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): January 28, 2020

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))

Securities registered pursuant to Section 12(b) of the Act

Title of each class	Trading Symbol	Name of each exchange on which registered
Common Stock, par value $2.00 per share	BHB	NYSE American

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 January 28, 2020, Bar Harbor Bankshares issued a press release reporting its financial results for the quarter ended December 31, 2019. The full text of this press release is furnished as Exhibit 99.1 and incorporated herein by reference.

The information contained herein, including the exhibit furnished herewith, is intended to be furnished and shall not be deemed "filed" for purposes of Section 18 of the Securities Exchange Act of 1934 or otherwise subject to the liabilities of that section, nor shall it be deemed incorporated by reference in any filing under the Securities Act of 1933 or the Securities Exchange Act of 1934, except as expressly set forth by specific reference in such filing.

Item 9.01 Financial Statements and Exhibits

(d) Exhibits.

Exhibit No.	Description
99.1	Press Release dated January 28, 2020

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
January 28, 2020	By:	/s/ Curtis C. Simard
		Curtis C. Simard
		President and CEO

EX-99.1

Bar Harbor Bankshares Reports Record Fourth Quarter Revenues

BAR HARBOR, MAINE - January 28, 2020 -- Bar Harbor Bankshares (NYSE American: BHB) reported fourth quarter 2019 net income of $4.2 million, or $0.27 per share, compared to $5.0 million, or $0.32 per share, in the prior quarter and $7.6 million or $0.49 per share in the fourth quarter of 2018. The non-GAAP measure of core earnings in the fourth quarter 2019 increased 20% to $8.8 million, or $0.56 per share, from $7.3 million, or $0.47 per share in the prior quarter and decreased from $9.2 million, or $0.59 per share in the fourth quarter of 2018. On October 25, 2019, the Company completed the previously announced acquisition of eight branches within Central Maine and closed five branches effective December 31, 2019, as part of its strategic review. During the quarter the Company recorded non-core charges totaling $0.29 per share after-tax, primarily related to the one-time costs associated with the acquisition and balance sheet optimization initiatives that were part of the strategic review.

FOURTH QUARTER FINANCIAL HIGHLIGHTS (compared to prior quarter, unless otherwise noted):

• 98% loan to deposit ratio, improved from 103%

• 6% increase in total revenue to $31.9 million

• 20 basis point expansion in net interest margin to 2.95%

• 0.44% non-performing loans to total loans, down from 0.65%

• Called higher cost subordinated debt and replaced with upsized issuance

President and Chief Executive Officer, Curtis C. Simard stated, “We finished the year with what I can only classify as judicious and efficient execution on all fronts. This includes repositioning the Company’s balance sheet, expanding our footprint within Central Maine and affirming our profitability strategies. Our strong performance and the recalibration of the balance sheet increased core return on assets to 0.96% for the quarter. In the fourth quarter, we achieved record revenues from higher interest and fee income, as well as lower cost of funds resulting from the expansion of our franchise.”

BHB - Bar Harbor Bankshares Page 1 www.barharbor.bank

Mr. Simard continued, “We completed several initiatives in the fourth quarter that reduced our cost of funds while improving interest rate risk and overall capital positions. Following the completion of the Central Maine branch acquisition, the Company used the net deposit proceeds to extinguish approximately $140 million of higher cost FHLB borrowings. Shortly thereafter, given the change in our balance sheet profile and funding needs, we terminated $90 million in interest rate caps related to rolling three-month FHLB borrowings. The losses from the caps were reclassified from other comprehensive income to earnings, with no further dilution to equity. We also completed a $40 million subordinated debt issuance which replaced $22 million of higher cost subordinated notes called earlier in the quarter. The offering was more than two times oversubscribed, driven by one of the most effective executions for 2019, and presented an opportunity to upsize the deal. It’s this level of interest in our Company and belief in our long-term strategy that will allow us to continue building franchise value for our shareholders.”

Mr. Simard went on to say, “Our loan origination teams continue to adhere to our disciplined underwriting practices and selectively pursue those opportunities that are accretive to our profitability metrics. This resulted in originations that kept relative pace with loan payoffs as we remixed the balance sheet and curtailed growth in lower yielding assets. In addition we exited certain non-performing loans further improving our non-performing loans to total loans to 0.44%. Implementation of all of these strategies, along with additional investment remixes that started in the third quarter resulted in net interest margin expanding 20 basis points in the fourth quarter, despite the current rate environment.”

