33
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON DC 20549
FORM 10-K
Annual Report pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934 (fee required)
For the fiscal year ended December 31, 1999.
Commission File No. 0-13666
BAR HARBOR BANKSHARES
State or other jurisdiction of incorporation or
organization: Maine
IRS Employer Identification Number:
01-0393663
Address: P O Box 400, 82 Main Street, Bar Harbor,
ME Zip Code:04609-0400
Registrant's telephone number, including area code:
(207) 288-3314
Securities registered pursuant to Section 12(g) of the
Act:
Title of Class: Common Stock.
Par Value $2.00 per share
Indicate by check mark whether the registrant (1) has
filed all reports required to be filed by Section 13 or
15(D) of the Securities 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 past 90 days: Yes XX
Indicate by check mark if disclosure of delinquent
filers pursuant to Item 405 of Regulation S-K (229.405
of this chapter) is not contained herein, and will not
be contained, to the best of registrant's knowledge, in
definite proxy or information statements incorporated
by reference in Part III of this Form 10-K or any
amendment to this form 10-K.
Based on the closing price of the common stock of the
registrant, the aggregate market value of the voting
stock held by non-affiliates of the registrant, as of
March 1, 2000 is:
Common stock, $2.00 par value
$56,067,231
The number of shares outstanding of each of the
registrant's classes of common stock, as of March 1,
2000 is:
Common stock
3,398,014
Documents incorporated by Reference:
(1) Portions of the Annual Report to Stockholders for
the year ended December 31, 1999 are incorporated by
reference into Part II, Items 6 through 8 and Part IV,
Item 14 of the Form 10-K.
INDEX
ITEM NUMBER PAGE
1. Business 3-5
2. Properties 5-6
3. Legal Proceedings 6
4. Submission of Matters to a Vote of 6
Security Holders
5. Market for Registrant's Common Equity and
Related Stockholder Matters 7
6. Selected Financial Data 7
7. Management's Discussion and Analysis of
Financial Condition and Results of 7-19
Operation
7a. Quantitative and Qualitative Disclosures 20
about Market Risk
8. Consolidated Financial Statements and 21
Supplementary Data
9. Changes in and Disagreements with
Accountants on Accounting and Financial 21
Disclosure
10. Directors and Executive Officers of the 22-
Registrant 24
11. Executive Compensation 25-
27
12. Security Ownership of Certain Beneficial
Owners and Management 28
13. Certain Relationships and Related 29
Transactions
14. Exhibits, Financial Statement Schedules
and Reports on Form 8-K 30-
31
</TABL
E>
PART I
ITEM 1. BUSINESS
Bar Harbor Bankshares, ("the Company"), was
incorporated January 19, 1984. As of December 31, 1999,
the Company's securities consisted of one class of
common stock ("the Common Stock"), par value of $2.00
per share, of which there are 3,421,514 shares
outstanding held of record by approximately 1,074
stockholders.
The Bank conducts operations typical of a full service,
independent, community bank. It has ten offices in
coastal Maine, including its principal office located
at 82 Main Street, Bar Harbor, as well as offices in
Hancock County, adjacent Washington County and a trust
department office in Penobscot County. The Hancock
County offices are located at Main Street, Northeast
Harbor; Main Street, Southwest Harbor; Main Street,
Blue Hill; route #15, Deer Isle; corner of High and
Washington Streets, Ellsworth; and Main Street, Winter
Harbor. The Washington County offices are located at
the corner of Routes 1 and 1A, Milbridge; Main Street,
Machias; and Washington Street, Lubec. The Bank
performs its operations, check clearing, technology and
mail services in its Operations Center located on Avery
Lane in Ellsworth, Maine. In addition, the Bank's Trust
Department has an office at One Cumberland Place,
Bangor, Maine.
The Bank is a retail bank serving primarily individual
customers, small retail establishments, seasonal
lodging, campgrounds and restaurants. As a coastal bank
it serves the lobstering, fishing and aquaculture
industries. It also serves Maine's wild blueberry
industry through its Washington County offices. The
Bank has not made any material changes in its mode of
conducting business during the past five years.
The Bank operates in a highly competitive market.
Competition among banks in Maine has increased in
recent years and includes competition from branch
offices of statewide and interstate bank holding
companies located in the Bank's market area. The Bank
continues to be one of the larger independent
commercial banks in the State of Maine.
In the Bank's immediate service area there are two
other independent commercial banks, one savings and
loan association, three savings bank branch offices and
three commercial bank branch offices owned by holding
companies based outside the state.
The Bank has a broad deposit base and loss of any one
depositor or closely aligned group of depositors would
not have a materially adverse effect on its business.
Approximately 85% of the Bank's deposits are in
interest bearing accounts. The Bank has paid, and
anticipates that it will continue to pay, current
competitive rates on certificates of deposit, IRAs, NOW
and money market accounts and does not anticipate loss
of these deposits.
The Bank provides the normal banking services offered
by a commercial bank including checking accounts, NOW
accounts, all forms of savings and time deposit
accounts, individual retirement accounts, safe deposit
boxes, collections, travelers checks, night depository
services, direct deposit payroll services, automated
teller services, credit cards, personal money orders,
bank-by-mail and club accounts and drive-up facilities
at all offices. During 1999, the Bank introduced
TeleDirect, an interactive voice response system
through which customers can get product information,
check balances and activity on their accounts as well
as perform transfers between their own accounts. The
Bank also has arrangements with other institutions for
the provision of certain services, which it does not
provide directly, such as computerized payroll
services. In addition, the Bank operates a large Trust
Department, including an office in Bangor, Maine.
Market value for the assets held in the Trust
Department as of December 31, 1999 was $379 million
compared to $385 million in 1998 and included $17.3
million in new business.
The Bank has Automated Teller Machines (ATMs) located
in each of its ten branch locations. These ATMs access
major networks for use of the Bank's cards throughout
the United States including the Plus and NYCE systems
as well as the major credit card networks.
In addition to the foregoing, the Bank offers lending
services including consumer credit in the form of
installment loans, overdraft protection (stand-by
credit), VISA credit card accounts, student loans,
residential mortgage loans and home equity loans. It
offers business loans to individuals, partnerships and
corporations for capital construction, the purchase of
real estate and working capital. Business loans are
provided primarily to organizations and individuals in
the tourist, health care, blueberry, shipbuilding and
fishing and aquaculture industries as well as to the
usual small businesses associated with small coastal
communities. Certain larger loans which would exceed
the Bank's lending limits are written on a
participation basis with correspondent banks, with the
Bank retaining only such portions of those loans as are
within its lending limits. The Bank also provides trust
and estate planning services to its customers. The
principal market area for all of the Bank's services
consists of Hancock and Washington Counties. The Bank's
policy for lending limits is up to 20% of its equity to
any borrower provided that the loans are secured and
approved by the Directors Loan Committee. This
committee is chaired by a member of the Bank's Board of
Directors, Bernard K. Cough, and includes members of
the Bank's management as well as Board of Directors.
As a state chartered bank, the Bank is supervised and
regulated by the Bureau of Banking of the State of
Maine and the Federal Deposit Insurance Corporation. In
addition, as a bank holding company, the Company is
supervised and regulated by the Federal Reserve Bank.
See also Footnote 13 in the notes to the financial
statements of the Annual Report to Stockholders.
In January of 2000, Bar Harbor Bankshares Chairman,
John P. Reeves, announced that Dean S. Read will be
joining the Company as Executive Vice President and
Chief Operating Officer of Bar Harbor Bankshares and
its wholly-owned subsidiary Bar Harbor Banking and
Trust Company. Mr. Read will be responsible for
management of all internal corporate functions as well
as stockholder relations and activities. Mr. Read will
succeed Sheldon F. Goldthwait, Jr. as President and
Chief Executive Officer upon Mr. Goldthwait's
retirement in 2000. Mr. Read brings 30 years of
commercial banking experience to the Company. He most
recently served as Senior Vice President and Senior
Relationship Manager with Key Bank National Association
in Augusta, Maine.
The Bank is not engaged in any material research
activities relating to the development of new services
or the improvement of existing services except in the
normal course of business activities. In order to
better serve its customers, it is the Bank's intent to
convert its major banking software systems in the
second quarter of 2000. This conversion will include
lending, deposit, general ledger, teller and item image
applications. As of December 31, 1999, the Bank
employed 182 persons in a full or part-time basis. The
President, Executive Vice President, Senior Vice
President of the Trust Department, Senior Vice
President and Treasurer, and Senior Vice President in
charge of Human Resources are employed by the Bank as
well as serving as officers of the Company. The Company
does not compensate them for their services. There are
no employees of the Company.
