8-K

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 8-K

CURRENT REPORT

PURSUANT TO SECTION 13 OR 15(D) OF

THE SECURITIES EXCHANGE ACT OF 1934 

Date of Report (Date of earliest event reported): July 19, 2018

BAR HARBOR BANKSHARES

(Exact Name of Registrant as Specified in its Charter)

Maine	001-13349	01-0393663
(State or Other Jurisdiction) of Incorporation)	(Commission File No.)	(I.R.S. Employer Identification No.)

PO Box 400	04609-0400
82 Main Street	(Zip Code)
Bar Harbor, Maine
(Address of Principal Executive Offices)

Registrant’s telephone number, including area code:(207) 288-3314

Not Applicable

(Former Name or Former Address, if Changed Since Last Report)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):

¨ Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

¨ Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

¨ Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

¨ Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).

Emerging growth company ¨

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ¨

Item 2.02 Results of Operations and Financial Condition

On July 19, 2018, Bar Harbor Bankshares (the “Company”), reported its financial results for the quarter ended June 30, 2018. The news release containing the financial results is included as Exhibit 99.1 and shall not be deemed “filed” for any purpose.

Item 9.01 Financial Statements and Exhibits

(a) Financial Statements of Businesses Acquired. Not applicable.

(b) Pro Forma Financial Information. Not applicable.

(c) Shell Company Transactions. Not applicable.

(d) Exhibits.

Exhibit No.	Description
99.1	News Release dated July 19, 2018

SIGNATURES

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, hereunto duly authorized.

			Bar Harbor Bankshares
DATE:	July 19, 2018	By:	/s/ Curtis C. Simard
			Curtis C. Simard
			President and CEO

EX-99.1

Bar Harbor Bankshares Reports Second Quarter Earnings

BAR HARBOR, MAINE - July 19, 2018 -- Bar Harbor Bankshares (NYSE American: BHB) reported second quarter 2018 GAAP earnings of $8.5 million, or 55 cents per share, compared with $6.6 million, or 42 cents per share in the same quarter of 2017. Core earnings in the second quarter 2018 totaled $8.7 million, or 56 cents per share, up from $8.1 million, or 52 cents in the second quarter of 2017.

SECOND QUARTER FINANCIAL HIGHLIGHTS (comparisons are to the second quarter 2017 unless otherwise noted):

• 9% annualized commercial loan growth

• 9% increase in non-interest income

• 58.8% efficiency ratio (non-GAAP measure)

• 1.00% core return on assets (non-GAAP measure)

• 9.86% core return on equity (non-GAAP measure)

• 9% annualized growth in tangible book value per share, excluding security adjustments (non-GAAP measure)

President and Chief Executive Officer, Curtis C. Simard stated, “Our teams had a successful second quarter as they executed on our strategies and delivered on financial performance. We diversified revenue streams, grew loans under a uniformed brand and banking franchise, adhered to our strong credit culture and maintained a disciplined approach to expense management. As a result, core return on assets improved to 1.00% on stronger core earnings (non-GAAP measure), up 8% on a year-over-year basis. Non-interest income grew by 9% year-over-year on higher customer activity and fees from the build out of our derivatives platform. With the additional talent we’ve hired and evolving needs of our customers, we expanded our derivatives capabilities in the second quarter, which contributed almost 3 cents of earnings per share. We expect this to be a continuing source of non-interest income as we look forward.”

BHB - Bar Harbor Bankshares Page 1 www.bhbt.com

“Our commercial teams continued to gain market share as we grew commercial loans at an annualized rate of 9%. Our pipeline remains robust going into the third quarter, especially in commercial and industrial products.”

Mr. Simard went on to say, “In April, we officially unified the Bar Harbor Bank & Trust brand throughout our footprint as we now operate under one name. Our brand identity as a True Community Bank is at the heart of who we are and has further strengthened us as a result of this unification.”

“In the third quarter, we will convert our current Visa debit card offering to Mastercard for all of our customers. The introduction of this card will allow us to further enhance security and fraud detection for customers to include EMV chips. In addition to the issuance of new cards, a rewards program and instant issuance capabilities will be rolled out at all of our branches and customer driven Bar Harbor card controls will be provided though mobile devices.”

Mr. Simard further stated, “One of the key elements in being a True Community Bank is the donation of time, money and expertise to those within our surrounding communities. In addition to the countless volunteer hours that we have committed to our communities, the Bank has already donated significantly this year to worthy causes in the places we call home. We also rolled out an employee incentive program to encourage charitable donations that will provide meaningful support to non-profit businesses.”

Mr. Simard concluded, “Excluding security adjustments, we are ahead of schedule on the earn-back of dilution to tangible book value per share and anticipate to be at pre-acquisition levels by year-end. We are proud of our key performance metrics and community achievements and are looking forward to the second half of 2018, as we build upon our current momentum and continue to enhance shareholder value.”

