Camden National Corp: Form 10-K for the period ended Dec 31, 2024

Overview. Camden National Corporation (hereafter referred to as “we,” “our,” “us,” or the “Company”) is a publicly-held bank holding company, with $5.8 billion in assets at December 31, 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 registered with NASDAQ Global Market (“NASDAQ”) under the ticker symbol “CAC.”

Our consolidated financial statements accompanying this Form 10-K include the accounts of the Company, the Bank and the Bank’s subsidiaries and divisions. All inter-company accounts and transactions have been eliminated in consolidation.

On January 2, 2025, we completed our acquisition of Northway Financial, Inc. (“Northway”) and its bank subsidiary, Northway Bank. The acquisition of Northway added $971.9 million of deposits and $1.2 billion total assets to our balance sheet, as of January 2, 2025. The acquisition also expanded our presence in New Hampshire by adding 17 branches to our network as of January 2, 2025. Refer to Item 7. “Management’s Discussion and Analysis of Financial Condition and Results of Operations-Introductory Note” and Note 23 of the consolidated financial statements for additional details regarding the Northway acquisition.

Who We Are. We are an award-winning, relationship-driven community bank that supports individuals, families, and businesses at every stage of their financial journey. With offices across Northern New England, we offer competitive financial products and services, complemented by the latest in digital banking to empower our customers to bank the way they want. We deliver expert guidance and personalized financial solutions to help our customers navigate any environment and achieve their financial goals. Founded in 1875, we are passionate about making a difference in the lives of our customers and communities we serve, so that together we can thrive in a vibrant, prosperous community for all.

As a dedicated community bank, we actively give back and make a difference in the communities and neighborhoods where we live, work, and play. We are dedicated to strengthening our communities through direct financing, donations and employee volunteerism. Community is at the core of what we do and why we do it, and as we grow, our commitment to doing so responsibly in a socially-minded way and giving-back to our communities remains at the heart of who we are.

Our Commitment to Community and Responsible Corporate Governance. Our commitment to our communities and corporate governance is an integral part of our company culture. Our culture and values support our strategic goal to generate consistent, sustainable long-term value for all of our constituents.

What We Do. The Company, as a diversified financial services provider, pursues the objective of achieving long-term sustainable and profitable growth, while mitigating risks inherent in the financial services industry. 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. For the years ended December 31, 2024, 2023 and 2022, net interest income was our primary revenue source, representing 75%, 81%, and 78%, of our total revenues,1 respectively. Net interest income is the interest earned on our lending activities, investment securities and other interest-earning assets, less the interest paid on interest-bearing deposits and borrowings (i.e. our primary business activities).

We have achieved a five-year compounded annual asset growth rate of 6%, resulting in $5.8 billion in total assets at December 31, 2024. Asset growth over the past five years of $1.5 billion has been organic, including further growth and expansion into Southern Maine, and select markets in New Hampshire and Massachusetts. We continue to focus on driving profitable organic growth through growing customer relationships and deepening our market penetration across our existing markets, as well as pursuing acquisitions that support our strategy and fit our culture and core values, such as the acquisition of Northway, which was completed in early 2025 and greatly expanded our New Hampshire footprint.

The financial services industry continues to experience consolidations through mergers that could create opportunities for us to promote our value proposition to other financial institutions and financial service companies. We continue to evaluate the possibility of expansion into new markets through both de novo expansion and acquisitions. Regardless of merger and acquisition opportunities that may be present, we are always focused on maximizing growth within our current markets, and

1 Revenue is the sum of net interest income and non-interest income.

particularly those that we see as growth markets. We consider our growth markets to be those that that have accelerated growth opportunities in comparison to our other markets, based on current and forecasted demographic information, and where we currently have less of a presence and market share. Further details of our financial information can be found within the consolidated financial statements in Item 8. Financial Statements and Supplementary Data of this report.

Camden National Bank. The Bank is a national banking association chartered under the laws of the United States and headquartered in Camden, Maine. Originally founded in 1875, the Bank became a direct, wholly-owned subsidiary of the Company as a result of a corporate reorganization in 1984. The Bank provides a broad array of banking and other financial services to consumer, institutional, municipal, non-profit, and commercial customers. As of December 31, 2024, the Bank had 56 branches in 13 of Maine's 16 counties, and two locations in New Hampshire, including a branch in Portsmouth and a commercial loan production office in Manchester. Upon completing the Northway acquisition on January 2, 2025, the Bank added 17 branches in New Hampshire and now has a physical presence in seven of New Hampshire’s ten counties. The Bank optimizes its in-person professional financial guidance with state-of-the-art technology, delivered through sophisticated digital channels. These digital products empower customers to bank anywhere at any time, including, but not limited to, online and mobile banking; MortgageTouch™, our easy-to-use online platform for consumer borrowers; BusinessTouch™, our online loan application system with instant approval, making borrowing faster and easier for small businesses; and TreasuryLink™, our secure online platform designed to offer advanced cash management, monitoring capabilities and controls for commercial customers.

The Bank offers comprehensive wealth management and trust services, including investment advisory services, through our wealth management team, doing business as Camden National Wealth Management, and brokerage, investment advisory, insurance, and financial planning services through our financial consulting team, doing business as Camden Financial Consultants.

• Camden National Wealth Management provides a broad range of fiduciary and asset management services to both individual and institutional clients. The wealth management services provided by Camden National Wealth Management complement the services provided by the Bank, offering high net worth individuals and families, businesses and not-for profit customers investment management, financial planning and trustee services.
• Camden Financial Consultants is in the business of helping clients work toward their financial goals. Camden Financial Consultants provides full-service brokerage and insurance and its financial offerings include college, retirement, and estate planning, mutual funds, strategic asset management accounts, and variable and fixed annuities.

Securities and advisory services are offered through LPL Financial (“LPL”), a registered investment advisor and broker-dealer (member FINRA/SIPC). Insurance products are offered through LPL or its licensed affiliates. Camden Financial Consultants and the Bank are not registered as a broker-dealer or investment advisor and are not affiliated with LPL Financial. Registered representatives of LPL offer products and services using Camden Financial Consultants, and may also be employees of the Bank. These products and services are being offered through LPL or its affiliates, which are separate entities from, and not affiliates of, Camden Financial Consultants or the Bank. Securities and insurance offered through LPL or its affiliates are not insured by the Federal Deposit Insurance Corporation (“FDIC”) or any other government agency, are not bank deposits or obligations and may lose value.

Customers may also access our products and services using other channels, including online at www.CamdenNational.bank (http://www.CamdenNational.bank) or by downloading our mobile phone application (or “app”).

Competition. We compete throughout Maine, New Hampshire, and select areas of Massachusetts. Many of the markets in which we compete are characterized as rural areas. Major competitors in our primary market areas include local independent banks, as well as local branches of large regional and national banking organizations and brokerage houses, marketplace lenders and other financial technology companies (“fintechs”), financial advisors, thrift institutions and credit unions. Other competitors for deposits and loans within our primary market area include insurance companies, money market funds, consumer finance companies and financing affiliates of consumer durable goods manufacturers.

We have competed effectively with other financial institutions by emphasizing customer service, which is 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. Through Camden National Wealth Management and Camden Financial Consultants, we compete for trust, trust-related, investment management, individual retirement, foundation and endowment management services and brokerage services with local banks and non-banks, as well as with a number of brokerage firms and investment advisors with offices in our market area. In addition, most of these services are widely available to our customers by telephone, online and mobile channels through firms located outside our market area.

Investor Relations. The Company’s Investor Relations information can be obtained through our internet address, www.CamdenNational.bank or www.CamdenNationalCorporation.com (http://www.CamdenNationalCorporation.com). The Company makes available on or through its Investor Relations page, without charge, its annual reports on Form 10-K, quarterly reports on Form 10-Q, and current reports on Form 8-K and amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended, as soon as reasonably practicable after such reports are electronically filed with, or furnished to, the SEC. The Company’s reports filed with, or furnished to, the SEC are also available at the SEC’s website at www.sec.gov (http://www.sec.gov). In addition, the Company makes available, free of charge, its press releases and Code of Business Conduct and Ethics through the Company’s Investor Relations page. Information on our website is not incorporated by reference into this document and should not be considered part of this report.

Human Capital

We recognize the importance of our relationships with our employees, customers, and the communities we serve. Our employees—known as “Stakeholders” at Camden National Bank—are the key to our success. We are powered by an extraordinary team of 586 employees, as of December 31, 2024, who work together to provide expert banking solutions to help people achieve their financial potential.

We believe we have the experience and responsibility to engage proactively with, and support, a broad range of employees. We strive to ensure our employees’ work experience permits them to use their skills and passions to make a difference while growing their careers and being recognized and appreciated for their unique talents, backgrounds, and perspectives.

Employee Development and Retention. To attract, engage, and retain top talent, we strive to create a supportive workplace, with opportunities for our employees to grow and develop in their careers. We provide numerous training and development opportunities, a robust tuition reimbursement program, and competitive compensation, including a minimum starting wage of $17 per hour for all employees.

Workplace Safety and Inclusion. We recognize that an inclusive workforce is essential to achieving and maintaining a thriving company. Through our commitment to fostering a fair, safe, and welcoming workplace environment for all, we aim to maintain a culture that enables our employees to be their best in serving our customers and communities, while achieving business success. We maintain a number of human resources and other policies, including an anti-harassment and anti-retaliation policy, to promote a workplace that is safe for all and that supports a culture where people feel they can report incidents that threaten that safety. In addition, we have a confidential whistleblower program that forwards complaints to the audit committee and the Board of Directors, and we work to take necessary action as quickly as possible after a complaint is received.

Health and Wellness. We are also deeply committed to the health and well-being of our employees. This commitment is reflected in the benefits we offer our employees, including: market-competitive compensation; healthcare; paid time off, including parental/family leave; retirement benefits; short-term and long-term disability; an employee hardship fund, which provides employees dealing with a financial hardship access to funds that the employee is not required to repay; an emotional well-being support program and a wellness reimbursement program.

Information about our Executive Officers

The following table sets forth certain information regarding the executive officers of the Company, as defined by Rule 3b-7 of the Securities and Exchange Act of 1934, as amended.

Simon R. Griffiths joined the Company in November 2023 as Executive Vice President (“EVP”) and Chief Operating Officer until he became President and Chief Executive Officer (“CEO”), and a member of the board of directors of the Company and the Bank on January 1, 2024. Prior to joining the Company, Mr. Griffiths most recently served as EVP - Head of Core Banking at Citizens Bank, managing the retail, business banking, contact center, deposit and core banking delivery channels. Mr. Griffiths joined Citizens Bank in 2015 from Santander Bank, where he served as EVP, Managing Director of the retail network. Mr. Griffiths started his banking career at Washington Mutual Bank in 2002.

Michael R. Archer joined the Company in 2013 and became EVP, Chief Financial Officer (“CFO”) of the Company on January 3, 2022. Prior to becoming EVP, CFO, Mr. Archer served as the Company’s Senior Vice President (“SVP”) and Corporate Controller from June 2016 until January 2022. Prior to joining the Company, Mr. Archer spent seven years at PricewaterhouseCoopers, LLP. Mr. Archer is a licensed Certified Public Accountant, and a graduate of the American Bankers Association (“ABA”) Stonier Graduate School of Banking where he also completed the Wharton Leadership Program. Mr. Archer currently serves as a member of local non-profit organizations, including as the Treasurer and Executive Committee member of the board of JMG, Inc., board member for the local little league, and as a committee member for the local town recreational department.

David J. Ackley joined the Company in 2011 and became EVP, Chief Risk Officer in July 2023. Prior to becoming EVP, Chief Risk Officer, Mr. Ackley served as SVP and Director of Information Security & Enterprise Risk Management for the Company from 2016 through July 2023 and prior to that served as Vice President and Senior Information Security Officer of the Company. Mr. Ackley began his career as a Communication Computer Systems Operator for the United States Air Force, specializing in information technology, cybersecurity, risk mitigation, and encrypted communications before spending 14 years as Science and Technology Corporation’s Manager of Information Technology. He achieved the ABA Certified Enterprise Risk Professional designation and currently serves on the ABA’s Risk and Compliance Conference Planning Committee.

Andrew R. Forbes joined the Company in March 2024 as EVP, Chief Human Resources Officer and has 25 years of Human Resources experience across multiple industries, which have provided him with expertise in talent acquisition and management, compensation and benefits, and culture and engagement. He served as Chief People Officer for Alcom LLC from 2022 until joining the Company. Prior to that he served as Vice President, Human Resources for Rimini Street from 2020 to 2022, as Vice President, Human Resources for Maine Medical Center from 2016 to 2020 and as Senior Director, Global Human Resources for Fairchild Semiconductor from 2010 to 2016. Mr. Forbes is a Society for Human Resource Management - Senior Certified Professional, and holds a master’s degree in industrial and organizational psychology from Hofstra University. Mr. Forbes currently serves on the Board of Directors of the Maine Mathematics and Science Alliance.

William H. Martel joined the Company in March 2020 as EVP, Technology and Support Services and currently holds the title of EVP, Chief Technology Officer. Prior to joining the Company Mr. Martel served as Head of U.S. Operations Technology for Santander U.S. in Boston, leading the Operations and Information Technology Service Management transformations for the US. Previously, Mr. Martel was a Senior Vice President at TD Bank and served in several senior management positions in the US and Canada. Mr. Martel began his banking career as a senior branch manager for People’s Heritage Bank, a predecessor to BankNorth Group. He is a founding member, past president and the current Treasurer of Amagara Marungi, a Maine-based non-profit.

Garrett A. McKnight joined the Company in April 2024 as the Managing Director of Camden National Wealth Management. Prior to joining the Company, Mr. McKnight served as Senior Vice President and Senior Managing Director of The Northern Trust Company, where he spent 15 years, and worked in U.S. Bank’s Private Client Group as a Private Banker and Managing Director for seven years. Mr. McKnight serves on the Investment Committee for Elon University’s Endowment and the Board of Directors at Cape Arundel Golf Club.

Barbara Raths joined the Company in 2019 and became EVP, Commercial Banking in March 2024. Prior to becoming EVP, Ms. Raths served as the Company’s Senior Vice President and Director of Treasury Management and Government Banking, leading business, nonprofit, and government treasury management business development efforts. Prior to joining the Company, Ms. Raths held government banking roles at People’s United Bank, worked in corporate treasury finance at Wex, Inc., and served as the Deputy State Treasurer for the State of Maine. Ms. Raths currently chairs the Board of Trustees for the Maine Health and Higher Education Facilities Authority, serves as Secretary of the Board of Directors for the Maine International Trade Center, and is a member of the Maine District Export Council. Ms. Raths is a graduate of the ABA Stonier Graduate School of Banking and received a leadership certificate from The Wharton School.

Patricia A. Rose joined the Company in September 2017 as EVP, Retail and Mortgage Banking. Ms. Rose came to the Company from Citizens Bank where she served for two years as Head of Strategic Onboarding & Orientation, and, prior to that, Director level roles in Retail Network Sales and Strategy at Santander Bank for six years. Ms. Rose began her career in banking at Fleet Bank and Sovereign Bank where she held a variety of leadership roles and served as Market President of Retail Banking in Eastern Massachusetts and New Hampshire.

Ryan A. Smith joined the Company in 2012 and held the title of EVP, Commercial Banking for the Company from 2020 through 2023 before being named as EVP, Chief Credit Officer in December 2023. Prior to becoming an EVP, Mr. Smith led the Southern Maine commercial banking line of business and the treasury management line of business from 2012 through 2015, when he then became Director of Commercial Banking for Central and Midcoast Maine from 2015 through 2019. In 2019, he was promoted to SVP, Director of Credit Administration. Prior to his time at Camden National Bank, Mr. Smith spent ten years with People’s United Bank (and its predecessor Maine Bank & Trust) in commercial banking and credit roles, beginning his career with Ford Motor Credit.

Renée D. Smyth joined the Company as SVP, Chief Marketing Officer upon completion of the merger of Camden National Corporation and SBM Financial, Inc., the parent company of The Bank of Maine, on October 16, 2015. She was promoted to EVP, Chief Experience and Marketing Officer in May 2017. Ms. Smyth served as SVP, Head of Marketing for The Bank of Maine, from 2010 through October 15, 2015. Prior to joining the Company, Ms. Smyth was SVP and Director of Affinity Programs for Override, an international loyalty marketing service company. She is a member of Junior Achievement of Maine’s Board of Directors and serves on its Finance Committee and is a strategic advisor to Finding Our Voices.

All of the executive officers hold office at the discretion of the Company’s Board of Directors. There are no arrangements or understandings between any of the directors, officers or any other persons pursuant to which any of the officers have been selected as officers. There are no “family relationships” among the directors and executive officers, as the Securities and Exchange Commission defines that term.

Supervision and Regulation

The following discussion addresses elements of the regulatory framework applicable to bank holding companies and their subsidiaries. This regulatory framework is intended primarily for the protection of depositors, the Federal Deposit Insurance Fund (“DIF”), and the banking system as a whole, rather than the protection of shareholders or non-depository creditors of a bank holding company such as the Company.

As a bank holding company, the Company is subject to regulation, supervision and examination by the Board of Governors of the Federal Reserve System (“FRB”) under the Bank Holding Company Act of 1956, as amended (“BHCA”). As a national bank, the Bank is subject to primary regulation, supervision and examination by the Office of the Comptroller of the Currency (“OCC”).

The following is a summary of certain aspects of various statutes and regulations applicable to the Company and its direct and indirect subsidiaries. This summary is not a comprehensive analysis of all applicable laws, and you should refer to the applicable statutes and regulations for more information. Changes in applicable laws or regulations, and in their interpretation and application by regulatory agencies and other governmental authorities, cannot be predicted, but may have a material effect on our business, financial condition or results of operations.

Regulation of the Company

As a bank holding company, the Company is subject to regulation, supervision and examination by the FRB, which has the authority, among other things, to order bank holding companies to cease and desist from unsafe or unsound banking practices; to assess civil money penalties; and to order termination of non-banking activities or termination of ownership and control of a non-banking subsidiary by a bank holding company.

Source of Strength. Under the Dodd-Frank Wall Street Reform and Consumer Protection Act (“Dodd-Frank Act”), the Company is required to serve as a source of financial strength for the Bank. This support may be required at times when the Company may not have the resources to provide it. In the event of a bank holding company’s bankruptcy, any commitment by the bank holding company to a federal bank regulatory agency to maintain the capital of a bank subsidiary will be assumed by the bankruptcy trustee and entitled to a priority of payment.

Acquisitions and Activities. The BHCA prohibits a bank holding company, without prior approval of the FRB, from acquiring all or substantially all the assets of a bank, acquiring control of a bank, merging or consolidating with another bank holding company, or acquiring direct or indirect ownership or control of any voting shares of another bank or bank holding company if, after such acquisition, the acquiring bank holding company would control more than 5% of any class of the voting shares of such other bank or bank holding company. The BHCA also prohibits a bank holding company from engaging directly or indirectly in activities other than those of banking, managing or controlling banks or furnishing services to its subsidiary banks. However, a bank holding company may engage in and may own shares of companies engaged in activities that the FRB has determined, by order or regulation, to be so closely related to banking as to be a proper incident thereto.

Limitations on Acquisitions of Company Common Stock. The Change in Bank Control Act prohibits a person or group of persons acting in concert from acquiring “control” of a bank holding company unless the FRB has been notified and has not objected to the transaction. Under a rebuttable presumption established by the FRB, the acquisition of 10% or more of a class of voting securities of a bank holding company with a class of securities registered under Section 12 of the Exchange Act would generally constitute the acquisition of control of a bank holding company. In addition, the BHCA prohibits any company from acquiring control of a bank or bank holding company without first having obtained the approval of the FRB. Under the BHCA, a company is deemed to control a bank or bank holding company if the company owns, controls or holds with power to vote 25% or more of a class of voting securities of the bank or bank holding company, controls in any manner the election of a majority of directors or trustees of the bank or bank holding company, or the FRB determines that the company has the power to exercise a controlling influence over the management or policies of the bank or bank holding company.

Regulation of the Bank

The Bank is subject to regulation, supervision, and examination by the OCC. Additionally, the Federal Deposit Insurance Corporation (“FDIC”) has secondary supervisory authority as the insurer of the Bank’s deposits. The Bank is also subject to regulations issued by the Consumer Financial Protection Bureau (“CFPB”), as enforced by the OCC. The FRB may directly examine the subsidiaries of the Company, including the Bank. The enforcement powers available to the federal banking regulators include, among other things, the ability to issue cease and desist or removal orders; to terminate insurance of deposits; to assess civil money penalties; to issue directives to increase capital; to place the Bank into receivership; and to initiate injunctive actions against banking organizations and institution-affiliated parties.

Deposit Insurance. The deposit obligations of the Bank are insured by the FDIC’s DIF up to the applicable limits. Under the Federal Deposit Insurance Act (“FDIA”), insurance of deposits may be terminated by the FDIC if the FDIC finds that the insured depository institution has engaged in unsafe and unsound practices, is in an unsafe or unsound condition to continue operations or has violated any applicable law, regulation, rule, order or condition imposed by the FDIC.

