BHB

Business Context and Reporting Period

Company: Bar Harbor Bankshares (BHB)
Filing Type: Form 10-Q (Unaudited)
Reporting Period: Quarter ended March 31, 2026
Overview: Bar Harbor Bankshares is a Maine-based financial institution holding company operating primarily through its subsidiary, Bar Harbor Bank & Trust. The company serves businesses and consumers in Northern New England. The reporting period reflects the integration of the Guaranty Bancorp, Inc. (Woodsville) acquisition completed in July 2025.

Key Financial Metrics

Material Changes vs. Prior Period

• Profitability Growth: Net income increased 32% year-over-year, driven by a 16% increase in total interest and dividend income and a 17% increase in non-interest income.
• Net Interest Income: Net interest income rose to $36.9 million from $29.0 million. The Net Interest Margin expanded 37 basis points to 3.54%, aided by loan yield expansion (5.50% vs 5.42%) and lower deposit costs (1.91% vs 2.31%).
• Expense Management: Non-interest expenses increased $5.2 million to $29.8 million, primarily due to $1.5 million in acquisition-related costs and higher salaries/benefits from the Woodsville integration. Despite higher expenses, the efficiency ratio improved to 56.92%.
• Asset Quality: Non-accrual loans increased to $23.1 million from $11.6 million at the end of 2025, though net charge-offs remained minimal at $42 thousand. The provision for credit losses was $305 thousand compared to a credit of $57 thousand in the prior year.
• Unusual Items: The company recorded a $1.0 million loss on available-for-sale debt securities due to a write-down on a corporate bond with deteriorating credit quality. Conversely, non-interest income included a $1.3 million gain from bank-owned life insurance death benefits.

Guidance, Outlook, and Risks

Management Commentary: Management highlighted strong liquidity with approximately $1.0 billion in available same-day liquidity. The company remains "well capitalized" with a Tier 1 leverage ratio of 9.66% and a Common Equity Tier 1 ratio of 11.22%. The balance sheet is currently asset-sensitive, meaning net interest income is projected to improve if interest rates rise.

Risks and Contingencies:

• Interest Rate Risk: Sensitivity modeling indicates that a 200 basis point decrease in rates would reduce net interest income by 5.5% over one year, while a 200 basis point increase would improve it by 5.7%.
• Acquisition Integration: Risks associated with realizing expected synergies and cost savings from the Guaranty Bancorp acquisition.
• Asset Quality: Potential for increased credit losses if economic conditions in Northern New England deteriorate, particularly in the commercial real estate sector.
• Corporate Bond Impairment: Continued monitoring of a specific corporate bond investment that has required multiple write-downs.

Investor Verification Checklist

• Acquisition Synergies: Verify the timeline and progress of cost savings and revenue enhancements from the Guaranty Bancorp acquisition.
• Corporate Bond Exposure: Review the specific details and remaining exposure of the impaired corporate bond in the available-for-sale portfolio.
• Non-Accrual Trends: Monitor the trend of non-accrual loans, which doubled from Q4 2025 to Q1 2026, to assess potential future charge-offs.
• Deposit Stability: Assess the stability of the deposit base, noting the shift from non-interest bearing to interest-bearing accounts and the reliance on brokered deposits ($169.6 million).
• Interest Rate Sensitivity: Evaluate the impact of the current asset-sensitive position on future earnings if the Federal Reserve alters its rate trajectory.