UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
Quarterly Report pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
For the quarter ended March 31, 1998 Commission File
No. 841105-D
BAR HARBOR BANKSHARES
Maine 01-0393663
(State or other jurisdiction of (I.R.S.
Employer
incorporation or organization
Identification No.)
P. O. Box 400
82 Main Street, Bar Harbor, ME 04609-
0400
(Address of principal executive offices)
(Zip Code)
Registrant's telephone number, including area code: (207)
288-3314
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 NO:
Indicate the number of shares outstanding of each of the
issuer's classes of common stock as of March 31, 1998:
Common Stock: 1,821,807
TABLE OF CONTENTS
Financial Information Page
Item 1. Financial Statements
Consolidated Balance Sheets 3
December 31, 1997 and March 31, 1998
Consolidated Statements of Earnings 4
Three months ended March 31, 1997 and 1998
Consolidated Statements of Changes in 5
Stockholders' Equity
Three months ended March 31, 1997 and 1998
Consolidated Statement of Cash Flows 6-7
Three months ended March 31, 1997 and 1998
Rate Volume Analysis 8
Three months ended March 31, 1997 and 1998
Notes to Financial Statements 9-11
Item II. Management's Discussion and Analysis of 12-
Financial 16
Condition and Results of
Operations
Signature Page 17
BAR HARBOR BANKSHARES AND SUBSIDIARY
CONSOLIDATED STATEMENT OF FINANCIAL CONDITION
MARCH 31, 1997 AND 1998
(in thousands, except number of shares and per share data)
(Unaudited)
<TABLE>
<CAPTION>
March March 31,
31, 1998 1997
<S> <C> <C>
ASSETS
Cash and Due from Banks $8,787 $7,537
Federal Funds Sold 0 0
Securities Available for Sale 17,343 14,608
Securities Held to Maturity (Market
Value 90,093 85,351
$90,830 in 1998 and $86,248 in
1997)
Other Securities 6,050 6,012
Loans Held for Sale 620 365
Loans, net of allowance for
possible loan
losses of $4,749 in 1998 and 211,365 212,396
$4,743
in 1997
Premises and Equipment 7,581 7,658
Other Assets 9,177 8,799
Total Assets $351,016 $342,726
LIABILITIES AND STOCKHOLDERS' EQUITY
LIABILITIES
Deposits
Demand Deposits $34,793 $36,838
NOW Accounts 39,996 39,536
Savings Deposits 51,415 53,378
Time Deposits 118,889 122,152
Total Deposits 245,093 251,903
Securities sold under Repurchase
Agreements 4,337 4,474
Advances from Federal Home Loan 52,967 39,160
Bank
Other Liabilities 5,049 4,727
Total Liabilities 307,445 300,264
Commitments and Contingent Liabilities
Capital Stock, par value $2
Authorized 10,000,000 shares
Issued 1,821,807 in 1998 and
1,820,583 in 1997 3,644 3,641
Surplus 7,645 7,574
Retained Earnings 33,635 32,562
Net unrealized appreciation on
securities (13) 24
available for sale, net of tax
Less: Cost of 100,000 shares of
Treasury Stock (1,340) (1,340)
TOTAL STOCKHOLDERS' EQUITY 43,571 42,461
TOTAL LIIABILITIES AND STOCKHOLDERS' $351,016 $342,726
EQUITY
</TABLE>
The accompanying notes are an integral part of these
consolidated financial statements.