Mr. Simard concluded, “Our efforts these past few quarters have positioned us well for 2020 and will move us towards our stated goals of higher quality earnings and capital growth with continued focus on our customers and relationships which are driving current momentum.”

FINANCIAL CONDITION

Total assets increased in the fourth quarter 2019 by $56.7 million to $3.7 billion primarily due to loans, goodwill and other intangible assets recorded from the branch acquisition. Securities available for sale declined $12.4 million as the Company both de-levered and remixed the investment portfolio as part of the strategic review. Loans in the fourth quarter grew by $63.8 million as acquired balances of $100.8 million were recorded and principally offset by run-off in jumbo residential loans of $14.2 million and two commercial relationships of $17.2 million that paid-off during the quarter.Mortgage growth on-balance sheet was curtailed as the secondary market platform was leveraged for fee income given the current rate environment. Non-maturity deposits increased by $172.2 million in the quarter including acquired balances, net of any year-end seasonal dips in demand deposit balances. Cash proceeds received from the acquisition were used to

BHB - Bar Harbor Bankshares Page 2 www.barharbor.bank

pay off approximately $140.0 million of higher cost FHLB borrowings during the quarter. Longer term subordinated borrowings increased by $17.0 million as existing notes at higher rates were called and opportunistically replaced with an upsized $40.0 million private placement issued in November 2019. The loan to deposit ratio improved to 98% in the fourth quarter 2019 compared to 103% in the prior quarter as a result of the branch acquisition.

Non-accruing loans in the fourth quarter 2019 decreased $5.1 million primarily due to one commercial real estate relationship that was settled with a $530 thousand recovery. The settlement also contributed to the improvement of the non-performing loans to total loans ratio to 0.44% from 0.65% in the prior quarter. The increase in 30-day past due accounts for the quarter is attributable to the payment schedules and calendar dates.

The Company’s book value per share was $25.48 at year-end 2019 compared with $25.37 at the end of the third quarter 2019 and $23.87 at year-end 2018. Tangible book value per share was $17.30 compared to $18.49 at the end of the third quarter and $16.94 at year-end 2018, with the decrease during the quarter reflecting the goodwill and intangibles recorded from the branch acquisition. Excluding the impact from the acquisition, tangible book value per share increased to $18.62; an increase of 10% annualized from the third quarter 2019 and for the year.

RESULTS OF OPERATIONS

Net income in the fourth quarter 2019 was $4.2 million, or $0.27 per share, compared to $5.0 million, or $0.32 per share, in the prior quarter and $7.6 million, or $0.49 per share in the fourth quarter 2018. The non-GAAP measure of core earnings in the fourth quarter 2019 was $8.8 million or $0.56 per share, up 20% from $7.3 million or $0.47 per share in the previous quarter and down from $9.2 million or $0.59 per share in the fourth quarter 2018. Results in the fourth quarter included operations from the branch acquisition as of the October 25, 2019 effective date. Total revenue comprising of net interest income and total non-interest income increased to $31.9 million in the fourth quarter 2019 as compared to $30.1 million in the previous quarter and $29.7 million in the fourth quarter of 2018. Net interest income grew $1.7 million during the quarter primarily as a result of leveraging the low cost of deposits acquired to repay higher cost of funds. Net interest margin in the fourth quarter 2019 expanded 20 basis points due to the strategic initiatives previously discussed. Execution of these strategies improved cost of borrowings by 32 basis points on a quarter-over-quarter basis.

BHB - Bar Harbor Bankshares Page 3 www.barharbor.bank

Non-interest income was $7.8 million compared to $7.6 million for the third quarter 2019 and $7.4 million in the fourth quarter of 2018. The increase in the quarter was driven by trust and investment management fee income and customer services fees associated from the branch acquisition.

Non-interest expense increased to $26.8 million in the fourth quarter 2019 from $23.4 million in the prior quarter and $20.1 million in the fourth quarter of 2018. The increase in the quarter is primarily a result of a $700 thousand increase in occupancy costs related to the acquired properties and other costs associated with the acquisition and strategic review. The $3.2 million loss associated with the termination of the interest rate caps was reclassified from shareholders’ equity and included in acquisition, conversion and other expenses. The prior quarter included $2.2 million of branch optimization costs.

BHB - Bar Harbor Bankshares Page 4 www.barharbor.bank

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 130 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.barharbor.bank.

