UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON DC 20549
FOR 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, 1996. 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
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.
The aggregate market value of the voting stock held by non-affiliates of the
registrant as of January 31, 1997 is:
Common stock, $2.00 par - $66,242,446
The number of shares outstanding of each of the registrant s classes of
common stock, as of January 31, 1997 is:
Common stock, 1,820,583
Documents incorporated by Reference:
(1) Portions of the Annual Report to Stockholders for the year ended December
31, 1996 are incorporated by reference into Part II, Items 7 and 8 and Part
IV, Item 14 of the Form 10-K.
PAGE
INDEX
[CAPTION]
# ITEM PAGE
1. Business 3 - 5
2. Properties 6 - 7
3. Pending Legal Proceedings 7
4 Submission of Matters to a Vote
of Security Holders 7
5 Market for Registrant s Common Equity
and Related Stockholders Matters 7
6 Selected Financial Data 8 - 28
7 Management s Discussion and Analysis 29
8 Consolidated Financial Statements and
Supplementary Data 29
9 Changes in and Disagreements with
Accountants on Accounting and Financial
Disclosure 29
10 Directors and Executive Officers 29-31
11 Executive Compensation 32-35
12 Security Ownership of Certain Beneficial
Owners and Management 36-37
13 Certain Relationships and Related
Transactions 37
14 Exhibits, Financial Statement Schedules
and Reports on Form 8-K 38-39
PAGE
PART I
ITEM 1. BUSINESS
Bar Harbor Bankshares, ( the Company ), was incorporated January 19, 1984. As
of December 31, 1996, 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 1,718,237 shares outstanding held of record by approximately 1040
stockholders.
The accompanying consolidated financial statements include the accounts of
the company and its wholly-owned subsidiary, Bar Harbor Banking and Trust
Company ( the Bank ). All intercompany balances and transactions have been
eliminated in the accompanying financial statements.
The Bank conducts substantially the same business operations as a typical
full service, independent, community commercial bank. It has ten offices in
coastal Maine, including its principal office located at 82 Main Street, Bar
Harbor, Hancock County and adjacent Washington 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 Route 1 and 1A, Milbridge; Main
Street, Machias; and Washington Street, Lubec. In January of 1997, the Bank
moved its operations, check clearing, technology and mail staff to a newly
constructed Operations Center located on Avery Lane in Ellsworth, Maine.
The Mt. Desert Block Company ( the Block Company ), a wholly owned subsidiary
of the Bank, owns and manages the real estate upon which all of the Bank s
offices are located. The Block Company also owns a parcel of real estate
which is not related to the Bank s operations and which is leased for
commercial purposes in Lubec; and land adjacent to the Blue Hill bank
property. In early 1997, the Block Company will be dissolved with the
transfer of real estate made to the Bank.
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 as a result of aggressive acquisition
programs by statewide holding companies and by completely open interstate
banking. The bank continues to be one of the largest independent commercial
banks in the State of Maine.
PAGE
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 banks which are 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 86% 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 and KEOGH plans, safe
deposit boxes, collections, travelers checks, night depository services,
direct deposit payroll services, credit cards, personal money orders, bank-
by-mail and club accounts and drive-up facilities at all offices. 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. The Trust Department handles book assets for
clients totaling $258,700,000 and offers professionally managed investment
accounts.
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, stand-by credit, VISA
credit card accounts and student loans; residential mortgage loans; home
equity loans; and 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 areas for all
of the Bank s
PAGE
services consist of Hancock and Washington Counties. The Bank s policy for
lending limits is up to 20% of capital and surplus to any borrower provided
that the loans are secured and approved by the Executive Loan Committee,
which includes members of the Bank s Board of Directors.
As a state chartered bank, the Bank has the Bureau of Banking of the State of
Maine and the Federal Deposit Insurance Corporation as bank regulatory
agencies responsible for its supervision. In addition, the Company is
supervised by the Federal Reserve Bank.
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. As of December 31, 1996 the Bank
employed 157 persons in a full or part time basis. The President, Executive
Vice President, Senior Vice Presidents and Vice President in charge of Human
Resources are employed by the Bank as well as serve as officers of the
Company. They are not compensated by the Company for their services. There
are no employees of the Company.
Since the Bank is located in a summer resort area, a portion of the Bank s
business is seasonal in nature. In addition, employment in the sardine and
blueberry industries of Washington County is seasonal. As a result of these
factors, the Bank has had an annual deposit swing which has been declining in
the last several years from swings of more than 20% in the late 1980s, to
under 6% for both 1995 and 1996. The reduction in outflow may be attributable
to increasing interest rates and to safety and soundness issues as customers
choose to have their funds insured by maintaining their deposits in the
banking system. Deposits generally peak in late September with the low point
in February. This deposit swing is predictable and does not have a materially
adverse effect on the Bank. Should the Bank need additional funds for
liquidity needs, it may utilize short term borrowing lines set up through the
Federal Home Loan Bank of Boston, seek repurchase agreements through a
primary securities dealer or draw on its seasonal line at the Federal Reserve
Bank of Boston.
On July 11, 1995, the Board of Directors declared a five-for-one stock split
to all shareholders of record as of that date and which took effect on August
7, 1995. All share and per data share included in this Form 10-K have been
restated to reflect the stock split.
PAGE
ITEM 2. PROPERTIES
The eleven parcels of real estate utilized by the Bank for its operations are
owned by the Mt. Desert Block Company ( the Block Company ), a wholly owned
subsidiary of the Bank, and are leased to the Bank. These properties 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 parking lot. The building was
renovated and expanded in 1987 and 1988. A portion of the expanded building
was completed in 1990 offering space for operational personnel.
2. An office is located at Main Street, Northeast Harbor, Maine. This
property consists of a building constructed in 1974 which is adequate for the
Bank s current 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, Maine. 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 was
occupied by the Bank s operations, check clearing, technology, training and
mail departments in January of 1997.
PAGE
The Block Company owns real estate located on Washington Street in Lubec,
Maine which is adjacent to the Lubec branch office of the Bank and is
presently unoccupied and available for sale.
A parcel of land adjacent to the Blue Hill branch was purchased in 1981.
Aggregate annual rentals paid by the Bank during its last fiscal year for its
operating properties did not exceed 5% of its operating expenses.
