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, 20232024
OR
      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)
 
Maine01-0413282
(State or other jurisdiction of(I.R.S. Employer
incorporation or organization)Identification No.)
  
2 ELM STREETCAMDENME04843
(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 classTrading Symbol(s)Name of each exchange on which registered
Common Stock, without par valueCACThe 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 filerAccelerated filer
Non-accelerated filerSmaller 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) 14,592,80414,606,693 shares.



CAMDEN NATIONAL CORPORATION

 FORM 10-Q FOR THE QUARTER ENDED MARCH 31, 20232024
TABLE OF CONTENTS OF INFORMATION REQUIRED IN REPORT

  PAGE
PART I.  FINANCIAL INFORMATION 
ITEM 1.FINANCIAL STATEMENTS 
 Consolidated Statements of Condition (unaudited) - March 31, 20232024 and December 31, 20222023
 Consolidated Statements of Income (unaudited) - Three Months Ended March 31, 20232024 and 20222023
 Consolidated Statements of Comprehensive Income (Loss) (unaudited) - Three Months Ended March 31, 20232024 and 20222023
 Consolidated Statements of Changes in Shareholders’ Equity (unaudited) - Three Months Ended March 31, 20232024 and 20222023
 Consolidated Statements of Cash Flows (unaudited) - Three Months Ended March 31, 20232024 and 20222023
 Notes to the Unaudited Consolidated Financial Statements
ITEM 2.MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
ITEM 3.QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK
ITEM 4.CONTROLS AND PROCEDURES
PART II. OTHER INFORMATION 
ITEM 1.LEGAL PROCEEDINGS
ITEM 1A.RISK FACTORS
ITEM 2.UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
ITEM 3.DEFAULTS UPON SENIOR SECURITIES
ITEM 4.MINE SAFETY DISCLOSURES
ITEM 5.OTHER INFORMATION
ITEM 6.EXHIBITS
SIGNATURES
2


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
ASSETSASSETS  ASSETS 
Cash and due from banksCash 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 cashTotal cash, cash equivalents and restricted cash75,741 75,427 
Investments:Investments:  Investments: 
Trading securitiesTrading securities3,971 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 investmentsOther investments19,414 12,713 
Total investmentsTotal investments1,249,882 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)
LoansLoans4,073,108 4,010,353 
Less: allowance for credit losses on loansLess: allowance for credit losses on loans(37,134)(36,922)
Net loansNet loans4,035,974 3,973,431 
GoodwillGoodwill94,697 94,697 
Core deposit intangible assetsCore deposit intangible assets1,415 1,563 
Bank-owned life insuranceBank-owned life insurance99,734 99,142 
Premises and equipment, netPremises and equipment, net35,688 36,022 
Deferred tax assetsDeferred tax assets47,281 50,217 
Other assetsOther assets71,631 76,993 
Total assetsTotal assets$5,716,605 $5,671,850 
LIABILITIES AND SHAREHOLDERS’ EQUITYLIABILITIES AND SHAREHOLDERS’ EQUITY  LIABILITIES AND SHAREHOLDERS’ EQUITY 
LiabilitiesLiabilities  Liabilities 
Deposits:Deposits:  Deposits: 
Non-interest checkingNon-interest checking$1,047,491 $1,141,753 
Interest checkingInterest checking1,609,330 1,763,850 
Savings and money marketSavings and money market1,409,861 1,439,622 
Certificates of depositCertificates of deposit360,103 300,451 
Brokered depositsBrokered deposits215,949 181,253 
Total depositsTotal deposits4,642,734 4,826,929 
Short-term borrowingsShort-term borrowings486,318 265,176 
Junior subordinated debenturesJunior subordinated debentures44,331 44,331 
Junior subordinated debentures
Junior subordinated debentures
Accrued interest and other liabilitiesAccrued interest and other liabilities78,348 84,136 
Total liabilitiesTotal liabilities5,251,731 5,220,572 
Commitments and Contingencies (Note 7)Commitments and Contingencies (Note 7)Commitments and Contingencies (Note 7)
Shareholders’ EquityShareholders’ 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, respectively115,590 115,069 
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 earningsRetained earnings468,755 462,164 
Accumulated other comprehensive lossAccumulated other comprehensive loss(119,471)(125,955)
Accumulated other comprehensive loss
Accumulated other comprehensive loss
Total shareholders’ equityTotal shareholders’ equity464,874 451,278 
Total liabilities and shareholders’ equityTotal liabilities and shareholders’ equity$5,716,605 $5,671,850 







The accompanying notes are an integral part of these consolidated financial statements.
3


CONSOLIDATED STATEMENTS OF INCOME
(unaudited)
Three Months Ended
March 31,
Three Months Ended
March 31,
Three Months Ended
March 31,
Three Months Ended
March 31,
(In thousands, except number of shares and per share data)
(In thousands, except number of shares and per share data)
(In thousands, except number of shares and per share data)(In thousands, except number of shares and per share data)20232022
Interest IncomeInterest Income  
Interest Income
Interest Income
Interest and fees on loans
Interest and fees on loans
Interest and fees on loansInterest and fees on loans$45,332 $32,035 
Taxable interest on investmentsTaxable interest on investments5,963 5,789 
Taxable interest on investments
Taxable interest on investments
Nontaxable interest on investments
Nontaxable interest on investments
Nontaxable interest on investmentsNontaxable interest on investments763 764 
Dividend incomeDividend income219 106 
Dividend income
Dividend income
Other interest income
Other interest income
Other interest incomeOther interest income448 164 
Total interest incomeTotal interest income52,725 38,858 
Total interest income
Total interest income
Interest Expense
Interest Expense
Interest ExpenseInterest Expense  
Interest on depositsInterest on deposits15,832 1,833 
Interest on deposits
Interest on deposits
Interest on borrowings
Interest on borrowings
Interest on borrowingsInterest on borrowings2,085 131 
Interest on junior subordinated debenturesInterest on junior subordinated debentures528 529 
Interest on junior subordinated debentures
Interest on junior subordinated debentures
Total interest expense
Total interest expense
Total interest expenseTotal interest expense18,445 2,493 
Net interest incomeNet interest income34,280 36,365 
Provision (credit) for credit losses2,002 (1,075)
Net interest income after provision (credit) for credit losses32,278 37,440 
Net interest income
Net interest income
(Credit) provision for credit losses
(Credit) provision for credit losses
(Credit) provision for credit losses
Net interest income after (credit) provision for credit losses
Net interest income after (credit) provision for credit losses
Net interest income after (credit) provision for credit losses
Non-Interest Income
Non-Interest Income
Non-Interest IncomeNon-Interest Income  
Debit card incomeDebit card income2,938 2,924 
Debit card income
Debit card income
Service charges on deposit accounts
Service charges on deposit accounts
Service charges on deposit accountsService charges on deposit accounts1,762 1,833 
Income from fiduciary servicesIncome from fiduciary services1,600 1,631 
Income from fiduciary services
Income from fiduciary services
Brokerage and insurance commissions
Brokerage and insurance commissions
Brokerage and insurance commissionsBrokerage and insurance commissions1,093 994 
Mortgage banking income, netMortgage banking income, net716 1,034 
Mortgage banking income, net
Mortgage banking income, net
Bank-owned life insurance
Bank-owned life insurance
Bank-owned life insuranceBank-owned life insurance592 576 
Other incomeOther income1,165 833 
Other income
Other income
Total non-interest income
Total non-interest income
Total non-interest incomeTotal non-interest income9,866 9,825 
Non-Interest ExpenseNon-Interest Expense  
Non-Interest Expense
Non-Interest Expense
Salaries and employee benefits
Salaries and employee benefits
Salaries and employee benefitsSalaries and employee benefits14,573 15,506 
Furniture, equipment and data processingFurniture, equipment and data processing3,211 3,132 
Furniture, equipment and data processing
Furniture, equipment and data processing
Net occupancy costs
Net occupancy costs
Net occupancy costsNet occupancy costs2,079 2,144 
Debit card expenseDebit card expense1,201 1,066 
Debit card expense
Debit card expense
Consulting and professional fees
Consulting and professional fees
Consulting and professional feesConsulting and professional fees1,055 1,007 
Regulatory assessmentsRegulatory assessments845 655 
Regulatory assessments
Regulatory assessments
Amortization of core deposit intangible assetsAmortization of core deposit intangible assets148 156 
Amortization of core deposit intangible assets
Amortization of core deposit intangible assets
Other real estate owned and collection costs, net
Other real estate owned and collection costs, net
Other real estate owned and collection costs, net
Other expenses
Other expenses
Other expensesOther expenses3,053 2,543 
Total non-interest expenseTotal non-interest expense26,165 26,209 
Total non-interest expense
Total non-interest expense
Income before income tax expense
Income before income tax expense
Income before income tax expenseIncome before income tax expense15,979 21,056 
Income Tax ExpenseIncome Tax Expense3,252 4,261 
Income Tax Expense
Income Tax Expense
Net Income
Net Income
Net IncomeNet Income$12,727 $16,795 
Per Share DataPer Share Data  
Per Share Data
Per Share Data
Basic earnings per share
Basic earnings per share
Basic earnings per shareBasic earnings per share$0.87 $1.14 
Diluted earnings per shareDiluted earnings per share$0.87 $1.13 
Diluted earnings per share
Diluted earnings per share
Cash dividends declared per share
Cash dividends declared per share
Cash dividends declared per shareCash dividends declared per share$0.42 $0.40 
Weighted average number of common shares outstandingWeighted average number of common shares outstanding14,573,122 14,741,271 
Weighted average number of common shares outstanding
Weighted average number of common shares outstanding
Diluted weighted average number of common shares outstandingDiluted weighted average number of common shares outstanding14,631,542 14,822,332 
Diluted weighted average number of common shares outstanding
Diluted weighted average number of common shares outstanding







The accompanying notes are an integral part of these consolidated financial statements.  
4


CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
(unaudited)
Three Months Ended
March 31,
(In thousands)20232022
Net Income$12,727 $16,795 
Other comprehensive income (loss): 
Net change in unrealized loss on debt securities, net of tax9,094 (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)20242023
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 tax2,491 

(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.
5


CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY
(unaudited)
Three Months Ended
Three Months EndedThree Months Ended
Common StockRetained
Earnings
Accumulated
Other Comprehensive
Income (Loss)
Total Shareholders’
Equity
Common StockRetained
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, 202114,739,956 $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 incomeNet income— — 16,795 — 16,795 
Other comprehensive loss, net of taxOther comprehensive loss, net of tax— — — (69,684)(69,684)
Stock-based compensation expenseStock-based compensation expense— 624 — — 624 
Exercise of stock options and issuance of vested share awards, net of repurchase for tax withholdings19,540 (114)— — (114)
Common stock repurchased(13,086)(609)— — (609)
Cash dividends declared ($0.40 per share)— — (5,860)— (5,860)
Balance at March 31, 202214,746,410 $123,012 $435,347 $(75,913)$482,446 
Balance at December 31, 202214,567,325 $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 withholdings20,581 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, 202314,587,906 $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.
6


