14 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 June 30, 2000 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 June 30, 2000: Common Stock: 3,354,814
TABLE OF CONTENTS <TABLE> <CAPTION> Financial Information Page <S> <C> Item 1. Independent Accountants' Report 3 Item 2. Financial Statements Consolidated Statements of Condition 5 December 31, 1999 and June 30, 2000 Consolidated Statements of Earnings 5 Three months and Six Months, June 30, 1999 and 2000 Consolidated Statements of Changes in 6 Stockholders' Equity Six months ended June 30, 1999 and 2000 Consolidated Statement of Cash Flows 7 Six months ended June 30, 1999 and 2000 Item 3. Notes to Consolidated Financial 8-9 Statements Item 4. Rate Volume Analysis 10 Item 5. Management's Discussion and 11-15 Analysis of Financial Condition and Results of Operations Signature Page 16 </TABLE>
INDEPENDENT ACCOUNTANTS' REPORT The Board of Directors Bar Harbor Bankshares We have reviewed the accompanying interim consolidated financial information of Bar Harbor Bankshares and Subsidiaries as of June 30, 2000, and for the three- and six-month periods then ended. These financial statements are the responsibility of the Company's management. We conducted our review in accordance with standards established by the American Institute of Certified Public Accountants. A review of interim financial information consists principally of applying analytical procedures to financial data and making inquiries of persons responsible for financial and accounting matters. It is substantially less in scope than an audit in accordance with generally accepted auditing standards, the objective of which is to express an opinion regarding the financial statements taken as a whole. Accordingly, we do not express such an opinion. Based on our review, we are not aware of any material modifications that should be made to the accompanying financial statements for them to be in conformity with generally accepted accounting principles. /s/ BERRY, DUNN, McNEIL & PARKER, LLC Portland, Maine August 11, 2000
BAR HARBOR BANKSHARES AND SUBSIDIARIES CONSOLIDATED STATEMENTSOF FINANCIAL CONDITION JUNE 30, 2000 and DECEMBER 31, 1999 (in thousands, except number of shares and per share data) <TABLE> <CAPTION> June Decembe 30, r 31, 2000 1999 (Unaudi ted) <S> <C> <C> ASSETS Cash and Due from Banks $13,739 $12,852 Securities Available for 38,659 31,690 Sale Securities Held to Maturity (Market Value $120,636 at 6/30/00; 124,812 128,831 $125,416 at 12/31/99) Other Securities 8,068 6,118 Loans, net of allowance for possible loan losses of $4,144 at 272,846 256,896 6/30/00; and $4,293 as of 12/31/99) Premises and Equipment 11,461 8,440 Other Assets 13,581 11,982 Total Assets $483,17 $456,80 0 9 LIABILITIES AND STOCKHOLDERS' EQUITY LIABILITIES Deposits Demand Deposits $39,695 $41,904 Now Accounts 40,725 45,107 Savings Deposits 72,394 78,511 Time Deposits 119,144 116,186 Total Deposits 271,958 281,708 Securities sold under Repurchase 6,342 8,807 Agreements Advances from Federal Home 150,600 113,035 Loan Bank Other Liabilities 5,129 4,114 Total Liabilities 434,029 407,664 STOCKHOLDERS' EQUITY Capital Stock, par value $2 Authorized 10,000,000 7,287 7,287 shares Issued 3,643,614 shares Surplus 4,002 4,002 Retained Earnings 41,563 40,611 Net unrealized depreciation on securities (885) (1,015) available for sale, net of tax Less: Cost of Treasury Stock 288,800 shares in 2000 and 222,100 shares (2,826) (1,740) in 1999 TOTAL STOCKHOLDERS' EQUITY 49,141 49,145 TOTAL LIABILITIES AND $483,17 $456,80 STOCKHOLDERS' EQUITY 0 9 </TABLE>
