BAR HARBOR BANKSHARES 10-Q

Table of Contents ​ ​ UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 ​ FORM 10-Q ​ ​ ​ ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 ​ For the quarterly period ended: September 30, 2024 ​ ​ ​ ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 ​ For the transition period from to Commission File Number: 001-13349 BAR HARBOR BANKSHARES (Exact name of registrant as specified in its charter) ​ ​ ​ ​ Maine ​ 01-0393663 (State or other jurisdiction of incorporation or organization) ​ (I.R.S. Employer Identification No.) ​ ​ ​ PO Box 400 ​ ​ 82 Main Street , Bar Harbor , ME ​ 04609-0400 (Address of principal executive offices) ​ (Zip Code) ​ Registrant’s telephone number, including area code: ( 207 ) 288-3314 ​ Securities registered pursuant to Section 12(b) of the Act: ​ Title of each class ​ Trading Symbol ​ Name of each exchange on which registered Common Stock, par value $2.00 per share ​ BHB ​ NYSE American ​ Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ⌧ No ◻ ​ Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ⌧ No ◻ ​ Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definition of "large accelerated filer," "accelerated filer", "smaller reporting company", and "emerging growth company" in Rule 12b-2 of the Exchange Act. ​ Large Accelerated Filer ◻ Accelerated Filer ⌧ Non-Accelerated Filer ◻ Smaller Reporting Company ☐ Emerging growth company ☐ ​ If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ◻ ​ Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act) Yes ☐ No ⌧ ​ The registrant had 15,267,856 shares of common stock, par value $2.00 per share, outstanding as of November 5, 2024. ​ ​ ​ ​ Table of Contents BAR HARBOR BANKSHARES AND SUBSIDIARIES FORM 10-Q ​ INDEX ​ ​ Page PART I. FINANCIAL INFORMATION ​ ​ ​ ​ Item 1. Consolidated Financial Statements (unaudited) ​ ​ ​ ​ ​ Consolidated Balance Sheets as of September 30, 2024 and December 31, 2023 5 ​ ​ ​ ​ Consolidated Statements of Income for the Three and Nine Months Ended September 30, 2024 and 2023 6 ​ ​ ​ ​ Consolidated Statements of Comprehensive Income for the Three and Nine Months Ended September 30, 2024 and 2023 7 ​ ​ ​ ​ Consolidated Statements of Changes in Shareholders’ Equity for the Three and Nine Months Ended September 30, 2024 and 2023 8 ​ ​ ​ ​ Consolidated Statements of Cash Flows for the Nine Months Ended September 30, 2024 and 2023 9 ​ ​ ​ ​ Condensed Notes to Unaudited Consolidated Interim Financial Statements ​ ​ ​ Note 1 Basis of Presentation 10 ​ ​ Note 2 Securities Available for Sale 12 ​ ​ Note 3 Loans and Allowance for Credit Losses 16 ​ ​ Note 4 Borrowed Funds 29 ​ ​ Note 5 Deposits 31 ​ ​ Note 6 Capital Ratios and Shareholders' Equity 32 ​ ​ Note 7 Earnings per Share 36 ​ ​ Note 8 Derivative Financial Instruments and Hedging Activities 37 ​ ​ Note 9 Fair Value Measurements 47 ​ ​ Note 10 Revenue from Contracts with Customers 54 ​ ​ ​ ​ ​ Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations 56 ​ ​ Selected Financial Data 64 ​ ​ Consolidated Loan and Deposit Analysis 65 ​ ​ Average Balances and Average Yields/Rates 66 ​ ​ Reconciliation of Non-GAAP Financial Measures 68 ​ ​ ​ Item 3. Quantitative and Qualitative Disclosures about Market Risk 70 ​ ​ ​ Item 4. Controls and Procedures 72 ​ ​ ​ PART II. OTHER INFORMATION ​ ​ ​ ​ Item 1. Legal Proceedings 72 ​ ​ ​ Item 1A. Risk Factors 72 ​ ​ ​ Item 2. Unregistered Sales of Equity Securities and Use of Proceeds 73 ​ ​ ​ Item 5. Other Information 73 ​ ​ ​ Item 6. Exhibits 74 ​ ​ ​ Signatures ​ 75 ​ ​ ​ 2 Table of Contents Bar Harbor Bankshares conducts business operations principally through Bar Harbor Bank & Trust, which may be referred to as the “Bank” and which is a subsidiary of Bar Harbor Bankshares. Unless the context requires otherwise, references in this report to “the Company,” "our," "us," and similar terms refer to Bar Harbor Bankshares and its subsidiaries, including the Bank, collectively. ​ ​ CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS ​ Certain statements contained in this Quarterly Report on Form 10-Q (this “Form 10-Q”) that are not historical facts may constitute 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 (the "Exchange Act"), and are intended to be covered by the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. When used in this Form 10-Q 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 about the Company’s future financial and operating results and the Company’s 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: ​ ● changes in general business and economic conditions on a national basis and in our markets throughout Northern New England; ● changes in consumer behavior due to political, business, and economic conditions, including inflation and concerns about liquidity; ● the possibility that our asset quality could decline or that we experience greater loan losses than anticipated; ● the impact of liquidity needs on our results of operations and financial condition; changes in the size and nature of our competition; ● the effect of interest rate increases on the cost of deposits; ● unanticipated weakness in loan demand, pricing or collectability; ● the possibility that future credit losses are higher than currently expected due to changes in economic assumptions or adverse economic developments; ● operational risks including, but not limited to, changes in information technology, cybersecurity incidents, fraud, natural disasters, climate change, war, terrorism, civil unrest, and future pandemics; ● lack of strategic growth opportunities or our failure to execute on available opportunities; ● our ability to effectively manage problem credits; ● our ability to successfully develop new products and implement efficiency initiatives on time and with the results projected; ● our ability to retain executive officers and key employees and their customer and community relationships; ● regulatory, litigation, and reputational risks and the applicability of insurance coverage; ● changes in the reliability of our vendors, internal control systems or information systems; ● the potential impact of climate change; ● changes in legislation or regulation and accounting principles, policies, and guidelines; ● reductions in the market value or outflows of wealth management assets under management; and ● changes in the assumptions used in making such forward-looking statements. ​ ​ ​ ​ ​ ​ 3 Table of Contents Other factors not identified above, including those described under the headings “Risk Factors” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” in our Annual Report on Form 10-K for the fiscal year ended December 31, 2023 (the “Form 10-K”), our 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 , may also cause actual results to differ materially from those described in our forward-looking statements. Most of these factors are difficult to anticipate and are generally beyond our control. Given these uncertainties, you are cautioned not to place undue reliance on such forward-looking statements, and you should consider these factors in connection with considering any forward-looking statements that may be made by us. We undertake no obligation to release publicly any revisions to any forward-looking statements, to report events or to report the occurrence of unanticipated events unless we are required to do so by law . ​ ​ ​ ​ 4 Table of Contents PART I. FINANCIAL INFORMATION ​ ITEM 1. CONSOLIDATED FINANCIAL STATEMENTS ​ BAR HARBOR BANKSHARES AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (UNAUDITED) ​ ​ ​ ​ ​ ​ ​ ​ (in thousands, except share data) September 30, 2024 December 31, 2023 Assets ​ ​ Cash and cash equivalents: ​ ​ ​ ​ ​ ​ Cash and due from banks ​ $ 39,877 ​ $ 42,221 Interest-earning deposits with other banks ​ 41,343 ​ 52,621 Total cash and cash equivalents ​ 81,220 ​ 94,842 Securities: ​ ​ ​ ​ ​ ​ Securities available for sale ​ 535,892 ​ 534,574 Federal Home Loan Bank stock ​ 7,600 ​ 12,788 Total securities ​ 543,492 ​ 547,362 Loans held for sale ​ ​ 1,272 ​ ​ 2,189 Total loans ​ 3,081,735 ​ 2,999,049 Less: Allowance for credit losses ​ ( 29,023 ) ​ ( 28,142 ) Net loans ​ 3,052,712 ​ 2,970,907 Premises and equipment, net ​ 51,644 ​ 48,287 Other real estate owned ​ — ​ — Goodwill ​ 119,477 ​ 119,477 Other intangible assets ​ 4,171 ​ 4,869 Cash surrender value of bank-owned life insurance ​ 81,824 ​ 80,037 Deferred tax assets, net ​ 20,923 ​ 22,979 Other assets ​ 73,192 ​ 79,936 Total assets ​ $ 4,029,927 ​ $ 3,970,885 ​ ​ ​ ​ ​ ​ ​ Liabilities ​ ​ Deposits: ​ ​ Non-interest bearing demand ​ $ 604,963 ​ $ 569,714 Interest-bearing demand ​ 913,910 ​ 946,978 Savings ​ 544,235 ​ 553,963 Money market ​ 380,624 ​ 370,242 Time ​ 817,354 ​ 700,260 Total deposits ​ 3,261,086 ​ 3,141,157 Borrowings: ​ ​ Senior ​ 186,207 ​ 271,044 Subordinated ​ 60,580 ​ 60,461 Total borrowings ​ 246,787 ​ 331,505 Other liabilities ​ 62,138 ​ 66,164 Total liabilities ​ 3,570,011 ​ 3,538,826 ​ ​ ​ ​ ​ ​ ​ ​ Shareholders’ equity ​ ​ ​ ​ Capital stock, par value $ 2.00 ; authorized 20,000,000 shares; issued 16,428,388 shares; outstanding 15,267,856 shares and 15,172,131 shares at September 30, 2024 and December 31, 2023, respectively ​ 32,857 ​ 32,857 Additional paid-in capital ​ 194,189 ​ 193,114 Retained earnings ​ 291,392 ​ 272,101 Accumulated other comprehensive loss ​ ( 43,085 ) ​ ( 49,862 ) Less: 1,160,532 and 1,256,257 shares of treasury stock, at cost, at September 30, 2024 and December 31, 2023, respectively ​ ( 15,437 ) ​ ( 16,151 ) Total shareholders’ equity ​ 459,916 ​ 432,059 Total liabilities and shareholders’ equity ​ $ 4,029,927 ​ $ 3,970,885 ​ The accompanying notes are an integral part of these consolidated financial statements. ​ 5 Table of Contents BAR HARBOR BANKSHARES AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Three Months Ended ​ Nine Months Ended ​ ​ September 30, ​ September 30, (in thousands, except earnings per share data) 2024 2023 2024 2023 Interest and dividend income ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Loans ​ $ 42,042 ​ $ 38,412 ​ $ 122,146 ​ $ 109,889 Securities and other ​ 6,538 ​ 6,723 ​ 19,095 ​ 18,478 Total interest and dividend income ​ 48,580 ​ 45,135 ​ 141,241 ​ 128,367 Interest expense ​ ​ ​ ​ Deposits ​ 16,174 ​ 11,415 ​ 45,486 ​ 25,270 Borrowings ​ 3,448 ​ 4,534 ​ 10,983 ​ 14,215 Total interest expense ​ 19,622 ​ 15,949 ​ 56,469 ​ 39,485 Net interest income ​ 28,958 ​ 29,186 ​ 84,772 ​ 88,882 Provision for credit losses ​ 228 ​ 673 ​ 1,102 ​ 2,221 Net interest income after provision for credit losses ​ 28,730 ​ 28,513 ​ 83,670 ​ 86,661 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Non-interest income ​ ​ ​ ​ Trust and investment management fee income ​ 4,129 ​ 3,522 ​ 11,992 ​ 10,882 Customer service fees ​ 3,788 ​ 3,926 ​ 11,235 ​ 11,377 Gain on sales of securities, net ​ — ​ — ​ 50 ​ 34 Mortgage banking income ​ ​ 681 ​ ​ 415 ​ ​ 1,496 ​ ​ 1,072 Bank-owned life insurance income ​ 570 ​ 515 ​ 1,714 ​ 2,166 Customer derivative income ​ 265 ​ 43 ​ 433 ​ 258 Other income ​ 220 ​ 186 ​ 576 ​ 588 Total non-interest income ​ 9,653 ​ 8,607 ​ 27,496 ​ 26,377 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Non-interest expense ​ ​ ​ ​ Salaries and employee benefits ​ 14,383 ​ 13,011 ​ 41,491 ​ 39,005 Occupancy and equipment ​ 4,453 ​ 4,469 ​ 13,308 ​ 13,275 Gain on sales of premises and equipment, net ​ — ​ — ​ ( 263 ) ​ ( 99 ) Outside services ​ 386 ​ 376 ​ 1,186 ​ 1,156 Professional services ​ 441 ​ 436 ​ 1,079 ​ 1,217 Communication ​ 189 ​ 170 ​ 570 ​ 507 Marketing ​ 434 ​ 326 ​ 1,522 ​ 1,211 Amortization of intangible assets ​ 233 ​ 233 ​ 699 ​ 699 Acquisition, conversion and other expenses ​ — ​ — ​ 20 ​ 20 Provision for unfunded commitments ​ ​ 35 ​ ​ 45 ​ ​ ( 150 ) ​ ( 85 ) Other expenses ​ 4,218 ​ 3,742 ​ 12,640 ​ 11,604 Total non-interest expense ​ 24,772 ​ 22,808 ​ 72,102 ​ 68,510 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Income before income taxes ​ 13,611 ​ 14,312 ​ 39,064 ​ 44,528 Income tax expense ​ 1,418 ​ 3,208 ​ 6,519 ​ 9,621 Net income ​ $ 12,193 ​ $ 11,104 ​ $ 32,545 ​ $ 34,907 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Earnings per share: ​ ​ ​ ​ Basic ​ $ 0.80 ​ $ 0.73 ​ $ 2.14 ​ $ 2.31 Diluted ​ $ 0.80 ​ $ 0.73 ​ $ 2.13 ​ $ 2.30 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Weighted average common shares outstanding: ​ ​ ​ ​ Basic ​ 15,261 ​ 15,155 ​ 15,229 ​ 15,135 Diluted ​ 15,326 ​ 15,196 ​ 15,292 ​ 15,189 The accompanying notes are an integral part of these consolidated financial statements. 6 Table of Contents BAR HARBOR BANKSHARES AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (UNAUDITED) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Three Months Ended Nine Months Ended ​ ​ September 30, ​ September 30, (in thousands) 2024 2023 2024 2023 Net income ​ $ 12,193 ​ $ 11,104 ​ $ 32,545 ​ $ 34,907 Other comprehensive income (loss), before tax: ​ ​ ​ ​ Changes in unrealized gain (loss) on securities available for sale ​ 16,147 ​ ( 14,586 ) ​ 10,043 ​ ( 14,637 ) Changes in unrealized gain (loss) on hedging derivatives ​ 82 ​ ( 3,395 ) ​ ( 1,167 ) ​ ( 2,307 ) Changes in unrealized gain on pension ​ — ​ — ​ 22 ​ — ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Income taxes related to other comprehensive income (loss): ​ ​ ​ ​ Changes in unrealized (gain) loss on securities available for sale ​ ( 3,808 ) ​ 3,363 ​ ( 2,368 ) ​ 3,353 Changes in unrealized (gain) loss on hedging derivatives ​ ( 19 ) ​ 782 ​ 275 ​ 531 Changes in unrealized gain on pension ​ — ​ — ​ ( 28 ) ​ — Total other comprehensive income (loss) ​ 12,402 ​ ( 13,836 ) ​ 6,777 ​ ( 13,060 ) Total comprehensive income (loss) ​ $ 24,595 ​ $ ( 2,732 ) ​ $ 39,322 ​ $ 21,847 ​ ​ The accompanying notes are an integral part of these consolidated financial statements. ​ ​ 7 Table of Contents BAR HARBOR BANKSHARES AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY (UNAUDITED) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Accumulated ​ ​ ​ ​ ​ ​ Common ​ Additional ​ ​ ​ ​ other ​ ​ ​ ​ ​ ​ ​ ​ stock ​ paid-in ​ Retained ​ comprehensive ​ Treasury ​ ​ ​ (in thousands, except per share data) amount capital earnings income (loss) stock Total Balance at December 31, 2022 ​ $ 32,857 ​ $ 191,922 ​ $ 243,815 ​ $ ( 58,340 ) ​ $ ( 16,804 ) ​ $ 393,450 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Net income ​ — ​ — ​ 23,803 ​ — ​ — ​ 23,803 Other comprehensive income ​ ​ — ​ — ​ — ​ 776 ​ — ​ ​ 776 Cash dividends declared ($ 0.54 per share) ​ ​ — ​ — ​ ( 8,148 ) ​ — ​ — ​ ​ ( 8,148 ) Net issuance ( 61,470 shares) to employee stock plans, including related tax effects ​ — ​ ( 264 ) ​ — ​ — ​ 416 ​ 152 Recognition of stock based compensation ​ — ​ 683 ​ — ​ — ​ — ​ 683 Balance at June 30, 2023 ​ $ 32,857 ​ $ 192,341 ​ $ 259,470 ​ $ ( 57,564 ) ​ $ ( 16,388 ) ​ $ 410,716 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Net income ​ — ​ — ​ 11,104 ​ — ​ — ​ 11,104 Other comprehensive loss ​ — ​ — ​ — ​ ( 13,836 ) ​ — ​ ( 13,836 ) Cash dividends declared ($ 0.28 per share) ​ — ​ — ​ ( 4,209 ) ​ — ​ — ​ ( 4,209 ) Net issuance ( 11,813 shares) to employee stock plans, including related tax effects ​ — ​ ( 381 ) ​ — ​ — ​ 101 ​ ( 280 ) Recognition of stock based compensation ​ — ​ 713 ​ — ​ — ​ — ​ 713 Balance at September 30, 2023 ​ $ 32,857 ​ $ 192,673 ​ $ 266,365 ​ $ ( 71,400 ) ​ $ ( 16,287 ) ​ $ 404,208 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Balance at December 31, 2023 ​ $ 32,857 ​ $ 193,114 ​ $ 272,101 ​ $ ( 49,862 ) ​ $ ( 16,151 ) ​ $ 432,059 Net income ​ — ​ — ​ 20,352 ​ — ​ — ​ 20,352 Other comprehensive loss ​ ​ — ​ — ​ — ​ ( 5,625 ) ​ — ​ ​ ( 5,625 ) Cash dividends declared ($ 0.58 per share) ​ ​ — ​ — ​ ( 8,724 ) ​ — ​ — ​ ​ ( 8,724 ) Net issuance ( 60,294 shares) to employee stock plans, including related tax effects ​ — ​ ( 799 ) ​ — ​ — ​ 473 ​ ( 326 ) Recognition of stock based compensation ​ — ​ 1,171 ​ — ​ — ​ — ​ 1,171 Balance at June 30, 2024 ​ $ 32,857 ​ $ 193,486 ​ $ 283,729 ​ $ ( 55,487 ) ​ $ ( 15,678 ) ​ $ 438,907 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Net income ​ — ​ — ​ 12,193 ​ — ​ — ​ 12,193 Other comprehensive loss ​ — ​ — ​ — ​ 12,402 ​ — ​ 12,402 Cash dividends declared ($ 0.30 per share) ​ — ​ — ​ ( 4,530 ) ​ — ​ — ​ ( 4,530 ) Net issuance ( 35,431 shares) to employee stock plans, including related tax effects ​ — ​ ( 221 ) ​ — ​ — ​ 241 ​ 20 Recognition of stock based compensation ​ — ​ 924 ​ — ​ — ​ — ​ 924 Balance at September 30, 2024 ​ $ 32,857 ​ $ 194,189 ​ $ 291,392 ​ $ ( 43,085 ) ​ $ ( 15,437 ) ​ $ 459,916 ​ The accompanying notes are an integral part of these consolidated financial statements. 8 Table of Contents ​ BAR HARBOR BANKSHARES AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Nine Months Ended September 30, (in thousands) 2024 2023 Cash flows from operating activities: ​ ​ Net income $ 32,545 ​ $ 34,907 Adjustments to reconcile net income to net cash provided by operating activities: ​ ​ ​ ​ Net change in loans held for sale ​ ​ ( 917 ) ​ ​ 2,016 Provision for credit losses ​ 1,102 ​ 2,221 Net amortization of securities ​ 1,312 ​ 1,758 Change in unamortized net loan costs and premiums ​ ( 656 ) ​ 73 Premises and equipment depreciation ​ 3,138 ​ 3,136 Stock-based compensation expense ​ 2,095 ​ 1,396 Amortization of other intangibles ​ 699 ​ 699 Income from cash surrender value of bank-owned life insurance policies ​ ( 1,714 ) ​ ( 2,166 ) Gain on sales of securities, net ​ ( 50 ) ​ ( 34 ) Amortization of right-of-use lease assets ​ ​ 753 ​ ​ 900 Decrease in lease liabilities ​ ​ ( 744 ) ​ ​ ( 879 ) Gain on premises and equipment, net ​ ( 263 ) ​ ( 99 ) Net change in other assets and liabilities ​ 1,813 ​ ( 12,835 ) Net cash provided by operating activities ​ 39,113 ​ 31,093 ​ ​ ​ ​ ​ ​ ​ Cash flows from investing activities: ​ ​ Proceeds from sales, maturities, calls and prepayments of securities available for sale ​ 47,017 ​ 32,542 Purchases of securities available for sale ​ ( 39,271 ) ​ ( 1,000 ) Net change in loans ​ ( 82,251 ) ​ ( 90,244 ) Purchase of Federal Home Loan Bank stock ​ ( 11,523 ) ​ ( 15,059 ) Proceeds from sale of Federal Home Loan Bank stock ​ 16,711 ​ 15,118 Purchase of premises and equipment, net ​ ( 6,548 ) ​ ( 3,650 ) Proceeds from sale of premises held for sale ​ ​ 1,479 ​ ​ — Proceeds from death benefit of bank-owned life insurance policy ​ ​ — ​ ​ 3,904 Net cash used in investing activities ​ ( 74,386 ) ​ ( 58,389 ) ​ ​ ​ ​ ​ ​ ​ Cash flows from financing activities: ​ ​ Net change in deposits ​ 119,929 ​ 97,063 Net change in short-term borrowings ​ ​ ( 84,829 ) ​ ​ ( 26,880 ) Repayments of long-term borrowings ​ ​ ( 7 ) ​ ​ ( 14 ) Net change in subordinated debt ​ ​ 118 ​ ​ 133 Net issuance to employee stock plans ​ ​ ( 306 ) ​ ​ ( 128 ) Cash dividends paid on common stock ​ ( 13,254 ) ​ ( 12,357 ) Net cash provided by financing activities ​ 21,651 ​ 57,817 ​ ​ ​ ​ ​ ​ ​ Net change in cash and cash equivalents ​ ( 13,622 ) ​ 30,521 Cash and cash equivalents at beginning of year ​ 94,842 ​ 92,295 Cash and cash equivalents at end of period ​ $ 81,220 ​ $ 122,816 ​ ​ ​ ​ ​ ​ ​ Supplemental cash flow information: ​ ​ Interest paid ​ $ 53,997 ​ $ 36,298 Income taxes paid, net ​ 7,079 ​ 12,228 ​ ​ ​ 9 Table of Contents BAR HARBOR BANKSHARES AND SUBSIDIARIES CONDENSED NOTES TO UNAUDITED CONSOLIDATED INTERIM FINANCIAL STATEMENTS ​ ​ NOTE 1. BASIS OF PRESENTATION ​ The consolidated financial statements (unaudited) (the “financial statements”) of Bar Harbor Bankshares and its subsidiaries (the “Company,” “we,” “our,” “us” or similar terms) have been prepared in conformity with accounting principles generally accepted in the United States of America (“GAAP”). The Company 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 our accounts, the accounts of our 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 GAAP requires otherwise. ​ In addition, these interim financial statements have been prepared in accordance with the instructions to Form 10-Q and Article 10 of Regulation S-X, and accordingly, certain information and footnote disclosures normally included in financial statements prepared according to GAAP have been omitted. ​ The results for any interim period are not necessarily indicative of results for the full year. The consolidated financial statements should be read in conjunction with the audited financial statements and note disclosures in the Form 10-K previously filed with the Securities and Exchange Commission (the “SEC”). In management's opinion, all adjustments necessary for a fair statement are reflected in the interim periods presented. ​ Reclassifications: Whenever necessary, amounts in the prior years’ financial statements are reclassified to conform to current presentation. ​ Income tax expense was $ 1.4 million in the third quarter 2024 compared with $ 3.2 million in the prior year quarter. The effective tax rate was 10.4 % for the third quarter 2024 compared to 22.4 % for the third quarter 2023. The reduction in tax expense in the current quarter is driven by a multiple year tax refund for tax exempt interest income on loans. ​ Goodwill assessment: In connection with acquisitions, management generally records as assets on our consolidated financial statements both goodwill and other intangible assets, such as core deposit and acquired customer relationship intangibles. ​ Goodwill represents the excess of the purchase price over the fair value of net assets acquired in accordance with the purchase method of accounting for business combinations. Goodwill is not amortized but, instead, is subject to impairment tests on at least an annual basis, or more frequently, if an event occurs or circumstances change that reduce the fair value of a reporting unit below its carrying amount. The impairment testing process is conducted by assigning assets and goodwill to each reporting unit. Currently, our goodwill is evaluated at the entity level as there is only one reporting unit. Management, at our discretion, assesses certain qualitative factors to determine if it is more likely than not that the fair value of the reporting unit is less than its carrying value. An impairment charge is recognized if the carrying fair value of goodwill exceeds the implied fair value of goodwill. ​ In the third quarter 2024, management completed its annual goodwill impairment testing using balance sheet and market data as of June 30, 2024. The analysis was performed at the consolidated Bank-level of the Company, which is considered the smallest reporting unit carrying goodwill. Based on an analysis performed, the Company's estimated fair value to a market participant as of September 30, 2024, exceeded its carrying amount resulting in no impairment charge for the period. Management evaluated current conditions and concluded there have been no significant changes in the economic environment or future projections and therefore, believes that there has been no further decline in the Company's fair value as of September 30, 2024. Management will continue to evaluate the economic conditions at future reporting periods for applicable changes. ​ 10 Table of Contents Recent Accounting Pronouncements ​ The following table provides a brief description of recent accounting standards updates (“ASU”) that could have a material impact to the Company’s consolidated financial statements upon adoption: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Standard Description Required Date of Adoption Effect on financial statements Standards Adopted in 2023 ​ ​ ​ ASU 2022-02 Financial Instruments - Credit Losses (Topic 326): Troubled Debt Restructurings ("TDRs") and Vintage Disclosures ​ ​ The amendments in this update eliminate TDR recognition and measurement guidance and, instead, require that an entity evaluate (consistent with the accounting for other loan