BHB Bar Harbor Bankshares

Bar Harbor Bankshares (NYSE American: BHB) reported record GAAP earnings in 2017 of $26.0 million, or $1.70 per share, compared with $14.9 million in 2016, or $1.63 per share. Core earnings in 2017 increased to $32.1 million, or $2.10 per share, from $13.9 million in 2016, or $1.52 per share. Earnings grew during 2017 due to business expansion, investments in talent and increased operational efficiencies.

Fourth quarter GAAP earnings were $6.6 million, or 43 cents per share. Core earnings totaled $9.0 million, or 58 cents per share. GAAP earnings included a $4.0 million income tax charge due to the revaluation of net deferred tax assets required by the Tax Cuts and Jobs Act of 2017 (“TCJA”). In addition, there was a net benefit of $2.6 million, which included the sale of the insurance subsidiary offset by other one-time charges.

FOURTH QUARTER FINANCIAL HIGHLIGHTS (comparisons are to prior quarter unless otherwise stated):

• 1.02% core return on assets (non-GAAP measure)
• 21% annualized commercial loan growth
• 13% annualized total deposit growth
• 53% efficiency ratio (non-GAAP measure)
• 9.97% core return on equity (non-GAAP measure)

President and Chief Executive Officer, Curtis C. Simard stated, “We delivered a strong finish to all of our key performance indicators within mere quarters of doubling our asset size and successfully completing a system conversion. Based on our momentum, we are well ahead of the earn back period from the acquisition and are poised to deliver another great year as we hold firm to our model of balancing growth and earnings.”

Mr. Simard went on to say, “Management continues to evolve as we attract seasoned, proven executives and senior managers to join our team. Earlier this week we announced a new EVP, Director of Retail Delivery, Marion Colombo, who will be joining the bank to lead our retail franchise.” Mr. Simard commented, “Simply put, retail branch activity is at the very heart of our business. Finding a long-term proven leader like Marion, who comes with over twenty-nine years of retail experience in many diverse markets, is a significant indication of our commitment to being a true community bank with a growing retail franchise.”

Excluding the impact of TCJA and other one-time adjustments, our fourth quarter performance peaked for the year with a return on assets of 1.02% and a return on equity of 9.97%. The tangible equity to tangible asset ratio (a non-GAAP measure) decreased to 7.12% at the end of the fourth quarter primarily due to the impact of the TCJA adjustment. We expect this reduction will be earned back from related tax savings within the first half of 2018 with opportunities for further expansion thereafter.

Mr. Simard further stated, “Our Commercial teams continue to penetrate their markets as is evidenced by another strong quarter of 21% loan growth led by commercial and industrial loans at 34%. Asset quality metrics remain strong while charge-offs are at historical lows. We also expanded our Treasury Management Services platform during the fourth quarter, which was rolled out in January 2018. Given the talent we have hired to manage this business and the enhanced capabilities, we expect this to be a significant contributor in 2018 in terms of both fee revenue and deposit gathering.”

Mr. Simard concluded, “As we enter 2018, we are positioned to continue with the momentum seen during the second half of 2017 while executing on our strategy to provide our customers with the best customer service. We remain committed to our communities and will seek opportunities to expand our branch model as a true community bank in 2018.”

RESULTS OF OPERATIONSGAAP earnings decreased to $6.6 million in the fourth quarter from $8.6 million in the third quarter. The decrease was primarily due to the TCJA charge offset by other one-time adjustments including the sale of our insurance subsidiary. Core earnings (a non-GAAP measure) increased to $9.0 million in the fourth quarter compared to $8.8 million in the prior quarter. Yields on loans decreased 1 basis point to 4.12% in the fourth quarter due to lower purchased loan accretion as compared to the third quarter. Excluding the impact of purchase loan accretion, loan yield expanded 2 basis points to 3.92% in the fourth quarter from 3.90% in the third quarter. The loan yield benefited from a $29 million average balance increase in fixed rate commercial real estate products. Security yields decreased in the fourth quarter as a result of accelerated premium amortization. The cost of interest-bearing deposits increased as a result of both interest rate hikes and an extension in maturities as we manage our overall interest rate risk. The Company’s overall cost of funds remained relatively flat for the quarter as the 13% growth in deposits offset more expensive alternative borrowing costs.

