KBRA Comments on Bar Harbor Bankshares' Proposed Acquisition of Guaranty Bancorp, Inc.

NEW YORK--(BUSINESS WIRE)--On March 11, 2025, Bar Harbor, ME-based Bar Harbor Bankshares (NYSE American: BHB) ("Bar Harbor"), parent company of Bar Harbor Bank & Trust, and Woodsville, NH-based Guaranty Bancorp, Inc. (OTC: GUAA) ("Guaranty"), parent company of Woodsville Guaranty Savings Bank, jointly announced that they had entered into a definitive agreement pursuant to which Guaranty would merge with and into Bar Harbor Bankshares and Woodsville Guaranty Savings Bank would merge with and into Bar Harbor Bank & Trust. The transaction, valued at $41.6 million (P/TBV: 1.3x), is an all-stock deal expected to close in 2H25 pending regulatory approval. Under the agreement, James Graham, Guaranty President and CEO, would be appointed to Bar Harbor's board of directors.

In our view, the proposed acquisition is in line with Bar Harbor's overall growth strategy of expansion into contiguous markets through both acquisitive and organic means. The transaction allows BHB to expand its footprint in New Hampshire, notably, in the Lebanon-Claremont MSA, while providing solid opportunities for commercial growth and expansion of its fee-based business lines while focusing on a commitment to community banking. The acquisition is expected to add approximately $675 million in assets to BHB's balance sheet at close, with proforma $4.8 billion in total assets, $3.6 billion in loans, and $3.9 billion in deposits, as well as adding 9 branch locations in New Hampshire. The combined company’s pro forma financial projections include strong profitability metrics following the close of the transaction, in part, due to expected cost savings of approximately 40% of Guaranty's operating base, with the combined company estimating 100% of the savings to be recognized in 2026. In addition to the cost savings, earnings should receive a temporary boost from accretion income, with BHB reporting an estimated $41.6 million in interest rate marks on the loan portfolio (accreted over six years).

Regarding credit quality, both institutions have reflected solid asset quality performance over time, including nominal credit loss history, which is underpinned by disciplined underwriting and conservative management teams that have extensive knowledge of operating markets. The proforma loan portfolio is not expected to change materially as both institutions have complementary loan mixes, with investor CRE remaining the largest component at ~40% of total loans (including multifamily), followed by residential loans at 35%, and C&I at 14%. BHB conducted a review of the loan portfolio and expects to record a total gross pre-tax credit mark of $4.3 million (1%), along with a Day 2 CECL adjustment of $4.3 million in relation to the transaction. With respect to deposit mix, GUAA maintains a diversified deposit base with contained deposit costs of 1.39% and NIB deposits representing 16% of total deposits. Moreover, Bar Harbor has managed solid capital metrics with a CET1 ratio of 11.4% at 4Q24, though this ratio is expected to decline to 10.3% at closing. Nonetheless, the pro forma earnings profile should enable meaningful rebuild of capital following the acquisition. Overall, we believe that the proposed acquisition complements BHB's growth strategy, and while there is an inherent level of integration risk involved with any bank M&A transaction, such risk is somewhat mitigated by management's previous M&A integration experience.

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