0 2 0 1 0 2 1 1 0 2 2 1 0 2 0 Tax-Equivalent Net Interest Income ($ in thousands) Non-Interest Income ($ in thousands) $1,303 1,000 $815 8 0 0 2 9 0 0 2 0 1 0 2 1 1 0 2 2 1 0 2 8 0 0 2 9 0 0 2 0 1 0 2 1 1 0 2 2 1 0 2 150 120 90 60 30 0 6,000 4,000 2,000 800 600 400 200 0 Net Income Available to Common Shareholders Diluted Earnings per Share ($ in thousands) Return on Average Equity Net Income Available to Common Shareholders Diluted Earnings per Share ($ in thousands) Return on Average Equity 15000 Average Shareholders’ Equity 40 ($ in thousands) Return on Average Assets Tax-Equivalent Net Interest Income ($ in thousands) 15,000 12,000 9,000 6,000 3,000 0 1.00 16 12 8 4 0 40000 35000 30000 25000 20000 15000 10000 5000 0 1400 1200 1000 800 600 400 200 0 15000 12000 9000 6000 3000 0 30000 25000 20000 10000 5000 0 16 12 8 4 0 40000 35000 30000 25000 20000 15000 10000 5000 0 1400 1200 1000 800 600 400 200 0 4 3 2 1 0 1.00 0.75 0.50 0.25 0.00 80 60 20 0 8000 6000 4000 2000 0 150 120 90 60 30 0 1000 800 600 400 200 0 15000 12000 9000 6000 3000 0 30000 25000 20000 15000 10000 5000 0 4 3 2 1 0 1.00 0.75 0.50 0.25 0.00 80 60 40 20 0 Return on Average Assets Tax-Equivalent Net Interest Income ($ in thousands) Non-Interest Income ($ in thousands) Non-Interest Expense Efficiency Ratio ($ in thousands) Assets ($ in millions) 0.75 Loans ($ in millions) 8 0 0 2 9 0 0 2 0 1 0 2 1 1 0 2 2 1 0 2 0 Return on Average Assets 0.50 0.25 30,000 25,000 20,000 15,000 10,000 5,000 $25,618 54.6% 80 60 40 20 0 30,000 25,000 20,000 15,000 10,000 5,000 0 1,400 1,200 1,000 800 600 400 200 0 Non-Interest Expense ($ in thousands) 6,000 Efficiency Ratio Assets ($ in millions) Loans ($ in millions) 8 0 0 2 9 0 0 2 0 1 0 2 1 1 0 2 2 1 0 2 8 0 0 2 9 0 0 2 0 1 0 2 1 1 0 2 2 1 0 2 0 Tax-Equivalent Net Interest Income ($ in thousands) Non-Interest Income ($ in thousands) $1,303 1,000 $815 4,000 2,000 800 600 400 200 0 Non-Interest Expense Efficiency Ratio ($ in thousands) Assets ($ in millions) Loans ($ in millions) 8 0 0 2 9 0 0 2 0 1 0 2 1 1 0 2 2 1 0 2 0 8 0 0 2 9 0 0 2 0 1 0 2 1 1 0 2 2 1 0 2 Non-Interest Expense Efficiency Ratio ($ in thousands) 8 0 0 2 9 0 0 2 0 1 0 2 1 1 0 2 2 1 0 2 8 0 0 2 9 0 0 2 0 1 0 2 1 1 0 2 2 1 0 2 Assets ($ in millions) Loans ($ in millions) Net Income Available to Common Shareholders 1 Diluted Earnings per Share ($ in thousands) Return on Average Equity Average Shareholders’ Equity ($ in thousands) 4 3 2 1 0 1.00 0.75 0.50 0.25 0.00 80 60 40 20 0 15000 12000 9000 6000 3000 0 30000 25000 20000 15000 10000 5000 0 4 3 2 0 1.00 0.75 0.50 0.25 0.00 80 60 40 0 15000 12000 9000 6000 3000 0 30000 25000 20000 15000 10000 5000 0 150 120 90 60 30 0 800 600 400 200 0 6000 4000 2000 0 16 12 8 4 0 40000 35000 30000 25000 20000 15000 10000 5000 0 1400 1200 1000 800 600 400 200 0 8000 6000 4000 0 150 120 90 60 30 0 1000 800 600 400 0 16 12 8 4 0 40000 35000 30000 25000 20000 15000 10000 5000 0 1400 1200 1000 800 600 400 200 0 Non-Interest Expense Efficiency Ratio ($ in thousands) 20 Assets ($ in millions) 200 Loans ($ in millions) Non-Interest Expense Efficiency Ratio ($ in thousands) Assets ($ in millions) Loans ($ in millions) Return on Average Assets Tax-Equivalent Net Interest Income 2000 ($ in thousands) Non-Interest Income ($ in thousands) Return on Average Assets Tax-Equivalent Net Interest Income ($ in thousands) Non-Interest Income ($ in thousands) 1000 Net Income Available to Common Shareholders Diluted Earnings per Share ($ in thousands) Return on Average Equity Average Shareholders’ Equity 8000 ($ in thousands) Net Income Available to Common Shareholders ($ in thousands) 1.00 Diluted Earnings 1.00% per Share 1.00 0.75 0.50 0.25 0.75 1.00% 0.50 0.25 8 0 0 2 9 0 0 2 0 1 0 2 1 1 0 2 2 1 0 2 0 Return on Average Assets $12,466 $3.18 $126 15,000 12,000 9,000 4.00 $12,466 6,000 3.00 3,000 8 0 0 2 0 2.00 9 0 0 2 0 1 0 2 4.00 3.00 2.00 $3.18 1.00 16 12 1 1 0 2 2 1 0 2 8 0 0 2 9 0 0 2 0 1 0 2 1 1 0 2 2 1 0 2 8 0 16 12 8 4 9.93% 8 0 0 2 9 0 0 2 0 15,000 15 12,000 9,000 6,000 150 120 90 9.93% 150 120 90 0 1 0 2 60 1 1 0 2 2 1 0 2 $126 2012 AnnuAl RepoRt 60 30 0 8 0 0 2 9 0 0 2 0 1 0 2 1 1 0 2 2 1 0 2 3,000 8.3%. the Company’s return on average shareholders’ Net Income Available 1.00 to Common Shareholders equity amounted to 9.93% in 2012, compared with 9.94% ($ in thousands) in 2011. the Company’s 2012 return on average assets amounted to 1.00%, up from 0.96% in 2011. 