Total non-interest income was $6.5 million in the fourth quarter compared to $7.0 million in the prior quarter. The decrease is primarily due to seasonality effects on customer service fees and the curtailment of revenue with the sale of our insurance subsidiary in October 2017. As previously announced, the sale of the insurance subsidiary was part of a strategic decision to redeploy capital and management resources to core businesses. The sale had no significant impact to core net income as the contribution margin was neutral. Trust and management fee income during the fourth quarter remained flat with the third quarter. Overall, the unfavorable variability of transactional fees during 2017 was offset by the growth of assets under management to $445 million at the end of 2017 from $425 million at the end of 2016. Non-interest expense excluding acquisition, conversion and other one-time adjustments decreased $362 thousand in the fourth quarter compared to the linked quarter. The efficiency ratio was 53% for the quarter compared to 54% in the third quarter, which reflects further disciplined cost control.

FINANCIAL CONDITIONTotal assets grew $89 million during the fourth quarter to $3.6 billion driven by total loan growth of $57 million, or 9% on an annualized basis. The majority of the loan growth was led by the commercial portfolio, which had an annualized growth rate of 21%. Total loan growth was funded by growth in deposits, which increased $77 million, or 13% on an annualized basis. Non-accruing loans increased by $7.5 million during the quarter primarily due to the deterioration of one specific commercial relationship, which is expected to be settled at the full contractual obligation. Asset quality metrics remain strong with charge-offs at historical lows and an allowance for credit losses to total loans ratio of 0.50%. The Company's book value per share increased to $22.96 from $22.90 in the third quarter while tangible book value (a non-GAAP measure) increased to $15.94 from $15.84.

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

FORWARD LOOKING STATEMENTSThis document contains forward-looking statements as defined in the Private Securities Litigation Reform Act of 1995. There are several factors that could cause actual results to differ significantly from expectations described in the forward-looking statements. For a discussion of such factors, please see the Company’s most recent reports on Forms 10-K and 10-Q filed with the Securities and Exchange Commission and available on the SEC’s website at www.sec.gov. The Company does not undertake any obligation to update forward-looking statements.

NON-GAAP FINANCIAL MEASURESThis document contains certain non-GAAP financial measures in addition to results presented in accordance with Generally Accepted Accounting Principles (“GAAP”). These non-GAAP measures provide supplemental perspectives on operating results, performance trends, and financial condition. They are not a substitute for GAAP measures; they should be read and used in conjunction with the Company’s GAAP financial information. A reconciliation of non-GAAP financial measures to GAAP measures is included beginning on page J in the accompanying financial tables. In all cases, it should be understood that non-GAAP per share measures do not depict amounts that accrue directly to the benefit of shareholders.

The Company utilizes the non-GAAP measure of core earnings in evaluating operating trends, including components for core revenue and expense. These measures exclude items which the Company does not view as related to its normalized operations. These items include securities gains/losses, acquisition costs, restructuring costs, and systems conversion costs. Non-core adjustments are presented net of an adjustment for income tax expense. This adjustment is determined as the difference between the GAAP tax rate and the effective tax rate applicable to core income. The efficiency ratio is adjusted for non-core revenue and expense items and for tax preference items. The Company also calculates measures related to tangible equity, which adjust equity (and assets where applicable) to exclude intangible assets due to the importance of these measures to the investment community. Charges related to the acquisition of Lake Sunapee Bank Group consist primarily of severance and retention cost, systems conversion and integration costs, and professional fees. The Company’s disclosure of organic growth of loans in 2017 is also adjusted for the Lake Sunapee Bank Group acquisition.

        TABLE

INDEX

    CONSOLIDATED FINANCIAL SCHEDULES (UNAUDITED)

A

   

Selected Financial Highlights

B

Footnotes to Selected Financial Highlights

C

Balance Sheets

D

Loan and Deposit Analysis

E

Statements of Income

F

Statements of Income (Five Quarter Trend)

G

Average Yields and Costs

H

Average Balances

I

Asset Quality Analysis

J

Reconciliation of Non-GAAP Financial Measures (Five Quarter Trend) and Supplementary Data