RESULTS OF OPERATIONS

GAAP earnings increased to $8.5 million, or 55 cents per share, in the second quarter of 2018 from $6.6 million, or 42 cents per share, in the same period of 2017. Core earnings were up 8% to $8.7 million, or 56 cents per share, in the second quarter of 2018 compared to $8.1 million, or 52 cents per share, in the second quarter of 2017. Core revenue totaled $30.1 million and includes the benefit of higher non-interest income from expanded customer activity fees and derivative income. Interest income totaled $31.7 million, up 7% on a year-over-year basis, and yields on loans and investments expanded eight basis points in total. However, net interest margin in the second quarter 2018 decreased to 2.91% from 3.16% in the prior year due to higher

BHB - Bar Harbor Bankshares Page 2 www.bhbt.com

cost of funds driven by short-term interest rate hikes. The Company’s loan to deposit ratio improved two basis points over the prior year to 105 at the end of the second quarter. Given the further flattening of the yield curve, the Company did extend liability durations during the quarter in an effort to mitigate the impact of future Federal Reserve tightening. The contribution from tax-equivalency adjustments also declined over the prior year as a result of the lower federal statutory tax rate. The second quarter provision for loan losses was $770 thousand and exceeded net charge-offs, which follows the positive trend in all quarterly periods presented.

Non-interest expense decreased to $18.7 million in the second quarter 2018 compared to $20.0 million in the second quarter of 2017. The decrease primarily relates to lower acquisition, conversion and other expenses, totaling $214 thousand in 2018 compared to $2.5 million in 2017. Offsetting this, brand consolidation costs also increased other expense in the second quarter 2018 by $318 thousand.

The second quarter effective tax rate decreased to 19.9% in 2018 compared with 31.6% in the same quarter of 2017, primarily reflecting a lower federal statutory tax rate. The effective tax rate in 2017 also benefited from the acquisition and conversion related costs.

FINANCIAL CONDITION

Total assets were $3.5 billion at the end of the second quarter 2018 increasing $30.1 million primarily due to growth in the loan portfolio. Total loans increased $20.6 million in the second quarter with the majority of the growth driven by commercial products lines. Non-accruing loans increased $1.6 million during the quarter mostly due to the deterioration of one specific residential relationship, which is expected to be settled for the full carrying value of the obligation. Overall, asset quality metrics remain strong with an allowance for credit losses to total loans ratio of 0.53%. Excluding the impact of securities fair value adjustments, earnings grew tangible book value per share (non-GAAP measure) to $16.81 compared from $16.44 in the first of quarter of 2018.

BHB - Bar Harbor Bankshares Page 3 www.bhbt.com

BACKGROUND

Bar Harbor Bankshares (NYSE American: BHB) is the parent company of its wholly-owned subsidiary, Bar Harbor Bank & Trust. Founded in 1887, Bar Harbor Bank & Trust is a true community bank serving the financial needs of its clients for over 125 years. Bar Harbor provides full-service community banking with office locations in all three Northern New England states of Maine, New Hampshire and Vermont. For more information, visit www.bhbt.com.

FORWARD LOOKING STATEMENTS

Certain statements contained in this document that are not historical facts may constitute forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended ("Securities Act"), and Section 21E of the Securities Exchange Act of 1934, as amended ("Exchange Act"), and are intended to be covered by the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. When used in this earnings release the words "may," "will," "should," "could," "would," "plan," "potential," "estimate," "project," "believe," "intend," "anticipate," "expect," "target" and similar expressions are intended to identify forward-looking statements, but these terms are not the exclusive means of identifying forward-looking statements. These forward-looking statements are subject to significant risks, assumptions and uncertainties, including among other things, changes in general economic and business conditions, increased competitive pressures, changes in the interest rate environment, legislative and regulatory change, changes in the financial markets, and other risks and uncertainties disclosed from time to time in documents that the Company files with the Securities and Exchange Commission, including but not limited to those discussed in the section titled "Risk Factors" in the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 2017. Because of these and other uncertainties, the Company’s actual results, performance or achievements, or industry results, may be materially different from the results indicated by these forward-looking statements. In addition, the Company’s past results of operations do not necessarily indicate future results. You should not place undue reliance on any of the forward-looking statements, which speak only as of the dates on which they were made. The Company is not undertaking an obligation to update forward-looking statements, even though its situation may change in the future, except as required under federal securities law. The Company qualifies all of its forward-looking statements by these cautionary statements.