modifications) whether the modification represents a new loan or a continuation of an existing loan. The amendments enhance existing disclosure requirements and introduce new requirements related to certain modifications of receivables made to borrowers experiencing financial difficulty. ​ ​ January 1, 2023 ​ ​ The adoption of this ASU did not have a material impact on our consolidated financial statements. ASU 2023-02 Investments - Equity Method and Joint Ventures (Topic 323): Accounting for Investments in Tax Credit Structures Using the Proportional Amortization Method ​ ​ The amendments in this update permit reporting entities to elect to account for their tax equity investments, regardless of the tax credit program from which the income tax credits are received, using the proportional amortization method if certain conditions are met. ​ ​ December 15, 2023, including interim periods within the fiscal year ​ ​ The adoption of this ASU did not have a material impact on our consolidated financial statements. Standards Not Yet Adopted ​ ​ ​ ASU 2023-09 Income Taxes (Topic 740): Improvements to Income Tax Disclosures ​ ​ The amendments in this update require that public business entities on an annual basis (1) disclose specific categories in the rate reconciliation and (2) provide additional information for reconciling items that meet a quantitative threshold (if the effect of those reconciling items is equal to or greater than 5 percent of the amount computed by multiplying pretax income [or loss] by the applicable statutory income tax rate). ​ ​ ​ Annual periods beginning after December 15, 2024 ​ ​ We do not expect adoption of this ASU to have a material impact on our consolidated financial statements. ​ ​ ​ ​ ​ ​ ​ ​ 11 Table of Contents NOTE 2. SECURITIES AVAILABLE FOR SALE ​ The following is a summary of securities available for sale (“AFS”): ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Gross ​ Gross ​ ​ ​ ​ ​ ​ ​ ​ Unrealized ​ Unrealized ​ ​ ​ (in thousands) Amortized Cost Gains Losses Fair Value September 30, 2024 ​ ​ ​ ​ Debt securities: ​ ​ ​ ​ Obligations of US Government-sponsored enterprises ​ $ 1,380 ​ $ 1 ​ $ ( 18 ) ​ $ 1,363 Mortgage-backed securities and collateralized mortgage obligations: ​ ​ ​ ​ US Government-sponsored enterprises ​ ​ 214,465 ​ ​ 85 ​ ​ ( 25,098 ) ​ ​ 189,452 US Government agency ​ 104,994 ​ 427 ​ ( 9,094 ) ​ 96,327 Private label ​ 46,310 ​ 26 ​ ( 949 ) ​ 45,387 Obligations of states and political subdivisions thereof ​ 118,147 ​ 4,174 ​ ( 12,994 ) ​ 109,327 Corporate bonds ​ 102,904 ​ 280 ​ ( 9,148 ) ​ 94,036 Total securities available for sale ​ $ 588,200 ​ $ 4,993 ​ $ ( 57,301 ) ​ $ 535,892 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Gross ​ Gross ​ ​ ​ ​ ​ ​ ​ ​ Unrealized ​ Unrealized ​ ​ ​ (in thousands) Amortized Cost Gains Losses Fair Value December 31, 2023 ​ ​ ​ ​ Debt securities: ​ ​ ​ ​ Obligations of US Government-sponsored enterprises ​ $ 2,021 ​ $ — ​ $ ( 29 ) ​ $ 1,992 Mortgage-backed securities and collateralized mortgage obligations: ​ ​ ​ ​ US Government-sponsored enterprises ​ ​ 223,602 ​ ​ 12 ​ ​ ( 30,332 ) ​ ​ 193,282 US Government agency ​ 85,005 ​ 145 ​ ( 10,937 ) ​ 74,213 Private label ​ 60,888 ​ 18 ​ ( 1,855 ) ​ 59,051 Obligations of states and political subdivisions thereof ​ 119,857 ​ 4,515 ​ ( 14,204 ) ​ 110,168 Corporate bonds ​ 105,552 ​ 19 ​ ( 9,703 ) ​ 95,868 Total securities available for sale ​ $ 596,925 ​ $ 4,709 ​ $ ( 67,060 ) ​ $ 534,574 ​ Credit Quality Information We monitor the credit quality of available for sale debt securities through credit ratings from various rating agencies and substantial price changes. In an effort to make informed decisions, we utilize credit ratings that express opinions about the credit quality of a security. Securities are triggered for further review in the quarter if the security has significant fluctuations in ratings, significant pricing changes, or drops below investment-grade. 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. ​ As of September 30, 2024 and December 31, 2023, we carried no allowance on available for sale debt securities in accordance with ASC 326, Measurement of Credit Losses on Financial Instruments. ​ The amortized cost and estimated fair value of available for sale securities segregated by contractual maturity at September 30, 2024 are presented below. Expected maturities may differ from contractual maturities because issuers may have the right to call or prepay obligations. Mortgage-backed securities and collateralized mortgage obligations are shown in total, as their maturities are highly variable. ​ 12 Table of Contents ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Available for sale (in thousands) Amortized Cost Fair Value Within 1 year $ 3,003 ​ $ 2,598 Over 1 year to 5 years ​ 52,409 ​ 48,118 Over 5 years to 10 years ​ 42,355 ​ 43,323 Over 10 years ​ 124,664 ​ 110,687 Total bonds and obligations ​ 222,431 ​ 204,726 Mortgage-backed securities and collateralized mortgage obligations ​ 365,769 ​ 331,166 Total securities available for sale ​ $ 588,200 ​ $ 535,892 ​ ​ ​ The following table presents the realized gains and losses from the sale of AFS securities for the periods presented: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Three Months Ended ​ Nine Months Ended ​ ​ ​ September 30, ​ September 30, ​ (in thousands) 2024 2023 2024 2023 Gross gains on sales of available for sale securities ​ $ — ​ $ — ​ $ 50 ​ $ 34 ​ Gross losses on sales of available for sale securities ​ — ​ — ​ — ​ — ​ Net gains on sale of available for sale securities ​ $ — ​ $ — ​ $ 50 ​ $ 34 ​ ​ Securities with unrealized losses, segregated by the duration of their continuous unrealized loss positions, are summarized as follows: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Less Than Twelve Months ​ Over Twelve Months ​ Total ​ ​ Gross ​ ​ Gross ​ ​ Gross ​ ​ ​ ​ Unrealized ​ Fair ​ Unrealized ​ Fair ​ Unrealized ​ Fair (in thousands) Losses Value Losses Value Losses Value September 30, 2024 ​ ​ ​ ​ ​ ​ Debt securities: ​ ​ ​ ​ ​ ​ Obligations of US Government-sponsored enterprises ​ $ — ​ $ — ​ $ 18 ​ $ 649 ​ $ 18 ​ $ 649 Mortgage-backed securities and collateralized mortgage obligations: ​ ​ ​ ​ ​ ​ US Government-sponsored enterprises ​ ​ 6 ​ ​ 4,349 ​ ​ 25,092 ​ ​ 176,860 ​ ​ 25,098 ​ ​ 181,209 US Government agency ​ 38 ​ 4,814 ​ 9,056 ​ 64,026 ​ 9,094 ​ 68,840 Private label ​ 3 ​ 1,317 ​ 946 ​ 25,274 ​ 949 ​ 26,591 Obligations of states and political subdivisions thereof ​ 6 ​ 2,378 ​ 12,988 ​ 102,422 ​ 12,994 ​ 104,800 Corporate bonds ​ 417 ​ 4,083 ​ 8,731 ​ 78,766 ​ 9,148 ​ 82,849 Total securities available for sale ​ $ 470 ​ $ 16,941 ​ $ 56,831 ​ $ 447,997 ​ $ 57,301 ​ $ 464,938 ​ 13 Table of Contents ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Less Than Twelve Months ​ Over Twelve Months ​ Total ​ Gross ​ ​ Gross ​ ​ Gross ​ ​ ​ ​ Unrealized ​ Fair ​ Unrealized ​ Fair ​ Unrealized ​ Fair (in thousands) ​ Losses ​ Value ​ Losses ​ Value ​ Losses ​ Value December 31, 2023 ​ ​ ​ ​ ​ ​ Debt securities: ​ ​ ​ ​ ​ ​ Obligations of US Government-sponsored enterprises ​ $ 1 ​ $ 1,084 ​ $ 28 ​ $ 907 ​ $ 29 ​ $ 1,991 Mortgage-backed securities and collateralized mortgage obligations: ​ ​ ​ ​ ​ ​ US Government-sponsored enterprises ​ ​ 10 ​ ​ 3,439 ​ ​ 30,322 ​ ​ 188,611 ​ ​ 30,332 ​ ​ 192,050 US Government agency ​ 2 ​ 120 ​ 10,935 ​ 68,891 ​ 10,937 ​ 69,011 Private label ​ — ​ 26 ​ 1,855 ​ 59,007 ​ 1,855 ​ 59,033 Obligations of states and political subdivisions thereof ​ 26 ​ 3,099 ​ 14,178 ​ 101,036 ​ 14,204 ​ 104,135 Corporate bonds ​ 156 ​ 4,913 ​ 9,547 ​ 84,950 ​ 9,703 ​ 89,863 Total securities available for sale ​ $ 195 ​ $ 12,681 ​ $ 66,865 ​ $ 503,402 ​ $ 67,060 ​ $ 516,083 ​ We expect to recover the amortized cost basis on all securities in our AFS portfolio. Furthermore, we do not intend to sell nor do we anticipate that we will be required to sell any securities in an unrealized loss position as of September 30, 2024, prior to this recovery. Our ability and intent to hold these securities until recovery is supported by our capital and liquidity positions as well as historically low portfolio turnover. ​ The following summarizes, by investment security type, the impact of securities in an unrealized loss position at September 30, 2024: ​ Obligations of US Government-sponsored enterprises ​ 7 out of the total 8 securities in our portfolio of AFS obligations of US Government-sponsored enterprises were in unrealized loss positions. Aggregate unrealized losses represented 2.63 % of the amortized cost of securities in unrealized loss positions. The US Small Business Administration guarantees the contractual cash flows of all of our obligations of US Government-sponsored enterprises. The securities are investment grade rated and there were no material underlying credit downgrades during the quarter. ​ US Government-sponsored enterprises ​ 400 out of the total 487 securities in our portfolio of AFS US Government-sponsored enterprises were in unrealized loss positions. Aggregate unrealized losses represented 12.17 % of the amortized cost of securities in unrealized loss positions. The Federal National Mortgage Association and Federal Home Loan Mortgage Corporation guarantee the contractual cash flows of all of our US Government-sponsored enterprises. The securities are investment grade rated and there were no material underlying credit downgrades during the quarter. ​ US Government agency ​ 121 out of the total 159 securities in our portfolio of AFS US Government agency securities were in unrealized loss positions. Aggregate unrealized losses represented 11.67 % of the amortized cost of securities in unrealized loss positions. The Government National Mortgage Association guarantees the contractual cash flows of all of our US Government agency securities. The securities are investment grade rated and there were no material underlying credit downgrades during the quarter. ​ 14 Table of Contents Private label ​ 19 of the total 25 securities in our portfolio of AFS private label mortgage-backed securities were in unrealized loss positions. Aggregate unrealized losses represented 3.45 % of the amortized cost of securities in unrealized loss positions. We expect to receive all of the future contractual cash flows related to the amortized cost on these securities. ​ Obligations of states and political subdivisions thereof ​ 54 of the total 67 securities in our portfolio of AFS municipal bonds and obligations were in unrealized loss positions. Aggregate unrealized losses represented 11.44 % of the amortized cost of securities in unrealized loss positions. We continually monitor the municipal bond sector of the market carefully and periodically evaluate the appropriate level of exposure to the market. At this time, we believe (i) the bonds in this portfolio carry minimal risk of default and (ii) we are appropriately compensated for the risk. There were no material underlying credit downgrades during the quarter. ​ Corporate bonds ​ 29 out of the total 35 securities in our portfolio of AFS corporate bonds were in an unrealized loss position. The aggregate unrealized loss represents 9.94 % of the amortized cost of bonds in unrealized loss positions. We review the financial strength of all of these bonds, and we have concluded that the amortized cost remains supported by the expected future cash flows of these securities. The most recent review includes all bond issuers and their current credit ratings, financial performance and capitalization. ​ ​ 15 Table of Contents NOTE 3. LOANS AND ALLOWANCE FOR CREDIT LOSSES ​ We evaluate risk characteristics of loans based on regulatory call report code with segmentation based on the underlying collateral for certain loan types. The following is a summary of total loans based on regulatory call report code segmentation for certain loan types: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ September 30, ​ December 31, (in thousands) 2024 2023 Commercial construction ​ $ 132,643 ​ $ 154,048 Commercial real estate owner occupied ​ 302,694 ​ 310,015 Commercial real estate non-owner occupied ​ 1,296,596 ​ 1,144,566 Tax exempt ​ 38,338 ​ 43,688 Commercial and industrial ​ 310,322 ​ 310,883 Residential real estate ​ 899,123 ​ 940,334 Home equity ​ 94,146 ​ 87,683 Consumer other ​ 7,873 ​ 7,832 Total loans ​ 3,081,735 ​ 2,999,049 Allowance for credit losses ​ 29,023 ​ 28,142 Net loans ​ $ 3,052,712 ​ $ 2,970,907 ​ Total unamortized net costs and premiums included in loan totals were as follows: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ September 30, ​ December 31, (in thousands) 2024 2023 Net unamortized loan origination costs ​ $ 2,041 ​ $ 3,039 Net unamortized fair value discount on acquired loans ​ ( 2,549 ) ​ ( 2,891 ) Total ​ $ ( 508 ) ​ $ 148 ​ We exclude accrued interest receivable from the amortized cost basis of loans disclosed throughout this footnote. As of September 30, 2024 and December 31, 2023, accrued interest receivable for loans totaled $ 12.3 million and $ 11.9 million, respectively, and is included in the “other assets” line item on the consolidated balance sheets. ​ Characteristics of each loan portfolio segment are as follows: ​ Commercial construction - Loans in this segment primarily include raw land, land development and construction of commercial and multifamily residential properties. Collateral values are determined based upon appraisals and evaluations of the completed structure in accordance with established policy guidelines. Maximum loan-to-value ratios at origination are governed by established policy guidelines that are more restrictive than on stabilized commercial real estate transactions. Construction loans are primarily paid by the cash flow generated from the completed structure, such as operating leases, rents, or other operating cash flows from the borrower. ​ Commercial real estate owner occupied and non-owner occupied - Loans in these segments are primarily owner-occupied or income-producing properties. Loans to real estate investment trusts and unsecured loans to developers that closely correlate to the inherent risk in commercial real estate markets are also included. Commercial real estate loans are typically written with amortizing payment structures. Collateral values are determined based upon appraisals and evaluations in accordance with established policy guidelines. Maximum loan-to-value ratios at origination are governed by established policy and regulatory guidelines. Commercial real estate loans are primarily paid by the cash flow generated from the real property, such as operating leases, rents, or other operating cash flows from the borrower. ​ Tax Exempt - Loans in this segment primarily include loans to various state and municipal government entities. Loans made to these borrowers may provide us with tax-exempt income. While governed and underwritten similar to commercial loans they do have unique requirements based on established polices. Almost all state and municipal loans are considered a general obligation of the issuing entity. Given the size of many municipal borrowers, borrowings are normally not rated by major rating agencies. 16 Table of Contents ​ Commercial and industrial loans - Loans consist of revolving and term loan obligations extended to business and corporate enterprises for the purpose of financing working capital and/or capital investment in this segment. Generally, loans are secured by assets of the business such as accounts receivable, inventory, marketable securities, other liquid collateral, equipment and other business assets. Some loans in this category may be unsecured or guaranteed by government agencies such as the US Small Business Administration. Loans are primarily paid by the operating cash flow of the borrower. ​ Residential real estate - All loans in this segment are collateralized by one-to-four family homes. Residential real estate loans held in the loan portfolio are made to borrowers who demonstrate the ability to make scheduled payments with full consideration to various underwriting factors. Borrower qualifications include favorable credit history combined with supportive income requirements and combined loan-to-value ratios within established policy guidelines. ​ Home equity - All loans and lines of credit are made to qualified individuals and are secured by senior or junior mortgage liens on owner-occupied one- to four-family homes, condominiums, or vacation homes. The home equity loan has a fixed rate and is billed as equal payments comprised of principal and interest. The home equity line of credit has a variable rate and is billed as interest-only payments during the draw period. At the end of the draw period, the home equity line of credit is billed as a percentage of the principal balance plus all accrued interest. Borrower qualifications include favorable credit history combined with supportive income requirements and combined loan-to-value ratios within established policy guidelines. ​ Consumer other - Loans in this segment include personal lines of credit and amortizing loans made to qualified individuals for various purposes such as auto loans, recreational equipment, overdraft protection or other consumer loans. Borrower qualifications include favorable credit history combined with supportive income and collateral requirements within established policy guidelines, as applicable. ​ Allowance for Credit Losses The Allowance for Credit Losses (“ACL”) is comprised of the allowance for loan losses and the allowance for unfunded commitments which is accounted for as a separate liability in other liabilities on our consolidated balance sheet. The level of the ACL represents management’s estimate of expected credit losses over the expected life of the loans at the consolidated balance sheet date. ​ The ACL 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 ACL 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, generally larger non-accruing commercial loans. ​ ​ ​ ​ ​ ​ 17 Table of Contents The activity in the ACL for the periods ended are as follows: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ At or for the Three Months Ended September 30, 2024 ​ ​ Balance at ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Beginning of ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Balance at (in thousands) Period ​ Charge Offs Recoveries Provision End of Period Commercial construction ​ $ 4,217 ​ $ — ​ $ — ​ $ ( 1,464 ) ​ $ 2,753 Commercial real estate owner occupied ​ 2,620 ​ — ​ — ​ 314 ​ 2,934 Commercial real estate non-owner occupied ​ 9,574 ​ — ​ — ​ 965 ​ 10,539 Tax exempt ​ 110 ​ — ​ — ​ 7 ​ 117 Commercial and industrial ​ 3,982 ​ ( 9 ) ​ 1 ​ 217 ​ 4,191 Residential real estate ​ 7,516 ​ — ​ 5 ​ 51 ​ 7,572 Home equity ​ 763 ​ — ​ 3 ​ 80 ​ 846 Consumer other ​ 73 ​ ( 89 ) ​ 29 ​ 58 ​ 71 Total ​ $ 28,855 ​ $ ( 98 ) ​ $ 38 ​ $ 228 ​ $ 29,023 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ At or for the Nine Months Ended September 30, 2024 ​ ​ Balance at ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Beginning of ​ ​ ​ ​ ​ ​ ​ ​ ​ Balance at (in thousands) Period ​ Charge Offs Recoveries Provision End of Period Commercial construction ​ $ 4,261 ​ $ — ​ $ — ​ $ ( 1,508 ) ​ $ 2,753 Commercial real estate owner occupied ​ 2,863 ​ ( 3 ) ​ — ​ 74 ​ 2,934 Commercial real estate non-owner occupied ​ 9,443 ​ — ​ — ​ 1,096 ​ 10,539 Tax exempt ​ 119 ​ — ​ — ​ ( 2 ) ​ 117 Commercial and industrial ​ 3,259 ​ ( 91 ) ​ 17 ​ 1,006 ​ 4,191 Residential real estate ​ 7,352 ​ — ​ 13 ​ 207 ​ 7,572 Home equity ​ 767 ​ — ​ 8 ​ 71 ​ 846 Consumer other ​ 78 ​ ( 223 ) ​ 58 ​ 158 ​ 71 Total ​ $ 28,142 ​ $ ( 317 ) ​ $ 96 ​ $ 1,102 ​ $ 29,023 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ At or for the Three Months Ended September 30, 2023 ​ ​ Balance at ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Beginning of ​ ​ ​ ​ ​ ​ ​ ​ ​ Balance at (in thousands) Period ​ Charge Offs Recoveries Provision End of Period Commercial construction ​ $ 3,377 ​ $ — ​ $ — ​ $ 300 ​ $ 3,677 Commercial real estate owner occupied ​ 2,566 ​ — ​ — ​ ( 81 ) ​ 2,485 Commercial real estate non-owner occupied ​ 9,481 ​ — ​ — ​ 72 ​ 9,553 Tax exempt ​ 101 ​ — ​ — ​ ( 5 ) ​ 96 Commercial and industrial ​ 3,613 ​ — ​ 34 ​ 558 ​ 4,205 Residential real estate ​ 7,376 ​ — ​ 13 ​ ( 243 ) ​ 7,146 Home equity ​ 768 ​ — ​ 1 ​ ( 4 ) ​ 765 Consumer other ​ 80 ​ ( 74 ) ​ 2 ​ 76 ​ 84 Total ​ $ 27,362 ​ $ ( 74 ) ​ $ 50 ​ $ 673 ​ $ 28,011 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 18 Table of Contents ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ At or for the Nine Months Ended September 30, 2023 ​ ​ Balance at ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Beginning of ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Balance at (in thousands) Period ​ Charge Offs Recoveries Provision End of Period Commercial construction ​ $ 2,579 ​ $ — ​ $ — ​ $ 1,098 ​ $ 3,677 Commercial real estate owner occupied ​ 2,189 ​ — ​ 142 ​ 154 ​ 2,485 Commercial real estate non-owner occupied ​ 9,341 ​ — ​ — ​ 212 ​ 9,553 Tax exempt ​ 93 ​ — ​ — ​ 3 ​ 96 Commercial and industrial ​ 3,493 ​ ( 122 ) ​ 86 ​ 748 ​ 4,205 Residential real estate ​ 7,274 ​ ( 8 ) ​ 28 ​ ( 148 ) ​ 7,146 Home equity ​ 811 ​ ( 12 ) ​ 5 ​ ( 39 ) ​ 765 Consumer other ​ 80 ​ ( 199 ) ​ 10 ​ 193 ​ 84 Total ​ $ 25,860 ​ $ ( 341 ) ​ $ 271 ​ $ 2,221 ​ $ 28,011 ​ Unfunded Commitments ​ The ACL on unfunded commitments is recognized as a liability (other liabilities on the consolidated balance sheet), with adjustments to the reserve recognized in other non-interest expense in the consolidated statement of operations. The activity in the ACL on unfunded commitments for the periods ended was as follows: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Three Months Ended September 30, ​ Nine Months Ended September 30, (in thousands) ​ 2024 2023 ​ 2024 2023 Beginning Balance ​ $ 3,640 ​ $ 3,780 ​ $ 3,825 ​ $ 3,910 Provision for credit losses ​ 35 ​ 45 ​ ( 150 ) ​ ( 85 ) Ending Balance ​ $ 3,675 ​ $ 3,825 ​ $ 3,675 ​ $ 3,825 ​ Loan Origination/Risk Management: We have certain lending policies and procedures in place designed to maximize loan income within an acceptable level of risk. Our Board of Directors reviews and approves these policies and procedures on a regular basis. A reporting system supplements the review process by providing management and the Board of Directors with frequent reports related to loan production, loan quality, and concentration of credit, loan delinquencies, non-performing loans and potential problem loans. We seek to diversify the loan portfolio as a means of managing risk associated with fluctuations in economic conditions. ​ Credit Quality Indicators: In monitoring the credit quality of the portfolio, management applies a credit quality indicator and uses an internal risk rating system to categorize commercial loans. These credit quality indicators range from one through nine, with a higher number correlating to increasing risk of loss. Consistent with regulatory guidelines, the Company provides for the classification of loans which are considered to be of lesser quality as special mention, substandard, doubtful, or loss (i.e. risk-rated 6, 7, 8 and 9, respectively). ​ The following are the definitions of our credit quality indicators: ​ Pass: Loans we consider in the commercial portfolio segments that are not adversely rated, are contractually current as to principal and interest, and are otherwise in compliance with the contractual terms of the loan agreement. Management believes there is a low risk of loss related to these loans considered pass-rated. ​ Special Mention: Loans considered having some potential weaknesses, but are deemed to not carry levels of risk inherent in one of the subsequent