  BAR HARBOR BANKSHARES SELECTED FINANCIAL HIGHLIGHTS - UNAUDITED     At or for the Quarters Ended (1)(3)   Dec 31,2017     Sep 30,2017     Jun 30,2017     Mar 31,2017     Dec 31,2016 PER SHARE DATA Net earnings, diluted $ 0.43 $ 0.56 $ 0.42 $ 0.29 $ 0.28 Core earnings, diluted (1) (2) 0.58 0.57 0.52 0.43 0.41 Total book value 22.96 22.90 22.53 22.17 17.19 Tangible book value (2) 15.94 15.84 15.44 15.07 16.61 Market price at period end 27.01 31.36 30.82 33.08 31.55 Dividends 0.19 0.19 0.19 0.19 0.19   PERFORMANCE RATIOS Return on assets 0.75 % 0.99 % 0.76 % 0.50 % 0.59 % Core return on assets (1) (2) 1.02 1.01 0.94 0.74 0.87 Return on equity 7.35 9.67 7.55 5.34 6.36 Core return on equity (1) (2) 9.97 9.90 9.32 7.88 9.34 Core return on tangible equity (1) (2) 14.53 14.51 13.78 12.24 9.66 Net interest margin, fully taxable equivalent (FTE) (4) 3.04 3.06 3.16 3.11 2.89 Net interest margin (FTE), excluding purchased loan accretion (4) 2.93 2.93 3.02 3.01 2.89 Efficiency ratio (2) 53.09 53.59 54.64 61.62 59.24   GROWTH (Year-to-date, annualized) Total commercial loans (2) 23.8 % 20.5 % 7.2 % 20.0 % 14.9 % Total loans (2) 13.1 12.2 7.0 13.3 15.0 Total deposits (2) 14.4 10.6 2.3 (10.2 ) 6.5   FINANCIAL DATA (In millions) Total assets $ 3,565 $ 3,476 $ 3,503 $ 3,427 $ 1,755 Total earning assets 3,241 3,184 3,139 3,139 1,683 Total investments 755 756 763 767 554 Total loans 2,486 2,429 2,377 2,372 1,129 Allowance for loan losses 12 12 11 11 10 Total goodwill and intangible assets 108 109 109 109 5 Total deposits 2,352 2,275 2,213 2,174 1,050 Total shareholders' equity 355 353 347 341 157 Net income 7 9 7 4 3 Core income (2) 9 9 8 6 4   ASSET QUALITY AND CONDITION RATIOS Net charge-offs (current quarter annualized)/average loans (5) 0.04 % 0.01 % 0.03 % 0.06 % (0.03 )% Allowance for loan losses/total loans (5) 0.50 0.49 0.48 0.46 0.92 Loans/deposits 106 107 107 109 108 Shareholders' equity to total assets 9.95 10.17 9.91 9.95 8.93 Tangible shareholders' equity to tangible assets (2)     7.12       7.26       7.01       6.99       8.65  

(1) Adjusted measurements are non-GAAP financial measures that are adjusted to exclude net non-operating charges primarily related to acquisitions, and gain on sale of securities. Refer to the Reconciliation of Non-GAAP Financial Measures in table J for additional information.(2) Non-GAAP financial measure.(3) All performance ratios are annualized and are based on average balance sheet amounts, where applicable.(4) Fully taxable equivalent considers the impact of tax advantaged investment securities and loans.(5) Generally accepted accounting principles require that loans acquired in a business combination be recorded at fair value, whereas loans from business activities are recorded at cost. The fair value of loans acquired in a business combination includes expected loan losses, and there is no loan loss allowance recorded for these loans at the time of acquisition. Accordingly, the ratio of the loan loss allowance to total loans is reduced as a result of the existence of such loans, and this measure is not directly comparable to prior periods. Similarly, net loan charge-offs are normally reduced for loans acquired in a business combination since these loans are recorded net of expected loan losses. Therefore, the ratio of net loan charge-offs to average loans is reduced as a result of the existence of such loans, and this measure is not directly comparable to prior periods. Other institutions may have loans acquired in a business combination, and therefore there may be no direct comparability of these ratios between and among other institutions.