ITEM 3. PENDING 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
Bar Harbor Bankshares stock is not listed on any national exchange and there
is no established trading market for the stock. Since the Company is not
aware of the price of all trades, the price is established by determining
what a willing buyer will pay a willing seller. The stock prices shown below
are based upon quotes received from The Bangor Daily News, and represent a
range of the high and low bids for each quarter of 1995 and 1996:
1st Quarter 2nd Quarter 3rd Quarter 4th Quarter
High Low High Low High Low High Low
1996 37.50 to 26.125 44.00 to 37.00 42.00 to 38.00 39.50 to 36.25
1995 17.00 to 16.40 20.00 to 17.00 25.50 to 20.00 28.00 to 25.50
PAGE
AVERAGE BALANCE SHEETS AND ANALYSIS OF NET INTEREST EARNINGS
[CAPTION]
1996
AVERAGE YIELD/
BALANCE INTEREST RATE
ASSETS
Loans $207,188,449 $ 20,303,252 9.80%
Taxable Investment Securities 93,606,754 6,421,615 6.86%
Non-Taxable Investment Securities 12,940,087 767,161 5.93%
Fed. Funds Sold & Money Market
Funds 556,555 30,447 5.47%
Total Interest-Earning Assets $314,291,845 $ 27,522,475 8.76%
Non-Interest Earning Assets:
Total Cash and Due from 8,877,912
Less: Allowance for Losses (4,261,505)
Bank Premises and Equipment 6,880,463
Other Assets 6,182,539
TOTAL ASSETS $331,971,254
LIABILITIES AND STOCKHOLDERS EQUITY
Interest Bearing Demand Deposits $ 38,036,466 $ 618,043 1.62%
Savings Deposits 54,503,408 1,370,782 2.52%
Time Deposits 124,426,589 6,898,950 5.54%
Repurchase Agreements and
Short Term Borrowings 37,519,384 2,030,030 5.41%
Long Term Borrowings 6,767,760 363,198 5.37%
TOTAL INTEREST BEARING LIABILITIES $261,253,607 $ 11,281,003 4.27%
Non-Interest Bearing Liabilities:
Non-Interest Bearing Demand
Deposits 33,407,813
Other Liabilities 1,735,263
Stockholders Equity 35,574,571
TOTAL LIABILITIES &
STOCKHOLDERS EQUITY $331,971,254
NET EARNING ASSETS $ 53,038,238
NET INTEREST INCOME/NET INTEREST
SPREAD $ 16,241,472 4.44%
NET INTEREST MARGIN 5.17%
PAGE
1995
AVERAGE YIELD/
BALANCE INTEREST RATE
ASSETS
Loans $195,178,495 $ 19,298,629 9.89%
Taxable Investment Securities 84,364,335 5,877,065 6.97%
Non-Taxable Investment Securities 14,138,613 852,051 6.03%
Fed. Funds Sold & Money Market
Funds 2,097,962 124,242 5.92%
Total Interest-Earning Assets $295,779,405 $ 26,151,987 8.84%
Non-Interest Earning Assets:
Total Cash and Due from 7,727,672
Less: Allowance for Losses (4,142,571)
Bank Premises and Equipment 5,720,449
Other Assets 6,027,318
TOTAL ASSETS $311,112,273
LIABILITIES AND STOCKHOLDERS EQUITY
Interest Bearing Demand Deposits $ 37,109,957 $ 606,437 1.63%
Savings Deposits 57,521,058 1,408,916 2.45%
Time Deposits 115,118,182 6,412,766 5.57%
Repurchase Agreements and
Short Term Borrowings 38,440,663 2,175,597 5.66%
Long Term Borrowings 580,132 20,677 3.56%
TOTAL INTEREST BEARING LIABILITIES $248,769,992 $ 10,624,393 4.27%
Non-Interest Bearing Liabilities:
Non-Interest Bearing Demand
Deposits 30,083,671
Other Liabilities 1,272,847
Stockholders Equity 30,985,763
TOTAL LIABILITIES &
STOCKHOLDERS EQUITY $311,112,273
NET EARNING ASSETS $ 47,009,413
NET INTEREST INCOME/NET INTEREST
SPREAD $ 15,527,594 4.57%
NET INTEREST MARGIN 5.25%
PAGE
1994
AVERAGE YIELD/
BALANCE INTEREST RATE
ASSETS
Loans $174,550,402 $ 16,006,536 9.17%
Taxable Investment Securities 75,333,849 4,911,599 6.52%
Non-Taxable Investment Securities 14,296,651 828,998 5.80%
Fed. Funds Sold & Money Market
Funds 1,192,601 48,457 4.06%
Total Interest-Earning Assets $265,373,503 $ 21,795,590 8.21%
Non-Interest Earning Assets:
Total Cash and Due from 7,664,386
Less: Allowance for Losses (3,720,244)
Bank Premises and Equipment 5,684,033
Other Assets 6,166,864
TOTAL ASSETS $281,168,542
LIABILITIES AND STOCKHOLDERS EQUITY
Interest Bearing Demand Deposits $ 38,591,994 $ 633,346 1.64%
Savings Deposits 63,106,980 1,621,651 2.57%
Time Deposits 84,786,001 3,812,734 4.50%
Repurchase Agreements and
Short Term Borrowings 37,686,124 1,608,404 4.27%
Long Term Borrowings 0 0 0%
TOTAL INTEREST BEARING LIABILITIES $224,171,099 $ 7,676,135 3.42%
Non-Interest Bearing Liabilities:
Non-Interest Bearing Demand
Deposits 28,559,472
Other Liabilities 1,033,450
Stockholders Equity 27,404,521
TOTAL LIABILITIES &
STOCKHOLDERS EQUITY $281,168,542
NET EARNING ASSETS $ 41,202,404
NET INTEREST INCOME/NET INTEREST
SPREAD $ 14,119,455 4.79%
NET INTEREST MARGIN 5.32%
PAGE
NOTES TO AVERAGE BALANCE SHEET
1. Tax-exempt income is calculated at coupon rate, not adjusted on a tax
equivalent basis.
2. At December 31, 1996, loans on non-accrual status totaled $3,541,000.
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 $314,000 higher in 1996.