BHB - Bar Harbor Bankshares Page 4 www.bhbt.com

NON-GAAP FINANCIAL MEASURES

This document contains certain non-GAAP financial measures in addition to results presented in accordance with accounting principles generally accepted in the United States of America ("GAAP"). These non-GAAP measures are intended to provide the reader with additional supplemental perspectives on operating results, performance trends, and financial condition. Non-GAAP financial measures are not a substitute for GAAP measures; they should be read and used in conjunction with the Company's GAAP financial information. A reconciliation of non-GAAP financial measures to GAAP measures is provided below. In all cases, it should be understood that non-GAAP measures do not depict amounts that accrue directly to the benefit of shareholders. An item which management excludes when computing non-GAAP adjusted earnings can be of substantial importance to the Company's results for any particular quarter or year. The Company's non-GAAP adjusted earnings information set forth is not necessarily comparable to non- GAAP information which may be presented by other companies. Each non-GAAP measure used by the Company in this report as supplemental financial data should be considered in conjunction with the Company's GAAP financial information.

The Company utilizes the non-GAAP measure of adjusted earnings in evaluating operating trends, including components for adjusted revenue and expense. These measures exclude amounts which the Company views as unrelated to its normalized operations, including securities gains/losses, acquisition costs, restructuring costs, legal settlements, and systems conversion costs. Non-GAAP adjustments are presented net of an adjustment for income tax expense.

The Company also calculates adjusted earnings per share based on its measure of adjusted earnings. The Company views these amounts as important to understanding its operating trends, particularly due to the impact of accounting standards related to acquisition activity. Analysts also rely on these measures in estimating and evaluating the Company's performance. Management also believes that the computation of non-GAAP adjusted earnings and adjusted earnings per share may facilitate the comparison of the Company to other companies in the financial services industry. The Company also adjusts certain equity related measures to exclude intangible assets due to the importance of these measures to the investment community.

###

BHB - Bar Harbor Bankshares Page 5 www.bhbt.com

CONTACTS

Josephine Iannelli; EVP, Chief Financial Officer & Treasurer; (207) 288-3314

TABLE INDEX	CONSOLIDATED FINANCIAL SCHEDULES (UNAUDITED)
A	Selected Financial Highlights
B	Footnotes to Selected Financial Highlights
C	Balance Sheets
D	Loan and Deposit Analysis
E	Statements of Income
F	Statements of Income  (Five Quarter Trend)
G	Average Yields and Costs
H	Average Balances
I	Asset Quality Analysis
J	Reconciliation of Non-GAAP Financial Measures (Five Quarter Trend) and Supplementary Data

BHB - Bar Harbor Bankshares Page 6 www.bhbt.com

BAR HARBOR BANKSHARES
SELECTED FINANCIAL HIGHLIGHTS - UNAUDITED
	At or for the Quarters Ended
	Jun 30, 2018			Mar 31, 2018			Dec 31, 2017			Sep 30, 2017			Jun 30, 2017
PER SHARE DATA
Net earnings, diluted	$	0.55		$	0.50		$	0.43		$	0.56		$	0.42
Core earnings, diluted (1) (2)	0.56			0.52			0.58			0.57			0.52
Total book value	22.97			22.78			22.96			22.90			22.53
Tangible book value (2)	16.00			15.78			15.94			15.84			15.44
Market price at period end	30.29			27.72			27.01			31.36			30.82
Dividends	0.19			0.19			0.19			0.19			0.19
PERFORMANCE RATIOS (3)
Return on assets	0.97		%	0.90		%	0.75		%	0.99		%	0.76		%
Core return on assets (1) (2)	1.00			0.93			1.02			1.01			0.94
Return on equity	9.65			9.01			7.35			9.67			7.55
Core return on equity (1) (2)	9.86			9.31			9.97			9.90			9.32
Core return on tangible equity (1) (2)	14.43			13.72			14.56			14.53			13.81
Net interest margin, fully taxable equivalent (FTE) (2) (4)	2.91			2.97			3.04			3.06			3.16
Net interest margin (FTE), excluding purchased loan accretion (2) (4)	2.80			2.85			2.93			2.93			3.02
Efficiency ratio (2)	58.83			60.44			53.02			53.53			54.57
GROWTH (Year-to-date, annualized) (2)
Total commercial loans	5.7		%	2.2		%	23.8		%	20.5		%	7.2		%
Total loans	—			(3.4		)	13.1			12.2			7.0
Total deposits	1.9			(1.8		)	14.4			10.6			2.3
FINANCIAL DATA (In millions)
Total assets	$	3,541		$	3,511		$	3,565		$	3,476		$	3,503
Total earning assets (5)	3,250			3,235			3,244			3,183			3,138
Total investments	749			757			755			756			763
Total loans	2,485			2,464			2,486			2,429			2,377
Allowance for loan losses	13			13			12			12			11
Total goodwill and intangible assets	108			108			108			109			109
Total deposits	2,375			2,341			2,352			2,275			2,213
Total shareholders' equity	356			352			355			353			347
Net income	9			8			7			9			7
Core income (1) (2)	9			8			9			9			8
ASSET QUALITY AND CONDITION RATIOS
Net charge-offs (current quarter annualized)/average loans	0.06		%	0.07		%	0.04		%	0.01		%	0.03		%
Allowance for loan losses/total loans	0.53			0.51			0.50			0.49			0.48
Loans/deposits	105			105			106			107			107
Shareholders' equity to total assets	10.05			10.03			9.95			10.17			9.91
Tangible shareholders' equity to tangible assets	7.22			7.17			7.12			7.26			7.01

