Camden National (CAC) - 2025 Q2 - Quarterly Report

PART I. FINANCIAL INFORMATION This part presents the unaudited consolidated financial information, including statements, notes, and management's discussion and analysis ITEM 1. FINANCIAL STATEMENTS This section presents the unaudited consolidated financial statements of Camden National Corporation, including the statements of condition, income, comprehensive income, changes in shareholders' equity, and cash flows for the periods ended June 30, 2025, and December 31, 2024 (or June 30, 2024 for income/cash flow statements). These statements provide a snapshot of the company's financial health, performance, and cash movements Consolidated Statements of Condition This statement provides a snapshot of the Company's assets, liabilities, and shareholders' equity at specific points in time | Metric (in thousands) | June 30, 2025 | December 31, 2024 | Change ($) | Change (%) | | :-------------------- | :------------ | :---------------- | :--------- | :--------- | | Total assets | $6,920,044 | $5,805,138 | $1,114,906 | 19.2% | | Total liabilities | $6,267,896 | $5,273,907 | $993,989 | 18.8% | | Total shareholders' equity | $652,148 | $531,231 | $120,917 | 22.8% | Consolidated Statements of Income This statement details the Company's revenues, expenses, and net income over specific reporting periods | Metric (in thousands) | 3 Months Ended June 30, 2025 | 3 Months Ended June 30, 2024 | Change ($) | Change (%) | 6 Months Ended June 30, 2025 | 6 Months Ended June 30, 2024 | Change ($) | Change (%) | | :-------------------- | :--------------------------- | :--------------------------- | :--------- | :--------- | :--------------------------- | :--------------------------- | :--------- | :--------- | | Total interest income | $79,323 | $62,162 | $17,161 | 27.6% | $157,718 | $122,345 | $35,373 | 28.9% | | Total interest expense | $30,114 | $29,978 | $136 | 0.5% | $59,651 | $58,888 | $763 | 1.3% | | Net interest income | $49,209 | $32,184 | $17,025 | 52.9% | $98,067 | $63,457 | $34,610 | 54.5% | | Provision for credit losses | $6,920 | $650 | $6,270 | 964.6% | $16,349 | $(1,452) | $17,801 | -1226.0% | | Total non-interest income | $13,067 | $10,645 | $2,422 | 22.8% | $24,263 | $20,967 | $3,296 | 15.7% | | Total non-interest expense | $37,596 | $27,310 | $10,286 | 37.7% | $82,047 | $54,672 | $27,375 | 50.1% | | Net Income | $14,081 | $11,993 | $2,088 | 17.4% | $21,407 | $25,265 | $(3,858) | -15.3% | | Basic EPS | $0.84 | $0.82 | $0.02 | 2.4% | $1.27 | $1.73 | $(0.46) | -26.6% | | Diluted EPS | $0.83 | $0.81 | $0.02 | 2.5% | $1.26 | $1.72 | $(0.46) | -26.7% | Consolidated Statements of Comprehensive Income This statement presents net income and other comprehensive income, reflecting changes in equity from non-owner sources | Metric (in thousands) | 3 Months Ended June 30, 2025 | 3 Months Ended June 30, 2024 | Change ($) | Change (%) | 6 Months Ended June 30, 2025 | 6 Months Ended June 30, 2024 | Change ($) | Change (%) | | :-------------------- | :--------------------------- | :--------------------------- | :--------- | :--------- | :--------------------------- | :--------------------------- | :--------- | :--------- | | Net Income | $14,081 | $11,993 | $2,088 | 17.4% | $21,407 | $25,265 | $(3,858) | -15.3% | | Other comprehensive income | $4,376 | $1,784 | $2,592 | 145.3% | $16,767 | $321 | $16,446 | 5123.4% | | Comprehensive Income | $18,457 | $13,777 | $4,680 | 34.0% | $38,174 | $25,586 | $12,588 | 49.2% | Consolidated Statements of Changes in Shareholders' Equity This statement outlines the changes in the Company's equity accounts, including common stock, retained earnings, and AOCI | Metric (in thousands) | June 30, 2025 | December 31, 2024 | Change ($) | Change (%) | | :-------------------- | :------------ | :---------------- | :--------- | :--------- | | Common stock outstanding (shares) | 16,919,689 | 14,579,339 | 2,340,350 | 16.0% | | Common stock (amount) | $214,365 | $116,425 | $97,940 | 84.1% | | Retained earnings | $515,662 | $509,452 | $6,210 | 1.2% | | Accumulated other comprehensive loss | $(77,879) | $(94,646) | $16,767 | -17.7% | | Total shareholders' equity | $652,148 | $531,231 | $120,917 | 22.8% | - The increase in common stock outstanding and amount is primarily due to the issuance of 2,283,782 shares for the acquisition of Northway Financial, Inc. on January 2, 2025[19] Consolidated Statements of Cash Flows This statement categorizes cash inflows and outflows from operating, investing, and financing activities | Metric (in thousands) | 6 Months Ended June 30, 2025 | 6 Months Ended June 30, 2024 | Change ($) | Change (%) | | :-------------------- | :--------------------------- | :--------------------------- | :--------- | :--------- | | Net cash provided by operating activities | $7,066 | $32,248 | $(25,182) | -78.1% | | Net cash provided by investing activities | $8,748 | $4,087 | $4,661 | 114.0% | | Net cash used in financing activities | $(116,962) | $(30,579) | $(86,383) | 282.5% | | Net (decrease) increase in cash, cash equivalents and restricted cash | $(101,148) | $5,756 | $(106,904) | -1857.3% | | Cash, cash equivalents, and restricted cash at end of period | $113,815 | $105,560 | $8,255 | 7.8% | - Cash received in Northway acquisition was $48.3 million, while assets acquired (excluding cash) were $1.16 billion and liabilities assumed were $1.12 billion. Common stock issued for the acquisition was $96.5 million[22] Notes to the Unaudited Consolidated Financial Statements This section provides detailed explanations and additional information supporting the consolidated financial statements NOTE 1 – BASIS OF PRESENTATION This note describes the basis of preparation for the interim financial statements and the scope of consolidation - The unaudited consolidated interim financial statements are prepared in accordance with Form 10-Q instructions and GAAP, including normal recurring accruals. The Company includes