NOTES TO FINANCIAL STATEMENTS DATED MARCHUNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
Quarterly Report pursuant to Section 13 or 15 (d) of the
Securities Exchange Act of 1934 (fee required)
For the fiscal year ended July 31, 1995 1)SummaryCommission File No.
841105-D
BAR HARBOR BANKSHARES
Maine 01-0393663
(State or other jurisdiction of interim financial statement adjustments.
The accompanying statements reflect(I.R.S. Employer
incorporation or organization) Identification No.)
P.O. Box 400, 82 Main Street, Bar Harbor, ME 04609-0400
Registrants's telephone number, including area code:
(207) 288-3314
Indicate by check mark whether the Registrant (1) has filed all
adjustments
(all of which are normal and recurring in nature) which are, in
the opinion of management, necessaryreports required to present a fair statementbe filed by Section 13 or 15 (d) of the
resultsSecurities Exchange Act of 1934 during the preceding 12 months
(or for such shorter period that the registrant was required to
file such reports), and (2) has been subject to such filing
requirements for the interim periods presented. The financial
statements should be read in conjunction withpast 90 days. { X }
Indicate the Consolidated
Financial Statements and related Notes included innumber of shares outstanding of each of the
Bank'sissuer s classes of common stock as of March 31, 1995:
Common Stock: 362,721
TABLE OF CONTENTS
FINANCIAL INFORMATION PAGE
ITEM I. Financial Statements
Consolidated Statement of Financial Condition
December 31, 1994 and June 30, 1995 2
Consolidated Statement of Earnings
Three months and six months ended
June 30, 1993, 1994, 1995 3
Consolidated Statement of Changes in
Stockholders Equity 4
Consolidated Statement of Cash Flows
Six months ended June 30, 1994 and 1995 5
Rate Volume Analysis
Six months ended June 30, 1994 and 1995 6
Rate Sensitivity Report
As of June 30, 1995 7
Notes to Financial Statements 8 - 10
ITEM II. Management s Discussion and Analysis
of Financial Condition and Results of
Operations 11-13
Signature Page 14
/TABLE
Bar Harbor Bankshares and Subsidiary
Consolidated Statement of Financial Condition
June 30, 1995 and December 31, 1994
June 30 December 31
1995 1994
ASSETS
Cash and due from Banks $7,923,517 $9,714,713
Federal Funds Sold 0 0
Investment Securities
Securities Held to Maturity 95,544,872 85,080,071
Securities available for Sale 6,281,737 6,238,887
Gross Loans 198,655,950 185,993,806
Allowance for possible
Loan losses ( 4,105,557) (3,891,835)
Net Loans 194,550,393 182,101,971
Premises and Equipment 6,291,108 5,566,224
Other Assets __8,448,139 7,985,584
TOTAL ASSETS $319,039,766 $296,687,450
LIABILITIES AND STOCKHOLDERS EQUITY
LIABILITIES
Deposits
Demand Deposits $28,955,671 $30,124,536
NOW Accounts 35,102,385 37,951,497
Savings Deposits 59,111,542 61,981,439
Time $100,000 and over 11,018,091 7,977,495
Other Time 104,121,533 87,509,593
TOTAL DEPOSITS 238,309,222 225,544,560
Securities Sold Under
Repurchase Agreements 21,617,337 13,947,903
Advances from Federal Home
Loan Bank 24,950,000 25,000,000
Other Liabilities 3,117,548 3,434,203
TOTAL LIABILITIES 287,994,107 267,926,666
Capital Stock, Par Value $10
Authorized 600,000 Shares
Issued 361,967 in 1994 and
362,721 in 1995 3,627,210 3,619,670
Surplus 7,368,696 7,314,408
Retained Earnings 21,310,442 19,118,679
Net Unrealized Appreciation on
Securities available for sale,
Net of tax of $40,857 in 1995 and
$24,742 in 1994 79,311 48,027
Less: Cost of 20,000 shares
of Treasury Stock (1,340,000) (1,340,000)
TOTAL STOCKHOLDERS EQUITY 31,045,659 28,760,784
TOTAL LIABILITIES AND ____________ ____________
STOCKHOLDERS EQUITY $319,039,766 $296,687,450
/TABLE
The accompanying notes are an integral part of these consolidated
financial statements.
