Total loans were $3.0 billion at the end of both the fourth and third quarters 2023. Commercial loans increased $12.0 million during the fourth quarter 2023, comprised of an $8.8 million increase in commercial and industrial, and an increase of $3.2 million in commercial real estate. Despite an uncertain rate environment, the fundamentals remain solid for the industrial, retail, and multifamily sectors driving performance that aligns with our continued strategy to grow our commercial portfolios. Residential loans decreased by $6.9 million compared to the third quarter 2023, primarily due to continued lower demand for prevailing mortgage rates and sales into the secondary market. Consumer loans increased by $1.8 million primarily due to higher home equity fixed and adjustable lines.

Securities available for sale increased to $534.6 million at the end of the fourth quarter 2023, from $509.5 million in the third quarter 2023 principally due to lower unrealized losses on the portfolio. Unrealized losses on securities totaled $62.4 million at the end of the fourth quarter 2023 versus $86.5 million at the end of the third quarter 2023 reflecting continued decreases in market rates. Proceeds received from amortization and prepayments were used to reinvest in the portfolio and pay down borrowings. The book yield from securities was 3.85% at December 31, 2023 and 3.87% at September 30, 2023 which included the impact of the repricing of variable rate securities, acceleration of discounts due to prepayments, and a run-off of lower coupon fixed-rate securities, which was fairly consistent in both periods.

The allowance for credit losses remained relatively flat at $28.1 million at the end of the fourth quarter 2023 compared to $28.0 million at the end of the third quarter 2023. Our allowance for credit losses continues to be driven by a combination of portfolio loan growth, nominal credit movement and general macroeconomic trends that reflect the economic stability of our Northern New England footprint. Non-accruing loans decreased during the fourth quarter 2023 to $5.5 million from $6.8 million in the third quarter 2023. The decline in non-accruing loans was mainly due to the settlement of one commercial loan in the fourth quarter 2023 that was fully reserved in the third quarter 2023.

Total deposits and the loan to deposit ratio remained at $3.1 billion and 95%, respectively as of December 31, 2023. The $48.7 million decrease in demand deposits in the fourth quarter 2023 was mainly driven by seasonality, tax payment timing, and migration to brokerage accounts and higher yielding certificates of deposit ("CDs"). Negotiable order of withdrawal ("NOW") and money market deposits increased by $25.9 million primarily due to higher business, Insured Cash Sweep, or ICS, reciprocal and trust accounts. Time deposits increased by $41.8 million primarily due to the migration of existing customers into higher yielding CDs. Brokered CDs increased by $17.7 million, and senior borrowings were paid down $36.0 million in the fourth quarter 2023.

The Company's book value per share was $28.48 as of December 31, 2023 compared to $26.67 as of September 30, 2023. Unrealized losses on securities, net of taxes, reduced book value per share by $3.14 and $4.39 at the end of those respective periods. Tangible book value per share (non-GAAP measure) was $20.28 at the end of the fourth quarter 2023, compared to $18.45 at the end of the third quarter 2023.

RESULTS OF OPERATIONS (December 31, 2023 to December 31, 2022 quarterly comparison)

Net interest margin was 3.17% compared to 3.76% in the fourth quarter 2022. The decrease was primarily driven by a higher cost of funds. The yield on loans expanded to 5.24% in the fourth quarter 2023, up from 4.56% in the same quarter of 2022. Costs of interest-bearing liabilities increased to 2.37% from 0.78% in the fourth quarter 2022 showing full realization of several 2023 rate hikes. We continue to experience a shift in deposit composition from non-maturity deposits to CDs, and we had a heavier reliance on wholesale borrowings in the fourth quarter 2023 as compared with the same quarter of 2022.

Non-interest income was $8.9 million in the fourth quarter 2023 compared to $8.2 million in the same quarter 2022. Customer service fees grew 3% to $3.8 million during the fourth quarter 2023 from $3.7 million in the same quarter of 2022 on a higher number of transactional accounts. Wealth management income was $3.4 million in both periods. Assets under management increased $143 million to $2.5 billion from $2.3 billion in the fourth quarter 2022 primarily due to higher security valuations in the fourth quarter 2023. Mortgage banking income was $515 thousand in the fourth quarter 2023, compared to $153 thousand in the fourth quarter 2022 primarily due to higher sales in the secondary market.