On October 4, 1999, the Company formed a wholly owned
subsidiary as the first step in a plan to expand and
reorganize the provision of financial services. On
January 10, 2000, the new subsidiary, BTI Financial
Group, acquired Dirigo Investments, Inc., a NASD
Registered broker dealer firm in Ellsworth, Maine.
Dirigo Investments, Inc. will continue to operate as a
full-service discount brokerage firm. In addition, BTI
Financial group has formed two other wholly owned
operating subsidiaries: Block Capital Management, which
it intends to register with the Securities and Exchange
Commission as an investment advisor, and Bar Harbor
Trust Services, to which the Bank intends to transfer
its trust assets after obtaining requisite regulatory
and court approvals.
The purchase of Dirigo Investments, Inc. will be
accounted for under the purchase method of accounting.
In addition to facilitating the purchase of Dirigo
Investments, Inc., the Bank will contribute capital to
Bar Harbor Bankshares, which, in turn, will make a
capital contribution to BTI Financial Group to
initially capitalize Bar Harbor Trust Services and
Block Capital Management. The Bank also will
contribute sufficient capital to Bar Harbor Bankshares
to provide funds needed to compensate the Bank for the
transfer of its Trust Department assets to Bar Harbor
Trust Services. Lastly, the Company has purchased real
estate in the Ellsworth area, which will house the
operations of BTI Financial Group and its subsidiaries.
The total transfer of capital for these purposes is
expected to be in excess of $7 million.
The addition of these three subsidiaries will position
BTI Financial Group to more fully participate in a
dynamic segment of the financial services industry.
Dirigo Investments, Inc., Block Capital Management and
Bar Harbor Trust Services will provide a broader range
of integrated financial services to Dirigo clients.
Dirigo will provide local brokerage services to Block
Capital Management and Bar Harbor Trust Services
clients. Each of these entities will face significant
competition for these services from local banks, which
may now or in the future offer a similar range of
services, as well as from a number of brokerage firms
and investment advisors with offices in the Bank's
market area. In addition, most of these services are
widely available to the Bank's customers by telephone
and over the Internet through firms located outside of
the Bank's market area.
The foregoing discussion, as well as certain other
statements contained in this Form 10-K, or incorporated
herein by reference, contain statements which may be
considered to be forward-looking within the meaning of
the Private Securities Litigation and Reform Act of
1995. Forward looking statements relate to future
operations, strategies, financial results or other
developments and are based on estimates and assumptions
that are subject to significant business, economic and
competitive uncertainties, many of which are beyond the
Company's control or are subject to change. The
expected benefits of the acquisition of Dirigo
Investments, Inc. and the operations of Block Capital
Management and Bar Harbor Trust Services are subject to
a number of future uncertainties including the ability
of Bar Harbor Bankshares to successfully integrate the
proposed new entities with its existing operations and
customer base, future competition from financial
institutions and others which may be in the future
offer competing services, future changes in state and
federal laws and regulations governing financial
services and securities, and the ability of existing
personnel to successfully manage the proposed financial
services group. The Company disclaims any obligation
to publicly update or revise any forward-looking
statement contained in the foregoing discussion, or
elsewhere in this Form 10-K.
The Company and its subsidiaries employ a total of 182
employees.
On December 8, 1998, the Board of Directors of the
Company declared a 100% stock dividend to owners of
record as of December 28, 1998, payable on January 25,
1999. All share and per share data information included
in the Form 10-K have been restated to reflect the 100%
stock dividend.
ITEM 2. PROPERTIES
The eleven parcels of real estate owned and utilized by
the Bank for its operations are described below:
1. The principal office of the Bank is located at 82
Main Street, Bar Harbor, Maine and includes a building
housing banking facilities and administrative offices
and an adjacent 35 car customer parking lot. The
building was renovated in 1998.
2. An office is located at Main Street, Northeast
Harbor, Maine. This property consists of a building
constructed in 1974 and underwent interior renovations
in 1998 to better meet the Bank's needs at that
location.
3. An office is located on Main Street, Southwest
Harbor, Maine. This property consists of a building
constructed in 1975 which was added to and renovated in
1989 to better meet the needs at that location.
4. An office is located at Church Street, Deer Isle,
Maine. This property consists of a building constructed
in 1974 which was added to and renovated in 1994 to
better meet the needs at that location.
5. An office is located on Main Street, Blue Hill,
Maine. This property consists of a building constructed
in 1960 which was renovated in 1989 to better meet the
needs at that location.
6. An office is located at Main Street, Milbridge,
Maine. This property consists of a building constructed
in 1974 to which a vestibule was added in 1994 to house
an ATM which helps to better meet the needs at that
location.
7. An office is located at Washington Street, Lubec,
Maine. This branch consists of a building constructed
in 1990 and is adequate for the Bank's needs at that
location.
8. An office is located at High Street, Ellsworth,
Maine. This branch consists of a building constructed
in 1982 which is adequate for the Bank's current needs
at that location.
9. An office is located at Main Street, Winter Harbor.
This branch consists of a building constructed in 1995
and is adequate for the Bank's needs at that location.
10. An office is located on Main Street, Machias,
Maine. This branch was purchased from Key Bank of Maine
in May, 1990, and was renovated in 1995 to better meet
the Bank's needs at that location.
11. An Operations Center is located on Avery Lane,
Ellsworth, Maine and houses the Bank's operations,
check clearing, technology, training and mail
departments. The building was constructed in 1996,
with occupancy by the Bank taking place in January of
1997.
A parcel of land adjacent to the Blue Hill branch was
purchased in 1981 but has not been developed.
In addition to the above Bank offices, in 2000, the
Company acquired land and a building on High Street in
Ellsworth, Maine located immediately behind the Bank's
Ellsworth branch which will house the operations of BTI
Financial Group and its subsidiaries.
The Bank has Automated Teller Machines (ATMs) located
in each of its ten branch locations.
ITEM 3. LEGAL PROCEEDINGS
Not applicable.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY
HOLDERS
Not applicable.
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND
RELATED STOCKHOLDER MATTERS
High and low bids for each quarter of 1999 and 1998 are
listed below per quotes from The Wall Street Journal.
The Company's common stock is traded on the American
Stock Exchange (AMEX) under the symbol BHB. Per share
data information has been adjusted to reflect the 100%
stock dividend described above.
1st Quarter 2nd Quarter 3rd Quarter 4th Quarter
High High High High
Low Low Low Low
1999 23.50 to 22.25 to 22.00 to 21.375 to
20.125 18.00 18.00 17.625
1998 29.00 to 29.50 to 25.25 to 25.00 to
25.125 24.875 19.25 17.00
ITEM 6. SELECTED FINANCIAL DATA
Selected financial information for the past five years
is contained on Page 3 of the Company's Annual Report
to Shareholders for the year ended December 31, 1999
and is incorporated herein by reference.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The information contained in the section captioned
"Management's Discussion and Analysis of Financial
Condition and Results of Operations" in the Company's
Annual Report is incorporated herein by reference.
