Bar Harbor Bankshares BHB Form 10-Q filing Q4 FY2026

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Bar Harbor Bankshares conducts business operations principally through Bar Harbor Bank & Trust, which may be referred to as the “Bank” and which is a subsidiary of Bar Harbor Bankshares. Unless the context requires otherwise, references in this report to “the Company,” "our," "us," and similar terms refer to Bar Harbor Bankshares and its subsidiaries, including the Bank, collectively.

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PART I. FINANCIAL INFORMATION

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Item 1. Consolidated Financial Statements (unaudited)

ITEM 1. CONSOLIDATED FINANCIAL STATEMENTS

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BAR HARBOR BANKSHARES AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS (UNAUDITED)

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The accompanying notes are an integral part of these consolidated financial statements.

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The accompanying notes are an integral part of these consolidated financial statements.

BAR HARBOR BANKSHARES AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (UNAUDITED)

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The accompanying notes are an integral part of these consolidated financial statements.

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The accompanying notes are an integral part of these consolidated financial statements.

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BAR HARBOR BANKSHARES AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)

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The accompanying notes are an integral part of these consolidated financial statements.

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BAR HARBOR BANKSHARES AND SUBSIDIARIES

CONDENSED NOTES TO UNAUDITED CONSOLIDATED INTERIM FINANCIAL STATEMENTS

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NOTE 1. BASIS OF PRESENTATION

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The consolidated financial statements (unaudited) (the “financial statements”) of Bar Harbor Bankshares and its subsidiaries (the “Company,” “we,” “our,” “us” or similar terms) have been prepared in conformity with accounting principles generally accepted in the United States of America (“GAAP”). The Company is a Maine financial institution holding company for the purposes of the laws of the State of Maine, and as such is subject to the jurisdiction of the Superintendent of the Maine Bureau of Financial Institutions. These financial statements include our accounts, the accounts of our wholly owned subsidiary Bar Harbor Bank & Trust (the “Bank”) and the Bank’s consolidated subsidiaries. The results of operations of companies or assets acquired are included only from the dates of acquisition. All material wholly owned and majority owned subsidiaries are consolidated unless GAAP requires otherwise.

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In addition, these interim financial statements have been prepared in accordance with the instructions to Form 10-Q and Article 10 of Regulation S-X, and accordingly, certain information and footnote disclosures normally included in financial statements prepared according to GAAP have been omitted.

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The results for any interim period are not necessarily indicative of results for the full year. The consolidated financial statements should be read in conjunction with the audited financial statements and note disclosures in the Form 10-K previously filed with the SEC. In management's opinion, all adjustments necessary for a fair statement are reflected in the interim periods presented.

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Reclassifications: Whenever necessary, amounts in the consolidated financial statements are reclassified to conform to current presentation. The reclassifications had no impact on net income, total shareholders’ equity or total assets and liabilities in the Company’s consolidated financial statements.

Segment Reporting: The Company’s reportable segment is determined by the Chief Executive Officer, who is designated as the chief operating decision maker (“CODM”), based upon information provided about the Company’s products and services offered, primarily banking operations. Operations of the Company are solely within community banking industry and include traditional community banking services, including lending activities, acceptance of demand, savings and time deposits, business services, investment management, trust and third-party brokerage services. These products and services have similar distribution methods, types of customers and regulatory responsibilities. An operating segment is defined as a component of a business for which separate financial information is available that is evaluated regularly by the chief operating decision-maker in deciding how to allocate resources and evaluate performance. Consolidated net income of the company is the primary performance metric utilized by the CODM. The CODM uses revenue streams to evaluate product pricing and significant expenses to assess performance and evaluate return on assets. The CODM uses consolidated net income to benchmark the Company against its competitors. The benchmarking analysis coupled with monitoring of budget to actual results are used in assessment performance and in establishing compensation. The majority of the Company’s revenue is from the business of banking. While the Company has assigned certain management responsibilities by business lines, the Company’s CODM monitors and evaluates financial performance on a Company-wide basis. Accordingly, segment information is not presented in the Consolidated Financial Statements. Therefore, the Company has determined that its business is conducted in one reportable segment and represents the consolidated financial statements of the Company.

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Recent Accounting Pronouncements

The following provides a brief description of recently issued accounting pronouncements that have yet to be adopted by the Company:

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Standard ​ ​ Description ​ ​ Required Date of Adoption ​ ​ Effect on financial statements

ASU 2025-12 Codification Improvements ​ ​ This Update is part of the Board’s ongoing effort to address technical corrections, clarifications, and minor improvements across the FASB Accounting Standards Codification. These improvements refine the application of existing guidance, resolve inconsistencies, and improve the usability of the Codification without introducing significant changes to accounting practice or requiring substantial implementation effort. The amendments are not expected to significantly affect current practice. However, updates will be reviewed for any potential effects on accounting policies or disclosure processes. ​ ​ ​ Annual periods beginning after December 15, 2026 and interim periods within those reporting periods ​ ​ We do not expect adoption of this ASU to have a material impact on our consolidated financial statements.

ASU 2025-11 Interim Reporting (Topic 270): Narrow-Scope Improvements ​ ​ The amendments in this Update are intended to improve the navigability and clarity of interim reporting requirements under Topic 270. The Update clarifies when Topic 270 applies, adds a comprehensive list of required interim disclosures, and introduces a disclosure principle requiring entities to disclose events occurring after the most recent annual period that have a material impact on the entity. The Update does not expand or reduce overall interim disclosure requirements but instead compiles and organizes them to improve consistency and comparability. The guidance also clarifies form and content expectations for interim financial statements, including the use of condensed statements, and aligns GAAP with prior SEC requirements regarding material events. ​ ​ ​ Interim periods beginning after December 15, 2027 ​ ​ We do not expect adoption of this ASU to have a material impact on our consolidated financial statements.

ASU 2025-09 Derivatives and Hedging (Topic 815): Hedging Accounting Improvements ​ ​ The amendments in this Update enhance and clarify several aspects of hedge accounting to better align financial reporting with the economics of an entity’s risk management activities. The guidance addresses key areas including similar risk assessments for groups of forecasted transactions, hedging of forecasted interest payments on “choose your rate” debt instruments, hedging of nonfinancial forecasted transactions, use of net written options as hedging instruments, and the treatment of foreign currency denominated debt in certain dual hedging strategies. The amendments allow a broader set of forecasted transactions to qualify for hedge accounting by focusing on “similar risk exposure” rather than requiring identical risk characteristics. Entities must evaluate this criterion at hedge inception and on an ongoing basis, using qualitative assessments where appropriate. ​ ​ ​ Annual periods beginning after December 15, 2026 ​ ​ We do not expect adoption of this ASU to have a material impact on our consolidated financial statements.

ASU 2025-07 Derivatives and Hedging (Topic 815) and Revenue from Contracts with Customers (Topic 606) ​ ​ The amendments in this Update apply to all entities that enter into non exchange-traded contracts with underlyings based on operations or activities specific to one of the parties to the contract. The amendments in this Update exclude from derivative accounting non exchange-traded contracts with underlyings that are based on operations or activities specific to one of the parties to the contract. However, this scope exception does not apply to (1) variables based on a market rate, market price, or market index, (2) variables based on the price or performance of a financial asset or financial liability of one of the parties to the contract, (3) contracts (or features) involving the issuer’s own equity that are evaluated under the guidance in Subtopic 815-40, Derivatives and Hedging—Contracts in Entity’s Own Equity, and (4) call options and put options on debt instruments. ​ ​ ​ Annual periods beginning after December 15, 2026 and interim periods within those reporting periods ​ ​ We do not expect adoption of this ASU to have a material impact on our consolidated financial statements.

