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 March 31, ~~2023~~2024

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE

SECURITIES EXCHANGE ACT OF 1934

Commission File No. 0-28190

CAMDEN NATIONAL CORPORATION

(Exact name of registrant as specified in its charter)


Maine			01-0413282
(State or other jurisdiction of			(I.R.S. Employer
incorporation or organization)			Identification No.)

2 ELM STREET	CAMDEN	ME	04843
(Address of principal executive offices)			(Zip Code)

Registrant's telephone number, including area code: (207) 236-8821

Securities registered pursuant to Section 12(b) of the Act:


Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock, without par value	CAC	The NASDAQ Stock Market LLC

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 periods that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Yes x 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 x No ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):

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 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 ☒

Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practical date:

Outstanding at April ~~28, 2023:~~30, 2024: Common stock (no par value) ~~14,592,804~~14,606,693 shares.

CAMDEN NATIONAL CORPORATION

FORM 10-Q FOR THE QUARTER ENDED MARCH 31, ~~2023~~2024

TABLE OF CONTENTS OF INFORMATION REQUIRED IN REPORT


		PAGE
PART I. FINANCIAL INFORMATION

ITEM 1.	FINANCIAL STATEMENTS

	Consolidated Statements of Condition (unaudited) - March 31, ~~2023~~2024 and December 31, ~~2022~~2023	3

	Consolidated Statements of Income (unaudited) - Three Months Ended March 31, ~~2023~~2024 and ~~2022~~2023	4

	Consolidated Statements of Comprehensive Income (Loss) (unaudited) - Three Months Ended March 31, ~~2023~~2024 and ~~2022~~2023	5

	Consolidated Statements of Changes in Shareholders’ Equity (unaudited) - Three Months Ended March 31, ~~2023~~2024 and ~~2022~~2023	6

	Consolidated Statements of Cash Flows (unaudited) - Three Months Ended March 31, ~~2023~~2024 and ~~2022~~2023	7

	Notes to the Unaudited Consolidated Financial Statements	8

ITEM 2.	MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS	4340

ITEM 3.	QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK	7068

ITEM 4.	CONTROLS AND PROCEDURES	7169

PART II. OTHER INFORMATION

ITEM 1.	LEGAL PROCEEDINGS	7270

ITEM 1A.	RISK FACTORS	7270

ITEM 2.	UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS	7270

ITEM 3.	DEFAULTS UPON SENIOR SECURITIES	7270

ITEM 4.	MINE SAFETY DISCLOSURES	7270

ITEM 5.	OTHER INFORMATION	7270

ITEM 6.	EXHIBITS	7371

SIGNATURES		7472

PART I. FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

CONSOLIDATED STATEMENTS OF CONDITION

(unaudited)


(In thousands, except number of shares)	(In thousands, except number of shares)	March 31, 2023		December 31, 2022		(In thousands, except number of shares)	March 31, 2024	December 31, 2023
ASSETS	ASSETS					ASSETS
Cash and due from banks	Cash and due from banks	$	53,867	$	50,566
Interest-bearing deposits in other banks (including restricted cash)	Interest-bearing deposits in other banks (including restricted cash)	21,874		24,861
Total cash, cash equivalents and restricted cash	Total cash, cash equivalents and restricted cash	75,741		75,427
Investments:	Investments:					Investments:
Trading securities	Trading securities	3,971		3,990
Available-for-sale securities, at fair value (amortized cost of $777,621 and $796,960, respectively)		686,423		695,875
Held-to-maturity securities, at amortized cost (fair value of $510,999 and $506,193, respectively)		540,074		546,583
Available-for-sale securities, at fair value (amortized cost of $685,263 and $702,937, respectively)
Held-to-maturity securities, at amortized cost (fair value of $496,517 and $510,595, respectively)
Other investments	Other investments	19,414		12,713
Total investments	Total investments	1,249,882		1,259,161
Loans held for sale, at fair value (book value of $4,539 and $5,259, respectively)		4,562		5,197
Loans held for sale, at fair value (book value of $9,441 and $10,152, respectively)
Loans	Loans	4,073,108		4,010,353
Less: allowance for credit losses on loans	Less: allowance for credit losses on loans	(37,134)		(36,922)
Net loans	Net loans	4,035,974		3,973,431
Goodwill	Goodwill	94,697		94,697
Core deposit intangible assets	Core deposit intangible assets	1,415		1,563
Bank-owned life insurance	Bank-owned life insurance	99,734		99,142
Premises and equipment, net	Premises and equipment, net	35,688		36,022
Deferred tax assets	Deferred tax assets	47,281		50,217
Other assets	Other assets	71,631		76,993
Total assets	Total assets	$	5,716,605	$	5,671,850
LIABILITIES AND SHAREHOLDERS’ EQUITY	LIABILITIES AND SHAREHOLDERS’ EQUITY					LIABILITIES AND SHAREHOLDERS’ EQUITY
Liabilities	Liabilities					Liabilities
Deposits:	Deposits:					Deposits:
Non-interest checking	Non-interest checking	$	1,047,491	$	1,141,753
Interest checking	Interest checking	1,609,330		1,763,850
Savings and money market	Savings and money market	1,409,861		1,439,622
Certificates of deposit	Certificates of deposit	360,103		300,451
Brokered deposits	Brokered deposits	215,949		181,253
Total deposits	Total deposits	4,642,734		4,826,929
Short-term borrowings	Short-term borrowings	486,318		265,176

Junior subordinated debentures	Junior subordinated debentures	44,331		44,331
Junior subordinated debentures
Junior subordinated debentures
Accrued interest and other liabilities	Accrued interest and other liabilities	78,348		84,136
Total liabilities	Total liabilities	5,251,731		5,220,572
Commitments and Contingencies (Note 7)	Commitments and Contingencies (Note 7)					Commitments and Contingencies (Note 7)
Shareholders’ Equity	Shareholders’ Equity					Shareholders’ Equity
Common stock, no par value: authorized 40,000,000 shares, issued and outstanding 14,587,906 and 14,567,325 on March 31, 2023 and December 31, 2022, respectively		115,590		115,069
Common stock, no par value: authorized 40,000,000 shares, issued and outstanding 14,593,830 and 14,565,952 on March 31, 2024 and December 31, 2023, respectively
Retained earnings	Retained earnings	468,755		462,164

Accumulated other comprehensive loss	Accumulated other comprehensive loss	(119,471)		(125,955)

Accumulated other comprehensive loss

Accumulated other comprehensive loss
Total shareholders’ equity	Total shareholders’ equity	464,874		451,278
Total liabilities and shareholders’ equity	Total liabilities and shareholders’ equity	$	5,716,605	$	5,671,850

The accompanying notes are an integral part of these consolidated financial statements.

CONSOLIDATED STATEMENTS OF INCOME

(unaudited)

Three Months Ended
March 31,

(In thousands, except number of shares and per share data)

2023

2022

Interest Income

Interest and fees on loans

45,332

32,035

Taxable interest on investments

5,963

5,789

Taxable interest on investments

Nontaxable interest on investments

763

764

Dividend income

219

106

Dividend income

Other interest income

448

164

Total interest income

52,725

38,858

Total interest income

Interest Expense

Interest on deposits

15,832

1,833

Interest on deposits

Interest on borrowings

2,085

131

Interest on junior subordinated debentures

528

529

Interest on junior subordinated debentures

Total interest expense

18,445

2,493

Net interest income

34,280

36,365

Provision (credit) for credit losses

2,002

(1,075)

Net interest income after provision (credit) for credit losses

32,278

37,440

Net interest income

(Credit) provision for credit losses

Net interest income after (credit) provision for credit losses

Non-Interest Income

Debit card income

2,938

2,924

Debit card income

Service charges on deposit accounts

1,762

1,833

Income from fiduciary services

1,600

1,631

Income from fiduciary services

Brokerage and insurance commissions

1,093

994

Mortgage banking income, net

716

1,034

Mortgage banking income, net

Bank-owned life insurance

592

576

Other income

1,165

833

Other income

Total non-interest income

9,866

9,825

Non-Interest Expense

Salaries and employee benefits

14,573

15,506

Furniture, equipment and data processing

3,211

3,132

Furniture, equipment and data processing

Net occupancy costs

2,079

2,144

Debit card expense

1,201

1,066

Debit card expense

Consulting and professional fees

1,055

1,007

Regulatory assessments

845

655

Regulatory assessments

Amortization of core deposit intangible assets

148

156

Amortization of core deposit intangible assets

Other real estate owned and collection costs, net

Other expenses

3,053

2,543

Total non-interest expense

26,165

26,209

Total non-interest expense

Income before income tax expense

15,979

21,056

Income Tax Expense

3,252

4,261

Income Tax Expense

Net Income

12,727

16,795

Per Share Data

Basic earnings per share

0.87

1.14

Diluted earnings per share

0.87

1.13

Diluted earnings per share

Cash dividends declared per share

0.42

0.40

Weighted average number of common shares outstanding

14,573,122

14,741,271

Weighted average number of common shares outstanding

Diluted weighted average number of common shares outstanding

14,631,542

14,822,332

Diluted weighted average number of common shares outstanding

The accompanying notes are an integral part of these consolidated financial statements.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

(unaudited)

Three Months Ended
March 31,
(In thousands) 2023 2022
Net Income $ 12,727 $ 16,795
Other comprehensive income (loss):
Net change in unrealized loss on debt securities, net of tax 9,094 (72,811)
Net change in unrealized gain on cash flow hedging derivatives, net of tax (2,605)

2,945
Net change in other comprehensive income for supplemental executive retirement plan and other postretirement benefit plan, net of tax (5) 182
Other comprehensive income (loss) 6,484 (69,684)
Comprehensive Income (Loss) $ 19,211 $ (52,889)


	Three Months Ended March 31,
(In thousands)	2024		2023
Net Income	$	13,272	$	12,727
Other comprehensive (loss) income:
Net change in fair value of debt securities, net of tax	(3,948)		9,094
Net change in fair value of cash flow hedging derivatives, net of tax	2,491		(2,605)
Net change in other comprehensive income for supplemental executive retirement plan and other postretirement benefit plan, net of tax	(6)		(5)
Other comprehensive (loss) income	(1,463)		6,484
Comprehensive Income	$	11,809	$	19,211

The accompanying notes are an integral part of these consolidated financial statements.

CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY

(unaudited)


			Three Months Ended
		Three Months Ended																			Three Months Ended
			Common Stock			Retained Earnings				Accumulated Other Comprehensive Income (Loss)				Total Shareholders’ Equity				Common Stock	Retained Earnings	Accumulated Other Comprehensive Income (Loss)		Total Shareholders’ Equity
(In thousands, except number of shares and per share data)	(In thousands, except number of shares and per share data)		Shares Outstanding	Amount
Balance at December 31, 2021			14,739,956	$	123,111			$	424,412			$	(6,229)			$	541,294
Balance at December 31, 2022
Balance at December 31, 2022
Balance at December 31, 2022
Net income
Other comprehensive income, net of tax
Stock-based compensation expense
Issuance of vested share awards, net of repurchase for tax withholdings

Cash dividends declared ($0.42 per share)
Cash dividends declared ($0.42 per share)
Cash dividends declared ($0.42 per share)
Balance at March 31, 2023
Balance at December 31, 2023
Net income	Net income		—	—		16,795				—				16,795
Other comprehensive loss, net of tax	Other comprehensive loss, net of tax		—	—		—				(69,684)				(69,684)
Stock-based compensation expense	Stock-based compensation expense		—	624		—				—				624
Exercise of stock options and issuance of vested share awards, net of repurchase for tax withholdings			19,540	(114)		—				—				(114)
Common stock repurchased			(13,086)	(609)		—				—				(609)
Cash dividends declared ($0.40 per share)			—	—		(5,860)				—				(5,860)
Balance at March 31, 2022			14,746,410	$	123,012	$	435,347			$	(75,913)			$	482,446
Balance at December 31, 2022			14,567,325	$	115,069	$	462,164			$	(125,955)			$	451,278
Net income			—	—		12,727				—				12,727
Other comprehensive loss, net of tax			—	—		—				6,484				6,484
Stock-based compensation expense			—	459		—				—				459
Exercise of stock options and issuance of vested share awards, net of repurchase for tax withholdings			20,581	62		—				—				62
Issuance of vested share awards, net of repurchase for tax withholdings

Cash dividends declared ($0.42 per share)	Cash dividends declared ($0.42 per share)		—	—		(6,136)				—				(6,136)
Balance at March 31, 2023			14,587,906	$	115,590	$	468,755			$	(119,471)			$	464,874

Cash dividends declared ($0.42 per share)

Cash dividends declared ($0.42 per share)
Balance at March 31, 2024

The accompanying notes are an integral part of these consolidated financial statements.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(unaudited)


			Three Months Ended March 31,
		Three Months Ended March 31,								Three Months Ended March 31,
(In thousands)	(In thousands)		2023		2022		(In thousands)	2024	2023
Operating Activities	Operating Activities						Operating Activities
Net Income	Net Income		$	12,727	$	16,795
Adjustments to reconcile net income to net cash provided by operating activities:	Adjustments to reconcile net income to net cash provided by operating activities:						Adjustments to reconcile net income to net cash provided by operating activities:
Originations of mortgage loans held for sale	Originations of mortgage loans held for sale		(34,397)		(47,671)
Proceeds from the sale of mortgage loans	Proceeds from the sale of mortgage loans		35,501		47,771
Gain on sale of mortgage loans, net of origination costs	Gain on sale of mortgage loans, net of origination costs		(384)		(1,132)
Provision (credit) for credit losses			2,002		(1,075)
(Credit) provision for credit losses
Depreciation and amortization expense	Depreciation and amortization expense		815		899
Investment securities amortization and accretion, net	Investment securities amortization and accretion, net		605		1,217
Stock-based compensation expense	Stock-based compensation expense		459		624
Amortization of core deposit intangible assets	Amortization of core deposit intangible assets		148		156
Purchase accounting accretion, net	Purchase accounting accretion, net		(34)		(80)

Net increase (decrease) in derivative collateral received from counterparties
Net increase (decrease) in derivative collateral received from counterparties
Net increase (decrease) in derivative collateral received from counterparties

Net (increase) decrease in derivative collateral posted			(1,370)		24,070
(Increase) decrease in other assets			(189)		998
(Decrease) increase in other liabilities			(1,367)		178

Decrease (increase) in other assets

Decrease (increase) in other assets

Decrease (increase) in other assets
Decrease in other liabilities
Net cash provided by operating activities	Net cash provided by operating activities		14,516		42,750
Investing Activities	Investing Activities
Proceeds from available-for-sale debt securities			18,888		69,572
Proceeds from sales, calls and maturities of available-for-sale debt securities			—		(77,865)
Proceeds from maturities of held-to-maturity securities			6,216		—
Proceeds from sales of available-for-sale debt securities
Proceeds from sales of available-for-sale debt securities
Proceeds from sales of available-for-sale debt securities
Proceeds from maturities of available-for-sale debt securities

Proceeds from maturities and recoveries of held-to-maturity securities
Proceeds from maturities and recoveries of held-to-maturity securities
Proceeds from maturities and recoveries of held-to-maturity securities

Net increase in loans	Net increase in loans		(63,055)		(102,976)
Net increase in loans
Net increase in loans

Purchase of Federal Home Loan Bank stock
Purchase of Federal Home Loan Bank stock
Purchase of Federal Home Loan Bank stock	Purchase of Federal Home Loan Bank stock		(13,591)		(1,799)
Proceeds from sale of Federal Home Loan Bank stock	Proceeds from sale of Federal Home Loan Bank stock		6,890		1,892
Purchase of premises and equipment	Purchase of premises and equipment		(495)		(393)

Recoveries of previously charged-off loans			107		62
Proceeds from the sale of other real estate owned			—		287

Net cash used in investing activities

Net cash used in investing activities

Net cash used in investing activities	Net cash used in investing activities		(45,040)		(111,220)
Financing Activities	Financing Activities
Net decrease in deposits	Net decrease in deposits		(184,195)		(32,225)
Net decrease in deposits
Net decrease in deposits
Net proceeds from borrowings less than 90 days	Net proceeds from borrowings less than 90 days		221,142		26,060
Proceeds from the Bank Term Funding Program

Common stock repurchases			—		(542)
Exercise of stock options and issuance of restricted stock, net of repurchase for tax withholdings			62		(114)
Issuance of restricted stock, net of repurchase for tax withholdings

Issuance of restricted stock, net of repurchase for tax withholdings

Issuance of restricted stock, net of repurchase for tax withholdings
Cash dividends paid on common stock	Cash dividends paid on common stock		(6,135)		(5,911)
Finance lease payments	Finance lease payments		(36)		(40)
Net cash provided (used in) by financing activities			30,838		(12,772)
Net increase (decrease) in cash, cash equivalents and restricted cash			314		(81,242)
Net cash provided by financing activities
Net increase in cash, cash equivalents and restricted cash
Cash, cash equivalents, and restricted cash at beginning of period	Cash, cash equivalents, and restricted cash at beginning of period		75,427		220,625
Cash, cash equivalents and restricted cash at end of period	Cash, cash equivalents and restricted cash at end of period		$	75,741	$	139,383
Supplemental information	Supplemental information

Interest paid
Interest paid
Interest paid	Interest paid		17,840		2,470
Income taxes paid	Income taxes paid		146		150

Cash dividends declared, not paid	Cash dividends declared, not paid		6,135		5,908
Unsettled common stock repurchase			—		67
Cash dividends declared, not paid
Cash dividends declared, not paid
Change in fair value hedges presented within residential real estate loans and other assets

The accompanying notes are an integral part of these consolidated financial statements.

NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1 – BASIS OF PRESENTATION

The accompanying unaudited consolidated interim financial statements were prepared in accordance with instructions for Form 10-Q and, therefore, do not include all disclosures required by accounting principles generally accepted in the United States of America for complete presentation of financial statements. In the opinion of management, the consolidated financial statements contain all adjustments (consisting only of normal recurring accruals) necessary to present fairly the consolidated statements of condition of Camden National Corporation (the "Company") as of March 31, ~~2023~~2024 and December 31, ~~2022,~~2023, the consolidated statements of income for the three months ended March 31, ~~2023~~2024 and ~~2022,~~2023, the consolidated statements of comprehensive income (loss) ~~income~~ for the three months ended March 31, ~~2023~~2024 and ~~2022,~~2023, the consolidated statements of changes in shareholders' equity for the three months ended March 31, ~~2023~~2024 and ~~2022,~~2023, and the consolidated statements of cash flows for the three months ended March 31, ~~2023~~2024 and ~~2022.~~2023. The consolidated financial statements include the accounts of the Company and Camden National Bank (the "Bank"), a wholly-owned subsidiary of the Company (which includes the consolidated accounts of Healthcare Professional Funding Corporation ("HPFC") and Property A, Inc.). All intercompany accounts and transactions have been eliminated in consolidation. Assets held by the Bank in a fiduciary capacity, through Camden National Wealth Management, a division of the Bank, are not assets of the Company and, therefore, are not included in the consolidated statements of condition. The Company also owns 100% of the common stock of Camden Capital Trust A and Union Bankshares Capital Trust I. These entities are unconsolidated subsidiaries of the Company. Certain reclassifications may have been made to prior period amounts to conform to the current period presentation. Any such reclassifications did not impact net income or shareholders' equity as previously reported. Net income reported for the three months ended March 31, ~~2023,~~2024, is not necessarily indicative of the results that may be expected for the full year. The information in this report should be read in conjunction with the consolidated financial statements and accompanying notes included in the Company's Annual Report on Form 10-K for the year ended December 31, ~~2022.~~2023.

The acronyms, abbreviations and definitions identified below are used throughout this Form 10-Q, including Part I. "Financial Information" and Part II. "Management's Discussion and Analysis of Financial Condition and Results of Operations." The following is provided to aid the reader and provide a reference page when reviewing these sections of the Form 10-Q.

Acronym

Description

Acronym

Description

AFS:

Available-For-Sale

~~Available-for-sale~~FRB:

~~FRBB:~~

Board of Governors of the Federal Reserve ~~Bank of Boston~~System

ALCO:

Asset/Liability Committee

GAAP:

Generally ~~accepted accounting principles~~Accepted Accounting Principles in the United States

ACL:

Allowance for ~~credit losses~~Credit Losses

HTM:

~~GDP:~~

~~Gross domestic product~~Held-To-Maturity

AOCI:

Accumulated Other Comprehensive Income (Loss)

~~Accumulated other comprehensive income (loss)~~LIBOR:

~~HPFC:~~

~~Healthcare Professional Funding Corporation, a wholly-owned subsidiary of Camden National Bank~~London Interbank Offered Rate

ASC:

Accounting Standards Codification

~~HTM:~~Management ALCO:

~~Held-to-maturity~~Management Asset/Liability Committee

ASU:

Accounting Standards Update

~~IRS:~~MBS:

~~Internal Revenue Service~~Mortgage-Backed Security

Bank:

Camden National Bank, a wholly-owned subsidiary of Camden National Corporation

~~LGD:~~MSPP:

~~Loss given default~~Management Stock Purchase Plan

BOLI:

Bank-Owned Life Insurance

~~Bank-owned life insurance~~N/A:

~~LIBOR:~~

~~London Interbank Offered Rate~~Not Applicable

Board ALCO:

Board of Directors' Asset/Liability Committee

~~LTIP:~~

~~Long-Term Performance Share Plan~~

~~CARES Act:~~

~~Coronavirus Aid, Relief, and Economic Security Act, signed into law in March 2020 in response to COVID-19~~

~~Management ALCO:~~

~~Management Asset/Liability Committee~~

~~CCTA:~~

~~Camden Capital Trust A, an unconsolidated entity formed by Camden National Corporation~~

~~MBS:~~

~~Mortgage-backed security~~

~~CDs:~~

~~Certificate of deposits~~

~~MSPP:~~

~~Management Stock Purchase Plan~~

~~CECL:~~

~~Current Expected Credit Losses~~

~~N/A:~~

~~Not applicable~~

~~Company:~~

~~Camden National Corporation~~

N.M.:

Not ~~meaningful~~Meaningful

~~CMO:~~BTFP:

Bank Term Funding Program, introduced by the Federal Reserve Bank in March 2023

~~Collateralized mortgage obligation~~

OCC:

Office of the Comptroller of the Currency

~~CUSIP:~~CDs:

Certificate of Deposits

~~Committee on Uniform Securities Identification Procedures~~

OCI:

Other ~~comprehensive income (loss)~~Comprehensive Income (Loss)

~~DCRP:~~Company:

~~Defined Contribution Retirement Plan~~Camden National Corporation

OREO:

Other ~~real estate owned~~Real Estate Owned

~~EPS:~~CMO:

Collateralized Mortgage Obligation

~~Earnings per share~~

~~PD:~~

~~Probability of default~~

~~FASB:~~

~~Financial Accounting Standards Board~~

SBA:

U.S. Small Business Administration

~~FDIC:~~EPS:

Earnings Per Share

~~Federal Deposit Insurance Corporation~~

SBA PPP:

U.S. Small Business Administration Paycheck Protection Program

FASB:

Financial Accounting Standards Board

SERP:

Supplemental Executive Retirement Plans

FDIC:

Federal Deposit Insurance Corporation

SOFR:

Secured Overnight Financing Rate

FHLB:

Federal Home Loan Bank

~~SERP:~~TDR:

~~Supplemental executive retirement plans~~Troubled-Debt Restructured Loan

FHLBB:

Federal Home Loan Bank of Boston

~~SOFR:~~U.S:

~~Secured Overnight Financing Rate~~

~~FHLMC:~~

~~Federal Home Loan Mortgage Corporation~~

~~TDR:~~

~~Troubled-debt restructured loan~~

~~FNMA:~~

~~Federal National Mortgage Association~~

~~UBCT:~~

~~Union Bankshares Capital Trust I, an unconsolidated entity formed by Union Bankshares Company that was subsequently acquired by Camden National Corporation~~

~~FOMC:~~

~~Federal Open Market Committee~~

~~U.S.:~~

United States of America

~~FRB:~~

~~Federal Reserve System Board of Governors~~

NOTE 2 – RECENT ACCOUNTING PRONOUNCEMENTS

The Company adopted and updated its accounting policies for the following accounting standards that have been applied to the Company's interim consolidated financial statements for the three months ended March 31, 2023:

~~ASU No. 2022-01, Derivatives and Hedging (Topic 815):Fair Value Hedging - Portfolio Layer Method~~ ~~("ASU 2022-01").~~ The FASB issued ASU 2022-01 to amend ASU 2017-12, which was adopted by the Company in 2018. This amendment renames the "last-of-layer" method to the "portfolio layer" method, permits non-repayable financial assets to be included in a closed portfolio hedged using the portfolio layer method, and provides additional guidance for entities that apply the portfolio layer method of hedge accounting in accordance with Topic 815. The Company adopted ASU 2022-01, as amended, effective January 1, 2023 and leveraged the "portfolio layer" method to enter into interest rate swaps to hedge fixed-rate residential mortgages during the three months ended March 31, 2023. There was no impact to the Company's consolidated financial statements upon adoption. Refer to Note 8 of the consolidated financial statements for further details.

~~ASU No. 2022-02, Financial Instruments - Credit Losses~~ ~~(Topic 326): Troubled Debt Restructurings and Vintage Disclosures~~ ~~("ASU 2022-02").The FASB issued~~ASU 2022-02 to provide new guidance on TDRs and charge-offs for entities that have adopted ASU 2016-13. The Company adopted ASU 2022-02 effective January 1, 2023 on a prospective basis, and upon adoption there was no impact to the consolidated financial statements. The adoption of ASU 2022-02 eliminates the accounting and disclosure requirements for TDRs, including the requirement to measure the allowance using a discounted cash flow ("DCF") methodology. Beginning January 1, 2023, the Company no longer establishes a specific reserve for newly modified loans to borrowers experiencing financial difficulty. Instead, these modifications are included in their respective segments, and the ACL is calculated utilizing models that consider the borrowers' probability of default, loss given default and exposure at default.

ASU 2022-02 also requires disclosure of modifications of loans to borrowers experiencing financial difficulty if the modification involves principal forgiveness, an interest rate reduction, an other-than-insignificant payment delay, a term extension, or a combination of any of these types of modifications. Additionally, ASU 2022-02 requires the disclosure of current period gross charge-offs by year of loss origination (vintage) which are required to be applied prospectively as of January 1, 2023, the Company's date of adoption. Refer to Note 4 of the consolidated financial statements for further details.

The following provides a brief description of recently issued accounting pronouncements that have yet to be adopted by the Company:

ASU No. ~~2023-02, Investments - Equity Method and Joint Ventures~~2023-09, Income Taxes (Topic ~~323)~~740): ~~Accounting for Investments in~~Improvements to Income Tax ~~Credit Structures Using the Proportional Amortization Method~~Disclosures ("“ASU ~~2023-02"~~2023-09”). The FASB issued ASU ~~2023-02~~2023-09 to ~~permit reporting entities to elect to account~~address investor requests for ~~tax equity investments, regardless of the tax credit program from which the~~more transparency about income tax credits are received, using the proportional amortization method if certain conditions are met. Under the proportional amortization method, the initial cost of the investment is amortized in proportioninformation through improvements to income tax disclosures primarily related to the rate reconciliation and income ~~tax credits or other tax benefits received.~~taxes paid information. ASU ~~2023-02~~2023-09 is to be applied on a prospective basis and is effective for ~~interim and~~ annual periods beginning after December 15, ~~2023. While~~2024 with early adoption permitted. ASU 2023-09 will impact income tax disclosures, and the Company ~~is currently evaluating, it~~ does not expect ~~the adoption of ASU 2023-02 to have~~ a material impact ~~on its~~to the Company’s consolidated financial statements.

NOTE 3 – INVESTMENTS

Trading Securities

Trading securities are reported on the Company's consolidated statements of condition at fair value. As of March 31, ~~2023~~2024 and December 31, ~~2022,~~2023, the fair value of the Company's trading securities were ~~$4.0 million.~~$4.8 million and $4.6 million, respectively. These securities are held in a rabbi trust account and invested in mutual funds. The trading securities will be used for future payments associated with the Company's deferred compensation plan for eligible employees and directors.

AFS Debt Securities

AFS debt securities are reported on the Company's consolidated statements of condition at fair value. The following table summarizes the amortized cost, estimated fair value, and unrealized gains (losses) of AFS debt securities, as of the dates indicated:


(In thousands)	(In thousands)	Amortized Cost		Unrealized Gains		Unrealized Losses		Fair Value		(In thousands)	Amortized Cost	Unrealized Gains	Unrealized Losses	Fair Value
March 31, 2023
March 31, 2024										March 31, 2024
Obligations of states and political subdivisions
Mortgage-backed securities issued or guaranteed by U.S. government-sponsored enterprises
Collateralized mortgage obligations issued or guaranteed by U.S. government-sponsored enterprises
Corporate bonds
Total AFS debt securities
December 31, 2023										December 31, 2023

Obligations of states and political subdivisions
Obligations of states and political subdivisions
Obligations of states and political subdivisions	Obligations of states and political subdivisions	$	49,142	$	41	$	(132)	$	49,051
MBS issued or guaranteed by U.S. government-sponsored enterprises	MBS issued or guaranteed by U.S. government-sponsored enterprises	585,249		214		(77,632)		507,831
CMO issued or guaranteed by U.S. government-sponsored enterprises	CMO issued or guaranteed by U.S. government-sponsored enterprises	117,552		—		(11,319)		106,233
Subordinated corporate bonds		25,678		—		(2,370)		23,308
Corporate bonds
Total AFS debt securities	Total AFS debt securities	$	777,621	$	255	$	(91,453)	$	686,423
December 31, 2022

Obligations of states and political subdivisions		$	49,678	$	11	$	(463)	$	49,226
MBS issued or guaranteed by U.S. government-sponsored enterprises		598,845		131		(84,957)		514,019
CMO issued or guaranteed by U.S. government-sponsored enterprises		122,760		—		(13,413)		109,347
Subordinated corporate bonds		25,677		3		(2,397)		23,283
Total AFS debt securities		$	796,960	$	145	$	(101,230)	$	695,875

As of March 31, ~~2023~~2024 and December 31, ~~2022,~~2023, there was no allowance carried on AFS debt securities.

In ~~June of~~ 2022, the Company transferred securities with a fair value of $520.3 million from AFS to HTM. The unrealized losses on the AFS debt securities at the time of transfer were $72.1 million, pre-tax, and were reported within AOCI. These unrealized losses are being amortized over the remaining life of the securities from AOCI into ~~interest income~~the HTM securities on the consolidated statements of ~~income.~~condition. At March 31, ~~2023~~2024, the net unrealized losses on the transferred securities reported within AOCI were ~~$50.9~~$45.7 million, net of a deferred tax asset of ~~$13.9~~$12.5 million and at December 31, ~~2022~~2023 were ~~$52.2~~$46.9 million, net of a deferred tax asset of ~~$14.3~~$12.8 million.

The net unrealized losses on AFS debt securities reported within AOCI (excluding the aforementioned securities transferred from AFS to HTM) at March 31, 2024 and December 31, 2023, were ~~$71.6~~$65.7 million and $60.5 million, respectively, and were net of a deferred tax asset of ~~$19.6~~$18.0 million and ~~at December 31, 2022 were $79.4~~$16.6 million, ~~net of a deferred tax asset of $21.7 million.~~respectively.

~~For the three months ended March 31, 2023 and 2022, the Company did not sell any AFS debt securities.~~

The following table presents the Company's AFS debt securities with gross unrealized losses, for which an ACL has not been recorded, segregated by the length of time the securities have been in a continuous loss position, as of the dates indicated:


			Less Than 12 Months				12 Months or More				Total							Less Than 12 Months		12 Months or More		Total
(In thousands, except number of holdings)	(In thousands, except number of holdings)	Number of Holdings	Fair Value		Unrealized Losses		Fair Value		Unrealized Losses		Fair Value		Unrealized Losses		(In thousands, except number of holdings)	Number of Holdings	Fair Value		Unrealized Losses	Fair Value	Unrealized Losses		Fair Value	Unrealized Losses
March 31, 2023
March 31, 2024															March 31, 2024
Obligations of states and political subdivisions	Obligations of states and political subdivisions	54	$	19,151	$	(48)	$	10,384	$	(84)	$	29,535	$	(132)
MBS issued or guaranteed by U.S. government-sponsored enterprises	MBS issued or guaranteed by U.S. government-sponsored enterprises	172	3,310		(80)		488,861		(77,552)		492,171		(77,632)
CMO issued or guaranteed by U.S. government-sponsored enterprises	CMO issued or guaranteed by U.S. government-sponsored enterprises	62	2,506		(56)		103,727		(11,263)		106,233		(11,319)
Subordinated corporate bonds		14	6,179		(412)		17,129		(1,958)		23,308		(2,370)
Corporate bonds
Total AFS debt securities	Total AFS debt securities	302	$	31,146	$	(596)	$	620,101	$	(90,857)	$	651,247	$	(91,453)

December 31, 2022
December 31, 2023

December 31, 2023

December 31, 2023

Obligations of states and political subdivisions
Obligations of states and political subdivisions
Obligations of states and political subdivisions	Obligations of states and political subdivisions	83	42,276		(463)		—		—		42,276		(463)
MBS issued or guaranteed by U.S. government-sponsored enterprises	MBS issued or guaranteed by U.S. government-sponsored enterprises	175	118,290		(11,521)		381,355		(73,436)		499,645		(84,957)
CMO issued or guaranteed by U.S. government-sponsored enterprises	CMO issued or guaranteed by U.S. government-sponsored enterprises	64	47,340		(4,589)		62,007		(8,824)		109,347		(13,413)
Subordinated corporate bonds		13	7,687		(384)		14,593		(2,013)		22,280		(2,397)
Corporate bonds
Total AFS debt securities	Total AFS debt securities	335	$	215,593	$	(16,957)	$	457,955	$	(84,273)	$	673,548	$	(101,230)

For the three months ended March 31, ~~2023~~2024 and ~~2022,~~2023, the unrealized losses on the Company's AFS debt securities have not been recognized into income because management does not intend to sell, and it is not more-likely-than-not it will be required to sell, any of the AFS debt securities before recovery of its amortized cost basis. Furthermore, the unrealized losses were due to changes in interest rates and other market conditions and were not reflective of credit events. Agency-backed and government-sponsored enterprise securities have a long history ~~with~~of no credit losses, including during times of severe stress. The principal and interest payments on agency guaranteed debt is backed by the U.S. government. Government-sponsored enterprises similarly guarantee principal and interest payments and securities backed by government-sponsored enterprises carry an implicit guarantee from the U.S. Department of the Treasury. Additionally, government-sponsored enterprise securities are exceptionally liquid, readily marketable, and provide a substantial amount of price transparency and price parity, indicating a perception of zero credit losses. AFS municipal debt holdings ~~are comprised solely of~~comprise only high credit quality (rated A- or higher) state and municipal obligations. High credit quality state and municipal obligations have a history of zero to near-zero credit loss. ~~Subordinated corporate~~Corporate bonds ~~are~~ primarily ~~comprised of~~comprise investment grade senior notes and senior subordinated notes of other financial institutions.

