Bar Harbor Bankshares(BHB) - 2025 Q2 - Quarterly Report

FORM 10-Q General Information This section provides general information about the Quarterly Report on Form 10-Q, including registrant details and filing period - The document is a Quarterly Report on Form 10-Q for the period ended June 30, 2025, filed by BAR HARBOR BANKSHARES[1][2] Registrant Information | Field | Value | | :---------------------------------- | :------------------------------------------------------------------- | | Commission File Number | 001-13349 | | State of Incorporation | Maine | | I.R.S. Employer Identification No. | 01-0393663 | | Principal Executive Offices Address | PO Box 400, 82 Main Street, Bar Harbor, ME 04609-0400 | | Registrant's Telephone Number | (207) 288-3314 | | Common Stock Trading Symbol | BHB | | Exchange | NYSE American | | Filer Status | Accelerated Filer | | Common Stock Outstanding (Aug 4, 2025) | 16,682,898 shares | | Shell Company | No | INDEX This section provides an overview of the Form 10-Q's structure, detailing its financial and other information parts - The index outlines the structure of the Form 10-Q, including Part I (Financial Information with Consolidated Financial Statements and Management's Discussion and Analysis) and Part II (Other Information covering Legal Proceedings, Risk Factors, and Exhibits)[5] Cautionary Statement Regarding Forward-Looking Statements This statement warns that forward-looking information is subject to various risks and uncertainties that could cause actual results to differ - The report contains forward-looking statements subject to risks, uncertainties, and other factors that may cause actual results to differ materially from those expressed or implied[7] - Key risk factors include changes in general business and economic conditions, consumer behavior, asset quality, liquidity needs, competition, interest rate increases, operational risks (e.g., cybersecurity, climate change), lack of strategic growth opportunities, regulatory changes, and reductions in wealth management assets[9] PART I. FINANCIAL INFORMATION This section presents the unaudited consolidated financial statements of Bar Harbor Bankshares and its subsidiaries, along with management's discussion and analysis of the company's financial condition and results of operations for the three and six months ended June 30, 2025 Item 1. Consolidated Financial Statements (Unaudited) This item includes the unaudited consolidated balance sheets, statements of income, comprehensive income, changes in shareholders' equity, and cash flows, along with condensed notes providing detailed accounting policies and disclosures for the interim periods Consolidated Balance Sheets This section presents the company's unaudited consolidated balance sheets, detailing assets, liabilities, and shareholders' equity at specific dates Consolidated Balance Sheet Highlights (in thousands) | Metric | June 30, 2025 | December 31, 2024 | | :----------------------------- | :------------ | :---------------- | | Total assets | $4,112,005 | $4,083,327 | | Cash and cash equivalents | $87,035 | $72,162 | | Net loans held for investment | $3,123,779 | $3,118,352 | | Total deposits | $3,291,988 | $3,267,688 | | Total borrowings | $297,061 | $290,601 | | Total shareholders' equity | $468,860 | $458,428 | Consolidated Statements of Income This section provides the unaudited consolidated statements of income, detailing revenues, expenses, and net income for the reported periods Consolidated Statements of Income Highlights (in thousands, except EPS) | Metric | 3 Months Ended June 30, 2025 | 3 Months Ended June 30, 2024 | 6 Months Ended June 30, 2025 | 6 Months Ended June 30, 2024 | | :----------------------------------- | :--------------------------- | :--------------------------- | :--------------------------- | :--------------------------- | | Total interest and dividend income | $48,688 | $46,838 | $96,226 | $92,661 | | Total interest expense | $18,793 | $19,079 | $37,324 | $36,847 | | Net interest income | $29,895 | $27,759 | $58,902 | $55,814 | | Provision for credit losses on loans | $528 | $585 | $471 | $874 | | Total non-interest income | $4,646 | $9,457 | $13,564 | $17,843 | | Total non-interest expense | $26,538 | $23,842 | $51,189 | $47,330 | | Net income | $6,092 | $10,257 | $16,303 | $20,352 | | Basic EPS | $0.40 | $0.67 | $1.06 | $1.34 | | Diluted EPS | $0.40 | $0.67 | $1.06 | $1.33 | Consolidated Statements of Comprehensive Income This section presents the unaudited consolidated statements of comprehensive income, including net income and other comprehensive income components Consolidated Statements of Comprehensive Income Highlights (in thousands) | Metric | 3 Months Ended June 30, 2025 | 3 Months Ended June 30, 2024 | 6 Months Ended June 30, 2025 | 6 Months Ended June 30, 2024 | | :--------------------------------- | :--------------------------- | :--------------------------- | :--------------------------- | :--------------------------- | | Net income | $6,092 | $10,257 | $16,303 | $20,352 | | Total other comprehensive income (loss) | $15 | $(2,919) | $2,727 | $(5,625) | | Total comprehensive income | $6,107 | $7,338 | $19,030 | $14,727 | Consolidated Statements of Changes in Shareholders' Equity This section details the changes in shareholders' equity, reflecting net income, dividends, and other comprehensive income adjustments - Total shareholders' equity increased from $458,428 thousand at December 31, 2024, to $468,860 thousand at June 30, 2025[10][15] - Cash dividends declared for the three months ended June 30, 2025, were $0.32 per share, totaling $5,040 thousand[15] - Net income for the six months ended June 30, 2025, was $16,303 thousand, contributing to retained earnings[11][14] Consolidated Statements of Cash Flows This section presents the unaudited consolidated statements of cash flows, categorizing cash activities into operating, investing, and financing Consolidated Statements of Cash Flows Highlights (in thousands) | Metric | 6 Months Ended June 30, 2025 | 6 Months Ended June 30, 2024 | | :--------------------------------- | :--------------------------- | :--------------------------- | | Net cash provided by operating activities | $14,588 | $15,612 | | Net cash provided by (used in) investing activities | $(20,959) | $(57,262) | | Net cash used in financing activities | $21,244 | $48,644 | | Net change in cash and cash equivalents | $14,873 | $6,994 | | Cash and cash equivalents at end of period | $87,035 | $101,836 | Condensed Notes to Unaudited Consolidated Interim Financial Statements This section provides detailed notes to the unaudited consolidated interim financial statements, covering accounting policies, specific asset and liability categories, capital ratios, earnings per share, derivatives, fair value measurements, and revenue recognition Note 1. Basis of Presentation This note details the basis of preparation for the unaudited consolidated financial statements, confirming adherence to GAAP and SEC regulations, and clarifies that the company operates in one reportable segment: community banking - The financial statements are prepared in conformity with GAAP and in accordance with Form 10-Q instructions and Article 10 of Regulation S-X[18][19] - The Company operates in one reportable segment, primarily community banking services including lending, deposits, business services, investment management, trust, and third-party brokerage[22] - ASU 2023-09 (Income Taxes) requires enhanced income tax disclosures for public business entities, with required adoption for annual periods beginning after December 15, 2024, and interim periods beginning after December 15, 2025[23] Note 2. Securities Available for Sale This note provides a summary of available-for-sale (AFS) debt securities, including their amortized cost, unrealized gains/losses, fair value, and credit quality information, along with details on impairment losses recognized Available-for-Sale Debt Securities (in thousands) | Metric | June 30, 2025 | December 31, 2024 | | :--------------------------------- | :------------ | :---------------- | | Total AFS debt securities (Fair Value) | $528,690 | $521,018 | | Total AFS debt securities (Amortized Cost) | $592,777 | $583,316 | | Gross Unrealized Gains | $613 | $5,954 | | Gross Unrealized Losses | $(64,700) | $(68,252) | | Allowance for credit losses | $0 | $(568) | - Management recognized impairment losses of $4.9 million on available-for-sale debt securities and other receivables during Q2 2025, primarily due to credit deterioration and the Company's decision not to hold the security until recovery[25][26][178] - A $1.2 million allowance for credit losses on corporate bonds was charged-off during the six months ended June 30, 2025, resulting in a zero ending balance for the allowance[27] Note 3. Loans and Allowance for Credit Losses This note details the loan portfolio segmentation, the allowance for credit losses (ACL) activity, credit quality indicators, past due and non-accrual loans, and information on loan modifications and mortgage banking activities Loan Portfolio and Allowance for Credit Losses (in thousands) | Metric | June 30, 2025 | December 31, 2024 | | :--------------------------------- | :------------ | :---------------- | | Total loans | $3,152,664 | $3,147,096 | | Allowance for credit losses | $28,885 | $28,744 | | Net loans | $3,123,779 | $3,118,352 | Allowance for Credit Losses Activity (in thousands) | Metric | 3 Months Ended June 30, 2025 | 6 Months Ended June 30, 2025 | | :--------------------------------- | :--------------------------- | :--------------------------- | | Beginning Balance | $28,614 | $28,744 | | Charge Offs | $(266) | $(350) | | Recoveries | $9 | $20 | | Provision | $528 | $471 | | Ending Balance | $28,885 | $28,885 | Past Due and Non-Accrual Loans (in thousands) | Metric | June 30, 2025 | December 31, 2024 | | :--------------------------------- | :------------ | :---------------- | | Total Past Due Loans (30-90+ days) | $8,320 | $20,334 | | Non-Accrual Loans | $9,734 | $6,994 | Note 4. Borrowed Funds This note outlines the company's borrowed funds, including FHLB advances, subordinated notes, and repurchase agreements, detailing their carrying values, weighted average rates, and maturities Borrowed Funds Summary (in thousands, except rates) | Category | June 30, 2025 Carrying Value | June 30, 2025 Weighted Average Rate | December 31, 2024 Carrying Value | December 31, 2024 Weighted Average Rate | | :----------------------- | :----------------------------- | :---------------------------------- | :----------------------------- | :---------------------------------- | | Short-term borrowings | $256,177 | 4.27% | $249,712 | 4.35% | | Long-term borrowings | $40,884 | 7.47% | $40,889 | 6.59% | | Total | $297,061 | 4.71% | $290,601 | 4.75% | - The available secured line of credit at the Federal Reserve Bank was $102.9 million at June 30, 2025, down from $105.6 million at December 31, 2024[84] - The company maintains an unused unsecured federal funds line of credit of $40.0 million as of June 30, 2025[85] Note 5. Deposits This note provides a summary of the company's deposit base, including non-interest bearing, interest-bearing demand, savings, money market, and time deposits, along with their scheduled maturities and details on brokered and reciprocal deposits Time Deposits by Amount (in thousands) | Category | June 30, 2025 | December 31, 2024 | | :-------------------------- | :------------ | :---------------- | | Time less than $100,000 | $467,007 | $439,648 | | Time $100,000 through $250,000 | $220,004 | $203,962 | | Time $250,000 or more | $207,761 | $186,664 | | Total | $894,772 | $830,274 | Time Deposits Scheduled Maturities (in thousands) | Maturity | June 30, 2025 | December 31, 2024 | | :------------------ | :------------ | :---------------- | | Within 1 year | $874,250 | $806,974 | | Over 1 year to 2 years | $14,500 | $16,422 | | Over 2 years to 3 years | $3,293 | $4,028 | | Over 3 years to 4 years | $1,451 | $1,805 | | Over 4 years to 5 years | $1,265 | $931 | | Over 5 years | $13 | $114 | | Total | $894,772 | $830,274 | - Brokered deposits totaled $270.8 million at June 30, 2025, up from $256.0 million at December 31, 2024. Reciprocal deposits were $64.1 million at June 30, 2025, up from $62.5 million at December 31, 2024[92] Note 6. Capital Ratios and Shareholders' Equity This note details the company's and the bank's regulatory capital ratios, confirming they exceed all minimum requirements to be considered "well capitalized." It also presents the components of accumulated other comprehensive income (loss) - Both the Company and the Bank exceeded all regulatory capital requirements and were considered "well capitalized" for regulatory purposes at June 30, 2025[98] Capital Ratios at June 30, 2025 | Ratio | Company Actual | Company Minimum Required for Capital Adequacy | Bank Actual | Bank Minimum Required to be Well Capitalized | | :------------------------------------ | :------------- | :-------------------------------------------- | :---------- | :------------------------------------------- | | Total capital to risk-weighted assets | 13.76% | 8.00% | 13.72% | 10.00% | | Common equity Tier 1 capital to risk-weighted assets | 11.73% | 4.50% | 12.77% | 6.50% | | Tier 1 capital to risk-weighted assets | 12.34% | 6.00% | 12.77% | 8.00% | | Tier 1 capital to average assets (leverage ratio) | 10.37% | 4.00% | 10.72% | 5.00% | Accumulated Other Comprehensive Loss (in thousands) | Component | June 30, 2025 | December 31, 2024 | | :------------------------------------------------- | :------------ | :---------------- | | Net unrealized loss on AFS securities, net of reclassifications | $(56,105) | $(62,298) | | Net unrealized loss on hedging derivatives | $(6,427) | $(3,368) | | Net unrealized loss on post-retirement plans | $(1,565) | $(1,565) | | Income taxes related to AFS securities | $13,403 | $14,557 | | Income taxes related to hedging derivatives | $1,533 | $786 | | Income taxes related to post-retirement plans | $352 | $352 | | Accumulated other comprehensive loss | $(48,809) | $(51,536) | Note 7. Earnings per Share This note provides the calculation of basic and diluted earnings per share for the three and six months ended June 30, 2025, and 2024, based on net income and weighted average common shares outstanding Earnings Per Share (in thousands, except per share data) | Metric | 3 Months Ended June 30, 2025 | 3 Months Ended June 30, 2024 | 6 Months Ended June 30, 2025 | 6 Months Ended June 30, 2024 | | :--------------------------------- | :--------------------------- | :--------------------------- | :--------------------------- | :--------------------------- | | Net income | $6,092 | $10,257 | $16,303 | $20,352 | | Basic EPS | $0.40 | $0.67 | $1.06 | $1.34 | | Diluted EPS | $0.40 | $0.67 | $1.06 | $1.33 | | Weighted average basic common shares outstanding | 15,320,665 | 15,227,457 | 15,312,202 | 15,212,897 | | Weighted average diluted common shares outstanding | 15,372,201 | 15,275,421 | 15,382,066 | 15,272,679 | Note 8. Derivative Financial Instruments and Hedging Activities This note describes the company's use of derivative instruments, including interest rate swaps and forward sale commitments, to manage interest rate risk and facilitate customer strategies, detailing their fair values and impact on financial statements Derivative Instruments Summary (in thousands) | Category | June 30, 2025 Notional Amount | June 30, 2025 Fair Value Asset (Liability) | December 31, 2024 Notional Amount | December 31, 2024 Fair Value Asset (Liability) | | :--------------------------------- | :------------------------------ | :----------------------------------- | :------------------------------ | :----------------------------------- | | Cash flow hedges | $50,000 | $(1,188) | $75,000 | $(1,775) | | Fair value hedges | $37,190 | $2,744 | $37,190 | $3,969 | | Economic hedges | $858,402 | $(54) | $809,452 | $13 | | Non-hedging derivatives | $5,193 | $238 | $3,760 | $85 | | Total | $950,785 | $1,740 | $925,402 | $2,292 | - The company uses interest rate swaps for cash flow hedges (on variable rate loans) and fair value hedges (on fixed rate callable securities) to mitigate interest rate volatility[107][122][123] - Economic hedges include forward sale commitments for residential mortgage loans and customer loan derivatives, with risks mitigated by offsetting agreements with third-party financial institutions[124][125] Note 9. Fair Value Measurements This note provides a detailed breakdown of financial assets and liabilities measured at fair value on a recurring and non-recurring basis, categorized by the fair value hierarchy (Level 1, 2, and 3 inputs), and explains the valuation techniques and unobservable inputs used Recurring Fair Value Measurements (in thousands) | Category | June 30, 2025 Fair Value | Level 1 Inputs | Level 2 Inputs | Level 3 Inputs | | :--------------------------------- | :----------------------- | :------------- | :------------- | :------------- | | Available for sale securities | $528,690 | $0 | $526,287 | $2,403 | | Loans held for sale | $2,829 | $0 | $2,829 | $0 | | Derivative assets | $12,625 | $0 | $12,387 | $238 | | Derivative liabilities | $(10,885) | $0 | $(10,831) | $(54) | - A corporate bond with a fair value of $2.4 million was transferred into Level 3 during Q2 2025 due to a change in valuation technique to a discounted cash flow approach, incorporating unobservable inputs like discount rate, expected cash flows, and loss severity[143] Non-Recurring Fair Value Measurements (in thousands) | Category | June 30, 2025 Level 3 Inputs | | :-------------------------- | :--------------------------- | | Individually evaluated loans | $3,583 | | Capitalized servicing rights | $6,729 | | Premises held for sale | $405 | | Total | $10,717 | Note 10. Revenue from Contracts with Customers This note disaggregates non-interest income into revenue streams within and outside the scope of ASC 606, detailing how revenue is recognized for services like trust management, financial services, interchange fees, and customer deposit fees Non-Interest Income Disaggregation (in thousands) | Category | 3 Months Ended June 30, 2025 | 3 Months Ended June 30, 2024 | 6 Months Ended June 30, 2025 | 6 Months Ended June 30, 2024 | | :--------------------------------- | :--------------------------- | :--------------------------- | :--------------------------- | :--------------------------- | | Non-interest income within ASC 606 | $7,852 | $7,930 | $15,293 | $15,310 | | Non-interest income not within ASC 606 | $(3,206) | $1,527 | $(1,729) | $2,533 | | Total non-interest income | $4,646 | $9,457 | $13,564 | $17,843 | - The decrease in non-interest income not within the scope of ASC 606 for Q2 2025 was primarily driven by the $4.9 million write-down of an available-for-sale debt security[158][197] - Revenue streams within ASC 606 include trust management fees (earned over time), financial services fees (point in time), interchange fees (point in time), and customer deposit fees (point in time)[159][160][161][163] Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations This section provides management's perspective on the company's financial condition and results of operations for the three and six months ended June 30, 2025, including discussions on key financial metrics, liquidity, capital, and asset quality, alongside reconciliations of non-GAAP financial measures General This section provides a general overview of Bar Harbor Bankshares, its business operations, and recent strategic developments - Bar Harbor Bankshares is a Maine-based bank holding company providing banking and nonbanking products and services primarily within its three-state footprint[168] - The company completed the acquisition of Guaranty Bancorp, Inc. and its bank subsidiary, Woodsville Guaranty Savings Bank, on July 31, 2025[169] Non-GAAP Financial Measures This section explains the use of non-GAAP financial measures to evaluate performance, emphasizing they should not replace GAAP measures - Non-GAAP financial measures are used to evaluate performance by excluding or including amounts not in GAAP, but should not be considered in isolation or as a substitute for GAAP measures[170][172] Quarterly Performance Summary This section summarizes the company's financial performance for the quarter, highlighting key GAAP and non-GAAP metrics and significant changes Q2 2025 vs. Q2 2024 Performance Highlights | Metric | Q2 2025 | Q2 2024 | Change | | :--------------------------------- | :------ | :------ | :----- | | GAAP Net Income (in millions) | $6.1 | $10.3 | $(4.2) | | GAAP Diluted EPS | $0.40 | $0.67 | $(0.27) | | Core Earnings (Non-GAAP, in millions) | $10.8 | $10.0 | $0.8 | | Core Diluted EPS (Non-GAAP) | $0.70 | $0.66 | $0.04 | | Net Interest Income (in millions) | $29.9 | $27.8 | $2.1 | | Net Interest Margin (NIM) | 3.23% | 3.09% | 0.14 pp | | Non-Interest Income (in millions) | $4.6 | $9.5 | $(4.9) | | Non-Interest Expenses (in millions) | $26.5 | $23.8 | $2.7 | | Efficiency Ratio | 62.10% | 62.78% | (0.68 pp) | - The decrease in GAAP net income and non-interest income for Q2 2025 was primarily driven by a $4.9 million write-down of an available-for-sale debt security[174] - Asset quality remains strong, with non-performing assets to total assets at 0.30% as of June 30, 2025, and minimal net charge-offs[171][174] Comparison of Financial Condition at June 30, 2025 and December 31, 2024 This section analyzes the changes in the company's financial position between June 30, 2025, and December 31, 2024, focusing on key balance sheet items - Total assets remained stable at $4.1 billion at June 30, 2025, compared to December 31, 2024[174] Key Financial Condition Changes (in millions) | Metric | June 30, 2025 | December 31, 2024 | Change | | :--------------------------------- | :------------ | :---------------- | :----- | | Cash and cash equivalents | $87.0 | $72.2 | $14.8 | | Securities available for sale | $528.7 | $521.0 | $7.7 | | Total loans | $3,152.7 | $3,147.1 | $5.6 | | Total deposits | $3,292.0 | $3,267.7 | $24.3 | | Senior borrowings | $256.4 | $249.9 | $6.5 | | Book value per share | $30.60 | $30.00 | $0.60 | | Tangible book value per share (Non-GAAP) | $22.58 | $21.93 | $0.65 | - Total loans increased by 4% annualized, driven by growth in commercial and industrial ($30.2 million) and commercial real estate ($5.1 million) segments[180][181] - Deposit mix shifted, with money market deposits decreasing $35.1 million, offset by increases in time deposits ($64.5 million) and interest-bearing deposits ($21.7 million)[183] Comparison of Operating Results for the Three Months and Six Months Ended June 30, 2025 and June 30, 2024 This section compares the company's operating results for the three and six months ended June 30, 2025, against the same periods in 2024, analyzing key income statement components Operating Results Comparison (in millions, except EPS) | Metric | Q2 2025 | Q2 2024 | 6M 2025 | 6M 2024 | | :--------------------------------- | :------ | :------ | :------ | :------ | | GAAP Net Income | $6.1 | $10.3 | $16.3 | $20.4 | | Core Earnings (Non-GAAP) | $10.8 | $10.0 | $21.2 | $20.0 | | Net Interest Margin | 3.23% | 3.09% | 3.20% | 3.12% | | Total Interest & Dividend Income | $48.7 | $46.8 | $96.2 | $92.7 | | Total Interest Expense | $18.8 | $19.1 | $37.3 | $36.8 | | Non-Interest Income | $4.6 | $9.5 | $13.6 | $17.8 | | Non-Interest Expense | $26.5 | $23.8 | $51.2 | $47.3 | - Net interest income increased due to repricing of commercial adjustable-rate loans and higher commercial loan balances, leading to yield expansion on earning assets[189][191] - Non-interest income significantly decreased in Q2 2025 primarily due to a $4.9 million write-down of an available-for-sale debt security[197] - Non-interest expenses increased due to $1.2 million in acquisition/conversion expenses related to the Guaranty merger and a 3% increase in salaries and employee benefits[201] Liquidity and Cash Flows This section discusses the company's liquidity position and cash flow activities, highlighting available resources and management strategies - Liquidity remains strong, with cash and available-for-sale securities representing approximately 15% of total assets at June 30, 2025[171] - Available same-day liquidity totaled approximately $1.0 billion at June 30, 2025, including cash, FHLB borrowing capacity ($278.6 million), Federal Reserve Discount Window capacity ($102.9 million), and unused lines of credit ($41.0 million)[206] Capital Resources This section reviews the company's capital adequacy, including regulatory capital ratios and dividend practices, confirming compliance with requirements - The Company and the Bank's capital levels exceeded all regulatory capital requirements and were considered "well capitalized" at June 30, 2025[98][208] - The company expects to continue its practice of paying quarterly cash dividends, with $9.6 million paid for the six months ended June 30, 2025, compared to $8.7 million in the prior year[210] Off-Balance Sheet Arrangements This section describes the company's off-balance sheet arrangements, primarily standby letters of credit, and confirms no material changes since the last Form 10-K - Off-balance sheet arrangements are limited to standby letters of credit, which carry similar credit risk to loans and are managed with established procedures[212] - No material changes to off-balance sheet arrangements were reported since the previous Form 10-K[213] Impact of New Accounting Pronouncements This section refers to detailed discussions on new accounting pronouncements that have been issued but not yet adopted by the company - Refer to Note 1, "Basis of Presentation - Recent Accounting Pronouncements," for discussion of accounting pronouncements issued but not yet adopted[214][215] Critical Accounting Policies and Estimates This section highlights the critical accounting policies and estimates that require significant management judgment in preparing the financial statements - The preparation of consolidated financial statements requires management to make estimates, assumptions, and judgments that affect reported amounts[215] - There have been no significant changes in the application of critical accounting policies and estimates since December 31, 2024[215] Selected Financial Data This section provides a summary of selected financial data, including key performance metrics and balance sheet figures for the reported periods Selected Financial Data Highlights | Metric | 3 Months Ended June 30, 2025 | 3 Months Ended June 30, 2024 | 6 Months Ended June 30, 2025 | 6 Months Ended June 30, 2024 | | :--------------------------------- | :--------------------------- | :--------------------------- | :--------------------------- | :--------------------------- | | Net earnings, diluted | $0.40 | $0.67 | $1.06 | $1.33 | | Adjusted earnings, diluted (Non-GAAP) | $0.70 | $0.66 | $1.38 | $1.31 | | Return on assets | 0.60% | 1.04% | 0.81% | 1.04% | | Adjusted return on assets (Non-GAAP) | 1.06% | 1.02% | 1.05% | 1.02% | | Net interest margin, fully taxable equivalent | 3.23% | 3.09% | 3.20% | 3.12% | | Total assets (in millions) | $4,112 | $4,034 | $4,112 | $4,034 | | Total loans (in millions) | $3,153 | $3,064 | $3,153 | $3,064 | | Total deposits (in millions) | $3,292 | $3,140 | $3,292 | $3,140 | Consolidated Loan and Deposit Analysis This section provides an unaudited analysis of the company's loan and deposit portfolios, detailing their composition and growth trends Loan Analysis (in thousands, annualized growth %) | Loan Type | Jun 30, 2025 | Mar 31, 2025 | Dec 31, 2024 | Quarter to Date Growth % | | :------------------------ | :----------- | :----------- | :----------- | :----------------------- | | Commercial real estate | $1,767,206 | $1,762,132 | $1,741,223 | 1% | | Commercial and industrial | $400,908 | $370,683 | $388,599 | 33% | | Total commercial loans | $2,168,114 | $2,132,815 | $2,129,822 | 7% | | Residential real estate | $796,184 | $807,514 | $826,492 | (6)% | | Consumer | $111,036 | $105,404 | $103,803 | 21% | | Tax exempt and other | $77,330 | $78,507 | $86,979 | (6)% | | Total loans | $3,152,664 | $3,124,240 | $3,147,096 | 4% | Deposit Analysis (in thousands, annualized growth %) | Deposit Type | Jun 30, 2025 | Mar 31, 2025 | Dec 31, 2024 | Quarter to Date Growth % | | :------------------------ | :----------- | :----------- | :----------- | :----------------------- | | Non-interest bearing demand | $552,074 | $547,401 | $575,649 | 3% | | Interest-bearing demand | $931,854 | $930,031 | $910,191 | 1% | | Savings | $542,579 | $551,280 | $545,816 | (6)% | | Money market | $370,709 | $405,326 | $405,758 | (34)% | | Total non-maturity deposits | $2,397,216 | $2,434,038 | $2,437,414 | (6)% | | Time | $894,772 | $862,773 | $830,274 | 15% | | Total deposits | $3,291,988 | $3,296,811 | $3,267,688 | (1)% | Average Balances and Average Yields/Rates This section provides unaudited average balances, yields, and rates for earning assets and interest-bearing liabilities, illustrating net interest margin trends Average Balances and Yields/Rates (Q2 2025 vs. Q2 2024, in thousands, except ratios) | Metric | Q2 2025 Average Balance | Q2 2025 Yield/Rate | Q2 2024 Average Balance | Q2 2024 Yield/Rate | | :--------------------------------- | :---------------------- | :----------------- | :---------------------- | :----------------- | | Total earning assets | $3,776,937 | 5.23% | $3,665,274 | 5.18% | | Total loans | $3,150,028 | 5.48% | $3,031,088 | 5.41% | | Total interest bearing deposits | $2,727,386 | 2.28% | $2,533,270 | 2.35% | | Total interest bearing liabilities | $2,998,796 | 2.51% | $2,911,391 | 2.64% | | Net interest spread | | 2.72% | | 2.55% | | Net interest margin | | 3.23% | | 3.09% | Average Balances and Yields/Rates (6M 2025 vs. 6M 2024, in thousands, except ratios) | Metric | 6M 2025 Average Balance | 6M 2025 Yield/Rate | 6M 2024 Average Balance | 6M 2024 Yield/Rate | | :--------------------------------- | :---------------------- | :----------------- | :---------------------- | :----------------- | | Total earning assets | $3,779,860 | 5.19% | $3,643,982 | 5.16% | | Total loans | $3,152,081 | 5.45% | $3,019,321 | 5.36% | | Total interest bearing deposits | $2,725,147 | 2.30% | $2,558,622 | 2.30% | | Total interest bearing liabilities | $2,992,683 | 2.52% | $2,898,955 | 2.56% | | Net interest spread | | 2.67% | | 2.60% | | Net interest margin | | 3.20% | | 3.12% | Reconciliation of Non-GAAP Financial Measures This section provides unaudited reconciliations of non-GAAP financial measures to their most directly comparable GAAP measures, offering additional insights into performance Non-GAAP Financial Measures Reconciliation (in thousands, except per share data) | Metric | Q2 2025 | Q2 2024 | 6M 2025 | 6M 2024 | | :--------------------------------- | :------ | :------ | :------ | :------ | | Net income | $6,092 | $10,257 | $16,303 | $20,352 | | Total non-recurring items | $4,658 | $(227) | $4,907 | $(354) | | Total adjusted income (Non-GAAP) | $10,750 | $10,030 | $21,210 | $19,998 | | Adjusted earnings per share, diluted (Non-GAAP) | $0.70 | $0.66 | $1.38 | $1.31 | | Core return on assets (Non-GAAP) | 1.06% | 1.02% | 1.05% | 1.02% | | Efficiency ratio (Non-GAAP) | 62.10% | 62.78% | 62.05% | 62.75% | - Non-recurring items adjusted include loss/gain on available-for-sale debt securities, gain on sale of premises and equipment, and acquisition, conversion and other expenses[228] Item 3. Quantitative and Qualitative Disclosures About Market Risk This item discusses the company's exposure to market risk, primarily interest rate risk, and its management strategies through the Asset and Liability Committee (ALCO) and interest rate sensitivity modeling Market Risk This section identifies the primary market risks affecting the company, with a focus on interest rate risk and its oversight - The most significant market risk affecting the company is interest rate risk, with oversight provided by the Bank's Asset and Liability Committee (ALCO)[232][233] Interest Rate Risk This section defines interest rate risk as arising from re-pricing, maturity, and cash flow imbalances, and outlines management's objectives for its mitigation - Interest rate risk arises from imbalances in the re-pricing, maturity, and cash flow characteristics of assets and liabilities[234] - Management's objectives are to measure, monitor, and develop strategies to preserve net interest income sensitivity and enhance profitability[234] Interest Rate Sensitivity Modeling This section describes the bank's use of an interest