The Bank’s deposits are subject to deposit insurance assessments to maintain the DIF. The Bank’s deposit insurance assessments are based on its assets. To determine its deposit insurance assessment, the Bank computes the base amount of its average consolidated assets less its average tangible equity (defined as the amount of Tier I capital) and the applicable assessment rate. The rule for calculating assessment rates for established small banks, including the Bank, utilizes the CAMELS rating system, which is a supervisory rating system designed to take into account and reflect all financial and operational risks that a bank may face, including capital adequacy, asset quality, management capability, earnings, liquidity and sensitivity to market risk. Each of the seven financial ratios and a weighted average of CAMELS component ratings is multiplied by a corresponding pricing multiplier. The sum of these products is added to a uniform amount, with the resulting sum being an institution’s initial base assessment rate (subject to minimum or maximum assessment rates based on a bank’s CAMELS composite rating). This method takes into account various measures, including an institution’s leverage ratio, brokered deposit ratio, one year asset growth, the ratio of net income before taxes to total assets and considerations related to asset quality.

In October 2022, the FDIC finalized a rule to increase the initial base deposit insurance assessment rate schedules for all insured depository institutions by 2 basis points, beginning with the first quarterly assessment period of 2023. The increased assessment rate is intended to improve the likelihood that the DIF reserve ratio would reach the required minimum of 1.35 percent by the statutory deadline of September 30, 2028. Under the FDIC’s final rule, assessments for established small banks range from 2.5 to 32 basis points, after adjustments. The FDIC has the power to make further adjustments to deposit insurance assessment rates at any time, and the Company is not able to predict the amount or timing of any such adjustment.

Activities and Investments of National Banking Associations. National banking associations must comply with the National Bank Act and the regulations promulgated thereunder by the OCC, which limit the activities of national banking associations to those that are deemed to be part of, or incidental to, the “business of banking.” Activities that are part of, or incidental to, the business of banking include taking deposits, borrowing and lending money and discounting or negotiating promissory notes, drafts, bills of exchange, and other evidences of debt. Subsidiaries of national banking associations generally may only engage in activities permissible for the parent national bank.

Lending Restrictions. Federal law limits a bank’s authority to extend credit to its insiders, including its directors, executive officers and 10% shareholders, as well as to entities controlled by such persons. Among other things, extensions of credit to insiders are required to be made on terms that are substantially the same as, and follow credit underwriting procedures that are not less stringent than, those prevailing for comparable transactions with unaffiliated persons. Also, the terms of such extensions of credit may not involve more than the normal risk of repayment or present other unfavorable features and may not exceed certain limitations on the amount of credit extended to such persons, individually and in the aggregate, which limits are based, in part, on the amount of the bank’s capital. An extension of credit to an insider includes credit exposure arising from a derivatives transaction, repurchase agreement, reverse repurchase agreement, securities lending transaction or securities borrowing transaction. Additionally, asset sale transactions with insiders must be on market terms, and if the transaction represents more than 10% of the capital and surplus of the Bank, the transactions must be approved by a majority of the disinterested directors of the Bank.

Brokered Deposits. Section 29 of the FDIA and FDIC regulations generally limit the ability of an insured depository institution to accept, renew or roll over any brokered deposit unless the institution’s capital category is “well capitalized” under the prompt corrective action framework described below or, with a waiver from the FDIC, “adequately capitalized.” A bank that is “adequately capitalized” and that accepts or renews brokered deposits subject to a waiver from the FDIC is subject to additional restrictions on the interest rates it may offer. Depository institutions that have brokered deposits in excess of 10% of total assets will be subject to increased FDIC deposit insurance premium assessments. Under FDIC regulations, an institution that is “well capitalized” and has a CAMELS composite rating of 1 or 2 is permitted to exempt reciprocal deposits from treatment as brokered deposits up to the lesser of $5 billion or 20% of the institution’s total liabilities. Institutions that are not well rated or “well capitalized” may treat reciprocal deposits as non-brokered up to an amount equal to a “special cap” set forth in the regulations.

Community Reinvestment Act (“CRA”). The CRA requires the OCC to evaluate the Bank’s performance in helping to meet the credit needs of the entire communities it serves, including low and moderate-income neighborhoods, consistent with its safe and sound banking operations, and to take this record into consideration when evaluating certain applications. The OCC rates a national bank’s compliance with the CRA as “Outstanding,” “Satisfactory,” “Needs to Improve” or “Substantial Noncompliance.” Failure of the Bank to receive at least a “Satisfactory” rating could inhibit the Bank or the Company from undertaking certain activities, including acquisitions of other financial institutions. The Bank currently has an “Outstanding” CRA rating resulting from its most recent CRA performance evaluation in 2021.

In October 2023, the OCC, together with the FRB and FDIC, issued a joint final rule to modernize the CRA regulatory framework. The final rule is intended, among other things, to adapt to changes in the banking industry, including the expanded role of mobile and online banking, and to tailor performance standards to account for differences in bank size and business models. The final rule introduces new tests under which the performance of banks with over $2 billion in assets, including the Bank, will be assessed. The new rule also includes data collection and reporting requirements, some of which would not apply to the Bank, because they are applicable only to banks with over $10 billion in assets. The final rule became effective on April

1, 2024, but has been paused subject to a court ordered injunction and most provisions of the final rule will not become applicable until after January 1, 2026, pending the outcome of litigation on the final rule.

Capital Adequacy and Safety and Soundness

Regulatory Capital Requirements. The Company and the Bank are subject to risk-based capital requirements and rules issued by the FRB, the OCC and the FDIC (the “Capital Rules”) that are based on the Basel Committee on Banking Supervision’s (“Basel Committee”) framework for strengthening capital and liquidity regulation (referred to as Basel III). The Capital Rules are intended to reflect the relationship between the banking organization’s capital and the degree of risk associated with its operations based on transactions recorded on-balance sheet as well as off-balance sheet items. The FRB and the OCC may from time to time require that a banking organization maintain capital above the minimum levels discussed below, due to the banking organization’s financial condition or actual or anticipated growth. Under the Capital Rules, the Company and the Bank apply the Standardized Approach in measuring their risk-weighted assets (“RWA”) and regulatory capital.

The Capital Rules define qualifying capital instruments and specify minimum amounts of capital as a percentage of assets that banking organizations are required to maintain.

Under the Capital Rules, risk-based capital ratios are calculated by dividing Common Equity Tier 1 (“CET1”) capital, Tier 1 capital and total risk-based capital, respectively, by RWA. Assets and off-balance sheet credit equivalents are assigned a risk weight based primarily on supervisory assessments of relative credit risk.

Under the Capital Rules, the Company and the Bank are each required to maintain a minimum CET1 capital to RWA ratio of 4.5%, a minimum Tier 1 capital to RWA ratio of 6%, a minimum total capital to RWA ratio of 8% and a minimum leverage ratio of 4%. Additionally, the Capital Rules require a capital conservation buffer, consisting solely of CET1 capital in an amount above the minimum risk-based capital requirements for “adequately capitalized” institutions equal to 2.5% of total RWA, resulting in a requirement for the Company and the Bank effectively to maintain CET1, Tier 1 and total capital ratios of 7%, 8.5% and 10.5%, respectively. Banking institutions with a ratio of CET1 capital to RWA above the minimum requirement but below the capital conservation buffer face 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” (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 Capital Rules provide for a number of deductions from and adjustments to CET1 capital. As a “non-advanced approaches” firm under the Capital Rules, the Company is subject to rules that provide for simplified capital requirements relating to the threshold deductions for mortgage servicing assets, deferred tax assets arising from temporary differences that a banking organization could not realize through net operating loss carry backs, and investments in the capital of unconsolidated financial institutions, as well as the inclusion of minority interests in regulatory capital.

The Company and the Bank, as non-advanced approaches banking organizations, made a one-time, permanent election under the Capital Rules to exclude the effects of certain components of accumulated other comprehensive income (“AOCI”) included in shareholders’ equity under U.S. GAAP in determining regulatory capital ratios.

The federal bank regulators have adopted regulations as required by the Economic Growth, Regulatory Relief, and Consumer Protection Act (“EGRRCPA”) to implement an exemption from the Capital Rules for smaller banking organizations, including the Company and the Bank, that maintain a “Community Bank Leverage Ratio” of at least 8% to 10%. Under these regulations, a “qualifying small banking organization” can choose to apply the Community Bank Leverage Ratio framework if its Community Bank Leverage Ratio (i.e., the ratio of its Tier 1 capital to average total consolidated assets minus certain deductions from total assets), is greater than the required threshold of 9%. A “qualifying small banking organization” that maintains tangible equity in excess of the applicable Community Bank Leverage Ratio would be deemed to be in compliance with (i) the leverage and risk-based capital requirements promulgated by the federal banking agencies; (ii) in the case of a depository institution, the capital ratio requirements to be considered “well-capitalized” under the federal banking agencies’ “prompt corrective action” regime (see “—Prompt Corrective Action” below); and (iii) “any other capital or leverage requirements” to which the organization is subject, unless the appropriate federal banking agency determines otherwise based on the particular organization’s risk profile. The Company has evaluated the potential impact of this rule and has elected not to apply the Community Bank Leverage Ratio framework to its operations, and instead measures its capital adequacy under the Capital Rules as described above. Under these regulations, as long as the Company and the Bank continue to meet the requirements to be qualifying small banking organizations (i.e., they have less than $10 billion in total consolidated assets and meet certain risk-based criteria), they are permitted to opt into (or out of) the Community Bank Leverage Ratio framework at any time and for any reason. The Company will continue to evaluate the impact of the Community Bank Leverage Ratio and may opt into that framework in the future. The Company cannot guarantee, however, that it or the Bank will continue to meet the conditions to be eligible to apply the Community Bank Leverage Ratio, nor can the Company predict at this time whether it or the Bank will choose to apply the Community Bank Leverage Ratio in the future.

In December 2017, the Basel Committee published standards that it described as the finalization of the Basel III post-crisis regulatory reforms. Among other things, these standards revise the Basel Committee's standardized approach for credit risk (including by recalibrating risk weights and introducing new capital requirements for certain “unconditionally cancellable commitments,” such as home equity lines of credit) and provides a new standardized approach for operational risk capital. Under the current U.S. capital rules, operational risk capital requirements and a capital floor apply only to advanced approaches institutions, and not to the Company or Bank. In July 2023, the federal banking regulators proposed revisions to the Basel III Capital Rules to implement the Basel Committee’s 2017 standards and make other changes to the Basel III Capital Rules. The revised capital requirements of the proposed rule would not apply to the Company or Bank because they have less than $100 billion in total consolidated assets and trading assets and liabilities below the threshold for market risk requirements.

Prompt Corrective Action. The FDIA requires the federal banking agencies to take prompt corrective action with respect to depository institutions that do not meet the minimum capital requirements described above. The FDIA establishes five capital categories (“well capitalized,” “adequately capitalized,” “undercapitalized,” “significantly undercapitalized” and “critically undercapitalized”). The federal banking regulators must take certain mandatory supervisory actions, and are authorized to take other discretionary actions, with respect to institutions that are less than adequately capitalized, with supervisory actions progressively becoming more punitive as the institution’s capital category declines. Supervisory actions include: (i) restrictions on payment of capital distributions and management fees, (ii) requirements that a federal bank regulator monitor the condition of the institution and its efforts to restore its capital, (iii) submission of a capital restoration plan, (iv) restrictions on the growth of the institution’s assets and (v) requirements for prior regulatory approval of certain expansion proposals. A bank that is “critically undercapitalized” (i.e., has a ratio of tangible equity to total assets that is equal to or less than 2.0%) will be subject to further restrictions and generally will be placed in conservatorship or receivership within 90 days. An insured depository institution is considered “well capitalized” if it (i) has a total risk-based capital ratio of 10.0% or greater; (ii) has a Tier 1 risk-based capital ratio of 8.0% or greater; (iii) has a CET1 ratio of at least 6.5% or greater; (iv) has a leverage capital ratio of 5.0% or greater; and (v) is not subject to any written agreement, order, capital directive, or prompt corrective action directive to meet and maintain a specific capital level for any capital measure.

The FDIA’s prompt corrective action provisions apply only to depository institutions such as the Bank, and not to bank holding companies. Under the FRB’s regulations, a bank holding company, such as the Company, is considered “well capitalized” if the bank holding company (i) has a total risk based capital ratio of at least 10%, (ii) has a Tier 1 risk-based capital ratio of at least 6%, and (iii) is not subject to any written agreement order, capital directive or prompt corrective action directive to meet and maintain a specific capital level for any capital measure. Although prompt corrective action regulations apply only to depository institutions and not to bank holding companies, a bank that is required to submit a capital restoration plan generally must concurrently submit a performance guarantee by its parent holding company. The liability of the parent holding company under any such guarantee is limited to the lesser of five percent of the bank’s assets at the time it became “undercapitalized” or the amount needed to comply.

Information concerning the Company and the Bank with respect to capital requirements is incorporated by reference from Item 7. "Management’s Discussion and Analysis of Financial Condition and Results of Operations—Capital Resources" and Note 14 of the consolidated financial statements included within this report.

The Bank and the Company meet all capital requirements under the Capital Rules, including the capital conservation buffer, and each meet the capital ratio requirements to be “well capitalized” for purposes of the prompt corrective action provisions of the FDIA and applicable FRB regulations, respectively.

Safety and Soundness Standards. The FDIA requires the federal bank regulatory agencies to prescribe safety and soundness standards, by regulations or guidelines, as the agencies deem appropriate. Guidelines adopted by the federal bank regulatory agencies establish general standards relating to internal controls and information systems, internal audit systems, loan documentation, credit underwriting, interest rate exposure, asset growth, asset quality, earnings and compensation, fees and benefits. In general, these guidelines require, among other things, appropriate systems and practices to identify and manage the risk and exposures specified in the guidelines. In addition, the federal banking agencies adopted regulations that authorize, but do not require, an agency to order an institution that has been given notice by an agency that it is not satisfying any of such safety and soundness standards to submit a compliance plan. If, after being so notified, an institution fails to submit an acceptable compliance plan or fails in any material respect to implement an acceptable compliance plan, the agency must issue an order directing action to correct the deficiency and may issue an order restricting asset growth, requiring an institution to increase its ratio of tangible equity to assets or directing other actions of the types to which an undercapitalized institution is subject under the “prompt corrective action” provisions of the FDIA. See “—Prompt Corrective Action” above. If an institution fails to comply with such an order, the agency may seek to enforce such order in judicial proceedings and to impose civil money penalties.

Dividend and Share Repurchase Restrictions

The Company is a legal entity separate and distinct from its subsidiaries. The revenue of the Company (on a parent-only basis) is derived primarily from interest and dividends paid to it by the Bank. The right of the Company, and consequently the right of shareholders of the Company, to participate in any distribution of the assets or earnings of the Bank through the payment of such dividends or otherwise is necessarily subject to the prior claims of creditors of the Bank (including depositors), except to the extent that certain claims of the Company in a creditor capacity may be recognized. The Company and the Bank are subject to various federal and state restrictions on their ability to pay dividends as described below.

Restrictions on Bank Holding Company Dividends. The FRB has the authority to prohibit bank holding companies from paying dividends if such payment is deemed to be an unsafe or unsound practice. The FRB has indicated generally that it may be an unsafe or unsound practice for bank holding companies to pay dividends unless the bank holding company’s net income over the preceding year is sufficient to fund the dividends and the expected rate of earnings retention is consistent with the organization’s capital needs, asset quality and overall financial condition. FRB guidance also directs bank holding companies to inform the FRB reasonably in advance of declaring or paying a dividend that exceeds earnings for the period for which the dividend is being paid. Further, the Company’s ability to pay dividends is restricted if it does not maintain the capital conservation buffer. See “—Capital Adequacy and Safety and Soundness—Regulatory Capital Requirements” above.

Under Maine law, a corporation’s Board of Directors may declare, and the corporation may pay, dividends on its outstanding shares, in cash or other property, generally only out of the corporation’s unreserved and unrestricted earned surplus, or out of the unreserved and unrestricted net earnings of the current fiscal year and the next preceding fiscal year taken as a single period, except under certain circumstances, including when the corporation is insolvent, or when the payment of the dividend would render the corporation insolvent or when the declaration would be contrary to the corporation’s charter.

Restrictions on Bank Dividends. Under OCC regulations, national banks generally may not declare a dividend in excess of the bank’s undivided profits or, absent OCC approval, if the total amount of dividends declared by the national bank in any calendar year exceeds the total of the national bank’s retained net income year-to-date combined with its retained net income for the preceding two years. National banks also are prohibited from declaring or paying any dividend if, after making the dividend, the national bank would be considered “undercapitalized” (as defined by reference to other OCC regulations). The OCC has the authority to use its enforcement powers to prohibit a national bank, such as the Bank, from paying dividends if, in its opinion, the payment of dividends would constitute an unsafe or unsound practice. Further, the Bank’s ability to pay dividends is restricted if it does not maintain the capital conservation buffer. See “—Capital Adequacy and Safety and Soundness—Regulatory Capital Requirements” above.

Certain Transactions by Banks with their Affiliates

Sections 23A and 23B of the Federal Reserve Act and the FRB’s Regulation W restrict transactions between a bank and its affiliates, including its parent bank holding company. The Bank is subject to these restrictions, which include quantitative and qualitative limits on the amounts and types of transactions that may occur, including extensions of credit (which include credit exposure arising from repurchase and reverse repurchase agreements, securities borrowing and derivative transactions) to affiliates, investments in the stock or securities of affiliates, purchases of assets from affiliates and other “covered transactions.” Generally, a bank’s (including its subsidiaries) covered transactions with any affiliate are subject to the following limits: (i) the aggregate amount of covered transactions with any one affiliate cannot exceed 10% of the bank’s capital stock and surplus; and (ii) the aggregate amount of covered transactions with all affiliates cannot exceed 20% of the bank’s capital stock and surplus. Transactions between a bank and its affiliates, including a parent holding company, must be on market terms and not otherwise unduly favorable to an affiliate, and, in the case of extensions of credit, be secured by specified amounts and types of collateral.

Anti-Tying Restrictions

Generally, a bank is prohibited from extending credit, leasing or selling property, furnishing any service or fixing or varying the consideration for any of the foregoing on the condition that (i) the customer obtains additional credit, property or services from the bank’s parent holding company or any subsidiary of the holding company, or (ii) the customer will not obtain credit, property or services from a competitor of the bank or its affiliates (except to the extent the restriction is a reasonable condition imposed to assure the soundness of the credit extended).

Consumer Protection Regulation

The Company and the Bank are subject to federal and state laws designed to protect consumers and prohibit unfair or deceptive business practices, including the Equal Credit Opportunity Act, the Fair Housing Act, the Home Ownership Protection Act, the Fair Credit Reporting Act (“FCRA”), as amended by the Fair and Accurate Credit Transactions Act of 2003 (“FACT Act”), the Gramm-Leach-Bliley Act of 1999 (“GLBA”), the Truth in Lending Act, the CRA, the Home Mortgage Disclosure Act, the Real Estate Settlement Procedures Act, the National Flood Insurance Act and various state law counterparts. These laws and regulations mandate certain disclosure requirements and regulate the manner in which financial institutions must interact with customers when taking deposits, making loans, collecting loans and providing other services. In addition, the CFPB has a broad mandate to prohibit unfair, deceptive or abusive acts and practices, is specifically empowered to require certain disclosures to consumers and draft model disclosure forms, and is responsible for making rules and regulations under the federal consumer protection laws relating to financial products and services. Failure to comply with consumer protection laws and regulations can subject financial institutions to enforcement actions, fines and other penalties. The OCC examines the Bank for compliance with CFPB rules and enforces CFPB rules with respect to the Bank.

FCRA. Like other lenders, the Bank uses consumer reports in its underwriting activities. Use of such information is regulated under the FCRA, and the FCRA also regulates reporting information to consumer reporting agencies, prescreening individuals for credit offers, sharing of consumer reports between affiliates, and using affiliate credit data for marketing purposes. Similar state laws may impose additional requirements on the Bank. In January 2025, the CFPB published a final FRCA-related rule that prohibits the inclusion of medical debts in consumer reports and prohibits a creditor’s use of medical debt to determine credit eligibility, absent a specific exception. There are currently two lawsuits filed against the CFPB disputing the validity of the final rule and a preliminary injunction has been granted by the court and the effective date of the final rule has been stayed until June 15, 2025. In addition, a notice of proposed rulemaking to revise the FCRA was published in December 2024, with comments to the proposal due in March 2025.

Mortgage Reform. The Dodd-Frank Act prescribes certain standards that mortgage lenders must consider before making a residential mortgage loan, including verifying a borrower’s ability to repay such mortgage loan, and allows borrowers to assert violations of certain provisions of the Truth in Lending Act as a defense to foreclosure proceedings. Under the Dodd-Frank Act, prepayment penalties are prohibited for certain mortgage transactions and creditors are prohibited from financing insurance policies in connection with a residential mortgage loan or home equity line of credit. In addition, the Dodd-Frank Act prohibits mortgage originators from receiving compensation based on the terms of residential mortgage loans and generally limits the ability of a mortgage originator to be compensated by others if compensation is received from a consumer. The Dodd-Frank Act requires mortgage lenders to make additional disclosures prior to the extension of credit, in each billing statement and for negative amortization loans and hybrid adjustable rate mortgages.

Data Privacy and Cyber Security. The GLBA requires financial institutions to implement policies and procedures regarding the disclosure of nonpublic personal information about consumers to nonaffiliated third parties. In general, the Bank must provide its customers with an initial and annual disclosure that explains its policies and procedures regarding the disclosure of such nonpublic personal information, and, except as otherwise required or permitted by law, the Bank is prohibited from disclosing such information except as provided in such policies and procedures. However, an annual disclosure is not required to be provided by a financial institution if the financial institution only discloses information under exceptions from GLBA that do not require an opt out to be provided and if there has been no change in its privacy policies and practices since its most recent disclosure provided to consumers. The GLBA also requires that the Bank develop, implement and maintain a comprehensive written information security program designed to ensure the security and confidentiality of customer information (as defined under GLBA), to protect against anticipated threats or hazards to the security or integrity of such information; and to protect against unauthorized access to or use of such information that could result in substantial harm or inconvenience to any customer. The Bank is also required to send a notice to customers whose sensitive information has been compromised if unauthorized use of this information is reasonably possible.

