| þ | ANNUAL REPORT PURSUANT TO SECTION 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 [FEE REQUIRED] |
| o | TRANSITION REPORT PURSUANT TO SECTION 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 [NO FEE REQUIRED] |
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Financial Statements: |
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Supplemental Schedules* |
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| * | Schedules required by Form 5500 that are not applicable have not been included. |
| 2010 | 2009 | |||||||
Investments, at fair value: |
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Cash |
$ | 84,176 | 1,264 | |||||
Money market fund |
1,144,234 | 1,211,435 | ||||||
Mutual funds |
7,397,473 | 6,319,102 | ||||||
Common stock of Bar Harbor Bankshares |
2,569,037 | 2,076,486 | ||||||
Total investments |
11,194,920 | 9,608,287 | ||||||
Receivables: |
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Participant loans receivable |
409,239 | 393,782 | ||||||
Participant contribution |
— | 8,279 | ||||||
Employer contribution |
— | 1,934 | ||||||
Total receivables |
409,239 | 403,995 | ||||||
Total plan assets |
11,604,159 | 10,012,282 | ||||||
Liabilities: |
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Other liability |
(81,040 | ) | — | |||||
Net assets available for benefits |
$ | 11,523,119 | 10,012,282 | |||||
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| 2010 | 2009 | |||||||
Additions to net assets attributed to: |
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Investment income: |
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Net appreciation in investments |
$ | 819,075 | 1,255,138 | |||||
Interest and dividends |
209,323 | 194,397 | ||||||
Investment income |
1,028,398 | 1,449,535 | ||||||
Contributions: |
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Participants |
676,974 | 597,130 | ||||||
Employer |
300,829 | 269,676 | ||||||
Rollovers |
— | 13,858 | ||||||
Total contributions |
977,803 | 880,664 | ||||||
Total increase |
2,006,201 | 2,330,199 | ||||||
Deductions from net assets attributed to: |
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Distributions |
(495,364 | ) | (127,247 | ) | ||||
Net increase in
assets available
for benefits |
1,510,837 | 2,202,952 | ||||||
Net assets available for benefits: |
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Beginning of year |
10,012,282 | 7,809,330 | ||||||
End of year |
$ | 11,523,119 | 10,012,282 | |||||
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| The following description of the Bar Harbor Bankshares (the Company or the Plan Sponsor) 401(k) Plan (the Plan) provides only general information. Participants should refer to the Plan document for a more complete description of the Plan’s provisions. |
| (a) | General | ||
| The Plan is a defined contribution plan covering all employees of the Company who have achieved the age of 20-1/2. There is no service requirement for eligibility. The Plan is subject to the provisions of the Employee Retirement Income Security Act of 1974 (ERISA). The Company pays Plan expenses. | |||
| (b) | Contributions | ||
| Each year, participants may contribute up to 100%
(limited to regulatory ceilings) of pretax annual
compensation, as defined in the Plan. Participants who
have attained age 50 before the end of the Plan year
are eligible to make catch-up contributions (limited
to regulatory ceilings). Participants may also
contribute amounts representing distributions from
other qualified defined benefit, IRA’s, or defined
contribution plans. Participants direct the investment
of their contributions into investment options offered
by the Plan. The Plan currently offers investment options for participants. The Plan is a safe harbor plan providing matching contributions under a basic matching contribution formula. During 2010 and 2009, the Company matched 100% up to the first 3% of each participant’s salary deferred and 50% on deferrals from 4% to 5% of each participant’s salary. The Company match is 100% vested immediately and invested in the same manner as the participant has directed for their contributions. Additional profit sharing amounts may be contributed at the option of the Company’s board of directors and, if provided, are vested immediately and invested as directed by the participant. No additional contributions were made in 2010 or 2009. |
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| (c) | Participants’ Accounts | ||