BAR HARBOR BANKSHARES AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF EARNINGS (in thousands, except number of shares and per share data) (UNAUDITED) <TABLE> <CAPTION> Three months ended Six months ended 6/30/00 6/30/99 6/30/00 6/30/ 99 Interest and Dividend Income: <S> <C> <C> <C> <C> Interest & Fees $6,082 $5,340 $11,782 $10,4 on Loans 82 Interest and Dividends on Investment 2,686 2,235 5,337 4,282 Securities: Taxable Interest Income Non-taxable 40 81 100 164 Interest Income Dividends 129 113 247 226 Federal Funds 4 5 19 28 Sold Total Interest & 8,941 7,774 17,485 15,18 Dividend Income 2 Interest on 2,157 2,024 4,297 4,073 Deposits Interest on 2,299 1,301 4,200 2,451 Borrowings Total Interest 4,456 3,325 8,497 6,524 Expense Net Interest 4,485 4,449 8,988 8,658 Income Provision for 163 269 326 537 Loan Losses Net Interest 8,121 Income after 4,322 4,180 8,662 Provision for Loan Losses Other Income 1,459 1,226 2,808 2,412 Other Expenses: 3,042 Salaries & 2,226 1,502 4,183 Employee Benefits Other 2,111 1,598 3,922 3,224 Earnings Before 1,444 2,306 3,365 4,267 Income Taxes Income Tax 487 779 1,122 1,423 Net Earnings $ 957 $1,527 $2,243 $2,84 4 PER COMMON SHARE DATA $0.28 $0.44 $0.66 $0.83 Net earnings Weighted 3,389,398 3,443,61 3,389,3 3,443 average number of 4 98 ,614 common Shares outstanding Dividends Per $0.19 $0.17 $0.38 $0.34 Share </TABLE>
BAR HARBOR BANKSHARES AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY FOR THE THREE MONTHS ENDED JUNE 30, 2000 and 1999 (in thousands, except number of shares and per share data) (UNAUDITED) <TABLE> <CAPTION> NET UNREALIZ ED (DEPRECI TOTAL CAPITA RETAINE ATION) TREASURY STOCKHOLD L SUIRPL D APPRECIA STOCK ERS' STOCK US EARNING TION ON EQUITY S SECURITI ES AVAILABL E FOR SALE <S> <C> <C> <C> <C> <C> <C> Balance, December 31, $7,287 $4,002 $36,861 $50 ($1,340) $46,860 1998 Net Earnings 2,844 $2,844 Net unrealized depreciation on Securities available for sale, (301) ($301) Net of tax benefit of $155 Total comprehensive 2,844 (301) 2,543 income Cash dividends declared ($0.34 per (1,171) ($1,171) share) Balance, June 30, 1999 $7,287 $4,002 $38,534 ($251) ($1,340) $48,232 Balance, December 31, $7,287 $4,002 $40,611 ($1,015)($1,740) $49,145 1999 Net Earnings 2,243 $2,243 Net unrealized appreciation on Securities 130 $130 available for sale, Net of tax of $67 Total comprehensive 2,243 130 0 2,373 income Cash dividends declared ($0.19 per (1,291) ($1,291) share) Purchase of Treasury Stock - (1,086) ($1,086) 66,700 shares Balance, June 30, 2000 $7,287 $4,002 $41,563 ($885) ($2,826) $49,141 </TABLE> The accompanying notes are an integral part of these consolidated financial statements.