0 2 1 0 2 2 1 0 2 0 1 0 2 1 1 0 2 8 0 0 2 9 0 0 2 0 1 0 2 1 1 0 2 8 0 0 2 9 0 0 2 Diluted Earnings per Share 0 4 0 30 9 0 0 2 8 0 0 2 1 1 0 2 0 1 0 2 Return on Average Equity trust and other financial services fees amounted to $3.3 million in 2012, compared with $3.1 million in 2011, repre- senting an increase of $217 thousand or 7.1%. this increase was principally attributed to increases in the value of assets under management and higher levels of fee income from Average retail brokerage activities. Reflecting new client relationships Shareholders’ Equity and some stability in the equity markets, at December 31, ($ in thousands) 2012, assets under management stood at $355.5 million, up $21.6 million or 6.5% compared with year-end 2011. 6,000 Return on Average Equity $38,599 40,000 30,000 35,000 8,000 2 1 0 2 2 1 0 2 0 1 0 2 1 1 0 2 8 0 0 2 9 0 0 2 0 Average Shareholders’ Equity ($ in thousands) $7,709 40,000 35,000 30,000 25,000 20,000 15,000 10,000 5,000 0 25,000 $38,599 20,000 15,000 10,000 5,000 0 8 0 0 2 8,000 6,000 $7,709 4,000 2,000 4,000 9 0 0 2 0 1 0 2 1 1 0 2 2 1 0 2 8 0 0 2 9 0 0 2 0 1 0 2 1 1 0 2 2 1 0 2 0 Tax-Equivalent 2,000 Net Interest Income ($ in thousands) Non-Interest Income ($ in thousands) 8 0 0 2 9 0 0 2 0 1 0 2 1 1 0 2 2 1 0 2 8 0 0 2 9 0 0 2 0 1 0 2 1 1 0 2 2 1 0 2 0 Tax-Equivalent Net Interest Income ($ in thousands) 1,400 Non-Interest Income ($ in thousands) $1,303 1,000 1,200 800 1,000 1,000 1,400 1,200 800 $1,303 For the year ended December 31, 2012, income generated 54.6% from service charges on deposit accounts amounted to $1.2 million, compared with $1.3 million in 2011, representing a decline of $88 thousand, or 6.9%. the decline in service charges on deposit accounts was principally attributed to declines 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 customers without their specific consent and to derive fees from overdraft protection programs in general. $815 400 1,000 200 600 600 800 600 800 200 400 600 2 1 0 2 2 1 0 2 0 1 0 2 1 1 0 2 8 0 0 2 9 0 0 2 8 0 0 2 0 0 400 1 1 0 2 $815 9 0 0 2 0 1 0 2 1 1 0 2 2 1 0 2 Efficiency Ratio 400 Loans ($ in millions) Assets ($ in millions) 200 0 9 0 0 2 8 0 0 2 1 1 0 2 0 1 0 2 2 1 0 2 200 For the year ended December 31, 2012, credit and debit card service charges and fees amounted to $1.5 million compared with $1.3 million in 2011, representing an increase of $185 thousand or 14.5%. this increase was principally attributed to continued growth of the Bank’s retail deposit base, higher levels of merchant credit card processing volumes, and continued success with a program that offers rewards for certain debit card transactions. Assets ($ in millions) Loans ($ in millions) 2 1 0 2 0 1 0 2 1 1 0 2 8 0 0 2 9 0 0 2 0 total securities gains, net of other-than-temporary impair- ment losses, amounted to $1.1 million in 2012, compared with $470 thousand in 2011, representing an increase of $615 thousand, or 130.9%. net 2012 securities gains were 30,000 25,000 20,000 15,000 10,000 5,000 8 0 0 2 9 0 0 2 0 1 0 2 1 1 0 2 2 1 0 2 Return on Average Assets Net Interest Income: net interest income is the principal 0 component of the Company’s income stream and repre- sents the difference or spread between interest generated from earning assets and the interest expense paid on depos- its and borrowed funds. Fluctuations in market interest rates, as well as volume and mix changes in earning assets and interest bearing liabilities, can materially impact net interest income. $25,618 30,000 20,000 25,000 60 80 80 15,000 $25,618 40 60 5,000 10,000 54.6% 20 For the year ended December 31, 2012, net interest income on a tax-equivalent basis amounted to $38.6 million, com- pared with $35.9 million in 2011, representing an increase of $2.7 million, or 7.6%. the increase in net interest income was principally attributed to average earning asset growth of $87.0 million, or 7.8%, combined with a stable net interest margin. the tax-equivalent net interest margin amounted to Non-Interest Expense 20 3.23% in 2012, unchanged compared with 2011. During ($ in thousands) 2012 the Bank managed to offset a decline in its weighted average earning asset yields by lowering the weighted aver- 0 0 age interest rate paid on total interest bearing liabilities. 