10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

(Mark One)

þ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2014

OR

¨ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

Commission File Number:  01-13349

BAR HARBOR BANKSHARES

(Exact name of registrant as specified in its charter)

Maine	01-0393663
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification Number)
PO Box 400
82 Main Street, Bar Harbor, ME	04609-0400
(Address of principal executive offices)	(Zip Code)

(207) 288-3314

(Registrant's telephone number, including area code)

Inapplicable

(Former name, former address and former fiscal year, if changed since last report)

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 þNO ¨

Indicate by check mark whether the Registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the Registrant was required to submit and post such files).  YES þ  NO ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company. See the definitions of “large accelerated filer”, “accelerated filer” and smaller reporting company” in Rule 12b-2 of the Exchange Act: Large accelerated filer ¨ Accelerated filer þ Non-accelerated filer (do not check if a smaller reporting company) ¨ Smaller reporting company ¨

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act):  YES: ¨ NO: þ

Indicate the number of shares outstanding of each of the issuer's classes of common stock as of the latest practicable date:

Class of Common Stock	Number of Shares Outstanding – August 1, 2014
$2.00 Par Value	5,930,654

TABLE OF CONTENTS

		Page No.
PART I	FINANCIAL INFORMATION
Item 1.	Interim Financial Statements (unaudited):
	Consolidated Balance Sheets at June 30, 2014 and December 31, 2013	3
	Consolidated Statements of Income for the three and six months ended June 30, 2014 and 2013	4
	Consolidated Statements of Comprehensive Income for the three and six months ended June 30, 2014 and 2013	5
	Consolidated Statements of Changes in Shareholders' Equity for the six months ended June 30, 2014 and 2013	6
	Consolidated Statements of Cash Flows for the six months ended June 30, 2014 and 2013	7
	Notes to Consolidated Interim Financial Statements	8-34
Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations	34-59
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	59-62
Item 4.	Controls and Procedures	62
PART II	OTHER INFORMATION
Item 1.	Legal Proceedings	62
Item 1A.	Risk Factors	63
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	63
Item 3.	Defaults Upon Senior Securities	63
Item 4.	Mine Safety Disclosures	63
Item 5.	Other Information	63
Item 6.	Exhibits	64
Signatures		64
Exhibit Index		65
Exhibits

PART I. FINANCIAL INFORMATION

Item 1. FINANCIAL STATEMENTS

BAR HARBOR BANKSHARES AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

JUNE 30, 2014 AND DECEMBER 31, 2013

(Dollars in thousands, except share and per share data)

(unaudited)

	June 30, 2014	December 31, 2013
Assets
Cash and cash equivalents	$    11,791	$       9,200
Securities available for sale, at fair value (amortized cost of       $472,521 and $461,635, respectively)	477,804	450,170
Federal Home Loan Bank stock	21,196	18,370
Loans	900,936	852,857
Allowance for loan losses	(8,751)	(8,475)
Loans, net of allowance for loan losses	892,185	844,382
Premises and equipment, net	20,409	20,145
Goodwill	4,935	4,935
Bank owned life insurance	8,014	7,879
Other assets	16,522	18,812
TOTAL ASSETS	$1,452,856	$1,373,893
Liabilities
Deposits:
Demand and other non-interest bearing deposits	$     61,876	$     72,259
NOW accounts	130,665	135,246
Savings and money market deposits	239,471	232,558
Time deposits	404,959	395,588
Total deposits	836,971	835,651
Short-term borrowings	377,467	312,945
Long-term advances from Federal Home Loan Bank	88,500	91,500
Junior subordinated debentures	5,000	5,000
Other liabilities	6,903	7,418
TOTAL LIABILITIES	1,314,841	1,252,514
Shareholders' equity
Capital stock, par value $2.00; authorized 15,000,000 and 10,000,000 shares;            issued 6,788,453 and 4,525,635 shares at June 30, 2014 and            December 31, 2013, respectively	13,577	9,051
Surplus	20,692	25,085
Retained earnings	108,941	103,907
Accumulated other comprehensive (loss) income:
Prior service cost and unamortized net actuarial losses on employee
benefit plans, net of tax of ($187) and ($192), at June 30, 2014 and        December 31, 2013, respectively	(364)	(373)
Net unrealized  appreciation (depreciation) on securities available for sale,           net of tax of $1,542 and ($4,150), at June 30, 2014 and December 31,           2013, respectively	2,994	(8,055)
Portion of OTTI attributable to non-credit gains, net of tax of $254 and           $252, at June 30, 2014 and December 31, 2013, respectively	493	488
Net unrealized appreciation on derivative instruments, net of tax       of $25 and $0, at June 30, 2014 and December 31, 2013, respectively
	49	---
Total accumulated other comprehensive income (loss)	3,172	(7,940)
Less: cost of 860,365 and 879,840 shares of treasury stock at June 30, 2014       and December 31, 2013, respectively	(8,367)	(8,724)
TOTAL SHAREHOLDERS' EQUITY	138,015	121,379
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY	$1,452,856	$1,373,893

 All share and per share amounts have been adjusted to reflect the effect of the 3-for-2 stock split (dividend) during May 2014.

 The accompanying notes are an integral part of these unaudited consolidated interim financial statements.

3

BAR HARBOR BANKSHARES AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF INCOME

FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2014 AND 2013

(Dollars in thousands, except per share data)

(unaudited)

	Three Months Ended		Six Months Ended
	June 30,		June 30,
	2014	2013	2014	2013
Interest and dividend income:
Interest and fees on loans	$9,205	$9,406	$18,269	$18,587
Interest on securities	4,077	3,056	7,985	6,218
Dividend on FHLB stock	69	12	138	34
Total interest and dividend income	13,351	12,474	26,392	24,839
Interest expense:
Deposits	1,462	1,669	2,899	3,371
Short-term borrowings	156	104	280	232
Long-term debt	869	1,218	1,790	2,464
Total interest expense	2,487	2,991	4,969	6,067
Net interest income	10,864	9,483	21,423	18,772
Provision for loan losses	428	405	885	758
Net interest income after provision for loan losses	10,436	9,078	20,538	18,014
Non-interest income:
Trust and other financial services	1,102	851	2,074	1,757
Service charges on deposit accounts	300	321	559	616
Credit and debit card service charges and fees	376	396	720	732
Net securities gains	350	256	747	521
Total other-than-temporary impairment ("OTTI") losses	---	(168)	---	(168)
Non-credit portion of OTTI losses (before taxes) (1)	---	53	---	53
Net OTTI losses recognized in earnings	---	(115)	---	(115)
Other operating income	165	165	309	313
Total non-interest income	2,293	1,874	4,409	3,824
Non-interest expense:
Salaries and employee benefits	4,283	3,696	8,199	7,303
Occupancy expense	544	493	1,108	977
Furniture and equipment expense	524	471	1,037	981
Credit and debit card expenses	100	92	197	188
FDIC insurance assessments	175	145	365	341
Other operating expense	1,735	1,698	3,301	3,112
Total non-interest expense	7,361	6,595	14,207	12,902
Income before income taxes	5,368	4,357	10,740	8,936
Income taxes	1,511	1,187	3,096	2,550
Net income	$3,857	$3,170	$ 7,644	$ 6,386
Per Common Share Data:
Basic earnings per share	$   0.65	$   0.54	$    1.29	$  1.08
Diluted earnings per share	$   0.65	$   0.54	$    1.28	$  1.08

All share and per share amounts have been adjusted to reflect the effect of the 3-for-2 stock split (dividend) during May 2014.

The accompanying notes are an integral part of these unaudited consolidated interim financial statements.

4

BAR HARBOR BANKSHARES AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2014 AND 2013

(Dollars in thousands)

(unaudited)

	Three Months Ended June 30,
	2014	2013
Net income	$ 3,857	$ 3,170
Other comprehensive income:
Net unrealized appreciation (depreciation) on securities available for sale,            net of tax of $2,903 and ($4,925), respectively	5,635	(9,560)
Less reclassification adjustment for net gains related to securities available for            sale included in net income, net of tax of $119 and $87, respectively	(231)	(169)
Add other-than-temporary impairment adjustment, net of tax of $0 and $57, respectively	---	111
Less non-credit portion of other-than-temporary impairment losses,           net of tax of $0 and $18, respectively	---	(35)
Net unrealized appreciation on interest rate derivatives, net of tax of $25 and $0, respectively	49	---
Net amortization of prior service cost and actuarial (gain) loss for           supplemental executive retirement plan,  net of related tax of $0 and ($28), respectively	---	(55)
Actuarial (loss) gain on supplemental executive retirement plan,           net of related tax of $2 and $5, respectively	4	10
Total other comprehensive income (loss)	5,457	(9,698)
Total comprehensive income (loss)	$ 9,314	$ (6,528)
	Six Months Ended June 30,
	2014	2013
Net income	$ 7,644	$      6,386
Other comprehensive income:
Net unrealized appreciation (depreciation) on securities available for sale,            net of tax of $5,948 and ($5,985), respectively	11,547	(11,617)
Less reclassification adjustment for net gains related to securities available for           sale included in net income,
net of tax of $254 and $177, respectively	(493)	(344)
Add other-than-temporary impairment adjustment, net of tax of $0 and $57, respectively	---	111
Less non-credit portion of other-than-temporary impairment losses,           net of tax of $0 and $18, respectively	---	(35)
Net unrealized appreciation on interest rate derivatives, net of tax of $25 and $0,  respectively	49	---
Net amortization of prior service cost and actuarial (gain) loss for           supplemental executive retirement plan,   net of related tax of $0 and ($56), respectively	---	(109)
Actuarial (loss) gain on supplemental executive retirement plan,            net of related tax of $5 and $10, respectively	9	20
Total other comprehensive income (loss)	11,112	(11,974)
Total comprehensive income (loss)	$18,756	$  (5,588)

The accompanying notes are an integral part of these unaudited consolidated interim financial statements

5

BAR HARBOR BANKSHARES AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY

FOR THE SIX MONTHS ENDED JUNE 30, 2014 AND 2013

(Dollars in thousands, except share and per share data)

(unaudited)

	Capital Stock	Surplus	Retained Earnings	Accumulated Other Comprehensive income (loss)	Treasury Stock	Total Shareholders' Equity
Balance December 31, 2012	$ 9,051	$24,905	$  95,688	$    7,697	$(9,295)	$128,046
Net income	---	---	6,386	---	---	6,386
Total other comprehensive (loss)	---	---	---	(11,974)	---	(11,974)
Dividend declared:
Common stock ($0.410 per share)	---	---	(2,414)	---	---	(2,414)
Stock options exercised (11,585 shares),       including related tax effects	---	6	(39)	---	242	209
Recognition of stock based compensation       expense	---	211	---	---	---	211
Restricted stock grants (5,055 shares)		(121)	17	---	104	---
Balance June 30, 2013	$9,051	$25,001	$  99,638	$ (4,277)	$(8,949)	$120,464
Balance December 31, 2013	$ 9,051	$25,085	103,907	$ (7,940)	$(8,724)	$121,379
Net income	---	---	7,644	---	---	7,644
Total other comprehensive income	---	---	---	11,112	---	11,112
Dividend declared:
Common stock ($0.440 per share)	---	---	(2,602)	---	---	(2,602)
Purchase of treasury stock (327 shares)	---	---	---	---	(8)	(8)
Stock options exercised (16,923 shares),       including related tax effects	---	19	(8)	---	312	323
Three-for-two stock split	4,526	(4,526)	---	---		---
Recognition of stock based compensation       expense	---	98	---	---	---	98
Restricted stock grants (2,878 shares)	---	16	---	---	53	69
Balance June 30, 2014	$13,577	$20,692	$108,941	$  3,172	$ (8,367)	$138,015

All share and per share amounts have been adjusted to reflect the effect of the 3-for-2 stock split (dividend) during May 2014.

The accompanying notes are an integral part of these unaudited consolidated interim financial statements.

6

BAR HARBOR BANKSHARES AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

FOR THE SIX MONTHS ENDED JUNE 30, 2014 AND 2013

(Dollars in thousands)

(unaudited)

	2014	2013
Cash flows from operating activities:
Net income	$ 7,644	$       6,386
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization of premises and equipment	799	710
Amortization of core deposit intangible	47	46
Provision for loan losses	885	758
Net securities gains	(747)	(521)
Other-than-temporary impairment	-	115
Net amortization of bond premiums and discounts	1,393	2,850
Recognition of stock based expense	98	211
Gains on sale of other real estate owned	-	(53)
Net change in other assets	(3,252)	(441)
Net change in other liabilities	(515)	(469)
Net cash provided by operating activities	6,352	9,592
Cash flows from investing activities:
Purchases of securities available for sale	(62,236)	(79,165)
Proceeds from maturities, calls and principal paydowns of mortgage-backed securities	28,483	50,884
Proceeds from sales of securities available for sale	22,221	9,629
Net (increase) decrease in Federal Home Loan Bank stock	(2,826)	81
Net loans made to customers	(49,008)	(38,136)
Proceeds from sale of other real estate owned	44	514
Capital expenditures	(1,063)	(1,050)
Net cash used in investing activities	(64,385)	(57,243)
Cash flows from financing activities:
Net increase in deposits	1,320	58,954
Net (decrease) increase in securities sold under repurchase agreements and fed funds purchased	(6,688)	(8,375)
Proceeds from Federal Home Loan Bank advances	89,200	13,000
Repayments of Federal Home Loan Bank advances	(20,990)	(15,141)
Purchases of Treasury Stock	(8)	---
Proceeds from stock option exercises, including excess tax benefits	323	209
Restricted stock grant	69	---
Payments of dividends	(2,602)	(2,414)
Net cash provided by financing activities	60,624	46,233
Net increase (decrease) in cash and cash equivalents	2,591	(1,418)
Cash and cash equivalents at beginning of period	9,200	14,992
Cash and cash equivalents at end of period	$ 11,791	$ 13,574
Supplemental disclosures of cash flow information:
Cash paid during the period for:
Interest	$   4,986	$    6,110
Income taxes	2,885	1,916
Schedule of noncash investing activities:
Transfers from loans to other real estate owned	$       320	$        120

The accompanying notes are an integral part of these unaudited consolidated interim financial statements.

7

BAR HARBOR BANKSHARES AND SUBSIDIARIES

NOTES TO UNAUDITED CONSOLIDATED INTERIM FINANCIAL STATEMENTS

JUNE 30, 2014

(Dollars in thousands, except share and per share data)

(unaudited)

Note 1: Basis of Presentation

The accompanying consolidated interim financial statements are unaudited. In the opinion of management, all adjustments considered necessary for a fair presentation have been included. All inter-company transactions have been eliminated in consolidation. Amounts in the prior period financial statements are reclassified whenever necessary to conform to current period presentation.  The net income reported for the three and six months ended June 30, 2014, is not necessarily indicative of the results that may be expected for the year ending December 31, 2014, or any other interim periods.

The consolidated balance sheet at December 31, 2013, has been derived from audited consolidated financial statements at that date.  The accompanying unaudited interim consolidated financial statements have been prepared in accordance with United States (“U.S.”) generally accepted accounting principles for interim financial information and with the instructions to Form 10-Q and Rule 10-01 of Regulation S-X (17 CFR Part 210).  Accordingly, they do not include all of the information and footnotes required by U.S. generally accepted accounting principles for complete financial statements.  For further information, please refer to the consolidated financial statements included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2013, and notes thereto.

Note 2: Management’s Use of Estimates

The preparation of financial statements in conformity with U.S. generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

Material estimates that are particularly susceptible to significant change in the near-term relate to the determination of the allowance for loan losses, other-than-temporary impairments on securities, income tax estimates, and the valuation of intangible assets.

Allowance for Loan Losses:  The allowance for loan losses (the “allowance”) is a significant accounting estimate used in the preparation of the Company’s consolidated financial statements. The allowance is available to absorb losses on loans and is maintained at a level that, in management’s judgment, is appropriate for the amount of risk inherent in the loan portfolio, given past and present conditions. The allowance is increased by provisions charged to operating expense and by recoveries on loans previously charged-off, and is decreased by loans charged-off as uncollectible.

Arriving at an appropriate level of allowance involves a high degree of judgment. The determination of the adequacy of the allowance and provisioning for estimated losses is evaluated regularly based on review of loans, with particular emphasis on non-performing or other loans that management believes warrant special consideration. The ongoing evaluation process includes a formal analysis, which considers among other factors: the character and size of the loan portfolio, business and economic conditions, real estate market conditions, collateral values, changes in product offerings or loan terms, changes in underwriting and/or collection policies, loan growth, previous charge-off experience, delinquency trends, non-performing loan trends, the performance of individual loans in relation to contract terms, and estimated fair values of collateral.

8

The allowance consists of allowances established for specific loans including impaired loans; allowances for pools of loans based on historical charge-offs by loan types; and supplemental allowances that adjust historical loss experience to reflect current economic conditions, industry specific risks, and other observable data.

While management uses available information to recognize losses on loans, changing economic conditions and the economic prospects of the borrowers may necessitate future additions or reductions to the allowance. In addition, various regulatory agencies, as an integral part of their examination process, periodically review the allowance, which also may necessitate future additions or reductions to the allowance, based on information available to them at the time of their examination.

Other-Than-Temporary Impairments on Investment Securities: One of the significant estimates relating to securities is the evaluation of other-than-temporary impairment (“OTTI”). If a decline in the fair value of a security is judged to be other-than-temporary, and management does not intend to sell the security and believes it is more-likely-than-not the Company will not be required to sell the security prior to recovery of cost or amortized cost, the portion of the total impairment attributable to the credit loss is recognized in earnings, and the remaining difference between the security’s amortized cost basis and its fair value is included in other comprehensive income.  

For impaired available for sale debt securities that management intends to sell, or where management believes it is more-likely-than-not that the Company will be required to sell, an OTTI charge is recognized in earnings equal to the difference between fair value and cost or amortized cost basis of the security. The fair value of the OTTI security becomes its new cost basis.

The evaluation of securities for impairments is a quantitative and qualitative process, which is subject to risks and uncertainties and is intended to determine whether declines in the fair value of securities should be recognized in current period earnings. The risks and uncertainties include changes in general economic conditions, the issuer’s financial condition and/or future prospects, the effects of changes in interest rates or credit spreads and the expected recovery period of unrealized losses. The Company has a security monitoring process that identifies securities that, due to certain characteristics, as described below, are subjected to an enhanced analysis on a quarterly basis.

Securities that are in an unrealized loss position are reviewed at least quarterly to determine if an OTTI is present based on certain quantitative and qualitative factors and measures. The primary factors considered in evaluating whether a decline in value of securities is other-than-temporary include: (a) the cause of the impairment; (b) the financial condition, credit rating and future prospects of the issuer; (c) whether the debtor is current on contractually obligated interest and principal payments; (d) the volatility of the securities’ fair value; (e) performance indicators of the underlying assets in the security including default rates, delinquency rates, percentage of non-performing assets, loan to collateral value ratios, conditional payment rates, third party guarantees, current levels of subordination, vintage, and geographic concentration and; (f) any other information and observable data considered relevant in determining whether an OTTI has occurred, including the expectation of the receipt of all principal and interest due.

In addition, for securitized financial assets with contractual cash flows, such as private label mortgage-backed securities (“MBS”), the Company periodically updates its best estimate of cash flows over the life of the security. The Company’s best estimate of cash flows is based upon assumptions consistent with the current economic environment, similar to those the Company believes market participants would use. If the fair value of a securitized financial asset is less than its cost or amortized cost and there has been an adverse change in timing or amount of anticipated future cash flows since the last revised estimate to the extent that the Company does not expect to receive the entire amount of future contractual principal and interest, an OTTI charge is recognized in earnings representing the estimated credit loss if management does not intend to sell the security and believes it is more-likely-than-not the Company will not be required to sell the security prior to recovery of cost or amortized cost. Estimating future cash flows is a

9

quantitative and qualitative process that incorporates information received from third party sources along with certain assumptions and judgments regarding the future performance of the underlying collateral. In addition, projections of expected future cash flows may change based upon new information regarding the performance of the underlying collateral.

Income Taxes: The Company uses the asset and liability method of accounting for income taxes. Under this method, deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. If current available information indicates that it is more-likely-than-not that deferred tax assets will not be realized, a valuation allowance is established. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date. Significant management judgment is required in determining income tax expense and deferred tax assets and liabilities. As of June 30, 2014, and December 31, 2013, there was no valuation allowance for deferred tax assets. Deferred tax assets are included in other assets on the consolidated balance sheet.

Goodwill and Identifiable Intangible Assets: In connection with acquisitions, the Company generally records as assets on its consolidated financial statements both goodwill and identifiable intangible assets, such as core deposit intangibles.

The Company evaluates whether the carrying value of its goodwill has become impaired, in which case the value is reduced through a charge to its earnings. Goodwill is evaluated for impairment at least annually, or upon a triggering event using certain fair value techniques. Goodwill impairment testing is performed at the segment (or “reporting unit”) level. Goodwill is assigned to reporting units at the date the goodwill is initially recorded. Once goodwill has been assigned to the reporting units, it no longer retains its association with a particular acquisition, and all of the activities within a reporting unit, whether acquired or organically grown, are available to support the value of the goodwill.  

Goodwill represents the excess of the purchase price over the fair value of net assets acquired in accordance with the purchase method of accounting for business combinations. Goodwill is not amortized but, instead, is subject to impairment tests on at least an annual basis or more frequently if an event occurs or circumstances change that reduce the fair value of a reporting unit below its carrying amount. The Company completes its annual goodwill impairment test as of December 31 of each year. The impairment testing process is conducted by assigning assets and goodwill to each reporting unit. Currently, the Company’s goodwill is evaluated at the entity level as there is only one reporting unit. The Company first assesses certain qualitative factors to determine if it is more likely than not that the fair value of the reporting unit is less than its carrying value. If it is more likely than not that the fair value of the reporting unit is less than the carrying value, then the fair value of each reporting unit is compared to the recorded book value “step one.” If the fair value of the reporting unit exceeds its carrying value, goodwill is not considered impaired and “step two” is not considered necessary. If the carrying value of a reporting unit exceeds its fair value, the impairment test continues (“step two”) by comparing the carrying value of the reporting unit’s goodwill to the implied fair value of goodwill. The implied fair value is computed by adjusting all assets and liabilities of the reporting unit to current fair value with the offset adjustment to goodwill. The adjusted goodwill balance is the implied fair value of the goodwill. An impairment charge is recognized if the carrying fair value of goodwill exceeds the implied fair value of goodwill. At December 31, 2013, there was no indication of impairment that led the Company to believe it needed to perform a two-step test.

Any changes in the estimates used by the Company to determine the carrying value of its goodwill, or which otherwise adversely affect their value or estimated lives, would adversely affect the Company’s consolidated results of operations.

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Note 3: Three-for-two Common Stock Split

On April 22, 2014, the Company’s Board of Directors declared a three-for-two split of its common stock, payable as a large stock dividend, which was paid on May 19, 2014 (the “payment date”) to all stockholders of record at the close of business on May 5, 2014. As of April 22, 2014, the Company had approximately 3,944,290 shares of common stock outstanding. After the stock split as a large stock dividend, the number of shares of Company common stock outstanding increased to approximately 5,916,435.  All previously reported share and per share data included in public filings subsequent to the payment date has been adjusted to reflect the retroactive effect of this three-for-two stock split.

Note 4: Earnings Per Share

Basic earnings per share excludes dilution and is computed by dividing income available to common shareholders by the weighted average number of common shares outstanding for the period. Diluted earnings per share reflects the potential dilution that could occur if securities or other contracts to issue common stock were exercised or converted into common stock or resulted in the issuance of common stock that then shared in the earnings of the Company, such as the Company’s dilutive stock options.

The following is a reconciliation of basic and diluted earnings per share for the three and six months ended June 30, 2014, and 2013:

	Three Months Ended June 30,		Six Months Ended June 30,
	2014	2013	2014	2013
Net income	$      3,857	$     3,170	$     7,644	$     6,386
Weighted average common shares outstanding
Basic	5,921,025	5,894,388	5,916,387	5,890,006
Effect of dilutive employee stock options	39,817	27,736	40,114	27,891
Diluted	5,960,842	5,922,124	5,956,501	5,917,897
Anti-dilutive options excluded from       earnings per share calculation	93,093	72,750	97,482	72,750
Per Common Share Data:
Basic earnings per share	$       0.65	$     0.54	$       1.29	$      1.08
Diluted earnings per share	$       0.65	$     0.54	$       1.28	$      1.08

All share and per share amounts have been adjusted to reflect the effect of the 3-for-2 stock split (dividend) during May 2014.

11

Note 5: Securities Available For Sale

The following tables summarize the securities available for sale portfolio as of June 30, 2014, and December 31, 2013:

June 30, 2014 Available for Sale:	Amortized Cost	Gross Unrealized Gains	Gross Unrealized Losses
				Estimated Fair Value
Mortgage-backed securities:
US Government-sponsored      enterprises	$286,494	$   6,287	$   3,595	$ 289,186
US Government agency	86,475	1,389	749	87,115
Private label	4,315	834	5	5,144
Obligations of states and political      subdivisions thereof	95,237	2,670	1,548	96,359
Total	$472,521	$11,180	$   5,897	$477,804
December 31, 2013 Available for Sale:	Amortized Cost	Gross Unrealized Gains	Gross Unrealized Losses
				Estimated Fair Value
Mortgage-backed securities:
US Government-sponsored       enterprises	$277,838	$ 4,386	$   8,592	$273,632
US Government agency	83,153	833	2,457	81,529
Private label	5,423	825	78	6,170
Obligations of states and political       subdivisions thereof	95,221	1,121	7,503	88,839
Total	$461,635	$ 7,165	$18,630	$450,170

Securities Maturity Distribution: The following table summarizes the maturity distribution of the amortized cost and estimated fair value of securities available for sale as of June 30, 2014. Actual maturities may differ from the final maturities noted below because issuers may have the right to prepay or call certain securities. In the case of MBS, actual maturities may also differ from expected maturities due to the amortizing nature of the underlying mortgage collateral, and the fact that borrowers have the right to prepay.

Securities Available for Sale	Amortized Cost	Estimated Fair Value
Due one year or less	$         ---	$          ---
Due after one year through five years	4,251	4,360
Due after five years through ten years	15,601	16,173
Due after ten years	452,669	457,271
Total	$472,521	$477,804

Securities Impairment: As a part of the Company’s ongoing security monitoring process, the Company identifies securities in an unrealized loss position that could potentially be other-than-temporarily impaired (“OTTI”). For the six months ended June 30, 2014, the Company did not have any OTTI losses recognized in earnings (before taxes), compared with $115 for the same period in 2013.

Upon initial impairment of a security, total OTTI losses represent the excess of the amortized cost over the fair value. For subsequent impairments of the same security, total OTTI losses represent additional credit losses and or declines in fair value subsequent to the previously recorded OTTI losses, if applicable. Unrealized OTTI losses recognized in accumulated other comprehensive income (“OCI”) represent the non-credit component of OTTI losses on debt securities. Net impairment losses recognized in earnings represent the credit component of OTTI losses on debt securities.

12

As of June 30, 2014, the Company held twelve private label MBS (debt securities) with a total amortized cost (i.e. carrying value) of $1,938 for which OTTI losses have previously been recognized in pre-tax earnings (dating back to the fourth quarter of 2008). For all twelve of these securities, the Company previously recognized credit losses in excess of the unrealized losses in accumulated OCI, creating an unrealized gain of $493, net of tax, as included in accumulated OCI as of June 30, 2014.  As of June 30, 2014, the total net unrealized gains included in accumulated OCI for securities held where OTTI has been historically recognized in pre-tax earnings amounted to $493, net of tax, compared with net unrealized gains of $488, net of tax, at December 31, 2013.

The OTTI losses previously recognized in earnings represented management’s best estimate of credit losses inherent in the securities based on discounted, bond-specific future cash flow projections using assumptions about cash flows associated with the pools of mortgage loans underlying each security. In estimating those cash flows the Company takes a variety of factors into consideration including, but not limited to, loan level credit characteristics, current delinquency and non-performing loan rates, current levels of subordination and credit support, recent default rates and future constant default rate estimates, original and current loan to collateral value ratios, recent collateral loss severities and future collateral loss severity estimates, recent and historical conditional prepayment rates and future conditional prepayment rate assumptions, and other estimates of future collateral performance.

Despite elevated levels of delinquencies, defaults and losses in the underlying residential mortgage loan collateral, given credit enhancements resulting from the structures of the individual securities, the Company currently expects that as of June 30, 2014 it will recover the amortized cost basis of its private label MBS as depicted in the table below and has therefore concluded that such securities were not OTTI as of that date. Nevertheless, given recent market conditions, it is possible that adverse changes in repayment performance and fair value could occur in future periods that would change the Company’s current best estimates.

The following table displays the beginning balance of OTTI related to historical credit losses on debt securities held by the Company at the beginning of the current reporting period, as well as changes in credit losses recognized in pre-tax earnings for the three and six months ending June 30, 2014, and 2013.

	2014	2013
Estimated credit losses as of March 31,	$3,413	$3,675
Additions for credit losses for securities on which      OTTI has been previously recognized	---	115
Additions for credit losses for securities on which      OTTI has not been previously recognized	---	---
Reductions for securities paid off during the period	---	---
Estimated credit losses as of June 30,	$3,413	$3,790
	2014	2013
Estimated credit losses as of prior year-end,	$3,923	$4,366
Additions for credit losses for securities on which      OTTI has been previously recognized	---	115
Additions for credit losses for securities on which      OTTI has not been previously recognized	---	---
Reductions for securities paid off during the period	510	691
Estimated credit losses as of June 30,	$3,413	$3,790

13

As of June 30, 2014, based on a review of the remaining securities in the securities portfolio, the Company concluded that it expects to recover its amortized cost basis for such securities. This conclusion was based on the issuers’ continued satisfaction of the securities obligations in accordance with their contractual terms and the expectation that they will continue to do so through the maturity of the security, the expectation that the Company will receive the entire amount of future contractual cash flows, as well as the evaluation of the fundamentals of the issuers’ financial condition and other objective evidence. Accordingly, the Company concluded that any declines in the values of those securities were temporary and that any additional OTTI charges were not appropriate at June 30, 2014. As of that date, the Company did not intend to sell nor anticipated that it would more-likely-than-not be required to sell any of its impaired securities, that is, where fair value is less than the cost basis of the security.

The following table summarizes the fair value of securities with continuous unrealized losses for less than 12 months and those that have been in a continuous unrealized loss position for 12 months or longer as of June 30, 2014 and December 31, 2013. All securities referenced are debt securities.

	Less than 12 months			12 months or longer			Total
	Estimated			Estimated			Estimated
June 30, 2014	Fair	Number of	Unrealized	Fair	Number of	Unrealized	Fair	Number of	Unrealized
	Value	Investments	Losses	Value	Investments	Losses	Value	Investments	Losses
Description of Securities:
Mortgage-backed securities:
US Government-      sponsored  enterprises	$  27,684	36	$    472	$  75,106	89	$3,123	$102,790	125	$ 3,595
US Government agency	11,138	16	151	23,718	28	598	34,856	44	749
Private label	---	0	---	156	4	5	156	4	5
Obligations of states and      political subdivisions      thereof	3,162	7	15	45,633	103	1,533	48,795	110	1,548
Total	$  41,984	59	$    638	$144,613	224	$5,259	$186,597	283	$ 5,897
	Less than 12 months			12 months or longer			Total
	Estimated			Estimated			Estimated
December 31, 2013	Fair	Number of	Unrealized	Fair	Number of	Unrealized	Fair	Number of	Unrealized
	Value	Investments	Losses	Value	Investments	Losses	Value	Investments	Losses
Description of Securities:
Mortgage-backed securities:
US Government-      Sponsored  enterprises	$111,169	140	$  4,801	$ 40,563	40	$3,791	$151,732	180	$ 8,592
US Government agency	36,356	47	1,982	9,156	12	475	45,512	59	2,457
Private label	826	12	61	449	7	17	1,275	19	78
Obligations of states and       political subdivisions       thereof	61,174	135	5,601	8,464	30	1,902	69,638	165	7,503
Total	$209,525	334	$12,445	$ 58,632	89	$ 6,185	$268,157	423	$18,630

For securities with unrealized losses, the following information was considered in determining that the impairments were not other-than-temporary:

·

Mortgage-backed securities issued by U.S. Government-sponsored enterprises: As of June 30, 2014, the total unrealized losses on these securities amounted to $3,595, compared with $8,592 at December 31, 2013.  All of these securities were credit rated “AA+” by the major credit rating agencies. Company management believes these securities have minimal credit risk, as these Government-sponsored enterprises play a vital role in the nation’s financial markets. Management’s analysis indicates that the unrealized losses at June 30, 2014 were attributed to changes in current market yields and pricing spreads for similar securities since the date the underlying securities were purchased, and does not consider these securities to be OTTI at June 30, 2014.

14

·

Mortgage-backed securities issued by U.S. Government agencies: As of June 30, 2014, the total unrealized losses on these securities amounted to $749, compared with $2,457 at December 31, 2013. All of these securities were credit rated “AA+” by the major credit rating agencies. Management’s analysis indicates that these securities bear little or no credit risk because they are backed by the full faith and credit of the United States. The Company attributes the unrealized losses at June 30, 2014 to changes in current market yields and pricing spreads for similar securities since the date the underlying securities were purchased, and does not consider these securities to be OTTI at June 30, 2014.

·

Private label mortgage-backed securities: As of June 30, 2014, the total unrealized losses on the Bank’s private label MBS amounted to $5, compared with $78 at December 31, 2013. The Company attributes the unrealized losses at June 30, 2014 to the current illiquid market for non-agency MBS, a still recovering housing market, risk-related market pricing discounts for non-agency MBS and credit rating downgrades on certain private label MBS owned by the Company. Based upon the foregoing considerations and the expectation that the Company will receive all of the future contractual cash flows related to amortized cost on these securities, the Company does not consider there to be any additional OTTI with respect to these securities at June 30, 2014.

·

Obligations of states of the U.S. and political subdivisions thereof: As of June 30, 2014, the total unrealized losses on the Bank’s municipal securities amounted to $1,548, compared with $7,503 at December 31, 2013. The Bank’s municipal securities primarily consist of general obligation bonds and to a lesser extent, revenue bonds. General obligation bonds carry less risk, as they are supported by the full faith, credit and taxing authority of the issuing government and in the cases of school districts, are additionally supported by state aid. Revenue bonds are generally backed by municipal revenue streams generated through user fees or lease payments associated with specific municipal projects that have been financed.

Municipal bonds are frequently supported with insurance, which guarantees that in the event the issuer experiences financial problems, the insurer will step in and assume payment of both principal and interest. Historically, insurance support has strengthened an issuer’s underlying credit rating to AAA or AA status. Starting in 2008 and continuing through 2014, many of the insurance companies providing municipal bond insurance experienced financial difficulties and, accordingly, were downgraded by at least one of the major credit rating agencies. Consequently, a portion of the Bank’s municipal bond portfolio was downgraded by at least one of the major credit rating agencies. Notwithstanding the credit rating downgrades, at June 30, 2014, the Bank’s municipal bond portfolio did not contain any below investment grade securities as reported by major credit rating agencies. In addition, at June 30, 2014, all municipal bond issuers were current on contractually obligated interest and principal payments.

The Company attributes the unrealized losses at June 30, 2014 to changes in current market yields and pricing spreads for similar securities since the date the underlying securities were purchased and, to a lesser extent, changes in credit ratings on certain securities. The Company also attributes the unrealized losses to ongoing media attention and market concerns about the prolonged recovery from the national economic recession and the impact it might have on the future financial stability of municipalities throughout the country. Accordingly, the Company does not consider these municipal securities to be other-than-temporarily impaired at June 30, 2014.

At June 30, 2014, the Company had no intent to sell nor believed it is more-likely-than-not that it would be required to sell any of its impaired securities as identified and discussed immediately above, and therefore did not consider these securities to be other OTTI as of that date.

15

Securities Gains and Losses: The following table summarizes realized gains and losses and OTTI losses on securities available for sale for the three and six months ended June 30, 2014 and 2013.

	Proceeds from Sale of Securities Available for Sale	Realized Gains	Realized Losses	Other Than Temporary Impairment Losses	Net
Three months ended June 30,
2014	$11,908	$385	$35	$  ---	$350
2013	$  3,568	$256	$---	$115	$141
Six months ended June 30,
2014	$22,221	$782	$35	$  ---	$747
2013	$  9,629	$529	$  8	$115	$406

Note 6: Loans and Allowance for Loan Losses

Loans are carried at the principal amounts outstanding adjusted by partial charge-offs and net deferred loan origination costs or fees.

Interest on loans is accrued and credited to income based on the principal amount of loans outstanding. Residential real estate and home equity loans are generally placed on non-accrual status when reaching 90 days past due, or in process of foreclosure, or sooner if judged appropriate by management. Consumer loans are generally placed on non-accrual status when reaching 90 days or more past due, or sooner if judged appropriate by management.  Secured consumer loans are written down to realizable value and unsecured consumer loans are charged-off upon reaching 120 days past due. Commercial real estate loans and commercial business loans that are 90 days or more past due are generally placed on non-accrual status, unless secured by sufficient cash or other assets immediately convertible to cash, and the loan is in the process of collection. Commercial real estate and commercial business loans may be placed on non-accrual status prior to the 90 days delinquency date if considered appropriate by management. When a loan has been placed on non-accrual status, previously accrued and uncollected interest is reversed against interest on loans. A loan can be returned to accrual status when principal is reasonably assured and the loan has performed for a period of time, generally six months.

Commercial real estate and commercial business loans are considered impaired when it becomes probable the Bank will not be able to collect all amounts due according to the contractual terms of the loan agreement. Factors considered by management in determining impairment include payment status and collateral value. In considering loans for evaluation of impairment, management generally excludes smaller balance, homogeneous loans, residential mortgage loans, home equity loans, and all consumer loans, unless such loans were restructured in a troubled debt restructuring. These loans are collectively evaluated for risk of loss.

Loan origination, commitment fees and direct loan origination costs are deferred, and the net amount is amortized as an adjustment of the related loans’ yield, using the level yield method over the estimated lives of the related loans.

16

The Company’s lending activities are principally conducted in downeast, midcoast and central Maine. The following table summarizes the composition of the loan portfolio as of June 30, 2014, and December 31, 2013:

LOAN PORTFOLIO SUMMARY

	June 30, 2014	December 31, 2013
Commercial real estate mortgages	$329,948	$336,542
Commercial and industrial	81,978	73,972
Commercial construction and land development	13,201	18,129
Agricultural and other loans to farmers	29,566	26,929
Total commercial loans	454,693	455,572
Residential real estate mortgages	364,908	317,115
Home equity loans	49,696	49,565
Other consumer loans	13,279	14,523
Total consumer loans	427,883	381,203
Tax exempt loans	18,543	16,355
Net deferred loan costs and fees	(183)	(273)
Total loans	900,936	852,857
Allowance for loan losses	(8,751)	(8,475)
Total loans net of allowance for loan losses	$892,185	$844,382

Loan Origination/Risk Management: The Bank has certain lending policies and procedures in place that are designed to maximize loan income within an acceptable level of risk. The Bank’s board of directors reviews and approves these policies and procedures on a regular basis. A reporting system supplements the review process by providing management and the board with frequent reports related to loan production, loan quality, concentrations of credit, loan delinquencies and non-performing loans and potential problem loans. The Bank seeks to diversify the loan portfolio as a means of managing risk associated with fluctuations in economic conditions.

Commercial Real Estate Mortgages: The Bank’s commercial real estate mortgage loans are collateralized by liens on real estate, typically have variable interest rates and amortize over a 15 to 20 year period. These loans are underwritten primarily as cash flow loans and secondarily as loans secured by real estate. Payments on loans secured by such properties are largely dependent on the successful operation of the property securing the loan or the business conducted on the property securing the loan. Accordingly, repayment of these loans may be subject to adverse economic conditions to a greater extent than other types of loans. The Bank seeks to minimize these risks in a variety of ways, including giving careful consideration to the property’s operating history, future operating projections, current and projected occupancy, location and physical condition in connection with underwriting these loans. The underwriting analysis also includes credit verification, analysis of global cash flows, appraisals and a review of the financial condition of the borrower. Reflecting the Bank’s business region, at June 30, 2014, approximately 33.9% of the commercial real estate mortgage portfolio was represented by loans to the lodging industry. The Bank underwrites lodging industry loans as operating businesses, lending primarily to seasonal establishments with stabilized cash flows.

17

Commercial and Industrial Loans: Commercial and industrial loans are underwritten after evaluating and understanding the borrower’s ability to operate profitably, and prudently expand its business. Commercial and industrial loans are primarily made in the Bank’s market areas and are underwritten on the basis of the borrower’s ability to service the debt from income. As a general practice, the Bank takes as collateral a lien on any available real estate, equipment or other assets owned by the borrower and obtains a personal guaranty of the borrower(s) or principal(s). Working capital loans are primarily collateralized by short-term assets whereas term loans are primarily collateralized by long-term assets. The risk in commercial and industrial loans is principally due to the type of collateral securing these loans. The increased risk also derives from the expectation that commercial and industrial loans generally will be serviced principally from the operations of the business, and, if not successful, these loans are primarily secured by tangible, non-real estate collateral.

Construction and Land Development Loans: The Bank makes loans to finance the construction of residential and, to a lesser extent, non-residential properties. Construction loans generally are collateralized by first liens on real estate. The Bank conducts periodic inspections, either directly or through an agent, prior to approval of periodic draws on these loans. Underwriting guidelines similar to those described immediately above are also used in the Bank’s construction lending activities. Construction loans involve additional risks attributable to the fact that loan funds are advanced against a project under construction and the project is of uncertain value prior to its completion.  Because of uncertainties inherent in estimating construction costs, the market value of the completed project and the effects of governmental regulation on real property, it can be difficult to accurately evaluate the total funds required to complete a project and the related loan to value ratio. As a result of these uncertainties, construction lending often involves the disbursement of substantial funds with repayment dependent, in part, on the success of the ultimate project rather than the ability of a borrower or guarantor to repay the loan. In many cases the success of the project can also depend upon the financial support/strength of the sponsorship.  If the Bank is forced to foreclose on a project prior to completion, there is no assurance that the Bank will be able to recover the entire unpaid portion of the loan. In addition, the Bank may be required to fund additional amounts to complete a project and may have to hold the property for an indeterminate period of time. While the Bank has underwriting procedures designed to identify what it believes to be acceptable levels of risks in construction lending, no assurance can be given that these procedures will prevent losses from the risks described above.