At March 31, ~~2023~~2024 and December 31, ~~2022,~~2023, total accrued interest receivable on AFS debt securities, which has been excluded from reported amortized cost basis on AFS debt securities, was ~~$2.0~~$1.7 million ~~and $1.9 million, respectively,~~at each date, and was reported within other assets on the consolidated statements of condition. An allowance was not carried on the accrued interest receivable at either date.

The amortized cost and estimated fair values of the Company's AFS debt securities by contractual maturity at March 31, ~~2023,~~2024, are shown below. Expected maturities will differ from contractual maturities because borrowers may have the right to call or prepay obligations with or without call or prepayment penalties. Mortgage-related securities are shown in total, as their maturities are highly variable.


(In thousands)	(In thousands)	Amortized Cost		Fair Value		(In thousands)	Amortized Cost	Fair Value
Due in one year or less	Due in one year or less	$	1,002	$	1,003
Due after one year through five years	Due after one year through five years	13,612		12,323
Due after five years through ten years	Due after five years through ten years	60,206		59,032
Due after ten years	Due after ten years	—		—
Subtotal	Subtotal	74,820		72,358
Mortgage-related securities	Mortgage-related securities	702,801		614,065
Total	Total	$	777,621	$	686,423

HTM Debt Securities

HTM debt securities are reported on the Company's consolidated statements of condition at amortized cost. The following table summarizes the amortized cost, estimated fair value and unrealized gains (losses) of HTM debt securities as of the dates indicated:


(In thousands)	(In thousands)	Amortized Cost(1)		Unrealized Gains		Unrealized Losses		Fair Value		(In thousands)	Amortized Cost(1)	Unrealized Gains	Unrealized Losses	Fair Value
March 31, 2023
March 31, 2024
Obligations of U.S. government-sponsored enterprises
Obligations of U.S. government-sponsored enterprises
Obligations of U.S. government-sponsored enterprises	Obligations of U.S. government-sponsored enterprises	$	7,491	$	—	$	(507)	$	6,984
Obligations of states and political subdivisions	Obligations of states and political subdivisions	56,049		1,683		(760)		56,972
MBS issued or guaranteed by U.S. government-sponsored enterprises	MBS issued or guaranteed by U.S. government-sponsored enterprises	314,589		—		(18,932)		295,657
CMO issued or guaranteed by U.S. government-sponsored enterprises	CMO issued or guaranteed by U.S. government-sponsored enterprises	143,030		—		(10,628)		132,402
Subordinated corporate bonds		18,915		607		(538)		18,984
Corporate bonds
Total HTM debt securities	Total HTM debt securities	$	540,074	$	2,290	$	(31,365)	$	510,999
December 31, 2022
December 31, 2023
Obligations of U.S. government-sponsored enterprises
Obligations of U.S. government-sponsored enterprises
Obligations of U.S. government-sponsored enterprises	Obligations of U.S. government-sponsored enterprises	$	7,457	$	—	$	(777)	$	6,680
Obligations of states and political subdivisions	Obligations of states and political subdivisions	55,978		431		(1,610)		54,799
MBS issued or guaranteed by U.S. government-sponsored enterprises	MBS issued or guaranteed by U.S. government-sponsored enterprises	317,406		—		(24,766)		292,640
CMO issued or guaranteed by U.S. government-sponsored enterprises	CMO issued or guaranteed by U.S. government-sponsored enterprises	145,069		—		(13,724)		131,345
Subordinated corporate bonds		20,673		332		(276)		20,729
Corporate bonds
Total HTM debt securities	Total HTM debt securities	$	546,583	$	763	$	(41,153)	$	506,193

(1) Amortized cost presented above includes unamortized unrealized losses ~~for~~from the aforementioned transfer from AFS to HTM securities as of March 31, ~~2023~~2024 and December 31, ~~2022: $1.1 million~~2023, as follows: (1) $958,000 and $992,000 in obligations of U.S. government-sponsored enterprises, ~~for both periods, $6.0~~(2) $5.5 million and ~~$6.1~~$5.6 million in obligations of state and political subdivisions, ~~$37.4~~(3) $33.7 million and ~~$38.4~~$34.6 million in ~~mortgage-backed securities, $20.1~~MBS, (4) $17.9 million and ~~$20.7~~$18.4 million in ~~collateralized mortgage obligations~~CMO, and ~~$108,000~~(5) $78,000 and ~~$117,000~~$85,000 in ~~subordinated~~ corporate ~~bonds.~~bonds, respectively.

1312

Agency-backed and government-sponsored enterprise securities have a long history with no credit losses, including during times of severe stress. The principal and interest payments on agency-guaranteed debt is backed by the U.S. government. Government-sponsored enterprises similarly guarantee principal and interest payments and carry an implicit guarantee from the U.S. Department of the Treasury. Additionally, government-sponsored enterprise securities are exceptionally liquid, readily marketable, and provide a substantial amount of price transparency and price parity, indicating a perception of zero credit losses. HTM municipal debt holdings are comprised solely of high credit quality (rated A- or higher) state and municipal obligations. High credit quality state and municipal obligations have a history of zero to near-zero credit loss. Subordinated corporate bonds are primarily comprised of investment grade senior notes and senior subordinated notes of other financial institutions.

For the three months ended March 31, ~~2023~~2024 and ~~2022,~~2023, the Company recorded a (credit) provision for credit losses on its HTM debt securities portfolio of ($910,000) and $1.8 million, respectively in the consolidated statements of income. The Company sold its Signature Bank corporate bond and ~~$0, respectively. The~~recorded a credit for credit losses on HTM debt securities of ($910,000) during the three months ended March 31, 2024. This credit represented the Company's recovery of a portion of the $1.8 million Signature Bank bond that was previously written off as a provision for credit losses ~~recorded~~on HTM debt securities during the three months ended March 31, 2023. The initial write-down and the subsequent sale of the Signature Bank bond were in response to Signature Bank's failure, which indicated a significant deterioration in its creditworthiness. Prior to the write-off, the Signature Bank bond was designated as HTM and carried no ACL. In addition to the write-off of the Signature Bank corporate bond during the three months ended March 31, 2023, ~~was due to the write-off of a Signature Bank subordinated corporate bond, which was designated as HTM and previously carried no ACL, as the bank failed during the quarter. Additionally,~~ the Company wrote-off accrued interest receivable ~~due from~~totaling $8,000 associated with the Signature Bank ~~subordinated corporate~~ bond ~~of $8,000 during the three months ended March 31, 2023,~~ and ~~it was~~ recorded as a reversal of interest income on the consolidated statements of ~~income. The Company did not write-off any accrued interest for~~income during the three months ended March 31, ~~2022.~~2023.

The Company evaluated its HTM debt securities with an amortized cost as of March 31, ~~2023~~2024 and December 31, ~~2022,~~2023, and determined that the expected credit loss on its HTM portfolio was immaterial, and therefore it did not carry an ACL on the HTM portfolio at either date.

The following table presents the activity in the ACL on HTM debt securities for the periods indicated:


	March 31,
(In thousands)	2024		2023
Beginning balance	$	—	$	—
HTM debt securities recovered (charged-off)	910		(1,838)
(Credit) provision on HTM debt securities	(910)		1,838
Ending balance	$	—	$	—

The HTM debt securities portfolio is comprised of the same types of securities as the AFS debt securities portfolio. Refer to the discussion above for considerations of credit risk.

As of March 31, ~~2023~~2024 and December 31, ~~2022,~~2023, none of the Company's HTM debt securities were past due or on non-accrual status. ~~For the three months ended March 31, 2023 and 2022, the~~The Company did not recognize any interest income on non-accrual HTM debt ~~securities.~~securities during the three months ended March 31, 2024 and 2023. At March 31, ~~2023~~2024 and December 31, ~~2022,~~2023, total accrued interest receivable ~~on HTM debt securities, which has been excluded from reported amortized cost basis~~ on HTM debt securities was $1.5 million and $1.7 million, respectively, and no allowance was provided for. Accrued interest on HTM debt securities is reported within other assets on the consolidated statements of ~~condition. An allowance was not carried on the HTM debt securities accrued interest receivable at either date.~~condition and excluded from reported amortized cost.

The amortized cost and estimated fair values of HTM debt securities by contractual maturity at March 31, ~~2023~~2024 are shown below. Expected maturities will differ from contractual maturities because borrowers may have the right to call or prepay obligations with or without call or prepayment penalties. Mortgage-related securities are shown in total, as their maturities are highly variable.


(In thousands)	(In thousands)	Amortized Cost		Fair Value		(In thousands)	Amortized Cost	Fair Value

Due in one year or less

Due in one year or less

Due in one year or less	Due in one year or less	$	—	$	—
Due after one year through five years	Due after one year through five years	1,285		1,272
Due after five years through ten years	Due after five years through ten years	20,527		19,720
Due after ten years	Due after ten years	60,643		61,947
Subtotal	Subtotal	82,455		82,939
Mortgage-related securities	Mortgage-related securities	457,619		428,060
Total	Total	$	540,074	$	510,999

AFS and HTM Debt Securities Pledged

At March 31, ~~2023~~2024 and December 31, ~~2022,~~2023, AFS and HTM debt securities with an amortized cost of ~~$630.2~~$736.8 million and ~~$821.9~~$675.5 million and estimated fair values of ~~$560.3~~$647.0 million and ~~$726.5~~$607.9 million, respectively, were pledged to secure FHLBB advances, FRB advances, public deposits, and securities sold under agreements to repurchase and for other purposes required or permitted by law.

1413

Other Investments

The Company's FHLBB and FRB common stock are reported at cost within other investments on the consolidated statements of condition. The Company evaluates these investments for impairment based on the ultimate recoverability of the par value. The Company did not record any impairment on its FHLBB and FRB stock for the three months ended March 31, ~~2023~~2024 and ~~2022.~~2023.

The following table summarizes the Company's investment in FHLBB stock and ~~FRBB~~FRB stock as presented within other investments on the consolidated statements of condition, as of the dates indicated:
(In thousands) March 31,
2023 December 31,
2022
FHLBB $ 14,040 $ 7,339
FRB 5,374 5,374
Total other investments $ 19,414 $ 12,713


(In thousands)	March 31, 2024		December 31, 2023
FHLBB	$	11,018	$	10,020
FRB	5,374		5,374
Total other investments	$	16,392	$	15,394

NOTE 4 – LOANS AND ALLOWANCE FOR CREDIT LOSSES ON LOANS

Loans

The composition of the Company’s loan portfolio, excluding residential loans held for sale, was as follows for the dates indicated:

(In thousands) March 31,
2023 December 31,
2022
Commercial Loans:
Commercial real estate - non-owner-occupied $ 1,328,793 $ 1,292,443
Commercial real estate - owner-occupied 337,824 332,494
Commercial 421,099 430,131
Total commercial loans 2,087,716 2,055,068
Retail Loans:
Residential real estate 1,733,147 1,700,266
Home equity 232,512 234,428
Consumer 19,733 20,591
Total retail loans 1,985,392 1,955,285
Total loans $ 4,073,108 $ 4,010,353


(In thousands)	March 31, 2024		December 31, 2023
Commercial Loans:
Commercial real estate - non-owner-occupied	$	1,402,326	$	1,370,446
Commercial real estate - owner-occupied	300,626		301,860
Commercial	397,395		403,901

Total commercial loans	2,100,347		2,076,207
Retail Loans:
Residential real estate	1,762,482		1,763,378
Home equity	240,674		240,341
Consumer	17,537		18,168
Total retail loans	2,020,693		2,021,887
Total loans	$	4,121,040	$	4,098,094

The loan balances for each portfolio segment presented above are net of their respective unamortized fair value mark discount on acquired loans and net of unamortized loan origination costs for the dates indicated:


(In thousands)	(In thousands)	March 31, 2023		December 31, 2022		(In thousands)	March 31, 2024	December 31, 2023
Net unamortized loan origination costs
Net unamortized fair value mark discount on acquired loans	Net unamortized fair value mark discount on acquired loans	$	(279)	$	(313)
Net unamortized loan origination costs		6,944		6,890
Total	Total	$	6,665	$	6,577

The Company's lending activities are primarily conducted in Maine, but also ~~include~~includes loan production offices in ~~Massachusetts and~~ New Hampshire. The Company originates single- and multi-family residential loans, commercial real estate loans, business loans, municipal loans and a variety of consumer loans. In addition, the Company makes loans for the construction of residential homes, multi-family properties and commercial real estate properties. The ability and willingness of borrowers to honor their repayment commitments is generally dependent on the level of overall economic activity within the geographic area and the general economy.

1514

~~SBA PPP Loans.~~ Beginning in April 2020, the Company originated SBA PPP loans issued to qualifying businesses as part of the federal stimulus packages issued due to the COVID-19 pandemic. This program provided qualifying businesses a specialized, low-interest-rate loan by the U.S. Treasury Department and was administered by the SBA. SBA PPP loans provided borrower guarantees for lenders, as well as loan forgiveness incentives for borrowers that utilized the loan proceeds to cover employee compensation-related business operating costs, as well as certain other costs up to pre-established limits. Effective May 31, 2021, the SBA PPP loan program ended and the Company ceased originating loans under this program. At March 31, 2023 and December 31, 2022, five loans with a total principal balance of $583,000 and $648,000, respectively, remain outstanding and were presented in commercial loans.

Related Party Loans. In the normal course of business, the Bank makes loans to certain officers, directors and their associated companies, under terms that are consistent with the Company's lending policies and regulatory requirements and that do not involve more than the normal risk of collectability or present other unfavorable features. At March 31, ~~2023~~2024 and December 31, ~~2022,~~2023, outstanding loans to certain officers, directors and their associated companies were less than 5% of the Company's shareholders' equity.

Loan Sales

For the three months ended March 31, ~~2023~~2024 and ~~2022,~~2023, the Company sold ~~$35.1~~$41.4 million and ~~$46.6~~$35.1 million, respectively, of residential mortgage loans on the secondary market, which resulted in gains on the sale of loans (net of costs) of ~~$384,000~~$470,000 and ~~$1.1 million,~~$384,000, respectively.

At March 31, ~~2023~~2024 and December 31, ~~2022,~~2023, the Company had certain residential mortgage loans with a principal balance of ~~$4.5~~$9.4 million and ~~$5.3~~$10.2 million, respectively, designated as held for sale. The Company has elected the fair value option of accounting for its loans held for sale, and at March 31, ~~2023~~2024 and December 31, ~~2022,~~2023, recorded an unrealized ~~gain (loss)~~gains of ~~$23,000~~$83,000 and ~~($62,000),~~$168,000, respectively. For the three months ended March 31, ~~2023~~2024 and ~~2022,~~2023, the Company recorded unrealized (losses) gains on loans held for sale ~~recorded~~ within mortgage banking income, net, on the Company's consolidated statements of income of ~~$85,000~~($85,000) and ~~$142,000,~~$85,000, respectively.

The Company has forward delivery commitments with a secondary market investor on each of its loans held for sale at March 31, ~~2023~~2024 and December 31, ~~2022.~~2023. Refer to Note 8 for further discussion of the Company's forward delivery commitments.

ACL on Loans

The Company manages its loan portfolio proactively to effectively identify problem credits and assess trends early, implement effective work-out strategies, and take charge-offs as promptly as practical. In addition, the Company continuously reassesses its underwriting standards in response to credit risk posed by changes in economic conditions. The Company monitors and manages credit risk through the following governance structure:

•The Credit Risk and Special Assets team and the Credit Risk Policy Committee, which is an internal management committee comprised of various executives and senior managers across business lines, including Accounting and Finance, Credit Underwriting, Credit Risk and Special Assets, Compliance, and Commercial and Retail Banking, oversee the Company's systems and procedures to monitor the credit quality of its loan portfolio, conduct a loan review program, and maintain the integrity of the loan rating system.

•The adequacy of the ACL is overseen by the Management Provision Committee, which is an internal management committee comprised of various Company executives and senior managers across business lines, including Accounting and Finance, Credit Underwriting, Credit Risk and Special Assets, Compliance, and Commercial and Retail Banking. The Management Provision Committee supports the oversight efforts of the Audit Committee of the Board of Directors.

•The Directors' Credit Committee of the Board of Directors reviews large credit exposures, monitors external loan review reports, reviews the lending authority for individual loan officers when required, and has approval authority and responsibility for all matters regarding the loan policy and other credit-related policies, including reviewing and monitoring asset quality trends, and concentration levels.

•The Audit Committee of the Board of Directors has approval authority and oversight responsibility for the ACL adequacy and methodology.

Segmentation. For purposes of determining the ACL on loans, the Company disaggregates its loans into portfolio segments. Each portfolio segment possesses unique risk characteristics that are considered when determining the appropriate level of allowance. As of March 31, ~~2023~~2024 and December 31, ~~2022,~~2023, the Company's loan portfolio segments, as determined based on the unique risk characteristics of each, include the following:

Commercial Real Estate - Non-Owner-Occupied. Non-owner-occupied commercial real estate loans are, in substance, all commercial real estate loans that are not categorized by the Company as owner-occupied commercial real estate loans. Non-owner-occupied commercial estate loans are investment properties in which the primary source for repayment of the loan by the borrower is derived from rental income associated with the property or the proceeds of the sale, refinancing, or permanent refinancing of the property. Non-owner-occupied commercial real estate loans consist of mortgage loans to finance investments

in real property that may include, but are not limited to, multi-family residential, commercial/retail office space, industrial/warehouse space, hotels, assisted living facilities and other specific use properties. ~~Also~~Construction projects are also included within the non-owner-occupied commercial real estate loan segment ~~are construction projects~~ until they are completed. Commercial real estate loans typically 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 - Owner-Occupied. Generally, owner-occupied commercial real estate loans are properties that are owned and operated by the borrower, and the primary source for repayment is the cash flow from the ongoing operations and activities conducted by the borrower's business. Owner-occupied commercial real estate loans consist of mortgage loans to finance investments in real property that may include, but are not limited to, commercial/retail office space, restaurants, educational and medical practice facilities and other specific use properties. 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. Commercial 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. Collateral generally consists of pledges of business assets including, but not limited to, accounts receivable, inventory, plant and equipment, and/or real estate, if applicable. Commercial loans primarily are ~~primarily~~ paid by the operating cash flow of the borrower. Commercial loans may be secured or unsecured.

Residential Real Estate. Residential real estate loans held in the Company's loan portfolio are made to borrowers who demonstrate the ability to make scheduled payments with full consideration to underwriting factors. Borrower qualifications include favorable credit history combined with supportive income requirements and combined loan-to-value ratios within established policy guidelines. Collateral consists of mortgage liens on one- to four-family residences, including for investment purposes.

Home Equity. Home equity 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. ~~Each~~The home equity loan has a fixed rate and is billed as equal payments comprised of principal and interest. ~~Each~~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. Consumer loan products include personal lines of credit and amortizing loans made to qualified individuals for various purposes such as education, auto loans, debt consolidation, personal expenses or overdraft protection. Borrower qualifications include favorable credit history combined with supportive income and collateral requirements within established policy guidelines, as applicable. Consumer loans may be secured or unsecured.

The following table presents the activity in the ACL on loans for the periods indicated:

Commercial Real Estate
(In thousands) Non-Owner-Occupied Owner- Occupied Commercial Residential Real Estate Home Equity Consumer Total
At or For The Three Months Ended March 31, 2023
Beginning balance, December 31, 2022 $ 17,296 $ 2,362 $ 5,446 $ 9,089 $ 2,225 $ 504 $ 36,922
Charge-offs — — (312) (18) — (4) (334)
Recoveries 1 — 99 4 — 3 107
(Credit) provision for loan losses (973) 108 (652) 1,737 215 4 439
Ending balance, March 31, 2023 $ 16,324 $ 2,470 $ 4,581 $ 10,812 $ 2,440 $ 507 $ 37,134
At or For The Three Months Ended March 31, 2022
Beginning balance, December 31, 2021 $ 18,834 $ 2,539 $ 4,202 $ 6,133 $ 1,469 $ 79 $ 33,256
Charge-offs — — (245) — — (67) (312)
Recoveries 1 2 57 — — 2 62
(Credit) provision for loan losses (2,263) (202) 843 343 (34) 92 (1,221)
Ending balance, March 31, 2022 $ 16,572 $ 2,339 $ 4,857 $ 6,476 $ 1,435 $ 106 $ 31,785
At or For The Year Ended December 31, 2022
Beginning balance, December 31, 2021 $ 18,834 $ 2,539 $ 4,202 $ 6,133 $ 1,469 $ 79 $ 33,256
Charge-offs — — (1,042) (66) — (134) (1,242)
Recoveries 3 2 379 — 87 7 478
(Credit) provision for loan losses (1,541) (179) 1,907 3,022 669 552 4,430
Ending balance, December 31, 2022 $ 17,296 $ 2,362 $ 5,446 $ 9,089 $ 2,225 $ 504 $ 36,922


	Commercial Real Estate
(In thousands)	Non-Owner-Occupied		Owner- Occupied		Commercial		Residential Real Estate		Home Equity		Consumer		Total
At or For The Three Months Ended March 31, 2024
Beginning balance, December 31, 2023	$	16,581	$	2,290	$	4,869	$	10,254	$	2,217	$	724	$	36,935
Charge-offs	—		—		(309)		—		—		(36)		(345)
Recoveries	7		—		92		6		80		2		187
(Credit) provision for loan losses	(1,294)		(60)		(192)		305		63		14		(1,164)
Ending balance, March 31, 2024	$	15,294	$	2,230	$	4,460	$	10,565	$	2,360	$	704	$	35,613
At or For The Three Months Ended March 31, 2023
Beginning balance, December 31, 2022	$	17,296	$	2,362	$	5,446	$	9,089	$	2,225	$	504	$	36,922
Charge-offs	—		—		(312)		(18)		—		(4)		(334)
Recoveries	1		—		99		4		—		3		107
(Credit) provision for loan losses	(973)		108		(652)		1,737		215		4		439
Ending balance, March 31, 2023	$	16,324	$	2,470	$	4,581	$	10,812	$	2,440	$	507	$	37,134
At or For The Year Ended December 31, 2023
Beginning balance, December 31, 2022	$	17,296	$	2,362	$	5,446	$	9,089	$	2,225	$	504	$	36,922
Charge-offs	—		(58)		(1,560)		(18)		—		(91)		(1,727)
Recoveries	19		—		471		44		1		31		566
(Credit) provision for loan losses	(734)		(14)		512		1,139		(9)		280		1,174
Ending balance, December 31, 2023	$	16,581	$	2,290	$	4,869	$	10,254	$	2,217	$	724	$	36,935

The ACL on loans ~~increased $200,000~~decreased $1.3 million during the three months ended March 31, ~~2023,~~2024, to ~~$37.1~~$35.6 million. The net ~~increase was driven by: an overall softening economy and the increasing likelihood of a recession and 2% loan growth during~~decrease over this period ~~which~~ was primarily driven by ~~residential real estate and~~a decrease of $1.3 million in the ACL on loans for the commercial real estate ~~- non-owner-occupied.~~loan portfolio, primarily due to the improvement in the economic outlook primarily for the U.S. and Maine gross domestic product forecast over the Company's forecast period, as compared to December 31, 2023.

At March 31, 2024 and December 31, 2023, total accrued interest receivable on loans, which has been excluded from reported amortized cost basis on loans, was $13.0 million and $12.7 million, respectively, and reported within other assets on the consolidated statements of condition. An allowance was not carried on the accrued interest receivable at either date.

Credit Concentrations

The Company focuses on maintaining a well-balanced and diversified loan portfolio. Despite such efforts, it is recognized that credit concentrations may occasionally emerge as a result of economic conditions, changes in local demand, natural loan growth and runoff. To identify credit concentrations effectively, all commercial and commercial real estate loans are assigned Standard Industrial Classification codes, North American Industry Classification System codes, and state and county codes. Shifts in portfolio concentrations are monitored. As of March 31, ~~2023,~~2024, the Company's total exposure to the lessors of nonresidential buildings' industry and lessors of residential buildings' industry were 13% and ~~12%~~11% of total loans and 32% and 28% of total commercial real estate loans, respectively. There were no other industry exposures exceeding 10% of the Company's total loan portfolio as of March 31, ~~2023.~~2024.

Credit Quality Indicators

To further identify loans with similar risk profiles, the Company categorizes each portfolio segment into classes by credit risk characteristic and applies a credit quality indicator to each portfolio segment. The indicators for commercial real estate - non-owner-occupied and owner-occupied, commercial and residential real estate portfolio segments are represented by Grades 1 through 10 as outlined below. In general, risk ratings are adjusted periodically throughout the year as updated analysis and review warrants. This process may include, but is not limited to, annual credit and loan reviews, periodic reviews of loan performance metrics, such as delinquency rates, and quarterly reviews of adversely risk rated loans. The Company uses the following definitions when assessing grades for the purpose of evaluating the risk and adequacy of the ACL on loans:

•Grade 1 through 6 — Grades 1 through 6 represent groups of loans that are not subject to adverse criticism as defined in regulatory guidance. Loans in these groups exhibit characteristics that represent low to moderate risks, which is measured using a variety of credit risk criteria, such as cash flow coverage, debt service coverage, balance sheet leverage, liquidity, management experience, industry position, prevailing economic conditions, support from secondary sources of repayment and other credit factors that may be relevant to a specific loan. In general, these loans are supported by properly margined collateral and guarantees of principal parties.

•Grade 7 — Loans with potential weakness (Special Mention). Loans in this category are currently protected based on collateral and repayment capacity and do not constitute undesirable credit risk, but have potential weakness that may result in deterioration of the repayment process at some future date. This classification is used if a negative trend is evident in the obligor’s financial situation. Special mention loans do not sufficiently expose the Company to warrant adverse classification.

•Grade 8 — Loans with definite weakness (Substandard). Loans classified as substandard are inadequately protected by the current sound worth and paying capacity of the obligor or by collateral pledged. Borrowers experience difficulty in meeting debt repayment requirements. Deterioration is sufficient to cause the Company to look to the sale of collateral.

•Grade 9 — Loans with potential loss (Doubtful). Loans classified as doubtful have all the weaknesses inherent in the substandard grade with the added characteristic that the weaknesses make collection or liquidation of the loan in full highly questionable and improbable. The possibility of some loss is extremely high, but because of specific pending factors that may work to the advantage and strengthening of the asset, its classification as an estimated loss is deferred until its more exact status may be determined.

•Grade 10 — Loans with definite loss (Loss). Loans classified as loss are considered uncollectible. The loss classification does not mean that the asset has absolutely no recovery or salvage value, but rather that it is not practical or desirable to defer writing off the asset because recovery and collection time may be protracted.

The Company periodically reassesses asset quality indicators to reflect appropriately the risk composition of the Company’s loan portfolio. Home equity and consumer loans are not individually risk rated, but rather analyzed as groups taking into account delinquency rates and other economic conditions which may affect the ability of borrowers to meet debt service requirements, including interest rates and energy costs. Performing loans include loans that are current and loans that are past due less than 90 days. Loans that are past due over 90 days and non-accrual loans, including TDRs prior to adoption of ASU 2022-02, are considered non-performing.

Based on the most recent analysis performed, the risk category of loans by portfolio segment by vintage was as follows as of and for the dates indicated:


(In thousands)	2024		2023		2022		2021		2020		Prior		Revolving Loans Amortized Cost Basis		Revolving Loans Converted to Term		Total
As of and for the period ended March 31, 2024
Commercial real estate - non-owner-occupied
Risk rating
Pass (Grades 1-6)	$	24,940	$	110,364	$	373,193	$	298,334	$	144,522	$	428,600	$	—	$	—	$	1,379,953
Special mention (Grade 7)	—		7,997		—		—		348		3,566		—		—		11,911
Substandard (Grade 8)	539		—		272		—		2,268		7,383		—		—		10,462
Doubtful (Grade 9)	—		—		—		—		—		—		—		—		—
Total commercial real estate - non-owner-occupied	$	25,479	$	118,361	$	373,465	$	298,334	$	147,138	$	439,549	$	—	$	—	$	1,402,326
Gross charge-offs for the three months ended	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—
Commercial real estate - owner-occupied
Risk rating
Pass (Grades 1-6)	$	7,549	$	25,991	$	51,679	$	75,480	$	24,167	$	101,351	$	—	$	—	$	286,217
Special mention (Grade 7)	—		545		—		2,242		—		1,869		—		—		4,656
Substandard (Grade 8)	—		—		399		317		—		9,037		—		—		9,753
Doubtful (Grade 9)	—		—		—		—		—		—		—		—		—
Total commercial real estate - owner occupied	$	7,549	$	26,536	$	52,078	$	78,039	$	24,167	$	112,257	$	—	$	—	$	300,626
Gross charge-offs for the three months ended	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—
Commercial
Risk rating
Pass (Grades 1-6)	$	6,841	$	39,680	$	52,095	$	53,429	$	23,017	$	58,186	$	121,578	$	33,102	$	387,928
Special mention (Grade 7)	—		58		236		—		—		99		538		159		1,090
Substandard (Grade 8)	—		234		484		357		887		2,108		2,471		1,836		8,377
Doubtful (Grade 9)	—		—		—		—		—		—		—		—		—
Total commercial	$	6,841	$	39,972	$	52,815	$	53,786	$	23,904	$	60,393	$	124,587	$	35,097	$	397,395
Gross charge-offs for the three months ended	$	—	$	2	$	—	$	14	$	—	$	218	$	25	$	50	$	309
Residential Real Estate
Risk rating
Pass (Grades 1-6)	$	24,318	$	165,392	$	533,172	$	532,317	$	217,904	$	285,193	$	377	$	380	$	1,759,053
Special mention (Grade 7)	—		—		—		—		—		—		—		—		—
Substandard (Grade 8)	—		—		—		664		—		2,765		—		—		3,429
Doubtful (Grade 9)	—		—		—		—		—		—		—		—		—
Total residential real estate	$	24,318	$	165,392	$	533,172	$	532,981	$	217,904	$	287,958	$	377	$	380	$	1,762,482
Gross charge-offs for the three months ended	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—
Home equity
Risk rating
Performing	$	1,889	$	15,937	$	22,054	$	506	$	319	$	15,771	$	169,846	$	13,364	$	239,686
Non-performing	—		—		288		—		—		10		546		144		988
Total home equity	$	1,889	$	15,937	$	22,342	$	506	$	319	$	15,781	$	170,392	$	13,508	$	240,674
Gross charge-offs for the three months ended	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—
Consumer
Risk rating
Performing	$	1,303	$	4,867	$	4,344	$	1,750	$	656	$	2,467	$	2,144	$	—	$	17,531
Non-performing	—		—		—		—		—		6		—		—		6
Total consumer	$	1,303	$	4,867	$	4,344	$	1,750	$	656	$	2,473	$	2,144	$	—	$	17,537
Gross charge-offs for the three months ended	$	—	$	15	$	15	$	5	$	—	$	—	$	1	$	—	$	36


(In thousands)	2023		2022		2021		2020		2019		Prior		Revolving Loans Amortized Cost Basis		Revolving Loans Converted to Term		Total
As of and for the year ended December 31, 2023
Commercial real estate - non-owner-occupied
Risk rating:
Pass (Grades 1-6)	$	103,012	$	364,777	$	296,152	$	146,707	$	116,777	$	320,101	$	—	$	—	$	1,347,526
Special mention (Grade 7)	7,997		—		—		350		33		3,597		—		—		11,977
Substandard (Grade 8)	747		450		—		2,287		114		7,345		—		—		10,943
Doubtful (Grade 9)	—		—		—		—		—		—		—		—		—
Total commercial real estate - non-owner-occupied	$	111,756	$	365,227	$	296,152	$	149,344	$	116,924	$	331,043	$	—	$	—	$	1,370,446
Gross charge-offs for the year ended	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—
Commercial real estate - owner-occupied
Risk rating:
Pass (Grades 1-6)	$	26,902	$	53,550	$	76,575	$	24,608	$	18,728	$	89,133	$	—	$	—	$	289,496
Special mention (Grade 7)	—		—		2,355		—		—		141		—		—		2,496
Substandard (Grade 8)	—		402		320		—		—		9,146		—		—		9,868
Doubtful (Grade 9)	—		—		—		—		—		—		—		—		—
Total commercial real estate - owner-occupied	$	26,902	$	53,952	$	79,250	$	24,608	$	18,728	$	98,420	$	—	$	—	$	301,860
Gross charge-offs for the year ended	$	—	$	—	$	—	$	—	$	—	$	58	$	—	$	—	$	58
Commercial
Risk rating:
Pass (Grades 1-6)	$	41,871	$	54,323	$	56,102	$	24,338	$	25,620	$	35,442	$	119,119	$	36,895	$	393,710
Special mention (Grade 7)	45		—		152		195		—		101		660		5		1,158
Substandard (Grade 8)	248		588		296		769		955		1,354		2,415		2,408		9,033
Doubtful (Grade 9)	—		—		—		—		—		—		—		—		—
Total commercial	$	42,164	$	54,911	$	56,550	$	25,302	$	26,575	$	36,897	$	122,194	$	39,308	$	403,901
Gross charge-offs for the year ended	$	—	$	68	$	137	$	31	$	20	$	1,075	$	82	$	147	$	1,560
Residential Real Estate
Risk rating:
Pass (Grades 1-6)	$	160,315	$	539,835	$	540,980	$	220,943	$	70,917	$	226,126	$	370	$	386	$	1,759,872
Special mention (Grade 7)	—		—		—		—		—		—		—		—		—
Substandard (Grade 8)	—		—		963		—		89		2,454		—		—		3,506
Doubtful (Grade 9)	—		—		—		—		—		—		—		—		—
Total residential real estate	$	160,315	$	539,835	$	541,943	$	220,943	$	71,006	$	228,580	$	370	$	386	$	1,763,378
Gross charge-offs for the year ended	$	—	$	—	$	—	$	—	$	—	$	18	$	—	$	—	$	18
Home equity
Risk rating:
Performing	$	15,976	$	23,104	$	547	$	324	$	4,124	$	12,686	$	169,416	$	13,405	$	239,582
Non-performing	—		—		—		—		—		11		527		221		759
Total home equity	$	15,976	$	23,104	$	547	$	324	$	4,124	$	12,697	$	169,943	$	13,626	$	240,341
Gross charge-offs for the year ended	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—
Consumer
Risk rating:
Performing	$	5,525	$	4,908	$	2,068	$	815	$	345	$	2,279	$	2,191	$	—	$	18,131
Non-performing	—		—		5		—		—		32		—		—		37
Total consumer	$	5,525	$	4,908	$	2,073	$	815	$	345	$	2,311	$	2,191	$	—	$	18,168
Gross charge-offs for the year ended	$	2	$	19	$	31	$	14	$	8	$	4	$	13	$	—	$	91

