What changed in this filing

/stocks — the workspaceLOADING

Item 1A. Risk Factors

2024-03-11 compared with 2023-03-14 · 74 added, 23 removed, 228 unchanged (30% of the section changed)

7 unchanged sentences

If this were to happen, the value of our securities could decline significantly, and you could lose all or part of your investment.

Deterioration in local economies or real estate market may adversely affect our financial performance, as our borrowers’ ability to repay loans and the value of the collateral securing the loans may decline.

Deterioration in local economies or real estate markets may adversely affect our financial performance, as our borrowers’ ability to repay loans and the value of the collateral securing the loans may decline.

We serve individuals and businesses located in Maine, New Hampshire, and Vermont.

7 unchanged sentences

Commercial loans typically involve larger balances to single borrowers or groups of related borrowers as compared to residential real estate loans.

As our loan portfolio contains a significant number of large commercial loans, the deterioration of one or a few of these loans could cause a significant increase in non-performing loans, provision for loan losses, and/or an increase in loan charge-offs, all of which could adversely affect our financial condition and results of operations.

As our loan portfolio contains a significant number of large commercial loans, the deterioration of one or a few of these loans could cause a significant increase in

non-performing loans, provision for loan losses, and/or an increase in loan charge-offs, all of which could adversely affect our financial condition and results of operations.

Greater than anticipated credit losses in the loan portfolios may adversely affect our earnings.

Credit losses are inherent in the business of making loans and could have a material adverse effect on operating results.

We make various assumptions and judgments about the collectability of the loan portfolio and provide an allowance for credit losses based on a number of factors.

The allowance for credit losses is evaluated on a periodic basis using current information, including the quality of the loan portfolio, economic conditions, and value of the underlying collateral and the level of non-accrual loans.

Although we believe the allowance for credit losses is appropriate to absorb probable losses in the loan portfolio, this allowance may not be adequate.

We make various assumptions and judgments about the collectability of the loan portfolio and provide an ACL based on a number of factors.

The ACL is evaluated on a periodic basis using current information, including the quality of the loan portfolio, economic conditions, and value of the underlying collateral and the level of non-accrual loans.

Although we believe the ACL is appropriate to absorb probable losses in the loan portfolio, this allowance may not be adequate.

Increases in the allowance will result in an expense for the period, thereby reducing reported net income.

14 unchanged sentences

Conversely, if interest rates increase, loans and investment securities may be subject to extension risk, which could negatively impact our net interest margin as well.

We are required to maintain sufficient capital and adequate liquidity.

As a banking organization, our capital and liquidity are subject to regulation and supervision by banking regulators.

We are required to maintain minimum levels of capital.

The proportion of the Bank’s deposit account balances that exceed FDIC insurance limits may expose the Bank to enhanced liquidity risk as it relates to maintaining such levels of capital as uninsured depositors historically have been more likely to withdraw their deposits.

In addition, our banking regulators could require us to maintain more and higher quality capital than previously expected.

Our banking regulators could also require us to hold higher levels of short-term investments, thereby limiting our ability to invest in longer-term or less liquid assets at higher yields.

The need to maintain capital and liquidity could result in our being required to take steps to increase our regulatory capital and may dilute shareholder value or limit our ability to pay dividends or otherwise return capital to our investors through stock repurchases.

In addition, if we fail to maintain appropriate levels of capital or liquidity, we could become subject to formal or informal enforcement actions that may impose restrictions on our business, including limiting our lending activities or our ability to expand, requiring us to raise additional capital (which may be dilutive to shareholders) or requiring regulatory approval to pay dividends or otherwise return capital to shareholders.

“Business—Regulation and Supervision—Capital Adequacy and Prompt Corrective Action” for additional information on capital requirements applicable to us and the Bank.

The Company’s earnings may not grow if we are unable to successfully attract core deposits and lending opportunities and execute opportunities to generate fee-based income.

The Company has experienced growth, and our future business strategy is to continue to expand.

Historically, the growth of our loans and deposits has been the principal factor in our increase in net-interest income.

In the event that we are unable to execute our business strategy of continued growth in loans and deposits, our earnings could be adversely impacted.

The Company’s ability to continue to grow depends, in part, upon our ability to expand our market share, to successfully attract core deposits and identify loan and investment opportunities, as well as opportunities to generate fee-based income.

