-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, F/cXMnXYQHJUNV9kjCVruj8AMUNMJxeJTsNCPnQiwOV7yebb+uBdzw8UE7XUPj4R LgXPJd9YyqM7aBp+X+DQNg== 0000743367-99-000004.txt : 19990331 0000743367-99-000004.hdr.sgml : 19990331 ACCESSION NUMBER: 0000743367-99-000004 CONFORMED SUBMISSION TYPE: 10-K405 PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 19981231 FILED AS OF DATE: 19990330 FILER: COMPANY DATA: COMPANY CONFORMED NAME: BAR HARBOR BANKSHARES CENTRAL INDEX KEY: 0000743367 STANDARD INDUSTRIAL CLASSIFICATION: STATE COMMERCIAL BANKS [6022] IRS NUMBER: 010393663 STATE OF INCORPORATION: ME FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-K405 SEC ACT: SEC FILE NUMBER: 001-13349 FILM NUMBER: 99578165 BUSINESS ADDRESS: STREET 1: 82 MAIN ST STREET 2: P O BOX 400 CITY: BAR HARBOR STATE: ME ZIP: 04609-0400 BUSINESS PHONE: 2072883314 MAIL ADDRESS: STREET 1: 82 MAIN ST STREET 2: P O BOX 400 CITY: BAR HARBOR STATE: ME ZIP: 04609-0400 10-K405 1 16 UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON DC 20549 FORM 10-K Annual Report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 (fee required) For the fiscal year ended December 31, 1998. Commission File No. 0-13666 BAR HARBOR BANKSHARES State or other jurisdiction of incorporation or organization: Maine IRS Employer Identification Number: 01-0393663 Address: P O Box 400, 82 Main Street, Bar Harbor, ME Zip Code:04609-0400 Registrant's telephone number, including area code: (207) 288-3314 Securities registered pursuant to Section 12(g) of the Act: Title of Class: Common Stock. Par Value $2.00 per share Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(D) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days: Yes XX Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (229.405 of this chapter) is not contained herein, and will not be contained, to the best of registrant's knowledge, in definite proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this form 10-K. The aggregate market value of the voting stock held by non-affiliates of the registrant, as of January 31, 1999 is: Common stock, $2.00 par value $81,785,833 The number of shares outstanding of each of the registrant's classes of common stock, as of January 31, 1999 is: Common stock 3,443,614 Documents incorporated by Reference: (1) portions of the Annual Report to Stockholders for the year ended December 31, 1998 are incorporated by reference into Part II, Items 6 through 8 and Part IV, Item 14 of the Form 10-K. INDEX

PART I ITEM 1. BUSINESS Bar Harbor Bankshares, ("the Company"), was incorporated January 19, 1984. As of December 31, 1998, the Company's securities consisted of one class of common stock ("the Common Stock"), par value of $2.00 per share, of which there are 3,443,614 shares outstanding held of record by approximately 1,072 stockholders. The accompanying consolidated financial statements include the accounts of the company and its wholly owned subsidiary, Bar Harbor Banking and Trust Company ("the Bank"). All inter-company balances and transactions have been eliminated in the accompanying financial statements. The Bank conducts substantially the same business operations as a typical full service, independent, community bank. It has ten offices in coastal Maine, including its principal office located at 82 Main Street, Bar Harbor, Hancock County, and adjacent Washington County. The Hancock County offices are located at Main Street, Northeast Harbor; Main Street, Southwest Harbor; Main Street, Blue Hill; route #15, Deer Isle; corner of High and Washington Streets, Ellsworth; and Main Street, Winter Harbor. The Washington County offices are located at the corner of Routes 1 and 1A, Milbridge; Main Street, Machias; and Washington Street, Lubec. The Bank performs its operations, check clearing, technology and mail services in its Operations Center located on Avery Lane in Ellsworth, Maine. In addition, the Bank's Trust Department has an office at One Cumberland Place, Bangor, Maine. The Bank is a retail bank serving primarily individual customers, small retail establishments, seasonal lodging, campgrounds and restaurants. As a coastal bank it serves the lobstering, fishing and aquaculture industries. It also serves Maine's wild blueberry industry through its Washington County offices. The Bank has not made any material changes in its mode of conducting business during the past five years. The Bank operates in a highly competitive market. Competition among banks in Maine has increased in recent years as a result of aggressive acquisition programs by statewide holding companies and by completely open interstate banking. The Bank continues to be one of the largest independent commercial banks in the State of Maine. In the Bank's immediate service area there are two other independent commercial banks, one Savings and Loan Association, three savings bank branch offices and three commercial banks which are offices owned by holding companies based outside the state. The Bank has a broad deposit base and loss of any one depositor or closely aligned group of depositors would not have a materially adverse effect on its business. Approximately 85% of the Bank's deposits are in interest bearing accounts. The Bank has paid, and anticipates that it will continue to pay, current competitive rates on certificates of deposit, IRAs, NOW and money market accounts and does not anticipate loss of these deposits. The Bank provides the normal banking services offered by a commercial bank including checking accounts, NOW accounts, all forms of savings and time deposit accounts, individual retirement accounts, safe deposit boxes, collections, travelers checks, night depository services, direct deposit payroll services, credit cards, personal money orders, bank-by-mail and club accounts and drive-up facilities at all offices. During 1998, the Bank introduced TeleDirect, an interactive voice response system through which customers can get product information, check balances and activity on their accounts as well as perform transfers between their own accounts. The Bank also has arrangements with other institutions for the provision of certain services which it does not provide directly, such as computerized payroll services. In addition, the Bank operates a large Trust Department, including an office in Bangor, Maine. Market value for the assets held in the Trust Department as of December 31, 1998 was $385 million compared to $357 million in 1997 and included $21.4 million in new business. The Bank has Automated Teller Machines (ATMs) located in each of its ten branch locations. These ATMs access major networks for use of the Bank's cards throughout the United States including the Plus and NYCE systems as well as the major credit card networks. In addition to the foregoing, the Bank offers lending services including consumer credit in the form of installment loans, overdraft protection (stand-by credit), VISA credit card accounts, student loans, residential mortgage loans and home equity loans. It offers business loans to individuals, partnerships and corporations for capital construction, the purchase of real estate and working capital. Business loans are provided primarily to organizations and individuals in the tourist, health care, blueberry, shipbuilding and fishing and aquaculture industries as well as to the usual small businesses associated with small coastal communities. Certain larger loans which would exceed the Bank's lending limits are written on a participation basis with correspondent banks, with the Bank retaining only such portions of those loans as are within its lending limits. The Bank also provides trust and estate planning services to its customers. The principal market area for all of the Bank's services consists of Hancock and Washington Counties. The Bank's policy for lending limits is up to 20% of its equity to any borrower provided that the loans are secured and approved by the Directors Loan Committee. This committee is chaired by Sheldon F. Goldthwait, Jr., President and CEO of the Bank, and includes members of the Bank's Board of Directors. As a state chartered bank, the Bank has the Bureau of Banking of the State of Maine and the Federal Deposit Insurance Corporation as bank regulatory agencies responsible for its supervision. In addition, as a bank holding company, the Federal Reserve Bank supervises the Company. The Bank is not engaged in any material research activities relating to the development of new services or the improvement of existing services except in the normal course of business activities. In order to better serve its customers, it is the Bank's intent to convert its major banking software systems in the first quarter of 2000. This conversion will include lending, deposit, general ledger, teller and item image applications. As of December 31, 1998, the Bank employed 176 persons in a full or part-time basis. The President, Executive Vice President, Senior Vice President of the Trust Department, Senior Vice President and Treasurer, and Vice President in charge of Human Resources are employed by the Bank as well as serve as officers of the Company. The Company does not compensate them for their services. There are no employees of the Company. On December 8, 1998, the Board of Directors of the Company declared a 100% stock dividend effected as a stock split to owners of record as of December 28, 1998, payable on January 25, 1999. All share and per share data information included in the Form 10-K have been restated to reflect the 100% stock dividend. ITEM 2. PROPERTIES The eleven parcels of real estate owned and utilized by the Bank for its operations are described below: 1. The principal office of the Bank is located at 82 Main Street, Bar Harbor, Maine and includes a building housing banking facilities and administrative offices and an adjacent 35 car customer parking lot. The building was renovated in 1998. 2. An office is located at Main Street, Northeast Harbor, Maine. This property consists of a building constructed in 1974 and underwent interior renovations in 1998 to better meet the Bank's needs at that location. 3. An office is located on Main Street, Southwest Harbor, Maine. This property consists of a building constructed in 1975 which was added to and renovated in 1989 to better meet the needs at that location. 4. An office is located at Church Street, Deer Isle, Maine. This property consists of a building constructed in 1974 which was added to and renovated in 1994 to better meet the needs at that location. 5. An office is located on Main Street, Blue Hill, Maine. This property consists of a building constructed in 1960 which was renovated in 1989 to better meet the needs at that location. 6. An office is located at Main Street, Milbridge, Maine. This property consists of a building constructed in 1974 to which a vestibule was added in 1994 to house an ATM which helps to better meet the needs at that location. 7. An office is located at Washington Street, Lubec, Maine. This branch consists of a building constructed in 1990 and is adequate for the Bank's needs at that location. 8. An office is located at High Street, Ellsworth, Maine. This branch consists of a building constructed in 1982 which is adequate for the Bank's current needs at that location. 9. An office is located at Main Street, Winter Harbor. This branch consists of a building constructed in 1995 and is adequate for the Bank's needs at that location. 10. An office is located on Main Street, Machias, Maine. This branch was purchased from Key Bank of Maine in May, 1990, and was renovated in 1995 to better meet the Bank's needs at that location. 11. An Operations Center is located on Avery Lane, Ellsworth, Maine and houses the Bank's operations, check clearing, technology, training and mail departments beginning in January of 1997. A parcel of land adjacent to the Blue Hill branch was purchased in 1981. ITEM 3. LEGAL PROCEEDINGS Not applicable. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS Not applicable. PART II ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS High and low bids for each quarter of 1998 and 1997 are listed below (per quotes from The Bangor Daily News through September 23, 1997), the date of listing on the American Stock Exchange. Per share data information has been adjusted to reflect the 100% stock dividend described above.

As of January 1, 1999, there were 1,072 registered holders of record of Bar Harbor Bankshares common stock. Dividends paid by the Company in 1998 and 1997:

ITEM 6. SELECTED FINANCIAL DATA Selected financial information for the past five years is contained on Page 3 of the Company's Annual Report to Shareholders for the year ended December 31, 1998 and is incorporated herein by reference. ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS The information contained in the section captioned "Management's Discussion and Analysis of Financial Condition and Results of Operations" in the Company's Annual Report is incorporated herein by reference. AVERAGE BALANCE SHEETS AND ANALYSIS OF NET INTEREST EARNINGS (Amounts in Thousands) 1998

AVERAGE BALANCE SHEETS AND ANALYSIS OF NET INTEREST EARNINGS (Amounts in Thousands) 1997

AVERAGE BALANCE SHEETS AND ANALYSIS OF NET INTEREST EARNINGS (Amounts in Thousands) 1996

NOTES TO AVERAGE BALANCE SHEET 1. Tax-exempt income is calculated at coupon rate, not adjusted on a tax equivalent basis. 2. At December 31, 1998, loans on non-accrual status totaled $1,744,000. These loans are included in the loan category on the preceding Average Balance Sheet. If interest had been accrued on such loans, interest income on loans would have been $107,400 higher in 1998. 3. Based on information reported by the Uniform Bank Performance Report, the Bank's net interest margin remains above the national average for peer banks, and has remained at higher than average levels for a number of years. The Bank is a community bank which focuses its efforts on customer relationships and good service while remaining competitive in the demand for loans, both in the commercial and consumer sectors. The spread and margin for the Bank have been decreasing over the past three years, as competition for the same customers within the Bank's market area continues to grow. The average yield on the Bank's earning assets dropped to 8.51% from 8.77% as of December 31, 1998. This had an impact on the net interest margin for the Bank, which dropped on average by 15 basis points when comparing 1998 to 1997. In comparison, the average rate on the bank's earning assets remained flat in 1997 as compared to 1996 and the cost of interest bearing liabilities increased by 7 basis points. The net interest spread dropped from 1996 to 1997 by 6 basis points and the average net interest margin was 5.17% for 1997. While year end deposits remained flat between year end 1996 and 1997, on average, non-interest bearing liabilities increased in 1997 over 1996 by $3.1 million. The Bank continues to seek quality loans, broadening its customer base as the spread tightens. The effect of rates and volumes is exemplified further in the Rate Volume Analysis as found below. RATE VOLUME ANALYSIS The following table represents a summary of the changes in interest earned and interest paid as a result of changes in rates and changes in volumes. For each category of earning assets and interest bearing liabilities, information is provided with respect to changes attributable to change in rate (change in rate multiplied by old volume) and change in volume (change in volume multiplied by old rate). The change in interest due to both volume and rate has been allocated to volume and rate changes in proportion to the relationships of the absolute dollar amounts of the change in each. YEAR-ENDED DECEMBER 31, 1998 COMPARED TO DECEMBER 31, 1997 INCREASES (DECREASES) DUE TO:

YEAR-ENDED DECEMBER 31, 1997 COMPARED TO DECEMBER 31, 1996 INCREASES (DECREASES) DUE TO:

SUMMARY OF INVESTMENT PORTFOLIO The information presented below is to facilitate the analysis and comparison of sources of income and exposure to risks.