Camden National Bank and its subsidiaries, eliminating intercompany transactions[23] - The Company acquired Northway Financial, Inc. on January 2, 2025, and its unconsolidated entities NCT III and NCT IV are now part of the Company's structure[26] NOTE 2 – RECENT ACCOUNTING PRONOUNCEMENTS AND TAX LEGISLATION This note discusses recently issued accounting standards and tax legislation and their expected impact on the Company - ASU No. 2023-09 (Income Taxes) is effective for annual periods after December 15, 2024, and ASU No. 2024-03 (Expense Disaggregation) is effective for annual periods after December 15, 2026[28][29] - The Company does not expect a material impact to its consolidated financial statements from the adoption of these new accounting pronouncements[28][29] NOTE 3 – BUSINESS COMBINATIONS This note details the acquisition of Northway Financial, Inc., including acquisition costs, assets acquired, and liabilities assumed - On January 2, 2025, Camden National Corporation completed the acquisition of Northway Financial, Inc. in an all-stock transaction, expanding its presence in New Hampshire with 17 new branches and increasing assets to $6.9 billion[30][32] | Acquisition Costs (in thousands) | 3 Months Ended June 30, 2025 | 6 Months Ended June 30, 2025 | | :------------------------------- | :--------------------------- | :--------------------------- | | Merger and acquisition costs | $1,405 | $8,930 | - The acquisition generated $56.8 million in provisional goodwill, allocated to Camden National Bank, representing expected synergies from combining operations[34] | Acquired Assets & Liabilities (in thousands) | As Recorded at Acquisition (Jan 2, 2025) | | :------------------------------------------- | :--------------------------------------- | | Consideration Paid (Company common stock) | $96,490 | | Loans and loans held for sale | $772,592 | | Investments | $229,954 | | Cash and due from banks | $48,261 | | Core deposit intangible assets | $48,058 | | Total Assets Acquired | $1,156,455 | | Deposits | $971,673 | | Total Liabilities Assumed | $1,116,773 | | Goodwill | $56,808 | NOTE 4 – INVESTMENTS This note provides information on the Company's investment portfolio, including available-for-sale and held-to-maturity securities - Total investments increased to $1.4 billion as of June 30, 2025, from $1.14 billion at December 31, 2024, primarily due to the Northway acquisition and subsequent purchases, partially offset by sales and maturities[13][263] | Investment Type (in thousands) | June 30, 2025 (Fair Value) | December 31, 2024 (Fair Value) | Change ($) | Change (%) | | :----------------------------- | :------------------------- | :----------------------------- | :--------- | :--------- | | Available-for-sale securities | $860,217 | $593,749 | $266,468 | 44.9% | | Held-to-maturity securities | $509,298 (Amortized Cost) | $517,778 (Amortized Cost) | $(8,480) | -1.6% | | Total investments | $1,401,720 | $1,139,284 | $262,436 | 23.0% | - Unrealized losses on AFS debt securities (excluding transferred securities) improved to $45.0 million (net of tax) as of June 30, 2025, from $62.2 million (net of tax) at December 31, 2024, due to changes in interest rates[54] NOTE 5 – LOANS AND ALLOWANCE FOR CREDIT LOSSES ON LOANS This note details the composition of the loan portfolio and the allowance for credit losses, including changes and asset quality metrics | Loan Category (in thousands) | June 30, 2025 | December 31, 2024 | Change ($) | Change (%) | | :--------------------------- | :------------ | :---------------- | :--------- | :--------- | | Commercial Loans | $2,596,860 | $2,094,749 | $502,111 | 24.0% | | Retail Loans | $2,334,509 | $2,020,510 | $313,999 | 15.5% | | Total loans | $4,931,369 | $4,115,259 | $816,110 | 19.8% | - The increase in total loans is largely attributable to the Northway acquisition, which added $775.7 million in loans held for investment[71][270] | ACL on Loans (in thousands) | June 30, 2025 | December 31, 2024 | Change ($) | Change (%) | | :-------------------------- | :------------ | :---------------- | :--------- | :--------- | | Ending balance | $53,022 | $35,728 | $17,294 | 48.4% | - The ACL on loans increased significantly due to a $5.9 million specific reserve for a syndicated commercial loan where the borrower filed for bankruptcy in Q2 2025, and a $6.3 million provision for acquired non-PCD loans from the Northway acquisition[84][244] | Non-Performing Assets (in thousands) | June 30, 2025 | December 31, 2024 | Change ($) | Change (%) | | :----------------------------------- | :------------ | :---------------- | :--------- | :--------- | | Total non-accrual loans | $18,177 | $4,829 | $13,348 | 276.4% | | Non-accrual loans to total loans | 0.37% | 0.12% | 0.25% | 208.3% | NOTE 6 – GOODWILL AND CORE DEPOSIT INTANGIBLE ASSETS This note explains the changes in goodwill and core deposit intangible assets, primarily due to business combinations | Intangible Asset (in thousands) | June 30, 2025 | December 31, 2024 | Change ($) | Change (%) | | :------------------------------ | :------------ | :---------------- | :--------- | :--------- | | Goodwill | $151,505 | $94,697 | $56,808 | 60.0% | | Core deposit intangible assets | $45,526 | $415 | $45,111 | 10870.1% | - The increases are primarily due to the Northway acquisition on January 2, 2025, which generated $56.8 million in goodwill and $48.1 million in core deposit intangible assets[102][103] NOTE 7 – BORROWINGS This note provides details on the Company's short-term borrowings and junior subordinated debentures | Borrowing Type (in thousands) | June 30, 2025 | December 31, 2024 | Change ($) | Change (%) | | :---------------------------- | :------------ | :---------------- | :--------- | :--------- | | Short-term borrowings | $599,367 | $500,621 | $98,746 | 19.7% | | Junior subordinated debentures | $61,365 | $44,331 | $17,034 | 38.4% | | Total borrowings | $660,732 | $544,952 | $115,780 | 