BAR HARBOR BANKSHARES AND SUBSIDIARY
CONSOLIDATED STATEMENT OF EARNINGS
(UNAUDITED)
3 MONTHS 3 MONTHS 3
MONTHS 6 MONTHS 6 MONTHS 6 MONTHS
ENDING ENDING
ENDING ENDING ENDING ENDING
6/39/95 6/30/94
6/30/93 6/30/95 6/30/94 6/39/93
Interest & Fees on Loans $4,796,211 $3,848,292
$3,636,906 $9,209,216 $7,537,524 $7,153,008
Interest & Dividends on
Investment Securities:
Taxable Interest Income 1,368,420 1,136,156
1,166,608 2,611,743 2,139,917 2,381,919
Non-taxable Interest Income 216,378 205,881
215,499 431,748 410,532 433,219
Dividends 103,688 94,370
59,221 208,064 148,533 110,368
Federal Funds Sold 33,277 11,632
1,783 49,351 27,453 5,621
Total Interest Income 6,517,974 5,296,331
5,080,017 12,510,122 10,263,959 10,084,135
Interest on deposits 2,049,437 1,396,604
1,379,273 3,844,035 2,732,410 2,828,302
Interest in Short Term
Borrowings 610,616 482,583
339,652 1,186,024 826,498 657,697
Total Interest Expense 2,660,053 1,879,187
1,718,925 5,030,059 3,558,908 3,485,999
Net Interest Income 3,857,921 3,417,144
3,361,092 7,480,063 6,705,051 6,598,136
Provision for Loan Losses 240,000 240,000
270,000 488,000 480,000 540,000
Net Interest Income after ________
________
________ ________ ________ ________
Provision for Loan Losses 3,617,921 3,177,144
3,091,092 7,000,063 6,225,051 6,058,136
Other Income 937,900 914,556
920,761 1,821,506 1,808,449 1,740,882
Investment Security Gains 0 7,500
0 0 25,962 0
Other Expenses:
Salaries & Employee Benefits 1,185,823 1,232,886
1,095,635 2,394,346 2,427,526 2,227,725
Other 1,220,050 1,242,582
1,280,889 2,393,096 2,301,614 2,238,710
Investment Securities Losses 0 0
0 0 0 0
Income before Income Taxes 2,149,948 1,623,732
1,635,329 4,034,127 3,330,322 3,332,583
Income Tax Expense 649,596 495,700
485,100 1,225,466 1,010,514 1,047,527
Net Income $1,500,352 $1,128,032
$1,150,229 $2,808,661 $2,319,808 $2,285,056
Earnings Per Share:
Based on 341,454 shares for
1993; 341,967 for 1994; and
342,721 shares for 1995 $4.38 $3.30
$3.37 $8.20 $6.78 $6.69
Dividends Per Share
$1.80 $1.50 $1.25
/TABLE
BAR HARBOR BANKSHARES AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS EQUITY
QUARTERS ENDED JUNE 30, 1994 AND 1995
Net unrea- Net
ized loss Stock-
Capital Retained
Treasury on equity holders
Stock Surplus Earnings
Stock securities Equity
Balance 12-31-93 $3,614,540 $7,280,550 $15,469,806
($1,340,000) ($37,566) $24,987,330
Net earnings 2,319,808
2,319,808
Cash dividends declared
(512,950) (512,950)
Net unrealized loss
on marketable equity
securities
(157,650) (157,650)
Sale of stock (513 shares) 5,130 33,858
38,988
__________
__________
__________ __________ __________
__________
Balance 06-30-94 $3,619,670 $7,314,408 $17,276,664
($1,340,000) ($195,216) $26,675,526
Balance 12-31-94 $3,619,670 $7,314,408 $19,118,678
($1,340,000) $48,027 $28,760,783
Net Earnings 2,808,661
2,808,661
Cumulative effect to record
appreciation on securities
available for sale
0
Cash Dividends Declared (616,897)
(616,897)
Net unrealized appreciation
on securities available
for sale, net of tax of $40,857
31,284 31,284
Sale of stock (754 shares) 7,540 54,288
61,828
________ _________ __________
__________ __________ __________
Balance 06-30-95 $3,627,210 $7,368,696 $21,310,442
($1,340,000) $79,311 $31,045,659 PAGE>
BAR HARBOR BANKSHARES AND SUBSIDIARY
CONSOLIDATED STATEMENT OF CASH FLOWS
(UNAUDITED)
JUNE 30, JUNE 30,
1995 1994
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income $2,808,661 $2,319,808
Adjustments to reconcile net earnings to
net cash provided by operating activities:
Depreciation 282,841 272,258
Provision for Loan Losses 480,000 480,000