BAR HARBOR BANKSHARES AND SUBSIDIARY
CONSOLIDATED STATEMENT OF EARNINGS
(in thousands, except number of shares and per share data)
(UNAUDITED)
<TABLE>
<CAPTION>
THREE THREE
MONTHS MONTHS
ENDING ENDING
3/31/98 3/31/97
<S> <C> <C>
Interest & Fees on Loans $5,059 $5,026
Interest and Dividends on
Investment Securities:
Taxable Interest Income 1,629 1,596
Non-taxable Interest Income 124 180
Dividends 100 96
Federal Funds Sold 15 9
Total Interest Income 6,928 6,907
Interest on Deposits 2,142 2,139
Interest on Borrowings 690 726
Total Interest Expense 2,832 2,865
Net Interest Income 4,096 4,042
Provision for Loan Losses 84 180
Net Interest Income after
Provision for Loan Losses 4,012 3,862
Other Income 1,126 1,027
Investment Securities Gains 57 (56)
(Losses)
Other Expenses:
Salaries & Employee Benefits 1,491 1,460
Other 1,307 1,055
Income Before Income Taxes 2,396 2,318
Income Tax Expense 772 744
Net Income 1,624 1,575
PER COMMON SHAE DATA, BASED ON
1,721,807 shares for 1998,
AND 1,720,583 shares for 1997 $0.94 $0.92
1,718,237 for 1996
Dividends Per Share $0.32 $0.28
The accompanying notes are an integral part of these
consolidated
financial statements
</TABLE>
BAR HARBOR BANKSHARES AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
QUARTERS ENDED MARCH 31, 1997 AND 1998
(in thousands, except number of shares and per share data)
(UNAUDITED)
<TABLE>
<CAPTION>
ACCUMULATE
D OTHER
COMPRE- NET
CAPITA RETAINE HENSIVE TREASURY STOCKHOLDERS
L SUIRPL D INCOME STOCK '
STOCK US EARNING EQUITY
S
<S> <C> <C> <C> <C> <C> <C>
Balance, 12/31/96 $3,636 $7,489 $28,205 ($103) ($1,340) $37,887
Net Earnings 1,575 $1,575
Other
comprehensive
income, net of tax
Unrealized
gains/losses on ($161)
securities
Other
Comprehensive (161) ($161)
income
Comprehensive $1,414
Income
Cash dividends
declared ($0.28
per share) ($482) ($482)
Sale of Stock
(2,346 shares) 5 85 $90
Balance, 3/31/97 $3,641 $7,574 $29,298 ($264) ($1,340) $38,908
Balance, 12/31/96 $ 3,641 $ 7,574 $32,652 24 ($1,340) $42,461
Net Earnings 1,624 $1,624
Other
comprehensive
income, net of tax
Unrealized
gains/losses on ($37)
securities
Other
comprehensive (37) ($37)
income
Comprehensive $1,587
Income
Cash dividends
declared ($0.32
per share) (551) ($551)
Sale of Stock
(1,224 shares) 2 71 $73
Balance, 3/31/98 $3,644 $7,645 $33,635 ($13) ($1,340) $43,571
The accompanying notes are an integral part of these consolidated financial
statements.
</TABLE>
BAR HARBOR BANKSHARES AND SUBSIDIARY
COLSOLIDATED STATEMENT OF CASH FLOWS
(in thousands)
<TABLE>
<CAPTION>
MARCH MARCH
31, 31,
1998 1997
<S> <C> <C>
Cash Flows from Operating Activities:
Net Income $1,624 $1,575
Adjustments to reconcile net earnings
to net
cash provided by operating activities: 225 222
Depreciation
Provision for Loss Losses 84 180
Provision for Losses on Other Real
Estate 0 0
Owned
New Loans Originated for Sale (4,423) (925)
Proceeds from Sale of Mortgages
Held 4,210 861
for Sale
Gain on Sale of Mortgages
Originated (31) (30)
for Sale
Net Amortization of Bond Premium 49 23
(Gain) Loss on sale of premises and
equipment 0 0
Net Change in Other Assets (375) (335)
Net Change in Other Liabilities 322 530
Net Cash Provided by Operating 1,685 2,101
Activities
Cash Flows from Investing Activities:
Net decrease (increase) in Federal
Funds Sold 0 0
Purchases of Securities Held to
Maturity (17,121) (5,054)
Proceeds from Maturity and Principal
Paydowns 4,830 4,847
of Securities held to maturity