21.2% | - The increase in junior subordinated debentures is due to the assumption of two new tranches totaling $20.6 million from the Northway acquisition[106][107][108] NOTE 8 – REPURCHASE AGREEMENTS This note outlines the Company's customer repurchase agreements and changes related to acquisitions | Repurchase Agreements (in thousands) | June 30, 2025 | December 31, 2024 | Change ($) | Change (%) | | :----------------------------------- | :------------ | :---------------- | :--------- | :--------- | | Total customer repurchase agreements | $240,367 | $175,621 | $64,746 | 36.9% | - The Company assumed $65.5 million in customer repurchase agreements through the Northway acquisition[106][116] NOTE 9 – COMMITMENTS AND CONTINGENCIES This note discloses off-balance sheet commitments, credit exposures, and potential impacts from legal proceedings | Off-Balance Sheet Commitments (in thousands) | June 30, 2025 | December 31, 2024 | Change ($) | Change (%) | | :------------------------------------------- | :------------ | :---------------- | :--------- | :--------- | | Commitments to extend credit | $952,964 | $774,659 | $178,305 | 23.0% | | Standby letters of credit | $5,114 | $4,553 | $561 | 12.3% | | Total | $958,078 | $779,212 | $178,866 | 22.9% | | ACL on Off-Balance Sheet Credit Exposures (in thousands) | June 30, 2025 | December 31, 2024 | Change ($) | Change (%) | | :------------------------------------------------------- | :------------ | :---------------- | :--------- | :--------- | | ACL on off-balance sheet credit exposures | $3,700 | $2,800 | $900 | 32.1% | - The Company believes that the outcome of pending and threatened legal actions will not have a material adverse effect on its consolidated financial statements[119] NOTE 10 – DERIVATIVES AND HEDGING This note describes the Company's use of derivative instruments to manage interest rate risk and their fair value - The Company uses interest rate derivatives (swaps) to manage interest rate risk, designating them as cash flow or fair value hedges[123][125] | Derivative Type (in thousands) | June 30, 2025 (Fair Value) | December 31, 2024 (Fair Value) | Change ($) | Change (%) | | :----------------------------- | :------------------------- | :----------------------------- | :--------- | :--------- | | Interest rate contracts (assets) | $9,062 | $14,040 | $(4,978) | -35.5% | | Interest rate contracts (liabilities) | $2,048 | $232 | $1,816 | 782.8% | | Customer loan swaps (assets) | $10,757 | $11,717 | $(960) | -8.2% | | Customer loan swaps (liabilities) | $10,797 | $11,787 | $(990) | -8.4% | - The Company estimates an additional $1.9 million will be reclassified as a decrease to interest expense from cash flow hedges over the next 12 months[124] NOTE 11 – BALANCE SHEET OFFSETTING This note explains the Company's policy regarding offsetting financial instruments on the consolidated statements of condition - The Company does not offset the carrying value for derivative instruments or repurchase agreements on the consolidated statements of condition but nets cash collateral against obligations under master netting arrangements[140] | Net Amount (in thousands) | June 30, 2025 | December 31, 2024 | Change ($) | Change (%) | | :------------------------ | :------------ | :---------------- | :--------- | :--------- | | Derivative assets | $7,262 | $12,295 | $(5,033) | -40.9% | | Derivative liabilities | $10,796 | $11,787 | $(991) | -8.4% | NOTE 12 – REGULATORY CAPITAL REQUIREMENTS This note presents the Company's and the Bank's compliance with regulatory capital requirements and their capital ratios - Both Camden National Corporation and Camden National Bank exceeded all regulatory capital requirements, including the capital conservation buffer, as of June 30, 2025, and December 31, 2024. The Bank is classified as "well capitalized"[146][331] | Capital Ratio | Camden National Corporation (June 30, 2025) | Minimum Regulatory Capital Required for Capital Adequacy plus Capital Conservation Buffer | | :------------ | :------------------------------------------ | :------------------------------------------------------------------------------------ | | Total risk-based capital ratio | 13.35% | 10.50% | | Tier 1 risk-based capital ratio | 12.18% | 8.50% | | Common equity Tier 1 risk-based capital ratio | 10.88% | 7.00% | | Tier 1 leverage capital ratio | 8.74% | 4.00% | - $63.0 million of junior subordinated debentures were included in Tier 1 and total risk-based capital for the Company as of June 30, 2025, up from $43.0 million at December 31, 2024[148] NOTE 13 – OTHER COMPREHENSIVE INCOME This note details the components of other comprehensive income, including unrealized gains and losses on debt securities and cash flow hedges | Component of AOCI (After-Tax, in thousands) | June 30, 2025 | December 31, 2024 | Change ($) | Change (%) | | :------------------------------------------ | :------------ | :---------------- | :--------- | :--------- | | Net Unrealized Gains (Losses) on Debt Securities | $(84,324) | $(104,015) | $19,691 | -18.9% | | Net Unrealized Gains (Losses) on Cash Flow Hedges | $6,045 | $8,958 | $(2,913) | -32.5% | | Defined Benefit Postretirement Plans | $400 | $411 | $(11) | -2.7% | | Total AOCI | $(77,879) | $(94,646) | $16,767 | -17.7% | - The increase in AOCI by $16.8 million for the six months ended June 30, 2025, was primarily driven by a $19.7 million improvement in net unrealized losses on debt securities, partially offset by a decrease in cash flow hedge gains[155] NOTE 14 – REVENUE FROM CONTRACTS WITH CUSTOMERS This note disaggregates revenue from contracts with customers by various non-interest income streams | Revenue Stream (in thousands) | 3 Months Ended June 30, 2025 | 3 Months Ended June 30, 2024 | Change ($) | Change (%) | 6 Months Ended June 30, 2025 | 6 Months Ended June 30, 2024 | Change ($) | Change (%) | | :---------------------------- | :--------------------------- | :--------------------------- | :--------- | :--------- | :--------------------------- | :--------------------------- | :--------- | :--------- | | Debit card interchange income | $3,646 | $3,069 | $577 | 18.8% | $6,879 | $5,935 | $944 | 15.9% | | Service charges on deposit accounts | $2,405 | $2,113 | $292 | 13.8% | $4,723 | $4,140 | $583 | 14.1% | | Fiduciary services income | $1,981 | $1,870 | $111 | 5.9% | $3,819 | $3,619 | $200 | 5.5% | | Investment program income | $1,794 | $1,441 | $353 | 24.5% | $3,491 | $2,680 | $811 | 30.2% | | Other non-interest income | $532 | $435 | $97 | 22.3% | $965 | $863 | $102 | 11.8% | | Total non-interest income within ASC 606 | $10,358 | $8,928 | $1,430 | 16.0% | $19,877 | $17,237 | $2,640 | 15.3% | NOTE 15 – EMPLOYEE BENEFIT PLANS This note provides information on the costs associated with the Company's employee benefit plans | Benefit Cost (in thousands) | 3 Months Ended June 30, 2025 | 3 Months Ended June 30, 2024 | Change ($) | Change (%) | 6 Months Ended June 30, 2025 | 6 Months Ended June 30, 2024 | Change ($) | Change (%) | | :-------------------------- | :--------------------------- | :--------------------------- | :--------- | :--------- | :--------------------------- | :--------------------------- | :--------- | :--------- | | SERP interest cost | $228 | $180 | $48 | 26.7% | $457 | $361 | $96 | 26.6% | | Postretirement benefit costs | $36 | $34 | $2 | 5.9% | $72 | $67 | $5 | 7.5% | NOTE 16 – EPS This note presents the basic and diluted earnings per share calculations and the factors influencing weighted average shares outstanding | EPS Metric | 3 Months Ended June 30, 2025 | 3 Months Ended June 30, 2024 | Change ($) | Change (%) | 6 Months Ended June 30, 2025 | 6 Months Ended June 30, 2024 | Change ($) | Change (%) | | :--------- | :--------------------------- | :--------------------------- | :--------- | :--------- | | Basic EPS | $0.84 | $0.82 | $0.02 | 2.4% | $1.27 | $1.73 | $(0.46) | -26.6% | | Diluted EPS | $0.83 | $0.81 | $0.02 | 2.5% | $1.26 | $1.72 | $(0.46) | -26.7% | - The weighted average common shares outstanding for basic EPS increased to 16.9 million for the three months ended June 30, 2025, from 14.6 million in the prior year, primarily due to the issuance of 2.28 million shares for the Northway acquisition[160] NOTE 17 – FAIR VALUE MEASUREMENT AND DISCLOSURE This note describes the Company's fair value measurements for financial instruments using a three-level hierarchy - The Company measures financial instruments at fair value using a hierarchy (Level 1, 2, 3) based on observability of inputs. Loans held for sale are elected at fair value[163][164][168] | Financial Assets Measured at Fair Value (in thousands) | June 30, 2025 (Fair Value) | December 31, 2024 (Fair Value) | | :----------------------------------------------------- | :------------------------- | :----------------------------- | | Trading securities (Level 1) | $5,326 | $5,243 | | AFS debt securities (Level 2) | $860,217 | $593,749 | | Loans held for sale (Level 2) | $22,567 | $11,049 | | Customer loan swaps (Level 2) | $10,757 | $11,717 | | Interest rate contracts (Level 2) | $9,062 | $14,040 | | Financial Liabilities Measured at Fair Value (in thousands) | June 30, 2025 (Fair Value) | December 31, 2024 (Fair Value) | | :-------------------------------------------------------- | :------------------------- | :----------------------------- | | Deferred compensation (Level 1) | $5,326 | $5,243 | | Customer loan swaps (Level 2) | $10,797 | $11,787 | | Interest rate contracts (Level 2) | $2,048 | $232 | NOTE 18 – SUBSEQUENT EVENTS This note discloses significant events that occurred after the balance sheet date but before the financial statements were issued - On July 4, 2025, the One Big Beautiful Bill Act (OBBBA) was signed into law, making permanent many tax provisions from 2017[187] - The Company is evaluating the impact of the OBBBA but does not expect a material impact on its financial statements[187] ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS This section provides management's perspective on the Company's financial condition, results of operations, and liquidity for the periods presented, highlighting key trends, significant events like the Northway acquisition, and future outlook. It also includes reconciliations of non-GAAP financial measures FORWARD-LOOKING STATEMENTS This section cautions readers about forward-looking statements, highlighting inherent risks and uncertainties that could affect actual results - The report contains forward-looking statements subject to numerous risks, assumptions, and uncertainties, which may cause actual results to differ materially from expectations[189][190] - Key factors that could cause differences include economic weakness, changes in monetary/fiscal policies, inflation, competition, cybersecurity risks, and the effects of the Northway acquisition[191][196] NON-GAAP FINANCIAL MEASURES AND RECONCILIATION TO GAAP This section provides non-GAAP financial measures used by management to assess performance and reconciles them to GAAP - Management uses non-GAAP financial measures like adjusted net income, adjusted diluted EPS, efficiency ratio, and tangible book value per share to evaluate performance, compare to peers, and analyze internal trends, excluding unusual items[198] | Non-GAAP Metric | 3 Months Ended June 30, 2025 | 3 Months Ended June 30, 2024 | 6 Months Ended June 30, 2025 | 6 Months Ended June 30, 2024 | | :-------------- | :--------------------------- | :--------------------------- | :--------------------------- | :--------------------------- | | Adjusted Net Income (in thousands) | $15,191 | $11,993 | $31,238 | $24,546 | | Adjusted Diluted EPS | $0.89 | $0.81 | $1.84 | $1.67 | | Non-GAAP efficiency ratio | 55.47% | 63.21% | 57.06% | 64.19% | | Tangible book value per share | $26.90 | $29.91 (Dec 31, 2024) | $26.90 | $29.91 (Dec 31, 2024) | - Adjustments for the six months ended June 30, 2025, include $6.3 million