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Insert For TARP Proxy

Insert for Bar Harbor Proxy

Bar Harbor Bankshares and
Subsidiaries

Pro Forma Condensed Consolidated Balance Sheet

September 30, 2008

(dollars in thousands)

(Unaudited)

    As of

    Pro Forma Adjustments

    Pro Forma

    09/30/08

    Minimum

    Maximum

    Minimum

    Maximum

    Balance Sheet Data:

    ASSETS

    Cash and due from banks
    $9,290

    $0

    $0

    $9,290

    $9,290

    Securities available for sale, at fair value
    269,609

    0

    0

    269,609

    269,609

    Loans, net of allowance for loan losses
    618,985

    0

    0

    618,985

    618,985

    Other Assets
    44,120

    0

    0

    44,120

    44,120

         TOTAL ASSETS
    $942,004

    $0

    $0

    $942,004

    $942,004

    LIABILITIES

    Total deposits (1)
    $578,163

    ($6,250)

    ($10,000)

    $571,913

    $568,163

    Borrowings(1)
    295,572

    0

    (8,751)

    295,572

    286,821

    Other Liabilities
    5,598

    0

    0

    5,598

    5,598

         TOTAL LIABILITIES
    879,333

    (6,250)

    (18,751)

    873,083

    860,582

    STOCKHOLDERS’ EQUITY

    Preferred Stock (1) (2)
    $0

    $6,250

    $18,751

    $6,250

    $18,751

    Capital Stock
    7,287

    0

    0

    7,287

    7,287

    Warrants (2) (4)
    0

    195

    584

    195

    584

    Discount on Preferred Stock (2) (3)
    0

    (195)

    (584)

    (195)

    (584)

    Surplus
    4,863

    0

    0

    4,863

    4,863

    Retained Earnings
    67,258

    0

    0

    67,258

    67,258

    Accumulated other comprehensive (loss) income
    (3,715)

    0

    0

    (3,715)

    (3,715)

    Treasury Stock
    (13,022)

    0

    0

    (13,022)

    (13,022)

         TOTAL STOCKHOLDERS’ EQUITY
    62,671

    6,250

    18,751

    68,921

    81,422

         TOTAL LIABILITIES AND

             STOCKHOLDERS’ EQUITY
    $942,004

    $0

    $0

    $942,004

    $942,004

(1) Pro forma amounts are based on an investment by the UST of a minimum
of $6.25 million and a maximum of $18.75 million in Capital Purchase Program
Securities.  The Company expects ultimately to utilize the proceeds to (i) strengthen
the Bank’s capital position, (ii) increase, where prudent, consumer and commercial
lending and (iii) facilitate the appropriate acquisition of bank branches or entire
banks.  Prior to such deployment, the TARP Capital Purchase Program proceeds, as
assumed in the pro forma financial statements above,  may be used to reduce brokered
deposits and other borrowings.   Expenses related to the issuance of Capital
Purchase Program Securities and the Warrants are expected to be immaterial and have not
been deducted from the sale proceeds.

(2) The proceeds from the sale of the Capital Purchase Program
Securities would be allocated between the  Shares and Warrants based on their
relative fair values on the issue date.  The fair value of the Warrants would be
determined using the Black-Scholes model which includes assumptions regarding the
Company’s common stock price, dividend yield, and stock price volatility, as well as
assumptions regarding the risk-free interest rate.  The fair value of the
Shares would be determined based on assumptions regarding the discount rate (market rate)
on the  Shares (currently estimated at 12%).

(3) The discount on the   Shares would be determined based on the
value that is allocated to the Warrants upon issuance, and would be accreted back to the
value of the  Shares over a five-year period (the expected life of the   Shares
upon issuance) using the constant effective yield method (approximately 5.7%).

(4) In connection with issuance of the Capital Purchase Program
Securities, and based on the market value of the Company’s   twenty day
average common share price as of November 21, 2008, the Company estimates it would issue
Warrants to the UST giving it the right to purchase approximately 34.8k shares of common
stock based on the Company’s sale of the minimum number of Capital Purchase Program
Securities, and 104.4k shares based on the Company’s sale of the maximum number of
Capital Purchase Program Securities.

Bar Harbor Bankshares and Subsidiaries

Pro Forma Condensed Consolidated Statements of Income

Pro Forma Impact of Minimum Estimated Proceeds

$6.25MM Preferred and Warrants for 34.8k shares

Year Ended December 31, 2007

(in thousands, except per share data)

    Historical

    12 Months

    Ended

    12/31/07

    Adjustments

    (unaudited)

    Pro Forma

    12 Months

    Ended

    12/31/07

    Net Interest Income
    $22,903

    $253
    (1)
    $23,156

    Loan Loss Provision
    456

    456

         Net Interest Income after
    Provision
    22,447

    253

    22,700

    Noninterest Income
    5,929

    5,929

    Noninterest Expense
    18,201

    18,201

         Income/(Loss) Before Taxes
    10,175

    253

    10,428

    Provision for Income Taxes
    3,020

    89
    (2)
    3,109

         Income before Preferred Dividends
    7,155

    165

    7,320

    Less: Preferred Dividends
    0

    348
    (3)
    348

         Income available to common
    shareholders
    $7,155

    ($183)