categories, are designated as special mention. A special mention loan has potential weaknesses that deserve management’s close attention. If left uncorrected, these potential weaknesses may result in deterioration of the repayment prospects for the asset or in the institution’s credit position at some future date. This might include loans which may require a higher level of supervision or internal reporting because of: (i) declining industry trends; (ii) increasing reliance on secondary sources of repayment; (iii) the poor condition of or lack of control over collateral; or (iv) failure to obtain proper documentation or any other deviations from prudent lending practices. Economic or market conditions which may, in the future, affect the obligor may warrant special mention of the asset. Loans for which an adverse trend in the borrower's operations or an imbalanced position in the balance sheet which has not reached a point 19 Table of Contents where the liquidation is jeopardized may be included in this classification. Special mention loans are not adversely classified and do not expose us to sufficient risks to warrant classification. ​ Substandard: Loans we consider as substandard are inadequately protected by the current net worth and paying capacity of the borrower or of the collateral pledged, if any. Substandard loans have a well-defined weakness that jeopardizes liquidation of the debt. Substandard loans include those loans where there is the distinct possibility of some loss of principal, if the deficiencies are not corrected. ​ Doubtful: Loans we consider as doubtful have all of the weaknesses inherent in those loans that are classified as substandard. These loans have the added characteristic of a well-defined weakness which is inadequately protected by the current sound worth and paying capacity of borrower or of the collateral pledged, if any, and calls into question the collectability of the full balance of the loan. The possibility of loss is high but because of certain important and reasonably specific pending factors, which may work to the advantage and strengthening of the loan, its classification as loss is deferred until its more exact status is determined. Pending factors include proposed merger, acquisition, or liquidation procedures, capital injection, perfecting liens on additional collateral and refinancing plans. The entire amount of the loan might not be classified as doubtful when collection of a specific portion appears highly probable. Loans are generally not classified doubtful for an extended period of time (i.e., over a year). ​ Loss: Loans we consider as losses are those considered uncollectible and of such little value that their continuance as an asset is not warranted and the uncollectible amounts are charged-off. This classification does not mean the asset has absolutely no recovery or salvage value, but rather it is not practical or desirable to defer writing off this worthless asset even though partial recovery may be effected in the future. Losses are taken in the period in which they are determined to be uncollectible. ​ 20 Table of Contents The following table presents our loans by year of origination, loan segmentation and risk indicator as of September 30, 2024 : ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ (in thousands) ​ 2024 ​ 2023 ​ 2022 ​ 2021 ​ 2020 ​ Prior ​ Total Commercial construction ​ ​ ​ ​ ​ ​ ​ Risk rating: ​ ​ ​ ​ ​ ​ ​ Pass ​ $ 16,490 ​ $ 28,989 ​ $ 71,155 ​ $ 895 ​ $ 5,343 ​ $ 9,771 ​ $ 132,643 Special mention ​ — ​ — ​ — ​ — ​ — ​ — ​ — Substandard ​ — ​ — ​ — ​ — ​ — ​ — ​ — Total ​ $ 16,490 ​ $ 28,989 ​ $ 71,155 ​ $ 895 ​ $ 5,343 ​ $ 9,771 ​ $ 132,643 Current period gross write-offs ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Commercial real estate owner occupied ​ ​ ​ ​ ​ ​ ​ Risk rating: ​ ​ ​ ​ ​ ​ ​ Pass ​ $ 26,103 ​ $ 59,703 ​ $ 61,243 ​ $ 30,222 ​ $ 21,028 ​ $ 98,435 ​ $ 296,734 Special mention ​ — ​ 136 ​ — ​ — ​ — ​ 2,095 ​ 2,231 Substandard ​ — ​ — ​ — ​ — ​ — ​ 3,626 ​ 3,626 Doubtful ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ 103 ​ ​ 103 Total ​ $ 26,103 ​ $ 59,839 ​ $ 61,243 ​ $ 30,222 ​ $ 21,028 ​ $ 104,259 ​ $ 302,694 Current period gross write-offs ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ 3 ​ ​ 3 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Commercial real estate non-owner occupied ​ ​ ​ ​ ​ ​ ​ Risk rating: ​ ​ ​ ​ ​ ​ ​ Pass ​ $ 71,774 ​ $ 40,475 ​ $ 406,603 ​ $ 243,094 ​ $ 133,453 ​ $ 312,889 ​ $ 1,208,288 Special mention ​ — ​ — ​ 379 ​ 21,266 ​ 27,781 ​ 13,658 ​ 63,084 Substandard ​ — ​ 7,730 ​ — ​ — ​ — ​ 17,494 ​ 25,224 Doubtful ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ — Total ​ $ 71,774 ​ $ 48,205 ​ $ 406,982 ​ $ 264,360 ​ $ 161,234 ​ $ 344,041 ​ $ 1,296,596 Current period gross write-offs ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Tax exempt ​ ​ ​ ​ ​ ​ ​ Risk rating: ​ ​ ​ ​ ​ ​ ​ Pass ​ $ 4,629 ​ $ 2,669 ​ $ 6,284 ​ $ 614 ​ $ 178 ​ $ 23,964 ​ $ 38,338 Special mention ​ — ​ — ​ — ​ — ​ — ​ — ​ — Substandard ​ — ​ — ​ — ​ — ​ — ​ — ​ — Total ​ $ 4,629 ​ $ 2,669 ​ $ 6,284 ​ $ 614 ​ $ 178 ​ $ 23,964 ​ $ 38,338 Current period gross write-offs ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Commercial and industrial ​ ​ ​ ​ ​ ​ ​ Risk rating: ​ ​ ​ ​ ​ ​ ​ Pass ​ $ 54,982 ​ $ 65,061 ​ $ 48,793 ​ $ 14,726 ​ $ 33,556 ​ $ 68,402 ​ $ 285,520 Special mention ​ 10 ​ 15,182 ​ 1,357 ​ 910 ​ 168 ​ 3,058 ​ 20,685 Substandard ​ 128 ​ 137 ​ 476 ​ 227 ​ 111 ​ 2,951 ​ 4,030 Doubtful ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ 87 ​ ​ 87 Total ​ $ 55,120 ​ $ 80,380 ​ $ 50,626 ​ $ 15,863 ​ $ 33,835 ​ $ 74,498 ​ $ 310,322 Current period gross write-offs ​ ​ — ​ ​ — ​ ​ — ​ ​ 62 ​ ​ 7 ​ ​ 22 ​ ​ 91 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Residential real estate ​ ​ ​ ​ ​ ​ ​ Performing ​ $ 22,821 ​ $ 72,614 ​ $ 177,091 ​ $ 156,724 ​ $ 91,186 ​ $ 375,105 ​ $ 895,541 Nonperforming ​ — ​ — ​ 463 ​ — ​ — ​ 3,119 ​ 3,582 Total ​ $ 22,821 ​ $ 72,614 ​ $ 177,554 ​ $ 156,724 ​ $ 91,186 ​ $ 378,224 ​ $ 899,123 Current period gross write-offs ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Home equity ​ ​ ​ ​ ​ ​ ​ Performing ​ $ 15,213 ​ $ 16,213 ​ $ 13,275 ​ $ 7,275 ​ $ 5,706 ​ $ 35,510 ​ $ 93,192 Nonperforming ​ — ​ — ​ 47 ​ 55 ​ — ​ 852 ​ 954 Total ​ $ 15,213 ​ $ 16,213 ​ $ 13,322 ​ $ 7,330 ​ $ 5,706 ​ $ 36,362 ​ $ 94,146 Current period gross write-offs ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Consumer other ​ ​ ​ ​ ​ ​ ​ Performing ​ $ 3,679 ​ $ 1,856 ​ $ 1,073 ​ $ 352 ​ $ 140 ​ $ 742 ​ $ 7,842 Nonperforming ​ — ​ 8 ​ — ​ 2 ​ 1 ​ 20 ​ 31 Total ​ $ 3,679 ​ $ 1,864 ​ $ 1,073 ​ $ 354 ​ $ 141 ​ $ 762 ​ $ 7,873 Current period gross write-offs ​ ​ — ​ ​ 56 ​ ​ 9 ​ ​ — ​ ​ 2 ​ ​ 156 ​ ​ 223 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Total Loans ​ $ 215,829 ​ $ 310,773 ​ $ 788,239 ​ $ 476,362 ​ $ 318,651 ​ $ 971,881 ​ $ 3,081,735 21 Table of Contents The following table presents our loans by year of origination, loan segmentation and risk indicator as of December 31, 2023: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ (in thousands) ​ 2023 ​ 2022 ​ 2021 ​ 2020 ​ 2019 ​ Prior ​ Total Commercial construction ​ ​ ​ ​ ​ ​ ​ Risk rating: ​ ​ ​ ​ ​ ​ ​ Pass ​ $ 14,040 ​ $ 99,115 ​ $ 35,978 ​ $ 3,992 ​ $ — ​ $ 923 ​ $ 154,048 Special mention ​ — ​ — ​ — ​ — ​ — ​ — ​ — Substandard ​ — ​ — ​ — ​ — ​ — ​ — ​ — Total ​ $ 14,040 ​ $ 99,115 ​ $ 35,978 ​ $ 3,992 ​ $ — ​ $ 923 ​ $ 154,048 Current period gross write-offs ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Commercial real estate owner occupied ​ ​ ​ ​ ​ ​ ​ Risk rating: ​ ​ ​ ​ ​ ​ ​ Pass ​ $ 57,603 ​ $ 61,015 ​ $ 43,228 ​ $ 20,209 ​ $ 20,462 ​ $ 91,187 ​ $ 293,704 Special mention ​ 160 ​ 387 ​ 7,488 ​ 1,596 ​ — ​ 3,066 ​ 12,697 Substandard ​ — ​ — ​ — ​ — ​ — ​ 3,497 ​ 3,497 Doubtful ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ 117 ​ ​ 117 Total ​ $ 57,763 ​ $ 61,402 ​ $ 50,716 ​ $ 21,805 ​ $ 20,462 ​ $ 97,867 ​ $ 310,015 Current period gross write-offs ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Commercial real estate non-owner occupied ​ ​ ​ ​ ​ ​ ​ Risk rating: ​ ​ ​ ​ ​ ​ ​ Pass ​ $ 41,270 ​ $ 353,613 ​ $ 199,311 ​ $ 127,231 ​ $ 78,759 ​ $ 238,973 ​ $ 1,039,157 Special mention ​ 7,809 ​ — ​ 14,134 ​ 37,249 ​ 15,246 ​ 17,108 ​ 91,546 Substandard ​ — ​ — ​ — ​ — ​ — ​ 13,863 ​ 13,863 Doubtful ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ — Total ​ $ 49,079 ​ $ 353,613 ​ $ 213,445 ​ $ 164,480 ​ $ 94,005 ​ $ 269,944 ​ $ 1,144,566 Current period gross write-offs ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Tax exempt ​ ​ ​ ​ ​ ​ ​ Risk rating: ​ ​ ​ ​ ​ ​ ​ Pass ​ $ 6,340 ​ $ 8,468 ​ $ 787 ​ $ 208 ​ $ 590 ​ $ 27,295 ​ $ 43,688 Special mention ​ — ​ — ​ — ​ — ​ — ​ — ​ — Substandard ​ — ​ — ​ — ​ — ​ — ​ — ​ — Total ​ $ 6,340 ​ $ 8,468 ​ $ 787 ​ $ 208 ​ $ 590 ​ $ 27,295 ​ $ 43,688 Current period gross write-offs ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Commercial and industrial ​ ​ ​ ​ ​ ​ ​ Risk rating: ​ ​ ​ ​ ​ ​ ​ Pass ​ $ 80,942 ​ $ 69,402 ​ $ 22,205 ​ $ 38,824 ​ $ 14,739 ​ $ 77,273 ​ $ 303,385 Special mention ​ 364 ​ 1,446 ​ — ​ 776 ​ 28 ​ 3,588 ​ 6,202 Substandard ​ 58 ​ 94 ​ 186 ​ 109 ​ 95 ​ 532 ​ 1,074 Doubtful ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ 87 ​ ​ 135 ​ ​ 222 Total ​ $ 81,364 ​ $ 70,942 ​ $ 22,391 ​ $ 39,709 ​ $ 14,949 ​ $ 81,528 ​ $ 310,883 Current period gross write-offs ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ 5 ​ ​ 659 ​ ​ 664 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Residential real estate ​ ​ ​ ​ ​ ​ ​ Performing ​ $ 72,395 ​ $ 194,109 ​ $ 165,434 ​ $ 96,016 ​ $ 62,648 ​ $ 345,823 ​ $ 936,425 Nonperforming ​ — ​ — ​ 41 ​ — ​ 234 ​ 3,634 ​ 3,909 Total ​ $ 72,395 ​ $ 194,109 ​ $ 165,475 ​ $ 96,016 ​ $ 62,882 ​ $ 349,457 ​ $ 940,334 Current period gross write-offs ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ 8 ​ ​ 8 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Home equity ​ ​ ​ ​ ​ ​ ​ Performing ​ $ 15,582 ​ $ 15,334 ​ $ 7,873 ​ $ 6,633 ​ $ 4,800 ​ $ 36,652 ​ $ 86,874 Nonperforming ​ — ​ — ​ — ​ — ​ — ​ 809 ​ 809 Total ​ $ 15,582 ​ $ 15,334 ​ $ 7,873 ​ $ 6,633 ​ $ 4,800 ​ $ 37,461 ​ $ 87,683 Current period gross write-offs ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ 12 ​ ​ 12 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Consumer other ​ ​ ​ ​ ​ ​ ​ Performing ​ $ 4,128 ​ $ 1,787 ​ $ 696 ​ $ 301 ​ $ 51 ​ $ 864 ​ $ 7,827 Nonperforming ​ — ​ — ​ 4 ​ 1 ​ — ​ — ​ 5 Total ​ $ 4,128 ​ $ 1,787 ​ $ 700 ​ $ 302 ​ $ 51 ​ $ 864 ​ $ 7,832 Current period gross write-offs ​ ​ — ​ ​ 52 ​ ​ 18 ​ ​ 5 ​ ​ — ​ ​ 214 ​ ​ 289 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Total Loans ​ $ 300,691 ​ $ 804,770 ​ $ 497,365 ​ $ 333,145 ​ $ 197,739 ​ $ 865,339 ​ $ 2,999,049 ​ 22 Table of Contents Past Dues ​ The following is a summary of past due loans for the periods ended: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ September 30, 2024 (in thousands) 30-59 60-89 90+ Total Past Due Current Total Loans Commercial construction ​ $ — ​ $ — ​ $ — ​ $ — ​ $ 132,643 ​ $ 132,643 Commercial real estate owner occupied ​ 89 ​ 156 ​ 798 ​ 1,043 ​ 301,651 ​ 302,694 Commercial real estate non-owner occupied ​ 195 ​ — ​ 274 ​ 469 ​ 1,296,127 ​ 1,296,596 Tax exempt ​ — ​ — ​ — ​ — ​ 38,338 ​ 38,338 Commercial and industrial ​ 99 ​ 15 ​ 747 ​ 861 ​ 309,461 ​ 310,322 Residential real estate ​ 478 ​ 1,070 ​ 1,279 ​ 2,827 ​ 896,296 ​ 899,123 Home equity ​ 137 ​ 589 ​ 297 ​ 1,023 ​ 93,123 ​ 94,146 Consumer other ​ 18 ​ 3 ​ 28 ​ 49 ​ 7,824 ​ 7,873 Total ​ $ 1,016 ​ $ 1,833 ​ $ 3,423 ​ $ 6,272 ​ $ 3,075,463 ​ $ 3,081,735 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ December 31, 2023 (in thousands) 30-59 60-89 90+ Total Past Due Current Total Loans Commercial construction ​ $ — ​ $ — ​ $ — ​ $ — ​ $ 154,048 ​ $ 154,048 Commercial real estate owner occupied ​ — ​ — ​ — ​ — ​ 310,015 ​ 310,015 Commercial real estate non-owner occupied ​ — ​ — ​ 103 ​ 103 ​ 1,144,463 ​ 1,144,566 Tax exempt ​ — ​ — ​ — ​ — ​ 43,688 ​ 43,688 Commercial and industrial ​ 465 ​ 59 ​ 330 ​ 854 ​ 310,029 ​ 310,883 Residential real estate ​ 1,520 ​ 627 ​ 1,999 ​ 4,146 ​ 936,188 ​ 940,334 Home equity ​ 600 ​ — ​ 337 ​ 937 ​ 86,746 ​ 87,683 Consumer other ​ 10 ​ 2 ​ — ​ 12 ​ 7,820 ​ 7,832 Total ​ $ 2,595 ​ $ 688 ​ $ 2,769 ​ $ 6,052 ​ $ 2,992,997 ​ $ 2,999,049 ​ Non-Accrual Loans ​ The following is a summary of non-accrual loans for the periods ended: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ September 30, 2024 ​ ​ ​ ​ ​ Nonaccrual With No ​ 90+ Days Past (in thousands) Nonaccrual Related Allowance Due and Accruing Commercial construction ​ $ — ​ $ — ​ $ — Commercial real estate owner occupied ​ 846 ​ 743 ​ — Commercial real estate non-owner occupied ​ 469 ​ 195 ​ — Tax exempt ​ — ​ — ​ — Commercial and industrial ​ 1,219 ​ 389 ​ — Residential real estate ​ 3,582 ​ 928 ​ — Home equity ​ 954 ​ 1 ​ — Consumer other ​ 30 ​ 1 ​ — Total ​ $ 7,100 ​ $ 2,257 ​ $ — ​ ​ ​ ​ ​ ​ ​ ​ ​ 23 Table of Contents ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ December 31, 2023 ​ ​ ​ ​ ​ Nonaccrual With No ​ 90+ Days Past (in thousands) Nonaccrual Related Allowance Due and Accruing Commercial construction ​ $ — ​ $ — ​ $ — Commercial real estate owner occupied ​ 103 ​ 44 ​ — Commercial real estate non-owner occupied ​ 340 ​ 224 ​ — Tax exempt ​ — ​ — ​ — Commercial and industrial ​ 363 ​ 6 ​ — Residential real estate ​ 3,908 ​ 1,131 ​ 118 Home equity ​ 809 ​ 1 ​ 22 Consumer other ​ 5 ​ — ​ — Total ​ $ 5,528 ​ $ 1,406 ​ $ 140 ​ Collateral Dependent Loans ​ Loans that do not share risk characteristics are evaluated on an individual basis. For loans that are individually evaluated and collateral dependent, financial loans where we have determined that foreclosure of the collateral is probable, or where the borrower is experiencing financial difficulty and we expect repayment of the financial asset to be provided substantially through the operation or sale of the collateral, the ACL is measured based on the difference between the fair value of the collateral and the amortized cost basis of the asset as of the measurement date. ​ The following table presents the amortized cost basis of collateral-dependent loans by loan portfolio segment for the periods ended: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ September 30, 2024 ​ December 31, 2023 (in thousands) Real Estate Other Real Estate Other Commercial construction ​ $ — ​ $ — ​ $ — ​ $ — Commercial real estate owner occupied ​ 846 ​ — ​ 104 ​ — Commercial real estate non-owner occupied ​ 469 ​ — ​ 340 ​ — Tax exempt ​ — ​ — ​ — ​ — Commercial and industrial ​ 1,219 ​ — ​ 229 ​ 134 Residential real estate ​ 3,582 ​ — ​ 3,908 ​ — Home equity ​ 954 ​ — ​ 808 ​ — Consumer other ​ 30 ​ — ​ 5 ​ — Total ​ $ 7,100 ​ $ — ​ $ 5,394 ​ $ 134 ​ ​ 24 Table of Contents 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, these modifications are 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. ​ These modifications typically result from loss mitigation activities and could include reductions in the interest rate, payment extensions, forgiveness of principal, forbearance, or other actions. ​ The following table presents the amortized cost basis of loans that were both experiencing financial difficulty and modified during the three and nine months ended September 30, 2024 and 2023, by class and by type of modification. ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ (in thousands) ​ Principal Forgiveness ​ Payment Delay ​ Term Extension ​ Interest Rate Reduction ​ Combination Interest Rate Reduction and Term Extension ​ % of Total Class of Loans Three Months Ended September 30, 2024 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Commercial construction ​ $ — ​ $ — ​ $ — ​ $ — ​ $ — ​ — % Commercial real estate owner occupied ​ — ​ — ​ — ​ — ​ — ​ — ​ Commercial real estate non-owner occupied ​ — ​ — ​ — ​ — ​ — ​ — ​ Tax exempt ​ — ​ — ​ — ​ — ​ — ​ — ​ Commercial and industrial ​ — ​ — ​ 9 ​ — ​ — ​ 0.00 ​ Residential real estate ​ — ​ 70 ​ — ​ — ​ 76 ​ 0.02 ​ Home equity ​ — ​ — ​ — ​ — ​ — ​ — ​ Consumer other ​ — ​ — ​ — ​ — ​ — ​ — ​ Total ​ $ — ​ $ 70 ​ $ 9 ​ $ — ​ $ 76 ​ 0.01 % Nine Months Ended September 30, 2024 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Commercial construction ​ $ — ​ $ — ​ $ — ​ $ — ​ $ — ​ — % Commercial real estate owner occupied ​ — ​ — ​ — ​ — ​ — ​ — ​ Commercial real estate non-owner occupied ​ — ​ — ​ — ​ — ​ — ​ — ​ Tax exempt ​ — ​ — ​ — ​ — ​ — ​ — ​ Commercial and industrial ​ — ​ — ​ 9 ​ — ​ — ​ 0.00 ​ Residential real estate ​ — ​ 70 ​ 31 ​ — ​ 76 ​ 0.02 ​ Home equity ​ — ​ — ​ — ​ — ​ — ​ — ​ Consumer other ​ — ​ — ​ — ​ — ​ — ​ — ​ Total ​ $ — ​ $ 70 ​ $ 40 ​ $ — ​ $ 76 ​ 0.01 ​ ​ ​ 25 Table of Contents ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ (in thousands) ​ Principal Forgiveness ​ Payment Delay ​ Term Extension ​ Interest Rate Reduction ​ Combination Interest Rate Reduction and Term Extension ​ % of Total Class of Loans Three Months Ended September 30, 2023 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Commercial construction ​ $ — ​ $ — ​ $ — ​ $ — ​ $ — ​ — % Commercial real estate owner occupied ​ — ​ — ​ — ​ — ​ — ​ — ​ Commercial real estate non-owner occupied ​ — ​ — ​ — ​ — ​ — ​ — ​ Tax exempt ​ — ​ — ​ — ​ — ​ — ​ — ​ Commercial and industrial ​ — ​ 66 ​ — ​ — ​ — ​ 0.02 ​ Residential real estate ​ — ​ — ​ — ​ — ​ — ​ — ​ Home equity ​ — ​ — ​ — ​ — ​ — ​ — ​ Consumer other ​ — ​ — ​ — ​ — ​ — ​ — ​ Total ​ $ — ​ $ 66 ​ $ — ​ $ — ​ $ — ​ 0.00 % Nine Months Ended September 30, 2023 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Commercial construction ​ $ — ​ $ — ​ $ — ​ $ — ​ $ — ​ — % Commercial real estate owner occupied ​ — ​ — ​ — ​ — ​ — ​ — ​ Commercial real estate non-owner occupied ​ — ​ — ​ — ​ — ​ — ​ — ​ Tax exempt ​ — ​ — ​ — ​ — ​ — ​ — ​ Commercial and industrial ​ — ​ 66 ​ 1,387 ​ — ​ — ​ 0.47 ​ Residential real estate ​ — ​ — ​ — ​ 100 ​ — ​ 0.01 ​ Home equity ​ — ​ — ​ — ​ — ​ — ​ — ​ Consumer other ​ — ​ — ​ — ​ — ​ — ​ — ​ Total ​ $ — ​ $ 66 ​ $ 1,387 ​ $ 100 ​ $ — ​ 0.05 % ​ ​ 26 Table of Contents The following table presents the financial effect of loan modifications made to borrowers experiencing financial difficulty during the three and nine months ended September 30, 2024 and 2023. ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Weighted-Average Months of Payment Delay ​ Weighted-Average Months of Term Extension ​ ​ Weighted-Average Interest Rate Reduction Three Months Ended September 30, 2024 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Commercial construction ​ ​ — ​ ​ — ​ ​ — % Commercial real estate owner occupied ​ ​ — ​ ​ — ​ ​ — ​ Commercial real estate non-owner occupied ​ ​ — ​ ​ — ​ ​ — ​ Tax exempt ​ ​ — ​ ​ — ​ ​ — ​ Commercial and industrial ​ ​ — ​ ​ 58 ​ ​ — ​ Residential real estate ​ ​ 3 ​ ​ 60 ​ ​ 1.25 ​ Home equity ​ ​ — ​ ​ — ​ ​ — ​ Consumer other ​ ​ — ​ ​ — ​ ​ — ​ Nine Months Ended September 30, 2024 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Commercial construction ​ ​ — ​ ​ — ​ ​ — % Commercial real estate owner occupied ​ ​ — ​ ​ — ​ ​ — ​ Commercial real estate non-owner occupied ​ ​ — ​ ​ — ​ ​ — ​ Tax exempt ​ ​ — ​ ​ — ​ ​ — ​ Commercial and industrial ​ ​ — ​ ​ 58 ​ ​ — ​ Residential real estate ​ ​ 3 ​ ​ 61 ​ ​ 1.25 ​ Home equity ​ ​ — ​ ​ — ​ ​ — ​ Consumer other ​ ​ — ​ ​ — ​ ​ — ​ ​ ​ ​ 27 Table of Contents ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Weighted-Average Months of Payment Delay ​ Weighted-Average Months of Term Extension ​ ​ Weighted-Average Interest Rate Reduction Three Months Ended September 30, 2023 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Commercial construction ​ ​ — ​ ​ — ​ ​ — % Commercial real estate owner occupied ​ ​ — ​ ​ — ​ ​ — ​ Commercial real estate non-owner occupied ​ ​ — ​ ​ — ​ ​ — ​ Tax exempt ​ ​ — ​ ​ — ​ ​ — ​ Commercial and industrial ​ ​ 3 ​ ​ 4 ​ ​ 3.75 ​ Residential real estate ​ ​ — ​ ​ — ​ ​ 1.38 ​ Home equity ​ ​ — ​ ​ — ​ ​ — ​ Consumer other ​ ​ — ​ ​ — ​ ​ — ​ Nine Months Ended September 30, 2023 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Commercial construction ​ ​ — ​ ​ — ​ ​ — % Commercial real estate owner occupied ​ ​ — ​ ​ — ​ ​ — ​ Commercial real estate non-owner occupied ​ ​ — ​ ​ — ​ ​ — ​ Tax exempt ​ ​ — ​ ​ — ​ ​ — ​ Commercial and industrial ​ ​ 3 ​ ​ 4 ​ ​ 3.75 ​ Residential real estate ​ ​ — ​ ​ — ​ ​ 1.38 ​ Home equity ​ ​ — ​ ​ — ​ ​ — ​ Consumer other ​ ​ — ​ ​ — ​ ​ — ​ ​ ​ Foreclosure There were $ 331 thousand of residential mortgage loans collateralized by real estate that are in the process of foreclosure as of September 30, 2024. Residential mortgage loans collateralized by real estate that are in the process of foreclosure as of December 31, 2023 totaled $ 430 thousand. ​ Mortgage Banking Loans held for sale at September 30, 2024 had an unpaid principal balance of $ 1.2 million and $ 2.2 million as of December 31, 2023. The interest rate exposure on loans held for sale is mitigated through forward sale commitments with certain approved secondary market investors. Forward sale commitments had a notional amount of $ 7.0 million at September 30, 2024, and $ 5.0 million at December 31, 2023. ​ For the three months ended September 30, 2024 and 2023, we sold $ 20.7 million and $ 20.2 million, respectively, of residential mortgage loans on the secondary market, which resulted in a net gain on sale of loans (net of costs, including direct and indirect origination costs) of $ 317 thousand and $ 14 thousand, respectively. For the nine months ended September 30, 2024 and 2023, we sold $ 37.9 million and $ 26.3 million, respectively, of residential mortgage loans on the secondary market, which resulted in a net gain on sale of loans (net of costs, including direct and indirect origination costs) of $ 502 thousand and $ 22 thousand, respectively. ​ We sell residential loans on the secondary market while primarily retaining the servicing of these loans. Servicing sold loans helps to maintain customer relationships and earn fees over the servicing period. Loans serviced for others are not included in the accompanying consolidated balance sheets. The risks inherent in servicing assets relate primarily to level of prepayments that result from shifts in interest rates. We obtain third-party valuations of our servicing assets portfolio quarterly, and the assumptions are reflected in Fair Value disclosures. ​ 28 Table of Contents NOTE 4. BORROWED FUNDS ​ Borrowed funds at September 30, 2024 and December 31, 2023 are summarized, as follows: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ September 30, 2024 ​ December 31, 2023 ​ ​ ​ ​ ​ Weighted ​ ​ ​ ​ Weighted ​ (dollars in thousands) Carrying Value Average Rate ​ Carrying Value Average Rate Short-term borrowings ​ ​ ​ ​ ​ ​ ​ Advances from the FHLB ​ $ 133,800 4.99 % ​ $ 232,300 5.46 % Advances from the FRB BTFP ​ ​ 45,000 ​ 4.76 ​ ​ ​ 30,000 ​ 4.90 ​ Other borrowings ​ 7,136 0.21 ​ ​ 8,465 0.56 ​ Total short-term borrowings ​ 185,936 4.73 ​ ​ 270,765 5.22 ​ Long-term borrowings ​ ​ ​ ​ Advances from the FHLB ​ 272 3.58 ​ ​ 279 4.39 ​ Subordinated borrowings ​ 60,579 6.17 ​ ​ 60,461 6.22 ​ Total long-term borrowings ​ 60,851 6.16 ​ ​ 60,740 6.21 ​ Total ​ $ 246,787 5.01 % ​ $ 331,505 5.40 % ​ Short-term debt includes Federal Home Loan Bank of Boston (“FHLB”) advances with a remaining maturity of less than one year. We also maintain a $ 1.0 million secured line of credit with the FHLB that bears a daily adjustable rate calculated by the FHLB. There was no outstanding balance on the FHLB line of credit for the periods ended September 30, 2024 and December 31, 2023. There are no variable rate short-term FHLB borrowings. ​ We have the capacity to borrow funds on a secured