BHB US Equity☆

ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion is management's analysis to assist in the understanding and evaluation of the consolidated financial condition and results of operations of the Company. It should be read in conjunction with the consolidated financial statements and footnotes and selected financial data presented elsewhere in this Annual Report. Within the tables presented, certain columns and rows may not sum due to the use of rounded numbers for disclosure purposes. The detailed financial discussion that follows focuses on 2025 results compared to 2024. For a discussion of 2024 results compared to 2023, see the Company's Annual Report on Form 10-K for the year ended December 31, 2024.

GENERAL

The Company is a bank holding company headquartered in Maine, providing a broad array of banking and nonbanking products and services to businesses and consumers primarily within our three-state footprint. The Company's primary sources of revenue, through the Bank, are net interest income (predominantly from loans and investment securities) and noninterest income (principally fees and other revenue from financial services provided to customers or ancillary services tied to loans and deposits).

ANNUAL PERFORMANCE OVERVIEW

Financial Highlights (For the year ended December 31, 2025 compared to the same period of 2024)

​

● $36.9 million net income compared to $43.5 million

● $2.31 diluted earnings per share compared to $2.84

● 3.41% net interest margin compared to 3.15%

● 59.23 efficiency ratio compared to 61.83%

● $4.7 billion total assets compared to $4.1 billion

● 6% organic annualized commercial loan growth

​

Acquisition of Guaranty Bancorp, Inc.

On August 1, 2025, we completed our acquisition of Guaranty Bancorp, Inc., the parent company of Woodsville Guaranty Savings Bank (“Woodsville”). After purchase accounting fair value adjustments, the acquisition added $658.1 million of total assets, including $413.4 million of loans, as well as $641.2 million of total liabilities, primarily consisting of $531.3 million in deposits and $109.2 million in borrowings and subordinated debt. Based on the $39.2 million consideration paid the Company recorded goodwill of $22.3 million and core deposit intangibles of $14.0 million in other intangibles related to the acquisition.

​

39

Table of Contents

SELECTED FINANCIAL DATA

​ ​ ​ ​ ​ ​ ​ ​ ​ ​

​ ​ At or For the Years Ended December 31,

(in millions, except ratios and share data) ​ ​ ​ 2025 ​ ​ ​ 2024 ​ ​ ​ 2023

Financial Condition Data: ​ ​ ​ ​ ​ ​ ​ ​ ​

Allowance for credit losses ​ 34 ​ 29 ​ 28

Total goodwill and intangible assets ​ 158 ​ 123 ​ 124

​ ​ ​ ​ ​ ​ ​ ​ ​ ​

Operating Data: ​ ​ ​ ​ ​ ​

Total interest and dividend income ​ $ 210 ​ $ 189 ​ $ 174

Total interest expense ​ 75 ​ 75 ​ 57

Non-interest income ​ 34 ​ 37 ​ 35

Provision for credit losses ​ 5 ​ 2 ​ 3

Total non-interest expense ​ 118 ​ 96 ​ 93

Income tax expense ​ 9 ​ 9 ​ 12

​ ​ ​ ​ ​ ​ ​ ​ ​ ​

Ratios and Other Data: ​ ​ ​ ​ ​ ​

Per Common Share Data ​ ​ ​ ​ ​ ​

Common stock price: ​ ​ ​ ​ ​ ​

​ ​ ​ ​ ​ ​ ​ ​ ​ ​

Weighted average common shares outstanding (in thousands): ​ ​ ​ ​ ​ ​

​

40

Table of Contents

​ ​ ​ ​ ​ ​ ​ ​

​ ​ At or For the Years Ended December 31,

(in millions, except ratios and share data) ​ ​ ​ 2025 ​ ​ ​ 2024 ​ ​ ​ 2023

Performance Ratios:(3)(4) ​ ​ ​ ​ ​ ​ ​

​ ​ ​ ​ ​ ​ ​ ​

Organic Growth Ratios: ​ ​ ​ ​

Total commercial loans 6 % 9 % 6 %

Total loans 1 5 3 ​

Total deposits 1 4 3 ​

​ ​ ​ ​ ​ ​ ​ ​

Asset Quality and Condition Ratios: ​ ​ ​ ​

Non-accruing loans/total loans 0.32 % 0.22 % 0.18 %

Net charge-offs (recoveries)/average loans 0.03 0.01 — ​

Allowance for credit losses/total loans 0.94 0.91 0.94 ​

​ ​ ​ ​ ​ ​ ​ ​

Capital Ratios: ​ ​ ​ ​

Tier 1 capital to average assets - Company 9.45 % 10.30 % 9.70 %

Tier 1 capital to risk-weighted assets - Company 11.54 12.06 11.96 ​

(2) Net revenue is defined as net interest income plus non-interest income.

​

41

Table of Contents

AVERAGE BALANCES AND AVERAGE YIELDS/RATES

The following table presents average balances (calculated using a daily average) and average rates and yields on a fully taxable equivalent basis for the periods indicated:

​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​

​ ​ Year Ended December 31,

Assets ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​

Loans: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​

Cash and due from banks ​ ​ 35 ​ ​ ​ ​ ​ ​ ​ ​ 32 ​ ​ ​ ​ ​ ​ ​ ​ 34 ​ ​ ​ ​ ​

Other assets ​ ​ 187 ​ ​ ​ ​ ​ ​ ​ ​ 182 ​ ​ ​ ​ ​ ​ ​ 179 ​ ​ ​ ​ ​

Total assets ​ $ 4,337 ​ ​ ​ ​ ​ ​ $ 3,986 ​ ​ ​ ​ ​ ​ $ 3,934 ​ ​ ​ ​ ​

​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​

Liabilities ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​

Non-interest bearing demand deposits ​ 614 ​ ​ ​ ​ ​ 571 ​ ​ ​ ​ ​ 619 ​ ​ ​ ​

Other liabilities ​ 59 ​ ​ ​ ​ ​ 65 ​ ​ ​ ​ ​ 67 ​ ​ ​ ​

Total liabilities ​ 3,844 ​ ​ ​ ​ ​ 3,540 ​ ​ ​ ​ ​ 3,522 ​ ​ ​ ​

​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​

Total shareholders' equity ​ 493 ​ ​ ​ ​ ​ 446 ​ ​ ​ ​ ​ 412 ​ ​ ​ ​

​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​

​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​

Net interest margin ​ ​ ​ ​ 3.41 ​ ​ ​ ​ ​ 3.15 ​ ​ ​ ​ ​ 3.29 ​

(2) The average balance for securities is based on amortized cost.

42

Table of Contents

RATE/VOLUME ANALYSIS

The following table presents the effects of rate and volume changes on the fully taxable equivalent net interest income. Tax exempt interest revenue is shown on a tax-equivalent basis for proper comparison. For each category of interest- earning assets and interest-bearing liabilities, information is provided with respect to changes attributable to (1) changes in rate (change in rate multiplied by prior year volume), (2) changes in volume (change in volume multiplied by prior year rate), and (3) changes in volume/rate (change in rate multiplied by change in volume) have been allocated proportionately based on the absolute value of the change due to the rate and the change due to volume.

​

​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​

​ ​ Increases (Decreases) due to ​ Increases (Decreases) due to

Interest income: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​

Loans: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​

​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​

Interest expense: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​

Deposits: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​

​

43

Table of Contents

NON-GAAP FINANCIAL MEASURES

​

Our accounting and reporting policies conform to accounting principles generally accepted in the United States of America ("GAAP") and the prevailing practices in the financial services industry. However, we also evaluate our performance by reference to certain additional financial measures discussed in this Annual Report that we identify as being “non-GAAP financial measures.” In accordance with SEC rules, we classify a financial measure as being a non-GAAP financial measure if that financial measure excludes or includes amounts, or is subject to adjustments that have the effect of excluding or including amounts, that are included or excluded, as the case may be, in the most directly comparable measure calculated and presented in accordance with GAAP as in effect from time to time in the United States in our statements of income, balance sheets or statements of cash flows. Non-GAAP financial measures do not include operating and other statistical measures or ratios or statistical measures calculated using exclusively either financial measures calculated in accordance with GAAP, operating measures or other measures that are not non-GAAP financial measures or both.

​

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 Annual Report 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 herein. 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 financial measures 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 Annual Report as supplemental financial data should be considered in conjunction with the Company's GAAP financial information. The Company utilizes these non-GAAP financial measures for purposes of measuring our performance against our peer group and other financial institutions and analyzing our internal performance. We also believe these non-GAAP financial measures help investors better understand the Company’s operating performance and trends and allow for better performance comparisons to other banks. In addition, these non-GAAP financial measures remove the impact of unusual items that may obscure trends in the Company’s underlying performance.

The non-GAAP financial measures that we discuss in this Annual Report should not be considered in isolation or as a substitute for the most directly comparable or other financial measures calculated in accordance with GAAP. Moreover, the manner in which we calculate the non-GAAP financial measures that we discuss in this Annual Report may differ from that of other companies reporting measures with similar names. You should understand how such other banking organizations calculate their financial measures similar or with names similar to the non-GAAP financial measures we have discussed in this Annual Report when comparing such non-GAAP financial measures. The following reconciliation table provides a more detailed analysis of these, and reconciliation for, each of non-GAAP financial measures.