2 1 0 2 2 1 0 2 2 1 0 2 8 0 0 2 0 1 0 2 1 1 0 2 9 0 0 2 0 1 0 2 1 1 0 2 8 0 0 2 9 0 0 2 9 0 0 2 0 1 0 2 8 0 0 2 9 0 0 2 0 1 0 2 1 1 0 2 8 0 0 2 40 0 0 Non-Interest Expense ($ in thousands) Efficiency Ratio 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 opera- tions. non-interest income is principally derived from finan- cial services including trust, investment management and brokerage activities, as well as service charges on deposit accounts, credit and debit card processing fees, net securi- ties gains, and a variety of other product and service fees. $12,466 $3.18 $126 8 0 0 2 9 0 0 2 0 1 0 2 1 1 0 2 2 1 0 2 0 8 0 0 2 9 0 0 2 0 1 0 2 1 1 0 2 2 1 0 2 0 Net Income Available Diluted Earnings to Common Shareholders per Share ($ in thousands) 8 0 0 2 9 0 0 2 0 1 0 2 1 1 0 2 2 1 0 2 8 0 0 2 9 0 0 2 0 1 0 2 1 1 0 2 2 1 0 2 Return on Average Equity Average Shareholders’ Equity ($ in thousands) 1.00% $38,599 8,000 $7,709 4.00 3.00 2.00 1.00 15,000 12,000 9,000 6,000 3,000 1.00 0.75 0.50 BAR HARBoR BAnKSHAReS 0.25 8 0 0 2 9 0 0 2 0 1 0 2 1 1 0 2 2 1 0 2 0 16 12 8 4 0 40,000 35,000 30,000 25,000 20,000 15,000 10,000 5,000 0 9.93% 150 120 90 60 30 0 6,000 4,000 2,000 16 8 0 0 2 9 0 0 2 0 1 0 2 1 1 0 2 2 1 0 2 8 0 0 2 9 0 0 2 0 1 0 2 1 1 0 2 2 1 0 2 0 Net Income Available to Common Shareholders Diluted Earnings per Share ($ in thousands) Return on Average Equity Average Shareholders’ Equity ($ in thousands) Return on Average Assets Tax-Equivalent Net Interest Income ($ in thousands) Non-Interest Income ($ in thousands) 15000 12000 9000 6000 3000 0 20000 15000 0 9000 30000 6000 25000 15000 12000 3000 0 30000 25000 20000 15000 10000 5000 0 4 3 2 1 0 1.00 0.75 0.50 0.25 0.00 80 60 40 0 4 3 2 1 0 1.00 0.75 0.50 0.25 0.00 80 60 40 20 0 16 12 8 4 0 40000 35000 30000 25000 20000 15000 10000 5000 0 1400 1200 1000 800 600 200 0 16 12 8 4 0 40000 35000 30000 25000 20000 15000 10000 5000 0 1400 1200 1000 800 600 400 200 0 8000 6000 4000 2000 0 150 120 90 60 30 0 1000 800 600 400 0 8000 6000 4000 2000 0 150 120 90 60 30 0 1000 800 600 400 200 0 Return on Average Assets Tax-Equivalent Net Interest Income ($ in thousands) Non-Interest Income ($ in thousands) Non-Interest Expense Efficiency Ratio ($ in thousands) Assets ($ in millions) Loans ($ in millions) 15,000 12,000 Return on Average Assets comprised of realized gains on the sale of securities amount- ing to $1.9 million, offset in part by other-than-temporary impairment losses of $853 thousand on certain available-for- sale, private label residential mortgage-backed securities. 3.00 $12,466 $3.18 4.00 Net Income Available 10000 Diluted Earnings to Common Shareholders per Share 20 ($ in thousands) 5000 Return on 400 Average Equity Average Shareholders’ Equity ($ in thousands) 200 Non-Interest Expense Efficiency Ratio ($ in thousands) Assets ($ in millions) Loans ($ in millions) 10,000 Net Income Available to Common Shareholders 5,000 ($ in thousands) Diluted Earnings 20 per Share 8 0 0 2 9 0 0 2 0 1 0 2 1 1 0 2 2 1 0 2 0 8 0 0 2 9 0 0 2 0 1 0 2 1 1 0 2 2 1 0 2 0 1.00 Non-Interest Expense 1.00% ($ in thousands) Efficiency Ratio 9,000 30,000 6,000 25,000 20,000 3,000 80 60 2.00 $25,618 1.00 54.6% 15,000 8 0 0 2 9 0 0 2 0 1 0 2 1 1 0 2 2 1 0 2 8 0 0 2 40 9 0 0 2 0 1 0 2 1 1 0 2 2 1 0 2 0 0 0.75 0.50 0.25 Non-interest Expense: For the year ended December 31, 2012, total non-interest expense amounted to $25.6 mil- lion, representing an increase of $2.3 million, or 10.0%, compared with 2011. the increase in non-interest expense was largely attributed to a $1.2 million or 9.5% increase in salaries and employee benefits, reflecting higher levels of employee severance payments including $263 thousand incurred in connection with the Border trust transaction, higher levels of employee incentive compensation, as well as normal increases in base salaries and changes in staffing 0 levels and mix. the year-over-year increase in salaries and employee benefits also reflected the recording of $130 thousand in employee health insurance credits, based on favorable claims experience, in 2011. Return on Average Assets 2 1 0 2 0 1 0 2 1 1 0 2 8 0 0 2 9 0 0 2 30,000 25,000 20,000 15,000 10,000 5,000 80 60 $25,618 the increase in 2012 non-interest expense was also attrib- uted to a $1.0 million or 17.5% increase in other operating expenses, principally reflecting $600 thousand in non- recurring expenses associated with the Border trust trans- action, including fees for professional services and a wide variety of conversion and integration related expenses. the increase in 2012 other operating expenses was additionally attributed to a $304 thousand or 132.7% increase in loan collection and other real estate owned expenses compared with 2011, largely reflecting higher levels of loan collection and foreclosure activity, as well as losses on the sale or write-down of owned properties. 