April 12, 2011

 Dear Shareholder:

            The 2011 Annual Meeting of the shareholders of Bar Harbor Bankshares will be held at 11:00 a.m. EDT on Tuesday, May 17, 2011, at the Bar Harbor Club located at 111 West Street in Bar Harbor, Maine. Our directors and officers join me in inviting you to attend this meeting and the reception following. The Notice of Annual Meeting, Proxy Statement and Proxy Card are enclosed, along with the Company’s 2010 Summary Annual Report and Annual Report on Form 10K.

            The accompanying Notice of Annual Meeting of shareholders describes matters to be acted upon at the Annual Meeting. Please give these materials your prompt attention. Then we ask that you complete, sign, date and mail promptly the enclosed Proxy Card in the return envelope, or use telephone or internet voting to ensure that your shares are represented and voted at the meeting. Shareholders who attend the Annual Meeting may withdraw their proxy and vote in person if they wish to do so. Your vote is extremely important, so please act at your earliest convenience.

            We look forward to seeing you on May 17^th. Please join us for the reception even if you are unable to attend the business meeting.

Enclosures

1 

             Notice is hereby given that the Annual Meeting of the Shareholders of Bar Harbor Bankshares (the "Annual Meeting") will be held at the Bar Harbor Club at 111 West Street in Bar Harbor, Maine, on Tuesday, May 17, 2011, at 11:00 a.m. EDT to consider and act upon the following proposals:

            The Board of Directors has fixed the close of business on March 21, 2011 as the record date for determining the shareholders of the Company entitled to receive notice of, and to vote at, the Annual Meeting (the "Record Date"). Only shareholders of record of the Company’s common stock at the close of business on the Record Date are entitled to receive notice of, and to vote at, the Annual Meeting.

            YOUR VOTE IS IMPORTANT, SHAREHOLDERS ARE URGED TO SIGN AND RETURN THE ENCLOSED PROXY IN THE POSTAGE PREPAID ENVELOPE AS PROMPTLY AS POSSIBLE WHETHER OR NOT THEY PLAN TO ATTEND THE MEEING IN PERSON. YOU MAY ALSO DELIVER YOUR VOTE BY TELEPHONE OR INTERNET BY FOLLOWING THE INSTRUCTIONS ON YOUR PROXY CARD OR VOTING INSTRUCTIONS FORM. SHAREHOLDERS WHO ATTEND THE ANNUAL MEETING MAY WITHDRAW THEIR PROXY AND VOTE IN PERSON IF THEY WISH TO DO SO.

By Order of the Board of Directors

/s/ Marsha C. Sawyer

Marsha C. Sawyer, Clerk

2

PROXY STATEMENT

            This Proxy Statement is furnished to the Shareholders of Bar Harbor Bankshares (the "Company") in connection with the solicitation of proxies on behalf of the Board of Directors for use at the Annual Meeting of Shareholders (the "Annual Meeting"). The Annual Meeting will be held on Tuesday, May 17, 2011, at 11:00 a.m. EDT at the Bar Harbor Club located at 111 West Street in Bar Harbor, Maine. The official Notice of the Annual Meeting of Shareholders accompanies this Statement. A Form of Proxy for use at the meeting and a return envelope for the proxy are enclosed.

            The Notice of Annual Meeting, Proxy Statement, and Proxy Card were first mailed to the Company’s shareholders on or about April 12, 2011 to solicit proxies for the Annual Meeting. Any shareholder giving a proxy has the right to revoke it at any time before it is exercised; therefore, the delivery of an executed Proxy Card will not in any way affect a shareholder’s right to attend the Annual Meeting and vote in person. Revocation may be made prior to the Annual Meeting by a written revocation, or by submitting a duly executed Proxy Card bearing a later date sent to the Company. attention: Marsha C. Sawyer, Clerk 82 Main Street, Bar Harbor, Maine 04609; or a proxy may be revoked personally at the Annual Meeting prior to the voting of the proxy.

            In absence of specific instructions to the contrary, shares represented by properly executed proxies received by the Company, including unmarked proxies, will be voted.

            Proposal - I "FOR" the election of the fourteen (14) persons nominated as directors by the Board of Directors;

            Proposal - II "FOR" setting the number of directors at fourteen [14]; and

            Proposal - III "FOR" approval of the non-binding, advisory resolution on the compensation of the named executive officers; and

            Proposal - IV "FOR" the option of "EVERY YEAR" as your preference for the frequency with which shareholders are provided an advisory vote on the compensation of our named executive officers; and

            Proposal - V "FOR" ratification of the appointment of KPMG LLP as the independent registered public accounting firm of the Company for the ensuing year.

            Except for procedural matters incidental to the conduct of the Annual Meeting, the Board of Directors does not know of any matters other than those described in the Notice of Annual Meeting that are to come before the Annual Meeting. If any other matters are properly brought before the Annual Meeting, the persons named in the proxy will vote the shares represented by such proxy on such matters as determined by a majority of the Board of Directors.

            Only shareholders of record as of March 21, 2011 (the "Record Date") will be entitled to notice of, to attend, and to vote at, the Annual Meeting. Each share is entitled to cast one vote for each of the fourteen (14) director nominees to the Company’s Board of Directors and to cast one vote on each of the other matters to be voted on at the Annual Meeting. Cumulative voting is not permitted. As of the Record Date, 3,841,590 shares of the Company’s common stock, $2.00 par value ("Common Stock"), were outstanding and entitled to vote at the Annual Meeting. The presence at the Annual Meeting, either in person or by proxy, of the holders of not less than a majority of the shares entitled to vote at any meeting will constitute a quorum. If a quorum is present at the Annual Meeting, action may be taken on any matter considered, excepting only the election of directors, by the holders of a majority of the shares present and voting. Directors are elected by a plurality of the votes cast by the shares entitled

3

to vote in the election at a meeting at which a quorum is present. The inspector of election will treat abstentions and broker non-votes as shares that are present and entitled to vote for purposes of determining the presence of a quorum, but not for purposes of voting with respect to determining the approval of any matter submitted to the Shareholders for a vote. Shareholders who are present will have an opportunity to vote on each matter properly brought before the Annual Meeting. A broker non-vote occurs when a broker or other nominee holder, such as a bank, submits a proxy representing shares that another person actually owns, and that person has not given voting instructions to the broker or other nominee holder, such as a bank, submits a proxy representing shares that another person actually owns, and that person has not given voting instructions to the broker or other nominees.