FORWARD LOOKING STATEMENTS

Certain statements under the heading "FOURTH QUARTER FINANCIAL HIGHLIGHTS" 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, 2018. 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 5 www.barharbor.bank

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 core earnings can be of substantial importance to the Company's results for any particular quarter or year. The Company's non-GAAP core 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 core earnings in evaluating operating trends, including components for core revenue and expense. These measures exclude amounts which the Company views as unrelated to its normalized operations, including gains/losses on securities, premises, equipment and other real estate owned, 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 core earnings per share based on its measure of core 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 core earnings and core 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 6 www.barharbor.bank

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 7 www.barharbor.bank

BAR HARBOR BANKSHARES
SELECTED FINANCIAL HIGHLIGHTS - UNAUDITED
	At or for the Quarters Ended
	Dec 31, 2019			Sep 30, 2019			Jun 30, 2019			Mar 31, 2019			Dec 31, 2018
PER SHARE DATA
Net earnings, diluted	$	0.27		$	0.32		$	0.39		$	0.47		$	0.49
Core earnings, diluted (1) (2)	0.56			0.47			0.41			0.47			0.59
Total book value	25.48			25.37			25.13			24.54			23.87
Tangible book value (2)	17.30			18.49			18.23			17.63			16.94
Market price at period end	25.39			24.93			26.59			25.87			22.43
Dividends	0.22			0.22			0.22			0.20			0.20
PERFORMANCE RATIOS (3)
Return on assets	0.46		%	0.55		%	0.67		%	0.83		%	0.85		%
Core return on assets (1) (2)	0.96			0.80			0.70			0.83			1.03
Return on equity	4.21			5.04			6.33			7.83			8.31
Core return on equity (1) (2)	8.81			7.36			6.57			7.83			10.01
Core return on tangible equity (1) (2)	12.66			10.31			9.30			11.19			14.46
Net interest margin, fully taxable equivalent (FTE) (2) (4)	2.95			2.75			2.65			2.77			2.78
Net interest margin (FTE), excluding purchased loan accretion (2) (4)	2.88			2.65			2.56			2.67			2.70
Efficiency ratio (2)	62.56			65.02			68.48			63.94			59.91
ORGANIC GROWTH (Year-to-date, annualized) (2) (6)
Total commercial loans	6.0		%	10.5		%	10.1		%	(3.3		%)	1.4		%
Total loans	2.0			4.7			7.1			5.9			0.2
Total deposits	(1.8		)	0.6			(0.1		)	(2.8		)	5.6
FINANCIAL DATA (In millions)
Total assets	$	3,669		$	3,612		$	3,688		$	3,629		$	3,608
Total earning assets (5)	3,336			3,270			3,355			3,312			3,263
Total investments	684			703			784			782			761
Total loans	2,641			2,577			2,578			2,527			2,490
Allowance for loan losses	15			15			15			14			14
Total goodwill and intangible assets	127			107			107			107			108
Total deposits	2,696			2,494			2,481			2,466			2,483
Total shareholders' equity	396			394			391			381			371
Net income	4			5			6			7			8
Core earnings (1) (2)	9			7			6			7			9
ASSET QUALITY AND CONDITION RATIOS
Net charge-offs (current quarter annualized)/average loans	0.08		%	0.02		%	—		%	0.03		%	0.03		%
Allowance for loan losses/total loans	0.58			0.60			0.57			0.55			0.56
Loans/deposits	98			103			104			102			100
Shareholders' equity to total assets	10.80			10.92			10.59			10.50			10.27
Tangible shareholders' equity to tangible assets	7.60			8.20			7.92			7.77			7.51

A

____________________________________

(1) Core measurements are non-GAAP financial measures that are adjusted to exclude net non-operating charges primarily related

to acquisitions, restructurings, system conversions, loss on debt extinguishment and gain or loss on sale of securities and premises and equipment. 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 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.

(6) Assets acquired from eight branches purchased from People's United Bank, National Association as of October 25, 2019, were

excluded from calculation.