BAR HARBOR BANKSHARES CONSOLIDATED BALANCE SHEETS - UNAUDITED                     (In thousands) Dec 31, 2017 Sep 30, 2017 Jun 30, 2017 Mar 31, 2017 Dec 31, 2016 Assets Cash and due from banks $ 34,262 $ 31,223 $ 28,112 $ 29,245 $ 8,219 Interest-bearing deposit with the Federal Reserve Bank 56,423   17,501   90,881   12,781   220   Total cash and cash equivalents 90,685 48,724 118,993 42,026 8,439 Securities available for sale, at fair value 717,242 718,459 718,364 724,224 528,856 Federal Home Loan Bank stock 38,105   37,107   44,168   42,404   25,331   Total securities 755,347 755,566 762,532 766,628 554,187 Commercial real estate 826,746 793,572 738,584 779,635 418,119 Commercial and industrial 379,423 357,072 350,002 309,995 151,240 Residential real estate 1,155,682 1,152,628 1,160,832 1,155,436 506,612 Consumer 123,762   125,590   127,229   127,370   53,093   Total loans 2,485,613 2,428,862 2,376,647 2,372,436 1,129,064 Less: Allowance for loan losses (12,325 ) (11,950 ) (11,442 ) (10,884 ) (10,419 ) Net loans 2,473,288 2,416,912 2,365,205 2,361,552 1,118,645   Premises and equipment, net 47,708 48,309 48,590 45,581 23,419 Other real estate owned 122 122 122 363 90 Goodwill 100,085 100,255 100,255 99,901 4,935 Other intangible assets 8,383 8,811 9,047 9,282 377 Cash surrender value of bank-owned life insurance 57,997 57,613 57,233 56,627 24,450 Deferred tax asset, net 7,180 13,052 13,211 14,158 5,990 Other assets 24,389   26,368   28,223   31,365   14,817   Total assets $ 3,565,184   $ 3,475,732   $ 3,503,411   $ 3,427,483   $ 1,755,349     Liabilities and shareholders' equity Demand and other non-interest bearing deposits $ 349,055 $ 357,398 $ 332,339 $ 349,896 $ 98,856 NOW deposits 466,610 442,085 451,171 242,876 175,150 Savings deposits 364,799 373,118 360,306 511,091 77,623 Money market deposits 305,275 300,398 285,312 349,491 282,234 Time deposits 866,346   802,110   783,876   720,899   416,437   Total deposits 2,352,085 2,275,109 2,213,004 2,174,253 1,050,300   Senior borrowings 786,688 775,582 872,021 842,150 531,596 Subordinated borrowings 43,033   43,048   43,063   43,078   5,000   Total borrowings 829,721 818,630 915,084 885,228 536,596   Other liabilities 28,737   28,534   28,201   26,954   11,713   Total liabilities 3,210,543 3,122,273 3,156,289 3,086,435 1,598,609   Total common shareholders' equity 354,641   353,459   347,122   341,048   156,740   Total liabilities and shareholders' equity $ 3,565,184   $ 3,475,732   $ 3,503,411   $ 3,427,483   $ 1,755,349     Net shares outstanding (2)     15,443       15,432       15,407       15,385       9,116  

(1) The Company completed the acquisition of Lake Sunapee Bank Group on January 13, 2017.(2) Adjusted for 3-for-2 stock-split completed in March 2017.

BAR HARBOR BANKSHARES CONSOLIDATED LOAN & DEPOSIT ANALYSIS - UNAUDITED  

LOAN ANALYSIS

                            Organic Annualized Growth % (1) December 31, 2017 (in thousands) Dec 31, 2017 Sep 30, 2017 Jun 30, 2017 Mar 31, 2017 Acquired Lake Sunapee Bank (2) Dec 31, 2016 Quarter End     Year to Date Commercial real estate $ 826,746 $ 793,572 $ 738,584 $ 779,635 $ 345,586 $ 418,119 16.7 % 15.1 % Commercial and industrial 293,707   270,759   269,960   236,526   89,259   135,564   33.9   50.8   Total commercial loans 1,120,453 1,064,331 1,008,544 1,016,161 434,845 553,683 21.1 23.8 Residential real estate 1,155,682 1,152,628 1,160,832 1,155,436 652,255 506,612 1.1 (0.6 ) Consumer 123,762 125,590 127,229 127,370 76,489 53,093 (5.8 ) (11.0 ) Tax exempt and other 85,716   86,313   80,042   73,469   44,611   15,676   (2.8 ) 162.2   Total loans     $ 2,485,613       $ 2,428,862       $ 2,376,647       $ 2,372,436       $ 1,208,200       $ 1,129,064       9.3 %     13.1 %

(1) Non-GAAP financial measure.(2) Acquired Lake Sunapee Bank loans are as of January 13, 2017.