1998 1997 1996 MATURITY SCHEDULE FOR INVESTMENTS HELD TO MATURITY At December, 1998
Greater Greater than One than Five Greater One Year or year to Years to than Ten Less Five Years Ten Years Years Obligations of Other U. S. Government Agencies $ 750 $ 2,250 $ 2,690 $ 0 Average Yield 6.63% 6.60% 6.79% Mortgage-backed Securities: U. S. Government Agencies 1,428 3,517 12,908 70,248 Average Yield 6.89% 6.40% 6.66% 6.90% Mortgage-backed Securities: Other 0 620 2,382 3,666 Average Yield 5.28% 6.46% 7.07% Obligations of State and Political Subdivisions 1,152 2,657 1,290 535 Average Yield 5.73% 6.86% 5.40% 6.80% Other Bonds 0 6,304 765 0 Average Yield 6.27% 6.50% TOTAL $ 3,330 $ 15,348 $ 20,035 $ 74,449
MATURITY SCHEDULE FOR INVESTMENT AVAILABLE FOR SALE AT DECEMBER 31, 1998 (at fair value)
Greater One Year One Year than Five Greater or Less to Years to than Ten Five Ten Years Years Years Obligations of Other U. S. Government $ 500 $ 1,004 $ 10,828 0 Agencies Average Yield 7.53% 6.07% 6.47% Mortgage-Backed Securities: 0 0 0 4,936 U. S. Government Agencies Average Yield 7.52% TOTAL $ 500 $ 1,004 $ 10,828 $ 4,936
Mortgage backed securities are included based upon the final maturity date of the security. The maturity schedule for securities available for sale excludes marketable equity securities totaling $576,000. Yields on tax exempt bonds were not computed on a tax equivalent basis. The Bank does not hold any securities for a single issuer, other than U. S. Government agencies and corporations, where the aggregate book value of the securities exceed 10% of the Bank's stockholders' equity. The maturities for the mortgage-backed securities are shown at the stated maturity. If the Bank presented mortgage-backed securities by average expected life, the breakdown would be:
Greater Greater One Year or than One than Five Greater Less Year to Years to than Ten Five Years Ten Years Years Mortgage-backed Securities Held to 6,564 53,531 16,284 18,390 Maturity Mortgage-backed Securities Available 1,061 3,875 0 0 For Sale at Fair Value
Changes in the market value of the investment portfolio follow national interest rate fluctuations. As national interest rates dropped by 75 basis points during 1998, the value of the portfolio increased with the total unrealized gain approximating $1,091,000 at December 31, 1998 over book value. The Bank does not hold any interest only or principal only bonds, nor does it hold any debt securities whose market value could change to a greater degree than traditional debt. SUMMARY OF LOAN PORTFOLIO
1998 1997 1996 1995 1994 Real estate loans: Construction & $ $ $ $ $ Development 11,366 7,925 8,906 8,072 4,595 Mortgage 168,25 158,592 8 146,041 135,06 124,62 8 0 Loans to finance agricultural 10,308 9,993 9,370 production and other 10,092 10,377 loans to farmers Commercial and 22,778 23,696 31,791 industrial loans 29,040 29,807 Loans to individuals for household, family and other 16,538 16,668 17,242 17,640 15,301 personal expenditures All other loans 138 209 319 7 22 Real Estate Under 49 56 320 794 295 Foreclosure TOTAL LOANS $229,4 $217,13 $211,96 $201,7 $185,9 35 9 0 65 94 Less: Allowance for possible loan 4,455 4,743 4,293 4,048 3,892 Loss NET LOANS $224,9 $212,39 $207,66 $197,7 $182,1 80 6 7 17 02
PAST DUE LOANS The figures below represent loans past due 30 days or more (% is percentage of loans outstanding for a specific category of loans).
1998 % 1997 % 1996 % 1995 % 1994 % Construction & 246 2.2 129 1.6 247 2.8 214 2.7 77 1.7 Development Real Estate 5,750 3.4 3,682 2.3 4,100 2.8 3,009 2.2 1,713 1.4 Commercial, Industrial and 1,309 3.9 1,041 3.1 1,479 3.8 517 1.3 559 1.4 Other Loans to 567 3.4 450 2.7 462 2.7 434 2.5 324 2.1 individuals Loans past due 90 days or 1,710 0.8 774 0.4 733 0.4 849 0.4 892 0.5 more and still accruing* Non-Accruing 1,744 0.8 3,236 1.5 3,541 1.7 3,360 1.7 3,139 1.7 Loans
*The percentage for loans past due 90 days or more and still accruing and non-accruing loans relate to total loans outstanding. Each loan in these categories is also included in its past due loan category. Loans that were non-performing as of December 31, 1997 and for which the real estate was acquired by the Bank in 1998 totaled $473,600. MATURITY SCHEDULE - LOAN PORTFOLIO As of December 31, 1998
After One One Year Year After or Less through Five Five Years Years Commercial, Financial and $ 13,632 $ 8,794 $ 10,660 Agricultural Real estate Construction and Land $ 9,278 $ 2,088 Development
The Bank makes construction loans on the basis of: a) permanent financing from another financial institution, or b) approval at the time of origination for permanent financing by our own Bank. In addition, a number of large commercial real estate loans are written and priced on the basis of fixed rates with a three to five year balloon payment. It is generally the intent of the Bank to re-negotiate the rate and term of the loan at the balloon maturity. Lines of credit are renewed annually. There are consumer construction loans that will either be sold to the secondary market upon completion of construction or rolled into the permanent portfolio of residential mortgage loans. The total amount of commercial, financial and agricultural, construction, and land development loans with adjustable interest rates and maturities of greater than one year is $12.7 million and with fixed interest rates and maturities of greater than one year is $8.9 million. RISK ELEMENTS
1998 1997 1996 1995 1994 Loans accounted for on a non- $1,744 $3,236 $3,541 $3,360 $3,139 accrual basis Accruing loans contractually past $1,710 $ 774 $ 733 $ $ 892 due 90-days or more 849
It is the policy of management to review past due loans on a monthly basis. Those loans 90-days or more past due which are not well secured or in the process of collection are designated as non-accruing. This includes government guaranteed loans unless the guaranteed portion has been sold. If interest had been accruing on such loans, interest income on loans would have been $107,400 higher in 1998. Interest collected on these loans totaled $122,200 in 1998 and was included in net income. Non-accrual loans and those loans 90-days past due and still accruing represent 1.51% of average loans for 1998 and 1.85% for 1997. Management is not aware of any potential problem loans that are not included in the above table. The Bank makes single-family residential loans, commercial real estate loans, commercial loans, and a variety of consumer loans. The Bank's lending activities are conducted in north coastal Maine. Because of the Bank's proximity to Acadia National Park, a large part of the economic activity in the area is generated from the hospitality business associated with tourism. Loans to the hospitality industry (hotels and restaurants) represent the highest loan concentration by industry at 65% of capital, $30.5 million up from $28.7 million in 1997. Other substantial loan concentrations include fishing, which dropped from $11.0 million in 1997 to $8 million in 1998, and commercial and real estate development, decreasing slightly from $13.9 million to $12.7 million. Credit concentrations over $700,000 remained at approximately $28 million. Eighty percent of the credits totaling $700,000 or more are secured by real estate and have loan to value ratios of no more than 70%. As most loans granted by the Bank are collateralized by real estate, the ability of the Bank's borrowers to repay is dependent on the level of economic activity and the level of real estate values in the Bank's market area. Because of the increasing health of the tourist industry and other industries in its market area, the Bank has benefited from the economic well being of its customers. SUMMARY OF LOAN LOSSES Delinquencies are reviewed on a monthly and quarterly basis by senior management as well as the Board of Directors. Information reviewed is used in determining if and when loans represent potential losses to the Bank. A determination of a potential loss could result in a charge to the provision for loan losses, with an increase to the reserve for possible loans so that risks in the portfolio can be identified on a timely basis and an appropriate reserve can be maintained. The Bank utilizes the methodology for the review of the allowance for loan losses to be in accordance with the approach suggested by bank regulators through the Interagency Policy Statement on Allowance for Loan and Lease Losses dated December 1993. The reserve includes specific reserves based on the review of specific credits, a pool of reserves based on historical charge- offs by loan types and supplementary reserves reflecting concerns and loan concentrations by industry, by customer and by general economic conditions. The allocation has changed based on concentration of loans in the fishing and tourist related industries. Charged off loans over the past five years as a percentage of the average loan portfolio have remained below three tenths of one percent, with the exception in 1995. The percentage of net charged off loans to average loans in 1997 represented the lowest percentage (.08%) in the five years presented. In 1997, there was a recovery of a single loan of $300,000 that was charged off in a previous year; but, absent that recovery, net charge offs would have been .22% of total loans. For the years ended 1994 and 1995, the majority of charge offs were commercial loans secured by real estate or real estate mortgages. However, since 1996, the majority of charge offs have been loans to individuals and included many small loans and credit card debt. In 1993, a property on Main Street in Ellsworth was written down by $100,000 to more closely reflect a liquidation price. In 1994, the same property in Ellsworth was written down by an additional $23,500. This property was sold in 1995 for $120,000. Additionally in 1994, three residential properties owned by the Bank were written down by a total of $58,000 to more closely reflect their market values. Approximately 28% of the loans charged off in 1995 represented loans secured by real estate, and 39% represented commercial credits. The increase in commercial loan charge offs in 1995 included the charge down of a large commercial loan. Recoveries totaled $141,000 and $97,000 for the years ended 1994 and 1995, respectively. In 1996, charged off loans to individuals represented over half of the total charge offs for that year and resulted from losses on installment loans and credit cards. This pattern continued in 1997 and 1998 with installment loans and other consumer loans representing 78% and 57%, respectively, of the total charge offs. Net losses in the commercial and agricultural portfolios totaled $177,000 or 28% of the net charged off loans for 1998. Actual net loan charge offs for 1998 were higher than estimated charge offs and were primarily attributable to the weaker economy in part of the bank's market area. Installment and other loans to individuals followed national trends of problems with consumers' extensions in unsecured debt as well as the economic situation in part of the Bank's market area. Real estate loan losses were lower than expected. The Bank anticipated one large real estate charge off. This property was sold, resulting in a smaller net charge off. Based on past experience and management's assessment of the present loan portfolio, it is expected that net loan charge offs for 1999 will not exceed $750,000.
~~Commercial $ 185,000 Real Estate mortgages $ 165,000 Installments and other loans to $ 400,000 individuals~~
A breakdown of the allowance for possible loan losses is as follows:
1998 1997 1996 1995 1994 Percent Percent Percent Percent Percent of of of of of Loans Loans Loans Loans Loans in each in each in each in each in each Categor Categor Categor Categor Categor Amount y to Amount y to Amount y to Amount y to Amount y to Total Total Total Total Total Loans Loans Loans Loans Loans Real Estate $ Mortgages $1,240 78.31% 146 76.71% $1,054 73.26% $ 915 71.34% $ 1,666 69.63% Installment s and other loans to 323 7.21% 2,939 7.68% 1,457 8.13% 1,469 8.74% 485 8.23% individuals Commercial, financial and 1,010 14.42% 481 15.51% 629 18.46% 278 19.92% 1,220 22.13% Agricultura l Other 180 .06% 0 .10% 0 .15% 0 0.00% 0 .01% Unallocated 1,702 .00% 1,177 .00% 1,153 0.00% 1,386 0.00% 521 .00% TOTAL 4,455 100.00% $4,743 100.00% $4,293 100.00% $4,048 100.00% $ 3,892 100.00%
SUMMARY OF LOAN LOSS EXPERIENCE
ALLOWANCE FOR LOAN 1998 1997 1996 1995 1994 LOSSES Balance at beginning $4,743 $4,293 $4,048 $3,892 $3,369 of period Charge offs: Commercial, Financial, 217 102 195 377 122 Agricultural, Others Real Estate 113 27 131 256 267 Mortgages Installments and other loans 458 456 385 268 189 to Individuals Total Charge Offs 788 585 711 901 578 Recoveries: Commercial, Financial, 40 169 73 20 47 Agricultural, Others Real Estate 21 154 94 20 54 Mortgages Installments and other loans 103 92 69 57 40 to Individuals Total Recoveries 164 415 236 97 141 Net Charge Offs 624 170 475 804 437 Provision Charge to 336 620 720 960 960 Operations Balance at End of $4,455 $4,743 $4,293 $4,048 $3,892 Period Average loans outstanding during $224,406 $217,295 $207,18 $195,179 $174,550 period 8 Net Charge Offs to Average Loans .28 .08 .23 .41 .25 Outstanding during Period
SUMMARY OF DEPOSIT PORTFOLIO
1998 1997 1996 Average Average Average Average Average Average Balance Rate Balance Rate Balance Rate Demand Deposits $38,890 $36,545 $ 33,408 NOW Accounts 41,872 1.48% 39,532 1.69% 38,036 1.62% Savings Accounts 57,791 2.86% 52,455 2.54% 54,503 2.52% Time Deposits 116,262 5.39% 122,491 5.54% 124,427 5.54% Total Deposits $254,815 $251,023 $250,374
MATURITY SCHEDULE FOR TIME DEPOSITS $100,000 OR MORE AT DECEMBER 31, 1998
Over Six Over Three Months Three Months or Months Through Through Over Twelve Less Six Months Twelve Months Months ~~$ 5,083 $ 4,040 $ 2,769 $1,741~~
RETURN ON EQUITY AND ASSETS
1998 1997 1996 Return on Average Assets 1.82% 1.86% 2.02% Return on Average Equity 14.96% 16.27% 18.86% Dividend Payout Ratio 34.92% 32.15% 30.22% Average Equity Capital to Average 12.14% 11.46% 10.72% Assets Ratio
As of January 1, 1999, there were approximately 1,072 holders of record of Bar Harbor Bankshares common stock. Dividends have been paid by the company during 1998 and 1997, as follows:
March June September December ~~1998 $0.16 $0.17 $0.17 $0.17 1997 $0.14 $0.15 $0.15 $0.16~~
SHORT TERM BORROWINGS (In Thousands)
Maximum Average Weighted Balance Weighted Outstandi Amount Average at end of Average ng at Outstandi Interest Period Interest Month End ng During Rate During Rate Year Year 1998 FHLB Advances $26,000 5.26% $29,000 $22,849 5.69% Repurchase $8,092 4.63% $10,192 $6,686 4.74% Agreements 1997 $24,000 5.69% $45,125 $34,207 5.67% FHLB Advances Repurchase $4,474 5.12% $8,025 $5,244 4.61% Agreements 1996 FHLB Advances $43,908 5.62% $41,000 $30,811 5.68& Wholesale 0 0.00% $10,000 $ 583 5.47% Repurchase Agreements Repurchase $8,246 4.14% $15,948 $7,693 3.93% Agreements
Repurchase agreements generally mature within one to four days from the transaction date. The terms for short-term FHLB advances taken in 1998 ranges from 7 days to 273 days and averaged 80 days. The terms for short-term FHLB advances taken in 1997 range from 7 days to 365 days and averaged 62 days. The terms for short-term FHLB advances taken in 1996 ranged from 2 days to 340 days and averaged 49 days. The terms for wholesale repurchase agreements taken in 1996 ranged from 7 days to 14 days and averaged 8 days. ITEM 7A. 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. The Company's primary market risk exposure is interest rate risk. The ongoing monitoring and management of this risk is an important component of the Company's asset/liability management process which is governed by policies established by its Board of Directors that are reviewed and approved annually. The Board of Directors delegates responsibility for carrying out the asset/liability management policies to the Asset/Liability Committee (ALCO). In this capacity, ALCO develops guidelines and strategies impacting the Company's asset/liability management related activities based upon estimated market risk sensitivity, policy limits and overall market interest rate levels/trends. Interest Rate Risk Interest rate risk represents the sensitivity of earnings to changes in market interest rates. As interest rates change, the interest income and expense streams associated with the Company's financial instruments also change thereby impacting net interest income (NII), the primary component of the Company's earnings. ALCO utilizes the results of a detailed and dynamic simulation model to quantify the estimated exposure of NII to sustained interest rate changes. While ALCO routinely monitors simulated NII sensitivity over a rolling two-year horizon, it also utilizes additional tools to monitor potential longer-term interest rate risk. The simulation model captures the impact of changing interest rates on the interest income received and interest expense paid on all assets and liabilities reflected on the Company's balance sheet as well as for off balance sheet derivative financial instruments. This sensitivity analysis is compared to ALCO policy limits which specify a maximum tolerance level for NII exposure over a one year horizon, assuming no balance sheet growth, given both a 200 basis point (bp) upward and downward shift in interest rates. A parallel and pro rata shift in rates over a 12 month period is assumed. The following reflects the Company's NII sensitivity analysis as of December 31, 1998. RATE CHANGE
-200 basis +200 basis points points Year I Net interest income $ 182 $ (161) change ($) Net interest income 1.11% (.98%) change (%) Year II Net interest income $ (181) $ (340) change ($) Net interest income ( 1.14%) (2.14%) change (%)
The preceding sensitivity analysis does not represent a Company forecast and should not be relied upon as being indicative of expected operating results. These hypothetical estimates are based upon numerous assumptions including: the nature and timing of interest rate levels, including yield curve shape, prepayments on loans and securities, deposit decay rates, pricing decisions on loans and deposits, reinvestment/replacement of asset and liability cashflows, and others. While assumptions are developed based upon current economic and local market conditions, the Company cannot make any assurances as to the predictive nature of these assumptions including how customer preferences or competitor influences might change. Also, as market conditions vary from those assumed in the sensitivity analysis, actual results will also differ due to: prepayment/refinancing levels likely deviating from those assumed, the varying impact of interest rate change caps or floors on adjustable rate assets, the potential effect of changing debt service levels on customers with adjustable rate loans, depositor early withdrawals and product preference changes, and other internal/external variables. Furthermore, the sensitivity analysis does not reflect actions that ALCO might take in responding to or anticipating changes in interest rates. When appropriate, ALCO may utilize off balance sheet instruments such as interest rate floors, caps and swaps to hedge its interest rate risk position. A Board of Directors approved hedging policy statement governs use of these instruments. As of December 31, 1998 the following derivative financial instruments were outstanding:
Notional Contract Maturity Fair Principal Date Date Value December 31, 1998 ~~Interest rate $10,000 June 3, June 3, $ 3 floor 1994 1999~~
The estimated effects of these derivative financial instruments on the Company's earnings are included in the sensitivity analysis presented above. The derivative contract presented in the above table is designed as a hedge in that it is utilized to modify the interest rate characteristics of selected assets and liabilities. The interest rate floor was purchased to hedge the interest income on variable rate loans and securities against the adverse effects of falling interest rates. ALCO monitors the effectiveness of its derivative hedge relative to its expectation that a high correlation be maintained between the hedging instrument and the related hedged assets/liabilities. The interest rate floor is accounted for using the accrual method with an income statement adjustment to interest income or interest expense depending on whether the hedged items are assets or liabilities. The unamortized premiums associated with the floor is presented on the balance sheet along with other prepaid assets. Interest receivable under the floor contract is reflected on the balance sheet along with other interest receivable and payable amounts. Unrealized gains or losses associated with this position is not recognized in the financial statements. While it is not the Company's practice to unwind derivative hedges prior to their maturity, any recognized gains/losses would be deferred on the balance sheet and amoritzed to interest income or expense, as required, over the remaining period of the original hedge. To the extent that a hedge were to be deemed ineffective due to a lack of correlation with the hedged items or if the hedged items were to be settled/terminated prior to maturity of the hedging instrument, then unrecognized gains/losses associated with the hedging instrument would be recognized in the income statement with subsequent accruals and gains/losses also included in the income statement in the period they occur. ITEM 8. CONSOLIDATED FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA The financial statements and Report of Independent Accountant required are contained in the Financial Section on pages 1 through 22 of the Company's Annual Report for the year ended December 31, 1998 and are incorporated herein by reference. ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURES Not applicable. PART III ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT The following statements pertain to all individuals listed below: 1. There are no arrangements or understandings between any director or officer listed below and any other person pursuant to which such director or officer was selected as an officer or director. 2. There is no family relationship among any of the directors and officers listed below. 3. None of the directors and officers listed below have been involved in any bankruptcy, criminal, or other proceeding set forth or described in sub-section (f) of Item 401 of Regulation S-K as promulgated by the Securities and Exchange Commission. 4. Each of the directors listed below has been elected to a three year term, except where the mandatory retirement age of 75 years necessitated an election of a shorter term, with one third of the Board of Directors, as nearly as may be, standing for election each year. Each director of the Company also serves as a director of the Bank, and references below to the year in which an individual was first elected refer to the year in which s/he was first elected a director of the Bank. All officers of the Company are elected annually. [1] Frederick F. Brown, Director, Age 72. Mr. Brown's principal occupation during the past five years has been as proprietor and owner of F. T. Brown Company, which owns and operates a hardware store in Northeast Harbor and as one-third owner of Island Plumbing & Heating in Northeast Harbor. Mr. Brown first was elected as a director on October 2, 1979. [2] Robert C. Carter, Director, Age 55. Mr. Carter's principal occupation is owner and operator of the Machias Motor Inn and owner and operator of Carter's Gun Shop, both located in Machias, Maine. Mr. Carter was first elected as a director on October 1, 1996. [3] Thomas A. Colwell, Director, Age 54. Mr. Colwell's principal occupation during the past five years has been as owner of Colwell Brothers, Inc. He also serves as a member of the Board of Directors of the Maine Lobster Pound Association and is a director of the Island Medical Center. Mr. Colwell was first elected as a director on October 1, 1991. [4] Bernard K. Cough, Director, Age 71. Mr. Cough's principal occupation during the past five years has been owner/operator of several motels, including the Atlantic Oakes Motel, Atlantic Eyrie Lodge, Inc., Brookside Motel, Bay View, Inc., and Ocean Gate, Inc. Mr. Cough is also Treasurer of Cough Bros., Inc. and President of Downeast Inns, Inc. Mr. Cough was first elected as a director on October 1, 1985. [5] Peter Dodge, Director, Age 55. Mr. Dodge is President of the Peter Dodge Agency (a Maine corporation) d/b/a the Merle B. Grindle Insurance Agency in Blue Hill, Maine. He is a Trustee of George Stevens Academy, and Director, Bagaduce Music Lending Library. He was first elected as a director on October 6, 1987. [6] Dwight L. Eaton, Senior Vice President and Trust Officer, Age 63. Mr. Eaton's principal occupation during the past five years has been as Senior Vice President and Trust Officer of the Bank. He serves as Vice President of the Company and was first appointed for that position in 1987. He serves as Chairman and Director of the Acadia Corporation. Mr. Eaton first was elected as a Director on October 4, 1988. [7] Ruth S. Foster, Director, Age 69. Mrs. Foster's principal occupation is the President and principal stockholder of Ruth Foster's, a children's clothing store in Ellsworth, Maine. Mrs. Foster first was elected as a director on October 7, 1986. [8] Cooper F. Friend, Director, Age 44. Mr. Friend's principal occupation is owner and President of Friend & Friend, Inc.; and one-third owner of U-Store It in Ellsworth, Maine. He also serves as President of Recreational Motorsports Association of Maine, Chairman of the Board of Directors of the James Russell Wiggins Down East Family YMCA. Mr. Friend first was elected as a director on October 1, 1997. [9] Robert L. Gilfillan, Chairman of the Board of Directors, Age 71. Mr. Gilfillan's principal occupation during the past five years has been as the owner and President of the West End Drug Company in Bar Harbor. Mr. Gilfillan first was elected as a director on November 5, 1957. [10] Sheldon F. Goldthwait, Jr., President and Chief Executive Officer, Age 60. Mr. Goldthwait was appointed President and Chief Executive Officer of Bar Harbor Banking and Trust Company January 1, 1995. Prior to that he served as Executive Vice President of Bar Harbor Banking and Trust Company. He serves as Treasurer and Director of the Acadia Corporation. Mr. Goldthwait first was elected as a director on October 4, 1988. [11] Marlene S. Haskell, Senior Vice President of the Bank, Age 46. Ms Haskell joined the Bank in 1990 as Vice President in charge of Marketing. She was promoted to Senior Vice President in August, 1997. Ms. Haskell's responsibilities include Branch Administration and Marketing. [12] H. Lee Judd, Director, Age 53. Mr. Judd's principal occupation during the past five years has been as President of Hinckley Insurance Group and President of Hinckley Real Estate, located in Southwest Harbor, Maine. He also serves as President of the Causeway Club and Chairman of the Board of Friends of Acadia. Mr. Judd first was elected as a director on October 1, 1997. [13] James C. MacLeod, Director, Age 74. Mr. MacLeod is retired. Mr. MacLeod served as Vice President of the Bank until his retirement in December of 1987. He was appointed as a Vice President of the Bank in 1972 and was first elected as a director of the Bank on November 7, 1961. [13] John P. McCurdy, Director, Age 67. Prior to his retirement in 1991, Mr. McCurdy's principal occupation was the owner and operator of McCurdy Fish Company of Lubec, a processor of smoked herring. Mr. McCurdy first was elected as a director on October 2, 1979. [15] Jarvis W. Newman, Director, Age 63. Mr. Newman is the owner of Newman Marine Brokerage, a boat brokerage in Southwest Harbor and half owner of the Newman and Gray Boatyard. Mr. Newman first was elected as a Director on October 5, 1971. [16] Lewis H. Payne, Executive Officer, Age 48. Mr. Payne is the Executive Vice President of the Company and of the Bank. He was first elected as Executive Vice President of the Company in 1995. [17] Robert M. Phillips, Director, Age 57. Mr. Phillips is an officer of International Foods Network, an exporter of a variety of food products, located in Sullivan, Maine. He was first elected as a director on October 5, 1993. [18] John P. Reeves. Director, Age 64. Mr. Reeves is retired. He was elected as President and Chief Executive Officer of Bar Harbor Banking and Trust Company in 1986 and retired in 1994. He first was elected as a director on October 6, 1970. [19] Marsha C. Sawyer, Executive Officer, Age 46. Mrs. Sawyer is Vice President of the Bank and serves as Clerk of the Company. She first was elected Clerk of the Company in 1986. [20] Gerald Shencavitz, Vice President of the Bank, Age 46. Mr. Shencavitz joined the Bank if April of 1998 and is responsible for Operations and Information Systems of the Bank. [21] Lynda Z. Tyson, Director, Age 43. Mrs. Tyson is Chief Operating Officer and Marketing Director of Tyson & Partners, Inc., a marketing communications consulting firm in Bar Harbor. Mrs. Tyson was first elected as a director on October 5, 1993. [22] Virginia M. Vendrell, Executive Officer, Age 49. Ms. Vendrell is Senior Vice President, Treasurer, and Chief Financial Officer of the Bank and Treasurer of the Company. She was first elected Treasurer of the Company in 1990. ITEM 11. EXECUTIVE COMPENSATION Officers of the Company do not, as such, receive compensation. The following table sets forth cash compensation received during the Bank's last fiscal year by the executive officers for whom such compensation exceeded $100,000.
ANNUAL COMPENSATION Other Annual Year Salary Incenti Compensation ($) ve ($) ($) Sheldon F. Goldthwait, 1996 135,99 27,428 0 Jr. 0 President and 1997 155,00 19,737 0 0 Chief Executive Officer 1998 158,00 22,202 0 0 Dwight L. Eaton 1996 95,992 19,460 0 Senior Vice President and 1997 98,000 12,984 0 Trust Officer 1998 100,95 14,115 0 0 Lewis H. Payne 1996 88,594 17,634 0 Executive Vice President 1997 93,500 12,237 0 1998 99,300 13,683 0 Virginia M. Vendrell 1996 83,609 16,631 N/A Senior Vice President and 1997 N/A N/A N/A Chief Financial Officer 1998 90,000 12,626 0