The following is the Board’s recommendation with respect to each of the items to be considered and voted upon at the Annual Meeting:

            Proposal I - The Board of Directors recommends that you vote "FOR" the election of the fourteen (14) persons nominated as directors;

            Proposal II - The Board of Directors recommends that you vote "FOR" setting the number of directors for the ensuing year at fourteen (14);

            Proposal III - The Board of Directors recommends that you vote "FOR" the approval of the non-binding advisory resolution on the compensation of the named executive officers;

            Proposal IV – The Board of Directors recommends that you vote "FOR" the option of "EVERY YEAR" as your preference for the frequency with which shareholders are provided an advisory vote on the compensation of our named executive offers; and

            Proposal V – The Board of Directors recommends that you vote "FOR" ratification of the appointment of KPMG LLP as the independent registered public accounting firm of the Company for the ensuing year.

            It is not anticipated that any matters will be presented at the Annual Meeting other than as set forth in the accompanying Notice of the Annual Meeting. If any other matters are presented properly at the Annual Meeting, however, the proxy will be voted by the proxy holders in accordance with the recommendations of the Board.

            Voting by Mail. Shareholders can ensure that their shares are voted at the Annual Meeting by completing, signing, dating, and mailing the enclosed proxy card in the enclosed, postage prepaid envelope.

            Voting by Telephone or the Internet. If you choose to vote by telephone or the Internet, instructions to do so are set forth on the enclosed proxy card. If you vote by telephone or the Internet, you do not have to mail in your proxy card, but your vote must be received by the voting deadline set forth on the proxy card.

            If your shares are held by a bank, broker, or other nominee, please follow the instructions provided with your proxy materials supplied by your bank or broker.

Revocability of Proxies

            Any shareholder who executes and delivers a proxy has the right to revoke it at any time before it is exercised by filing with the Company Clerk an instrument revoking it, or by submitting a duly executed proxy bearing a later date. A proxy may also be revoked by attending the Annual Meeting and voting in person at the Annual Meeting. If your shares are held in street name, you should follow the instructions of your broker, bank or nominee regarding the revocations of proxies.

Solicitation of Proxies

            Proxies are being solicited by the Board of Directors of the Company, (the "Board"), principally through the mail. The Board of Directors and Management of the Company may also solicit proxies personally, or by telephone, e-mail, or facsimile transmission. The entire expense of solicitation, including costs of preparing assembling and mailing the proxy material will be borne by the Company

4

            In addition, the Company will provide without charge upon the written request of any shareholder a copy of the Company’s Annual Report on Form 10-K, including the financial statements and the financial statement schedules, required to be filed with the United States Securities and Exchange Commission ("SEC") for the fiscal year ended December 31, 2010. Requests should be directed to Bar Harbor Bankshares, Attn: Investor Relations, 82 Main Street, Bar Harbor, Maine 04609.

            At the Annual Meeting of Shareholders, fourteen (14) director-nominees will stand for re-election to serve until the 2012 Annual Meeting of Shareholders and until each director’s successor is elected and qualified. Each director-nominee has consented to serve, and to the use of his or her name in this Proxy. All fourteen (14) of the director-nominees currently serve on the Board of the Company.

            The Board has determined the majority of director-nominees are "independent directors" as required in accordance with applicable laws, regulations, and NYSE Amex listing requirements. The exception is director-nominee Joseph M. Murphy, who serves as President and Chief Executive Officer of the Company. Mr. Murphy does not serve as a voting member of the Audit, Compensation and Human Resources, or Governance Committees.

Board of Director’s Recommendation

            THE BOARD OF DIRECTORS RECOMMENDS THAT THE SHAREHOLDERS VOTE "FOR" THE ELECTION OF THE FOURTEEN (14) PERSONS NOMINATED AS DIRECTORS IN THE PROXY.

            The Company’s Board of Directors currently consists of fourteen (14) members. The Bylaws of the Company provide for no fewer than nine (9) or more than twenty-seven (27) directors, with directors serving annual terms.

Board of Director’s Recommendation

            THE BOARD OF DIRECTORS RECOMMENDS THAT THE SHAREHOLDERS VOTE "FOR" SETTING THE NUMBER OF DIRECTORS FOR THE ENSUING YEAR AT FOURTEEN (14).

            The recently enacted Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 the ("Dodd-Frank Act"), requires the Company to provide shareholders an opportunity to vote to approve, on a non-binding, advisory basis, the compensation of named executive officers as disclosed in this proxy statement. This vote does not address any specific item of compensation, but rather the overall compensation of the Company’s named executive officers and its compensation philosophy, policies and practices, as disclosed in this proxy statement.

5

            The compensation of the Company’s named executive officers is disclosed in the Compensation Discussion and Analysis, the summary compensation table and the other related tables and narrative disclosure contained elsewhere in this proxy statement. As discussed in those disclosures, the Board of Directors believes that our executive compensation philosophy, policies, and procedures provide a strong link between each named executive officer’s compensation and our short and long-term performance. The objective of our executive compensation program is to provide compensation which is competitive based on our performance and aligned with the long-term interests of our shareholders.

            The Company asks shareholders to indicate their support of our named executive offers’ compensation as described in this proxy statement. This proposal will be presented at the Annual Meeting as a resolution in substantially the following form:

            RESOLVED, on an advisory basis, that the compensation paid the Company’s named executive officers, as disclosed pursuant to Item 402 of Regulation S-K, including the Compensation Discussion and Analysis, compensation tables and narrative discussion, is hereby APPROVED.

Board of Director’s Recommendation

            THE BOARD OF DIRECTORS RECOMMENDS THAT THE SHAREHOLDERS VOTE "FOR" THIS PROPOSAL.