AVERAGE BALANCE SHEETS AND ANALYSIS OF NET INTEREST
EARNINGS
(Amounts in Thousands)
1999
AVERAGE YIELD/
BALANCE INTERE RATE
ST
ASSETS
Loans $248,708 $21,77 8.76%
7
Taxable Investment 149,698 9,798 6.55%
Securities
Non-Taxable Investment 5,332 316 5.92%
Securities
Fed. Funds Sold & Money 1,128 61 5.38%
Market Funds
Total Interest-Earning $404,866 $31,95 7.89%
Assets 2
Non-Interest Earning Assets:
Total Cash and Due from 11,450
Banks
Allowance for Possible Loan (4,781)
Losses
Bank Premises and Equipment 7,960
Other Assets 9,060
TOTAL ASSETS $428,555
LIABILITIES AND
STOCKHOLDERS' EQUITY
Interest Bearing Demand $44,115 $ 480 1.29%
Deposits
Savings Deposits 77,021 2,338 3.04%
Time Deposits 110,854 5,471 4.93%
Repurchase Agreements and 74,640 3,930 5.26%
Short Term Borrowings
Long Term Borrowings 28,662 1,583 5.52%
TOTAL INTEREST BEARING $335,292 $13,80 4.12%
LIABILITIES 2
Non-Interest Bearing
Liabilities:
Non-Interest Bearing Demand 43,103
Deposits
Other Liabilities 2,029
Stockholders' Equity 48,131
TOTAL LIABILITIES AND
STOCKHOLDERS' $428,555
EQUITY
NET EARNING ASSETS $69,574
NET INTEREST INCOME/NET $18,15 3.77%
INTEREST SPREAD 0
NET INTEREST MARGIN 4.48%
NET EARNINGS FOR YEAR END $6,225
DIVIDENDS PAID IN CURRENT $2,476
YEAR
RETURN ON EQUITY AND ASSETS
RETURN ON AVERAGE ASSETS 1.45%
RETURN ON AVERAGE EQUITY 12.93%
DIVIDEND PAYOUT RATIO 39.78%
EQUITY CAPITAL TO ASSETS 11.23%
RATIO
AVERAGE BALANCE SHEETS AND ANALYSIS OF NET INTEREST
EARNINGS
(Amounts in Thousands)
1998
AVERAGE YIELD/
INTERE RATE
BALANCE ST
ASSETS
Loans $224,40 $21,29 9.49%
6 0
Taxable Investment Securities 111,111 7,450 6.71%
Non-Taxable Investment 6,650 424 6.37%
Securities
Fed. Funds Sold & Money 955 47 4.92%
Market Funds
Total Interest-Earning Assets $343,12 $29,21 8.51%
2 1
Non-Interest Earning Assets:
Total Cash and Due from Banks 10,856
Allowance for Possible Loan (4,721)
Losses
Bank Premises and Equipment 7,823
Other Assets 6,577
TOTAL ASSETS $363,65
7
LIABILITIES AND STOCKHOLDERS'
EQUITY
Interest Bearing Demand $41,872 $622 1.48%
Deposits
Savings Deposits 57,791 1,650 2.86%
Time Deposits 116,262 6,267 5.39%
Repurchase Agreements and 39,644 2,133 5.38%
Short Term Borrowings
Long Term Borrowings 22,849 1,301 5.69%
TOTAL INTEREST BEARING $278,41 $11,97 4.30%
LIABILITIES 8 3
Non-Interest Bearing
Liabilities:
Non-Interest Bearing Demand 38,890
Deposits
Other Liabilities 2,177
Stockholders' Equity 44,172
TOTAL LIABILITIES AND
STOCKHOLDERS' $363,65
EQUITY 7
NET EARNING ASSETS $64,704
NET INTEREST INCOME/NET $17,23 4.21%
INTEREST SPREAD 8
NET INTEREST MARGIN 5.02%
NET EARNINGS FOR YEAR END $6,607
DIVIDENDS PAID IN CURRENT $2,307
YEAR
RETURN ON EQUITY AND ASSETS
RETURN ON AVERAGE ASSETS 1.82%
RETURN ON AVERAGE EQUITY 14.96%
DIVIDEND PAYOUT RATIO 34.92%
EQUITY CAPITAL TO ASSETS 12.14%
RATIO
AVERAGE BALANCE SHEETS AND ANALYSIS OF NET INTEREST
EARNINGS
(Amounts in Thousands)
1997
AVERAG YIELD/
E INTERE RATE
ST
BALANC
E
ASSETS
Loans $217,2 $21,02 9.68%
95 8
Taxable Investment 96,195 6,792 7.06%
Securities
Non-Taxable Investment 10,653 651 6.11%
Securities
Fed. Funds Sold & Money 900 47 5.23%
Market Funds
Total Interest-Earning $325,0 $28,51 8.77%
Assets 43 8
Non-Interest Earning
Assets:
Total Cash and Due from 9,797
Banks
Allowance for Possible Loan (4,465
Losses )
Bank Premises and Equipment 7,737
Other Assets 6,442
TOTAL ASSETS $344,5
54
LIABILITIES AND
STOCKHOLDERS' EQUITY
Interest Bearing Demand $39,53 $668 1.69%
Deposits 2
Savings Deposits 52,455 1,334 2.54%
Time Deposits 122,49 6,791 5.54%
1
Repurchase Agreements and 40,769 2,238 5.49%
Short Term Borrowings
Long Term Borrowings 11,486 679 5.91%
TOTAL INTEREST BEARING $266,7 $11,71 4.39%
LIABILITIES 33 0
Non-Interest Bearing
Liabilities:
Non-Interest Bearing Demand 36,545
Deposits
Other Liabilities 1,804
Stockholders' Equity 39,472
TOTAL LIABILITIES AND
STOCKHOLDERS' $344,5
EQUITY 54
NET EARNING ASSETS $58,31
0
NET INTEREST INCOME/NET $16,80 4.38%
INTEREST SPREAD 8
NET INTEREST MARGIN 5.17%
NET EARNINGS FOR YEAR END $6,422
DIVIDENDS PAID IN CURRENT 2,065
YEAR
RETURN ON EQUITY AND ASSETS
RETURN ON AVERAGE ASSETS 1.86%
RETURN ON AVERAGE EQUITY 16.27%
DIVIDEND PAYOUT RATIO 32.15%
EQUITY CAPITAL TO ASSETS 11.46%
RATIO
NOTES TO AVERAGE BALANCE SHEET
1. Tax-exempt income is calculated at coupon rate,
not adjusted on a tax equivalent basis.
1. At December 31, 1999, loans on non-accrual status
totaled $2,016,000. These loans are included in the
loan category on the preceding Average Balance Sheet.
If interest had been accrued on such loans, interest
income on loans would have been $107,900 higher in
1999.
2. Based on information reported by the Uniform Bank
Performance Report, the Bank's net interest margin for
1999 is consistent with the national average for peer
banks. In previous years, the net interest margin had
remained at higher than the national average levels.
The Bank is a community bank which focuses its efforts
on customer relationships and good service while
remaining competitive in the demand for loans, both in
the commercial and consumer sectors. The spread and
margin for the Bank have been decreasing over the past
three years, as competition for the same customers
within the Bank's market area continues to grow. The
average yield on the Bank's earning assets dropped to
7.89% from 8.51% as of December 31, 1999. This had an
impact on the net interest margin for the Bank, which
dropped on average by 62 basis points when comparing
1999 to 1998. In comparison, the average rate on the
bank's earning assets dropped 26 basis points in 1998
as compared to 1997, and the margin dropped 15 basis
points. The Bank continues to seek quality loans,
broadening its customer base as the spread tightens.
The effect of rates and volumes is exemplified further
in the Rate Volume Analysis as found below
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 relationships of the absolute dollar amounts of the
change in each.
YEAR-ENDED DECEMBER 31, 1999
COMPARED TO DECEMBER 31, 1998
INCREASES (DECREASES) DUE TO:
VOLUME RATE NET
Loans $2,201 ($1,71 $487
4)
Taxable Investment Securities 2,530 (164) 2,366
Non-taxable Investment (80) (28) (108)
Securities
Federal Funds Sold and Money 11 (15) (4)
Market Funds
TOTAL EARNING ASSETS $4,662 ($1,92 $2,74
1) 1
Deposits $650 ($900) ($250
)
Repurchase Agreements and 1,845 (48) 1,797
Short Term Borrowings
Long Term Borrowings 322 (40) 282
TOTAL INTEREST BEARING $2,817 ($988) $1,82
LIABILITIES 9
NET CHANGE IN INTEREST $1,845 ($933) $912
YEAR-ENDED DECEMBER 31, 1998
COMPARED TO DECEMBER 31, 1997
INCREASES (DECREASES) DUE TO:
VOLUME RATE NET
Loans $680 ($418) $262
Taxable Investment Securities 1,005 (357) 648
Non-taxable Investment (254) 27 (227)
Securities
Federal Funds Sold and Money 4 6 10
Market Funds
TOTAL EARNING ASSETS $1,435 ($742) $693
Deposits $131 ($385) ($254
)
Repurchase Agreements and (61) (44) (105)
Short Term
Borrowings
Long Term Borrowings 648 (26) 622
TOTAL INTEREST BEARING $718 ($455) $263
LIABILITIES
NET CHANGE IN INTEREST $717 ($287) $430
SUMMARY OF INVESTMENT PORTFOLIO
The information presented below is to facilitate the
analysis and comparison of sources of income and
exposure to risks.