Proceeds from Call of Securities Held 7,500 175
to Maturity
Purchases of Securities Available for (4,000) (500)
Sale
Proceeds from Maturity and Principal
Paydowns 209 39
of available for sale
Proceeds from sale and calls of
securities available for sale 1,000 60
Net decrease (increase) in other
securities 0 0
Net Loans Made to Customers 915 (2,860)
Capital Expenditures (148) (346)
Proceeds from sale of other real
estate owned 0 0
Proceeds from Sale of Fixed Assets 0 0
Net Cash Used in Investing Activities (6,815) (3,639)
Cash Flows from Financing Activities:
Net Change in Savings, NOW and Demand (3,547) (7,683)
Deposits
Net Change in Time Deposits (3,263) 383
Net Change in securities sold under
Repurchase Agreements (137) (2,852)
Purchase of Advances from FHLB 18,500 3,000
Proceeds from FHLB (9,500) (5,000)
Net Change in Short Term Other 4,805 10,642
Borrowed Funds
Proceeds from Sale of Capital Stock 73 90
Payment of Dividends (551) (482)
Net Cash Provided by Financing 6,380 (1,903)
Activities
Net Increase (Decrease) in Cash and Cash 1,250 (3,441)
Equivalents
Cash and Cash Equivalents at Beginning of 7,537 13,298
Year
Cash and Cash Equivalents at End of $8,787 $9,857
Quarter
Supplemental Disclosures of Cash Flow
Information:
Cash Paid during the Year for:
Interest $2,877 $2,841
Income Taxes, Net of Refunds $50 $279
Non-Cash Transactions:;
Transfers from Loans to Real Estate
Owned $0 $0
(Other Assets)
Transfer of Securities from Held to
Maturity to Available for Sale $0 $0
The accompanying notes are an integral part of these
consolidated financial statements
</TABLE>
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 collar
amounts of the change in each.
YEAR-TO-DATE FIGURES AS OF MARCH 31, 1998
COMPARED TO MARCH 31, 1997
(in thousands, except number of shares
per share data)
INCREASES (DECREASES) DUE TO:
<TABLE>
<CAPTION>
VOLUME RATE NET
<S> <C> <C> <C>
Loans $104 ($71) $33
Taxable Securities 93 (56) 37
Tax Exempt Securities (70) 15 (55)
Federal Funds Sold and Money
Market Funds 5 1 6
TOTAL EARNING ASSETS $132 ($111 $21
)
Deposits 15 (12) 3
Borrowings (58) 22 (36)
Total Interest Bearing ($43) $10 ($33)
Liabilities
NET CHANGE IN INTEREST $175 ($121 $54
)
</TABLE>
YEAR-TO-DATE FIGURES AS OF MARCH 31, 1997
COMPARED TO MARCH 31, 1996
INCREASES (DECREASES) DUE TO:
<TABLE>
<CAPTION>
VOLUME RATE NET
<S> <C> <C> <C>
Loans $281 ($257 $24
)
Taxable Securities 75 64 138
Tax Exempt Securities (13) (3) (16)
Federal Funds Sold and Money
Market Funds 4 0 4
TOTAL EARNING ASSETS $347 $197 $150
Deposits (66) (103) (168)
Borrowings 212 4 216
Total Interest Bearing $147 ($99) $48
Liabilities
NET CHANGE IN INTEREST $200 ($98) $102
</TABLE>
NOTES TO FINANCIAL STATEMENTS DATED MARCH 31, 1998
(Tables presented in thousands)
1. Summary of interim financial statement adjustments.
The accompanying unaudited statements reflect all
adjustments (all of which are normal and recurring in nature)
which are, in the opinion of management, necessary to present
a fair statement of the results for the interim periods
presented. The financial statements should be read in
conjunction with the Consolidated Financial Statements and
related Notes included in the Bank's 1997 Annual Report.
Effect of recent accounting pronouncements:
During 1997, the Company adopted SFAS No. 125 and No.127
which relate to the accounting for transfers and servicing of
financial assets and extinguishment of certain liabilities.
