UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

x QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE

SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended ~~September 30, 2015~~March 31, 2016

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

SECURITIES EXCHANGE ACT OF 1934

Commission File No. 0-28190

CAMDEN NATIONAL CORPORATION

(Exact name of registrant as specified in its charter)



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

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

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

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter periods that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Yes x No ¨

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).

Yes x No ¨

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



Large accelerated filer ¨	Accelerated filer x
Non-accelerated filer ¨	Smaller reporting company ¨
(Do not check if a smaller reporting company)

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Yes ¨ No x

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

Outstanding at ~~November~~May 3, ~~2015:~~2016: Common stock (no par value) ~~10,204,101~~10,272,083 shares.

CAMDEN NATIONAL CORPORATION

FORM 10-Q FOR THE QUARTER ENDED ~~SEPTEMBER 30, 2015~~MARCH 31, 2016

TABLE OF CONTENTS OF INFORMATION REQUIRED IN REPORT



		PAGE
PART I. FINANCIAL INFORMATION

ITEM 1.	FINANCIAL STATEMENTS

	Consolidated Statements of Condition - ~~September 30, 2015~~March 31, 2016 and December 31, ~~2014~~2015	3

	Consolidated Statements of Income - Three ~~and Nine~~ Months Ended ~~September 30,~~March 31, 2016 and 2015 ~~and 2014~~	4

	Consolidated Statements of Comprehensive Income - Three ~~and Nine~~ Months Ended ~~September 30,~~March 31, 2016 and 2015 ~~and 2014~~	5

	Consolidated Statements of Changes in Shareholders’ Equity - ~~Nine~~Three Months Ended ~~September 30,~~March 31, 2016 and 2015 ~~and 2014~~	6

	Consolidated Statements of Cash Flows - ~~Nine~~Three Months Ended ~~September 30,~~March 31, 2016 and 2015 ~~and 2014~~	7

	Notes to Consolidated Financial Statements	8

ITEM 2.	MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS	3740

ITEM 3.	QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK	5659

ITEM 4.	CONTROLS AND PROCEDURES	5861

PART II. OTHER INFORMATION

ITEM 1.	LEGAL PROCEEDINGS	5962

ITEM 1A.	RISK FACTORS	5962

ITEM 2.	UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS	5962

ITEM 3.	DEFAULTS UPON SENIOR SECURITIES	5962

ITEM 4.	MINE SAFETY DISCLOSURES	5962

ITEM 5.	OTHER INFORMATION	5962

ITEM 6.	EXHIBITS	6063

SIGNATURES		6164

EXHIBITS

PART I. FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

CONSOLIDATED STATEMENTS OF CONDITION (unaudited)	CONSOLIDATED STATEMENTS OF CONDITION (unaudited)							CONSOLIDATED STATEMENTS OF CONDITION (unaudited)

(In Thousands, Except Number of Shares)		September 30, 2015			December 31, 2014				March 31, 2016			December 31, 2015
ASSETS
Cash and due from banks		$	66,644		$	60,813			$	72,201		$	79,488
Securities:
Available-for-sale securities, at fair value		724,237			763,063				800,029			750,338
Held-to-maturity securities, at amortized cost		75,368			20,179				87,950			84,144
Federal Home Loan Bank and Federal Reserve Bank stock, at cost		20,447			20,391				21,605			21,513
Total securities		820,052			803,633				909,584			855,995
Loans held for sale		890			—				16,632			10,958
Loans		1,830,143			1,772,610				2,492,634			2,490,206
Less: allowance for loan losses		(21,132		)	(21,116		)		(21,339		)	(21,166		)
Net loans		1,809,011			1,751,494				2,471,295			2,469,040
Goodwill									95,267			95,657
Other intangible assets									8,191			8,667
Bank-owned life insurance		59,090			57,800				60,338			59,917
Goodwill and other intangible assets		47,309			48,171
Premises and equipment, net		23,567			23,886				44,973			45,959
Deferred tax assets		12,875			14,434				36,154			39,716
Interest receivable		6,577			6,017				8,785			7,985
Other real estate owned		204			1,587				1,228			1,304
Other assets		25,579			22,018				37,898			34,658
Total assets		$	2,871,798		$	2,789,853			$	3,762,546		$	3,709,344
LIABILITIES AND SHAREHOLDERS’ EQUITY
Liabilities
Deposits:
Demand		$	308,576		$	263,013			$	349,586		$	357,673
Interest checking		480,065			480,521				686,517			740,084
Savings and money market		650,701			653,708				949,309			912,668
Certificates of deposit		339,937			317,123				482,821			516,867
Brokered deposits		228,898			217,732				206,599			199,087
Total deposits		2,008,177			1,932,097				2,674,832			2,726,379
Federal Home Loan Bank advances		55,000			56,039				55,000			55,000
Other borrowed funds		464,804			476,939				545,473			458,763
Junior subordinated debentures		44,101			44,024
Subordinated debentures									58,638			58,599
Accrued interest and other liabilities		40,313			35,645				53,146			47,413
Total liabilities		2,612,395			2,544,744				3,387,089			3,346,154
Commitments and Contingencies
Shareholders’ Equity
Common stock, no par value; authorized 20,000,000 shares, issued and outstanding 7,454,045 and 7,426,222 shares as of September 30, 2015 and December 31, 2014, respectively		42,072			41,555
Common stock, no par value; authorized 20,000,000 shares, issued and outstanding 10,271,083 and 10,220,478 shares as of March 31, 2016 and December 31, 2015, respectively									154,437			153,083
Retained earnings		223,682			211,979				227,540			222,329
Accumulated other comprehensive loss:
Net unrealized gains (losses) on available-for-sale securities, net of tax		2,880			(319		)		3,968			(3,801		)
Net unrealized losses on derivative instruments, net of tax		(7,184		)	(5,943		)
Net unrealized losses on cash flow hedging derivative instruments, net of tax									(8,479		)	(6,374		)
Net unrecognized losses on postretirement plans, net of tax		(2,047		)	(2,163		)		(2,009		)	(2,047		)
Total accumulated other comprehensive loss		(6,351		)	(8,425		)		(6,520		)	(12,222		)
Total shareholders’ equity		259,403			245,109				375,457			363,190
Total liabilities and shareholders’ equity		$	2,871,798		$	2,789,853			$	3,762,546		$	3,709,344

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

CONSOLIDATED STATEMENTS OF INCOME (unaudited)	CONSOLIDATED STATEMENTS OF INCOME (unaudited)									CONSOLIDATED STATEMENTS OF INCOME (unaudited)

		Three Months Ended September 30,				Nine Months Ended September 30,					Three Months Ended March 31,
(In Thousands, Except Number of Shares and Per Share Data)		2015		2014		2015		2014			2016		2015
Interest Income
Interest and fees on loans		$	18,651	$	18,112	$	56,077	$	52,649		$	27,016	$	18,084
Interest on U.S. government and sponsored enterprise obligations		3,598		3,896		11,187		12,250			3,990		3,872
Interest on state and political subdivision obligations		624		319		1,504		927			714		387
Interest on federal funds sold and other investments		183		90		393		266			261		105
Total interest income		23,056		22,417		69,161		66,092			31,981		22,448
Interest Expense
Interest on deposits		1,557		1,562		4,630		4,678			2,042		1,529
Interest on borrowings		849		848		2,556		2,500			1,136		860
Interest on junior subordinated debentures		638		638		1,894		1,894
Interest on subordinated debentures											851		625
Total interest expense		3,044		3,048		9,080		9,072			4,029		3,014
Net interest income		20,012		19,369		60,081		57,020			27,952		19,434
Provision for credit losses		279		539		979		1,675			872		446
Net interest income after provision for credit losses		19,733		18,830		59,102		55,345			27,080		18,988
Non-Interest Income
Service charges on deposit accounts		1,554		1,600		4,634		4,689			1,724		1,487
Other service charges and fees		1,682		1,646		4,776		4,584			2,328		1,510
Income from fiduciary services		1,177		1,212		3,725		3,745			1,169		1,220
Mortgage banking income, net											808		239
Brokerage and insurance commissions		411		441		1,362		1,378			458		449
Bank-owned life insurance		443		377		1,267		975			422		422
Mortgage banking income, net		390		55		975		197
Net gain on sale of securities		4		—		4		451
Other income		900		623		2,275		2,131			1,008		820
Total non-interest income		6,561		5,954		19,018		18,150			7,917		6,147
Non-Interest Expense
Salaries and employee benefits		8,691		8,078		25,550		24,359			11,610		8,375
Furniture, equipment and data processing		1,705		1,704		5,530		5,236			2,427		1,923
Net occupancy		1,194		1,175		3,905		3,825			1,877		1,472
Consulting and professional fees		470		468		1,734		1,768			885		591
Other real estate owned and collection costs		543		637		1,554		1,665			656		562
Regulatory assessments		513		511		1,534		1,477			721		510
Amortization of intangible assets		288		287		862		861			476		287
Merger and acquisition costs		766		—		1,629		—			644		735
Other expenses		2,541		2,319		7,371		6,905			3,632		2,346
Total non-interest expense		16,711		15,179		49,669		46,096			22,928		16,801
Income before income taxes		9,583		9,605		28,451		27,399			12,069		8,334
Income Taxes		3,127		3,154		9,191		8,917			3,735		2,723
Net Income		$	6,456	$	6,451	$	19,260	$	18,482		$	8,334	$	5,611

Per Share Data
Basic earnings per share		$	0.86	$	0.87	$	2.58	$	2.47		$	0.81	$	0.75
Diluted earnings per share		$	0.86	$	0.86	$	2.57	$	2.46		$	0.81	$	0.75
Weighted average number of common shares outstanding		7,453,222		7,421,592		7,443,543		7,459,972			10,259,995		7,431,065
Diluted weighted average number of common shares outstanding		7,477,039		7,439,948		7,464,484		7,479,327			10,298,171		7,453,875

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

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(unaudited)
Three Months Ended
September 30, Nine Months Ended
September 30,
(In Thousands) 2015 2014 2015 2014
Net Income $ 6,456
$ 6,451
$ 19,260
$ 18,482
Other comprehensive income (loss):

Available-for-sale securities:

Net unrealized gains (losses) on available-for-sale securities arising during the period, net of tax of ($1,649), $1,189, ($1,723) and ($2,749), respectively 3,064
(2,208 ) 3,202
5,106
Reclassification of gains included in net income, net of tax of $1, $0, $1, $158, respectively⁽¹⁾
(3 ) —
(3 ) (293 )
Net change in unrealized gains (losses) on available-for-sale securities, net of tax 3,061
(2,208 ) 3,199
4,813
Net change in unrealized losses on cash flow hedging derivatives, net of tax of $950, $50, $668, and $1,070, respectively (1,763 ) (93 ) (1,241 ) (1,988 )
Reclassification of amortization of net unrecognized actuarial loss and prior service cost, net of tax of ($20), ($13), ($61) and ($40), respectively⁽²⁾
39
24
116
71
Other comprehensive income (loss) 1,337
(2,277 ) 2,074
2,896
Comprehensive Income $ 7,793
$ 4,174
$ 21,334
$ 21,378

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (unaudited)

	Three Months Ended March 31,
(In Thousands)	2016			2015
Net Income	$	8,334		$	5,611
Other comprehensive income:
Net change in unrealized gains on available-for-sale securities, net of tax of ($4,183), and ($2,212), respectively	7,769			4,108
Net change in unrealized losses on cash flow hedging derivatives:
Net change in unrealized loss on cash flow hedging derivatives, net of tax of $1,261, and $751, respectively	(2,342		)	(1,395		)
Net reclassification adjustment for effective portion of cash flow hedges included in interest expense, net of tax of ($128) and ($120), respectively⁽¹⁾	237			223
Net change in unrealized losses on cash flow hedging derivatives, net of tax	(2,105		)	(1,172		)
Reclassification of amortization of net unrecognized actuarial loss and prior service cost, net of tax of ($21) and ($21), respectively⁽²⁾	38			38
Other comprehensive income	5,702			2,974
Comprehensive Income	$	14,036		$	8,585

(1) Reclassified into the consolidated statements of income in ~~net gain~~interest on ~~sale of securities.~~subordinated debentures.

(2) Reclassified into the consolidated statements of income in salaries and employee benefits.

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

CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY (unaudited)	CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY (unaudited)																CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY (unaudited)

		Common Stock								Accumulated Other Comprehensive Loss				Total Shareholders’ Equity				Common Stock								Accumulated Other Comprehensive Loss			Total Shareholders’ Equity
(In Thousands, Except Number of Shares and Per Share Data)		Shares Outstanding		Amount			Retained Earnings							Total Shareholders’ Equity			Shares Outstanding		Amount			Retained Earnings				Accumulated Other Comprehensive Loss			Total Shareholders’ Equity
Balance at December 31, 2013		7,579,913		$	47,783		$	195,660		Accumulated Other Comprehensive Loss	$	(12,347	)		$	231,096
Net income		—		—			18,482			—				18,482
Other comprehensive income, net of tax		—		—			—			2,896				2,896
Stock-based compensation expense		—		453			—			—				453
Exercise of stock options and issuance of vested share awards, net of repurchase for tax withholdings and tax benefit		23,037		157			—			—				157
Common stock repurchased		(181,355	)	(7,155		)	—			—				(7,155		)
Cash dividends declared ($0.81 per share)		—		—			(6,017		)	—				(6,017		)
Balance at September 30, 2014		7,421,595		$	41,238		$	208,125		$	(9,451	)		$	239,912

Balance at December 31, 2014		7,426,222		$	41,555		$	211,979		$	(8,425	)		$	245,109			7,426,222		$	41,555		$	211,979		$	(8,425	)	$	245,109
Net income		—		—			19,260			—				19,260				—		—			5,611			—			5,611
Other comprehensive income, net of tax		—		—			—			2,074				2,074				—		—			—			2,974			2,974
Stock-based compensation expense		—		542			—			—				542				—		198			—			—			198
Exercise of stock options and issuance of vested share awards, net of repurchase for tax withholdings and tax benefit		27,823		512			—			—				512				12,707		136			—			—			136
Equity issuance costs		—		(537		)	—			—				(537		)
Cash dividends declared ($0.90 per share)		—		—			(7,557		)	—				(7,557		)
Balance at September 30, 2015		7,454,045		$	42,072		$	223,682		$	(6,351	)		$	259,403
Cash dividends declared ($0.30 per share)																		—		—			(2,229		)	—			(2,229		)
Balance at March 31, 2015																		7,438,929		$	41,889		$	215,361		$	(5,451	)	$	251,799

Balance at December 31, 2015																		10,220,478		$	153,083		$	222,329		$	(12,222	)	$	363,190
Net income																		—		—			8,334			—			8,334
Other comprehensive income, net of tax																		—		—			—			5,702			5,702
Stock-based compensation expense																		—		337			—			—			337
Exercise of stock options and issuance of vested share awards, net of repurchase for tax withholdings and tax benefit																		50,605		1,017			—			—			1,017
Cash dividends declared ($0.30 per share)																		—		—			(3,123		)	—			(3,123		)
Balance at March 31, 2016																		10,271,083		$	154,437		$	227,540		$	(6,520	)	$	375,457

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

CONSOLIDATED STATEMENTS OF CASH FLOWS (unaudited)	CONSOLIDATED STATEMENTS OF CASH FLOWS (unaudited)							CONSOLIDATED STATEMENTS OF CASH FLOWS (unaudited)

		Nine Months Ended September 30,							Three Months Ended March 31,
(In Thousands)		2015			2014				2016			2015
Operating Activities
Net Income		$	19,260		$	18,482			$	8,334		$	5,611
Adjustments to reconcile net income to net cash provided by operating activities:
Provision for credit losses		979			1,675				872			446
Depreciation expense		2,130			2,199				1,427			764
Investment securities amortization and accretion, net		1,638			1,301
Purchase accounting accretion, net									(1,055		)	(66		)
Investment securities amortization, net									652			509
Stock-based compensation expense		542			453				337			198
Amortization of intangible assets		862			861				476			287
Net gain on sale of investment securities		(4		)	(451		)
Net increase in other real estate owned valuation allowance and loss on disposition		348			222				66			81
Originations of mortgage loans held for sale		(25,341		)	(399		)		(44,431		)	(5,425		)
Proceeds from the sale of mortgage loans		24,996			416				39,868			4,935
Gain on sale of mortgage loans		(541		)	(17		)		(972		)	(129		)
Increase in other assets		(3,107		)	(3,438		)		2,869			780
(Decrease) increase in other liabilities		(11		)	806				(4,170		)	16
Net cash provided by operating activities		21,751			22,110				4,273			8,007
Investing Activities
Proceeds from sales and maturities of available-for-sale securities		123,650			105,818
Proceeds from maturities of available-for-sale securities									28,580			37,132
Purchase of available-for-sale securities		(81,262		)	(62,494		)		(66,849		)	(20,344		)
Purchase of held-to-maturity securities		(55,462		)	(11,589		)		(3,929		)	(16,076		)
Net increase in loans		(60,601		)	(148,967		)		(2,321		)	(20,293		)
Purchase of bank-owned life insurance		—			(10,000		)
Purchase of Federal Home Loan Bank and Federal Reserve Bank stock		(56		)	(706		)		(92		)	—
Proceeds from sale of Federal Reserve Bank stock		—			51
Proceeds from the sale of other real estate owned		2,760			1,591				42			1,564
Recoveries of previously charged-off loans		554			538				104			133
Purchase of premises and equipment		(1,797		)	(831		)		(464		)	(464		)
Net cash used by investing activities		(72,214		)	(126,589		)		(44,929		)	(18,348		)
Financing Activities
Net increase in deposits		76,155			114,850
Proceeds from Federal Home Loan Bank long-term advances		10,000			—
Net (decrease) increase in deposits									(51,286		)	34,112
Repayments on Federal Home Loan Bank long-term advances		(11,039		)	(54		)		—			(19		)
Net (decrease) increase in other borrowed funds		(12,081		)	11,171
Equity issuance costs		(537		)	—
Common stock repurchased		—			(7,475		)
Net increase (decrease) in other borrowed funds									86,726			(29,392		)
Exercise of stock options and issuance of restricted stock, net of repurchase for tax withholdings and tax benefit		512			157				1,017			136
Cash dividends paid on common stock		(6,716		)	(6,075		)		(3,088		)	(2,235		)
Net cash provided by financing activities		56,294			112,574				33,369			2,602
Net increase in cash and cash equivalents		5,831			8,095
Net decrease in cash and cash equivalents									(7,287		)	(7,739		)
Cash and cash equivalents at beginning of period		60,813			51,355				79,488			60,813
Cash and cash equivalents at end of period		$	66,644		$	59,450			$	72,201		$	53,074
Supplemental information
Interest paid		$	9,104		$	9,129			$	4,029		$	3,015
Income taxes paid		8,345			10,147				5			5
Transfer from loans to other real estate owned		1,725			1,184				32			1,439
Held-to-maturity securities purchased but unsettled									—			4,830
SBM acquisition measurement-period adjustments									390			—

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

NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

(Dollar Amounts inIn Tables Expressed in Thousands, Except ~~Number of Shares and per~~Per Share Data)

NOTE 1 – BASIS OF PRESENTATION

The accompanying unaudited consolidated interim financial statements were prepared in accordance with instructions for Form 10-Q and, therefore, do not include all disclosures required by accounting principles generally accepted in the United States of America for complete presentation of financial statements. In the opinion of management, the consolidated financial statements contain all adjustments (consisting only of normal recurring accruals) necessary to present fairly the consolidated statements of condition of Camden National Corporation as of ~~September 30, 2015~~March 31, 2016 and December 31, ~~2014~~2015, the consolidated statements of income for the three ~~and nine~~ months ended ~~September 30, 2015~~March 31, 2016 and ~~2014~~2015, the consolidated statements of comprehensive income for the three ~~and nine~~ months ended ~~September 30, 2015~~March 31, 2016 and ~~2014~~2015, the consolidated statements of changes in shareholders' equity for the ~~nine~~three months ended ~~September 30, 2015~~March 31, 2016 and ~~2014,~~2015, and the consolidated statements of cash flows for the ~~nine~~three months ended ~~September 30, 2015~~March 31, 2016 and ~~2014~~2015. All significant intercompany transactions and balances are eliminated in consolidation. Certain items from the prior period were reclassified to conform to the current period presentation. The income reported for the three ~~and nine~~ months ended ~~September 30, 2015~~March 31, 2016 is not necessarily indicative of the results that may be expected for the full year. The information in this report should be read in conjunction with the consolidated financial statements and accompanying notes included in the year ended December 31, ~~2014~~2015 Annual Report on Form 10-K.

The acronyms and abbreviations identified below are used throughout this Form 10-Q, including Part I. "Financial Information" and Part II. "Other Information." The following is provided to aid the reader and provide a reference page when reviewing this Form 10-Q.



Acadia Trust:	Acadia Trust, N.A., a wholly-owned subsidiary of Camden National Corporation	FASB:	Financial Accounting Standards Board
~~Act:~~AFS:	~~Medicare Prescription Drug, Improvement and Modernization Act~~Available-for-sale	FDIC:	Federal Deposit Insurance Corporation
~~AFS:~~ALCO:	~~Available-for-sale~~Asset/Liability Committee	FHLB:	Federal Home Loan Bank
~~ALCO:~~ALL:	~~Asset/Liability Committee~~Allowance for loan losses	FHLBB:	Federal Home Loan Bank of Boston
~~ALL:~~AOCI:	~~Allowance for loan losses~~Accumulated other comprehensive income (loss)	FRB:	Federal Reserve Bank
~~AOCI:~~ASC:	~~Accumulated other comprehensive income (loss)~~Accounting Standards Codification	Freddie Mac:	Federal Home Loan Mortgage Corporation
~~ASC:~~ASU:	Accounting Standards ~~Codification~~Update	GAAP:	Generally accepted accounting principles in the United States
~~ASU:~~	~~Accounting Standards Update~~	~~HTM:~~	~~Held-to-maturity~~
Bank:	Camden National Bank, a wholly-owned subsidiary of Camden National Corporation	~~IRS:~~HPFC:	~~Internal Revenue Service~~Healthcare Professional Funding Corporation, a wholly-owned subsidiary of Camden National Bank
BOLI:	Bank-owned life insurance	~~LIBOR:~~HTM:	~~London Interbank Offered Rate~~Held-to-maturity
Board ALCO:	Board of Directors' Asset/Liability Committee	~~LTIP:~~IRS:	~~Long-Term Performance Share Plan~~Internal Revenue Service
BSA:	Bank Secrecy Act	~~Management ALCO:~~LIBOR:	~~Management Asset/Liability Committee~~London Interbank Offered Rate
CCTA:	Camden Capital Trust A, an unconsolidated entity formed by Camden National Corporation	~~MBS:~~LTIP:	~~Mortgage-backed security~~Long-Term Performance Share Plan
CDARS:	Certificate of Deposit Account Registry System	Management ALCO:	Management Asset/Liability Committee
CDs:	Certificate of deposits	MBS:	Mortgage-backed security
Company:	Camden National Corporation	Merger:	On October 16, 2015, the two-step merger of Camden National Corporation, SBM Financial, Inc. and Atlantic Acquisitions, LLC, a wholly-owned subsidiary of Camden National Corporation, was completed
~~CDs:~~CSV:	~~Certificate of deposits~~Cash surrender value	Merger Agreement:	Plan of Merger, dated as of March 29, 2015, by and among Camden National Corporation, SBM Financial, Inc. and Atlantic Acquisitions, LLC, a wholly-owned subsidiary of the Company
~~Company:~~CMO:	~~Camden National Corporation~~Collateralized mortgage obligation	MSHA:	Maine State Housing Authority
~~CSV:~~DCRP:	~~Cash surrender value~~Defined Contribution Retirement Plan	MSRs:	Mortgage servicing rights
~~CMO:~~EPS:	~~Collateralized mortgage obligation~~Earnings per share	MSPP:	Management Stock Purchase Plan
~~DCRP:~~	~~Defined Contribution Retirement Plan~~	~~OTTI:~~	~~Other-than-temporary impairment~~
~~EPS:~~	~~Earnings per share~~	~~NIM:~~	~~Net interest margin on a fully-taxable basis~~



~~N.M.:~~OTTI:	~~Not meaningful~~Other-than-temporary impairment	SBM:	SBM Financial, Inc., the parent company of The Bank of Maine
NIM:	Net interest margin on a fully-taxable basis	SERP:	Supplemental executive retirement plans
~~Non-Agency:~~N.M.:	~~Non-agency private issue collateralized mortgage obligation~~Not meaningful	TDR:	Troubled-debt restructured loan
NRV:	Net realizable value	UBCT:	Union Bankshares Capital Trust I, an unconsolidated entity formed by Union Bankshares Company that was subsequently acquired by Camden National Corporation
OCC:	Office of the Comptroller of the Currency	U.S.:	United States of America
OCI:	Other comprehensive income (loss)	2003 Plan:	2003 Stock Option and Incentive Plan
OFAC:	Office of Foreign Assets Control	2012 Plan:	2012 Equity and Incentive Plan
OREO:	Other real estate owned	2013 Repurchase Program:	2013 Common Stock Repurchase Program, approved by the Company's Board of Directors
~~SBM:~~	~~SBM Financial, Inc., the parent company of The Bank of Maine~~

NOTE 2 – EPS

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


	Three Months Ended September 30,						Nine Months Ended September 30,						Three Months Ended March 31,
	2015			2014			2015			2014			2016			2015
Net income	$	6,456		$	6,451		$	19,260		$	18,482		$	8,334		$	5,611
Dividends and undistributed earnings allocated to participating securities⁽¹⁾	(21		)	(20		)	(61		)	(57		)	(29		)	(17		)
Net income available to common shareholders	$	6,435		$	6,431		$	19,199		$	18,425		$	8,305		$	5,594
Weighted-average common shares outstanding for basic EPS	7,453,222			7,421,592			7,443,543			7,459,972			10,259,995			7,431,065
Dilutive effect of stock-based awards⁽²⁾	23,817			18,356			20,941			19,355			38,176			22,810
Weighted-average common and potential common shares for diluted EPS	7,477,039			7,439,948			7,464,484			7,479,327			10,298,171			7,453,875
Earnings per common share:
Basic EPS	$	0.86		$	0.87		$	2.58		$	2.47		$	0.81		$	0.75
Diluted EPS	$	0.86		$	0.86		$	2.57		$	2.46		$	0.81		$	0.75
Awards excluded from the calculation of diluted EPS⁽³⁾:
Stock options	13,750			30,750			16,250			14,750			13,250			15,250

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

(2) Represents the effect of the assumed exercise of stock options, vesting of restricted shares, vesting of restricted stock units, and vesting of LTIP awards that have met the performance criteria, as applicable, utilizing the treasury stock method.

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

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

Net income is allocated between the common stock and participating securities pursuant to the two-class method. Basic EPS is computed by dividing net income available to common shareholders by the weighted average number of common shares outstanding during the period, excluding participating nonvested stock-based awards.

Diluted EPS is computed in a similar manner, except that the denominator ~~is increased to include~~includes the number of additional common shares that would have been outstanding if potentially dilutive common shares were issued using the treasury stock method.

NOTE 3 – SECURITIES

The following tables summarize the amortized cost and estimated fair values of AFS and HTM securities, as of the dates indicated:


	Amortized Cost		Unrealized Gains		Unrealized Losses			Fair Value		Amortized Cost		Unrealized Gains		Unrealized Losses			Fair Value
September 30, 2015
March 31, 2016
AFS Securities:
Obligations of U.S. government-sponsored enterprises	$	4,969	$	125	$	—		$	5,094	$	4,973	$	146	$	—		$	5,119
Obligations of states and political subdivisions	19,471		401		—			19,872		15,254		286		—			15,540
Mortgage-backed securities issued or guaranteed by U.S. government-sponsored enterprises	376,950		5,490		(1,391		)	381,049		460,604		6,612		(617		)	466,599
Collateralized mortgage obligations issued or guaranteed by U.S. government-sponsored enterprises	318,417		2,512		(2,707		)	318,222		308,902		2,126		(2,470		)	308,558
Subordinated corporate bonds										3,480		18		(37		)	3,461
Total AFS debt securities										793,213		9,188		(3,124		)	799,277
Equity securities										712		40		—			752
Total AFS securities	$	719,807	$	8,528	$	(4,098	)	$	724,237	$	793,925	$	9,228	$	(3,124	)	$	800,029
HTM Securities:
Obligations of states and political subdivisions	$	75,368	$	1,311	$	(101	)	$	76,578	$	87,950	$	2,816	$	(37	)	$	90,729
Total HTM securities	$	75,368	$	1,311	$	(101	)	$	76,578	$	87,950	$	2,816	$	(37	)	$	90,729
December 31, 2014
December 31, 2015
AFS Securities:
Obligations of U.S. government-sponsored enterprises	$	4,962	$	65	$	—		$	5,027	$	4,971	$	69	$	—		$	5,040
Obligations of states and political subdivisions	26,080		697		—			26,777		17,355		339		—			17,694
Mortgage-backed securities issued or guaranteed by U.S. government-sponsored enterprises	377,657		5,656		(2,005		)	381,308		419,429		3,474		(3,857		)	419,046
Collateralized mortgage obligations issued or guaranteed by U.S. government-sponsored enterprises	348,855		953		(5,911		)	343,897		312,719		409		(6,271		)	306,857
Private issue collateralized mortgage obligations	5,999		63		(8		)	6,054
Subordinated corporate bonds										1,000		—		(4		)	996
Total AFS debt securities										755,474		4,291		(10,132		)	749,633
Equity securities										712		2		(9		)	705
Total AFS securities	$	763,553	$	7,434	$	(7,924	)	$	763,063	$	756,186	$	4,293	$	(10,141	)	$	750,338
HTM Securities:
Obligations of states and political subdivisions	$	20,179	$	265	$	(19	)	$	20,425	$	84,144	$	1,564	$	(61	)	$	85,647
Total HTM securities	$	20,179	$	265	$	(19	)	$	20,425	$	84,144	$	1,564	$	(61	)	$	85,647

Net unrealized gains on AFS securities at ~~September 30, 2015~~March 31, 2016 included in AOCI amounted to $~~2.9~~4.0 million, net of a deferred tax liability of $~~1.6~~2.1 million. Net unrealized losses on AFS securities at December 31, ~~2014~~2015 included in AOCI amounted to ~~$319,000,~~$3.8 million, net of a deferred tax benefit of ~~$172,000.~~$2.0 million.

