SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

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

SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, ~~2020~~2021

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

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

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

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



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

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

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

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

Large accelerated filer

☐

Accelerated filer

☒

Non-accelerated filer

☐

Smaller reporting company

☐

~~Large accelerated filer~~ ¨

~~Accelerated filer~~ x

~~Non-accelerated filer~~ ¨

~~Smaller reporting company~~ ¨

Emerging growth company¨

☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised accounting standards provided pursuant to Section 13(a) of the Exchange Act. ¨

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

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

Outstanding at April 30, ~~2020:~~2021: Common stock (no par value) ~~14,954,765~~14,941,949 shares.

CAMDEN NATIONAL CORPORATION

FORM 10-Q FOR THE QUARTER ENDED MARCH 31, ~~2020~~2021

TABLE OF CONTENTS OF INFORMATION REQUIRED IN REPORT


				PAGE
PART I. FINANCIAL INFORMATION

ITEM 1.			FINANCIAL STATEMENTS

				~~PAGE~~
~~PART I. FINANCIAL INFORMATION~~

~~ITEM 1.~~	~~FINANCIAL STATEMENTS~~

	Consolidated Statements of Condition (unaudited) - March 31, ~~2020~~2021 and December 31, ~~2019~~2020	3

			Consolidated Statements of Income (unaudited) - Three Months Ended March 31, ~~2020~~2021 and ~~2019~~2020	4

			Consolidated Statements of Comprehensive Income (unaudited) - Three Months Ended March 31, ~~2020~~2021 and ~~2019~~2020	5

			Consolidated Statements of Changes in Shareholders’ Equity (unaudited) - Three Months Ended March 31, ~~2020~~2021 and ~~2019~~2020	6

			Consolidated Statements of Cash Flows (unaudited) - Three Months Ended March 31, ~~2020~~2021 and ~~2019~~2020	7

			Notes to the Unaudited Consolidated Financial Statements	8

ITEM 2.			MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS	4143

ITEM 3.			QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK	6768

ITEM 4.			CONTROLS AND PROCEDURES	6869

PART II. OTHER INFORMATION

ITEM 1.			LEGAL PROCEEDINGS	6970

ITEM 1A.			RISK FACTORS	6970

ITEM 2.			UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS	70

ITEM 3.			DEFAULTS UPON SENIOR SECURITIES	70

ITEM 4.			MINE SAFETY DISCLOSURES	70

ITEM 5.			OTHER INFORMATION	70

ITEM 6.			EXHIBITS	70

SIGNATURES				71

PART I. FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

CONSOLIDATED STATEMENTS OF CONDITION
(unaudited)
(In thousands, except number of shares)
March 31,
2020

December 31,
2019
ASSETS

Cash and due from banks $ 32,477
$ 39,586
Interest-bearing deposits in other banks (including restricted cash) 21,732
36,050
Total cash, cash equivalents and restricted cash 54,209
75,636
Investments:

Available-for-sale securities, at fair value (book value of $931,876 and $913,978, respectively) 960,131
918,118
Held-to-maturity securities, at amortized cost (fair value of $1,358 and $1,359, respectively) 1,300
1,302
Other investments 15,056
13,649
Total investments 976,487
933,069
Loans held for sale, at fair value (book value of $28,356 and $11,915, respectively) 27,730
11,854
Loans 3,157,762
3,095,023
Less: allowance for loan losses (26,521 ) (25,171 )
Net loans 3,131,241
3,069,852
Goodwill 94,697
94,697
Core deposit intangible assets 3,355
3,525
Bank-owned life insurance 93,033
92,344
Premises and equipment, net 41,131
41,836
Deferred tax assets 10,708
16,823
Other assets 161,948
89,885
Total assets $ 4,594,539
$ 4,429,521
LIABILITIES AND SHAREHOLDERS’ EQUITY

Liabilities

Deposits:

Non-interest checking $ 536,243
$ 552,590
Interest checking 1,147,653
1,153,203
Savings and money market 1,146,038
1,119,193
Certificates of deposit 545,013
521,752
Brokered deposits 188,758
191,005
Total deposits 3,563,705
3,537,743
Short-term borrowings 326,722
268,809
Long-term borrowings 35,000
10,000
Subordinated debentures 59,155
59,080
Accrued interest and other liabilities 117,277
80,474
Total liabilities 4,101,859
3,956,106
Commitments and Contingencies

Shareholders’ Equity

Common stock, no par value: authorized 40,000,000 shares, issued and outstanding 14,951,597 and 15,144,719 on March 31, 2020 and December 31, 2019, respectively 131,498
139,103
Retained earnings 349,141
340,580
Accumulated other comprehensive income (loss):

Net unrealized gain on available-for-sale debt securities, net of tax 22,180
3,250
Net unrealized loss on cash flow hedging derivative instruments, net of tax (6,802 ) (6,048 )
Net unrecognized loss on postretirement plans, net of tax (3,337 ) (3,470 )
Total accumulated other comprehensive income (loss) 12,041
(6,268 )
Total shareholders’ equity 492,680
473,415
Total liabilities and shareholders’ equity $ 4,594,539
$ 4,429,521
CONSOLIDATED STATEMENTS OF CONDITION

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

CONSOLIDATED STATEMENTS OF INCOME
(unaudited)
Three Months Ended
March 31,
(In thousands, except number of shares and per share data) 2020 2019
Interest Income

Interest and fees on loans $ 34,045
$ 35,721
Taxable interest on investments 4,878
4,994
Nontaxable interest on investments 787
644
Dividend income 168
230
Other interest income 335
420
Total interest income 40,213
42,009
Interest Expense

Interest on deposits 6,662
8,423
Interest on borrowings 838
974
Interest on subordinated debentures 887
717
Total interest expense 8,387
10,114
Net interest income 31,826
31,895
Provision for credit losses 1,775
744
Net interest income after provision for credit losses 30,051
31,151
Non-Interest Income

Mortgage banking income, net 3,534
1,252
Debit card income 2,141
2,010
Service charges on deposit accounts 2,012
2,023
Income from fiduciary services 1,502
1,392
Bank-owned life insurance 689
594
Brokerage and insurance commissions 657
585
Customer loan swap fees 114
525
Other income 754
1,008
Total non-interest income 11,403
9,389
Non-Interest Expense

Salaries and employee benefits 14,327
12,978
Furniture, equipment and data processing 2,790
2,680
Net occupancy costs 2,003
1,914
Debit card expense 934
823
Consulting and professional fees 783
813
Amortization of core deposit intangible assets 170
176
Regulatory assessments 162
472
Other real estate owned and collection costs (recoveries), net 101
(307 )
Other expenses 3,291
3,234
Total non-interest expense 24,561
22,783
Income before income tax expense 16,893
17,757
Income Tax Expense 3,400
3,484
Net Income $ 13,493
$ 14,273
Per Share Data

Basic earnings per share $ 0.89
$ 0.91
Diluted earnings per share $ 0.89
$ 0.91
Weighted average number of common shares outstanding 15,103,176
15,592,141
Diluted weighted average number of common shares outstanding 15,147,218
15,634,126
Cash dividends declared per share $ 0.33
$ 0.30

CONSOLIDATED STATEMENTS OF INCOME

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

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(unaudited)
Three Months Ended
March 31,
(In thousands) 2020 2019
Net Income $ 13,493
$ 14,273
Other comprehensive income:
Net change in unrealized gain on available-for-sale securities, net of tax 18,930
10,899
Net change in unrealized loss on cash flow hedging derivatives, net of tax (754 )
(831 )
Net gain on postretirement plans, net of tax 133
48
Other comprehensive income 18,309
10,116
Comprehensive Income $ 31,802
$ 24,389

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

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

CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY
(unaudited)
Three Months Ended
Common Stock
Retained
Earnings

Accumulated
Other Comprehensive
Income (Loss)

Total Shareholders’
Equity
(In thousands, except number of shares and per share data)
Shares
Outstanding
Amount
Balance at December 31, 2018 15,591,914
$ 158,215
$ 302,030
$ (24,420 ) $ 435,825
Cumulative-effect adjustment upon adoption of ASU 2016-02⁽¹⁾
—
—
254
—
254
Net income —
—
14,273
—
14,273
Other comprehensive income, net of tax —
—
—
10,116
10,116
Stock-based compensation expense —
458
—
—
458
Exercise of stock options and issuance of vested share awards, net of repurchase for tax withholdings 24,208
(215 ) —
—
(215 )
Common stock repurchased (55,557 ) (2,306 ) —
—
(2,306 )
Cash dividends declared ($0.30 per share) —
—
(4,687 ) —
(4,687 )
Balance at March 31, 2019 15,560,565
$ 156,152
$ 311,870
$ (14,304 ) $ 453,718
Balance at December 31, 2019 15,144,719
$ 139,103
$ 340,580
$ (6,268 ) $ 473,415
Net income —
—
13,493
—
13,493
Other comprehensive income, net of tax —
—
—
18,309
18,309
Stock-based compensation expense —
421
—
—
421
Exercise of stock options and issuance of vested share awards, net of repurchase for tax withholdings 23,909
(53 ) —
—
(53 )
Common stock repurchased (217,031 ) (7,973 ) —
—
(7,973 )
Cash dividends declared ($0.33 per share) —
—
(4,932 ) —
(4,932 )
Balance at March 31, 2020 14,951,597
$ 131,498
$ 349,141
$ 12,041
$ 492,680

CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY


	Three Months Ended
	Common Stock			Retained Earnings		Accumulated Other Comprehensive Income (Loss)		Total Shareholders’ Equity
(In thousands, except number of shares and per share data)	Shares Outstanding	Amount
Balance at December 31, 2019	15,144,719	$	139,103	$	340,580	$	(6,268)	$	473,415
Net income	—	—		13,493		—		13,493
Other comprehensive income, net of tax	—	—		—		18,309		18,309
Stock-based compensation expense	—	421		—		—		421
Exercise of stock options and issuance of vested share awards, net of repurchase for tax withholdings	23,909	(53)		—		—		(53)
Common stock repurchased	(217,031)	(7,973)		—		—		(7,973)
Cash dividends declared ($0.33 per share)	—	—		(4,932)		—		(4,932)
Balance at March 31, 2020	14,951,597	$	131,498	$	349,141	$	12,041	$	492,680
Balance at December 31, 2020	14,909,097	$	131,072	$	377,502	$	20,740	$	529,314
Net income	—	—		19,740		—		19,740
Other comprehensive loss, net of tax	��	—		—		(12,175)		(12,175)
Stock-based compensation expense	—	703		—		—		703
Exercise of stock options and issuance of vested share awards, net of repurchase for tax withholdings	19,337	(80)		—		—		(80)


Cash dividends declared ($0.36 per share)	—	—		(5,382)		—		(5,382)
Balance at March 31, 2021	14,928,434	$	131,695	$	391,860	$	8,565	$	532,120

~~(1)~~

~~Effective January 1, 2019, the Company adopted ASU 2016-02,~~ ~~Leases, on a modified-retrospective basis.~~

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

CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited)
Three Months Ended
March 31,
(In thousands) 2020 2019
Operating Activities

Net Income $ 13,493
$ 14,273
Adjustments to reconcile net income to net cash used in operating activities:

Originations of mortgage loans held for sale (85,676 ) (32,405 )
Proceeds from the sale of mortgage loans 70,711
28,834
Gain on sale of mortgage loans, net of origination costs (1,476 ) (826 )
Provision for credit losses 1,775
744
Depreciation and amortization expense 969
922
Investment securities amortization and accretion, net 742
660
Stock-based compensation expense 421
458
Amortization of intangible assets 170
176
Purchase accounting accretion, net (244 ) (477 )
Increase in other assets (34,101 ) (10,710 )
Increase (decrease) in other liabilities 221
(6,291 )
Net cash used in operating activities (32,995 ) (4,642 )
Investing Activities

Proceeds from sales and maturities of available-for-sale securities 40,188
26,355
Purchase of available-for-sale securities (58,826 ) (26,749 )
Net increase in loans (62,982 ) (16,734 )
Purchase of Federal Home Loan Bank stock (9,161 ) (2,012 )
Proceeds from sale of Federal Home Loan Bank stock 7,754
5,691
Purchase of premises and equipment (1,284 ) (1,583 )
Recoveries of previously charged-off loans 68
75
Net cash used in investing activities (84,243 ) (14,957 )
Financing Activities
Net increase in deposits 25,966
113,740
Net proceeds from (repayments of) borrowings less than 90 days 57,913
(14,687 )
Proceeds from Federal Home Loan Bank long-term advances 25,000
—
Common stock repurchases (7,973 ) (1,957 )
Exercise of stock options and issuance of restricted stock, net of repurchase for tax withholdings (53 ) (215 )
Cash dividends paid on common stock (5,009 ) (4,687 )
Finance lease payments (33 ) (26 )
Net cash provided by financing activities 95,811
92,168
Net (decrease) increase in cash, cash equivalents and restricted cash (21,427 ) 72,569
Cash, cash equivalents, and restricted cash at beginning of period 75,636
66,999
Cash, cash equivalents and restricted cash at end of period $ 54,209
$ 139,568
Supplemental information

Interest paid $ 8,555
$ 9,738
Income taxes paid 126
91
Unsettled common stock repurchase —
349
Transfer from loans to other real estate owned —
543

CONSOLIDATED STATEMENTS OF CASH FLOWS

(unaudited)


	Three Months Ended March 31,
(In thousands)	2021		2020
Operating Activities
Net Income	$	19,740	$	13,493
Adjustments to reconcile net income to net cash provided by (used in) operating activities:
Originations of mortgage loans held for sale	(174,370)		(85,676)
Proceeds from the sale of mortgage loans	198,799		70,711
Gain on sale of mortgage loans, net of origination costs	(6,173)		(1,476)
(Credit) provision for credit losses	(1,956)		1,775
Depreciation and amortization expense	927		969
Investment securities amortization and accretion, net	1,971		742
Stock-based compensation expense	703		421
Amortization of core deposit intangible assets	164		170
Purchase accounting accretion, net	(234)		(244)



Net decrease (increase) in derivative collateral posted	24,380		(29,040)
Decrease (increase) in other assets	591		(1,801)
Decrease in other liabilities	(2,484)		(3,039)
Net cash provided by (used in) by operating activities	62,058		(32,995)
Investing Activities
Proceeds from sales and maturities of available-for-sale securities	94,697		40,188
Purchase of available-for-sale securities	(118,707)		(58,826)


Net increase in loans	(17,277)		(62,982)

Purchase of Federal Home Loan Bank stock	0		(9,161)
Proceeds from sale of Federal Home Loan Bank stock	1,329		7,754
Purchase of premises and equipment	(320)		(1,284)


Recoveries of previously charged-off loans	51		68
Proceeds from the sale of other real estate owned	350		0
Net cash used in investing activities	(39,877)		(84,243)
Financing Activities
Net increase in deposits	206,386		25,966
Net proceeds from borrowings less than 90 days	23,969		57,913
Proceeds from Federal Home Loan Bank long-term advances	0		25,000
Repayments of Federal Home Loan Bank long-term advances	(25,000)		0


Common stock repurchases	(11)		(7,973)
Exercise of stock options and issuance of restricted stock, net of repurchase for tax withholdings	(80)		(53)
Cash dividends paid on common stock	(4,934)		(5,009)
Finance lease payments	(38)		(33)
Net cash provided by financing activities	200,292		95,811
Net increase (decrease) in cash, cash equivalents and restricted cash	222,473		(21,427)
Cash, cash equivalents, and restricted cash at beginning of period	145,774		75,636
Cash, cash equivalents and restricted cash at end of period	$	368,247	$	54,209
Supplemental information
Interest paid	$	3,117	$	8,555
Income taxes paid	176		126

Transfer from premises to other real estate owned	204		0

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

NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1 – BASIS OF PRESENTATION

The accompanying unaudited consolidated interim financial statements were prepared in accordance with instructions for Form 10-Q and, therefore, do not include all disclosures required by accounting principles generally accepted in the United States of America for complete presentation of financial statements. In the opinion of management, the consolidated financial statements contain all adjustments (consisting only of normal recurring accruals) necessary to present fairly the consolidated statements of condition of Camden National Corporation (the "Company") as of March 31, ~~2020~~2021 and December 31, ~~2019~~,2020, the consolidated statements of income for the three months ended March 31, ~~2020~~2021 and ~~2019~~,2020, the consolidated statements of comprehensive income for the three months ended March 31, ~~2020~~2021 and ~~2019~~,2020, the consolidated statements of changes in shareholders' equity for the three months ended March 31, ~~2020~~2021 and ~~2019,~~2020, and the consolidated statements of cash flows for the three months endedMarch 31, ~~2020~~2021 and ~~2019~~.2020. The consolidated financial statements include the accounts of the Company and Camden National Bank (the "Bank"), a wholly-owned subsidiary of the Company (which includes the consolidated accounts of Healthcare Professional Funding Corporation ("HPFC"), and Property A, Inc. as of and for the three months ended March 31, 2021 and HPFC, Property A, Inc. and Property P, Inc.) as of and for the three months ended March 31, 2020). All intercompany accounts and transactions have been eliminated in consolidation. Assets held by the Bank in a fiduciary capacity, through Camden National Wealth Management, a division of the Bank, are not assets of the Company and, therefore, are not included in the consolidated statements of condition. The Company also owns 100% of the common stock of Camden Capital Trust A and Union Bankshares Capital Trust I. These entities are unconsolidated subsidiaries of the Company. Certain reclassifications have been made to prior period amounts to conform to the current period presentation. Such reclassifications did not impact net income or shareholders' equity as previously reported. Net income reported for the three months ended March 31, ~~2020~~,2021, is not necessarily indicative of the results that may be expected for the full year. The information in this report should be read in conjunction with the consolidated financial statements and accompanying notes included in the Company's Annual Report on Form 10-K for the year ended December 31, ~~2019~~.2020.

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

AFS:

Available-for-sale

~~HPFC:~~FRBB:

Federal Reserve Bank of Boston

ALCO:

Asset/Liability Committee

GAAP:

Generally accepted accounting principles in the United States

ACL:

Allowance for credit losses

GDP:

Gross domestic product

AOCI:

Accumulated other comprehensive income (loss)

HPFC:

Healthcare Professional Funding Corporation, a wholly-owned subsidiary of Camden National Bank

~~ALCO:~~ASC:

~~Asset/Liability Committee~~Accounting Standards Codification

HTM:

Held-to-maturity

~~ALL:~~ASU:

~~Allowance for loan losses~~Accounting Standards Update

IRS:

Internal Revenue Service

~~AOCI:~~Bank:

~~Accumulated other comprehensive income (loss)~~

~~LIBOR:~~

~~London Interbank Offered Rate~~

~~ASC:~~

~~Accounting Standards Codification~~

~~LTIP:~~

~~Long-Term Performance Share Plan~~

~~ASU:~~

~~Accounting Standards Update~~

~~Management ALCO:~~

~~Management Asset/Liability Committee~~

~~Bank:~~

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

~~MBS:~~LGD:

~~Mortgage-backed security~~Loss given default

BOLI:

Bank-owned life insurance

~~MSPP:~~LIBOR:

~~Management Stock Purchase Plan~~London Interbank Offered Rate

Board ALCO:

Board of Directors' Asset/Liability Committee

~~N/A:~~LTIP:

~~Not applicable~~Long-Term Performance Share Plan

~~CCTA:~~CARES Act:

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

Management ALCO:

Management Asset/Liability Committee

CCTA:

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

~~N.M.:~~MBS:

~~Not meaningful~~Mortgage-backed security

CDs:

Certificate of deposits

~~OCC:~~MSPP:

Management Stock Purchase Plan

CECL:

Current Expected Credit Losses

N/A:

Not applicable

Company:

Camden National Corporation

N.M.:

Not meaningful

CMO:

Collateralized mortgage obligation

OCC:

Office of the Comptroller of the Currency

~~Company:~~CUSIP:

~~Camden National Corporation~~Committee on Uniform Securities Identification Procedures

OCI:

Other comprehensive income (loss)

~~CMO:~~DCRP:

~~Collateralized mortgage obligation~~Defined Contribution Retirement Plan

OREO:

Other real estate owned

~~DCRP:~~EPS:

~~Defined Contribution Retirement Plan~~

~~OTTI:~~

~~Other-than-temporary impairment~~

~~EPS:~~

Earnings per share

~~SERP:~~OTTI:

Other-than-temporary impairment

FASB:

Financial Accounting Standards Board

PD:

Probability of default

FDIC:

Federal Deposit Insurance Corporation

SBA:

U.S. Small Business Administration

FHLB:

Federal Home Loan Bank

SBA PPP

U.S. Small Business Administration Paycheck Protection Program

FHLBB:

Federal Home Loan Bank of Boston

SERP:

Supplemental executive retirement plans

~~FASB:~~FHLMC:

~~Financial Accounting Standards Board~~

~~Tax Act:~~

~~Tax Cuts and Jobs Act of 2017, enacted on December 22, 2017~~

~~FDIC:~~

~~Federal Deposit Insurance Corporation~~

~~TDR:~~

~~Troubled-debt restructured loan~~

~~FHLB:~~

Federal Home Loan ~~Bank~~Mortgage Corporation

~~UBCT:~~TDR:

Troubled-debt restructured loan

FNMA:

Federal National Mortgage Association

UBCT:

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

~~FHLBB:~~FRB:

~~Federal Home Loan Bank of Boston~~

~~U.S.:~~

~~United States of America~~

~~FRB:~~

Federal Reserve System Board of Governors

~~2003 Plan:~~U.S.:

~~2003 Stock Option and Incentive Plan~~

~~FRBB:~~

~~Federal Reserve Bank of Boston~~

~~2012 Plan:~~

~~2012 Equity and Incentive Plan~~

~~GAAP:~~

~~Generally accepted accounting principles in the~~ United States

of America

NOTE 2 – RECENT ACCOUNTING PRONOUNCEMENTS

Accounting Standards Adopted in ~~2020~~2021

The Company adopted and updated its accounting policy for the following accounting ~~standard(s)~~standards that ~~became effective January 1, 2020 and were~~have been applied to the Company's interim consolidated financial statements for the three months ended March 31, ~~2020 interim consolidated financial statements:~~2021:

~~Goodwill.~~ ~~The Company adopted~~ ASU No. ~~2017-04, Intangibles - Goodwill and Other~~2019-12, Income Taxes (Topic ~~350)~~740): Simplifying the ~~Test~~Accounting for ~~Goodwill Impairment~~ ("Income Taxes ("ASU ~~2017-04"~~2019-12"),.The FASB issued ASU 2019-12 to simplify the accounting for income taxes by removing certain technical exceptions and by clarifying and amending certain areas. ASU 2019-12 is effective for interim and annual periods beginning after December 15, 2020, and as such the Company adopted effective January 1, ~~2020.~~In accordance with ASU 2017-04, the Company will recognize an impairment of goodwill to the extent the carrying value of a reporting unit exceeds its fair value ("Step 1"). ASU 2017-04 eliminated the need to calculate the implied fair value of goodwill for a reporting unit and recognize an impairment to the extent the carrying value exceeded its implied fair value ("Step 2"). The Company adopted ASU 2017-04 prospectively. Upon adoption, ASU 2017-04 did not have a2021. There was no material impact on the Company's consolidated financial ~~statements. Under~~statements as a result of adopting ASU 2019-12.

ASU No. 2020-04, Reference Rate Reform (Topic 848):Facilitation of the ~~new~~Effects of Reference Rate Reform ("ASU 2020-04"), as amended by ASU No. 2021-01, Reference Rate Reform (Topic 848) Scope ("ASU 2021-01"). On March 12, 2020, the FASB issued ASU 2020-04, which was subsequently amended by ASU 2021-01. The FASB issued these updates to ease the burden in accounting ~~guidance~~for the effects of reference rate reform on financial reporting. ASU 2020-04 and ASU 2021-01 contain optional expedients and exceptions for applying GAAP to contracts, hedging relationships, and other transactions affected by reference rate reform. The Company ~~is more likely to record an impairment of goodwill, as~~adopted ASU 2020-04 and ASU 2021-01 effective January 1, 2021, and there ~~are now less requirements.~~

~~As described within~~was no material impact on the Company's ~~Annual Report~~consolidated financial statements as a result of adopting this guidance.

NOTE 3 – INVESTMENTS

Trading Securities

Trading securities are reported on ~~Form 10-K for~~ the ~~year ended December 31, 2019, the Company last evaluated goodwill for impairment as~~Company's consolidated financial statements of November 30, 2019 and determined goodwill was not impaired. In light of the COVID-19 pandemic and its impact on global, national and local markets and economy, the Company assessed if a triggering event that would require an interim goodwill impairment assessment occurred ascondition at fair value. As of March 31, ~~2020. Through its assessment,~~2021 and December 31, 2020, the ~~Company determined that~~fair value of the Company's trading securities were $4.1 million and $4.2 million, respectively. These securities are held in a ~~triggering event had not occurred~~rabbi trust account and invested in mutual funds. The trading securities will be used for future payments associated with the Company's Executive Deferred Compensation Plan and Director Deferred Compensation Plan.

AFS Debt Securities

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


(In thousands)	Amortized Cost		Unrealized Gains		Unrealized Losses		Fair Value
March 31, 2021
Obligations of U.S. government sponsored enterprises	$	5,200	$	0	$	(217)	$	4,983
Obligations of states and political subdivisions	114,280		5,982		(463)		119,799
Mortgage-backed securities issued or guaranteed by U.S. government-sponsored enterprises	564,151		10,581		(5,413)		569,319
Collateralized mortgage obligations issued or guaranteed by U.S. government-sponsored enterprises	406,358		6,452		(2,166)		410,644
Subordinated corporate bonds	10,525		293		(15)		10,803
Total AFS debt securities	$	1,100,514	$	23,308	$	(8,274)	$	1,115,548
December 31, 2020
Obligations of states and political subdivisions	$	119,608	$	7,627	$	(115)	$	127,120
Mortgage-backed securities issued or guaranteed by U.S. government-sponsored enterprises	547,396		19,796		(574)		566,618
Collateralized mortgage obligations issued or guaranteed by U.S. government-sponsored enterprises	399,937		10,652		(135)		410,454
Subordinated corporate bonds	11,533		186		(98)		11,621
Total AFS debt securities	$	1,078,474	$	38,261	$	(922)	$	1,115,813

As of March 31, ~~2020. The Company will continue to monitor the impact~~2021 and ~~effects of the pandemic~~December 31, 2020, there was 0 allowance carried on ~~its business and assess goodwill for impairment should a triggering event occur.~~

~~Accounting Standards Issued~~

~~The following are recently issued accounting pronouncements that have yet to be adopted by the Company:~~

AFS debt securities in accordance with ASU No. 2016-13,~~, Financial Instruments - Credit Losses(Topic 326):~~ M~~easurement of Credit Losses on Financial Instruments~~ ~~("ASU 2016-13")~~, ~~updated by ASU No. 2018-19~~ - Financial Instruments - Credit Losses (Topic 326): ~~Codification improvements to Topic 326~~ Measurement of Credit Losses on Financial Instruments ("ASU ~~2018-19"), and ASU No. 2019-05,~~ ~~Financial Instruments - Credit Losses (Topic 326): Targeted Transition Relief~~ ~~("ASU 2019-05"~~2016-13").The FASB issued ASU 2016-13, commonly referred to as “CECL,” to require more timely recording of credit losses on loans and other financial instruments held by financial institutions and other organizations.

On March 27, 2020, the Coronavirus, Relief, and Economic Security Act ("CARES Act") was signed into law in response to the COVID-19 pandemic. Under Section 4014 of the CARES Act, the Company is permitted to delay its compliance with CECL until the earlier of (1) the date on which the national emergency concerning the COVID-19 pandemic that the President of the United States declared on March 15, 2020 terminates, or (2) December 31, 2020. The Company intends to delay the implementation of CECL until December 31, 2020, unless earlier implementation is required. The Company opted to delay its compliance with CECL so it could devote its resources to serve its customers impacted by the pandemic and support the roll-out of the various federal relief programs introduced by the CARES Act, such as the Paycheck Protection Program. When adopted, the Company will adopt CECL using a modified-retrospective approach as of January 1, 2020, which is the original effective date of the standard for the Company, and will record a cumulative-effect adjustment to retained earnings.

The measurement of expected credit losses under CECL is applicable to financial assets measured at amortized cost, including loan receivables and HTM debt securities. CECL also applies to certain off-balance sheet credit exposures, such as loan commitments, standby letters of credit, financial guarantees and other similar investments. In addition, ASU 2016-13 made changes to the accounting for AFS debt securities, and a company will no longer immediately write-down a security for any impairment deemed to be a credit loss. Instead, a company will be required to present credit lossesnet unrealized gains on AFS debt securities ~~as an allowance on investments if it does not intend to sell the impaired security or it is not more-likely-than-not required to sell the impaired security before recovery of its amortized cost basis.~~

The Company assembled a cross-functional project team that met regularly to address the additional data requirements, to determine the approach for implementation, and to identify new internal controls over enhanced accounting processes for estimating the allowance for credit losses (“ACL”). This included assessing the adequacy of existing loan and loss data, as well as assessing models for default and loss estimates. The Company is currently working to finalize its third party independent review of the Company's model, mechanics and certain key assumptions, internal CECL policy, and internal control framework.

The Company has completed the development of its process for estimation of the allowance for loan losses and off-balance sheet exposures. To estimate the allowance for loan losses, the Company will primarily utilize a discounted cash flow model that contains additional assumptions to calculate credit losses over the estimated life of financial assets and will include the impact of forecasted economic conditions. To estimate the off-balance sheet credit exposures, which are primarily unfunded loan commitments, the Company will apply certain assumptions, including, but not limited to, a funding assumption and expected loss rate.

The Company has performed parallel calculations as of December 31, 2019 and March 31, 2020 comparing the ALL calculated under current accounting guidance, commonly referred to as the “incurred model,” to the ACL calculated under CECL. Had CECL been adopted as of January 1, 2020, the Company estimates that its ACL would have increased $2.0 to $4.0 million over the ALL reported as of December 31, 2019, and increased $2.5 to $8.7 million over the ALL reported as of March 31, 2020.

In March 2020, the regulatory banking agencies issued an interim final rule that allows banking institutions that implement CECL during 2020 to delay for two years the estimated impact of CECL on regulatory capital, followed by a three-year transition period. As an alternative, banking institutions may elect to forego the provided relief under the interim final rule, and may use the regulatory capital transition rule issued by the regulatory banking agencies in February 2019 that provided a three-year phase in option, effective upon adoption of CECL. The Company is currently assessing its options at this time, and will make its election during the 2020 calendar quarter in which it adopts CECL.