DEPOSIT ANALYSIS

                            Organic Annualized Growth % (1) December 31, 2017 (in thousands) Dec 31, 2017 Sep 30, 2017 Jun 30, 2017 Mar 31, 2017 Acquired Lake Sunapee Bank (2) Dec 31, 2016 Quarter End     Year to Date Demand $ 349,055 $ 357,398 $ 332,339 $ 349,896 $ 248,051 $ 98,856 (9.3 )% 2.2 % NOW 466,610 442,085 451,171 242,876 39,999 175,150 22.2 143.6 Money market 305,275 300,398 285,312 349,491 103,142 282,234 6.5 (28.4 ) Savings 364,799   373,118   360,306   511,091   467,735   77,623   (8.9 ) (232.6 ) Total non-maturity deposits 1,485,739 1,472,999 1,429,128 1,453,354 858,927 633,863 3.5 (1.1 ) Total time deposits 866,346   802,110   783,876   720,899   291,684   416,437   32.0   38.0   Total deposits     $ 2,352,085       $ 2,275,109       $ 2,213,004       $ 2,174,253       $ 1,150,611       $ 1,050,300       13.5 %     14.4 %

(1) Non-GAAP financial measure.(2) Acquired Lake Sunapee Bank deposits are as of January 13, 2017.

BAR HARBOR BANKSHARES CONSOLIDATED STATEMENTS OF INCOME - UNAUDITED                 Three Months Ended December 31, Twelve Months Ended December 31, (In thousands, except per share data) 2017 2016 2017 2016 Interest and dividend income Loans $ 24,895 $ 11,026 $ 94,976 $ 41,653 Securities and other 5,261   3,820   21,093   15,834 Total interest and dividend income 30,156 14,846 116,069 57,487 Interest expense Deposits 3,381 1,768 11,307 6,699 Borrowings 3,279   1,421   12,607   5,414 Total interest expense 6,660   3,189   23,914   12,113 Net interest income 23,496   11,657   92,155   45,374 Provision for loan losses 597 225 2,788 979 Net interest income after provision for loan losses 22,899   11,432   89,367   44,395 Non-interest income Trust and investment management fee income 3,042 951 12,270 3,829 Insurance and brokerage service income 77 — 1,097 — Customer service fees 2,495 649 8,484 2,648 Gain on sales of securities, net — 9 19 4,498 Bank-owned life insurance income 374 163 1,539 703 Other income 530   263   2,573   671 Total non-interest income 6,518   2,035   25,982   12,349 Non-interest expense Salaries and employee benefits 9,524 5,127 39,589 19,775 Occupancy and equipment 3,060 1,144 11,633 4,610 Loss on sales of premises and equipment, net — 32 94 248 Outside services 780 337 3,000 767 Professional services 298 405 1,655 1,489 Communication 249 94 1,289 586 Amortization of intangible assets 186 1 720 26 Acquisition, conversion and other expenses (2,615 ) 1,838 3,302 2,650 Other expenses 2,781   1,479   11,444   5,784 Total non-interest expense 14,263   10,457   72,726   35,935   Income before income taxes 15,154 3,010 42,623 20,809 Income tax expense 8,545   426   16,630   5,876 Net income     $ 6,609       $ 2,584       $ 25,993       $ 14,933   Earnings per share: Basic (1) $ 0.43 $ 0.28 $ 1.71 $ 1.65 Diluted (1) 0.43 0.28 1.70 1.63   Weighted average shares outstanding: Basic (1) 15,437 9,096 15,184 9,069 Diluted (1)     15,537       9,215       15,290       9,143

(1) Adjusted for 3-for-2 stock-split completed in March 2017.