During the first ~~nine~~three months of 2016, the Company purchased investment securities totaling $70.8 million. The Company designated $66.9 million as AFS securities and $3.9 million as HTM securities.

During the first three months of 2015, the Company purchased investment securities totaling ~~$136.7~~$36.4 million. The Company designated ~~$81.3~~$20.3 million as AFS securities and ~~$55.4~~$16.1 million as HTM securities.

Impaired Securities

Management periodically reviews the Company’s investment portfolio to determine the cause, magnitude and duration of declines in the fair value of each security. Thorough evaluations of the causes of the unrealized losses are performed to determine whether the impairment is temporary or other-than-temporary in nature. Considerations such as the ability of the securities to meet cash flow requirements, levels of credit enhancements, risk of curtailment, recoverability of invested amount over a reasonable period of time, and the length of time the security is in a loss position, for example, are applied in determining OTTI. Once a decline in value is determined to be other-than-temporary, the ~~value~~cost basis of the security is permanently reduced and a corresponding charge to earnings is recognized.

The following table presents the estimated fair values and gross unrealized losses of investment securities that were in a continuous loss position at ~~September 30, 2015~~March 31, 2016 and December 31, ~~2014~~2015, by length of time that individual securities in each category have been in a continuous loss position:


	Less Than 12 Months					12 Months or More					Total					Less Than 12 Months					12 Months or More					Total
	Fair Value		Unrealized Losses			Fair Value		Unrealized Losses			Fair Value		Unrealized Losses			Fair Value		Unrealized Losses			Fair Value		Unrealized Losses			Fair Value		Unrealized Losses
September 30, 2015
March 31, 2016
AFS Securities:
Mortgage-backed securities issued or guaranteed by U.S. government-sponsored enterprises	$	53,164	$	(395	)	$	57,721	$	(996	)	$	110,885	$	(1,391	)	$	14,453	$	(82	)	$	49,596	$	(535	)	$	64,049	$	(617	)
Collateralized mortgage obligations issued or guaranteed by U.S. government-sponsored enterprises	12,183		(188		)	145,289		(2,519		)	157,472		(2,707		)	8,240		(47		)	145,716		(2,423		)	153,956		(2,470		)
Subordinated corporate bonds																1,963		(37		)	—		—			1,963		(37		)
Total AFS securities	$	65,347	$	(583	)	$	203,010	$	(3,515	)	$	268,357	$	(4,098	)	$	24,656	$	(166	)	$	195,312	$	(2,958	)	$	219,968	$	(3,124	)
HTM Securities:
Obligations of states and political subdivisions	$	12,388	$	(101	)	$	—	$	—		$	12,388	$	(101	)	$	2,181	$	(37	)	$	—	$	—		$	2,181	$	(37	)
Total HTM securities	$	12,388	$	(101	)	$	—	$	—		$	12,388	$	(101	)	$	2,181	$	(37	)	$	—	$	—		$	2,181	$	(37	)
December 31, 2014
December 31, 2015
AFS Securities:
Mortgage-backed securities issued or guaranteed by U.S. government-sponsored enterprises	$	42,856	$	(171	)	$	125,439	$	(1,834	)	$	168,295	$	(2,005	)	$	234,897	$	(2,351	)	$	45,629	$	(1,506	)	$	280,526	$	(3,857	)
Collateralized mortgage obligations issued or guaranteed by U.S. government-sponsored enterprises	75,723		(432		)	182,512		(5,479		)	258,235		(5,911		)	111,143		(1,068		)	147,180		(5,203		)	258,323		(6,271		)
Private issue collateralized mortgage obligations	1,785		(8		)	—		—			1,785		(8		)
Subordinated corporate bonds																996		(4		)	—		—			996		(4		)
Equity Securities																615		(9		)	—		—			615		(9		)
Total AFS securities	$	120,364	$	(611	)	$	307,951	$	(7,313	)	$	428,315	$	(7,924	)	$	347,651	$	(3,432	)	$	192,809	$	(6,709	)	$	540,460	$	(10,141	)
HTM Securities:
Obligations of states and political subdivisions	$	5,756	$	(19	)	$	—	$	—		$	5,756	$	(19	)	$	5,507	$	(61	)	$	—	$	—		$	5,507	$	(61	)
Total HTM securities	$	5,756	$	(19	)	$	—	$	—		$	5,756	$	(19	)	$	5,507	$	(61	)	$	—	$	—		$	5,507	$	(61	)

At ~~September 30,~~March 31, 2016 and December 31, 2015,, the Company held 7342 and 109 investment securities with a fair value of $~~280.7~~222.1 million and $546.0 million with unrealized losses totaling ~~$4.2~~$3.2 million and $10.2 million, respectively, that ~~are~~were considered temporary. Of these, the Company had 3429 MBS and CMO investments with a fair value of ~~$203.0~~$195.3 million that ~~have been~~were in an unrealized loss position totaling $3.0 million at March 31, 2016 and 28 MBS and CMO investments with a fair value of $192.8 million that were in an unrealized loss position totaling $6.7 million at December 31, 2015 for 12 months or more. The decline in the fair value of securities is reflective of current interest rates in excess of the yield received on investments and is not indicative of an overall change in credit ~~deterioration~~quality or other factors with the Company's investment portfolio. At ~~September 30,~~March 31, 2016

and December 31, 2015, gross unrealized losses on the Company's AFS and HTM securities were 1% and 2%, respectively, of ~~amortized cost.~~the respective investment securities fair value.

The Company has the intent and ability to retain its investment securities in an unrealized loss position at ~~September 30, 2015~~March 31, 2016 until the decline in value has recovered.

~~Sale of Securities~~

~~The following table details the Company’s sales of AFS securities for the period indicated below:~~

Three Months Ended September 30, Nine Months Ended September 30,
2015 2014 2015 2014
Proceeds from sales of securities $ 12,426
$ —
$ 12,426
$ 25,695
Gross realized gains 221
—
221
451
Gross realized losses (217 ) —
(217 ) —

For the three months ended ~~September 30,~~March 31, 2016 and 2015, the Company sold certain AFS securities with total carrying value of $12.4 million and recorded net gains on the sale of AFS securities of $4,000 within non-interest income in the consolidated statements of income. As part of the Company’s securities portfolio restructuring due to its pending merger with SBM as of September 30, 2015 (which subsequently was completed on October 16, 2015) it sold all of its Non-Agency investments in the quarter ended September 30, 2015, along with $7.3 million of MBS investments experiencing high prepayment speeds. The Company recorded a net gain of $4,000 from the sale of its Non-Agency and MBS investments. The Company had previously recorded OTTI on its Non-Agency investments of $204,000. For the three months ended September 30, 2014, the Company did not sell any investment securities.

~~For the~~ ~~nine months~~ ~~ended September 30,~~FHLBB and FRB Stock

As of March 31, 2016 and December 31, 2015, the ~~Company sold certain AFS securities with total carrying value of $12.4~~Company's investment in FHLBB stock was $20.7 million and ~~recorded net gains on sale~~$20.6 million, respectively. As of ~~AFS securities of $4,000 within non-interest income~~March 31, 2016 and December 31, 2015, the Company's investment in ~~the consolidated statements of income. For the nine months ended September 30, 2014, the Company sold certain AFS securities with a total carrying value of~~ ~~$25.2 million~~ ~~and recorded net gains on the sale of AFS securities of~~ ~~$451,000~~ ~~within non-interest income in the consolidated statements of income.~~FRB stock was $908,000.

Securities Pledged

At ~~September 30, 2015~~March 31, 2016 and December 31, ~~2014~~2015, securities with an amortized cost of $~~508.9~~557.1 million and $~~486.2~~577.6 million, respectively, and estimated fair values of $~~510.3~~559.6 million and $~~485.6~~570.9 million, respectively, were pledged to secure FHLBB advances, public deposits, and securities sold under agreements to repurchase and for other purposes required or permitted by law.

Contractual Maturities

The amortized cost and estimated fair values of debt securities by contractual maturity at ~~September 30, 2015~~March 31, 2016, are shown below. Expected maturities will differ from contractual maturities because borrowers may have the right to call or prepay obligations with or without call or prepayment penalties.


	Amortized Cost		Fair Value		Amortized Cost		Fair Value
AFS Securities
Due in one year or less	$	3,594	$	3,634	$	1,002	$	1,016
Due after one year through five years	87,212		88,411		103,817		105,196
Due after five years through ten years	110,852		113,415		111,295		113,903
Due after ten years	518,149		518,777		577,099		579,162
	$	719,807	$	724,237	$	793,213	$	799,277
HTM Securities
Due in one year or less	$	—	$	—
Due after one year through five years	2,234		2,290		$	2,204	$	2,260
Due after five years through ten years	1,134		1,143		2,494		2,538
Due after ten years	72,000		73,145		83,252		85,931
	$	75,368	$	76,578	$	87,950	$	90,729

NOTE 4 – LOANS AND ALLOWANCE FOR LOAN LOSSES

The composition of the Company’s loan portfolio, excluding residential loans held for sale, at ~~September 30, 2015~~March 31, 2016 and December 31, ~~2014~~2015 was as follows:


	September 30, 2015			December 31, 2014			March 31, 2016			December 31, 2015
Residential real estate(1)	$	583,424		$	585,996		$	813,266		$	821,074
Commercial real estate(1)	690,935			640,661			953,220			927,951
Commercial(1)	258,105			257,515			291,684			297,721
Home equity(1)	281,492			271,709			343,137			348,634
Consumer(1)	16,535			17,257			17,096			17,953
Net deferred fees	(348		)	(528		)
Total	$	1,830,143		$	1,772,610
HPFC⁽¹⁾							74,304			77,243
Deferred loan fees, net							(73		)	(370		)
Total loans							$	2,492,634		$	2,490,206


(1)	The loan balances are presented net of the unamortized fair value mark discount associated with the purchase accounting for acquired loans of $12.1 million and $13.1 million at March 31, 2016 and December 31, 2015, respectively.

The ~~Company’s~~Bank’s lending activities are primarily conducted in Maine, and its footprint continues to expand into other New England states, including New Hampshire and Massachusetts. The Company originates single family and multi-family residential loans, commercial real estate loans, business loans, municipal loans and a variety of consumer loans. In addition, the Company makes loans for the construction of residential homes, multi-family properties and commercial real estate properties. The ability and willingness of borrowers to honor their repayment commitments is generally dependent on the level of overall economic activity within the geographic area and the general economy.

HPFC provides niche commercial lending to the small business medical field, including dentists, optometrists and veterinarians across the U.S. The ability and willingness of borrowers to honor their repayment commitments is generally dependent on the success of the borrower's business. Unlike the Bank's loan portfolio, there is, generally, little to no indication of credit quality issues and/or concerns of borrowers honoring their commitments until a payment is delinquent. Generally, once a payment is delinquent, if the payment is not received shortly thereafter to bring the loan current, the loan is deemed impaired (typically within 45 days). Effective February 19, 2016, the Company closed HPFC's operations and is no longer originating loans.

The ALL is management’s best estimate of the inherent risk of loss in the Company’s loan portfolio as of the consolidated statement of condition date. Management makes various assumptions and judgments about the collectability of the loan portfolio and provides an allowance for potential losses based on a number of factors including historical losses. If those assumptions are incorrect, the ALL may not be sufficient to cover losses and may cause an increase in the allowance in the future. Among the factors that could affect the Company’s ability to collect loans and require an increase to the allowance in the future are: (i) financial condition of borrowers; (ii) real estate market changes; (iii) state, regional, and national economic conditions; and (iv) a requirement by federal and state regulators to increase the provision for loan losses or recognize additional charge-offs.

There were no significant changes in the Company's ALL methodology during the ~~nine~~three months ended ~~September 30, 2015.~~March 31, 2016.

The board of directors monitors credit risk through the Directors' Loan Review Committee, which reviews large credit exposures, monitors the 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, concentration levels, and the ALL methodology. The ~~Corporate~~Credit Risk ~~Management Group~~Administration and the Credit Risk Policy Committee oversee the Company's systems and procedures to monitor the credit quality of its loan portfolio, conduct a loan review program, maintain the integrity of the loan rating system, determine the adequacy of the ALL and support the oversight efforts of the Directors' Loan Review Committee and the board of directors. The Company's practice is to proactively manage the portfolio such that management can identify problem credits 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. For purposes of

determining the ALL, the Company disaggregates its loans into portfolio segments, which include residential real estate, commercial real estate, commercial, home equity, consumer and ~~consumer.~~HPFC. Each portfolio segment possesses unique risk characteristics that are considered when determining the appropriate level of allowance. These risk characteristics unique to each portfolio segment include:

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

Commercial Real Estate. Commercial real estate loans consist of mortgage loans to finance investments in real property such as multi-family residential, commercial/retail, office, industrial, hotels, educational, health care facilities and other specific use properties. Commercial real estate loans are typically written with amortizing payment structures. Collateral values are determined based upon appraisals and evaluations in accordance with established policy guidelines. Loan-to-value ratios at origination are governed by established policy and regulatory guidelines. Commercial real estate loans are primarily paid by the cash flow generated from the real property, such as operating leases, rents, or other operating cash flows from the borrower.

Commercial. Commercial loans consist of revolving and term loan obligations extended to business and corporate enterprises for the purpose of financing working capital and/or capital investment. Collateral generally consists of pledges of business assets including, but not limited to, accounts receivable, inventory, plant & equipment, or real estate, if applicable. Commercial loans are primarily paid by the operating cash flow of the borrower. Commercial loans may be secured or unsecured.

Home Equity. Home equity loans and lines are made to qualified individuals for legitimate purposes secured by senior or junior mortgage liens on owner-occupied one- to four-family homes, condominiums, or vacation homes. The home equity loan has a fixed rate and is billed as equal payments comprised of principal and interest. The home equity line of credit has a variable rate and is billed as interest-only payments during the draw period. At the end of the draw period, the home equity line of credit is billed as a percentage of the principal balance plus all accrued interest. Borrower qualifications include favorable credit history combined with supportive income requirements and combined loan-to-value ratios within established policy guidelines.

Consumer. Consumer loan products including personal lines of credit and amortizing loans made to qualified individuals for various purposes such as education, auto loans, debt consolidation, personal expenses or overdraft protection. Borrower qualifications include favorable credit history combined with supportive income and collateral requirements within established policy guidelines. Consumer loans may be secured or unsecured.

HPFC. HPFC is a niche lender that provides commercial lending to dentists, optometrists and veterinarians, many of which are start-up companies. HPFC's loan portfolio consists of term loan obligations extended for the purpose of financing working capital and/or purchase of equipment. Collateral may consist of pledges of business assets including, but not limited to, accounts receivable, inventory, and/or equipment. These loans are primarily paid by the operating cash flow of the borrower and the terms range from seven to ten years.

The following ~~table~~tables presents the activity in the ALL and select loan information by portfolio segment for the ~~three and~~ ~~nine~~three months ended ~~September 30, 2015~~March 31, 2016 and ~~2014,~~2015, and for the year ended December 31, ~~2014:~~2015:


	Residential Real Estate			Commercial Real Estate			Commercial			Home Equity			Consumer			Unallocated			Total			Residential Real Estate			Commercial Real Estate			Commercial			Home Equity			Consumer			HPFC		Unallocated			Total
For The Three and Nine Months Ended September 30, 2015
For The Three Months Ended March 31, 2016
ALL for the three months ended:
Beginning balance	$	4,689		$	4,698		$	6,777		$	2,144		$	268		$	2,618		$	21,194		$	4,545		$	10,432		$	3,241		$	2,731		$	193		$	24	$	—		$	21,166
Loans charged off	(176		)	(71		)	(144		)	(198		)	(23		)	—			(612		)	(210		)	(222		)	(226		)	(128		)	(15		)	—		—			(801		)
Recoveries	15			4			115			132			3			—			269			40			9			52			1			2			—		—			104
Provision (credit)⁽¹⁾	4			661			85			(6		)	13			(476		)	281
Provision⁽¹⁾																						141			161			231			18			2			317		—			870
Ending balance	$	4,532		$	5,292		$	6,833		$	2,072		$	261		$	2,142		$	21,132		$	4,516		$	10,380		$	3,298		$	2,622		$	182		$	341	$	—		$	21,339
ALL for the nine months ended:
ALL balance attributable to loans:
Individually evaluated for impairment																						$	512		$	158		$	214		$	89		$	—		$	307	$	—		$	1,280
Collectively evaluated for impairment																						4,004			10,222			3,084			2,533			182			34		—			20,059
Total ending ALL																						$	4,516		$	10,380		$	3,298		$	2,622		$	182		$	341	$	—		$	21,339
Loans:
Individually evaluated for impairment																						$	6,033		$	3,130		$	3,862		$	492		$	7		$	357	$	—		$	13,881
Collectively evaluated for impairment																						805,941			949,351			288,202			344,005			17,182			74,072		—			2,478,753
Total ending loans balance																						$	811,974		$	952,481		$	292,064		$	344,497		$	17,189		$	74,429	$	—		$	2,492,634
For The Three Months Ended March 31, 2015
ALL for the three months ended:
Beginning balance	$	4,899		$	4,482		$	6,823		$	2,247		$	281		$	2,384		$	21,116		$	4,899		$	7,951		$	3,354		$	2,247		$	281		$	—	$	2,384		$	21,116
Loans charged off	(468		)	(174		)	(387		)	(439		)	(42		)	—			(1,510		)	(113		)	(55		)	(159		)	(89		)	(8		)	—		—			(424		)
Recoveries	35			68			297			137			17			—			554			3			10			104			5			11			—		—			133
Provision (credit)⁽¹⁾	66			916			100			127			5			(242		)	972			46			328			128			84			(14		)	—		(132		)	440
Ending balance	$	4,532		$	5,292		$	6,833		$	2,072		$	261		$	2,142		$	21,132		$	4,835		$	8,234		$	3,427		$	2,247		$	270		$	—	$	2,252		$	21,265
ALL balance attributable to loans:
Individually evaluated for impairment	$	956		$	352		$	192		$	276		$	89		$	—		$	1,865		$	743		$	132		$	139		$	—		$	78		$	—	$	—		$	1,092
Collectively evaluated for impairment	3,576			4,940			6,641			1,796			172			2,142			19,267			4,092			8,102			3,288			2,247			192			—		2,252			20,173
Total ending ALL	$	4,532		$	5,292		$	6,833		$	2,072		$	261		$	2,142		$	21,132		$	4,835		$	8,234		$	3,427		$	2,247		$	270		$	—	$	2,252		$	21,265
Loans:
Individually evaluated for impairment	$	7,499		$	4,711		$	1,720		$	1,037		$	206		$	—		$	15,173		$	6,107		$	2,696		$	823		$	302		$	156		$	—	$	—		$	10,084
Collectively evaluated for impairment	575,577			686,224			256,385			280,455			16,329			—			1,814,970			578,366			654,765			256,940			274,482			16,443			—		—			1,780,996
Total ending loans balance	$	583,076		$	690,935		$	258,105		$	281,492		$	16,535		$	—		$	1,830,143		$	584,473		$	657,461		$	257,763		$	274,784		$	16,599		$	—	$	—		$	1,791,080


	Residential Real Estate			Commercial Real Estate			Commercial			Home Equity			Consumer			Unallocated			Total			Residential Real Estate			Commercial Real Estate			Commercial			Home Equity			Consumer			HPFC		Unallocated			Total
For The Three and Nine Months Ended September 30, 2014
ALL for the three months ended:
Beginning balance	$	5,141		$	4,361		$	6,484		$	2,752		$	318		$	2,849		$	21,905
Loans charged off	(9		)	(100		)	(675		)	(166		)	(59		)	—			(1,009		)
Recoveries	2			17			117			8			11			—			155
Provision (credit)⁽¹⁾	122			82			35			(63		)	23			335			534
Ending balance	$	5,256		$	4,360		$	5,961		$	2,531		$	293		$	3,184		$	21,585
ALL for the nine months ended:
Beginning balance	$	5,603		$	4,374		$	6,220		$	2,403		$	319		$	2,671		$	21,590
Loans charged off	(370		)	(276		)	(1,201		)	(272		)	(99		)	—			(2,218		)
Recoveries	136			67			286			19			30			—			538
Provision (credit)⁽¹⁾	(113		)	195			656			381			43			513			1,675
Ending balance	$	5,256		$	4,360		$	5,961		$	2,531		$	293		$	3,184		$	21,585
ALL balance attributable to loans:
Individually evaluated for impairment	$	1,420		$	222		$	121		$	573		$	111		$	—		$	2,447
Collectively evaluated for impairment	3,836			4,138			5,840			1,958			182			3,184			19,138
Total ending ALL	$	5,256		$	4,360		$	5,961		$	2,531		$	293		$	3,184		$	21,585
Loans:
Individually evaluated for impairment	$	10,964		$	6,710		$	3,380		$	1,860		$	309		$	—		$	23,223
Collectively evaluated for impairment	566,134			606,800			242,232			269,998			17,840			—			1,703,004
Total ending loans balance	$	577,098		$	613,510		$	245,612		$	271,858		$	18,149		$	—		$	1,726,227
For The Year Ended December 31, 2014
For The Year Ended December 31, 2015
ALL:
Beginning balance	$	5,603		$	4,374		$	6,220		$	2,403		$	319		$	2,671		$	21,590		$	4,899		$	7,951		$	3,354		$	2,247		$	281		$	—	$	2,384		$	21,116
Loans charged off	(785		)	(361		)	(1,544		)	(611		)	(143		)	—			(3,444		)	(801		)	(481		)	(655		)	(525		)	(154		)	—		—			(2,616		)
Recoveries	165			135			395			19			32			—			746			55			74			389			188			22			—		—			728
Provision (credit)⁽¹⁾	(84		)	334			1,752			436			73			(287		)	2,224			392			2,888			153			821			44			24		(2,384		)	1,938
Ending balance	$	4,899		$	4,482		$	6,823		$	2,247		$	281		$	2,384		$	21,116		$	4,545		$	10,432		$	3,241		$	2,731		$	193		$	24	$	—		$	21,166
ALL balance attributable to loans:
Individually evaluated for impairment	$	1,220		$	251		$	168		$	496		$	104		$	—		$	2,239		$	544		$	644		$	92		$	89		$	—		$	—	$	—		$	1,369
Collectively evaluated for impairment	3,679			4,231			6,655			1,751			177			2,384			18,877			4,001			9,788			3,149			2,642			193			24		—			19,797
Total ending ALL	$	4,899		$	4,482		$	6,823		$	2,247		$	281		$	2,384		$	21,116		$	4,545		$	10,432		$	3,241		$	2,731		$	193		$	24	$	—		$	21,166
Loans:
Individually evaluated for impairment	$	9,656		$	7,658		$	1,853		$	1,741		$	271		$	—		$	21,179		$	6,026		$	4,610		$	3,937		$	588		$	74		$	—	$	—		$	15,235
Collectively evaluated for impairment	575,812			633,003			255,662			269,968			16,986			—			1,751,431			814,591			923,341			293,784			348,046			17,879			77,330		—			2,474,971
Total ending loans balance	$	585,468		$	640,661		$	257,515		$	271,709		$	17,257		$	—		$	1,772,610		$	820,617		$	927,951		$	297,721		$	348,634		$	17,953		$	77,330	$	—		$	2,490,206

(1) The provision (credit) for loan losses excludes any impact for the change in the reserve for unfunded commitments, which represents management's estimate of the amount required to reflect the probable inherent losses on outstanding letters of credit and unused lines of credit. The reserve for unfunded commitments is presented within accrued interest and other liabilities on the consolidated statements of condition. At September 30, 2015 and 2014, and December 31, 2014, the reserve for unfunded commitments was $24,000, $21,000 and $17,000, respectively.

(1)

The provision (credit) for loan losses excludes any impact for the change in the reserve for unfunded commitments, which represents management's estimate of the amount required to reflect the probable inherent losses on outstanding letters of credit and unused lines of credit. The reserve for unfunded commitments is presented within accrued interest and other liabilities on the consolidated statements of condition. At March 31, 2016 and 2015, and December 31, 2015, the reserve for unfunded commitments was $24,000, $23,000 and $22,000, respectively.

The following table reconciles the three ~~and nine~~ months ended ~~September 30,~~March 31, 2016 and 2015, ~~and 2014,~~ and year ended December 31, ~~2014~~2015 provision for loan losses to the provision for credit losses as presented on the consolidated statement of income:


	Three Months Ended September 30,					Nine Months Ended September 30,				Year Ended December 31,			Three Months Ended March 31,				Year Ended December 31,
	2015			2014		2015		2014		2014			2016		2015		2015
Provision for loan losses	$	281		$	534	$	972	$	1,675	$	2,224		$	870	$	440	$	1,938
Change in reserve for unfunded commitments	(2		)	5		7		—		(4		)	2		6		(2		)
Provision for credit losses	$	279		$	539	$	979	$	1,675	$	2,220		$	872	$	446	$	1,936

The Company focuses on maintaining a well-balanced and diversified loan portfolio. Despite such efforts, it is recognized that credit concentrations may occasionally emerge as a result of economic conditions, changes in local demand, natural loan growth and runoff. To ensure that credit concentrations can be effectively identified, all commercial and commercial real estate loans are assigned Standard Industrial Classification codes, North American Industry Classification System codes, and state and county codes. Shifts in portfolio concentrations are monitored by ~~the Corporate~~Credit Risk ~~Management Group.~~Administration. As of ~~September 30, 2015,~~March 31, 2016, the non-residential building operators industry exposure was 11% of the Company's total loan portfolio and ~~28%~~29% of the total commercial real estate portfolio. There were no other industry exposures exceeding 10% of the Company's total loan portfolio as of ~~September 30, 2015.~~March 31, 2016.

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

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

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

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

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

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

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

The following table summarizes credit risk exposure indicators by portfolio segment as of the following dates:


	Residential Real Estate		Commercial Real Estate		Commercial		Home Equity		Consumer		Total		Residential Real Estate		Commercial Real Estate		Commercial		Home Equity		Consumer		HPFC		Total
September 30, 2015
March 31, 2016
Pass (Grades 1-6)	$	573,229	$	647,831	$	247,817	$	—	$	—	$	1,468,877	$	795,256	$	886,346	$	277,568	$	—	$	—	$	72,615	$	2,031,785
Performing	—		—		—		280,455		16,329		296,784		—		—		—		342,929		17,185		—		360,114
Special Mention (Grade 7)	2,599		12,689		5,881		—		—		21,169		3,043		32,330		7,778		—		—		301		43,452
Substandard (Grade 8)	7,248		30,415		4,407		—		—		42,070		13,675		33,805		6,718		—		—		1,513		55,711
Non-performing	—		—		—		1,037		206		1,243		—		—		—		1,568		4		—		1,572
Total	$	583,076	$	690,935	$	258,105	$	281,492	$	16,535	$	1,830,143	$	811,974	$	952,481	$	292,064	$	344,497	$	17,189	$	74,429	$	2,492,634
December 31, 2014
December 31, 2015
Pass (Grades 1-6)	$	572,589	$	606,387	$	244,930	$	—	$	—	$	1,423,906	$	802,873	$	868,664	$	281,553	$	—	$	—	$	70,173	$	2,023,263
Performing	—		—		—		269,968		16,986		286,954		—		—		—		346,701		17,835		—		364,536
Special Mention (Grade 7)	3,579		4,690		6,023		—		—		14,292		3,282		20,732		7,527		—		—		3,179		34,720
Substandard (Grade 8)	9,300		29,584		6,562		—		—		45,446		14,462		38,555		8,641		—		—		3,978		65,636
Non-performing	—		—		—		1,741		271		2,012		—		—		—		1,933		118		—		2,051
Total	$	585,468	$	640,661	$	257,515	$	271,709	$	17,257	$	1,772,610	$	820,617	$	927,951	$	297,721	$	348,634	$	17,953	$	77,330	$	2,490,206

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

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


	30-59 Days Past Due		60-89 Days Past Due		Greater than 90 Days		Total Past Due		Current		Total Loans Outstanding		Loans > 90 Days Past Due and Accruing		Non-Accrual Loans		30-59 Days Past Due		60-89 Days Past Due		Greater than 90 Days		Total Past Due		Current		Total Loans Outstanding		Loans > 90 Days Past Due and Accruing		Non-Accrual Loans
September 30, 2015
March 31, 2016
Residential real estate	$	977	$	303	$	3,199	$	4,479	$	578,597	$	583,076	$	—	$	4,149	$	965	$	719	$	4,764	$	6,448	$	805,526	$	811,974	$	—	$	6,275
Commercial real estate	1,997		64		1,964		4,025		686,910		690,935		—		3,384		3,077		1,357		2,369		6,803		945,678		952,481		—		3,044
Commercial	669		51		1,107		1,827		256,278		258,105		—		1,383		664		123		1,255		2,042		290,022		292,064		—		4,128
Home equity	211		35		811		1,057		280,435		281,492		—		1,037		568		221		1,325		2,114		342,383		344,497		—		1,568
Consumer	55		25		183		263		16,272		16,535		—		206		34		9		7		50		17,139		17,189		—		4
HPFC																	624		320		—		944		73,485		74,429		—		357
Total	$	3,909	$	478	$	7,264	$	11,651	$	1,818,492	$	1,830,143	$	—	$	10,159	$	5,932	$	2,749	$	9,720	$	18,401	$	2,474,233	$	2,492,634	$	—	$	15,376
December 31, 2014
December 31, 2015
Residential real estate	$	1,206	$	426	$	4,531	$	6,163	$	579,305	$	585,468	$	—	$	6,056	$	3,325	$	571	$	6,077	$	9,973	$	810,644	$	820,617	$	—	$	7,253
Commercial real estate	1,696		—		3,791		5,487		635,174		640,661		—		7,043		4,219		2,427		1,584		8,230		919,721		927,951		—		4,529
Commercial	456		269		1,139		1,864		255,651		257,515		—		1,529		267		550		1,002		1,819		295,902		297,721		—		4,489
Home equity	889		88		1,129		2,106		269,603		271,709		—		1,741		643		640		1,505		2,788		345,846		348,634		—		1,933
Consumer	28		—		254		282		16,975		17,257		—		271		112		7		118		237		17,716		17,953		—		118
HPFC																	165		—		—		165		77,165		77,330		—		—
Total	$	4,275	$	783	$	10,844	$	15,902	$	1,756,708	$	1,772,610	$	—	$	16,640	$	8,731	$	4,195	$	10,286	$	23,212	$	2,466,994	$	2,490,206	$	—	$	18,322

Interest income that would have been recognized if loans on non-accrual status had been current in accordance with their original terms was ~~$103,000~~$184,000 and ~~$192,000~~$143,000 for the three months ended ~~September 30,~~March 31, 2016 and 2015, ~~and 2014, respectively, and $375,000 and $647,000 for the nine months ended September 30, 2015 and 2014,~~ respectively.