A

_____________________________________

(1) Core measurements are non-GAAP financial measures that are adjusted to exclude net non-operating charges primarily related to acquisitions, system conversions and gain on sale of securities. Refer to the Reconciliation of Non-GAAP Financial Measures in table J for additional information.                                    

(2) Non-GAAP financial measure.                                        

(3) All performance ratios are annualized and are based on average balance sheet amounts, where applicable.

(4) Fully taxable equivalent considers the impact of tax-advantaged investment securities and loans.

(5) Earning assets includes non-accruing loans and securities are valued at amortized cost.

B

BAR HARBOR BANKSHARES
CONSOLIDATED BALANCE SHEETS - UNAUDITED
(in thousands)	Jun 30, 2018			Mar 31, 2018			Dec 31, 2017			Sep 30, 2017			Jun 30, 2017
Assets
Cash and due from banks	$	39,327		$	35,088		$	34,262		$	31,223		$	28,112
Interest-bearing deposits with the Federal Reserve Bank	22,066			12,725			56,423			17,501			90,881
Total cash and cash equivalents	61,393			47,813			90,685			48,724			118,993
Securities available for sale, at fair value	710,147			718,559			717,242			718,459			718,364
Federal Home Loan Bank stock	38,712			38,105			38,105			37,107			44,168
Total securities	748,859			756,664			755,347			755,566			762,532
Commercial real estate	838,546			824,721			826,746			793,572			738,584
Commercial and industrial	400,293			387,205			379,423			357,072			350,002
Residential real estate	1,127,895			1,132,977			1,155,682			1,152,628			1,160,832
Consumer	118,332			119,516			123,762			125,590			127,229
Total loans	2,485,066			2,464,419			2,485,613			2,428,862			2,376,647
Less: Allowance for loan losses	(13,090		)	(12,679		)	(12,325		)	(11,950		)	(11,442		)
Net loans	2,471,976			2,451,740			2,473,288			2,416,912			2,365,205
Premises and equipment, net	48,038			48,464			47,708			48,309			48,590
Other real estate owned	129			216			122			122			122
Goodwill	100,085			100,085			100,085			100,255			100,255
Other intangible assets	7,921			8,152			8,383			8,811			9,047
Cash surrender value of bank-owned life insurance	58,811			58,433			57,997			57,613			57,233
Deferred tax asset, net	10,309			9,627			7,180			13,052			13,211
Other assets	33,534			29,793			24,389			26,368			28,223
Total assets	$	3,541,055		$	3,510,987		$	3,565,184		$	3,475,732		$	3,503,411
Liabilities and shareholders' equity
Demand and other non-interest bearing deposits	$	341,773		$	342,192		$	349,055		$	357,398		$	332,339
NOW deposits	449,715			448,992			466,610			442,085			451,171
Savings deposits	350,339			361,591			364,799			373,118			360,306
Money market deposits	260,642			303,777			305,275			300,398			285,312
Time deposits	972,252			884,848			866,346			802,110			783,876
Total deposits	2,374,721			2,341,400			2,352,085			2,275,109			2,213,004
Senior borrowings	735,924			742,198			786,688			775,582			872,021
Subordinated borrowings	43,003			43,018			43,033			43,048			43,063
Total borrowings	778,927			785,216			829,721			818,630			915,084
Other liabilities	31,444			32,214			28,737			28,534			28,201
Total liabilities	3,185,092			3,158,830			3,210,543			3,122,273			3,156,289
Total common shareholders' equity	355,963			352,157			354,641			353,459			347,122
Total liabilities and shareholders' equity	$	3,541,055		$	3,510,987		$	3,565,184		$	3,475,732		$	3,503,411
Net shares outstanding	15,496			15,459			15,443			15,432			15,407

