BHB 10-K & 10-Q changes, risk factors and insider trading
Bar Harbor Bankshares · NYSE · State Commercial Banks · CIK 743367 · All filings on SEC.gov
At a glance
What changed in the latest 10-K
Risk Factors
New heading “Potential downgrades of U.S. government securities by one or more of the credit ratings agencies could have a material adverse effect on our operations, earnings and financial condition.”
New heading “A portion of our loan portfolio consists of loan participations, which may have a higher risk of loss than loans we originate because we are not the lead lender and we have limited control over credit monitoring.”
New heading “We may continue to incur substantial costs related to our acquisition of Guaranty Bancorp and the integration of Woodsville, and these costs may be greater than anticipated due to unexpected events.”
New heading “We may fail to realize the anticipated benefits of acquiring Guaranty Bancorp.”
New heading “Our ability to maintain our reputation is critical to the success of our business and the failure to do so may materially adversely affect our performance.”
New heading “Inflation can have an adverse impact on our business and on our customers.”
New heading “Changes in U.S. trade policies, including the imposition of tariffs and retaliatory tariffs, may adversely affect our business, financial condition and results of operations.”
New heading “Our financial statements are based in part on assumptions and estimates, which, if wrong, could cause unexpected losses in the future.”
Largest changes
“Potential downgrades of U.S. government securities by one or more of the credit ratings agencies could have a material adverse effect on our operations, earnings and financial condition.”see in full comparison
“Pursuant to U.S. GAAP, we are required to use certain assumptions and estimates in preparing our financial statements, including in determining loan loss and litigation reserves, goodwill impairment and the fair value of certain assets and liabilities, among other items. If assumptions or estimates underlying our financial statements are incorrect, we may experience material losses.”see in full comparison
“Changes in U.S. trade policies, including the imposition of tariffs and retaliatory tariffs, may adversely affect our business, financial condition and results of operations.”see in full comparison
“A possible future downgrade of the sovereign credit ratings of the U.S. government and a decline in the perceived creditworthiness of U.S. government-related obligations could impact our ability to obtain funding that is collateralized by affected instruments, as well as affect the pricing of that funding when it is available. A downgrade may also adversely affect the market value of such instruments. We cannot predict if, when or how any changes to the credit ratings or perceived creditworthiness of these organizations will affect economic conditions. …”see in full comparison
“Inflation can have an adverse impact on our business and on our customers.”see in full comparison
“There have been significant changes to U.S. trade policies, including tariffs affecting China, Canada and Mexico and there continues to be significant discussion regarding other potential changes to U.S. trade policies, treaties and tariffs, including the potential for additional tariffs. In addition, retaliatory tariffs have been imposed and additional retaliatory tariffs are likely. …”see in full comparison
Full comparison: every changed paragraph (27)
We must maintain sufficient funds to respond to the needs of customers. To manage liquidity, we use a number of funding sources in addition to core deposit growth, loan repayments and maturities of loans and securities. These sources include FHLB and the Federal Reserve Bank (“FRB”) advances, proceeds from the sale of securities and loans and liquidity resources at the holding company. Our ability to manage liquidity will be severely constrained if unable to maintain access to funding or if adequate financing is not available to accommodate future growth at acceptable costs. In addition, if we need to rely heavily on more expensive funding sources to support future growth, revenues may not increase proportionately to cover costs. In this case, our operating margins and profitability would be adversely affected. Additionally, any deterioration in the FHLB’s performance or financial condition may affect our ability to access funding and/or require us to deem the required investment in FHLB stock to be impaired. If we are not able to access funding through the FHLB, we may not be able to meet our liquidity needs, which could have an adverse effect on our results of operations or financial condition. Similarly, if we deem all or part of our investment in FHLB stock impaired, such action could have an adverse effect on our financial condition or results of operations.
Additionally, any deterioration in the FHLB’s performance or financial condition may affect our ability to access funding and/or require us to deem the required investment in FHLB stock to be impaired. If we are not able to access funding through the FHLB, we may not be able to meet our liquidity needs, which could have an adverse effect on our results of operations or financial condition. Similarly, if we deem all or part of our investment in FHLB stock impaired, such action could have an adverse effect on our financial condition or results of operations.
Changes in interest rates can negatively affect the performance of most of our investment securities. Interest rate volatility can reduce unrealized gains or increase unrealized losses in our portfolio, as was the case in 2023 with the rising rate environment.portfolio. Interest rates are highly sensitive to many factors including monetary policies, domestic and international economic, social and political conditions and issues, including trade disputes, global health pandemics, and other factors beyond our control. Fluctuations in interest rates can materially affect both the returns on and market value of our investment securities.
Under current accounting standards, goodwill is not amortized but, instead, is subject to impairment tests on at least an annual basis or more frequently if an event occurs or circumstances change that reduce the fair value of a reporting unit below its carrying amount. A decline in our stock price or occurrence of a triggering event following any of its quarterly earnings releases and prior to the filing of the periodic report for that period could, under certain circumstances, require performance of a goodwill impairment test and result in an impairment charge being recorded for that period which was not reflected in such earnings release. During 2024,2025, our annual impairmentqualitative test conducted in October, using discounted cash flows and market-based approaches,assessment indicated that it was more likely than not that the estimated fair value of our solethe reporting unit “Bar Harbor Bank & Trust” exceeded theits carrying value.value, resulting in no impairment. In a future assessment, we could conclude that all or a portion of our goodwill is impaired, which would result in a non-cash charge to earnings.
Potential downgrades of U.S. government securities by one or more of the credit ratings agencies could have a material adverse effect on our operations, earnings and financial condition.
A possible future downgrade of the sovereign credit ratings of the U.S. government and a decline in the perceived creditworthiness of U.S. government-related obligations could impact our ability to obtain funding that is collateralized by affected instruments, as well as affect the pricing of that funding when it is available. A downgrade may also adversely affect the market value of such instruments. We cannot predict if, when or how any changes to the credit ratings or perceived creditworthiness of these organizations will affect economic conditions. Such ratings actions could result in a significant adverse impact on us. Among other things, a downgrade in the U.S. government’s credit rating could adversely impact the value of our securities portfolio and may trigger requirements that we post additional collateral for trades relative to these securities. A downgrade of the sovereign credit ratings of the U.S. government or the credit ratings of related institutions, agencies or instruments could significantly exacerbate the other risks to which we are subject and any related adverse effects on the business, financial condition and results of operations.
Credit losses are inherent in the business of making loans and could have a material adverse effect on operating results. We make various assumptions and judgments about the collectability of the loan portfolio and provide an ACL based on a number of factors. The ACL is evaluated on a periodic basis using current information, including the quality of the loan portfolio, economic conditions, and value of the underlying collateral and the level of non-accrual loans. Although we believe the ACL is appropriate to absorb probable losses in the loan portfolio, this allowance may not be adequate. Increases in the allowance will result in an expense for the period, thereby reducing reported net income. In addition, our regulators, as an integral part of their examination process, periodically review the allowance for credit losses on loans and may require us to increase the allowance for credit losses on loans by recognizing additional provisions for loan losses charged to income, or to charge-off loans, which, net of any recoveries, would decrease the allowance for credit losses on loans. Any such additional provisions for credit losses or charge-offs could have a material adverse effect on our financial condition and results of operation.
A portion of our loan portfolio consists of loan participations, which may have a higher risk of loss than loans we originate because we are not the lead lender and we have limited control over credit monitoring.
We occasionally purchase loan participations. Although we underwrite these loan participations consistent with our general underwriting criteria, loan participations may have a higher risk of loss than loans we originate because we are limited in our ability to monitor the performance of the loan and rely significantly on the lead lender . Moreover, our decisions regarding the classification of a loan participation and loan loss provisions associated with a loan participation are made in part based upon information provided by the lead lender. A lead lender also may not monitor a participation loan in the same manner as we would for loans that we originate. At December 31, 2025, we held loan participation interests in our commercial portfolio totaling $686 million and residential and consumer loans totaling $104 million.
In the course of business, we may own or foreclose and take title to real estate that may be subject to environmental liabilities with respect to subject property. As a result, we may be held liable for property damage, personal injury, investigation and restoration costs. The cost associated with investigation or restoration activities could be substantial. In addition, as the owner or former owner of a contaminated site, we may be subject to common law claims by third parties based on damages and costs resulting from environmental contamination emanating from the property. We may not have adequate remedies against the prior owner or other responsible parties and could find it difficult or impossible to sell the affected properties. These events could have an adverse effect on our financial condition and results of operations.
We may continue to incur substantial costs related to our acquisition of Guaranty Bancorp and the integration of Woodsville, and these costs may be greater than anticipated due to unexpected events.