1999 1998 1997
U. S. Treasury Securities
and
Obligations of Other U.
S. Government $ $5,690 $13,250
Agencies 2,424
Mortgage Backed
Securities: 94,592 88,101 57,913
U. S. Government
Agencies
Other 14,636 6,668 5,082
Obligations of State and
Political 4,422 5,634 8,105
Subdivisions
Other Bonds 12,757 7,069 1,001
SECURITIES HELD TO $128,83 $113,16 $85,351
MATURITY 1 2
Obligations of Other U.
S. Government 28,155 12,332 8,803
Agencies
Mortgage Backed
Securities:
U. S. Government 2,334 4,936 5,233
Agencies
Marketable Equity 1,201 576 572
Securities
SECURITIES AVAILABLE FOR $ $17,844 $14,608
SALE 31,690
MATURITY SCHEDULE FOR INVESTMENTS HELD TO MATURITY
At December, 1999
Greate Greate
r than r than Greate
One One Five r than
Year or year Years Ten
Less to to Ten Years
Five Years
Years
Obligations of Other U. S.
Government Agencies $ 0 $2,424 $ 0 $
0
Average Yield 6.79%
Mortgage-backed Securities:
U. S. Government Agencies 70 2,343 21,254 70,925
Average Yield 8.69% 6.34% 6.51% 6.82%
Mortgage-backed Securities:
Other 0 285 3,821 10,530
Average Yield 5.25% 6.69% 6.74%
Obligations of State and
Political Subdivisions 1,925 1,567 420 510
Average Yield 6.77% 5.67% 6.20% 6.20%
Other Bonds $ 0 12,254 503 $
0
Average Yield 6.41% 8.24%
TOTAL $ $ $ $
1,995 18,873 25,998 81,965
MATURITY SCHEDULE FOR INVESTMENTS
AVAILABLE FOR SALE AT DECEMBER 31, 1999
(at fair value)
Greater
One One than Greater
Year Year to Five than Ten
or Five Years Years
Less Years to Ten
Years
Obligations of Other
U. S. Government $ $ $ 0
Agencies 5,092 23,063
Average Yield % 6.49% 6.69%
Mortgage-Backed
Securities: 0 0 0 2,334
U. S. Government
Agencies
Average Yield 7.81%
TOTAL $ $ $ $ 2,334
0 5,092 23,063
Mortgage backed securities are included based upon the
final maturity date of the security.
The maturity schedule for securities available for sale
excludes marketable equity securities totaling
$1,200,500
Yields on tax-exempt bonds were not computed on a tax
equivalent basis.
The Bank does not hold any securities for a single
issuer, other than U. S. Government agencies and
corporations, where the aggregate book value of the
securities exceed 10% of the Bank's stockholders'
equity.
The maturities for the mortgage-backed securities are
shown at the stated maturity. If the Bank presented
mortgage-backed securities by average expected life,
the breakdown would be:
Greater Greater
One than One than Greater
Year or Year to Five than Ten
Less Five Years Years
Years to Ten
Years
Mortgage-backed
Securities Held to 4,092 33,035 43,443 28,658
Maturity
Mortgage-backed
Securities Available 2,334 0 0
For Sale at Fair
Value
Changes in the market value of the investment portfolio
follow national interest rate fluctuations. As national
interest rates rose 75 basis points during 1999, the
value of the portfolio decreased with the total
unrealized loss (before tax benefit) approximating
$(4,951,858) at December 31, 1999 over book value. The
Bank does not hold any interest only or principal only
bonds, nor does it hold any debt securities whose
market value could change to a greater degree than
traditional debt.
SUMMARY OF LOAN PORTFOLIO
1999 1998 1997 1996 1995
Real estate loans:
Construction & $ $ $ $ $
Development 15,674 11,366 7,925 8,906 8,072
Mortgage 195,64 168,258 158,592
5 146,04 135,06
1 8
Loans to finance
agricultural 10,814 10,308 9,993
Production and other 10,092 10,377
loans to farmers
Commercial and 22,561 22,778 23,696
industrial loans 29,040 29,807
Loans to individuals
for household,
Family and other 15,693 16,538 16,668 17,242 17,640
personal
expenditures
All other loans 282 138 209 319 7
Real Estate Under 520 49 56 320 794
Foreclosure
TOTAL LOANS $261,1 $229,43 $217,13 $211,9 $201,7
89 5 9 60 65
Less: Allowance
for possible loan 4,293 4,455 4,743 4,293 4,048
Loss
NET LOANS $256,8 $224,98 $212,39 $207,6 $197,7
96 0 6 67 17
PAST DUE LOANS
The figures below represent loans past due 30 days or more (% is percentage of
loans outstanding for a specific category of loans).
1999 % 1998 % 1997 % 1996 % 1995 %
<C <C <C <C <C
> > > > >
Construction &
373 2. 246 2. 129 1. 247 2. 214 2.
Development 4 2 6 8 7
Real Estate 6,75 3. 5,75 3. 3,682 2. 4,10 2. 3,00 2.
7 4 0 4 3 0 8 9 2
Commercial,
Industrial and 1,40 4. 1,30 3. 1,041 3. 1,47 3. 517 1.
Other 5 2 9 9 1 9 8 3
Loans to 476 3. 567 3. 450 2. 462 2. 434 2.
individuals 0 4 7 7 5
Loans past due
90 days or 710 0. 1,71 0. 774 0. 733 0. 849 0.
more and 3 0 8 4 4 4
still accruing*
Non-Accruing 2,01 0. 1,74 0. 3,236 1. 3,54 1. 3,36 1.
Loans 6 8 4 8 5 1 7 0 7
*The percentage for loans past due 90 days or more and
still accruing and non-accruing loans relate to total
loans outstanding. Each loan in these categories is
also included in its past due loan category.
Loans that were non-performing as of December 31, 1998
and for which the real estate was acquired by the Bank
in 1999 totaled $64,400.
MATURITY SCHEDULE - LOAN PORTFOLIO
As of December 31, 1999
After
One Year One After
or Less Year Five
through Years
Five
Years
Commercial, Financial
and $ 12,635 $ $
Agricultural 9,065 11,675
Real estate
Construction and Land $ 11,243 $ 1,100 $
Development 3,331
The Bank makes construction loans on the basis of: a)
permanent financing from another financial institution,
or b) approval at the time of origination for permanent
financing by the Bank itself. In addition, a number of
large commercial real estate loans are written and
priced on the basis of fixed rates with a three to five
year balloon payment. It is generally the intent of the
Bank to re-negotiate the rate and term of the loan at
the balloon maturity. Lines of credit are renewed
annually. There are consumer construction loans that
will either be sold to the secondary market upon
completion of construction or rolled into the permanent
portfolio of residential mortgage loans.
The total amount of commercial, financial and
agricultural, construction, and land development loans
with adjustable interest rates and maturities of
greater than one year is $13.6 million and with fixed
interest rates and maturities of greater than one year
is $10.6 million.
RISK ELEMENTS
1999 1998 1997 1996 1995
Loans accounted
for on a non- $2,0 $1,7 $3,23 $3,54 $3,36
accrual 16 44 6 1 0
basis
Accruing loans
contractually $ $1,7 $ $ $
past 710 10 774 733 849
Due 90-days
or more
It is the policy of management to review past due loans
on a monthly basis. Those loans 90-days or more past
due which are not well secured or in the process of
collection are designated as non-accruing. This
includes government guaranteed loans unless the
guaranteed portion has been sold. If interest had been
accruing on such loans, interest income on loans would
have been $107,900 higher in 1999. Interest collected
on these loans totaled $73,900 in 1999 and was included
in net income. Non-accrual loans and those loans 90-
days past due and still accruing represent 1.10% of
average loans for 1999 and 1.51% for 1998.
Management is not aware of any potential problem loans
that are not included in the above table. The Bank
makes single-family residential loans, commercial real
estate loans, commercial loans, and a variety of
consumer loans. The Bank's lending activities are
conducted in north coastal Maine. Because of the Bank's
proximity to Acadia National Park, a large part of the
economic activity in the area is generated from the
hospitality business associated with tourism.
Loans to the hospitality industry (hotels and
restaurants) represent the highest loan concentration
by industry at 65% of capital, $32.5 million up from
$30.5 million in 1998. Other substantial loan
concentrations include fishing, which dropped from $8.9
million in 1998 to $6.9 million in 1999, and commercial
and real estate development, decreasing slightly from
$12.7 million to $11.7 million.