BAR HARBOR BANKSHARES AND SUBSIDIARIES COLSOLIDATED STATEMENT OF CASH FLOWS (in thousands) <TABLE> <CAPTION> JUNE 30, JUNE 30, 2000 1999 <S> <C> <C> Cash Flows from Operating Activities: $2,243 2,844 Net Income Adjustments to reconcile net earnings to net cash provided by operating 616 491 activities: Depreciation Provision for Loss 326 537 Losses Gain on Other Real (7) 0 Estate Owned New Loans Originated (451) (7,120) for Sale Proceeds from Sale of 452 8,092 Mortgages Held for Sale Gain (Loss) on sale of 51 (60) Mortgages Originated for Sale Net Amortization of 46 132 Bond Premium Loss on sale of 111 25 premises and equipment Net Change in Other (1,658) (2,972) Assets Net Change in Other 1,015 (295) Liabilities Net Cash Provided by 2,744 1,674 Operating Activities Cash Flows from Investing Activities: Purchases of Securities (5,313) (26,066) Held to Maturity Proceeds from Maturity and Principal Paydowns 9,272 2,750 of Securities held to maturity Proceeds from Call of 0 15,788 Securities Held to Maturity Purchases of Securities (6,807) (15,215) Available for Sale Proceeds from Maturity and Principal Paydowns 49 1,493 of available for sale Proceeds from sale and calls of securities 0 3,500 available for sale Net decrease (increase) in 1,950 28 other securities Net Loans Made to (16,367) (22,601) Customers Capital Expenditures (3,811) (160) Proceeds from Sale of 39 80 Other Real Estate Owned Proceeds from Sale of 59 6 Premises and Equipment Net Cash Used in Investing (24,841) (40,457) Activities Cash Flows from Financing Activities: (12,708) 8,420 Net Change in Savings, NOW and Demand Deposits Net Change in Time 2,958 (4,396) Deposits Net Change in securities sold under (2,465) (1,165) Repurchase Agreements Purchase of Advances from 86,000 60,000 FHLB Repayment of Advances from (71,500) (22,000) FHLB Net Change in Short Term 23,064 (162) Other Borrowed Funds Proceeds from Sale of (1,086) 0 Capital Stock Payment of Dividends (1,291) (1,171) Net Cash Provided by 22,972 39,526 Financing Activities Net Increase in Cash and Cash 887 743 Equivalents Cash and Cash Equivalents at 12,852 11,511 Beginning of Year Cash and Cash Equivalents at $13,739 $12,254 End of Quarter Supplemental Disclosures of Cash Flow Information: Cash Paid during the Year $8,582 $3,186 for: Interest Non-Cash Transactions: Transfers from Loans to $92 $49 Other Real Estate Owned </TABLE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) 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 1999 Annual Report. Statement of Financial Accounting Standards (SFAS) No. 133, "Accounting for Derivative Instruments and Hedging Activities," as amended by SFAS No. 137 and SFAS No. 138, ("Accounting for Certain Derivative Instruments and Certain Hedging Activities,") are effective for years beginning after June 15, 2000. These statements set accounting and reporting standards for derivative instruments and hedging activities. They require an entity recognize all derivatives as either assets or liabilities in the balance sheet and measure those instruments at fair value. These statements are expected to have no impact on the Company, as it has not engaged in any derivative transactions. 2. Line of Business Reporting The Company manages and operates two major lines of business: Community Banking and Financial Services. Community Banking includes lending and deposit- gathering activities and related services to businesses and consumers. Financial Services consists of broker/deal operations, trust services, and portfolio management. The business lines are identified by the entities through which the product or service is delivered. The reported line of business results reflect the underlying core operating performance within the business units. Other is comprised of intercompany eliminations. Information is not presented for prior periods as the Financial Services segment was not formed until January 2000 and it is impractical to restate corresponding information for the prior periods. Substantially all of the Company's assets are part of the community banking line of business. Selected segment information is included in the following table. <TABLE> <CAPTION> Six Months Ended Community Financia Other Consolid June 30, 2000 Banking l ated Services Totals <S> <C> <C> <C> <C> Net Interest $8,979 $ 9 $ 0 $ 8,988 Income Provision for 326 0 0 326 loan losses Net interest income after 8,653 9 0 8,662 provision Other income 3,186 1,582 (1,960) 2,808 Other expense 6,305 1,865 65 8,105 Earnings (loss) before income 5,534 (274) (1,895) 3,365 taxes Income taxes 1,840 (93) (625) 1,122 Net earnings $3,694 $ (181) $ (1,270) $ 2,243 (loss) </TABLE>
