Total cash and cash equivalents were $81.2 million at the third quarter 2024, compared to $101.8 million at end of the second quarter 2024. Interest-earning deposits held with other banks totaled $41.3 million at the third quarter 2024, compared to $62.2 million at end of the second quarter and yielded 5.54% and 5.65%, respectively. The change in cash balances was driven by utilization for loan originations and security purchases.

Total loans grew $17.6 million or 2% on an annualized basis. Commercial loans grew 1% primarily driven by a $42.7 million, or 10% annualized increase in commercial real estate partially offset by a $38.7 million, or 37% annualized, decrease in commercial and industrial loans driven by pay downs, payoffs and a mix shift to tax exempt and other. Residential real estate decreased by $18.2 million, or 8% annualized, compared to the second quarter 2024, as we focus on growing the portfolio with higher yielding commercial loans. Consumer loans increased $3.7 million, or 15% annualized, driven by continued growth in home equity line originations and drawdowns on established lines in the third quarter 2024.

Securities available for sale increased to $535.9 million compared to $512.9 million in the second quarter 2024 driven by $16.4 million in purchases partially offset by pay downs of $10.4 million, net amortization of $418 thousand, and matured and called securities of $96 thousand. Federal Home Loan Bank ("FHLB") stock decreased to $7.6 million in the third quarter 2024 compared to $14.8 million in the second quarter 2024 driven by $120.5 million in pay downs of FHLB borrowings. Fair value adjustments decreased the security portfolio by $52.3 million at the end of the third quarter compared to $68.5 million at the end of the second quarter. The weighted average yield of the total securities portfolio for the third quarter 2024 was 3.96% compared to 4.00% at the end of the previous quarter primarily due to the interest rate environment and change in the profile of the yield curve. As of the end of the second and third quarters 2024, respectively, our securities portfolio maintained an average life of nine and eight years with an effective duration of five years for both quarters and all securities remain classified as available for sale to provide flexibility in asset funding and other opportunities as they arise.

The allowance for credit losses continued to build, standing at $29.0 million at the end of the third quarter 2024 compared to $28.9 million at the end of the second quarter 2024. Our allowance for credit losses continues to be driven by a combination of portfolio loan growth, nominal credit movement and general macroeconomic trends. Non-accruing loans increased during the third quarter 2024 to $7.1 million from $6.3 million in the second quarter 2024 driven by commercial real estate and consumer installment changes partially offset by commercial installment and residential real estate decreases. The increase in non-accruing loans was centered in one well-secured owner-occupied CRE credit ($759 thousand) that is carrying no associated specific reserve after being reviewed for impairment. Total non-accruing loans to total loans was 0.23% in the third quarter compared to 0.20% in the second quarter 2024 which remains below peer group medians and averages. Charge-offs and specific reserves on non-accruing loans continue to be nominal, supported by relatively strong collateral values.

Total deposits increased $120.6 million to $3.3 billion in the third quarter 2024 from $3.1 billion at the second quarter 2024. Non-maturity deposits increased 15% on an annualized basis, or $104.4 million, to $2.4 billion driven by a $51.9 million increase in non-interest bearing demand, a $31.8 million increase in interest-bearing demand, and a $21.4 million increase in money market balances. Average yields on interest-bearing deposits increased 10 points to 2.45%.

Senior borrowings decreased $143.1 million to $186.2 million from the second quarter 2024 driven by increased deposits and cash balances available to fund loan growth and investment purchases. FHLB borrowings decreased $120.5 million to $133.8 million at the end of the third quarter 2024 compared to $254.3 million at the end of the second quarter 2024. Borrowings under the Federal Reserve's Bank Term Funding Program decreased $20.0 million to $45 million at the end of the third quarter 2024 compared to $65 million at the end of the second quarter 2024. Total borrowing costs decreased from 4.57% at the end of the second quarter 2024 to 4.38% at the end of the third quarter 2024.