BAR HARBOR BANKSHARES CONSOLIDATED STATEMENTS OF INCOME (5 Quarter Trend) - UNAUDITED                     (In thousands, except per share data) Dec 31,2017 Sep 30,2017 Jun 30,2017 Mar 31,2017 Dec 31,2016 Interest and dividend income Loans $ 24,895 $ 24,661 $ 24,226 $ 21,194 $ 11,026 Securities and other 5,261   5,402   5,439   4,991   3,820 Total interest and dividend income 30,156 30,063 29,665 26,185 14,846 Interest expense Deposits 3,381 3,177 2,539 2,210 1,768 Borrowings 3,279   3,408   3,317   2,603   1,421 Total interest expense 6,660   6,585   5,856   4,813   3,189 Net interest income 23,496 23,478 23,809 21,372 11,657 Provision for loan losses 597   660   736   795   225 Net interest income after provision for loan losses 22,899   22,818   23,073   20,577   11,432 Non-interest income Trust and investment management fee income 3,042 3,040 3,324 2,864 951 Insurance and brokerage service income 77 329 327 364 — Customer service fees 2,495 2,638 1,991 1,360 649 Gain on sales of securities, net — 19 — — 9 Bank-owned life insurance income 374 380 386 399 163 Other income 530   554   530   959   263 Total non-interest income 6,518   6,960   6,558   5,946   2,035 Non-interest expense Salaries and employee benefits 9,524 9,617 10,127 10,321 5,127 Occupancy and equipment 3,060 2,894 3,013 2,666 1,144 Loss on sales of premises and equipment,net — (1 ) — 95 32 Outside services 780 907 716 597 337 Professional services 298 428 489 440 405 Communication 249 382 290 368 94 Amortization of intangible assets 186 189 188 157 1 Acquisition, conversion and other expenses (2,615 ) 346 2,459 3,112 1,838 Other expenses 2,781   2,824   2,764   3,075   1,479 Total non-interest expense 14,263   17,586   20,046   20,831   10,457   Income before income taxes 15,154 12,192 9,585 5,692 3,010 Income tax expense 8,545   3,575   3,029   1,481   426 Net income     $ 6,609       $ 8,617       $ 6,556       $ 4,211       $ 2,584   Earnings per share: Basic (1) $ 0.43 $ 0.56 $ 0.43 $ 0.29 $ 0.28 Diluted (1) 0.43 0.56 0.42 0.29 0.28   Weighted average shares outstanding: Basic (1) 15,437 15,420 15,393 14,471 9,096 Diluted (1)     15,537       15,511       15,506       14,591       9,215

(1) Adjusted for 3-for-2 stock split completed in March 2017.

BAR HARBOR BANKSHARES AVERAGE YIELDS AND COSTS (Fully Taxable Equivalent - Annualized) - UNAUDITED                     Quarters Ended   Dec 31,2017 Sep 30,2017 Jun 30,2017 Mar 31,2017 Dec 31,2016 Earning assets Loans 4.12 % 4.13 % 4.14 % 4.00 % 3.94 % Securities and other 3.06   3.13   3.19   3.01   3.01   Total earning assets 3.87 % 3.89 % 3.91 % 3.76 % 3.65 %   Funding liabilities Interest bearing deposits 0.70 % 0.66 % 0.56 % 0.52 % 0.76 % Borrowings 1.62   1.66   1.41   1.25   1.05   Total interest-bearing liabilities 0.97 % 0.96 % 0.85 % 0.76 % 0.86 %                                 Net interest spread 2.90 2.93 3.06 3.00 2.79 Net interest margin     3.04       3.06       3.16       3.11       2.89     BAR HARBOR BANKSHARES AVERAGE BALANCES - UNAUDITED                     Quarters Ended (In thousands) Dec 31,2017 Sep 30,2017 Jun 30,2017 Mar 31,2017 Dec 31,2016 Assets Total loans (1) $ 2,433,585 $ 2,402,171 $ 2,377,141 $ 2,346,340 $ 1,119,065 Securities and other (2) 753,282   754,450   761,546   746,653   556,365   Total earning assets 3,186,867 3,156,621 3,138,687 3,092,993 1,675,430 Cash and due from banks 65,145 49,169 87,332 25,556 5,976 Allowance for loan losses (12,202 ) (11,786 ) (11,292 ) (10,584 ) (10,336 ) Goodwill and other intangible assets 108,769 109,147 109,108 109,261 5,324 Other assets 144,359   149,394   110,129   122,396   71,807   Total assets $ 3,492,938   $ 3,452,545   $ 3,433,964   $ 3,339,622   $ 1,748,201     Liabilities and shareholders' equity Total interest-bearing deposits $ 1,925,802 $ 1,901,501 $ 1,811,226 $ 1,798,014 $ 930,983 Borrowings 803,469   812,938   941,789   856,328   537,818   Total interest-bearing liabilities 2,729,271 2,714,439 2,753,015 2,654,342 1,468,801 Non-interest-bearing demand deposits 376,066 354,470 320,503 350,497 108,961 Other liabilities 30,971   30,079   13,145   19,334   7,929   Total liabilities 3,136,308 3,098,988 3,086,663 3,024,173 1,585,691   Total shareholders' equity 356,630 353,557 347,301 315,449 162,510             Total liabilities and shareholders' equity     $ 3,492,938       $ 3,452,545       $ 3,433,964       $ 3,339,622       $ 1,748,201  