The adoption of these standards did not have a material
effect on the financial statements.
The Financial Accounting Standards Board (FASB) issued the
following statements of financial accounting standards (SFAS)
during 1997:
SFAS No. 128 Earnings per share
SFAS No. 129 Disclosure of information about capital
structure
SFAS No. 130 Reporting comprehensive income
SFAS No. 131 Disclosure about Segments of an enterprise and
related information.
These four statements do not change the measurement or
recognition methods used in the financial statements but
rather deal with disclosure and presentation requirements.
At December 31, 1997, the Company adopted SFAS No. 128 which
specifies the computation and disclosure requirements for
earnings per share for entities with publicly held common
stock. The Company has no potential common stock and
therefore no diluted earnings per share.
At December 31, 1997, the Company adopted SFAS No. 129. This
statement has no effect on the Company's financial statements
as the capital disclosures meet the requirements of SFAS No.
129.
At March 31, 1998, the Company adopted SFAS No. 130.
Comprehensive income may be reviewed in the Statement of
Changes in Stockholders' Equity.
At March 31, 1998, the Company adopted SFAS No. 131. This
statement has no effect on the Company's financial
statements.
In February, 1998, the FASB issued SFAS No. 132, "Employers'
Disclosures about Pensions and Other Post Retirement
Benefits" effective for financial statements for the fiscal
year beginning after December 15, 1997. SFAS No. 132, which
supersedes the benefit disclosure requirements in FASB
Statements No's 87,88 and 106, requires entities to
standardize the disclosure requirements for pension and other
post retirement benefits to the extent practicable, requires
additional information on changes in the benefit obligations
and fair value of plan assets that will facilitate financial
analysis. The Company expects no material impact from
adopting SFAS No. 132.
<TABLE>
<CAPTION>
March 31, 1998
2. INVESTMENT SECURITIES CARRYING CARRYING
AVAILABLE FOR SALE VALUE VALUE
<S> <C> <C>
a: U. S. Treasury and other $16,813 $16,777
government agencies
b: Marketable equity 550 566
securities
Total Securities Available $17,363 $17,343
For Sale
HELD TO MATURITY:
a: U. S. Treasury and other $75,077 $75,604
government agencies
b: States of the U.S. and
other political subdivisions 7,647 7,860
c: Corporate bonds 7,369 7,366
Total Securities Held to $90,093 $90,830
Maturity
OTHER SECURITIES $6,050 $6,050
TOTAL SECURITIES $113,506 $114,223
</TABLE>
The Bank does not hold any securities for a single issuer
which exceed 10% of the Bank's stockholders' equity.
<TABLE>
<CAPTION>
March December
31, 1998 31, 1997
3. LOANS
<S> <C> <C>
a: Commercial, agricultural and $35,112 $33,897
other loans
b: Real Estate - Construction 8,277 7,925
c: Real Estate - Mortgage 156,055 158,649
d: Installment Loans 16,670 16,668
Total Loans $216,114 $217,139
</TABLE>
<TABLE>
<CAPTION>
4. CHANGES IN ALLOWANCE FOR March March
POSSIBLE LOAN LOSSES: 31, 31,
1998 1997
<S> <C> <C>
Balance, beginning January 1 $4,743 $4,293
Provision charged to income 84 180
Recoveries of amounts 33 26
charged
Losses charged to provision 111 133
Balance, ending March 31 $4,749 $4,366
Information regarding March Decembe
impaired loans: 31, r 31,
1998 1997
Average investment in $1,887 $2,045
impaired loans
Interest income recognized
on impaired loans including
interest income $131 $165
recognized on cash basis
Interest income recognized
on impaired loans on cash $131 $165
basis
Balance of impaired loans $1,887 $2,670
Less portion for which no
allowance for loan losses is 0 0
allowed
Portion of impaired loan
balance for which an $1,887 $2,670
allowance for credit losses
is allocated