for non-PCD acquired loans, $8.9 million for merger and acquisition costs, and a $2.4 million deferred tax valuation adjustment related to the Northway acquisition[201][202] CRITICAL ACCOUNTING ESTIMATES This section discusses the Company's critical accounting estimates that require significant judgment and could materially impact financial results - Critical accounting estimates involve significant judgments and uncertainties, particularly the Allowance for Credit Losses (ACL) on loans and accounting for acquisitions (goodwill and intangible assets impairment review)[218] - There have been no material changes to the Company's critical accounting policies from those disclosed in its Annual Report on Form 10-K for the year ended December 31, 2024[219] GENERAL OVERVIEW This section provides a high-level description of Camden National Corporation's business, operations, and strategic focus - Camden National Corporation is a publicly-held bank holding company with $6.9 billion in assets as of June 30, 2025, headquartered in Camden, Maine, and operating primarily in Maine and New Hampshire[221] - The Company's main business is attracting deposits and extending loans to consumer, institutional, municipal, non-profit, and commercial customers, along with wealth management, trust, brokerage, investment advisory, and insurance services[221] EXECUTIVE OVERVIEW This section summarizes the Company's financial performance for the period, highlighting key drivers and the impact of significant events | Metric | 6 Months Ended June 30, 2025 | 6 Months Ended June 30, 2024 | Change ($) | Change (%) | | :----- | :--------------------------- | :--------------------------- | :--------- | :--------- | | Net income | $21.4 million | $25.3 million | $(3.9) million | -15% | | Diluted EPS | $1.26 | $1.72 | $(0.46) | -26.7% | - The operating results for the first half of 2025 were materially impacted by the acquisition of Northway Financial, Inc., which closed on January 2, 2025[224] - Adjusted net income (non-GAAP) for the six months ended June 30, 2025, was $31.2 million, and adjusted diluted EPS (non-GAAP) was $1.84, representing increases of 27% and 10% respectively, over the same period in 2024, after adjusting for one-time acquisition costs and provision for acquired non-PCD loans[227] - The Company incurred $8.9 million in transaction-related costs and $6.5 million in provision expense for acquired non-PCD loans related to the Northway acquisition[226] - A $5.9 million provision expense was recorded for one syndicated commercial loan due to the borrower entering bankruptcy in Q2 2025[227] RESULTS OF OPERATIONS This section analyzes the Company's financial performance, focusing on key income and expense components over the reporting periods Net Interest Income and Net Interest Margin This section analyzes the Company's net interest income and net interest margin, detailing factors influencing interest revenue and expense | Metric | 3 Months Ended June 30, 2025 | 3 Months Ended June 30, 2024 | Change ($) | Change (%) | 6 Months Ended June 30, 2025 | 6 Months Ended June 30, 2024 | Change ($) | Change (%) | | :----- | :--------------------------- | :--------------------------- | :--------- | :--------- | :--------------------------- | :--------------------------- | :--------- | :--------- | | Net interest income (FTE) | $49.5 million | $32.3 million | $17.2 million | 53% | $98.7 million | $63.8 million | $34.9 million | 55% | | Net interest margin (FTE) | 3.06% | 2.36% | 0.70% | 29.7% | 3.05% | 2.32% | 0.73% | 31.5% | | Core net interest margin (FTE, non-GAAP) | 2.70% | 2.36% | 0.34% | 14.4% | 2.69% | 2.32% | 0.37% | 15.9% | - The increase in net interest income and margin was primarily driven by a $1.0 billion (18-19%) increase in average interest-earning assets due to the Northway acquisition, higher asset yields, and a decrease in the average cost of funds (36-39 bps) due to the changing interest rate environment and Northway's low-cost deposit franchise[231][235] Provision (Credit) for Credit Losses This section discusses the Company's provision for credit losses, including factors contributing to changes in the allowance for credit losses | Provision (Credit) for Credit Losses (in thousands) | 3 Months Ended June 30, 2025 | 3 Months Ended June 30, 2024 | Change ($) | Change (%) | 6 Months Ended June 30, 2025 | 6 Months Ended June 30, 2024 | Change ($) | Change (%) | | :-------------------------------------------------- | :--------------------------- | :--------------------------- | :--------- | :--------- | :--------------------------- | :--------------------------- | :--------- | :--------- | | Provision (credit) for loan losses | $6,596 | $188 | $6,408 | N.M. | $15,469 | $(976) | $16,445 | N.M. | | Provision for credit losses on off-balance sheet credit exposures | $324 | $462 | $(138) | -30% | $880 | $434 | $446 | 103% | | Credit for HTM debt securities | $0 | $0 | $0 | 0% | $0 | $(910) | $910 | -100% | | Total Provision (credit) for credit losses | $6,920 | $650 | $6,270 | 965% | $16,349 | $(1,452) | $17,801 | -1226% | - The significant increase in provision for loan losses for the six months ended June 30, 2025, was due to a $6.3 million provision for acquired non-PCD loans from the Northway acquisition and a $5.9 million additional reserve for a commercial borrower that entered bankruptcy[244] Non-Interest Income This section analyzes the various components of the Company's non-interest income, highlighting growth drivers and trends | Non-Interest Income (in thousands) | 3 Months Ended June 30, 2025 | 3 Months Ended June 30, 2024 | Change ($) | Change (%) | 6 Months Ended June 30, 2025 | 6 Months Ended June 30, 2024 | Change ($) | Change (%) | | :--------------------------------- | :--------------------------- | :--------------------------- | :--------- | :--------- | :--------------------------- | :--------------------------- | :--------- | :--------- | | Debit card income | $3,646 | $3,069 | $577 | 18.8% | $6,879 | $5,935 | $944 | 15.9% | | Service charges on deposit accounts | $2,405 | $2,113 | $292 | 13.8% | $4,723 | $4,140 | $583 | 14.1% | | Income from fiduciary services | $1,981 | $1,870 | $111 | 5.9% | $3,819 | $3,619 | $200 | 5.5% | | Brokerage and insurance commissions | $1,794 | $1,441 | $353 | 24.5% | $3,491 | $2,680 | $811 | 30.2% | | Bank-owned life insurance | $1,003 | $694 | $309 | 44.5% | $1,663 | $1,377 | $286 | 20.8% | | Mortgage banking income, net | $1,060 | $516 | $544 | 105.4% | $1,568 | $1,324 | $244 | 18.4% | | Other income | $1,178 | $942 | $236 | 25.1% | $2,120 | $1,892 | $228 | 12.0% | | Total non-interest income | $13,067 | $10,645 | $2,422 | 22.8% | $24,263 | $20,967 | $3,296 | 15.7% | - The increase in non-interest income categories was primarily driven by the Northway acquisition, which added approximately 50,000 customer accounts, 28,000 new debit card customers, and one BOLI policy[246] - Brokerage and insurance commissions increased due to a 22% increase in assets under management to $1.1 billion. Mortgage banking income increased due to positive changes in fair value on loans held for sale and residential mortgage loan pipelines[246][248] Non-Interest Expense This section details the Company's non-interest expenses, explaining significant changes and cost management efforts | Non-Interest Expense (in thousands) | 3 Months Ended June 30, 2025 | 3 Months Ended June 30, 2024 | Change ($) | Change (%) | 6 Months Ended June 30, 2025 | 6 Months Ended June 30, 2024 | Change ($) | Change (%) | | :---------------------------------- | :--------------------------- | :--------------------------- | :--------- | :--------- | :--------------------------- | :--------------------------- | :--------- | :--------- | | Salaries and employee benefits | $19,392 | $15,601 | $3,791 | 24.3% | $39,635 | $31,555 | $8,080 | 25.6% | | Furniture, equipment and data processing | $4,294 | $3,497 | $797 | 22.8% | $9,025 | $7,126 | $1,899 | 26.6% | | Net occupancy costs | $2,693 | $1,981 | $712 | 35.9% | $5,726 | $4,051 | $1,675 | 41.3% | | Debit card expense | $1,725 | $1,311 | $414 | 31.6% | $3,415 | $2,575 | $840 | 32.6% | | Consulting and professional fees | $1,310 | $1,149 | $161 | 14.0% | $2,808 | $2,009 | $799 | 39.8% | | Regulatory assessments | $1,127 | $813 | $314 | 38.6% | $2,113 | $1,670 | $443 | 26.5% | | Amortization of core deposit intangible assets | $1,473 | $139 | $1,334 | N.M. | $2,946 | $278 | $2,668 | N.M. | | Merger and acquisition costs | $1,405 | $0 | $1,405 | N.M. | $8,930 | $0 | $8,930 | N.M. | | Other expenses | $4,086 | $2,772 | $1,314 | 47.4% | $7,268 | $5,351 | $1,917 | 35.8% | | Total non-interest expense | $37,596 | $27,310 | $10,286 | 37.7% | $82,047 | $54,672 | $27,375 | 50.1% | - The increases across most expense categories are primarily due to the Northway acquisition. The Company is optimizing and achieving targeted cost savings through elimination of redundancies, with further improvements expected in H2 2025[249] - Merger and acquisition costs totaled $8.9 million for the six months ended June 30, 2025, including personnel termination, consulting, legal, accounting, and contract termination costs[250][251] Income Tax Expense This section analyzes the Company's income tax expense, effective tax rate, and any significant tax adjustments | Income Tax Expense (in thousands) | 3 Months Ended June 30, 2025 | 3 Months Ended June 30, 2024 | Change ($) | Change (%) | 6 Months Ended June 30, 2025 | 6 Months Ended June 30, 2024 | Change ($) | Change (%) | | :-------------------------------- | :--------------------------- | :--------------------------- | :--------- | :--------- | :--------------------------- | :--------------------------- | :--------- | :--------- | | Income Tax Expense | $3,679 | $2,876 | $803 | 27.9% | $2,527 | $5,939 | $(3,412) | -57.5% | - The Company's estimated normalized effective tax rate is 20.6%. A one-time income tax benefit of $2.4 million was recognized in Q1 2025 due to a deferred tax rate change (from 21.5% to 22.8%) following the Northway acquisition[253] FINANCIAL CONDITION This section provides an overview of the Company's balance sheet, detailing changes in assets, liabilities, and equity Cash and Cash Equivalents This section discusses the Company's cash and cash equivalents, explaining changes in balances and their utilization | Cash and Cash Equivalents (in thousands) | June 30, 2025 | December 31, 2024 | Change ($) | Change (%) | | :--------------------------------------- | :------------ | :---------------- | :--------- | :--------- | | Total cash, cash equivalents and restricted cash | $113,815 | $214,963 | $(101,148) | -47.1% | - The decrease was due to utilizing cash to support loan growth and prepay FHLBB borrowings assumed from the Northway acquisition, despite acquiring $48.3 million in cash[257] Investments This section analyzes the Company's investment portfolio, including composition, fair value, and factors influencing changes | Investment Portfolio (in thousands) | June 30, 2025 | December 31, 2024 | Change ($) | Change (%) | | :---------------------------------- | :------------ | :---------------- | :--------- | :--------- | | Total investments | $1,401,720 | $1,139,284 | $262,436 | 23.0% | - The increase was driven by $230.0 million in investments acquired from Northway, $120.9 million in AFS debt securities purchases, and a $22.4 million increase in AFS fair value, partially offset by $56.4 million in sales of acquired Northway debt securities[263] - The debt securities portfolio has limited credit risk, with 92% backed by the U.S. government and government-sponsored agencies as of June 30, 2025. The duration of the debt investment securities portfolio was 5.3 years[262][264] Loans This section details the Company's loan portfolio, including its composition, growth, and geographical and industry concentrations | Loan Portfolio (in thousands) | June 30, 2025 | December 