basis utilizing the Borrower in Custody program, and the Discount Window at the Federal Reserve Bank of Boston (the “Reserve Bank”). At September 30, 2024, our available secured line of credit at the Reserve Bank was $ 132.0 million versus $ 156.6 million at December 31, 2023. We have pledged certain loans and securities to the Reserve Bank to support this arrangement. ​ As of September 30, 2024, we maintained a Bank Term Funding Program (the “BTFP”) balance of $ 45 million at a fixed rate of 4.76 % with a maturity date of January 16, 2025. During the first quarter 2024, we prepaid our existing advance of $ 30 million at a rate of 4.85 %, and entered into a new advance for $ 65 million at a rate of 4.76 %. During the third quarter of 2024, we prepaid $ 20 million of our existing advance. The BTFP was an additional source of liquidity with favorable prepayment terms, as we may prepay at any time without penalty. As announced by the Board of Governors of the Federal Reserve System (the “Federal Reserve”) on January 24, 2024, the BTFP has ceased making new loans effective March 11, 2024. ​ We maintain an unused unsecured federal funds line of credit with a correspondent bank that has an aggregate overnight borrowing capacity of $ 40.0 million as of September 30, 2024 and December 31, 2023. There was no outstanding balance on the line of credit as of September 30, 2024 and December 31, 2023. ​ Long-term FHLB advances consist of advances with a remaining maturity of more than one year. The advances outstanding at September 30, 2024 include no callable advances and amortizing advances of $ 272 thousand. There were no callable advances outstanding and $ 279 thousand of amortizing advances at December 31, 2023. All FHLB borrowings, including the line of credit, are secured by a blanket security agreement on certain qualified collateral, principally residential first mortgage loans and certain securities. There are no variable rate long-term FHLB borrowings. ​ A summary of maturities of FHLB advances as of September 30, 2024 is, as follows: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Weighted Average (in thousands, except rates) ​ Amount ​ Rate 2024 ​ $ 113,800 5.15 % 2025 ​ 20,000 4.05 ​ Thereafter ​ 272 3.58 ​ Total FHLB advances ​ $ 134,072 4.98 % ​ 29 Table of Contents We executed a Subordinated Note Purchase Agreement with an aggregate of $ 40.0 million of subordinated notes (the “Notes”) to accredited investors on November 19, 2019. The Notes have a maturity date of December 1, 2029 and bear a fixed interest rate of 4.63 % through December 1, 2024 payable semi-annually in arrears. From December 1, 2024 and thereafter the interest rate shall be reset quarterly to an interest rate per annum equal to the then current three-month Secured Overnight Financing Rate (“SOFR”) plus 3.27 %. We have the option beginning with the interest payment date of December 1, 2024, and on any scheduled payment date thereafter, to redeem the Notes, in whole or in part upon prior approval of the Federal Reserve. The transaction included debt issuance costs of $ 40 thousand as of September 30, 2024 and $ 158 thousand net of amortization as of December 31, 2023, which are netted against the subordinated debt. On September 27, 2024, we notified the trustee of the Notes that we had exercised our option to partially redeem an aggregate $ 20.0 million of the Notes, effective December 1, 2024. We also have $ 20.6 million in floating Junior Subordinated Deferrable Interest Debentures (“Debentures”) issued by NHTB Capital Trust II (“Trust II”) and NHTB Capital Trust III (“Trust III”), which are both Connecticut statutory trusts. The Debentures issued on March 30, 2004 carry a variable interest rate of three-month SOFR plus 2.79 %, and mature in 2034. The debt is callable by the Company at the time when any interest payment is made. Trust II and Trust III are considered variable interest entities for which we are not the primary beneficiary. Accordingly, Trust II and Trust III are not consolidated into our financial statements. Repurchase Agreements We can raise additional liquidity by entering into repurchase agreements at our discretion. In a security repurchase agreement transaction, we will generally sell a security, agreeing to repurchase either the same or substantially identical security on a specified later date, at a greater price than the original sales price. The difference between the sale price and purchase price is the cost of the proceeds, which is recorded as interest expense on the consolidated statements of income. The securities underlying the agreements are delivered to counterparties as security for the repurchase obligations. Since the securities are treated as collateral and the agreement does not qualify for a full transfer of effective control, the transactions do not meet the criteria to be classified as sales, and are therefore considered secured borrowing transactions for accounting purposes. Payments on such borrowings are interest only until the scheduled repurchase date. In a repurchase agreement, we are subject to the risk that the purchaser may default at maturity and not return the securities underlying the agreements. In order to minimize this potential risk, we either deal with established firms when entering into these transactions or with customers whose agreements stipulate that the securities underlying the agreement are not delivered to the customer and instead are held in segregated safekeeping accounts by our safekeeping agents. ​ ​ ​ ​ ​ ​ ​ ​ (in thousands) ​ September 30, 2024 ​ December 31, 2023 Customer Repurchase Agreements ​ ​ US Government-sponsored enterprises ​ $ 7,136 ​ $ 8,465 Total ​ $ 7,136 ​ $ 8,465 ​ ​ ​ ​ 30 Table of Contents NOTE 5. DEPOSITS ​ A summary of time deposits is, as follows: ​ ​ ​ ​ ​ ​ ​ ​ (in thousands) September 30, 2024 December 31, 2023 Time less than $100,000 ​ $ 449,922 ​ $ 381,902 Time $100,000 through $250,000 ​ 187,100 ​ 163,933 Time $250,000 or more ​ 180,332 ​ 154,425 Total ​ $ 817,354 ​ $ 700,260 ​ At September 30, 2024 and December 31, 2023, the scheduled maturities by year for time deposits are, as follows: ​ ​ ​ ​ ​ ​ ​ ​ (in thousands) September 30, 2024 ​ December 31, 2023 Within 1 year ​ $ 795,594 ​ $ 670,961 Over 1 year to 2 years ​ 14,049 ​ 17,000 Over 2 years to 3 years ​ 4,301 ​ 6,932 Over 3 years to 4 years ​ 2,282 ​ 3,434 Over 4 years to 5 years ​ 1,014 ​ 1,795 Over 5 years ​ 114 ​ 138 Total ​ $ 817,354 ​ $ 700,260 ​ Included in time deposits are brokered deposits of $ 274.3 million and $ 219.6 million at September 30, 2024 and December 31, 2023, respectively. Also included in time deposits are reciprocal deposits of $ 55.6 million and $ 43.3 million at September 30, 2024 and December 31, 2023, respectively. ​ ​ ​ 31 Table of Contents NOTE 6. CAPITAL RATIOS AND SHAREHOLDERS’ EQUITY ​ The actual and required capital ratios are, as follows: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ September 30, 2024 ​ ​ ​ ​ ​ ​ ​ ​ ​ Minimum Regulatory ​ ​ ​ Actual ​ Capital Requirements ​ (in thousands, except ratios) Amount Ratio ​ Amount Ratio ​ Company (consolidated) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Total capital to risk-weighted assets ​ $ 472,668 ​ 14.37 % ​ $ 263,059 ​ 8.00 % Common equity tier 1 capital to risk-weighted assets ​ 379,352 ​ 11.54 ​ ​ 147,971 ​ 4.50 ​ Tier 1 capital to risk-weighted assets ​ 399,972 ​ 12.16 ​ ​ 197,295 ​ 6.00 ​ Tier 1 capital to average assets (leverage ratio) ​ 399,972 ​ 10.09 ​ ​ 158,637 ​ 4.00 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Bank ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Total capital to risk-weighted assets ​ $ 465,418 ​ 14.17 % ​ $ 262,744 ​ 8.00 % Common equity tier 1 capital to risk-weighted assets ​ 432,722 ​ 13.18 ​ ​ 147,793 ​ 4.50 ​ Tier 1 capital to risk-weighted assets ​ 432,722 ​ 13.18 ​ ​ 197,058 ​ 6.00 ​ Tier 1 capital to average assets (leverage ratio) ​ 432,722 ​ 10.92 ​ ​ 158,511 ​ 4.00 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ December 31, 2023 ​ ​ ​ ​ ​ ​ ​ ​ ​ Minimum Regulatory ​ ​ ​ Actual ​ Capital Requirements ​ (in thousands, except ratios) Amount Ratio ​ Amount Ratio ​ Company (consolidated) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Total capital to risk-weighted assets ​ $ 450,160 ​ 14.24 % ​ $ 252,888 ​ 8.00 % Common equity tier 1 capital to risk-weighted assets ​ 357,574 ​ 11.31 ​ ​ 142,249 ​ 4.50 ​ Tier 1 capital to risk-weighted assets ​ 378,194 ​ 11.96 ​ ​ 189,666 ​ 6.00 ​ Tier 1 capital to average assets (leverage ratio) ​ 378,194 ​ 9.70 ​ ​ 156,022 ​ 4.00 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Bank ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Total capital to risk-weighted assets ​ $ 441,278 ​ 13.97 % ​ $ 252,642 ​ 8.00 % Common equity tier 1 capital to risk-weighted assets ​ 409,312 ​ 12.96 ​ ​ 142,111 ​ 4.50 ​ Tier 1 capital to risk-weighted assets ​ 409,312 ​ 12.96 ​ ​ 189,482 ​ 6.00 ​ Tier 1 capital to average assets (leverage ratio) ​ 409,312 ​ 10.50 ​ ​ 155,908 ​ 4.00 ​ ​ In order to be classified as “well-capitalized” under the relevant regulatory framework, (i) the Company must, on a consolidated basis, maintain a total risk-based capital ratio of 10.00% or greater and a Tier 1 risk-based capital ratio of 6.00% or greater; and (ii) the Bank must maintain a total risk-based capital ratio of 10.00% or greater, a Tier 1 risk-based capital ratio of 8.00% or greater, a common equity Tier 1 capital ratio of 6.50% or greater, and a leverage ratio of 5.00% or greater. At each date shown in the tables above, the Company and the Bank met the conditions to be classified as “well-capitalized” under the relevant regulatory framework. ​ 32 Table of Contents Accumulated other comprehensive (loss) income ​ Components of accumulated other comprehensive loss is, as follows: ​ ​ ​ ​ ​ ​ ​ ​ (in thousands) September 30, 2024 December 31, 2023 Accumulated other comprehensive loss, before tax: ​ ​ Net unrealized loss on AFS securities ​ $ ( 52,308 ) ​ $ ( 62,351 ) Net unrealized loss on hedging derivatives ​ ( 2,489 ) ​ ( 1,322 ) Net unrealized loss on post-retirement plans ​ ( 1,517 ) ​ ( 1,540 ) ​ ​ ​ ​ ​ ​ ​ Income taxes related to items of accumulated other comprehensive loss: ​ ​ Net unrealized loss on AFS securities ​ 12,334 ​ 14,702 Net unrealized loss on hedging derivatives ​ 587 ​ 312 Net unrealized loss on post-retirement plans ​ 308 ​ 337 Accumulated other comprehensive loss ​ $ ( 43,085 ) ​ $ ( 49,862 ) ​ The following table presents the components of other comprehensive income (loss) for the three and nine months ended September 30, 2024 and 2023: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ (in thousands) Before Tax Tax Effect Net of Tax Three Months Ended September 30, 2024 ​ ​ ​ Net unrealized gain on AFS securities: ​ ​ ​ Net unrealized gain arising during the period ​ $ 16,147 ​ $ ( 3,808 ) ​ $ 12,339 Less: reclassification adjustment for gains realized in net income ​ — ​ — ​ — Net unrealized gain on AFS securities ​ 16,147 ​ ( 3,808 ) ​ 12,339 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Net unrealized gain on hedging derivatives: ​ ​ ​ ​ Net unrealized gain arising during the period ​ 82 ​ ( 19 ) ​ 63 Less: reclassification adjustment for gains (losses) realized in net income ​ — ​ — ​ — Net unrealized gain on cash flow hedging derivatives ​ 82 ​ ( 19 ) ​ 63 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Net unrealized loss on post-retirement plans: ​ ​ ​ ​ Net unrealized loss arising during the period ​ — ​ — ​ — Less: reclassification adjustment for gains (losses) realized in net income ​ — ​ — ​ — Net unrealized loss on post-retirement plans ​ — ​ — ​ — Other comprehensive gain ​ $ 16,229 ​ $ ( 3,827 ) ​ $ 12,402 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Three Months Ended September 30, 2023 ​ ​ ​ Net unrealized loss on AFS securities: ​ ​ ​ Net unrealized loss arising during the period ​ $ ( 14,586 ) ​ $ 3,363 ​ $ ( 11,223 ) Less: reclassification adjustment for gains (losses) realized in net income ​ — ​ — ​ — Net unrealized loss on AFS securities ​ ( 14,586 ) ​ 3,363 ​ ( 11,223 ) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Net unrealized loss on hedging derivatives: ​ ​ ​ ​ Net unrealized loss arising during the period ​ ( 3,395 ) ​ 782 ​ ( 2,613 ) Less: reclassification adjustment for gains (losses) realized in net income ​ — ​ — ​ — Net unrealized loss on cash flow hedging derivatives ​ ( 3,395 ) ​ 782 ​ ( 2,613 ) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Net unrealized loss on post-retirement plans: ​ ​ ​ ​ Net unrealized loss arising during the period ​ — ​ — ​ — Less: reclassification adjustment for gains (losses) realized in net income ​ — ​ — ​ — Net unrealized loss on post-retirement plans ​ — ​ — ​ — Other comprehensive loss ​ $ ( 17,981 ) ​ $ 4,145 ​ $ ( 13,836 ) ​ 33 Table of Contents ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ (in thousands) Before Tax Tax Effect Net of Tax Nine Months Ended September 30, 2024 ​ ​ ​ Net unrealized gain on AFS securities: ​ ​ ​ Net unrealized gain arising during the period ​ $ 10,093 ​ $ ( 2,380 ) ​ $ 7,713 Less: reclassification adjustment for gains realized in net income ​ 50 ​ ( 12 ) ​ 38 Net unrealized gain on AFS securities ​ 10,043 ​ ( 2,368 ) ​ 7,675 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Net unrealized loss on hedging derivatives: ​ ​ ​ ​ Net unrealized loss arising during the period ​ ( 1,167 ) ​ 275 ​ ( 892 ) Less: reclassification adjustment for gains realized in net income ​ — ​ — ​ — Net unrealized loss on hedging derivatives ​ ( 1,167 ) ​ 275 ​ ( 892 ) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Net unrealized gain on post-retirement plans: ​ ​ ​ Net unrealized gain arising during the period ​ 22 ​ ( 28 ) ​ ( 6 ) Less: reclassification adjustment for gains realized in net income ​ — ​ — ​ — Net unrealized gain on post-retirement plans ​ 22 ​ ( 28 ) ​ ( 6 ) Other comprehensive gain ​ $ 8,898 ​ $ ( 2,121 ) ​ $ 6,777 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Nine Months Ended September 30, 2023 ​ ​ ​ Net unrealized loss on AFS securities: ​ ​ ​ Net unrealized loss arising during the period ​ $ ( 14,603 ) ​ $ 3,345 ​ $ ( 11,258 ) Less: reclassification adjustment for gains realized in net income ​ 34 ​ ( 8 ) ​ 26 Net unrealized loss on AFS securities ​ ( 14,637 ) ​ 3,353 ​ ( 11,284 ) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Net unrealized loss on hedging derivatives: ​ ​ ​ Net unrealized loss arising during the period ​ ( 2,307 ) ​ 531 ​ ( 1,776 ) Less: reclassification adjustment for gains realized in net income ​ — ​ — ​ — Net unrealized loss on hedging derivatives ​ ( 2,307 ) ​ 531 ​ ( 1,776 ) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Net unrealized loss on post-retirement plans: ​ ​ ​ Net unrealized loss arising during the period ​ — ​ — ​ — Less: reclassification adjustment for gains (losses) realized in net income ​ — ​ — ​ — Net unrealized loss on post-retirement plans ​ — ​ — ​ — Other comprehensive loss ​ $ ( 16,944 ) ​ $ 3,884 ​ $ ( 13,060 ) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 34 Table of Contents The following table presents the changes in each component of accumulated other comprehensive income (loss), net of tax impacts, for the three and nine months ended September 30, 2024 and 2023: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Net unrealized Net gain (loss) on Net unrealized ​ ​ ​ ​ gain (loss) ​ effective cash ​ loss ​ ​ ​ ​ ​ on AFS ​ flow hedging ​ on pension ​ ​ ​ (in thousands) ​ Securities ​ derivatives ​ plans ​ Total Three Months Ended September 30, 2024 ​ ​ ​ ​ ​ ​ ​ ​ Balance at beginning of period ​ $ ( 52,313 ) ​ $ ( 1,965 ) ​ $ ( 1,209 ) ​ $ ( 55,487 ) Other comprehensive gain before reclassifications ​ 12,339 ​ 63 ​ — ​ 12,402 Less: amounts reclassified from accumulated other comprehensive income ​ — ​ — ​ — ​ — Total other comprehensive gain ​ 12,339 ​ 63 ​ — ​ 12,402 Balance at end of period ​ $ ( 39,974 ) ​ $ ( 1,902 ) ​ $ ( 1,209 ) ​ $ ( 43,085 ) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Three Months Ended September 30, 2023 ​ ​ ​ ​ ​ Balance at beginning of period ​ $ ( 55,307 ) ​ $ ( 957 ) ​ $ ( 1,300 ) ​ $ ( 57,564 ) Other comprehensive loss before reclassifications ​ ( 11,223 ) ​ ( 2,613 ) ​ — ​ ( 13,836 ) Less: amounts reclassified from accumulated other comprehensive income ​ — ​ — ​ — ​ — Total other comprehensive loss ​ ( 11,223 ) ​ ( 2,613 ) ​ — ​ ( 13,836 ) Balance at end of period ​ $ ( 66,530 ) ​ $ ( 3,570 ) ​ $ ( 1,300 ) ​ $ ( 71,400 ) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Nine Months Ended September 30, 2024 ​ ​ ​ ​ ​ Balance at beginning of period ​ $ ( 47,649 ) ​ $ ( 1,010 ) ​ $ ( 1,203 ) ​ $ ( 49,862 ) Other comprehensive gain before reclassifications ​ 7,713 ​ ( 892 ) ​ ( 6 ) ​ 6,815 Less: amounts reclassified from accumulated other comprehensive income ​ 38 ​ — ​ — ​ 38 Total other comprehensive gain ​ 7,675 ​ ( 892 ) ​ ( 6 ) ​ 6,777 Balance at end of period ​ $ ( 39,974 ) ​ $ ( 1,902 ) ​ $ ( 1,209 ) ​ $ ( 43,085 ) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Nine Months Ended September 30, 2023 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Balance at beginning of period ​ $ ( 55,246 ) ​ $ ( 1,794 ) ​ $ ( 1,300 ) ​ $ ( 58,340 ) Other comprehensive loss before reclassifications ​ ( 11,258 ) ​ ( 1,776 ) ​ — ​ ( 13,034 ) Less: amounts reclassified from accumulated other comprehensive income ​ 26 ​ — ​ — ​ 26 Total other comprehensive loss ​ ( 11,284 ) ​ ( 1,776 ) ​ — ​ ( 13,060 ) Balance at end of period ​ $ ( 66,530 ) ​ $ ( 3,570 ) ​ $ ( 1,300 ) ​ $ ( 71,400 ) ​ ​ ​ ​ 35 Table of Contents The following tables presents the amounts reclassified out of each component of accumulated other comprehensive income for three and nine months ended September 30, 2024 and 2023: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Three Months Ended September 30, ​ Nine Months Ended September 30, ​ ​ Affected Line Item where (in thousands) 2024 2023 2024 2023 Net Income is Presented Net realized gains on AFS securities: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Before tax ​ $ — ​ $ — ​ $ 50 ​ $ 34 ​ Non-interest income Tax effect ​ — ​ — ​ ( 12 ) ​ ( 8 ) ​ Tax expense Total reclassifications for the period ​ $ — ​ $ — ​ $ 38 ​ $ 26 ​ ​ ​ ​ ​ ​ NOTE 7. EARNINGS PER SHARE ​ The following table presents the calculation of earnings per share: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Three Months Ended ​ Nine Months Ended ​ ​ September 30, ​ September 30, (in thousands, except per share and share data) 2024 2023 2024 2023 Net income ​ $ 12,193 ​ $ 11,104 ​ $ 32,545 ​ $ 34,907 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Average number of basic common shares outstanding ​ 15,260,942 ​ 15,155,457 ​ 15,229,029 ​ 15,134,954 Plus: dilutive effect of stock options and awards outstanding ​ 65,132 ​ 40,067 ​ 62,863 ​ 53,765 Average number of diluted common shares outstanding (1) ​ 15,326,074 ​ 15,195,524 ​ 15,291,892 ​ 15,188,719 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Earnings per share: ​ ​ ​ ​ Basic ​ $ 0.80 ​ $ 0.73 ​ $ 2.14 ​ $ 2.31 Diluted ​ ​ 0.80 ​ ​ 0.73 ​ ​ 2.13 ​ ​ 2.30 (1) Average diluted shares outstanding are computed using the treasury stock method. ​ ​ 36 Table of Contents NOTE 8. DERIVATIVE FINANCIAL INSTRUMENTS AND HEDGING ACTIVITIES ​ We use derivative instruments to minimize fluctuations in earnings and cash flows caused by interest rate volatility. Our interest rate risk management strategy involves modifying the re-pricing characteristics of certain assets or liabilities so the changes in interest rates do not have a significant effect on net interest income. Thus, all of our derivative contracts are considered to be interest rate contracts. ​ We recognize our derivative instruments on the consolidated balance sheet at fair value. On the date the derivative instrument is entered into, we designate whether the derivative is part of a hedging relationship (i.e., cash flow or fair value hedge). We formally document relationships between hedging instruments and hedged items, as well as our risk management objective and strategy for undertaking hedge transactions. We also assess, both at the hedge’s inception and on an ongoing basis, whether the derivatives used in hedging transactions are highly effective in offsetting the changes in cash flows or fair values of hedged items. Changes in fair value of derivative instruments that are highly effective and qualify as cash flow hedges are recorded in other comprehensive income or loss. ​ We offer derivative products in the form of interest rate swaps, to commercial loan customers to facilitate their risk management strategies. These instruments are executed through Master Netting Arrangements (“MNAs”) with financial institution counterparties or Risk Participation Agreements (“RPAs”) with commercial bank counterparties, for which we assume a pro rata share of the credit exposure associated with a borrower's performance related to the derivative contract with the counterparty. ​ The following tables present information about derivative assets and liabilities at September 30, 2024 and December 31, 2023: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ September 30, 2024 ​ ​ ​ ​ Weighted ​ ​ ​ ​ ​ Notional ​ Average ​ Fair Value ​ Location Fair ​ ​ Amount ​ Maturity ​ Asset (Liability) Value Asset ​ (in thousands) (in years) (in thousands) (Liability) Cash flow hedges: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Interest rate swap on wholesale funding ​ $ 75,000 ​ 0.3 ​ $ 745 ​ Other assets Interest rate swap on variable rate loans ​ ​ 50,000 ​ ​ 1.5 ​ ​ ( 2,069 ) ​ Other liabilities Total cash flow hedges ​ 125,000 ​ ​ ​ ​ ( 1,324 ) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Fair value hedges: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Interest rate swap on securities ​ 37,190 ​ 4.8 ​ 3,005 ​ Other assets Total fair value hedges ​ 37,190 ​ ​ ​ ​ 3,005 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Economic hedges: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Forward sale commitments ​ 7,025 ​ 0.1 ​ ( 8 ) ​ Other liabilities Customer Loan Swaps-MNA Counterparty ​ ​ 193,534 ​ ​ 4.4 ​ ​ ( 10,620 ) ​ Other liabilities Customer Loan Swaps-RPA Counterparty ​ ​ 143,914 ​ ​ 5.3 ​ ​ — ​ Other liabilities Customer Loan Swaps-Customer ​ ​ 337,448 ​ ​ 4.8 ​ ​ 10,620 ​ Other assets Total economic hedges ​ 681,921 ​ ​ ​ ​ ( 8 ) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Non-hedging derivatives: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Interest rate lock commitments ​ 7,502 ​ 0.1 ​ 147 ​ Other assets Total non-hedging derivatives ​ 7,502 ​ ​ ​ ​ 147 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Total ​ $ 851,613 ​ ​ ​ ​ $ 1,820 ​ ​ ​ ​ 37 Table of Contents ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ December 31, 2023 ​ ​ ​ ​ Weighted ​ ​ ​ ​ ​ Notional ​ Average ​ Fair Value ​ Location Fair ​ ​ Amount ​ Maturity ​ Asset (Liability) Value Asset ​ (in thousands) (in years) (in thousands) (Liability) Cash flow hedges: ​ ​ ​ ​ ​ Interest rate swap on wholesale funding ​ $ 75,000 ​ 1.0 ​ $ 2,803 ​ Other assets Interest rate swap on variable rate loans ​ ​ 50,000 ​ ​ 2.2 ​ ​ ( 3,459 ) ​ Other liabilities Total cash flow hedges ​ 125,000 ​ ​ ​ ​ ( 656 ) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Fair value hedges: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Interest rate swap on securities ​ 37,190 ​ 5.6 ​ 3,844 ​ Other assets Total fair value hedges ​ 37,190 ​ ​ ​ ​ 3,844 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Economic hedges: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Forward sale commitments ​ ​ 5,000 ​ — ​ ( 20 ) ​ Other liabilities Customer Loan Swaps-MNA Counterparty ​ ​ 197,683 ​ ​ 4.9 ​ ​ ( 14,842 ) ​ Other liabilities Customer Loan Swaps-RPA Counterparty ​ ​ 133,703 ​ ​ 4.9 ​ ​ — ​ Other liabilities Customer Loan Swaps-Customer ​ ​ 331,386 ​ ​ 4.9 ​ ​ 14,842 ​ Other assets Total economic hedges ​ 667,772 ​ ​ ​ ​ ( 20 ) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Non-hedging derivatives: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Interest rate lock commitments ​ 3,153 ​ 0.1 ​ 63 ​ Other assets Total non-hedging derivatives ​ 3,153 ​ ​ ​ ​ 63 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Total ​ $ 833,115 ​ ​ ​ ​ $ 3,231 ​ ​ ​ ​ As of September 30, 2024 and December 31, 2023, the following amounts were recorded on the consolidated balance sheet related to cumulative basis adjustments for fair value hedges: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Cumulative Amount of Fair ​ ​ Location of Hedged Item on ​ Carrying Amount of Hedged ​ Value Hedging Adjustment in ​ Balance Sheet Assets Carrying Amount September 30, 2024 ​ ​ Interest rate swap on securities Securities available for sale ​ $ 33,019 ​ $ ( 4,171 ) ​ ​ ​ ​ ​ ​ ​ ​ ​ December 31, 2023 ​ ​ Interest rate swap on securities Securities available for sale ​ $ 32,680 ​ $ ( 4,510 ) ​ ​ 38 Table of Contents Information about derivative assets and liabilities for the three and nine months ended September 30, 2024 and 2023, follows: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Three Months Ended September 30, 2024 ​ Amount of ​ Amount of ​ ​ ​ ​ Gain (Loss) ​ ​ ​ Gain (Loss) ​ ​ ​ ​ ​ ​ Recognized in ​ ​ ​ Reclassified ​ Location of ​ Amount of ​ ​ Other ​ Location of Gain (Loss) ​ from Other ​ Gain (Loss) ​ Gain (Loss) ​ ​ Comprehensive ​ Reclassified from Other ​ Comprehensive ​ Recognized in ​ Recognized (in thousands) Income Comprehensive Income Income Income in Income Cash flow hedges: ​ ​ ​ Interest rate swap on wholesale funding ​ $ ( 706 ) ​ Interest expense ​ $ — Interest expense ​ $ 828 Interest rate swap on variable rate loans ​ ​ 911 ​ Interest income ​ ​ — ​ Interest income ​ ​ ( 588 ) Total cash flow hedges ​ 205 ​ ​ — ​ 240 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Fair value hedges: ​ ​ ​ ​ ​ ​ Interest rate swap on securities ​ ( 142 ) Interest income ​ — Interest income ​ 372 Total fair value hedges ​ ( 142 ) ​ ​ — ​ 372 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Economic hedges: ​ ​ ​ ​ ​ ​ Forward commitments ​ — Other income ​ — Mortgage banking income ​ ( 23 ) Total economic hedges ​ — ​ ​ — ​ ( 23 ) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Non-hedging derivatives: ​ ​ ​ ​ ​ ​ Interest rate lock commitments ​ — Other expense ​ — Mortgage banking income ​ 1 Total non-hedging derivatives ​ — ​ ​ — ​ 1 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Total ​ $ 63 ​ ​ ​ $ — ​ $ 590 ​ ​ ​ 39 Table of Contents ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Three Months Ended September 30, 2023 ​ Amount of ​ Amount of ​ ​ ​ ​ Gain (Loss) ​ ​ ​ Gain (Loss) ​ ​ ​ ​ ​ ​ Recognized in ​ ​ ​ Reclassified ​ Location of ​ Amount of ​ ​ Other ​ Location of Gain (Loss) ​ from Other ​ Gain (Loss) ​ Gain (Loss) ​ ​ Comprehensive ​ Reclassified from Other ​ Comprehensive ​ Recognized in ​ Recognized (in thousands) ​ Income ​ Comprehensive Income ​ Income ​ Income ​ in Income Cash flow hedges: ​ ​ ​ Interest rate swap on wholesale funding ​ $ ( 564 ) Interest expense ​ $ — Interest expense ​ $ 816 Interest rate swap on variable rate loans ​ ​ 48 ​ Interest income ​ ​ — ​ Interest income ​ ​ ( 578 ) Total cash flow hedges ​ ​ ( 516 ) ​ ​ ​ — ​ ​ 238 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Fair value hedges: ​ ​ ​ ​ ​ ​ ​ Interest rate swap on securities ​ ( 2,096 ) Interest income ​ — Interest income ​ 369 Total economic hedges ​ ​ ( 2,096 ) ​ ​ ​ — ​ 369 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Economic hedges: ​ ​ ​ ​ ​ ​ ​ Forward commitments ​ — Other income ​ — Mortgage banking income ​ ( 2 ) Total economic hedges ​ ​ — ​ ​ ​ — ​ ( 2 ) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Non-hedging derivatives: ​ ​ ​ ​ ​ ​ Interest rate lock commitments ​ — Other expense ​ — Mortgage banking income ​ 24 Total non-hedging derivatives ​ ​ — ​ ​ ​ — ​ 24 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Total ​ $ ( 2,612 ) ​ $ — ​ $ 629 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 40 Table of Contents ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Nine Months Ended September 30, 2024 ​ Amount of ​ Amount of ​ ​ ​ ​ Gain (Loss) ​ ​ ​ Gain (Loss) ​ ​ ​ ​ ​ ​ Recognized in ​ ​ ​ Reclassified ​ Location of ​ Amount of ​ ​ Other ​ Location of Gain (Loss) ​ from Other ​ Gain (Loss) ​ Gain (Loss) ​ ​ Comprehensive ​ Reclassified from Other ​ Comprehensive ​ Recognized in ​ Recognized (in thousands) Income Comprehensive Income Income Income in Income Cash flow hedges: ​ ​ ​ Interest rate swap on wholesale funding ​ $ ( 1,572 ) ​ Interest expense ​ $ — Interest expense ​ $ 2,483 Interest rate swap on variable rate loans ​ ​ 1,062 ​ Interest income ​ ​ — ​ Interest income ​ ​ ( 1,758 ) Total cash flow hedges ​ ( 510 ) ​ ​ — ​ 725 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Fair value hedges: ​ ​ ​ ​ ​ ​ Interest rate swap on securities ​ ( 382 ) Interest expense ​ — Interest income ​ 1,113 Total fair value hedges ​ ( 382 ) ​ ​ — ​ 1,113 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Economic hedges: ​ ​ ​ ​ ​ ​ Forward commitments ​ — Other income ​ — Mortgage banking income ​ 12 Total economic hedges ​ — ​ ​ — ​ 12 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Non-hedging derivatives: ​ ​ ​ ​ ​ ​ Interest rate lock commitments ​ — Other expense ​ — Mortgage banking income ​ 84 Total non-hedging derivatives ​ — ​ ​ — ​ 84 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Total ​ $ ( 892 ) ​ ​ ​ $ — ​ $ 1,934 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 41 Table of Contents ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Nine Months Ended September 30, 2023 ​ Amount of ​ Amount of ​ ​ ​ ​ Gain (Loss) ​ ​ ​ Gain (Loss) ​ ​ ​ ​ ​ ​ Recognized in ​ ​ ​ Reclassified ​ Location of ​ Amount of ​ ​ Other ​ Location of Gain (Loss) ​ from Other ​ Gain (Loss) ​ Gain (Loss) ​ ​ Comprehensive ​ Reclassified from Other ​ Comprehensive ​ Recognized in ​ Recognized (in thousands) ​ Income ​ Comprehensive Income ​ Income ​ Income ​ in Income Cash flow hedges: ​ ​ ​ Interest rate swap on wholesale funding ​ $ ( 786 ) Interest expense ​ $ — Interest expense ​ $ 2,225 Interest rate swap on variable rate loans ​ ​ 178 ​ Interest income ​ ​ — ​ Interest income ​ ​ ( 1,575 ) Total cash flow hedges ​ ​ ( 608 ) ​ ​ ​ — ​ ​ 650 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Fair value hedges: ​ ​ ​ ​ ​ ​ ​ Interest rate swap on securities ​ ( 1,168 ) Interest income ​ — Interest income ​ 985 Total economic hedges ​ ​ ( 1,168 ) ​ ​ ​ — ​ 985 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Economic hedges: ​ ​ ​ ​ ​ ​ ​ Forward commitments ​ — Other income ​ — Mortgage banking income ​ 47 Total economic hedges ​ ​ — ​ ​ ​ — ​ 47 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Non-hedging derivatives: ​ ​ ​ ​ ​ ​ Interest rate lock commitments ​ — Other expense ​ — Mortgage banking income ​ ( 79 ) Total non-hedging derivatives ​ ​ — ​ ​ ​ — ​ ( 79 ) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Total ​ $ ( 1,776 ) ​ $ — ​ $ 1,603 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 42 Table of Contents The effect of cash flow hedging and fair value accounting on the consolidated statements of income for the three and nine months ended September 30, 2024 and 2023: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Three Months Ended September 30, 2024 ​ ​ Interest and Dividend Income ​ Interest Expense ​ ​ ​ (in thousands) Loans ​ Securities and other Deposits ​ Borrowings Non-interest Income Income and expense line items presented in the consolidated statements of income $ 42,042 ​ $ 6,538 ​ $ 16,174 ​ $ 3,448 ​ $ 9,653 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ The effects of cash flow and fair value hedging: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Gain (loss) on cash flow hedges: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Interest rate swap on wholesale funding ​ ​ — ​ ​ — ​ ​ — ​ ​ 828 ​ ​ — Interest rate swap on variable rate loans ​ ( 588 ) ​ ​ — ​ — ​ ​ — ​ — ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Gain (loss) on fair value hedges: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Interest rate swap on securities ​ ​ — ​ ​ 372 ​ ​ — ​ ​ — ​ ​ — ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Three Months Ended September 30, 2023 ​ ​ Interest and Dividend Income ​ Interest Expense ​ ​ ​ (in thousands) Loans ​ Securities and other Deposits ​ Borrowings Non-interest Income Income and expense line items presented in the consolidated statements of income $ 38,412 ​ $ 6,723 ​ $ 11,415 ​ $ 4,534 ​ $ 8,815 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ The effects of cash flow and fair value hedging: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Gain (loss) on cash flow hedges: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Interest rate swap on wholesale funding ​ ​ — ​ ​ — ​ ​ — ​ ​ 816 ​ ​ — Interest rate swap on variable rate loans ​ ( 578 ) ​ ​ — ​ — ​ ​ — ​ — ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Gain (loss) on fair value hedges: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Interest rate swap on securities ​ ​ — ​ ​ 369 ​ ​ — ​ ​ — ​ ​ — ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 43 Table of Contents ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Nine Months Ended September 30, 2024 ​ ​ Interest and Dividend Income ​ Interest Expense ​ ​ ​ (in thousands) Loans ​ Securities and other Deposits ​ Borrowings Non-interest Income Income and expense line items presented in the consolidated statements of income $ 122,146 ​ $ 19,095 ​ $ 45,486 ​ $ 10,983 ​ $ 27,496 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ The effects of cash flow and fair value hedging: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Gain (loss) on cash flow hedges: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Interest rate swap on wholesale funding ​ ​ — ​ ​ — ​ ​ — ​ ​ 2,483 ​ ​ — Interest rate swap on variable rate loans ​ ( 1,758 ) ​ ​ — ​ — ​ ​ — ​ — ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Gain (loss) on fair value hedges: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Interest rate swap on securities ​ ​ — ​ ​ 1,113 ​ ​ — ​ ​ — ​ ​ — ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Nine Months Ended September 30, 2023 ​ ​ Interest and Dividend Income ​ Interest Expense ​ ​ ​ (in thousands) Loans ​ Securities and other Deposits ​ Borrowings Non-interest Income Income and expense line items presented in the consolidated statements of income $ 109,889 ​ $ 18,478 ​ $ 25,270 ​ $ 14,215 ​ $ 26,979 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ The effects of cash flow and fair value hedging: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Gain (loss) on cash flow hedges: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Interest rate swap on wholesale funding ​ ​ — ​ ​ — ​ ​ — ​ ​ 2,225 ​ ​ — Interest rate swap on variable rate loans ​ ( 1,575 ) ​ ​ — ​ — ​ ​ — ​ — ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Gain (loss) on fair value hedges: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Interest rate swap on securities ​ ​ — ​ ​ 985 ​ ​ — ​ ​ — ​ ​ — ​ 44 Table of Contents The effect of derivatives not designated as hedging instruments on the consolidated statements of income for the three and nine months ended September 30, 2024 and 2023 is as follows: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Location of Gain (Loss) Recognized ​ Three Months Ended September 30, ​ Nine Months Ended September 30, (In thousands) ​ in Non-interest Income ​ 2024 ​ ​ 2023 ​ 2024 ​ ​ 2023 Economic hedges: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Forward commitments ​ Mortgage banking income ​ $ ( 23 ) ​ $ ( 2 ) ​ $ 12 ​ $ 47 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Non-hedging derivatives: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Interest rate lock commitments ​ Mortgage banking income ​ ​ 1 ​ ​ 24 ​ ​ 84 ​ ​ ( 79 ) ​ Cash flow hedges ​ Interest rate swaps on wholesale funding As of September 30, 2024, we have two interest rate swaps on wholesale borrowings to limit our exposure to rising interest rates over a five-year term on 3-month FHLB borrowings or brokered certificates, or a combination thereof at each maturity date. The first of the two agreements was entered into in November 2019 with a $ 50.0 million notional amount and pays a fixed interest rate of 1.53 %. A second agreement was entered into in April 2020 with a $ 25.0 million notional amount and pays a fixed rate of 0.59 %. The financial institution counterparty pays us interest on the daily SOFR rate plus 26 basis points. We designated the swaps as cash flow hedges. ​ Interest rate swap on variable rate loans We have an interest rate swap that effectively fixes our interest rate on $ 50 million at the daily SOFR rate plus 11 basis points of based loan assets at 0.806 % plus the credit spread on the loans that reprices on a weighted average basis. The instrument is specifically designed to hedge the risk of changes in its cash flows from interest receipts attributable to changes in a contractually specified interest rate, on an amount of our variable rate loan assets equal to $ 50 million. We designated the swap as a cash flow hedge. ​ Fair value hedges ​ Interest rate swap on securities For derivative instruments that are designated and qualify as a fair value hedge, the gain or loss on the derivative instrument as well as the offsetting loss or gain on the hedged asset or liability attributable to the hedged risk are recognized in current earnings. We utilize interest rate swaps designated as fair value hedges to mitigate the effect of changing interest rates on the fair values of fixed rate callable securities available-for-sale. The hedging strategy on securities converts the fixed interest rates to SOFR based variable interest rates. These derivatives are designated as partial term hedges of selected cash flows covering specified periods of time prior to the call dates of the hedged securities. During 2019, we entered into eight swap transactions with a notional amount of $ 37.2 million designated as fair value hedges. These derivatives are intended to protect against the effects of changing interest rates on the fair values of fixed rate securities. The fixed rates on the transactions have a weighted average of 1.70 %. ​ Economic hedges ​ Forward sale commitments We utilize forward sale commitments on residential mortgage loans to hedge interest rate risk and the associated effects on the fair value of interest rate lock commitments and loans originated for sale. The forward sale commitments are accounted for as derivatives. We typically use a combination of best efforts and mandatory delivery contracts. The contracts are loan sale agreements where we commit to deliver a certain principal amount of mortgage loans to an investor at a specified price on or before a specified date. Generally, we enter into contracts just prior to the loan closing with a customer. ​ Customer loan derivatives We enter into customer loan derivatives to facilitate the risk management strategies for commercial banking customers. We mitigate this risk by entering into equal and offsetting loan swap agreements with highly rated third-party financial 45 Table of Contents institutions. The loan swap agreements are free standing derivatives and are recorded at fair value in our consolidated balance sheet. We are party to MNAs with our financial institutional counterparties; however, we do not offset assets and liabilities under these arrangements for financial statement presentation purposes. ​ ​ The MNAs provide for a single net settlement of all loan swap agreements, as well as collateral or cash funds, in the event of default on, or termination of, any one contract. Collateral is provided by cash or securities received or posted by the counterparty with net liability positions, respectively, in accordance with contract thresholds. ​ The below tables describe the potential effect of master netting arrangements on the consolidated balance sheet and the financial collateral pledged for these arrangements: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Gross Amounts Offset in the Consolidated Balance Sheet ​ ​ Derivative ​ ​ ​ Cash Collateral ​ ​ ​ (in thousands) Liabilities Derivative Assets Pledged Net Amount As of September 30, 2024 ​ ​ ​ ​ ​ ​ ​ ​ Customer Loan Derivatives: ​ ​ ​ ​ MNA counterparty ​ $ ( 10,620 ) ​ $ 10,620 ​ $ — ​ $ — RPA counterparty ​ — ​ — ​ — ​ — Total ​ $ ( 10,620 ) ​ $ 10,620 ​ $ — ​ $ — ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Gross Amounts Offset in the Consolidated Balance Sheet ​ ​ Derivative ​ ​ ​ Cash Collateral ​ ​ ​ (in thousands) Liabilities Derivative Assets Pledged Net Amount As of December 31, 2023 ​ ​ ​ ​ ​ ​ ​ ​ Customer Loan Derivatives: ​ ​ ​ ​ MNA counterparty ​ $ ( 14,842 ) ​ $ 14,842 ​ $ — ​ $ — RPA counterparty ​ — ​ — ​ — ​ — Total ​ $ ( 14,842 ) ​ $ 14,842 ​ $ — ​ $ — ​ Non-hedging derivatives ​ Interest rate lock commitments We enter into interest rate lock commitments (“IRLCs”) for residential mortgage loans, which commit us to lend funds to a potential borrower at a specific interest rate and within a specified period of time. IRLCs relate to the origination of residential mortgage loans that are held for sale and are considered derivative financial instruments under applicable accounting guidance. Outstanding IRLCs expose us to the risk that the price of the mortgage loans underlying the commitments may decline due to increases in mortgage interest rates from inception of the rate lock to the funding of the loan. The IRLCs are free standing derivatives, which are carried at fair value with changes recorded in non-interest income in our Consolidated Statements of Income. Changes in the fair value of IRLCs subsequent to inception are based on (i) changes in the fair value of the underlying loan resulting from the fulfillment of the commitment and (ii) changes in the probability when the loan will fund within the terms of the commitment, which is affected primarily by changes in interest rates and the passage of time. ​ ​ ​ 46 Table of Contents NOTE 9. FAIR VALUE MEASUREMENTS ​ Recurring Fair Value Measurements ​ The following table summarizes financial assets and financial liabilities measured at fair value on a recurring basis as of September 30, 2024 and December 31, 2023, segregated by the level of the valuation inputs within the fair value hierarchy utilized to measure fair value: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ September 30, 2024 ​ Level 1 Level 2 Level 3 Total (in thousands) ​ Inputs ​ Inputs ​ Inputs ​ Fair Value Available for sale securities: ​ ​ ​ ​ ​ ​ ​ ​ ​ Obligations of US Government-sponsored enterprises ​ $ — ​ $ 1,363 ​ $ — ​ $ 1,363 Mortgage-backed securities: ​ ​ ​ ​ ​ US Government-sponsored enterprises ​ ​ — ​ ​ 189,452 ​ ​ — ​ ​ 189,452 US Government agency ​ — ​ 96,327 ​ — ​ 96,327 Private label ​ — ​ 45,387 ​ — ​ 45,387 Obligations of states and political subdivisions thereof ​ — ​ 109,327 ​ — ​ 109,327 Corporate bonds ​ — ​ 94,036 ​ — ​ 94,036 Loans held for sale ​ ​ — ​ ​ 1,272 ​ ​ — ​ ​ 1,272 Derivative assets ​ — ​ 14,370 ​ 147 ​ 14,517 Derivative liabilities ​ — ​ ( 12,689 ) ​ ( 8 ) ​ ( 12,697 ) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ December 31, 2023 ​ Level 1 Level 2 Level 3 Total (in thousands) ​ Inputs ​ Inputs ​ Inputs ​ Fair Value Available for sale securities: ​ ​ ​ ​ ​ ​ ​ ​ Obligations of US Government-sponsored enterprises ​ $ — ​ $ 1,992 ​ $ — ​ $ 1,992 Mortgage-backed securities: ​ ​ ​ ​ ​ US Government-sponsored enterprises ​ ​ — ​ ​ 193,282 ​ ​ — ​ ​ 193,282 US Government agency ​ — ​ 74,213 ​ — ​ 74,213 Private label ​ — ​ 59,051 ​ — ​ 59,051 Obligations of states and political subdivisions thereof ​ — ​ 110,168 ​ — ​ 110,168 Corporate bonds ​ — ​ 95,868 ​ — ​ 95,868 Loans held for sale ​ ​ — ​ ​ 2,189 ​ ​ — ​ ​ 2,189 Derivative assets ​ — ​ 21,775 ​ 63 ​ 21,838 Derivative liabilities ​ — ​ ( 18,587 ) ​ ( 20 ) ​ ( 18,607 ) ​ ​ Securities Available for Sale: All securities and major categories of securities classified as available for sale are reported at fair value utilizing Level 2 inputs. For these securities, we obtain fair value measurements from independent pricing providers. The fair value measurements used by the pricing providers consider observable data that may include dealer quotes, market maker quotes and live trading systems. If quoted prices are not readily available, fair values are determined using matrix pricing models, or other model-based valuation techniques requiring observable inputs other than quoted prices such as market pricing spreads, credit information, callable features, cash flows, the US Treasury yield curve, trade execution data, market consensus prepayment speeds, default rates, and the securities’ terms and conditions, among other things. ​ Loans Held for Sale: The valuation of the Company’s loans held for sale are determined on an individual basis using quoted secondary market prices and are classified as Level 2 measurements. Derivative Assets and Liabilities ​ Cash Flow Hedges. The valuation of our cash flow hedges are obtained from a third party. The pricing analysis is based on observable inputs for the contractual terms of the derivatives, including the period to maturity and interest rate curves. The inputs used to value the cash flow hedges are all classified as Level 2 measurements. 