We have incurred and expect to incur a number of non-recurring costs associated with the acquisition of Guaranty Bancorp, including facilities and systems consolidation costs and employment-related costs. We may also incur additional costs to maintain employee morale and to retain key employees. There are many factors beyond our control that could affect the total amount or the timing of the integration costs. Moreover, many of the additional costs that will be incurred are, by their nature, difficult to estimate accurately. These integration costs may result in the combined company taking additional charges against earnings, and the amount and timing of such charges are uncertain at present.
We may fail to realize the anticipated benefits of acquiring Guaranty Bancorp.
The success of our acquisition of Guaranty Bancorp will depend on, among other things, the ability to realize the anticipated benefits and cost savings from combining Woodsville’s business with the Bank’s business. To realize the anticipated benefits and cost savings, we must successfully integrate and combine our businesses in a manner that permits those cost savings to be realized without adversely affecting current revenues and future growth. If we are not able to successfully achieve these objectives, the anticipated benefits may not be realized fully or at all or may take longer to realize than expected. In addition, the actual cost savings of the acquisition could be less than anticipated, and integration may result in additional and unforeseen expenses.
In the ordinary course of business, we rely on electronic communications and information systems to conduct its businesses and to store sensitive data, including financial information regarding its customers. The integrity of information systems is under significant threat from cyberattacks by third parties, including through coordinated attacks sponsored by foreign nations and criminal organizations to disrupt business operations and other compromises to data and systems for political or criminal purposes. We employ an in-depth, layered, defense approach that leverages people, processes and technology to manage and maintain cybersecurity controls. Notwithstanding the strength of defensive measures, cybersecurity threats and the threattactics, techniques and procedures used in cyberattacks change, develop and evolve rapidly and continuously, including from growth in third-party services that facilitate or carry out cyberattacks is severe, attacks are sophisticated and attackersfrom respondemerging rapidlytechnologies, such as artificial intelligence (including machine learning and generative artificial intelligence) and quantum computing, which may be used to changesenhance inthe defensivetactics, measures.techniques and procedures described above and facilitate new cyber threats. Cybersecurity risks may also occur with our third-party service providers,providers and may interfere with their ability to fulfill their contractual obligations to us, with additional potential for financial loss or liability that could adversely affect our financial condition or results of operations. We offer our customers the ability to bank remotely and provide other technology-based products and services, which services include the secure transmission of confidential information over the Internetinternet and other remote channels. To the extent that our customers’ systems are not secure or are otherwise compromised, our network could be vulnerable to unauthorized access, malicious software, phishing schemes and other security breaches. To the extent that our activities or the activities of its customers or third-party service providers involve the storage and transmission of confidential information, security breaches and malicious software could expose us to claims, regulatory scrutiny, litigation and other possible liabilities.
Our ability to maintain our reputation is critical to the success of our business and the failure to do so may materially adversely affect our performance.
Our reputation is one of the most valuable components of our business. A key component of our business strategy is to rely on our reputation for customer service and knowledge of local markets to expand our presence by capturing new business opportunities from existing and prospective customers in our market area. We strive to conduct our business in a manner that enhances our reputation. This is done, in part, by recruiting, hiring and retaining employees who share our core values of being an integral part of the communities we serve, delivering superior service to our customers and caring about our customers and associates. If our reputation is negatively affected by the actions of our employees, by our inability to conduct our operations in a manner that is appealing to current or prospective customers, or by events beyond our control, our business and operating results may be adversely affected. The proliferation of social media websites utilized by us and other third parties, as well as the personal use of social media by our employees and others, including personal blogs and social network profiles, also may increase the risk that negative, inappropriate or unauthorized information may be posted or released publicly that could harm our reputation or have other negative consequences, including as a result of our employees interacting with our customers in an unauthorized manner in various social media outlets. Any damage to our reputation could affect our ability to retain and develop the business relationships necessary to conduct business, which in turn could negatively impact our financial condition, results of operations, and the market price of our common stock.
The financial services industry undergoes rapid technological changes with frequent introductions of new technology-driven products and services, including developments in artificial intelligence.intelligence and machine learning. In addition to serving clients better, the effective use of technology increases efficiency and enables financial institutions to reduce costs. Our future success will depend, at least in part, upon our ability to address the needs of our clients by using technology to provide products and services that will satisfy client demands for convenience, as well as to create additional efficiencies in our operations as we continue to grow and expand our products and service offerings. We offer electronic banking services for consumer and business customers via our website, including Internet banking and electronic bill payment, as well as mobile banking. We also offer debit cards, ATM cards, and automatic and ACH transfers. We may experience operational challenges as we implement these new technology enhancements or products, which could impair our ability to realize the anticipated benefits from such new technology or require us to incur significant costs to remedy any such challenges in a timely manner.
Many of our larger competitors have substantially greater resources to invest in technological improvements. We may not be as timely or successful in assessing the competitive landscape and developing or introducing new products and services as these larger competitors. Our business may be negatively impacted if we, or our third-party providers, do not timely develop and apply emerging technologies, like artificial intelligence and quantum computing, or if our initiatives in these areas are deficient or fail. Our, or our third-party providers’, inability or resistance to timely innovate or adapt operations, products and services to evolving regulatory and market environments, industry standards and consumer preferences could result in service disruptions, harm our business and adversely affect our results of operations and reputation. Third parties upon which we rely for our technology needs may not be able to develop on a cost-effective basis the systems that will enable us to keep pace with such developments. As a result, competitors may be able to offer additional or superior products compared to those that we will be able to provide, which would put us at a competitive disadvantage. We may lose clients seeking new technology-driven products and services to the extent we are unable to provide such products and services. Accordingly, the ability to keep pace with technological change is important and the failure to do so could adversely affect our business, financial condition and results of operations.
Inflation can have an adverse impact on our business and on our customers.
Inflation risk is the risk that the value of assets or income from investments will be worth less in the future as inflation decreases the value of money. The future rate of inflation and other economic factors remain uncertain, and the Federal Reserve Board may decrease or increase interest rates slower or faster than anticipated. If inflation increases and interest rates rise, the value of our investment securities, particularly those with longer maturities, will decrease, although this effect is less pronounced for floating rate instruments. Prolonged periods of inflation also may impact our profitability by negatively impacting our costs and expenses, including increasing funding costs and expenses related to talent acquisition and retention, and negatively impacting the demand for our products and services. Moreover, our customers are also affected by inflation and the rising costs of goods and services used in their households and businesses, which could have a negative impact on their ability to repay their loans. Adverse changes in inflation and interest rates could negatively impact consumer and business confidence, and adversely affect the economy as well as our business, results of operations and financial condition.
Changes in U.S. trade policies, including the imposition of tariffs and retaliatory tariffs, may adversely affect our business, financial condition and results of operations.
There have been significant changes to U.S. trade policies, including tariffs affecting China, Canada and Mexico and there continues to be significant discussion regarding other potential changes to U.S. trade policies, treaties and tariffs, including the potential for additional tariffs. In addition, retaliatory tariffs have been imposed and additional retaliatory tariffs are likely. Tariffs, retaliatory tariffs or other trade restrictions on products and materials that our customers import or export could cause the prices of our customers’ products to increase, which could reduce demand for such products. Any of these effects could adversely affect the ability of our customers to pay their loans. If our borrowers are unable to pay their loans, it would adversely affect our financial condition and results of operations. At this time, we are unable to predict whether and to what extent additional or higher tariffs or retaliatory tariffs will be imposed and the impact such actions will have on our customers.
Accounting policies are fundamental to understanding our results of operations, and financial condition. Some of the accounting policies are critical because they require us to make difficult, subjective and complex judgments about matters that are inherently uncertain and because it is likely that materially different amounts would be reported under different conditions or using different assumptions. We may experience material losses if such estimates or assumptions underlying in our financial statements are incorrect.
Our accounting policies and methods are fundamental to how we record and report our financial condition and results of operations. From time to time, the FASB and the SEC change the financial accounting and reporting standards or the interpretation of those standards that govern the preparation of our external financial statements. These changes could materially impact how we report our results of operations and financial condition. New or revised standards could also require retroactive application, which could result in the restatement of our prior period financial statements in material amounts.
Our financial statements are based in part on assumptions and estimates, which, if wrong, could cause unexpected losses in the future.
Pursuant to U.S. GAAP, we are required to use certain assumptions and estimates in preparing our financial statements, including in determining loan loss and litigation reserves, goodwill impairment and the fair value of certain assets and liabilities, among other items. If assumptions or estimates underlying our financial statements are incorrect, we may experience material losses.
Management's Discussion & Analysis (MD&A)
New heading “Acquisition of Guaranty Bancorp, Inc.”