Most states, including the states where the Bank operates, have enacted legislation concerning breaches of data security and Congress is considering federal legislation that would require consumer notice of data security breaches. Pursuant to the FACT Act, the Bank must develop and implement a written identity theft prevention program to detect, prevent, and mitigate identity theft in connection with the opening of certain accounts or certain existing accounts. Additionally, the FACT Act amends the Fair Credit Reporting Act to generally prohibit a person from using information received from an affiliate to make a solicitation for marketing purposes to a consumer, unless the consumer is given notice and a reasonable opportunity and a reasonable and simple method to opt out of the making of such solicitations.

The U.S. federal bank regulatory agencies impose notification requirements on banking organizations with respect to significant computer security incidents. Under these regulations, a bank holding company, such as the Company, and a national bank, such as the Bank, are required to notify the FRB or OCC, respectively, within 36 hours of incidents that have materially disrupted or degraded, or are reasonably likely to materially disrupt or degrade the banking organization’s ability to deliver services to a material portion of its customer base, jeopardize the viability of key operations of the banking organization, or pose a threat to the financial stability of the United States (“U.S.”).

Anti-Money Laundering

The Bank Secrecy Act. Under the Bank Secrecy Act (“BSA”), a financial institution is required to have systems in place to detect certain transactions, based on the size and nature of the transaction, and to monitor and report suspicious activity to appropriate law enforcement or regulatory authorities. Financial institutions, such as the Bank, are also required to adopt and implement policies and procedures with respect to, among other things, anti-money laundering (“AML”) compliance, suspicious activity, currency transaction reporting, customer identity verification and customer risk analysis, enhanced due diligence based upon risk and identification and monitoring of beneficial ownership. In addition, financial institutions are required to take steps to monitor their correspondent banking and private banking relationships as well as, if applicable, their relationships with “shell banks.” In evaluating an application under Section 3 of the BHCA to acquire a bank or an application under the Bank Merger Act to merge banks or affect a purchase of assets and assumption of deposits and other liabilities, the applicable federal banking regulator must consider the AML compliance record of both the applicant and the target.

In January 2021, the Anti-Money Laundering Act of 2020 (“AMLA”), which amends the BSA, was enacted. Among other things, the AMLA codified a risk-based approach to AML compliance for financial institutions; required the development of standards by the U.S. Department of the Treasury for evaluating technology and internal processes for BSA compliance; and expanded enforcement- and investigation-related authority, including a significant expansion in the available sanctions for certain BSA violations. Many of the statutory provisions in the AMLA will require additional rule-makings, reports and other measures, and the impact of the AMLA will depend on, among other things, rule-making and implementation guidance. In June 2021, the Financial Crimes Enforcement Network, a bureau of the U.S. Department of the Treasury (“FinCEN”), issued the priorities for anti-money laundering and countering the financing of terrorism policy required under the AMLA. The priorities include corruption, cybercrime, terrorist financing, fraud, transnational crime, drug trafficking, human trafficking and proliferation financing. In July 2024, the OCC, the Federal Reserve, the FDIC and the National Credit Union Administration issued a joint proposed rule that would amend their rules regarding AML programs. Among other things, the proposed rule would require national banks to incorporate a risk assessment process into their AML programs that consider the priorities published by FinCEN and would encourage, but not require, banks to consider, evaluate and implement innovative approaches to meet BSA compliance obligations. The effects of the proposed rule on the Bank will depend on the final form of any rulemaking.

OFAC. The U.S. has imposed economic sanctions that affect transactions with designated foreign countries, nationals and others. These sanctions, which are administered by the U.S. Treasury’s Office of Foreign Assets Control (“OFAC”), take many different forms. Generally, however, they contain one or more of the following elements: (i) restrictions on trade with or investment in a sanctioned country, including prohibitions against direct or indirect imports from and exports to a sanctioned country and prohibitions on “U.S. persons” engaging in financial or other transactions relating to a sanctioned country or with certain designated persons and entities; (ii) a blocking of assets in which the government or specially designated nationals of the sanctioned country have an interest, by prohibiting transfers of property subject to U.S. jurisdiction (including property in the possession or control of U.S. persons); and (iii) restrictions on transactions with or involving certain persons or entities. Blocked assets (for example, property and bank deposits) cannot be paid out, withdrawn, set off or transferred in any manner without a license from OFAC. Failure to comply with these sanctions could have serious legal and reputational consequences for the Company.

Executive and Incentive Compensation

Guidelines adopted by the federal banking agencies prohibit excessive compensation as an unsafe and unsound practice and describe compensation as “excessive” when the amounts paid are unreasonable or disproportionate to the services performed by an executive officer, employee, director or principal stockholder. The federal banking regulators have issued comprehensive guidance on incentive compensation policies (the “Incentive Compensation Guidance”) intended to ensure that the incentive compensation policies of banking organizations do not undermine safety and soundness of such organizations by encouraging excessive risk-taking. The Incentive Compensation Guidance is based upon the key principles that a banking organization’s incentive compensation arrangements should (i) provide incentives that do not encourage risk-taking beyond the organization’s ability to effectively identify and manage risks, (ii) be compatible with effective internal controls and risk management, and (iii) be supported by strong corporate governance, including active and effective oversight by the organization’s board of directors.

The Incentive Compensation Guidance states that enforcement actions may be taken against a banking organization if its incentive compensation arrangements or related risk-management control or governance processes pose a risk to the organization’s safety and soundness and the organization is not taking prompt and effective measures to correct the deficiencies.

During 2016, the federal bank regulatory agencies and the SEC proposed revised rules on incentive-based payment arrangements at specified regulated entities having at least $1 billion of total assets. In July 2024, the OCC, FDIC, Federal Housing Finance Agency and National Credit Union Administration jointly re-proposed the regulatory text of the 2016 proposal. The Federal Reserve and the SEC did not join the proposal, and the proposed rule will not be published in the Federal Register until the agencies have joined.

An investment in the Company involves risk, which could be substantial. Market, liquidity, credit, operational, legal, compliance, reputational and strategic risks are inherent in our business. The material risks and uncertainties that management believes affect the Company are described below. Any of the following risks could affect the Company’s financial condition and results of operations and could be material and/or adverse in nature. You should consider all of the following risks together with all of the other information in this Annual Report on Form 10-K.

Economic and Market Conditions Risk

Our financial condition and results of operations have been adversely affected, and in the future may be adversely affected, by the U.S. and international financial market and economic conditions.

We have been, and in the future may be, affected by general business and economic conditions in the U.S. and, to a lesser extent, abroad. These conditions include short-term and long-term interest rates, inflation, money supply, political issues, legislative and regulatory changes, fluctuations in both debt and equity capital markets, broad trends in industry and finance, unemployment, investor confidence and customer deposit behavior, all of which are beyond our control. These conditions can change suddenly and negatively. For example, changes in these conditions caused by the COVID-19 pandemic, geopolitical events such as Russia’s invasion in Ukraine, and inflation adversely affected our business in prior periods. In addition, volatility due to failures of other banks or general uncertainty regarding the health of banks may affect customer deposit behavior and cause deposit withdrawals, even if we are not experiencing the same uncertainty. Future changes in any of these conditions, whether related to pandemic, geopolitical conflict, the threat or occurrence of a U.S. sovereign default or government shutdown, a downgrade, or perceived future downgrade, in the U.S. sovereign credit rating or outlook, disruptions in the financial services industry or other future events that we are unable to predict, could result in increases in loan delinquencies and non-performing assets, decreases in loan collateral values, the value of our investment portfolio and demand for our products and services or otherwise adversely affect our financial condition or results of operations.

In addition, volatility and uncertainty related to inflation and its effects may contribute to or enhance some of the risks described in this section. For example, higher inflation has in the past reduced, and could in the future reduce, demand for our products, adversely affect the creditworthiness of our borrowers or result in lower values for our interest-earning assets and investment securities. Any of these effects, or others that we are not able to predict, could adversely affect our financial condition or results of operations.

Fluctuations in market interest rates have in the past adversely affected, and may in the future adversely affect, our performance.

Our profitability depends to a large extent upon our net interest income, which is the difference between interest income earned from loans and investments and the interest expense paid on deposits and borrowings. Net interest income is our largest source of revenue and can be affected significantly by changes in market interest rates, including in the shape of the yield curve or in spreads between different market interest rates, as well as by changes related to inflation. In particular, changes in relative interest rates may reduce our net interest income as the difference between interest income and interest expense decreases. As a result, we have adopted asset and liability management policies to minimize the potential adverse effects of changes in interest rates on net interest income, primarily by altering the mix and maturity of loans, investments and funding sources. See Item 7. “Management’s Discussion and Analysis—Risk Management Policies—Interest Rate Risk” for additional information regarding the Company’s asset and liability management policies and practices, as well as its interest rate risk position, including assumptions used in determining such, as of December 31, 2024. There is risk that any change in interest rates could negatively affect our results of operations or financial condition. Because market interest rates may change by differing magnitudes and at different times, significant changes in interest rates over an extended period of time could reduce overall net interest income.

In response to inflation, the Federal Reserve raised targeted Effective Federal Funds Rate throughout 2022 and 2023, and in 2024 began to lower interest rates. The Federal Reserve Board may continue to lower short-term interest rates during 2025 in response to economic conditions. Longer-term interest rates, while volatile, have remained elevated. Volatility in interest rates can result in customer deposits flowing away from financial institutions into direct investments, and a prolonged high-interest rate environment may cause the Bank to experience increased deposit migration. This may cause the Bank to lose some of its low-cost deposit funding or could adversely affect the Bank’s operations and liquidity. Customers may also continue to move non-interest-bearing deposits into interest-bearing accounts, thereby increasing our overall deposit costs. Higher funding costs may continue to reduce our net interest margin and net interest income.

Volatility in interest rates can also result in customer deposits flowing away from financial institutions into direct investments. Direct investments, such as U.S. government and corporate securities and other investment vehicles (including money market mutual funds), generally pay higher rates of return than financial institutions because of the absence of federal insurance premiums, and a prolonged high-interest rate environment may cause the Bank to experience increased deposit migration. This may cause the Bank to lose some of its low-cost deposit funding or could adversely affect the Bank’s operations and liquidity. Customers may also continue to move non-interest-bearing deposits into interest-bearing accounts, thereby increasing our overall deposit costs. Higher funding costs may continue to reduce our net interest margin and net interest income.

Changes in U.S. trade policies, including the imposition of tariffs and retaliatory tariffs, may adversely affect our business, financial condition and results of operations.

There has been recent significant change to U.S. trade policies, including tariffs affecting China, Canada and Mexico and there continues to be significant discussion regarding other potential changes to U.S. trade policies, treaties and tariffs, including the potential for additional tariffs. In addition, retaliatory tariffs have been imposed and additional retaliatory tariffs are likely. Tariffs, retaliatory tariffs or other trade restrictions on products and materials that our customers import or export could cause the prices of our customers’ products to increase, which could reduce demand for such products. Any of these effects could adversely affect the ability of our customers to pay their loans. For example, tariffs on Canadian imports could negatively affect a number of industries in Maine, and therefore our customers. In addition, if prices of consumer goods increase materially due to tariffs or other trade policy, the ability of individual households to pay their mortgages and other debt may be affected negatively. If our borrowers are unable to pay their loans, it would adversely affect our financial condition and results of operations. At this time, we are unable to predict whether and to what extent additional or higher tariffs or retaliatory tariffs will be imposed. This uncertainty complicates business planning for our customers in certain industries, and any resulting changes in our customers’ spending and borrowing patterns in response to this uncertainty could have an adverse effect on our business and results of operations.

We could be adversely affected by the actions or commercial soundness, strength or stability of other financial institutions.

Actual or perceived issues with, or rumors or questions about, one or more financial institutions, or the financial services industry more generally, have led to, and may in the future lead to, market-wide liquidity problems; rapid and significant deposit withdrawals at certain banks, particularly those with elevated levels of uninsured deposits; losses or defaults by certain institutions, up to and including failures of certain banks; and significant volatility in the stock of financial services institutions. In addition, our ability to engage in routine funding and settlement transactions could be adversely affected by any of these events or by other events that affect the commercial soundness of other financial institutions. Failures of one or more banks that are unrelated to the Bank may in the future increase the Bank’s deposit insurance assessments, and customers and others may seek to make comparisons between failed or failing banks and the Bank, which, even if unfounded, can spread quickly through social media or other online channels. Such comparisons could affect customer confidence in the Bank and lead to deposit withdrawals or other negative effects we are unable to predict, any of which could materially and negatively affect our results of operations and financial condition.

Financial services institutions are interrelated as a result of trading, clearing, counterparty and other relationships. We maintain a diversified securities portfolio and have exposure to many different counterparties, and we routinely execute transactions with counterparties in the financial services industry. As a result, defaults by, or even rumors or questions about, the soundness, strength or stability of one or more financial services institutions, or the financial services industry generally, could lead to losses or defaults by us or by other institutions and organizations. Many of these transactions expose us to credit risk in the event of default of our counterparty or client. Furthermore, our credit risk may be exacerbated when the collateral held by us cannot be liquidated or is liquidated at prices not sufficient to recover the full amount of the financial instrument exposure due to us. Any such losses could materially and adversely affect our results of operations.

In addition, if a counterparty should default, become insolvent, declare bankruptcy, or otherwise cease to exist, the value of our investment securities may be impaired. This could result in provision for credit losses or realized losses being charged against future income. Given the significant judgments involved, there is risk that material provisions may be recorded to establish an allowance for credit losses resulting in realized losses.

Camden National Wealth Management may be negatively affected by changes in economic and market conditions.

A substantial portion of income from fiduciary services is dependent on the market value of wealth management assets under management, which are primarily marketable securities. Changes in domestic and foreign economic conditions, volatility in financial markets, and general trends in business and finance, all of which are beyond our control, could adversely impact the market value of these assets and the fee revenues derived from the management of these assets.

Continued market volatility has impacted, and may in the future impact, our business and the value of our common stock.

Our business performance and the trading price of shares of our common stock have in the past, and may in the future be, affected by many factors, including volatility in the credit, mortgage and housing markets, fluctuations in interest rates (including in response to inflation), the markets for securities relating to mortgages or housing, and the value of debt and mortgage-backed and other securities that we hold in our investment portfolio. Government action and legislation may also impact us and the value of our common stock. We cannot predict what impact, if any, future volatility will have on our business or share price.

In addition, the value of securities, derivatives and other financial instruments which we own can be affected materially by market volatility. Volatility, illiquid market conditions or other disruptions in the financial markets may make it difficult to value certain financial instruments. Valuations of financial instruments in future periods may result in significant changes in the value of financial instruments we own. At the time of any disposition of such financial instruments, the price that we realize will depend on the demand and liquidity in the market at that time and may be materially lower than their current fair value. Any of these factors could cause a decline in the value of financial instruments that we own, which may have an adverse effect on our results of operations. In addition, losses in the value of our investment securities or loan portfolio could affect market perception of us and create volatility in our stock price. Losses in the value of our investment securities, even if they do not affect earnings or capital, could also cause some depositors, particularly those who maintain uninsured and uncollateralized deposits, to question the stability of the Bank and to move their deposits away from the Bank. Such events could negatively affect our liquidity, financial condition and results of operations.

Credit Risk and Lending Business Risk

Our loans are concentrated in certain areas of Northern New England and adverse conditions in those markets could adversely affect our operations.

Prior to 2025, we primarily served individuals and businesses located in the state of Maine, with 68% of our loan portfolio concentrated among borrowers in Maine as of December 31, 2024, with higher concentrations of exposure in Cumberland, Kennebec, Knox and York counties. Although our loan portfolio became more geographically diverse following our acquisition of Northway, our loan portfolio remains significantly concentrated among Northern New England borrowers, with over 50% still located in Maine. Because a substantial portion of the loan portfolio is secured by real estate in this area, the value of the associated collateral is also subject to regional real estate market conditions. Adverse economic, political or business developments or natural hazards, the severity and frequency of which are increasing as a result of climate change, may affect these areas and the ability of property owners in these areas to make payments of principal and interest on the underlying mortgages. If these regions experience adverse economic, political or business conditions, such as prolonged elevated inflation and interest rates, or if they experience a pandemic or similar event, we likely would likely higher rates of loss and delinquency on these loans than if the loans were more geographically diverse. In addition, adverse economic, political or other events may affect certain industries in our markets more than others. For example, the COVID-19 pandemic adversely affected hospitality, transportation and commercial real estate industries in Maine. Negative effects on those industries could result in higher rates of loss and delinquency on our loans, which could have a material, adverse effect on our financial condition or results of operations.

Our loan portfolio includes commercial real estate and commercial loans, which are generally riskier than other types of loans.

At December 31, 2024, our commercial real estate and commercial loan portfolios comprised 51% of our total loan balances. Commercial loans generally carry larger loan balances and involve a higher risk of nonpayment or late payment than residential mortgage loans. Commercial loans may lack standardized terms and may include a balloon payment feature. The ability of a borrower to make or refinance a balloon payment may be affected by a number of factors, including the financial condition of the borrower, prevailing economic conditions and prevailing interest rates, and rising interest rates may make it more difficult or impossible for borrowers to refinance maturing loans. Repayment of these loans is generally more dependent on the economy and the successful operation of a business. High vacancy rates in commercial properties have affected, and in the future may affect, the value of commercial real estate, including by causing the value of properties securing commercial real estate loans to be less than the amounts owed on such loans. Because of the risks associated with commercial loans, we may experience higher rates of default, and other risks described above may be more pronounced, than if the portfolio were more heavily weighted toward residential mortgage loans. Higher rates of default or other events could cause us to experience higher credit losses or could otherwise have an adverse effect on our financial condition and results of operations.

Refer to “—Financial Condition—Loans” for additional information regarding concentrations within our commercial loan portfolio. Risks of higher credit losses and other risks described above that could result from adverse economic or other events affecting any industry within our commercial loan portfolio may be exacerbated by industry concentrations within the commercial loan portfolio.

If our allowance for credit losses for loans is not adequate to cover actual loan losses, our earnings could decrease.

We make various assumptions and judgments about the collectability of our loan portfolio and provide an allowance for credit losses for these loans (herein referred to as the “allowance for loan losses”) based on a number of factors. The level of the allowance for loan losses reflects management's continuing evaluation of industry concentrations, specific credit risks, credit loss experience, current loan portfolio quality, current economic trends and conditions, reasonable and supportable forecasts about the future, changes in competitive, legal, and regulatory conditions, and unidentified losses inherent in the current loan portfolio. Determination of the allowance for loan losses is inherently subjective because it requires significant estimates and management judgment of credit risks and future trends, which are subject to material changes. If our assumptions are incorrect, the allowance for loan losses may not be sufficient to cover the losses we could experience, which would have an adverse effect on operating results, and may also cause us to increase the allowance for loan losses in the future. Deterioration in economic conditions affecting borrowers, new information regarding existing loans, identification of additional problem loans, changes in accounting principles, and other factors, both within and outside our control, may require an increase in the allowance for loan losses. In addition, bank regulators periodically review our allowance for loan losses and may require us to increase our provisions for credit losses or recognize further loan charge-offs. Any increase in our allowance for loan losses or loan charge-offs as required by regulatory authorities could have a material adverse effect on our consolidated results of operations and financial condition. If additional amounts are provided to the allowance for credit losses, our earnings could decrease.

Prepayments of loans may negatively impact our business.

Generally, our customers may prepay the principal amount of their outstanding loans at any time, frequently without financial penalty to the borrower. The speeds at which such prepayments occur, as well as the size of such prepayments, are within our customers’ discretion. Fluctuations in interest rates, in certain circumstances, may also lead to high levels of loan prepayments. If customers prepay the principal amount of their loans, and we are unable to lend those funds to other borrowers or invest the funds at the same or higher interest rates, interest income will be reduced. A significant reduction in interest income could have a negative impact on our results of operations and financial condition.

Competitive and Strategic Risk

We experience strong competition within our industry and markets, which may impact our profitability and adversely affect the price of our common stock.

Competition in the banking and financial services industry is strong. In our market areas, we compete for loans, deposits and other financial products and services with large financial companies, local independent banks, thrift institutions, savings institutions, mortgage brokerage firms, credit unions, finance companies, mutual funds, insurance companies, brokerage and investment banking firms, and other financial intermediaries that offer similar services. Some of these competitors have substantially greater resources and lending limits than those of the Bank and may offer services that the Bank does not or cannot provide. Some of our non-bank competitors are not subject to the same extensive regulations we are, and, as a result, may be able to compete more effectively for business. In particular, the activity of non-bank lenders and other financial technology companies (“fintechs”) has grown significantly over recent years and is expected to continue to grow. Fintechs have offered and may continue to offer bank or bank-like products. For example, a number of fintechs have applied for, and in some cases received, bank or industrial loan charters. In addition, other fintechs have partnered with existing banks to allow them to offer deposit and loan products to their customers. Regulatory changes may also make it easier for fintechs to partner with banks and offer deposit products, or increase the ability of fintechs to compete through the use of non-banking products such as cryptocurrency or alternative payment systems. There is also increased competition by out-of-market competitors through online and mobile channels. Our long-term success depends on our ability to compete successfully with other financial institutions and fintechs. Because we maintain a smaller staff and have fewer financial and other resources than larger institutions with which we compete, we may be limited in our ability to attract customers. If we are unable to attract and retain customers, we may be unable to achieve growth in the loan and core deposit portfolios, and our results of operations and financial condition may be negatively affected.