TDRs:

The Company takes a conservative approach with credit risk management and remains focused on community lending and reinvesting. The Company works closely with borrowers experiencing credit problems to assist in loan repayment or term modifications. TDR loans consist of loans where the Company, for economic or legal reasons related to the borrower’s financial difficulties, granted a concession to the borrower that it would not otherwise consider. TDRs, typically, involve term modifications or a reduction of either interest or principal. Once such an obligation has been restructured, it will remain a TDR until paid in full, or until the loan is again restructured at current market rates and no concessions are granted.

The specific reserve allowance was determined by discounting the total expected future cash flows from the borrower at the original loan interest rate, or if the loan is currently collateral-dependent, using the NRV, which was obtained through independent appraisals and internal evaluations. The following is a summary of TDRs, by portfolio segment, and the associated specific reserve included within the ALL as ~~of:~~of the periods indicated:


	Number of Contracts		Recorded Investment				Specific Reserve				Number of Contracts		Recorded Investment				Specific Reserve
	September 30, 2015	December 31, 2014	September 30, 2015		December 31, 2014		September 30, 2015		December 31, 2014		March 31, 2016	December 31, 2015	March 31, 2016		December 31, 2015		March 31, 2016		December 31, 2015
Residential real estate	22	24	$	3,452	$	3,786	$	568	$	635	22	22	$	3,343	$	3,398	$	336	$	544
Commercial real estate	6	7	1,573		1,702		48		—		4	6	1,109		1,459		—		48
Commercial	9	9	413		426		11		10		7	9	325		399		1		11
Home equity	1	1	23		29		—		—		1	1	20		21		—		—
Total	38	41	$	5,461	$	5,943	$	627	$	645	34	38	$	4,797	$	5,277	$	337	$	603

At ~~September 30,~~March 31, 2016, the Company had performing and non-performing TDRs with a recorded investment balance of $4.6 million and $227,000, respectively. At December 31, 2015, the Company had performing and non-performing TDRs with a recorded investment balance of ~~$5.0~~$4.8 million and ~~$473,000, respectively. At December 31, 2014, the Company had performing and non-performing TDRs with a recorded investment balance of $4.5 million and $1.4 million,~~$446,000, respectively. As of ~~September 30, 2015~~March 31, 2016 and December 31, ~~2014,~~2015, the Company did not have any commitments to lend additional funds to borrowers with loans classified as TDRs.

~~The following represents~~There were no loan modifications that occurred during the three ~~and nine~~ months ended ~~September 30,~~March 31, 2016 or 2015 ~~and 2014~~ that qualify as ~~TDRs, by portfolio segment, and the associated specific reserve included within the ALL:~~

Number of Contracts
Pre-Modification
Outstanding
Recorded Investment

Post-Modification
Outstanding
Recorded Investment
Specific Reserve
September 30, September 30, September 30, September 30,
2015 2014 2015 2014 2015 2014 2015 2014
For the Three Months Ended:
Residential real estate 1
—
$ 74
$ —
$ 78
$ —
$ —
$ —
Commercial real estate —
1
—
235
—
235
—
—
Commercial —
3
—
77
—
77
—
9
Consumer and home equity —
1
—
40
—
30
—
—
Total 1
5
$ 74
$ 352
$ 78
$ 342
$ —
$ 9

For the Nine Months Ended:
Residential real estate 1
1
$ 74
$ 136
$ 78
$ 149
$ —
$ 44
Commercial real estate —
1
—
235
—
235
—
—
Commercial —
3
—
77
—
77
—
9
Consumer and home equity —
1
—
40
—
30
—
—
Total 1
6
$ 74
$ 488
$ 78
$ 491
$ —
$ 53
TDRs.

For the three ~~and nine~~ months ended ~~September 30,~~March 31, 2016 and 2015, ~~and 2014,~~ no loans were modified as TDRs within the previous 12 months for which the borrower subsequently defaulted.

Impaired Loans:

Impaired loans consist of non-accrual and TDR loans ~~and TDRs. All impaired loans~~that are ~~allocated a portion of~~individually evaluated for impairment in accordance with the ~~allowance to cover potential losses.~~Company's policy. The following is a summary of impaired loan balances and the associated allowance by portfolio segment as of and for ~~the~~ three ~~and nine~~ months ended ~~September 30,~~March 31, 2016 and 2015, and ~~2014:~~

Three Months Ended Nine Months Ended

Recorded
Investment

Unpaid
Principal
Balance

Related
Allowance

Average
Recorded
Investment

Interest
Income
Recognized⁽¹⁾
Average
Recorded
Investment Interest
Income
Recognized
September 30, 2015:
With an allowance recorded:

Residential real estate $ 5,880
$ 5,880
$ 956
$ 7,618
$ 55
$ 6,963
$ 82
Commercial real estate 1,442
1,475
352
2,161
—
1,930
—
Commercial 1,016
1,016
192
1,320
5
1,188
6
Home equity 834
834
276
1,410
—
1,099
—
Consumer 189
189
89
248
—
229
—
Ending Balance 9,361
9,394
1,865
12,757
60
11,409
88
Without an allowance recorded:

Residential real estate 1,619
2,118
—
1,774
4
1,607
6
Commercial real estate 3,269
3,430
—
3,102
18
2,735
45
Commercial 704
876
—
503
4
567
8
Home equity 203
454
—
303
—
390
—
Consumer 17
37
—
17
—
17
—
Ending Balance 5,812
6,915
—
5,699
26
5,316
59
Total impaired loans $ 15,173
$ 16,309
$ 1,865
$ 18,456
$ 86
$ 16,725
$ 147
September 30, 2014:
With an allowance recorded:

Residential real estate $ 9,441
$ 9,441
$ 1,420
$ 9,236
$ 38
$ 9,928
$ 102
Commercial real estate 2,987
2,987
222
3,142
1
5,588
2
Commercial 1,562
1,562
121
2,724
(2 ) 2,653
8
Home equity 1,510
1,510
573
1,486
—
1,571
—
Consumer 292
292
111
333
—
392
—
Ending Balance 15,792
15,792
2,447
16,921
37
20,132
112
Without an allowance recorded:

Residential real estate 1,523
1,880
—
1,751
2
2,340
5
Commercial real estate 3,723
4,116
—
3,490
14
2,230
43
Commercial 1,818
2,318
—
870
6
609
8
Home equity 350
477
—
403
—
415
—
Consumer 17
37
—
17
—
17
—
Ending Balance 7,431
8,828
—
6,531
22
5,611
56
Total impaired loans $ 23,223
$ 24,620
$ 2,447
$ 23,452
$ 59
$ 25,743
$ 168

~~(1) Negative interest income represents the re-allocation of income between "with an allowance recorded" and "without an allowance recorded" (or vice versa) during the period.~~

~~The following is a summary of impaired loan balances and associated allowance by portfolio segment~~ as of and for the year-ended December 31, 2015:



							Three Months Ended
	Recorded Investment		Unpaid Principal Balance		Related Allowance		Average Recorded Investment		Interest Income Recognized
March 31, 2016:
With an allowance recorded:
Residential real estate	$	3,137	$	3,137	$	512	$	3,156	$	27
Commercial real estate	540		538		158		1,256		—
Commercial	321		334		214		239		—
Home equity	303		303		89		303		—
Consumer	—		—		—		—		—
HPFC	357		383		307		230		—
Ending balance	4,658		4,695		1,280		5,184		27
Without an allowance recorded:
Residential real estate	2,896		3,832		—		2,954		2
Commercial real estate	2,590		3,327		—		2,643		11
Commercial	3,541		3,996		—		3,664		4
Home equity	189		452		—		218		—
Consumer	7		10		—		7		—
HPFC	—		—		—		—		—
Ending balance	9,223		11,617		—		9,486		17
Total impaired loans	$	13,881	$	16,312	$	1,280	$	14,670	$	44
March 31, 2015:
With an allowance recorded:
Residential real estate	$	4,342	$	4,341	$	743	$	4,409	$	29
Commercial real estate	256		266		132		86		—
Commercial	233		233		139		199		—
Home equity	—		—		—		—		—
Consumer	139		140		78		140		—
HPFC	—		—		—		—		—
Ending Balance	4,970		4,980		1,092		4,834		29
Without an allowance recorded:
Residential real estate	1,765		2,289		—		1,774		2
Commercial real estate	2,440		2,748		—		3,102		8
Commercial	590		754		—		503		4
Home equity	302		505		—		303		—
Consumer	17		37		—		17		—
HPFC	—		—		—		—		—
Ending Balance	5,114		6,333		—		5,699		14
Total impaired loans	$	10,084	$	11,313	$	1,092	$	10,533	$	43



							Year Ended
	Recorded Investment		Unpaid Principal Balance		Related Allowance		Average Recorded Investment		Interest Income Recognized
December 31, 2015:
With an allowance recorded:
Residential real estate	$	3,191	$	3,191	$	544	$	6,064	$	112
Commercial real estate	1,825		1,857		644		1,753		—
Commercial	156		156		92		945		2
Home equity	303		303		89		900		—
Consumer	—		—		—		195		—
HPFC	—		—		—		—		—
Ending Balance	5,475		5,507		1,369		9,857		114
Without an allowance recorded:
Residential real estate	2,835		4,353		—		2,175		8
Commercial real estate	2,785		3,426		—		2,719		65
Commercial	3,781		4,325		—		1,412		17
Home equity	285		688		—		369		—
Consumer	74		150		—		20		—
HPFC	—		—		—		—		—
Ending Balance	9,760		12,942		—		6,695		90
Total impaired loans	$	15,235	$	18,449	$	1,369	$	16,552	$	204

The impaired loan information presented above as of and for the three months ended March 31, 2015 and year ended December 31, ~~2014:~~

Year Ended

Recorded
Investment

Unpaid
Principal
Balance

Related
Allowance

Average
Recorded
Investment

Interest
Income
Recognized
With an allowance recorded:

Residential real estate $ 7,713
$ 7,713
$ 1,220
$ 9,524
$ 125
Commercial real estate 3,419
3,419
251
4,911
—
Commercial 1,390
1,390
168
2,466
8
Home equity 1,410
1,410
496
1,545
—
Consumer 254
254
104
358
—
Ending Balance 14,186
14,186
2,239
18,804
133
Without an allowance recorded:




Residential real estate 1,943
2,604
—
2,257
13
Commercial real estate 4,239
4,502
—
2,869
59
Commercial 463
606
—
791
11
Home equity 331
581
—
399
—
Consumer 17
37
—
21
—
Ending Balance 6,993
8,330
—
6,337
83
Total impaired loans $ 21,179
$ 22,516
$ 2,239
$ 25,141
$ 216
2015 was revised to disclose only those impaired loans that are individually evaluated for impairment in accordance with the Company's policy, which includes (i) loans with a principal balance greater than $250,000 or more and are classified as substandard or doubtful and are on non-accrual status and (ii) all TDRs. Previously, the Company's impaired loan disclosures included certain non-accrual loans which were collectively evaluated under ASC 450-20. The revision of prior period information had no impact on the Company's ALL, provision for loan losses, or its asset quality ratios as of and for the three months ended March 31, 2015 and year ended December 31, 2015.

Loan Sales:

For the three months ended ~~September 30,~~March 31, 2016 and 2015, ~~and 2014,~~ the Company sold ~~$11.9~~$38.9 million and ~~$0,~~$4.8 million, respectively, of fixed rate residential mortgage loans on the secondary market that resulted in ~~net~~ gains on the sale of loans (net of ~~$249,000~~costs) of $819,000 and $0, respectively. For the nine months ended September 30, 2015 and 2014, the Company sold $24.5 million and $399,000 of fixed rate residential mortgage loans on the secondary market that resulted in net gains on the sale of loans of $541,000 and $17,000,$129,000, respectively.

At ~~September 30,~~March 31, 2016 and December 31, 2015, the Company had certain ~~fixed rate~~residential mortgage loans with a ~~total~~ principal balance of ~~$890,000~~$16.5 million and $10.8 million, respectively, designated as held for sale. The Company has elected ~~to record~~the fair value option of accounting for its loans held for sale and at ~~fair value. At September 30,~~March 31, 2016 and December 31, 2015 ~~the Company~~ recorded an unrealized gain of ~~$4,000~~$139,000 and $133,000, respectively. For the three months ended March 31, 2016 and 2015, the Company recorded within ~~non-operating~~non-interest income on its consolidated statements of income a change in unrealized gains of $6,000 for ~~the three months ended September 30, 2015. The company did not have any loans designated as held for sale at September 30, 2014.~~each period.

OREO:

The Company records its properties obtained through foreclosure or deed-in-lieu of foreclosure as OREO properties on the consolidated statements of condition at NRV. At ~~September 30, 2015,~~March 31, 2016, the Company had ~~three~~four residential and five commercial real estate properties with a carrying value of ~~$204,000~~$273,000 and $955,000, respectively, within OREO. At December 31, ~~2014,~~2015, the Company had 11two residential real estate properties and ~~six~~seven commercial properties with a carrying value of ~~$575,000~~$241,000 and $1.0 million, respectively, within OREO.

In-Process Foreclosure Proceedings:

At ~~September 30, 2015~~March 31, 2016 and December 31, ~~2014,~~2015, the Company had ~~$2.6~~$3.6 million and ~~$4.9~~$2.9 million, respectively, of consumer mortgage loans secured by residential real estate properties for which foreclosure proceedings were in process, representing ~~48%~~43% and ~~61%~~32%, respectively, of non-accrual loans within the Company's residential, consumer and home equity portfolios. The Company continues to be focused on working these consumer mortgage loans through the foreclosure process to resolution; however, the foreclosure process, typically, will take 18 to 24 months due to the State of Maine foreclosure laws.

FHLB Advances:

FHLB advances are those borrowings from the FHLBB greater than 90 days. FHLB advances are collateralized by a blanket lien on qualified collateral consisting primarily of loans with first mortgages secured by one- to four-family properties, certain commercial real estate loans, certain pledged investment securities and other qualified assets. The carrying value of residential real estate and commercial loans pledged as collateral was ~~$830.6 million and $843.2 million~~$1.1 billion at ~~September 30, 2015~~March 31, 2016 and December 31, ~~2014, respectively.~~2015.

Refer to Note 3 and 9 of the consolidated financial statements for discussion of securities pledged as collateral.

NOTE 5 – GOODWILL AND OTHER INTANGIBLE ASSETS

The Company has recognized goodwill and certain identifiable intangible assets in connection with certain business combinations in prior years.

Goodwill as of ~~September 30, 2015~~March 31, 2016 and December 31, ~~2014~~2015 for each reporting unit is shown in the table below:


	Goodwill								Goodwill
	Banking		Financial Services			Total			Banking			Financial Services			Total
September 30, 2015 and December 31, 2014:
December 31, 2015:
Goodwill, gross	$	40,902	$	7,474		$	48,376		$	91,753		$	7,474		$	99,227
Accumulated impairment losses	—		(3,570		)	(3,570		)	—			(3,570		)	(3,570		)
Reported goodwill at September 30, 2015 and December 31, 2014	$	40,902	$	3,904		$	44,806
Reported goodwill at December 31, 2015									91,753			3,904			95,657
2016 measurement-period adjustments									(390		)	—			(390		)
Reported goodwill at March 31, 2016									$	91,363		$	3,904		$	95,267

On October 16, 2015, the Company completed its acquisition of SBM, as previously reported. In the first quarter of 2016, the Company made certain measurement-period adjustments to its initial purchase accounting that decreased goodwill by $390,000. These measurement-period adjustments increased the previously reported loan balance by $211,000, increased acquired interest receivable and other assets by $157,000, and increased acquired deferred tax assets $22,000. The measurement-period adjustments have no impact on current or future years' net income and were presented and disclosed prospectively as of March 31, 2016 in accordance with ASU No. 2015-16, Business Combinations (Topic 805): Simplifying the Accounting for Measurement-Period Adjustments.

At March 31, 2016, the Company's accounting for the acquired loans and deferred tax assets was not yet complete and balances disclosed and presented within its Annual Report on Form 10-K for the year ended December 31, 2015, as adjusted by the aforementioned measurement-period adjustments, are provisional amounts.

The changes in core deposit and trust relationship intangible assets for the ~~nine~~three months ended ~~September 30, 2015~~March 31, 2016 are shown in the table below:

Core Deposit Intangible Trust Relationship Intangible
Total Accumulated Amortization Net Total Accumulated Amortization Net
Balance at December 31, 2014 $ 17,300
$ (14,161 ) $ 3,139
$ 753
$ (527 ) $ 226
2015 amortization —
(805 ) (805 ) —
(57 ) (57 )
Balance at September 30, 2015 $ 17,300
$ (14,966 ) $ 2,334
$ 753
$ (584 ) $ 169



	Core Deposit Intangible								Trust Relationship Intangible
	Total		Accumulated Amortization			Net			Total		Accumulated Amortization			Net
Balance at December 31, 2015	$	23,908	$	(15,392	)	$	8,516		$	753	$	(602	)	$	151
2016 amortization	—		(457		)	(457		)	—		(19		)	(19		)
Balance at March 31, 2016	$	23,908	$	(15,849	)	$	8,059		$	753	$	(621	)	$	132
Total carrying value of other intangible assets at December 31, 2015														$	8,667
Total carrying value of other intangible assets at March 31, 2016														$	8,191

~~It is estimated that core deposit and trust relationship intangible assets will be fully amortized by December 31, 2017.~~ The following table reflects the expected amortization ~~of core deposit and trust relationship~~schedule for intangible assets over ~~their respective~~the period of estimated ~~remaining useful lives as of~~ ~~September 30, 2015~~economic benefit (assuming no additional intangible assets are created or impaired):


	Core Deposit Intangible		Trust Relationship Intangible		Core Deposit Intangible		Trust Relationship Intangible		Total
2015	$	269	$	19
2016	1,073		75		$	1,371	$	56	$	1,427
2017	992		75		1,735		76		1,811
2018					725		—		725
2019					705		—		705
2020					682		—		682
Thereafter					2,841		—		2,841
Total	$	2,334	$	169	$	8,059	$	132	$	8,191

NOTE 6 – REGULATORY CAPITAL REQUIREMENTS

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

Effective January 1, 2015, the Company implemented the Basel III regulatory capital framework. These new rules and framework revised minimum capital requirements and adjusted prompt corrective action thresholds. The Company and the Bank are required to maintain certain levels of capital based on risk-adjusted assets. These capital requirements represent quantitative measures of ~~our~~their assets, liabilities and certain off-balance sheet items as calculated under regulatory accounting practices. The Company and Bank's capital classification is also subject to qualitative judgments by our regulators about components, risk weightings and other factors. ~~Under the Basel III regulatory capital framework, the~~The quantitative measures established to ensure capital adequacy require us to maintain minimum amounts and ratios of total, Tier I capital, and common equity Tier I ~~(as defined in the applicable regulations)~~ to risk-weighted assets, ~~(as defined in the applicable regulations),~~ and of Tier I capital to average assets, or leverage ~~ratio (as defined in the applicable regulations).~~ratio. These guidelines apply to the Company on a consolidated basis. Under the current guidelines, banking organizations must have a minimum total risk-based capital ratio of 8.0%, a minimum Tier I risk-based capital ratio of 6.0%, a minimum common equity Tier I risk-based capital ratio of 4.5%, and a minimum leverage ratio of 4.0%. in order to be "adequately capitalized." In addition to these requirements, banking organization must maintain a 2.5% capital conservation buffer consisting of common Tier I equity, subject to a transition schedule with a full phase-in by 2019. Effective January 1, 2016, the Company and the Bank were required to establish a capital conservation buffer of 0.625%, increasing the minimum required total risk-based capital, Tier I risk-based and common equity Tier I capital to risk-weighted assets they must maintain to avoid limits on capital distributions and certain bonus payments to executive officers and similar employees.

The Company and the Bank's risk-based capital ratios exceeded regulatory guidelines at ~~September 30, 2015~~March 31, 2016 ~~under the newly implemented Basel III regulatory capital framework. The Company~~ and ~~Bank's risk-based capital ratios under prior rules at~~ December 31, ~~2014~~ ~~also exceeded regulatory capital requirements under previous regulatory capital requirements in place.~~2015. The following table presents the Company and Bank's regulatory capital ratios at the periods indicated:

Current Regulatory Guidance Prior Regulatory Guidance
September 30,
2015 Minimum Regulatory Capital Required Minimum Regulatory Provision To Be "Well Capitalized" Under Prompt Corrective Action Provisions December 31,
2014 Minimum Regulatory Capital Required Minimum Regulatory Provision To Be "Well Capitalized" Under Prompt Corrective Action Provisions
Camden National Corporation:
Total risk-based capital ratio 14.76 % 8.00 % N/A
15.16 % 8.00 % N/A
Tier I risk-based capital ratio 13.67 % 6.00 % N/A
13.97 % 4.00 % N/A
Common equity Tier I risk-based capital ratio⁽¹⁾
11.44 % 4.50 % N/A
N/A
N/A
N/A
Tier I leverage capital ratio 9.41 % 4.00 % N/A
9.26 % 4.00 % N/A
Camden National Bank:
Total risk-based capital ratio 13.47 % 8.00 % 10.00 % 13.85 % 8.00 % 10.00 %
Tier I risk-based capital ratio 12.37 % 6.00 % 8.00 % 12.65 % 4.00 % 6.00 %
Common equity Tier I risk-based capital ratio⁽¹⁾
12.37 % 4.50 % 6.50 % N/A
N/A
N/A
Tier I leverage capital ratio 8.52 % 4.00 % 5.00 % 8.38 % 4.00 % 5.00 %

~~(1) Common equity Tier I risk-based capital ratio was a new risk-based capital ratio implemented with Basel III on January 1, 2015.~~



	March 31, 2016				Minimum Regulatory Capital Required for Capital Adequacy plus Capital Conservation Buffer		Minimum Regulatory Provision To Be "Well Capitalized" Under Prompt Corrective Action Provisions		December 31, 2015				Minimum Regulatory Capital Required for Capital Adequacy		Minimum Regulatory Provision To Be "Well Capitalized" Under Prompt Corrective Action Provisions
	Amount		Ratio						Amount		Ratio		Minimum Regulatory Capital Required for Capital Adequacy
Camden National Corporation:
Total risk-based capital ratio	$	341,422	13.08	%	8.63	%	N/A		$	335,740	12.98	%	8.00	%	N/A
Tier I risk-based capital ratio	305,058		11.69	%	6.63	%	N/A		299,552		11.58	%	6.00	%	N/A
Common equity Tier I risk-based capital ratio	270,792		10.37	%	5.13	%	N/A		269,350		10.42	%	4.50	%	N/A
Tier I leverage capital ratio	305,058		8.42	%	4.00	%	N/A		299,552		8.74	%	4.00	%	N/A
Camden National Bank:
Total risk-based capital ratio	$	308,105	11.77	%	8.63	%	10.00	%	$	304,847	11.75	%	8.00	%	10.00	%
Tier I risk-based capital ratio	286,742		10.96	%	6.63	%	8.00	%	283,659		10.93	%	6.00	%	8.00	%
Common equity Tier I risk-based capital ratio	286,742		10.96	%	5.13	%	6.50	%	283,659		10.93	%	4.50	%	6.50	%
Tier I leverage capital ratio	286,742		7.97	%	4.00	%	5.00	%	283,659		8.33	%	4.00	%	5.00	%

In addition, the OCC requires a minimum level of $2.5 million of Tier I capital to be maintained at Acadia Trust. As of ~~September 30, 2015~~March 31, 2016 and December 31, ~~2014,~~2015, Acadia Trust met all of its capital requirements.

Although the ~~junior~~ subordinated debentures are recorded as a liability on the Company's consolidated statements of condition, the Company is permitted, in accordance with regulatory guidelines, to include, subject to certain limits, the junior subordinated debentures in our calculation of risk-based capital. At ~~September 30, 2015~~March 31, 2016 and December 31, ~~2014,~~2015, $43.0 million of the junior subordinated debentures were included in Tier I and total risk-based capital for the Company. Additionally, the Company's $15.0 million of subordinated debentures qualify as Tier II capital and were included in total risk-based capital for the Company at March 31, 2016 and December 31, 2015.

NOTE 7 – EMPLOYEE BENEFIT PLANS

The Company sponsors unfunded, non-qualified SERPs for certain officers and provides medical and life insurance to certain eligible retired employees. The components of net period benefit cost for the periods ended ~~September 30, 2015~~March 31, 2016 and ~~2014~~2015 were as follows:

Supplemental Executive Retirement Plan:


	Three Months Ended September 30,				Nine Months Ended September 30,				Three Months Ended March 31,
Net periodic benefit cost	2015		2014		2015		2014		2016		2015
Service cost	$	77	$	67	$	231	$	201	$	77	$	77
Interest cost	106		114		318		342		108		106
Recognized net actuarial loss	54		35		162		105		55		54
Recognized prior service cost	5		5		15		15		2		5
Net period benefit cost⁽¹⁾	$	242	$	221	$	726	$	663	$	242	$	242

(1) Presented within the consolidated statements of income within salaries and employee benefits.

Other Postretirement Benefit Plan:


	Three Months Ended September 30,						Nine Months Ended September 30,						Three Months Ended March 31,
Net periodic benefit cost	2015			2014			2015			2014			2016			2015
Service cost	$	15		$	11		$	45		$	33		$	15		$	15
Interest cost	29			33			87			99			38			29
Recognized net actuarial loss	6			2			18			6			8			6
Amortization of prior service credit	(6		)	(5		)	(18		)	(15		)	(6		)	(6		)
Net period benefit cost⁽¹⁾	$	44		$	41		$	132		$	123		$	55		$	44

(1) Presented within the consolidated statements of income within salaries and employee benefits.

NOTE 8 – STOCK-BASED COMPENSATION PLANS

For the ~~nine~~three months ended ~~September 30, 2015,~~March 31, 2016, the Company granted share-based awards, subject to certain terms and conditions, to certain officers, executive officers, and directors of the Company, Bank and Acadia Trust. All share-based awards granted were issued under the 2012 Plan. The following outlines the details, and terms and conditions of the material awards granted during the ~~nine~~three months ended ~~September 30, 2015:~~March 31, 2016:

~~84 unrestricted~~5,793 restricted stock awards were ~~issued~~granted to ~~a newly appointed director of the Company~~executive officers under the ~~Independent Directors' Equity Compensation Program. The unrestricted stock awards fully vested on the January 1, 2015 grant date. The~~2016-2018 LTIP, at a fair value of ~~the~~$43.30 per share, ~~awards issued was determined using~~based on the closing market price of the Company's common stock on ~~December 31, 2014~~January 4, 2016. The restricted stock awards vest pro-rata over a three year period. The holders of ~~$39.84 per share.~~the restricted stock awards participate fully in the rewards of stock ownership of the Company, including voting and dividend rights.

A total of ~~6,281~~7,165 restricted stock awards and restricted stock units were granted at a fair value of $~~37.31~~40.80 per share, based on the closing market price of the Company’s common stock on the March ~~6, 2015~~17, 2016 grant date. The restricted stock awards vest pro-rata over a ~~three~~five-year period, while the restricted stock units vest pro-rata over a three-year period subject to the achievement of certain performance measures. The holders of the restricted stock awards participate fully in the rewards of stock ownership of the Company, including voting and dividend rights.

~~9,379~~10,676 shares of the Company's common stock were purchased under the MSPP at a one-third discount, based on the closing market price of the Company's common stock on the ~~March 6, 2015~~February 23, 2016 grant date of ~~$37.31,~~$38.11 (6,954 shares) and the March 17, 2016 grant date of $40.80 (3,722 shares), in lieu of the officers and executive officers annual incentive bonus. The shares fully vest after two years of service from the grant date.