<TABLE> <CAPTION> Three Months Community Financial Other Consoli Ended June Banking Services dated 30,2000 Totals <S> <C> <C> <C> <C> Net Interest $ 4,478 $ 7 $ 0 $ 4,485 Income Provision for loan losses 163 0 0 163 Net interest income after 4,315 7 0 4,322 provision Other income 673 786 1,459 Other expense 3,390 979 (32) 4,337 Earnings (loss) before income 1,598 (186) 32 1,444 taxes Income taxes 538 (63) 12 487 Net earnings $1,060 $ (123) $ 20 $ 957 (loss) </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 JUNE 30, 2000 COMPARED TO JUNE 30, 1999 (in thousands, except number of shares and per share data) INCREASES (DECREASES) DUE TO: <TABLE> <CAPTION> VOLUME RATE NET <S> <C> <C> <C> Loans $1,238 $62 $1,300 Taxable Securities 961 115 1,076 Tax Exempt Securities (64) 0 (64) Federal Funds Sold and (21) 12 (9) Money Market Funds TOTAL EARNING ASSETS 2,114 189 2,303 Deposits 172 52 224 Borrowings 1,386 363 1,749 Total Interest Bearing 1,558 415 1,973 Liabilities NET CHANGE IN INTEREST $556 ($226) $330 </TABLE>
MANAGEMENT'S DISCUSSION AND ANALYSIS The following is the review of Bar Harbor Bankshares (the Company) and its subsidiaries for the six months ended June 30, 2000. REVIEW OF FINANCIAL CONDITION AT JUNE 30, 2000 AND DECEMBER 31, 1999 Total assets for the Company of $483 million at June 30, 2000 has grown by $26 million since December 31, 1999. Earnings of $2,243,000 were achieved for the first six months of 2000, and are $601,000 below the earnings for the same period in 1999. Two projects, the formation of BTI Financial Group and its three subsidiary companies and the conversion of the banking software for Bar Harbor Banking and Trust Company (the Bank), were the primary focus of the Company over the past twelve months. The impact of these projects on the Company's earnings is discussed below. BTI Financial Group (BTI), a wholly owned financial services subsidiary of Bar Harbor Bankshares, was formed in the fall of 1999. BTI Financial Group's subsidiaries, Dirigo Investments, Inc., Bar Harbor Trust Services and Block Capital Management started operating in January of 2000. As a result of the formation of BTI, the Company has implemented segment reporting as required by Statement of Accounting Standard (SFAS) No. 131, "Disclosures about Segments of an Enterprise and Related Information." The formation of these three companies will position BTI to more fully participate in various segments of the financial services industry with the potential for significant growth. During the latter part of June of 2000, a branch office of Dirigo Investments, Inc. was established in the Bangor area including an office manager and a broker, expanding the potential market area. The total asset growth of $26 million from December 31, 1999 to June 30, 2000 has come primarily from loan growth of $16 million, investment growth of $5 million and increases in premises owned by the Company totaling $3 million. Loan growth has come from approximately $8 million in consumer real estate loans, $1.1 million from commercial real estate loans and $3.8 million from other commercial loans. The balance between consumer and commercial loans remains similar to the last several years' relationship with consumer loans approximating 56% of the portfolio. The Bank's reserve for possible loan losses as of June 30, 2000 is 1.5% of total loans compared to 1.64% at December 31, 1999. The reduction in the reserve ratio is attributed to management's analysis of the loss exposure inherent in the loan portfolio. Management reviews the allocation to the reserve on a quarterly basis and funds the reserve as deemed necessary. This review includes a provision for specific accounts and impaired loans, provisions due to historic loan loss experience by loan type and reserves reflecting industry and credit concentrations, current local and national economic conditions, and underwriting standards. During the first six months of 2000, net charge offs totaled $475,000 compared to $80,000 during the first six months of 1999. The increase in the six months comparison is due to relatively large charge offs taken late in 1999 and early in 2000. At this time, management is not anticipating any major charge offs for the remainder of 2000. The amounts represented below are the total dollars past due as of June 30, 2000 and December 31, 1999. <TABLE> <CAPTION Category June 30, December 31, 2000 1999 90-days past due and still accruing $3,260 $ 709 <S> <C> <C> Non-accruing 2,906 2,016 $6,166 $2,725 Gross Loans $276,990 $261,188 Percentage of Gross 2.23% 1.04% Loans </TABLE> Premises and equipment growth included