​

44

Table of Contents

RECONCILIATION OF NON-GAAP FINANCIAL MEASURES

​

The following table summarizes the reconciliation of non-GAAP items for the time periods presented:

​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​

​ ​ ​ Year Ended December 31,

(in thousands) ​ ​ ​ Calculations ​ 2025 ​ ​ ​ ​ 2024 ​ ​ ​ ​ 2023

Non-recurring items: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​

Loss (gain) on available-for-sale debt securities (6) ​ 5,329 ​ (50) ​ (34)

Gain on sale of premises and equipment, net ​ 257 ​ (192) ​ 182

Provision on non-PCD acquired loans ​ ​ ​ 3,954 ​ ​ — ​ ​ —

Acquisition, conversion and other expenses ​ 10,592 ​ 20 ​ 283

Total non-recurring items ​ ​ ​ 15,194 ​ ​ (169) ​ ​ 327

​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​

Loss (gain) on available-for-sale debt securities (6) ​ 5,329 ​ (50) ​ (34)

​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​

Non-recurring expenses: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​

Gain on sale of premises and equipment, net ​ (257) ​ 192 ​ (182)

Acquisition, conversion and other expenses ​ (10,592) ​ (20) ​ (283)

Total non-recurring expenses ​ ​ ​ (10,849) ​ ​ 172 ​ ​ (465)

​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​

​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​

​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​

(in millions) ​ ​ ​ ​ ​ ​

Average shareholders' equity (G) 493 ​ 446 ​ 412

Average tangible shareholders' equity(2)(3) (H) 356 ​ 323 ​ 288

Tangible shareholders' equity, period-end(2)(3) (I) 374 ​ 335 ​ 308

​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​

​

45

Table of Contents

​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​

​ ​ ​ Year Ended December 31, ​

(in thousands) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​

​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​

Adjusted earnings per share, diluted(2) (A/L) $ 3.27 ​ $ 2.84 ​ $ 2.95 ​

Tangible book value per share, period-end(2) (I/K) ​ 22.41 ​ ​ 21.93 ​ ​ 20.28 ​

​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​

Performance ratios(4) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​

Return on assets ​ ​ ​ 0.85 % ​ 1.09 % ​ 1.14 %

Adjusted return on assets(2) ​ (A/F) ​ 1.20 ​ ​ 1.09 ​ ​ 1.15 ​

Pre-tax, pre-provision return on assets(2) ​ (S/F) ​ 1.18 ​ ​ 1.37 ​ ​ 1.53 ​

Adjusted return on equity(2) ​ (A/G) ​ 10.58 ​ ​ 9.72 ​ ​ 10.96 ​

Adjusted return on tangible equity(1)(2) ​ (A+Q)/H ​ 14.94 ​ ​ 13.67 ​ ​ 15.96 ​

​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​

Supplementary data (in thousands) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​

Franchise taxes included in non-interest expense ​ (O) ​ 408 ​ ​ 538 ​ ​ 638 ​

Intangible amortization ​ (Q) ​ 1,514 ​ ​ 932 ​ ​ 932 ​

(2) Non-GAAP financial measure.

​

46

Table of Contents

COMPARISON OF FINANCIAL CONDITION AT DECEMBER 31, 2025 AND 2024

Cash and cash equivalents

Total cash and cash equivalents at December 31, 2025 were $80.8 million, compared to $72.2 million at December 31, 2024. Interest-earning deposits held with other banks totaled $35.9 million at year-end 2025 compared to $37.9 million at year-end 2024 carrying a yield of 4.53% in 2025 versus 5.54% in 2024.

​

Available-for-sale debt securities

Securities totaled $597.4 million at year-end 2025 and $521.0 million at year-end 2024. The increase is primarily due to $115.0 million in securities from the Woodsville acquisition. During 2025, security purchases totaled $91.0 million and were offset by $43.6 million in sales and $99.8 million of maturities, calls and pay-downs of amortizing securities. The sales primarily consisted of $40.8 million of lower yielding securities from the acquisition of Woodsville. Fair value adjustments decreased the security portfolio by $47.5 million in 2025 compared to a $62.3 million unrealized loss in 2024. The weighted average yield of the securities portfolio was 3.97% as of December 31, 2025 compared to 3.94% at year-end 2024. At the end of 2025, our securities portfolio had an average life of 7.1 years with an effective duration of 5.2 years and an average life of 8.5 and an effective duration of 4.8 at year-end 2024. All securities remain classified as available for sale to provide flexibility in loan funding and management of our cost of funds.

​

Federal Home Loan Bank stock

FHLB Stock was $11.3 million at year-end 2025, compared to $12.2 million at year-end 2024. Activity during 2025 consisted of $4.4 million acquired from Woodsville and purchases of $11.7 million offset by redemptions of $17.0 million due to paydowns of wholesale borrowings.

​

Loans held for sale

Loans held for sale increased to $5.3 million at year-end 2025 compared to $1.2 million at year-end 2024. The increase was driven by the interest rate environment and demand for wholesale loans. During 2025 we sold $52.4 million of loans held for sale resulting in a net gain of $724 thousand, during 2024 we sold $54.9 million of loans held for sale resulting in a net gain of $663 thousand.

​

Loans

Loans were $3.6 billion at year-end 2025, compared to $3.1 billion at year-end 2024. Loan growth was driven by the $413.4 million in loans acquired from Woodsville. Total commercial loans in 2025 were $2.4 billion, growing 6% on an annualized basis, excluding the impact of acquired loans, compared to $2.1 billion at year-end 2024. Commercial growth included $690.9 million in originations during the year, partially offset by payoffs and paydowns. Total residential loans increased to $1.1 billion at year-end 2025 from $888.3 million at year-end 2024, primarily as a result of $248.5 million in acquired loans. Consumer loans were $128.8 million at year-end 2025 compared to $102.2 million at year-end 2024 and included $21.4 million in loans acquired from Woodsville.

​

Allowance for Credit Losses on Loans

The allowance for credit losses on loans was $34.1 million at December 31, 2025 compared to $28.7 million as of December 31, 2024. The increase was primarily driven by $4.0 million in reserves on non-PCD loans and $1.6 million in reserves on PCD loans from the Woodsville acquisition. Net charge-offs were $950 thousand in 2025 compared to $353 thousand in 2024 driven by the resolution of three commercial and industrial loans. The net charge-offs to average loans ratio remains strong at 0.03% in 2025 compared to 0.01% in 2024.

​

Premises and Equipment

Premises and equipment increased $7.0 million at December 31, 2025 to $58.2 million compared to $51.2 million at December 31, 2024, driven by $6.6 million in acquired assets from the Woodsville acquisition. We sold $406 thousand of premises held for sale in 2025 that resulted in a gain of $189 thousand. The gain from premises held for sale was offset by the disposal of certain acquired assets resulting in a loss of $446 thousand for a net loss on premises and equipment of $257 thousand.

​

​

​

47

Table of Contents

Goodwill and Other Intangibles

Goodwill increased to $141.8 million in 2025 compared to $119.5 million at year-end 2024. During the year the Company acquired Woodsville which led to the increase in goodwill of $22.3 million. Other intangibles increased $12.5 million in 2025 driven by $14.0 million from the acquisition partially offset by amortization of $1.5 million.

​

Other Assets

Total other assets increased $16.6 million to $200.8 million at December 31, 2025 from $184.2 million as of December 31, 2024. The increase is driven by the cash surrender value of bank-owned life insurance income which increased $14.4 million primarily due to the acquisition of Woodsville. Deferred tax assets increased $6.6 million and was offset in part by other assets decreasing $4.4 million.

​

Deposits

Total deposits increased $553.6 million to $3.8 billion at the end of 2025 compared to $3.3 billion at the end of 2024. The overall increase in deposits is due to the acquisition of $531.3 million from Woodsville. Non-maturity deposits, excluding acquired deposits, increased $38.9 million during 2025 primarily due to interest-bearing demand deposits. Excluding the impact of acquired deposits, time deposits decreased $16.6 million during the year primarily due to $86.0 million in brokered deposit maturities.

Borrowings

Total borrowings decreased $21.0 million to $269.6 million at December 31, 2025 compared to $290.6 million as of December 31, 2024. Acquired FHLB borrowings totaled $98.0 million, of which $15.0 million of advances were paid off shortly after the acquisition date. Senior borrowings decreased $33.2 million during the year as loan paydowns, deposits and proceeds from the investment portfolio were utilized to decrease borrowing levels. Subordinated borrowings increased $12.2 million primarily due to $11.2 million of subordinated borrowings from the Woodsville acquisition.

​

Derivative Financial Instruments and Other Liabilities

Other liabilities totaled $60.4 million at December 31, 2025 compared to $66.6 million as of December 31, 2024. The decrease was primarily driven by a $10.0 million reduction in the fair value of customer loan swaps, partially offset by increased unpaid services and $2.6 million in unearned income related to contract negotiations from the Woodsville acquisition.The reserve for unfunded commitments increased $796 thousand at the end of 2025 to $3.8 million compared to $3.1 million at December 31, 2024, which are also recorded in other liabilities.