(In thousands) 2023 2022 2021 2020 2019 Prior Revolving Loans
Amortized Cost Basis Revolving Loans
Converted to Term Total
As of and for the period ended March 31, 2023
Commercial real estate - non-owner-occupied
Risk rating
Pass (Grades 1-6) $ 32,495 $ 348,906 $ 292,459 $ 158,884 $ 123,148 $ 343,942 $ — $ — $ 1,299,834
Special mention (Grade 7) — — 166 356 252 388 — — 1,162
Substandard (Grade 8) — 177 123 1,255 200 26,042 — — 27,797
Doubtful (Grade 9) — — — — — — — — —
Total commercial real estate - non-owner-occupied $ 32,495 $ 349,083 $ 292,748 $ 160,495 $ 123,600 $ 370,372 $ — $ — $ 1,328,793
Gross charge-offs for the three months ended $ — $ — $ — $ — $ — $ — $ — $ — $ —
Commercial real estate - owner-occupied
Risk rating
Pass (Grades 1-6) $ 17,730 $ 54,516 $ 79,464 $ 27,889 $ 21,962 $ 106,937 $ — $ — $ 308,498
Special mention (Grade 7) — — — — — 404 — — 404
Substandard (Grade 8) — 8 2,228 — 19,993 6,693 — — 28,922
Doubtful (Grade 9) — — — — — — — — —
Total commercial real estate - owner occupied $ 17,730 $ 54,524 $ 81,692 $ 27,889 $ 41,955 $ 114,034 $ — $ — $ 337,824
Gross charge-offs for the three months ended $ — $ — $ — $ — $ — $ — $ — $ — $ —
Commercial
Risk rating
Pass (Grades 1-6) $ 13,993 $ 68,567 $ 66,044 $ 30,359 $ 31,455 $ 45,211 $ 130,278 $ 30,254 $ 416,161
Special mention (Grade 7) — — — 87 114 180 200 10 591
Substandard (Grade 8) 192 229 88 134 267 1,906 692 839 4,347
Doubtful (Grade 9) — — — — — — — — —
Total commercial $ 14,185 $ 68,796 $ 66,132 $ 30,580 $ 31,836 $ 47,297 $ 131,170 $ 31,103 $ 421,099
Gross charge-offs for the three months ended $ — $ — $ 51 $ 9 $ — $ 172 $ 20 $ 60 $ 312
Residential Real Estate
Risk rating
Pass (Grades 1-6) $ 47,241 $ 544,518 $ 572,505 $ 236,212 $ 77,364 $ 252,040 $ 347 $ — $ 1,730,227
Special mention (Grade 7) — — — — — — — — —
Substandard (Grade 8) — — — — 92 2,828 — — 2,920
Doubtful (Grade 9) — — — — — — — — —
Total residential real estate $ 47,241 $ 544,518 $ 572,505 $ 236,212 $ 77,456 $ 254,868 $ 347 $ — $ 1,733,147
Gross charge-offs for the three months ended $ — $ — $ — $ — $ — $ 18 $ — $ — $ 18
Home equity
Risk rating
Performing $ 3,926 $ 25,674 $ 564 $ 338 $ 4,655 $ 15,125 $ 170,075 $ 11,717 $ 232,074
Non-performing — — — — — 12 347 79 438
Total home equity $ 3,926 $ 25,674 $ 564 $ 338 $ 4,655 $ 15,137 $ 170,422 $ 11,796 $ 232,512
Gross charge-offs for the three months ended $ — $ — $ — $ — $ — $ — $ — $ — $ —
Consumer
Risk rating
Performing $ 1,441 $ 7,204 $ 3,359 $ 1,455 $ 826 $ 2,662 $ 2,786 $ — $ 19,733
Non-performing — — — — — — — — —
Total consumer $ 1,441 $ 7,204 $ 3,359 $ 1,455 $ 826 $ 2,662 $ 2,786 $ — $ 19,733
Gross charge-offs for the three months ended $ — $ — $ — $ — $ — $ 4 $ — $ — $ 4

(In thousands) 2022 2021 2020 2019 2018 Prior Revolving Loans
Amortized Cost Basis Revolving Loans
Converted to Term Total
As of December 31, 2022
Commercial real estate - non-owner-occupied
Risk rating
Pass (Grades 1-6) $ 339,171 $ 287,749 $ 160,621 $ 125,029 $ 108,823 $ 242,024 $ — $ — $ 1,263,417
Special mention (Grade 7) — 167 364 259 75 321 — — 1,186
Substandard (Grade 8) — 127 1,306 203 7,798 18,406 — — 27,840
Doubtful (Grade 9) — — — — — — — — —
Total commercial real estate - non-owner-occupied $ 339,171 $ 288,043 $ 162,291 $ 125,491 $ 116,696 $ 260,751 $ — $ — $ 1,292,443
Commercial real estate - owner-occupied
Risk rating
Pass (Grades 1-6) $ 60,127 $ 80,781 $ 28,378 $ 23,381 $ 39,554 $ 70,568 $ — $ — $ 302,789
Special mention (Grade 7) — 2,053 — 19,992 — 411 — — 22,456
Substandard (Grade 8) 17 — — — 3,266 3,966 — — 7,249
Doubtful (Grade 9) — — — — — — — — —
Total commercial real estate - owner occupied $ 60,144 $ 82,834 $ 28,378 $ 43,373 $ 42,820 $ 74,945 $ — $ — $ 332,494
Commercial
Risk rating
Pass (Grades 1-6) $ 73,537 $ 70,110 $ 32,272 $ 33,491 $ 22,271 $ 26,245 $ 135,157 $ 30,191 $ 423,274
Special mention (Grade 7) — — 93 141 70 189 1,196 12 1,701
Substandard (Grade 8) 149 52 133 216 846 1,524 50 2,186 5,156
Doubtful (Grade 9) — — — — — — — — —
Total commercial $ 73,686 $ 70,162 $ 32,498 $ 33,848 $ 23,187 $ 27,958 $ 136,403 $ 32,389 $ 430,131
Residential Real Estate
Risk rating
Pass (Grades 1-6) $ 533,035 $ 579,216 $ 244,691 $ 79,492 $ 50,214 $ 210,262 $ 340 $ — $ 1,697,250
Special mention (Grade 7) — — — — — 23 — — 23
Substandard (Grade 8) — — — — 163 2,830 — — 2,993
Doubtful (Grade 9) — — — — — — — — —
Total residential real estate $ 533,035 $ 579,216 $ 244,691 $ 79,492 $ 50,377 $ 213,115 $ 340 $ — $ 1,700,266
Home equity
Risk rating
Performing $ 26,712 $ 693 $ 341 $ 4,842 $ 7,730 $ 8,551 $ 173,338 $ 11,735 $ 233,942
Non-performing — — — — — 27 377 82 486
Total home equity $ 26,712 $ 693 $ 341 $ 4,842 $ 7,730 $ 8,578 $ 173,715 $ 11,817 $ 234,428
Consumer
Risk rating
Performing $ 8,009 $ 3,816 $ 1,702 $ 1,188 $ 345 $ 2,462 $ 3,069 $ — $ 20,591
Non-performing — — — — — — — — —
Total consumer $ 8,009 $ 3,816 $ 1,702 $ 1,188 $ 345 $ 2,462 $ 3,069 $ — $ 20,591

Past Due and Non-Accrual Loans

The Company closely monitors the performance of its loan portfolio. A loan is placed on non-accrual status when the financial condition of the borrower is deteriorating, payment in full of both principal and interest is not expected as scheduled, or principal or interest has been in default for 90 days or more. Exceptions may be made if the asset is secured by collateral sufficient to satisfy both the principal and accrued interest in full and collection is reasonably assured. When one loan to a borrower is placed on non-accrual status, all other loans to the borrower are re-evaluated to determine if they should also be placed on non-accrual status. All previously accrued and unpaid interest is reversed at this time. A loan will return to accrual status when collection of principal and interest is assured and the borrower has demonstrated timely payments of principal and interest for a reasonable period, generally at least six months. Unsecured loans, however, are not normally placed on non-accrual status because they are generally charged-off once their collectability is in doubt.

The following is a loan aging analysis by portfolio segment (including loans past due over 90 days and non-accrual loans) and loans past due over 90 days and accruing as of the following dates:


(In thousands)	(In thousands)	30-59 Days Past Due		60-89 Days Past Due		90 Days or Greater Past Due		Total Past Due		Current		Total Loans Outstanding		Loans > 90 Days Past Due and Accruing
March 31, 2023
(In thousands)
(In thousands)
March 31, 2024
March 31, 2024
March 31, 2024
Commercial real estate - non-owner-occupied
Commercial real estate - non-owner-occupied
Commercial real estate - non-owner-occupied	Commercial real estate - non-owner-occupied	$	34	$	—	$	10	$	44	$	1,328,749	$	1,328,793	$	—
Commercial real estate - owner-occupied	Commercial real estate - owner-occupied	77		—		47		124		337,700		337,824
Commercial real estate - owner-occupied
Commercial real estate - owner-occupied
Commercial
Commercial
Commercial	Commercial	965		79		465		1,509		419,590		421,099		—
Residential real estate	Residential real estate	283		194		459		936		1,732,211		1,733,147		—
Residential real estate
Residential real estate
Home equity
Home equity
Home equity	Home equity	552		106		151		809		231,703		232,512		—
Consumer	Consumer	32		29		—		61		19,672		19,733		—
Consumer
Consumer
Total	Total	$	1,943	$	408	$	1,132	$	3,483	$	4,069,625	$	4,073,108	$	—
December 31, 2022
Total
Total
December 31, 2023
December 31, 2023
December 31, 2023
Commercial real estate - non-owner-occupied
Commercial real estate - non-owner-occupied
Commercial real estate - non-owner-occupied	Commercial real estate - non-owner-occupied	$	267	$	—	$	11	$	278	$	1,292,165	$	1,292,443	$	—
Commercial real estate - owner-occupied	Commercial real estate - owner-occupied	55		—		47		102		332,392		332,494		—
Commercial real estate - owner-occupied
Commercial real estate - owner-occupied
Commercial
Commercial
Commercial	Commercial	667		134		640		1,441		428,690		430,131		—
Residential real estate	Residential real estate	852		186		524		1,562		1,698,704		1,700,266		—
Residential real estate
Residential real estate
Home equity
Home equity
Home equity	Home equity	357		—		171		528		233,900		234,428		—
Consumer	Consumer	23		11		—		34		20,557		20,591		—
Consumer
Consumer
Total	Total	$	2,221	$	331	$	1,393	$	3,945	$	4,006,408	$	4,010,353	$	—
Total
Total

The following table presents the amortized cost basis of loans on non-accrual status ~~(including non-accruing TDRs prior to adoption of ASU 2022-02)~~ by portfolio segment as of the dates indicated:


			March 31, 2023						December 31, 2022
		March 31, 2024																	March 31, 2024			December 31, 2023
(In thousands)	(In thousands)		Non-Accrual Loans With an Allowance		Non-Accrual Loans Without an Allowance		Total Non-Accrual Loans		Non-Accrual Loans With an Allowance		Non-Accrual Loans Without an Allowance		Total Non-Accrual Loans		(In thousands)	Non-Accrual Loans With an Allowance	Non-Accrual Loans Without an Allowance	Total Non-Accrual Loans		Non-Accrual Loans With an Allowance	Non-Accrual Loans Without an Allowance		Total Non-Accrual Loans
Commercial real estate - non-owner-occupied	Commercial real estate - non-owner-occupied		$	—	$	10	$	10	$	—	$	11	$	11
Commercial real estate - owner-occupied	Commercial real estate - owner-occupied		—		47		47		—		46		46
Commercial	Commercial		606		142		748		415		300		715
Residential real estate	Residential real estate		1,359		356		1,715		1,314		419		1,733
Home equity	Home equity		377		61		438		421		65		486
Consumer	Consumer		—		—		—		—		—		—
Total	Total		$	2,342	$	616	$	2,958	$	2,150	$	841	$	2,991

The following table presents the amortized cost basis of collateral-dependent ~~non-accrual~~ loans ~~(including non-accruing TDRs prior to adoption of ASU 2022-02)~~ by portfolio segment and collateral type, as of the dates indicated:

March 31,
2023 December 31,
2022
Collateral Type Total Collateral -Dependent
Non-Accrual Loans Collateral Type Total Collateral -Dependent
Non-Accrual Loans
(In thousands) Real Estate General Business Assets Real Estate General Business Assets
Residential real estate $ 325 $ — $ 325 $ 387 $ — $ 387
Home equity — — — — — —
Total $ 325 $ — $ 325 $ 387 $ — $ 387


	March 31, 2024				December 31, 2023
	Collateral Type		Total Collateral -Dependent Loans			Collateral Type		Total Collateral -Dependent Loans
(In thousands)	Real Estate					Real Estate
Commercial real estate - non-owner occupied	$	4,493	$	4,493		$	4,494	$	4,494
Commercial	—		—			671		671



Total	$	4,493	$	4,493		$	5,165	$	5,165

Collateral-dependent loans are loans for which repayment is expected to be provided substantially by the underlying collateral and there are no other available and reliable sources of repayment.

Interest income that would have been recognized if loans on non-accrual status had been current in accordance with their original terms is estimated to have been ~~$25,000~~$43,000 and ~~$46,000~~$25,000 for the three months ended March 31, ~~2023~~2024 and ~~2022,~~2023, respectively.

The Company's policy is to reverse previously recorded accrued interest income when a loan is placed on non-accrual. As a result, the Company did not record any interest income on its ~~non-accruals~~non-accrual loans for the three months ended March 31, ~~2023~~2024 and 2022. At March 31, 2023 and December 31, 2022, total accrued interest receivable on loans, which has been excluded from reported amortized cost basis on loans, was $11.0 million and $10.3 million, respectively, and reported within other assets on the consolidated statements of condition. An allowance was not carried on the accrued interest receivable at either date.2023.

Loan Modifications for Borrowers Experiencing Financial Difficulty

Effective January 1, 2023, the Company ~~adopted prospectively ASU No. 2022-02, Financial Instruments - Credit Losses~~ ~~(Topic 326): Troubled Debt Restructurings and Vintage Disclosures~~ ~~("ASU 2022-02"). ASU 2022-02 provided guidance that eliminated the recognition and measurement of TDRs. Following the adoption of this guidance, the Company~~ evaluates all loan modifications ~~made~~in accordance with ASU 2022-02. Under ASU 2022-02, a loan is evaluated to ~~borrowers experiencing financial difficulty, according to~~consider whether the ~~accounting guidance for~~ loan, ~~refinancing and restructuring to determine whether such loan modification should be accounted for~~ as modified, represents a new loan or is a continuation of ~~the~~an existing loan. ~~Our loan modifications for borrowers experiencing financial difficulty are generally accounted for as a continuation of the existing loan.~~

~~We offer~~The Company offers several types of ~~loans~~loan and receivables modification programs to borrowers experiencing financial difficulty, primarily interest rate reductions and term extensions. In such instances, wethe Company may modify loans and receivables with the intention to minimize future losses and improve collectability, while providing customers with temporary or permanent financial relief. There were no loans modified ~~loans that required disclosure~~for borrowers experiencing financial difficulty for the three months ended March 31, 2024 and 2023.

~~Troubled Debt Restructuring Disclosures Prior to Adoption of ASU 2022-02~~

Prior to the Company's adoption of ASU 2022-02, which became effective for the Company on January 1, 2023, TDRs consisted of loans where the Company, for economic or legal reasons related to the borrower’s financial difficulties, granted a concession to the borrower that it would not otherwise consider. TDRs typically involved term modifications or a reduction of either interest or principal. Once such an obligation has been restructured, it will remain a TDR until paid in full, or until the loan is again restructured at current market rates and no concessions are granted.

2422

The specific reserve allowance was determined by discounting the total expected future cash flows from the borrower at the original loan interest rate, or if the loan is currently collateral-dependent, using net realizable value, which was obtained through independent appraisals and internal evaluations. The following is a summary of TDRs prior to adoption of ASU 2022-02, by portfolio segment, and the associated specific reserve included within the ACL as of December 31, 2022:

Number of Contracts Recorded Investment Specific Reserve
(In thousands, except number of contracts) December 31,
2022 December 31,
2022 December 31,
2022
Commercial real estate - owner-occupied 1 $ 113 $ 50
Commercial — — —
Residential real estate 18 2,208 $ 307
Consumer and home equity 3 245 9
Total 22 $ 2,566 $ 366

~~At December 31, 2022, the Company had performing and non-performing TDRs with a recorded investment balance of $2.1 million and $452,000, respectively.~~

The ~~following represents loan modifications~~Company closely monitors the performance of loans that ~~qualify as TDRs as~~are modified to borrowers experiencing financial difficulty to understand the effectiveness of ~~December 31, 2022 that occurred during~~its modification efforts and relevant factors are considered while assessing the ~~period indicated:~~

Number of Contracts Pre-Modification
Outstanding
Recorded Investment Post-Modification
Outstanding
Recorded Investment Specific Reserve
(In thousands, except number of contracts) December 31,
2022 December 31,
2022 December 31,
2022 December 31,
2022
Home equity:
Interest rate concession and payment deferral — $ — $ — $ —
Maturity concession 1 69 96 —
Total 1 $ 69 $ 96 $ —

adequacy of the ACL. For the ~~year~~three months ended ~~December~~March 31, ~~2022,~~2024 and 2023, there were no modified loans to borrowers experiencing financial difficulty that were ~~modified as TDRs within the previous 12 months~~past due or for which the borrower subsequently defaulted.

In-Process Foreclosure Proceedings

At March 31, ~~2023~~2024 and December 31, ~~2022,~~2023, the Company had ~~$450,000~~$952,000 and ~~$481,000,~~$1.1 million, respectively, of consumer mortgage loans secured by residential real estate properties for which foreclosure proceedings were in process.

FHLB Advances

FHLB advances are those borrowings from the FHLBB greater than 90 days. FHLB advances are collateralized by a blanket lien on qualified collateral consisting primarily of loans with first mortgages secured by one- to four-family properties, certain commercial real estate loans, certain pledged investment securities and other qualified assets. ~~The~~At March 31, 2024 and December 31, 2023, the combined carrying value of residential real estate and commercial loans pledged as collateral was ~~$1.8 billion at March 31, 2023 and December 31, 2022, respectively.~~$1.9 billion.

Refer to Notes 3 and 6 of the consolidated financial statements for discussion of securities pledged as collateral.

NOTE 5 – BORROWINGS

The following summarizes the Company's short-term borrowed funds as presented on the consolidated statements of condition as of the dates ~~indicated.~~indicated:


(In thousands)	March 31, 2024		December 31, 2023
Short-Term Borrowings:
Bank Term Funding Program	$	225,000	$	135,000
Customer Repurchase Agreements	201,499		200,657
Overnight Borrowings	—		24,950
FHLBB Borrowings	175,000		125,000

Total Short-Term Borrowings	$	601,499	$	485,607

At March 31, 2024, the Company had three tranches of BTFP advances totaling $225.0 million, each at a fixed rate of 4.76%, that are scheduled to mature in January of 2025 unless the Company exercises its right to prepayment without penalty. The Company ~~did not have any long-term borrowings as~~refinanced its $135.0 million of ~~the dates indicated.~~

(In thousands) March 31,
2023 December 31,
2022
Short-Term Borrowings:
Customer repurchase agreements $ 196,918 $ 196,451
Overnight borrowings 189,400 18,725
FHLBB borrowings 100,000 50,000
Total short-term borrowings $ 486,318 $ 265,176
BTFP advances outstanding at December 31, 2023 in January 2024.

The Company has two tranches of junior subordinated debentures in the amount of $44.3 million as of March 31, ~~2023~~2024 and December 31, ~~2022.~~2023. Refer to Note 10 of the consolidated financial statements for further details. The Company did not have any other long-term borrowings as of the dates indicated.

NOTE 6 – REPURCHASE AGREEMENTS

The Company can raise additional liquidity by entering into repurchase agreements at its discretion. In a security repurchase agreement transaction, the Company will generally sell a security, agreeing to repurchase either the same or a 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 within interest on borrowings on the consolidated statements of income. The securities underlying the agreements are delivered to counterparties as collateral for the repurchase obligations. Because 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 the Company is 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, the Company either deals 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 the Company's safekeeping agents.

The table below sets forth information regarding the Company’s repurchase agreements accounted for as secured borrowings and types of collateral as of the dates indicated:

(In thousands)

March 31,
2023

December 31,
2022

(In thousands)

March 31,
2024

December 31,

2023

Customer Repurchase Agreements(1)(2):

Mortgage-backed securities issued or guaranteed by U.S. government-sponsored enterprises

174,276

99,105

Mortgage-backed securities issued or guaranteed by U.S. government-sponsored enterprises

Collateralized mortgage obligations issued or guaranteed by U.S. government-sponsored enterprises

22,642

94,328

Obligations of states and political subdivisions

—

3,018

Total

196,918

196,451

(1) Presented within short-term borrowings on the consolidated statements of condition.

(2) All customer repurchase agreements mature continuously or overnight for the dates indicated.

At March 31, ~~2023~~2024 and December 31, ~~2022,~~2023, certain customers held CDs totaling ~~$617,000~~$330,000 and ~~$616,000,~~$396,000, respectively, that were collateralized by CMO and MBS securities that were overnight repurchase agreements.

Certain counterparties monitor collateral, and may request additional collateral to be posted from time to time.

NOTE 7 – COMMITMENTS AND CONTINGENCIES

Commitments

In the normal course of business, the Company is a party to both on- and off-balance sheet financial instruments involving, to varying degrees, elements of credit risk and interest rate risk in addition to the amounts recognized in the consolidated statements of condition.

The following is a summary of the Company's contractual off-balance sheet commitments as of the dates indicated:


(In thousands)	(In thousands)	March 31, 2023		December 31, 2022		(In thousands)	March 31, 2024	December 31, 2023
Commitments to extend credit	Commitments to extend credit	$	779,402	$	817,772
Standby letters of credit	Standby letters of credit	6,769		6,801
Total	Total	$	786,171	$	824,573

The Company’s commitments to extend credit from its lending activities do not necessarily represent future cash requirements since certain of these instruments may expire without being funded and others may not be fully drawn upon. These commitments are subject to the Company’s credit approval process, including an evaluation of the customer’s creditworthiness and related collateral requirements. Commitments generally have fixed expiration dates or other termination clauses.

Standby letters of credit are conditional commitments issued to guarantee the performance of a borrower to a third party. In the event of nonperformance by the borrower, the Company would be required to fund the commitment and would be entitled to the underlying collateral, if applicable, which generally consists of pledges of business assets including, but not limited to, accounts receivable, inventory, plant and equipment, and/or real estate. The maximum potential future payments are limited to the contractual amount of the commitment.

The Company establishes an ACL on off-balance sheet credit exposures on its contractual off-balance sheet commitments, except those that are unconditionally cancellable by the Company. As of March 31, ~~2023~~2024 and December 31, ~~2022,~~2023, the ACL on off-balance sheet credit exposures was ~~$3.0~~$2.3 million and ~~$3.3~~$2.4 million, respectively. The ACL on off-balance sheet credit exposure was presented within accrued interest and other liabilities on the consolidated statements of condition.

For the three months ended March 31, ~~2023~~2024 and ~~2022,~~2023, the (credit) ~~provision~~ for credit losses on off-balance sheet credit exposures was ($~~275,000)~~27,000) and ~~$161,000, respectively.~~($275,000), respectively and was presented within (credit) provision for credit losses on the consolidated statements of income.

Legal Contingencies

In the normal course of business, the Company and its subsidiaries are subject to pending and threatened litigation, claims, investigations and legal and administrative cases and proceedings. Although the Company is not able to predict the outcome of such actions, after reviewing pending and threatened actions with counsel, management believes that, based on the information currently available, the outcome of such actions, individually or in the aggregate, will not have a material adverse effect on the Company’s consolidated financial statements.

Reserves are established for legal claims only when losses associated with the claims are judged to be probable, and the loss can be reasonably estimated. Assessments of litigation exposure are difficult because they involve inherently unpredictable factors including, but not limited to: whether the proceeding is in the early stages; whether damages are unspecified, unsupported, or uncertain; whether there is a potential for punitive or other pecuniary damages; whether the matter involves legal uncertainties, including novel issues of law; whether the matter involves multiple parties and/or jurisdictions; whether discovery has begun or is not complete; whether meaningful settlement discussions have commenced; and whether the lawsuit involves class allegations. In many lawsuits and arbitrations, it is not possible to determine whether a liability has been incurred or to estimate the ultimate or minimum amount of that liability until the case is close to resolution, in which case a reserve will not be recognized until that time. Assessments of class action litigation, which is generally more complex than other types of litigation, are particularly difficult, especially in the early stages of the proceeding when it is not known whether a class will be certified or how a potential class, if certified, will be defined. As a result, the Company may be unable to estimate reasonably possible losses with respect to every litigation matter it faces.

The Company did not have any material loss contingencies that were provided for and/or that are required to be disclosed as of March 31, ~~2023~~2024 and December 31, ~~2022,~~2023, respectively.

NOTE 8 – DERIVATIVES AND HEDGING

The Company is exposed to certain risk arising from both its business operations and economic conditions. The Company principally manages its exposures to a wide variety of business and operational risks through management of its core business activities. The Company manages economic risks, including interest rate, liquidity, and credit risk primarily by managing the amount, sources, and duration of its assets and liabilities and the use of derivative financial instruments. Specifically, the Company enters into derivative financial instruments to manage exposures that arise from business activities that result in the receipt or payment of future known and uncertain cash amounts, the value of which are determined by interest rates. The Company’s credit derivatives result from loan participation arrangements, and therefore are not used to manage interest rate risk in the Company’s assets or liabilities.

Derivatives Designated as Hedging Instruments - Hedges of Interest Rate Risk

Interest Rate Contracts - Cash Flow Hedges. The Company’s objectives in using interest rate derivatives are to add stability to interest income and expense and to manage its exposure to interest rate movements. To accomplish this objective, the Company primarily uses interest rate swaps as part of its interest rate risk management strategy. Interest rate swaps designated as cash flow hedges involve the receipt of variable amounts from a counterparty in exchange for the Company making fixed rate payments or the receipt of fixed rate amounts from a counterparty in exchange for the Company making variable-rate payments over the life of the agreements without exchange of the underlying notional amount. For the three months ended March 31, ~~2023~~2024 and ~~2022,~~2023, such derivatives were used to hedge the variable cash flows associated with existing variable-rate assets or liabilities or forecasted issuances of debt.

For derivatives designated, and that qualify as cash flow hedges of interest rate risk, the gain or loss on the derivative is recorded in AOCI and subsequently is reclassified into interest expense or interest income in the same period(s) during which the hedged transaction affects earnings. Amounts reported in AOCI related to derivatives will be reclassified to interest expense or interest income as interest payments are made or received on the Company’s variable-rate liabilities or assets. The Company estimates that an additional ~~$2.5~~$3.3 million will be reclassified as a decrease to interest expense and an additional ~~$3.0 million~~$720,000 will be reclassified as a decrease to interest income over the next 12 months.

Interest Rate Contracts - Fair Value Hedges. Derivatives designated as fair value hedges are utilized to mitigate the risk of changes in the fair values of recognized assets and liabilities. The Company uses interest rate contracts in this manner to manage its exposure to changes in the fair value of hedged items caused by changes in interest rates.

Changes in the fair value of the derivatives and changes in the fair value of the hedged item due to changes in the hedged risk are recognized in earnings in the same line item. If a hedge is terminated, but the hedged item was not derecognized, all remaining adjustments to the carrying amount of the hedged item are amortized over a period that is consistent with the amortization of other discounts or premiums associated with the hedged item.

Derivatives not Designated as Hedges

Customer Loan Swaps. Derivatives not designated as hedges are not speculative and result from a service the Company provides to certain customers. The Company executes interest rate swaps with commercial banking customers to facilitate their respective risk management strategies. Those interest rate swaps are simultaneously hedged by offsetting derivatives that the Company executes with a third party, such that the Company minimizes its net risk exposure resulting from such transactions.

As the interest rate derivatives associated with this program do not meet the strict hedge accounting requirements, changes in the fair value of both the customer derivatives and the offsetting derivatives are recognized directly in earnings.

Fixed Rate Mortgage Interest Rate Lock Commitments. As part of the origination process of a residential loan, the Company may enter into rate lock agreements with its borrower, which is considered an interest rate lock commitment. If the Company intends to sell the loan upon origination, it will account for the interest rate lock commitment as a derivative.

Forward Delivery Commitments. The Company typically enters into a forward delivery commitment with a secondary market investor, which has been approved by the Company within its normal governance process, at the onset of the loan origination process. The Company may enter into these arrangements with the secondary market investors on a "best effort" or "mandatory delivery" basis. The Company's normal practice is typically to enter into these arrangements on a "best effort" basis. The Company enters into these arrangements with the secondary market investors to manage its interest rate exposure. The Company accounts for the forward delivery commitment as a derivative upon origination of a loan identified as held for sale.

Risk Participation Agreements. The Company’s existing credit derivatives result from participations in or out of interest rate swaps provided by or to external lenders as part of loan participation arrangements, therefore, are not used to manage interest rate risk in the Company’s assets or liabilities. Derivatives not designated as hedges are not speculative and result from a service the Company provides to certain lenders which participate in loans.

The following table presents the fair value of the Company's derivative financial instruments as well as their classification on the consolidated statements of condition as of the dates indicated:

Derivative Assets Derivative Liabilities
(Dollars in thousands) Notional
Amount Location Fair
Value Notional
Amount Location Fair
Value
March 31, 2023
Derivatives designated as hedging instruments:
Interest rate contracts(1)
$ 60,000 Other assets $ 10,996 $ 433,000 Accrued interest and other liabilities $ 6,859
Total derivatives designated as hedging instruments $ 10,996 $ 6,859
Derivatives not designated as hedging instruments:
Customer loan swaps(1)
$ 288,076 Other assets $ 11,479 $ 288,076 Accrued interest and other liabilities $ 11,554
Risk participation agreements 21,696 Other assets — 44,127 Accrued interest and other liabilities —
Fixed rate mortgage interest rate lock commitments 6,883 Other assets 71 5,843 Accrued interest and other liabilities 43
Forward delivery commitments 2,887 Other assets 32 1,651 Accrued interest and other liabilities 14
Total derivatives not designated as hedging instruments $ 11,582 $ 11,611
December 31, 2022
Derivatives designated as hedging instruments:
Interest rate contracts(1)
$ 110,000 Other assets $ 13,051 $ 133,000 Accrued interest and other liabilities $ 5,515
Total derivatives designated as hedging instruments $ 13,051 $ 5,515
Derivatives not designated as hedging instruments:
Customer loan swaps(1)
$ 260,130 Other assets $ 14,802 $ 345,545 Accrued interest and other liabilities $ 14,850
Risk participation agreements 21,818 Other assets — 53,704 Accrued interest and other liabilities —
Fixed rate mortgage interest rate lock commitments 4,493 Other assets 31 9,597 Accrued interest and other liabilities 87
Forward delivery commitments 5,259 Other assets 114 — Accrued interest and other liabilities —
Total derivatives not designated as hedging instruments $ 14,947 $ 14,937


	Derivative Assets					Derivative Liabilities
(Dollars in thousands)	Notional Amount		Location	Fair Value		Notional Amount		Location	Fair Value
March 31, 2024
Derivatives designated as hedging instruments:
Interest rate contracts(1)	$	568,000	Other Assets	$	17,636	$	125,000	Accrued interest and other liabilities	$	1,239
Total derivatives designated as hedging instruments				$	17,636				$	1,239
Derivatives not designated as hedging instruments:
Customer loan swaps(1)	$	295,892	Other assets	$	14,343	$	295,892	Accrued interest and other liabilities	$	14,373
Risk participation agreements	27,951		Other assets	—		61,310		Accrued interest and other liabilities	—
Fixed rate mortgage interest rate lock commitments	17,354		Other assets	331		2,011		Accrued interest and other liabilities	29
Forward delivery commitments	3,355		Other assets	76		6,086		Accrued interest and other liabilities	72
Total derivatives not designated as hedging instruments				$	14,750				$	14,474
December 31, 2023
Derivatives designated as hedging instruments:
Interest rate contracts(1)	$	435,000	Other assets	$	12,206	$	258,000	Accrued interest and other liabilities	$	3,387
Total derivatives designated as hedging instruments				$	12,206				$	3,387
Derivatives not designated as hedging instruments:
Customer loan swaps(1)	$	298,143	Other assets	$	10,699	$	298,143	Accrued interest and other liabilities	$	10,748
Risk participation agreements	28,077		Other assets	—		52,193		Accrued interest and other liabilities	—
Fixed rate mortgage interest rate lock commitments	10,924		Other assets	215		2,092		Accrued interest and other liabilities	11
Forward delivery commitments	3,445		Other assets	51		6,706		Accrued interest and other liabilities	132
Total derivatives not designated as hedging instruments				$	10,965				$	10,891

(1) Reported fair values include accrued interest receivable and payable.

The following table shows the carrying amount and associated cumulative basis adjustments related to the application of hedge accounting that is included in the carrying amount of hedged assets and liabilities in fair value hedging relationships:

Location in Consolidated Statements of Condition Carrying Amount of Hedged Assets/(Liabilities) Cumulative Fair Value Hedging Adjustment in the Carrying Amount of the Hedged Assets/(Liabilities)
(Dollars in thousands) March 31, 2023 December 31, 2022 March 31, 2023 December 31, 2022
Loans(1)
$ 301,552 $ — $ (1,552) $ —
Total $ 301,552 $ — $ (1,552) $ —


Location in Consolidated Statements of Condition	Carrying Amount of Hedged Assets/(Liabilities)				Cumulative Fair Value Hedging Adjustment in the Carrying Amount of the Hedged Assets/(Liabilities)
(Dollars in thousands)	March 31, 2024		December 31, 2024		March 31, 2024		December 31, 2023
Loans(1)	$	369,616	$	374,032	$	(5,384)	$	(968)
Total	$	369,616	$	374,032	$	(5,384)	$	(968)

(1) These amounts include the amortized cost basis of ~~closed portfolios of fixed rate assets~~residential real estate loans that were used to designate hedging relationships in which the hedged item is the stated amount of assets in the closed portfolio anticipated to be outstanding for the designated hedged period. At March 31, 2024 and December 31, 2023, the amortized cost basis of the ~~closed portfolios~~residential real estate loans used in these hedging relationships was ~~$853.7~~$795.4 million and $806.5 million, respectively, and the ~~amounts~~amount of the designated hedged ~~items were $300.0~~residential loans was $375.0 million.