Our ability to manage growth successfully will also depend on whether we can continue to efficiently fund asset growth and maintain asset quality and cost controls, as well as on factors beyond our control, such as economic conditions and interest-rate trends.

Wholesale funding sources may prove insufficient to replace deposits, support operations and future growth.

1 unchanged sentence

To manage liquidity, we use a number of funding sources in addition to core deposit growth, loan repayments and maturities of loans and securities.

These sources include FHLB and FRB advances, proceeds from the sale of securities and loans and liquidity resources at the holding company.

These sources include FHLB and the Federal Reserve Bank (“FRB”) advances, proceeds from the sale of securities and loans and liquidity resources at the holding company.

Our ability to manage liquidity will be severely constrained if unable to maintain access to funding or if adequate financing is not available to accommodate future growth at acceptable costs.

4 unchanged sentences

We compete with banks and other financial institutions for deposits.

Funding costs may increase if deposits are lost and are forced to replace them with more expensive sources of funding, if customers shift their deposits into higher cost products or if we need to raise interest rates to avoid losing deposits.

Funding costs may increase if deposits are lost and we are forced to replace them with more expensive sources of funding, if customers shift their deposits into higher cost products or if we need to raise interest rates to avoid losing deposits.

Higher funding costs reduce our net interest income, net interest margin, and net income.

2 unchanged sentences

The Company depends on dividends, distributions and other payments from its banking and non-banking subsidiaries to fund dividend payments on its common stock, debt service of subordinated borrowings, fund stock repurchase program and to fund strategic initiatives or other obligations.

The Company’s subsidiaries are subject to laws that authorize regulatory bodies to block or reduce the flow of funds from those subsidiaries to the Company based on assertion that certain payments from subsidiaries are considered an unsafe or unsound practice, which could impede our access to funds that we may need to make payments on our obligations or dividend payments, if and when declared from time to time by our board of directors in its sole discretion out of funds legally available for that purpose.

Prepayments of loans may negatively impact our business as customers may prepay the principal amount of their outstanding loans at any time.

19 unchanged sentences

The occurrence of any of these risks could result in a diminished ability to operate (e.g., by requiring us to expend significant resources to correct the defect), as well as potential liability to customers, reputational damage, and regulatory intervention.

In addition, we are dependent on our reputation within our market area, as a trusted and responsible financial company, for all aspects of our relationships with customers, employees, vendors, third-party service providers and others with whom we conduct business or potential future business, particularly because our business is primarily concentrated in Northern New England.

Our actual or perceived failure, including, to (i) identify and address potential conflicts of interest, ethical issues, money-laundering, or privacy issues;

(ii) meet legal and regulatory requirements applicable to the Bank and to the Company;

(iii) maintain the privacy of customer and accompanying personal information;

(iv) maintain adequate record keeping;

(v) engage in proper sales and trading practices;

and (vi) identify the legal, reputational, credit, liquidity and market risks inherent in our products;

or any action of one of our employees that results in actual or perceived misconduct or error, among other things, could give rise to reputational risk that could cause harm to the Bank and our business prospects.

If we fail to address any of these issues in an appropriate manner, we could be subject to additional legal risks, which, in turn, could increase the size and number of litigation claims and damages asserted or subject us to enforcement actions, fines and penalties and cause us to incur related costs and expenses.

Because we primarily serve individuals and businesses located in Northern New England, any negative impact resulting from reputational harm, including any impact on our ability to attract and retain customers and employees, likely would be greater than if our business were more geographically diverse.

Disruptions to our information systems and security breaches may adversely affect our business and reputation.

6 unchanged sentences

To the extent that our customers’ systems are not secure or are otherwise compromised, its network could be vulnerable to unauthorized access, malicious software, phishing schemes and other security breaches.

To the extent that our activities or the activities of its customers or third-party service providers involve the storage and transmission of confidential information, security breaches and malicious software could expose us to claims, regulatory scrutiny, litigation and other possible liabilities.

To the extent that our activities or the activities of its customers or third-party service providers involve

the storage and transmission of confidential information, security breaches and malicious software could expose us to claims, regulatory scrutiny, litigation and other possible liabilities.