(1) Total loans include non-accruing loans.(2) Average balances for securities available-for-sale are based on amortized cost.

BAR HARBOR BANKSHARES ASSET QUALITY ANALYSIS - UNAUDITED                     At or for the Quarters Ended (in thousands) Dec 31,2017 Sep 30,2017 Jun 30,2017 Mar 31,2017 Dec 31,2016 NON-PERFORMING ASSETS Non-accruing loans: Commercial real estate $ 8,343 $ 2,467 $ 2,090 $ 2,354 $ 2,564 Commercial installment 1,209 236 270 451 315 Residential real estate 4,266 3,619 2,783 3,066 3,419 Consumer installment 500   496   160   160   198   Total non-accruing loans 14,318 6,818 5,303 6,031 6,496 Other real estate owned 122   122   122   363   90   Total non-performing assets $ 14,440   $ 6,940   $ 5,425   $ 6,394   $ 6,586     Total non-accruing loans/total loans 0.58 % 0.28 % 0.22 % 0.25 % 0.58 % Total non-performing assets/total assets 0.41 0.20 0.15 0.19 0.38   PROVISION AND ALLOWANCE FOR LOAN LOSSES Balance at beginning of period $ 11,950 $ 11,442 $ 10,884 $ 10,419 $ 10,103 Charged-off loans (277 ) (297 ) (213 ) (344 ) (28 ) Recoveries on charged-off loans 55   145   35   14   119   Net loans charged-off (222 ) (152 ) (178 ) (330 ) 91 Provision for loan losses 597   660   736   795   225   Balance at end of period $ 12,325   $ 11,950   $ 11,442   $ 10,884   $ 10,419     Allowance for loan losses/total loans 0.50 % 0.49 % 0.48 % 0.46 % 0.92 % Allowance for loan losses/non-accruing loans 86 175 216 180 160   NET LOAN CHARGE-OFFS Commercial real estate $ (92 ) $ (16 ) $ (6 ) $ (103 ) $ 5 Commercial installment 1 6 (138 ) (17 ) 89 Residential real estate — (79 ) (13 ) (198 ) 8 Consumer installment (131 ) (63 ) (21 ) (12 ) (11 ) Total, net $ (222 ) $ (152 ) $ (178 ) $ (330 ) $ 91     Net charge-offs (QTD annualized)/average loans 0.04 % 0.01 % 0.03 % 0.06 % (0.03 )% Net charge-offs (YTD annualized)/average loans 0.04 0.04 0.04 0.06 (0.03 )   DELINQUENT AND NON-ACCRUING LOANS/TOTAL LOANS 30-89 Days delinquent 0.37 % 0.35 % 0.55 % 0.33 % 0.54 % 90+ Days delinquent and still accruing 0.02   0.01   —   —   —   Total accruing delinquent loans 0.39 0.36 0.55 0.33 0.54 Non-accruing loans 0.58   0.28   0.22   0.25   0.58   Total delinquent and non-accruing loans     0.97 %     0.64 %     0.77 %     0.58 %     1.12 %   BAR HARBOR BANKSHARES RECONCILIATION OF NON-GAAP FINANCIAL MEASURES AND SUPPLEMENTARY DATA - UNAUDITED     At or for the Quarters Ended (in thousands)   Dec 31,2017     Sep 30,2017     Jun 30,2017     Mar 31,2017     Dec 31,2016 Net income $ 6,609 $ 8,617 $ 6,556 $ 4,211 $ 2,584 Adj: Security Gains — (19 ) — — (9 ) Adj: Loss on sale of fixed assets, net — (1 ) — 95 32 Adj: Acquisition, conversion and other expenses (2,615 ) 346 2,459 3,112 1,838 Adj: Income taxes (37.57% in 2017, 35.0% in 2016) 982 (122 ) (924 ) (1,205 ) (651 ) Adj: Tax reform charge   3,988   —   —   —   —   Total core income (4) (A) $ 8,964   $ 8,821   $ 8,091   $ 6,213   $ 3,794     Net-interest income (B) $ 23,496 $ 23,478 $ 23,809 $ 21,372 $ 11,657 Plus: Non-interest income   6,518   6,960   6,558   5,946   2,035   Total Revenue 30,014 30,438 30,367 27,318 13,692 