LONG TERM COMPENSATION AWARDS PAYOUT Restric LTIP ted Optional Payout Year Stock SARs (#) s Awards ($) ($) Sheldon F. Goldthwait, 1996 0 0 0 Jr. 1997 0 0 0 1998 0 0 0 Dwight L. Eaton 1996 0 0 0 1997 0 0 0 1998 0 0 0 Lewis H. Payne 1996 0 0 0 1997 0 0 0 1998 0 0 0 Virginia M. Vendrell 1996 0 0 0 1997 0 0 0 1998 0 0 0

ALL OTHER COMPENSATION ($) Sheldon F. Goldthwait, 1996 24,035 Jr. 1997 30,027 1998 52,906 Dwight L. Eaton 1996 36,175 1997 41,654 1998 48,104 Lewis H. Payne 1996 1,752 1997 1,848 1998 1,561 Virginia M. Vendrell 1996 570 1997 N/A 1998 138
The Bank has an incentive plan in which all employees who were on the payroll as of January 1st of a calendar year and who worked through December 31st are eligible. The computation is based on earnings per share growing by 10% each year with 1992 being the base year. Once the 10% growth is attained, a pool is created in which all eligible employees receive the same percentage of their salary in the form of an incentive payment. COMPENSATION COMMITTEE The Bank Board has appointed a six-member Compensation Committee comprised of Directors Brown, Dodge, Gilfillan, Phillips, Reeves, and Mr. Goldthwait, who is a Director and also a member of management. The Compensation Committee meets several times each year and makes compensation recommendations for the ensuing year to the Board of Directors. The recommendations of the Committee are then considered and voted upon by the Full Board. During 1998, Mr. Goldthwait was a member of the Compensation Committee and also a director. He abstained from participating in discussion, recommendations, or voting regarding his own compensation. Mr. Reeves, who chairs the Compensation Committee, is a former President of the Company and the Bank. COMPENSATION OF DIRECTORS Each of the directors of the Company is a director of the Bank and as such receives a fee of $250 for each committee meeting attended and a $300.00 fee for attending the monthly Full Board Meeting. The fee paid for the Annual Meeting is $500.00 per member of the Board of Directors. Meetings of the Board of Directors of the Bank are held monthly. No directors' fees are paid to the directors of the Company as such. Those directors of the Bank who are also officers do not receive directors' fees. The Chairman of the Board receives an annual retainer of $3,000 in addition to meeting fees. EMPLOYEE BENEFIT PLANS The Company has two non-qualified supplemental retirement plans for certain officers. The agreements provide supplemental retirement benefits payable in installments over a period of years upon retirement or death. The Company recognizes the cost associated with the agreements over the service lives of the participating officers. For 1998, 1997, and 1996, the expense of these supplemental plans was $138,600, $127,600, and $118,000, respectively. 401(k) Plan The Bank has a contributory 401(k) plan available to full-time employees. Employees may contribute between 1% and 15% of their compensation, to which the Bank will match 25% of the first 6% contributed. For the years ended December 31, 1998, 1997, and 1996, the Bank contributed $51,300, $49,500, and $52,000, respectively. The Bank has a non-contributory plan. In 1998, 1997 and 1996, the Board of Directors voted to credit each eligible participant's 401(k) account with 3% of salary. The total contributions made was $127,400, $122,800 and $128,000 for the years ended December 31, 1998, 1997and 1996, respectively. Restricted Stock Purchase Plan In 1997 and 1996, the Bank provided a restricted stock purchase plan through which each employee could purchase shares of Bar Harbor Bankshares stock at the current fair market price as of a date determined by the Board of Directors. These shares were available for purchase through direct purchase or through the employee's 401(k) accounts. In September of 1997, the Company was listed on the American Stock Exchange, making Bar Harbor Bankshares stock readily available for transactions. Therefore, the restricted stock purchase plan was terminated effective December 31, 1997. At December 31, 1997, employees exercised their right and purchased common stock totaling $73,000, with the actual purchase transpiring in January of 1998. At December 31, 1996, employees exercised their right and purchased common stock totaling $90,000, with the actual purchase transpiring in January of 1997. The Bank has entered into agreements with Messrs. Reeves, Goldthwait, and Eaton whereby those individuals, or their beneficiaries, will receive upon death or retirement, an annual supplemental pension benefit over a period of 10 years in the amount of $15,000 per annum (in the case of Mr. Reeves), and in the amount of $10,000 per annum (in the case of Messrs. Goldthwait and Eaton). This plan is unfunded and benefits will be paid out of Bank earnings. Because Mr. Reeves chose early retirement, he began drawing his annual installment of $5,300 pursuant to this deferred compensation arrangement as of January 1, 1995. In 1993, the Company established a non-qualified supplemental retirement plan for Messrs. Reeves, Eaton, Goldthwait, and MacDonald. The agreements provide supplemental retirement benefits payable in installments over twenty years upon retirement or death. The Company recognizes the costs associated with the agreements over the service lives of the participating officers. The cost relative to the supplemental plan was $126,100, $115,700, and $106,500 for 1998, 1997, and 1996 respectively. The agreements with Messrs. Reeves, Eaton, Goldthwait, and MacDonald are in the amounts of $49,020,$22,600, $37,400 and $7,700 respectively. Mr. Reeves began drawing his annual installment of $49,020 as of January 1, 1995. Officers of the Bank are entitled to participate in certain group insurance benefits. In accordance with Bank policy, all such benefits are available generally to employees of the Bank. PERFORMANCE GRAPH The following graph illustrates the estimated yearly percentage change in the Company's cumulative total shareholder return on its common stock for each of the last five years. For purposes of comparison, the graph also illustrates comparable shareholder return of American Stock Exchange (AMEX) banks as a group as measured by the AMEX Market Index and the peer group index as defined by AMEX. The graph assumes a $100 investment on December 31, 1993 in the common stock of each of the Company, the AMEX peer group banks and the AMEX Market Index as a group and measures the amount by which the market value of each, assuming reinvestment of dividends, has increased as of December 31 of each calendar year since the base measurement point of December 31, 1993. The following graph is based upon a good faith determination of approximate market value for each year indicated based on information obtained from the American Stock Exchange, in the case of its common stock, and from anecdotal information available to the Company as to the value at which its common stock has traded in isolated transactions from time to time. Therefore, although the graph represents a good faith estimate of shareholder return as reflected by market value, the valuations utilized are, of necessity, estimates and may not accurately reflect the actual value at which common stock has traded in particular transactions as of any of the dates indicated. The following information is presented in a line graph in the printed Form 10-K:
1993 1994 1995 1996 1997 1998 Bar Harbor Banking and 100.00 112.76 195.00 267.18 411.39 365.31 Trust Company Peer Group 100.00 98.30 130.79 148.70 243.58 245.81 Index AMEX Market 100.00 88.33 113.86 120.15 144.57 142.61 Index
ITEM 12: SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT As of December 31, 1998, to the knowledge of the Company, Bernard K. Cough was the only beneficial owner of more than five percent of the Company's common stock. Mr. Cough's address is 5 Norman Road, Bar Harbor, Maine. The following table lists, as of December 31, 1998, the number of shares of Common Stock and the percentage of the Common Stock represented thereby, beneficially owned by each director and nominee for director, and by all principal officers and directors of the Company as a group.
Amount of Percent Director, Executive Officer Benefic of or Nominee ial Class Ownersh ip Frederick F. Brown 25,140 * Robert C. Carter 2,100 * Thomas A. Colwell 5,400 * Bernard K. Cough 172,220 5.00% Peter Dodge 4,860 * Dwight L. Eaton 8,968 * Ruth S. Foster 3,350 * Cooper F. Friend 3,200 * Robert L. Gilfillan 79,930 2.32% Sheldon F. Goldthwait, Jr. 30,408 * H. Lee Judd 6,900 * James C. MacLeod 40,600 1.18% John P. McCurdy 6,600 * Jarvis W. Newman 30,100 * Robert M. Phillips 1,300 * John P. Reeves 25,358 * Lynda Tyson 1,400 * Total ownership of all Directors and Executive 457,270 13.28% Officers of Company as a group (22 persons). * Less than one percent
For purposes of this table, beneficial ownership has been determined in accordance with the provisions of Rule 13-d-3 promulgated under the Securities Exchange Act of 1934 as amended. Direct beneficial ownership includes shares held outright or jointly with others. Indirect beneficial ownership includes shares held in the same name of a director's spouse or minor children or in trust for the benefit of a director or member of his or her family. Indirect beneficial ownership does not include, in the case of each director, 97,360 shares (2.83%) of the Common Stock held by two trusts which shares, for purposes of voting, are allocated equally among the directors of the bank under the terms of the respective trust instruments. No director has any other beneficial interest in such shares. Ownership figures for directors and nominees include directors' qualifying shares owned by each person named. Management is not aware of any arrangement which could, at a subsequent date, result in a change in control of the company. ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS The Bank retains the firm of Tyson & Partners, Inc. to assist with its marketing program. Lynda Z. Tyson, who was elected to the Board of the Company and the Bank on October 4, 1993, serves as that firm's Chief Operating Officer as well as Director of Marketing. Management believes that the fees charged by Tyson & Partners, Inc. are at least as favorable as any which could have been obtained from persons not affiliated with the Bank. The Bank has had, and expects to have in the future, banking transactions in the ordinary course of its business with directors, officers, principal stockholders and their associates. These transactions comprise of substantially the same terms, including interest rates and collateral on the loans, as those prevailing at the same time for comparable transactions with others. Such loans have not and will not involve more than normal risk of collectability or present other unfavorable features. PART IV ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K (a) (1) The following financial statements are incorporated by reference from Item 8 hereof: [Annual Report to Stockholders, Financial Section, included herein as Exhibit 13].
ITEM PAGE NUMBER Independent Auditor's Report 8 Consolidated Statements of Financial Condition, 9 December 31, 1998 and 1997 Consolidate Statements of Earnings for the years ended 10 December 31, 1998, 1997 and 1996 Consolidated Statements of Changes in the Stockholders' Equity for the years ended December 11 31, 1998, 1997 and 1996 Consolidated Statements of Cash Flows for the years ended 12 December 31, 1998, 1997, and 1996 Notes to Consolidated Financial 13-23 Statements (a) (2) Financial Statement Schedules - See Item 14 (d) Form 10-K (a) (3) Listing of Exhibits - see Item 14 (c) (b) Report on Form 8-K not applicable (c) Exhibits - Exhibit Index