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NOTE 2. ACQUISITION

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Guaranty Bancorp, Inc.

On July 31, 2025, the Company completed its acquisition of Guaranty Bancorp, Inc. (“Guaranty”), the holding company of Woodsville Guaranty Savings Bank (“Woodsville”). The acquisition was accounted for as a business combination under ASC Topic 805, and Guaranty’s results of operations have been included in the Company’s consolidated financial statements since the acquisition date.

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As of June 30, 2026, the acquisition accounting remains provisional primarily with respect to the valuation of loans, identifiable intangible assets, deposits, and certain assumed liabilities. The measurement period will not exceed one year from the acquisition date. No measurement-period adjustments were recognized during the three months ended June 30, 2026.

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Included in acquisition, conversion and other expenses on the Consolidated Statements of Income were acquisition and integration related costs, expensed as incurred, totaling $93 thousand and $1.2 million for the three months ended June 30, 2026 and 2025, respectively. For the six months ended June 30, 2026 and 2025, direct acquisition and integration related costs totaled $1.4 million respectively and are recorded in acquisition, conversion and other expenses on the Consolidated Statements of Income.

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The following provides the unaudited pro forma results of operations for the three months ended June 30, 2025, as if the acquisition had occurred on January 1, 2025. The pro forma results combine the historical results of Guaranty into our Condensed Consolidated Statements of Income, including the impact of certain acquisition accounting adjustments, which includes loan discount accretion, intangible assets amortization, and deposit premium amortization. The pro forma results have been prepared for comparative purposes only and are not necessarily indicative of the results that would have been obtained had the acquisition actually occurred on January 1, 2025. No assumptions have been applied to the pro forma results of operations regarding possible revenue enhancements, provision for credit losses, expense efficiencies or asset dispositions. Recognized acquisition-related expenses and other adjustments related to the timing of expenses, are included in net income. For the three months ended June 30, 2025 total revenue would have been $41.9 million and net income would have been $6.8 million. For the six months ended June 30, 2025 total revenue would have been $86.4 million and net income would have been $14.2 million.

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NOTE 3. SECURITIES AVAILABLE FOR SALE

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The following is a summary of available-for-sale debt securities (“AFS”):

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Included in mortgage-backed securities and collateralized mortgage obligations are securities backed by residential and commercial loans. As of June 30, 2026, securities backed by commercial mortgages had an amortized cost of $84.6 million and a fair value of $76.1 million and securities backed by residential mortgages had an amortized cost of $374.2 million and a fair value of $348.3 million. As of December 31, 2025, securities backed by commercial mortgages had an amortized cost of $85.5 million and a fair value of $78.2 million and securities backed by residential mortgages had an amortized cost of $358.6 million and a fair value of $336.2 million.

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Credit Quality Information

We monitor the credit quality of available-for-sale debt securities through credit ratings from various rating agencies and substantial price changes. In an effort to make informed decisions, we utilize credit ratings that express opinions about the credit quality of a security. Securities are triggered for further review in the quarter if the security has significant fluctuations in ratings, significant pricing changes, or drops below investment-grade. For securities without credit ratings, we utilize other financial information indicating the financial health of the underlying municipality, agency, or organization associated with the underlying security.

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The Company has one previously identified nonaccrual corporate bond with a carrying value of $1.3 million as of June 30, 2026 and $2.2 million as of December 31, 2025.

The table below presents a rollforward for the three and six months ended June 30, 2026 and 2025 of the allowance for credit losses on available-for-sale debt securities held at period end:

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The amortized cost and estimated fair value of available-for-sale debt securities segregated by contractual maturity at June 30, 2026 are presented below. Expected maturities may differ from contractual maturities because issuers may have the right to call or prepay obligations. Mortgage-backed securities and collateralized mortgage obligations are shown in total, as their maturities are highly variable.

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The proceeds from sales, calls and maturities of available-for-sale debt securities, gross realized gains and losses for the three and six months ended June 30, 2026 and 2025 are as follows:

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Accrued interest receivable on available-for-sale debt securities totaled $3.3 million at June 30, 2026 and $3.2 million at December 31, 2025, which is reported in other assets on the consolidated balance sheets.

The following tables summarize available-for-sale debt securities in an unrealized loss position for which an allowance for credit losses has not been recorded at June 30, 2026 and December 31, 2025, aggregated by major security type and length of time in continuous unrealized loss position:

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The following summarizes, by investment security type, the impact of performing securities in an unrealized loss position at June 30, 2026:

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Obligations of US Government-sponsored enterprises

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6 out of the total 6 securities in our portfolio of AFS obligations of US Government-sponsored enterprises were in unrealized loss positions. Aggregate unrealized losses represented 2.79% of the amortized cost of securities in unrealized loss positions. The US Small Business Administration guarantees the contractual cash flows of all of our obligations of US Government-sponsored enterprises. The securities are investment grade rated and there were no material underlying credit downgrades during the quarter. Because the decline in fair value is attributable to changes in interest rates, and not credit quality, and the Company does not have the intent to sell these securities and it is likely that it will not be required to sell the securities before their anticipated recovery, the securities are investment grade rated and there were no material underlying credit downgrades during the quarter. All securities are performing.

US Government-sponsored enterprises

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413 out of the total 504 securities in our portfolio of AFS US Government-sponsored enterprises were in unrealized loss positions. Aggregate unrealized losses represented 11.69% of the amortized cost of securities in unrealized loss positions. The Federal National Mortgage Association and Federal Home Loan Mortgage Corporation guarantee the contractual cash flows of all of our US Government-sponsored enterprises. The securities are investment grade rated and there were no material underlying credit downgrades during the quarter. Because the decline in fair value is attributable to changes in interest rates, and not credit quality, and the Company does not have the intent to sell these securities and it is likely that it will not be required to sell the securities before their anticipated recovery, the securities are investment grade rated and there were no material underlying credit downgrades during the quarter. All securities are performing.

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US Government agency

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142 out of the total 167 securities in our portfolio of AFS US Government agency securities were in unrealized loss positions. Aggregate unrealized losses represented 7.47% of the amortized cost of securities in unrealized loss positions. The Government National Mortgage Association guarantees the contractual cash flows of all of our US Government agency securities. The securities are investment grade rated and there were no material underlying credit downgrades during the quarter. Because the decline in fair value is attributable to changes in interest rates, and not credit quality, and the Company does not have the intent to sell these securities and it is likely that it will not be required to sell the securities before their anticipated recovery, the securities are investment grade rated and there were no material underlying credit downgrades during the quarter. All securities are performing.

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Private label

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13 of the total 14 securities in our portfolio of AFS private label mortgage-backed securities were in unrealized loss positions. Aggregate unrealized losses represented 7.15% of the amortized cost of securities in unrealized loss positions. We expect to receive all of the future contractual cash flows related to the amortized cost on these securities. Because the decline in fair value is attributable to changes in interest rates, and not credit quality, and the Company does not have the intent to sell these securities and it is likely that it will not be required to sell the securities before their anticipated recovery, the securities are investment grade rated and there were no material underlying credit downgrades during the quarter. All securities are performing.

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Obligations of states and political subdivisions thereof

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51 of the total 64 securities in our portfolio of AFS municipal bonds and obligations were in unrealized loss positions. Aggregate unrealized losses represented 12.61% of the amortized cost of securities in unrealized loss positions. We continually monitor the municipal bond sector of the market carefully and periodically evaluate the appropriate level of exposure to the market. At this time, we believe (i) the bonds in this portfolio carry minimal risk of default and (ii) we are appropriately compensated for the risk. There were no material underlying credit downgrades during the quarter. Because the decline in fair value is attributable to changes in interest rates, and not credit quality, and the Company does not have the intent to sell these securities and it is likely that it will not be required to sell the securities before their anticipated recovery, the securities are investment grade rated and there were no material underlying credit downgrades during the quarter. All securities are performing.