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)20232022(In thousands)20242023
Operating ActivitiesOperating Activities  Operating Activities 
Net IncomeNet 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 saleOriginations of mortgage loans held for sale(34,397)(47,671)
Proceeds from the sale of mortgage loansProceeds from the sale of mortgage loans35,501 47,771 
Gain on sale of mortgage loans, net of origination costsGain on sale of mortgage loans, net of origination costs(384)(1,132)
Provision (credit) for credit losses2,002 (1,075)
(Credit) provision for credit losses
Depreciation and amortization expenseDepreciation and amortization expense815 899 
Investment securities amortization and accretion, netInvestment securities amortization and accretion, net605 1,217 
Stock-based compensation expenseStock-based compensation expense459 624 
Amortization of core deposit intangible assetsAmortization of core deposit intangible assets148 156 
Purchase accounting accretion, netPurchase 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 activitiesNet cash provided by operating activities14,516 42,750 
Investing ActivitiesInvesting Activities 
Proceeds from available-for-sale debt securities18,888 69,572 
Proceeds from sales, calls and maturities of available-for-sale debt securities— (77,865)
Proceeds from maturities of held-to-maturity securities6,216 — 
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 loansNet 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 stockPurchase of Federal Home Loan Bank stock(13,591)(1,799)
Proceeds from sale of Federal Home Loan Bank stockProceeds from sale of Federal Home Loan Bank stock6,890 1,892 
Purchase of premises and equipmentPurchase of premises and equipment(495)(393)
Recoveries of previously charged-off loans107 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 activitiesNet cash used in investing activities(45,040)(111,220)
Financing ActivitiesFinancing Activities
Net decrease in depositsNet decrease in deposits(184,195)(32,225)
Net decrease in deposits
Net decrease in deposits
Net proceeds from borrowings less than 90 daysNet proceeds from borrowings less than 90 days221,142 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 withholdings62 (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 stockCash dividends paid on common stock(6,135)(5,911)
Finance lease paymentsFinance lease payments(36)(40)
Net cash provided (used in) by financing activities30,838 (12,772)
Net increase (decrease) in cash, cash equivalents and restricted cash314 (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 periodCash, cash equivalents, and restricted cash at beginning of period75,427 220,625 
Cash, cash equivalents and restricted cash at end of periodCash, cash equivalents and restricted cash at end of period$75,741 $139,383 
Supplemental informationSupplemental information 
Interest paid
Interest paid
Interest paidInterest paid17,840 2,470 
Income taxes paidIncome taxes paid146 150 
Cash dividends declared, not paidCash dividends declared, not paid6,135 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.
7


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, 20232024 and December 31, 2022,2023, the consolidated statements of income for the three months ended March 31, 20232024 and 2022,2023, the consolidated statements of comprehensive income (loss) income for the three months ended March 31, 20232024 and 2022,2023, the consolidated statements of changes in shareholders' equity for the three months ended March 31, 20232024 and 2022,2023, and the consolidated statements of cash flows for the three months ended March 31, 20232024 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.

8




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.
AcronymDescriptionAcronymDescription
AFS:Available-For-SaleAvailable-for-saleFRB:FRBB:Board of Governors of the Federal Reserve Bank of BostonSystem
ALCO:Asset/Liability CommitteeGAAP:Generally accepted accounting principlesAccepted Accounting Principles in the United States
ACL:Allowance for credit lossesCredit LossesHTM:GDP:Gross domestic productHeld-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 BankLondon Interbank Offered Rate
ASC:Accounting Standards CodificationHTM:Management ALCO:Held-to-maturityManagement Asset/Liability Committee
ASU:Accounting Standards UpdateIRS:MBS:Internal Revenue ServiceMortgage-Backed Security
Bank:Camden National Bank, a wholly-owned subsidiary of Camden National CorporationLGD:MSPP:Loss given defaultManagement Stock Purchase Plan
BOLI:Bank-Owned Life InsuranceBank-owned life insuranceN/A:LIBOR:London Interbank Offered RateNot Applicable
Board ALCO:Board of Directors' Asset/Liability CommitteeLTIP:Long-Term Performance Share Plan
CARES Act:Coronavirus Aid, Relief, and Economic Security Act, signed into law in March 2020 in response to COVID-19Management ALCO:Management Asset/Liability Committee
CCTA:Camden Capital Trust A, an unconsolidated entity formed by Camden National CorporationMBS:Mortgage-backed security
CDs:Certificate of depositsMSPP:Management Stock Purchase Plan
CECL:Current Expected Credit LossesN/A:Not applicable
Company:Camden National CorporationN.M.:Not meaningfulMeaningful
CMO:BTFP:Bank Term Funding Program, introduced by the Federal Reserve Bank in March 2023Collateralized mortgage obligationOCC:Office of the Comptroller of the Currency
CUSIP:CDs:Certificate of DepositsCommittee on Uniform Securities Identification ProceduresOCI:Other comprehensive income (loss)Comprehensive Income (Loss)
DCRP:Company:Defined Contribution Retirement PlanCamden National CorporationOREO:Other real estate ownedReal Estate Owned
EPS:CMO:Collateralized Mortgage ObligationEarnings per sharePD:Probability of default
FASB:Financial Accounting Standards BoardSBA:U.S. Small Business Administration
FDIC:EPS:Earnings Per ShareFederal Deposit Insurance CorporationSBA PPP:U.S. Small Business Administration Paycheck Protection Program
FASB:Financial Accounting Standards BoardSERP:Supplemental Executive Retirement Plans
FDIC:Federal Deposit Insurance CorporationSOFR:Secured Overnight Financing Rate
FHLB:Federal Home Loan BankSERP:TDR:Supplemental executive retirement plansTroubled-Debt Restructured Loan
FHLBB:Federal Home Loan Bank of BostonSOFR:U.S:Secured Overnight Financing Rate
FHLMC:Federal Home Loan Mortgage CorporationTDR:Troubled-debt restructured loan
FNMA:Federal National Mortgage AssociationUBCT: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 CommitteeU.S.:United States of America
FRB:Federal Reserve System Board of Governors

9


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 issuedASU 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 Ventures2023-09, Income Taxes (Topic 323)740): Accounting for Investments inImprovements to Income Tax Credit Structures Using the Proportional Amortization MethodDisclosures ("ASU 2023-02"2023-09”). The FASB issued ASU 2023-022023-09 to permit reporting entities to elect to accountaddress investor requests for tax equity investments, regardless of the tax credit program from which themore 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 2023-022023-09 is to be applied on a prospective basis and is effective for interim and annual periods beginning after December 15, 2023. While2024 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 itsto 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, 20232024 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.
9


10


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, 2024March 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, 2023December 31, 2023 
Obligations of states and political subdivisions
Obligations of states and political subdivisions
Obligations of states and political subdivisionsObligations of states and political subdivisions$49,142 $41 $(132)$49,051 
MBS issued or guaranteed by U.S. government-sponsored enterprisesMBS issued or guaranteed by U.S. government-sponsored enterprises585,249 214 (77,632)507,831 
CMO issued or guaranteed by U.S. government-sponsored enterprisesCMO issued or guaranteed by U.S. government-sponsored enterprises117,552 — (11,319)106,233 
Subordinated corporate bonds25,678 — (2,370)23,308 
Corporate bonds
Total AFS debt securitiesTotal 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 enterprises598,845 131 (84,957)514,019 
CMO issued or guaranteed by U.S. government-sponsored enterprises122,760 — (13,413)109,347 
Subordinated corporate bonds25,677 (2,397)23,283 
Total AFS debt securities$796,960 $145 $(101,230)$695,875 

As of March 31, 20232024 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 incomethe HTM securities on the consolidated statements of income.condition. At March 31, 20232024, 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, 20222023 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.

10

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


11


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 Months12 Months or MoreTotal Less Than 12 Months12 Months or MoreTotal
(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, 2024March 31, 2024    
Obligations of states and political subdivisionsObligations of states and political subdivisions54 $19,151 $(48)$10,384 $(84)$29,535 $(132)
MBS issued or guaranteed by U.S. government-sponsored enterprisesMBS issued or guaranteed by U.S. government-sponsored enterprises172 3,310 (80)488,861 (77,552)492,171 (77,632)
CMO issued or guaranteed by U.S. government-sponsored enterprisesCMO issued or guaranteed by U.S. government-sponsored enterprises62 2,506 (56)103,727 (11,263)106,233 (11,319)
Subordinated corporate bonds14 6,179 (412)17,129 (1,958)23,308 (2,370)
Corporate bonds
Total AFS debt securitiesTotal AFS debt securities302 $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 subdivisionsObligations of states and political subdivisions83 42,276 (463)— — 42,276 (463)
MBS issued or guaranteed by U.S. government-sponsored enterprisesMBS issued or guaranteed by U.S. government-sponsored enterprises175 118,290 (11,521)381,355 (73,436)499,645 (84,957)
CMO issued or guaranteed by U.S. government-sponsored enterprisesCMO issued or guaranteed by U.S. government-sponsored enterprises64 47,340 (4,589)62,007 (8,824)109,347 (13,413)
Subordinated corporate bonds13 7,687 (384)14,593 (2,013)22,280 (2,397)
Corporate bonds
Total AFS debt securitiesTotal AFS debt securities335 $215,593 $(16,957)$457,955 $(84,273)$673,548 $(101,230)

For the three months ended March 31, 20232024 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 withof 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 ofcomprise 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 corporateCorporate bonds are primarily comprised ofcomprise investment grade senior notes and senior subordinated notes of other financial institutions.

At March 31, 20232024 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.

11




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.
12


(In thousands)(In thousands)Amortized
Cost
Fair
Value
(In thousands)Amortized
Cost
Fair
Value
Due in one year or lessDue in one year or less$1,002 $1,003 
Due after one year through five yearsDue after one year through five years13,612 12,323 
Due after five years through ten yearsDue after five years through ten years60,206 59,032 
Due after ten yearsDue after ten years— — 
SubtotalSubtotal74,820 72,358 
Mortgage-related securitiesMortgage-related securities702,801 614,065 
TotalTotal$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 enterprisesObligations of U.S. government-sponsored enterprises$7,491 $— $(507)$6,984 
Obligations of states and political subdivisionsObligations of states and political subdivisions56,049 1,683 (760)56,972 
MBS issued or guaranteed by U.S. government-sponsored enterprisesMBS issued or guaranteed by U.S. government-sponsored enterprises314,589 — (18,932)295,657 
CMO issued or guaranteed by U.S. government-sponsored enterprisesCMO issued or guaranteed by U.S. government-sponsored enterprises143,030 — (10,628)132,402 
Subordinated corporate bonds18,915 607 (538)18,984 
Corporate bonds
Total HTM debt securitiesTotal 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 enterprisesObligations of U.S. government-sponsored enterprises$7,457 $— $(777)$6,680 
Obligations of states and political subdivisionsObligations of states and political subdivisions55,978 431 (1,610)54,799 
MBS issued or guaranteed by U.S. government-sponsored enterprisesMBS issued or guaranteed by U.S. government-sponsored enterprises317,406 — (24,766)292,640 
CMO issued or guaranteed by U.S. government-sponsored enterprisesCMO issued or guaranteed by U.S. government-sponsored enterprises145,069 — (13,724)131,345 
Subordinated corporate bonds20,673 332 (276)20,729 
Corporate bonds
Total HTM debt securitiesTotal HTM debt securities$546,583 $763 $(41,153)$506,193 
(1)    Amortized cost presented above includes unamortized unrealized losses forfrom the aforementioned transfer from AFS to HTM securities as of March 31, 20232024 and December 31, 2022: $1.1 million2023, 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, $20.1MBS, (4) $17.9 million and $20.7$18.4 million in collateralized mortgage obligationsCMO, 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, 20232024 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. Therecorded 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 recordedon 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 fromtotaling $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 forincome during the three months ended March 31, 2022.2023.