The table below presents the effect of cash flow hedge accounting, before tax, on AOCI for the periods indicated:


(Dollars in thousands)	(Dollars in thousands)	Amount of Gain (Loss) Recognized in OCI on Derivative		Amount of Gain (Loss) Recognized in OCI Included Component		Amount of Gain (Loss) Recognized in OCI Excluded Component		Location of Gain (Loss) Recognized from AOCI into Income	Amount of Gain (Loss) Reclassified from AOCI into Income		Amount of Gain (Loss) Reclassified from AOCI into Income Included Component		Amount of Gain (Loss) Reclassified from AOCI into Income Excluded Component		(Dollars in thousands)	Amount of Gain (Loss) Recognized in OCI on Derivative	Amount of Gain (Loss) Recognized in OCI Included Component	Amount of Gain (Loss) Recognized in OCI Excluded Component	Location of Gain (Loss) Recognized from AOCI into Income	Amount of Gain (Loss) Reclassified from AOCI into Income	Amount of Gain (Loss) Reclassified from AOCI into Income Included Component	Amount of Gain (Loss) Reclassified from AOCI into Income Excluded Component
For the Three Months Ended March 31, 2023
For the Three Months Ended March 31, 2024
Interest rate contracts
Interest rate contracts
Interest rate contracts

Interest rate contracts	Interest rate contracts	$	182	$	182	$	—	Interest and fees on loans	$	(717)	$	(717)	$	—
Interest rate contracts	Interest rate contracts	(1)		(1)		—		Interest on deposits	306		306		—
Interest rate contracts	Interest rate contracts	(796)		(796)		—		Interest on borrowings	487		487		—
Interest rate contracts	Interest rate contracts	(934)		(934)		—		Interest on junior subordinated debentures	133		133		—
Total	Total	$	(1,549)	$	(1,549)	$	—		$	209	$	209	$	—

For the Three Months Ended March 31, 2022
For the Three Months Ended March 31, 2023

For the Three Months Ended March 31, 2023

For the Three Months Ended March 31, 2023
Interest rate contracts	Interest rate contracts	$	(3,011)	$	(3,011)	$	—	Interest and fees on loans	$	382	$	382	$	—
Interest rate contracts	Interest rate contracts	3,488		3,488		—		Interest on deposits	(149)		(149)		—

Interest rate contracts
Interest rate contracts
Interest rate contracts
Interest rate contracts	Interest rate contracts	3,158		3,158				Interest on junior subordinated debentures	(351)		(351)
Total	Total	$	3,635	$	3,635	$	—		$	(118)	$	(118)	$	—

The table below presents the effect of fair value and cash flow hedge accounting on the consolidated statements of income for the periods indicated:


			Location and Amount of Gain (Loss) Recognized in Income
			Three Months Ended March 31,
			2023								2022
			Location and Amount of Gain (Loss) Recognized in Income
			Location and Amount of Gain (Loss) Recognized in Income
			Location and Amount of Gain (Loss) Recognized in Income
		Three Months Ended March 31,																								Three Months Ended March 31,
		2024																			2024			2023
(Dollars in thousands)	(Dollars in thousands)		Interest and fees on loans		Interest on deposits		Interest on borrowings		Interest on junior subordinated debentures		Interest and fees on loans		Interest on deposits			Interest on junior subordinated debentures		(Dollars in thousands)	Interest and fees on loans	Interest on borrowings		Interest on junior subordinated debentures	Interest and fees on loans		Interest on deposits		Interest on borrowings	Interest on junior subordinated debentures
Total presented on the consolidated statements of income in which the effects of cash flow hedges are recorded	Total presented on the consolidated statements of income in which the effects of cash flow hedges are recorded		$	45,332	$	15,832	$	2,085	$	528	$	32,035	$	1,833		$	529
Gain (loss) on fair value hedging relationships	Gain (loss) on fair value hedging relationships														Gain (loss) on fair value hedging relationships
Interest rate contracts:	Interest rate contracts:														Interest rate contracts:
Hedged items	Hedged items		$	1,552	$	—	$	—	$	—	$	—	$	—		$	—
Derivatives designated as hedging instruments	Derivatives designated as hedging instruments		$	(1,077)	$	—	$	—	$	—	$	—	$	—		$	—
Gain (loss) on cash flow hedging relationships	Gain (loss) on cash flow hedging relationships														Gain (loss) on cash flow hedging relationships
Interest rate contracts:	Interest rate contracts:														Interest rate contracts:
Amount of gain (loss) reclassified from AOCI into income	Amount of gain (loss) reclassified from AOCI into income		$	(717)	$	306	$	487	$	133	$	382	$	(149)		$	(351)
Amount of gain (loss) reclassified from AOCI into income - included component	Amount of gain (loss) reclassified from AOCI into income - included component		$	(717)	$	306	$	487	$	133	$	382	$	(149)		$	(351)
Amount of gain (loss) reclassified from AOCI into income - excluded component	Amount of gain (loss) reclassified from AOCI into income - excluded component		$	—	$	—	$	—	$	—	$	—	$	—		$	—

The table below presents the effect of the Company's derivative financial instruments that are not designated as hedging instruments on the consolidated statements of income for the periods indicated:

Location of Gain (Loss) Recognized in Income

Amount of Gain (Loss)
Recognized in Income

Three Months Ended
March 31,

Location of Gain (Loss) Recognized in Income

Amount of Gain (Loss)
Recognized in Income

Three Months Ended

March 31,

(Dollars in thousands)

Location of Gain (Loss) Recognized in Income

2023

2022

Customer loan swaps

(27)

Customer loan swaps

Fixed rate mortgage interest rate lock commitments

Mortgage banking income, net

(459)

Forward delivery commitments

Mortgage banking income, net

(96)

166

Forward delivery commitments

Total

(39)

(199)

Total

Credit Risk-Related Contingent Features

By using derivatives, the Company is exposed to credit risk to the extent that counterparties to the derivative contracts do not perform as required. Should a counterparty fail to perform under the terms of a derivative contract, the Company’s credit exposure on interest rate swaps is limited to the net positive fair value and accrued interest of all swaps with each counterparty. The Company seeks to minimize counterparty credit risk through credit approvals, limits, monitoring procedures, and obtaining collateral, where appropriate. As such, management believes the risk of incurring credit losses on derivative contracts with institutional counterparties is remote.

The Company has agreements with its derivative counterparties that contain a provision where if the Company defaults on any of its indebtedness, including default where repayment of the indebtedness has not been accelerated by the lender, then the Company could also be declared in default on its derivative obligations. In addition, the Company also has agreements with certain of its derivative counterparties that contain a provision where if the Company fails to maintain its status as a well- capitalized institution, then the counterparty could terminate the derivative position(s) and the Company could be required to settle its obligations under the agreements.

As of March 31, ~~2023~~2024 and December 31, ~~2022,~~2023, the fair value of derivatives in a net liability position, which includes accrued interest but excludes any adjustment for non-performance risk, related to these agreements was ~~$11.6~~$14.4 million and ~~$14.8~~$10.8 million, respectively. As of March 31, ~~2023~~2024 and December 31, ~~2022,~~2023, the Company has minimum collateral posting thresholds with certain of its derivative counterparties and has posted cash collateral of $0 and $0, respectively. If the Company had breached any of these provisions at March 31, ~~2023~~2024 or December 31, ~~2022,~~2023, it could have been required to settle its obligations under the agreements at their termination value of ~~$11.6~~$14.4 million and ~~$14.8~~$10.8 million, respectively.

NOTE 9 – BALANCE SHEET OFFSETTING

The Company does not offset the carrying value for derivative instruments or repurchase agreements on the consolidated statements of condition. The Company nets the amount recognized for the right to reclaim cash collateral against the obligation to return cash collateral arising from instruments executed with the same counterparty under a master netting arrangement. Collateral legally required to be pledged or received is monitored and adjusted as necessary. Refer to Note 6 for further discussion of repurchase agreements and Note 8 for further discussion of derivative instruments.

3229

The following table presents the Company's derivative positions and repurchase agreements, and the potential effect of netting arrangements on its financial position, as of the dates indicated:


								Gross Amount Not Offset in the Consolidated Statements of Condition
(Dollars in thousands)
(Dollars in thousands)
(Dollars in thousands)															Gross Amount Recognized in the Consolidated Statements of Condition	Gross Amount Offset in the Consolidated Statements of Condition	Net Amount Presented in the Consolidated Statements of Condition	Financial Instruments Pledged (Received)(1)	Cash Collateral Pledged (Received)(1)	Net Amount
March 31, 2024
Derivative assets:
Derivative assets:
Derivative assets:
Customer loan swaps - dealer bank(2)
Customer loan swaps - dealer bank(2)
Customer loan swaps - dealer bank(2)
Customer loan swaps - commercial customer(3)
Interest rate contracts(2)

Total
Total
Total
Derivative liabilities:
Customer loan swaps - commercial customer(3)
Customer loan swaps - commercial customer(3)
Customer loan swaps - commercial customer(3)
Interest rate contracts(2)

									Gross Amount Not Offset in the Consolidated Statements of Condition
(Dollars in thousands)		Gross Amount Recognized in the Consolidated Statements of Condition		Gross Amount Offset in the Consolidated Statements of Condition		Net Amount Presented in the Consolidated Statements of Condition			Financial Instruments Pledged (Received)(1)		Cash Collateral Pledged (Received)(1)		Net Amount
March 31, 2023
Total

Total

Total
Customer repurchase agreements
December 31, 2023
Derivative assets:	Derivative assets:
Customer loan swaps - commercial customer(2)		$	11,479	$	—	$	11,479		$	—	$	—	$	11,479
Interest rate contracts(3)		10,996		—		10,996			—		(10,889)		107
Derivative assets:
Derivative assets:
Customer loan swaps - dealer bank(2)
Customer loan swaps - dealer bank(2)
Customer loan swaps - dealer bank(2)
Customer loan swaps - commercial customer(3)
Interest rate contracts(2)

Total

Total

Total	Total	$	22,475	$	—	$	22,475		$	—	$	(10,889)	$	11,586
Derivative liabilities:	Derivative liabilities:
Customer loan swaps - dealer bank(3)		$	11,554	$	—	$	11,554		$	—	$	—	$	11,554
Interest rate contracts(3)		6,859		—		6,859			—		6,859		—
Customer loan swaps - commercial customer(3)
Customer loan swaps - commercial customer(3)
Customer loan swaps - commercial customer(3)
Interest rate contracts(2)

Total	Total	$	18,413	$	—	$	18,413		$	—	$	6,859	$	11,554
Customer repurchase agreements		$	196,918	$	—	$	196,918		$	196,918	$	—	$	—
December 31, 2022
Derivative assets:
Customer loan swaps - dealer bank(3)		$	14,802	$	—	$	14,802		$	—	$	—	$	14,802
Interest rate contracts(3)		13,051		—		13,051			—		(10,915)		2,136

Total	Total	$	27,853	$	—	$	27,853		$	—	$	(10,915)	$	16,938
Derivative liabilities:
Customer loan swaps - commercial customer(2)		$	14,850	$	—	14,850			$	—	$	—	$	14,850
Interest rate contracts(3)		5,515		—		5,515			—		5,515		—

Total	Total	$	20,365	$	—	$	20,365		$	—	$	5,515	$	14,850
Customer repurchase agreements	Customer repurchase agreements	$	196,451	$	—	$	196,451		$	196,451	$	—	$	—

(1) The amount presented was the lesser of the amount pledged (received) or the net amount presented in the consolidated statements of condition.

(2) The Company maintains master netting arrangements with each counterparty and settles collateral on a net basis for all contracts.

(3) The Company manages its net exposure on its commercial customer loan swaps by obtaining collateral as part of the normal loan policy and underwriting practices. The Company does not post collateral to its commercial customers as part of its ~~contract..~~

(3) Interest rate swap contracts were completed with the same dealer bank. The Company maintains a master netting arrangement with each counterparty and settles collateral on a net basis for all contractscontract.

NOTE 10 – REGULATORY CAPITAL REQUIREMENTS

The Company and Bank are subject to various regulatory capital requirements administered by the FRB and the OCC. Failure to meet minimum capital requirements can result in mandatory and possible additional discretionary actions by regulators that, if undertaken, could have a direct material effect on the Company’s consolidated financial statements.

The Company and Bank are required to maintain certain levels of capital based on risk-adjusted assets. These capital requirements represent quantitative measures of their assets, liabilities and certain off-balance sheet items as calculated under regulatory accounting practices. The Company and Bank's capital classification is also subject to qualitative judgments by our regulators about components, risk weightings and other factors. The quantitative measures established to ensure capital adequacy require the Company and Bank to maintain minimum amounts and ratios of total capital, Tier 1 capital, and common equity Tier 1 capital to risk-weighted assets, and of Tier 1 capital to average assets, or the leverage ratio. These requirements apply to the Company on a consolidated basis.

Under the current requirements, banking organizations must have a minimum total risk-based capital ratio of 8.0%, a minimum Tier 1 risk-based capital ratio of 6.0%, a minimum common equity Tier 1 risk-based capital ratio of 4.5%, and a minimum leverage ratio of 4.0% in order to be "adequately capitalized." In addition to these requirements, banking organizations must maintain a capital conservation buffer consisting of common Tier 1 equity in an amount above the minimum

risk-based capital requirements for "adequately capitalized" institutions equal to 2.5% of total risk-weighted assets, resulting in a requirement for the Company and the Bank effectively to maintain common equity Tier 1, Tier 1 and total capital ratios of 7.0%, 8.5% and 10.5%, respectively. The Company and the Bank must maintain the capital conservation buffer to avoid restrictions on the ability to pay dividends, pay discretionary bonuses and to engage in share repurchases based on the amount of the shortfall and the institution's "eligible retained income" (that is, the greater of (i) net income for the preceding four quarters, net of distributions and associated tax effects not reflected in net income and (ii) average net income over the preceding four quarters).

The Company and Bank's risk-based capital ratios exceeded regulatory requirements, including the capital conservation buffer, at March 31, ~~2023~~2024 and December 31, ~~2022,~~2023, and the Bank's capital ratios met the requirements for it to be considered "well capitalized" under prompt corrective action provisions for each period. There were no changes to the Company or Bank's capital ratios that occurred subsequent to March 31, ~~2023~~2024 that would change the Company or Bank's regulatory capital categorization. The following table presents the Company and Bank's regulatory capital ratios at the periods indicated:


			March 31, 2023				Minimum Regulatory Capital Required for Capital Adequacy plus Capital Conservation Buffer			Minimum Regulatory Provision to Be "Well Capitalized"				December 31, 2022								Minimum Regulatory Capital Required for Capital Adequacy plus Capital Conservation Buffer				Minimum Regulatory Provision to Be "Well Capitalized"
		March 31, 2024																														March 31, 2024									Minimum Regulatory Capital Required for Capital Adequacy plus Capital Conservation Buffer						Minimum Regulatory Provision to Be "Well Capitalized"						December 31, 2023										Minimum Regulatory Capital Required for Capital Adequacy plus Capital Conservation Buffer					Minimum Regulatory Provision to Be "Well Capitalized"
(Dollars in thousands)	(Dollars in thousands)		Amount		Ratio				Minimum Regulatory Capital Required for Capital Adequacy plus Capital Conservation Buffer					Minimum Regulatory Provision to Be "Well Capitalized"				Amount						Ratio						Minimum Regulatory Capital Required for Capital Adequacy plus Capital Conservation Buffer		Minimum Regulatory Provision to Be "Well Capitalized"
Camden National Corporation:	Camden National Corporation:
Camden National Corporation:
Camden National Corporation:
Total risk-based capital ratio
Total risk-based capital ratio
Total risk-based capital ratio	Total risk-based capital ratio		$	564,967	13.95	%	10.50	%				10.00	%			$	557,571			13.80	%			10.50	%			10.00	%			$	584,405		14.52			14.52		%				10.50		%				10.00		%				$	577,440		14.36			14.36		%			10.50		%			10.00		%
Tier 1 risk-based capital ratio	Tier 1 risk-based capital ratio		524,843		12.96	%	8.50	%		6.00	%			517,385				12.81	%			8.50	%			6.00	%	Tier 1 risk-based capital ratio			546,468			13.58			13.58		%				8.50		%				6.00		%				538,153			13.38			13.38		%			8.50		%			6.00		%
Common equity Tier 1 risk-based capital ratio(1)	Common equity Tier 1 risk-based capital ratio(1)		481,843		11.90	%	7.00	%		N/A				474,385				11.74	%			7.00	%			N/A		Common equity Tier 1 risk-based capital ratio(1)			503,468			12.51			12.51		%				7.00		%				N/A						495,153			12.31			12.31		%			7.00		%			N/A
Tier 1 leverage capital ratio(1)	Tier 1 leverage capital ratio(1)		524,843		9.24	%	4.00	%		N/A				517,385				9.22	%			4.00	%			N/A		Tier 1 leverage capital ratio(1)			546,468			9.59			9.59		%				4.00		%				N/A						538,153			9.40			9.40		%			4.00		%			N/A
Camden National Bank:	Camden National Bank:
Total risk-based capital ratio	Total risk-based capital ratio		$	532,658	13.18	%	10.50	%		10.00	%			$	525,346			13.03	%			10.50	%			10.00	%
Total risk-based capital ratio
Total risk-based capital ratio																															$	556,066				13.85		%				10.50		%				10.00		%				$	549,221					13.70	%				10.50	%				10.00	%
Tier 1 risk-based capital ratio	Tier 1 risk-based capital ratio		492,534		12.19	%	8.50	%		8.00	%			485,160				12.03	%			8.50	%			8.00	%	Tier 1 risk-based capital ratio			518,129			12.90			12.90		%				8.50		%				8.00		%				509,934			12.72			12.72		%			8.50		%			8.00		%
Common equity Tier 1 risk-based capital ratio	Common equity Tier 1 risk-based capital ratio		492,534		12.19	%	7.00	%		6.50	%			485,160				12.03	%			7.00	%			6.50	%	Common equity Tier 1 risk-based capital ratio			518,129			12.90			12.90		%				7.00		%				6.50		%				509,934			12.72			12.72		%			7.00		%			6.50		%
Tier 1 leverage capital ratio	Tier 1 leverage capital ratio		492,534		8.68	%	4.00	%		5.00	%			485,160				8.65	%			4.00	%			5.00	%	Tier 1 leverage capital ratio			518,129			9.10			9.10		%				4.00		%				5.00		%				509,934			8.91			8.91		%			4.00		%			5.00		%

(1) “Minimum Regulatory Provisions to Be ‘Well Capitalized’” are not formally defined under applicable banking regulations for bank holding companies.

In 2006 and 2008, the Company issued $43.0 million of junior subordinated debentures in connection with the issuance of trust preferred securities. Although the junior subordinated debentures are recorded as liabilities on the Company's consolidated statements of condition, the Company is permitted, in accordance with applicable regulation, to include the debentures within its calculation of risk-based capital, subject to certain limits. At March 31, ~~2023~~2024 and December 31, ~~2022,~~2023, $43.0 million of the junior subordinated debentures were included in Tier 1 and ~~Tier 2~~total risk-based capital for the Company.

The Company and Bank's regulatory capital and risk-weighted assets fluctuate due to normal business, including profits and losses generated by the Company and Bank as well as changes to their asset mix. Of particular significance are changes within the Company and Bank's loan portfolio mix due to the differences in regulatory risk-weighting between retail and commercial loans. Furthermore, the Company and Bank's regulatory capital and risk-weighted assets are subject to change due to changes in GAAP and regulatory capital standards. The Company and Bank proactively monitor their regulatory capital and risk-weighted assets, and the impact of changes to their asset mix, and the impact of proposed and pending changes as a result of new and/or amended GAAP standards and regulatory changes.

3431

NOTE 11 – OTHER COMPREHENSIVE INCOME (LOSS)

The following tables present a reconciliation of the changes in the components of other comprehensive income and loss for the periods indicated, including the amount of tax (expense) benefit allocated to each component:


			For the Three Months Ended
			March 31, 2023						March 31, 2022
		For the Three Months Ended																				For the Three Months Ended
		March 31, 2024																	March 31, 2024				March 31, 2023
(In thousands)	(In thousands)		Pre-Tax Amount		Tax (Expense) Benefit		After-Tax Amount		Pre-Tax Amount		Tax (Expense) Benefit		After-Tax Amount		(In thousands)	Pre-Tax Amount	Tax (Expense) Benefit	After-Tax Amount		Pre-Tax Amount	Tax (Expense) Benefit			After-Tax Amount
Debt Securities:	Debt Securities:
Change in fair value	Change in fair value		$	9,885	$	(2,125)	$	7,760	$	(92,753)	$	19,942	$	(72,811)
Less: reclassification adjustment for amortization of securities transferred from AFS to HTM(1)			(1,699)		365		(1,334)		—		—		—
Change in fair value
Change in fair value
Less: reclassification adjustment for amortization of securities transferred from AFS to HTM

Net change in fair value
Net change in fair value
Net change in fair value	Net change in fair value		11,584		(2,490)		9,094		(92,753)		19,942		(72,811)
Cash Flow Hedges:	Cash Flow Hedges:
Change in fair value	Change in fair value		(3,109)		668		(2,441)		3,635		(782)		2,853
Less: reclassified AOCI gain (loss) into interest expense(2)			926		(199)		727		(500)		108		(392)
Less: reclassified AOCI (loss) gain into interest income(3)			(717)		154		(563)		382		(82)		300
Change in fair value
Change in fair value
Less: reclassified AOCI gain into interest expense(1)
Less: reclassified AOCI (loss) gain into interest income(2)
Net change in fair value	Net change in fair value		(3,318)		713		(2,605)		3,753		(808)		2,945
Postretirement Plans:	Postretirement Plans:

Amortization of settlement recognition of net loss and prior service credit(4)			(6)		1		(5)		232		(50)		182
Other comprehensive income (loss)			$	8,260	$	(1,776)	$	6,484	$	(88,768)	$	19,084	$	(69,684)
Amortization of settlement recognition of net loss and prior service credit(3)

Amortization of settlement recognition of net loss and prior service credit(3)

Amortization of settlement recognition of net loss and prior service credit(3)
Other comprehensive (loss) gain

(1) ��Reclassified into taxable interest on investments and/or nontaxable interest on investments in the consolidated statements of income. Refer to Note 3 of the consolidated financial statements for further details.

~~(2)~~ Reclassified into interest on deposits, borrowings and/or junior subordinated debentures on the consolidated statements of income. Refer to Note 8 of the consolidated financial statements for further details.

~~(3)~~(2) Reclassified into interest and fees on loans on the consolidated statements of income. Refer to Note 8 of the consolidated financial statements for further details.

~~(4)~~(3) Reclassified into other expenses on the consolidated statements of income. Refer to Note 13 of the consolidated financial statements for further details.

The following table presents the changes in each component of AOCI, after tax, for the periods indicated:


(In thousands)	(In thousands)	Net Unrealized Gains (Losses) on Debt Securities(1)		Net Unrealized (Losses) Gains on Cash Flow Hedges(1)		Defined Benefit Postretirement Plans(1)		AOCI(1)		(In thousands)	Net Unrealized Gains (Losses) on Debt Securities(1)	Net Unrealized (Losses) Gains on Cash Flow Hedges(1)	Defined Benefit Postretirement Plans(1)	AOCI(1)

Balance at December 31, 2023
Balance at December 31, 2023
Balance at December 31, 2023
Other comprehensive (loss) income before reclassifications
Less: Amounts reclassified from AOCI
Other comprehensive (loss) income
Balance at March 31, 2024

Balance at December 31, 2022
Balance at December 31, 2022
Balance at December 31, 2022	Balance at December 31, 2022	$	(131,539)	$	5,891	$	(307)	$	(125,955)
Other comprehensive income (loss) before reclassifications	Other comprehensive income (loss) before reclassifications	7,760		(2,441)		—		5,319
Less: Amounts reclassified from AOCI	Less: Amounts reclassified from AOCI	(1,334)		164		5		(1,165)
Other comprehensive income (loss)	Other comprehensive income (loss)	9,094		(2,605)		(5)		6,484
Balance at March 31, 2023	Balance at March 31, 2023	$	(122,445)	$	3,286	$	(312)	$	(119,471)

Balance at December 31, 2021		$	(1,173)	$	(1,779)	$	(3,277)	$	(6,229)
Other comprehensive (loss) income before reclassifications		(72,811)		2,853		—		(69,958)
Less: Amounts reclassified from AOCI		—		(92)		(182)		(274)
Other comprehensive (loss) income		(72,811)		2,945		182		(69,684)
Balance at March 31, 2022		$	(73,984)	$	1,166	$	(3,095)	$	(75,913)

(1) All amounts are net of ~~tax~~tax.

NOTE 12 – REVENUE FROM CONTRACTS WITH CUSTOMERS

A portion of the Company's non-interest income is derived from contracts with customers, and, as such, the revenue recognized depicts the transfer of promised goods or services to its customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. The Company considers the terms of the contract and all relevant facts and circumstances when applying this guidance.

The Company has disaggregated its revenue from contracts with customers into categories based on the nature of the revenue. The categorization of revenues from contracts with customers that are within the scope of ASC 606 closely aligns with the presentation of revenue categories presented within non-interest income on the consolidated statements of income. The following table presents the revenue streams within the scope of ASC 606 for the periods indicated:

Location on Consolidated Statements of Income

Three Months Ended
March 31,

Location on Consolidated Statements of Income

(In thousands)

Location on Consolidated Statements of Income

2023

2022

Debit card interchange income

2,938

2,924

Debit card interchange income

Services charges on deposit accounts

Service charges on deposit accounts

1,762

1,833

Fiduciary services income

Income from fiduciary services

1,600

1,631

Fiduciary services income

Investment program income

Brokerage and insurance commissions

1,093

994

Other non-interest income

Other income

422

400

Other non-interest income

Total non-interest income within the scope of ASC 606

7,815

7,782

Total non-interest income not in scope of ASC 606

2,051

2,043

Total non-interest income not in scope of ASC 606

Total non-interest income

9,866

9,825

Total non-interest income

In each of the revenue streams identified above, there were no significant judgments made in determining or allocating the transaction price, as the consideration and services are generally explicitly identified in the associated contracts.

NOTE 13 – EMPLOYEE BENEFIT PLANS

The Company sponsors unfunded, non-qualified SERPs for certain officers and provides medical and life insurance to certain eligible retired employees.

The components of net periodic pension and postretirement benefit costs were as follows for the following periods:

Supplemental Executive Retirement Plan:

(In thousands)

Location on Consolidated Statements of Income

Three Months Ended
March 31,

(In thousands)

Net periodic pension cost

Location on Consolidated Statements of Income

2023

2022

Service cost

133

Net periodic pension cost

Service cost (1)

Interest cost

Other expenses

189

115

Recognized net actuarial loss

Other expenses

—

216

Interest cost

Total

259

464

Total

(1) As of December 31, 2023, there are no active participants in the SERP.

Other Postretirement Benefit Plan:

(In thousands)

Location on Consolidated Statements of Income

Three Months Ended
March 31,

(In thousands)

Net periodic postretirement benefit cost

Location on Consolidated Statements of Income

2023

2022

Service cost

Interest cost

Other expenses

Recognized net actuarial (gain) loss

Other expenses

(1)

Interest cost

Recognized net actuarial gain

Amortization of prior service credit

Other expenses

(6)

Total

NOTE 14 – EPS

The following is an analysis of basic and diluted EPS, reflecting the application of the two-class method, as described below:

Three Months Ended
March 31,

(In thousands, except number of shares and per share data)

2023

2022

Net income

12,727

16,795

Net income

Dividends and undistributed earnings allocated to participating securities(1)

(25)

(43)

Net income available to common shareholders

12,702

16,752

Net income available to common shareholders

Weighted-average common shares outstanding for basic EPS

14,573,122

14,741,271

Dilutive effect of stock-based awards(2)

58,420

81,061

Dilutive effect of stock-based awards(2)

Weighted-average common and potential common shares for diluted EPS

14,631,542

14,822,332

Earnings per common share:

Basic EPS

0.87

1.14

Diluted EPS

0.87

1.13

Diluted EPS

Awards excluded from the calculation of diluted EPS(3):

Performance-based awards

1,141

1,027

Performance-based awards

(1) Represents dividends paid and undistributed earnings allocated to non-vested stock-based awards that contain non-forfeitable rights to dividends.

(2) Represents the assumed dilutive effect of unexercised and/or unvested stock options, restricted shares, restricted share units and contingently issuable performance-based awards utilizing the treasury stock method.

(3) Represents stock-based awards not included in the computation of potential common shares for purposes of calculating diluted EPS as the exercise prices were greater than the average market price of the Company's common stock, and, therefore, are considered anti-dilutive.

Non-vested stock-based payment awards that contain non-forfeitable rights to dividends are participating securities and are included in the computation of EPS pursuant to the two-class method. The two-class method is an earnings allocation formula that determines EPS for each class of common stock and participating security according to dividends declared (or accumulated) and participation rights in undistributed earnings. Certain of the Company’s non-vested stock-based awards qualify as participating securities.

Net income is allocated between the common stock and participating securities pursuant to the two-class method. Basic EPS is computed by dividing net income available to common shareholders by the weighted average number of common shares outstanding during the period, excluding participating non-vested stock-based awards. Diluted EPS is computed in a similar manner, except that the denominator includes the number of additional common shares that would have been outstanding if potentially dilutive common shares were issued using the treasury stock method.

NOTE 15 – FAIR VALUE MEASUREMENT AND DISCLOSURE

Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. Fair value is best determined using quoted market prices. However, in many instances, quoted market prices are not available. In such instances, fair values are determined using various valuation techniques. Various assumptions and observable inputs must be relied upon in applying these techniques. GAAP establishes a fair value hierarchy for valuation inputs that gives the highest priority to quoted prices in active markets for identical assets or liabilities and the lowest priority to unobservable inputs.

GAAP permits an entity to choose to measure eligible financial instruments and other items at fair value. The Company has elected the fair value option for its loans held for sale. Electing the fair value option for loans held for sale enables the Company’s financial position to align more clearly with the economic value of the actively traded asset.

The fair value hierarchy for valuation of an asset or liability is as follows:

Level 1:1: Valuation is based upon unadjusted quoted prices in active markets for identical assets and liabilities that the entity has the ability to access as of the measurement date.

Level 2:2: Valuation is determined from quoted prices for similar assets or liabilities in active markets, from quoted prices for identical or similar instruments in markets that are not active or by model-based techniques in which all significant inputs are observable in the market.

Level 3:3: Valuation is derived from model-based and other techniques in which at least one significant input is unobservable and which may be based on the Company’s own estimates about the assumptions that market participants would use to value the asset or liability.

In general, fair value is based upon quoted market prices, where available. If such quoted market prices are not available, fair value is based upon model-based techniques incorporating various assumptions including, but not limited to, interest rates, prepayment speeds and credit losses. Assets and liabilities valued using model-based techniques are classified as either Level 2 or Level 3, depending on the lowest level classification of an input that is considered significant to the overall valuation. A description of the valuation methodologies used for instruments measured at fair value, as well as the general classification of such instruments pursuant to the valuation hierarchy, is set forth below.

Financial Instruments Recorded at Fair Value on a Recurring Basis

Trading Securities and Deferred ~~Compensation:~~Compensation: The fair value of trading securities and deferred compensation is reported using market quoted prices and has been classified as Level 1 as such securities and underlying securities are actively traded and no valuation adjustments have been applied.

Debt ~~Securities~~Securities: The fair value of investments in debt securities is reported utilizing prices provided by an independent pricing service based on recent trading activity and other observable information including, but not limited to, dealer quotes, market spreads, cash flows, market interest rate curves, market consensus prepayment speeds, credit information, and the bond’s terms and conditions. The fair value of debt securities is classified as Level 2.

Loans Held For ~~Sale:~~Sale: The fair value of loans held for sale is determined on an individual loan basis using quoted secondary market prices and is classified as Level 2.

Derivatives: The fair value of interest rate swaps is determined using inputs that are observable in the market place obtained from third parties including yield curves, publicly available volatilities, and floating indexes and, accordingly, are classified as Level 2 inputs. The credit value adjustments associated with derivatives utilize Level 3 inputs, such as estimates of current credit spreads to evaluate the likelihood of default. As of March 31, ~~2023~~2024 and December 31, ~~2022,~~2023, the credit valuation adjustment on the overall valuation of its derivative positions ~~and~~ was not significant to the overall valuation of its derivatives, and, thus, the Company's interest rate swaps were classified as Level 2.

The fair value of the Company's fixed rate interest rate lock commitments were determined using secondary market pricing for loans with similar structures, including term, rate and borrower credit quality, adjusted for the Company's pull-through rate estimate (i.e. estimate of loans within its loan pipeline that will ultimately complete the origination process and be funded). The Company has classified its fixed rate interest rate lock commitments as Level 2, as the quoted secondary market prices are the more significant input, and, although the Company's internal pull-through rate estimate is a Level 3 estimate, it is less significant to the ultimate valuation.

The fair value of the Company's forward delivery commitments is determined using secondary market pricing for loans with similar structures, including term, rate and borrower credit quality, and the locked and agreed to price with the secondary market investor. The Company has classified its fixed rate interest rate lock commitments as Level 2.