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Corporate bonds

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18 out of the total 30 securities in our portfolio of AFS corporate bonds were in an unrealized loss position. The aggregate unrealized loss represents 3.76% of the amortized cost of bonds in unrealized loss positions. We review the financial strength of all of these bonds, and we have concluded that the amortized cost remains supported by the expected future cash flows of these securities. The most recent review includes all bond issuers and their current credit ratings, financial performance and capitalization. For the securities in an unrealized loss position, the decline in fair value is attributable to changes in interest rates, not credit quality, and the Company does not have the intent to sell these securities and it is likely that it will not be required to sell the securities before their anticipated recovery, the securities are investment grade rated, and there were no material underlying credit downgrades during the quarter. All but the one corporate bond discussed above are performing.

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We expect to recover the amortized cost basis on all securities in our AFS portfolio. Furthermore, we do not intend to sell nor do we anticipate that we will be required to sell any securities in an unrealized loss position as of June 30, 2026, prior to this recovery.

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A summary of securities pledged as collateral for certain deposits and borrowing arrangements for the months ended June 30, 2026 and December 31, 2025 is as follows:

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(1) The Bank pledged securities as collateral for certain borrowing arrangements with the Federal Home Loan Bank of Boston and the Federal Reserve Bank of Boston (the “Reserve Bank”).

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NOTE 4. LOANS AND ALLOWANCE FOR CREDIT LOSSES

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We evaluate risk characteristics of loans based on regulatory call report code with segmentation based on the underlying collateral for certain loan types. The following is a summary of total loans based on regulatory call report code segmentation for certain loan types:

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Total unamortized net costs and premiums included in loan totals were as follows:

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We exclude accrued interest receivable from the amortized cost basis of loans disclosed throughout this footnote. As of June 30, 2026 and December 31, 2025, accrued interest receivable for loans totaled $12.4 million and $11.5 million, respectively, and is included in the “other assets” line item on the consolidated balance sheets.

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Characteristics of each loan portfolio segment, including acquired loans, are as follows:

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Commercial construction - Loans in this segment primarily include raw land, land development and construction of commercial and multifamily residential properties. Collateral values are determined based upon appraisals and evaluations of the completed structure in accordance with established policy guidelines. Maximum loan-to-value ratios at origination are governed by established policy guidelines that are more restrictive than on stabilized commercial real estate transactions. Construction loans are primarily paid by the cash flow generated from the completed structure, such as operating leases, rents, or other operating cash flows from the borrower.

Commercial real estate owner occupied and non-owner occupied - Loans in these segments are primarily owner-occupied or income-producing properties. Loans to Real Estate Investment Trusts and unsecured loans to developers that closely correlate to the inherent risk in commercial real estate markets are also included. Commercial real estate loans are typically written with amortizing payment structures. Collateral values are determined based upon appraisals and evaluations in accordance with established policy guidelines. Maximum loan-to-value ratios at origination are governed by established policy and regulatory guidelines. Commercial real estate loans are primarily paid by the cash flow generated from the real property, such as operating leases, rents, or other operating cash flows from the borrower.

Municipal and other - Loans in this segment primarily include loans to various state and municipal government entities. Loans made to these borrowers may provide us with tax-exempt income. While governed and underwritten similar to commercial loans they do have unique requirements based on established polices. Almost all state and municipal loans are considered a general obligation of the issuing entity. Given the size of many municipal borrowers, borrowings are normally not rated by major rating agencies. Municipal loans are primarily repaid by taxes collected by the municipality.

Commercial and industrial loans - Loans consist of revolving and term loan obligations extended to business and corporate enterprises for the purpose of financing working capital and/or capital investment in this segment. Generally loans are secured by assets of the business such as accounts receivable, inventory, marketable securities, other liquid collateral, equipment and other business assets. Some loans in this category may be unsecured or guaranteed by government agencies such as the U.S. Small Business Administration. Loans are primarily paid by the operating cash flows of the borrower.

Residential real estate - All loans in this segment are collateralized by one-to-four family homes. Residential real estate loans held in the loan portfolio are made to borrowers who demonstrate the ability to make scheduled payments with full consideration to various underwriting factors. Borrower qualifications include favorable credit history combined with supportive income requirements and combined loan-to-value ratios within established policy guidelines. Repayment of these loans is primarily dependent on the personal income of the borrowers, which can be impacted by economic conditions in their market areas such as unemployment levels.

Home equity - All loans and lines of credit are made to qualified individuals and are secured by senior or junior mortgage liens on owner-occupied one- to four-family homes, condominiums, or vacation homes. The home equity loan has a fixed rate and is billed as equal payments comprised of principal and interest. The home equity line of credit has a variable rate and is billed as interest-only payments during the draw period. At the end of the draw period, the home equity line of credit is billed as a percentage of the principal balance plus all accrued interest. Borrower qualifications include favorable credit history combined with supportive income requirements and combined loan-to-value ratios within established policy guidelines. Repayment of these loans is primarily dependent on the personal income of the borrowers, which can be impacted by economic conditions in their market areas such as unemployment levels.

Consumer other - Loans in this segment include personal lines of credit and amortizing loans made to qualified individuals for various purposes such as auto loans, recreational equipment, overdraft protection or other consumer loans. Borrower qualifications include favorable credit history combined with supportive income and collateral requirements within established policy guidelines, as applicable. Consumer loans may be secured or unsecured. Repayment of these loans is primarily dependent on the personal income of the borrowers, which can be impacted by economic conditions in their market areas such as unemployment levels.

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Allowance for Credit Losses

The Allowance for Credit Losses (“ACL”) is comprised of the allowance for loan losses and the allowance for unfunded commitments which is accounted for as a separate liability in other liabilities on our consolidated balance sheets. The level of the ACL represents management’s estimate of expected credit losses over the expected life of the loans at the consolidated balance sheet date.

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The allowance for credit losses is a valuation account that is deducted from the amortized cost basis of loans to present the net amount expected to be collected on the loans. Loans, or portions thereof, are charged off against the allowance when they are deemed uncollectible. Expected recoveries do not exceed the aggregate of amounts previously charged-off and expected to be charged-off. The allowance is comprised of reserves measured on a collective (pool) basis based on a lifetime loss-rate model when similar risk characteristics exist. Loans that do not share risk characteristics are evaluated on an individual basis.

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The estimate of expected credit losses on collectively evaluated loans is based on relevant information about current conditions, past events, and reasonable and supportable forward-looking forecasts regarding collectability of the reported amounts. Management employs a process and methodology to estimate the allowance for credit losses on collectively evaluated loans that evaluates both quantitative and qualitative components. The methodology for evaluating the quantitative component involves pooling loans into portfolio segments for loans that share similar risk characteristics.

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For all loan segments measured on a collective basis, the Company utilizes a discounted cash flow (“DCF”) methodology to estimate credit losses over the expected life of the loan. The DCF methodology applies the probability of default (“PD”) and the loss given default (“LGD”) assumptions over the remaining contractual life of the loan which is adjusted for prepayment speeds, curtailment rate and time to recovery assumptions to estimate a reserve for each loan. For all loan segments, the quantitative loss rates are supplemented by qualitative factors reflecting management’s view of how losses may vary from those represented by quantitative loss rates. Qualitative factors are applied to each portfolio segment to reflect management’s estimate of expected changes in current conditions at the balance sheet date relative to historical performance.