Residential Real Estate Mortgages: The Bank originates first-lien, adjustable-rate and fixed-rate, one-to-four-family residential real estate loans for the construction, purchase or refinancing of residential property. These loans are principally collateralized by owner-occupied properties, and to a lesser extent second homes and vacation properties, and are amortized over 10 to 30 years. From time to time the Bank will sell longer-term, low rate, residential mortgage loans to the Federal Home Loan Mortgage Corporation (“FHLMC”) with servicing rights retained. This practice allows the Bank to better manage interest rate risk and liquidity risk. In an effort to manage risk of loss and strengthen secondary market liquidity opportunities, management typically uses secondary market underwriting, appraisal, and servicing guidelines for all loans, including those held in its portfolio. Loans on one-to-four-family residential real estate are mostly originated in amounts of no more than 80% of appraised value or have private mortgage insurance. Mortgage title insurance and hazard insurance are required. Construction loans have a unique risk, because they are secured by an incomplete dwelling. This risk is reduced through more stringent underwriting standards, including regular inspections throughout the construction period.

18

Home Equity Loans: The Bank originates home equity lines of credit and second mortgage loans (loans which are secured by a junior lien position on one-to-four-family residential real estate). These loans carry a higher risk than first mortgage residential loans as they are in a second position relating to collateral. Risk is reduced through underwriting criteria, which include credit verification, appraisals and evaluations, a review of the borrower's financial condition, and personal cash flows. A security interest, with title insurance when necessary, is taken in the underlying real estate.

Non-performing Loans: the following table sets forth information regarding non-accruing loans and accruing loans 90 days or more overdue at June 30, 2014, and December 31, 2013.

TOTAL NON-PERFORMING LOANS

	June 30, 2014	December 31, 2013
Commercial real estate mortgages	$1,505	$2,046
Commercial and industrial loans	1,155	793
Commercial construction and land development	1,328	1,913
Agricultural and other loans to farmers	76	56
Total commercial loans	4,064	4,808
Residential real estate mortgages	2,752	3,227
Home equity loans	644	745
Other consumer loans	40	60
Total consumer loans	3,436	4,032
Total non-accrual loans	7,500	8,840
Accruing loans contractually past due 90 days or more	345	---
Total non-performing loans	$7,845	$8,840

Troubled Debt Restructures: A Troubled Debt Restructure (“TDR”) results from a modification to a loan to a borrower who is experiencing financial difficulty in which the Bank grants a concession to the debtor that it would not otherwise consider but for the debtor’s financial difficulties.  Financial difficulty arises when a debtor is bankrupt or contractually past due, or is likely to become so, based upon its ability to pay.  A concession represents an accommodation not generally available to other customers, which may include a below-market interest rate, deferment of principal payments, extension of maturity dates, etc.  Such accommodations extended to customers who are not experiencing financial difficulty do not result in TDR classification.

There were no TDRs that occurred during the three and six months ended June 30, 2014.  

19

Summary information pertaining to the TDRs that occurred during the three and six months ended June 30, 2013 follows:

	For the Three Months Ended			For the Six Months Ended
	June 30,			June 30,
	2013			2013
	Number of Loans	Pre-Modification Outstanding Recorded Investment	Post-Modification Outstanding Recorded Investment	Number of Loans	Pre-Modification Outstanding Recorded Investment	Post-Modification Outstanding Recorded Investment
Commercial and industrial loans	1	$49	$49	1	$49	$49
Total commercial loans	1	49	49	1	49	49
Residential real estate mortgages	0	$ ---	$ ---	0	$ ---	$ ---
Home equity loans	0	---	---	1	16	21
Other consumer loans	0	---	---	1	14	14
Total consumer loans	0	---	---	2	30	35
Total	1	$49	$49	3	$79	$84

The following table shows the Bank’s post-modification balance of TDRs listed by type of modification for the three and six months ended June 30, 2013:

	June 30, 2013
	Three Months Ended	Six Months Ended
Extended maturity and adjusted interest rate	$49	$84
Temporary payment amount adjustment	---	---
Court ordered concession	---	---
Total	$49	$84

As of June 30, 2014, the Bank had six real estate secured loans, six commercial and industrial loans, and one other consumer loan, to eight relationships totaling $1,416 that were classified as TDRs.  At June 30, 2014, seven of these TDRs totaling $397 were classified as non-accrual, and none were past due 30 days or more and still accruing.

During the six months ended June 30, 2014 and 2013, there were no defaults on loans that had been modified as TDRs within the previous twelve months. A default for purposes of this disclosure is a TDR in which the borrower is 90 days or more past due or results in foreclosure and repossession of the applicable collateral.

As of December 31, 2013, the Bank had six real estate secured, six commercial and industrial loans and one other consumer loan to eight relationships totaling $1,454 that were classified as TDRs.  At December 31, 2013, seven TDR’s totaling $416 were past due or classified as non-performing.

20

Past Due Loans: Loans are considered past due if the required principal and interest payments have not been received as of the date such payments were due. The following tables set forth information regarding past due loans at June 30, 2014, and December 31, 2013. Amounts shown exclude deferred loan origination fees and costs.

June 30, 2014	30-59 Days Past Due	60-89 Days Past Due	90 Days or Greater	Total Past Due	Current	Total Loans	Non-Accrual	>90 Days Past Due and Accruing
Commercial real       estate mortgages	$   718	$    952	$   644	$ 2,314	327,634	$ 329,948	$1,505	$  ---
Commercial and industrial	53	517	529	1,099	80,879	81,978	1,155	---
Commercial construction      and land development	---	---	1,328	1,328	11,873	13,201	1,328	---
Agricultural and other       loans to farmers	169	78	25	272	29,294	29,566	76	---
Residential real estate       mortgages	701	729	1,555	2,985	361,923	364,908	2,752	345
Home equity	484	9	246	739	48,957	49,696	644	---
Other consumer loans	72	57	24	153	13,126	13,279	40	---
Tax exempt	---	---	---	---	18,543	18,543	---	---
Total	$2,197	$2,342	$4,351	$ 8,890	$892,229	$901,119	$7,500	$345
December 31, 2013	30-59 Days Past Due	60-89 Days Past Due	90 Days or Greater	Total Past Due	Current	Total Loans	Non-Accrual	>90 Days Past Due and Accruing
Commercial real       estate mortgages	$  786	$   361	$  698	1,845	334,697	$336,542	$2,046	$ ---
Commercial and industrial	29	20	456	505	73,467	73,972	793	---
Commercial construction      and land development	---	---	1,845	1,845	16,284	18,129	1,913	---
Agricultural and other       loans to farmers	22	---	---	22	26,907	26,929	56	---
Residential real estate      mortgages	2,170	1,864	1,649	5,683	311,432	317,115	3,227	---
Home equity	67	---	---	67	49,498	49,565	745	---
Other consumer loans	57	80	41	178	14,345	14,523	60	---
Tax exempt	---	---	---	---	16,355	16,355	---	---
Total	$3,131	$2,325	$4,689	$10,145	$842,985	$853,130	$8,840	$  ---

Impaired Loans: Impaired loans are all commercial loans for which the Company believes it is probable that it will be unable to collect all amounts due according to the contractual terms of the loan agreement, as well as all loans modified into a TDR, if any. Allowances for losses on impaired loans are determined by the lower of the present value of the expected cash flows related to the loan, using the original contractual interest rate, and its recorded value, or in the case of collateral dependant loans, the lower of the fair value of the collateral, less costs to dispose, and the recorded amount of the loans. When foreclosure is probable, impairment is measured based on the fair value of the collateral less cost to sell.

21

Details of impaired loans as of June 30, 2014 and December 31, 2013 follows:

	June 30, 2014			December 31, 2013
		Unpaid			Unpaid
	Recorded	Principal	Related	Recorded	Principal	Related
	Investment	Balance	Allowance	Investment	Balance	Allowance
With no related allowance:
Commercial real estate mortgages	$2,022	$2,241	$ ---	$1,949	$2,103	$  ---
Commercial and industrial	712	822	---	660	770	---
Commercial construction and      land development	1,328	3,253	---	68	68	---
Agricultural and other loans to farmers	76	76	---	56	56	---
Residential real estate loans	439	469	---	442	442	---
Home equity loans	20	20	---	21	21	---
Other consumer	12	12	---	13	13	---
Subtotal	$4,609	$6,893	$ ---	$3,209	$3,473	$  ---
With an allowance:
Commercial real estate mortgages	$    229	$   229	$  68	$    854	$    854	$100
Commercial and industrial	457	537	367	150	150	150
Commercial construction and      land development	---	---	---	1,845	3,770	20
Agricultural and other loans to farmers	---	---	---	---	---	---
Residential real estate loans	---	---	---	---	---	---
Home equity loans	---	---	---	---	---	---
Other consumer	---	---	---	---	---	---
Subtotal	$    686	$   766	$435	$2,849	$4,774	$270
Total	$5,295	$7,659	$435	$6,058	$8,247	$270

Details of impaired loans for the three and six months ended June 30, 2014 and 2013 follows:

	June 30, 2014				June 30, 2013
	Three Months Ended		Six Months Ended		Three Months Ended		Six Months Ended
	Average		Average		Average		Average
	Recorded	Interest	Recorded	Interest	Recorded	Interest	Recorded	Interest
	Investment	Recorded	Investment	Recorded	Investment	Recorded	Investment	Recorded
With no related allowance:
Commercial real      estate mortgages	$2,075	$16	$2,191	$31	$2,294	$17	$2,253	$34
Commercial and       industrial	764	1	754	2	597	1	757	3
Commercial construction      and land development	1,504	---	1,702	---	---	---	---	---
Agricultural and other       loans to farmers	60	---	61	---	323	---	452	---
Residential real       estate mortgages	491	3	492	6	266	1	267	1
Home equity loans	20	1	20	1	21	1	20	1
Other consumer	12	---	12	---	14	---	14	1
Subtotal	$4,926	$21	$5,232	$40	$3,515	$20	$3,763	$40
With an allowance:
Commercial real      estate mortgages	$    297	$---	$  379	$---	$   207	$---	$    223	$---
Commercial and       industrial	536	---	389	---	---	---	---	---
Commercial construction      and land development	---	---	---	---	2,029	---	2,131	---
Agricultural and other      loans to farmers	---	---	---	---	---	---	---	---
Residential real      estate mortgages	---	---	---	---	---	---	---	---
Home equity loans	---	---	---	---	---	---	---	---
Other consumer	---	---	---	---	---	---	---	---
Subtotal	$    833	$---	$   768	$---	$2,236	$---	$2,354	$---
Total	$ 5,759	$21	$6,000	$40	$5,751	$20	$6,117	$40

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Credit Quality Indicators/Classified Loans:In monitoring the credit quality of the portfolio, management applies a credit quality indicator to all categories of commercial loans. These credit quality indicators range from one through nine, with a higher number correlating to increasing risk of loss. These ratings are used as inputs to the calculation of the allowance for loan losses. Loans rated one through five are consistent with the regulators’ Pass ratings, and are generally allocated a lesser percentage allocation in the allowance for loan losses than loans rated from six through nine.

Consistent with regulatory guidelines, the Bank provides for the classification of loans which are considered to be of lesser quality as substandard, doubtful, or loss. The Bank considers a loan substandard if it is inadequately protected by the current net worth and paying capacity of the borrower or of the collateral pledged, if any. Substandard loans have a well defined weakness that jeopardizes liquidation of the debt. Substandard loans include those loans where there is the distinct possibility of some loss of principal, if the deficiencies are not corrected.

Loans that the Bank classifies as doubtful have all of the weaknesses inherent in those loans that are classified as substandard but also have the added characteristic that the weaknesses present make collection or liquidation in full, on the basis of currently existing facts, conditions, and values, highly questionable and improbable. The possibility of loss is high but because of certain important and reasonably specific pending factors which may work to the advantage and strengthening of the loan, its classification as an estimated loss is deferred until its more exact status may be determined. Pending factors include proposed merger, acquisition, or liquidation procedures, capital injection, perfecting liens on additional collateral and refinancing plans. The entire amount of the loan might not be classified as doubtful when collection of a specific portion appears highly probable. Loans are generally not classified doubtful for an extended period of time (i.e., over a year).

Loans that the Bank classifies as loss, are those considered uncollectible and of such little value that their continuance as an asset is not warranted and the uncollectible amounts are charged-off. This classification does not mean that the asset has absolutely no recovery or salvage value, but rather it is not practical or desirable to defer writing off this basically worthless asset even though partial recovery may be affected in the future. Losses are taken in the period in which they surface as uncollectible.

Loans that do not expose the Bank to risk sufficient to warrant classification in one of the aforementioned categories, but which possess some weaknesses, are designated special mention. A special mention loan has potential weaknesses that deserve management’s close attention. If left uncorrected, these potential weaknesses may result in deterioration of the repayment prospects for the asset or in the institution’s credit position at some future date. This might include loans which the lending officer may be unable to supervise properly because of: lack of expertise, inadequate loan agreement, the poor condition of or lack of control over collateral, failure to obtain proper documentation or any other deviations from prudent lending practices. Economic or market conditions which may, in the future, affect the obligor may warrant special mention of the asset. Loans for which an adverse trend in the borrower's operations or an imbalanced position in the balance sheet which has not reached a point where the liquidation is jeopardized may be included in this classification. Special mention assets are not adversely classified and do not expose an institution to sufficient risks to warrant classification.

The following tables summarize the commercial loan portfolio as of June 30, 2014, and December 31, 2013, by credit quality indicator. Credit quality indicators are reassessed for each applicable commercial loan at least annually, or upon receipt and analysis of the borrower’s financial statements, when applicable. Consumer loans, which principally consist of residential mortgage loans, are not rated, but are evaluated for credit quality after origination based on delinquency status (see past due loan aging table above).

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June 30, 2014	Commercial real estate mortgages	Commercial and industrial	Commercial construction and land development	Agricultural and other loans to farmers	Total
Pass	$300,965	$69,023	$   9,984	$29,084	$409,056
Other Assets      Especially Mentioned	19,071	9,529	424	178	29,202
Substandard	9,912	3,426	2,793	304	16,435
Doubtful	---	---	---	---	---
Loss	---	---	---	---	---
Total	$329,948	$81,978	$13,201	$29,566	$454,693
December 31, 2013	Commercial real estate mortgages	Commercial and industrial	Commercial construction and land development	Agricultural and other loans to farmers	Total
Pass	$307,486	$60,330	$14,403	$26,447	$408,666
Other Assets      Especially Mentioned	19,768	10,568	437	182	30,955
Substandard	9,288	3,074	3,289	300	15,951
Doubtful	---	---	---	---	---
Loss	---	---	---	---	---
Total	$336,542	$73,972	$18,129	$26,929	$455,572

Allowance for Loan Losses: The allowance for loan losses (the “allowance”) is a reserve established through a provision for loan losses (the “provision”) charged to expense, which represents management’s best estimate of probable losses that have been incurred within the existing portfolio of loans. The allowance, in the judgment of management, is necessary to provide for estimated loan losses and risks inherent in the loan portfolio. The Bank’s allowance for loan loss methodology includes allowance allocations calculated in accordance with ASC Topic 310, “Receivables” and allowance allocations calculated in accordance with ASC Topic 450, “Contingencies.” Accordingly, the methodology is based on historical loss experience by type of credit and internal risk grade, specific homogeneous risk pools and specific loss allocations, with adjustments for current events and conditions. The Bank’s process for determining the appropriate level of the allowance is designed to account for credit deterioration as it occurs. The provision reflects loan quality trends, including the levels of and trends related to non-accrual loans, past due loans, potential problem loans, criticized loans and net charge-offs or recoveries, among other factors. The provision also reflects the totality of actions taken on all loans for a particular period. In other words, the amount of the provision reflects not only the necessary increases in the allowance related to newly identified criticized loans, but it also reflects actions taken related to other loans including, among other things, any necessary increases or decreases in required allowances for specific loans or loan pools.

The level of the allowance reflects management’s continuing evaluation of industry concentrations, specific credit risks, loan loss experience, current loan portfolio quality, present economic, political and regulatory conditions and unidentified losses inherent in the current loan portfolio. While management utilizes its best judgment and information available, the ultimate adequacy of the allowance is dependent upon a variety of factors beyond the Bank’s control, including, among other things, the performance of the Bank’s loan portfolio, the economy, changes in interest rates and the view of the regulatory authorities toward loan classifications.

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The Bank’s allowance for loan losses consists of three principal elements: (i) specific valuation allowances determined in accordance with ASC Topic 310 based on probable losses on specific loans; (ii) historical valuation allowances determined in accordance with ASC Topic 450 based on historical loan loss experience for similar loans with similar characteristics and trends, adjusted, as necessary, to reflect the impact of current conditions; and (iii) general valuation allowances determined in accordance with ASC Topic 450 based on general economic conditions and other qualitative risk factors both internal and external to the Bank.

The allowances established for probable losses on specific loans are based on a regular analysis and evaluation of problem loans. Loans are classified based on an internal credit risk grading process that evaluates, among other things: (i) the obligor’s ability to repay; (ii) the underlying collateral, if any; and (iii) the economic environment and industry in which the borrower operates. This analysis is performed at the relationship level for all commercial loans. When a loan has a classification of substandard or worse, the Bank analyzes the loan to determine whether the loan is impaired and, if impaired, the need to specifically allocate a portion of the allowance to the loan. Specific valuation allowances are determined by analyzing the borrower’s ability to repay amounts owed, collateral deficiencies, the relative risk grade of the loan and economic conditions affecting the borrower’s industry, among other observable considerations.

Historical valuation allowances are calculated based on the historical loss experience of specific types of loans and the internal risk grade of such loans at the time they were charged-off. The Bank calculates historical loss ratios for pools of similar loans with similar characteristics based on the proportion of actual charge-offs experienced to the total population of loans in the pool. The historical loss ratios are periodically updated based on actual charge-off experience. A historical valuation allowance is established for each pool of similar loans based upon the product of the historical loss ratio and the total dollar amount of the loans in the pool, net of any loans for which reserves are already established. The Bank’s pools of similar loans include similarly risk-graded groups of commercial real estate loans, commercial and industrial loans, consumer real estate loans and consumer and other loans.

General valuation allowances are based on general economic conditions and other qualitative risk factors both internal and external to the Bank. In general, such valuation allowances are determined by evaluating, among other things: (i) the experience, ability and effectiveness of the Bank’s lending management and staff; (ii) the effectiveness of the Bank’s loan policies, procedures and internal controls; (iii) changes in asset quality; (iv) changes in loan portfolio volume; (v) the composition and concentrations of credit; (vi) the impact of competition on loan structuring and pricing; (vii) the effectiveness of the internal loan review function; (viii) the impact of environmental risks on portfolio risks; and (ix) the impact of rising interest rates on portfolio risk. Management evaluates the degree of risk that each one of these components has on the quality of the loan portfolio on a quarterly basis. The results are then used to determine an appropriate general valuation allowance.

Loans identified as losses by management, external loan review and/or bank examiners, are charged-off. Furthermore, consumer loan accounts are charged-off based on regulatory requirements.

The following tables detail activity in the allowance for loan losses by portfolio segment for the three and six months ended June 30, 2014, and 2013. The tables also provide details regarding the Bank’s recorded investment in loans related to each balance in the allowance for loan losses by portfolio segment and disaggregated on the basis of the Bank’s impairment methodology. Allocation of a portion of the allowance to one category of loans does not preclude its availability to absorb losses in other categories.

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Three Months Ended June 30, 2014	Commercial Real Estate	Commercial and Industrial	Commercial Construction and land development	Agricultural	Residential Real Estate	Consumer	Home Equity	Tax Exempt	Total
Beginning Balance	$  4,735	$   1,654	$     231	$     350	$    1,128	$     206	$      239	$     179	$    8,722
Charged-off	(165)	(88)	---	---	(125)	(63)	---	---	(441)
Recoveries	----	10	---	15	11	6	---	---	42
Provision	317	(3)	23	6	135	(46)	2	(6)	428
Ending Balance	$  4,887	$   1,573	$     254	$     371	$    1,149	$     103	$      241	$     173	$    8,751
Six Months Ended June 30, 2014	Commercial Real Estate	Commercial and Industrial	Commercial Construction and land development	Agricultural	Residential Real Estate	Consumer	Home Equity	Tax Exempt	Total
Beginning Balance	$4,825	$    1,266	$       314	$     335	$    1,166	$     137	$      264	$     168	$    8,475
Charged-off	(165)	(99)	---	(14)	(293)	(80)	(18)	---	(669)
Recoveries	6	12	---	15	12	15	---	---	60
Provision	221	394	(60)	35	264	31	(5)	5	885
Ending Balance	$   4,887	$   1,573	$      254	$     371	$    1,149	$     103	$     241	$     173	$    8,751
of which:
Amount for loans      individually       evaluated for       impairment	$       68	$      367	$        ---	$       ---	$        ---
						$       ---	$       ---	$        ---	$       435
Amount for loans      collectively      evaluated for      impairment	$   4,819	$   1,206	$     254	$     371	$    1,149	$     103	$     241	$     173	$    8,316
Loans individually       evaluated      for impairment	$    1,505	$   1,155	$   1,328	$       76	$         ---	$       ---	$       ---	$        ---	$    4,064
Loans collectively       evaluated       for impairment	$328,443	$ 80,823	$11,873	$29,490	$364,908	$13,279	$49,696	$18,543	$897,055
Three Months Ended June 30, 2013	Commercial Real Estate	Commercial and Industrial	Commercial Construction and land development	Agricultural	Residential Real Estate	Consumer	Home Equity	Tax Exempt	Total
Beginning Balance	$  4,413	$   1,011	$      340	$       337	$    1,354	$     197	$     264	$     139	$    8,055
Charged-off	(84)	(14)	---	(81)	(59)	(40)	(25)	---	(303)
Recoveries	3	---	---	---	1	5	1	---	10
Provision	103	65	15	67	125	(15)	30	15	405
Ending Balance	$  4,435	$   1,062	$      355	$      323	$    1,421	$     147	$      270	$     154	$    8,167
Six Months Ended June 30, 2013	Commercial Real Estate	Commercial and Industrial	Commercial Construction and land development	Agricultural	Residential Real Estate	Consumer	Home Equity	Tax Exempt	Total
Beginning Balance	$  4,320	$   1,026	$     515	$      303	$    1,330	$     207	$       255	$      141	$    8,097
Charged-off	(84)	(178)	---	(81)	(287)	(68)	(34)	---	(732)
Recoveries	3	10	---	1	1	10	19	---	44
Provision	196	204	(160)	100	377	(2)	30	13	758
Ending Balance	$   4,435	$   1,062	$     355	$      323	$    1,421	$     147	$      270	$      154	$    8,167

Loan concentrations: Because of the Company’s proximity to Acadia National Park, a large part of the economic activity in the Bank’s area is generated from the hospitality business associated with tourism. At June 30, 2014, and December 31, 2013, loans to the lodging industry amounted to approximately $117,389 and $114,982, respectively.

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Note 7: Reclassifications Out of Accumulated Other Comprehensive Income

The following table summarizes the reclassifications out of Accumulated Other Comprehensive Income for the six months ended June 30, 2014.

Details about Accumulated Other Comprehensive Income	Amount Reclassified from Accumulated Other Comprehensive Income	Affected Line Item in the Statement Where Net Income is Presented
Unrealized gains and losses on available-for-sale securities
	$ 747	Net gain on sales of investments
	(254)	Provision for income taxes
	$ 493	Net income
Amortization of post retirement benefit plan
Amortization of actuarial gain/loss for supplemental      executive retirement plan	$   14	Salaries and benefits
	14
Tax (expense) or benefit	5	Provision for income taxes
Net of tax	$     9	Net income
Total reclassification for the period	$ 502	Net income, net of tax

Note 8: Financial Derivative Instruments

As part of its overall asset and liability management strategy, the Bank periodically uses derivative instruments to minimize significant unplanned fluctuations in earnings and cash flows caused by interest rate volatility.  The Bank’s interest rate risk management strategy involves modifying the re-pricing characteristics of certain assets or liabilities so that changes in interest rates do not have a significant effect on net interest income.

The Company recognizes its derivative instruments on the consolidated balance sheet at fair value.  On the date the derivative instrument is entered into, the Bank designates whether the derivative is part of a hedging relationship (i.e., cash flow or fair value hedge). The Bank formally documents relationships between hedging instruments and hedged items, as well as its risk management objective and strategy for undertaking hedge transactions. The Bank also assesses, both at the hedge’s inception and on an ongoing basis, whether the derivatives used in hedging transactions are highly effective in offsetting the changes in cash flows or fair values of hedged items.

Changes in fair value of derivative instruments that are highly effective and qualify as cash flow hedges are recorded in other comprehensive income or loss. Any ineffective portion is recorded in earnings. The Bank discontinues hedge accounting when it is determined that the derivative is no longer highly effective in offsetting changes of the hedged risk on the hedged item, or management determines that the designation of the derivative as a hedging instrument is no longer appropriate.

At June 30, 2014, the Bank had two outstanding derivative instruments with notional amounts totaling $45,000. These derivative instruments were interest rate caps, with notional principal amounts totaling $25,000 and $20,000, respectively. The notional amounts of the financial derivative instruments do not represent exposure to credit loss. The Bank is exposed to credit loss only to the extent the counter-party defaults in its responsibility to pay interest under the terms of the agreements. The credit risk in derivative instruments is mitigated by entering into transactions with highly-rated counterparties that management believes to be creditworthy and by limiting the amount of exposure to each counter-party.

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The details of the Bank’s financial derivative instruments as of June 30, 2014 are summarized below:

Interest Rate Cap Agreements

Notional Amount	Expiration Date	3-month LIBOR Strike Rate	Premium Paid	Unamortized Premium 6/30/14	Fair Value 6/30/14
$25,000	06/30/21	3.00%	$921	$   921	$928
$20,000	06/30/24	3.00%	$1,470	$1,470	$1,537

In the second quarter of 2014, interest rate cap agreements were purchased to limit the Bank’s exposure to rising interest rates on two rolling, three-month borrowings indexed to three month LIBOR.  Under the terms of the agreements, the Bank paid premiums of $921 and $1,470 for the right to receive cash flow payments if 3-month LIBOR rises above the caps of 3.00%, thus effectively ensuring interest expense on the borrowings at maximum rates of 3.00% for the duration of the agreements. The interest rate cap agreements were designated as cash flow hedges.

At June 30, 2014, the total fair value of the interest rate cap agreements was $2,465. The fair values of the interest rate cap agreements are included in other assets on the Company’s consolidated balance sheets. Changes in the fair value, representing unrealized gains or losses, are recorded in accumulated other comprehensive income, net of tax.

The premiums paid on the interest rate cap agreements are being recognized as increases in interest expense over the duration of the agreements using the caplet method. During the three and six months ended June 30, 2014, no premium amortization was required.  During the next twelve months, less than $1 of the total premiums will be recognized as increases to interest expense, increasing the interest expense related to the hedged borrowings.

A summary of the hedging related balances as of June 30, 2014 follows:

	June 30, 2014		December 31, 2013
	Gross	Net of Tax	Gross	Net of Tax
Unrealized gain on interest rate caps	$     74	$     49	$---	$---
Unamortized premium on interest rate caps	2,391	1,578	---	---
Total	$2,465	$1,627	$---	$---

There were no hedging related balances as of December 31, 2013.

Note 9: Retirement Benefit Plans

The Company has non-qualified supplemental executive retirement agreements with certain retired officers. The agreements provide supplemental retirement benefits payable in installments over a period of years upon retirement or death. The Company recognized the net present value of payments associated with the agreements over the service periods of the participating officers. Interest costs continue to be recognized on the benefit obligations.  

The Company also has a supplemental executive retirement agreement with a certain current executive officer. This agreement provides a stream of future payments in accordance with a defined vesting schedule upon retirement, termination, or upon a change of control.

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The following tables summarize the net periodic benefit costs for the three and six months ended June 30, 2014, and 2013:

	Supplemental Executive Retirement Plans
Three Months Ended June 30,	2014	2013
Service cost	$ 16	$   91
Interest cost	38	30
Net amortization of prior service cost and actuarial (gain)/loss	---	(83)
Actuarial loss on supplemental executive retirement plan, net of tax	7	15
Net periodic benefit cost	$ 61	$   53
	Supplemental Executive
	Retirement Plans
Six Months Ended June 30,	2014	2013
Service cost	$  32	$ 182
Interest cost	75	60
Net amortization of prior service cost and actuarial (gain)/loss	---	(165)
Actuarial loss on supplemental executive retirement plan, net of tax	14	30
Net periodic benefit cost	$121	$ 107

The Company is expected to recognize $241 of expense for the foregoing plans for the year ended December 31, 2014. The Company is expected to contribute $331 to the foregoing plans in 2014. As of June 30, 2014, the Company had contributed$161.

Note 10: Commitments and Contingent Liabilities

The Bank is a party to financial instruments in the normal course of business to meet financing needs of its customers. These financial instruments include commitments to extend credit, unused lines of credit, and standby letters of credit.  

Commitments to originate loans, including unused lines of credit, are agreements to lend to a customer provided there is no violation of any condition established in the contract. Commitments generally have fixed expiration dates or other termination clauses and may require payment of a fee.  Since many of the commitments are expected to expire without being drawn upon, the total commitment amounts do not necessarily represent future cash requirements. The Bank uses the same credit policy to make such commitments as it uses for on-balance-sheet items, such as loans. The Bank evaluates each customer’s creditworthiness on a case-by-case basis. The amount of collateral obtained, if deemed necessary by the Bank upon extension of credit, is based on management’s credit evaluation of the borrower.

The Bank guarantees the obligations or performance of customers by issuing standby letters of credit to third parties. These standby letters of credit are primarily issued in support of third party debt or obligations.  The risk involved in issuing standby letters of credit is essentially the same as the credit risk involved in extending loan facilities to customers, and they are subject to the same credit origination, portfolio maintenance and management procedures in effect to monitor other credit and off-balance sheet instruments.  Exposure to credit loss in the event of non-performance by the counter-party to the financial instrument for standby letters of credit is represented by the contractual amount of those instruments.  Typically, these standby letters of credit have terms of five years or less and expire unused; therefore, the total amounts do not necessarily represent future cash requirements.

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The following table summarizes the contractual amounts of commitments and contingent liabilities as of June 30, 2014, and December 31, 2013:

	June 30, 2014	December 31, 2013
Commitments to originate loans	$21,055	$10,269
Unused lines of credit	$93,204	$98,486
Un-advanced portions of construction loans	$18,001	$12,203
Standby letters of credit	$     325	$     378

As of June 30, 2014, and December 31, 2013, the fair value of the standby letters of credit was not significant to the Company’s consolidated financial statements.

Note 11: Goodwill and Other Intangible Assets

Goodwill: Goodwill totaled $4,935 at June 30, 2014, and December 31, 2013. In the third quarter of 2012 the Company recorded $1,777 of goodwill in connection with the Bank’s acquisition of substantially all of the assets and the assumption of certain liabilities including all deposits of the Border Trust Company.

Core Deposit Intangible Asset: The Company has a finite-lived intangible asset capitalized on its consolidated balance sheet in the form of a core deposit intangible asset related to the Border Trust Company acquisition. The core deposit intangible is being amortized over an estimated useful life of eight and one-half years and is included in other assets on the Company’s consolidated balance sheet. At June 30, 2014, and December 31, 2013, the balance of the core deposit intangible asset amounted to $608 and $655, respectively.  

(in thousands)	June 30, 2014	December 31, 2013
Core deposit intangibles:
Gross carrying amount	$783	$783
Less:  accumulated amortization	175	128
Net carrying amount	$608	$655

Amortization expense on the finite-lived intangible assets is expected to total $92 for each year from 2014 through 2020, then $8 for 2021.

Note 12: Fair Value Measurements

The Company measures fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants. A fair value measurement assumes that the transaction to sell the asset or transfer the liability occurs in the principal market for the asset or liability or, in the absence of a principal market, the most advantageous market for the asset or liability. The price in the principal (or most advantageous) market used to measure the fair value of the asset or liability shall not be adjusted for transaction costs. An orderly transaction is a transaction that assumes exposure to the market for a period prior to the measurement date to allow for marketing activities that are usual and customary for transactions involving such assets and liabilities; it is not a forced transaction. Market participants are buyers and sellers in the principal market that are (i) independent, (ii) knowledgeable, (iii) able to transact, and (iv) willing to transact.

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The Company’s fair value measurements employ valuation techniques that are consistent with the market approach, the income approach and/or the cost approach. The market approach uses prices and other relevant information generated by market transactions involving identical or comparable assets and liabilities. The income approach uses valuation techniques to convert future amounts, such as cash flows or earnings, to a single present amount on a discounted basis. The cost approach is based on the amount that currently would be required to replace the servicing capacity of an asset (replacement cost). Valuation techniques are consistently applied. Inputs to valuation techniques refer to the assumptions that market participants would use in pricing the asset or liability. Inputs may be observable, meaning those that reflect the assumptions market participants would use in pricing the asset or liability developed based on market data obtained from independent sources, or unobservable, meaning those that reflect the reporting entity's own assumptions about the assumptions market participants would use in pricing the asset or liability developed based on the best information available in the circumstances. The Company uses a fair value hierarchy for valuation inputs that gives the highest priority to quoted prices in active markets (Level 1 measurements) for identical assets or liabilities and the lowest priority to unobservable inputs (Level 3 measurements). The fair value hierarchy is as follows:

·

Level 1 – Valuation is based on unadjusted quoted prices in active markets for identical assets or liabilities that the reporting entity has the ability to access at the measurement date.

·

Level 2 – Valuation is based on quoted prices for similar instruments in active markets, quoted prices for identical or similar assets or liabilities in markets that are not active, and model-based techniques for which all significant assumptions are observable in the market.

·

Level 3 – Valuation is principally generated from model-based techniques that use at least one significant assumption not observable in the market. These unobservable assumptions reflect estimates that market participants would use in pricing the asset or liability. Valuation techniques include use of discounted cash flow models and similar techniques.

The level in the fair value hierarchy within which the fair value measurement in its entirety falls is determined based on the lowest level input that is significant to the fair value measurement in its entirety.

The most significant instruments that the Company values are securities, all of which fall into Level 2 in the fair value hierarchy. The securities in the available for sale portfolio are priced by independent providers. In obtaining such valuation information from third parties, the Company has evaluated their valuation methodologies used to develop the fair values in order to determine whether valuations are appropriately placed within the fair value hierarchy and whether the valuations are representative of an exit price in the Company’s principal markets. The Company’s principal markets for its securities portfolios are the secondary institutional markets, with an exit price that is predominantly reflective of bid level pricing in those markets. Additionally, the Company periodically tests the reasonableness of the prices provided by these third parties by obtaining fair values from other independent providers and by obtaining desk bids from a variety of institutional brokers.

A description of the valuation methodologies used for instruments measured at fair value, as well as the general classification of such instruments pursuant to the valuation hierarchy, is set forth below.

Securities Available for Sale: All securities and major categories of securities classified as available for sale are reported at fair value utilizing Level 2 inputs. For these securities, the Company obtains fair value measurements from independent pricing providers. The fair value measurements used by the pricing providers consider observable data that may include dealer quotes, market maker quotes and live trading systems. If quoted prices are not readily available, fair values are determined using matrix pricing models, or other model-based valuation techniques requiring observable inputs other than quoted prices such as market pricing spreads, credit information, callable features, cash flows, the U.S. Treasury yield curve,

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trade execution data, market consensus prepayment speeds, default rates, and the securities’ terms and conditions, among other things.

The foregoing valuation methodologies may produce fair value calculations that may not be fully indicative of net realizable value or reflective of future fair values. While Company management believes these valuation methodologies are appropriate and consistent with other market participants, the use of different methodologies or assumptions to determine the fair value of certain financial instruments could result in a different estimate of fair value at the reporting date.

The following tables summarize financial assets and financial liabilities measured at fair value on a recurring basis as of June 30, 2014, and December 31, 2013, segregated by the level of the valuation inputs within the fair value hierarchy utilized to measure fair value:

June 30, 2014	Level 1 Inputs	Level 2 Inputs	Level 3 Inputs	Total Fair Value
Securities available for sale:
Mortgage-backed securities:
US Government-sponsored enterprises	$  ---	$289,186	$  ---	$289,186
US Government agencies	$  ---	$  87,115	$  ---	$  87,115
Private label	$  ---	$    5,144	$  ---	$    5,144
Obligations of states and political      subdivisions thereof	$  ---	$  96,359	$  ---	$  96,359
Derivative assets	$  ---	$    2,465	$  ---	$    2,465
December 31, 2013	Level 1 Inputs	Level 2 Inputs	Level 3 Inputs	Total Fair Value
Securities available for sale:
Mortgage-backed securities:
US Government-sponsored enterprises	$  ---	$273,632	$  ---	$273,632
US Government agencies	$  ---	$  81,529	$  ---	$  81,529
Private label	$  ---	$    6,170	$  ---	$    6,170
Obligations of states and political      subdivisions thereof	$  ---	$  88,839	$  ---	$  88,839

The following tables present the carrying value of certain financial assets and financial liabilities measured at fair value on a non-recurring basis, segregated by the level of the valuation inputs within the fair value hierarchy utilized to measure fair value.

For the Six Months Ended 6/30/14	Level 1 Inputs	Level 2 Inputs	Level 3 Inputs	Fair Value as of 3/31/14	Loss
Other real estate owned	$  ---	$  ---	$1,771	$1,771	$130
Collateral dependent impaired loans	$  ---	$  ---	$1,623	$1,623	$ ---
For the Year Ended 12/31/13	Level 1 Inputs	Level 2 Inputs	Level 3 Inputs	Fair Value as of 12/31/13	Loss
Other real estate owned	$  ---	$  ---	$1,625	$1,625	$338
Collateral dependent impaired loans	$  ---	$  ---	$2,699	$2,699	$  ---

The Company had total collateral dependent impaired loans with carrying values of approximately $1,623 and $2,699 which had specific reserves included in the allowance of $68 and $120, at June 30, 2014 and December 31, 2013, respectively. The Company measures the value of collateral dependent impaired loans using Level 3 inputs.  Specifically, the Company uses the appraised value of the collateral, which is then discounted for estimated costs to dispose and other considerations.  These discounts generally range from 10% to 30% of appraised value.

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In estimating the fair value of OREO, the Company generally uses market appraisals less estimated costs to dispose of the property, which generally range from 10% to 30% of appraised value. Management may also make adjustments to reflect estimated fair value declines, or may apply other discounts to appraised values for unobservable factors resulting from its knowledge of the property or consideration of broker quotes. The appraisers use a market, income, and/or a cost approach in determining the value of the collateral. Therefore they have been categorized as a Level 3 measurement.

There were no transfers between levels during the periods presented.

Note 13: Fair Value of Financial Instruments

The Company discloses fair value information about financial instruments for which it is practicable to estimate fair value. Fair value estimates are made as of a specific point in time based on the characteristics of the financial instruments and relevant market information. Where available, quoted market prices are used. In other cases, fair values are based on estimates using present value or other valuation techniques. These techniques involve uncertainties and are significantly affected by the assumptions used and judgments made regarding risk characteristics of various financial instruments, discount rates, estimates of future cash flows, future expected loss experience and other factors. Changes in assumptions could significantly affect these estimates. Derived fair value estimates cannot be substantiated by comparison to independent markets and, in certain cases, could not be realized in an immediate sale of the instrument.

Fair value estimates are based on existing financial instruments without attempting to estimate the value of anticipated future business and the value of assets and liabilities that are not considered financial instruments. Accordingly, the aggregate fair value amounts presented do not purport to represent the underlying market value of the Company.

The following describes the methods and significant assumptions used by the Company in estimating the fair values of significant financial instruments:

Cash and Cash Equivalents: For cash and cash equivalents, including cash and due from banks and other short-term investments with maturities of 90 days or less, the carrying amounts reported on the consolidated balance sheet approximate fair values.

Federal Home Loan Bank stock: For Federal Home Loan Bank stock, the carrying amounts report on the consolidated balance sheet approximate fair values. 

Loans: For variable rate loans that re-price frequently and have no significant change in credit risk, fair values are based on carrying values. The fair value of other loans is estimated by discounting the future cash flows using the current rates at which similar loans would be made to borrowers with similar credit ratings and for the same remaining maturities.

Deposits: The fair value of deposits with no stated maturity is equal to the carrying amount. The fair value of time deposits is based on the discounted value of contractual cash flows, applying interest rates currently being offered on wholesale funding products of similar maturities. The fair value estimates for deposits do not include the benefit that results from the low-cost funding provided by the deposit liabilities compared to the cost of alternative forms of funding (“deposit base intangibles”).

Borrowings: For borrowings that mature or re-price in 90 days or less, carrying value approximates fair value. The fair value of the Company’s remaining borrowings is estimated by using discounted cash flows based on current rates available for similar types of borrowing arrangements taking into account any optionality.

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Accrued Interest Receivable and Payable: The carrying amounts of accrued interest receivable and payable approximate their fair values.

Off-Balance Sheet Financial Instruments:The Company’s off-balance sheet instruments consist of loan commitments and standby letters of credit.  Fair values for standby letters of credit and loan commitments were insignificant.