3. Interest on loans includes loan fees pursuant to FASB91 in the following
amounts:
1996 1995 1994
$66,353 $103,788 $176,032
4. The Bank s net interest margin remains above the national average, but
has remained at higher than average levels for a number of years. 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 gradually over the past three
years, as competition for the same customers within the Bank s market
area continues to grow. The average rate on the bank s earning assets
decreased in 1996 by 35 basis points and the cost of interest bearing
liabilities decreased by 17 basis points. This compares with the average
rate on earning assets increasing by 63 basis points in 1995 when
compared to 1994; and the average rate on interest bearing liabilities
increasing by 85 basis points. Although the net interest spread dropped
from 1995 to 1996, the drop was not as significant as the drop between
1994 and 1995. 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 found on page 12 of this
report.
PAGE
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.
YEAR ENDED DECEMBER 31, 1996
COMPARED TO DECEMBER 31, 1995
INCREASES (DECREASES) DUE TO:
VOLUME RATE NET
Loans $1,178,248 $ (173,625) $1,004,623
Taxable Investment Securities 654,084 (109,534) 544,550
Non-Taxable Investment
Securities (71,244) (13,646) (84,890)
Federal Funds Sold and
Money Market Funds (84,979) (8,816) (93,795)
TOTAL INTEREST EARNING ASSETS $1,676,109 $ (305,622) $1,370,488
Deposits $ 373,494 $ 86,161 $ 459,655
Repurchase Agreements and
Short Term Borrowings (55,225) (90,342) (145,567)
Long Term Borrowings 344,202 (1,681) 342,521
TOTAL INTEREST BEARING
LIABILITIES $ 662,471 $ (5,862) $ 656,609
NET CHANGE IN INTEREST $1,013,638 $ (299,759) $ 713,879
PAGE
YEAR ENDED DECEMBER 31, 1995
COMPARED TO DECEMBER 31, 1994
INCREASES (DECREASES) DUE TO:
VOLUME RATE NET
Loans $1,980,684 $1,311,410 $3,292,093
Taxable Investment Securities 604,581 360,885 965,466
Non-Taxable Investment
Securities (9,243) 32,296 23,053
Federal Funds Sold and
Money Market Funds 47,287 28,498 75,785
TOTAL INTEREST EARNING ASSETS $2,623,309 $1,733,088 $4,356,397
Deposits $ 728,282 $1,632,106 $2,360,388
Repurchase Agreements and
Short Term Borrowings 41,548 525,645 567,193
Long Term Borrowings 20,677 0 20,677
TOTAL INTEREST BEARING
LIABILITIES $ 790,507 $2,157,751 $2,948,258
NET CHANGE IN INTEREST $1,832,802 ($424,663) $1,408,139
PAGE
INTEREST RATE SENSITIVITY ANALYSIS
AS OF DECEMBER 31, 1996
(Unaudited)
Amounts in Thousands
The following table sets forth the amounts of interest-earning assets and
interest-bearing liabilities outstanding at December 31, 1996 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
TOTAL TO FIVE THAN FIVE
ONE YEAR YEARS YEARS TOTAL
Loans
Fixed Rate $ 17,650 $ 18,435 $ 32,123 $ 68,208
Variable Rate 106,506 37,246 0 143,752
Investments 45,541 37,396 24,788 107,725
Federal Funds Sold 2,000 0 0 2,000
Interest Rate Swap 0 15,000 0 15,000
TOTAL EARNING ASSETS $171,697 $108,077 $ 56,911 $336,685
Deposits $130,790 $ 19,277 $101,608 $251,675
Repurchase Agreements 8,246 0 0 8,246
Borrowings 31,187 12,721 0 43,908
Interest Rate Swap 5,000 5,000 5,000 15,000
TOTAL SOURCES $175,223 $ 36,998 $106,608 $318,829
Net Gap Position $ (3,526) $ 71,079 $(49,697) $ 17,856
Cumulative Gap (3,526) 67,553 17,856 17,856
Rate Sensitive Assets/
Rate Sensitive Liabilities 97.99% 292.12% 53.38% 105.60%
Except as stated below, the amounts of assets and liabilities shown which
reprice or mature during a particular period were determined in accordance
with the earlier of term to repricing or the contractual terms of the asset
or liability. The Bank has assumed that 4 1/2% of its savings is more rate
sensitive and will react to rate changes, and has therefore categorized it in
the one-year time horizon. The remainder is stable and is listed in the
greater than five year category. NOW accounts, other than seasonal
fluctuations approximating $4,000,000, are stable and are listed in the
greater than five year category. Money market accounts are assumed to reprice
in three months or less. Certificates of deposit are assumed to reprice at
the date of contractual maturity. Fixed rate mortgages, totaling $42,000,000
are amortized using the weighted average maturity of 145 months, with an
additional prepayment rate of 10%,which approximates the Bank s prior
experience.
SUMMARY OF INVESTMENT PORTFOLIO
The information presented below is to facilitate the analysis and comparison
of sources of income and exposure to risks.
1996 1995 1994
U.S. Treasury Securities $ 0 $ 1,000,470 $ 3,007,997
Obligations of Other U.S.
Government Agencies 11,749,820 13,278,651 13,322,895
Mortgage Backed Securities:
U.S. Government Agencies 49,255,463 42,764,250 46,739,125
Other 6,811,600 8,210,646 4,086,750
Obligations of State and
Political Subdivision 12,391,860 13,240,946 14,401,790
Other Bonds 2,508,093 3,714,099 3,521,514
SECURITIES HELD TO MATURITY $82,716,836 $82,209,062 $85,080,071
Obligations of Other U.S.
Government Agencies $13,337,031 8,145,160 0
Mortgage Backed Securities--
U.S. Government Agencies 5,430,506 5,578,826 0
Other Bonds 0 500,000 487,500
Marketable Equity Securities 616,896 0 0
SECURITIES AVAILABLE FOR SALE $19,384,433 $ 14,223,986 $ 487,500
PAGE
MATURITY SCHEDULE FOR INVESTMENTS HELD TO MATURITY
AT DECEMBER, 1996
Greater than Greater than Greater
One Year One Year to Five Years to than
or Less Five Years Ten Years Ten Years
U.S. Treasury Securities $ 0 $ 0 $ 0 $ 0
Average Yield
Obligations of other U.S.