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The Company uses regression models to develop the PD and LGD assumptions, which are derived primarily from segment-specific selected peers. The loss rates are adjusted by an economic forecast over the reasonable and supportable forecast period after which time they revert back to the historical mean. Key economic indicators used in the model include unemployment rates, commercial real estate values, and housing prices. Management currently applies a two-quarter reasonable and supportable forecast period, followed by a six-quarter straight-line reversion to historical mean for each economic indicator. The combination of adjustments for credit expectations (PD and LGD) and timing expectations (prepayment, curtailment, and time to recovery) produces an expected cash flow stream at the instrument level. Specific instrument effective yields are calculated, net of the impacts of prepayment assumptions, and the instrument expected cash flows are then discounted at that effective yield to produce an instrument-level Net Present Value (“NPV”). An allowance is established for the difference between the instrument’s NPV and amortized cost basis. The allowance is also adjusted for current conditions through the use qualitative factors. The qualitative factors consider both relevant internal and external information in their application.

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The activity in the ACL for the periods ended are as follows:

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Unfunded Commitments

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The ACL on unfunded commitments is recognized as a liability (other liabilities on the consolidated balance sheets), with adjustments to the reserve recognized in other non-interest expense in the consolidated statements of income. Unfunded commitments to extend credit include unused portions of lines of credit and standby and commercial letters of credit. The process used to determine the allowance for these exposures is consistent with the process for determining the allowance for loans, as adjusted for estimated funding probabilities or loan equivalency factors. A charge (credit) to provision for credit losses on the consolidated statements of income is made to account for the change in the allowance on off-balance sheet exposures between reporting periods.

The activity in the ACL on unfunded commitments for the periods ended was as follows:

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Credit Quality Indicators: In monitoring the credit quality of the portfolio, management applies a credit quality indicator and uses an internal risk rating system to categorize commercial loans. These credit quality indicators range from one through nine, with a higher number correlating to increasing risk of loss. Consistent with regulatory guidelines, the Company provides for the classification of loans which are considered to be of lesser quality as special mention, substandard, doubtful, or loss (i.e. risk-rated 6, 7, 8 and 9, respectively). Residential, home equity and consumer loans are classified as performing or non-performing based on payment performance.

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The following are the definitions of our credit quality indicators:

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Pass: Loans we consider in the commercial portfolio segments that are not adversely rated, are contractually current as to principal and interest, and are otherwise in compliance with the contractual terms of the loan agreement. Management believes there is a low risk of loss related to these loans considered pass-rated.

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Special Mention: Loans considered having some potential weaknesses, but are deemed to not carry levels of risk inherent in one of the subsequent categories, are designated as special mention. A special mention loan has potential weaknesses that deserve management’s close attention. If left uncorrected, these potential weaknesses may result in deterioration of the repayment prospects for the asset or in the institution’s credit position at some future date. This might include loans which may require a higher level of supervision or internal reporting because of: (i) declining industry trends; (ii) increasing reliance on secondary sources of repayment; (iii) the poor condition of or lack of control over collateral; or (iv) failure to obtain proper documentation or any other deviations from prudent lending practices. Economic or market conditions which may, in the future, affect the obligor may warrant special mention of the asset. Loans for which an adverse trend in the borrower's operations or an imbalanced position in the balance sheet which has not reached a point where the liquidation is jeopardized may be included in this classification. Special mention loans are not adversely classified and do not expose us to sufficient risks to warrant classification.

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Substandard: Loans we consider as substandard are inadequately protected by the current net worth and paying capacity of the borrower or of the collateral pledged, if any. Substandard loans have a well-defined weakness that jeopardizes liquidation of the debt. Substandard loans include those loans where there is the distinct possibility of some loss of principal, if the deficiencies are not corrected.

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Doubtful: Loans we consider as doubtful have all of the weaknesses inherent in those loans that are classified as substandard. These loans have the added characteristic of a well-defined weakness which is inadequately protected by the current sound worth and paying capacity of borrower or of the collateral pledged, if any, and calls into question the collectability of the full balance of the loan. The possibility of loss is high but because of certain important and reasonably specific pending factors, which may work to the advantage and strengthening of the loan, its classification as loss is deferred until its more exact status is determined. Pending factors include proposed merger, acquisition, or liquidation procedures, capital injection, perfecting liens on additional collateral and refinancing plans. The entire amount of the loan might not be classified as doubtful when collection of a specific portion appears highly probable. Loans are generally not classified doubtful for an extended period of time (i.e., over a year).

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Loss: Loans we consider as losses are those considered uncollectible and of such little value that their continuance as an asset is not warranted and the uncollectible amounts are charged-off. This classification does not mean the asset has absolutely no recovery or salvage value, but rather it is not practical or desirable to defer writing off this worthless asset even though partial recovery may be effected in the future. Losses are taken in the period in which they are determined to be uncollectible.

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The following table presents our loans by year of origination, loan segmentation and risk indicator as of June 30, 2026:

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The following table presents our loans by year of origination, loan segmentation and risk indicator as of December 31, 2025:

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Past Dues

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The following is a summary of past due loans for the periods ended:

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Non-Accrual Loans

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The following is a summary of non-accrual loans for the periods ended:

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Our policy is to reverse previously recorded interest income when a loan is placed on non-accrual, as such, the Company did not record any interest income on its non-accrual loans for the three and six months ended June 30, 2026 and 2025.

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Collateral Dependent Loans

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Loans that do not share risk characteristics are evaluated on an individual basis. For loans that are individually evaluated and collateral dependent, financial loans where we have determined that foreclosure of the collateral is probable, or where the borrower is experiencing financial difficulty and we expect repayment of the financial asset to be provided substantially through the operation or sale of the collateral, the ACL is measured based on the difference between the fair value of the collateral and the amortized cost basis of the asset as of the measurement date.

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The following table presents the amortized cost basis of collateral-dependent loans by loan portfolio segment for the periods ended:

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Loan Modifications to Borrowers Experiencing Financial Difficulty

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Modifications to borrowers experiencing financial difficulty typically result from loss mitigation activities and could include reductions in the interest rate, payment extensions, forgiveness of principal, forbearance, or other actions.

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The following table presents the amortized cost basis of loans that were both experiencing financial difficulty and modified during the three and six months ended June 30, 2026 and 2025, by class and by type of modification.

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The following table presents the financial effect of loan modifications made to borrowers experiencing financial difficulty during the three and six months ended June 30, 2026 and 2025.

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​ ​ Weighted-Average Months of Payment Delay ​ Weighted-Average Months of Term Extension ​ ​ Weighted-Average Interest Rate Reduction

Three Months Ended June 30, 2025 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​

Commercial construction ​ ​ — ​ ​ — ​ ​ — %

Commercial real estate owner occupied ​ ​ — ​ ​ — ​ ​ — ​

Commercial real estate non-owner occupied ​ ​ — ​ ​ — ​ ​ — ​

Municipal and other ​ ​ — ​ ​ — ​ ​ — ​

Commercial and industrial ​ ​ — ​ ​ 2 ​ ​ — ​

Residential real estate ​ ​ — ​ ​ — ​ ​ — ​

Home equity ​ ​ — ​ ​ — ​ ​ — ​

Consumer other ​ ​ — ​ ​ — ​ ​ — ​

Six Months Ended June 30, 2025 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​

Commercial construction ​ ​ — ​ ​ — ​ ​ — %

Commercial real estate owner occupied ​ ​ — ​ ​ — ​ ​ — ​

Commercial real estate non-owner occupied ​ ​ — ​ ​ — ​ ​ — ​

Municipal and other ​ ​ — ​ ​ — ​ ​ — ​

Commercial and industrial ​ ​ — ​ ​ 47 ​ ​ — ​

Residential real estate ​ ​ — ​ ​ — ​ ​ — ​

Home equity ​ ​ — ​ ​ — ​ ​ — ​

Consumer other ​ ​ — ​ ​ — ​ ​ — ​

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As of June 30, 2026 the Bank had no loans that were modified during the current period that defaulted within 12 months of the modification date.