3935

The following table summarizes financial assets and financial liabilities measured at fair value on a recurring basis, segregated by the level of the valuation inputs within the fair value hierarchy utilized to measure fair value, for the dates indicated:


(In thousands)	(In thousands)	Fair Value		Readily Available Market Prices (Level 1)		Observable Market Data (Level 2)		Company Determined Fair Value (Level 3)		(In thousands)	Fair Value	Readily Available Market Prices (Level 1)	Observable Market Data (Level 2)	Company Determined Fair Value (Level 3)
March 31, 2023
March 31, 2024										March 31, 2024
Financial assets:	Financial assets:									Financial assets:
Trading securities	Trading securities	$	3,971	$	3,971	$	—	$	—
AFS debt securities:	AFS debt securities:									AFS debt securities:

Obligations of states and political subdivisions	Obligations of states and political subdivisions	49,051		—		49,051		—
Mortgage-backed securities issued or guaranteed by U.S. government-sponsored enterprises		507,831		—		507,831		—
Collateralized mortgage obligations issued or guaranteed by U.S. government-sponsored enterprises		106,233		—		106,233		—
Subordinated corporate bonds		23,308		—		23,308		—
Obligations of states and political subdivisions
Obligations of states and political subdivisions
MBS issued or guaranteed by U.S. government-sponsored enterprises
CMO issued or guaranteed by U.S. government-sponsored enterprises
Corporate bonds
Loans held for sale	Loans held for sale	4,562		—		4,562		—
Customer loan swaps	Customer loan swaps	11,479		—		11,479		—
Interest rate contracts	Interest rate contracts	10,996		—		10,996		—

Fixed rate mortgage interest rate lock commitments
Fixed rate mortgage interest rate lock commitments
Fixed rate mortgage interest rate lock commitments	Fixed rate mortgage interest rate lock commitments	71		—		71		—
Forward delivery commitments	Forward delivery commitments	32		—		32		—
Financial liabilities:	Financial liabilities:									Financial liabilities:
Deferred compensation	Deferred compensation	$	3,971	$	3,971	$	—	$	—

Customer loan swaps	Customer loan swaps	11,554		—		11,554		—
Customer loan swaps
Customer loan swaps

Interest rate contracts
Interest rate contracts
Interest rate contracts	Interest rate contracts	6,859		—		6,859		—
Fixed rate mortgage interest rate lock commitments	Fixed rate mortgage interest rate lock commitments	43		—		43		—
Forward delivery commitments	Forward delivery commitments	14		—		14		—
December 31, 2022
December 31, 2023										December 31, 2023
Financial assets:	Financial assets:									Financial assets:
Trading securities	Trading securities	$	3,990	$	3,990	$	—	$	—
AFS debt securities:	AFS debt securities:

Obligations of states and political subdivisions	Obligations of states and political subdivisions	49,226		—		49,226		—
Mortgage-backed securities issued or guaranteed by U.S. government-sponsored enterprises		514,019		—		514,019		—
Collateralized mortgage obligations issued or guaranteed by U.S. government-sponsored enterprises		109,347		—		109,347		—

Obligations of states and political subdivisions

Obligations of states and political subdivisions
MBS issued or guaranteed by U.S. government-sponsored enterprises
CMO issued or guaranteed by U.S. government-sponsored enterprises
Subordinated corporate bonds	Subordinated corporate bonds	23,283		—		23,283		—
Loans held for sale	Loans held for sale	5,197		—		5,197		—
Customer loan swaps	Customer loan swaps	14,802		—		14,802		—
Interest rate contracts	Interest rate contracts	13,051		—		13,051		—

Fixed rate mortgage interest rate lock commitments

Fixed rate mortgage interest rate lock commitments

Fixed rate mortgage interest rate lock commitments	Fixed rate mortgage interest rate lock commitments	31		—		31		—
Forward delivery commitments	Forward delivery commitments	114		—		114		—
Financial liabilities:	Financial liabilities:									Financial liabilities:
Deferred compensation	Deferred compensation	$	3,990	$	3,990	$	—	$	—
Customer loan swaps	Customer loan swaps	14,850		—		14,850		—
Interest rate contracts	Interest rate contracts	5,515		—		5,515		—

Fixed rate mortgage interest rate lock commitments	Fixed rate mortgage interest rate lock commitments	87		—		87		—

Fixed rate mortgage interest rate lock commitments

Fixed rate mortgage interest rate lock commitments
Forward delivery commitments

The Company did not have any transfers between Level 1 and Level 2 of the fair value hierarchy during the three months ended March 31, ~~2023.~~2024. The Company’s policy for determining transfers between levels occurs at the end of the reporting period when circumstances in the underlying valuation criteria change and result in transfer between levels.

4036

Financial Instruments Recorded at Fair Value on a Nonrecurring Basis

The Company may be required, from time to time, to measure certain financial assets and financial liabilities at fair value on a nonrecurring basis in accordance with GAAP, which may consist of collateral-dependent loans and servicing assets. These include assets that are measured at the lower of cost or market value that were recognized at fair value below cost at the end of the period. ~~As of March 31, 2023 and March 31, 2022, the Company did not have any material financial instruments measured and reported at fair value.~~

Collateral-Dependent Loans: Expected credit losses on individually assessed loans deemed to be collateral dependent are valued based upon the lower of amortized cost or fair value of the underlying collateral less costs to sell. Management estimates the fair values of these assets using Level 2 inputs, such as the fair value of collateral based on independent third-party market approach appraisals for collateral-dependent loans, and Level 3 inputs where circumstances warrant an adjustment to the appraised value based on the age of the appraisal and/or comparable sales, condition of the collateral, and market conditions.

Servicing Assets: The Company accounts for mortgage servicing assets at cost, subject to impairment testing. When the carrying value of a tranche exceeds fair value, a valuation allowance is established to reduce the carrying cost to fair value. Fair value is based on a valuation model that calculates the present value of estimated net servicing income. The Company obtains a third-party valuation based upon loan level data including note rate, type and term of the underlying loans. The model utilizes two significant unobservable inputs, namely loan prepayment assumptions and the discount rate used, to calculate the fair value of each tranche, and, as such, the Company has classified the model within Level 3 of the fair value hierarchy.

The table below highlights financial assets measured and reported at fair value on a non-recurring basis for the dates indicated:


(In thousands)	Fair Value		Readily Available Market Prices (Level 1)		Observable Market Data (Level 2)		Company Determined Fair Value (Level 3)
March 31, 2024
Financial assets:
Collateral-dependent loans	$	4,159	$	—	$	—	$	4,159
December 31, 2023


Financial assets:
Collateral-dependent loans	$	4,768	$	—	$	—	$	4,768

The following table presents the valuation methodology and unobservable inputs for Level 3 assets measured at fair value on a non-recurring basis for the dates indicated:

(Dollars in thousands)

Fair Value

Valuation Methodology

Unobservable input

Discount

March 31, 2024

Collateral-dependent loans:

Specifically reserved

4,159

Market approach appraisal of collateral

Estimated selling costs

December 31, 2023

Collateral-dependent loans:

Specifically reserved

4,768

Market approach appraisal of collateral

Estimated selling costs

Non-Financial Instruments Recorded at Fair Value on a Non-Recurring Basis

~~The Company had no non-financial assets or non-financial liabilities measured at fair value on a non-recurring basis as of March 31, 2023 and March 31, 2022.~~ Non-financial assets measured at fair value on a ~~non-recurring~~nonrecurring basis may consist of OREO, goodwill and core deposit intangible assets. As of March 31, 2024 and December 31, 2023, the Company did not have any material non-financial instruments measured and reported at fair value.

OREO: OREO properties acquired through foreclosure or deed in lieu of foreclosure are recorded at net realizable value, which is the fair value of the real estate, less estimated costs to sell. Any write-down of the recorded investment in the related loan is charged to the ACL upon transfer to OREO. Upon acquisition of a property, a current appraisal is used or an internal valuation is prepared to substantiate fair value of the property. After foreclosure, management periodically, but at least annually, obtains updated valuations of the OREO properties and, if additional impairments are deemed necessary, the subsequent write-downs for declines in value are recorded through a valuation allowance and a provision for credit losses charged to other non-interest expense within the consolidated statements of income. As management considers appropriate, adjustments are made to the appraisal obtained for the OREO property to account for recent sales activity of comparable properties, changes in the condition of the property, and changes in market conditions. These adjustments are not observable in an active market and are classified as Level 3. At March 31, ~~2023~~2024 and December 31, ~~2022,~~2023, the Company did not have any OREO properties.

Goodwill: Goodwill represents the excess cost of an acquisition over the fair value of the net assets acquired. The fair value of goodwill is estimated by utilizing several standard valuation techniques, including discounted cash flow analyses, bank merger multiples, and/or an estimation of the impact of business conditions and investor activities on the long-term value of the goodwill. Should an impairment occur, the associated goodwill is written-down to fair value and the impairment charge is recorded within non-interest expense in the consolidated statements of income. The Company conducts an annual impairment test of goodwill in the fourth quarter each year, or more frequently as necessary. There have been no indications or triggering events during the three months ended March 31, ~~2023,~~2024, for which management believes it is more likely than not that goodwill is impaired.

Core Deposit Intangible Assets: The Company's core deposit intangible assets represent the estimated value of acquired customer relationships and are amortized over the estimated life of those relationships. Core deposit intangibles are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. There were no events or changes in circumstances for the three months ended March 31, ~~2023,~~2024, that indicated the carrying amount may not be recoverable.

4138

The estimated fair values and related carrying amounts for assets and liabilities for which fair value is only disclosed are shown below as of the dates indicated:


		Carrying Amount		Fair Value		Readily Available Market Prices (Level 1)		Observable Market Prices (Level 2)		Company Determined Market Prices (Level 3)
March 31, 2023
(In thousands)												(In thousands)	Carrying Amount	Fair Value	Readily Available Market Prices (Level 1)	Observable Market Prices (Level 2)	Company Determined Market Prices (Level 3)
March 31, 2024
Financial assets:
Financial assets:
Financial assets:	Financial assets:
HTM debt securities	HTM debt securities	$	540,074	$	510,999	$	—	$	510,999	$	—
Commercial real estate loans(1)(2)	Commercial real estate loans(1)(2)	1,647,823		1,586,974		—		—		1,586,974
Commercial loans(2)	Commercial loans(2)	416,518		405,429		—		—		404,847
Residential real estate loans(2)	Residential real estate loans(2)	1,722,335		1,509,387		—		—		1,509,387
Home equity loans(2)	Home equity loans(2)	230,072		228,821		—		—		228,821
Consumer loans(2)	Consumer loans(2)	19,226		16,993		—		—		16,993
Servicing assets	Servicing assets	2,413		4,187		—		—		4,187
Financial liabilities:	Financial liabilities:
Time deposits	Time deposits	$	360,103	$	351,795	$	—	$	351,795	$	—
Time deposits
Time deposits
Short-term borrowings	Short-term borrowings	486,318		485,505		—		485,505		—

Subordinated debentures		44,331		31,918		—		31,918		—
December 31, 2022
Junior subordinated debentures
Junior subordinated debentures
Junior subordinated debentures
December 31, 2023
Financial assets:	Financial assets:
Financial assets:
Financial assets:
HTM debt securities
HTM debt securities
HTM debt securities	HTM debt securities	$	546,583	$	506,193	$	—	$	506,193	$	—
Commercial real estate loans(1)(2)	Commercial real estate loans(1)(2)	1,605,279		1,550,379		—		—		1,550,379
Commercial loans(2)	Commercial loans(2)	424,685		414,353		—		—		414,353
Residential real estate loans(2)	Residential real estate loans(2)	1,691,177		1,494,707		—		—		1,494,707
Home equity loans(2)	Home equity loans(2)	232,203		237,967		—		—		237,967
Consumer loans(2)	Consumer loans(2)	20,087		17,853		—		—		17,853
Servicing assets	Servicing assets	2,458		4,412		—		—		4,412
Financial liabilities:	Financial liabilities:
Time deposits	Time deposits	$	300,451	$	291,568	$	—	$	291,568	$	—
Time deposits
Time deposits
Short-term borrowings	Short-term borrowings	265,176		264,779		—		264,779		—

Subordinated debentures		44,331		31,032		—		31,032		—
Junior subordinated debentures
Junior subordinated debentures
Junior subordinated debentures

(1) Commercial real estate loan includes non-owner-occupied and owner-occupied properties.

(2) The presented carrying amount is net of the allocated ACL on loans.

Excluded from the summary were financial instruments measured at fair value on a recurring and nonrecurring basis, as previously described.

The Company considers its financial instruments' current use to be the highest and best use of the instruments.

4239

ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION

AND RESULTS OF OPERATIONS

FORWARD-LOOKING STATEMENTS

The discussions set forth below and in the documents we incorporate by reference herein contain certain statements that may be considered forward-looking statements ~~within the meaning of~~under the Private Securities Litigation Reform Act of 1995, as amended, including certain plans, exceptions, goals, projections, and statements, which are subject to numerous risks, assumptions, and uncertainties. Forward-looking statements can be identified by the use of the words “believe,” “expect,” “anticipate,” “intend,” “estimate,” “assume,” “plan,” “target,” “potential” or “goal” or future or conditional verbs such as “will,” “may,” “might,” “should,” “could” and other expressions which predict or indicate future events or trends and which do not relate to historical matters. Forward-looking statements are not guarantees of future performance and involve risks, uncertainties and assumptions that are difficult for the Company to predict. The actual results, performance or achievements of the Company may differ materially from what is reflected in such forward-looking statements

Forward-looking statements should not be relied on, because they involve known and unknown risks, uncertainties and other factors, some of which are beyond the control of the Company. These risks, uncertainties and other factors may cause the actual results, performance or achievements of the Company to be materially different from the anticipated future results, performance or achievements expressed or implied by the forward-looking statements.

The following factors, among others, could cause the Company’s financial performance to differ materially from the Company’s goals, plans, objectives, intentions, expectations and other forward-looking statements:

•~~the impact of the COVID-19 pandemic;~~

•~~the impact of the war in Ukraine;~~

•weakness in the United States economy in general and the regional and local economies within the New England region and Maine, which could result in a deterioration of credit quality, an increase in the allowance for credit losses or a reduced demand for the Company’s credit or fee-based products and services;

•changes in trade, monetary, and fiscal policies and laws, including interest rate policies of the Board of Governors of the Federal Reserve System;

•inflation, interest rate, market, and monetary fluctuations;

•ongoing competition in the labor markets and increased employee turnover;

•the adequacy of succession planning for key executives or other personnel, and the Company’s ability to transition effectively to new members of the senior executive team;

•competitive pressures, including continued industry consolidation and the increased financial services provided by non-banks;

•deterioration in the value of the Company's investment securities;

•commercial real estate vacancies and their impact on the ability of borrowers to repay their loans;

•volatility in the securities markets that could adversely affect the value or credit quality of the Company’s assets, impairment of goodwill, or the availability and terms of funding necessary to meet the Company’s liquidity needs;

•changes in information technology and other operational risks, including cybersecurity, that require increased capital spending;

•changes in consumer spending and savings habits;

•changes in tax, banking, securities and insurance laws and regulations;

•the outcome of pending and future litigation and governmental proceedings, including tax-related examinations and other matters;

•changes in accounting policies, practices and standards, as may be adopted by the regulatory agencies as well as the Financial Accounting Standards Board ("FASB"), and other accounting standard setters;

•the effects of climate change on the Company and its customers, borrowers or service providers;

•the effects of civil unrest, international hostilities, including the war in Ukraine and conflict in the Middle East, or other geopolitical events;

•the effects of epidemics and pandemics;

•turmoil and volatility in the financial services industry, including failures or rumors of failures of other depository institutions, which could affect the ability of depository institutions, including Camden National Bank, to attract and retain depositors, and could affect the ability of financial services providers, including the Company, to borrow or raise capital;

•actions taken by governmental agencies to stabilize the financial system and the effectiveness of such actions;

•increases in deposit insurance assessments due to bank failures;

•changes to regulatory capital requirements in response to recent development affecting the banking sector; and

•questions about the soundness of one or more financial institutions with which the Company does business.

In addition, statements regarding the potential effects of ~~the war in Ukraine, the COVID-19 pandemic and other~~ notable national and global current events on the Company’s business, financial condition, liquidity and results of operations may constitute forward-looking statements and are subject to the risk that the actual effects may differ, possibly materially, from what is reflected in those forward-looking statements due to factors and future developments that are uncertain, unpredictable and in many cases beyond the Company's control.

You should carefully review all of these factors, and be aware that there may be other factors that could cause differences, including the risk factors listed in our Annual Report on Form 10-K for the year ended December 31, ~~2022,~~2023, as updated by the Company's quarterly reports on Form 10-Q, including this report, and other filings with the Securities and Exchange Commission. Readers should carefully review the risk factors described therein and should not place undue reliance on our forward-looking statements.

These forward-looking statements were based on information, plans and estimates at the date of this report, and we undertake no obligation to update any forward-looking statements to reflect changes in underlying assumptions or factors, new information, future events or other changes, except to the extent required by applicable law or regulation.

4441

NON-GAAP FINANCIAL MEASURES AND RECONCILIATION TO GAAP

In addition to evaluating the Company’s results of operations in accordance with GAAP, management supplements this evaluation with an analysis of certain non-GAAP financial measures such as: adjusted net income; adjusted diluted earnings per share; adjusted return on average assets; adjusted return on average equity; pre-tax, pre-provision income; adjusted pre-tax, pre-provision income; return on average tangible equity and adjusted return on average tangible equity; the efficiency ~~ratio;~~and tangible common equity ratios; net interest income (fully-taxable equivalent); earnings before income taxes and provision; earnings before income taxes, provision, and SBA PPP loan income; adjusted yield on interest-earning assets and adjusted net interest margin (fully-taxable equivalent); tangible book value per share; ~~tangible common equity ratio; and~~ core deposits and average core deposits. We utilize these non-GAAP financial measures for purposes of measuring performance against the Company's peer group and other financial institutions, as well as for analyzing its internal performance. The Company also believes these non-GAAP financial measures help investors better understand the Company's operating performance and trends and allows for better performance comparisons to other banks. In addition, these non-GAAP financial measures remove the impact of unusual items that may obscure trends in the Company’s underlying performance. These disclosures should not be viewed as a substitute for GAAP operating results, nor are they necessarily comparable to non-GAAP performance measures that may be presented by other financial institutions.

Adjusted Net Income; Adjusted Diluted Earnings per Share; Adjusted Return on Average ~~Tangible~~Assets; and Adjusted Return on Average Equity. ~~Return~~The following table provides a reconciliation of net income, diluted EPS, return on average ~~tangible~~assets and return on average equity ~~is the ratio of (i)~~to adjusted net income, adjusted ~~for (a) tax effected amortization of core deposit intangible~~diluted EPS, adjusted return on average assets and ~~(b) goodwill impairment, as necessary,~~adjusted return on average equity. Certain transactions have been excluded to ~~(ii)~~calculate adjusted net income, adjusted diluted EPS, adjusted return on average ~~shareholders' equity,~~assets and adjusted ~~for~~return on average ~~goodwill and core deposit intangible assets. This~~equity. We believe the following adjusted financial ~~ratio reflects a shareholder's return on tangible capital deployed in~~metrics assist users of our ~~business and is a common measure within the~~ financial ~~services industry.~~statements with their financial analysis period-over-period as it adjusts for certain non-recurring items.

Three Months Ended
March 31,
(Dollars in thousands) 2023 2022
Net income, as presented $ 12,727 $ 16,795
Add: amortization of core deposit intangible assets, net of tax(1)
117 123
Net income, adjusted for amortization of core deposit intangible assets $ 12,844 $ 16,918
Average equity, as presented $ 462,651 $ 525,438
Less: average goodwill and core deposit intangible assets (96,191) (96,815)
Average tangible equity $ 366,460 $ 428,623
Return on average equity 11.16 % 12.96 %
Return on average tangible equity 14.21 % 16.01 %


	For the Three Months Ended
(In thousands, except number of shares, per share data and ratios)	March 31, 2024			March 31, 2023
Adjusted Net Income:
Net income, as presented	$	13,272		$	12,727

Adjustment for Signature Bank bond (recovery) write-off	(910)			1,838
Tax impact of above adjustments(1)	191			(386)
Adjusted net income	$	12,553		$	14,179
Adjusted Diluted Earnings per Share:
Diluted earnings per share, as presented	$	0.91		$	0.87

Adjustment for Signature Bank bond (recovery) write-off	(0.06)			0.13
Tax impact of above adjustments(1)	0.01			(0.03)
Adjusted diluted earnings per share	$	0.86		$	0.97
Adjusted Return on Average Assets:
Return on average assets, as presented	0.93		%	0.91		%

Adjustment for Signature Bank bond (recovery) write-off	(0.06)		%	0.13		%
Tax impact of above adjustments(1)	0.01		%	(0.03)		%
Adjusted return on average assets	0.88		%	1.01		%
Adjusted Return on Average Equity:
Return on average equity, as presented	10.77		%	11.16		%

Adjustment for Signature Bank bond (recovery) write-off	(0.74)		%	1.61		%
Tax impact of above adjustments(1)	0.16		%	(0.34)		%
Adjusted return on average equity	10.19		%	12.43		%

(1) Assumed a 21% tax rate.

Pre-Tax, Pre-Provision Income and Adjusted Pre-Tax, Pre-Provision Income. Pre-tax, pre-provision income and adjusted pre-tax, pre-provision income are each a supplemental measure of operating earnings and performance. Pre-tax, pre-provision income is calculated as net income before provision for credit losses and income tax expense, and adjusted pre-tax, pre-provision income is calculated as net income before provision for credit losses, income tax expense, and adjusted for certain other items, as applicable. These supplemental measures became more widely used by financial institutions as a measure of financial performance for comparability across financial institutions.


	Three Months Ended March 31,
(Dollars in thousands)	2024		2023
Net income, as presented	$	13,272	$	12,727
Adjustment for (credit) provision for credit losses	(2,102)		2,002
Adjustment for income tax expense	3,063		3,252
Adjusted pre-tax, pre-provision income	$	14,233	$	17,981

Efficiency Ratio. The efficiency ratio represents an approximate measure of the cost required for the Company to generate a dollar of revenue. This is a common measure within the financial services industry and is a key ratio for evaluating Company performance. The efficiency ratio is calculated as the ratio of (i) total non-interest expense, adjusted for certain operating expenses, as necessary, to (ii) net interest income on a tax equivalent basis plus total non-interest income, adjusted for certain other income items, as necessary.


		Three Months Ended March 31,
		Three Months Ended March 31,
		Three Months Ended March 31,
		Three Months Ended March 31,
(Dollars in thousands)
(Dollars in thousands)
(Dollars in thousands)	(Dollars in thousands)	2023			2022
Non-interest expense, as presented	Non-interest expense, as presented	$	26,165		$	26,209
Non-interest expense, as presented
Non-interest expense, as presented
Net interest income, as presented	Net interest income, as presented	$	34,280		$	36,365
Add: effect of tax-exempt income(1)		229			226
Net interest income, as presented
Net interest income, as presented
Adjustment for the effect of tax-exempt income(1)
Adjustment for the effect of tax-exempt income(1)
Adjustment for the effect of tax-exempt income(1)
Non-interest income, as presented
Non-interest income, as presented
Non-interest income, as presented	Non-interest income, as presented	9,866			9,825

Adjusted net interest income plus non-interest income	Adjusted net interest income plus non-interest income	$	44,375		$	46,416

Adjusted net interest income plus non-interest income

Adjusted net interest income plus non-interest income
Ratio of non-interest expense to total revenues(2)
Ratio of non-interest expense to total revenues(2)
Ratio of non-interest expense to total revenues(2)	Ratio of non-interest expense to total revenues(2)	59.27		%	56.74		%
Efficiency ratio	Efficiency ratio	58.96		%	56.47		%
Efficiency ratio
Efficiency ratio

(1) Assumed a 21% tax rate.

(2) Revenue is the sum of net interest income and non-interest income.

4543

~~Net Interest Income (Fully-Taxable Equivalent).~~

Return on Average Tangible Equity: ~~Net interest~~Return on average tangible equity is the ratio of (i) net income, ~~on a fully-taxable equivalent basis is net interest income plus~~adjusted for (a) amortization of core deposit intangible assets and the ~~taxes that would have been paid had tax-exempt securities been taxable. This number attempts to enhance the comparability~~tax impact of the ~~performance of assets that have different tax liabilities.~~adjustment and (b) goodwill impairment, as necessary, to (ii) average shareholders' equity, adjusted for average goodwill and core deposit intangible assets. This adjusted financial ratio reflects a shareholder's return on tangible capital deployed in our business and is a common measure within the financial services ~~industry~~industry.

Adjusted Return on Average Tangible Equity: Adjusted return on average tangible equity is the ratio of (i) adjusted net income (as defined in the table above) adjusted for (a) amortization of core deposit intangible assets and ~~is used within~~ the ~~calculation~~tax impact of ~~net interest margin on a fully-taxable equivalent basis.~~the adjustment and (b) goodwill impairment, as necessary, to (ii) average shareholders' equity, adjusted for average goodwill and core deposit intangible assets.

Three Months Ended
March 31,
(In thousands) 2023 2022
Net interest income, as presented $ 34,280 $ 36,365
Add: effect of tax-exempt income(1)
229 226
Net interest income (fully-taxable equivalent) $ 34,509 $ 36,591


	Three Months Ended March 31,
(Dollars in thousands)	2024			2023
Return on Average Tangible Equity:
Net income, as presented	$	13,272		$	12,727
Adjustment for amortization of core deposit intangible assets	139			148
Tax impact of above adjustment(1)	(29)			(31)
Net income, adjusted for amortization of core deposit intangible assets	$	13,382		$	12,844
Average equity, as presented	$	495,513		$	462,651
Adjustment for average goodwill and core deposit intangible assets	(95,604)			(96,191)
Average tangible equity	$	399,909		$	366,460
Return on average equity	10.77		%	11.16		%
Return on average tangible equity	13.46		%	14.21		%
Adjusted Return on Average Tangible Equity:
Adjusted net income (see "Adjusted Net Income" table above)	$	12,553		$	14,179
Adjustment for amortization of core deposit intangible assets	139			148
Tax impact of above adjustment(1)	(29)			(31)
Adjusted net income, adjusted for amortization of core deposit intangible assets	$	12,663		$	14,296
Adjusted return on average tangible equity	12.74		%	15.82		%

(1) Assumed a 21% tax rate.

~~Earnings before Income Taxes and Provision, and Earnings before Income Taxes, Provision and SBA PPP Loan Income.~~ Earnings before income taxes and provision, and earnings before income taxes, provision and SBA PPP loan income are each a supplemental measure of operating earnings and performance. Earnings before income taxes and provision is calculated as net income before provision for credit losses and income tax expense, and earnings before income taxes, provision and SBA PPP loan income is calculated as net income before provision for credit losses, income tax expense and SBA PPP loan income. These supplemental measures have become more widely used by financial institutions as a measure of financial performance for comparability across financial institutions due to the impact of the COVID-19 pandemic on the provision for credit losses, as well as the origination of SBA PPP loans in response to the COVID-19 pandemic that are not a recurring and sustainable source of revenues for financial institutions.

Three Months Ended
March 31,
(In thousands) 2023 2022
Net income, as presented $ 12,727 $ 16,795
Add: income tax expense, as presented 3,252 4,261
Add: provision (credit) for credit losses, as presented 2,002 (1,075)
Earnings before income taxes and provision for credit losses 17,981 19,981
Less: SBA PPP loan income (4) (1,033)
Earnings before income taxes, provision for credit losses and SBA PPP Loan income $ 17,977 $ 18,948

4644

Tangible Book Value per Share. Tangible book value per share is the ratio of (i) shareholders’ equity less goodwill and other intangibles to (ii) total common shares outstanding at period end. Tangible book value per share is a common measure within the financial services industry to assess the value of a company, as it removes goodwill and other intangible assets generated within purchase accounting upon a business combination.

Tangible Common Equity Ratio. Tangible common equity is the ratio of (i) shareholders’ equity less goodwill and other intangible assets to (ii) total assets less goodwill and other intangible assets. This ratio is a measure used within the financial services industry to assess a company's capital adequacy.


(In thousands, except number of shares, per share data and ratios)		March 31, 2023			December 31, 2022
(Dollars in thousands, except number of shares, per share data and ratios)								(Dollars in thousands, except number of shares, per share data and ratios)	March 31, 2024		December 31, 2023
Tangible Book Value Per Share:	Tangible Book Value Per Share:
Shareholders’ equity, as presented	Shareholders’ equity, as presented	$	464,874		$	451,278
Less: goodwill and core deposit intangible assets		(96,112)			(96,260)
Shareholders’ equity, as presented
Shareholders’ equity, as presented
Adjustment for goodwill and core deposit intangible assets
Tangible shareholders’ equity	Tangible shareholders’ equity	$	368,762		$	355,018
Shares outstanding at period end	Shares outstanding at period end	14,587,906			14,567,325
Book value per share	Book value per share	$	31.87		$	30.98
Tangible book value per share	Tangible book value per share	$	25.28		$	24.37
Tangible Common Equity Ratio:	Tangible Common Equity Ratio:
Total assets	Total assets	$	5,716,605		$	5,671,850
Less: goodwill and core deposit intangible assets		(96,112)			(96,260)
Total assets
Total assets
Adjustment for goodwill and core deposit intangible assets
Tangible assets	Tangible assets	$	5,620,493		$	5,575,590
Common equity ratio	Common equity ratio	8.13		%	7.96		%	Common equity ratio	8.66	%	8.66	%
Tangible common equity ratio	Tangible common equity ratio	6.56		%	6.37		%	Tangible common equity ratio	7.12	%	7.11	%

Core Deposits. Core deposits are used by management to measure the portion of the Company's total deposits that management believes to be more stable and at a lower interest rate cost. The Company calculates core deposits as total deposits (as reported on the consolidated statements of condition) less certificates of deposit and brokered deposits. Management believes core deposits is a useful measure to assess the Company's deposit base, including its potential volatility.

(In thousands) March 31,
2023 December 31,
2022
Total deposits $ 4,642,734 $ 4,826,929
Less: certificates of deposit (360,103) (300,451)
Less: brokered deposits (215,949) (181,253)
Core deposits $ 4,066,682 $ 4,345,225


(Dollars in thousands)	March 31, 2024		December 31, 2023
Total deposits	$	4,551,524	$	4,597,360
Adjustment for certificates of deposit	(585,786)		(609,503)
Adjustment for brokered deposits	(153,942)		(101,919)
Core deposits	$	3,811,796	$	3,885,938

Average Core Deposits. Average core deposits are used by management to measure the portion of the Company's total deposits that management believes to be more stable and at a lower interest rate cost. The Company calculates average core deposits as total average deposits (excluding average brokered deposits, as disclosed on the Average Balance, Interest and Yield/Rate Analysis tables) less average certificates of deposit. Management believes core deposits is a useful measure to assess the Company's deposit base, including its potential volatility.

Three Months Ended
March 31,

(In thousands)

2023

2022

Three Months Ended

March 31,

Three Months Ended

March 31,

Three Months Ended

March 31,

(Dollars in thousands)

Total average deposits(1)

4,520,424

4,380,035

Less: average certificates of deposit

(320,209)

(304,720)

Total average deposits(1)

Adjustment average certificates of deposit

Average core deposits

4,200,215

4,075,315

Average core deposits

(1) Brokered deposits are excluded from total average deposits, as presented on the Average Balance, Interest and Yield/Rate analysis table.

4745

CRITICAL ACCOUNTING POLICIES

Critical accounting policies are defined as those that are reflective of significant judgments and uncertainties, and could potentially result in materially different results under different assumptions and conditions. In preparing the Company’s consolidated financial statements, management is required to make significant estimates and assumptions that affect assets, liabilities, revenues, and expenses reported. Actual results could differ materially from our current estimates as a result of changing conditions and future events. Several estimates are particularly critical and are susceptible to significant near-term change, including (i) the ACL, including the ACL on loans, off-balance sheet credit exposures and investments; (ii) accounting for acquisitions and the subsequent review of goodwill and intangible assets generated in an acquisition for impairment; (iii) income taxes; and (iv) accounting for defined benefit and postretirement plans.

There have been no material changes to the Company's critical accounting policies from those disclosed within its Annual Report on Form 10-K for the year ended December 31, ~~2022.~~2023. Refer to the Company's Annual Report on Form 10-K for the year ended December 31, ~~2022,~~2023, for discussion of the Company's critical accounting policies.

Refer to Note 2 of the consolidated financial statements for discussion of accounting pronouncements issued but yet to be adopted and implemented.

GENERAL OVERVIEW

Camden National Corporation (hereafter referred to as “we,” “our,” “us,” or the “Company”) is a publicly-held bank holding company, with approximately ~~$5.7~~$5.8 billion in assets at March 31, ~~2023,~~2024, incorporated under the laws of the State of Maine and headquartered in Camden, Maine. Camden National Bank (the "Bank"), a wholly-owned subsidiary of the Company, was founded in 1875. The Company was founded in 1984, went public in 1997 and is ~~now~~ registered with NASDAQ Global Market (“NASDAQ”) under the ticker symbol "CAC."

The primary business of the Company and the Bank is to attract deposits from, and to extend loans to, consumer, institutional, municipal, non-profit and commercial customers. The Company, through the Bank, provides a broad array of banking and other financial services, including wealth management and trust services, brokerage, investment advisory and insurance services, to consumer, business, non-profit and municipal customers.

The Company operates throughout Maine, with its primary markets and presence being throughout coastal and central Maine, and select areas of New Hampshire and Massachusetts. The Company and the Bank generally have effectively competed with other financial institutions by emphasizing customer service, highlighted by local decision-making, establishing long-term customer relationships, building customer loyalty and providing products and services designed to meet the needs of customers.

EXECUTIVE OVERVIEW

~~First Quarter Update.~~ ~~Throughout~~Net income for the first quarter of 2024 was $13.3 million, an increase of $545,000, or 4%, compared to the first quarter of 2023, ~~the interest rate environment remained volatile, highlighted by the 10-year U.S Treasury ranging from 3.37%~~and diluted EPS increased $0.04 or 5%, to ~~4.08% and averaging 3.65% for the quarter. The yield curve continues to be inverted, and~~$0.91 for the first quarter of ~~2023~~2024 compared to the ~~average 3-month U.S. Treasury was 114 basis points higher than~~same period last year. The Company's operating results for the ~~average 10-year U.S. Treasury. The volatility in interest rates and prolonged inverted yield curve continues to be~~first quarter of 2024 included a $910,000 partial recovery from the ~~result~~sale of ~~rising interest rates in response to inflationary pressures in the U.S., but were amplified further by the failing of two regional banks in March 2023, and concerns~~a Signature Bank corporate bond that ~~additional banks could fail, which did subsequently occur on May 1, 2023. As a result of the turbulence in the banking industry~~we had written off in the first quarter of 2023 upon notice of Signature Bank failing. Excluding the ~~focus across much~~sale of the ~~industry quickly transitioned from earnings to financial position.~~

The Company's financial footing is strong based on firm fundamentals that are supported by a diverse deposit base, a strong liquidity position, excellent asset quality and regulatory capital that is well in excess of all required levels. The following are a few metrics that highlight the Company's financial strength as of March 31, 2023:

•~~Uninsured and uncollateralized~~1 ~~deposits were 15% of total deposits, compared to 16% as of December 31, 2022, which speaks to the diversification of our depositor base.~~

1 ~~Uncollateralized deposits are customer deposit balances for which the Company has not pledged any of its assets, including investment securities, or provided any other type of guarantee.~~

•Primary liquidity sources, which consists of cash, investment securities and FHLBB and FRB borrowing capacity, totaled $1.3 billion, which was approximately 1.9 times total uninsured and uncollateralized deposits.

•~~Annualized~~corporate bond, adjusted net ~~charge-offs~~income (non-GAAP) for the first quarter of ~~2023 were 0.02%, compared to 0.03% for the fourth quarter~~2024 was $12.6 million and adjusted EPS was $0.86, each a decrease of ~~2022 and 0.02% for~~11% from the first quarter of ~~2022.~~

•~~Non-performing assets were 0.09% of total assets and past due loans were 0.05% of total loans, compared to 0.09% and 0.06%, respectively, as of December 31, 2022.~~

•~~Equity to assets ratio was 8.13% and tangible common equity ratio (non-GAAP) was 6.56%, compared to 7.96% and 6.37%, respectively, as of December 31, 2022.~~

•~~Common Equity Tier 1 risk-based capital ratio was 11.90%, which exceeded the minimum regulatory capital required for capital adequacy plus the capital conservation buffer by 4.90%.~~2023.