In addition, return on shareholders’ equity and other measures of profitability, which affect the market price of our common stock, depend in part on continued growth and expansion. The ability to generate internal growth is affected by the competitive factors described herein as well as by the primarily rural characteristics and related demographic features of the markets we serve. If we are unable to compete or grow effectively in our markets, it could adversely affect our business and the price of our common stock.

Market changes may adversely affect pricing of, and demand for, our services and impact results of operations.

Channels for servicing our customers are evolving rapidly, with less reliance on traditional branches, more use of online and mobile banking, and increased demand for universal bankers and other relationship managers who can service multiple product lines. We compete with larger providers that are rapidly evolving their service offerings, thereby escalating the costs of evolving the Bank’s efforts to keep pace. We have a process for evaluating the profitability of our branches and other office and operational facilities. The identification of unprofitable operations and facilities can lead to restructuring charges and introduce the risk of disruptions to revenues and customer relationships.

In addition, our success depends, in part, on our ability to adapt products and services to changing industry standards. There is increasing pressure to provide products and services at lower prices. Lower prices can reduce our net interest margin and revenues from fee-based products and services. The adoption of new or emerging technologies, such as blockchain and artificial intelligence, or further developments in current technologies may require us to make substantial expenditures to modify or adapt our existing products and services to remain competitive. These and other capital investments in our businesses may not produce expected growth in earnings anticipated at the time of the expenditure. We might not be successful in developing or introducing new products and services, adapting to changing customer preferences and spending and saving habits (which may be altered significantly and suddenly), achieving market acceptance of our products and services, or sufficiently developing and maintaining loyal customer relationships.

Sustainability-related topics as well as companies’ actions and initiatives on such issues, have received significant attention from a wide range of stakeholders. The U.S. federal government, U.S. states and certain other countries and regions have adopted or are considering legislation, regulation or policies on these topics. Compliance with such laws, regulations or policies, including any that may be adopted in the future, could, among other things, increase the costs of operating our businesses, reduce the demand for our products and services and impact the prices we charge our customers, any or all of which could adversely affect our results of operations. In addition, policymakers in some jurisdictions have adopted or proposed laws, regulations and policies that diverge from, or potentially conflict with, those in other jurisdictions. Failure to comply with any legislation, regulation or policy, including as a result of making good faith interpretations that may differ from those taken by enforcement authorities in relevant jurisdictions, could potentially result in substantial fines, criminal sanctions, reputational harm or operational changes. Moreover, our customers, stockholders, employees and other stakeholders have diverse expectations, demands and perspective on these topics, which are continuing to evolve. We may not be able to meet the diverse expectations and demands of all our stakeholders, which could harm our reputation, reduce customer demand for our products and services, and subject us to legal and operational risks.

Camden National Wealth Management faces intense competition in attracting and retaining clients.

Due to strong competition, Camden National Wealth Management may not be able to attract and retain clients at current levels. Competition is strong as there are numerous well-established and successful investment management and wealth advisory firms including commercial banks and trust companies, investment advisory firms, mutual fund companies, stock brokerage firms, and other financial companies. Our ability to attract and retain wealth management clients is dependent upon our ability to compete with competitors’ investment products, level of investment performance, client services, and marketing and distribution capabilities. If we are not successful, our results of operations and financial condition may be negatively affected.

The Company faces competition in pursuing acquisition opportunities, may not be able to identify attractive acquisition targets or may not be able to complete future acquisitions.

In pursuing acquisition opportunities, we may be in competition with other companies having similar growth strategies, including banks, bank holding companies, mutual banks and mutual holding companies. In addition, economic conditions may impede our ability to identify or acquire acquisition candidates. In particular, current market conditions have resulted in large unrealized losses in the investment portfolios at many banking organizations. If we were to acquire such an organization, any such losses would be recognized, thereby impeding our ability to complete an acquisition on acceptable terms. Furthermore, a number of banks in our markets or neighboring markets are organized as mutual banks and may not be interested in a transaction with a counterparty that is not organized in the same manner, such as the Company. These and other economic factors or competition for these acquisitions could result in increased acquisition prices and a lack of attractive acquisition opportunities. As a result, we may not be able to identify or acquire acquisition candidates.

In addition, we generally must receive federal regulatory approval before we can acquire a bank or bank holding company. Our ability to pursue or complete an attractive acquisition could be negatively affected by regulatory delay or other regulatory issues. We cannot be certain when or if, or on what terms and conditions, any required regulatory approvals will be granted. If we commit certain regulatory violations, including those that result in a downgrade in certain of our bank regulatory ratings, we may not be able to pursue future acquisitions for a period of time, or governmental authorities could preclude us from doing so even if we were otherwise able.

Completed acquisitions may not produce the expected results, may result in unforeseen integration difficulties and may dilute shareholders’ interests.

There can be no assurance that we will realize the anticipated positive results of any acquisition we complete, such as our recently completed acquisition of Northway, including results related to expected revenue increases, cost savings, increases in geographic or product presence or other projected benefits. We may incur substantial expenses related to acquisitions and integration of acquired companies. Successful integration of an acquired company may present challenges due to differences in systems, operations, policies and procedures, management teams and corporate cultures and may be more costly or difficult to complete than anticipated or have unanticipated adverse results. Integration efforts could divert management’s attention and resources, which could adversely affect our operations or results. Integration efforts could result in higher than expected customer loss, deposit attrition, loss of key employees, issues with systems and technology, disruption of our businesses or the businesses of the acquired company, or otherwise adversely affect our ability to maintain relationships with customers and employees or achieve anticipated benefits of the acquisition. We issued additional shares of our common stock as consideration for our acquisition of Northway, which diluted our shareholders’ ownership interests. Other future acquisitions may be material to us, and we may issue additional shares of our common stock to pay for those acquisitions, which would further dilute current shareholders’ ownership interests.

Liquidity Risk

Our cost of funds has increased and may in the future increase further as a result of loss of deposits, a change in deposit mix or changes in interest rates.

Deposits are a low cost, stable source of funding. We compete with banks, other financial institutions and fintechs for deposits. Increases in short-term interest rates throughout 2022 and 2023 resulted in more intense competition in deposit pricing. Competition and increasing interest rates caused us to increase the interest rates we pay on deposits. Although the Federal Reserve began to lower short-term interest rates in 2024, competition for deposits remains elevated. In addition, a loss in the value of our investment or loan portfolio, perceived concerns regarding our or the Bank’s capital position or perceived concerns regarding the level of the Bank’s uninsured and uncollateralized deposits could cause rapid and significant deposit outflows. Funding costs may increase further if we lose deposits and are forced to replace them with more expensive sources of funding, if clients shift their deposits into higher cost products or if we need to continue to raise interest rates to avoid losing deposits. Higher funding costs reduce our net interest margin, net interest income and net income. If we were to experience a significant outflow of deposits, we may face significantly increased funding costs, suffer significant losses and have a significantly reduced ability to raise new capital.

As of December 31, 2024, brokered deposits made up 4% of our total deposits. We have utilized and will continue to utilize brokered deposits when it is a more cost effective source of funding compared to alternative funding sources. Should we become less than well-capitalized under the prompt corrective action framework, our use of brokered deposits may be limited, which could result in the use of more costly funding sources that would reduce our net interest margin, net interest income and net income. See “Supervision and Regulation—Capital Adequacy and Safety and Soundness—Prompt Corrective Action” and “Supervision and Regulations—Regulation of the Bank—Brokered Deposits” for additional information on the prompt corrective action framework and the regulation of brokered deposits.

Wholesale funding sources may prove insufficient to replace deposits and support our operations and future growth.

The Company and the Bank must maintain sufficient funds to respond to the needs of depositors and borrowers. To manage liquidity, we draw upon a number of funding sources in addition to core deposit growth and repayments and maturities of loans and investments. These sources include brokered deposits, borrowings through the Federal Home Loan Bank of Boston (“FHLBB”) and correspondent banks, proceeds from the sale of investments and loans, and liquidity resources at the holding company. Our ability to manage liquidity will be severely constrained if we are unable to maintain access to funding or if adequate financing is not available to accommodate future growth at acceptable costs, or if there are unforeseen outflows of cash or collateral, such as that seen by certain banks that experienced large and sudden outflows of deposits in 2023. In addition, if we are required to rely more heavily on more expensive funding sources to support future growth, our revenues may not increase proportionately to cover our costs. In this case, operating margins and profitability would be adversely affected. Turbulence in the capital and credit markets may adversely affect our liquidity and financial condition and the willingness of certain counterparties and customers to do business with us.

We could lose access to sources of liquidity if we were to experience financial or regulatory issues.

We rely on sources of liquidity provided by the Federal Reserve, such as the Federal Reserve discount window and other liquidity facilities that the Federal Reserve may establish from time to time, as well as liquidity provided by FHLBB. To access these sources of liquidity, the Federal Reserve or FHLBB may impose conditions that we and the Bank are in sound financial condition (as determined by the Federal Reserve or FHLBB) or that we and the Bank maintain minimum supervisory ratings. If we or the Bank were to experience financial or regulatory issues, it could affect our or the Bank’s ability to access liquidity facilities, including at times when we or the Bank needs additional liquidity for the operation of its business. If we or the Bank were to lose access to these liquidity sources, it could have a material adverse effect on our operations and financial condition.

In addition, bank failures during 2023 led to significant volatility in the financial services industry and to liquidity problems at certain institutions. Although governmental support was provided in connection with the 2023 bank failures, including the FDIC’s invoking the systemic risk exception to guarantee uninsured deposits, there can be no guarantee that the FDIC will invoke the systemic risk exception in connection with any future bank failures or that the government would otherwise take any action to provide liquidity to troubled institutions. Further, even if governmental support for financial institutions is available in the future, it may not be sufficient to address systemic risks.

We are a holding company and dependent upon our subsidiary for dividends, distributions and other payments to meet our liquidity needs.

We are a legal entity separate and distinct from our direct and indirect subsidiaries. Our revenue (on a parent-only basis) is derived primarily from interest and dividends paid to us by the Bank. Our right, and consequently the right of our shareholders, to participate in any distribution of the assets or earnings of the Bank through the payment of such dividends or otherwise is necessarily subject to the prior claims of creditors of the Bank (including depositors), except to the extent that certain claims of us in a creditor capacity may be recognized.

Holders of our common stock are entitled to receive dividends only when, and if declared by our Board of Directors. Although we have historically declared cash dividends on our common stock, we are not required to do so and our Board of Directors may reduce or eliminate our common stock dividend in the future. The FRB has authority to prohibit bank holding companies from paying dividends if such payment is deemed to be an unsafe or unsound practice. Additionally, the OCC has the authority to use its enforcement powers to prohibit a bank from paying dividends if, in its opinion, the payment of dividends would constitute an unsafe or unsound practice. Further, as a bank holding company, we are required inform and consult with FRB supervisory staff prior to declaring and paying a dividend that exceeds earnings for the period for which the dividend is being paid. If we experience losses in a series of consecutive quarters, we may be required to inform and consult with the FRB supervisory staff prior to declaring or paying any dividends. In this event, there can be no assurance that the FRB will approve the payment of such dividends. Our ability to pay dividends would also be restricted under current regulatory capital rules if we do not maintain a capital conservation buffer. A reduction or elimination of dividends could adversely affect the market price of our common stock. See Item 1. “Business—Supervision and Regulation—Dividend Restrictions” and “Business—Supervision and Regulation—Regulatory Capital Requirements.”

Regulatory and Legal Risk

Our banking business is highly regulated, and we may be adversely affected by changes in law and regulation.

We are subject to regulation and supervision by the FRB, and the Bank is subject to regulation and supervision by the OCC and the FDIC, as well as regulations issued by the CFPB. Federal laws and regulations govern numerous matters affecting us, including changes in the ownership or control of banks and bank holding companies, maintenance of adequate capital and the financial condition of a financial institution, permissible types, amounts and terms of extensions of credit and investments, permissible non-banking activities, the level of reserves against deposits and restrictions on dividend payments. The OCC possesses the power to issue cease and desist orders to prevent or remedy unsafe or unsound practices or violations of law by banks subject to their regulation, and the FRB possesses similar powers with respect to bank holding companies. These and other restrictions limit the manner in which we may conduct business and obtain financing.

Our business is highly regulated and the laws, rules, regulations, and supervisory guidance and policies applicable to us are subject to regular modification and change, and there have been significant revisions to the laws and regulations applicable to banks and bank holding companies that have been enacted or proposed in recent years. We expect that we will remain subject to extensive regulation and supervision, and that the level of regulatory scrutiny may fluctuate over time, based on numerous factors, including changes in the U.S. presidential administration or one or both houses of Congress and public sentiment regarding financial institutions (which can be influenced by scandals and other incidents that involve participants in the industry). In particular, recent changes in national political leadership have introduced uncertainty into the direction and timing of any future regulation. Although an overall reduction in the regulation of the financial services sector could result in some operational and cost benefits, any potential new regulations or changes to existing regulations and supervisory expectations may necessitate changes to our existing regulatory compliance and risk management programs. New regulations and changes to existing regulations and supervisory expectations have increased, and may in the future increase, our costs over time.

In addition, changes to statutes, regulations or regulatory policies, or their interpretation or implementation, and/or regulatory practices, requirements or expectations, could affect us in substantial and unpredictable ways. In particular, the potential effects of a number of proposed regulations on us remain uncertain due to legal challenges and the recent changes in the U.S. presidential administration and control of the U.S. Senate, which could result in changing federal or state regulatory priorities.

We are unable to predict the form or nature of any future changes to statutes or regulation, including the interpretation or implementation thereof. Changes to statutes, regulations, or regulatory policies, including changes in interpretation or implementation of statutes, regulations, or policies, have and could in the future subject us to additional costs, limit the types of financial services and products we may offer, and/or increase the ability of non-banks to offer competing financial services and products, among other things. Failure to comply with laws, regulations, policies or supervisory guidance could result in enforcement and other legal actions by federal or state authorities, including criminal and civil penalties, the loss of FDIC insurance, revocation of a banking charter, other sanctions by regulatory agencies, civil money penalties, and/or reputational damage, which could have a material adverse effect on our business, financial condition, and results of operations. See Item 1., “Business—Supervision and Regulation.”

We may become involved in lawsuits and legal proceedings that may lead to adverse consequences.

As a participant in the financial services industry, many aspects of the Company’s business involve substantial risk of legal liability. For example, banking organizations have been subject to claims regarding patent infringement or other violations of intellectual property rights in recent years which, in some cases, have resulted in large judgments against the banks. From time to time, we are named or threatened to be named as defendants in various lawsuits, including class actions, arising from our business activities. In addition, when other financial institutions receive adverse judgments in litigation or agree to settlements, that may encourage plaintiffs and their attorneys to bring and maintain claims, including class actions, against other financial institutions, including the Company. There is no assurance that litigation with private parties will not increase in the future. Future actions against us may result in judgments, settlements, fines, penalties or other results adverse to us, which could materially adversely affect our business, financial condition or results of operations, or cause serious reputational harm to us. In addition, the scope of insurance coverage we maintain may not provide us with full, or even partial, coverage in any particular case. As a result, a judgment against us in any such litigation and/or legal costs incurred in defending us against such litigation could have a material adverse effect on our financial condition and results of operation.

We may incur fines, penalties and other negative consequences from regulatory violations, possibly even inadvertent or unintentional violations.

The financial services industry is subject to intense scrutiny from bank supervisors in the examination process and aggressive enforcement of federal and state regulations, particularly with respect to mortgage-related practices and other consumer compliance matters, and compliance with AML, BSA and OFAC regulations, and economic sanctions against certain foreign countries and nationals. Enforcement actions may be initiated for violations of laws and regulations and unsafe or unsound practices. In addition, some legal/regulatory frameworks provide for the imposition of fines or penalties for noncompliance even though the noncompliance was inadvertent or unintentional and even though there were systems and procedures designed to ensure compliance in place at the time. There have been a number of significant enforcement actions in recent years by regulators, state attorneys general and the Department of Justice against banks and other non-bank financial institutions with respect to AML and sanctions laws, and some have resulted in substantial penalties including criminal pleas. Although the Company and the Bank have adopted policies and procedures designed to comply with these laws, any failure to comply with these laws and other regulations, or to maintain an adequate compliance program, could result in significant fines, penalties, lawsuits, regulatory sanctions, reputational damage, or restrictions on our business.

We are subject to numerous laws designed to meet the credit needs of low- and moderate-income communities and to protect consumers, including the Community Reinvestment Act and fair lending laws, and failure to comply with these laws could lead to a wide variety of sanctions.

The Community Reinvestment Act, the Equal Credit Opportunity Act, the Fair Housing Act and other fair lending laws and regulations impose community investment and nondiscriminatory lending requirements on financial institutions. The FRB, OCC, CFPB, the Department of Justice and other federal agencies are responsible for enforcing these laws and regulations. A successful regulatory challenge to an institution’s performance under the Community Reinvestment Act, the Equal Credit Opportunity Act, the Fair Housing Act or other fair lending laws and regulations could result in a wide variety of sanctions, including damages and civil money penalties, injunctive relief, restrictions on mergers and acquisitions, restrictions on expansion and restrictions on entering new business lines. Private parties may also have the ability to challenge an institution’s performance under fair lending laws in private class action litigation. Such actions could have a material adverse effect on our business, financial condition and results of operations.

We are required to maintain sufficient capital and adequate liquidity.

As a banking organization, our capital and liquidity are subject to regulation and supervision by banking regulators. We are required to maintain minimum levels of capital. In addition, our banking regulators could require us to maintain more and higher quality capital than previously expected. Our banking regulators could also require us to hold higher levels of short-term investments, thereby limiting our ability to invest in longer-term or less liquid assets at higher yields. The need to maintain capital and liquidity could result in our being required to take steps to increase our regulatory capital and may dilute shareholder value or limit our ability to pay dividends or otherwise return capital to our investors through stock repurchases. In addition, if we fail to maintain appropriate levels of capital or liquidity, we could become subject to formal or informal enforcement actions that may impose restrictions on our business, including limiting our lending activities or our ability to expand, requiring us to raise additional capital (which may be dilutive to shareholders) or requiring regulatory approval to pay dividends or otherwise return capital to shareholders. See Item 1. “Business-Supervision and Regulation-Regulatory Capital Requirements” for additional information on capital requirements applicable to us and the Bank.

Operational and Business Risk

Damage to our reputation could significantly harm our business.

We are dependent on our reputation within our market area, as a trusted and responsible financial company, for all aspects of our relationships with customers, employees, vendors, third-party service providers and others with whom we conduct business or potential future business, particularly because our business is primarily concentrated in certain areas of Northern New England. Our actual or perceived failure to (i) identify and address potential conflicts of interest, ethical issues, money-laundering, or privacy issues; (ii) meet legal and regulatory requirements applicable to the Bank and to the Company; (iii) maintain the privacy of customer and accompanying personal information; (iv) maintain adequate record keeping; (v) engage in proper sales and trading practices; and (vi) identify the legal, reputational, credit, liquidity and market risks inherent in our products; or any action of one of our employees that results in actual or perceived misconduct or error, among other things, could give rise to reputational risk that could cause harm to the Bank and our business prospects. If we fail to address any of these issues in an appropriate manner, we could be subject to additional legal risks, which, in turn, could increase the size and number of litigation claims and damages asserted or subject us to enforcement actions, fines and penalties and cause us to incur related costs and expenses. Because we primarily serve individuals and businesses located in Maine and New Hampshire, any negative impact resulting from reputational harm, including any impact on our ability to attract and retain customers and employees, likely would be greater than if our business were more geographically diverse. Moreover, the advent and expansion of social media creates the potential for rapid and widespread dissemination of information, including inaccurate, misleading, or false information, that could damage our reputation and affect our ability to attract and retain customers and employees.

We may incur significant losses as a result of ineffective risk management processes and strategies.

We seek to monitor and control our risk exposure through a risk and control framework encompassing a variety of separate but complementary financial, credit, operational, compliance and legal reporting systems, internal controls, management review processes and other mechanisms. While we employ a broad and diversified set of risk monitoring and risk mitigation techniques, those techniques and the judgments that accompany their application may not be effective and may not anticipate every economic and financial outcome in all market environments or the specifics and timing of such outcomes. Market conditions over the last several years have involved unprecedented dislocations and highlight the limitations inherent in using historical data to manage risk. If our risk and control framework, or the assumptions underlying our framework, prove ineffective, we may not be able to mitigate our risk exposures effectively, and, as a result, we could incur litigation, negative regulatory consequences, reputational damage or other adverse consequences, and we could suffer unexpected losses that may affect our business, financial condition or results of operations.

Our business may be adversely affected if we are unable to attract and retain qualified employees.

Competition for qualified personnel is intense in many areas of the financial services industry. If the Company provides inadequate succession planning, or is unable to continue to retain and attract qualified employees, this could result in a material adverse effect on the Company’s performance, including its competitive position.

We could be held responsible for environmental liabilities of properties we acquired through foreclosure.

In the course of business, we may acquire, through foreclosure, properties securing loans originated or purchased that are in default. Particularly in commercial real estate lending, there is a risk that material environmental violations could be discovered on these properties. In this event, we might be required to remedy these violations at the affected properties at our sole cost and expense. The cost of remedial action could substantially exceed the value of affected properties. We may not have adequate remedies against the prior owner or other responsible parties and could find it difficult or impossible to sell the affected properties. These events could have an adverse effect on our financial condition and results of operations.

Systems failures, interruptions or breaches of security concerning our information base, including the information we maintain relating to our customers, could have an adverse effect on our financial condition and results of operations.