31, 2024 | Change ($) | Change (%) | | :---------------------------- | :------------ | :---------------- | :--------- | :--------- | | Total loans | $4,931,369 | $4,115,259 | $816,110 | 19.8% | | Commercial Loan Portfolio | $2,596,860 | $2,094,749 | $502,111 | 24.0% | | Retail Loan Portfolio | $2,334,509 | $2,020,510 | $313,999 | 15.5% | - The Northway acquisition contributed $775.7 million in loans held for investment[270] - Geographical concentrations as of June 30, 2025, were Maine (57%), New Hampshire (25%), and Massachusetts (13%), with increases in New Hampshire and Massachusetts due to the acquisition[271] - Industry concentrations in commercial real estate included non-residential building operators (31%) and lessors of residential buildings (30%) of the commercial real estate portfolio, each representing 13% of total loans[272] Asset Quality This section assesses the quality of the Company's assets, focusing on non-performing loans and the allowance for credit losses | Asset Quality Metric | June 30, 2025 | December 31, 2024 | Change | | :------------------- | :------------ | :---------------- | :----- | | Non-accrual loans | $18,177 (in thousands) | $4,829 (in thousands) | Up $13,348 (276.4%) | | Non-accrual loans to total loans | 0.37% | 0.12% | Up 0.25% | | ACL on loans | $53,022 (in thousands) | $35,728 (in thousands) | Up $17,294 (48.4%) | | ACL on loans to total loans | 1.08% | 0.87% | Up 0.21% | - The increase in non-accrual loans was primarily due to one syndicated commercial loan of $12.0 million where the borrower filed for bankruptcy[276] - The ACL on loans increased due to the Northway acquisition (provision for non-PCD loans) and the specific reserve for the bankrupt commercial loan. The ACL incorporates a higher probability of recession in its macroeconomic outlook[283][284] Goodwill and CDI Assets This section discusses the Company's goodwill and core deposit intangible assets, primarily from business combinations | Intangible Asset (in thousands) | June 30, 2025 | December 31, 2024 | Change ($) | Change (%) | | :------------------------------ | :------------ | :---------------- | :--------- | :--------- | | Goodwill | $151,505 | $94,697 | $56,808 | 60.0% | | Core deposit intangible assets | $45,526 | $415 | $45,111 | 10870.1% | - The increases are directly attributable to the Northway acquisition, which generated $56.8 million in goodwill and $48.1 million in CDI assets[290] Investment in BOLI This section provides information on the Company's bank-owned life insurance investments and their impact | BOLI (in thousands) | June 30, 2025 | December 31, 2024 | Change ($) | Change (%) | | :------------------ | :------------ | :---------------- | :--------- | :--------- | | BOLI | $110,342 | $104,308 | $6,034 | 5.8% | - The increase was driven by the acquisition of one BOLI policy through the Northway acquisition[292] Deferred Tax Assets This section explains the Company's deferred tax assets, including factors influencing their balance and valuation | Deferred Tax Assets (in thousands) | June 30, 2025 | December 31, 2024 | Change ($) | Change (%) | | :--------------------------------- | :------------ | :---------------- | :--------- | :--------- | | Deferred tax assets | $57,340 | $40,037 | $17,303 | 43.2% | - The increase was due to the Northway acquisition, which led to an increase in the Company's deferred tax rate from 21.5% to 22.8% and the revaluation of legacy deferred tax assets[294] Liabilities This section details the Company's liabilities, including deposits and borrowings, and factors driving their changes | Liability Category (in thousands) | June 30, 2025 | December 31, 2024 | Change ($) | Change (%) | | :-------------------------------- | :------------ | :---------------- | :--------- | :--------- | | Total deposits | $5,514,712 | $4,633,167 | $881,545 | 19.0% | | Total borrowings | $660,732 | $544,952 | $115,780 | 21.2% | - Total deposits increased by $881.5 million, primarily due to the Northway acquisition, which added $971.7 million in deposits (82% low-cost core deposits). Excluding acquired deposits, organic deposits decreased by $90.1 million due to outflows from large customers[297][298] - Total borrowings increased by $115.8 million, driven by increases in customer repurchase agreements and junior subordinated debentures (from Northway acquisition) and FHLBB advances[303] Shareholders' Equity This section analyzes the Company's shareholders' equity, including common stock, retained earnings, and other comprehensive income | Shareholders' Equity (in thousands) | June 30, 2025 | December 31, 2024 | Change ($) | Change (%) | | :---------------------------------- | :------------ | :---------------- | :--------- | :--------- | | Total shareholders' equity | $652,148 | $531,231 | $120,917 | 22.8% | - The increase was driven by the issuance of $96.5 million in common stock for the Northway acquisition and a $19.7 million increase in AOCI due to lower interest rates[305][328] - The Company declared a quarterly cash dividend of $0.42 per share, with an annualized dividend yield of 4.14% as of June 30, 2025[306] LIQUIDITY This section discusses the Company's liquidity management strategies and available sources of funding to meet obligations - The Company manages liquidity to meet depositor withdrawals and credit commitments, utilizing deposits, FHLBB borrowings, cash flows from loans/investments, and operations[310] | Primary Liquidity Sources (in thousands) | June 30, 2025 | | :--------------------------------------- | :------------ | | Excess cash | $10,629 | | Unpledged investment securities | $477,344 | | Over collateralized securities pledging position | $62,125 | | FHLBB | $934,995 | | Fed Discount Window | $155,636 | | Unsecured borrowing lines | $94,872 | | Total available primary liquidity | $1,735,601 | - Total available primary liquidity of $1.7 billion was 2.2 times uninsured and uncollateralized deposits as of June 30, 