The Company evaluated its HTM debt securities with an amortized cost as of March 31, 20232024 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)20242023
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, 20232024 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, theThe 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, 20232024 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, 20232024 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 lessDue in one year or less$— $— 
Due after one year through five yearsDue after one year through five years1,285 1,272 
Due after five years through ten yearsDue after five years through ten years20,527 19,720 
Due after ten yearsDue after ten years60,643 61,947 
SubtotalSubtotal82,455 82,939 
Mortgage-related securitiesMortgage-related securities457,619 428,060 
TotalTotal$540,074 $510,999 

AFS and HTM Debt Securities Pledged

At March 31, 20232024 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, 20232024 and 2022.2023.

The following table summarizes the Company's investment in FHLBB stock and FRBBFRB 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 
FRB5,374 5,374 
Total other investments$19,414 $12,713 
(In thousands)March 31,
2024
December 31,
2023
FHLBB$11,018 $10,020 
FRB5,374 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-occupied337,824 332,494 
Commercial421,099 430,131 
Total commercial loans2,087,716 2,055,068 
Retail Loans:
Residential real estate1,733,147 1,700,266 
Home equity232,512 234,428 
Consumer19,733 20,591 
Total retail loans1,985,392 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-occupied300,626 301,860 
Commercial397,395 403,901 
Total commercial loans2,100,347 2,076,207 
Retail Loans:
Residential real estate1,762,482 1,763,378 
Home equity240,674 240,341 
Consumer17,537 18,168 
Total retail loans2,020,693 2,021,887 
Total loans$4,121,040 $4,098,094 
The loan balances for each portfolio segment presented above are net of their respective unamortized fair value mark discount on acquired loans and net of unamortized loan origination costs for the dates indicated:
(In thousands)(In thousands)March 31,
2023
December 31,
2022
(In thousands)March 31,
2024
December 31,
2023
Net unamortized loan origination costs
Net unamortized fair value mark discount on acquired loansNet unamortized fair value mark discount on acquired loans$(279)$(313)
Net unamortized loan origination costs6,944 6,890 
TotalTotal$6,665 $6,577 

The Company's lending activities are primarily conducted in Maine, but also includeincludes 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, 20232024 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.



16


Loan Sales

For the three months ended March 31, 20232024 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, 20232024 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, 20232024 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, 20232024 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, 20232024 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, 20232024 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
15




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. AlsoConstruction 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.
17



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. EachThe home equity loan has a fixed rate and is billed as equal payments comprised of principal and interest. EachThe 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.

18
16




The following table presents the activity in the ACL on loans for the periods indicated:
Commercial Real Estate
(In thousands)Non-Owner-OccupiedOwner- OccupiedCommercialResidential Real EstateHome EquityConsumerTotal
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— 99 — 107 
(Credit) provision for loan losses(973)108 (652)1,737 215 439 
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)
Recoveries57 — — 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)
Recoveries379 — 87 478 
(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-OccupiedOwner- OccupiedCommercialResidential Real EstateHome EquityConsumerTotal
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— 92 80 187 
(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— 99 — 107 
(Credit) provision for loan losses(973)108 (652)1,737 215 439 
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)
Recoveries19 — 471 44 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 $200,000decreased $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 duringdecrease over this period which was primarily driven by residential real estate anda 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:

17




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.
19


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:
18




(In thousands)20242023202220212020PriorRevolving 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 $397,395 
Gross charge-offs for the three months ended$— $$— $14 $— $218 $25 $50 $309 
Residential Real Estate      
Risk rating
Pass (Grades 1-6)$24,318 $165,392 $533,172 $532,317 $217,904 $285,193 $377 $380 $1,759,053 
Special mention (Grade 7)— — — — — — — — — 
Substandard (Grade 8)— — — 664 — 2,765 — — 3,429 
Doubtful (Grade 9)— — — — — — — — — 
Total residential real estate$24,318 $165,392 $533,172 $532,981 $217,904 $287,958 $377 $380 $1,762,482 
Gross charge-offs for the three months ended$— $— $— $— $— $— $— $— $— 
Home equity      
Risk rating
Performing$1,889 $15,937 $22,054 $506 $319 $15,771 $169,846 $13,364 $239,686 
Non-performing— — 288 — — 10 546 144 988 
Total home equity$1,889 $15,937 $22,342 $506 $319 $15,781 $170,392 $13,508 $240,674 
Gross charge-offs for the three months ended$— $— $— $— $— $— $— $— $— 
Consumer      
Risk rating
Performing$1,303 $4,867 $4,344 $1,750 $656 $2,467 $2,144 $— $17,531 
Non-performing— — — — — — — 
Total consumer$1,303 $4,867 $4,344 $1,750 $656 $2,473 $2,144 $— $17,537 
Gross charge-offs for the three months ended$— $15 $15 $$— $— $$— $36 
19




(In thousands)20232022202120202019PriorRevolving 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 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— — — — 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$$19 $31 $14 $$$13 $— $91 
20


(In thousands)20232022202120202019PriorRevolving 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)— 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 $$— $172 $20 $60 $312 
Residential Real Estate      
Risk rating
Pass (Grades 1-6)$47,241 $544,518 $572,505 $236,212 $77,364 $252,040 $347 $— $1,730,227 
Special mention (Grade 7)— — — — — — — — — 
Substandard (Grade 8)— — — — 92 2,828 — — 2,920 
Doubtful (Grade 9)— — — — — — — — — 
Total residential real estate$47,241 $544,518 $572,505 $236,212 $77,456 $254,868 $347 $— $1,733,147 
Gross charge-offs for the three months ended$— $— $— $— $— $18 $— $— $18 
Home equity      
Risk rating
Performing$3,926 $25,674 $564 $338 $4,655 $15,125 $170,075 $11,717 $232,074 
Non-performing— — — — — 12 347 79 438 
Total home equity$3,926 $25,674 $564 $338 $4,655 $15,137 $170,422 $11,796 $232,512 
Gross charge-offs for the three months ended$— $— $— $— $— $— $— $— $— 
Consumer      
Risk rating
Performing$1,441 $7,204 $3,359 $1,455 $826 $2,662 $2,786 $— $19,733 
Non-performing— — — — — — — — — 
Total consumer$1,441 $7,204 $3,359 $1,455 $826 $2,662 $2,786 $— $19,733 
Gross charge-offs for the three months ended$— $— $— $— $— $$— $— $
21


(In thousands)20222021202020192018PriorRevolving 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 


22


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
CurrentTotal 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-occupiedCommercial real estate - non-owner-occupied$34 $— $10 $44 $1,328,749 $1,328,793 $— 
Commercial real estate - owner-occupiedCommercial real estate - owner-occupied77 — 47 124 337,700 337,824 
Commercial real estate - owner-occupied
Commercial real estate - owner-occupied
Commercial
Commercial
CommercialCommercial965 79 465 1,509 419,590 421,099 — 
Residential real estateResidential real estate283 194 459 936 1,732,211 1,733,147 — 
Residential real estate
Residential real estate
Home equity
Home equity
Home equityHome equity552 106 151 809 231,703 232,512 — 
ConsumerConsumer32 29 — 61 19,672 19,733 — 
Consumer
Consumer
TotalTotal$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-occupiedCommercial real estate - non-owner-occupied$267 $— $11 $278 $1,292,165 $1,292,443 $— 
Commercial real estate - owner-occupiedCommercial real estate - owner-occupied55 — 47 102 332,392 332,494 — 
Commercial real estate - owner-occupied
Commercial real estate - owner-occupied
Commercial
Commercial
CommercialCommercial667 134 640 1,441 428,690 430,131 — 
Residential real estateResidential real estate852 186 524 1,562 1,698,704 1,700,266 — 
Residential real estate
Residential real estate
Home equity
Home equity
Home equityHome equity357 — 171 528 233,900 234,428 — 
ConsumerConsumer23 11 — 34 20,557 20,591 — 
Consumer
Consumer
TotalTotal$2,221 $331 $1,393 $3,945 $4,006,408 $4,010,353 $— 
Total
Total
21





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 AllowanceNon-Accrual Loans Without an AllowanceTotal Non-Accrual LoansNon-Accrual Loans With an AllowanceNon-Accrual Loans Without an AllowanceTotal Non-Accrual Loans(In thousands)Non-Accrual Loans With an AllowanceNon-Accrual Loans Without an AllowanceTotal Non-Accrual LoansNon-Accrual Loans With an AllowanceNon-Accrual Loans Without an AllowanceTotal Non-Accrual Loans
Commercial real estate - non-owner-occupiedCommercial real estate - non-owner-occupied$— $10 $10 $— $11 $11 
Commercial real estate - owner-occupiedCommercial real estate - owner-occupied— 47 47 — 46 46 
CommercialCommercial606 142 748 415 300 715 
Residential real estateResidential real estate1,359 356 1,715 1,314 419 1,733 
Home equityHome equity377 61 438 421 65 486 
ConsumerConsumer— — — — — — 
TotalTotal$2,342 $616 $2,958 $2,150 $841 $2,991 

23


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 TypeTotal Collateral -Dependent
Non-Accrual Loans
Collateral TypeTotal Collateral -Dependent
Non-Accrual Loans
(In thousands)Real EstateGeneral Business AssetsReal EstateGeneral Business Assets
Residential real estate$325 $— $325 $387 $— $387 
Home equity— — — — — — 
Total$325 $— $325 $387 $— $387 
March 31,
2024
December 31,
2023
Collateral TypeTotal Collateral -Dependent LoansCollateral TypeTotal Collateral -Dependent Loans
(In thousands)Real EstateReal 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, 20232024 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-accrualsnon-accrual loans for the three months ended March 31, 20232024 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 madein accordance with ASU 2022-02. Under ASU 2022-02, a loan is evaluated to borrowers experiencing financial difficulty, according toconsider 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 thean existing loan. Our loan modifications for borrowers experiencing financial difficulty are generally accounted for as a continuation of the existing loan.