B

BAR HARBOR BANKSHARES
CONSOLIDATED BALANCE SHEETS - UNAUDITED
(in thousands)	Dec 31, 2019			Sep 30, 2019			Jun 30, 2019			Mar 31, 2019			Dec 31, 2018
Assets
Cash and due from banks	$	37,261		$	50,032		$	42,657		$	37,504		$	35,208
Interest-bearing deposits with the Federal Reserve Bank	19,649			21,561			17,203			16,599			63,546
Total cash and cash equivalents	56,910			71,593			59,860			54,103			98,754
Securities available for sale, at fair value	663,230			675,675			748,560			747,235			725,837
Federal Home Loan Bank stock	20,679			27,469			35,220			35,107			35,659
Total securities	683,909			703,144			783,780			782,342			761,496
Commercial real estate	930,661			923,773			881,479			821,567			826,699
Commercial and industrial	423,291			402,706			416,725			409,937			404,870
Residential real estate	1,151,857			1,143,452			1,167,759			1,184,053			1,144,698
Consumer	135,283			107,375			112,275			111,402			113,960
Total loans	2,641,092			2,577,306			2,578,238			2,526,959			2,490,227
Less: Allowance for loan losses	(15,353		)	(15,353		)	(14,572		)	(13,997		)	(13,866		)
Net loans	2,625,739			2,561,953			2,563,666			2,512,962			2,476,361
Premises and equipment, net	51,205			47,644			50,230			49,661			48,804
Other real estate owned	2,236			2,455			2,351			2,351			2,351
Goodwill	118,649			100,085			100,085			100,085			100,085
Other intangible assets	8,641			6,879			7,072			7,266			7,459
Cash surrender value of bank-owned life insurance	75,863			75,368			74,871			74,352			73,810
Deferred tax asset, net	3,865			4,988			5,649			7,632			9,514
Other assets	42,111			38,365			40,071			38,441			29,853
Total assets	$	3,669,128		$	3,612,474		$	3,687,635		$	3,629,195		$	3,608,487
Liabilities and shareholders' equity
Demand and other non-interest bearing deposits	$	414,534		$	380,707		$	354,125		$	342,030		$	370,889
NOW deposits	575,809			490,315			472,576			470,277			484,717
Savings deposits	388,683			360,570			352,657			346,813			358,888
Money market deposits	384,090			359,328			305,506			349,833			335,951
Time deposits	932,635			902,665			996,512			956,818			932,793
Total deposits	2,695,751			2,493,585			2,481,376			2,465,771			2,483,238
Senior borrowings	471,396			641,819			733,084			703,283			680,823
Subordinated borrowings	59,920			42,928			42,943			42,958			42,973
Total borrowings	531,316			684,747			776,027			746,241			723,796
Other liabilities	45,654			39,683			39,670			36,160			30,874
Total liabilities	3,272,721			3,218,015			3,297,073			3,248,172			3,237,908
Total common shareholders' equity	396,407			394,459			390,562			381,023			370,579
Total liabilities and shareholders' equity	$	3,669,128		$	3,612,474		$	3,687,635		$	3,629,195		$	3,608,487
Net shares outstanding	15,558			15,549			15,544			15,524			15,523

C

BAR HARBOR BANKSHARES
CONSOLIDATED LOAN & DEPOSIT ANALYSIS - UNAUDITED
LOAN ANALYSIS
													Organic Annualized Growth %
(in thousands)	Dec 31, 2019		Sep 30, 2019		Jun 30, 2019		Mar 31, 2019		Dec 31, 2018		Acquired(1)		Quarter End		Year to Date
Commercial real estate	$	930,661	$	923,773	$	881,479	$	821,567	$	826,699	$	25,054	(7.9	)%	9.5	%
Commercial and industrial	318,988		301,590		312,029		305,185		309,544		19,739		(3.1	)	(3.3	)
Total commercial loans	1,249,649		1,225,363		1,193,508		1,126,752		1,136,243		44,793		(6.7	)	6.0
Residential real estate	1,151,857		1,143,452		1,167,759		1,184,053		1,144,698		23,716		(5.4	)	(1.4	)
Consumer	135,283		107,375		112,275		111,402		113,960		29,530		(6.0	)	(7.2	)
Tax exempt and other	104,303		101,116		104,696		104,752		95,326		2,753		1.7		6.5
Total loans	$	2,641,092	$	2,577,306	$	2,578,238	$	2,526,959	$	2,490,227	$	100,792	(5.7	)%	2.0	%

(1) Acquired loans from eight branches purchased from People's United Bank, National Association as of October 25, 2019.

