Bar Harbor Bankshares(BHB) - 2025 Q4 - Annual Report

Loan Portfolio - Total loans increased to $3,605.9 million in 2025, up from $3,147.1 million in 2024, representing a growth of 14.5%[37] - The commercial real estate non-owner occupied loans accounted for 40% of the total loan portfolio in 2025, compared to 43% in 2024[37] - The residential real estate loans increased to $1,068.4 million, representing 30% of the total loan portfolio, up from 28% in 2024[37] - The top 10 loans in the non-owner occupied commercial real estate portfolio represent approximately 18.1% of total commercial real estate loans outstanding[38] - Delinquencies in the commercial real estate segment were less than 0.02% as of December 31, 2025[38] - The weighted average loan-to-value ratio for the top 10 loans in the non-owner occupied segment was 61.0% as of December 31, 2025[38] - The total commercial loan portfolio had a pass rating of 95%[38] Non-Performing Assets - Non-performing loans increased to $11,586, representing 0.32% of total loans, up from 0.22% in the previous year[43] - The total non-performing assets amount to $13,789, which is 0.29% of total assets, slightly down from 0.31% the previous year[43] Credit Losses - The allowance for credit losses (ACL) at the end of the year is $34,052, which is 0.94% of total loans, compared to 0.91% the previous year[46] Investment Portfolio - The investment portfolio's total amortized cost is $644,953, with a fair value of $597,424[50] - The weighted average yield for debt securities is 3.44%, with specific yields of 5.70% for securities within 1 year and 3.07% for those over 10 years[50] Customer Service and Operations - The company operates 22 full-service branches in Maine, 30 in New Hampshire, and 10 in Vermont, serving over 144,000 customers across these states[20][21][22][23] - The company emphasizes quality customer service and local decision-making to compete effectively in the financial services market[33] Fee Income - Fee income is fundamental to profitability, driven by trust and treasury management services, customer derivatives, and secondary market mortgage sales[18] - Customer-related deposit fees are a significant source of fee income, primarily from debit card interchange fees[56] Deposits - The company’s total deposits were composed of 17% non-interest bearing demand, 28% interest-bearing demand, 17% savings, 12% money market, and 26% time deposits in 2025[57] - Estimated uninsured non-maturity deposits increased to $424.6 million as of December 31, 2025, compared to $404.7 million in 2024, reflecting a growth of about 4.7%[59] - The total estimated uninsured time deposits were $112.4 million in 2025, up from $85.3 million in 2024, marking an increase of approximately 31.5%[59] - The average balance of interest-bearing demand deposits for 2025 was $1,003,074 thousand with a weighted average rate of 1.41%, consistent with 2024[57] - Time deposits for 2025 totaled $909,629 thousand with a weighted average rate of 3.79%, down from 4.30% in 2024, indicating a decrease of approximately 11.88% in the rate[57] - The scheduled maturities of time deposits greater than $250 thousand totaled $230,105 thousand as of December 31, 2025[59] Employee and Compensation - The company had 530 full-time equivalent employees as of December 31, 2025, with no union representation, emphasizing a focus on talent and growth potential[68] - The company’s compensation strategy is rooted in a pay-for-performance philosophy, aligning colleague contributions with organizational success[70] Capital Adequacy - The Bank is considered "well capitalized" under the FDIC's prompt corrective action rules, meeting all required capital ratios[102] - The minimum common equity Tier 1 capital to risk-weighted assets ratio required is 4.5%, with a minimum Tier 1 capital ratio of 6.0% and total capital ratio of 8.0%[99] - The capital adequacy rules require banks to maintain a capital conservation buffer of more than 2.5% of total risk-weighted assets to avoid restrictions on dividends and bonuses[101] Regulatory Compliance - The Bank must comply with consumer protection laws, including the Equal Credit Opportunity Act and the Fair Credit Reporting Act, to avoid enforcement actions and penalties[112] - The Bank is required to implement a comprehensive written information security program to protect customer information and respond to data breaches[114] - The Bank must report any cash transactions involving at least $10,000 and file suspicious activity reports for transactions over $5,000 that may involve illegal funds[117] Interest Rate Risk Management - The Bank's interest rate sensitivity modeling indicates that the balance sheet was asset sensitive over the one- and two-year horizons as of December 31, 2025[301] - A 200 basis point decline in interest rates is expected to result in a deterioration of net interest income by $8,358 thousand (5.1%) over the first year and $20,741 thousand (12.0%) over the second year[302] - Conversely, a 200 basis point increase in interest rates is projected to improve net interest income by $8,607 thousand (5.3%) in the first year and $17,446 thousand (10.1%) in the second year[302] - The Bank's Asset Liability Management Policy establishes interest rate risk limits to control variability of net interest income under different rate scenarios[297] - Interest rate risk management is overseen by the Bank's Asset and Liability Committee (ALCO), which meets regularly to review balance sheet structure and formulate strategies[292] - The sensitivity analysis does not represent a forecast and is based on numerous assumptions regarding interest rate levels and customer behavior[306] - The Bank utilizes a widely recognized interest rate risk model to simulate the behavior of interest income and expense under different interest rate scenarios[298] - As of December 31, 2024, the Bank's asset sensitivity was lower in down rate scenarios compared to the current year, indicating a shift in risk profile[305] - The Bank's interest rate risk measurement techniques incorporate re-pricing and cash flow attributes of balance sheet instruments to assess potential changes in net interest income[296] Trust Management Services - As of December 31, 2025, total assets under management (AUM) for trust management services reached $3.0 billion, up from $2.8 billion in 2024, representing a growth of approximately 7.14%[67]