~~NOTE 3 – INVESTMENTS~~

~~AFS and HTM Investments~~

~~The following table summarizes the amortized cost and estimated fair values of AFS and HTM investments, as of the dates indicated:~~

(In thousands)
Amortized
Cost

Unrealized
Gains

Unrealized
Losses

Fair
Value
March 31, 2020

AFS Investments (carried at fair value):
Obligations of states and political subdivisions $ 123,893
$ 3,324
$ (337 ) $ 126,880
Mortgage-backed securities issued or guaranteed by U.S. government-sponsored enterprises 472,508
15,618
(77 ) 488,049
Collateralized mortgage obligations issued or guaranteed by U.S. government-sponsored enterprises 324,929
9,698
(12 ) 334,615
Subordinated corporate bonds 10,546
116
(75 ) 10,587
Total AFS investments $ 931,876
$ 28,756
$ (501 ) $ 960,131
HTM Investments (carried at amortized cost):
Obligations of states and political subdivisions $ 1,300
$ 58
$ —
$ 1,358
Total HTM investments $ 1,300
$ 58
$ —
$ 1,358
December 31, 2019

AFS Investments (carried at fair value):
Obligations of states and political subdivisions $ 115,632
$ 2,779
$ (328 ) $ 118,083
Mortgage-backed securities issued or guaranteed by U.S. government-sponsored enterprises 462,593
3,398
(2,605 ) 463,386
Collateralized mortgage obligations issued or guaranteed by U.S. government-sponsored enterprises 325,200
3,183
(2,478 ) 325,905
Subordinated corporate bonds 10,553
191
—
10,744
Total AFS investments $ 913,978
$ 9,551
$ (5,411 ) $ 918,118
HTM Investments (carried at amortized cost):
Obligations of states and political subdivisions $ 1,302
$ 57
$ —
$ 1,359
Total HTM investments $ 1,302
$ 57
$ —
$ 1,359

~~The net unrealized gain on AFS investments~~ reported within AOCI at March 31, ~~2020, was~~ ~~$22.2~~2021, were $11.8 million,, net of a deferred tax liability of ~~$6.1 million~~.$3.2 million. The net unrealized ~~gain~~gains on AFS investments reported within AOCI at December 31, ~~2019, was $3.3~~2020, were $29.3 million, net of a deferred tax liability of ~~$890,000.~~$8.0 million.

~~Impaired~~For the three months ended March 31, 2021 and 2020, the company did 0t sell any AFS ~~and HTM Investments:~~debt securities.

Quarterly, management reviews the Company’s AFS and HTM investments 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, and 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 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~~Company's AFS debt securities with gross unrealized losses, ~~on AFS and HTM investments that were in a continuous loss position that was considered temporary,~~for which an ACL has not been recorded, segregated by the length of time ~~that an individual security in each category has~~the securities have been in a continuous loss position, as of the dates indicated:


		Less Than 12 Months				12 Months or More				Total
(In thousands, except number of holdings)	Number of Holdings	Fair Value		Unrealized Losses		Fair Value		Unrealized Losses		Fair Value		Unrealized Losses
March 31, 2021
Obligations of U.S. government sponsored enterprises	2	$	4,983	$	(217)	$	0	$	0	$	4,983	$	(217)
Obligations of states and political subdivisions	3	2,445		(116)		2,171		(347)		4,616		$	(463)
Mortgage-backed securities issued or guaranteed by U.S. government-sponsored enterprises	51	234,124		(5,410)		347		(3)		234,471		(5,413)
Collateralized mortgage obligations issued or guaranteed by U.S. government-sponsored enterprises	30	142,364		(2,166)		0		0		142,364		(2,166)
Subordinated corporate bonds	1	985		(15)		0		0		985		(15)
Total AFS debt securities	87	$	384,901	$	(7,924)	$	2,518	$	(350)	$	387,419	$	(8,274)



December 31, 2020
Obligations of states and political subdivisions	1	$	2,404	$	(115)	$	0	$	0	$	2,404	$	(115)
Mortgage-backed securities issued or guaranteed by U.S. government-sponsored enterprises	15	61,222		(568)		980		(6)		62,202		(574)
Collateralized mortgage obligations issued or guaranteed by U.S. government-sponsored enterprises	9	39,107		(135)		0		0		39,107		(135)
Subordinated corporate bonds	5	4,902		(98)		0		0		4,902		(98)
Total AFS debt securities	30	$	107,635	$	(916)	$	980	$	(6)	$	108,615	$	(922)

Less Than 12 Months 12 Months or More Total
(In thousands, except number of holdings)
Number of
Holdings

Fair
Value

Unrealized
Losses

Fair
Value

Unrealized
Losses

Fair
Value

Unrealized
Losses
March 31, 2020

AFS Investments:
Obligations of states and political subdivisions 168
$ 20,029
$ (337 ) $ —
$ —
$ 20,029
$ (337 )
Mortgage-backed securities issued or guaranteed by U.S. government-sponsored enterprises 144
7,626
(34 ) 1,638
(43 ) 9,264
(77 )
Collateralized mortgage obligations issued or guaranteed by U.S. government-sponsored enterprises 86
5,180
(12 ) —
—
5,180
(12 )
Subordinated corporate bonds 8
4,925
(75 ) —
—
4,925
(75 )
Total AFS investments 406
$ 37,760
$ (458 ) $ 1,638
$ (43 ) $ 39,398
$ (501 )
December 31, 2019

AFS Investments:
Obligations of states and political subdivisions 11
$ 30,459
$ (328 ) $ —
$ —
$ 30,459
$ (328 )
Mortgage-backed securities issued or guaranteed by U.S. government-sponsored enterprises 59
162,964
(1,850 ) 63,633
(755 ) 226,597
(2,605 )
Collateralized mortgage obligations issued or guaranteed by U.S. government-sponsored enterprises 35
66,549
(733 ) 68,614
(1,745 ) 135,163
(2,478 )
Total AFS investments 105
$ 259,972
$ (2,911 ) $ 132,247
$ (2,500 ) $ 392,219
$ (5,411 )

At March 31, 2020 and December 31, 2019, unrealized losses within the AFS and HTM investment portfolios were reflective of current interest rates in excess of the yield received on debt investments, and were not indicative of an overall change in credit quality or other factors. At March 31, 2020 and December 31, 2019, gross unrealized losses on the Company's AFS and HTM investments were 1% of their respective fair values.

~~At March 31, 2020, the Company had the intent and ability to retain its debt investments in an unrealized loss position until the decline in value has recovered.~~

~~Sale of AFS Investments:~~

For the three months ended March 31, 2021 and 2020, the unrealized losses on Company's AFS debt securities have not been recognized within income because management does not intend to sell and ~~2019, the Company did~~it is not more-likely-than-not it will be required to sell any of the AFS ~~investments.~~debt securities before recovery of its amortized cost basis. Furthermore, the unrealized losses were largely due to changes in interest rates and other market conditions and not reflective of credit events. The issuers continue to make timely principal and interest payments on the bonds.

~~AFS and HTM Investments Pledged:~~

At March 31, ~~2020~~2021 and December 31, ~~2019~~,2020, total accrued interest receivable on AFS ~~and HTM investments with an~~debt securities, which has been excluded from reported amortized cost basis on AFS debt securities, was $3.1 million and was reported within other assets on the consolidated statements of ~~$712.4 million~~ ~~and~~ ~~$709.0 million~~ ~~and estimated fair values of~~ ~~$735.3 million~~ ~~and~~ ~~$712.4 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.~~condition. An allowance was not carried on the accrued interest receivable at either date.

~~Contractual Maturities:~~

The amortized cost and estimated fair values of the Company's AFS ~~and HTM investments~~debt securities by contractual maturity at March 31, ~~2020~~,2021, 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.


(In thousands)	Amortized Cost		Fair Value		(In thousands)	Amortized Cost		Fair Value
AFS Investments
Due in one year or less	$	—	$	—	Due in one year or less	$	3,025	$	3,102
Due after one year through five years	76,517		78,367		Due after one year through five years	61,558		63,040
Due after five years through ten years	215,515		223,272		Due after five years through ten years	248,264		255,924
Due after ten years	639,844		658,492		Due after ten years	787,667		793,482
Total	$	931,876	$	960,131	Total	$	1,100,514	$	1,115,548
HTM Investments
Due in one year or less	$	—	$	—
Due after one year through five years	511		532
Due after five years through ten years	789		826
Due after ten years	—		—
Total	$	1,300	$	1,358

~~Other Investments~~HTM Debt Securities

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


(In thousands)	Amortized Cost		Unrealized Gains		Unrealized Losses		Fair Value
March 31, 2021
Obligations of states and political subdivisions	$	1,295	$	101	$	0	$	1,396
Total HTM debt securities	$	1,295	$	101	$	0	$	1,396
December 31, 2020
Obligations of states and political subdivisions	$	1,297	$	114	$	0	$	1,411
Total HTM debt securities	$	1,297	$	114	$	0	$	1,411

As of March 31, 2021 and December 31, 2020, the Company’s HTM debt securities portfolio was made up of three investment grade municipal debt securities, of which two securities also carried credit enhancements. The HTM debt securities portfolio was comprised solely of high credit quality (rated AA or higher) state and municipal obligations. High credit quality state and municipal obligations have a history of zero to near-zero credit loss. As a result, the Company determined that the expected credit loss on its HTM portfolio was immaterial, and therefore, an allowance was 0t carried on its HTM debt securities at March 31, 2021 or December 31, 2020.

As of March 31, 2021 and December 31, 2020, none of the Company's HTM debt securities were past due or on non-accrual status. For the three months ended March 31, 2021 and 2020, the Company did not recognize any interest income on non-accrual HTM debt securities. At March 31, 2021 and December 31, 2020, total accrued interest receivable on HTM debt securities, which has been excluded from reported amortized cost basis on HTM debt securities, was $8,000 and $10,000, respectively, and reported within other assets on the consolidated statements of condition. An allowance was not carried on the accrued interest receivable at either date.

The amortized cost and estimated fair values of HTM debt securities by contractual maturity at March 31, 2021 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.


(In thousands)	Amortized Cost		Fair Value






Due in one year or less	$	0	$	0
Due after one year through five years	869		937
Due after five years through ten years	426		459
Due after ten years	0		0
Total	$	1,295	$	1,396

AFS and HTM Debt Securities Pledged

At March 31, 2021 and December 31, 2020, AFS and HTM debt securities with an amortized cost of $484.3 million and $485.0 million and estimated fair values of $495.4 million and $507.1 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.

Other Investments

The Company's FHLBB and FRB common stock are reported at cost within other investments on the consolidated statements of condition. The Company evaluates these investments for impairment based on the ultimate recoverability of the par value. The Company did not record any impairment on its FHLBB and FRB stock for the three months ended March 31, 2021 and 2020.

The following table summarizes the Company's investment in ~~equity securities,~~ FHLBB stock and FRBB stock as presented within other investments on the consolidated statements of condition, as of the dates indicated:


(In thousands)	Cost
March 31, 2021
FHLBB	$	4,838
FRB	5,374
Total other investments	$	10,212
December 31, 2020
FHLBB	$	6,167
FRB	5,374
Total other investments	$	11,541

(In thousands) Cost
Unrealized
Gains

Unrealized
Losses

Fair Value /
Carrying Value
March 31, 2020

Equity securities - bank stock (carried at fair value) $ 544
$ 1,130
$ —
$ 1,674
FHLBB (carried at cost) 8,008
—
—
8,008
FRB (carried at cost) 5,374
—
—
5,374
Total other investments $ 13,926
$ 1,130
$ —
$ 15,056
December 31, 2019

Equity securities - bank stock (carried at fair value) $ 544
$ 1,130
$ —
$ 1,674
FHLBB (carried at cost) 6,601
—
—
6,601
FRB (carried at cost) 5,374
—
—
5,374
Total other investments $ 12,519
$ 1,130
$ —
$ 13,649

For the three months ended March 31, 2020 and 2019, the Company recognized an unrealized gain of $0 and $243,000, respectively, due to the change in fair value of its bank stock equity securities, which was presented within other income on the consolidated statements of income.

~~The Company did not record any OTTI on its FHLBB and FRB stock for the three months ended March 31, 2020 and 2019.~~

NOTE 4 – LOANS AND ALLOWANCE FOR ~~LOAN~~CREDIT LOSSES ON LOANS

Loans

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


(In thousands)	March 31, 2021		December 31, 2020
Commercial Loans:
Commercial real estate - non owner-occupied	$	1,116,617	$	1,097,975
Commercial real estate - owner-occupied	273,710		271,495
Commercial	366,159		381,494
SBA PPP	169,407		135,095
Total commercial loans	1,925,893		1,886,059
Retail Loans:
Residential real estate	1,051,765		1,054,798
Home equity	240,486		258,573
Consumer	18,902		20,392
Total retail loans	1,311,153		1,333,763
Total loans	$	3,237,046	$	3,219,822

(In thousands) March 31,
2020 December 31,
2019
Residential real estate $ 1,064,212
$ 1,070,374
Commercial real estate 1,299,860
1,243,397
Commercial 444,830
421,108
Home equity 306,226
312,779
Consumer 24,377
25,772
HPFC 18,257
21,593
Total loans $ 3,157,762
$ 3,095,023

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


(In thousands)	March 31, 2021		December 31, 2020
Net unamortized fair value mark discount on acquired loans	$	(1,058)	$	(1,291)
Net unamortized loan (fees) origination costs(1)	(2,444)		856
Total	$	(3,502)	$	(435)

(In thousands) March 31,
2020 December 31,
2019
Net unamortized fair value mark discount on acquired loans $ (2,346 ) $ (2,593 )
Net unamortized loan origination costs 3,115
3,111
Total $ 769
$ 518
(1) The change in net unamortized loan (fees) origination costs from December 31, 2020 to March 31, 2021, was primarily driven by SBA PPP loan origination fees capitalized during the three months ended March 31, 2021. As of March 31, 2021 and December 31, 2020, unamortized loan fees on originated SBA PPP loans were $5.1 million and $2.2 million, respectively.

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

~~The HPFC loan portfolio is an acquired loan portfolio. It consists~~Beginning in April 2020, the Company started funding SBA PPP loans issued to qualifying businesses as part of ~~niche commercial lending~~the federal stimulus package issued due to the ~~small business medical field, including dentists, optometrists and veterinarians,~~COVID-19 pandemic. For the three months ended March 31, 2021, the Company originated 1,348 SBA PPP loans totaling $85.1 million to qualifying businesses across our markets in need of financial support due to the COVID-19 pandemic. For the year ended December 31, 2020, the Company originated 3,034 SBA PPP loans totaling $244.8 million. This program provided qualifying businesses a specialized low-interest loan by 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. In 2016, the Company closed HPFC's operations~~Treasury Department and is ~~no longer originating HPFC loans.~~administered by the SBA. The PPP provides borrower guarantees for lenders, as well as loan forgiveness incentives for borrowers that utilize the loan proceeds to cover employee compensation-related business operating costs, as well as certain other costs up to pre-established limits.

In the normal course of business, the Bank makes loans to certain officers, directors and their associated companies, under terms that are consistent with the Company's lending policies and regulatory requirements and that do not involve more than the normal risk of collectability or present other unfavorable features. At March 31, ~~2020~~2021 and December 31, ~~2019,~~2020, outstanding loans to certain officers, directors and their associated companies was less than 5% of the Company's shareholders' equity.

Loan Sales

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, including consideration ~~of the effect and impact of the COVID-19 pandemic; and (iv) a requirement by federal and state regulators to increase the provision for loan losses or recognize additional charge-offs.~~

As discussed in Note 2, the Company did not adopt ASU 2016-04, commonly referred to as "CECL", in the first quarter of 2020. The Company's ALL, as presented, has been determined in accordance with its policies and procedures described within its Annual Report on Form 10-K for the year ended December 31, 2019. In light of the COVID-19 pandemic, the Company adjusted its economic qualitative factor ("Q-factor") to estimate the impact of the health crisis on its loan portfolio, based on information available as of March 31, 2020. The Q-factor adjustment resulted in an $800,000 increase in the ALL as of March 31, 2020. The Company will continue to adjust its economic Q-factor in coming quarters, as appropriate, as additional economic data becomes available and/or should the Company experience credit deterioration within its loan portfolio. There were no other significant changes to the Company's ALL methodology duringFor the three months ended March 31, ~~2020.~~2021 and 2020, the Company sold $192.6 million and $69.2 million, respectively, of fixed rate residential mortgage loans on the secondary market, which resulted in gains on the sale of loans (net of costs) of $6.2 million and $1.5 million, respectively.

At March 31, 2021 and December 31, 2020, the Company had certain residential mortgage loans with a principal balance of $22.2 million and $40.5 million, respectively, designated as held for sale. The Company has elected the fair value option of accounting for its loans held for sale, and at March 31, 2021 and December 31, 2020, recorded an unrealized (loss) gain of ($14,000) and $1.1 million, respectively. For the three months ended March 31, 2021 and 2020, the Company recorded an unrealized loss on loans held for sale recorded within mortgage banking income, net, on the Company's consolidated statements of income of $1.1 million and $565,000, respectively.

The Company has forward delivery commitments with a secondary market investor on each of its loans held for sale at March 31, 2021 and December 31, 2020. Refer to Note 8 for further discussion of the Company's forward delivery commitments.

ACL on Loans

Under CECL, effective January 1, 2020 but applied to interim reporting periods on or after October 1, 2020, the ACL on loans is management's estimate of expected credit losses within its loan portfolio as of each reporting date.

The Board of Directors monitors credit risk ~~through~~through: (i) the Directors' ~~Loan Review~~Credit 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, and concentration ~~levels,~~levels; and (ii) the ~~ALL~~Audit Committee, which has approval authority and oversight responsibility for ACL adequacy and methodology.

Credit Risk 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, and maintain the integrity of the loan rating ~~system, determine~~system. The adequacy of the ACL, including the ACL on loans, is overseen by the Management Provision Committee, which is an internal management committee comprised of various Company executives and senior managers across business lines, including Accounting and Finance, Credit Risk, Compliance, and Commercial and Retail Banking. The Management Provision Committee is further supported by other management-level committees to ensure the adequacy of the ~~ALL and support~~ACL. The Management Provision Committee supports the oversight efforts of the ~~Directors' Loan Review Committee~~director-level committees discussed in the paragraph above and the Board of Directors. The Company's practice is to manage the portfolio proactively 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,~~ACL on loans, the Company disaggregates its loans into portfolio ~~segments, which include residential real estate, commercial real estate, commercial, home equity, consumer and HPFC.~~segments. Each portfolio segment possesses unique risk characteristics that are considered when determining the appropriate level of allowance. ~~These~~As of March 31, 2021, the Company's loan portfolio segments, as determined based on the unique risk characteristics ~~unique to~~of each, ~~portfolio segment~~ include the following:

~~Residential~~Commercial Real Estate. ~~Residential~~ - Non Owner-Occupied. Non-owner occupied commercial real estate loans ~~held~~are, in substance, all commercial real estate loans that are not categorized by the ~~Company's~~Company as owner-occupied commercial real estate loans. Non owner-occupied commercial estate loans are investment properties in which the primary source for repayment of the loan ~~portfolio are made to borrowers who demonstrate~~by the ~~ability to make scheduled payments~~borrower is derived from rental income associated 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 consiststhe property or the proceeds of ~~mortgage liens on one- to four-family residential properties, including for investment purposes.~~

~~Commercial Real Estate.~~ ~~Commercial~~the sale, refinancing, or permanent refinancing of the property. Non owner-occupied commercial real estate loans consist of mortgage loans to finance investments in real property ~~such as~~that may include, but is not limited to, multi-family residential, commercial/retail office ~~industrial,~~space, industrial/warehouse space, hotels, assisted living facilities and other specific use properties. Also included within the non owner-occupied commercial real estate loan segment are construction projects until they are completed. Commercial real estate loans are typically written with amortizing payment structures. Collateral values are determined based upon appraisals and evaluations in accordance with established policy guidelines. Maximum loan-to-value ratios at origination are governed by established policy and regulatory guidelines.

Commercial Real Estate - Owner-Occupied. Generally, owner-occupied commercial real estate loans are properties that are owned and operated by the borrower, and the primary source for repayment is the cash flow from the ongoing operations and activities conducted by the borrower's business. Owner-occupied commercial real estate loans consist of mortgage loans to finance investments in real property that may include, but is not limited to, commercial/retail office space, restaurants, educational ~~health care~~and medical practice facilities and other specific use properties. Commercial real estate loans are typically written with amortizing payment structures. Collateral values are determined based upon appraisals and evaluations in accordance with established policy guidelines. ~~Loan-to-value~~Maximum 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 and equipment, and/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.

SBA PPP. SBA PPP loans are unsecured, fully-guaranteed commercial loans backed by the SBA, issued to qualifying small businesses as part of federal stimulus issued in response to the COVID-19 pandemic. Loans made under the program during the year ended December 31, 2020 have terms of two or five years, and those made for the three months ended March 31, 2021 have a term of five years. SBA PPP loans are to be used by the borrower to offset certain payroll and other operating costs, such as rent and utilities. The loan and accrued interest, or a portion thereof, is eligible for forgiveness by the SBA should the qualifying small business meet certain conditions. These loans were originated under the guidance of the SBA, which has been subject to change.

Residential Real Estate. Residential real estate loans held in the Company's loan portfolio are made to borrowers who demonstrate the ability to make scheduled payments with full consideration to underwriting factors. Borrower qualifications

include favorable credit history combined with supportive income requirements and combined loan-to-value ratios within established policy guidelines. Collateral consists of mortgage liens on one- to four-family residences, including for investment purposes.

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

~~HPFC.~~ Prior to the Company's closing of HPFC's operations in 2016, it provided commercial lending to dentists, optometrists and veterinarians, many of which were 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 consists 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.

The following table presents the activity in the ~~ALL~~ACL on loans, as reported under CECL, for the periods indicated:


	Commercial Real Estate
(In thousands)	Non Owner-Occupied		Owner- Occupied		Commercial		SBA PPP		Residential Real Estate		Home Equity		Consumer		Total
At or For The Three Months Ended March 31, 2021

Beginning balance, December 31, 2020	$	21,778	$	2,832	$	6,703	$	69	$	3,474	$	2,616	$	393	$	37,865
Loans charged off	0		0		(147)		0		(53)		(38)		(49)		(287)
Recoveries	0		2		43		0		0		0		6		51
Provision (credit) for loan losses	695		(286)		(1,429)		18		(328)		(402)		(122)		(1,854)
Ending balance, March 31, 2021	$	22,473	$	2,548	$	5,170	$	87	$	3,093	$	2,176	$	228	$	35,775
At or For The Year Ended December 31, 2020

Beginning balance, December 31, 2019	$	10,924	$	1,490	$	3,985	$	0	$	5,842	$	2,423	$	507	$	25,171
Impact of adopting CECL(1)	(668)		(90)		1,548		0		(1,129)		792		(220)		233
Loans charged off	(82)		(21)		(1,130)		0		(121)		(317)		(167)		(1,838)
Recoveries	107		13		572		0		292		33		67		1,084
Provision (credit) for loan losses	11,497		1,440		1,728		69		(1,410)		(315)		206		13,215
Ending balance, December 31, 2020	$	21,778	$	2,832	$	6,703	$	69	$	3,474	$	2,616	$	393	$	37,865

(1) The Company adopted ASU 2016-13, "CECL," effective January 1, 2020 but applied to reporting periods on or after October 1, 2020.

During the three months ended March 31, 2021, there were no significant changes in our CECL modeling methodology to determine the ACL on loans at March 31, 2021. The significant key assumptions used with the ACL on loans calculation at March 31, 2021 and December 31, 2020, included: (i) Company-specific macroeconomic factors (i.e. loss drivers), (ii) our forecast period and reversion speed, (iii) prepayment speeds, and (iv) various qualitative factors.

The ACL on loans, as presented and accounted for under the CECL methodology, decreased $2.1 million during the three months ended March 31, 2021, to $35.8 million as of March 31, 2021. The decrease in the ACL on loans was driven by an overall improvement in management's forecast of its macroeconomic factors over its one-year forecast period.

The following table presents activity in the ACL on loans and select loan information by portfolio segment, under the incurred loss methodology, for the ~~periods~~period indicated:


(In thousands)	Residential Real Estate			Commercial Real Estate			Commercial			Home Equity			Consumer			HPFC			Total			(In thousands)	Commercial Real Estate(1)		Commercial		Residential Real Estate		Home Equity		Consumer		Total
At or For The Three Months Ended March 31, 2020																						At or For The Three Months Ended March 31, 2020
ALL for the three months ended:
Allowance for the three months ended:																						Allowance for the three months ended:
Beginning balance	$	5,842		$	12,414		$	3,769		$	2,423		$	507		$	216		$	25,171		Beginning balance	$	12,414	$	3,985	$	5,842	$	2,423	$	507	$	25,171
Loans charged off	(96		)	(50		)	(253		)	(34		)	(57		)	—			(490		)	Loans charged off	(50)		(253)		(96)		(34)		(57)		(490)
Recoveries	2			4			53			4			5			—			68			Recoveries	4		53		2		4		5		68
Provision (credit)⁽¹⁾	149			1,006			545			87			18			(33		)	1,772
Provision																						Provision	1,006		512		149		87		18		1,772
Ending balance	$	5,897		$	13,374		$	4,114		$	2,480		$	473		$	183		$	26,521		Ending balance	$	13,374	$	4,297	$	5,897	$	2,480	$	473	$	26,521
ALL balance attributable to loans:

Allowance balance attributable to loans:																						Allowance balance attributable to loans:
Individually evaluated for impairment	$	324		$	34		$	—		$	89		$	—		$	—		$	447		Individually evaluated for impairment	$	34	$	0	$	324	$	89	$	0	$	447
Collectively evaluated for impairment	5,573			13,340			4,114			2,391			473			183			26,074			Collectively evaluated for impairment	13,340		4,297		5,573		2,391		473		26,074
Total ending ALL	$	5,897		$	13,374		$	4,114		$	2,480		$	473		$	183		$	26,521
Total ending allowance																						Total ending allowance	$	13,374	$	4,297	$	5,897	$	2,480	$	473	$	26,521
Loans:																						Loans:
Individually evaluated for impairment	$	3,286		$	400		$	299		$	370		$	—		$	—		$	4,355		Individually evaluated for impairment	$	400	$	299	$	3,286	$	370	$	0	$	4,355
Collectively evaluated for impairment	1,060,926			1,299,460			444,531			305,856			24,377			18,257			3,153,407			Collectively evaluated for impairment	1,299,460		462,788		1,060,926		305,856		24,377		3,153,407
Total ending loans balance	$	1,064,212		$	1,299,860		$	444,830		$	306,226		$	24,377		$	18,257		$	3,157,762		Total ending loans balance	$	1,299,860	$	463,087	$	1,064,212	$	306,226	$	24,377	$	3,157,762
At or For The Three Months Ended March 31, 2019
ALL for the three months ended:
Beginning balance	$	6,071		$	11,654		$	3,620		$	2,796		$	234		$	337		$	24,712
Loans charged off	(11		)	(65		)	(236		)	(10		)	(14		)	—			(336		)
Recoveries	2			4			62			—			7			—			75
Provision (credit)⁽¹⁾	91			245			170			241			32			(29		)	750
Ending balance	$	6,153		$	11,838		$	3,616		$	3,027		$	259		$	308		$	25,201
ALL balance attributable to loans:
Individually evaluated for impairment	$	553		$	27		$	—		$	347		$	—		$	—		$	927
Collectively evaluated for impairment	5,600			11,811			3,616			2,680			259			308			24,274
Total ending ALL	$	6,153		$	11,838		$	3,616		$	3,027		$	259		$	308		$	25,201
Loans:
Individually evaluated for impairment	$	4,736		$	410		$	223		$	895		$	—		$	—		$	6,264
Collectively evaluated for impairment	1,012,706			1,258,064			390,759			323,074			20,733			30,842			3,036,178
Total ending loans balance	$	1,017,442		$	1,258,474		$	390,982		$	323,969		$	20,733		$	30,842		$	3,042,442

(1) Includes both commercial real estate - non owner-occupied and owner-occupied loan segments.

(In thousands)
Residential
Real Estate

Commercial
Real Estate
Commercial
Home
Equity
Consumer HPFC Total
At or For The Year Ended December 31, 2019
ALL:

Beginning balance $ 6,071
$ 11,654
$ 3,620
$ 2,796
$ 234
$ 337
$ 24,712
Loans charged off (462 ) (300 ) (1,167 ) (412 ) (301 ) (71 ) (2,713 )
Recoveries 16
49
225
1
19
—
310
Provision (credit)⁽¹⁾
217
1,011
1,091
38
555
(50 ) 2,862
Ending balance $ 5,842
$ 12,414
$ 3,769
$ 2,423
$ 507
$ 216
$ 25,171
ALL balance attributable to loans:
Individually evaluated for impairment $ 364
$ 30
$ —
$ 69
$ —
$ —
$ 463
Collectively evaluated for impairment 5,478
12,384
3,769
2,354
507
216
24,708
Total ending ALL $ 5,842
$ 12,414
$ 3,769
$ 2,423
$ 507
$ 216
$ 25,171
Loans:





Individually evaluated for impairment $ 3,384
$ 402
$ 319
$ 373
$ —
$ —
$ 4,478
Collectively evaluated for impairment 1,066,990
1,242,995
420,789
312,406
25,772
21,593
3,090,545
Total ending loans balance $ 1,070,374
$ 1,243,397
$ 421,108
$ 312,779
$ 25,772
$ 21,593
$ 3,095,023

~~(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, 2020 and 2019, and December 31, 2019, the reserve for unfunded commitments was $24,000, $16,000 and $21,000, respectively.

~~The following reconciles the provision for loan losses to the provision for credit losses as presented on the consolidated statements of income for the periods indicated:~~

Three Months Ended
March 31,
Year Ended December 31,
2019
(In thousands) 2020 2019
Provision for loan losses $ 1,772
$ 750
$ 2,862
Change in reserve for unfunded commitments 3
(6 ) (1 )
Provision for credit losses $ 1,775
$ 744
$ 2,861

The Company focuses on maintaining a well-balanced and diversified loan portfolio. Despite such efforts, it is recognized that credit concentrations may occasionally emerge as a result of economic conditions, changes in local demand, natural loan growth and runoff. To identify credit concentrations effectively, all commercial and commercial real estate loans are assigned Standard Industrial Classification codes, North American Industry Classification System codes, and state and county codes. Shifts in portfolio concentrations are monitored. As of March 31, ~~2020,~~2021, the Company's total exposure to the lessors of nonresidential buildings' industry was ~~13%~~14% of total loans and 32% of total commercial real estate loans. There were no0 other industry exposures exceeding 10% of the Company's total loan portfolio as of March 31, ~~2020.~~2021.

COVID-19 Loan Deferral Program

In response to the COVID-19 pandemic, the Company worked with businesses and consumers through the year ended 2020 to provide temporary debt payment relief that generally provided principal and/or interest payment deferrals for a period of 180 days or less. All loans that were granted temporary payment relief during the year ended 2020 complied with the terms of the CARES Act, which was signed into law in March 2020 and bank regulator guidance, and thus were not individually assessed, designated or accounted for as TDRs.

The Company did not issue or extend temporary debt relief to customers due to COVID-19 hardships during the three months ended March 31, 2021. However, the Company may do so on case-by-case under bank regulator guidance or the Consolidated Appropriations Act of 2021, which extended the provisions within the CARES Act that provided TDR accounting relief to the earlier of: (i) December 31, 2021 or (ii) the date that is 60 days after the date the national emergency concerning the COVID-19 pandemic declared by the President on March 13, 2020 terminates.

At March 31, 2021, the Company's loans impacted by the COVID-19 pandemic and operating under temporary short-term payment deferral arrangements for a period of 180 days or less totaled $2.4 million, compared to $26.5 million at December 31, 2021.

Credit Quality Indicators

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

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

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

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

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

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

~~Asset~~Loans that were granted temporary debt relief due to the COVID-19 pandemic were not automatically downgraded into lower credit risk ratings. The Company continues to actively monitor these loans for indications of deterioration as the deferral period matures, which could result in future downgrades.