DEPOSIT ANALYSIS
													Organic Annualized Growth %
(in thousands)	Dec 31, 2019		Sep 30, 2019		Jun 30, 2019		Mar 31, 2019		Dec 31, 2018		Acquired(1)		Quarter End		Year to Date
Demand	$	414,534	$	380,707	$	354,125	$	342,030	$	370,889	$	51,933	(19.0	)%	(2.2	)%
NOW	575,809		490,315		472,576		470,277		484,717		85,980		(0.4	)	1.1
Savings	388,683		360,570		352,657		346,813		358,888		25,841		2.5		1.1
Money market	384,090		359,328		305,506		349,833		335,951		26,399		(1.8	)	6.5
Total non-maturity deposits	1,763,116		1,590,920		1,484,864		1,508,953		1,550,445		190,153		(4.5	)	1.5
Total time deposits	932,635		902,665		996,512		956,818		932,793		68,240		(17.0	)	(7.3	)
Total deposits	$	2,695,751	$	2,493,585	$	2,481,376	$	2,465,771	$	2,483,238	$	258,393	(9.0	)%	(1.8	)%

(1) Acquired deposits from eight branches purchased from People's United Bank, National Association as of October 25, 2019.

D

BAR HARBOR BANKSHARES
CONSOLIDATED STATEMENTS OF INCOME - UNAUDITED
	Three Months Ended December 31,						Twelve Months Ended December 31,
(in thousands, except per share data)	2019			2018			2019		2018
Interest and dividend income
Loans	$	28,361		$	26,743		$	111,042	$	104,015
Securities and other	5,756			6,029			24,349		23,436
Total interest and dividend income	34,117			32,772			135,391		127,451
Interest expense
Deposits	6,698			5,653			27,034		19,521
Borrowings	3,315			4,855			18,547		17,047
Total interest expense	10,013			10,508			45,581		36,568
Net interest income	24,104			22,264			89,810		90,883
Provision for loan losses	538			572			2,317		2,780
Net interest income after provision for loan losses	23,566			21,692			87,493		88,103
Non-interest income
Trust and investment management fee income	3,227			2,949			12,063		11,985
Customer service fees	2,791			2,477			10,127		9,538
Gain (loss) on sales of securities, net	80			(924		)	237		(924		)
Bank-owned life insurance income	495			493			2,053		1,821
Customer derivative income	475			315			2,028		860
Other income	738			2,140			2,561		4,655
Total non-interest income	7,806			7,450			29,069		27,935
Non-interest expense
Salaries and employee benefits	11,432			9,269			45,000		40,964
Occupancy and equipment	4,113			3,022			14,214		12,386
(Loss) gain on sales of premises and equipment, net	(3		)	—			18		—
Outside services	540			811			1,818		2,408
Professional services	370			458			2,191		1,474
Communication	114			103			821		804
Marketing	453			536			1,872		1,743
Amortization of intangible assets	240			207			861		828
Loss on debt extinguishment	1,096			—			1,096		—
Acquisition, conversion and other expenses	4,998			1,109			8,317		1,728
Other expenses	3,450			4,581			13,525		13,204
Total non-interest expense	26,803			20,096			89,733		75,539
Income before income taxes	4,569			9,046			26,829		40,499
Income tax expense	362			1,426			4,209		7,562
Net income	$	4,207		$	7,620		$	22,620	$	32,937
Earnings per share:
Basic	$	0.27		$	0.49		$	1.46	$	2.13
Diluted	0.27			0.49			1.45		2.12
Weighted average shares outstanding:
Basic	15,554			15,516			15,541		15,488
Diluted	15,602			15,574			15,587		15,564

E

BAR HARBOR BANKSHARES
CONSOLIDATED STATEMENTS OF INCOME (5 Quarter Trend) - UNAUDITED
(in thousands, except per share data)	Dec 31, 2019			Sep 30, 2019		Jun 30, 2019		Mar 31, 2019		Dec 31, 2018
Interest and dividend income
Loans	$	28,361		$	28,157	$	27,660	$	26,864	$	26,743
Securities and other	5,756			6,105		6,125		6,363		6,029
Total interest and dividend income	34,117			34,262		33,785		33,227		32,772
Interest expense
Deposits	6,698			7,143		6,886		6,307		5,653
Borrowings	3,315			4,674		5,403		5,155		4,855
Total interest expense	10,013			11,817		12,289		11,462		10,508
Net interest income	24,104			22,445		21,496		21,765		22,264
Provision for loan losses	538			893		562		324		572
Net interest income after provision for loan losses	23,566			21,552		20,934		21,441		21,692
Non-interest income
Trust and investment management fee income	3,227			3,013		3,066		2,757		2,949
Customer service fees	2,791			2,553		2,618		2,165		2,477
Gain (loss) on sales of securities, net	80			157		—		—		(924		)
Bank-owned life insurance income	495			497		519		542		493
Customer derivative income	475			828		696		29		315
Other income	738			595		554		674		2,140
Total non-interest income	7,806			7,643		7,453		6,167		7,450
Non-interest expense
Salaries and employee benefits	11,432			11,364		11,685		10,519		9,269
Occupancy and equipment	4,113			3,415		3,300		3,386		3,022
(Loss) gain on sales of premises and equipment, net	(3		)	—		21		—		—
Outside services	540			424		443		411		811
Professional services	370			707		570		544		458
Communication	114			189		283		235		103
Marketing	453			613		511		295		536
Amortization of intangible assets	240			207		207		207		207
Loss on debt extinguishment	1,096			—		—		—		—
Acquisition, conversion and other expenses	4,998			3,039		280		—		1,109
Other expenses	3,450			3,442		3,606		3,027		4,581
Total non-interest expense	26,803			23,400		20,906		18,624		20,096
Income before income taxes	4,569			5,795		7,481		8,984		9,046
Income tax expense	362			780		1,364		1,703		1,426
Net income	$	4,207		$	5,015	$	6,117	$	7,281	$	7,620
Earnings per share:
Basic	$	0.27		$	0.32	$	0.39	$	0.47	$	0.49
Diluted	0.27			0.32		0.39		0.47		0.49
Weighted average shares outstanding:
Basic	15,554			15,547		15,538		15,523		15,516
Diluted	15,602			15,581		15,586		15,587		15,574

