Reports from this year’s Annual Meeting

February 21, 2019

This year's Annual Meeting included reports by President Bill Weir and Senior Vice President Vicky Vendrell, regarding the bank's performance in 2018.

Report by Bill Weir, President and CEO:

Good afternoon and welcome to the 2019 Annual Meeting of the Bar Harbor Savings and Loan Association. It is with great pride I announce the bank has had a record year of earnings and an increase in loans and deposits.

In 2018, we began the remake of the lot behind our building for customer, tenant and employee parking. The space can be used for disaster recovery with the possibility of a future bank building to serve our needs.

Two additional employees were added in 2018. IT Specialist, Zoran Manev, and Mortgage Specialist, Jo Gollapinni, each bring their banking experience and expertise to the Savings and Loan. The Board also promoted Rhonda Sawyer to Mortgage Department SupervisorManager, recognizing her hard work and knowledge. Sharon Kelley retired from the mortgage Department after 16 years of service and will be missed.

Our emphasis in 2019 will be to innovate new products and services to secure the future of the bank. We will do this in the following ways:

• Continue to implement the 2018 Strategic Plan which will monitor growth and risk.

• Actively participate with the Federal Home Loan Bank Home Mortgage Program, selling them long term, 30 year mortgages while keeping loan servicing in house. This will insure the good will of our customers.

• Fill a marketing position to promote on-line social media, on-line banking and other technology and also to introduce our products to new and existing customers.

• Actively solicit commercial loans and deposits from our expanded business area in of all of Hancock County

• Continue to promote short term second mortgages, home improvement loans and lines of credit for our current mortgage customers.

I would like to extend a thank you to our hard working board members and bank employees. A special thanks to the Strategic Planning Committee for the many hours of planning and guidance they have given.

We all look forward to the challenges in 2019 and with outstanding teamwork, we can continue to make the Savings & Loan a viable institution and a leader in the community now and in the future.

A copy of the Berry Dunn audit is available for review at the bank.

William R. Weir, Jr.
President and CEO

Remarks by Vicky Vendrell, Senior Vice President and Treasurer:

The Bank concluded a successful year in 2018, with earnings of $1 million for the first time in its over 100 years of existence in Bar Harbor. In many ways it was a very challenging year, with changing the business model and incorporating additional checks and balances (or oversight) in order to better quantify the Bank’s performance. The Bank worked and continues to work tirelessly on its Strategic Plan, looking out 5 years from today and where will it be and how the Bank will look and perform.

Part of the goals for the Bank includes adequate staffing. As mentioned earlier, the Bank hired Zoran Manev, who brought his knowledge and enthusiasm much needed in the myriad of IT challenges. While prepared to have someone onsite for IT was initially conceived as a part time position, we are thankful for Zoran’s full time support of us as users and as a monitoring and compliance arm in connection with the Bank’s major IT vendor, Systems Engineering. His oversight role will serve the Bank in its overall assessment and safety.

When comparing the Bank’s 2018 earnings to 2017’s earnings (which totaled $817,000), a major component was the tax relief benefit initiated during 2017. Income before taxes for years 2017 and 2018 were virtually identical. A reduction in the Bank’s tax expense in 2018 ($224,000) gave the Bank net earnings of $1 million. Let’s look at the make-up of balance sheet first to understand its effect on earnings.

While the Bank has seen rapid growth over the past years, primarily through its loan portfolio, it intentionally chose to slow down that growth and concentrate on diversifying and shortening the duration (or term) of its earning assets. Total loans grew by $3 million during 2018 to reach $90 million. The diversification to shorter maturity terms became especially important as interest rates began to rise. Rising rates plus the growth in the stock market in late 2017 and early 2018 saw an increase in depositors shifting funds into opportunities in the stock market.

In order to retain longer term funds, the Bank chose to offer higher rates on different CD products, including a bump up promotion for longer term CDs. The bump up allows the customer to choose when to increase the interest rate on the CD based on market interest rate changes which influence the increases in rates by the Bank. The Bank’s CD promotions have been quite successful in bringing in both new funds as well as new customers. Some of those new funds have been used to pay off maturing bank borrowings (totaling a reduction of $800,000 by year end 2018).

Rising market rates at a time when deposits were increasing due to promotions offered the Bank the opportunity to invest in other Bank’s CDs at attractive rates for very short terms. This has helped to diversify the Bank’s concentration from long term assets, in the form of loans, although the total invested in CDs (just under $5 million) has been small in comparison to other earning assets. And while the balances for CDs in other banks have remained virtually the same as in 2017, utilizing short term maturities has afforded the Bank increased interest rates with each maturity.

A few specifics relative to earnings for 2018: Interest income increased by $200,000, primarily from the Bank’s loan portfolio. Offsetting that increase was increased cost in funding (i.e. deposits and/or borrowings). Interest paid on deposits increased by $120,000. Additionally employee expenses increased by $100,000 and included increased benefit costs, staffing, salaries and bonuses.

There is a bank indicator “Assets per employee”. As of 12/31/2018, the Bank’s staff was responsible for $10.4 million of its assets – per employee. This compares to the Bank’s peer banks with assets per employee totaling $5 million or half of the dollars of assets that our staff supports.

The Bank’s ending net income for 2018 helped to increase the Bank’s capital for 2018. Capital represents the value of the Bank’s assets minus its liabilities (or debts owed to customers or others). The Bank has over the years been able to increase its capital and in 2018 the capital grew almost $950,000 to $11,250,000. To give you a comparison, at 12/31/2013, the Bank’s capital was $6,800,000 or an increase of 65% over 5 years.

In closing I wish to express my sincere gratitude to the staff for their support during 2018 and to the Board of Directors for their support and guidance. Thank you sincerely.