NO. EXHIBIT POSITION 1. Underwriting Agreements Not Applicable 2. Plan of Acquisition, Incorporated by reorganization agreement, reference to Form S- liquidation, or succession 14 dated March 14, 1984 3. Articles of Incorporation and Incorporated by Bylaws reference to Form S- 14 dated March 14, 1984 4. Instruments defining the rights of security holders Not Applicable 5. Opinion re: legality Not Applicable 6. Opinion re: discount on capital Not Applicable Shares 7. Opinion re: liquidation Not Applicable preference 8. Opinion re: tax matters Not Applicable 9. Voting Trust Agreements Not Applicable 10. Material Contracts Incorporated by reference to Form S- 14 dated March 14, 1984 11. Statement re: computation of Not Applicable per share earnings 12. Statement of computation of Not Applicable ratios 13. Annual Report to security Enclosed herewith holders 14. Material foreign patents Not Applicable 15. Letter re: unaudited interim financial information Not Applicable 16. Letter re: change in certifying Not Applicable accountant 17. Letter re: director Not Applicable resignations 18. Letter re: change in accounting Not Applicable principles 19. Previously unfiled documents Not Applicable 20. Report furnished to security Not Applicable holders 21. Other documents or statements to security holders Not Applicable 22. Subsidiaries of the registrant Incorporated by reference to Form S- 14 dated March 14, 1984 23. Published report regarding matters submitted to vote of Not Applicable security holders 24. Consents of experts and counsel Not Applicable 25. Power of Attorney Not Applicable 26. Statement of eligibility of Not Applicable Trustee 27. Invitation for competitive bids Not Applicable 28. Additional Exhibits (d) Financial Statement Not Applicable Schedules
SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. BAR HARBOR BANKSHARES (Registrant) /S/ Sheldon F. Goldthwait, Jr. Sheldon F. Goldthwait, Jr. President and Chief Executive Officer Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the persons on behalf of the Registrant and in the capacities and on the dates indicated. /S/ Sheldon F. Goldthwait, Jr. /S/ Virginia M. Vendrell Sheldon F. Goldthwait, jr. Virginia M. Vendrell President and Director Chief Financial Officer Chief Executive Officer Chief Accounting Officer /s/ Robert L. Gilfillan /S/ Frederick F. Brown Robert L. Gilfillan, Chairman Frederick F. Brown, Director /S/ Thomas A. Colwell Thomas A. Colwell, Director /S/ Bernard K. Cough /S/ Peter Dodge Bernard K. Cough, Director Peter Dodge, Director /S/ Dwight L. Eaton /S/ Ruth S. Foster Dwight L. Eaton, Director Ruth S. Foster /S/ Cooper F. Friend /S/ H. Lee Judd Cooper F. Friend, Director H. Lee Judd, Director /S/ James C. MacLeod /S/ John P. McCurdy James C. MacLeod, Director John P. McCurdy, Director /S/ Robert M. Phillips /S/ Lynda Z. Tyson Robert M. Phillips, Director Lynda Z. Tyson, Director EX-99 2 (Front Cover) (Sepiatone photo of Bar Harbor banking floor, 1929) Caption: New Bar Harbor banking floor, 1929 (Inset full-color photo of Bar Harbor banking floor renovation, 1998) Bar Harbor Bankshares 1998 Annual Report (LOGO) Mission Statement Bar Harbor Banking and Trust Company is an independent, publicly owned, community bank pledged to providing innovative, quality financial services to the people and businesses of eastern Maine. We take pride in our commitment to deliver our services person-to-person, in a professional and efficient manner while producing the maximum benefit for our customers, employees and shareholders. We are dedicated to providing a quality environment in which employees are challenged to uphold our pledge to excellence. We demonstrate our responsibility as a good corporate citizen through our support of the communities and people we serve. _ Table of Contents Inside front cover Mission statement Pages 2, 3 Five year summaries of financial performance Pages 4, 5 1998 year in review Pages 6 - 9 Milestones -- 1887 to 1998 Pages 10 - 12 Directors, officers, employees Inside back cover Shareholder information Financial Section Pages 1 - 6 Management's Discussion and Analysis Page 7 Independent Auditors' Report Pages 8 - 11 Consolidated Statements of Financial Condition Pages 12 - 22 Notes to Consolidated Statements Photography: Ken Woisard, Bar Harbor Banking and Trust Company Archives, Bar Harbor Historical Society Design & Printing: Downeast Graphics & Printing, Inc. _ Summary of Financial Performance Bar graphs show the following information: Net loans (In millions of dollars) scale 0 to 250 1994 = 182, 1995 = 198, 1996 = 208, 1997 = 212, 1998 = 224 Total deposits (In millions of dollars) scale 0 - 270 1994 = 226, 1995 = 251, 1996 = 252, 1997 = 252, 1998 = 266 Average assets (In millions of dollars) scale 0- 400 1994 = 281, 1995 = 311, 1996 = 332, 1997 = 345, 1998 = 364 Average equity (In millions of dollars) scale 0 - 50 1994 = 27, 1995 = 31, 1996 = 36, 1997 = 39, 1998 = 44 Net interest income (In millions of dollars) scale 0 - 20 1994 = 14, 1995 = 15.5, 1996 = 16, 1997 = 16.8, 1998 = 17.2 Dividends per share (In dollars) scale 0.00 to $.75 1994 = .37, 1995 = .43, 1996 = .59, 1997 = .60, 1998 = .67 Dividend payout ratio (Percent) scale: 0 to 50% 1994 = 25.75, 1995 = 25.07. 1996 = 30.22, 1997 = 32.15, 1998 = 34.92% Net income (In thousands of dollars) scale: 0 to 7,000 1994 = 4,900, 1995 = 5,800, 1996 = 6,700, 1997 = 6,400, 1998 = 6,600 Average equity/average assets (Percent) scale: 0 to 15 1994 = 9.75, 1995 = 9.96, 1996 = 10.72, 1997 = 11.46, 1998 = 12.15 _ Five-Year Selected Financial Data (In thousands, except per share data)
1998 1997 1996 1995 1994 Balance sheet totals Total assets $392,047 $342,726 $345,143 $326,609 $296,687 Net loans 224,980 212,396 207,667 197,718 182,102 Total deposits 266,448 251,903 251,676 251,471 225,545 Total equity 46,861 42,462 37,887 33,243 28,761 Average assets 363,657 344,554 331,971 311,112 281,169 Average equity 44,172 39,472 35,575 30,986 27,405 Statement of earnings totals Interest and dividend income $29,211 $28,518 $27,522 $26,152 $21,795 Interest expense 11,973 11,710 11,281 10,624 7,676 Net interest income 17,238 16,808 16,241 15,528 14,119 Provision for loan 336 620 720 960 960 losses Net interest income after provision for 16,902 16,188 15,521 14,568 13,159 loan losses Non-interest income (including net security gains 5,688 5,001 5,000 4,389 4,012 (losses)) Non-interest expense 12,865 11,801 10,913 10,471 10,161 Applicable income 3,118 2,966 2,899 2,616 2,096 taxes Net earnings 6,607 6,422 6,709 5,879 4,914 Per share data (restated for two-for- one stock divided declared in 1998) Net earnings $1.92 $1.87 $1.95 $1.72 $1.44 Dividends $0.67 $0.60 $0.59 $0.43 $0.37 Weighted average number of common 3,443,387 3,440,104 3,436,232 3,426,898 3,419,390 shares outstanding Dividend payout ratio 34.92% 32.15% 30.22% 25.07% 25.75% Total return -11.20% 53.97% 37.02% 72.93% 12.76% Return on total 1.82% 1.86% 2.02% 1.89% 1.75% average assets Return on total 14.96% 16.27% 18.86% 18.97% 17.93% average equity Average 12.15% 11.46% 10.72% 9.96% 9.75% equity/average assets Efficiency ratio 56.95% 55.69% 53.18% 55.21% 59.18%
1st Quarter 2nd Quarter 3rd Quarter 4th Quarter 1998 29.0 to 29.50 to 25.25 to 25.00 to 25.125 24.875 19.25 17.00 1997 19.375 to 21.375 to 24.188 to 31.00 to 17.50 18.188 19.875 24.563
As of January 1, 1999, there were 1,072 registered holders of record of Bar Harbor Bankshares common stock. Dividends paid by the Company in 1998 and 1997:
1st 2nd 3rd 4th Quarter Quarter Quarter Quarter ~~1998 $0.16 $0.17 $0.17 $0.17 1997 $0.14 E0.15 $0.15 $0.16~~
INDEPENDENT AUDITORS' REPORT (On Berry Dunn letterhead) BDM&P LOGO BERRY, DUNN, McNEIL & PARKER CERTIFIED PUBLIC ACCOUNTANTS MANAGEMENT CONSULTANTS _______________________________________________________ _____ 100 Middle Street / P.O. Box 1100, Portland, Maine 04104-1100 / (207 775-2387 / FAX (207) 774-2375 The Board of Directors Bar Harbor Bankshares We have audited the accompanying consolidated statements of financial condition of Bar Harbor Bankshares and Subsidiary as of December 31, 1998 and 1997, and the related consolidated statements of earnings, changes in stockholders' equity, and cash flows for each of the three years in the period ended December 31, 1998. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated financial position of Bar Harbor Bankshares and Subsidiary as of December 31, 1998 and 1997, and the consolidated results of their operations and their consolidated cash flows for each of the three years in the period ended December 31, 1998, in conformity with generally accepted accounting principles. (signature: Berry, Dunn, McNeil & Parker) Portland, Maine February 18, 1999 Offices in: Bangor, Maine, Portland, Maine, Lebanon, New Hampshire, Manchester, New Hampshire _ CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION BAR HARBOR BANKSHARES AND SUBSIDIARY CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION DECEMBER 31, 1998 AND 1997 (in thousands, except number of shares)
1998 1997 ASSETS Cash and Due from banks $11,511 $7,537 Securities available for sale 17,844 14,608 Securities held to maturity (market value $114,177 in 1998; $86,248 in 1997) 113,162 85,351 Other securities 6,133 6,012 Loans held for sale 1,018 365 Loans, net of allowance for possible loan losses of $4,455 in 1998 and $4,743 in 1997 224,980 212,396 Premises and equipment 7,951 7,658 Other assets 9,449 8,799 Total Assets $392,047 $342,726 Liabilities and stockholders' equity Liabilities Deposits Demand Deposits $42,323 $36,837 NOW accounts 43,319 39,536 Savings deposits 67,620 53,378 Time deposits 113,187 122,152 Total Deposits 266,448 251,903 Securities sold under repurchase agreement 8,092 4,474 Advances from Federal Home Loan Bank 66,120 39,160 Other liabilities 4,526 4,727 Total liabilities 345,187 300,264 Commitments and contingent liabilities (Note 17) Stockholders' Equity Capital stock, par value $2; authorized 10,000,000 shares; issued 3,643,614 in 1998 7,287 7,284 and 3,641,166 in 1997 Surplus 4,002 3,932 Retained earnings 36,862 32,562 Net unrealized appreciation on securities available for sale, net of tax 50 24 Less: Cost of 200,000 shares of Treasury (1,340) (1,340) stock Total stockholders' equity 46,861 42,462 Total liabilities and stockholders' equity $392,047 $342,726
The accompanying notes are an integral part of these consolidated financial statements. CONSOLIDATED STATEMENTS OF EARNINGS YEARS ENDED DECEMBEER 31, 1998, 1997 AND 1996 (in thousands, except number of shares and per share data)
1998 1997 1996 Interest and dividend income: Interest and fees on loans $21,290 $21,028 $20,303 Interest and dividends on: Taxable securities 7,074 6,415 6,099 Non-taxable securities 424 651 767 Equity Securities 423 424 353 Total interest and dividends 29,211 28,518 27,522 Interest expense: Deposits 8,539 8,793 8,888 Borrowings 3,434 2,917 2,393 Total interest expense 11,973 11,710 11,281 Net interest income 17,238 16,808 16,241 Provision for loan losses 336 620 720 Net interest income after provision for loan losses 16,902 16,188 15,521 Other operating income: Trust department income 2,727 2,525 2,211 Service charges on deposit accounts 722 690 797 Other service charges, commissions 1,867 1,634 1,624 and fees Other operating income 225 149 351 Net securities gains 148 3 17 5,688 5,001 5,000 Other operating expense: Salaries and employee benefits 6,031 6,005 5,689 Occupancy expense 650 608 596 Furniture and equipment expense 1,214 1,155 911 Other operating expense 4,970 4,033 3,717 12,865 11,801 10,913 Earnings before Income Taxes 9,725 9,388 9,608 Income Taxes 3,118 2,966 2,899 Net Earnings $6,607 $6,422 $6,709 Per common share data Net Earnings $1.92 $1.87 $1.95 Weighted average number of common shares outstanding 3,443,3 3,440,1 3,436,2 87 04 32
Bar Harbor Bankshares and Subsidiary CONSOLIDATED STATEMENTS OF CASH FLOWS Years ended December 31, 1998, 1997 and 1996 (in thousands)
1998 1997 1996 Cash flows from operating activities: Net earnings $6,607 $6,422 $6,709 Adjustments to reconcile net earnings to net cash provided by operating activities: Depreciation 938 888 786 Deferred income taxes 248 (191) (73) Provision for loan losses 336 620 720 Provision for losses on other real estate owned 0 0 7 New loans originated for sale (17,684) *5,465) (8,266) Proceeds from sale of mortgages held 17,068 5,450 8,250 for sale Gain on sale of mortgages originated (218) (40) (169) for sale Net securities gains (148) (3) (17) Net amortization of bond premium 249 137 269 Loss on sale of premises and 1 5 31 equipment Net change in other assets (691) (234) (514) Net change in other liabilities (200) 1,300 23 Net cash provided by operating 6,525 8,901 7,807 activities Cash flows from investing activities: Net decrease in federal funds sold 9 2,000 1,800 Purchases of securities held to (72,428) (31,402 (18,320) maturity ) Proceeds from maturity and principal paydowns of securities held to 28,024 18,881 12,793 maturity Proceeds from call of securities held to maturity 16,346 9,750 4,750 Purchases of securities available (16,245) (1,253) (6,113) for sale Proceeds from maturity and principal paydowns of available for sale 302 160 183 Proceeds from call of securities available for sale 12,750 6,060 500 OTHER SECURITIES Net decrease (increase) in other 22 (388) 55 securities Net loans made to customers (13,485) (5,349) (11,121) Capital expenditures (1,231) (1,069) (2,493) Proceeds from sale of other real 505 199 331 estate owned Proceeds from sale of fixed assets 0 16 397 Net cash used in investing (45,440) (2,395) (17,238) activities Cash flows from financing activities: Net change in savings, NOW and demand deposits 23,510 218 5,178 Net change in time deposits (8,965) 10 (4,974) Net change in securities sold under repurchase agreements 3,618 (3,772) 2,455 Advances from Federal Home Loan Bank 50,0000 48,500 53,000 Repayment of advances from Federal Home Loan Bank (30,500) (35,000 (28,900) ) Net change in short term other 7,460 (8,248) (12,892) borrowed funds Proceeds from sale of capital stock 72 90 130 Payments of dividends (2,307) (2,065) *2,028) Net cash provided (used) by financing activities 42,889 (10,267 11,969 ) Net increase (decrease) in cash and cash equivalents 3,996 (3,761) 2,538 Cash and cash equivalents at beginning of year 7,537 11,298 8,760 Cash and cash equivalents at end of $11,533 $7,537 $11,298 year Supplemental disclosures of cash flow information: Cash paid during the year for: Interest $11,992 $11,683 $11,322 Income taxes, net of refunds $3,180 $2,596 $3,347 Non-cash transactions Transfer from loans to real estate owned (other $564 $0 $215
BAR HARBOR BANKSHARES AND SUBSIDIARY CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY YEARS ENDED DECEMBER 31, 1998, 1997 and 1996 (in thousands, except number of shares and per share data)
NET UNREALIZED APPRECIATIO TOTAL CAPITAL RETAINED N TREASURY STOCKHOLDERS STOCK SURPLU EARNINGS (DEPRECIATI STOCK ' S ON) ON EQUITY SECURITIES AVAILABLE FOR Balance, December 31, $7,270 $3,726 $23,524 $63 ($1,340) $33,180 1995 Net Earnings, 1996 6,709 6,709 Net unrealized depreciation on securities available for sale, net of tax benefit of $86 (167) (167) Total comprehensive income 6,709 (167) 6,542 Cash dividends declared ($0.59 per share) (2,028) (2,028) Sale of stock 9 120 130 Balance December 31, 7,279 3,847 28,205 (104) ($1,340) 37,991 1996 Net Earnings, 1997 6,422 6,422 Net unrealized appreciation on securities available for sale, net of tax of $66 128 128 Total comprehensive income 6,422 128 6,550 Cash dividends declared ($0.60 per share) (2,065) (2,065) Sale of stock 4,692 85 0 90 Balance December 31, 7,284 3,932 32,562 24 ($1,340) 42,438 1997 Net earnings, 1998 6,607 6,607 Net unrealized appreciation on securities available for sale, net of tax of $14 26 26 Total comprehensive income 6,607 26 6,633 Cash dividends declared ($0.67 per share) (2,307) (2,307) Sale of stock 3 70 73 Balance December 31, $7,287 $4,002 $36,862 $50 ($1,340) $46,861 1998