The Company's book value per share was $30.12 as of September 30, 2024 compared to $28.81 as of June 30, 2024. Tangible book value per share (non-GAAP) was $22.02 at the end of the third quarter 2024, compared to $20.68 at the end of the second quarter 2024.

RESULTS OF OPERATIONS (September 30, 2024 compared to September 30, 2023)

The net interest margin was 3.15% in the third quarter 2024 compared to 3.18% in the third quarter 2023. The decrease was primarily driven by 42% higher cost of funds driven by the interest rate environment and growth in deposits, partially offset by lower borrowing balances and costs. The yield on loans grew 52 basis points to 5.54% in the third quarter 2024, up from 5.02% in the same quarter 2023. Costs of interest-bearing deposits grew 64 basis points to 2.45% from 1.81% in the third quarter 2023 driven by the continued competitive pricing within the interest rate environment.

Total interest and dividend income increased by 9.5% to $48.6 million in the third quarter 2024 primarily driven by the repricing of adjustable-rate loans and originations of higher fixed-rate loans within the commercial portfolio. The yield on commercial real estate loans grew to 5.67% in the third quarter 2024 from 5.34% in the third quarter 2023. Commercial and industrial yield grew to 6.98% in the third quarter 2024 compared to 6.56% in the third quarter 2023. Yields on earning assets grew to 5.24% compared to 4.90% in the third quarter 2023.

Total interest expense increased by 23% to $19.6 million in the third quarter 2024 compared to $15.9 million in the third quarter 2023 driven by an increase in cost of funds compounded with a $120.6 million increase in deposits and a shift in the mix of deposits from non-maturity deposits to time deposits. Non-maturity deposits decreased $38.2 million and time deposits increased $158.9 million in 2024 compared to the third quarter 2023. Borrowings decreased $120.9 million from the third quarter 2023 with a 21 basis point decrease in yields to 4.38% in the third quarter 2024.

The provision for credit losses was $228 thousand compared to $673 thousand in the third quarter 2023 as net charge-offs remain stable and minimal and credit quality continues to remain strong. Total accruing delinquent loans were down to 0.10% in the third quarter of 2024 from 0.16% in the third quarter 2023 and total delinquent and non-accruing loans were down to 0.33% from 0.39%. Total non-accruing loans to total loans remains flat year over year at 0.23%.

Non-interest income was $9.7 million in the third quarter 2024 compared to $8.6 million in the same quarter 2023. Wealth management income grew 17.2% to $4.1 million compared to $3.5 million in the third quarter 2023. Assets under management grew 20% to $2.8 billion from $2.3 billion in the third quarter 2023 driven by higher security valuations and an 8% growth in the managed accounts. Mortgage banking income increased $266 thousand compared to the third quarter 2023 driven by increased margins on our held-for-sale mortgage business.

Non-interest expense was $24.8 million in the third quarter 2024 compared to $22.8 million in the third quarter 2023 driven by salary and benefits, and other expenses. Salary and benefit expenses increased 10.5%, or $1.4 million, from the third quarter 2023 driven in part by stock compensation due to a $7.21 per share increase in stock price and a lower discount on postretirement liabilities year over year. Other expenses increased to $4.2 million from $3.7 million in the third quarter 2023 primarily due to increases in media relations and corporate press releases, software expenses, and debit and ATM card expenses.

Income tax expense for the third quarter 2024 was $1.4 million compared to $3.2 million in the third quarter 2023. The decrease in taxes represents a one-time multiple year tax refund on tax exempt loan income and a state apportionment adjustment. Excluding one-time charges, our effective tax rate for the period ended September 30, 2024 was consistent with the prior year.

BACKGROUND

Bar Harbor Bankshares (NYSE American:BHB) is the parent company of its wholly-owned subsidiary, Bar Harbor Bank & Trust. Founded in 1887, Bar Harbor Bank & Trust is a true community bank serving the financial needs of its clients for over 135 years. Bar Harbor Bank & Trust provides full-service community banking with office locations in all three Northern New England states of Maine, New Hampshire and Vermont. For more information, visit www.barharbor.bank.