A summary of the carrying values and estimated fair values of the Company’s significant financial instruments at June 30, 2014, and December 31, 2013, follows:

	Carrying Value	Level 1 Inputs	Level 2 Inputs	Level 3 Inputs	Total Fair Value
June 30, 2014
Financial Assets:
Cash and cash equivalents	$  11,791	$11,791	$         ---	$         ---	$  11,791
Federal Home Loan Bank stock	21,196	---	21,196	---	21,196
Loans, net	892,185	---	---	896,937	896,937
Interest receivable	5,692	5,692	---	---	5,692
Financial liabilities:
Deposits (with no stated maturity)	$432,012	$       ---	$432,012	$          ---	$432,012
Time deposits	404,959	---	406,140	---	406,140
Borrowings	470,967	---	472,080	---	472,080
Interest payable	497	497	---	---	497
	Carrying Value	Level 1 Inputs	Level 2 Inputs	Level 3 Inputs	Total Fair Value
December 31, 2013
Financial Assets:
Cash and cash equivalents	$    9,200	$  9,200	$         ---	$         ---	$    9,200
Federal Home Loan Bank stock	18,370	---	18,370	---	18,370
Loans, net	844,382	---	---	850,190	850,190
Interest receivable	4,788	4,788	---	---	4,788
Financial liabilities:
Deposits (with no stated maturity)	$440,063	$       ---	$440,063	$         ---	$440,063
Time deposits	395,588	---	398,668	---	398,668
Borrowings	409,445	---	411,298	---	411,298
Interest payable	514	514	---	---	514

Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Management’s discussion and analysis, which follows, focuses on the factors affecting the Company’s consolidated results of operations for the three months ended June 30, 2014 and 2013, and financial condition at June 30, 2014, and December 31, 2013, and where appropriate, factors that may affect future financial performance. The following discussion and analysis of financial condition and results of operations of the Company and its subsidiaries should be read in conjunction with the consolidated financial statements and notes thereto, and selected financial and statistical information appearing elsewhere in this report on Form 10-Q.

Amounts in the prior period financial statements are reclassified whenever necessary to conform to current period presentation.

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Unless otherwise noted, all dollars are expressed in thousands except share data.

Use of Non-GAAP Financial Measures: Certain information discussed below is presented on a fully taxable equivalent basis. Specifically, included in interest income in the second quarter of 2014 and 2013 was $1,001 and $852 respectively, of tax-exempt interest income from certain investment securities and loans. For the six months ended June 30, 2014 and 2013, the amount of tax exempt income included in interest income was $1,991 and $1,669, respectively.

An amount equal to the tax benefit derived from this tax exempt income has been added back to the interest income totals discussed in certain sections of this Management’s Discussion and Analysis, representing tax equivalent adjustments of $480 and $418 in the second quarter of 2014 and 2013, respectively, and $954 and $818 for the six months ended June 30, 2014 and 2013, respectively, which increased net interest income accordingly. The analysis of net interest income tables included in this report on Form 10-Q provide a reconciliation of tax equivalent financial information to the Company's consolidated financial statements, which have been prepared in accordance with U.S. generally accepted accounting principles.

Management believes the disclosure of tax equivalent net interest income information improves the clarity of financial analysis, and is particularly useful to investors in understanding and evaluating the changes and trends in the Company's results of operations. Other financial institutions commonly present net interest income on a tax equivalent basis. This adjustment is considered helpful in the comparison of one financial institution's net interest income to that of another institution, as each will have a different proportion of tax-exempt interest from their earning asset portfolios. Moreover, net interest income is a component of a second financial measure commonly used by financial institutions, net interest margin, which is the ratio of net interest income to average earning assets. For purposes of this measure as well, other financial institutions generally use tax equivalent net interest income to provide a better basis of comparison from institution to institution. The Company follows these practices.

FORWARD LOOKING STATEMENTS DISCLAIMER

Certain statements, as well as certain other discussions contained in this quarterly report on Form 10-Q, or incorporated herein by reference, contain statements which may be considered to be forward-looking within the meaning of Section 27A of the Securities Act of 1933, as amended and Section 21E of the Securities Exchange Act of 1934, as amended.  Readers can identify these forward-looking statements by the use of words like "strategy," "expects," "plans," "believes," "will," "estimates," "intends," "projects," "goals," "targets," and other words of similar meaning.  Readers can also identify them by the fact that they do not relate strictly to historical or current facts.

Investors are cautioned that forward-looking statements are inherently uncertain. Forward-looking statements include, but are not limited to, those made in connection with estimates with respect to the future results of operation, financial condition, and the business of the Company which are subject to change based on the impact of various factors that could cause actual results to differ materially from those projected or suggested due to certain risks and uncertainties. Those factors include but are not limited to:

(i)	The Company's success is dependent to a significant extent upon general economic conditions in Maine, and Maine's ability to attract new business, as well as factors that affect tourism, a major source of economic activity in the Company’s immediate market areas;
(ii)	The Company's earnings depend to a great extent on the level of net interest income (the difference between interest income earned on loans and investments and the interest expense paid on deposits and borrowings) generated by the Company’s wholly-owned banking subsidiary, Bar Harbor Bank & Trust (the “Bank”), and thus the Company’s results of operations may be adversely affected by increases or decreases in interest rates;
(iii)	The banking business is highly competitive and the profitability of the Company depends on the Bank's ability to attract loans and deposits in Maine, where the Bank competes with a variety of traditional banking and non-traditional institutions, such as credit unions and finance companies;
(iv)	A significant portion of the Bank's loan portfolio is comprised of commercial loans and loans secured by real estate, exposing the Company to the risks inherent in financings based upon analysis of credit risk, the value of underlying collateral, and other intangible factors which are considered in making commercial loans and, accordingly, the Company's profitability may be negatively impacted by judgment errors in risk analysis, by loan defaults, and the ability of certain borrowers to repay such loans during a downturn in general economic conditions;
(v)	Adverse changes in repayment performance and fair value of underlying residential mortgage loan collateral, that differ from the Company’s current estimates, could change the Company’s expectations that it will recover the amortized cost of its private label mortgage backed securities portfolio and/or its conclusion that such securities were not other-than temporarily impaired as of the date of this report;
(vi)	The Company’s allowance for loan losses may be adversely impacted by a variety of factors, including, but not limited to, the performance of the Company’s loan portfolio, the economy, changes in interest rates, and the view of regulatory authorities toward loan classifications;
(vii)	Significant changes in the Company’s internal controls, or internal control failures;
(viii)	Acts or threats of terrorism and actions taken by the United States or other governments as a result of such threats, including military action, could further adversely affect business and economic conditions in the United States generally and in the Company’s markets, which could have an adverse effect on the Company’s financial performance and that of borrowers and on the financial markets and the price of the Company’s common stock;
(ix)	Significant changes in the extensive laws, regulations, and policies governing bank holding companies and their subsidiaries could alter the Company's business environment or affect its operations;
(x)	Changes in general, national, international, regional or local economic conditions and credit markets which are less favorable than those anticipated by Company management that could impact the Company's securities portfolio, quality of credits, or the overall demand for the Company's products or services; and
(xi)	The Company’s success in managing the risks involved in all of the foregoing matters.

Readers should carefully review all of these factors as well as the risk factors set forth in Item 1A- Risk Factors, contained in the Company’s Annual Report on Form 10-K for the year ended December 31, 2013. There may be other risk factors that could cause differences in future periods from those anticipated by management.

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The forward-looking statements contained herein represent the Company's judgment as of the date of this quarterly report on Form 10-Q and the Company cautions readers not to place undue reliance on such statements. The Company disclaims any obligation to publicly update or revise any forward-looking statement contained in the succeeding discussion, or elsewhere in this quarterly report on Form 10-Q, except to the extent required by federal securities laws.

APPLICATION OF CRITICAL ACCOUNTING POLICIES

The Company’s significant accounting policies are more fully enumerated in Note 1 to the Consolidated Financial Statements included in Item 8 of its December 31, 2013, report on Form 10-K. The reader of the financial statements should review these policies to gain a greater understanding of how the Company’s financial performance is reported.

Management’s discussion and analysis of the Company’s financial condition and results of operations are based on the Consolidated Financial Statements, which are prepared in accordance with U.S. generally accepted accounting principles. The preparation of such financial statements requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses and related disclosure of contingent assets and liabilities. Management evaluates its estimates on an ongoing basis. Management bases its estimates on historical experience and various other assumptions that are believed to be reasonable under the circumstances, the results of which form the basis in making judgments about the carrying values of assets that are not readily apparent from other sources. Actual results could differ from the amount derived from management’s estimates and assumptions under different assumptions or conditions. Material estimates that are particularly susceptible to significant change in the near-term relate to the determination of the allowance for loan losses, other than temporary impairment on securities, income tax estimates, and the evaluation of intangible assets. The use of these estimates is more fully described in Part I, Item 1, Note 2 of the consolidated financial statements in this quarterly report on Form 10-Q.

SUMMARY FINANCIAL RESULTS

On April 22, 2014, the Company’s Board of Directors declared a three-for-two split of its common stock, payable as a large stock dividend, which was paid on May 19, 2014 (the “payment date”) to all stockholders of record at the close of business on May 5, 2014. As of April 22, 2014, the Company had approximately 3,944,290 shares of common stock outstanding. After the stock split as a large stock dividend, the number of shares of Company common stock outstanding increased to approximately 5,916,435.  All previously reported share and per share data included in public filings subsequent to the payment date has been restated to reflect the retroactive effect of this three-for-two stock split.

For the three months ended June 30, 2014, the Company reported net income of $3,857, compared with $3,170 for the second quarter of 2013, representing an increase of $687, or 21.7%. The Company’s diluted earnings per share amounted to $0.65 for the quarter, compared with $0.54 in the second quarter of 2013, representing an increase of $0.11, or 20.4%.

The Company’s annualized return on average shareholders’ equity (“ROE”) amounted to 11.53% for the quarter, compared with 9.90% in the second quarter of 2013. The Company’s second quarter return on average assets (“ROA”) amounted to 1.09%, compared with 0.96% in the second quarter of 2013.

For the six months ended June 30, 2014, the Company reported net income of $7,644, compared with $6,386 for the same period in 2013, representing an increase of $1,258, or 19.7%. Diluted earnings per share amounted to $1.28 for the six months ended June 30, 2014, compared with $1.08 for the same period in 2013, representing an increase of $0.20, or 18.5%.

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For the six months ended June 30, 2014, the Company’s annualized return on average shareholders’ equity (“ROE”) amounted to 11.79%, compared with 10.02% in the first half of 2013. The Company’s return on average assets (“ROA”) amounted to 1.10%, compared with 0.98% for the six months ending June 30, 2013.

As more fully enumerated in the following management discussion and analysis, the Company’s year-to-date operating results were highlighted by a $2,787 or 14.2% increase in net interest income and a nineteen basis point improvement in the net interest margin, compared with the six months ended June 30, 2013. Led by a $317, or 18.0% increase in trust and other financial services fees, total non-interest income increased $585, or 15.3%, compared with the first half of 2013. The Company continued to focus on the management of its operating expenses, posting year-to-date efficiency ratio of 54.2%, compared with 55.7% for the same period in 2013.

Led by growth in the loan and securities portfolios, total assets ended the quarter at $1,452,856, representing an increase of $78,963, or 5.7%, compared with December 31, 2013. Total loans ended the quarter at $900,936, representing an increase of $48,079, or 5.6%, compared with December 31, 2013. The credit quality of the loan portfolio remained stable during the first half of 2014, with total non-performing loans and other delinquent loans and other potential problem loans posting declines of 11.3% and 6.4%, respectively.  Similarly, the Company’s year-to-date net loan charge-offs were down 11.5%, compared with the first half of 2013.

RESULTS OF OPERATIONS

Net Interest Income

Net interest income is the principal component of the Company's income stream and represents the difference or spread between interest generated from earning assets and the interest expense paid on deposits and borrowed funds. Net interest income is entirely generated by the Bank. Fluctuations in market interest rates as well as volume and mix changes in earning assets and interest bearing liabilities can materially impact net interest income.

Total Net Interest Income: For the three months ended June 30, 2014, net interest income on a tax equivalent basis amounted to $11,344, compared with $9,901 for the second quarter of 2013, representing an increase of $1,443, or 14.6%. The increase in second quarter 2014 tax-equivalent net interest income compared with the second quarter of 2013 was attributed to average earning asset growth of $96,892 or 7.6%, combined with a twenty basis point improvement in the net interest margin.

For the six months ended June 30, 2014, net interest income on a tax equivalent basis amounted to $22,377, compared with $19,590 for the same period in 2013, representing an increase of $2,787, or 14.2%. The increase in tax-equivalent net interest income compared with the first half of 2013 was attributed to average earning asset growth of $94,574, or 7.5%, combined with a nineteen basis point improvement in the net interest margin.

Factors contributing to the changes in net interest income and the net interest margin are more fully enumerated in the following discussion and analysis.

Net Interest Income Analysis: The following tables summarize the Company’s average balance sheets and components of net interest income, including a reconciliation of tax equivalent adjustments, for the three and six months ended June 30, 2014, and 2013:

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AVERAGE BALANCE SHEET AND

ANALYSIS OF NET INTEREST INCOME

THREE MONTHS ENDED

JUNE 30, 2014 AND 2013

		2014			2013
	Average Balance	Interest	Weighted Average Rate	Average Balance	Interest	Weighted Average Rate
Interest Earning Assets:
Loans (1,3)	$     872,400	$ 9,266	4.26%	$  833,696	$ 9,465	4.55%
Securities (2,3)	478,804	4,496	3.77%	421,921	3,415	3.25%
Federal Home Loan Bank stock	19,414	69	1.43%	18,108	12	0.27%
Fed funds sold, money market funds, and time	---	---	0.00%	1	---	0.00%
deposits with other banks
Total Earning Assets	$1,370,618	13,831	4.05%	1,273,726	12,892	4.06%
Non-Interest Earning Assets:
Cash and due from banks	3,895			3,832
Allowance for loan losses	(8,831)			(8,166)
Other assets (2)	54,451			56,321
Total Assets	$1,420,133			$1,325,713
Interest Bearing Liabilities:
Deposits	$   805,213	$ 1,462	0.73%	$      779,192	$ 1,669	0.86%
Borrowings	413,339	1,025	0.99%	352,944	1,322	1.50%
Total Interest Bearing Liabilities	$1,218,552	2,487	0.82%	1,132,136	2,991	1.06%
Rate Spread			3.23%			3.00%
Non-Interest Bearing Liabilities:
Demand and other non-interest bearing deposits	60,915			60,860
Other liabilities	6,469			4,345
Total Liabilities	1,285,936			1,197,341
Shareholders' equity	134,197			128,372
Total Liabilities and Shareholders' Equity	$1,420,133			$1,325,713
Net interest income and net interest margin (3)		11,344	3.32%		9,901	3.12%
Less:  Tax Equivalent adjustment		(480)			(418)
Net Interest Income		$10,864	3.18%		$  9,483	2.99%

(1)

For purposes of these computations, non-accrual loans are included in average loans.

(2)

For purposes of these computations, unrealized gains (losses) on available for sale securities are recorded in other assets.

(3)

For purposes of these computations, reported on a tax equivalent basis calculated using a tax rate of 34%.

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AVERAGE BALANCE SHEET AND

ANALYSIS OF NET INTEREST INCOME

SIX MONTHS ENDED

JUNE 30, 2014 AND 2013

		2014			2013
	Average Balance	Interest	Weighted Average Rate	Average Balance	Interest	Weighted Average Rate
Interest Earning Assets:
Loans (1,3)	$   861,899	$18,389	4.30%	$    824,775	$18,704	4.57%
Securities (2,3)	473,339	8,819	3.76%	416,828	6,919	3.35%
Federal Home Loan Bank stock	19,075	138	1.46%	18,135	34	0.38%
Fed funds sold, money market funds, and time
deposits with other banks	---	---	0.00%	1	---	0.00%
Total Earning Assets	1,354,313	27,346	4.07%	1,259,739	25,657	4.11%
Non-Interest Earning Assets:
Cash and due from banks	3,815			3,736
Allowance for loan losses	(8,722)			(8,223)
Other assets (2)	51,602			57,571
Total Assets	$1,401,008			$1,312,823
Interest Bearing Liabilities:
Deposits	$   804,028	$  2,899	0.73%	$   747,881	$ 3,371	0.91%
Borrowings	395,207	2,070	1.06%	367,745	2,696	1.48%
Total Interest Bearing Liabilities	1,199,235	4,969	0.84%	1,115,626	6,067	1.10%
Rate Spread			3.23%			3.01%
Non-Interest Bearing Liabilities:
Demand and other non-interest bearing deposits	64,314			63,765
Other liabilities	6,670			4,962
Total Liabilities	1,270,219			1,184,353
Shareholders' equity	130,789			128,470
Total Liabilities and Shareholders' Equity	$1,401,008			$1,312,823
Net interest income and net interest margin (3)		22,377	3.33%		19,590	3.14%
Less:  Tax Equivalent adjustment		(954)			(818)
Net Interest Income		$21,423	3.19%		$18,772	3.00%

(1)

For purposes of these computations, non-accrual loans are included in average loans.

(2)

For purposes of these computations, unrealized gains (losses) on available for sale securities are recorded in other assets.

(3)

For purposes of these computations, reported on a tax equivalent basis calculated using a tax rate of 34%.

Net Interest Margin: The net interest margin, expressed on a tax equivalent basis, represents the difference between interest and dividends earned on interest-earning assets and interest paid to depositors and other creditors, expressed as a percentage of average earning assets.  

The net interest margin is determined by dividing tax equivalent net interest income by average interest-earning assets.  The interest rate spread represents the difference between the average tax equivalent yield earned on interest earning-assets and the average rate paid on interest bearing liabilities.  The net interest margin is generally higher than the interest rate spread due to the additional income earned on those assets funded by non-interest bearing liabilities, primarily demand deposits and shareholders’ equity.

For the three months ended June 30, 2014, the tax equivalent net interest margin amounted to 3.32%, compared with 3.12% in the second quarter of 2013, representing an increase of twenty basis points. The increase in the net interest margin was principally attributed to the weighted average cost of interest bearing liabilities, which declined to a much greater extent than the Bank’s weighted average earning

40

asset yields. Specifically, the weighted average cost of interest bearing liabilities declined twenty-four basis points to 0.82%, while the weighted average yield on earning assets declined only one basis point to 4.05%, compared with the second quarter of 2013.

For the six months ended June 30, 2014, the tax equivalent net interest margin amounted to 3.33%, compared with 3.14% in the first half of 2013, representing an increase of nineteen basis points. The increase in the net interest margin was principally attributed to the weighted average cost of interest bearing liabilities, which declined faster and to a much greater extent than the Bank’s weighted average earning asset yields. Specifically, the weighted average cost of interest bearing liabilities declined twenty-six basis points to 0.84%, while the weighted average yield on earning assets declined only four basis points to 4.07%, compared with the first half of 2013.

The following table summarizes the net interest margin components, on a quarterly basis, over the past two years. Factors contributing to the changes in the net interest margin are further enumerated in the following discussion and analysis.

NET INTEREST MARGIN ANALYSIS

FOR QUARTER ENDED

WEIGHTED AVERAGE RATES	2014		2013				2012
Quarter:	2	1	4	3	2	1	4	3
Interest Earning Assets:
Loans (1,3)	4.26%	4.35%	4.33%	4.39%	4.55%	4.59%	4.71%	4.72%
Securities (2,3)	3.77%	3.75%	3.61%	3.33%	3.25%	3.45%	3.72%	3.72%
Federal Home Loan Bank stock	1.43%	1.49%	0.37%	0.39%	0.27%	0.49%	0.50%	0.49%
Fed Funds sold, money market funds,
and time deposits with other banks	0.00%	0.00%	0.00%	0.00%	0.00%	0.00%	0.00%	0.00%
Total Earning Assets	4.05%	4.10%	4.03%	3.97%	4.06%	4.16%	4.32%	4.32%
Interest Bearing Liabilities:
Deposits	0.73%	0.73%	0.82%	0.82%	0.86%	0.96%	1.05%	1.07%
Borrowings	0.99%	1.12%	1.15%	1.27%	1.50%	1.46%	1.63%	1.72%
Total Interest Bearing Liabilities	0.82%	0.85%	0.93%	0.97%	1.06%	1.14%	1.24%	1.28%
Rate Spread	3.23%	3.25%	3.10%	3.00%	3.00%	3.02%	3.08%	3.04%
Net Interest Margin (3)	3.32%	3.34%	3.21%	3.12%	3.12%	3.15%	3.23%	3.20%
Net Interest Margin without      Tax Equivalent Adjustments	3.18%	3.20%	3.07%	2.98%	2.99%	3.02%	3.08%	3.06%

(1)   For purposes of these computations, non-accrual loans are included in average loans.

(2)   For purposes of these computations, unrealized gains (losses) on available for sale securities are recorded in other assets.

(3)   For purposes of these computations, reported on a tax equivalent basis calculated using a tax rate of 34%.

For the three and six months ended June 30, 2014, the weighted average yield on average earning assets amounted to 4.05% and 4.07%, compared with 4.06% and 4.11% for the same periods in 2013, representing declines of one and four basis points, respectively. As more fully discussed below, these declines were entirely attributed to declining yields on the Bank’s loan portfolio, as securities yields increased sixteen basis points and fifty-two basis points, respectively, compared with the same periods in 2013.

For the three and six months ended June 30, 2014, the weighted average cost of interest bearing liabilities amounted to 0.82% and 0.84%, compared with 1.06% and 1.10% for the same periods in 2013, representing declines of twenty-four and twenty-six basis points. As more fully discussed below, these declines principally reflected the ongoing re-pricing of maturing time deposits and borrowings at historically low interest rates.  

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Interest and Dividend Income:  For the three months ended June 30, 2014, total interest and dividend income on a tax-equivalent basis amounted to $13,831, compared with $12,892 in the second quarter of 2013, representing an increase of $939, or 7.3%. The increase in interest and dividend income was principally attributed to average earning asset growth of $96,892, or 7.6%, slightly offset by a one basis point decline in the weighted average earning asset yield to 4.05%.

For the three months ended June 30, 2014, total tax-equivalent interest income from the securities portfolio amounted to $4,496, representing an increase of $1,081, or 31.7%, compared with the second quarter of 2013. The increase in interest income from securities was principally attributed to a fifty-two basis point increase in the weighted average securities portfolio yield to 3.77%, combined with a $56,883 or 13.5% increase in total average securities, compared with the second quarter of 2013. The increase in the weighted average securities yield was attributed to increases in long-term interest rates and slowing mortgage refinance activity over this past year, which caused the amortization of mortgage-backed security purchase premiums to slow.

For the three months ended June 30, 2014, total tax-equivalent interest income from the loan portfolio amounted to $9,266, representing a decline of $199, or 0.2%, compared with the second quarter of 2013. While the average loan portfolio increased $38,704 or 4.6%, the impact of this increase was entirely offset by a twenty-nine basis point decline in the weighted average loan portfolio yield to 4.26%, compared with the second quarter of 2013. The decline in the weighted average loan yield principally reflected the origination and competitive re-pricing of certain commercial loans, as well as residential mortgage loan origination and refinancing activity during a period of still-historically low interest rates.

For the six months ended June 30, 2014, total interest and dividend income on a tax-equivalent basis amounted to $27,346, compared with $25,657 for the same period in 2013, representing an increase of $1,689, or 6.6%. The increase in interest and dividend income was principally attributed to average earning asset growth of $94,574, or 7.5%, partially offset by a four basis point decline in the weighted average earning asset yield to 4.07%.

For the six months ended June 30, 2014, total tax-equivalent interest income from the securities portfolio amounted to $8,819, representing an increase of $1,900, or 27.5%, compared with the same period in 2013. The increase in interest income from securities was principally attributed to a forty-one basis point increase in the weighted average securities portfolio yield to 3.76%, combined with a $56,511 or 13.6% increase in total average securities, compared with the same period in 2013. The increase in the weighted average securities yield was attributed to increases in long-term interest rates and slowing mortgage refinance activity over this past year, which caused the amortization of MBS purchase premiums to slow.

For the six months ended June 30, 2014, total tax-equivalent interest income from the loan portfolio amounted to $18,389, representing a decline of $315, or 0.2%, compared with the same period in 2013. While the average loan portfolio increased $37,124 or 4.5%, the impact of this increase was entirely offset by a twenty-seven basis point decline in the weighted average loan portfolio yield to 4.30%, compared with the same period in 2013. The decline in the weighted average loan yield principally reflected the origination and competitive re-pricing of certain commercial loans, as well as residential mortgage loan origination and refinancing activity during a period of still-historically low interest rates.

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Interest Expense: For the three months ended June 30, 2014, total interest expense amounted to $2,487, compared with $2,991 in the second quarter of 2013, representing a decline of $504, or 16.9%. The decline in interest expense was principally attributed to a twenty-four basis point decline in the weighted average cost of interest bearing liabilities, the impact of which was largely offset by an $86,416, or 7.6%, increase in total average interest bearing liabilities, compared with the second quarter of 2013.

The decline in the second quarter weighted average cost of interest bearing liabilities compared with the same quarter in 2013 was principally attributed to prevailing, historically low short-term and long-term market interest rates, with maturing time deposits and borrowings being added or replaced at a lower cost and other interest bearing deposits re-pricing into the lower interest rate environment. For the three months ended June 30, 2014, the total weighted average cost of interest bearing liabilities amounted to 0.82%, compared with 1.06% for the same quarter in 2013, representing a decline of twenty-four basis points. The weighted average cost of interest bearing deposits declined thirteen basis points to 0.73%, compared with the second quarter of 2013, while the weighted average cost of borrowed funds declined 51 basis points to 0.99%.

For the six months ended June 30, 2014, total interest expense amounted to $4,969, compared with $6,067 for the same period in 2013, representing a decline of $1,098, or 18.1%. The decline in interest expense was principally attributed to a twenty-six basis point decline in the weighted average cost of interest bearing liabilities, the impact of which was largely offset by an $83,609, or 7.5%, increase in total average interest bearing liabilities, compared with the same period in 2013.

The decline in the weighted average cost of interest bearing liabilities compared with the first six months of 2013 was principally attributed to prevailing, historically low short-term and long-term market interest rates, with maturing time deposits and borrowings being added or replaced at a lower cost and other interest bearing deposits re-pricing into the lower interest rate environment. For the six months ended June 30, 2014, the total weighted average cost of interest bearing liabilities amounted to 0.84%, compared with 1.10% for the same period in 2013, representing a decline of twenty-six basis points. The weighted average cost of interest bearing deposits declined eighteen basis points to 0.73%, while the weighted average cost of borrowed funds declined forty-two basis points to 1.06%.

Rate/Volume Analysis: The following tables set forth a summary analysis of the relative impact on net interest income of changes in the average volume of interest earning assets and interest bearing liabilities, and changes in average rates on such assets and liabilities.  The income from tax-exempt assets has been adjusted to a fully tax equivalent basis, thereby allowing uniform comparisons to be made.  Because of the numerous simultaneous volume and rate changes during the periods analyzed, it is not possible to precisely allocate changes to volume or rate.  For presentation purposes, changes which are not solely due to volume changes or rate changes have been allocated to these categories in proportion to the relationships of the absolute dollar amounts of the change in each.

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ANALYSIS OF VOLUME AND RATE CHANGES ON NET INTEREST INCOME

THREE MONTHS ENDED JUNE 30, 2014 and 2013

INCREASES (DECREASES) DUE TO:

	Average Volume	Average Rate	Total Change
Loans (1,3)	$440	$(639)	$  (199)
Securities (2,3)	461	620	1,081
Federal Home Loan Bank stock	1	56	57
Fed funds sold, money market funds, and time      deposits with other banks	---	---	---
TOTAL EARNING ASSETS	$902	$    37	$   939
Interest bearing deposits	56	(263)	(207)
Borrowings	227	(524)	(297)
TOTAL INTEREST BEARING LIABILITIES	$283	$(787)	$  (504)
NET CHANGE IN NET INTEREST INCOME	$619	$ 824	$1,443

(1)

For purposes of these computations, non-accrual loans are included in average loans.

(2)

For purposes of these computations, unrealized gains (losses) on available for sale securities are recorded in other assets.

(3)

For purposes of these computations, interest income is reported on a tax equivalent basis calculated using a tax rate of 34%.

ANALYSIS OF VOLUME AND RATE CHANGES ON NET INTEREST INCOME

SIX MONTHS ENDED JUNE 30, 2014 and 2013

INCREASES (DECREASES) DUE TO:

	Average Volume	Average Rate	Total Change
Loans (1,3)	$   843	$(1,158)	$   (315)
Securities (2,3)	939	961	1,900
Federal Home Loan Bank stock	2	102	104
Fed funds sold, money market funds, and time
deposits with other banks	---	---	---
TOTAL EARNING ASSETS	$1,784	$     (95)	$ 1,689
Interest bearing deposits	253	(725)	(472)
Borrowings	202	(828)	(626)
TOTAL INTEREST BEARING LIABILITIES	$   455	$(1,553)	$(1,098)
NET CHANGE IN NET INTEREST INCOME	$1,329	$ 1,458	$ 2,787

(1)

For purposes of these computations, non-accrual loans are included in average loans.

(2)

For purposes of these computations, unrealized gains (losses) on available for sale securities are recorded in other assets.

(3)

For purposes of these computations, interest income is reported on a tax equivalent basis calculated using a tax rate of 34%.

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Provision for Loan Losses

The provision for loan losses (the “provision”) reflects the amount necessary to maintain the allowance for loan losses at a level that, in management’s judgment, is appropriate for the amount of inherent risk of probable loss in the Bank’s current loan portfolio.  

The overall credit quality of the Bank’s loan portfolio remained stable during the six months ended June 30, 2014, with non-performing and other delinquent and potential problem loans posting declines from year-end 2013. Total non-performing loans amounted to $7,845 at June 30, 2014, compared with $8,840 at December 31, 2013, representing a decline of $995, or 11.3%. Other delinquent and potential problem loans totaled $14,344 at June 30, 2014, representing a decline of $981, or 6.4%, compared with December 31, 2013. Total non-performing loans expressed as a percentage of total loans ended the second quarter at 0.87%, down from 1.04% at year-end 2013. Similarly, the allowance for loan losses expressed as a ratio to non-performing loans ended the quarter at 111.5%, up from 95.9% at December 31, 2013.

For six months ended June 30, 2014, total net loan charge-offs amounted to $609, or annualized net charge-offs to average loans outstanding of 0.14%, compared with $688 and 0.17%, respectively, during the first half of 2013.

For the three and six months ended June 30, 2014, the Bank recorded provisions of $428 and $885, compared with $405 and $758 for the same periods in 2013, representing increases of $23 and $127, or 5.7% and 16.8%, respectfully.

Refer below to Item 2 of this Part I, Financial Condition, Loans, Non-Performing Loans, Potential Problem Loans and Allowance for Loan Losses, in this report on Form 10-Q for further discussion and analysis related to the provision for loan losses.

Non-interest Income

For the three and six months ended June 30, 2014, total non-interest income amounted to $2,293 and $4,409, compared with $1,874 and $3,824 for the same periods in 2013, representing increases of $419 and $585, or 22.4% and 15.3%, respectively.

Factors contributing to the changes in non-interest income are enumerated in the following discussion and analysis.

Trust and Other Financial Services: Income from trust and other financial services is principally derived from fee income based on a percentage of the fair market value of client assets under management and held in custody with Bar Harbor Trust Services, the Company’s second tier non-depository trust company subsidiary, and, to a lesser extent, revenue from brokerage services conducted through Bar Harbor Financial Services, an independent third-party broker.

For the three and six months ended June 30, 2014, trust and other financial service fees amounted to $1,102 and $2,074, compared with $851 and $1,757 for the same periods in 2013, representing increases of $251 and $317, or 29.5% and 18.0%, respectively. These increases were attributed to higher levels of revenue from retail brokerage activities, as well as increases in the fair value of assets under management. At June 30, 2014 total assets under management stood at $393,877, up from $387,633 at year-end 2013, and representing an increase of $20,652 or 5.5% compared with June 30, 2013.

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Service Charges on Deposit Accounts: Service charges on deposits are largely derived from customer overdraft fees. For the three and six months ended June 30, 2014, income from service charges on deposit accounts amounted to $300 and $559, compared with $321 and $616 for the same periods in 2013, representing declines of $21 and $57, or 6.5% and 9.3%, respectfully. The Bank has not been aggressive in selling its fee based overdraft products as a cautionary measure in light of continued regulatory pressure on the banking industry including the Consumer Financial Protection Bureau, which was established by the Wall Street Reform and Consumer Protection Act (the “Dodd – Frank Act”).

Credit and Debit Card Service Charges and Fees: For the three and six months ended June 30, 2014, income generated from credit and debit card service charges and fees amounted to $376 and $720, compared with $396 and $732 for the same periods in 2013, representing declines of $20 and $12, or 5.1% and 1.6%, respectively. Included in prior periods credit and debit card income, were quarterly payments of $48 received from the Bank’s merchant payment processing provider pursuant to a 2008 Referral and Sales Agreement, at which time the Bank sold its merchant credit card processing portfolio. This agreement expired in the fourth quarter of 2013.

Net Securities Gains: For the three and six months ended June 30, 2014, total net realized securities gains amounted to $350 and $747, compared with $256 and $521 for the same periods in 2013, representing increases of $94 and $226, or 36.7% and 43.4%, respectively. The net realized securities gains recorded during the first half of 2014 were comprised of realized gains of $782, offset by realized losses of $35.

Non-interest Expense

For the three and six months ended June 30, 2014, total non-interest expense amounted to $7,361 and $14,207, compared with $6,595 and $12,902 for the same periods in 2013, representing increases of $766 and $1,305, or 11.6% and 10.1%, respectively.

Factors contributing to the changes in non-interest expense are more fully enumerated in the following discussion and analysis.

Salaries and Employee Benefits: For the three and six months ended June 30, 2014, total salaries and employee benefits expense amounted to $4,283 and $8,199, compared with $3,696 and $7,303 for the same periods in 2013, representing increases of $587 and $896, or 15.9% and 12.3%, respectfully.

The increase in salaries and employee benefits were attributed to a variety of factors including normal increases in base salaries, higher levels of employee incentive compensation, higher levels of employee health insurance as well as increases in staffing levels and strategic changes in staffing mix. The increases in salaries and employee benefits were also attributed to lower levels of deferred loan origination costs, which for the six months ended June 30, 2014 were down $136, compared with the same period in 2013.

Occupancy Expense: For the three and six months ended June 30, 2014, total occupancy expense amounted to $544 and $1,108, compared with $493 and $977 for the same periods in 2013, representing increases of $51 and $131, or 10.3% and 13.4%, respectfully. These increases largely attributed to higher levels of utilities expense and grounds maintenance, including snowplowing early in 2014.

Other Operating Expenses: For the three and six months ended June 30, 2014, total other operating expenses amounted to $1,735 and $3,301, compared with $1,698 and $3,112 for the same periods in 2013, representing increases of $37 and $189, or 2.2% and 6.1%, respectfully.These increases were principally attributed to higher levels of loan collection and other real estate owned expenses.

Efficiency Ratio

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The Company’s efficiency ratio measures the relationship of operating expenses to revenues. The efficiency ratio is calculated by dividing non-interest operating expenses by the sum of tax-equivalent net interest income and non-interest income other than net securities gains, other-than-temporary impairments, and other significant non-recurring expenses. For the three and six months ended June 30, 2014, the Company’s efficiency ratio amounted to 55.1% and 54.2%, compared with 56.3% and 55.7% for the same periods in 2013, respectively.

Income Taxes

For the three and six months ended June 30, 2014, total income taxes amounted to $1,511 and $3,096, compared with $1,187 and $2,550 for the same periods in 2013, representing increases of $324 and $546, or 27.3% and 21.4%, respectfully.

The Company's effective tax rates for the three and six months ended June 30, 2014 amounted to 28.1% and 28.8%, compared with 27.2% and 28.5% for the same periods in 2013. The income tax provisions for these periods were less than the expense that would result from applying the federal statutory rate of 35% to income before income taxes, principally because of the impact of tax exempt interest income on certain investment securities, loans and bank owned life insurance.  Fluctuations in the Company’s effective tax rate are generally attributed to changes in the relationship between non-taxable income and non-deductible expense, and income before income taxes, during any given reporting period.

FINANCIAL CONDITION

Total Assets

The Company’s assets principally consist of loans and securities, which at June 30, 2014, represented 62.0% and 32.9%, respectively, of total assets, compared with 62.1% and 32.8%, respectively, at December 31, 2013.  

At June 30, 2014, the Company’s total assets amounted to $1,452,856, compared with $1,373,893 at December 31, 2013, representing an increase of $78,963, or 5.7%.

Securities

The securities portfolio is comprised of mortgage-backed securities (“MBS”) issued by U.S. Government agencies, U.S. Government sponsored enterprises, and other non-agency, private label issuers.  The portfolio also includes tax-exempt obligations of state and political subdivisions.

Management considers securities as a relatively attractive means to effectively leverage the Bank’s strong capital position, as securities are typically assigned significantly lower risk weightings compared with the Bank’s other earning assets for the purpose of calculating the Bank’s and the Company’s risk-based capital ratios. The overall objectives of the Company’s strategy for the securities portfolio include maintaining appropriate liquidity reserves, diversifying earning assets, managing interest rate risk, leveraging the Company’s strong capital position, and generating acceptable levels of net interest income.

Securities available for sale represented 100% of total securities at June 30, 2014, and December 31, 2013. Securities available for sale are reported at their fair value with unrealized gains or losses, net of taxes, excluded from earnings but shown separately as a component of shareholders’ equity. At June 30, 2014, total net unrealized securities gains amounted to $5,283, compared with net unrealized losses of losses of $11,465 at December 31, 2013. The unrealized losses at December 31, 2013 were attributed to market interest rates and wider pricing spreads, which increased significantly late in the second quarter of 2013. The yield on the 10-year U.S. Treasury Note reached a year-to-date low of 1.61% on May 1, 2013

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and then increased steadily to 3.03% by year end 2013. The unrealized gains at June 30, 2014 were attributed to a moderate decline in long-term interest rates during the first half of 2014, with the 10-year U.S. Treasury Note ending the quarter at 2.53%.

Total Securities: At June 30, 2014, total securities amounted to $477,804, compared with $450,170 at December 31, 2013, representing an increase of $27,634, or 6.1%. The securities purchased during the first half of 2014 consisted of MBS issued and guaranteed by U.S. Government agencies and sponsored-enterprises, and to a lesser extent, obligations of states and political subdivisions thereof (municipal securities).

The following tables summarize the securities available for sale portfolio as of June 30, 2014, and December 31, 2013:

June 30, 2014 Available for Sale:	Amortized Cost	Gross Unrealized Gains	Gross Unrealized Losses
				Estimated Fair Value
Mortgage-backed securities:
US Government-sponsored       enterprises	$286,494	$  6,287	$ 3,595	$289,186
US Government agency	86,475	1,389	749	87,115
Private label	4,315	834	5	5,144
Obligations of states and political       subdivisions thereof	95,237	2,670	1,548	96,359
Total	$472,521	$11,180	$ 5,897	$477,804
December 31, 2013 Available for Sale:	Amortized Cost	Gross Unrealized Gains	Gross Unrealized Losses
				Estimated Fair Value
Mortgage-backed securities:
US Government-sponsored       enterprises	$277,838	$ 4,386	$  8,592	$273,632
US Government agency	83,153	833	2,457	81,529
Private label	5,423	825	78	6,170
Obligations of states and political      subdivisions thereof	95,221	1,121	7,503	88,839
Total	$461,635	$ 7,165	$18,630	$450,170

Impaired Securities: The securities portfolio contains certain securities where amortized cost exceeds fair value, which at June 30, 2014, amounted to an excess of $5,897, or 1.2% of the amortized cost of the total securities portfolio. At December 31, 2013 this amount represented an excess of $18,630, or 4.0% of the amortized cost of the total securities portfolio. As of June 30, 2014, unrealized losses on securities in a continuous unrealized loss position more than twelve-months amounted to $5,259, compared with $6,185 at December 31, 2013.

As a part of the Company’s ongoing security monitoring process, the Company identifies securities in an unrealized loss position that could potentially be other-than-temporarily impaired (“OTTI”).  If a decline in the fair value of an available for sale security is judged to be OTTI, a charge is recorded in pre-tax earnings equal to the estimated credit losses inherent in the security.

Further information regarding impaired securities, OTTI securities and evaluation of securities for impairment is incorporated by reference to above Notes 2 and 5 of the interim unaudited consolidated financial statements in Part I, Item 1 of this report on Form 10-Q.

Loans

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Total Loans: At June 30, 2014, total loans stood at $900,936, compared with $852,857 at December 31, 2013, representing an increase of $48,079, or 5.6%.

The loan portfolio is primarily secured by real estate in the counties of Hancock, Washington, Knox, Kennebec and Sagadahoc, Maine. The following table summarizes the components of the Bank's loan portfolio as of the dates indicated.

LOAN PORTFOLIO SUMMARY

	June 30, 2014	December 31, 2013
Commercial real estate mortgages	$329,948	$336,542
Commercial and industrial	81,978	73,972
Commercial construction and land development	13,201	18,129
Agricultural and other loans to farmers	29,566	26,929
Total commercial loans	454,693	455,572
Residential real estate mortgages	364,908	317,115
Home equity loans	49,696	49,565
Other consumer loans	13,279	14,523
Total consumer loans	427,883	381,203
Tax exempt loans	18,543	16,355
Net deferred loan costs and fees	(183)	(273)
Total loans	900,936	852,857
Allowance for loan losses	(8,751)	(8,475)
Total loans net of allowance for loan losses	$892,185	$844,382

Commercial Loans: At June 30, 2014, total commercial loans amounted to $454,693, compared with $455,572 at December 31, 2013, representing a decline of $879, or 0.2%. New commercial loan originations during the first quarter were more than offset with certain sizable loan payoffs as well as scheduled principal amortization from the portfolio.

Commercial loan growth has generally been challenged by a still-recovering economy, continuing economic uncertainty, diminished demand, and strong competition for quality loans.

Consumer Loans: At June 30, 2014, total consumer loans, which principally consisted of residential real estate mortgage loans, amounted to $427,883, compared with $381,203 at December 31, 2013, representing an increase of $46,680, or 12.2%.  

Mortgage origination activity continued to slow during the first half of 2014, driven by higher interest rates, rising home prices and inclement weather. The  increase in consumer loans compared with year-end 2013 was largely attributed to the purchase of residential mortgage loans. Loans originated and closed by the Bank during the first half of 2014 were largely offset by loan re-financings and principal pay-downs from the existing residential real estate loan portfolio.

Tax Exempt Loans: At June 30, 2014, total tax exempt loans amounted to $18,543, compared with $16,355 at December 31, 2013, representing an increase of $2,188, or 13.4 %. Tax-exempt loans generally include loans to or guaranteed by local government municipalities, federal agencies, not-for-

49

profit organizations, and other organizations that qualify for tax-exempt treatment. Government municipality loans typically have short maturities (e.g., tax anticipation notes). Government municipality loans are normally originated through a bid process among local financial institutions and are typically priced aggressively, thus generating relatively narrow net interest margins.