Like many others across the banking industry, the Company's earnings ~~have been~~continue to be affected by the inverted yield ~~curve, as deposit and~~curve. Through the first quarter of 2024, our funding costs ~~have risen~~continued to rise at a faster pace than our ~~assets have repriced,~~earning asset yields, which ~~in turn has~~ resulted in ~~continued compression of our~~further net interest ~~margin. Our~~margin compression period-over-period. The Company's net interest margin for the first quarter of ~~2023~~2024 was ~~2.54%~~2.30%, compared to ~~2.76%~~2.54% for the same period of 2023.

Our asset quality continues to be a strength of the Company, and we continue to monitor the portfolio actively for potential risks. In light of the current macroeconomic environment and developments in the banking industry, we have and continue to monitor our commercial real estate portfolio. Through these reviews, there have been no significant signs of distress within the portfolios, which speaks to our disciplined and consistent underwriting of loans in all economic environments and cycles. On March 31, 2024, loans 30-89 days past due to total loans decreased to 0.05% of total loans, from 0.12% at December 31, 2023, and annualized net charge-offs continue to be very strong at 0.02% of average loans for the first quarter of 2024, compared to 0.03% for the fourth quarter of ~~2022 and 2.87% for the first quarter of 2022. We have taken, and continue~~2023. Due to take, actions to manage net interest margin closely, including, but not limited to, disciplined loan and deposit pricing, as well as the utilization of interest rate swaps and brokered and retail CDs to reduce our exposure to rising short-term interest rates. The results of these ~~actions can be seen in our interest rate risk position as of March 31, 2023, which is detailed in our interest rate risk modeling within~~ ~~"—Risk Management—Interest Rate Risk,"~~ ~~as the Company's net interest income at risk over~~strong credit quality metrics, combined with a 12-month period improved in an up 200 basis points scenario (based on our model as described). As of March 31, 2023, net interest income would decrease 2.24% in an up 200 basis point scenario, as compared to a decrease of 3.93% as of December 31, 2022.

The Company's investment portfolio continues to be a primary source of liquidity through investment cash flows, as well as the ability to pledge securities as collateral for funding. As of March 31, 2023, the fair value of the Company's bond portfolio was $1.2 billion and was in a net unrealized loss position of $122.0 million. We did not purchase any investments during the first quarter of 2023, as we used investment cash flows to fund incremental loan growth. The investment portfolio continues to be primarily made up of agency-backed MBS and CMO, but also contains subordinated corporate bonds and municipal securities as further described within ~~"—Financial Condition—Investments."~~ While the investment portfolio consists primarily of highly-rated securities, the Company did fully charge-off of a $1.8 million Signature Bank bond due to Signature Bank's failure in March 2023. As of March 31, 2023, we did not have any other exposures to failed banks. The weighted-average life and duration of our bond portfolio as of March 31, 2023, was 8.2 years and 5.7 years, respectively, compared to 7.8 years and 5.8 years, respectively, as of December 31, 2022.

~~Discussed below is further information on the Company's financial performance for the first quarter of 2023 and its current financial position.~~

~~Operating Results.~~ Net income for the first quarter of 2023 was $12.7 million, a decrease of $4.1 million or 24%, compared to the first quarter of 2022, and diluted EPS decreased $0.26, or 23%, to $0.87 for the first quarter of 2023 compared to the same period last year. Earnings before income taxes, provision expense and SBA PPP loan income (non-GAAP) for the first quarter of 2023 were $18.0 million, a decrease of $971,000, or 5%, between periods.

~~The key drivers of the decrease in net income between the quarter ended March 31, 2023 and 2022 included:~~

•~~A decrease in net interest income of $2.1 million, or 6%, driven by a decrease in net interest margin between periods of 33 basis points, which~~ more ~~than offset the increase in average interest-earnings assets between periods of 6%.~~

•An increase in provision for credit losses of $3.1 million between periods. For the first quarter of 2023, the Company recorded a provision of $2.0 million that was primarily driven by the full charge-off of a $1.8 million Signature Bank bond due to Signature Bank's failure in March 2023. For the first quarter of 2022, the Company recorded negative provision expense (or a credit) of $1.1 million as it released a portion of its ACL on loans it established in 2020 at the onset of the COVID-19 pandemic.

favorable

4946

~~Other~~

macroeconomic forecast between periods, the Company’s allowance for credit losses ("ACL") on loans decreased to 0.86% as of March 31, 2024, compared to 0.90% at December 31, 2023.

The following table outlines other key financial metrics for the periods ~~indicated were as follows:~~indicated:

Three Months Ended
March 31,
2023 2022
Return on average assets (annualized) 0.91 % 1.26 %
Return on average equity (annualized) 11.16 % 12.96 %
Return on average tangible equity (annualized) (non-GAAP) 14.21 % 16.01 %
Ratio of non-interest expense to total revenues 59.27 % 56.74 %
Efficiency ratio (non-GAAP) 58.96 % 56.47 %
Overhead ratio (non-interest expense divided by average assets) (annualized) 1.84 % 1.93 %


	At or for the Three Months Ended
(In thousands, except per share data and ratios)	March 31, 2024			December 31, 2023			March 31, 2023			% Change Mar 2024 vs. Dec 2023		% Change Mar 2024 vs. Mar 2023
Earnings and Profitability
Net income	$	13,272		$	8,480		$	12,727		57	%	4	%
Diluted EPS	$	0.91		$	0.58		$	0.87		57	%	5	%
Adjusted net income (non-GAAP)	$	12,553		$	12,410		$	14,179		1	%	(11)	%
Adjusted diluted EPS (non-GAAP)	$	0.86		$	0.85		$	0.97		1	%	(11)	%
Return on average assets	0.93		%	0.59		%	0.91		%	0.34	%	0.02	%
Adjusted return on average assets (non-GAAP)	0.88		%	0.87		%	1.01		%	0.01	%	(0.13)	%
Return on average equity	10.77		%	7.20		%	11.16		%	3.57	%	(0.39)	%
Adjusted return on average equity (non-GAAP)	10.19		%	10.53		%	12.43		%	(0.34)	%	(2.24)	%
Return on average tangible equity (non-GAAP)	13.46		%	9.18		%	14.21		%	4.28	%	(0.75)	%
Adjusted return on average tangible equity (non-GAAP)	12.74		%	13.38		%	15.82		%	(0.64)	%	(3.08)	%
Efficiency ratio (non-GAAP)	65.55		%	63.48		%	58.96		%	2.07	%	6.59	%
Balance Sheet and Liquidity
Loans	$	4,121,040		$	4,098,094		$	4,073,108		1	%	1	%
Deposits	$	4,551,524		$	4,597,360		$	4,642,734		(1)	%	(2)	%
Cash dividends declared per share	$	0.42		$	0.42		$	0.42		—	%	—	%
Uninsured and uncollateralized deposits to total deposits	14.80		%	14.60		%	14.90		%	0.20	%	(0.10)	%
Available liquidity sources to uninsured and uncollateralized deposits	207.86		%	201.67		%	187.70		%	6.19	%	20.16	%
Credit Quality and Capital
Non-performing assets to total assets	0.13		%	0.13		%	0.09		%	—	%	0.04	%
Loans 30-89 days past due to total loans	0.05		%	0.12		%	0.05		%	(0.07)	%	—	%
Allowance for credit losses on loans to total loans	0.86		%	0.90		%	0.91		%	(0.04)	%	(0.05)	%
Total risk-based capital ratio	14.52		%	14.36		%	13.95		%	0.16	%	0.57	%
Tangible common equity ratio (non-GAAP)	7.12		%	7.11		%	6.56		%	0.01	%	0.56	%

~~Asset Quality.~~ As of March 31, 2023 and December 31, 2022, the Company's credit quality metrics remained strong with non-performing loans totaling 0.13%. We continue to monitor the Company's loan portfolio closely for any leading indicators of potential stress.

As previously noted, in the first quarter of 2023, we fully wrote-off a $1.8 million investment in a Signature Bank bond. Our corporate and municipal bond portfolio continues to be of high credit quality, and we have since re-evaluated these portfolios and do not see any further credit risk at this time. As of March 31, 2023, there was no allowance or impairments recorded on the Company's investment portfolio.

~~Shareholders' Equity.~~ ~~As of March 31, 2023, the Company's regulatory capital ratios were each well in excess of regulatory capital requirements.~~

The Company announced a cash dividend of $0.42 per share, payable on April 28, 2023, to shareholders of record on April 14, 2023, representing an annualized dividend yield of 4.64%, based on the Company's closing share price of $36.19, as reported by NASDAQ on March 31, 2023.

In January 2023, we announced a new share repurchase program was approved by the Company’s Board of Directors for up to 750,000 shares, or approximately 5% of total shares outstanding as of December 31, 2022, and the termination of our share repurchase program that was opened in 2022.

RESULTS OF OPERATIONS

Net Interest Income and Net Interest Margin

Net interest income is the interest earned on loans, securities, and other interest-earning assets, adjusted for net loan fees, origination costs, and accretion or amortization of fair value marks on loans and/or CDs created in purchase accounting, less the interest paid on interest-bearing deposits and borrowings. Net interest income is our largest source of revenue ("revenue" is defined as the sum of net interest income and non-interest income). For the quarter ended March 31, ~~2023,~~2024, net interest income was ~~78%~~75% of total revenues, compared to ~~79%~~78% for the quarter ended March 31, ~~2022.~~2023. Net interest income is affected by ~~several~~ factors including, but not limited to, changes in interest rates, loan and deposit pricing strategies and competitive conditions, loan prepayment speeds, the volume and mix of interest-earning assets and interest-bearing liabilities, and the level of non-performing assets.

Net interest margin is calculated as net interest income on a fully-taxable equivalent basis (non-GAAP) as a percentage of average interest-earning assets.

Net Interest ~~Income and Net Interest Margin.~~Income. Net interest income on a fully-taxable equivalent basis for the quarter ended March 31, ~~2023~~2024 was ~~$34.5~~$31.4 million, a decrease of ~~$2.1~~$3.1 million, or 6%9%, compared to the ~~same period in 2022.~~first quarter of 2023. The decrease consisted of a ~~$16.0~~$10.5 million increase in interest expense, ~~which reflects the change in short-term interest rates between periods,~~ partially offset by an increase in interest income on a fully-taxable equivalent basis of ~~$13.9~~$7.4 million ~~or 36%,~~ between periods.

~~Our net interest margin on a fully-taxable equivalent basis for the quarters ended March 31, 2023 and 2022 was 2.54% and 2.87%, respectively.~~

•The increase in interest expense between periods was primarily the result of ~~a 124~~an 82 basis ~~points~~point increase in our average cost of ~~funds. The Federal Funds Target Rate range at March 31, 2023 was 4.75% - 5.00%, compared~~funds to ~~0.25% - 0.50% at March 31, 2022. From~~2.27% for the ~~start of the rising interest rate cycle (December 31, 2021), the Company has actively managed its funding costs and, in doing so, has held its total funding beta~~2 ~~to 28% through March 31, 2023. More recently, the Company has seen its total funding cost beta rise at an accelerated pace due to the FOMC increasing interest rates 125 basis points in the fourth~~first quarter of ~~2022~~2024. Our deposit and ~~another 50 basis points~~borrowing costs increased throughout the past year and in the first quarter of ~~2023. The Company's total funding beta for~~2024 as the Federal Funds Rate target range was 5.25% - 5.50% in the first quarter of ~~2023 was 56%.~~2024, compared to 4.75% - 5.00% as of March 31, 2023. The increase in short-term interest rates between periods has resulted in rising funding costs between periods and we remain in a higher interest rate environment.

The Company’s ~~funding~~average deposit costs ~~grew to 1.45%~~ for ~~first~~the quarter ~~of 2023,~~ended March 31, 2024 were 1.97%, compared to ~~0.21%~~1.22% for the same period in 2023. Deposit costs have continued to be pressured throughout the first quarter of ~~2022~~2024 due to the higher short-term rates. Other drivers of deposit costs included strong deposit competition within our markets, and more broadly across depository institutions, including changes in the deposit mix as depositors moved deposits ~~costs increased 107 basis points~~into higher interest-earning deposit accounts. Customers continued to deploy excess cash into higher interest-earning deposit accounts to obtain the best rates, and this change in deposit mix drove a significant increase in money market and CD balances over ~~this period to 1.22%~~the past year and a significant decrease in low-cost savings and checking accounts.

The Company’s average cost of borrowings for the ~~first quarter of 2023 and borrowing costs~~three months ended March 31, 2024 increased ~~228 basis points over this period~~ to 3.96%, up from 3.13% for the ~~first quarter of~~three months ended March 31, 2023. AsThe increase was driven by the continued increase in short-term interest ~~rates continued~~between years, but also was due to ~~rise, depositors became more interest rate sensitive and deposit balances shifted from lower cost~~the increase in average borrowings of $139.0 million, or 22%, which were used to offset the decreases in deposits ~~such as non-interest checking and savings, to higher cost deposits, such as interest checking and CDs.~~of $149.7 million, or 3%, over the past year.

•The increase in interest income ~~between periods~~on a fully-taxable equivalent basis was also primarily driven by ~~both~~the higher interest rate environment between years. For the first quarter of 2024, the Company’s yield on average interest-earning assets was 4.44%, compared to 3.92% for the same period in 2023.

The Company’s average loan yield ~~expansion and average interest-earning asset growth~~was 5.00% for the first three months of ~~$311.7 million, or 6%. Between periods, our yield on interest-earning assets grew 85~~2024, an increase of 50 basis points over the first three months of 2023. We continue to ~~3.92%~~reinvest loan and investment cash flows primarily back into loans at current market rates to support yield expansion.

The Company’s average investment yield was 2.59% for the first quarter of ~~2023, driven by loan yield expansion~~2024, an increase of 8040 basis points ~~to 4.50% for~~over the ~~first quarter~~same period in 2023. The increase between periods is the result of the continued cash flow from lower-yielding investments combined with the sale of investments in the second half of 2023 ~~and~~to reposition the Company's balance sheet. The increase in our investment yield ~~expansion of 35 basis points~~was able to ~~2.19% for the first quarter of 2023. over this same period. This increased yield reflects the~~drive an increase in interest ~~rates~~income on investments year-over-year and fully offset the impact of a decrease in average investment balances of 7% between periods.

Furthermore, in the first quarter of 2023, the Company executed four pay-fixed, receive-floating interest rate swaps, totaling $300.0 million of notional value on a designated pool of fixed rate residential real estate loans. The derivative transaction was designated as a “fair value hedge” under ASC 815, and was completed to reduce its near-term interest rate risk exposure to rising interest rates. For the first quarter of 2023, the Company paid a weighted-average rate on these interest swaps of 3.65% and received Fed Funds Overnight Index Swap ("OIS") Rate, which generated $479,000 of interest income.

~~The following table presents,~~Net Interest Margin. Net interest margin on a fully-taxable equivalent basis for the ~~periods noted, average balances, interest income, interest expense,~~three months ended March 31, 2024 and ~~the corresponding average yields earned~~2023 was 2.30% and ~~rates paid, as well as net interest income, net interest rate spread and net interest margin:~~2.54%, respectively.

2 ~~The total funding beta measures the change in total funding costs for the Company as compared to the change in the average Federal Funds Rate over the same period.~~

5148

Quarterly Average Balance, Interest and Yield/Rate Analysis


			Three Months Ended
			March 31, 2023						March 31, 2022
		Three Months Ended																																								Three Months Ended
		March 31, 2024																												March 31, 2024														March 31, 2023
(Dollars in thousands)	(Dollars in thousands)		Average Balance		Interest		Yield/Rate		Average Balance		Interest		Yield/Rate		(Dollars in thousands)			Average Balance					Interest						Yield/Rate						Average Balance						Interest						Yield/Rate
Assets	Assets
Interest-earning assets:	Interest-earning assets:
Interest-earning assets:
Interest-earning assets:
Interest-bearing deposits in other banks and other interest-earning assets
Interest-bearing deposits in other banks and other interest-earning assets
Interest-bearing deposits in other banks and other interest-earning assets	Interest-bearing deposits in other banks and other interest-earning assets		$	26,018	$	253	3.89	%	$	100,002	$	33	0.13	%		$	44,487		$		$	488			4.34			4.34		%				$	26,018		$			$	253		3.89				3.89	%
Investments - taxable	Investments - taxable		1,237,351		6,377		2.06	%	1,409,567		6,026		1.71	%	Investments - taxable			1,187,699		7,521				7,521			2.53				2.53	%				1,237,351			6,377				6,377			2.06			2.06	%
Investments - nontaxable(1)	Investments - nontaxable(1)		105,502		966		3.66	%	115,021		967		3.36	%	Investments - nontaxable(1)			62,385		589				589			3.78				3.78	%				105,502			966				966			3.66			3.66	%
Loans(2):	Loans(2):
Commercial real estate
Commercial real estate
Commercial real estate	Commercial real estate		1,646,005		18,959		4.61	%	1,489,304		13,559		3.64	%		1,682,599			21,007			21,007				4.94			4.94		%				1,646,005			18,959				18,959			4.61			4.61	%
Commercial(1)	Commercial(1)		409,112		5,615		5.49	%	372,910		3,302		3.54	%	Commercial(1)			389,695		5,960				5,960			6.05				6.05	%				409,112			5,615				5,615			5.49			5.49	%
SBA PPP	SBA PPP		594		4		2.55	%	21,687		1,033		19.05	%	SBA PPP			324		4				4			4.46				4.46	%				594			4				4			2.55			2.55	%
Municipal(1)	Municipal(1)		15,997		140		3.56	%	15,221		130		3.46	%	Municipal(1)			14,653		160				160			4.40				4.40	%				15,997			140				140			3.56			3.56	%
Residential real estate	Residential real estate		1,715,192		16,200		3.78	%	1,347,427		11,652		3.46	%	Residential real estate			1,773,077		19,557				19,557			4.41				4.41	%				1,715,192			16,200				16,200			3.78			3.78	%
Consumer and home equity	Consumer and home equity		253,760		4,440		7.10	%	226,731		2,382		4.26	%	Consumer and home equity			257,305		5,047				5,047			7.89				7.89	%				253,760			4,440				4,440			7.10			7.10	%
Total loans	Total loans		4,040,660		45,358		4.50	%	3,473,280		32,058		3.70	%	Total loans			4,117,653		51,735				51,735			5.00				5.00	%				4,040,660			45,358				45,358			4.50			4.50	%
Total interest-earning assets	Total interest-earning assets		5,409,531		52,954		3.92	%	5,097,870		39,084		3.07	%	Total interest-earning assets			5,412,224		60,333				60,333			4.44				4.44	%				5,409,531			52,954				52,954			3.92			3.92	%
Cash and due from banks	Cash and due from banks		46,713						47,820
Other assets	Other assets		268,550						308,524
Other assets
Other assets
Less: ACL
Less: ACL
Less: ACL	Less: ACL		(37,127)						(33,111)
Total assets	Total assets		$	5,687,667					$	5,421,103
Total assets
Total assets
Liabilities & Shareholders' Equity
Liabilities & Shareholders' Equity
Liabilities & Shareholders' Equity	Liabilities & Shareholders' Equity
Deposits:	Deposits:
Deposits:
Deposits:
Non-interest checking
Non-interest checking
Non-interest checking	Non-interest checking		$	1,076,469	$	—	—	%	$	1,199,456	$	—	—	%		$	933,321		$		$	—			—			—		%				$	1,076,469		$			$	—		—				—	%
Interest checking	Interest checking		1,689,862		8,341		2.00	%	1,414,704		664		0.19	%	Interest checking			1,490,185		9,381				9,381			2.53				2.53	%				1,689,862			8,341				8,341			2.00			2.00	%
Savings	Savings		734,804		137		0.08	%	750,899		76		0.04	%	Savings			599,791		305				305			0.20				0.20	%				734,804			137				137			0.08			0.08	%
Money market	Money market		699,080		3,785		2.20	%	710,256		518		0.30	%	Money market			764,585		6,260				6,260			3.29				3.29	%				699,080			3,785				3,785			2.20			2.20	%
Certificates of deposit	Certificates of deposit		320,209		1,368		1.73	%	304,720		338		0.45	%	Certificates of deposit			582,806		5,470				5,470			3.77				3.77	%				320,209			1,368				1,368			1.73			1.73	%
Total deposits	Total deposits		4,520,424		13,631		1.22	%	4,380,035		1,596		0.15	%	Total deposits			4,370,688		21,416				21,416			1.97				1.97	%				4,520,424			13,631				13,631			1.22			1.22	%
Borrowings:	Borrowings:
Brokered deposits	Brokered deposits		220,559		2,201		4.05	%	176,399		237		0.55	%
Brokered deposits
Brokered deposits																		133,385					1,762						5.31		%				220,559						2,201						4.05	%
Customer repurchase agreements	Customer repurchase agreements		182,754		481		1.07	%	208,147		129		0.25	%	Customer repurchase agreements			182,487		728				728			1.60				1.60	%				182,754			481				481			1.07			1.07	%
Subordinated debentures			44,331		528		4.83	%	44,331		529		4.84	%
Junior subordinated debentures															Junior subordinated debentures			44,331					534						4.85		%				44,331						528						4.83	%
Other borrowings	Other borrowings		175,223		1,604		3.71	%	1,613		2		0.39	%	Other borrowings			401,683		4,470				4,470			4.40				4.40	%				175,223			1,604				1,604			3.71			3.71	%
Total borrowings	Total borrowings		622,867		4,814		3.13	%	430,490		897		0.85	%	Total borrowings			761,886		7,494				7,494			3.96				3.96	%				622,867			4,814				4,814			3.13			3.13	%
Total funding liabilities	Total funding liabilities		5,143,291		18,445		1.45	%	4,810,525		2,493		0.21	%	Total funding liabilities			5,132,574		28,910				28,910			2.27				2.27	%				5,143,291			18,445				18,445			1.45			1.45	%
Other liabilities	Other liabilities		81,725						85,140
Shareholders' equity	Shareholders' equity		462,651						525,438
Shareholders' equity
Shareholders' equity
Total liabilities & shareholders' equity
Total liabilities & shareholders' equity
Total liabilities & shareholders' equity	Total liabilities & shareholders' equity		$	5,687,667					$	5,421,103
Net interest income (fully-taxable equivalent)	Net interest income (fully-taxable equivalent)				34,509						36,591
Net interest income (fully-taxable equivalent)
Net interest income (fully-taxable equivalent)
Less: fully-taxable equivalent adjustment
Less: fully-taxable equivalent adjustment
Less: fully-taxable equivalent adjustment	Less: fully-taxable equivalent adjustment				(229)						(226)
Net interest income	Net interest income				$	34,280					$	36,365
Net interest income
Net interest income
Net interest rate spread (fully-taxable equivalent)
Net interest rate spread (fully-taxable equivalent)
Net interest rate spread (fully-taxable equivalent)	Net interest rate spread (fully-taxable equivalent)						2.47	%					2.86	%																		2.17	%																		2.47	%
Net interest margin (fully-taxable equivalent)	Net interest margin (fully-taxable equivalent)						2.54	%					2.87	%	Net interest margin (fully-taxable equivalent)																		2.30	%																		2.54	%

(1) Reported on tax-equivalent basis calculated using a 21% tax rate, including certain commercial loans.

(2) Non-accrual loans and loans held for sale are included in total average loans.

5249

The following table presents certain information on a fully-taxable equivalent basis regarding changes in interest income and interest expense for the periods indicated. For each category of interest-earning assets and interest-bearing liabilities, information is provided with respect to changes attributable to rate and volume. The (a) changes in volume (change in volume multiplied by prior period's rate), (b) changes in rates (change in rate multiplied prior period's volume), and (c) changes in rate/volume (change in rate multiplied by the change in volume), which is allocated to the change due to rate column.

Three Months Ended
March 31, 2023 vs. March 31, 2022

Increase (Decrease) Due to:

Net Increase (Decrease)

Three Months Ended

March 31, 2024 vs. March 31, 2023

Three Months Ended

March 31, 2024 vs. March 31, 2023

Three Months Ended

March 31, 2024 vs. March 31, 2023

Increase (Decrease) Due to:

(In thousands)

Volume

Rate

Net Increase (Decrease)

Interest-earning assets:

Interest-bearing deposits in other banks and other interest-earning assets

(24)

244

220

Investments – taxable

(736)

1,087

351

Investments – taxable

Investments – nontaxable

(80)

(1)

Commercial real estate

1,469

3,546

5,015

Commercial real estate

Commercial

397

1,922

2,319

SBA PPP

(1,005)

(24)

(1,029)

Commercial

Municipal

Residential real estate

3,080

1,847

4,927

Residential real estate

Consumer and home equity

284

1,774

2,058

Total interest income (fully-taxable equivalent)

3,392

10,478

13,870

Total interest income (fully-taxable equivalent)

Interest-bearing liabilities:

Interest checking

129

7,548

7,677

Interest checking

Savings

(2)

Money market

(8)

3,275

3,267

Money market

Certificates of deposit

1,013

1,030

Brokered deposits

1,904

1,964

Brokered deposits

Customer repurchase agreements

(16)

368

352

Junior subordinated debentures

—

(1)

Junior subordinated debentures

Other borrowings

191

1,411

1,602

Total interest expense

371

15,581

15,952

Total interest expense

Net interest income (fully-taxable equivalent)

3,021

(5,103)

(2,082)

Net interest income (fully-taxable equivalent)

Net interest income on a fully-taxable equivalent basis included the following for the periods indicated:

Income Statement Location Three Months Ended
March 31,
(In thousands) 2023 2022
Loan (cost) fees Interest income $ (467) $ 1,081
Net fair value mark accretion from purchase accounting Interest income and Interest expense 34 81
Recoveries on previously charged-off acquired loans Interest income 26 145
Total $ (407) $ 1,307


	Income Statement Location	Three Months Ended March 31,
(In thousands)		2024		2023
Interest income from residential real estate derivatives	Interest income	$	1,519	$	479
Loan fees (costs)	Interest income	326		(467)
Net fair value mark accretion from purchase accounting	Interest income and Interest expense	23		34
Recoveries on previously charged-off acquired loans	Interest income	98		26
Total		$	1,966	$	72

5350

Provision ~~(Credit)~~ for Credit Losses

The provision ~~(credit)~~ for credit losses was made up of the following components for the periods indicated:

Three Months Ended
March 31, Change
(Dollars in thousands) 2023 2022 $ %
Provision (credit) for loan losses $ 439 $ (1,236) $ 1,675 (136) %
(Credit) provision for credit losses on off-balance sheet credit exposures (276) 161 (437) (271) %
Provision for HTM debt securities 1,839 — 1,839 — %
Provision (credit) for credit losses $ 2,002 $ (1,075) $ 3,077 (286) %


	Three Months Ended March 31,				Change
(Dollars in thousands)	2024		2023		$		%
(Credit) provision for loan losses(1)	$	(1,164)	$	439	$	(1,603)	(365)	%
Credit for credit losses on off-balance sheet credit exposures(2)	(28)		(276)		248		(90)	%
(Credit) provision for HTM debt securities(3)	(910)		1,839		(2,749)		—	%
Provision for credit losses	$	(2,102)	$	2,002	$	(4,104)	(205)	%

~~Provision for loan losses.~~(1) ~~For the quarter ended March 31, 2023, we recorded~~(Credit) provision for loan ~~losses of $439,000 due to the continued future uncertain macroeconomic conditions and outlook as a fear of a recession in the near term continues to grow. Partially offsetting the need~~losses: Negative provision expense (i.e., credit for ~~provisions was continued strong asset quality across the Company’s loan portfolios with no immediate signs of deterioration, as highlighted by the following~~ credit quality metrics: (i) net charge-offs of 0.02% of average loans (annualized) for the quarter ended March 31, 2023, (ii) non-performing assets of 0.09% of total assets as of March 31, 2023, and (iii) and past due loans (30-89 days) of 0.05% of total loans as of March 31, 2023. The releaselosses) of $1.2 million ~~in provision~~was recorded for the first quarter of ~~2022~~2024 and was driven by ~~the release of qualitative reserves for certain commercial real estate loans that were established at the onset of the COVID-19 pandemic.~~strong asset quality and an improved macroeconomic forecast between periods.

(2)

~~(Credit) provision~~ Credit for credit losses on off-balance sheet credit ~~exposures.~~exposures: At March 31, ~~2023,~~2024, the ACL on off-balance sheet credit exposures was ~~$3.0~~$2.3 million, as compared to ~~$3.4~~$3.0 million as of March 31, ~~2022.~~2023. The decrease was driven by the decrease in unfunded commitments of ~~$110.1~~$76.1 million between periods and the improvement of the macroeconomic forecast between periods.

(3)

Provision for HTM debt ~~securities.~~securities: ~~The provision for HTM debt securities was driven by the full write-off of one corporate bond invested in Signature Bank due to its failure in~~In the first quarter of ~~2023.~~2024, the Company sold a Signature Bank corporate bond and recovered proceeds of $910,000. In the first quarter of 2023, the Company had written-off the Signature Bank corporate bond upon receiving notice of its failure.

Non-Interest Income

The following table presents the components of non-interest income for the periods indicated:




		Three Months Ended March 31,						Change
(Dollars in thousands)	(Dollars in thousands)	2023			2022			$		%
(Dollars in thousands)
(Dollars in thousands)
Debit card income	Debit card income	$	2,938		$	2,924		$	14	—	%
Service charges on deposit accounts		1,762			1,833			(71)		(4)	%
Debit card income
Debit card income
Service charges on deposit accounts(1)
Service charges on deposit accounts(1)
Service charges on deposit accounts(1)
Income from fiduciary services
Income from fiduciary services
Income from fiduciary services	Income from fiduciary services	1,600			1,631			(31)		(2)	%
Brokerage and insurance commissions	Brokerage and insurance commissions	1,093			994			99		10	%
Mortgage banking income, net(1)		716			1,034			(318)		(31)	%
Brokerage and insurance commissions
Brokerage and insurance commissions
Mortgage banking income, net
Mortgage banking income, net
Mortgage banking income, net
Bank-owned life insurance
Bank-owned life insurance
Bank-owned life insurance	Bank-owned life insurance	592			576			16		3	%

Other income(2)	Other income(2)	1,165			833			332		40	%

Other income(2)

Other income(2)
Total non-interest income
Total non-interest income
Total non-interest income	Total non-interest income	$	9,866		$	9,825		$	41	—	%
Non-interest income as a percentage of total revenues	Non-interest income as a percentage of total revenues	22		%	21		%
Non-interest income as a percentage of total revenues
Non-interest income as a percentage of total revenues

(1) ~~Mortgage banking income, net:~~Service charges on deposit accounts: The ~~decrease for the three months ended March 31, 2023, compared to the same period of 2022,~~increase was driven by the ~~change~~increase in ~~the housing market~~overdraft income of $199,000 between periods, highlighted by the shift in the interest rate environment between periods that drove the decrease in mortgage production of 58% compared to the first quarter of 2022. During the first quarter of 2023, the Company sold $35.1 million, or 40%, of its residential mortgage loan production compared to $46.6 million, or 24%, of its residential mortgage loan production for the first quarter of 2022. As of March 31, 2023, the Company's residential mortgage loan pipeline stood at $45.5 million, compared to the $121.4 million at March 31, 2022, a decrease of 62%.periods.

(2) Other income: The ~~increase in other income for the first quarter of 2023, compared to the same period last year,~~decrease was driven by ~~an increase~~a decrease in customer loan swap fees of ~~$299,000.~~$238,000 between periods.

Non-Interest Expense

The following table presents the components of non-interest expense for the periods indicated:




		Three Months Ended March 31,						Change
(Dollars in thousands)	(Dollars in thousands)	2023			2022			$		%
(Dollars in thousands)
(Dollars in thousands)
Salaries and employee benefits(1)	Salaries and employee benefits(1)	$	14,573		$	15,506		$	(933)	(6)	%
Furniture, equipment and data processing		3,211			3,132			79		3	%
Salaries and employee benefits(1)
Salaries and employee benefits(1)
Furniture, equipment and data processing(2)
Furniture, equipment and data processing(2)
Furniture, equipment and data processing(2)
Net occupancy costs	Net occupancy costs	2,079			2,144			(65)		(3)	%
Debit card expense(2)		1,201			1,066			135		13	%
Net occupancy costs
Net occupancy costs
Debit card expense
Debit card expense
Debit card expense
Consulting and professional fees	Consulting and professional fees	1,055			1,007			48		5	%
Regulatory assessments(3)		845			655			190		29	%
Consulting and professional fees
Consulting and professional fees
Regulatory assessments
Regulatory assessments
Regulatory assessments
Amortization of core deposit intangible assets	Amortization of core deposit intangible assets	148			156			(8)		(5)	%
Amortization of core deposit intangible assets
Amortization of core deposit intangible assets
OREO and collection costs, net
OREO and collection costs, net
OREO and collection costs, net

Other expenses(3)

Other expenses(4)		3,053			2,543			510		20	%
Other expenses(3)

Other expenses(3)
Total non-interest expense
Total non-interest expense
Total non-interest expense	Total non-interest expense	$	26,165		$	26,209		$	(44)	—	%
Ratio of non-interest expense to total revenues	Ratio of non-interest expense to total revenues	59.27		%	56.74		%
Ratio of non-interest expense to total revenues
Ratio of non-interest expense to total revenues
Efficiency ratio (non-GAAP)	Efficiency ratio (non-GAAP)	58.96		%	56.47		%
Efficiency ratio (non-GAAP)
Efficiency ratio (non-GAAP)

(1) Salaries and employee benefits: The ~~decrease~~increase between periods was primarily driven by ~~lower~~higher incentive ~~accruals.~~accruals due to better company performance in the first quarter 2024 compared to the same period of 2023.

(2) ~~Debit card expense:~~Furniture, equipment and data processing: The increase between periods ~~was driven by higher per unit costs.~~reflects the continued investments in customer-facing technology platforms, internal systems and production platforms to drive increased productivity and efficiencies, and updates to various information security and resiliency-related systems and enhancements.

(3) ~~Regulatory assessments:~~Other expense: The decrease between periods was driven by the decrease in external hiring costs of $237,000 due to CEO transition costs incurred in the first quarter of 2023 and the decrease in donations of $118,000.