The Company periodically reassesses asset quality indicators ~~are periodically reassessed~~ to reflect 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 summarizes credit~~Based on the most recent analysis performed, the risk ~~exposure indicators~~category of loans by portfolio segment by vintage, reported under the CECL methodology, was as follows as of the ~~following dates:~~dates indicated:


(In thousands)	2021		2020		2019		2018		2017		Prior		Revolving Loans Amortized Cost Basis		Revolving Loans Converted to Term		Total
As of March 31, 2021
Commercial real estate - non owner-occupied
Risk rating
Pass (Grades 1-6)	$	30,274	$	145,318	$	220,520	$	140,581	$	116,094	$	408,514	$	0	$	0	$	1,061,301
Special mention (Grade 7)	0		5,878		1,454		0		4,258		8,734		0		0		20,324
Substandard (Grade 8)	0		23		124		4,406		401		30,038		0		0		34,992
Doubtful (Grade 9)	0		0		0		0		0		0		0		0		0
Total commercial real estate - non owner-occupied	30,274		151,219		222,098		144,987		120,753		447,286		0		0		1,116,617
Commercial real estate - owner-occupied
Risk rating
Pass (Grades 1-6)	7,062		34,293		32,904		47,928		44,604		97,690		0		0		264,481
Special mention (Grade 7)	0		0		0		3,488		1,386		1,497		0		0		6,371
Substandard (Grade 8)	0		0		0		885		452		1,521		0		0		2,858
Doubtful (Grade 9)	0		0		0		0		0		0		0		0		0
Total commercial real estate - owner occupied	7,062		34,293		32,904		52,301		46,442		100,708		0		0		273,710
Commercial
Risk rating
Pass (Grades 1-6)	11,196		46,824		70,501		36,679		24,848		63,924		74,255		28,928		357,155
Special mention (Grade 7)	0		0		21		21		4,617		493		0		0		5,152
Substandard (Grade 8)	0		184		971		203		51		1,797		275		371		3,852
Doubtful (Grade 9)	0		0		0		0		0		0		0		0		0
Total commercial	11,196		47,008		71,493		36,903		29,516		66,214		74,530		29,299		366,159
SBA PPP
Risk rating
Pass (Grades 1-6)	81,032		88,375		0		0		0		0		0		0		169,407
Special mention (Grade 7)	0		0		0		0		0		0		0		0		0
Substandard (Grade 8)	0		0		0		0		0		0		0		0		0
Doubtful (Grade 9)	0		0		0		0		0		0		0		0		0
Total SBA PPP	81,032		88,375		0		0		0		0		0		0		169,407
Residential Real Estate
Risk rating
Pass (Grades 1-6)	102,106		331,223		158,297		101,369		65,714		286,323		921		0		1,045,953
Special mention (Grade 7)	0		0		0		0		0		239		0		0		239
Substandard (Grade 8)	0		0		643		174		0		4,756		0		0		5,573
Doubtful (Grade 9)	0		0		0		0		0		0		0		0		0
Total residential real estate	102,106		331,223		158,940		101,543		65,714		291,318		921		0		1,051,765
Home equity
Risk rating
Performing	77		782		8,443		15,723		3,256		16,192		182,664		11,481		238,618
Non-performing	0		0		48		0		0		167		1,153		500		1,868
Total home equity	77		782		8,491		15,723		3,256		16,359		183,817		11,981		240,486
Consumer
Risk rating
Performing	1,612		5,716		5,454		2,281		1,078		2,128		604		0		18,873
Non-performing	0		9		17		0		0		3		0		0		29
Total consumer	1,612		5,725		5,471		2,281		1,078		2,131		604		0		18,902
Total Loans	$	233,359	$	658,625	$	499,397	$	353,738	$	266,759	$	924,016	$	259,872	$	41,280	$	3,237,046


(In thousands)	Residential Real Estate		Commercial Real Estate		Commercial		Home Equity		Consumer		HPFC		Total		(In thousands)	2020		2019		2018		2017		2016		Prior		Revolving Loans Amortized Cost Basis		Revolving Loans Converted to Term		Total
March 31, 2020
As of December 31, 2020															As of December 31, 2020
Commercial real estate - non owner-occupied															Commercial real estate - non owner-occupied
Risk rating															Risk rating
Pass (Grades 1-6)	$	1,057,552	$	1,254,201	$	439,638	$	—	$	—	$	17,410	$	2,768,801	Pass (Grades 1-6)	$	138,010	$	224,148	$	144,552	$	119,409	$	157,588	$	264,253	$	0	$	0	$	1,047,960
Special mention (Grade 7)															Special mention (Grade 7)	5,739		0		0		4,256		3,497		847		0		0		14,339
Substandard (Grade 8)															Substandard (Grade 8)	24		125		2,070		405		1,522		31,530		0		0		35,676
Doubtful (Grade 9)															Doubtful (Grade 9)	0		0		0		0		0		0		0		0		0
Total commercial real estate - non owner-occupied															Total commercial real estate - non owner-occupied	143,773		224,273		146,622		124,070		162,607		296,630		0		0		1,097,975
Commercial real estate - owner-occupied															Commercial real estate - owner-occupied
Risk rating															Risk rating
Pass (Grades 1-6)															Pass (Grades 1-6)	35,948		29,217		48,312		47,065		25,507		76,098		0		0		262,147
Special mention (Grade 7)															Special mention (Grade 7)	0		0		4,584		0		0		1,513		0		0		6,097
Substandard (Grade 8)															Substandard (Grade 8)	0		0		891		462		0		1,898		0		0		3,251
Doubtful (Grade 9)															Doubtful (Grade 9)	0		0		0		0		0		0		0		0		0
Total commercial real estate - owner occupied															Total commercial real estate - owner occupied	35,948		29,217		53,787		47,527		25,507		79,509		0		0		271,495
Commercial															Commercial
Risk rating															Risk rating
Pass (Grades 1-6)															Pass (Grades 1-6)	53,966		72,863		40,688		25,478		15,788		51,869		72,425		37,026		370,103
Special mention (Grade 7)															Special mention (Grade 7)	0		22		313		4,924		117		400		0		867		6,643
Substandard (Grade 8)															Substandard (Grade 8)	187		1,012		211		51		42		2,081		65		1,099		4,748
Doubtful (Grade 9)															Doubtful (Grade 9)	0		0		0		0		0		0		0		0		0
Total commercial															Total commercial	54,153		73,897		41,212		30,453		15,947		54,350		72,490		38,992		381,494
SBA PPP															SBA PPP
Risk rating															Risk rating
Pass (Grades 1-6)															Pass (Grades 1-6)	135,095		0		0		0		0		0		0		0		135,095
Special mention (Grade 7)															Special mention (Grade 7)	0		0		0		0		0		0		0		0		0
Substandard (Grade 8)															Substandard (Grade 8)	0		0		0		0		0		0		0		0		0
Doubtful (Grade 9)															Doubtful (Grade 9)	0		0		0		0		0		0		0		0		0
Total SBA PPP															Total SBA PPP	135,095		0		0		0		0		0		0		0		135,095
Residential Real Estate															Residential Real Estate
Risk rating															Risk rating
Pass (Grades 1-6)															Pass (Grades 1-6)	339,834		183,877		119,426		79,159		57,269		266,324		3,028		0		1,048,917
Special mention (Grade 7)															Special mention (Grade 7)	0		0		0		0		0		398		0		0		398
Substandard (Grade 8)															Substandard (Grade 8)	0		0		176		487		0		4,820		0		0		5,483
Doubtful (Grade 9)															Doubtful (Grade 9)	0		0		0		0		0		0		0		0		0
Total residential real estate															Total residential real estate	339,834		183,877		119,602		79,646		57,269		271,542		3,028		0		1,054,798
Home equity															Home equity
Risk rating															Risk rating
Performing	—		—		—		304,131		24,372		—		328,503		Performing	855		9,415		17,281		3,478		1,339		17,664		194,065		12,480		256,577
Special Mention (Grade 7)	469		31,028		1,424		—		—		77		32,998
Substandard (Grade 8)	6,191		14,631		3,768		—		—		770		25,360
Non-performing	—		—		—		2,095		5		—		2,100		Non-performing	0		0		0		0		0		207		1,241		548		1,996
Total	$	1,064,212	$	1,299,860	$	444,830	$	306,226	$	24,377	$	18,257	$	3,157,762
December 31, 2019
Pass (Grades 1-6)	$	1,062,825	$	1,196,683	$	415,870	$	—	$	—	$	20,667	$	2,696,045
Total home equity															Total home equity	855		9,415		17,281		3,478		1,339		17,871		195,306		13,028		258,573
Consumer															Consumer
Risk rating															Risk rating
Performing	—		—		—		310,653		25,748		—		336,401		Performing	6,572		6,525		3,096		1,359		378		1,780		678		0		20,388
Special Mention (Grade 7)	473		31,753		2,544		—		—		89		34,859
Substandard (Grade 8)	7,076		14,961		2,694		—		—		837		25,568
Non-performing	—		—		—		2,126		24		—		2,150		Non-performing	0		0		0		0		4		0		0		0		4
Total	$	1,070,374	$	1,243,397	$	421,108	$	312,779	$	25,772	$	21,593	$	3,095,023
Total consumer															Total consumer	6,572		6,525		3,096		1,359		382		1,780		678		0		20,392
Total Loans															Total Loans	$	716,230	$	527,204	$	381,600	$	286,533	$	263,051	$	721,682	$	271,502	$	52,020	$	3,219,822

Past Due and Non-Accrual Loans

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

All loans that were granted temporary payment relief due to the COVID-19 pandemic were current with payments in accordance with the terms of the CARES Act and bank regulatory guidance at the time of initial relief. At March 31, 2021, the payment status for loans that continued to operate under a payment deferral arrangement were reported based on payment status at the time the deferral was granted to the borrower.

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:

(In thousands)
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
March 31, 2020

Residential real estate $ 1,778
$ 320
$ 2,445
$ 4,543
$ 1,059,669
$ 1,064,212
$ —
$ 3,499
Commercial real estate 1,207
1,460
478
3,145
1,296,715
1,299,860
—
646
Commercial 1,315
388
602
2,305
442,525
444,830
—
748
Home equity 1,140
430
1,743
3,313
302,913
306,226
—
2,098
Consumer 58
31
5
94
24,283
24,377
—
4
HPFC 21
144
252
417
17,840
18,257
—
322
Total $ 5,519
$ 2,773
$ 5,525
$ 13,817
$ 3,143,945
$ 3,157,762
$ —
$ 7,317
December 31, 2019

Residential real estate $ 2,297
$ 627
$ 2,598
$ 5,522
$ 1,064,852
$ 1,070,374
$ —
$ 4,096
Commercial real estate 267
1,720
544
2,531
1,240,866
1,243,397
—
1,122
Commercial 548
—
417
965
420,143
421,108
—
420
Home equity 681
238
1,459
2,378
310,401
312,779
—
2,130
Consumer 108
31
23
162
25,610
25,772
—
24
HPFC —
243
288
531
21,062
21,593
—
364
Total $ 3,901
$ 2,859
$ 5,329
$ 12,089
$ 3,082,934
$ 3,095,023
$ —
$ 8,156
The following table presents the amortized cost basis of loans on non-accrual status (including non-accruing TDRs) by portfolio segment as of the dates indicated:

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

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

Interest income that would have been recognized if loans on non-accrual status had been current in accordance with their original terms is estimated to have been ~~$79,000~~$76,000 and ~~$109,000~~$79,000 for the three months ended March 31, ~~2020~~2021 and ~~2019,~~2020, respectively.

~~TDRs:~~The Company's policy is to reverse previously recorded interest income when a loan is placed on non-accrual, as such, the Company did not record any interest income on its non-accruals for the three months ended March 31, 2021 and 2020. An immaterial amount of accrued interest on non-accrual loans was written-off during the three months ended March 31, 2021 and 2020, by reversing interest income. At March 31, 2021 and December 31, 2020, total accrued interest receivable on loans, which has been excluded from reported amortized cost basis on loans, was $9.6 million and $10.2 million, respectively, and reported within other assets on the consolidated statements of condition. An allowance was not carried on the accrued interest receivable at either date.

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. TDRs 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~~ net realizable value, 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~~ACL for the dates indicated:

Number of Contracts Recorded Investment Specific Reserve
(In thousands, except number of contracts) March 31, 2020 December 31, 2019 March 31, 2020 December 31, 2019 March 31, 2020 December 31, 2019
Residential real estate 21
22
$ 2,692
$ 2,869
$ 324
$ 364
Commercial real estate 2
2
338
338
34
30
Commercial 2
2
118
123
—
—
Consumer and home equity 1
1
299
299
89
69
Total 26
27
$ 3,447
$ 3,629
$ 447
$ 463

At March 31, 2021, the Company had performing and non-performing TDRs with a recorded investment balance of $2.6 million and $494,000, respectively. At December 31, 2020, the Company had performing and non-performing TDRs with a recorded investment balance of ~~$3.0~~$2.8 million and ~~$438,000, respectively. At December 31, 2019, the Company had performing and non-performing TDRs with a recorded investment balance of $3.0 million and $636,000,~~$248,000, respectively.

~~In response to the COVID-19 pandemic, the Company worked with businesses and consumers to provide temporary debt payment relief.~~ The Company's payment relief program provided principal and/or interest payment deferrals of 30 to 180 days for businesses and 90 to 180 days for consumers. For loans modified due to the COVID-19 pandemic, the Company may apply the following ~~accounting treatment in this order:~~

~~There were no~~represents loan modifications that qualify as TDRs that occurred ~~for~~during the ~~three months ended~~periods indicated:

As of March 31, 2021 and December 31, 2020, ~~and 2019.~~the Company did 0t have any material commitments to lend additional funds to borrowers with loans classified as TDRs.

For the three months ended March 31, 2021 and 2020, ~~and 2019, no~~0 loans were modified as TDRs within the previous 12 months for which the borrower subsequently defaulted.

Impaired ~~Loans:~~Loans

For periods prior to the adoption of CECL (i.e. periods before October 1, 2020), under the incurred loss methodology, impaired loans ~~consist~~consisted of non-accrual loans and TDRs that ~~are~~were individually evaluated for impairment in accordance with the Company's policy. The following is a summary of impaired loan balances and the associated allowance by portfolio segment as of and for the periods indicated:


							For The Three Months Ended
(In thousands)	Recorded Investment		Unpaid Principal Balance		Related Allowance		Average Recorded Investment		Interest Income Recognized
March 31, 2020:
With an allowance recorded:
Commercial real estate	$	128	$	128	$	34	$	128	$	1
Commercial	0		0		0		—		—
Residential real estate	2,220		2,220		324		2,307		24
Home equity	318		318		89		318		—
Consumer	0		0		0		—		—
Ending balance	2,666		2,666		447		2,753		25
Without an allowance recorded:
Commercial real estate	272		431		0		273		3
Commercial	299		665		0		309		2
Residential real estate	1,066		1,247		0		1,028		3
Home equity	52		190		0		54		—
Consumer	0		0		0		—		—
Ending balance	1,689		2,533		0		1,664		8
Total impaired loans	$	4,355	$	5,199	$	447	$	4,417	$	33

For the
Three Months Ended
(In thousands)
Recorded
Investment

Unpaid
Principal
Balance

Related
Allowance

Average
Recorded
Investment

Interest
Income
Recognized
March 31, 2020:
With an allowance recorded:

Residential real estate $ 2,220
$ 2,220
$ 324
$ 2,307
$ 24
Commercial real estate 128
128
34
128
1
Commercial —
—
—
—
—
Home equity 318
318
89
318
—
Consumer —
—
—
—
—
HPFC —
—
—
—
—
Ending balance 2,666
2,666
447
2,753
25
Without an allowance recorded:

Residential real estate 1,066
1,247
—
1,028
3
Commercial real estate 272
431
—
273
3
Commercial 299
665
—
309
2
Home equity 52
190
—
54
—
Consumer —
—
—
—
—
HPFC —
—
—
—
—
Ending balance 1,689
2,533
—
1,664
8
Total impaired loans $ 4,355
$ 5,199
$ 447
$ 4,417
$ 33
March 31, 2019:
With an allowance recorded:

Residential real estate $ 3,454
$ 3,454
$ 553
$ 3,462
$ 30
Commercial real estate 131
131
27
131
1
Commercial —
—
—
278
—
Home equity 828
828
347
573
—
Consumer —
—
—
—
—
HPFC —
—
—
—
—
Ending Balance 4,413
4,413
927
4,444
31
Without an allowance recorded:

Residential real estate 1,282
1,406
—
1,286
10
Commercial real estate 279
455
—
539
3
Commercial 223
286
—
226
2
Home equity 67
265
—
96
—
Consumer —
—
—
—
—
HPFC —
—
—
—
—
Ending Balance 1,851
2,412
—
2,147
15
Total impaired loans $ 6,264
$ 6,825
$ 927
$ 6,591
$ 46
In-Process Foreclosure Proceedings

For the
Year Ended
(In thousands)
Recorded
Investment

Unpaid
Principal
Balance

Related
Allowance

Average
Recorded
Investment

Interest
Income
Recognized
December 31, 2019:
With an allowance recorded:

Residential real estate $ 2,395
$ 2,395
$ 364
$ 2,989
$ 110
Commercial real estate 128
128
30
130
11
Commercial —
—
—
292
—
Home equity 318
318
69
522
—
Consumer —
—
—
—
—
HPFC —
—
—
—
—
Ending Balance 2,841
2,841
463
3,933
121
Without an allowance recorded:




Residential real estate 989
1,116
—
1,258
21
Commercial real estate 274
433
—
381
13
Commercial 319
685
—
238
7
Home equity 55
192
—
115
—
Consumer —
—
—
1
—
HPFC —
—
—
—
—
Ending Balance 1,637
2,426
—
1,993
41
Total impaired loans $ 4,478
$ 5,267
$ 463
$ 5,926
$ 162

For the three months ended March 31, 2020 and 2019, the Company sold $69.2 million and $28.0 million, respectively, of fixed rate residential mortgage loans on the secondary market, which resulted in gains on the sale of loans (net of costs) of $1.5 million and $826,000, respectively.

At March 31, ~~2020~~2021 and December 31, ~~2019,~~2020, the Company had ~~certain residential mortgage loans with a principal balance of $28.4~~$1.1 million and $11.9 million, respectively, designated as held for sale. The Company has elected the fair value option of accounting for its loans held for sale, and at March 31, 2020 and December 31, 2019, recorded an unrealized loss of $626,000 and $61,000, respectively. For the three months ended March 31, 2020 and 2019, the net change in unrealized losses (gains) on loans held for sale recorded within mortgage banking income, net, on the Company's consolidated statements of income was $565,000 and ($4,000), respectively.

The Company has forward delivery commitments with a secondary market investor on each of its loans held for sale at March 31, 2020 and December 31, 2019. Refer to Note 8 for further discussion of the Company's forward delivery commitments.

~~In-Process Foreclosure Proceedings:~~

~~At March 31, 2020 and December 31, 2019, the Company had $1.4 million and $1.3~~$1.5 million, respectively, of consumer mortgage loans secured by residential real estate properties for which foreclosure proceedings were in process. Due to the COVID-19 pandemic, the Company has been abiding by state issued mandates requiring a temporary moratorium on foreclosures. The Company ~~continues~~will continue to ~~be focused on working~~work these consumer mortgage loans through the foreclosure process ~~to resolution; however,~~once the ~~foreclosure process~~moratorium is lifted, which typically ~~will take~~takes 18 to 24 ~~months due to the State of Maine foreclosure laws.~~months.

FHLB ~~Advances:~~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 ~~$1.4~~$1.3 billion at March 31, ~~2020~~2021 and December 31, ~~2019.~~2020.

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

NOTE 5 – BORROWINGS

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

(In thousands) March 31,
2020
December 31,
2019
Short-Term Borrowings:

Customer repurchase agreements $ 265,997
$ 237,984
FHLBB borrowings 50,000
25,000
Overnight borrowings 10,725
5,825
Total short-term borrowings $ 326,722
$ 268,809
Long-Term Borrowings:

FHLBB borrowings $ 35,000
$ 10,000
Total long-term borrowings $ 35,000
$ 10,000

NOTE 6 – REPURCHASE AGREEMENTS

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

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

Customer Repurchase Agreements(1)(2):

(In thousands)
March 31,
2020

December 31,
2019
Customer Repurchase Agreements⁽¹⁾⁽²⁾:

Collateralized mortgage obligations issued or guaranteed by U.S. government-sponsored enterprises $ 147,529
$ 118,969
Mortgage-backed securities issued or guaranteed by U.S. government-sponsored enterprises 116,852
117,654
Obligations of states and political subdivisions 1,616
1,361
Total $ 265,997
$ 237,984
(1) Presented within short-term borrowings on the consolidated statements of condition.

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

At March 31, ~~2020~~2021 and December 31, ~~2019,~~2020, certain customers held CDs totaling $1.0 million, that were collateralized by CMO and MBS securities that were overnight repurchase agreements.

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

NOTE 7 – COMMITMENTS AND CONTINGENCIES

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

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

(In thousands)
March 31,
2020

December 31,
2019
Commitments to extend credit $ 764,368
$ 734,649
Standby letters of credit 5,002
5,211
Total $ 769,370
$ 739,860

The Company’s commitments to extend credit from its lending activities do not necessarily represent future cash requirements since certain of these instruments may expire without being funded and others may not be fully drawn upon. These commitments are subject to the Company’s credit approval process, including an evaluation of the customer’s creditworthiness and related collateral requirements. Commitments generally have fixed expiration dates or other termination clauses. ~~Of the total commitments to extend credit, $272.5 million and $274.6 million were unconditionally cancellable by the Company at March 31, 2020 and December 31, 2019, respectively.~~

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

The Company establishes an ACL on off-balance sheet credit exposures on its contractual off-balance sheet commitments, except those that are unconditionally cancellable by the Company, of $2.5 million and $2.6 million as of March 31, 2021 and December 31, 2020, respectively. The ACL on off-balance sheet credit exposures was presented within accrued interest and other liabilities on the consolidated statements of condition.

For the three months ended March 31, 2021 and 2020, the (credit) provision for credit losses on off-balance sheet credit exposures was ($102,000) and $3,000, respectively.

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

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

~~As of March 31, 2020 and December 31, 2019, the~~The Company did ~~not~~0t have any material loss contingencies that were provided for and/or that are required to be ~~disclosed.~~disclosed as of March 31, 2021 and December 31, 2020.

NOTE 8 – DERIVATIVES AND HEDGING

The Company ~~uses~~is exposed to certain risk arising from both its business operations and economic conditions. The Company principally manages its exposures to a wide variety of business and operational risks through management of its core business activities. The Company manages economic risks, including interest rate, liquidity, and credit risk primarily by managing the

amount, sources, and duration of its assets and liabilities and the use of derivative financial instruments. Specifically, the Company enters into derivative financial instruments ~~for~~to manage exposures that arise from business activities that result in the receipt or payment of future known and uncertain cash amounts, the value of which are determined by interest rates.

Derivatives Designated as Hedging Instruments - Cash Flow Hedges of Interest Rate Risk

Interest Rate Contracts

The Company’s objectives in using interest rate derivatives are to add stability to interest income and expense and to manage its exposure to interest rate movements. To accomplish this objective, the Company primarily uses interest rate swaps as part of its interest rate risk management ~~purposes (primarily~~strategy. Interest rate swaps designated as cash flow hedges involve the receipt of variable amounts from a counterparty in exchange for the Company making fixed-rate payments or the receipt of fixed-rate amounts from a counterparty in exchange for the Company making variable-rate payments over the life of the agreements without exchange of the underlying notional amount. For the three months ended March 31, 2021 and 2020, such derivatives were used to hedge the variable cash flows associated with existing variable-rate assets or liabilities or forecasted issuances of debt.

For derivatives designated and that qualify as cash flow hedges of interest rate ~~risk)~~risk, the gain or loss on the derivative is recorded in AOCI and ~~not for trading~~subsequently reclassified into interest expense or ~~speculative purposes.~~interest income in the same period(s) during which the hedged transaction affects earnings. Amounts reported in AOCI related to derivatives will be reclassified to interest expense or interest income as interest payments are made or received on the Company’s variable-rate liabilities or assets. The Company ~~controls~~estimates that an additional $2.2 million will be reclassified as an increase to interest expense and an additional $1.6 million will be reclassified as an increase to interest income over the ~~credit~~next 12 months.

Derivatives not Designated as Hedges

Derivatives not designated as hedges are not speculative and result from a service the Company provides to certain customers. The Company executes interest rate swaps with commercial banking customers to facilitate their respective risk management strategies. Those interest rate swaps are simultaneously hedged by offsetting derivatives that the Company executes with a third party, such that the Company minimizes its net risk exposure resulting from such transactions. As the interest rate derivatives associated with ~~these derivative financial instruments through collateral, credit approvals and monitoring procedures.~~

~~Derivative financial instruments are carried at fair value on~~this program do not meet the ~~consolidated statements of condition. The~~strict hedge accounting ~~for~~requirements, changes in the fair value of ~~a derivative instrument is dependent upon whether or not it has been designated as a hedge for accounting purposes, and, if so,~~both the ~~type of hedge it has been designated as. The changes in fair value of the Company's derivative instruments not designated as hedges are accounted for within the consolidated statements of income.~~

Quarterly, in conjunction with financial reporting, each cash flow hedge is assessed for ineffectiveness. To the extent ineffectiveness is identified, this amount is recorded within the consolidated statements of income. The gain or loss on the effective portion of the cash flow hedge is reclassified from AOCI into interest within the consolidated statements of income in the period the hedged transaction affects earnings.

~~Derivatives Not Designated as Hedges~~

~~Customer Loan Swaps~~

The Company will enter into interest rate swaps with its commercial customers 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 fixed rate to a variable rate to manage its interest rate exposure effectively. 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 its consolidated statements of income. Customer loan swaps are presented 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 ~~loans swaps with each party for the dates indicated:~~

(In thousands, except number of positions) March 31, 2020 December 31, 2019
Presentation on Consolidated Statements of Condition Number of Positions Notional Amount Fair Value Number of Positions Notional Amount Fair Value
Receive fixed, pay variable Accrued interest and other liabilities —
$ —
$ —
10
$ 45,243
$ (514 )
Receive fixed, pay variable Other assets 85
408,545
45,220
75
366,351
17,756
Pay fixed, receive variable (Accrued interest and other liabilities) / other assets 85
408,545
(45,220 ) 85
411,594
(17,242 )
Total 170
$ 817,090
$ —
170
$ 823,188
$ —

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 mitigates its institutional counterparty credit risk exposure by limiting the institutions for which it will enter into interest swap arrangements through an approved listing by its Board of Directors.

The Company has entered into a master netting arrangement with its counterparty and settles payments with the counterparty as necessary. The Company's arrangement with its institutional counterparty requires it to post cash or other assets as collateral for its customer loan swap contracts in a net liability position based on their aggregate fair valuederivatives and the ~~Company's credit rating. The Company may also receive cash collateral for contracts~~offsetting derivatives are recognized directly in a net asset position as requested. At March 31, 2020 and December 31, 2019 the Company posted $46.2 million and $18.4 million, respectively, of cash to the counterparty as collateral on its customer loan swap contracts which was presented within other assets on the consolidated statements of condition. Refer to Note 9 for further discussion of master netting arrangements and presentation within the Company's consolidated financial statements.earnings.

Fixed-Rate Mortgage Interest Rate Lock Commitments

As part of the origination process of a residential loan, the Company may enter into rate lock agreements with its borrower, which is considered an interest rate lock commitment. If the Company intends to sell the loan upon origination, it will account for the interest rate lock commitment as a derivative. ~~The Company's pipeline of mortgage loans with fixed-rate interest rate lock commitments for which it intends to sell the loan upon origination was as follows for the dates indicated:~~

March 31, 2020 December 31, 2019
(In thousands) Presentation on Consolidated Statements of Condition Notional Amount Fair Value Notional Amount Fair Value
Fixed-rate mortgage interest rate locks Other assets $ 91,943
$ 2,241
$ 27,087
$ 480
Fixed-rate mortgage interest rate locks Accrued interest and other liabilities 36,538
(264 ) 2,519
(18 )
Total $ 128,481
$ 1,977
$ 29,606
$ 462

For the three months ended March 31, 2020 and 2019, the net unrealized gain from the change in fair value on the Company's fixed-rate mortgage rate locks reported within mortgage banking income, net, on the consolidated statements of income was $1.5 million and $181,000, respectively.

Forward Delivery Commitments

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

The following table presents the fair value of the Company's ~~forward delivery commitments~~derivative financial instruments as well as their classification on ~~loans held for sale~~the consolidated statements of condition as of the dates indicated:

Interest rate contracts(1)

Customer loan swaps(1)

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

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


(Dollars in thousands)	Amount of Gain (Loss) Recognized in OCI on Derivative		Amount of Gain (Loss) Recognized in OCI Included Component		Amount of Gain (Loss) Recognized in OCI Excluded Component		Location of Gain (Loss) Recognized from AOCI into Income	Amount of Gain (Loss) Reclassified from AOCI into Income		Amount of Gain (Loss) Reclassified from AOCI into Income Included Component		Amount of Gain (Loss) Reclassified from AOCI into Income Excluded Component
Derivatives in Cash Flow Hedge Relationships
For the three months ended March 31, 2021
Interest rate contracts	$	(802)	$	(802)	$	0	Interest and fees on loans	$	392	$	392	$	0
Interest rate contracts	7,194		7,194		0		Interest on deposits	(79)		(79)		0
							Interest on borrowings	(77)		(77)
							Interest on subordinated debentures	(422)		(422)
Total	$	6,392	$	6,392	$	0		$	(186)	$	(186)	$	0

For the three months ended March 31, 2020
Interest rate contracts	$	(6,309)	$	(6,309)	$	0	Interest and fees on loans	$	52	$	52	$	0
Interest rate contracts	5,160		5,160		0		Interest on deposits	(4)		(4)		0
							Interest on borrowings	4		4
							Interest on subordinated debentures	(240)		(240)
Total	$	(1,149)	$	(1,149)	$	0		$	(188)	$	(188)	$	0

March 31, 2020 December 31, 2019
(In thousands) Presentation on Consolidated Statements of Condition Notional Amount Fair Value Notional Amount Fair Value
Forward delivery commitments ("best effort") Other Assets $ 26,786
$ 1,185
$ 10,846
$ 312
Forward delivery commitments ("best effort") Accrued interest and other liabilities 1,570
(30 ) 1,069
(15 )
Total $ 28,356

$ 1,155
$ 11,915
$ 297

~~For~~The table below presents the ~~three months ended March 31, 2020 and 2019, the net unrealized gain from the change in fair value on the Company's forward delivery commitments reported within mortgage banking income, net,~~effect of cash flow hedge accounting on the consolidated statements of income ~~was $858,000 and $83,000, respectively.~~

~~Derivatives Designated as Hedges~~

~~Interest Rate Swap on Loans~~

In 2019, the Company entered into a $100.0 million interest rate swap contract with a counterparty to manage interest rate risk associated with its variable-rate loans. The Company has entered into a master netting arrangement with its institutional counterparty and settles payments monthly on a net basis.

The arrangement with the institutional counterparty requires it to post collateral for its interest rate swaps on loans and borrowings when they are in a net liability position based on their fair values. If the interest rate swaps are in a net asset position based on their fair values, the counterparty will post collateral to the Company as requested. At March 31, 2020, the institutional counterparty posted $3.8 million of cash as collateral on its interest rate swaps on loans and borrowings, which was presented within interest-bearing deposits in other banks as restricted cash with a matching liability within accrued interest and other liabilities on the consolidated statements of condition. At December 31, 2019, the counterparty posted $560,000 as collateral on its interest rate swap on loans. Refer to Note 9 for further discussion of master netting arrangements and presentation within the Company's consolidated financial statements.