            The Dodd-Frank Act also requires the Company to permit a separate non-binding, advisory shareholder vote with respect to the frequency of the advisory vote on the compensation of its named executive officers. In particular, you may vote whether the advisory vote should occur every three years, every two years, or every year. Shareholders may also abstain from voting.

Board of Director’s Recommendation

            THE BOARD OF DIRECTORS RECOMMENDS THAT SHAREHOLDERS VOTE "FOR" THE OPTION OF ‘EVERY YEAR’ AS YOUR PREFERENCE FOR THE FREQUENCY WITH WHICH SHAREHOLDERS ARE PROVIDED AN ADVISORY VOTE ON THE COMPENSATION OF OUR NAMED EXECUTIVE OFFICERS.

General

            As discussed in the Compensation Discussion and Analysis, the Board of Directors believes that its current executive compensation programs directly link executive compensation to its short and long-term financial performance and align the interests of its named executive officers with those of its shareholders. After careful consideration of this Proposal IV, the Board of Directors has determined that an advisory vote on executive compensation that occurs every year is the most appropriate alternative, and therefore the Board of Directors recommends that you vote for an annual advisory vote on executive compensation.

            In formulating its recommendation, the Board of Directors considered that an annual advisory vote on executive compensation will provide shareholders with direct input on the Company’s executive compensation in a timely manner and enable the Board of Directors to respond effectively to such input.

            Although the advisory vote is non-binding, the Board of Directors will review the results of the vote and take them into account in making a determination concerning the frequency of advisory votes on executive compensation.

6

            The company’s Audit committee has appointed KPMG LLP as the Company’s principal independent registered public accounting firm for the fiscal year ending December 31, 2011. The Company is asking its shareholders to ratify the appointment of KPMG LLP as its independent registered public accounting firm because it believes it is a matter of good corporate practice to do so. If the Company’s shareholders do not ratify the appointment, the Audit Committee will reconsider whether to retain KPMG LLP, but may still retain them. Even if the appointment is ratified, the Audit committee, in its discretion, may change the appointment at any time during the year if it determines such a change would be in the best interest of the Company and its shareholders.

Information regarding the audit fees and reports of KPMG LLP is set forth in this Proxy under the caption INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM.

Our Recommendation

            THE BOARD OF DIRECTORS RECOMMENDS THAT SHAREHOLDERS VOTE "FOR" THE RATIFICATION OF THE APPOINTMENT OF KPMG LLP AS THE COMPANY’S INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM FOR THE YEAR ENDING DECEMBER 31, 2011.

 VOTING SECURITIES AND PRINCIPAL HOLDERS THEREOF

            As of the Record Date, the Company had outstanding 3,841,590 shares of its voting common stock (the "Common Stock"), par value $2.00 per share.

            The following table sets forth information with respect to the beneficial ownership of the Company’s voting Common Stock as of the Record Date (unless otherwise noted), by: (i) each person or entity known by the Company to own beneficially more than five percent (5%) of the outstanding Common Stock calculated on the outstanding shares on December 31, 2010, (ii) each current director-nominee for director on the Company’s Board of Directors, (iii) the Company’s named executive officers (as defined on page 29 of this Proxy under the heading "2010 Summary Compensation Table") and (iv) all executive officers and directors as a group.

(This space intentionally left blank)

9

            The Parker Trust was established in 1955 in perpetuity. Bar Harbor Trust Services, the Company’s second tier non-depository trust services Company located in Ellsworth, Maine, is the sole Trustee, with full powers, of this trust benefiting the Mt. Heights Cemetery in Southwest Harbor, Maine.

            The Fred & Hattie Lynam Private Foundation, formerly known as the Lynam Trust, was established in 1942 in perpetuity to benefit Mount Desert Island charities and to provide scholarships to graduates of Mount Desert Island High School. Bar Harbor Trust Services is the sole Trustee, with full powers, and administers the trust with the assistance of an established Grant and Scholarship Committee made up of members of the Bar Harbor Bankshares Board of Directors and community representatives.

            The information provided is based on the records of the Company and on information furnished by the persons listed.

            The Company is not aware of any arrangement that could at a subsequent date result in a change in control of the Company.

SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE

            Section 16(a) of the Securities Exchange Act of 1934 requires the Company’s officers, directors, and persons who own more than ten percent (10%) of a registered class of the Company’s equity securities (collectively "Section 16 Persons") to file initial reports of ownership and reports of changes of ownership with the U.S. Securities and Exchange Commission (the "Commission") and the NYSE Amex (formerly the American Stock Exchange or "AMEX" and hereinafter "NYSE Amex"). Section 16 Persons are required by the Commission regulations to furnish the Company with copies of all Section 16(a) forms they file.

            To the Company’s knowledge, based solely on review of such reports provided to the Company and written representations, all reports were filed timely and as required except for:

            On December 14, 2010, Mr. Scott Toothaker gifted 100 shares each to his two minor children for which timely reporting did not occur. On December 23, 2010, a Form 4 was filed reflecting his updated ownership.

            A Form 5 was filed for Kenneth E. Smith on February 11, 2011 that included a total of 18 shares purchased through a dividend reinvestment account in March, June, September, and December 2007 not previously reported.

DIRECTORS AND EXECUTIVE OFFICERS

Directors and Nominees:

            The Company’s Board of Directors currently consists of fourteen (14) members. The Board has determined the majority of director-nominees are "independent directors" as required in accordance with applicable laws, regulations, and NYSE Amex listing requirements. The exception is director–nominee Murphy, who serves as President and Chief Executive Officer of the Company. Mr. Murphy does not serve as a voting member of the Audit, Compensation and Human Resources, or Governance Committees.

            The following table sets forth for each director-nominee for election, their name, age as the Record Date and positions with the Company or its subsidiaries, Bar Harbor Bank & Trust ("BHBT") and Bar Harbor Trust Services ("BHTS").