Government Agencies 2,000,000 5,750,000 3,999,820 0
Average Yield 6.00 7.30 7.16
Mortgage-backed Securities:
U.S. Government Agencies 0 9,284,892 4,678,079 35,292,492
Average Yield 7.37 7.81 7.25
Mortgage-Backed Securities:
Other 0 0 1,858,973 4,952,627
Average Yield 5.29 7.35
Obligations of State and
Political Subdivisions 4,144,784 6,422,076 0 1,825,000
Average Yield 5.57 6.47 6.88
Other Bonds 1,498,970 1,009,123 0 0
Average Yield 6.59 7.56
TOTAL $7,643,754 $22,466,091 $10,536,872 $42,070,119
MATURITY SCHEDULE FOR INVESTMENTS
AVAILABLE FOR SALE AT DECEMBER 31, 1996
Greater than Greater
Five Years to than
Ten Years Ten Years
Obligations of Other U. S.
Government Agencies $ 11,500,733 $ 2,000,000
Average Yield 7.18 7.18
Mortgage Backed Securities --
U.S. Government Agencies $ 0 $ 5,430,506
Average Yield 7.49
Other Bonds 0 0
Average Yield
$ 11,500,733 $ 7,430,506
Mortgage-backed securities are included based upon the final maturity date
of the security.
PAGE
he maturity schedule for securities available for sale excludes marketable
equity securities totaling $616,896.
Yield on tax exempt bonds were not computed on a tax equivalent basis
The bank does not hold any securities for a single issuer 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 than Greater than Greater
One Year One Year to Five Years to than
or Less Five Years Ten Years Ten Years
Mortgage-backed Securities Held
To Maturity $ 2,707,209 $33,183,344 $20,176,510 $ 0
Mortgage-backed Securities Available
For Sale 3,633,172 1,797,334 0 0
Changes in the market value of the investment portfolio follow national
interest rate fluctuations. As national interest rates remained level for
1996, the value of the portfolio also remained level with the total unrealized
gain approximately $300,000 over book value. The Bank does not hold any
interest only or principal only bonds, nor does it hold any securities whose
market value could change to a greater degree than traditional debt. The Bank
does hold one 10-year step up debenture that is backed by the U. S.
government. The step up has a fixed rate of interest for the first three years
and which then increases incrementally each year until maturity. This
debenture is callable at its semi-annual coupon date.
PAGE
SUMMARY OF LOAN PORTFOLIO
1996 1995 1994
Real estate Loans:
Construction & Development $ 8,905,823 $ 8,072,230 $ 4,594,803
Mortgage 146,041,165 135,068,891 124,620,343
Loans to finance agricultural
production and other loans
to farmers 10,092,214 10,377,194 9,369,651
Commercial and industrial loans 29,040,315 29,806,328 31,791,148
Loans to individuals for
household, family and other
personal expenditures 17,241,472 17,640,397 15,301,322
All other loans 318,911 6,790 21,635
Real Estate Under Foreclosure 320,147 793,887 294,904
TOTAL LOANS $211,960,047 $201,765,717 $185,993,806
Less: Allowance for
possible loan loss (4,292,995) 4,047,883 3,891,835
NET LOANS $207,667,052 $197,717,834 $182,101,971
1993 1992
Real estate Loans:
Construction & Development $ 4,606,935 $ 5,642,294
Mortgage 107,9338,202 94,906,632
Loans to finance agricultural
production and other loans
to farmers 8,217,183 7,174,262
Commercial and industrial loans 27,533,900 25,621,342
Loans to individuals for
household, family and other
personal expenditures 14,621,364 12,248,539
All other loans 269,371 182,397
Real Estate Under Foreclosure 328,703 434,384
TOTAL LOANS $163,525,658 $146,209,850
Less: Allowance for
possible loan loss 3,369,387 3,205,868
NET LOANS $160,156,271 $143,003,982
PAGE
PAST DUE LOANS
(Amounts in Thousands)
The figures below represent loans past due 30 days or more
(% is percentage of loans outstanding for a specific category of loans).
1996 % 1995 % 1994 %
Construction & Development 247 2.8 214 2.7 77 1.7
Real Estate 4,100 2.8 3,009 2.2 1,713 1.4
Commercial, Industrial
and other 1,479 3.8 517 1.3 559 1.4
Loans to individuals 462 2.7 434 2.5 324 2.1
Loans past due 90 days or
more and still accruing* 733 0.4 849 .4 892 .5
Non-Accruing Loans 3,541 1.7 3,360 1.7 3,139 1.7
1993 % 1992 %
Construction & Development 0 0.0 377 6.7
Real Estate 2,177 2.0 4,889 5.2
Commercial, Industrial
and other 615 1.7 1,524 5.9
Loans to individuals 238 1.6 296 2.4
Loans past due 90 days or
more and still accruing* 513 .3 593 .4
Non-Accruing Loans 2,645 1.6 3,683 2.5
<FN>
<F1> *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 which were non-performing as of December 31, 1995 and for
which the real estate was acquired by the Bank in 1996 totaled
$215,000.
PAGE
MATURITY SCHEDULE - LOAN PORTFOLIO
As of December 31, 1996
After one
One Year Year through After five
or Less five years years
Commercial, Financial
and Agricultural $21,097,055 $ 9,004,059 $ 9,031,415
Real estate Construction
and Land Development $ 7,561,028 $ 1,344,795
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 our own Bank. 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
renegotiate 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 permanent portfolio residential mortgage loans on the Bank s
books.
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 $9,882,139 and with fixed interest rates and
maturities of greater than one year is $9,498,130.
RISK ELEMENTS
1996 1995 1994 1993 1992
Loans accounted for on a non-
accrual basis $3,541,296 $3,359,857 $3,139,465 $2,644,678 $3,683,185
Accruing loans contractually past
due 90-days or more $ 732,791 $ 849,127 $ 891,986 $ 512,784 $ 593,237
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 $313,584
higher in 1996. Interest collected on these loans totaled $307,645 in 1996 and
was included in net income. Non-accrual loans represent 1.7% of average loans
for 1996 and 1995.
Management is not aware of any potential problems loans which are not included
in the above table.
PAGE
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.
