Bar Harbor Bankshares redeems preferred stock, exits TARP

Bar Harbor Bankshares, the Maine-based holding company for Bar Harbor Bank & Trust, has redeemed the preferred stock it issued to the U.S. government and exited the Troubled Asset Relief Program.

The company repaid $18.75 million that it received from the Treasury Department in January 2009, along with all accrued and unpaid dividends. It completed the transaction on Wednesday.

As part of its participation in TARP, Bar Harbor also issued the Treasury a warrant to buy as many as 104,910 shares of its common stock at an exercise price of $26.81 per share.

The Treasury continues to hold the warrant, although the number of common shares it is entitled to purchase was halved by Bar Harbor's successful completion of a common stock offering in December.

That share sale generated $22.4 million and positioned the company to redeem its preferred stock.  Bar Harbor subsequently gained all the necessary regulatory approvals and moved quickly to exit TARP.

In a refreshing note of gratitude from a TARP beneficiary, Chief Executive Joseph M. Murphy said that the government's investment "enabled our Company to maintain a very strong capital position during extremely uncertain times while providing additional capacity and confidence to increase lending in our local markets."

The Treasury's warrant to buy 52,455 shares of Bar Harbor's common stock is close to showing a paper profit. The company's shares ended Friday at $26.75, just 6 cents below the exercise price.

Bar Harbor said it intends to repurchase the warrant from the Treasury at fair market value, but there is no guarantee that it will be able to come to terms with the agency on the price.