FORWARD-LOOKING STATEMENTS

All statements, other than statements of historical fact, included in this release that address activities, events or developments that the Company expects, believes or anticipates will or may occur in the future are "forward-looking statements" within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, and are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. When used in this release the words "believe," "anticipate," "expect," "may," "will," "assume," "should," "predict," "could," "would," "intend," "targets," "estimates," "projects," "plans," and "potential," and other similar words and expressions of the future, are intended to identify such forward-looking statements, but other statements not based on historical information may also be considered forward-looking, including statements relating to Company's balance sheet management, our credit trends, our overall credit performance, and the Company's strategic plans, objectives, and intentions. All forward-looking statements are subject to risks, uncertainties, and other factors that may cause the actual results, performance, or achievements of the Company to differ materially from any results, performance, or achievements expressed or implied by such forward-looking statements. These forward-looking statements are subject to known and unknown risks, uncertainties and other factors that could cause the actual results to differ materially from the statements, including, but not limited to: (1) changes in general business and economic conditions on a national basis and in our markets throughout Northern New England; (2) changes in consumer behavior due to political, business, and economic conditions, including inflation and concerns about liquidity; (3) the possibility that our asset quality could decline or that we experience greater loan losses than anticipated; (4) the impact of liquidity needs on our results of operations and financial condition; (5) changes in the size and nature of our competition; (6) the effect of interest rate increases on the cost of deposits; (7) unanticipated weakness in loan demand, pricing or collectability; (8) the possibility that future credit losses are higher than currently expected due to changes in economic assumptions or adverse economic developments; (9) operational risks including, but not limited to, changes in information technology, cybersecurity incidents, fraud, natural disasters, climate change, war, terrorism, civil unrest, and future pandemics; (10) lack of strategic growth opportunities or our failure to execute on available opportunities; (11) our ability to effectively manage problem credits; (12) our ability to successfully develop new products and implement efficiency initiatives on time and with the results projected; (13) our ability to retain executive officers and key employees and their customer and community relationships; (14) regulatory, litigation, and reputational risks and the applicability of insurance coverage; (15) changes in the reliability of our vendors, internal control systems or information systems; (16) the potential impact of climate change; (17) changes in legislation or regulation and accounting principles, policies, and guidelines; (18) reductions in the market value or outflows of wealth management assets under management; and (19) changes in the assumptions used in making such forward-looking statements. Additional factors which could affect the forward-looking statements can be found in the Company's annual report on Form 10-K, quarterly reports on Form 10-Q, and current reports on Form 8-K filed with the Securities and Exchange Commission (the "SEC") and available on the SEC's website at https://www.sec.gov. The Company believes the forward-looking statements contained herein are reasonable; however, many of such risks, uncertainties, and other factors are beyond the Company's ability to control or predict and undue reliance should not be placed on any forward-looking statements, which are based on current expectations and speak only as of the date that they are made. Therefore, the Company can give no assurance that its future results will be as estimated. The Company does not intend to, and disclaims any obligation to, update or revise any forward-looking statement.

NON-GAAP FINANCIAL MEASURES

This document contains certain non-GAAP financial measures in addition to results presented in accordance with accounting principles generally accepted in the United States of America ("GAAP"). These non-GAAP measures are intended to provide the reader with additional supplemental perspectives on operating results, performance trends, and financial condition. Non-GAAP financial measures are not a substitute for GAAP measures; they should be read and used in conjunction with the Company's GAAP financial information. Because non-GAAP financial measures presented in this document are not measurements determined in accordance with GAAP and are susceptible to varying calculations, these non-GAAP financial measures, as presented, may not be comparable to other similarly titled measures presented by other companies. A reconciliation of non-GAAP financial measures to GAAP measures is provided below. In all cases, it should be understood that non-GAAP measures do not depict amounts that accrue directly to the benefit of shareholders. An item which management excludes when computing non-GAAP core earnings can be of substantial importance to the Company's results for any particular quarter or year. Each non-GAAP measure used by the Company in this report as supplemental financial data should be considered in conjunction with the Company's GAAP financial information.