Net Securities (Gains) Losses 0 (7,500)
Net Amortization of Bond Premium 84,464 268,294
Net Change in Other Assets (478,670)(1,017,309)
Net Change in Other Liabilities (316,655) 589,280
Net Cash Provided by
Operating Activities 2,860,641 2,904,831
Cash Flows from Investing Activities:
Proceeds from the Maturities and
Principal Payments on Investments including
Mortgage Backed securities 4,582,527 7,590,517
Proceeds from the Sale of Interest
Bearing Investments 0 4,320,599
Proceeds from the Sale of
Equity Securities 0 0
Purchase of Investment Securities (15,127,243)(23,169,678)
Net Loans Made to Customers (12,928,422)(12,021,470)
Capital Expenditures (1,007,725) (1,034,990)
Net Cash Used in Investing Activities (24,480,863)(24,315,022)
Cash Flows from Financing Activities:
Net Change in Deposits 12,764,661 12,590,257
Increase in Repurchase Agreements 7,669,434 2,207,181
Net Change in Other Borrowings (50,000) 9,000,000
Proceeds from Sale of Capital Stock 61,828 38,988
Payment of Dividends (616,897) (512,950)
Net Cash Provided by
Financing Activities 19,829,026 23,323,476
Net Increase in Cash and
Cash Equivalents (1,791,196) 1,913,285
Cash and Cash Equivalents at
Beginning of Quarter 9,714,713 6,134,371
Cash and Cash Equivalents
at End of Quarter $7,923,517 $8,047,656
Supplemental Disclosures of Cash Flow Information:
Cash Paid During the Year for:
Interest $4,995,817 $3,702,160
Income Taxes $1,210,679 $ 679,681
/TABLE
See accompanying Notes to Consolidated Financial Statements
RATE VOLUME ANALYSIS
The following table represents a summary of the changes in
interest earned and interest paid as a result of changes in rates
and changes in volumes.
For each category of earning assets and interest-bearing
liabilities, information is provided with respect to changes
attributable to change in rate (change in rate multiplied by old
volume) and change in volume (change in volume multiplied by old
rate). The change in interest due to both volume and rate has
been allocated to volume and rate changes in proportion to the
relationship of the absolute dollar amounts of the change in
each.
[CAPTION] YEAR-TO-DATE FIGURES AS OF JUNE 30, 1995
COMPARED TO JUNE 30,1994
INCREASES (DECREASES) DUE TO:
VOLUME RATE NET
Loans $1,096,962 $574,730 $1,671,692
Taxable Securities 257,688 273,669 531,357
Tax Exempt Securities 625 20,591 21,216
Federal Funds Sold and
Money Market Fund 4,077 17,821 21,898
TOTAL EARNING ASSET $1,359,352 $886,811 $2,246,163
Deposits $405,121 $706,504 $1,111,625
Borrowings (8,862) 368,388 359,526
TOTAL INTEREST BEARING
LIABILITIES $ 396,259 $1,074,892 $1,471,151
NET CHANGE IN INTEREST 963,093 (188,081) 775,012
[CAPTION] YEAR-TO-DATE FIGURES AS OF JUNE 30, 1994
COMPARED TO JUNE 30,1993
INCREASES (DECREASES) DUE TO:
VOLUME RATE NET
Loans $900,126 $(515,610) $384,516
Taxable Securities 214,708 (418,545) (203,837)
Tax Exempt Securities (17,665) (5,022) (22,687)
Federal Funds Sold and
Money Market Fund 20,276 1,556 21,832
TOTAL EARNING ASSET $1,117,445 ($937,621) $179,824
Deposits $234,153 ($330,045) $(95,892)
Borrowings 148,555 20,246 168,801
TOTAL INTEREST BEARING
LIABILITIES $382,709 ($309,799) $72,909
NET CHANGE IN INTEREST $734,737 ($627,822) ($106,915)
/TABLE
INTEREST RATE SENSITIVITY ANALYSIS
AS OF JUNE 30, 1995
(UNAUDITED)
Amounts in Thousands
The following table sets forth the amounts of interest-earning
assets and interest-bearing liabilities outstanding at June 30,
1995 which are anticipated by the Bank, based upon certain
assumptions, to reprice or mature in each of the future time
periods shown.