~~The details of the interest rate swap~~ for the ~~dates indicated were as follows:~~periods indicated:

(Dollars in thousands) March 31, 2020 December 31, 2019
Trade
Date Maturity Date Variable Index
Paid Fixed Rate
Received
Presentation on Consolidated
Statements of Condition
Notional
Amount
Fair
Value
Notional
Amount
Fair
Value
6/12/2019 6/10/2024
1-Month
USD LIBOR
1.693% Other assets $ 100,000
$ 5,591
$ 100,000
$ 483

~~For the three months ended March 31, 2020, the Company did not record any ineffectiveness within the consolidated statements of income.~~

Net payments received from the institutional counterparty for the three months ended March 31, 2020 were $52,000, and were classified as cash flows from operating activities within the consolidated statements of cash flows.

~~Interest Rate Swaps on Borrowings~~

In March 2020, the Company entered into two $50.0 million interest rate swap arrangements with an institutional counterparty to mitigate interest rate risk. The Company has entered into a master netting arrangement with the institutional counterparty and settles payments on a net basis, monthly for the Federal Funds Effective Rate swap and quarterly for the 3-Month USD LIBOR swap.

~~The details of the Company's interest rate swaps on borrowings for the dates indicated were as follows:~~

(Dollars in thousands) March 31, 2020
Trade
Date Maturity Date Variable Index
Received Fixed Rate
Paid
Presentation on Consolidated
Statements of Condition
Notional
Amount
Fair
Value
3/2/2020 3/1/2023 Fed Funds Effective Rate 0.705% Accrued interest and other liabilities $ 50,000
$ (853 )
3/26/2020 3/26/2030
3-Month
USD LIBOR
0.857% Accrued interest and other liabilities 50,000
(762 )
$ 100,000
$ (1,615 )

~~For the three months ended March 31, 2020, the Company did not record any ineffectiveness within the consolidated statements of income.~~

~~Junior Subordinated Debt Interest Rate Swaps~~

The Company entered into five interest rate swap agreements with an institutional counterparty to manage interest rate risk associated with the Company's variable rate borrowings. The Company entered into a master netting arrangement with its institutional counterparty and settles payments quarterly on a net basis. The interest rate swap arrangements contain provisions that require the Company to post cash or other assets as collateral with the counterparty for contracts that are in a net liability position based on their aggregate fair value and the Company’s credit rating. If the interest rate swaps are in a net asset position based on their aggregate fair value, the institutional counterparty will post collateral to the Company as requested. At March 31, 2020 and December 31, 2019, the Company posted $13.3 million and $8.8 million, respectively, of cash as collateral to the institutional counterparty, which was presented within other assets on the consolidated statements of financial condition. Refer

~~to Note 9 for further discussion of master netting arrangements and presentation within the Company's consolidated financial statements.~~

~~The details of the junior subordinated debt interest rate swaps for the dates indicated were as follows:~~

(Dollars in thousands) March 31, 2020 December 31, 2019
Trade
Date Maturity
Date Variable Index
Received Fixed Rate
Paid
Presentation on Consolidated
Statements of Condition

Notional
Amount

Fair
Value

Notional
Amount

Fair
Value
3/18/2009 6/30/2021 3-Month USD LIBOR 5.09% Accrued interest and other liabilities $ 10,000
$ (396 ) $ 10,000
$ (299 )
7/8/2009 6/30/2029 3-Month USD LIBOR 5.84% Accrued interest and other liabilities 10,000
(3,494 ) 10,000
(2,318 )
5/6/2010 6/30/2030 3-Month USD LIBOR 5.71% Accrued interest and other liabilities 10,000
(3,686 ) 10,000
(2,384 )
3/14/2011 3/30/2031 3-Month USD LIBOR 4.35% Accrued interest and other liabilities 5,000
(1,993 ) 5,000
(1,279 )
5/4/2011 7/7/2031 3-Month USD LIBOR 4.14% Accrued interest and other liabilities 8,000
(3,073 ) 8,000
(1,907 )
$ 43,000
$ (12,642 ) $ 43,000
$ (8,187 )

~~For the three months ended March 31, 2020 and 2019, the Company did not record any ineffectiveness on these cash flow hedges within the consolidated statements of income.~~

Net payments to the counterparty for the three months ended March 31, 2020 and 2019 were $240,000 and $152,000, respectively, and were classified as cash flows from operating activities in the Company's consolidated statements of cash flows.

The table below presents the effect of the ~~Company’s~~Company's derivative financial instruments ~~included in OCI and current earnings~~that are not designated as hedging instruments on the consolidated statements of income for the periods indicated:


		Amount of Gain Recognized in Income
		Three Months Ended March 31,
(Dollars in thousands)	Location of Gain Recognized in Income	2021		2020
Fixed-rate mortgage interest rate lock commitments	Mortgage banking income, net	$	945	$	1,515
Forward delivery commitments	Mortgage banking income, net	482		858
Total		$	1,427	$	2,373

For The
Three Months Ended
March 31,
(In thousands) 2020 2019
Derivatives designated as cash flow hedges:
Effective portion of unrealized losses recognized within OCI during the period, net of tax $ (902 ) $ (925 )
Net reclassification adjustment for effective portion of cash flow hedges included in interest expense, gross $ 240
$ 119
Net reclassification adjustment for effective portion of cash flow hedges included in interest income, gross $ (52 ) $ —

Credit Risk-Related Contingent Features

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

The Company ~~expects approximately $577,000~~has agreements with its derivative counterparties that contain a provision where if the Company defaults on any of its indebtedness, including default where repayment of the indebtedness has not been accelerated by the lender, then the Company could also be declared in default on its derivative obligations. In addition, the Company also has agreements with certain of its derivative counterparties that contain a provision where if the Company fails to maintain its status as a well- capitalized institution, then the counterparty could terminate the derivative position(s) and the Company could be ~~reclassified from AOCI, related~~required to settle its obligations under the Company’s cash flow hedges, in the next 12 months, decreasing net interest income on the consolidated statements of income. This reclassification is due to anticipated payments that will be made on the swaps based upon the forward curve asagreements.

As of March 31, ~~2020.~~2021 and December 31, 2020, the fair value of derivatives in a net liability position, which includes accrued interest but excludes any adjustment for non-performance risk, related to these agreements was $31.4 million and $50.5 million, respectively. As of March 31, 2021 and December 31, 2020, the Company has minimum collateral posting thresholds with certain of its derivative counterparties and has posted cash collateral of $35.5 million and $57.5 million, respectively. If the Company had breached any of these provisions at March 31, 2021 or December 31, 2020, it could have been required to settle its obligations under the agreements at their termination value of $31.4 million and $50.5 million, respectively.

NOTE 9 – BALANCE SHEET OFFSETTING

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

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


							Gross Amount Not Offset in the Consolidated Statements of Condition														Gross Amount Not Offset in the Consolidated Statements of Condition
(In thousands)	Gross Amount Recognized in the Consolidated Statements of Condition		Gross Amount Offset in the Consolidated Statements of Condition		Net Amount Presented in the Consolidated Statements of Condition		Financial Instruments Pledged (Received)⁽¹⁾		Cash Collateral Pledged (Received)⁽¹⁾			Net Amount		(In thousands)	Gross Amount Recognized in the Consolidated Statements of Condition		Gross Amount Offset in the Consolidated Statements of Condition		Net Amount Presented in the Consolidated Statements of Condition		Financial Instruments Pledged (Received)(1)		Cash Collateral Pledged (Received)(1)		Net Amount
March 31, 2020
March 31, 2021														March 31, 2021
Derivative assets:														Derivative assets:
Customer loan swaps - commercial customer⁽²⁾	$	45,220	$	—	$	45,220	$	—	$	—		$	45,220	Customer loan swaps - commercial customer(2)	$	25,164	$	0	$	25,164	$	0	$	0	$	25,164
Interest rate swap on loans⁽³⁾	5,591		—		5,591		—		(5,435		)	156
Interest rate contracts(3)														Interest rate contracts(3)	9,188		0		9,188		0		(8,943)		245

Total	$	50,811	$	—	$	50,811	$	—	$	(5,435	)	$	45,376	Total	$	34,352	$	0	$	34,352	$	0	$	(8,943)	$	25,409
Derivative liabilities:														Derivative liabilities:
Customer loan swaps - dealer bank	$	45,220	$	—	$	45,220	$	—	$	45,220		—
Junior subordinated debt interest rate swaps	12,642		—		12,642		—		12,642			—
Interest rate swaps on borrowings⁽³⁾	1,615		—		1,615		—		1,615			—
Customer loan swaps - dealer bank(3)														Customer loan swaps - dealer bank(3)	$	25,164	$	0	$	25,164	$	0	$	25,164	$	0
Interest rate contracts(3)														Interest rate contracts(3)	8,520		0		8,520		0		8,520		0

Total	$	59,477	$	—	$	59,477	$	—	$	59,477		$	—	Total	$	33,684	$	0	$	33,684	$	0	$	33,684	$	0
Customer repurchase agreements	$	265,997	$	—	$	265,997	$	265,997	$	—		$	—	Customer repurchase agreements	$	186,408	$	0	$	186,408	$	186,408	$	0	$	0
December 31, 2019
December 31, 2020														December 31, 2020
Derivative assets:														Derivative assets:
Customer loan swaps - commercial customer⁽²⁾	17,756		—		17,756		—		—			17,756		Customer loan swaps - commercial customer(2)	$	39,627	$	0	$	39,627	$	0	$	0	$	39,627
Interest rate swap on loans	483		—		483		—		(483		)	—
Interest rate contracts(3)														Interest rate contracts(3)	5,731		0		5,731		0		(5,595)		136

Total	$	18,239	$	—	$	18,239	$	—	$	(483	)	$	17,756	Total	$	45,358	$	0	$	45,358	$	0	$	(5,595)	$	39,763
Derivative liabilities:														Derivative liabilities:
Customer loan swaps - dealer bank	$	17,242	$	—	$	17,242	$	—	$	17,242		$	—
Junior subordinated debt interest rate swaps	$	8,187	$	—	$	8,187	$	—	$	8,187		$	—
Customer loan swaps - commercial customer⁽²⁾	514		—		514		—		—			514
Customer loan swaps - dealer bank(3)														Customer loan swaps - dealer bank(3)	$	39,627	$	0	$	39,627	$	0	$	39,627	$	0
Interest rate contracts(3)														Interest rate contracts(3)	11,625		0		11,625		0		11,625		0

Total	$	25,943	$	—	$	25,943	$	—	$	25,429		$	514	Total	$	51,252	$	0	$	51,252	$	0	$	51,252	$	0
Customer repurchase agreements	$	237,984	$	—	$	237,984	$	237,984	$	—		$	—	Customer repurchase agreements	$	162,439	$	0	$	162,439	$	162,439	$	0	$	0

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

(2) The Company manages its net exposure on its commercial customer loan swaps by obtaining collateral as part of the normal loan policy and underwriting practices.

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

NOTE 10 – REGULATORY CAPITAL REQUIREMENTS

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

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

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

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

The Company and Bank's risk-based capital ratios exceeded regulatory ~~guidelines,~~requirements, including the capital conservation buffer, at March 31, ~~2020~~2021 and December 31, ~~2019,~~2020, and the Bank's capital ratios met the requirements for it to be considered "well capitalized" under prompt ~~correct~~corrective action provisions for each period. There were no changes to the Company or Bank's capital ratios that occurred subsequent to March 31, ~~2020,~~2021 that would change the Company or Bank's regulatory capital categorization. The following table presents the Company and Bank's regulatory capital ratios at the periods indicated:

Common equity Tier 1 risk-based capital ratio(1)

Tier 1 leverage capital ratio(1)

March 31,
2020 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,
2019 Minimum Regulatory Capital Required for Capital Adequacy plus Capital Conservation Buffer Minimum Regulatory Provision To Be "Well Capitalized" Under Prompt Corrective Action Provisions
(Dollars in thousands) Amount Ratio Amount Ratio
Camden National Corporation:
Total risk-based capital ratio $ 458,376
13.81 % 10.50 % N/A
$ 455,702
14.44 % 10.50 % N/A
Tier 1 risk-based capital ratio 416,831
12.56 % 8.50 % N/A
415,511
13.16 % 8.50 % N/A
Common equity Tier 1 risk-based capital ratio 373,831
11.27 % 7.00 % N/A
372,511
11.80 % 7.00 % N/A
Tier 1 leverage capital ratio 416,831
9.53 % 4.00 % N/A
415,511
9.55 % 4.00 % N/A
Camden National Bank:
Total risk-based capital ratio $ 432,673
13.08 % 10.50 % 10.00 % $ 423,540
13.45 % 10.50 % 10.00 %
Tier 1 risk-based capital ratio 406,129
12.28 % 8.50 % 8.00 % 398,349
12.65 % 8.50 % 8.00 %
Common equity Tier 1 risk-based capital ratio 406,129
12.28 % 7.00 % 6.50 % 398,349
12.65 % 7.00 % 6.50 %
Tier 1 leverage capital ratio 406,129
9.33 % 4.00 % 5.00 % 398,349
9.19 % 4.00 % 5.00 %
(1) “Minimum Regulatory Provisions To Be ‘Well Capitalized’” are not formally defined under applicable banking regulations for bank holding companies.

In 2015, the Company issued $15.0 million of subordinated debentures, and in 2006 and 2008, it issued $43.0 million of junior subordinated debentures in connection with the issuance of trust preferred securities. Although the subordinated debentures and the junior subordinated debentures are recorded as liabilities on the Company's consolidated statements of condition, the Company is permitted, in accordance with applicable regulation, to include, subject to certain limits, each within its calculation of risk-based capital. At March 31, ~~2020~~2021 and December 31, ~~2019, $15.0~~2020, $12.0 million of subordinated debentures were included as Tier 2 capital and were included in the calculation of the Company's total risk-based capital, and, at March 31, ~~2020~~2021 and December 31, ~~2019,~~2020, $43.0 million of the junior subordinated debentures were included in Tier 1 and total risk-based capital for the Company. The Company's $15.0 million of subordinated debentures ~~are~~were subject to phase-out of 20% annually ~~beginning on~~after its ~~six~~five year anniversary, and 20% a year thereafter until it is fully phases out.

On April 16, 2021, the Company redeemed the $15.0 million of subordinated debentures, in full, at a redemption price equal to the principal amount of the notes plus accrued and unpaid interest. At March 31, 2021 and December 31, 2020, the Company's $15.0 million of subordinated debt provided $12.0 million of Tier 2 capital, or 38 basis points and 37 basis points, respectively, of the Total risk-based capital ratio. The Company's Total risk-based capital ratio exceeded regulatory requirements, including the capital conservation buffer, after the debentures were redeemed.

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

NOTE 11 – OTHER COMPREHENSIVE INCOME (LOSS)

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

Less: reclassified AOCI gain (loss) into interest expense(1)

Less: reclassified AOCI gain (loss) into interest income(2)

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

For The Three Months Ended
March 31, 2020
(In thousands)
Pre-Tax
Amount

Tax (Expense)
Benefit

After-Tax
Amount
AFS Securities:
Unrealized holdings gains $ 24,115
$ (5,185 ) $ 18,930
Net unrealized gains 24,115
(5,185 ) 18,930
Cash Flow Hedges:
Net decrease in fair value (1,149 ) 247
(902 )
Less: effective portion reclassified into interest expense⁽¹⁾
(240 ) 52
(188 )
Less: effective portion reclassified into interest income⁽²⁾
52
(12 ) 40
Net decrease in fair value (961 ) 207
(754 )
Postretirement Plans:
Net actuarial gain 175
(37 ) 138
Less: Amortization of net prior service credits⁽³⁾
6
(1 ) 5
Net gain on postretirement plans 169
(36 ) 133
Other comprehensive income $ 23,323
$ (5,014 ) $ 18,309
(1) Reclassified into interest on deposits, borrowings and/or subordinated debentures on the consolidated statements of income. Refer to Note 8 of the consolidated financial statements for further details.

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

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

For The Three Months Ended
March 31, 2019
(In thousands)
Pre-Tax
Amount

Tax (Expense)
Benefit

After-Tax
Amount
AFS Securities:
Unrealized holdings gains $ 13,884
$ (2,985 ) $ 10,899
Net unrealized gains 13,884
(2,985 ) 10,899
Cash Flow Hedges:
Net decrease in fair value (1,178 ) 253
(925 )
Less: effective portion reclassified into interest expense⁽¹⁾
(119 ) 25
(94 )
Net decrease in fair value (1,059 ) 228
(831 )
Postretirement Plans:
Net actuarial gain 67
(14 ) 53
Less: Amortization of net prior service credits⁽³⁾
6
(1 ) 5
Net gain on postretirement plans 61
(13 ) 48
Other comprehensive income $ 12,886
$ (2,770 ) $ 10,116

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

(In thousands)
Net Unrealized Gains (Losses) on AFS Securities⁽¹⁾

Net Unrealized Losses on Cash Flow Hedges⁽¹⁾

Defined Benefit Postretirement Plans⁽¹⁾

AOCI⁽¹⁾
Balance at December 31, 2018 $ (17,826 ) $ (4,437 ) $ (2,157 ) $ (24,420 )
Other comprehensive income (loss) before reclassifications 10,899
(925 ) 53
10,027
Less: Amounts reclassified from AOCI —
(94 ) 5
(89 )
Other comprehensive income (loss) 10,899
(831 ) 48
10,116
Balance at March 31, 2019 $ (6,927 ) $ (5,268 ) $ (2,109 ) $ (14,304 )

Balance at December 31, 2019 $ 3,250
$ (6,048 ) $ (3,470 ) $ (6,268 )
Other comprehensive income (loss) before reclassifications 18,930
(902 ) 138
18,166
Less: Amounts reclassified from AOCI —
(148 ) 5
(143 )
Other comprehensive income (loss) 18,930
(754 ) 133
18,309
Balance at March 31, 2020 $ 22,180
$ (6,802 ) $ (3,337 ) $ 12,041

NOTE 12 – REVENUE FROM CONTRACTS WITH CUSTOMERS

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

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


		Three Months Ended March 31,
(In thousands)	Location on Consolidated Statements of Income	2021		2020
Debit card interchange income	Debit card income	$	2,736	$	2,141
Services charges on deposit accounts	Service charges on deposit accounts	1,539		2,012
Fiduciary services income	Income from fiduciary services	1,526		1,502
Investment program income	Brokerage and insurance commissions	953		657
Other non-interest income	Other income	400		383
Total non-interest income within the scope of ASC 606		7,154		6,695
Total non-interest income not in scope of ASC 606		8,061		4,708
Total non-interest income		$	15,215	$	11,403

Three Months Ended March 31,
(In thousands) Income Statement Line Item 2020 2019
Debit card interchange income Debit card income $ 2,141
$ 2,010
Services charges on deposit accounts Service charges on deposit accounts 2,012
2,023
Fiduciary services income Income from fiduciary services 1,502
1,392
Investment program income Brokerage and insurance commissions 657
585
Other non-interest income Other income 383
383
Total non-interest income within the scope of ASC 606 6,695
6,393
Total non-interest income not in scope of ASC 606 4,708
2,996
Total non-interest income $ 11,403
$ 9,389

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

NOTE 13 – EMPLOYEE BENEFIT PLANS

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

The components of net periodic pension and postretirement benefit cost were as follow for the ~~periods ended~~ ~~March 31, 2020~~ ~~and~~ ~~2019, were as follows:~~following periods:

Supplemental Executive Retirement Plan:


(In thousands)		Three Months Ended March 31,
Net periodic pension cost	Location on Consolidated Statements of Income	2021		2020
Service cost	Salaries and employee benefits	$	126	$	116
Interest cost	Other expenses	97		115
Recognized net actuarial loss	Other expenses	195		156
Total		$	418	$	387

(In thousands) Three Months Ended
March 31,
Net periodic pension cost Income Statement Presentation 2020 2019
Service cost Salaries and employee benefits $ 116
$ 99
Interest cost Other expenses 115
131
Recognized net actuarial loss Other expenses 156
61
Total $ 387
$ 291

Other Postretirement Benefit Plan:


(In thousands)		Three Months Ended March 31,						(In thousands)		Three Months Ended March 31,
Net periodic postretirement benefit cost	Income Statement Presentation	2020			2019			Net periodic postretirement benefit cost	Location on Consolidated Statements of Income	2021		2020
Service cost	Salaries and employee benefits	$	7		$	12		Service cost	Salaries and employee benefits	$	7	$	7
Interest cost	Other expenses	31			37			Interest cost	Other expenses	26		31
Recognized net actuarial loss	Other expenses	19			6			Recognized net actuarial loss	Other expenses	29		19
Amortization of prior service credit	Other expenses	(6		)	(6		)	Amortization of prior service credit	Other expenses	(6)		(6)
Total		$	51		$	49		Total		$	56	$	51

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

Dividends and undistributed earnings allocated to participating securities(1)

Dilutive effect of stock-based awards(2)

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

Dividends and undistributed earnings allocated to participating securities⁽¹⁾

Dilutive effect of stock-based awards⁽²⁾

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

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

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

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 includes the number of additional common shares that would have been outstanding if potentially dilutive common shares were issued using the treasury stock method.

NOTE 15 – FAIR VALUE MEASUREMENT AND DISCLOSURE

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

GAAP permits an entity to choose to measure eligible financial instruments and other items at fair value. The Company has elected the fair value option for its loans held for sale. Electing the fair value option for loans held for sale enables the Company’s financial position to 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:

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:~~

Trading Securities: The fair value of ~~loans held for sale~~trading securities e is ~~determined on an individual loan basis~~reported using market quoted ~~secondary market~~ prices and ishas been classified as Level 2.1 as they are actively traded and no valuation adjustments have been applied.

Debt Securities: The fair value of investments in debt securities is reported utilizing prices provided by an independent pricing service based on recent trading activity and other observable information including, but not limited to, dealer quotes,

market spreads, cash flows, market interest rate curves, market consensus prepayment speeds, credit information, and the bond’s terms and conditions. The fair value of debt securities is classified as Level 2.

~~Equity Securities:~~Loans Held For Sale: The fair value of ~~equity securities in bank stock~~loans held for sale is ~~reported utilizing~~determined on an individual loan basis using quoted secondary market prices ~~based on recent trading activity~~ and ~~dealer quotes. These equity securities are traded on inactive markets and are~~is classified as Level 2.

Derivatives: The fair value of interest rate swaps is determined using inputs that are observable in the market place obtained from third parties including yield curves, publicly available volatilities, and floating indexes and, accordingly, are classified as Level 2 inputs. The credit value adjustments associated with derivatives utilize Level 3 inputs, such as estimates of current credit spreads to evaluate the likelihood of default by the Company and its counterparties. As of March 31, ~~2020~~2021 and December 31, ~~2019,~~2020, 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~~as sufficient collateral ~~postings.~~exists, mitigating the credit risk.

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

more significant input, and, although the Company's internal pull-through rate estimate is a Level 3 estimate, it is less significant to the ultimate valuation.

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

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


(In thousands)	Fair Value		Readily Available Market Prices (Level 1)		Observable Market Data (Level 2)		Company Determined Fair Value (Level 3)
March 31, 2021
Financial assets:
Trading securities	$	4,123	$	4,123	$	0	$	0
AFS debt securities:
Obligations of U.S. government sponsored enterprises	4,983		0		4,983		0
Obligations of states and political subdivisions	119,799		0		119,799		0
Mortgage-backed securities issued or guaranteed by U.S. government-sponsored enterprises	569,319		0		569,319		0
Collateralized mortgage obligations issued or guaranteed by U.S. government-sponsored enterprises	410,644		0		410,644		0
Subordinated corporate bonds	10,803		0		10,803		0
Loans held for sale	22,229		0		22,229		0
Customer loan swaps	25,164		0		25,164		0
Interest rate contracts	9,188		0		9,188		0

Fixed-rate mortgage interest rate lock commitments	1,465		0		1,465		0
Forward delivery commitments	607		0		607		0
Financial liabilities:
Trading securities	$	4,123	$	4,123	$	0	$	0

Customer loan swaps	25,164		0		25,164		0

Interest rate contracts	8,520		—		8,520		0
Fixed-rate mortgage interest rate lock commitments	160		—		160		0
Forward delivery commitments	10		—		10		0
December 31, 2020
Financial assets:
Trading securities	$	4,161	$	4,161	$	0	$	0
AFS debt securities:
Obligations of states and political subdivisions	127,120		0		127,120		0
Mortgage-backed securities issued or guaranteed by U.S. government-sponsored enterprises	566,618		0		566,618		0
Collateralized mortgage obligations issued or guaranteed by U.S. government-sponsored enterprises	410,454		0		410,454		0
Subordinated corporate bonds	11,621		0		11,621		0
Loans held for sale	41,557		0		41,557		0
Customer loan swaps	39,627		0		39,627		0
Interest rate contracts	5,731		0		5,731		0


Fixed-rate mortgage interest rate lock commitments	608		0		608		0
Forward delivery commitments	311		0		311		0
Financial liabilities:
Trading securities	$	4,161	$	4,161	$	0	$	0
Customer loan swaps	39,627		0		39,627		0
Interest rate contracts	11,625		0		11,625		0


Fixed-rate mortgage interest rate lock commitments	248		0		248		0
Forward delivery commitments	196		0		196		0

(In thousands)
Fair
Value

Readily
Available
Market
Prices
(Level 1)

Observable
Market
Data
(Level 2)

Company
Determined
Fair Value
(Level 3)
March 31, 2020

Financial assets:

Loans held for sale $ 27,730
$ —
$ 27,730
$ —
AFS investments:

Obligations of states and political subdivisions 126,880
—
126,880
—
Mortgage-backed securities issued or guaranteed by U.S. government-sponsored enterprises 488,049
—
488,049
—
Collateralized mortgage obligations issued or guaranteed by U.S. government-sponsored enterprises 334,615
—
334,615
—
Subordinated corporate bonds 10,587
—
10,587
—
Equity securities - bank stock 1,674
—
1,674
—
Customer loan swaps 45,220
—
45,220
—
Interest rate swap on loans 5,591
—
5,591
—
Fixed-rate mortgage interest rate lock commitments 2,241
—
2,241
—
Forward delivery commitments 1,185
—
1,185
—
Financial liabilities:

Junior subordinated debt interest rate swaps 12,642
—
12,642
—
Customer loan swaps 45,220
—
45,220
—
Interest rate swap on borrowings 1,615
—
1,615
—
Fixed-rate mortgage interest rate lock commitments 264
—
264
—
Forward delivery commitments 30
—
30
—
December 31, 2019

Financial assets:

Loans held for sale $ 11,854
$ —
$ 11,854
$ —
AFS investments:


Obligations of states and political subdivisions 118,083
—
118,083
—
Mortgage-backed securities issued or guaranteed by U.S. government-sponsored enterprises 463,386
—
463,386
—
Collateralized mortgage obligations issued or guaranteed by U.S. government-sponsored enterprises 325,905
—
325,905
—
Subordinated corporate bonds 10,744
—
10,744
—
Equity securities - bank stock 1,674
—
1,674
—
Customer loan swaps 17,756
—
17,756
—
Interest rate swap on loans 483
—
483
—
Fixed-rate mortgage interest rate lock commitments 480
—
480
—
Forward delivery commitments 312
—
312
—
Financial liabilities:

Junior subordinated debt interest rate swaps 8,187
—
8,187
—
Customer loan swaps 17,756
—
17,756
—
Fixed-rate mortgage interest rate lock commitments 18
—
18
—
Forward delivery commitments 15
—
15
—

The Company did not have any transfers between Level 1 and Level 2 of the fair value hierarchy during the three months ended March 31, ~~2020.~~2021. 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~~Expected credit losses on individually assessed loans deemed to be collateral dependent are valued based upon the lower of ~~interest and principal will not be made in accordance with the contractual terms~~amortized cost of the loan agreement are considered impaired. The Company's policy is to evaluate individually for impairment loans with a principal balance of $500,000 or more, that 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 net realizable value, which is the fair value of the underlying collateral less ~~estimated~~ costs to sell, to the carrying value of the loan. If the net realizable value 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 net realizable value. Accordingly, certain collateral-dependent impaired loans are subject to measurement at fair value on a non-recurring basis.sell. Management ~~has estimated~~estimates the fair values of these assets using Level 2 inputs, such as the fair value of collateral based on independent third-party market approach appraisals for collateral-dependent loans, and Level 3 inputs where circumstances warrant an adjustment to the appraised value based on the age of the appraisal and/or comparable sales, condition of the collateral, and market conditions.

Servicing Assets: The Company accounts for mortgage servicing assets at cost, subject to impairment testing. When the carrying value of a tranche exceeds fair value, a valuation allowance is established to reduce the carrying cost to fair value. Fair value is based on a valuation model that calculates the present value of estimated net servicing income. The Company obtains a third-party valuation based upon loan level data including note rate, type and term of the underlying loans. The model utilizes two significant unobservable inputs, namely loan prepayment assumptions and the discount rate used, to calculate the fair value of each tranche, and, as such, the Company has classified the model within Level 3 of the fair value hierarchy. ~~At March 31, 2020 and December 31, 2019, the mortgage servicing assets were not carried at fair value.~~

Non-Financial Instruments 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, goodwill and core deposit intangible assets.