54.6% 20 40 8 0 0 2 9 0 0 2 0 1 0 2 1 1 0 2 2 1 0 2 8 0 0 2 9 0 0 2 0 1 0 2 1 1 0 2 2 1 0 2 0 Non-Interest Expense ($ in thousands) 0 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 Efficiency Ratio 16 150 Tax-Equivalent Net Interest Income ($ in thousands) Non-Interest Income impairments, and significant non-recurring expenses, ($ in thousands) measures the relationship of operating expenses to reve- nues. low efficiency ratios are typically a key factor for high $126 performing financial institutions. For the year ended December 31, 2012, the Company’s efficiency ratio amounted to 54.6%, representing a modest improvement compared with the 55.0% reported in 2011. these ratios compared favorably to peer and industry averages. $1,303 9.93% 1,400 1,000 120 90 12 8 $815 1,200 60 800 4 30 8 0 0 2 9 0 0 2 800 600 1,000 Income Taxes: For the year ended December 31, 2012, total income taxes amounted to $4.9 million, representing an increase of $482 thousand, or 10.8%, compared with 2011. the Company’s effective tax rate amounted to 28.4% in 2012, compared with 28.8% in 2011. Fluctuations in Average the Company’s effective tax rate are generally attributed to Shareholders’ Equity 200 increases in the level of non-taxable income in relation to ($ in thousands) taxable income. Return on 400 Average Equity 200 600 400 2 1 0 2 2 1 0 2 0 1 0 2 1 1 0 2 8 0 0 2 9 0 0 2 0 1 0 2 1 1 0 2 0 0 8 0 0 2 9 0 0 2 0 1 0 2 1 1 0 2 2 1 0 2 0 8 0 0 2 9 0 0 2 0 1 0 2 1 1 0 2 2 1 0 2 0 40,000 FINANCIAL CONDITION Assets $38,599 Assets: the Company’s total assets increased $135.5 mil- ($ in millions) lion or 11.6% during 2012, ending the year at $1.30 billion. the increase in total assets was led by loan growth and, to a lesser extent, an increase in the securities portfolio. Loans $7,709 ($ in millions) 30,000 35,000 8,000 6,000 25,000 5,000 4,000 2,000 15,000 10,000 20,000 Loans: Consumer loans, which principally consisted of resi- dential real estate mortgage loans and home equity loans, comprised 45.3% of the Bank’s total loan portfolio at December 31, 2012. the Bank also serves the small busi- ness market throughout downeast, midcoast and central Maine. It offers business loans to individuals, partnerships, corporations, and other business entities for capital con- struction, real estate purchases, working capital, real estate development, and a broad range of other business pur- poses. At December 31, 2012, commercial business loans represented 52.9% of the Bank’s total loan portfolio. Tax-Equivalent Net Interest Income ($ in thousands) Non-Interest Income ($ in thousands) 2 1 0 2 2 1 0 2 0 1 0 2 0 1 0 2 1 1 0 2 8 0 0 2 9 0 0 2 8 0 0 2 1 1 0 2 9 0 0 2 0 0 1,400 1,200 1,000 800 600 400 200 0 $1,303 1,000 800 600 400 200 0 $815 8 0 0 2 9 0 0 2 0 1 0 2 1 1 0 2 2 1 0 2 Loans ($ in millions) 8 0 0 2 9 0 0 2 0 1 0 2 1 1 0 2 2 1 0 2 Assets ($ in millions) 17 2012 AnnuAl RepoRt total loans ended the year at $815.0 million, representing an increase of $86.0 million, or 11.8%, compared with December 31, 2011. Consumer loans, which principally consist of residential real estate mortgages, were up $55.2 million or 17.6% compared with December 31, 2011, largely reflecting the purchase of loans from Border trust as well as the purchase of a new england-based portfolio of residential mortgage loans. the Bank’s commercial loan portfolio increased $26.3 million, or 6.5%, compared with December 31, 2011, of which approximately $9.3 million was attributed to the Border trust transaction. tax-exempt loans also showed meaningful growth, posting an increase of $5.5 million, compared with year end 2011. Commercial loan growth has been generally challenged by economic and political uncertainty, a struggling economy and vigorous competition for quality loans. Bank management attributes the continued growth of its commercial loan portfolio to an effective business banking team, deep local market knowl- edge, sustained new business development efforts, and a resilient local economy that has been faring better than the nation as a whole. 