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PCD Loans

PCD loans were recorded at their amortized cost, less an allowance for credit losses on the Acquisition Date. There is no provision for credit loss expense recognized on PCD loans because the initial allowance is established by grossing-up the amortized cost of the PCD loans. The remaining difference between the net amortized cost basis and the allowance for credit losses and the fair value allocated to the loans on the date of acquisition is recognized as a non-credit-related discount that will be accreted into interest income over the life of the loans.

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The following tables presents the unpaid principal balance and carrying amount of PCD loans. The balances do not include an allowance for credit losses which was $745 thousand as of June 30, 2026 and $751 thousand as of December 31, 2025.

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The following table presents a reconciliation of acquired Guaranty PCD loans between their purchase price and par value at the time of the acquisition:

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Foreclosure

There were $1.2 million of residential mortgage loans collateralized by real estate that are in the process of foreclosure as of June 30, 2026. Residential mortgage loans collateralized by real estate that were in the process of foreclosure as of December 31, 2025 totaled $171 thousand.

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Mortgage Banking

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Loans Held for Sale

Loans held for sale at June 30, 2026 had an unpaid principal balance of $10.1 million and $5.2 million as of December 31, 2025. The interest rate exposure on loans held for sale is mitigated through forward sale commitments with certain approved secondary market investors. Forward sale commitments had a notional amount of $17.9 million at June 30, 2026, and $5.2 million at December 31, 2025. Refer to Note 9 for further discussion of forward sale commitments.

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Loans Sold

For the three months ended June 30, 2026 and 2025, we sold $26.2 million and $11.6 million, respectively, of residential mortgage loans on the secondary market, which resulted in a net gain on sale of loans (net of costs, including direct and indirect origination costs) of $151 thousand and $275 thousand, respectively.

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For the six months ended June 30, 2026 and 2025, we sold $42.8 million and $21.4 million, respectively, of residential mortgage loans on the secondary market, which resulted in a net gain on sale of loans (net of costs, including direct and indirect origination costs) of $386 thousand and $449 thousand, respectively.

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We sell residential loans on the secondary market while primarily retaining the servicing of these loans. Servicing retained loans helps to maintain customer relationships and earn fees over the servicing period. Loans serviced for others are not included in the accompanying consolidated balance sheets. The risks inherent in servicing assets relate primarily to level of prepayments that result from shifts in interest rates. We obtain third-party valuations of our servicing assets portfolio quarterly, and the assumptions are reflected in Fair Value disclosures.

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NOTE 5. BORROWED FUNDS

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Borrowed funds at June 30, 2026 and December 31, 2025 are summarized, as follows:

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Short-term debt includes FHLB advances with an original term of one year or less. We also maintain a $1.0 million secured line of credit with the FHLB that bears a daily adjustable rate calculated by the FHLB. There was no outstanding balance on the FHLB line of credit for the periods ended June 30, 2026 and December 31, 2025. There are no variable rate short-term FHLB borrowings.

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We have the capacity to borrow funds on a secured basis utilizing the Borrower in Custody program, and the Discount Window at the Reserve Bank. At June 30, 2026, our available secured line of credit at the Reserve Bank was $105.6 million versus $94.0 million at December 31, 2025. We have pledged certain loans and securities to the Reserve Bank to support this arrangement.

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We maintain an unused unsecured federal funds line of credit with a correspondent bank that has an aggregate overnight borrowing capacity of $40.0 million as of June 30, 2026 and December 31, 2025. There was no outstanding balance on the line of credit as of June 30, 2026 and December 31, 2025.

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Long-term FHLB advances consist of advances with an original term of more than one year. The advances outstanding at June 30, 2026 include callable advances of $80.0 million, non-callable advances of $1.0 million and amortizing advances of $997 thousand. There were $80.0 million of callable advances outstanding, non-callable advances of $1.0 million and $1.0 million of amortizing advances at December 31, 2025. All FHLB borrowings, including the line of credit, are secured by a blanket security agreement on certain qualified collateral, principally residential first mortgage loans and certain securities. There are no variable rate long-term FHLB borrowings.

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A summary of maturities of FHLB advances as of June 30, 2026 is, as follows:

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Each advance is payable at its maturity date, with a prepayment penalty for fixed rate advances. The advances were collateralized by $1.0 billion and $740.7 million of loans under a blanket lien arrangement as of June 30, 2026 and December 31, 2025, respectively. Based on this collateral and the Company’s holdings of FHLB stock, the Company had unused borrowing capacity of $521.9 million at June 30, 2026, compared to $259.1 million at December 31, 2025.

At months ended June 30, 2026 and December 31, 2025, subordinated borrowings was as follows:

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We executed a Subordinated Note Purchase Agreement with an aggregate of $40.0 million of subordinated notes (the “2029 Notes”) to accredited investors on November 26, 2019. The 2029 Notes have a maturity date of December 1, 2029 and bear 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%. We have the option beginning with the interest payment date of December 1, 2024, and on any scheduled payment date thereafter, to redeem the 2029 Notes, in whole or in part upon prior approval of the Board of Governors of the Federal Reserve System (“Federal Reserve”). During 2024, we paid down $20.0 million of the outstanding subordinated notes. As of June 30, 2026, we have an outstanding subordinated note balance under the 2029 Notes of $20.0 million.

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We also have $20.6 million in floating Junior Subordinated Deferrable Interest Debentures (“Debentures”) issued by NHTB Capital Trust II Variable (“Trust II”) and NHTB Capital Trust III Fixed (“Trust III”), which are both Connecticut statutory trusts. The Debentures issued on March 30, 2004 now carry a variable interest rate of three-month SOFR plus 2.79%, and mature in 2034. The Debentures are callable by the Company at the time when any interest payment is made. Trust II and Trust III are considered variable interest entities for which we are not the primary beneficiary. Accordingly, Trust II and Trust III are not consolidated into our financial statements.

In connection with the acquisition, the Company assumed $13.0 million in fixed-to-floating rate subordinated notes, that had a fair value of $11.2 million (the “2031 Notes”) issued by Guaranty. The 2031 Notes were originally issued on March 23, 2021 with a maturity date of April 1, 2031. The 2031 Notes bear a fixed-to-floating interest rate of 4.875% through April 1, 2026, payable quarterly in arrears. Beginning April 1, 2026 and thereafter, the interest rate shall be reset quarterly to an interest rate per annum equal to the then current three-month SOFR plus 4.82%. We have the option beginning with the interest payment date of April 1, 2026, and on any scheduled payment date thereafter, to redeem the 2031 Notes, in whole or in part upon prior approval of the Federal Reserve.

Repurchase Agreements

We can raise additional liquidity by entering into repurchase agreements at our discretion. In a security repurchase agreement transaction, we will generally sell a security, agreeing to repurchase either the same or substantially identical security on a specified later date, at a greater price than the original sales price. The difference between the sale price and purchase price is the cost of the proceeds, which is recorded as interest expense on the consolidated statements of income. The securities underlying the agreements are delivered to counterparties as security for the repurchase obligations. Since the securities are treated as collateral and the agreement does not qualify for a full transfer of effective control, the transactions do not meet the criteria to be classified as sales, and are therefore considered secured borrowing transactions for accounting purposes. Payments on such borrowings are interest only until the scheduled repurchase date. In a repurchase agreement, we are subject to the risk that the purchaser may default at maturity and not return the securities underlying the agreements. In order to minimize this potential risk, we either deal with established firms when entering into these transactions or with customers whose agreements stipulate that the securities underlying the agreement are not delivered to the customer and instead are held in segregated safekeeping accounts by our safekeeping agents.