New heading “Goodwill and Other Intangibles”
Removed heading “Earnings (For year ended December 31, 2024 compared to the same period of 2023)”
Removed heading “Cash and cash equivalents”
Largest changes
“The estimate of expected credit losses on collectively evaluated loans is based on relevant information about current conditions, past events, and reasonable and supportable forward-looking forecasts regarding collectability of the reported amounts. Management employs a process and methodology to estimate the allowance for credit losses (“ACL”) on collectively evaluated loans that evaluates both quantitative and qualitative components. The methodology for evaluating the quantitative component involves pooling loans into portfolio segments for loans that share similar risk characteristics. …”see in full comparison
“Total borrowings decreased $40.9 million to $290.6 million at December 31, 2024 compared to $331.5 million as of December 31, 2023 primarily due to excess cash available generated from operations. The Bank Term Funding Program (the “BTFP”) was an additional source of liquidity with favorable prepayment terms of which during the fourth quarter of 2024, we prepaid our outstanding BTFP advance of $30 million, net of current activity which was held at a fixed rate of 4.76%. …”see in full comparison
“Assumptions evaluated each reporting period include the probability of default and loss given default assumptions, macroeconomic forecast variables, prepayment speed assumptions, and the determination of the qualitative factors. As of December 31, 2025 management utilized National Unemployment Rate, Commercial Real Estate Price Index and House Price Index in their economic forecast. Hypothetically, if the economic forecast was deteriorated by 100bps compared to management’s base scenario the impact to the allowance would be an increase of $1.3 million. …”see in full comparison
“Non-interest income in 2025 was $34.6 million compared to $36.9 million in 2024. Trust management fees were $16.1 million in 2025 compared to $15.7 million in 2024 due to higher assets under management of $3.0 billion at year-end 2025 compared to $2.8 billion at year-end 2024. Customer service fees increased 8% to $16.0 million in 2025 from $14.8 million in 2024 driven by increased deposit balances due to the Woodsville acquisition. Customer derivative income increased $1.1 million year-over-year primarily driven by the interest rate environment and swap timing. …”see in full comparison
“Earnings (For year ended December 31, 2024 compared to the same period of 2023)”see in full comparison
Full comparison: every changed paragraph (50)
ANNUAL PERFORMANCE SUMMARYOVERVIEW
Earnings (For year ended December 31, 2024 compared to the same period of 2023)
Financial PositionHighlights (For the year ended December 31, 20242025 compared to the same period of 20232024)
Acquisition of Guaranty Bancorp, Inc.
On August 1, 2025, we completed our acquisition of Guaranty Bancorp, Inc., the parent company of Woodsville Guaranty Savings Bank (“Woodsville”). After purchase accounting fair value adjustments, the acquisition added $658.1 million of total assets, including $413.4 million of loans, as well as $641.2 million of total liabilities, primarily consisting of $531.3 million in deposits and $109.2 million in borrowings and subordinated debt. Based on the $39.2 million consideration paid the Company recorded goodwill of $22.3 million and core deposit intangibles of $14.0 million in other intangibles related to the acquisition.
The following table presents average balances (calculated using a daily average) and average rates and yields on a fully taxable equivalent basis for the periods includedindicated:
2023 assumes a marginal tax rate of 24.01% for the fourth quarter and 23.80% for the first three quarters. 2022 assumes a marginal tax rate of 23.53% for the fourth quarter and 23.41% for the first three quarters.
Cash and cash equivalents
Total cash and cash equivalents at December 31, 20242025 were $72.2$80.8 million, compared to $94.8$72.2 million at December 31, 2023.2024. Interest-earning cashdeposits held with other banks totaled $35.9 million at year-end 2025 compared to $37.9 million at year-end 2024 compared to $52.6 million at year-end 2023 carrying a yield of 4.53% in 2025 versus 5.54% in 2024 versus 5.33% in 2023.2024.
Securities
Securities totaled $533.3$597.4 million at year-end 20242025 and $547.4$521.0 million at year-end 2023.2024. The increase is primarily due to $115.0 million in securities from the Woodsville acquisition. During 2024,2025, security purchases totaled $53.5$91.0 million and were offset by $64.4$43.6 million in sales and $99.8 million of maturities, calls and pay-downs of amortizing securities. ThereThe weresales $21.4primarily consisted of $40.8 million of purchaseslower andyielding $21.9securities millionfrom inthe salesacquisition of FHLB stock during the year.Woodsville. Fair value adjustments decreased the security portfolio by $62.3$47.5 million in 20242025 compared to a $62.4$62.3 million unrealized loss in 2023. Unrealized losses stabilized in 2024 due to changes in the long-term treasury yield curve.2024. The weighted average yield of the securities portfolio was 4.03%3.97% as of December 31, 20242025 compared to 3.88%3.94% at year-end 2023.2024. At the end of 2024,2025, our securities portfolio had an average life of 97.1 years with an effective duration of 55.2 years forand bothan periodsaverage respectively.life of 8.5 and an effective duration of 4.8 at year-end 2024. All securities remain classified as available for sale to provide flexibility in loan funding and management of our cost of funds.
FHLB Stock was $11.3 million at year-end 2025, compared to $12.2 million at year-end 2024. Activity during 2025 consisted of $4.4 million acquired from Woodsville and purchases of $11.7 million offset by redemptions of $17.0 million due to paydowns of wholesale borrowings.
Loans held for sale increased to $5.3 million at year-end 2025 compared to $1.2 million at year-end 2024. The increase was driven by the interest rate environment and demand for wholesale loans. During 2025 we sold $52.4 million of loans held for sale resulting in a net gain of $724 thousand, during 2024 we sold $54.9 million of loans held for sale resulting in a net gain of $663 thousand.
Loans were $3.6 billion at year-end 2025, compared to $3.1 billion at year-end 2024. Loan growth was driven by the $413.4 million in loans acquired from Woodsville. Total commercial loans in 2025 were $2.4 billion, growing 6% on an annualized basis, excluding the impact of acquired loans, compared to $2.1 billion at year-end 2024. Commercial growth included $690.9 million in originations during the year, partially offset by payoffs and paydowns. Total residential loans increased to $1.1 billion at year-end 2025 from $888.3 million at year-end 2024, primarily as a result of $248.5 million in acquired loans. Consumer loans were $128.8 million at year-end 2025 compared to $102.2 million at year-end 2024 and included $21.4 million in loans acquired from Woodsville.
Loans increased by $148.1 million from year-end 2023 or 5% annualized. The growth was primarily in real estate and rental and leasing, and partially in finance and insurance industries. Total commercial loans were $2.1 billion, growing 9% annualized in 2024 and 6% in 2023 which was driven mostly from new relationships primarily to commercial borrowers. Total residential loans decreased 7% annualized or $63.4 million from year-end 2023, due to lower demand for prevailing mortgage rates and the continued strategy to sell production to the secondary market. Home Equity lines increased 7% or $6.5 million from year-end 2023 due to record available home equity levels and increased demand for credit. By borrowing some of the value of a home, homeowners are able to make home improvements or consolidate, pay down or pay off higher-interest debts.
Allowance for Credit Losses on Loans
The allowance for credit losses on loans was $28.7$34.1 million at December 31, 20242025 compared to $28.1$28.7 million as of December 31, 2023.2024. The increase was primarily due to commercial real estate prices, and loan portfolio growth. Net charge offs to average loans were 0.01% in 2024 compared to 0.02% in 2023. Non-accruing loans increased $1.4 million to $7.0 million, or 0.22% of total loans at the end of 2024 from $5.5 million or 0.18% of total loans at year-end 2023 driven by increases$4.0 million in commercialreserves on non-PCD loans and industrial,$1.6 commercialmillion realin estatereserves owneron occupiedPCD andloans homefrom equitythe loans.Woodsville acquisition. Net charge-offs decreasedwere $950 thousand in 2025 compared to $353 thousand in 2024 from $626 thousand in 2023 compared driven by the resolution of onethree non-accruingcommercial C&Iand loan.industrial loans. The net charge-offs to average loans ratio remains strong at 0.03% in 2025 compared to 0.01% in 2024.
The allowance for credit losses on available for sale investments increased to $568 thousand at December 31, 2024, driven by two corporate securities with a book value of $9.0 million, unrealized non-credit losses of $2.7 million and unrealized credit losses of $568 thousand. There was no ACL on available for sale securities at December 31, 2023.
Premises and equipment increased $7.0 million at December 31, 2025 to $58.2 million compared to $51.2 million at December 31, 2024, driven by $6.6 million in acquired assets from the Woodsville acquisition. We sold $406 thousand of premises held for sale in 2025 that resulted in a gain of $189 thousand. The gain from premises held for sale was offset by the disposal of certain acquired assets resulting in a loss of $446 thousand for a net loss on premises and equipment of $257 thousand.
Goodwill and Other Intangibles
Goodwill increased to $141.8 million in 2025 compared to $119.5 million at year-end 2024. During the year the Company acquired Woodsville which led to the increase in goodwill of $22.3 million. Other intangibles increased $12.5 million in 2025 driven by $14.0 million from the acquisition partially offset by amortization of $1.5 million.