At December 31, 1996, approximately $27,800,000 of loans were made to
companies in the hospitality industry. Of this total indebtedness, 2.8% were
30 days or more delinquent as of December 31, 1996. Loans to real estate
investors and developers totaled $14,300,000 in 1996. In the fishing industry
in 1996, loans returned to the $10,000,000 found previously in
From the standpoint of large loans to single borrowers, loans of $700,000 or
more to one borrower remained constant at 95% as a percentage of stockholders
equity for years ended December 31, 1996 and 1995. 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
Delinquencies are reviewed on a monthly and quarterly basis by senior
management as well as the Board of Directors. Information reviewed is used in
determining if and when loans represent potential losses to the Bank. A
determination of a potential loss could result in a charge to the provision
for loan losses, with an increase to the reserve for possible loans so that
risks in the portfolio can be identified on a timely basis and an appropriate
reserve can be maintained.
Since 1991, the Bank has utilized the methodology for the review of the
allowance for loan losses to be in accordance with the approach suggested by
bank regulators through the Interagency Policy Statement on Allowance for Loan
and Lease Losses dated December, 1993. The reserve includes specific reserves
based on the review of specific credits, a pool of reserves based on
historical charge offs by loan types and supplementary reserves reflecting
concerns and loan concentrations by industry, by customer and by general
economic conditions. The allocation has changed based on concentration of
loans in the fishing and tourist related industries.
In 1992, the Bank continued to concentrate on resolving loan problems,
focusing on the reduction of non-earning assets and resolution of troubled
debt situations. With continued softness in the economy, the Bank aggressively
charged off problem loans, and, at the same time provided more reserves for
possible loan losses in the future. Building on the prior year s program of
measuring adequacy, the Bank continued to build reserves to ensure that future
earnings were not hurt by unforseen problems in the loan area.
Charged off loans have decreased over the past five years both in dollars
(from $1,123,000 in 1992 to $711,000 in 1996) and as a percentage of the
average loan portfolio with the exception in 1995. The percentage of charge
off to average loans in 1996 represents the lowest percentage (.23%) in the
five years presented. For the years ended 1992 through 1995, the majority of
PAGE
charge offs have been commercial loans secured by real estate. However, in
1996, the majority of charge offs were loans to individuals and included many
small loans and credit card debt. In 1992, increases in charge offs were
attributable to an account where faulty documentation resulted in loss of
collateral. The Bank real estate charge offs in 1993 represent charge down of
loan balances on troubled loans based on updated fair value appraisals, or
highest third party bids at auction.
In 1993 there were two writedowns of REO charged directly to earnings. A
property in Northeast Harbor was sold at a loss of $74,000 after paying all
expenses, and property on Main Street in Ellsworth was written down by
$100,000 to more closely reflect a liquidation. In 1994, the same property
in Ellsworth was written down by additional $23,500. This property was sold in
1995 for $120,000. Additionally in 1994, three residential properties owned by
the Bank were written down by a total of $58,000 to more closely reflect their
market values.
Approximately 28% of the chargeoffs in 1995 represented loans secured by real
estate, and 39% represented commercial credits. The increase in commercial
loan chargeoffs in 1995 included a chargedown of a large commercial loan.
Recoveries offset losses totaling $97,000, $141,000 and $264,900 for the years
ended 1995, 1994 and 1993, respectively.
Softness in the economy in the early 1990's, reduction of collateral value,
and, in some cases, poor management by the owners of the business have caused
the major losses in the commercial area in the early 1990's.
Based on past experience and management s assessment of the present loan
portfolio, it is expected that loan charge offs for 1997 will not exceed
$500,000.
Commercial $ 44,000
Real estate mortgages 382,000
Installments to individuals 74,000
A breakdown of the allowance for possible loan losses is as follows:
1996 1995 1994
Percent of Percent of Percent of
Loans in each loans in each loans in each
Category to Category to Category to
Amount Total Loans Amount Total Loans Amount Total Loans
Real Estate Mortgages $1,053,500 73.26% $ 915,168 71.34% $ 1,665,363 69.63%
Installments to individuals 470,100 8.13% 503,777 8.74% 404,942 8.23%
Commercial, financial
And agricultural 629,000 18.46% 277,775 19.92% 1,220,253 22.13%
Other 987,250 .15% 965,391 0.00% 80,337 .01%
Unallocated 1,153,145 0.00% 1,385,772 0.00% 520,940 .00%
TOTAL $4,292,995 100.00% $ 4,047,883 100.00% $ 3,891,835 100.00%
PAGE
SUMMARY OF LOAN LOSS EXPERIENCE
(In thousands)
% = Percentage of Loans Outstanding for a Specific Category of Loans
ALLOWANCE FOR LOAN LOSSES 1996 1995 1994 1993 1992
Balance at beginning of period $4,048 $3,892 $3,369 $3,206 $2,121
Charge offs:
Commercial, Financial,
Agricultural, Others 195 377 122 386 302
Real Estate Mortgages 131 256 267 505 633
Installments to individuals 385 268 189 290 188
Total Charge Offs 711 901 578 1,181 1,123
Recoveries:
Commercial, Financial,
Agricultural, Others 73 20 47 101 55
Real Estate Mortgages 94 20 54 118 49
Installments to individuals 69 57 40 45 39
Total Recoveries 236 97 141 264 143
Net Charge Offs 475 804 437 917 980
Provision Charge to Operations 720 960 960 1,080 2,065
Balance at End of Period $4,293 $ 4,048 $3,892 $3,369 $3,206
Average loans outstanding
during period $ 207,188 $195,178 $174,550 $153,232 $146,257
Net Charge Offs to Average
Loans Outstanding during
Period .23 .41 .25 .60 .67
PAGE
SUMMARY OF DEPOSIT PORTFOLIO
(In thousands)
1996 1995 1994
Average Average Average Average Average Average
Balance Rate Balance Rate Balance Rate
Demand Deposits 33,408 30,084 28,559
NOW Accounts 38,036 1.62% 37,110 1.63% 38,592 1.64%
Savings Accounts 54,503 2.52% 57,521 2.45% 63,107 2.57%
Time Deposits 124,427 5.54% 115,118 5.57% 84,786 4.50%
Total Deposits 250,374 239,833 215,044
MATURITY SCHEDULE FOR TIME DEPOSITS
$100,000 OR MORE
Over Three Over Six
Three Months Months Through Months Through Over
or Less Six Months Twelve Months Twelve Months
$ 5,579,061 $ 3,837,764 $ 3,462,260 $ 1,965,303
RETURN ON EQUITY AND ASSETS
1996 1995 1994
Return on Average Assets 2.02 1.89 1.75
Return on Average Equity 18.86 18.97 17.93
Dividend Payout Ratio 30.22 25.07 25.75
Average Equity Capital to
Average Assets Ratio 10.71 9.96 9.75
PAGE
As of January 1, 1997, there were approximately 1040 holders of record of Bar
Harbor Bankshares common stock.