2025. An additional $1.2 billion in funding is accessible through brokered deposits[312] - Core deposits (excluding CDs and brokered deposits) increased by $683.9 million (17%) to $4.6 billion, primarily due to the Northway acquisition[314] CAPITAL RESOURCES This section outlines the Company's capital structure and its compliance with regulatory capital requirements | Capital Metric | June 30, 2025 | December 31, 2024 | Change ($) | Change (%) | | :------------- | :------------ | :---------------- | :--------- | :--------- | | Shareholders' equity (in thousands) | $652,148 | $531,231 | $120,917 | 22.8% | | Average equity to average assets | 9.35% | 8.76% | 0.59% | 6.7% | | Common equity ratio | 9.42% | 9.15% | 0.27% | 3.0% | | Tangible common equity ratio (non-GAAP) | 6.77% | 7.64% | -0.87% | -11.4% | - The increase in shareholders' equity was driven by the $96.5 million common stock issuance for the Northway acquisition and a $19.7 million increase in AOCI[305][328] - The Company declared $14.2 million in cash dividends for the six months ended June 30, 2025, reflecting the increased share count from the Northway acquisition[329] - The Bank declared $3.8 million in dividends to the Company for the six months ended June 30, 2025[330] RISK MANAGEMENT This section describes the Company's approach to identifying, measuring, monitoring, and controlling various financial risks Interest rate risk This section details the Company's management of interest rate risk, including simulation models and hedging strategies - The Company uses a detailed and dynamic simulation model to quantify net interest income exposure to sustained interest rate changes, monitored by Board ALCO and Management ALCO[336][337] | Estimated Changes In Net Interest Income | June 30, 2025 | June 30, 2024 | | :------------------------------------- | :------------ | :------------ | | Year 1: +200 basis points | (2.0)% | (3.9)% | | Year 1: -200 basis points | 3.2% | 4.8% | | Year 2: +200 basis points | 4.7% | 1.9% | | Year 2: Rates unchanged | 7.8% | 10.2% | | Year 2: -200 basis points | 11.6% | 18.8% | - If rates remain current, net interest income is projected to increase in year two. If rates increase 200 bps, NII is projected to decrease in year one but increase in year two. If rates decrease 200 bps, NII is projected to improve in both years[340][342][343] - The Company uses its investment portfolio and derivative financial instruments (loan swaps, interest rate swaps, floors, caps) to manage interest rate risk[344][345] ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK This section incorporates by reference the market risk disclosures provided in Item 2, specifically within the "Risk Management" section, which details the Company's exposure to interest rate risk and its management strategies - Information regarding quantitative and qualitative disclosure about market risk is included in Item 2, "Management's Discussion and Analysis of Financial Condition and Results of Operations - Risk Management"[346] ITEM 4. CONTROLS AND PROCEDURES This section confirms that the Company's management, including the CEO and CFO, evaluated the effectiveness of its disclosure controls and procedures as of June 30, 2025, and concluded they were effective. No material changes to internal control over financial reporting occurred during the period - The Company's management, including the CEO and CFO, concluded that disclosure controls and procedures were effective as of June 30, 2025[348] - There were no material changes in internal control over financial reporting during the period covered by this report[349] PART II. OTHER INFORMATION This part includes disclosures on legal proceedings, risk factors, equity sales, defaults, mine safety, other information, and exhibits ITEM 1. LEGAL PROCEEDINGS This section discloses information about legal actions involving the Company and management's assessment of their potential impact - The Company is subject to pending and threatened legal actions, but management believes these will not have a material adverse effect on its consolidated financial position[352] ITEM 1A. RISK FACTORS This section refers to the comprehensive discussion of factors that could adversely affect the Company's business and financial results - Readers should refer to the "Risk Factors" section in the Company's Annual Report on Form 10-K for the year ended December 31, 2024, for a discussion of factors that may adversely affect the Company[353] ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS This section reports on the Company's unregistered sales of equity securities and the use of proceeds from such transactions | Period | Total number of shares (or units) purchased | Average price paid per share (or unit) | | :-------------- | :------------------------------------------ | :------------------------------------- | | April 1-30, 2025 | 4,138 | $38.64 | | May 1-31, 2025 | — | — | | June 1-30, 2025 | — | — | | Total | 4,138 | $38.64 | - All shares purchased were surrendered by employees to satisfy tax withholding obligations for restricted stock awards[354] ITEM 3. DEFAULTS UPON SENIOR SECURITIES This section reports any defaults by the Company on its senior securities during the reporting period - No defaults upon senior securities were reported[355] ITEM 4. MINE SAFETY DISCLOSURES This section provides disclosures related to mine safety, if applicable to the Company's operations - This item is not applicable[356] ITEM 5. OTHER INFORMATION This section includes any other material information not required to be disclosed elsewhere in the report - No other information was reported[357] ITEM 6. EXHIBITS This section lists all exhibits filed as part of the report, including certifications and financial data - Exhibits include certifications from the Chief Executive Officer and Chief Financial Officer (31.1, 31.2, 32.1, 32.2) and iXBRL financial data (101, 104)[358] [SIGNATURES](index=86&type=section&id