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NOTE 6. DEPOSITS

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A summary of time deposits is, as follows:

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At June 30, 2026 and December 31, 2025, the scheduled maturities by year for time deposits are, as follows:

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Included in time deposits are brokered deposits of $167.4 million and $151.6 million at June 30, 2026 and December 31, 2025, respectively. Also included in time deposits are reciprocal deposits of $81.9 million and $88.7 million at June 30, 2026 and December 31, 2025, respectively.

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NOTE 7. CAPITAL RATIOS AND SHAREHOLDERS’ EQUITY

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The Company and the Bank are subject to various regulatory capital requirements administered by the Federal Reserve and the FDIC. Failure to meet minimum capital requirements can result in mandatory and possible additional discretionary actions by regulators that, if undertaken, could have a direct material effect on the Company’s unaudited Consolidated Financial Statements.

Under the capital rules, risk-based capital ratios are calculated by dividing Tier 1, common equity Tier 1, and total risk-based capital, respectively, by risk-weighted assets. Assets and off-balance sheet credit equivalents are assigned to one of several risk-weight categories, based primarily on relative risk. The rules require banks and bank holding companies to maintain a minimum common equity Tier 1 capital ratio of 4.5%, a minimum Tier 1 capital ratio of 6.0% and a total capital ratio of 8.0%. In addition, a Tier 1 leverage ratio of 4.0% is required. Additionally, the capital rules require a bank holding company to maintain a capital conservation buffer of common equity Tier 1 capital in an amount above the minimum risk-based capital requirements equal to 2.5% of total risk weighted assets, or face restrictions on the ability to pay dividends, pay discretionary bonuses, and to engage in share repurchases.

Under the FDIC’s prompt corrective action rules, an insured state nonmember bank is considered “well capitalized” if its capital ratios meet or exceed the ratios as set forth in the following table and is not subject to any written agreement, order, capital directive, or prompt corrective action directive to meet and maintain a specific capital level for any capital measure. The Bank must meet well capitalized requirements under prompt corrective action provisions. Prompt corrective action provisions are not applicable to bank holding companies.

A bank holding company is considered “well capitalized” if the bank holding company (i) has a total risk-based capital ratio of at least 10.0%, (ii) has a Tier 1 risk-based capital ratio of at least 6.0%, and (iii) is not subject to any written agreement order, capital directive or prompt corrective action directive to meet and maintain a specific capital level for any capital measure.

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At June 30, 2026, the capital levels of both the Company and the Bank exceeded all regulatory capital requirements, and their regulatory capital ratios were above the minimum levels required to be considered well capitalized for regulatory purposes. The actual and required capital ratios are, as follows:

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Accumulated other comprehensive income (loss)

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Components of accumulated other comprehensive income (loss) are as follows:

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The following table presents the components of other comprehensive income (loss) for the three and six months ended June 30, 2026 and 2025:

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The following table presents the changes in each component of accumulated other comprehensive income (loss), net of tax impacts, for the three and six months ended June 30, 2026 and 2025:

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The following table presents the amounts reclassified out of each component of accumulated other comprehensive income for the three and six months ended June 30, 2026 and 2025:

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NOTE 8. EARNINGS PER SHARE

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The following table presents the calculation of earnings per share:

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(1) In the third quarter of 2025, the Company issued 1,350,464 shares of common stock in consideration for the acquisition of Guaranty.

(2) Average diluted shares outstanding are computed using the treasury stock method.

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NOTE 9. DERIVATIVE FINANCIAL INSTRUMENTS AND HEDGING ACTIVITIES

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We use derivative instruments to minimize fluctuations in earnings and cash flows caused by interest rate volatility. Our interest rate risk management strategy involves modifying the re-pricing characteristics of certain assets or liabilities so the changes in interest rates do not have a significant effect on net interest income. Thus, all of our derivative contracts are considered to be interest rate contracts.

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We recognize our derivative instruments on the Consolidated Balance Sheets at fair value. On the date the derivative instrument is entered into, we designate whether the derivative is part of a hedging relationship (i.e., cash flow or fair value hedge). We formally document relationships between hedging instruments and hedged items, as well as our risk management objective and strategy for undertaking hedge transactions. We also assess, both at the hedge’s inception and on an ongoing basis, whether the derivatives used in hedging transactions are highly effective in offsetting the changes in cash flows or fair values of hedged items. Changes in fair value of derivative instruments that are highly effective and qualify as cash flow hedges are recorded in other comprehensive income or loss.

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We offer derivative products in the form of interest rate swaps, to commercial loan customers to facilitate their risk management strategies. These instruments are executed through Master Netting Arrangements (“MNAs”) with financial institution counterparties or Risk Participation Agreements (“RPAs”) with commercial bank counterparties, for which we assume a pro rata share of the credit exposure associated with a borrower's performance related to the derivative contract with the counterparty.

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Information about derivative assets and liabilities at June 30, 2026 and December 31, 2025, follows:

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As of June 30, 2026 and December 31, 2025, the following amounts were recorded on the balance sheet related to cumulative basis adjustments for fair value hedges:

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Information about derivative assets and liabilities for the three and six months ended June 30, 2026 and 2025, follows:

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The effect of cash flow hedging and fair value accounting on the consolidated statements of income for the three and six months ended June 30, 2026 and 2025:

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The effect of economic hedges and derivatives not designated as hedging instruments on the consolidated statements of income for three and six months ended June 30, 2026 and 2025 is as follows:

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Cash flow hedges

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Interest rate swaps on wholesale funding

As of June 30, 2026, we have no remaining interest rate swaps on wholesale borrowings.

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Interest rate swap on variable rate loans

As of June 30, 2026, we have no remaining interest rate swaps on loans. The $50 million loan swap we entered into in March 2021 matured effective March 2026.

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Fair value hedges

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Interest rate swap on securities

For derivative instruments that are designated and qualify as a fair value hedge, the gain or loss on the derivative instrument as well as the offsetting loss or gain on the hedged asset or liability attributable to the hedged risk are recognized in current earnings. We utilize interest rate swaps designated as fair value hedges to mitigate the effect of changing interest rates on the fair values of fixed rate callable securities available-for-sale. The hedging strategy on securities converts the fixed interest rates to SOFR based variable interest rates. These derivatives are designated as partial term hedges of selected cash flows covering specified periods of time prior to the call dates of the hedged securities. These derivatives are intended to protect against the effects of changing interest rates on the fair values of fixed rate securities. The fixed rates on the transactions have a weighted average rate of 1.70%.

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Economic hedges

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Forward sale commitments

We utilize forward sale commitments on residential mortgage loans to hedge interest rate risk and the associated effects on the fair value of interest rate lock commitments and loans originated for sale. The forward sale commitments are accounted for as derivatives. We typically use a combination of best efforts and mandatory delivery contracts. The contracts are loan sale agreements where we commit to deliver a certain principal amount of mortgage loans to an investor at a specified price on or before a specified date. Generally, we enter into contracts just prior to the loan closing with a customer.

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Customer loan derivatives

We enter into customer loan derivatives to facilitate the risk management strategies for commercial banking customers. We mitigate this risk by entering into equal and offsetting loan swap agreements with highly rated third-party financial institutions. The loan swap agreements are free standing derivatives and are recorded at fair value in our consolidated balance sheets. We are party to MNAs with our financial institutional counterparties; however, we do not offset assets and liabilities under these arrangements for financial statement presentation purposes.

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The MNAs provide for a single net settlement of all loan swap agreements, as well as collateral or cash funds, in the event of default on, or termination of, any one contract. Collateral is provided by cash or securities received or posted by the counterparty with net liability positions, respectively, in accordance with contract thresholds.