~~2,406~~2,730 deferred stock awards were issued to certain executive officers under the DCRP. Of the 2,730 awards granted, 1,161 vested immediately on the grant date, the remainder will vest pro-rata until the recipient reaches age 65. The stock awards have been determined to have a fair value of ~~$38.85~~$40.55 per unit, based on the closing market price of the Company's common stock on the March ~~13, 2015~~15, 2016 grant date.

3,030 unrestricted stock awards were issued to the directors of the Company and Bank under the Independent Directors' Equity Compensation Program. The unrestricted stock awards fully vested immediately on the May 1, 2015 grant date. The fair value of the share awards issued was determined using the closing market price of the Company's stock on May 1, 2015 of $38.36 per share.

NOTE 9 – REPURCHASE AGREEMENTS

The Company can raise additional liquidity by entering into repurchase agreements at its discretion. In a security repurchase agreement transaction, the Company will generally sell a security, agreeing to repurchase either the same or substantially identical security on a specified later date, at a greater price than the original sales price. The difference between the sale price and purchase price is the cost of the proceeds, which is recorded as interest expense on the consolidated statement of income. The securities underlying the agreements are delivered to counterparties as security for the repurchase obligations. Since the securities are treated as collateral and the agreement does not qualify for a full transfer of effective control, the transactions does not meet the criteria to be classified as a sale, and is therefore considered a secured borrowing transaction for accounting purposes. Payments on such borrowings are interest only until the scheduled repurchase date. In a repurchase agreement, the Company is subject to the risk that the purchaser may default at maturity and not return the securities underlying the agreements. In order to minimize this potential risk, the Company either deals with established firms when entering into these transactions or with customers whose agreements stipulate that the securities underlying the agreement are not delivered to the customer and instead are held in segregated safekeeping accounts by the Company's safekeeping agents.

The table below sets forth information regarding the Company’s repurchase agreements accounted for as secured borrowings and types of collateral ~~at the date indicated:~~as of March 31, 2016 and December 31, 2015:


	September 30, 2015										Remaining Contractual Maturity of the Agreements
	Remaining Contractual Maturity of the Agreements										Overnight and Continuous		Up to 30 Days		30 - 90 Days		Greater than 90 Days		Total
	Overnight and Continuous		Up to 30 Days		30 - 90 Days		Greater than 90 Days		Total
March 31, 2016:
Customer Repurchase Agreements:
Obligations of states and political subdivisions	$	372	$	—	$	—	$	—	$	372	$	538	$	—	$	—	$	—	$	538
Mortgage-backed securities issued or guaranteed by U.S. government-sponsored enterprises	102,016		—		—		—		102,016		107,589		—		—		—		107,589
Collateralized mortgage obligations issued or guaranteed by U.S. government-sponsored enterprises	71,415		—		—		—		71,415		101,299		—		—		—		101,299
Total Customer Repurchase Agreements	173,803		—		—		—		173,803		209,426		—		—		—		209,426
Wholesale Repurchase Agreements:
Mortgage-backed securities issued or guaranteed by U.S. government-sponsored enterprises	—		—		—		27,959		27,959		—		—		—		22,032		22,032
Collateralized mortgage obligations issued or guaranteed by U.S. government-sponsored enterprises	—		—		—		2,104		2,104		—		—		—		8,009		8,009
Total Wholesale Repurchase Agreements	—		—		—		30,063		30,063		—		—		—		30,041		30,041
Total Repurchase Agreements⁽¹⁾	$	173,803	$	—	$	—	$	30,063	$	203,866	$	209,426	$	—	$	—	$	30,041	$	239,467
(1) Total repurchase agreements are presented within other borrowed funds on the consolidated statements of condition.
December 31, 2015:
Customer Repurchase Agreements:
Obligations of states and political subdivisions											$	556	$	—	$	—	$	—	$	556
Mortgage-backed securities issued or guaranteed by U.S. government-sponsored enterprises											95,967		—		—		—		95,967
Collateralized mortgage obligations issued or guaranteed by U.S. government-sponsored enterprises											88,466		—		—		—		88,466
Total Customer Repurchase Agreements											184,989		—		—		—		184,989
Wholesale Repurchase Agreements:
Mortgage-backed securities issued or guaranteed by U.S. government-sponsored enterprises											—		—		—		22,016		22,016
Collateralized mortgage obligations issued or guaranteed by U.S. government-sponsored enterprises											—		—		—		8,036		8,036
Total Wholesale Repurchase Agreements											—		—		—		30,052		30,052
Total Repurchase Agreements⁽¹⁾											$	184,989	$	—	$	—	$	30,052	$	215,041


(1)	Total repurchase agreements are presented within other borrowed funds on the consolidated statements of condition.

Certain customers held CDs totaling $915,000 and $914,000 with the Bank at March 31, 2016 and December 31, 2015, respectively, that were collateralized by CMO and MBS securities that were overnight repurchase agreements.

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

NOTE 10 – FAIR VALUE MEASUREMENT AND DISCLOSURE

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

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

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

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

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

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

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

Financial Instruments Recorded at Fair Value on a Recurring Basis

Loans Held For Sale: The fair value of loans held for sale is determined using quoted secondary market prices or executed sales agreements and is classified as Level 2.

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

The fair value of equity AFS securities is reported utilizing market prices based on recent trading activity. The equity securities are traded on inactive markets and are classified as Level 2.

Derivatives: The fair value of interest rate swaps is determined using inputs that are observable in the market place obtained from third parties including yield curves, publicly available volatilities, and floating indexes and, accordingly, are classified as Level 2 inputs. The credit value adjustments associated with derivatives utilize Level 3 inputs, such as estimates of current credit spreads to evaluate the likelihood of default by the Company and its counterparties. As of ~~September 30, 2015~~March 31, 2016 and December 31, ~~2014~~2015, the Company has assessed the significance of the impact of the credit valuation adjustments on the overall valuation of its derivative positions and has determined that the credit valuation adjustments are not significant to the overall valuation of its derivatives due to collateral postings.

26The fair value of interest rate lock commitments is determined based on current market prices for similar assets in the secondary market and, therefore, classified as Level 2 within the fair value hierarchy.

The following table summarizes financial assets and financial liabilities measured at fair value on a recurring basis as of ~~September 30, 2015~~March 31, 2016 and December 31, ~~2014~~2015, segregated by the level of the valuation inputs within the fair value hierarchy utilized to measure fair value:


	Fair Value		Readily Available Market Prices (Level 1)		Observable Market Data (Level 2)		Company Determined Fair Value (Level 3)		Fair Value		Readily Available Market Prices (Level 1)		Observable Market Data (Level 2)		Company Determined Fair Value (Level 3)
September 30, 2015
March 31, 2016
Financial assets:
Loans held for sale	$	890	$	—	$	890	$	—	$	16,632	$	—	$	16,632	$	—
AFS securities:
Obligations of U.S. government-sponsored enterprises	5,094		—		5,094		—		5,119		—		5,119		—
Obligations of states and political subdivisions	19,872		—		19,872		—		15,540		—		15,540		—
Mortgage-backed securities issued or guaranteed by U.S. government-sponsored enterprises	381,049		—		381,049		—		466,599		—		466,599		—
Collateralized mortgage obligations issued or guaranteed by U.S. government-sponsored enterprises	318,222		—		318,222		—		308,558		—		308,558		—
Customer interest rate swap agreements	3,188		—		3,188		—
Subordinated corporate bonds									3,461		—		3,461		—
Equity securities									752		—		752		—
Customer loan swaps									9,426		—		9,426		—
Interest rate lock commitments									431		—		431		—
Financial liabilities:
Interest rate swap agreements	10,165		—		10,165		—
Forward-starting interest rate swap agreements	887		—		887		—
Customer interest rate swap agreements	3,188		—		3,188		—
December 31, 2014
Junior subordinated debt interest rate swaps									11,934		—		11,934		—
Forecasted interest rate swaps									1,110		—		1,110		—
Customer loan swaps									9,426		—		9,426		—
December 31, 2015
Financial assets:
Loans held for sale									$	10,958	$	—	$	10,958	$	—
AFS securities:
Obligations of U.S. government-sponsored enterprises	$	5,027	$	—	$	5,027	$	—	5,040		—		5,040		—
Obligations of states and political subdivisions	26,777		—		26,777		—		17,694		—		17,694		—
Mortgage-backed securities issued or guaranteed by U.S. government-sponsored enterprises	381,308		—		381,308		—		419,046		—		419,046		—
Collateralized mortgage obligations issued or guaranteed by U.S. government-sponsored enterprises	343,897		—		343,897		—		306,857		—		306,857		—
Private issue collateralized mortgage obligations	6,054		—		6,054		—
Customer interest rate swap agreements	1,140		—		1,140		—
Subordinated corporate bonds									996		—		996		—
Equity securities									705		—		705		—
Customer loan swaps									3,166		—		3,166		—
Interest rate lock commitments									139		—		139		—
Financial liabilities:
Interest rate swap agreements	9,143		—		9,143		—
Customer interest rate swap agreements	1,140		—		1,140		—
Junior subordinated debt interest rate swaps									9,229		—		9,229		—
Forecasted interest rate swaps									576		—		576		—
Customer loan swaps									3,166		—		3,166		—

The Company did not have any transfers between Level 1 and Level 2 of the fair value hierarchy during the ~~nine~~three months ended ~~September 30, 2015~~March 31, 2016. The Company’s policy for determining transfers between levels occurs at the end of the reporting period when circumstances in the underlying valuation criteria change and result in transfer between levels.

Financial Instruments Recorded at Fair Value on a Nonrecurring Basis

The Company may be required, from time to time, to measure certain financial assets and financial liabilities at fair value on a nonrecurring basis in accordance with GAAP. These include assets that are measured at the lower of cost or market value that were recognized at fair value below cost at the end of the period.

Collateral-Dependent Impaired Loans: Loans for which it is probable that payment of interest and principal will not be made in accordance with the contractual terms of the loan agreement are considered impaired. The Company's policy is to individually evaluate for impairment loans with a principal balance greater than $250,000 or more and are classified as substandard or doubtful and are on non-accrual status. Once the population of loans is identified for individual impairment assessment, the Company measures these loans for impairment by comparing NRV, which is the fair value of the collateral, less estimated costs to sell, to the carrying value of the loan. If the NRV of the loan is less than the carrying value of the loan, then a loss is recognized as part of the ALL to adjust the loan's carrying value to NRV. Accordingly, certain collateral-dependent impaired loans are subject to measurement at fair value on a non-recurring basis. Management has estimated the fair values of these assets using Level 2 inputs, such as the fair value of collateral based on independent third-party market approach appraisals for collateral-dependent loans, and Level 3 inputs where circumstances warrant an adjustment to the appraised value based on the age of the appraisal and/or comparable sales, condition of the collateral, and market conditions.

MSRs: The Company accounts for mortgage servicing assets at cost, subject to impairment testing. When the carrying value of a tranche exceeds fair value, a valuation allowance is established to reduce the carrying cost to fair value. Fair value is based on a valuation model that calculates the present value of estimated net servicing income. The Company obtains a third-party valuation based upon loan level data including note rate, type and term of the underlying loans. The model utilizes a variety of observable inputs for its assumptions, the most significant of which are loan prepayment assumptions and the discount rate used to discount future cash flows. Other assumptions include delinquency rates, servicing cost inflation and annual unit loan cost. MSRs are classified within Level 2 of the fair value hierarchy.

Non-Financial Assets and Non-Financial Liabilities Recorded at Fair Value on a Non-Recurring Basis

The Company has no non-financial assets or non-financial liabilities measured at fair value on a recurring basis. Non-financial assets measured at fair value on a non-recurring basis consist of OREO and goodwill and other intangible assets.

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

Goodwill and Other Intangible Assets: Goodwill represents the excess cost of an acquisition over the fair value of the net assets acquired. The fair value of goodwill is estimated by utilizing several standard valuation techniques, including discounted cash flow analyses, bank merger multiples, and/or an estimation of the impact of business conditions and investor activities on the long-term value of the goodwill. Should an impairment of either reporting unit's goodwill occur, the associated goodwill is written-down to fair value and the impairment charge is recorded within non-interest expense in the consolidated statements of income. The Company conducts an annual impairment test of goodwill in the fourth quarter each year, or more frequently as necessary. There have been no indications or triggering events during for the ~~first nine~~three months ~~of 2015~~ended March 31, 2016 for which management believes that it is more likely than not that goodwill is impaired.

The Company's core deposit intangible assets represent the estimated value of acquired customer relationships and are amortized on a straight-line basis over the estimated life of those relationships. Core deposit intangibles are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. If necessary, management will test the core deposit intangibles for impairment by comparing its carrying value to the expected undiscounted cash flows of the assets. If the undiscounted cash flows of the intangible assets exceed its carrying value then the intangible assets are deemed to be fully recoverable and not impaired. However, if the undiscounted cash flows of the intangible assets are less than its carrying value than an impairment charge is recorded to mark the carrying value of the intangible assets to fair value. There were no events or changes in circumstances ~~during~~occurred for the ~~first nine~~three months ~~of 2015~~ended March 31, 2016 that indicated the carrying amount may not be recoverable.

The table below highlights financial and non-financial assets measured and recorded at fair value on a non-recurring basis as of ~~September 30, 2015~~March 31, 2016 and December 31, ~~2014~~2015. Not included in the table below because they were not recorded at fair value at September 30, 2015 and December 31, 2014 are: (i) impaired loans of $13.2 million and $17.6 million, respectively; (ii) MSRs reported of $165,000 and $319,000, respectively; and (iii) OREO properties of $0 and $305,000, respectively.


	Fair Value		Readily Available Market Prices (Level 1)		Observable Market Data (Level 2)		Company Determined Fair Value (Level 3)		Fair Value		Readily Available Market Prices (Level 1)		Observable Market Data (Level 2)		Company Determined Fair Value (Level 3)
September 30, 2015
March 31, 2016
Financial assets:
Collateral-dependent impaired loans	$	1,986	$	—	$	—	$	1,986	$	1,091	$	—	$	—	$	1,091
MSRs⁽¹⁾	392		—		392		—		1,523		—		1,523		—
Non-financial assets:
OREO	204		—		—		204		1,228		—		—		1,228
December 31, 2014
December 31, 2015
Financial assets:
Collateral-dependent impaired loans	$	3,581	$	—	$	—	$	3,581	$	1,971	$	—	$	—	$	1,971
MSRs⁽¹⁾	173		—		173		—		440		—		440		—
Non-financial assets:
OREO	1,282		—		—		1,282		1,304		—		—		1,304

(1) Represents MSRs deemed to be impaired and a valuation allowance established to carry at fair value.

The following table presents the valuation methodology and unobservable inputs for Level 3 assets measured at fair value on a non-recurring basis at ~~September 30, 2015~~March 31, 2016 and December 31, ~~2014:~~2015:


	Fair Value		Valuation Methodology	Unobservable input	Discount Range (Weighted-Average)		Fair Value		Valuation Methodology	Unobservable input	Discount Range (Weighted-Average)
September 30, 2015
March 31, 2016
Collateral-dependent impaired loans:
Partially charged-off	$	1,186	Market approach appraisal of collateral	Management adjustment of appraisal	0%	(0%)	$	131	Market approach appraisal of collateral	Management adjustment of appraisal	0%	(0%)
				Estimated selling costs	0 - 10%	(6%)				Estimated selling costs	0 - 10%	(9%)
Specifically reserved	800		Market approach appraisal of collateral	Management adjustment of appraisal	0 - 50%	(10%)	960		Market approach appraisal of collateral	Management adjustment of appraisal	0 - 50%	(14%)
				Estimated selling costs	0 - 10%	(10%)				Estimated selling costs	0 - 10%	(7%)
OREO	204		Market approach appraisal of collateral	Management adjustment of appraisal	0%	(0%)	1,228		Market approach appraisal of collateral	Management adjustment of appraisal	0 - 73%	(23%)
				Estimated selling cost	0 - 10%	(1%)				Estimated selling cost	10%	(10%)
December 31, 2014
December 31, 2015
Collateral-dependent impaired loans:
Partially charged-off	$	1,569	Market approach appraisal of collateral	Management adjustment of appraisal	0 - 17%	(0%)	$	399	Market approach appraisal of collateral	Management adjustment of appraisal	0%	(0%)
				Estimated selling costs	10%	(10%)				Estimated selling costs	0 - 10%	(7%)
Specifically reserved	2,012		Market approach appraisal of collateral	Management adjustment of appraisal	0 - 50%	(22%)	1,572		Market approach appraisal of collateral	Management adjustment of appraisal	0 - 57%	(45%)
				Estimated selling costs	10%	(10%)				Estimated selling costs	10%	(10%)
OREO	1,282		Market approach appraisal of collateral	Management adjustment of appraisal	0 - 68%	(21%)	1,304		Market approach appraisal of collateral	Management adjustment of appraisal	0 - 43%	(18%)
				Estimated selling costs	6 - 10%	(9%)				Estimated selling costs	10%	(10%)

GAAP requires disclosure of the fair value of financial assets and financial liabilities, including those financial assets and financial liabilities that are not measured and reported at fair value on a recurring basis or non-recurring basis. The methodologies for estimating the fair value of financial assets and financial liabilities that are measured at fair value on a recurring or non-recurring basis are discussed above. The following methods and assumptions were used by the Company in estimating the fair values of its other financial instruments.

Cash and Due from Banks: The carrying amounts reported in the consolidated statements of condition approximate fair value.

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

Loans: For variable rate loans that reprice frequently and have no significant change in credit risk, fair values are based on carrying values. The fair value of other loans is estimated by discounting the future cash flows using the current rates at which similar loans would be made to borrowers with similar credit ratings and for the same remaining maturities.

Interest Receivable and Payable: The carrying amounts reported in the consolidated statements of condition approximate fair value.

Deposits: The fair value of demand, interest checking, savings and money market deposits ~~with no stated maturity~~ is ~~equal to~~determined as the ~~carrying amount.~~amount payable on demand at the reporting date. The fair value of ~~certificates of deposit~~time deposits is estimated by discounting the estimated future cash flows using ~~a discounted cash flow calculation that applies interest~~market rates ~~and~~offered for deposits of similar remaining ~~maturities for currently offered certificates of deposit.~~maturities.

Borrowings: The carrying amounts of short-term borrowings from the FHLB, securities sold under repurchase agreements, notes payable and other short-term borrowings approximate fair value. The fair values of long-term borrowings and commercial repurchase agreements are based on the discounted cash flows using current rates for advances of similar remaining maturities.

~~Junior~~ Subordinated Debentures: The ~~carrying amounts reported~~fair values of are based on quoted prices from similar instruments in ~~the consolidated statements of condition approximate fair value.~~inactive markets.

The following table presents the carrying amounts and estimated fair value for financial instrument assets and liabilities measured at ~~September 30, 2015~~March 31, 2016:


	Carrying Amount		Fair Value		Readily Available Market Prices (Level 1)		Observable Market Prices (Level 2)		Company Determined Market Prices (Level 3)		Carrying Amount		Fair Value		Readily Available Market Prices (Level 1)		Observable Market Prices (Level 2)		Company Determined Market Prices (Level 3)
Financial assets:
Cash and due from banks	$	66,644	$	66,644	$	66,644	$	—	$	—	$	72,201	$	72,201	$	72,201	$	—	$	—
AFS securities	724,237		724,237		—		724,237		—		800,029		800,029		—		800,029		—
HTM securities	75,368		76,578		—		76,578		—		87,950		90,729		—		90,729		—
Loans held for sale	890		890		—		890		—		16,632		16,632		—		16,632		—
Residential real estate loans(1)	578,033		590,234		—		—		590,234		807,458		827,116		—		—		827,116
Commercial real estate loans(1)	685,046		677,866		—		—		677,866		942,101		945,232		—		—		945,232
Commercial loans(2)	250,501		248,747		—		—		248,747		362,854		366,453		—		—		366,453
Home equity loans(1)	279,186		281,045		—		—		281,045		341,875		345,834		—		—		345,834
Consumer loans(1)	16,245		16,643		—		—		16,643		17,007		18,136		—		—		18,136
MSRs⁽¹⁾⁽³⁾	557		1,399		—		1,399		—		1,574		2,050		—		2,050		—
Interest receivable	6,577		6,577		—		6,577		—		8,785		8,785		—		8,785		—
Customer interest rate swap agreements	3,188		3,188		—		3,188		—
Customer loan swaps											9,426		9,426		—		9,426		—
Interest rate lock commitments											431		431		—		431		—
Financial liabilities:
Deposits	$	2,008,177	$	2,010,117	$	1,408,272	$	601,845	$	—	$	2,674,832	$	2,677,503	$	—	$	2,677,503	$	—
FHLB advances	55,000		56,515		—		56,515		—		55,000		56,097		—		56,097		—
Commercial repurchase agreements	30,063		31,012		—		31,012		—		30,041		30,920		—		30,920		—
Other borrowed funds	434,740		434,836				434,836		—		515,432		516,633				516,633		—
Junior subordinated debentures	44,101		44,101		—		44,101		—
Subordinated debentures											58,638		40,800		—		40,800		—
Interest payable	505		505		505		—		—		641		641		—		641		—
Interest rate swap agreements	10,165		10,165		—		10,165		—
Forward-starting interest rate swap agreements	887		887		—		887		—
Customer interest rate swap agreements	3,188		3,188		—		3,188		—
Junior subordinated debt interest rate swaps											11,934		11,934		—		11,934		—
Forecasted interest rate swaps											1,110		1,110		—		1,110		—
Customer loan swaps											9,426		9,426		—		9,426		—

~~(1) Reported fair value represents all MSRs currently being serviced by the Company, regardless of carrying amount.~~


(1)	The presented carrying amount is net of the allocated ALL.


(2)	Includes the HPFC loan portfolio.


(3)	Reported fair value represents all MSRs currently being serviced by the Company, regardless of carrying amount.

The following table presents the carrying amounts and estimated fair value for financial instrument assets and liabilities measured at December 31, ~~2014:~~2015:


	Carrying Amount		Fair Value		Readily Available Market Prices (Level 1)		Observable Market Prices (Level 2)		Company Determined Market Prices (Level 3)		Carrying Amount		Fair Value		Readily Available Market Prices (Level 1)		Observable Market Prices (Level 2)		Company Determined Market Prices (Level 3)
Financial assets:
Cash and due from banks	$	60,813	$	60,813	$	60,813	$	—	$	—	$	79,488	$	79,488	$	79,488	$	—	$	—
AFS securities	763,063		763,063		—		763,063		—		750,338		750,338		—		750,338		—
HTM securities	20,179		20,425		—		20,425		—		84,144		85,647		—		85,647		—
Residential real estate loans	579,946		596,172		—		—		596,172
Commercial real estate loans	635,609		631,434		—		—		631,434
Commercial loans	249,823		244,713		—		—		244,713
Home equity loans	269,176		270,904		—		—		270,904
Consumer loans	16,940		17,007		—		—		17,007
MSRs⁽¹⁾	493		1,447		—		1,447		—
Loans held for sale											10,958		10,958		—		10,958		—
Residential real estate loans⁽¹⁾											808,180		820,774		—		—		820,774
Commercial real estate loans⁽¹⁾											922,257		911,316		—		—		911,316
Commercial loans⁽¹⁾⁽²⁾											371,684		371,854		—		—		371,854
Home equity loans⁽¹⁾											349,215		348,963		—		—		348,963
Consumer loans⁽¹⁾											17,704		18,163		—		—		18,163
MSRs⁽³⁾											2,161		2,947		—		2,947		—
Interest receivable	6,017		6,017		—		6,017		—		7,985		7,985		—		7,985		—
Customer interest rate swap agreement	1,140		1,140		—		1,140		—
Customer loan swaps											3,166		3,166		—		3,166		—
Interest rate lock commitments											139		139		—		139		—
Financial liabilities:
Deposits	$	1,932,097	$	1,933,805	$	1,361,604	$	572,201	$	—	$	2,726,379	$	2,726,300	$	—	$	2,726,300	$	—
FHLB advances	56,039		57,986		—		57,986		—		55,000		56,001		—		56,001		—
Commercial repurchase agreements	30,097		31,395		—		31,395		—		30,052		30,931		—		30,931		—
Other borrowed funds	446,842		446,909		446,909		—		—		428,711		428,778		—		428,778		—
Junior subordinated debentures	44,024		44,024		—		44,024		—
Subordinated debentures											58,599		42,950		—		42,950		—
Interest payable	537		537		537		—		—		641		641		—		641		—
Interest rate swap agreements	9,143		9,143		—		9,143		—
Customer interest rate swap agreement	1,140		1,140		—		1,140		—
Junior subordinated debt interest rate swaps											9,229		9,229		—		9,229		—
Forecasted interest rate swaps											576		576		—		576		—
Customer loan swaps											3,166		3,166		—		3,166		—

~~(1) Reported fair value represents all MSRs currently being serviced by the Company, regardless of carrying amount.~~


(1)	The presented carrying amount is net of the allocated ALL.


(2)	Includes the HPFC loan portfolio.


(3)	Reported fair value represents all MSRs currently being serviced by the Company, regardless of carrying amount.

NOTE 11 – COMMITMENTS, ~~AND~~ CONTINGENCIES AND DERIVATIVES

Legal Contingencies

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

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 ~~September 30,~~March 31, 2016 and December 31, 2015, the Company did not have any material loss contingencies for which accruals were provided for and/or disclosure was deemed necessary.

Financial Instruments

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

The following is a summary of the contractual and notional amounts of the Company’s financial instruments:


	September 30, 2015		December 31, 2014		March 31, 2016		December 31, 2015
Lending-Related Instruments:
Loan origination commitments and unadvanced lines of credit:
Home equity	$	336,459	$	303,815	$	484,537	$	464,701
Commercial and commercial real estate	45,729		47,066		78,875		94,791
Residential	17,608		10,975		31,554		16,256
Letters of credit	2,436		3,103		4,218		4,468
Other commitments	651		1,305		534		433
Derivative Financial Instruments:
Interest rate swaps	43,000		43,000
Forward-starting interest rate swaps	50,000		—
Customer loan swaps	171,302		58,234		$	319,630	$	285,888
Forecasted interest rate swaps					50,000		50,000
Junior subordinated debt interest rate swaps					43,000		43,000
Interest rate lock commitments					34,220		20,735

Lending-Related Instruments

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

Derivative Financial Instruments

The Company uses derivative financial instruments for risk management purposes (primarily interest rate risk) and not for trading or speculative purposes. The Company controls the credit risk of these instruments through collateral, credit approvals and monitoring procedures. Additionally, as part of Company's normal mortgage origination process, it provides the borrower with the option to lock their interest rate based on current market prices. During the period from commitment date to the loan closing date, the Company is subject to the risk of interest rate change. In an effort to mitigate such risk the Company may enter into forward delivery sales commitments, typically on a "best-efforts" basis, with certain approved investors.

Derivative instruments are carried at fair value in the Company’s financial statements. The accounting for changes in the fair value of a derivative instrument is dependent upon whether or not it qualifies and has been designated as a hedge for accounting purposes, and further, by the type of hedging relationship.

The Company has designated its interest rate swaps on its junior subordinated debentures and its interest rate swaps on forecasted 30-day FHLBB borrowings as cash flow hedges. The change in the fair value of the Company's cash flow hedges is accounted within OCI, net of tax. Quarterly, in conjunction with financial reporting, the Company assesses each cash flow hedge for ineffectiveness. To the extent any significant ineffectiveness is identified, this amount is recorded within the consolidated statements of income. Furthermore, the Company will reclassify the gain or loss on the effective portion of the cash flow hedge from OCI into interest within the consolidated statements of income in the period the hedged transaction affects earnings.

The change in fair value of the Company's other derivative instruments, not designated and qualifying as hedges, are accounted for within the consolidated statements of income.

Junior Subordinated Debt Interest Rate Swaps:

The Company, from time to time, will enter into an interest rate swap agreement with a counterparty to manage interest rate risk associated with its variable rate borrowings. The Company’s interest rate swap arrangements contain provisions that require the Company to post cash collateral with the counterparty for contracts that are in a net liability position based on their fair values and the Company’s credit rating. If the interest rate swaps are in a net asset position based on their fair value, the counterparty is required to post collateral to the Company. The collateral posted by the Company (or counterparty) is not readily available and has been presented within cash and due from banks on the consolidated statements of condition. At March 31, 2016 and December 31, 2015, the Company had a notional amount of ~~$43.0~~$43.0 million in variable-for-fixed interest rate swap agreements on its junior subordinated debentures and ~~$10.3~~$13.0 million in of cash ~~held~~ as ~~collateral.~~collateral to the counterparty at March 31, 2016.

The ~~terms~~details of the interest rate swap agreements are as follows:


						September 30, 2015			December 31, 2014								March 31, 2016			December 31, 2015
Notional Amount	Notional Amount	Trade Date	Maturity Date	Variable Index Received	Fixed Rate Paid	Fair Value⁽¹⁾			Fair Value⁽¹⁾			Notional Amount	Trade Date	Maturity Date	Variable Index Received	Fixed Rate Paid	Fair Value⁽¹⁾			Fair Value⁽¹⁾
$	10,000	3/18/2009	6/30/2021	3-Month USD LIBOR	5.09%	$	(1,240	)	$	(1,092	)	10,000	3/18/2009	6/30/2021	3-Month USD LIBOR	5.09%	$	(1,299	)	$	(1,038	)
10,000	10,000	7/8/2009	6/30/2029	3-Month USD LIBOR	5.84%	(2,763		)	(2,511		)	10,000	7/8/2009	6/30/2029	3-Month USD LIBOR	5.84%	(3,233		)	(2,537		)
10,000	10,000	5/6/2010	6/30/2030	3-Month USD LIBOR	5.71%	(2,697		)	(2,434		)	10,000	5/6/2010	6/30/2030	3-Month USD LIBOR	5.71%	(3,218		)	(2,477		)
5,000	5,000	3/14/2011	3/30/2031	3-Month USD LIBOR	4.35%	(1,414		)	(1,279		)	5,000	3/14/2011	3/30/2031	3-Month USD LIBOR	4.35%	(1,687		)	(1,301		)
8,000	8,000	5/4/2011	7/7/2031	3-Month USD LIBOR	4.14%	(2,051		)	(1,827		)	8,000	5/4/2011	7/7/2031	3-Month USD LIBOR	4.14%	(2,497		)	(1,876		)
$	43,000					$	(10,165	)	$	(9,143	)	43,000					$	(11,934	)	$	(9,229	)
(1) Presented within accrued interest and other liabilities on the consolidated statements of condition.