In the ordinary course of business, we rely on electronic communications and information systems to conduct our business and to store sensitive data, including financial information regarding customers. We are subject to certain operational risks, including, but not limited to, data processing system failures and errors, inadequate or failed internal processes, human error, customer or employee fraud, cyberattacks, hacking, identity theft and catastrophic failures resulting from terrorist acts or natural disasters. We depend upon data processing, software, communication, and information exchange on a variety of computing platforms and networks and over the internet, and we rely on the services of a variety of vendors to meet our data processing and communication needs. We cannot be certain that all of our systems are entirely free from vulnerability to attack or other technological difficulties or failures. If information security is breached or other technology difficulties or failures occur, information may be lost or misappropriated, services and operations may be interrupted and we could be exposed to claims from customers. A cybersecurity breach or cyberattack could persist for an extended period before being detected and could result in theft of sensitive data or disruption of our transaction processing systems. Any of these results could have a material adverse effect on our reputation, business, financial condition, results of operations or liquidity.

We are subject to a variety of cybersecurity risks that, if realized, could adversely affect our business, financial condition and results of operations.

Information security risks for financial institutions such as the Company and the Bank are significant due to the use of online, telephone and mobile banking channels by customers and the increased sophistication and activities of organized crime, hackers, terrorists and other external parties. Third parties with whom we or our customers do business also present operational and information security risks to us. We see an increasing trend of cyberattacks targeting providers in the financial services industry, as well as increased security breaches or failures of their own systems. Our operations rely on the secure processing, transmission and storage of confidential information in our computer systems and networks. Our businesses rely on our digital technologies, computer and email systems, software, and networks to conduct their operations. As our reliance on technology systems increases, the potential risks of technology-related interruptions in our operations or the occurrence of cyber incidents also increases. Our technologies, systems, networks and our customers’ devices are periodically the target of cyberattacks, and may be the target of future cyberattacks, including through the introduction of computer viruses, and/or malicious code, or by means of phishing attacks, social engineering or other information security breaches. Malicious actors may also attempt to fraudulently induce employees, customers or other users of our systems to disclose sensitive information, including passwords and other identifying information, in order to gain access to data or our systems.

In recent years, there have been several well-publicized attacks on various companies, including in the financial services industry, and personal, proprietary, and public e-mail systems in which the perpetrators gained unauthorized access to confidential information and customer data, often through the introduction of computer viruses or malware, cyberattacks, phishing, social engineering or other means. Even if not directed at the Company or the Bank specifically, attacks on other entities with whom we do business or on whom we otherwise rely or attacks on financial or other institutions important to the overall functioning of the financial system could adversely affect, directly or indirectly, aspects of our business.

Information security risks continue to increase, in part because of the proliferation of new technologies, including artificial intelligence (“AI”), ongoing work-from-home arrangements, the use of the Internet and telecommunications technologies to conduct financial transactions, and the increased sophistication and activities of organized crime, hackers, terrorists, activists, and other external parties, some of which may be linked to terrorist organizations or hostile foreign governments. We have expended substantial resources to protect our systems and, as cyber threats continue to evolve, we may be required to expend significant additional resources to continue to modify or enhance our systems or to investigate and remediate vulnerabilities. System enhancements and updates may also create risks associated with implementing and integrating new systems. Due to the complexity and interconnectedness of information technology systems, the process of enhancing our systems can itself create a risk of systems disruptions and security issues. Failure to properly utilize system enhancements that are implemented in the future could result in impairment charges and could result in significant costs to remediate or replace the defective components. In addition, we may incur significant training, licensing, maintenance, consulting and amortization expenses during and after systems implementations, and any such costs may continue for an extended period of time.

We may not be able to anticipate, detect, or implement effective preventative measures against all potential threats, particularly because the techniques used by cyber criminals change frequently, often are not recognized until launched and can be initiated from a variety of sources. In addition, a cybersecurity breach or cyberattack could persist for an extended period before being detected, which could exacerbate the harmful effects of a successful cyberattack. If one or more of the events described above occurs, this could result in the unauthorized release, gathering, monitoring, misuse, loss or destruction of our or our customers’ confidential, proprietary and other information, the theft of customer assets through fraudulent transactions or disruption of our or our customers’ or other third parties’ business operations, which could result in legal or regulatory action, significant losses, increased compliance costs or reputational damage, any of which could adversely affect our business, financial condition or results of operations. Because the investigation of any information security breach is inherently unpredictable and would require substantial time to complete, the Company may not be able to quickly remediate the consequences of any breach, which may increase the costs, and enhance the negative consequences associated with a breach. In addition, to the extent the Company’s insurance covers aspects of any breach, such insurance may not be sufficient to cover all of the Company’s losses.

As cybersecurity and data privacy risks for banking organizations and other financial institutions have significantly increased in recent years, cybersecurity and data privacy issues have become the subject of increasing legislative and regulatory focus. We could be adversely affected if new legislation or regulations are adopted or if existing legislation or regulations are modified such that we are required to alter our systems or are required to change our business practices or privacy policies. If cybersecurity, data privacy, data protection, data transfer or data retention laws are implemented, interpreted or applied in a manner inconsistent with our current practices, we may be subject to fines, litigation or regulatory enforcement actions or ordered to change our business practices, policies or systems in a manner that adversely affects our results of operations.

We must adapt to information technology changes in the financial services industry, which could present operational issues, require significant capital spending, or impact our reputation.

The financial services industry is constantly undergoing technological changes, with frequent introductions of new technology-driven products and services. Our future success will depend, in part, upon our ability to address the needs of our customers by using technology to provide products and services that will satisfy customer demands for convenience, as well as to create additional efficiencies in our operations. To compete effectively, the Company may use new and evolving technologies, including AI and machine learning, to help improve its customer service, marketing, and products or to automate certain business decisions or risk management practices, such as fraud identification. We may not be able to effectively implement new technology-driven products and services or be successful in marketing these products and services to our customers. Failure to successfully implement and integrate future system enhancements could adversely impact the ability to provide timely and accurate financial information in compliance with legal and regulatory requirements, which could result in sanctions from regulatory authorities. Such sanctions could include fines and suspension of trading in our stock, among others. In addition, future system enhancements could have higher than expected costs and/or result in operating inefficiencies, which could increase the costs associated with the implementation as well as ongoing operations. Furthermore, legal and regulatory requirements relating to new technologies such as AI are evolving rapidly, and the inability to predict how this regulation will take shape and the absence of a uniform regulatory framework for AI may present unforeseen challenges in applying and relying on existing compliance systems. Complying with such requirements could increase expenses and exposure to legal or regulatory proceedings.

We rely on other companies to provide key components of our business infrastructure.

Third-party vendors provide key components of our business infrastructure. Any problems caused by these third parties, including as a result of their not providing us their services for any reason or their performing their services poorly, could adversely affect our ability to deliver products and services to our customers or otherwise conduct our business efficiently and effectively. Replacing these third party vendors could also entail significant delay and expense.

Third parties with which we do business could also be sources of information security risk to us, including from breakdowns, systems failures or cyber threats through their systems to our systems. Any of these occurrences could impact our ability to operate our business, or cause financial loss, potential liability to clients, reputational damage or regulatory consequences, any of which could have a material adverse effect on our financial condition or results of operations.

Our operations and financial performance could be adversely affected by natural disasters, and climate change may exacerbate those risks and create compliance, strategic, reputational and other risks.

Our business, as well as the operations and activities of our customers, could be negatively affected by climate change. Climate change presents both immediate and long-term risks to us and our customers and these risks are expected to increase over time. Climate change presents several risks, including (i) operational risk from the physical effects of climate events on our facilities and other assets, on our vendors’ facilities and on our customers’ assets, including real estate pledged as collateral for our loans; and (ii) transitional risks, including new or more stringent regulatory requirements and potential effects on our reputation and/or changes in our business as a result of our climate change practices, our carbon footprint and our business relationships with customers who operate in carbon-intensive industries.

Natural disasters can disrupt our operations, result in damage to our properties, reduce or destroy the value of the collateral for our loans and negatively affect the economies in which we operate, which could have a material adverse effect on our results of operations and financial condition. A significant natural disaster, such as a tornado, hurricane, earthquake, fire or flood, could have a material adverse impact on our ability to conduct business (including as a result of damage to our own facilities or systems or to the facilities or systems of third-party vendors on which we rely), and our insurance coverage may be insufficient to compensate for losses that may occur. Because we primarily serve individuals and businesses located in Northern New England, a natural disaster likely would have a greater impact on our business, operations and financial condition than if our business were more geographically diverse.

Both the frequency and severity of some kinds of natural disasters, including wildfires, flooding, tornadoes and hurricanes, have increased, and we expect will continue to increase, as a result of climate change. In addition, long-term shifts in the climate, including altered distribution and intensity of rainfall, rising sea levels and a rising heat index, negatively affect our ability to predict the effects of natural disasters accurately. Climate change may result in reduced availability of insurance for our borrowers, including insurance that protects property pledged as collateral, or disrupt their operations, which could increase our credit risk by diminishing borrowers’ repayment capacity or collateral values.

To the extent the U.S. continues to transition to a low-carbon economy, related risks may arise from changes in consumer preferences, technologies, public policies and legal and regulatory requirements. New laws and regulations could result in significant costs as the we implement compliance, disclosure and other programs. Failure to comply with any applicable laws or regulations could result in legal or regulatory sanctions and harm to our reputation. Failure to adequately consider transition risks in our operations could lead to a loss of market share, lower revenues, decreased asset values and higher credit costs. In addition, we may not be able to meet the diverging expectations and priorities of different groups, including our employees, shareholders and regulators. We could also experience increased expenses resulting from strategic planning, litigation and technology and market changes, and reputational harm as a result of negative public sentiment, regulatory scrutiny and reduced investor and employee confidence due to our response to climate change and our climate change strategy.

Risks associated with climate change are continuing to evolve rapidly, making it difficult to assess the effects of climate change on our business, and we expect that climate change-related risks will continue to evolve and increase over time.

Acts of terrorism, pandemics and other external events could harm our business.

Acts of terrorism, war or other international hostilities, civil unrest, violence or pandemics could cause disruptions to our business or the economy as a whole, such as the disruptions experienced during the COVID-19 pandemic. Any of these events could affect us directly (for example, by interrupting our systems, causing significant damage to our facilities or otherwise preventing us from conducting our ordinary business) or indirectly as a result of effects on our borrowers and other customers or third-party vendors (for example, by damaging property pledged as collateral for our loans). The Company has suffered, and could in the future suffer, adverse consequences to the extent that pandemics, terrorist activities, civil unrest, international hostilities, or other external events affect the financial markets or the economy in general or in any region in which the Company, or third parties on which the Company relies, operate.

Depending on the impact of external events on general economic and market conditions, there is a risk that adverse conditions could occur or worsen, including supply chain disruptions; higher inflation; decreased demand for our products and services or those of our borrowers, which could increase credit risk; challenges related to maintaining sufficient qualified personnel due to labor shortages, talent attrition, employee illness, or willingness to return to work; and disruptions to our business operations or those of our counterparties, vendors and other service providers.

Our ability to mitigate the adverse consequences of these occurrences is in part dependent on the quality of our resiliency planning, and our ability, if any, to anticipate the nature of any such event that occurs. The adverse effects of pandemics, terrorist activities, civil unrest, international hostilities or other external events also could be increased to the extent that there is a lack of preparedness on the part of national or regional emergency responders or on the part of other organizations and businesses that we transact with, particularly those that we depend upon, but have no control over.

Accounting and Tax Risk

Our financial statements are based in part on assumptions and estimates, which, if wrong, could cause unexpected losses in the future.

Pursuant to U.S. generally accepted accounting principles, we are required to use certain assumptions and estimates in preparing our financial statements, including in determining credit loss reserves, reserves related to litigation and the fair value of certain assets and liabilities, among other items. If assumptions or estimates underlying our financial statements are incorrect, we may experience material losses. For additional information, see Item 7. “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Critical Accounting Estimates.”

We may be required to write down goodwill and other identifiable intangible assets.

When we acquire a business, a portion of the purchase price of the acquisition may be allocated to goodwill and other identifiable intangible assets. The excess of the purchase price over the fair value of the net identifiable tangible and intangible assets acquired determines the amount of the purchase price that is allocated to goodwill. At December 31, 2024, our goodwill and other identifiable intangible assets totaled $95.7 million. Under current accounting standards, if we determine goodwill or intangible assets are impaired, we would be required to write down the value of these assets to fair value. We conduct an annual review, or more frequently if events or circumstances warrant such additional review, to determine whether goodwill is impaired. We recently completed our goodwill impairment analysis as of November 30, 2024 and concluded goodwill was not impaired. We conduct a review of our other intangible assets for impairment should events or circumstances warrant such review. There were no triggers for such review for impairment for other intangible assets for the year ended December 31, 2024. We may be required to take an impairment charge in the future. Any impairment charge would have a negative effect on our shareholders’ equity and financial results and may cause a decline in our stock price.

On January 2, 2025, we completed the acquisition of Northway. As part of this acquisition, we expect additional goodwill and other intangible assets to be recognized upon completion of our purchase accounting, as further described within Note 23 of the consolidated financial statements. The goodwill and intangible assets created from the acquisition of Northway will also be subject to assessment for impairment as described above.

Changes in accounting standards can be difficult to predict and can materially impact how we record and report our financial condition and results of operations.

Our accounting policies and methods are fundamental to how we record and report our financial condition and results of operations. From time to time, the FASB and the SEC change the financial accounting and reporting standards that govern the preparation of our financial statements. These changes can be hard to anticipate and implement and can materially impact how we record and report our financial condition and results of operations. For example, the introduction of Accounting Standard Update No. 2016-13, Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments (“ASU 2016-13”), as updated, commonly referred to as “CECL,” substantially changed how we calculate our allowance for credit losses. Other future changes in accounting standards could materially impact how we report our financial condition, and we cannot predict whether such standards will be adopted or their resultant impact.

Changes in tax laws and regulations and differences in interpretation of tax laws and regulations may adversely impact our financial statements.

Local, state or federal tax authorities may interpret tax laws and regulations differently than we do and challenge tax positions that we have taken on tax returns. This may result in differences in the treatment of revenues, deductions, credits and/or differences in the timing of these items. The differences in treatment may result in payment of additional taxes, interest or penalties that could have a material adverse effect on our results. In addition, there may be future changes to tax laws, administrative rulings or court decisions that could adversely affect our financial condition, including an increased provision for income taxes and/or reduced net income. We are not able to predict the timing or impact of any changes in local, state or federal tax laws.

Cybersecurity Risk Management and Strategy

The Company has developed and implemented a comprehensive cybersecurity risk management program that is intended to protect the secure processing, transmission and storage of confidential information in its computer systems and networks. The Company’s cybersecurity risk management program, a component of the Company’s Enterprise Risk Management (“ERM”) Program, is based on the National Institute of Standards and Technology (“NIST”) Cybersecurity Framework, regulatory guidance and other industry standards. The Company’s process for identifying, assessing, managing and prioritizing cybersecurity risks throughout the Company includes:

• A third party risk assessment program for the Company’s third party vendors that access the Company’s data (each, a “Vendor”) to ensure that all Vendors meet the Company’s cybersecurity requirements, including, periodic risk assessments of Vendors, monitoring Vendor compliance with the Company’s cybersecurity requirements, and a requirement that all contracts with Vendors include provisions requiring the Vendor to notify the Company of any cyber incident, and/or to maintain minimum levels of cybersecurity insurance;
• A security awareness program that includes training employees on best practices for securing the Company’s data, as well as regular social engineering testing to keep employees informed of cybersecurity threats and to train them to look for malicious emails and other potential cybersecurity threats;
• A dedicated information security team that monitors threats and vulnerabilities that arise, and regularly performs threat intelligence and vulnerability management;
• The Company’s engagement of a third party to conduct periodic independent testing of the Company’s cybersecurity defenses to confirm that the defenses are effective;
• A Managed Detection and Response (“MDR”) service that continuously monitors the Company’s systems and alerts the Company’s information security team of any detected anomalies or suspicious activity and stops any event that is deemed dangerous to the Company’s systems or networks;
• An Incident Response Plan (“IRP”) and Business Continuity Plan (“BCP”) which outline steps to be taken during a cyber incident and to recover systems and continue business operations following a cyber incident; and
• A Cybersecurity Incident Response Team (“CSIRT”) that tracks cyber incidents, including those that affect third parties that are handling the Company’s data.

Cybersecurity Threats

During the fiscal year ended December 31, 2024, the Company did not identify any risks from cybersecurity threats, including as a result of any previous cybersecurity incidents, that have materially affected, or that are reasonably likely to materially affect the Company, including its business strategy, results of operations, or financial condition other than the risks described in Item 1A. “Risk Factors”.

Cybersecurity Governance

Board of Directors’ Oversight. The Company’s Board of Directors oversees the Company’s cybersecurity program, including the oversight of risks related to cybersecurity through various committees that are responsible for monitoring and testing the Company's information security. The Board of Directors conducts an annual review of the Company’s cybersecurity- related policies. Quarterly, the Company’s Senior Vice President, Director of Information Security (“DIS”) presents reports to the Audit Committee on vulnerability management and cybersecurity testing effectiveness, emerging threats and industry and regulatory changes that affect cybersecurity, and responds to inquiries from the Audit Committee. In addition, the Technology Committee receives and evaluates quarterly updates from the DIS on cybersecurity performance and on cybersecurity trends and strategies. The Board of Directors receives quarterly updates from the EVP, Chief Risk Officer (“CRO”) on cybersecurity metrics and the cybersecurity risk management program’s performance.

Management Oversight. While the Board of Directors and its Audit and Technology Committees oversee management’s processes related to cybersecurity risks, management is responsible for identifying, monitoring and mitigating the material cybersecurity risks that face the Company. The Company’s CRO is directly responsible for the overall cybersecurity risk management program which is a part of the Company's ERM Program. The CRO and the DIS oversee the information security department’s implementation and maintenance of the cybersecurity risk management program, including oversight of Vendors and regular reporting to the Board of Directors and its Audit and Technology Committees on the effectiveness of the cybersecurity risk management program. The DIS updates the CRO as appropriate, including as new developments or information related to cyber incidents arise.

The Company’s CRO has over 27 years of experience in cybersecurity and information technology. The CRO joined the Company in 2011 and became CRO in July 2023. Prior to becoming CRO, he served as SVP and Director of Information Security & ERM for six years and prior to that served five years as Vice President and Senior Information Security Officer of the Company. Prior to joining the Company, the CRO had a ten year career in information technology and began his career serving with the U.S. Air Force, specializing in information technology, cybersecurity, risk mitigation, and encrypted communications.

The Company’s DIS joined the Company in 2023 and has over 20 years of experience in information technology and cybersecurity. The DIS has held senior management positions in information security for the past ten years. The DIS holds several industry certifications including Certified Information Systems Security Professional (“CISSP”), Certified Information Systems Auditor (“CISA”), Certified in Risk and Management Systems Controls (“CRISC”) and Certified Data Privacy Solutions Engineer (“CDPSE”).

As of December 31, 2024, the Company owns its principal executive offices, located at 2 Elm Street, Camden, Maine, and the Company leases additional executive offices at 3 Canal Plaza, Portland, Maine. The Company also owns and operates a service center in Rockport, Maine, and owns or leases, and operates, 56 branches located throughout Maine, a branch in Portsmouth, New Hampshire, and a commercial loan production office in Manchester, New Hampshire. None of the properties owned by the Company are subject to a mortgage or other encumbrance. All facilities are fully utilized and considered suitable and adequate for the purposes intended.

For additional information regarding the Company's premises and equipment and lease obligations see Notes 6 and 7 of the consolidated financial statements within Item 8. Financial Statements and Supplementary Data.

The Company is currently involved, and from time to time in the future may become involved, in various legal claims that arise in the normal course of the Company’s business. The Company may also in the future become involved in other regulatory, judicial and/or arbitration proceedings relating to matters that arise in connection with the conduct of the Company’s business. Because of the difficulty in predicting the outcome of these matters, particularly when they are in their early stages, the Company cannot predict what the final outcome of each legal proceeding may be, or what the eventual loss, fine or penalty related to each proceeding may be, if any. Based on currently available information, in our opinion the results of legal proceedings that are currently pending are not expected to have a material effect on our 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. 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. As of December 31, 2024 and 2023, the Company did not maintain material reserves against legal claims.

The discussion below focuses on the factors affecting our consolidated results of operations and financial condition at and for the year ended December 31, 2024, and where appropriate, factors that may affect our future financial performance, unless stated otherwise. This discussion should be read in conjunction with the consolidated financial statements, notes to the consolidated financial statements and selected consolidated financial data.

Refer to the Company’s 2023 annual report on Form 10-K filed with the SEC on March 8, 2024 for the discussion of results of operations and financial condition at and for the year ended December 31, 2023.

INTRODUCTORY NOTE

On January 2, 2025, the Company completed its previously announced stock-for stock acquisition of Northway. The total consideration paid by the Company consisted of approximately $96.5 million (approximately 2.3 million shares of the Company’s common stock) based on the closing price of the Company’s common stock of $42.25, as reported by Nasdaq on January 2, 2025. Results of operations and cash flows for all periods presented in this Annual Report on Form 10-K reflect only the results of operations and cash flows of the Company and do not include the results of operations or cash flows of Northway. In addition, neither the shares of Company common stock issued as consideration in the acquisition nor any purchase accounting adjustment that the Company will make in connection with the acquisition are reflected in the Company’s financial condition for any period presented in this Annual Report on Form 10-K. The Company will account for the Northway acquisition as a business combination in results of operations for the first quarter of 2025. For additional information regarding the Company’s acquisition of Northway, refer to Note 23 of the consolidated financial statements in Item 8 of this Annual Report on Form 10-K.