Equity

Total equity was $532.5 million at year-end 2025, compared with $458.4 million at year-end 2024. Book value per share was $31.88 as of December 31, 2025 compared with $30.00 at December 31, 2024. Upon the acquisition of Woodsville each share of Guaranty’s common stock was converted into the right to receive 1.85 shares of the Company’s common stock, with cash paid in lieu of any fractional shares. The total consideration paid by the Company was $39.2 million and in total the Company issued 1.4 million shares of its common stock.

​

During 2025 and 2024, the Company declared and distributed regular cash dividends on its common stock in the aggregate amounts of $20.4 million and $17.8 million, respectively. The Company’s 2025 dividend payout ratio amounted to 44%, compared with 42% in 2024. Total cash dividends paid increased 7% in 2025 and was $1.26 per share of common stock, compared with $1.18 per share of common stock in 2024.

The Company and the Bank remained well-capitalized under regulatory guidelines at period end as further described in Note 13 – Shareholders’ Equity and Earnings Per Common Share on the Consolidated Financial Statements.

COMPARISON OF OPERATING RESULTS FOR THE YEARS ENDED DECEMBER 31, 2025 AND 2024

Net Interest Income

Net interest income for 2025 was $134.5 million compared with $113.8 million in 2024. The net interest margin was 3.41% in 2025 compared to 3.15% in the prior year. The yield on earning assets totaled 5.28% at December 31, 2025 compared to 5.18% at December 31, 2024. The yield on loans was 5.53% in 2025 and 5.40% in 2024 primarily due to the acquisition of $413.4 million loans. Total loan yield growth was partially offset by a decrease in the commercial and

48

Table of Contents

industrial yield to 6.44% for 2025 from 6.75% in 2024 driven by the decrease in rates of adjustable-rate loans. Costs of interest-bearing deposits decreased in 2025 to 2.17% from 2.37% in 2024 while borrowing costs increased to 4.69% in 2025 from 4.40% in 2024.

Provision for Credit Losses

The provision for credit losses on loans was $4.6 million at December 31, 2025 compared to $955 thousand at December 31, 2024. The increase was due to the $4.0 million reserve on non-PCD loans as a result of the Woodsville acquisition. The provision for credit losses on available-for-sale debt securities was $636 thousand in 2025 compared to $1.2 million in 2024. The provision for available-for-sale-debt securities was due to the deterioration in scheduled interest payments and estimated future cash flows of two corporate securities in 2024.

Non-Interest Income

Non-interest income in 2025 was $34.6 million compared to $36.9 million in 2024. Trust management fees were $16.1 million in 2025 compared to $15.7 million in 2024 due to higher assets under management of $3.0 billion at year-end 2025 compared to $2.8 billion at year-end 2024. Customer service fees increased 8% to $16.0 million in 2025 from $14.8 million in 2024 driven by increased deposit balances due to the Woodsville acquisition. Customer derivative income increased $1.1 million year-over-year primarily driven by the interest rate environment and swap timing. The overall decrease was driven by the Company recognizing impairment losses of $4.6 million on available-for-sale debt securities in 2025. For further detail see Note 3 – Available-for-Sale Debt Securities on the Consolidated Financial Statements.

​

Non-Interest Expense

Non-interest expense increased to $117.7 million in 2025 compared to $96.0 million in 2024. The increase was primarily due to $10.6 million in acquisition, conversion and other expenses related to the Woodsville acquisition. Salaries and benefits expense increased $5.7 million to $60.5 million in 2025 mostly due to increased personnel from the acquisition. Other expenses increased $5.5 million driven by a $1.5 million increase in the provision for unfunded commitments, $742 thousand increase in occupancy and equipment and $582 thousand in amortization of other intangibles all of which are related to the acquisition of Woodsville.

Income Tax Expense

Income tax expense was $9.0 million for the year ended December 31, 2025 compared to $9.1 million for the year ended December 31, 2024. The effective tax rate was 19.6% in 2025 compared to 17.26% in 2024.

LIQUIDITY AND CASH FLOWS

Liquidity is measured by the ability to meet short-term cash needs at a reasonable cost or minimal loss. Favorable sources of liabilities are sought to maintain prudent levels of liquid assets in order to satisfy varied liquidity demands. Besides serving as a funding source for maturing obligations, liquidity provides flexibility in responding to customer initiated needs. Many factors affect the ability to meet liquidity needs, including variations in the markets served by its network of offices, its mix of assets and liabilities, reputation and credit standing in the marketplace, and general economic conditions.

The liquidity position is actively managed through target ratios established under our liquidity and funding policy. Continual monitoring of these ratios, by using historical data and through forecasts under multiple rate and stress scenarios, allows the ability to employ strategies necessary to maintain adequate liquidity. The policy is to maintain a liquidity position of at least 8% of total assets. A portion of the deposit base has been historically seasonal in nature, with balances typically declining in the winter months through late spring, during which period the liquidity position tightens.

A liquidity contingency plan is approved by the Bank’s Board of Directors. This plan addresses the steps that would be taken in the event of a liquidity crisis, and identifies other sources of liquidity available to the Company. Management believes that the level of liquidity is sufficient to meet current and future funding requirements. However, changes in economic conditions, including consumer savings habits and availability or access to the brokered deposit market could potentially have a significant impact on the liquidity position.

The existing cash and cash equivalents (including an interest-bearing deposit at the FRB Boston), securities available for sale and cash flows from operating activities will be sufficient to meet anticipated cash needs for at least the next

49

Table of Contents

12 months. Future working capital needs will depend on many factors, including the rate of business and revenue growth. To the extent cash and cash equivalents, securities available for sale and cash flows from operating activities are insufficient to fund future activities, the need to raise additional funds through debt arrangements or public or private debt or equity financings may be utilized. The need to raise additional funds may be needed in the event it is determined in the future to effect one or more acquisitions of banks or businesses. If additional funding is required, we may not be able to obtain debt arrangements or to effect an equity or debt financing on terms acceptable or at all.

Capital Resources

Consistent with our long-term goal of operating a sound and profitable organization, at December 31, 2025, we continue to be a “well-capitalized” financial institution according to applicable regulatory standards. Management believes this to be vital in promoting depositor and investor confidence and providing a solid foundation for future growth.

At December 31, 2025, available same-day liquidity totaled approximately $1.0 billion, including cash, borrowing capacity at FHLB and the Federal Reserve Discount Window and various lines of credit. Additional sources of liquidity include cash flows from operations, wholesale deposits, cash flow from the Company's amortizing securities and loan portfolios. At December 31, 2025, we had unused borrowing capacity at the FHLB of $259.1 million, unused borrowing capacity at the Federal Reserve of $94.0 million and unused lines of credit totaling $41.0 million.

​

Purchase Obligations

In the normal course of conducting our banking and financial services business, and in connection with providing products and services to our customers, a variety of traditional third-party contracts for support services have been entered into. Examples of such contractual agreements include, but are not limited to: services providing core banking systems, ATM and debit card processing, trust services software, accounting software and the leasing of T-1 telecommunication lines and other technology infrastructure supporting our network. These types of purchase obligations that will come due during 2026 is approximately $10.3 million as of December 31, 2025 which is expected to be funded by cash flows generated from our operations.

Impact of Inflation and Changing Prices

A banking organization’s assets and liabilities are primarily monetary. Changes in the rate of inflation do not have as great an impact on the financial condition of a bank as do changes in interest rates. Moreover, interest rates do not necessarily change at the same percentage as inflation. Accordingly, changes in inflation are not expected to have a material impact on the Company.

The FOMC often applies contractionary monetary policies during times of high inflation, resulting in elevated interest rates. Elevated interest rates may lower the market value of existing balance sheet assets and often result in a significant unrealized loss position. These lower market values may negatively affect the Bank’s liquidity position as it results in a lower value of the Bank’s liquid assets.

IMPACT OF NEW ACCOUNTING PRONOUNCEMENTS

Please refer to the notes on Recently Adopted Accounting Principles and Future Application of Accounting Pronouncements in Note 1 – Summary of Significant Accounting Policies of the Consolidated Financial Statements.

50

Table of Contents

CRITICAL ACCOUNTING POLICIES AND ESTIMATES

Note 1 – Summary of Significant Accounting Policies to our audited Consolidated Financial Statements for the year ended December 31, 2025 contains a summary of significant accounting policies. Various elements of these accounting policies, by their nature, are subject to estimation techniques, valuation assumptions and other subjective assessments. Certain assets are carried in the consolidated statements of financial condition at estimated fair value or the lower of cost or estimated fair value. Policies with respect to the methodology used to determine the allowance for credit losses is a critical accounting policy and estimate because of its importance to the presentation of our financial condition and results of operations. The critical accounting policy involves a higher degree of complexity and requires management to make difficult and subjective judgments which often require assumptions or estimates about highly uncertain matters. The use of different judgments, assumptions, and estimates could result in material differences in the results of operations or financial condition.