ONE TO GREATER
DAILY TOTAL TO TOTAL
TO FIVE THAN FIVE
FLOATING 90 DAYS ONE
YEAR YEARS YEARS TOTAL
Loans - Fixed Rate $0 $3,479
$12,190 $23,324 $19,015 $54,529
- Variable Rate 0 59,496
133,543 6,917 0 140,460
Investments 0 14,738
36,406 47,052 18,190 101,648
Federal Funds Sold 0 0
0 0 0 0
Interest Rate Swap 0
5,000 5,000 0 10,000
Total Earning Assets 0 $77,713
187,139 $82,293 $37,205 $306,637
Deposits 0 52,892
121,871 24,746 91,664 238,281
Repurchase Agreements 0 20,370
22,870 0 0 22,870
Borrowings 0 7,950
24,950 0 0 24,950
Interest Rate Swap 0 0
10,000 0 0 10,000
Total Sources 0 81,212
179,691 24,746 91,664 296,101
Net Gap Position 0 (3,499)
7,448 57,547 (54,459) 10,536
Cumulative Gap $0 ($3,499)
$7,448 $64,995 $10,536 $10,536
Rate Sensitive Assets/
Rate Sensitive Liabilities 0.0% 95.69%
104.14% 332.55% 40.59% 103.56%
/TABLE
NOTES TO FINANCIAL STATEMENTS DATED JUNE 30, 1995
1. Summary of interim financial statement adjustments. The
accompanying statements reflect all adjustments (all of
which are normal and recurring in nature) which are, in the
opinion of management, necessary to present a fair statement
of the results for the interim periods presented. The
financial statements should be read in conjunction with the
Consolidated Financial Statements and related Notes included
in the Bank s 1994 Annual Report.
MARCH 31, 1995
CARRYING MARKET
2)INVESTMENT SECURITIES: VALUE VALUE
a: U.S.[CAPTION] JUNE 30, 1995
CARRYING MARKET
VALUE VALUE
2. INVESTMENT SECURITIES:
a) U. S. Treasury and other
government agencies $64,274,708 $62,820,680
b: States of the U.S. and other
political subdivisions 14,390,108 14,760,746
c: Other securities 13,942,069 13,724,342
Total Securities $92,606,885 $91,305,768
March 31, December 31,
3)LOANS: 1995 1994
a: Commercial, agricultural
and other loans $41,216,434 $41,221,396
b: Real Estate - Construction 5,561,341 7,980,026
c: Real Estate - Mortgage 128,056,793 121,491,0
d: Installment loans 15,624,845 15,301,322
Total Loans $190,459,413 $185,993,806
4)CHANGES IN ALLOWANCE FOR POSSIBLE LOAN LOSSES:
March 31, March 31,
1995 1994
Balance, beginning January 1: $3,891,835 $3,369,387
Provision charged to income 240,000 240,000
Recoveries of amounts charged 31,964 22,508
Losses charged to provision 103,501 47,691
Balance, ending March 31 $4,060,298 $3,584,204
5)The aggregate dollar amount of loans made to directors,
executive officers or principal holders of equity securities
as of March
government agencies $69,625,783 $69,396,024
b) States of the U.S. and other
political subdivisions 14,343,346 14,812,621
c) Other securities 17,857,481 17,764,621
TOTAL SECURITIES $101,826,609 $101,973,266
Securities held to maturity 95,544,872 95,691,529
Securities held for sale 6,281,737 6,281,737
$101,826,609 $101,973,266
JUNE 30, DECEMBER 31,
1995 1994
3. LOANS:
a) Commercial, agricultural and
other loans $45,415,301 $41,221,396
b) Real Estate - Construction 6,076,619 7,980,026
c) Real Estate - Mortgage 130,940,157 121,491,062
d) Installment loans 16,223,873 15,301,322
TOTAL LOANS $198,655,950 $185,993,806
JUNE 30, JUNE 30,
1995 1994
4. CHANGES IN ALLOWANCE FOR POSSIBLE LOAN LOSSES:
Balance, beginning January 1 $3,891,835 $3,369,387
Provision charged to income 480,000 480,000
Recoveries of amounts charged 56,182 78,601
Losses charged to provision 322,460 226,301