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

Goodwill ~~and Core Deposit 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 occur, the associated goodwill is written-down to fair value and the impairment charge is recorded within non-interest expense in the consolidated statements of income. The Company conducts an annual impairment test of goodwill in the fourth quarter each year, or more frequently as necessary. There have been no indications or triggering events during the three months ended March 31, ~~2020,~~2021, for which management believes ~~that~~ it is more likely than not that goodwill is impaired. ~~Refer to Note 2 for further discussion.~~

Core Deposit Intangible Assets: The Company's core deposit intangible assets represent the estimated value of acquired customer relationships and are amortized over the estimated life of those relationships. Core deposit intangibles are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. There were no events or changes in circumstances for the three months ended March 31, ~~2020,~~2021, 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 for the dates indicated:


(In thousands)	Fair Value		Readily Available Market Prices (Level 1)		Observable Market Data (Level 2)		Company Determined Fair Value (Level 3)
March 31, 2021
Financial assets:
Collateral-dependent loans	$	210	$	0	$	0	$	210



December 31, 2020
Financial assets:
Servicing assets	$	1,010	$	0	$	0	$	1,010

Non-financial assets:
OREO	$	236	$	0	$	0	$	236

(In thousands)
Fair
Value

Readily
Available
Market
Prices
(Level 1)

Observable
Market
Data
(Level 2)

Company
Determined
Fair Value
(Level 3)
March 31, 2020

Financial assets:

Collateral-dependent impaired loans $ 110
$ —
$ —
$ 110
Non-financial assets:
OREO 94
—
—
94
December 31, 2019

Non-financial assets:
OREO $ 94
$ —
$ —
$ 94

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

(Dollars in thousands)

Fair Value

Valuation Methodology

Unobservable Input

Discount

March 31, 2021

Collateral-dependent loans:

Partially charged-off

210

Market approach appraisal of
collateral

Estimated selling costs

11%

December 31, 2020

Servicing assets

1,010

Discounted cash flow

Weighted-average constant prepayment rate

19%

Weighted average discount rate

10%

OREO

236

Market approach appraisal of
collateral

Management adjustment of appraisal

Estimated selling cost

11%

(Dollars in thousands) Fair Value Valuation Methodology Unobservable Input Discount
March 31, 2020
Collateral-dependent impaired loans:

Partially charged-off $ 110

Market approach appraisal of
   collateral

Management adjustment of
   appraisal
0% (0%)
Estimated selling costs 10% (10%)
OREO $ 94
Market approach appraisal of
collateral
Management adjustment of
   appraisal
18% (18%)
Estimated selling cost 13% (13%)
December 31, 2019

OREO $ 94

Market approach appraisal of
   collateral

Management adjustment of
   appraisal
18% (18%)
Estimated selling cost 13% (13%)

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


(In thousands)	Carrying Amount		Fair Value		Readily Available Market Prices (Level 1)		Observable Market Prices (Level 2)		Company Determined Market Prices (Level 3)
March 31, 2021
Financial assets:
HTM debt securities	$	1,295	$	1,396	$	0	$	1,396	$	0
Commercial real estate loans(1)(2)	1,365,306		1,325,614		0		0		1,325,614
Commercial loans(2)	360,989		357,306		0		0		357,306
SBA PPP loans(2)	169,320		174,409		0		0		174,409
Residential real estate loans(2)	1,048,672		1,057,713		0		0		1,057,713
Home equity loans(2)	238,310		237,736		0		0		237,736
Consumer loans(2)	18,674		16,764		0		0		16,764
Servicing assets	2,447		3,063		0		0		3,063
Financial liabilities:
Time deposits	$	396,072	$	397,667	$	0	$	397,667	$	0
Short-term borrowings	186,408		186,390		0		186,390		0

Subordinated debentures	59,331		46,697		0		46,697		0
December 31, 2020
Financial assets:
HTM debt securities	$	1,297	$	1,411	$	0	$	1,411	$	0
Commercial real estate loans(1)(2)	1,344,860		1,307,132		0		0		1,307,132
Commercial loans(2)	374,791		372,194		0		0		372,194
SBA PPP loans(2)	135,026		137,209		0		0		137,209
Residential real estate loans(2)	1,051,324		1,066,991		0		0		1,066,991
Home equity loans(2)	255,957		253,276		0		0		253,276
Consumer loans(2)	19,999		18,102		0		0		18,102
Servicing assets	2,196		1,437		0		0		1,437
Financial liabilities:
Time deposits	$	457,694	$	460,278	$	0	$	460,278	$	0
Short-term borrowings	162,439		162,420		0		162,420		0
Long-term borrowings	25,000		25,442		0		25,442		0
Subordinated debentures	59,331		46,475		0		46,475		0

(In thousands)
Carrying
Amount
Fair Value
Readily
Available
Market
Prices
(Level 1)

Observable
Market
Prices
(Level 2)

Company
Determined
Market
Prices
(Level 3)
March 31, 2020
Financial assets:

HTM securities $ 1,300
$ 1,358
$ —
$ 1,358
$ —
Residential real estate loans⁽¹⁾
1,058,315
1,070,839
—
—
1,070,839
Commercial real estate loans⁽¹⁾
1,286,486
1,246,184
—
—
1,246,184
Commercial loans⁽¹⁾⁽²⁾
458,790
455,364
—
—
455,364
Home equity loans⁽¹⁾
303,746
292,371
—
—
292,371
Consumer loans⁽¹⁾
23,904
22,034
—
—
22,034
Servicing assets 903
1,418
—
—
1,418
Financial liabilities:



Time deposits $ 595,061
$ 598,911
$ —
$ 598,911
$ —
Short-term borrowings 326,722
326,678
—
326,678
—
Long-term borrowings 35,000
34,923
—
34,923
—
Subordinated debentures 59,155
44,327
—
44,327
—
December 31, 2019
Financial assets:
HTM securities $ 1,302
$ 1,359
$ —
$ 1,359
$ —
Residential real estate loans⁽¹⁾
1,064,532
1,066,544
—
—
1,066,544
Commercial real estate loans⁽¹⁾
1,230,983
1,196,297
—
—
1,196,297
Commercial loans⁽¹⁾⁽²⁾
438,716
431,892
—
—
431,892
Home equity loans⁽¹⁾
310,356
293,565
—
—
293,565
Consumer loans⁽¹⁾
25,265
23,355
—
—
23,355
Servicing assets 877
1,496
—
—
1,496
Financial liabilities:



Time deposits $ 595,549
$ 594,881
$ —
$ 594,881
$ —
Short-term borrowings 268,809
268,631
—
268,631
—
Long-term borrowings 10,000
10,002
—
10,002
—
Subordinated debentures 59,080
50,171
—
50,171
—
(1)    Commercial real estate loan includes non owner-occupied and owner-occupied properties.


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


~~(2)~~	~~Includes the HPFC loan portfolio.~~

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

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

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

~~NOTE 16 – SUBSEQUENT EVENTS~~

Subsequent to March 31, 2020, global, national and local economies and financial markets have continued to be negatively impacted by the effects of the worldwide COVID-19 pandemic. The Company is actively working through this unprecedented situation. The impact the pandemic may have on the Company’s consolidated financial statements is unknown at this time.

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

AND RESULTS OF OPERATIONS

FORWARD-LOOKING STATEMENTS

The discussions set forth below and in the documents we incorporate by reference herein contain certain statements that may be considered forward-looking statements under the Private Securities Litigation Reform Act of 1995, as amended, including certain plans, exceptions, goals, projections, and statements, which are subject to numerous risks, assumptions, and uncertainties. Forward-looking statements can be identified by the use of the words “believe,” “expect,” “anticipate,” “intend,” “estimate,” “assume,” “plan,” “target,” 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~~credit losses or a reduced demand for the Company’s credit or fee-based products and services;

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

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

•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 which could lead to impairment in the value of securities in the Company's investment portfolio;

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

•changes in consumer spending and savings habits;

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

•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.

In addition, statements about the potential effects of the COVID-19 pandemic on the Company's businesses and results of operations and financial conditions may constitute forward-looking statements. Such statements may include, but are not limited to, statements concerning:

•the continued effectiveness of our Pandemic Work Group;

•the continuing ability of our employees to work remotely;

•our continuing ability to staff our branches and keep our branches open;

•the continuing strength of our capital and liquidity positions;

•our continued ability to access sources of contingent liquidity;

•the continuing strength of the asset quality in our lending portfolios; and

•the potential effectiveness of relief measures and programs for customers affected by COVID-19.

These statements are subject to the risk that the actual effects may differ, possibly materially, from what is reflected in those forward-looking statements due to factors and future developments that are uncertain, unpredictable and in many cases beyond our control, including the scope and duration of the pandemic, actions taken by governmental authorities in response to the pandemic, and the direct and indirect impact of the pandemic on our customers, third parties and the Company.

You should carefully review all of these factors, and be aware that there may be other factors that could cause differences, including the risk factors listed in our Annual Report on Form 10-K for the year ended December 31, ~~2019,~~2020, 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.

NON-GAAP FINANCIAL MEASURES AND RECONCILIATION TO GAAP

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

Return on Average Tangible Equity: Return on average tangible equity is the ratio of (i) net income, adjusted for (a) tax effected amortization of core deposit intangible assets and (b) goodwill impairment, as necessary, to (ii) average shareholders' equity, adjusted for average goodwill and ~~other~~core deposit intangible assets. This adjusted financial ratio reflects a shareholders' return on tangible capital deployed in our business and is a common measure within the financial services industry.


	Three Months Ended March 31,
(Dollars in thousands)	2021			2020
Net income, as presented	$	19,740		$	13,493
Add: amortization of core deposit intangible assets, net of tax(1)	130			134
Net income, adjusted for amortization of core deposit intangible assets	$	19,870		$	13,627
Average equity, as presented	$	533,645		$	480,174
Less: average goodwill and core deposit intangible assets	(97,463)			(98,143)
Average tangible equity	$	436,182		$	382,031
Return on average equity	15.00		%	11.30		%
Return on average tangible equity	18.47		%	14.35		%

Three Months Ended
March 31,
(Dollars in thousands) 2020 2019
Net income, as presented $ 13,493
$ 14,273
Add: amortization of intangible assets, net of tax⁽¹⁾
134
139
Net income, adjusted for amortization of intangible assets $ 13,627
$ 14,412
Average equity, as presented $ 480,174
$ 441,027
Less: average goodwill and other intangible assets (98,143 ) (98,838 )
Average tangible equity $ 382,031
$ 342,189
Return on average equity 11.30 % 13.13 %
Return on average tangible equity 14.35 % 17.08 %


~~(1)~~	(1) Assumed a 21% tax rate.

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


	Three Months Ended March 31,
(Dollars in thousands)	2021			2020
Non-interest expense, as presented	$	24,899		$	24,561
Less: prepayment penalty on borrowings	(514)			—
Adjusted non-interest expense	$	24,385		$	24,561
Net interest income, as presented	$	32,364		$	31,826
Add: effect of tax-exempt income(1)	271			280
Non-interest income, as presented	15,215			11,403



Adjusted net interest income plus non-interest income	$	47,850		$	43,509
Ratio of non-interest expense to total revenues(2)	52.33		%	56.82		%
Efficiency ratio	50.96		%	56.45		%

(1) Assumed a 21% tax rate.

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

Three Months Ended
March 31,
(Dollars in thousands) 2020 2019
Non-interest expense, as presented $ 24,561
$ 22,783
Net interest income, as presented $ 31,826
$ 31,895
Add: effect of tax-exempt income⁽¹⁾
280
244
Non-interest income, as presented 11,403
9,389
Adjusted net interest income plus non-interest income $ 43,509
$ 41,528
Ratio of non-interest expense to total revenues⁽²⁾
56.82 % 55.19 %
Efficiency ratio 56.45 % 54.86 %


~~(1)~~	~~Assumed a 21% tax rate.~~


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

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


	Three Months Ended March 31,
(In thousands)	2021		2020
Net interest income, as presented	$	32,364	$	31,826
Add: effect of tax-exempt income(1)	271		280
Net interest income (fully-taxable equivalent)	$	32,635	$	32,106

(1) Assumed a 21% tax rate.

Pre-tax, Pre-provision Earnings. Pre-tax, pre-provision earnings is a supplemental measure of operating earnings and performance, and is calculated as net income before provision for credit losses and income tax expense. This supplemental measure is becoming more widely used by financial institutions as a measure of financial performance for comparability across financial institutions due to the impact of the COVID-19 pandemic on the provision for credit losses, as well as the differences in accounting methodology for the ACL currently across financial institutions as the CARES Act provided financial institutions the option to delay adoption of the new accounting methodology, commonly referred to as "CECL," as further described in "– Critical Accounting Policies" and Note 2 of the consolidated financial statements.


	Three Months Ended March 31,
(In thousands)	2021		2020
Net income, as presented	$	19,740	$	13,493
Add: (credit) provision for credit losses	(1,956)		1,775
Add: income tax expense	4,896		3,400
Pre-tax, pre-provision earnings	$	22,680	$	18,668

Adjusted Yield on Interest-Earning Assets. Adjusted yield on interest-earning assets normalizes the Company's reported yield on interest-earning assets for certain unusual, non-recurring items, including: (i) the impact of PPP loans and (ii) excess cash/liquidity held by the Company, primarily due to Federal stimulus programs and changes in the FRB cash holding requirements for financial institutions both in response to COVID-19.


	Three Months Ended March 31,
	2021		2020
Yield on interest-earning assets, as presented	3.15	%	3.90	%
Add: effect of excess liquidity on yield on interest-earning assets	0.10	%	—	%
Less: effect of SBA PPP loans on yield on interest-earning assets	(0.06)	%	—	%
Adjusted yield on interest-earning assets	3.19	%	3.90	%

Adjusted Net Interest Margin (Fully-Taxable Equivalent). Adjusted net interest margin on a fully-taxable equivalent basis normalizes the Company's reported net interest margin on a fully-taxable equivalent basis for certain unusual, non-recurring items, including: (i) the impact of PPP loans and (ii) excess cash/liquidity held by the Company, primarily due to Federal stimulus programs and changes in the FRB cash holding requirements for financial institutions both in response to COVID-19.


	Three Months Ended March 31,
	2021		2020
Net interest margin (fully-taxable equivalent), as presented	2.88	%	3.08	%
Add: effect of excess liquidity on net interest margin (fully-taxable equivalent)	0.10	%	0.01	%
Less: effect of SBA PPP loans on net interest margin (fully-taxable equivalent)	(0.07)	%	—	%
Adjusted net interest margin (fully-taxable equivalent)	2.91	%	3.09	%

Three Months Ended
March 31,
(In thousands) 2020 2019
Net interest income, as presented $ 31,826
$ 31,895
Add: effect of tax-exempt income⁽¹⁾
280
244
Net interest income, tax equivalent $ 32,106
$ 32,139


~~(1)~~	~~Assumed a 21% tax rate.~~

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

Tangible Common Equity Ratio. Tangible common equity is the ratio of (i) shareholders’ equity less goodwill and other intangible assets to (ii) total assets less goodwill and other intangible assets. This ratio is a measure used within the financial services industry to assess whether or not a company is highly leveraged.


(In thousands, except number of shares, per share data and ratios)	March 31, 2021			December 31, 2020
Tangible Book Value Per Share:
Shareholders’ equity, as presented	$	532,120		$	529,314
Less: goodwill and other intangible assets	(97,377)			(97,540)
Tangible shareholders’ equity	$	434,743		$	431,774
Shares outstanding at period end	14,928,434			14,909,097
Book value per share	$	35.64		$	35.50
Tangible book value per share	$	29.12		$	28.96
Tangible Common Equity Ratio:
Total assets	$	5,089,279		$	4,898,745
Less: goodwill and other intangible assets	(97,377)			(97,540)
Tangible assets	$	4,991,902		$	4,801,205
Common equity ratio	10.46		%	10.81		%
Tangible common equity ratio	8.71		%	8.99		%

(In thousands, except number of shares, per share data and ratios)
March 31,
2020

December 31,
2019
Tangible Book Value Per Share:
Shareholders’ equity, as presented $ 492,680
$ 473,415
Less: goodwill and other intangible assets (98,052 ) (98,222 )
Tangible shareholders’ equity $ 394,628
$ 375,193
Shares outstanding at period end 14,951,597
15,144,719
Book value per share $ 32.95
$ 31.26
Tangible book value per share $ 26.39
$ 24.77
Tangible Common Equity Ratio:
Total assets $ 4,594,539
$ 4,429,521
Less: goodwill and other intangible assets (98,052 ) (98,222 )
Tangible assets $ 4,496,487
$ 4,331,299
Common equity ratio 10.72 % 10.69 %
Tangible common equity ratio 8.78 % 8.66 %

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


(In thousands)	March 31, 2021		December 31, 2020
Total deposits	$	4,211,630	$	4,005,244
Less: certificates of deposit	(346,046)		(357,666)
Less: brokered deposits	(288,758)		(283,567)
Core deposits	$	3,576,826	$	3,364,011

(In thousands)
March 31,
2020

December 31,
2019
Total deposits $ 3,563,705
$ 3,537,743
Less: certificates of deposit (545,013 ) (521,752 )
Less: brokered deposits (188,758 ) (191,005 )
Core deposits $ 2,829,934
$ 2,824,986

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


	Three Months Ended March 31,
(In thousands)	2021		2020
Total average deposits	$	3,770,314	$	3,355,595
Less: average certificates of deposit	(351,555)		(552,079)
Average core deposits	$	3,418,759	$	2,803,516

Three Months Ended
March 31,
(In thousands) 2020 2019
Total average deposits $ 3,355,595
$ 3,087,121
Less: average certificates of deposit (552,079 ) (443,107 )
Average core deposits $ 2,803,516
$ 2,644,014

CRITICAL ACCOUNTING POLICIES

Critical accounting policies are defined as those that are reflective of significant judgments and uncertainties, and could potentially result in materially different results under different assumptions and conditions. In preparing the Company’s consolidated financial statements, management is required to make significant estimates and assumptions that affect assets, liabilities, revenues, and expenses reported. Actual results could materially differ from ~~the Company's~~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 ~~ALL;~~ACL, including the ACL on loans, off-balance sheet credit exposures and investments; (ii) accounting for acquisitions and the subsequent review of goodwill and ~~core deposit~~ intangible assets generated in an acquisition for impairment; (iii) ~~OTTI of investments; (iv)~~ income taxes; and ~~(v)~~(iv) accounting for defined benefit and postretirement plans.

There have been no material changes to the Company's critical accounting policies as disclosed within its Annual Report on Form 10-K for the year ended December 31, ~~2019, with the exception of updates noted below.~~2020. Refer to the Annual Report on Form 10-K for the year ended December 31, ~~2019,~~2020, for discussion of the Company's critical accounting policies.

~~ALL.~~ On March 27, 2020, the Coronavirus Aid, Relief, and Economic Security Act ("CARES Act") was signed into law in response to the COVID-19 pandemic. Under Section 4014 of the CARES Act, we were permitted to delay our compliance with ASU No. 2016-13~~, Financial Instruments - Credit Losses(Topic 326):~~ M~~easurement of Credit Losses on Financial Instruments~~ ("ASU 2016-13"), commonly referred to as "CECL," until the earlier of (1) the date on which the national emergency concerning the COVID-19 pandemic that the President of the United States declared on March 15, 2020 terminates, or (2) December 31, 2020. We opted to delay our compliance with CECL to devote our attention and resources to supporting our customers and communities during these unprecedented times. Upon the earlier of the termination of the national emergency or December 31, 2020, the Company will adopt CECL as of January 1, 2020, using a modified-retrospective method, and will record a one-time adjustment to shareholders' equity through retained earnings. Refer to Note 2 of the consolidated financial statements for discussion of our current status for CECL readiness and estimated one-time charge to shareholders' equity upon adoption.

Furthermore, because we opted to delay adoption of CECL as outlined above, we will be required to reassess our ALL and reserve for unfunded commitments recorded during interim periods in 2020 (including these interim consolidated financial statements for the three months ended March 31, 2020) and restate interim period financial statements to present such interim period financial statements in accordance with ASU 2016-13 upon adoption of CECL. This will require a restatement of interim period 2020 consolidated financial statements, including net income, EPS, and diluted EPS, upon adoption of CECL. Refer to Note 2 of the consolidated financial statements for discussion of our estimated impact to the allowance for credit losses in accordance with ASU 2016-13 as of March 31, 2020.

~~Goodwill Impairment.~~ ~~Effective January 1, 2020, the Company adopted ASU No. 2017-04, Intangibles - Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment~~ ("ASU 2017-04"). ASU 2017-04 eliminated "Step 2" of the goodwill impairment test. As such, upon completion of our annual (or more frequent should a trigger event be identified) assessment of goodwill for impairment, if the book value of a reporting unit exceeds its fair value, an impairment charge will be recorded, which will reduce goodwill. The carrying value of goodwill may not be less than zero. Although ASU 2017-04 simplifies the goodwill impairment test, it increases the likelihood of impairment because it no longer requires a two-step analysis. Refer to Note 2 of the consolidated financial statements for further discussion.

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

GENERAL OVERVIEW

Camden National Corporation (hereafter referred to as “we,” “our,” “us,” or the “Company”) is a publicly-held bank holding company, with ~~$4.6~~approximately $5.1 billion in assets at March 31, ~~2020,~~2021, incorporated under the laws of the State of Maine and headquartered in Camden, Maine. Camden National Bank (the "Bank"), a wholly-owned subsidiary of the Company, was founded in 1875. The Company was founded in 1984, went public in 1997 and is now registered with NASDAQ Global Market (“NASDAQ”) under the ticker symbol "CAC."

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

The Company competes throughout Maine, and select areas of New Hampshire and Massachusetts. We operate in 13 of Maine's 16 counties, with our primary markets and presence being throughout coastal and central Maine. The Company and the Bank generally have effectively competed with other financial institutions by emphasizing customer service, highlighted by local decision-making, establishing long-term customer relationships, building customer loyalty and providing products and services designed to meet the needs of customers.

EXECUTIVE OVERVIEW

~~First Quarter 2020 Review.~~ Global, national and local markets and economies are facing unprecedented challenges from the COVID-19 pandemic. The Company, with the full support of its Board of Directors, has taken certain actions (i) to provide for the safety and health of its employees, customers, and communities; (ii) to help ease the far-reaching financial hardships the pandemic presents to our employees and customers; and (iii) fortify the financial strength of the Company.

As the pandemic unfolded in March 2020, we initiated a Pandemic Work Group that was led by the Company's executive team and certain senior managers across various business lines. The Pandemic Work Group took immediate action, including, but not limited to:

~~Devised and executed a plan that shifted over half of our employees to work remotely;~~

Developed procedures and policies to provide for the safety of our employees and customers, which included transitioning our branch network to serve customers through our drive-up windows by eliminating lobby visits other than by appointment, and temporarily closing certain branches to maximize staffing resources and ensure contingency plans are in place;

Began providing premium pay to front-line employees that continue to provide essential banking services to our customers and communities, as well as announced that we would not have any layoffs as a result of the pandemic for a period of 90 days, and that we would reassess our position thereafter;

~~Developed temporary loan payment deferral programs to assist customers impacted by the pandemic; and~~

~~Oversaw the roll-out of the Small Business Administration ("SBA") Paycheck Protection Program issued by the federal government as part of its stimulus plan to respond to the pandemic.~~

Over the course of a few weeks, our strategic focus shifted from executing on long-terms plans and initiatives to drive earnings growth to capital preservation to further solidify our balance sheet as we enter uncertain times. Fortunately, we enter these challenging economic times after having record net income for 2019, solid operating results for the first quarter of 2020, and solid asset quality.

Operating Results. Net income for the three months ended March 31, ~~2020,~~2021, was ~~$13.5~~$19.7 million, a ~~decrease of $780,000, or 5%, compared to~~quarterly record for the Company and 46% greater than the three months ended March 31, 2020. Over the same comparable period, ~~last year. Diluted~~diluted EPS increased 47% to $1.31 for the three months ended March 31, ~~2020, was $0.89, a decrease~~2021.

Key earnings drivers between periods included:

•A release of ~~$0.02, or 2%, compared to the same period last year.~~

~~Other key financial metrics over these periods include:~~

~~A return on average assets for the three months ended March 31, 2020, of 1.21%, compared to 1.33% for the same period last year;~~

~~A return on average equity for the three months ended March 31, 2020, of 11.30%, compared to 13.13% for the same period last year; and~~

~~A return on average tangible equity (non-GAAP) for the three months ended March 31, 2020, of 14.35%, compared to 17.08% for the same period last year.~~

~~Asset Quality.~~ As of March 31, 2020, non-performing assets were 0.23% of total assets and past due loans were 0.24% of total loans. In comparison, at December 31, 2019, non-performing assets were 0.25% of total assets and past due loans were 0.17% of total loans. At March 31, 2020, the ALL was 0.84% of total loans and 257% of non-performing loans.

In March 2020, we offered temporary debt relief to customers affected by the COVID-19 pandemic. Generally, the terms of the internal temporary debt relief program provided customers with up to 180 days of payment deferral. As of April 22, 2020, we had approved for deferral 1,732 loans totaling $547.7 million of loans, or 17% of the Company's loan portfolio at March 31, 2020.

In response to the COVID-19 pandemic, the CARES Act was signed into law in March 2020. The CARES Act provided certain companies with optional temporary relief from applying the current expected credit losses model, commonly referred to as "CECL." We chose to delay the implementation of CECL under the terms of the CARES Act. As such, the reported allowanceprovision for credit losses ~~and related provision expense~~of $2.0 million for the first quarter of 2021, as compared to a $1.8 million provision charge for the first quarter of 2020. In March 2020, ~~was accounted for under~~COVID-19 had been announced as a global pandemic and the ~~incurred loss model. Refer to "– Critical Accounting Policies" and Note 2 of the consolidated financial statements for further discussion of CECL.~~

~~The~~Company's provision for credit losses for the three months ended March 31, ~~2020,~~2021 was ~~$1.8~~accounted for and reported under the incurred loss model, whereas the Company's provision for credit losses for the three months ended March 31, 2021 was accounted for and reported under the Current Expected Credit Loss model (commonly referred to as "CECL").

•Mortgage banking income for the first quarter of 2021 was $3.6 million, ~~an increase of $1.0 million over~~or 101%, higher than the same period ~~last year. The~~of 2020. In response to the COVID-19 pandemic, interest rates dropped to new historical lows while housing demand grew within our markets, driving an 85% increase ~~reflects our initial estimate~~in residential mortgage originations for the first quarter of ~~the impact of the pandemic as of March 31, 2020, based on known information at that time.~~

~~Capital Position.~~ ~~Our capital strategy shifted during~~2021 compared to the first quarter of 2020 asand an increase in loans sold between periods of $123.4 million, or 178%.

•Net interest income increased $538,000, or 2%, between periods driven by SBA PPP income of $1.9 million for the ~~COVID-19 pandemic spread~~first quarter of 2021. SBA PPP lending did not begin until the second quarter of 2020. Net interest margin on a fully-taxable equivalent basis decreased 20 basis points between periods to 2.88% for the first quarter of 2021. The

combination of lower interest rates and ~~growing uncertainty as~~an increase excess cash from average deposit growth of 12% between periods compressed our net interest margin on a fully-taxable equivalent basis. Our adjusted net interest margin on a fully-taxable equivalent basis (non-GAAP), which is adjusted for SBA PPP income and excess cash, for the three months ended March 31, 2021 was 2.91%, compared to ~~its impact~~3.09% for the three months ended March 31, 2020.

Other key financial metrics between quarters included:

•Diluted EPS for the three months ended March 31, 2021 was $1.31, an increase of $0.42, or 47%, over the three months ended March 31, 2020.

•Pre-tax, pre-provision earnings (non-GAAP) for the three months ended March 31, 2021 increased $4.0 million, or 21%, over the three months ended March 31, 2021.

•Return on average assets for the ~~global, national~~three months ended March 31, 2021 was 1.62%, compared to 1.21% for the three months ended March 31, 2020.

•Return on average equity for the three months ended March 31, 2021 was 15.00%, compared to 11.30% for the three months ended March 31, 2020, and ~~local economies mounted. Through early-March 2020, we repurchased 217,031 shares~~return on average tangible equity (non-GAAP) was 18.47% and 14.35% for the same periods, respectively.

Asset Quality. As of March 31, 2021, the Company's ~~common stock~~asset quality metrics remained very strong, continuing its trend from December 31, 2020. Non-performing assets were 0.20% of total assets and loans 30-89 days past due of 0.05% of total loans. In comparison, at December 31, 2020, non-performing assets were 0.22% of total assets and loans 30-89 days past due were 0.10% of total loans.

As of March 31, 2021, total commercial and retail loans operating under short-term deferral arrangements due to COVID-19 were $2.4 million, compared to $26.5 million at December 31, 2020. As of March 31, 2021, the Company has not provided any additional temporary debt relief to borrowers; however, such relief may be made in the future on a ~~cost~~case-by-case basis and, if so, would be done within the terms of ~~$8.0 million. In mid-March 2020, we suspended repurchasing shares of our common stock.~~CARES Act and bank regulatory guidance.

~~The Company enters this period of economic uncertainty well-positioned from a capital perspective.~~Capital Position. At March 31, ~~2020,~~2021, the Company's capital position ~~was~~remained well in excess of regulatory capital requirements, including a total risk-based capital ratio of ~~13.81%, a tier 1 risk-based capital ratio of 12.56%, common equity tier 1 risk-based capital ratio of 11.27%,~~16.00% and a tier 1 leverage ratio of 9.61%, compared to 13.81% and 9.53%~~. Additionally,~~ at March 31, 2020, ~~the Company's common equity ratio was 10.72% and tangible common equity ratio (non-GAAP) was 8.78%.~~respectively.

InOn March ~~2020,~~30, 2021, the Company announced a $0.03, or 9%, increase in its quarterly cash dividend to shareholders ~~of $0.33~~to $0.36 per share, ~~an increase of 10% compared to a year ago. The cash dividend is~~ payable on April 30, 2021 to shareholders of record as of April 15, ~~2020, and shareholders will begin receiving payments on April 30, 2020.~~2021. As of March 31, ~~2020,~~2021, the Company's annualized dividend yield was ~~4.20%,~~3.01% based on ~~Camden National's~~its closing share price of ~~$31.45 on March 31, 2020,~~$47.86, as reported by NASDAQ. As of March 31, 2021, the Company's book value per share grew 8% to $35.64 year-over-year, while its tangible book value per share (non-GAAP) grew 10% over the same period to $29.12 at March 31, 2021.

In the first quarter of 2021, the Company initiated a new share repurchase program for up to 750,000 shares of its common stock, or approximately 5% of the Company's shares outstanding. This share repurchase program replaces the program that terminated in January 2021.

RESULTS OF OPERATIONS

Net Interest Income and Net Interest Margin

Net interest income is the interest earned on loans, securities, and other interest-earning assets, ~~plus~~adjusted for net loan fees, origination costs, and accretion or amortization of fair value marks on loans and/or CDs created in purchase accounting, less the interest paid on interest-bearing deposits and borrowings. Net interest income is our largest source of ~~revenue.~~revenue, which is defined as the sum of net interest income and non-interest income. For the three months ended March 31, ~~2020~~2021 and ~~2019,~~2020, net interest income ~~accounted for 74% and 77%, respectively,~~was $32.4 million, or 68% of total ~~revenues.~~revenues, and $31.8 million, or 74% of total revenues, respectively. Net interest income is affected by several factors including, but not limited to, changes in interest rates, loan and deposit pricing strategies and competitive conditions, the volume and mix of interest-earning assets and liabilities, and the level of non-performing assets.

Net Interest Income

For the three months ended March 31, 2021, net interest income on a fully-taxable equivalent basis (non-GAAP) was $32.6 million, an increase of $529,000, or 2%, over the three months ended March 31, 2020. The increase was driven by a $5.4 million decrease in interest expense between periods that offset the decrease of $4.8 million in interest income on a fully-taxable equivalent basis between periods. The decrease in interest expense between periods was the result of a 57 basis point decrease in our average cost of funds driven by lower interest rates and the change in funding mix as average deposits grew to 88% of total funding for the three months ended March 31, 2021, compared to 86% for the three months ended March 31, 2020. The decrease in interest income on a fully-taxable equivalent basis between periods was the result of a 75 basis point decrease in our yield on average interest-earning assets driven by the lower interest rate environment, but was partially offset by average loan growth of $118.6 million, or 4%. Average loan growth for the period was fueled by SBA PPP loans and commercial real estate growth of $154.9 million and $109.3 million, respectively, but was partially offset by a decrease in average commercial loans of $83.1 million and average consumer and home equity loans of $66.1 million.

Net Interest Margin

For the three months ended March 31, 2021, net interest margin on a fully-taxable equivalent basis was 2.88%, a decrease of 20 basis points compared to the three months ended March 31, 2020. The Company's yield on average interest-earning assets compressed 75 basis points period-over-period to 3.15% for the three months ended March 31, 2021, while its cost of funds decreased 57 basis points period-over-period to 0.29% for the three months ended March 31, 2021. The decrease in net margin on a fully-taxable equivalent basis was driven by the following factors:

•During the first quarter of 2020, the Federal Reserve reduced the targeted Federal Funds rate to between zero and 0.25% in response to COVID-19 and benchmark interest rates fell, compressing asset yields. In response to compressing asset yields, we proactively took actions to reduce deposit costs.

•SBA PPP loans originated during 2020 and the first quarter of 2021 provided a 6 basis point lift to our average interest-earning asset yield and a 7 basis point lift to net interest margin on a fully-taxable equivalent basis for the three months ended March 31, ~~2020, was $32.1 million, a decrease of $33,000 over the same period last year. The decrease was due to net interest margin~~¹~~compression of ten basis points between periods to 3.08% for the first quarter of 2020, but was partially offset by average interest-earning asset growth between periods of $103.4~~2021.