As most loans granted by the Bank are collateralized by
real estate, the ability of the Bank's borrowers to
repay is dependent on the level of economic activity
and the level of real estate values in the Bank's
market area. Because of the increasing health of the
tourist industry and other industries in its market
area, the Bank has benefited from the economic well
being of its customers.
SUMMARY OF LOAN LOSSES
The allowance for loan losses is established through a
provision for loan losses charged to operations. Loan
losses are charged against the allowance when
management believes that the collectibility of the loan
principal is unlikely. Recoveries on loans previously
charged off are credited to the allowance.
The allowance is an amount that management believes
will be adequate to absorb possible loan losses based
on evaluation of their collectibility and prior loss
experience. The evaluation takes into consideration
such factors as changes in the nature and volume of the
portfolio, overall portfolio quality, specific problem
loans, and current and anticipated economic conditions
that may affect the borrower's ability to pay.
While management uses available information to
recognize losses on loans, changing economic conditions
and the economic prospects of the borrowers may
necessitate future additions to the allowance. In
addition, various regulatory agencies, as an integral
part of their examination process, periodically review
the Bank's allowance for loan losses. Such agencies may
require the Bank to recognize additions to the
allowance based on their judgments about information
available to them at the time of their examination.
Impaired loans, including restructured loans, are
measured at the present value of expected future cash
flows discounted at the loan's effective interest rate,
at the loan's observable market price, or the fair
value of the collateral if the loan is collateral
dependent. Management takes into consideration
impaired loans in addition to the above mentioned
factors in determining the appropriate level of
allowance for loan losses.
With the exception of 1995, net loans charged off for
the past five years have been below three tenths of one
percent. The percentage of net charged off loans to
average loans in 1997 represented the lowest percentage
(.08%) in the five years presented. In 1997, there was
a recovery of a single loan of $300,000 that was
charged off in a previous year; but, absent that
recovery, net charge offs would have been .22% of total
loans. In 1995, the majority of charge offs were
commercial loans secured by real estate or real estate
mortgages. For the past five years, the majority of
loans charged off have been loans to individuals and
included many small loans and credit card debt.
However, the increase in commercial loan charge offs in
1995 included the charge down of a large commercial
loan. Another large commercial loan charge off
increased the commercial charge offs for 1999.
Approximately 28% of the loans charged off in 1995
represented loans secured by real estate, and 39%
represented commercial credits, with recoveries
totaling $97,000. In 1996, charged off loans to
individuals represented over half of the total charge
offs for that year and resulted from losses on
installment loans and credit cards. This pattern
continued in 1997 and 1998 with installment loans and
other consumer loans representing 78% and 57%,
respectively, of the total charge offs. In 1999, net
losses in the commercial and agricultural portfolios
totaled $394,000 or 62% of the net charged off loans.
Based on past experience and management's assessment of
the present loan portfolio, it is expected that net
loan charge offs for 2000 will not exceed $660,000.
A breakdown of the allowance for possible loan losses
is as follows:
1999 1998 1997
Percen Perce Percen
t of nt of t of
Loans Loans Loans
in in in
Amou each Amou each Amount each
nt Catego nt Categ Catego
ry to ory ry to
Total to Total
Loans Total Loans
Loans
Real Estate $ 81.10% $1,2 78.31 $ 76.71%
Mortgages 627 40 % 146
Installments
and other 1,10 6.01% 323 7.21% 2,939 7.68%
loans to 9
individuals
Commercial,
financial 1,87 12.78% 1,01 14.42 481 15.51%
and 8 0 %
Agricultural
Other 183 .11% 180 .06% 0 .10%
Unallocated 496 .00% 1,70 .00% 1,177 .00%
2
TOTAL $4,2 100.00 4,45 100.0 $4,743 100.00
93 % 5 0% %
1996 1995
Perce Percen
nt of t of
Loans Loans
in in
each each
Amou Categ Amou Catego
nt ory nt ry to
to Total
Total Loans
Loans
Real Estate $1,0 73.26 $ 71.34%
Mortgages 54 % 915
Installments
and other 1,45 8.13% 1,46 8.74%
loans to 7 9
individuals
Commercial,
financial 629 18.46 278 19.92%
and %
Agricultural
Other 0 .15% 0 0.00%
Unallocated 1,15 0.00% 1,38 0.00%
3 6
TOTAL $4,2 100.0 $4,0 100.00
93 0% 48 %
SUMMARY OF LOAN LOSS EXPERIENCE
ALLOWANCE FOR LOAN 1999 1998 1997 1996 1995
LOSSES
Balance at beginning $ $4,743 $4,293 $4,048 $3,892
of period 4,455
Charge offs:
Commercial,
Financial, 445 217 102 195 377
Agricultural,
Others
Real Estate 58 113 27 131 256
Mortgages
Installments
and other loans 385 458 456 385 268
to Individuals
Total Charge Offs 888 788 585 711 901
Recoveries:
Commercial,
Financial, 51 40 169 73 20
Agricultural,
Others
Real Estate 60 21 154 94 20
Mortgages
Installments
and other loans 141 103 92 69 57
to Individuals
Total Recoveries 252 164 415 236 97
Net Charge Offs 636 624 170 475 804
Provision Charged to 474 336 620 720 960
Operations
Balance at End of $4,29 $4,455 $4,743 $4,293 $4,048
Period 3
Average loans
outstanding during $248, $224,4 $217,2 $207,1 $195,1
period 708 06 95 88 79
Net Charge Offs to
Average Loans .26 .28 .08 .23 .41
Outstanding
during Period
SUMMARY OF DEPOSIT PORTFOLIO
1999 1998 1997
Averag Averag Averag Averag Averag Averag
e e Rate e e Rate e e Rate
Balanc Balanc Balanc
e e e
Demand Deposits $43,10 $38,89 $36,54
3 0 5
NOW Accounts 44,115 1.07% 41,872 1.48% 39,532 1.69%
Savings Accounts 77,021 3.04% 57,791 2.86% 52,455 2.54%
Time Deposits 110,85 4.93% 116,26 5.39% 122,49 5.54%
4 2 1
Total Deposits $275,0 $254,8 $251,0
93 15 23
MATURITY SCHEDULE FOR TIME DEPOSITS $100,000 OR MORE
AT DECEMBER 31, 1999
Over Six
Over Three Months Through
Three Months Months Through Twelve Months Over Twelve
or Less Six Months Months
$ 7,558 $ 2,190 $ 6,289 $ 898
RETURN ON EQUITY AND ASSETS
1999 1998 1997
Return on Average 1.45% 1.82% 1.86%
Assets
Return on Average 12.93 14.96% 16.27%
Equity %
Dividend Payout Ratio 39.78 34.92% 32.15%
%
Average Equity Capital
to Average Assets 11.23 12.14% 11.46%
Ratio %
SHORT TERM BORROWINGS
Maximum Average Weighte
Balance Weighte Outstan Amount d
at end d ding at Outstan Average
of Average Month ding Interes
Period Interes End During t Rate
t Rate Year During
Year
1999
FHLB Advances $74,000 5.76% $74,000 $60,396 5.31%
Repurchase $ 8,807 4.50% $11,209 $ 8,264 4.48%
Agreements
1998
FHLB Advances $26,000 5.26% $29,000 $22,849 5.69%
Repurchase $8,092 4.63% $10,192 $6,686 4.74%
Agreements
1997 $24,000 5.69% $45,125 $34,207 5.67%
FHLB Advances
Repurchase $4,474 5.12% $8,025 $5,244 4.61%
Agreements
Repurchase agreements generally mature within one to
four days from the transaction date.
The terms for short-term FHLB advances taken in 1999
ranges from 7 days to 365 days and averaged 84 days.
The terms for short-term FHLB advances taken in 1998
ranges from 7 days to 273 days and averaged 80 days.
The terms for short-term FHLB advances taken in 1997
range from 7 days to 365 days and averaged 62 days.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES
ABOUT MARKET RISK
Market risk is the risk of loss arising from adverse
changes in the fair value of financial instruments due
to changes in interest rates. The Bank's market risk
is composed primarily of interest rate risk. The
Bank's Asset/Liability Committee (ALCO) is responsible
for reviewing the interest rate sensitivity position
of the Company and establishing policies to monitor
and limit exposure to interest rate risk. All
guidelines and policies established by ALCO have been
approved by the Board of Directors.