The Company utilizes the non-GAAP measure of core earnings in evaluating operating trends, including components for core revenue and expense. These measures exclude amounts which the Company views as unrelated to its normalized operations, including gains/losses on securities, premises, equipment and other real estate owned, acquisition costs, restructuring costs, legal settlements, and systems conversion costs. Non-GAAP adjustments are presented net of an adjustment for income tax expense.

The Company also calculates core earnings per share based on its measure of core earnings. The Company views these amounts as important to understanding its operating trends, particularly due to the impact of accounting standards related to acquisition activity. Analysts also rely on these measures in estimating and evaluating the Company's performance. Management also believes that the computation of non-GAAP core earnings and core earnings per share may facilitate the comparison of the Company to other companies in the financial services industry. The Company also adjusts certain equity related measures to exclude intangible assets due to the importance of these measures to the investment community.

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CONTACTS

Josephine Iannelli; EVP, Chief Financial Officer & Treasurer; (207) 288-3314

BAR HARBOR BANKSHARES
SELECTED FINANCIAL HIGHLIGHTS - UNAUDITED

(1) Non-GAAP financial measure. Refer to the Reconciliation of Non-GAAP Financial Measures in tables I-J for additional information.
(2) All performance ratios are based on average balance sheet amounts, where applicable.
(3) Fully taxable equivalent considers the impact of tax-advantaged investment securities and loans.
(4) Earning assets includes non-accruing loans and interest-bearing deposits with other banks. Securities are valued at amortized cost.
(5) Current quarter annualized.

BAR HARBOR BANKSHARES
CONSOLIDATED BALANCE SHEETS - UNAUDITED

BAR HARBOR BANKSHARES
CONSOLIDATED LOAN & DEPOSIT ANALYSIS - UNAUDITED

LOAN ANALYSIS

*Indicates ratio greater than 100%

DEPOSIT ANALYSIS

BAR HARBOR BANKSHARES
CONSOLIDATED STATEMENTS OF INCOME - UNAUDITED

BAR HARBOR BANKSHARES
CONSOLIDATED STATEMENTS OF INCOME (5 Quarter Trend) - UNAUDITED

BAR HARBOR BANKSHARES
AVERAGE YIELDS AND COSTS (Fully Taxable Equivalent (Non-GAAP) - Annualized) - UNAUDITED

(1) Non-GAAP financial measure. Refer to the Reconciliation of Non-GAAP Financial Measures in tables I-J for additional information.

BAR HARBOR BANKSHARES
AVERAGE BALANCES - UNAUDITED

(1) Total average interest-bearing deposits with other banks is net of Federal Reserve daily cash letter.
(2) Average balances for securities available-for-sale are based on amortized cost.
(3)Total average loans include non-accruing loans and loans held for sale.

BAR HARBOR BANKSHARES
ASSET QUALITY ANALYSIS - UNAUDITED

BAR HARBOR BANKSHARES
RECONCILIATION OF NON-GAAP FINANCIAL MEASURES AND SUPPLEMENTARY DATA - UNAUDITED

BAR HARBOR BANKSHARES
RECONCILIATION OF NON-GAAP FINANCIAL MEASURES AND SUPPLEMENTARY DATA - UNAUDITED

(1) Assumes a marginal tax rate of 23.82% in the second and third quarter 2024, 24.01% in the first quarter 2024 and the fourth quarter 2023, and 23.80% in the first three quarters of 2023.
(2) Non-GAAP financial measure.
(3) Tangible shareholders' equity is computed by taking total shareholders' equity less the intangible assets at period-end. Tangible assets is computed by taking total assets less the intangible assets at period-end.
(4) All performance ratios are based on average balance sheet amounts, where applicable.
(5) Efficiency ratio is computed by dividing core non-interest expense net of franchise taxes and intangible amortization divided by core revenue on a fully taxable equivalent basis.

SOURCE: Bar Harbor Bank & Trust

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