Credit Risk: Credit risk is managed through loan officer authorities, loan policies, and oversight from the Bank’s Senior Credit Officer, the Bank's Senior Loan Officers Committee, the Directors’ Loan Committee, and the Bank's Board of Directors. Management follows a policy of continually identifying, analyzing and grading credit risk inherent in the loan portfolio. An ongoing independent review, subsequent to management's review, of individual credits is performed by an independent loan review consulting firm, which reports to the Audit Committee of the Board of Directors.

As a result of management’s ongoing review of the loan portfolio, loans are placed on non-accrual status, either due to the delinquent status of principal and/or interest, or a judgment by management that, although payments of principal and or interest are current, such action is prudent because collection in full of all outstanding principal and interest is in doubt. Loans are generally placed on non-accrual status when principal and or interest is 90 days overdue, or sooner, if judged appropriate by management.  Consumer loans are generally charged-off when principal and/or interest payments are 120 days overdue, or sooner, if judged appropriate by management.

Non-performing Loans: Non-performing loans include loans on non-accrual status and loans past due 90 days or more and still accruing interest. The following table sets forth the details of non-performing loans as of the dates indicated:

TOTAL NON-PERFORMING LOANS

	June 30, 2014	December 31, 2013
Commercial real estate mortgages	$1,505	$2,046
Commercial and industrial loans	1,155	793
Commercial construction and land development	1,328	1,913
Agricultural and other loans to farmers	76	56
Total commercial loans	4,064	4,808
Residential real estate mortgages	2,752	3,227
Home equity loans	644	745
Other consumer loans	40	60
Total consumer loans	3,436	4,032
Total non-accrual loans	7,500	8,840
Accruing loans contractually past due 90 days or more	345	---
Total non-performing loans	$7,845	$8,840
Allowance for loan losses to non-performing loans	111.5%	95.9%
Non-performing loans to total loans	0.87%	1.04%
Allowance to total loans	0.97%	0.99%

At June 30, 2014, total non-performing loans amounted to $7,845, compared with $8,840 at December 31, 2013, representing a decline of $995, or 11.3%. As more fully discussed below, one commercial real estate loan to a local, non-profit affordable housing authority in support of an affordable housing project accounted for $1,261, or 16.1% of total non-performing loans at June 30, 2014.

Non-performing commercial real estate mortgages totaled to $1,505 at June 30, 2014, down from $2,046 at December 31, 2013. At June 30, 2014, non-performing commercial real estate mortgages were represented by eleven business relationships, with outstanding balances ranging from $23 to $229.

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Non-performing commercial and industrial loans totaled $1,155 at June 30, 2014, up from $793 at December 31, 2013.  At June 30, 2014, non-performing commercial and industrial loans were represented by twelve business relationships, with outstanding balances ranging from $4 to $387.

Non-performing commercial construction and land development loans totaled $1,328 at June 30, 2014, down from $1,913 at December 31, 2013. At June 30, 2014, non-performing commercial construction and land development loans were almost entirely represented by a $1,261 commercial real estate loan to a local, non-profit affordable housing authority in support of an affordable housing project. This loan is principally secured by the housing units from the project. The project is fully constructed and there is no construction risk associated with the loan. The primary source of repayment is the sale of the existing housing units. This loan is impaired and was put on non-accrual status in late 2010. To date, the Bank has charged-off $2,014 of the original outstanding balance of this collateral dependent impaired loan. These charge-offs were based on current appraisals and revised prospects for future cash flows. This loan is recorded at fair value in the Company’s financial statements.

Non-performing residential real estate mortgages totaled $2,752 at June 30, 2014, down from $3,227 at December 31, 2013. At June 30, 2014, non-performing residential real estate loans were represented by thirty, conventional, 1-4 family mortgage loans, with outstanding balances ranging from $14 to $352.

Non-performing home equity loans totaled $644 at June 30, 2014, down from $745 at December 31, 2013. At June 30, 2014, non-performing home equity loans were represented by four relationships with outstanding balances ranging from $4 to $394.

While the level and mix of non-performing loans continued to reflect favorably on the overall quality of the Bank’s loan portfolio as of June 30, 2014, Bank management is cognizant of the still-recovering real estate market, elevated unemployment rates and soft economic conditions overall. Bank management believes that the current credit cycle has yet to reach a definitive turning point and it may be some time before the overall level of credit quality in the Bank’s loan portfolio returns to pre-recession levels and shows lasting improvement. Future levels of non-performing loans may be influenced by economic conditions, including the impact of those conditions on the Bank’s customers, including debt service levels, collateral values, tourism activity, consumer confidence and other factors existing at the time.  Management believes the economic activity and conditions in the local real estate markets will continue to be significant determinants of the quality of the loan portfolio in future periods and, thus, the Company’s results of operations and financial condition.

Delinquencies and Potential Problem Loans: In addition to the non-performing loans discussed above, the Bank also has loans that are 30 to 89 days delinquent and still accruing. These loans amounted to $3,358 and $4,201 at June 30, 2014 and December 31, 2013, or 0.37% and 0.49% of total loans, respectively, net of any loans classified as non-performing that are within these delinquency categories. These loans and delinquency trends in general are considered in the evaluation of the allowance for loan losses and the related determination of the provision for loan losses.

Periodically, the Bank reviews the commercial loan portfolio for evidence of potential problem loans. Potential problem loans are loans that are currently performing in accordance with contractual terms, but where known information about possible credit problems of the borrower causes doubt about the ability of the borrower to comply with the loan payment terms and may result in disclosure of such loans as non-performing at some time in the future.

At June 30, 2014, the Bank identified twenty-eight commercial relationships totaling $10,986 as potential problem loans, or 1.22% of total loans. At December 31, 2013, the Bank identified twenty-eight commercial relationships totaling $11,123 as potential problem loans, or 1.30% of total loans. Factors such as payment

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history, value of supporting collateral, and personal or government guarantees led the Bank to conclude that the current risk exposure on these potential problem loans did not warrant accounting for the loans as non-performing. Although in a performing status as of quarter-end, these loans exhibited certain risk factors, which have the potential to cause them to become non-performing at some point in the future.

Troubled Debt Restructures: A Troubled Debt Restructure (“TDR”) results from a modification to a loan to a borrower who is experiencing financial difficulty in which the Bank grants a concession to the debtor that it would not otherwise consider but for the debtor’s financial difficulties.  Financial difficulty arises when a debtor is bankrupt or contractually past due, or is likely to become so, based upon its ability to pay.  A concession represents an accommodation not generally available to other customers, which may include below-market interest rate, deferment of principal payments, extension of maturity dates, etc.  Such accommodations extended to customers who are not experiencing financial difficulty do not result in TDR classification.

As of June 30, 2014, the Bank had six real estate secured loans, six commercial and industrial loans, and one other consumer loan, to eight relationships totaling $1,416 that were classified as TDRs.  At June 30, 2014, seven of these TDRs totaling $397 were classified as non-accrual, and none were past due 30 days or more and still accruing.

As of December 31, 2013, the Bank had six real estate secured six commercial and industrial loans, and one other consumer loan, to eight relationships totaling $1,454 that were classified as TDR’s, of which seven TDRs totaling $416 were past due or classified as non-performing.

Allowance for Loan Losses: At June 30, 2014, the allowance for loan losses (the “allowance”) stood at $8,751, compared with $8,475 at December 31, 2013, representing an increase of $276, or 3.3%. The moderate increase in the allowance from December 31, 2013 was largely attributed to loan growth as well as changes in the overall mix of non-performing and potential problem loans. At June 30, 2014, the allowance expressed as a percentage of non-performing loans stood at 111.5%, up from 95.9% at December 31, 2013.

The allowance is available to absorb probable losses on loans. The determination of the adequacy of the allowance and provisioning for estimated losses is evaluated quarterly based on review of loans, with particular emphasis on non-performing and other loans that management believes warrant special consideration.

The allowance is maintained at a level that, in management’s judgment, is appropriate for the amount of risk inherent in the current loan portfolio, and adequate to provide for estimated, probable losses. Allowances are established for specific impaired loans, a pool of reserves based on historical net loan charge-offs by loan types, and supplemental reserves that adjust historical net loss experience to reflect current economic conditions, industry specific risks, and other qualitative and environmental considerations impacting the inherent risk of loss in the current loan portfolio.

Specific allowances for impaired loans are determined based upon a discounted cash flows analysis, or as appropriate, a collateral shortfall analysis. The amount of collateral dependent impaired loans totaled $1,623 as of June 30, 2014, compared with $2,699 as of December 31, 2013.  The related allowances for loan losses on these loans amounted to $68 as of June 30, 2014, compared with $120 as of December 31, 2013.  

Management recognizes that early and accurate recognition of risk is the best means to reduce credit losses.  The Bank employs a comprehensive risk management structure to identify and manage the risk of loss.  For consumer loans, the Bank identifies loan delinquency beginning at 10-day delinquency and provides appropriate follow-up by written correspondence or personal contact. Non-residential mortgage

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consumer loan losses are recognized no later than the point at which a loan is 120 days past due. Residential mortgage losses are recognized during the foreclosure process, or sooner, when that loss is quantifiable and reasonably assured.  For commercial loans, the Bank applies a risk grading system, which stratifies the portfolio and allows management to focus appropriate efforts on the highest risk components of the portfolio.  The risk grades include ratings that correlate substantially with regulatory definitions of “Pass,” “Other Assets Especially Mentioned,” “Substandard,” “Doubtful,” and “Loss.”

While management uses available information to recognize losses on loans, changing economic conditions and the economic prospects of the borrowers may necessitate future additions or reductions to the allowance. In addition, various regulatory agencies, as an integral part of their examination process, periodically review the Bank’s allowance, which also may necessitate future additions or reductions to the allowance, based on information available to them at the time of their examination.

The following table details changes in the allowance and summarizes loan loss experience by loan type for the six-month periods ended June 30, 2014, and 2013.

ALLOWANCE FOR LOAN LOSSES

SIX MONTHS ENDED

JUNE 30, 2014 AND 2013

	2014	2013
Balance at beginning of period	$8,475	$8,097
Charge-offs:
Commercial real estate mortgages	165	84
Commercial and industrial	99	178
Commercial construction and land development	---	---
Agricultural and other loans to farmers	14	81
Residential real estate mortgages	293	287
Other consumer loans	80	68
Home equity loans	18	34
Tax exempt loans	---	---
Total charge-offs	669	732
Recoveries:
Commercial real estate mortgages	6	$       3
Commercial and industrial loans	12	10
Commercial construction and land development	---	---
Agricultural and other loans to farmers	15	1
Residential real estate mortgages	12	1
Other consumer loans	15	10
Home equity loans	---	19
Tax exempt loans	---	---
Total recoveries	60	44
Net charge-offs	609	688
Provision charged to operations	885	758
Balance at end of period	$       8,751	$8,167

For the six months ended June 30, 2014, total net loan charge-offs amounted to $609, or annualized net charge-offs to average loans outstanding of 0.14%, down from $688 and 0.17%, for the first six months of 2013.

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General allowances for loan losses account for the risk and estimated loss inherent in certain pools of industry and geographic loan concentrations within the loan portfolio. There were no material changes in loan concentrations during the three months ended June, 2014.

Based upon the process employed and giving recognition to all attendant factors associated with the loan portfolio, Company management believes the allowance for loan losses at June 30, 2014 is appropriate for the amount of risk inherent in the current loan portfolio and adequate to provide for estimated probable losses.

Further information regarding loans and the allowance for loan losses, is incorporated by reference to above Note 6, Loans and Allowance for Loan Losses, of the interim unaudited consolidated financial statements in Part I, Item 1 of this report on Form 10-Q.

Other Real Estate Owned: Real estate acquired in satisfaction of a loan is reported in other assets. Properties acquired by foreclosure or deed in lieu of foreclosure are transferred to other real estate owned (“OREO”) and recorded at the lower of cost or fair market value less estimated costs to sell based on appraised value at the date actually or constructively received. Loan losses arising from the acquisition of such property are charged against the allowance for loan losses. Subsequent reductions in fair value below the carrying value are charged to other operating expenses.

At June 30, 2014, the Bank’s OREO amounted to $1,771, compared with $1,625 as of December 31, 2013, representing an increase of $146, or 9.0%. Five residential and six commercial properties comprised the June 30, 2014 balance of OREO.  

During the six months ended June 30, 2014, two properties were added to OREO.  There were write-downs of $130 and there were two sales of OREO property. There were no gains or losses on the properties that were sold.

Deposits

Historically, the banking business in the Bank’s market area has been seasonal, with lower deposits in the winter through late spring and higher deposits in summer and autumn. These seasonal swings have been fairly predictable and have not had a materially adverse impact on the Bank.  Seasonal swings in deposits have been typically absorbed by the Bank’s strong liquidity position, including borrowing capacity from the FHLB of Boston, brokered certificates of deposit obtained from the national market and cash flows from the securities portfolio.

At June 30, 2014, total deposits stood at $836,971, compared with $835,651 at December 31, 2013, representing an increase of $1,320, or 0.2%.  Demand deposits and NOW accounts experienced a combined seasonal decline of $14,964, or 7.2%, compared with December 31, 2013. This decline was more than offset with a $16,284 increase in savings and money market accounts and time deposits compared with December 31, 2013.

Borrowed Funds

Borrowed funds principally consist of advances from the FHLB of Boston (the “FHLB”) and, to a lesser extent, securities sold under agreements to repurchase and Fed funds purchased. Advances from the FHLB are secured by stock in the FHLB, investment securities, blanket liens on qualifying mortgage loans and home equity loans, and certain commercial real estate loans.  

The Bank utilizes borrowed funds to leverage its strong capital position and support its earning asset portfolios.  Borrowed funds are principally utilized to support the Bank’s investment securities portfolio and, to a lesser extent, fund loan growth.  Borrowed funds also provide a means to help manage balance

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sheet interest rate risk, given the Bank’s ability to select desired amounts, terms and maturities on a daily basis.

At June 30, 2014, total borrowings amounted to $470,967, compared with $409,445 at December 31, 2013, representing an increase of $61,522, or 15.0%. The increase in total borrowings was principally utilized to fund earning asset growth during the first half of 2014 as seasonal core deposit declines kept deposits relatively flat compared with December 31, 2013.

Capital Resources

Consistent with its long-term goal of operating a sound and profitable organization, the Company maintained its strong capital position and continued to be a “well-capitalized” bank holding company according to applicable regulatory standards. Management believes this to be vital in promoting depositor and investor confidence and providing a solid foundation for future growth.

Capital Ratios:The Company and the Bank are subject to the risk-based capital guidelines administered by the Company’s and the Bank's principal regulators. The risk-based capital guidelines are designed to make regulatory capital requirements more sensitive to differences in risk profiles among banks and bank holding companies, to account for off-balance sheet exposure and to minimize disincentives for holding liquid assets. Under these guidelines, assets and off-balance sheet items are assigned to broad risk categories, each with appropriate weights. The resulting capital ratios represent capital as a percentage of risk-weighted assets and off-balance sheet items. The guidelines require all banks and bank holding companies to maintain a minimum ratio of total risk-based capital to risk-weighted assets of 8%, including a minimum ratio of Tier I capital to total risk-weighted assets of 4% and a Tier I capital to average assets of 4% (“Leverage Ratio”). Failure to meet minimum capital requirements can initiate certain mandatory, and possible additional discretionary actions by regulators that, if undertaken, could have a material adverse effect on the Company's financial statements.

As of June 30, 2014, the Company and the Bank were considered well-capitalized under the regulatory framework for prompt corrective action. Under the capital adequacy guidelines, a well-capitalized institution must maintain a minimum total risk-based capital to total risk-weighted assets ratio of at least 10.0%, a minimum Tier I capital to total risk-weighted assets ratio of at least 6.0%, and a minimum Tier I Leverage ratio of at least 5.0%. At June 30, 2014, the Company’s Total Risk-based, Tier I Risk-based, and Tier I Leverage ratios were 16.83%, 15.20% and 9.14%, respectively.

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The following tables set forth the Company's and the Bank’s regulatory capital at June 30, 2014, and December 31, 2013, under the rules applicable at that date.

	Consolidated		For Capital Adequacy Purposes		To be well Capitalized Under Prompt Corrective Action Provisions
	Actual Amount	Ratio	Required Amount	Actual Amount	Required Amount	Ratio
June 30, 2014
Total Capital
(To Risk-Weighted Assets)
Consolidated	$143,166	16.83%	$68,060	8.0%	N/A
Bank	$144,503	17.00%	$67,995	8.0%	$84,993	10.0%
Tier 1 Capital
(To Risk-Weighted Assets)
Consolidated	$129,300	15.20%	$34,030	4.0%	N/A
Bank	$130,637	15.37%	$33,997	4.0%	$50,996	6.0%
Tier 1 Capital
(To Average Assets)
Consolidated	$129,300	9.14%	$56,584	4.0%	N/A
Bank	$130,637	9.24%	$56,550	4.0%	$70,688	5.0%

	Consolidated		For Capital Adequacy Purposes		To be well Capitalized Under Prompt Corrective Action Provisions
	Actual Amount	Ratio	Required Amount	Ratio	Required Amount	Ratio
As of December 31, 2013
Total Capital
(To Risk-Weighted Assets)
Consolidated	$137,311	16.62%	$66,106	8.00%	N/A
Bank	$138,761	16.81%	$66,041	8.00%	$82,551	10.00%
Tier 1 Capital
(To Risk-Weighted Assets)
Consolidated	$123,730	14.97%	$33,053	4.00%	N/A
Bank	$125,180	15.16%	$33,020	4.00%	$49,531	6.00%
Tier 1 Capital
(To Average Assets)
Consolidated	$123,730	9.01%	$54,954	4.00%	N/A
Bank	$125,180	9.12%	$54,923	4.00%	$68,653	5.00%

Trends, Events or Uncertainties: There are no known trends, events or uncertainties, nor any recommendations by any regulatory authority, that are reasonably likely to have a material effect on the Company’s capital resources, liquidity, or financial condition.

Cash Dividends: The Company's principal source of funds to pay cash dividends and support its commitments is derived from Bank operations.

The Company paid a regular cash dividend of 22.3 cents per share of common stock in the second quarter of 2014, representing a post-stock split (effectuated as a large stock dividend) adjusted increase of 1.7 cents, or 8.1%, compared with the second quarter of 2013.

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The Company's Board of Directors recently declared  a third quarter 2014 regular cash dividend of 23.0 cents per share of Company common stock, representing a post-stock split (effectuated as a large stock dividend) adjusted increase of 2.0 cents, or 9.5%, compared with compared with the third quarter of 2013. The quarterly cash dividend is payable to all Company stockholders of record as of the close of business August 15, 2014, and will be paid on September 15, 2014. This represented the thirteenth consecutive quarter where the Company increased its quarterly cash dividend to shareholders.

Stock Repurchase Plan: In August 2008, the Company’s Board of Directors approved a program to repurchase up to 450,000 shares of the Company’s common stock, or approximately 10.2% of the shares then currently outstanding. The stock repurchase program became effective as of August 21, 2008, and was authorized to continue for a period of up to twenty-four consecutive months. In August of 2010, the Company’s Board of Directors authorized the continuance of this program through August 17, 2012. In August of 2012, the Company’s Board of Directors authorized the continuance of this program through August 17, 2014. In July of 2014, the Company’s Board of Directors authorized the continuance of this program through August 17, 2016. Depending on market conditions and other factors, these purchases may be commenced or suspended at any time, or from time to time, without prior notice and may be made in the open market or through privately negotiated transactions.

As of June 30, 2014, the Company had repurchased 157,731 shares of stock under this plan, at a total cost of $2,945 and an average price of $18.67 per share. During the six months ended June 30, 2014, the Company repurchased 327 shares under the plan.  The Company records repurchased shares as treasury stock.

Off-Balance Sheet Arrangements

The Company is, from time to time, a party to certain off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on the Company's financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources, that may be considered material to investors.

Standby Letters of Credit: The Bank guarantees the obligations or performance of certain customers by issuing standby letters of credit to third parties. These letters of credit are sometimes issued in support of third party debt. The risk involved in issuing standby letters of credit is essentially the same as the credit risk involved in extending loan facilities to customers, and they are subject to the same origination, portfolio maintenance and management procedures in effect to monitor other credit products. The amount of collateral obtained, if deemed necessary by the Bank upon issuance of a standby letter of credit, is based upon management's credit evaluation of the customer.

At June 30, 2014, commitments under existing standby letters of credit totaled $325, compared with $378 at December 31, 2013. The fair value of the standby letters of credit was not significant as of the foregoing dates.

Commitments to Extend Credit: Commitments to extend credit represent agreements by the Bank to lend to a customer provided there is no violation of any condition established in the contract. These commitments generally have fixed expiration dates or other termination clauses and may require payment of a fee.

Since many of these commitments are expected to expire without being drawn upon, the total commitment amounts do not necessarily represent future cash requirements. The Bank evaluates each customer's creditworthiness on a case-by-case basis using the same credit policies as it does for its balance sheet instruments. The amount of collateral obtained, if deemed necessary by the Bank upon the issuance of commitment, is based on management's credit evaluation of the customer.

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The following table details the notional or contractual amount for financial instruments with off-balance sheet risk as of June 30, 2014, and December 31, 2013:

	June 30, 2014	December 31, 2013
Commitments to originate loans	$  21,055	$  10,269
Unused lines of credit	93,204	98,486
Un-advanced portions of construction loans	18,001	12,203
Total	$132,260	$120,958

Liquidity

Liquidity is measured by the Company’s ability to meet short-term cash needs at a reasonable cost or minimal loss.  The Company seeks to obtain favorable sources of liabilities and to maintain prudent levels of liquid assets in order to satisfy varied liquidity demands. Besides serving as a funding source for maturing obligations, liquidity provides flexibility in responding to customer-initiated needs. Many factors affect the Company’s ability to meet liquidity needs, including variations in the markets served by its network of offices, its mix of assets and liabilities, reputation and credit standing in the marketplace, and general economic conditions.

The Bank actively manages its liquidity position through target ratios established under its asset liability management policy. Continual monitoring of these ratios, both historical and through forecasts under multiple rate scenarios, allows the Bank to employ strategies necessary to maintain adequate liquidity. A portion of the Bank’s deposit base has been historically seasonal in nature, with balances typically declining in the winter months through late spring, during which period the Bank’s liquidity position tightens.

The Bank uses a basic surplus model to measure its liquidity over 30 and 90-day time horizons. The relationship between liquid assets and short-term liabilities that are vulnerable to non-replacement are routinely monitored.  The Bank’s general policy is to maintain a liquidity position of at least 4.0% of total assets over the 30-day horizon. At June 30, 2014, liquidity, as measured by the basic surplus/deficit model, was 5.6% over the 30-day horizon and 6.0% over the 90-day horizon.

At June 30, 2014, the Bank had unused lines of credit and net unencumbered qualifying collateral availability to support its credit line with the FHLB of Boston approximating $130 million.  The Bank also had capacity to borrow funds on a secured basis utilizing the Borrower-In-Custody (“BIC”) program and the Discount Window at the Federal Reserve Bank of Boston. At June 30, 2014, the Bank’s available secured line of credit at the Federal Reserve Bank of Boston stood at $165,815, or 11.4% of the Bank’s total assets. The Bank also has access to the national brokered deposit market, and periodically uses this funding source to bolster its on-balance sheet liquidity position.

The Bank maintains a liquidity contingency plan approved by the Bank’s Board of Directors.  This plan addresses the steps that would be taken in the event of a liquidity crisis, and identifies other sources of liquidity available to the Company.  The Company believes that the level of liquidity is sufficient to meet current and future funding requirements.  However, changes in economic conditions, including consumer savings habits and availability or access to the brokered deposit market could potentially have a significant impact on the Company’s liquidity position.

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Recent Accounting Developments

The following information presents a summary of Accounting Standards Updates (“ASU’s”) that were recently adopted by the Company, as well as those that will be subject to implementation in future periods.

ASU 2013-11, Presentation of an Unrecognized Tax Benefit When a Net Operating Loss Carryforward, a Similar Tax Loss, or a Tax Credit Carryforward Exists, which amends ASC 740, Income Taxes.  The amendments provide guidance on the financial statement presentation of an unrecognized tax benefit, as either a reduction of a deferred tax asset or as a liability, when a net operating loss carry-forward, similar tax loss, or a tax credit carryforward exists. The amendments are effective for fiscal years, and interim periods within those years, beginning after December 15, 2013 and may be applied on either a prospective or retrospective basis. The adoption of these provisions did not have a significant impact on the Company’s consolidated financial statements.

ASU 2014-04, Receivables – Troubled Debt Restructurings by Creditors (Subtopic 310-40), In January 2014, the FASB issued ASU 2014-04, which clarifies when an in-substance repossession or foreclosure has occurred and the creditor should be considered to have received physical possession of residential real estate property collateralizing a consumer mortgage loan such that the loan receivable should be derecognized and the real estate property recognized. A creditor is considered to have received physical possession of residential real estate property collateralizing a consumer mortgage loan either when legal title to the residential real estate property is obtained upon completion of a foreclosure or when the borrower has conveyed all interest in the residential real property to the creditor to satisfy the loan through completion of a deed in lieu of foreclosure or similar arrangement. The ASU also requires disclosure of both the amount of foreclosed residential real estate property held by the creditor and the recorded investment in consumer mortgage loans collateralized by residential real estate property that are in the process of foreclosure. The guidance is effective for annual periods, and interim periods within those annual periods, beginning after December 15, 2014. We do not expect the adoption of these provisions to have a significant impact on the Company’s consolidated financial statements.

Item 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Market risk is the risk of loss in a financial instrument arising from adverse changes in market rates/prices, such as interest rates, foreign currency exchange rates, commodity prices and equity prices. Interest rate risk is the most significant market risk affecting the Company. Other types of market risk do not arise in the normal course of the Company’s business activities.

Interest Rate Risk: Interest rate risk can be defined as an exposure to movement in interest rates that could have an adverse impact on the Bank's net interest income. Interest rate risk arises from the imbalance in the re-pricing, maturity and/or cash flow characteristics of assets and liabilities. Management's objectives are to measure, monitor and develop strategies in response to the interest rate risk profile inherent in the Bank's balance sheet. The objectives in managing the Bank's balance sheet are to preserve the sensitivity of net interest income to actual or potential changes in interest rates, and to enhance profitability through strategies that promote sufficient reward for understood and controlled risk.

The Bank's interest rate risk measurement and management techniques incorporate the re-pricing and cash flow attributes of balance sheet and off balance sheet instruments as they relate to current and potential changes in interest rates. The level of interest rate risk, measured in terms of the potential future effect on net interest income, is determined through the use of modeling and other techniques under multiple interest rate scenarios. Interest rate risk is evaluated in depth on a quarterly basis and reviewed by the Asset/Liability Committee ("ALCO") and the Bank’s Board of Directors.

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The Bank's Asset Liability Management Policy, approved annually by the Bank’s Board of Directors, establishes interest rate risk limits in terms of variability of net interest income under rising, flat, and decreasing rate scenarios. It is the role of ALCO to evaluate the overall risk profile and to determine actions to maintain and achieve a posture consistent with policy guidelines.

The Bank utilizes an interest rate risk model widely recognized in the financial industry to monitor and measure interest rate risk. The model simulates the behavior of interest income and expense of all balance sheet and off-balance sheet instruments, under different interest rate scenarios together with a dynamic future balance sheet.  Interest rate risk is measured in terms of potential changes in net interest income based upon shifts in the yield curve.

The interest rate risk sensitivity model requires that assets and liabilities be broken down into components as to fixed, variable, and adjustable interest rates, as well as other homogeneous groupings, which are segregated as to maturity and type of instrument. The model includes assumptions about how the balance sheet is likely to evolve through time and in different interest rate environments. The model uses contractual re-pricing dates for variable products, contractual maturities for fixed rate products, and product specific assumptions for deposit accounts, such as money market accounts, that are subject to re-pricing based on current market conditions. Re-pricing margins are also determined for adjustable rate assets and incorporated in the model. Investment securities and borrowings with call provisions are examined on an individual basis in each rate environment to estimate the likelihood of a call. Prepayment assumptions for mortgage loans and mortgage backed securities are developed from industry median estimates of prepayment speeds, based upon similar coupon ranges and seasoning. Cash flows and maturities are then determined, and for certain assets, prepayment assumptions are estimated under different interest rate scenarios. Interest income and interest expense are then simulated under several hypothetical interest rate conditions including:

·

A flat interest rate scenario in which current prevailing rates are locked in and the only balance sheet fluctuations that occur are due to cash flows, maturities, new volumes, and re-pricing volumes consistent with this flat rate assumption.

·

A 200 basis point rise or decline in interest rates applied against a parallel shift in the yield curve over a twelve-month period together with a dynamic balance sheet anticipated to be consistent with such interest rate changes.

·

Various non-parallel shifts in the yield curve, including changes in either short-term or long-term rates over a twelve-month horizon, together with a dynamic balance sheet anticipated to be consistent with such interest rate changes.

·

An extension of the foregoing simulations to each of two, three, four and five year horizons to determine the interest rate risk with the level of interest rates stabilizing in years two through five. Even though rates remain stable during this two to five year time period, re-pricing opportunities driven by maturities, cash flow, and adjustable rate products will continue to change the balance sheet profile for each of the rate conditions.

Changes in net interest income based upon the foregoing simulations are measured against the flat interest rate scenario and actions are taken to maintain the balance sheet interest rate risk within established policy guidelines.

The following table summarizes the Bank's net interest income sensitivity analysis as of June 30, 2014, over one and two-year horizons and under rising and declining interest rate scenarios. In light of the Federal Funds rate of 0% to 0.25% and the two-year U.S. Treasury Note of 0.46% on the date presented, the analysis incorporates a declining interest rate scenario of 100 basis points, rather than the 200 basis points, as would traditionally be the case.

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INTEREST RATE RISK

CHANGE IN NET INTEREST INCOME FROM THE FLAT RATE SCENARIO

June 30, 2014

	-100 Basis Points  Parallel Yield Curve Shift	+200 Basis Points  Parallel Yield Curve Shift
Year 1
Net interest income ($)	$   (175)	$(1,190)
Net interest income (%)	-0.39%	-2.66%
Year 2
Net interest income ($)	$(1,608)	$(1,661)
Net interest income (%)	-3.59%	-3.71%

As more fully discussed below, the June 30, 2014, interest rate sensitivity modeling results indicate that the Bank’s balance sheet was moderately liability sensitive over the one and two-year horizons (i.e., exposed to rising interest rates.

Assuming interest rates remain at or near their current levels and the Bank’s balance sheet structure and size remain at current levels, the interest rate sensitivity simulation model suggests that net interest income will remain relatively stable over the one and two-year horizons. The relatively stable trend over the one and two-year horizons principally results from funding costs rolling over at lower prevailing rates, while largely offsetting expected but moderate declines in earning asset yields.

Assuming short-term and long-term interest rates decline 100 basis points from current levels (i.e., a parallel yield curve shift) and the Bank’s balance sheet structure and size remain at current levels, management believes net interest income will remain stable over the one year horizon and then decline moderately over the two-year horizon as declining earning assets yields outpace reductions in funding costs. Should the yield curve steepen as rates fall, the model suggests that accelerated earning asset prepayments will slow, resulting in a more stabilized level of net interest income. Management anticipates that moderate earning asset growth will be needed to meaningfully increase the Bank’s current level of net interest income should both long-term and short-term interest rates decline in parallel.

Assuming the Bank’s balance sheet structure and size remain at current levels and the Federal Reserve increases short-term interest rates by 200 basis points with the balance of the yield curve shifting in parallel with these increases, management believes net interest income will decline moderately over the one-year and two year horizons and then trend upward over the three year horizon and beyond. The interest rate sensitivity simulation model suggests that as interest rates rise, the Bank’s funding costs will initially re-price disproportionately with earning asset yields to a moderate degree. As funding costs begin to stabilize early in the third year of the simulation, the model suggests that the earning asset portfolios will continue to re-price at prevailing interest rate levels and cash flows from the Bank’s earning asset portfolios will be reinvested into higher yielding earning assets, resulting in a widening of spreads and increases in net interest income over the three year horizon and beyond. Management believes moderate to strong earning asset growth will be necessary to meaningfully increase the current level of net interest income over the one-year and two-year horizons should short-term and long-term interest rates rise in parallel.

Interest rates plummeted during 2008 and have remained historically low ever since, as the global economy slowed at unprecedented levels, unemployment levels soared, delinquencies on all types of loans increased along with decreased consumer confidence and dramatic declines in housing prices. Management believes the most significant ongoing factor affecting market risk exposure and the impact on net interest income continues to be the slow and extended recovery from the severe nationwide

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recession and the U.S. Government’s extraordinary responses, including a variety of government stimulus programs and quantitative easing strategies. The Federal Reserve has maintained short-term interest rates at historically low levels for an extended period of time, further threatening net interest income. Net interest income exposure is also significantly affected by the shape and level of the U.S. Government securities and interest rate swap yield curve, and changes in the size and composition of the Bank’s loan, investment and deposit portfolios.

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 and yield curve shape, prepayment speeds on loans and securities, deposit rates, pricing decisions on loans and deposits, reinvestment or replacement of asset and liability cash flows, and renegotiated loan terms with borrowers. 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.

As market conditions vary from those assumed in the sensitivity analysis, actual results may also differ due to: prepayment and refinancing levels deviating from those assumed; the 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 such variables.  The sensitivity analysis also does not reflect additional actions that the Bank’s ALCO and Board of Directors might take in responding to or anticipating changes in interest rates, and the anticipated impact on the Bank’s net interest income.

ITEM 4. CONTROLS AND PROCEDURES

Company management evaluated, with the participation of the Chief Executive Officer and Chief Financial Officer, the effectiveness of the Company's disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934) as of the end of the period covered by this quarterly report. Based on such evaluation, the Chief Executive Officer and the Chief Financial Officer have concluded that the Company's disclosure controls and procedures are designed to ensure that information required to be disclosed by the Company in the reports it files or submits under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission's rules and regulations and are operating in an effective manner.  

No change in the Company's internal control over financial reporting (as defined in Rules 13a-15(f) and 15(d)-15(f) under the Securities Exchange Act of 1934) occurred during the most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the Company's internal control over financial reporting.

PART II. OTHER INFORMATION

Item 1: Legal Proceedings

The Company and its subsidiaries are parties to certain ordinary routine litigation incidental to the normal conduct of their respective businesses, which in the opinion of management based upon currently available information will have no material adverse effect on the Company's consolidated financial statements.

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Item 1A: Risk Factors

We believe the risk factors identified in our Annual Report on Form 10-K for the year ended December 31, 2013, continue to represent the most significant risks to our future results of operations and financial conditions, without modification or amendment.  Please refer to such risk factors listed in Part 1, Item 1A. of our Annual Report on Form 10-K for the fiscal year ended December 31, 2013.

Item 2: Unregistered Sales of Equity Securities and Use of Proceeds

(c) As of June 30, 2014, the Company has repurchased 157,731 shares at an average price of $18.67 per share, or 35.1% of the repurchase program’s total allotment, and 2.7% of total outstanding shares.

The following table sets forth the Company’s repurchases of its common stock under the Company’s stock repurchase plan for the three months ended June 30, 2014.

	(a)	(b)	(c )	(d)
Period	Total number of shares purchased	Average price paid per share	Total number of shares purchased as part of publicly announced plans or programs	Maximum number of shares that may yet be purchased under the plans or programs
April 1-30, 2014	327	$  24.97	327	292,245
May 1-31, 2014	---	$      ---	---	292,245
June 1-30, 2014	---	$      ---	---	292,245

Item 3: Defaults Upon Senior Securities

None.

Item 4: Mine Safety Disclosures

Not applicable.

Item 5: Other Information

None.

63

Item 6: Exhibits

The exhibits required to be furnished as part of this Quarterly Report on Form 10-Q are listed in the Exhibit Index hereto and are incorporated herein by reference.

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

	BAR HARBOR BANKSHARES (Registrant)
	/s/Curtis C. Simard
Date: August 06, 2014	Curtis C. Simard
	President & Chief Executive Officer
	/s/Gerald Shencavitz
Date: August 06, 2014	Gerald Shencavitz Executive Vice President, Chief Financial Officer & Principal Accounting Officer

64

Exhibit Index

3.1	Articles of Incorporation, as amended to date (incorporated herein by reference to Form 10-K, Part IV, Item 15, Exhibit 3.1, filed with the Commission on March 16, 2009).
3.2	Bylaws, as amended to date (incorporated herein by reference to Form 8-K, Exhibit 3, filed with the Commission on November 29, 2011).
4	Instruments Defining Rights of Security Holders
4.1	Certificate of Designations, Fixed Rate Cumulative Perpetual Preferred Stock, Series A (incorporated herein by reference to Form 8-K, Exhibit 3.1, filed with the Commission on January 21, 2009).
4.2	Form of Specimen Stock Certificate for Series A Preferred Stock (incorporated by reference to Form 8-K, Exhibit 4.1, filed with the Commission on January 21, 2009).
4.3	Debt Securities Purchase Agreement (incorporated herein by reference to Form 10-K, Part IV, Item 15, Exhibit 4.5, filed with the commission on March 16, 2009).
4.4	Form of Subordinated Debt Security of Bar Harbor Bank & Trust (incorporated herein by reference to Form 10-K, Part IV, Item 15, Exhibit 4.6, filed with the Commission on March 16, 2009).
10.1	Change in Control, Confidentiality and Noncompetition Agreement with Richard Maltz, newly appointed Chief Risk Officer of the Company and Bar Harbor Bank & Trust, effective as of September 1, 2014 (incorporated herein by reference to Form 8-K, Item 1.01 and Item 9.01, Exhibit 10.1, filed with the Commission on July 11, 2014).
10.2	2014 through 2016 Long Term Executive Incentive Plan (the “LTEIP”) applicable to certain executive officers of the Company and its wholly owned first tier bank and second tier trust company subsidiaries, including the Company’s named executive officers (incorporated by reference to Form 8-K, Items 5.02 and 9.01, Exhibit 10.1, filed with the Commission on July 24, 2014)
11.1	Statement re computation of per share earnings (data required by SFAS No. 128, Earnings Per Share, is provided in Note 4 to the consolidated financial statements in this report on Form 10-Q and incorporated herein by reference thereto).
31.2	Certification of the Chief Financial Officer under Rule 13a-14(a)/15d-14(a)  (filed herewith)
32.1	Certification of Chief Executive Officer under 18 U.S.C. Section 1350  (furnished herewith)
32.2	Certification of Chief Financial Officer under 18 U.S.C. Section 1350  (furnished herewith)

101*

Financial statements from the quarterly report on Form 10-Q of Bar Harbor Bankshares for the period ended June 30, 2014, formatted in XBRL (eXtensible Business Reporting Language): (i) the Consolidated Balance Sheets, (ii) the Consolidated Statements of Operations, (iii) the Consolidated Statements of Shareholders’ Equity and Comprehensive Income, (iv) the Consolidated Statements of Cash Flows and (v) Notes to Consolidated Financial Statements.

*

Pursuant to Rule 406T of Regulation S-T, the Interactive Data Files on Exhibit 101 hereto are deemed not filed or part of a registration statement or prospectus for purposes of Sections 11 or 12 of the Securities Act of 1933, as amended, are deemed not filed for purposes of Section 18 of the Securities and Exchange Act of 1934, as amended, and otherwise are not subject to liability under those sections.

65

EX-31

Exhibit 31.1

CERTIFICATION OF THE CHIEF EXECUTIVE OFFICER

PURSUANT TO RULES 13a-14 AND 15d-14 OF THE SECURITIES EXCHANGE ACT
OF 1934 AND SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, Curtis C. Simard, certify that:

1.

I have reviewed this quarterly report on Form 10-Q of Bar Harbor Bankshares (the “Registrant”);

2.

Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.

Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the Registrant as of, and for, the periods presented in this report;

4.

The Registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal controls over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the Registrant and have:

(a)

Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the Registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b)

Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c)

Evaluated the effectiveness of the Registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d)

Disclosed in this report any change in the Registrant’s internal control over financial reporting that occurred during the Registrant’s most recent fiscal quarter (the Registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the Registrant’s internal control over financial reporting; and

5.

The Registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the Registrant’s auditors and the audit committee of Registrant’s board of directors (or persons performing the equivalent functions):

(a)

All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the Registrant’s ability to record, process, summarize and report financial information; and

(b)

Any fraud, whether or not material, that involves management or other employees who have a significant role in the Registrant’s internal control over financial reporting.

Date:  August 6, 2014

/s/ Curtis C. Simard

Name:  Curtis C. Simard

Title:    President and Chief Executive Officer

EX-31

Exhibit 31.2

CERTIFICATION OF THE CHIEF FINANCIAL OFFICER

PURSUANT TO RULES 13a-14 AND 15d-14 OF THE SECURITIES EXCHANGE ACT
OF 1934 AND SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, Gerald Shencavitz, certify that:

1.

I have reviewed this quarterly report on Form 10-Q of Bar Harbor Bankshares (the “Registrant”);

2.

Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.

Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the Registrant as of, and for, the periods presented in this report;

4.

The Registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal controls over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the Registrant and have:

(a)

Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the Registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b)

Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c)

Evaluated the effectiveness of the Registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d)

Disclosed in this report any change in the Registrant’s internal control over financial reporting that occurred during the Registrant’s most recent fiscal quarter (the Registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the Registrant’s internal control over financial reporting; and

5.

The Registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the Registrant’s auditors and the audit committee of Registrant’s board of directors (or persons performing the equivalent functions):

(a)

All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the Registrant’s ability to record, process, summarize and report financial information; and

(b)

Any fraud, whether or not material, that involves management or other employees who have a significant role in the Registrant’s internal control over financial reporting.