| Each participant’s account is credited with the participant’s contribution, allocations of the Company’s match, and profit sharing contributions along with an allocation, based upon a participant’s account balance, of any earnings or losses. The benefit to which a participant is entitled is the benefit that can be provided from the Participant’s vested account. | |||
| (d) | Vesting | ||
| Participants are vested immediately in their personal contributions and the Company’s contributions. |
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| (e) | Plan Termination | ||
| Although it has not expressed any intent to do so, the Company has the right under the Plan to discontinue its contributions at any time and to terminate the Plan subject to the provisions of ERISA. In the event of Plan termination, participants would remain 100% vested in all funds represented by their account balance. | |||
| (f) | Payment of Benefits | ||
| On termination of employment including disability or retirement, a participant with a balance greater than $5,000 may request payment in a lump sum amount equal to the value of the vested interest in his or her account. Upon the death of an employee, the named beneficiary receives a lump sum amount equal to the vested balance in the deceased employee’s account. Participants with vested balances in their accounts of $1,000 or less must take a lump sum distribution. Participants who terminate employment with a vested balance greater than $1,000 but less than or equal to $5,000 must have their vested balance rolled over to an IRA, unless they make a voluntary election for another form of distribution or roll-over. | |||
| (g) | Participant Loans | ||
| Participants may borrow from their accounts the lesser of $50,000 or 50% of the account balance. Participants may carry up to two loans secured by the balance in their account. Loans are generally fixed rate and are written with an interest rate of 1% over Prime. Existing loans presently range from 4.25% to 9.25%. Principal and interest is paid according to amortization schedules through biweekly payroll deductions. | |||
| (h) | Risks and Uncertainties | ||
| The Plan invests in various investment securities. Investment securities are exposed to various risks such as interest rates and market risks. Due to the level of risk associated with investment securities, it is at least reasonably possible that changes in the values of investment securities will occur in the near term and that such changes could materially affect participants’ account balances and the amounts reported in the statement of net assets available for benefits. |
| (a) | Basis of Presentation | ||
| The Plan’s financial statements have been prepared on an accrual basis of accounting. Benefits are recorded when paid. Cash equivalents are generally funds held in money market funds at December 31, 2010 and 2009. Amounts in prior year’s financial statements are reclassified when necessary to conform to current year’s presentation. |
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| (b) | Investments and Participant Loans | ||
| The Plan’s investments are valued on a daily basis, using quoted market prices. Purchases and sales of securities are recorded on a trade-date basis. Dividends are recorded on the ex-dividend date. Participant loans are valued at their outstanding unpaid principal amounts plus accrued interest. | |||
| (c) | Use of Estimates | ||
| The preparation of financial statements, in conformity with U.S. generally accepted accounting principles; require management to make estimates and assumptions affecting the reported amounts of assets and liabilities and changes therein, and disclosure of contingent assets and liabilities. Actual results could differ from those estimates. The current economic environment has increased the degree of uncertainty inherent in those estimates and assumptions. | |||
| (d) | Subsequent Events | ||
| In connection with the preparation of financial statements, the Plan evaluated subsequent events after the balance sheet date of December 31, 2010 through July 14, 2011, which was the date the financial statements were issued. | |||
| (e) | Effects of New Accounting Pronouncements | ||