We offerThe Company offers several types of loansloan 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 disclosurefor 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 ContractsRecorded InvestmentSpecific Reserve
(In thousands, except number of contracts)December 31,
2022
December 31,
2022
December 31,
2022
Commercial real estate - owner-occupied$113 $50 
Commercial— — — 
Residential real estate18 2,208 $307 
Consumer and home equity245 
Total22 $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 modificationsCompany closely monitors the performance of loans that qualify as TDRs asare modified to borrowers experiencing financial difficulty to understand the effectiveness of December 31, 2022 that occurred duringits modification efforts and relevant factors are considered while assessing the period indicated:
Number of ContractsPre-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 concession69 96 — 
Total$69 $96 $— 

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

In-Process Foreclosure Proceedings

At March 31, 20232024 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. TheAt 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.

25


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 Agreements201,499 200,657 
Overnight Borrowings— 24,950 
FHLBB Borrowings175,000 125,000 
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 asrefinanced 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 borrowings189,400 18,725 
FHLBB borrowings100,000 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, 20232024 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.

23




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)(In thousands)March 31,
2023
December 31,
2022
(In thousands)March 31,
2024
December 31,
2023
Customer Repurchase Agreements(1)(2):
Customer Repurchase Agreements(1)(2):
Mortgage-backed securities issued or guaranteed by U.S. government-sponsored enterprisesMortgage-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
Mortgage-backed securities issued or guaranteed by U.S. government-sponsored enterprises
Collateralized mortgage obligations issued or guaranteed by U.S. government-sponsored enterprisesCollateralized mortgage obligations issued or guaranteed by U.S. government-sponsored enterprises22,642 94,328 
Obligations of states and political subdivisions— 3,018 
Total
Total
TotalTotal$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, 20232024 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.

26


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 creditCommitments to extend credit$779,402 $817,772 
Standby letters of creditStandby letters of credit6,769 6,801 
TotalTotal$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, 20232024 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, 20232024 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.
24




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.

27


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, 20232024 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, 20232024 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.

25




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.
28


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.

29


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 AssetsDerivative Liabilities
(Dollars in thousands)Notional
Amount
 LocationFair
Value
Notional
Amount
LocationFair
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 agreements21,696 Other assets— 44,127 Accrued interest and other liabilities— 
Fixed rate mortgage interest rate lock commitments6,883 Other assets71 5,843 Accrued interest and other liabilities43 
Forward delivery commitments2,887 Other assets32 1,651 Accrued interest and other liabilities14 
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 agreements21,818 Other assets— 53,704 Accrued interest and other liabilities— 
Fixed rate mortgage interest rate lock commitments4,493 Other assets31 9,597 Accrued interest and other liabilities87 
Forward delivery commitments5,259 Other assets114 — Accrued interest and other liabilities— 
Total derivatives not designated as hedging instruments$14,947 $14,937 
26




Derivative AssetsDerivative Liabilities
(Dollars in thousands)Notional
Amount
 LocationFair
Value
Notional
Amount
LocationFair
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 agreements27,951 Other assets— 61,310 Accrued interest and other liabilities— 
Fixed rate mortgage interest rate lock commitments17,354 Other assets331 2,011 Accrued interest and other liabilities29 
Forward delivery commitments3,355 Other assets76 6,086 Accrued interest and other liabilities72 
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 agreements28,077 Other assets— 52,193 Accrued interest and other liabilities— 
Fixed rate mortgage interest rate lock commitments10,924 Other assets215 2,092 Accrued interest and other liabilities11 
Forward delivery commitments3,445 Other assets51 6,706 Accrued interest and other liabilities132 
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 ConditionCarrying Amount of Hedged Assets/(Liabilities)Cumulative Fair Value Hedging Adjustment in the Carrying Amount of the Hedged Assets/(Liabilities)
(Dollars in thousands)March 31, 2023December 31, 2022March 31, 2023December 31, 2022
Loans(1)
$301,552 $— $(1,552)$— 
Total$301,552 $— $(1,552)$— 

Location in Consolidated Statements of ConditionCarrying 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 assetsresidential 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 portfoliosresidential real estate loans used in these hedging relationships was $853.7$795.4 million and $806.5 million, respectively, and the amountsamount of the designated hedged items were $300.0residential loans was $375.0 million.

30
27




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 DerivativeAmount of Gain (Loss) Recognized in OCI Included ComponentAmount of Gain (Loss) Recognized in OCI Excluded ComponentLocation of Gain (Loss) Recognized
from AOCI into Income
Amount of Gain (Loss) Reclassified from AOCI into IncomeAmount of Gain (Loss) Reclassified from AOCI into Income Included ComponentAmount of Gain (Loss) Reclassified from AOCI into Income Excluded Component(Dollars in thousands)Amount of Gain (Loss) Recognized in OCI on DerivativeAmount of Gain (Loss) Recognized in OCI Included ComponentAmount of Gain (Loss) Recognized in OCI Excluded ComponentLocation of Gain (Loss) Recognized
from AOCI into Income
Amount of Gain (Loss) Reclassified from AOCI into IncomeAmount of Gain (Loss) Reclassified from AOCI into Income Included ComponentAmount 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 contractsInterest rate contracts$182 $182 $— Interest and fees on loans$(717)$(717)$— 
Interest rate contractsInterest rate contracts(1)(1)— Interest on deposits306 306 — 
Interest rate contractsInterest rate contracts(796)(796)— Interest on borrowings487 487 — 
Interest rate contractsInterest rate contracts(934)(934)— Interest on junior subordinated debentures133 133 — 
TotalTotal$(1,549)$(1,549)$— $209 $209 $— 
For the Three Months Ended March 31, 2022
For the Three Months Ended March 31, 2023
For the Three Months Ended March 31, 2023
For the Three Months Ended March 31, 2023
Interest rate contractsInterest rate contracts$(3,011)$(3,011)$— Interest and fees on loans$382 $382 $— 
Interest rate contractsInterest rate contracts3,488 3,488 — Interest on deposits(149)(149)— 
Interest rate contracts
Interest rate contracts
Interest rate contracts
Interest rate contractsInterest rate contracts3,158 3,158 Interest on junior subordinated debentures(351)(351)
TotalTotal$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,
20232022
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,
202420242023
(Dollars in thousands)(Dollars in thousands)Interest and fees on loansInterest on depositsInterest on borrowingsInterest on junior subordinated debenturesInterest and fees on loansInterest on depositsInterest on junior subordinated debentures(Dollars in thousands)Interest and fees on loansInterest on borrowingsInterest on junior subordinated debenturesInterest and fees on loansInterest on depositsInterest on borrowingsInterest on junior subordinated debentures
Total presented on the consolidated statements of income in which the effects of cash flow hedges are recordedTotal 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 relationshipsGain (loss) on fair value hedging relationshipsGain (loss) on fair value hedging relationships
Interest rate contracts:Interest rate contracts:Interest rate contracts:
Hedged itemsHedged items$1,552 $— $— $— $— $— $— 
Derivatives designated as hedging instrumentsDerivatives designated as hedging instruments$(1,077)$— $— $— $— $— $— 
Gain (loss) on cash flow hedging relationshipsGain (loss) on cash flow hedging relationshipsGain (loss) on cash flow hedging relationships
Interest rate contracts:Interest rate contracts:Interest rate contracts:
Amount of gain (loss) reclassified from AOCI into incomeAmount of gain (loss) reclassified from AOCI into income$(717)$306 $487 $133 $382 $(149)$(351)
Amount of gain (loss) reclassified from AOCI into income - included componentAmount 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 componentAmount of gain (loss) reclassified from AOCI into income - excluded component$— $— $— $— $— $— $— 

28




31



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 IncomeAmount of Gain (Loss)
Recognized in Income
Three Months Ended
March 31,
Location of Gain (Loss) Recognized in Income
Location of Gain (Loss) Recognized in Income
Location of Gain (Loss) Recognized in IncomeAmount of Gain (Loss)
Recognized in Income
Three Months Ended
March 31,
(Dollars in thousands)
(Dollars in thousands)
(Dollars in thousands)(Dollars in thousands)Location of Gain (Loss) Recognized in Income20232022
Customer loan swapsCustomer loan swaps$(27)$94 
Customer loan swaps
Customer loan swaps
Fixed rate mortgage interest rate lock commitments
Fixed rate mortgage interest rate lock commitments
Fixed rate mortgage interest rate lock commitmentsFixed rate mortgage interest rate lock commitmentsMortgage banking income, net84 (459)
Forward delivery commitmentsForward delivery commitmentsMortgage banking income, net(96)166 
Forward delivery commitments
Forward delivery commitments
TotalTotal$(39)$(199)
Total
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, 20232024 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, 20232024 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, 20232024 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 ConditionGross Amount Offset in the Consolidated Statements of ConditionNet 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 ConditionGross Amount Offset in the Consolidated Statements of ConditionNet 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
TotalTotal$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)
TotalTotal$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 
TotalTotal$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 — 
TotalTotal$20,365 $— $20,365 $— $5,515 $14,850 
Customer repurchase agreementsCustomer 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.
30





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
33


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, 20232024 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, 20232024 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 BufferMinimum Regulatory Provision to Be "Well Capitalized"December 31,
2022
Minimum Regulatory Capital Required for Capital Adequacy plus Capital Conservation BufferMinimum Regulatory Provision to Be "Well Capitalized"
March 31,
2024
March 31,
2024
Minimum Regulatory Capital Required for Capital Adequacy plus Capital Conservation BufferMinimum Regulatory Provision to Be "Well Capitalized"December 31,
2023
Minimum Regulatory Capital Required for Capital Adequacy plus Capital Conservation BufferMinimum Regulatory Provision to Be "Well Capitalized"
(Dollars in thousands)(Dollars in thousands)AmountRatioMinimum Regulatory Capital Required for Capital Adequacy plus Capital Conservation BufferMinimum Regulatory Provision to Be "Well Capitalized"AmountRatioMinimum Regulatory Capital Required for Capital Adequacy plus Capital Conservation BufferMinimum 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 ratioTotal 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 ratioTier 1 risk-based capital ratio524,843 12.96 %8.50 %6.00 %517,385 12.81 %8.50 %6.00 %Tier 1 risk-based capital ratio546,468 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/A474,385 11.74 %7.00 %N/A
Common equity Tier 1 risk-based capital ratio(1)
503,468 12.51 12.51 %7.00 %N/A495,153 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/A517,385 9.22 %4.00 %N/A
Tier 1 leverage capital ratio(1)
546,468 9.59 9.59 %4.00 %N/A538,153 9.40 9.40 %4.00 %N/A
Camden National Bank:Camden National Bank:
Total risk-based capital ratioTotal 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 ratioTier 1 risk-based capital ratio492,534 12.19 %8.50 %8.00 %485,160 12.03 %8.50 %8.00 %Tier 1 risk-based capital ratio518,129 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 ratioCommon equity Tier 1 risk-based capital ratio492,534 12.19 %7.00 %6.50 %485,160 12.03 %7.00 %6.50 %Common equity Tier 1 risk-based capital ratio518,129 12.90 12.90 %7.00 %6.50 %509,934 12.72 12.72 %7.00 %6.50 %
Tier 1 leverage capital ratioTier 1 leverage capital ratio492,534 8.68 %4.00 %5.00 %485,160 8.65 %4.00 %5.00 %Tier 1 leverage capital ratio518,129 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, 20232024 and December 31, 2022,2023, $43.0 million of the junior subordinated debentures were included in Tier 1 and Tier 2total 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, 2023March 31, 2022
For the Three Months EndedFor the Three Months Ended
March 31, 2024March 31, 2024March 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 valueChange 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 valueNet change in fair value11,584 (2,490)9,094 (92,753)19,942 (72,811)
Cash Flow Hedges:Cash Flow Hedges:
Change in fair valueChange 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 valueNet 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)(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.
35


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, 2022Balance at December 31, 2022$(131,539)$5,891 $(307)$(125,955)
Other comprehensive income (loss) before reclassificationsOther comprehensive income (loss) before reclassifications7,760 (2,441)— 5,319 
Less: Amounts reclassified from AOCILess: Amounts reclassified from AOCI(1,334)164 (1,165)
Other comprehensive income (loss)Other comprehensive income (loss)9,094 (2,605)(5)6,484 
Balance at March 31, 2023Balance 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 taxtax.