BALANCE, ENDING JUNE 30 $4,105,557 $3,701,687
/TABLE
5. The aggregate dollar amount of loans made to directors,
executive officers or principal holders of equity securities
as of June 30, 1995 and December 31, 1994 respectively were:
Aggregate amount, beginning 1-1 $3,409,868 $3,482,587
New loans 190,296 862,194
Repayments 302,375 934,913
Aggregate amount, ending 3-31-95 $3,297,789
Aggregate amount, ending 12-31-94 $3,409,868
March 31, December 31,
6)OTHER ASSETS: 1995 1994
a: Interest earned but not paid on:
Loans $1,617,074 $1,286,864
Investments 1,083,082 907,931
b: Other Real Estate Owned 422,807 611,054
7)INCOME TAXES:
The company adopted Financial Accounting Standards No.
109 "Accounting for Income Taxes" effective January 1, 1993.
The standard requires adoption of a liability method of
accounting for income taxes. The accounting change had no
effect on the company's net income or retained earnings.
Components of income tax expense for the period ended March
Aggregate amount, beginning 1-1 $3,409,868 $3,482,587
New loans 239,934 862,194
Repayments 326,514 934,913
Aggregate amount, ending 6-30-95 3,323,288
Aggregate amount, ending 12-31-94 3,409,868
JUNE 30, DECEMBER 31,
1995 1994
6. OTHER ASSETS:
a) Interest earned but not paid on:
Loans $1,971,184 $1,286,864
b) Other Real Estate Owned 339,264 611,054
7. INCOME TAXES:
The company adopted Financial Accounting Standards No. 109
Accounting for Income Taxes effective January 1, 1993. The
standard requires adoption of a liability method of
accounting for income taxes. The accounting change had no
effect on the company s net income or retained earnings.
Components of income tax expense for the period ended June
30, 1995 are as follows:
Current
Federal $651,499
State 26,184
$677,683
Deferred (101,813)
$575,870
Actual tax expense differs from the expected tax
expense computed by applying the applicable federal corporate
income tax rate of 34% is as follows for the three months ended
March 31,
Current
Federal $1,293,741
State 42,682
$1,336,423
Deferred (110,957)
$1,225,466
Actual tax expense differs from the expected tax expense
computed by applying the applicable federal corporate income
tax rate of 34% is as follows for the six months ended June
30, 1995:
Computed tax expense $508,429
Tax exempt interest (81,443)
Other 148,884
$575,870
At March 31,
Computed tax expense $1,021,005
Tax exempt interest (167,264)
Other 371,726
$1,225,467
/TABLE
At June 30, 1995, items giving rise to the deferred income
tax assets and liabilities, using a tax rate of 34%, are as
follows:
ASSET LIABILITY
Allowance for possible losses
on loans and real estate owned $1,232,180
Deferred and accrued employee
benefits 884,785
Deferred loan origination fees 143,373
Securities losses not currently
deductible 19,595
Core deposit intangibles 121,447
Depreciation 161
Other 8,595
$2,409,975 $161
No valuation allowance is deemed necessary for the deferred tax
asset.
8)
ASSET LIABILITY
Allowance for possible losses
On loans and real estate owned $1,242,968
Deferred and accrued
employee benefits 890,831
Deferred loan origination fees 130,317
Securities losses not currently
deductible 19,595
Core deposit intangibles 116,217
Depreciation 1,998
Other 17,031
$2,418,957 $ 0
No valuation allowance is deemed necessary for the deferred
tax asset.