Date:  August 6, 2014

/s/ Gerald Shencavitz

Name: Gerald Shencavitz

Title:   Executive Vice President and Chief Financial Officer

EX-32

Exhibit 32.1

CERTIFICATION OF CHIEF EXECUTIVE OFFICER

PURSUANT TO SECTION 906 OF THE
SARBANES-OXLEY ACT OF 2002 (18 U.S.C. Section 1350)

     The undersigned executive officer of Bar Harbor Bankshares (the “Registrant”) hereby certifies that the Registrant’s Form 10-Q for the three and six months ended June 30, 2014, fully complies with the requirements of Section 13(a) or 15(d), as applicable of the Securities Exchange Act of 1934 (the “Exchange Act”) and that the information contained therein fairly presents, in all material respects, the financial condition and results of operations of the Registrant. This certification is provided pursuant to 18 U.S.C. Section 1350 and Item 601(b)(32) of Regulation S-K (“Item 601(b)(32)”) promulgated under the Securities Act of 1933, as amended (the “Securities Act”) and the Exchange Act. In accordance with clause (ii) of Item 601(b)(32), this certification (a) shall not be deemed “filed” for purposes of Section 18 of the Exchange Act, or otherwise subject to liability under that section, and (b) shall not be deemed to be incorporated by reference into any filing under the Securities Act or the Exchange Act, except to the extent that the Registrant specifically incorporates it by reference.

Date: August 6, 2014

/s/ Curtis C. Simard

Name:  Curtis C. Simard

Title:    President and Chief Executive Officer

Note: A signed original of this written statement required by Section 906 of the Sarbanes-Oxley Act of 2002 has been provided to Bar Harbor Bankshares and will be retained by Bar Harbor Bankshares and furnished to the Securities and Exchange Commission or its staff upon request.

EX-32

Exhibit 32.2

CERTIFICATION OF CHIEF FINANCIAL OFFICER

PURSUANT TO SECTION 906 OF THE
SARBANES-OXLEY ACT OF 2002 (18 U.S.C. Section 1350)

     The undersigned executive officer of Bar Harbor Bankshares (the “Registrant”) hereby certifies that the Registrant’s Form 10-Q for the three and six months ended June 30, 2014, fully complies with the requirements of Section 13(a) or 15(d), as applicable of the Securities Exchange Act of 1934 (the “Exchange Act”) and that the information contained therein fairly presents, in all material respects, the financial condition and results of operations of the Registrant. This certification is provided pursuant to 18 U.S.C. Section 1350 and Item 601(b)(32) of Regulation S-K (“Item 601(b)(32)”) promulgated under the Securities Act of 1933, as amended (the “Securities Act”) and the Exchange Act. In accordance with clause (ii) of Item 601(b)(32), this certification (a) shall not be deemed “filed” for purposes of Section 18 of the Exchange Act, or otherwise subject to liability under that section, and (b) shall not be deemed to be incorporated by reference into any filing under the Securities Act or the Exchange Act, except to the extent that the Registrant specifically incorporates it by reference.

Date: August 6, 2014

/s/ Gerald Shencavitz

Name:  Gerald Shencavitz

Title:  Executive Vice President and Chief Financial Officer

Note: A signed original of this written statement required by Section 906 of the Sarbanes-Oxley Act of 2002 has been provided to Bar Harbor Bankshares and will be retained by Bar Harbor Bankshares and furnished to the Securities and Exchange Commission or its staff upon request.

XML

Securities Available For Sale (Schedule Of OTTI Related To Historical Estimated Credit Losses On Debt Securities And Changes In Estimated Credit Losses Recognized In Pre-Tax Earnings) (Details) (USD $) In Thousands, unless otherwise specified	3 Months Ended		6 Months Ended
	Jun. 30, 2014	Jun. 30, 2013	Jun. 30, 2014	Jun. 30, 2013
Securities Available For Sale [Abstract]
Estimated credit losses as of beginning of period	$ 3,413	$ 3,675	$ 3,923	$ 4,366
Additions for credit losses for securities on which OTTI has been previously recognized		115		115
Additions for credit losses for securities on which OTTI has not been previously recognized
Reductions for securities paid off during the period			510	691
Estimated credit losses as of ending of period	$ 3,413	$ 3,790	$ 3,413	$ 3,790

XML

Retirement Benefit Plans (Summary Of Net Periodic Benefit Costs) (Details) (USD $) In Thousands, unless otherwise specified	3 Months Ended		6 Months Ended
	Jun. 30, 2014	Jun. 30, 2013	Jun. 30, 2014	Jun. 30, 2013
Retirement Benefit Plans [Abstract]
Service cost	$ 16	$ 91	$ 32	$ 182
Interest cost	38	30	75	60
Net amortization of prior service cost and actuarial (gain) loss		(83)		(165)
Actuarial loss on supplemental executive retirement plan, net of tax	7	15	14	30
Net periodic benefit cost	61	53	121	107
Recognized expense for the foregoing plans			241
Expected contributions to forgoing plans			331
Contributions to plans			$ 161

XML

Loans And Allowance For Loan Losses (Schedule Of Loans With Credit Quality Indicators) (Details) (USD $) In Thousands, unless otherwise specified	Jun. 30, 2014	Dec. 31, 2013
Financing Receivable, Recorded Investment [Line Items]
Commercial loan	$ 454,693	$ 455,572
Pass [Member]
Financing Receivable, Recorded Investment [Line Items]
Commercial loan	409,056	408,666
Other Assets Especially Mentioned [Member]
Financing Receivable, Recorded Investment [Line Items]
Commercial loan	29,202	30,955
Substandard [Member]
Financing Receivable, Recorded Investment [Line Items]
Commercial loan	16,435	15,951
Commercial Real Estate Mortgages [Member]
Financing Receivable, Recorded Investment [Line Items]
Commercial loan	329,948	336,542
Commercial Real Estate Mortgages [Member] | Pass [Member]
Financing Receivable, Recorded Investment [Line Items]
Commercial loan	300,965	307,486
Commercial Real Estate Mortgages [Member] | Other Assets Especially Mentioned [Member]
Financing Receivable, Recorded Investment [Line Items]
Commercial loan	19,071	19,768
Commercial Real Estate Mortgages [Member] | Substandard [Member]
Financing Receivable, Recorded Investment [Line Items]
Commercial loan	9,912	9,288
Commercial And Industrial [Member]
Financing Receivable, Recorded Investment [Line Items]
Commercial loan	81,978	73,972
Commercial And Industrial [Member] | Pass [Member]
Financing Receivable, Recorded Investment [Line Items]
Commercial loan	69,023	60,330
Commercial And Industrial [Member] | Other Assets Especially Mentioned [Member]
Financing Receivable, Recorded Investment [Line Items]
Commercial loan	9,529	10,568
Commercial And Industrial [Member] | Substandard [Member]
Financing Receivable, Recorded Investment [Line Items]
Commercial loan	3,426	3,074
Commercial Construction And Land Development [Member]
Financing Receivable, Recorded Investment [Line Items]
Commercial loan	13,201	18,129
Commercial Construction And Land Development [Member] | Pass [Member]
Financing Receivable, Recorded Investment [Line Items]
Commercial loan	9,984	14,403
Commercial Construction And Land Development [Member] | Other Assets Especially Mentioned [Member]
Financing Receivable, Recorded Investment [Line Items]
Commercial loan	424	437
Commercial Construction And Land Development [Member] | Substandard [Member]
Financing Receivable, Recorded Investment [Line Items]
Commercial loan	2,793	3,289
Agriculture And Other Loans To Farmers [Member]
Financing Receivable, Recorded Investment [Line Items]
Commercial loan	29,566	26,929
Agriculture And Other Loans To Farmers [Member] | Pass [Member]
Financing Receivable, Recorded Investment [Line Items]
Commercial loan	29,084	26,447
Agriculture And Other Loans To Farmers [Member] | Other Assets Especially Mentioned [Member]
Financing Receivable, Recorded Investment [Line Items]
Commercial loan	178	182
Agriculture And Other Loans To Farmers [Member] | Substandard [Member]
Financing Receivable, Recorded Investment [Line Items]
Commercial loan	$ 304	$ 300

XML

Commitments And Contingent Liabilities (Schedule Of Contractual Amounts Of Commitments And Contingent Liabilities) (Details) (USD $) In Thousands, unless otherwise specified									6 Months Ended
	Jun. 30, 2014 Commitments To Originate Loans [Member]	Dec. 31, 2013 Commitments To Originate Loans [Member]	Jun. 30, 2014 Unused Lines Of Credit [Member]	Dec. 31, 2013 Unused Lines Of Credit [Member]	Jun. 30, 2014 Un-Advanced Portions Of Construction Loans [Member]	Dec. 31, 2013 Un-Advanced Portions Of Construction Loans [Member]	Jun. 30, 2014 Standby Letters Of Credit [Member]	Dec. 31, 2013 Standby Letters Of Credit [Member]	Jun. 30, 2014 Maximum [Member]
Long-term Purchase Commitment [Line Items]
Contractual amount of commitment and contingent liability	$ 21,055	$ 10,269	$ 93,204	$ 98,486	$ 18,001	$ 12,203	$ 325	$ 378
Standby letters of credit terms, in years									5 years

XML

Loans And Allowance For Loan Losses (Schedule Of Past Due Loans) (Details) (USD $) In Thousands, unless otherwise specified	Jun. 30, 2014	Dec. 31, 2013
Financing Receivable, Recorded Investment, Past Due [Line Items]
30-59 Days Past Due	$ 2,197	$ 3,131
60-89 Days Past Due	2,342	2,325
90 Days or Greater	4,351	4,689
Total Past Due	8,890	10,145
Current	892,229	842,985
Total loans	901,119	853,130
Non-Accrual	7,500	8,840
Greater than 90 Days Past Due and Accruing	345
Commercial Real Estate Mortgages [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
30-59 Days Past Due	718	786
60-89 Days Past Due	952	361
90 Days or Greater	644	698
Total Past Due	2,314	1,845
Current	327,634	334,697
Total loans	329,948	336,542
Non-Accrual	1,505	2,046
Greater than 90 Days Past Due and Accruing
Commercial And Industrial [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
30-59 Days Past Due	53	29
60-89 Days Past Due	517	20
90 Days or Greater	529	456
Total Past Due	1,099	505
Current	80,879	73,467
Total loans	81,978	73,972
Non-Accrual	1,155	793
Greater than 90 Days Past Due and Accruing
Commercial Construction And Land Development [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
90 Days or Greater	1,328	1,845
Total Past Due	1,328	1,845
Current	11,873	16,284
Total loans	13,201	18,129
Non-Accrual	1,328	1,913
Greater than 90 Days Past Due and Accruing
Agriculture And Other Loans To Farmers [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
30-59 Days Past Due	169	22
60-89 Days Past Due	78
90 Days or Greater	25
Total Past Due	272	22
Current	29,294	26,907
Total loans	29,566	26,929
Non-Accrual	76	56
Greater than 90 Days Past Due and Accruing
Residential Real Estate Mortgages [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
30-59 Days Past Due	701	2,170
60-89 Days Past Due	729	1,864
90 Days or Greater	1,555	1,649
Total Past Due	2,985	5,683
Current	361,923	311,432
Total loans	364,908	317,115
Non-Accrual	2,752	3,227
Greater than 90 Days Past Due and Accruing	345
Home Equity Loans [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
30-59 Days Past Due	484	67
60-89 Days Past Due	9
90 Days or Greater	246
Total Past Due	739	67
Current	48,957	49,498
Total loans	49,696	49,565
Non-Accrual	644	745
Greater than 90 Days Past Due and Accruing
Consumer Loans [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
30-59 Days Past Due	72	57
60-89 Days Past Due	57	80
90 Days or Greater	24	41
Total Past Due	153	178
Current	13,126	14,345
Total loans	13,279	14,523
Non-Accrual	40	60
Greater than 90 Days Past Due and Accruing
Tax Exempt [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Current	18,543	16,355
Total loans	18,543	16,355
Greater than 90 Days Past Due and Accruing

XML

Fair Value Of Financial Instruments (Tables)

6 Months Ended

Jun. 30, 2014

Fair Value Of Financial Instruments [Abstract]

Summary Of The Carrying Values And Estimated Fair Values Of Financial Instruments

		Carrying		Level 1		Level 2		Level 3		Total
		Value		Inputs		Inputs		Inputs		Fair Value
June 30, 2014
Financial Assets:
Cash and cash equivalents	$	11,791	$	11,791	$	--	$	--	$	11,791
Federal Home Loan Bank stock		21,196		--		21,196		--		21,196
Loans, net		892,185		--		--		896,937		896,937
Interest receivable		5,692		5,692		--		--		5,692
Financial liabilities:
Deposits (with no stated maturity)	$	432,012	$	--	$	432,012	$	--	$	432,012
Time deposits		404,959		--		406,140		--		406,140
Borrowings		470,967		--		472,080		--		472,080
Interest payable		497		497		--		--		497

		Carrying		Level 1		Level 2		Level 3		Total
		Value		Inputs		Inputs		Inputs		Fair Value
December 31, 2013
Financial Assets:
Cash and cash equivalents	$	9,200	$	9,200	$	--	$	--	$	9,200
Federal Home Loan Bank stock		18,370		--		18,370		--		18,370
Loans, net		844,382		--		--		850,190		850,190
Interest receivable		4,788		4,788		--		--		4,788
Financial liabilities:
Deposits (with no stated maturity)	$	440,063	$	--	$	440,063	$	--	$	440,063
Time deposits		395,588		--		398,668		--		398,668
Borrowings		409,445		--		411,298		--		411,298
Interest payable		514		514		--		--		514

XML

Goodwill And Other Intangible Assets (Core Deposit Intangible Assets) (Details) (USD $) In Thousands, unless otherwise specified	Jun. 30, 2014	Dec. 31, 2013
Goodwill And Other Intangible Assets [Abstract]
Gross carrying amount	$ 783	$ 783
Less: accumulated amortization	175	128
Net carrying amount	$ 608	$ 655

XML

Securities Available For Sale (Tables)

6 Months Ended

Jun. 30, 2014

Securities Available For Sale [Abstract]

Summary Of Securities Available For Sale

June 30, 2014				Gross		Gross
		Amortized		Unrealized		Unrealized		Estimated
Available for Sale:		Cost		Gains		Losses		Fair Value
Mortgage-backed securities:
US Government-sponsored
enterprises	$	286,494	$	6,287	$	3,595	$	289,186
US Government agency		86,475		1,389		749		87,115
Private label		4,315		834		5		5,144
Obligations of states and political
subdivisions thereof		95,237		2,670		1,548		96,359
Total	$	472,521	$	11,180	$	5,897	$	477,804
December 31, 2013				Gross		Gross
		Amortized		Unrealized		Unrealized		Estimated
Available for Sale:		Cost		Gains		Losses		Fair Value
Mortgage-backed securities:
US Government-sponsored
enterprises	$	277,838	$	4,386	$	8,592	$	273,632
US Government agency		83,153		833		2,457		81,529
Private label		5,423		825		78		6,170
Obligations of states and political
subdivisions thereof		95,221		1,121		7,503		88,839
Total	$	461,635	$	7,165	$	18,630	$	450,170

Schedule Of Maturities Distribution Of The Amortized Cost And Estimated Fair Value Of Securities Available For Sale

			Amortized			Estimated
Securities Available for Sale			Cost			Fair Value
Due one year or less	$	-	--	$	-	--
Due after one year through five years			4,251			4,360
Due after five years through ten years			15,601			16,173
Due after ten years			452,669			457,271
Total	$		472,521	$		477,804

Schedule Of OTTI Related To Historical Estimated Credit Losses On Debt Securities And Changes In Estimated Credit Losses Recognized In Pre-Tax Earnings

		2014		2013
Estimated credit losses as of March 31,	$	3,413	$	3,675
Additions for credit losses for securities on which
OTTI has been previously recognized	-	--		115
Additions for credit losses for securities on which
OTTI has not been previously recognized	-	--	-	--
Reductions for securities paid off during the period	-	--	-	--
Estimated credit losses as of June 30,	$	3,413	$	3,790
		2014		2013
Estimated credit losses as of prior year-end,	$	3,923	$	4,366
Additions for credit losses for securities on which
OTTI has been previously recognized	-	--		115
Additions for credit losses for securities on which
OTTI has not been previously recognized	-	--	-	--
Reductions for securities paid off during the period		510		691
Estimated credit losses as of June 30,	$	3,413	$	3,790

Schedule Of Fair Value Of Securities With Continuous Unrealized Losses

		Less than 12 months							12 months or longer					Total
		Estimated						Estimated					Estimated
June 30, 2014		Fair	Number of			Unrealized		Fair	Number of		Unrealized		Fair	Number of		Unrealized
		Value	Investments			Losses		Value	Investments		Losses		Value	Investments		Losses
Description of Securities:
Mortgage-backed securities:
US Government-
sponsored enterprises	$	27,684	36	$		472	$	75,106	89	$	3,123	$	102,790	125	$	3,595
US Government agency		11,138	16			151		23,718	28		598		34,856	44		749
Private label	-	--	0		-	--		156	4		5		156	4		5
Obligations of states and
political subdivisions
thereof		3,162	7			15		45,633	103		1,533		48,795	110		1,548
Total	$	41,984	59	$		638	$	144,613	224	$	5,259	$	186,597	283	$	5,897

		Less than 12 months					12 months or longer						Total
		Estimated					Estimated					Estimated
December 31, 2013		Fair	Number of		Unrealized		Fair	Number of		Unrealized		Fair	Number of		Unrealized
		Value	Investments		Losses		Value	Investments		Losses		Value	Investments		Losses
Description of Securities:
Mortgage-backed securities:
US Government-
Sponsored enterprises	$	111,169	140	$	4,801	$	40,563	40	$	3,791	$	151,732	180	$	8,592
US Government agency		36,356	47		1,982		9,156	12		475		45,512	59		2,457
Private label		826	12		61		449	7		17		1,275	19		78
Obligations of states and
political subdivisions
thereof		61,174	135		5,601		8,464	30		1,902		69,638	165		7,503
Total	$	209,525	334	$	12,445	$	58,632	89	$	6,185	$	268,157	423	$	18,630

Schedule Of Realized Gains And Losses And Other-Than-Temporary Impairment Losses On Securities

		Proceeds						Other
		from Sale of						Than
		Securities						Temporary
		Available		Realized		Realized		Impairment
		for Sale		Gains		Losses		Losses		Net
Three months ended June 30,
2014	$	11,908	$	385	$	35	$	---	$	350
2013	$	3,568	$	256	$	---	$	115	$	141
Six months ended June 30,
2014	$	22,221	$	782	$	35	$	---	$	747
2013	$	9,629	$	529	$	8	$	115	$	406

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Reclassifications Out Of Accumulated Other Comprehensive Income (Details) (USD $) In Thousands, unless otherwise specified	3 Months Ended		6 Months Ended
	Jun. 30, 2014	Jun. 30, 2013	Jun. 30, 2014	Jun. 30, 2013
Reclassification Adjustment out of Accumulated Other Comprehensive Income [Line Items]
Net gain on sales of investments	$ 350	$ 256	$ 747	$ 521
Provision for income taxes	1,511	1,187	3,096	2,550
Net income	3,857	3,170	7,644	6,386
Salaries and employee benefits	4,283	3,696	8,199	7,303
Reclassification Out Of Accumulated Other Comprehensive Income [Member]
Reclassification Adjustment out of Accumulated Other Comprehensive Income [Line Items]
Net income			502
Reclassification Out Of Accumulated Other Comprehensive Income [Member] | Accumulated Net Unrealized Investment Gain (Loss) [Member]
Reclassification Adjustment out of Accumulated Other Comprehensive Income [Line Items]
Net gain on sales of investments			747
Provision for income taxes			(254)
Net income			493
Reclassification Out Of Accumulated Other Comprehensive Income [Member] | Accumulated Defined Benefit Plans Adjustment [Member]
Reclassification Adjustment out of Accumulated Other Comprehensive Income [Line Items]
Provision for income taxes			5
Net income			9
Reclassification Out Of Accumulated Other Comprehensive Income [Member] | Amortization Of Actuarial Gain/Loss For Supplemental Executive Retirement Plan [Member]
Reclassification Adjustment out of Accumulated Other Comprehensive Income [Line Items]
Salaries and employee benefits			$ 14

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Loans And Allowance For Loan Losses (Narrative) (Details) (USD $) In Thousands, unless otherwise specified	6 Months Ended	12 Months Ended
	Jun. 30, 2014 loan	Dec. 31, 2013 loan
Loans And Allowance For Loan Losses [Line Items]
Number of TDRs past due and classified as non-performing	7	7
Number of relationships to loans classified as troubled debt restructurings	8	8
Loans	$ 454,693	$ 455,572
Maximum [Member]
Loans And Allowance For Loan Losses [Line Items]
Percentage of appraised value of residential real estate loans	80.00%
Maximum [Member] | Commercial Real Estate Mortgages [Member]
Loans And Allowance For Loan Losses [Line Items]
Number of years for which principally collateralized loans are amortized	20 years
Maximum [Member] | Residential Real Estate Mortgages [Member]
Loans And Allowance For Loan Losses [Line Items]
Number of years for which principally collateralized loans are amortized	30 years
Minimum [Member] | Commercial Real Estate Mortgages [Member]
Loans And Allowance For Loan Losses [Line Items]
Number of years for which principally collateralized loans are amortized	15 years
Minimum [Member] | Residential Real Estate Mortgages [Member]
Loans And Allowance For Loan Losses [Line Items]
Number of years for which principally collateralized loans are amortized	10 years
Real Estate Secured Loans [Member]
Loans And Allowance For Loan Losses [Line Items]
Number of loans, classified as TDRs, to relationships	6	6
Loans to relationships classified as TDRs, Total	1,416	1,454
TDRs past due and classified as non-performing, total amount	397	416
Commercial And Industrial [Member]
Loans And Allowance For Loan Losses [Line Items]
Number of loans, classified as TDRs, to relationships	6	6
Consumer Loans [Member]
Loans And Allowance For Loan Losses [Line Items]
Number of loans, classified as TDRs, to relationships	1	1
Lodging Industry [Member]
Loans And Allowance For Loan Losses [Line Items]
Percentage of commercial real estate mortgage portfolio	33.90%
Loans	$ 117,389	$ 114,982

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Securities Available For Sale (Summary Of Securities Available For Sale) (Details) (USD $) In Thousands, unless otherwise specified	6 Months Ended	12 Months Ended
	Jun. 30, 2014	Dec. 31, 2013
Schedule of Available for sale Securities [Line Items]
Available for Sale, Amortized Cost	$ 472,521	$ 461,635
Available for Sale, Gross Unrealized Gains	11,180	7,165
Available for Sale, Gross Unrealized Losses	5,897	18,630
Available for Sale, Estimated Fair Value	477,804	450,170
Obligations Of US Government-Sponsored Enterprises [Member]
Schedule of Available for sale Securities [Line Items]
Available for Sale, Amortized Cost	286,494	277,838
Available for Sale, Gross Unrealized Gains	6,287	4,386
Available for Sale, Gross Unrealized Losses	3,595	8,592
Available for Sale, Estimated Fair Value	289,186	273,632
US Government-Sponsored Enterprises [Member]
Schedule of Available for sale Securities [Line Items]
Available for Sale, Gross Unrealized Losses	3,595	8,592
US Government Agency [Member]
Schedule of Available for sale Securities [Line Items]
Available for Sale, Amortized Cost	86,475	83,153
Available for Sale, Gross Unrealized Gains	1,389	833
Available for Sale, Gross Unrealized Losses	749	2,457
Available for Sale, Estimated Fair Value	87,115	81,529
Private Label Mortgage-Backed Securities [Member]
Schedule of Available for sale Securities [Line Items]
Available for Sale, Amortized Cost	4,315	5,423
Available for Sale, Gross Unrealized Gains	834	825
Available for Sale, Gross Unrealized Losses	5	78
Available for Sale, Estimated Fair Value	5,144	6,170
Obligations Of States And Political Subdivisions Thereof [Member]
Schedule of Available for sale Securities [Line Items]
Available for Sale, Amortized Cost	95,237	95,221
Available for Sale, Gross Unrealized Gains	2,670	1,121
Available for Sale, Gross Unrealized Losses	1,548	7,503
Available for Sale, Estimated Fair Value	$ 96,359	$ 88,839

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Financial Derivative Instruments (Schedule of Notional Amounts of Outstanding Derivative Positions) (Details) (USD $) In Thousands, unless otherwise specified				6 Months Ended
	Jun. 30, 2014	Dec. 31, 2013	Jun. 30, 2014 Interest Rate Cap [Member]	Jun. 30, 2014 Interest Rate Cap 1 [Member]	Jun. 30, 2014 Interest Rate Cap 2 [Member]
Derivative [Line Items]
Notional Amount			$ 45,000	$ 25,000	$ 20,000
Expiration Date				Jun. 30, 2021	Jun. 30, 2024
Cap Interest Rate				3.00%	3.00%
Premium Paid				921	1,470
Unamortized Premium	2,391			921	1,470
Fair Value	$ 2,465		$ 2,465	$ 928	$ 1,537

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Loans And Allowance For Loan Losses (Schedule Of Impaired Loans) (Details) (USD $) In Thousands, unless otherwise specified	3 Months Ended		6 Months Ended
	Jun. 30, 2014	Jun. 30, 2013	Jun. 30, 2014	Jun. 30, 2013	Dec. 31, 2013
Financing Receivable, Impaired [Line Items]
Impaired loans, with no related allowance, Recorded Investment	$ 4,609		$ 4,609		$ 3,209
Impaired loans, with no related allowance, Unpaid Principal Balance	6,893		6,893		3,473
Impaired loans, with related allowance, Recorded Investment	686		686		2,849
Impaired loans, with related allowance, Unpaid Principal Balance	766		766		4,774
Impaired loans, Related Allowance	435		435		270
Impaired Financing Receivable, Recorded Investment	5,295		5,295		6,058
Impaired Financing Receivable, Unpaid Principal Balance	7,659		7,659		8,247
Impaired loans, with no related allowance, Average Recorded Investment	4,926	3,515	5,232	3,763
Impaired loans, with no related allowance, Interest Recorded	21	20	40	40
Impaired loans, with related allowance, Average Recorded Investment	833	2,236	768	2,354
Impaired loans, with related allowance, Interest Recorded
Impaired loans, Average Recorded Investment, Total	5,759	5,751	6,000	6,117
Impaired loans, Interest Recorded, Total	21	20	40	40
Commercial Real Estate Mortgages [Member]
Financing Receivable, Impaired [Line Items]
Impaired loans, with no related allowance, Recorded Investment	2,022		2,022		1,949
Impaired loans, with no related allowance, Unpaid Principal Balance	2,241		2,241		2,103
Impaired loans, with related allowance, Recorded Investment	229		229		854
Impaired loans, with related allowance, Unpaid Principal Balance	229		229		854
Impaired loans, Related Allowance	68		68		100
Impaired loans, with no related allowance, Average Recorded Investment	2,075	2,294	2,191	2,253
Impaired loans, with no related allowance, Interest Recorded	16	17	31	34
Impaired loans, with related allowance, Average Recorded Investment	297	207	379	223
Impaired loans, with related allowance, Interest Recorded
Commercial And Industrial [Member]
Financing Receivable, Impaired [Line Items]
Impaired loans, with no related allowance, Recorded Investment	712		712		660
Impaired loans, with no related allowance, Unpaid Principal Balance	822		822		770
Impaired loans, with related allowance, Recorded Investment	457		457		150
Impaired loans, with related allowance, Unpaid Principal Balance	537		537		150
Impaired loans, Related Allowance	367		367		150
Impaired loans, with no related allowance, Average Recorded Investment	764	597	754	757
Impaired loans, with no related allowance, Interest Recorded	1	1	2	3
Impaired loans, with related allowance, Average Recorded Investment	536		389
Impaired loans, with related allowance, Interest Recorded
Commercial Construction And Land Development [Member]
Financing Receivable, Impaired [Line Items]
Impaired loans, with no related allowance, Recorded Investment	1,328		1,328		68
Impaired loans, with no related allowance, Unpaid Principal Balance	3,253		3,253		68
Impaired loans, with related allowance, Recorded Investment					1,845
Impaired loans, with related allowance, Unpaid Principal Balance					3,770
Impaired loans, Related Allowance					20
Impaired loans, with no related allowance, Average Recorded Investment	1,504		1,702
Impaired loans, with no related allowance, Interest Recorded
Impaired loans, with related allowance, Average Recorded Investment		2,029		2,131
Impaired loans, with related allowance, Interest Recorded
Agriculture And Other Loans To Farmers [Member]
Financing Receivable, Impaired [Line Items]
Impaired loans, with no related allowance, Recorded Investment	76		76		56
Impaired loans, with no related allowance, Unpaid Principal Balance	76		76		56
Impaired loans, with no related allowance, Average Recorded Investment	60	323	61	452
Impaired loans, with no related allowance, Interest Recorded
Impaired loans, with related allowance, Interest Recorded
Residential Real Estate Loans [Member]
Financing Receivable, Impaired [Line Items]
Impaired loans, with no related allowance, Recorded Investment	439		439		442
Impaired loans, with no related allowance, Unpaid Principal Balance	469		469		442
Impaired loans, with no related allowance, Average Recorded Investment	491	266	492	267
Impaired loans, with no related allowance, Interest Recorded	3	1	6	1
Impaired loans, with related allowance, Interest Recorded
Home Equity Loans [Member]
Financing Receivable, Impaired [Line Items]
Impaired loans, with no related allowance, Recorded Investment	20		20		21
Impaired loans, with no related allowance, Unpaid Principal Balance	20		20		21
Impaired loans, with no related allowance, Average Recorded Investment	20	21	20	20
Impaired loans, with no related allowance, Interest Recorded	1	1	1	1
Impaired loans, with related allowance, Interest Recorded
Other Consumer Loans [Member]
Financing Receivable, Impaired [Line Items]
Impaired loans, with no related allowance, Recorded Investment	12		12		13
Impaired loans, with no related allowance, Unpaid Principal Balance	12		12		13
Impaired loans, with no related allowance, Average Recorded Investment	12	14	12	14
Impaired loans, with no related allowance, Interest Recorded				1
Impaired loans, with related allowance, Interest Recorded

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Consolidated Statements Of Cash Flows (USD $) In Thousands, unless otherwise specified	6 Months Ended
	Jun. 30, 2014	Jun. 30, 2013
Cash flows from operating activities:
Net income	$ 7,644	$ 6,386
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization of premises and equipment	799	710
Amortization of core deposit intangible	47	46
Provision for loan losses	885	758
Net securities gains	(747)	(521)
Other-than-temporary impairment		115
Net amortization of bond premiums and discounts	1,393	2,850
Recognition of stock based expense	98	211
Gain on sale of other real estate owned		(53)
Net change in other assets	(3,252)	(441)
Net change in other liabilities	(515)	(469)
Net cash provided by operating activities	6,352	9,592
Cash flows from investing activities:
Purchases of securities available for sale	(62,236)	(79,165)
Proceeds from maturities, calls and principal paydowns of mortgage-backed securities	28,483	50,884
Proceeds from sales of securities available for sale	22,221	9,629
Net (increase) decrease in Federal Home Loan Bank stock	(2,826)	81
Net loans made to customers	(49,008)	(38,136)
Proceeds from sale of other real estate owned	44	514
Capital expenditures	(1,063)	(1,050)
Net cash used in investing activities	(64,385)	(57,243)
Cash flows from financing activities:
Net increase in deposits	1,320	58,954
Net (decrease) increase in securities sold under repurchase agreements and fed funds purchased	(6,688)	(8,375)
Proceeds from Federal Home Loan Bank advances	89,200	13,000
Repayments of Federal Home Loan Bank advances	(20,990)	(15,141)
Purchases of treasury stock	(8)
Proceeds from stock option exercises, including excess tax benefits	323	209
Restricted stock grant	69
Payments of dividends	(2,602)	(2,414)
Net cash provided by financing activities	60,624	46,233
Net increase (decrease) in cash and cash equivalents	2,591	(1,418)
Cash and cash equivalents at beginning of period	9,200	14,992
Cash and cash equivalents at end of period	11,791	13,574
Supplemental disclosures of cash flow information:
Interest	4,986	6,110
Income taxes	2,885	1,916
Schedule of noncash investing activities:
Transfers from loans to other real estate owned	$ 320	$ 120

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Loans And Allowance For Loan Losses (Summary Of Composition Of Loan Portfolio) (Details) (USD $) In Thousands, unless otherwise specified	Jun. 30, 2014	Dec. 31, 2013
Accounts, Notes, Loans and Financing Receivable [Line Items]
Net deferred loan costs and fees	$ (183)	$ (273)
Total Loans	900,936	852,857
Allowance for loan losses	(8,751)	(8,475)
Loans, net of allowance for loan losses	892,185	844,382
Commercial Real Estate Mortgages [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Loans and Leases Receivable, Gross	329,948	336,542
Commercial And Industrial [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Loans and Leases Receivable, Gross	81,978	73,972
Commercial Construction And Land Development [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Loans and Leases Receivable, Gross	13,201	18,129
Agricultural And Other Loans To Farmers [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Loans and Leases Receivable, Gross	29,566	26,929
Commercial Loans [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Loans and Leases Receivable, Gross	454,693	455,572
Residential Real Estate Mortgages [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Loans and Leases Receivable, Gross	364,908	317,115
Home Equity Loans [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Loans and Leases Receivable, Gross	49,696	49,565
Other Consumer Loans [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Loans and Leases Receivable, Gross	13,279	14,523
Consumer Loans [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Loans and Leases Receivable, Gross	427,883	381,203
Tax Exempt Loans [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Loans and Leases Receivable, Gross	$ 18,543	$ 16,355

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Retirement Benefit Plans (Tables)

6 Months Ended

Jun. 30, 2014

Retirement Benefit Plans [Abstract]

Summary Of Net Periodic Benefit Costs

		Supplemental Executive
		Retirement Plans
Three Months Ended June 30,		2014		2013
Service cost	$	16		$	91
Interest cost		38			30
Net amortization of prior service cost and actuarial (gain)/loss	-	--			(83	)
Actuarial loss on supplemental executive retirement plan, net of tax		7			15
Net periodic benefit cost	$	61		$	53
		Supplemental Executive
		Retirement Plans
Six Months Ended June 30,		2014		2013
Service cost	$	32	$	182
Interest cost		75			60
Net amortization of prior service cost and actuarial (gain)/loss	-	--		(165		)
Actuarial loss on supplemental executive retirement plan, net of tax		14			30
Net periodic benefit cost	$	121	$	107

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Financial Derivative Instruments (Tables)

6 Months Ended

Jun. 30, 2014

Financial Derivative Instruments [Abstract]

Schedule of Notional Amounts of Outstanding Derivative Positions

Interest Rate Cap Agreements

			3-month					Unamortized
	Notional	Expiration	LIBOR Strike			Premium		Premium		Fair Value
	Amount	Date	Rate			Paid		6/30/14		6/30/14
$	25,000	06/30/21	3.00	%	$	921	$	921	$	928
$	20,000	06/30/24	3.00	%	$	1,470	$	1,470	$	1,537

Schedule of Interest Rate Derivatives

		June 30, 2014			December 31, 2013
		Gross		Net of Tax	Gross	Net of Tax
Unrealized gain on interest rate caps	$	74	$	49	$---	$---
Unamortized premium on interest rate caps		2,391		1,578	---	---
Total	$	2,465	$	1,627	$---	$---

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Goodwill And Other Intangible Assets (Narrative) (Details) (USD $) In Thousands, unless otherwise specified	Jun. 30, 2014	Mar. 31, 2014	Dec. 31, 2013	Aug. 10, 2012 Border Trust Company [Member]
Schedule Of Goodwill And Other Intangible Assets [Line Items]
Goodwill	$ 4,935	$ 4,935	$ 4,935	$ 1,777
Balance of core deposit intangibles	608		655
Expected amortization for 2014	92
Expected amortization for 2015	92
Expected amortization for 2016	92
Expected amortization for 2017	92
Expected amortization for 2018	92
Expected amortization for 2019	92
Expected amortization for 2020	92
Expected amortization for 2021	$ 8

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Loans And Allowance For Loan Losses (Summary Of Non Performing Loans) (Details) (USD $) In Thousands, unless otherwise specified	Jun. 30, 2014	Dec. 31, 2013
Financing Receivable, Recorded Investment, Past Due [Line Items]
Total non-accrual loans	$ 7,500	$ 8,840
Accruing loans contractually past due 90 days or more	345
Non-Performing Loans [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Total commercial loans	4,064	4,808
Total consumer loans	3,436	4,032
Total non-accrual loans	7,500	8,840
Accruing loans contractually past due 90 days or more	345
Total non-performing loans	7,845	8,840
Commercial Real Estate Mortgages [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Total non-accrual loans	1,505	2,046
Accruing loans contractually past due 90 days or more
Commercial Real Estate Mortgages [Member] | Non-Performing Loans [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Total commercial loans	1,505	2,046
Commercial And Industrial [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Total non-accrual loans	1,155	793
Accruing loans contractually past due 90 days or more
Commercial And Industrial [Member] | Non-Performing Loans [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Total commercial loans	1,155	793
Commercial Construction And Land Development [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Total non-accrual loans	1,328	1,913
Accruing loans contractually past due 90 days or more
Commercial Construction And Land Development [Member] | Non-Performing Loans [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Total commercial loans	1,328	1,913
Agriculture And Other Loans To Farmers [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Total non-accrual loans	76	56
Accruing loans contractually past due 90 days or more
Agriculture And Other Loans To Farmers [Member] | Non-Performing Loans [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Total commercial loans	76	56
Residential Real Estate Mortgages [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Total non-accrual loans	2,752	3,227
Accruing loans contractually past due 90 days or more	345
Residential Real Estate Mortgages [Member] | Non-Performing Loans [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Total consumer loans	2,752	3,227
Home Equity Loans [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Total non-accrual loans	644	745
Accruing loans contractually past due 90 days or more
Home Equity Loans [Member] | Non-Performing Loans [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Total consumer loans	644	745
Consumer Loans [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Total non-accrual loans	40	60
Accruing loans contractually past due 90 days or more
Consumer Loans [Member] | Non-Performing Loans [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Total consumer loans	$ 40	$ 60

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Commitments And Contingent Liabilities (Tables)

6 Months Ended

Jun. 30, 2014

Commitments And Contingent Liabilities [Abstract]

Schedule Of Contractual Amounts Of Commitments And Contingent Liabilities

		June 30,		December 31,
		2014		2013
Commitments to originate loans	$	21,055	$	10,269
Unused lines of credit	$	93,204	$	98,486
Un-advanced portions of construction loans	$	18,001	$	12,203
Standby letters of credit	$	325	$	378

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Goodwill And Other Intangible Assets (Tables)

6 Months Ended

Jun. 30, 2014

Goodwill And Other Intangible Assets [Abstract]

Schedule Of Core Deposits Intangible Assets

		June 30,		December 31,
(in thousands)		2014		2013
Core deposit intangibles:
Gross carrying amount	$	783	$	783
Less: accumulated amortization		175		128
Net carrying amount	$	608	$	655

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Consolidated Statements Of Changes In Shareholders' Equity (Parenthetical) (USD $)	6 Months Ended
	Jun. 30, 2014	Jun. 30, 2013
Consolidated Statements Of Changes In Shareholders' Equity [Abstract]
Common stock dividends, per share	$ 0.44	$ 0.41
Purchase of treasury stock, shares	327
Stock options exercised, shares	16,923	11,585
Restricted stock grants, shares	2,878	5,055
Stockholders' Equity Note, Stock Split, Conversion Ratio	1.5	1.5

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Fair Value Measurements (Tables)

6 Months Ended

Jun. 30, 2014

Fair Value Measurements [Abstract]

Financial Assets And Financial Liabilities Measured At Fair Value On A Recurring Basis

		Level 1		Level 2		Level 3		Total Fair
June 30, 2014		Inputs		Inputs		Inputs		Value
Securities available for sale:
Mortgage-backed securities:
US Government-sponsored enterprises	$	---	$	289,186	$	---	$	289,186
US Government agencies	$	---	$	87,115	$	---	$	87,115
Private label	$	---	$	5,144	$	---	$	5,144
Obligations of states and political
subdivisions thereof	$	---	$	96,359	$	---	$	96,359
Derivative assets	$	---	$	2,465	$	---	$	2,465

		Level 1		Level 2		Level 3		Total Fair
December 31, 2013		Inputs		Inputs		Inputs		Value
Securities available for sale:
Mortgage-backed securities:
US Government-sponsored enterprises	$		$	273,632	$	---	$	273,632
US Government agencies	$	---	$	81,529	$	---	$	81,529
Private label	$	---	$	6,170	$	---	$	6,170
Obligations of states and political
subdivisions thereof	$	---	$	88,839	$	---	$	88,839

Financial Assets And Financial Liabilities Measured At Fair Value On A Non-Recurring Basis

		Level 1		Level 2		Level 3		Fair Value
For the Six Months Ended 6/30/14		Inputs		Inputs		Inputs		as of 3/31/14		Loss
Other real estate owned	$	---	$	---	$	1,771	$	1,771	$	130
Collateral dependent impaired loans	$	---	$	---	$	1,623	$	1,623	$	---

		Level 1		Level 2		Level 3		Fair Value
For the Year Ended 12/31/13		Inputs		Inputs		Inputs		as of 12/31/13		Loss
Other real estate owned	$	---	$	$ ---	$	1,625	$	1,625	$	338
Collateral dependent impaired loans	$	$ ---	$	$ ---	$	2,699	$	2,699	$	---