Premises and equipment increased $2.9 million at December 31, 2024 to $51.2 million compared to $48.3 million at December 31, 2023, driven by $10.5 million in additions of $4.6 million in building and land improvement, $3.5 million in aircraft and $2.3 million in furniture and equipment. The additional expenses were largely attributed to facilities renovations and improvements at our 135 High Street location in Ellsworth, Maine and our disposal of our Avery Lane location earlier in the year offset by $4.2 million in depreciation expense.
Total other assets increased $16.6 million to $200.8 million at December 31, 2025 from $184.2 million as of December 31, 2024. The increase is driven by the cash surrender value of bank-owned life insurance income which increased $14.4 million primarily due to the acquisition of Woodsville. Deferred tax assets increased $6.6 million and was offset in part by other assets decreasing $4.4 million.
Total deposits increased $553.6 million to $3.8 billion at the end of 2025 compared to $3.3 billion at the end of 2024. The overall increase in deposits is due to the acquisition of $531.3 million from Woodsville. Non-maturity deposits, excluding acquired deposits, increased $38.9 million during 2025 primarily due to interest-bearing demand deposits. Excluding the impact of acquired deposits, time deposits decreased $16.6 million during the year primarily due to $86.0 million in brokered deposit maturities.
Total borrowings decreased $21.0 million to $269.6 million at December 31, 2025 compared to $290.6 million as of December 31, 2024. Acquired FHLB borrowings totaled $98.0 million, of which $15.0 million of advances were paid off shortly after the acquisition date. Senior borrowings decreased $33.2 million during the year as loan paydowns, deposits and proceeds from the investment portfolio were utilized to decrease borrowing levels. Subordinated borrowings increased $12.2 million primarily due to $11.2 million of subordinated borrowings from the Woodsville acquisition.
Total other assets increased $356 thousand to $307.7 million at December 31, 2024 from $307.3 million as of December 31, 2023. The increase is attributed to a $1.8 million increase in cash surrender value of bank owned life insurance and deferred tax assets, net, of $351 thousand million as of December 31, 2024 compared to 2023 offset by intangible asset amortization of $931 thousand and fair value adjustments in derivative assets attributed to a maturity and the interest rate environment.
Total deposits increased $126.5 million to $3.3 billion at the end of 2024 compared to $3.1 billion at the end of 2023. Non-maturity deposits remained relatively flat decreasing $3.5 million in 2024. 10,135 non-maturity deposit accounts were opened with consumer customers while 1,479 non-maturity deposit accounts were opened with business customers in 2024. Time deposits increased $130.0 million to $830.3 million at year-end 2024 versus $700.3 million in 2023. Our retail teams opened 8,787 new time deposit accounts in 2024. Retail time deposits increased $62.2 million as customers moved funds from non-maturity deposits into higher yielding alternatives. Our deposit composition at year-end 2024 and 2023 was 47% commercial customers and 53% consumer customers. Brokered deposits increased $36.4 million and comprised 8% of total deposits at December 31, 2024 compared to 7% of total deposits at December 31, 2023.
Total borrowings decreased $40.9 million to $290.6 million at December 31, 2024 compared to $331.5 million as of December 31, 2023 primarily due to excess cash available generated from operations. The Bank Term Funding Program (the “BTFP”) was an additional source of liquidity with favorable prepayment terms of which during the fourth quarter of 2024, we prepaid our outstanding BTFP advance of $30 million, net of current activity which was held at a fixed rate of 4.76%. Our Subordinated Note Purchase Agreement had a fixed interest rate of 4.63% through December 1, 2024 payable semi-annually in arrears. From December 1, 2024 and thereafter the interest rate shall be reset quarterly to an interest rate per annum equal to the then current three-month Secured Overnight Financing Rate (“SOFR”) plus 3.27%. Beginning with the interest payment date of December 1, 2024, and on any scheduled payment date thereafter, we had the option to redeem the Notes, in whole or in part upon prior approval of the Federal Reserve. During the fourth quarter of 2024 we obtained approval from the Federal Reserve and redeemed $20.0 million of the outstanding subordinated notes. These paydowns were partially offset by an increase in FHLB advances of $10.3 million to $243.0 million at December 31, 2024 compared to $233.0 million at December 31, 2023.
Other liabilities totaled $66.6$60.4 million at theDecember end31, of 20242025 compared to $66.2$66.6 million as of December 31, 2023.2024. The $447 thousand increasedecrease was primarily driven by a $1.9$10.0 million increasereduction in lease obligations driven by extensions and $1.3 million in higher brokered CD interest payable offset by a $1.4 million decrease inthe fair value of customer loan hedgeswaps, liabilitiespartially offset by increased unpaid services and $1.2$2.6 million in unpaidunearned servicesincome payable duerelated to yearcontract overnegotiations yearfrom lowerthe renovationWoodsville accruals and paydowns of outstanding commitments. Theacquisition.The reserve for unfunded commitments declinedincreased $775$796 thousand at the end of 20242025 to $3.1$3.8 million compared to $3.9$3.1 million at December 31, 2023,2024, which are also recorded in other liabilities.
Total equity was $532.5 million at year-end 2025, compared with $458.4 million at year-end 2024. Book value per share was $31.88 as of December 31, 2025 compared with $30.00 at December 31, 2024. Upon the acquisition of Woodsville each share of Guaranty’s common stock was converted into the right to receive 1.85 shares of the Company’s common stock, with cash paid in lieu of any fractional shares. The total consideration paid by the Company was $39.2 million and in total the Company issued 1.4 million shares of its common stock.
Total equity was $458.4 million at year-end 2024, compared with $432.1 million at year-end 2023. Book value per share was $30.00 as of December 31, 2024 compared with $28.48 at December 31, 2023. Equity included securities adjustments, net of tax, totaling a $47.7 million loss at the end of 2024 compared to a $47.6 million loss at year-end 2023.
During 20242025 and 2023,2024, the Company declared and distributed regular cash dividends on its common stock in the aggregate amounts of $17.8$20.4 million comparedand to $16.6$17.8 million, respectively. The Company’s 20242025 dividend payout ratio amounted to 42%,44%, compared with 37%42% in 2023.2024. Total cash dividends paid increased 7% in 20242025 and was $1.18$1.26 per share of common stock, compared with $1.10$1.18 per share of common stock in 2023.2024.
Net interest income for 20242025 was $113.8$134.5 million compared with $117.7$113.8 million in 2023.2024. The net interest margin was 3.15%3.41% in 20242025 compared to 3.29%3.15% in the prior year. The yield on earning assets totaled 5.18% compared5.28% at December 31, 20242025 compared to 3.73%5.18% at December 31, 2023.2024. The yield on loans was 5.53% in 2025 and 5.40% in 2024 and 5.04% in 2023. Costs of interest-bearing liabilities increased in 2024 to 2.58% from 1.99% in 2023primarily due to increasedthe depositacquisition ratesof and market competition. Interest expense on borrowings decreased $5.1$413.4 million inloans. 2024Total comparedloan toyield 2023growth drivenwas partially offset by a decrease in averagethe borrowingscommercial and industrial yield to 6.44% for 2025 from 6.75% in 2024 driven by $101the milliondecrease andin at an average raterates of 4.40%adjustable-rate loans. Costs of interest-bearing deposits decreased in 2025 to 2.17% from 4.56%,2.37% respectively,in reflecting2024 lowerwhile interestborrowing ratescosts andincreased decreasedto average4.69% borrowings.in 2025 from 4.40% in 2024.
The provision for credit losses on loans was $4.6 million at December 31, 2025 compared to $955 thousand at December 31, 2024. The increase was due to the $4.0 million reserve on non-PCD loans as a result of the Woodsville acquisition. The provision for credit losses on available-for-sale debt securities was $636 thousand in 2025 compared to $1.2 million in 2024. The provision for available-for-sale-debt securities was due to the deterioration in scheduled interest payments and estimated future cash flows of two corporate securities in 2024.
The provision for credit losses was $2.1 million at December 31, 2024 compared to $2.9 million expense at December 31, 2023. The expense in 2024 was primarily due to more refined economic forecasting, especially in the national unemployment figures and in commercial real estate prices, and loan portfolio growth.
Non-interest income in 2025 was $34.6 million compared to $36.9 million in 2024. Trust management fees were $16.1 million in 2025 compared to $15.7 million in 2024 due to higher assets under management of $3.0 billion at year-end 2025 compared to $2.8 billion at year-end 2024. Customer service fees increased 8% to $16.0 million in 2025 from $14.8 million in 2024 driven by increased deposit balances due to the Woodsville acquisition. Customer derivative income increased $1.1 million year-over-year primarily driven by the interest rate environment and swap timing. The overall decrease was driven by the Company recognizing impairment losses of $4.6 million on available-for-sale debt securities in 2025. For further detail see Note 3 – Available-for-Sale Debt Securities on the Consolidated Financial Statements.