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The below tables describe the potential effect of master netting arrangements on the Consolidated Balance Sheets and the financial collateral pledged for these arrangements:

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Non-hedging derivatives

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Interest rate lock commitments

We enter into interest rate lock commitments (“IRLCs”) for residential mortgage loans, which commit us to lend funds to a potential borrower at a specific interest rate and within a specified period of time. IRLCs relate to the origination of residential mortgage loans that are held for sale and are considered derivative financial instruments under applicable accounting guidance. Outstanding IRLCs expose us to the risk that the price of the mortgage loans underlying the commitments may decline due to increases in mortgage interest rates from inception of the rate lock to the funding of the loan. The IRLCs are free standing derivatives, which are carried at fair value with changes recorded in non-interest income in our Consolidated Statements of Income. Changes in the fair value of IRLCs subsequent to inception are based on (i) changes in the fair value of the underlying loan resulting from the fulfillment of the commitment and (ii) changes in the probability when the loan will fund within the terms of the commitment, which is affected primarily by changes in interest rates and the passage of time.

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NOTE 10. FAIR VALUE MEASUREMENTS

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Recurring Fair Value Measurements

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The following table summarizes financial assets and financial liabilities measured at fair value on a recurring basis as of June 30, 2026 and December 31, 2025, segregated by the level of the valuation inputs within the fair value hierarchy utilized to measure fair value:

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Available-for-sale Debt Securities: All securities and major categories of securities classified as available-for-sale are reported at fair value utilizing Level 2 inputs, unless otherwise disclosed. For these securities, we obtain fair value measurements from independent pricing providers. The fair value measurements used by the pricing providers consider observable data that may include dealer quotes, market maker quotes and live trading systems. If quoted prices are not readily available, fair values are determined using matrix pricing models, or other model-based valuation techniques requiring observable inputs other than quoted prices such as market pricing spreads, credit information, callable features, cash flows, the US Treasury yield curve, trade execution data, market consensus prepayment speeds, default rates, and the securities’ terms and conditions, among other things. For securities where fair value is calculated using a discounted cash flow model or other market indicators are reported at fair value utilizing Level 3 inputs.

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Corporate Bonds

At June 30, 2026, the Company held one corporate bond investment classified as available-for-sale for which the fair value was determined using unobservable inputs, resulting in a Level 3 classification under the fair value hierarchy. During the quarter ended June 30, 2025, management identified a change in the estimated future cash flows associated with this security. As a result, the Company recognized an impairment loss of $4.4 million and charged off an allowance for credit losses of $1.2 million. In the third quarter 2025, the Company wrote down an additional $200 thousand resulting in a fair value of $2.2 million as of September 30, 2025. In the first quarter of 2026, the Company wrote down an additional $874 thousand resulting in a fair value of $1.3 million. These losses were recorded in net gain (loss) on available-for-sale debt securities in the consolidated statements of income. There was no activity during the second quarter of 2026.

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The fair value of the corporate bond was determined using a present value discounted cash flow approach. This method incorporated management’s current expectations about the timing and amount of future cash flows, which were adjusted for expected prepayments and credit-related losses. The revised cash flows were then discounted using the bond’s original effective interest rate. Unobservable inputs used in the fair value measurement included the discount rate, expected cash flows, and loss severity. The discount rate reflects the original effective yield at the time of purchase, adjusted for changes in market conditions and issuer-specific risk. Expected cash flows were developed based on management’s assessment of the issuer’s current financial condition, forward-looking performance expectations, and relevant macroeconomic indicators. Loss severity was estimated based on the Company’s expectations regarding the potential shortfall in principal and interest in the event of default, taking into account the nature of the issuer’s collateral, if any.

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Loans Held for Sale: The valuation of the Company’s loans held for sale are determined on an individual basis using quoted secondary market prices and are classified as Level 2 measurements.

Derivative Assets and Liabilities

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Cash Flow Hedges: The valuations of our cash flow hedges are obtained from a third party. The pricing analysis is based on observable inputs for the contractual terms of the derivatives, including the period to maturity and interest rate curves. The inputs used to value the cash flow hedges are all classified as Level 2 measurements.

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Interest Rate Lock Commitments: We enter into IRLCs for residential mortgage loans, which commit us to lend funds to potential borrowers at a specific interest rate and within a specified period of time. The estimated fair value of commitments to originate residential mortgage loans for sale is based on quoted prices for similar loans in active markets. However, this value is adjusted by a factor which considers the likelihood of a loan in a lock position will ultimately close. The closing ratio is derived from internal data and is adjusted using significant management judgment. As such, IRLCs are classified as Level 3 measurements.

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Forward Sale Commitments**:** We utilize forward sale commitments as economic hedges against potential changes in the values of the IRLCs and loans originated for sale. The fair values of mandatory delivery loan sale commitments are determined similarly to the IRLCs using quoted prices in the market place that are observable. However, closing ratios included in the calculation are internally generated and are based on management’s judgment and prior experience, which are not considered observable factors. As such, mandatory delivery forward commitments are classified as Level 3 measurements.

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The table below presents the changes in Level 3 assets and liabilities that were measured at fair value on a recurring basis for the three and six months ended June 30, 2026 and 2025:

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Quantitative information about the significant unobservable inputs within Level 3 recurring assets and liabilities is, as follows:

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Non-Recurring Fair Value Measurements

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We are required, on a non-recurring basis, to adjust the carrying value or provide valuation allowances for certain assets using fair value measurements in accordance with GAAP. The following is a summary of applicable non-recurring fair value measurements:

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There are no liabilities measured at fair value on a non-recurring basis as of June 30, 2026 and December 31, 2025.

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Individually evaluated loans

Loans are generally not recorded at fair value on a recurring basis. Periodically, we record non-recurring adjustments to the carrying value of loans based on fair value measurements for partial charge-offs of the uncollectible portions of those loans. Non-recurring adjustments can also include certain impairment amounts for collateral-dependent loans calculated when establishing the ACL. Such amounts are generally based on the fair value of the underlying collateral supporting the loan and, as a result, the carrying value of the loan less the calculated valuation amount does not necessarily represent the fair value of the loan. Real estate collateral is typically valued using appraisals or other indications of value based on recent comparable sales of similar properties or assumptions generally observable in the marketplace. However, the choice of observable data is subject to significant judgment, and there are often adjustments based on judgment in order to make observable data comparable and to consider the impact of time, the condition of properties, interest rates, and other market factors on current values. Additionally, commercial real estate appraisals frequently involve discounting of projected cash flows, which relies inherently on unobservable data. Therefore, non-recurring fair value measurement adjustments relating to real estate collateral have generally been classified as Level 3. Estimates of fair value for other collateral supporting commercial loans are generally based on assumptions not observable in the marketplace and therefore such valuations have been classified as Level 3.

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Capitalized loan servicing rights

A loan servicing right asset represents the amount by which the present value of the estimated future net cash flows to be received from servicing loans exceed adequate compensation for performing the servicing. The fair value of loan servicing rights is estimated using a present value cash flow model. The most important assumptions used in the valuation model are the anticipated rate of the loan prepayments and discount rates. Adjustments are only recorded when the discounted cash flows derived from the valuation model are less than the carrying value of the asset. Although some assumptions in determining fair value are based on standards used by market participants, some are based on unobservable inputs and therefore are classified in Level 3 of the valuation hierarchy.

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Other real estate owned (“OREO”)

OREO results from the foreclosure process on residential or commercial loans issued by the Company. Upon assuming the real estate, we record the property at the fair value of the asset less the estimated sales cost. Thereafter, OREO properties are recorded at the lower of cost or fair value less the estimated sales costs. OREO fair values are primarily determined based on Level 3 data including sales comparables and appraisals. As of June 30, 2026, the Company maintained a bank-owned commercial real estate property with a fair value of $8.2 million. During the quarter there was an associated charge-off of $3.3 million at the time of the transfer into other real estate owned and related expenses of $273 thousand. As of December 31, 2025, the Company had no bank-owned real estate property.