C

BAR HARBOR BANKSHARES
CONSOLIDATED LOAN & DEPOSIT ANALYSIS - UNAUDITED
LOAN ANALYSIS
											Annualized Growth %
(in thousands)	Jun 30, 2018		Mar 31, 2018		Dec 31, 2017		Sep 30, 2017		Jun 30, 2017		Quarter End		Year to Date
Commercial real estate	$	838,546	$	824,721	$	826,746	$	793,572	$	738,584	6.7	%	2.9	%
Commercial and industrial	313,680		301,811		293,707		270,759		269,960		15.7		13.6
Total commercial loans	1,152,226		1,126,532		1,120,453		1,064,331		1,008,544		9.1		5.7
Residential real estate	1,127,895		1,132,977		1,155,682		1,152,628		1,160,832		(1.8	)	(4.8	)
Consumer	118,332		119,516		123,762		125,590		127,229		(4.0	)	(8.8	)
Tax exempt and other	86,613		85,394		85,716		86,313		80,042		5.7		2.1
Total loans	$	2,485,066	$	2,464,419	$	2,485,613	$	2,428,862	$	2,376,647	3.4	%	—	%

DEPOSIT ANALYSIS
											Annualized Growth %
(in thousands)	Jun 30, 2018		Mar 31, 2018		Dec 31, 2017		Sep 30, 2017		Jun 30, 2017		Quarter End		Year to Date
Demand	$	341,773	$	342,192	$	349,055	$	357,398	$	332,339	(0.5	)%	(4.2	)%
NOW	449,715		448,992		466,610		442,085		451,171		0.6		(7.2	)
Savings	350,339		361,591		364,799		373,118		360,306		(12.4	)	(7.9	)
Money Market	260,642		303,777		305,275		300,398		285,312		(56.8	)	(29.2	)
Total non-maturity deposits	1,402,469		1,456,552		1,485,739		1,472,999		1,429,128		(14.9	)	(11.2	)
Total time deposits	972,252		884,848		866,346		802,110		783,876		39.5		24.4
Total deposits	$	2,374,721	$	2,341,400	$	2,352,085	$	2,275,109	$	2,213,004	5.7	%	1.9	%

D

BAR HARBOR BANKSHARES
CONSOLIDATED STATEMENTS OF INCOME - UNAUDITED
	Three Months Ended June 30,				Six Months Ended June 30,
(in thousands, except per share data)	2018		2017		2018		2017
Interest and dividend income
Loans	$	25,934	$	24,226	$	51,060	$	45,420
Securities and other	5,784		5,439		11,435		10,430
Total interest and dividend income	31,718		29,665		62,495		55,850
Interest expense
Deposits	4,405		2,539		8,390		4,749
Borrowings	4,321		3,317		7,955		5,920
Total interest expense	8,726		5,856		16,345		10,669
Net interest income	22,992		23,809		46,150		45,181
Provision for loan losses	770		736		1,565		1,531
Net interest income after provision for loan losses	22,222		23,073		44,585		43,650
Non-interest income
Trust and investment management fee income	3,122		3,324		6,084		6,188
Insurance brokerage service income	—		327		—		691
Customer service fees	2,347		1,991		4,571		3,764
Bank-owned life insurance income	377		386		823		785
Other income	1,275		530		1,881		1,076
Total non-interest income	7,121		6,558		13,359		12,504
Non-interest expense
Salaries and employee benefits	10,375		10,127		21,364		20,448
Occupancy and equipment	2,925		2,829		5,998		5,495
Loss on sales of premises and equipment, net	—		—		—		95
Outside services	581		716		1,141		1,313
Professional services	360		489		793		929
Communication	304		290		484		658
Amortization of intangible assets	207		211		414		391
Acquisition, conversion and other expenses	214		2,459		549		5,571
Other expenses	3,719		2,925		6,794		5,977
Total non-interest expense	18,685		20,046		37,537		40,877
Income before income taxes	10,658		9,585		20,407		15,277
Income tax expense	2,123		3,029		4,060		4,510
Net income	$	8,535	$	6,556	$	16,347	$	10,767
Earnings per share:
Basic	$	0.55	$	0.43	$	1.06	$	0.72
Diluted	$	0.55	$	0.42	1.05		0.72
Weighted average shares outstanding:
Basic	15,482		15,393		15,465		14,935
Diluted	15,571		15,506		15,560		15,049