Portion of allowance for
loan losses allocated to the $110 $104
impaired loan balance
</TABLE>
<TABLE>
<CAPTION>
5. CHANGES IN ALLOWANCE FOR OTHER
REAL ESTATE:
3/31/98 3/31/9 3/31/96
7
<S> <C> <C> <C>
Balance, beginning January $17 $23 $26
1
Provision charged to 0 0 (2)
income
Losses charged to 0 0 0
provision
Balance, ending March 31 $17 $23 $24
</TABLE>
6. The aggregate dollar amount of loans made to directors,
executive officers or principal holders of equity securities
as of March 31, 1998 and December 31, 1997 respectively were:
<TABLE>
<S> <C> <C>
Aggregate amount, beginning 1/1 $3,952 $3,807
New loans 692 1,693
Repayments 76 1,548
Aggregate amount, ending $4,568
3/31/98
Aggregate amount, ending $3,952
12/31/97
</TABLE>
<TABLE>
<CAPTION>
7. OTHER ASSETS March 31, December
1998 31, 1997
<S> <C> <C>
a: Interest earned but not paid on:
Loans $1,785 $1,437
Investments 906 1,041
b: Other Real Estate Owned 185 59
</TABLE>
8. INCOME TAXES:
Components of income tax expense for the period ended
March 31, 1998 are as follows:
<TABLE>
<S> <C>
Current
Federal $914
State 25
Deferred (167)
$772
</TABLE>
Actual tax expense differs from the expected tax expense
computed by applying the applicable federal corporate income
tax rate of 34% is as follows for the three months March 31,
1998:
<TABLE>
<S> <C>
Computed tax expense $793
Tax exempt interest (45)
Other 24
$772
</TABLE>
At March 31, 1998, items giving rise to the deferred
income tax assets and liabilities, using a tax rate of 34%,
are as follows:
<TABLE>
<CAPTION>
<S> <C> <C>
ASSET LIABILITY
Allowance for possible losses on
loans and real estate owned $1,452
Deferred and accrued employee 970
benefits
Deferred mortgage servicing 64
rights
Deferred loan origination fees 296
Securities losses not currently 15
deductible
Core deposit intangibles 57
Depreciation 0 65
Other 9
$2,799 $129
</TABLE>
No valuation allowance is deemed necessary for the deferred
tax asset.
<TABLE>
<CAPTION>
9. INCOME TAX EXPENSE March 31, March 31,
1998 1997
<S> <C> <C>
Federal Income Tax $747 $718
State Income Tax 25 26
</TABLE>
MANAGEMENT'S DISCUSSION AND ANALYSIS
The following is the review of the results of operations
for March 31, 1998, as compared to March 31, 1997, showing
earnings with a 3% increase, and changes in the balance sheet
of $6 million over last year. Total loans remained constant
over the past twelve months, with the balance within the
portfolio between consumer and commercial loans also
remaining constant. The investment portfolio grew by $5.5 million
or 5% over the past year. Purchase in the investment portfolio
totaled in excess of $48.7 million; however, maturities and principal
paydowns from the Bank's mortgage backed securities
portfolios were $42.6 million for the same period. Purchases
were made of US government-sponsored debentures or mortgage
backed pools. Many of the debentures are callable securities
and some have supported the bank's earnings in lieu of
selling fed funds. Unrealized gains and losses gained
strength with the reduction of the unrealized loss of
$265,000 to $13,000. This shift is indicative of the current
economic marketplace. This is also visible in the total
market value of the portfolio that is currently $718,000
greater than book value.
In the loan area, the Bank continues to experience
strong competition from other financial institutions within
its marketplace. Within the past twelve months a local bank
has opened a branch in the Bank's home
office community and strongest market area (Mount Desert
Island), and a second local bank has announced the opening of
a branch also on Mount Desert Island. Bar Harbor Banking and
Trust Company's strength lies in the relationships built with
its customers and the ability to offer prompt service in
response to their needs.