| In January 2010, the FASB issued Accounting Standards Update (ASC) 2010-06, Fair Value Measurements and Disclosures (Topic 820) — Improving Disclosures about Fair Value Measurements. This guidance requires: (i) separate disclosure of significant transfers between Level 1 and Level 2 and reasons for the transfers; (ii) disclosure, on a gross basis, of purchases, sales issuances, and net settlements within Level 3; (iii) disclosures by class of assets and liabilities; and (iv) a description of the valuation techniques and inputs used to measure fair value for both recurring and nonrecurring fair value measurements. This guidance is effective for reporting periods beginning after December 15, 2009, except for the Level 3 disclosure requirements, which will be effective for fiscal years beginning after December 15, 2010 and interim periods within those fiscal years with early adoption permitted. | |||
| The FASB issued ASU 2010-25, Reporting Loans to Participants by Defined Contribution Pension Plans, a consensus of the Financial Accounting Standards Board Emerging Issues Task Force, which states that loans should be classified as notes receivable carried at amortized cost plus any accrued but unpaid interest and that such loans are exempt from the fair value and credit quality disclosure requirements. The update is effective for periods ending after December 15, 2010. Retrospective application is required and early adoption is permitted. The Plan adopted ASU 2010-25 in the 2010 financial statements, applied retrospectively for all periods presented. The adoption of ASU 2010-25 was not significant. |
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| Investments, including those that represent 5% or more of the net assets available for benefits, at December 31, 2010 or 2009 are as follows: |
| 2010 | 2009 | |||||||
Money market funds: |
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Money market fund |
$ | 1,144,234 | 1,211,435 | |||||
Mutual funds: |
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Domestic equity mutual funds: |
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American Growth Fund Inc. |
$ | 1,296,239 | 1,271,033 | |||||
Investment Company of America |
748,053 | 654,495 | ||||||
Blackrock — Mid Cap Value Equity Fund Class A |
1,310,961 | 612,096 | ||||||
Blackrock — Aurora Class A |
— | 395,307 | ||||||
Vanguard 500 Index Fund — Admiral Signal Shares |
1,073,419 | 877,486 | ||||||
Foreign equity mutual funds: |
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American Europacific Growth Fund |
719,275 | 628,151 | ||||||
American New Perspective Fund |
697,845 | 625,928 | ||||||
Bond mutual funds: |
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Intermediate Bond Fund America |
967,759 | 689,091 | ||||||
Blended mutual funds: |
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MFS Total Return Fund A |
583,922 | 565,515 | ||||||
Total mutual funds |
$ | 7,397,473 | 6,319,102 | |||||
Common stock: |
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Bar Harbor Bankshares |
$ | 2,569,037 | 2,076,486 | |||||
| During 2010 and 2009, the Plan’s investments appreciated in value (including realized gains and losses on investments bought, sold, and held during the year) as follows: |
| Year ended December 31 | ||||||||
| 2010 | 2009 | |||||||
Mutual Funds |
$ | 685,075 | 1,146,485 | |||||
Common stock of Bar Harbor Bankshares |
134,000 | 108,653 | ||||||
| $ | 819,075 | 1,255,138 | ||||||
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| The Plan uses a three-level hierarchy for disclosure of fair value measurements. The valuation hierarchy is based upon the transparency of inputs to the valuation of an asset or liability as of the measurement date. A financial instrument’s categorization within the valuation hierarchy is based upon the lowest level of input that is significant to the fair value measurement. The three levels are defined as follows: |
| • | Level 1 — Inputs to the valuation methodology are quoted prices (unadjusted) for identical assets or liabilities in active markets. | ||
| • | Level 2 — Inputs to the valuation methodology include quoted prices for similar assets and liabilities in active markets and inputs that are observable for the asset or liability, either directly or indirectly, for substantially the full term of the financial instrument. | ||
| • | Level 3 — Inputs to the valuation methodology are unobservable and significant to the fair value measurement (i.e. supported by little or no market activity). All fair values of investments measured at December 31, 2010 and 2009 were determined using Level 1 inputs |
| The Internal Revenue Service has issued an opinion letter dated March 31, 2008 to the prototype sponsor that the form of the plan and underlying trust, as then designed, were in compliance with the applicable requirements of the Internal Revenue Code (IRC) and therefore the plan is exempt from income taxes. Although the Plan has been amended since receiving the opinion letter, the plan administrator believes that the Plan is designed and is currently being operated in compliance with the applicable requirements of the IRC. |