Allowance for credit losses on loans (the “allowance”)

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 (“ACL”) 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. 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. 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.

Assumptions evaluated each reporting period include the probability of default and loss given default assumptions, macroeconomic forecast variables, prepayment speed assumptions, and the determination of the qualitative factors. As of December 31, 2025 management utilized National Unemployment Rate, Commercial Real Estate Price Index and House Price Index in their economic forecast. Hypothetically, if the economic forecast was deteriorated by 100bps compared to management’s base scenario the impact to the allowance would be an increase of $1.3 million. Hypothetically, if the economic forecast improved by 100bps compared to management’s base scenario, the impact to the allowance would be a decrease of $1.3 million. Hypothetically, if prepayment speeds doubled there would be a decrease to the allowance of $2.6 million. Hypothetically, if prepayment speeds were decreased by half there would be an increase to the allowance of $2.9 million.

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Market Risk

Market risk is the risk of loss in a financial instrument arising from adverse changes in market rates/prices, such as interest rates, foreign currency exchange rates, commodity prices and equity prices. The most significant market risk that affects us is interest rate risk. Other types of market risk do not arise in the normal course of our business activities.

​

The responsibility for interest rate risk management oversight is the function of the Bank’s Asset and Liability Committee, or ALCO, chaired by the Bank’s Chief Financial Officer and composed of various members of the Bank’s senior management. ALCO meets regularly to review balance sheet structure, formulate strategies in light of current and expected economic conditions, adjust product prices as necessary, implement policy, monitor liquidity, and review performance against guidelines established to control exposure to the various types of inherent risk.

​

Interest Rate Risk

Interest rate risk can be defined as an exposure to movement in interest rates that could have an adverse impact on the Bank's net interest income. Interest rate risk arises from the imbalance in the re-pricing, maturity and/or cash flow

51

Table of Contents

characteristics of assets and liabilities. Management’s objectives are to measure, monitor and develop strategies in response to the interest rate risk profile inherent in the Bank’s balance sheet. The objectives in managing the Bank's balance sheet are to preserve the sensitivity of net interest income to actual or potential changes in interest rates, and to enhance profitability through strategies that promote sufficient reward for understood and controlled risk.

​

The Bank’s interest rate risk measurement and management techniques incorporate the re-pricing and cash flow attributes of balance sheet and off-balance sheet instruments as each relate to current and potential changes in interest rates. The level of interest rate risk, measured in terms of the potential future effect on net interest income, is determined through the use of modeling and other techniques under multiple interest rate scenarios. Interest rate risk is evaluated in depth on a quarterly basis and reviewed by ALCO and the Bank’s Board of Directors.

​

The Bank's Asset Liability Management Policy, approved annually by the Bank’s Board of Directors, establishes interest rate risk limits in terms of variability of net interest income under rising, flat, and decreasing rate scenarios. It is the role of the ALCO to evaluate the overall risk profile and to determine actions to maintain and achieve a posture consistent with policy guidelines.

​

Interest Rate Sensitivity Modeling:

The Bank utilizes an interest rate risk model widely recognized in the financial industry to monitor and measure interest rate risk. The model simulates the behavior of interest income and expense for all balance sheet and off-balance sheet instruments, under different interest rate scenarios together with a dynamic future balance sheet. Interest rate risk is measured in terms of potential changes in net interest income based upon shifts in the yield curve.

​

The interest rate risk sensitivity model requires that assets and liabilities be broken down into components as to fixed, variable, and adjustable interest rates, as well as other homogeneous groupings, which are segregated as to maturity and type of instrument. The model includes assumptions about how the balance sheet is likely to evolve through time and in different interest rate environments. The model uses contractual re-pricing dates for variable products, contractual maturities for fixed rate products, and product-specific assumptions for deposit accounts, such as money market accounts, that are subject to re-pricing based on current market conditions. Re-pricing margins are also determined for adjustable rate assets and incorporated in the model. Investment securities and borrowings with option provisions are examined on an individual basis in each rate environment to estimate the likelihood of exercise. Prepayment assumptions for mortgage loans are calibrated using specific Bank experience while mortgage-backed securities are developed from industry standard models of prepayment speeds, based upon similar coupon ranges and degree of seasoning. Cash flows and maturities are then determined, and for certain assets, prepayment assumptions are estimated under different interest rate scenarios. Interest income and interest expense are then simulated under several hypothetical interest rate conditions.

​

The simulation models a parallel and pro rata shift in rates over a 12-month period. Using this approach, we are able to produce simulation results that illustrate the effect that both a gradual “rate ramp” and a “rate shock” have on earnings expectations. Our net interest income sensitivity analysis reflects changes to net interest income assuming no balance sheet growth and a parallel shift in interest rates. All rate changes were “ramped” over the first 12-month period and then maintained at those levels over the remainder of the simulation horizon. Changes in net interest income based upon these simulations are measured against the flat interest rate scenario.

​

As of December 31, 2025, interest rate sensitivity modeling results indicate that the Bank’s balance sheet was asset sensitive over the one- and two-year horizons.

​

52

Table of Contents

The following table presents the changes in sensitivities on net interest income for the periods ended December 31, 2025 and 2024:

​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​

(in thousands, except ratios) ​ $ Change ​ % Change ​ ​ $ Change ​ % Change

At December 31, 2025 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​

At December 31, 2024 ​ ​ ​ ​ ​ ​ ​ ​

​

Assuming short-term and long-term interest rates decline 200 basis points from current levels (i.e., a parallel yield curve shift) over the next twelve months and the Bank’s balance sheet structure and size remain at current levels, management believes net interest income will deteriorate over the one year horizon while deteriorating further from that level over the two-year horizon.

​

Assuming short-term and long-term interest rates increase 200 basis points from current levels (i.e., a parallel yield curve shift) over the next twelve months and the Bank’s balance sheet structure and size remain at current levels, management believes net interest income will improve over the one year horizon while improving further from that level over the two-year horizon.

​

As compared to December 31, 2024, asset sensitivity in year one is higher in up rate scenarios but slightly lower in down rate scenarios, while in year two, sensitives are higher in both up and down rate scenarios.

​

The preceding sensitivity analysis does not represent a forecast and should not be relied upon as being indicative of expected operating results. These hypothetical estimates are based upon numerous assumptions including: the nature and timing of interest rate levels and yield curve shape, prepayment speeds on loans and securities, deposit rates, pricing decisions on loans and deposits, reinvestment or replacement of asset and liability cash flows, and renegotiated loan terms with borrowers. While assumptions are developed based upon current economic and local market conditions, we cannot make any assurances as to the predictive nature of these assumptions including how customer preferences or competitor influences might change.

​

As market conditions vary from those assumed in the sensitivity analysis, actual results may also differ due to: prepayment and refinancing levels deviating from those assumed; the impact of interest rate changes, caps or floors on adjustable rate assets; the potential effect of changing debt service levels on customers with adjustable rate loans; depositor early withdrawals and product preference changes; and other such variables. The sensitivity analysis also does not reflect additional actions that the Bank’s Senior Executive Team and Board of Directors might take in responding to or anticipating changes in interest rates, and the anticipated impact on the Bank’s net interest income.

​

53

Table of Contents

ITEM 8. CONSOLIDATED FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

​

​

Shareholders and the Board of Directors of Bar Harbor Bankshares and Subsidiaries

Bar Harbor, Maine

​

​

Opinions on the Financial Statements and Internal Control over Financial Reporting

​

We have audited the accompanying consolidated balance sheet of Bar Harbor Bankshares and Subsidiaries (the "Company") as of December 31, 2025, the related consolidated statements of income, comprehensive income (loss), changes in shareholders’ equity, and cash flows for the year ended December 31, 2025, and the related notes (collectively referred to as the "financial statements"). We also have audited the Company’s internal control over financial reporting as of December 31, 2025, based on criteria established in Internal Control – Integrated Framework: (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).

​

In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of the Company as of December 31, 2025, and the results of its operations and its cash flows for the year ended December 31, 2025 in conformity with accounting principles generally accepted in the United States of America. Also in our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2025, based on criteria established in Internal Control – Integrated Framework: (2013) issued by COSO.

​

Basis for Opinions

​

The Company’s management is responsible for these financial statements, for maintaining effective internal control over financial reporting, and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management Report on Internal Control over Financial Reporting. Our responsibility is to express an opinion on the Company’s financial statements and an opinion on the Company’s internal control over financial reporting based on our audit. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) ("PCAOB") and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

​

We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud, and whether effective internal control over financial reporting was maintained in all material respects.

​

Our audit of the financial statements included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audit also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audit also included performing such other procedures as we considered necessary in the circumstances. We believe that our audit provide a reasonable basis for our opinions.

​

Definition and Limitations of Internal Control Over Financial Reporting

​

A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies

54

Table of Contents

and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

​

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

​

Critical Audit Matter

​

The critical audit matter communicated below is a matter arising from the current period audit of the financial statements that was communicated or required to be communicated to the audit committee and that: (1) relates to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of the critical audit matter does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.