The provision for credit losses was $687 thousand in both the fourth quarters of 2023 and 2022 and was largely a function of loan growth, limited credit movement and macro trends.

Non-interest expense was $24.4 million in the fourth quarter 2023 compared to $24.6 million in the fourth quarter 2022. Salary and benefit expense increased $611 thousand from the comparative quarter on higher stock compensation and post-retirement expense due to changes in the Company's stock price and discount rates, respectively, in the fourth quarter 2023. Non-core expenses associated with the opening of a new service totaled $544 thousand in the fourth quarter 2023, which raised our efficiency ratio by 1.47%. A steady commercial loan pipeline during 2023 kept the provision for unfunded commitment expense at zero compared to a volume increase that drove the $1.4 million of expense in the fourth quarter of 2022.

The effective tax rate was 21% in the fourth quarter of 2023 and 2022. Non-recurring items for return to provision adjustments associated with tax credit investments increased the effective rate by 0.55% in the fourth quarter 2023 and 0.86% in the same quarter of 2022.

BACKGROUND

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

FORWARD-LOOKING STATEMENTS

All statements, other than statements of historical fact, included in this release that address activities, events or developments that the Company expects, believes or anticipates will or may occur in the future are "forward-looking statements" within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, and are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. The words "believe," "anticipate," "expect," "may," "will," "assume," "should," "predict," "could," "would," "intend," "targets," "estimates," "projects," "plans," and "potential," and other similar words and expressions of the future, are intended to identify such forward-looking statements, but other statements not based on historical information may also be considered forward-looking, including statements relating to Company's balance sheet management, our credit trends, our overall credit performance, and the Company's strategic plans, objectives, and intentions. All forward-looking statements are subject to risks, uncertainties, and other factors that may cause the actual results, performance, or achievements of the Company to differ materially from any results, performance, or achievements expressed or implied by such forward-looking statements. These forward-looking statements are subject to known and unknown risks, uncertainties and other factors that could cause the actual results to differ materially from the statements, including, but not limited to: (1) deterioration in the financial performance and/or condition of borrowers of Bar Harbor Bank & Trust (the "Bank"), including as a result of the negative impact of inflationary pressures on our customers and their businesses resulting in significant increases in credit losses and provisions for those losses; (2) the possibility that our asset quality could decline or that we experience greater loan losses than anticipated; (3) increased levels of other real estate owned, primarily as a result of foreclosures; (4) the impact of liquidity needs on our results of operations and financial condition; (5) competition from financial institutions and other financial service providers; (6) the effect of interest rate increases on the cost of deposits; (7) unanticipated weakness in loan demand or loan pricing; (8) adverse conditions in the national or local economies including in our markets throughout Northern New England; (9) changes in consumer spending, borrowing and saving habits; (10) the emergence and effects related to a future pandemic, epidemic or outbreak of an infectious disease, including actions taken by governmental officials to curb the spread of such an infectious disease, and the resulting impact on general economic and financial market conditions and on the Company's and our customers' business, results of operations, asset quality and financial condition; (11) the effects of civil unrest, international hostilities or other geopolitical events, including the war in Ukraine and recent hostilities in the Middle East; (12) inflation, interest rate, market, and monetary fluctuations; (13) lack of strategic growth opportunities or our failure to execute on available opportunities; (14) the ability to grow and retain low-cost core deposits and retain large, uninsured deposits; (15) our ability to effectively manage problem credits; (16) our ability to successfully implement efficiency initiatives on time and with the results projected; (17) our ability to successfully develop and market new products and technology; (18) the impact of negative developments in the financial industry and United States and global capital and credit markets; (19) our ability to retain executive officers and key employees and their customer and community relationships; (20) our ability to adapt to technological changes; (21) risks associated with litigation, including reputational and financial risks and the applicability of insurance coverage; (22) our ability to implement new technology effectively; (23) the vulnerability of the Bank's computer and information technology systems and networks, and the systems and networks of third parties with whom the Company or the Bank contract, to unauthorized access, computer viruses, phishing schemes, spam attacks, human error, natural disasters, power loss, and other security breaches and interruptions; (24) changes in the reliability of our vendors, internal control systems or information systems; (25) ongoing competition in the labor markets and increased employee turnover; (26) the potential impact of climate change; (27) the impact of pandemics, epidemics or any other health-related crisis; (28) our ability to comply with various governmental and regulatory requirements applicable to financial institutions; (29) changes in state and federal laws, rules, regulations, or policies applicable to banks or bank or financial holding companies, including regulatory or legislative developments; (30) the effects of and changes in trade and monetary and fiscal policies and laws, including the interest rate policies of the Board of Governors of the Federal Reserve System; (31) adverse impacts (including costs, fines, reputational harm, or other negative effects) from current or future litigation, regulatory examinations, or other legal and/or regulatory actions; and (32) general competitive, economic, political, and market conditions, including economic conditions in the local markets where we operate. Additional factors which could affect the forward-looking statements can be found in the Company's annual report on Form 10-K, quarterly reports on Form 10-Q, and current reports on Form 8-K filed with the Securities and Exchange Commission (the "SEC") and available on the SEC's website at http://www.sec.gov. The Company believes the forward-looking statements contained herein are reasonable; however, many of such risks, uncertainties, and other factors are beyond the Company's ability to control or predict and undue reliance should not be placed on any forward-looking statements, which are based on current expectations and speak only as of the date that they are made. Therefore, the Company can give no assurance that its future results will be as estimated. The Company does not intend to, and disclaims any obligation to, update or revise any forward-looking statement.