47 Table of Contents ​ Interest Rate Lock Commitments. We enter into IRLCs for residential mortgage loans, which commit us to lend funds to potential borrowers at a specific interest rate and within a specified period of time. The estimated fair value of commitments to originate residential mortgage loans for sale is based on quoted prices for similar loans in active markets. However, this value is adjusted by a factor which considers the likelihood of a loan in a lock position will ultimately close. The closing ratio is derived from internal data and is adjusted using significant management judgment. As such, IRLCs are classified as Level 3 measurements. ​ Forward Sale Commitments . We utilize forward sale commitments as economic hedges against potential changes in the values of the IRLCs and loans originated for sale. The fair values of mandatory delivery loan sale commitments are determined similarly to the IRLCs using quoted prices in the market place that are observable. However, closing ratios included in the calculation are internally generated and are based on management’s judgment and prior experience, which are not considered observable factors. As such, mandatory delivery forward commitments are classified as Level 3 measurements. ​ Customer Loan Derivatives. The valuation of our customer loan derivatives is obtained from a third-party pricing service and is determined using a discounted cash flow analysis on the expected cash flows of each derivative. The pricing analysis is based on observable inputs for the contractual terms of the derivatives, including the period to maturity and interest rate curves. We incorporate credit valuation adjustments to appropriately reflect our nonperformance risk and the respective counterparty’s nonperformance risk in the fair value measurements. In adjusting the fair value of the derivative contracts for the effect of nonperformance risk, we have considered the impact of MNAs and any applicable credit enhancements, such as collateral postings. ​ Although we have determined that the majority of the inputs used to value customer loan derivatives fall within Level 2 of the fair value hierarchy, the credit valuation adjustments associated with derivatives utilize Level 3 inputs, such as estimates of current credit spreads to evaluate the likelihood of default by itself and counterparties. However, as of September 30, 2024, we assessed the significance of the impact of the credit valuation adjustments on the overall valuation of our derivative positions and determined that the credit valuation adjustments are not significant to the overall valuation of our derivatives. As a result, we determined that the derivative valuations in their entirety are classified in Level 2 of the fair value hierarchy. ​ 48 Table of Contents The table below presents the changes in Level 3 assets and liabilities that were measured at fair value on a recurring basis for the three and nine months ended September 30, 2024 and 2023: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Assets (Liabilities) ​ ​ Interest Rate Lock ​ Forward (in thousands) Commitments Commitments Three Months Ended September 30, 2024 ​ ​ ​ ​ Balance at beginning of period ​ $ 146 ​ $ 15 Realized gain recognized in non-interest income ​ 1 ​ ( 23 ) Balance at end of period ​ $ 147 ​ $ ( 8 ) ​ ​ ​ ​ ​ ​ ​ Three Months Ended September 30, 2023 ​ ​ ​ ​ Balance at beginning of period ​ $ 8 ​ $ — Realized gain (loss) recognized in non-interest income ​ 17 ​ 47 Balance at end of period ​ $ 25 ​ $ 47 ​ ​ ​ ​ ​ ​ ​ Nine Months Ended September 30, 2024 ​ ​ Balance at beginning of period ​ $ 63 ​ $ ( 20 ) Realized gain recognized in non-interest income ​ 84 ​ 12 Balance at end of period ​ $ 147 ​ $ ( 8 ) ​ ​ ​ ​ ​ ​ ​ Nine Months Ended September 30, 2023 ​ ​ Balance at beginning of period ​ $ — ​ $ — Realized loss recognized in non-interest income ​ 25 ​ 47 Balance at end of period ​ $ 25 ​ $ 47 ​ Quantitative information about the significant unobservable inputs within Level 3 recurring assets and liabilities is, as follows: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Fair Value ​ ​ ​ ​ ​ ​ ​ ​ (in thousands, ​ September 30, ​ Valuation ​ Unobservable ​ Unobservable ​ except ratios) 2024 Techniques Inputs Input Value Assets (Liabilities) ​ ​ ​ ​ ​ ​ Interest Rate Lock Commitment $ 147 ​ Pull-through Rate Analysis Closing Ratio ​ 88 % ​ ​ ​ ​ Pricing Model ​ Origination Costs, per loan ​ $ 1.7 ​ ​ ​ ​ ​ ​ Discount Cash Flows ​ Mortgage Servicing Asset ​ ​ 1.0 % ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Forward Commitments ​ ( 8 ) ​ Quoted prices for similar loans in active markets Freddie Mac pricing system ​ $ 101 to $ 104.2 ​ Total ​ $ 139 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Fair Value ​ ​ ​ Significant ​ ​ December 31, ​ Valuation ​ Unobservable ​ Unobservable ​ (in thousands, except ratios) 2023 ​ Techniques Inputs Input Value ​ Assets (Liabilities) ​ ​ ​ ​ ​ ​ Interest Rate Lock Commitment $ 63 ​ Pull-through Rate Analysis Closing Ratio ​ 95 % ​ ​ ​ ​ Pricing Model ​ Origination Costs, per loan ​ $ 1.7 ​ ​ ​ ​ ​ ​ Discount Cash Flows ​ Mortgage Servicing Asset ​ ​ 1.0 % ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Forward Commitments ​ ( 20 ) ​ Quoted prices for similar loans in active markets Freddie Mac pricing system ​ $ 100.9 to $ 103.3 ​ Total ​ $ 43 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 49 Table of Contents Non-Recurring Fair Value Measurements ​ We are required, on a non-recurring basis, to adjust the carrying value or provide valuation allowances for certain assets using fair value measurements in accordance with GAAP. The following is a summary of applicable non-recurring fair value measurements: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Fair Value ​ ​ ​ ​ ​ ​ ​ ​ Three Months Ended ​ Nine Months Ended ​ Measurement Date as of ​ ​ Sep 30, 2024 ​ Dec 31, 2023 ​ September 30, 2024 ​ September 30, 2024 ​ September 30, 2024 ​ ​ Level 3 ​ Level 3 ​ Total ​ Total ​ Level 3 (in thousands) Inputs Inputs Gains (Losses) Gains (Losses) Inputs Assets ​ ​ ​ ​ ​ ​ ​ ​ ​ Individually evaluated loans ​ $ 3,496 ​ $ 3,500 ​ $ 867 ​ $ ( 4 ) ​ September 2024 Capitalized servicing rights ​ 6,545 ​ ​ 6,764 ​ ( 449 ) ​ ( 219 ) September 2024 Premises held for sale ​ 252 ​ ​ 1,154 ​ — ​ ( 902 ) September 2024 Total ​ $ 10,293 ​ $ 11,418 ​ $ 418 ​ $ ( 1,125 ) ​ There are no liabilities measured at fair value on a non-recurring basis in 2024 and 2023. ​ ​ 50 Table of Contents Quantitative information about the significant unobservable inputs within Level 3 non-recurring assets is, as follows: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ (in thousands, except ratios) Fair Value September 30, 2024 Valuation Techniques Unobservable Inputs Range (Weighted Average) (a) Assets ​ ​ ​ ​ Individually evaluated loans ​ $ 3,001 Fair value of collateral-appraised value Loss severity ​ ​ 10 % to 61 % ​ ​ ​ ​ ​ ​ ​ Appraised value ​ ​ $ 215 to $ 1,260 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Individually evaluated loans ​ 495 Discount cash flow Discount rate ​ 4.00 % to 4.99 % ​ ​ ​ ​ ​ ​ ​ Cash flows ​ ​ $ 504 to $ 505 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Capitalized servicing rights ​ 6,545 Discounted cash flow Constant prepayment rate ​ 7.64 % ​ ​ ​ ​ Discount rate ​ 10.06 % ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Premises held for sale ​ 252 Fair value of asset less selling costs Appraised value ​ ​ $ 265 ​ ​ ​ ​ Selling Costs ​ 5 % ​ Total ​ $ 10,293 ​ ​ (a) Where dollar amounts are disclosed, the amounts represent the lowest and highest fair value of the respective assets in the population except for adjustments for market/property conditions, which represents the range of adjustments to individual properties. ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ (in thousands, except ratios) Fair Value December 31, 2023 Valuation Techniques Unobservable Inputs Range (Weighted Average) (a) ​ Assets ​ ​ ​ ​ Individually evaluated loans ​ $ 2,437 Fair value of collateral-appraised value Loss severity ​ ​ 10 % to 43 % ​ ​ ​ ​ ​ ​ ​ Appraised value ​ ​ $ 80 to $ 965 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Individually evaluated loans ​ 1,063 Discount cash flow Discount rate ​ 3.25 % to 7.13 % ​ ​ ​ ​ ​ ​ ​ Cash flows ​ ​ $ 2 to $ 520 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Capitalized servicing rights ​ 6,764 Discounted cash flow Constant prepayment rate ​ 7.20 % ​ ​ ​ ​ Discount rate ​ 10.06 % ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Premises held for sale ​ 1,154 Fair value of asset less selling costs Appraised value ​ ​ $ 1,223 ​ ​ ​ ​ Selling Costs ​ 6 % ​ Total ​ $ 11,418 ​ ​ (a) Where dollar amounts are disclosed, the amounts represent the lowest and highest fair value of the respective assets in the population except for adjustments for market/property conditions, which represents the range of adjustments to individual properties. ​ There were no Level 1 or Level 2 non-recurring fair value measurements for the periods ended September 30, 2024 and December 31, 2023. ​ ​ ​ ​ ​ 51 Table of Contents Individually evaluated loans Loans are generally not recorded at fair value on a recurring basis. Periodically, we record non-recurring adjustments to the carrying value of loans based on fair value measurements for partial charge-offs of the uncollectible portions of those loans. Non-recurring adjustments can also include certain impairment amounts for collateral-dependent loans calculated when establishing the ACL. Such amounts are generally based on the fair value of the underlying collateral supporting the loan and, as a result, the carrying value of the loan less the calculated valuation amount does not necessarily represent the fair value of the loan. Real estate collateral is typically valued using appraisals or other indications of value based on recent comparable sales of similar properties or assumptions generally observable in the marketplace. However, the choice of observable data is subject to significant judgment, and there are often adjustments based on judgment in order to make observable data comparable and to consider the impact of time, the condition of properties, interest rates, and other market factors on current values. Additionally, commercial real estate appraisals frequently involve discounting of projected cash flows, which relies inherently on unobservable data. Therefore, non-recurring fair value measurement adjustments relating to real estate collateral have generally been classified as Level 3. Estimates of fair value for other collateral supporting commercial loans are generally based on assumptions not observable in the marketplace and therefore such valuations have been classified as Level 3. ​ Capitalized loan servicing rights A loan servicing right asset represents the amount by which the present value of the estimated future net cash flows to be received from servicing loans exceed adequate compensation for performing the servicing. The fair value of loan servicing rights is estimated using a present value cash flow model. The most important assumptions used in the valuation model are the anticipated rate of the loan prepayments and discount rates. Adjustments are only recorded when the discounted cash flows derived from the valuation model are less than the carrying value of the asset. Although some assumptions in determining fair value are based on standards used by market participants, some are based on unobservable inputs and therefore are classified in Level 3 of the valuation hierarchy. ​ Other real estate owned (“OREO”) OREO results from the foreclosure process on residential or commercial loans issued by the Company. Upon assuming the real estate, we record the property at the fair value of the asset less the estimated sales costs. Thereafter, OREO properties are recorded at the lower of cost or fair value less the estimated sales costs. OREO fair values are primarily determined based on Level 3 data including sales comparables and appraisals. There was no OREO as of September 30, 2024 and December 31, 2023. ​ Premises held for sale Assets held for sale, identified as part of our strategic review and branch optimization exercise, were transferred from premises and equipment at the lower of amortized cost or fair value less the estimated sales costs. Assets held for sale fair values are primarily determined based on Level 3 data including sales comparables and appraisals. ​ 52 Table of Contents Summary of Estimated Fair Values of Financial Instruments ​ The estimated fair values, and related carrying amounts, of our financial instruments are included in the table below. Certain financial instruments and all non-financial instruments are excluded from disclosure requirements. Accordingly, the aggregate fair value amounts presented herein may not necessarily represent the underlying fair value of the Company. ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ September 30, 2024 ​ ​ Carrying ​ Fair ​ ​ ​ ​ ​ ​ ​ ​ ​ (in thousands) Amount Value Level 1 Level 2 Level 3 Financial Assets ​ ​ ​ ​ ​ Cash and cash equivalents ​ $ 81,220 ​ $ 81,220 ​ $ 81,220 ​ $ — ​ $ — Securities available for sale ​ 535,892 ​ 535,892 ​ — ​ 535,892 ​ — FHLB stock ​ 7,600 ​ 7,600 ​ — ​ 7,600 ​ — Loans held for sale ​ ​ 1,272 ​ ​ 1,272 ​ ​ — ​ ​ 1,272 ​ ​ — Net loans ​ 3,052,715 ​ 2,900,619 ​ — ​ — ​ 2,900,619 Accrued interest receivable ​ 5,360 ​ 5,360 ​ — ​ 5,360 ​ — Cash surrender value of bank-owned life insurance policies ​ 81,824 ​ 81,824 ​ — ​ 81,824 ​ — Derivative assets ​ 14,517 ​ 14,517 ​ — ​ 14,370 ​ 147 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Financial Liabilities ​ ​ ​ ​ ​ Non-maturity deposits ​ $ 2,443,732 ​ $ 2,338,648 ​ $ — ​ $ 2,338,648 ​ $ — Time deposits ​ ​ 817,354 ​ ​ 815,614 ​ ​ — ​ ​ 815,614 ​ ​ — Securities sold under agreements to repurchase ​ ​ 7,136 ​ ​ 7,136 ​ ​ — ​ ​ 7,136 ​ ​ — FRB advances ​ ​ 45,000 ​ ​ 44,990 ​ ​ — ​ ​ 44,990 ​ ​ — FHLB advances ​ 134,072 ​ 133,994 ​ — ​ 133,994 ​ — Subordinated borrowings ​ 60,579 ​ 68,443 ​ — ​ 68,443 ​ — Derivative liabilities ​ 12,697 ​ 12,697 ​ — ​ 12,689 ​ 8 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ December 31, 2023 ​ ​ Carrying ​ Fair ​ ​ ​ ​ ​ ​ ​ ​ ​ (in thousands) Amount Value Level 1 Level 2 Level 3 Financial Assets ​ ​ ​ ​ ​ Cash and cash equivalents ​ $ 94,842 ​ $ 94,842 ​ $ 94,842 ​ $ — ​ $ — Securities available for sale ​ 534,574 ​ 534,574 ​ — ​ 534,574 ​ — FHLB stock ​ 14,834 ​ 14,834 ​ — ​ 14,834 ​ — Loans held for sale ​ ​ 2,189 ​ ​ 2,189 ​ ​ — ​ ​ 2,189 ​ ​ — Net loans ​ 2,970,907 ​ 2,832,173 ​ — ​ — ​ 2,832,173 Accrued interest receivable ​ 4,921 ​ 4,921 ​ — ​ 4,921 ​ — Cash surrender value of bank-owned life insurance policies ​ 80,037 ​ 80,037 ​ — ​ 80,037 ​ — Derivative assets ​ 21,838 ​ 21,838 ​ — ​ 21,775 ​ 63 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Financial Liabilities ​ ​ ​ ​ ​ Non-maturity deposits ​ $ 2,482,012 ​ $ 2,325,307 ​ $ — ​ $ 2,325,307 ​ $ — Time deposits ​ ​ 658,482 ​ ​ 651,855 ​ ​ — ​ ​ 651,855 ​ ​ — Securities sold under agreements to repurchase ​ ​ 8,465 ​ ​ 8,465 ​ ​ — ​ ​ 8,465 ​ ​ — FRB advances ​ ​ 30,000 ​ ​ 30,000 ​ ​ — ​ ​ 30,000 ​ ​ — FHLB advances ​ 232,579 ​ 232,375 ​ — ​ 232,375 ​ — Subordinated borrowings ​ 60,422 ​ 67,635 ​ — ​ 67,635 ​ — Derivative liabilities ​ 15,607 ​ 15,607 ​ — ​ 15,587 ​ 20 ​ ​ ​ ​ 53 Table of Contents NOTE 10. REVENUE FROM CONTRACTS WITH CUSTOMERS ​ We account for our various non-interest revenue streams and related contracts in accordance with “Revenue from Contracts with Customers” (“ASC 606”). ASC 606 is based on the consideration specified in the contract with a customer and excludes amounts collected on behalf of third parties. Revenue is recognized when we satisfy our performance obligation, which is generally when services are rendered and can be either satisfied at a point in time or over time. We recognize revenue at a point in time that is transactional in nature. We recognize revenue over time that is earned as services are performed and performance obligations are satisfied over time. ​ A substantial portion of our revenue is specifically excluded from the scope of ASC 606. This exclusion is associated with financial instruments, including interest income on loans and investment securities, in addition to loan derivative income and gains on loan and investment sales. ​ Disaggregation of Revenue ​ The following presents non-interest income, segregated by revenue streams in-scope and out-of-scope of Topic 606: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Three Months Ended September 30, ​ Nine Months Ended September 30, (in thousands) 2024 2023 2024 2023 Non-interest income within the scope of ASC 606: ​ ​ ​ ​ Trust management fees ​ $ 3,476 ​ $ 3,135 ​ $ 10,464 ​ $ 9,724 Financial services fees ​ 653 ​ 387 ​ 1,528 ​ 1,158 Interchange fees ​ 1,977 ​ 1,971 ​ 5,842 ​ 5,909 Customer deposit fees ​ 1,521 ​ 1,669 ​ 4,610 ​ 4,688 Other customer service fees ​ 290 ​ 286 ​ 783 ​ 780 Total non-interest income within the scope of ASC 606 ​ ​ 7,917 ​ ​ 7,448 ​ ​ 23,227 ​ ​ 22,259 Total non-interest income not within the scope of ASC 606 ​ ​ 1,736 ​ ​ 1,159 ​ ​ 4,269 ​ ​ 4,118 Total non-interest income ​ $ 9,653 ​ $ 8,607 ​ $ 27,496 ​ $ 26,377 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Three Months Ended September 30, ​ Nine Months Ended September 30, (in thousands) 2024 2023 2024 2023 Timing of Revenue Recognition ​ ​ ​ ​ Products and services transferred at a point in time ​ $ 4,199 ​ $ 4,045 ​ $ 12,095 ​ $ 11,842 Products and services transferred over time ​ 3,718 ​ 3,403 ​ 11,132 ​ 10,417 Total ​ $ 7,917 ​ $ 7,448 ​ $ 23,227 ​ $ 22,259 ​ Trust Management Fees The trust management business generates revenue through a range of fiduciary services including trust and estate administration and investment management to individuals, businesses, not-for-profit organizations, and municipalities. These fees are primarily earned over time as we charge our customers on a monthly or quarterly basis in accordance with investment advisory agreements. Fees are generally assessed based on a tiered scale of the average monthly market value of assets under management. Certain fees, such as bill paying fees, distribution fees, real estate sale fees, and supplemental tax service fees, are recorded as revenue at a point in time upon the completion of the service. ​ Financial Services Fees Bar Harbor Financial Services is a branch office of Osaic Institutions, Inc. (“Osaic”), a full-service third-party broker-dealer, conducting business under the assumed business name “Bar Harbor Financial Services.” Osaic is an independent registered broker-dealer and is not affiliated with the Company or its subsidiaries. We have a revenue sharing agreement with Osaic for any financial service fee income generated. Financial services fees are recognized at a point in time upon the completion of service requirements. ​ 54 Table of Contents Interchange Fees We earn interchange fees from transaction fees that merchants pay whenever a customer uses a debit card to make a purchase from their store. The fees are paid to the card-issuing bank to cover handling costs, fraud, bad debt costs and the risk involved in approving the payment. Interchange fees are generally recognized as revenue at a point in time upon the completion of a debit card transaction. ​ Customer Deposit Fees The Customer Deposit business offers a variety of deposit accounts with a range of interest rates, fee schedules and other terms, which are designed to meet the customer's financial needs. Additional depositor-related services provided to customers include ATM, bank-by-phone, internet banking, internet bill pay, mobile banking, and other cash management services, which include remote deposit capture, ACH origination, and wire transfers. These customer deposit fees are generally recognized at a point in time upon the completion of the service. ​ Other Customer Service Fees We have certain incentive and referral fee arrangements with independent third parties in which fees are earned for new account activity, product sales, or transaction volume generated for the respective third parties. We also earn a percentage of the fees generated from third-party credit card plans promoted through the Bank. Revenue from these incentive and referral fee arrangements are recognized over time using the right to invoice measure of progress. ​ Contract Balances from Contracts with Customers ​ The following table provides information about contract assets or receivables and contract liabilities or deferred revenues from contracts with customers: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ (in thousands) ​ September 30, 2024 ​ December 31, 2023 Balances from contracts with customers only: ​ ​ Other Assets ​ $ 1,332 ​ $ 1,178 Other Liabilities ​ 1,485 ​ 1,769 ​ The timing of revenue recognition, billings and cash collections results in contract assets or receivables and contract liabilities or deferred revenue on the consolidated balance sheets. For most customer contracts, fees are deducted directly from customer accounts and, therefore, there is no associated impact on the accounts receivable balance. For certain types of service contracts, we have an unconditional right to consideration under the service contract and an accounts receivable balance is recorded for services completed. When consideration is received, or such consideration is unconditionally due, from a customer prior to transferring goods or services to the customer under the terms of a contract, a contract liability is recorded. Contract liabilities are recognized as revenue after control of the products or services is transferred to the customer and all revenue recognition criteria have been met. ​ Costs to Obtain and Fulfill a Contract ​ We currently expense contract costs for processing and administrative fees for debit card transactions. We also expense custody fees and transactional costs associated with securities transactions as well as third-party tax preparation fees. We have elected the practical expedient in ASC 340-40-25-4, whereby we recognize the incremental costs of obtaining contracts as an expense when incurred if the amortization period of the assets we otherwise would have recognized is one year or less. ​ ​ ​ ​ ​ 55 Table of Contents ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS ​ The following is management’s discussion and analysis of the major factors that influenced our results of operations and financial condition as of and for the three and nine months ended September 30, 2024 and should be read in conjunction with our unaudited consolidated financial statements and condensed notes thereto included elsewhere in this Form 10-Q as well as our audited consolidated financial statements and notes thereto included in our Form 10-K. The following discussion contains "forward-looking statements" that reflect our future plans, estimates, beliefs and expected performance. We caution that assumptions, expectations, projections, intentions or beliefs about future events may, and often do, vary from actual results and the differences can be material. Factors that could cause such differences are discussed in the sections titled "Cautionary Statement Regarding Forward-Looking Statements" and "Part II, Item 1A. Risk Factors" in this Form 10-Q. All amounts, dollars and percentages presented in this Form 10-Q are rounded and therefore approximate. 