Executive Officers:

            Set forth below is a list of the Company’s named executive officers, including their ages as of the Record Date, and positions with the Company and its subsidiaries, Bar Harbor Bank & Trust ("BHBT") and Bar Harbor Trust Services ("BHTS") as of the Record Date:

11

            The Bylaws of the Company provide that the executive officers be elected annually by the Board of Directors and that the President and Chief Executive Officer, Chairperson of the Board, Treasurer, and Clerk shall serve at the pleasure of the Board and until their successors have been chosen and qualified. All other officers serve at the pleasure of the Chief Executive Officer. There are no arrangements or understanding between any of the directors, executive officers, or any other persons pursuant to which the above directors have been selected as directors or any of the above officers have been selected as officers. There are no "family relationships" as defined by the Commission, between any director, executive officer, or person nominated or chosen by the Company to become a director or executive officer.

Business Experience

            The principal occupation and business experience for at least the last five (5) years for each director, nominee, and executive officer is set forth below. None of the organizations discussed below, except for Bar Harbor Bank & Trust and Bar Harbor Trust Services, are affiliated with the Company.

Directors and Nominees:

Robert C. Carter. Mr. Carter resides in Machias, Maine. He presently operates Carter Enterprises, a rental management business also located in Machias, Maine. He is a former game warden for the Maine Department of Inland Fisheries. Mr. Carter previously owned and operated Helen’s Restaurant and Machias Motor Inn for 12 and 20 years, respectively. Mr. Carter’s business experience and first-hand knowledge of the Washington County business community and local issues provides essential guidance to the Company in this unique market.

12

Thomas A. Colwell. Mr. Colwell resides in Deer Isle, Maine. Mr. Colwell is the former President of Colwell Bros. Inc. (lobster pounding) and retired from that position as of December 31, 2006. He is a director of the Lobster Institute, the Penobscot East Resource Center (non-profit), and a past member of the Maine Lobster Pound Association. His knowledge of this specialized industry and the working waterfront provides a unique understanding to the Board of this important segment of business lending for a community bank operating on the coast of Maine.

Jacquelyn S. Dearborn. Mrs. Dearborn resides in Holden, Maine, and has a private mediation practice and works for the Court Alternative Resolution Service serving the Ellsworth and Bangor court systems. Mrs. Dearborn is also employed as Treasurer of the law office of Joel A. Dearborn Sr. Esq., PA located in Brewer, Maine, and is the former President of C. K. Foster, Co., Inc. of Ellsworth, Maine. She has served on various civic and municipal boards. Mrs. Dearborn’s association with various boards, committees, and work experiences brings a diverse perspective to the Board.

Peter Dodge. Mr. Dodge resides in Blue Hill, Maine, and is President, Insurance Agent, and majority owner of Peter Dodge Agency d/b/a Merle B. Grindle Agency, John R. Crooker Agency, and The Endicott Agency, providing insurance services from locations in Blue Hill, Bucksport, and Castine, Maine. Mr. Dodge has been part of our Board since 1987 and is the longest serving director who brings a historical, long-term perspective and leadership to the Board. He has served as Chairperson of the Company’s Loan, Audit, and Compensation and Human Resources Committees various times during his tenure, before accepting the position of Chairperson of the Board in May, 2009.

Martha T. Dudman. Ms. Dudman resides in Northeast Harbor, Maine, and is a fundraising consultant and published author. She is past President and General Manager of Dudman Communications Corporation, operating a group of radio stations in Ellsworth and Bangor, Maine. She previously served as Senior Counsel with Gary Friedmann & Associates, providing consulting service to nonprofits throughout the State of Maine. She has extensive experience in business management, public relations, marketing and sales. Ms. Dudman has been awarded membership in the Deborah Morton Society, recognizing women of high distinction in their careers and public service and whose leadership in civic, cultural, and social causes has been exceptional. She serves on several non-profit boards and is currently Chairperson of the Northeast Harbor Library.

Lauri E. Fernald. Ms. Fernald resides in Mount Desert, Maine, and is a Certified Funeral Service Provider, President and an owner in Jordan-Fernald headquartered in Mount Desert, Maine. She is also Managing Partner of Jordan Family Properties LLC and L.E. Fernald LLC, operating as real estate holding companies. Ms. Fernald serves on the finance committees of Hospice Volunteers of Hancock County and St. Mary and St. Jude Episcopal Church of Northeast Harbor. She is also a board member of Maine Coast Healthcare Foundation and Woodbine Cemetery Association both of Ellsworth and Brookside Cemetery Corp. of Mount Desert.

Gregg S. Hannah. Mr. Hannah resides in Surry, Maine, and formerly served as Secretary and Treasurer of Hannah & Associates Inc., a marketing consulting firm. He is a past Associate Professor of Business Management at Nichols College in Dudley, Massachusetts. Mr. Hannah was employed in a professional investment capacity from 1973 to 1987 and is a Chartered Financial Analyst. His investment experience is valuable to his assigned role as a member of the Trust Committee. Mr. Hannah is currently a Trustee and member of the Executive Committee of the Woodlawn Museum.

Clyde H. Lewis. Mr. Lewis resides in Sullivan, Maine, and is Vice President, General Manager, and an owner of Morrison Chevrolet Inc., of Ellsworth, Maine. He is presently a member of the Executive Board of the Downeast Family YMCA. He has served as President of the Ellsworth Chamber of Commerce, is a Past Master of the Lygonia Masonic Lodge, and a member of the Anah Temple and Hancock County Shrine Clubs. His knowledge of and contacts with residents and customers from the large geographic area surrounding Ellsworth brings unique market intelligence to the Board.

Joseph M. Murphy. Mr. Murphy resides in Mount Desert, Maine, and is President and Chief Executive Officer of Bar Harbor Bankshares and Bar Harbor Bank & Trust. Mr. Murphy has over 35 years of banking experience at the executive level with community banks in Connecticut (Centerbank), Delaware (WSFS Bank) and Maine (BHB). He serves as a member of the Executive Committee of Maine Banker’s Association. He currently serves as a board member of Friends of Acadia and the Maine Sea Coast Mission.