•Average deposits grew $414.7 million, or 3%12%, ~~to $4.1 billion for the first quarter of 2020.~~

~~Interest income on a fully-taxable equivalent basis.~~ ~~Interest income on a fully-taxable equivalent basis~~ for the three months ended March 31, ~~2020, decreased $1.8 million, or 4%, to $40.5 million,~~2021, compared to the same period ~~last year. The decrease was~~of 2020, driven by federal government stimulus provided to retail and business customers in response to the COVID-19 pandemic. Average deposit growth occurred within average core deposits (non-GAAP), highlighted by an increase in average balances of $615.2 million, or 22%, period-over-period. Over the same period, average investments grew $138.3 million, or 15%, and average loans grew $118.6 million. The pace in which deposits outgrew loans and investments created excess cash holdings further compressing interest-earning asset yields and net interest margin on a ~~decrease in~~fully-taxable equivalent basis. For the three months ended March 31, 2021, excess cash/liquidity reduced the Company's average interest-earning asset yield ~~of 30~~10 basis points ~~between periods to 3.90% for~~and net interest margin 10 basis points.

The Company's adjusted net interest margin on a fully-taxable equivalent basis (non-GAAP), which excludes the ~~first quarter~~impact of 2020, as loan yields decreased 38 basis points between periods, which was reflective of the change in interest rate environment. The average 10-year U.S. Treasury interest rate for the first quarter of 2020 was 1.37%, compared to 2.65% for the first quarter of 2019.

~~Interest expense.~~ ~~Interest expense~~SBA PPP loans and excess cash, for the three months ended March 31, ~~2020, decreased $1.7 million, or 17%~~2021, was 2.91%, ~~to $8.4 million,~~ compared to ~~the same period last year. The decrease was due to a decrease in cost of funds of 21 basis points between periods to 0.86%~~3.09% for the first quarter of 2020. Cost of funds decreased between periods primarily due to: (i) strong average deposit growth of $268.5 million, or 9%, between periods, which drove a decrease in borrowings of $185.2 million, or 25%, and enabled the Company to fund asset growth with lower cost funding; and (ii) the Federal Funds rate was cut twice in the first quarter of 2020 dropping the rate to 0.25% atthree months ended March 31, ~~2020, compared to 2.50% at March 31, 2019.~~

2020.

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 net interest margin on a fully-taxable basis for the followings periods:

Quarterly Average Balance, Interest and Yield/Rate Analysis


	Three Months Ended
	March 31, 2021						March 31, 2020
(Dollars in thousands)	Average Balance		Interest		Yield/Rate		Average Balance		Interest		Yield/Rate
Assets
Interest-earning assets:
Interest-bearing deposits in other banks and other interest-earning assets	$	210,844	$	47	0.09	%	$	66,180	$	207	1.24	%
Investments - taxable	946,456		4,054		1.71	%	809,041		5,174		2.56	%
Investments - nontaxable(1)	118,469		922		3.11	%	117,537		996		3.39	%
Loans(2):
Commercial real estate	1,382,795		12,374		3.58	%	1,273,538		13,646		4.24	%
Commercial(1)	333,458		3,120		3.74	%	416,527		4,435		4.21	%
SBA PPP	154,900		1,877		4.85	%	—		—		—	%
HPFC	12,549		225		7.18	%	20,336		402		7.83	%
Municipal(1)	24,133		198		3.33	%	16,990		155		3.67	%
Residential real estate	1,083,101		10,078		3.72	%	1,078,836		11,292		4.19	%
Consumer and home equity	268,711		2,764		4.17	%	334,771		4,186		5.03	%
Total loans	3,259,647		30,636		3.76	%	3,140,998		34,116		4.32	%
Total interest-earning assets	4,535,416		35,659		3.15	%	4,133,756		40,493		3.90	%
Cash and due from banks	51,554						42,869
Other assets	388,345						336,819
Less: ACL	(37,926)						(25,252)
Total assets	$	4,937,389					$	4,488,192
Liabilities & Shareholders' Equity
Deposits:
Non-interest checking	$	817,631	$	—	—	%	$	529,501	$	—	—	%
Interest checking	1,289,511		612		0.19	%	1,146,783		1,987		0.70	%
Savings	626,591		64		0.04	%	476,849		86		0.07	%
Money market	685,026		523		0.31	%	650,383		1,586		0.98	%
Certificates of deposit	351,555		549		0.63	%	552,079		2,209		1.61	%
Total deposits	3,770,314		1,748		0.19	%	3,355,595		5,868		0.70	%
Borrowings:
Brokered deposits	284,620		315		0.45	%	208,084		794		1.54	%
Customer repurchase agreements	165,721		121		0.29	%	236,351		633		1.08	%
Subordinated debentures	59,331		805		5.50	%	59,119		887		6.04	%
Other borrowings	14,444		35		0.99	%	59,257		205		1.39	%
Total borrowings	524,116		1,276		0.99	%	562,811		2,519		1.80	%
Total funding liabilities	4,294,430		3,024		0.29	%	3,918,406		8,387		0.86	%
Other liabilities	109,314						89,612
Shareholders' equity	533,645						480,174
Total liabilities & shareholders' equity	$	4,937,389					$	4,488,192
Net interest income (fully-taxable equivalent)			32,635						32,106
Less: fully-taxable equivalent adjustment			(271)						(280)
Net interest income			$	32,364					$	31,826
Net interest rate spread (fully-taxable equivalent)					2.86	%					3.04	%
Net interest margin (fully-taxable equivalent)					2.88	%					3.08	%
Adjusted net interest margin (fully-taxable equivalent) (non-GAAP)					2.91	%					3.09	%

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

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

~~Net interest margin on a fully-taxable equivalent basis is calculated as net interest income on a full-taxable equivalent basis as a percentage of average interest-earning assets.~~

Quarterly Average Balance, Interest and Yield/Rate Analysis
For The Three Months Ended
March 31, 2020 March 31, 2019
(Dollars in thousands) Average Balance Interest Yield/Rate Average Balance Interest Yield/Rate
Assets
Interest-earning assets:
Interest-bearing deposits in other banks and other interest-earning assets $ 66,180
$ 207
1.24 % $ 29,985
$ 197
2.63 %
Investments - taxable 809,041
5,174
2.56 % 851,516
5,447
2.56 %
Investments - nontaxable⁽¹⁾
117,537
996
3.39 % 94,710
815
3.44 %
Loans⁽²⁾:

Residential real estate 1,078,836
11,292
4.19 % 1,008,285
10,838
4.30 %
Commercial real estate 1,273,538
13,646
4.24 % 1,281,501
15,169
4.73 %
Commercial⁽¹⁾
416,527
4,435
4.21 % 369,832
4,344
4.70 %
Municipal⁽¹⁾
16,990
155
3.67 % 15,333
136
3.60 %
Consumer and home equity 334,771
4,186
5.03 % 347,052
4,671
5.46 %
HPFC 20,336
402
7.83 % 32,171
636
7.91 %
Total loans 3,140,998
34,116
4.32 % 3,054,174
35,794
4.70 %
Total interest-earning assets 4,133,756
40,493
3.90 % 4,030,385
42,253
4.20 %
Cash and due from banks 42,869
40,362

Other assets 336,819
292,482

Less: ALL (25,252 ) (24,780 )
Total assets $ 4,488,192
$ 4,338,449

Liabilities & Shareholders' Equity

Deposits:
Non-interest checking $ 529,501
$ —
— % $ 490,382
$ —
— %
Interest checking 1,146,783
1,987
0.70 % 1,085,301
2,622
0.98 %
Savings 476,849
86
0.07 % 485,646
95
0.08 %
Money market 650,383
1,586
0.98 % 582,685
1,740
1.21 %
Certificates of deposit 552,079
2,209
1.61 % 443,107
1,465
1.34 %
Total deposits 3,355,595
5,868
0.70 % 3,087,121
5,922
0.78 %
Borrowings:
Brokered deposits 208,084
794
1.54 % 405,837
2,501
2.50 %
Customer repurchase agreements 236,351
633
1.08 % 238,499
729
1.24 %
Subordinated debentures 59,119
887
6.04 % 59,007
717
4.93 %
Other borrowings 59,257
205
1.39 % 44,711
245
2.22 %
Total borrowings 562,811
2,519
1.80 % 748,054
4,192
2.27 %
Total funding liabilities 3,918,406
8,387
0.86 % 3,835,175
10,114
1.07 %
Other liabilities 89,612
62,247

Shareholders' equity 480,174
441,027

Total liabilities & shareholders' equity $ 4,488,192
$ 4,338,449

Net interest income (fully-taxable equivalent) 32,106
32,139

Less: fully-taxable equivalent adjustment (280 ) (244 )
Net interest income $ 31,826
$ 31,895

Net interest rate spread (fully-taxable equivalent) 3.04 % 3.13 %
Net interest margin (fully-taxable equivalent) 3.08 % 3.18 %
Net interest margin (fully-taxable equivalent), excluding fair value mark accretion and collection of previously charged-off acquired loans⁽³⁾
3.06 % 3.14 %


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


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

~~(3)~~

Excludes the impact of the fair value mark accretion on loans and CDs generated in purchase accounting and collection of previously charged-off acquired loans for the three months ended March 31, 2020 and 2019, totaling $283,000 and $390,000, respectively.

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


	Three Months Ended March 31, 2021 vs. March 31, 2020
	Increase (Decrease) Due to:				Net Increase (Decrease)
(In thousands)	Volume		Rate
Interest-earning assets:
Interest-bearing deposits in other banks and other interest-earning assets	$	448	$	(608)	$	(160)
Investments – taxable	879		(1,999)		(1,120)
Investments – nontaxable	8		(82)		(74)

Commercial real estate	1,171		(2,443)		(1,272)
Commercial	(884)		(431)		(1,315)
SBA PPP	1,877		—		1,877
HPFC	(154)		(23)		(177)
Municipal	65		(22)		43
Residential real estate	45		(1,259)		(1,214)
Consumer and home equity	(826)		(596)		(1,422)
Total interest income (fully-taxable equivalent)	2,629		(7,463)		(4,834)
Interest-bearing liabilities:
Interest checking	248		(1,623)		(1,375)
Savings	26		(48)		(22)
Money market	84		(1,147)		(1,063)
Certificates of deposit	(803)		(857)		(1,660)
Brokered deposits	293		(772)		(479)
Customer repurchase agreements	(189)		(323)		(512)
Subordinated debentures	3		(85)		(82)
Other borrowings	(155)		(15)		(170)
Total interest expense	(493)		(4,870)		(5,363)
Net interest income (fully-taxable equivalent)	$	3,122	$	(2,593)	$	529

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


	Income Statement Location	Three Months Ended March 31,
(In thousands)		2021		2020
Loan fees (cost)(1)	Interest income	$	1,440	$	(334)
Net fair value mark accretion from purchase accounting	Interest income and Interest expense	234		251
Recoveries on previously charged-off acquired loans	Interest income	25		32
Total		$	1,699	$	(51)

(1) As of March 31, 2021 and December 31, 2020, there were $5.1 million and $2.2 million of SBA PPP loan origination fees yet to be recognized, respectively.

For The Three Months Ended
March 31, 2020 vs. March 31, 2019
Increase (Decrease) Due to: Net Increase (Decrease)
(In thousands) Volume
Rate⁽¹⁾

Interest-earning assets:


Interest-bearing deposits in other banks and other interest-earning assets $ 238
$ (228 ) $ 10
Investments – taxable (272 ) (1 ) (273 )
Investments – nontaxable 196
(15 ) 181
Residential real estate 758
(304 ) 454
Commercial real estate (94 ) (1,429 ) (1,523 )
Commercial 549
(458 ) 91
Municipal 15
4
19
Consumer and home equity (165 ) (320 ) (485 )
HPFC (234 ) —
(234 )
Total interest income 991
(2,751 ) (1,760 )
Interest-bearing liabilities:
Interest checking 149
(784 ) (635 )
Savings (2 ) (7 ) (9 )
Money market 202
(356 ) (154 )
Certificates of deposit 360
384
744
Brokered deposits (1,219 ) (488 ) (1,707 )
Customer repurchase agreements (7 ) (89 ) (96 )
Subordinated debentures 1
169
170
Other borrowings 80
(120 ) (40 )
Total interest expense (436 ) (1,291 ) (1,727 )
Net interest income (fully-taxable equivalent) $ 1,427
$ (1,460 ) $ (33 )


~~(1)~~	Presented within increase (decrease) due to rate for the three months ended March 31, 2020 compared to the three months ended March 31, 2019 was a decrease in net interest income on a fully-taxable equivalent basis of $107,000 due to a decrease in fair value mark accretion on loans and CDs generated in purchase accounting and collection of previously charged-off acquired loans.

(Credit) Provision for Credit Losses

~~As further described in "– Critical Accounting Policies" and Note 2 of the consolidated financial statements,~~

Effective January 1, 2020, but applied to interim reporting periods on or after October 1, 2020, the Company ~~opted to delay implementation~~adopted ASU No. 2016-13, Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments ("ASU ~~2016-13,~~2016-13"), commonly referred to as "CECL," ~~under~~to account for the ~~terms provided~~ACL. CECL requires the measurement of expected lifetime credit losses for ~~within the CARES Act, signed into law in March 2020. The Company will be required to adopt~~financial assets measured at amortized cost, including loans and HTM debt investments, as well as certain off-balance sheet credit exposures. CECL ~~upon the earlier of (1) the date on which the national emergency concerning the COVID-19 pandemic~~requires that the ~~President~~ACL be calculated based on current expected credit losses over the remaining expected life of the ~~United States declared on March 15, 2020 terminates, or (2) December 31, 2020. As such, the Company determined its first quarter 2020~~financial asset and also considers expected changes in macroeconomic conditions. The (credit) provision for credit losses on the consolidated statements income for the three months March 31, 2021, was calculated using the ~~policies and procedures described in~~CECL methodology, whereas the ~~Company's Annual Report on Form 10-K~~(credit) provision for credit losses for the ~~year~~three months ended ~~December~~March 31, ~~2020.~~2020, was calculated using the incurred loss model, which relied on management's periodic assessment of the adequacy of the ACL.

The provision for credit losses ~~consists~~was made up of the ~~provision~~following components for ~~loan losses and~~ the ~~provision for unfunded commitments.~~periods indicated:


	Three Months Ended March 31,				Change
	2021		2020		$		%
	CECL		(Incurred Loss)
(Credit) provision for loan losses	$	(1,854)	$	1,772	$	(3,626)	(205)	%
(Credit) provision for credit losses on off-balance sheet credit exposures	(102)		3		(105)		N.M.
(Credit) provision for credit losses	$	(1,956)	$	1,775	$	(3,731)	(210)	%

The provision for loan 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, 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 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.~~

For the three months ended March 31, ~~2020, the~~2021, a release of provision for loan losses of $1.9 million was ~~$1.8 million,~~recorded, which reflects the Company's current asset quality strength and an ~~increase of $1.0 million, or 136%,~~improvement in its macroeconomic outlook over ~~the same~~its four quarter forecast period ~~last year.~~under CECL. The ~~increase in the~~Company's provision for loan losses ~~was primarily due to an increase of $800,000~~ for ~~a qualitative factor adjustment under~~ the ~~incurred model for consideration~~three months ended March 31, 2020, reflected the onset of the COVID-19 pandemic ~~based on information known~~ and ~~available as of~~an elevated qualitative factor adjustment ("Q-factor") under the incurred loss model.

Annualized net charge-offs for the three months ended March 31, ~~2020. As~~2021, were 0.03% of average loans, compared to 0.05% of average loans for three months ended March 31, 2020, the Company had not experienced any deteriorating asset quality trends. We, however, expect that credit strain within our loan portfolio is probable given the impact the COVID-19 pandemic has had, and is anticipated to continue to have, on the economy. Refer to "~~—Financial Condition—Asset Quality" for further discussion and details of temporary debt relief program provided to loan customers.~~2020.

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 statements of condition. Refer to Note 4 of the consolidated financial statements for further discussion.

~~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 periods indicated:


	Three Months Ended March 31,						Change
(Dollars in thousands)	2021			2020			$		%
Mortgage banking income, net(1)	$	7,109		$	3,534		3,575		101	%
Debit card income(2)	2,736			2,141			595		28	%
Service charges on deposit accounts(3)	1,539			2,012			(473)		(24)	%
Income from fiduciary services	1,526			1,502			24		2	%
Brokerage and insurance commissions	953			657			296		45	%
Bank-owned life insurance	594			689			(95)		(14)	%
Customer loan swap fees	—			114			(114)		(100)	%

Other income	758			754			4		1	%
Total non-interest income	$	15,215		$	11,403		$	3,812	33	%
Non-interest income as a percentage of total revenues	32		%	26		%

Three Months Ended
March 31, Change
(Dollars in thousands) 2020 2019 $ %
Mortgage banking income, net⁽¹⁾
$ 3,534
$ 1,252
$ 2,282
182 %
Debit card income 2,141
2,010
131
7 %
Service charges on deposit accounts 2,012
2,023
(11 ) (1 )%
Income from fiduciary services 1,502
1,392
110
8 %
Bank-owned life insurance 689
594
95
16 %
Brokerage and insurance commissions 657
585
72
12 %
Customer loan swap fees⁽²⁾
114
525
(411 ) (78 )%
Other income⁽³⁾
754
1,008
(254 ) (25 )%
Total non-interest income $ 11,403
$ 9,389
$ 2,014
21 %
Non-interest income as a percentage of total revenues 26 % 23 %

(1) Mortgage banking income, net: The increase ~~for the three months ended March 31, 2020, compared to the same period last year,~~in mortgage banking income, net was driven by ~~higher~~an increase in residential mortgage sales during the first quarter of 2021 of $123.4 million, or 178%. The increase in originations was largely due to the historically low interest rate environment as benchmark interest rates decreased in response to the COVID-19 pandemic. The increase in loan sales between periods also led to the creation of additional mortgage servicing assets and ~~pipeline activity~~an increase in related income of $332,000 period-over-period. The carrying value of mortgage servicing assets at March 31, 2021, was $2.4 million, compared to $2.2 million at December 31, 2020.

(2) Debit card income: The increase was driven by an increase in customer spend driven by federal government stimulus in the first quarter of ~~2020 due~~2021 in response to ~~a sharp~~the COVID-19 pandemic.

(3) Service charges on deposit accounts: The decrease in ~~interest rates. In the first quarter~~fees earned was largely driven by lower overdraft and non sufficient funds fees of ~~2020, the Company sold $69.2 million of residential mortgage loans, compared to $28.0 million~~$430,000, which was primarily driven by elevated deposit balances across our customers from government stimulus in the first quarter of ~~2019, and the unrealized gain on mortgage banking activity was $1.5 million higher~~2021 issued in ~~the first quarter of 2020, compared~~response to the ~~same period last year.~~


~~(2)~~	~~Customer loan swap fees:~~ ~~The decrease for the three months ended March 31, 2020, compared to the same period last year, due to a decrease in volume.~~

~~(3)~~ ~~Other income:~~ The decrease for the three months ended March 31, 2020, compared to the same period last year, was due to the recognition of an unrealized gain of $242,000 in the first quarter of 2019 on its bank equity securities.COVID-19 pandemic.

Non-Interest Expense

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


	Three Months Ended March 31,						Change
(Dollars in thousands)	2021			2020			$		%
Salaries and employee benefits(1)	$	14,522		$	14,327		$	195	1	%
Furniture, equipment and data processing(2)	3,027			2,790			237		8	%
Net occupancy costs	1,951			2,003			(52)		(3)	%
Debit card expense	986			934			52		6	%
Consulting and professional fees	863			783			80		10	%
Regulatory assessments(3)	503			162			341		210	%
Amortization of core deposit intangible assets	164			170			(6)		(4)	%
Other real estate owned and collection (recoveries) costs, net(4)	(191)			101			(292)		(289)	%

Other expenses(5)	3,074			3,291			(217)		(7)	%
Total non-interest expense	$	24,899		$	24,561		$	338	1	%
GAAP efficiency ratio	52.33		%	56.82		%
Non-GAAP efficiency ratio	50.96		%	56.45		%

Three Months Ended
March 31, Change
(Dollars in thousands) 2020 2019 $ %
Salaries and employee benefits⁽¹⁾
$ 14,327
$ 12,978
$ 1,349
10 %
Furniture, equipment and data processing 2,790
2,680
110
4 %
Net occupancy costs 2,003
1,914
89
5 %
Debit card expense 934
823
111
13 %
Consulting and professional fees 783
813
(30 ) (4 )%
Amortization of intangible assets 170
176
(6 ) (3 )%
Regulatory assessments⁽²⁾
162
472
(310 ) (66 )%
Other real estate owned and collection costs (recoveries), net⁽³⁾
101
(307 ) 408
(133 )%
Other expenses 3,291
3,234
57
2 %
Total non-interest expense $ 24,561
$ 22,783
$ 1,778
8 %
GAAP efficiency ratio 56.82 % 55.19 %
Non-GAAP efficiency ratio 56.45 % 54.86 %

(1) Salaries and employee benefits: ~~The~~During the first quarter of 2021, the Company received a one-time employer tax credit of $329,000, partially offsetting the increase in incentive-related accruals of $377,000 between periods driven by strong performance to budget for the three months ended March 31, 2020, ~~compared to the same period last year,~~which included record reported quarterly earnings.

(2) Furniture, equipment and data processing costs: The increase was ~~primarily~~ driven by ~~normal merit increases,~~our continued investment in technology and data processing, which included transitioning our items' processing to an outsourced solution during 2020.

(3) Regulatory assessments: The increase was driven by the receipt of the Small Bank Assessment Credit from the FDIC beginning in the ~~number~~first quarter of ~~employees,~~ 2020. The Company has no remaining Small Bank Assessment Credits, and ~~higher incentive accruals.~~its regulatory assessment costs for the first quarter of 2021 aligned with normal historical levels.

~~(2)~~

~~Regulatory assessments:~~ ~~The decrease for the three months ended March 31, 2020 compared to the same period last year, was driven by the receipt during the first quarter of 2020 of a~~ ~~Small Bank Assessment Credit~~ from the FDIC for the Company's fourth quarter assessment period, as the FDIC Deposit Insurance Fund ("DIF") reserve ratio exceeded its regulatory limit. It is anticipated that the Company will receive its final credit in the second quarter of 2020, should the FDIC continue to meet and exceed its required DIF reserve ratio.

~~(3)~~ (4) Other real estate owned and collection (recoveries) costs, ~~(recoveries),~~ net: ~~The increase for the three months ended March 31, 2020, compared to the same period last year, was driven by reimbursement of $378,000 in~~In the first quarter of ~~2019 for related legal costs.~~2021, the Company recouped $160,000 of costs previously incurred and recorded a gain upon sale of an OREO property of $114,000.

(5) Other expenses: The decrease was driven by lower employee-related costs of $316,000 and marketing-related costs of $257,000, partially offset by a one-time prepayment penalty of $514,000 upon the termination of a long-term FHLBB borrowing.

FINANCIAL CONDITION

Cash and Cash Equivalents

Total cash and cash equivalents at March 31, 2021 were $368.2 million, compared to $145.8 million at December 31, 2020. The increase in cash and cash equivalents balances of $222.5 million during the first quarter was primarily driven by an increase in deposits of $206.4 million, or 5%, resulting from another round of government stimulus in response to COVID-19. We continuously monitor our cash levels to ensure compliance with applicable regulatory requirements, including liquidity and FRB reserve requirements.

For the reserve maintenance period beginning March 26, 2020, the FRB eliminated the cash reserve requirement for all depository institutions in response to COVID-19, by effectively reducing the required reserve ratio against net transaction deposits above and in the low reserve tranche to 0%.

Investments

The Company utilizes the investment portfolio to manage liquidity, interest rate risk, and regulatory capital, as well as to take advantage of market conditions to generate ~~a favorable return on investments~~returns without undue risk. ~~The~~At March 31, 2021 and December 31, 2020, the Company’s investment portfolio generally consists of MBS, CMO, municipal and corporate debt securities, ~~we have designated~~FHLBB and FRB common stock, and mutual funds held in a rabbi trust for purposes of Company executive and director nonqualified retirement plans. We designate our debt securities as AFS or HTM based on our intent and investment strategy, FHLBB and FRB common stock is carried at cost, and mutual funds are trading securities.

At March 31, 2021, the Company's investments portfolio totaled $1.1 billion, a decrease of $1.6 million since December 31, 2020. The decrease during the first quarter of 2021 was driven by changes within AFS debt securities ~~we have designated as HTM,~~attributable to: (i) paydowns and ~~common stock~~calls of ~~the FHLBB, FRB~~$94.7 million, and ~~certain banks. Investments increased $43.4~~(ii) and a $22.3 million ~~or 5%, at March 31, 2020 as compared to December 31, 2019. The following is the activity in our investment portfolio:~~

~~The purchase of $58.8 million of investments in the first three months of 2020 with a weighted-average life of 6.1 years;~~

~~A net increase~~decrease in the fair value of certain securities, based on changes in market interest rates, (iii) partially offset by debt security purchases in the first quarter of 2021 of $118.7 million, which had a weighted-average life of 6.0 years. Our debt securities designated as AFS, which comprised 99% of our investment portfolio at March 31, 2021 and December 31, 2020 were carried at fair value using level 2 valuation techniques. Refer to Note 15 of the consolidated financial statements for further details on fair value. At March 31, 2021 and December 31, 2020, investments were 22% and 23% of total assets, respectively.

The AFS and HTM debt securities portfolio ~~of $24.1 million driven~~has limited credit risk due to its composition, which includes highly rated debt securities by nationally recognized rating agencies, and securities backed by the ~~change in general market conditions, specifically a decrease in long-term interest rates~~U.S. government and government sponsored agencies. At March 31, 2021 and December 31, 2020, these investments represented approximately 88%, of the investment portfolio. The majority of the municipal bonds, which represented 11% of the investment portfolio at March 31, ~~2020, compared to~~2021 and December 31, ~~2019;~~2020, had a credit rating of "AA" or higher.

~~Partially offset by paydowns and calls of $40.2 million.~~

~~Our investments in FHLBB and FRB common stock are carried at cost. These investments are presented within other investments~~The Company's "other investments" on the consolidated statements of ~~condition.~~condition consist of FHLBB and FRB common stock. These investments are carried at cost. We are required to maintain a certain level of investment in FHLBB stock based on our level of FHLBB advances, and maintain a certain level of investment in FRB common stock based on the Bank's capital levels. As of March 31, ~~2020~~2021 and December 31, ~~2019, our~~2020, investment in FHLBB stock totaled ~~$8.0~~$4.8 million and ~~$6.6~~$6.2 million, respectively, and our investment in FRB stock was $5.4 million at each date.

~~As further described~~Our investments in ~~"– Critical Accounting Policies"~~mutual funds are designated as trading securities and carried at fair value. These investments are held within a rabbi trust and will be used for future payments associated with the Company’s Executive and Director Deferred Compensation Plan. These investments are carried at fair value using level 1 valuation techniques. Refer to Note 215 of the consolidated financial statements ~~the Company opted to delay~~for further details on fair value.

Upon implementation of ASU 2016-13, ~~commonly referred~~effective January 1, 2020, but applied to ~~as "CECL," under the terms provided for within the CARES Act, signed into law in March 2020. The Company will be required to adopt CECL upon the earlier of (1) the date~~reporting periods beginning on ~~which the national emergency concerning the COVID-19 pandemic that the President of the United States declared on March 15,~~or after October 1, 2020, terminates, or (2) December 31, 2020. As such, the Company assessed its investments for OTTI using the policies and procedures described in the Company's Annual Report on Form 10-K for the year ended December 31, 2019.

~~The Company monitors its investments for the presence of OTTI. For~~each reporting period, our AFS debt securities ~~which made up 99%~~that are in an unrealized loss position are assessed to determine if an allowance should be recorded or if a write-down is required. We did not record any allowances or write-down any of our ~~investment portfolio at March 31, 2020, the primary consideration~~AFS debt securities in ~~determining OTTI impairment is whether or not the Bank expects to collect all contractual cash flows. There was no OTTI recorded on investments~~an unrealized loss position as of March 31, ~~2020~~2021 or December 31, ~~2019.~~2020.

Upon implementation of ASU 2016-13, effective January 1, 2020, but applied to reporting periods beginning on or after October 1, 2020, each reporting period our HTM debt securities are assessed to determine if an allowance should be recorded or if a write-down is required. We did not record any allowances or write-down any of our HTM debt securities as of March 31, 2021 or December 31, 2020.

We continuously monitor and evaluate our investment portfolio to identify and assess risks within our portfolio, including, but not limited to, the impact of the current interest rate environment and the related prepayment risk, and review credit ratings. The overall mix of debt securities at March 31, ~~2020,~~2021, compared to December 31, ~~2019,~~2020, remains relatively unchanged and well positioned to provide a stable source of cash flow. At March 31, ~~2020~~2021 and December 31, ~~2019,~~2020, the duration of our debt investment securities portfolio, adjusting for calls when appropriate and consensus prepayment speeds, was ~~4.4~~4.3 and ~~4.7~~3.9 years, respectively. ~~We are currently investing in longer duration debt securities, or those with call protection, to limit prepayment risk and to protect against a lower rate environment.~~

Loans

The Company provides loans primarily to customers located within our geographic market area. Our primary ~~markets~~market continues to be in Maine, making up ~~75% and 76%~~73% of the loan portfolio as of March 31, ~~2020~~2021 and December 31, ~~2019, respectively.~~2020. Massachusetts and New Hampshire are our second and third largest markets that we serve, making up 13% and 6%8%, respectively, of our total loan portfolio as of March 31, ~~2020~~2021 and December 31, ~~2019.~~2020. Our distribution channels include 57 branches within Maine, a residential mortgage lending office in Massachusetts, a branch and commercial loan production office in New Hampshire, and on-line residential mortgage and small commercial loan platforms.