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Premises held for sale

Assets held for sale, identified as part of our strategic review and branch optimization exercise, were transferred from premises and equipment at the lower of amortized cost or fair value less the estimated sales cost. Assets held for sale fair values are primarily determined based on Level 3 data including sales comparables and appraisals.

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Quantitative information about the significant unobservable inputs within Level 3 non-recurring assets follows:

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(a) Where dollar amounts are disclosed, the amounts represent the lowest and highest fair value of the respective assets in the population except for adjustments for market/property conditions, which represents the range of adjustments to individual properties.

(a) Where dollar amounts are disclosed, the amounts represent the lowest and highest fair value of the respective assets in the population except for adjustments for market/property conditions, which represents the range of adjustments to individual properties.

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There were no Level 1 or Level 2 non-recurring fair value measurements for the periods ended June 30, 2026 and December 31, 2025.

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Summary of Estimated Fair Values of Financial Instruments

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The estimated fair values, and related carrying amounts, of our financial instruments are included in the table below. Certain financial instruments and all non-financial instruments are excluded from disclosure requirements. Accordingly, the aggregate fair value amounts presented herein may not necessarily represent the underlying fair value of the Company.

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NOTE 11. REVENUE FROM CONTRACTS WITH CUSTOMERS

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We account for our various non-interest revenue streams and related contracts in accordance with “Revenue from Contracts with Customers” (“ASC 606”). ASC 606 is based on the consideration specified in the contract with a customer and excludes amounts collected on behalf of third parties. Revenue is recognized when we satisfy our performance obligation, which is generally when services are rendered and can be either satisfied at a point in time or over time. We recognize revenue at a point in time that is transactional in nature. We recognize revenue over time that is earned as services are performed and performance obligations are satisfied over time.

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A substantial portion of our revenue is specifically excluded from the scope of ASC 606. This exclusion is associated with financial instruments, including interest income on loans and investment securities, in addition to loan derivative income and gains on loan and investment sales.

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Disaggregation of Revenue

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The following presents non-interest income, segregated by revenue streams in-scope and out-of-scope of Topic 606:

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Trust Management Fees

The trust management business generates revenue through a range of fiduciary services including trust and estate administration and investment management to individuals, businesses, not-for-profit organizations, and municipalities. These fees are primarily earned over time as we charge our customers on a monthly or quarterly basis in accordance with investment advisory agreements. Fees are generally assessed based on a tiered scale of the average monthly market value of assets under management. Certain fees, such as bill paying fees, distribution fees, real estate sale fees, and supplemental tax service fees, are recorded as revenue at a point in time upon the completion of the service.

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Financial Services Fees

Bar Harbor Financial Services is a branch office of Osaic Institutions, Inc. (“Osaic”), a full-service third-party broker-dealer, conducting business under the assumed business name “Bar Harbor Financial Services.” Osaic is an independent registered broker-dealer and is not affiliated with the Company or its subsidiaries. We have a revenue sharing agreement with Osaic for any financial service fee income generated. Financial services fees are recognized at a point in time upon the completion of service requirements.

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Interchange Fees

We earn interchange fees from transaction fees that merchants pay whenever a customer uses a debit card to make a purchase from their store. The fees are paid to the card-issuing bank to cover handling costs, fraud, bad debt costs and the risk involved in approving the payment. Interchange fees are generally recognized as revenue at a point in time upon the completion of a debit card transaction.

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Customer Deposit Fees

The Customer Deposit business offers a variety of deposit accounts with a range of interest rates, fee schedules and other terms, which are designed to meet the customer's financial needs. Additional depositor-related services provided to customers include ATM, bank-by-phone, internet banking, internet bill pay, mobile banking, and other cash management services, which include remote deposit capture, ACH origination, and wire transfers. These customer deposit fees are generally recognized at a point in time upon the completion of the service.

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Other Customer Service Fees

We have certain incentive and referral fee arrangements with independent third parties in which fees are earned for new account activity, product sales, or transaction volume generated for the respective third parties. We also earn a percentage of the fees generated from third-party credit card plans promoted through the Bank. Revenue from these incentive and referral fee arrangements are recognized over time using the right to invoice measure of progress.

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Contract Balances from Contracts with Customers

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The following table provides information about contract assets or receivables and contract liabilities or deferred revenues from contracts with customers:

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The timing of revenue recognition, billings and cash collections results in contract assets or receivables and contract liabilities or deferred revenue on the consolidated balance sheets. For most customer contracts, fees are deducted directly from customer accounts and, therefore, there is no associated impact on the accounts receivable balance. For certain types of service contracts, we have an unconditional right to consideration under the service contract and an accounts receivable balance is recorded for services completed. When consideration is received, or such consideration is unconditionally due, from a customer prior to transferring goods or services to the customer under the terms of a contract, a contract liability is recorded. Contract liabilities are recognized as revenue after control of the products or services is transferred to the customer and all revenue recognition criteria have been met.

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Costs to Obtain and Fulfill a Contract

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We currently expense contract costs for processing and administrative fees for debit card transactions. We also expense custody fees and transactional costs associated with securities transactions as well as third-party tax preparation fees. We have elected the practical expedient in ASC 340-40-25-4, whereby we recognize the incremental costs of obtaining contracts as an expense when incurred if the amortization period of the assets we otherwise would have recognized is one year or less.

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NOTE 12. GOODWILL AND OTHER INTANGIBLES

The activity impacting goodwill as of June 30, 2026 and December 31, 2025 is as follows:

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(1) In the third quarter 2025, the Company completed its acquisition of Woodsville and recorded $22.3 million in goodwill. Refer to Note 2 for further details.

The components of other intangible assets as of June 30, 2026 and December 31, 2025 are as follows:

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(1) In the third quarter 2025, the Company completed its acquisition of Woodsville and recorded $14.0 million in CDI assets that will amortize over a ten-year period.

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Other intangible assets are amortized on a straight-line basis over their estimated lives, which range from five years to 11 years. Amortization expenses related to intangibles for the three months ended June 30, 2026 and 2025 were $582 thousand and $233 thousand, respectively. Amortization expenses related to intangibles for the six months ended June 30, 2026 and 2025 were $1.2 million and $466 thousand, respectively.

The estimated aggregate future amortization expense for other intangible assets remaining at June 30, 2026 is as follows:

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NOTE 13. LEASES

A lease is defined as a contract, or part of a contract, that conveys the right to control the use of identified property, plant or equipment for a period of time in exchange for consideration. Most of our leases are for branches, ATM locations, and office space and have terms extending through 2046. All leases are classified as operating leases, and are recognized on the consolidated balance sheets as a right-of-use (“ROU”) asset with a corresponding lease liability.

The following table presents the consolidated balance sheets classification of the ROU assets and lease liabilities:

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The calculated amount of the ROU assets and lease liabilities in the table above are impacted by the length of the lease term and the discount rate used for the present value of the minimum lease payments. The lease agreements often include one or more options to renew at our discretion. If at lease inception, we consider the exercising of a renewal option to be reasonably certain, we will include the extended term in the calculation of the ROU asset and lease liability.

The following table presents the weighted average lease term and discount rate of the leases:

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The following table represents lease costs and other lease information. As we have elected, for all classes of underlying assets, not to separate lease and non-lease components and instead to account for them as a single lease component, the variable lease cost primarily represents variable payments such as real estate taxes, common area maintenance and utilities.

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Future minimum payments for operating leases with initial or remaining terms of one year or more as of June 30, 2026 are, as follows:

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