13

Robert M. Phillips. Mr. Phillips resides in Sullivan, Maine, and is a former consultant for Cherryfield Foods, Maine Wild Blueberry, and Oxford Foods, food processors with locations in Washington County, Maine. Mr. Phillips serves as a consultant for the Wild Blueberry Association of North America and the Maine Wild Blueberry Commission, is a Maine Trustee of the Eastern States Exposition ("the BIG E"), is on the Technology Board of the Maine Technology Institute, and is an advisor to the Food Science Department of the University of Maine. Mr. Phillips is also the project manager of a house currently being built for Habitat for Humanity. Mr. Phillip’s expert knowledge gained by his employment in the wild blueberry industry has been an important resource to the Board for this important agricultural business segment of Downeast Maine.

Constance C. Shea. Mrs. Shea resides in Mount Desert, Maine, and is a Real Estate Broker and a former owner in Sylvia Shea Inc. d/b/a Lynam Real Estate Agency, Bar Harbor, Maine. Mrs. Shea is also the owner of a commercial real estate property located in Bar Harbor, Maine. She serves as Treasurer of the Somesville Library Association. Mrs. Shea has been involved with the real estate brokerage business since 1989. Her perspective of year round and seasonal real estate markets provides valuable insights into real estate trends in our major markets, especially Mount Desert Island, which is important to the activities of the Loan Committee.

Kenneth E. Smith. Mr. Smith resides in Bar Harbor, Maine, and has been owner and Innkeeper of Manor House Inn since 2003 and former owner of Wonder View Inn, both lodging facilities located in Bar Harbor, Maine. The hospitality industry is a critical segment of the local economy and the Bank’s commercial loan portfolio. Mr. Smith’s 36 years of experience and expertise in the field are highly valued by the Board. Mr. Smith has served as Chairperson of the Bar Harbor Town Council and is a member of the Anah Temple Shrine.

Scott G. Toothaker. Mr. Toothaker resides in Ellsworth, Maine, and is a Principal and Vice President of Melanson Heath & Co., PC, a CPA firm with an office located in Ellsworth, Maine, which specializes in professional services to small businesses and entrepreneurs throughout New England. He holds a MBA from the University of Maine and a MST from Bentley College. A practicing CPA, Mr. Toothaker serves as Chairperson of the Audit Committee.

David B. Woodside. Mr. Woodside resides in Bar Harbor, Maine, and is Chief Executive Officer and General Manager of The Acadia Corporation, a locally owned company operating restaurants and retail shops located in Acadia National Park and Bar Harbor, Maine. Since receiving his BS degree in Business Administration from the University of Maine, Mr. Woodside has been employed by Acadia Corporation for 35 years. In addition to serving numerous local non-profit organizations, Mr. Woodside serves as Vice Chairperson of the National Park Hospitality Association, representing the diverse companies providing visitor hospitality services in National Parks across the country. His in-depth knowledge of the retail industry and its impact on the tourist segment of the local economy, as well as his involvement with tourism on the national level provides significant expertise to the Board.

Executive Officers:

Joseph M. Murphy. For a summary of Mr. Murphy’s business experience, refer to the "Directors and Nominees" section immediately above.

Gerald Shencavitz. Mr. Shencavitz resides in Mount Desert, Maine, and has served as Executive Vice President, Chief Financial Officer, and Treasurer of the Company since December, 2007. Prior to his promotion in December 2007 to Executive Vice President, he served as Chief Financial Officer and Treasurer of the Company since June 2001. Mr. Shencavitz has served as Executive Vice President, Chief Financial Officer, and Chief Operating Officer of Bar Harbor Bank & Trust since his promotion in December, 2007. He was Chief Financial Officer, Senior Vice President and Chief Operating Officer of Bar Harbor Bank & Trust between June 2001 and December, 2007. Mr. Shencavitz serves as Treasurer of Bar Harbor Trust Services, an office he has held since 2001. Mr. Shencavitz has also served as a member of the Federal Home Loan Bank of Boston’s Advisory Panel since 2007.

Michael W. Bonsey. Mr. Bonsey resides in Bar Harbor, Maine, and has served as Senior Vice President of Credit Administration of Bar Harbor Bank & Trust since December, 2001. Mr. Bonsey served as Vice President of Credit Administration from 2000 through December, 2001. Mr. Bonsey is the Chairperson of the Mount Desert Island Hospital’s Finance Committee and is a past President of Bar Harbor Rotary.

14

Gregory W. Dalton. Mr. Dalton resides in Mount Desert, Maine, and has served as Senior Vice President of Business Banking of Bar Harbor Bank & Trust since 2000. He is also an owner in both the Bar Harbor Jam Co. and its real estate holding companies, Blueberry Partners LLC and Triangle Development LLC located in Bar Harbor, Maine. Mr. Dalton also serves as Vice Chair of the MDI YMCA and is a board member of Criterion Theatre and Neighborhood House.

Stephen M. Leackfeldt. Mr. Leackfeldt resides in Harrington, Maine, and has served as Senior Vice President of Retail Banking and Consumer Lending of Bar Harbor Bank & Trust since 2001. He is also the owner of State Cinemas located in Calais, Maine.

CORPORATE GOVERNANCE

Board of Directors:

            A Board of Directors comprised of fourteen (14) members managed the Company during 2010. A majority of the Board of Directors meets the independence standards established by NYSE Amex. The Board has determined that all the named director-nominees listed in this Proxy, with the exception of Mr. Murphy, meet applicable independence standards established by NYSE Amex. The Board of Directors of the Company held a total of twelve (12) regular meetings, and one (1) annual meeting during 2010. The Bylaws of the Company provide for a minimum of quarterly meetings. Each director attended at least 75% of the total number of board and committee meetings that he or she was eligible to attend. The Board encourages, but does not require, each director to attend its Annual Meeting. All of the Board’s members attended the 2010 Annual Meeting.

            There have been no changes to the composition of the Board of Directors since Peter Dodge accepted the role as Chairperson of the Board at the Annual Director’s meeting immediately following the Annual Meeting on May 19, 2009. Thomas Colwell stepped down from the Chairperson’s position on that date and assumed the role of the newly created Vice Chairperson.