ACRONYMS AND ABBREVIATIONS

The acronyms and abbreviations identified below are used throughout Item 7. “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 this section of the Form 10-K:

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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 core net income; core diluted earnings per share; core return on average assets; core return on average equity; pre-tax, pre-provision income and core pre-tax, pre-provision; income; the efficiency ratio; return on average tangible equity and core return on average tangible equity; tangible book value per share and tangible common equity ratio; net interest income (fully-taxable equivalent); and core deposits and average core deposits. We utilize these non-GAAP financial measures for purposes of measuring our performance against our peer group and other financial institutions and analyzing our internal performance. We also believe these non-GAAP financial measures help investors better understand the Company’s operating performance and trends and allow 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.

Core Net Income; Core Diluted Earnings per Share; Core Return on Average Assets; and Core Return on Average Equity. Core net income, core diluted earnings per share, core return on average assets and core return on average equity are each supplemental measures that exclude certain transactions as outlined and calculated in the table below. Each item reconciles to reported net income, diluted earnings per share, return on average assets and return on average equity. The Company believes these core financial metrics assist users of its financial statements with their financial analysis period-over-period as they are core for certain non-recurring items.

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

(1) Assumed a 21% income tax rate for eligible costs.

Pre-Tax, Pre-Provision Income. Pre-tax, pre-provision income is a supplemental measure of operating earnings and performance. Pre-tax, pre-provision income is calculated as net income before adjustment for (credit) provision for credit losses and adjustment for income tax expense. This supplemental measure became a widely used by financial institutions as a measure of financial performance for comparability across financial institutions.

(In thousands)

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 used by financial institutions 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.

(In thousands)

(1) Reported on a tax-equivalent basis using a 21% income tax rate.

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

Return on Average Tangible Equity and Core Return on Average Tangible Equity. Return on average tangible equity is the ratio of (i) net income, adjusted for tax effected amortization of core deposit intangible assets and other adjustments, as necessary, to (ii) average shareholders' equity, adjusted for average goodwill and core deposit intangible assets. This adjusted financial ratio reflects a shareholders' return on tangible capital deployed in our business and is a common performance measure within the financial services industry. Core return on average tangible equity is calculated the same as return on average tangible equity but uses core net income which excludes certain transactions as shown in the table above. The Company believes this adjusted metric assists users of its financial statements with their period-over-period financial analysis as it is adjusted for certain non-recurring items.

(In thousands)

(1) Assumed a 21% income tax rate.

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

Tangible common equity is the ratio of (i) shareholders’ equity less goodwill and core deposit intangible assets to (ii) total assets less goodwill and core deposit intangible assets. This ratio is a measure used within our industry to assess whether or not a company is highly leveraged.

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

Net Interest Income (Fully-Taxable Equivalent). Net interest income on a fully-taxable equivalent basis is net interest income plus the taxes that would have been paid had tax-exempt securities been taxable. This number attempts to enhance the comparability of the performance of assets that have different tax liabilities. This is a common measure with the financial services industry and is used within the calculation of net interest margin on a fully-taxable equivalent basis.

(In thousands)

(1) Reported on a tax-equivalent basis using a 21% income tax rate.

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 lower cost. The Company calculates core deposits as total deposits less CDs and brokered deposits. Management believes core deposits is a useful measure to assess the Company's deposit base, including its potential volatility.

(In thousands)

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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 deposits less CDs. Management believes core deposits is a useful measure to assess the Company's deposit base, including its potential volatility.

(In thousands)

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

CRITICAL ACCOUNTING ESTIMATES

Critical accounting estimates 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 materially differ from our current estimates, as a result of changing conditions and future events. Estimates particularly critical and susceptible to significant near-term change, include (i) the ACL on loans and (ii) accounting for acquisitions and the subsequent review of goodwill and intangible assets generated in an acquisition for impairment.

Refer to Note 1 of the consolidated financial statements for additional details of the Company's accounting policies, including new accounting standards recently adopted.

Allowance for Credit Losses (“ACL”). The ACL is calculated using the current expected credit loss accounting model, often referred to as “CECL.” Under CECL, the ACL at each reporting period serves as our best estimate of projected credit losses over the contractual life of certain assets, adjusted for expected prepayments, given an expectation of economic conditions and forecasts as of the valuation date.

The recorded ACL on loans is determined based on the amortized cost basis of the assets and may be determined at various levels, including homogeneous loan pools and individual credits with unique risk factors. We use a discounted cash flow approach to calculate the ACL for each loan segment. Within the discounted cash flow model, a probability of default (“PD”) and loss given default (“LGD”) assumption is applied to calculate the expected loss for each loan segment. PD is the probability the asset will default within a given timeframe and LGD is the percentage of the assets not expected to be collected due to default. PD and LGD data may be derived using (1) internal historical default and loss experience, as well as from (2) external data if there are not statistically meaningful loss events or our own internal loss data does not span a full economic cycle for a given loan segment.

CECL may create more volatility in our ACL and particularly in our ACL on loans. Under CECL, our ACL may increase or decrease period-to-period based on many assumptions, including, but not limited to: (i) macroeconomic forecasts and conditions; (ii) a change in the forecast period; (iii) a change in the reversion speed; (iv) a change in the prepayment speed assumption; (v) various qualitative factors outlined in ASU 2016-13.

ACL on Loans. We consider the ACL on loans to be a critical accounting estimate given the uncertainty in evaluating the allowance required to cover management’s estimate of all expected credit losses over the expected contractual life of the loans in its portfolio. Determining the appropriateness of the allowance is a key management function that requires significant judgment and estimate by management about the effect of matters that are inherently uncertain. Subsequent evaluations of the current loan portfolio, in light of the factors then prevailing, may result in significant changes in the allowance in future periods. While our current evaluation indicates that the ACL on loans at December 31, 2024 and 2023 was appropriate, the allowance may need to be increased under adversely different conditions or assumptions.

The significant key assumptions used with the ACL on loans calculation at December 31, 2024 and 2023 using the CECL methodology, included:

• Macroeconomic factors (loss drivers): Macroeconomic factors are used within our discounted cash flow model to forecast the PD over the forecast period. As macroeconomic factor conditions worsen, the PD increases, and the

corresponding LGD increases, resulting in an increase in the ACL on loans. We monitor and assess Maine unemployment, changes in Maine GDP, changes in National GDP, and changes in Maine's Housing Price Index at least annually to determine if these macroeconomic factors continue to be the most predictive indicator of losses within our loan portfolio. Macroeconomic factors used in the calculation of the ACL on loans may change from time to time and in times of greater uncertainty, we may consider a range of possible forecasts and evaluate the probability of each scenario. We assessed our loss factors again in the fourth quarter of 2024 and there were no changes made to the ACL on loans calculation for reporting as of December 31, 2024.

• Forecast Period and Reversion speed: The company uses a reasonable and supportable forecast period in developing the ACL, which represents the time period that management believes it can reasonably forecast the identified loss drivers. Generally, the forecast period management believes to be reasonable and supportable is set annually and validated through an assessment of economic leading indicators. In periods of greater volatility and uncertainty, such as that seen across the global markets and economies, including the U.S., we are likely to use a shorter forecast period, whereas when markets, economies and various other factors are considered more stable and certain, we are likely to use a longer forecast period. Generally, we expect our forecast period to range from one to three years. Once the reasonable and supportable forecast period is determined, the company reverts its loss expectations to the long-run historical mean for the remainder of the contract life of the asset, adjusted for prepayments. In determining the length of time over which the reversion will take place (i.e. “reversion speed”), we consider such factors such as, but not limited to, historical loan loss experience over previous economic cycles, as well as where we believe we are within the current economic cycle. At December 31, 2024 and 2023, we used a two-year forecast period and a two-year reversion period for each loan segment to measure the ACL on loans as we believe this methodology aligns the economic forecasted data used to calculate the ACL with the Company’s internal views of the future economic state.
• Prepayment speeds: Prepayment speeds are determined for each loan segment utilizing our own historical loan data, as well as consideration of current environmental factors. The prepayment speed assumption is utilized with the discounted cash flow model (i.e. the CECL model) to forecast expected cash flows over the contractual life of the loan, adjusted for expected prepayments. A higher prepayment speed assumption will drive a lower ACL, and vice versa.
• Qualitative factors: Companies are required to consider various qualitative factors that may impact expected credit losses. We continue to consider qualitative factors in determining and arriving at our ACL on loans each reporting period. In 2024 the Company increased the qualitative factors used to address the increased risk for all loans that were rated as criticized or classified.

As of December 31, 2024 and 2023, the recorded ACL on loans was $35.7 and $36.9 million, respectively, and represented our best estimate of expected credit losses within our loan portfolio as of each date. However, we may adjust our assumptions to account for differences between expected and actual losses each period. A future change of our assumptions will likely alter the level of allowance required and may have a material impact on future results of operations and financial condition. The ACL is reviewed periodically within a calendar quarter to assess trends in the aforementioned key assumptions, as well as asset quality within our loan portfolio, and we consider the impact of these trends on the ACL and the Company's financial condition, if any. The ACL on loans is reviewed and approved on a quarterly basis by the Company's Audit Committee, and later reviewed and ratified by the Bank's Board of Directors.

Refer to “—Results of Operations—Provision for Credit Losses,” “—Financial Condition—Asset Quality,” and Note 3 of the consolidated financial statements for further discussion.

Purchase Price Allocation and Impairment of Goodwill and Identifiable Intangible Assets. We record all acquired assets and liabilities at fair value, which is an estimate determined by the use of internal valuation techniques. We also may engage external valuation services to assist with the valuation of material assets and liabilities acquired, including, but not limited to, loans, core deposit intangibles and/or other intangible assets, real estate and time deposits. As part of purchase accounting, we typically acquire goodwill and other intangible assets as part of the purchase price. These assets are subject to ongoing periodic impairment tests under differing accounting models. We did not acquire any other company or assets during 2024 or 2023, however, refer to Note 23 of the consolidated financial statements for subsequent events.

Goodwill impairment evaluations are required to be performed at least annually, but may be required more frequently if certain conditions indicate a potential impairment may exist. Our policy is to perform the goodwill impairment analysis annually as of November 30th, or more frequently as warranted. The goodwill impairment evaluation is required to be performed at the reporting unit level. Goodwill impairment is measured by the amount the book value of the reporting unit exceeds its fair value, and an impairment charge is recorded for the lesser of this amount or the amount to write-down goodwill to zero.

We elected to use the quantitative analysis to perform the annual goodwill impairment assessment as of November 30, 2024 and 2023 and concluded that goodwill was not impaired. We may use a qualitative analysis to evaluate goodwill for impairment when it is believed that it is not more-likely-than-not that the fair value of the reporting unit is below its book value, or if a quantitative analysis was recently used to estimate the fair value of the reporting unit, and there are not any indications of events that would suggest such conclusions for impairment have changed. The Company did not recognize any impairment of goodwill in 2024, 2023 or 2022.

Refer to “—Financial Condition—Goodwill and Core Deposit Intangible Assets” and Note 4 of the consolidated financial statements for further discussion.

EXECUTIVE OVERVIEW

2024 Overview. Throughout 2024, we continued our work and efforts from 2023 with a goal of continuing to improve and optimize our net interest margin and maintain our strong asset quality. Over the course of 2024, we took various actions to improve our net interest margin. Those actions, combined with the Federal Reserve reducing the Federal Funds Rate by 100 basis points during the second half of 2024, resulted in an improvement to our net interest margin from a reported 2.30% for the first quarter of 2024 to 2.57% for the fourth quarter of 2024. Our improvement in net interest margin consistently each calendar quarter throughout 2024, along with continued strong asset quality and disciplined management of our operating expenses, translated into strong reported earnings for 2024 of $53.0 million, or $3.62 per a diluted share, which was 22% higher than reported net income for 2023. Profitability continues to improve, highlighted by a return on average assets of 1.01%, return on average equity of 10.99% and a return on tangible shareholders’ equity (non-GAAP) of 13.50% for the fourth quarter of 2024.

On September 10, 2024, we announced our planned acquisition of Northway, the bank holding company of Northway Bank, which we later closed on January 2, 2025. The acquisition of Northway presented a great opportunity for two historic franchises in Northern New England to combine and create a premier banking and financial services franchise across Maine and New Hampshire through 73 total branches. Through the combination, the Company’s total assets are approximately $7.0 billion as of January 2, 2025.

We enter 2025 with strong financial momentum and a balance sheet positioned well for the current interest rate environment.

Operating Results. For 2024, the Company reported net income of $53.0 million and diluted EPS of $3.62, each an increase of 22% compared to 2023. During 2023, we took certain actions to improve the Company’s future earnings capacity and profitability by selling certain investments and redeploying the proceeds into higher yielding assets. In doing so, the Company recorded pre-tax investment losses totaling $10.3 million in 2023. Also, during 2023, we wrote-off a $1.8 million Signature Bank corporate bond in full due to Signature Bank’s failure. During 2024, we sold our position in this corporate bond and recovered $910,000, before taxes. Adjusting for these items, along with $1.2 million, before taxes, of merger-related costs associated with the acquisition of Northway Financial during 2024, we reported core net income of $53.4 million and diluted EPS of $3.65, each an increase of 1% over 2023.

Financial Highlights. Our financial highlights for 2024 include:

Improving Profitability and Return Profile – Improved net interest margin and disciplined management of operating expenses, the Company resulted in positive operating leverage of 4% for 2024, which drove improved financial profitability and shareholder returns, headlined by a return on average assets of 0.92%, return on average equity of 10.36% and return on average tangible equity (non-GAAP) of 12.83%, compared to 0.76%, 9.30% and 11.83% for 2023, respectively.

Strong Asset Quality – Key credit quality metrics in both commercial and consumer portfolios remained resilient throughout 2024, headlined by non-performing assets of 0.11% of total assets and past due loans of 0.05% of total loans at December 31, 2024.

Strong Capital Position – At December 31, 2024, all of our regulatory capital ratios were well in excess of regulatory capital requirements. Our capital and loan reserve levels, along with our strong credit quality position us for continued success.

(In thousands, except per share data and ratios)

43

RESULTS OF OPERATIONS

Net Interest Income and Net Interest Margin

Net interest income is the interest earned on our lending activities, investment securities and other interest-earning assets, less the interest paid on interest-bearing deposits and borrowings (i.e. our primary business activities). Net interest income, which is our largest source of revenue, accounted for 75%, 81% and 78% of total revenues for the years ended 2024, 2023 and 2022, respectively. Net interest income is affected by 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 Income. Net interest income on a fully-taxable equivalent basis for the year ended December 31, 2024 was $133.1 million, a slight decrease of $75,000 from 2023. The decrease consisted of a $23.1 million, or 25%, increase in interest expense, which was partially offset by an increase in interest income on a fully-taxable equivalent basis of $23.3 million, or 10%, between periods.

• The Company’s average cost of funds for the year ended December 31, 2024 was 2.28%, compared to 1.83% for the year ended December 31, 2023, and was the driver for the increase in interest expense year-over-year. The increase in our average funding costs year-over-year reflects the higher short-term interest rate environment, highlighted by an average Federal Fund Effective Interest Rate of 5.14% for the year ended December 31, 2024, compared to 5.02% for the year ended December 31, 2023. Beginning in September 2024, the Federal Reserve Bank began lowering the Federal Funds Interest Rate. From September 2024 through December 31, 2024, the Federal Funds Rate was decreased by 1.00%, and the Federal Funds Target rate stood at 4.25% to 4.50% at December 31, 2024.
• The increase in interest income on a fully-taxable equivalent basis was also primarily driven by the higher interest rate environment between years. For the year ended December 31, 2024, the Company’s yield on average interest-earning assets was 4.62%, compared to 4.19% for the year ended December 31, 2023. The average 10-year U.S. Treasury Rate for 2024 was 4.58%, compared to 3.96% for 2023.

Net Interest Margin. Net interest margin is calculated as net interest income on a fully-taxable equivalent basis as a percentage of average interest-earning assets. Our net interest margin on a fully-taxable equivalent basis for each of the years ended December 31, 2024 and 2023 was 2.46%.

The following table presents, for the periods noted, average balances, interest income, interest expense, and the corresponding average yields earned and rates paid, as well as net interest income, net interest rate spread and net interest margin:

(Dollars in thousands)

(1) Reported average balances are calculated on a daily basis.

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

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

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 year's rate), (b) changes in rates (change in rate multiplied by current year'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.

(In thousands)

Net interest income included the following for the periods indicated:

(In thousands)

The Company's consolidated financial statements and the notes to the consolidated financial statements presented within have been prepared in accordance with GAAP, which requires the measurement of the financial position and operating results in terms of historical dollars and, in some cases, current fair values without considering changes in the relative purchasing power of money over time due to inflation. Unlike many industrial companies, substantially all of our assets and virtually all of our liabilities are monetary in nature. As a result, interest rates have a more significant impact on our performance than the general level of inflation. Over short periods of time, interest rates and the yield curve may not necessarily move in the same direction or in the same magnitude as inflation.

(Credit) Provision for Credit Losses

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

Provision for loan losses. For the year ended December 31, 2024, a provision for loan losses of $53,000 was recorded and was primarily driven by improvement within our macroeconomic forecast for 2024 and lower loan growth of $17.2 million during 2024, compared to $87.7 million of loan growth for 2023. Asset quality continued be strong through 2024, as highlighted by non-accruals of 0.12% of total loans and net charge-offs of 0.03% of average loans as of and for the year ended December 31, 2024, compared to 0.13% and 0.03%, respectively, as of and for the year ended December 31, 2023. The Company’s asset quality remained strong at December 31, 2024 and 2023. Refer to “—Financial Condition—Asset Quality” for further details.

Provision for credit losses on off-balance credit exposures. At December 31, 2024, the ACL on off-balance sheet credit exposures was $2.8 million, as compared to $2.4 million as of December 31, 2023. The increase was driven by the increase in unfunded credit lines of $37.0 million and the increase in the residential and commercial pipelines of $19.4 million between periods.

Provision for HTM debt securities: In the first quarter of 2023, the Company fully wrote-off a $1.8 million Signature Bank corporate bond due to Signature Bank’s failure. In the first quarter of 2024, the Company sold its Signature Bank corporate bond and recovered proceeds of $910,000.There was no additional provision expense recorded for the years ended December 31, 2024 and 2023, respectively.

Non-Interest Income

The following table sets forth information regarding non-interest income for the periods indicated:

(Dollars in thousands)

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

Debit card income represents the interchange fees earned from debit card transactions of our business and consumer checking account customers, and the annual incentive bonus received from our network provider.

Service charges on deposit accounts represents the fees earned from providing various services to deposit customers, including overdraft, normal fees for servicing deposit accounts, and cash management fees for business customers. The increase in 2024 compared to 2023 was primarily driven by: (1) an increase in cash management fees of $399,000 as commercial deposit customers opted to pay services fees and waive any service fee credit as short-term interest rates increased, and (2) overdraft fee income increased $255,000 to $5.7 million for the year ended 2024.

Income from fiduciary services represents the fees earned for investment advisory and trust services provided by Camden National Wealth Management. The fees earned are primarily a percentage of our clients' assets under management. Assets under management increased 10% during 2024 to $1.2 billion as of December 31, 2024.

Mortgage banking income, net is generated through the sale of residential mortgage loans to secondary market investors and also includes income recognized upon the sale of residential mortgages in which we maintain the servicing rights creating a mortgage servicing asset, net of related amortization of the capitalized mortgage servicing asset. Our practice has been to sell the servicing rights for residential mortgages originated, except for certain third party relationships that require the Company to service the loan.

The increase in mortgage banking income, net for the year ended 2024 compared to 2023, was driven by the increase in net gains recognized on residential mortgage loan sales. In 2024, we sold 56% of our residential mortgage production, compared to 48% in 2023.

Brokerage and insurance commissions represent the fees earned for brokerage services, investment advisory and insurance services provided by the Bank, doing business as Camden Financial Consultants. Assets under administration grew 15% during 2024 to $913.3 million as of December 31, 2024.

Bank-owned life insurance represents the change in cash surrender value of the Company's various BOLI policies in place for certain current and former officers of the Company and Bank. The change in cash surrender value reflects the performance of the underlying investments of the policies.

Net loss on sale of securities represents the realized (loss) gain upon sale of our debt investments. In 2023, we executed investment sales that resulted in pre-tax losses of $10.3 million. The trades were completed to reposition a portion of our balance sheet. We reinvested $126.8 million of cash proceeds from the investment sales and expect these trades will optimize our balance sheet and improve future earnings and profitability. We did not execute on any similar investment trades during 2024. Refer to “—Financial Condition—Investments,” and Note 3 of the consolidated financial statements for further discussion.

Other Income includes third party merchant and credit card commissions, customer loan swap fees and other miscellaneous fees and net gains on equity securities.

Non-Interest Expense

The following table sets forth information regarding non-interest expense for the periods indicated:

(Dollars in thousands)

Salaries and employee benefits includes employee wages, commissions, incentives, equity compensation, employer-related taxes, insurance benefits, and other certain employee-related costs, net of direct employee-related costs incurred for loan originations. The increase for the year ended December 31, 2024 compared to 2023 was primarily driven by an increase in performance-based incentives of $3.5 million between periods. The operating environment in 2023 included the Federal Reserve increasing the Federal Funds Interest Rate by 1.00% to a target range of 5.25% to 5.50% at December 31, 2023, as well as the well-publicized failure of three banks in the U.S., one of which resulted in the Company writing-off a $1.8 million Signature Bank bond during 2023 (refer to Note 3 of the consolidated financial statement for further details). In comparison, the Federal Reserve lowered the Federal Funds Interest rate by 1.00% during the second half of 2024 to a target range of 4.25% to 4.50% at December 31, 2024.