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


							Change
(Dollars in thousands)	March 31, 2021			December 31, 2020			($)		(%)
Commercial real estate - non owner-occupied	$	1,116,617		$	1,097,975		$	18,642	2	%
Commercial real estate - owner-occupied	273,710			271,495			2,215		1	%
Commercial	366,159			381,494			(15,335)		(4)	%
SBA PPP	169,407			135,095			34,312		25	%
Residential real estate	1,051,765			1,054,798			(3,033)		—	%
Consumer and home equity	259,388			278,965			(19,577)		(7)	%
Total loans	$	3,237,046		$	3,219,822		$	17,224	1	%
Commercial Loan Portfolio	$	1,925,893		$	1,886,059		$	39,834	2	%
Retail Loan Portfolio	1,311,153			1,333,763			(22,610)		(2)	%
Commercial Portfolio Mix	59		%	59		%
Retail Portfolio Mix	41		%	41		%

March 31,
2020 December 31,
2019 Change
(Dollars in thousands) ($) (%)
Residential real estate $ 1,064,212
$ 1,070,374
$ (6,162 ) (1 )%
Commercial real estate 1,299,860
1,243,397
56,463
5 %
Commercial 444,830
421,108
23,722
6 %
Consumer and home equity 330,603
338,551
(7,948 ) (2 )%
HPFC 18,257
21,593
(3,336 ) (15 )%
Total loans $ 3,157,762
$ 3,095,023
$ 62,739
2 %
Commercial Loan Portfolio $ 1,762,947
$ 1,686,098
$ 76,849
5 %
Retail Loan Portfolio $ 1,394,815
$ 1,408,925
$ (14,110 ) (1 )%
Commercial Portfolio Mix 56 % 54 %
Retail Portfolio Mix 44 % 46 %

Beginning in April 2020, the Company started funding SBA ~~Paycheck Protection Program~~PPP loans issued to qualifying small businesses as part of the federal stimulus package issued due to the COVID-19 pandemic. AsIn the first quarter of ~~April 22, 2020,~~2021, the Company ~~had approved 1,649~~began originating SBA PPP loans ~~with total balances~~again as a result of ~~$197.4 million~~another round of federal stimulus that provided additional funding for ~~funding.~~the PPP program. The Company continues to participate in SBA PPP lending to customers and borrowers in need of funding due to the COVID-19 pandemic. Under the terms of the SBA PPP, loans issued may be forgiven in part or in full should the borrower meet certain conditions. In this instance, the Company will seek payment for the forgivable portion of the loan from the SBA. Loans made under the SBA ~~Paycheck Protection Program~~PPP may have terms of two or five years, are ~~two-year loans,~~ fully guaranteed by the SBA, and have a fixed rate of 1.0%. For originating the loans, the Company ~~will receive a~~receives an origination fee, ~~to be~~ paid by the SBA, based on a tiered structure that is dependent on each individual loan size. These fees ~~are to be~~were capitalized as origination fees and earned over the life of the loan in accordance with the Company's policy. As of March 31, 2021 and December 31, 2020, there were $5.1 million and $2.2 million of SBA PPP loan origination fees yet to be recognized, respectively. As SBA PPP loans are forgiven, these loan balances will decrease and unearned fees will be recognized.

Asset Quality

Asset quality is of the upmost importance and continues to be of great focus to the Company, particularly in light of COVID-19 and its impact on our markets and economies. The Company continues to dedicate significant resources to monitor and manage credit risk throughout our loan portfolio.

The Board of Directors monitors credit risk through: (i) the Directors' Credit Committee, which reviews large credit exposures, monitors external loan review reports, reviews the lending authority for individual loan officers when required, and has approval authority and responsibility for all matters regarding the loan policy and other credit-related policies, including reviewing and monitoring asset quality trends, and concentration levels; and (ii) the Audit Committee, which has approval authority and oversight responsibility for ACL adequacy and methodology.

Credit Risk 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, and maintain the integrity of the loan rating system. The adequacy of the ACL is overseen by the Management Provision Committee, which is an internal management committee comprised of various Company executives and senior managers across business lines, including Accounting and Finance, Credit Risk, Compliance, and Commercial and Retail Banking. The Management Provision Committee is further supported by other management-level committees to ensure the adequacy of the ACL. The Management Provision Committee supports the oversight efforts of the director-level committees discussed in the paragraph above and the Board of Directors. The Company's practice is to manage the portfolio proactively such that management can identify problem credits early, assess and implement effective work-out strategies, and take charge-offs as promptly as practical.

In response to the COVID-19 pandemic, we have worked directly with businesses and consumers to provide temporary debt relief that generally provided principal and/or interest payment deferrals for a period of 180 days or less. For these loans receiving temporary debt relief, we provided such relief under the guidance of the CARES Act and bank regulatory guidance that enabled such qualifying loans to be exempted from assessment under TDR accounting guidance. All loans granted temporary debt relief met the TDR exemption criteria under authoritative guidance, and, therefore, were not individually assessed, designated or accounted for as a TDR. In addition, these loans that were granted temporary debt relief were not automatically downgraded into lower credit risk ratings. Instead, we have monitored, and continue to, actively monitor these loans for any sign of more permanent credit deterioration, and should such occur, a future downgrade and/or change in accrual status may occur. Lastly, in order to qualify for temporary debt relief, these loans were required to be current with terms of payments in accordance with the CARES Act and bank regulatory guidance at the time of relief. At March 31, 2021 and

December 31, 2020, the payment status of loans operating under a temporary payment deferral arrangement were reported based on payment status at the time the deferral was granted to the borrower.

At March 31, 2021 and December 31, 2020, the amortized cost of loans operating under a short-term temporary debt relief program was $2.4 million and $26.5 million, respectively. In late December 2020, another stimulus package was signed into law to provide additional COVID-19 relief for businesses and consumers. This stimulus package permits the Company the opportunity to again provide temporary debt relief to borrowers impacted by COVID-19. As of March 31, 2021, the Company had not provided any additional temporary debt relief to borrowers; however, such relief may be made in the future on a case-by-case basis.

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


(Dollars in thousands)	March 31, 2020			December 31, 2019			(Dollars in thousands)	March 31, 2021			December 31, 2020
Non-accrual loans:							Non-accrual loans:
Commercial real estate - non owner-occupied							Commercial real estate - non owner-occupied	$	170		$	366
Commercial real estate - owner-occupied							Commercial real estate - owner-occupied	139			146
Commercial							Commercial	1,737			1,607
SBA PPP							SBA PPP	—			—
Residential real estate	$	3,499		$	4,096		Residential real estate	3,637			3,477
Commercial real estate	646			1,122
Commercial	748			420
Consumer and home equity	2,102			2,154			Consumer and home equity	1,897			2,000
HPFC	322			364
Total non-accrual loans	7,317			8,156			Total non-accrual loans	7,580			7,596
Accruing loans past due 90 days	—			—

Accruing TDRs not included above	3,008			2,993			Accruing TDRs not included above	2,579			2,818
Total non-performing loans	10,325			11,149			Total non-performing loans	10,159			10,414
Other real estate owned	94			94			Other real estate owned	204			236
Total non-performing assets	$	10,419		$	11,243		Total non-performing assets	$	10,363		$	10,650
Non-accrual loans to total loans	0.23		%	0.26		%	Non-accrual loans to total loans	0.23		%	0.24		%
Non-performing loans to total loans	0.33		%	0.36		%	Non-performing loans to total loans	0.31		%	0.32		%
ALL to non-performing loans	256.86		%	225.77		%
ACL on loans to non-performing loans							ACL on loans to non-performing loans	352.15		%	363.60		%
Non-performing assets to total assets	0.23		%	0.25		%	Non-performing assets to total assets	0.20		%	0.22		%
ALL to non-performing assets	254.54		%	223.88		%
ACL on loans to non-performing assets							ACL on loans to non-performing assets	345.22		%	355.54		%

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 March 31, ~~2020,~~2021, potential problem loans amounted to ~~$2.8 million,~~$186,000, or ~~0.09%~~0.01% of total loans.

Past Due Loans.

Past due loans consist of accruing loans that were between 30 and 89 days past due. The following table presents the recorded investment of past due loans ~~at the date indicated:~~

(Dollars in thousands)
March 31,
2020

December 31,
2019
Accruing loans 30-89 days past due:

Residential real estate $ 1,781
$ 2,227
Commercial real estate 2,641
1,582
Commercial 1,560
548
Consumer and home equity 1,379
750
HPFC 165
243
Total $ 7,526
$ 5,350
Accruing loans 30-89 days past due to total loans 0.24 % 0.17 %

~~COVID-19 Loan Modifications.~~ In response to the COVID-19 pandemic, the Company worked with businesses and consumers to provide temporary debt payment relief. The Company's payment relief program provided principal and/or interest payment deferrals of 30 to 180 days for businesses and 90 to 180 days for consumers. Refer to Note 4 of the consolidated financial statements for the Company's accounting treatment for loans modified due to the COVID-19 pandemic.

~~As of April 22, 2020, the Company had modified the following loans, of which none were deemed to be a TDR:~~

(Dollars in thousands) Units Recorded Investment
Percent of Total Loans at
March 31, 2020
Business 1,072
$ 435,615
14 %
Consumer 660
112,040
3 %
Total 1,732
$ 547,655
17 %

~~As these loans are performing loans, the Company will continue to accrue interest and recognize interest income in accordance with the Company's policies.~~

~~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 ALL is increased by provisions charged to earnings and by recoveries of amounts previously charged-off, and is reduced by charge-offs on loans.~~dates indicated:


(Dollars in thousands)	March 31, 2021			December 31, 2020
Accruing loans 30-89 days past due:
Commercial real estate - non owner-occupied	$	102		$	50
Commercial real estate - owner-occupied	75			—
Commercial	425			430
SBA PPP	—			—
Residential real estate	772			2,297
Consumer and home equity	264			440
Total	$	1,638		$	3,217
Accruing loans 30-89 days past due to total loans	0.05		%	0.10		%

ACL

The following table sets forth information concerning the ~~activity in the ALL~~components of our ACL for the periods indicated:


	At or For The Three Months Ended March 31,						At or For The Year Ended December 31, 2020
(Dollars in thousands)	2021			2020
	(CECL)			(Incurred Loss)				(CECL)
ACL on loans at the beginning of the period	$	37,865		$	25,171			$	25,171
Impact of CECL adoption	—			—				233
(Credit) provision for loan losses	(1,854)			1,772				13,215
Charge-offs:
Commercial real estate - non owner-occupied	—			—				82
Commercial real estate - owner-occupied	—			50				21
Commercial	147			253				1,130
SBA PPP	—			—				—
Residential real estate	53			96				121
Consumer and home equity	87			91				484
Total charge-offs	287			490				1,838
Recoveries:
Commercial real estate - non owner-occupied	—			1				107
Commercial real estate - owner-occupied	2			3				13
Commercial	43			53				572
SBA PPP	—			—				—
Residential real estate	—			2				292
Consumer and home equity	6			9				100
Total recoveries	51			68				1,084
Net charge-offs	236			422				754
ACL on loans at the end of the period	$	35,775		$	26,521			$	37,865
Components of ACL:
ACL on loans	$	35,775		$	26,521			$	37,865
ACL on off-balance sheet credit exposures	2,466			24				2,568
ACL at end of the period	$	38,241		$	26,545			$	40,433
Net charge-offs (annualized) to average loans	0.03		%	0.05		%		0.02		%
(Credit) provision for loan losses (annualized) to average loans	(0.23)		%	0.23		%		0.40		%
ACL on loans to total loans	1.11		%	0.84		%		1.18		%

ACL on loans to net charge-offs (annualized)	3,789.72		%	1,571.15		%		5,021.88		%

At or For The
Three Months Ended
March 31,
At or For The
Year Ended
December 31, 2019
(Dollars in thousands) 2020 2019
ALL at the beginning of the period $ 25,171
$ 24,712
$ 24,712
Provision for loan losses 1,772
750
2,862
Charge-offs:
Residential real estate 96
11
462
Commercial real estate 50
65
300
Commercial 253
236
1,167
Consumer and home equity 91
24
713
HPFC —
—
71
Total charge-offs 490
336
2,713
Recoveries:
Residential real estate 2
2
16
Commercial real estate 4
4
49
Commercial 53
62
225
Consumer and home equity 9
7
20
HPFC —
—
—
Total recoveries 68
75
310
Net charge-offs 422
261
2,403
ALL at the end of the period $ 26,521
$ 25,201
$ 25,171
Components of allowance for credit losses:
Allowance for loan losses $ 26,521
$ 25,201
$ 25,171
Liability for unfunded credit commitments 24
16
21
Balance of allowance for credit losses at end of the period $ 26,545
$ 25,217
$ 25,192
Net charge-offs (annualized) to average loans 0.05 % 0.03 % 0.08 %
Provision for loan losses (annualized) to average loans 0.23 % 0.10 % 0.09 %
ALL to total loans 0.84 % 0.83 % 0.81 %
ALL to net charge-offs (annualized) 1,571.15 % 2,413.89 % 1,047.48 %

ACL on Loans

~~The determination~~

During the first quarter of an appropriate level of ALL, and subsequent provision for loan losses which affects earnings, is based on our analysis of various economic factors, which included consideration of the COVID-19 pandemic, 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, known2021, there were no significant changes in our modeling methodology to determine 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.

~~We believe the ALL of $26.5 million, or 0.84% of total loans and 256.86% of total non-performing~~ACL on loans at March 31, 2021. The significant key assumptions used with the ACL on loans calculation at March 31, 2021 and December 31, 2020, included: (i) Company-specific macroeconomic factors (i.e. loss drivers), (ii) our forecast period and reversion speed, (iii) prepayment speeds, and (iv) various qualitative factors.

As of March 31, 2021 and December 31, 2020, the recorded ACL on loans was ~~appropriate given~~$35.8 million and $37.9 million, respectively, and represented our best estimate. The decrease in the ~~current economic conditions~~ACL on loans during the first quarter of $2.1 million was driven by an improvement in management's forecast of its macroeconomic factors over its one-year forecast period.

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

ACL on Off-Balance Sheet Credit Exposures

During the first quarter of 2021, there were no significant changes in our ~~service area, which included consideration of~~modeling methodology to determine the ~~COVID-19 pandemic and its impact~~ACL on ~~our customers, local economies and markets, and the condition of the loan portfolio. Based on information available~~off-balance sheet credit exposures as of March 31, ~~2020,~~2021. The model uses the ~~ALL~~credit loss factors for each segment calculated within the ACL on loans model described above. The decrease in the ACL on off-balance sheet credit exposures during the first quarter of 2021 of $102,000 was ~~increased~~also driven by ~~$800,000, with a corresponding charge~~the improvement in management's forecast of its macroeconomic factors over its one-year forecast period.

The ACL on off-balance sheet credit exposures was presented within accrued interest and other liabilities on the consolidated statements of condition. Increases (decreases) to the ACL on off-balance sheet credit exposures were presented within (credit) provision for ~~loan~~credit losses ~~as we considered~~on the ~~impact~~consolidated statements of ~~the COVID-19 pandemic within~~income.

We may adjust our ~~qualitative factors. The impact of the COVID-19 pandemic on a global, national and/or local economy is uncertain at this time, though we expect it~~assumptions to account for differences between expected and actual losses from period to period. A future change to our assumptions will likely ~~result in overall credit quality deterioration, particularly within certain industries more susceptible to~~alter the ~~impact~~level of ~~COVID-19, which we believe to include lodging, senior living~~allowance required and care facilities, restaurants, and travel and recreation, which made up 13% of total loans as of March 31, 2020. Should credit quality, or factors known to affect credit quality, deteriorate in future periods and/or the Company experience elevated net charge-offs, we would anticipatemay have a ~~corresponding increase in the ALL and provision for loan losses.~~

~~Goodwill~~

~~We evaluated the Company's goodwill for impairment as of November 30, 2019 and determined goodwill was not impaired. In light of the COVID-19 pandemic and its~~material impact on ~~global, national~~future results of operations and local markets and economy, we assessed if a triggering event occurred as of March 31, 2020, that would require an interim goodwill impairment assessment. Through our assessment, we determined that a triggering event had not occurred. We will continue to monitor the impact and effects of the COVID-19 pandemic on the Company's business and operations, including its economies and markets. We will assess goodwill for impairment should a triggering event occur.financial condition.

Liabilities and Shareholders’ Equity.

~~Deposits.~~ ~~Total~~

Deposits

At March 31, 2021, deposits ~~increased $26.0~~totaled $4.2 billion, an increase of $206.4 million, or 1%5%, since December 31, ~~2019,~~2020. The increase in deposits during the first quarter of 2021 was driven by an increase in core deposits (non-GAAP) of $212.8 million, or 6%. The increase was driven by another round of stimulus provided to ~~$3.6 billion~~businesses and consumers in response to the COVID-19 pandemic driving higher checking, savings and money mark account balances.

The Company's loan-to-deposit ratio was 77% at March 31, 2021, compared to 80% at December 31, 2020.

Borrowings

At March 31, 2021, total borrowings were $245.7 million, a decrease of $1.0 million since December 31, 2020. During the first quarter of 2021, in light of its liquidity position, the Company terminated a $25.0 million long-term borrowing contract with the FHLBB under which advances had an interest rate of 0.98%, and incurred a one-time prepayment penalty of $514,000.

On April 16, 2021, the Company redeemed in full $15.0 million of subordinated notes that had a 5.50% interest rate, at a redemption price equal to the principal amount of the notes plus accrued and unpaid interest. As of March 31, 2021, the Company's $15.0 million of subordinated notes provided 38 basis points of tier 2 capital for its total risk-based capital ratio. The Company's total risk-based capital ratio at March 31, 2021, was 16.00%, well in excess of regulatory requirements.

Shareholders' Equity

On March 30, 2021, the Company announced a $0.03, or 9%, increase in its quarterly cash dividend to shareholders to $0.36 per share, payable on April 30, 2021 to shareholders of record as of April 15, 2021. As of March 31, 2021, the Company's annualized dividend yield was 3.01% based on Camden National's closing share price of $47.86, as reported by NASDAQ.

In the first quarter of 2020, savings and money market deposits grew 2% and certificates of deposit grew 4%, while checking account and brokered deposits each decreased 1%. The decrease in checking account balances was primarily driven by certain large depositors' balances reducing interest checking balances by $20.7 million. The Company did not see its normal core deposit outflows in the first quarter of 2020, likely due to changes in customer behavior due to the COVID-19 pandemic.

~~Borrowings.~~ Total borrowings increased $83.0 million, or 25%, since December 31, 2019, to $420.9 million at March 31, 2020. In the first quarter of 2020, we entered into two FHLBB term borrowings: (i) $25.0 million at a fixed rate of 0.98% for five years; and (ii) $50.0 million at a fixed rate of 0.34% for 90 days. We took certain actions in the first quarter of 2020 to ladder in long-term funding at fixed rates below 1.00% for future ALM and interest rate risk planning.

Additionally, we entered into two interest rate swaps to lock in $50.0 million of three-year funding at 0.71% and $50.0 million of ten-year funding at 0.86%. Each interest rate swap was designated as a cash flow hedge for accounting purposes. Refer to "~~—Contractual Obligations and Off-Balance Sheet Commitments" and Note 8 of the consolidated financial statements for further discussion.~~

~~A $10.0 million FHLBB borrowing at a rate of 1.87% matured in April 2020.~~

~~Shareholders' Equity.~~ ~~In January 2020,~~2021, the Company's Board of Directors authorized the purchase of up to 750,000 shares of our common stock, representing approximately 5.0% of ~~our~~the Company's issued and outstanding shares as of ~~December~~March 31, ~~2019. In~~2021. The Company did not repurchase any shares during the first quarter of 2020, we repurchased 217,031 shares of the Company's common stock at a weighted average price of $36.74 per share, before suspending our repurchase program on March 20, 2020, as our strategy shifted from earnings generation to capital preservation during the COVID-19 pandemic.2021.

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


	At or For The Three Months Ended March 31,						At or For The Year Ended December 31, 2020
	2021			2020
Financial Ratios
Average equity to average assets	10.81		%	10.70		%		10.39		%
Common equity ratio	10.46		%	10.72		%		10.81		%
Tangible common equity ratio (non-GAAP)	8.71		%	8.78		%		8.99		%
Dividend payout ratio	27.27		%	37.08		%		33.33		%
Per Share Data
Book value per share	$	35.64		$	32.95			$	35.50
Tangible book value per share (non-GAAP)	29.12			26.39				28.96
Dividends declared per share	0.36			0.33				1.32

At or For The
Three Months Ended
March 31,

At or For The
Year Ended
December 31,
2019
2020 2019
Financial Ratios
Average equity to average assets 10.70 % 10.17 % 10.43 %
Common equity ratio 10.72 % 10.26 % 10.69 %
Tangible common equity ratio⁽¹⁾
8.78 % 8.21 % 8.66 %
Dividend payout ratio 37.08 % 32.97 % 33.24 %
Per Share Data
Book value per share $ 32.95
$ 29.16
$ 31.26
Tangible book value per share⁽¹⁾
26.39
22.81
24.77
Dividends declared per share 0.33
0.30
1.23

~~(1) Please refer to "Non-GAAP Financial Measures and Reconciliation to GAAP" for further details.~~

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

LIQUIDITY

Our liquidity needs require the availability of cash to meet the withdrawal demands of depositors and credit commitments to borrowers. Liquidity is defined as our ability to maintain availability of funds to meet customer needs, as well as to support our asset base. The primary objective of liquidity management is to maintain a balance between sources and uses of funds to meet our cash flow needs in the most economical and expedient manner. Due to the potential for unexpected fluctuations in both deposits and loans, active management of liquidity is necessary. We maintain various sources of funding and levels of liquid assets 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 March 31, ~~2020~~2021 and December 31, ~~2019,~~2020, 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, borrowings from the FHLBB and other sources, cash flows from operations, prepayments and maturities of outstanding loans, investments and mortgage-backed securities and the sale of mortgage loans.

Deposits continue to represent our primary source of funds. For the three months ended March 31, ~~2020,~~2021, average deposits (excluding brokered deposits) of ~~$3.4~~$3.8 billion increased ~~$268.5~~$414.7 million, or 9%12%, compared to the same period last year. Average core deposits (non-GAAP) of ~~$2.8~~$3.4 billion for the three months ended March 31, ~~2020,~~2021, increased ~~$159.5~~$615.2 million, or 6%22%, compared to the same period a year ago. Included within our average money market deposits for the three months ended March 31, 2021 and 2020, ~~and 2019,~~ were ~~$75.6~~$57.6 million and ~~$69.2~~$75.6 million, respectively, of deposits from the Bank's wealth management department, Camden National Wealth Management, which represent client funds. These deposits fluctuate with changes in the portfolios of the clients of Camden National Wealth Management.

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 three months ended March 31, ~~2020,~~2021, average total borrowings (including brokered deposits) decreased ~~$185.2~~$38.7 million, or ~~25%~~7%, to ~~$562.8~~$524.1 million compared to the same period last year. We secure borrowings from the FHLBB with qualified residential real estate loans, certain investment securities and certain other assets available to be pledged. Customer repurchase agreements are secured by mortgage-backed securities and government-sponsored enterprises. Through the Bank, we have available lines of credit with the FHLBB of $9.9 million, with a correspondent bank of $50.0 million, and with the FRB Discount Window of ~~$64.5~~$58.9 million as of March 31, ~~2020.~~2021. The Company also has a $10.0 million line of credit with a correspondent bank that matures on December ~~18, 2020.~~17, 2021.

We believe our 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, the 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 our current 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, whether as a result of the COVID-19 pandemic or otherwise, 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 ~~$492.7~~$532.1 million and ~~$473.4~~$529.3 million at March 31, ~~2020~~2021 and December 31, ~~2019,~~2020, respectively, which amounted to 10% and 11% of total assets as of the respective dates. Refer to "— Financial Condition — Liabilities and Shareholders' Equity" for discussion regarding changes in shareholders' equity for the three months ended March 31, ~~2020.~~2021.

Our principal cash requirement is the payment of dividends on our common stock, as and when declared by the Company's Board of Directors. We declared dividends to shareholders in the aggregate amount of ~~$4.9~~$5.4 million and ~~$4.7~~$4.9 million for the three months ended March 31, ~~2020~~2021 and ~~2019,~~2020, respectively. The Company's Board of Directors approves cash dividends on a quarterly basis after careful analysis and consideration of various factors, including the following: (i) capital position relative to total assets, (ii) risk-based assets, (iii) total classified assets, (iv) economic conditions, (v) growth rates for total assets and total liabilities, (vi) earnings performance and projections and (vii) strategic initiatives and related capital requirements. All dividends declared and distributed by the Company will be in compliance with applicable state corporate law and regulatory requirements.

We are primarily dependent upon the payment of cash dividends by the Bank, our wholly-owned subsidiary, to service our commitments. We, as the sole shareholder of the Bank, are entitled to dividends, when and as declared by the Bank's Board of Directors from legally available funds. For the three months ended March 31, ~~2020~~2021 and ~~2019,~~2020, the Bank declared dividends payable to the Company in the amount of ~~$6.9~~$17.0 million and ~~$7.0~~$6.9 million, respectively. Under regulations prescribed by the OCC, the Bank may not declare dividends in excess of the Bank’s net income for the current year plus its retained net income for the prior two years without prior approval from the OCC. If we are required to use dividends from the Bank to service unforeseen commitments in the future, we may be required to reduce the dividends paid to our shareholders going forward.

Please refer to Note 10 of the consolidated financial statements for discussion and details of the Company and Bank's regulatory capital requirements. At March 31, ~~2020~~2021 and December 31, ~~2019,~~2020, the Company and Bank exceeded all regulatory capital requirements, and the Bank continues to meet the capital requirements to be classified as "well capitalized" under applicable prompt corrective action provisions.

CONTRACTUAL OBLIGATIONS AND OFF-BALANCE SHEET COMMITMENTS

Off-Balance Sheet Financial Instruments

Credit Commitments and Standby Letters of ~~Credit.~~ Credit

In the normal course of business, we are a party to credit related financial instruments with off-balance sheet risk, which are not reflected in the consolidated statements of condition. These financial instruments include commitments to extend credit and standby letters of credit. 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 borrower is represented by the contractual amount of those instruments. ~~Since many~~Many of the commitments ~~are expected to~~will expire without being drawn upon, and thus, the total amount does not necessarily represent future cash requirements. In the event of nonperformance by the borrower, we are entitled to underlying collateral, as applicable, which generally consists of pledges of business assets including, but not limited to, accounts receivable, inventory, plant and equipment, and/or real estate.

~~Derivatives.~~Refer to Note 7 of the consolidated financial statements for additional details.

Derivatives

We use derivative financial instruments for risk management purposes (primarily interest rate risk) and not for trading or speculative purposes. We control the credit risk of these instruments through collateral, credit approvals and monitoring procedures. Additionally, as part of our normal mortgage origination process, we provide 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, we are subject to the risk of interest rate change. 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. We account for interest rate lock commitments on loans that will be held for sale as derivative instruments. Furthermore, we record a derivative for our best-effort forward delivery commitments upon origination of a loan identified as held for sale. Should we enter into a forward delivery commitment on a mandatory delivery arrangement with an investor, we account for the forward delivery commitment as a derivative upon execution of the mandatory delivery contract.

Refer to Note 8 of the consolidated financial statements for additional details.

Hedge ~~Instruments.~~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 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.

Refer to ~~Notes 7 and~~Note 8 of the consolidated financial statements for additional details.

At March 31, ~~2020,~~2021, we had the following levels of off-balance sheet financial instruments:


(In thousands)	Total Amount		Commitment Expires in:
Off-Balance Sheet Financial Instruments	Committed		<1 Year		1 – 3 Years		3 – 5 Years		>5 Years
Commitments to extend credit	$	696,086	$	391,420	$	18,893	$	15,712	$	270,061
Standby letters of credit	4,855		3,344		70		—		1,441
Customer loan swaps - notional value	740,480		6,169		49,466		146,706		538,139
Interest rate contracts - notional value	253,000		10,000		50,000		100,000		93,000
Fixed-rate mortgage interest rate lock commitments - notional value	81,807		81,807		—		—		—
Forward delivery commitments - notional value	22,225		22,225		—		—		—
Total	$	1,798,453	$	514,965	$	118,429	$	262,418	$	902,641

(In thousands) Total Amount Commitment Expires in:
Off-Balance Sheet Financial Instruments Committed <1 Year 1 – 3 Years 3 – 5 Years >5 Years
Commitments to extend credit $ 764,368
$ 345,062
$ 70,854
$ 20,944
$ 327,508
Standby letters of credit 5,002
2,161
1,819
—
1,022
Customer loan swaps - notional value 817,090
—
76,901
75,578
664,611
Interest rate swap on loans - notional value 100,000
—
—
100,000
—
Interest rate swaps on borrowings - notional value 100,000
—
50,000
—
50,000
Fixed-rate mortgage interest rate lock commitments - notional value 128,481
128,481
—
—
—
Junior subordinated debt interest rate swaps - notional value 43,000
—
10,000
—
33,000
Forward delivery commitments - notional value 28,356
28,356
—
—
—
Total $ 1,986,297
$ 504,060
$ 209,574
$ 196,522
$ 1,076,141

Contractual Obligations and Commitments

We are a party to several contractual obligations through lease agreements on a number of branches. Renewal options within our various lease contracts, as applicable, are considered to determine the lease term and estimate the contractual obligation and commitment for the Company's operating and finance leases. Furthermore, certain lease contracts of the Company contain language that subject its rent payment to variability, such as those tied to an index or change in an index. As a result, the future contractual obligation and commitment may materially differ from that estimated and disclosed within the table below.

We enter into agreements routinely as part of our normal business to manage deposits and borrowings.

At March 31, ~~2020,~~2021, we had an obligation and commitment to make future payments under each of these contracts as follows:


(In thousands)	Total Amount		Payments Due per Period
Contractual obligations and commitments	Committed		<1 Year		1 – 3 Years		3 – 5 Years		>5 Years
Operating leases	$	14,950	$	1,332	$	2,461	$	1,998	$	9,159
Finance leases	7,660		307		621		633		6,099




Retail repurchase agreements	186,408		186,408		—		—		—
Junior subordinated debentures	44,331		—		—		—		44,331
Subordinated debentures(1)	15,000		—		—		15,000		—
Other contractual obligations	3,065		3,065		—		—		—
Total	$	271,414	$	191,112	$	3,082	$	17,631	$	59,589

(In thousands) Total Amount Payments Due per Period
Contractual obligations and commitments Committed <1 Year 1 – 3 Years 3 – 5 Years >5 Years
Operating leases $ 16,583
$ 1,415
$ 2,703
$ 2,386
$ 10,079
Finance leases 7,964
304
616
627
6,417
FHLBB advances less than 90 days 50,000
50,000
—
—
—
FHLBB advances - other 35,000
10,000
—
25,000
—
Retail repurchase agreements 265,997
265,997
—
—
—
Junior subordinated debentures 44,331
—
—
—
44,331
Subordinated debentures 14,824
—
—
—
14,824
Other contractual obligations 1,582
1,582
—
—
—
Total $ 436,281
$ 329,298
$ 3,319
$ 28,013
$ 75,651
(1) On April 16, 2021, the Company redeemed in full $15.0 million of subordinated notes that had a 5.50% interest rate, at redemption price equal to the principal amount of the notes plus accrued and unpaid interest.

Borrowings from the FHLBB consist of short- and long-term fixed and variable rate borrowings that 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.

We have an obligation and commitment to repay all short- and long-term borrowings. These commitments and borrowings and the related payments are made during the normal course of business.

RISK MANAGEMENT

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

The spread of the COVID-19 pandemic has increased many of the risks we face, including our credit, operational, vendor and third party, and technology risks. In response to the COVID-19 pandemic, the Company formed the Pandemic Work Group to develop and oversee the Company’s response. The Pandemic Work Group has: (i) developed employee practices, policies and playbooks to address pandemic related issues; (ii) implemented monitoring of all federal, state and local actions (e.g., stay-at-home orders) so that the Company can comply with all legal requirements; (iii) completed risk assessments and proactive monitoring over critical vendors, along with enhanced cybersecurity monitoring and reporting; (iv) created ongoing assessment and monitoring over employee availability, safety, workloads and access to tools (including technology needed to work from home effectively); (v) initiated and continues to monitor the temporary loan relief programs; (vi) ~~rolled~~oversaw the roll out of the SBA ~~Paycheck Protection Program;~~PPP loan program and continues to monitor; (vii) developed our branch network plan, including determinations of which branches should be closed in order to best allocate ~~resources.~~ resources; and (viii) developed a plan for, and oversaw the re-opening of branches in June 2020, which included ensuring health and safety protocols and practices were in place for our employees and customers. In addition, the Pandemic Work Group is currently formulating the Company's short- and long-term strategy for returning its employees that continue to work remotely back to its locations safely in compliance with health officials' guidelines.