0.40 Credit Quality: total non-performing loans ended the year at $9.9 million, representing a decline of $3.0 million or 23.6% compared with year-end 2011. one commercial real estate development loan to a local, non-profit housing authority in support of an affordable housing project accounted for $2.0 million or 20.6% of total non-performing loans, down from $2.8 million at December 31, 2011. At December 31, 2012, total non-performing loans repre- sented 1.21% of total loans, down from 1.77% at year end 2011. total net loan charge-offs amounted to $1.8 million in 2012, or 0.23% of total average loans outstanding, down from $2.7 million and 0.37% in 2011, respectively. 0.15 1.21% 0.23% 0.20 0.35 0.25 0.30 For the year ended December 31, 2012, the Bank recorded a provision for loan losses (the “provision”) of $1.7 million, representing a decline of $743 thousand or 31.0% com- pared with 2011. the provision recorded in 2012 was largely driven by the Bank’s charge-off experience, growth in the loan portfolio and still-depressed real estate values. the decline in the provision largely reflected improved credit quality metrics which continued to stabilize during 2012. In addition to improved charge-off experience, delinquent loans and potential problem loans expressed as a percentage of total loans were down slightly compared with December 31, 2011, while non-performing loans declined 23.6%. 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 of risk inherent in the current loan portfolio and adequate to provide for estimated probable losses. At December 31, 2012, the allowance stood at $8.1 million, representing a decline of $124 thousand or 1.5% compared with December 31, 2011. the small decline in the allowance was princi- pally attributed to improved credit quality metrics, as well as the elimination of certain loan-specific loss allowances for loans that were charged-off during the year. 3,500 3,000 2,500 2,000 1,500 1,000 500 0 8 0 0 2 9 0 0 2 3,500 10,000 8,000 6,000 $1,652 4,000 2,000 0 1 0 2 1 1 0 2 2 1 0 2 8 0 0 2 9 0 0 2 0 10,000 $8,097 0 1 0 2 1 1 0 2 2 1 0 2 0.10 0.05 0 1.21% 8 0 0 2 2.0 9 0 0 2 0 1 0 2 1 1 0 2 2 1 0 2 Non-Performing Loans to Total Loans 1.5 1.0 0.5 $418 300 0 8 0 0 2 9 0 0 2 0 1 0 2 1 1 0 2 2 1 0 2 Non-Performing Loans to Total Loans 8 0 0 2 0.40 9 0 0 2 0 1 0 2 1 1 0 2 2 1 0 2 Net Charge-Offs 0.35 to Average Loans 0.30 0.25 0.20 0.15 0.10 0.05 0 0.23% $795 8 0 0 2 9 0 0 2 0 1 0 2 1 1 0 2 2 1 0 2 Net Charge-Offs to Average Loans 3,000 Provision for Loan Losses ($ in thousands) 2,500 Allowance for Loan Losses ($ in thousands) 8,000 $8,097 6,000 1,500 1,000 2,000 4,000 $1,652 Investment Securities: During 2012 the securities portfolio continued to serve as a key source of earning assets and liquidity for the Bank. total securities ended the year at $418.0 million, up $36.2 million, or 9.5%, compared with December 31, 2011. Bank management considers securi- ties as a relatively attractive means to effectively leverage the Bank’s strong capital position, as securities are typically assigned a significantly lower risk weighting for the purpose of calculating the Bank’s and the Company’s risk-based capital ratios. the overall objectives of the Bank’s strategy Allowance for Loan Losses ($ in thousands) Provision for Loan Losses ($ in thousands) 2,000 500 2 1 0 2 2 1 0 2 0 1 0 2 1 1 0 2 8 0 0 2 9 0 0 2 1 1 0 2 0 1 0 2 9 0 0 2 8 0 0 2 0 0 800 700 600 500 400 300 2.0 1.5 1.0 0.5 0 500 400 200 100 0 0 1 0 2 1 1 0 2 2 1 0 2 200 100 0 8 0 0 2 500 9 0 0 2 8 0 0 2 800 9 0 0 2 0 1 0 2 1 1 0 2 2 1 0 2 $795 Securities ($ in millions) 400 $418 Deposits 700 ($ in millions) 600 300 200 100 0 500 400 300 200 100 0 8 0 0 2 9 0 0 2 0 1 0 2 1 1 0 2 2 1 0 2 8 0 0 2 9 0 0 2 0 1 0 2 1 1 0 2 2 1 0 2 Securities ($ in millions) Deposits ($ in millions) 3500 3000 2500 2000 1500 1000 500 2000 1500 1000 500 0 10000 8000 6000 4000 2000 6000 4000 2000 0 0.0 2.0 0.00 0.40 0 3500 0 10000 Non-Performing Loans to Total Loans Net Charge-Offs 0.35 to Average Loans Provision for 3000 Loan Losses ($ in thousands) 2500 Allowance for Loan Losses 8000 ($ in