NON-GAAP FINANCIAL MEASURES

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

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

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

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CONTACTS

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

BAR HARBOR BANKSHARES
SELECTED FINANCIAL HIGHLIGHTS - UNAUDITED

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

2. All performance ratios are based on average balance sheet amounts, where applicable.

3. Fully taxable equivalent considers the impact of tax-advantaged investment securities and loans.

4. Earning assets includes non-accruing loans and interest-bearing deposits with other banks. Securities are valued at amortized cost.

5. Current quarter annualized.

BAR HARBOR BANKSHARES
CONSOLIDATED BALANCE SHEETS - UNAUDITED

BAR HARBOR BANKSHARES
CONSOLIDATED LOAN & DEPOSIT ANALYSIS - UNAUDITED
LOAN ANALYSIS

DEPOSIT ANALYSIS

*Indicates ratio greater than 100%

BAR HARBOR BANKSHARES
CONSOLIDATED STATEMENTS OF INCOME - UNAUDITED

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

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

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

BAR HARBOR BANKSHARES
AVERAGE BALANCES - UNAUDITED

1. Total average interest-bearing deposits with other banks is net of Federal Reserve daily cash letter.

2. Average balances for securities available-for-sale are based on amortized cost.

3. Total average loans include non-accruing loans and loans held for sale.

BAR HARBOR BANKSHARES
ASSET QUALITY ANALYSIS - UNAUDITED

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

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

1. Assumes a marginal tax rate of 24.01% in the fourth quarter 2023, 23.80% in the first three quarters of 2023 and 23.53% in the fourth quarter 2022.

2. Non-GAAP financial measure.

3. Tangible shareholders' equity is computed by taking total shareholders' equity less the intangible assets at period-end. Tangible assets is computed by taking total assets less the intangible assets at period-end.

4. Securities adjustment, net of tax represents the total unrealized loss on available-for-sale securities recorded on the Company's consolidated balance sheets within total common shareholders' equity.

5. All performance ratios are based on average balance sheet amounts, where applicable.

6. Efficiency ratio is computed by dividing core non-interest expense net of franchise taxes and intangible amortization divided by core revenue on a fully taxable equivalent basis.

SOURCE: Bar Harbor Bank and Trust

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