Dividends have been paid by the company during 1996 and 1995, as follows:
March June September December
1996 $ 0.20 $ 0.20 $ 0.25 $ 0.53
1995 N/A $ 0.36 N/A $ 0.50
PAGE
SHORT TERM BORROWINGS
(In thousands)
Average Weighted
Weighted Maximum Amount Average
Balance Average Outstanding Outstanding Interest
at end Interest During During Rate During
of Period Rate Period Period Period
1996
FHLB Advances $ 43,908 5.62% $ 41,000 $ 30,811 5.68%
Wholesale Repurchase Agreements $ 0 .00 % $ 10,000 $ 583 5.47%
1995
FHLB Advances $ 26,700 5.85% $ 29,000 $ 17,058 5.84%
Wholesale Repurchase Agreements $ 0 0.00% $ 18,250 $ 4,338 6.16%
1994
FHLB Advances $ 25,000 5.54% $ 50,000 $ 28,904 4.28%
Wholesale Repurchase Agreements $ 0 0.00% $ 11,000 $ 4,810 4.22%
The terms for short-term FHLB advances taken in 1996 ranged from 2 days to
340 days and averaged 49 days. The terms for wholesale repurchase agreements
taken in 1996 ranged from 7 days to 14 days and averaged 8 days.
The terms for short-term FHLB advances taken in 1995 ranged from 5 days to
200 days and averaged 49 days. The terms for wholesale repurchase agreements
taken in 1995 ranged from 4 days to 90 days and averaged 24 days.
The terms for short-term FHLB advances taken in 1994 ranged from 14 days to
257 days and averaged 82 days. The terms for wholesale repurchase agreements
taken in 1994 ranged from four days to 90 days and averaged 25 days.
PAGE
ITEM 6. SELECTED FINANCIAL DATA
The following data represents selected year end financial information for
the past five years. All information is unaudited.
(In thousands, except per share data)
BALANCE SHEET TOTALS 1996 1995 1994 1993 1992
Total Assets $345,143 $326,609 $296,687 $257,347 $247,149
Net Loans 207,667 197,718 182,102 160,156 143,004
Total Deposits 251,675 251,471 225,545 203,523 195,723
Total Equity 37,887 33,243 28,761 24,987 23,558
Average Assets 331,971 311,112 281,169 249,773 231,114
Average Equity 35,575 30,986 27,405 25,784 23,563
STATEMENT OF EARNINGS TOTALS
Interest Income $ 27,522 $ 26,152 $ 21,795 $ 19,855 $ 20,283
Interest Expense 11,281 10,624 7,676 6,775 7,997
Net Interest Income 16,241 15,528 14,119 13,080 12,286
Provision for Loan
Losses 720 960 960 1,080 2,065
Net Interest Income
After provision for
Loan Losses 15,521 14,568 13,159 12,000 10,221
Non-interest income
(Includes net security
gains {losses]) 5,000 4,398 4,012 4,153 3,576
Non-interest expense 10,914 10,471 10,161 10,957 9,169
Applicable income
Taxes 2,899 2,616 2,096 1,632 1,254
Net income before Cumulative Effect of
Accounting Change 6,709 5,879 4,914 3,564 3,374
Cumulative Effect of
Accounting Change 0 0 0 (1,058)
Net Income $ 6,709 $ 5,879 $ 4,914 $ 2,506 $ 3,374
PER SHARE DATA:
(Restated for five-for-one stock split in 1995)
Income Before Cumulative Effect of
Accounting Change $3.90 $ 3.43 $ 2.87 $ 2.09 $ 1.87
Cumulative Effect of Change in
Accounting for Postretirement
Benefits, Net of Income
Tax Benefit $ 0.00 $ 0.00 $ 0.00 ($ 0.62) $ 0.00
Net Income $ 3.90 $ 3.43 $ 2.87 $ 1.47 $ 1.87
Dividends $ 1.18 $ 0.86 $ 0.74 $ 0.62 $ 0.42
Weighted average number of
Common shares outstanding,
In thousands 1,718 1,713 1,710 1,707 1,806
Return on total average
Assets/Net Income 2.02% 1.89% 1.75% 1.00% 1.46%
SUPPLEMENTARY FINANCIAL DATA BY QUARTERS
(In thousands except per share data)
1996 1st Quarter 2nd Quarter 3rd Quarter 4th Quarter
Interest Income $ 6,757 $ 6,735 $ 7,019 $ 7,012
Interest Expense 2,307 2,250 2,162 2,169
Net Interest Income 3,940 3,866 4,233 4,203
Provision for Losses 240 240 120 120
Security Gains
(Losses) 0 17 0 0
Income Before Income
Taxes 2,190 2,165 2,817 2,436
Income Taxes 668 656 727 849
Net Income 1,522 1,509 2,090 1,588
Earnings Per Share $ 0.89 $ 0.88 $ 1.22 $ 0.92
1995 1st Quarter 2nd Quarter 3rd Quarter 4th Quarter
Interest Income $ 5,992 $ 6,518 $ 6,902 $ 6,740
Interest Expense 2,370 2,660 2,767 2,827
Net Interest Income 3,622 3,858 4,135 3,913
Provision for Losses 240 240 240 240
Security Gains
(Losses) 0 0 0 0
Income Before Income
Taxes 1,884 2,150 2,706 1,755
Income Taxes 576 650 859 531
Net Income 1,308 1,500 1,846 1,225
Earnings Per Share $ 0.76 $ 0.88 $ 1.08 $ 0.71
PAGE
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.
ITEM 8. CONSOLIDATED FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The financial statements required are contained on pages 12 through 30 of
the Company s Annual Report for the year ended December 31, 1996 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
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 precluded 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.
