KBRA Affirms Ratings for Bar Harbor Bankshares

KBRA affirms the senior unsecured debt rating of BBB, the subordinated debt rating of BBB-, and the short-term debt rating of K3 for Bar Harbor, Maine-based Bar Harbor Bankshares (NYSE American: BHB) (“the company” or "Bar Harbor"). In addition, KBRA affirms the deposit and senior unsecured debt ratings of BBB+, the subordinated debt rating of BBB, and the short-term deposit and debt ratings of K2 for the lead subsidiary, Bar Harbor Bank & Trust ("the bank"). The Outlook for all long-term ratings is Stable.

Key Credit Considerations

The ratings are supported by Bar Harbor’s stable core earnings profile with an average ROA of roughly 1% over the last five years, underpinned by a diversified revenue mix. The company’s revenue profile is complemented by stable fee noninterest income which contributes an average of 25% to operating revenue. Net interest income is supported by a relatively low-cost deposit base despite its above 100% loan-to-core deposit ratio, with total deposit costs of 1.89% at 1H25, approximately 30 bps below the peer average, anchored by granular retail relationships across its rural branch network. While the NIB deposit mix is lower than peers at 17%, balances have remained resilient despite industry-wide pressures. Management’s ongoing strategy shift toward a more commercially centric loan mix with a core deposit funded model has improved earning asset yields, allowing the company to sustain a stable NIM in the ~3.10%-3.20% range over the last year, despite higher funding costs. Additionally, asset quality performance has been favorable, with negligible loan losses over the last 5 years. While investor CRE concentrations are somewhat elevated at 333% of risk-based capital, office exposure is contained at ~8% of loans. The bank’s disciplined underwriting standards, deep market expertise, and selective borrower base, supported by collateral strength and guarantees, provide comfort that concentration risk remains well managed. Regulatory capital protection remains sound with a CET1 ratio of 11.7% at 2Q25, providing adequate protection relative to the company’s risk profile. Although the recently closed acquisition of Guaranty Bancorp, Inc. will pressure capital ratios, KBRA favorably views management’s commitment to rebuild capital to levels consistent with peers and the company’s risk profile.

Rating Sensitivities

A rating upgrade is unlikely in the intermediate term, although sustaining above peer earnings with greater fee income scale and higher core funding levels, while maintaining above peer capital ratios could lead to positive rating momentum over time. Asset quality deterioration in the form of elevated levels of nonperforming loans or outsized credit losses, material contraction in capital ratios, substantial earnings weakness, or meaningful increases in wholesale funding sources could have negative rating implications.

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