~~As each derivative instrument qualifies as a highly effective~~For the three months ended March 31, 2016 or 2015, the Company did not record any ineffectiveness on these cash flow ~~hedge,~~hedges within the ~~decrease in~~consolidated statements of income.

Net payments to the ~~fair value of the interest rate swaps~~counterparty for the ~~nine~~three months ended ~~September 30,~~March 31, 2016 and 2015 of ~~$665,000, net of tax, was recorded in OCI. Net payments~~ were $316,000 and $343,000 and have been classified as cash flows from operating activities in the consolidated statements of cash flows. The Company would reclassify unrealized gains or losses accounted for within AOCI into earnings if the interest rate swaps were to become ineffective or the arrangements were to terminate. In the next 12 months, the Company does not believe it will reclassify any related unrealized gains or losses accounted for within AOCI into earnings.

~~Forward-Starting~~Forecasted Interest Rate Swaps:

In the first quarter of 2015, the Bank entered into two interest rate swap arrangements with a counterparty ~~for~~on two tranches of 30-day FHLBB advances with a total notional amount of $50.0 million. Each derivative arrangement ~~will commence~~commenced on February 25, 2016, with one contract set to expire on February 25, 2018 and the other on February 25, 2019. The Bank entered into these forward-starting interest rate swaps to mitigate its ~~cost of~~interest rate exposure on borrowings ~~exposure~~ in a rising interest rate environment. The Bank has designated each arrangement as a cash flow hedge in accordance with GAAP, and, therefore, the change in unrealized gains or losses on the derivative instruments is recorded within AOCI, net of tax. Also, quarterly, in conjunction with financial reporting, the Company assesses each derivative instrument for ineffectiveness. To the extent any significant ineffectiveness is identified this amount would be recorded within the consolidated statements of income. For the three ~~and nine~~ months ended ~~September 30, 2015~~March 31, 2016, the Company did not record any ineffectiveness within the consolidated statements of income.

The Bank's arrangement with the counterparty requires it to post cash collateral for contracts in a net liability position based on their fair values and the Bank's credit rating. If the interest rate swaps are in a net asset position based on their fair value, the counterparty is required to post collateral to the Company. The collateral posted by the Company (or counterparty) is not readily available and is presented within cash and due from banks on the consolidated statements of condition. At ~~September 30, 2015,~~March 31, 2016, the Bank posted cash collateral with the counterparty of ~~$824,000.~~$1.3 million to the counterparty.

The ~~terms~~details of the interest rate swap agreements are as follows:


						September 30, 2015								March 31, 2016			December 31, 2015
Notional Amount	Notional Amount	Trade Date	Maturity Date	Variable Index Received	Fixed Rate Paid	Fair Value⁽¹⁾			Notional Amount	Trade Date	Maturity Date	Variable Index Received	Fixed Rate Paid	Fair Value⁽¹⁾			Fair Value⁽¹⁾
$	25,000	2/25/2015	2/25/2018	30-Day FHLBB	1.54%	$	(356	)	25,000	2/25/2015	2/25/2018	1-Month USD LIBOR	1.54%	$	(413	)	$	(230	)
25,000	25,000	2/25/2015	2/25/2019	30-Day FHLBB	1.74%	(531		)	25,000	2/25/2015	2/25/2019	1-Month USD LIBOR	1.74%	(697		)	(346		)
$	50,000					$	(887	)	50,000					$	(1,110	)	$	(576	)
(1) Presented within accrued interest and other liabilities on the consolidated statements of condition.	(1) Presented within accrued interest and other liabilities on the consolidated statements of condition.								(1) Presented within accrued interest and other liabilities on the consolidated statements of condition.

~~As each derivative instrument qualifies as a highly effective cash flow hedge,~~Net payments to the ~~decrease in the fair value of the interest rate swaps~~counterparty for the ~~nine~~three months ended ~~September 30, 2015~~ ~~of $576,000, net of tax, was recorded in OCI. Net payments~~March 31, 2016 were $49,000 and have been classified as cash flows from operating activities in the consolidated statements of cash flows. ~~In the next 12 months, the Company does not believe it will reclassify any related unrealized gains or losses accounted for within AOCI into earnings.~~

Customer Loan Swaps:

The Company will enter into interest rate swaps with its commercial customers, from time to time, to provide them with a means to lock into a long-term fixed rate, while simultaneously the Company enters into an arrangement with a counterparty to swap the fixed rate to a variable rate to allow it to effectively manage its interest rate exposure. At September 30, 2015 and December 31, 2014, the Company had interest rate swap agreements with a total notional amount of $85.7 million and $29.1 million, respectively, with its commercial customers, and interest rate swap agreements of equal notional amounts with a dealer bank.

The Company's customer loan level derivative program is not designated as a hedge for accounting purposes. As the interest rate swap agreements have substantially equivalent and offsetting terms, they do not materially change the Company’s interest rate risk or present any material exposure to the Company's consolidated statements of income. The Company records its customer loan swaps at fair value and presents such on a gross basis within other assets and accrued interest and other liabilities on the consolidated statements of condition.

The following table presents the total positions, notional and fair value of the Company's customer ~~loan~~loans swaps ~~at September 30, 2015~~with its commercial customers and ~~December 31, 2014 were $3.2 million and $1.1 million, respectively.~~the corresponding interest rate swap agreements with counterparty for the periods indicated:



	March 31, 2016						December 31, 2015
	Number of Positions	Notional		Fair Value			Number of Positions	Notional		Fair Value
Receive fixed, pay variable⁽¹⁾	32	$	159,815	$	9,426		28	$	142,944	$	3,166
Pay fixed, received variable⁽²⁾	32	159,815		(9,426		)	28	142,944		(3,166		)
(1) Presented within other assets on the consolidated statements of condition.
(2) Presented within accrued interest and other liabilities on the consolidated statements of condition.

The Company seeks to mitigate its customer counterparty credit risk exposure through its loan policy and underwriting process, which includes credit approval limits, monitoring procedures, and obtaining collateral, where appropriate. The Company seeks to mitigate its institutional counterparty credit risk exposure by limiting the institutions for which it will enter into interest swap arrangements through an approved listing by the Company's board of directors. The Company's arrangement with an institutional counterparty requires it to post ~~cash~~ collateral for contracts in a net liability position based on their fair values and the Bank's credit rating or receive ~~cash~~ collateral for contracts in a net asset position. At ~~September 30, 2015,~~March 31, 2016, the Company posted cash collateral with the counterparty of ~~$3.0~~$10.8 million. The collateral posted by the Company (or counterparty) is not readily available and is presented within cash and due from banks on the consolidated statements of condition.

Interest Rate ~~Locks:~~Locks Commitments:

As part of originating residential ~~mortgages,~~and commercial loans, the Company may enter into rate lock agreements with customers and may issue commitment letters to customers, which are considered interest rate lock commitments. At ~~September 30, 2015~~March 31, 2016 and December 31, ~~2014, based upon the~~2015, our pipeline of mortgage loans with interest rate lock commitments were as follows:



	March 31, 2016				December 31, 2015
	Notional		Fair Value		Notional		Fair Value
Mortgage interest rate locks⁽¹⁾	$	34,220	$	431	$	20,735	$	139
(1) Presented within other assets on the consolidated statements of condition.

For the three months ended March 31, 2016 and 2015 the unrealized gains from the change in fair value ~~of these commitments was immaterial to~~on the Company's ~~consolidated financial statements.~~

~~NOTE 12 – MERGER AND ACQUISITION ACTIVITY~~

On October 16, 2015, the Company completed its previously announced acquisition of SBM pursuant to the terms and conditions of the Merger Agreement. Additionally, The Bank of Maine, a wholly owned subsidiary of SBM, merged with and into Camden National Bank, with Camden National Bank continuing as the surviving bank.

Pursuant to the Merger Agreement, each share of SBM common stock outstanding at the effective time of the Merger was converted into the right to receive, at the election of the stockholder and subject to the allocation and proration procedures described in the Merger Agreement, either: (1) $206.00 in cash, withoutmortgage interest or (2) 5.421 shares of common stock of the Company; provided that 80% of the SBM shares outstanding immediately prior to the effective time of the Merger were converted into the right to receive common stock of the Company and the remaining SBM shares were converted into the right to receive cash. The total consideration paid by the Company was approximately $136.7 million, consisting of (i) approximately $26.1 million in cash; (ii) 2,749,762 shares of Camden common stock valued at approximately $108.6 million basedrate locks reported within mortgage banking income, net, on ~~the October 16, 2015 closing price of $39.48 per share; and (iii) the fair value of 92,688 non-qualified stock options issued under the 2012 Plan of $2.0 million.~~

As of October 16, 2015, SBM's total assets were approximately $815.0 million, total net loans were approximately $640.0 million, and total deposits and borrowings were approximately $710.0 million. These balances are unaudited and do not include any adjustments for purchase accounting. As a result of the proximity of the closing of the merger to the date these consolidated financial statements were available to be issued, the Company continues to evaluate the estimated fair values of the assets acquired and the liabilities assumed. Accordingly, the amount of any goodwill and other intangible assets to be recognized in connection with this transaction is also yet to be determined.

~~Upon completion of the Merger on October 16, 2015, the Company had 10,203,807 shares of common stock outstanding.~~

In conjunction with the Merger, the Company incurred certain non-recurring costs, including legal fees, investment banking fees, and other integration-related costs for the three and nine months ended September 30, 2015 of $766,000 and $1.6 million, respectively. These non-recurring costs are presented on the consolidated statements of income ~~within non-interest~~was $292,000 and $2,000, respectively.

The table below presents the effect of the Company’s derivative financial instruments included in OCI and current earnings for the periods indicated:



	For The Three Months Ended March 31,
	2016			2015
Derivatives designated as cash flow hedges
Net change in unrealized losses on cash flow hedging derivatives, net of tax (effective portion)	$	(2,105	)	$	(1,172	)
Net reclassification adjustment for effective portion of cash flow hedges included in interest expense (effective portion), gross	$	(365	)	$	(343	)

The Company expects approximately $2.1 million (pre-tax) to be reclassified to interest expense ~~as merger and acquisition costs. In addition, the Company incurred certain equity issuance costs totaling $537,000~~from OCI, related to the ~~registration~~Company’s cash flow hedges, in the next twelve months. This reclassification is due to anticipated payments that will be made and/or received on the swaps based upon the forward curve as of ~~additional shares of the Company's common stock. These costs have been accounted for as a reduction to shareholders' equity.~~March 31, 2016.

In accordance with the Internal Revenue Code, certain non-recurring costs are not deductible for income tax purposes. The impact to the Company's effective tax rate for the nine months ended September 30, 2015 was an increase of 2.1%. Non-recurring costs incurred for the three months ended September 30, 2015 had no impact on the Company's three months ended effective tax rate.

~~NOTE 13 – SUBSEQUENT EVENTS~~

On October 8, 2015, the Company issued $15.0 million in aggregate principal amount of 5.50% fixed rate subordinated notes due 2025 to certain institutional accredited investors. The notes were issued at par and are redeemable, in whole or in part, on or after October 8, 2020 and at any time upon the occurrences of certain events. The Company intends to use the proceeds for general corporate purposes, including for the provision of additional liquidity and working capital. The notes qualify as Tier II capital and will be included as such within the Company's total risk-based capital ratio. Costs incurred associated with the debt issuance will be capitalized and amortized over the life of notes.

~~Also, refer to Note 12 for discussion of the Merger with SBM that was completed on October 16, 2015.~~

NOTE 1412 – RECENT ACCOUNTING PRONOUNCEMENTS

~~In January 2015, the FASB issued ASU No. 2015-01,~~ ~~Income Statement - Extraordinary and Unusual Items~~ ~~(Subtopic 225-30):~~ ~~Simplifying Income Statement Presentation by Eliminating the Concept of Extraordinary Items~~. The ASU was issued as part of the FASB's simplification initiative to reduce complexity in accounting standards by eliminating the concept of extraordinary items. The ASU is effective for annual periods, and interim periods within those annual periods, beginning after December 15, 2015. The ASU does not have a material effect on the Company's consolidated financial statements.

~~In April 2015, the FASB issued ASU No. 2015-03,~~ ~~Interest - Imputation of Interest~~ ~~(Subtopic 835-30):~~ ~~Simplifying the Presentation of Debt Issuance Costs.~~ The ASU was issued to simplify the presentation of debt issuance costs as part of the FASB's simplification initiative. The ASU requires that debt issuance costs related to a recognized debt liability be presented in the balance sheet as a direct reduction of the carrying amount of that debt liability, consistent with debt discounts. The ASU is effective for fiscal years beginning after December 15, 2015, and interim periods within those fiscal years. The new guidance will be applied on a retrospective basis, which will require disclosure of this as a change in accounting principle. The Company does not expect the ASU to have a material effect on its consolidated financial statements.

~~In April 2015, the FASB issued ASU No. 2015-05,~~ ~~Intangibles - Goodwill and Other - Internal-Use Software (Subtopic 350-40): Customer's Accounting for Fees Paid in a Cloud Computing Arrangement.~~ The ASU was issued because existing GAAP did not include explicit guidance for accounting for fees paid in a cloud computing arrangement. The ASU is effective for annual periods, including interim periods within those annual periods, beginning after December 15, 2015. The Company does not expect the ASU to have a material effect on its consolidated financial statements.

In August 2015, the FASB issued ASU No. 2015-14, Revenue from Contracts with Customers (Topic 606): Deferral of the Effective Date. The ASU was issued to defer the effective date of Update 2014-09, Revenue from Contracts with Customers (Topic 606), for all entities by one year. ASU 2014-09 was issued to clarify the principles for recognizing revenue and to develop a common revenue standard. ASU 2014-09 is now effective for annual reporting periods beginning after December 15, 2017, including interim reporting periods within that reporting period. The Company continues to evaluate the potential impact of ASU 2014-09, as updated by ASU 2015-14, but currently does not expect the ASU to have a material effect on its consolidated financial statements.

In ~~September 2015,~~January 2016, the FASB issued ASU No. ~~2015-16,~~2016-01, ~~Business Combinations~~Income Statement - Financial Instruments - Overall (~~Topic 805)~~Subtopic 825-10): ~~: Simplifying the Accounting for Measurement-Period Adjustments.~~ Recognition and Measurement of Financial Assets and Liabilities.The ASU was issued to ~~simplify measurement period accounting, by requiring recognition of measurement period adjustments identified in~~enhance the reporting ~~period in which they are determined instead~~model for financial instruments to provide the users of ~~applying them retrospectively.~~financial statements with more useful information for decisions. The ASU is effective for fiscal years beginning after December 15, ~~2015,~~2017, including interim periods within those fiscal ~~years and early application~~years. Early adoption is permitted for only one of the six amendments, otherwise it is not permitted. The Company is evaluating the potential impact of the ASU on its consolidated financial statements.

In February 2016, the FASB issued ASU No. 2016-02, Leases (Topic 842). The ASU was issued to increase transparency and comparability among organizations by recognizing lease assets and liabilities (including operating leases) on the balance sheet and disclosing key information about leasing arrangements. Current lease accounting does not require the inclusion of operating leases in the balance sheet. The ASU is effective for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years, early application is permitted. The Company expects the ASU will have a material effect on its consolidated financial statements and is currently evaluating the impact.

36In March 2016, the FASB issued ASU No. 2016-09, Compensation - Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting. The ASU was issued to simplify accounting for share-based payment transactions, including income tax consequences, classification of awards, and classification on the statement of cash flows. The ASU is effective for annual periods beginning after December 15, 2016 and interim periods within those annual periods, early adoption is permitted. The Company is evaluating the potential impact of the ASU on its consolidated financial statements.

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

AND RESULTS OF OPERATIONS

(Dollar Amounts In Tables Expressed in Thousands, Except Per Share Data)

FORWARD-LOOKING STATEMENTS

The discussions set forth below and in the documents we incorporate by reference herein contain certain statements that may be considered forward-looking statements under the Private Securities Litigation Reform Act of 1995, including certain plans, exceptions, goals, projections, and statements, which are subject to numerous risks, assumptions, and uncertainties. Forward-looking statements can be identified by the use of the words “believe,” “expect,” “anticipate,” “intend,” “estimate,” “assume,” “plan,” “target,” or “goal” or future or conditional verbs such as “will,” “may,” “might,” “should,” “could” and other expressions which predict or indicate future events or trends and which do not relate to historical matters. Forward-looking statements should not be relied on, because they involve known and unknown risks, uncertainties and other factors, some of which are beyond the control of the Company. These risks, uncertainties and other factors may cause the actual results, performance or achievements of the Company to be materially different from the anticipated future results, performance or achievements expressed or implied by the forward-looking statements.

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

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

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

inflation, interest rate, market, and monetary fluctuations;

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

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

changes in information technology that require increased capital spending;

changes in consumer spending and savings habits;

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

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

~~the ability of the Company to successfully integrate SBM Financial, Inc. and The Bank of Maine;~~ and

the ability of the Company to achieve cost savings as a result of the merger or in achieving such cost savings within the projected timeframe.

You should carefully review all of these factors, and be aware that there may be other factors that could cause differences, including the risk factors listed in Part II, Item 1A. “Risk Factors” of this Form 10-Q and in our Annual Report on Form 10-K for the year ended December 31, ~~2014,~~2015, as updated by the Company's quarterly reports on Form 10-Q, including this report, and other filings with the Securities and Exchange Commission. Readers should carefully review the risk factors described therein and should not place undue reliance on our forward-looking statements.

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

CRITICAL ACCOUNTING POLICIES

Critical accounting policies are 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. Several estimates are particularly critical and are susceptible to significant near-term change, including (i) the allowance for credit losses; (ii) accounting for acquisitions and the subsequent review of goodwill and other identifiable intangible assets generated in an acquisition for impairment; ~~valuation of OREO;~~(iii) OTTI of investments; ~~effectiveness of hedging derivatives; and~~(iv) accounting for postretirement ~~plans, stock-based compensation,~~plans; and (v) income taxes. There have been no material changes to our critical accounting policies as disclosed within our Annual Report on Form 10-K for the year ended December 31, ~~2014.~~2015. Refer to the Annual Report on Form 10-K for the year ended December 31, ~~2014~~2015 for discussion of the Company's critical accounting policies.

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. We believe these non-GAAP financial measures help investors in understanding 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 financial results, nor are they necessarily comparable to non-GAAP financial measures that may be presented by other financial institutions.

Efficiency Ratio. The efficiency ratio, which represents an approximate measure of the cost required for the Company to generate a dollar of revenue, is the ratio of (i) total non-interest expense, excluding merger and acquisition costs (the numerator) to (ii) net interest income on a fully taxable equivalent basis (assumed 35% tax rate) plus total non-interest income ~~excluding the net gain on sale of securities~~ (the denominator).


	Three Months Ended September 30,						Nine Months Ended September 30,						Three Months Ended March 31,
(Dollars In Thousands)	2015			2014			2015			2014
													2016			2015
Non-interest expense, as presented	$	16,711		$	15,179		$	49,669		$	46,096		$	22,928		$	16,801
Less: merger and acquisition costs	766			—			1,629			—			644			735
Non-interest expense, adjusted	$	15,945		$	15,179		$	48,040		$	46,096
Core operating expenses													$	22,284		$	16,066
Net interest income, as presented	$	20,012		$	19,369		$	60,081		$	57,020		$	27,952		$	19,434
Add: effect of tax-exempt income	483			325			1,239			836			525			346
Non-interest income, as presented	6,561			5,954			19,018			18,150			7,917			6,147
Less: net gain on sale of securities	4			—			4			451
Net interest income and non-interest income, adjusted	$	27,052		$	25,648		$	80,334		$	75,555		$	36,394		$	25,927
Non-GAAP efficiency ratio	58.94		%	59.18		%	59.80		%	61.01		%	61.23		%	61.97		%
GAAP efficiency ratio	62.89		%	59.94		%	62.79		%	61.32		%	63.92		%	65.68		%

Tax Equivalent Net Interest Income. Tax-equivalent net interest income is net interest income plus the taxes that would have been paid (assumed 35% tax rate) had tax-exempt securities been taxable. This number attempts to enhance the comparability of the performance of assets that have different tax implications.


	Three Months Ended September 30,				Nine Months Ended September 30,				Three Months Ended March 31,
(Dollars In Thousands)	2015		2014		2015		2014
									2016		2015
Net interest income, as presented	$	20,012	$	19,369	$	60,081	$	57,020	$	27,952	$	19,434
Add: effect of tax-exempt income	483		325		1,239		836		525		346
Net interest income, tax equivalent	$	20,495	$	19,694	$	61,320	$	57,856	$	28,477	$	19,780

Tangible Book Value Per Share and Tangible Common Equity ~~To Tangible Assets~~Ratio. Tangible book value per share is the ratio of (i) shareholders’ equity less goodwill and other intangibles (the numerator) to (ii) total common shares outstanding at period end (the denominator). We believe this is a meaningful measure as it provides information to assess capital adequacy and is a common measure within our industry.

~~Tangible~~The tangible common equity ~~to tangible assets~~ratio is the ratio of (i) shareholders' equity less goodwill and other intangibles (the numerator) to (ii) total assets less goodwill and other intangibles (the denominator). This ratio is a measure used within our industry to assess whether or not a company is highly leveraged. The following table provides a reconciliation between the tangible ~~shareholders'~~common equity ~~to tangible assets~~ratio and shareholders' equity to assets.


(Dollars In Thousands)	September 30, 2015			December 31, 2014
							March 31, 2016			December 31, 2015
Tangible Book Value Per Share
Shareholders’ equity	$	259,403		$	245,109		$	375,457		$	363,190
Less: goodwill and other intangibles	47,309			48,171			103,458			104,324
Tangible shareholders’ equity	$	212,094		$	196,938		$	271,999		$	258,866
Shares outstanding at period end	7,454,045			7,426,222			10,271,083			10,220,478
Tangible book value per share	$	28.45		$	26.52		$	26.48		$	25.33
Book value per share	$	34.80		$	33.01		$	36.55		$	35.54
Tangible Equity to Tangible Assets
Tangible Common Equity Ratio
Total assets	$	2,871,798		$	2,789,853		$	3,762,546		$	3,709,344
Less: goodwill and other intangibles	47,309			48,171			103,458			104,324
Tangible assets	$	2,824,489		$	2,741,682		$	3,659,088		$	3,605,020
Tangible equity to tangible assets	7.51		%	7.18		%
Tangible common equity ratio							7.43		%	7.18		%
Shareholders' equity to assets	9.03		%	8.79		%	9.98		%	9.79		%

Core Return On Average Tangible Equity: Core return on average tangible equity is the ratio of (i) net income, adjusted for (a) tax effected amortization of intangible assets, net of tax, and (b) merger and acquisition costs, ~~net of tax, and (c) gains on sale of securities,~~ net of tax (the numerator) to (ii) average shareholders' equity, adjusted for average goodwill and other intangible assets. We believe this is a meaningful measure of our financial performance as it reflects our return on tangible equity in our business, excluding the financial impact of transactions that are not reflective of our core operating activities and the amortization of intangible assets.


	Three Months Ended September 30,						Nine Months Ended September 30,						Three Months Ended March 31,
(Dollars In Thousands)	2015			2014			2015			2014
													2016			2015
Net income, as presented	$	6,456		$	6,451		$	19,260		$	18,482		$	8,334		$	5,611
Amortization of intangible assets, net of tax⁽¹⁾	187			187			560			560			309			187
Merger and acquisition costs, net of tax⁽²⁾	498			—			1,266			—			419			653
Gains on sale of securities, net of tax⁽¹⁾	(3		)	—			(3		)	(293		)
Core tangible operating earnings	$	7,138		$	6,638		$	21,083		$	18,749		$	9,062		$	6,451
Average shareholders' equity	$	256,326		$	239,162		$	252,802		$	234,574		$	369,458		$	247,732
Less: average goodwill and other intangible assets	47,446			48,596			47,730			48,879			103,800			48,017
Average tangible equity	$	208,880		$	190,566		$	205,072		$	185,695		$	265,658		$	199,715
Core return on average tangible equity	13.56		%	13.82		%	13.75		%	13.50		%	13.72		%	13.10		%
Return on average equity	9.99		%	10.70		%	10.19		%	10.53		%	9.07		%	9.19		%

(1) Assumed 35.0% tax rate.

(2) Assumed 35.0% tax rate for deductible expenses.

Core Operating Earnings, Core Operating Expenses, Core Operating Expenses to Total Average Assets, Core Diluted EPS, Core Return on Average Assets, and Core Return on Average Equity: The following tables provide a reconciliation of GAAP net income, GAAP diluted EPS, GAAP return on average assets, ~~and~~ GAAP return on average shareholders' equity, GAAP non-interest expense and GAAP non-interest expense to total average assets for the three ~~and nine~~ months ended ~~September 30,~~March 31, 2016 and 2015 ~~and 2014~~ to exclude the financial impact of certain transactions for which management does not believe are representative of its core operations. Management utilizes core operating earnings, core diluted EPS, core return on average assets and average tangible assets, ~~and~~ core return on average shareholders' equity, core operating expenses and core operating expenses to total average assets to compare and assess financial results period-over-period.


	Three Months Ended September 30,						Nine Months Ended September 30,						Three Months Ended March 31,
(Dollars In Thousands)	2015			2014			2015			2014
													2016			2015
Core Operating Earnings:
Net income, as presented	$	6,456		$	6,451		$	19,260		$	18,482		$	8,334		$	5,611
Merger and acquisition costs, net of tax⁽¹⁾	498			—			1,266			—			419			653
Gains on sale of securities, net of tax⁽²⁾	(3		)	—			(3		)	(293		)
Core operating earnings	$	6,951		$	6,451		$	20,523		$	18,189		$	8,753		$	6,264
Core Diluted EPS:
Diluted EPS, as presented	$	0.86		$	0.86		$	2.57		$	2.46		$	0.81		$	0.75
Non-core transactions impact	0.07			—			0.17			(0.04		)	0.04			0.09
Core diluted EPS	$	0.93		$	0.86		$	2.74		$	2.42		$	0.85		$	0.84
Core Return on Average Assets:
Return on average assets, as presented	0.90		%	0.94		%	0.91		%	0.93		%	0.90		%	0.82		%
Non-core transactions impact	0.07		%	—			0.06		%	(0.02		)%	0.04		%	0.09		%
Core return on average assets	0.97		%	0.94		%	0.97		%	0.91		%	0.94		%	0.91		%
Core Return on Average Equity:
Return on average equity, as presented	9.99		%	10.70		%	10.19		%	10.53		%	9.07		%	9.19		%
Non-core transactions impact	0.77		%	—			0.67		%	(0.16		)%	0.46		%	1.06		%
Core return on average equity	10.76		%	10.70		%	10.86		%	10.37		%	9.53		%	10.25		%
Core Operating Expense and Core Operating Expenses to Total Average Assets:
Non-interest expense, as presented													$	22,928		$	16,801
Less: merger and acquisition costs													644			735
Core operating expenses													$	22,284		$	16,066
Total average assets													$	3,742,445		$	2,784,558
Core operating expense to total average assets (annualized)													2.38		%	2.31		%
Non-interest expense to total average assets (annualized)													2.45		%	2.41		%

(1) Assumed 35.0% tax rate for deductible expenses.

~~(2) Assumed 35.0% tax rate.~~

EXECUTIVE OVERVIEW

~~Core operating earnings~~¹ ~~and core diluted EPS~~¹, which excludes the effect of merger and acquisition costs and investment security gains, for the three months ended September 30, 2015 were $7.0 million and $0.93 per share, respectively, representing increases of 8% over the third quarter of 2014. Core operating earnings and core diluted EPS for the nine months ended September 30, 2015 were $20.5 million and $2.74, representing increases of 13% over the same period of 2014. The increase in core operating earnings for the third quarter of 2015 compared to the third quarter of 2014 was driven by revenue² growth of 5% due to a 3% increase in net interest income and a 10% increase in core non-interest income. The increase in core operating earnings for the nine months ended September 30, 2015 compared to the same period of 2014 was also driven by revenue growth of 5% as net interest income and core non-interest income both increased 5%.