​

Allowance for Credit Losses on Collectively Evaluated Loans

As discussed in Note 1 and Note 4 to the consolidated financial statements, the Company’s allowance for credit losses totaled $34.1 million as of December 31, 2025, which is primarily related to loans evaluated on a collective basis. 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 (“ACL”) 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.

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. 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.

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.

We identified auditing the ACL on collectively evaluated loans as a critical audit matter because there is a high degree of measurement uncertainty due to the volume of data inputs and assumptions needed to perform the quantitative calculation as well as management judgement in deriving qualitative factors. This resulted in significant auditor judgment and audit effort in evaluating the appropriateness of the data inputs and assumptions used in the DCF methodology, as well as the reasonableness of qualitative factors applied in the ACL calculation.

The primary procedures we performed to address this critical audit matter included:

Testing the design and operating effectiveness of controls over the ACL on collectively evaluated loans, including controls addressing:

55

Table of Contents

● Reasonableness of the significant assumptions applied in the DCF methodology.

Substantively testing management’s process, including evaluating the method, data, and assumptions, for developing the ACL on loans collectively evaluated, which included:

​

​

/s/ Crowe LLP

​

​

We have served as the Company's auditor since 2025.

​

Boston, Massachusetts

March 12, 2026

​

​

56

Table of Contents

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Shareholders and the Board of Directors of Bar Harbor Bankshares and Subsidiaries

Opinion on the Financial Statements

We have audited the accompanying consolidated balance sheet of Bar Harbor Bankshares and Subsidiaries (the Company) as of December 31, 2024, the related consolidated statements of income, comprehensive income (loss), changes in shareholders’ equity and cash flows, for each of the two years in the period ended December 31, 2024, and the related notes to the consolidated financial statements (collectively, the financial statements). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2024, and the results of its operations and its cash flows for each of the two years in the period ended December 31, 2024, in conformity with accounting principles generally accepted in the United States of America.

Basis for Opinion

These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial statements based on our audit. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud.

Our audit included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audit also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audit provides a reasonable basis for our opinion.

​

/s/ RSM US LLP

We served as the Company’s auditor from 2015 to 2025.

Hartford, Connecticut

March 11, 2025

​

​

​

57

Table of Contents

BAR HARBOR BANKSHARES AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

​ ​ ​ ​ ​ ​ ​

Assets ​ ​ ​ ​

Cash and cash equivalents: ​ ​ ​ ​ ​ ​

Interest-earning deposits with other banks ​ 35,890 ​ 37,896

Securities: ​ ​ ​ ​ ​ ​

Less: Allowance for credit losses ​ (34,052) ​ (28,744)

Other real estate owned ​ — ​ —

Cash surrender value of bank-owned life insurance ​ 96,250 ​ 81,858

​ ​ ​ ​ ​ ​ ​

Liabilities ​ ​ ​ ​

Deposits: ​ ​ ​ ​

Borrowings: ​ ​ ​ ​

​

​ ​ ​ ​ ​ ​ ​

Shareholders’ equity ​ ​ ​ ​ ​ ​ ​ ​ ​ ​

Accumulated other comprehensive loss ​ (35,409) ​ (51,536)

​

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

58

Table of Contents

BAR HARBOR BANKSHARES AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF INCOME

​ ​ ​ ​ ​ ​ ​ ​ ​ ​

​ ​ ​ ​ ​ ​

​ ​ Years Ended December 31,

(in thousands, except earnings per share data) ​ ​ ​ 2025 ​ ​ ​ 2024 ​ ​ ​ 2023

Interest and dividend income ​ ​ ​ ​ ​ ​ ​ ​ ​

Interest-earning deposits with other banks ​ ​ 2,159 ​ ​ 1,982 ​ ​ 1,997

Interest expense ​ ​ ​ ​ ​ ​

Provision for credit losses on loans ​ 4,636 ​ 955 ​ 2,908

​ ​ ​ ​ ​ ​ ​ ​ ​ ​

Non-interest income ​ ​ ​ ​ ​ ​

(Loss) gain on available-for-sale debt securities, net ​ (5,329) ​ 50 ​ 34

​ ​ ​ ​ ​ ​ ​ ​ ​ ​

Non-interest expense ​ ​ ​ ​ ​ ​

Gain (loss) on premises and equipment, net ​ 257 ​ (192) ​ 182

Amortization of intangible assets ​ 1,514 ​ 932 ​ 932

Acquisition, conversion and other expenses ​ 10,592 ​ 20 ​ 283

Provision (credit) for unfunded commitments ​ ​ 796 ​ (775) ​ ​ (85)

​ ​ ​ ​ ​ ​ ​ ​ ​ ​

​ ​ ​ ​ ​ ​ ​ ​ ​ ​

Earnings per share: ​ ​ ​ ​ ​ ​

Weighted average common shares outstanding: ​ ​ ​ ​ ​ ​

​

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

​

59

Table of Contents

BAR HARBOR BANKSHARES AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

​ ​ ​ ​ ​ ​ ​ ​ ​ ​

​ ​ ​ ​ ​ ​ ​ ​ ​ ​

​ ​ Years Ended December 31,

Other comprehensive income (loss), before tax: ​ ​ ​ ​ ​ ​

Changes in unrealized gain (loss) on pension ​ 277 ​ (25) ​ 135

​ ​ ​ ​ ​ ​ ​ ​ ​ ​

Income taxes related to other comprehensive income (loss): ​ ​ ​ ​ ​ ​

Changes in unrealized loss (gain) on hedging derivatives ​ 118 ​ 474 ​ (227)

Changes in unrealized loss (gain) on pension ​ 6 ​ 15 ​ (38)

Total other comprehensive income (loss) ​ 16,127 ​ (1,674) ​ 8,478

​

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

​

60

Table of Contents

BAR HARBOR BANKSHARES AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY

​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​

​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Accumulated ​ ​ ​ ​ ​ ​ ​ ​ ​ ​

​ ​ Common ​ Additional ​ ​ ​ ​ other ​ ​ ​ ​ ​ ​

​ ​ stock ​ paid-in ​ Retained ​ comprehensive ​ Treasury ​ ​ ​

​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​

Other comprehensive income ​ — ​ — ​ — ​ 8,478 ​ — ​ 8,478

Cash dividends declared ($1.10 per share) ​ — ​ — ​ (16,566) ​ — ​ — ​ (16,566)

Recognition of stock based compensation ​ — ​ 2,650 ​ — ​ — ​ — ​ 2,650

​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​

Other comprehensive loss ​ ​ — ​ — ​ — ​ (1,674) ​ — ​ ​ (1,674)

Recognition of stock based compensation ​ — ​ 3,292 ​ — ​ — ​ — ​ 3,292

​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​

Other comprehensive income ​ — ​ — ​ — ​ 16,127 ​ — ​ 16,127

Cash dividends declared ($1.26 per share) ​ — ​ — ​ (20,404) ​ — ​ — ​ (20,404)

Reclassification of shares ​ ​ (88) ​ ​ (171) ​ ​ — ​ ​ — ​ ​ 259 ​ ​ —

Recognition of stock based compensation ​ — ​ 3,081 ​ — ​ — ​ — ​ 3,081

​

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

​

61

Table of Contents

BAR HARBOR BANKSHARES AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

​ ​ ​ ​ ​ ​ ​ ​ ​ ​

​ ​ Year Ended December 31,

Cash flows from operating activities: ​ ​ ​ ​ ​ ​ ​

Provision for credit losses on loans ​ 4,636 ​ 955 ​ 2,908

Net (accretion) amortization of securities ​ (399) ​ 1,655 ​ 2,429

Deferred tax (benefit) expense ​ ​ (64) ​ ​ (366) ​ ​ (686)

Change in unamortized net loan costs and premiums ​ (53) ​ (1,057) ​ (145)

Accretion of purchase accounting entries, net ​ (3,261) ​ — ​ —

Amortization of other intangibles ​ 1,514 ​ 932 ​ 932

Loss (gain) on available-for-sale debt securities ​ 5,329 ​ (50) ​ (34)

Decrease (increase) right-of-use lease assets ​ ​ 336 ​ ​ (1,712) ​ ​ 1,204

(Decrease) increase in lease liabilities ​ ​ (421) ​ ​ 1,918 ​ ​ (1,179)

Loss (gain) on premises and equipment, net ​ 257 ​ (192) ​ 182

Net change in other assets and liabilities ​ 2,251 ​ (565) ​ (5,020)

​ ​ ​ ​ ​ ​ ​ ​ ​ ​

Cash flows from investing activities: ​ ​ ​ ​ ​ ​

Proceeds from sales of available-for-sale debt securities ​ ​ 43,559 ​ ​ — ​ ​ —

Purchases of available-for-sale debt securities ​ (90,966) ​ (53,496) ​ (7,521)

Purchase of premises and equipment ​ (4,811) ​ (7,396) ​ (6,533)

Proceeds from sale of premises held for sale ​ ​ 406 ​ ​ 1,408 ​ ​ 413

Cash received from acquisitions, net ​ ​ 77,521 ​ ​ — ​ ​ —

​ ​ ​ ​ ​ ​ ​ ​ ​ ​

Cash flows from financing activities: ​ ​ ​ ​ ​ ​

Repayments of long-term borrowings ​ ​ (14,475) ​ ​ (10) ​ ​ (2,317)