thousands) 300 0.0 Non-Performing Loans to Total Loans Net Charge-Offs to Average Loans Provision for Loan Losses ($ in thousands) Allowance for Loan Losses ($ in thousands) 2.0 1.5 1.0 0.5 500 400 200 100 1.5 1.0 0.5 300 200 100 0 0.40 0.35 0.30 0.25 0.20 0.15 0.10 0.05 800 700 600 500 400 300 200 100 0.30 0.25 0.20 0.15 0.10 0.05 0.00 600 500 400 300 200 100 0 0 500 0 800 Securities ($ in millions) 400 Deposits 700 ($ in millions) Securities ($ in millions) Deposits ($ in millions) 3500 3000 2500 2000 1500 1000 500 0 10000 8000 6000 4000 2000 0 Non-Performing Loans to Total Loans Net Charge-Offs to Average Loans Provision for Loan Losses ($ in thousands) Allowance for Loan Losses ($ in thousands) 2.0 1.5 1.0 0.5 0.0 500 400 300 200 100 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 Securities ($ in millions) Deposits ($ in millions) 2.0 BAR HARBoR BAnKSHAReS 1.5 0.40 0.35 0.30 0.25 1.21% 0.23% 0.5 1.0 0.20 0.15 0.10 for the securities portfolio include maintaining appropriate liquidity reserves, diversifying earning assets, managing interest rate risk, leveraging the Bank’s strong capital posi- tion, generating acceptable levels of net interest income and, when appropriate, generating realized gains on the sale of securities. the securities portfolio is comprised of mortgage- backed securities issued by u.S. Government agencies, u.S. Government-sponsored enterprises, and other non- agency, private-label issuers. the securities portfolio also includes tax-exempt obligations of states and political sub- divisions thereof. Non-Performing Loans to Total Loans Net Charge-Offs to Average Loans 0.05 2 1 0 2 2 1 0 2 1 1 0 2 9 0 0 2 0 1 0 2 8 0 0 2 0 1 0 2 1 1 0 2 8 0 0 2 9 0 0 2 0 0 3,500 3,000 2,500 10,000 8,000 $8,097 18 6,000 2,000 1,000 1,500 4,000 $1,652 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 posi- tion and supporting its earning asset portfolios. total bor- rowings ended the year at $371.6 million, representing an increase of $51.3 million, or 16.0%, compared with December 31, 2011. the increase in borrowings was uti- lized to help support the Bank’s 2012 earning asset growth, while lowering its dependence on brokered deposits obtained from the national market. Allowance for Loan Losses ($ in thousands) Provision for Loan Losses ($ in thousands) 2,000 500 2 1 0 2 0 1 0 2 9 0 0 2 8 0 0 2 1 1 0 2 1 1 0 2 8 0 0 2 9 0 0 2 0 1 0 2 2 1 0 2 0 0 500 400 300 200 100 0 $418 8 0 0 2 9 0 0 2 0 1 0 2 1 1 0 2 2 1 0 2 Securities ($ in millions) 800 700 600 500 400 300 200 100 0 $795 8 0 0 2 9 0 0 2 0 1 0 2 1 1 0 2 2 1 0 2 Deposits ($ in millions) Deposits: During 2012, the most significant funding source for the Bank’s earning assets continued to be retail depos- its, gathered through its network of fifteen banking offices throughout downeast, midcoast and central Maine. total deposits ended the year at $795.0 million, up $72.1 mil- lion, or 10.0%, compared with December 31, 2011. the deposits acquired in connection with the Border trust trans- action accounted for approximately $38.5 million or 53.4% of the growth in total deposits. Demand, noW and money market accounts combined were up $56.1 million or 15.2% compared with December 31, 2011, while time deposits were up $16.0 million, or 4.5%. Capital: Consistent with its long-term strategy of operating a sound and profitable organization, at December 31, 2012, the Company and the Bank continued to exceed regulatory requirements for “well-capitalized” financial institutions. Company management considers this to be vital in promot- ing 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, 2012, the Company’s tier I leverage, tier I Risk-based, and total Risk-based capital ratios were 8.87%, 14.15% and 15.78%, respectively. Shareholder Dividends: During 2012 the Company paid regular cash dividends on its common stock in the aggre- gate amount of $4.57 million, compared with $4.23 million in 2011. the Company’s 2012 dividend payout ratio amounted to 36.6%, compared with 38.3% in 2011. the total regular cash dividends paid in 2012 amounted to $1.17 per share of common stock, compared with $1.095 per share in 2011, representing an increase of $0.075 per share, or 6.9%. As previously announced, the Company’s Board of Directors recently declared a first quarter 2013 regular cash dividend of $0.305 per share of common stock, representing an increase of $0.02 or 7.0% compared with the first quarter of 2012. Based on the year-end 2012 price of BHB’s com- mon stock of $33.65 per share, the dividend yield amounted to 3.63%. 