GAAP net income and diluted EPS for the three months ended ~~September 30, 2015~~March 31, 2016 was ~~$6.5~~$8.3 million and ~~$0.86~~$0.81 per share, respectively, representing an increase of 49% and $19.3 million and $2.57 per share for the nine months ended September 30, 2015. Net income and diluted EPS for the third quarter of 2015 was flat compared to the third quarter of 2014 as our third quarter 2015 financial results included $766,000 of one-time costs related to the merger with SBM. Net income and diluted EPS for the nine months ended September 30, 2015 each increased 4%8%, respectively, over the same period ~~for 2014, highlighting~~a year ago. The growth in net income reflects our ~~ability to absorb significant one-time costs~~increased earnings capacity as a larger and combined organization since our completion of the acquisition of SBM on October 16, 2015. Core operating earnings⁽¹⁾ and core diluted EPS⁽¹⁾continue to ~~deliver strong performance.~~

~~Our strong~~be financial ~~performance~~measures we monitor and measure ourselves against internally as it excludes the impact of non-recurring costs, primarily SBM acquisition-related costs. Core operating earnings for the three ~~and nine~~ months ended ~~September 30,~~March 31, 2016 were $8.8 million, representing an increase of 40% over the same period a year ago, while core diluted EPS increased 1% to $0.85 per share over the same period a year ago. The modest increase in core diluted EPS over the first quarter of 2015 ~~and 2014 are highlighted~~reflects an increase in weighted-average shares outstanding of 2.8 million shares, or 38%, primarily due to the issuance of 2.7 million shares in the fourth quarter of 2015 associated with the SBM acquisition.

For the first quarter of 2016, our focus was largely on executing our remaining integration initiatives to achieve the operational efficiencies we had set out to complete by the end of the second quarter of 2016 to allow us to meet our $11.4 million cost saves target by year-end as a combined organization. In the first quarter of 2016, we closed HPFC's operations, which included terminating its Boston, Massachusetts, office lease agreement and employees, closing the acquired operations center located in Gardiner, Maine, and consolidating two banking centers into one in Portland, Maine.

With the acquisition of SBM, our mortgage banking platform has become an important revenue stream with loan production now in Southern Maine, New Hampshire and Massachusetts. In the first quarter of 2016, we sold $38.9 million of mortgages that resulted in net gains of $819,000 compared to $4.8 million of mortgage sales and net gains of $129,000 for the first quarter of 2015.

Tangible book value per share grew 5% to $26.48 at March 31, 2016 since year-end. The Company's board of directors approved a $0.30 dividend per common share, reflecting a 37% payout ratio, for payment on April 29, 2016.

The financial metrics below for the three months ended March 31, 2016 and 2015 further highlight the favorable ~~changes~~trends within our key operating ~~ratios below:~~ratios:

For The
Three Months Ended
September 30,
Change
As Of or For The
Nine Months Ended
September 30,
Change
2015 2014 2015 2014
Core return on average assets 0.97 % 0.94 % 0.03 % 0.97 % 0.91 % 0.06 %
Core return on average equity 10.76 % 10.70 % 0.06 % 10.86 % 10.37 % 0.49 %
Efficiency ratio 58.94 % 59.18 % (0.24 )% 59.80 % 61.01 % (1.21 )%
Tangible common equity ratio
7.51 % 7.11 % 0.40 %
Tangible book value per share
$ 28.45
$ 25.80
$ 2.65

On October 16, 2015, the Company completed its merger with SBM, and, in doing so, acquired approximately $815.0 million of total assets, or 28% of the Company's total assets at September 30, 2015; net loans of approximately $640.0 million, or 35% of the Company's total gross loans (excluding loans held for sale) at September 30, 2015; and total deposits and borrowings of $710.0 million, or 28% of the Company's total deposits and borrowings at September 30, 2015. As a result of the merger, SBM merged into Camden National Corporation, and SBM's wholly-owned subsidiary, The Bank of Maine, merged into Camden National Bank. Camden National Corporation and Camden National Bank were the surviving entities, and as a merged company will continue to operate under the Camden National Corporation and Camden National Bank name and brand. The Bank of Maine had a wholly-owned subsidiary, Healthcare Professional Funding Corporation, that upon completion of the merger became a wholly-owned subsidiary of Camden National Bank. Healthcare Professional Funding Corporation is headquartered out of Boston, Massachusetts and provides niche lending to the healthcare industry, specifically veterinarians, optometrists and dentists, across the country.



	At or For The Three Months Ended March 31,						Change
	2016			2015			Change
Core return on average assets (annualized)⁽¹⁾	0.94		%	0.91		%	0.03		%
Core return on average tangible equity (annualized)⁽¹⁾	13.72		%	13.10		%	0.62		%
Efficiency ratio⁽¹⁾	61.23		%	61.97		%	(0.74		)%
Tangible common equity ratio⁽¹⁾	7.43		%	7.38		%	0.05		%
Tangible book value per share⁽¹⁾	$	26.48		$	27.41		$	(0.93	)

¹~~This is a non-GAAP measure. Refer to "—Non-GAAP Financial Measures and Reconciliation to GAAP" for further details.~~

²~~Revenue is defined as net interest income plus non-interest income.~~

RESULTS OF OPERATIONS

Net Interest Income

Net interest income is the interest earned on loans, securities, and other ~~earning~~interest-earning assets, plus net loan fees, origination costs, and accretion or amortization of fair value marks on loans and/or CDs created in purchase accounting, less the interest paid on interest-bearing deposits and borrowings. Net interest income, which is our largest source of revenue and accounts for ~~approximately~~78% and 76% of total revenues (net interest income and non-interest income), for the three months ended March 31, 2016 and 2015, respectively, is affected by factors including, but not limited to, changes in interest rates, loan and deposit pricing strategies and competitive conditions, the volume and mix of interest-earning assets and liabilities, and the level of non-performing assets.

¹This is a non-GAAP measure. Refer to "—Non-GAAP Financial Measures and Reconciliation to GAAP" for further details.

Net Interest Income - Three Months Ended ~~September 30, 2015~~March 31, 2016 and ~~2014.~~2015. Net interest income ~~earned~~was $28.5 million on a fully-taxable equivalent basis for the ~~third~~first quarter of ~~2015 was $20.5~~2016 compared to $19.8 million the same period a year ago, representing an increase of ~~$801,000, or 4%, compared to the third quarter of 2014. The increase is attributable to our strong loan growth over the past year, highlighted by an increase in average loans of $101.0~~$8.7 million, or 6%, to $1.8 billion for the third quarter of 2015 compared to the third quarter of 2014. Our yield on interest-earning assets for the third quarter of 2015 was 3.54%, which represents a decrease of four basis points compared to the third quarter for 2014. Our yield on interest-earning assets continues to decline due to the sustained low interest rate environment as new and refinanced loans are priced at lower current market rates, and, in part, a larger weighting of variable rate loans within our loan mix.

Average core deposits of $1.5 billion for the third quarter of 2015 increased $73.1 million, or 5%, over the third quarter of 2014 driven by higher demand and interest checking deposits of $78.6 million, which are our lowest cost funding sources. Money market balances decreased $36.1 million to $370.0 million for the third quarter of 2015 over the same period for 2014, which was largely due to the $19.8 million decrease in the average money market balances of our wealth management subsidiary, Acadia Trust. These deposits fluctuate with changes in the portfolios of the clients of Acadia Trust.

~~Total average borrowings for the third quarter of 2015 were $784.9 million, an~~44%. The increase ~~of $46.3 million, or 6%, compared to the third quarter of 2014, which~~ was driven by higher ~~brokered deposits~~average interest-earning assets of ~~$48.9~~$807.2 million, ~~used~~or 31%, due to ~~fund our strong loan growth over~~ the ~~past year.~~

~~Our average cost~~acquisition of ~~funds for~~$615.2 million of loans in the ~~third~~fourth quarter of 2015 as part of the acquisition of SBM as well as strong organic loan growth period-over-period. Our average loan balance for the first quarter of 2016 totaled $2.5 billion, representing an increase of $720.2 million, or 40%, over the first quarter of 2015. Our NIM (fully-taxable equivalent) for the first quarter of 2016 was ~~0.47%, representing a decrease~~3.35% compared to 3.07% for the first quarter of 22015. Our NIM (fully-taxable equivalent) improved period-over-period as our average yield on earning assets for the first quarter of 2016 increased 28 basis points to 3.82% compared to the ~~third~~first quarter of ~~2014.~~2015. Our first quarter 2016 NIM (fully-taxable equivalent) benefited from HPFC's higher yielding commercial loans, as well as from certain non-recurring and non-core income transactions, including (i) collections totaling $370,000 of previously charged-off acquired SBM loans, and (ii) accretion of the loan and CD fair value marks created in purchase accounting totaling $1.1 million for the first quarter of 2016. Excluding these transactions, our loan yield and NIM on a fully-taxable equivalent basis for the first quarter of 2016 was 4.13% and 3.18%, respectively.

~~Our NIM~~For the three months ended March 31, 2016, our interest expense associated with deposits and borrowings totaled $4.0 million compared to $3.0 million for the ~~third~~same period of 2015, representing an increase of $1.0 million, or 34%. Our average funding balance increased 33% primarily due to $687.0 million of deposits acquired as part of the SBM acquisition in the fourth quarter of 2015.

The SBM acquisition in the fourth quarter of 2015 ~~was 3.08%, representing~~improved our interest rate risk position in a ~~2 basis point decrease~~rising rate environment due to the level of floating rate loans within the acquired loan portfolio as well as total deposits acquired of $687.0 million. Additionally, we continue to utilize customer loans swaps within our commercial real estate loan portfolio to improve our interest rate risk position in a rising rate environment by swapping fixed rate for variable rate. At March 31, 2016, our total notional on customer loan swaps with our borrowers totaled $159.8 million compared to ~~the third quarter of 2014.~~$142.9 million at December 31, 2015 and $45.8 million at March 31, 2015 (we have matching notional agreements with a counterparty).

The following table presents average balances, interest income, interest expense, and the corresponding average yields earned and cost of funds, as well as net interest income, net interest rate spread and NIM (fully-taxable equivalent) for the three months ended ~~September 30, 2015~~March 31, 2016 and ~~2014:~~

Quarterly Average Balance, Interest and Yield/Rate Analysis
For The Three Months Ended
September 30, 2015 September 30, 2014
(Dollars in Thousands) Average Balance Interest Yield/Rate Average Balance Interest Yield/Rate
Assets
Interest-earning assets:
Securities - taxable $ 723,549
$ 3,781
2.09 % $ 755,114
$ 3,986
2.11 %
Securities - nontaxable⁽¹⁾
87,390
959
4.39 % 38,884
491
5.05 %
Loans⁽²⁾:

Residential real estate 586,631
6,019
4.10 % 570,737
6,030
4.23 %
Commercial real estate 677,329
7,326
4.23 % 614,128
6,982
4.45 %
Commercial⁽¹⁾
245,482
2,427
3.87 % 229,079
2,257
3.85 %
Municipal⁽¹⁾
16,379
131
3.16 % 17,812
138
3.08 %
Consumer 297,721
2,896
3.86 % 290,760
2,858
3.90 %
Total loans 1,823,542
18,799
4.07 % 1,722,516
18,265
4.19 %
Total interest-earning assets 2,634,481
23,539
3.54 % 2,516,514
22,742
3.58 %
Cash and due from banks 54,497
47,893

Other assets 178,119
171,639

Less: ALL (21,279 ) (21,829 )
Total assets $ 2,845,818
$ 2,714,217

Liabilities & Shareholders' Equity
Deposits:
Demand $ 299,506
$ —
—
$ 268,291
$ —
—
Interest checking 503,417
104
0.08 % 456,072
79
0.07 %
Savings 281,556
42
0.06 % 250,900
36
0.06 %
Money market 369,983
310
0.33 % 406,084
295
0.29 %
Certificates of deposit 315,390
732
0.92 % 325,144
759
0.93 %
Total deposits 1,769,852
1,188
0.27 % 1,706,491
1,169
0.27 %
Borrowings:
Brokered deposits 237,308
369
0.62 % 188,420
393
0.83 %
Junior subordinated debentures 44,088
638
5.74 % 43,986
638
5.75 %
Other borrowings 503,542
849
0.67 % 506,268
848
0.66 %
Total borrowings 784,938
1,856
0.94 % 738,674
1,879
1.01 %
Total funding liabilities 2,554,790
3,044
0.47 % 2,445,165
3,048
0.49 %
Other liabilities 34,702
29,890

Shareholders' equity 256,326
239,162

Total liabilities & shareholders' equity $ 2,845,818
$ 2,714,217

Net interest income (fully-taxable equivalent) 20,495
19,694

Less: fully-taxable equivalent adjustment (483 ) (325 )
Net interest income $ 20,012
$ 19,369

Net interest rate spread (fully-taxable equivalent) 3.07 % 3.09 %
Net interest margin (fully-taxable equivalent) 3.08 % 3.10 %

(1) Reported on tax-equivalent basis calculated using a tax rate of 35.0%, including certain commercial loans.
(2) Non-accrual loans and loans held for sale are included in total average loans.

~~Net Interest Income - Nine Months Ended September 30, 2015 and 2014.~~ Net interest income earned on a fully-taxable equivalent basis for the nine months ended September 30, 2015 was $61.3 million, representing an increase of $3.5 million, or 6%, compared to the same period for 2014. The increase is attributable to our strong loan growth over the past year, highlighted by an increase in average loans of $138.9 million, or 8%, to $1.8 billion for the nine months ended September 30, 2015 over the same period for 2014. Also contributing to the increase was a one-time income pick-up of $734,000 related to settlement and full pay-off of one significant commercial real estate loan that was on non-accrual status. The income earned on this loan increased our nine months ended September 30, 2015 yield on interest-earnings assets and NIM three and four basis points, respectively. Our yield on interest-earning assets for the first nine months of 2015 excluding the effect of this one-time income pick-up was 3.55%, which represents a decrease of four basis points compared to the same period for 2014. Our yield on interest-earning assets continues to decline due to the sustained low interest rate environment as new and refinanced loans are priced at lower current market rates, and, in part, a larger weighting of variable rate loans within our loan mix.2015:

Average core deposits of $1.4 billion for the nine months ended September 30, 2015 increased $50.3 million, or 4%, over the same period for 2014. Demand and interest checking deposits increased $62.9 million, or 9% for the nine months ended September 30, 2015 over the same period of 2014. Money market balances decreased $38.6 million for the nine months ended September 30, 2015 over the same period for 2014, which was largely due to the $21.3 million decrease in the average money market balances of our wealth management subsidiary, Acadia Trust. These deposits fluctuate with changes in the portfolios of the clients of Acadia Trust.

Total average borrowings for the nine months ended September 30, 2015 were $796.3 million, an increase of $91.1 million, or 13%, compared to the same period for 2014. The increase was driven by higher brokered deposits of $92.1 million used to fund our strong loan growth over the past year.

~~Our average cost of funds for the nine months ended September 30, 2015 was 0.48%, representing a decrease of two basis points compared to the same period for 2014.~~

Our NIM for the nine months ended September 30, 2015 was 3.12%, including the four basis point impact of the one-time income pick-up in the second quarter of $734,000. Our NIM excluding the effect of this one-time income pick-up was 3.08%, representing a two basis point decrease compared to the third quarter of 2014.

The following table presents average balances, interest income, interest expense, and the corresponding average yields earned and cost of funds, as well as net interest income, net interest rate spread and NIM for the nine months ended September 30, 2015 and 2014:

Year-To-Date Average Balance, Interest and Yield/Rate Analysis
Quarterly Average Balance, Interest and Yield/Rate Analysis																	Quarterly Average Balance, Interest and Yield/Rate Analysis

	For The Nine Months Ended																	For The Three Months Ended
	September 30, 2015								September 30, 2014									March 31, 2016								March 31, 2015
(Dollars in Thousands)	Average Balance			Interest			Yield/Rate		Average Balance			Interest			Yield/Rate
																		Average Balance			Interest			Yield/Rate		Average Balance			Interest			Yield/Rate
Assets
Interest-earning assets:
Securities - taxable	$	736,077		$	11,580		2.10	%	$	775,440		$	12,516		2.15	%		$	781,525		$	4,251		2.18	%	$	745,518		$	3,978		2.13	%
Securities - nontaxable⁽¹⁾	69,195			2,313			4.46	%	36,349			1,426			5.23	%		102,057			1,099			4.31	%	51,099			595			4.66	%
Loans⁽²⁾:
Loans⁽²⁾⁽³⁾:
Residential real estate	585,655			18,087			4.12	%	568,347			18,011			4.23	%		825,022			8,351			4.05	%	585,581			6,014			4.11	%
Commercial real estate⁽³⁾	663,032			22,319			4.44	%	586,514			20,080			4.51	%		946,938			10,573			4.42	%	652,770			6,958			4.26	%
Commercial⁽¹⁾	246,128			7,200			3.86	%	204,811			6,093			3.92	%		277,038			2,789			3.98	%	243,068			2,364			3.89	%
Municipal⁽¹⁾	13,641			349			3.42	%	14,504			379			3.49	%		13,409			119			3.58	%	10,551			100			3.85	%
Consumer	294,088			8,552			3.89	%	289,468			8,423			3.89	%		362,636			3,751			4.16	%	289,301			2,785			3.91	%
HPFC																		76,432			1,573			8.14	%	—			—			—	%
Total loans	1,802,544			56,507			4.16	%	1,663,644			52,986			4.23	%		2,501,475			27,156			4.32	%	1,781,271			18,221			4.10	%
Total interest-earning assets	2,607,816			70,400			3.58	%	2,475,433			66,928			3.59	%		3,385,057			32,506			3.82	%	2,577,888			22,794			3.54	%
Cash and due from banks	49,415								43,942									79,606								46,974
Other assets	179,408								169,269									299,067								180,924
Less: ALL	(21,303		)						(21,776		)							(21,285		)						(21,228		)
Total assets	$	2,815,336							$	2,666,868								$	3,742,445							$	2,784,558
Liabilities & Shareholders' Equity
Deposits:
Demand	$	271,665		$	—		—		$	241,255		$	—		—			$	345,173		$	—		—		$	257,161		$	—		—
Interest checking	493,501			291			0.08	%	461,040			237			0.07	%		716,941			165			0.09	%	480,580			85			0.07	%
Savings	272,773			119			0.06	%	246,822			104			0.06	%		450,574			67			0.06	%	266,032			38			0.06	%
Money market	378,507			895			0.32	%	417,069			915			0.29	%		477,190			468			0.39	%	390,568			289			0.30	%
Certificates of deposit	313,705			2,172			0.93	%	331,966			2,336			0.94	%
Certificates of deposit⁽³⁾																		508,223			930			0.74	%	313,518			721			0.93	%
Total deposits	1,730,151			3,477			0.27	%	1,698,152			3,592			0.28	%		2,498,101			1,630			0.26	%	1,707,859			1,133			0.27	%
Borrowings:
Brokered deposits	237,852			1,153			0.65	%	145,798			1,086			1.00	%		202,163			412			0.82	%	225,635			396			0.71	%
Junior subordinated debentures	44,063			1,894			5.75	%	43,961			1,894			5.76	%
Subordinated debentures																		58,780			851			5.82	%	44,037			625			5.75	%
Other borrowings	514,336			2,556			0.66	%	515,383			2,500			0.65	%		562,228			1,136			0.81	%	522,109			860			0.67	%
Total borrowings	796,251			5,603			0.94	%	705,142			5,480			1.04	%		823,171			2,399			1.17	%	791,781			1,881			0.96	%
Total funding liabilities	2,526,402			9,080			0.48	%	2,403,294			9,072			0.50	%		3,321,272			4,029			0.49	%	2,499,640			3,014			0.49	%
Other liabilities	36,132								29,000									51,715								37,186
Shareholders' equity	252,802								234,574									369,458								247,732
Total liabilities & shareholders' equity	$	2,815,336							$	2,666,868								$	3,742,445							$	2,784,558
Net interest income (fully-taxable equivalent)				61,320								57,856									28,477								19,780
Less: fully-taxable equivalent adjustment				(1,239		)						(836		)							(525		)						(346		)
Net interest income				$	60,081							$	57,020								$	27,952							$	19,434
Net interest rate spread (fully-taxable equivalent)							3.10	%							3.09	%								3.33	%							3.05	%
Net interest margin (fully-taxable equivalent)⁽³⁾							3.12	%							3.10	%								3.35	%							3.07	%

(1) Reported on tax-equivalent basis calculated using a tax rate of 35.0%, including certain commercial loans.
(1) Reported on tax-equivalent basis calculated using a tax rate of 35%, including certain commercial loans.																	(1) Reported on tax-equivalent basis calculated using a tax rate of 35%, including certain commercial loans.
(2) Non-accrual loans and loans held for sale are included in total average loans.
(3) Includes $734,000 of income recognized in the second quarter of 2015 upon payoff of one loan that was on non-accrual status. Excluding this one-time pick-up, net interest margin for the nine months ended September 30, 2015 was 3.08%
(3) Net interest margin for the first quarter of 2016 was 3.18% excluding the impact of the fair value mark accretion on loans and certificate of deposits generated in purchase accounting and collection of previously charged-off acquired loans totaling $1.5 million for the first quarter of 2016.																	(3) Net interest margin for the first quarter of 2016 was 3.18% excluding the impact of the fair value mark accretion on loans and certificate of deposits generated in purchase accounting and collection of previously charged-off acquired loans totaling $1.5 million for the first quarter of 2016.

Provision for Credit Losses

The provision for credit losses is made up of our provision for loan losses and the provision for unfunded commitments.

The provision for loan losses, which makes up the vast majority of the provision for credit losses, is a recorded expense determined by management that adjusts the ALL to a level that, in management’s best estimate, is necessary to absorb probable losses within the existing loan portfolio. The provision for loan losses reflects loan quality trends, including, among other factors, the levels of and trends related to non-accrual loans, past due loans, potential problem loans, criticized loans, net charge-offs or recoveries and growth in the loan portfolio. Accordingly, the amount of the provision for loan losses reflects both the necessary increases in the ALL related to newly identified criticized loans, as well as the actions taken related to other loans including, among other things, any necessary increases or decreases in required allowances for specific loans or loan pools.

The provision for unfunded commitments represents management's estimate of the amount required to reflect the probable inherent losses on outstanding letters and unused lines of credit. The reserve for unfunded commitments is presented within accrued interest and other liabilities on the consolidated statement of condition.

The following table outlines the components making up the provision for credit losses as recorded on consolidated statements of income for the three ~~and nine~~ months ended ~~September 30, 2015~~March 31, 2016 and ~~2014:~~2015:


	Three Months Ended September 30,					Nine Months Ended September 30,				Three Months Ended March 31,
(Dollars In Thousands)	2015			2014		2015		2014
										2016		2015
Provision for loan losses	$	281		$	534	$	972	$	1,675	$	870	$	440
Change in reserve for unfunded commitments	(2		)	5		7		—		2		6
Provision for credit losses	$	279		$	539	$	979	$	1,675	$	872	$	446

Please refer to “—Financial Condition—Asset Quality” below for additional discussion regarding the ALL and overall asset quality.

Non-Interest Income

The following table presents the components of non-interest income for the three ~~and nine~~ months ended ~~September 30, 2015~~March 31, 2016 and ~~2014:~~2015:


	Three Months Ended September 30,						Change					Nine Months Ended September 30,						Change					Three Months Ended March 31,						Change
(Dollars In Thousands)	2015			2014			$			%		2015			2014			$			%
																							2016			2015			$			%
Service charges on deposit accounts	$	1,554		$	1,600		$	(46	)	(3	)%	$	4,634		$	4,689		$	(55	)	(1	)%	$	1,724		$	1,487		$	237		16	%
Other service charges and fees	1,682			1,646			36			2	%	4,776			4,584			192			4	%	2,328			1,510			818			54	%
Income from fiduciary services	1,177			1,212			(35		)	(3	)%	3,725			3,745			(20		)	(1	)%	1,169			1,220			(51		)	(4	)%
Mortgage banking income, net																							808			239			569			238	%
Brokerage and insurance commissions	411			441			(30		)	(7	)%	1,362			1,378			(16		)	(1	)%	458			449			9			2	%
Bank-owned life insurance	443			377			66			18	%	1,267			975			292			30	%	422			422			—			—	%
Mortgage banking income, net	390			55			335			609	%	975			197			778			395	%
Other income	900			623			277			44	%	2,275			2,131			144			7	%	1,008			820			188			23	%
Core non-interest income	6,557			5,954			603			10	%	19,014			17,699			1,315			7	%
Net gain on sale of securities	4			—			4			N.M.		4			451			(447		)	(99	)%
Total non-interest income	$	6,561		$	5,954		$	607		10	%	$	19,018		$	18,150		$	868		5	%	$	7,917		$	6,147		$	1,770		29	%
Non-interest income as a percentage of total revenues⁽¹⁾	25		%	24		%						24		%	24		%						22		%	24		%

(1) Revenue is defined as the sum of net interest income ~~plus~~and non-interest income.

Non-Interest Income - Three Months Ended ~~September 30, 2015~~March 31, 2016 and ~~2014.~~2015. The significant changes in non-interest income for the three months ended ~~September 30, 2015~~March 31, 2016 compared to the three months ~~September 30, 2014 are:~~March 31, 2015 are primarily due to the SBM acquisition completed in the fourth quarter of 2015 and include:

An increase in ~~mortgage banking income~~service charges on deposit accounts of $335,000 from the sale of $11.9 million of 30-year fixed rate mortgages in the third quarter of 2015, which generated gains on sale of $249,000, while in the third quarter of 2014 we did not have any loans sales. The remaining increase is reflective of higher servicing assets and servicing fees as the servicing rights were retained for the majority of the loans sold.

~~An increase in other income of $277,000~~$237,000 was primarily driven by higher income from customer loan swaps of $435,000 as the Company executed loan swap arrangements on commercial real estate loans of $46.0 million in the third quarter of 2015 compared to none in the third quarter of 2014. Partially offsetting this were higher unrealized losses of $111,000 on executive and director deferred compensation plans (noting an offsetting unrealized gain of equal amount is presented within other expenses) and lower income on our third party loan servicing relationships, primarily our MSHA servicing portfolio, of $25,000 compared to the third quarter of 2014.

~~Non-Interest Income - Nine Months Ended September 30, 2015 and 2014.~~ ~~The significant changes in non-interest income for the nine months ended September 30, 2015 compared to the nine months September 30, 2014 are:~~

An increase in mortgage banking income of $778,000 from the sale of $24.5 million of 30-year fixed rate mortgages for the nine months ended September 30, 2015 that generated gains on sale of $541,000, compared to gains of $17,000 for the same period last year. The remaining increase is reflective of higher servicing assets as the servicing rights were retained for the majority of the loans sold.

~~An increase in bank-owned life insurance of $292,000~~primary due to the ~~additional $10.0 million investment made in~~SBM acquisition and the ~~third quarter~~addition of ~~2014.~~approximately 30,000 customer checking accounts driving higher overdraft fees.

An increase in other service charges and fees of ~~$192,000~~$818,000 was primarily ~~driven by higher~~due to the SBM acquisition and the addition of approximately 30,000 new customer checking accounts driving an increase in debit card income of ~~$183,000,~~$720,000 and 29 ATMs driving higher ATM fees of ~~which $54,000~~$57,000.

An increase in mortgage banking income of $569,000 was ~~an annual incentive fee received~~driven by: (i) sale of $38.9 million of mortgages in the first quarter of 2016, which generated net gains on sale of $819,000, compared to $4.8 million of mortgage sales and net gains of $129,000 for the first quarter of 2015; and (ii) higher unrealized gains recorded on interest rate lock commitments of $290,000 due to a significant increase in our loan pipeline at March 31, 2016 compared to March 31, 2015 through the expansion of our mortgage banking business over the past year; partially offset by lower mortgage servicing income of $411,000 driven by higher prepayment activity and higher prepayment speed assumptions resulting in higher MSR amortization and a valuation adjustment. At March 31, 2016, our MSRs of $1.6 million were 0.43% of the respective serviced loan portfolio compared to 0.35% at March 31, 2015.

An increase in other income of ~~$144,000~~$188,000 was primarily driven by higher ~~income on customer loan swaps of $458,000 for~~other fees earned due to a larger customer-base from the ~~nine months ended September 30, 2015 compared to the same period for 2014, partially offset by~~SBM acquisition, as well as higher ~~unrealized losses on executive and director deferred compensation plans of $176,000 (noting an offsetting unrealized gain of equal amount is presented within other expenses) and lower~~ income on our ~~third party~~customer loan ~~servicing relationships, primarily our MSHA servicing portfolio,~~swap program of ~~$99,000 compared to the same period~~$34,000 and higher early withdrawal penalties on CDs of ~~2014.~~

~~A decrease on gains from sale of investment securities of $447,000 compared to the nine months ended September 30, 2014.~~$29,000.

Non-Interest Expense

The following table presents the components of non-interest expense for the three ~~and nine~~ months ended ~~September 30, 2015~~March 31, 2016 and ~~2014:~~2015:


	Three Months Ended September 30,						Change					Nine Months Ended September 30,						Change					Three Months Ended March 31,						Change
(Dollars In Thousands)	2015			2014			$			%		2015			2014			$			%
																							2016			2015			$			%
Salaries and employee benefits	$	8,691		$	8,078		$	613		8	%	$	25,550		$	24,359		$	1,191		5	%	$	11,610		$	8,375		$	3,235		39	%
Furniture, equipment and data processing	1,705			1,704			1			—	%	5,530			5,236			294			6	%	2,427			1,923			504			26	%
Net occupancy	1,194			1,175			19			2	%	3,905			3,825			80			2	%	1,877			1,472			405			28	%
Consulting and professional fees	470			468			2			—	%	1,734			1,768			(34		)	(2	)%	885			591			294			50	%
Other real estate owned and collection costs	543			637			(94		)	(15	)%	1,554			1,665			(111		)	(7	)%	656			562			94			17	%
Regulatory assessments	513			511			2			—	%	1,534			1,477			57			4	%	721			510			211			41	%
Amortization of intangible assets	288			287			1			—	%	862			861			1			—	%	476			287			189			66	%
Other expenses	2,541			2,319			222			10	%	7,371			6,905			466			7	%	3,632			2,346			1,286			55	%
Core operating expenses	15,945			15,179			766			5	%	48,040			46,096			1,944			4	%	22,284			16,066			6,218			39	%
Merger and acquisition costs	766			—			766			N.M.		1,629			—			1,629			N.M.		644			735			(91		)	(12	)%
Total non-interest expense	$	16,711		$	15,179		$	1,532		10	%	$	49,669		$	46,096		$	3,573		8	%	$	22,928		$	16,801		$	6,127		36	%
Efficiency ratio (non-GAAP)	58.94		%	59.18		%						59.80		%	61.01		%
Efficiency ratio⁽¹⁾																							61.23		%	61.97		%
Core operating expense to total average assets (annualized)⁽¹⁾																							2.38		%	2.31		%


(1)	This is a non-GAAP measure. Refer to "—Non-GAAP Financial Measures and Reconciliation to GAAP" for further details.