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Securities Available For Sale (Schedule Of Fair Value Of Securities With Continuous Unrealized Losses) (Details) (USD $) In Thousands, unless otherwise specified	6 Months Ended	12 Months Ended
	Jun. 30, 2014 security	Dec. 31, 2013 security
Schedule of Available for sale Securities [Line Items]
Securities with continuous unrealized losses, Less than 12 months, Estimated Fair Value	$ 41,984	$ 209,525
Securities with continuous unrealized losses, Less than 12 months, Number of Investments	59	334
Securities with continuous unrealized losses, Less than 12 months, Unrealized Losses	638	12,445
Securities with continuous unrealized losses, 12 months or longer, Estimated Fair Value	144,613	58,632
Securities with continuous unrealized losses, 12 months or longer, Number of Investments	224	89
Securities with continuous unrealized losses, 12 months or longer, Unrealized Losses	5,259	6,185
Securities with continuous unrealized losses, Estimated Fair Value	186,597	268,157
Securities with continuous unrealized losses, Number of Investments	283	423
Securities with continuous unrealized losses, Unrealized Losses	5,897	18,630
US Government-Sponsored Enterprises [Member]
Schedule of Available for sale Securities [Line Items]
Securities with continuous unrealized losses, Less than 12 months, Estimated Fair Value	27,684	111,169
Securities with continuous unrealized losses, Less than 12 months, Number of Investments	36	140
Securities with continuous unrealized losses, Less than 12 months, Unrealized Losses	472	4,801
Securities with continuous unrealized losses, 12 months or longer, Estimated Fair Value	75,106	40,563
Securities with continuous unrealized losses, 12 months or longer, Number of Investments	89	40
Securities with continuous unrealized losses, 12 months or longer, Unrealized Losses	3,123	3,791
Securities with continuous unrealized losses, Estimated Fair Value	102,790	151,732
Securities with continuous unrealized losses, Number of Investments	125	180
Securities with continuous unrealized losses, Unrealized Losses	3,595	8,592
US Government Agency [Member]
Schedule of Available for sale Securities [Line Items]
Securities with continuous unrealized losses, Less than 12 months, Estimated Fair Value	11,138	36,356
Securities with continuous unrealized losses, Less than 12 months, Number of Investments	16	47
Securities with continuous unrealized losses, Less than 12 months, Unrealized Losses	151	1,982
Securities with continuous unrealized losses, 12 months or longer, Estimated Fair Value	23,718	9,156
Securities with continuous unrealized losses, 12 months or longer, Number of Investments	28	12
Securities with continuous unrealized losses, 12 months or longer, Unrealized Losses	598	475
Securities with continuous unrealized losses, Estimated Fair Value	34,856	45,512
Securities with continuous unrealized losses, Number of Investments	44	59
Securities with continuous unrealized losses, Unrealized Losses	749	2,457
Private Label Mortgage-Backed Securities [Member]
Schedule of Available for sale Securities [Line Items]
Securities with continuous unrealized losses, Less than 12 months, Estimated Fair Value		826
Securities with continuous unrealized losses, Less than 12 months, Number of Investments	0	12
Securities with continuous unrealized losses, Less than 12 months, Unrealized Losses		61
Securities with continuous unrealized losses, 12 months or longer, Estimated Fair Value	156	449
Securities with continuous unrealized losses, 12 months or longer, Number of Investments	4	7
Securities with continuous unrealized losses, 12 months or longer, Unrealized Losses	5	17
Securities with continuous unrealized losses, Estimated Fair Value	156	1,275
Securities with continuous unrealized losses, Number of Investments	4	19
Securities with continuous unrealized losses, Unrealized Losses	5	78
Obligations Of States And Political Subdivisions Thereof [Member]
Schedule of Available for sale Securities [Line Items]
Securities with continuous unrealized losses, Less than 12 months, Estimated Fair Value	3,162	61,174
Securities with continuous unrealized losses, Less than 12 months, Number of Investments	7	135
Securities with continuous unrealized losses, Less than 12 months, Unrealized Losses	15	5,601
Securities with continuous unrealized losses, 12 months or longer, Estimated Fair Value	45,633	8,464
Securities with continuous unrealized losses, 12 months or longer, Number of Investments	103	30
Securities with continuous unrealized losses, 12 months or longer, Unrealized Losses	1,533	1,902
Securities with continuous unrealized losses, Estimated Fair Value	48,795	69,638
Securities with continuous unrealized losses, Number of Investments	110	165
Securities with continuous unrealized losses, Unrealized Losses	$ 1,548	$ 7,503

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Financial Derivative Instruments (Schedule of Interest Rate Derivatives) (Details) (USD $) In Thousands, unless otherwise specified	6 Months Ended	12 Months Ended
	Jun. 30, 2014	Dec. 31, 2013
Financial Derivative Instruments [Abstract]
Unrealized gain on interest rate caps, Gross	$ 74
Unamortized premium on interest rate caps, Gross	2,391
Total, Gross	2,465
Unrealized gain on interest rate caps, Net of Tax	49
Unamortized premium on interest rate caps, Net of Tax	1,578
Total, Net of Tax	$ 1,627

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Consolidated Balance Sheets (USD $) In Thousands, unless otherwise specified	Jun. 30, 2014	Dec. 31, 2013
Assets
Cash and cash equivalents	$ 11,791	$ 9,200
Securities available for sale, at fair value (amortized cost of $472,521 and $461,635, respectively)	477,804	450,170
Federal Home Loan Bank stock	21,196	18,370
Loans	900,936	852,857
Allowance for loan losses	(8,751)	(8,475)
Loans, net of allowance for loan losses	892,185	844,382
Premises and equipment, net	20,409	20,145
Goodwill	4,935	4,935
Bank owned life insurance	8,014	7,879
Other assets	16,522	18,812
TOTAL ASSETS	1,452,856	1,373,893
Deposits:
Demand and other non-interest bearing deposits	61,876	72,259
NOW accounts	130,665	135,246
Savings and money market deposits	239,471	232,558
Time deposits	404,959	395,588
Total deposits	836,971	835,651
Short-term borrowings	377,467	312,945
Long-term advances from Federal Home Loan Bank	88,500	91,500
Junior subordinated debentures	5,000	5,000
Other liabilities	6,903	7,418
TOTAL LIABILITIES	1,314,841	1,252,514
Shareholders' equity
Capital stock, par value $2.00; authorized 15,000,000 and 10,000,000 shares; issued 6,788,453 and 4,525,635 shares at June 30, 2014 and December 31, 2013, respectively	13,577	9,051
Surplus	20,692	25,085
Retained earnings	108,941	103,907
Accumulated other comprehensive (loss) income:
Prior service cost and unamortized net actuarial losses on employee benefit plans, net of tax of ($187) and ($192), at June 30, 2014 and December 31, 2013, respectively	(364)	(373)
Net unrealized appreciation (depreciation) on securities available for sale, net of tax of $1,542 and ($4,150), at June 30, 2014 and December 31, 2013, respectively	2,994	(8,055)
Portion of OTTI attributable to non-credit gains, net of tax of $254 and $252, at June 30, 2014 and December 31, 2013, respectively	493	488
Net unrealized appreciation on derivative instruments, net of tax of $25 and $0, at June 30, 2014 and December 31, 2013, respectively	49
Total accumulated other comprehensive (loss) income	3,172	(7,940)
Less: cost of 860,365 and 879,840 shares of treasury stock at June 30, 2014 and December 31, 2013, respectively	(8,367)	(8,724)
TOTAL SHAREHOLDERS' EQUITY	138,015	121,379
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY	$ 1,452,856	$ 1,373,893

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Loans And Allowance For Loan Losses (Summary Of Troubled Debt Restructures) (Details) (USD $) In Thousands, unless otherwise specified	3 Months Ended	6 Months Ended
	Jun. 30, 2013 loan	Jun. 30, 2013 loan
Financing Receivable, Modifications [Line Items]
Number of Loans	1	3
Pre-Modification Outstanding Recorded Investment	$ 49	$ 79
Post-Modification Outstanding Recorded Investment	49	84
Commercial Real Estate Mortgages [Member]
Financing Receivable, Modifications [Line Items]
Number of Loans	1	1
Pre-Modification Outstanding Recorded Investment	49	49
Post-Modification Outstanding Recorded Investment	49	49
Commercial Loans [Member]
Financing Receivable, Modifications [Line Items]
Number of Loans	1	1
Pre-Modification Outstanding Recorded Investment	49	49
Post-Modification Outstanding Recorded Investment	49	49
Residential Real Estate Mortgages [Member]
Financing Receivable, Modifications [Line Items]
Number of Loans	0	0
Home Equity Loans [Member]
Financing Receivable, Modifications [Line Items]
Number of Loans	0	1
Pre-Modification Outstanding Recorded Investment		16
Post-Modification Outstanding Recorded Investment		21
Other Consumer Loans [Member]
Financing Receivable, Modifications [Line Items]
Number of Loans	0	1
Pre-Modification Outstanding Recorded Investment		14
Post-Modification Outstanding Recorded Investment		14
Consumer Loans [Member]
Financing Receivable, Modifications [Line Items]
Number of Loans	0	2
Pre-Modification Outstanding Recorded Investment		30
Post-Modification Outstanding Recorded Investment		35
Extended maturity and adjusted interest rate [Member]
Financing Receivable, Modifications [Line Items]
Post-Modification Outstanding Recorded Investment	$ 49	$ 84

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Consolidated Statements Of Comprehensive Income (Parenthetical) (USD $) In Thousands, unless otherwise specified	3 Months Ended		6 Months Ended
	Jun. 30, 2014	Jun. 30, 2013	Jun. 30, 2014	Jun. 30, 2013
Consolidated Statements Of Comprehensive Income [Abstract]
Net unrealized (depreciation) appreciation on securities available for sale, tax	$ 2,903	$ (4,925)	$ 5,948	$ (5,985)
Reclassification adjustment for net gains related to securities available for sale included in net income, tax	119	87	254	177
Other-than-temporary impairment adjustment, tax	0	57	0	57
Non-credit portion of other-than-temporary impairment losses, tax	0	18	0	18
Amortization of actuarial gain for supplemental executive retirement plan, tax	0	(28)	0	(56)
Net unrealized appreciation on interest rate derivatives, tax	25	0	25	0
Actuarial loss (gain) on supplemental executive retirement plan, net of related tax	$ 2	$ 5	$ 5	$ 10

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Fair Value Measurements (Financial Assets And Financial Liabilities Measured At Fair Value On A Non-Recurring Basis) (Details) (USD $) In Thousands, unless otherwise specified	6 Months Ended	12 Months Ended
	Jun. 30, 2014	Dec. 31, 2013
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Impaired loans with a carrying value	$ 5,295	$ 6,058
Impaired loans, allowance	435	270
Other Real Estate Owned [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Financial assets and liabilities, fair value	1,771	1,625
Loss	130	338
Other Real Estate Owned [Member] | Level 1 Inputs [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Financial assets and liabilities, fair value
Other Real Estate Owned [Member] | Level 2 Inputs [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Financial assets and liabilities, fair value
Other Real Estate Owned [Member] | Level 3 Inputs [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Financial assets and liabilities, fair value	1,771	1,625
Collateral Dependent Impaired Loans [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Financial assets and liabilities, fair value	1,623	2,699
Impaired loans with a carrying value	1,623	2,699
Impaired loans, allowance	68	120
Collateral Dependent Impaired Loans [Member] | Level 1 Inputs [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Financial assets and liabilities, fair value
Collateral Dependent Impaired Loans [Member] | Level 2 Inputs [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Financial assets and liabilities, fair value
Collateral Dependent Impaired Loans [Member] | Level 3 Inputs [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Financial assets and liabilities, fair value	$ 1,623	$ 2,699
Maximum [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Discounts for estimated costs to dispose and other considerations	30.00%
Minimum [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Discounts for estimated costs to dispose and other considerations	10.00%

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Earnings Per Share (Reconciliation Of Basic And Diluted Earnings Per Share) (Details) (USD $) In Thousands, except Share data, unless otherwise specified	3 Months Ended		6 Months Ended
	Jun. 30, 2014	Jun. 30, 2013	Jun. 30, 2014	Jun. 30, 2013
Earnings Per Share [Abstract]
Net income available to common shareholders	$ 3,857	$ 3,170	$ 7,644	$ 6,386
Weighted average common shares outstanding
Basic	5,921,025	5,894,388	5,916,387	5,890,006
Effect of dilutive employee stock options and awards	39,817	27,736	40,114	27,891
Diluted	5,960,842	5,922,124	5,956,501	5,917,897
Anti-dilutive options excluded from earnings per share calculation	93,093	72,750	97,482	72,750
Per Common Share Data:
Basic earnings per share	$ 0.65	$ 0.54	$ 1.29	$ 1.08
Diluted earnings per share	$ 0.65	$ 0.54	$ 1.28	$ 1.08

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Fair Value Of Financial Instruments

6 Months Ended

Jun. 30, 2014

Fair Value Of Financial Instruments [Abstract]

Fair Value Of Financial Instruments

Note 13: Fair Value of Financial Instruments

The Company discloses fair value information about financial instruments for which it is practicable to estimate fair value. Fair value estimates are made as of a specific point in time based on the characteristics of the financial instruments and relevant market information. Where available, quoted market prices are used. In other cases, fair values are based on estimates using present value or other valuation techniques. These techniques involve uncertainties and are significantly affected by the assumptions used and judgments made regarding risk characteristics of various financial instruments, discount rates, estimates of future cash flows, future expected loss experience and other factors. Changes in assumptions could significantly affect these estimates. Derived fair value estimates cannot be substantiated by comparison to independent markets and, in certain cases, could not be realized in an immediate sale of the instrument.

Fair value estimates are based on existing financial instruments without attempting to estimate the value of anticipated future business and the value of assets and liabilities that are not considered financial instruments. Accordingly, the aggregate fair value amounts presented do not purport to represent the underlying market value of the Company.

The following describes the methods and significant assumptions used by the Company in estimating the fair values of significant financial instruments: Cash and Cash Equivalents: For cash and cash equivalents, including cash and due from banks and other short-term investments with maturities of 90 days or less, the carrying amounts reported on the consolidated balance sheet approximate fair values.

Federal Home Loan Bank stock: For Federal Home Loan Bank stock, the carrying amounts report on the consolidated balance sheet approximate fair values.

Loans: For variable rate loans that re-price frequently and have no significant change in credit risk, fair values are based on carrying values. The fair value of other loans is estimated by discounting the future cash flows using the current rates at which similar loans would be made to borrowers with similar credit ratings and for the same remaining maturities.

Deposits: The fair value of deposits with no stated maturity is equal to the carrying amount. The fair value of time deposits is based on the discounted value of contractual cash flows, applying interest rates currently being offered on wholesale funding products of similar maturities. The fair value estimates for deposits do not include the benefit that results from the low-cost funding provided by the deposit liabilities compared to the cost of alternative forms of funding ("deposit base intangibles").

Borrowings: For borrowings that mature or re-price in 90 days or less, carrying value approximates fair value. The fair value of the Company's remaining borrowings is estimated by using discounted cash flows based on current rates available for similar types of borrowing arrangements taking into account any optionality.

Accrued Interest Receivable and Payable: The carrying amounts of accrued interest receivable and payable approximate their fair values.

Off-Balance Sheet Financial Instruments: The Company's off-balance sheet instruments consist of loan commitments and standby letters of credit. Fair values for standby letters of credit and loan commitments were insignificant.

A summary of the carrying values and estimated fair values of the Company's significant financial instruments at June 30, 2014, and December 31, 2013, follows:

		Carrying		Level 1		Level 2		Level 3		Total
		Value		Inputs		Inputs		Inputs		Fair Value
June 30, 2014
Financial Assets:
Cash and cash equivalents	$	11,791	$	11,791	$	--	$	--	$	11,791
Federal Home Loan Bank stock		21,196		--		21,196		--		21,196
Loans, net		892,185		--		--		896,937		896,937
Interest receivable		5,692		5,692		--		--		5,692
Financial liabilities:
Deposits (with no stated maturity)	$	432,012	$	--	$	432,012	$	--	$	432,012
Time deposits		404,959		--		406,140		--		406,140
Borrowings		470,967		--		472,080		--		472,080
Interest payable		497		497		--		--		497

		Carrying		Level 1		Level 2		Level 3		Total
		Value		Inputs		Inputs		Inputs		Fair Value
December 31, 2013
Financial Assets:
Cash and cash equivalents	$	9,200	$	9,200	$	--	$	--	$	9,200
Federal Home Loan Bank stock		18,370		--		18,370		--		18,370
Loans, net		844,382		--		--		850,190		850,190
Interest receivable		4,788		4,788		--		--		4,788
Financial liabilities:
Deposits (with no stated maturity)	$	440,063	$	--	$	440,063	$	--	$	440,063
Time deposits		395,588		--		398,668		--		398,668
Borrowings		409,445		--		411,298		--		411,298
Interest payable		514		514		--		--		514

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Securities Available For Sale (Narrative) (Details) (USD $) In Thousands, unless otherwise specified	3 Months Ended	6 Months Ended		12 Months Ended	6 Months Ended	12 Months Ended	3 Months Ended	6 Months Ended	12 Months Ended	6 Months Ended	12 Months Ended	6 Months Ended	12 Months Ended
	Jun. 30, 2013	Jun. 30, 2014 security	Jun. 30, 2013	Dec. 31, 2013	Jun. 30, 2014 Obligations Of States And Political Subdivisions Thereof [Member]	Dec. 31, 2013 Obligations Of States And Political Subdivisions Thereof [Member]	Mar. 31, 2013 Private Label Mortgage-Backed Securities [Member]	Jun. 30, 2014 Private Label Mortgage-Backed Securities [Member] security	Dec. 31, 2013 Private Label Mortgage-Backed Securities [Member]	Jun. 30, 2014 US Government Agency [Member]	Dec. 31, 2013 US Government Agency [Member]	Jun. 30, 2014 US Government-Sponsored Enterprises [Member]	Dec. 31, 2013 US Government-Sponsored Enterprises [Member]
Schedule of Available for sale Securities [Line Items]
Private-label MBS (debt securities), amount held								12
Amortized cost included OTTI losses								$ 1,938
Securities recognized as credit losses in excess of the unrealized losses in accumulated OCI, creating an unrealized gain		12
Total other-than-temporary impairment ("OTTI") losses	(168)		(168)
Net OTTI losses recognized in earnings	115		115
Unrealized gain, net of tax		493					488
OTTI recognized in pre-tax earnings amount, net of tax		493		488
Unrealized losses on securities		$ 5,897		$ 18,630	$ 1,548	$ 7,503		$ 5	$ 78	$ 749	$ 2,457	$ 3,595	$ 8,592

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Earnings Per Share (Tables)

6 Months Ended

Jun. 30, 2014

Earnings Per Share [Abstract]

Reconciliation Of Basic And Diluted Earnings Per Share

		Three Months Ended				Six Months Ended
		June 30,				June 30,
		2014		2013		2014		2013
Net income	$	3,857	$	3,170	$	7,644	$	6,386
Weighted average common shares outstanding
Basic		5,921,025		5,894,388		5,916,387		5,890,006
Effect of dilutive employee stock options		39,817		27,736		40,114		27,891
Diluted		5,960,842		5,922,124		5,956,501		5,917,897
Anti-dilutive options excluded from
earnings per share calculation		93,093		72,750		97,482		72,750
Per Common Share Data:
Basic earnings per share	$	0.65	$	0.54	$	1.29	$	1.08
Diluted earnings per share	$	0.65	$	0.54	$	1.28	$	1.08

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Consolidated Statements Of Changes In Shareholders' Equity (USD $) In Thousands, unless otherwise specified	Capital Stock [Member]	Surplus [Member]	Retained Earnings [Member]	Accumulated Other Comprehensive Income (Loss) [Member]	Treasury Stock [Member]	Total
Balance at Dec. 31, 2012	$ 9,051	$ 24,905	$ 95,688	$ 7,697	$ (9,295)	$ 128,046
Net income			6,386			6,386
Total other comprehensive income (loss)				(11,974)		(11,974)
Dividend declared:
Common stock			(2,414)			(2,414)
Stock options exercised, including related tax effects		6	(39)		242	209
Recognition of stock based compensation expense		211				211
Restricted stock grants		(121)	17		104
Balance at Jun. 30, 2013	9,051	25,001	99,638	(4,277)	(8,949)	120,464
Balance at Dec. 31, 2013	9,051	25,085	103,907	(7,940)	(8,724)	121,379
Net income			7,644			7,644
Total other comprehensive income (loss)				11,112		11,112
Dividend declared:
Common stock			(2,602)			(2,602)
Purchase of treasury stock					(8)	(8)
Stock options exercised, including related tax effects		19	(8)		312	323
Three-for-two stock split	4,526	(4,526)
Recognition of stock based compensation expense		98				98
Restricted stock grants		16			53	69
Balance at Jun. 30, 2014	$ 13,577	$ 20,692	$ 108,941	$ 3,172	$ (8,367)	$ 138,015

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Consolidated Balance Sheets (Parenthetical) (USD $) In Thousands, except Share data, unless otherwise specified	Jun. 30, 2014	Dec. 31, 2013
Consolidated Balance Sheets [Abstract]
Securities available for sale, amortized cost	$ 472,521	$ 461,635
Capital stock, par value	$ 2	$ 2
Capital stock, shares authorized	15,000,000	10,000,000
Capital stock, shares issued	6,788,453	4,525,635
Prior service cost and unamortized net actuarial losses on employee benefit plans, tax	(187)	(192)
Net unrealized appreciation on securities available for sale, tax	1,542	(4,150)
Portion of OTTI attributable to non-credit losses, tax	254	252
Net unrealized appreciation on derivative instruments, tax	$ 25	$ 0
Treasury stock, shares	860,365	879,840

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Financial Derivative Instruments

6 Months Ended

Jun. 30, 2014

Financial Derivative Instruments [Abstract]

Financial Derivative Instruments

Note 8: Financial Derivative Instruments

As part of its overall asset and liability management strategy, the Bank periodically uses derivative instruments to minimize significant unplanned fluctuations in earnings and cash flows caused by interest rate volatility. The Bank's interest rate risk management strategy involves modifying the re-pricing characteristics of certain assets or liabilities so that changes in interest rates do not have a significant effect on net interest income.

The Company recognizes its derivative instruments on the consolidated balance sheet at fair value. On the date the derivative instrument is entered into, the Bank designates whether the derivative is part of a hedging relationship (i.e., cash flow or fair value hedge). The Bank formally documents relationships between hedging instruments and hedged items, as well as its risk management objective and strategy for undertaking hedge transactions. The Bank also assesses, both at the hedge's inception and on an ongoing basis, whether the derivatives used in hedging transactions are highly effective in offsetting the changes in cash flows or fair values of hedged items.

Changes in fair value of derivative instruments that are highly effective and qualify as cash flow hedges are recorded in other comprehensive income or loss. Any ineffective portion is recorded in earnings. The Bank discontinues hedge accounting when it is determined that the derivative is no longer highly effective in offsetting changes of the hedged risk on the hedged item, or management determines that the designation of the derivative as a hedging instrument is no longer appropriate.

At June 30, 2014, the Bank had two outstanding derivative instruments with notional amounts totaling $45,000. These derivative instruments were interest rate caps, with notional principal amounts totaling $25,000 and $20,000, respectively. The notional amounts of the financial derivative instruments do not represent exposure to credit loss. The Bank is exposed to credit loss only to the extent the counter-party defaults in its responsibility to pay interest under the terms of the agreements. The credit risk in derivative instruments is mitigated by entering into transactions with highly-rated counterparties that management believes to be creditworthy and by limiting the amount of exposure to each counter-party.

The details of the Bank's financial derivative instruments as of June 30, 2014 are summarized below:

Interest Rate Cap Agreements

			3-month					Unamortized
	Notional	Expiration	LIBOR Strike			Premium		Premium		Fair Value
	Amount	Date	Rate			Paid		6/30/14		6/30/14
$	25,000	06/30/21	3.00	%	$	921	$	921	$	928
$	20,000	06/30/24	3.00	%	$	1,470	$	1,470	$	1,537

In the second quarter of 2014, interest rate cap agreements were purchased to limit the Bank's exposure to rising interest rates on two rolling, three-month borrowings indexed to three month LIBOR. Under the terms of the agreements, the Bank paid premiums of $921 and $1,470 for the right to receive cash flow payments if 3-month LIBOR rises above the caps of 3.00%, thus effectively ensuring interest expense on the borrowings at maximum rates of 3.00% for the duration of the agreements. The interest rate cap agreements were designated as cash flow hedges.

At June 30, 2014, the total fair value of the interest rate cap agreements was $2,465. The fair values of the interest rate cap agreements are included in other assets on the Company's consolidated balance sheets. Changes in the fair value, representing unrealized gains or losses, are recorded in accumulated other comprehensive income, net of tax.

The premiums paid on the interest rate cap agreements are being recognized as increases in interest expense over the duration of the agreements using the caplet method. During the three and six months ended June 30, 2014, no premium amortization was required. During the next twelve months, less than $1 of the total premiums will be recognized as increases to interest expense, increasing the interest expense related to the hedged borrowings.

A summary of the hedging related balances as of June 30, 2014 follows:

		June 30, 2014				December 31, 2013
		Gross		Net of Tax		Gross		Net of Tax
Unrealized gain on interest rate caps	$	74	$	49	$	---	$	---
Unamortized premium on interest rate caps		2,391		1,578		---		---
Total	$	2,465	$	1,627	$	---	$	---

There were no hedging related balances as of December 31, 2013.

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Document And Entity Information	6 Months Ended
	Jun. 30, 2014	Aug. 01, 2014
Document And Entity Information [Abstract]
Document Type	10-Q
Amendment Flag	false
Document Period End Date	Jun. 30, 2014
Document Fiscal Year Focus	2014
Document Fiscal Period Focus	Q2
Entity Registrant Name	BAR HARBOR BANKSHARES
Entity Central Index Key	0000743367
Current Fiscal Year End Date	--12-31
Entity Filer Category	Accelerated Filer
Entity Common Stock, Shares Outstanding		5,390,654

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Retirement Benefit Plans

6 Months Ended

Jun. 30, 2014

Retirement Benefit Plans [Abstract]

Retirement Benefit Plans

Note 9: Retirement Benefit Plans

The Company has non-qualified supplemental executive retirement agreements with certain retired officers. The agreements provide supplemental retirement benefits payable in installments over a period of years upon retirement or death. The Company recognized the net present value of payments associated with the agreements over the service periods of the participating officers. Interest costs continue to be recognized on the benefit obligations.

The Company also has a supplemental executive retirement agreement with a certain current executive officer. This agreement provides a stream of future payments in accordance with a defined vesting schedule upon retirement, termination, or upon a change of control.

28

The following tables summarize the net periodic benefit costs for the three and six months ended June 30, 2014, and 2013:

		Supplemental Executive
		Retirement Plans
Three Months Ended June 30,		2014		2013
Service cost	$	16		$	91
Interest cost		38			30
Net amortization of prior service cost and actuarial (gain)/loss	-	--			(83	)
Actuarial loss on supplemental executive retirement plan, net of tax		7			15
Net periodic benefit cost	$	61		$	53
		Supplemental Executive
		Retirement Plans
Six Months Ended June 30,		2014		2013
Service cost	$	32	$	182
Interest cost		75			60
Net amortization of prior service cost and actuarial (gain)/loss	-	--		(165		)
Actuarial loss on supplemental executive retirement plan, net of tax		14			30
Net periodic benefit cost	$	121	$	107

The Company is expected to recognize $241 of expense for the foregoing plans for the year ended December 31, 2014. The Company is expected to contribute $331 to the foregoing plans in 2014. As of June 30, 2014, the Company had contributed $161.

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Consolidated Statements Of Income (USD $) In Thousands, except Per Share data, unless otherwise specified	3 Months Ended		6 Months Ended
	Jun. 30, 2014	Jun. 30, 2013	Jun. 30, 2014	Jun. 30, 2013
Interest and dividend income:
Interest and fees on loans	$ 9,205	$ 9,406	$ 18,269	$ 18,587
Interest on securities	4,077	3,056	7,985	6,218
Dividend on FHLB stock	69	12	138	34
Total interest and dividend income	13,351	12,474	26,392	24,839
Interest expense:
Deposits	1,462	1,669	2,899	3,371
Short-term borrowings	156	104	280	232
Long-term debt	869	1,218	1,790	2,464
Total interest expense	2,487	2,991	4,969	6,067
Net interest income	10,864	9,483	21,423	18,772
Provision for loan losses	428	405	885	758
Net interest income after provision for loan losses	10,436	9,078	20,538	18,014
Non-interest income:
Trust and other financial services	1,102	851	2,074	1,757
Service charges on deposit accounts	300	321	559	616
Credit and debit card service charges and fees	376	396	720	732
Net securities gains	350	256	747	521
Total other-than-temporary impairment ("OTTI") losses		(168)		(168)
Non-credit portion of OTTI losses (before taxes)		53		53
Net OTTI losses recognized in earnings		(115)		(115)
Other operating income	165	165	309	313
Total non-interest income	2,293	1,874	4,409	3,824
Non-interest expense:
Salaries and employee benefits	4,283	3,696	8,199	7,303
Occupancy expense	544	493	1,108	977
Furniture and equipment expense	524	471	1,037	981
Credit and debit card expenses	100	92	197	188
FDIC insurance assessments	175	145	365	341
Other operating expense	1,735	1,698	3,301	3,112
Total non-interest expense	7,361	6,595	14,207	12,902
Income before income taxes	5,368	4,357	10,740	8,936
Income taxes	1,511	1,187	3,096	2,550
Net income	$ 3,857	$ 3,170	$ 7,644	$ 6,386
Per Common Share Data:
Basic earnings per share	$ 0.65	$ 0.54	$ 1.29	$ 1.08
Diluted earnings per share	$ 0.65	$ 0.54	$ 1.28	$ 1.08

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Three-for-two Common Stock Split

6 Months Ended

Jun. 30, 2014

Stockholders' Equity Note [Abstract]

Three-for-two Common Stock Split

Note 3: Three-for-two Common Stock Split

On April 22, 2014, the Company's Board of Directors declared a three-for-two split of its common stock, payable as a large stock dividend, which was paid on May 19, 2014 (the "payment date") to all stockholders of record at the close of business on May 5, 2014. As of April 22, 2014, the Company had approximately 3,944,290 shares of common stock outstanding. After the stock split as a large stock dividend, the number of shares of Company common stock outstanding increased to approximately 5,916,435. All previously reported share and per share data included in public filings subsequent to the payment date has been adjusted to reflect the retroactive effect of this three-for-two stock split.

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Management's Use Of Estimates

6 Months Ended

Jun. 30, 2014

Management's Use Of Estimates [Abstract]

Management's Use Of Estimates

Note 2: Management's Use of Estimates

The preparation of financial statements in conformity with U.S. generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

Material estimates that are particularly susceptible to significant change in the near-term relate to the determination of the allowance for loan losses, other-than-temporary impairments on securities, income tax estimates, and the valuation of intangible assets.

Allowance for Loan Losses: The allowance for loan losses (the "allowance") is a significant accounting estimate used in the preparation of the Company's consolidated financial statements. The allowance is available to absorb losses on loans and is maintained at a level that, in management's judgment, is appropriate for the amount of risk inherent in the loan portfolio, given past and present conditions. The allowance is increased by provisions charged to operating expense and by recoveries on loans previously charged-off, and is decreased by loans charged-off as uncollectible.

Arriving at an appropriate level of allowance involves a high degree of judgment. The determination of the adequacy of the allowance and provisioning for estimated losses is evaluated regularly based on review of loans, with particular emphasis on non-performing or other loans that management believes warrant special consideration. The ongoing evaluation process includes a formal analysis, which considers among other factors: the character and size of the loan portfolio, business and economic conditions, real estate market conditions, collateral values, changes in product offerings or loan terms, changes in underwriting and/or collection policies, loan growth, previous charge-off experience, delinquency trends, non-performing loan trends, the performance of individual loans in relation to contract terms, and estimated fair values of collateral.

The allowance consists of allowances established for specific loans including impaired loans; allowances for pools of loans based on historical charge-offs by loan types; and supplemental allowances that adjust historical loss experience to reflect current economic conditions, industry specific risks, and other observable data.

While management uses available information to recognize losses on loans, changing economic conditions and the economic prospects of the borrowers may necessitate future additions or reductions to the allowance. In addition, various regulatory agencies, as an integral part of their examination process, periodically review the allowance, which also may necessitate future additions or reductions to the allowance, based on information available to them at the time of their examination

Other-Than-Temporary Impairments on Investment Securities: One of the significant estimates relating to securities is the evaluation of other-than-temporary impairment ("OTTI"). If a decline in the fair value of a security is judged to be other-than-temporary, and management does not intend to sell the security and believes it is more-likely-than-not the Company will not be required to sell the security prior to recovery of cost or amortized cost, the portion of the total impairment attributable to the credit loss is recognized in earnings, and the remaining difference between the security's amortized cost basis and its fair value is included in other comprehensive income.

For impaired available for sale debt securities that management intends to sell, or where management believes it is more-likely-than-not that the Company will be required to sell, an OTTI charge is recognized in earnings equal to the difference between fair value and cost or amortized cost basis of the security. The fair value of the OTTI security becomes its new cost basis.

The evaluation of securities for impairments is a quantitative and qualitative process, which is subject to risks and uncertainties and is intended to determine whether declines in the fair value of securities should be recognized in current period earnings. The risks and uncertainties include changes in general economic conditions, the issuer's financial condition and/or future prospects, the effects of changes in interest rates or credit spreads and the expected recovery period of unrealized losses. The Company has a security monitoring process that identifies securities that, due to certain characteristics, as described below, are subjected to an enhanced analysis on a quarterly basis.

Securities that are in an unrealized loss position are reviewed at least quarterly to determine if an OTTI is present based on certain quantitative and qualitative factors and measures. The primary factors considered in evaluating whether a decline in value of securities is other-than-temporary include: (a) the cause of the impairment; (b) the financial condition, credit rating and future prospects of the issuer; (c) whether the debtor is current on contractually obligated interest and principal payments; (d) the volatility of the securities' fair value; (e) performance indicators of the underlying assets in the security including default rates, delinquency rates, percentage of non-performing assets, loan to collateral value ratios, conditional payment rates, third party guarantees, current levels of subordination, vintage, and geographic concentration and; (f) any other information and observable data considered relevant in determining whether an OTTI has occurred, including the expectation of the receipt of all principal and interest due.

In addition, for securitized financial assets with contractual cash flows, such as private label mortgage-backed securities ("MBS"), the Company periodically updates its best estimate of cash flows over the life of the security. The Company's best estimate of cash flows is based upon assumptions consistent with the current economic environment, similar to those the Company believes market participants would use. If the fair value of a securitized financial asset is less than its cost or amortized cost and there has been an adverse change in timing or amount of anticipated future cash flows since the last revised estimate to the extent that the Company does not expect to receive the entire amount of future contractual principal and interest, an OTTI charge is recognized in earnings representing the estimated credit loss if management does not intend to sell the security and believes it is more-likely-than-not the Company will not be required to sell the security prior to recovery of cost or amortized cost. Estimating future cash flows is a quantitative and qualitative process that incorporates information received from third party sources along with certain assumptions and judgments regarding the future performance of the underlying collateral. In addition, projections of expected future cash flows may change based upon new information regarding the performance of the underlying collateral.

Income Taxes: The Company uses the asset and liability method of accounting for income taxes. Under this method, deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. If current available information indicates that it is more-likely-than-not that deferred tax assets will not be realized, a valuation allowance is established. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date. Significant management judgment is required in determining income tax expense and deferred tax assets and liabilities. As of June 30, 2014, and December 31, 2013, there was no valuation allowance for deferred tax assets. Deferred tax assets are included in other assets on the consolidated balance sheet.

Goodwilland Identifiable Intangible Assets: In connection with acquisitions, the Company generally records as assets on its consolidated financial statements both goodwill and identifiable intangible assets, such as core deposit intangibles.

The Company evaluates whether the carrying value of its goodwill has become impaired, in which case the value is reduced through a charge to its earnings. Goodwill is evaluated for impairment at least annually, or upon a triggering event using certain fair value techniques. Goodwill impairment testing is performed at the segment (or "reporting unit") level. Goodwill is assigned to reporting units at the date the goodwill is initially recorded. Once goodwill has been assigned to the reporting units, it no longer retains its association with a particular acquisition, and all of the activities within a reporting unit, whether acquired or organically grown, are available to support the value of the goodwill.

Goodwill represents the excess of the purchase price over the fair value of net assets acquired in accordance with the purchase method of accounting for business combinations. Goodwill is not amortized but, instead, is subject to impairment tests on at least an annual basis or more frequently if an event occurs or circumstances change that reduce the fair value of a reporting unit below its carrying amount. The Company completes its annual goodwill impairment test as of December 31 of each year. The impairment testing process is conducted by assigning assets and goodwill to each reporting unit. Currently, the Company's goodwill is evaluated at the entity level as there is only one reporting unit. The Company first assesses certain qualitative factors to determine if it is more likely than not that the fair value of the reporting unit is less than its carrying value. If it is more likely than not that the fair value of the reporting unit is less than the carrying value, then the fair value of each reporting unit is compared to the recorded book value "step one." If the fair value of the reporting unit exceeds its carrying value, goodwill is not considered impaired and "step two" is not considered necessary. If the carrying value of a reporting unit exceeds its fair value, the impairment test continues ("step two") by comparing the carrying value of the reporting unit's goodwill to the implied fair value of goodwill. The implied fair value is computed by adjusting all assets and liabilities of the reporting unit to current fair value with the offset adjustment to goodwill. The adjusted goodwill balance is the implied fair value of the goodwill. An impairment charge is recognized if the carrying fair value of goodwill exceeds the implied fair value of goodwill. At December 31, 2013, there was no indication of impairment that led the Company to believe it needed to perform a two-step test.

Any changes in the estimates used by the Company to determine the carrying value of its goodwill, or which otherwise adversely affect their value or estimated lives, would adversely affect the Company's consolidated results of operations.

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Management's Use Of Estimates (Policy)

6 Months Ended

Jun. 30, 2014

Management's Use Of Estimates [Abstract]

Allowance For Loan Losses

Allowance for Loan Losses: The allowance for loan losses (the "allowance") is a significant accounting estimate used in the preparation of the Company's consolidated financial statements. The allowance is available to absorb losses on loans and is maintained at a level that, in management's judgment, is appropriate for the amount of risk inherent in the loan portfolio, given past and present conditions. The allowance is increased by provisions charged to operating expense and by recoveries on loans previously charged-off, and is decreased by loans charged-off as uncollectible.

Arriving at an appropriate level of allowance involves a high degree of judgment. The determination of the adequacy of the allowance and provisioning for estimated losses is evaluated regularly based on review of loans, with particular emphasis on non-performing or other loans that management believes warrant special consideration. The ongoing evaluation process includes a formal analysis, which considers among other factors: the character and size of the loan portfolio, business and economic conditions, real estate market conditions, collateral values, changes in product offerings or loan terms, changes in underwriting and/or collection policies, loan growth, previous charge-off experience, delinquency trends, non-performing loan trends, the performance of individual loans in relation to contract terms, and estimated fair values of collateral.

The allowance consists of allowances established for specific loans including impaired loans; allowances for pools of loans based on historical charge-offs by loan types; and supplemental allowances that adjust historical loss experience to reflect current economic conditions, industry specific risks, and other observable data.

While management uses available information to recognize losses on loans, changing economic conditions and the economic prospects of the borrowers may necessitate future additions or reductions to the allowance. In addition, various regulatory agencies, as an integral part of their examination process, periodically review the allowance, which also may necessitate future additions or reductions to the allowance, based on information available to them at the time of their examination

Other-Than-Temporary Impairments On Investment Securities

Other-Than-Temporary Impairments on Investment Securities: One of the significant estimates relating to securities is the evaluation of other-than-temporary impairment ("OTTI"). If a decline in the fair value of a security is judged to be other-than-temporary, and management does not intend to sell the security and believes it is more-likely-than-not the Company will not be required to sell the security prior to recovery of cost or amortized cost, the portion of the total impairment attributable to the credit loss is recognized in earnings, and the remaining difference between the security's amortized cost basis and its fair value is included in other comprehensive income.

For impaired available for sale debt securities that management intends to sell, or where management believes it is more-likely-than-not that the Company will be required to sell, an OTTI charge is recognized in earnings equal to the difference between fair value and cost or amortized cost basis of the security. The fair value of the OTTI security becomes its new cost basis.

The evaluation of securities for impairments is a quantitative and qualitative process, which is subject to risks and uncertainties and is intended to determine whether declines in the fair value of securities should be recognized in current period earnings. The risks and uncertainties include changes in general economic conditions, the issuer's financial condition and/or future prospects, the effects of changes in interest rates or credit spreads and the expected recovery period of unrealized losses. The Company has a security monitoring process that identifies securities that, due to certain characteristics, as described below, are subjected to an enhanced analysis on a quarterly basis.

Securities that are in an unrealized loss position are reviewed at least quarterly to determine if an OTTI is present based on certain quantitative and qualitative factors and measures. The primary factors considered in evaluating whether a decline in value of securities is other-than-temporary include: (a) the cause of the impairment; (b) the financial condition, credit rating and future prospects of the issuer; (c) whether the debtor is current on contractually obligated interest and principal payments; (d) the volatility of the securities' fair value; (e) performance indicators of the underlying assets in the security including default rates, delinquency rates, percentage of non-performing assets, loan to collateral value ratios, conditional payment rates, third party guarantees, current levels of subordination, vintage, and geographic concentration and; (f) any other information and observable data considered relevant in determining whether an OTTI has occurred, including the expectation of the receipt of all principal and interest due.

In addition, for securitized financial assets with contractual cash flows, such as private label mortgage-backed securities ("MBS"), the Company periodically updates its best estimate of cash flows over the life of the security. The Company's best estimate of cash flows is based upon assumptions consistent with the current economic environment, similar to those the Company believes market participants would use. If the fair value of a securitized financial asset is less than its cost or amortized cost and there has been an adverse change in timing or amount of anticipated future cash flows since the last revised estimate to the extent that the Company does not expect to receive the entire amount of future contractual principal and interest, an OTTI charge is recognized in earnings representing the estimated credit loss if management does not intend to sell the security and believes it is more-likely-than-not the Company will not be required to sell the security prior to recovery of cost or amortized cost. Estimating future cash flows is a quantitative and qualitative process that incorporates information received from third party sources along with certain assumptions and judgments regarding the future performance of the underlying collateral. In addition, projections of expected future cash flows may change based upon new information regarding the performance of the underlying collateral.

Income Taxes

Goodwilland Identifiable Intangible Assets: In connection with acquisitions, the Company generally records as assets on its consolidated financial statements both goodwill and identifiable intangible assets, such as core deposit intangibles.

The Company evaluates whether the carrying value of its goodwill has become impaired, in which case the value is reduced through a charge to its earnings. Goodwill is evaluated for impairment at least annually, or upon a triggering event using certain fair value techniques. Goodwill impairment testing is performed at the segment (or "reporting unit") level. Goodwill is assigned to reporting units at the date the goodwill is initially recorded. Once goodwill has been assigned to the reporting units, it no longer retains its association with a particular acquisition, and all of the activities within a reporting unit, whether acquired or organically grown, are available to support the value of the goodwill.