32




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 IncomeThree Months Ended
March 31,
Location on Consolidated Statements of Income
Location on Consolidated Statements of Income
Location on Consolidated Statements of Income
(In thousands)
(In thousands)
(In thousands)(In thousands)Location on Consolidated Statements of Income20232022
Debit card interchange incomeDebit card interchange income$2,938 $2,924 
Debit card interchange income
Debit card interchange income
Services charges on deposit accounts
Services charges on deposit accounts
Services charges on deposit accountsServices charges on deposit accountsService charges on deposit accounts1,762 1,833 
Fiduciary services incomeFiduciary services incomeIncome from fiduciary services1,600 1,631 
Fiduciary services income
Fiduciary services income
Investment program income
Investment program income
Investment program incomeInvestment program incomeBrokerage and insurance commissions1,093 994 
Other non-interest incomeOther non-interest incomeOther income422 400 
Other non-interest income
Other non-interest income
Total non-interest income within the scope of ASC 606
Total non-interest income within the scope of ASC 606
Total non-interest income within the scope of ASC 606Total non-interest income within the scope of ASC 6067,815 7,782 
Total non-interest income not in scope of ASC 606Total non-interest income not in scope of ASC 6062,051 2,043 
Total non-interest income not in scope of ASC 606
Total non-interest income not in scope of ASC 606
Total non-interest incomeTotal non-interest income$9,866 $9,825 
Total non-interest income
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.

36


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)(In thousands)Location on Consolidated Statements of IncomeThree Months Ended
March 31,
(In thousands)
(In thousands)
Net periodic pension costNet periodic pension costLocation on Consolidated Statements of Income20232022
Service cost$70 $133 
Net periodic pension cost
Net periodic pension cost
Service cost (1)
Service cost (1)
Service cost (1)
Interest costInterest costOther expenses189 115 
Recognized net actuarial lossOther expenses— 216 
Interest cost
Interest cost
TotalTotal$259 $464 
Total
Total
(1)    As of December 31, 2023, there are no active participants in the SERP.

Other Postretirement Benefit Plan:
(In thousands)(In thousands)Location on Consolidated Statements of IncomeThree Months Ended
March 31,
(In thousands)
(In thousands)
Net periodic postretirement benefit cost
Net periodic postretirement benefit cost
Net periodic postretirement benefit costNet periodic postretirement benefit costLocation on Consolidated Statements of Income20232022
Service costService cost$$
Service cost
Service cost
Interest costInterest costOther expenses40 28 
Recognized net actuarial (gain) lossOther expenses(1)22 
Interest cost
Interest cost
Recognized net actuarial gain
Recognized net actuarial gain
Recognized net actuarial gain
Amortization of prior service credit
Amortization of prior service credit
Amortization of prior service creditAmortization of prior service creditOther expenses(6)(6)
TotalTotal$36 $49 
Total
Total

33




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,
Three Months Ended
March 31,
Three Months Ended
March 31,
Three Months Ended
March 31,
(In thousands, except number of shares and per share data)
(In thousands, except number of shares and per share data)
(In thousands, except number of shares and per share data)(In thousands, except number of shares and per share data)20232022
Net incomeNet income$12,727 $16,795 
Net income
Net income
Dividends and undistributed earnings allocated to participating securities(1)
Dividends and undistributed earnings allocated to participating securities(1)
Dividends and undistributed earnings allocated to participating securities(1)
Dividends and undistributed earnings allocated to participating securities(1)
(25)(43)
Net income available to common shareholdersNet income available to common shareholders$12,702 $16,752 
Net income available to common shareholders
Net income available to common shareholders
Weighted-average common shares outstanding for basic EPS
Weighted-average common shares outstanding for basic EPS
Weighted-average common shares outstanding for basic EPSWeighted-average common shares outstanding for basic EPS14,573,122 14,741,271 
Dilutive effect of stock-based awards(2)
Dilutive effect of stock-based awards(2)
58,420 81,061 
Dilutive effect of stock-based awards(2)
Dilutive effect of stock-based awards(2)
Weighted-average common and potential common shares for diluted EPS
Weighted-average common and potential common shares for diluted EPS
Weighted-average common and potential common shares for diluted EPSWeighted-average common and potential common shares for diluted EPS14,631,542 14,822,332 
Earnings per common share:Earnings per common share:  
Earnings per common share:
Earnings per common share:
Basic EPS
Basic EPS
Basic EPSBasic EPS$0.87 $1.14 
Diluted EPSDiluted EPS$0.87 $1.13 
Diluted EPS
Diluted EPS
Awards excluded from the calculation of diluted EPS(3):
Awards excluded from the calculation of diluted EPS(3):
Awards excluded from the calculation of diluted EPS(3):
Awards excluded from the calculation of diluted EPS(3):
Performance-based awardsPerformance-based awards1,141 1,027 
Performance-based awards
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.
37



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.

34




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 SecuritiesSecurities: 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.

38


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, 20232024 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, 2024March 31, 2024  
Financial assets:Financial assets:   Financial assets:  
Trading securitiesTrading securities$3,971 $3,971 $— $— 
AFS debt securities:AFS debt securities:  AFS debt securities: 
Obligations of states and political subdivisionsObligations of states and political subdivisions49,051 — 49,051 — 
Mortgage-backed securities issued or guaranteed by U.S. government-sponsored enterprises507,831 — 507,831 — 
Collateralized mortgage obligations issued or guaranteed by U.S. government-sponsored enterprises106,233 — 106,233 — 
Subordinated corporate bonds23,308 — 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 saleLoans held for sale4,562 — 4,562 — 
Customer loan swapsCustomer loan swaps11,479 — 11,479 — 
Interest rate contractsInterest rate contracts10,996 — 10,996 — 
Fixed rate mortgage interest rate lock commitments
Fixed rate mortgage interest rate lock commitments
Fixed rate mortgage interest rate lock commitmentsFixed rate mortgage interest rate lock commitments71 — 71 — 
Forward delivery commitmentsForward delivery commitments32 — 32 — 
Financial liabilities:Financial liabilities:  Financial liabilities: 
Deferred compensationDeferred compensation$3,971 $3,971 $— $— 
Customer loan swapsCustomer loan swaps11,554 — 11,554 — 
Customer loan swaps
Customer loan swaps
Interest rate contracts
Interest rate contracts
Interest rate contractsInterest rate contracts6,859 — 6,859 — 
Fixed rate mortgage interest rate lock commitmentsFixed rate mortgage interest rate lock commitments43 — 43 — 
Forward delivery commitmentsForward delivery commitments14 — 14 — 
December 31, 2022   
December 31, 2023December 31, 2023  
Financial assets:Financial assets:   Financial assets:  
Trading securitiesTrading securities$3,990 $3,990 $— $— 
AFS debt securities:AFS debt securities:
Obligations of states and political subdivisionsObligations of states and political subdivisions49,226 — 49,226 — 
Mortgage-backed securities issued or guaranteed by U.S. government-sponsored enterprises514,019 — 514,019 — 
Collateralized mortgage obligations issued or guaranteed by U.S. government-sponsored enterprises109,347 — 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 bondsSubordinated corporate bonds23,283 — 23,283 — 
Loans held for saleLoans held for sale5,197 — 5,197 — 
Customer loan swapsCustomer loan swaps14,802 — 14,802 — 
Interest rate contractsInterest rate contracts13,051 — 13,051 — 
Fixed rate mortgage interest rate lock commitments
Fixed rate mortgage interest rate lock commitments
Fixed rate mortgage interest rate lock commitmentsFixed rate mortgage interest rate lock commitments31 — 31 — 
Forward delivery commitmentsForward delivery commitments114 — 114 — 
Financial liabilities:Financial liabilities:  Financial liabilities:  
Deferred compensationDeferred compensation$3,990 $3,990 $— $— 
Customer loan swapsCustomer loan swaps14,850 — 14,850 — 
Interest rate contractsInterest rate contracts5,515 — 5,515 — 
Fixed rate mortgage interest rate lock commitmentsFixed rate mortgage interest rate lock commitments87 — 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 ValueReadily 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 ValueValuation MethodologyUnobservable inputDiscount
March 31, 2024
Collateral-dependent loans:        
Specifically reserved$4,159 Market approach appraisal of collateralEstimated selling costs7%
December 31, 2023
Collateral-dependent loans:      
Specifically reserved$4,768 Market approach appraisal of collateralEstimated selling costs7%

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-recurringnonrecurring 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.
37




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, 20232024 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 ValueReadily
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 ValueReadily
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 securitiesHTM 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 assetsServicing assets2,413 4,187 — — 4,187 
Financial liabilities:Financial liabilities:     
Time depositsTime deposits$360,103 $351,795 $— $351,795 $— 
Time deposits
Time deposits
Short-term borrowingsShort-term borrowings486,318 485,505 — 485,505 — 
Subordinated debentures44,331 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 securitiesHTM 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 assetsServicing assets2,458 4,412 — — 4,412 
Financial liabilities:Financial liabilities:
Time depositsTime deposits$300,451 $291,568 $— $291,568 $— 
Time deposits
Time deposits
Short-term borrowingsShort-term borrowings265,176 264,779 — 264,779 — 
Subordinated debentures44,331 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 ofunder 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;
40




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;
43


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 TangibleAssets; and Adjusted Return on Average Equity. ReturnThe following table provides a reconciliation of net income, diluted EPS, return on average tangibleassets and return on average equity is the ratio of (i)to adjusted net income, adjusted for (a) tax effected amortization of core deposit intangiblediluted 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 forreturn on average goodwill and core deposit intangible assets. Thisequity. We believe the following adjusted financial ratio reflects a shareholder's return on tangible capital deployed inmetrics 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)20232022
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 equity11.16 %12.96 %
Return on average tangible equity14.21 %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 presented0.93 %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 assets0.88 %1.01 %
Adjusted Return on Average Equity:
Return on average equity, as presented10.77 %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 equity10.19 %12.43 %
(1)    Assumed a 21% tax rate.