FINANCIAL CONDITION

Cash and Cash Equivalents

Total cash and cash equivalents at March 31, 2024, was $176.7 million, compared to $99.8 million at December 31, 2023. The increase in cash of $76.9 million, or 77%, between periods was driven by the increase in ~~FDIC assessments rates, effective January 1, 2023.~~

~~(4)~~ ~~Other expenses:~~ ~~The increase between periods was driven by an increase in external hiring costs~~timing of ~~$234,000,~~loan and ~~a change in the credit valuation adjustment on the Company's back-to-back loan swaps with its commercial customers of $123,000.~~

~~FINANCIAL CONDITION~~

~~Cash~~deposit cash flows. Subsequent to quarter end cash levels have decreased to our historical normal levels and ~~Cash Equivalents~~

~~Total cash and cash equivalents at March, 31 2023, were $75.7 million, compared to $75.4 million at December 31, 2022. We~~management continually ~~monitor~~monitors our cash levels as part of our liquidity risk management practices. Refer to the "—"—Liquidity" section for additional ~~details~~.details.

Investments

The Company utilizes the investment portfolio to manage liquidity, interest rate risk, and regulatory capital, as well as to take advantage of market conditions to generate returns without undue risk. At March 31, ~~2023~~2024 and December 31, ~~2022, the Company’s~~2023, our investment portfolio consisted of MBS, CMO, municipal and corporate debt securities, FHLBB and FRB common stock, and mutual funds held in a rabbi trust for ~~its~~the executive and director nonqualified retirement plans. We designate our debt securities as AFS or HTM based on our intent and investment strategy and they are carried at fair value orand amortized cost, respectively. Our FHLBB and FRB common stock is carried at cost, and our mutual funds are designated as trading securities and are carried at fair value.

In ~~the second quarter of~~ 2022, we transferred securities from AFS to HTM to help manage our capital position in a rising interest rate environment. The securities were reclassified at fair value at the time of the transfer, which was a non-cash transaction. At March 31, 2024, the net unrealized losses on the transferred securities reported within AOCI were $45.7 million, net of a deferred tax asset of $12.5 million, and the weighted-average life on these securities was 8.4 years. At December 31, 2023, the net unrealized losses on the transferred securities reported within AOCI were ~~$50.9~~$46.9 million, net of a deferred tax asset of ~~$13.9~~$12.8 million and the weighted-average life onof these securities was ~~8.8~~8.5 years. ~~At December 31, 2022, the net unrealized losses on the transferred securities reported within AOCI were $52.2 million, net of a deferred tax asset of $14.3 million.~~

At March 31, ~~2023,~~2024, the reported value of the Company's total investments portfolio was $1.2 billion, a decrease of ~~$9.3~~$27.6 million, or ~~0.7%~~2.3%, since December 31, ~~2022.~~2023. This was driven by changes within our debt securities portfolio, including:

•Paydowns, calls and maturities of ~~$25.1 million;~~$23.3 million.

5552

•A net ~~increase~~decrease in the fair value of the AFS debt securities portfolio of ~~$9.9~~$6.6 million due to interest rate movements during the quarter. The 2-year U.S. Treasury decreased 35 basis points and the 10-year U.S. Treasury fell 40 basis points during the first three months of 2023 to 4.06% and 3.48%, respectively, at March 31, 2023, causing bond prices to rise.

•~~An increase of $6.7 million in FHLBB common stock due to increased borrowing levels during the first quarter of 2023.~~

•~~At March 31, 2023, the Company wrote-off a $1.8 million Signature Bank bond as the bank failed during the first quarter of 2023.~~

Our AFS debt securities portfolio, which comprised ~~55%~~52% and 53% of our investment portfolio at March 31, ~~2023~~2024 and December 31, ~~2022,~~2023, respectively, was carried at fair value using Level 2 valuation techniques. Refer to Note 15 of the consolidated financial statements for further details on the Company's fair value techniques. Our HTM debt securities portfolio comprised ~~43%~~46% of our investment portfolio at both March 31, ~~2023~~2024 and at December 31, ~~2022.~~2023.

The book value of our debt securities as of both March 31, ~~2023~~2024 and December 31, ~~2022,~~2023, was ~~$1.3~~$1.2 billion. Our debt securities portfolio has limited credit risk due to its composition, which includes securities backed by the U.S. government and government-sponsored agencies, and highly rated corporate and municipal bonds by nationally recognized rating agencies. The following table provides the make-up of the Company's investment portfolio as of March 31, 2024 and December 31, 2023, based on the book value of each security type as a percentage of total book value of the Company's debt securities:

(Dollars in thousands) Three Months Ended
March 31, 2023 Percentage of Total
MBS - Agency Backed $ 877,688 66 %
CMO - Agency Backed 260,582 19 %
Municipal 105,191 8 %
Corporate Bonds 44,593 3 %
Other - Agency Backed 53,026 4 %
Total $ 1,341,080 100 %


(Dollars in thousands)	March 31, 2024		Percent of Total at March 31, 2024		December 31, 2023		Percent of Total at December 31, 2023
MBS - Agency-backed	$	816,230	67	%	$	830,288	67	%
CMO - Agency-backed	299,141		24	%	306,505		25	%
Municipal	61,759		5	%	62,691		5	%
Corporate	40,853		3	%	40,790		3	%
Other - Agency-backed	7,627		1	%	7,593		1	%
Total	$	1,225,610	100	%	$	1,247,867	100	%

We continually monitor and evaluate our investment portfolio to identify and assess risks within our portfolio, including but not limited to, the impact of the current interest rate environment and the related prepayment risk, and the review of credit ratings. The overall mix of debt securities at March 31, ~~2023,~~2024, compared to December 31, ~~2022,~~2023, remains relatively unchanged and the Company expects itthe portfolio will continue to be well positioned to provide a stable source of cash flow. At March 31, ~~2023~~2024 and December 31, ~~2022,~~2023, the duration of our debt investment securities portfolio, adjusting for calls when appropriate and consensus prepayment speeds, was ~~5.7~~5.5 years and ~~5.8~~5.7 years, respectively.

~~In the first quarter of 2023, we wrote-off a $1.8 million Signature Bank corporate bond as that bank failed during the quarter. This corporate bond was designated as HTM and previously carried no ACL.~~ We completed a review of our HTM and AFS investment portfolio as of March 31, ~~2023,~~2024, and concluded that no ACL was warranted on any of the remaining bonds at this time. The fair value and book value of the Company's corporate bonds and municipal securities as of March 31, ~~2023~~2024 and December 31, ~~2022~~2023 was as follows:


			March 31, 2023						December 31, 2022
		March 31, 2024																	March 31, 2024				December 31, 2023
(Dollars in thousands)	(Dollars in thousands)		Fair Value		Book Value		Net Unrealized (Loss) Gain		Fair Value		Book Value		Net Unrealized Loss		(Dollars in thousands)	# of Securities	Fair Value	Book Value		Net Unrealized (Loss) Gain	# of Securities	Fair Value		Book Value	Net Unrealized (Loss) Gain
Municipal bonds
Corporate bonds	Corporate bonds		$	42,292	$	44,593	$	(2,301)	$	44,013	$	46,350	$	(2,337)
Municipal bonds			106,023		105,191		832		104,024		105,656		(1,632)
Total	Total		$	148,315	$	149,784	$	(1,469)	$	148,037	$	152,006	$	(3,969)

At March 31, 2024 and December 31, 2023, municipal bonds were 5% of the book value of the total bond portfolio and all carried an investment-grade credit rating.

At March 31, 2024 and December 31, 2023, corporate bonds were ~~approximately~~ 3% of the book value of the total bond ~~portfolio. At March 31, 2023,~~portfolio and 77% of these corporate bonds ~~with a book value of $35.1 million, or 79% of the corporate bond portfolio,~~ carried an investment-grade credit ~~rating and the~~rating. The remaining ~~$9.5 million~~23% of ~~book value, or 21% of the~~ corporate ~~bond portfolio,~~bonds were non-rated corporate

bonds of community banks within our markets. As of March 31, ~~2023,~~2024, the corporate bond portfolio was made up of 2018 different companies, which included 1716 different banks. The banks in the portfolio range from the largest U.S. banks to community banks, with ~~the largest~~32% of our exposure ~~being to a global systemically important bank, or "G-SIB", with a book value of $6.7 million~~ as of March 31, 2023. Since March 31, 2023, a limited number of the rated corporate bonds in the portfolio have been downgraded as a result of stress in the banking system, although all remain investment-grade. We will continue2024, being to ~~monitor this portfolio.~~global systemically important banks, or "G-SIBs".

At March 31, ~~2023, municipal bonds were approximately 8% of the book value of the total bond portfolio. At March 31, 2023, all municipal bonds carried an investment-grade credit rating.~~

~~At March 31, 2023~~2024 and December 31, ~~202,~~2023, the Company did not carry an ACL on any of its corporate or municipal bonds.

Our other investments on the consolidated statements of condition consist of FHLBB and FRB common stock. These investments are carried at cost. We are required to maintain a certain level of investment in FHLBB stock based on our level of FHLBB advances, and maintain a certain level of investment in FRB common stock based on the Bank's capital levels. As of March 31, ~~2023~~2024 and December 31, ~~2022,~~2023, our investment in FHLBB stock totaled ~~$14.0~~$11.0 million and ~~$7.3~~$10.0 million, respectively, and our investment in FRB stock was $5.4 million at each date.

Our investments in mutual funds are designated as trading securities and carried at fair value. These investments are held within a rabbi trust and will be used for future payments associated with the Company’s Executive and Director Deferred Compensation Plan. These investments are carried at fair value using Level 1 valuation techniques. Refer to Note 15 of the consolidated financial statements for further details on fair value.

Loans

The ~~Company provides loans primarily to customers located within~~following table sets forth the composition of our ~~geographic market area.~~ loan portfolio as of the dates indicated:


							Change
(Dollars in thousands)	March 31, 2024			December 31, 2023			($)		(%)
Commercial real estate - non-owner-occupied	$	1,402,326		$	1,370,446		$	31,880	2	%
Commercial real estate - owner-occupied	300,626			301,860			(1,234)		—	%
Commercial	397,395			403,901			(6,506)		(2)	%
Residential real estate	1,762,482			1,763,378			(896)		—	%
Consumer and home equity	258,211			258,509			(298)		—	%
Total loans	$	4,121,040		$	4,098,094		$	22,946	1	%
Commercial Loan Portfolio	$	2,100,347		$	2,076,207		$	24,140	1	%
Retail Loan Portfolio	$	2,020,693		$	2,021,887		$	(1,194)	—	%
Commercial Portfolio Mix	51		%	51		%
Retail Portfolio Mix	49		%	49		%

Portfolio Concentrations

Our primary market continues to be Maine, making up ~~69% and 70%~~68% of the loan portfolio as of both March 31, ~~2023~~2024 and December 31, ~~2022, respectively.~~2023. Massachusetts and New Hampshire are our second and third largest markets that we serve, making up 15% and 9%10%, of our total loan portfolio as of March 31, ~~2023,~~2024, respectively, and ~~15%~~16% and 9%10% as of December 31, ~~2022.~~2023, respectively. As of March 31, ~~2023,~~2024, our distribution channels included 5755 branches within Maine, two locations in New Hampshire, including a branch in Portsmouth and a commercial loan production office in Manchester, a mortgage loan production office in Braintree, Massachusetts, and an online residential mortgage and small business digital loan platform.

~~The following table sets forth the composition of our loan portfolio as of the dates indicated:~~

Change
(Dollars in thousands) March 31,
2023 December 31,
2022 ($) (%)
Commercial real estate - non-owner-occupied $ 1,328,793 $ 1,292,443 $ 36,350 3 %
Commercial real estate - owner-occupied 337,824 332,494 5,330 2 %
Commercial 421,099 430,131 (9,032) (2) %
Residential real estate 1,733,147 1,700,266 32,881 2 %
Consumer and home equity 252,245 255,019 (2,774) (1) %
Total loans $ 4,073,108 $ 4,010,353 $ 62,755 2 %
Commercial Loan Portfolio $ 2,087,716 $ 2,055,068 $ 32,648 2 %
Retail Loan Portfolio $ 1,985,392 $ 1,955,285 $ 30,107 2 %
Commercial Portfolio Mix 51 % 51 %
Retail Portfolio Mix 49 % 49 %

For the first quarter of 2023, the Company held 60% of its funded residential mortgage production, which decreased from 84% in the fourth quarter of 2022. The Company anticipates over the next several quarters it will continue to sell more residential mortgage production as a percentage of total production in comparison to more recent periods in order to manage the Company's balance sheet in the current interest rate environment.

At March 31, ~~2023 and December 31, 2022,~~2024, the non-residential building operators' industry (operators of commercial and industrial buildings, retail establishments, theaters, banks and insurance buildings) and lessors of residential buildings industry (lessors of buildings used as residences, such as single-family homes, apartments and town houses) concentrations were 32% and 28% of our total commercial real estate portfolio and 13% and ~~12%~~11% of total loans, respectively. At December 31, 2023, the non-residential building operators’ industry and lessors of residential building industry concentrations were 33% and 28%, respectively, of total commercial real estate portfolio and 14% and 11% of total loans. At March 31, ~~2023,~~2024, there were no other industry concentrations within our loan portfolio that exceeded 10% of total loans.

~~During~~

The table below summarizes the ~~first quarter of 2023, the banking~~ industry faced a heightened focus on commercial real estate and the office space sector specifically given the increase in vacant properties. As of March 31, 2023, the Company's commercial portfolio, including commercial real estate and commercial loans, totaled $2.1 billion, of which office space totaled $207.2 million, or 5% of total loans and 20%concentrations of the commercial loan portfolio at the dates indicated:


	March 31,				December 31,
	2024				2023				Change
(Dollars in thousands)	$		% of Commercial Loan Portfolio		$		% of Commercial Loan Portfolio		$		%
Real estate investment(1)	$	1,056,849	50	%	$	1,057,148	51	%	$	(299)	—	%
Lodging	242,536		12	%	229,017		11	%	13,519		6	%
Retail trade	118,395		6	%	116,623		6	%	1,772		2	%
Health care	97,906		5	%	95,801		5	%	2,105		2	%
Manufacturing	72,494		3	%	74,089		4	%	(1,595)		(2)	%
Construction	71,753		3	%	73,936		4	%	(2,183)		(3)	%
Wholesale trade	68,338		3	%	67,512		3	%	826		1	%
Finance and insurance	64,511		3	%	66,038		3	%	(1,527)		(2)	%
Other (each < 3%)	307,565		15	%	296,043		14	%	11,522		4	%
Total	$	2,100,347	100	%	$	2,076,207	100	%	$	24,140	1	%
Commercial loan portfolio mix:
Commercial real estate - non-owner-occupied	$	1,402,326	67	%	$	1,370,446	66	%	31,880		2	%
Commercial real estate - owner-occupied	300,626		14	%	301,860		15	%	(1,234)		—	%
Commercial	397,395		19	%	403,901		19	%	(6,506)		(2)	%
Total	$	2,100,347	100	%	$	2,076,207	100	%	$	24,140	1	%

(1) The following table summarizes the real estate investment ~~portfolio. The Company's office space loans~~loan portfolio, by property type as of the dates indicated:


	March 31,						December 31,
	2024						2023						Change
(Dollars in thousands)	$		% of Real Estate Investment Portfolio		% of Total Loan Portfolio		$		% of Real Estate Investment Portfolio		% of Total Loan Portfolio		$		%
Multi-family (5+ units)(a)	$	272,752	26	%	7	%	$	274,181	26	%	7	%	$	(1,429)	(1)	%
Office(b)	169,729		16	%	4	%	169,904		16	%	4	%	(175)		—	%
Multi-family (1-4 units)(c)	168,395		16	%	4	%	153,166		14	%	4	%	15,229		10	%
Industrial	165,154		16	%	4	%	164,021		16	%	4	%	1,133		1	%
Retail	163,691		15	%	4	%	167,865		16	%	4	%	(4,174)		(2)	%
Other(d)	117,128		11	%	3	%	128,011		12	%	3	%	(10,883)		(9)	%
Total	$	1,056,849	100	%	26	%	$	1,057,148	100	%	26	%	$	(299)	—	%

(a) Multi-family (5+ units) loans are primarily located in non-urban locations, including 79% in Maine, 11% in Massachusetts, 8% in New Hampshire, and 2% in other states at March 31, 2024 and December 31, 2023, ~~were~~respectively.

(b) Office loans are located in ~~its primary markets —~~non-urban locations, including 52% in Maine, 26% in New Hampshire, and 22% in Massachusetts ~~and New Hampshire. As of~~at March 31, 2024. and December 31, 2023, respectively.

(d) Other includes multiple property types that individually are less than 5% of the ~~Company was not aware of any troubled credits within its office space~~real estate investment portfolio and ~~it had no office space loans that were non-performing~~individually are 1% or ~~30-89 days past due.~~

less of the total loan portfolio.

Related Party Transactions

The Bank is permitted, in its normal course of business, to make loans to certain officers and directors of the Company and Bank under terms that are consistent with the Bank’s lending policies and regulatory requirements. In addition to extending loans to certain officers and directors of the Company and Bank on terms consistent with the Bank’s lending policies, federal banking regulations also require training, audit and examination of the adherence to this policy (also known as “Regulation O” requirements). Note 3 and Note 8 of the consolidated financial statements provide information on related party lending and deposit transactions, respectively. We have not entered into significant related party transactions.

Asset Quality

Our practice is to manage the Company's loan portfolio proactively so that we are able to effectively identify problem credits and trends early, assess and implement effective work-out strategies, and take charge-offs as promptly as practical. In addition, the Company continually reassesses its underwriting standards in response to credit risk posed by changes in economic conditions. The Company continues to dedicate significant resources to monitor and manage credit risk throughout our loan portfolio and includes management and board-level oversight as follows:

•The Credit Risk and Special Assets team and the Credit Risk Policy Committee, which is an internal management committee comprised of various executives and senior managers across business lines, including Accounting and Finance, Credit Underwriting, Credit Risk and Special Assets, Risk, and Commercial and Retail Banking, oversee the Company's systems and procedures to monitor the credit quality of its loan portfolio, conduct a loan review program, and maintain the integrity of the loan ratings system.

•The Directors Credit Committee of the Board of Directors reviews large credit exposures, monitors external loan review reports, reviews the lending authority for individual loan officers when required, and has approval authority and responsibility for all matters regarding the loan policy and other credit-related policies, including reviewing and monitoring asset quality trends, and concentration levels.

•The Audit Committee of the Board of Directors has approval authority and oversight responsibility for the ACL adequacy and methodology.

Non-Performing Assets. Non-performing assets include non-accrual loans, accruing loans 90 days or more past due, accruing TDRs prior to the Company's adoption ASU 2022-02, and property acquired through foreclosure or repossession. The following table sets forth the composition and amounts of our non-performing loans as of the dates indicated:


(Dollars in thousands)	(Dollars in thousands)	March 31, 2023			December 31, 2022			(Dollars in thousands)	March 31, 2024		December 31, 2023
Non-accrual loans:	Non-accrual loans:							Non-accrual loans:
Commercial real estate - non-owner-occupied	Commercial real estate - non-owner-occupied	$	10		$	11
Commercial real estate - owner-occupied	Commercial real estate - owner-occupied	47			46
Commercial	Commercial	748			715
Residential real estate	Residential real estate	1,715			1,733
Consumer and home equity	Consumer and home equity	438			486
Total non-accrual loans	Total non-accrual loans	2,958			2,991

Accruing TDRs prior to ASU 2022-02 adoption not included above
Accruing TDRs prior to ASU 2022-02 adoption not included above
Accruing TDRs prior to ASU 2022-02 adoption not included above	Accruing TDRs prior to ASU 2022-02 adoption not included above	2,154			2,114
Total non-performing loans	Total non-performing loans	5,112			5,105
Other real estate owned	Other real estate owned	—			—
Total non-performing assets	Total non-performing assets	$	5,112		$	5,105
Total loans, excluding loans held for sale	Total loans, excluding loans held for sale	$	4,073,108		$	4,010,353
Total assets	Total assets	$	5,716,605		$	5,671,850
ACL on loans	ACL on loans	$	37,134		$	36,922
ACL on loans to non-accrual loans	ACL on loans to non-accrual loans	1,255.38		%	1,234.44		%	ACL on loans to non-accrual loans	629.43	%	677.96	%
Non-accrual loans to total loans	Non-accrual loans to total loans	0.07		%	0.07		%	Non-accrual loans to total loans	0.14	%	0.13	%
Non-performing loans to total loans	Non-performing loans to total loans	0.13		%	0.13		%	Non-performing loans to total loans	0.19	%	0.18	%
Non-performing assets to total assets	Non-performing assets to total assets	0.09		%	0.09		%	Non-performing assets to total assets	0.13	%	0.13	%

Potential Problem Loans. Potential problem loans consist of classified accruing commercial and commercial real estate loans that were 30-89 days past due. Such loans are characterized by weaknesses in the financial condition of borrowers or collateral deficiencies. Based on historical experience, the credit quality of some of these loans may improve due to changes in collateral values or the financial condition of the borrowers, while the credit quality of other loans may deteriorate, resulting in a loss. These loans are not included in the above analysis of non-accrual loans. At March 31, 2024 and December 31, 2023, loans classified as potential problem loans totaled ~~$65,000.~~$173,000 and $1.2 million, respectively.

Past Due Loans. Past due loans consist of accruing loans that were 30-89 days past due. The following table presents the recorded investment of past due loans as of the dates indicated:


(Dollars in thousands)	(Dollars in thousands)	March 31, 2023			December 31, 2022			(Dollars in thousands)	March 31, 2024		December 31, 2023
Accruing loans 30-89 days past due:	Accruing loans 30-89 days past due:							Accruing loans 30-89 days past due:
Commercial real estate - non-owner-occupied	Commercial real estate - non-owner-occupied	$	34		$	267
Commercial real estate - owner-occupied	Commercial real estate - owner-occupied	77			55
Commercial	Commercial	1,030			801
Residential real estate	Residential real estate	313			1,038
Consumer and home equity	Consumer and home equity	684			391
Total	Total	$	2,138		$	2,552
Total loans	Total loans	$	4,073,108		$	4,010,353
Accruing loans 30-89 days past due to total loans	Accruing loans 30-89 days past due to total loans	0.05		%	0.06		%	Accruing loans 30-89 days past due to total loans	0.05	%	0.12	%

ACL. The following table sets forth information concerning the components of our ACL for the periods indicated:


		At or For The Three Months Ended March 31,						At or For The Year Ended December 31, 2022
		At or For The Three Months Ended March 31,
		At or For The Three Months Ended March 31,
		At or For The Three Months Ended March 31,																At or For The Year Ended December 31, 2023
(Dollars in thousands)	(Dollars in thousands)	2023			2022				At or For The Year Ended December 31, 2022
ACL on loans at the beginning of the period	ACL on loans at the beginning of the period	$	36,922		$	33,256				$	33,256
Provision (credit) for loan losses		439			(1,236)					4,430
ACL on loans at the beginning of the period
ACL on loans at the beginning of the period
(Credit) provision for loan losses
Net charge-offs (recoveries)1	Net charge-offs (recoveries)1												Net charge-offs (recoveries)1
Commercial real estate	Commercial real estate	(1)			(2)					(5)

Commercial	Commercial	213			189					663
Commercial
Commercial
Residential real estate	Residential real estate	14			—					66
Consumer and home equity	Consumer and home equity	1			63					40

Total net charge-offs
ACL on loans at the end of the period	ACL on loans at the end of the period	$	37,134		$	31,770				$	36,922
Components of ACL:	Components of ACL:												Components of ACL:
ACL on loans	ACL on loans	$	37,134		$	31,770				$	36,922
ACL on off-balance sheet credit exposures	ACL on off-balance sheet credit exposures	2,990			3,355					3,265
ACL at end of the period	ACL at end of the period	$	40,124		$	35,125				$	40,187
Total loans, excluding loans held for sale	Total loans, excluding loans held for sale	$	4,073,108		$	3,534,218				$	4,010,353
Average Loans	Average Loans	$	4,040,660		$	3,473,280				$	3,710,415
Net charge-offs to average loans (annualized)	Net charge-offs to average loans (annualized)	0.02		%	0.03		%			0.02		%	Net charge-offs to average loans (annualized)	0.02	%	0.02	%		0.03	%
Provision (credit) for loan losses (annualized) to average loans		0.04		%	(0.14)		%			0.12		%
(Credit) provision for loan losses (annualized) to average loans													(Credit) provision for loan losses (annualized) to average loans	(0.11)	%	0.04	%		0.03	%
ACL on loans to total loans	ACL on loans to total loans	0.91		%	0.90		%			0.92		%	ACL on loans to total loans	0.86	%	0.91	%		0.90	%

(1) Additional information related to net charge-offs (recoveries) is presented in the following table for the periods indicated:

For The Three Months Ended
March 31,
(Dollars in thousands) Total
Charge-offs Total
Recoveries Net
Charge-Offs (Recoveries) Average
Loans Ratio of Net Charge-Offs (Recoveries) to Average Loans (Annualized)
2023:
Commercial real estate $ — $ 1 $ (1) $ 1,646,005 — %
Commercial 312 99 213 425,703 0.20 %
Residential real estate 18 4 14 1,715,192 — %
Consumer and home equity 4 3 1 253,760 — %
Total $ 334 $ 107 $ 227 $ 4,040,660 0.02 %
2022:
Commercial real estate $ — $ 2 $ (2) $ 1,489,304 — %
Commercial 246 57 189 394,597 0.19 %
Residential real estate — — — 1,347,427 — %
Consumer and home equity 66 3 63 226,731 0.11 %
Total $ 312 $ 62 $ 250 $ 3,458,059 0.03 %
For the Year Ended
December 31, 2022
Commercial real estate $ — $ 5 $ (5) $ 1,532,225 — %
Commercial 1,042 379 663 422,304 0.16 %
Residential real estate 66 — 66 1,511,985 — %
Consumer and home equity 134 94 40 243,901 0.02 %
Total $ 1,242 $ 478 $ 764 $ 3,710,415 0.02 %

6058


	For The Three Months Ended March 31,
(Dollars in thousands)	Total Charge-offs		Total Recoveries		Net Charge-Offs (Recoveries)		Average Loans		Ratio of Net Charge-Offs (Recoveries) to Average Loans
2024:
Commercial real estate	$	—	$	7	$	(7)	$	1,682,599	—	%
Commercial	309		92		217		404,672		0.05	%
Residential real estate	—		6		(6)		1,773,077		—	%
Consumer and home equity	36		82		(46)		257,305		(0.02)	%
Total	$	345	$	187	$	158	$	4,117,653	0.02	%
2023:
Commercial real estate	$	—	$	1	$	(1)	$	1,646,005	—	%
Commercial	312		99		213		425,703		0.05	%

Residential real estate	18		4		14		1,715,192		—	%
Consumer and home equity	4		3		1		253,760		—	%
Total	$	334	$	107	$	227	$	4,040,660	0.02	%















	For the Year Ended December 31,
2023:
Commercial real estate	$	58	$	19	$	39	$	1,659,078	—	%
Commercial	1,560		471		1,089		415,650		0.26	%
Residential real estate	18		44		(26)		1,748,076		—	%
Consumer and home equity	91		32		59		253,877		0.02	%
Total	$	1,727	$	566	$	1,161	$	4,076,681	0.03	%

ACL on Loans. There were no significant changes in our modeling methodology to determine the ACL on loans during the three months ended March 31, ~~2023.~~2024. The significant key assumptions used with the ACL on loans calculation at March 31, ~~2023~~2024 and December 31, ~~2022,~~2023, included: (i) Company-specific macroeconomic factors (i.e., loss drivers), (ii) our forecast period and reversion speed, (iii) prepayment speeds, and (iv) various qualitative factors.

As of March 31, ~~2023~~2024 and December 31, ~~2022,~~2023, the recorded ACL on loans was ~~$37.1~~$35.6 million, or 0.86% to total loans, and $36.9 million, or 0.90% of total loans, respectively, and represented our best estimate. Our ACL on loans estimate as of each date incorporated the ongoing risk of a recession over the next 12 to 24 months using multiple scenarios and probability weighting each scenario. The ~~increase~~ACL on loans as of March 31, 2024 incorporated a lower weighting for the probability of a recession over the next 12 to 24 months based on management's forecasted macroeconomic outlook as of that date. The improved macroeconomic outlook, combined with the Company's strong asset quality at both March 31, 2024 and December 31, 2023, which included proactive stress testing by management on certain loan segments, resulted in a decrease in the ACL on ~~loans between periods was primarily driven by economic outlook of a softening economy over the coming quarters.~~loans.

The overall global and national markets continue to be volatile and carry a high degree of uncertainty, and any changes to our forecast or qualitative factors subject our ACL estimate to a higher risk of fluctuation between periods.

We may adjust our assumptions to account for differences between expected and actual losses from period to period. A future change of our assumptions likely will alter the level of allowance required and may have a material impact on future results of operations and financial condition. The ACL on loans is reviewed periodically within a calendar quarter to assess trends in CECL ("Current Expected Credit Losses") key assumptions and asset quality, and their effects on the Company's financial condition.

ACL on Off-Balance Sheet Credit Exposures. There were no significant changes in our modeling methodology to determine the ACL on off-balance sheet credit exposures during the three months ended March 31, ~~2023.~~2024. The model uses the credit loss factors for each segment calculated within the ACL on loans model described above. The ACL on off-balance sheet credit exposures as of March 31, ~~2023~~2024 and December 31, ~~2022,~~2023, was ~~$3.0~~$2.3 million and ~~$3.3~~$2.4 million, respectively.

The ACL on off-balance sheet credit exposures was presented within accrued interest and other liabilities on the consolidated statements of condition. Increases (decreases) to the ACL on off-balance sheet credit exposures were presented within (credit) provision ~~(credit)~~ for credit losses on the consolidated statements of income.

We may adjust our assumptions to account for differences between expected and actual losses from period to period. A future change to our assumptions will likely alter the level of allowance required and may have a material impact on future results of operations and financial condition.

ACL on HTM Securities. Each quarter the Company evaluates its investment portfolio for potential credit risk, and, in the first quarter of 2023, the Company fully wrote-off one $1.8 million Signature Bank HTM corporate bond. Through our evaluation of our HTM security holdings there were no other credit concerns identified within our investment portfolio. As of March 31, ~~2023~~2024, we have evaluated our HTM debt securities and we have not identified any credit concerns. As of March 31, 2024 and December 31, ~~2022,~~2023, there was no ACL recorded on HTM investments. Refer to "—Investments" and Note 3 of the consolidated financial statements for further discussion.

Liabilities

Deposits. At March 31, 2024 and December 31, 2023, deposits totaled $4.6 ~~billion,~~billion. The deposit landscape continues to be highly competitive across our markets due to the interest rate environment as depositors look to deploy excess liquidity into higher yielding, interest-bearing deposit accounts. We continue to manage our deposits closely with a focus on maintaining and enhancing existing depositor relationships and developing new ones, while balancing the Company's overall funding cost and liquidity position.

The decrease of 1% in deposits in the first quarter of 2024, was driven by a decrease ~~of $184.2~~in checking account balances, which were lower by $89.2 million, or 4%, ~~since December 31, 2022. The decrease in~~due to: (1) normal seasonality; (2) continued remix from low-cost deposits, ~~during the first quarter of 2023 was driven primarily by one large~~such as checking and savings accounts, to money market and CDs; and (3) we managed out a single higher-cost municipal deposit relationship ~~decreasing its interest checking balance by $122.4~~totaling $72.0 million ~~during the first quarter of~~at December 31, 2023. ~~The Company has the ability to~~From time-to-time, we will move ~~funds~~ in and out of this ~~deposit relationship when it is cost advantageous compared to other funding sources, such as FHLBB borrowings. Excluding the impact of this one large~~ municipal deposit relationship ~~the Company's total deposits~~based on funding needs and opportunities to optimize our funding costs. CD balances decreased ~~$61.8~~$23.7 million, or 1%4%, ~~during~~in the first quarter of ~~2023.~~

~~Core~~2024, as the Company opted to not renew a single higher-cost municipal CD totaling $50.0 million as we were able to utilize other funding means that were more cost effective, including the BTFP, brokered deposits (non-GAAP) totaled $4.1 billion as of March 31, 2023, a decrease of $278.5 million, or 6%, since December 31, 2022. However, excluding the impact of the one large municipal deposit relationship discussed above, core deposits decreased $156.1 million, or 4%, during the first quarter of 2023. The decrease in core deposits was primarily the result of normal seasonal outflows combined with pricing pressures as depositors look for alternative products with higher interest rates in the current environment, such as certificates of deposit ("CD"), which increased $59.7 million, or 20%, during the first quarter of 2023.and derivatives.

The Company's loan-to-deposit ratio was ~~88%~~91% at March 31, ~~2023,~~2024, compared to ~~82%~~89% at December 31, ~~2022.~~2023.

At March 31, ~~2023,~~2024, the Company had no customer relationships that exceeded 10% of total deposits.

Uninsured and Uncollateralized Deposits. Total deposits that exceeded the FDIC deposit insurance limit of $250,000 ~~was $1.1 billion,~~were $935 million, or ~~24%~~21% of total deposits, as of March 31, ~~2023~~2024, and ~~$1.4~~$1.1 billion, or ~~29%~~23% of total deposits, as of December 31, ~~2022.~~2023.

Total uninsured and uncollateralized deposits that exceeded the FDIC deposit insurance limit of $250,000 and were not secured by pledged assets or any other guarantee of the Company totaled ~~$691.5~~$674.4 million, or 15% of total deposits, as of March 31, ~~2023~~2024 and ~~$754.9~~$669.5 million, or ~~16%~~15% of total deposits, as of December 31, ~~2022.~~2023.

The ~~portion~~balance of CDs that exceeded the FDIC deposit insurance limit of $250,000 was ~~$72.9~~$117.1 million, or 20% of CD balances, as of March 31, ~~2023~~2024, and ~~$62.5~~$167.2 million, or ~~21%~~27% of CD balances, as of December 31, ~~2022.~~2023. The total uninsured portion of these CDs was $41.6 million, or 7% and $93.7 million, or 15% as of March 31, 2024 and December 31, 2023, respectively.

~~Borrowings.~~Borrowings. At March 31, ~~2023,~~2024, total borrowings were ~~$530.6~~$645.8 million, an increase of ~~$221.1~~$115.9 million, or ~~71%~~22%, since December 31, ~~2022. The increase reflects the need for additional funding to support asset growth of 1% and a decrease in deposits of 4% during~~2023. In the first quarter of ~~2023.~~2024, we took several actions to optimize our funding costs and improve net interest income and net interest margin. This included refinancing our existing BTFP and increasing our advances by $90.0 million and increasing our FHLBB ~~overnight~~ advances ~~increased $170.7~~by $50.0 million ~~during the first quarter~~as part of ~~2023 to $189.4 million~~an interest rate swap. The Company’s borrowings at March 31, ~~2023,~~2024, consisted of:

•Borrowings from the BTFP totaling $225.0 million that are at a fixed rate of 4.76% and ~~short-term~~scheduled to mature in January 2025. The Company may prepay the BTFP borrowing at any time without penalty.

•Customer repurchase agreements totaling $201.5 million, an increase of $842,000, since December 31, 2023.