[1] Frederick F. Brown, Director, Age 70. 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. He also
serves as President of Northeast Harbor Water Company. Mr. Brown first was
elected as a director on October 2, 1979.
PAGE
[2] Robert C. Carter, Director. Mr. Carter s principal occupation is owner
and operator of the Machias Motor Inn, Machias, Maine. Mr. Carter was first
elected as a director on October 1, 1996.
[3] Thomas A. Colwell, Director. Age 52. Mr. Colwell s principal occupation
during the past five years has been as owner of Colwell Brothers, Inc. He
also serves as a member of the Board of Directors of the Maine Lobster Pound
Association. Mr. Colwell was first elected as a director on October 1, 1991.
[4] Bernard K. Cough, Director, Age 69. 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., Brookside
Motel, Bay View, Inc., and Ocean Gate, Inc. Mr. Cough is also Treasurer of
Cough Bros., Inc. and President of Downeast Inns, Inc. Mr. Cough was first
elected as a director on October 1, 1985.
[5] Peter Dodge, Director, Age 53. 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 also Director and Treasurer of Coastal Holdings,
Inc., 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, Senior Vice President and Trust Officer, Age 61. Mr.
Eaton s principal occupation during the past five years has been as Senior
Vice President and Trust Officer of Bar Harbor Banking and Trust Company. 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 67. Mrs. Foster s principal occupation is
the 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] Robert L. Gilfillan, Chairman of the Board of Directors, Age 69. 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.
[9] Sheldon F. Goldthwait, Jr., President and Chief Executive Officer, Age
58. He 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.
[10] James C. MacLeod, Director, Age 72. Mr. MacLeod is retired. Mr. MacLeod
served as Vice President of the Bank until his retirement in December of
1987. He was appointed as a Vice president of the Bank in 1972 and was first
elected as a director of the Bank on November 7, 1961.
PAGE
[11] John P. McCurdy, Director, Age 65. Prior to his retirement in 1991. Mr.
McCurdy s principal occupation was the 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.
[12] Jarvis W. Newman, Director, Age 61. Mr. Newman is the owner of Newman
Marine, a boat brokerage in Southwest Harbor. Mr. Newman first was elected
as a Director on October 5, 1971.
[13] Robert M. Phillips, Director, Age 55. Mr. Phillips is 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.
[14] John P. Reeves. Director, Age 62. 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.
[15] Abner L. Sargent, Director, Age 72. Mr. Sargent is former owner and
designated broker of High Street Real Estate and Vice President and
Treasurer of Sargent s Mobile Homes, Inc., of Ellsworth. He first was
elected as a director on October 6, 1981.
[16] Lynda Z. Tyson, Director, Age 41. Mrs. Tyson is Chief Operating Officer
and Marketing Director of Tyson & Partners, Inc., a marketing communications
consulting firm in Bar Harbor. Mrs. Tyson was first elected as a director on
October 5, 1993.
PAGE
ITEM 11. EXECUTIVE COMPENSATION
Officers of the Company do not, as such, receive compensation. The following
table sets forth cash compensation received during the Bank s last fiscal
year by the executive officers for whom such compensation exceeded $100,000.
SUMMARY COMPENSATION TABLE
ANNUAL COMPENSATION
Other
Name and Annual
Principal Salary Incentive Compensation
Position Year ($) ($) ($)
John P. Reeves 1994 $ 135,000 $ 17,629 $ 0
Retired President and 1995 0 4,922
Chief Executive Officer 1996 --- --- ---
Sheldon F. Goldthwait, Jr. 1994 $ 92,000 $ 12,084 $ 0
President and 1995 $ 130,000 $ 23,108 $ 0
Chief Executive Officer 1996 $ 135,990 $ 27,428 0
Dwight L. Eaton 1994 $ 92,000 $ 12,084 $ 0
Senior Vice President 1995 $ 94,000 $ 17,637 $ 0
and Trust officer 1996 $ 95,992 $ 19,460 0
Lewis H. Payne 1994 $ N/A $ N/A $ 0
Executive Vice President 1995 $ N/A $ N/a $ 0
1996 $ 88,594 $ 17,634 0
Virginia M. Vendrell 1994 $ N/A $ N/A $ 0
Senior Vice President 1995 $ N/A $ N/A $ 0
and Chief Financial Officer 1996 $ 83,609 $ 16,631 0
LONG TERM COMPENSATION
AWARDS PAYOUT
Restricted
Stock LTIP
Awards Options/ Payouts
Year ($) SARs (#) ($)
John P. Reeves 1994 $ 0 0 $ 0
1995 0 0 0
1996 0 0 0
Sheldon F. Goldthwait, Jr. 1994 0 0 0
1995 $ 0 0 $ 0
1996 0 0 0
Dwight L. Eaton 1994 0 0 0
1995 $ 0 0 $ 0
1996 0 0 0
Lewis H. Payne 1994 0 0 0
1995 $ 0 0 $ 0
1996 0 0 0
Virginia M. Vendrell 1994 0 0 0
1995 $ 0 0 $ 0
1996 0 0 0
PAGE
ALL OTHER COMPENSATION ($)
John P. Reeves 1994 $ 4,984
1995 $ 0
1996 $ 0
Sheldon F. Goldthwait, Jr. 1994 $ 2,384
1995 $ 3,522
1996 $24,035
Dwight L. Eaton 1994 $ 2,937
1995 $ 3,439
1996 $36,175
Lewis H. Payne 1994 N/A
1995 N/A
1996 1,752
Virginia M. Vendrell 1994 N/A
1995 N/A
1996 570
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 computation is based on earnings per share
growing by 10% each year with 1992 being the base year. Once the 10% growth
is attained, a pool is created in which all eligible employees receive the
same percentage of their salary in the form of an incentive payment.
COMPENSATION OF DIRECTORS
Each of the directors of the Company is a director of the Bank and as such
receives a fee of $250.00 for each committee meeting attended and $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.
EMPLOYEE BENEFIT PLANS
Effective August 31, 1993, the Board of Directors ratified the termination
of the Company s noncontributory defined benefit pension plan, which covered
all eligible employees.