Asset/liability management has the role of maintaining
a balance between interest-sensitive earning assets
and interest-bearing liabilities. Effective management
of interest rate risk can protect the Bank against
adverse changes in interest rates and can enhance the
Bank's interest margins and earnings through periods
of changing interest rates. In times of rising
interest rates, Bar Harbor Banking and Trust Company
will maximize earnings if more loans and/or
investments are subject to rate changes than interest
bearing liabilities. As interest rates rise, the Bank
monitors its rate sensitivity seeking to ensure that
both assets and liabilities respond to changes in
interest rates to minimize the effect of those changes
on net interest income.
As of December 31, 1999, Bar Harbor Banking and Trust
Company was somewhat liability sensitive with $166
million in assets and $249 million in liabilities that
could be repriced within one year. This increases the
exposure of interest rate risk to the bank on these
funds in a rising rate environment. The repricing
structure for 1998 was more evenly matched, with $170
million in assets and $184 million in liabilities that
could be repriced within one year.
Management continues to watch economic trends with
respect to interest rates. The Bank utilizes a
simulation model to quantify the estimated exposure to
interest rates. The model captures the impact of
changing interest rates for the Bank's interest
earning assets and interest paying liabilities. The
model assumes a static balance sheet and utilizes a
non-parallel yield curve shift in rates to recognize
the impact of interest rate changes. As mentioned
above, the Bank is liability sensitive in the one-year
horizon. Based on simulations, if interest rates were
to rise by 200 basis points and if the Bank were to
maintain the balance sheet as it stands today, the
Bank would reduce its net interest income by $620,000
during the next twelve months. If rates were to drop
by 200 basis points, the Bank would experience an
increase in its net interest income of $867,000 during
the next twelve months.
The following reflects the Bank's net interest income
sensitivity analysis as of December 31, 1999 and 1998.
RATE CHANGE - 1999
-200 basis +200 basis
points points
Year I
Net interest income $ 834 $ (1,022)
change ($)
Net interest income 4.64% (5.69%)
change (%)
Year II
Net interest income $ 1,307 $ (2,132)
change ($)
Net interest income 8.18% (10.95%)
change (%)
RATE CHANGE - 1998
-200 basis +200 basis
points points
Year I
Net interest income $ 182 $ (161)
change ($)
Net interest income 1.11% (.98%)
change (%)
Year II
Net interest income $ (181) $ (340)
change ($)
Net interest income ( 1.14%) (2.14%)
change (%)
The preceding sensitivity analysis does not represent
a Company forecast and should not be relied upon as
being indicative of expected operating results. These
hypothetical estimates are based upon numerous
assumptions including: the nature and timing of
interest rate levels, including yield curve shape,
prepayments on loans and securities, deposit decay
rates, pricing decisions on loans and deposits,
reinvestment/replacement of asset and liability
cashflows, and others. While assumptions are developed
based upon current economic and local market
conditions, the Company cannot make any assurances as
to the predictive nature of these assumptions
including how customer preferences or competitor
influences might change.
Also, as market conditions vary from those assumed in
the sensitivity analysis, actual results will also
differ due to: prepayment/refinancing levels likely
deviating from those assumed, the varying impact of
interest rate change caps or floors on adjustable rate
assets, the potential effect of changing debt service
levels on customers with adjustable rate loans,
depositor early withdrawals and product preference
changes, and other internal/external variables.
Furthermore, the sensitivity analysis does not reflect
actions that ALCO might take in responding to or
anticipating changes in interest rates.
When appropriate, ALCO may utilize off balance sheet
instruments such as interest rate floors, caps and
swaps to hedge its interest rate risk position. A
Board of Directors approved hedging policy statement
governs use of these instruments. As of December 31,
1999 there were no off balance sheet instruments in
place.
ITEM 8. CONSOLIDATED FINANCIAL STATEMENTS AND
SUPPLEMENTARY DATA
The financial statements and Report of Independent
Accountant required are contained in the Financial
Section on pages 1 through 22 of the Company's Annual
Report for the year ended December 31, 1999 and are
incorporated herein by reference.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS
ON ACCOUNTING AND FINANCIAL DISCLOSURES
Not applicable.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE
REGISTRANT
The following statements pertain to all individuals
listed below:
1. There are no arrangements or understandings
between any director or officer listed below and any
other person pursuant to which such director or
officer was selected as an officer or director.
2. There is no family relationship among any of the
directors and officers listed below.
3. None of the directors and officers listed below
have been involved in any bankruptcy, criminal, or
other proceeding set forth or described in sub-section
(f) of Item 401 of Regulation S-K as promulgated by
the Securities and Exchange Commission.
4. Each of the directors listed below has been
elected to a three year term, except where the
mandatory retirement age of 75 years necessitated an
election of a shorter term, with one third of the
Board of Directors, as nearly as may be, standing for
election each year. Each director of the Company also
serves as a director of the Bank, and references below
to the year in which an individual was first elected
refer to the year in which s/he was first elected a
director of the Bank. All officers of the Company are
elected annually.
[1] Frederick F. Brown, Director, Age 73. Mr. Brown's
principal occupation during the past five years has
been as proprietor and owner of F. T. Brown Company,
which owns and operates a hardware store in Northeast
Harbor and as one-third owner of Island Plumbing &
Heating in Northeast Harbor. Mr. Brown first was
elected as a director on October 2, 1979.
[2] Robert C. Carter, Director, Age 56. Mr. Carter's
principal occupation is owner and operator of the
Machias Motor Inn and owner and operator of Carter's
Gun Shop, both located in Machias, Maine. Mr. Carter
was first elected as a director on October 1, 1996.
[3] Thomas A. Colwell, Director, Age 55. Mr. Colwell's
principal occupation during the past five years has
been as owner of Colwell Brothers, Inc, a lobster
pound and shipping company. He also serves as a member
of the Board of Directors of the Maine Lobster Pound
Association and is a director of the Island Medical
Center. Mr. Colwell was first elected as a director on
October 1, 1991.
[4] Bernard K. Cough, Director, Age 72. Mr. Cough's
principal occupation during the past five years has
been owner/operator of several motels, including the
Atlantic Oakes Motel, Atlantic Eyrie Lodge, Inc., Bay
View, Inc., and Ocean Gate, Inc. Mr. Cough is also
Treasurer of Cough Bros., Inc. Mr. Cough was first
elected as a director on October 1, 1985.
[5] Peter Dodge, Director, Age 56. Mr. Dodge is
President of the Peter Dodge Agency (a Maine
corporation) d/b/a the Merle B. Grindle Insurance
Agency in Blue Hill, Maine. He is a Trustee of George
Stevens Academy, and Director, Bagaduce Music Lending
Library. He was first elected as a director on October
6, 1987.
[6] Dwight L. Eaton, Executive Officer, Senior Vice
President and Trust Officer, Age 64. Mr. Eaton's
principal occupation during the past five years has
been as Senior Vice President and Trust Officer of the
Bank. He serves as Vice President of the Company and
was first appointed for that position in 1987. He
serves as Chairman and Director of the Acadia
Corporation. Mr. Eaton first was elected as a Director
on October 4, 1988.
[7] Ruth S. Foster, Director, Age 70. Mrs. Foster's
principal occupation during the past five years has
been as President and principal stockholder of Ruth
Foster's, a children's clothing store in Ellsworth,
Maine. Mrs. Foster first was elected as a director on
October 7, 1986.
[8] Cooper F. Friend, Director, Age 46. Mr. Friend's
principal occupation during the past five years has
been as owner and President of Friend & Friend, Inc.,
a recreational vehicle dealership; and one-third owner
of U-Store It, a storage rental facility, both located
in Ellsworth, Maine. He also serves as President of
Recreational Motorsports Association of Maine, and is
a member of the Board of Directors of the James
Russell Wiggins Down East Family YMCA. Mr. Friend
first was elected as a director on October 1, 1997.
[9] Robert L. Gilfillan, Director, Age 72. Mr.
Gilfillan's principal occupation during the past five
years has been as the owner and President of the West
End Drug Company in Bar Harbor. Mr. Gilfillan first
was elected as a director on November 5, 1957.
[10] Sheldon F. Goldthwait, Jr., President and Chief
Executive Officer, Age 61. Mr. Goldthwait was
appointed President and Chief Executive Officer of Bar
Harbor Banking and Trust Company January 1, 1995.