•Short-term FHLBB advances ~~increased~~of $175.0 million, an increase of $50.0 million ~~during the first quarter of 2023 to $100.0 million at March~~since December 31, 2023.

Shareholders' Equity

Shareholders' equity at March 31, ~~2023,~~2024, totaled ~~$464.9~~$501.6 million, an increase of ~~$13.6~~$6.5 million, or 3%1%, since December 31, ~~2022.~~2023. The increase was driven by net income of ~~$12.7~~$13.3 million for the ~~first quarter of 2023, net of~~three months ended March 31, 2024, offset by regular quarterly cash dividends of $6.1 million, and ~~an increase~~a decrease to AOCI of ~~$6.5 million driven by a decrease in long-term interest rates between periods resulting in an improvement in valuation of the AFS bond portfolio.~~$1.5 million.

On March ~~28, 2023,~~26, 2024, the Company announced a quarterly cash dividend to shareholders of $0.42 per share, payable on April ~~28, 2023~~30, 2024 to shareholders of record as of April ~~14, 2023.~~15, 2024. As of March 31, ~~2023,~~2024, the Company's annualized dividend yield was ~~4.64%~~5.01% based on Camden National's closing share price of ~~$36.19,~~$33.52, as reported by NASDAQ on March ~~31, 2023.~~28, 2024, the last trading day of the first quarter of 2024.

In January ~~2023,~~2024, the Company's Board of Directors authorized the repurchase of up to 750,000 shares of the Company's common stock, representing approximately 5% of the Company's issued and outstanding shares of common stock as of December 31, ~~2022. During the first quarter ended March 31, 2023, the Company~~2023. We did not repurchase any ~~shares.~~shares of the Company's common stock during the first quarter of 2024.

The following table presents certain information regarding shareholders’ equity as of and for the periods indicated:


			At or For The Three Months Ended March 31,						At or For The Year Ended December 31, 2022
			2023			2022
			At or For The Three Months Ended March 31,
			At or For The Three Months Ended March 31,
			At or For The Three Months Ended March 31,																	At or For The Year Ended December 31, 2023
		2024
Financial Ratios	Financial Ratios
Financial Ratios
Financial Ratios
Average equity to average assets
Average equity to average assets
Average equity to average assets	Average equity to average assets		8.13		%	9.69		%		8.51		%		8.67	%		8.13	%			8.18	%
Common equity ratio	Common equity ratio		8.13		%	8.90		%		7.96		%	Common equity ratio		8.66	%		8.13	%			8.66	%
Tangible common equity ratio (non-GAAP)	Tangible common equity ratio (non-GAAP)		6.56		%	7.25		%		6.37		%	Tangible common equity ratio (non-GAAP)		7.12	%		6.56	%			7.11	%
Dividend payout ratio	Dividend payout ratio		48.28		%	35.09		%		38.76		%	Dividend payout ratio		46.15	%		48.28	%			56.38	%
Per Share Data	Per Share Data
Book value per share	Book value per share		$	31.87		$	32.72			$	30.98
Book value per share
Book value per share
Tangible book value per share (non-GAAP)	Tangible book value per share (non-GAAP)		$	25.28		$	26.16			$	24.37
Dividends declared per share	Dividends declared per share		$	0.42		$	0.40			$	1.62

Refer to "—Capital Resources" and Note 10 of the consolidated financial statements for further discussion of the Company and Bank's capital resources and regulatory capital requirements.

LIQUIDITY

Our liquidity needs require the availability of cash to meet the withdrawal demands of depositors and credit commitments to borrowers. Liquidity is defined as our ability to maintain availability of funds to meet customer needs, as well as to support our asset base. The primary objective of liquidity management is to maintain a balance between sources and uses of funds to meet our cash flow needs in the most economical and expedient manner. Due to the potential for unexpected fluctuations in both deposits and loans, active management of liquidity is necessary. We maintain various sources of funding and levels of liquid assets and monitor liquidity in accordance with internal guidelines and all applicable regulatory requirements. Sources of funds that we utilize consist of deposits; borrowings from the FHLBB and other sources; cash flows from loans and investments; and cash flows from operations, including other contractual obligations and commitments.

During the first quarter of 2023, the banking industry experienced two high-profile bank failures, followed by another on May 1, 2023, which led to an industry-wide increase in concerns related to liquidity, deposit outflows and eroding customer confidence in the banking system. Despite these developments and related recent volatility in the banking industry, our liquidity position continued to exceed our target levels and we believe we currently have appropriate liquidity available to respond to demands.

As of March 31, ~~2023,~~2024, our primary liquidity sources available were as follows:


(In thousands)	Amount
Available primary liquidity:
Excess cash1	$	~~17,259~~101,978
Unpledged investment securities	~~475,225~~412,146
~~Unpledged municipal securities~~	~~94,967~~
Over collateralized securities pledging position	~~150,687~~62,561
FHLBB ~~borrowing capacity~~	~~446,478~~683,235
~~Current~~ Fed Discount Window ~~availability~~	~~43,502~~46,126
Unsecured borrowing lines	~~69,872~~94,872
Total available primary liquidity	$	~~1,297,990~~1,400,918

(1) Excess ~~Cash~~cash represents cash held at the FRB that is above the minimum reserve requirement. At March 31, ~~2023~~2024, the minimum reserve requirement remains at zero.

Total available primary liquidity of ~~$1.3~~$1.4 billion was ~~1.9~~2.1 times uninsured and uncollateralized deposits as of March 31, ~~2023.~~2024. Refer to "—Financial Condition—Liabilities—Uninsured and Uncollateralized Deposits" for further details.

In addition to the available primarily liquidity noted above, as of March 31, ~~2023,~~2024, we may access additional funding through ~~the~~ brokered ~~markets.~~

Subsequent to March 31, 2023, we are also now eligible to borrow up to $146.0 million from the Federal Reserve's Bank Term Funding Program ("BTFP"), which provides additional contingent liquidity through the pledging of certain qualifying securities and other assets. Advances can be requested under the BTFP until at least March 11, 2024, and may have a term of up to one year. The Company can borrow any time during the term and can repay the obligation at any time without penalty.deposits.

Although we believe that our level of liquidity is sufficient to meet current and future funding requirements, changes in current economic conditions, including consumer saving habits and the availability or access to the brokered deposit and wholesale repurchase markets, could significantly affect our liquidity position.

Deposits. Deposits continue to represent our primary source of funds. As of March 31, ~~2023~~2024 and December 31, ~~2022,~~2023, total deposits, including brokered deposits, were $4.6 billion ~~which included money market deposits of $72.6 million and $73.5 million, respectively, from Camden National Wealth Management, which represent client funds. These funds fluctuate with changes~~at each date. The slight decrease in the ~~portfolios~~first quarter of 2024 was driven by the ~~clients~~decrease in core deposits (which exclude CDs and brokered deposits) (non-GAAP) of ~~Camden National Wealth Management. Time deposits are generally considered~~$74.1 million, or 2%, due to ~~be more interest rate sensitive than other deposits and, therefore, more likely to be withdrawn to obtain higher yields elsewhere if available.~~the decrease from a single higher-cost deposit relationship we manage. Additionally, CDs decreased $23.7 million, or 4%, in the first quarter.

The following is a summary of the scheduled maturities of CDs (not including brokered CDs) as of March 31, ~~2023:~~2024:


(In thousands)	CDs
1 year or less	$	~~133,263~~545,998
> 1 year	~~226,840~~39,788
Total	$	~~360,103~~585,786

~~Brokered~~The decrease in retail deposits ~~totaled $215.9~~was offset by the increase in brokered deposits of $52.0 million, or 51%, to $153.9 million at March 31, ~~2023, and~~2024. Brokered deposits consisted of ~~$143.4~~$75.0 million of brokered CDs and ~~$72.5~~$78.9 million of brokered money market accounts. As of March 31, ~~2023,~~2024, all brokered CDs ~~are schedule~~were scheduled to mature within ~~the next~~ 12 months. ~~At March 31, 2023, we also have access to additional brokered deposits.~~

Borrowings. Borrowings are used to supplement deposits as a source of ~~liquidity, which may include~~liquidity. Our primary sources of borrowings ~~and advances from~~are the FHLBB, FRB and other federal funds and customer repurchase agreements. As of March 31, ~~2023,~~2024, total borrowings were ~~$530.6~~$645.8 million, compared to ~~$309.5~~$529.9 million as of December 31, ~~2022.~~2023. We secure borrowings from the FHLBB with qualified residential real estate loans, certain investment securities and certain other assets available to be pledged.

As of March 31, ~~2023,~~2024, the Company had ~~$446.5~~$683.2 million in ~~this~~ borrowing capacity from the FHLBB. At March 31, 2024, the Company has $225.0 million in borrowings under the BTFP at a rate of 4.76%, which are secured by the Company's investment securities at par. The BTFP loan is scheduled to mature in January 2025 and may be prepaid at any time without penalty. The BTFP is no longer a source for additional liquidity as new advances can no longer be issued under the program.

Customer repurchase agreements are secured by mortgage-backed securities and government-sponsored enterprises. Through the Bank, as of March 31, 2024, we have available lines of credit of $9.9 million with the FHLBB, of ~~$9.9~~$95.0 million with three correspondent banks, and of ~~$50.0~~$38.1 million ~~and $10.0 million, and~~ with the FRB Discount ~~Window of $43.5 million as of March 31, 2023.~~Window. We also ~~believe we~~ have ~~additional untapped~~ access to the brokered deposit market and wholesale reverse repurchase transactions market. These sources are considered as liquidity alternatives in our contingent liquidity plan.

As previously noted, subsequent to March 31, 2023, we added $146.0 million of borrowing capacity under the BTFP, which has not been utilized to date. The Company pledged securities to obtain such level of borrowing capacity.

The following is a summary of the scheduled maturities of borrowings as of March 31, ~~2023:~~2024:


(In thousands)	(In thousands)	FHLBB Advances		Customer Repurchase Agreements		Subordinated Debentures		Total		(In thousands)	FHLBB Advances	BTFP	Customer Repurchase Agreements	Junior Subordinated Debentures	Total
1 year or less	1 year or less	$	289,400	$	196,918	$	—	$	486,318
> 1 year	> 1 year	—		—		44,331		44,331
Total	Total	$	289,400	$	196,918	$	44,331	$	530,649

Loans. Contractual loan repayments also affect our liquidity position. Actual speed and timing of repayment may differ materially from contract terms due to prepayments or nonpayment.

The Company's unpledged residential mortgage loan portfolio is also a source of contingent liquidity as it could be sold in a reasonable time period, at fair value, on the secondary market. As of March 31, ~~2023,~~2024, qualifying residential mortgage loans with a ~~book~~book value of $1.7 billion wer~~$1.6 billion~~ ~~were~~e pledged as collateral to the FHLBB.

The following table presents the contractual maturities of loans at the date indicated:
March 31, 2023
(Dollars in thousands) Due in 1 Year or Less Due after 1 Year Through 5 Years Due After 5 Years Through 15 Years Due in More than 15 Years Total Percent of Total Loans
Maturity Distribution(1):

Fixed Rate:
Commercial real estate(2)
$ 17,884 $ 184,365 $ 597,129 $ 2,070 $ 801,448 20 %
Commercial 8,192 95,643 88,544 436 192,815 5 %
Residential real estate 251 10,106 168,556 1,174,591 1,353,504 33 %
Consumer and home equity 2,677 11,633 22,592 165,353 202,255 5 %
Total fixed rate 29,004 301,747 876,821 1,342,450 2,550,022 63 %
Adjustable Rate(3):

Commercial real estate(2)
6,070 188,060 410,220 260,819 865,169 21 %
Commercial 65,251 96,499 56,268 10,266 228,284 6 %
Residential real estate 28 957 39,009 339,649 379,643 9 %
Consumer and home equity 143 2,148 11,220 36,479 49,990 1 %
Total variable rate 71,492 287,664 516,717 647,213 1,523,086 37 %
Total loans $ 100,496 $ 589,411 $ 1,393,538 $ 1,989,663 $ 4,073,108 100 %


	March 31, 2024
(Dollars in thousands)	Due in 1 Year or Less		Due after 1 Year Through 5 Years		Due After 5 Years Through 15 Years		Due in More than 15 Years		Total		Percent of Total Loans
Maturity Distribution(1):
Fixed Rate:
Commercial real estate(2)	$	19,501	$	255,973	$	539,493	$	2,576	$	817,543	20	%
Commercial	5,449		102,719		66,709		368		175,245		4	%
Residential real estate	181		10,479		145,352		1,235,229		1,391,241		34	%
Consumer and home equity	1,548		11,774		19,101		169,389		201,812		5	%
Total fixed rate	26,679		380,945		770,655		1,407,562		2,585,841		63	%
Adjustable/Variable Rate:
Commercial real estate(2)	21,130		285,155		341,275		237,849		885,409		21	%
Commercial	62,040		113,466		38,034		8,610		222,150		5	%
Residential real estate	20		928		38,837		331,456		371,241		9	%
Consumer and home equity	140		2,297		13,918		40,044		56,399		1	%
Total adjustable/variable rate	83,330		401,846		432,064		617,959		1,535,199		37	%
Total loans	$	110,009	$	782,791	$	1,202,719	$	2,025,521	$	4,121,040	100	%

(1) Scheduled repayments are reported in the maturity category in which payment is due. Demand loans, loans having no stated schedule of repayments and no stated maturity, and overdrafts are reported as due in one year or ~~less~~less.

(2) Commercial real estate loans includes non-owner-occupied and owner-occupied properties.

~~(3) Includes floating rate loans.~~

Additionally, we have active relationships with various secondary market investors that purchase residential mortgage loans we originate. In addition to managing our interest rate risk position and earnings through the sale of these loans, we are also able to manage our liquidity position through timely sales of residential mortgage loans to the secondary market.

Investments. We generally invest in amortizing MBS and CMO debt securities that return cash flow at an accelerated rate in comparison to other types of debt securities that are of a bullet structure. MBS and CMO debt security cash flow will vary

depending on the interest rate environment because borrowers may have the right to call or prepay obligations with or without

prepayment penalties. The rise in interest rates during 2022 and 2023 resulted in slowing cash flows. As of March 31, ~~2023~~2024 and December 31, ~~2022,~~2023, the Company's MBS and CMO debt securities portfolio totaled ~~88%~~91% of book value for both periods, respectively, of the Company's investment portfolio.

The Company's unpledged AFS investment portfolio is also a source of contingent liquidity, as it could be sold in a reasonable time period ~~at fair value,~~ on the secondary market, at fair value, which was ~~$338.2~~$267.5 million at March 31, ~~2023.~~2024.

6564

The following is a summary of the scheduled cash flows from our debt securities portfolio, including investments designated as AFS and HTM, as of March 31, ~~2023:~~

2024:

(In thousands)

Contractual

Cash Flows(1)

1 year or less

~~90,747~~100,730

> 1 year

~~1,135,745~~1,041,195

Total

~~1,226,492~~1,141,925

(1) Expected contractual cash flows could differ as borrowers may have the right to call or prepay obligations with or without call or prepayment penalties.

Other Liquidity Requirements. The Company generates cash flows from earnings through its normal course of business from earnings and, although not contractual, the Company has a history of paying a quarterly cash dividend to its shareholders and repurchasing its shares of common stock. For the ~~first quarter~~three months ended March 31, ~~2023,~~2024, the Company reported ~~$12.7 million of~~ net income of $13.3 million and paid cash dividends of $6.1 million to shareholders.

~~Also through~~In addition, in the course of its normal operations the Company is party to several other contractual obligations not previously discussed, such as various lease agreements on a number of its branches. Renewal options within the various lease contracts, as applicable, were considered to determine the lease term and estimate the contractual obligation and commitment for the Company's operating and finance leases. Furthermore, certain lease contracts of the Company contain language that subject its rent payment to variability, such as those tied to an index or change in an index. As a result, the future contractual obligation and commitment may materially differ from that estimated and disclosed within the table below. At March 31, ~~2023,~~2024, we had the following lease and other contractual obligations to make future payments under each of these contracts as follows:


(In thousands)	(In thousands)	Total Amount		Payments Due per Period				(In thousands)	Total Amount	Payments Due per Period
Contractual obligations and commitments	Contractual obligations and commitments	Committed		<1 Year		1 – 3 Years		Contractual obligations and commitments	Committed	1 Year or Less	> 1 Year
Operating leases	Operating leases	$	3,659	$	1,360	$	2,299
Finance leases	Finance leases	945		312		633

Other contractual obligations	Other contractual obligations	6,390		6,390		—

Other contractual obligations

Other contractual obligations
Total	Total	$	10,994	$	8,062	$	2,932

The Company's estimated lease liability for its various operating and finance leases was reported within other liabilities on our consolidated statements of condition.

In the normal course of business, we are a party to credit related financial instruments with off-balance sheet risk, which are not reflected in the consolidated statements of condition. These financial instruments include commitments to extend credit and standby letters of credit. Many of the commitments will expire without being drawn upon, and thus, the total amount does not necessarily represent future cash requirements. Refer to Note 7 of the consolidated financial statements for additional details.

We use derivative financial instruments for risk management purposes (primarily interest rate risk) and not for trading or speculative purposes. These contracts with our various counterparties may subject the Company to various cash flow requirements, which may include posting of cash as collateral (or other assets) for arrangements that the Company is in a liability position (i.e. “underwater”). Refer to Note 8 of the consolidated financial statements for further discussion of our derivatives and hedge instruments.

CAPITAL RESOURCES

As part of our goal to operate a safe, sound and profitable financial organization, we are committed to maintaining a strong capital base. Shareholders’ equity totaled ~~$464.9~~$501.6 million and ~~$451.3~~$495.1 million at March 31, ~~2023~~2024 and December 31, ~~2022,~~2023, respectively, which amounted to 8%9% of total assets for both periods. Refer to "—Financial Condition—Shareholders' Equity" for further discussion ~~regarding the driver for the increase in~~on shareholders' equity for the three months ended March 31, ~~2023.~~2024.

Our principal cash requirement is the payment of dividends on our common stock, as and when declared by the Company's Board of Directors. We declared dividends to shareholders in the aggregate amount of $6.1 million ~~and $5.9 million~~ for each of the three months ended March 31, ~~2023~~2024 and ~~2022, respectively.~~2023. The Company's Board of Directors approves cash dividends on a quarterly basis after careful

analysis and consideration of various factors, including the following: (i) capital position relative to total assets, (ii) risk-based assets, (iii) total classified assets, (iv) economic conditions, (v) growth rates for total assets and total liabilities, (vi) earnings performance and projections and (vii) strategic initiatives and related capital requirements. All dividends declared and distributed by the Company will be in compliance with applicable state corporate law and regulatory requirements.

We are primarily dependent upon the payment of cash dividends by the Bank, our wholly-owned subsidiary, to service our commitments. We, as the sole shareholder of the Bank, are entitled to dividends, when and as declared by the Bank's Board of Directors from legally available funds. For the three months ended March 31, ~~2023~~2024 and ~~2022,~~2023, the Bank declared dividends payable to the Company in the amount of ~~$6.3~~$6.0 million and ~~$8.1~~$6.3 million, respectively. Under regulations prescribed by the OCC, the Bank may not declare dividends in excess of the Bank’s net income for the current year plus its retained net income for the prior two years without prior approval from the OCC. If we are required to use dividends from the Bank to service unforeseen commitments in the future, we may be required to reduce the dividends paid to our shareholders going forward.

Please refer to Note 10 of the consolidated financial statements for discussion and details of the Company and Bank's regulatory capital requirements. At March 31, ~~2023~~2024 and December 31, ~~2022,~~2023, the Company and Bank exceeded all regulatory capital requirements, and the Bank continues to meet the capital requirements to be classified as "well capitalized" under applicable prompt corrective action provisions.

RISK MANAGEMENT

The Company’s Board of Directors and management have identified significant risk categories which affect the Company. The risk categories include: credit; liquidity; market; interest rate; capital; ~~operational and~~operational; technology, including cybersecurity; vendor and third party; people and compensation; compliance and legal; strategic alignment; and reputation. The Board of Directors has approved an Enterprise Risk Management ("ERM") Policy that addresses each category of risk. The direct oversight and responsibility for the Company's risk management program has been delegated to the Company's Executive Vice President, ~~Enterprise Risk Management and~~ Chief Risk Officer, who is a member of the Executive Committee and reports directly to the Chief Executive Officer.

During 2020 and 2021, the spread of the COVID-19 pandemic increased many of the risks that we faced, including our credit, operational, vendor and third party, and technology risks. Over the course of 2022, the Company largely experienced a return to a pre-pandemic environment, and experienced minimal business or operational disruption related to the pandemic. During 2022, the Company reevaluated its “return-to-office” strategy that was implemented late in 2021 and determined to continue to operate under such strategy, which requires certain employees to work from the Company’s offices full-time, and permits others employees to work through a hybrid model (i.e., work from home part-time and from one of the Company's physical locations part-time) or to work remotely full-time. As of March 31, 2023, a majority of the Company’s non-branch employees were working under a hybrid or remote arrangement. The Company continues to monitor, evaluate and address risks that may arise in connection with hybrid and remote work arrangements, such as potential cybersecurity risks.

There have been no material changes to the Company's risk categories and risk management policies as described in Item 7 of the Company's Annual Report on Form 10-K for the year ended December 31, ~~2022.~~2023. Please refer to Item 7 of the Company's Annual Report on Form 10-K for the year ended December 31, ~~2022~~2023 for further details regarding the Company's risk management.

Interest rate risk

Interest rate risk represents the sensitivity of earnings to changes in market interest rates. As interest rates change, the interest income and expense streams associated with our financial instruments also change, thereby impacting net interest income, the primary component of our earnings. Board ALCO and Management ALCO utilize the results of a detailed and

dynamic simulation model to quantify the estimated exposure of net interest income to sustained interest rate changes. While Board ALCO and Management ALCO routinely monitor simulated net interest income sensitivity over a rolling two-year horizon, they also utilize additional tools to monitor potential longer-term interest rate risk.

The simulation model captures the impact of changing interest rates on the interest income received and interest expense paid on all interest-earning assets and interest-bearing liabilities reflected on our consolidated statements of condition, as well as for derivative financial instruments. This sensitivity analysis is compared to ALCO policy limits, which specify a maximum tolerance level for net interest income exposure over a one- and two-year horizon, assuming a static balance sheet, given a 200 basis point upward and downward shift in interest rates. Although our policy specifies a downward shift of 200 basis points, this would have resulted in negative rates as of March 31, 2022, as many deposit and funding rates were below 2.00%. In this case, a downward shift of 100 basis points was the only down scenario performed. A parallel and pro rata shift in rates over a 12-month period is assumed. Using this approach, we are able to produce simulation results that illustrate the effect that both a gradual change of rates and a “rate shock” have on earnings expectations. In the down ~~100 and~~ 200 basis points ~~scenarios,~~scenario, Federal Funds and Treasury yields are floored at 0.01% while Prime is floored at 3.00%. All other market rates are floored at the lesser of current levels or 0.25%.

The sensitivity analysis below 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, among others, the nature and timing of interest rate levels, yield curve shape, prepayments on loans and securities, deposit decay rates, pricing decisions on loans and deposits and reinvestment/replacement of asset and liability cash flows. 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 of March 31, ~~2023~~2024 and ~~2022,~~2023, our net interest income sensitivity analysis reflected the following changes to net interest income, as compared to our modeled Year 1 Base 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 ALCO simulation horizon.


		Estimated Changes In Net Interest Income					Estimated Changes In Net Interest Income
Rate Change from Year 1 — Base	Rate Change from Year 1 — Base	March 31, 2023		March 31, 2022		Rate Change from Year 1 — Base	March 31, 2024		March 31, 2023
Year 1	Year 1					Year 1
+200 basis points	+200 basis points	(2.24)	%	(0.79)	%	+200 basis points	(1.9)	%	(2.2)	%
-100 basis points		N/A		(0.24)	%
-200 basis points	-200 basis points	1.87	%	N/A		-200 basis points	3.5	%	1.9	%

Year 2	Year 2
Year 2
Year 2
+200 basis points	+200 basis points	13.52	%	6.04	%
-100 basis points		N/A		(1.91)	%
+200 basis points
+200 basis points							6.1	%	13.5	%
-200 basis points	-200 basis points	10.96	%	N/A		-200 basis points	20.0	%	11.0	%

If rates remain at or near current levels, net interest income is projected to increase in year two of the simulation. Asset cash flows reprice and replace into the current higher rate environment at rates above current portfolio averages ~~while~~more than offsetting the pressure from funding costs ~~remain largely unchanged,~~replacing into higher rates, causing balance sheet spread to expand.

If rates increase 200 basis points, net interest income is projected to decrease slightly in the first year of the simulation as the funding base adjusts into the higher rate environment to a greater degree than asset yields increase. In the second year, net interest income is projected to increase as loan and investment yields continue to reprice/reset into higher yields and funding cost increases ~~continually~~ slow.

If rates decrease 200 basis points, net interest income is projected to increase slightly in the first year of the simulation as reductions in funding costs are able to more than offset near-term asset yield deterioration. In the second year, net interest income is projected to increase ~~however to a lesser degree than the up 200 basis points scenario discussed above,~~ as asset yields are supported by fixed rates and floors while cost of funds reductions ~~continue at a slowing pace and begin to reach assumed floors.~~continue.

In addition to using our investments portfolio to manage liquidity risk, we also use it to manage our interest rate risk and provide a natural hedge to our interest risk exposure created by loans, deposits and borrowings. Refer to "—Financial Condition—Investments" for further details of the Company's investment portfolio, including the duration of the bond portfolio as of March 31, ~~2023~~2024 and December 31, ~~2022.~~2023.

Periodically, if deemed appropriate, we use back-to-back loan swaps, interest rate swaps, floors and caps, which are common derivative financial instruments, to hedge our interest rate risk position. The Board of Directors has approved hedging policy statements governing the use of these instruments. The Board and Management ALCO monitor derivative activities relative to their expectations and our hedging policies. Refer Note 8 of the consolidated financial statements for further discussion of these derivative instruments.

LIBOR is a benchmark interest rate for certain floating rate loans, deposits and borrowings, and off-balance sheet exposures of the Company. The administrator of LIBOR has announced that the publication of the most commonly used U.S. Dollar LIBOR settings will cease to be provided or will cease to be representative after June 30, 2023. The publication of all other LIBOR settings ceased to be provided or ceased to be representative as of December 31, 2021. As such, the Company has an internal project team that is focused on an orderly transition from LIBOR to alternative reference rates. The Adjustable Interest Rate (LIBOR) Act (the “LIBOR Act”), and its implementing regulations, were finalized in December 2022. The LIBOR Act and its implementing regulations establish a process for replacing LIBOR on existing LIBOR contracts that do not provide for the use of a clearly defined or practicable replacement benchmark rate with a benchmark replacement based on SOFR. As of March 31, 2023, the Company has no LIBOR-based deposits.

6967

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK

Information required by this Item 3 is included in Item 2. "Management's Discussion and Analysis of Financial Condition and Results of Operations - Risk Management" and such information is incorporated into this Item 3 by reference.

7068

ITEM 4. CONTROLS AND PROCEDURES

As required by Rule 13a-15 under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), the Company’s management conducted an evaluation with the participation of the Company’s Chief Executive Officer and Chief Operating Officer and Chief Financial Officer & Principal Financial and Accounting Officer, regarding the effectiveness of the Company’s disclosure controls and procedures, as of the end of the last fiscal year. In designing and evaluating the Company’s disclosure controls and procedures, the Company and its management recognize that any controls and procedures, no matter how well designed and operated, can provide only a reasonable assurance of achieving the desired control objectives, and management necessarily was required to apply its judgment in evaluating and implementing possible controls and procedures. Based upon that evaluation, the Chief Executive Officer and Chief Operating Officer and Chief Financial Officer & Principal Financial and Accounting Officer concluded that they believe the Company’s disclosure controls and procedures are effective to ensure that information required to be disclosed by the Company in the reports it files or submits under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms. We intend to continue to review and document our disclosure controls and procedures, including our internal controls and procedures for financial reporting, and we may from time to time make changes to the disclosure controls and procedures to enhance their effectiveness and to ensure that our systems evolve with our business.

There was no change in our internal control over financial reporting that occurred during the period covered by this Quarterly Report on Form 10-Q that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

7169

PART II. OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

In the normal course of business, the Company and its subsidiaries are subject to pending and threatened legal actions. Although the Company is not able to predict the outcome of such actions, after reviewing pending and threatened actions with counsel, management believes that based on the information currently available the outcome of such actions, individually or in the aggregate, will not have a material adverse effect on the Company’s consolidated financial position as a whole.

ITEM 1A. RISK FACTORS

There are a number of factors that may adversely affect the Company’s business, financial results or stock price. Refer to “Risk Factors” in the Company’s Annual Report on Form 10-K for the year ended December 31, ~~2022,~~2023, for discussion of these risks.

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

(a) ~~None.~~None

(b) ~~None.~~None


Issuer Purchases of Equity Securities
Period	Total number of shares (or units) purchased	Average price paid per share (or unit)		Total number of shares (or units) purchased as part of publicly announced plans or programs	Maximum number (or appropriate dollar value) of shares (or units) that may yet be purchased under the plans or programs (1)
January 1-31, 2024	—	$	—	—	750,000
February 1-29, 2024	—	—		—	750,000
March 1-31, 2024	—	—		—	750,000
Total	—	$	—	—	750,000

(1) In January 2024, the Company announced that the Board of Directors had authorized a common stock repurchase program for management to repurchase up to 750,000 shares. This program replaced the 2023 repurchase program and will terminate upon the earlier of (i) reaching the authorized share repurchase amount, (ii) vote by the Board of Directors to terminate the plan, or (iii) January 5, 2025.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

None.

ITEM 4. MINE SAFETY DISCLOSURES

Not applicable.

ITEM 5. OTHER INFORMATION

None.

7270

ITEM 6. EXHIBITS


Exhibit No.						Definition
10.1†*						Release of Claims ,dated April 1, 2024 , by Gre gory A. Dufour, pursuant to the Transition Employment and Retention Agreement between Gregory A. Dufour, Camden National Corporation ~~Third~~ ~~Amended~~ and ~~Restated~~ ~~Long-Term Incentive~~ ~~Program, effective as of~~ ~~March 31, 2023.~~
~~10.2~~†						Camden National ~~Corporation Third Amended and Restated~~ ~~Management Stock Purchase~~ ~~Program, effective as of~~ ~~February 28, 2023~~ ~~(incorporated herein by reference to Exhibit~~ ~~10.23~~ ~~to the~~ ~~Company’s Annual~~ ~~Report on Form~~ ~~10-K~~ ~~filed with the Commission on~~ ~~March 10, 2023).~~
~~10.3~~†*						~~Camden National Corporation~~ ~~Third~~ ~~Amended and Restated~~ ~~Defined Contribution Retirement~~ ~~Program, effective as of April 26,~~ Bank dated August 16, 2023.
~~10.4~~†						~~Form of~~ ~~Restricted Stock Award Agreement Under the~~ ~~Third Amended~~ ~~and~~ ~~Restated Management Stock Purchase Program~~ ~~(incorporated herein by reference to Exhibit~~ ~~10.24~~ ~~to the~~ ~~Company’s Annual~~ ~~Report on Form~~ ~~10-K~~ ~~filed with the Commission on~~ ~~March 10, 2023).~~
~~10.5~~†						~~Form of~~ ~~Restricted Stock~~ ~~Unit~~ ~~Award Agreement~~ ~~for Company Employees~~ ~~Under the 2022 Equity and Incentive Plan (incorporated herein by reference to Exhibit~~ ~~10.25~~ ~~to the Company's~~ ~~Annual~~ ~~Report on Form~~ ~~10-K~~ ~~filed with the Commission on~~ ~~March 10, 2023).~~
31.1*						Certification of Chief Executive Officer pursuant to Rule 13a-14(a) of the Securities Exchange Act of 1934.
31.2*						Certification of Chief Financial Officer, Principal Financial & Accounting Officer pursuant to Rule 13a-14(a) of the Securities Exchange Act of 1934.
32.1**						Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
32.2**						Certification of Chief Financial Officer, Principal Financial & Accounting Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
101*						iXBRL (Inline eXtensible Business Reporting Language). The following materials from Camden National Corporation’s Quarterly Report on Form 10-Q for the period ended March 31, ~~2023,~~2024, formatted in iXBRL: (i) Consolidated Statements of Condition - March 31, ~~2023~~2024 and December 31, ~~2022;~~2023; (ii) Consolidated Statements of Income - Three Months Ended March 31, ~~2023~~2024 and ~~2022;~~2023; (iii) Consolidated Statements of Comprehensive (Loss) Income - Three Months Ended March 31, ~~2023~~2024 and ~~2022;~~2023; (iv) Consolidated Statements of Changes in Shareholders’ Equity - Three Months Ended March 31, ~~2023~~2024 and ~~2022;~~2023; (v) Consolidated Statements of Cash Flows - Three Months Ended March 31, ~~2023~~2024 and ~~2022;~~2023; and (vi) Notes to the Unaudited Consolidated Financial Statements.
104*						Cover Page Interactive Data File (formatted as inline XBRL and contained in Exhibit 101).
*						Filed herewith.
**						Furnished herewith.
†						Management contract or a compensatory plan or arrangement.

7371

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.


CAMDEN NATIONAL CORPORATION
(Registrant)

/s/ ~~Gregory A. Dufour~~Simon R. Griffiths						May ~~9, 2023~~8, 2024
~~Gregory A. Dufour~~Simon R. Griffiths						Date
President and Chief Executive Officer (Principal Executive Officer)

/s/ Michael R. Archer						May ~~9, 2023~~8, 2024
Michael R. Archer						Date
Chief Financial Officer and Principal Financial & Accounting Officer

7472


	Number of Contracts	Recorded Investment		Specific Reserve
(In thousands, except number of contracts)	December 31, 2022	December 31, 2022		December 31, 2022
Commercial real estate - owner-occupied	1	$	113	$	50
Commercial	—	—		—
Residential real estate	18	2,208		$	307
Consumer and home equity	3	245		9
Total	22	$	2,566	$	366


	Number of Contracts	Pre-Modification Outstanding Recorded Investment		Post-Modification Outstanding Recorded Investment		Specific Reserve

(In thousands, except number of contracts)	December 31, 2022	December 31, 2022		December 31, 2022		December 31, 2022

Home equity:
Interest rate concession and payment deferral	—	$	—	$	—	$	—
Maturity concession	1	69		96		—
Total	1	$	69	$	96	$	—


(Dollars in thousands)	Three Months Ended March 31, 2023		Percentage of Total
MBS - Agency Backed	$	877,688	66	%
CMO - Agency Backed	260,582		19	%
Municipal	105,191		8	%
Corporate Bonds	44,593		3	%
Other - Agency Backed	53,026		4	%
Total	$	1,341,080	100	%