            The Board of Directors provides oversight to the management of the Company's risk profile, including but not limited to internal controls over financial reporting, credit risk, interest rate risk, liquidity risk, operational risk, reputational risk and compliance risk. The Board of Directors monitors and manages these risks through the activities of specialized Board Committees in conjunction with management, internal audit, the independent registered public accounting firm, and other independent advisors. Some of the more significant risks and the Board’s oversight of those risks are described below.

            The Board manages credit risk through a Director’s Loan Committee, which operates at the BHBT level and meets at least monthly. This committee sets loan policy, establishes credit authorities, and approves or ratifies all extensions of credit over $1,000,000. This committee regularly reviews credit trends, delinquencies, non-performing loans and recommends loans to be charged off to the Board of Directors.

15

            The Asset and Liability Management Committee (ALCO) comprised by the entire senior management team and chaired by the Chief Financial Officer assists in the management of interest rate and liquidity risk. This committee meets on a regular basis to review market interest rate trends and product pricing strategies. On a quarterly basis, ALCO meets with its asset and liability management consultant, Darling Consulting Group, to review current trends, possible interest rate or liquidity risks in the balance sheet and to review prospective strategies over typically a two-year horizon using their proprietary modeling services. The Chairperson of the Board attends these quarterly meetings and the findings and recommendations are reported to the full Board by the consultants at twice a year. The Company's balance sheet position and risk mitigation strategies are reviewed by internal audit and the data verified by an outsourced specialist from M & M Consulting.

            The Board manages incentive compensation risk through its Compensation and Human Resources Committee. This committee has engaged Pearl Meyer & Company as compensation consultants to provide this committee with both competitive market data and research into compensation best practices to guide the decisions of this committee. To mitigate the inherent risks of incenting behaviors potentially adverse to the Company and its stakeholders, the committee has reviewed the plans with the assistance of the Chairperson of the Audit Committee who has been charged by the Board to ensure that incentive plans for senior officers and others do not encourage excessive risk-taking.

            The Company’s Audit Committee meets quarterly and receives reports from its independent registered public accounting firm, the independent loan review consultants, and the Company's internal audit function. The senior auditor conducts an annual risk-based audit program and provides audit findings quarterly.

            The Board of Directors has required and management has established an internal Enterprise Risk Management committee, chaired by the Chief Financial Officer, and attended by several key operational officers, the senior internal auditor and the compliance officer. This committee is charged with surfacing emerging risks and identifying accountabilities for managing such risks. No members of the Board of Directors serve on this Committee; however, reports of the meetings are shared and discussed with the Board of Directors.

            The Company believes that its risk management activities and procedures will provide sufficient information to management and the Board of Directors to assist them in properly and adequately evaluating the Company’s compliance with its risk management programs and policies. There can be no assurance that the Board’s risk oversight structure has identified and addressed every potential material risk and there may be additional risks that could arise in the Company’s business. Both known and unknown risks could result in potentially material financial and/or business losses despite the Board’s efforts to oversee risk.

Committees

            The Board of Directors has a standing Executive Committee, Audit Committee, Governance Committee, and Compensation and Human Resources Committee.

            Executive Committee

            The Bylaws of the Company provide that after each Annual Meeting of Shareholders, the Board shall designate from among its members an Executive Committee with the authority to exercise all the powers of the Board of Directors in regard to ordinary operations of the business of the Company when the Board is not in session, subject to any specific vote of the Board. The Executive Committee for 2010 included directors Dodge, Colwell, Dudman, Murphy, Phillips, Shea, Toothaker, and Woodside. Peter Dodge has served as Chairperson. The Executive Committee held two (2) meetings in 2010.

            Audit Committee

16

            The Company’s Board has determined that the Audit Committee is composed of independent directors, in accordance with applicable NYSE Amex listing requirements and Rule 10A-3(b)(1) under the Exchange Act. The Audit Committee operates under a written charter, which has been adopted by the Audit Committee and the Company’s Board. Audit Committee members do not accept any consulting, advisory, or other compensatory fees (except directors fees) and are not affiliated with the Company (except as a director) or any of its subsidiaries. The Board of Directors has determined that the Company has at least one "audit committee financial expert" serving on its Audit Committee. Mr. Scott G. Toothaker, CPA, meets the criteria for an "audit committee financial expert" and is "independent" within the meaning of the rules adopted by the NYSE Amex pursuant to the Sarbanes-Oxley Act of 2002.

            The Audit Committee has the sole authority to appoint and replace the independent registered public accounting firm. The Audit Committee is responsible for the compensation and oversight of the independent registered public accounting firm and this firm reports directly to the Audit Committee. The Audit Committee assists the Board of Directors in fulfilling its oversight responsibilities with respect to (i) the financial information to be provided to shareholders and the Commission; (ii) the review of quarterly financial statements; (iii) the system of financial reporting controls management has established; and (iv) the internal audit, external audit, and loan review processes.

            Governance Committee

            The Governance Committee for 2010 was comprised of directors Shea, Dodge, Colwell, Carter, and Lewis. The Governance Committee met four (4) times during 2010. Mrs. Shea served as Chairperson of the Committee. The Company Board of Directors has determined that each member of the Governance Committee is independent for purposes of NYSE Amex listing standards.

            The Governance Committee’s responsibilities include screening director candidates, recommending nominees to the full Board of Directors (including the slate of returning directors) to be elected each year, making recommendations concerning the size and composition of the Board of Directors, recommending Committee structure and membership, and sponsoring new director orientation and education. The Governance Committee has a written charter, which may be viewed on the Company’s general website under the Investor Relations section at www.BHBT.com.