Prior to that he served as Executive Vice President of
Bar Harbor Banking and Trust Company. He serves as
Treasurer and Director of the Acadia Corporation. Mr.
Goldthwait first was elected as a director on October
4, 1988.
[11] Marlene S. Haskell, Executive Officer, Senior
Vice President of the Bank, Age 47. Ms Haskell joined
the Bank in 1990 as Vice President in charge of
Marketing. She was promoted to Senior Vice President
in August, 1997. Ms. Haskell's responsibilities
include Branch Administration and Marketing.
[12] H. Lee Judd, Director, Age 54. Mr. Judd's
principal occupation during the past five years has
been as President of Hinckley Insurance Group and
President of Hinckley Real Estate, located in
Southwest Harbor, Maine. He also serves as President
of the Causeway Club and Chairman of the Board of
Friends of Acadia. Mr. Judd first was elected as a
director on October 1, 1997.
[13] John P. McCurdy, Director, Age 68. Prior to his
retirement in 1991, Mr. McCurdy's principal occupation
was as owner and operator of McCurdy Fish Company of
Lubec, a processor of smoked herring. Mr. McCurdy
first was elected as a director on October 2, 1979.
[14] Jarvis W. Newman, Director, Age 64. Mr. Newman is
the owner of Newman Marine Brokerage, a boat brokerage
in Southwest Harbor and half owner of the Newman and
Gray Boatyard. Mr. Newman first was elected as a
Director on October 5, 1971.
[15] Robert M. Phillips, Director, Age 58. Mr.
Phillips is a consultant in the food industry and an
officer of International Foods Network, an exporter of
a variety of food products, located in Sullivan,
Maine. He was first elected as a director on October
5, 1993.
[16] John P. Reeves. Chairman of the Board of
Directors, Age 65. Mr. Reeves is retired. He was
elected as President and Chief Executive Officer of
Bar Harbor Banking and Trust Company in 1986 and
retired in 1994. He first was elected as a director on
October 6, 1970.
[17] Marsha C. Sawyer, Executive Officer, Age 47. Mrs.
Sawyer is Senior Vice President of the Bank and serves
as Clerk of the Company. She first was elected Clerk
of the Company in 1986.
[18] Gerald Shencavitz, Executive Officer, Senior Vice
President of the Bank, Age 47. Mr. Shencavitz joined
the Bank in April of 1998 and is responsible for
Operations and Information Systems of the Bank.
[19] Lynda Z. Tyson, Director, Age 44. Mrs. Tyson
works as a marketing and communications consultant and
is a freelance writer and editor. Mrs. Tyson was first
elected as a director on October 5, 1993.
[20] Virginia M. Vendrell, Executive Officer, Age 50.
Ms. Vendrell is Senior Vice President, Treasurer, and
Chief Financial Officer of the Bank and Treasurer of
the Company. She was first elected Treasurer of the
Company in 1990.
The Company inadvertently failed to file Form 5 for
the years ended December 31, 1998 and 1999.
Information is being gathered from all directors and
senior officers to complete these forms for each
covered person, and the Company expects to file all
such forms on or before April 30, 2000. No Form 4's
were required to be filed during this period. The
following is a listing of each reporting person who
failed to file a Form 5 for the stated periods and the
number of transactions with respect to which no Form 5
was filed:
Name of # of Year
Participant Transacti
ons
Bernard K. Cough 3 1998
Dwight L. Eaton 1 1999
H. Lee Judd 1 1998
Robert M. 1 1998
Phillips
In addition, Sheldon F. Goldthwait, Jr., John P.
Reeves, Dwight L. Eaton, Virginia M. Vendrell, Marsha
C. Sawyer and Marlene S. Haskell maintain Bar Harbor
Bankshares stock with the Bank's 401-K plan. Small
intermittent purchases and sales were made during 1998
and 1999 at market prices.
ITEM 11. EXECUTIVE COMPENSATION
Officers of the Company do not, as such, receive
compensation, and are compensated as employees of the
Bank. The following table sets forth cash compensation
received during the Bank's last fiscal year by the
executive officers for which such compensation
exceeded $100,000.
ANNUAL COMPENSATION
Other Annual
Year Salary Incenti Compensation
($) ve ($) ($)
Sheldon F. Goldthwait, 1997 155,00 19,737 0
Jr. 0
President and 1998 158,00 22,202 0
0
Chief Executive Officer 1999 160,38 6,039 0
0
Dwight L. Eaton 1997 98,000 12,984 0
Senior Vice President and 1998 100,95 14,115 0
0
Trust Officer 1999 102,47 9,546 0
0
Lewis H. Payne 1997 93,500 12,237 0
Executive Vice President 1998 99,300 13,683 0
1999 106,51 3,795 0
2
Virginia M. Vendrell 1997 N/A N/A 0
Senior Vice President and 1998 90,000 12,626 0
Chief Financial Officer 1999 N/A N/A 0
LONG TERM COMPENSATION
AWARDS PAYOUT
Restric LTIP
ted Optional Payout
Year Stock SARs (#) s
Awards ($)
($)
Sheldon F. Goldthwait, 1997 0 0 0
Jr.
1998 0 0 0
1999 0 0 0
Dwight L. Eaton 1997 0 0 0
1998 0 0 0
1999 0 0 0
Lewis H. Payne 1997 0 0 0
1998 0 0 0
1999 0 0 0
Virginia M. Vendrell 1997 0 0 0
1998 0 0 0
1999 0 0 0
ALL OTHER COMPENSATION
($)
Sheldon F. Goldthwait, 1997 30,027
Jr.
1998 52,906
1999 52,905
Dwight L. Eaton 1997 41,654
1998 48,104
1999 50,857
Lewis H. Payne 1997 1,848
1998 1,561
1999 616
Virginia M. Vendrell 1997 N/A
1998 138
1999 N/A
The Bank has an incentive plan in which all employees
who were on the payroll as of January 1st of a
calendar year and who worked through December 31st are
eligible. The Bank utilizes the Performance
Compensation Plan for Stakeholders developed by Mike
Higgins & Associates, Inc. The plan encompasses the
Bank creating incentive models based on multiple goal
achievements and weighted to provide reward to share a
portion of the improved contribution. The goals must
include profit, growth, productivity and quality.
COMPENSATION COMMITTEE
The Bank Board has appointed a six-member
Compensation Committee comprised of Directors Brown,
Dodge, Phillips, Reeves, Eaton and Goldthwait. Mr.
Eaton and Mr. Goldthwait are Directors and also
members of management. The Compensation Committee
meets several times each year and makes compensation
recommendations for the ensuing year to the Board of
Directors.
The recommendations of the Committee are then
considered and voted upon by the Full Board. During
1999, Mr. Goldthwait and Mr. Eaton were members of the
Compensation Committee and also directors. Each
abstained from participating in discussion,
recommendations, or voting regarding his own
compensation.
COMPENSATION OF DIRECTORS
Each of the directors of the Company is a director of
the Bank and as such receives a fee of $250 for each
committee meeting attended and a $300.00 fee for
attending the monthly Full Board Meeting. The fee paid
for the Annual Meeting is $500.00 per member of the
Board of Directors. Meetings of the Board of Directors
of the Bank are held monthly. No directors' fees are
paid to the directors of the Company as such. Those
directors of the Bank who are also officers do not
receive directors' fees. The Chairman of the Board
receives an annual retainer of $3,000 in addition to
meeting fees.
EMPLOYEE BENEFIT PLANS
The Bank has entered into agreements with Messrs.
Reeves, Goldthwait, and Eaton whereby those
individuals, or their beneficiaries, will receive upon
death or retirement, an annual supplemental pension
benefit over a period of 10 years in the amount of
$15,000 per annum (in the case of Mr. Reeves), and in
the amount of $10,000 per annum (in the case of
Messrs. Goldthwait and Eaton). This plan is unfunded
and benefits will be paid out of Bank earnings.
Because Mr. Reeves chose early retirement, he began
drawing his annual installment of $5,300 pursuant to
this deferred compensation arrangement as of January
1, 1995. Messrs. Goldthwait and Eaton will begin
drawing their annual installment during the year 2000.