Non-interest income in 2024 was $36.9 million compared to $35.1 million in 2023. Trust management fees were $15.7 million in 2024 compared to $14.3 million in 2023 due to higher market valuation of assets under management (“AUM”) throughout the year. AUM was $2.8 billion compared to $2.5 billion in 2023, the increase of $327 million primarily due to higher security valuations throughout 2024. Customer service fees decreased 2.2% to $14.8 million in 2024 from $15.2 million in 2023 due to lower transaction volumes. BOLI income decreased $395 thousand in 2024 compared to 2023 related to one-time death benefits during the first quarter of 2023.
Non-interest expense increased to $117.7 million in 2025 compared to $96.0 million in 2024. The increase was primarily due to $10.6 million in acquisition, conversion and other expenses related to the Woodsville acquisition. Salaries and benefits expense increased $5.7 million to $60.5 million in 2025 mostly due to increased personnel from the acquisition. Other expenses increased $5.5 million driven by a $1.5 million increase in the provision for unfunded commitments, $742 thousand increase in occupancy and equipment and $582 thousand in amortization of other intangibles all of which are related to the acquisition of Woodsville.
Non-interest expense increased $3.3 million to $96.0 million in 2024 compared to $92.7 million in 2023. Salaries and benefits expense increased $2.3 million to $54.9 million in 2024 driven by $1.1 million in salaries and other incentive benefits, $617 thousand in commissions, and $642 thousand increase in stock compensation expense due to the revaluation of our long term incentive obligations. Other expenses increased $1.7 million driven by Debit and ATM card expenses of $354 thousand for current year replacement initiative, a decrease in cash surrender value of a split dollar insurance arrangement for $353 thousand, software expenses of $290 thousand, credit card expenses of $199 thousand, $98 thousand in higher charitable donations and $369 thousand in miscellaneous expenses.
Income tax expense was $9.0 million for the year ended December 31, 2025 compared to $9.1 million for the year ended December 31, 2024. The effective tax rate was 19.6% in 2025 compared to 17.26% in 2024.
Income tax expense was $9.1 million for the year ended December 31, 2024 compared to $12.3 million for the year ended December 31, 2023. The effective tax rate decreased to 17.26% in 2024 from 21.5% in 2023 due to a one-time multiple year tax refund on tax exempt loan income and a state apportionment adjustment in the third quarter of 2024 in addition to lower income before taxes year over year.
The existing cash and cash equivalents (including an interest-bearing deposit at the FRB Boston), securities available for sale and cash flows from operating activities will be sufficient to meet anticipated cash needs for at least the next 12 months. Future working capital needs will depend on many factors, including the rate of business and revenue growth.
The existing cash and cash equivalents (including an interest-bearing deposit at the FRB Boston), securities available for sale and cash flows from operating activities will be sufficient to meet anticipated cash needs for at least the next 12 months. Future working capital needs will depend on many factors, including the rate of business and revenue growth. To the extent cash and cash equivalents, securities available for sale and cash flows from operating activities are insufficient to fund future activities, the need to raise additional funds through debt arrangements or public or private debt or equity financings may be utilized. The need to raise additional funds may be needed in the event it is determined in the future to effect one or more acquisitions of banks or businesses. If additional funding is required, we may not be able to obtain debt arrangements or to effect an equity or debt financing on terms acceptable or at all.
At December 31, 2024,2025, available same-day liquidity totaled approximately $1.0 billion, including cash, borrowing capacity at FHLB and the Federal Reserve Discount Window and various lines of credit. Additional sources of liquidity include cash flows from operations, wholesale deposits, cash flow from the Company's amortizing securities and loan portfolios. At December 31, 2024,2025, we had unused borrowing capacity at the FHLB of $307.7$259.1 million, unused borrowing capacity at the Federal Reserve of $105.6$94.0 million and unused lines of credit totaling $41.0 million, in addition to over $200 million in unencumbered, liquid investment portfolio assets.million.
In the normal course of conducting our banking and financial services business, and in connection with providing products and services to our customers, a variety of traditional third-party contracts for support services have been entered into. Examples of such contractual agreements include, but are not limited to: services providing core banking systems, ATM and debit card processing, trust services software, accounting software and the leasing of T-1 telecommunication lines and other technology infrastructure supporting our network. These types of purchase obligations that will come due during 20242026 approximatesis $10.2approximately $10.3 million as of December 31, 20242025 which is expected to be funded by cash flows generated from our operations.
The estimate of expected credit losses on collectively evaluated loans is based on relevant information about current conditions, past events, and reasonable and supportable forward-looking forecasts regarding collectability of the reported amounts. Management employs a process and methodology to estimate the allowance for credit losses (“ACL”) on collectively evaluated loans that evaluates both quantitative and qualitative components. The methodology for evaluating the quantitative component involves pooling loans into portfolio segments for loans that share similar risk characteristics. For all loan segments measured on a collective basis, the Company utilizes a discounted cash flow (“DCF”) methodology to estimate credit losses over the expected life of the loan. The DCF methodology applies the probability of default (“PD”) and the loss given default (“LGD”) assumptions over the remaining contractual life of the loan which is adjusted for prepayment speeds, curtailment rate and time to recovery assumptions to estimate a reserve for each loan. The Company uses regression models to develop the PD and LGD assumptions, which are derived primarily from segment-specific selected peers. The loss rates are adjusted by an economic forecast over the reasonable and supportable forecast period after which time they revert back to the historical mean.
Assumptions evaluated each reporting period include the probability of default and loss given default assumptions, macroeconomic forecast variables, prepayment speed assumptions, and the determination of the qualitative factors. As of December 31, 2025 management utilized National Unemployment Rate, Commercial Real Estate Price Index and House Price Index in their economic forecast. Hypothetically, if the economic forecast was deteriorated by 100bps compared to management’s base scenario the impact to the allowance would be an increase of $1.3 million. Hypothetically, if the economic forecast improved by 100bps compared to management’s base scenario, the impact to the allowance would be a decrease of $1.3 million. Hypothetically, if prepayment speeds doubled there would be a decrease to the allowance of $2.6 million. Hypothetically, if prepayment speeds were decreased by half there would be an increase to the allowance of $2.9 million.
The allowance is sensitive to a number of internal factors, such as modifications in the mix and level of loan balances outstanding, portfolio performance and assigned risk ratings. The allowance is also sensitive to external factors such as the general health of the economy, as evidenced by changes in unemployment rates, home pricing index, gross domestic product, retail sales and changes in commercial real estate values. We consider these variables and all other available information when establishing the final level of the allowance. These variables and others have the ability to result in actual loan losses that differ from the originally estimated amounts.
Changes in the factors used by management to determine the appropriateness of the allowance or the availability of new information could cause the allowance to be increased or decreased in future periods. Additionally, changes in circumstances related to individually large credits, or certain macroeconomic forecast assumptions may result in volatility.
It is difficult to estimate how potential changes in any one economic factor might affect the overall allowance because a wide variety of factors and inputs are considered in the allowance estimate. Changes in the factors and inputs may not occur at the same rate and may not be consistent across all product types. Additionally, changes in factors and inputs may be directionally inconsistent, such that improvement in one factor may offset deterioration in others. However, to consider the impact of a hypothetical stressed forecast, we estimated the allowance using forecast inputs that were severely unfavorable to the expected scenario for each macroeconomic variable.
What changed in the latest 10-Q
Risk Factors
There were no material changes to the risk factors discussed in Part I, Item 1A. “Risk Factors” of our Annual Report on Form 10-K.
Full comparison: every changed paragraph (1)
There were no material changes to the risk factors discussed in Part I, Item 1A. “Risk Factors” of our Annual Report on Form 10-K.
Management's Discussion & Analysis (MD&A)
New heading “Net Interest Margin”
Removed heading “Interest and Dividend Income”
Removed heading “Net Interest Income and Net Interest Margin”
Largest changes
Non-interest income increasedsee in full comparison$1.5$7.1 million in thefirstsecond quarter 2026 to$10.4$11.7 million compared to$8.9$4.6 million in the same quarter20252025. The increase was primarily driven by increases in customer service fees in the second quarter 2026 compared to the same period of 2025 and a$1.3loss on available-for-sale debt securities of $25 thousand compared to $4.9 milliongainforonthedeathsamebenefitperiodfromofbank owned life insurance.2025. Trust management fee income increased$199$314 thousand driven by the7%,12%, or$183.5$330.0 million, increase in assets under management compared to the same period of 2025.CustomerBankserviceownedfeeslife insurance income increased$577$815 thousandorin16%the second quarter of 2026 compared to thesamesecondperiodquarter of2025.2025Theprimarilyincreaseduewas offset in part by the previously noted additional write-down on one corporate debt security resulting into alossdeathon available-for-sale debt securities of $1.0 millionbenefit during thefirst quarter 2026quarter.