NOTES TO CONSOLIDATED STATEMENTS Bar Harbor Bankshares and Subsidiary December 31, 1998, 1997, and 1996 (Tables presented in thousands) 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Business Bar Harbor Bankshares, ("the Company") through its wholly owned subsidiary, Bar Harbor Banking and Trust Company,("the Bank") provides a full range of banking services to individual and corporate customers throughout eastern Maine. These banking services are available in each of its ten branch locations. The Bank is subject to the regulations of certain federal and state agencies and undergoes periodic examination by those regulatory authorities. Basis of financial statement presentation The financial statements have been prepared in conformity with generally accepted accounting principles. In preparing the financial statements, management is required to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities as of the date of the balance sheet and revenues and expenses for the period. Actual results could differ significantly 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 and the valuation of real estate acquired in connection with foreclosures or in satisfaction of loans. In connection with the determination of the allowances for loan losses and real estate owned, management obtains independent appraisals for significant properties. Substantial portions of the Bank's loans are secured by real estate in eastern Maine. In addition, all of the real estate acquired through foreclosure is located in those same markets. Accordingly, the ultimate ability to collect on a substantial portion of the Bank's loan portfolio and the recovery of the carrying amount on real estate owned are susceptible to changes in market conditions in eastern Maine. Certain amounts in prior years have been restated to conform with the current year presentation. Principles of consolidation The accompanying consolidated financial statements include the accounts of Bar Harbor Bankshares and its wholly owned subsidiary, Bar Harbor Banking and Trust Company. All intercompany balances and transactions have been eliminated in the accompanying consolidated financial statements. Segments The Company, through the branch network of the Bank, provides a broad range of financial services to individuals and companies in eastern Maine. These services include demand, savings and time deposits; lending; credit card servicing; ATM processing and trust services. Operations are managed and financial performance is evaluated on a corporate-wide basis. Accordingly, all of the Company's banking operations are considered by management to be aggregated in one reportable operating segment. Comprehensive income Under a new accounting standard, comprehensive income is now reported for all periods. Comprehensive income includes both net income and other comprehensive income. Other comprehensive income includes the change in unrealized gains and losses on securities available for sale and is disclosed in the consolidated statements as of changes in stockholders' equity. Cash and due from banks The Bank is required to comply with various laws and regulations of the Federal Reserve Bank, which require that the Bank maintain certain amounts of cash on deposit and is restricted from investing those amounts. In the normal course of business, the Bank has funds on deposit at other financial institutions in amounts in excess of the $100,000 that is insured by the FDIC. The Bank has not experienced any losses in such accounts and the Bank believes it is not exposed to any significant risk with respect to these accounts. Securities available for sale Securities available for sale consist of certain securities to be held for indefinite periods of time which are reported at fair value with unrealized gains and losses reported as a separate component of stockholders' equity, net of tax effect. Gains and losses on the sale of securities available for sale are determined using the specific-identification method and are shown separately in the statement of earnings. Premiums and discounts are recognized in interest income using the interest method over the period to maturity. Securities to be held to maturity Debt securities for which the Bank has the positive intent and ability to hold to maturity are reported at cost, adjusted for amortization of premiums and accretion of discounts that are recognized in interest income using the interest method over the period to maturity. It is management's policy to acquire securities for long-term investment purposes, rather than to acquire such securities for purposes of trading. For this reason, the Bank has not classified any of its securities as trading. Other securities Other securities include Federal Home Loan Bank stock and other non-marketable securities carried at cost. Loans held for sale Loans held for sale are individual residential mortgage loans that qualify for sale in the secondary market to the Federal Home Loan Mortgage Corporation (Freddie Mac). These loans are closed and immediately sold without recourse to Freddie Mac, with the Bank retaining loan servicing on said loans. The Bank does not pool mortgages for sale. Because loans are sold immediately, the cost is considered to approximate market value. Loans Interest on loans is accrued and credited to income based on the principal amount of loans outstanding. The accrual of interest income is discontinued when, in the opinion of management, there is an indication that the borrower may be unable to meet payments as they become due and the loan is not well secured. Interest income on impaired loans is reported on a cash basis when received. Loan origination fees and certain direct loan origination costs are deferred and recognized in interest income as an adjustment to the loan yield over the life of the related loans. The Bank amortizes these amounts using a method that approximates the effective yield. The unamortized net deferred fees and costs are included on the balance sheet with the related loan balances. The allowance for loan losses is established through a provision for loan losses charged to operations. Loan losses are charged against the allowance when management believes that the collectibility of the loan principal is unlikely. Recoveries on loans previously charged off are credited to the allowance. The allowance is an amount that management believes will be adequate to absorb possible loan losses based on evaluation of their collectibility and prior loss experience. The evaluation takes into consideration such factors as changes in the nature and volume of the portfolio, overall portfolio quality, specific problem loans, and current and anticipated economic conditions that may affect the borrower's ability to pay. While management uses available information to recognize losses on loans, changing economic conditions and the economic prospects of the borrowers may necessitate future additions to the allowance. In addition, various regulatory agencies, as an integral part of their examination process, periodically review the Bank's allowance for loan losses. Such agencies may require the Bank to recognize additions to the allowance based on their judgments about information available to them at the time of their examination. Impaired loans, including restructured loans, are measured at the present value of expected future cash flows discounted at the loan's effective interest rate, at the loan's observable market price, or the fair value of the collateral if the loan is collateral dependent. Management takes into consideration impaired loans in addition to the above mentioned factors in determining the appropriate level of allowance for loan losses. Premises and Equipment Premises and equipment and related improvements are stated at cost less accumulated depreciation. Depreciation is computed by the straight-line and accelerated methods over the estimated useful lives of the related assets. Repairs and maintenance charges are expensed as incurred. Other real estate owned (OREO) 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 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. OREO is stated at the lower of cost or market. An allowance for losses on OREO is maintained for subsequent valuation adjustments on a specific property basis. Income taxes Deferred tax assets and liabilities are reflected at currently enacted income tax rates applicable to the period in which the deferred tax assets or liabilities are expected to be realized or settled. As changes in the tax laws or rates are enacted, deferred tax assets and liabilities are adjusted through the provision for income taxes. Financial instruments with off-balance sheet risk In the ordinary course of business the Bank has entered into off-balance sheet financial instruments consisting of commitments to extend credit, commitments under credit-card arrangements, commercial letters of credit, and standby letters of credit. Such financial instruments are recorded in the financial statements when they are funded or related fees are incurred or received. Interest rate exchange agreements (swaps) are accounted for using the accrual method. Net interest income (expense) resulting from the differential between exchanging floating and fixed-rate interest payments is recorded on a current basis. Interest rate floors are contracts in which a floor is established at a specified rate and period of time. The premium paid for the contract is amortized over its life. Any cash payments received are recorded as an adjustment to net interest income. Statements of cash flows For purposes of the statements of cash flows, the Bank considers cash on hand and amounts due from banks as cash and cash equivalents. Basic earnings per share Basic earnings per share is calculated by dividing net earnings by the number of weighted average shares outstanding for the year. There are no diluted earnings per share as there is no potential common stock. Fair value disclosures The Bank in estimating its fair market value disclosures for financial instruments used the following methods and assumptions: Cash and cash equivalents: The carrying amounts reported in the statement of condition for cash and cash equivalents approximate their fair values. Securities available for sale, securities held to maturity and other securities: Fair values for investment securities are based on quoted market prices, where available. If quoted market prices are not available, fair values are based on quoted market prices of comparable instruments. Loans receivable: Fair values are estimated for portfolios of loans with similar financial characteristics. Loans are segregated by type such as commercial, commercial real estate, residential mortgage, credit card, and other consumer. Each loan category is also segmented into fixed and variable rate interest terms and by performing and non-performing categories. Fair value of all performing loans is calculated by discounting scheduled cash flows through the estimated maturity using estimated discount market rates. These rates are based on independent market indices adjusted for administrative costs and credit risk. Estimated maturity is based on the weighted average of the portfolio. Real estate and installment maturities are adjusted for estimates of prepayment rates, with high interest, longer term loans prepaying at a more rapid rate. Fair value for non-performing loans is determined on an individual basis, taking into account management's plans regarding potential time to resolution and subsequent sale of collateral and the borrower's plan for the continuance of principal and interest payments along with the potential of the borrower to rebuild equity in the loan collateral. Deposits: The fair value of demand deposits, NOW accounts and savings accounts is the amount payable on demand. The fair value of fixed maturity certificates of deposit is estimated using the rates currently offered in the Bank's market for deposits of similar remaining maturities. Borrowings: The carrying amounts of federal funds purchased, borrowings under repurchase agreements, and other short-term borrowings maturing within 90 days approximate their fair values. Fair values of other short-term borrowings are estimated using discounted cash flow analyses based on the Bank's current incremental borrowing rates for similar types of borrowing arrangements. The fair values of the Bank's long-term borrowings (other than deposits) are estimated using discounted cash flow analyses, based on quoted market rates. Accrued interest: The carrying amounts of accrued interest approximate their fair values. Off-balance sheet instruments: The Bank's off-balance sheet instruments include interest rate swaps, floors and loan commitments. Fair values for interest rate swaps and floors are based on quoted market prices. Fair values for loan commitments have not been presented as the future revenue derived from such financial instruments is not significant. Effect of recent accounting pronouncements During 1998, the Company adopted Statements of Financial Accounting Standards (SFAS) No. 130, No. 131 and No. 132. The adoption of SFAS No. 130, "Reporting Comprehensive Income", requires that certain items be reported under a new category of income "Other Comprehensive Income". Unrealized gains and losses on securities available for sale is the only item included in other comprehensive income. SFAS No. 131 and No. 132 relate to disclosures about segments and employee benefits, respectively. The financial statements for 1998 and prior periods where applicable, include the required additional disclosures for SFAS No. 130, No. 131 and No. 132. In addition, the Financial Accounting Standards Board issued SFAS No. 133, "Accounting for Derivative Instruments and Hedging Activities" and SFAS No. 134, "Accounting for Mortgage-Backed Securities Retained after the Securitization of Mortgage Loans Held for Sale by a Mortgage Banking Enterprise", which are effective for fiscal years beginning after June 15, 1999 and the first fiscal quarter beginning July 1, 1999 respectively. Management has not determined the impact of SFAS No. 133 or SFAS No. 134 on the financial statements. 2. INVESTMENT SECURITIES The amortized cost of investment securities and their approximate fair values at December 31, 1998 and 1997 follows:
1998 Gross Gross Estimated Amortized Unrealiz Unreali Fair Cost ed Gains zed Value Losses Available for Sale: Obligations of U.S. Gov't Agencies $12,249 $84 $1 $12,332 Mortgage Backed Securities -U.S. Gov't 4,969 0 33 4,936 Agencies Marketable Equity 550 26 0 576 Securities Total Securities Available for sale $17,768 $110 $34 $17,844 Held to Maturity: Obligations of U. S. Gov't Agencies $5,690 $47 $0 $5,737 Mortgage Backed Securities-U.S. Gov't 88,101 941 145 88,897 Agencies Mortgage Backed Securities - Other 6,668 45 27 6,686 Obligations of states of the U.S. and political subdivisions 5,634 159 17 5,776 thereof Other Bonds 7,069 49 37 7,081 Total securities held to maturity $113,162 $2,241 $226 $114,177