E

BAR HARBOR BANKSHARES
CONSOLIDATED STATEMENTS OF INCOME (5 Quarter Trend) - UNAUDITED
(in thousands, except per share data)	Jun 30, 2018		Mar 31, 2018		Dec 31, 2017			Sep 30, 2017			Jun 30, 2017
Interest and dividend income
Loans	$	25,934	$	25,126	$	24,895		$	24,661		$	24,226
Securities and other	5,784		5,651		5,261			5,402			5,439
Total interest and dividend income	31,718		30,777		30,156			30,063			29,665
Interest expense
Deposits	4,405		3,985		3,381			3,177			2,539
Borrowings	4,321		3,634		3,279			3,408			3,317
Total interest expense	8,726		7,619		6,660			6,585			5,856
Net interest income	22,992		23,158		23,496			23,478			23,809
Provision for loan losses	770		795		597			660			736
Net interest income after provision for loan losses	22,222		22,363		22,899			22,818			23,073
Non-interest income
Trust and investment management fee income	3,122		2,962		3,042			3,040			3,324
Insurance brokerage service income	—		—		77			329			327
Customer service fees	2,347		2,224		2,495			2,638			1,991
Gain on sales of securities, net	—		—		—			19			—
Bank-owned life insurance income	377		446		374			380			386
Other income	1,275		606		530			554			530
Total non-interest income	7,121		6,238		6,518			6,960			6,558
Non-interest expense
Salaries and employee benefits	10,375		10,989		9,524			9,617			10,127
Occupancy and equipment	2,925		3,073		2,866			2,700			2,829
Gain on sales of premises and equipment,net	—		—		—			(1		)	—
Outside services	581		560		780			907			716
Professional services	360		433		298			428			489
Communication	304		180		249			382			290
Amortization of intangible assets	207		207		209			212			211
Acquisition, conversion, and other expenses	214		335		(2,615		)	346			2,459
Other expenses	3,719		3,075		2,952			2,995			2,925
Total non-interest expense	18,685		18,852		14,263			17,586			20,046
Income before income taxes	10,658		9,749		15,154			12,192			9,585
Income tax expense	2,123		1,937		8,545			3,575			3,029
Net income	$	8,535	$	7,812	$	6,609		$	8,617		$	6,556
Earnings per share:
Basic	$	0.55	$	0.51	$	0.43		$	0.56		$	0.43
Diluted	$	0.55	$	0.50	$	0.43		$	0.56		$	0.42
Weighted average shares outstanding:
Basic	15,482		15,448		15,437			15,420			15,393
Diluted	15,571		15,553		15,537			15,511			15,506

F

BAR HARBOR BANKSHARES
AVERAGE YIELDS AND COSTS (Fully Taxable Equivalent - Annualized) - UNAUDITED
	Quarters Ended
	Jun 30, 2018		Mar 31, 2018		Dec 31, 2017		Sep 30, 2017		Jun 30, 2017
Earning assets
Commercial real estate	4.48	%	4.41	%	4.30	%	4.28	%	4.24	%
Commercial and industrial	4.69		4.41		4.77		4.84		4.77
Residential	3.88		3.87		3.78		3.79		3.83
Consumer	4.65		4.47		4.17		4.34		4.71
Total loans	4.25		4.16		4.12		4.13		4.14
Securities and other	3.18		3.16		3.06		3.13		3.19
Total earning assets	3.99	%	3.92	%	3.87	%	3.89	%	3.91	%
Funding liabilities
NOW	0.37	%	0.34	%	0.31	%	0.32	%	0.25	%
Savings	0.17		0.18		0.19		0.18		0.13
Money market	0.79		0.68		0.58		0.52		0.45
Time deposits	1.51		1.39		1.19		1.13		1.01
Total interest bearing deposits	0.90		0.82		0.70		0.66		0.56
Borrowings	2.07		1.80		1.62		1.66		1.41
Total interest-bearing liabilities	1.25	%	1.11	%	0.97	%	0.96	%	0.85	%
Net interest spread	2.74		2.81		2.90		2.93		3.06
Net interest margin	2.91		2.97		3.04		3.06		3.16