The Pandemic Work Group continues to oversee areas of the Company’s response such as employee practices and assessment of employee availability, safety and workload. Members of the Pandemic Work Group include the Company’s executive team and other members of senior management. The Pandemic Work Group, through the Company's executive team, regularly reports to the Board of Directors to assist the Board of Directors with both its ongoing oversight of the Company’s response to COVID-19 as well as its management of all areas of risks the Company faces, which have been affected by the COVID-19 pandemic.

Please refer to "– Executive Overview" and "– Financial Condition" above for additional discussion of specific actions the Company has taken in response to the COVID‑19 pandemic. Please also refer to Item 1A, "Risk Factors" for additional information on the Company’s risks relating to the COVID-19 pandemic.

~~Other than as described above, for the three months ended March 31, 2020, there~~There have been no material changes to the Company's risk categories and risk management policies as described in Item 7 of the Company's Annual Report on Form 10-K for the year ended December 31, ~~2019.~~2020. Please refer to Item 7 of the Company's Annual Report on Form 10-K for the year ended December 31, ~~2019~~2020 for further details regarding the Company's risk management.

For the three months ended March 31, 2020, there have been no material changes to the Company's risk categories and risk management policies as described in Item 7 of the Company's Annual Report on Form 10-K for the year ended December 31, 2019, with the exception of the addition of the Pandemic Work Group described above. Please refer to Item 7 of the Company's Annual Report on Form 10-K for the year ended December 31, 2019 for further details regarding the Company's risk management.

Interest rate risk

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

The simulation model captures the impact of changing interest rates on the interest income received and interest expense paid on all interest-earning assets and interest-bearing liabilities reflected on our consolidated statements of condition, as well as for derivative financial instruments. This sensitivity analysis is compared to ALCO policy limits, which specify a maximum tolerance level for net interest income exposure over a one- and two-year horizon, assuming no balance sheet growth, 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 result in negative rates as many deposit and funding rates are below 2.00%. During the last few years, our downward shift has been 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 and a “rate

shock” 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 the lesser of current levels or 0.25%.

As of March 31, ~~2020~~2021 and ~~2019,~~2020, our net interest income sensitivity analysis reflected the following changes to net interest income assuming no balance sheet growth and a parallel shift in interest rates. All rate changes were “ramped” over the first 12-month period and then maintained at those levels over the remainder of the ALCO simulation horizon.


	Estimated Changes In Net Interest Income
Rate Change from Year 1 — Base	March 31, 2021		March 31, 2020
Year 1
+200 basis points	2.61	%	(0.97)	%
-100 basis points	(0.94)	%	(0.18)	%

Year 2
+200 basis points	10.03	%	4.51	%
-100 basis points	(9.80)	%	(3.79)	%

Estimated Changes In
Net Interest Income
Rate Change from Year 1 — Base March 31,
2020 March 31,
2019
Year 1

+200 basis points (0.97 )% 0.47 %
-100 basis points (0.18 )% (0.83 )%
Year 2
+200 basis points 4.51 % 6.87 %
-100 basis points (3.79 )% (2.26 )%

The preceding sensitivity analysis does not represent a forecast and should not be relied upon as being indicative of expected operating results. Furthermore, this sensitivity analysis may not represent the full magnitude of interest rate shocks, because Federal Funds and Treasury yields are floored at 0.01%, and Prime is floored at 3.00%. The COVID-19 pandemic has driven significant economic and interest rate contraction over recent months, and the future state of the economy remains highly uncertain at this time. These hypothetical estimates are based upon numerous assumptions including, among others, the nature and timing of interest rate levels, yield curve shape, prepayments on loans and securities, deposit decay rates, pricing decisions on loans and deposits, ~~and~~ reinvestment/replacement of asset and liability cash ~~flows. While~~flows, and non-performing asset levels. Although assumptions are developed based upon current economic and local market conditions, we cannot make any assurances as to the predictive nature of these assumptions, including how customer preferences or competitor influences might change.

If rates remain at or near current levels, net interest income is projected to ~~decrease marginally as assets redeploy~~decrease. Asset cash flows reprice and replace into ~~reduced replacement yields~~the low rate environment, and are ~~nearly~~more than offset by the positive impact of funding cost reductions, causing balance sheet spread to ~~funding costs. As assets continue to reset and reprice into rates below portfolio averages and funding costs reach their assumed floors, net interest income begins to trend downward.~~tighten. If rates decrease 100 basis points, net interest income is projected to trend slightly ~~below~~above current levels as funding cost reductions mitigate asset yield pressure. In the second year, net interest income is projected to continue to decrease as loans and investment cash flow reprice into lower yields as prepayments increase while reduction in the cost of funds is exhausted. If rates increase 200 basis points, net interest income is projected to ~~decrease~~increase slightly in the first year due to ~~pressure on~~asset yields outpacing funding ~~costs outpacing asset yields.~~cost increases. In the second year, net interest income is projected to continue to increase as loan and investment yields continue to reprice/reset into higher yields and funding cost increases subside.

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

relative to their expectations and our hedging policies. Refer to "—Contractual Obligations and Off-Balance Sheet Commitments" and Note 8 of the consolidated financial statements for further discussion of these derivative instruments.

LIBOR is a benchmark interest rate for certain floating rate loans, deposits and borrowings, and off-balance sheet exposures of the Company. In 2017, the U.K. Financial Conduct Authority, which regulates LIBOR, announced that it will not compel panel banks to contribute to LIBOR after 2021. As such, we have ~~begun~~ an internal project team that is focused on an orderly transition from LIBOR to alternative reference rates. The markets for alternative rates are developing. We will continue to assess the use of alternative rates, and expect to transition to alternative rates as the markets and best practices develop.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK

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

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.

Although a significant number of our employees continue to work from home as a result of the COVID-19 pandemic, we have concluded that these changes in work arrangements did not have a material effect on our internal controls over financial reporting during the first quarter of 2021. 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

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

ITEM 1A. RISK FACTORS

~~Our business, financial condition, liquidity, capital and results of operations have been, and will likely continue to be, adversely affected by the COVID-19 pandemic.~~

~~The COVID-19 pandemic has created economic and financial disruptions that have adversely affected, and~~There are likely to continue to adversely affect, our business, financial condition, liquidity, capital and results of operations. We cannot predict at this time the extent to which the COVID-19 pandemic will continue to negatively affect our business, financial condition, liquidity and results of operations. The extent of any continued or future adverse effects of the COVID-19 pandemic will depend on future developments, which are highly uncertain and outside our control, including the scope and duration of the pandemic, the direct and indirect impact of the pandemic on our employees, customers, counterparties and service providers, as well as other market participants, and actions taken by governmental authorities and other third parties in response to the pandemic. Although our Pandemic Work Group continues to monitor the COVID-19 pandemic and to take action in response to ongoing developments, there can be no guarantee this or any other aspect of our business continuity planning will be effective in addressing some or all of the effects of the COVID-19 pandemic.

The COVID-19 pandemic has contributed, or will likely contribute, to (i) sudden and significant declines, and significant increases in volatility, in financial markets; (ii) ratings downgrades, credit deterioration and defaults in many industries, including hospitality, transportation and commercial real estate; (iii) significant draws on credit lines as customers seek to increase liquidity; (iv) significant reductions in the targeted federal funds rate (which was reduced to a target rate of between zero and 0.25% in the first quarter of 2020, and may be reduced to below zero if the Federal Reserve determines economic conditions warrant); and (v) heightened cybersecurity, information security and operational risks as a result of work-from-home arrangements. Many of our counterparties and third-party service providers have been, and may further be, affected by “stay-at-home” orders, market volatility and other factors that increase their risks of business disruption or that may otherwise affect their ability to perform under the terms of any agreements with us or provide essential services. As a result, our operational and other risks are generally expected to increase until the pandemic subsides. In addition, our business operations may be disrupted if significant portions of our workforce are unable to work effectively, including because of illness, quarantines, government actions, or other restrictions in connection with the pandemic, or if we are unable to keep our branches open because of, or risk of, infection. We have already temporarily closed certain branches and have taken action to reduce operating hours and eliminate lobby services (other than by appointment) at our remaining branches.

~~In response to the pandemic and to support our customers, we have provided temporary debt payment relief, in some cases of up to 180 days, to business and consumer borrowers. A significant~~ number of ~~our customers have sought to defer payments of interest and/or principal under these programs. Payment deferrals under these programs~~factors that may adversely affect ~~our revenue and results of operations. In addition, if such measures are not effective in mitigating~~ the ~~effects of COVID-19 on borrowers, we may experience higher rates of default and increased credit losses in future periods.~~

Certain industries to which the Company has credit exposure, including lodging, senior living and care facilities, restaurants, and travel and recreation, have experienced significant operational challenges as a result of COVID-19. These negative effects may result in a number of our customers making higher than usual draws on outstanding lines of credit, which may negatively affect our liquidity if current economic conditions persist. The effects of COVID-19 may also cause our business and consumer customers to be unable to pay their loans as they come due or may decrease the value of collateral, which we expect would cause significant increases in our credit losses.

Governmental authorities worldwide have taken unprecedented measures to stabilize the markets and support economic growth. The success of these measures is unknown and they may not be sufficient to address the negative effects of COVID-19 or avert severe and prolonged reductions in economic activity.

~~Other negative effects of COVID-19 that may impact our~~Company’s business, financial ~~condition, liquidity, capital and~~ results ~~of operations cannot be predicted at this time, but it is likely that our business, financial condition, liquidity, capital and results of operations will continue~~or stock price. Refer to ~~be adversely affected until the pandemic subsides and the U.S. economy begins to recover. Further,~~

~~the COVID-19 pandemic may also have the effect of heightening many of the other risks described in the section entitled~~ “Risk Factors” in ~~our most recent~~the Company’s Annual Report on Form ~~10-K. Until~~10-K for the ~~pandemic subsides, we expect reduced revenues from our lending businesses, and increased credit losses in our lending portfolios, as well as recognize the possibility~~year ended December 31, 2020, for an increase in credit line utilization. Even after the pandemic subsides, it is possible that the U.S. and other major economies continue to experience a prolonged recession, which we expect would materially and adversely affect our business, financial condition, liquidity, capital and resultsdiscussion of ~~operations.~~these risks.

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		Camden National Corporation Amended and Restated Bylaws (incorporated herein by reference to Exhibit 3.1 to the Company's Form 8-K filed with the Commission on ~~May 4, 2020)~~March 30, 2021 ).
~~10.1~~31.1+*		Camden National Corporation 2020-2022 Amended and Restated Long-Term Performance Share Plan (incorporated herein by reference to Exhibit 10.1 to the Company's Form 8-K filed with the Commission on May 4, 2020).
~~10.2~~+*	~~Form of Performance Share Unit Award Agreement for Company Employees under the Camden National Corporation Amended and Restated Long-Term Performance Share Unit Plan.~~
~~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~~iXBRL (Inline eXtensible Business Reporting Language). The following materials from Camden National Corporation’s Quarterly Report on Form 10-Q for the period ended March 31, ~~2020,~~2021, formatted in ~~XBRL:~~iXBRL: (i) Consolidated Statements of Condition - ~~March31, 2020~~March 31, 2021 and December 31, ~~2019;~~2020; (ii) Consolidated Statements of Income - Three Months Ended March 31, ~~2020~~2021 and ~~2019;~~2020; (iii) Consolidated Statements of Comprehensive Income - Three Months Ended March 31, ~~2020~~2021 and ~~2019;~~2020; (iv) Consolidated Statements of Changes in Shareholders’ Equity - Three Months Ended March 31, ~~2020~~2021 and ~~2019;~~2020; (v) Consolidated Statements of Cash Flows - Three Months Ended March 31, ~~2020~~2021 and ~~2019;~~2020; and (vi) Notes to the Unaudited Consolidated Financial Statements.
104		~~Filed herewith.~~Cover Page Interactive Data File (formatted as inline XBRL and contained in Exhibit 101).
**		~~Furnished~~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						May ~~7, 2020~~6, 2021
Gregory A. Dufour						Date
President and Chief Executive Officer (Principal Executive Officer)

/s/ Gregory A. White						May ~~7, 2020~~6, 2021
Gregory A. White						Date
Chief Financial Officer and Principal Financial & Accounting Officer

CONSOLIDATED STATEMENTS OF CONDITION (unaudited)

(In thousands, except number of shares)	March 31, 2020			December 31, 2019
ASSETS
Cash and due from banks	$	32,477		$	39,586
Interest-bearing deposits in other banks (including restricted cash)	21,732			36,050
Total cash, cash equivalents and restricted cash	54,209			75,636
Investments:
Available-for-sale securities, at fair value (book value of $931,876 and $913,978, respectively)	960,131			918,118
Held-to-maturity securities, at amortized cost (fair value of $1,358 and $1,359, respectively)	1,300			1,302
Other investments	15,056			13,649
Total investments	976,487			933,069
Loans held for sale, at fair value (book value of $28,356 and $11,915, respectively)	27,730			11,854
Loans	3,157,762			3,095,023
Less: allowance for loan losses	(26,521		)	(25,171		)
Net loans	3,131,241			3,069,852
Goodwill	94,697			94,697
Core deposit intangible assets	3,355			3,525
Bank-owned life insurance	93,033			92,344
Premises and equipment, net	41,131			41,836
Deferred tax assets	10,708			16,823
Other assets	161,948			89,885
Total assets	$	4,594,539		$	4,429,521
LIABILITIES AND SHAREHOLDERS’ EQUITY
Liabilities
Deposits:
Non-interest checking	$	536,243		$	552,590
Interest checking	1,147,653			1,153,203
Savings and money market	1,146,038			1,119,193
Certificates of deposit	545,013			521,752
Brokered deposits	188,758			191,005
Total deposits	3,563,705			3,537,743
Short-term borrowings	326,722			268,809
Long-term borrowings	35,000			10,000
Subordinated debentures	59,155			59,080
Accrued interest and other liabilities	117,277			80,474
Total liabilities	4,101,859			3,956,106
Commitments and Contingencies
Shareholders’ Equity
Common stock, no par value: authorized 40,000,000 shares, issued and outstanding 14,951,597 and 15,144,719 on March 31, 2020 and December 31, 2019, respectively	131,498			139,103
Retained earnings	349,141			340,580
Accumulated other comprehensive income (loss):
Net unrealized gain on available-for-sale debt securities, net of tax	22,180			3,250
Net unrealized loss on cash flow hedging derivative instruments, net of tax	(6,802		)	(6,048		)
Net unrecognized loss on postretirement plans, net of tax	(3,337		)	(3,470		)
Total accumulated other comprehensive income (loss)	12,041			(6,268		)
Total shareholders’ equity	492,680			473,415
Total liabilities and shareholders’ equity	$	4,594,539		$	4,429,521



	Three Months Ended March 31,					Year Ended December 31, 2019
(In thousands)	2020		2019			Year Ended December 31, 2019
Provision for loan losses	$	1,772	$	750		$	2,862
Change in reserve for unfunded commitments	3		(6		)	(1		)
Provision for credit losses	$	1,775	$	744		$	2,861


(In thousands)	30-59 Days Past Due		60-89 Days Past Due		90 Days or Greater Past Due		Total Past Due		Current		Total Loans Outstanding		Loans > 90 Days Past Due and Accruing
March 31, 2021
Commercial real estate - non owner-occupied	$	102	$	0	$	106	$	208	$	1,116,409	$	1,116,617	$	0
Commercial real estate - owner-occupied	0		75		47		122		273,588		273,710		0
Commercial	425		0		1,022		1,447		364,712		366,159		0
SBA PPP	0		0		0		—		169,407		169,407		0
Residential real estate	423		514		2,542		3,479		1,048,286		1,051,765		0
Home equity	35		192		1,312		1,539		238,947		240,486		0
Consumer	21		22		29		72		18,830		18,902		0
Total	$	1,006	$	803	$	5,058	$	6,867	$	3,230,179	$	3,237,046	$	0
December 31, 2020
Commercial real estate - non owner-occupied	$	0	$	50	$	173	$	223	$	1,097,752	$	1,097,975	$	0
Commercial real estate - owner-occupied	99		0		47		146		271,349		271,495		0
Commercial	430		0		857		1,287		380,207		381,494		0
SBA PPP	0		0		0		0		135,095		135,095		0
Residential real estate	1,406		1,103		2,535		5,044		1,049,754		1,054,798		0
Home equity	335		173		1,416		1,924		256,649		258,573		0
Consumer	92		67		4		163		20,229		20,392		0
Total	$	2,362	$	1,393	$	5,032	$	8,787	$	3,211,035	$	3,219,822	$	0


	March 31, 2021						December 31, 2020
	Collateral Type				Total Collateral -Dependent Non-Accrual Loans		Collateral Type				Total Collateral -Dependent Non-Accrual Loans
(In thousands)	Real Estate		General Business Assets				Real Estate		General Business Assets


Commercial	$	0	$	657	$	657	$	0	$	689	$	689
Residential real estate	336		0		336		248		0		248


Total	$	336	$	657	$	993	$	248	$	689	$	937


	Number of Contracts		Recorded Investment				Specific Reserve
(In thousands, except number of contracts)	March 31, 2021	December 31, 2020	March 31, 2021		December 31, 2020		March 31, 2021		December 31, 2020
Commercial real estate - owner-occupied	2	2	$	330	$	328	$	43	$	37
Commercial	2	2	95		100		0		0
Residential real estate	20	21	2,520		2,638		307		364
Consumer and home equity	1	0	157		0		56		0
Total	25	25	$	3,102	$	3,066	$	406	$	401


3.	Should a loan modification (i) not meet the criteria set forth in Section 4013 of the CARES Act or the interagency guidance described above, or (ii) the Company elects not to apply the guidance, then the Company would assess the loan modification under its existing accounting policies (GAAP).


	Number of Contracts		Pre-Modification Outstanding Recorded Investment				Post-Modification Outstanding Recorded Investment				Specific Reserve
(In thousands, except number of contracts)	For The Three Months Ended March 31,		For The Three Months Ended March 31,				For The Three Months Ended March 31,				For The Three Months Ended March 31,
	2021	2020	2021		2020		2021		2020		2021		2020







Home equity:
Interest rate concession and payment deferral	1	0	$	159	$	0	$	170	$	0	$	56	$	0
Total	1	0	$	159	$	0	$	170	$	0	$	56	$	0



							For the Year Ended
(In thousands)	Recorded Investment		Unpaid Principal Balance		Related Allowance		Average Recorded Investment		Interest Income Recognized
December 31, 2019:
With an allowance recorded:
Residential real estate	$	2,395	$	2,395	$	364	$	2,989	$	110
Commercial real estate	128		128		30		130		11
Commercial	—		—		—		292		—
Home equity	318		318		69		522		—
Consumer	—		—		—		—		—
HPFC	—		—		—		—		—
Ending Balance	2,841		2,841		463		3,933		121
Without an allowance recorded:
Residential real estate	989		1,116		—		1,258		21
Commercial real estate	274		433		—		381		13
Commercial	319		685		—		238		7
Home equity	55		192		—		115		—
Consumer	—		—		—		1		—
HPFC	—		—		—		—		—
Ending Balance	1,637		2,426		—		1,993		41
Total impaired loans	$	4,478	$	5,267	$	463	$	5,926	$	162


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


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


	Derivative Assets					Derivative Liabilities
(In thousands)	Notional Amount		Location	Fair Value		Notional Amount		Location	Fair Value
March 31, 2021
Derivatives designated as hedging instruments
Interest rate contracts(1)	$	160,000	Other assets	$	9,188	$	93,000	Accrued interest and other liabilities	$	8,520
Total derivatives designated as hedging instruments				$	9,188				$	8,520
Derivatives not designated as hedging instruments
Customer loan swaps(1)	$	370,240	Other assets	$	25,164	$	370,240	Accrued interest and other liabilities	$	25,164
Fixed-rate mortgage interest rate lock commitments	66,389		Other assets	1,465		15,418		Accrued interest and other liabilities	160
Forward delivery commitments	20,872		Other assets	607		1,353		Accrued interest and other liabilities	10
Total derivatives not designated as hedging instruments				$	27,236				$	25,334
December 31, 2020
Derivatives designated as hedging instruments
Interest rate contracts	$	110,000	Other assets	$	5,731	$	143,000	Accrued interest and other liabilities	$	11,625
Total derivatives designated as hedging instruments				$	5,731				$	11,625
Derivatives not designated as hedging instruments
Customer loan swaps	$	376,290	Other assets	$	39,627	$	376,290	Accrued interest and other liabilities	$	39,627
Fixed-rate mortgage interest rate lock commitments	58,574		Other assets	608		28,346		Accrued interest and other liabilities	248
Forward delivery commitments	24,951		Other assets	311		15,548		Accrued interest and other liabilities	196
Total derivatives not designated as hedging instruments				$	40,546				$	40,071


	Location and Amount of Gain (Loss) Recognized in Income
	Three Months Ended March 31,
	2021								2020
(Dollars in thousands)	Interest and fees on loans		Interest on deposits		Interest on borrowings		Interest on subordinated debentures		Interest and fees on loans		Interest on deposits		Interest on borrowings		Interest on subordinated debentures
Total presented on the consolidated statements of income in which the effects of cash flow hedges are recorded	$	30,560	$	2,063	$	156	$	805	$	34,045	$	6,662	$	838	$	887
Gain (loss) on cash flow hedging relationships
Interest rate contracts:
Amount of gain (loss) reclassified from AOCI into income	$	392	$	(79)	$	(77)	$	(422)	$	52	$	(4)	$	4	$	(240)
Amount of gain (loss) reclassified from AOCI into income - included component	$	392	$	(79)	$	(77)	$	(422)	$	52	$	(4)	$	4	$	(240)
Amount of gain (loss) reclassified from AOCI into income - excluded component	$	0	$	0	$	0	$	0	$	0	$	0	$	0	$	0



(Dollars in thousands)					March 31, 2020
Trade Date	Maturity Date	Variable Index Received	Fixed Rate Paid	Presentation on Consolidated Statements of Condition	Notional Amount		Fair Value
3/2/2020	3/1/2023	Fed Funds Effective Rate	0.705%	Accrued interest and other liabilities	$	50,000	$	(853	)
3/26/2020	3/26/2030	3-Month USD LIBOR	0.857%	Accrued interest and other liabilities	50,000		(762		)
					$	100,000	$	(1,615	)



	For The Three Months Ended March 31,
(In thousands)	2020			2019
Derivatives designated as cash flow hedges:
Effective portion of unrealized losses recognized within OCI during the period, net of tax	$	(902	)	$	(925	)
Net reclassification adjustment for effective portion of cash flow hedges included in interest expense, gross	$	240		$	119
Net reclassification adjustment for effective portion of cash flow hedges included in interest income, gross	$	(52	)	$	—


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


	March 31, 2021				Minimum Regulatory Capital Required for Capital Adequacy plus Capital Conservation Buffer		Minimum Regulatory Provision To Be "Well Capitalized"		December 31, 2020				Minimum Regulatory Capital Required for Capital Adequacy plus Capital Conservation Buffer		Minimum Regulatory Provision To Be "Well Capitalized"
(Dollars in thousands)	Amount		Ratio						Amount		Ratio
Camden National Corporation:
Total risk-based capital ratio	$	511,438	16.00	%	10.50	%	10.00	%	$	498,290	15.40	%	10.50	%	10.00	%
Tier 1 risk-based capital ratio	461,197		14.43	%	8.50	%	6.00	%	445,858		13.78	%	8.50	%	6.00	%
Common equity Tier 1 risk-based capital ratio(1)	418,197		13.08	%	7.00	%	N/A		402,858		12.45	%	7.00	%	N/A
Tier 1 leverage capital ratio(1)	461,197		9.61	%	4.00	%	N/A		445,858		9.13	%	4.00	%	N/A
Camden National Bank:
Total risk-based capital ratio	$	462,401	14.53	%	10.50	%	10.00	%	$	460,611	14.28	%	10.50	%	10.00	%
Tier 1 risk-based capital ratio	424,160		13.33	%	8.50	%	8.00	%	420,294		13.03	%	8.50	%	8.00	%
Common equity Tier 1 risk-based capital ratio	424,160		13.33	%	7.00	%	6.50	%	420,294		13.03	%	7.00	%	6.50	%
Tier 1 leverage capital ratio	424,160		8.87	%	4.00	%	5.00	%	420,294		8.64	%	4.00	%	5.00	%



	For The Three Months Ended March 31, 2020
(In thousands)	Pre-Tax Amount			Tax (Expense) Benefit			After-Tax Amount
AFS Securities:
Unrealized holdings gains	$	24,115		$	(5,185	)	$	18,930
Net unrealized gains	24,115			(5,185		)	18,930
Cash Flow Hedges:
Net decrease in fair value	(1,149		)	247			(902		)
Less: effective portion reclassified into interest expense⁽¹⁾	(240		)	52			(188		)
Less: effective portion reclassified into interest income⁽²⁾	52			(12		)	40
Net decrease in fair value	(961		)	207			(754		)
Postretirement Plans:
Net actuarial gain	175			(37		)	138
Less: Amortization of net prior service credits⁽³⁾	6			(1		)	5
Net gain on postretirement plans	169			(36		)	133
Other comprehensive income	$	23,323		$	(5,014	)	$	18,309


~~(2)~~			~~Reclassified into interest and fees on loans on the consolidated statements of income.~~


(In thousands)	Net Unrealized Gains (Losses) on AFS Debt Securities		Net Unrealized Losses (Gains) on Cash Flow Hedges		Defined Benefit Postretirement Plans		AOCI
Balance at December 31, 2019	$	3,250	$	(6,048)	$	(3,470)	$	(6,268)
Other comprehensive income (loss) before reclassifications	18,930		(902)		138		18,166
Less: Amounts reclassified from AOCI	0		(148)		5		(143)
Other comprehensive income (loss)	18,930		(754)		133		18,309
Balance at March 31, 2020	$	22,180	$	(6,802)	$	(3,337)	$	12,041

Balance at December 31, 2020	$	29,310	$	(4,626)	$	(3,944)	$	20,740
Other comprehensive (loss) income before reclassifications	(17,509)		5,018		175		(12,316)
Less: Amounts reclassified from AOCI	0		(146)		5		(141)
Other comprehensive (loss) income	(17,509)		5,164		170		(12,175)
Balance at March 31, 2021	$	11,801	$	538	$	(3,774)	$	8,565



(In thousands)	Net Unrealized Gains (Losses) on AFS Securities⁽¹⁾			Net Unrealized Losses on Cash Flow Hedges⁽¹⁾			Defined Benefit Postretirement Plans⁽¹⁾			AOCI⁽¹⁾
Balance at December 31, 2018	$	(17,826	)	$	(4,437	)	$	(2,157	)	$	(24,420	)
Other comprehensive income (loss) before reclassifications	10,899			(925		)	53			10,027
Less: Amounts reclassified from AOCI	—			(94		)	5			(89		)
Other comprehensive income (loss)	10,899			(831		)	48			10,116
Balance at March 31, 2019	$	(6,927	)	$	(5,268	)	$	(2,109	)	$	(14,304	)

Balance at December 31, 2019	$	3,250		$	(6,048	)	$	(3,470	)	$	(6,268	)
Other comprehensive income (loss) before reclassifications	18,930			(902		)	138			18,166
Less: Amounts reclassified from AOCI	—			(148		)	5			(143		)
Other comprehensive income (loss)	18,930			(754		)	133			18,309
Balance at March 31, 2020	$	22,180		$	(6,802	)	$	(3,337	)	$	12,041



		Three Months Ended March 31,
(In thousands)	Income Statement Line Item	2020		2019
Debit card interchange income	Debit card income	$	2,141	$	2,010
Services charges on deposit accounts	Service charges on deposit accounts	2,012		2,023
Fiduciary services income	Income from fiduciary services	1,502		1,392
Investment program income	Brokerage and insurance commissions	657		585
Other non-interest income	Other income	383		383
Total non-interest income within the scope of ASC 606		6,695		6,393
Total non-interest income not in scope of ASC 606		4,708		2,996
Total non-interest income		$	11,403	$	9,389


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


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


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

Quarterly Average Balance, Interest and Yield/Rate Analysis

	For The Three Months Ended
	March 31, 2020								March 31, 2019
(Dollars in thousands)	Average Balance			Interest			Yield/Rate		Average Balance			Interest			Yield/Rate
Assets
Interest-earning assets:
Interest-bearing deposits in other banks and other interest-earning assets	$	66,180		$	207		1.24	%	$	29,985		$	197		2.63	%
Investments - taxable	809,041			5,174			2.56	%	851,516			5,447			2.56	%
Investments - nontaxable⁽¹⁾	117,537			996			3.39	%	94,710			815			3.44	%
Loans⁽²⁾:
Residential real estate	1,078,836			11,292			4.19	%	1,008,285			10,838			4.30	%
Commercial real estate	1,273,538			13,646			4.24	%	1,281,501			15,169			4.73	%
Commercial⁽¹⁾	416,527			4,435			4.21	%	369,832			4,344			4.70	%
Municipal⁽¹⁾	16,990			155			3.67	%	15,333			136			3.60	%
Consumer and home equity	334,771			4,186			5.03	%	347,052			4,671			5.46	%
HPFC	20,336			402			7.83	%	32,171			636			7.91	%
Total loans	3,140,998			34,116			4.32	%	3,054,174			35,794			4.70	%
Total interest-earning assets	4,133,756			40,493			3.90	%	4,030,385			42,253			4.20	%
Cash and due from banks	42,869								40,362
Other assets	336,819								292,482
Less: ALL	(25,252		)						(24,780		)
Total assets	$	4,488,192							$	4,338,449
Liabilities & Shareholders' Equity
Deposits:
Non-interest checking	$	529,501		$	—		—	%	$	490,382		$	—		—	%
Interest checking	1,146,783			1,987			0.70	%	1,085,301			2,622			0.98	%
Savings	476,849			86			0.07	%	485,646			95			0.08	%
Money market	650,383			1,586			0.98	%	582,685			1,740			1.21	%
Certificates of deposit	552,079			2,209			1.61	%	443,107			1,465			1.34	%
Total deposits	3,355,595			5,868			0.70	%	3,087,121			5,922			0.78	%
Borrowings:
Brokered deposits	208,084			794			1.54	%	405,837			2,501			2.50	%
Customer repurchase agreements	236,351			633			1.08	%	238,499			729			1.24	%
Subordinated debentures	59,119			887			6.04	%	59,007			717			4.93	%
Other borrowings	59,257			205			1.39	%	44,711			245			2.22	%
Total borrowings	562,811			2,519			1.80	%	748,054			4,192			2.27	%
Total funding liabilities	3,918,406			8,387			0.86	%	3,835,175			10,114			1.07	%
Other liabilities	89,612								62,247
Shareholders' equity	480,174								441,027
Total liabilities & shareholders' equity	$	4,488,192							$	4,338,449
Net interest income (fully-taxable equivalent)				32,106								32,139
Less: fully-taxable equivalent adjustment				(280		)						(244		)
Net interest income				$	31,826							$	31,895
Net interest rate spread (fully-taxable equivalent)							3.04	%							3.13	%
Net interest margin (fully-taxable equivalent)							3.08	%							3.18	%
Net interest margin (fully-taxable equivalent), excluding fair value mark accretion and collection of previously charged-off acquired loans⁽³⁾							3.06	%							3.14	%



(Dollars in thousands)	Units	Recorded Investment		Percent of Total Loans at March 31, 2020
Business	1,072	$	435,615	14	%
Consumer	660	112,040		3	%
Total	1,732	$	547,655	17	%