Non-Interest Expense - Three Months Ended ~~September 30, 2015~~March 31, 2016 and ~~2014.~~2015. The significant changes in non-interest expense for the three months ended ~~September 30, 2015~~March 31, 2016 compared to the three months ended ~~September 30, 2014 are:~~March 31, 2015 are primarily due to the SBM acquisition completed in the fourth quarter of 2015 and include:

An increase in salaries and employee benefits of ~~$613,000 due to normal merit increases and higher incentive compensation due to strong year-to-date financial performance.~~

An$3.2 million was driven by an increase ~~in merger and acquisition costs~~ of ~~$766,000~~approximately 160 full-time employees due to the ~~pending merger~~SBM acquisition, along with ~~SBM. Refer to Note 12 of the consolidated financial statements for further details.~~

An increase in other expenses of $222,000 driven by higher losses associated with check and debit card fraud of $71,000, an increase in website platform costs of $67,000 due to the recent company-wide re-branding effort, and higher postage costs of $53,000 due to the recent change in process and vendor.

~~Non-Interest Expense - Nine Months Ended September 30, 2015 and 2014.~~ ~~The significant changes in non-interest expense for the nine months ended September 30, 2015 compared to the nine months ended September 30, 2014 are:~~

~~An increase in merger and acquisition costs of $1.6 million due to the pending merger with SBM. Refer to Note 12 of the consolidated financial statements for further details.~~

~~An increase in salaries and employee benefits of $1.2 million, or 5%, due to~~ normal merit ~~increases, hiring of commercial production personnel over the past year, and higher performance-based incentives based on the year-to-date performance.~~increases.

An increase in furniture, equipment and data processing ~~costs~~ of ~~$294,000~~$504,000 was driven by ~~internal system and software upgrades over~~higher data processing charges across our key systems totaling $347,000 as our number of customer accounts increased due to the ~~past year~~SBM acquisition, as well as higher depreciation expense of $51,000 due to ~~enhance~~ the ~~functionality and experience for our customers and drive internal efficiencies.~~SBM acquisition.

An increase in net occupancy of $405,000 was due to the addition of 24 banking centers due to the SBM acquisition.

An increase in other expenses of ~~$466,000~~$1.3 million was driven by ~~higher losses~~incremental costs associated with ~~check~~operating as a larger organization due to the SBM acquisition. These incremental costs included: (i) higher customer mailing costs, ATM surcharge rebates, telephone and communication costs, and travel and entertainment costs of $644,000 due an increase in customers, locations and employees; (ii) higher debit card ~~fraud~~costs of ~~$121,000,~~$303,000 due to an increase in number of transactions; (iii) higher marketing and donation costs of ~~$127,000,~~$127,000; and (iv) $90,000 of ~~which a portion was attributable to~~expense associated with our ~~Hope@Home~~ ~~campaign for which we provide a $100 donation to a local homeless shelter~~cash back rewards program that begun in the fourth quarter of 2015 in conjunction with the ~~borrower's choice for each residential loan originated, higher postage costs of $78,000, and an increase in website platform costs of $67,000 due to the recent company-wide re-branding effort.~~SBM acquisition.

FINANCIAL CONDITION

Overview

Total assets at ~~September 30,~~March 31, 2016 were $3.8 billion compared to $3.7 billion at December 31, 2015, ~~were $2.9 billion,~~ representing an increase of ~~$81.9 million, or 3%, since year-end.~~$53.2 million. The ~~growth~~increase in ~~total~~ assets was primarily driven ~~primarily~~ by an increase in ~~loans (including~~our investment portfolio of $53.6 million. At March 31, 2016, our investment portfolio represented 24% of total assets compared to 23% at December 31, 2015. Loans (excluding loans held for sale) at March 31, 2016 totaled $2.5 billion, an increase of ~~$58.4 million, or 3%. Our loan growth was centered within the commercial real estate portfolio, which has increased $50.3~~$2.4 million since December 31, ~~2014. Our commercial loan portfolio now makes up 52% due to our continued focus on becoming Maine's business bank~~2015.

Total deposits at March 31, 2016 were $2.7 billion, representing a decrease of $51.5 million since year-end. Core deposits (demand, interest checking, savings and ~~supporting the growth and economic development across all communities that we serve. The retail loan portfolio saw modest growth~~money market) at March 31, 2016 totaled $2.0 billion, representing a decrease of ~~$6.7 million, or~~ 1%, since year-end, which ~~is in large part~~was consistent with the same period a year ago, due to the seasonality and cyclical nature of core deposit flows within our ~~strategic shift in 2015~~market. Certificates of deposit decreased $34.0 million since year-end, primarily due to ~~sell all 30-year mortgage production. For~~ the ~~nine months ended September 30, 2015, the Company has sold $24.5~~maturity and non-renewal of one significant government account totaling $30.0 million. Total borrowings at March 31, 2016 totaled $659.1 million, ~~of 30-year mortgage production.~~

~~Total deposits (excluding brokered deposits) at September 30, 2015 were $1.8 billion,~~ representing an increase of $64.9 million, or 4%, since year-end. Non-interest bearing demand deposits increased $45.6 million, or 17%, at September 30, 2015 compared to year-end largely due to the seasonality of core deposits within our markets across Maine, but we also experienced a $26.8 million, or 10%, increase over September 30, 2014. Certificates of deposit increased $22.8$86.7 million since ~~year-end~~year-end.

Our asset quality at March 31, 2016 remains strong with non-performing loans as ~~one significant depositor shifted funds into~~ a ~~6-month term in the third quarter~~percentage of ~~2015. Total borrowings (including brokered deposits) were $792.8 million at September 30, 2015,~~total loans of 0.80%, representing a decrease of ~~$1.9 million~~0.13% since year-end. ~~The decrease is~~At March 31, 2016, the ratio of loans 30-89 days past due to total loans was 0.30%, representing a decrease of 0.10% since year-end.

The Company and its wholly-owned subsidiary Camden National Bank continue to maintain risk-based capital ratios in excess of the ~~seasonal inflow of core deposits.~~regulatory levels required for an institution to be considered “well capitalized.” At March 31, 2016, the Company’s total risk-based capital ratio, Tier I risk-based capital ratio, common equity Tier I risk-based capital ratio, and Tier I leverage capital ratio were 13.08%, 11.69%, 10.37%, and 8.42%, respectively.

Total shareholders’ equity at ~~September 30, 2015~~March 31, 2016 was ~~$259.4~~$375.5 million, an increase of ~~$14.3~~$12.3 million, or 8%14% annualized, since year-end.

Investment Securities

We purchase and hold investment securities including municipal bonds, MBS (pass through securities and CMOs), subordinated corporate bonds and FHLB and FRB stock to diversify our revenues, interest rate and credit risk, and to provide for liquidity and funding needs. At ~~September 30, 2015,~~March 31, 2016, our total holdings in investment securities were ~~$820.1~~$909.6 million, an increase of ~~$16.4~~$53.6 million since December 31, ~~2014.~~2015. For the ~~nine~~three months ended ~~September 30, 2015,~~March 31, 2016, we purchased ~~$136.7~~$70.8 million of debt securities and received proceeds from the ~~sale and~~ maturity of debt securities totaling ~~$123.7~~$28.6 million.

During the ~~nine~~three months ended ~~September 30, 2015,~~March 31, 2016, we classified all municipal bonds purchased as HTM securities. In total, we purchased ~~$55.4~~$3.9 million of municipal bonds year-to-date. We have the intent and ability, evidenced by our strong capital and liquidity ratios, to hold these investments to maturity. The remaining ~~$81.3~~$66.9 million of securities purchased were a ~~collection~~combination of MBS, CMO and ~~CMO~~subordinated corporate debt securities. All of these investments have been categorized as AFS securities and are carried at fair value on the consolidated statements of condition with the associated unrealized gains or losses recorded in AOCI, net of tax. At ~~September 30, 2015,~~March 31, 2016, we had a ~~$2.9~~$4.0 million net unrealized gain on our AFS securities, net of tax, compared to a ~~$319,000~~$3.8 million net unrealized loss, net of tax, at December 31, ~~2014.~~2015. The fluctuation in the fair value of our MBS and CMO investment securities is highly dependent on interest rates as of the end of the reporting period and is not reflective of an overall credit deterioration within our portfolio.

We ~~continuously monitor~~started purchasing subordinated corporate bonds in December 2015 and ~~evaluate our AFS portfolio to identify and assess risks within our portfolio, including, but not limited~~continued through the first quarter of 2016, adding $2.5 million to the ~~impact of~~portfolio. Subordinated corporate bonds are subordinated notes issued by U.S. banks and bank holding companies that meet certain underwriting criteria with coupons ranging from 5.00% to 6.25% and 10 year maturities with call options that can be exercised by the ~~current rate environment~~issuer after five years. At March 31, 2016 and December 31, 2015, the ~~related prepayment risk and review credit ratings. In the third quarter of 2015, we sold certain MBS investment securities with a total net book~~fair value of ~~$7.3~~our subordinated corporate bonds was $3.5 million ~~that we identified had a higher prepayment risk.~~and $996,000, respectively. We ~~recognized a net gain on the sale of these investment securities of $209,000. Additionally, during the third quarter of 2015, we sold~~have designated our ~~entire Non-Agency investment portfolio that had a net book value of $5.1 million. We sold these~~subordinated corporate bond investments as they contain higher credit risks and recorded a net loss on the sale of these investments of $205,000. We had previously recorded OTTI on these investments of $204,000. The net gain on the sale of investment securities for the three and nine months ended September 30, 2015 was $4,000. For the three and nine months ended September 30, 2014, we recognized gains on the sale of investment securities of $0 and $451,000, respectively.AFS.

The duration of our investment securities portfolio ~~increased modestly~~decreased slightly to ~~3.87~~3.9 years at ~~September 30, 2015~~March 31, 2016 from ~~3.58~~4.0 years at December 31, ~~2014. The increase~~2015. This decrease was due to ~~the change in~~a higher mix of MBS investments purchased in the first quarter of 2016, making up 91% of our total investment ~~securities portfolio as municipal bonds, which~~purchases. MBS investments have a ~~longer~~shorter weighted-average life than ~~our MBS~~the municipal bonds, and, ~~CMO portfolio, at September 30,~~in 2015, ~~made up 12%~~a less significant portion of the ~~net book value~~mix of ~~our debt~~investment securities ~~portfolio compared to 6% at December 31, 2014.~~purchased were MBS securities. We generally purchase MBS and CMO investments with an average life of no longer than six years to limit prepayment ~~risk.~~risk compared to fifteen years for a municipal bond.

We completed our quarterly OTTI assessment for our investment portfolio as of ~~September 30, 2015~~March 31, 2016 and concluded that no OTTI ~~was necessary.~~existed across our investment portfolio. Our process and methodology for analyzing our investments portfolio for OTTI has not changed since last disclosed within our Annual Report on Form 10-K for the year ended December 31, ~~2014.~~2015. Refer to the Annual Report on Form 10-K for the year ended December 31, ~~2014~~2015 for further discussion of the Company's process and methodology.

Loans

We provide loans primarily to customers located within our geographic market area. Our primary market continues to be in Maine, making up ~~approximately 90%~~89% of our loan portfolio at ~~September 30, 2015;~~March 31, 2016; however, our loan production outside of Maine and through New England has increased with our expanded presence in Southern Maine and New Hampshire. The commercial loan portfolio increased $16.0 million, or 5% annualized, since December 31, 2015, while the retail loan portfolio decreased $13.6 million over the same period. With the ramp-up of our mortgage banking platform over the past year, we continue to sell a significant portion of our residential mortgage production. In the first quarter of 2016, the Company sold $38.9 million of residential mortgage loans and recognized net gains of $819,000, compared to $4.8 million and net gains of $129,000 in the first quarter of 2015. At ~~September 30, 2015, total loans (including~~March 31, 2016, loans held for ~~sale)~~sale totaled $16.6 million, representing an increase of ~~$1.8 billion increased $58.4~~$5.7 million ~~or 3%,~~ since December 31, 2014. Loan growth continues to be centered within our commercial real estate portfolio, which has increased $50.3 million since year-end. Our commercial loan portfolio at September 30, 2015 made up 52% of our total loan portfolio and reflects our focus on becoming Maine's business bank. The retail portfolio (including loans held for sale) grew $6.7 million, or 1% since year-end. The modest growth highlights our strategic shift to sell 30-year mortgage production to allow us to be interest rate sensitive and recognize the immediate gains on the sale. For the nine months ended September 30, 2015, we sold $24.5 million of fixed rate mortgage loans to the secondary market generating gains of $541,000.2015.

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

(Dollars In Thousands) September 30,
2015 December 31,
2014
Residential real estate loans $ 583,424
$ 585,996
Commercial real estate loans 690,935
640,661
Commercial loans 258,105
257,515
Home equity loans 281,492
271,709
Consumer loans 16,535
17,257
Net deferred fees (348 ) (528 )
Total loans $ 1,830,143
$ 1,772,610
Commercial Loan Portfolio $ 949,040
$ 898,176
Retail Loan Portfolio 881,103
874,434
Commercial Portfolio Mix 52 % 51 %
Retail Portfolio Mix 48 % 49 %



	March 31, 2016			December 31, 2015			Change
	March 31, 2016			December 31, 2015			($)			(%)
Residential real estate	$	811,974		$	820,617		$	(8,643	)	(1	)%
Commercial real estate	952,481			927,951			24,530			3	%
Commercial	292,064			297,721			(5,657		)	(2	)%
Consumer and home equity	361,686			366,587			(4,901		)	(1	)%
HPFC	74,429			77,330			(2,901		)	(4	)%
Total loans	$	2,492,634		$	2,490,206		$	2,428		1	%
Commercial Loan Portfolio	$	1,318,974		$	1,303,002		$	15,972		1	%
Retail Loan Portfolio	$	1,173,660		$	1,187,204		$	(13,544	)	(1	)%
Commercial Portfolio Mix	53		%	52		%
Retail Portfolio Mix	47		%	48		%

Asset Quality

Non-Performing Assets. Non-performing assets include non-accrual loans, accruing loans 90 days or more past due, accruing TDRs, and property acquired through foreclosure or repossession. Our non-performing assets to total assets ratio at September 30, 2015 was 0.54%, representing a decrease of 28 basis points since year-end. The decrease in non-performing assets at September 30, 2015 compared to December 31, 2014 was due, in part, to the migration of loans from non-performing status to performing status as the financial condition of our borrowers has improved, but also was largely due to (i) the full pay-off of one significant commercial real estate loan of $1.9 million that was on non-accrual status in the second quarter of 2015 and (ii) the decrease in our OREO portfolio of $1.4 million since year-end. We continue to see favorable trends across our asset quality metrics supporting a reduced provision for credit losses for the three and nine months ended September 30, 2015 of $260,000 and $696,000, respectively, compared to the same periods a year ago.

The following table sets forth the make-up and amount of our non-performing assets as of the dates indicated:


(Dollars in Thousands)	September 30, 2015			December 31, 2014
Non-accrual loans:
							March 31, 2016			December 31, 2015
Non-accrual loans⁽¹⁾:
Residential real estate	$	4,149		$	6,056		$	6,275		$	7,253
Commercial real estate	3,384			7,043			3,044			4,529
Commercial	1,383			1,529			4,128			4,489
Consumer and home equity loans	1,243			2,012			1,572			2,051
HPFC							357			—
Total non-accrual loans	10,159			16,640			15,376			18,322
Accruing loans past due 90 days	—			—			—			—
Accruing TDRs not included above	5,013			4,539			4,594			4,861
Total non-performing loans	15,172			21,179			19,970			23,183
Other real estate owned	204			1,587			1,228			1,304
Total non-performing assets	$	15,376		$	22,766		$	21,198		$	24,487
Non-accrual loans to total loans	0.55		%	0.94		%	0.62		%	0.74		%
Non-performing loans to total loans	0.83		%	1.19		%	0.80		%	0.93		%
ALL to non-performing loans	139.27		%	99.70		%	106.86		%	91.30		%
Non-performing assets to total assets	0.54		%	0.82		%	0.56		%	0.66		%
ALL to non-performing assets	137.43		%	92.75		%	100.67		%	86.44		%


(1)	Non-accrual loan balances are presented net of the unamortized fair value mark discount associated with the purchase accounting for acquired loans.

Our non-performing assets to total assets ratio at March 31, 2016 was 0.56%, representing a decrease of 10 basis points since year-end. The decrease in non-performing assets period-over-period was driven by the decrease in non-accrual loans. At March 31, 2016, non-accrual loans totaled $15.4 million, representing a decrease of $2.9 million since year-end. The decrease in non-accrual loans in the first quarter of 2016 was primarily driven by liquidation and auction activity.

Potential Problem Loans. Potential problem loans consist of classified accruing commercial and commercial real estate loans that were between 30 and 89 days past due. Such loans are characterized by weaknesses in the financial condition of borrowers or collateral deficiencies. Based on historical experience, the credit quality of some of these loans may improve due to changes in collateral values or the financial condition of the borrowers, while the credit quality of other loans may deteriorate, resulting in a loss. These loans are not included in the above analysis of non-accrual loans. At ~~September 30, 2015 and~~March 31, 2016, potential problem loans amounted to $3.8 million, or 0.15% of total loans, compared to $649,000, or 0.03% of total loans, at December 31, ~~2014, we had one potential problem loan in the commercial portfolio. The loan balance at risk at September 30, 2015 and December 31, 2014 was $183,000 and $162,000, respectively.~~2015.

Past Due Loans. Past due loans consist of accruing loans that were between 30 and 89 days past due. The following table sets forth information concerning the past due loans at the date indicated:


(Dollars in Thousands)	September 30, 2015			December 31, 2014
							March 31, 2016			December 31, 2015
Accruing loans 30-89 days past due:
Residential real estate	$	1,153		$	1,303		$	1,109		$	3,590
Commercial real estate	1,281			381			4,201			4,295
Commercial	497			656			667			637
Consumer and home equity loans	315			891			808			1,255
HPFC							624			165
Total accruing loans 30-89 days past due	$	3,246		$	3,231		$	7,409		$	9,942
Accruing loans 30-89 days past due to total loans	0.18		%	0.18		%	0.30		%	0.40		%

Allowance for Loan Losses. We use a methodology to systematically measure the amount of estimated loan loss exposure inherent in the loan portfolio for purposes of establishing a sufficient ALL. The ALL is management’s best estimate of the probable loan losses as of the balance sheet date. The allowance is increased by provisions charged to earnings and by recoveries of amounts previously charged-off, and is reduced by charge-offs on loans.

The following table sets forth information concerning the activity in our ALL during the periods indicated.


	At or For The Three Months Ended September 30,						At or For The Nine Months Ended September 30,						At or For The Year Ended December 31,			At or For The Three Months Ended March 31,						At or For The Year Ended December 31,
(Dollars in Thousands)	2015			2014			2015			2014			2014
																2016			2015			2015
ALL at the beginning of the period	$	21,194		$	21,905		$	21,116		$	21,590		$	21,590		$	21,166		$	21,116		$	21,116
Provision for loan losses	281			534			972			1,675			2,224			870			440			1,938
Charge-offs:
Residential real estate loans	176			9			468			370			785			210			113			801
Commercial real estate	71			100			174			276			361			222			55			481
Commercial loans	144			675			387			1,201			1,544			226			159			655
Consumer and home equity loans	221			225			481			371			754			143			97			679
HPFC																—			—			—
Total loan charge-offs	612			1,009			1,510			2,218			3,444			801			424			2,616
Recoveries:
Residential real estate loans	15			2			35			136			165			40			3			55
Commercial real estate loans	4			17			68			67			135			9			10			74
Commercial loans	115			117			297			286			395			52			104			389
Consumer and home equity loans	135			19			154			49			51			3			16			210
HPFC																—			—			—
Total loan recoveries	269			155			554			538			746			104			133			728
Net charge-offs	343			854			956			1,680			2,698			697			291			1,888
ALL at the end of the period	$	21,132		$	21,585		$	21,132		$	21,585		$	21,116		$	21,339		$	21,265		$	21,166
Components of allowance for credit losses:
Allowance for loan losses	$	21,132		$	21,585		$	21,132		$	21,585		$	21,116		$	21,339		$	21,265		$	21,166
Liability for unfunded credit commitments	24			21			24			21			17			24			23			22
Balance of allowance for credit losses at end of the period	$	21,156		$	21,606		$	21,156		$	21,606		$	21,133		$	21,363		$	21,288		$	21,188
Total loans, excluding loans held for sale																$	2,492,634		$	1,769,815		$	2,490,206
Average loans	$	1,823,542		$	1,722,516		$	1,802,544		$	1,663,644		$	1,681,297		$	2,501,475		$	1,781,271		$	1,948,621
Net charge-offs (annualized) to average loans	0.08		%	0.20		%	0.07		%	0.13		%	0.16		%	0.11		%	0.07		%	0.10		%
Provision for loan losses (annualized) to average loans	0.06		%	0.12		%	0.07		%	0.13		%	0.13		%	0.14		%	0.10		%	0.10		%
ALL to total loans	1.15		%	1.25		%	1.15		%	1.25		%	1.19		%	0.86		%	1.20		%	0.85		%
ALL to net charge-offs (annualized)	1,540.23		%	631.88		%	1,657.85		%	963.62		%	782.65		%	765.39		%	1,826.89		%	1,122.25		%

The determination of an appropriate level of ALL, and subsequent provision for loan losses which affects earnings, is based on our analysis of various economic factors and review of the loan portfolio. During our analysis and review, many factors are considered including, but not limited to, loan growth, payoffs of lower quality loans, recoveries on previously charged-off loans, improvement in the financial condition of the borrowers, risk rating downgrades/upgrades and charge-offs. We utilize a comprehensive approach toward determining the ALL, which includes an expanded risk rating system to assist us in identifying the risks being undertaken.

For the three ~~and nine~~ months ended ~~September 30, 2015,~~March 31, 2016, we provided ~~$281,000 and $972,000~~$870,000 of provision expense to the ALL compared to ~~$534,000 and $1.7 million~~$440,000 for the same ~~periods~~period for ~~2014,~~2015, respectively. The ~~decrease~~increase in the provision for loan losses was ~~primarily attributable to improvement~~driven by: (i) elevated net charge-offs in the ~~general economic condition~~first quarter of ~~our borrowers supported by a decrease in annualized net charge-offs of 12 and 6 basis points, respectively, for the three and nine months ended September 30, 2015~~2016 compared to the ~~same periods for 2014. Furthermore,~~first quarter of 2015 of $406,000, which drove an increase in our ~~asset quality metrics have continued~~net charge-offs (annualized) to ~~show favorable trends as non-accrual~~average loans ratio of four basis points period-over-period; and (ii) the migration of performing loans to ~~total~~classified in the first quarter of 2016. At March 31, 2016, loans ~~have decreased 39 basis points~~classified as special mention (risk rated 7) totaled $43.5 million, representing an increase of $8.7 million since year-end to 0.55%, and non-performing assets to total assets has decreased 28 basis points to 0.54%. The improving asset quality metrics is reflective of the resolution of problem loans over recent years.year-end.

We believe the ALL of ~~$21.1~~$21.3 million, or ~~1.15%~~0.86% of total loans and ~~139.27%~~106.86% of total non-performing loans, at ~~September 30, 2015~~March 31, 2016 was appropriate given the current economic conditions in our service area and the condition of the loan portfolio. However, if conditions deteriorate the provision will likely increase.

Liabilities and Shareholders’ Equity

Deposits and Borrowings. Total deposits ~~(including brokered deposits)~~ at ~~September 30, 2015~~March 31, 2016 were ~~$2.0~~$2.7 billion, ~~an increase~~representing a decrease of ~~$76.1~~$51.5 million, or 4%2%, since ~~December 31, 2014. The increase was driven by (i) higher core~~year-end. Core deposits (demand, interest checking, savings and money market) at March 31, 2016 totaled $2.0 billion, representing a decrease of ~~$42.1 million, or 3%, largely~~1% since year-end, which was consistent with the same period a year ago, due to the seasonality and cyclical nature of ~~Maine's markets. Specifically, non-interest bearing demand deposits increased 17% over this period.~~core deposit flows within our market. CDs decreased $34.0 million, or 7%, since year-end, primarily due to the maturity and non-renewal of one significant government account totaling $30.0 million.

Total borrowings at ~~September 30, 2015~~March 31, 2016 were ~~$563.9~~$659.1 million, ~~a decrease~~representing an increase of ~~$13.1~~$86.7 million, or 2%15%, since December 31, ~~2014.~~2015. The ~~decrease~~increase in borrowings was due to ~~the reduction~~an increase in FHLBB overnight and short-term advances of ~~$28.1~~$62.3 million due to the ~~increase~~aforementioned decrease in ~~funding from core deposits and higher customer repurchase agreements of $16.0 million.~~deposits.

Shareholders' Equity. Total shareholders' equity at ~~September 30, 2015~~March 31, 2016 was ~~$259.4~~$375.5 million, representing an increase of ~~$14.3~~$12.3 million, or 6%3%, since December 31, ~~2014.~~2015. The increase was largely due to net income of ~~$19.3~~$8.3 million for the ~~nine~~first quarter of 2016 and an increase in unrealized gains on AFS securities of $7.8 million due to change in interest rates for the three months ended ~~September 30, 2015,~~March 31, 2016, partially offset by dividends ~~paid of $0.90 per share over this period totaling $7.6 million. Our third quarter 2015 dividend~~ declared ~~and paid on October 30, 2015 increased $834,000 over~~in the ~~second~~first quarter of ~~2015 due to the issuance~~2016 of 2,749,762 shares on October 16, 2015 in connection with the Merger with SBM. We also incurred equity issuance costs of $537,000 associated with the registration of shares for the Merger with SBM. These costs have been accounted for as a reduction of shareholders' equity as required under GAAP.$3.1 million.

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


	Three Months Ended September 30,						Nine Months Ended September 30,						Year Ended December 31, 2014			Three Months Ended March 31,						Year Ended December 31, 2015
	2015			2014			2015			2014			Year Ended December 31, 2014			2016			2015			Year Ended December 31, 2015
Return on average assets	0.90		%	0.94		%	0.91		%	0.93		%	0.92		%	0.90		%	0.82		%	0.70		%
Return on average equity	9.99		%	10.70		%	10.19		%	10.53		%	10.37		%	9.07		%	9.19		%	7.54		%
Average equity to average assets	9.01		%	8.81		%	8.98		%	8.80		%	8.83		%	9.87		%	8.90		%	9.26		%
Dividend payout ratio⁽¹⁾	47.65		%	31.14		%	39.24		%	32.56		%	33.73		%	37.07		%	39.73		%	50.60		%
Book value per share	$	34.80		$	32.33		$	34.80		$	32.33		$	33.01		$	36.55		$	33.85		$	35.54
Tangible book value per share⁽²⁾⁽¹⁾	$	28.45		$	25.80		$	28.45		$	25.80		$	26.52		$	26.48		$	27.41		$	25.33
Dividends declared per share	$	0.30		$	0.27		$	0.90		$	0.81		$	1.11		$	0.30		$	0.30		$	1.20

(1) ~~The dividend declared for the third quarter of 2015 included shares to be issued on October 16, 2015 for the Merger.~~

~~(2)~~ This is a non-GAAP measure. Refer to "—Non-GAAP Financial Measures and Reconciliation to GAAP" for further details.

Refer to ~~"—Capital~~"Capital Resources" and Note 6 of the consolidated financial statements further discussion of the Company and Bank's capital resources and regulatory capital requirements.

LIQUIDITY

Our liquidity needs require the availability of cash to meet the withdrawal demands of depositors and credit commitments to borrowers. Liquidity is defined as our ability to maintain availability of funds to meet customer needs, as well as to support our asset base. The primary objective of liquidity management is to maintain a balance between sources and uses of funds to meet our cash flow needs in the most economical and expedient manner. Due to the potential for unexpected fluctuations in both deposits and loans, active management of liquidity is necessary. We maintain various sources of funding and levels of liquid assets in excess of regulatory guidelines in order to satisfy their varied liquidity demands. We monitor liquidity in accordance with internal guidelines and all applicable regulatory requirements. As of ~~September 30, 2015~~March 31, 2016 and ~~2014,~~December 31, 2015, our level of liquidity exceeded target levels. We believe that we currently have appropriate liquidity available to respond to liquidity demands. Sources of funds that we utilize consist of ~~deposits,~~deposits; borrowings from the FHLBB and other ~~sources,~~sources; cash flows from ~~operations,~~operations; prepayments and maturities of outstanding ~~loans,~~loans; investments and mortgage-backed securities, of which the fair value at March 31, 2016 of investment securities designated as AFS, were in an unrealized gain position and were not pledged as collateral totaled $231.5 million; and the sale of mortgage loans.

