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ACQUISITION
 9 Months Ended
Sep. 30, 2025
ACQUISITION  
ACQUISITION

NOTE 2.           ACQUISITION

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Guaranty Bancorp, Inc.

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On July 31, 2025, the Company completed its acquisition of Guaranty Bancorp, Inc. (“Guaranty”), the holding company of Woodsville Guaranty Savings Bank (“Woodsville”), a New Hampshire chartered bank with nine full-service branches located in New Hampshire. As a result of the transaction, Guaranty merged with and into Bar Harbor Bankshares, and Woodsville merged with and into Bar Harbor Bank & Trust. The acquisition expanded the Company’s presence in New Hampshire with the addition of 9 branches.

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On the acquisition date, 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, based on the Company’s July 31, 2025 (acquisition date) closing price of $29.04. In total the Company issued 1.4 million shares of its common stock, representing 9% of the Company’s outstanding shares of common stock at the time of issuance.

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The merger was accounted for under the acquisition method of accounting in accordance with ASC Topic 805, Business Combinations. Under this method of accounting, the respective assets acquired and liabilities assumed were recorded at their estimated fair values. The excess of consideration paid over the estimated fair value of the net assets acquired totaled $22.3 million and was recorded as goodwill. The results of Guaranty’s operations were included in the Company’s consolidated financial statements subsequent to the merger date. The fair values assigned to certain assets acquired and liabilities assumed are provisional and subject to change as additional information becomes available during the measurement period (not to exceed one year from the acquisition date). The provisional amounts primarily relate to the valuation of loans, identifiable intangible assets, and certain assumed liabilities such as deposits. Adjustments to the provisional fair values, if any, will be recorded as measurement period adjustments in the reporting period in which the adjustments are determined, with corresponding adjustments to goodwill.

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Consideration paid, and fair values of Guaranty’s assets acquired and liabilities assumed, along with the resulting goodwill, are summarized in the following table:

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Fair Value 

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As Recorded 

(in thousands, except shares)

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As Acquired

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Adjustments

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at Acquisition

Consideration paid:

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Bar Harbor Bankshares common stock issued to Guaranty Bancorp, Inc. stockholders (1,350,464 shares)

 

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$

39,217

Cash paid for fractional shares

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3

Total consideration paid

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39,220

Recognized amounts of identifiable assets acquired and liabilities assumed, at fair value:

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Cash and cash equivalents

 

$

77,524

 

$

—

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$

77,524

Investments

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116,728

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(1,124)

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(a)

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115,604

Federal Home Loan Bank stock

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4,370

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—

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4,370

Loans

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446,990

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(33,582)

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(b)

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413,408

Premises and equipment

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6,522

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112

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(c)

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6,634

Core deposit intangible

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—

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13,983

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(d)

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13,983

Bank-owned life insurance

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11,816

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—

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11,816

Deferred taxes, net

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6,377

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4,988

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(e)

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11,365

Other assets

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3,250

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101

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3,351

Deposits

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(530,871)

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(418)

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(f)

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(531,289)

Borrowings

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(109,895)

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673

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(g)

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(109,222)

Other liabilities

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(1,053)

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387

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(666)

Total identifiable net assets

 

$

31,758

 

$

(14,880)

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$

16,878

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Goodwill

 

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$

22,342

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Explanation of Certain Fair Value Adjustments

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a.Represents the write down of the book value of investments to their estimated fair value at the date of acquisition.
b.Represents the write down of the book value of loans to their estimated fair value. The acquired loan portfolio was divided into two segments: (1) purchase credit deteriorated (PCD) loans and (2) non-PCD loans. For the non-PCD portfolio the fair value was calculated using a discounted cash flow analysis. This analysis took into consideration the contractual terms of the loans and assumptions related to the credit risk, expected lifetime losses, discount rates, prepayment assumptions and other liquidity considerations to estimate projected cash flows. The fair value of PCD loans were calculated on an individual basis based on underlying collateral values and other factors. The adjustment also includes the reversal of Woodsville’s historic allowance for loan losses.
c.Represents the adjustment of the book value of buildings and equipment, to their estimated fair value based on appraisals and other methods. The adjustments will be depreciated over the estimated economic lives of the assets.
d.Represents the value of the core deposit base assumed in the acquisition. The core deposit asset was recorded as an identifiable intangible asset and will be amortized using a straight-line method over the average life of the deposit base, which is estimated to be ten years.
e.Represents net deferred tax assets resulting from the fair value adjustments related to the acquired assets and liabilities, identifiable intangibles, and other purchase accounting adjustments.
f.Represents adjustments made to time deposits due to the weighted average contractual interest rates compared to the cost of similar funding at the time of acquisition. The amount will be amortized using a straight-line method over the weighted average maturity bucket.
g.Represents the present value difference between cash flows of current debt instruments using contractual rates and those of similar borrowings on the date of acquisition.  The adjustment will be amortized over the remaining contractual life.

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Direct acquisition and integration costs were expensed as incurred, and totaled $5.0 million and $6.4 million during the three and nine months ending September 30, 2025.

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Goodwill, which is not amortized for financial reporting purposes, is not deductible for tax purposes.

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The acquired loan portfolio was segmented into two segments: (1) PCD loans and (2) non-PCD loans.

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PCD Loans

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

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Information about acquired purchase deteriorated loans is as follows:

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(in thousands)

    

As of August 1, 2025

Unpaid principal balance of acquired PCD loans

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$

11,222

Non-credit related discount

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(713)

Allowance for credit losses on PCD loans

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(1,622)

Fair value of acquired PCD loans

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8,887

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Pro Forma Information (unaudited)

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The following table presents selected unaudited pro forma financial information reflecting the acquisition of Guaranty assuming the acquisition was completed as of January 1, 2024. The unaudited pro forma financial information includes adjustments for scheduled amortization and accretion of fair value adjustments recorded at the acquisition. The unaudited pro forma financial information is presented for illustrative purposes only and is not necessarily indicative of the combined financial results of the Company and Guaranty had the transaction actually been completed at the beginning of the periods presented, nor does it indicate future results for any other interim or full-year period. Information for the three and nine months ended September 30, 2025 reflects the actual results of the Company excluding merger costs, provision for credit losses on non-PCD loans, and the benefit from a deferred tax rate change.

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Information for the three and nine months ended September 30, 2024, includes Guaranty’s calculated results for the three and nine months ended September 30, 2024 and reflect adjustments related to the amortization or accretion of purchase accounting fair value adjustments, merger and acquisition costs, provision for credit losses on non-PCD loans, and the benefit from a deferred tax rate change. The unaudited pro forma information below does not reflect management’s estimate of any revenue-enhancing opportunities or anticipated cost-savings.

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Three Months Ended 

    

Nine Months Ended 

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September 30,

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September 30,

(in thousands, except earnings per share)

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2025

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2024

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2025

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2024

Total revenue(1)

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$

47,588

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$

46,068

 

$

132,997

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$

131,951

Net income

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18,074

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14,925

 

 

38,784

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38,545

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(1)Total revenue is defined as the sum of net interest income plus non-interest income.