Goodwill And Identifiable Intangible Assets

Goodwilland Identifiable Intangible Assets: In connection with acquisitions, the Company generally records as assets on its consolidated financial statements both goodwill and identifiable intangible assets, such as core deposit intangibles.

The Company evaluates whether the carrying value of its goodwill has become impaired, in which case the value is reduced through a charge to its earnings. Goodwill is evaluated for impairment at least annually, or upon a triggering event using certain fair value techniques. Goodwill impairment testing is performed at the segment (or "reporting unit") level. Goodwill is assigned to reporting units at the date the goodwill is initially recorded. Once goodwill has been assigned to the reporting units, it no longer retains its association with a particular acquisition, and all of the activities within a reporting unit, whether acquired or organically grown, are available to support the value of the goodwill.

Goodwill represents the excess of the purchase price over the fair value of net assets acquired in accordance with the purchase method of accounting for business combinations. Goodwill is not amortized but, instead, is subject to impairment tests on at least an annual basis or more frequently if an event occurs or circumstances change that reduce the fair value of a reporting unit below its carrying amount. The Company completes its annual goodwill impairment test as of December 31 of each year. The impairment testing process is conducted by assigning assets and goodwill to each reporting unit. Currently, the Company's goodwill is evaluated at the entity level as there is only one reporting unit. The Company first assesses certain qualitative factors to determine if it is more likely than not that the fair value of the reporting unit is less than its carrying value. If it is more likely than not that the fair value of the reporting unit is less than the carrying value, then the fair value of each reporting unit is compared to the recorded book value "step one." If the fair value of the reporting unit exceeds its carrying value, goodwill is not considered impaired and "step two" is not considered necessary. If the carrying value of a reporting unit exceeds its fair value, the impairment test continues ("step two") by comparing the carrying value of the reporting unit's goodwill to the implied fair value of goodwill. The implied fair value is computed by adjusting all assets and liabilities of the reporting unit to current fair value with the offset adjustment to goodwill. The adjusted goodwill balance is the implied fair value of the goodwill. An impairment charge is recognized if the carrying fair value of goodwill exceeds the implied fair value of goodwill. At December 31, 2013, there was no indication of impairment that led the Company to believe it needed to perform a two-step test.

Any changes in the estimates used by the Company to determine the carrying value of its goodwill, or which otherwise adversely affect their value or estimated lives, would adversely affect the Company's consolidated results of operations.

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Commitments And Contingent Liabilities

6 Months Ended

Jun. 30, 2014

Commitments And Contingent Liabilities [Abstract]

Commitments And Contingent Liabilities

Note 10: Commitments and Contingent Liabilities

The Bank is a party to financial instruments in the normal course of business to meet financing needs of its customers. These financial instruments include commitments to extend credit, unused lines of credit, and standby letters of credit.

Commitments to originate loans, including unused lines of credit, are agreements to lend to a customer provided there is no violation of any condition established in the contract. Commitments generally have fixed expiration dates or other termination clauses and may require payment of a fee. Since many of the commitments are expected to expire without being drawn upon, the total commitment amounts do not necessarily represent future cash requirements. The Bank uses the same credit policy to make such commitments as it uses for on-balance-sheet items, such as loans. The Bank evaluates each customer's creditworthiness on a case-by-case basis. The amount of collateral obtained, if deemed necessary by the Bank upon extension of credit, is based on management's credit evaluation of the borrower.

The Bank guarantees the obligations or performance of customers by issuing standby letters of credit to third parties. These standby letters of credit are primarily issued in support of third party debt or obligations. The risk involved in issuing standby letters of credit is essentially the same as the credit risk involved in extending loan facilities to customers, and they are subject to the same credit origination, portfolio maintenance and management procedures in effect to monitor other credit and off-balance sheet instruments. Exposure to credit loss in the event of non-performance by the counter-party to the financial instrument for standby letters of credit is represented by the contractual amount of those instruments. Typically, these standby letters of credit have terms of five years or less and expire unused; therefore, the total amounts do not necessarily represent future cash requirements.

The following table summarizes the contractual amounts of commitments and contingent liabilities as of June 30, 2014, and December 31, 2013:

		June 30,		December 31,
		2014		2013
Commitments to originate loans	$	21,055	$	10,269
Unused lines of credit	$	93,204	$	98,486
Un-advanced portions of construction loans	$	18,001	$	12,203
Standby letters of credit	$	325	$	378

As of June 30, 2014, and December 31, 2013, the fair value of the standby letters of credit was not significant to the Company's consolidated financial statements.

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Loans And Allowance For Loan Losses

6 Months Ended

Jun. 30, 2014

Loans And Allowance For Loan Losses [Abstract]

Loans And Allowance For Loan Losses

Note 6: Loans and Allowance for Loan Losses

Loans are carried at the principal amounts outstanding adjusted by partial charge-offs and net deferred loan origination costs or fees.

Interest on loans is accrued and credited to income based on the principal amount of loans outstanding. Residential real estate and home equity loans are generally placed on non-accrual status when reaching 90 days past due, or in process of foreclosure, or sooner if judged appropriate by management. Consumer loans are generally placed on non-accrual status when reaching 90 days or more past due, or sooner if judged appropriate by management. Secured consumer loans are written down to realizable value and unsecured consumer loans are charged-off upon reaching 120 days past due. Commercial real estate loans and commercial business loans that are 90 days or more past due are generally placed on non-accrual status, unless secured by sufficient cash or other assets immediately convertible to cash, and the loan is in the process of collection. Commercial real estate and commercial business loans may be placed on non-accrual status prior to the 90 days delinquency date if considered appropriate by management. When a loan has been placed on non-accrual status, previously accrued and uncollected interest is reversed against interest on loans. A loan can be returned to accrual status when principal is reasonably assured and the loan has performed for a period of time, generally six months.

Commercial real estate and commercial business loans are considered impaired when it becomes probable the Bank will not be able to collect all amounts due according to the contractual terms of the loan agreement. Factors considered by management in determining impairment include payment status and collateral value. In considering loans for evaluation of impairment, management generally excludes smaller balance, homogeneous loans, residential mortgage loans, home equity loans, and all consumer loans, unless such loans were restructured in a troubled debt restructuring. These loans are collectively evaluated for risk of loss.

Loan origination, commitment fees and direct loan origination costs are deferred, and the net amount is amortized as an adjustment of the related loans' yield, using the level yield method over the estimated lives of the related loans.

The Company's lending activities are principally conducted in downeast, midcoast and central Maine. The following table summarizes the composition of the loan portfolio as of June 30, 2014, and December 31, 2013:

LOAN PORTFOLIO SUMMARY

		June 30,			December 31,
		2014			2013
Commercial real estate mortgages	$	329,948		$	336,542
Commercial and industrial		81,978			73,972
Commercial construction and land development		13,201			18,129
Agricultural and other loans to farmers		29,566			26,929
Total commercial loans		454,693			455,572
Residential real estate mortgages		364,908			317,115
Home equity loans		49,696			49,565
Other consumer loans		13,279			14,523
Total consumer loans		427,883			381,203
Tax exempt loans		18,543			16,355
Net deferred loan costs and fees		(183	)		(273	)
Total loans		900,936			852,857
Allowance for loan losses		(8,751	)		(8,475	)
Total loans net of allowance for loan losses	$	892,185		$	844,382

Loan Origination/Risk Management: The Bank has certain lending policies and procedures in place that are designed to maximize loan income within an acceptable level of risk. The Bank's board of directors reviews and approves these policies and procedures on a regular basis. A reporting system supplements the review process by providing management and the board with frequent reports related to loan production, loan quality, concentrations of credit, loan delinquencies and non-performing loans and potential problem loans. The Bank seeks to diversify the loan portfolio as a means of managing risk associated with fluctuations in economic conditions.

Commercial Real Estate Mortgages: The Bank's commercial real estate mortgage loans are collateralized by liens on real estate, typically have variable interest rates and amortize over a 15 to 20 year period. These loans are underwritten primarily as cash flow loans and secondarily as loans secured by real estate. Payments on loans secured by such properties are largely dependent on the successful operation of the property securing the loan or the business conducted on the property securing the loan. Accordingly, repayment of these loans may be subject to adverse economic conditions to a greater extent than other types of loans. The Bank seeks to minimize these risks in a variety of ways, including giving careful consideration to the property's operating history, future operating projections, current and projected occupancy, location and physical condition in connection with underwriting these loans. The underwriting analysis also includes credit verification, analysis of global cash flows, appraisals and a review of the financial condition of the borrower. Reflecting the Bank's business region, at June 30, 2014, approximately 33.9% of the commercial real estate mortgage portfolio was represented by loans to the lodging industry. The Bank underwrites lodging industry loans as operating businesses, lending primarily to seasonal establishments with stabilized cash flows.

Commercial and Industrial Loans: Commercial and industrial loans are underwritten after evaluating and understanding the borrower's ability to operate profitably, and prudently expand its business. Commercial and industrial loans are primarily made in the Bank's market areas and are underwritten on the basis of the borrower's ability to service the debt from income. As a general practice, the Bank takes as collateral a lien on any available real estate, equipment or other assets owned by the borrower and obtains a personal guaranty of the borrower(s) or principal(s). Working capital loans are primarily collateralized by short-term assets whereas term loans are primarily collateralized by long-term assets. The risk in commercial and industrial loans is principally due to the type of collateral securing these loans. The increased risk also derives from the expectation that commercial and industrial loans generally will be serviced principally from the operations of the business, and, if not successful, these loans are primarily secured by tangible, non-real estate collateral.

Construction and Land Development Loans: The Bank makes loans to finance the construction of residential and, to a lesser extent, non-residential properties. Construction loans generally are collateralized by first liens on real estate. The Bank conducts periodic inspections, either directly or through an agent, prior to approval of periodic draws on these loans. Underwriting guidelines similar to those described immediately above are also used in the Bank's construction lending activities. Construction loans involve additional risks attributable to the fact that loan funds are advanced against a project under construction and the project is of uncertain value prior to its completion. Because of uncertainties inherent in estimating construction costs, the market value of the completed project and the effects of governmental regulation on real property, it can be difficult to accurately evaluate the total funds required to complete a project and the related loan to value ratio. As a result of these uncertainties, construction lending often involves the disbursement of substantial funds with repayment dependent, in part, on the success of the ultimate project rather than the ability of a borrower or guarantor to repay the loan. In many cases the success of the project can also depend upon the financial support/strength of the sponsorship. If the Bank is forced to foreclose on a project prior to completion, there is no assurance that the Bank will be able to recover the entire unpaid portion of the loan. In addition, the Bank may be required to fund additional amounts to complete a project and may have to hold the property for an indeterminate period of time. While the Bank has underwriting procedures designed to identify what it believes to be acceptable levels of risks in construction lending, no assurance can be given that these procedures will prevent losses from the risks described above.

Residential Real Estate Mortgages: The Bank originates first-lien, adjustable-rate and fixed-rate, one-to-four-family residential real estate loans for the construction, purchase or refinancing of residential property. These loans are principally collateralized by owner-occupied properties, and to a lesser extent second homes and vacation properties, and are amortized over 10 to 30 years. From time to time the Bank will sell longer-term, low rate, residential mortgage loans to the Federal Home Loan Mortgage Corporation("FHLMC") with servicing rights retained. This practice allows the Bank to better manage interest rate risk and liquidity risk. In an effort to manage risk of loss and strengthen secondary market liquidity opportunities, management typically uses secondary market underwriting, appraisal, and servicing guidelines for all loans, including those held in its portfolio. Loans on one-to-four-family residential real estate are mostly originated in amounts of no more than 80% of appraised value or have private mortgage insurance. Mortgage title insurance and hazard insurance are required. Construction loans have a unique risk, because they are secured by an incomplete dwelling. This risk is reduced through more stringent underwriting standards, including regular inspections throughout the construction period.

Home Equity Loans: The Bank originates home equity lines of credit and second mortgage loans (loans which are secured by a junior lien position on one-to-four-family residential real estate). These loans carry a higher risk than first mortgage residential loans as they are in a second position relating to collateral. Risk is reduced through underwriting criteria, which include credit verification, appraisals and evaluations, a review of the borrower's financial condition, and personal cash flows. A security interest, with title insurance when necessary, is taken in the underlying real estate.

Non-performing Loans: the following table sets forth information regarding non-accruing loans and accruing loans 90 days or more overdue at June 30, 2014, and December 31, 2013.

TOTAL NON-PERFORMING LOANS

		June 30,		December 31,
		2014		2013
Commercial real estate mortgages	$	1,505	$	2,046
Commercial and industrial loans		1,155		793
Commercial construction and land development		1,328		1,913
Agricultural and other loans to farmers		76		56
Total commercial loans		4,064		4,808
Residential real estate mortgages		2,752		3,227
Home equity loans		644		745
Other consumer loans		40		60
Total consumer loans		3,436		4,032
Total non-accrual loans		7,500		8,840
Accruing loans contractually past due 90 days or more		345	-	--
Total non-performing loans	$	7,845	$	8,840

Troubled Debt Restructures: A Troubled Debt Restructure ("TDR") results from a modification to a loan to a borrower who is experiencing financial difficulty in which the Bank grants a concession to the debtor that it would not otherwise consider but for the debtor's financial difficulties. Financial difficulty arises when a debtor is bankrupt or contractually past due, or is likely to become so, based upon its ability to pay. A concession represents an accommodation not generally available to other customers, which may include a below-market interest rate, deferment of principal payments, extension of maturity dates, etc. Such accommodations extended to customers who are not experiencing financial difficulty do not result in TDR classification.

There were no TDRs that occurred during the three and six months ended June 30, 2014.

Summary information pertaining to the TDRs that occurred during the three and six months ended June 30, 2013 follows:

	For the Three Months Ended					For the Six Months Ended
	June 30,					June 30,
	2013					2013
			Pre-		Post-			Pre-		Post-
			Modification		Modification			Modification		Modification
			Outstanding		Outstanding			Outstanding		Outstanding
	Number		Recorded		Recorded	Number		Recorded		Recorded
	of Loans		Investment		Investment	of Loans		Investment		Investment
Commercial and industrial loans	1	$	49	$	49	1	$	49	$	49
Total commercial loans	1		49		49	1		49		49
Residential real estate mortgages	0	$	---	$	---	0	$	---	$	---
Home equity loans	0	-	--	-	--	1		16		21
Other consumer loans	0	-	--	-	--	1		14		14
Total consumer loans	0	-	--	-	--	2		30		35
Total	1	$	49	$	49	3	$	79	$	84

The following table shows the Bank's post-modification balance of TDRs listed by type of modification for the three and six months ended June 30, 2013:

		June 30, 2013
		Three
		Months		Six Months
		Ended		Ended
Extended maturity and adjusted interest rate	$	49	$	84
Temporary payment amount adjustment	-	--	-	--
Court ordered concession	-	--	-	--
Total	$	49	$	84

As of June 30, 2014, the Bank had six real estate secured loans, six commercial and industrial loans, and one other consumer loan, to eight relationships totaling $1,416 that were classified as TDRs. At June 30, 2014, seven of these TDRs totaling $397 were classified as non-accrual, and none were past due 30 days or more and still accruing.

During the six months ended June 30, 2014 and 2013, there were no defaults on loans that had been modified as TDRs within the previous twelve months. A default for purposes of this disclosure is a TDR in which the borrower is 90 days or more past due or results in foreclosure and repossession of the applicable collateral.

As of December 31, 2013, the Bank had six real estate secured, six commercial and industrial loans and one other consumer loan to eight relationships totaling $1,454 that were classified as TDRs. At December 31, 2013, seven TDR's totaling $416 were past due or classified as non-performing.

Past Due Loans: Loans are considered past due if the required principal and interest payments have not been received as of the date such payments were due. The following tables set forth information regarding past due loans at June 30, 2014, and December 31, 2013. Amounts shown exclude deferred loan origination fees and costs.

																>90 Days
June 30, 2014		30-59		60-89		90										Past Due
		Days		Days		Days or		Total				Total				and
		Past Due		Past Due		Greater		Past Due		Current		Loans		Non-Accrual		Accruing
Commercial real
estate mortgages	$	718	$	952	$	644	$	2,314		327,634	$	329,948	$	1,505	$	---
Commercial and industrial		53		517		529		1,099		80,879		81,978		1,155	-	--
Commercial construction
and land development	-	--	-	--		1,328		1,328		11,873		13,201		1,328	-	--
Agricultural and other
loans to farmers		169		78		25		272		29,294		29,566		76	-	--
Residential real estate
mortgages		701		729		1,555		2,985		361,923		364,908		2,752		345
Home equity		484		9		246		739		48,957		49,696		644	-	--
Other consumer loans		72		57		24		153		13,126		13,279		40	-	--
Tax exempt	-	--	-	--	-	--	-	--		18,543		18,543	-	--	-	--
Total	$	2,197	$	2,342	$	4,351	$	8,890	$	892,229	$	901,119	$	7,500	$	345

																>90 Days
		30-59				90 Days										Past Due
December 31, 2013		Days Past		60-89 Days		or		Total Past				Total				and
		Due		Past Due		Greater		Due		Current		Loans		Non-Accrual		Accruing
Commercial real
estate mortgages	$	786	$	361	$	698		1,845		334,697	$	336,542	$	2,046	$	---
Commercial and industrial		29		20		456		505		73,467		73,972		793		---
Commercial construction
and land development	-	--	-	--		1,845		1,845		16,284		18,129		1,913		---
Agricultural and other
loans to farmers		22	-	--	-	--		22		26,907		26,929		56		---
Residential real estate
mortgages		2,170		1,864		1,649		5,683		311,432		317,115		3,227		---
Home equity		67	-	--	-	--		67		49,498		49,565		745		---
Other consumer loans		57		80		41		178		14,345		14,523		60		---
Tax exempt	-	--	-	--	-	--	-	--		16,355		16,355	-	--		---
Total	$	3,131	$	2,325	$	4,689	$	10,145	$	842,985	$	853,130	$	8,840	$	---

Impaired Loans: Impaired loans are all commercial loans for which the Company believes it is probable that it will be unable to collect all amounts due according to the contractual terms of the loan agreement, as well as all loans modified into a TDR, if any. Allowances for losses on impaired loans are determined by the lower of the present value of the expected cash flows related to the loan, using the original contractual interest rate, and its recorded value, or in the case of collateral dependant loans, the lower of the fair value of the collateral, less costs to dispose, and the recorded amount of the loans. When foreclosure is probable, impairment is measured based on the fair value of the collateral less cost to sell.

Details of impaired loans as of June 30, 2014 and December 31, 2013 follows:

		June 30, 2014							December 31, 2013
					Unpaid						Unpaid
			Recorded		Principal		Related		Recorded		Principal		Related
			Investment		Balance		Allowance		Investment Balance Allowance
With no related allowance:
Commercial real estate mortgages	$		2,022	$	2,241	$	---	$	1,949	$	2,103	$	---
Commercial and industrial			712		822	-	--		660		770	-	--
Commercial construction and
land development			1,328		3,253	-	--		68		68	-	--
Agricultural and other loans to farmers			76		76	-	--		56		56	-	--
Residential real estate loans			439		469	-	--		442		442	-	--
Home equity loans			20		20	-	--		21		21	-	--
Other consumer			12		12	-	--		13		13	-	--
Subtotal	$		4,609	$	6,893	$	---	$	3,209	$	3,473	$	---
With an allowance:
Commercial real estate mortgages	$		229	$	229	$	68	$	854	$	854	$	100
Commercial and industrial			457		537		367		150		150		150
Commercial construction and
land development		-	--	-	--	-	--		1,845		3,770		20
Agricultural and other loans to farmers		-	--	-	--	-	--	-	--	-	--	-	--
Residential real estate loans		-	--	-	--	-	--	-	--	-	--	-	--
Home equity loans		-	--	-	--	-	--	-	--	-	--	-	--
Other consumer		-	--	-	--	-	--	-	--	-	--	-	--
Subtotal	$		686	$	766	$	435	$	2,849	$	4,774	$	270
Total	$		5,295	$	7,659	$	435	$	6,058	$	8,247	$	270

Details of impaired loans for the three and six months ended June 30, 2014 and 2013 follows:

			June 30, 2014								June 30, 2013
			Three Months Ended				Six Months Ended				Three Months Ended				Six Months Ended
			Average				Average				Average				Average
			Recorded		Interest		Recorded		Interest		Recorded		Interest		Recorded		Interest
			Investment		Recorded		Investment		Recorded		Investment		Recorded		Investment		Recorded
With no related allowance:
Commercial real
estate mortgages	$		2,075	$	16	$	2,191	$	31	$	2,294	$	17	$	2,253	$	34
Commercial and
industrial			764		1		754		2		597		1		757		3
Commercial construction
and land development			1,504	-	--		1,702	-	--	-	--	-	--	-	--	-	--
Agricultural and other
loans to farmers			60	-	--		61	-	--		323	-	--		452	-	--
Residential real
estate mortgages			491		3		492		6		266		1		267		1
Home equity loans			20		1		20		1		21		1		20		1
Other consumer			12	-	--		12	-	--		14	-	--		14		1
Subtotal	$		4,926	$	21	$	5,232	$	40	$	3,515	$	20	$	3,763	$	40
With an allowance:
Commercial real
estate mortgages	$		297	$	---	$	379	$	---	$	207	$	---	$	223	$	---
Commercial and
industrial			536	-	--		389	-	--	-	--	-	--	-	--	-	--
Commercial construction
and land development		-	--	-	--	-	--	-	--		2,029	-	--		2,131	-	--
Agricultural and other
loans to farmers		-	--	-	--	-	--	-	--	-	--	-	--	-	--	-	--
Residential real
estate mortgages		-	--	-	--	-	--	-	--	-	--	-	--	-	--	-	--
Home equity loans		-	--	-	--	-	--	-	--	-	--	-	--	-	--	-	--
Other consumer		-	--	-	--	-	--	-	--	-	--	-	--	-	--	-	--
Subtotal	$		833	$	---	$	768	$	---	$	2,236	$	---	$	2,354	$	---
Total	$		5,759	$	21	$	6,000	$	40	$	5,751	$	20	$	6,117	$	40

Credit Quality Indicators/Classified Loans: In monitoring the credit quality of the portfolio, management applies a credit quality indicator to all categories of commercial loans. These credit quality indicators range from one through nine, with a higher number correlating to increasing risk of loss. These ratings are used as inputs to the calculation of the allowance for loan losses. Loans rated one through five are consistent with the regulators' Pass ratings, and are generally allocated a lesser percentage allocation in the allowance for loan losses than loans rated from six through nine.

Consistent with regulatory guidelines, the Bank provides for the classification of loans which are considered to be of lesser quality as substandard, doubtful, or loss. The Bank considers a loan substandard if it is inadequately protected by the current net worth and paying capacity of the borrower or of the collateral pledged, if any. Substandard loans have a well defined weakness that jeopardizes liquidation of the debt. Substandard loans include those loans where there is the distinct possibility of some loss of principal, if the deficiencies are not corrected.

Loans that the Bank classifies as doubtful have all of the weaknesses inherent in those loans that are classified as substandard but also have the added characteristic that the weaknesses present make collection or liquidation in full, on the basis of currently existing facts, conditions, and values, highly questionable and improbable. The possibility of loss is high but because of certain important and reasonably specific pending factors which may work to the advantage and strengthening of the loan, its classification as an estimated loss is deferred until its more exact status may be determined. Pending factors include proposed merger, acquisition, or liquidation procedures, capital injection, perfecting liens on additional collateral and refinancing plans. The entire amount of the loan might not be classified as doubtful when collection of a specific portion appears highly probable. Loans are generally not classified doubtful for an extended period of time (i.e., over a year).

Loans that the Bank classifies as loss, are those considered uncollectible and of such little value that their continuance as an asset is not warranted and the uncollectible amounts are charged-off. This classification does not mean that the asset has absolutely no recovery or salvage value, but rather it is not practical or desirable to defer writing off this basically worthless asset even though partial recovery may be affected in the future. Losses are taken in the period in which they surface as uncollectible.

Loans that do not expose the Bank to risk sufficient to warrant classification in one of the aforementioned categories, but which possess some weaknesses, are designated special mention. A special mention loan has potential weaknesses that deserve management's close attention. If left uncorrected, these potential weaknesses may result in deterioration of the repayment prospects for the asset or in the institution's credit position at some future date. This might include loans which the lending officer may be unable to supervise properly because of: lack of expertise, inadequate loan agreement, the poor condition of or lack of control over collateral, failure to obtain proper documentation or any other deviations from prudent lending practices. Economic or market conditions which may, in the future, affect the obligor may warrant special mention of the asset. Loans for which an adverse trend in the borrower's operations or an imbalanced position in the balance sheet which has not reached a point where the liquidation is jeopardized may be included in this classification. Special mention assets are not adversely classified and do not expose an institution to sufficient risks to warrant classification.

The following tables summarize the commercial loan portfolio as of June 30, 2014, and December 31, 2013, by credit quality indicator. Credit quality indicators are reassessed for each applicable commercial loan at least annually, or upon receipt and analysis of the borrower's financial statements, when applicable. Consumer loans, which principally consist of residential mortgage loans, are not rated, but are evaluated for credit quality after origination based on delinquency status (see past due loan aging table above).

						Commercial		Agricultural
		Commercial		Commercial		construction		and other
		real estate		and		and land		loans to
June 30, 2014		mortgages		industrial		development		farmers		Total
Pass	$	300,965	$	69,023	$	9,984	$	29,084	$	409,056
Other Assets
Especially Mentioned		19,071		9,529		424		178		29,202
Substandard		9,912		3,426		2,793		304		16,435
Doubtful	-	--	-	--	-	--	-	--	-	--
Loss	-	--	-	--	-	--	-	--	-	--
Total	$	329,948	$	81,978	$	13,201	$	29,566	$	454,693

						Commercial		Agricultural
		Commercial		Commercial		construction		and other
		real estate		and		and land		loans to
December 31, 2013		mortgages		industrial		development		farmers		Total
Pass	$	307,486	$	60,330	$	14,403	$	26,447	$	408,666
Other Assets
Especially Mentioned		19,768		10,568		437		182		30,955
Substandard		9,288		3,074		3,289		300		15,951
Doubtful	-	--	-	--	-	--	-	--	-	--
Loss	-	--	-	--	-	--	-	--	-	--
Total	$	336,542	$	73,972	$	18,129	$	26,929	$	455,572

Allowance for Loan Losses: The allowance for loan losses (the "allowance") is a reserve established through a provision for loan losses (the "provision") charged to expense, which represents management's best estimate of probable losses that have been incurred within the existing portfolio of loans. The allowance, in the judgment of management, is necessary to provide for estimated loan losses and risks inherent in the loan portfolio. The Bank's allowance for loan loss methodology includes allowance allocations calculated in accordance with ASC Topic 310, "Receivables" and allowance allocations calculated in accordance with ASC Topic 450, "Contingencies." Accordingly, the methodology is based on historical loss experience by type of credit and internal risk grade, specific homogeneous risk pools and specific loss allocations, with adjustments for current events and conditions. The Bank's process for determining the appropriate level of the allowance is designed to account for credit deterioration as it occurs. The provision reflects loan quality trends, including the levels of and trends related to non-accrual loans, past due loans, potential problem loans, criticized loans and net charge-offs or recoveries, among other factors. The provision also reflects the totality of actions taken on all loans for a particular period. In other words, the amount of the provision reflects not only the necessary increases in the allowance related to newly identified criticized loans, but it also reflects actions taken related to other loans including, among other things, any necessary increases or decreases in required allowances for specific loans or loan pools.

The level of the allowance reflects management's continuing evaluation of industry concentrations, specific credit risks, loan loss experience, current loan portfolio quality, present economic, political and regulatory conditions and unidentified losses inherent in the current loan portfolio. While management utilizes its best judgment and information available, the ultimate adequacy of the allowance is dependent upon a variety of factors beyond the Bank's control, including, among other things, the performance of the Bank's loan portfolio, the economy, changes in interest rates and the view of the regulatory authorities toward loan classifications.

The Bank's allowance for loan losses consists of three principal elements: (i) specific valuation allowances determined in accordance with ASC Topic 310 based on probable losses on specific loans; (ii) historical valuation allowances determined in accordance with ASC Topic 450 based on historical loan loss experience for similar loans with similar characteristics and trends, adjusted, as necessary, to reflect the impact of current conditions; and (iii) general valuation allowances determined in accordance with ASC Topic 450 based on general economic conditions and other qualitative risk factors both internal and external to the Bank.

The allowances established for probable losses on specific loans are based on a regular analysis and evaluation of problem loans. Loans are classified based on an internal credit risk grading process that evaluates, among other things: (i) the obligor's ability to repay; (ii) the underlying collateral, if any; and (iii) the economic environment and industry in which the borrower operates. This analysis is performed at the relationship level for all commercial loans. When a loan has a classification of substandard or worse, the Bank analyzes the loan to determine whether the loan is impaired and, if impaired, the need to specifically allocate a portion of the allowance to the loan. Specific valuation allowances are determined by analyzing the borrower's ability to repay amounts owed, collateral deficiencies, the relative risk grade of the loan and economic conditions affecting the borrower's industry, among other observable considerations.

Historical valuation allowances are calculated based on the historical loss experience of specific types of loans and the internal risk grade of such loans at the time they were charged-off. The Bank calculates historical loss ratios for pools of similar loans with similar characteristics based on the proportion of actual charge-offs experienced to the total population of loans in the pool. The historical loss ratios are periodically updated based on actual charge-off experience. A historical valuation allowance is established for each pool of similar loans based upon the product of the historical loss ratio and the total dollar amount of the loans in the pool, net of any loans for which reserves are already established. The Bank's pools of similar loans include similarly risk-graded groups of commercial real estate loans, commercial and industrial loans, consumer real estate loans and consumer and other loans.

General valuation allowances are based on general economic conditions and other qualitative risk factors both internal and external to the Bank. In general, such valuation allowances are determined by evaluating, among other things: (i) the experience, ability and effectiveness of the Bank's lending management and staff; (ii) the effectiveness of the Bank's loan policies, procedures and internal controls; (iii) changes in asset quality; (iv) changes in loan portfolio volume; (v) the composition and concentrations of credit; (vi) the impact of competition on loan structuring and pricing; (vii) the effectiveness of the internal loan review function; (viii) the impact of environmental risks on portfolio risks; and (ix) the impact of rising interest rates on portfolio risk. Management evaluates the degree of risk that each one of these components has on the quality of the loan portfolio on a quarterly basis. The results are then used to determine an appropriate general valuation allowance.

Loans identified as losses by management, external loan review and/or bank examiners, are charged-off. Furthermore, consumer loan accounts are charged-off based on regulatory requirements.

The following tables detail activity in the allowance for loan losses by portfolio segment for the three and six months ended June 30, 2014, and 2013. The tables also provide details regarding the Bank's recorded investment in loans related to each balance in the allowance for loan losses by portfolio segment and disaggregated on the basis of the Bank's impairment methodology. Allocation of a portion of the allowance to one category of loans does not preclude its availability to absorb losses in other categories.

								Commercial
Three Months					Commercial			Construction
Ended June 30,		Commercial			and			and land				Residential						Home		Tax
2014		Real Estate			Industrial			development		Agricultural		Real Estate			Consumer			Equity		Exempt			Total
Beginning Balance	$	4,735		$	1,654		$	231	$	350	$	1,128		$	206		$	239	$	179		$	8,722
Charged-off		(165	)		(88	)	-	--	-	--		(125	)		(63	)	-	--	-	--			(441	)
Recoveries	-	---			10		-	--		15		11			6		-	--	-	--			42
Provision		317			(3	)		23		6		135			(46	)		2		(6	)		428
Ending Balance	$	4,887		$	1,573		$	254	$	371	$	1,149		$	103		$	241	$	173		$	8,751

								Commercial
Six Months					Commercial			Construction
Ended June 30,		Commercial			and			and land						Residential						Home			Tax
2014		Real Estate			Industrial			development			Agricultural			Real Estate			Consumer			Equity			Exempt		Total
Beginning Balance	$	4,825		$	1,266		$	314		$	335		$	1,166		$	137		$	264		$	168	$	8,475
Charged-off		(165	)		(99	)	-	--			(14	)		(293	)		(80	)		(18	)	-	--		(669	)
Recoveries		6			12		-	--			15			12			15		-	--		-	--		60
Provision		221			394			(60	)		35			264			31			(5	)		5		885
Ending Balance	$	4,887		$	1,573		$	254		$	371		$	1,149		$	103		$	241		$	173	$	8,751
of which:
Amount for loans
individually
evaluated for
impairment	$	68		$	367		$	---		$	---		$	---		$	---		$	---		$	---	$	435
Amount for loans
collectively
evaluated for
impairment	$	4,819		$	1,206		$	254		$	371		$	1,149		$	103		$	241		$	173	$	8,316
Loans individually
evaluated
for impairment	$	1,505		$	1,155		$	1,328		$	76		$	---		$	---		$	---		$	---	$	4,064
Loans collectively
evaluated
for impairment	$	328,443		$	80,823		$	11,873		$	29,490		$	364,908		$	13,279		$	49,696		$	18,543	$	897,055

								Commercial
Three Months					Commercial			Construction
Ended June 30,		Commercial			and			and land					Residential						Home			Tax
2013		Real Estate			Industrial			development		Agricultural			Real Estate			Consumer			Equity			Exempt		Total
Beginning Balance	$	4,413		$	1,011		$	340	$	337		$	1,354		$	197		$	264		$	139	$	8,055
Charged-off		(84	)		(14	)	-	--		(81	)		(59	)		(40	)		(25	)	-	--		(303	)
Recoveries		3		-	--		-	--	-	--			1			5			1		-	--		10
Provision		103			65			15		67			125			(15	)		30			15		405
Ending Balance	$	4,435		$	1,062		$	355	$	323		$	1,421		$	147		$	270		$	154	$	8,167

								Commercial
Six Months					Commercial			Construction
Ended June 30,		Commercial			and			and land						Residential						Home			Tax
2013		Real Estate			Industrial			development			Agricultural			Real Estate			Consumer			Equity			Exempt		Total
Beginning Balance	$	4,320		$	1,026		$	515		$	303		$	1,330		$	207		$	255		$	141	$	8,097
Charged-off		(84	)		(178	)	-	--			(81	)		(287	)		(68	)		(34	)	-	--		(732	)
Recoveries		3			10		-	--			1			1			10			19		-	--		44
Provision		196			204			(160	)		100			377			(2	)		30			13		758
Ending Balance	$	4,435		$	1,062		$	355		$	323		$	1,421		$	147		$	270		$	154	$	8,167

Loan concentrations: Because of the Company's proximity to Acadia National Park, a large part of the economic activity in the Bank's area is generated from the hospitality business associated with tourism. At June 30, 2014, and December 31, 2013, loans to the lodging industry amounted to approximately $117,389 and $114,982, respectively.

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Fair Value Of Financial Instruments (Summary Of The Carrying Values And Estimated Fair Values Of Financial Instruments) (Details) (USD $) In Thousands, unless otherwise specified	Jun. 30, 2014	Dec. 31, 2013
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Time deposits	$ 404,959	$ 395,588
Carrying Value [Member]
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Cash and cash equivalents	11,791	9,200
Federal Home Loan Bank stock	21,196	18,370
Loans, net	892,185	844,382
Interest receivable	5,692	4,788
Deposits (with no stated maturity)	432,012	440,063
Time deposits	404,959	395,588
Borrowings	470,967	409,445
Interest payable	497	514
Level 1 Inputs [Member]
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Cash and cash equivalents	11,791	9,200
Interest receivable	5,692	4,788
Interest payable	497	514
Level 2 Inputs [Member]
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Federal Home Loan Bank stock	21,196	18,370
Deposits (with no stated maturity)	432,012	440,063
Time deposits	406,140	398,668
Borrowings	472,080	411,298
Level 3 Inputs [Member]
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Loans, net	896,937	850,190
Fair Value [Member]
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Cash and cash equivalents	11,791	9,200
Federal Home Loan Bank stock	21,196	18,370
Loans, net	896,937	850,190
Interest receivable	5,692	4,788
Deposits (with no stated maturity)	432,012	440,063
Time deposits	406,140	398,668
Borrowings	472,080	411,298
Interest payable	$ 497	$ 514

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Earnings Per Share

6 Months Ended

Jun. 30, 2014

Earnings Per Share [Abstract]

Earnings Per Share

Note 4: Earnings Per Share

Basic earnings per share excludes dilution and is computed by dividing income available to common shareholders by the weighted average number of common shares outstanding for the period. Diluted earnings per share reflects the potential dilution that could occur if securities or other contracts to issue common stock were exercised or converted into common stock or resulted in the issuance of common stock that then shared in the earnings of the Company, such as the Company's dilutive stock options.

The following is a reconciliation of basic and diluted earnings per share for the three and six months ended June 30, 2014, and 2013:

		Three Months Ended				Six Months Ended
		June 30,				June 30,
		2014		2013		2014		2013
Net income	$	3,857	$	3,170	$	7,644	$	6,386
Weighted average common shares outstanding
Basic		5,921,025		5,894,388		5,916,387		5,890,006
Effect of dilutive employee stock options		39,817		27,736		40,114		27,891
Diluted		5,960,842		5,922,124		5,956,501		5,917,897
Anti-dilutive options excluded from
earnings per share calculation		93,093		72,750		97,482		72,750
Per Common Share Data:
Basic earnings per share	$	0.65	$	0.54	$	1.29	$	1.08
Diluted earnings per share	$	0.65	$	0.54	$	1.28	$	1.08

All share and per share amounts have been adjusted to reflect the effect of the 3-for-2 stock split (dividend) during May 2014.

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Securities Available For Sale

6 Months Ended

Jun. 30, 2014

Securities Available For Sale [Abstract]

Securities Available For Sale

Note 5: Securities Available For Sale

The following tables summarize the securities available for sale portfolio as of June 30, 2014, and December 31, 2013:

June 30, 2014				Gross		Gross
		Amortized		Unrealized		Unrealized		Estimated
Available for Sale:		Cost		Gains		Losses		Fair Value
Mortgage-backed securities:
US Government-sponsored
enterprises	$	286,494	$	6,287	$	3,595	$	289,186
US Government agency		86,475		1,389		749		87,115
Private label		4,315		834		5		5,144
Obligations of states and political
subdivisions thereof		95,237		2,670		1,548		96,359
Total	$	472,521	$	11,180	$	5,897	$	477,804
December 31, 2013				Gross		Gross
		Amortized		Unrealized		Unrealized		Estimated
Available for Sale:		Cost		Gains		Losses		Fair Value
Mortgage-backed securities:
US Government-sponsored
enterprises	$	277,838	$	4,386	$	8,592	$	273,632
US Government agency		83,153		833		2,457		81,529
Private label		5,423		825		78		6,170
Obligations of states and political
subdivisions thereof		95,221		1,121		7,503		88,839
Total	$	461,635	$	7,165	$	18,630	$	450,170

Securities Maturity Distribution: The following table summarizes the maturity distribution of the amortized cost and estimated fair value of securities available for sale as of June 30, 2014. Actual maturities may differ from the final maturities noted below because issuers may have the right to prepay or call certain securities. In the case of MBS, actual maturities may also differ from expected maturities due to the amortizing nature of the underlying mortgage collateral, and the fact that borrowers have the right to prepay.

			Amortized			Estimated
Securities Available for Sale			Cost			Fair Value
Due one year or less	$	-	--	$	-	--
Due after one year through five years			4,251			4,360
Due after five years through ten years			15,601			16,173
Due after ten years			452,669			457,271
Total	$		472,521	$		477,804

Securities Impairment: As a part of the Company's ongoing security monitoring process, the Company identifies securities in an unrealized loss position that could potentially be other-than-temporarily impaired ("OTTI"). For the six months ended June 30, 2014, the Company did not have any OTTI losses recognized in earnings (before taxes), compared with $115 for the same period in 2013.

Upon initial impairment of a security, total OTTI losses represent the excess of the amortized cost over the fair value. For subsequent impairments of the same security, total OTTI losses represent additional credit losses and or declines in fair value subsequent to the previously recorded OTTI losses, if applicable. Unrealized OTTI losses recognized in accumulated other comprehensive income ("OCI") represent the non-credit component of OTTI losses on debt securities. Net impairment losses recognized in earnings represent the credit component of OTTI losses on debt securities.

As of June 30, 2014, the Company held twelve private label MBS (debt securities) with a total amortized cost (i.e. carrying value) of $1,938 for which OTTI losses have previously been recognized in pre-tax earnings (dating back to the fourth quarter of 2008). For all twelve of these securities, the Company previously recognized credit losses in excess of the unrealized losses in accumulated OCI, creating an unrealized gain of $493, net of tax, as included in accumulated OCI as of June 30, 2014. As of June 30, 2014, the total net unrealized gains included in accumulated OCI for securities held where OTTI has been historically recognized in pre-tax earnings amounted to $493, net of tax, compared with net unrealized gains of $488, net of tax, at December 31, 2013.

The OTTI losses previously recognized in earnings represented management's best estimate of credit losses inherent in the securities based on discounted, bond-specific future cash flow projections using assumptions about cash flows associated with the pools of mortgage loans underlying each security. In estimating those cash flows the Company takes a variety of factors into consideration including, but not limited to, loan level credit characteristics, current delinquency and non-performing loan rates, current levels of subordination and credit support, recent default rates and future constant default rate estimates, original and current loan to collateral value ratios, recent collateral loss severities and future collateral loss severity estimates, recent and historical conditional prepayment rates and future conditional prepayment rate assumptions, and other estimates of future collateral performance.

Despite elevated levels of delinquencies, defaults and losses in the underlying residential mortgage loan collateral, given credit enhancements resulting from the structures of the individual securities, the Company currently expects that as of June 30, 2014 it will recover the amortized cost basis of its private label MBS as depicted in the table below and has therefore concluded that such securities were not OTTI as of that date. Nevertheless, given recent market conditions, it is possible that adverse changes in repayment performance and fair value could occur in future periods that would change the Company's current best estimates.

The following table displays the beginning balance of OTTI related to historical credit losses on debt securities held by the Company at the beginning of the current reporting period, as well as changes in credit losses recognized in pre-tax earnings for the three and six months ending June 30, 2014, and 2013.