Information security risks have generally increased in recent years, and continue to increase, in part because of the proliferation of new technologies, the implementation of work-from-home arrangements, the use of the Internet and telecommunications technologies to conduct financial transactions, and the increased sophistication and activities of organized crime, hackers, terrorists, activists, and other external parties, some of which may be linked to terrorist organizations or hostile foreign governments.

2 unchanged sentences

Due to the complexity and interconnectedness of information technology systems, the process of enhancing our systems can itself create a risk of systems disruptions and security issues.

While to date we have not experienced a significant compromise, significant data loss or material financial losses related to cybersecurity attacks, our systems and those of our customers and third-party service providers, are under constant threat and may experience a significant event in the future.

While to date we believe that we have not experienced a significant compromise, significant data loss or material financial losses related to cybersecurity attacks, our systems and those of our customers and third-party service providers, are under constant threat and may experience a significant event in the future.

We may suffer material financial losses related to these risks or be subject to liability for compromises to its customers or third-party providers.

20 unchanged sentences

Bank and non-bank financial services companies are interrelated as a result of trading, clearing, counterparty and other relationships.

Further, when volatility, market events or similar issues affect a subset of financial institutions, or when there are news reports or high-profile incidents relating to trends, concerns, and other issues in the banking industry, the ramifications can affect the sector as a whole, regardless of the effect, or lack thereof, on any specific institution.

We have exposure to different industries and counterparties through transactions with counterparties in the bank and non-bank financial services industries, including brokers and dealers, commercial banks, investment banks and other institutional clients.

As a result, defaults by, or even rumors or questions about, one or more bank or non-bank financial services companies, or the bank or non-bank financial services industries generally, have led to market-wide liquidity problems and could lead to losses or defaults by us or by other institutions.

These losses or defaults could have an adverse effect on our business, financial condition and results of operations.

Future events of this nature could have an adverse effect on our business, financial condition and results of operations.

Changes in the federal, state or local tax laws may negatively impact our financial performance and we are subject to examinations and challenges by tax authorities.

13 unchanged sentences

In addition, from time to time we may restructure portions of our investment securities portfolio as part of our asset liability management strategies or in response to liquidity needs, and we may incur losses, which may be material, in connection with any such restructuring.

If we were to sell any of these securities before their value recovers, including as

a result of asset liability management strategies or in response to liquidity needs, we would be required to recognize these losses and the recognition of those losses could materially and adversely affect our results of operations, capital and financial.

If we were to sell any of these securities before their value recovers, including as a result of asset liability management strategies or in response to liquidity needs, we would be required to recognize these losses and the recognition of those losses could materially and adversely affect our results of operations, capital and financial.

Impairment of investment securities or goodwill could result in a negative impact on our results of operations.

2 unchanged sentences

A decline in our stock price or occurrence of a triggering event following any of its quarterly earnings releases and prior to the filing of the periodic report for that period could, under certain circumstances, require performance of a goodwill impairment test and result in an impairment charge being recorded for that period which was not reflected in such earnings release.

During 2022, our annual impairment test conducted in October, using discounted cash flows and market based approaches, indicated that the estimated fair value of our sole reporting unit “Bar Harbor Bank & Trust” exceeded the carrying value.

During 2023, our annual impairment test conducted in October, using discounted

cash flows and market-based approaches, indicated that the estimated fair value of our sole reporting unit “Bar Harbor Bank & Trust” exceeded the carrying value.

In a future assessment, we could conclude that all or a portion of our goodwill is impaired, which would result in a non-cash charge to earnings.

4 unchanged sentences

Our wealth management business may be negatively affected by changes in economic and market conditions.

A decline in economic conditions, such as recession, economic downturn, and/or inflationary conditions, changes in domestic and foreign economic conditions, volatility in financial markets, and general trends in business and finance, all of which are beyond our control, could adversely impact the market value of wealth management assets under management, which are primarily marketable securities, and the fee revenues derived from the management of these assets.

A decline in economic conditions, such as recession, economic downturn, and/or inflationary conditions, changes in domestic and foreign economic conditions, volatility in financial markets, and general trends in business and finance, all of which are beyond our control, could adversely impact the market value of wealth management AUM, which are primarily marketable securities, and the fee revenues derived from the management of these assets.

Strategic and External Risks

3 unchanged sentences

Any contraction of economic activity, including an economic recession, may adversely affect our asset quality, deposit levels and loan demand and, therefore, our earnings.