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). ​ ● Liquidity remains strong, with cash and available for sale securities representing approximately 15.3% of our total assets at September 30, 2024. We maintain the ability to access sources of contingent liquidity at the Federal Home Loan Bank (“FHLB”) and the Federal Reserve Bank of Boston (the “Reserve Bank”). We consider the Company's current liquidity position to be adequate to meet both short-term and long-term liquidity needs. Refer to “ Liquidity and Cash Flows” for additional information. ​ ● Capital remains strong, with both the Company and the Bank well capitalized under regulatory guidelines at period end as further described in Note 6 – “Capital Ratios and Shareholders’ Equity” to our unaudited consolidated financial statements. ​ ● Asset quality remains solid, with non-performing assets to total assets of 0.18% as of September 30, 2024 and net charge-offs of $60 thousand, reflecting our strong credit performance in the midst of a challenging environment. ​ ​ NON-GAAP FINANCIAL MEASURES Our accounting and reporting policies conform to 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 Form 10-Q 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, 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. ​ 56 Table of Contents The non-GAAP financial measures that we discuss in this Form 10-Q 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 Form 10-Q 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 Form 10-Q when comparing such non-GAAP financial measures. ​ ​ QUARTERLY PERFORMANCE SUMMARY Earnings (third quarter 2024, compared to the same period of 2023) ​ ​ ● GAAP and core (Non-GAAP) net income of $12.2 million or $0.80 per diluted share compared to GAAP and core (Non-GAAP) net income of $11.1 million or $0.73 per diluted share in the same quarter of 2023. ​ ● Return on assets was 1.20% versus 1.11% and return on equity was 10.68% compared to 10.72%. Return on average assets was higher due to higher net income and average asset balances. The decrease in the return on equity ratio reflected higher average asset and equity balances. See the “Financial Position” section for further discussion. ​ ● Net interest income was $29.0 million compared to $29.2 million and net interest margin (“NIM”) was 3.15%, versus 3.18%. The decrease was primarily driven by higher cost of funds partially offset by yield expansion on earnings assets. ​ ● The provision for credit losses was $228 thousand compared to $673 thousand in the third quarter 2023 as net charge-offs remain stable and minimal and credit quality continues to remain strong. Total accruing delinquent loans were down to 0.10% in the third quarter of 2024 from 0.16% in the third quarter 2023 and total delinquent and non-accruing loans were down to 0.33% from 0.39%. Total non-accruing loans to total loans remained flat year over year at 0.23%. ​ ● Non-interest income grew $1.1 million to $9.7 million in the third quarter 2024 compared to $8.6 million in the same quarter 2023 primarily driven by wealth management income. ​ ● Non-interest expense was $24.8 million in the third quarter 2024 compared to $22.8 million in the third quarter 2023 driven by salary and benefits, and other expenses. Other expenses increased to $4.2 million from $3.7 million in the third quarter 2023 primarily due to increases in media relations expenses, software expenses, and debit and ATM card expenses. ​ ● The efficiency ratio was 62.09% compared to 58.37% reflecting higher non-interest expenses primarily due to salaries and benefits and marketing expenses. ​ ​ ​ ​ ​ 57 Table of Contents Financial Position ( September 30, 2024, compared to June 30, 2024) ​ ● Total assets remained steady at $4.0 billion at the end of the third quarter 2024 compared to the second quarter 2024 primarily due to consistent loan growth, increased deposits and securities available for sale offset by lower borrowings and cash at the end of the third quarter. ​ ● Total cash and cash equivalents were $81.2 million at the third quarter 2024, compared to $101.8 million at end of the second quarter 2024. Interest-earning deposits held with other banks totaled $41.3 million at the third quarter 2024 compared to $62.2 million at the second quarter and yielded 5.54% and 5.65%, respectively. The change in cash balances was driven by utilization for loan originations and security purchases. ​ ● Securities available for sale increased to $535.9 million compared to $512.9 million in the second quarter 2024 driven by $16.4 million in purchases partially offset by paydowns of $10.4 million, net amortization of $418 thousand, and matured and called securities of $96 thousand. FHLB stock decreased to $7.6 million in the third quarter 2024 compared to $14.8 million in the second quarter 2024 driven by $120.5 million in paydowns of FHLB borrowings. Fair value adjustments decreased the security portfolio by $52.3 million at the end of the third quarter compared to $68.5 million at the end of the second quarter. The weighted average yield of the total securities portfolio for the third quarter 2024 was 3.96% compared to 4.00% at the end of the previous quarter primarily due to the interest rate environment and change in the profile of the yield curve. As of the end of the second and third quarters 2024, our securities portfolio maintained an average life of nine and eight years, respectively, with an effective duration of five years for both quarters, and all securities remain classified as available for sale to provide flexibility in asset funding and other opportunities as they arise. ​ ● Total loans grew $17.6 million or 2% on an annualized basis. Commercial loans grew 1% primarily driven by a $42.7 million, or 10% annualized increase in commercial real estate partially offset by a $38.7 million, or 37% annualized, decrease in commercial and industrial loans driven by paydowns, payoffs and a mix shift to tax exempt and other. Residential real estate decreased by $18.2 million, or 8% annualized, compared to the second quarter 2024, as we focus on growing the portfolio with higher yielding commercial loans. Consumer loans increased $3.7 million, or 15% annualized, driven by continued growth in home equity line originations and drawdowns on established lines in the third quarter 2024. ​ ● The allowance for credit losses continued to build, standing at $29.0 million at the end of the third quarter 2024 compared to $28.9 million at the end of the second quarter 2024. Our allowance for credit losses continues to be driven by a combination of portfolio loan growth, nominal credit movement and general macroeconomic trends. Non-accruing loans increased during the third quarter 2024 to $7.1 million from $6.3 million in the second quarter 2024 driven by commercial real estate and consumer installment changes partially offset by commercial installment and residential real estate decreases. The increase in non-accruing loans was centered in one well-secured owner-occupied CRE credit ($759 thousand) that is carrying no associated specific reserve after being reviewed for impairment. Total non-accruing loans to total loans was 0.23% in the third quarter compared to 0.20% in the second quarter 2024 which remains below peer group medians and averages. ​ ● Total deposits increased $120.6 million to $3.3 billion in the third quarter 2024 from $3.1 billion at the second quarter 2024. Non-maturity deposits increased 15% on an annualized basis, or $104.4 million, to $2.4 billion driven by a $51.9 million increase in non-interest bearing demand, a $31.8 million increase in interest-bearing demand, and a $21.4 million increase in money market balances. Average yields on interest-bearing deposits increased 10 points to 2.45%. ​ ● Senior borrowings decreased $143.1 million to $186.2 million from the second quarter 2024 driven by increased deposits and cash balances available to fund loan growth and investment purchases. FHLB borrowings decreased $120.5 million to $133.8 million at the end of the third quarter 2024 compared to $254.3 million at the end of the second quarter 2024. Borrowings under the Federal Reserve’s Bank Term Funding Program decreased $20.0 million to $45 million at the end of the third quarter 2024 compared to $65 million at the end of the second quarter 2024. Total borrowing costs decreased from 4.57% at the end of the second quarter 2024 to 4.38% at the end of the third quarter 2024. 58 Table of Contents ​ ● The Company's book value per share was $30.12 as of September 30, 2024 compared to $28.81 as of June 30, 2024. Tangible book value per share (non-GAAP) was $22.02 at the end of the third quarter 2024 compared to $20.68 at the end of the second quarter 2024. ​ COMPARISON OF FINANCIAL CONDITION AT SEPTEMBER 30, 2024 AND DECEMBER 31, 2023 Cash and cash equivalents Total cash and cash equivalents were $81.2 million compared to $94.8 million at year-end 2023. Interest-earning cash held with other banks totaled $41.3 million for the nine months ended September 30, 2024 compared to $52.6 million at year-end 2023 and yielded 5.5% and 6.4 %, respectively. ​ Securities Total securities decreased to $543.5 million compared to $547.4 million at year-end 2023 driven by a $5.2 million lower FHLB stock balance due to $98.5 million in paydowns of borrowings partially offset by a $1.3 million increase in securities available for sale. Securities available for sale year to date increased by $1.3 million driven by security purchases that replaced paydowns, $7.0 million in called or matured securities which were offset by fair value adjustments. The year to date weighted average yield of the securities portfolio was 4.0% compared to 3.9% at year-end primarily due to a run-off of lower coupon fixed-rate securities as well as higher yielding purchases. As of quarter-end, our securities portfolio had an average life of eight years compared with an average life of nine years at year-end. The effective duration of the portfolio was five years for the quarter-end and year-end and all securities remain classified as available for sale to provide flexibility in asset funding and other opportunities as they arise. ​ Loans Total loans grew 2.8%, or $82.7 million, to $3.1 billion. Commercial loans grew 5.5%, or $107.6 million, driven by a $125.2 million, or 8.1%, increase in commercial real estate loans partially offset by a decrease in commercial and industrial loans of $17.6 million, or 4.4%. Residential loans decreased by $53.3 million or 6.0% compared to the fourth quarter 2023, primarily due to continued lower demand for prevailing mortgage rates. Tax exempt loans increased by $22.0 million or 36.7% driven by a shift within the portfolio in the third quarter 2024. ​ Allowance for Credit Losses The ACL increased by $881 thousand to $29.0 million at the end of third quarter 2024 compared to $28.1 million at the end of the fourth quarter 2023. Our ACL continued to be driven by a combination of portfolio loan growth, nominal credit movement and general macroeconomic trends. Non-accruing loans increased to $7.1 million from $5.5 million in the fourth quarter 2023. Charge-offs and specific reserves on non-accruing loans remained nominal, with these non-accruing relationships supported by relatively strong collateral values. ​ Deposits Total deposits increased $119.9 million to $3.3 billion compared to $3.1 billion at the end of 2023. Total average yield on time deposits for the quarter ended September 30, 2024 increased to 2.5% from 2.1% as of the fourth quarter 2023. Time deposits increased by $117.1 million primarily due to remix into higher yielding deposit categories as yields increased to 4.4% at quarter ended September 30, 2024 compared to 3.7% for the quarter ended December 31, 2024. Brokered CDs increased by $72.4 million compared to year end. Interest bearing demand deposits decreased $33.0 million at a weighted average yield of 1.5% compared to 1.3% as of the fourth quarter 2023. Non-interest bearing demand deposits increased $35.2 million compared to the fourth quarter 2023. ​ Borrowings Senior borrowings decreased $84.8 million to $246.7 million as of September 30, 2024 compared to $331.5 million at the end of the fourth quarter 2023. The decline in borrowings was primarily driven by FHLB paydowns attributed to higher seasonal deposit growth. ​ Equity Total equity was $459.9 million at September 30, 2024 compared with $432.1 million at year-end. Tangible book value per share (non-GAAP) was $22.02 at September 30, 2024 compared with $20.28 at year-end. 59 Table of Contents COMPARISON OF OPERATING RESULTS FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2024 AND SEPTEMBER 30, 2023 ​ Net Income Net income in the third quarter 2024 was $12.2 million compared to $11.1 million. Diluted earnings per share was $0.80, compared to $0.73. Net income was higher in the quarter driven by a one-time tax refund adjustment for tax exempt loan interest. ​ Net income for the nine months ended September 30, 2024 was $32.5 million, or $2.14 per diluted share compared to $34.9 million, or $2.31 per diluted share, in the same period of 2023. The decrease was primarily driven by a higher cost of funds on deposits partially offset by lower borrowing costs and increased interest and dividend income from rising asset yields in the third quarter and nine months ended September 30, 2024. ​ Interest and Dividend Income Total interest and dividend income in the third quarter 2024 increased by $3.5 million or 7.6% to $48.6 million compared to $45.1 million in the third quarter 2023 primarily driven by the repricing of adjustable loans and originations of higher fixed rate loans within the commercial portfolio. The yield on commercial real estate loans grew to 5.7% at the end of the third quarter 2024 from 5.3% for the third quarter ended 2023. Commercial and industrial yield grew to 7.0% at the end of the third quarter 2024 from 6.6% for the quarter ended 2023. Increases in yields were driven by the current rate environment. ​ Total interest and dividend income in the nine months ended September 30, 2024 increased by $12.9 million or 10.0% to $141.2 million compared to $128.4 million in comparative prior year primarily driven by the same circumstances noted above for the quarter. The yield on commercial real estate loans grew to 5.6% for the nine months ended September 30, 2024 from 5.2% in the first nine months of 2023. Commercial and industrial yield grew to 6.8% at September 30, 2024 compared to 6.3% at September 30, 2023. Increases in yields were driven by the same circumstances above. ​ Net Interest Income and Net Interest Margin NIM in the third quarter 2024 and 2023 was 3.2% respectively. The yield on loans grew to 5.5% in the third quarter 2024, up from 5.1% in the same quarter 2023. Costs of interest-bearing deposits increased $4.8 million driven by yields moving to 2.5% from 1.8% in the third quarter 2023 along with an increase in deposit balances. Borrowings costs decreased $1.1 million from the third quarter 2023 compounded with a decrease in yields to 4.4% in the third quarter 2024 from 4.6% in the same quarter 2023. ​ NIM in the nine months ended September 30, 2024 was 3.1% compared to 3.3% in the same period ended 2023. The yield on loans grew to 5.4% in the nine months ended September 30, 2024, up from 5.0% in the comparative period 2023. Costs of interest-bearing deposits increased $20.2 million driven by yields moving to 2.4% from 1.4% in the nine months ended September 30, 2023. Borrowings costs decreased $3.2 million for the first nine months of 2024 driven by lower borrowing levels and decrease in yields to 4.5% for the nine months ended September 30, 2024 compared to 4.6% for the same period ended 2023. ​ The decrease in both periods was primarily driven by higher cost of funds partially offset by lower borrowing costs. Competitive pricing within the interest rate environment and a $158.9 million growth in total deposits driven in time deposits year-over-year partially offset by mix change between interest-bearing and non-interest bearing demand deposits. ​ Provision for Credit Losses The provision for credit losses in the third quarter 2024 was $228 thousand compared to $673 thousand in the third quarter 2023 as net charge-offs to total loans continue to remain nominal. Non-accruing loans to total loans remained flat at 0.23% at the end of the third quarter 2024 compared the third quarter 2023. ​ The provision for credit losses in the nine months ended September 30, 2024 was $1.1 million lower than the prior year at $1.1 million compared to $2.2 million in the nine months ended September 30, 2023. The increase ACL balance in the nine months ended September 30, 2023 was largely due to loan growth; however, the ratio of ACL to total loans has remained stable at 0.94% in the first nine months of 2024 compared to the same period in 2023 driven by more refined 60 Table of Contents economic forecasting, especially in the national unemployment figures. Net charge-offs to total loans were $221 thousand compared to $70 thousand in the nine months ended September 30, 2023. ​ Non-Interest Income Non-interest income was $9.7 million in the third quarter ended 2024 compared to $8.6 million in the same quarter 2023. Wealth management income grew 17.2% to $4.1 million compared to $3.5 million in the in the third quarter 2023 driven by an increase in managed accounts and increased investment market values. Mortgage banking income increased $266 thousand compared to the third quarter 2023 driven by increased margins on our held–for-sale mortgage business. ​ Non-interest income increased $1.1 million to $27.5 million in the nine months ended September 30, 2024 compared to $26.4 million for the same period in 2023. Wealth management income grew $1.1 million to $12.0 million compared to $10.9 million in the nine months ended September 30, 2023 driven by the same reasons as discussed in the quarterly above. Assets under management grew 20% in the third quarter 2024 to $2.6 billion from $2.3 billion in the third quarter 2023 driven by higher security valuations and an 8% growth in the managed accounts. BOLI income decreased $452 thousand driven by timing of one-time death benefits that occurred during the first quarter 2023. Mortgage banking income increased $424 thousand compared to the nine months ended September 30, 2023 driven by increased volume and margins on our held–for-sale mortgage business. ​ Non-Interest Expense Non-interest expense was $24.8 million in the third quarter 2024 compared to $22.8 million in the third quarter 2023 driven by salary and benefits, and other expenses. Salary and benefit expenses increased 10.5%, or $1.4 million, from the third quarter 2023 driven in part by stock compensation due to a $7.21 per share increase in stock price and a lower discount on postretirement liabilities year over year. Other expenses increased to $4.2 million from $3.7 million in the third quarter 2023 primarily due to increases in media relations expenses, software expenses, and debit and ATM card expenses. ​ Non-interest expense was $72.1 million for the nine months ended September 30, 2024 compared to $68.5 million in the same period in 2023. Salaries and benefits expenses increased $2.5 million for the nine months ended September 30, 2024 to $41.5 million driven by the same items mentioned above. Other expenses increased $1.0 million in the nine months ended September 30, 2024 driven by software expenses and debit and ATM card expenses. ​ Income Tax Expense Income tax expense was $1.4 million in the third quarter 2024 compared with $3.2 million in the prior year quarter. The effective tax rate was 10.4% for the third quarter 2024 compared to 22.4% for the third quarter 2023. The reduction in tax expense in the current quarter is driven by a multiple year tax refund for tax exempt interest income on loans. Income tax expense for the nine months ended September 30, 2024 was $6.5 million compared with $9.6 million for the same period in 2023. The effective tax rate was 16.6% for the nine months ended September 30, 2024 compared to 21.6% for the nine months ended September 30, 2023. Liquidity and Cash Flows Liquidity is measured by our ability to meet short-term cash needs at a reasonable cost or minimal loss. We seek to obtain favorable sources of liabilities and 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 our ability to meet liquidity needs, including variations in the markets served by our network of offices, mix of assets and liabilities, reputation and credit standing in the marketplace, and general economic conditions. ​ The Bank actively manages its liquidity position through target ratios established under its Asset-Liability Management Policy. Continual monitoring of these ratios, by using historical data and through forecasts under multiple rate and stress scenarios, allows the Bank to employ strategies necessary to maintain adequate liquidity. The Bank's policy is to maintain a liquidity position of at least 8% of total assets. A portion of the Bank’s deposit base has been historically seasonal in nature, with balances typically declining in the winter months through late spring, during which period the Bank’s liquidity position tightens. ​ 61 Table of Contents As of September 30, 2024, available same-day liquidity totaled approximately $1.1 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 our amortizing securities and loan portfolios. As of September 30, 2024, we had unused borrowing capacity at the FHLB of $475.1 million, unused borrowing capacity at the Reserve Bank of $87.0 million and unused lines of credit totaling $41.0 million, in addition to $101.8 million in cash. ​ The Bank maintains a liquidity contingency plan 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 us. Our management believes 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 our liquidity position. ​ Capital Resources Please refer to “Comparison of Financial Condition at September 30, 2024 and December 31, 2023 - Equity” for a discussion of shareholders’ equity together with Note 6 - “Capital Ratios and Shareholders’ Equity” in the unaudited consolidated financial statements. Additional information about regulatory capital is contained in the notes to the consolidated financial statements and in our most recent Form 10-K. ​ We expect to continue our current practice of paying quarterly cash dividends with respect to our common stock subject to our Board of Directors’ discretion to modify or terminate this practice at any time and for any reason without prior notice. We believe our quarterly dividend rate per share as approved by our Board of Directors, enables us to balance our multiple objectives of managing our business and returning a portion of our earnings to our shareholders. Historically, and a practice we intend to continue, our principal cash expenditure is the payment of dividends on our common stock, if as and when declared by our Board of Directors. Dividends were paid to our shareholders in the aggregate amount of $13.3 million and $12.4 million for the nine months ended September 30, 2024 and 2023, respectively. All dividends declared and distributed by us will be in compliance with applicable state corporate law and regulatory requirements. ​ Off-Balance Sheet Arrangements We are, from time to time, a party to certain off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources, that may be material to investors. ​ Our off-balance sheet arrangements are limited to standby letters of credit whereby the Bank guarantees the obligations or performance of certain customers. These letters of credit are sometimes issued in support of third-party debt. The risk involved in issuing standby letters of credit is essentially the same as the credit risk involved in extending loan facilities to customers, and such letters of credit are subject to the same origination, portfolio maintenance and management procedures in effect to monitor other credit products. The amount of collateral obtained, if deemed necessary by the Bank upon issuance of a standby letter of credit, is based upon management's credit evaluation of the customer. ​ Our off-balance sheet arrangements have not changed materially since previously reported in our Form 10-K. ​ IMPACT OF NEW ACCOUNTING PRONOUNCEMENTS Please refer to Note 1 – “Basis of Presentation - Recent Accounting Pronouncements” of the Consolidated Financial Statements in this Form 10-Q and Note 1 - “Summary of Significant Accounting Policies” of the Consolidated Financial Statements to our Form 10-K. ​ CRITICAL ACCOUNTING POLICIES AND ESTIMATES Our Consolidated Financial Statements were prepared in accordance with GAAP and follow general practices within the industries in which we operate. The most significant accounting policies we follow are presented in Note 1—“Summary of Significant Accounting Policies” of the Consolidated Financial Statements to our Form 10-K. Application of these principles requires us to make estimates, assumptions, and judgments that affect the amounts reported in the Consolidated Financial Statements and accompanying notes. Most accounting policies are not considered by management to be critical accounting policies. Several factors are considered in determining whether or not a policy is critical in the preparation of the Consolidated Financial Statements. These factors include among other things, whether the policy requires management 62 Table of Contents to make difficult, subjective, and complex judgments about matters that are inherently uncertain and because it is likely that materially different amounts would be reported under different conditions or using different assumptions. The accounting policies which we believe to be most critical in preparing our Consolidated Financial Statements are presented in the section titled “Management's Discussion and Analysis of Financial Condition and Results of Operations - Critical Accounting Policies and Estimates” included in our Form 10-K. There have been no significant changes in our application of critical accounting policies and estimates since December 31, 2023. Refer to Note 1 – “Basis of Presentation - Recent Accounting Pronouncements” of the consolidated financial statements for discussion of accounting pronouncements issued but yet to be adopted and implemented. ​ ​ 63 Table of Contents SELECTED FINANCIAL DATA ​ The following summary data is based in part on the unaudited consolidated financial statements and accompanying notes and other information appearing elsewhere in this Form 10-Q or prior SEC filings. ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Three Months Ended ​ ​ Nine Months Ended ​ ​ September 30, ​ ​ September 30, ​ 2024 2023 ​ 2024 2023 PER SHARE DATA ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Net earnings, diluted ​ $ 0.80 ​ $ 0.73 ​ ​ $ 2.13 ​ $ 2.30 ​ Adjusted earnings, diluted (1) ​ 0.80 ​ 0.73 ​ ​ 2.11 ​ 2.29 ​ Total book value ​ 30.12 ​ 26.67 ​ ​ 30.12 ​ 26.67 ​ Tangible book value per share (1) ​ 22.02 ​ 18.45 ​ ​ 22.02 ​ 18.45 ​ Market price at period end ​ 30.84 ​ 23.63 ​ ​ 30.84 ​ 23.63 ​ Dividends ​ 0.30 ​ 0.28 ​ ​ 0.88 ​ 0.82 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ PERFORMANCE RATIOS (2) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Return on assets ​ 1.20 % 1.11 % ​ 1.09 % 1.19 % Adjusted return on assets (1) ​ 1.20 ​ 1.11 ​ ​ 1.08 ​ 1.18 ​ Pre-tax, pre-provision return on assets ​ ​ 1.37 ​ 1.49 ​ ​ 1.35 ​ 1.59 ​ Adjusted pre-tax, pre-provision return on assets (1) ​ ​ 1.37 ​ 1.49 ​ ​ 1.34 ​ 1.58 ​ Return on equity ​ 10.68 ​ 10.72 ​ ​ 9.97 ​ 11.38 ​ Adjusted return on equity (1) ​ 10.68 ​ 10.72 ​ ​ 9.86 ​ 11.35 ​ Return on tangible equity ​ ​ 14.90 ​ ​ 15.65 ​ ​ ​ 14.16 ​ ​ 16.61 ​ Adjusted return on tangible equity (1) ​ 14.90 ​ 15.65 ​ ​ 14.01 ​ 16.57 ​ Net interest margin, fully taxable equivalent (1) (3) ​ 3.15 ​ 3.18 ​ ​ 3.14 ​ 3.32 ​ Efficiency ratio (1) ​ 62.09 ​ 58.37 ​ ​ 62.52 ​ 57.59 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ FINANCIAL DATA (In millions) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Total assets ​ $ 4,030 ​ $ 3,984 ​ ​ $ 4,030 ​ $ 3,984 ​ Total earning assets (4) ​ 3,720 ​ 3,687 ​ ​ 3,720 ​ 3,687 ​ Total investments ​ 543 ​ 524 ​ ​ 543 ​ 524 ​ Total loans ​ 3,082 ​ 2,993 ​ ​ 3,082 ​ 2,993 ​ Allowance for credit losses ​ 29 ​ 28 ​ ​ 29 ​ 28 ​ Total goodwill and intangible assets ​ 124 ​ 125 ​ ​ 124 ​ 125 ​ Total deposits ​ 3,261 ​ 3,140 ​ ​ 3,261 ​ 3,140 ​ Total shareholders' equity ​ 460 ​ 404 ​ ​ 460 ​ 404 ​ Net income ​ 12 ​ 11 ​ ​ 33 ​ 35 ​ Adjusted income (1) ​ 12 ​ 11 ​ ​ 32 ​ 35 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ASSET QUALITY AND CONDITION RATIOS ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Net charge-offs (recoveries) (5) /average loans ​ 0.01 % — % ​ 0.01 % — % Allowance for credit losses/total loans ​ 0.94 ​ 0.94 ​ ​ 0.94 ​ 0.94 ​ Loans/deposits ​ 95 ​ 95 ​ ​ 95 ​ 95 ​ Shareholders' equity to total assets ​ 11.41 ​ 10.15 ​ ​ 11.41 ​ 10.15 ​ Tangible shareholders' equity to total tangible assets (1) ​ 8.61 ​ 7.25 ​ ​ 8.61 ​ 7.25 ​ (1) Non-GAAP financial measure. Refer to the Reconciliation of Non-GAAP Financial Measures section of the “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” in this Form 10-Q for additional information. (2) All performance ratios are annualized and 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 deposit with other banks. Securities are valued at amortized cost. (5) Current quarter annualized. 64 Table of Contents ​ ​ CONSOLIDATED LOAN AND DEPOSIT ANALYSIS (UNAUDITED) ​ The following tables present the quarterly trend in loan and deposit data and accompanying growth rates as of September 30, 2024 on an annualized basis: ​ LOAN ANALYSIS ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Annualized ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Growth % ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Quarter ​ ​ Year (in thousands, except ratios) Sep 30, 2024 Jun 30, 2024 Mar 31, 2024 Dec 31, 2023 Sep 30, 2023 to Date ​ to Date Commercial real estate ​ $ 1,677,310 ​ $ 1,634,658 ​ $ 1,574,802 ​ $ 1,552,061 ​ $ 1,548,835 10 % ​ 11 % Commercial and industrial ​ 382,554 ​ 421,297 ​ 412,567 ​ 400,169 ​ 391,347 (37) ​ (6) ​ Total commercial loans ​ 2,059,864 ​ 2,055,955 ​ 1,987,369 ​ 1,952,230 ​ 1,940,182 1 ​ ​ 7 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Residential real estate ​ 836,566 ​ 854,718 ​ 873,213 ​ 889,904 ​ 896,757 (8) ​ (8) ​ Consumer ​ 103,415 ​ 99,776 ​ 95,838 ​ 97,001 ​ 95,160 15 ​ 9 ​ Tax exempt and other ​ 81,890 ​ 53,732 ​ 55,252 ​ 59,914 ​ 60,692 * ​ 49 ​ Total loans ​ $ 3,081,735 ​ $ 3,064,181 ​ $ 3,011,672 ​ $ 2,999,049 ​ $ 2,992,791 2 % ​ 4 % ​ *Indicates ratio greater than 100% DEPOSIT ANALYSIS ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Annualized ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Growth % ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Quarter ​ ​ Year (in thousands, except ratios) Sep 30, 2024 Jun 30, 2024 Mar 31, 2024 Dec 31, 2023 Sep 30, 2023 to Date ​ to Date Non-interest bearing demand ​ $ 604,963 ​ $ 553,067 ​ $ 544,495 ​ $ 569,714 ​ $ 618,421 38 % ​ 8 % Interest-bearing demand ​ 913,910 ​ 882,068 ​ 888,591 ​ 946,978 ​ 929,481 14 ​ (5) ​ Savings ​ 544,235 ​ 544,980 ​ 551,493 ​ 553,963 ​ 572,271 (1) ​ (2) ​ Money market ​ 380,624 ​ 359,208 ​ 365,289 ​ 370,242 ​ 361,839 24 ​ 4 ​ Total non-maturity deposits ​ 2,443,732 ​ 2,339,323 ​ 2,349,868 ​ 2,440,897 ​ 2,482,012 18 ​ — ​ Time ​ 817,354 ​ 801,143 ​ 777,208 ​ 700,260 ​ 658,482 8 ​ 22 ​ Total deposits ​ $ 3,261,086 ​ $ 3,140,466 ​ $ 3,127,076 ​ $ 3,141,157 ​ $ 3,140,494 15 % ​ 5 % 65 Table of Contents AVERAGE BALANCES AND AVERAGE YIELDS/RATES (UNAUDITED) ​ The following tables present average balances and average yields and rates on an annualized fully taxable equivalent basis for the periods included: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Three Months Ended September 30, ​ ​ 2024 ​ 2023 ​ ​ Average ​ ​ ​ ​ Yield/ ​ Average ​ ​ ​ ​ Yield/ (in thousands, except ratios) Balance Interest (3) Rate (3) ​ Balance Interest (3) Rate (3) Assets ​ ​ ​ ​ ​ ​ ​ Interest-earning deposits with other banks ​ $ 54,897 ​ $ 765 ​ 5.54 % ​ $ 70,499 ​ $ 892 ​ 5.02 % Securities available for sale and FHLB stock (2)(3) ​ ​ 601,489 ​ ​ 5,991 ​ 3.96 ​ ​ ​ 620,851 ​ ​ 6,051 ​ 3.87 ​ Loans: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Commercial real estate ​ ​ 1,645,933 ​ ​ 23,445 ​ 5.67 ​ ​ ​ 1,550,188 ​ ​ 20,856 ​ 5.34 ​ Commercial and industrial ​ 473,049 ​ ​ 8,297 ​ 6.98 ​ ​ ​ 439,915 ​ ​ 7,270 ​ 6.56 ​ Residential ​ 851,426 ​ ​ 8,793 ​ 4.11 ​ ​ ​ 909,296 ​ ​ 8,801 ​ 3.84 ​ Consumer ​ 101,230 ​ ​ 1,840 ​ 7.23 ​ ​ ​ 96,362 ​ ​ 1,670 ​ 6.88 ​ Total loans (1) ​ 3,071,638 ​ ​ 42,375 ​ 5.49 ​ ​ ​ 2,995,761 ​ ​ 38,597 ​ 5.11 ​ Total earning assets ​ 3,728,024 ​ ​ 49,131 ​ 5.24 % ​ ​ 3,687,111 ​ ​ 45,540 ​ 4.90 % Cash and due from banks ​ ​ 34,036 ​ ​ ​ ​ ​ ​ ​ ​ 36,713 ​ ​ ​ ​ ​ ​ Allowance for credit losses ​ ​ (28,893) ​ ​ ​ ​ ​ ​ ​ ​ (27,473) ​ ​ ​ ​ ​ ​ Goodwill and other intangible assets ​ ​ 123,761 ​ ​ ​ ​ ​ ​ ​ ​ 124,926 ​ ​ ​ ​ ​ ​ Other assets ​ 170,113 ​ ​ ​ ​ ​ ​ ​ ​ 162,801 ​ ​ ​ ​ ​ ​ Total assets ​ $ 4,027,041 ​ ​ ​ ​ ​ ​ ​ $ 3,984,078 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Liabilities ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Interest-bearing demand ​ $ 888,325 ​ $ 3,314 ​ 1.48 % ​ $ 915,072 ​ $ 2,567 ​ 1.11 % Savings ​ 547,482 ​ ​ 958 ​ 0.70 ​ ​ ​ 579,090 ​ ​ 616 ​ 0.42 ​ Money market ​ 378,855 ​ ​ 2,985 ​ 3.13 ​ ​ ​ 358,742 ​ ​ 2,302 ​ 2.55 ​ Time ​ 807,180 ​ ​ 8,917 ​ 4.39 ​ ​ ​ 645,285 ​ ​ 5,930 ​ 3.65 ​ Total interest bearing deposits ​ 2,621,842 ​ ​ 16,174 ​ 2.45 ​ ​ ​ 2,498,189 ​ ​ 11,415 ​ 1.81 ​ Borrowings ​ 312,891 ​ ​ 3,448 ​ 4.38 ​ ​ ​ 391,976 ​ ​ 4,534 ​ 4.59 ​ Total interest bearing liabilities ​ 2,934,733 ​ ​ 19,622 ​ 2.66 % ​ ​ 2,890,165 ​ ​ 15,949 ​ 2.19 % Non-interest bearing demand deposits ​ 577,428 ​ ​ ​ ​ ​ ​ ​ ​ 610,644 ​ ​ ​ ​ ​ ​ Other liabilities ​ 60,731 ​ ​ ​ ​ ​ ​ ​ ​ 72,409 ​ ​ ​ ​ ​ ​ Total liabilities ​ 3,572,892 ​ ​ ​ ​ ​ ​ ​ ​ 3,573,218 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Total shareholders' equity ​ 454,149 ​ ​ ​ ​ ​ ​ ​ ​ 410,860 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Total liabilities and shareholders' equity ​ $ 4,027,041 ​ ​ ​ ​ ​ ​ ​ $ 3,984,078 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Net interest spread ​ ​ ​ ​ ​ ​ 2.58 % ​ ​ ​ ​ ​ ​ ​ 2.71 % Net interest margin ​ ​ ​ ​ ​ ​ ​ 3.15 ​ ​ ​ ​ ​ ​ ​ ​ 3.18 ​ (1) The average balances of loans include non-accrual loans and unamortized deferred fees and costs. (2) The average balance for securities available for sale is based on amortized cost. (3) Fully taxable equivalent considers the impact of tax-advantaged securities and loans. ​ ​ ​ ​ 66 Table of Contents ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Nine Months Ended September 30, ​ ​ 2024 ​ 2023 ​ ​ Average ​ Interest ​ Yield/ ​ Average ​ Interest ​ Yield/ (in millions, except ratios) Balance (3) ​ Rate (3) ​ Balance (3) ​ Rate (3) Assets ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Interest-earning deposits with other banks ​ $ 39,174 ​ $ 1,685 ​ 5.75 % ​ $ 39,174 ​ ​ 1,400 ​ 4.78 % Securities available for sale and FHLB stock (2)(3) ​ ​ 590,056 ​ ​ 18,069 ​ 4.09 ​ ​ ​ 616,220 ​ ​ 17,746 ​ 3.85 ​ Loans: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Commercial real estate ​ ​ 1,603,932 ​ ​ 66,934 ​ 5.57 ​ ​ ​ 1,531,413 ​ ​ 59,679 ​ 5.21 ​ Commercial and industrial (3) ​ 468,913 ​ ​ 23,882 ​ 6.80 ​ ​ 430,602 ​ ​ 20,237 ​ 6.28 ​ Residential ​ 865,701 ​ ​ 26,676 ​ 4.12 ​ ​ 907,051 ​ ​ 25,598 ​ 3.77 ​ Consumer ​ 98,492 ​ ​ 5,323 ​ 7.22 ​ ​ 97,981 ​ ​ 4,863 ​ 6.64 ​ Total loans (1) ​ 3,037,038 ​ 122,815 5.40 ​ ​ 2,967,047 ​ 110,377 4.97 ​ Total earning assets ​ 3,666,268 ​ ​ 142,569 ​ 5.19 % ​ 3,622,441 ​ ​ 129,523 ​ 4.78 % Cash and due from banks ​ ​ 32,188 ​ ​ ​ ​ ​ ​ ​ ​ 33,588 ​ ​ ​ ​ ​ ​ Allowance for credit losses ​ ​ (28,543) ​ ​ ​ ​ ​ ​ ​ ​ (26,836) ​ ​ ​ ​ ​ ​ Goodwill and other intangible assets ​ ​ 123,983 ​ ​ ​ ​ ​ ​ ​ ​ 124,913 ​ ​ ​ ​ ​ ​ Other assets ​ ​ 181,816 ​ ​ ​ ​ ​ ​ ​ ​ 180,558 ​ ​ ​ ​ ​ ​ Total assets ​ $ 3,975,712 ​ ​ ​ ​ ​ $ 3,934,664 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Liabilities ​ ​ ​ ​ ​ ​ Interest-bearing demand ​ $ 882,884 ​ $ 9,276 ​ 1.40 % ​ $ 895,596 ​ ​ 5,754 ​ 0.86 % Savings ​ 547,436 ​ ​ 2,696 ​ 0.66 ​ ​ 607,880 ​ ​ 1,660 ​ 0.37 ​ Money market ​ 375,216 ​ ​ 8,560 ​ 3.05 ​ ​ 419,030 ​ ​ 7,500 ​ 2.39 ​ Time ​ 775,316 ​ ​ 24,954 ​ 4.30 ​ ​ 492,117 ​ ​ 10,355 ​ 2.81 ​ Total interest bearing deposits ​ 2,580,852 ​ 45,486 2.35 ​ ​ 2,414,623 ​ 25,269 1.40 ​ Borrowings ​ 326,648 ​ ​ 10,983 ​ 4.49 ​ ​ 417,392 ​ ​ 14,215 ​ 4.55 ​ Total interest bearing liabilities ​ 2,907,500 ​ 56,469 2.59 % ​ 2,832,015 ​ 39,484 1.86 % Non-interest bearing demand deposits ​ 561,063 ​ ​ ​ 623,368 ​ ​ Other liabilities ​ 71,187 ​ ​ ​ 69,026 ​ ​ Total liabilities ​ 3,539,750 ​ ​ ​ 3,524,409 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Total shareholders' equity ​ 435,962 ​ ​ ​ 410,255 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Total liabilities and shareholders' equity ​ $ 3,975,712 ​ ​ ​ $ 3,934,664 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Net interest spread ​ ​ ​ ​ ​ ​ ​ 2.60 % ​ ​ ​ ​ ​ ​ ​ 2.92 % Net interest margin ​ ​ 3.14 ​ ​ ​ 3.32 ​ ​ (1) The average balances of loans include non-accrual loans and unamortized deferred fees and costs. (2) The average balance for securities available for sale is based on amortized cost. (3) Fully taxable equivalent considers the impact of tax-advantaged securities and loans. ​ 67 Table of Contents RECONCILIATION OF NON-GAAP FINANCIAL MEASURES (UNAUDITED) The following reconciliation table provides a more detailed analysis of these, and reconciliation for, each of non-GAAP financial measures: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Three Months Ended September 30, ​ ​ Nine Months Ended September 30, (in thousands) Calculations ​ 2024 ​ 2023 ​ ​ ​ 2024 ​ 2023 Net income ​ $ 12,193 ​ $ 11,104 ​ ​ $ 32,544 ​ $ 34,907 Non-recurring items: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Gain on sale of securities, net ​ — ​ — ​ ​ (50) ​ (34) Gain on sale of premises and equipment, net ​ — ​ — ​ ​ (263) ​ (99) Acquisition, conversion and other expenses ​ — ​ — ​ ​ 20 ​ 20 Income tax expense (1) ​ — ​ — ​ ​ (61) ​ 28 Total non-recurring items ​ ​ ​ ​ — ​ ​ — ​ ​ ​ (354) ​ ​ (85) Total adjusted income (2) (A) ​ $ 12,193 ​ $ 11,104 ​ ​ $ 32,190 ​ $ 34,822 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Net interest income (B) ​ $ 28,958 ​ $ 29,186 ​ ​ $ 84,772 ​ $ 88,882 Plus: Non-interest income ​ 9,653 ​ 8,815 ​ ​ 27,496 ​ 26,423 Total Revenue ​ 38,611 ​ 38,001 ​ ​ 112,268 ​ 115,305 Gain on sale of securities, net ​ — ​ — ​ ​ (50) ​ (34) Total adjusted revenue (2) (C) ​ $ 38,611 ​ $ 38,001 ​ ​ $ 112,218 ​ $ 115,271 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Total non-interest expense ​ $ 24,772 ​ $ 23,016 ​ ​ $ 72,103 ​ $ 68,556 Non-recurring expenses: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Gain on sale of premises and equipment, net ​ — ​ — ​ ​ 263 ​ 99 Acquisition, conversion and other expenses ​ — ​ — ​ ​ (20) ​ (20) Total non-recurring expenses ​ ​ ​ ​ — ​ ​ — ​ ​ ​ 243 ​ ​ 79 Adjusted non-interest expense (2) (D) ​ $ 24,772 ​ $ 23,016 ​ ​ $ 72,346 ​ $ 68,635 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Total revenue ​ ​ ​ ​ 38,611 ​ ​ 38,001 ​ ​ ​ 112,268 ​ ​ 115,305 Total non-interest expense ​ ​ ​ ​ 24,772 ​ ​ 23,016 ​ ​ ​ 72,103 ​ ​ 68,556 Pre-tax, pre-provision net revenue ​ ​ ​ $ 13,839 ​ $ 14,985 ​ ​ $ 40,165 ​ $ 46,749 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Adjusted revenue (2) ​ ​ ​ ​ 38,611 ​ ​ 38,001 ​ ​ ​ 112,218 ​ ​ 115,271 Adjusted non-interest expense (2) ​ ​ ​ ​ 24,772 ​ ​ 23,016 ​ ​ ​ 72,346 ​ ​ 68,635 Adjusted pre-tax, pre-provision net revenue (2) ​ (U) ​ $ 13,839 ​ $ 14,985 ​ ​ $ 39,872 ​ $ 46,636 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ (in millions) ​ ​ ​ ​ ​ ​ ​ ​ ​ Average earning assets (E) ​ $ 3,728 ​ $ 3,687 ​ ​ $ 3,666 ​ $ 3,622 Average assets (F) ​ ​ 4,027 ​ ​ 3,984 ​ ​ 3,976 ​ 3,935 Average shareholders' equity (G) ​ ​ 454 ​ ​ 411 ​ ​ 436 ​ 410 Average tangible shareholders' equity (2)(3) (H) ​ ​ 330 ​ ​ 286 ​ ​ 312 ​ 285 Tangible shareholders' equity, period-end (2)(3) (I) ​ ​ 336 ​ ​ 280 ​ ​ 336 ​ 280 Tangible assets, period-end (2)(3) (J) ​ ​ 3,906 ​ ​ 3,859 ​ ​ 3,906 ​ 3,859 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 68 Table of Contents ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Three Months Ended September 30, ​ ​ Nine Months Ended September 30, ​ ​ Calculations ​ 2024 ​ 2023 ​ ​ ​ 2024 ​ 2023 (in thousands) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Common shares outstanding, period-end (K) ​ ​ 15,268 ​ 15,156 ​ ​ ​ 15,268 ​ ​ 15,156 ​ Average diluted shares outstanding (L) ​ ​ 15,326 ​ 15,196 ​ ​ ​ 15,292 ​ ​ 15,189 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Adjusted earnings per share, diluted (2) (A/L) ​ $ 0.80 ​ $ 0.73 ​ ​ $ 2.11 ​ $ 2.29 ​ Tangible book value per share, period-end (2) (I/K) ​ ​ 22.02 ​ 18.45 ​ ​ ​ 22.02 ​ ​ 18.45 ​ Total tangible shareholders' equity/total tangible assets (2) (I/J) ​ ​ 8.61 ​ 7.25 ​ ​ ​ 8.61 ​ ​ 7.25 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Performance ratios (4) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Return on assets ​ ​ ​ 1.20 % ​ 1.11 % ​ ​ 1.09 % ​ 1.19 % Core return on assets (2) ​ (A/F) ​ ​ 1.20 ​ ​ 1.11 ​ ​ ​ 1.08 ​ ​ 1.18 ​ Pre-tax, pre-provision return on assets ​ ​ ​ ​ 1.37 ​ ​ 1.49 ​ ​ ​ 1.35 ​ ​ 1.59 ​ Adjusted pre-tax, pre-provision return on assets (2) ​ (U/F) ​ ​ 1.37 ​ ​ 1.49 ​ ​ ​ 1.34 ​ ​ 1.58 ​ Return on equity ​ ​ ​ 10.68 ​ ​ 10.72 ​ ​ ​ 9.97 ​ ​ 11.38 ​ Core return on equity (2) ​ (A/G) ​ ​ 10.68 ​ ​ 10.72 ​ ​ ​ 9.86 ​ ​ 11.35 ​ Return on tangible equity ​ ​ ​ ​ 14.90 ​ ​ 15.65 ​ ​ ​ 14.16 ​ ​ 16.61 ​ Adjusted return on tangible equity (1)(2) ​ (A+Q)/H ​ ​ 14.90 ​ ​ 15.65 ​ ​ ​ 14.01 ​ ​ 16.57 ​ Efficiency ratio (1)(2)(5) ​ (D-O-Q)/(C+N) ​ ​ 62.09 ​ ​ 58.59 ​ ​ ​ 62.52 ​ ​ 57.59 ​ Net interest margin ​ (B+P)/E ​ ​ 3.15 ​ ​ 3.18 ​ ​ ​ 3.14 ​ ​ 3.32 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Supplementary data (in thousands) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Taxable equivalent adjustment for efficiency ratio ​ (N) ​ $ 686 ​ $ 565 ​ ​ $ 1,737 ​ $ 1,831 ​ Franchise taxes included in non-interest expense ​ (O) ​ ​ 138 ​ ​ 186 ​ ​ ​ 399 ​ ​ 497 ​ Tax equivalent adjustment for net interest margin ​ (P) ​ ​ 550 ​ ​ 405 ​ ​ ​ 1,327 ​ ​ 1,155 ​ Intangible amortization ​ (Q) ​ ​ 233 ​ ​ 233 ​ ​ ​ 699 ​ ​ 699 ​ (1) Assumes a marginal tax rate of 23.82% in the second and third quarter of 2024 and 24.01% for the first quarter 2024 and 23.80% for 2023. (2) Non-GAAP financial measure. (3) Tangible shareholders' equity is computed by taking total shareholders' equity less the intangible assets at period-end. Tangible assets is computed by taking total assets less the intangible assets at period-end. (4) All performance ratios are based on average balance sheet amounts, where applicable. (5) Efficiency ratio is computed by dividing core non-interest expense net of franchise taxes and intangible amortization divided by core revenue on a fully taxable equivalent basis. ​ ​ 69 Table of Contents ​ ITEM 3. 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 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 70 Table of Contents 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 September 30, 2024, interest rate sensitivity modeling results indicate that the Bank’s balance sheet was asset sensitive over the one- and two-year horizons. ​ The following table presents the changes in sensitivities on net interest income for the periods ended September 30, 2024 and 2023: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Change in Interest Rates-Basis Points (Rate Ramp) ​ 1 - 12 Months ​ ​ 13 - 24 Months (in thousands, except ratios) ​ $ Change ​ % Change ​ ​ $ Change ​ % Change At September 30, 2024 ​ ​ ​ ​ -200 ​ $ (5,070) ​ (4.1) % ​ $ (13,418) ​ (9.9) % -100 ​ ​ (2,875) ​ (2.3) ​ ​ ​ (6,555) ​ (4.8) ​ +100 ​ ​ 2,899 ​ 2.4 ​ ​ ​ 5,873 ​ 4.3 ​ +200 ​ 5,162 ​ 4.2 ​ ​ ​ 10,758 ​ 7.9 ​ At September 30, 2023 ​ ​ ​ ​ ​ ​ -200 ​ $ (4,125) ​ (3.2) % ​ $ (10,532) ​ (7.6) % -100 ​ (1,359) (1.1) ​ ​ ​ (4,201) (3.0) ​ +100 ​ ​ 1,247 ​ 1.0 ​ ​ ​ 2,660 ​ 1.9 ​ +200 ​ 2,314 1.8 ​ ​ 4,575 3.3 ​ ​ 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 September 30, 2023, asset sensitivity has increased in both year one and year two. ​ 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. 71 Table of Contents ITEM 4. CONTROLS AND PROCEDURES ​ (a) Disclosure controls and procedures. ​ Under the supervision and with the participation of our senior management, consisting of our principal executive officer and our principal financial officer, we conducted an evaluation of the effectiveness of the design and operation of its disclosure controls and procedures, as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act, as of the end of the period covered by this Form 10-Q. Based on this evaluation, our management, including our principal executive officer and principal financial officer, concluded that as of September 30, 2024, our disclosure controls and procedures were effective to ensure that information required to be disclosed by the reports that we file under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in SEC rules and forms. Our disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by using our Exchange Act reports is accumulated and communicated to our management, including our principal executive officer and principal financial officer, as appropriate to allow timely decisions regarding required disclosure. Management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving their objectives, and management necessarily applies its judgment in evaluating the cost-benefit relationship of possible controls and procedures. (b) Changes in internal control over financial reporting. ​ There were no changes in our internal control over financial reporting that occurred during the last fiscal quarter that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting. ​ PART II. OTHER INFORMATION ​ ITEM 1. LEGAL PROCEEDINGS ​ We and our subsidiari es are parties to certain ordinary routine litigation incidental to the normal conduct of their respective businesses. Although the Company is not able to predict the outcome of such actions, at this time, in the opinion of management, the likelihood is remote that the impact of such proceedings, either individually or in the aggregate, would have a material adverse effect on the Company’s consolidated financial position as a whole. However, one or more unfavorable outcomes in any claim or litigation against us could have a material adverse effect for the period in which they are resolved. In addition, regardless of their merits or their ultimate outcomes, such matters are costly, divert management’s attention and may materially adversely affect our reputation, even if resolved in our favor. ​ ITEM 1A. RISK FACTORS ​ We believe there were no material changes to the risk factors discussed in Part I, Item 1A. “Risk Factors” of our Form 10-K. ​ ​ ​ ​ ​ 72 Table of Contents ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS ​ No unregistered equity securities were sold by the Company during the quarter ended September 30, 2024. On April 18, 2024, the Board of Directors approved a 12-month plan to repurchase up to 5% of the Company’s outstanding shares of common stock, representing approximately 761,000 shares. No shares were repurchased by the Company in the first nine months of 2024 and the maximum number of shares that may yet be purchased under the plan is 761,000 shares. We will continue examine buying opportunities considering market conditions, including interest rate volatility and potential loan and risk-weighted asset growth. ​ ​ ​ ITEM 5. OTHER INFORMATION ​ During the quarter ended September 30, 2024, no director or officer (as defined in Rule 16a-1(f) under the Exchange Act) of the Company adopted or terminated any "Rule 10b5-1 trading arrangement" or "non-Rule 10b5-1 trading arrangement" as such terms are defined in Item 408(a) of Regulation S-K. ​ ​ ​ ​ ​ ​ 73 Table of Contents ITEM 6. EXHIBITS ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 31.1* Certification of Chief Executive Officer under Rule 13a-14(a)/15d-14(a) ​ ​ ​ ​ 31.2* Certification of Chief Financial Officer under Rule 13a-14(a)/15d-14(a) ​ ​ ​ ​ 32.1** Certification of Chief Executive Officer under 18 U.S.C. Sec. 1350 ​ ​ ​ ​ 32.2** Certification of Chief Financial Officer under 18 U.S.C. Sec. 1350 ​ ​ ​ 101* The following financial information from the Company’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2024 is formatted in Inline Extensible Business Reporting Language (iXBRL) : (i) Consolidated Statements of Income, (ii) the Consolidated Balance Sheets, (iii) the Consolidated Statements of Changes in Shareholders’ Equity, (iv) Consolidated Statements of Cash Flows and (v) Condensed Notes to the Consolidated Financial Statements ​ ​ 104 ​ ​ ​ Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101) ​ ​ ​ ​ *Filed herewith **Furnished herewith ​ ​ 74 Table of Contents SIGNATURES ​ Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. ​ ​ ​ ​ ​ BAR HARBOR BANKSHARES ​ ​ ​ ​ ​ Dated: November 7, 2024 By: /s/ Curtis C. Simard ​ ​ Curtis C. Simard ​ ​ President & Chief Executive Officer (Principal Executive Officer) ​ ​ ​ ​ Dated: November 7, 2024 ​ /s/ Josephine Iannelli ​ ​ Josephine Iannelli ​ ​ Executive Vice President & Chief Financial Officer (Principal Financial and Accounting Officer) ​ ​ ​ 75