the purchase of the future headquarters of BTI in Ellsworth, Maine and properties adjacent to the Ellsworth branch office of the Bank and in front of the future headquarters of BTI. New projections for the renovations of the BTI headquarters indicate costs approximating $2,000,000. Completion of this project is expected by the summer of 2001. The bank experiences a seasonal swing in its deposit base and between December 31, 1999 and June 30, 2000 deposits declined by $9.8 million or 3.5%. Increased advances from the Federal Home Loan Bank funded the growth in loans and investments, as well as the decline in deposits. RESULTS OF OPERATIONS FOR THE PERIODS ENDING JUNE 30, 2000 AND 1999 Rates, volumes and the mix of earning assets and interest bearing liabilities affect interest income. Comparing the first six months of 2000 with the same period for 1999, net interest income increased by $330,000. While there has been considerable growth in the earning assets of the Bank, competition for loans requires narrowing margins, and the increased income from investments yields less than loan income. Funding costs have increased more rapidly than the asset yields. While the Bank has added fixed rate and, traditionally, longer term assets to its statement of financial condition, it has funded those assets with shorter-term (one year or less) liabilities. Interest earned on loans for the first six months of 2000 when compared to the first six months of 1999 increased by more than $1.2 million due to increases in volumes and by $62,000 due to increases in interest rates charged on portions of the loan portfolio. Since December 31, 1999, the loan portfolio yield has increased by 8 basis points. Interest on loans for the quarter ended June 30, 2000 was $742,000 or 13.9% more than for the quarter ended June 30, 1999 and is attributable to increased volumes in the loan portfolio. Interest derived from growth in the investment portfolio was $876,000 more during the six months ended June 30, 2000 as compared to June 30, 1999 while increases in interest rates created an additional $127,000 in income. The entire portfolio earned 6.72% as of June 30, 2000, which is 21 basis points higher than a year ago and 12 basis points higher than the overall yield at December 31, 1999. Interest on investments for the quarter ended June 30, 2000 was $425,000 more than for the quarter ended June 30, 1999 and is attributable primarily to increased volumes in the investment portfolio. Interest expense for the six months ended June 30, 2000 increased by approximately $2.0 million compared to the same period in 1999. Interest expense increased by $1.6 million based on increased volume and by $415,000 based on interest rates. The overall cost of interest bearing liabilities went up 38 basis points between June 30, 2000 and June 30, 1999. The cost of these liabilities has increased by 23 basis points since December 31, 1999 and has enhanced the margin squeeze. The overall cost of interest bearing liabilities for the quarter ended June 30, 2000 was $1.1 million more than for the quarter ended June 30, 1999 and represents the cost of the increased volumes in advances through the Federal Home Loan Bank as well as increases in the rates charges on those advances. NON-INTEREST INCOME Non-interest income for the six months ended June 30, 2000 totaled $2.8 million and was $396,000 more than the first six months in 1999. BTI Financial Group's gross income of $1.6 million surpassed the Trust Department's income for the six months ended June 30, 1999 by $246,000. Additionally, service charges on the bank's deposit accounts exceeded the first six months of last year by $190,000, and represents increased charges implemented in the third quarter of 1999. When comparing non-interest income for the quarter ending June 30, 2000, BTI's revenue is $159,000 greater than the income generated by the Bank's Trust Department for the same period in 1999. Also, for the same comparison periods, service charges on deposit accounts have contributed $116,000 more for the quarter ended June 30, 2000. NON-INTEREST EXPENSE Non-interest expenses for the six months ended June 30, 2000 totaled $8.1 million and exceeded the first six months of 1999's non-interest expenses by $1.8 million. Salaries and benefits make up $1.1 million of the increase over 1999. The formation of BTI Financial Group, and the subsequent purchase of Dirigo Investments, Inc., contribute to the increase in salary and benefits as positions have been added as the three subsidiary companies have been formed. BTI's salaries and benefits totaling $781,000 exceed the Bank's Trust