    $6,972

    Basic Earnings Per Share
    $2.36

    ($0.06)

    $2.30

    Diluted Earnings Per Share
    $2.30

    ($0.06)

    $2.24

    Weighted Average Shares Outstanding:

         Basic
    3,037,074

    3,037,074

         Diluted
    3,112,736

    4,914
    (4)
    3,117,650

(1) Assumes Capital Purchase Program proceeds are used to reduce
brokered deposits and short-term borrowings at an assumed annualized rate of approximately
4%. The actual impact to net interst income would be differnt as the Company expects
ultimately to utilize a portion of the proceeds to (i) increase, where prudent, consumer
and commercial lending and (ii) facilitate the appropriate acquisition of bank branches or
entire banks. However, such impact cannot be estimated at this time as the impact would
vary based on the timing of when the loans are funded, the actual pricing of any such
loans, and the cost of funding. Prior to such deployment, the TARP Capital Purchase
Program proceeds, as assumed in the pro forma financial statements above, may be used to
reduce brokered deposits and short term borrowings or augment investment securities.

(2) Additional income tax expense is attributable to additional net
interest income as described in Note (1).

(3) Consists of dividends on preferred stock at a 5% annual rate as well
as accretion on discount on preferred stock upon issuance. The discount is determined
based on the value that is allocated to the warrants upon issuance. The discount is
accreted back to par value on a constant effective yield method (approximately 5.7%) over
a five year term, which is the expected life of the preferred stock upon issuance. The
estimated accretion is based on a number of assumptions which are subject to change. These
assumptions include the discount (market rate at issuance) rate on the preferred stock,
and assumptions underlying the value of the warrants. The estimated proceeds are allocated
based on the relative fair value of the warrants as compared to the fair value of the
preferred stock. The fair value of the warrants is determined under a Black-Scholes model.
The model includes assumptions regarding Bar Harbor’s common stock price, dividend
yield, stock price volatility, as well as assumptions regarding the risk-free interest
rate. The lower the value of the warrants, the less negative impact on net income and
earnings per share available to common shareholders. The fair value of the preferred stock
is determined based on assumptions regarding the discount rate (market rate) on the
preferred stock (currently estimated at 12%). The lower the discount rate, the less
negative impact on net income and earnings per share available to common shareholders.

(4) As described in the Section titled “Additional Terms of the
Capital Purchase Program”, if approved to participate in the Capital Purchase
Program, the UST would receive warrants to purchase a number of shares of the
Company’s common stock having an aggregate market price equal to 15% of the proceeds
on the date of issuance with a strike price equal to the trailing twenty day trading
average leading up to the closing date. This pro forma assumes that the warrants would
give the UST the option to purchase 34.8k shares of Bar Harbor& Trust common stock.
The pro forma adjustment shows the increase in diluted shares outstanding assuming that
the warrants had been issued on January 1, 2007 at a strike price of $26.94 (based on the
trailing twenty day Bar Harbor average share price as of November 21, 2008) and remained
outstanding for the entire period presented. The treasury stock method was utilized to
determine dilution of the warrants for the period presented.

Bar Harbor Bankshares and
Subsidiaries

Pro Forma Condensed Consolidated Statements of Income

Pro Forma Impact of Maximum Estimated Proceeds

$18.75MM Preferred and Warrants for 104.4k shares

Year Ended December 31, 2007

(in thousands, except per share data)

    Historical

    12 Months

    Ended

    12/31/08

    Adjustments

    (unaudited)

    Pro Forma

    12 Months

    Ended

    12/31/07

    Net
    Interest Income
    $22,903

    $759

    (1)
    $23,662

    Loan
    Loss Provision
    456

    456

    Net Interest Income after Provision
    22,447

    759

    23,206

    Noninterest Income
    5,929

    5,929

    Noninterest
    Expense
    18,201

    18,201

    Income/(Loss) Before Taxes
    10,175

    759

    10,934

    Provision for
    Income Taxes
    3,020

    266
    (2)
    3,286

         Income before Preferred Dividends
    7,155

    494

    7,649

    Less:
    Preferred Dividends
    0

    1,042
    (3)
    1,042

    Income available to common shareholders
    $7,155

    ($548)

    $6,607

    Basic
    Earnings Per Share
    $2.36

    ($0.18)

    $2.18

    Diluted
    Earnings Per Share
    $2.30

    ($0.19)

    $2.11

    Weighted
    Average Shares Outstanding:

    Basic
    3,037,074

    3,037,074

    Diluted
    3,112,736

    14,744

    (4)

    3,127,480

(1) Assumes Capital Purchase Program proceeds are used to reduce
brokered deposits and short-term borrowings at an assumed annualized rate of approximately
4%. The actual impact to net interst income would be differnt as the Company expects
ultimately to utilize a portion of the proceeds to (i) increase, where prudent, consumer
and commercial lending and (ii) facilitate the appropriate acquisition of bank branches or
entire banks. However, such impact cannot be estimated at this time as the impact would
vary based on the timing of when the loans are funded, the actual pricing of any such
loans, and the cost of funding. Prior to such deployment, the TARP Capital Purchase
Program proceeds, as assumed in the pro forma financial statements above, may be used to
reduce brokered deposits and short term borrowings or augment investment securities.