Deposits continue to represent our primary source of funds. For the ~~nine~~three months ended ~~September 30, 2015,~~March 31, 2016, average deposits (excluding brokered deposits) of ~~$1.7~~$2.5 billion increased ~~$32.0~~$790.2 million, or 2%46%, compared to the ~~same period~~first quarter of ~~2014.~~2015. Average core deposits of ~~$1.4~~$1.9 billion for the ~~nine~~three months ended ~~September 30, 2015~~March 31, 2016 increased ~~$50.3~~$595.5 million, or 43%, compared to the ~~same period~~first quarter of 2015 was due to organic growth, as well as the acquired deposits (excluding brokered deposits) and core deposits in ~~2014, while CDs decreased $18.3~~connection with the SBM acquisition of $687.0 million ~~to $313.7 million.~~and $497.4 million, respectively, on October 16, 2015. Included within our money market deposit category are deposits from our wealth management subsidiary, Acadia Trust, which represent client funds. The deposits in the Acadia Trust client accounts, totaled ~~$63.3~~$70.0 million at ~~September 30, 2015~~March 31, 2016. These deposits fluctuate with changes in the portfolios of the clients of Acadia Trust.

Borrowings are used to supplement deposits as a source of liquidity. In addition to borrowings and advances from the FHLBB, we utilize brokered deposits, purchase federal funds, and sell securities under agreements to repurchase. For the ~~nine~~three months ended ~~September 30, 2015~~March 31, 2016 average total borrowings (including brokered deposits) increased ~~$91.1~~$31.4 million to ~~$796.3~~$823.2 million compared to the ~~same period for 2014. The increase in average borrowings was driven by an increase brokered deposits~~first quarter of ~~$92.1 million. The increase in average borrowings was to fund our strong loan growth during 2015 and has proven to be a cost effective short-term funding source.~~2015. We secure borrowings from the FHLBB, whose advances remain the largest non-deposit-related funding source, with qualified residential real estate loans, certain investment securities and certain other assets available to be pledged. Through the Bank, we have available lines of credit with the FHLBB of $9.9 million, with PNC Bank of $50.0 million, and with the FRB Discount Window of ~~$63.4~~$65.6 million as of ~~September 30, 2015.~~March 31, 2016. We had no outstanding balances on these lines of credit at ~~September 30, 2015.~~March 31, 2016. Long-term borrowings represent securities sold under repurchase agreements with major brokerage firms. Both wholesale and customer repurchase agreements are secured by mortgage-backed securities and government-sponsored enterprises. The Company also has a $10.0 million line of credit with a maturity date of December 20, ~~2015.~~2016. We had no outstanding balance on these lines of credit at ~~September 30, 2015.~~March 31, 2016.

We believe the investment portfolio and residential loan portfolio provide a significant amount of contingent liquidity that could be accessed in a reasonable time period through sales of those portfolios. We also believe that we have additional untapped access to the brokered deposit market, wholesale reverse repurchase transaction market and the FRB discount window. These sources are considered as liquidity alternatives in our contingent liquidity plan. We believe that the level of liquidity is sufficient to meet current and future funding requirements; however, changes in economic conditions, including consumer saving habits and the availability or access to the national brokered deposit and wholesale repurchase markets, could significantly impact our liquidity position.

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 ~~$259.4~~$375.5 million, ~~$245.1~~$363.2 million and ~~$239.9~~$251.8 million at ~~September 30, 2015,~~March 31, 2016, December 31, ~~2014~~2015 and ~~September 30, 2014,~~March 31, 2015, respectively, which amounted to 10%, 10% and 9%, respectively, of total assets as of the respective dates. Refer to "— Financial Condition — Liabilities and Shareholders' Equity" for discussion regarding changes in shareholders' equity since December 31, ~~2014.~~2015.

Our principal cash requirement is the payment of dividends on our common stock, as and when declared by the Board of Directors. We ~~paid~~declared dividends to shareholders in the aggregate amount of ~~$7.6~~$3.1 million and ~~$6.0~~$2.2 million for the ~~nine~~three months ended ~~September 30,~~March 31, 2016 and 2015, ~~and 2014,~~ respectively. The increase in dividends declared in the first quarter of 2016 of $894,000 compared to the first quarter of 2015 was due to the increase in common shares outstanding in connection with the SBM acquisition for which 2.7 million shares were issued. Our Board of Directors approves cash dividends on a quarterly basis after careful analysis and consideration of various factors, including the following: (i) capital position relative to total assets, (ii) risk-based assets, (iii) total classified assets, (iv) economic conditions, (v) growth rates for total assets and total liabilities, (vi) earnings performance and projections and (vii) strategic initiatives and related capital requirements. All dividends declared and distributed by the Company will be in compliance with applicable state corporate law and regulatory requirements.

We are primarily dependent upon the payment of cash dividends by our subsidiaries to service our commitments. We, as the sole shareholder of our subsidiaries, are entitled to dividends, when and as declared by each subsidiary’s Board of Directors from legally available funds. The Bank declared dividends in the aggregate amount of ~~$39.2~~$4.8 million ~~which includes a $30.0 million special dividend related to the acquisition of SBM,~~ and ~~$9.5~~$3.2 million for the ~~nine~~three months ended ~~September 30,~~March 31, 2016 and 2015, ~~and 2014,~~ respectively. Under regulations prescribed by the OCC, without prior OCC approval, the Bank may not declare dividends in any year in excess of the Bank’s (i) net income for the current year, (ii) 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 6 of the consolidated financial statements for discussion and details of the Company and Bank's capital regulatory requirements. At ~~September 30, 2015~~March 31, 2016 and December 31, ~~2014,~~2015, the Company and Bank met all regulatory capital requirements and the Bank continues to be classified as ~~"Well Capitalized"~~"well capitalized" under the prompt correction action provisions.

CONTRACTUAL OBLIGATIONS AND COMMITMENTS

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 lending commitments and letters of credit. Those instruments involve varying degrees of credit risk in excess of the amount recognized in the consolidated statements of condition. We follow the same credit policies in making commitments to extend credit and conditional obligations as we do for on-balance sheet instruments, including requiring similar collateral or other security to support financial instruments with credit risk. Our exposure to credit loss in the event of nonperformance by the customer is represented by the contractual amount of those instruments. Since many of the commitments are expected to expire without being drawn upon, the total amount does not necessarily represent future cash requirements. At ~~September 30, 2015~~March 31, 2016, we had the following levels of commitments to extend credit:

Total Amount Commitment Expires in:
(Dollars in Thousands) Committed <1 Year 1 – 3 Years 4 – 5 Years >5 Years
Letters of Credit $ 2,436
$ 2,436
$ —
$ —
$ —
Commercial Commitment Letters 45,729
45,729
—
—
—
Residential Loan Origination 17,608
17,608
—
—
—
Home Equity Line of Credit Commitments 336,459
110,366
22,973
23,957
179,163
Other Commitments to Extend Credit 651
651
—
—
—
Total $ 402,883
$ 176,790
$ 22,973
$ 23,957
$ 179,163



	Total Amount		Commitment Expires in:
(Dollars in Thousands)	Committed		<1 Year		1 – 3 Years		4 – 5 Years		>5 Years
Letters of credit	$	4,218	$	4,218	$	—	$	—	$	—
Commercial commitment letters	78,875		78,875		—		—		—
Residential loan origination	31,554		31,554		—		—		—
Home equity line of credit commitments	484,537		196,614		29,573		25,016		233,334
Other commitments to extend credit	534		534		—		—		—
Total	$	599,718	$	311,795	$	29,573	$	25,016	$	233,334

We are a party to several on- and off-balance sheet contractual obligations through various borrowing agreements and lease agreements on a number of branch facilities. We have an obligation and commitment to make future payments under these contracts. At ~~September 30, 2015~~March 31, 2016, we had the following levels of contractual obligations:

Total Amount Payments Due per Period
(Dollars in Thousands) of Obligations <1 Year 1 – 3 Years 4 – 5 Years >5 Years
Operating Leases $ 5,792
$ 1,290
$ 1,824
$ 1,124
$ 1,554
Capital Leases⁽¹⁾
1,351
128
253
253
717
FHLBB Borrowings 315,000
285,000
20,000
10,000
—
Wholesale Repurchase Agreements 30,063
25,000
5,063
—
—
Customer Repurchase Agreements 173,803
173,803
—
—
—
Junior Subordinated Debentures 44,101
—
—
—
44,101
Other Contractual Obligations 1,637
1,637
—
—
—
Total $ 571,747
$ 486,858
$ 27,140
$ 11,377
$ 46,372

~~(1) Includes contingent rentals, which are based on the Consumer Price Index and reset every five years. Total contingent rentals for year one through year five are $4,000.~~



	Total Amount		Payments Due per Period
(Dollars in Thousands)	of Obligations		<1 Year		1 – 3 Years		4 – 5 Years		>5 Years
Operating leases	$	7,653	$	1,573	$	2,450	$	1,525	$	2,105
Capital leases	1,285		126		253		253		653
FHLBB borrowings - overnight	30,600		30,600		—		—		—
FHLBB borrowings - advances	329,500		299,500		20,000		10,000		—
Retail repurchase agreements	209,426		209,426		—		—		—
Commercial repurchase agreements	30,041		30,041		—		—
Subordinated debentures	58,638		—		—		—		58,638
Other contractual obligations	2,190		2,190		—		—		—
Total	$	669,333	$	573,456	$	22,703	$	11,778	$	61,396

Borrowings from the FHLBB consist of short- and long-term fixed- and variable-rate borrowings and are collateralized by all stock in the FHLBB and a blanket lien on qualified collateral consisting primarily of loans with first mortgages secured by one- to four-family properties, certain pledged investment securities and other qualified assets. ~~Other borrowed funds include securities sold under repurchase agreements and our junior subordinated debentures scheduled to mature in 2036.~~ We have an obligation and commitment to repay all borrowings and debentures. These commitments, borrowings, ~~junior~~ subordinated debentures and the related payments are made during the normal course of business.

WeDerivatives

Hedge Instruments: From time to time, we may enter into derivative instruments as partial hedges against large fluctuations in interest rates. We may also enter into fixed-rate interest rate swaps and floor instruments to partially hedge against potentially lower yields on the variable prime rate loan category in a declining rate environment. If interest rates were to decline, resulting in reduced income on the adjustable rate loans, there would be an increased income flow from the interest rate swap and floor instrument. We may also enter into variable rate interest rate swaps and cap instruments to partially hedge against increases in short-term borrowing rates. If interest rates were to rise, resulting in an increased interest cost, there would be an increased income flow from the interest rate swaps and cap instruments. These financial instruments are factored into our overall interest rate risk position. We regularly review the credit quality of the counterparty from which the instruments have been purchased.

At ~~September 30,~~March 31, 2016 and December 31, 2015,, we had $43.0 million of notional in interest rate swaps on our junior subordinated debentures. The arrangement allowed us to fix our floating rate debentures and mitigate our interest exposure in a rising rate environment. ~~In February~~At March 31, 2016 and December 31, 2015, the interest rate swaps were in a loss position of $11.9 million and $9.2 million, respectively, and were recorded as a liability within our consolidated statements of condition.

At March 31, 2016 and December 31, 2015, we ~~entered into~~had $50.0 million of notional on two ~~forward interest rate swap agreements with a counterparty for a total notional~~tranches of ~~$50.0 million. These arrangements are scheduled to commence~~forecasted 30-day FHLBB advances. Each derivative arrangement commenced on February 25, 2016, with one contract set to expire on February 25, 2018 and ~~will provide us fixed~~the other on February 25, 2019. We entered into these forecasted interest rate swaps to mitigate our interest rate exposure on borrowings ~~for~~in a 2rising interest rate environment. At March 31, 2016 and ~~3 year period at~~December 31, 2015, the forecasted interest ~~rates~~rate swaps were in a loss position of ~~1.54%~~$1.1 million and ~~1.74%, respectively.~~ $576,000 and were recorded as a liability within our consolidated statements of condition.

Refer to Note 11 toof the consolidated financial statements for ~~additional details of~~further details.

Customer Loan Swaps: In our normal course lending with commercial real estate customers, we will enter into interest rate swaps with qualifying commercial customers, from time to time, to provide them with a means to lock into a long-term fixed rate, while simultaneously entering into an arrangement with a counterparty to swap the long-term fixed rate loan to variable rate to allow us to effectively manage our interest rate exposure. Unlike the aforementioned cash flow hedges above, these arrangements ~~including~~are not designated as hedges and provide little risk to us as the ~~fair value as~~interest rate swap agreements have substantially equivalent and offsetting terms. We mitigate our commercial customer counterparty credit risk exposure through our loan policy and underwriting process, which includes credit approval limits, monitoring procedures, and obtaining collateral, where appropriate. We mitigate our institutional counterparty credit risk exposure by limiting the institutions for which we will enter into interest swap arrangements through an approved listing by the Company's board of ~~September 30, 2015 and the accounting treatment.~~directors.

At ~~September 30,~~March 31, 2016 and December 31, 2015,, we had a notional amount of ~~$85.7~~$159.8 million and $142.9 million, respectively, in interest rate swap agreements with commercial customers and an equal notional amount with a dealer bank related to our commercial loan ~~level derivative~~swap program. ~~This program allows us to retain variable-rate commercial loans while allowing~~At March 31, 2016 and December 31, 2015, the ~~customer to synthetically fix the loan rate by entering into a variable- for fixed- interest rate swap. It is anticipated that, over time, customer interest rate derivatives will reduce~~fair value of these arrangements were $9.4 million and $3.2 million, respectively, and were recorded gross on our consolidated statements of condition as assets and liabilities. As the interest rate swap agreements have substantially equivalent and offsetting terms, they do not materially change our interest rate risk ~~inherent in the longer-term, fixed-rate commercial business.~~ or present any material exposure to our consolidated statements of income.

Refer to Note 11 toof the consolidated financial statements for ~~additional details~~further details.

Interest Rate Locks: As part of ~~these arrangements, including~~our normal mortgage origination process, we provide potential borrowers with the option to lock their interest rate based on current market prices. During the period from commitment date to the loan closing date, we are subject to interest rate risk as market rates fluctuate. In an effort to mitigate such risk, we may enter into forward delivery sales commitments, typically on a "best-efforts" basis, with certain approved investors.

At March 31, 2016 and December 31, 2015, we had a notional amount of $34.2 million and $20.7 million, respectively, of interest rate lock commitments on mortgages within our loan pipeline. At March 31, 2016 and December 31, 2015, the fair value of our interest rate locks was $431,000 and $139,000, respectively, and was recorded as assets on our consolidated statements of ~~September 30,~~condition. For the three months ended March 31, 2016 and 2015, we recorded unrealized gains on these interest rate lock commitments of $292,000 and $2,000, respectively, within mortgage banking income (net) on the ~~accounting treatment.~~consolidated statements of income.

Refer to Note 11 of the consolidated financial statements for further details.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK

MARKET RISK

Market risk is the risk of loss to earnings, capital and the economic values of certain assets and liabilities arising from adverse changes to interest rates, foreign currency exchange rates, and equity prices. Our only significant market risk exposure is changes in interest ~~rate risk.~~rates. The ongoing monitoring and management of this risk is an important component of our asset/liability management process, which is governed by policies established by the Bank’s board of directors, and 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 interest rate risk sensitivity, policy limits and overall market interest rate levels/trends. Management ALCO and Board ALCO jointly meet on a quarterly basis to review strategies, policies, economic conditions and various activities as part of the management of these risks. Management ALCO manages interest rate risk by using two risk measurement techniques: (i) simulation of net interest income and (ii) simulation of economic value of equity. These measures are complementary and provide for both short and long-term risk profiles of the Company.

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. Board ALCO and Management ALCO routinely monitor simulated net interest income sensitivity over a rolling five-year horizon.

The simulation model captures the impact of changing interest rates, interest rate indices and spreads, rate caps and floors 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, if any. The simulation of net interest income also requires a number of key assumptions such as: (i) no balance sheet growth, (ii) the future balance sheet mix, including prepayment assumptions for loans and securities projected under each rate scenario, (iii) new business loan rates that are based on recent origination experience, (iv) deposit pricing beta assumptions, and (v) non-maturity decay ~~rates~~rate estimates. These assumptions can be inherently uncertain, and, as a result, actual results may differ from the simulation forecasts due to the timing, magnitude and frequency of rate changes, future business conditions and unanticipated changes in management strategies. This sensitivity analysis is compared to ALCO policy limits, which specify a maximum tolerance level for net interest income exposure over a one- and two-year horizon given a 200 basis point upward and downward shift in interest rates. Although our policy specifies a downward shift of 200 basis points, this would results in negative rates as many deposit and funding rates are now below 2.00%. Our current downward shift is 100 basis points. A parallel and pro rata shift in rates over a 12-month period is assumed. Using this approach, we are able to produce simulation results that illustrate the effect that both a gradual change of rates have on earnings expectations. In the down 100 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 0.25%.

~~For the nine months ended September 30,~~As of March 31, 2016 and 2015, ~~and 2014,~~ our net interest income sensitivity analysis reflected the following changes to net interest income. All rate changes were “ramped” over the first 12-month period and then maintained at those levels over the remainder of the ALCO simulation horizon.


	Estimated Changes In Net Interest Income				Estimated Changes In Net Interest Income
Rate Change from Year 1 - Base	September 30, 2015		September 30, 2014
Rate Change from Year 1 — Base					March 31, 2016		March 31, 2015
Year 1
+200 basis points	(5.39	)%	(6.07	)%	(2.58	)%	(5.73	)%
-100 basis points	(0.80	)%	(0.36	)%	(1.48	)%	(0.88	)%
Year 2
+200 basis points	(5.23	)%	(5.20	)%	0.54	%	(6.12	)%
-100 basis points	(4.53	)%	(3.41	)%	(7.86	)%	(6.21	)%

The most significant factors affecting the changes in market risk exposure ~~for the nine months ended September 30,~~at March 31, 2016 compared to March 31, 2015 were ~~loan growth, an increasing~~the acquisition of SBM, which increased the mix of variable rate loans and ~~short-term funding.~~increased core deposits, and an increase in back-to-back loan swaps. If rates remain at or near current levels, net interest income is projected to be virtually flat as loan rates have repriced to current rates and the cost of funds remains unchanged. Beyond the first year, net interest income ~~also remains flat.~~increases slightly. If rates decrease 100 basis points, net interest income is projected to decrease slightly as changes in loan and funding costs almost offset in the first year. In the second year, net interest income is projected to continue to decrease as loans and investment cash flow reprice into lower yields ~~primarily due to~~as prepayments increase while ~~there is limited ability to reduce~~ the cost of ~~funds.~~funds remains flat. If rates increase 200 basis points, net interest income is projected to decrease in the first year due to the repricing of short-term funding. Then in the second year, net interest income is projected to increase as loans and investments continue to reprice/reset into higher yields while the cost of funds ~~stabilize and~~lag. At this point, the ~~reinvestment of loan and investment cash flows reprice to higher yields but is insufficient to exceed our base net interest income.~~Company's balance sheet becomes asset sensitive. In ~~year's~~years three to five, the loan and investment cash flows continue to reprice as the cost of funds lags increasing net interest income above our ~~base as the balance sheet shifts to being asset sensitive.~~base.

The economic value of equity at risk simulation is conducted in tandem with the net interest income simulations, to determine a longer term view of the Company’s interest rate risk position by capturing longer-term re-pricing risk and option-risk embedded in the balance sheet. It measures the sensitivity of economic value of equity to changes in interest rates. The economic value of equity at risk simulation values only the current balance sheet. As with net interest income modeling, this simulation captures product characteristics such as loan resets, re-pricing terms, maturity dates, rate caps and floors. Key assumptions include loan prepayment speeds, deposit pricing betas and non-maturity deposit decay rates. These assumptions can have significant impacts on valuation results as the assumptions remain in effect for the entire life of each asset and liability. All key assumptions are subject to a periodic review.

Our base case economic value of equity at risk is calculated by estimating the net present value of all future cash flows from existing assets and liabilities using current interest rates. The base case scenario assumes that future interest rates remain unchanged.


	Economic Value of Equity				Economic Value of Equity
	September 30, 2015		September 30, 2014		March 31, 2016		March 31, 2015
+200 basis points	8.60	%	8.49	%	9.23	%	8.47	%
+100 basis points	9.18	%	9.20	%	9.50	%	9.01	%
Base	9.66	%	9.85	%	9.56	%	9.44	%
-100 basis points	8.79	%	9.35	%	8.42	%	9.49	%

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 Company’s Board of Directors has approved hedging policy statements governing the use of these instruments. At ~~September 30, 2015,~~March 31, 2016, we had $43.0 million notional principal amount of interest rate swap agreements related to our junior subordinated debentures, $50.0 million notional principal amount of forward-starting interest rate swap agreements related to our short-term funding and ~~$171.3~~$159.8 million notional principal amount of interest rate swap agreements related to the Company’s commercial loan level derivative program. The Board ALCO and Management ALCO monitor derivative activities relative to their expectations and our hedging policies.

ITEM 4. CONTROLS AND PROCEDURES

As required by Rule 13a-15 under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), the Company’s management conducted an evaluation with the participation of the Company’s Chief Executive Officer and Chief Financial Officer (Principal Financial & Accounting Officer), regarding the effectiveness of the Company’s disclosure controls and procedures, as of the end of the last fiscal quarter covered by this report. 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 & 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 Securities and Exchange Commission’s rules and forms.

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

PART II. OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

ITEM 1A. RISK FACTORS

There have been no material changes to the Company's Risk Factors described in Item 1A. of the Company’s Annual Report on Form 10-K for the year ended December 31, 2014, as updated by the Company's Quarterly Report on Form 10-Q for the quarter ended March 31, 2015, with the exception of the removal of the identified risk "If the proposed merger of SBM Financial, Inc. with and into Camden National Corporation is not completed, both Camden and SBM Financial, Inc. will have incurred substantial expenses without their shareholders realizing the expected benefits" as the merger closed on October 16, 2015.

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

(a) None.

(b) None.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

None.

ITEM 4. MINE SAFETY DISCLOSURES

Not applicable.

ITEM 5. OTHER INFORMATION

None.

ITEM 6. EXHIBITS



Exhibit No.		Definition
3.1		Articles of Incorporation of Camden National Corporation, as amended (incorporated herein by reference to Exhibit 3.i.1 to the Company's Form 10-K filed with the Commission on March 2, 2011).

3.2		Amended and Restated Bylaws of Camden National Corporation ~~as amended~~ (incorporated herein by reference to Exhibit 3.2 to the Company's Form 10-K filed with the Commission on March 12, 2014).

~~10.1~~10.1+		Amended and Restated Long-Term Performance Share Plan (incorporated herein by reference to Exhibit ~~10.27~~10.26 to the Company's Form 8-K filed with the Commission on ~~July 6, 2015)~~March 29, 2016).

31.1*		Certification of Chief Executive Officer pursuant to Rule 13a-14(a) of the Securities Exchange Act of 1934.

31.2*		Certification of Chief Financial Officer, Principal Financial & Accounting Officer pursuant to Rule 13a-14(a) of the Securities Exchange Act of 1934.

32.1**		Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

32.2**		Certification of Chief Financial Officer, Principal Financial & Accounting Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

101		XBRL (Extensible Business Reporting Language)

		The following materials from Camden National Corporation’s Quarterly Report on Form 10-Q for the period ended ~~September 30, 2015,~~March 31, 2016, formatted in XBRL: (i) Consolidated Statements of Condition - ~~September 30, 2015~~March 31, 2016 and December 31, ~~2014;~~2015; (ii) Consolidated Statements of Income - Three ~~and Nine~~ Months Ended ~~September 30, 2015~~March 31, 2016 and ~~2014;~~2015; (iii) Consolidated Statements of Comprehensive Income - Three ~~and Nine~~ Months Ended ~~September 30, 2015~~March 31, 2016 and ~~2014;~~2015; (iv) Consolidated Statements of Changes in Shareholders’ Equity - ~~Nine~~Three Months Ended ~~September 30, 2015~~March 31, 2016 and ~~2014;~~2015; (v) Consolidated Statements of Cash Flows - ~~Nine~~Three Months Ended ~~September 30, 2015~~March 31, 2016 and ~~2014;~~2015; and (vi) Notes to Consolidated Financial Statements.

*		Filed herewith

**		Furnished herewith

+		Management contract or a compensatory plan or arrangement.

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.



CAMDEN NATIONAL CORPORATION
(Registrant)

/s/ Gregory A. Dufour		~~November 9, 2015~~May 6, 2016
Gregory A. Dufour		Date
President and Chief Executive Officer (Principal Executive Office)

/s/ Deborah A. Jordan		~~November 9, 2015~~May 6, 2016
Deborah A. Jordan		Date
Chief Operating Officer, Chief Financial Officer and
Principal Financial & Accounting Officer

6164



	Number of Contracts		Pre-Modification Outstanding Recorded Investment				Post-Modification Outstanding Recorded Investment				Specific Reserve
	September 30,		September 30,				September 30,				September 30,
	2015	2014	2015		2014		2015		2014		2015		2014
For the Three Months Ended:
Residential real estate	1	—	$	74	$	—	$	78	$	—	$	—	$	—
Commercial real estate	—	1	—		235		—		235		—		—
Commercial	—	3	—		77		—		77		—		9
Consumer and home equity	—	1	—		40		—		30		—		—
Total	1	5	$	74	$	352	$	78	$	342	$	—	$	9

For the Nine Months Ended:
Residential real estate	1	1	$	74	$	136	$	78	$	149	$	—	$	44
Commercial real estate	—	1	—		235		—		235		—		—
Commercial	—	3	—		77		—		77		—		9
Consumer and home equity	—	1	—		40		—		30		—		—
Total	1	6	$	74	$	488	$	78	$	491	$	—	$	53



							Three Months Ended					Nine Months Ended
	Recorded Investment		Unpaid Principal Balance		Related Allowance		Average Recorded Investment		Interest Income Recognized⁽¹⁾			Average Recorded Investment		Interest Income Recognized
September 30, 2015:
With an allowance recorded:
Residential real estate	$	5,880	$	5,880	$	956	$	7,618	$	55		$	6,963	$	82
Commercial real estate	1,442		1,475		352		2,161		—			1,930		—
Commercial	1,016		1,016		192		1,320		5			1,188		6
Home equity	834		834		276		1,410		—			1,099		—
Consumer	189		189		89		248		—			229		—
Ending Balance	9,361		9,394		1,865		12,757		60			11,409		88
Without an allowance recorded:
Residential real estate	1,619		2,118		—		1,774		4			1,607		6
Commercial real estate	3,269		3,430		—		3,102		18			2,735		45
Commercial	704		876		—		503		4			567		8
Home equity	203		454		—		303		—			390		—
Consumer	17		37		—		17		—			17		—
Ending Balance	5,812		6,915		—		5,699		26			5,316		59
Total impaired loans	$	15,173	$	16,309	$	1,865	$	18,456	$	86		$	16,725	$	147
September 30, 2014:
With an allowance recorded:
Residential real estate	$	9,441	$	9,441	$	1,420	$	9,236	$	38		$	9,928	$	102
Commercial real estate	2,987		2,987		222		3,142		1			5,588		2
Commercial	1,562		1,562		121		2,724		(2		)	2,653		8
Home equity	1,510		1,510		573		1,486		—			1,571		—
Consumer	292		292		111		333		—			392		—
Ending Balance	15,792		15,792		2,447		16,921		37			20,132		112
Without an allowance recorded:
Residential real estate	1,523		1,880		—		1,751		2			2,340		5
Commercial real estate	3,723		4,116		—		3,490		14			2,230		43
Commercial	1,818		2,318		—		870		6			609		8
Home equity	350		477		—		403		—			415		—
Consumer	17		37		—		17		—			17		—
Ending Balance	7,431		8,828		—		6,531		22			5,611		56
Total impaired loans	$	23,223	$	24,620	$	2,447	$	23,452	$	59		$	25,743	$	168



	Current Regulatory Guidance						Prior Regulatory Guidance
	September 30, 2015		Minimum Regulatory Capital Required		Minimum Regulatory Provision To Be "Well Capitalized" Under Prompt Corrective Action Provisions		December 31, 2014		Minimum Regulatory Capital Required		Minimum Regulatory Provision To Be "Well Capitalized" Under Prompt Corrective Action Provisions
Camden National Corporation:
Total risk-based capital ratio	14.76	%	8.00	%	N/A		15.16	%	8.00	%	N/A
Tier I risk-based capital ratio	13.67	%	6.00	%	N/A		13.97	%	4.00	%	N/A
Common equity Tier I risk-based capital ratio⁽¹⁾	11.44	%	4.50	%	N/A		N/A		N/A		N/A
Tier I leverage capital ratio	9.41	%	4.00	%	N/A		9.26	%	4.00	%	N/A
Camden National Bank:
Total risk-based capital ratio	13.47	%	8.00	%	10.00	%	13.85	%	8.00	%	10.00	%
Tier I risk-based capital ratio	12.37	%	6.00	%	8.00	%	12.65	%	4.00	%	6.00	%
Common equity Tier I risk-based capital ratio⁽¹⁾	12.37	%	4.50	%	6.50	%	N/A		N/A		N/A
Tier I leverage capital ratio	8.52	%	4.00	%	5.00	%	8.38	%	4.00	%	5.00	%



	For The Three Months Ended September 30,				Change		As Of or For The Nine Months Ended September 30,						Change
	2015		2014		Change		2015			2014			Change
Core return on average assets	0.97	%	0.94	%	0.03	%	0.97		%	0.91		%	0.06		%
Core return on average equity	10.76	%	10.70	%	0.06	%	10.86		%	10.37		%	0.49		%
Efficiency ratio	58.94	%	59.18	%	(0.24	)%	59.80		%	61.01		%	(1.21		)%
Tangible common equity ratio							7.51		%	7.11		%	0.40		%
Tangible book value per share							$	28.45		$	25.80		$	2.65