1997 Gross Gross Estimated Amortized Unrealiz Unreali Fair Cost ed Gains zed Value Losses Available for Sale: Obligations of U.S. Gov't Agencies $8,751 $69 $17 $8,803 Mortgage Backed Securities -U.S. Gov't 5,271 0 38 5,233 Agencies Marketable Equity 550 22 0 572 Securities Total Securities Available for sale $14,572 $91 $55 $14,608 Held to Maturity: Obligations of U. S. Gov't Agencies $13,250 $33 $3 $13,280 Mortgage Backed Securities-U.S. Gov't 57,913 725 105 58,533 Agencies Mortgage Backed Securities - Other 5,082 26 21 5,087 Obligations of states of the U.S. and political subdivisions 8,105 240 0 8,345 thereof Other Bonds 1,001 2 0 1,003 Total securities held to maturity $85,351 $1,026 $129 $86,248
SECURITIES AVAILABLE FOR SALE
Estimated Fair Amortized Value Cost Due in one year or less $500 $500 Due after one year through five 1,000 1,004 years Due after five years through ten 10,749 10,828 years Due after ten years 0 0 Mortgage-backed securities 4,969 4,936 $17,218 $17,268
SECURITIES HELD TO MATURITY
Estimated Amortized Fair Value Cost Due in one year or less $1,902 $1,922 Due in one year through five years 11,211 11,373 Due after five years through ten 4,745 4,764 years Due after ten years 535 535 Mortgage-backed securities 94,769 95,583 $113,162 $114,177
There were no sales of securities available for sale or held to maturity in 1998, 1997 or 1996. U.S. Government securities having a carrying value of approximately $25.1 million at December 31, 1998, and $19.3 million at December 31, 1997 are pledged to secure certain deposits and for other purposes as required by law. Market values for these securities at December 31, 1998 and 1997 were $25.4 million and $19.4 million, respectively. 3. LOANS The following table shows the composition of the Bank's loan portfolio as of December 31, 1998 and 1997:
1998 1997 Commercial loans: Real estate - variable rate $57,619 $50,471 Real estate - fixed rate 4,073 9,801 Other - variable rate 24,292 24,430 Other 14,825 14,872 100,809 99,574 Tax exempt: Variable rate 463 610 Fixed rate 1,586 1,190 2,049 1,800 Consumer: Real estate - variable rate 60,265 56,333 Real estate - fixed rate 37,770 32,350 Home equity 13,244 11,545 Installment 10,726 11,177 Other 5,419 5,128 127,424 116,533 Real estate under foreclosure 49 56 Deferred origination fees, net (896) (824) Allowance for loan losses (4,455) (4,743) $224,980 $212,396
At December 31, 1998 and 1997, loans on non-accrual status totaled $1.7 million and $3.2 million, respectively. Interest income not recognized on non- accruing loans was $107,000, $363,000 and $314,000, in 1998, 1997 and 1996, respectively. In addition to loans on non-accrual status at December 31, 1998 and 1997, the Bank had loans past due greater than 90 days totaling $1.7 million and $774,000, respectively. The Bank continues to accrue interest on these loans because it believes collection of the interest due is reasonably assured. The Bank makes single family and multi-family residential loans, commercial real estate loans, commercial loans, and a variety of consumer loans. The Bank's lending activities are conducted in eastern Maine. Because of the Bank's proximity to Acadia National Park, a large part of the economic activity in the area is generated from the hospitality business associated with tourism. At December 31, 1998, approximately $30.5 million of loans were made to companies in the hospitality industry. Loans for commercial and real estate development totaled $12.7 million. The loan portfolio at December 31, 1998 and 1997 consisted of 68% and 70%, respectively, of variable rate loans. From the standpoint of large loans to single borrowers, loans of $700,000 or more to one borrower decreased as a percentage of stockholders' equity to 65% in 1998 from 66% in 1997. Of these larger loans, 70% are secured by real estate. 4. ALLOWANCE FOR LOAN LOSSES Changes in the allowance for loan losses for each of the three years ended December 31 were as follows:
1998 1997 1996 Balance, beginning of year $4,743 $4,293 $4,048 Provision for loan losses 336 620 720 Loans charged off 788 585 711 Less recoveries on loans previously charged off 164 415 236 Net loans charged off 624 170 475 Balance, end of year $4,455 $4,743 $4,293
Information regarding impaired loans is as follows for each of the three years ended December 31:
1998 1997 1996 Average investment in impaired loans $1,576 $2,045 $1,882 Interest income recognized on impaired loans including interest income recognized on cash basis 35 165 108 Balance of impaired loans 1,073 2,670 2,196 Portion of impaired loan balance for which an allowance for credit losses is 1,073 2,670 2,196 allocated Portion of allowance for loan losses allocated to the impaired loan balance $42 $104 $128
5. LOANS TO RELATED PARTIES In the ordinary course of business, the Bank has granted loans to certain officers and directors and the companies with which they are associated. All such loans and commitments to lend were made under terms that are consistent with the Bank's normal lending policies. Loans to related parties at December 31, 1998 and 1997 which in aggregate exceed $60,000 were as follows:
1998 1997 Beginning balance $3,952 $3,807 New Loans 5,393 1,693 Less: repayments 2,102 1,548 Ending balance $7,243 $3,952
6. MORTGAGE SERVICING Mortgage servicing rights of $264,000 are capitalized and recorded at their estimated fair value of $221,000 at December 31, 1998. Mortgage servicing rights of $131,000 had an estimated fair value of $113,000 at December 31, 1997. Mortgage servicing rights are amortized over the estimated weighted average life of the loans. Amortization of mortgage servicing rights was $48,300 and $36,600 in 1998 and 1997, respectively. The Bank services residential mortgage loans sold under non-recourse agreements totaling $58.5 million and $64.7 million in 1998 and 1997, respectively. Projected changes in mortgage servicing values are based on an analysis of market implied prepayment rates and reflect the expected change in value based on current market conditions. 7. PREMISES AND EQUIPMENT The detail of premises and equipment is as follows:
1998 1997 Land $ 561 $ 561 Buildings and improvements 7,378 6,737 Furniture and equipment 3,841 3,509 11,780 10,807 Less: accumulated depreciation 3,829 3,149 $7,951 $7,658
8. OTHER REAL ESTATE OWNED The following table summarizes the composition of other real estate owned, which is included in other assets:
December 31 1998 1997 Real estate properties and other assets acquired in settlement of $114 $ 76 loans Less allowance for losses 16 17 $98 $59
Changes in the allowance for other real estate owned for each of the three years ended December 31 were as follows:
1998 1997 1996 Balance, beginning January $17 $23 $26 Provision charged to income 0 0 7 Losses charged to provision 1 6 10 Balance, ending December 31 $16 $17 $23
9. DEPOSITS The aggregate amount of short-term jumbo certificates of deposit, each with a minimum denomination of $100,000, was $13.6 million and $13.8 million in 1998 and 1997, respectively. A certificate of deposit of $1 million is collateralized by a Federal National Mortgage Association debenture of equal amount. Overdrafts in the amount of $294,000 have been classified as loans at December 31, 1998. At December 31, 1998, the scheduled maturities of time deposits are as follows: 1999 $88,761 2000 10,294 2001 4,301 2002 561 2003 and thereafter 838 Individual Retirement Accounts (IRAs), without scheduled maturities 8,432 $113,18 7