In particular, interest rates are highly sensitive to many factors that are beyond our control, including global, domestic and local economic conditions and the policies of various governmental and regulatory agencies and, specifically, the Federal Reserve Bank (“FRB”).

Throughout 2022 the Federal Open Market Committee (“FOMC”) raised the target range for the Federal funds rate on seven separate occasions and-citing factors including the hardships caused by the ongoing Russia-Ukraine conflict, continued global supply chain disruptions and imbalances, and increased inflationary pressure-the FOMC has indicated that ongoing increases may be appropriate.

Throughout 2023 the Federal Open Market Committee (“FOMC”) raised the target range for the Federal funds rate on four separate occasions and-citing factors including the hardships caused by the ongoing Russia-Ukraine conflict, an economic slowdown in China, continued global supply chain disruptions and imbalances, and increased inflationary pressure-the FOMC has indicated that ongoing increases may be appropriate.

The tightening of the FRB's monetary policies, including repeated and aggressive increases in the target range for the Federal funds rate as well as the conclusion of the FRB's tapering of asset purchases, together with ongoing economic and geopolitical instability, increases the risk of an economic recession.

6 unchanged sentences

Adverse economic developments, specifically including inflation-related impacts, may have a negative effect on the ability of our borrowers to make timely repayments of their loans or to finance future home purchases.

Moreover, while commercial real estate values have stabilized as demand has returned to pre-pandemic levels in several markets;

Moreover, while certain commercial real estate values have stabilized as demand has returned to pre-pandemic levels in several markets;

the post-pandemic outlook for commercial real estate demand remains dependent on the broader economic environment and, specifically, how major subsectors respond to a rising interest rate environment, the reduction of office utilization due to the impact of hybrid working patterns, greater flexibility for work location, and higher prices for commodities, goods and services.

In each case, credit performance over the medium- and long-term is susceptible to economic and market forces and therefore forecasts remain uncertain.

Instability and uncertainty in the commercial and residential real estate markets, headwinds for lease rates and landlord cash flows, as well as in the broader commercial and retail credit markets, could have a material adverse effect on our financial condition and results of operations.

Instability and uncertainty in the commercial and residential real estate markets, including headwinds for mortgage rates, lease rates and landlord cash flows, as well as in the broader commercial and retail credit markets, could have a material adverse effect on our financial condition and results of operations.

Monetary policy and economic environment could impact our financial performance.

14 unchanged sentences

We compete with an ever-increasing array of financial service providers.

See the section entitled “Competition” of Item 1 of this Annual Report for additional competitor information.

See the section entitled “Competition” in Part I.

Item 1, “Business” of this Annual Report for additional competitor information.

Competition from nationwide banks, as well as local institutions, continues to mount in our markets.

6 unchanged sentences

We compete with larger financial institutions who are rapidly evolving their service channels and escalating the costs of evolving the service process.

Our business is concentrated in and largely dependent upon the continued growth and welfare of the general geographic markets in which we operate.

Our operations are concentrated in Northern New England (and in particular, Maine, New Hampshire and Vermont).

As a result, the Company's financial condition, results of operations and cash flows are significantly impacted by changes in the economic conditions in those areas.

Therefore, the Company’s financial performance generally, and in particular, the ability of borrowers to pay interest on and repay the principal of outstanding loans and the value of collateral securing these loans, is highly dependent upon the business environment in the markets where the Company operates.

The Company's success depends to a significant extent upon the business activity, population, income levels, deposits and real estate activity in these markets.

Although the Company's clients’ business and financial interests may extend well beyond these markets, adverse economic conditions that affect these markets could disproportionately reduce the Company's growth rate, affect the ability of the Company's clients to repay their loans to the Company, affect the value of collateral underlying loans and generally affect the Company's financial condition and results of operations.

Because of the Company's geographic concentration, we are less able than other regional or national financial institutions to diversify our credit risks across multiple markets.

For additional information on the Company's market area, see Part I, Item 1, "Business" of this Annual Report.

Expansion, growth, and acquisitions could negatively impact earnings if not successful.

21 unchanged sentences

Our efforts to take these risks into account in making lending and other decisions may not be effective in protecting us from the negative impact of new laws and regulations or changes in consumer or business behavior.