Liquidity is measured by the Bank's ability to meet cash
needs at a reasonable cost or minimum loss to the Bank.
Liquidity management involves the ability to meet cash flow
requirements of its customers, which may come from depositors
withdrawing funds or borrowers requiring funds to meet credit
needs. Without adequate liquidity management, the Bank would
not be able to meet the needs of the individuals and
communities it serves. The Bank utilizes a Basic
Surplus/Deficit model to measure its liquidity over a 30-day
and a 90-day time horizon. The relationship between liquid
assets and short-term liabilities that are vulnerable to non-
replacement within a 30-day period are examined. The Bank's
Policy is to maintain its liquidity position at a minimum of
5% of total assets. The Bank has maintained liquidity in its
balance sheet in excess of 15% for the past twelve months.
Liquidity as measured by the Basic Surplus/Deficit model was
19.2% as of March 31, 1998 for the 30-day horizon and 19.8%
for the 90-day horizon.
How changes in the balance sheet have affected the Bank
may be viewed through the earnings statement for the periods
ending March 31, 1997 and 1998. With a relatively flat
change in the balance sheet from year to year, earnings grew
by $50,000. In comparison, the Bank experienced a 6% growth
in the balance sheet in 1997 when compared to 1996, with
earnings increasing by $52,000.
Rates, volumes and the mix of earning assets and
interest bearing liabilities affect interest income. For the
first three months of 1998, net interest income increased by
$54,000 and was a factor of the growth in the balance sheet
coming from investments, with yields earning less than loans,
and savings realized in funding costs. Interest earned on
loans increased by more than $100,000 but was reduced by
$70,000 due to decreases in interest rates charged on
portions of the loan portfolio. Overall, the loan portfolio
yield dropped by 23 basis points. Interest on investments
increased due to volumes and partially due to a shift from
tax exempt income to taxable income as maturing tax exempt
securities are being replaced by taxable securities. The
entire portfolio is earning 6.8% and only 8 basis points less
than it was a year ago. Interest bearing liabilities
decreased by less than one-half of 1%, but the cost of those
liabilities decreased by more than 1%. For the past several
years, the Bank has maintained its cost of deposits by not
increasing its interest rates on savings, NOW and money
market accounts. The overall cost of liabilities went down
by 17 basis points between March 31, 1998 and March 31, 1997.
For the first three months of 1997, net interest income
increased by $100,000 and was attributable to the following.
The loan portfolio yielded the Bank interest income of
$280,000 more than in 1996 through increases in volumes, but
experienced offsetting decreases in interest income totaling
$257,000 due to decreases in rates, leaving the growth in
loan interest income virtually flat over that twelve month
period. Yields on loans decreased by 21 basis points from
March 1996 to March of 1997.
Although the investment portfolio did not grow between
the years ended March 31, 1996 and 1997, the portfolio
changed as securities matured or were called. Total
investment income grew by $126,000, with increases in both
rates and volumes on those securities that are taxable
($142,000) and decreasing in both rates and volumes on tax
exempt securities owned by the bank ($16,000). The yield on
the entire securities portfolio went up just slightly (6
basis point) between March 31, 1996 and March 31, 1997
At March 31, 1997, the Bank's cost of deposits had
decreased by $168,000, $65,000 due to reductions in volumes
of certificates of deposit and $102,000 due to reductions in
rates. The cost of borrowings increased by $216,000, which
is comprised of $212,000 due to increased volumes and only
$4,000 increase, attributed to rate increases. The cost of
purchased funds increased by 8.5 basis points between March
31, 1996 and 1997.
The Bank's position with regard to interest rate
sensitivity consists of the matching of its assets and
liabilities for repricing within a year. There is some
exposure to rising rates out beyond a year with the Bank
having almost $21 million invested in callable securities
with final maturities of ten years or less that potentially
would not be called. The gap analysis in today's interest
rate environment shows the Bank with approximately $28
million more liabilities than assets that would be repricable
within twelve months. If rates were to drop by 200 basis
points, simulations based on a static balance sheet indicate
that the Bank's net interest income could rise by
approximately $193,000 during the first year of the drop,
while increasing its income in the second year by $135,000.