		2014		2013
Estimated credit losses as of March 31,	$	3,413	$	3,675
Additions for credit losses for securities on which
OTTI has been previously recognized	-	--		115
Additions for credit losses for securities on which
OTTI has not been previously recognized	-	--	-	--
Reductions for securities paid off during the period	-	--	-	--
Estimated credit losses as of June 30,	$	3,413	$	3,790
		2014		2013
Estimated credit losses as of prior year-end,	$	3,923	$	4,366
Additions for credit losses for securities on which
OTTI has been previously recognized	-	--		115
Additions for credit losses for securities on which
OTTI has not been previously recognized	-	--	-	--
Reductions for securities paid off during the period		510		691
Estimated credit losses as of June 30,	$	3,413	$	3,790

As of June 30, 2014, based on a review of the remaining securities in the securities portfolio, the Company concluded that it expects to recover its amortized cost basis for such securities. This conclusion was based on the issuers' continued satisfaction of the securities obligations in accordance with their contractual terms and the expectation that they will continue to do so through the maturity of the security, the expectation that the Company will receive the entire amount of future contractual cash flows, as well as the evaluation of the fundamentals of the issuers' financial condition and other objective evidence. Accordingly, the Company concluded that any declines in the values of those securities were temporary and that any additional OTTI charges were not appropriate at June 30, 2014. As of that date, the Company did not intend to sell nor anticipated that it would more-likely-than-not be required to sell any of its impaired securities, that is, where fair value is less than the cost basis of the security.

The following table summarizes the fair value of securities with continuous unrealized losses for less than 12 months and those that have been in a continuous unrealized loss position for 12 months or longer as of June 30, 2014 and December 31, 2013. All securities referenced are debt securities.

		Less than 12 months							12 months or longer					Total
		Estimated						Estimated					Estimated
June 30, 2014		Fair	Number of			Unrealized		Fair	Number of		Unrealized		Fair	Number of		Unrealized
		Value	Investments			Losses		Value	Investments		Losses		Value	Investments		Losses
Description of Securities:
Mortgage-backed securities:
US Government-
sponsored enterprises	$	27,684	36	$		472	$	75,106	89	$	3,123	$	102,790	125	$	3,595
US Government agency		11,138	16			151		23,718	28		598		34,856	44		749
Private label	-	--	0		-	--		156	4		5		156	4		5
Obligations of states and
political subdivisions
thereof		3,162	7			15		45,633	103		1,533		48,795	110		1,548
Total	$	41,984	59	$		638	$	144,613	224	$	5,259	$	186,597	283	$	5,897

		Less than 12 months					12 months or longer						Total
		Estimated					Estimated					Estimated
December 31, 2013		Fair	Number of		Unrealized		Fair	Number of		Unrealized		Fair	Number of		Unrealized
		Value	Investments		Losses		Value	Investments		Losses		Value	Investments		Losses
Description of Securities:
Mortgage-backed securities:
US Government-
Sponsored enterprises	$	111,169	140	$	4,801	$	40,563	40	$	3,791	$	151,732	180	$	8,592
US Government agency		36,356	47		1,982		9,156	12		475		45,512	59		2,457
Private label		826	12		61		449	7		17		1,275	19		78
Obligations of states and
political subdivisions
thereof		61,174	135		5,601		8,464	30		1,902		69,638	165		7,503
Total	$	209,525	334	$	12,445	$	58,632	89	$	6,185	$	268,157	423	$	18,630

For securities with unrealized losses, the following information was considered in determining that the impairments were not other-than-temporary:

• Mortgage-backed securities issued by U.S. Government-sponsored enterprises: As of June 30, 2014, the total unrealized losses on these securities amounted to $3,595, compared with $8,592 at December 31, 2013. All of these securities were credit rated "AA+" by the major credit rating agencies. Company management believes these securities have minimal credit risk, as these Government-sponsored enterprises play a vital role in the nation's financial markets.
  Management's analysis indicates that the unrealized losses at June 30, 2014 were attributed to changes in current market yields and pricing spreads for similar securities since the date the underlying securities were purchased, and does not consider these securities to be OTTI at June 30, 2014.

• Mortgage-backed securities issued by U.S. Government agencies: As of June 30, 2014, the total unrealized losses on these securities amounted to $749, compared with $2,457 at December 31, 2013. All of these securities were credit rated "AA+" by the major credit rating agencies.
  Management's analysis indicates that these securities bear little or no credit risk because they are backed by the full faith and credit of the United States. The Company attributes the unrealized losses at June 30, 2014 to changes in current market yields and pricing spreads for similar securities since the date the underlying securities were purchased, and does not consider these securities to be OTTI at June 30, 2014.
• Private label mortgage-backed securities: As of June 30, 2014, the total unrealized losses on the Bank's private label MBS amounted to $5, compared with $78 at December 31, 2013. The Company attributes the unrealized losses at June 30, 2014 to the current illiquid market for non- agency MBS, a still recovering housing market, risk-related market pricing discounts for non- agency MBS and credit rating downgrades on certain private label MBS owned by the Company.
  Based upon the foregoing considerations and the expectation that the Company will receive all of the future contractual cash flows related to amortized cost on these securities, the Company does not consider there to be any additional OTTI with respect to these securities at June 30, 2014.
• Obligations of states of the U.S. and political subdivisions thereof: As of June 30, 2014, the total unrealized losses on the Bank's municipal securities amounted to $1,548, compared with $7,503 at December 31, 2013. The Bank's municipal securities primarily consist of general obligation bonds and to a lesser extent, revenue bonds. General obligation bonds carry less risk, as they are supported by the full faith, credit and taxing authority of the issuing government and in the cases of school districts, are additionally supported by state aid. Revenue bonds are generally backed by municipal revenue streams generated through user fees or lease payments associated with specific municipal projects that have been financed.
  Municipal bonds are frequently supported with insurance, which guarantees that in the event the issuer experiences financial problems, the insurer will step in and assume payment of both principal and interest. Historically, insurance support has strengthened an issuer's underlying credit rating to AAA or AA status. Starting in 2008 and continuing through 2014, many of the insurance companies providing municipal bond insurance experienced financial difficulties and, accordingly, were downgraded by at least one of the major credit rating agencies. Consequently, a portion of the Bank's municipal bond portfolio was downgraded by at least one of the major credit rating agencies. Notwithstanding the credit rating downgrades, at June 30, 2014, the Bank's municipal bond portfolio did not contain any below investment grade securities as reported by major credit rating agencies. In addition, at June 30, 2014, all municipal bond issuers were current on contractually obligated interest and principal payments.
  The Company attributes the unrealized losses at June 30, 2014 to changes in current market yields and pricing spreads for similar securities since the date the underlying securities were purchased and, to a lesser extent, changes in credit ratings on certain securities. The Company also attributes the unrealized losses to ongoing media attention and market concerns about the prolonged recovery from the national economic recession and the impact it might have on the future financial stability of municipalities throughout the country. Accordingly, the Company does not consider these municipal securities to be other-than-temporarily impaired at June 30, 2014.

At June 30, 2014, the Company had no intent to sell nor believed it is more-likely-than-not that it would be required to sell any of its impaired securities as identified and discussed immediately above, and therefore did not consider these securities to be other OTTI as of that date.

Securities Gains and Losses: The following table summarizes realized gains and losses and OTTI losses on securities available for sale for the three and six months ended June 30, 2014 and 2013.

• 		Proceeds						Other
  		from Sale of						Than
  		Securities						Temporary
  		Available		Realized		Realized		Impairment
  		for Sale		Gains		Losses		Losses		Net
  Three months ended June 30,
  2014	$	11,908	$	385	$	35	$	---	$	350
  2013	$	3,568	$	256	$	---	$	115	$	141
  Six months ended June 30,
  2014	$	22,221	$	782	$	35	$	---	$	747
  2013	$	9,629	$	529	$	8	$	115	$	406

  
  

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Reclassifications Out Of Accumulated Other Comprehensive Income

6 Months Ended

Jun. 30, 2014

Reclassifications Out Of Accumulated Other Comprehensive Income [Abstract]

Reclassifications Out Of Accumulated Other Comprehensive Income

Note 7: Reclassifications Out of Accumulated Other Comprehensive Income

The following table summarizes the reclassifications out of Accumulated Other Comprehensive Income for the six months ended June 30, 2014.

		Amount
		Reclassified from
		Accumulated Other
Details about Accumulated		Comprehensive		Affected Line Item in the Statement
Other Comprehensive Income		Income		Where Net Income is Presented
Unrealized gains and losses on available-for-sale securities
	$	747		Net gain on sales of investments
		(254	)	Provision for income taxes
	$	493		Net income
Amortization of post retirement benefit plan
Amortization of actuarial gain/loss for supplemental
executive retirement plan	$	14		Salaries and benefits
		14
Tax (expense) or benefit		5		Provision for income taxes
Net of tax	$	9		Net income
Total reclassification for the period	$	502		Net income, net of tax

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Three-for-two Common Stock Split (Details)	6 Months Ended
	Jun. 30, 2014	Jun. 30, 2013	Apr. 23, 2014	Apr. 22, 2014
Stockholders' Equity Note [Abstract]
Stockholders' Equity Note, Stock Split, Conversion Ratio	1.5	1.5
Common Stock, Shares, Outstanding			5,916,435	3,944,290

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Financial Derivative Instruments (Narrative) (Details) (USD $) In Thousands, unless otherwise specified	Jun. 30, 2014	Dec. 31, 2013
Derivative [Line Items]
Fair Value	$ 2,465
Interest Rate Cap [Member]
Derivative [Line Items]
Number of Interest Rate Derivatives Held	2
Notional Amount	45,000
Fair Value	2,465
Interest Rate Cash Flow Hedge Gain (Loss) to be Reclassified During Next 12 Months, Net	1
Interest Rate Cap 1 [Member]
Derivative [Line Items]
Notional Amount	25,000
Premium Paid	921
Cap Interest Rate	3.00%
Fair Value	928
Interest Rate Cap 2 [Member]
Derivative [Line Items]
Notional Amount	20,000
Premium Paid	1,470
Cap Interest Rate	3.00%
Fair Value	$ 1,537

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Fair Value Measurements

6 Months Ended

Jun. 30, 2014

Fair Value Measurements [Abstract]

Fair Value Measurements

Note 12: Fair Value Measurements

The Company measures fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants. A fair value measurement assumes that the transaction to sell the asset or transfer the liability occurs in the principal market for the asset or liability or, in the absence of a principal market, the most advantageous market for the asset or liability. The price in the principal (or most advantageous) market used to measure the fair value of the asset or liability shall not be adjusted for transaction costs. An orderly transaction is a transaction that assumes exposure to the market for a period prior to the measurement date to allow for marketing activities that are usual and customary for transactions involving such assets and liabilities; it is not a forced transaction. Market participants are buyers and sellers in the principal market that are (i) independent, (ii) knowledgeable, (iii) able to transact, and (iv) willing to transact.

T

The Company's fair value measurements employ valuation techniques that are consistent with the market approach, the income approach and/or the cost approach. The market approach uses prices and other relevant information generated by market transactions involving identical or comparable assets and liabilities. The income approach uses valuation techniques to convert future amounts, such as cash flows or earnings, to a single present amount on a discounted basis. The cost approach is based on the amount that currently would be required to replace the servicing capacity of an asset (replacement cost). Valuation techniques are consistently applied. Inputs to valuation techniques refer to the assumptions that market participants would use in pricing the asset or liability. Inputs may be observable, meaning those that reflect the assumptions market participants would use in pricing the asset or liability developed based on market data obtained from independent sources, or unobservable, meaning those that reflect the reporting entity's own assumptions about the assumptions market participants would use in pricing the asset or liability developed based on the best information available in the circumstances. The Company uses a fair value hierarchy for valuation inputs that gives the highest priority to quoted prices in active markets (Level 1 measurements) for identical assets or liabilities and the lowest priority to unobservable inputs (Level 3 measurements). The fair value hierarchy is as follows:

• Level 1 – Valuation is based on unadjusted quoted prices in active markets for identical assets or liabilities that the reporting entity has the ability to access at the measurement date.
• Level 2 – Valuation is based on quoted prices for similar instruments in active markets, quoted prices for identical or similar assets or liabilities in markets that are not active, and model-based techniques for which all significant assumptions are observable in the market.
• Level 3 – Valuation is principally generated from model-based techniques that use at least one significant assumption not observable in the market. These unobservable assumptions reflect estimates that market participants would use in pricing the asset or liability. Valuation techniques include use of discounted cash flow models and similar techniques.

The level in the fair value hierarchy within which the fair value measurement in its entirety falls is determined based on the lowest level input that is significant to the fair value measurement in its entirety.

The most significant instruments that the Company values are securities, all of which fall into Level 2 in the fair value hierarchy. The securities in the available for sale portfolio are priced by independent providers. In obtaining such valuation information from third parties, the Company has evaluated their valuation methodologies used to develop the fair values in order to determine whether valuations are appropriately placed within the fair value hierarchy and whether the valuations are representative of an exit price in the Company's principal markets. The Company's principal markets for its securities portfolios are the secondary institutional markets, with an exit price that is predominantly reflective of bid level pricing in those markets. Additionally, the Company periodically tests the reasonableness of the prices provided by these third parties by obtaining fair values from other independent providers and by obtaining desk bids from a variety of institutional brokers.

A description of the valuation methodologies used for instruments measured at fair value, as well as the general classification of such instruments pursuant to the valuation hierarchy, is set forth below.

Securities Available for Sale: All securities and major categories of securities classified as available for sale are reported at fair value utilizing Level 2 inputs. For these securities, the Company obtains fair value measurements from independent pricing providers. The fair value measurements used by the pricing providers consider observable data that may include dealer quotes, market maker quotes and live trading systems. If quoted prices are not readily available, fair values are determined using matrix pricing models, or other model-based valuation techniques requiring observable inputs other than quoted prices such as market pricing spreads, credit information, callable features, cash flows, the U.S. Treasury yield curve, trade execution data, market consensus prepayment speeds, default rates, and the securities' terms and conditions, among other things.

The foregoing valuation methodologies may produce fair value calculations that may not be fully indicative of net realizable value or reflective of future fair values. While Company management believes these valuation methodologies are appropriate and consistent with other market participants, the use of different methodologies or assumptions to determine the fair value of certain financial instruments could result in a different estimate of fair value at the reporting date.

The following tables summarize financial assets and financial liabilities measured at fair value on a recurring basis as of June 30, 2014, and December 31, 2013, segregated by the level of the valuation inputs within the fair value hierarchy utilized to measure fair value:

		Level 1		Level 2		Level 3		Total Fair
June 30, 2014		Inputs		Inputs		Inputs		Value
Securities available for sale:
Mortgage-backed securities:
US Government-sponsored enterprises	$	---	$	289,186	$	---	$	289,186
US Government agencies	$	---	$	87,115	$	---	$	87,115
Private label	$	---	$	5,144	$	---	$	5,144
Obligations of states and political
subdivisions thereof	$	---	$	96,359	$	---	$	96,359
Derivative assets	$	---	$	2,465	$	---	$	2,465

		Level 1		Level 2		Level 3		Total Fair
December 31, 2013		Inputs		Inputs		Inputs		Value
Securities available for sale:
Mortgage-backed securities:
US Government-sponsored enterprises	$		$	273,632	$	---	$	273,632
US Government agencies	$	---	$	81,529	$	---	$	81,529
Private label	$	---	$	6,170	$	---	$	6,170
Obligations of states and political
subdivisions thereof	$	---	$	88,839	$	---	$	88,839

The following tables present the carrying value of certain financial assets and financial liabilities measured at fair value on a non-recurring basis, segregated by the level of the valuation inputs within the fair value hierarchy utilized to measure fair value.

		Level 1		Level 2		Level 3		Fair Value
For the Six Months Ended 6/30/14		Inputs		Inputs		Inputs		as of 3/31/14		Loss
Other real estate owned	$	---	$	---	$	1,771	$	1,771	$	130
Collateral dependent impaired loans	$	---	$	---	$	1,623	$	1,623	$	---

		Level 1		Level 2		Level 3		Fair Value
For the Year Ended 12/31/13		Inputs		Inputs		Inputs		as of 12/31/13		Loss
Other real estate owned	$	---	$	$ ---	$	1,625	$	1,625	$	338
Collateral dependent impaired loans	$	$ ---	$	$ ---	$	2,699	$	2,699	$	---

The Company had total collateral dependent impaired loans with carrying values of approximately $1,623 and $2,699 which had specific reserves included in the allowance of $68 and $120, at June 30, 2014 and December 31, 2013, respectively. The Company measures the value of collateral dependent impaired loans using Level 3 inputs. Specifically, the Company uses the appraised value of the collateral, which is then discounted for estimated costs to dispose and other considerations. These discounts generally range from 10% to 30% of appraised value.

In estimating the fair value of OREO, the Company generally uses market appraisals less estimated costs to dispose of the property, which generally range from 10% to 30% of appraised value. Management may also make adjustments to reflect estimated fair value declines, or may apply other discounts to appraised values for unobservable factors resulting from its knowledge of the property or consideration of broker quotes. The appraisers use a market, income, and/or a cost approach in determining the value of the collateral. Therefore they have been categorized as a Level 3 measurement.

There were no transfers between levels during the periods presented.

XML

Loans And Allowance For Loan Losses (Tables)

6 Months Ended

Jun. 30, 2014

Loans And Allowance For Loan Losses [Abstract]

Summary Of Composition Of Loan Portfolio

		June 30,			December 31,
		2014			2013
Commercial real estate mortgages	$	329,948		$	336,542
Commercial and industrial		81,978			73,972
Commercial construction and land development		13,201			18,129
Agricultural and other loans to farmers		29,566			26,929
Total commercial loans		454,693			455,572
Residential real estate mortgages		364,908			317,115
Home equity loans		49,696			49,565
Other consumer loans		13,279			14,523
Total consumer loans		427,883			381,203
Tax exempt loans		18,543			16,355
Net deferred loan costs and fees		(183	)		(273	)
Total loans		900,936			852,857
Allowance for loan losses		(8,751	)		(8,475	)
Total loans net of allowance for loan losses	$	892,185		$	844,382

Summary Of Non-Performing Loans

		June 30,		December 31,
		2014		2013
Commercial real estate mortgages	$	1,505	$	2,046
Commercial and industrial loans		1,155		793
Commercial construction and land development		1,328		1,913
Agricultural and other loans to farmers		76		56
Total commercial loans		4,064		4,808
Residential real estate mortgages		2,752		3,227
Home equity loans		644		745
Other consumer loans		40		60
Total consumer loans		3,436		4,032
Total non-accrual loans		7,500		8,840
Accruing loans contractually past due 90 days or more		345	-	--
Total non-performing loans	$	7,845	$	8,840

Summary Of Troubled Debt Restructures

	For the Three Months Ended					For the Six Months Ended
	June 30,					June 30,
	2013					2013
			Pre-		Post-			Pre-		Post-
			Modification		Modification			Modification		Modification
			Outstanding		Outstanding			Outstanding		Outstanding
	Number		Recorded		Recorded	Number		Recorded		Recorded
	of Loans		Investment		Investment	of Loans		Investment		Investment
Commercial and industrial loans	1	$	49	$	49	1	$	49	$	49
Total commercial loans	1		49		49	1		49		49
Residential real estate mortgages	0	$	---	$	---	0	$	---	$	---
Home equity loans	0	-	--	-	--	1		16		21
Other consumer loans	0	-	--	-	--	1		14		14
Total consumer loans	0	-	--	-	--	2		30		35
Total	1	$	49	$	49	3	$	79	$	84

Past Due Financing Receivable Post Modification Balances

		June 30, 2013
		Three
		Months		Six Months
		Ended		Ended
Extended maturity and adjusted interest rate	$	49	$	84
Temporary payment amount adjustment	-	--	-	--
Court ordered concession	-	--	-	--
Total	$	49	$	84

Schedule Of Past Due Loans

																>90 Days
June 30, 2014		30-59		60-89		90										Past Due
		Days		Days		Days or		Total				Total				and
		Past Due		Past Due		Greater		Past Due		Current		Loans		Non-Accrual		Accruing
Commercial real
estate mortgages	$	718	$	952	$	644	$	2,314		327,634	$	329,948	$	1,505	$	---
Commercial and industrial		53		517		529		1,099		80,879		81,978		1,155	-	--
Commercial construction
and land development	-	--	-	--		1,328		1,328		11,873		13,201		1,328	-	--
Agricultural and other
loans to farmers		169		78		25		272		29,294		29,566		76	-	--
Residential real estate
mortgages		701		729		1,555		2,985		361,923		364,908		2,752		345
Home equity		484		9		246		739		48,957		49,696		644	-	--
Other consumer loans		72		57		24		153		13,126		13,279		40	-	--
Tax exempt	-	--	-	--	-	--	-	--		18,543		18,543	-	--	-	--
Total	$	2,197	$	2,342	$	4,351	$	8,890	$	892,229	$	901,119	$	7,500	$	345

																>90 Days
		30-59				90 Days										Past Due
December 31, 2013		Days Past		60-89 Days		or		Total Past				Total				and
		Due		Past Due		Greater		Due		Current		Loans		Non-Accrual		Accruing
Commercial real
estate mortgages	$	786	$	361	$	698		1,845		334,697	$	336,542	$	2,046	$	---
Commercial and industrial		29		20		456		505		73,467		73,972		793		---
Commercial construction
and land development	-	--	-	--		1,845		1,845		16,284		18,129		1,913		---
Agricultural and other
loans to farmers		22	-	--	-	--		22		26,907		26,929		56		---
Residential real estate
mortgages		2,170		1,864		1,649		5,683		311,432		317,115		3,227		---
Home equity		67	-	--	-	--		67		49,498		49,565		745		---
Other consumer loans		57		80		41		178		14,345		14,523		60		---
Tax exempt	-	--	-	--	-	--	-	--		16,355		16,355	-	--		---
Total	$	3,131	$	2,325	$	4,689	$	10,145	$	842,985	$	853,130	$	8,840	$	---

Schedule Of Impaired Loans

Details of impaired loans as of June 30, 2014 and December 31, 2013 follows:

		June 30, 2014							December 31, 2013
					Unpaid						Unpaid
			Recorded		Principal		Related		Recorded		Principal		Related
			Investment		Balance		Allowance		Investment Balance Allowance
With no related allowance:
Commercial real estate mortgages	$		2,022	$	2,241	$	---	$	1,949	$	2,103	$	---
Commercial and industrial			712		822	-	--		660		770	-	--
Commercial construction and
land development			1,328		3,253	-	--		68		68	-	--
Agricultural and other loans to farmers			76		76	-	--		56		56	-	--
Residential real estate loans			439		469	-	--		442		442	-	--
Home equity loans			20		20	-	--		21		21	-	--
Other consumer			12		12	-	--		13		13	-	--
Subtotal	$		4,609	$	6,893	$	---	$	3,209	$	3,473	$	---
With an allowance:
Commercial real estate mortgages	$		229	$	229	$	68	$	854	$	854	$	100
Commercial and industrial			457		537		367		150		150		150
Commercial construction and
land development		-	--	-	--	-	--		1,845		3,770		20
Agricultural and other loans to farmers		-	--	-	--	-	--	-	--	-	--	-	--
Residential real estate loans		-	--	-	--	-	--	-	--	-	--	-	--
Home equity loans		-	--	-	--	-	--	-	--	-	--	-	--
Other consumer		-	--	-	--	-	--	-	--	-	--	-	--
Subtotal	$		686	$	766	$	435	$	2,849	$	4,774	$	270
Total	$		5,295	$	7,659	$	435	$	6,058	$	8,247	$	270

Details of impaired loans for the three and six months ended June 30, 2014 and 2013 follows:

			June 30, 2014								June 30, 2013
			Three Months Ended				Six Months Ended				Three Months Ended				Six Months Ended
			Average				Average				Average				Average
			Recorded		Interest		Recorded		Interest		Recorded		Interest		Recorded		Interest
			Investment		Recorded		Investment		Recorded		Investment		Recorded		Investment		Recorded
With no related allowance:
Commercial real
estate mortgages	$		2,075	$	16	$	2,191	$	31	$	2,294	$	17	$	2,253	$	34
Commercial and
industrial			764		1		754		2		597		1		757		3
Commercial construction
and land development			1,504	-	--		1,702	-	--	-	--	-	--	-	--	-	--
Agricultural and other
loans to farmers			60	-	--		61	-	--		323	-	--		452	-	--
Residential real
estate mortgages			491		3		492		6		266		1		267		1
Home equity loans			20		1		20		1		21		1		20		1
Other consumer			12	-	--		12	-	--		14	-	--		14		1
Subtotal	$		4,926	$	21	$	5,232	$	40	$	3,515	$	20	$	3,763	$	40
With an allowance:
Commercial real
estate mortgages	$		297	$	---	$	379	$	---	$	207	$	---	$	223	$	---
Commercial and
industrial			536	-	--		389	-	--	-	--	-	--	-	--	-	--
Commercial construction
and land development		-	--	-	--	-	--	-	--		2,029	-	--		2,131	-	--
Agricultural and other
loans to farmers		-	--	-	--	-	--	-	--	-	--	-	--	-	--	-	--
Residential real
estate mortgages		-	--	-	--	-	--	-	--	-	--	-	--	-	--	-	--
Home equity loans		-	--	-	--	-	--	-	--	-	--	-	--	-	--	-	--
Other consumer		-	--	-	--	-	--	-	--	-	--	-	--	-	--	-	--
Subtotal	$		833	$	---	$	768	$	---	$	2,236	$	---	$	2,354	$	---
Total	$		5,759	$	21	$	6,000	$	40	$	5,751	$	20	$	6,117	$	40

Schedule Of Loans With Credit Quality Indicators

						Commercial		Agricultural
		Commercial		Commercial		construction		and other
		real estate		and		and land		loans to
June 30, 2014		mortgages		industrial		development		farmers		Total
Pass	$	300,965	$	69,023	$	9,984	$	29,084	$	409,056
Other Assets
Especially Mentioned		19,071		9,529		424		178		29,202
Substandard		9,912		3,426		2,793		304		16,435
Doubtful	-	--	-	--	-	--	-	--	-	--
Loss	-	--	-	--	-	--	-	--	-	--
Total	$	329,948	$	81,978	$	13,201	$	29,566	$	454,693

						Commercial		Agricultural
		Commercial		Commercial		construction		and other
		real estate		and		and land		loans to
December 31, 2013		mortgages		industrial		development		farmers		Total
Pass	$	307,486	$	60,330	$	14,403	$	26,447	$	408,666
Other Assets
Especially Mentioned		19,768		10,568		437		182		30,955
Substandard		9,288		3,074		3,289		300		15,951
Doubtful	-	--	-	--	-	--	-	--	-	--
Loss	-	--	-	--	-	--	-	--	-	--
Total	$	336,542	$	73,972	$	18,129	$	26,929	$	455,572

Schedule Of Allowance For Loan Losses By Portfolio Segment

								Commercial
Three Months					Commercial			Construction
Ended June 30,		Commercial			and			and land				Residential						Home		Tax
2014		Real Estate			Industrial			development		Agricultural		Real Estate			Consumer			Equity		Exempt			Total
Beginning Balance	$	4,735		$	1,654		$	231	$	350	$	1,128		$	206		$	239	$	179		$	8,722
Charged-off		(165	)		(88	)	-	--	-	--		(125	)		(63	)	-	--	-	--			(441	)
Recoveries	-	---			10		-	--		15		11			6		-	--	-	--			42
Provision		317			(3	)		23		6		135			(46	)		2		(6	)		428
Ending Balance	$	4,887		$	1,573		$	254	$	371	$	1,149		$	103		$	241	$	173		$	8,751

								Commercial
Six Months					Commercial			Construction
Ended June 30,		Commercial			and			and land						Residential						Home			Tax
2014		Real Estate			Industrial			development			Agricultural			Real Estate			Consumer			Equity			Exempt		Total
Beginning Balance	$	4,825		$	1,266		$	314		$	335		$	1,166		$	137		$	264		$	168	$	8,475
Charged-off		(165	)		(99	)	-	--			(14	)		(293	)		(80	)		(18	)	-	--		(669	)
Recoveries		6			12		-	--			15			12			15		-	--		-	--		60
Provision		221			394			(60	)		35			264			31			(5	)		5		885
Ending Balance	$	4,887		$	1,573		$	254		$	371		$	1,149		$	103		$	241		$	173	$	8,751
of which:
Amount for loans
individually
evaluated for
impairment	$	68		$	367		$	---		$	---		$	---		$	---		$	---		$	---	$	435
Amount for loans
collectively
evaluated for
impairment	$	4,819		$	1,206		$	254		$	371		$	1,149		$	103		$	241		$	173	$	8,316
Loans individually
evaluated
for impairment	$	1,505		$	1,155		$	1,328		$	76		$	---		$	---		$	---		$	---	$	4,064
Loans collectively
evaluated
for impairment	$	328,443		$	80,823		$	11,873		$	29,490		$	364,908		$	13,279		$	49,696		$	18,543	$	897,055

								Commercial
Three Months					Commercial			Construction
Ended June 30,		Commercial			and			and land					Residential						Home			Tax
2013		Real Estate			Industrial			development		Agricultural			Real Estate			Consumer			Equity			Exempt		Total
Beginning Balance	$	4,413		$	1,011		$	340	$	337		$	1,354		$	197		$	264		$	139	$	8,055
Charged-off		(84	)		(14	)	-	--		(81	)		(59	)		(40	)		(25	)	-	--		(303	)
Recoveries		3		-	--		-	--	-	--			1			5			1		-	--		10
Provision		103			65			15		67			125			(15	)		30			15		405
Ending Balance	$	4,435		$	1,062		$	355	$	323		$	1,421		$	147		$	270		$	154	$	8,167

								Commercial
Six Months					Commercial			Construction
Ended June 30,		Commercial			and			and land						Residential						Home			Tax
2013		Real Estate			Industrial			development			Agricultural			Real Estate			Consumer			Equity			Exempt		Total
Beginning Balance	$	4,320		$	1,026		$	515		$	303		$	1,330		$	207		$	255		$	141	$	8,097
Charged-off		(84	)		(178	)	-	--			(81	)		(287	)		(68	)		(34	)	-	--		(732	)
Recoveries		3			10		-	--			1			1			10			19		-	--		44
Provision		196			204			(160	)		100			377			(2	)		30			13		758
Ending Balance	$	4,435		$	1,062		$	355		$	323		$	1,421		$	147		$	270		$	154	$	8,167

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Loans And Allowance For Loan Losses (Schedule Of Allowance For Loan Losses By Portfolio Segment) (Details) (USD $) In Thousands, unless otherwise specified	3 Months Ended		6 Months Ended
	Jun. 30, 2014	Jun. 30, 2013	Jun. 30, 2014	Jun. 30, 2013
Financing Receivable, Allowance for Credit Losses [Line Items]
Beginning Balance	$ 8,722	$ 8,055	$ 8,475	$ 8,097
Charged off	(441)	(303)	(669)	(732)
Recoveries	42	10	60	44
Provision	428	405	885	758
Ending Balance	8,751	8,167	8,751	8,167
Amount for loans individually evaluated for impairment	435		435
Amount for loans collectively evaluated for impairment	8,316		8,316
Loans individually evaluated for impairment	4,064		4,064
Loans collectively evaluated for impairment	897,055		897,055
Commercial Real Estate Mortgages [Member]
Financing Receivable, Allowance for Credit Losses [Line Items]
Beginning Balance	4,735	4,413	4,825	4,320
Charged off	(165)	(84)	(165)	(84)
Recoveries		3	6	3
Provision	317	103	221	196
Ending Balance	4,887	4,435	4,887	4,435
Amount for loans individually evaluated for impairment	68		68
Amount for loans collectively evaluated for impairment	4,819		4,819
Loans individually evaluated for impairment	1,505		1,505
Loans collectively evaluated for impairment	328,443		328,443
Commercial And Industrial [Member]
Financing Receivable, Allowance for Credit Losses [Line Items]
Beginning Balance	1,654	1,011	1,266	1,026
Charged off	(88)	(14)	(99)	(178)
Recoveries	10		12	10
Provision	(3)	65	394	204
Ending Balance	1,573	1,062	1,573	1,062
Amount for loans individually evaluated for impairment	367		367
Amount for loans collectively evaluated for impairment	1,206		1,206
Loans individually evaluated for impairment	1,155		1,155
Loans collectively evaluated for impairment	80,823		80,823
Commercial Construction And Land Development [Member]
Financing Receivable, Allowance for Credit Losses [Line Items]
Beginning Balance	231	340	314	515
Provision	23	15	(60)	(160)
Ending Balance	254	355	254	355
Amount for loans collectively evaluated for impairment	254		254
Loans individually evaluated for impairment	1,328		1,328
Loans collectively evaluated for impairment	11,873		11,873
Agriculture And Other Loans To Farmers [Member]
Financing Receivable, Allowance for Credit Losses [Line Items]
Beginning Balance	350	337	335	303
Charged off		(81)	(14)	(81)
Recoveries	15		15	1
Provision	6	67	35	100
Ending Balance	371	323	371	323
Amount for loans collectively evaluated for impairment	371		371
Loans individually evaluated for impairment	76		76
Loans collectively evaluated for impairment	29,490		29,490
Residential Real Estate Mortgages [Member]
Financing Receivable, Allowance for Credit Losses [Line Items]
Beginning Balance	1,128	1,354	1,166	1,330
Charged off	(125)	(59)	(293)	(287)
Recoveries	11	1	12	1
Provision	135	125	264	377
Ending Balance	1,149	1,421	1,149	1,421
Amount for loans collectively evaluated for impairment	1,149		1,149
Loans collectively evaluated for impairment	364,908		364,908
Consumer Loans [Member]
Financing Receivable, Allowance for Credit Losses [Line Items]
Beginning Balance	206	197	137	207
Charged off	(63)	(40)	(80)	(68)
Recoveries	6	5	15	10
Provision	(46)	(15)	31	(2)
Ending Balance	103	147	103	147
Amount for loans collectively evaluated for impairment	103		103
Loans collectively evaluated for impairment	13,279		13,279
Home Equity Loans [Member]
Financing Receivable, Allowance for Credit Losses [Line Items]
Beginning Balance	239	264	264	255
Charged off		(25)	(18)	(34)
Recoveries		1		19
Provision	2	30	(5)	30
Ending Balance	241	270	241	270
Amount for loans collectively evaluated for impairment	241		241
Loans collectively evaluated for impairment	49,696		49,696
Tax Exempt [Member]
Financing Receivable, Allowance for Credit Losses [Line Items]
Beginning Balance	179	139	168	141
Provision	(6)	15	5	13
Ending Balance	173	154	173	154
Amount for loans collectively evaluated for impairment	173		173
Loans collectively evaluated for impairment	$ 18,543		$ 18,543

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Securities Available For Sale (Schedule Of Realized Gains And Losses And Other-Than-Temporary Impairment Losses On Securities) (Details) (USD $) In Thousands, unless otherwise specified	3 Months Ended		6 Months Ended
	Jun. 30, 2014	Jun. 30, 2013	Jun. 30, 2014	Jun. 30, 2013
Securities Available For Sale [Abstract]
Proceeds from Sale of Securities Available for Sale	$ 11,908	$ 3,568	$ 22,221	$ 9,629
Realized Gains	385	256	782	529
Realized Losses	35		35	8
Other than Temporary Impairment Losses		115		115
Securities Gains and Losses, Net	$ 350	$ 141	$ 747	$ 406

XML

Consolidated Statements Of Comprehensive Income (USD $) In Thousands, unless otherwise specified	3 Months Ended		6 Months Ended
	Jun. 30, 2014	Jun. 30, 2013	Jun. 30, 2014	Jun. 30, 2013
Consolidated Statements Of Comprehensive Income [Abstract]
Net income	$ 3,857	$ 3,170	$ 7,644	$ 6,386
Other comprehensive income:
Net unrealized appreciation (depreciation) on securities available for sale, net of tax	5,635	(9,560)	11,547	(11,617)
Less reclassification adjustment for net gains related to securities available for sale included in net income, net of tax	(231)	(169)	(493)	(344)
Add other-than-temporary impairment adjustment, net of tax		111		111
Less non-credit portion of other-than-temporary impairment losses, net of tax		(35)		(35)
Net unrealized appreciation on interest rate derivatives, net of tax	49		49
Net amortization of prior service cost and actuarial gain for supplemental executive retirement plan, net of related tax		(55)		(109)
Actuarial (loss) gain on supplemental executive retirement plan, net of related tax	4	10	9	20
Total other comprehensive income (loss)	5,457	(9,698)	11,112	(11,974)
Total comprehensive income	$ 9,314	$ (6,528)	$ 18,756	$ (5,588)

XML

Basis Of Presentation

6 Months Ended

Jun. 30, 2014

Basis Of Presentation [Abstract]

Basis Of Presentation

Note 1: Basis of Presentation

The accompanying consolidated interim financial statements are unaudited. In the opinion of management, all adjustments considered necessary for a fair presentation have been included. All inter-company transactions have been eliminated in consolidation. Amounts in the prior period financial statements are reclassified whenever necessary to conform to current period presentation. The net income reported for the three and six months ended June 30, 2014, is not necessarily indicative of the results that may be expected for the year ending December 31, 2014, or any other interim periods.

The consolidated balance sheet at December 31, 2013, has been derived from audited consolidated financial statements at that date. The accompanying unaudited interim consolidated financial statements have been prepared in accordance with United States ("U.S.") generally accepted accounting principles for interim financial information and with the instructions to Form 10-Q and Rule 10-01 of Regulation S-X (17 CFR Part 210). Accordingly, they do not include all of the information and footnotes required by U.S. generally accepted accounting principles for complete financial statements. For further information, please refer to the consolidated financial statements included in the Company's Annual Report on Form 10-K for the year ended December 31, 2013, and notes thereto.

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Fair Value Measurements (Financial Assets And Financial Liabilities Measured At Fair Value On A Recurring Basis) (Details) (USD $) In Thousands, unless otherwise specified	Jun. 30, 2014	Dec. 31, 2013
US Government-Sponsored Enterprises [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Assets, Fair Value Disclosure, Recurring	$ 289,186	$ 273,632
US Government-Sponsored Enterprises [Member] | Level 2 Inputs [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Assets, Fair Value Disclosure, Recurring	289,186	273,632
US Government Agency [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Assets, Fair Value Disclosure, Recurring	87,115	81,529
US Government Agency [Member] | Level 2 Inputs [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Assets, Fair Value Disclosure, Recurring	87,115	81,529
Private Label Mortgage-Backed Securities [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Assets, Fair Value Disclosure, Recurring	5,144	6,170
Private Label Mortgage-Backed Securities [Member] | Level 2 Inputs [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Assets, Fair Value Disclosure, Recurring	5,144	6,170
Obligations Of States And Political Subdivisions Thereof [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Assets, Fair Value Disclosure, Recurring	96,359	88,839
Obligations Of States And Political Subdivisions Thereof [Member] | Level 2 Inputs [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Assets, Fair Value Disclosure, Recurring	96,359	88,839
Derivative Financial Instruments, Assets [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Assets, Fair Value Disclosure, Recurring	2,465
Derivative Financial Instruments, Assets [Member] | Level 2 Inputs [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Assets, Fair Value Disclosure, Recurring	$ 2,465

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Reclassifications Out Of Accumulated Other Comprehensive Income (Tables)

6 Months Ended

Jun. 30, 2014

Reclassifications Out Of Accumulated Other Comprehensive Income [Abstract]

Reclassifications Out Of Accumulated Other Comprehensive Income

		Amount
		Reclassified from
		Accumulated Other
Details about Accumulated		Comprehensive		Affected Line Item in the Statement
Other Comprehensive Income		Income		Where Net Income is Presented
Unrealized gains and losses on available-for-sale securities
	$	747		Net gain on sales of investments
		(254	)	Provision for income taxes
	$	493		Net income
Amortization of post retirement benefit plan
Amortization of actuarial gain/loss for supplemental
executive retirement plan	$	14		Salaries and benefits
		14
Tax (expense) or benefit		5		Provision for income taxes
Net of tax	$	9		Net income
Total reclassification for the period	$	502		Net income, net of tax

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Securities Available For Sale (Schedule Of Maturities Distribution Of The Amortized Cost And Estimated Fair Value Of Securities Available For Sale) (Details) (USD $) In Thousands, unless otherwise specified	Jun. 30, 2014	Dec. 31, 2013
Securities Available For Sale [Abstract]
Amortized Cost, Due one year of less
Amortized Cost, Due after one year through five years	4,251
Amortized Cost, Due after five years through ten years	15,601
Amortized Cost, Due after ten years	452,669
Securities Available for Sale, Amortized Cost	472,521	461,635
Estimated Fair Value, Due one year of less
Estimated Fair Value, Due after one year through five years	4,360
Estimated Fair Value, Due after five years through ten years	16,173
Estimated Fair Value, Due after ten years	457,271
Securities Available for Sale, Estimated Fair Value	$ 477,804	$ 450,170

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Goodwill And Other Intangible Assets

6 Months Ended

Jun. 30, 2014

Goodwill And Other Intangible Assets [Abstract]

Goodwill And Other Intangible Assets

Note 11: Goodwill and Other Intangible Assets

Goodwill: Goodwill totaled $4,935 at June 30, 2014, and December 31, 2013. In the third quarter of 2012 the Company recorded $1,777 of goodwill in connection with the Bank's acquisition of substantially all of the assets and the assumption of certain liabilities including all deposits of the Border Trust Company.

Core Deposit Intangible Asset: The Company has a finite-lived intangible asset capitalized on its consolidated balance sheet in the form of a core deposit intangible asset related to the Border Trust Company acquisition. The core deposit intangible is being amortized over an estimated useful life of eight and one-half years and is included in other assets on the Company's consolidated balance sheet. At June 30, 2014, and December 31, 2013, the balance of the core deposit intangible asset amounted to $608 and $655, respectively.

		June 30,		December 31,
(in thousands)		2014		2013
Core deposit intangibles:
Gross carrying amount	$	783	$	783
Less: accumulated amortization		175		128
Net carrying amount	$	608	$	655

Amortization expense on the finite-lived intangible assets is expected to total $92 for each year from 2014 through 2020, then $8 for 2021.