Department salaries and benefits for the six months ended June 30, 1999 by $347,600. The Bank has added a senior credit administrator and has recruited a seasoned and knowledgeable collector to build up the credit administration efforts for the Bank. These additions have increased salary and benefit costs for the Bank. Additionally, the focus on the banking software conversion to Information Technology, Inc. (ITI) took priority in human resources' commitment, including additional temporary staffing and overtime. The ITI conversion was successfully completed in April 2000, although commitments of time for clean up and completion of maintenance issues continued into the second quarter of 2000. Increases in salary and benefit costs for the quarter ended June 30, 2000 exceeded the costs for the same period in 1999 by $724,000. As mentioned earlier, the start up of a Bangor location for BTI subsidiary, Dirigo Investments, Inc., transpired during the second quarter of 2000, increasing salary and benefit costs. In total, BTI's salary costs have been approximately $200,000 more for the quarter ended June 30, 2000 when compared to the Bank's Trust Department salary costs for the quarter ended June 30, 1999. Additional staffing in the credit administration area and completion of training and clean up from the banking software conversion increased salary expenses for the quarter ended June 30, 2000. Other expenses, exclusive of salaries and benefits are $698,000 more in the six months ended June 30, 2000 as compared to the same period for 1999. Start up costs incurred during the first quarter of 2000 for BTI Financial Group represent a portion of this increase. BTI's expenses for the first six months of 2000, exclusive of salary and benefit costs and including the start up costs and including $36,500 in amortization, total $1 million. This amount exceeds the Bank's Trust Department expenses for the first six months of 1999 by $588,000. Other expenses for the quarter ended June 30, 2000 were $513,000 more than for the comparable period in 1999. Of that variance, BTI expenses were $293,700 more than those for the Bank's Trust Department for the quarters ended June 30, 2000 and 1999. Sale of equipment used for item capture in conjunction with the previous banking solution was completed during the second quarter of 2000. This combined with the replacement of personal computers created losses to the Bank of approximately $95,000, most of which was booked during the second quarter of 2000. The Company has not incurred any additional costs or any losses due to the Year 2000 rollover. All internal and third party provided software has been performing satisfactorily since January 1, 2000. The Company continues to monitor all systems for any potential Year 2000 issues. 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 10% for the past twelve months. Liquidity as measured by the Basic Surplus/Deficit model was 17.8% as of June 30, 2000 for the 30-day horizon and 20.1% for the 90- day horizon. The Bank's position with regard to interest rate sensitivity consists of the matching of its assets and liabilities for repricing within a year. The exposure is to rising rates out beyond a year as the Bank has almost $39 million invested in callable securities with final maturities of ten years or less funded by short- term liabilities. The exposure lies with the possibility that these securities would not be called. The gap analysis in today's interest rate environment shows the Bank with approximately $112 million more liabilities than assets that would be repriceable within twelve months. Assuming rates were to drop by 200 basis points and utilizing a steepening yield curve shift in rates, simulations based on a static balance sheet indicate that the Bank's net interest income could rise by approximately $812,000 during the first year of the drop, while increasing its income in the second year by $1.5 million. If rates were to rise by 200 basis points, interest income could decrease by $57,000 in the first year, and decrease by $146,000 during the second year. The Company's capital to asset ratio is 10.2% at June 30, 2000, and the Bank exceeds the required risk based capital ratio of 8% with its Tier 1 ratio of 12.7% and total capital ratio of 13.9% or additional capital of $18.6 million. These ratios compare to December 31, 1999 when the capital to average asset ratio was 10.8%, Tier 1 and total capital ratios compared to risk weighted assets were 17.8% and 19.1% 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 /s/ Dean S. Read Date: August 11, 2000 Dean S. Read Chief Executive Officer