rate risk model to simulate net interest income under various rate scenarios and presents the sensitivity results - The Bank utilizes an interest rate risk model to simulate the behavior of interest income and expense under different interest rate scenarios[237][238] - As of June 30, 2025, interest rate sensitivity modeling results indicate the Bank's balance sheet was asset sensitive over the one- and two-year horizons[241] Net Interest Income Sensitivity (in thousands, % Change) | Change in Interest Rates (Basis Points) | 1 - 12 Months $ Change | 1 - 12 Months % Change | 13 - 24 Months $ Change | 13 - 24 Months % Change | | :-------------------------------------- | :--------------------- | :--------------------- | :---------------------- | :---------------------- | | At June 30, 2025 | | | | | | -200 | $(7,185) | (5.6)% | $(16,885) | (12.2)% | | -100 | $(3,003) | (2.3)% | $(7,570) | (5.5)% | | +100 | $2,903 | 2.3% | $6,575 | 4.7% | | +200 | $5,711 | 4.4% | $12,735 | 9.2% | PART II. OTHER INFORMATION This section contains other required disclosures not directly related to financial statements, including controls and procedures, legal proceedings, risk factors, equity sales, defaults, mine safety, and exhibits Item 4. Controls and Procedures Management concluded that the company's disclosure controls and procedures were effective as of June 30, 2025, ensuring timely and accurate reporting. No material changes in internal control over financial reporting occurred during the quarter - The company's disclosure controls and procedures were effective as of June 30, 2025, ensuring information required to be disclosed is recorded, processed, summarized, and reported timely[246] - There were no changes in internal control over financial reporting during the last fiscal quarter that materially affected, or are reasonably likely to materially affect, internal control over financial reporting[247] Item 1. Legal Proceedings The company is involved in routine litigation incidental to its business. Management believes the likelihood of a material adverse effect on its financial position from these proceedings is remote, though unfavorable outcomes could impact reputation and divert management attention - The company and its subsidiaries are parties to certain ordinary routine litigation incidental to their respective businesses[248] - Management believes the likelihood is remote that the impact of such proceedings would have a material adverse effect on the company's consolidated financial position[248] Item 1A. Risk Factors This section updates the risk factors from the previous Form 10-K, specifically highlighting risks related to the recently announced merger with Guaranty Bancorp, Inc., including potential failure to realize anticipated benefits and the incurrence of integration costs - There were no material changes to the risk factors discussed in Part I, Item 1A. "Risk Factors" of the company's Form 10-K, except as set forth in this section[249] - Risks associated with the merger with Guaranty Bancorp, Inc. include the potential failure to realize anticipated benefits and cost savings, and the incurrence of integration costs[250][251] Item 2. Unregistered Sales of Equity Securities and Use of Proceeds No unregistered equity securities were sold by the company during the quarter ended June 30, 2025 - No unregistered equity securities were sold by the Company during the quarter ended June 30, 2025[253] Item 3. Defaults Upon Senior Securities There were no defaults upon senior securities during the reported period - None[254] Item 4. Mine Safety Disclosures This item is not applicable to the company - Not applicable[255] Item 5. Other Information No director or officer adopted or terminated any Rule 10b5-1 or non-Rule 10b5-1 trading arrangements during the quarter ended June 30, 2025 - No director or officer adopted or terminated any "Rule 10b5-1 trading arrangement" or "non-Rule 10b5-1 trading arrangement" during the quarter ended June 30, 2025[256] Item 6. Exhibits This item lists the exhibits filed with the Form 10-Q, including certifications, financial information in iXBRL format, and the interactive data file - Exhibits include certifications of the Chief Executive Officer and Chief Financial Officer, and financial information formatted in Inline Extensible Business Reporting Language (iXBRL)[259] SIGNATURES This section confirms the official signing of the report by the company's President & CEO and Executive Vice President & CFO - The report is signed by Curtis C. Simard, President & Chief Executive Officer, and Josephine Iannelli, Executive Vice President & Chief Financial Officer, on August 6, 2025[262]