Net change in subordinated debt ​ ​ — ​ ​ 159 ​ ​ —

Repayments of subordinated debt ​ ​ — ​ ​ (20,000) ​ ​ —

Net issuance to employee stock plans ​ ​ (827) ​ ​ (1,005) ​ ​ (805)

​ ​ ​ ​ ​ ​ ​ ​ ​ ​

Net change in cash and cash equivalents ​ 8,675 ​ (22,680) ​ 2,547

62

Table of Contents

​

​ ​ ​ ​ ​ ​ ​ ​ ​ ​

​ ​ Year Ended December 31,

Supplemental cash flow information: ​ ​ ​ ​ ​ ​ ​

Transfer of non-cash assets ​ 1,000 ​ — ​ ​ —

Common stock issued for Acquisition of Guaranty Bancorp, Inc. ​ 39,217 ​ — ​ ​ —

​

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

​

63

Table of Contents

BAR HARBOR BANKSHARES AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of presentation: The consolidated financial statements (the “financial statements”) of Bar Harbor Bankshares and its subsidiaries (the “Company,” or “we”) have been prepared in conformity with accounting principles generally accepted in the United States of America (“U.S. GAAP”). Bar Harbor Bankshares 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 the accounts of the Company, its 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 U.S. GAAP requires otherwise.

Principles of Consolidation: The accompanying consolidated financial statements have been prepared in accordance with U.S. GAAP. The consolidated financial statements include the accounts of Bar Harbor Bankshares and its wholly-owned subsidiaries, Bar Harbor Bank & Trust, Bar Harbor Wealth Management, and Cottage Street Corporation. All significant inter-company balances and transactions have been eliminated in consolidation. Assets held in a fiduciary capacity are not assets of the Company, but assets of customers, and therefore, are not included in the Consolidated Balance Sheets.

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. Most 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.

Reclassifications: Whenever necessary, amounts in the prior years’ financial statements are reclassified to conform to current presentation. The reclassifications had no impact on net income in the Company’s consolidated statements of income or to the consolidated financial statements. In December 2025 management retrospectively adjusted the net change in loans held for sale to report them gross in the operating activities within the consolidated statement of cash flows for previous years to be comparable to the 2025 presentation.

Use of estimates: The preparation of financial statements in conformity with U.S. generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent liabilities at the date of the financial statements. Actual results could differ from those estimates.

Cash and Cash Equivalents: Cash and cash equivalents include cash on hand and amounts due from banks, interest-bearing deposits with other banks, federal funds sold, and other short-term investments with maturities less than 90 days.

Debt Securities: Debt securities are classified as available-for-sale (“AFS”) when they may be sold before maturity. Available for sale securities primarily consist of mortgage-backed securities, obligations of state and political subdivisions thereof, and corporate bonds and are carried at estimated fair value. Fair values for debt securities are based upon quoted market prices, where available. If quoted market prices are not available, fair values are based upon quoted market prices

64

Table of Contents

of comparable instruments, or a discounted cash flow model using market estimates of interest rates and volatility. Changes in estimated fair value of AFS securities, net of applicable income taxes, are reported in accumulated other comprehensive income (loss) as a separate component of shareholders’ equity unless deemed to have a credit loss as discussed below.

Interest income includes amortization of purchase premium or discount. Premiums and discounts on securities are amortized on the level-yield method without anticipating prepayments, except for mortgage-backed securities where prepayments are anticipated.

Premiums on callable debt securities are amortized to their earliest call date. Gains and losses on sales are recorded on the trade date and determined using the specific identification method. Gains and losses on the sale of securities are recognized at the trade date using the specific-identification method and are shown separately in the Consolidated Statements of Income.

A debt security is placed on nonaccrual status at the time any principal or interest payments become 90 days delinquent. Interest accrued but not received for a security placed on non-accrual is reversed against interest income. The amount of accrued interest reversed against interest income totaled $603 thousand for the year ended December 31, 2024 there was no accrued interest for the year ended December 31, 2025.

Allowance for Credit Loss on AFS Debt Securities: Credit quality of AFS debt securities is monitored through credit ratings from various rating agencies and substantial price changes. Credit ratings express opinions about the credit quality of a security and are utilized by us to make informed decisions. Securities are triggered for further review in the quarter if the security has significant fluctuations in ratings, drops below investment grade, or exhibits significant pricing changes. 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. If this assessment indicates that a credit loss exists, the present value of cash flows expected to be collected from the security are compared to the amortized cost basis of the security. If the present value of cash flows expected to be collected is less than the amortized cost basis, a credit loss exists and an allowance on AFS debt securities is recorded for the credit loss, limited by the amount that the fair value is less than the amortized cost basis. When assessing an AFS debt security for credit loss, securities with identical CUSIPs are pooled together to assess for impairment using the average cost basis. Any impairment that is non-credit related and has not been recorded through an allowance is recognized in other comprehensive income.

A change in the allowance on AFS debt securities may be in full or a portion thereof, is recorded as expense (credit) within provision for credit losses on the consolidated statements of income. Losses are charged against the allowance when management believes an AFS debt security is uncollectible based on the above described analysis. Refer to Note 3 – Securities Available for Sale of the consolidated financial statements for further discussion.

For available-for sale debt securities in an unrealized loss position, management first assesses whether it intends to sell, or it is more likely than not that it will be required to sell, the security before recovery of its amortized cost basis. If either of the criteria regarding intent or requirement to sell is met, the security’s amortized cost basis is written down to fair value through Gain/loss on sale of investments. For available-for-sale debt securities that do not meet the aforementioned criteria, management evaluates whether the decline in fair value has resulted from credit losses or other factors. In making this assessment, management considers the security structure, recent security collateral performance metrics, if applicable, external credit ratings, failure of the issuer to make scheduled interest or principal payments, judgement about and expectations on future performance and relevant industry research, analysis and forecasts. If this assessment indicates that a credit loss exists, the present value of the cash flows expected to be collected from the security are compared to the amortized cost basis of the security. If the present value of the cash flows expected to be collected from the security is less than the amortized cost basis of the security, a credit loss exists and an allowance for credit losses is recorded, limited by the amount that the fair value is less than the amortized cost basis. Losses are charged against the allowance when management believes the uncollectibility of an available-for-sale security is confirmed or when either of the criteria regarding intent or requirement to sell is met.

Accrued interest receivable on available-for-sale debt securities totaled $3.2 million as of December 31, 2025 and $3.3 million as of December 31, 2024 and is excluded from the estimation of credit losses.

65

Table of Contents

Federal Home Loan Bank Stock (“FHLB”): The bank is a member of the Federal Home Loan Bank (“FHLB”) system. Members are required to own a certain amount of stock based on the level of borrowings and other factors, and may invest in additional amounts. FHLB stock is a non-marketable restricted security and therefore is reported at cost, which generally equals par value. Shares held in excess of the minimum required by the FHLB are generally redeemable at par value. Dividends from FHLB stock are reported in interest and dividend income.

FHLB stock is periodically evaluated for impairment based on the capital adequacy of the FHLB and its overall financial condition. Based on the capital adequacy, liquidity position and sustained profitability of the FHLB, there was no impairment related to the carrying amount of FHLB stock as of December 31, 2025 and 2024.

Loans Held for Sale: Residential loans originated with the intent to be sold in the secondary market are accounted for at fair value. Fair value is primarily determined based on quoted prices for similar loans in active markets. Residential loans held for sale are generally sold with servicing rights retained. The carrying value of loans sold is reduced by the amount allocated to the servicing right. Gains and losses on sales of residential loans (sales proceeds minus carrying value) are recorded in non-interest income. The loan portfolio is consistently evaluated in conjunction with asset/liability management practices, and certain residential mortgage loans may be sold to manage interest rate exposure and for other business purposes, including generating fee income through mortgage sale gains.

Loans:Loans held for investment are reported at amortized cost. Amortized cost is the principal balance outstanding net of the unamortized balance of any deferred fees or costs and the unamortized balance of any premiums or discounts on loans purchased or acquired.

For originated loans, loan fees and certain direct origination costs are deferred and amortized into interest income over the contractual term of the loan using either the level-yield for loans with defined repayment terms, or straight-line method for open ended loans such as lines of credit. When a loan is paid off, the unamortized portion of deferred fees or costs are recognized in interest income. Interest income on originated loans is accrued based upon the daily principal amount outstanding except for loans on non-accrual status.

For acquired loans, interest income is accrued based upon the daily principal amount outstanding and is then further adjusted by the accretion of any discount or amortization of any premium associated with the loan that was recognized based on the acquisition date fair value. When a loan is paid off, the unamortized portion of any premiums or discounts on loans are recognized in interest income.