If rates were to rise by 200 basis points, the Bank could
experience a drop in interest income in the first year by
$77,000, and drop additional interest earnings in the second
year by $400,000.
The Bank has maintained its reserve for possible loan
losses at better than 2% of total loans outstanding for a
number of years, with a ratio of 2.2% as of March 31, 1998.
The Bank reviews its allocation to the reserve on a monthly
basis and funds the reserve as deemed necessary. This review
includes a provision for specific credits, provisions due to
historic loan losses by loan types and reserves reflecting
industry concentrations, credit concentrations, current
economic conditions and underwriting standards. In 1995, the
Bank added a provision for impaired loans in accordance with
FASB 114/118. Reference is made to the notes included in
this filing that outlines the impaired loan figures. Losses
in the loan portfolio are estimated at $500,000 for 1998,
with first quarter 1998 charge offs totaling $110,000
compared to $133,000 during the first quarter of 1997. The
amounts represented below are the total dollars past due for
the first three months of each year listed.
<TABLE>
<S> <C> <C> <C>
Category 1998 1997 1996
90-day past due and still $1,102,919 $1,302,437 $1,247,941
accruing
Non-accruing $3,438,992 $3,207,492 $3,289,461
$4,541,911 $4,509,929 $4,537,402
Gross loans $216,113,8 $214,687,01 $201,502,68
53 6 2
Percentage of gross loans 2.10% 2.10% 2.25%
</TABLE>
With earnings as of March 31, 1998 $50,000 ahead of
March 31, 1997, the following is a review of non-interest
income and non-interest expense. As stated earlier, the Bank
has maintained a reserve for possible loan losses in excess
of 2% when compared to total loans for a number of years.
With loan growth and net charged off loans slowing down, the
Bank is able to reduce the amount it provides for the
reserve. As of March 31, 1998, the provision for possible
loan losses is $96,000 less than a year before. Other income
is almost $100,000 ahead of last year's first quarter income
and includes the Trust Department income, which is $52,000
ahead of last year's income. No other major category in
other income can be singled out for substantial growth from
year to year.
Other non-interest expense is $252,000 more as of March
31, 1998 when compared to the same period for 1997. The
introduction of the bank's call center, interactive voice
response system and several loan promotions have created
media opportunities for the bank. Additionally, the bank is
involved in several projects as of March 31, 1998, including
the review of banking software. Another expense in 1998,
which was not found in 1997, includes the development of the
bank's Year 2000 assessment and action plan. The due
diligence process will be in place by June 30, 1998 as
recommended by the FDIC. The assessment of customers'
preparedness and the resulting impact on the institution
should be substantially completed by September 30, 1998.
Testing of parts of the bank's hardware and software has
already begun.
In reviewing non-interest income and non-
interest expense for the period between March 31, 1996 and
1997, there are no categories showing significant changes
with dollars exceeding $60,000 and more than 4% for any major
category.
The Bank's capital to asset ratio is 12.4% and the Bank
far exceeds the required risk based capital ratio of 8% with
its Tier 1 ratio of 20.3% and total capital ratio of 21.5% or
additional capital of $28.7 million. These ratios compare
favorably to March 31, 1997 when the capital to average asset
ratio was 11.6%, Tier 1 and total capital ratios compared to
risk weighted assets were 18.3% and 19.5% respectively.
Pursuant to the requirements of the Securities Exchange Act
of 1934, the registrant has duly caused this report to be
signed on its behalf by the undersigned thereunto duly
authorized.
BAR HARBOR BANKSHARES
Date: May 15, 1998 Sheldon F. Goldthwait, Jr.
Chief Executive Officer
Date: May 15, 1998 Virginia M. Vendrell
Treasurer and
Chief Financial Officer
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