BAR HARBOR BANKSHARES Income Taxes Disclosure
NOTE 10. INCOME TAXES
Pretax income shown from continuing operations for the year ended December 31, 2025 is as follows:
(in thousands) | | 2025 | |
Domestic | $ | 45,935 | |
Total pretax income from continuing operations | $ | 45,935 | |
The Company did not have any income tax expense (benefit) in foreign jurisdictions for the years ended December 31, 2025, 2024, and 2023.
The following table summarizes the current and deferred components of income tax expense (benefit) for each of the years ended December 31, 2025, 2024 and 2023:
(in thousands) | | 2025 | |
Current Expense: |
| | |
Federal | $ | 7,395 | |
State and city |
| 1,685 | |
Total current tax expense |
| 9,080 | |
Deferred tax (benefit) expense: | |||
Federal |
| (278) | |
State and city |
| 214 | |
Total income tax expense | $ | 9,016 | |
(in thousands) | | 2024 | | 2023 | ||
Current: |
| |
| | ||
Federal tax expense | $ | 7,688 | $ | 10,704 | ||
State tax expense |
| 1,748 |
| 2,247 | ||
Total current tax expense |
| 9,436 |
| 12,951 | ||
Deferred tax (benefit) expense |
| (366) |
| (686) | ||
Total income tax expense | $ | 9,070 | $ | 12,265 | ||
In December 2023, the FASB issued ASU No. 2023-09 – Income Taxes (Topic 740) – Improvements to Income Tax Disclosures, intended to enhance the transparency of income tax disclosures primarily related to the rate reconciliation and income taxes paid information. ASU 2023-09 became effective for the Company on January 1, 2025 for annual reporting periods on a prospective basis.
The following table reconciles the expected federal income tax expense (computed by applying the federal statutory tax rate of 21%) to recorded income tax expense for the years ended December 31, 2025, 2024 and 2023:
2025 | ||||||
(in thousands, except ratios) | Amount | Rate | ||||
U.S. Federal statutory tax rate | | $ | 9,646 | | 21.00 | % |
State and local income taxes, net of federal income tax effect (a) |
| 1,500 |
| 3.20 |
| |
Tax credits, net of benefits (b) |
| (263) |
| (0.57) |
| |
Nontaxable or nondeductible items: |
|
|
| |||
Tax exempt interest Income |
| (1,492) |
| (3.22) |
| |
Bank owned life insurance income |
| (535) |
| (1.16) |
| |
Other |
| 160 |
| 0.72 |
| |
Effective tax rate | $ | 9,016 |
| 19.64 | % | |
| (a) | State taxes in New Hampshire and Massachusetts made up the majority (greater than 50 percent) of the tax effect in this category. |
| (b) | Includes tax expense related to proportional amortization of $1.4 million and tax benefit related to flow-through losses of $175 thousand. |
2024 | 2023 |
| |||||||||
(in thousands, except ratios) | Amount | Rate | Amount | Rate |
| ||||||
Statutory tax rate | | $ | 11,049 | | 21.00 | % | $ | 11,995 | | 21.00 | % |
Increase (decrease) resulting from: |
| |
|
| |
|
| ||||
State taxes, net of federal benefit |
| 1,287 |
| 2.45 |
| 1,539 |
| 2.69 |
| ||
Tax exempt interest |
| (1,405) |
| (2.67) |
| (1,042) |
| (1.82) |
| ||
Federal tax credits |
| (239) |
| (0.45) |
| (471) |
| (0.82) |
| ||
Officers' life insurance |
| (416) |
| (0.79) |
| (578) |
| (1.01) |
| ||
Gain on disposal of low income housing tax credit investments |
| — |
| — |
| — |
| — |
| ||
Stock-based compensation plans |
| (37) |
| (0.07) |
| 17 |
| 0.03 |
| ||
Other |
| (1,169) | (2.22) |
| 805 |
| 1.40 |
| |||
Effective tax rate | $ | 9,070 |
| 17.25 | % | $ | 12,265 |
| 21.47 | % | |
The Company did not have any income tax expense (benefit) in foreign jurisdictions for the years ended December 31, 2025, 2024, and 2023.
Income taxes paid were as follows:
(in thousands, except ratios) | 2025 | ||
Federal | | $ | 5,000 |
State and local |
| | |
New Hampshire |
| 625 | |
Massachusetts |
| 450 | |
Maine |
| 320 | |
All other states |
| 204 | |
Total | $ | 6,599 | |
The net deferred tax asset was $29.9 million at December 31, 2025 and $23.3 million at December 31, 2024.