8. INCOME TAX EXPENSE:
1995 1994
Federal Income Tax $549,686 $491,473
State Income Tax 26,184 23,341
1995 1994
Federal Income Tax $1,182,784 $964,856
State Income Tax 42,682 45,658
/TABLE
MANAGEMENT S DISCUSSION AND ANALYSIS
The results of operations for June 30, 1995 as compared to
June 30, 1994 show similar growth in the balance sheet as from
1993 to 1994 with total assets growing almost 13.0% in both
comparisons. The major changes are found in the investment and
loan portfolios. The investment portfolio, which has grown by
more than $12,000,000, has grown predominantly in the area of
USGovernment agency debentures which were purchased with the
intent to hold to maturity. The Bank s available for sale
portfolio is very small, but has increased its appreciation of
net unrealized gains to $79,000 as of June 30, 1995. In the loan
portfolio, which has grown by $23,000,000 in the past twelve
months, the Bank s concentration has been through the extension
to its customers of loans secured by real estate totaling
$16,700,000 more than one year ago.
Funding for the asset growth has come from increases in
deposits totalling $22,000,000 and predominantly from interest
bearing certificates of deposit. As opportunities have surfaced
to attract lower cost deposits and repurchase agreements,
advances from the Federal Home Loan Bank have not increased.
Short term borrowings will be reduced through seasonal deposit
growth, investment maturities and/or calls and principal paydowns
from the Bank s mortgage backed securities portfolio.
Liquidity is measured by the Bank s ability to meet cash
needs at a reasonable cost or minimum loss to the Bank. Liquidity
management involves the ability to meet cash flow requirements of
its customers, which may come from depositors withdrawing funds
or borrowers requiring funds to meet credit needs. Without
adequate liquidity management, the Bank would not be able to meet
the needs of the individuals and communities it serves. The
Bank s policy is to maintain its liquidity position at a minimum
of 5% of total assets. At June 30, 1995 the Bank has liquidity in
excess of 10% in its balance sheet.
How the changes in the balance sheet have affected the Bank
may be viewed through the earnings statement for the periods
ending June 30, 1993, 1994 and 1995. Overall, the net earnings
for the Bank are $489,000 ahead of last year s first six months
earnings which represents a 21% increase. Net interest income for
the first six months of 1995 has added strong earnings and is
affected by rates, volumes and the mix of earning assets and
interest bearing liabilities. Increases in the loan portfolio
have afforded the Bank additional interest income of $1,097,000
due to increases in volumes, with further increases of $575,000
due to changes in rates. The Bank increased its base lending rate
by 125 basis points between June 30, 1994 and June 30, 1995.
Although only a portion of loans are immediately affected by
changes in the Bank s base rate, the effect of the increases has
over time increased the yields in the portfolio. Loan yields have
increased by 55 basis points over the past twelve months and
represents the first increase in several years. Decreases in
yields experienced in 1994 and 1993 were 55 and 64 basis points
respectively. Interest on investments has also increased both due
to volumes ($262,000) and to increased rates ($312,000). Similar
to the loan yields, 1995 is the first year in several in which
the overall investment yield increased rather than decreased.
Yields on investments have increased by 47 basis points during
the past year while experiencing 77 and 72 basis point drops in
1994 and 1993 respectively. It is the boost from the increases in
rates in the Bank s earning assets that have helped to offset the
increases seen in liability costs as described below.
As interest rates began to rise on earning assets, rates
have likewise risen on the liability side of the balance sheet
with the cost of deposited funds increasing from June 1994 to
June 1995 by 64 basis points. Additionally, rates rose on
borrowed funds during the past twelve months by over 100 basis
points. Due to this increase in borrowed funds costs, the Bank
elected to promote certificates of deposit early in 1995, locking
in acceptable rates for the Bank which were lower than
alternative sources of funding. Taking into consideration the
increased cost of borrowings and the increased volumes in
certificates of deposit, the Bank s overall cost of purchased
funds increased by $1,471,000 when compared to June of 1994. With
increases on both sides of the balance sheet, the Bank s earnings
remain strong with its net interest income $775,000 more than one
year ago.