F

BAR HARBOR BANKSHARES
AVERAGE YIELDS AND COSTS (Fully Taxable Equivalent - Annualized) - UNAUDITED
	Quarters Ended
	Dec 31, 2019		Sep 30, 2019		Jun 30, 2019		Mar 31, 2019		Dec 31, 2018
Earning assets
Commercial real estate	4.69	%	4.74	%	4.74	%	4.78	%	4.71	%
Commercial and industrial	4.58		4.78		4.75		4.79		4.61
Residential	3.89		3.88		3.93		3.94		3.83
Consumer	4.84		5.13		5.21		5.25		5.07
Total loans	4.33		4.38		4.39		4.42		4.31
Securities and other	3.49		3.44		3.29		3.47		3.28
Total earning assets	4.15	%	4.17	%	4.13	%	4.19	%	4.07	%
Funding liabilities
NOW	0.44	%	0.51	%	0.49	%	0.51	%	0.50	%
Savings	0.20		0.21		0.21		0.19		0.18
Money market	1.17		1.37		1.44		1.38		0.93
Time deposits	2.06		2.16		2.11		2.00		1.85
Total interest-bearing deposits	1.19		1.33		1.32		1.25		1.12
Borrowings	2.30		2.62		2.74		2.74		2.53
Total interest-bearing liabilities	1.42	%	1.65	%	1.71	%	1.66	%	1.50	%
Net interest spread	2.74		2.52		2.42		2.53		2.57
Net interest margin	2.95		2.75		2.65		2.77		2.78

G

BAR HARBOR BANKSHARES
AVERAGE BALANCES - UNAUDITED
	Quarters Ended
(in thousands)	Dec 31, 2019			Sep 30, 2019			Jun 30, 2019			Mar 31, 2019			Dec 31, 2018
Assets
Commercial real estate	$	928,445		$	900,568		$	846,921		$	825,596		$	836,813
Commercial and industrial	412,595			410,453			416,000			405,107			393,396
Residential real estate	1,156,215			1,154,552			1,176,583			1,143,862			1,137,493
Consumer	127,425			109,562			111,641			113,060			114,960
Total loans (1)	2,624,680			2,575,135			2,551,145			2,487,625			2,482,662
Securities and other (2)	683,939			732,925			779,072			777,458			762,901
Total earning assets	3,308,619			3,308,060			3,330,217			3,265,083			3,245,563
Cash and due from banks	67,642			62,999			52,728			50,298			68,904
Allowance for loan losses	(15,657		)	(14,965		)	(14,459		)	(14,119		)	(13,922		)
Goodwill and other intangible assets	114,537			107,058			107,252			107,446			107,657
Other assets	179,512			178,804			170,340			152,332			138,074
Total assets	$	3,654,653		$	3,641,956		$	3,646,078		$	3,561,040		$	3,546,276
Liabilities and shareholders' equity
NOW	$	551,335		$	487,506		$	459,572		$	468,392		$	475,449
Savings	378,997			359,242			352,733			346,707			346,905
Money market	379,361			338,013			338,095			335,882			272,612
Time deposits	918,528			947,949			935,616			894,160			914,674
Total interest bearing deposits	2,228,221			2,132,710			2,086,016			2,045,141			2,009,640
Borrowings	571,936			708,222			789,953			761,885			761,781
Total interest-bearing liabilities	2,800,157			2,840,932			2,875,969			2,807,026			2,771,421
Non-interest-bearing demand deposits	418,324			368,100			349,322			351,362			384,636
Other liabilities	40,136			37,975			33,107			25,520			26,569
Total liabilities	3,258,617			3,247,007			3,258,398			3,183,908			3,182,626
Total shareholders' equity	396,036			394,949			387,680			377,132			363,650
Total liabilities and shareholders' equity	$	3,654,653		$	3,641,956		$	3,646,078		$	3,561,040		$	3,546,276