Adj: Net security gains   —   (19 ) —   —   (9 ) Total core revenue (4) (C) $ 30,014   $ 30,419   $ 30,367   $ 27,318   $ 13,683     Total non-interest expense $ 14,263 $ 17,586 $ 20,046 $ 20,831 $ 10,457 Less: Acquisition expenses   2,615   (346 ) (2,459 ) (3,112 ) (1,838 ) Core non-interest expense (4) (D) $ 16,878   $ 17,240   $ 17,587   $ 17,719   $ 8,619     (in millions) Total average earning assets (E) $ 3,187 $ 3,157 $ 3,139 $ 3,093 $ 1,675 Total average assets (F) 3,493 3,453 3,434 3,340 1,748 Total average shareholders' equity (G) 357 354 347 315 163 Total average tangible shareholders' equity (H) 248 244 238 206 157 Total tangible shareholders' equity, period-end (1) (I) 246 244 238 232 152 Total tangible assets, period-end (1) (J) 3,457 3,367 3,394 3,318 1,750   (in thousands) Total common shares outstanding, period-end (K) 15,443 15,432 15,407 15,385 9,116 Average diluted shares outstanding (L) 15,537 15,511 15,506 14,591 9,215   Core earnings per share, diluted (A/L) $ 0.58 $ 0.57 $ 0.52 $ 0.43 $ 0.41 Tangible book value per share, period-end (I/K) 15.94 15.84 15.44 15.07 16.61 Total tangible shareholders' equity/total tangible assets (H/J) 7.12 7.26 7.01 6.99 8.65   Performance ratios (2) GAAP return on assets 0.75 % 0.99 % 0.76 % 0.50 % 0.59 % Core return on assets (4) (A/F) 1.02 1.01 0.94 0.74 0.87 GAAP return on equity 7.35 9.67 7.55 5.34 6.36 Core return on equity (4) (A/G) 9.97 9.90 9.32 7.88 9.34 Core return on tangible equity (3) (4) (A/I) 14.53 14.51 13.78 12.24 9.66 Efficiency ratio (4)(5) (D-N-P)/(C+M) 53.09 53.59 54.64 61.62 59.24 Net interest margin (B+O)/E 3.04 3.06 3.16 3.11 2.89 Supplementary data (in thousands) Taxable equivalent adjustment for efficiency ratio (M) 1,122 1,107 1,185 977 538 Franchise taxes included in non-interest expense (N) 161 154 158 126 37 Tax equivalent adjustment for net interest margin (O) 897 878 936 754 182 Intangible amortization (P)     186       189       188       157       157  

(1) Total tangible shareholders' equity is computed by taking total shareholders' equity less the intangible assets at period-end. Total tangible assets is computed by taking total assets less the intangible assets at period-end.(2) Ratios are annualized and based on average balance sheet amounts, where applicable. Quarterly data may not sum to year-to-date data due to rounding.(3) Core return on tangible equity is computed by dividing the total core income adjusted for the tax-effected amortization of intangible assets, assuming a marginal rate of 37.57% in 2017 and 35.0% in 2016, by tangible equity.(4) Non-GAAP financial measure.(5) Efficiency ratio is computed by dividing total core tangible non-interest expense by the sum of total net interest income on a fully taxable equivalent basis and total core non-interest income. The Company uses this non-GAAP measure to provide important information about its operating efficiency.

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Bar Harbor BanksharesJosephine Iannelli, 207-288-3314EVP, Chief Financial Officer & TreasurerorMarsha Sawyer, 207-288-3314EVP, Investor Relations