With regards to interest rate sensitivity, the Bank is
positioned well for any interest rate cycle with only $7,000,000
more of its earning assets repricing within a year when compared
to its liabilities. On the shorter run (out to 90 days), the Bank
has $3,000,000 more in liabilities which are sensitive to rate
changes than assets which, although small in significance, is
timed well for the reduction of 25 basis points taken by the
Federal Reserve on July 6, 1995.
Due to changes in the methodology used for computing the
reserve for possible loan losses, the Bank increased its ratio to
gross loans to over 2% beginning in 1993 and through June 30,
1995 has maintained that reserve to loan ratio. The Bank reviews
its allocation to the reserve on a monthly basis and funds the
reserve as deemed necessary. Losses for 1995 were originally
estimated at $950,000 with $322,000 charged off through June 30,
1995 and $226,000 charged off in the first six months in 1994.
Included in loans on a non-accrual basis as of June 30, 1995 are
two large credits relating to the fishing industry. After quarter
end, one of these loans with a balance of approximately $790,000
was resolved with stronger guarantees and was taken off the non-
accrual list. The amounts represented below are the total dollars
outstanding for the first six months of each year listed.
CATEGORY 1995 1994 1993
90-day past due and
Still accruing 510,267 645,920 1,150,195
Non-accruing 3,838,118 2,627,314 2,984,000
4,358,385 3,273,234 4,134,195
Gross loans $198,655,950 $175,399,428 $154,217,991
Percentage of
Gross loans 2.19% 1.87% 2.68%
In reviewing non-interest income, the Bank experienced an
almost flat year ($13,000 increase). Both 1994 and 1993 showed
increases as compared to their respective previous years. 1994
increased by $67,000 whereas 1994 experienced a $105,000 increase
over 1992. Throughout 1992 and 1994, the Bank witnessed
significant growth from its commitment to its customers and
communities through its continued efforts in the residential real
estate market. The selling of mortgages in the secondary market
has generated fees on sold mortgages as well as servicing fees on
these loans. During the first six months of 1994 the Bank earned
almost $193,000 from fees generated by the secondary mortgage
program. This compares to $125,500 and $56,500 for 1994 and 1995
respectively. The decline in income generated from the sale of
residential mortgages through the secondary market are directly
related to the interest rate cycle and as rates have risen, sales
and refinances of homes have dropped. The fees generated in the
granting of residential mortgages during the falling rate
interest cycle of the early 1990s is now translated into earnings
through the servicing of those loans which total over $57,000,000
in outstanding balances and totals $132,500 in income thus far in
1995.
Salary and employee benefits for 1995 are actually one
percent below 1994's expenses and compare favorably with 1994
which shows a $200,000 (or 9%) increase over 1993. The increase
in 1994 represents increases in compensation of 5% and costs
incurred with the addition of a deferred plan for certain senior
officers in light of the termination of the defined pension plan.
This increase is comparable to the $160,000 or 7.7% increase
experienced in 1994 as compared to 1992. 1993 was the year of
adoption of FASB 106 pertaining to postretirement benefits and
the expense incurred pertained to future benefits for employees.
With regards to other expense, 1995 marks the third year in
a row in which increases in other expenses have been maintained
at a minimum with increased expenses in 1995 over 1994 of $91,500
or 3.9%, 1994 over 9193 of $63,000 or 1.8% and $76,000 or 3.5%
increase in 1993 over 1992, In 1992, the Bank upgraded its
computer system and began selling off its used Wang equipment
which ultimately led to an expected loss in excess of $100,000.
The Bank s year-to-date efficiency ratio is 53% which is well
under the national average.
The Bank s capital to asset ratio is 9.7% and the Bank for
exceeds the required risk based capital ratio of 8% with its Tier
I ratio of 14.7% and total capital ratio of 15.9% or capital in
excess of requirements of $16,486,000.
Pursuant to the requirements of the Securities Exchange Act of
1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned thereunto duly authorized.
BAR HARBOR BANKSHARES
Sheldon F. Goldthwait, Jr. /s/
Date: August 14, 1995 ____________________________
Sheldon F. Goldthwait, Jr.
Chief Executive Officer
Virginia M. Vendrell /s/
Date: August 14, 1995 _____________________________
Virginia M. Vendrell
Treasurer and
Chief Financial Officer