At December 31, 1994, the plan s projected benefit obligation was
essentially equivalent to the plan s net assets available for benefits of
approximately $2,150,000, and such assets were invested in U.S. Government
obligations and cash equivalents. The settlement of the vested benefit
obligation by the purchase of nonparticipating annuity contracts for, or
the lump sum payments to, each covered employee was completed in 1994, upon
receipt of certain regulatory approvals. The Company recognized no
curtailment gain or loss in 1993 as a result of the plan termination and no
gain or loss was recognized when the plan s benefit obligation was settled
in 1994.
PAGE
Prior to the plan termination, pension benefits were based on years of
service, and the Company s policy was to fund, at a minimum, the amount
required under the Employee Retirement Income Security Act of 1974. Net
pension income of $51,000 in 1993 has been included in operating results.
The weighted average discount rate and increase in salary levels used in
determining the projected benefit obligation were 8% in 1993. The expected
long-term rate of return on assets was 9%.
The Bank offers a 401(k) plan to all employees who have completed one year
of service and who have attained the age of 21. Employees may elect to defer
from 1% to 15% of their salaries subject to a maximum amount determined by a
formula annually, which amount was $9,500 in 1996 and $9,240 in 1995 and
1994. In 1996, the Bank matched employee contributions to the 401(k) plan to
the extent of 25% of the first 6% of salary for a total contribution by the
Bank of $51,979. The Bank match for 1995 and 1994 was $46,637 and $42,590,
respectively. During 1996, the Bank contributed to each participating
employee an additional 3% of the employee s salary. The total contribution
made for the non-contributory plan was $128,014, $122,386, and $113,432 for
years ended December 31, 1996, 1995 and 1994, respectively. This ono-
contributory plan was established in 1994 and any future contributions by
the Bank will be determined annually by the vote of the Board of Directors.
In 1996, 1995, and 1994, the Bank provided a restricted stock purchase plan
through which each employee having one year of service may purchase up to
100 shares of Bar Harbor Bankshares stock at the current fair market price
as of a date determined by the Board of Directors. These shares may be
purchased through a direct purchase or through the employees 401(k)
accounts.
At December 31, 1996, employees exercised their right to purchase 2,346
shares at $38.25 per share, with the actual purchase transpiring in January
of 1996. At December 31, 1995, employees exercised their right to purchase
4,632 shares at $28.00 per share, with the actual purchase transpiring in
January of 1996.
The Bank provides certain of its officers with individual memberships in
local civic organizations and clubs. The aggregate value of these benefits
with respect to any individual officer did not exceed $5,000 during the
Bank s last fiscal year.
The Bank has entered into agreements with Messrs. Avery, 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 (in the case of Messrs. Avery and Reeves)
and in the amount of $10,000 (in the case of Messrs. Goldthwait and Eaton).
This plan is unfunded and benefits will be paid out of Bank earnings. Mr.
Avery received his final installment prior to his death in 1996. Mr. Reeves
began drawing his annual installment of $5,300.04 (reduced for early
retirement) as of January 1, 1995.
PAGE
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.
The cost relative to the supplemental plan was $106,497, $98,273, and
$368,898, for 1996, 1995, and 1994, respectively. The agreements with
Messrs. Reeves, Eaton, Goldthwait and MacDonald are in the amounts of
$49,020, $22,600, $37,400 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.
PAGE
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
As of December 31, 1996, 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 117 Eden Street, Bar Harbor, Maine.
The following table lists, as of December 31, 1996, 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.
Director, Principal Amount of
Officer or Beneficial Percent of
Nominee Ownership Class
Frederick F. Brown 12,570 *
Robert C. Carter 550 *
Thomas A. Colwell 2,700 *
Bernard K. Cough 86,510 5.03
Peter Dodge 2,430 *
Dwight L. Eaton 3,881 *
Ruth S. Foster 1,675 *
Robert L. Gilfillan 39,965 2.33
Sheldon F. Goldthwait, Jr. 11,160 *
James C. MacLeod 20,300 1.18
John P. McCurdy 3,300 *
Jarvis W. Newman 15,050 *
Lewis H. Payne 2,559 *
Robert M. Phillips 550 *
John P. Reeves 12,645 *
Abner L. Sargent 3,500 *
Marsha C. Sawyer 1,050 *
Lynda Z. Tyson 600 *
Virginia M. Vendrell 1,520 *
Total Ownership of all directors and
principal officers of Company as a
group (20 persons) 222,515 12.95
<FN>
<F1> * 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, one sixteenth (3,043 shares) of the 48,680 shares (2.83%) of
PAGE
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 which 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
which 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 upon 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 collectibility or present
other unfavorable features.
PAGE
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 included herein as
Exhibit 13].
PAGE
Independent Auditor s Report 9
Consolidated Statements of Financial Condition
December 31, 1996 and 1995 10
Consolidated Statements of Earnings for the years ended
December 31, 1996, 1995 and 1994 11
Consolidated Statements of changes in the Stockholders
Equity for the years ended
December 31, 1996, 1995 and 1994 12
Consolidated Statements of Cash Flows for the years ended
December 31, 1996, 1995 and 1994 13
Notes to Consolidated Financial Statements 14 - 25
(a) (2) Financial Data Schedule
See Item 14(d)
(a) (3) Listing of Exhibits -- see Item 14
(b) Report on Form 8-K not applicable
Exhibits -- EXHIBIT INDEX
EXHIBIT INDEX - 14
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
4. Instruments defining the rights of Not Applicable
security holders, including indentures
9. Voting Trust Agreements Not Applicable
10. Material Contracts Incorporated by reference
to Form 10-K dated
December 31, 1986
11. Statement re: computation of per Not Applicable
share earnings
12. Statement of computation of ratios Not Applicable
13. Annual report to security holders Enclosed herewith
16. Letter re: change in certifying Not Applicable
accountant
PAGE
18. Letter re: change in accounting Not Applicable
principles
21. Subsidiaries of the registrant Incorporated by reference
to Form 10-K dated
December 31, 1986
22. Published report regarding matters Not Applicable
submitted to vote of security holders
23. Consents of experts and counsel Not Applicable
24. Power of Attorney Not Applicable
27. Financial Data Schedule Enclosed Herewith
28. Information from reports furnished to
State insurance regulatory authorities Not Applicable
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
March 31, 1997