10. REPURCHASE AGREEMENTS Securities sold under agreements to repurchase generally mature within one to four days from the transaction date. Information concerning securities sold under agreements to repurchase for 1998 and 1997 is summarized as follows:
1998 1997 Average daily balance during $6,686 $5,244 the year Average interest rate during 4.74% 4.61% the year Maximum month-end balance during the year $10,192 $8,025 Securities underlying the agreements at year end were under the Bank's control and were as follows: Carrying value $23,036 $16,560 Estimated fair value $23,359 $16,724
11. ADVANCES FROM THE FEDERAL HOME LOAN BANK (FHLB) A summary of advances from the FHLB is as follows:
Total Principa Range of Interest Rates Maturi l December 31, 1998 ty $28,250 4.95% to 6.05% 1999 5,870 5.48% to 6.10% 2001 3,000 5.71% 2002 9,000 5.37% to 5.84% 2003 5,000 5.49% 2005 15,000 4.99% to 5.68% 2008 $66,120 December 31, 1997 $25,500 5.26% to 7.05% 1998 5,000 5.75% to 6.05% 1999 5,660 5.48% to 6.10% 2001 3,000 5.71% 2002 $39,160
All FHLB advances are fixed rate instruments. The Bank has one amortizing advance, payable in monthly installments of $76,000, maturing in February, 2001. The remaining advances are payable at their call dates or final maturity. The Bank has $26 million in callable advances with maturity dates ranging from 2003 to 2008. In addition to the above outstanding advances, other FHLB funds available to the Bank at December 31, 1998, totaled approximately $70.6 million. Pursuant to collateral agreements with the FHLB, advances are collateralized by all stock in the FHLB. Qualifying first mortgage loans, U. S. Government debentures and U. S. Government mortgage-backed securities totaling $91.2 million are available as collateral for FHLB advances. 12. INCOME TAXES The current and deferred components of income tax expense are as follows:
1998 1997 1996 Current Federal $2,771 $3,062 $2,877 State 99 95 95 2,870 3,157 2,972 Deferred 248 (191) (73) $3,118 $2,966 $2,899
The actual tax expense differs from the expected tax expense computed by applying the applicable U.S. Federal corporate income tax rate to earnings before income taxes as follows:
1998 1997 1996 Computed tax expense $3,307 $3,192 $3,267 Increase (reduction) in income taxes resulting from: Officer's life insurance (38) (36) (88) Tax exempt interest (177) (240) (290) State taxes, net of federal benefit 65 63 62 Other (39) (13) (52) $3,118 $2,966 $2,899
The tax effect of temporary differences that give rise to deferred income tax assets and liabilities are as follows:
1998 1997 Asset Liabili Asset Liabili ty ty Allowance for possible losses on loans and other real estate owned $1,277 $1,356 Capital loss carry 39 79 forward Deferred loan origination fees $30 Deferred compensation 399 349 Core deposit intangible 60 73 asset Non-accrual interest 29 80 Postretirement benefit obligation 656 665 Unrealized appreciation (depreciation) on securities available 26 $12 for sale Depreciation 280 242 Other 25 76 25 40 $2,485 $412 $2,796 $294
As of December 31, 1998 and 1997, the net deferred income tax asset amounted to $2.1 million and $2.5 million, respectively, and is included in other assets on the balance sheet. No valuation allowance for deferred taxes was required at December 31, 1998 or 1997. 13. STOCKHOLDERS' EQUITY On December 28, 1998, the Board of Directors declared a two-for-one stock dividend effected as a stock split to all stockholders of record as of that date, which was payable on January 25, 1999. All share and per share data included in this annual report have been restated to reflect the stock dividend. Bar Harbor Bankshares' subsidiary, Bar Harbor Banking and Trust Company, has the ability to pay dividends to the parent subject to the minimum regulatory capital requirements. At December 31, 1998,the amount available for dividends was approximately $29 million. The Bank is subject to various regulatory capital requirements administered by the federal banking agencies. Failure to meet minimum capital requirements can initiate certain mandatory, and possibly additional discretionary actions by regulators that, if undertaken, could have a direct material effect on the Bank's financial statements. Under capital adequacy guidelines and the regulatory framework for prompt corrective action, the Bank must meet specific capital guidelines that involve quantitative measures of the Bank's assets, liabilities, and certain off-balance sheet items as calculated under regulatory accounting practices. The Bank's capital amounts and classification are also subject to qualitative judgments by the regulators about components, risk weightings and other factors. Quantitative measures established by regulation to ensure capital adequacy require the Bank to maintain minimum amounts and ratios (set forth in the table below) of total and Tier I capital to risk-weighted assets and average assets. Management believes, as of December 31, 1998, that the Bank exceeds all capital adequacy requirements to which it is subject. As of December 31, 1998, the most recent notification from the federal regulators categorized the Bank as well capitalized under the regulatory framework for prompt corrective action. To be categorized as well capitalized the Bank must maintain minimum total risk- based, Tier I risk-based, and Tier I leverage ratios as set forth in the following table. There are no conditions or events since that notification that management believes have changed the Bank's category. The Bank's actual capital amounts and ratios are also presented in the following table.
To be well For capital capitalized adequacy under prompt purposes corrective action provisions Actual Actual Actual As of December 31, 1998 Amount Ratio Amount Ratio Amount Ratio Total Capital (To Risk-Weighted $50,075 19.0% $21,055 8.0% $26,319 10.0% Assets) Tier I Capital (To Risk-Weighted $46,785 17.8% $10,528 4.0% $15,791 6.0% Assets) Tier I Capital (To Average Assets) $46,785 12.9% $14,546 4.0% $18,183 5.0% As of December 31, 1997 Total Capital (To Risk-Weighted $45,117 21.5% $16,764 8.0% $20,955 10.0% Assets) Tier I Capital (To Risk-Weighted $42,498 20.3% $8,382 4.0% $12,573 6.0% Assets) Tier I Capital (To Average Assets) $42,498 12.3% $13,782 4.0% $17,228 5.0%
Consolidated capital ratios of the Company would approximate those of the Bank. At December 31, 1998 and 1997, the Company and its subsidiary, Bar Harbor Banking and Trust Company, were in compliance with all applicable regulatory requirements and had capital ratios in excess of federal regulatory risk-based and leverage requirements. 14. EMPLOYEE BENEFIT PLANS The Company has two non-qualified supplemental retirement plans for certain officers. The agreements provide supplemental retirement benefits payable in installments over a period of years upon retirement or death. The Company recognizes the costs associated with the agreements over the service lives of the participating officers. For 1998, 1997 and 1996, the expense of these supplemental plans was $138,600, $127,600 and $118,000 respectively. 401(k) PLAN The Bank has a contributory 401(k) plan available to full-time employees. Employees may contribute between 1% and 15% of their compensation, to which the Bank will match 25% of the first 6% contributed. For the years ended December 31, 1998, 1997 and 1996, the Bank contributed $51,300, $49,500 and $52,000, respectively. The Bank has a non-contributory plan. In 1998, 1997 and 1996, the Board of Directors voted to credit each eligible participant's 401(k) account with 3% of salary. The total contribution made was $127,400, $122,800 and $128,000 for the years ended December 31, 1998, 1997 and 1996, respectively. In 1997 and 1996, the Bank provided a restricted stock purchase plan through which each employee could purchase shares of Bar Harbor Bankshares stock at the current fair market price as of a date determined by the Board of Directors. These shares could be purchased through direct purchase or through the employees' 401(k) accounts. In September of 1997, the Company was listed on the American Stock Exchange, making Bar Harbor Bankshares stock readily available for transactions. Therefore, the restricted stock purchase plan was terminated effective December 31, 1997. At December 31, 1997, employees exercised their right and purchased common stock totaling $73,000, with the actual purchase transpiring in January of 1998. 15. POSTRETIREMENT BENEFITS The Company sponsors a postretirement benefit plan, which provides medical and life insurance coverage to all eligible employees. The cost of providing these benefits is accrued during the active service period of the employee. Net periodic postretirement benefit cost includes the following components:
1998 1997 1996 Service costs of benefits $15 $15 $18 earned Interest cost on accumulated postretirement benefit 108 101 101 obligation Amortization (45) (47) (51) Net periodic postretirement benefit cost $78 $69 $68
It is the Company's policy to fund the cost of postretirement health care and life insurance plans as claims and premiums are paid.
Change in benefit obligation: 1998 1997 Benefit obligation at beginning of $1,899 $1,887 year Service costs of benefits earned 15 15 Interest cost on accumulated postretirement benefit obligation 108 101 Amortization (45) (47) Benefits paid (56) (57) Benefit obligation at end of year $1,921 $1,899 Accrued benefit cost included in other liabilities $1,921 $1,899
The accumulated postretirement benefit obligation (APBO) was determined using 7% for net periodic benefit cost and 8% weighted average discount for accumulated postretirement benefit obligations and no assumed compensation increase. The health care cost trend rates were assumed to be 12% in 1998, gradually declining to 6% after 12 years and remaining at that level thereafter. An increase in the health care trend of 1% would increase the APBO by approximately $93,000 and the net periodic cost by $7,000. A decrease in the health care trend of 1% would decrease the APBO by approximately $94,000 and the net periodic cost by $7,000. 16. OTHER OPERATING EXPENSE Other operating expense includes the following item greater than 1% of revenues:
1998 1997 1996 ~~Merchant credit card $867 $624 $535 expense~~
17. FINANCIAL INSTRUMENTS The Bank is party to financial instrument with off- balance sheet risk in the normal course of business to meet the financial needs of its customers and to reduce its own exposure to fluctuations in interest rates. These financial instruments include commitments to originate loans and standby letter of credit, and an interest rate floor. In 1997, the Bank was also party to an interest rate swap agreement. Involved in these instruments, to varying degrees, are elements of credit and interest rate risk in excess of the amount recognized in the consolidated balance sheet. The contract or notional amounts of those instruments reflect the extent of the involvement the Bank has in particular classes of financial instruments. Commitments to originate loans 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 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's exposure to credit loss in the event of non- performance by the other party to the financial instrument for commitments to extend credit and standby letters of credit is represented by the contractual notional amount of those instruments. The Bank uses the same credit policies in making commitments and conditional obligations as it does for its balance sheet instruments. For interest rate floor and swap transactions, the contract or notional amounts do not represent exposure to credit loss. The Bank controlled the credit risk of its interest rate swap agreement through credit approvals, limits, and monitoring procedures. The structure the Bank had entered into was a fixed versus floating interest rate swap. The Bank received interest payments at a fixed rate and made payments at a variable rate. The notional or contract amount for financial instruments with off- balance sheet risk are:
1998 1997 Commitments to originate loans $ 6,394 $2,729 Unused lines and standby letters of 49,712 39,269 credit Unadvanced portions of construction 5,849 5,887 loans Interest rate swap 0 5,000 Interest rate floor $10,000 $10,000
The estimated fair values of the Bank's financial instruments were as follows:
December 31, 1998 December 31, 1997 Carryin Fair Carryin Fair g Value g Value Financial assets: Cash and cash equivalents $11,511 $11,511 $7,537 $7,537 Securities available for 17,844 17,844 14,608 14,608 sale Securities held to 113,162 114,177 85,351 86,248 maturity Other securities 6,133 6,133 6,012 6,012 Loans held for sale 1,018 1,018 365 365 Loans receivable 224,980 231,537 212,396 223,094 Interest receivable 2,758 2,758 2,478 2,478 Financial liabilities: Deposits 266,448 266,901 251,903 252,018 Securities sold under repurchase Agreements 8,092 8,092 4,474 4,474 Borrowings 66,120 65,534 39,160 39,018

Notiona Contract Maturity Fair l date Date Value Princip al December 31, 1998 Interest rate $10,000 June 3, June 3, $3 floor 1994 1999 December 31, 1997 Interest rate swap $ 5,000 May 4, May 4, ($13) 1993 1998 Interest rate $10,000 June 3, June 3, $3 floor 1994 1999
18. QUARTERLY SUMMARIZED FINANCIAL DATA (UNAUDITED)
1998 Quarter 1 2 3 4 Year Interest and dividend $6,928 $7,194 $7,429 $7,660 $29,21 income 1 Interest expense 2,832 2,983 3,045 3,113 11,973 Net interest income 4,096 4,211 4,384 4,547 17,238 Provision for loan losses 84 84 84 84 336 Other non-interest income 1,182 1,270 1,685 1,551 5,688 Other non-interest 2,798 3,113 3,536 3,418 12,865 expense Income before income 2,396 2,284 2,449 2,596 9,725 taxes Income taxes 772 729 826 791 3,118 Net earnings $1,624 $1,555 $1,623 $1,805 $6,607 Earnings per share, in $0.47 $0.45 $0.47 $0.53 $1.92 dollars