_____________________________________

(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)	Dec 31, 2019			Sep 30, 2019			Jun 30, 2019			Mar 31, 2019			Dec 31, 2018
NON-PERFORMING ASSETS
Non-accruing loans:
Commercial real estate	$	3,489		$	8,519		$	7,048		$	7,516		$	8,156
Commercial installment	1,836			2,077			2,081			2,192			2,331
Residential real estate	5,335			5,340			5,965			6,326			7,210
Consumer installment	890			743			861			565			538
Total non-accruing loans	11,550			16,679			15,955			16,599			18,235
Other real estate owned	2,236			2,455			2,351			2,351			2,351
Total non-performing assets	$	13,786		$	19,134		$	18,306		$	18,950		$	20,586
Total non-accruing loans/total loans	0.44		%	0.65		%	0.62		%	0.66		%	0.73		%
Total non-performing assets/total assets	0.38			0.53			0.50			0.52			0.57
PROVISION AND ALLOWANCE FOR LOAN LOSSES
Balance at beginning of period	$	15,353		$	14,572		$	13,997		$	13,866		$	13,487
Charged-off loans	(603		)	(215		)	(104		)	(231		)	(631		)
Recoveries on charged-off loans	65			103			117			38			438
Net loans charged-off	(538		)	(112		)	13			(193		)	(193		)
Provision for loan losses	538			893			562			324			572
Balance at end of period	$	15,353		$	15,353		$	14,572		$	13,997		$	13,866
Allowance for loan losses/total loans	0.58		%	0.60		%	0.57		%	0.55		%	0.56		%
Allowance for loan losses/non-accruing loans	133			92			91			84			76
NET LOAN CHARGE-OFFS
Commercial real estate	$	(92	)	$	1		$	114		$	(41	)	$	(25	)
Commercial installment	(331		)	62			(12		)	(15		)	53
Residential real estate	(16		)	(124		)	(65		)	(86		)	(31		)
Consumer installment	(99		)	(51		)	(24		)	(51		)	(190		)
Total, net	$	(538	)	$	(112	)	$	13		$	(193	)	$	(193	)
Net charge-offs (QTD annualized)/average loans	0.08		%	0.02		%	0.03		%	0.03		%	0.03		%
Net charge-offs (YTD annualized)/average loans	0.03			0.02			0.01			0.03			0.05
DELINQUENT AND NON-ACCRUING LOANS/TOTAL LOANS
30-89 Days delinquent	0.74		%	0.18		%	0.29		%	0.21		%	0.38		%
90+ Days delinquent and still accruing	0.01			0.03			—			—			0.01
Total accruing delinquent loans	0.75			0.21			0.29			0.21			0.39
Non-accruing loans	0.44			0.65			0.62			0.66			0.73
Total delinquent and non-accruing loans	1.19		%	0.86		%	0.91		%	0.87		%	1.12		%