“The provision for credit losses on loans in the first quarter 2026 was $305 thousand compared to a recapture of $57 thousand in the same period of 2025. The provision reflects minimal net charge-offs of $42 thousand, portfolio changes and credit quality indicators. There was no provision for investment losses in the current year compared to a $636 thousand provision in the first quarter 2025. We had a loss on available-for-sale debt securities of $1.0 million during the first quarter 2026. …”see in full comparison
Non-interest expenses increasedsee in full comparison$5.2$2.6 million to$29.8$29.2 million in thefirstsecond quarter 2026 compared to$24.7$26.5 million in thefirstsecond quarter20252025. The increase was driven by$1.5highermillion in expenses related to the Woodsville acquisition. Salariessalaries and employee benefitsincreasedcosts$2.0ofmillion to $15.8$16.8 million in thefirstsecond quarter 2026 compared to$13.7$14.3 million in thefirstsecond quarter20252025,primarilyasduefull-time equivalents increased toadditional530salaryascostsofassociatedJunewith30,the2026retainedfromWoodsville455personnel.as of June 30, 2025. Occupancy and equipment increased$711$746 thousand driven primarily by higher maintenance contractcostscosts, as a result of the Woodsville acquisition. Amortization of intangible assets increased $349 thousand, reflecting incremental amortization associated with the Woodsville acquisition. Acquisition, conversion and other expenses decreased $1.2 million from theacquisitionsecond quarter ofWoodsville.2025Amortizationasofexpensesintangibles increased $349 thousand duerelated to the acquisitionofnearedWoodsville.completion. Other expenses increased$854$896 thousand for thefirstsecond quarter 2026 compared to thefirstsecond quarter 2025 primarily due toincreasesexpensesinrelatedsoftwaretoexpenses.otherLossrealonestatesale of premises and equipment was $134 thousand in the first quarter 2026 driven by a building sale.owned.
Full comparison: every changed paragraph (42)
The following is management’s discussion and analysis of the major factors that influenced our results of operations and financial condition as of and for the three and six months ended MarchJune 31,30, 2026 and should be read in conjunction with our unaudited consolidated financial statements and condensed notes thereto included elsewhere in this Form 10-Q as well as our audited consolidated financial statements and notes thereto included in our Annual Report on Form 10-K. The following discussion contains "forward-looking statements" that reflect our future plans, estimates, beliefs and expected performance. We caution that assumptions, expectations, projections, intentions or beliefs about future events may, and often do, vary from actual results and the differences can be material. Factors that could cause such differences are discussed in the sections titled "Cautionary Statement Regarding Forward-Looking Statements", “Part I, Item 1.A. Risk Factors” in the Form 10-K, and "Part II, Item 1A. Risk Factors" in this Form 10-Q. All amounts, dollars and percentages presented in this Form 10-Q are rounded and therefore approximate.
Financial Highlights (quarter ended MarchJune 31,30, 2026, compared to the same period of 2025 unless otherwise stated)
COMPARISON OF FINANCIAL CONDITION AT MARCHJUNE 31,30, 2026 AND DECEMBER 31, 2025
Total cash and cash equivalents were $82.2$104.4 million at the end of the firstsecond quarter 2026, compared to $80.8 million at the end of the fourth quarter 2025. Interest-earning deposits with other banks increased to $46.6$58.1 million at the end of the firstsecond quarter 2026, compared to $35.9 million at the end of the fourth quarter 2025 and yielded 3.90%3.92% and 4.53%, respectively. The increase in cash balances was driven primarily by loan payoffs duringas thewell quarter.as end of quarter timing.
Available-for-sale debt securities were $598.0$601.8 million compared to $597.4 million at the end of the fourth quarter 2025. The increase was driven by $52.6 million in purchases offset in part by $30.2 million in paydowns and $15.2 million in sales, calls and maturities. Net unrealized losses increased to $52.4$50.4 million at quarter-end compared to $47.5 million at the end of the fourth quarter 2025 due to the interest rate environment. The total unrealized losses include $6.7$5.4 million in unrealized losses on fair value hedged municipal securities. During the quarter there were purchases of $25.2 million, paydowns and calls of $19.3 million and net accretion of $411 thousand. The quarter-to-date weighted average yield of the securities portfolio was 4.05%4.06% compared to 4.03% at the end of the fourth quarter 2025. As of the firstsecond quarter 2026 and the fourth quarter 2025, the securities portfolio had an average life of 7.67.2 years and 7.1 years respectively, with an effective duration of 5.45.2 years andfor 5.2both years, respectively.periods. At the end of the firstsecond quarter 2026 all securities remain classified as available for sale.
Federal Home Loan Bank stock decreasedincreased $1.7$2.1 million to $9.6$13.4 million at the end of the firstsecond quarter 2026 compared to $11.3 million at the end of the fourth quarter 2025 primarily driven by the decreaseincrease in wholesale borrowings.
Loans held for sale were $11.5$10.2 million in the firstsecond quarter 2026 compared to $5.3 million in the fourth quarter 2025 as we originated $23.6$47.3 million in loans held for sale and sold $16.2$42.4 million in loans during the quarter.first and second quarter 2026.
Total loans decreasedincreased $20.6$8.3 million to $3.6 billion in the firstsecond quarter 2026 compared to the fourth quarter 2025 driven primarily by commercial real estate payoffs.2026. Commercial real estate loans decreased $30.2$10.0 million primarily due to one early payoff of $14.4 million and $24.4$130.6 million in loansmaturities, that maturedpayoffs and paidpaydowns offand duringwas theoffset quarter.in part by originations of $120.6 million. Commercial and industrial loans increased 24%$39.5 on an annualized basismillion and included $16.6$48.5 million of originations during the quarter.first two quarters of 2026. Residential real estate loans decreased $8.1$18.5 million duringto $983.3 million at the end of the second quarter 2026 compared to $1.0 billion at the end of the fourth quarter 2025, primarily driven by increased prepayment activity and offset in part by a $12.0 million residential loan purchase.activity. Consumer loans remainedwere relatively$132.6 flatmillion withat athe decreaseend of $348the thousandsecond duequarter 2026 compared to paydowns$128.0 onmillion homeat equitythe linesend of credit.the fourth quarter 2025 primarily driven by $10.6 million in originations during the period.
The allowance for credit losses (“ACL”) on loans remainedwas stable at $34.3$32.2 million at the end of the firstsecond quarter 2026 compared to $34.1 million at the end of the fourth quarter 2025. The activitychange in the ACLallowance iswas reflectiveprimarily driven by a $3.3 million charge-off related to a previously disclosed non-accruing relationship that was transferred into other real estate owned in the second quarter 2026. The loan was previously reserved for and the charge-offs recorded reflect the Company's best estimate of loanthe portfolioproperty's changesfair value based on underlying appraisal and creditmarket quality indicators. The allowance for credit losses to total loans coverage ratio for the first quarter 2026 was in line with the fourth quarter 2025 at 0.96% versus 0.94%.information.
Premises and equipment increased in the first quarterhalf of 2026 to $58.9$61.2 million compared to $58.2 million at the end of the fourth quarter 2025 driven by renovation projects. Other real estate owned was $8.2 million at the end of the second quarter 2026 due to the aforementioned non-accruing loan, there was no other real estate owned as of December 31, 2025. Bank owned life insurance decreased $6.4$7.5 million or 7% driven by death benefit pay outspayouts that occurred at the end of the first quarter 2026,2026 partiallyas offsetwell byas increasesan additional death benefit that was recognized in cashthe surrendersecond value.quarter 2026. Other assets increased $12.7$12.1 million primarily due to a non-cash$5.2 transfermillion betweenchange loans and other assets asin the resultfair value of the payoff timing of acustomer loan participation which settled within one day of quarter-end.swaps.
Total deposits were $3.9 billion at the end of the firstsecond quarter 2026 compared to $3.8 billion at the end of the fourth quarter of 2025. The increase was driven primarily by $17.2$73.8 million in new customer non-maturity deposits. Non-interest bearing demand deposits decreasedincreased $19.5$7.3 million, interest-bearing demand deposits increased $3.3 million, savings deposits remained flat at $635.3 million and wasmoney offsetmarket bydeposits aincreased $15.2$17.0 millionmillion. increase in interest-bearing demand, a $14.0 million increase in savings and a $28.6 millionThe increase in money market deposits.deposits included $15.4 million in new accounts during 2026. Time deposits increased $8.2$5.1 million during the quarterperiod primarily due to $4.8$6.5 million in new customer time deposits and an $18.0 million increase in brokered deposits, which was offset in part by maturities.deposits.
Total borrowings increased $11.5 million at the end of the second quarter 2026 to $281.2 million compared to $269.6 million in the fourth quarter 2025. The increase was driven by increased wholesale borrowings to fund loan originations. Included in total borrowings as of June 30, 2026 was a $20.0 million outstanding subordinated note balance under the 2029 Notes. On July 7, 2026 following receipt of Federal Reserve approval, we notified the holders of the 2029 Notes of our intent to fully redeem the 2029 Notes on September 1, 2026.
Total borrowings decreased $53.9 million in the first quarter 2026 to $215.7 million compared to $269.6 million in the fourth quarter 2025. The decrease was driven by cash inflows from loan payoffs and increased deposits.
The Company's book value per share was $32.13$32.80 at the end of the firstsecond quarter 2026 compared to $31.88 at the end of the fourth quarter 2025. Tangible book value per share (non-GAAP) was $22.71$23.43 at the end of the firstsecond quarter 2026, compared to $22.41 at the end of the fourth quarter 2025.
COMPARISON OF OPERATING RESULTS FOR THE THREE AND SIX MONTHS ENDED MARCHJUNE 31,30, 2026 AND MARCHJUNE 31,30, 2025
FirstSecond quarter 2026 GAAP net income was $13.5$15.2 million, or $0.81$0.91 per diluted share, and adjusted earnings (Non-GAAP) was $14.7$15.4 million, or $0.88$0.92 per diluted share, compared to GAAP net income of $10.2$6.1 million, or $0.66$0.40 per diluted share, and adjusted earnings (Non-GAAP) of $10.5$10.8 million or $0.68$0.70 per diluted share in the firstsecond quarter of 2025.
For the six months ended June 30, 2026, GAAP net income was $28.8 million, or $1.71 per diluted share, and adjusted earnings (Non-GAAP) was $30.2 million, or $1.79 per diluted share, compared to GAAP net income of $16.3 million, or $1.06 per diluted share, and adjusted earnings (Non-GAAP) of $21.2 million or $1.38 per diluted share for the six months ended June 30, 2025.
Interest and Dividend Income
Total interest and dividend income increased by 16%, or $7.7 million,15% to $55.3$55.9 million in the firstsecond quarter 2026 compared to $47.5$48.7 million in the prior year. Yields on earning assets grew to 5.27%5.29% in the firstsecond quarter 2026 compared to 5.16%5.23% in the firstsecond quarter 2025. The increase wasis driven by year-over-yearthe securities yield expansion of 20 basis points to 4.06% in the second quarter 2026 compared to 3.86% in the same period of 2025. The increase is primarily due to $115.6 million in acquired investments from the acquisition of Woodsville Guaranty Savings Bank (“Woodsville”). The loan yield expansionincreased primarilyin part due to the acquisition of $413.4 million in loans from theWoodsville acquisitionbut ofalso Woodsville.includes The$48.1 million in organic growth. Residential loan yield onexpansion commercialwas realthe estateprimary loansdriver grewas the yield increased to 5.68%4.62% infor the firstsecond quarter 2026 from 5.58%4.14% in the first quarter 2025. The residential loan yield increased to 4.64% for the first quarter 2026 from 4.22% in the firstsecond quarter of 2025. Total loan yield growth was partially offset by a decrease in the commercial and industrial yield to 6.13%6.17% for the firstsecond quarter 2026 from 6.57%6.41% in the firstsecond quarter 2025 driven by the decrease in rates of adjustable-rate loans.
Total interest and dividend income increased by 16% to $111.2 million for the six months ended June 30, 2026 compared to $96.2 million in the prior year primarily driven by the same reasons noted for the quarter. Yields on earning assets grew to 5.28% for the six months ended June 30, 2026 compared to 5.19% for the same period of 2025. The yield on available-for-sale debt securities increased 22 basis points to 4.05% primarily due to the aforementioned Woodsville securities. The loan yield increased to 5.51% in the six months ended June 30, 2026 compared to 5.45% for the same period of 2025 as average loan balances grew $451.7 million year-over-year and also benefitted from $1.9 million in accretion.
Net Interest Income and Net Interest Margin
The net interest margin was 3.54% in the first quarter 2026 compared to 3.17% in the same quarter 2025. As loan balances grew year-over-year the yield on loans expanded 8 basis points to 5.50% compared to 5.42% in the same period of 2025. Interest-bearing deposit costs decreased year-over-year to 2.19% compared to 2.52% in the same period of 2025.
Total interest expense decreased $153$806 thousand in the firstsecond quarter 2026 compared to the firstsecond quarter 2025. Deposit costs were down $623$873 thousand year-over-year.year-over-year as the cost of interest-bearing deposits decreased to 1.88% in the second quarter 2026 from 2.28% in the same period of 2025. Borrowing costs increased $470$67 thousand, or 16%2% year-over-year, driven by the subordinated debt acquired from Woodsville.
Total interest expense for the six months ended June 30, 2026 was $36.4 million compared to $37.3 million for the same period ended 2025 driven by a $1.5 million decrease in cost of interest-bearing deposits primarily driven by average brokered deposits which decreased $107.1 million year-over-year. Costs of borrowings increased in the first six months of 2026 to 5.33% from 4.75% in the same period of 2025.
Net Interest Margin
Net interest margin for the second quarter 2026 was 3.61% compared to 3.23% for the second quarter 2025. As loan balances grew year-over-year the yield on loans expanded 4 basis points to 5.52% compared to 5.48% in the same period of 2025. Interest-bearing deposit costs decreased year-over-year to 1.88% compared to 2.28% in the same period of 2025.
Net interest margin for the six months ended June 30, 2026 was 3.57% compared to 3.20% for the six months ended June 30, 2025. As total average loan balances grew 14%, the yield on loans grew to 5.51% for the six months ended June 30, 2026, up from 5.45% in the same period for 2025. Costs of interest-bearing deposits decreased year-over-year to 1.89% in 2026 from 2.30% in 2025. Total interest-bearing liabilities costs decreased in the first six months of 2026 to 2.16% from 2.52% in the same period of 2025.
The provision for credit losses on loans in the second quarter 2026 was $1.3 million compared to $528 thousand in the same period of 2025. The provision for losses for the six months ended June 30, 2026 was $1.6 million compared to $471 thousand in the same period of 2025. The allowance for credit losses to total loans coverage ratio for the second quarter 2026 remains well-funded and was 0.89% compared to 0.92% in the second quarter 2025.
There was no provision for available-for-sale debt securities in the second quarter of 2026 and 2025 or for the six months ended June 30, 2026. For the six months ended June 30, 2025 there was a provision of $636 thousand related to one corporate debt security.
The provision for credit losses on loans in the first quarter 2026 was $305 thousand compared to a recapture of $57 thousand in the same period of 2025. The provision reflects minimal net charge-offs of $42 thousand, portfolio changes and credit quality indicators. There was no provision for investment losses in the current year compared to a $636 thousand provision in the first quarter 2025. We had a loss on available-for-sale debt securities of $1.0 million during the first quarter 2026. The loss relates to a write-down on a previously identified corporate bond with continued deteriorated credit quality.
Non-interest income increased $1.5$7.1 million in the firstsecond quarter 2026 to $10.4$11.7 million compared to $8.9$4.6 million in the same quarter 20252025. The increase was primarily driven by increases in customer service fees in the second quarter 2026 compared to the same period of 2025 and a $1.3loss on available-for-sale debt securities of $25 thousand compared to $4.9 million gainfor onthe deathsame benefitperiod fromof bank owned life insurance.2025. Trust management fee income increased $199$314 thousand driven by the 7%,12%, or $183.5$330.0 million, increase in assets under management compared to the same period of 2025. CustomerBank serviceowned feeslife insurance income increased $577$815 thousand orin 16%the second quarter of 2026 compared to the samesecond periodquarter of 2025.2025 Theprimarily increasedue was offset in part by the previously noted additional write-down on one corporate debt security resulting into a lossdeath on available-for-sale debt securities of $1.0 millionbenefit during the first quarter 2026quarter.
Non-interest income for the six months ended June 30, 2026 was $22.1 million compared to $13.6 million for the same period ended 2025 driven by the loss on available-for-sale debt security of $4.9 million in 2025 and the increase in bank owned life insurance income of $2.2 million in 2026 due to the payout and recognition of death benefits during the period.
Non-interest expenses increased $5.2$2.6 million to $29.8$29.2 million in the firstsecond quarter 2026 compared to $24.7$26.5 million in the firstsecond quarter 20252025. The increase was driven by $1.5higher million in expenses related to the Woodsville acquisition. Salariessalaries and employee benefits increasedcosts $2.0of million to $15.8$16.8 million in the firstsecond quarter 2026 compared to $13.7$14.3 million in the firstsecond quarter 20252025, primarilyas duefull-time equivalents increased to additional530 salaryas costsof associatedJune with30, the2026 retainedfrom Woodsville455 personnel.as of June 30, 2025. Occupancy and equipment increased $711$746 thousand driven primarily by higher maintenance contract costscosts, as a result of the Woodsville acquisition. Amortization of intangible assets increased $349 thousand, reflecting incremental amortization associated with the Woodsville acquisition. Acquisition, conversion and other expenses decreased $1.2 million from the acquisitionsecond quarter of Woodsville.2025 Amortizationas ofexpenses intangibles increased $349 thousand duerelated to the acquisition ofneared Woodsville.completion. Other expenses increased $854$896 thousand for the firstsecond quarter 2026 compared to the firstsecond quarter 2025 primarily due to increasesexpenses inrelated softwareto expenses.other Lossreal onestate sale of premises and equipment was $134 thousand in the first quarter 2026 driven by a building sale.owned.
Non-interest expenses increased $7.8 million to $59.0 million for the six months ended June 30, 2026 compared to $51.2 million in the same period in 2025. The increases were primarily due to the $4.6 million increase in salary and employee benefits due to higher full time equivalents as discussed above. Occupancy and equipment expenses increased $1.5 million due to higher maintenance contracts as well as on-going renovation projects.
Income tax expense was $3.6$4.0 million for the firstsecond quarter 2026 compared to $2.5$1.4 million for the firstsecond quarter of 2025, respectively.2025. Our GAAP effective tax rate for the firstsecond quarter 2026 was 21.09%20.8% and 19.57%18.5% in the firstsecond quarter 20252025. Income tax expense for the six months ended June 30, 2026 was $7.6 million compared to $3.9 million in the same period in 2025. The increase for both the quarter and the effectivesix taxmonths rateended were driven by lower 2025 pre-tax income due to the loss on adjustedavailable-for-sale earningsdebt (Non-GAAP) was 21.89% and 22.98%, respectively.security.
As of MarchJune 31,30, 2026, available same-day liquidity totaled approximately $1.0$1.3 billion, including cash, borrowing capacity at FHLB and the Federal Reserve Discount Window and various lines of credit. Additional sources of liquidity include cash flows from operations, wholesale deposits, cash flow from our amortizing securities and loan portfolios. As of MarchJune 31,30, 2026, we had unused borrowing capacity at the FHLB of $451.5$521.9 million, unused borrowing capacity at the Reserve Bank of $94.5$105.6 million and unused lines of credit totaling $41.0 million, in addition to $82.2$104.4 million in cash.
Please refer to “Comparison of Financial Condition at MarchJune 31,30, 2026 and December 31, 2025- Equity” for a discussion of shareholders’ equity together with Note 7 - “Capital Ratios and Shareholders’ Equity” in the unaudited consolidated financial statements. Additional information about regulatory capital is contained in the notes to the consolidated financial statements and in our most recent Form 10-K.
We expect to continue our current practice of paying quarterly cash dividends with respect to our common stock subject to our Board of Directors’ discretion to modify or terminate this practice at any time and for any reason without prior notice. We believe our quarterly dividend rate per share as approved by our Board of Directors, enables us to balance our multiple objectives of managing our business and returning a portion of our earnings to our shareholders. Historically, and a practice we intend to continue, our principal cash expenditure is the payment of dividends on our common stock, if as and when declared by our Board of Directors. Dividends were paid to our shareholders in the aggregate amount of $5.4$11.1 million and $4.6$9.7 million for the threesix months ended MarchJune 31,30, 2026 and 2025, respectively. All dividends declared and distributed by us will be in compliance with applicable state corporate law and regulatory requirements.
Our off-balance sheet arrangements have not changed materially since previously reported in our Annual Report on Form 10-K.
Please refer to Note 1 – “Basis of Presentation - Recent Accounting Pronouncements” of the Consolidated Financial Statements in this Form 10-Q and Note 1 - “Summary of Significant Accounting Policies” of the Consolidated Financial Statements to our Annual Report on Form 10-K.
Our Consolidated Financial Statements were prepared in accordance with GAAP and follow general practices within the industries in which we operate. The most significant accounting policies we follow are presented in Note 1—“Summary of Significant Accounting Policies” of the Consolidated Financial Statements to our Annual Report on Form 10-K. Application of these principles requires us to make estimates, assumptions, and judgments that affect the amounts reported in the Consolidated Financial Statements and accompanying notes. Most accounting policies are not considered by management to be critical accounting policies. Several factors are considered in determining whether or not a policy is critical in the preparation of the Consolidated Financial Statements. These factors include among other things, whether the policy requires management to make difficult, subjective, and complex judgments about matters that are inherently uncertain and because it is likely that materially different amounts would be reported under different conditions or using different assumptions. The accounting policies which we believe to be most critical in preparing our Consolidated Financial Statements are presented in the section titled “Management's Discussion and Analysis of Financial Condition and Results of Operations - Critical Accounting Policies and Estimates” included in our Annual Report on Form 10-K. There have been no significant changes in our application of critical accounting policies and estimates since December 31, 2025. Refer to Note 1 – “Basis of Presentation - Recent Accounting Pronouncements” of the consolidated financial statements for discussion of accounting pronouncements issued but yet to be adopted and implemented.
The following tables present the quarterly trend in loans by collateral type and deposits and accompanying growth rates as of MarchJune 31,30, 2026 on an annualized basis:
BHB insider buying and selling (Form 4)
Since 2026-04-11, insiders reported open-market purchases in 1 Form 4 filing (1 insider, 1 trade date, 760 shares, about $26.4K) and open-market sales in 0 filings. Net open-market shares: 760 (purchases minus sales); net value about $26.4K.Totals add up every open-market (code P and S) line in those filings, using the prices reported in the filings. Awards, option exercises, tax withholding and gifts are listed below but not counted.
| Trade date | Insider | Transaction | Shares | Price | Value |
|---|---|---|---|---|---|
| 2026-09-18 | Simard Curtis C |
Grant/award | 725 | $40.08 | $29.0K |
| 2026-09-18 | Williams John Mogan |
Grant/award | 71 | $40.08 | $2.9K |
| 2026-09-18 | Williams John Mogan |
Grant/award | 3 | $40.14 | $111 |
| 2026-09-18 | Scully Joseph Patrick |
Grant/award | 100 | $40.08 | $4.0K |
| 2026-09-18 | Shaw Brian D |
Grant/award | 36 | $40.08 | $1.4K |
| 2026-09-18 | Jones Heather D |
Grant/award | 22 | $40.08 | $873 |
| 2026-09-18 | Colter David M |
Grant/award | 18 | $40.34 | $719 |
| 2026-09-18 | Caras Matthew L |
Grant/award | 115 | $40.08 | $4.6K |
| 2026-06-18 | Scully Joseph Patrick |
Grant/award | 109 | $36.25 | $4.0K |
| 2026-06-18 | Williams John Mogan |
Grant/award | 78 | $36.25 | $2.8K |
| 2026-06-18 | Williams John Mogan |
Grant/award | 3 | $36.28 | $110 |
| 2026-06-18 | Shaw Brian D |
Grant/award | 39 | $36.25 | $1.4K |
| 2026-06-18 | Jones Heather D |
Grant/award | 24 | $36.25 | $865 |
| 2026-06-18 | Colter David M |
Grant/award | 20 | $36.10 | $710 |
| 2026-06-18 | Caras Matthew L |
Grant/award | 125 | $36.25 | $4.5K |
| 2026-06-18 | Simard Curtis C |
Grant/award | 801 | $36.25 | $29.0K |
| 2026-04-28 | Caras Matthew L |
Open-market purchase | 760 | $34.68 | $26.4K |
| 2026-04-23 | Dipaola Alison Noelle |
Grant/award | 2,012 | — | — |
| 2026-04-23 | Dipaola Alison Noelle |
Shares withheld for tax | 1,417 | $34.38 | $48.7K |
| 2026-04-23 | Williams John Mogan |
Shares withheld for tax | 1,811 | $34.38 | $62.3K |
| 2026-04-23 | Williams John Mogan |
Grant/award | 2,339 | — | — |
| 2026-04-23 | Mercier John M |
Grant/award | 3,173 | — | — |
| 2026-04-23 | Mercier John M |
Shares withheld for tax | 2,098 | — | — |
| 2026-04-23 | Edgar Jason Paul |
Grant/award | 3,070 | — | — |
| 2026-04-23 | Edgar Jason Paul |
Shares withheld for tax | 2,044 | $34.38 | $70.3K |
| 2026-04-23 | Scully Joseph Patrick |
Shares withheld for tax | 2,295 | — | — |
| 2026-04-23 | Scully Joseph Patrick |
Grant/award | 3,042 | — | — |
| 2026-04-23 | Colombo Marion |
Shares withheld for tax | 2,395 | $34.38 | $82.3K |
| 2026-04-23 | Colombo Marion |
Grant/award | 3,173 | — | — |
| 2026-04-23 | Iannelli Josephine |
Grant/award | 4,910 | — | — |
| 2026-04-23 | Iannelli Josephine |
Shares withheld for tax | 3,519 | $34.38 | $121.0K |
| 2026-04-23 | Simard Curtis C |
Grant/award | 15,321 | — | — |
| 2026-04-23 | Simard Curtis C |
Shares withheld for tax | 9,734 | $34.38 | $334.7K |
Well-known investors holding BHB (13F)
None of the 59 investors we track reported a position in their latest 13F.