Furniture, equipment and data processing includes depreciation expense of capitalized furniture, equipment and data-related costs, and ongoing system and other data processing costs, including outsourced solutions. The increase for the year ended December 31, 2024 compared to 2023 was driven by the Company’s continued investments in customer-facing technology platforms, which during 2024 included investment in an enhanced wealth management platform and continued investments in our online banking platform and mobile app, internal systems and production platforms to drive increased productivity and efficiencies, and updates to various information security and resiliency-related systems and enhancements.

Net occupancy costs include building and property costs associated with the operation of our branches, loan production offices and service centers, including, but not limited to, rent, depreciation, maintenance and related taxes, net of rental income earned from the lease of office space.

Consulting and professional fees include third party consulting services and other professional fees, such as audit and tax services, legal services, and Company and Bank director fees. During 2023, we incurred legal, consulting and director fees associated with the succession and transition of the Company and Bank’s President and CEO, which was the driver of elevated consulting and professional costs for 2023 in comparison to 2024.

Debit card expense is the cost incurred for the generation of debit card income, including third party switch network provider fees and related data transmission costs, and plastic card costs for the generation of debit cards for checking account customers. The increase for the year ended December 31, 2024 compared to 2023 was driven by rising vendor costs, including fraud detection and prevention costs. Many of the costs associated with debit card expense are fixed per unit regardless of the activity that generates income, and, thus, an increase or decrease in debit card income may not necessarily directly correlate with the change in debit card expense year-over-year.

Regulatory assessments are the costs incurred and paid to various regulatory agencies, including the FDIC and OCC. Regulatory assessment fees are based on a number of factors, including but not limited to, asset growth, regulator risk assessment and positive or negative trends specific to the financial institution.

Merger and acquisition costs are the acquisition costs, including legal, investment banker, consulting and other related costs, incurred through December 31, 2024 associated with our acquisition of Northway Financial on January 2, 2025. Of the merger and acquisition costs incurred through December 31, 2024, all but $56,000 of the costs were estimated to be non-deductible for federal income tax purposes. We anticipate incurring additional merger-related costs during 2025, with the majority of costs expected to be incurred during the first half of 2025.

The following table summarizes Merger-related costs incurred through December 31, 2024:

(Dollars in thousands)

OREO and collection costs, net include the costs associated with OREO, collection and foreclosure efforts for the Company's loans. Should asset quality metrics deteriorate in 2025, the costs associated with OREO, collection and foreclosure efforts likely would increase.

Amortization of core deposit intangible assets represents the amortization expense on core deposit intangible assets. Refer to “—Financial Condition—Goodwill and Core Deposit Intangible Assets,” and Note 4 of the consolidated financial statements for further details. We anticipate the creation of additional core deposit intangible assets associated with the acquisition of Northway Financial on January 2, 2025. These core deposit intangible assets are definite-lived intangible assets and will be amortized over their estimated useful life.

Other expenses include employee-related costs, such as certain SERP and other postretirement benefits expenses; hiring, training, education, meeting and business travel costs; donations and marketing costs; postage, freight and courier costs; and other expenses. The decrease for the year ended December 31, 2024, compared to the same period in 2023, was driven by external recruiting costs associated with the CEO succession and transition that was effective on January 1, 2024.

Income Tax Expense

Income tax expense for the years ended December 31, 2024 and 2023 was $12.5 million and $10.5 million, respectively, and resulted in an effective income tax rate of 19.0% for 2024 and 19.4% for 2023, respectively. The Company's effective income tax rate for the year ended December 31, 2024 of 19.0% was lower than our marginal tax rate of 22.8%, which includes our 21.0% federal income tax rate and a 1.8% blended state income tax rate, net of federal tax benefit. The decrease in the effective tax rate for the year ended December 31, 2024 compared to 2023, was primarily due to an increase in tax credit investments, partially offset by nondeductible merger and acquisition costs and an increase in income before income tax expense of $11.6 million, or 21.6%, compared to 2023,

The Company's deferred tax assets were $40.0 million and $42.2 million at December 31, 2024 and 2023, respectively. The decrease in deferred tax assets during 2024 was primarily driven by the decrease in unrealized losses on the AFS investments portfolio, including the remaining losses from the investments transferred from AFS to HTM in June 2022. While not anticipated as of December 31, 2024, should the Company realize a loss on these investments, the loss would be characterized as an ordinary loss for income tax purposes and not as a capital loss, and thus would not carry restrictions on use of any such loss. We continuously monitor and assess the need for a valuation allowance on our deferred tax assets, and we determined that no valuation allowance was necessary as of December 31, 2024 or December 31, 2023.

Refer to “—Financial Condition—Investments,” and Note 2 of the consolidated financial statements for further discussion of investments.

Refer to Note 19 of the consolidated financial statements for further discussion of income taxes and related deferred tax assets and liabilities.

2023 Operating Results as Compared to 2022 Operating Results

Results of operations for the year ended December 31, 2023 compared to the year ended December 31, 2022 can be found in Item 7. “Management’s Discussion and Analysis of Financial Condition and Results of Operations” of the Company’s 2023 annual report on Form 10-K filed with the SEC on March 8, 2024.

FINANCIAL CONDITION

Cash and Cash Equivalents

Total cash and cash equivalents at December 31, 2024 were $215.0 million, compared to $99.8 million at December 31, 2023. The elevated cash balances at December 31, 2024 were temporary due to anticipated cash usage in the first quarter of 2025 associated with normal seasonal deposit outflows, an expected deposit outflow of $61.8 million by one large deposit customer that temporarily deposited funds with the Bank in fourth quarter of 2024, and the payoff of $45.0 million of Northway’s FHLBB advances to optimize our balance sheet upon the Company’s completion of the acquisition of Northway on January 2, 2025.

Included within the Company’s cash and cash equivalents balances at December 31, 2024 and 2023, was cash held in escrow by the FHLBB as collateral posted by the counterparties for our derivatives in a net asset position at each reporting date totaling $13.2 million and $15.4 million, respectively. We and the counterparty manage these cash accounts daily. Refer to Notes 12 and 13 of the consolidated financial statements for additional detail on the Company’s derivatives and collateral.

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 December 31, 2024 and 2023, the Company’s investment portfolio generally consisted of MBS, CMO, municipal and corporate debt securities, FHLBB and FRB common stock, and mutual funds held in a rabbi trust for purposes of Company 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 and amortized cost, respectively. Our FHLBB and FRB common stock is carried at cost, and our mutual fund investments are carried at fair value. At December 31, 2024 and 2023, total investments were 20% and 21%, respectively, of total assets.

In 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 December 31, 2024, the net unrealized losses on the transferred securities reported within AOCI were $41.8 million, net of a deferred tax asset of $11.4 million, and the weighted-average life on these securities was 7.9 years. At December 31, 2023, the net unrealized losses on the transferred securities reported within AOCI were $46.9 million, net of a deferred tax asset of $12.8 million and the weighted-average of these securities was 8.5 years.

At December 31, 2024 and 2023, the Company's investments portfolio totaled $1.1 billion and $1.2 billion, respectively, representing a decrease of $51.5 million, or 4%, for the year ended December 31, 2024. Given the interest rate environment, our primary strategy throughout 2024 was to redeploy normal investment cash flows from pay downs, calls and maturities to fund loan growth and optimize funding costs. The primary components for the net change in total investments for the year ended 2024 were:

• Pay downs, calls and maturities of $122.2 million;
• Purchases of $60.4 million of debt securities during 2024;
• Net amortization and accretion of $4.7 million; and
• The change in the fair value of the Company’s AFS debt securities of $4.7 million.

Our AFS debt securities portfolio, which comprised 52% and 53% of our investment portfolio at December 31, 2024 and 2023, respectively, was carried at fair value using level 2 valuation techniques. Refer to Notes 1 and 21 of the consolidated financial statements for further details on the Company's fair value techniques.

The AFS and HTM 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 corporate and municipal bonds that are highly rated by nationally recognized rating agencies. At December 31, 2024 and 2023, the book value of U.S. government and government-sponsored agencies represented approximately 91% of the AFS and HTM debt securities portfolio. The book value of corporate and municipal bonds carrying a credit rating of “AA” or higher at December 31, 2024 and 2023 and was 5% and 4% of the AFS and HTM debt securities, respectively.

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

December 31, 2024 and 2023, our investment in FHLBB stock totaled $17.1 million and $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.

The following table sets forth the carrying value of the Company’s investments portfolio along with the percentage distribution as of the dates indicated:

(Dollars in thousands)

We continuously monitor and evaluate our investment securities portfolio to identify and assess risks within our portfolio, including, but not limited to, the impact of the current rate environment and the related prepayment risk, and credit ratings. The overall mix of debt securities at December 31, 2024 compared to December 31, 2023 remains relatively unchanged and well positioned to provide a stable source of cash flow. The duration of our debt investment securities portfolio at December 31, 2024 was 5.2 years, compared to 5.7 years at December 31, 2023. The weighted average life of our debt securities portfolio at December 31, 2024 was 7.0 years, compared to 7.8 years at December 31, 2023.

The Company’s AFS debt securities that are in an unrealized loss position are assessed to determine if an allowance should be recorded or if a write-down is required in accordance with ASU 2016-13. As of and for the years ended December 31, 2024, 2023 and 2022, we did not record any allowances or write-down any of our AFS debt securities in an unrealized loss position. Refer to Note 1 of the consolidated financial statements for further discussion of our practices and policies, and refer to Note 2 of the consolidated financial statements for additional details of our assessment of the allowance for AFS investments as of December 31, 2024 and 2023.

We assess our HTM debt securities each reporting period to determine if an allowance should be recorded or if a write-down is required. In the first quarter of 2023, we wrote-off a $1.8 million corporate bond issued by Signature Bank due to Signature Bank's failure through provision expense on the consolidated statements of income. This corporate bond was designated as HTM and previously carried no ACL. In January 2024, we sold the Signature Bank security and recovered $910,000. We completed a review of our HTM investment portfolio as of December 31, 2024 and 2023, and concluded that no ACL was warranted on any bonds at this time. Refer to Note 1 of the consolidated financial statements for further discussion of our practices and policies, and refer to Note 2 of the consolidated financial statements for additional details of our assessment of the allowance for HTM investments as of December 31, 2024 and 2023.

The fair value and book value of the Company's corporate bonds and municipal securities as of December 31, 2024 and 2023 was as follows:

(Dollars in thousands)

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

At December 31, 2024 and 2023, corporate bonds were 3% of the book value of the total bond portfolio. At December 31, 2024 and 2023, corporate bonds with a book value of $25.9 million and $31.2 million, or 70% and 77% of the corporate bond portfolio, carried an investment-grade credit rating. The remaining $11.2 million and $9.6 million of book value, or 30% and 23% of the corporate bond portfolio, were non-rated corporate bonds of community banks within our markets. As of December 31, 2024, the corporate bond portfolio was made up of 18 different companies, which included 16 different banks. The banks in the portfolio range from the largest U.S. banks to community banks, with 35% of our exposure as of December 31, 2024, being to global systemically important banks, or "G-SIBs." A limited number of our rated corporate bonds were downgraded in 2023 as a result of stress in the banking system, although all remain investment-grade as of December 31, 2024. We continue to monitor and analyze the performance of our corporate bond portfolio.

The following table presents the book value and fully-taxable equivalent weighted-average yields of debt investments by contractual maturity and the carrying value of other investments, for the periods indicated. Actual maturities of debt investments may differ from contractual maturities because borrowers may have the right to call or prepay.

(Dollars in thousands)

(1) Weighted average is calculated by dividing the book value by the book value times tax yield.

(2) There is no scheduled maturity date.

Loans

The following table sets forth the composition of our loan portfolio at the dates indicated, as well as the change during 2024:

(Dollars in thousands)

Refer to Note 3 of the consolidated financial statements for additional details on our loan segmentation and risks as of December 31, 2024 and 2023.

At December 31, 2024 and 2023, 36% and 35% of the consumer loan portfolio was unsecured, respectively. At December 31, 2024 and 2023, 55% and 53% of the home equity portfolio was secured by a junior lien position, respectively.

Portfolio Concentrations

The Company provides loans primarily to customers located within our geographic market area. As of December 31, 2024 and 2023, our primary markets continued to be in Maine, making up 68% of our loan portfolio. Massachusetts and New Hampshire were our second and third largest markets, making up 16% and 11%, respectively, of our total loan portfolio as of December 31, 2024, compared to 16% and 10%, respectively, as of December 31, 2023. As of December 31, 2024, our distribution channels included 56 branches within Maine, two locations in New Hampshire, including a branch in Portsmouth and a commercial loan production office in Manchester, and an online residential mortgage and small business digital loan platform. On January 2, 2025, we completed our acquisition of Northway, which included Northway Bank and its 17 branches across New Hampshire. Northway Bank’s primary lending area is within New Hampshire.

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

The table below summarizes the industry concentrations of the commercial loan portfolio at the dates indicated:

(Dollars in thousands)

56

(1) The following table summarizes the real estate investment loan portfolio, by property type as of the dates indicated:

(Dollars in thousands)

(a) Multi-family (5+ units) loans are primarily located in non-urban locations, including 68% in Maine, 23% in New Hampshire, and 7% in Massachusetts at December 31, 2024.

(b) Office loans are nearly all located in non-urban locations, including 52% in Maine, 26% in New Hampshire, and 23% in Massachusetts at December 31, 2024.

(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 real estate investment portfolio and individually are 1% or less of the total loan portfolio.

Related Party Transactions

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

Asset Quality

Asset quality is of the upmost importance to the Company, and continues to be of great focus given current market conditions. 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 continuously 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 team, Collection 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, Collections 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 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, Collections 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.

Non-Performing Assets. Non-performing assets include non-accrual loans, accruing loans 90 days or more past due, and property acquired through foreclosure or repossession. The following table sets forth the composition and amount of our non-performing loans as of the dates indicated:

(Dollars in thousands)

Generally, a loan is classified as non-accrual when interest and/or principal payments are 90 days past due or when management believes collecting all principal and interest owed is in doubt. All previously accrued but unpaid interest on non-accrual loans is reversed from interest income in the current period. Interest payments received on non-accrual loans are applied as a reduction of principal. A loan remains on non-accrual status until all principal and interest amounts contractually due are brought current, all future principal and interest payments are reasonably assured, and a consistent repayment record, generally six consecutive payments, has been demonstrated. At that time, we may reclassify the loan to performing.

The following table highlights the interest income that would have been recognized if loans on non-accrual status had been current in accordance with their original terms (*i.e., “*foregone interest income”) for the periods indicated:

(In thousands)

58

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 our borrowers or collateral deficiencies. Based on historical experience, the credit quality of some of these loans may improve due to the financial condition of the borrowers or changes in collateral values, while the credit quality of other loans may deteriorate, resulting in some amount of loss. These loans are not included in the above analysis of non-accrual loans. At December 31, 2024, potential problem loans totaled $96,000.

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 at the dates indicated:

(Dollars in thousands)

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

(Dollars in thousands)

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

(Dollars in thousands)

The following table sets forth information concerning the allocation of the ACL on loans by loan categories at the dates indicated:

(Dollars in thousands)

Refer to “—Critical Accounting Estimates” and Note 1 of the consolidated financial statements for further details of our CECL model macroeconomic factors (i.e. loss drivers), and refer to Note 3 of the consolidated financial statements for discussion of the risk characteristics for each portfolio segment considered when evaluating the ACL, as well as factors driving the change in the ACL on loans at December 31, 2024 compared to December 31, 2023.

Goodwill and Core Deposit Intangible Assets

Upon completion of an acquisition the Company will likely generate goodwill and other intangible assets. Goodwill represents the price paid in excess of the fair value of acquired assets and liabilities. Through the acquisition of other financial institutions, core deposit intangible assets are recognized at the estimated fair value of the acquired non-maturity deposit customer relationships. Goodwill is reviewed for impairment as of November 30th annually, or more frequently as determined by management, and core deposit intangible assets are reviewed when a triggering event suggests such a review necessary.

At December 31, 2024 and 2023, goodwill totaled $94.7 million. Through our annual impairment analysis performed as of November 30, 2024 and 2023, we determined goodwill was not impaired. Refer to “—Critical Accounting Estimates” and Note 4 of the consolidated financial statements for further details of the testing performed.

At December 31, 2024 and 2023, core deposit intangible assets totaled $415,000 and $971,000, respectively, and related amortization was $556,000, $592,000, and $625,000 for the years ended 2024, 2023 and 2022, respectively. There were no indications of potential risk of impairment of core deposit intangible assets for any of the aforementioned years.

On January 2, 2025, the Company completed its previously announced acquisition of Northway and has not yet completed the purchase accounting due to the timing of the Merger, and it continues to evaluate the estimated fair values of the assets acquired and the liabilities assumed. Accordingly, the fair value of the assets and liabilities acquired, including goodwill and other intangible assets, is not yet available. Refer to Note 23 of the consolidated financial statements.

Investment in BOLI

BOLI is presented in the consolidated statements of condition at its cash surrender value. Increases in BOLI’s cash surrender value are reported as a component of non-interest income in the consolidated statements of income.

BOLI was $104.3 million and $101.5 million at December 31, 2024 and 2023, respectively. The increase year-over-year reflects the increase in the cash surrender value. BOLI provides a means to mitigate increasing employee benefit costs. We expect to benefit from the BOLI contracts as a result of the tax-free growth in cash surrender value and death benefits that are expected to be generated over time. The largest risk to the BOLI program is credit risk of the insurance carriers. At December 31, 2024, we had one stable value account (that is subject to a wrapper) and that totals 9% of the BOLI portfolio, while the remaining amounts of the BOLI portfolio are in general accounts. To mitigate risk, annual financial condition reviews are completed on all carriers and we impose internal policy limits so that no one carrier exceed 10% of Tier 1 capital plus the allowable ACL (as defined for regulatory purposes). BOLI is invested in the “general account” of quality insurance companies or in separate account products, 94% of our balances are with insurance carriers that had an A.M. Best rating of “A” or better at December 31, 2024.

Deposits

The Company receives checking, savings and time deposits primarily from customers located within our markets. Other forms of deposits include brokered deposits and deposits with the Certificate of Deposit Account Registry System (“CDARS”). The table below details the Company’s deposits, and change between periods, as of each date indicated:

(Dollars in thousands)

(1) Includes $89.1 million and $61.5 million of deposits from Camden National Wealth Management as of December 31, 2024 and 2023, respectively, which represent client funds. These deposits fluctuate with changes in the portfolios of the clients of Camden National Wealth Management.

(2) At December 31, 2024 and 2023, brokered deposits consisted of $105.2 million and $70.9 million, respectively, of brokered money market balances and $74.8 million and $31.0 million, respectively, of brokered certificates of deposit (“CD”) balances.

The deposit landscape was highly competitive across our markets throughout 2024 as depositors looked to deploy excess liquidity into higher yielding, interest-bearing deposit accounts prior to short-term interest rate cuts by the Federal Reserve. 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 sharp increase in short-term interest rates during 2022 and 2023 resulted in our customers, and more broadly across the banking industry, moving excess deposits from lower interest-earning accounts, including checking and savings accounts, to higher yielding accounts, including money market and CD. Throughout 2023 and 2024, our CD product offerings remained relatively short in term to provide the opportunity for CDs to reprice faster and manage our interest rate risk position to falling interest rates. The weighted-average life to maturity of our CD portfolio at December 31, 2024 was 6 months.

Other factors impacting deposits during 2024 included:

• The introduction of a high-yield savings product during the first half of 2024 in an effort to raise cost effective deposits, drive new customer acquisition and provide an alternative higher-yielding deposit product for customers looking for greater liquidity than CDs while enabling us to be better positioned for expected lower short-term interest rates. Through this new product, we drove savings deposit growth of 23%in 2024.
• Given the strength of our overall liquidity position, we took certain actions that included pricing down certain non-relationship, higher cost municipal and institutional deposits with a goal of improving our net interest margin that resulted in approximately $150.0 million of deposit outflows during 2024. Adjusting for these intentional deposit outflows, deposits during 2024 grew 4%.

We will supplement the Company’s funding using brokered deposits to manage overall funding costs, liquidity and our interest rate risk position. The Company’s brokered CDs of $74.8 million matured in February 2025.

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

Uninsured and Uncollateralized Deposits. Total deposits that exceeded the FDIC deposit insurance limit of $250,000 were $1.1 billion, or 23% of total deposits, for both December 31, 2024 and 2023, respectively.

Total uninsured and uncollateralized deposits that exceeded the FDIC deposit insurance limit of $250,000 and that were not secured by pledged assets or any other guarantee of the Company, totaled $760.8 million, or 16%, of total deposits as of December 31, 2024, and $669.5million, or 15%, of total deposits as of December 31, 2023.

The balance of CDs that exceeded the FDIC deposit insurance limit of $250,000 was $109.2 million, or 21% of CD balances, as of December 31, 2024, and $167.2 million, or 27% of CD balances, as of December 31, 2023. The total uninsured portion of these CDs was $40.2million, or 8% and $93.7 million or 15% as of December 31, 2024 and 2023, respectively.