Purchase Credit Deteriorated (“PCD”) Loans: The Company has purchased loans, some of which have experienced more than insignificant credit deterioration since origination. The company determines more than insignificant credit deterioration if loans are non-accruing, have an internal risk rating of criticized or worse, are more than 30 days past due at the purchase date or were previously categorized as PCD. PCD loans are recorded at the amount paid. An allowance for credit losses is determined using the same methodology as other loans held for investment. The initial allowance for credit losses determined on a collective basis is allocated to individual loans. The sum of the loan’s purchase price and allowance for credit losses becomes its initial amortized cost basis. The difference between the initial amortized cost basis and the par value of the loan is a noncredit discount or premium, which is amortized into interest income over the life of the loan. Subsequent changes to the allowance for credit losses are recorded through credit loss expense.

​

Non-performing loans: Residential real estate and home equity loans are generally placed on non-accrual status when reaching 90 days past due, are in process of foreclosure, or sooner if considered appropriate by management. Consumer other loans are generally placed on non-accrual when reaching 90 days or more past due, or sooner if considered appropriate by management. Commercial real estate loans and commercial and industrial loans that are 90 days or more past due are generally placed on non-accrual status, unless secured by sufficient cash or other assets immediately convertible to cash, and the loan is in the process of collection. Commercial real estate and commercial and industrial loans may be placed on non-accrual status prior to the 90 days delinquency date if considered appropriate by management.

When a loan has been placed on non-accrual status, previously accrued and uncollected interest is reversed against interest on the loan. The interest on non-accrual loans is accounted for using the cash-basis or cost-recovery method depending on corresponding credit risk, until qualifying for return to accrual status. A loan can be returned to accrual status when

66

Table of Contents

collectability of principal is reasonably assured and the loan has performed for a period, generally a minimum of six months.

Loan Modifications to Borrowers Experiencing Financial Difficulty: In January 2023, the Company adopted ASU 2022-02, “Financial Instruments - Credit Losses (Topic 326): Troubled Debt Restructurings and Vintage Disclosures” which eliminated the accounting guidance for TDRs while enhancing disclosure requirements for certain loan refinancing and restructurings by creditors when a borrower is experiencing financial difficulty. This guidance was applied on a prospective basis. Upon adoption of this guidance, we are no longer required to establish a specific reserve for modifications to borrowers experiencing financial difficulty. Instead, modified loans are generally included in their respective category and a historical loss rate is applied to the current loan balance to arrive at the quantitative baseline portion of the ACL.

However, performance prior to the modification, or significant events that coincide with the modification, are included in assessing whether the borrower can meet the new terms and may result in the loan being returned to accrual status at the time of loan modification or after a shorter performance period. If the borrower’s ability to meet the revised payment schedule is uncertain, the loan remains on non-accrual status.

Allowance for Credit Losses on Loans (“ACL”): The allowance for credit losses (the “allowance”) is a significant accounting estimate used in the preparation of the Company’s consolidated financial statements. The level of the allowance represents management’s estimate of expected credit losses over the expected life of the loans at the Consolidated Balance Sheets date.

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.

The Company’s allowance for credit losses totaled $34.1 million as of December 31, 2025, which is primarily related to loans evaluated on a collective basis. 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 (“ACL”) 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.

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.

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

67

Table of Contents

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.

Arriving at an appropriate level of allowance involves a high degree of judgment. There is a high degree of measurement uncertainty due to the volume of data inputs and assumptions needed to perform the quantitative calculation as well as management judgement in deriving qualitative factors. While management uses available information to recognize losses on loans, changing economic conditions and the economic prospects of the borrowers may necessitate future additions or reductions to the allowance.

Individually Evaluated Loans: Loans that do not share risk characteristics with existing pools are evaluated on an individual basis. For loans that are individually evaluated and collateral dependent, financial loans where management has determined that foreclosure of the collateral is probable, or where the borrower is experiencing financial difficulty and management expects repayment of the financial asset to be provided substantially through the sale of the collateral, the ACL is measured based on the difference between the fair value of the collateral less estimated cost to sell and the amortized cost basis of the asset as of the measurement date. When repayment is expected to be from the operation of the collateral or going concern, the specific credit loss reserve is calculated as the amount by which the amortized cost basis of the financial asset exceeds the NPV from the operation of the collateral.

​

Accrued Interest. Accrued interest receivable balances are presented within other assets on the Consolidated Balance Sheets.

Allowance for off-balance sheet credit exposures: The exposure is a component of other liabilities in the Consolidated Balance Sheets and represents the estimate for probable credit losses inherent in unfunded commitments to extend credit. 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.

Concentrations of Business Risk: Most of the Company’s business activity is with customers located within Maine, New Hampshire and Vermont. Therefore, the Company’s exposure to credit risk is significantly affected by changes in the economy in the Northern New England area.

Premises and Equipment: Land is carried at cost. Premises and equipment and related improvements are stated at cost less accumulated depreciation. Depreciation is computed on the straight-line method over the lesser of the lease term or estimated useful lives of related assets; generally five to 39 years for premises and three to eight years for furniture and equipment. Software costs are stated at cost less accumulated depreciation within other assets on the Consolidated Balance Sheets. Amortization expense on software is calculated using the straight-line method over the estimated useful lives of the related assets.

Transfers of Financial Assets: Transfers of an entire financial asset, group of entire financial assets, or a participating interest in an entire financial asset are accounted for as sales when control over the assets has been surrendered. Control over transferred assets is deemed to be surrendered when (1) the assets have been isolated from total Company assets, (2) the transferee obtains the right to pledge or exchange the transferred assets, and (3) effective control is not maintained over the transferred assets.

Other Real Estate Owned: Other real estate owned consists of properties acquired through foreclosure proceedings or acceptance of a deed-in-lieu of foreclosure. These properties are recorded at fair value less estimated costs to sell the property. Initially at transfer if the recorded investment in the loan exceeds the property’s fair value at the time of acquisition, a charge-off is recorded against the allowance. If the fair value of the property initially at transfer exceeds the carrying amount of the loan, the excess is recorded either as a recovery to the allowance if a charge-off had previously been recorded, or as a gain on initial transfer in other non-interest income. Subsequent decreases in the property’s fair value and operating expenses of the property are recognized through charges to other non-interest expense. The fair value

68

Table of Contents

of the property acquired and ongoing valuation is based on third-party appraisals, broker price opinions, recent sales activity, or a combination thereof, subject to management judgment. Due to changing market conditions the amount ultimately realized on the other real estate owned may differ from the amounts reflected in the financial statements. There was no other real estate owned for the years ended December 31, 2025 and 2024.

Goodwill: Goodwill represents the excess of the purchase price over the fair value of the net assets acquired in a business combination. Goodwill is assessed annually for impairment, and more frequently if events or changes in circumstances indicate that there may be an impairment. Adverse changes in the economic environment, declining operations, unanticipated competition, loss of key personnel, or other factors could result in a decline in the implied fair value of goodwill. Subsequent reversals of goodwill impairment are prohibited.

Other Intangibles: Intangible assets are acquired assets that lack physical substance but can be distinguished from goodwill because of contractual or other legal rights or the asset is capable of being sold or exchanged either on its own or in combination with a related contract, asset or liability.

The fair values of these assets are generally determined based on appraisals and are subsequently amortized on a straight-line basis or an accelerated basis over their estimated lives. Management assesses the recoverability of these intangible assets at least annually or whenever events or changes in circumstances indicate that their carrying value may not be recoverable. If the carrying amount exceeds fair value, an impairment charge is recorded to income.

Bank-Owned Life Insurance: Bank-owned life insurance (“BOLI”) represents life insurance on the lives of certain current and retired employees who had provided positive consent allowing the Bank to be the beneficiary of such policies. Increases in the cash value of the policies, as well as insurance proceeds received in excess of the cash surrender value, are recorded in other non-interest income, and are not subject to income taxes.

Capitalized Servicing Rights: Capitalized servicing rights are recognized as assets when residential loans are sold and the rights to service those loans are retained.

Capitalized servicing rights are initially recorded at fair value. Fair values are established by using a discounted cash flow model to calculate the present value of estimated future net servicing income. Changes in the fair value of capitalized servicing rights are primarily due to changes in valuation inputs, assumptions, and the collection and realization of expected cash flows. However, these capitalized servicing rights are amortized in proportion to and over the period of estimated net servicing income, which includes prepayment assumptions. An impairment analysis is prepared on a quarterly basis by estimating the fair value of the capitalized servicing rights and comparing that value to the carrying amount. A valuation allowance is established when the carrying amount of these capitalized servicing rights exceeds fair value. The capitalized servicing rights are included in other assets on the Consolidated Balance Sheets.

Derivative Financial Instruments: Derivative instruments are recognized on the Consolidated Balance Sheets at fair value. On the inception date, management designates whether the derivative is part of a hedging relationship (i.e., cash flow or fair value hedge). Management formally documents relationships between hedging instruments and hedged items, as well as its risk management objective and strategy for undertaking hedge transactions. Both at the hedge’s inception and on an ongoing basis, management assesses whether the derivatives used in hedging transactions are highly effective in offsetting the changes in cash flows or fair values of hedged items. The fair value of the derivative is reflected on the Consolidated Balance Sheets in either other assets or liabilities.