G

BAR HARBOR BANKSHARES
AVERAGE BALANCES - UNAUDITED
	Quarters Ended
(in thousands)	Jun 30, 2018			Mar 31, 2018			Dec 31, 2017			Sep 30, 2017			Jun 30, 2017
Assets
Commercial real estate	$	824,356		$	819,531		$	783,730		$	764,770		$	767,669
Commercial and industrial	396,471			380,029			362,881			353,194			322,147
Residential	1,126,714			1,147,010			1,161,865			1,158,069			1,159,714
Consumer	119,570			121,467			125,109			126,138			127,611
Total loans (1)	2,467,111			2,468,037			2,433,585			2,402,171			2,377,141
Securities and other (2)	767,886			765,328			753,282			754,450			761,546
Total earning assets	3,234,997			3,233,365			3,186,867			3,156,621			3,138,687
Cash and due from banks	50,869			53,151			65,145			49,169			87,332
Allowance for loan losses	(13,107		)	(12,589		)	(12,202		)	(11,786		)	(11,292		)
Goodwill and other intangible assets	108,118			108,349			108,769			109,147			109,108
Other assets	131,522			129,525			144,359			149,394			110,129
Total assets	$	3,512,399		$	3,511,801		$	3,492,938		$	3,452,545		$	3,433,964
Liabilities and shareholders' equity
NOW	$	441,645		$	447,026		$	449,669		$	447,459		$	440,452
Savings	351,712			362,508			368,714			368,443			362,899
Money market	288,169			305,105			308,071			292,110			275,687
Time deposits	872,149			857,796			799,348			793,489			732,188
Total interest bearing deposits	1,953,675			1,972,435			1,925,802			1,901,501			1,811,226
Borrowings	836,295			819,576			803,469			812,938			941,789
Total interest-bearing liabilities	2,789,970			2,792,011			2,729,271			2,714,439			2,753,015
Non-interest-bearing demand deposits	339,374			339,349			376,066			354,470			320,503
Other liabilities	28,386			29,000			30,971			30,079			13,145
Total liabilities	3,157,730			3,160,360			3,136,308			3,098,988			3,086,663
Total shareholders' equity	354,669			351,441			356,630			353,557			347,301
Total liabilities and shareholders' equity	$	3,512,399		$	3,511,801		$	3,492,938		$	3,452,545		$	3,433,964

_____________________________________

(1) Total loans include non-accruing loans.

(2) Average balances for securities available-for-sale are based on amortized cost.

H

BAR HARBOR BANKSHARES
ASSET QUALITY ANALYSIS - UNAUDITED
	At or for the Quarters Ended
(in thousands)	Jun 30, 2018			Mar 31, 2018			Dec 31, 2017			Sep 30, 2017			Jun 30, 2017
NON-PERFORMING ASSETS
Non-accruing loans:
Commercial real estate	$	8,883		$	8,422		$	8,343		$	2,467		$	2,090
Commercial installment	2,411			2,304			1,209			236			270
Residential real estate	9,945			8,548			4,266			3,619			2,783
Consumer installment	707			1,065			500			496			160
Total non-accruing loans	21,946			20,339			14,318			6,818			5,303
Other real estate owned	129			216			122			122			122
Total non-performing assets	$	22,075		$	20,555		$	14,440		$	6,940		$	5,425
Total non-accruing loans/total loans	0.88		%	0.83		%	0.58		%	0.28		%	0.22		%
Total non-performing assets/total assets	0.62			0.59			0.41			0.20			0.15
PROVISION AND ALLOWANCE FOR LOAN LOSSES
Balance at beginning of period	$	12,679		$	12,325		$	11,950		$	11,442		$	10,884
Charged-off loans	(517		)	(461		)	(277		)	(297		)	(213		)
Recoveries on charged-off loans	158			20			55			145			35
Net loans charged-off	(359		)	(441		)	(222		)	(152		)	(178		)
Provision for loan losses	770			795			597			660			736
Balance at end of period	$	13,090		$	12,679		$	12,325		$	11,950		$	11,442
Allowance for loan losses/total loans	0.53		%	0.51		%	0.50		%	0.49		%	0.48		%
Allowance for loan losses/non-accruing loans	60			62			86			175			216
NET LOAN CHARGE-OFFS
Commercial real estate	$	(92	)	$	(91	)	$	(92	)	$	(16	)	$	(6	)
Commercial installment	(54		)	(140		)	1			6			(138		)
Residential real estate	(64		)	1			—			(79		)	(13		)
Consumer installment	(149		)	(211		)	(131		)	(63		)	(21		)
Total, net	$	(359	)	$	(441	)	$	(222	)	$	(152	)	$	(178	)
Net charge-offs (QTD annualized)/average loans	0.06		%	0.07		%	0.04		%	0.01		%	0.03		%
Net charge-offs (YTD annualized)/average loans	0.06			0.07			0.04			0.04			0.04
DELINQUENT AND NON-ACCRUING LOANS/TOTAL LOANS
30-89 Days delinquent	0.14		%	0.24		%	0.37		%	0.35		%	0.55		%
90+ Days delinquent and still accruing	—			—			0.02			0.01			—
Total accruing delinquent loans	0.14			0.24			0.39			0.36			0.55
Non-accruing loans	0.88			0.83			0.58			0.28			0.22
Total delinquent and non-accruing loans	1.02		%	1.07		%	0.97		%	0.64		%	0.77		%