42




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)20242023
Net income, as presented$13,272 $12,727 
Adjustment for (credit) provision for credit losses(2,102)2,002 
Adjustment for income tax expense3,063 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)20232022
Non-interest expense, as presentedNon-interest expense, as presented$26,165 $26,209 
Non-interest expense, as presented
Non-interest expense, as presented
Net interest income, as presentedNet 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 presentedNon-interest income, as presented9,866 9,825 
Adjusted net interest income plus non-interest incomeAdjusted 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 ratioEfficiency ratio58.96 %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 interestReturn on average tangible equity is the ratio of (i) net income, on a fully-taxable equivalent basis is net interest income plusadjusted 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 comparabilitytax 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 industryindustry.

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 calculationtax 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)20232022
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)20242023
Return on Average Tangible Equity:
Net income, as presented$13,272 $12,727 
Adjustment for amortization of core deposit intangible assets139 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 equity10.77 %11.16 %
Return on average tangible equity13.46 %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 assets139 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 equity12.74 %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)20232022
Net income, as presented$12,727 $16,795 
Add: income tax expense, as presented3,252 4,261 
Add: provision (credit) for credit losses, as presented2,002 (1,075)
Earnings before income taxes and provision for credit losses17,981 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 presentedShareholders’ 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’ equityTangible shareholders’ equity$368,762 $355,018 
Shares outstanding at period endShares outstanding at period end14,587,906 14,567,325 
Book value per shareBook value per share$31.87 $30.98 
Tangible book value per shareTangible book value per share$25.28 $24.37 
Tangible Common Equity Ratio:Tangible Common Equity Ratio:
Total assetsTotal 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 assetsTangible assets$5,620,493 $5,575,590 
Common equity ratioCommon equity ratio8.13 %7.96 %Common equity ratio8.66 %8.66 %
Tangible common equity ratioTangible common equity ratio6.56 %6.37 %Tangible common equity ratio7.12 %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)20232022
Three Months Ended
March 31,
Three Months Ended
March 31,
Three Months Ended
March 31,
(Dollars in thousands)
(Dollars in thousands)
(Dollars in thousands)
Total average deposits(1)
Total average deposits(1)
$4,520,424 $4,380,035 
Less: average certificates of deposit(320,209)(304,720)
Total average deposits(1)
Total average deposits(1)
Adjustment average certificates of deposit
Adjustment average certificates of deposit
Adjustment average certificates of deposit
Average core depositsAverage core deposits$4,200,215 $4,075,315 
Average core deposits
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. ThroughoutNet 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 20232024 compared to the average 3-month U.S. Treasury was 114 basis points higher thansame 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 befirst quarter of 2024 included a $910,000 partial recovery from the resultsale 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 concernsa 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 industrywe had written off in the first quarter of 2023 upon notice of Signature Bank failing. Excluding the focus across muchsale 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 uncollateralized1 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.
48


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.
Annualizedcorporate bond, adjusted net charge-offsincome (non-GAAP) for the first quarter of 2023 were 0.02%, compared to 0.03% for the fourth quarter2024 was $12.6 million and adjusted EPS was $0.86, each a decrease of 2022 and 0.02% for11% 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 beencontinue to be affected by the inverted yield curve, as deposit andcurve. Through the first quarter of 2024, our funding costs have risencontinued to rise at a faster pace than our assets have repriced,earning asset yields, which in turn has resulted in continued compression of ourfurther net interest margin. Ourmargin compression period-over-period. The Company's net interest margin for the first quarter of 20232024 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 continue2023. 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 overstrong 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,
20232022
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 revenues59.27 %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, 2024December 31, 2023March 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 %%
Diluted EPS$0.91 $0.58 $0.87 57 %%
Adjusted net income (non-GAAP)$12,553 $12,410 $14,179 %(11)%
Adjusted diluted EPS (non-GAAP)$0.86 $0.85 $0.97 %(11)%
Return on average assets0.93 %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 equity10.77 %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 %%
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 deposits14.80 %14.60 %14.90 %0.20 %(0.10)%
Available liquidity sources to uninsured and uncollateralized deposits207.86 %201.67 %187.70 %6.19 %20.16 %
Credit Quality and Capital
Non-performing assets to total assets0.13 %0.13 %0.09 %— %0.04 %
Loans 30-89 days past due to total loans0.05 %0.12 %0.05 %(0.07)%— %
Allowance for credit losses on loans to total loans0.86 %0.90 %0.91 %(0.04)%(0.05)%
Total risk-based capital ratio14.52 %14.36 %13.95 %0.16 %0.57 %
Tangible common equity ratio (non-GAAP)7.12 %7.11 %6.56 %0.01 %0.56 %
47



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.

50


Net Interest Income and Net Interest Margin.Income. Net interest income on a fully-taxable equivalent basis for the quarter ended March 31, 20232024 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 124an 82 basis pointspoint increase in our average cost of funds. The Federal Funds Target Rate range at March 31, 2023 was 4.75% - 5.00%, comparedfunds to 0.25% - 0.50% at March 31, 2022. From2.27% 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 beta2 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 fourthfirst quarter of 20222024. Our deposit and another 50 basis pointsborrowing costs increased throughout the past year and in the first quarter of 2023. The Company's total funding beta for2024 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 fundingaverage deposit costs grew to 1.45% for firstthe 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 20222024 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 pointsinto 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 coststhree months ended March 31, 2024 increased 228 basis points over this period to 3.96%, up from 3.13% for the first quarter ofthree months ended March 31, 2023. AsThe increase was driven by the continued increase in short-term interest rates continuedbetween years, but also was due to rise, depositors became more interest rate sensitive and deposit balances shifted from lower costthe 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 periodson a fully-taxable equivalent basis was also primarily driven by boththe 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 growthwas 5.00% for the first three months of $311.7 million, or 6%. Between periods, our yield on interest-earning assets grew 852024, 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 expansion2024, an increase of 8040 basis points to 4.50% forover the first quartersame 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 andto reposition the Company's balance sheet. The increase in our investment yield expansion of 35 basis pointswas able to 2.19% for the first quarter of 2023. over this same period. This increased yield reflects thedrive an increase in interest ratesincome 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 earned2023 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, 2023March 31, 2022
Three Months EndedThree Months Ended
March 31, 2024March 31, 2024March 31, 2023
(Dollars in thousands)(Dollars in thousands)Average BalanceInterestYield/RateAverage BalanceInterestYield/Rate(Dollars in thousands)Average BalanceInterestYield/RateAverage BalanceInterestYield/Rate
AssetsAssets
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 - taxableInvestments - taxable1,237,351 6,377 2.06 %1,409,567 6,026 1.71 %Investments - taxable1,187,699 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 estateCommercial real estate1,646,005 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 PPPSBA PPP594 2.55 %21,687 1,033 19.05 %SBA PPP324 4.46 4.46 %594 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 estateResidential real estate1,715,192 16,200 3.78 %1,347,427 11,652 3.46 %Residential real estate1,773,077 19,557 19,557 4.41 4.41 %1,715,192 16,200 16,200 3.78 3.78 %
Consumer and home equityConsumer and home equity253,760 4,440 7.10 %226,731 2,382 4.26 %Consumer and home equity257,305 5,047 5,047 7.89 7.89 %253,760 4,440 4,440 7.10 7.10 %
Total loansTotal loans4,040,660 45,358 4.50 %3,473,280 32,058 3.70 %Total loans4,117,653 51,735 51,735 5.00 5.00 %4,040,660 45,358 45,358 4.50 4.50 %
Total interest-earning assetsTotal interest-earning assets5,409,531 52,954 3.92 %5,097,870 39,084 3.07 %Total interest-earning assets5,412,224 60,333 60,333 4.44 4.44 %5,409,531 52,954 52,954 3.92 3.92 %
Cash and due from banksCash and due from banks46,713 47,820 
Other assetsOther assets268,550 308,524 
Other assets
Other assets
Less: ACL
Less: ACL
Less: ACLLess: ACL(37,127)(33,111)
Total assetsTotal assets$5,687,667 $5,421,103 
Total assets
Total assets
Liabilities & Shareholders' Equity
Liabilities & Shareholders' Equity
Liabilities & Shareholders' EquityLiabilities & Shareholders' Equity
Deposits:Deposits:
Deposits:
Deposits:
Non-interest checking
Non-interest checking
Non-interest checkingNon-interest checking$1,076,469 $— — %$1,199,456 $— — %$933,321 $$— — — %$1,076,469 $$— — — %
Interest checkingInterest checking1,689,862 8,341 2.00 %1,414,704 664 0.19 %Interest checking1,490,185 9,381 9,381 2.53 2.53 %1,689,862 8,341 8,341 2.00 2.00 %
SavingsSavings734,804 137 0.08 %750,899 76 0.04 %Savings599,791 305 305 0.20 0.20 %734,804 137 137 0.08 0.08 %
Money marketMoney market699,080 3,785 2.20 %710,256 518 0.30 %Money market764,585 6,260 6,260 3.29 3.29 %699,080 3,785 3,785 2.20 2.20 %
Certificates of depositCertificates of deposit320,209 1,368 1.73 %304,720 338 0.45 %Certificates of deposit582,806 5,470 5,470 3.77 3.77 %320,209 1,368 1,368 1.73 1.73 %
Total depositsTotal deposits4,520,424 13,631 1.22 %4,380,035 1,596 0.15 %Total deposits4,370,688 21,416 21,416 1.97 1.97 %4,520,424 13,631 13,631 1.22 1.22 %
Borrowings:Borrowings:
Brokered depositsBrokered deposits220,559 2,201 4.05 %176,399 237 0.55 %
Brokered deposits
Brokered deposits133,385 1,762 5.31 %220,559 2,201 4.05 %
Customer repurchase agreementsCustomer repurchase agreements182,754 481 1.07 %208,147 129 0.25 %Customer repurchase agreements182,487 728 728 1.60 1.60 %182,754 481 481 1.07 1.07 %
Subordinated debentures44,331 528 4.83 %44,331 529 4.84 %
Junior subordinated debenturesJunior subordinated debentures44,331 534 4.85 %44,331 528 4.83 %
Other borrowingsOther borrowings175,223 1,604 3.71 %1,613 0.39 %Other borrowings401,683 4,470 4,470 4.40 4.40 %175,223 1,604 1,604 3.71 3.71 %
Total borrowingsTotal borrowings622,867 4,814 3.13 %430,490 897 0.85 %Total borrowings761,886 7,494 7,494 3.96 3.96 %622,867 4,814 4,814 3.13 3.13 %
Total funding liabilitiesTotal funding liabilities5,143,291 18,445 1.45 %4,810,525 2,493 0.21 %Total funding liabilities5,132,574 28,910 28,910 2.27 2.27 %5,143,291 18,445 18,445 1.45 1.45 %
Other liabilitiesOther liabilities81,725 85,140 
Shareholders' equityShareholders' equity462,651 525,438 
Shareholders' equity
Shareholders' equity
Total liabilities & shareholders' equity
Total liabilities & shareholders' equity
Total liabilities & shareholders' equityTotal 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 adjustmentLess: fully-taxable equivalent adjustment(229)(226)
Net interest incomeNet 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:
Increase (Decrease) Due to:
Increase (Decrease) Due to:
(In thousands)
(In thousands)
(In thousands)(In thousands)VolumeRateNet Increase (Decrease)
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 assetsInterest-bearing deposits in other banks and other interest-earning assets$(24)$244 $220 
Investments – taxableInvestments – taxable(736)1,087 351 
Investments – taxable
Investments – taxable
Investments – nontaxable
Investments – nontaxable
Investments – nontaxableInvestments – nontaxable(80)79 (1)
Commercial real estateCommercial real estate1,469 3,546 5,015 
Commercial real estate
Commercial real estate
CommercialCommercial397 1,922 2,319 
SBA PPP(1,005)(24)(1,029)
Commercial
Commercial
Municipal
Municipal
MunicipalMunicipal10 
Residential real estateResidential real estate3,080 1,847 4,927 
Residential real estate
Residential real estate
Consumer and home equity
Consumer and home equity
Consumer and home equityConsumer and home equity284 1,774 2,058 
Total interest income (fully-taxable equivalent)Total interest income (fully-taxable equivalent)3,392 10,478 13,870 
Total interest income (fully-taxable equivalent)
Total interest income (fully-taxable equivalent)
Interest-bearing liabilities:
Interest-bearing liabilities:
Interest-bearing liabilities:Interest-bearing liabilities:
Interest checkingInterest checking129 7,548 7,677 
Interest checking
Interest checking
Savings
Savings
SavingsSavings(2)63 61 
Money marketMoney market(8)3,275 3,267 
Money market
Money market
Certificates of deposit
Certificates of deposit
Certificates of depositCertificates of deposit17 1,013 1,030 
Brokered depositsBrokered deposits60 1,904 1,964 
Brokered deposits
Brokered deposits
Customer repurchase agreements
Customer repurchase agreements
Customer repurchase agreementsCustomer repurchase agreements(16)368 352 
Junior subordinated debenturesJunior subordinated debentures— (1)(1)
Junior subordinated debentures
Junior subordinated debentures
Other borrowings
Other borrowings
Other borrowingsOther borrowings191 1,411 1,602 
Total interest expenseTotal interest expense371 15,581 15,952 
Total interest expense
Total interest expense
Net interest income (fully-taxable equivalent)Net interest income (fully-taxable equivalent)$3,021 $(5,103)$(2,082)
Net interest income (fully-taxable equivalent)
Net interest income (fully-taxable equivalent)