| Shares of common stock issued by the Company represent certain Plan investments (see Note 3). The decision to invest in Company stock is voluntary on the part of participants. These transactions are party-in-interest transactions. Senior officers are prohibited from purchasing, selling, or reallocating their positions in the Company’s common stock during times of established blackouts or while in possession of insider information. Bar Harbor Trust Services, a subsidiary of the Plan Sponsor, was the custodian with respect to the common stock of the Plan Sponsor through September 30, 2009. Beginning October 1, 2009 Wilmington Trust Retirement and Institutional Services Company became the custodian of the common stock of the Plan Sponsor. Shares of Wilmington Prime Money Market Fund issued by Wilmington Trust Retirement and Institutional Services Company, the Plan trustee, represent party-in-interest transactions (see Note 3). Effective December 1, 2010, Reliance Trust Company became Trustee and investments (including Bar Harbor Bankshares) were held by Fidelity Investments. Participant loan distributions and repayments are also considered party-in-interest transactions. |
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| During 2010, there were delays by the Plan Sponsor in submitting certain employee deferrals totaling $248. These amounts due to the Plan were submitted after December 31, 2010. The Plan Sponsor has assessed any lost earnings and excise taxes due for the resulting costs. These transactions have not been reported on the schedule of nonexempt party-in-interest transactions because the Plan Sponsor has corrected these delays under the Voluntary Fiduciary Compliance Program and has satisfied the condition of Prohibited Transaction Exemption 2002 — 51. |
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| (c) Description of investment | ||||||||
| (b) Identity of Issuer, | including maturity date, | |||||||
| borrower, lessor, or | rate of interest, collateral, par, | (d) Current | ||||||
| (a) | similar party | or maturity value | value | |||||
Cash-Pass through account |
$ | 84,176 | ||||||
| * | Fidelity Retirement Money Market |
Money market fund | 1,144,234 | |||||
American Growth Fund Inc |
Equity mutual fund, 42,583 shares | 1,296,239 | ||||||
American Europacific Growth Fund |
Foreign equity mutual fund, 17,386 shares | 719,275 | ||||||
American New Perspective Fund |
Foreign equity mutual fund, 24,383 shares | 697,845 | ||||||
Intermediate Bond Fund America |
Bond mutual fund, 72,060 shares | 967,759 | ||||||
Investment Company of America |
Equity mutual fund, 26,564 shares | 748,053 | ||||||
MFS Total Return Fund A |
Equity mutual fund, 41,413 shares | 583,922 | ||||||
Blackrock — Mid Cap Value
Equity Fund Class A |
Equity mutual fund, 114,594 shares | 1,310,961 | ||||||
Vanguard 500 Index Fund —
Admiral Signal Shares |
Equity mutual fund, 11,219 shares | 1,073,419 | ||||||
| * | Bar Harbor Bankshares |
Common stock, 88,435 shares | 2,569,037 | |||||
| * | Participant Loans Receivable |
Interest rates — 4.25 — 9.25% | 409,924 | |||||
| $ | 11,604,159 | |||||||
| * | Party-in-interest |
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| Participant | ||||||||||||||||||||
| contributions | ||||||||||||||||||||
| transferred | ||||||||||||||||||||
| late to the | ||||||||||||||||||||
| Plan | ||||||||||||||||||||
| Check here if | Totally | |||||||||||||||||||
| late | fully | |||||||||||||||||||
| Participant | corrected | |||||||||||||||||||
| loan | Total that Constitute Nonexempt Prohibited Transactions | under | ||||||||||||||||||
| prepayments are included |
Contributions | Contributions corrected outside |
Contributions pending correction |
VFCP and PTE |
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| o | Not corrected | VFCP | in VFCP | 2002-51 | ||||||||||||||||
| $ | 248 | $ | — | $ | — | $ | — | $ | 248 | |||||||||||
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| Bar Harbor Bankshares 401(k) Plan | ||||
By:
|
/s/ Marsha C. Sawyer | Date: July 14, 2011 | ||
| Marsha C. Sawyer | ||||
| Plan Administrator | ||||
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| Exhibit No. | Exhibit | |
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|
Consent of KPMG LLP |
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