            The Governance Committee expects to identify nominees to serve as directors of the Company primarily by accepting and considering the suggestions and nominee recommendations made by directors, management, and shareholders. To date the Governance Committee has not engaged any third parties to assist it in identifying candidates for the Board of Directors. The Governance Committee considers among other things the background, business and professional experience (including any requisite financial expertise or other special qualifications), current employment, community service, and other board service of its director-nominees, as well as racial, ethnic, and gender diversity of the Board as a whole. The Governance Committee generally considers a candidate’s qualifications in light of these broad criteria as well as an assessment as to whether the candidate can make decisions on behalf of or while representing the Company in a manner consistent with its stated business goals and objectives. The Governance Committee will also consider the candidate’s "independent" status in accordance with applicable regulations and listing standards. The Governance Committee will consider nominees recommended by shareholders. Any shareholder wishing to nominate a candidate for director must follow the procedures for submission of proposals set forth in the section of this Proxy Statement entitled "Nominations by Shareholders."

            The Compensation and Human Resources Committee reviews and considers recommendations from management, consultants, and directors concerning executive compensation policies, employee benefit plans, and salary administration programs, including reviewing annually the performance, total compensation, and recommended adjustments for all executive officers the Company’s and its subsidiaries. The deliberations of the Compensation and Human Resources Committee are reported to the Board of Directors for review and approval. The Compensation and Human Resources Committee has a written charter, which may be viewed on the Company’s general website under the Investor Relations section at www.BHBT.com.

17

            The Compensation and Human Resources Committee is comprised of Company directors Phillips, Colwell, Dearborn, Dodge, and Fernald. Mr. Phillips serves as Chairperson of the Committee. The Company’s and Bank’s President and Chief Executive Officer, Mr. Murphy, serves on the Committee in a non-voting, ex-officio capacity, as does the Bank’s Senior Vice President of Human Resources, Mrs. Marsha C. Sawyer. All voting members of the Compensation and Human Resource Committee are independent for purposes of NYSE Amex listing standards. The Compensation and Human Resources Committee met six (6) times during 2010.

            Further information regarding the Compensation and Human Resources Committee can be found below in this Proxy Statement beginning under the caption "Role of the Compensation Committee." The Compensation Committee report appears at page 29 of this Proxy Statement.

COMPENSATION OF DIRECTORS AND EXECUTIVE OFFICERS

COMPENSATION OF EXECUTIVE OFFICERS

Compensation Discussion and Analysis

            In the paragraphs that follow, is an overview and analysis of the Company’s compensation program and policies, the material compensation decisions made under those programs and policies with respect to its named executive officers, and the material factors considered in making those decisions. Later in this Proxy Statement under the heading, "Executive Compensation" is a series of tables containing specific information about the compensation earned or paid to the named executive officers, referred to as "NEOs."

            The discussion below is intended to aid understanding the detailed information provided in those tables and put that information into context within the overall compensation program.

Named Executive Officers

            As used in this Proxy Statement, the term "named executive officers" or "NEOs" includes: (i) the Company’s Chief Executive Officer ("CEO"), Joseph M. Murphy and Chief Financial Officer ("CFO"), Gerald Shencavitz, and (ii) the Company’s three (3) other most highly compensated policy making, executive officers who earned more than $100,000 in total compensation during the Company’s last fiscal year. In 2010, the other three NEOs were Senior Vice Presidents: Michael W. Bonsey, Gregory W. Dalton and Stephen M. Leackfeldt.

            The objective of the Company’s compensation program is to attract, retain, motivate, and reward NEOs and other executives who contribute to its financial and operational success, which ultimately builds value for its shareholders. The Company Board of Directors believes that, in order to do this effectively, the program must:

• Provide Company NEOs with total compensation opportunities at levels that are competitive for comparable positions at companies and banks with whom it competes for talent;

• directly link a significant portion of total compensation to the Company’s achievement of performance goals in a way that proportionally rewards higher performance levels;

• provide significant upside opportunities for exceptional individual performance, which can result in differentiated compensation among NEOs based on performance; and

• Closely align the NEOs’ interest with those of Company shareholders by making stock-based incentives an element of the executive’s compensation over time.

18

Role of the Compensation Committee

            The Compensation and Human Resources Committee (the "Committee") oversees regulatory compliance for all Company compensation and benefit plans and administers the Company’s executive compensation programs. The Committee recommends these programs to the Company’s Board of Directors for approval at least annually and more frequently, if circumstances warrant. These programs are intended to provide a variety of competitive compensation components including base salaries, traditional benefits, annual cash performance incentives, and retirement programs. In addition, the Company has sought to align the long-term interests of its executives, including the NEOs, with those of the shareholders by providing share-based incentives in the form of stock option grants. The composition of the components may vary from year to year based on individual performance, the Company’s business plan, market conditions, or other factors.

            The Committee believes that the Company’s compensation policies and procedures are designed to provide a strong link between each NEO’s compensation and the Company’s short and long-term performance. The objective of the Company’s compensation program is to provide compensation which is competitive, variable based on the Corporation’s performance, and aligned with the long-term interests of shareholders.

            Shareholders were first entitled to vote on an advisory, non-binding resolution on the Company’s compensation policies and procedures in 2009. Ninety-three percent of the shareholders voting, representing seventy-three percent of the outstanding shares, voted in favor of the Company’s practices.

            The Compensation Committee will continue to consider the outcome of future advisory, non-binding Say on Pay votes when considering future executive compensation arrangements.

            The Committee approves and recommends to the Board compensation programs it believes meets the Company’s ongoing need to attract, motivate, and retain talented and qualified executives who have the ability to make a major contribution to the leadership and success of the Company. The Committee regularly reviews industry-standard compensation survey information provided by the Company’s compensation consulting firm, Pearl Meyer & Partners. Pearl Meyer & Partners is retained by the Committee and does not provide any other consulting services to the Company or its subsidiaries. Pearl Meyer & Partners draws salary information from its own proprietary database and public filings detailing compensation programs. In addition, the Committee reviews comparative salary and benefit information gleaned from public filings of a peer group the Company established for compensation comparison (the "Compensation Peer Group"). The Committee felt it was important to expand its Compensation Peer Group to financial institutions outside of Maine to incorporate a larger selection of publicly-traded financial institutions and provide a representation of the geographical area that may be considered for recruitment purposes. With the assistance of Pearl Meyer & Partners, the Company redefined its 2010 Compensation Peer Group to the companies listed below. The Committee believes these Compensation Peer Group filings disclose compensation programs of similarly situated executives in comparable institutions throughout Maine and the Northeast region and they are a useful comparative tool for the Committee in establishing executive compensation programs and individual criteria for its executives including the NEOs. The Compensation Peer Group information is used as a guide in establishing reasonableness in the Company’s compensation program.