Net interest income on a fully-taxable equivalent basis included the following for the periods indicated:
Income Statement LocationThree Months Ended
March 31,
(In thousands)20232022
Loan (cost) feesInterest income$(467)$1,081 
Net fair value mark accretion from purchase accountingInterest income and Interest expense34 81 
Recoveries on previously charged-off acquired loansInterest income26 145 
Total$(407)$1,307 

Income Statement Location
Three Months Ended
March 31,
(In thousands)20242023
Interest income from residential real estate derivativesInterest income$1,519 $479 
Loan fees (costs)Interest income326 (467)
Net fair value mark accretion from purchase accountingInterest income and Interest expense23 34 
Recoveries on previously charged-off acquired loansInterest income98 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)20232022$%
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 securities1,839 — 1,839 — %
Provision (credit) for credit losses$2,002 $(1,075)$3,077 (286)%
Three Months Ended
March 31,
Change
(Dollars in thousands)20242023$%
(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 needlosses: 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 provisionwas recorded for the first quarter of 20222024 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 inIn 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)20232022$%
(Dollars in thousands)
(Dollars in thousands)
Debit card incomeDebit card income$2,938 $2,924 $14 — %
Service charges on deposit accounts1,762 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 servicesIncome from fiduciary services1,600 1,631 (31)(2)%
Brokerage and insurance commissionsBrokerage and insurance commissions1,093 994 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 insuranceBank-owned life insurance592 576 16 %
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 incomeTotal non-interest income$9,866 $9,825 $41 — %
Non-interest income as a percentage of total revenuesNon-interest income as a percentage of total revenues22 %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 changeincrease in the housing marketoverdraft 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 increasea decrease in customer loan swap fees of $299,000.$238,000 between periods.
51



54


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)20232022$%
(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 processing3,211 3,132 79 %
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 costsNet occupancy costs2,079 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 feesConsulting and professional fees1,055 1,007 48 %
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 assetsAmortization of core deposit intangible assets148 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 expenseTotal non-interest expense$26,165 $26,209 $(44)— %
Ratio of non-interest expense to total revenuesRatio of non-interest expense to total revenues59.27 %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 decreaseincrease between periods was primarily driven by lowerhigher 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 coststiming 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

Cashdeposit 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. Wemanagement continually monitormonitors 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, 20232024 and December 31, 2022, the Company’s2023, 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 itsthe 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 8.88.5 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 increasedecrease 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, 20232024 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, 20232024 and at December 31, 2022.2023.

The book value of our debt securities as of both March 31, 20232024 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 Backed260,582 19 %
Municipal105,191 %
Corporate Bonds44,593 %
Other - Agency Backed53,026 %
Total$1,341,080 100 %
(Dollars in thousands)March 31, 2024
Percent of Total at
March 31, 2024
December 31, 2023Percent of Total at
December 31, 2023
MBS - Agency-backed$816,230 67 %$830,288 67 %
CMO - Agency-backed299,141 24 %306,505 25 %
Municipal61,759 %62,691 %
Corporate40,853 %40,790 %
Other - Agency-backed7,627 %7,593 %
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, 20232024 and December 31, 2022,2023, the duration of our debt investment securities portfolio, adjusting for calls when appropriate and consensus prepayment speeds, was 5.75.5 years and 5.85.7 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, 20232024 and December 31, 20222023 was as follows:

March 31, 2023December 31, 2022
March 31, 2024March 31, 2024December 31, 2023
(Dollars in thousands)(Dollars in thousands)Fair ValueBook ValueNet Unrealized (Loss) GainFair ValueBook ValueNet Unrealized Loss(Dollars in thousands)# of SecuritiesFair ValueBook ValueNet Unrealized (Loss) Gain# of SecuritiesFair ValueBook ValueNet Unrealized (Loss) Gain
Municipal bonds
Corporate bondsCorporate bonds$42,292 $44,593 $(2,301)$44,013 $46,350 $(2,337)
Municipal bonds106,023 105,191 832 104,024 105,656 (1,632)
TotalTotal$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 therating. The remaining $9.5 million23% of book value, or 21% of the corporate bond portfolio,bonds were non-rated corporate
56


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 largest32% 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, 20232024 and December 31, 202,2023, the Company did not carry an ACL on any of its corporate or municipal bonds.
53





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, 20232024 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 withinfollowing 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 %
Commercial real estate - owner-occupied300,626 301,860 (1,234)— %
Commercial397,395 403,901 (6,506)(2)%
Residential real estate1,762,482 1,763,378 (896)— %
Consumer and home equity258,211 258,509 (298)— %
Total loans$4,121,040 $4,098,094 $22,946 %
Commercial Loan Portfolio$2,100,347 $2,076,207 $24,140 %
Retail Loan Portfolio$2,020,693 $2,021,887 $(1,194)— %
Commercial Portfolio Mix51 %51 %
Retail Portfolio Mix49 %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, 20232024 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 %
Commercial real estate - owner-occupied337,824 332,494 5,330 %
Commercial421,099 430,131 (9,032)(2)%
Residential real estate1,733,147 1,700,266 32,881 %
Consumer and home equity252,245 255,019 (2,774)(1)%
Total loans$4,073,108 $4,010,353 $62,755 %
Commercial Loan Portfolio$2,087,716 $2,055,068 $32,648 %
Retail Loan Portfolio$1,985,392 $1,955,285 $30,107 %
Commercial Portfolio Mix51 %51 %
Retail Portfolio Mix49 %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.
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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
54




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 $207.2 million, or 5% of total loans and 20%concentrations of the commercial loan portfolio at the dates indicated:
March 31,December 31,
20242023Change
(Dollars in thousands)$% of Commercial Loan Portfolio$% of Commercial Loan Portfolio$%
Real estate investment(1)
$1,056,849 50 %$1,057,148 51 %$(299)— %
Lodging242,536 12 %229,017 11 %13,519 %
Retail trade118,395 %116,623 %1,772 %
Health care97,906 %95,801 %2,105 %
Manufacturing72,494 %74,089 %(1,595)(2)%
Construction71,753 %73,936 %(2,183)(3)%
Wholesale trade68,338 %67,512 %826 %
Finance and insurance64,511 %66,038 %(1,527)(2)%
Other (each < 3%)307,565 15 %296,043 14 %11,522 %
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 %
Commercial real estate - owner-occupied300,626 14 %301,860 15 %(1,234)— %
Commercial397,395 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 loansloan portfolio, by property type as of the dates indicated:
March 31,December 31,
20242023Change
(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 %%$274,181 26 %%$(1,429)(1)%
Office(b)
169,729 16 %%169,904 16 %%(175)— %
Multi-family (1-4 units)(c)
168,395 16 %%153,166 14 %%15,229 10 %
Industrial165,154 16 %%164,021 16 %%1,133 %
Retail163,691 15 %%167,865 16 %%(4,174)(2)%
Other(d)
117,128 11 %%128,011 12 %%(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, wererespectively.
(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 ofat March 31, 2024. and December 31, 2023, respectively.
(c) Represents multi-family (1-4 units) that are used for commercial purposes.
(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 spacereal estate investment portfolio and it had no office space loans that were non-performingindividually are 1% or 30-89 days past due.
less of the total loan portfolio.

55




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 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.