Factors associated with global climate change, including evolving and increasing regulations, increasing global concern and stakeholder scrutiny about climate change and extreme weather conditions could adversely affect our business, reputation, results of operations and financial position.

There has been an increased focus from regulators and stakeholders on environmental, social, and governance (“ESG”) matters.

Our failure or perceived failure to achieve our ESG goals, maintain ESG practices, or comply with emerging ESG regulations that meet evolving regulatory or stakeholder expectations could adversely affect public perception of our business, employee morale or patient or stakeholder support, expend corporate resources, result in substantial costs and expenses, result in legal or regulatory proceedings against the Company and negatively impact our financial condition and results of operations.

Damage to our reputation may reduce demand for our services and thus have an adverse effect on our future financial performance, as well as require additional resources to rebuild our reputation.

Global climate change also presents both immediate and long-term physical risks (such as extreme weather conditions) and risks associated with the transition to a low-carbon economy (such as regulatory or technology changes).

These changes could result in, for example, closures of our banking offices and other facilities, and supply chain disruptions, as well as increased costs of products, commodities and energy (including utilities), and disruptions in our information systems, which in turn could negatively impact our business and results of operations.

In addition, certain of our operations

and facilities are located in regions that may be disproportionately impacted by the physical risks of climate change (including hurricanes and flooding), and we face the risk of losses incurred as a result of physical damage to our facilities and business interruptions caused by such events.

We maintain property insurance coverage to address the impact of physical damage to our facilities and for business interruption losses.

However, such insurance coverage may be insufficient to cover all losses and we may experience a material, adverse effect on our results of operations that is not recoverable through our insurance policies.

Additionally, if we experience a significant increase in climate-related events that result in material losses we may be unable to obtain similar levels of property insurance coverage in the future or at rates that are significantly higher than our current rates.

Changes in consumer preferences and additional legislation and regulatory requirements, including those associated with the transition to a low-carbon economy, may increase costs associated with compliance, the operation of our facilities and supplies.

Regulations limiting greenhouse gas emissions and energy inputs may also increase in coming years, which may adversely impact us through increased compliance costs for us and our suppliers and vendors.

Pandemics, severe weather, natural disasters, acts of war or terrorism, and other external events could significantly impact our business and the business of our customers.

18 unchanged sentences

Revenues derived from transaction fees associated with overdraft protection programs offered to our customers represent a significant portion of its noninterest income.

In response to recent increased congressional and regulatory scrutiny, and in anticipation of enhanced supervision and enforcement of overdraft protection practices in the future, certain banking organizations have begun to modify their overdraft protection programs, including by discontinuing the imposition of overdraft transaction fees.

In response to recent increased congressional and regulatory scrutiny, and

in anticipation of enhanced supervision and enforcement of overdraft protection practices in the future, certain banking organizations have begun to modify their overdraft protection programs, including by discontinuing the imposition of overdraft transaction fees.

These competitive pressures, as well as any adoption by the Bank’s regulators of new rules or supervisory guidance or more aggressive examination and enforcement policies in respect of banks' overdraft protection practices, could cause it to modify programs and practices in ways that may have a negative impact on revenue and our earnings.

10 unchanged sentences

Any system of controls, however well designed and operated, is based in part on certain assumptions and can provide only reasonable, not absolute, assurances that the objectives of the controls are met.

failure or circumvention of our controls and procedures or failure to comply with regulations related to controls and procedures could have a material adverse effect on our business, results of operations, and financial condition.

Any failure or circumvention of our controls and procedures or failure to comply with regulations related to controls and procedures could have a material adverse effect on our business, results of operations, and financial condition.

We may be unable to attract and retain key personnel.

2 unchanged sentences

In addition, the Bank’s rural geographic marketplace, combined with relatively expensive real estate purchase prices in the many tourist communities we serve, create additional risks for the our ability to attract and retain key personnel.

The unexpected loss of key personnel could have an adverse impact on our business because of their skills, knowledge of the markets in which the we operate, years of industry experience and the difficulty of promptly finding qualified replacement personnel.

The unexpected loss of key personnel could have an adverse impact on our business because of their skills, knowledge of the markets in which we operate, years of industry experience and the difficulty of promptly finding qualified replacement personnel.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 1A. Risk Factors