(2) Additional income tax expense is attributable to additional net
interest income as described in Note (1).

(3) Consists of dividends on preferred stock at a 5% annual rate as well
as accretion on discount on preferred stock upon issuance. The discount is determined
based on the value that is allocated to the warrants upon issuance. The discount is
accreted back to par value on a constant effective yield method (approximately 5.7%) over
a five year term, which is the expected life of the preferred stock upon issuance. The
estimated accretion is based on a number of assumptions which are subject to change. These
assumptions include the discount (market rate at issuance) rate on the preferred stock,
and assumptions underlying the value of the warrants. The estimated proceeds are allocated
based on the relative fair value of the warrants as compared to the fair value of the
preferred stock. The fair value of the warrants is determined under a Black-Scholes model.
The model includes assumptions regarding Bar Harbor’s common stock price, dividend
yield, stock price volatility, as well as assumptions regarding the risk-free interest
rate. The lower the value of the warrants, the less negative impact on net income and
earnings per share available to common shareholders. The fair value of the preferred stock
is determined based on assumptions regarding the discount rate (market rate) on the
preferred stock (currently estimated at. The lower the discount rate, the less negative
impact on net income and earnings per share available to common shareholders.

(4) As described in the Section titled “Additional Terms of the
Capital Purchase Program”, if approved to participate in the Capital Purchase
Program, the UST would receive warrants to purchase a number of shares of the
Company’s common stock having an aggregate market price equal to 15% of the proceeds
on the date of issuance with a strike price equal to the trailing twenty day trading
average leading up to the closing date. This pro forma assumes that the warrants would
give the UST the option to purchase 104.4k shares of Bar Harbor’s common stock. The
pro forma adjustment shows the increase in diluted shares outstanding assuming that the
warrants had been issued on January 1, 2007 at a strike price of $26.94 (based on the
trailing twenty day Bar Harbor average share price as of November 21, 2008) and remained
outstanding for the entire period presented. The treasury stock method was utilized to
determine dilution of the warrants for the period presented.

Bar Harbor Bankshares and
Subsidiaries

Pro Forma Condensed Consolidated Statements of Income

Pro Forma Impact of Minimum Estimated Proceeds

$6.25MM Preferred and Warrants for 34.8k shares

Year Ended December 31, 2007

(in thousands, except per share data)

    Historical

    9 Months

    Ended

    09/30/08

    Adjustments

    (unaudited)

    Pro Forma

    9 Months

    Ended

    09/30/08

    Net Interest Income
    $19,952

    $189
    (1)
    $20,141

    Loan Loss Provision
    1,669

    1,669

         Net Interest Income after
    Provision
    18,283

    189

    18,472

    Noninterest Income
    6,205

    6,205

    Noninterest Expense
    15,334

    15,334

         Income/(Loss) Before Taxes
    9,154

    189

    9,343

    Provision for Income Taxes
    2,840

    66
    (2)
    2,906

         Income before Preferred Dividends
    6,314

    123

    6,437

    Less: Preferred Dividends
    0

    261
    (3)
    261

         Income available to common
    shareholders
    $6,314

    ($138)

    $6,176

    Basic Earnings Per Share
    $2.13

    ($0.05)

    $2.09

    Diluted Earnings Per Share
    $2.09

    ($0.05)

    $2.04

    Weighted Average Shares Outstanding:

         Basic
    2,959,120

    2,959,120

         Diluted
    3,025,526

    3,286
    (4)
    3,028,812

(1) Assumes Capital Purchase Program proceeds are used to reduce
brokered deposits and short-term borrowings at an assumed annualized rate of approximately
4%. The actual impact to net interst income would be differnt as the Company expects
ultimately to utilize a portion of the proceeds to (i) increase, where prudent, consumer
and commercial lending and (ii) facilitate the appropriate acquisition of bank branches or
entire banks. However, such impact cannot be estimated at this time as the impact would
vary based on the timing of when the loans are funded, the actual pricing of any such
loans, and the cost of funding. Prior to such deployment, the TARP Capital Purchase
Program proceeds, as assumed in the pro forma financial statements above, may be used to
reduce brokered deposits and short term borrowings or augment investment securities.

(2) Additional income tax expense is attributable to additional net
interest income as described in