Changes in the fair value of derivative instruments that are highly effective and qualify as cash flow hedge are recorded in other comprehensive income (loss). Any ineffective portion is recorded in earnings. For fair value hedges that are highly effective, the gain or loss on the derivative and the loss or gain on the hedged item attributable to the hedged risk are both recognized in earnings, with the differences (if any) representing hedge ineffectiveness. Management discontinues hedge accounting when it is determined that the derivative is no longer highly effective in offsetting changes of the hedged risk on the hedged item, or determines that the designation of the derivative as a hedging instrument is no longer appropriate.

Net cash settlements on derivatives that qualify for hedge accounting are recorded in interest income or interest expense based on the item being hedged. Net cash settlements on derivatives that do not quality for hedge accounting are reporting

69

Table of Contents

in non-interest income. Cash flows on hedges are classified in the cash flow statement the same as cash flows of the items being hedged.

Commitments to fund mortgage loans with borrowers (interest rate locks) and forward commitments for the future delivery of these mortgage loans for sale on the secondary market are classified as free standing derivatives. These derivatives are designed to hedge against inherent interest rate and pricing risk associated with selling loans. The commitments to lend generally terminate once the loan is funded, the lock period expires or the borrower decides not to contract for the loan. The forward commitments generally terminate once the loan is sold or the commitment period expires. These commitments are considered derivatives which are accounted for by recognizing their estimated fair value on the Consolidated Balance Sheets in either other assets or other liabilities.

Senior and Subordinated Borrowings: Senior borrowings include retail and wholesale repurchase agreements, FHLB overnight, FHLB short-term and long-term advances, federal funds purchased, credit facilities, and line of credit advances. Subordinated borrowings consist of subordinated notes issued to investors. At times, posting of collateral is required for which, cash, loans and/or investment securities are used.

Off-Balance Sheet Financial Instruments: Off-balance sheet financial instruments consist of commitments to extend credit, and unused or unfunded loan funds and letters of credit. These financial instruments are recorded in the consolidated financial statements when they are funded or related fees are incurred or received.

Stock Based Compensation: Equity award plans include stock options, restricted stock awards restricted stock units and performance stock units, which are described more fully in Note 14 – Stock Based Compensation Plans of the Consolidated Financial Statements. Stock based compensation expenses are recognized for stock options and restricted awards based on the fair value of these awards as of the grant date. For restricted stock units and performance stock units the expense is recognized over the vesting periods of the grants. Treasury shares are used for issuing shares upon option exercises, restricted stock awards, restricted stock unit vesting and performance stock unit vesting.

Employee Stock Purchase Plan: Compensation expense is recognized based on the difference between the market price and the discounted price of shares issued from participant enrollment over each six month enrollment period.

Post-retirement Plans: Non-qualified supplemental retirement benefit payments are provided or promised to certain ex-employees and retired officers based on contractual agreements. This plan is described more fully in Note 9 – Employee Benefit Plans of the Consolidated Financial Statements. The plan agreements provide payments in installments over a period of years upon reaching a certain age, retirement or death. Benefit obligations are recognized as the net present value of payments associated with the agreements over the service periods of the participants. Compensation expense is recognized from these plans based on various actuarial assumptions regarding future experience under the plans, including discount rate, interest costs, the impact of changes in mortality rates on the benefit obligations and the expected return on plan assets.

Pension Plan: The pension plan is an inherited, frozen, noncontributory, qualified, defined benefit plan for certain employees who met age and service requirements. This plan is described more fully in Note 9 – Employee Benefit Plans of the Consolidated Financial Statements. In order to measure the expense associated with the Plans, various assumptions are made including the discount rate, expected return on plan assets, anticipated mortality rates, and expected future healthcare costs. The assumptions are based on historical experience as well as current facts and circumstances. As of the measurement date December 31, 2025 and 2024, plan assets are determined based on fair value, generally representing observable market prices. The projected benefit obligation is primarily determined based on the present value of projected benefit distributions at an assumed discount rate.

Net periodic pension benefit costs include interest costs based on an assumed discount rate, the expected return on plan assets based on actuarially derived market-related values, and the amortization of net actuarial losses. Differences between expected and actual results in each year are included in the net actuarial gain or loss amount, which is recognized in other comprehensive income. The net actuarial gain or loss in excess of a 10% corridor is amortized in net periodic benefit cost over the average remaining service period of active participants in the Plans. The prior service credit is amortized over the average remaining service period to full eligibility for participating employees expected to receive benefits.

70

Table of Contents

At the end of each year the Plans’ assets and obligations are examined to determine its funded status as of the end of the fiscal year and recognizes those changes in other comprehensive income, net of tax. The plans over or under funded status is recognized in the Consolidated Balance Sheets as an asset or liability, respectively.

401(k) Plan: The employer sponsored 401(k) plan to which participants may make contributions in the form of salary deferrals also provides participants with matching contributions in accordance with the terms of the plan. Contributions due under the terms of the defined contribution plans are accrued through compensation expense as earned by employees.

Income Taxes: The company and its subsidiaries file a consolidated federal income tax return. Provision for income taxes is based on taxes currently payable or refundable as well as the deferred taxes that are based on temporary differences between the tax basis of assets and liabilities and their reported amounts in the financial statements. The asset and liability method of accounting for income taxes is utilized. Under this method, deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. If current available information indicates that it is more likely than not that deferred tax assets will not be realized, a valuation allowance is established. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date.

A valuation allowance, if needed, reduces deferred tax assets to the amount expected to be realized. A tax position is recognized as a benefit only if it is “more likely than not” that the tax position would be sustained in a tax examination, with a tax examination being presumed to occur. The amount recognized is the largest amount of tax benefit that is greater than 50% likely of being realized on examination. For tax positions not meeting the “more likely than not” test, no tax benefit is recorded. The Company recognizes interest and/or penalties related to income tax matters in income tax expense.

Treasury Stock: Shares of the Company’s common stock that are repurchased are recorded in treasury stock at cost. On the date of subsequent re-issuance, the treasury stock account is reduced by the cost of such stock on an average cost basis.

Earnings Per Share: Basic earnings per share excludes dilution and is computed by dividing income available to common shareholders by the weighted average number of common shares outstanding for the period. Diluted earnings per share reflect the potential dilution that could occur if securities or other contracts to issue common stock were exercised or converted into common stock or resulted in the issuance of common stock that then shared in earnings, such as dilutive stock options.

Revenue Recognition: Non-interest revenue is recognized in accordance with ASC 606, "Revenue from Contracts with Customers." ASC 606 requires a five step process: (1) identify the contract(s) with a customer, (2) identify the performance obligations in the contract, (3) determine the transaction price, (4) allocate the transaction price to the performance obligations in the contract, and (5) recognize revenue when (or as) a performance obligation is satisfied. Revenue recognition under ASC 606 depicts the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for the goods or service. See Note 16 – Revenue from Contracts with Customers of the Company’s Consolidated Financial Statements for additional information on revenue recognition.

Wealth Management:Wealth management assets held in a fiduciary or agent capacity are not included in the accompanying Consolidated Balance Sheets because the ownership is held by customers. Trust and investment management fees are primarily comprised of fees earned from investment management, trust administration, tax return preparation, and financial planning. The performance obligation for revenue recognition is generally satisfied over time and the resulting in monthly fee income, based on the daily accrual of the market value of the investment accounts and the applicable fee rate.

Marketing Costs: Marketing costs are expensed as incurred.

Leases: Leases are classified as operating or finance leases at the lease commencement date. The Company records leases on the balance sheet in the form of a lease liability for the present value of future lease payments under the lease terms and

71

Table of Contents

a right-of-use asset equal to the lease liability adjusted for items such as deferred or prepaid rent, lease incentives, and any impairment of the right-of-use asset. The discount rate used in determining the lease liability is based upon incremental borrowing rates the Company could obtain for similar loans as of the date of commencement or renewal. The Company does not record short term leases with an initial lease term of one year or less on the Consolidated Balance Sheets.

​

At lease inception, the Company determines the lease term by considering the noncancelable lease term and all optional renewal periods that the Company is reasonably certain to renew. The lease term is also used to calculate straight-line lease expense. Leasehold improvements, except for those relating to leases between entities under common control, are amortized over the shorter of the useful life and the estimated lease term. Leasehold improvements relating to leases between entities under common control are amortized over the useful life of the improvements to the common control group. The Company’s leases do not contain residual value guarantees or material variable lease payments. Operating lease expense consists of a single lease cost allocated over the remaining lease term on a straight-line basis, variable lease expense, and any impairment of the right-of-use asset. Lease expense is included in occupancy and equipment expense on the Company's consolidated statements of income.

​

The Company's variable lease expense includes rent escalators that are based on market conditions and include items such as common area maintenance, utilities, parking, property taxes, insurance and other costs associated with the lease. The amortization of the right-of-use asset arising from finance leases is expensed through occupancy and equipment expense and the interest on the related lease liability is expensed through interest expense on borrowings on the Company's consolidated statements of income.

​

Dividend Restrictions: Banking regulations require maintaining certain capital levels and may limit the dividends paid by the bank to the holding company or by the holding company to shareholders

​