19 2012 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 Bar HarBor Bank & trust ManageMent Joseph M. Murphy* President & Chief Executive Officer Gerald Shencavitz* Executive Vice President, Chief Financial Officer & Chief Operating Officer Michael W. Bonsey* Executive Vice President & Chief Risk Officer Gregory W. Dalton* Executive Vice President, Business Banking Stephen M. Leackfeldt* Executive Vice President, Retail Banking & Operations senior Vice PresiDents Daniel A. Hurley, III Bar Harbor Trust Services Cheryl L. Mullen Sales & Marketing Marsha C. Sawyer Human Resources Vice PresiDent & senior oPerations officer Marcia T. Bender *Named Executive Officers regionaL Vice PresiDents Samuel S. McGee Business Banking Greater Ellsworth Adam L. Robertson Business Banking Central Region 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 David S. Cohen Controller & Assistant Treasurer Dawn L. Crabtree Operations Jacqueline M. Curtis Administrative Officer Audrey H. Eaton Retail & Residential Lending Joseph E. Hackett Business Banking Vicki L. Hall Business Banking Lisa A. Holmes Retail & Residential Lending Branch Relationship Manager, Machias James W. Lacasse Business Banking Robert J. Lavoie Information Systems assistant Vice PresiDents Stacie J. Alley Managed Assets Rebecca H. Emerson Branch Relationship Manager, Deer Isle Marjorie E. Gray Product Development & Research Donna B. Hutton Customer Service Center Gregory S. Jones Branch Relationship Manager, Rockland 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 Catherine M. Planchart Corporate Communications & Community Relations Bonnie A. Poland Retail Lending Support Terry E. Tracy Retail Banking Operations Ann G. Upham Retail & Residential Lending Jody C. Warren Branch Relationship Manager, Ellsworth Maureen T. Lord Regional Branch Relationship Manager, Machias & Lubec Carolyn R. Lynch Internal Audit Elena M. Martin Electronic Banking Shawn R. Megathlin Corporate Compliance J. Paul Michaud Application Support & Project Management Lisa L. Parsons Regional Market Manager, Mount Desert Island Russell A. Patton Risk & Information Security Chris P. Perry Regional Market Manager, Augusta, South China & Topsham Lester L. Porter Assistant Controller Carol J. Pye Retail & Residential Lending Lottie B. Stevens Retail Lending Support Lisa F. Veazie Regional Market Manager, Blue Hill & Deer Isle J. Christopher Young Regional Market Manager, Ellsworth, Milbridge, Winter Harbor & Customer Service Center Roger S. White Special Projects Kim W. Wright Finance Leita K. Zeugner Deposit Services BAR HARBoR BAnKSHAReS officers Faye M. Allen Deposit Services Holly J. Archer Retail & Residential Lending Judith W. Fuller Corporate Secretary Xin Liang Credit Administration Deborah A. Maffucci Finance Sara H. O’Connell Human Resources Lindsey W. Troxell Retail & Residential Lending Managers Susan L. Albee Customer Service Manager, Machias Laura A. Bridges Servicing & Quality Assurance Brenda B. Colwell Human Resources Brenda J. Condon Customer Service Manager, Deer Isle Michelle E. Curtis Branch Relationship Manager, Topsham & South China Christine R. Perry Customer Service Manager, Augusta & South China Andrew L. Somes Branch Relationship Manager, Winter Harbor Diane B. Thompson Customer Service Manager, Blue Hill 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 Peter C. Nicholson Trust Investment Officer Sarah C. Robinson Trust Officer Katheryn R. Fournier-Decoste Human Resources Operations officer Shelley E. Gray Customer Service Manager, Milbridge Krystal E. Jordan Branch Relationship Manager, Milbridge Virginia L. MacLeod Customer Service Manager, Southwest Harbor Dylan A. Mooney Assistant Manager Finance Debbie B. Norwood Regional Customer Service Manager, Northeast Harbor & Somesville Andrea L. Parker Accounts & Transaction Processing 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 3/1/2013) Abbott, Gwen M. Abbott, Jennifer C. Allen, Andrea l. Allen, Deena M. Andrews, Holly M. Atherton, June G. Austin, Vicki J. Barnes, Virginia H. Barton, Hannah R. Bates-Mitchell, Kristi l. Baudanza, erin F. Beal, Charleen l. Beal, Jenna