The tax effects of temporary differences that give rise to deferred tax assets and deferred tax liabilities at December 31, 2025 and 2024 are summarized below:
(in thousands) | 2025 | ||
Deferred Tax Assets: | |||
Unrealized gain or loss on securities available for sale | $ | 10,106 | |
Allowance for credit losses | 8,158 | ||
Acquired available-for-sale debt securities fair value mark | | 4,620 | |
Deferred compensation |
| 4,907 | |
Lease liability |
| 2,394 | |
Equity compensation |
| 1,491 | |
Unrealized gain or loss on derivatives |
| 905 | |
Non-accrual interest |
| 887 | |
Contract incentives |
| 860 | |
Deferred loan origination fees, net |
| 543 | |
Acquisition fair value adjustments |
| 7,512 | |
Other | — | ||
Total gross deferred tax assets | 42,383 | ||
Deferred tax liabilities: | |||
Acquired deposits and core deposit intangible | 3,674 | ||
Right of use asset |
| 2,216 | |
Branch acquisition costs and goodwill |
| 2,687 | |
Depreciation |
| 1,910 | |
Mortgage servicing rights |
| 795 | |
Prepaid pension | 738 | ||
Prepaid expenses |
| 421 | |
Other |
| 16 | |
Total deferred tax liabilities |
| 12,457 | |
Net deferred tax asset | $ | 29,926 | |
2024 | ||||||
(in thousands) | Assets | Liabilities | ||||
Allowance for credit losses | $ | 6,872 | $ | — | ||
Deferred compensation |
| 3,941 |
| — | ||
Unrealized gain or loss on securities available for sale |
| 14,557 |
| — | ||
Unrealized gain or loss on derivatives |
| 786 |
| — | ||
Depreciation |
| — |
| 1,403 | ||
Deferred loan origination fees, net |
| 13 |
| — | ||
Non-accrual interest |
| 731 |
| — | ||
Branch acquisition costs and goodwill |
| — |
| 2,363 | ||
Core deposit intangible |
| — |
| 547 | ||
Acquisition fair value adjustments |
| 260 |
| — | ||
Prepaid expenses |
| — |
| 287 | ||
Mortgage servicing rights |
| — |
| 738 | ||
Equity compensation |
| 1,269 |
| — | ||
Prepaid pension |
| — |
| 673 | ||
Contract incentives |
| 391 |
| — | ||
Right of use asset |
| — |
| 2,053 | ||
Lease liability |
| 2,209 |
| — | ||
Other |
| 365 |
| — | ||
Total | $ | 31,394 | $ | 8,064 | ||
The Company has determined that a valuation allowance is not required for its net deferred tax asset since it is more likely than not that this asset is realizable principally through future taxable income and future reversal of existing temporary differences.
GAAP requires the measurement of unrecorded tax benefits related to uncertain tax positions. An unrecorded tax benefit is the difference between the tax benefit of a position taken, or expected to be taken on a tax return and the benefit recorded for accounting purposes. At December 31, 2025 and 2024, we had no unrecorded tax benefits and do not expect our position to significantly change within the next 12 months.
We are subject to income tax in the U.S. federal jurisdiction and also in the states of Maine, New Hampshire, Massachusetts and various other states. We are no longer subject to examination by taxing authorities for years before 2022.
In July 2025, the One Big Beautiful Bill Act was signed into law, which included a broad range of tax reform provisions affecting businesses, including extending and modifying certain key provisions from the Tax Cuts and Jobs Act of 2017 and expanding certain incentives from the Inflation Reduction Act of 2022 while accelerating the phase-out of others. The tax provisions of the One Big Beautiful Bill Act did not have a material impact on our overall tax position.
Historical Timeline
| Fiscal Year | Filed | |
|---|---|---|
| 2025 | Mar 13, 2026 | Showing above |
| 2024 | Mar 11, 2025 | |
| 2023 | Mar 11, 2024 | |
| 2022 | Mar 14, 2023 | |
| 2021 | Mar 14, 2022 | |
| 2020 | Mar 10, 2021 | |
| 2019 | Mar 10, 2020 | |
| 2018 | Mar 12, 2019 | |
| 2017 | Mar 13, 2018 | |
| 2016 | Mar 14, 2017 | |
| 2015 | Mar 14, 2016 | |
About Income Taxes Disclosures
The income tax disclosure reveals how much a company actually pays in taxes versus what the statutory rate would predict. Analysts focus on the effective tax rate (ETR) reconciliation, which breaks down every item driving the gap between the 21% federal rate and the company's reported ETR — including R&D credits, foreign rate differentials, and state taxes. Deferred tax assets (DTAs) and their valuation allowances signal management's confidence in future profitability: a rising allowance suggests the company doubts it can use accumulated tax benefits. Uncertain tax benefit (UTB) reserves quantify exposure to IRS challenges on aggressive positions.
Key signals to watch: sudden ETR drops without clear operational reasons, large increases in valuation allowances, growing UTB balances, and significant unremitted foreign earnings. Post-TCJA, pay attention to GILTI and BEAT provisions that affect multinational tax structures. Compare the cash taxes paid (from the cash flow statement) against the income tax provision to gauge earnings quality.