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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: 
58


(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-occupiedCommercial real estate - non-owner-occupied$10 $11 
Commercial real estate - owner-occupiedCommercial real estate - owner-occupied47 46 
CommercialCommercial748 715 
Residential real estateResidential real estate1,715 1,733 
Consumer and home equityConsumer and home equity438 486 
Total non-accrual loansTotal non-accrual loans2,958 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 aboveAccruing TDRs prior to ASU 2022-02 adoption not included above2,154 2,114 
Total non-performing loansTotal non-performing loans5,112 5,105 
Other real estate ownedOther real estate owned— — 
Total non-performing assetsTotal non-performing assets$5,112 $5,105 
Total loans, excluding loans held for saleTotal loans, excluding loans held for sale$4,073,108 $4,010,353 
Total assetsTotal assets$5,716,605 $5,671,850 
ACL on loansACL on loans$37,134 $36,922 
ACL on loans to non-accrual loansACL on loans to non-accrual loans1,255.38 %1,234.44 %ACL on loans to non-accrual loans629.43 %677.96 %
Non-accrual loans to total loansNon-accrual loans to total loans0.07 %0.07 %Non-accrual loans to total loans0.14 %0.13 %
Non-performing loans to total loansNon-performing loans to total loans0.13 %0.13 %Non-performing loans to total loans0.19 %0.18 %
Non-performing assets to total assetsNon-performing assets to total assets0.09 %0.09 %Non-performing assets to total assets0.13 %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-occupiedCommercial real estate - non-owner-occupied$34 $267 
Commercial real estate - owner-occupiedCommercial real estate - owner-occupied77 55 
CommercialCommercial1,030 801 
Residential real estateResidential real estate313 1,038 
Consumer and home equityConsumer and home equity684 391 
TotalTotal$2,138 $2,552 
Total loansTotal loans$4,073,108 $4,010,353 
Accruing loans 30-89 days past due to total loansAccruing loans 30-89 days past due to total loans0.05 %0.06 %Accruing loans 30-89 days past due to total loans0.05 %0.12 %





57




ACL. The following table sets forth information concerning the components of our ACL for the periods indicated:
59


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)20232022At or For The
Year Ended
December 31, 2022
ACL on loans at the beginning of the periodACL on loans at the beginning of the period$36,922 $33,256 $33,256 
Provision (credit) for loan losses439 (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 estateCommercial real estate(1)(2)(5)
CommercialCommercial213 189 663 
Commercial
Commercial
Residential real estateResidential real estate14 — 66 
Consumer and home equityConsumer and home equity63 40 
Total net charge-offs
ACL on loans at the end of the periodACL 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 loansACL on loans$37,134 $31,770 $36,922 
ACL on off-balance sheet credit exposuresACL on off-balance sheet credit exposures2,990 3,355 3,265 
ACL at end of the periodACL at end of the period$40,124 $35,125 $40,187 
Total loans, excluding loans held for saleTotal loans, excluding loans held for sale$4,073,108 $3,534,218 $4,010,353 
Average LoansAverage 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 loans0.04 %(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 loansACL on loans to total loans0.91 %0.90 %0.92 %ACL on loans to total loans0.86 %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$— $$(1)$1,646,005 — %
Commercial312 99 213 425,703 0.20 %
Residential real estate18 14 1,715,192 — %
Consumer and home equity253,760 — %
Total$334 $107 $227 $4,040,660 0.02 %
2022:
Commercial real estate$— $$(2)$1,489,304 — %
Commercial246 57 189 394,597 0.19 %
Residential real estate— — — 1,347,427 — %
Consumer and home equity66 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)$1,532,225 — %
Commercial1,042 379 663 422,304 0.16 %
Residential real estate66 — 66 1,511,985 — %
Consumer and home equity134 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$— $$(7)$1,682,599 — %
Commercial309 92 217 404,672 0.05 %
Residential real estate— (6)1,773,077 — %
Consumer and home equity36 82 (46)257,305 (0.02)%
Total$345 $187 $158 $4,117,653 0.02 %
2023:
Commercial real estate$— $$(1)$1,646,005 — %
Commercial312 99 213 425,703 0.05 %
Residential real estate18 14 1,715,192 — %
Consumer and home equity253,760 — %
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 — %
Commercial1,560 471 1,089 415,650 0.26 %
Residential real estate18 44 (26)1,748,076 — %
Consumer and home equity91 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, 20232024 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, 20232024 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 increaseACL 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.

59




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, 20232024 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, 20232024, 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.

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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 $184.2in checking account balances, which were lower by $89.2 million, or 4%, since December 31, 2022. The decrease indue to: (1) normal seasonality; (2) continued remix from low-cost deposits, during the first quarter of 2023 was driven primarily by one largesuch 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 $122.4totaling $72.0 million during the first quarter ofat December 31, 2023. The Company has the ability toFrom 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 depositsbased on funding needs and opportunities to optimize our funding costs. CD balances decreased $61.8$23.7 million, or 1%4%, duringin the first quarter of 2023.

Core2024, 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.

61


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, 20232024, 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, 20232024 and $754.9$669.5 million, or 16%15% of total deposits, as of December 31, 2022.2023.

The portionbalance 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, 20232024, 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% during2023. 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 $170.7by $50.0 million during the first quarteras part of 2023 to $189.4 millionan 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-termscheduled 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 increasedof $175.0 million, an increase of $50.0 million during the first quarter of 2023 to $100.0 million at Marchsince 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 ofthree months ended March 31, 2024, offset by regular quarterly cash dividends of $6.1 million, and an increasea 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, 202330, 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 Company2023. We did not repurchase any shares.shares of the Company's common stock during the first quarter of 2024.
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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
20232022
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 RatiosFinancial Ratios
Financial Ratios
Financial Ratios
Average equity to average assets
Average equity to average assets
Average equity to average assetsAverage equity to average assets8.13 %9.69 %8.51 %8.67 %8.13 %8.18 %
Common equity ratioCommon equity ratio8.13 %8.90 %7.96 %Common equity ratio8.66 %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 ratioDividend payout ratio48.28 %35.09 %38.76 %Dividend payout ratio46.15 %48.28 %56.38 %
Per Share DataPer Share Data
Book value per shareBook 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 shareDividends 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.

62


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
$17,259101,978 
Unpledged investment securities475,225412,146 
Unpledged municipal securities94,967 
Over collateralized securities pledging position150,68762,561 
FHLBB borrowing capacity446,478683,235 
Current Fed Discount Window availability43,50246,126 
Unsecured borrowing lines69,87294,872 
Total available primary liquidity$1,297,9901,400,918 
(1)     Excess Cashcash represents cash held at the FRB that is above the minimum reserve requirement. At March 31, 20232024, the minimum reserve requirement remains at zero.

Total available primary liquidity of $1.3$1.4 billion was 1.92.1 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.

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Deposits. Deposits continue to represent our primary source of funds. As of March 31, 20232024 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 changesat each date. The slight decrease in the portfoliosfirst quarter of 2024 was driven by the clientsdecrease 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.

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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$133,263545,998 
> 1 year226,84039,788 
Total$360,103585,786 

BrokeredThe decrease in retail deposits totaled $215.9was offset by the increase in brokered deposits of $52.0 million, or 51%, to $153.9 million at March 31, 2023, and2024. 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 schedulewere 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 includeliquidity. Our primary sources of borrowings and advances fromare 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 AdvancesCustomer Repurchase AgreementsSubordinated DebenturesTotal(In thousands)FHLBB AdvancesBTFPCustomer Repurchase AgreementsJunior Subordinated DebenturesTotal
1 year or less1 year or less$289,400 $196,918 $— $486,318 
> 1 year> 1 year— — 44,331 44,331 
TotalTotal$289,400 $196,918 $44,331 $530,649 

64


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 bookbook value of $1.7 billion wer$1.6 billion weree pledged as collateral to the FHLBB.
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The following table presents the contractual maturities of loans at the date indicated:
March 31, 2023
(Dollars in thousands)Due in 1 Year or LessDue after 1 Year Through 5 YearsDue After 5 Years Through 15 YearsDue in More than 15 YearsTotalPercent of Total Loans
Maturity Distribution(1):
      
Fixed Rate:    
Commercial real estate(2)
$17,884 $184,365 $597,129 $2,070 $801,448 20 %
Commercial8,192 95,643 88,544 436 192,815 %
Residential real estate251 10,106 168,556 1,174,591 1,353,504 33 %
Consumer and home equity2,677 11,633 22,592 165,353 202,255 %
Total fixed rate29,004 301,747 876,821 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 %
Commercial65,251 96,499 56,268 10,266 228,284 %
Residential real estate28 957 39,009 339,649 379,643 %
Consumer and home equity143 2,148 11,220 36,479 49,990 %
Total variable rate71,492 287,664 516,717 647,213 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 LessDue after 1 Year Through 5 YearsDue After 5 Years Through 15 YearsDue in More than 15 YearsTotalPercent of Total Loans
Maturity Distribution(1):
      
Fixed Rate:    
Commercial real estate(2)
$19,501 $255,973 $539,493 $2,576 $817,543 20 %
Commercial5,449 102,719 66,709 368 175,245 %
Residential real estate181 10,479 145,352 1,235,229 1,391,241 34 %
Consumer and home equity1,548 11,774 19,101 169,389 201,812 %
Total fixed rate26,679 380,945 770,655 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 %
Commercial62,040 113,466 38,034 8,610 222,150 %
Residential real estate20 928 38,837 331,456 371,241 %
Consumer and home equity140 2,297 13,918 40,044 56,399 %
Total adjustable/variable rate83,330 401,846 432,064 617,959 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 lessless.
(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, 20232024 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.

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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$90,747100,730 
> 1 year1,135,7451,041,195 
Total$1,226,4921,141,925 
(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 quarterthree 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 throughIn 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 AmountPayments Due per Period(In thousands)Total AmountPayments Due per Period
Contractual obligations and commitmentsContractual obligations and commitmentsCommitted<1 Year1 – 3 YearsContractual obligations and commitmentsCommitted1 Year or Less> 1 Year
Operating leasesOperating leases$3,659 $1,360 $2,299 
Finance leasesFinance leases945 312 633 
Other contractual obligationsOther contractual obligations6,390 6,390 — 
Other contractual obligations
Other contractual obligations
TotalTotal$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.

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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, 20232024 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 inon 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, 20232024 and 2022, respectively.2023. The Company's Board of Directors approves cash dividends on a quarterly basis after careful
65




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, 20232024 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, 20232024 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 andoperational; 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, 20222023 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
67


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.
66





As of March 31, 20232024 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 — BaseRate Change from Year 1 — BaseMarch 31,
2023
March 31,
2022
Rate Change from Year 1 — BaseMarch 31,
2024
March 31,
2023
Year 1Year 1  Year 1 
+200 basis points+200 basis points(2.24)%(0.79)%+200 basis points(1.9)%(2.2)%
-100 basis pointsN/A(0.24)%
-200 basis points-200 basis points1.87 %N/A-200 basis points3.5 %1.9 %
Year 2Year 2
Year 2
Year 2
+200 basis points+200 basis points13.52 %6.04 %
-100 basis pointsN/A(1.91)%
+200 basis points
+200 basis points6.1 %13.5 %
-200 basis points-200 basis points10.96 %N/A-200 basis points20.0 %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 whilemore 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.

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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, 20232024 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.

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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.

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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.
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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
(c) None.The Company's did not repurchase any of its stock during the three months ended March, 31, 2024:
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.

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ITEM 6.  EXHIBITS
Exhibit No.Definition
10.1†*
10.2
10.3†*
10.4
10.5
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, 20232024 and December 31, 2022;2023; (ii) Consolidated Statements of Income - Three Months Ended March 31, 20232024 and 2022;2023; (iii) Consolidated Statements of Comprehensive (Loss) Income - Three Months Ended March 31, 20232024 and 2022;2023; (iv) Consolidated Statements of Changes in Shareholders’ Equity - Three Months Ended March 31, 20232024 and 2022;2023; (v) Consolidated Statements of Cash Flows - Three Months Ended March 31, 20232024 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.
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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. DufourSimon R. Griffiths May 9, 20238, 2024
Gregory A. DufourSimon R. Griffiths Date
President and Chief Executive Officer
(Principal Executive Officer)
  
   
/s/ Michael R. Archer May 9, 20238, 2024
Michael R. Archer Date
Chief Financial Officer and Principal Financial & Accounting Officer  
  
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