M. Beal, Karen C. Blanchard, Amy H. Boudreau, Alain R. Brady, penny S. Brown, Heather l. Bryer, Katy A. Card, Amy l. Caouette, Marian R. Capristo, Kim R. Carter, Hillary A. Colson, theresa l. Conner, erin S. Coombs, April e. Coombs, Jessica l. Cormier, Sarah A. Crandall, Kevin J. Crosby, lisa l. Culshaw, Geneva e. Curtis, Cheryl D. Danielson, laura H. Davis, Sharon J. Douglass, Joanne M. Dupuy, Mia B. Durand, Catherine A. Dyndiuk, Brittany n. eaton, Julie M. Farnsworth, pamela J. Fernandez, Rebecca R. Foskett, Amy n. Gatcomb, Dena M. Griffin, Susanne M. Haley, Andrew J. Hall, Kelli M. Hamilton, Kirsten M. Hanscom, Betsy B. Harding, Christine l. Hastings, nancy B. Hawes, Bethany A. Hays, Mary D. Heal, Ivy M. Hepburn, Barbara F. Higgins, Cathy A. Hinckley, Melissa S. Hinkel, nicole S. Hodgkin, Samuel C. Howie, Jeanette l. Huffman, lynn l. Hunt, Marianne Hutchinson, Margaret l. Jackson, Cathy M. Jipson, Bruce W. 20 Kane, Hildie l. Kane, Maureen e. Kent, Rebecca H. Kief, Kathryn M. lachance, Janice e. lambert, Jane e. lamoureux, paula M. leblanc, Bonnie S. lee, nichole J. lewis, Stephanie M. lloyd, Marlene A. lovely, norma K. Mackenzie, Bailey e. Magee, Gabriella M. Mahoney, Sharon I. Marshall, Carol M. Matthews, Ashley S. McIntosh, lucy A. Millett, Marcia l. Mitchell, J. Aaron Mockler, Julie e. Mora, Angela R. 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. pendleton, Candy A. Ratner, Mary C. Redman, Julie A. Richards, Judy A. Riitano, Zachary J. Robbins, Amanda l. Robinson, Jane M. Rogers, Jennifer A. Saunders, Jennifer M. Schaefer, Frank J. Schoppee, Rhonda l. Schwartz, edith e. Scott-Henderson, Debra l. Sinclair, Jacklyn M. Smith, Samantha A. Smyth, David J. Snow, Andrea l. Stanley, Angela M. Stover, teri A. Swanberg, peter M. Swett, Andrea D. timmons, Bristol n. tucker, Jennifer M. tucker, Jyl e. urquhart, Kirstie A. Vanskike, Corey M. Wallace, Allyson M. Wasson, Krystal e. Webster, paula R. Weeks, Jeanne l. Wiberg, Katie G. Wood, Crystal n. **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. Board of Directors 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 Thomas A. Colwell Deer Isle, ME—Vice Chairman of the Board Retired President, Colwell Bros., Inc. Gregg S. Hannah Surry, ME Chartered Financial Analyst, Past Associate Professor of Business Management at Nichols College Clyde H. Lewis Sullivan, ME Retired Vice President and General Manager, Morrison Chevrolet, Inc. Robert C. Carter Machias, ME Owner of Carter Enterprises (rental manage- ment) and Retired Owner of Machias Motor Inn Joseph M. Murphy Mt. Desert, ME President and Chief Executive Officer of the Company and the Bank Martha T. Dudman Northeast Harbor, ME Fundraising Consultant and Author, Former President of Dudman Communications Lauri E. Fernald Mt. Desert, ME Funeral Director and an Owner in Jordan-Fernald Funeral Home Robert M. phillips Sullivan, ME Consultant to the Wild Blueberry Industry 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. David B. Woodside Bar Harbor, ME President and General Manager of Acadia Corporation Annual Meeting The Annual Meeting of shareholders of Bar Harbor Bankshares will be held at 11:00 a.m. on Tuesday May 21, 2013 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. Corporate Information 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 MKT, LLC (www.nyse.com), under the symbol BHB. Form 10-K Annual Report The Company refers you to its Annual Report on Form 10-K for fiscal year ended December 31, 2012 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 head- quarters 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, 2012. 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 Photography by Chris Pinchbeck/www.pinchbeckphoto.com Our Locations 15 Branches 220 Employees Winter Harbor 385 Main Street Winter Harbor, ME 04693 Business Banking, TrusT & Financial services OFFices Bangor One Cumberland Place Suite 100 Bangor, ME 04401 Ellsworth 135 High Street Ellsworth, ME 04605 Augusta 227 Water Street Augusta, ME 04330 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 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 South China 368 Route 3 China, ME 04358 Southwest Harbor 314 Main Street Southwest Harbor, ME 04679 Topsham 2 Main Street Topsham, ME 04086 1-888-853-7100 • www.BHBT.com 

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