(This space intentionally left blank)

 19

              Financial performance statistics for the Company’s Compensation Peer Group is shown for the nine months ended September 30, 2010. The statistical information was provided to Pearl Meyer & Partners by SNL Financial. For 2010, the Company Compensation Peer Group was comprised of the following institutions.

            The Committee did not target the elements of its compensation program at any specific level or percentile within the Peer Group, but used the information as a whole and the 50th percentile as a way to determine the competitiveness and reasonableness of the Company’s pay practices. Rather than rely on a specific formula-based model, the Committee believes that retaining discretion to also assess the overall performance of NEOs gives the Committee the ability to more accurately reflect individual contributions that cannot be absolutely quantified. The Committee also considers the senior incentive program tailored to provide more emphasis on incentive compensation for the NEO group as an important component of the Company’s overall compensation program.

            The Committee used detailed compensation information on the Compensation Peer Group as disclosed in the most recent proxy filings available for competitive reference along with market salary survey information provided by Pearl Meyer & Partners. The Committee further referenced salary survey information and guidance provided by Pearl Meyer & Partners in its process to establish compensation levels for this group.

 20

            2010 compensation and comparative market salary information is detailed below:

*Bank employees, including NEOs are paid on a 26 bi-weekly basis most years. Infrequently, the calendar
provides for 27 bi-weekly pay days. NEO’s received 1/26^th of their 2009 base salary on January 4,
2010 to accommodate this additional pay date. This adjusting amount is not reflected in the base salary identified
above for comparison purposes.

1Source A is comprised of Peer Group Average Proxy filing data from the financial institutions disclosed
on page 20 of base salary and cash (incentive) compensation and multiple industry survey results utilized
by Pearl Meyer & Partners.

            The Committee also considers the relative scarcity of senior banking executive candidates in its immediate market area and the difficulties of recruiting out-of-market candidates to work in rural Maine. The Committee does not use any formal, fixed, or indexed criteria for establishing compensation levels for any of its NEOs within market identified ranges. The Committee believes over time, the growth in total compensation provided to its executive officers should be more heavily weighted towards incentive compensation opportunities directly tied to corporate performance with less emphasis upon growth in base salaries.

Role of Management in Establishing Compensation

            On an annual basis Mrs. Marsha C. Sawyer, the Senior Vice President of Human Resources, with the oversight of the Chief Executive Officer, provides the Committee with general information on executive officer compensation, including the NEOs. The Committee then reviews, discusses, and considers this information and any recommendations. The Chief Executive Officer and the Senior Vice President of Human Resources generally attend Committee meetings but were not present for the executive sessions or for any discussion of their own compensation. Mrs. Sawyer assists in the administration of all executive compensation programs, prepares Committee and Board meeting materials and performs work as requested by the Committee, including working directly with the Company’s Compensation Consultant in preparation of peer analyses for the Committee’s consideration. Mr. Murphy, the Company’s President and Chief Executive Officer, attends portions of the Committee’s meetings and makes recommendations on base salary, annual incentives, and equity compensation for executive officers who report to him. The Committee has the discretion to accept, reject, or modify the CEO’s

21

recommendations. No changes occurred in 2010 with respect to the participation by management in the compensation process.

Compensation Consultants

            The Committee has occasionally utilized, and expects to utilize in the future, various outside consultants, actuaries, and employment attorneys to assist it in developing and implementing the essential components of the Company’s compensation program, including its stock option program, Supplemental Executive Retirement Plan ("SERP"), and incentive compensation arrangements.

            During 2010, Committee Chair, Robert Phillips attended a multi-day conference sponsored by Bank Director Magazine, NASDAQ, and Institutional Shareholder Services specifically targeted at Bank Executive & Board Compensation best practices. In January, 2008, the Committee, under authority granted by its Charter, engaged Pearl Meyer & Partners to assist in a total review of the Company’s executive officer and director compensation packages. During 2008, Pearl Meyer’s engagement included:

• A comprehensive and competitive review of the Company’s total compensation arrangements including base salaries, equity and retirement programs for the Company’s CEO and its senior executives including the NEOs;

• A comprehensive review of the Company’s compensation program for its directors;

• Recommendations for an expanded, appropriate Peer Company comparison group for compensation purposes;

• Assisting in the establishment of an appropriate compensation mix and pay for performance plan based on the Company’s size, geographic location, and unique characteristics;

• Developing a short-term, annual cash incentive plan for its executives, including NEOs with thresholds, targets, and stretch goals tied to the Company’s strategic and long-term financial plans; and

• Assisting with the development of an equity incentive plan to encourage decision-making with the long-term interests of the Company in mind by executives including the NEOs.

            The Committee continues to review and implement portions of Pearl Meyer & Partner’s 2008 recommendations. In addition Pearl Meyer & Partners provided the following services since the 2008 report:

• Provided oversight and testing of the Company’s proposed Bar Harbor Bankshares and Subsidiaries Equity Incentive Plan of 2009 for reasonableness prior to submitting it for a shareholder vote in May 2009;

• Provided a competitive assessment of total compensation, by component and in aggregate for the Compensation Committee’s review in 2009;

• Performed a pay-performance analysis and peer group performance comparison for the CEO position in 2009; and

• Provided 2009 and 2010 current market-based total compensation guidelines to assist in establishing appropriate and ongoing compensation levels for the Company’s NEOs.

22

Compensation Plan Components

The Company’s executive compensation program applicable to the NEOs is comprised of the following primary components: (a) base salaries and benefits, (b) annual incentive cash compensation programs, (c) long-term incentives in the form of stock option grants, and (d) retirement benefits: