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What changed in BAR HARBOR BANKSHARES's 10-K — 2023 vs 2024

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Paragraph-level year-over-year comparison of BAR HARBOR BANKSHARES's 2023 and 2024 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2024 report.

+382 added−326 removedSource: 10-K (2025-03-11) vs 10-K (2024-03-11)

Top changes in BAR HARBOR BANKSHARES's 2024 10-K

382 paragraphs added · 326 removed · 185 edited across 7 sections

Item 1. Business

Business — how the company describes what it does

50 edited+98 added−80 removed60 unchanged
Biggest changeThe following table summarizes the major industries of the commercial loan portfolio as of December 31, 2023 and 2022: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 2023 ​ 2022 (in thousands, except percentages) Loans Total Exposure ​ % of Total Portfolio ​ Loans ​ Total Exposure ​ % of Total Commerical Portfolio Real Estate and Rental and Leasing ​ $ 1,018,035 ​ $ 1,196,273 ​ 52 % ​ $ 946,591 ​ $ 1,212,986 ​ 51 % Accommodation and Food Services ​ 334,838 ​ ​ 347,588 ​ 17 ​ ​ ​ 334,053 ​ ​ 347,023 ​ 18 ​ Health Care and Social Assistance ​ 99,601 ​ ​ 109,771 ​ 5 ​ ​ ​ 105,634 ​ ​ 145,361 ​ 6 ​ Retail Trade ​ 78,036 ​ ​ 94,074 ​ 4 ​ ​ ​ 61,265 ​ ​ 79,401 ​ 3 ​ Agriculture, Forestry, Fishing and Hunting ​ ​ 55,214 ​ ​ 63,052 ​ 3 ​ ​ ​ 60,815 ​ ​ 68,040 ​ 3 ​ Wholesale Trade ​ ​ 63,088 ​ ​ 110,703 ​ 3 ​ ​ ​ 55,546 ​ ​ 83,696 ​ 3 ​ Educational Services ​ ​ 51,512 ​ ​ 63,731 ​ 3 ​ ​ ​ 49,162 ​ ​ 61,526 ​ 3 ​ Finance and Insurance ​ ​ 59,753 ​ ​ 103,444 ​ 3 ​ ​ ​ 33,148 ​ ​ 52,551 ​ 2 ​ Manufacturing ​ ​ 44,277 ​ ​ 67,221 ​ 2 ​ ​ ​ 44,672 ​ ​ 66,083 ​ 2 ​ Arts, Entertainment, and Recreation ​ ​ 30,914 ​ ​ 33,441 ​ 2 ​ ​ ​ 29,300 ​ ​ 31,898 ​ 2 ​ Construction ​ ​ 23,086 ​ ​ 44,518 ​ 1 ​ ​ ​ 29,448 ​ ​ 49,450 ​ 2 ​ Public Administration ​ ​ 35,995 ​ ​ 40,669 ​ — ​ ​ ​ 33,769 ​ ​ 39,357 ​ 2 ​ Transportation and Warehousing ​ ​ 14,424 ​ ​ 22,139 ​ — ​ ​ ​ 14,087 ​ ​ 16,051 ​ 1 ​ All other ​ ​ 54,427 ​ ​ 79,691 ​ 5 ​ ​ ​ 51,566 ​ ​ 81,045 ​ 2 ​ Total commercial loans ​ $ 1,963,200 ​ $ 2,376,315 ​ 100 % ​ $ 1,849,056 ​ $ 2,334,468 ​ 100 % 7 Table of Contents Within our non-owner-occupied commercial real estate portfolio (considered “Commercial construction” and “Commercial Real Estate Non-Owner Occupied” above), the top 10 loans represent approximately 13.9% of total commercial outstanding.
Biggest changeThe following table summarizes the major industries of the commercial loan portfolio as of December 31, 2024 and 2023: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 2024 ​ 2023 (in thousands, except percentages) Loans Total Exposure ​ % of Total Portfolio ​ Loans ​ Total Exposure ​ % of Total Commercial Portfolio Real Estate and Rental and Leasing ​ $ 1,109,613 ​ $ 1,286,712 ​ 51 % ​ $ 1,018,035 ​ $ 1,196,273 ​ 52 % Accommodation and Food Services ​ 415,321 ​ ​ 444,028 ​ 19 ​ ​ ​ 334,838 ​ ​ 347,588 ​ 17 ​ Health Care and Social Assistance ​ 96,767 ​ ​ 105,873 ​ 4 ​ ​ ​ 99,601 ​ ​ 109,771 ​ 5 ​ Retail Trade ​ 77,771 ​ ​ 95,424 ​ 4 ​ ​ ​ 78,036 ​ ​ 94,074 ​ 4 ​ Finance and Insurance ​ ​ 79,692 ​ ​ 117,718 ​ 4 ​ ​ ​ 59,753 ​ ​ 103,444 ​ 3 ​ Wholesale Trade ​ ​ 62,832 ​ ​ 112,913 ​ 3 ​ ​ ​ 63,088 ​ ​ 110,703 ​ 3 ​ Agriculture, Forestry, Fishing and Hunting ​ ​ 47,591 ​ ​ 58,335 ​ 2 ​ ​ ​ 55,214 ​ ​ 63,052 ​ 3 ​ Educational Services ​ ​ 47,635 ​ ​ 56,855 ​ 2 ​ ​ ​ 51,512 ​ ​ 63,731 ​ 3 ​ Public Administration ​ ​ 37,106 ​ ​ 38,191 ​ 2 ​ ​ ​ 35,995 ​ ​ 40,669 ​ — ​ Manufacturing ​ ​ 36,627 ​ ​ 56,644 ​ 2 ​ ​ ​ 44,277 ​ ​ 67,221 ​ 2 ​ Arts, Entertainment, and Recreation ​ ​ 29,794 ​ ​ 32,221 ​ 1 ​ ​ ​ 30,914 ​ ​ 33,441 ​ 2 ​ Construction ​ ​ 23,817 ​ ​ 67,060 ​ 1 ​ ​ ​ 23,086 ​ ​ 44,518 ​ 1 ​ Transportation and Warehousing ​ ​ 12,069 ​ ​ 14,411 ​ 1 ​ ​ ​ 14,424 ​ ​ 22,139 ​ — ​ All other ​ ​ 80,000 ​ ​ 115,435 ​ 4 ​ ​ ​ 51,566 ​ ​ 79,691 ​ 5 ​ Total commercial loans ​ $ 2,156,635 ​ $ 2,601,820 ​ 100 % ​ $ 1,963,200 ​ $ 2,376,315 ​ 100 % 7 Table of Contents Within our non-owner-occupied commercial real estate portfolio (considered “Commercial construction” and “Commercial Real Estate Non-Owner Occupied” above), the top 10 loans represent approximately 12.7% of total commercial real estate loans outstanding.
These portfolios include the categories commercial real estate, commercial and industrial, residential real estate and other consumer loans. Loan interest rates and 6 Table of Contents other key loan terms are affected principally by our lending policy, asset/liability strategy, loan demand, competition, and the supply of money available for lending purposes.
These portfolios include the categories commercial real estate, commercial and industrial, residential real estate and other consumer loans. Loan interest rates and other key loan terms are affected principally by our lending policy, asset/liability strategy, loan demand, competition, and 6 Table of Contents the supply of money available for lending purposes.
Our corporate goal is to be one of the most consistently high performing community banks in New England, and our business model is centered on the following: ​ ● Employee and customer experience is the foundation of superior performance, which leads to significant financial benefit to shareholders ● Geography, heritage, and performance are key while remaining true to a community-focused culture ● Commitment to risk management while balancing growth and earnings ● Service and sales driven culture with a focus on core business growth ● Fee income is fundamental to our profitability through trust and treasury management services, customer derivatives, and secondary market mortgage sales ● Investment in processes, products, technology, training, leadership, and infrastructure ● Expansion of our brand and business to deepen market presence ● Opportunity and growth for existing employees while adding catalyst recruits across all levels ​ 4 Table of Contents Shown below is a profile and geographical footprint of the Bank as of December 31, 2023: We serve affluent and growing markets in Maine, New Hampshire, and Vermont with more than 49 thousand, 48 thousand, and 24 thousand customers, respectively in those states.
Our corporate goal is to be one of the most consistently high performing community banks in New England, and our business model is centered on the following: ​ ● Employee and customer experience is the foundation of superior performance, which leads to significant financial benefit to shareholders ● Geography, heritage, and performance are key while remaining true to a community-focused culture ● Commitment to risk management while balancing growth and earnings ● Service and sales driven culture with a focus on core business growth ● Fee income is fundamental to our profitability through trust and treasury management services, customer derivatives, and secondary market mortgage sales ● Investment in processes, products, technology, training, leadership, and infrastructure ● Expansion of our brand and business to deepen market presence ● Opportunity and growth for existing employees while adding catalyst recruits across all levels ​ 4 Table of Contents Shown below is a profile and geographical footprint of the Bank as of December 31, 2024: ​ We serve affluent and growing markets in Maine, New Hampshire, and Vermont with more than 49 thousand, 48 thousand, and 24 thousand customers, respectively in those states.
In addition, we offer Flexible Work Arrangements, which offers options such as fully remote, partially remote, condensed workweeks, and flexible hours. The flexibility of these various arrangements allows colleagues to manage their work-life needs while continuing to deliver stellar results in the workplace. ​ Embracing unique perspectives and supporting inclusivity and diversity are at the core of who we are.
In addition, we offer Flexible Work Arrangements, which offers options such as fully remote, partially remote, condensed workweeks, and flexible hours. The flexibility of these various arrangements allows colleagues to manage their work-life needs while continuing to deliver stellar results in the workplace. ​ Embracing unique perspectives and supporting inclusivity are at the core of who we are.
Our ability to attract and retain diverse, top-tier talent while sustaining and deepening the current relationships is critical to maintaining a best-in-class customer and colleague experience. The opportunity for personal and professional development is a critically important focus of ours and one that helps us retain top talent.
Our ability to attract and retain top-tier talent while sustaining and deepening the current relationships is critical to maintaining a best-in-class customer and colleague experience. The opportunity for personal and professional development is a critically important focus of ours and one that helps us retain top talent.
There are two Connecticut statutory trusts for which all of the common stock is owned. These capital trusts are unconsolidated, and their only material asset is a $20.6 million trust preferred security related to the junior subordinated debentures reported in Note 7 – Borrowed Funds of the Consolidated Financial Statements.
There are two Connecticut statutory trusts for which all of the common stock is owned by the Company. These capital trusts are unconsolidated, and their only material asset is a $20.6 million trust preferred security related to the junior subordinated debentures reported in Note 7 – Borrowed Funds of the Consolidated Financial Statements.
Among other circumstances, under the BHC Act, a company has control of a bank or bank holding company if the company owns, controls or holds with power to vote 25% or more of a class of voting securities of the bank or bank holding company, controls in any manner the election of a majority of directors or trustees of the bank or bank holding company, or the federal bank regulator has determined, after notice and opportunity for hearing, that the company has the power to exercise a controlling influence over the management or policies of the bank or bank holding company.
Among other circumstances, under the BHC Act, a company has control of a bank or bank holding company if the company owns, controls or holds with power to vote 25% or more of a class of voting securities of the bank or bank holding company, controls in any manner the election of a majority of directors or trustees of the bank or bank holding company, or the Federal Reserve Board has determined, after notice and opportunity for hearing, that the company has the power to exercise a controlling influence over the management or policies of the bank or bank holding company.
Outside of trust services, they also provide 401(k) plan services, financial, estate and charitable planning, investment management, family office, municipal and tax services. The 13 Table of Contents employees include credentialed investment professionals with extensive experience. At December 31, 2023 and 2022, trust management services had total assets under management (“AUM”) of $2.5 billion and $2.3 billion, respectively.
Outside of trust services, they also provide 401(k) plan services, financial, estate and charitable planning, investment management, family office, municipal and tax services. The 13 Table of Contents employees include credentialed investment professionals with extensive experience. At December 31, 2024 and 2023, trust management services had total assets under management (“AUM”) of $2.8 billion and $2.5 billion, respectively.
HUMAN CAPITAL We are very fortunate to have a diverse, committed team throughout Maine, New Hampshire, and Vermont who are capable, determined and empowered to drive our company forward. As of December 31, 2023, we had 462 full time equivalent employees. None of our colleagues are represented by unions. All employment decisions are based on talent and potential for growth.
HUMAN CAPITAL We are very fortunate to have a committed team throughout Maine, New Hampshire, and Vermont who are capable, determined and empowered to drive our company forward. As of December 31, 2024, we had 458 full time equivalent employees. None of our colleagues are represented by unions. All employment decisions are based on talent and potential for growth.
The average loan size in the CRE segment is approximately $2.0 million. Delinquencies within the segment were nominal at less than 0.01% as a percentage of the total segment as of December 31, 2023. Maximum loan-to-value ratios at origination are governed by established policy and regulatory guidelines.
The average loan size in the CRE segment is approximately $2.1 million. Delinquencies within the segment were nominal at less than 0.02% as a percentage of the total segment as of December 31, 2024. Maximum loan-to-value ratios at origination are governed by established policy and regulatory guidelines.
Generally, however, they contain one or more of the following elements: (i) restrictions on trade with or investment in a sanctioned country, including prohibitions against direct or indirect imports from and exports to a sanctioned country and prohibitions on “U.S. persons” engaging in financial transactions relating to making investments in, or providing investment-related advice or assistance to, a sanctioned country; and (ii) a blocking of assets in which the government or specially designated nationals of the sanctioned country have an interest, by prohibiting transfers of property subject to U.S. jurisdiction (including property in the possession or control of U.S. persons).
Generally, however, they contain one or more of the following elements: (i) restrictions on trade with or investment in a sanctioned country, including prohibitions against direct or indirect imports from and exports to a sanctioned country and prohibitions on “U.S. persons” engaging in financial or other transactions relating to a sanctioned country or with certain designated persons and entities; (ii) a blocking of assets in which the government or specially designated nationals of the sanctioned country have an interest, by prohibiting transfers of property subject to U.S. jurisdiction (including property in the possession or control of U.S. persons); and (iii) restrictions on transactions with or involving certain persons or entities.
As of December 31, 2023, BHWM had an appropriate liquidation reserve, minimum capital in excess of statutory requirements, and all funds were held in accordance with prudent investor standards of NH RSA 564-B:9-902 and as required by NH RSA 383-C:5-502.
As of December 31, 2024, BHWM had an appropriate liquidation reserve, minimum capital in excess of statutory requirements, and all funds were held in accordance with prudent investor standards of NH RSA 564-B:9-902 and as required by NH RSA 383-C:5-502. Employee Retirement Income Security Act of 1974.
The following table presents the scheduled maturities of time deposits greater than $250 thousand at December 31, 2023: ​ ​ ​ ​ ​ ​ (in thousands, except ratios) ​ Amount Three months or less ​ $ 33,583 Over 3 months through 6 months ​ 31,522 Over 6 months through 12 months ​ 85,198 Over 12 months ​ 4,122 Total ​ $ 154,425 ​ BORROWING ACTIVITIES Borrowings may be utilized as an alternative source of funds which can be invested at a positive interest rate spread when additional capacity to fund loan demand is desired or when asset/liability management goals are met to diversify funding sources and enhance interest rate risk management. ​ Borrowings historically have included advances from the Federal Home Loan Bank of Boston ("FHLB"), securities sold under repurchase agreements, and a correspondent bank unsecured line of credit.
The following table presents the scheduled maturities of time deposits greater than $250 thousand at December 31, 2024: ​ ​ ​ ​ ​ ​ (in thousands, except ratios) ​ Amount Three months or less ​ $ 39,188 Over 3 months through 6 months ​ 62,799 Over 6 months through 12 months ​ 81,767 Over 12 months ​ 2,910 Total ​ $ 186,664 ​ BORROWING ACTIVITIES Borrowings may be utilized as an alternative source of funds which can be invested at a positive interest rate spread when additional capacity to fund loan demand is desired or when asset/liability management goals are met to diversify funding sources and enhance interest rate risk management. ​ Borrowings historically have included advances from the Federal Home Loan Bank of Boston ("FHLB"), securities sold under repurchase agreements, and a correspondent bank unsecured line of credit.
Our total commercial portfolio has a pass rating of 93%, included in the commercial portfolio are office loans of $245.8 million which have a pass rating of 86%. ​ Maturity and Sensitivity of the Loan Portfolio The following table shows contractual maturities of selected loan categories at December 31, 2023.
Our total commercial portfolio has a pass rating of 95%, included in the commercial portfolio are office loans of $247.8 million which have a pass rating of 85%. ​ Maturity and Sensitivity of the Loan Portfolio The following table shows contractual maturities of selected loan categories at December 31, 2024.
The weighted average loan-to-value ratio for the top 10 loans within the non-owner occupied segment was 61.54% as of December 31, 2023. The top 10 office loans represent approximately 9% of the total commercial real estate segment exposure inclusive of unfunded commitments and 10% of the outstanding balances.
The weighted average loan-to-value ratio for the top 10 loans within the non-owner occupied segment was 60.7% as of December 31, 2024. The top 10 office loans represent approximately 8.3% of the total commercial real estate segment exposure inclusive of unfunded commitments and 9.0% of the outstanding balances.
The BHC Act provides that, in the event of 16 Table of Contents a bank holding company’s bankruptcy, any commitment by the bank holding company to a federal bank regulatory agency to maintain the capital of a bank subsidiary will be assumed by the bankruptcy trustee and entitled to priority of payment.
In the event of a bank holding company’s bankruptcy, any commitment by the bank holding company to a federal bank regulatory agency to maintain the capital of a bank subsidiary will be assumed by the bankruptcy trustee and entitled to a priority of payment. Acquisitions and Activities.
The ACL is discussed further in Note 1 – Summary of Significant Accounting Policies of the Consolidated Financial Statements. ​ 9 Table of Contents The following table presents an analysis of the ACL for the years indicated: ​ ​ ​ ​ ​ ​ ​ ​ (in thousands, except ratios) 2023 2022 Balance at beginning of year ​ $ 25,860 ​ $ 22,718 ​ Charged-off loans: ​ ​ ​ Commercial construction ​ — ​ — ​ Commercial real estate owner occupied ​ — ​ — ​ Commercial real estate non-owner occupied ​ — ​ — ​ Tax exempt ​ ​ — ​ ​ — ​ Commercial and industrial ​ ​ (664) ​ ​ (8) ​ Residential real estate ​ ​ (8) ​ ​ (84) ​ Home equity ​ ​ (12) ​ ​ (7) ​ Consumer other ​ (289) ​ (267) ​ Total charged-off loans ​ (973) ​ (366) ​ Recoveries on charged-off loans: ​ ​ ​ Commercial construction ​ — ​ — ​ Commercial real estate owner occupied ​ 142 ​ 120 ​ Commercial real estate non-owner occupied ​ — ​ — ​ Tax exempt ​ ​ — ​ ​ — ​ Commercial and industrial ​ ​ 149 ​ ​ 341 ​ Residential real estate ​ ​ 31 ​ ​ 106 ​ Home equity ​ ​ 6 ​ ​ 25 ​ Consumer other ​ 19 ​ 12 ​ Total recoveries on charged-off loans ​ 347 ​ 604 ​ Net (charge-offs) recoveries ​ (626) ​ 238 ​ Provision for credit losses ​ 2,908 ​ 2,904 ​ Balance at end of year ​ $ 28,142 ​ $ 25,860 ​ ​ ​ ​ ​ ​ ​ ​ ​ Ratios: ​ ​ ​ Net charge-offs (recoveries)/average loans ​ 0.02 % (0.01) % Recoveries/charged-off loans ​ 36 ​ 165 ​ Allowance for credit losses/total loans ​ 0.94 ​ 0.89 ​ Allowance for credit losses/non-accruing loans ​ 509 ​ 395 ​ ​ The following table presents year-end data for the approximate allocation of the ACL by loan categories at the dates indicated.
The ACL is discussed further in Note 1 – Summary of Significant Accounting Policies of the Consolidated Financial Statements. ​ ​ ​ 9 Table of Contents The following table presents an analysis of the ACL for the years indicated: ​ ​ ​ ​ ​ ​ ​ ​ (in thousands, except ratios) 2024 2023 Balance at beginning of year ​ $ 28,142 ​ $ 25,860 ​ Charged-off loans: ​ ​ ​ Commercial construction ​ — ​ — ​ Commercial real estate owner occupied ​ (3) ​ — ​ Commercial real estate non-owner occupied ​ — ​ — ​ Tax exempt and other ​ ​ — ​ ​ — ​ Commercial and industrial ​ ​ (187) ​ ​ (664) ​ Residential real estate ​ ​ — ​ ​ (8) ​ Home equity ​ ​ — ​ ​ (12) ​ Consumer other ​ (277) ​ (289) ​ Total charged-off loans ​ (467) ​ (973) ​ Recoveries on charged-off loans: ​ ​ ​ Commercial construction ​ — ​ — ​ Commercial real estate owner occupied ​ — ​ 142 ​ Commercial real estate non-owner occupied ​ — ​ — ​ Tax exempt and other ​ ​ — ​ ​ — ​ Commercial and industrial ​ ​ 29 ​ ​ 149 ​ Residential real estate ​ ​ 15 ​ ​ 31 ​ Home equity ​ ​ 11 ​ ​ 6 ​ Consumer other ​ 59 ​ 19 ​ Total recoveries on charged-off loans ​ 114 ​ 347 ​ Net (charge-offs) recoveries ​ (353) ​ (626) ​ Provision for credit losses ​ 955 ​ 2,908 ​ Balance at end of year ​ $ 28,744 ​ $ 28,142 ​ ​ ​ ​ ​ ​ ​ ​ ​ Ratios: ​ ​ ​ Net charge-offs (recoveries)/average loans ​ 0.01 % 0.02 % Recoveries/charged-off loans ​ 24 ​ 36 ​ Allowance for credit losses/total loans ​ 0.91 ​ 0.94 ​ Allowance for credit losses/non-accruing loans ​ 411 ​ 509 ​ ​ The following table presents year-end data for the approximate allocation of the ACL by loan categories at the dates indicated.
For example, state law restrictions in Maine include limitations and restrictions relating to indemnification of directors, distributions and dividends to shareholders, transactions involving directors, officers or interested shareholders, maintenance of books, records, and minutes, and observance of certain corporate formalities.
Other Regulations As a Maine corporation, the Company is subject to certain limitations and restrictions under applicable Maine corporate law. For example, state law restrictions in Maine include limitations and restrictions relating to indemnification of directors, distributions and dividends to shareholders, transactions involving directors, officers or interested shareholders, maintenance of books, records, and minutes, and observance of certain corporate formalities.
Limitations on Acquisitions of the Company’s Common Stock The federal Change in Bank Control Act prohibits a person or group of persons from acquiring “control” of a bank holding company unless the appropriate federal bank regulator has been notified and has not objected to the transaction.
The Change in Bank Control Act prohibits a person or group of persons from acquiring “control” of a bank holding company unless the Federal Reserve Board has been notified and has not objected to the transaction.
Loan collections are managed by a combination of the related business units and the managed assets group. ​ ​ 8 Table of Contents The following table presents the problem assets for the years indicated: ​ ​ ​ ​ ​ ​ ​ ​ (in thousands, except ratios) 2023 2022 Non-accruing loans: ​ ​ ​ Commercial construction ​ $ — ​ $ — ​ Commercial real estate owner occupied ​ 103 ​ 439 ​ Commercial real estate non-owner occupied ​ 340 ​ 550 ​ Tax exempt ​ ​ — ​ ​ — ​ Commercial and industrial ​ 363 ​ 207 ​ Residential real estate ​ ​ 3,908 ​ ​ 4,385 ​ Home equity ​ ​ 809 ​ ​ 963 ​ Consumer other ​ 5 ​ 5 ​ Total loans ​ ​ 5,528 ​ ​ 6,549 ​ Other real estate owned ​ — ​ — ​ Total non-performing assets ​ $ 5,528 ​ $ 6,549 ​ ​ ​ ​ ​ ​ ​ ​ ​ Total non-performing loans/total loans ​ 0.18 % 0.23 % Total non-performing assets/total assets ​ 0.14 ​ 0.17 ​ ​ ​ Allowance for Credit Losses Our loan portfolio is regularly reviewed by management to evaluate the adequacy of the allowance for credit losses (“ACL”).
Loan collections are managed by a combination of the related business units and the managed assets group. ​ ​ 8 Table of Contents The following table presents the problem assets for the years indicated: ​ ​ ​ ​ ​ ​ ​ ​ (in thousands, except ratios) 2024 2023 Non-accruing loans: ​ ​ ​ Commercial construction ​ $ — ​ $ — ​ Commercial real estate owner occupied ​ 736 ​ 103 ​ Commercial real estate non-owner occupied ​ 277 ​ 340 ​ Tax exempt and other ​ ​ — ​ ​ — ​ Commercial and industrial ​ 1,099 ​ 363 ​ Residential real estate ​ ​ 3,591 ​ ​ 3,908 ​ Home equity ​ ​ 1,267 ​ ​ 809 ​ Consumer other ​ 24 ​ 5 ​ Total loans ​ ​ 6,994 ​ ​ 5,528 ​ Non-Performing securities available for sale ​ ​ 5,760 ​ ​ — ​ Other real estate owned ​ — ​ — ​ Total non-performing assets ​ $ 12,754 ​ $ 5,528 ​ ​ ​ ​ ​ ​ ​ ​ ​ Total non-performing loans/total loans ​ ​ 0.22 % 0.18 % Total non-performing assets/total assets ​ ​ 0.31 ​ 0.14 ​ ​ Allowance for Credit Losses Our loan portfolio is regularly reviewed by management to evaluate the adequacy of the allowance for credit losses (“ACL”).
Further, as a Maine financial institution holding company, the Company is also subject to certain requirements and restrictions under applicable Maine banking law.
Further, as a Maine financial institution holding company, the Company is also subject to certain requirements and restrictions under applicable Maine banking law. The Company is also under the jurisdiction of the SEC and is subject to the disclosure and regulatory requirements of the Securities Act and the Exchange Act.
As of December 31, 2023, BHWM’s total capital was $16.8 million and it had liquidation reserves of $504 thousand held in a money market account. BHWM also had operating reserves of $15.7 million held primarily at the Bank.
As of December 31, 2024, BHWM’s total capital was $13.2 million and it had liquidation reserves of $505 thousand held in a money market account. BHWM also had operating reserves of $11.2 million held primarily at the Bank.
Estimated uninsured time deposits were $60.0 million and $27.9 million as of December 31, 2023 and 2022, respectively.
Estimated uninsured time deposits were $85.3 million and $60.0 million as of December 31, 2024 and 2023, respectively.
The allocation of the allowance to each category is not indicative of future losses and does not restrict the use of any of the allowance to absorb losses in any category. ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 2023 ​ 2022 ​ ​ ​ ​ ​ % Allocated to ​ ​ ​ ​ % Allocated to (in thousands, except ratios) Amount Total Loans Amount Total Loans Commercial construction $ 4,261 0.14 % $ 2,579 0.09 % Commercial real estate owner occupied ​ 2,863 0.10 ​ 2,189 0.08 ​ Commercial real estate non-owner occupied ​ ​ 9,443 0.31 ​ 9,341 0.32 ​ Tax exempt ​ ​ 119 ​ — ​ ​ 93 ​ — ​ Commercial and industrial ​ ​ 3,259 ​ 0.11 ​ ​ 3,493 ​ 0.12 ​ Residential real estate ​ ​ 7,352 ​ 0.25 ​ ​ 7,274 ​ 0.25 ​ Home equity ​ ​ 767 ​ 0.03 ​ ​ 811 ​ 0.03 ​ Consumer other ​ ​ 78 ​ — ​ ​ 80 ​ — ​ Total ​ $ 28,142 ​ 0.94 % $ 25,860 ​ 0.89 % ​ 10 Table of Contents INVESTMENT SECURITIES ACTIVITIES The objective of the investment portfolio is to provide liquidity when loan demand is high, and to absorb excess funds when demand is low.
The allocation of the allowance to each category is not indicative of future losses and does not restrict the use of any of the allowance to absorb losses in any category. ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 2024 ​ 2023 ​ ​ ​ ​ ​ % Allocated to ​ ​ ​ ​ % Allocated to (in thousands, except ratios) Amount Total Loans Amount Total Loans Commercial construction $ 2,096 0.07 % $ 4,261 0.14 % Commercial real estate owner occupied ​ 2,794 0.09 ​ 2,863 0.10 ​ Commercial real estate non-owner occupied ​ ​ 11,104 0.35 ​ 9,443 0.31 ​ Tax exempt and other ​ ​ 128 ​ 0.01 ​ ​ 119 ​ — ​ Commercial and industrial ​ ​ 5,064 ​ 0.16 ​ ​ 3,259 ​ 0.11 ​ Residential real estate ​ ​ 6,732 ​ 0.21 ​ ​ 7,352 ​ 0.25 ​ Home equity ​ ​ 741 ​ 0.02 ​ ​ 767 ​ 0.03 ​ Consumer other ​ ​ 85 ​ — ​ ​ 78 ​ — ​ Total ​ $ 28,744 ​ 0.91 % $ 28,142 ​ 0.94 % ​ 10 Table of Contents INVESTMENT SECURITIES ACTIVITIES The objective of the investment portfolio is to provide liquidity when loan demand is high, and to absorb excess funds when demand is low.
As a Maine-chartered financial institution, the Bank is subject to supervision, regular examination, and regulation by the Maine Bureau of Financial Institutions ("BFI") and the FDIC as its primary federal regulator and as its deposit insurer. The Bank’s deposits are insured by the FDIC in accordance with applicable federal laws and regulations.
Regulation of the Bank As a Maine-chartered financial institution, the Bank is subject to supervision, regular examination, and regulation by the Maine Bureau of Financial Institutions (“BFI”) and the FDIC as its primary federal regulator and as its deposit insurer.
The weighted average loan-to-value for the top ten loans within the office segment is 60.37%.
The weighted average loan-to-value for the top 10 loans within the office segment is 68.8%.
Further information about the composition of the loan portfolio is contained in Note 3 – Loans and Allowance for Credit Losses of the Consolidated Financial Statements. ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 2023 ​ 2022 (in thousands, except ​ % of ​ ​ % of percentages) ​ Amount ​ Total ​ Amount ​ Total Commercial construction $ 154,048 5 % ​ $ 117,577 4 % Commercial real estate owner occupied ​ 310,015 10 ​ ​ 244,814 8 ​ Commercial real estate non-owner occupied ​ ​ 1,144,566 ​ 38 ​ ​ ​ 1,146,674 ​ 40 ​ Tax exempt ​ ​ 43,688 ​ 2 ​ ​ ​ 42,879 ​ 2 ​ Commercial and industrial ​ ​ 310,883 ​ 10 ​ ​ ​ 297,112 ​ 10 ​ Residential real estate ​ 940,334 32 ​ ​ 954,968 33 ​ Home equity ​ ​ 87,683 ​ 3 ​ ​ ​ 90,865 ​ 3 ​ Consumer other ​ 7,832 — ​ ​ 7,801 — ​ Total loans ​ $ 2,999,049 100 % ​ $ 2,902,690 100 % ​ Commercial Loan Exposure and Industries All commercial loans are assigned Standard Industrial Classification codes, North American Industry Classification System codes, and state and county codes.
Further information about the composition of the loan portfolio is contained in Note 3 – Loans and Allowance for Credit Losses of the Consolidated Financial Statements. ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 2024 ​ 2023 (in thousands, except ​ % of ​ ​ % of percentages) ​ Amount ​ Total ​ Amount ​ Total Commercial construction $ 131,617 ​ 4 % ​ $ 154,048 5 % Commercial real estate owner occupied ​ 302,074 ​ 10 ​ ​ 310,015 10 ​ Commercial real estate non-owner occupied ​ ​ 1,358,903 ​ 43 ​ ​ ​ 1,144,566 ​ 38 ​ Tax exempt and other ​ ​ 44,275 ​ 2 ​ ​ ​ 43,688 ​ 2 ​ Commercial and industrial ​ ​ 319,766 ​ 10 ​ ​ ​ 310,883 ​ 10 ​ Residential real estate ​ 888,251 ​ 28 ​ ​ 940,334 32 ​ Home equity ​ ​ 94,141 ​ 3 ​ ​ ​ 87,683 ​ 3 ​ Consumer other ​ 8,069 ​ — ​ ​ 7,832 — ​ Total loans ​ $ 3,147,096 100 % ​ $ 2,999,049 100 % ​ Commercial Loan Exposure and Industries All commercial loans are assigned Standard Industrial Classification codes, North American Industry Classification System codes, and state and county codes.
Federal law also prohibits the payment of dividends by a bank that will result in the bank failing to meet its applicable capital requirements on a pro forma basis.
Federal law also prohibits the payment of dividends by a bank that will result in the bank failing to meet its applicable capital requirements on a pro forma basis. Maine law requires the approval of the BFI for any dividend that would reduce a bank’s capital below prescribed limits.
The following table presents the average balances and weighted average rates for deposits for the years indicated: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 2023 ​ 2022 (in thousands, except ratios) Average Balance Percent of Total Weighted Average Rate Average Balance Percent of Total Weighted Average Rate ​ Demand ​ $ 618,685 20 % — % $ 679,081 22 % — % NOW ​ 900,035 30 0.98 ​ 907,123 30 0.16 ​ Savings ​ 594,959 20 0.39 ​ 657,591 21 0.10 ​ Money market ​ 406,759 13 2.48 ​ 466,426 15 0.63 ​ Time deposits ​ 532,981 17 3.19 ​ 366,404 12 0.61 ​ Total ​ $ 3,053,419 100 % 1.25 % $ 3,076,625 100 % 0.24 % ​ 12 Table of Contents Estimated uninsured non-maturity deposits were $525.3 million as of December 31, 2023 and $617.7 million as of December 31, 2022.
The following table presents the average balances and weighted average rates for deposits for the years indicated: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 2024 ​ 2023 (in thousands, except ratios) Average Balance Percent of Total Weighted Average Rate Average Balance Percent of Total Weighted Average Rate ​ Non-interest bearing demand ​ $ 570,787 18 % — % $ 618,685 20 % — % Interest-bearing demand ​ 886,272 28 1.41 ​ 900,035 30 0.98 ​ Savings ​ 546,517 17 0.67 ​ 594,959 20 0.39 ​ Money market ​ 379,997 12 3.02 ​ 406,759 13 2.48 ​ Time deposits ​ 791,228 25 4.30 ​ 532,981 17 3.19 ​ Total ​ $ 3,174,801 100 % 1.94 % $ 3,053,419 100 % 1.25 % ​ 12 Table of Contents Estimated uninsured non-maturity deposits were $404.7 million as of December 31, 2024 and $525.3 million as of December 31, 2023.
We offer a variety of financial products and services designed around our customers in order to serve their banking and financial needs. Through these efforts, we continue to be a relationship-focused community bank, maintaining our credit quality and serving businesses, entrepreneurs, and individuals within our footprint.
Through these efforts, we continue to be a relationship-focused community bank, maintaining our credit quality and serving businesses, entrepreneurs, and individuals within our footprint.
The prior approval of the FDIC is required, and the prior approval of the BFI may be required, for the Bank to establish or relocate a branch office. BHWM, a New Hampshire chartered non-depository trust company and an indirect subsidiary of the Bank, is subject to supervision, regular examination, and regulation by the New Hampshire Banking Department.
Other Significant Banking Regulations Applicable to the Bank BHWM, a New Hampshire chartered non-depository trust company and an indirect subsidiary of the Bank, is subject to supervision, regular examination, and regulation by the New Hampshire Banking Department.
In addition to these efforts, we have 14 Table of Contents provided charitable donations to more than 450 community organizations across the Northern New England states of Maine, New Hampshire, and Vermont. ​ REGULATION AND SUPERVISION As a bank holding company, the Company is regulated under the federal Bank Holding Company Act (“BHC Act”) and is subject to examination and supervision by the Federal Reserve Board.
In addition to these efforts, we have 14 Table of Contents provided charitable donations to more than 450 community organizations across the Northern New England states of Maine, New Hampshire, and Vermont. ​ REGULATION AND SUPERVISION The following discussion addresses elements of the regulatory framework applicable to the Company.
The following table presents the amortized cost and fair value of securities available for sale for the years indicated: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 2023 ​ 2022 ​ ​ Amortized ​ ​ ​ ​ Amortized ​ ​ ​ (in thousands) Cost Fair Value Cost Fair Value Debt Securities: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Obligations of US Government-sponsored enterprises ​ $ 2,021 ​ $ 1,992 ​ $ 2,692 ​ $ 2,660 Mortgage-backed securities and collateralized mortgage obligations: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ US Government-sponsored enterprises ​ ​ 223,602 ​ ​ 193,282 ​ ​ 249,838 ​ ​ 215,027 US Government agency ​ 85,005 ​ 74,213 ​ 90,318 ​ 79,606 Private label ​ 60,888 ​ 59,051 ​ 64,056 ​ 60,154 Obligations of states and political subdivisions thereof ​ 119,857 ​ 110,168 ​ 121,939 ​ 107,737 Corporate bonds ​ 105,552 ​ 95,868 ​ 102,505 ​ 94,332 Total ​ $ 596,925 ​ $ 534,574 ​ $ 631,348 ​ $ 559,516 ​ The following table presents the amortized cost and weighted average yields of securities available for sale at by maturity: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ December 31, 2023 ​ ​ Within ​ Over 1 Year ​ Over 5 Years ​ Over ​ ​ ​ (in thousands, except ratios) 1 Year to 5 Years ​ to 10 years ​ 10 Years ​ Total Debt Securities: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Obligations of US Government-sponsored enterprises ​ $ — ​ $ 83 ​ $ 513 ​ $ 1,425 ​ $ 2,021 ​ Mortgage-backed securities and collateralized mortgage obligations: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ US Government-sponsored enterprises ​ ​ 634 ​ ​ 3,447 ​ ​ 17,225 ​ ​ 202,296 ​ ​ 223,602 ​ US Government agency ​ ​ 6 ​ ​ 240 ​ ​ 3,272 ​ ​ 81,487 ​ ​ 85,005 ​ Private label ​ — — ​ ​ 27,234 ​ ​ 33,654 ​ ​ 60,888 ​ Obligations of states and political subdivisions thereof ​ — 450 ​ ​ 2,127 ​ ​ 117,280 ​ ​ 119,857 ​ Corporate bonds ​ 3,038 49,939 ​ ​ 47,569 ​ ​ 5,006 ​ ​ 105,552 ​ Total ​ $ 3,678 ​ $ 54,159 ​ $ 97,940 ​ $ 441,148 ​ $ 596,925 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Weighted Average Yield ​ ​ 5.51 % ​ 5.67 % ​ 5.28 % ​ 2.68 % ​ 3.40 % ​ DERIVATIVE FINANCIAL INSTRUMENTS Interest swap derivatives are utilized to minimize fluctuations in earnings and cash flows caused by interest rate volatility either in the form of interest rate swaps on wholesale funding and variable rate loans designated as cash flow hedges or 11 Table of Contents partial interest rate hedges on securities accounted for as fair value hedges.
The following table presents the amortized cost and fair value of securities available for sale for the years indicated: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 2024 ​ 2023 ​ ​ Amortized ​ ​ ​ ​ Amortized ​ ​ ​ (in thousands) Cost Fair Value Cost Fair Value Debt Securities: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Obligations of US Government-sponsored enterprises ​ $ 1,344 ​ $ 1,318 ​ $ 2,021 ​ $ 1,992 Mortgage-backed securities and collateralized mortgage obligations: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ US Government-sponsored enterprises ​ ​ 208,818 ​ ​ 177,316 ​ ​ 223,602 ​ ​ 193,282 US Government agency ​ 115,177 ​ 103,916 ​ 85,005 ​ 74,213 Private label ​ 40,633 ​ 39,564 ​ 60,888 ​ 59,051 Obligations of states and political subdivisions thereof ​ 116,421 ​ 105,452 ​ 119,857 ​ 110,168 Corporate bonds ​ 100,923 ​ 93,452 ​ 105,552 ​ 95,868 Total ​ $ 583,316 ​ $ 521,018 ​ $ 596,925 ​ $ 534,574 ​ The following table presents the amortized cost and weighted average yields of securities available for sale at by maturity: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ December 31, 2024 ​ ​ Within ​ Over 1 Year ​ Over 5 Years ​ Over ​ ​ ​ (in thousands, except ratios) 1 Year to 5 Years ​ to 10 years ​ 10 Years ​ Total Debt Securities: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Obligations of US Government-sponsored enterprises ​ $ — ​ $ 330 ​ $ 305 ​ $ 709 ​ $ 1,344 ​ Mortgage-backed securities and collateralized mortgage obligations: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ US Government-sponsored enterprises ​ ​ 787 ​ ​ 2,657 ​ ​ 16,361 ​ ​ 189,013 ​ ​ 208,818 ​ US Government agency ​ ​ 8 ​ ​ 157 ​ ​ 3,466 ​ ​ 111,546 ​ ​ 115,177 ​ Private label ​ — 4,000 ​ ​ 26,074 ​ ​ 10,559 ​ ​ 40,633 ​ Obligations of states and political subdivisions thereof ​ — 600 ​ ​ 2,768 ​ ​ 113,053 ​ ​ 116,421 ​ Corporate bonds ​ 3,000 51,469 ​ ​ 41,454 ​ ​ 5,000 ​ ​ 100,923 ​ Total ​ $ 3,795 ​ $ 59,213 ​ $ 90,428 ​ $ 429,880 ​ $ 583,316 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Weighted Average Yield ​ ​ 7.42 % ​ 5.68 % ​ 5.27 % ​ 2.56 % ​ 3.33 % ​ 11 Table of Contents DERIVATIVE FINANCIAL INSTRUMENTS Interest swap derivatives are utilized to minimize fluctuations in earnings and cash flows caused by interest rate volatility either in the form of interest rate swaps on wholesale funding and variable rate loans designated as cash flow hedges or partial interest rate hedges on securities accounted for as fair value hedges.
We undertake no obligation to release publicly any revisions to any forward-looking statements, to report events or to report the occurrence of unanticipated events unless we are required to do so by law . ​ GENERAL Bar Harbor Bankshares (the “Company,” “we,” “our” or “us” or similar terms) is the parent company of Bar Harbor Bank & Trust (the "Bank”), which is the only community bank headquartered in Northern New England with branches in Maine, New Hampshire, and Vermont.
GENERAL Bar Harbor Bankshares (the “Company,” “we,” “our” or “us” or similar terms) is the parent company of Bar Harbor Bank & Trust (the "Bank”), which is the only community bank headquartered in Northern New England with branches in Maine, New Hampshire, and Vermont. The Bank is a regional community bank that thinks differently about banking.
The BHC Act requires every bank holding company to obtain the prior approval of the Federal Reserve Board before (i) acquiring more than 5% of the voting stock of any bank or other bank holding company, (ii) acquiring all or substantially all of the assets of any bank or bank holding company, or (iii) merging or consolidating with any other bank holding company.
The BHC Act prohibits a bank holding company, without prior approval of the Federal Reserve Board, from acquiring all or substantially all the assets of a bank, acquiring control of a bank, merging or consolidating with another bank holding company, or acquiring direct or indirect ownership or control of any voting shares of another bank or bank holding company if, after such acquisition, the acquiring bank holding company would control more than 5% of any class of the voting shares of such other bank or bank holding company.
Having recently celebrated the 137th anniversary of the Bank’s founding, we remain focused on helping our customers achieve their goals as the key to the Bank’s success. With over 450 dedicated professionals and more than 50 locations, we are committed to servicing and building enduring relationships by providing a higher standard of banking.
With over 450 dedicated professionals and more than 50 locations, we are committed to servicing and building enduring relationships by providing a higher standard of banking. We offer a variety of financial products and services designed around our customers in order to serve their banking and financial needs.
The Bank is a regional community bank that thinks differently about banking. The Bank provides the technology offerings and capabilities of larger banks, accompanied by access to local decision makers who are acutely focused on their local markets.
The Bank provides the technology offerings and capabilities of larger banks, accompanied by access to local decision makers who are acutely focused on their local markets. Having recently celebrated the 138th anniversary of the Bank’s founding, we remain focused on helping our customers achieve their goals as the key to the Bank’s success.
Under a rebuttable presumption established by the federal bank regulator, the acquisition of 10% or more of a class of voting securities of a bank holding company with a class of securities registered under Section 12 of the Exchange Act would constitute the acquisition of control of a bank holding company.
The Federal Reserve has established presumptions of control under which the acquisition of control of 5% or more of a class of voting securities of a bank holding company, together with other factors enumerated by the Federal Reserve, could constitute the acquisition of control of a bank holding company for purposes of the BHC Act.
You should consider these factors in connection with considering any forward-looking statements that may be made by us.
You should consider these factors in connection with considering any forward-looking statements that may be made by us. We undertake no obligation to release publicly any revisions to any forward-looking statements, to report events or to report the occurrence of unanticipated events unless we are required to do so by law .
Our commitment to racial and social equity is ingrained in our guiding principles and allows us to work together to foster an inclusive and equitable work environment. ​ Serving the needs of all of the members of our communities also remains an important part of our commitment and strategy.
We strive to understand the unique opportunities and challenges that our customers and colleagues face and are committed to fostering an inclusive and equitable work environment. ​ Serving the needs of all of the members of our communities also remains an important part of our commitment and strategy.
In addition, the BHC Act prohibits any company from acquiring control of a bank or bank holding company without first having obtained the approval of the federal bank regulator.
As a result, if the proposed rule is adopted, the acquisition of control of a bank holding company for an insured state nonmember bank would require prior notice to both the FDIC and the Federal Reserve Board. 15 Table of Contents In addition, the BHC Act prohibits any company from acquiring control of a bank or bank holding company without first having obtained the approval of the Federal Reserve Board.
These standards cover internal controls, information and internal audit systems, loan documentation, credit underwriting, interest rate exposure, asset growth, compensation, fees and benefits, such other operational and managerial standards as the agency determines to be appropriate, and standards for asset quality, earnings and stock valuation.
Safety and Soundness Standard. Guidelines adopted by the federal bank regulatory agencies pursuant to the FDIA establish general standards relating to internal controls and information systems, internal audit systems, loan documentation, credit underwriting, interest rate exposure, asset growth, asset quality, earnings, and compensation and benefits.
Blocked assets (e.g., property and bank deposits) cannot be paid out, withdrawn, set off or transferred in any manner without a license from OFAC. The Company is responsible for, among other things, blocking accounts of, and transactions with, such targets and countries, prohibiting unlicensed trade and financial transactions with them and reporting blocked transactions after their occurrence.
Blocked assets (for example, property and bank deposits) cannot be paid out, withdrawn, set off or transferred in any manner without a license from OFAC. Failure to comply with these sanctions could have serious legal and reputational consequences for the Bank.
Under this policy, the bank holding company is expected to commit resources to support its bank subsidiary, including at times when the bank holding company may not be in a financial position to provide it. As discussed below, the Company could be required to guarantee the capital plan of the Bank if it becomes undercapitalized for purposes of banking regulations.
Under the BHC Act, as amended by the Dodd-Frank Act, the Company is required to serve as a source of financial strength for the Bank. This support may be required at times when the Company may not have the resources to provide support to the Bank.
Generally, Sections 23A and 23B: (i) limit the extent to which an insured depository or its subsidiaries may engage in covered transactions (a) with an affiliate (as defined in such sections) to an amount equal to 10% of such institution’s capital and surplus, and (b) with all affiliates, in the aggregate to an amount equal to 20% of such capital and surplus; and (ii) require all transactions with an affiliate, whether or not covered transactions, to be on terms substantially the same, or at least as favorable to the institution or subsidiary, as the terms provided or that would be provided to a non-affiliate.
An insured depository institution (and its subsidiaries) may not lend money to, or engage in covered transactions with, its non-depository institution affiliates if the aggregate amount of “covered transactions” outstanding involving the bank, plus the proposed transaction, exceeds the following limits: (i) in the case of any one such affiliate, the aggregate amount of “covered transactions” of the insured depository institution and its subsidiaries cannot exceed 10% of the capital stock and surplus of the insured depository institution; and (ii) in the case of all affiliates, the aggregate amount of covered transactions of the insured depository institution and its subsidiaries cannot exceed 20% of the capital stock and surplus of the insured depository institution.
The BHC Act generally limits acquisitions by bank holding companies to banks and companies engaged in activities that the Federal Reserve Board has determined to be so closely related to banking as to be a proper incident thereto.
However, among other permitted activities, a bank holding company may engage directly or indirectly in, and acquire control of companies engaged in, activities that the Federal Reserve Board has determined to be closely related to banking, subject to certain notification requirements. Limitations on Acquisitions of Company Common Stock.
Office of Foreign Assets Control Regulation The United States has imposed economic sanctions that affect transactions with designated foreign countries, nationals and others. These are typically known as the “OFAC” rules based on their administration by the U.S. Treasury Department Office of Foreign Assets Control (“OFAC”). The OFAC-administered sanctions targeting countries take many different forms.
These sanctions, which are administered by U.S. Treasury Department’s Office of Foreign Assets Control (“OFAC”), take many different forms.
Furthermore, if an insured depository institution is classified in one of the undercapitalized categories, it is required to submit a capital restoration plan to the appropriate federal banking agency, and the holding company must guarantee the performance of that plan.
A bank that is required to submit a capital restoration plan must concurrently submit a performance guarantee by each company that controls the bank.
The FDIC may terminate deposit insurance if it determines the institution involved has engaged in or is engaging in unsafe or unsound banking practices, is in an unsafe or unsound condition, or has violated applicable laws, regulations or orders.
In addition, under the Federal Deposit Insurance Act (the “FDIA”), the FDIC may terminate deposit insurance, among other circumstances, upon a finding that the institution has engaged in unsafe and unsound practices, is in an unsafe or unsound condition to continue operations, or has violated any applicable law, regulation, rule, order or condition imposed by the FDIC. Acquisitions and Branching.
The prior approval of the BFI and the FDIC is required, among other things, for the Bank to assume deposits or engage in any merger, consolidation, purchase or sale of all or substantially all of the assets of any bank.
Prior approval from the BFI and the FDIC is required in order for the Bank to acquire another bank or establish a new branch office.
Removed
The contractual maturities do not reflect premiums, discounts, deferred costs, or prepayments. ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Within ​ 1 to 5 ​ 5 to 15 ​ After ​ ​ ​ ​ ​ ​ (in thousands, except percentages) ​ ​ 1 year Years Years ​ 15 Years Total ​ % of Total Contractual Maturity ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Commercial construction $ 6,850 ​ $ 72,019 ​ $ 71,924 ​ $ 3,255 ​ $ 154,048 ​ 5 % Commercial real estate owner occupied ​ 8,979 ​ 79,518 ​ 204,259 ​ 17,259 ​ 310,015 ​ 10 ​ Commercial real estate non-owner occupied ​ ​ 73,288 ​ 473,200 ​ 584,110 ​ 13,968 ​ 1,144,566 ​ 38 ​ Tax exempt ​ ​ 5,663 ​ 6,575 ​ 22,523 ​ 8,927 ​ 43,688 ​ 2 ​ Commercial and industrial ​ ​ 69,179 ​ ​ 116,484 ​ ​ 79,481 ​ ​ 45,739 ​ ​ 310,883 ​ 10 ​ Residential real estate ​ ​ 1,294 ​ ​ 33,448 ​ ​ 144,362 ​ ​ 761,230 ​ ​ 940,334 ​ 32 ​ Home equity ​ ​ 2,512 ​ ​ 5,438 ​ ​ 11,050 ​ ​ 68,683 ​ ​ 87,683 ​ 3 ​ Consumer other ​ ​ 1,791 ​ ​ 5,446 ​ ​ 430 ​ ​ 165 ​ ​ 7,832 ​ — ​ Total loans ​ $ 169,556 ​ $ 792,128 ​ $ 1,118,139 ​ $ 919,226 ​ $ 2,999,049 ​ 100 % ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Repricing Date ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Fixed-rate ​ ​ 99,517 ​ ​ 359,198 ​ ​ 579,268 ​ ​ 637,546 ​ ​ 1,675,529 ​ 56 ​ Floating or adjustable rate ​ ​ 70,039 ​ ​ 432,930 ​ ​ 538,871 ​ ​ 281,680 ​ ​ 1,323,520 ​ 44 ​ Total loans ​ $ 169,556 ​ $ 792,128 ​ $ 1,118,139 ​ $ 919,226 ​ $ 2,999,049 ​ 100 % ​ Problem Assets There is a preference to work with borrowers to resolve problems rather than proceeding to foreclosure.
Added
The contractual maturities do not reflect premiums, discounts, deferred costs, or prepayments. ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Within ​ 1 to 5 ​ 5 to 15 ​ After ​ ​ ​ ​ ​ ​ (in thousands, except percentages) ​ ​ 1 year Years Years ​ 15 Years Total ​ % of Total Contractual Maturity ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Commercial construction $ 24,794 ​ $ 62,021 ​ ​ 40,307 ​ ​ 4,495 ​ $ 131,617 ​ 4 % Commercial real estate owner occupied ​ 14,956 ​ 95,317 ​ ​ 176,464 ​ ​ 15,337 ​ 302,074 ​ 10 ​ Commercial real estate non-owner occupied ​ ​ 105,868 ​ 678,114 ​ ​ 564,631 ​ ​ 10,290 ​ 1,358,903 ​ 43 ​ Tax exempt and other ​ ​ 27,276 ​ 2,282 ​ ​ 14,716 ​ ​ 1 ​ 44,275 ​ 2 ​ Commercial and industrial ​ ​ 43,043 ​ ​ 118,343 ​ ​ 123,573 ​ ​ 34,807 ​ ​ 319,766 ​ 10 ​ Residential real estate ​ ​ 2,210 ​ ​ 37,579 ​ ​ 135,969 ​ ​ 712,493 ​ ​ 888,251 ​ 28 ​ Home equity ​ ​ 2,427 ​ ​ 3,057 ​ ​ 12,902 ​ ​ 75,755 ​ ​ 94,141 ​ 3 ​ Consumer other ​ ​ 2,827 ​ ​ 4,810 ​ ​ 290 ​ ​ 142 ​ ​ 8,069 ​ — ​ Total loans ​ $ 223,401 ​ $ 1,001,523 ​ $ 1,068,852 ​ $ 853,320 ​ $ 3,147,096 ​ 100 % ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Repricing Date ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Fixed-rate ​ ​ 107,184 ​ ​ 424,840 ​ ​ 507,205 ​ ​ 582,517 ​ ​ 1,621,746 ​ 52 ​ Floating or adjustable rate ​ ​ 116,217 ​ ​ 576,683 ​ ​ 561,647 ​ ​ 270,803 ​ ​ 1,525,350 ​ 48 ​ Total loans ​ $ 223,401 ​ $ 1,001,523 ​ $ 1,068,852 ​ $ 853,320 ​ $ 3,147,096 ​ 100 % ​ Problem Assets There is a preference to work with borrowers to resolve problems rather than proceeding to foreclosure.
Removed
We strive to understand the unique opportunities and challenges that our customers and colleagues face.
Added
This regulatory framework is intended primarily to protect the safety and soundness of depository institutions, the federal deposit insurance system and depositors, rather than the shareholders of a bank holding company such as the Company. The following discussion is qualified in its entirety by reference to the full text of the statutes, regulations, policies and guidelines described below.
Removed
The Federal Reserve Board requires the Company to file various reports and also may conduct an examination of the Company. The Company is also under the jurisdiction of the SEC and is subject to the disclosure and regulatory requirements of the Securities Act and the Exchange Act.
Added
Regulation of the Company As a bank holding company, the Company is subject to regulation, supervision and examination by the Federal Reserve Board under the Bank Holding Company Act of 1956, as amended (the “BHC Act”), and the Maine Bureau of Financial Institutions (the “BFI”).
Removed
Any change in applicable laws or regulations could have a material adverse impact on the operations and financial performance of the Company and the Bank. In addition, the Company and the Bank are affected by the monetary and fiscal policies of the United States Government, including the Federal Reserve Board.
Added
The Federal Reserve Board has the authority, among other things, to order bank holding companies to cease and desist from unsafe or unsound banking practices; to assess civil money penalties; and to order termination of non-banking activities or termination of ownership and control of a non-banking subsidiary by a bank holding company. Source of Strength.
Removed
In view of changing conditions in the national economy and in the financial markets, it is impossible for management to accurately predict future changes in monetary policy or the effect such changes may have on the business or financial condition of the Company and the Bank.
Added
The BHC Act also generally prohibits a bank holding company from engaging directly or indirectly in activities other than those of banking, managing or controlling banks or furnishing services to its subsidiary banks.
Removed
Certain Laws and Regulations Applicable to the Company The BHC Act and other federal laws subject bank holding companies to particular restrictions on the types of activities in which the Company may engage, and to a range of supervisory requirements and activities, including regulatory enforcement actions for violations of laws and regulations.
Added
Under rebuttable presumptions of control established by the Federal Reserve Board, the acquisition of control of voting securities of a bank holding company constitutes an acquisition of control under the Change in Bank Control Act, requiring prior notice to the Federal Reserve Board, if, immediately after the transaction, the acquiring person (or persons acting in concert) will own, control, or hold with power to vote 10% or more of any class of voting securities of the bank holding company, and if either (i) the bank holding company has registered securities under Section 12 of the Exchange Act, or (ii) no other person will own, control, or hold the power to vote a greater percentage of that class of voting securities immediately after the transaction.
Removed
Below is a summary of certain provisions of the BHC Act and certain other laws and regulations applicable to the Company. These laws or regulations may be amended or changed by Congress or through other governmental or legal processes, which could have a material effect on the results of the Company.
Added
On July 30, 2024, the FDIC approved a notice of proposed rulemaking to amend the FDIC’s rules implementing the Change in Bank Control Act.
Removed
Permitted Activities Generally, bank holding companies are prohibited under the BHC Act from engaging in non-banking activities, or acquiring direct or indirect control of any company engaged in non-banking activities.
Added
If adopted, the proposed rule would eliminate an exemption from prior notice to the FDIC for a proposed change in control involving the acquisition of voting securities of a depository institution holding company for which the Federal Reserve Board reviews a notice pursuant to the Change in Bank Control Act.
Removed
The Federal Reserve Board has allowed by regulation some exceptions based on activities closely related to banking including: (i) making or servicing loans; (ii) performing certain data processing services; (iii) providing discount brokerage services; (iv) acting as fiduciary, 15 Table of Contents investment or financial advisor; and (v) acquiring a savings and loan association whose direct and indirect activities are limited to those permitted for bank holding companies.
Added
Maine law also requires that any “person or company” obtain the approval of the Maine Superintendent of Financial Institutions before acquiring control of a Maine financial institution.
Removed
The Federal Reserve Board has the authority to require a bank holding company to terminate an activity or terminate control of or liquidate or divest certain subsidiaries or affiliates when the Federal Reserve Board believes the activity or the control of the subsidiary or affiliate constitutes a significant risk to the financial safety, soundness, or stability of any of its banking subsidiaries.
Added
For purposes of Maine law, a “person” means an individual or individuals acting in concert, and a company may be deemed to control a Maine financial institution, among other circumstances, if it would be presumed to control the financial institution under the Change in Bank Control Act, including through acting in concert with other persons or entities.
Removed
A bank holding company that qualifies and elects to become a financial holding company is permitted to engage in additional activities that are financial in nature or incidental or complementary to financial activity. The Company currently has no plans to make a financial holding company election.
Added
The Bank is also subject to various Maine business and banking regulations and the regulations issued by the Consumer Financial Protection Bureau (“CFPB”) (as enforced by the FDIC). The Federal Reserve Board may also directly examine the subsidiaries of the Company, including the Bank.
Removed
Safe and Sound Banking Practices Bank holding companies and their non-banking subsidiaries are prohibited from engaging in activities that represent unsafe and unsound banking practices.
Added
The FDIC and the BFI have the authority to issue cease and desist orders; to terminate insurance of deposits; to assess civil money penalties; to issue directives to increase capital; to place the bank into receivership; and to initiate injunctive actions against banking organizations and institution-related parties. Deposit Insurance.
Removed
For example, under certain circumstances the Federal Reserve Board’s Regulation Y requires a holding company to give the Federal Reserve Board prior notice of any redemption or repurchase of its own equity securities if the consideration to be paid, together with the consideration paid for any repurchases during the preceding 12 months, is equal to 10% or more of the company’s consolidated net worth.
Added
The deposit obligations of the Bank are insured by the FDIC’s Deposit Insurance Fund up to $250,000 per depositor with respect to deposits held in the same right and capacity. Deposit insurance premiums are based on assets.
Removed
The Federal Reserve Board may oppose the transaction if it believes that the transaction would constitute an unsafe or unsound practice or would violate a regulation.
Added
The FDIC calculates deposit insurance assessment rates for established small banks, generally those banks with less than $10 billion of assets that have been insured for at least five years, using the CAMELS rating system and other factors.
Removed
As another example, a holding company is prohibited from impairing its subsidiary bank’s safety and soundness by causing the bank to make funds available to non-banking subsidiaries or their customers if the Federal Reserve Board believes it not prudent to do so.
Added
The CAMELS rating system is a supervisory rating system designed to take into account and reflect various financial and operational risks that a bank may face, including capital adequacy, asset quality, management capability, earnings, liquidity and sensitivity to market risk.

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Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

58 edited+67 added−41 removed65 unchanged
Biggest changeOur success depends, to a certain extent, upon global, domestic and local economic and political conditions, as well as governmental monetary policies. Conditions such as changes in interest rates, money supply, levels of employment and other factors beyond our control may have a negative impact on economic activity.
Biggest changeStrategic and External Risks Changes and instability in economic conditions, geopolitical matters and financial markets, including a contraction of economic activity, could adversely impact our business, results of operations and financial condition. Our success depends, to a certain extent, upon global, domestic and local economic and political conditions, as well as governmental monetary policies.
Our ability to manage growth successfully will also depend on whether we can continue to efficiently fund asset growth and maintain asset quality and cost controls, as well as on factors beyond our control, such as economic conditions and interest-rate trends. Wholesale funding sources may prove insufficient to replace deposits, support operations and future growth.
Our ability to manage growth successfully will also depend on whether we can continue to efficiently fund asset growth and maintain asset quality and cost controls, as well as on factors beyond our control, such as economic conditions and interest-rate trends. Wholesale funding sources may prove insufficient to replace deposits and support operations and future growth.
We are further exposed to the risk that its external vendors may be unable to fulfill their contractual obligations (or will be subject to the same risk of fraud or operational errors by their respective employees) and to the risk that our vendors’ business continuity and data security systems prove to be inadequate.
We are further exposed to the risk that our external vendors may be unable to fulfill their contractual obligations (or will be subject to the same risk of fraud or operational errors by their respective employees) and to the risk that our vendors’ business continuity and data security systems prove to be inadequate.
Secondary mortgage market conditions may adversely affect financial condition and earnings. The secondary mortgage markets are impacted by interest rates and investor demand for residential mortgage loans and increased investor yield requirements for these loans. These conditions may fluctuate in the future.
Secondary mortgage market conditions may adversely affect our financial condition and earnings. The secondary mortgage markets are impacted by interest rates and investor demand for residential mortgage loans and increased investor yield requirements for these loans. These conditions may fluctuate in the future.
To the extent that our customers’ systems are not secure or are otherwise compromised, its network could be vulnerable to unauthorized access, malicious software, phishing schemes and other security breaches.
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.
These competitive pressures, as well as any adoption by the Bank’s regulators of new rules or supervisory guidance or more aggressive examination and enforcement policies in respect of banks' overdraft protection practices, could cause it to modify programs and practices in ways that may have a negative impact on revenue and our earnings. ​ General Risk Factors ​ Changes in accounting policies or in accounting standards could materially affect our results of operations, and financial condition.
These competitive pressures, as well as any adoption by the Bank’s regulators of new rules or supervisory guidance or more aggressive examination and enforcement policies in respect of banks' overdraft protection practices, could cause it to modify programs and practices in ways that may have a negative impact on revenue and our earnings. 32 Table of Contents General Risk Factors Changes in accounting policies or in accounting standards could materially affect our results of operations, and financial condition.
Our ability to engage in routine funding transactions could be adversely affected by the actions and commercial soundness of other financial institutions. Bank and non-bank financial services companies are interrelated as a result of trading, clearing, counterparty and other relationships.
Our ability to engage in routine funding transactions could be adversely affected by the actions and commercial soundness of other financial institutions. Financial services companies are interrelated as a result of trading, clearing, counterparty and other relationships.
If customers prepay the principal amount of their loans, and we are unable to lend those funds to other borrowers or invest the funds at the same or higher interest rates, interest income will be reduced. A significant reduction in interest income could have a negative impact on results of operations and financial condition.
If customers prepay the principal amount of their loans, and we are unable to lend those funds to other borrowers or invest the funds at the same or higher interest rates, interest income will be 24 Table of Contents reduced. A significant reduction in interest income could have a negative impact on results of operations and financial condition.
As our loan portfolio contains a significant number of large commercial loans, the deterioration of one or a few of these loans could cause a significant increase in 22 Table of Contents non-performing loans, provision for loan losses, and/or an increase in loan charge-offs, all of which could adversely affect our financial condition and results of operations.
As our loan portfolio contains a significant number of large commercial loans, the deterioration of one or a few of these loans could cause a significant increase in non-performing loans, provision for loan losses, and/or an increase in loan charge-offs, all of which could adversely affect our financial condition and results of operations.
We may also be subject to disruptions of our operating systems arising from events that are wholly or partially beyond its control (e.g., computer viruses or electrical or telecommunications outages, natural disaster, pandemics, or other damage to property or physical assets), which may give rise to disruption of service to customers and to financial loss or liability.
We may also be 26 Table of Contents subject to disruptions of our operating systems arising from events that are wholly or partially beyond our control (e.g., computer viruses or electrical or telecommunications outages, natural disaster, pandemics, or other damage to property or physical assets), which may give rise to disruption of service to customers and to financial loss or liability.
To the extent that our activities or the activities of its customers or third-party service providers involve 25 Table of Contents the storage and transmission of confidential information, security breaches and malicious software could expose us to claims, regulatory scrutiny, litigation and other possible liabilities.
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.
In response to recent increased congressional and regulatory scrutiny, and 31 Table of Contents in anticipation of enhanced supervision and enforcement of overdraft protection practices in the future, certain banking organizations have begun to modify their overdraft protection programs, including by discontinuing the imposition of overdraft transaction fees.
In response to recent increased congressional and regulatory scrutiny, and in anticipation of enhanced supervision and enforcement of overdraft protection practices in the future, certain banking organizations have begun to modify their overdraft protection programs, including by discontinuing the imposition of overdraft transaction fees.
See Item 1. “Business—Regulation and Supervision—Capital Adequacy and Prompt Corrective Action” for additional information on capital requirements applicable to us and the Bank. 23 Table of Contents The Company’s earnings may not grow if we are unable to successfully attract core deposits and lending opportunities and execute opportunities to generate fee-based income.
See Item 1. “Business—Regulation and Supervision—Capital Adequacy and Prompt Corrective Action” for additional information on capital requirements applicable to us and the Bank. The Company’s earnings may not grow if we are unable to successfully attract core deposits and lending opportunities and execute opportunities to generate fee-based income.
Success may also depend on acceptance of the Bank by customers in these new markets and, in the case of expansion through acquisitions, these factors include the long-term recruitment and retention of key personnel and acquired customer relationships.
Success may also depend on acceptance of the Bank by customers in these new markets and, in the case of expansion through acquisitions, these factors include the long-term recruitment and 30 Table of Contents retention of key personnel and acquired customer relationships.
Interest rates are highly sensitive to many factors that are beyond our control, including general economic conditions, demand for loans, securities and deposits, policies of various governmental and regulatory agencies.
Interest rates are highly sensitive to many factors that are beyond our control, including general economic conditions, both domestic and foreign, demand for loans, securities and deposits, policies of various governmental and regulatory agencies.
If we were to sell any of these securities before their value recovers, including as a result of asset liability management strategies or in response to liquidity needs, we would be required to recognize these losses and the recognition of those losses could materially and adversely affect our results of operations, capital and financial. ​ Impairment of investment securities or goodwill could result in a negative impact on our results of operations.
If we were to sell any of these securities before their value recovers, including as a result of asset liability management strategies or in response to liquidity needs, we would be required to recognize these losses and the recognition of those losses could materially and adversely affect our results of operations, capital and financial.
During 2023, our annual impairment test conducted in October, using discounted 27 Table of Contents cash flows and market-based approaches, indicated that the estimated fair value of our sole reporting unit “Bar Harbor Bank & Trust” exceeded the carrying value.
During 2024, our annual impairment test conducted in October, using discounted cash flows and market-based approaches, indicated that the estimated fair value of our sole reporting unit “Bar Harbor Bank & Trust” exceeded the carrying value.
Changes in monetary policy, including changes in interest rates, or the slope of the yield curve could influence not only the interest received on loans and securities and the amount of interest paid on deposits and borrowings, but such changes could also affect (i) the ability to originate loans and obtain deposits, (ii) the fair value of our financial assets and liabilities, and (iii) the average duration of loans and securities that are collateralized by mortgages.
Changes in monetary policy, including changes in interest rates, fiscal policy, including expansion of U.S. federal deficit spending and resultant debt issuance, or the slope of the yield curve could influence not only the interest received on loans and securities and the amount of interest paid on deposits and borrowings, but such changes could also affect (i) the ability to originate loans and obtain deposits, (ii) the fair value of our financial assets and liabilities, and (iii) the average duration of loans and securities that are collateralized by mortgages.
Any failure or circumvention of our controls and procedures or failure to comply with regulations related to controls and procedures could have a material adverse effect on our business, results of operations, and financial condition. ​ We may be unable to attract and retain key personnel.
Any failure or circumvention of our controls and procedures or failure to comply with regulations related to controls and procedures could have a material adverse effect on our business, results of operations, and financial condition. We may be unable to attract and retain key personnel. Our success depends, in large part, on its ability to attract and retain key personnel.
While we have comprehensive policies and procedures in place to mitigate risk in all phases of vendor management from selection to performance monitoring, the failure of a vendor to perform in accordance with contractual agreements could be disruptive to our business, which could have a material adverse effect on our financial condition and results of operations. 26 Table of Contents We may be adversely affected by the soundness of other financial institutions.
While we have comprehensive policies and procedures in place to mitigate risk in all phases of vendor management from selection to performance monitoring, the failure of a vendor to perform in accordance with contractual agreements could be disruptive to our business, which could have a material adverse effect on our financial condition and results of operations.
The Company depends on dividends, distributions and other payments from its banking and non-banking subsidiaries to fund dividend payments on its common stock, debt service of subordinated borrowings, fund stock repurchase program and to fund strategic initiatives or other obligations.
The Company is a separate and distinct legal entity from the Bank and its non-banking subsidiaries. The Company depends on dividends, distributions and other payments from its banking and non-banking subsidiaries to fund dividend payments on its common stock, debt service of subordinated borrowings, fund stock repurchase program and to fund strategic initiatives or other obligations.
The Company’s subsidiaries are subject to laws that authorize regulatory bodies to block or reduce the flow of funds from those subsidiaries to the Company based on assertion that certain payments from subsidiaries are considered an unsafe or unsound practice, which could impede our access to funds that we may need to make payments on our obligations or dividend payments, if and when declared from time to time by our board of directors in its sole discretion out of funds legally available for that purpose. ​ Prepayments of loans may negatively impact our business as customers may prepay the principal amount of their outstanding loans at any time.
The Company’s subsidiaries are subject to laws that authorize regulatory bodies to block or reduce the flow of funds from those subsidiaries to the Company based on assertion that certain payments from subsidiaries are considered an unsafe or unsound practice, which could impede our access to funds that we may need to make payments on our obligations or dividend payments, if and when declared from time to time by our board of directors in its sole discretion out of funds legally available for that purpose.
A decline in economic conditions, such as recession, economic downturn, and/or inflationary conditions, changes in domestic and foreign economic conditions, volatility in financial markets, and general trends in business and finance, all of which are beyond our control, could adversely impact the market value of wealth management AUM, which are primarily marketable securities, and the fee revenues derived from the management of these assets. ​ Strategic and External Risks ​ Changes and instability in economic conditions, geopolitical matters and financial markets, including a contraction of economic activity, could adversely impact our business, results of operations and financial condition.
A decline in economic conditions, such as recession, economic downturn, and/or inflationary conditions, changes in domestic and foreign economic conditions, volatility in financial markets, and general trends in business and finance, all of which are beyond our control, could adversely impact the market value of wealth management AUM, which are primarily marketable securities, and the fee revenues derived from the management of these assets.
The identification of unprofitable operations and facilities can lead to restructuring charges and introduce the risk of disruptions to revenues and customer relationships. We compete with larger financial institutions who are rapidly evolving their service channels and escalating the costs of evolving the service process.
The identification of unprofitable operations and facilities can lead to restructuring charges and introduce the risk of disruptions to revenues and customer relationships. We compete with larger financial institutions who are rapidly evolving their service channels and escalating the costs of evolving the service process. Expansion, growth, and acquisitions could negatively impact earnings if not successful.
Pandemics, including the continuing COVID-19 pandemic, severe weather, natural disasters, acts of war or terrorism, and other adverse external events could have a significant impact on our ability to conduct business.
Future pandemics, severe weather, natural disasters, acts of war or terrorism, and other external events could significantly impact our business and the business of our customers. Future pandemics, severe weather, natural disasters, acts of war or terrorism, and other adverse external events could have a significant impact on our ability to conduct business.
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. Liquidity and Interest Rate Risks ​ Interest rate volatility could significantly reduce our profitability.
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.
Any such losses or liabilities could adversely affect our financial condition or results of operations, and could expose us to reputation risk, the loss of client business, increased operational costs, as well as additional regulatory scrutiny, possible litigation, and related financial liability.
Any such losses or liabilities could adversely affect our financial condition or results of operations, and could expose us to reputation risk, the loss of client business, increased operational costs, as well as additional regulatory scrutiny, possible litigation, and related financial liability. These risks also include possible business interruption, including the inability to access critical information and systems.
Funding costs may increase if deposits are lost and we are forced to replace them with more expensive sources of funding, if customers shift their deposits into higher cost products or if we need to raise interest rates to avoid losing deposits. Higher funding costs reduce our net interest income, net interest margin, and net income.
We compete with banks and other financial institutions for deposits. Funding costs may increase if deposits are lost and we are forced to replace them with more expensive sources of funding, if customers shift their deposits into higher cost products or if we need to raise interest rates to avoid losing deposits.
Fluctuations in interest rates can materially affect both the returns on and market value of our investment securities. ​ In addition, from time to time we may restructure portions of our investment securities portfolio as part of our asset liability management strategies or in response to liquidity needs, and we may incur losses, which may be material, in connection with any such restructuring.
In addition, from time to time we may restructure portions of our investment securities portfolio as part of our asset liability management strategies or in response to liquidity needs, and we may incur losses, which may be material, in connection with any such restructuring.
These risks also include possible business interruption, including the inability to access critical information and systems. ​ We have a continuing need for technological change, and we may not have the resources to implement new technology effectively, or we may experience operational challenges when implementing new technology or technology needed to compete effectively with larger institutions may not be available to us on a cost-effective basis.
We have a continuing need for technological change, and we may not have the resources to implement new technology effectively, or we may experience operational challenges when implementing new technology or technology needed to compete effectively with larger institutions may not be available to us on a cost-effective basis.
Our earnings and cash flows are largely dependent upon net interest income. Net interest income is the difference between interest income earned on interest-bearing assets such as loans and securities and interest expense paid on interest-bearing liabilities such as deposits and borrowed funds.
Net interest income is the difference between interest income earned on interest-bearing assets such as loans and securities and interest expense paid on interest-bearing liabilities such as deposits and borrowed funds.
The risks and uncertainties described below are not the only ones facing us. Additional risks and uncertainties that management is not aware of or focused on or that management currently deems immaterial may also impair our business operations.
The risks and uncertainties described below are not the only ones facing us. Additional risks and uncertainties that management is not aware of or focused on or that management currently deems immaterial may also impair our business operations. This Annual Report is qualified in its entirety by these risk factors.
This Annual Report is qualified in its entirety by these risk factors. ​ If any of the events described in the risk factors should actually occur, our financial condition and results of operations could be materially and adversely affected.
If any of the events described in the risk factors should actually occur, our financial condition and results of operations could be materially and adversely affected.
In addition, the Bank’s rural geographic marketplace, combined with relatively expensive real estate purchase prices in the many tourist communities we serve, create additional risks for the our ability to attract and retain key personnel.
Competition for qualified personnel in the financial services industry can be intense and we may not be able to hire or retain the key personnel. In addition, the Bank’s rural geographic marketplace, combined with relatively expensive real estate purchase prices in the many tourist communities we serve, create additional risks for the our ability to attract and retain key personnel.
While to date we believe that we have not experienced a significant compromise, significant data loss or material financial losses related to cybersecurity attacks, our systems and those of our customers and third-party service providers, are under constant threat and may experience a significant event in the future.
Due to the complexity and interconnectedness of information technology systems, the process of enhancing our systems can itself create a risk of systems disruptions and security issues. 27 Table of Contents While to date we believe that we have not experienced a significant compromise, significant data loss or material financial losses related to cybersecurity attacks, our systems and those of our customers and third-party service providers, are under constant threat and may experience a significant event in the future.
Further, work-from-home and other modified business practices may introduce additional operational risks, including cybersecurity and execution risks, which may result in inefficiencies or delays, and may affect our ability to, or the manner in which we, conduct our business activities. ​ Legal, Regulatory and Compliance Risks ​ We are subject to extensive government regulation and supervision, which may interfere with the ability to conduct business and may negatively impact our financial results.
Further, work-from-home and other modified business practices may introduce additional operational risks, including cybersecurity and execution risks, which may result in inefficiencies or delays, and may affect our ability to, or the manner in which we, conduct our business activities.
Whether customer claims and legal action related to our performance of fiduciary responsibilities are founded or unfounded, if such claims and legal actions are not resolved in a favorable manner, they may result in significant financial liability and/or adversely affect the market perception of us and products and services as well as impact customer demand for our products and services.
Whether customer claims and legal action related to the performance of our responsibilities are founded or unfounded, if such claims and legal actions are not resolved in a manner favorable to us, they may result in significant expenses, attention from management and financial liability.
The unexpected loss of key personnel could have an adverse impact on our business because of their skills, knowledge of the markets in which we operate, years of industry experience and the difficulty of promptly finding qualified replacement personnel. ​ ​ ITEM 1B. UNRESOLVED STAFF COMMENTS. None. ​ ​
The unexpected loss of key personnel could have an adverse impact on our business because of their skills, knowledge of the markets in which we operate, years of industry experience and the difficulty of promptly finding qualified replacement personnel. Future capital offerings may adversely affect the market price of our common stock.
The speeds at which such prepayments occur, as well as the size of such prepayments, are within the customers’ discretion. Fluctuations in interest rates, in certain circumstances, may also lead to high levels of loan prepayments, which may also have an adverse impact on net interest income.
Fluctuations in interest rates, in certain circumstances, may also lead to high levels of loan prepayments, which may also have an adverse impact on net interest income.
These agencies could limit purchases of conforming loans due to capital constraints, changes in conforming loan criteria or other factors.
These agencies could limit purchases of conforming loans due to capital constraints, changes in conforming loan criteria or other factors. Proposals to reform mortgage finance could affect the role of these agencies and the market for conforming loans.
Proposals to reform mortgage finance could affect the role of these agencies and the market for conforming loans. 24 Table of Contents Operational Risks ​ We are subject to a variety of operational risks, including reputational risk, and the risk of fraud or theft by employees or outsiders, which may adversely affect our business and results of operations.
Operational Risks We are subject to a variety of operational risks, including reputational risk, and the risk of fraud or theft by employees or outsiders, which may adversely affect our business and results of operations.
The financial services industry undergoes rapid technological changes with frequent introductions of new technology-driven products and services, including developments in telecommunications, data processing, automation, internet-based banking, debit cards and so-called “smart cards” and remote deposit capture. In addition to serving clients better, the effective use of technology increases efficiency and enables financial institutions to reduce costs.
The financial services industry undergoes rapid technological changes with frequent introductions of new technology-driven products and services, including developments in artificial intelligence. In addition to serving clients better, the effective use of technology increases efficiency and enables financial institutions to reduce costs.
Future events of this nature could have an adverse effect on our business, financial condition and results of operations. Changes in the federal, state or local tax laws may negatively impact our financial performance and we are subject to examinations and challenges by tax authorities. We are subject to federal and applicable state tax laws and regulations.
Changes in the federal, state or local tax laws may negatively impact our financial performance and we are subject to examinations and challenges by tax authorities. We are subject to federal and applicable state tax laws and regulations.
As of December 31, 2023, approximately 64% of our loan portfolio consisted of commercial real estate, commercial and industrial and construction loans. Commercial loan portfolio concentration generally exposes lenders to greater risk of delinquency and loss than residential real estate loans because repayment of the loans often depends on the successful operation and income streams from the property.
Commercial loan portfolio concentration generally exposes lenders to greater risk of delinquency and loss than residential real estate loans because repayment of the loans often depends on the successful operation and income streams from the property. Commercial loans typically involve larger balances to single borrowers or groups of related borrowers as compared to residential real estate loans.
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.
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. 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.
Banking regulations are primarily intended to protect depositors’ funds, the Federal Deposit Insurance Fund and the safety and soundness of the banking system as a whole, not shareholders. These regulations affect our lending practices, capital structure, investment practices, dividend policy and growth, among other things. Congress and federal regulatory agencies continually review banking laws, regulations and policies for possible changes.
These regulations affect our lending practices, capital structure, investment practices, dividend policy and growth, among other things. Congress and federal regulatory agencies continually review banking laws, regulations and policies for possible changes.
In assessing whether the impairment of securities is related to a deterioration in credit factors, we consider the length of time and extent to which the fair value has been less than cost, the financial condition and near-term prospects of the issuer, and the intent and ability to retain the securities for a period of time sufficient to allow for any anticipated recovery in fair value in the near term. ​ 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.
In assessing whether the impairment of securities is related to a deterioration in credit factors, we consider the length of time and extent to which the fair value has been less than cost, the financial condition and near-term prospects of the issuer, and the intent and ability to retain the securities for a period of time sufficient to allow for any anticipated recovery in fair value in the near term.
If this were to happen, the value of our securities could decline significantly, and you could lose all or part of your investment. ​ Credit Risks ​ Deterioration in local economies or real estate markets may adversely affect our financial performance, as our borrowers’ ability to repay loans and the value of the collateral securing the loans may decline.
Credit Risks Deterioration in local economies or real estate markets may adversely affect our financial performance, as our borrowers’ ability to repay loans and the value of the collateral securing the loans may decline. We serve individuals and businesses located in Maine, New Hampshire, and Vermont.
If any such challenges are made and are not resolved in our favor, they could have a material adverse effect on our business, financial condition and results of operations. ​ The performance of our investment securities portfolio is subject to fluctuation due to changes in interest rates and market conditions, including credit deterioration of the issuers of individual securities.
If any such challenges are made and are not resolved in our favor, they could have a material adverse effect on our business, financial condition and results of operations.
It is not possible to predict the nature of future changes in monetary and fiscal policies, or the effect which they may have on our business and earnings. Involvement in wealth management creates risks associated with the industry. Our wealth management operations present special risks not borne by institutions that focus exclusively on other traditional retail and commercial banking products.
In times of market stress or other unforeseen circumstances, previously uncorrelated indicators may become correlated, which may limit the effectiveness of our strategies to manage these risks. Involvement in wealth management creates risks associated with the industry. Our wealth management operations present special risks not borne by institutions that focus exclusively on other traditional retail and commercial banking products.
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. Loss of deposits or a change in deposit mix could increase our cost of funding.
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.
Changes to statutes, regulations or regulatory policies, including changes in interpretation or implementation of statutes, regulations or policies, could affect us in substantial and unpredictable ways. Such changes could subject us to additional costs, limit the types of financial services and products we can offer, and/or limit the pricing we can charge on certain banking services, among other things.
These and other restrictions could subject us to additional costs, limit the types of financial services and products we can offer, and/or limit the pricing we can charge on certain banking services, among other things. Compliance personnel and resources may increase costs of operations and adversely impact earnings.
A downturn in the local economies may adversely affect collateral values, sources of funds, and demand for products, all of which could have a negative impact on results of operations, financial condition and business expansion. High concentrations of commercial loans may increase exposure to credit loss upon borrower default.
Our success is largely dependent on the economic conditions, including employment levels, population growth, income levels, savings trends and government policies in those market areas. A downturn in the local economies may adversely affect collateral values, sources of funds, and demand for products, all of which could have a negative impact on results of operations, financial condition and business expansion.
We serve individuals and businesses located in Maine, New Hampshire, and Vermont. A substantial portion of the loan portfolio is secured by real estate in these areas and the value of the associated collateral is subject to local real estate market conditions.
A substantial portion of the loan portfolio is secured by real estate in these areas and the value of the associated collateral is subject to local real estate market conditions. Furthermore, many customers in the hospitality industry rely upon a high number of tourists to vacation destinations and attractions within our markets.
Compliance personnel and resources may increase costs of operations and adversely impact earnings. We are subject to possible claims and litigation pertaining to fiduciary responsibilities. From time to time, customers make claims and take legal action pertaining to our performance of fiduciary responsibilities.
From time to time, customers and others make claims and take legal action pertaining to the performance of our responsibilities, including our responsibilities as a fiduciary.
Failure to comply with laws, regulations or policies could result in sanctions by regulatory agencies, civil money penalties and/or reputation damage, which could have a material adverse effect on our business, financial condition and results of operations. While we have policies and procedures designed to prevent any such violations, there can be no assurance that such violations will not occur.
Any financial liability or reputational damage could have a material adverse effect on our business, which, in turn, could have a material adverse effect on our financial condition and results of operations. There is no assurance that litigation with private parties will not increase in the future.
We have exposure to different industries and counterparties through transactions with counterparties in the bank and non-bank financial services industries, including brokers and dealers, commercial banks, investment banks and other institutional clients.
We have exposure to a number of different counterparties, and we routinely execute transactions with counterparties in the financial industry, including brokers and dealers, other commercial banks, investment banks, and other financial institutions. Many of these transactions expose us to credit risk in the event of default of our counterparty or customer.
As a result, defaults by, or even rumors or questions about, one or more bank or non-bank financial services companies, or the bank or non-bank financial services industries generally, have led to market-wide liquidity problems and could lead to losses or defaults by us or by other institutions.
Actual events involving limited liquidity, defaults, non-performance or other adverse developments that affect financial institutions, transactional counterparties or other companies in the financial services industry or the financial services industry generally, or concerns or rumors about any events of these kinds or other similar risks, have in the past and may in the future lead to market-wide liquidity problems.
Removed
Furthermore, many customers in the hospitality industry rely upon a high number of tourists to vacation destinations and attractions within our markets. Our success is largely dependent on the economic conditions, including employment levels, population growth, income levels, savings trends and government policies in those market areas.
Added
If this were to happen, the value of our securities could decline significantly, and you could lose all or part of your investment. 22 Table of Contents Liquidity and Interest Rate Risks Interest rate volatility could significantly reduce our profitability. Our earnings and cash flows are largely dependent upon net interest income.
Removed
Commercial loans typically involve larger balances to single borrowers or groups of related borrowers as compared to residential real estate loans.
Added
In this case, our operating margins and profitability would be adversely affected. 23 Table of Contents 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.
Removed
Deposits are a low cost and stable source of funding. We compete with banks and other financial institutions for deposits.
Added
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.
Removed
Our access to funds from subsidiaries may be restricted. The Company is a separate and distinct legal entity from the Bank and its non-banking subsidiaries.
Added
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. Loss of deposits or a change in deposit mix could increase our cost of funding. Deposits are a low cost and stable source of funding.
Removed
Due to the complexity and interconnectedness of information technology systems, the process of enhancing our systems can itself create a risk of systems disruptions and security issues.
Added
Higher funding costs reduce our net interest income, net interest margin, and net income. If we are unable to access the capital markets, have prolonged net deposit outflows, or our borrowing costs increase, our liquidity and competitive position will be negatively affected. Liquidity is essential to our business.
Removed
Further, when volatility, market events or similar issues affect a subset of financial institutions, or when there are news reports or high-profile incidents relating to trends, concerns, and other issues in the banking industry, the ramifications can affect the sector as a whole, regardless of the effect, or lack thereof, on any specific institution.
Added
We must maintain sufficient funds to respond to the needs of depositors and borrowers. To manage liquidity, we draw upon a number of funding sources in addition to in-market deposit growth and repayments and maturities of loans and investments.
Removed
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.
Added
Any inability to access the capital markets, illiquidity or volatility in the capital markets, the decrease in value of eligible collateral or increased collateral requirements (including as a result of credit concerns for short-term borrowing), changes to our relationships with our funding providers based on real or perceived changes in our risk profile, prolonged federal government shutdowns, or changes in regulations or regulatory guidance, or other events could negatively affect our access to or cost of funding, affecting our ongoing ability to accommodate liability maturities and deposit withdrawals, meet contractual obligations, or fund asset growth and new business initiatives at a reasonable cost, in a timely manner and without adverse consequences.
Removed
Any contraction of economic activity, including an economic recession, may adversely affect our asset quality, deposit levels and loan demand and, therefore, our earnings. In particular, interest rates are highly sensitive to many factors that are beyond our control, including global, domestic and local economic conditions and the policies of various governmental and regulatory agencies and, specifically, the FRB.
Added
Additionally, our liquidity or cost of funds may be negatively impacted by the unwillingness or inability of the Federal Reserve Board to act as lender of last resort, unexpected simultaneous draws on lines of credit or deposits, the withdrawal of or failure to attract customer deposits, or increased regulatory liquidity, capital and margin requirements.
Removed
Throughout 2023 the Federal Open Market Committee (“FOMC”) raised the target range for the Federal funds rate on four separate occasions and-citing factors including the hardships caused by the ongoing Russia-Ukraine conflict, an economic slowdown in China, continued global supply chain disruptions and imbalances, and increased inflationary pressure-the FOMC has indicated that ongoing increases may be appropriate. ​ The tightening of the FRB's monetary policies, including repeated and aggressive increases in the target range for the Federal funds rate as well as the conclusion of the FRB's tapering of asset purchases, together with ongoing economic and geopolitical instability, increases the risk of an economic recession.
Added
Although we maintain a liquid asset portfolio and have implemented strategies to maintain sufficient and diverse sources of funding to accommodate planned, as well as unanticipated, changes in assets, liabilities, and off-balance sheet commitments under various economic conditions, a substantial, unexpected, or prolonged change in the level or cost of liquidity could have a material adverse effect on us.
Removed
Although forecasts have varied, many economists are projecting that U.S. economic growth will slow and inflation will remain elevated in the coming quarters, potentially resulting in a contraction of U.S. gross domestic output in 2024.
Added
If the cost effectiveness or the availability of supply in these credit markets is reduced for a prolonged period of time, our funding needs may require us to access funding and manage liquidity by other means.
Removed
Any such downturn, especially domestically and in the regions in which we operate, may adversely affect our asset quality, deposit levels, loan demand and results of operations. ​ As a result of the economic and geopolitical factors discussed above, financial institutions also face heightened credit risk, among other forms of risk.
Added
These alternatives may include generating client deposits, extending the maturity of wholesale borrowings, borrowing under certain secured borrowing arrangements, using relationships developed with a variety of fixed income investors, selling or securitizing loans, and further managing loan growth and investment opportunities.

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Item 1C. Cybersecurity

Cybersecurity — threats and controls disclosure

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Biggest changeWe maintain a robust Information Security Program that sets forth our commitment to the continual review and improvement of policies, processes, procedures, and standards for evaluating electronic and physical methods of accessing, collecting, storing, using, transmitting, disposing, and protecting sensitive information, including customer information under guidelines established as part of the Gramm Leach-Bliley Act (GLBA). ​ The Bank manages cybersecurity threats proactively and maintains robust controls to protect its critical systems and data by investing in secure, reliable and resilient technology infrastructure, fostering a culture of technology risk awareness and continuously improving its technology risk management practices.
Biggest changeWe maintain a robust Information Security Program that sets forth our commitment to the continual review and improvement of policies, processes, procedures, and standards for evaluating electronic and physical methods of accessing, collecting, storing, using, transmitting, disposing of, and protecting sensitive information, including customer information under guidelines established as part of the Gramm Leach-Bliley Act (GLBA).
They devote significant time and attention to the oversight of cybersecurity and information security risks. The Board through its BRC reviews monthly information technology and Information Security and Vendor Management reports that highlight key areas of focus and risk.
The management of cybersecurity risks is ultimately the responsibility of Company management and is governed by the Board. They devote significant time and attention to the oversight of cybersecurity and information security risks. The Board through its BRC reviews monthly information technology and Information Security and Vendor Management reports that highlight key areas of focus and risk.
Our process for monitoring and mitigating cybersecurity risk is designed in conjunction with our overall Risk Management Policy and Information Security Program.
Our process for monitoring and mitigating 34 Table of Contents cybersecurity risk is designed in conjunction with our overall Risk Management Policy and Information Security Program.
For the 2023 period, there were no material incidents affecting the VRM framework or controls. ​ We have developed cybersecurity and data privacy programs designed to enable and safeguard the confidentiality, integrity and availability of our information systems and data by providing proactive security expertise and risk assessments, creating and maintaining a resilient and secure environment, and fostering a culture of security awareness and compliance throughout our organization.
We have developed cybersecurity and data privacy programs designed to enable and safeguard the confidentiality, integrity and availability of our information systems and data by providing proactive security expertise and risk assessments, creating and maintaining a resilient and secure environment, and fostering a culture of security awareness and compliance throughout our organization.
However, third parties may expose us and our customers to various risks. We have implemented a Vendor Risk Management (“VRM”) framework, which provides the tools and practices utilized in the oversight of third-party service providers, with an objective to meet legal and regulatory obligations, contractual requirements, performance expectations, 32 Table of Contents and our own principles and values.
We have implemented a Vendor Risk Management (“VRM”) framework, which provides the tools and practices utilized in the oversight of third-party service providers, with an objective to meet legal and regulatory obligations, contractual requirements, performance expectations, and our own principles and values. For the 2024 period, there were no material incidents affecting the VRM framework or controls.
Examples of those threats are malware, phishing, hacking, denial of service attacks, stealing information, unauthorized intrusions into internal systems or the systems of third-party vendors that could adversely impact operations or damage reputations. ​ We utilize third party service providers to support and facilitate business and operational activities to achieve strategic goals.
ITEM 1C. CYBERSECURITY Cybersecurity threats pose a risk to the Company as crimes committed through or involving the internet. Examples of those threats are malware, phishing, hacking, denial of service attacks, stealing information, unauthorized intrusions into internal systems or the systems of third-party vendors that could adversely impact operations or damage reputations.
Our federal regulator, the FDIC, is part of the Federal Financial Institutions Examination Council (FFIEC), which publishes extensive guidelines and examination procedures that are used to review the security of financial institutions. ​ To date, we have not experienced a cybersecurity incident or data breach that has materially affected us or our business strategy, results of operations, or financial condition. ​ ​ ​ 33 Table of Contents
To date, we have not experienced a cybersecurity incident or data breach that has materially affected us or our business strategy, results of operations, or financial condition. ​ 35 Table of Contents
They are required to undergo periodic information security awareness training to ensure a clear understanding of their roles in protecting information assets and to create a security-minded culture.
They are required to undergo periodic information security awareness training to ensure a clear understanding of their roles in protecting information assets and to create a security-minded culture. Additionally, the Company carries out regular phishing simulation tests throughout the year to keep employees alert, spread awareness and ensure that employees have the knowledge and resources necessary to report suspicious activity.
Removed
ITEM 1C. CYBERSECURITY Cybersecurity threats pose a risk to the Company as crimes committed through or involving the internet.
Added
We utilize third party service providers to support and facilitate business and operational activities to achieve strategic goals. However, third parties may expose us and our customers to various risks.
Removed
Additionally, the Company carries out regular phishing simulation tests throughout the year to keep employees alert, spread awareness and ensure that employees have the knowledge and resources necessary to report suspicious activity. ​ The management of cybersecurity risks is ultimately the responsibility of Company management and is governed by the Board.
Added
The Bank manages cybersecurity threats proactively and maintains robust controls to protect its critical systems and data by investing in secure, reliable and resilient technology infrastructure, fostering a culture of technology risk awareness and continuously improving its technology risk management practices.
Added
Our federal regulator, the FDIC, is part of the Federal Financial Institutions Examination Council (FFIEC), which publishes extensive guidelines and examination procedures that are used to review the security of financial institutions.

Item 3. Legal Proceedings

Legal Proceedings — active lawsuits and investigations

3 edited+1 added−1 removed1 unchanged
Biggest changeHowever, one or more unfavorable outcomes in any claim or litigation against us could have a material adverse effect for the period in which they are resolved.
Biggest changeHowever, one or more unfavorable outcomes in any claim or litigation against us could have a material adverse effect for the period in which they are resolved. In addition, regardless of their merits or their ultimate outcomes, such matters are costly, divert management’s attention and may materially adversely affect our reputation, even if resolved in our favor. Item 4.
These claims and litigation may include, among other things, allegations of violation of banking and other applicable regulations, competition laws, labor laws and consumer protection laws, as well as claims or litigation relating to intellectual property, securities, breach of contract and tort.
These claims and litigation may include, among other things, allegations of violation of banking and other applicable regulations, competition laws, labor laws and consumer protection laws, as well as claims or litigation relating to intellectual property, securities, breach of contract and tort. We intend to defend ourselves vigorously against any pending or future claims and litigation.
We intend to defend ourselves vigorously against any pending or future claims and litigation. ​ At this time, in the opinion of management, the likelihood is remote that the impact of such proceedings, either individually or in the aggregate, would have a material adverse effect on our consolidated results of operations, financial condition or cash flows.
At this time, in the opinion of management, the likelihood is remote that the impact of such proceedings, either individually or in the aggregate, would have a material adverse effect on our consolidated results of operations, financial condition or cash flows.
Removed
In addition, regardless of their merits or their ultimate outcomes, such matters are costly, divert management’s attention and may materially adversely affect our reputation, even if resolved in our favor. ​ ​ Item 4. Mine Safety Disclosures. Not applicable. ​ ​ ​ 34 Table of Contents PART II
Added
Mine Safety Disclosures. Not applicable. ​ ​ 36 Table of Contents PART II

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

6 edited+3 added−1 removed4 unchanged
Biggest changeNo shares were repurchased by the Company during the year ended December 31, 2023 and the maximum number of shares that may yet be purchased under the plan is 756,000 shares. ​ ​ ​ 35 Table of Contents Common Stock Performance Graph The following graph illustrates the estimated yearly change in value of the cumulative total shareholder return on our common stock for each of the last five years.
Biggest changeNo shares were repurchased by the Company during the year ended December 31, 2024 and the maximum number of shares that may yet be purchased under the plan is 761,000 shares.
For purposes of comparison, the graph also matches our cumulative 5-Year total shareholder return on common stock with the cumulative total returns of the NYSE American Composite Index, and the S&P U.S. SmallCap Banks Index.
For purposes of comparison, the graph also matches our cumulative 5-Year total shareholder return on common stock with the cumulative total returns of the NYSE American Composite Index, and the S&P U.S. Small Cap Banks Index.
Cash dividends declared and paid totaled $0.28 per share in the second, third and fourth quarters of 2023 and $0.26 per share in the first quarter of 2023. We currently expect that comparable cash dividends will continue to be paid in the future.
Cash dividends declared and paid totaled $0.30 per share in the second, third and fourth quarters of 2024 and $0.28 per share in the first quarter of 2024. We currently expect that comparable cash dividends will continue to be paid in the future.
Recent Sale of Unregistered Securities and Use of Proceeds from Registered Securities No unregistered equity securities were sold by the Company during the year ended December 31, 2023. On May 22, 2023, the Board approved a 12-month plan to repurchase up to 5% of the Company’s outstanding shares of common stock, representing 756,000 shares.
Recent Sale of Unregistered Securities and Use of Proceeds from Registered Securities No unregistered equity securities were sold by the Company during the year ended December 31, 2024. On April 18, 2024, the Board approved a 12-month plan to repurchase up to 5% of the Company’s outstanding shares of common stock, representing 761,000 shares.
As of March 7, 2024, there were 15,185,021 shares of Bar Harbor Bankshares common stock, par value $2.00 per share, outstanding and approximately 1,375 shareholders of record, as obtained through the Company’s transfer agent.
As of March 7, 2025, there were 15,317,222 shares of Bar Harbor Bankshares common stock, par value $2.00 per share, outstanding and approximately 1,315 shareholders of record, as obtained through the Company’s transfer agent.
The graph tracks the performance of a $100 investment in our common stock and in each index (with the reinvestment of all dividends) from December 31, 2018 to December 31, 2023. ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Period Ending Index 12/31/18 12/31/19 12/30/20 12/31/21 12/31/22 12/31/23 Bar Harbor Bankshares ​ 100.00 ​ 117.15 ​ 108.68 ​ 143.81 ​ 165.04 ​ 157.69 NYSE American Composite Index 100.00 113.72 108.34 160.76 197.94 224.59 S&P U.S.
The graph tracks the performance of a $100 investment in our common stock and in each index (with the reinvestment of all dividends) from December 31, 2019 to December 31, 2024. ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Period Ending Index 12/31/19 12/30/20 12/31/21 12/31/22 12/31/23 12/30/24 Bar Harbor Bankshares ​ 100.00 ​ 92.77 ​ 122.76 ​ 140.87 ​ 134.60 ​ 146.22 NYSE American Composite Index 100.00 95.27 141.37 174.07 197.50 206.76 S&P U.S.
Removed
SmallCap Banks Index 100.00 125.46 113.94 158.62 139.85 140.55 ​ ​ ​ 36 Table of Contents ITEM 6. [RESERVED] Not applicable.
Added
The ability of the Company to pay dividends is contingent on the ability of the Bank to dividend funds to the Company to finance the payment of those dividends.
Added
We will continue examine buying opportunities considering market conditions, including interest rate volatility and potential loan and risk-weighted asset growth. ​ 37 Table of Contents Common Stock Performance Graph The following graph illustrates the estimated yearly change in value of the cumulative total shareholder return on our common stock for each of the last five years.
Added
Small Cap Banks Index 100.00 90.82 126.43 111.47 112.03 132.44 ​ ​ 38 Table of Contents ITEM 6. [RESERVED] ​

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

50 edited+20 added−14 removed26 unchanged
Biggest changeThe following reconciliation table provides a more detailed analysis of these, and reconciliation for, each of non-GAAP financial measures. ​ 43 Table of Contents RECONCILIATION OF NON-GAAP FINANCIAL MEASURES ​ The following table summarizes the reconciliation of non-GAAP items for the time periods presented: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Year Ended December 31, (in thousands) Calculations ​ 2023 ​ 2022 ​ 2021 Net income ​ $ 44,852 ​ $ 43,557 ​ $ 39,299 Non-recurring items: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Gain on sale of securities, net ​ (34) ​ (53) ​ (2,870) Gain on sale of premises and equipment, net ​ 182 ​ 10 ​ 378 Loss on debt extinguishment ​ ​ ​ ​ — ​ ​ — ​ ​ 2,851 Acquisition, conversion and other expenses ​ 283 ​ 266 ​ 1,667 Income tax expense (1) ​ (104) ​ (51) ​ (479) Total non-recurring items ​ ​ ​ ​ 327 ​ ​ 172 ​ ​ 1,547 Total adjusted income (2) (A) ​ $ 45,179 ​ $ 43,729 ​ $ 40,846 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Net interest income (B) ​ $ 117,675 ​ $ 113,681 ​ $ 95,573 Plus: Non-interest income ​ 35,829 ​ 35,321 ​ 42,261 Total Revenue ​ 153,504 ​ 149,002 ​ 137,834 Gain on sale of securities, net ​ (34) ​ (53) ​ (2,870) Total adjusted revenue (2) (C) ​ $ 153,470 ​ $ 148,949 ​ $ 134,964 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Total non-interest expense ​ $ 93,479 ​ $ 91,253 ​ $ 90,508 Non-recurring expenses: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Gain on sale of premises and equipment, net ​ (182) ​ (10) ​ (378) Loss on debt extinguishment ​ ​ ​ ​ — ​ ​ — ​ ​ (2,851) Acquisition, conversion and other expenses ​ (283) ​ (266) ​ (1,667) Total non-recurring expenses ​ ​ ​ ​ (465) ​ ​ (276) ​ ​ (4,896) Adjusted non-interest expense (2) (D) ​ $ 93,014 ​ $ 90,977 ​ $ 85,612 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Total revenue ​ ​ ​ ​ 153,504 ​ ​ 149,002 ​ ​ 137,834 Total non-interest expense ​ ​ ​ ​ 93,479 ​ ​ 91,253 ​ ​ 90,508 Pre-tax, pre-provision net revenue ​ ​ ​ $ 60,025 ​ $ 57,749 ​ $ 47,326 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Adjusted revenue (2) ​ ​ ​ ​ 153,470 ​ ​ 148,949 ​ ​ 134,964 Adjusted non-interest expense (2) ​ ​ ​ ​ 93,014 ​ ​ 90,977 ​ ​ 85,612 Adjusted pre-tax, pre-provision net revenue (2) ​ (U) ​ $ 60,456 ​ $ 57,972 ​ $ 49,352 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ (in millions) ​ ​ ​ Average earning assets (E) ​ $ 3,623 ​ $ 3,425 ​ $ 3,373 Average paycheck protection program (PPP) loans ​ (R) ​ ​ — ​ ​ 1 ​ ​ 51 Average earning assets, excluding PPP loans ​ (S) ​ ​ 3,623 ​ ​ 3,424 ​ ​ 3,103 Average assets (F) ​ 3,934 ​ 3,747 ​ 3,718 Average shareholders' equity (G) ​ 412 ​ 399 ​ 414 Average tangible shareholders' equity (2)(3) (H) ​ 288 ​ 273 ​ 288 Tangible shareholders' equity, period-end (2)(3) (I) ​ 308 ​ 268 ​ 298 Tangible assets, period-end (2)(3) (J) ​ 3,847 ​ 3,784 ​ 3,583 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 44 Table of Contents ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Year Ended December 31, ​ ​ ​ Calculations ​ 2023 ​ 2022 ​ 2021 ​ (in thousands) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Common shares outstanding, period-end (K) ​ ​ 15,172 ​ 15,083 ​ 15,001 ​ Average diluted shares outstanding (L) ​ ​ 15,195 ​ 15,112 ​ 15,045 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Adjusted earnings per share, diluted (2) (A/L) ​ $ 2.95 ​ $ 2.89 ​ $ 2.72 ​ Tangible book value per share, period-end (2) (I/K) ​ ​ 20.28 ​ 17.78 ​ 19.86 ​ Securities adjustment, net of tax (1)(4) (M) ​ ​ (47,649) ​ (55,246) ​ 1,985 ​ Tangible book value per share, excluding securities adjustment (2)(4) (I+M)/K ​ ​ 23.42 ​ 21.44 ​ 19.73 ​ Total tangible shareholders' equity/total tangible assets (2) (I/J) ​ ​ 8.00 ​ 7.09 ​ 8.32 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Performance ratios (5) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Return on assets ​ ​ ​ 1.14 % ​ 1.16 % ​ 1.06 % Core return on assets (2) ​ (A/F) ​ ​ 1.15 ​ ​ 1.17 ​ ​ 1.10 ​ Pre-tax, pre-provision return on assets ​ ​ ​ ​ 1.53 ​ ​ 1.54 ​ ​ 1.27 ​ Adjusted pre-tax, pre-provision return on assets (2) ​ (U/F) ​ ​ 1.54 ​ ​ 1.49 ​ ​ 1.33 ​ Return on equity ​ ​ ​ 10.88 ​ ​ 10.91 ​ ​ 9.50 ​ Core return on equity (2) ​ (A/G) ​ ​ 10.96 ​ ​ 10.96 ​ ​ 9.87 ​ Return on tangible equity ​ ​ ​ ​ 15.84 ​ ​ 16.20 ​ ​ 13.92 ​ Adjusted return on tangible equity (1)(2) ​ (A+Q)/H ​ ​ 15.96 ​ ​ 16.26 ​ ​ 14.46 ​ Efficiency ratio (1)(2)(6) ​ (D-O-Q)/(C+N) ​ ​ 58.67 ​ ​ 59.26 ​ ​ 61.29 ​ Net interest margin ​ (B+P)/E ​ ​ 3.29 ​ ​ 3.36 ​ ​ 2.88 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Supplementary data (in thousands) ​ ​ ​ ​ ​ ​ ​ ​ Taxable equivalent adjustment for efficiency ratio ​ (N) ​ $ 2,392 ​ $ 2,020 ​ $ 2,330 ​ Franchise taxes included in non-interest expense ​ (O) ​ ​ 638 ​ ​ 583 ​ ​ 528 ​ Tax equivalent adjustment for net interest margin ​ (P) ​ ​ 1,550 ​ ​ 1,398 ​ ​ 1,653 ​ Intangible amortization ​ (Q) ​ ​ 932 ​ ​ 932 ​ ​ 940 ​ Interest and fees on PPP loans ​ (T) ​ ​ — ​ ​ 223 ​ ​ 6,039 ​ (1) 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. 2021 assumes a marginal tax rate of 23.41% for the fourth quarter and 23.71% for the first three quarters.
Biggest changeThe following reconciliation table provides a more detailed analysis of these, and reconciliation for, each of non-GAAP financial measures. ​ 45 Table of Contents RECONCILIATION OF NON-GAAP FINANCIAL MEASURES ​ The following table summarizes the reconciliation of non-GAAP items for the time periods presented: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Year Ended December 31, (in thousands) Calculations ​ 2024 ​ 2023 ​ 2022 Net income ​ $ 43,544 ​ $ 44,852 ​ $ 43,557 Non-recurring items: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Gain on sale of securities, net ​ (50) ​ (34) ​ (53) Gain on sale of premises and equipment, net ​ (192) ​ 182 ​ 10 Acquisition, conversion and other expenses ​ 20 ​ 283 ​ 266 Income tax expense (1) ​ 53 ​ (104) ​ (51) Total non-recurring items ​ ​ ​ ​ (169) ​ ​ 327 ​ ​ 172 Total adjusted income (2) (A) ​ $ 43,375 ​ $ 45,179 ​ $ 43,729 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Net interest income (B) ​ $ 113,839 ​ $ 117,675 ​ $ 113,681 Plus: Non-interest income ​ 36,888 ​ 35,073 ​ 34,647 Total Revenue ​ 150,727 ​ 152,748 ​ 148,328 Gain on sale of securities, net ​ (50) ​ (34) ​ (53) Total adjusted revenue (2) (C) ​ $ 150,677 ​ $ 152,714 ​ $ 148,275 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Total non-interest expense ​ $ 95,987 ​ $ 92,723 ​ $ 90,579 Non-recurring expenses: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Gain on sale of premises and equipment, net ​ 192 ​ (182) ​ (10) Acquisition, conversion and other expenses ​ (20) ​ (283) ​ (266) Total non-recurring expenses ​ ​ ​ ​ 172 ​ ​ (465) ​ ​ (276) Adjusted non-interest expense (2) (D) ​ $ 96,159 ​ $ 92,258 ​ $ 90,303 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Total revenue ​ ​ ​ ​ 150,727 ​ ​ 152,748 ​ ​ 148,328 Total non-interest expense ​ ​ ​ ​ 95,987 ​ ​ 92,723 ​ ​ 90,579 Pre-tax, pre-provision net revenue ​ ​ ​ $ 54,740 ​ $ 60,025 ​ $ 57,749 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Adjusted revenue (2) ​ ​ ​ ​ 150,677 ​ ​ 152,714 ​ ​ 148,275 Adjusted non-interest expense (2) ​ ​ ​ ​ 96,159 ​ ​ 92,258 ​ ​ 90,303 Adjusted pre-tax, pre-provision net revenue (2) ​ (U) ​ $ 54,518 ​ $ 60,456 ​ $ 57,972 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ (in millions) ​ ​ ​ Average earning assets (E) ​ $ 3,677 ​ $ 3,623 ​ $ 3,425 Average assets (F) ​ 3,986 ​ 3,934 ​ 3,747 Average shareholders' equity (G) ​ 446 ​ 412 ​ 399 Average tangible shareholders' equity (2)(3) (H) ​ 323 ​ 288 ​ 273 Tangible shareholders' equity, period-end (2)(3) (I) ​ 335 ​ 308 ​ 268 Tangible assets, period-end (2)(3) (J) ​ 3,960 ​ 3,847 ​ 3,784 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 46 Table of Contents ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Year Ended December 31, ​ ​ ​ Calculations ​ 2024 ​ 2023 ​ 2022 ​ (in thousands) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Common shares outstanding, period-end (K) ​ ​ 15,280 ​ ​ 15,172 ​ ​ 15,083 ​ Average diluted shares outstanding (L) ​ ​ 15,311 ​ ​ 15,195 ​ ​ 15,112 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Adjusted earnings per share, diluted (2) (A/L) ​ $ 2.84 ​ $ 2.95 ​ ​ 2.89 ​ Tangible book value per share, period-end (2) (I/K) ​ ​ 21.93 ​ ​ 20.28 ​ ​ 17.78 ​ Total tangible shareholders' equity/total tangible assets (2) (I/J) ​ ​ 8.46 ​ ​ 8.00 ​ ​ 7.09 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Performance ratios (4) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Return on assets ​ ​ ​ 1.09 % ​ 1.14 % ​ 1.16 % Core return on assets (2) ​ (A/F) ​ ​ 1.09 ​ ​ 1.15 ​ ​ 1.17 ​ Pre-tax, pre-provision return on assets ​ ​ ​ ​ 1.37 ​ ​ 1.53 ​ ​ 1.54 ​ Adjusted pre-tax, pre-provision return on assets (2) ​ (U/F) ​ ​ 1.37 ​ ​ 1.54 ​ ​ 1.49 ​ Return on equity ​ ​ ​ 9.75 ​ ​ 10.88 ​ ​ 10.91 ​ Core return on equity (2) ​ (A/G) ​ ​ 9.72 ​ ​ 10.96 ​ ​ 10.96 ​ Return on tangible equity ​ ​ ​ ​ 13.72 ​ ​ 15.84 ​ ​ 16.20 ​ Adjusted return on tangible equity (1)(2) ​ (A+Q)/H ​ ​ 13.67 ​ ​ 15.96 ​ ​ 16.26 ​ Efficiency ratio (1)(2)(5) ​ (D-O-Q)/(C+N) ​ ​ 61.83 ​ ​ 58.47 ​ ​ 59.54 ​ Net interest margin ​ (B+P)/E ​ ​ 3.15 ​ ​ 3.29 ​ ​ 3.36 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Supplementary data (in thousands) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Taxable equivalent adjustment for efficiency ratio ​ (N) ​ $ 2,455 ​ $ 2,392 ​ ​ 2,020 ​ Franchise taxes included in non-interest expense ​ (O) ​ ​ 538 ​ ​ 638 ​ ​ 583 ​ Tax equivalent adjustment for net interest margin ​ (P) ​ ​ 1,905 ​ ​ 1,550 ​ ​ 1,398 ​ Intangible amortization ​ (Q) ​ ​ 932 ​ ​ 932 ​ ​ 932 ​ Interest and fees on PPP loans ​ (T) ​ ​ — ​ ​ — ​ ​ 223 ​ (1) 2024 assumes a marginal tax rate of 23.73% for the fourth quarter, 23.82% for the second and third quarters and 24.01% for the first quarter. 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.
It should be read in conjunction with the consolidated financial statements and footnotes and selected financial data presented elsewhere in this Annual Report. Within the tables presented, certain columns and rows may not sum due to the use of rounded numbers for disclosure purposes. The detailed financial discussion that follows focuses on 2023 results compared to 2022.
It should be read in conjunction with the consolidated financial statements and footnotes and selected financial data presented elsewhere in this Annual Report. Within the tables presented, certain columns and rows may not sum due to the use of rounded numbers for disclosure purposes. The detailed financial discussion that follows focuses on 2024 results compared to 2023.
For a discussion of 2022 results compared to 2021, see the Company's Annual Report on Form 10-K for the year ended December 31, 2022 . ​ GENERAL The Company is a bank holding company headquartered in Maine, providing a broad array of banking and nonbanking products and services to businesses and consumers primarily within our three-state footprint.
For a discussion of 2023 results compared to 2022, see the Company's Annual Report on Form 10-K for the year ended December 31, 2023 . GENERAL The Company is a bank holding company headquartered in Maine, providing a broad array of banking and nonbanking products and services to businesses and consumers primarily within our three-state footprint.
Capital Resources Consistent with our long-term goal of operating a sound and profitable organization, at December 31, 2023, we continue to be a “well-capitalized” financial institution according to applicable regulatory standards. Management believes this to be vital in promoting depositor and investor confidence and providing a solid foundation for future growth.
Capital Resources Consistent with our long-term goal of operating a sound and profitable organization, at December 31, 2024, we continue to be a “well-capitalized” financial institution according to applicable regulatory standards. Management believes this to be vital in promoting depositor and investor confidence and providing a solid foundation for future growth.
(2) The average balance for securities is based on amortized cost. (3) Fully taxable equivalent considers the impact of tax-advantaged securities and loans. 41 Table of Contents RATE/VOLUME ANALYSIS ​ The following table presents the effects of rate and volume changes on the fully taxable equivalent net interest income.
(2) The average balance for securities is based on amortized cost. (3) Fully taxable equivalent considers the impact of tax-advantaged securities and loans. 43 Table of Contents RATE/VOLUME ANALYSIS The following table presents the effects of rate and volume changes on the fully taxable equivalent net interest income.
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 48 Table of Contents other technology infrastructure supporting our network.
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.
At December 31, 2023, available same-day liquidity totaled approximately $1.2 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, 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.
These types of purchase obligations that will come due during 2024 approximates $9.5 million as of December 31, 2023 which is expected to be funded by cash flows generated from our operations. Impact of Inflation and Changing Prices A banking organization’s assets and liabilities are primarily monetary.
These types of purchase obligations that will come due during 2024 approximates $10.2 million as of December 31, 2024 which is expected to be funded by cash flows generated from our operations. Impact of Inflation and Changing Prices A banking organization’s assets and liabilities are primarily monetary.
The increase was the net result of the strategy to grow commercial construction and commercial real estate owner-occupied segments. ​ ● The ratio of the allowance for credit losses to total loans was 0.94%, increasing from 0.89%, reflecting more refined economic forecasting, especially in the national unemployment figures, increase in specific reserves, and loan portfolio growth.
The increase was the net result of the strategy to grow commercial construction and commercial real estate owner-occupied segments. ​ ● The ratio of the allowance for credit losses to total loans was 0.91%, increasing from 0.94%, reflecting updated economic forecasting, especially in the national unemployment figures and decreases in specific reserves, offset with loan portfolio growth.
Changes in the rate of inflation do not have as great an impact on the financial condition of a bank as do changes in interest rates. Moreover, interest rates do not necessarily change at the same percentage as inflation.
Changes in the rate of inflation do not have as great an impact on the financial condition of a bank as do changes in interest rates. Moreover, interest rates do not necessarily change at the same percentage as inflation. Accordingly, changes in inflation are not expected to have a material impact on the Company.
Tangible book value per share excluding net unrealized security losses (non-GAAP) increased 9% on an annualized basis on net income offset by dividends to shareholders. ​ 38 Table of Contents ​ SELECTED FINANCIAL DATA ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ At or For the Years Ended December 31, (in millions, except ratios and share data) 2023 2022 2021 Financial Condition Data: ​ ​ ​ ​ ​ ​ ​ ​ ​ Total assets ​ $ 3,971 ​ $ 3,910 ​ $ 3,709 Total earning assets (1) ​ 3,664 ​ 3,601 ​ 3,377 Total investments ​ 547 ​ 574 ​ 626 Total loans ​ 2,999 ​ 2,903 ​ 2,532 Allowance for credit losses ​ 28 ​ 26 ​ 23 Total goodwill and intangible assets ​ 124 ​ 125 ​ 126 Total deposits ​ 3,141 ​ 3,043 ​ 3,049 Total borrowings ​ 332 ​ 394 ​ 179 Total shareholders' equity ​ 432 ​ 393 ​ 424 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Operating Data: ​ ​ ​ Total interest and dividend income ​ $ 174 ​ $ 127 ​ $ 111 Total interest expense ​ 57 ​ 13 ​ 15 Net interest income ​ 118 ​ 114 ​ 96 Non-interest income ​ 36 ​ 35 ​ 42 Net revenue (2) ​ 154 ​ 149 ​ 138 Provision for credit losses ​ 3 ​ 3 ​ (1) Total non-interest expense ​ 93 ​ 91 ​ 91 Income tax expense ​ 12 ​ 11 ​ 9 Net income ​ 45 ​ 44 ​ 39 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Ratios and Other Data: ​ ​ ​ Per Common Share Data ​ ​ ​ Basic earnings ​ $ 2.96 ​ $ 2.90 ​ $ 2.63 Diluted earnings ​ 2.95 ​ 2.88 ​ 2.61 Total book value (5) ​ 28.48 ​ 26.09 ​ 28.27 Dividends ​ 1.10 ​ 1.02 ​ 0.94 Common stock price: ​ ​ ​ High ​ 32.42 ​ 33.11 ​ 32.94 Low ​ 19.55 ​ 24.00 ​ 21.26 Close ​ 29.36 ​ 32.04 ​ 28.93 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Weighted average common shares outstanding (in thousands) : ​ ​ ​ Basic ​ 15,142 ​ 15,040 ​ 14,969 Diluted ​ 15,195 ​ 15,112 ​ 15,045 ​ 39 Table of Contents ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ At or For the Years Ended December 31, (in millions, except ratios and share data) 2023 2022 2021 Performance Ratios: (4) ​ ​ ​ ​ ​ ​ ​ Return on assets 1.14 % 1.16 % 1.06 % Return on equity 10.88 10.91 9.50 ​ Interest rate spread 2.86 3.24 2.74 ​ Net interest margin (5) 3.29 3.36 2.88 ​ Dividend payout ratio 36.93 35.20 35.81 ​ ​ ​ ​ ​ ​ ​ ​ ​ Organic Growth Ratios: ​ Total commercial loans 6 % 19 % 7 % Total loans 3 15 (1) ​ Total deposits 3 (0) 5 ​ ​ ​ ​ ​ ​ ​ ​ ​ Asset Quality and Condition Ratios: ​ Non-accruing loans/total loans 0.18 % 0.23 % 0.40 % Net (recoveries) charge-offs/average loans — (0.01) 0.01 ​ Allowance for credit losses/total loans 0.94 0.89 0.90 ​ Loans/deposits 95 95 83 ​ ​ ​ ​ ​ ​ ​ ​ ​ Capital Ratios: ​ Tier 1 capital to average assets - Company 9.70 % 9.21 % 8.66 % Tier 1 capital to risk-weighted assets - Company 11.96 11.02 11.90 ​ Tier 1 capital to average assets - Bank 10.50 10.10 9.62 ​ Tier 1 capital to risk-weighted assets - Bank 12.96 12.67 13.22 ​ Shareholders equity to total assets (5) 10.88 10.06 11.43 ​ (1) Earning assets includes non-accruing loans and interest-bearing deposits with other banks.
The dividend increased to $0.30 per share an increase of 9.7% to yield an annualized dividend yield of 3.92%. 40 Table of Contents SELECTED FINANCIAL DATA ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ At or For the Years Ended December 31, (in millions, except ratios and share data) 2024 2023 2022 Financial Condition Data: ​ ​ ​ ​ ​ ​ ​ ​ ​ Total assets ​ $ 4,083 ​ $ 3,971 ​ $ 3,910 Total earning assets (1) ​ 3,782 ​ 3,664 ​ 3,601 Total investments ​ 533 ​ 547 ​ 574 Total loans ​ 3,147 ​ 2,999 ​ 2,903 Allowance for credit losses ​ 29 ​ 28 ​ 26 Total goodwill and intangible assets ​ 123 ​ 124 ​ 125 Total deposits ​ 3,268 ​ 3,141 ​ 3,043 Total borrowings ​ 291 ​ 332 ​ 394 Total shareholders' equity ​ 458 ​ 432 ​ 393 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Operating Data: ​ ​ ​ Total interest and dividend income ​ $ 189 ​ $ 174 ​ $ 127 Total interest expense ​ 75 ​ 57 ​ 13 Net interest income ​ 114 ​ 118 ​ 114 Non-interest income ​ 37 ​ 35 ​ 35 Net revenue (2) ​ 151 ​ 154 ​ 149 Provision for credit losses ​ 2 ​ 3 ​ 3 Total non-interest expense ​ 96 ​ 93 ​ 91 Income tax expense ​ 9 ​ 12 ​ 11 Net income ​ 44 ​ 45 ​ 44 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Ratios and Other Data: ​ ​ ​ Per Common Share Data ​ ​ ​ Basic earnings ​ $ 2.86 ​ $ 2.96 ​ $ 2.90 Diluted earnings ​ 2.84 ​ 2.95 ​ 2.88 Total book value (5) ​ 30.00 ​ 28.48 ​ 26.09 Dividends ​ 1.18 ​ 1.10 ​ 1.02 Common stock price: ​ ​ ​ High ​ 38.47 ​ 32.42 ​ 33.11 Low ​ 23.26 ​ 19.55 ​ 24.00 Close ​ 30.58 ​ 29.36 ​ 32.04 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Weighted average common shares outstanding (in thousands) : ​ ​ ​ Basic ​ 15,240 ​ 15,142 ​ 15,040 Diluted ​ 15,311 ​ 15,195 ​ 15,112 ​ 41 Table of Contents ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ At or For the Years Ended December 31, (in millions, except ratios and share data) 2024 2023 2022 Performance Ratios: (3)(4) ​ ​ ​ ​ ​ ​ ​ Return on assets 1.09 % 1.14 % 1.16 % Return on equity 9.75 10.88 10.91 ​ Interest rate spread 2.61 2.86 3.24 ​ Net interest margin (5) 3.15 3.29 3.36 ​ Dividend payout ratio 40.85 36.93 35.20 ​ ​ ​ ​ ​ ​ ​ ​ ​ Organic Growth Ratios: ​ ​ Total commercial loans 9 % 6 % 19 % Total loans 5 3 15 ​ Total deposits 4 3 (0) ​ ​ ​ ​ ​ ​ ​ ​ ​ Asset Quality and Condition Ratios: ​ ​ Non-accruing loans/total loans 0.22 % 0.18 % 0.23 % Net charge-offs (recoveries)/average loans 0.01 — (0.01) ​ Allowance for credit losses/total loans 0.91 0.94 0.89 ​ Loans/deposits 96 95 95 ​ ​ ​ ​ ​ ​ ​ ​ ​ Capital Ratios: ​ ​ Tier 1 capital to average assets - Company 10.30 % 9.70 % 9.21 % Tier 1 capital to risk-weighted assets - Company 12.06 11.96 11.02 ​ Tier 1 capital to average assets - Bank 10.66 10.50 10.10 ​ Tier 1 capital to risk-weighted assets - Bank 12.50 12.96 12.67 ​ Shareholders equity to total assets (5) 11.23 10.88 10.06 ​ (1) Earning assets includes non-accruing loans and interest-bearing deposits with other banks.
Accordingly, changes in inflation are not expected to have a material impact on the Company. ​ The FOMC often applies contractionary monetary policies during times of high inflation, resulting in elevated interest rates. Elevated interest rates may lower the market value of existing balance sheet assets and often result in a significant unrealized loss position.
The FOMC often applies contractionary monetary policies during times of high inflation, resulting in elevated interest rates. Elevated interest rates may lower the market value of existing balance sheet assets and often result in a significant unrealized loss position.
Interest-earning cash held with other banks totaled $52.6 million at year-end 2023 compared to $52.4 million at year-end 2022 carrying a yield of 5.33% in 2023 versus 1.07% in 2022. ​ Securities Securities totaled $547.4 million at year-end 2023 and $574.4 million at year-end 2022.
Interest-earning cash held with other banks totaled $37.9 million at year-end 2024 compared to $52.6 million at year-end 2023 carrying a yield of 5.54% in 2024 versus 5.33% in 2023. ​ Securities Securities totaled $533.3 million at year-end 2024 and $547.4 million at year-end 2023.
Refer to the Reconciliation of Non-GAAP Financial Measures for additional information. ​ 40 Table of Contents AVERAGE BALANCES AND AVERAGE YIELDS/RATES ​ The following table presents average balances and average rates and yields on a fully taxable equivalent basis for the periods included: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Year Ended December 31, ​ ​ 2023 ​ 2022 ​ 2021 ​ ​ ​ Average ​ Interest ​ Yield/ ​ Average ​ Interest ​ Yield/ ​ Average ​ Interest ​ Yield/ (in millions, except ratios) Balance (3) ​ Rate (3) ​ Balance (3) ​ Rate (3) Balance (3) ​ Rate (3) Assets ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Interest-earning deposits with other banks ​ $ 37 ​ $ 2 ​ 5.33 % ​ $ 72 ​ ​ 1 ​ 1.07 % ​ $ 219 ​ $ — ​ 0.15 % Securities available for sale and FHLB stock (2)(3) ​ ​ 610 ​ ​ 26 ​ 3.88 ​ ​ ​ 630 ​ ​ 19 ​ 2.99 ​ ​ ​ 621 ​ ​ 16 ​ 2.63 ​ Loans: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Commercial real estate ​ ​ 1,537 ​ ​ 81 ​ 5.27 ​ ​ ​ 1,340 ​ ​ 55 ​ 4.13 ​ ​ ​ 1,210 ​ ​ 40 3.34 ​ Commercial and industrial (3) ​ 437 ​ ​ 28 ​ 6.39 ​ ​ 410 ​ ​ 17 ​ 4.25 ​ ​ 348 ​ 14 3.98 ​ Paycheck protection program ​ ​ — ​ ​ — ​ — ​ ​ ​ 1 ​ ​ — ​ 17.27 ​ ​ ​ 51 ​ ​ 6 ​ 11.93 ​ Residential ​ 905 ​ ​ 35 ​ 3.82 ​ ​ 873 ​ ​ 31 ​ 3.55 ​ ​ 825 ​ 32 3.86 ​ Consumer ​ 97 ​ ​ 7 ​ 6.75 ​ ​ 100 ​ ​ 4 ​ 4.41 ​ ​ 99 ​ 4 3.77 ​ Total loans (1) ​ 2,976 ​ 151 5.04 ​ ​ 2,724 ​ 107 3.98 ​ ​ 2,533 ​ 96 3.78 ​ Total earning assets ​ 3,623 ​ ​ 179 ​ 4.85 % ​ 3,426 ​ ​ 127 ​ 3.73 % ​ 3,373 ​ 112 3.33 % Cash and due from banks ​ ​ 34 ​ ​ ​ ​ ​ ​ ​ ​ 37 ​ ​ ​ ​ ​ ​ ​ ​ 35 ​ ​ ​ ​ Allowance for credit losses ​ ​ (27) ​ ​ ​ ​ ​ ​ ​ ​ (24) ​ ​ ​ ​ ​ ​ ​ ​ (23) ​ ​ ​ ​ Other assets ​ ​ 304 ​ ​ ​ ​ ​ ​ ​ ​ 308 ​ ​ ​ ​ ​ ​ ​ 333 ​ ​ ​ ​ Total assets ​ $ 3,934 ​ ​ ​ ​ ​ $ 3,747 ​ ​ ​ ​ ​ $ 3,718 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Liabilities ​ ​ ​ ​ ​ ​ ​ ​ ​ NOW ​ $ 900 ​ $ 9 ​ 0.98 % ​ $ 907 ​ ​ 1 ​ 0.16 % ​ $ 949 ​ $ 1 0.11 % Savings ​ 595 ​ ​ 2 ​ 0.39 ​ ​ 658 ​ ​ 1 ​ 0.10 ​ ​ 629 ​ 1 0.90 ​ Money market ​ 407 ​ ​ 10 ​ 2.48 ​ ​ 466 ​ ​ 3 ​ 0.63 ​ ​ 390 ​ 1 0.12 ​ Time deposits ​ 533 ​ ​ 17 ​ 3.19 ​ ​ 366 ​ ​ 2 ​ 0.61 ​ ​ 425 ​ 6 1.51 ​ Total interest bearing deposits ​ 2,435 ​ 38 1.57 ​ ​ 2,397 ​ 7 0.31 ​ ​ 2,393 ​ 9 0.36 ​ Borrowings ​ 401 ​ ​ 18 ​ 4.56 ​ ​ 203 ​ ​ 6 ​ 2.71 ​ ​ 175 ​ 7 3.82 ​ Total interest bearing liabilities ​ 2,836 ​ 56 1.99 % ​ 2,600 ​ 13 0.49 % ​ 2,568 ​ 16 0.59 % Non-interest bearing demand deposits ​ 619 ​ ​ ​ 679 ​ ​ ​ 668 ​ ​ Other liabilities ​ 67 ​ ​ ​ 69 ​ ​ ​ 68 ​ ​ Total liabilities ​ 3,522 ​ ​ ​ 3,348 ​ ​ ​ 3,304 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Total shareholders' equity ​ 412 ​ ​ ​ 399 ​ ​ ​ 414 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Total liabilities and shareholders' equity ​ $ 3,934 ​ ​ ​ $ 3,747 ​ ​ ​ $ 3,718 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Net interest spread ​ ​ ​ ​ ​ ​ ​ 2.86 % ​ ​ ​ ​ ​ ​ ​ 3.24 % ​ ​ ​ ​ ​ ​ ​ 2.74 % Net interest margin ​ ​ 3.29 ​ ​ ​ 3.36 ​ ​ ​ 2.88 ​ ​ ​ (1) The average balances of loans include non-accrual loans and unamortized deferred fees and costs.
Refer to the Reconciliation of Non-GAAP Financial Measures for additional information. ​ 42 Table of Contents AVERAGE BALANCES AND AVERAGE YIELDS/RATES The following table presents average balances and average rates and yields on a fully taxable equivalent basis for the periods included: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Year Ended December 31, ​ ​ 2024 ​ 2023 ​ 2022 ​ ​ ​ Average ​ Interest ​ Yield/ ​ Average ​ Interest ​ Yield/ ​ Average ​ Interest ​ Yield/ (in millions, except ratios) Balance (3) ​ Rate (3) ​ Balance (3) ​ Rate (3) Balance (3) ​ Rate (3) Assets ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Interest-earning deposits with other banks ​ $ 36 ​ $ 2 ​ 5.54 % ​ $ 37 ​ ​ 2 ​ 5.33 % ​ $ 72 ​ $ 1 ​ 1.07 % Securities available for sale and FHLB stock (2)(3) ​ ​ 590 ​ ​ 24 ​ 4.03 ​ ​ ​ 610 ​ ​ 26 ​ 3.88 ​ ​ ​ 630 ​ ​ 19 ​ 2.99 ​ Loans: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Commercial real estate ​ ​ 1,626 ​ ​ 91 ​ 5.59 ​ ​ ​ 1,537 ​ ​ 81 ​ 5.27 ​ ​ ​ 1,340 ​ ​ 55 4.13 ​ Commercial and industrial (3) ​ 466 ​ ​ 32 ​ 6.75 ​ ​ 437 ​ ​ 28 ​ 6.39 ​ ​ 410 ​ 17 4.25 ​ Paycheck protection program ​ ​ — ​ ​ — ​ — ​ ​ ​ — ​ ​ — ​ — ​ ​ ​ 1 ​ ​ — ​ 17.27 ​ Residential ​ 859 ​ ​ 35 ​ 4.12 ​ ​ 905 ​ ​ 35 ​ 3.82 ​ ​ 873 ​ 31 3.55 ​ Consumer ​ 100 ​ ​ 7 ​ 7.14 ​ ​ 97 ​ ​ 7 ​ 6.75 ​ ​ 100 ​ 4 4.41 ​ Total loans (1) ​ 3,051 ​ 165 5.40 ​ ​ 2,976 ​ 151 5.04 ​ ​ 2,724 ​ 107 3.98 ​ Total earning assets ​ 3,677 ​ ​ 191 ​ 5.18 % ​ 3,623 ​ ​ 179 ​ 4.85 % ​ 3,426 ​ 127 3.73 % Cash and due from banks ​ ​ 32 ​ ​ ​ ​ ​ ​ ​ ​ 34 ​ ​ ​ ​ ​ ​ ​ ​ 37 ​ ​ ​ ​ Allowance for credit losses ​ ​ (29) ​ ​ ​ ​ ​ ​ ​ ​ (27) ​ ​ ​ ​ ​ ​ ​ ​ (24) ​ ​ ​ ​ Goodwill and other intangible assets ​ ​ 124 ​ ​ ​ ​ ​ ​ ​ ​ 125 ​ ​ ​ ​ ​ ​ ​ ​ 125 ​ ​ ​ ​ ​ ​ Other assets ​ ​ 182 ​ ​ ​ ​ ​ ​ ​ ​ 179 ​ ​ ​ ​ ​ ​ ​ 183 ​ ​ ​ ​ Total assets ​ $ 3,986 ​ ​ ​ ​ ​ $ 3,934 ​ ​ ​ ​ ​ $ 3,747 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Liabilities ​ ​ ​ ​ ​ ​ ​ ​ ​ Interest-bearing demand ​ $ 886 ​ $ 12 ​ 1.41 % ​ $ 900 ​ ​ 9 ​ 0.98 % ​ $ 907 ​ $ 1 0.16 % Savings ​ 547 ​ ​ 4 ​ 0.67 ​ ​ 595 ​ ​ 2 ​ 0.39 ​ ​ 658 ​ 1 0.10 ​ Money market ​ 380 ​ ​ 12 ​ 3.02 ​ ​ 407 ​ ​ 10 ​ 2.48 ​ ​ 466 ​ 3 0.63 ​ Time ​ 791 ​ ​ 34 ​ 4.30 ​ ​ 533 ​ ​ 17 ​ 3.19 ​ ​ 366 ​ 2 0.61 ​ Total interest bearing deposits ​ 2,604 ​ 62 2.37 ​ ​ 2,435 ​ 38 1.57 ​ ​ 2,397 ​ 7 0.31 ​ Borrowings ​ 300 ​ ​ 13 ​ 4.40 ​ ​ 401 ​ ​ 18 ​ 4.56 ​ ​ 203 ​ 6 2.71 ​ Total interest bearing liabilities ​ 2,904 ​ 75 2.58 % ​ 2,836 ​ 56 1.99 % ​ 2,600 ​ 13 0.49 % Non-interest bearing demand deposits ​ 571 ​ ​ ​ 619 ​ ​ ​ 679 ​ ​ Other liabilities ​ 65 ​ ​ ​ 67 ​ ​ ​ 69 ​ ​ Total liabilities ​ 3,540 ​ ​ ​ 3,522 ​ ​ ​ 3,348 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Total shareholders' equity ​ 446 ​ ​ ​ 412 ​ ​ ​ 399 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Total liabilities and shareholders' equity ​ $ 3,986 ​ ​ ​ $ 3,934 ​ ​ ​ $ 3,747 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Net interest spread ​ ​ ​ ​ ​ ​ ​ 2.61 % ​ ​ ​ ​ ​ ​ ​ 2.86 % ​ ​ ​ ​ ​ ​ ​ 3.24 % Net interest margin ​ ​ 3.15 ​ ​ ​ 3.29 ​ ​ ​ 3.36 ​ (1) The average balances of loans include non-accrual loans and unamortized deferred fees and costs.
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.
During 2023, security purchases totaled $7.5 million and were offset $44.6 million of maturities, calls and pay-downs of amortizing securities. There were $18.4 million of purchases and $20.5 million in sales of FHLB stock during the year. Fair value adjustments decreased the security portfolio by $62.4 million in 2023 compared to a $71.8 million unrealized gain in 2022.
During 2024, security purchases totaled $53.5 million and were offset by $64.4 million of maturities, calls and pay-downs of amortizing securities. There were $21.4 million of purchases and $21.9 million in sales of FHLB stock during the year. Fair value adjustments decreased the security portfolio by $62.3 million in 2024 compared to a $62.4 million unrealized loss in 2023.
Total cash dividends paid in 2023 was $1.10 per share of common stock, compared with $1.02 per share of common stock in 2022. ​ The Company and the Bank remained well-capitalized under regulatory guidelines at period end as further described in Note 12 – Shareholders’ Equity and Earnings Per Common Share on the Consolidated Financial Statements. ​ COMPARISON OF OPERATING RESULTS FOR THE YEARS ENDED DECEMBER 31, 2023 AND 2022 Net Interest Income Net interest income for 2023 was $117.7 million compared with $113.7 million in 2022.
Total cash dividends paid in 2024 was $1.18 per share of common stock, compared with $1.10 per share of common stock in 2023. The Company and the Bank remained well-capitalized under regulatory guidelines at period end as further described in Note 12 – Shareholders’ Equity and Earnings Per Common Share on the Consolidated Financial Statements.
Certain assets are carried in the consolidated statements of financial condition at estimated fair value or the lower of cost or estimated fair value. Policies with respect to the methodology used to determine the allowance for credit losses is a critical accounting policy and estimate because of its importance to the presentation of our financial condition and results of operations.
Policies with respect to the methodology used to determine the allowance for credit losses is a critical accounting policy and estimate because of its importance to the presentation of our financial condition and results of operations.
Net unrealized losses were $62.4 million, or 11% of gross securities, compared with a gain of $71.8 million, or 12% of gross securities. All securities are classified as available for sale preserving capital flexibility. ​ ● Total loans grew 3% year-over-year as commercial loans increased 6%.
Net unrealized losses were flat at $62.3 million, compared with a gain of $62.4 million in the previous period, or 12% and 11% of gross securities for the respective periods. All securities are classified as available for sale preserving capital flexibility. ​ ● Total loans grew 5% annualized year over year.
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.
Future working capital needs will depend on many factors, including the rate of business and revenue growth. 50 Table of Contents 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.
Retail time deposits increased $172.4 million as customers moved funds from non-maturity deposits into higher yielding alternatives. Our deposit composition at year-end 2023 and 2022 was 47% commercial customers and 53% consumer customers.
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.
Unrealized gains shifted to loss position in 2022 due to changes in the long-term treasury yield curve. The weighted average yield of the securities portfolio was 3.85% as of December 31, 2023 compared to 2.99% at year-end 2022.
Unrealized losses stabilized in 2024 due to changes in the long-term treasury yield curve. The weighted average yield of the securities portfolio was 4.03% as of December 31, 2024 compared to 3.88% at year-end 2023.
(2) Non-GAAP financial measure. (3) Tangible shareholders’ equity is computed by taking total shareholders’ equity less the intangible assets at period-end. Tangible assets are computed by taking total assets less the intangible assets at period-end.
(2) Non-GAAP financial measure. (3) Tangible shareholders’ equity is computed by taking total shareholders’ equity less the intangible assets at period-end. Tangible assets are computed by taking total assets less the intangible assets at period-end. (4) All performance ratios are based on average balance sheet amounts, where applicable.
For each category of interest- earning assets and interest-bearing liabilities, information is provided with respect to changes attributable to (1) changes in rate (change in rate multiplied by prior year volume), (2) changes in volume (change in volume multiplied by prior year rate), and (3) changes in volume/rate (change in rate multiplied by change in volume) have been allocated proportionately based on the absolute value of the change due to the rate and the change due to volume. ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 2023 Compared with 2022 ​ 2022 Compared with 2021 ​ ​ Increases (Decreases) due to ​ Increases (Decreases) due to (in thousands) Rate Volume Net Rate Volume Net Interest income: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Interest-earning deposits with other banks ​ $ 1,595 ​ $ (369) ​ $ 1,226 ​ $ 660 ​ $ (224) ​ $ 436 Securities available for sale and FHLB stock ​ ​ 5,424 ​ ​ (575) ​ ​ 4,849 ​ ​ 2,274 ​ ​ 233 ​ ​ 2,507 Loans: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Commercial real estate ​ ​ 17,630 ​ ​ 8,110 ​ ​ 25,740 ​ ​ 10,614 ​ ​ 4,340 ​ ​ 14,954 Commercial and industrial ​ 9,360 ​ 1,168 ​ 10,528 ​ 75 ​ 3,448 ​ 3,523 Paycheck protection program ​ ​ — ​ ​ (223) ​ ​ (223) ​ ​ 114 ​ ​ (5,891) ​ ​ (5,777) Residential ​ 2,376 ​ 1,142 ​ 3,518 ​ (2,662) ​ 1,836 ​ (826) Consumer ​ 2,280 ​ (109) ​ 2,171 ​ 644 ​ 43 ​ 687 Total loans ​ 31,646 ​ 10,088 ​ 41,734 ​ 8,785 ​ 3,776 ​ 12,561 Total interest income ​ $ 38,665 ​ $ 9,144 ​ $ 47,809 ​ $ 11,719 ​ $ 3,785 ​ $ 15,504 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Interest expense: ​ ​ ​ ​ ​ ​ Deposits: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ NOW ​ $ 7,342 ​ $ (12) ​ $ 7,330 ​ $ 466 ​ $ (48) ​ $ 418 Savings ​ 1,707 ​ (66) ​ 1,641 ​ 101 ​ 25 ​ 126 Money market ​ 7,517 ​ (376) ​ 7,141 ​ 2,368 ​ 93 ​ 2,461 Time deposits ​ 13,761 ​ 1,015 ​ 14,776 ​ (3,318) ​ (886) ​ (4,204) Total deposits ​ 30,327 ​ 561 ​ 30,888 ​ (383) ​ (816) ​ (1,199) Borrowings ​ 7,406 ​ 5,368 ​ 12,774 ​ (2,249) ​ 1,062 ​ (1,187) Total interest expense ​ $ 37,733 ​ $ 5,929 ​ $ 43,662 ​ $ (2,632) ​ $ 246 ​ $ (2,386) Change in net interest income ​ $ 932 ​ $ 3,215 ​ $ 4,147 ​ $ 14,351 ​ $ 3,539 ​ $ 17,890 ​ 42 Table of Contents NON-GAAP FINANCIAL MEASURES ​ Our accounting and reporting policies conform to accounting principles generally accepted in the United States of America ("GAAP") and the prevailing practices in the financial services industry.
For each category of interest- earning assets and interest-bearing liabilities, information is provided with respect to changes attributable to (1) changes in rate (change in rate multiplied by prior year volume), (2) changes in volume (change in volume multiplied by prior year rate), and (3) changes in volume/rate (change in rate multiplied by change in volume) have been allocated proportionately based on the absolute value of the change due to the rate and the change due to volume. ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 2024 Compared with 2023 ​ 2023 Compared with 2022 ​ ​ Increases (Decreases) due to ​ Increases (Decreases) due to (in thousands) Rate Volume Net Rate Volume Net Interest income: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Interest-earning deposits with other banks ​ $ 78 ​ $ (91) ​ $ (13) ​ $ 1,595 ​ $ (369) ​ $ 1,226 Securities available for sale and FHLB stock ​ ​ 929 ​ ​ (812) ​ ​ 117 ​ ​ 5,424 ​ ​ (575) ​ ​ 4,849 Loans: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Commercial real estate ​ ​ 5,100 ​ ​ 4,724 ​ ​ 9,824 ​ ​ 17,630 ​ ​ 8,110 ​ ​ 25,740 Commercial and industrial ​ 1,698 ​ 1,886 ​ 3,584 ​ 9,360 ​ 1,168 ​ 10,528 Paycheck protection program ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ (223) ​ ​ (223) Residential ​ 2,605 ​ (1,761) ​ 844 ​ 2,376 ​ 1,142 ​ 3,518 Consumer ​ 382 ​ 160 ​ 542 ​ 2,280 ​ (109) ​ 2,171 Total loans ​ 9,785 ​ 5,009 ​ 14,794 ​ 31,646 ​ 10,088 ​ 41,734 Total interest income ​ $ 10,792 ​ $ 4,106 ​ $ 14,898 ​ $ 38,665 ​ $ 9,144 ​ $ 47,809 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Interest expense: ​ ​ ​ ​ ​ ​ Deposits: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ NOW ​ $ 3,790 ​ $ (135) ​ $ 3,655 ​ $ 7,342 ​ $ (12) ​ $ 7,330 Savings ​ 1,546 ​ (190) ​ 1,356 ​ 1,707 ​ (66) ​ 1,641 Money market ​ 2,059 ​ (663) ​ 1,396 ​ 7,517 ​ (376) ​ 7,141 Time deposits ​ 8,818 ​ 8,239 ​ 17,057 ​ 13,761 ​ 1,015 ​ 14,776 Total deposits ​ 16,213 ​ 7,251 ​ 23,464 ​ 30,327 ​ 561 ​ 30,888 Borrowings ​ (461) ​ (4,625) ​ (5,086) ​ 7,406 ​ 5,368 ​ 12,774 Total interest expense ​ $ 15,752 ​ $ 2,626 ​ $ 18,378 ​ $ 37,733 ​ $ 5,929 ​ $ 43,662 Change in net interest income ​ $ (4,960) ​ $ 1,480 ​ $ (3,480) ​ $ 932 ​ $ 3,215 ​ $ 4,147 ​ 44 Table of Contents NON-GAAP FINANCIAL MEASURES ​ Our accounting and reporting policies conform to accounting principles generally accepted in the United States of America ("GAAP") and the prevailing practices in the financial services industry.
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. This unfavorable scenario resulted in an allowance that is approximately $8.0 million higher than the allowance using the expected scenario. 49 Table of Contents ​
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.
BOLI income increased $699 thousand in 2023 compared to 2022 related to one-time death benefits during the first quarter of 2023. ​ Non-Interest Expense Non-interest expense was $93.5 million in 2023 compared to $91.3 million in 2022.
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 Non-interest expense increased $3.3 million to $96.0 million in 2024 compared to $92.7 million in 2023.
The reserve for unfunded commitments remained flat at the end of 2023 at $3.9 million, which are also recorded in other liabilities. ​ Equity Total equity was $432.1 million at year-end 2023, compared with $393.5 million at year-end 2022. Book value per share was $28.48 as of December 31, 2023 compared with $26.09 at December 31, 2022.
The reserve for unfunded commitments declined $775 thousand at the end of 2024 to $3.1 million compared to $3.9 million at December 31, 2023, which are also recorded in other liabilities. Equity Total equity was $458.4 million at year-end 2024, compared with $432.1 million at year-end 2023.
The yield on loans was 5.04% in 2023 and 3.98% in 2022. Costs of interest-bearing liabilities increased in 2023 to 1.99% from 0.49% in 2022 due to increased deposit rates.
The yield on earning assets totaled 5.18% compared at December 31, 2024 compared to 3.73% at December 31, 2023. The yield on loans was 5.40% in 2024 and 5.04% in 2023. Costs of interest-bearing liabilities increased in 2024 to 2.58% from 1.99% in 2023 due to increased deposit rates and market competition.
We have unused borrowing capacity at the FHLB of $381.4 million, unused borrowing capacity at the Federal Reserve of $126.6 million and unused lines of credit totaling $51.0 million, in addition to over $200 million in unencumbered, liquid investment portfolio assets. ​ Purchase Obligations 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.
Purchase Obligations 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.
Both ratios include higher borrowing costs and lower unrealized losses on securities as noted below under the “Financial Position” section. ​ ● Net interest income was $117.7 million, an increase of 4%. Net interest margin was 3.29%, a decrease of 7 basis points from the same period in 2022.
Both ratios include higher cost of funds and relatively flat unrealized losses on securities as noted below under the “Financial Position” section. ​ ● Net interest income was $113.8 million, compared to $117.7 million in the previous year. Net interest margin was 3.15% compared to 3.29% for 2023.
Diluted earnings per share was $2.95, an increase of $0.07 or 2%. ​ ● Return on assets was 1.14% compared to 1.16%. Return on equity was 10.88% compared to 10.91%.
Diluted earnings per share was $2.84, compared to $2.95 for the previous year. ​ ● Return on assets was 1.09% compared to 1.14%. Return on equity was 9.75% compared to 10.88%.
(6) Efficiency ratio is computed by using adjusted non-interest expense net of franchise taxes and intangible amortization divided by adjusted revenue tax effected for tax-advantaged assets.
(5) Efficiency ratio is computed by using adjusted non-interest expense net of franchise taxes and intangible amortization divided by adjusted revenue tax effected for tax-advantaged assets. ​ 47 Table of Contents COMPARISON OF FINANCIAL CONDITION AT DECEMBER 31, 2024 AND 2023 Cash and cash equivalents Total cash and cash equivalents at December 31, 2024 were $72.2 million, compared to $94.8 million at December 31, 2023.
The Company's primary sources of revenue, through the Bank, are net interest income (predominantly from loans and investment securities) and noninterest income (principally fees and other revenue from financial services provided to customers or ancillary services tied to loans and deposits). ​ ANNUAL PERFORMANCE SUMMARY Earnings (For year ended December 31, 2023 compared to the same period of 2022) ​ ● Net income was $44.9 million compared to $43.6, an increase of 3%, driven primarily due to a benefit to net interest income as our assets repriced to higher rates.
ANNUAL PERFORMANCE SUMMARY Earnings (For year ended December 31, 2024 compared to the same period of 2023) ​ ● Net income was $43.5 million compared to $44.9, a decrease of 3%, driven primarily due to higher net interest expense as deposits repriced to higher rates.
The expense in 2023 was primarily due to more refined economic forecasting, especially in the national unemployment figures and in commercial real estate prices, and loan portfolio growth. Overall credit quality remains strong and credit quality metrics improved with notable decreases in non-accruing loans. Non-Interest Income Non-interest income in 2023 was $35.8 million compared to $35.3 million in 2022.
Provision for Credit Losses 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.
Trust management fees were $14.3 million in 2023 compared to $14.6 in 2022 due to lower market valuation of assets under management (“AUM”) throughout the year. AUM was $2.5 billion compared to $2.3 billion in 2022, the increase of $143 million primarily due to higher security valuations in the fourth quarter 2023.
Non-Interest Income 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.
These lower market values may negatively affect the Bank’s liquidity position as it results in a lower value of the Bank’s liquid assets. ​ IMPACT OF NEW ACCOUNTING PRONOUNCEMENTS Please refer to the notes on Recently Adopted Accounting Principles and Future Application of Accounting Pronouncements in Note 1 – Summary of Significant Accounting Policies of the Consolidated Financial Statements.
IMPACT OF NEW ACCOUNTING PRONOUNCEMENTS Please refer to the notes on Recently Adopted Accounting Principles and Future Application of Accounting Pronouncements in Note 1 – Summary of Significant Accounting Policies of the Consolidated Financial Statements. 51 Table of Contents CRITICAL ACCOUNTING POLICIES AND ESTIMATES Note 1 – Summary of Significant Accounting Policies to our audited Consolidated Financial Statements for the year ended December 31, 2024 contains a summary of significant accounting policies.
The decrease is primarily due to the repricing of variable rate assets and continued loan growth offset by higher borrowing costs and cost of interest-bearing liabilities. ​ ● The provision for credit losses was an expense of $2.9 million in both 2023 and 2022. ​ ● Non-interest income was $35.8 million, compared to $35.3 million primarily due to $699 thousand higher bank-owned life insurance (“ BOLI”) income related to one-time death benefits during the first quarter of 2023. ​ ● Non-interest expense was $93.5 million versus $91.3 million.
The decrease is primarily due to the repricing of deposits and continued loan growth offset by higher borrowing costs and cost of interest-bearing liabilities. ​ ● The provision for credit losses was an expense of $2.1 million in 2024 compared to $2.9 million in 2023. ​ ● Non-interest income was $36.9 million, compared to $35.1 million primarily due to $1.4 million higher Trust and investment management fee income driven by increased assets under management and improved market performance . ​ ● Non-interest expense was $96.0 million versus $92.7 million.
Salaries and benefits expense increased $3.9 million to $52.5 million in 2023 due to revaluation of post-retirement plan liabilities, higher stock compensation expense and decrease in deferred loan origination costs. ​ ● Efficiency ratio improved to 58.7% in 2023 from 59.3% in 2022. ​ ​ Financial Position (For year ended December 31, 2023 compared to the same period of 2022) ​ ● Total assets increased $61.1 million to $4.0 billion mainly due to loan growth offset by available for sale security pay-downs. ​ 37 Table of Contents ● Cash and cash equivalents increased to $94.8 million, from $92.3 million primarily due to excess cash available generated from operations. ​ ● Total securities were $547.4 million, or 14% of total assets, compared to $574.4 million, or 15% of total assets.
Other expenses increased $1.7 million driven by increased Debit, ATM and credit card expenses, software costs and adjustments in cash surrender values on a split dollar policy. ​ ● Efficiency ratio was 61.83% compared to 58.47% at the end of 2023. ​ 39 Table of Contents Financial Position (For year ended December 31, 2024 compared to the same period of 2023) ​ ● Total assets increased $86.1 million to $4.1 billion mainly due to loan growth offset by available for sale security pay-downs. ​ ● Cash and cash equivalents were $72.2 million compared to $94.8 million in the previous year primarily due to loan growth and paydown of borrowings. ​ ● Total securities were $533.3 million, or 13% of total assets, compared to $547.4 million, or 14% of total assets.
Equity included securities adjustments, net of tax, totaling a $47.6 million loss at the end of 2023 compared to a $55.3 million loss at year-end 2022. ​ During 2023 and 2022, the Company declared and distributed regular cash dividends on its common stock in the aggregate amounts of $16.6 million compared to $15.3 million, respectively.
During 2024 and 2023, the Company declared and distributed regular cash dividends on its common stock in the aggregate amounts of $17.8 million compared to $16.6 million, respectively. The Company’s 2024 dividend payout ratio amounted to 42%, compared with 37% in 2023.
CRITICAL ACCOUNTING POLICIES AND ESTIMATES Note 1 – Summary of Significant Accounting Policies to our audited Consolidated Financial Statements for the year ended December 31, 2023 contains a summary of significant accounting policies. Various elements of these accounting policies, by their nature, are subject to estimation techniques, valuation assumptions and other subjective assessments.
Various elements of these accounting policies, by their nature, are subject to estimation techniques, valuation assumptions and other subjective assessments. Certain assets are carried in the consolidated statements of financial condition at estimated fair value or the lower of cost or estimated fair value.
Salaries and benefits expense increased $3.9 million to $52.5 million in 2023 due to a $2.0 million increase in revaluation of post-retirement plan liabilities driven by rate environment, $711 thousand increase in stock compensation expense due to the revaluation of our 47 Table of Contents long term incentive obligations and a $782 thousand decrease in deferred loan origination costs driven by lower residential loan volume.
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.
Total commercial loans were $2.0 billion, growing 6% in 2023 and 19% in 2022 which was driven mostly from new relationships primarily to commercial borrowers. Total residential loans decreased 2% or $14.6 million from year-end 2022, due to lower demand for prevailing mortgage rates and strategy to sell production to the secondary market.
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.
Net charge-offs increased to $626 thousand in 2023 compared to a net recovery of $238 thousand in 2022 primarily driven by the resolution of one non-accruing C&I loan. ​ Other Assets Total other assets decreased $10.6 million to $356 million at December 31, 2023 from $366 million as of December 31, 2022.
Net charge-offs decreased to $353 thousand in 2024 from $626 thousand in 2023 compared driven by the resolution of one non-accruing C&I loan. ​ 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.
Non-maturity deposits decreased $279.1 million in 2023, or 10% due to consumer’s migration to brokerage accounts and higher yielding Time deposits. 4,638 non-maturity deposit accounts with new customers were opened in 2023. Time deposits increased $376.8 million to $700.3 million at year-end 2023 versus $323.4 million in 2022. Brokered deposits increased $204.5 million.
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.
All securities remain classified as available for sale to provide flexibility in loan funding and management of our cost of funds. ​ Loans Loans increased by $96.4 million from year-end 2022 or 3%. The controlled growth was a function of the tight credit markets and the rising interest rate environment in 2023 that limited commercial loan refinancing activity.
At the end of 2024, our securities portfolio had an average life of 9 years with an effective duration of 5 years for both periods respectively. All securities remain classified as available for sale to provide flexibility in loan funding and management of our cost of funds. ​ Loans Loans increased by $148.1 million from year-end 2023 or 5% annualized.
Total borrowings decreased $62.7 million to $271 million at December 31, 2023 compared to $334 million as of December 31, 2022 primarily due to excess cash available generated from operations. 46 Table of Contents ​ Derivative Financial Instruments and Other Liabilities Other liabilities totaled $66.2 million at the end of 2023 compared to $78.7 million as of December 31, 2022.
Borrowings 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 increase 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-accruing loans decreased $1 million to $5.5 million, or 0.18% of total loans at the end of 2023 from $6.5 million or 0.23% of total loans at year-end 2022.
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 in commercial and industrial, commercial real estate owner occupied and home equity loans.
Net charge-offs increased to $590 thousand in 2023 compared to a net recovery of $238 thousand in 2022 primarily driven by one non-accrual commercial and industrial (“C&I loan”). ​ ● Deposit balances increased 3% year-over-year due to consumer’s migration to brokerage accounts and higher yielding time deposits and an increase in brokered deposits. ​ ● Borrowings decreased to $331.5 million from $394.3 million primarily due to excess cash available generated from operations. ​ ● Total book value per share was $28.48 compared to $26.09.
Net charge-offs were 0.01% of average loans, a nominal increase compared to last year. ​ ● Deposit balances increased 4% annualized due to consumers’ migration to money market accounts and higher yielding time deposits. ​ ● Borrowings decreased to $40.9 million primarily due to excess cash available generated from operations used to pay off $20 million in subordinated debt and $30 million, net in Bank Term Funding Program borrowings with the FRB offset by a $10 million increase in FHLB advances. ​ ● Total book value per share was $30.00 compared to $28.48.
Income Tax Expense Income tax expense was $12.3 million for the year ended December 31, 2023, compared with $11.3 million for the year ended December 31, 2022. The effective tax rate increased to 21.5% in 2023 from 20.6% in 2022 due to a higher proportion of revenue from non-exempt sources.
Income Tax Expense 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.
Interest expense on borrowings increased $12.8 million in 2023 compared to 2022 driven by a 79 basis point increase in the weighted average rate of borrowings to 3.24% from 2.45%, respectively, reflecting higher interest rates and increased average borrowings. ​ Provision for Credit Losses The provision for credit losses in both 2023 and 2022 was a $2.9 million expense.
Interest expense on borrowings decreased $5.1 million in 2024 compared to 2023 driven by a decrease in 49 Table of Contents average borrowings by $101 million and at an average rate of 4.40% from 4.56%, respectively, reflecting lower interest rates and decreased average borrowings.
Removed
Net unrealized security losses reduced book value per share by $3.14.
Added
The Company's primary sources of revenue, through the Bank, are net interest income (predominantly from loans and investment securities) and noninterest income (principally fees and other revenue from financial services provided to customers or ancillary services tied to loans and deposits).
Removed
(4) Securities adjustment, net of tax represents the total unrealized (loss) gain on securities recorded on the Company’s consolidated balance sheets within total common shareholders’ equity. (5) All performance ratios are based on average balance sheet amounts, where applicable.
Added
Salaries and benefits expense increased $2.3 million driven by cost of living increases, higher commissions and incentive costs.
Removed
Adjusted net interest margin excludes PPP loans and interest-earning deposits with other banks. ​ 45 Table of Contents COMPARISON OF FINANCIAL CONDITION AT DECEMBER 31, 2023 AND 2022 Cash and cash equivalents Total cash and cash equivalents at December 31, 2023 were $94.8 million, compared to $92.3 million at December 31, 2022.
Added
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.
Removed
At the end of 2023, our securities portfolio had an average life of 8.7 years with an effective duration of 4.8 compared to an average life of 9.4 years with an effective duration of 5.0 years at the end of 2022. The extension of duration during 2022 was driven by the increase in rates.
Added
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 The allowance for credit losses on loans was $28.7 million at December 31, 2024 compared to $28.1 million as of December 31, 2023.
Removed
Home Equity lines decreased 4% or $3.2 million from year-end 2022 due to the run-off of balances associated with the repricing of home equity lines of credit. ​ Allowance for Credit Losses The ACL was $28.1 million at the end of 2023 compared to $25.9 million at year-end 2022.
Added
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.
Removed
The ratio of accruing past due loans to total loans increased to 0.12% of total loans from 0.09%. Total delinquent and non-accruing loans as percentage of total loans improved to 0.30% from 0.32%.
Added
There was no ACL on available for sale securities at December 31, 2023. ​ Premises and Equipment 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.
Removed
The decrease is primarily attributed to a $5.1 million decrease in the asset position customer loan swaps and $2.2 million decrease in interest rate swaps on wholesale funding. Other intangible assets decreased $932 thousand from 2022 driven by amortization.
Added
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. ​ Other Assets Total other assets increased $356 thousand to $307.7 million at December 31, 2024 from $307.3 million as of December 31, 2023.
Removed
Deferred tax assets, net, decreased $1.5 million as of December 31, 2023 compared to 2022 driven by the unrealized loss position in the securities available for sale portfolio.
Added
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. ​ 48 Table of Contents Deposits 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.
Removed
Cash surrender value of Bank Owned Life insurance decreased $1.2 million due to settlement of one-time death benefits that occurred in the first quarter of 2023. ​ Deposits and Borrowings Total deposits increased $97.8 million to $3.1 billion at the end of 2023 compared to $3.0 billion at the end of 2022.
Added
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%.
Removed
The $12.5 million decrease primarily reflects a $10.0 million decrease in capital commitments on limited partnership investments, a $5.2 million net decrease in customer loan swaps, and a $1.5 million variable rate loan hedge decrease offset by $3.5 million increase in brokered CD and a $581 thousand increase in CD interest payable.
Added
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%.
Removed
The net fair value of all derivatives was an asset of $3.2 million at the end of 2023 compared to a $4.8 million asset at year-end 2022. The decrease in net derivative fair values reflects the slowing of rising long-term interest rates.
Added
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.
Removed
The Company’s 2023 dividend payout ratio amounted to 37%, compared with 35% in 2022.
Added
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. Derivative Financial Instruments and Other Liabilities Other liabilities totaled $66.6 million at the end of 2024 compared to $66.2 million as of December 31, 2023.
Removed
The net interest margin was 3.29% in 2023 compared to 3.35% in the prior year. Interest-earning cash balances, held mostly at the Federal Reserve Bank, reduced NIM by 2 basis points in the year and 5 basis points in 2022. The yield on earning assets totaled 4.85% compared to 3.73% in 2022.
Added
The $447 thousand increase was primarily driven by a $1.9 million increase in lease obligations driven by extensions and $1.3 million in higher brokered CD interest payable offset by a $1.4 million decrease in fair value of loan hedge liabilities and $1.2 million in unpaid services payable due to year over year lower renovation accruals and paydowns of outstanding commitments.
Removed
Customer service fees increased 3% to $15.2 million in 2023 due to higher transaction volumes associated with 1,000 net new core accounts that opened during the year.
Added
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.
Added
COMPARISON OF OPERATING RESULTS FOR THE YEARS ENDED DECEMBER 31, 2024 AND 2023 Net Interest Income Net interest income for 2024 was $113.8 million compared with $117.7 million in 2023. The net interest margin was 3.15% in 2024 compared to 3.29% in the prior year.
Added
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.

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

10 edited+5 added−2 removed8 unchanged
Biggest changeChanges in net interest income based upon these simulations are measured against the flat interest rate scenario. ​ As of December 31, 2023, interest rate sensitivity modeling results indicate that the balance sheet was asset sensitive over the one- and two-year horizons. ​ The following table presents the changes in sensitivities on net interest income for the years ended December 31, 2023 and 2022: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Change in Interest Rates-Basis Points (Rate Ramp) ​ 1 - 12 Months ​ ​ 13 - 24 Months (in thousands, except ratios) ​ $ Change ​ % Change ​ ​ $ Change ​ % Change At December 31, 2023 ​ ​ ​ ​ -200 ​ $ (6,229) ​ (5.0) % ​ $ (12,776) ​ (9.7) % -100 ​ ​ (3,310) ​ (2.7) ​ ​ ​ (6,468) ​ (4.9) ​ +100 ​ ​ 2,421 ​ 2.0 ​ ​ ​ 4,818 ​ 3.7 ​ +200 ​ 4,938 ​ (4.0) ​ ​ ​ 9,143 ​ 6.9 ​ At December 31, 2022 ​ ​ ​ ​ ​ ​ -200 ​ $ (6,183) ​ (4.3) % ​ $ (19,692) ​ (12.8) % -100 ​ (2,261) (1.6) ​ ​ ​ (7,954) (5.2) ​ +100 ​ ​ 1,704 ​ 1.2 ​ ​ ​ 5,583 ​ 3.6 ​ +200 ​ 3,253 2.3 ​ ​ 10,627 6.9 ​ ​ Assuming short-term and long-term interest rates decline 100 to 200 basis points from current levels (i.e., a parallel yield curve shift) and the Bank’s balance sheet structure and size remain at current levels, management believes net interest income will deteriorate over the one year horizon while deteriorating further from that level over the two-year horizon. ​ Assuming the Bank’s balance sheet structure and size remain at current levels and the Federal Reserve increases short-term interest rates by 100 to 200 basis points with the balance of the yield curve shifting in parallel with these increases, management believes net interest income will improve over both the one and two-year horizons. ​ As compared to December 31, 2022, sensitivity to rate movements has decreased as the bank has incrementally shifted to a less asset sensitive position. ​ The preceding sensitivity analysis does not represent a forecast and should not be relied upon as being indicative of expected operating results.
Biggest changeAs of December 31, 2024, interest rate sensitivity modeling results indicate that the Bank’s balance sheet was asset sensitive over the one- and two-year horizons. 53 Table of Contents The following table presents the changes in sensitivities on net interest income for the periods ended December 31, 2024 and 2023: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Change in Interest Rates-Basis Points (Rate Ramp) ​ 1 - 12 Months ​ ​ 13 - 24 Months (in thousands, except ratios) ​ $ Change ​ % Change ​ ​ $ Change ​ % Change At December 31, 2024 ​ ​ ​ ​ -200 ​ $ (6,422) ​ (5.3) % ​ $ (14,688) ​ (11.1) % -100 ​ ​ (3,511) ​ (2.9) ​ ​ ​ (7,321) ​ (5.5) ​ +100 ​ ​ 2,597 ​ 2.0 ​ ​ ​ 5,625 ​ 4.2 ​ +200 ​ 5,127 ​ 4.2 ​ ​ ​ 10,880 ​ 8.2 ​ At December 31, 2023 ​ ​ ​ ​ ​ ​ -200 ​ $ (6,229) ​ (5.0) % ​ $ (12,776) ​ (9.7) % -100 ​ (3,310) (2.7) ​ ​ ​ (6,468) (4.9) ​ +100 ​ ​ 2,421 ​ 2.0 ​ ​ ​ 4,818 ​ 3.7 ​ +200 ​ 4,938 4.0 ​ ​ 9,143 6.9 ​ ​ Assuming short-term and long-term interest rates decline 200 basis points from current levels (i.e., a parallel yield curve shift) over the next twelve months and the Bank’s balance sheet structure and size remain at current levels, management believes net interest income will deteriorate over the one year horizon while deteriorating further from that level over the two-year horizon.
The sensitivity analysis also does not reflect additional actions that the Bank’s senior executive team and Board of Directors might take in responding to or anticipating changes in interest rates, and the anticipated impact on the Bank’s net interest income. ​ 51 Table of Contents
The sensitivity analysis also does not reflect additional actions that the Bank’s senior executive team and Board of Directors might take in responding to or anticipating changes in interest rates, and the anticipated impact on the Bank’s net interest income. ​ 54 Table of Contents
The objectives in managing the balance sheet are to preserve the sensitivity of net interest income to actual or potential changes in interest rates, and to enhance profitability through strategies that promote sufficient reward for understood and controlled risk. ​ The interest rate risk measurement and management techniques incorporate the re-pricing and cash flow attributes of balance sheet and off-balance sheet instruments as each relate to current and potential changes in interest rates.
The objectives in managing the balance sheet are to preserve the sensitivity of net interest income to actual or potential changes in interest rates, and to enhance profitability through strategies that promote sufficient reward for understood and controlled risk. ​ 52 Table of Contents The interest rate risk measurement and management techniques incorporate the re-pricing and cash flow attributes of balance sheet and off-balance sheet instruments as each relate to current and potential changes in interest rates.
The level of interest rate risk, measured in terms of the potential future effect on net interest income, is determined through the use of modeling and other techniques under multiple interest rate scenarios.
The level of interest rate risk, measured in terms of the potential future effect on net interest income, is determined through the use of modeling and other techniques under multiple interest rate scenarios. Interest rate risk is evaluated in depth on a quarterly basis and reviewed by ALCO and the Board of Directors.
Interest rate risk is measured in terms of potential changes in net interest income based upon shifts in the yield curve. ​ The interest rate risk sensitivity model requires that assets and liabilities be broken down into components as to fixed, variable, and adjustable interest rates, as well as other homogeneous groupings, which are segregated as to maturity and type of instrument.
The interest rate risk sensitivity model requires that assets and liabilities be broken down into components as to fixed, variable, and adjustable interest rates, as well as other homogeneous groupings, which are segregated as to maturity and type of instrument.
While assumptions are developed based upon current economic and local market conditions, we cannot make any assurances as to the predictive nature of these assumptions including how customer preferences or competitor influences might change. ​ As market conditions vary from those assumed in the sensitivity analysis, actual results may also differ due to: prepayment and refinancing levels deviating from those assumed; the impact of interest rate changes, caps or floors on adjustable rate assets; the potential effect of changing debt service levels on customers with adjustable rate loans; depositor early withdrawals and product preference changes; and other such variables.
As market conditions vary from those assumed in the sensitivity analysis, actual results may also differ due to: prepayment and refinancing levels deviating from those assumed; the impact of interest rate changes, caps or floors on adjustable rate assets; the potential effect of changing debt service levels on customers with adjustable rate loans; depositor early withdrawals and product preference changes; and other such variables.
The model simulates the behavior of interest income and expense for all balance sheet and off-balance sheet instruments, under different interest rate scenarios together with a dynamic future balance sheet.
Interest Rate Sensitivity Modeling: The Bank utilizes an interest rate risk model widely recognized in the financial industry to monitor and measure interest rate risk. The model simulates the behavior of interest income and expense for all balance sheet and off-balance sheet instruments, under different interest rate scenarios together with a dynamic future balance sheet.
Interest rate risk is evaluated in depth on a quarterly basis and reviewed by ALCO and the Board of Directors. ​ The Asset Liability Management Policy, approved annually by the Bank’s Board of Directors, establishes interest rate risk limits in terms of variability of net interest income under rising, flat, and decreasing rate scenarios.
The Asset Liability Management Policy, approved annually by the Bank’s Board of Directors, establishes interest rate risk limits in terms of variability of net interest income under rising, flat, and decreasing rate scenarios. It is the role of the ALCO to evaluate the overall risk profile and to determine actions to maintain and achieve a posture consistent with policy guidelines.
Using this approach, we are able to produce simulation results that illustrate the effect that both a gradual “rate ramp” and a “rate shock” have on earnings expectations. Our net interest income sensitivity analysis reflects changes to net interest income assuming no balance sheet growth and a parallel shift in interest rates.
Interest income and interest expense are then simulated under several hypothetical interest rate conditions. The simulation models a parallel and pro rata shift in rates over a 12-month period. Using this approach, we are able to produce simulation results that illustrate the effect that both a gradual “rate ramp” and a “rate shock” have on earnings expectations.
All rate changes were “ramped” over the first 12-month period and then maintained at those levels over the remainder of the simulation horizon.
Our net interest income sensitivity analysis reflects changes to net interest income assuming no balance sheet growth and a parallel shift in interest rates. All rate changes were “ramped” over the first 12-month period and then maintained at those levels over the remainder of the simulation horizon.
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It is the role of the ALCO to evaluate the overall risk profile and to determine actions to maintain and achieve a posture consistent with policy guidelines. ​ Interest Rate Sensitivity Modeling: An interest rate risk model widely recognized in the financial industry is used to monitor and measure interest rate risk.
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Interest rate risk is measured in terms of potential changes in net interest income based upon shifts in the yield curve.
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Interest income and interest expense are then simulated under several hypothetical interest rate conditions. ​ 50 Table of Contents The simulation models a parallel and pro rata shift in rates over a 12-month period.
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Changes in net interest income based upon these simulations are measured against the flat interest rate scenario.
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Assuming short-term and long-term interest rates increase 200 basis points from current levels (i.e., a parallel yield curve shift) over the next twelve months and the Bank’s balance sheet structure and size remain at current levels, management believes net interest income will improve over the one year horizon while improving further from that level over the two-year horizon.
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As compared to December 31, 2023, asset sensitivity has increased in both year one and year two. The preceding sensitivity analysis does not represent a forecast and should not be relied upon as being indicative of expected operating results.
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While assumptions are developed based upon current economic and local market conditions, we cannot make any assurances as to the predictive nature of these assumptions including how customer preferences or competitor influences might change.

Other BHB 10-K year-over-year comparisons