I

BAR HARBOR BANKSHARES
RECONCILIATION OF NON-GAAP FINANCIAL MEASURES AND SUPPLEMENTARY DATA - UNAUDITED
		At or for the Quarters Ended
(in thousands)		Dec 31, 2019			Sep 30, 2019			Jun 30, 2019			Mar 31, 2019			Dec 31, 2018
Net income		$	4,207		$	5,015		$	6,117		$	7,281		$	7,620
Plus (less):
(Gain) loss on sale of securities, net		(80		)	(157		)	—			—			924
(Gain) loss on sale of premises and equipment, net		(3		)	—			21			—			—
Loss on other real estate owned		20			146			—			—			5
Loss on debt extinguishment		1,096			—			—			—			—
Acquisition, restructuring and other expenses		4,998			3,039			280			—			1,109
Income tax expense (1)		(1,440		)	(720		)	(72		)	—			(485		)
Total core earnings (2)	(A)	$	8,798		$	7,323		$	6,346		$	7,281		$	9,173
Net interest income	(B)	$	24,104		$	22,445		$	21,496		$	21,765		$	22,264
Plus: Non-interest income		7,806			7,643			7,453			6,167			7,450
Total Revenue		31,910			30,088			28,949			27,932			29,714
Adj: (Gain) loss on sale of securities, net		(80		)	(157		)	—			—			924
Total core revenue (2)	(C)	$	31,830		$	29,931		$	28,949		$	27,932		$	30,638
Total non-interest expense		26,803			23,400			20,906			18,624			20,096
Less: Gain (loss) on sale of premises and equipment, net		3			—			(21		)	—			—
Less: Loss on other real estate owned		(20		)	(146		)	—			—			(5		)
Less: Loss on debt extinguishment		(1,096		)	—			—			—			—
Less: Acquisition, conversion and other expenses		(4,998		)	(3,039		)	(280		)	—			(1,109		)
Core non-interest expense (2)	(D)	$	20,692		$	20,215		$	20,605		$	18,624		$	18,982
(in millions)
Total average earning assets	(E)	$	3,309		$	3,308		$	3,330		$	3,265		$	3,246
Total average assets	(F)	3,655			3,642			3,646			3,561			3,546
Total average shareholders' equity	(G)	396			395			388			377			364
Total average tangible shareholders' equity (2) (3)	(H)	281			288			280			270			256
Total tangible shareholders' equity, period-end (2) (3)	(I)	269			287			283			274			263
Total tangible assets, period-end (2) (3)	(J)	3,542			3,506			3,580			3,522			3,501
(in thousands)
Total common shares outstanding, period-end	(K)	15,558			15,549			15,544			15,524			15,523
Average diluted shares outstanding	(L)	15,602			15,581			15,586			15,587			15,574
Core earnings per share, diluted (2)	(A/L)	$	0.56		$	0.47		$	0.41		$	0.47		$	0.59
Tangible book value per share, period-end (2)	(I/K)	17.30			18.49			18.23			17.63			16.94
Securities adjustment, net of tax (1) (4)	(M)	5,549			8,002			5,550			(1,842		)	(8,663		)
Tangible book value per share, excluding securities adjustment (2)	(I+M)/K	16.94			17.98			17.88			17.75			17.50
Total tangible shareholders' equity/total tangible assets (2)	(I/J)	7.60			8.20			7.92			7.77			7.51

J

BAR HARBOR BANKSHARES
RECONCILIATION OF NON-GAAP FINANCIAL MEASURES AND SUPPLEMENTARY DATA - UNAUDITED
		At or for the Quarters Ended
(in thousands)		Dec 31, 2019			Sep 30, 2019			Jun 30, 2019			Mar 31, 2019			Dec 31, 2018
Performance ratios(5)
GAAP return on assets		0.46		%	0.55		%	0.67		%	0.83		%	0.85		%
Core return on assets (2)	(A/F)	0.96			0.80			0.70			0.83			1.03
GAAP return on equity		4.21			5.04			6.33			7.83			8.31
Core return on equity (2)	(A/G)	8.81			7.36			6.57			7.83			10.01
Core return on tangible equity (2) (6)	(A+Q)/H	12.66			10.31			9.30			11.19			14.46
Efficiency ratio (2) (7)	(D-O-Q)/(C+N)	62.56			65.02			68.48			63.94			59.91
Net interest margin	(B+P)/E	2.95			2.75			2.65			2.77			2.78
Supplementary data(in thousands)
Taxable equivalent adjustment for efficiency ratio	(N)	$	674		$	658		$	676		$	684		$	633
Franchise taxes included in non-interest expense	(O)	119			119			111			120			39
Tax equivalent adjustment for net interest margin	(P)	516			503			514			515			488
Intangible amortization	(Q)	240			207			207			207			207

______________________________________

(1) Assumes a marginal tax rate of 23.78% in the first three quarters of 2019 and 23.87% in the fourth quarter 2019. A marginal tax rate of 23.78% was used in the fourth quarter of 2018.

(2) Non-GAAP financial measure.        

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

(4) Securities adjustment, net of tax represents the total unrealized loss on available-for-sale securities recorded on the Company's consolidated balance sheets within total common shareholders' equity.

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

(6) 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 23.78% in the first three quarters of 2019 and 23.87% in the fourth quarter 2019 and 23.78% in the fourth quarter of 2018, by tangible equity.    

(7) Efficiency ratio is computed by dividing adjusted non-interest expense by the sum of net interest income on a fully taxable equivalent basis and adjusted non-interest income. 

K