I

BAR HARBOR BANKSHARES
RECONCILIATION OF NON-GAAP FINANCIAL MEASURES AND SUPPLEMENTARY DATA- UNAUDITED
		At or for the Quarters Ended
(in thousands)		Jun 30, 2018			Mar 31, 2018			Dec 31, 2017			Sep 30, 2017			Jun 30, 2017
Net income		$	8,535		$	7,812		$	6,609		$	8,617		$	6,556
Adj: Security Gains		—			—			—			(19		)	—
Adj: Gain on sale of fixed assets, net		—			—			—			(1		)	—
Adj: Loss on other real estate owned		23			—			—			—			—
Adj: Acquisition, conversion and other expenses		214			335			(2,615		)	346			2,459
Adj: Income taxes (1)		(57		)	(81		)	982			(122		)	(924		)
Adj: Tax reform charge		—			—			3,988			—			—
Total core income (2)	(A)	$	8,715		$	8,066		$	8,964		$	8,821		$	8,091
Net-interest income	(B)	$22,992			$23,158			$23,496			$23,478			$23,809
Plus: Non-interest income		7,121			6,238			6,518			6,960			6,558
Total Revenue		30,113			29,396			30,014			30,438			30,367
Adj: Net security gains		—			—			—			(19		)	—
Total core revenue (2)	(C)	$30,113			$29,396			$30,014			$30,419			$30,367
Total non-interest expense		18,685			18,852			14,263			17,586			20,046
Less: Gain on sale of fixed assets, net		—			—			—			1			—
Less: Loss on other real estate owned		(23		)	—			—			—			—
Less: Acquisition, conversion and other expenses		(214		)	(335		)	2,615			(346		)	(2,459		)
Core non-interest expense (2)	(D)	$18,448			$18,517			$16,878			$17,241			$17,587
(in millions)
Total average earning assets	(E)	$	3,235		$	3,233		$	3,187		$	3,157		$	3,139
Total average assets	(F)	3,512			3,512			3,493			3,453			3,434
Total average shareholders' equity	(G)	355			351			357			354			347
Total average tangible shareholders' equity (2) (3)	(H)	247			243			248			244			238
Total tangible shareholders' equity, period-end (2) (3)	(I)	248			244			246			244			238
Total tangible assets, period-end (2) (3)	(J)	3,433			3,403			3,457			3,367			3,394
(in thousands)
Total common shares outstanding, period-end	(K)	15,496			15,459			15,443			15,432			15,407
Average diluted shares outstanding	(L)	15,571			15,553			15,537			15,511			15,506
Core earnings per share, diluted (2)	(A/L)	$	0.56		$	0.52		$	0.58		$	0.57		$	0.52
Tangible book value per share, period-end (2)	(I/K)	16.00			15.78			15.94			15.84			15.44
Securities adjustment, net of tax (1)	(M)	(12,594)			(10,237)			1,711			(1,155		)	(827		)
Tangible book value per share, excluding securities adjustment (2)	(I+M)/K	16.81			16.44			15.83			15.91			15.49
Total tangible shareholders' equity/total tangible assets (2)	(H/J)	7.22			7.17			7.12			7.26			7.01

J

Performance ratios
GAAP return on assets		0.97		%	0.90		%	0.75		%	0.99		%	0.76		%
Core return on assets (2)	(A/F)	1.00			0.93			1.02			1.01			0.94
GAAP return on equity		9.65			9.01			7.35			9.67			7.55
Core return on equity (2)	(A/G)	9.86			9.31			9.97			9.90			9.32
Core return on tangible equity (2) (4)	(A/I)	14.43			13.72			14.56			14.53			13.81
Efficiency ratio (2) (5)	(D-O-Q)/(C+N)	58.83			60.44			53.02			53.53			54.57
Net interest margin	(B+P)/E	2.91			2.97			3.04			3.06			3.16
Supplementary data(in thousands)
Taxable equivalent adjustment for efficiency ratio	(N)	$	622		$	645		$	1,122		$	1,107		$	1,185
Franchise taxes included in non-interest expense	(O)	159			152			161			154			158
Tax equivalent adjustment for net interest margin	(P)	502			503			897			878			936
Intangible amortization	(Q)	207			207			209			212			211

_____________________________________

(1) Assumes a marginal tax rate of 24.15% in 2018 and 37.57% in 2017.

(2) Non-GAAP financial measure.        

(3) Total tangible shareholders' equity is computed by taking total shareholders' equity less the intangible assets at period-end. Total tangible assets is computed by taking total assets less the intangible assets at period-end.              

(4) Adjusted return on tangible equity is computed by dividing the total core income adjusted for the tax-effected amortization of intangible assets, assuming a marginal rate of 24.15% in 2018 and 37.57% in 2017, by tangible equity.    

(5) Efficiency ratio is computed by dividing total core tangible non-interest expense by the sum of total net interest income on a fully taxable equivalent basis and total core non-interest income.  The Company uses this non-GAAP measure to provide important information about its operating efficiency.

K