Borrowings and Advances

We utilize a variety of funding sources to manage our borrowings, including, but not limited to, FHLBB and correspondent bank overnight borrowings, FHLBB advances, customer and wholesale repurchase agreements, the Bank Term Funding Program (“BTFP”) (under which the Federal Reserve no longer allowed for additional borrowings from financial institutions as of March 11, 2024), and junior subordinated debentures. We proactively monitor our borrowings through Management and Board ALCO as part of prudent balance sheet, earnings, and liquidity management. As part of our liquidity management, we use internal designations of “short-term” and “long-term” borrowings, and manage our borrowings within each designation:

• Short-term borrowings include, but are not limited to, FHLBB and correspondent bank overnight borrowings, FHLBB advances with maturity within one year of origination, the BTFP, and customer repurchase agreements; and
• Long-term borrowings may include, but are not limited to, FHLBB advances with maturity greater than one year, wholesale repurchase agreements, and junior subordinated debentures.

At December 31, 2024, short-term borrowings were $500.6 million, representing an increase of $15.0 million, or 3%, since December 31, 2023. In 2024, we prepaid BTFP borrowings of $135.0 million held at December 31, 2023, and replaced the debt with $150.0 million of FHLBB advances to extend and diversify the term of our borrowings. To reduce borrowing costs, we entered into two tranches of interest swaps on these FHLBB advances.

Short-Term Borrowings. The following table below provides certain information on our short-term borrowings at and for the period ended:

(Dollars in thousands)

Junior Subordinated Debentures. In connection with the formation of CCTA and UBCT, and the issuance and sale of trust preferred securities to the public, we received and had outstanding at December 31, 2024 and 2023, junior subordinated debentures totaling $44.3 million.

FHLBB Collateral. FHLBB short-term and long-term borrowings are collateralized by a blanket lien on qualified collateral consisting primarily of loans with first mortgages secured by one- to four-family properties, certain commercial real estate loans, certain pledged investment securities and other qualified assets. The carrying value of residential real estate and commercial loans pledged as collateral was $1.9 billion for both December 31, 2024 and 2023, respectively. The carrying value of securities pledged as collateral at the FHLBB was $4.0 million and $4.3 million at December 31, 2024 and 2023, respectively.

Shareholders’ Equity

Total shareholders’ equity at December 31, 2024 was $531.2 million, which was an increase of $36.2 million, or 7%, since December 31, 2023. The increase was primarily driven by: (1) an increase in retained earnings of $28.4 million driven by net income of $53.0 million, partially offset by dividends declared of $24.5 million for the year ended December 31, 2024; and (2) an increase in AOCI of $6.9 million driven by an increase in the fair value of the Company's debt securities and interest rate swaps, net of tax.

At each of December 31, 2024 and 2023, the Company and the Bank exceeded all regulatory capital requirements, and the Bank met the capital ratios necessary to be considered “well capitalized” under the prompt corrective action framework. There were no changes to the Company’s or the Bank's capital ratios that occurred subsequent to December 31, 2024 that would change the Company or Bank's regulatory capital categorization.

In January 2024, the Company's Board of Directors authorized the repurchase of up to 750,000 shares of the Company's common stock, representing approximately 5.0% of the Company's issued and outstanding shares of common stock as of December 31, 2023. This program replaced the 2023 program and matured on January 4, 2025. We currently do not have an active share repurchase program in place.

For the year ended December 31, 2024, the Company repurchased 50,000 shares of its common stock at a weighted-average price of $32.19 per share.

Refer to “—Capital Resources” and Note 14 of the consolidated financial statements for further discussion of the Company's capital position.

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

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. At December 31, 2024 and 2023, the Company's liquidity level exceeded its target. We believe that we currently have appropriate liquidity available to respond to demands. 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.

As of December 31, 2024, our primary liquidity sources available were as follows:

(Dollars in thousands)

64

Deposits. Deposits continue to represent our primary source of funds. As of December 31, 2024, total deposits were $4.6 billion, an increase of 1% over December 31, 2023. Refer to “—Financial Condition—Deposits” for additional discussion on the Company’s deposit mix and changes in deposit balances during 2024.

The following is a summary of the scheduled maturities of CDs as of December 31, 2024:

(In thousands)

At December 31, 2024, the Company’s brokered deposits totaled $180.0 million and was comprised of $74.8 million of brokered CDs and $105.2 million of brokered money market accounts. The Company’s brokered CDs of $74.8 million at December 31, 2024, matured in February 2025. The Company has established an internal policy limiting brokered deposits to 20% of the Bank’s assets and had $979.9 million of brokered deposit capacity as of December 31, 2024. Our internal brokered deposit limit falls within the Bank’s total borrowed funds limit that cannot exceed 50% of the Bank’s assets.

Borrowings. Borrowings are used to supplement deposits as a source of liquidity. Our primary sources of borrowings are with the FHLBB, federal funds and customer repurchase agreements, but may also include alternative sources such as various forms of subordinated debentures. At December 31, 2024, total borrowings were $545.0 million.

Our practice is to secure borrowings from the FHLBB with qualified commercial and residential real estate loans, home equity loans and certain investment securities. At December 31, 2024, our total borrowing capacity with FHLBB was $711.0 million.

Customer repurchase agreements are secured by mortgage-backed securities and government-sponsored enterprises. Through the Bank, we also have available lines of credit with the FHLBB of $9.9 million, with correspondent banks of $85.0 million, and with the FRB Discount Window of $35.0 million as of December 31, 2024. We also believe that we have additional untapped access to the brokered deposit market and wholesale reverse repurchase transaction market. These sources are considered as liquidity alternatives in our contingent liquidity plan.

The following is a summary of the scheduled maturities of borrowings as of December 31, 2024:

(In thousands)

65

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 residential mortgage loan portfolio is also a significant source of contingent liquidity for the Company that could be accessed in a reasonable time period through the sale of loans on the secondary market, as needed. As of December 31, 2024, qualifying loans with a book value of $1.9 billion were pledged as collateral.

The following table presents the contractual maturities of loans at the date indicated:

(Dollars in thousands)

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

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

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 also manage our liquidity position through timely sales of residential mortgage loans to the secondary market. For the year ended December 31, 2024, we sold 56%, or $221.9 million, of our residential mortgage loan originations 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 December 31, 2024 and 2023, the Company's MBS and CMO debt securities portfolio totaled 91% of the Company's investment portfolio. The investment portfolio is also a significant source of contingent liquidity for the Company that could be accessed in a reasonable time period through the sale of investments on the secondary market, if needed. As of December 31, 2024 and 2023, $334.8 million and $337.6 million of the MBS and CMO debt securities portfolio, or 56% and 54%, respectively, were designated as AFS and not pledged as collateral. As of December 31, 2024 and 2023, $305.7 million and $200.4 million, or 59% and 37%, respectively, were designated as HTM and not pledged as collateral.

The following is a summary of the scheduled cash flows from our debt securities portfolio, including investments designated as AFS and HTM, as of December 31, 2024:

(In thousands)

(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 year ended December 31, 2024, the Company reported $53.0 million of net income, paid cash dividends of $24.6 million to shareholders and repurchased shares of its common stock for $1.6 million.

Also through 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 differ materially from that estimated and disclosed within the table below. At December 31, 2024, we had the following lease and other contractual obligations to make future payments under each of these contracts as follows:

(In thousands)

The Company's estimated lease liability for its various operating and finance leases was reported within other liabilities on our consolidated statements of condition. Please refer to Notes 1 and 6 of the consolidated financial statements for discussion and details of our leases.

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 11 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 12 of the consolidated financial statements for further discussion of our derivatives and hedge instruments.

CAPITAL RESOURCES

As part of our goal to operate a safe, sound and profitable financial organization, we are committed to maintaining a strong capital base. Shareholders’ equity totaled $531.2 million and $495.1 million at December 31, 2024 and December 31, 2023, respectively, which amounted to 9% of total assets at each date. Refer to “—Financial Condition—Shareholders' Equity” for discussion regarding changes in shareholders' equity since December 31, 2023.

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 $24.5 million, or $1.68 per share, $24.5 million, or $1.68 per share, and $23.7 million, or $1.62 per share, for the years ended December 31, 2024, 2023 and 2022, respectively. The Company's Board of Directors approves cash dividends on a quarterly basis after careful analysis and consideration of various factors, including the following: (i) capital position relative to total assets, (ii) risk-based assets, (iii) total classified assets, (iv) economic conditions, (v) growth rates for total assets and total liabilities, (vi) earnings performance and projections and (vii) strategic initiatives and related capital requirements. All dividends declared and distributed by the Company will be in compliance with applicable regulatory requirements and state corporate law.

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 years ended December 31, 2024, 2023, and 2022, the Bank declared dividends payable to the Company in the amount of $30.1 million, $22.5 million, and $31.7 million, respectively. Under OCC regulations, the Bank generally may not declare a dividend in excess of the Bank’s undivided profits or, absent OCC approval, if the total amount of dividends declared by the Bank in any calendar year exceeds the total of the Bank's retained net income for the current year plus its retained net income for the prior two years. 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 14 of the consolidated financial statements for discussion and details of the Company and Bank's capital regulatory requirements. At December 31, 2024 and 2023, the Company and Bank met all regulatory capital requirements and the Bank continues to be classified as “well capitalized” under 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; technology, including cybersecurity; vendor and third party; people and compensation; compliance and legal; and 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, Chief Risk Officer, who is a member of the Executive Committee and reports directly to the Chief Executive Officer.

The Company is, and may become, subject to other risks. Refer to Item 1A. Risk Factors for further description of the Company's material risks.

Credit Risk. Credit risk is the current and prospective risk to earnings or capital arising from an obligor's failure to meet the terms of any contract with the Company or otherwise to perform as agreed. It is found in all activities in which success depends on counterparty, issuer or borrower performance. It arises any time funds are extended, committed, invested or otherwise exposed through actual or implied contractual agreements, whether reflected on or off the Company's balance sheet. The Company makes various assumptions and judgments about the collectability of its loan portfolio, including the creditworthiness of its borrowers and counterparties and the value of the real estate and other assets serving as collateral for the repayment of loans. For further discussion regarding credit risk and the credit quality of the Company’s loan portfolio, refer to “—Financial Condition—Asset Quality,” and Note 3 of the consolidated financial statements.

Liquidity Risk. Liquidity risk is the current and prospective risk to earnings or capital arising from the Company’s inability to meet its obligations when they come due, without incurring unacceptable losses. Liquidity risk includes the inability to manage unplanned decreases or changes in funding sources. Liquidity risk also arises from the failure to recognize or address changes in market conditions that affect the ability to liquidate assets quickly and with minimal loss in value. For further discussion regarding the Company's management of liquidity risk, refer to the “—Liquidity” section.

Market Risk. Market risk is the risk of loss in a financial instrument arising from adverse changes in market rates and prices, such as interest rates, foreign currency exchange rates, commodity prices and equity prices. Our primary market risk exposure is interest rate risk. The ongoing monitoring and management of this risk is an important component of our asset and liability management process, which is governed by policies established by the Bank’s Board of Directors that are reviewed and approved annually. The Board ALCO delegates responsibility for carrying out the asset/liability management policies to Management ALCO. In this capacity, Management ALCO develops guidelines and strategies impacting our asset/liability management-related activities based upon estimated market risk sensitivity, policy limits and overall market interest rate levels and trends. Board ALCO meets on a quarterly basis to review strategies, policies, economic conditions and various activities as part of the management of these risks.

Certain of the Company's revenues are asset-based and determined as a percentage of the value of a client's assets under management. Such values are affected by changes in financial markets, such as interest rate risk, equity prices, and foreign exchange rates, and, accordingly, declines in the financial market may negatively impact its revenue. As of December 31, 2024, client assets under management by Camden National Wealth Management were $1.2 billion. It is estimated that a 1% increase or decrease in client assets under management would result in a de minimis impact to our consolidated financial results.

Interest Rate Risk. Interest rate risk represents the sensitivity of earnings to changes in market interest rates. As interest rates change, the interest income and expense streams associated with our financial instruments also change, thereby impacting net interest income, the primary component of our earnings. Board ALCO and Management ALCO utilize the results of a detailed and dynamic simulation model to quantify the estimated exposure of net interest income to sustained interest rate changes. While Board ALCO and Management ALCO routinely monitor simulated net interest income sensitivity over a rolling two-year horizon, they also utilize additional tools to monitor potential longer-term interest rate risk.

The simulation model captures the impact of changing interest rates on the interest income received and interest expense paid on all interest-earning assets and interest-bearing liabilities reflected on our consolidated statements of condition, as well as for derivative financial instruments. This sensitivity analysis is compared to internal ALCO policy limits, which specify a maximum tolerance level for net interest income exposure over a one- and two-year horizon, assuming no balance sheet growth or change in composition, given a 200 basis point upward and downward shift in interest rates. In the down 200 basis points 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%.

As of December 31, 2024, 2023 and 2022, our net interest income sensitivity analysis reflected the following changes to net interest income assuming no balance sheet growth or change in composition, 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.

The preceding sensitivity analysis 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, decay rates, pricing decisions on loans and deposits, including loan and deposit betas, 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.

Based upon the net interest income simulation models, in Year 1 of a rising interest rate environment the Company is slightly liability sensitive as our funding will reprice faster than assets as market rates rise over the first year and result in lower net interest income. Cash flows from investments and loans are redeployed into current market rates at higher yields than our existing portfolio, however funding cost pressures continue in the higher current rate environment and outpace asset yield expansion. In Year 2, funding cost pressures subside and asset yields continue to improve, resulting in improved net interest income compared to our Year 1 base scenario. In Year 1 of a falling interest rate environment, net interest income is expected to improve as the decrease in funding costs outpaces the decrease in asset yields from accelerated loan and investment prepayments. In Year 2, net interest income is expected to further increase compared to our Year 1 base scenario as asset yields are supported by fixed rates and floors while cost of funds reductions continue.

Periodically, if deemed appropriate, we use 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. As of December 31, 2024, we had interest rate swap agreements with a total notional of $43.0 million related to our junior subordinated debentures, $50.0 million of notional interest rate swap agreements on variable rate deposits to mitigate exposure to rising rates, $400.0 million of notional interest rate swap agreements on short-term fixed-rate rolling funding to mitigate exposure to rising rates, and $375.0 million of notional interest rate swap agreements to hedge fixed-rate residential mortgages using the “portfolio layer” method, and $313.4 million of notional interest rate swap agreements related to commercial loan level derivative program with both our commercial customers and a corresponding swap dealer. The Board and Management ALCO monitor derivative activities relative to their expectations and our hedging policies. Refer to Note 12 of the consolidated financial statements for further discussion of our derivatives instruments.

Capital Risk. Capital risk is the risk that an investor may lose all or part of the principal amount invested. The Company faces this risk as it manages its balance sheet and has investments or loans that may lose all or part of the principal amount the Company has invested, which can have an impact on shareholders' equity. The Company also faces capital risk in that the entity may lose value on components of its shareholders' equity. The regulatory environment mandates the Company and Bank maintain certain levels of capital. These capital levels can change based upon regulatory changes, which can then impact what the Company is able to accomplish from a strategic perspective. For further discussion regarding capital risk and management of this risk, refer to “—Capital Resources,” and Note 14 of the consolidated financial statements.

Operational Risk. Operational risk is the current and prospective risk to earnings and capital arising from fraud, error and the inability to deliver products or services, maintain a competitive position and manage information. Risk is inherent in efforts to gain strategic advantage and in the failure to keep pace with changes in the financial services marketplace. Operational risk is evident in each product and service offered by the Company and encompasses product development and delivery, transaction processing, systems development, change management, complexity of products and services, human resource elements and the internal control environment. The risk that transactions may not be processed on time or correctly can have significant impact on the Bank’s reputation, which can result in compliance violations and fines, and/or other financial risks.

The Company manages operational risk through a series of internal programs, as well as through the assistance of third parties. These programs include various internal and external audit programs, internal committees to oversee compliance with programs and remedial actions, if necessary, and various documented policies, procedures and framework for addressing such risks.

Technology Risk, including Cybersecurity. Technology Risk, including risk relating to artificial intelligence and other emerging or developing technologies, is the risk of financial loss, disruption or damage to the reputation of an organization resulting from the failure of its information technology systems, weak computing infrastructure, or a breach of information technology systems. Technology and cybersecurity risk could materialize in a variety of ways, such as unpatched or vulnerable computing systems, deliberate and unauthorized breaches of security to gain access to information systems, unintentional or accidental breaches of security, operational information technology risks due to factors such as poor system integrity, weak computing infrastructure and/or a weak Cybersecurity protection program.

Poorly managed technology and cybersecurity risk can leave an institution exposed to a variety of cybercrimes, with consequences ranging from data disruption to economic destitution. Reputation risk due to a technology and/or cybersecurity event can be significant to overcome depending on the severity of the event.

The Company manages technology and cybersecurity risks through its internal programs, as well as through the assistance of third parties. Refer to Item 1C. Cybersecurity for further information.

Vendor and Third Party Risk. Vendor and third party risk represents the risk related to outsourced activities and in certain situations includes reliance on vendors to deliver services on our behalf. The Company has many service partners and an increasing reliance on outsourced services, which places greater risk on the Company through these many partners. These relationships are controlled by contracts and service level agreements, but represent increasing risk to the Company.

The Company manages vendor and third party risk through its vendor management program, which includes robust due diligence and risk assessment prior to engaging a new vendor, annual review of certain vendors depending on the services provided by the vendor, and an evaluation of the risk the vendor may present to the Company through our reliance on its services.

People and Compensation Risk. People and compensation risk includes: (1) the risk of employee dishonesty, incompetence or error; (2) the risk of not having individuals with adequate training and experience to properly discharge their responsibilities; (3) the risk of not having sufficient depth of personnel to provide back up for critical functions; (4) the risk of lawsuit by employees alleging improper actions by or on behalf of the Company; (5) succession planning; and (6) compensation risk, which includes having compensation plans that effectively allow the Company to hire and keep the right talent, and properly designed compensation and incentive programs to promote ethical behavior and assure that excessive risk is not encouraged.

The Company manages people and compensation risk through annual risk assessments of various compensation and incentive plans, oversight by the Compensation Committee of the Board of Directors, the use of third party compensation consultants, and various insurance programs.

Compliance and Legal Risk. Compliance and legal risk is the current and prospective risk to earnings or capital arising from violations of, or nonconformance with, laws, rules, regulations, prescribed practices, internal policies and procedures, or ethical standards. This risk exposes the Company to fines, civil money penalties, payment of damages, and the voiding of contracts. Compliance risk can lead to diminished reputation, reduced franchise value, limited business opportunities, reduced expansion potential, and an inability to enforce contracts. Legal risk exists in generally all activity of the Company where there is any possibility that the Company will become subject to liability for improper actions.

The Company manages compliance and legal risk through various internal and external audit programs, use of third parties for consulting and legal support, ongoing compliance risk assessments, the ERM Committee and various insurance programs.

Strategic Alignment Risk. Strategic alignment risk is the current and prospective impact on earnings or capital arising from adverse business decisions, improper implementation of decisions, or lack of responsiveness to industry changes. This risk is a function of the compatibility of the Company's strategic goals, the business strategies developed to achieve those goals, the resources deployed against these goals, and the quality of implementation.

Reputation Risk. Reputation risk is the current and prospective impact on earnings and capital arising from negative public opinion. The reputation of financial services companies can be based on brand and trust, and the loss of brand or trust can negatively impact the Company's operations and financial results. Reputation risk exposure is present throughout the organization and our interactions with our various stakeholders, including, but not limited to, our customers, communities and investors.

The Company manages its strategic alignment and reputation risk through various internal policies and programs, including, but not limited to, the Company's core values, code of ethics policy, financial code of ethics policy, Audit Committee complaint policy, employee handbook, and other policies and programs, as well as through strategic planning and oversight by the Board of Directors.

RECENT ACCOUNTING PRONOUNCEMENTS

See Note 1 of the consolidated financial statements for details of recently issued accounting pronouncements and their expected impact on the consolidated financial statements.

Information required by this Item 7A is included in Item 7. “Management's Discussion and Analysis of Financial Condition and Results of Operations—Risk Management” and is incorporated into this Item 7A by reference.

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 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 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 Annual Report on Form 10-K that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

MANAGEMENT’S ANNUAL REPORT

ON INTERNAL CONTROL OVER FINANCIAL REPORTING

The Management of the Company is responsible for the preparation and fair presentation of the financial statements and other financial information contained in this Form 10-K. Management is also responsible for establishing and maintaining adequate internal control over financial reporting and for identifying the framework used to evaluate its effectiveness. Management has designed processes, internal controls and a business culture that foster financial integrity and accurate reporting. The Company’s comprehensive system of internal control over financial reporting was designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of the consolidated financial statements of the Company in accordance with accounting principles generally accepted in the United States of America. The Company’s accounting policies and internal control over financial reporting, established and maintained by management, is under the general oversight of the Company’s Board of Directors, including the Board of Directors’ Audit Committee.

Management has made a comprehensive review, evaluation, and assessment of the Company’s internal control over financial reporting as of December 31, 2024. The standard measures adopted by management in making its evaluation are the measures in Internal Control — Integrated Framework (2013) published by the Committee of Sponsoring Organizations of the Treadway Commission. Based upon its review and evaluation, management concluded that, as of December 31, 2024, the Company’s internal control over financial reporting was effective and that there were no material weaknesses. However, Management recognizes a control system, no matter how well designed and operated, has inherent limitations and can provide only reasonable, not absolute, assurance that the control system’s objectives will be met and may not prevent or detect all error and fraud. Therefore, even a system determined to be effective can provide only reasonable assurance with respect to financial statement preparation and presentation.

RSM US LLP, an independent registered public accounting firm, which has audited and reported on the consolidated financial statements contained in this Form 10-K, has issued its written attestation report on management’s assessment of the Company’s internal control over financial reporting which precedes this report.