1997 Quarter 1 2 3 4 Year Interest and dividend $6,907 $7,062 $7,372 $7,177 $28,51 income 8 Interest expense 2,865 2,987 2,952 2,906 $11,71 0 Net interest income 4,042 4,075 4,420 4,271 16,808 Provision for loan losses 180 180 180 80 $620 Other non-interest income 971 1,112 1,562 1,356 $5,001 Other non-interest 2,514 2,929 3,322 3,036 $11,80 expense 1 Income before income 2,319 2,078 2,480 2,511 9,388 taxes Income taxes 744 663 789 770 $2,966 Net earnings $1,575 $1,415 $1,691 $1,741 $6,422 Earnings per share, in $0.46 $0.41 $0.49 $0.51 $1.87 dollars
19. PARENT ONLY CONDENSED FINANCIAL STATEMENTS The condensed financial statements of Bar Harbor Bankshares as of December 31, 1998 and 1997, and for each of the three years in the period ended December 31, 1998, are presented below: BALANCE SHEETS
December 31 1998 1997 Cash $355 $281 Investment in 46,506 42,181 subsidiaries Total assets $46,861 $42,462 Stockholders' equity $46,861 $42,462
STATEMENTS OF EARNINGS Years Ended December 31
1998 1997 1996 Dividend income from $2,308 $1,549 $2,029 subsidiary Equity in undistributed earnings of subsidy 4,299 4,873 4,680 Net earnings $6,607 $6,422 $6,709
STATEMENTS OF CASH FLOWS Years Ended December 31
1998 1997 1996 Cash flows from operating activities: Net earnings $6,607 $6,422 $6,709 Adjustment to reconcile net earnings to net cash provided by operating activities: Equity in undistributed earnings of (4,299) (4,873) (4,680 subsidiary ) Net cash provided by operating 2,308 1,549 2,029 activities: Cash flows from financing activities: Proceeds from sale of stock 73 90 130 Dividends paid (2,307) (2,065) (2,028 ) Net cash used in financing activities (2,234) (1,975) (1,898 ) Net increase (decrease) in cash 74 (426) 131 Cash beginning of year 281 707 576 Cash, end of year $355 $281 $707
Milestones: 1887 to 1998 (photo of original Bar Harbor Banking & Trust Co. building, circa 1896) A bank is born. Late in the year 1885, George H. Grant and his partner Fred C. Lynam took the first step to convert their Bar Harbor check cashing exchange into a financial institution. They applied for a bank charter, Mt. Desert Island's first, "Seeking to meet the demands of the people." Bar Harbor Banking and Trust Company's purpose has remained thus ever since. Salaries are established. For the first seven years after its founding, no one was paid at the Bank. Start- up costs left no margin for salaries until 1894, nor were there any employees besides officers. In 1894, however, satisfactory compensation was finally affordable. An annual fee for the president was set at $200. The secretary and treasurer each received $500. (Photo of original Northeast Harbor branch office circa 1914) First branch office. In the early 1900s state regulations made formal establishment of branches a cumbersome process requiring a new charter. However, community interest in a facility in Northeast Harbor was strong and in 1914, the Bank's first branch was established there. (Photo of Bar Harbor office on fire, Feb. 23, 1929 with firemen and bank employees exiting by windows and fire escape) A fortuitous fire. By 1928, the Bank was bulging at the seams in its original office building in the Mount Desert Block. Growth in staff and operations prompted the Directors to deliberate the possibility of acquiring additional space. On February 23, 1929, a decision was made for them when a fire threatened to consume the building. By June of that year, Mount Desert Block had been rebuilt, and the Bank moved into the building next to its original location. Women in management. In 1929, the Bank rewarded two decades of devoted service by Louise Leland and Dora Brewer with promotions. Leland was promoted to assistant treasurer, and Brewer to trust officer. Since women played a secondary role in Bar Harbor business, these promotions provoked considerable local controversy, the most tolerant of critics considering them to be "bold steps for the times." History proved them to be wise steps, however. For five decades, these two extraordinary personalities set a standard for service and professionalism for the Bank that remains today. Toughing it out. Wall Street's "Black Friday" in October of 1929 marked the beginning of the Great Depression. While no one survived the next five grim years unscathed, a tradition of self-sufficiency saved the Bank and its community from the worst effects. Nevertheless, the times called for drastic measures. Bank salaries were cut by a flat 10%. Loans were made with the greatest of care. Checks drawn on other banks were credited only when the funds had been collected. Mortgages were closely scrutinized. Interest was discontinued on demand deposits. The semi-annual dividend was lowered to 5%. Interest on savings accounts was pared to 2.5%, and a service charge was applied to checks. The Bank ultimately pulled itself up by its own bootstraps and then helped the community get back on its feet by not forcing mortgage collections, and working out reasonable finance charges and repayment schedules with its creditors. (Photo of exterior of The Lubec Trust and Banking Company circa 1936) First acquisition. The Lubec Trust and Banking Company, chartered in 1907, had fared poorly in the Great Depression largely through undercapitalization. As the Depression came to an end, the sardine industry in Lubec needed greater resources than the local bank could provide. Bar Harbor Banking and Trust Company stepped in, and on July 1, 1936, the Lubec bank became the Lubec Branch of the Bar Harbor Banking and Trust Company. 50th Anniversary. In the years following the Great Depression, Mt. Desert Island experienced a strong economic recovery from which the Bank also benefited. In 1937, the Bank's 50th anniversary year, resources totaled $6.223 million, up from $4.934 million only the year before. Rapid financial strides and pride in the achievements of half a century were cause for celebration. An anniversary committee comprised of two of the Bank's founders, Judge Deasy and Fred Lynam, and two members of the Trust Department, Louise Leland and David Rodick, planned the festivities. (Photo of bank employee working with adding machine in Bar Harbor branch circa 1940) Modernization. After the Great Depression, the Bank began a policy of continually upgrading equipment and facilities to increase productivity and remain on the cutting edge of banking in Maine. To this end, in November of 1940, the Bank purchased a Burroughs Adding Machine and a Dictaphone. (Illustrated portraits of former Bank presidents Judge Luere B. Deasy and Fred C. Lynam) Orphaned. The deaths of founding fathers, Judge Luere B. Deasy in 1940, and Fred C. Lynam in 1942, severed the last links to the Bank's origins. Judge Deasy was president from 1893 to 1929 and played an important role in the business and civic life of Bar Harbor including the creation of Acadia National Park. Fred Lynam was president of the Bank from 1932 to 1942, and remained firmly in the saddle until his demise. His remarkable career spanned 60 years, and his influence is still felt in the community today. Area high school graduates benefit annually from scholarships created by The Fred C. Lynam Trust. (Photo of fish canning assembly line at the R. J. Peacock Company, Lubec, circa 1941) The war years. Despite a period of financial turmoil and personal sacrifice and uncertainty, the Bank's business continued to grow. Resources nearly doubled between 1939 and 1945 to $12.556 million. Staff was increased by three to a total of 21, and group life and group health insurance benefits were instituted. Still, renewed business activity at the end of the war in 1945 was much welcomed by the Bank. A disastrous fire. For six days during October, 1947, fires raged out of control on Mt. Desert Island devastating 29 square miles and affecting 17,000 acres. Three people died, hundreds were evacuated, and over 500 Bar Harbor residents were left homeless. 170 year round residences, 67 summer homes, country clubs, three large summer hotels, many of the smaller guest lodgings, and a variety of workplaces were destroyed. The Jackson Laboratory lost valuable research studies and thousands of strains of mice. Damage estimates ranged up to $11 million. Throughout this difficult chapter in the island's history, Bank president, Sheldon F. Goldthwait, Sr., assumed a leadership role, acting as community spokesman and spearheading the process of rebuilding and economic revitalization. (Photo of exterior of Bar Harbor branch circa 1945) Financial milestones. Between the Bank's 50th and 75th anniversary (1937-1962), total resources tripled and trust accounts more than quadrupled. The Bank grew from a modest, provincial institution to a powerful leader in Maine banking. (Photo of Dora Brewer) Record tenure. In 1965, Dora Brewer died. She began her career at the Bank in 1909 as an assistant bookkeeper and later became a trust officer and assistant treasurer. Her 56 years with the Bank is a record that is unlikely ever to be broken. (Photo of Agnes Salisbury) Another institution. In 1953, Agnes Salisbury was hired as a secretary for Albert Cunningham who was later to become president of the Bank. Shortly after being hired, Agnes was "temporarily" delegated to the lobby to greet customers and provide information. She remained there until her retirement in 1989 having endeared herself to generations of permanent residents and summer visitors alike. Today, the Agnes Salisbury Award is given annually to one or more Bank employees for outstanding customer service. (Photo of Bob Avery) High tech, high touch. Robert H. Avery became president in 1971, and for 15 years guided the Bank through the most dramatic growth period in its history. Early on, he recognized the tremendous potential of the computer for both operational efficiency and customer service. In 1984, he successfully married past and future by integrating the Bank's traditional high touch brand of personal service with high tech systems. Ignominious beginning. On July 11, 1986, two weeks after John Reeves had taken over from Bob Avery as president, the Bank's only armed robbery occurred. A middle-aged male entered the Bank's Blue Hill office wearing dark glasses, lipstick, a faded bedspread worn as a poncho, a floppy hat, and white beads. Brandishing a homemade handgun, this local eccentric made off with $71,000. As embarrassing as the episode was, it ended well enough. Within a week, telltale clues led the FBI to the "perp" ensconced in a palatial suite at the Hyatt-Regency Hotel in Cambridge, Massachusetts. He was apprehended and most of the money was recovered. Steadfastly independent. In the late 1980s merger mania hit Maine banks. Small highly capitalized community banks became prime acquisition targets for larger in- state and out of state banks. Many of the smaller banks succumbed to the temptation of short term financial gain. The management and directors of Bar Harbor Banking and Trust steadfastly resisted, choosing instead to preserve ithe Bank's most valuable asset _ a century of long-term relationships with its customers and communities. Today, the Bank remains one of 14 independent community banks in the state. (Photo of exterior of new Operations Center in Ellsworth, 1996) High tech, high touch revisited. In 1996, current Bank president Sheldon, F. Goldthwait, Jr. stated: "The key to competing successfully for the foreseeable future is service. And the key to service is technology, properly administered and with the human touch retained." Toward that end, the Bank designed and built a new centrally located operations center in Ellsworth. This new facility gives employees the state- of-the-art tools necessary to provide and deliver outstanding financial service to our customers. (Photo of Sheldon Goldthwait and president of American Stock Exchange ringing the opening bell the day Bar Harbor Bankshares was listed on the exchange.) Bank goes public. On September 23, 1997, the Bank's stock was listed on the American Stock Exchange, trading under the symbol BHB. This was an important move for stockholders as it ensures a more orderly market and greater liquidity. _ DIRECTORS, OFFICERS, EMPLOYEES (Photo of Directors with the following caption) (Standing from left to right) James C. MacLeod, Bernard K. Cough, John P. McCurdy, Dwight L. Eaton, Thomas A. Colwell, H. Lee Judd, Ruth S. Foster, Cooper F. Friend, Robert M. Phillips, Frederick F. Brown (Seated from left to right) Peter Dodge, Jarvis W. Newman, Sheldon F. Goldthwait, Jr., Robert L. Gilfillan, John P. Reeves, Lynda Z. Tyson, Robert C. Carter. BAR HARBOR BANKSHARES AND BAR HARBOR BANKING AND TRUST COMPANY BOARD OF DIRECTORS Robert L. Gilfillan Chairman of the Board Bar Harbor Frederick F. Brown Northeast Harbor Robert C. Carter Machias Thomas A. Colwell Deer Isle Bernard K. Cough Bar Harbor Peter Dodge Blue Hill Dwight L. Eaton Bar Harbor Ruth S. Foster Ellsworth Cooper F. Friend Ellsworth Sheldon F. Goldthwait, Jr. Bar Harbor H. Lee Judd Southwest Harbor James C. MacLeod Bar Harbor John P. McCurdy Lubec Jarvis W. Newman Southwest Harbor Robert M. Phillips Sullivan John P. Reeves Bar Harbor Lynda Z. Tyson Salisbury Cove BAR HARBOR BANKSHARES Chairman of the Board Robert L. Gilfillan President Sheldon F. Goldthwait, Jr. Executive Vice President Lewis H. Payne Vice President Dwight L. Eaton Treasurer Virginia M. Vendrell Clerk Marsha C. Sawyer BAR HARBOR BANKING AND TRUST COMPANY MANAGEMENT President and Chief Executive Officer Sheldon F. Goldthwait, Jr.* Executive Vice President Lewis H. Payne* Senior Vice Presidents Dwight L. Eaton* Trust Marlene S. Haskell* Marketing and Branch Administration Virginia M. Vendrell* Chief Financial Officer and Treasurer Vice Presidents Paul G. Ahern Trust Investments Edwin A. Bonenfant Trust Investments Richard A. Burgess Commercial Loans Gregory W. Dalton Commercial Loans Richard S. Douglas Trust Anne C. Gibson Trust Margaret K. Hill Risk and Facilities Management E. Ray Huntley Commercial Loans Andrea G. Leonard Consumer Loans H. Stanley MacDonald Commercial Loans Sarah C. Robinson Trust Marsha C. Sawyer* Human Resources Gerald Shencavitz* Operations Geddes W. Simpson, Jr. Trust Michael E. Smith Commercial Loans Stephen H. Sprague Consumer Loans Assistant Vice Presidents Michelle R. Bannister Ellsworth Branch Patricia J. Curtis Blue Hill Branch Thomas E. Estes, Sr. Consumer Loans John F. Gibbons, Jr. Southwest Harbor Branch Linda B. Stratton Deer Isle Branch Trust Officer Faye A. Geel Trust Operations Officer Charlene H. Tibbetts Banking Officers Jane A. Chute Machias Branch Jenene J. Schneider Milbridge Branch Assistant Treasurer Tuesdi J. Woodworth Credit Administration Officer Lottie B. Stevens Assistant Trust Officer Melanie J. Bowden * Executive Officers (Photo of Senior Management with the following caption) (Standing from left to right) Sheldon F. Goldthwait, Jr., Gerald Shencavitz, Marsha C. Sawyer, Lewis H. Payne (Seated from left to right) Marlene S. Haskell, Dwight L. Eaton, Virginia M. Vendrell. BRANCH MANAGEMENT Blue Hill Patricia J. Curtis Assistant Vice President Sharon A. Grindle Assistant Manager Deer Isle Linda B. Stratton Assistant Vice President Ellsworth E. Ray Huntley Regional Vice President Michelle R. Bannister Assistant Vice President Lubec Jane A. Chute Manager (Interim) Machias Richard A. Burgess Vice President Jane A. Chute Banking Officer Lori A. Peakall-Cote Assistant Manager Milbridge Jenene J. Schneider Banking Officer Paula S. Colwell Assistant Manager Northeast Harbor Charlene M. Bucklin Manager Southwest Harbor John F. Gibbons, Jr. Assistant Vice President Dianne L. Watson Assistant Manager Winter Harbor Judith L. Newenham Manager _ EMPLOYEES Gale L. Abbott Shannon L. Ackley Paul G. Ahern Deena M. Allen Julie A. Archer Beverly A. Arsenault June G. Atherton Rebecca J. Atwater Cheryl L. Bagley Debra L. Baker Stephanie A. Baker Michelle R. Bannister Karen R. Bean Marcia T. Bender Lorraine M. Benn Terry D. Bickford Edwin A. Bonenfant Melanie J. Bowden Laura A. Bridges Steven R. Broschat Charlene M. Bucklin Richard A. Burgess Jennifer L. Butler Lisa L. Carlson Elena M. Chapman Patricia M. Chapman Stephanie L. Chesley Jane A. Chute Robyne J. Clark Brenda B. Colwell Paula S. Colwell Arthur G. Corliss, Jr. Gale S. Coughlin Barbara A. Crosthwaite Sylvia B. Cunningham Patricia J. Curtis Gregory W. Dalton Laura H. Danielson Rachael M. Davis Donna L. Day Ann DeLill Richard S. Douglas Marilyn H. Dow Dawn L. Dyer Dwight L. Eaton Julie M. Eaton Pamela J. Eaton Thomas E. Estes, Sr. Pamela J. Farnsworth Ernest F. Fernald Andrea P. Foster Judith W. Fuller Faye A. Geel Mischelle E. Gehan Tracy M. Gellerson John F. Gibbons, Jr. Anne C. Gibson Sheldon F. Goldthwait, Jr. John B. Gooch Keith N. Goodrich McKenzie S. Grant Marjorie E. Gray Sharon A. Grindle Annette J. Guertin Carla A. Hall Kelton I. Hallett Marie E. Hardie Christine L. Harding Marlene S. Haskell Nancy B. Hastings Barbara F. Hepburn Gail C. Higgins Margaret K. Hill Brenda M. Hitchcock Margrethe Y. Hooper Lara K. Horner E. Ray Huntley Jane L. Iverson Valorie D. Jandreau Robert F. Jordan Maureen E. Kane Kerry M. Kempton Paula M. Lamoureux Kenneth N. Larrabee Robert J. Lavoie Wendy S. Leach Andrea G. Leonard Dean G. Leppi Marlene A. Lloyd Kerry L. Lord Lynn L. Lyons Nadine S. Lyons H. Stanley MacDonald Diane MacFeat Jennifer D. Madore M. Joseph Marshall Gloria J. Merrill Judith F. Messer Paula M. Michaud Mary Jane Miltner Sherry A. Mitchell Debra S. Mitchell-Dow Tanya E. Moon Kelvin L. Mote Willie M. McCauley Dawn B. Nason Cathy P. Nevel Judith L. Newenham Mary E. Newman Alexandra Orcutt Jane M. Parker Lisa L. Parsons Lewis H. Payne Lori A. Peakall-Cote Carol J. Pelletier Bettina L. Perkins Leah R. Perry Bonita E. Poitras Bonnie A. Poland David B. Preble Michele A. Prior Julie A. Redman Taffy F. Richardson Wanda S. Ring Nancy W. Robbins Sarah C. Robinson Amanda L. Salsbury Debra A. Sanner Marsha C. Sawyer Rhonda L. Sawyer Frank J. Schaefer Jessica W. Schaefer Jenene J. Schneider Catherine P. Scovill Clark F. Scoville Gerald Shencavitz Bridgette M. Shorey Geddes W. Simpson, Jr. Selina M. Sites Marcia L. Slater Michael E. Smith Michelle M. Smith Andrea L. Snow Stephen H. Sprague Ellen F. Stanley Letitia S. Stanley Lottie B. Stevens Linda B. Stratton Karen M. Tainter Amanda L. Temple Charlene H. Tibbetts Terry E. Tracy Sonja L. Vance Allyson M. Wallace Nancy J. Warner Dianne L. Watson Cheri R. Wentworth Doris E. Williams Tammy L. Williams Tuesdi J. Woodworth Carolyn A. Wright Edward P. Wynn, Sr. Jennifer L. Young J. Christopher Young Katy A. Young Lisa M. Young Mary A. Youngblood Renee C. Zanke Julie B. Zimmerman Loretta M. Ziobro _ (Inside back cover) ANNUAL MEETING Bar Harbor Bankshares Tuesday, October 5, 1999, 11:00 A.M. The Bank will provide, without charge, upon written request, a copy of Bar Harbor Bankshares' Annual Report to the Securities and Exchange Commission, Form 10-K. The Bank will also provide, upon request, Annual Disclosure Statements for the Bar Harbor Banking and Trust Company as of December 31, 1998. Please contact: Marsha C. Sawyer, Clerk Bar Harbor Bankshares PO Box 400 Bar Harbor, Maine 04609-0400 _ (Back Cover) (photograph of BHB&T, 82 Main Street, circa 1900. Caption: The Bar Harbor Banking and Trust Company at 82 Main Street in 1900.) Bar Harbor Bankshares P.O. Box 400 Bar Harbor, Maine 04609-0400 www.bhbt.com _ EX-27 3
9 12-MOS DEC-31-1998 DEC-31-1998 11,511 0 0 0 17,844 113,162 114,177 229,435 (4,455) 392,047 266,448 34,092 4,526 0 0 0 7,287 39,574 392,047 21,290 7,858 63 29,211 8,539 11,973 17,238 336 148 12,865 9,725 9,725 0 0 6,607 1.92 1.92 8.11 1,744 1,710 0 0 4,743 788 164 4,455 4,455 0 1,157

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