In 1993, the Company established a non-qualified
supplemental retirement plan for Messrs. Reeves,
Eaton, Goldthwait, and MacDonald. The agreements
provide supplemental retirement benefits payable in
installments over twenty years upon retirement or
death. The Company recognizes the costs associated
with the agreements over the service lives of the
participating officers. In 1999, the Company modified
the plan for Mr. Goldthwait, which resulted in a one-
time expense of $639,700. The cost relative to the
supplemental plan was $866,200, $138,600, and $127,600
for 1999, 1998 and 1997 respectively. The agreements
with Messrs. Reeves, Eaton, Goldthwait, and MacDonald
are in the amounts of $49,020, $22,600, $87,176 and
$7,700 respectively. Mr. Reeves began drawing his
annual installment of $49,020 as of January 1, 1995.
Officers of the Bank are entitled to participate in
certain group insurance benefits. In accordance with
Bank policy, all such benefits are available generally
to employees of the Bank.
PERFORMANCE GRAPH
The following graph illustrates the estimated yearly
percentage change in the Company's cumulative total
shareholder return on its common stock for each of the
last five years. Total shareholder return is computed
by taking the difference between the ending price of
the common stock at the end of the previous year and
the current year, plus any dividends paid divided by
the ending price of the common stock at the end of the
previous year. For purposes of comparison, the graph
also illustrates comparable shareholder return of
American Stock Exchange (AMEX) banks as a group as
measured by the AMEX Market Index and the peer group
index as defined by AMEX. The graph assumes a $100
investment on December 31, 1994 in the common stock of
each of the Company, the AMEX peer group banks and the
AMEX Market Index as a group and measures the amount
by which the market value of each, assuming
reinvestment of dividends, has increased as of
December 31 of each calendar year since the base
measurement point of December 31, 1994.
The following graph is based upon a good faith
determination of approximate market value for each
year indicated based on information obtained from the
American Stock Exchange, in the case of its common
stock, and from anecdotal information available to the
Company as to the value at which its common stock has
traded in isolated transactions from time to time.
Therefore, although the graph represents a good faith
estimate of shareholder return as reflected by market
value, the valuations utilized are, of necessity,
estimates and may not accurately reflect the actual
value at which common stock has traded in particular
transactions as of any of the dates indicated.
The following information is presented in a line graph
in the printed Form 10-K:
1994 1995 1996 1997 1998 1999
Bar Harbor
Banking
and Trust 100.0 195. 367. 411. 365.3 284.
Company 0 00 18 39 1 10
Peer Group
Index 100.0 132. 151. 247. 250.1 214.
0 35 54 13 1 50
AMEX Broad
Market 100.0 128. 136. 163. 161.4 201.
Index 0 90 01 66 4 27
ITEM 12: SECURITY OWNERSHIP OF CERTAIN BENEFICIAL
OWNERS AND MANAGEMENT
As of December 31, 1999, to the knowledge of the
Company, Bernard K. Cough was the only beneficial
owner of more than five percent of the Company's
common stock. Mr. Cough's address is 5 Norman Road,
Bar Harbor, Maine.
The following table lists, as of December 31, 1999,
the number of shares of Common Stock and the
percentage of the Common Stock represented thereby,
beneficially owned by each director and nominee for
director, and by all principal officers and directors
of the Company as a group.
Amount
of Percent
Director, Executive Officer Benefic of Class
or Nominee ial
Ownersh
ip
Frederick F. Brown 25,140 *
Robert C. Carter 2,100 *
Thomas A. Colwell 5,400 *
Bernard K. Cough 172,220 5.03%
Peter Dodge 4,860 *
Dwight L. Eaton 10,762 *
Ruth S. Foster 3,350 *
Cooper F. Friend 3,400 *
Robert L. Gilfillan 79,930 2.34%
Sheldon F. Goldthwait, Jr. 30,671 *
H. Lee Judd 6,900 *
John P. McCurdy 6,600 *
Jarvis W. Newman 30,100 *
Robert M. Phillips 1,300 *
John P. Reeves 25,678 *
Lynda Tyson 1,800 *
Total ownership of all
Directors and Executive 416,544 12.17%
Officers of Company as a
group (20 persons).
* Less than one percent
For purposes of this table, beneficial ownership has
been determined in accordance with the provisions of
Rule 13-d-3 promulgated under the Securities Exchange
Act of 1934 as amended. Direct beneficial ownership
includes shares held outright or jointly with others.
Indirect beneficial ownership includes shares held in
the same name of a director's spouse or minor children
or in trust for the benefit of a director or member of
his or her family. Indirect beneficial ownership does
not include, in the case of each director, 97,360
shares (2.85%) of the Common Stock held by two trusts
which shares, for purposes of voting, are allocated
equally among the directors of the Bank under the
terms of the respective trust instruments. No director
has any other beneficial interest in such shares.
Ownership figures for directors and nominees include
directors' qualifying shares owned by each person
named.
Management is not aware of any arrangement that could,
at a subsequent date, result in a change in control of
the Company.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED
TRANSACTIONS
The Bank retains the firm of Tyson & Partners, Inc. to
assist with its marketing program. Lynda Z. Tyson, who
was elected to the Board of the Company and the Bank
on October 4, 1993, serves as that firm's Chief
Operating Officer as well as Director of Marketing.
Management believes that the fees charged by Tyson &
Partners, Inc. are at least as favorable as any that
could have been obtained from persons not affiliated
with the Bank.
The Bank has had, and expects to have in the future,
banking transactions in the ordinary course of its
business with directors, officers, principal
stockholders and their associates. These transactions
are on substantially the same terms, including
interest rates and collateral on the loans, as those
prevailing at the same time for comparable
transactions with others. Such loans have not and will
not involve more than normal risk of collectability or
present other unfavorable features.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND
REPORTS ON FORM 8-K
(a) (1) The following financial statements are
incorporated by reference from Item 8 hereof: [Annual
Report to Stockholders, Financial Section, included
herein as Exhibit 13].
PAGE
Independent Auditor's Report 7
Consolidated Statements of Financial Condition
December 31, 1999 and 1998 8
Consolidated Statements of Earnings for the years
ended
December 31, 1999, 1998, and 1997 9
Consolidated Statements of Changes in Stockholders'
Equity for the years ended
December 31, 1999, 1998, and 1997 10
Consolidated Statements of Cash Flows for the years
ended
December 31, 1999, 1998, and 1997 11
Notes to Consolidated Financial Statements 12 - 22
(a) (2) Financial Statement Schedules
See Item 14(d) Form 10-K
(a) (3) Listing of Exhibits -- see Item 14 (c)
(b) Report on Form 8-K not applicable
(c) Exhibits -- EXHIBIT INDEX
EXHIBIT
NUMBER
2. Plan of Acquisition, reorganization
Incorporated by reference agreement,
liquidation or succession to Form S-14
dated
March 14, 1984
3. Articles of Incorporation and Bylaws
Incorporated by reference
To Form S-14
dated
March 14, 1984
10. Material Contracts Incorporated by
reference
to Form 10-K
dated
December 31,
1986
13. Annual report to security holders Enclosed
herewith
21. Subsidiaries of the registrant Incorporated by
reference
to Form 10-K
dated
December 31,
1987
27. Financial Data Schedule Enclosed
herewith
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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
(Registrant)
/s/ Sheldon F.
Goldthwait, Jr.
Sheldon F.
Goldthwait, Jr.
President and Chief
Executive
Officer
Pursuant to the requirements of the Securities
Exchange Act of 1934, this report has been signed
below by the persons on behalf of the Registrant and
in the capacities and on the dates indicated.
/s/ Sheldon F. Goldthwait, Jr. /s/ Virginia M.
Vendrell
Sheldon F. Goldthwait, Jr. Virginia M. Vendrell
President and Director Chief Financial
Officer
Chief Executive Officer Chief Accounting
Officer
/s/Robert L. Gilfillan /s/ Frederick F.
Brown
Robert L. Gilfillan, Director Frederick F. Brown,
Director
/s/ Thomas A.
Colwell
Thomas A. Colwell,
Director
/s/ Bernard K. Cough /s/ Peter Dodge
Bernard K. Cough, Director Peter Dodge,
Director
/s/ Dwight L. Eaton /s/ Ruth S. Foster
Dwight L. Eaton, Director Ruth S. Foster,
Director
/s/ Cooper F. Friend /s/ H. Lee Judd
Cooper F. Friend, Director H. Lee Judd,
Director
/s/ Robert M. Phillips /s/ John P. McCurdy
James C. MacLeod, Director John P. McCurdy,
Director
/s/ Lynda Z. Tyson
Lynda Z. Tyson